I. Overview

[1] On April 29, 2005, Environmental Management Solutions Inc. (now Englobe Corp.) held its annual general meeting of shareholders. A proxy fight played out at that meeting. By its end a dissident group, led by Englobe’s previously dismissed CEO, the plaintiff, Frank D’Addario, had lost. Mr. D’Addario later challenged those results in court, but was unsuccessful.

[2] The events leading up to and surrounding that dispute spawned close to a dozen lawsuits between D’Addario family members and EnGlobe. By late 2005 EnGlobe was desperate for new financing. The only offer on the table required the company to get rid of its litigation with the D’Addarios. A settlement was reached in December, and closed in May, 2006, with the D’Addarios receiving $1.7 million from EnGlobe to resolve their litigation. Releases addressed all but one of the outstanding lawsuits; a consent dismissal order a month later dealt with the remaining one.

[3] Then, several months later, in November, 2006, Mr. D’Addario commenced this action, calling into question again the events of 2005, and contending that “new” evidence had given him “new” claims to assert against EnGlobe. Mr. D’Addario now alleged that Englobe’s then CEO, the defendant, Tony Busseri, had acted in concert with the defendant, Robert Sansone, in a deceitful manner, and several years later amended his claim to assert that EnGlobe and Mr. Busseri (the “EnGlobe Defendants”) had acted in an oppressive manner against Mr. D’Addario’s interests as a minority shareholder.

[4] Mr. Sansone had sued Mr. D’Addario in October, 2005, alleging entitlement to the EnGlobe shares owned by the plaintiffs. A consent injunction had been put in place on October 18, 2005 under which the D’Addarios were prevented from dealing with their EnGlobe shares.

[5] Mr. D’Addario settled his claim against Mr. Sansone in late 2009, leaving for this trial only his claims against Englobe and Mr. Busseri. In an interesting twist, Mr. Sansone, following that 2009 settlement, recanted the version of events he had consistently given in numerous affidavits prior to the settlement and, instead, provided Mr. D’Addario with evidence of a new version of events for use against the EnGlobe Defendants at this trial.

[6] In this lawsuit the D’Addario plaintiffs claim damages for economic injuries allegedly suffered as a result of their inability to sell their shareholdings in EnGlobe from the time of the October 18, 2005 consent injunction until it was dissolved as a consequence of the 2009 settlement between Messrs. D’Addario and Sansone. The plaintiffs seek damages for the loss of trading profit which they allege they suffered as a result of the freezing of their EnGlobe shares.

[7] For the reasons set out below, I dismiss their action.

II. The parties

A. EnGlobe

[8] Environmental Management Solutions Inc. (“EMS”), now EnGlobe Corp., a federally incorporated company, was until January 17, 2011, a publicly traded company with its common shares trading on the Toronto Stock Exchange (TSX). EnGlobe changed its name from Environmental Management Solutions Inc. on or about April 20, 2007. EnGlobe carries on business as an environmental services company specializing in the management, treatment, reuse and disposal of organic waste and contaminated soil, with emphasis on beneficial reuse.

B. Frank D’Addario and the other plaintiffs

[9] The Plaintiff, Frank D’Addario, had founded EMS around 1995. Until 2004 Mr. D’Addario was the Vice-Chairman, President, Chief Executive Officer and a director of EnGlobe.

[10] In early 2004 Mr. D’Addario brought in a new board of directors at EnGlobe. In September, 2004, as a result of investigations carried out by EnGlobe, Mr. D’Addario resigned as the company’s President and CEO. The employment of his wife, Ferne D’Addario, was terminated. On January 17, 2005, EnGlobe dismissed Mr. D’Addario for cause. Mr. D’Addario vehemently disputed the company’s actions against him and his wife, and he strongly disagreed with the direction in which the new management was taking EnGlobe.

C. Tony Busseri

[11] Tony Busseri was EnGlobe’s President and CEO from October 21, 2004 until January 11, 2008.

D. Robert Sansone

[12] Robert Sansone was the owner of 310 Waste Ltd. (“310 Waste”), a waste processing company. When Frank D’Addario had been the Chief Executive Officer of EnGlobe the company had entered into a letter of intent to acquire 310 Waste. That transaction did not proceed to closing. As will be described in more detail below, Mr. Sansone assisted Mr. D’Addario during the April, 2005 proxy fight.

[13] Mr. D’Addario settled this action as against Mr. Sansone and served a notice of discontinuance on October 8, 2009.

III. The evidence

[14] The parties agreed that in addition to the viva voce evidence adduced at trial, and the associated briefs of exhibits, the evidentiary record for the trial would also consist of a large volume of affidavits previously sworn by parties and other witnesses in this proceeding (Ex. 1), the various cross-examinations thereon and related examinations (Ex. 3), an Agreed Statement of Facts (Ex. 2), and an affidavit sworn by Mr. Wesley Hall (Ex. 5). Counsel stated that some of the Exhibit 1 affidavits might not bear much relevance in view of the more limited issues put in play at trial. That was an understatement. If they were so irrelevant I query why they were filed in the first place. Nonetheless, in preparing these Reasons I have reviewed all of that evidence.

IV. The structure of these Reasons

[15] The defendants have raised a number of defences – effect of releases; effect of a consent dismissal order; and the application of prescription periods – which, if found in their favour, would obviate the need to determine the claims of the plaintiffs on their merits. Given the long history of litigation between the parties, however, I think a final determination of the plaintiffs’ claims on their merits must be undertaken. Accordingly, I plan to structure these Reasons in the following order:

(i) A review of the evidence;

(ii) First Issue: Did EnGlobe engage in oppressive conduct against minority shareholders – the plaintiffs – which resulted in depriving them of the use of their shares?

(iii) Second Issue: Did EnGlobe conspire with Mr. Sansone with the intention of injuring the plaintiffs by depriving them of the use of their shares by fraud or deceit?

(iv) Third Issue: Were the claims asserted in this action by the plaintiffs released by virtue of the terms of the December, 2005 settlement between the D’Addarios and EnGlobe?

(v) Fourth Issue: Are the claims asserted in this action by the plaintiffs barred by res judicata cause of action estoppel as a result of the consent dismissal order dated June 22, 2006 in Action No. 05-CL-6109?

(vi) Fifth Issue: Are the claims sounding in oppression asserted in this action by the plaintiffs statute-barred by reason of the operation of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B?

[16] While I will make some findings of fact during the course of my review of the evidence, most findings of fact will be made during the consideration of each specific issue. Let me now turn to the evidence.

V. The events leading up to and concerning the April 29, 2005 shareholders’ meeting

A. The proxy fight

[17] As I mentioned above, the new board and management of EnGlobe fired Mr. D’Addario and his wife. Much litigation then ensued in 2004 and early 2005. Eight separate pieces of litigation were initiated by the D’Addarios and EnGlobe against each other prior to the April, 2005 Shareholders Meeting.

[18] Despite his dismissal Mr. D’Addario remained a significant shareholder of EnGlobe, both directly and through family-controlled entities - the plaintiffs 1301965 Ontario Inc. and the D’Addario Family Trust. The beneficiaries of the family trust were Frank D’Addario, his wife, Ferne, and their three children. Ferne D’Addario was also a significant shareholder in 1301965 Ontario. In 2005 the plaintiffs owned over 20% of the issued and outstanding common shares of EnGlobe.

[19] In early 2005 Mr. D’Addario used his significant family shareholdings to attempt to oust the directors and management of EnGlobe leading a dissident group in what C. Campbell J. described as a “bitterly and hotly contested fight” for the control of the Board of EnGlobe at its April 29, 2005 annual general meeting. As he testified at trial, Mr. D’Addario believed that he had been robbed of his company, and he was determined to use every instrument to get back into EnGlobe. Mr. D’Addario failed in those efforts, but in a very real sense this action represents the final reverberations of Mr. D’Addario’s attempt in 2005 to win back his company.

