2026 ONSC 1720

DIVISIONAL COURT FILE NO.: 370/25

DATE: 20260323

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Backhouse, Lococo and Kaufman JJ.

BETWEEN: )

SHERIF GERGES PHARMACY PROFESSIONAL CORPORATION on its

own behalf as shareholder of and in the name of and on behalf of SEVA DRUG MART INC. and, SHERIF GERGES on his own behalf as shareholder of and in the name and on behalf of ELINTON DRUGS INC., and SHERIF GERGES on his own behalf as shareholder of and in the name and on behalf of WOODBINE DOWNS HEALTHCARE REALTY INC.

) Christopher A.L. Caruana, for the

) Respondents in appeal (Applicants)

Respondents in appeal (Applicants) )

– and – )

NIAM PHARMACEUTICALS INC., CONNECT RX INC., o/a SRX HEALTH WHOLESALE & DISTRIBUTION, ADESH VORA PHARMACY PROFESSIONAL CORPORATION and ADESH VORA

) Robert Brush and Clarke Tedesco, for the

) Appellants (Respondents)

Appellants (Respondents) )

) HEARD at Toronto: December 8, 2025

REASONS FOR DECISION

By the Court

Introduction

The appellant Adesh Vora and related parties appeal the order of Justice Jane O. Dietrich of the Superior Court of Justice dated April 2, 2025, with reasons reported at 2025 ONSC 2058, 176 O.R. (3d) 303 (the “Decision”).

The respondents in appeal are Sherif Gerges, Sherif Gerges Pharmacy Professional Corporation (“Gerges PC”), Seva Drug Mart Inc. (“Seva”), Eglinton Drugs Inc. (“Eglinton”) and Woodbine Downs Healthcare Realty Inc. (“Woodbine”).

Mr. Vora and Mr. Gerges are former business partners. They are direct or indirect equal shareholders of Seva and Eglinton (the “Pharmacies”), companies that operate pharmacies. They are also direct or indirect equal shareholders of a real estate holding company, Woodbine Downs Healthcare Realty Inc. (“Woodbine”).

Mr. Gerges alleges that: (i) Mr. Vora has carried on the business or affairs of the Pharmacies in a manner that is oppressive or unfairly prejudices Mr. Gerges; and (ii) Mr. Vora without Mr. Gerges’ knowledge or consent unilaterally sold Woodbine’s real properties and transferred the net sale proceeds to Niam.

Mr. Gerges together with Gerges PC, the Pharmacies and Woodbine (collectively, the “Gerges respondents” or “Gerges”) brought an application for an order under the Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”) to, among other things, appoint an inspector to investigate the business and financial affairs of the Pharmacies. They also sought leave to bring derivative actions on behalf of the Pharmacies and Woodbine against the appellants. In the Decision, the motion judge made an investigation order appointing the inspector and granted leave to bring the derivative actions.

The appellants submit that the motion judge erred by appointing an inspector when (i) a prima facie case has not been made out, (ii) there are other more appropriate methods to obtain the information in question, and (iii) the scope of the investigation should not cover claims which they submit are statute barred for limitation reasons. The appellants further submit that (i) the proposed action is required to be determined by way of arbitration, (ii) a derivative action is not appropriate and not warranted in the circumstances and (iii) the motion judge erred in determining that there was no sufficient alternative available remedy such as the oppression remedy under the OBCA.

The appellants ask the court to set aside the investigation order and deny leave to bring the derivation actions. In the alternative, if the investigation order is not set aside, the appellants request that the inspector be restricted to dealing with claims that are not statute barred.

For the reasons below, the appeal is dismissed.

Background

Relationship between the parties

Mr. Vora and Mr. Gerges became business partners in or around 2010. They have direct or indirect equal shareholdings in the Pharmacies. Mr. Vora and Mr. Gerges previously indirectly owned nine pharmacies together. They also have equal shareholdings in Woodbine, a real estate

holding company: Decision, at paras. 6-7. Mr. Vora and Gerges are each directors of Seva, Eglinton and Woodbine.

In June 2011, the Pharmacies each entered into a unanimous shareholders agreement (“USA”) with their respective shareholders. There is no USA with respect to Woodbine: Decision, at para. 23. Each of the USAs included provisions relating to resolution of disputes by arbitration under the Arbitration Act, 1991, S.O. 1991, c. 17, as outlined further below: see Decision, at paras. 24-27.

