SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Latvian House Toronto Limited, Applicant

AND:

Fraternity “Lidums” et al., Respondents

BEFORE: D. M. Brown J.

COUNSEL: J. Heller and D. Kuze, for the Applicants

S.Tint, for the Respondent, Toronto Latvian Association

R. Watt, for Visvaldis Freimanis, a shareholder

U. Kancharla, for Baiba Kurens

HEARD: February 16, 2012

REASONS FOR DECISION

I. Motions for directions on the liquidation of a corporation

[1] A private for-share capital corporation incorporated under the Ontario Corporations Act, the Latvian House Toronto Limited was authorized to wind up its affairs by order of Pepall J. made April 8, 2009. LHTL has sold its real estate assets, and the corporation applies for a variety of relief in order to commence the distribution of its assets to its shareholders.

[2] On the motion before me several issues were raised: (i) the process for setting the list of shareholders eligible to receive distributions; (ii) the treatment of the portion of distributable assets to those shareholders whose addresses are not known; (iii) whether the funds of LHTL should continue to be invested in an interest-bearing account; (iv) whether the list of shareholders filed with the court should be sealed; and (v) how to deal with the claim of Ms. Baiba Kurens to a share of the distribution.

II. The shareholders’ list and the submissions of Mr. Freimanis and Ms. Kurens

[3] LHTL filed extensive evidence detailing its efforts to identify the shareholders of the corporation entitled to share in the distribution of its assets, as well as the history of the structure of the shareholdings in the company. I am satisfied that LHTL has used reasonable efforts to locate its shareholders, including publishing notices in community media. LHTL set a record date of August 15, 2011 for its shareholders’ list. It updated the list on November 24, 2011 as a result of further information which came into its hands.

[4] As a result of its efforts LHTL has identified 845 shareholders who hold the 2,000 issued and outstanding common shares of the corporation. LHTL prepared a list of 717 shareholders with confirmed addresses who own 1,844 shares; it has prepared another list identifying 128 shareholders who own 156 shares and whose addresses are unknown (collectively the “Shareholder Lists”). The Shareholder Lists were filed with the court on a confidential basis.

[5] As presently forecast, each shareholder will receive a distribution of approximately $1,250 per share.

[6] Visvaldis Freimanis owns one share of LHTL. Mr. Freimanis has filed a notice of appearance on behalf of himself and the estate of his late father, Ainis Freimanis, who died intestate. LHTL states that Mr. Freimanis has not produced a certificate of appointment of estate trustee without a will for his father’s estate; accordingly, Mr. Freimanis lacks the status to represent his father. Mr. Freimanis deposed that he has been orally authorized by his two brothers who do not live in Canada to represent them in this proceeding. Mr. Freimanis has not produced powers of attorney signed by his brothers providing him with that authority, so he lacks standing to represent them in this proceeding. I will therefore consider the submissions of Mr. Freimanis on the basis that he represents the interests of one shareholder, himself, who is entitled to a distribution of $1,250.

[7] Mr. Freimanis has brought a companion motion seeking an order that this court direct a reference to a Master in Toronto to identify the shareholders of LHTL and for an accounting of the sale of the corporation’s two properties. In paragraph 16 of his affidavit Mr. Freimanis posed a number of questions which he asserted must be answered in order to determine who are the shareholders of LHTL.

[8] It is apparent that since March, 2009 Mr. Freimanis has attempted to insert himself into the process of identifying the shareholders. As appears from his counsel’s letter of August 29, 2011 LHTL provided Mr. Freimanis with some information about shareholders. In paragraph 19 of his affidavit Mr. Freimanis admitted that LHTL provided him with lists of shareholders with ownership rights in the corporation, but he complained that the corporation “has refused to identify how those shareholders were put on the list”. With respect, the process of putting together the Shareholders List was described by Mr. Liepins in his affidavit of January 10, 2012.

[9] Mr. Freimanis deposed that nine of the respondents were now defunct, creating some uncertainty about the status of some shares. He did not identify which respondents allegedly were defunct. Mr. Liepins fully addressed that point in paragraphs 7 through 10 of his supplementary affidavit dated February 7, 2012.

[10] On my review of the evidence, Mr. Freimanis offered nothing more than speculation to support his request for a reference to the Master. By contrast, LHTL has adduced evidence about how it put together the Shareholder Lists and it has addressed the specific points raised by Mr. Freimanis. I see no need to order a reference – it would simply be an expensive make-work project with no apparent benefit. I therefore dismiss the motion of Mr. Freimanis, including his request for an accounting – LHTL’s motion record contained ample evidence of how funds have been used.

[11] Ms. Baiba Kurens filed a notice of appearance and she claims that she is a shareholder of LHTL. The Shareholder Lists do not record her as a shareholder. The reason for that was explained by Mr. Liepins in his affidavit: a share had been held by the husband of Ms. Kurens; prior to his death he transferred it to a Latvian community organization called “Skolas Funds”; following her husband’s death Ms. Kurens wrote that organization requesting the return of the share, and on June 17, 2009 the organization refused to do so. That was over two years ago. Ms. Kurens has taken no steps to adjudicate her dispute with Skolas Funds since it refused to return the share (which has a maximum value of $1,250). Ms. Kurens’s dispute is with Skolas Funds, not LHTL. I see no reason to alter the process for the distribution of funds to deal with a claim which is over two years old and for which the claimant has not sought legal recourse.

