CITATION: Bateni v. Jamali, 2023 ONSC 1761
DIVISIONAL COURT FILE NO.: 869/21
DATE: 2023/03/16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McLean, Ryan Bell, and Nishikawa JJ.
BETWEEN:
Roy Bateni also known as Mohammad Ali Bateni and 2287214 Ontario Ltd.
Plaintiffs/Respondents
– and –
Massoud Jamali also known as Tom Jamali and Caledon Chrysler Dodge Jeep Ram Inc.
Defendants/Appellants
Jonathan Rosenstein and A. Paul Gribilas for the Plaintiffs/Respondents
Peter R. Jervis, David D. Conklin, and D. Block for the Defendants/Appellants
HEARD: November 29, 2022 at Toronto (via ZOOM)
REASONS FOR DECISION
RYAN BELL J.
Overview
[1] In this action, Roy Bateni and 2287214 Ontario Ltd. (“228”) alleged that an agreement was reached between Mr. Bateni and Mr. Jamali, pursuant to which Mr. Bateni would receive an equity share in a car dealership in Bolton which Mr. Jamali was in the process of establishing. Bateni and 228 alleged that Mr. Jamali breached that agreement when he refused to provide Mr. Bateni with the promised equity share.
[2] Following an eight day trial, Patillo J. found that there was an agreement between Mr. Bateni and Mr. Jamali and that Mr. Jamali had breached the agreement. The trial judge awarded Mr. Bateni and 228 damages for oppression in the amount of $254,400.
[3] Mr. Jamali and Caledon Chrysler Dodge Jeep Ram Inc. (“Caledon Chrysler”) appeal. They submit that the trial judgment was grounded on extricable legal errors and that the trial judge erred in misapplying fundamental legal principles to his factual findings. According to the appellants, the trial judge erred in finding that a binding shareholders’ agreement had been entered into, notwithstanding his finding that the parties to the shareholders’ agreement did not agree on how many shares each shareholder would hold. The appellants argue that the trial judge failed to apply a basic principle of contractual formation – that the essential terms of the contract must have been agreed to for a binding and enforceable contract to exist.
[4] The appellants further argue that the trial judge failed to consider the consequences of his finding that the parties’ agreement was frustrated by the actions of a third party. Finally, the appellants submit that the trial judge erred in finding that Mr. Bateni and 228 had standing as complainants to raise a s. 248 oppression claim under the OBCA[^1] and in his findings regarding their reasonable expectations.
[5] For the reasons that follow, I would dismiss the appeal. The trial judge’s findings that an agreement was reached between Mr. Bateni and Mr. Jamali and that Mr. Jamali breached that agreement were amply supported by the evidence at trial. The appellants have not identified any reversible error justifying appellate interference with the trial judge’s findings and determinations.
Background and The Findings of the Trial Judge
[6] Mr. Bateni and Mr. Jamali first met when Mr. Bateni worked at Willowdale Dodge, and then again in 2003, when Mr. Bateni alerted Mr. Jamali that the dealership was for sale. In 2003, Mr. Jamali purchased Willowdale Dodge, later known as North York Chrysler Jeep Dodge Ram Fiat, together with Mr. Totonchian and another partner.
[7] In December 2010 and January 2011, Mr. Jamali and Mr. Bateni discussed the possibility of acquiring a Chrysler dealership in Bolton, with Mr. Jamali telling Mr. Bateni that Mr. Totonchian would also be included in the proposed new dealership. The trial judge found that Mr. Bateni and Mr. Jamali entered into an oral agreement that they would seek to obtain a new and used car dealership from Chrysler Canada in Bolton (the “Oral Agreement”).
[8] The trial judge found that the Oral Agreement was not reached at one meeting but over a series of meetings between Mr. Bateni and Mr. Jamali, and “culminating with the Caledon Hills [Shareholders Agreement].” The terms of the Oral Agreement as found by the trial judge were:
Mr. Jamali would be the majority owner and Mr. Bateni would have an ownership interest which was ultimately settled at 20 per cent on the signing of the Caledon Hills Shareholders Agreement;
Mr. Bateni would be the dealer principal and general manager of the business;
Mr. Jamali would be responsible for obtaining the dealership from Chrysler Canada and Mr. Bateni would work at North York Chrysler at a reduced salary until the new dealership was ready to open; and
Mr. Bateni’s ownership interest would be paid for through his “sweat equity”: Mr. Bateni would pay for his capital contribution to the dealership by receiving a lower salary from the dealership than he would otherwise receive given his experience and success.
