Court File and Parties

Citation: 1640895 Ontario Inc. v. Harvey, 2009 ONCA 76

Date: 20090126

Docket: C49234

Court of Appeal for Ontario

Gillese, MacFarland and LaForme JJ.A.

Between:

1640895 Ontario Inc.

Applicant (Respondent)

and

David Harvey, Ian Harvey, Jason Harvey, Tara Harvey, Robin Edwards, Claybrooke Inc., 1643890 Ontario Inc. and Claybrooke Marketing Inc.

Respondents (Appellants)

Counsel:

N. Iatrou, for the appellants

D. Taub, for the respondent

Heard: January 26, 2009

On appeal from the order of Justice Alexandra Hoy of the Superior Court of Justice dated July 29, 2008.

Appeal Book Endorsement

[1] The application below by Kimco was essentially that the individual respondents, led by David Harvey, caused Claybrooke Marketing Inc. (the "Corporation") to fund two outside corporations owned by them to the detriment of the Corporation and Kimco. In short, the allegation is self-dealing.

[2] The respondents brought a motion for a stay. The motion judge dismissed the motion. She noted that David Harvey was not a party to the shareholders' agreement and that the agreement did not address the officers of the Corporation. She also found that: (i) Kimco did not allege or rely on any alleged breach of the shareholders' agreement in advancing its oppression claim; (ii) there was nothing in the shareholders' agreement which the respondents could point to as putting self-dealing within the reasonable expectation of Kimco; (iii) the alleged oppressive conduct did not relate to the substance of the shareholders' agreement or the implementation of any of its terms; and (iv) the remedies sought by Kimco were not provided for in the shareholders' agreement.

[3] The respondents appeal. They ask that the order below be set aside. The primary ground of appeal is that the motion judge failed to afford the parties the presumption of arbitrability.

[4] We see no error in the reasoning or result below. Although the language of the arbitration clause is broad, its scope is restricted to disputes and questions arising in connection with the shareholders' agreement. While one paragraph in the recitals contains broader language, as the motion judge noted, the substance of the shareholders' agreement is narrower than the broadly-drafted recital. Given that Kimco seeks to enforce its statutory right to relief from oppression, the matters in dispute are outside the scope of the shareholders' agreement. The oppression claim does not refer to the shareholders' agreement nor does it rely on its provisions. Further, the oppression allegations are in respect of the respondents in their capacities as officers, directors and employees of the Corporation, not as shareholders.

[5] Accordingly, the appeal is dismissed with costs to the respondent fixed at $5000, all inclusive.