995132 Ontario Limited v. 1149056 Ontario Inc. et al.

1149056 Ontario Inc. et al. v. 995132 Ontario Limited et al. [Indexed as: 995132 Ontario Ltd. v. 1149056 Ontario Inc.]

58 O.R. (3d) 457

[2002] O.J. No. 863

Docket No. C35468

Court of Appeal for Ontario

Catzman, Labrosse and Doherty JJ.A.

March 5, 2002

Civil procedure -- Pre-trial conference -- Trial parties explicitly agreeing that pre-trial judge may preside at trial -- Pre-trial conference judge presiding at trial despite prohibition in rule 50.04 -- No prejudice -- Waiver of grounds of objection -- Appeal based on contravention of rule 50.04 dismissed -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 50.04.

Where, despite rule 50.04, which provides that a judge who conducts a pre-trial conference shall not preside at the trial of the action, the parties explicitly agree that the pre-trial judge may preside and there is no prejudice, it would not be just to permit the losing party to hold out rule 50.04 as grounds to overturn an unfavourable judgment.

APPEAL of a judgment in an action dealing with the distribution of corporate assets.

Statutes referred to Business Corporations Act, R.S.O. 1990, c. B.16, s. 248(3)

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 50.04

Counsel: Mark L. Goodman and Nancy Tourgis, for appellants/plaintiffs by counterclaim. John O'Sullivan, for respondent/defendants to counterclaim.

Endorsement

[1] Endorsement BY THE COURT: -- This appeal arises from the judgment of Spence J. dealing with the distribution of the assets of the appellant 1149056 Ontario Inc. (the "Manager") caused by the appellants Roter and Gordon who controlled the Manager. The respondent was a shareholder of the Manager and claimed that Roter and Gordon distributed the assets in a way that wrongfully favoured themselves and the other appellants over the other shareholders of the Manager. The assets of the Manager consisted of shares and warrants in SiGEM Inc.

[2] The trial judge agreed with the respondent and gave judgment in its favour.

[3] The appeal raises two main issues: a) whether the judgment should be set aside because the trial judge had pre- tried the case; and b) the proper allocation of the SiGEM shares and warrants.

[4] With respect to the first issue, we find that it is totally devoid of merit. Having pre-tried the case, the trial judge agreed to try the case only with the explicit agreement of counsel for the appellants and respondent. Counsel for the appellants clearly waived any objections that the pre-trial judge not sit as the trial judge. The appellants do not allege any prejudice. In all of the circumstances, it would not be "just" to permit the appellants to hold out rule 50.04 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] to overturn a judgment unfavourable to them.

[5] The evidence which was submitted on the hearing of the appeal does not qualify as fresh evidence and does not advance the appellants' argument. The motion for leave to admit it is dismissed.

[6] On the second issue, the trial judge rejected the appellants' argument that the 1995 Memorandum of Understanding had been superseded by an implied agreement to distribute the SiGEM shares according to the shareholdings in the Manager and an explicit oral compensation agreement to give all the warrants to the appellant Peak Hospitality Corp. by way of compensation for its management. Rather, the trial judge found on the evidence that there was an arrangement that the SiGEM shares were to be issued to the creditors and investors in the Manager in proportion to the amounts owed to them. He found that there was no agreement to commit the warrants to compensate Peak Hospitality Corp. He concluded that the respondent's entitlement to the SiGEM shares and warrants was in the proportion to its shareholder loans at the time of distribution.

[7] The trial judge ordered that the shares and proceeds wrongfully received by the appellants be returned to the respondent and the Manager and ordered damages in respect of the exercised warrants. He determined the liability of the various appellants consistent with the broad powers granted under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16.

[8] In our view, the findings of the trial judge are well supported by the evidence. We particularly note the following:

(1) At the relevant time, Roter and Gordon who ran the Manager on a day-to-day basis, were aware that the Manager had no assets other than the SiGEM shares and warrants and no prospect of future income;

(2) There was no resolution of the Board of the Manager or formal meeting authorizing the distributions;

(3) No documentation placed in evidence supports the appellants' position; and

(4) Most importantly, the findings of the trial judge are essentially based on his preference to the evidence adduced in support of the respondent's position.

[9] Counsel for the appellants acknowledged that there was a basis for the trial judge's imposition of liability on Roter, Gordon and Peak Hospitality, but argued that there was no basis for the imposition of liability on Peak Equity. We do not agree. The trial judge specifically grounded his imposition of liability on s. 248(3) of the Ontario Business Corporations Act which, as he noted, expressly contemplates orders being made against persons other than the manager. He found it "fit", to use the term found in the introductory words of that subsection, to extend his judgment to Gordon, Roter, Peak Equity and Peak Hospitality. Having regard to the intimate connection of these four defendants and to their interlocking shareholdings, we find that he made no error in casting the net to include them all.

[10] Accordingly, the appeal is dismissed. We fix the costs of the appeal in the sum of $10,000 plus disbursements plus GST.

Appeal dismissed with costs.