[9] The trial judge found the fact that Mr. Jamali and Mr. Bateni did not agree on the amount of sweat equity required from Mr. Bateni did not affect the Oral Agreement: “[t]he fact that Bateni’s capital contribution would be through a reduced salary was an essential term of the [Oral] Agreement. The details of the amount and how that contribution would be calculated could be determined later.”
[10] On December 20, 2011, Mr. Bateni and Mr. Jamali, together with Mr. Totonchian, signed a shareholders’ agreement (the “Caledon Hills Shareholders’ Agreement”). Both Chrysler Canada and the Ontario Motor Vehicle Industry Council (“OMVIC”) required a written shareholders’ agreement between the principals of the new dealership. The trial judge found that the Caledon Hills Shareholders’ Agreement – and the share percentages in that agreement (20 per cent to Mr. Bateni and 29 per cent to Mr. Totonchian) – was a binding agreement. The parties submitted the Caledon Hills Shareholders Agreement to OMVIC for the registration of Caledon Hills as a car dealer, thereby representing to OMVIC who the shareholders were and their respective interests in Caledon Hills.
[11] Mr. Bateni and Mr. Totonchian expected to renegotiate their respective equity percentages with Mr. Jamali after the execution of the Caledon Hills Shareholders Agreement, and Mr. Jamali had promised to do so. The trial judge found, however, that “[w]hile they accepted Jamali’s promise to continue discussing their ownership interests, they understood that their percentage in the Caledon Hills [Shareholders Agreement] was their ownership interest in Caledon Hills at that time.”
[12] The relationship between Mr. Jamali and Mr. Totonchian deteriorated in the immediate aftermath of the signing of the Caledon Hills Shareholders Agreement. At some point, Chrysler Canada became aware of the dispute between Mr. Jamali and Mr. Totonchian. On March 30, 2012, Chrysler Canada informed Mr. Jamali and Mr. Totonchian that if the ownership dispute in Caledon Hills was not resolved by April 10, 2012, the Caledon Hills letter of intent to establish a Bolton dealership would be rescinded. The dispute was not resolved. On April 10, 2012, Chrysler Canada informed Mr. Jamali and Mr. Totonchian that the Caledon Hills letter of intent was rescinded, effective 5:00 p.m. that day.
[13] The parties had, for a time, anticipated that Caledon Hills Chrysler Jeep Dodge Ram Inc. (“Caledon Hills”) would be the corporate vehicle through which they would establish a Chrysler car dealership in Bolton. In the end, however, Mr. Jamali established the Bolton dealership through a different corporation, the appellant.
[14] Mr. Jamali then applied to Chrysler Canada on behalf of Caledon Chrysler Dodge Jeep Ram Inc. (“Caledon Chrysler”), excluding Mr. Bateni as both an owner and general manager. The trial judge found that Mr. Jamali’s actions “in effectively causing the Caledon Hills LOI to be rescinded by Chrysler Canada”, applying on behalf of Caledon Chrysler, and excluding Mr. Bateni, constituted a breach of the Oral Agreement. The trial judge found that Mr. Jamali’s actions resulted in Mr. Bateni being deprived of his agreed 20 per cent ownership interest in the Bolton Chrysler dealership, contrary to the terms of the Oral Agreement.
[15] The trial judge found that Mr. Bateni, as an officer and director of Caledon Hills, and 228 as a shareholder of Caledon Hills, were complainants within the meaning of s. 245 of the OBCA. The trial judge was satisfied that Mr. Bateni and 228’s expectations that Mr. Jamali would act in accordance with the Caledon Hills Shareholders Agreement and would deal with them, fairly and in good faith, with respect to their interests in Caledon Hills and its application for the Bolton dealership were reasonable. The trial judge was also satisfied that their expectations that Caledon Hills would obtain the Chrysler dealership in Bolton and that 228 would own 20 per cent of the dealership, with Mr. Bateni as the dealer principal and general manager, were reasonable.
[16] On the issue of oppression, the trial judge summarized:
Based on the evidence as I have found it, I am satisfied that Jamali, by his actions, both in causing the Caledon Hills LOI to be rescinded while at the same time causing Caledon Hills affiliate Caledon Chrysler to obtain the Bolton dealership thereby terminating its opportunity to obtain the Bolton Chrysler dealership, and with it 228’s ownership interest in Caledon Hills violated Bateni’s and 228’s reasonable expectations. Further, I am satisfied that Jamali’s actions in that regard were oppressive and were clearly prejudicial to and disregarded the interests of Bateni and 228.