Mr. Vora also owns or has a controlling interest in the appellants Adesh Vora Pharmacy Professional Corporation (“Vora PC”), Niam Pharmaceuticals Inc. (“Niam”) and ConnectRx Inc. (“ConnectRX”). SRX Health Solutions Inc. ("SHSI"), the parent company of ConnectRx, owns or controls various other pharmacies and other companies in which Mr. Vora has an interest (collectively, the “SRS Group”). Neither Mr. Gerges nor the Pharmacies own shares directly or indirectly in SHSI or ConnectRx: Decision, at paras. 1(a)(i), 8-9.

Disputed related party transactions

In the Decision, at para. 10, the motion judge provided background for the dispute between the parties arising from Mr. Gerges’ claim that the appellants have treated the Pharmacies as part of the SRX Group, even though Mr. Gerges has no interest in the SRX Group. At para. 10, the motion judge noted the following issues:

a. The SRX Group provide certain administrative or operational support functions to the Pharmacies. Since at least July 2023, inventory purchases of the Pharmacies were pooled with the SRX Group through SHSI. Rebates associated with those purchases were received by SHSI and remain owing to the Pharmacies to some extent (the “rebate issue”). The appellants provided some information relating to the rebate issue to BDO (accountants Gerges retained), but the evidence was incomplete. BDO was unable to verify the rebates at issue and the amounts SHSI paid to the Pharmacies.

b. BDO was also concerned that the amount of inventory that the Pharmacies paid for as set out in the invoices was much greater than the inventory the Pharmacies received (the “overstated inventory issue”). Mr. Vora admitted that the Pharmacies were used to purchase inventory for members of the SRX Group that were experiencing credit problems (the “credit issue”). It may be that the credit issue was related to the overstated inventory issue, but BDO was unable to perform a full reconciliation based on the records that the appellants provided.

c. Seva entered into a contract to make certain charitable donations to a hospital foundation, but instead paid the donations to Seva Foundation (of which Mr. Vora is a director) rather than directly to the hospital foundation. BDO raised concern that the underlying charitable program did not benefit Seva from a commercial or economic perspective and questioned whether benefits were received by parties related to the appellants (the “donations issue”).

Mr. Gerges claimed that the issues identified above showed a pattern of related party transactions that Mr. Vora, as a director of the Pharmacies, was required to disclose: Decision, at para. 11.

In paras. 12-13 of the Decision, the motion judge noted that there were two previous consent court orders (by Conway J. dated May 27, 2024, and Kimmel J. dated December 6, 2024) for the production of records to Mr. Gerges relating to the disputed transactions. However, despite the court orders, the appellants “have not provided information sufficient to allow Mr. Gerges to reconcile the extent of the related party transactions and the effect on the pharmacies. The evidence is that relevant records are with SHSI or other members of SRX Group controlled by Vora”: Decision, at para. 14. Subsequent to Kimmel J.’s order, Mr. Gerges “took over exclusive operation of the pharmacies, changed the staff and opened new bank accounts”: Decision, at para. 15.

Sale of Woodbine properties

On or about April 12, 2024, Mr. Vora, without Mr. Gerges’ knowledge or consent, amended the provincial corporate profile report for Woodbine to remove Mr. Gerges as a director. Mr. Vora then proceeded to sell real properties that Woodbine owned, without Mr. Gerges’s knowledge or consent, and transfer the net proceed of approximately $2 million to Niam: Decision, at paras. 17-20.

In addition to the Decision under appeal, the parties’ dispute arising from the sale of the Woodbine properties was the subject of Dietrich J.’s previous decision dated February 12, 2025 (amended February 13, 2025), reported at 2025 ONSC 970 (the “Feb. 2025 Decision”), referred to further below.

Superior Court application and decisions

Notice of Application

By Notice of Application dated November 15, 2024 (amended November 25, 2024 and January 7, 2024), the Gerges respondents brought a Superior Court application against the appellants. Gerges sought an order under Part XIII of the OBCA to appoint an inspector to investigate the business and financial affairs of the Pharmacies. They also sought an order under

s. 246 of the OBCA to (i) grant leave to Mr. Gerges and Gerges PC to commence a derivative action in the name of and on behalf of the Pharmacies, and (ii) grant leave to Mr. Gerges to commence a derivate action in the name of and on behalf of Woodbine. The application included a draft Statement of Claim, alleging, among other things, “fraud, conversion, a constructive trust over the proceeds of sale, and oppression”: Feb. 2025 Decision, at para. 20.