[20] Since the legality of events at the April, 2005 meeting was subject to previous litigation before this Court, I see no need to repeat, yet again, much of what has been said before. An outline of the key events leading up to the April, 2005 Shareholders Meeting can be found in the parties’ Agreed Statement of Facts:

(i) EnGlobe set out in its Annual Information Form for the year ended December 31, 2003 that it had completed its qualifying transaction under the TSX Venture Exchange policies in June of 2002;

(ii) On January 20, 2004, EnGlobe announced the appointment of the Honourable Michael Harris, Kevin O’Leary, John Risley and Allen Clarke as directors of EnGlobe. At the request of Frank D’Addario, these individuals had been contacted by Brian Tobin to ask that they join the EnGlobe board;

(iii) On or about March 16, 2004, Timothy Rowley and Dr. Fred Kasravi were also added to the EnGlobe board;

(iv) On September 28, 2004, EnGlobe announced that Mr. D’Addario had resigned as Chief Executive Office and was to be replaced by Michael MacDonald as interim CEO;

(v) On October 21, 2004, EnGlobe announced the appointment of the defendant, Mr. Tony Busseri, as its Chief Executive Officer and he also joined the Board;

(vi) On January 17, 2005, EnGlobe announced that it had terminated the employment of its Vice-Chair, Mr. D’Addario, for cause effective immediately. As set out in the press release, as at that time, Mr. D’Addario continued to be a director of EnGlobe. To the best of the company’s knowledge, Mr. D’Addario and other family related parties owned, directly or indirectly, or had control or direction over, approximately 9,557,023 common shares representing 26.2% of the then issued and outstanding common shares of EnGlobe;

(vii) In two press releases dated February 9 and 10, 2005, EnGlobe set its shareholders meeting for April 29, 2005 for both its annual meeting and a special meeting of shareholders. The special meeting was called in response to a requisition from a group of shareholders headed by Mr. D’Addario. Mark McQueen also became a director of EnGlobe.

[21] I should note that when in 2004 Mr. D’Addario was told to step down as CEO, the company terminated the employment of his wife, Ferne D’Addario. Also, in November, 2004 the D’Addarios received an offer to purchase their shares from one of the directors of EnGlobe, Mr. John Risley. The offer was conditional on the D’Addarios settling their litigation with EnGlobe. In the result, nothing came of the offer.

[22] Mr. D’Addario initiated litigation against EnGlobe in advance of the April, 2005 Shareholders Meeting. The pre-meeting court motions were described by C. Campbell J. in his July 12, 2005 Reasons:[^1]

[3] The subject of the shareholders’ meeting was previously dealt with before me in March of this year by order dated March 8, 2005 with reasons delivered March 15, 2005. The special meeting sought by Mr. D’Addario in Calgary on March 17, 2005 was enjoined in favour of the Annual General Meeting, which was held April 29, 2005.

[4] On April 28, a motion before me by Mr. D’Addario sought the appointment of an independent chair of the April 29 meeting. The order requested was refused in an endorsement of that date.

[23] Returning to the narrative of events set out in the Agreed Statement of Facts:

(i) The meeting of shareholders occurred on April 29, 2005. As a result of the vote, the incumbent slate of directors was elected and the slate headed by Mr. D’Addario was not elected. As reported in EnGlobe’s press release, the Scrutineer reported that 30.5 million or 81% of the 37.7 million shares outstanding were voted, with 15.3 million shares voted in favour of the company nominated slate of directors and 15.1 million voted in favour of the D’Addario slate, including Frank D’Addario and those who requisitioned the meeting;

(ii) Mr. D’Addario challenged the result of the meeting before this Court. Mr. Justice Colin Campbell, by reasons dated July 12, 2005, dismissed that challenge. Mr. D’Addario announced his intention to appeal immediately and filed an appeal with respect to that decision on or about August 5, 2005. No stay or interim order was sought with respect to the appeal;

(iii) In the course of the proxy battle in the early part of 2005, Mr. D’Addario enlisted the assistance of Mr. Robert Sansone. As will be seen later in these Reasons, the terms under which Mr. D’Addario did so later became a matter of dispute between himself and Mr. Sansone.

[24] Notwithstanding that last agreed fact, at trial Mr. D’Addario testified that he had not retained Mr. Sansone for the proxy fight and Mr. Sansone had “absolutely not” provided services, except for bringing in some investors he may have known. However, Mr. Sansone attached to his February 2, 2006, affidavit a large number of emails which showed that Mr. D’Addario was in frequent contact with him for a good six weeks before the Shareholders Meeting discussing how to secure votes for the dissidents and for another six weeks after the meeting to review go-forward strategies for the dissidents.

[25] The dissident shareholders retained Kingsdale Shareholder Services Inc. to provide them with shareholder communication services during the course of the proxy fight. Under the agreement Kingsdale was entitled to a basic management fee ($25,000) and a success fee ($250,000).

[26] At the heart of the dispute which emerged between Mr. D’Addario, on the one hand, and Mr. Sansone and EnGlobe on the other, lies a March 1, 2005 document entitled, “Consulting Agreement and Share Pledge Agreement” (the “Pledge Agreement”). It purports to be an agreement between the D’Addario shareholders and Mr. Sansone for consulting services in respect of the proxy fight at the April, 2005 AGM. Mr. D’Addario called the document a fraud and a forgery; Mr. Sansone contended that it was a valid and binding agreement prepared by Mr. D’Addario and signed by them both. They have settled their litigation, so at this point the issue about the validity of the Pledge Agreement is moot. But the Pledge Agreement casts a shadow over all aspects of this action between Mr. D’Addario and EnGlobe, so a brief summary of its purported terms is appropriate.

[27] According to the Pledge Agreement, in return for Mr. Sansone providing proxy fight-related services to the D’Addarios, he would receive a $5 million one-time fee regardless of whether the D’Addarios won or lost the proxy fight. In addition, the D’Addario group was to pay Mr. Sansone an annual consulting fee of $240,000 for a year, with an increase to $350,000 for up to 5 years if they won the proxy fight, and provide him with a “brand new Mercedes model E55-AMG”, together with future stock options. While the agreement contemplated that the $5 million one-time fee would by paid out of funds borrowed by EnGlobe in the event the dissident shareholders assumed control of the company, it stipulated that in the event the proxy fight was not successful the D’Addarios still would pay the fee. Under the agreement the D’Addarios purported to pledge their shares to Mr. Sansone as security for their promise to pay the fee and other compensation. Upon an event of default Mr. Sansone could effect the registration of the pledged shares in his name.

[28] Attached to the Pledge Agreement was a Schedule “A” dated March 1, 2005, which identified, by share certificate number, the shares issued to each of the D’Addario group, as well as the date on which such shares were transferred to an intermediary.

VI. The evidence about events from after the April, 2005 AGM to the December, 2005 settlement between EnGlobe and the D’Addarios

A. April, 2005 AGM to the end of June, 2005

[29] By the Spring of 2005 EnGlobe was a company in serious financial trouble. A few weeks after the annual general meeting, on May 13, 2005, EnGlobe filed its interim financial statements for the three months ended March 31, 2005. They showed a net loss for the period of $4,903,979 and a deficit at the end of the period of $32,193,542. In addition, EnGlobe advised in the notes to the interim financial statements that it was in breach of certain debt covenants.

[30] The parties agreed that following the April 29, 2005 Shareholders Meeting, Mr. Sansone, who had worked for the dissident group in the proxy fight, reached out to Mr. Busseri on various occasions advising that he would attempt to broker a settlement with Mr. D’Addario. Mr. Busseri understood that Mr. Sansone was representing Mr. D’Addario’s interests.

[31] Internal emails between Mr. Busseri and the Board starting in mid-June described the shifting sands of the negotiations with Mr. D’Addario to resolve the dispute. Initially Mr. Busseri contemplated a settlement which would see (i) no role for Mr. D’Addario until he was cleared by the Ontario Securities Commission, (ii) an ability on the part of Mr. D’Addario to recommend some members for the Board, (iii) a payment of $250,000 to Mr. D’Addario, (iv) the end of all lawsuits, and (v) using Mr. Sansone as a conduit through which Mr. D’Addrio could run business relationships which would benefit the company.

[32] Mr. Sansone acted as an intermediary as Mr. D’Addario and Mr. Busseri felt each other out on settlement. Mr. Sansone would receive information about Mr. D’Addario’s “ask” from Tony DiFruscio, and the parameters of EnGlobe’s “give” from Mr. Busseri.

[33] Ferne D’Addario recalled that the discussions commenced with Mr. Sansone visiting their house in Ottawa indicating that Mr. Busseri wanted to settle the dispute, and the D’Addarios told him they wanted $2 million to settle everything. This meeting seems to have occurred on June 12, 2005.

[34] As the settlement dance started between EnGlobe and Mr. D’Addario in mid-June, the company was facing a bleak prospect. In a memo to the Board dated June 13, 2005 Mr. Busseri summarized the current state of the company’s affairs as follows:

We are extremely tight. Without a finish line in sight for a cash injection at corporate or into our Western Canadian operations, we need to immediately consider “life saving measures”.

In canvassing the alternatives available to EnGlobe Mr. Busseri considered the possibility of a settlement with Mr. D’Addario:

In an “ideal” world I would strike a settlement with Frank prior to Friday’s hearing [before C. Campbell J.] History has suggested that a settlement is unlikely but I will pursue it with the hope I can bring a qualitative structure for board review early this week. At such a meeting we would also discuss our economic settlement position.

By way of conclusion, however, Mr. Busseri saw seeking CCAA protection as “the only practical alternative. I suggest that we let the discussions with Frank unfold and if they do not produce the desired result we meet to discuss this alternative.”