Standard of Review
[17] The standard of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 6-10 and 36-37. On a pure question of law, the standard of review is correctness. The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error.” Questions of mixed fact and law are subject to the palpable and overriding error standard, unless it is clear that the trial judge made an error of law or principle that can be identified independently in the judge’s application of the law to the facts of the case.
Analysis
The Trial Judge’s Finding that Mr. Bateni and Mr. Jamali Entered into the Oral Agreement
[18] The appellants submit the trial judge’s finding that the Caledon Hills Shareholders Agreement was formed and was a binding agreement is an extricable error of law, reversible on a correctness standard. They argue that the three proposed shareholders of Caledon Hills – Mr. Bateni, Mr. Jamali, and Mr. Totonchian – never agreed on two central points: 1) which shareholder would hold what amount of shares; and 2) how Mr. Bateni would pay for his shares with “sweat equity.”
[19] I disagree. With respect, the appellants’ argument conflates the Oral Agreement with the Caledon Hills Shareholders Agreement.
[20] I begin with the Caledon Hills Shareholders Agreement. The trial judge found that the Caledon Hills Shareholders Agreement was not an agreement to agree: “[i]n signing it, the parties, including Jamali, were clearly in agreement with its terms. It is a binding agreement.”
[21] The trial judge explained his finding. First, he found that Mr. Jamali “clearly” agreed with the share percentages as set out in the Caledon Hills Shareholders Agreement because he never deviated from that position. Second, the trial judge found that while Mr. Bateni and Mr. Totonchian accepted Mr. Jamali’s promise to continue discussing their ownership interests, they understood their percentages as set out in the Caledon Hills Shareholders Agreement were their respective ownership interests in Caledon Hills “at that time.” Third, in submitting the Caledon Hills Shareholders Agreement to OMVIC for registration, the parties represented to the government regulator of car dealers who the shareholders were and what their interests were in Caledon Hills.
[22] The terms of the Oral Agreement as found by the trial judge included Mr. Bateni having an ownership interest “which was ultimately settled at 20 per cent on the signing of the Calendon Hills Shareholders Agreement.” The trial judge’s finding that the Oral Agreement was reached over a series of meetings, culminating with the signing of the Caledon Hills Shareholders Agreement was available to him on the evidence at trial.
[23] The terms of the Oral Agreement as found by the trial judge also included that Mr. Bateni would pay for his capital contribution to the dealership by receiving a lower salary from the dealership than he would otherwise receive given his experience and success. The trial judge found that the Oral Agreement was not affected by the fact that the sweat equity to be contributed by Mr. Bateni was not quantified: “[t]he fact that Bateni’s capital contribution would be through a reduced salary was an essential term of the Agreement. The details of the amount and how that contribution would be calculated could be determined later.”
[24] At trial, Mr. Jamali denied that the parties agreed that Mr. Bateni’s capital contribution would be through sweat equity. The trial judge provided detailed reasons explaining why he preferred Mr. Bateni’s evidence on the point. The trial judge found that, consistent with the terms of the Oral Agreement, Mr. Bateni served as manager at North York Chrysler and then at the Bolton dealership at a reduced salary, up until the day that Mr. Jamali wrongfully terminated Mr. Bateni’s employment.
[25] The trial judge’s findings and conclusions were amply supported by the evidence at trial. They disclose no extricable error of law and no palpable and overriding error of fact.
The Trial Judge’s Finding that Mr. Jamali Breached the Oral Agreement
[26] The appellants submit that the trial judge made palpable and overriding errors of mixed fact and law in determining that Mr. Jamali breached the Caledon Hills Shareholders Agreement by “failing to negotiate to resolve an essential term of the agreement ‘in good faith’ and causing the rescission of the Caledon Hills LOI by Chrysler Canada.”
[27] Again, I disagree. The trial judge found that Mr. Jamali’s actions “effectively caused” the Caledon Hills letter of intent to be rescinded by Chrysler Canada. Mr. Jamali then applied on behalf of Caledon Chrysler resulting in Mr. Bateni being deprived of his agreed 20 per cent ownership interest in the Bolton Chrysler dealership. As found by the trial judge, these actions were in breach of the Oral Agreement.