Motion for interim relief and Feb. 2025 Decision

By way of interim relief, the Gerges respondents also sought (i) a Mareva injunction relating to the net proceeds of the Woodbine property sale (the “Funds”), (ii) a preservation order with respect to the Funds, and (iii) a production order for documents in Mr. Vora’s power, possession or control relating to the Funds: Feb. 2025 Decision, at para. 1.

The motion for interim relief came before Dietrich J. on February 3, 2025. In his evidence, Mr. Vora did not contest that the Woodbine properties were sold and that the proceeds transferred without Mr. Gerges’ knowledge. As set out in the Feb. 2025 Decision, at paras. 11, 14, Mr. Vora offered the following explanation:

11. Mr. Vora, however, attempts to justify his actions. He states that he and Mr. Gerges together owned nine pharmacies. Those pharmacies were losing substantial amounts each month. Mr. Gerges was subject to a non-dissipation order ("NDO") in his family law proceedings and was not able to sell his shares in those pharmacies (or related companies). To keep the pharmacies going, Mr. Vora caused other pharmacies to make a series of inter-company loans, and Mr. Vora advanced funds to the various pharmacies as well. Mr. Vora says that the only viable option was the sale of the Woodbine Downs properties.

12. Mr. Vora's position is that he has a number of claims against Mr. Gerges that should be subject to equitable set off, such that the amount ultimately to be paid to Mr. Gerges as shareholder of Woodbine Downs will be even further reduced.

In the Feb. 2025 Decision, the motion judge dismissed the motion for interim relief. In considering whether to grant the Mareva injunction, the motion judge concluded, at para. 20, that “there is a strong prima facie case, at least for conversion”, despite Mr. Vola’s explanation. At para. 24, the motion judge found that “Mr. Gerges has established a strong prima facie case”, satisfying the first element of the test for a Mareva injunction. However, the motion judge concluded, at para. 31, that other elements of the Mareva test had not been satisfied. She dismissed the request for a Mareva injunction as well as the other requested interim relief.

Decision under appeal

The Gerges respondents’ request to appoint an inspector and for leave to bring the derivative actions came before Dietrich J. for hearing on March 27, 2025. On April 2, 2025, the motion judge released the Decision, appointing an inspector and granting leave to bring the derivative actions.

With respect to appointing an inspector, the application judge held that the Gerges respondents met the low bar of establishing a prima facie case that Mr. Vora had been exercising his powers as a director in an oppressive or unfairly prejudicial way. Further, the motion judge considered and rejected the appellants’ argument that there were cheaper and better ways to obtain the information the Gerges respondents seek: Decision, at paras. 36-50.

The appellants conceded that the arbitration provisions in the shareholders agreement do not apply to the relief sought by Mr. Gerges in respect of the appointment of the inspector. With respect to whether the proposed action was required to be determined by way of arbitration, the motion judge rejected this argument on the grounds that the appellants failed to satisfy the third and fourth elements of the test in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, [2022] 3 S.C.R. 265: Decision, at paras. 51-60.

The motion judge concluded that the third element was not satisfied because the relief sought in the proposed action does not on the face of the arbitration provisions fall within its scope. She further found that the fourth element was not met because rather than bringing a motion as contemplated by s.7(1) of the Arbitration Act to stay the relief requested, the appellants fully and actively participated in the proceedings since the delivery of the original Notice of Application without raising the arbitration provisions or otherwise objecting to the proceedings on that basis.

As to whether leave to pursue the derivative actions should be granted and if so on what terms, the appellants conceded that in respect of the statutory test, only the fifth element, the best interests of the company, is in dispute. They argued that there were other alternative remedies available, so leave should be denied. The appellants argued that because the only shareholders of the Pharmacies and Woodbine are Mr. Gerges and Mr. Vora, either directly or through their holding companies, any benefit from the derivative actions would accrue solely to Mr. Gerges rather than to the companies themselves.. The motion judge rejected this argument. She held that the claims for unjust enrichment and conversion can only be advanced by the Pharmacies and Woodbine, not by Mr. Gerges personally, and therefore leave was appropriate.. Further, the motion judge was not persuaded that certain claims were statute barred at this point, and that it would be inappropriate to limit the claims at this stage: Decision, at paras. 61-70.