[35] EnGlobe was also exploring possible equity investors in the company, one of which was ONCAP, part of the Onex group of companies. Mr. Busseri periodically sent ONCAP information about the company’s efforts to settle with Mr. D’Addario. Potential investors in the company were sending a clear signal that a settlement with Mr. D’Addario was a pre-condition to any investment by them.

[36] In a later June 13 memo Mr. Busseri updated the Board on Mr. D’Addario’s response through his “negotiator”, advising that Mr. D’Addario would be looking for compensation of $850,000, an ability to recommend half of the Board members, a settlement of the litigation, and a possible future role for himself when cleared by the OSC.

[37] By June 14 Mr. Busseri was pressing Mr. Sansone to have Mr. D’Addario arrange for a meeting between his lawyer and the company’s. That same day Mr. Busseri received an email from the Chair of the Board, Michael Harris, who expressed a less than favourable view about Mr. D’Addario:

I am increasingly uncomfortable at working alongside anybody that is willing to sleep with Frank – I also don’t think he is anywhere close if he thinks he is an asset to us and that he is entitled to one lousy cent.

[38] Later on June 14 Tony DiFruscio, a friend and representative of Mr. D’Addario, communicated the D’Addario’s “final offer” to Mr. Sansone: a position on the Board for Mr. D’Addario, as well as a consulting contract; a payment of $1.35 million to members of the D’Addario family, together with options in EnGlobe.

[39] That offer went nowhere with EnGlobe. As Mr. Busseri emailed to Mr. Sansone: “We are done. Thanks for the effort.” On June 15 Mr. Sansone said he would continue to talk with Mr. D’Addario, but he needed some flexibility from the company. Mr. Busseri held out no hope: “Can’t Rob. I have nowhere to move period…We are looking at bankruptcy Rob, Frank needs to understand that period”.

[40] Mr. D’Addario had access to legal counsel during those discussions. On June 17 his lawyer, Paul Stein of the Cassels Brock firm, sent a further offer to EnGlobe’s counsel, Andrew Wilder of Aird & Berlis. Mr. Busseri told Mr. Sansone that he would take to the Board Mr. D’Addario’s best offer, but he was not negotiating: “The gap between ‘in the ball park’ and this proposal is huge”.

[41] On June 20 Mr. DiFruscio sent Mr. Sansone amendments to the settlement structure proposed by Mr. D’Addario, to which Mr. Busseri commented: “Still not close”.

[42] Mr. Sansone asked Mr. Busseri to tell him what the Board might consider as a possible settlement. Mr. Busseri did so by way of a June 21 memo which indicated that the Board was not prepared to pay Mr. D’Addario or his family any compensation, wanted the lawsuits dropped, but would consider an additional member for the Board recommended by Mr. D’Addario. Mr. Sansone responded that “this is an impossible task of your request”, which Mr. Busseri forwarded to his Board with the comment, “Here endeth this chapter”.

[43] I have reviewed in some detail the evidence of the unsuccessful settlement negotiations in June, 2005 simply to highlight several points:

(i) a huge chasm existed between Mr. D’Addario’s expectations about compensation he could obtain from EnGlobe for settling outstanding litigation and what the Board was prepared to consider;

(ii) the company was conducting these negotiations at a time when its financial prospects were bleak;

(iii) throughout these negotiations Mr. D’Addario had access to legal advice – Cassels, Brock – and other advisors, such as Mr. DiFruscio; and,

(iv) Mr. Sansone was acting as a go-between, with EnGlobe perceiving him as standing in Mr. D’Addario’s camp, as evidenced by Mr. Busseri’s email to Mr. Sansone of June 17 – “Ball remains in your\FDAs court”.

In sum, Mr. D’Addario and EnGlobe stood in an adversarial position to each other, and efforts to negotiate a settlement of their conflict failed at that time.

B. July, 2005

B.1 EnGlobe contracts with Mr. Sansone’s company

[44] Mr. Busseri had been convinced by Mr. Sansone that he could procure some soils for the company’s Sudbury facility, and Mr. Busseri thought it was a credible request. On July 12, 2005 EnGlobe entered into an agreement with Mr. Sansone’s company, 2014671 Ontario Ltd., “to procure sales of delivery of hydro-carbon contaminated soil to the Soil Treatment Facility (STF) in Sudbury, Ontario”, paying the company $10,000 a month, plus a volume commission on soil received at the STF.

[45] Mr. Busseri testified that at the time EnGlobe had three professionals working to procure soil for the company and the form of contract used with Mr. Sansone’s company was the same as that used with other soil procurers.

[46] At trial Mr. Sansone testified that although under that agreement he brought into EnGlobe two or three contracts for soil, he spent most of his time working on efforts to settle the D’Addario claims or to purchase their shares.

[47] By contrast, Mr. Brian Brunetti, a former vice-president of corporate development for EnGlobe, testified that Mr. Sansone in fact facilitated a number of meetings and site visits in an effort to obtain soil for the Sudbury facility. As well, email exchanges in August and September revealed that EnGlobe was providing Mr. Sansone with information about sales contacts at potential customers for the purpose of trying to bid for work and that Mr. Sansone was trying to solicit soil business for the company.

[48] Mr. Busseri testified that Mr. Sansone brought EnGlobe business under the Consulting Agreement which more than paid for his monthly fixed commission of $10,000.00.

B.2 Mr. D’Addario fails in his litigation efforts to review the vote at the April shareholders’ meeting

[49] On July 12 C. Campbell J. released his reasons dismissing Mr. D’Addario’s application to review the vote taken at the April Shareholders Meeting. Notwithstanding that Mr. D’Addario has sought relief in this action from the Superior Court of Justice for Ontario, he evidently has little faith in the justice administered by this court. After the release of the July 12 decision dismissing his request for a vote recount Mr. D’Addario emailed a Mr. Chris Napier writing: “I just heard the Judge would not allow a recount. Why? Because he was bought IMO [in my opinion].”

[50] The next day Mr. Sansone emailed Mr. Busseri to congratulate him on the decision. Mr. Sansone went a bit further. That same day Mr. D’Addario shared with a group of people, including Mr. Sansone, a letter he had received from his counsel at Cassels Brock advising that grounds existed to appeal the decision of C. Campbell J. Mr. Sansone promptly forwarded the letter to Mr. Busseri, together with an email Ferne D’Addario had circulated commenting on the decision. It appears that by this point of time Mr. Sansone was playing both sides of the field.

[51] It is interesting to note that a Canadian Press report on the court decision reported that EnGlobe’s shares had jumped 33% following the release of the decision and that Mr. D’Addario was considering an appeal. Mr. Busseri passed this news item on to Mr. Sansone.

B.3 Further discussions to buy the D’Addario EnGlobe shares

[52] According to Mr. Busseri, by mid-July Mr. Sansone had suggested that he or others buy-out Mr. D’Addario’s shares. In a July 15 email Mr. Busseri wrote Mr. Sansone:

I spent some time after our call last night thinking about the best way to make an offer to purchase Frank’s position. I could not get myself away from the fact that transparency needs to be integral to our plan. Therefore, I took the time to write out a deal that we need to get FDA to sign off on before I bring it to John Risley or any other partner you and I want to bring to the table…

I looked at the proposal from my personal perspective and what I would feel comfortable with. This is my request.

Mr. Sansone responded by stating that Mr. D’Addario would not sell if he knew “any of the people on board or yourself is buying”. To which Mr. Busseri replied: “But it is the only way to settle the lawsuits at the same time.” Mr. Busseri stated that Mr. Risley would be the principal financier of any such share acquisition.

[53] Mr. D’Addario testified that Mr. DiFruscio represented his interests in the share purchase discussions that summer. Yet, Mr. Sansone and Mr. D’Addario met at a restaurant on July 27 to discuss a sale of his shares. Mr. D’Addario understood from Mr. Sansone that some Russian investors were interested in buying them. Both Mr. Sansone and Mr. D’Addario agreed that they discussed a possible purchaser for the D’Addario shares at $1.00 a share. The two sketched out the terms of an agreement on a table napkin, leading the parties to call the accord the “Napkin Agreement”. A dispute existed about whether all of the information on the Napkin Agreement was written that evening or whether Mr. Sansone added some language at a later date.

[54] On the issue of a commission, Mr. Sansone took the position that Mr. D’Addario had agreed to pay him a $500,000 commission for finding a purchaser for his shares. Mr. D’Addario’s evidence on that point varied. In one affidavit he deposed agreeing that a commission of such an amount would be appropriate “but we did not agree who would be responsible to pay such commission”.[^2] In another affidavit he contended that certain conduct of Mr. Sansone “stunned me as I had actually entered into a commission agreement with him in July 2005 in which I offered to pay him a commission if he could obtain the price of $1.00 per share for our group of shares in the proposed transaction.”[^3]

[55] Ferne D’Addario testified that she received a call from her husband that day advising that Mr. Sansone had found a buyer for all of their shares and asking whether she would sell for $1 per share. Ms. D’Addario said she would.