[28] The trial judge explained this finding. The failure of Mr. Jamali and Mr. Totonchian to reach an agreement concerning the latter’s interest in Caledon Hills was the reason why Chrysler Canada rescinded the Caledon Hills letter of intent. The trial judge found, based on the evidence, that the reason they could not agree was because Mr. Jamali failed to negotiate with Mr. Totonchian in good faith. The trial judge further found that,
... having precipitated the rescission of the Caledon Hills LOI, Jamali, before it was rescinded and without any notice to Bateni, submitted an application to Chrysler Canada for the Bolton dealership in the name of Caledon Chrysler without including Bateni as either an owner or the general manager. In so doing, Jamali breached the Agreement with Bateni. In doing so, I am of the view that he acted in bad faith.
[29] The trial judge was satisfied on the evidence that in the absence of Mr. Jamali’s actions, Caledon Hills would have obtained the Bolton dealership from Chrysler Canada, noting that when Mr. Jamali switched to Caledon Chrysler, he used all of the steps that Caledon Hills had taken, enabling him to fast track the approval.
[30] The trial judge found that Mr. Jamali’s subsequent offer to Mr. Bateni to become a 20 per cent shareholder in Caledon Chrysler did not cure the breach because Mr. Jamali required Mr. Bateni to pay for his 20 per cent interest – contrary to the Oral Agreement – and sign a shareholders’ agreement that was contrary to the Caledon Hills Shareholders Agreement.
[31] The trial judge’s finding that Mr. Jamali breached the Oral Agreement was amply supported by the evidence at trial. The trial judge’s reasons disclose no palpable and overriding error of fact or mixed fact and law.
The Trial Judge’s Alleged Failure to Address the Frustration Argument
[32] The appellants submit that the trial judge erred in failing to determine that the conduct of Chrysler Canada, a third party, frustrated any contract that had been agreed to. The trial judge found that Chrysler Canada rescinded the Caledon Hills letter of intent. The appellants say that Chrysler Canada’s rescission effectively frustrated the Caledon Hills Shareholders Agreement and rendered performance impossible. According to the appellants, Chrysler Canada’s rescission of the letter of intent effectively discharged Messrs. Jamali, Bateni, and Totonchian of any contractual obligations they may or could have had to each other.
[33] I do not accept this argument. The Caledon Hills Shareholders Agreement could not be frustrated by the actions of a third party because a unanimous shareholders’ agreement is an agreement that governs the internal management of a corporation.
[34] As for the Oral Agreement, the trial judge found that it was breached by Mr. Jamali in causing the Caledon Hills letter of intent to be rescinded, and by applying on behalf of Caledon Chrysler, excluding Mr. Bateni as an equity owner and general manager. Importantly, the trial judge was satisfied on the evidence that in the absence of Mr. Jamali’s actions, Caledon Hills would have obtained the Bolton dealership from Chrysler Canada. Finally, the trial judge found that Mr. Jamali’s offer to Mr. Bateni to become a 20 per cent shareholder in Caledon Chrysler did not cure the breach because the offer was contrary to both the Oral Agreement and the Caledon Hills Shareholders Agreement.
[35] The trial judge did not err in law. His findings were available to him on the evidence and disclose no palpable and overriding error of fact or mixed fact and law.
The Trial Judge’s Finding that Mr. Bateni and 228 were Complainants
[36] The appellants submit that the trial judge made an extricable error of law by finding that Mr. Bateni and 228 had standing as “proper complainants” to pursue a claim of oppression under s. 248 of the OBCA.
[37] The oppression remedy in s. 248 of the OBCA is available to a complainant. Section 245 provides:
“complainant” means,
(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,
(b) a director or an officer or a former director or officer of a corporation or any of its affiliates,
(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part.
[38] The trial judge found that Mr. Bhateni, as an officer and director of Caledon Hills, and 228, as a shareholder of Caledon Hills, were complainants. The trial judge also found that because Mr. Jamali was the chairman, a director, and 51 per cent owner of Caledon Hills, and the majority owner and controlling mind of Caledon Chrysler, Caledon Hills and Caledon Chrysler were affiliates within the meaning of s. 1(4) of the OBCA.
[39] Both the appellants and the respondents rely on Fedel v. Tan, [2008] O.J. No. 3585, aff’d 2010 ONCA 473. In my view, Fedel supports the respondents, not the appellants. The Court of Appeal noted that in determining Fedel was a proper complainant under s. 245, the application judge found that Fedel had an equity or ownership interest in GPI, a conclusion amply supported by the evidence. The application judge properly considered all the circumstances relating to Tan and Fedel’s 14-year business relationship as it applied to the business operated by GPI. At para. 68, the Court of Appeal explained the broad discretion provided to the court under s. 245(c) of the OBCA:
Section 245(c) provides a court with a broad discretion to determine who is a proper person to bring an application under s. 248. I am satisfied that the nature of Fedel and Tan’s relationship, as well as Fedel’s relationship with GPI provided ample basis for the application judge to exercise the broad discretion conferred on him by s. 245(c) to conclude that Fedel was a proper person to bring an application [citations omitted].
