DATE: 20030529

DOCKET: C38782

COURT OF APPEAL FOR ONTARIO

RE: IN THE MATTER OF the Bankruptcy of Diversified Business Communications Ltd., of the City of Mississauga, in the Regional Municipality of Peel;

AND IN THE MATTER OF the Bankruptcy of Diversified Furniture Systems Inc., of the City of Mississauga, in the Regional Municipality of Peel;

AND IN THE MATTER OF the Bankruptcy of 1239698 Ontario Inc. c.o.b. as “Dynamic Custom Equipment, of the City of Mississauga, in the Regional Municipality of Peel;

AND IN THE MATTER OF the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended

BEFORE: ABELLA, LASKIN and MOLDAVER JJ.A.

COUNSEL: Robert J van Kessel, for the appellant Jeffrey Rosekat, for the respondent

HEARD: February 17, 2003

RELEASED ORALLY: February 17, 2003

On appeal from the judgment of Justice James M. Farley of the Superior Court of Justice dated August 30, 2002.

E N D O R S E M E N T

[1] The appellants submit that the motions judge erred in failing to find that they were deemed directors and therefore entitled to dispute the petition. The motions judge did not make an express finding on whether or not on the evidence the appellants were deemed directors because he concluded that s. 115(4) of the Ontario Business Corporations Act, R.S.O. 1990, c.B‑16 (Act) is a provision imposing responsibilities, but not conferring powers or rights. Thus, on the motions judge’s view, the appellants had no right to dispute the petition.

[2] The appellants submit that the motions judge erred in his interpretation of s. 115(4) of the Act. They contend that the subsection contemplates powers as well as responsibilities. Even assuming that the appellants are right in their interpretation of s. 115(4) ‑ and we make no finding on this issue ‑ we nonetheless conclude that the appellants are not deemed directors. On the evidence they neither managed nor supervised the management of the business or affairs of the corporation as required by s. 115(4). The business of Diversified no longer exists; it has been wound up by Deloitte and Touche.

[3] All the appellants can claim is that they have the companies’ books and records and that they propose to begin a derivative action on the companies’ behalf, for which they need the leave of the court.

[4] In our view this does not amount to managing or supervising the affairs of the corporation. We add that although the motions judge did not expressly make a factual finding on whether the appellants were deemed directors, he did find that they were not de facto directors, a finding that on this record is virtually equivalent and is entirely supported by the record.

[5] Accordingly, the appeal is dismissed with costs fixed in the amount of $2,500.

[6] The cross‑appeal is dismissed on the basis that the undertaking in paragraph 33 of the respondent’s factum is operative given the final paragraph of Farley J.’s endorsement.

“R. S. Abella J.A.”

“John Laskin J.A.”

“M. J. Moldaver J.A.”