[56] Mr. Busseri testified that he was not aware of this July 27 commission arrangement, or Napkin Agreement, between Messrs. Sansone and D’Addario.

[57] Mr. D’Addario’s evidence at to whose interests he thought Mr. Sansone was advancing during the June settlement discussions and the summer share purchase discussions also varied. At trial Mr. D’Addario testified that he understood Mr. Sansone was not acting on his, Mr. D’Addario’s, behalf but was representing Mr. Busseri, the EnGlobe Board or himself in the settlement discussions. However, less than a year before trial, Mr. D’Addario, in his affidavit sworn August 6, 2010, deposed, in paragraphs 23 and 35:

Sansone initially attempted to broker a transaction whereby Busseri and/or other Board members of Englobe would purchase our shares. Although I believed that he was acting on our behalf in those negotiations which took place in July and August 2005, I subsequently learned that he was on retainer with Englobe for the purpose of acting in their interest solely.

At this time [the summer of 2005], I believed that Sansone was acting in accordance with my instructions and best interests.

However, in other affidavits Mr. D’Addario took a different position:

(i) In his October 15, 2005 affidavit (para. 64) he described Mr. Sansone as playing a “limited intermediary role as communicator on behalf of EMS with DiFruscio”;

(ii) In an April 20, 2007 affidavit (para. 4) he stated that in July Mr. Sansone “offered to assist me in finding a purchaser for my shares in EMS”;

(iii) Then in his June 26, 2007 affidavit (para. 17) he deposed that in June, 2005 “Sansone acted on behalf of EMS as intermediary in settlement discussions with me.”

(iv) In his March 31, 2008 affidavit (para. 6) he deposed that “I did not ask [Sansone] to help negotiate a settlement with EMS; rather, on or around June 10, 2005, he initiated contact on behalf of EMS. I responded that Tony DiFruscio would negotiate on my behalf; which he did. I understood that Sansone was communicating with and taking directions from EMS”; and,

(v) Finally, in his August 27, 2005 email to the EnGlobe Board of Directors Mr. D’Addario had written:

As you must know, Rob Sansone has been negotiating on behalf of EMS and Tony Busseri. Rob Sansone is an employee of EMS acting as Director of Operations as per his business card. (emphasis added)

C. August, 2005

[58] On or about August 15, 2005, EnGlobe filed its interim financial statements for the six months ended June 30, 2005. Those financial statements showed a net loss for the period of $13,697,873 and a deficit at the end of the period of $40,987,436. In addition, EnGlobe advised in the notes to the interim financial statements that it was in breach of certain debt covenants.

C.1 Disclosure of the Pledge Agreement to EnGlobe

[59] Mr. D’Addario testified that the Pledge Agreement was a fraudulent document prepared by Mr. Sansone, not a document which he had prepared and presented to Mr. Sansone. In his various affidavits prior to his 2009 settlement with Mr. D’Addario, Mr. Sansone had taken an opposite view. The conflicting positions of those two protagonists was summed up by Mr. D’Addario in one of his affidavits:

There are two mutually exclusive stories about how the Consulting and Share Pledge Agreement came into existence:

Either Sansone and I executed the Document at the Keele Street Waste Transfer Station on or about March 1, 2005, as Sansone claims; or,
The Document is a deliberate forgery assembled from various documents, including an unattached signature page that I signed under duress at the Keele Street Waste Transfer Station on August 24, 2005…[^4]

[60] Mr. Busseri testified that he did not see a copy of the Pledge Agreement until early September, and he did not read it at the time. Prior to then he had learned from Mr. Sansone that Mr. D’Addario owed him some money under an agreement and that he enjoyed security against the D’Addario shares.

C.2 The ComputerShare email: August 10, 2005

[61] On August 10, 2005, Ms. Kari Begg, an account manager at Computershare Investor Services, sent an email to Andrew Wilder, EnGlobe’s counsel, setting out a history of the shares issued to the D’Addarios (the “Computershare Email”). Her email identified the number of shares, the share certificate numbers and dates of issuance for all issues of shares to the D’Addarios, as well as the dates on which the share certificates had been transferred to intermediaries, such as the Canadian Depository Services (“CDS”). The share issuances covered the period 2001 to 2003; the share transfers to intermediaries took place in the period 2001 to 2004.

[62] Mr. Busseri testified that Mr. Sansone had contacted him that morning to ask if there was any way he could tell him whether Mr. D’Addario still owned EnGlobe stock. Mr. Busseri thought the request was consistent with earlier comments made by Mr. Sansone that he was owed money by Mr. D’Addario and had an interest in the shares owned by him. Mr. Busseri thought the request was innocuous, and he passed it on to the company’s counsel, Mr. Wilder. Mr. Busseri denied that at the time he knew Mr. Sansone would use the information in the Computershare Email to pursue the D’Addario shares.

[63] In a February 28, 2008 affidavit Mr. Busseri deposed:

In early August 2005 Sansone contacted me to ask if EMS knew whether D’Addario continued to hold his EMS shares. Sansone indicated that he had information that D’Addario may be planning on independently disposing of his EMS shares and that he was concerned that if that happened he would lose his security for the monies he claimed to be owed by D’Addario.[^5]

In that same affidavit Mr. Busseri deposed that he believed that “information about D’Addario’s shareholdings in EMS was information in the public domain…and I would have assumed…that Sansone could have obtained the same information as EMS about D’Addario’s shareholdings and that he was simply asking EMS if it had that information readily available.”[^6]

[64] Mr. Wilder, a corporate securities lawyer, testified that Mr. Busseri had asked him to determine how many shares Mr. D’Addario owned in EnGlobe. Apparently the shareholders’ list only showed 50,000 shares, but the dissident proxy circular for the April Shareholders Meeting had indicated that Mr. D’Addario owned 8.8 million shares. Mr. Wilder called Ms. Begg at Computershare on August 10 to obtain the information, and she sent Mr. Wilder the Computershare Email with the information later that day. Mr. Wilder stated that he passed the email on to Mr. Busseri, who promptly forwarded it to Mr. Sansone the same day. Mr. Wilder did not learn until after the litigation had started that Mr. Busseri had sent Mr. Sansone the Computershare Email.

[65] The disputed Pledge Agreement contained two schedules. The first, a Schedule “A” dated March 1, 2005, listed, by certificate number, the shares owned by the D’Addarios which were pledged to Mr. Sansone. The second was a funding proposal letter from the Laurus family of funds for an investment in EnGlobe. Mr. D’Addario acknowledged that he most likely provided a copy of the Laurus letter to Mr. Sansone. Mr. D’Addario was adamant that he never gave Mr. Sansone the Schedule “A” and had nothing to do with its preparation.

[66] Mr. Sansone’s evidence about the source of Schedule “A” varied depending upon whether it was given before or after his fall 2009 settlement with the D’Addarios. Prior to the settlement, in February, 2007, Mr. D’Addario had asserted in an affidavit that the share certificate information in Schedule “A” came from an August 10, 2005 email sent by EnGlobe to Mr. Sansone.[^7] Mr. Sansone’s first response to that allegation was in his February 1, 2008 affidavit in which he deposed:

Following execution of the [Pledge] Agreement, D’Addario provided me with the List of Shares attached as Schedule “A” to the Agreement. I did not receive Schedule “A” from any other source.[^8]

[67] Mr. Sansone repeated that evidence during the course of his June 11, 2008 cross-examination:

Q. 1260. Looking at Schedule A, how did you get Schedule A?

A. Frank, this is his…he supplied it.

Q. 1263. Okay, and he supplied it at the same time he supplied the consulting and share pledge agreement you signed?

A. Correct.

Q. 1269. …but in fact you did receive the exact information that is contained in Schedule A from another source?

A. I got it confirmed from another source.

Q. 1270. On August the 10th of 2005 you received an e-mail from Tony Busseri?

A. Correct.

Q. 1271. And that e-mail contains the exact information in Schedule A.

A. Okay.

A. 1275. I asked Tony to…I need confirmation of those certificates.

A. 1281. That what Frank had said were his certificates were his actual certificates.

Q. 1282. Why did you need that?

A. I wanted to be sure that was…

Q. 1283. Why on August the 10th did you want to be sure?

A. Because he…there are things that…what was happening was I asked Busseri, “Can you get me your …confirm the list of what Frank D’Addario’s shares were?”

Q. 1284. Why did not you ask Frank?

A. Because Frank had already given them to me.

Q. 1290. And you’re sure you didn’t take the e-mail you got from Tony Busseri and create Schedule A yourself?

A. No.

Q. 1291. You’re positive?

A. Positive.

Q. 1296. Did you tell Tony in…Tony Busseri in…did you tell Tony Busseri before you entered into a consulting agreement with EMS that you had a consulting agreement with Frank?