By Notice of Appeal to this court dated May 2, 2025, the appellants appeal the Decision.

Appeal from Decision

Jurisdiction and standard of review

The Divisional Court has jurisdiction to hear this appeal. An appeal from a final decision of a judge under the Construction Act, R.S.O. 1990, c. C.30, lies to the Divisional Court: Construction Act, s. 71(1).

The appellants argue that the Decision is a final order because the substance of the application was determined by the Decision. On June 18, 2025, O’Brien J. directed that the issue of whether the Decision is an interlocutory or final order be left to this panel. The appellants submit that where an order disposes of the issues raised in the proceeding, the order is final, even if that order does not finally decide the real underlying matter in dispute between the parties: Buck Bros. Ltd. v. Frontenac Builders Ltd. (1994), 1994 2403 (ON CA), 19 O.R. (3d) 97 (C.A.), at p. 101. In Sax v. Aurora, 2018 ONSC 1834 (Div.Ct.), at paras. 3, 19-33, the court held that granting leave to commence a derivative action was a final order. In Akagi v. Synergy Group (2000) Inc., 2015 ONCA 368, 125

O.R. (3d) 401, at para. 56, the Court of Appeal for Ontario held that granting leave to appoint a receiver was a final order and accordingly, leave to appeal is not required.

The respondents made no submissions on the issue.

We agree with the appellants that the Decision is a final order and no leave is required.

The appellate standards of review apply, as set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8, 10, 19, 25-37. The standard of review is correctness for questions of law. The standard of review is palpable and overriding error for questions of fact and for

questions of mixed fact and law except where there is an extricable question of law, which is reviewable on a correctness standard.

Issues to be determined

The issues to be determined are:

Issue 1: Did the motion judge err in not dismissing the respondents’ request for

leave to bring a derivative action on the basis of the arbitration provisions?

Issue 2: Did the motion judge err in ordering the appointment of an inspector to investigate the business and financial affairs of the Pharmacies?

Issue 3: Did the motion judge err in granting leave to commence a derivative action in the name of and on behalf of the Pharmacies and Woodbine?

As explained below, we see no error in the motion judge’s conclusions.

Analysis

Issue 1: Did the motion judge err in not dismissing the respondents’ request for leave to bring

a derivative action on the basis of the arbitration provisions?

The appellants submit that USAs existed for the Pharmacies, and one was also intended for Woodbine, but was never finalized. The USAs contained arbitration clauses which directed any dispute or difference between the parties to be settled by arbitration. The appellant submits that the motion judge erred in taking any action in regard to the dispute between the parties, except for assisting in the conduct of the arbitration or enforcement of its awards.

The appellants argue that the motion judge erred in finding that the second and third elements of the Peace River test were not met. With respect to the third element—whether the court proceedings fall within the scope of the arbitration agreement—they argue that the motion judge should have found that it was met. The appellants submit that the motion judge should have considered that the non-parties to the USAs are all controlled by either Mr. Vora or Mr. Gerges. In their view, this control structure supports the conclusion that the disputes fall within the arbitration agreements.

Further, the motion judge should have found that the principle of competence-competence applies. That principle provides that arbitrators should be allowed to exercise their power to rule first on their own jurisdiction and that part of that jurisdiction includes the procedural determination of whether non-parties should be added to the arbitral proceeding: Ontario Medical Assn. v. Willis Canada Inc., 2013 ONCA 745, 118 O.R. (3d) 241, at para. 20; Toronto Standard Condominium Corporation No. 2299 v. Distillery SE Development Corp., 2023 ONSC 5340, at paras. 1-5, 16-18.

On the fourth element of the test —whether the party seeking a stay has taken a step in the proceeding—the appellants submit that the motion judge erred because the Gerges respondents commenced an application in which there were some issues unrelated to the arbitration provisions. The appellants say that the motion judge misconstrued the appellants’ participation in parts of the

proceeding unrelated to the arbitration clause as taking steps in the proceeding within the meaning of the fourth step of the test. The appellants submit that there is no statutory exception that prevents the matter from going to arbitration.