[40] The same is true in this case. Mr. Jamali promised Mr. Bateni an equity interest in a to-be-established corporation, in return for Mr. Bateni working in the business at a reduced salary. The trial judge found that Mr. Bateni did in fact serve as manager at North York Chrysler and then at the Bolton dealership at a reduced salary, up until the day that Mr. Jamali wrongfully terminated Mr. Bateni’s employment. Their working relationship collapsed when, as found by the trial judge, Mr. Jamali precipitated the rescission of the Caledon Hills letter of intent and acted in bad faith by submitting another application in the name of Caledon Chrysler without notice to Mr. Bateni and in breach of the Oral Agreement. As found by the trial judge, under the terms of the Oral Agreement, Mr. Bateni was entitled to 20 per cent of the shares in Mr. Jamali’s Bolton dealership, whatever corporate vehicle was ultimately used.
[41] The findings and conclusions of the trial judge were amply supported by the evidence. The trial judge properly considered Mr. Bateni and Mr. Jamali’s relationship, and the terms of the Oral Agreement, in determining that Mr. Bateni and 228 were proper persons within the meaning of s. 245(c) of the OBCA. There is no basis to interfere with the trial judge’s exercise of his discretion in this regard.
The Trial Judge’s Finding of Oppression
[42] The appellants submit that, based on the trial judge’s factual findings, it was not open for him to determine that Mr. Bateni had reasonable expectations as a shareholder of Caledon Hills.
[43] I would not give effect to this submission.
[44] Oppression proceedings that are based on the enforcement of prior contractual arrangements between the parties tend to be clearer than other oppression proceedings because the contract may inform the court’s decision as to the reasonable expectations of the parties: Itak International Corp. v. CPI Plastics Group Limited and Clark, [2006] O.J. No. 2637 (S.C.J.), at para. 47.
[45] The trial judge found that Mr. Bateni and Mr. Jamali were parties to the Oral Agreement. The trial judge further found that the respondents’ expectations that Caledon Hills would obtain the Chrysler dealership in Bolton, 228 would own 20 per cent of the dealership, and Mr. Bateni would be the dealer principal and general manager – all in accordance with the terms of the Oral Agreement – were reasonable.
[46] The trial judge was also satisfied that Mr. Bateni and 228’s expectations that Mr. Jamali would act in accordance with the Caledon Hills Shareholders Agreement and would deal with them fairly and in good faith in respect of their interests in Caledon Hills and its application for the Bolton dealership were reasonable.
[47] The trial judge found on the evidence that Mr. Jamali, by his actions in causing the Caledon Hills letter of intent to be rescinded, while at the same time causing its affiliate Caledon Chrysler to obtain the Bolton dealership, thereby terminating Caledon Hills’ opportunity to obtain the Bolton dealership, violated Mr. Bateni and 228’s reasonable expectations. The trial judge was satisfied that Mr. Jamali’s actions were oppressive, clearly prejudicial to, and disregarded their interests.
[48] The findings of the trial judge in respect of Mr. Bateni and 228’s reasonable expectations were clearly available to him on the evidence at trial. The appellants have not identified any error of law, nor have they identified any palpable and overriding error in the findings of the trial judge.
Disposition
[49] For these reasons, I would dismiss the appeal. In accordance with the parties’ agreement as to costs, the appellants shall pay the respondents the amount of $20,000 all inclusive.
“Ryan Bell J.”
“I agree: McLean J.”
“I agree: Nishikawa J.”
Released: March 16, 2023
CITATION: Bateni v. Jamali, 2023 ONSC 1761
DIVISIONAL COURT FILE NO.: 869/21
DATE: 2023/03/16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McLean, Ryan Bell, and Nishikawa JJ.
BETWEEN:
Roy Bateni also known as Mohammad Ali Bateni and 2287214 Ontario Ltd.
Plaintiffs/Respondents
– and –
Massoud Jamali also known as Tom Jamali and Caledon Chrysler Dodge Jeep Ram Inc.
Defendants/Appellants
REASONS FOR JUDGMENT
Ryan Bell J.
Released: March 16, 2023
[^1]: Business Corporations Act, R.S.O. 1990, c. B.16.