A. Did I tell him? Yeah, he was aware of it, they knew.

Q. 1297. So, before July the 1st Tony Bussseri knew that you had a consulting agreement with Frank?

A. I believe so, yeah.

Q. 1298. How did he know that?

A. Because I had told him that.[^9]

[68] Mr. Sansone changed his tune after his settlement with Mr. D’Addario, swearing an affidavit dated October 19, 2009 in which he contended that it was Mr. Busseri who had provided him with an unsigned Pledge Agreement to review and who had told Mr. Sansone to ask EnGlobe to provide information about the D’Addario shareholdings, which it did by forwarding to Mr. Sansone the Computershare Email.[^10]

[69] Notwithstanding that affidavit, a few months later, when giving answers to undertakings from his November 18, 2009 examination, Mr. Sansone re-affirmed the truth and accuracy of the evidence he had given in his pre-settlement February 1, 2008 affidavit.[^11]

[70] At trial, Mr. Sansone’s evidence shifted yet again. Under cross-examination by Mr. D’Addario’s counsel Mr. Sansone initially stated that when the Pledge Agreement was first prepared it had a Schedule “A” which only showed the block amounts of shares owned by each D’Addario shareholder, simply repeating the information set out in recital “a” to the Agreement. According to Mr. Sansone, he showed Mr. Busseri this completed Pledge Agreement and at the time Mr. Busseri did not make any suggestions about the document.

[71] Later in his trial evidence Mr. Sansone further testified that when he showed the Pledge Agreement to Mr. Busseri he was not intending to proceed to sue on the agreement because he was not prepared to pay the legal fees involved. At some point, according to Mr. Sansone, Mr. Busseri told him he would pay the legal costs and get a lawyer for Mr. Sansone. Mr. Sansone went so far as to assert that had Mr. Busseri not made that commitment, Mr. Sansone would not have sued Mr. D’Addario. I have great difficulty accepting that assertion. By early 2006 Mr. Sansone was describing in court documents a split which had emerged between himself and EnGlobe, yet he continued his lawsuit against Mr. D’Addario for over another three years.

[72] In any event, Mr. Sansone’s evidence at trial was that when Mr. Busseri agreed to fund the litigation he pointed out that the references to “global amounts” of shares in the Schedule “A” would not be adequate to enable Mr. Sansone to secure a transfer of the share certificates into his name under the default remedy provisions in the Pledge Agreement. Mr. Busseri gave Mr. Sansone a “sheet” - the more detailed Schedule “A” containing share certificate numbers and transfer dates - to “fix the problem”. At trial Mr. Sansone contended that before receiving the August 10 Computershare information he had never seen the share certificate numbers for the shares owned by the D’Addarios, and that the Schedule “A” showing those certificate numbers was prepared by Mr. Busseri using the information in the Computershare Email. Mr. Sansone then inserted the new Schedule “A” into the Pledge Agreement. According to Mr. Sansone, Mr. Busseri told him that with such information EnGlobe could transfer the D’Addarios’ share certificates into Mr. Sansone’s name, although Mr. Sansone did not understand how that could be done.

[73] Mr. Sansone gave no hint whatsoever of this version of events in the numerous affidavits he had sworn in the Sansone/D’Addario litigation prior to the settlement of that action.

[74] When during his cross-examination by Mr. Busseri’s counsel Mr. Sansone was taken to the evidence he had given on his June, 2008 cross-examination to the effect that Mr. D’Addario had given him the Schedule “A” with share certificate numbers, Mr. Sansone tried to explain that he had been referring to a Schedule “A” with “block” numbers of shares given to him by Mr. D’Addario, not one with detailed share certificate numbers. I do not accept that explanation. The relevant portions of the June, 2008 cross-examination transcript indicate that the answers he gave referred to the detailed Schedule “A” with share certificate numbers.

[75] Mr. Busseri testified that he did not see the Pledge Agreement until early September, after Mr. Wilder had met with Mr. Sansone to discuss the events of August 24. Mr. Busseri acknowledged that the $5 million in compensation under the Pledge Agreement was “a very large number”, but he stated that he had spent much time trying to clean up outrageous agreements which Mr. D’Addario had entered into with third parties.

[76] At one point during the trial Mr. D’Addario testified that he first saw the Computershare Email after he had settled his litigation with Mr. Sansone in 2009. However, he later corrected himself, acknowledging that the email came to his attention in September, 2006.

[77] The plaintiffs called as a witness at trial Ms. Lara Donaldson, a client services general manager at Computershare. Ms. Donaldson testified that with respect to public companies, the identity of shareholders and the number of shares held by each shareholder is publically-available information. She stated that a transfer agent, such as Computershare, would disclose that information in accordance with applicable regulations, including providing such information to an issuer. If someone stated they intended to sue a shareholder, Computershare would not provide the information about the shareholder. Ms. Donaldson testified that information about share certificate numbers and the dates of transfers to the Canadian Depository System is not publically available, but Computershare would provide such information to an issuer.

C.3 Further discussions concerning a purchase of the D’Addario shares

[78] There was a meeting between Messrs. Busseri, Sansone and DiFruscio, who represented Mr. D’Addario, at the EnGlobe offices on August 17, 2005 which discussed, in part, a possible purchase of the D’Addario shares. Those discussions did not go anywhere.

C.4 Continued efforts by Mr. D’Addario to requisition another shareholders’ meeting

[79] From Mr. Busseri’s perspective, the prospect of a further proxy fight led by Mr. D’Addario loomed as soon as he filed an appeal from the July decision of C. Campbell J. Mr. Busseri was concerned that if another proxy fight ensued, EnGlobe’s lenders might pull the plug and the company might go into bankruptcy.

[80] During August Mr. D’Addario continued communications with other shareholders with a view to requisitioning a further shareholders meeting, including an August 15 email to Mr. Jean Shoiry. As Mr. D’Addario testified, his intent going into the fall of 2005 was to oust EnGlobe’s board.

[81] Meanwhile Mr. Busseri and Mr. Sansone were emailing each other. On August 18 Mr. Busseri emailed that he had heard Messrs D’Addario and Shoiry “could be planning something” and asked Mr. Sansone to “dig into what is going on”. On August 23 Mr. Sansone wrote that they “were on the same team”, to which Mr. Busseri agreed.

D. The August 24 encounter and response by EnGlobe

[82] Mr. Sansone told Mr. D’Addario that he knew of some investors who would be interested in buying the D’Addario shares in EnGlobe. On August 23 Mr. D’Addario emailed Mr. Sansone giving advice on how he could help the new investors change EnGlobe’s board. Mr. Sansone passed on that email to Mr. Busseri.

[83] On August 24 Mr. Sansone emailed Mr. D’Addario an airplane ticket to enable him to come down from Ottawa to Toronto. A meeting took place that evening between Mr. Sansone and Frank D’Addario. What occurred at that meeting is a matter of dispute. Each swore and filed affidavits setting out their version of events. According to Mr. D’Addario’s account he was lured to Toronto by Mr. Sansone on the false pretence of meeting with some outside investors interested in buying his shares and, instead, Mr. Sansone took him to his office where his brother, Joe Sansone, pulled a gun and compelled Mr. D’Addario to sign certain documents. Mr. Sansone denied that version of events, contending that he drove Mr. D’Addario to the office of 310 Waste where he signed an extension to the Napkin Agreement, after which they went to a restaurant. The plaintiffs stated that for the purposes of adjudicating their claims I need not determine what, in fact, transpired that evening.

[84] According to emails exchanged on August 24 between Mr. Busseri and Mr. Sansone, the former thought that Mr. Sansone was driving up to Ottawa that evening.[^12] However, at trial Mr. Sansone contended that Mr. Busseri knew Mr. D’Addario was coming down to Toronto to meet with him and some investors. Mr. Busseri denied that assertion; he stated that while he knew Mr. Sansone planned to meet with Mr. D’Addario, he understood it had nothing to do with EnGlobe issues.

[85] Ferne D’Addario called Mr. Busseri twice on the night of August 24, 2005 and informed him that Frank D’Addario had been threatened by Mr. Sansone and his brother at gun point. Mr. Busseri told Mrs. D’Addario to contact the police. She did not. Ms. D’Addario had no further communications with Mr. Busseri.

[86] When her husband returned home the following day Ms. D’Addario typed up a Chronology of Events describing what her husband contended had happened on the evening of August 24. Mr. D’Addario also talked to his lawyer, Mr. William Burden, about what had transpired.

[87] Mr. D’Addario did not make a complaint to the police at that time. He made a complaint to the police on or about October 14, 2005 after receiving the demand from Faskens, on behalf of Mr. Sansone, for the pledged shares. The police consulted the Crown’s office and the Crown decided no criminal charges would be laid. Mr. D’Addario’s complaint about this failure to lay charges was dismissed in 2008.