Finally, the appellants submit that while no motion pursuant to s. 7 of the Arbitrations Act was brought, it was premature to bring this motion, because leave had not yet been granted to bring the derivative actions.

No error in not dismissing the respondents’ request for leave to bring a derivative action on the

basis of the arbitration provisions

Sections 7(1) and 7(2) of the Arbitration Act provide:

Stay

7(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

Exceptions

(2) However, the court may refuse to stay the proceeding in any of the following cases:

1. A party entered into the arbitration agreement while under a legal incapacity.

2. The arbitration agreement is invalid.

3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.

4. The motion was brought with undue delay.

5. The matter is a proper one for default or summary judgment.

Although the appellants did not bring a motion as contemplated by s. 7(1) of the Arbitration Act to stay the application, the motion judge was not effectively requiring the appellants to bring a motion to stay. The motion judge accepted the appellants’ argument that she should look to the framework for a mandatory stay set out in Peace River in determining whether the application should be dismissed in favour of arbitration. She properly instructed herself at para. 54 of the Decision on the four technical requirements for a mandatory stay in favour of arbitration:

1. an arbitration agreement exists;

2. a party to the arbitration agreement has commenced litigation;

3. the court proceedings are within the scope of the arbitration agreement; and

4. the party applying for a stay of the court proceedings has not taken a step in the proceeding: see Wasylyk v. Lyft, 2024 ONSC 664, at para. 19, relying on Peace River.

The motion judge found that there was no dispute over the first two technical requirements having been met. With respect to the third requirement, the motion judge accepted that the arbitration provisions only apply to disputes between the shareholders as defined in the USAs which expressly excludes the “Corporation”, that is, the Pharmacies. The shareholders do not include the Pharmacies on behalf of whom causes of action in the proposed action are being brought. The motion judge found that to the extent the proposed action is brought on behalf of the Pharmacies and Woodbine, the relief does not, on the face of the arbitration provisions, fall within its scope.

The appellants’ argument ignores that shareholders and corporations are separate entities. It also ignores that there is no shareholder agreement for Woodbine, and Woodbine is not a party to the Pharmacies’ shareholder agreements.

The motion judge determined that as the technical requirements outlined in Peace River were not met, the principle of competence-competence did not arise. The motion judge found that the appellants had attorned to the jurisdiction of the court to hear the matter.

In Peace River, at para. 42, the Supreme Court found that:

The competence-competence principle is not absolute however. A court may resolve a challenge to an arbitrator’s jurisdiction if the challenge involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration of the evidentiary record.

It is apparent on the face of the USAs that the Pharmacies are not parties and are not subject to the arbitration provisions. It is plain on the face of the record that the Peace River requirements for a mandatory stay have not been met. The motion judge did not err in rejecting the appellants’ competence-competence argument.

The motion judge’s interpretation of the shareholder agreements is a question of mixed fact and law and is reviewable on a standard of palpable and overriding error. There is no such error in this case.

The motion judge also accepted that the appellants had not met the fourth technical requirement – that the party applying for a stay of the court proceedings has not taken a step in the proceeding. The appellants accepted service of the Notice of Application, delivered responding materials, appeared before Justice Kimmel, entered into a consent order, and participated in cross-examinations and a scheduled hearing, among other appearances.

The motion judge relied upon Azam v. Multani Custom Homes Ltd., 2022 ONSC 6536, which held that a party who is aware of an arbitration provision and yet fully and actively participates in the court process has waived its right to rely on the arbitration provision and has attorned to the jurisdiction of the court.

In the Decision, at paras. 57-58, the motion judge found:

The Arbitration Provisions were referred in Gerges notice of application. At ground

(n) of the Amended Notice of Application, the Arbitration Provisions were

referenced along with the following statement: “The within dispute is not a dispute or difference between shareholders within the meaning of the [shareholders agreements], as it involves causes of action being advanced by the Pharmacies and causes of action being advanced against corporations who are not parties to the arbitration agreement.” The language referred to was part of the amendments and had existed in the originally issued Notice of Application.

Accordingly, the respondents were aware of the Arbitration Provisions since the delivery of the original Notice of Application. Rather than bring a motion for a stay of the relevant relief under s. 7(1) of the Arbitration Act, the respondents have participated in the litigation as noted above only raising the Arbitration Provisions in their responding factum filed for this hearing.