III. Sealing the shareholders’ list

[12] LHTL filed the Shareholder Lists with the Court on a confidential basis and seeks a sealing order for those documents (Exhibits “N” and “O”).

[13] As explained by the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 S.C.R. 522, a sealing order should only be granted when:

(a) such an order is necessary in order to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonably alternative measures will not prevent the risk; and

(b) the salutary effects of the confidentiality order, including the effects on the right of civil litigants to a fair trial, outweigh its deleterious effects, including the effects on the right to free expression, which in this context includes the public interest in open and accessible court proceedings.[^1]

[14] The risk in question must be real and substantial, in that the risk is well grounded in the evidence. Our Court of Appeal has stressed the need for a solid evidentiary basis to support any sealing order or publication ban.[^2] The risk must also pose a serious threat to the commercial interest in question.[^3] In order to qualify as an "important commercial interest", the interest in question cannot merely be specific to the party requesting the order; the interest must be one which can be expressed in terms of a public interest in confidentiality.

For example, a private company could not argue simply that the existence of a particular contract should not be made public because to do so would cause the company to lose business, thus harming its commercial interests. However, if, as in this case, exposure of information would cause a breach of a confidentiality agreement, then the commercial interest affected can be characterized more broadly as the general commercial interest of preserving confidential information. Simply put, if there is no general principle at stake, there can be no "important commercial interest" for the purposes of this test.[^4]

In Sierra Club the Supreme Court emphasized that courts must be cautious in determining what constitutes an "important commercial interest" and must remain alive to the fundamental importance of the open court rule.[^5]

[15] As part of the evaluation of "reasonably alternative measures" a judge must consider not only whether reasonable alternatives to a confidentiality order are available, but also must restrict the order as much as is reasonably possible while preserving the commercial interest in question.[^6]

[16] I conclude that granting a sealing order over the Shareholder Lists would be appropriate in the circumstances. LHTL filed the Lists with the court in order to obtain approval of them and to reference them in the approval order. In the ordinary course the Shareholder Lists would not be public information – requests to access those lists would have to be made through the corporation and meet the applicable tests of corporate law. Accordingly, I think a sealing order is appropriate in order to preserve the important public principle that access to the shareholder lists of private corporations remain through the channels specified by Ontario corporate law, unless a person can demonstrate, on application to the Court, some legitimate reason why it should be granted access to the Shareholder Lists. A sealing order shall issue.

IV. The distribution of assets, including the treatment of the portion of distributable assets to those shareholders whose addresses are not known

[17] LHTL seeks approval to make an initial distribution of assets to shareholders. LHTL filed evidence showing that it has addressed claims by any creditors, including the tax authorities. No person opposed the distribution. I am satisfied from the evidence that such an initial distribution of $1 million can be made and I approve LHTL doing so.

[18] The corporation proposes that a second distribution of $1 million and a final distribution of any residuary be authorized without further resort to the Court. I am not prepared to grant this request. I think the second distribution of $1 million, or just under half of the assets of the corporation, should be done by seeking further approval of the court.

[19] As to the investment of the funds following the initial distribution, it is unclear how long it will take to obtain a tax clearance certificate. Under those circumstances, given the amount of money in issue, the corporation should continue to invest its funds in an interest-bearing account.

V. Shareholders whose addresses are unknown

[20] LHTL sought directions on how to distribute the portion of its assets to shareholders for whom it does not have current addresses. At the hearing counsel informed me that LHTL was in the process of discussing this issue with the Public Guardian and Trustee. I think the best way to proceed is to require counsel to book a 9:30 appointment with me for the week of March 12 at which time this issue can be further discussed and directions given.

VI. Conclusion

[21] I grant the motion of LHTL, subject to the determinations which I have made above. I dismiss the motion of Mr. Freimanis. I have placed my fiat on a marked-up copy of an order which counsel for LHTL may pick-up at 9:30 on any day during the week of February 21, 2012 at Courtroom 8-6, 330 University Avenue, Toronto.

[22] I would encourage the parties to try to settle the costs of this motion. If they cannot, any party seeking costs may serve and file with my office (c/o Judges’ Reception, 361 University Avenue) written cost submissions, together with a Bill of Costs, by February 29, 2012. Any party opposing a requested cost award may serve and file with my office responding written cost submissions by March 8, 2012. The costs submissions shall not exceed three pages in length, excluding the Bill of Costs.

D. M. Brown J.

Date: February 17, 2012

[^1]: Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 S.C.R. 522, para. 53. [^2]: M.E.H. v. Williams, 2012 ONCA 35. [^3]: Ibid., para. 54. [^4]: Ibid., para. 55 [^5]: Ibid., para. 56. [^6]: Ibid., para. 57.