[88] On August 25 Mr. Wilder, counsel for EnGlobe, wrote to Mr. D’Addario’s counsel:

We understand that your client, Frank D’Addario entered into an arrangement of some kind with Robert Sansone. We further understand that in connection with this arrangement, Mr. Sansone and Mr. D’Addario had a meeting yesterday in Ottawa. I have been advised that Fern D’Addario called Tony Busseri, late last night twice as a result of this meeting.

Please be advised that neither our client nor Mr. Busseri is involved in any way, shape or form with the arrangement between your client and Mr. Sansone. Accordingly, please ensure that your client, his associates and family do not directly contact Mr. Busseri again in connection with any such arrangement.

EnGlobe counsel’s reference to a meeting in Ottawa reflected the information which Mr. Busseri had received from Mr. Sansone on August 23 that the latter was driving up to Ottawa that night.

[89] Two days later, on August 27, Mr. D’Addario emailed his wife’s Chronology of Events to the members of the EnGlobe Board writing:

I had been asked to go to Toronto to meet with investors interested in buying my EMS Shares and was of the understanding that EMS was party to this meeting.

Early last week Tony DiFruscio, who has been negotiating on my behalf, met with Tony Busseri and Rob Sansone at the EMS head office. As you must know, Rob Sansone has been negotiating on behalf of EMS and Tony Busseri. Rob Sansone is an employee of EMS acting as Director of Operations as per his business card.

As directors of EMS I believe you should know what transpired.

In the first affidavit which he swore about two months after these events Mr. D’Addario did not suggest that he had understood “EMS was party to this meeting”; his affidavit referred only to his understanding that on August 24 he would be meeting the “Russian investors” interested in buying his shares.[^13] His wife’s Chronology of Events recorded that Mr. Sansone had claimed the investors were “connected to Mike Harris”, the Chair of EnGlobe.

[90] Mr. D’Addario copied one of his counsel, Mr. Burden, on his email to the Board. He understood that EnGlobe’s counsel contacted his to discuss the events of August 24.

[91] On August 29 Mr. Busseri emailed a report to Board members indicating that he had read Mr. D’Addario’s communication to the Board, and Mr. Busseri set out his understanding of the material facts:

(i) Mr. Sansone was a contract consultant to EnGlobe, not an employee;

(ii) Mr. Busseri had been told by Mr. Sansone that he planned to meet Mr. D’Addario in Ottawa “to clear up Robert Sansone’s outstanding compensation that was owed to him by FDA as explained to me”;

(iii) “I was not aware there was to be a meeting on August 24th about the purchase of Frank D’Addario’s shares”;

(iv) Mr. Sansone had not been negotiating on behalf of EnGlobe to buy the D’Addario shares, but Mr. Busseri and Mr. Risely had expressed an interest in buying them;

(v) “I am not sure what really happened the night of the 24th. I have now spoken with Robert Sansone (this afternoon at 2:30 pm) and his version of the meeting, not surprisingly, is very different”;

(vi) “I also informed him that I would no longer have any further negotiations through him to buy FDA’s stock. I have also made it clear to Robert Sansone, that I nor the Company support, encourage or agree with the alleged August 24th form of communication with FDA”;

(vii) “Lastly, I made it clear to Robert Sansone that if he had a dispute with FDA, he should resolve it through a legal avenue.”

[92] On August 31 Mr. Chalmers, of the Aird & Berlis firm, wrote to Mr. Burden, who was counsel for Mr. D’Addario, to advise that a number of the facts set out in Mr. D’Addario’s August 27 email to the EnGlobe Board were not correct, including:

(i) EnGlobe was not a party to the August 24 meeting;

(ii) Mr. Sansone was not an employee of EnGlobe; instead, his company was providing consulting services to EnGlobe under a July 1, 2005 contract;

(iii) Mr. Sansone was not acting on behalf of EnGlobe in trying to broker a settlement between EnGlobe and Mr. D’Addario;

(iv) Each of Mr. Sansone and Mr. DiFruscio had approached Mr. Busseri to see if he, or anyone else, might be interested in buying Mr. D’Addario’s shares;

(v) On the night of August 24 Mr. Busseri had told Ferne D’Addario that neither he nor EnGlobe had anything to do with the meeting and had encouraged her to phone the police.

Mr. Chalmers concluded his letter as follows:

EMS was not involved in the Meeting and, but for being advised of the same by Mrs. D’Addario and in the Email, EMS is unaware as to what transpired at the Meeting. However, in light of the seriousness of the matter, EMS shall investigate Mr. D’Addario’s disturbing allegations.

[93] Mr. D’Addario’s counsel made no response to this letter from EnGlobe’s lawyers and did not follow up with them regarding the progress or results of the investigation which the company planned to conduct.[^14] EnGlobe did make some investigation into Mr. D’Addario’s allegations, including interviewing Mr. Sansone and attempting to secure from him information from others corroborating his version of events.

[94] Mr. Wilder met with Mr. Sansone around September 1 to obtain his version of events. Mr. Sansone denied Frank D’Addario’s allegations and provided his own explanation of events which was fundamentally inconsistent with Mr. D’Addario’s but, if accurate, was consistent with no improper conduct by Mr. Sansone. Mr. Wilder learned from Mr. Sansone about the Pledge Agreement and obtained a copy of it. Mr. Wilder testified that he did not consider at the time whether the agreement made any commercial sense. Mr. Wilder sent a September 2 email to Mr. Busseri and Mr. Harris, the Board Chair, attaching a number of documents which he had received from Mr. Sansone, including the Pledge Agreement.

[95] Mr. Busseri testified that he did not read the Pledge Agreement at the time. However, he agreed on cross-examination that the $5 million in compensation set out in the Agreement seemed “pretty outlandish”.

[96] At a Board meeting on September 12, 2005 EnGlobe’s outside counsel, Mr. Wilder, reported on the inquiries he had made into the allegations by Mr. D’Addario. The Minutes of that meeting stated:

Mr. Wilder advised that based upon the documentation and the verbal advice of Mr. Sansone, it appears that most of the events set out by Mr. D’Addario in his email and in his chronology of events were likely fabricated as there appears to be a clear motive on his part to fabricate such events.

E. September, 2005 to October 12, 2005: the prelude to Sansone’s litigation against D’Addario

E.1 Mr. Sansone retains the Faskens firm

[97] Mr. Busseri testified that in light of the allegations Mr. D’Addario had made against Mr. Sansone in his letter to EnGlobe’s Board, his counsel or the company’s lawyer had encouraged Mr. Sansone to get independent counsel.[^15] On September 7, 2005, Mr. Busseri’s counsel provided Mr. Sansone with the names of two lawyers whom he would recommend “for your case”. One was Mr. Jeffery Kaufman at the Fasken Martineau firm. Mr. Sansone emailed Mr. Kaufman on September 12 confirming he would drop off the retainer cheque and advising “we need to regroup on the issue cause I would like to proceed rapidly.” Mr. Michael Round worked with Mr. Kaufman on the file.

[98] At trial Mr. Sansone contended that by this point of time Mr. Busseri and the company had agreed to pay all of his legal fees for a suit against Mr. D’Addario and without such a commitment he would not have sued Mr. D’Addario. Other witnesses disputed Mr. Sansone’s evidence on this point:

(i) Mr. Wilder testified that he never informed Mr. Sansone that the company would pay his legal fees nor did he participate in any discussion to that effect. Mr. Wilder testified that at the time Mr. Sansone retained Faskens he was not aware of how that law firm would be paid nor did he participate in any discussions about that issue;

(ii) Mr. Kaufman recalled Mr. Sansone telling him that Mr. Busseri might front his legal fees and he should work the details out with Aird & Berlis, but Mr. Kaufman testified that he called Mr. Wilder to tell him Faskens would not accept such an arrangement and Mr. Wilder told him that EnGlobe would not do so either. Mr. Kaufman stated that Mr. Sansone’s suggestion went nowhere;

(iii) Mr. Busseri testified that Mr. Sansone had asked the company to fund his litigation, but “we said absolutely not”.

I do not accept Mr. Sansone’s evidence on this point and prefer the evidence of Messrs. Wilder, Kaufman and Busseri. The evidence disclosed that Mr. Sansone litigated from 2006 to 2009 against Mr. D’Addario by paying his own legal bills, indicating that he was more than prepared to proceed against Mr. D’Addario without funding from EnGlobe.