We find no error in the motion judge’s conclusion that the arbitration provisions did not require dismissal of the respondents’ request for leave to bring a derivative action.

Issue 2: Did the motion judge err in ordering the appointment of an inspector to investigate the business and financial affairs of the Pharmacies?

The appellants submit that the motion judge made palpable and overriding errors with respect to the third element of the test for appointing an inspector, and with respect to the criteria outlined in the case law.

The appellants agree with the motion judge’s articulation of the third part of the test which she sets out at para. 40 of the Decision:

40. As for the third portion of test, is it appropriate to appoint an inspector, recognizing that the remedy is both discretionary and extraordinary, the court has considered the following factors:

(a) whether the applicant needs access to the information;

(b) whether there are better or less expensive means to acquire the information;

(c) whether the proposed investigation would give a tactical advantage to the applicant; and

(d) the expense of the investigation as compared to the benefits see: Khavariv v Mizrah, 2016 ONSC 4934 at para 41.

The appellants submit that it was not appropriate to appoint the inspector because the limited information held by the SRX Group would still require validation and instead, the information could be sought from the neutral third parties who hold this information.

No error in ordering the appointment of an inspector to investigate the business and financial affairs of the Pharmacies

The appellant’s submission ignores that the motion judge found that despite two previous court orders requiring the appellants to produce records to reconcile the extent of the related party transactions and the effect on the Pharmacies, the appellants have not done so. The motion judge found that the information sought by Mr. Gerges is required to provide an accurate picture of the

Pharmacies’ financial condition and determine the extent and financial impact of Mr. Vora’s related party dealings. She further found that relevant records are with SHSI or other members of SRX Group controlled by Mr. Vora and she was not satisfied that the alternative means to acquire the information proposed by the appellants was better: Decision, at paras. 12-14, 41-42.

Clearly, in the face of two court orders which have not been complied with, bringing a further motion for compliance, obtaining the information from third party sources when the documents are controlled by the appellants, proceeding through the discovery process or having a financial audit without the disclosure, are not better or less expensive means to acquire the information. It was open to the motion judge to reject the appellants’ argument that there were better and less expensive ways for the Gerges respondents to acquire the information rather than appointing an inspector. There is no error.

The motion judge found that when considering the alternative means of obtaining the information proposed by the appellants, the appointment of an investigator should have the benefit of being able to proceed in an efficient and focused manner, the proposed scope is relatively defined and that a complete audit of the Pharmacies would be much broader and likely more expensive: Decision, at para. 43. All of these findings were open to the motion judge to make.

The appellants submit that jurisprudence establishes that the appointment of an inspector is an extraordinary remedy that should not be used to assist parties in preparing for litigation, to determine whether funds were used for “legitimate” purposes, or to support a finding of oppressive conduct: Kerbel v. Morris Kerbel Holdings Ltd., 2023 ONSC 529, at para. 59. The appellant submits that the motion judge made a palpable and overriding error in distinguishing the facts of Kerbel on two grounds. First, there is no basis to distinguish this case from Kerbel, because in both proceedings the applicants can have the information and materials to which they say they are entitled and they require if they commence oppression proceedings. Second, the motion judge erred in distinguishing Kerbel on the grounds that Mr. Gerges in this proceeding is not looking for the inspector to determine legal issues, but rather to find facts. The appellants submit that this statement is contrary to Mr. Gerges’ evidence during cross examination.

We disagree. The motion judge did not err in principle, nor did she make a palpable and overriding error in distinguishing Kerbel. The distinction between Kerbel and this case is clear In Kerbel, the court was satisfied with the respondents’ undertaking to provide material and information relating to the four core transactions about which the applicants complained and on which they rely for their allegations of oppression: Kerbel, at para. 62. The motion judge found at para. 45 that this “is not the present case”. In Kerbel, the court found at para. 68 that the applicants already had the material facts sufficient to prepare a claim alleging oppressive conduct and was not satisfied that the second and third elements of the test had been met. In the present case, the motion judge at para. 45 found that Mr. Gerges is not looking for the inspector to determine legal issues, but rather to find facts and obtain documents to support an accurate picture of the Pharmacies’ financial position – which she noted is, as stated by the Court of Appeal in Akagi, the purpose of an inspector.

