CITATION: Booth v. Alliance Windsor Insurance Brokers Inc., 2007 ONCA 805
DATE: 20071126
DOCKET: C45544
COURT OF APPEAL FOR ONTARIO
O’CONNOR A.C.J.O., GILLESE and WATT JJ.A.
BETWEEN:
TERRY BOOTH
Plaintiff (Respondent)
and
ALLIANCE WINDSOR INSURANCE BROKERS INC., DENNIS COLLISION, GARY LAUZON AND DAVID TOOMBS
Defendants (Appellants)
AND BETWEEN:
ALLIANCE WINDSOR INSURANCE BROKERS INC.
Plaintiff (Appellant)
and
TERRY BOOTH
Defendant (Respondent)
John W. Makins and Lianne Armstrong for the appellants
Edward J. Posliff for the respondent
Heard: November 22, 2007
On appeal from the judgment of Justice Joseph G. Quinn of the Superior Court of Justice, dated May 30, 2006.
ENDORSEMENT
[1] The appellants argue that the trial judge erred: (1) in finding that the respondent was wrongfully dismissed; (2) in valuing the respondent’s common shares as of September 30, 2005 as opposed to an earlier date; and (3) in requiring the appellants to pay bonuses to the respondent up to September 30, 2005. For the reasons that follow, we dismiss the appeal.
Wrongful Dismissal
[2] The appellants submit that the trial judge erred when he found that the respondent’s payment of additional compensation and accelerated rent were not grounds for dismissal. We disagree. There was evidence to support the trial judge’s finding that neither ground gave the corporate appellant cause to terminate the respondent’s employment.
[3] First, although the trial judge did not find that there was a binding agreement authorizing the respondent to pay additional compensation to himself and his wife (by way of income splitting), he did find that two of the four shareholders, including the respondent, believed that there was one. Moreover, the respondent did not attempt to conceal the payments. He entered them into the books and records of the company, and he answered honestly when asked about them. The effect of the trial judge’s finding is that the respondent mistakenly, not fraudulently, made the additional compensation payments to himself and his wife. On this evidence, it was open to the trial judge to find that the respondent’s conduct did not constitute cause for termination.
[4] Second, the trial judge also found that the alleged accelerated rent payments to the respondent’s brother were not sufficient cause for termination. Again, the record supported this conclusion. In the end, there was no evidence that the corporate appellant was owed any money by the landlord. Moreover, the accelerated rent problem was one that was created by all four shareholders, not just the respondent. As the trial judge said, “no one should have been taken by surprise by the accelerated rent issue”.
[5] We see no basis upon which to interfere with the trial judge’s conclusion that the corporate appellant did not have cause to terminate.
Valuation Date
[6] By way of statement of claim dated July 17, 2002, the respondent sought a declaration that the appellants acted in an oppressive manner contrary to s. 248 of the Business Corporations Act, R.S.O. 1990, c. B.16. As relief, the respondent sought an order valuing his common shares and requiring the appellants to pay the value of those shares to him.
[7] On being served with the statement of claim, the appellants did not admit oppression, nor did they offer to buy the respondent’s shares at the then fair market value. Instead, the appellants defended the action and counterclaimed. On May 30, 2006, after a lengthy trial, the trial judge found that the appellants’ conduct had been oppressive, and he ordered that the appellants buy the respondent’s common shares valued as of September 30, 2005 (the most recent financial year end of the corporate appellant).
[8] The trial judge found that the conduct of the individual appellants towards the respondent after his employment was terminated was oppressive, unfairly prejudicial, and unfairly disregarded the interests of the respondent as a shareholder.
[9] The trial judge found that the individual appellants were not justified in excluding the respondent from the management of the corporation. In addition, the trial judge concluded that the individual appellants did not call formal shareholders meetings, did not declare dividends (to ensure that the respondent would not receive income from the corporate appellant), and paid bonuses to themselves. In addition, two shareholders used corporate funds to prosecute the litigation with the respondent.
[10] The appellants do not challenge the trial judge’s finding of oppression.
[11] The appellants argue only that the trial judge erred in selecting September 30, 2005 as the valuation date for the common shares. They argue he should have used the date of the respondent’s termination in December 2001 or the date the respondent commenced his action, July 17, 2002.
[12] In determining the valuation date for valuing shares in cases like this, the court should select the fairest date based on the particular facts. There is no rigid rule or formula. Rather, all of the circumstances of the case must be considered in making the decision. See Chiaramonte v. World Wide Importing Inc. (1996), 1996 7987 (ON SC), 28 O.R. (3d) 641 at 656.
[13] The trial judge concluded his discussion of the valuation date saying, “after having found that Booth [the respondent] was wrongly terminated, I find that a fair valuation date would be September 30, 2005”. Booth, if not terminated, would have shared in the growth of Alliance as was anticipated on incorporation.
[14] The appellants argue that the trial judge impermissibly linked the selection of the valuation date to the termination of the respondent’s employment.
[15] We do not agree. To start, it is clear from the trial judge’s reasons that he was aware that the valuation date was being selected in connection with the oppression he found as set out in para. 9 above. The termination of the respondent’s employment triggered the oppression of the respondent as a shareholder.
[16] Moreover, a fair reading of the record discloses that the respondent reasonably expected a long-term relationship with the appellants, including receiving benefits from the client business he brought to the enterprise and from the accounting and computer systems that he installed. Even after the respondent was wrongfully terminated, the business continued to benefit from the systems he had introduced and from the substantial client base that he left behind. These benefits continued to accrue to the appellants up to the time that the trial judge ordered the appellants to purchase the respondent’s shares.
[17] Finally, when the respondent started the action in July 2002, the appellants could have agreed to the remedy he sought – namely, a purchase of his common shares. Instead, they continued with what the trial judge found to be oppressive conduct by excluding the respondent from any participation in the company. In this way, they attempted to appropriate the company’s growth, rather than allow it to accrue to all the common shareholders.
[18] For the above reasons, we are satisfied that the trial judge’s selection of September 30, 2005 as the valuation date for the respondent’s common shares was reasonable. We would not give effect to this ground of appeal.
Bonus
[19] The trial judge directed that the appellants pay the respondent fifty percent of the bonuses he would have received as a shareholder up to September 30, 2005. The appellants argued that the period for payment of bonuses should have ended either on the termination of the respondent’s employment or on the date the respondent brought this action. For the reasons set out above, with respect to the valuation date for the common shares, we agree with the trial judge that the appellants should pay the respondent bonuses for the period up to September 30, 2005.
Disposition
[20] In the result, the appeal is dismissed. Costs are awarded to the respondent and are fixed in the amount of $8,000, inclusive of G.S.T. and disbursements.
“D. O’Connor A.C.J.O.”
“E.E. Gillese J.A.”
“David Watt J.A.”