E.2 The preparation of Mr. Sansone’s lawsuit against Mr. D’Addario

[99] There were communications between Mr. Sansone’s counsel and counsel for EnGlobe and Mr. Busseri in September and October, 2005 regarding Mr. Sansone’s proposed action, the investigation into Frank D’Addario’s allegations regarding the events of August 24, 2005, and a proposal by Mr. Busseri to purchase the D’Addario shares in the event that Mr. Sansone received title to the shares. The plaintiffs alleged that EnGlobe acted in concert or together with Mr. Sansone to sue Mr. D’Addario in order to freeze his EnGlobe shares; the EnGlobe Defendants denied any such plan or joint arrangement. It was the position at trial of Mr. Busseri that EnGlobe would not be upset if Mr. Sansone took action which benefitted it. Let me review the evidence on this point in some detail since it is critical to the claims advanced by the plaintiffs.

September 12

[100] Mr. Busseri sent Mr. Sansone an email on September 12, 2005 headed: “TD is doing a lot of selling today”. Mr. Busseri counseled that Mr. Sansone should move on his action. On cross-examination Mr. Busseri testified that with Mr. Sansone suggesting he was going to sue Mr. D’Addario, he was encouraging him, saying “the sooner the better”:

If the shares were in hands other than Mr. D’Addario’s, in hands that were friendly to the company, it definitely could help in saving the company.

Andrew [Wilder] had taken instruction from myself to stay close with Mr. Sansone’s counsel because this would not be a bad outcome for the company.

Q. You wanted to ensure that EMS was monitoring this and making sure it was moving forward?

A. Correct.

[101] Mr. Round recalled that “on occasion” he discussed Mr. Sansone’s claim with Mr. Wilder, EnGlobe’s counsel at Aird & Berlis, and asked for information.

[102] Mr. Wilder testified that he regularly corresponded or spoke with Faskens to find out the status of what Mr. Sansone was intending to do. He stated that EnGlobe was an interested party since about 25% of the company’s shares were involved in the dispute between Mr. Sansone and Mr. D’Addario.

[103] Mr. Round testified that initially there was not much urgency to issue a claim, but ultimately Mr. Sansone became concerned that Frank D’Addario was attempting to sell the shares pledged under the agreement, and Mr. Round testisfied that they suggested to Mr. Sansone to get moving before the shares disappeared. Mr. Round did not recall Mr. Busseri telling Mr. Sansone that he should move on his action.

September 14

[104] Around September 14 Mr. Busseri’s counsel, Alistair Crawley, sent some materials to Faskens. Mr. Sansone proposed that “we should all meet to discuss the situation so that Jeff has a good understanding of D’Addario”.

[105] Mr. Wilder stated that he provided Faskens with a copy of the memo which he had prepared of the meeting held with Mr. Sansone to obtain his version of the August 24 events.

September 19

[106] On September 19 Faskens filed registrations under the Personal Property Security Act in respect of the Pledge Agreement.

[107] Mr. Round testified that once they had decided to secure the shares before Mr. D’Addario could sell them they needed to find out who was holding the shares so that notices could be sent to them. PPSA searches did not reveal any useful information, so Faskens contacted EnGlobe to see what information they had.

September 22

[108] On September 22 Mr. Wilder sent Mr. Round a copy of the August 10, 2005 Computershare Email; he thought the information must have been requested of him because he would not have simply offered it up. Mr. Round stated that this information was not materially different from that contained on Schedule A to the Pledge Agreement which Mr. Sansone had provided to them. Mr. Kaufman only had a general recollection about receipt of the email, but he recalled it arose in the context of Faskens attempting to obtain relevant information from EnGlobe without resorting to a motion to do so.

[109] In his transmitting email Mr. Wilder wrote to Mr. Round:

Nice speaking with you today. I look forward to working with you. Set out below is an email that I received from Computershare our registrar and transfer agent regarding Mr. D’Addario’s shareholdings. If you require any additional information, please do not hesitate to contact me.

At trial Mr. Wilder testified that he did not know if, when he wrote that email, he was aware Mr. Sansone was planning to sue Mr. D’Addario, and he described the language of his email as “niceties that were exchanged amongst colleagues to assist him to understand the facts as I understand them”.

[110] Mr. Wilder testified that the information on the Computershare Email was innocuous; it talked about shares transferred into the depository, CDS, back in 2002.

[111] Mr. Busseri testified that by September 22 he knew that Mr. Sansone was working with his counsel to prepare a claim to seize the D’Addario shares.

September 23

[112] On September 23 Mr. Wilder emailed Mr. Round offering two forms of advice: send a letter to Mr. D’Addario demanding immediate delivery of the pledged shares, and inform another shareholder, Jean Shoiry, with whom Mr. D’Addario was planning to mount another shareholders’ requisition, that Mr. D’Addario no longer owned the pledged shares. Mr. Round testified that they ignored Mr. Wilder at that time.

[113] Mr. Busseri testified that while he was not aware of the specific communications Mr. Wilder was having with Faskens, he was aware that Mr. Wilder was tracking where Mr. Sansone stood with his litigation and was keeping him informed on that point. Mr. Busseri stated that there was no plan by the company to work with Faskens on a litigation strategy concerning the D’Addario shares. Mr. Busseri emphatically denied the suggestion that Mr. Sansone was working in concert with EnGlobe and himself.

September 30

[114] On September 30 Mr. Wilder emailed Mr. Round asking for an update regarding Mr. Sansone’s recovery of the pledged shares. Mr. Round could not recall whether he responded to the inquiry.

First week of October

[115] In early October Mr. Busseri sent Mr. Sansone a letter offering, in his personal capacity, to buy the EnGlobe shares which Mr. Sansone might acquire from Mr. D’Addario. Mr. Busseri testified that he was trying to “lock down” the stock if it became available through legitimate means. Mr. Round testified that ultimately he saw a copy of that offer to purchase around October 3. That day Mr. Round wrote Mr. Busseri expressing concern that “entering into an agreement of the kind proposed, before you even have possession of the shares, could unnecessarily prejudice our ability to enforce the terms of the Consulting Agreement”. He continued:

Third, we are of the view that, at this stage, it would be better to avoid providing Frank with any ammunition that he can use to suggest that you have somehow acted in consort with EMS or any of its officers or directors.

From this email it was apparent that Faskens had not been able to move forward and prepare materials for a court application to enforce the Pledge Agreement because Mr. Round requested Mr. Sansone to provide documents needed to prepare an affidavit. Mr. Sansone immediately forwarded Mr. Round’s email to Mr. Busseri. In the result Mr. Sansone did not accept Mr. Busseri’s offer to buy his shares; he testified that he followed his counsel’s advice on the matter. Mr. Wilder, EnGlobe’s counsel, testified that at the time he was not aware of Mr. Busseri’s offer to purchase.

[116] Mr. Kaufman was asked about Mr. Round’s reference to avoid providing Mr. D’Addario “with any ammunition” suggesting the parties were acting in concert. Mr. Kaufman could not offer a specific interpretation of Mr. Round’s language, but he did testify that Faskens was acting in an independent way to enforce the Pledge Agreement and did not do anything in concert with EnGlobe or Mr. Busseri. Mr. Kaufman testified that Mr. Wilder never provided them with a plan about the litigation and Faskens proceeded with the lawsuit in the way they thought appropriate.

October 7

[117] On October 7 Mr. Wilder emailed Mr. Round asking for an update “as soon as possible” on whether Mr. Sansone had sent out notices about his interest in the shares owned by Mr. D’Addario. Mr. Round recalled that at the time EnGlobe was continuing its fight with Mr. D’Addario, there had been some suggestion of a proxy fight, and EnGlobe thought it would be helpful if Mr. Sansone pushed ahead because Mr. D’Addario’s shares might be tied up. He was aware that EnGlobe was anxious to proceed because of the potential of a further proxy battle. Mr. Round stated that Faskens was ignoring EnGlobe to the extent they could. He did not recall Mr. Sansone telling him that Mr. Busseri was pushing him to send out notices or commence litigation against Mr. D’Addario.

[118] That said, late in the afternoon of October 7 Mr. Busseri sent Mr. Sansone a copy of Mr. Wilder’s email to Mr. Round asking for an update stating, “Please address”. Two hours later Mr. Sansone sent an email entitled “Need coordination” to his lawyers writing:

Jeff, Michael, can we please set up a conference call with all parties, as listed as this is a big concern with all parties. The prompt action is needed to go forward and put all at ease. Our attard (sic) actions to the other solicitors are becoming a problem.

[119] Mr. Round could not recall having such a conference call, although he stated on one or two occasions he spoke with EnGlobe’s counsel about such things as jurisdiction, whether EnGlobe would be an active party, and what to do about Computershare. Mr. Wilder could not recall the occurrence of any multi-party meeting or conference call to discuss Mr. Sansone’s planned litigation.