Mr. Gerges’ evidence during cross-examination cannot be reasonably read to establish that he was looking for the inspector to determine legal issues.

Finally, the appellants submit that the motion judge erred in finding that the limitation period did not begin to run in October 2022, when former counsel for the respondents wrote to the appellants alleging issues with inventory and invoicing because the indications in the letter were only “suspicions”. The appellants submit that at a minimum, the issue related to invoicing and inventory raised on this application were barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. They further submit that this is an error of law for which the correctness standard applies.

The motion judge found that it is not clear-cut based on the record before her that certain claims are statute barred based on limitation arguments. She found that it is not clear that the suspicions related to inflated invoices referred to in the correspondence are the same as the claims raised in the Issues or whether the conduct complained of consists of a series of discrete events or a pattern of ongoing conduct. She found that determination is best made in the context of a more fulsome record.

The motion judge did not err in declining to limit the investigation order to claims that the appellants claim are statute-barred. The appellants seek to have this court substitute its own findings for those of the motion judge and to exercise its discretion differently. The motion judge did not err in distinguishing or declining to follow Jones v. Mizzi, 2016 ONSC 4907, 61 B.L.R. (5th) 95. The reasons in that case do not explain the nature of the claims or how the inspector would be able to determine which issues were time-barred and which were not and therefore provided no guidance on this point: see Jones, at paras. 18-19.

Issue 3: Did the motion judge err in granting leave to commence a derivative action in the name of and on behalf of the Pharmacies and Woodbine?

We have addressed above the appellants’ submissions that leave to commence the derivative actions should have been denied on the basis that the Pharmacies were subject to the arbitration clause and that the inventory‑related claims were statute‑barred. We now turn to the appellants’ remaining argument: that the motion judge erred in her application of the statutory test for granting leave to commence a derivative action.

The appellants submit that the motion judge correctly stated the test for leave to commence a derivative action, and they concede the first four elements of the test. However, they take issue with the motion judge’s application of the last two elements: whether it is in the best interests of the companies to grant leave and the availability of adequate alternative remedies.

The appellants submit that the motion judge committed a palpable and overriding error in determining that the companies stood to gain more from granting leave to commence the derivative actions. They argue that to the extent that the companies have suffered a loss due to actions on the part of Mr. Vora, any money awarded by the court would be paid to the applicable company, and the company would pay that out to Mr. Vora and to Mr. Gerges respectively. In response to this argument, the motion judge held that the companies may have other stakeholders. The appellants submit that the motion judge misdirected herself since she was required to compare the benefits to be gained upon the evidence. The evidence did not support the motion judge’s conclusion.

The appellants submit that the motion judge made an error in law in finding that only the Pharmacies and Woodbine would be able to assert claims of unjust enrichment and conversion. The appellants argue that courts have held that the oppression remedy is available to rectify

conduct by directors that amounts to self-dealing at the expense of the corporation or other shareholders. Therefore, these issues could be asserted by Mr. Gerges or Gerges PC as shareholders under the oppression remedy.

No error in granting leave to commence a derivative action in the name of and on behalf of the Pharmacies and Woodbine

The issues the appellants raise on this appeal are issues of fact or mixed fact and law, and require that the motion judge made a palpable and overriding error. In arguing that the derivative claims are not in the best interests of the companies because even if the respondents are successful, Mr. Vora would be entitled to half of the economic benefit of a successful judgment, disregards the corporate structure.

The motion judge rejected the appellants’ argument that only Mr. Gerges will obtain a benefit if leave to commence a derivative action is granted. She found that the Pharmacies and Woodbine may have other stakeholders and that the evidence was not clear that all creditors of Woodbine have been paid. While Mr. Vora explains where the proceeds were paid, he does not assert that “all” creditors were paid as is incorrectly stated in the Appellants’ factum. The motion judge’s finding was supported by Mr. Vora’s evidence that the accounting for the Woodbine proceeds is incomplete. Similarly, the motion judge did not speculate as to whether the Pharmacies and Woodbine have other stakeholders. The Pharmacies are going concerns and their employees and creditors are clearly stakeholders.

The motion judge found that as noted in Crescent (1952) Ltd. v. Jones, 2011 ONSC 756, at para .36, looking at the benefits from the point of view of some of the shareholders is the wrong point of view – it is the point of view of the corporation itself that should be considered: Decision, at para. 64. The motion judge held, at para. 65:

As the court found in Crescent, if funds have been diverted from a corporation, it may be that the shareholder will benefit, but remedying the alleged wrongs must also be in the corporations’ interest: see Crescent at para 38. Here if Mr. Vora has diverted funds from the Pharmacies to his related companies, then it must be in the Pharmacies’ interest to have those funds returned. Similarly, it is not disputed that Mr. Vora has removed approximately $2 million from Woodbine Downs and transferred those funds to Niam (a company related to Mr. Vora). It is in Woodbine Downs’ interest to remedy that alleged wrong to Woodbine Downs.

The motion judge considered the appellants’ argument that Mr. Gerges could assert the claims in an oppression remedy application and therefore leave to pursue the proposed actions on behalf of Woodbine and the Pharmacies should be denied. In concluding that oppression is not an alternative remedy to address all of the claims asserted in the proposed actions, she found that the wrongs alleged in the proposed actions include wrongs done to the corporations, not to Mr. Gerges. At para. 67 of the Decision, she found:

As in Crescent, Mr. Vora is a director of both the proposed plaintiffs and the proposed defendants, however, the proposed plaintiffs and the proposed defendants do not, as submitted by the respondents, all have the same shareholders. Gerges is not a shareholder of ConnectRx and SHSI. As in Crescent,

it is alleged that Mr. Vora has preferred his interests and the interests of the proposed defendant corporations over that of the Pharmacies and Woodbine Downs, which is a breach of a director’s duties. With respect to Woodbine Downs the Proposed Action also seeks to assert claims of unjust enrichment and conversion. Only the Pharmacies and Woodbine Downs can sue for those alleged breaches.

The appellants rely upon the Court of Appeal’s decision in Binscarth Holdings LP v. Anthony, 2024 ONCA 522, 172 O.R. (3d) 522. In Binscarth, the court considered whether limited partners could bring a common law derivative action on behalf of a limited partnership in the context of the Limited Partnerships Act, R.S.O. 1990, c. L.16, which does not provide a statutory right to commence a derivative action. The court found that as parties to a limited partnership agreement, the limited partners have standing to sue the general partner. As they can pursue a direct claim, resort to a derivative action is not required. This is distinguishable from the facts in this case which involve corporations and not a limited partnership. A corporation has a separate legal personality from its shareholders and only the corporation has a cause of action for wrongs done to it: Biscarth, at para. 59.

Both proposed actions are brought to recover damages to the Pharmacies and Woodbine Downs, respectively, resulting from Mr. Vora’s breach of his fiduciary duties, his actions preferring his interests and those of the other corporate defendants over theirs and, in the case of Woodbine, conversion of its property and remedies for unjust enrichment. These are not personal shareholder claims, even for shareholders of a closely held corporation. The Court of Appeal in Rea v. Wildeboer, 2015 ONCA 373 at paras. 19, 27 made it clear that the oppression remedy has not displaced the rule in Foss v. Harbottle, [1843] J.C.J. No. 1, and that the claims must be advanced by the Pharmacies and Woodbine themselves.

Conclusion

For the above reasons, we dismiss the appeal and order the appellants to pay costs of the appeal to the Gerges respondents in the agreed amount of $35,000 all inclusive.

J.

Kaufman J.

Date: March 23, 2026

2026 ONSC 1720

DIVISIONAL COURT FILE NO.: 370/25

DATE: 20260323

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Backhouse, Lococo and Kaufman JJ.

BETWEEN:

SHERIF GERGES PHARMACY PROFESSIONAL CORPORATION on its own

behalf as shareholder of and in the name of and on behalf of SEVA DRUG MART INC. and, SHERIF GERGES on its own behalf as shareholder of and in the name and on behalf of ELINTON DRUGS INC., and SHERIF GERGES on its own behalf as shareholder of and in the name and on behalf of WOODBINE DOWNS HEALTHCARE REALTY INC.

Applicants (Respondents)

– and –

NIAM PHARMACEUTICALS INC., CONNECT RX INC., o/a SRX HEALTH WHOLESALE & DISTRIBUTION, ADESH VORA PHARMACY PROFESSIONAL CORPORATION and ADESH VORA

Respondents (Appellants)

REASONS FOR DECISION

THE COURT

Date: March 23, 2026