[120] Later on October 7 another round of emails circulated, this one started by Mr. Busseri’s counsel, Mr. Crawley, who emailed Mr. Busseri advising that he had spoken a few days before to Mr. Round about the proposed share purchase agreement between Messrs. Busseri and Sansone “and advised him that I did not share his concerns”. He continued:

I also spoke with Andrew [Wilder] today and we are both a bit concerned that Faskens is not moving this the way we had envisaged. This doubly concerns me as I recommended Kaufman. I am not sure if they are fannying around or Rob is. I will get on their case Tuesday. We should speak. (emphasis added)

Mr. Busseri flipped the email to Mr. Sansone with the comment, “This is a real concern”, and Mr. Sansone forwarded it to Faskens.

October 11

[121] On October 11 Mr. Busseri tried to set up a conference call with Mr. Sansone and his counsel. In an exchange between Mr. Sansone and Mr. Kaufman the latter wrote:

Michael spoke to Andrew. EMS still must have your brother’s list of witnesses asap. Plse have this looked after and advise Michael. Letters to financial institutions will go out tomorrow. No one knows with any degree of certainty where shares are. (emphasis added)

[122] That same day Mr. Busseri emailed Mr. Sansone, “Lots of BMO selling? Move it…”, to which Mr. Sansone responded that he had sent Mr. Kaufman an email about it. Mr. Busseri explained that if Mr. Sansone intended on moving against Mr. D’Addario, then based on trades reported in recent public filings he might want to move promptly to obtain an injunction.

[123] Mr. D’Addario had been discussing a possible further proxy fight with another shareholder, Jean Shoiry. On October 11 Mr. Shoiry informed Mr. D’Addario that he was closing discussions with him about supporting another proxy fight.

F. October 12 to October 17: the demands

[124] On the morning of October 12 Mr. Busseri emailed Mr. Sansone expressing concern that Mr. D’Addario was dumping EnGlobe shares and advising: “Better get those notices out. Someone got wind of what you are up.”

[125] On October 12 Faskens sent out letters to a large number of brokers advising them of the Pledge Agreement, requesting the particulars of any EnGlobe shares held on behalf of the D’Addarios, and requiring that any such shares be transferred to Mr. Sansone. Mr. Round testified that Mr. Wilder did not participate in drafting or reviewing those notices; Mr. Wilder’s evidence was to the same effect.

[126] In several of the letters – the ones to BMO Nesbitt Burns, Canaccord Capital, and CIBC Mellon – Faskens referred to a specific number of EnGlobe shares held by those institutions as of April 1, 2005. Those numbers corresponded with the information contained in an April 5, 2005 CDS Holders of Record Report which Mr. Sansone had received around that time from Mr. D’Addario as part of the proxy fight.

[127] Close to 6 p.m. that afternoon Faskens sent a demand letter to Mr. D’Addario requiring that “all of the Pledged Shares be immediately transferred into [Mr. Sansone’s] name”. The letter continued:

Despite being under no obligation to do so, our client is prepared to agree that he will refrain from taking steps to realize upon those Shares, in order to provide you with a reasonable period within which you may cure your default. His willingness to do so is, however, contingent upon you demonstrating your good faith by fulfilling your obligation to immediately effect the transfer of the Shares into our client’s name.

To that end, we require that by the close of business tomorrow, you provide full particulars of the accounts within which the pledged shares are held and that you contact your brokers and advise them to immediately transfer all of the Pledged Shares into our client’s name. Once that has been done, we can discuss how much time you might reasonably require to cure your defaults.

If you fail to do so, then our client will assume that you have no intention of honouring your obligations under the Agreement and will take immediate steps to realize upon the security that you have granted to him.

Mr. D’Addario testified that he was shocked when he received the letter; prior to receiving it he had never heard about the Pledge Agreement.

[128] On October 13 Faskens put EnGlobe, Computershare and CDS on notice of the demand made by Mr. Sansone on Mr. D’Addario under the Pledge Agreement:

In the event that the Pledgors fail to comply with our client’s demands, then our client will be requiring your assistance to ensure: (a) that the Pledgors are prevented from effecting any transfers of the pledged Shares in violation of the terms of the Agreement; and (b) that all appropriate steps are taken to effect the issuance of new share certificates in our client’s name.

[129] That letter had been preceded by an email from Mr. Busseri to Mr. Sansone entitled “Round” stating:

Push on him to get me the letter ASAP. We want that release going out by 4 pm. I need 2 hours to draft and get lawyers approval before it can hit the tape.

That prompted Mr. Sansone to email Mr. Round: “Please send letter to EMS please”. Later that day Mr. Busseri informed Mr. Sansone that the press release would go out the following morning before 9 a.m.

[130] On October 14 EnGlobe issued a press release, drafted by communications counsel (not Mr. Wilder), and reviewed by Mr. Busseri, stating that it had been advised of Mr. Sansone’s claim for ownership of shares controlled by Mr. D’Addario and stating:

EMS intends to meet all requirements of corporate law to comply with this requested transfer of shares.

On a previous examination Mr. Busseri testified that the intent of that statement was EnGlobe would do whatever the courts told it to do.[^16]

[131] Later on October 14 Mr. Sansone emailed Andrew DeFrancesco at Apollo Limited Partnership telling him to read the EnGlobe announcement. Mr. DeFrancesco replied: “Brother – just was – now U can buy Lambos in every colour”, to which Mr. Sansone rejoined, “No brother we all can”.

[132] On October 15 Mr. Sansone emailed his counsel, Mr. Kaufman, suggesting that his lawsuit include EnGlobe in order to put pressure on the company to cancel the shares issued to the D’Addarios and transfer them to him.

G. The October 18, 2005 injunction orders

[133] On October 13, 2005, Mr. Sansone commenced an action in Toronto against Frank D’Addario, Ferne D’Addario, 1301965 Ontario Inc. and the D’Addario Family Trust in Action No. 05-CL-6109 (the “Sansone Pledge Action”) seeking damages for breach of the Pledge Agreement and an injunction restraining the D’Addarios from selling their shares. Mr. Wilder, counsel for EnGlobe, testified that he did not see a copy of the statement of claim before it was issued.

[134] On October 17, 2005, Mr. D’Addario commenced a separate claim in Ottawa against Mr. Sansone and EnGlobe as Action No. 05-CV-032504 (the “D’Addario Pledge Action”). The claim sought a declaration that agreements alleged by Mr. Sansone to exist between Mr. D’Addario and himself were null and void and sought injunctive relief. Frank D’Addario alleged that his signature on the Pledge Agreement was “forged by Sansone and/or EMS and/or an unknown third party at the request of Sansone and/or EMS”.

[135] Counsel for Mr. D’Addario and Mr. Sansone jockeyed back and forth about the timing and the location of the injunction motions their respective clients intended to bring. In the result there were two consent Orders dated October 18, 2005 with respect to the actions which provided, inter alia, that neither Mr. Sansone nor Mr. D’Addario were permitted to transfer, sell or encumber the EnGlobe shares of the Plaintiffs. Mr. D’Addario’s lawyer drafted the orders.

[136] Mr. Round could not recall the specifics about how the consent orders came about except that they agreed on terms so as to give them time to prepare responding materials. He did not recall how long counsel thought it would take to put responding materials together.

[137] Throughout the Sansone litigation Mr. D’Addario acknowledged that the October 18 orders were made on consent.[^17] The factum filed on behalf of the D’Addarios in February, 2006, in opposition to Mr. Sansone’s contempt motion, stated: “The parties negotiated, drafted and consented to the Injunction Orders…The D’Addario Defendants consented to the Injunction Orders because they did not impair, in any way, the voting rights of the Shares.” The factum went on to state, in paragraph 25:

Counsel for both parties had the opportunity to review the draft Injunction Orders and make any required changes, which they did. The Injunction Orders reflect the real intentions of the parties.

[138] Mr. D’Addario testified that he had understood from his counsel that the injunction would be in place for only a few months.

H. The consolidation of the Sansone and D’Addario Pledge Actions

[139] On October 24, 2005, EnGlobe made a demand for particulars in the D’Addario Pledge Action in relation to the allegation that it had participated in the forgery of Frank D’Addario’s signature on the agreement.

[140] By Order dated October 31, 2005, the two actions commenced in Ottawa and Toronto were consolidated on the Commercial List in Toronto under court file no. 05-CL-6109 with Mr. Sansone as the plaintiff (the “Consolidated Pledge Action”). On November 24, 2005, the D’Addarios served a Statement of Defence, Counterclaim and Crossclaim, which included a crossclaim against EnGlobe. In that pleading the D’Addarios dropped their previous allegation that EnGlobe had participated in the forgery of the Pledge Agreement and limited the prayer for relief in the crossclaim against EnGlobe to an injunction restraining it from transferring the disputed shares.

[141] One term of the October 18 order of C. Campbell J. required the D’Addario Defendants to advise the plaintiff within 24 hours “as to which brokerage firm presently has possession of the D’Addario Share certificates…” Emails between counsel on October 20 indicated that Mr. Sansone was taking the position that Mr. D’Addario had not complied with that term of the order.

[142] On October 21, 2005 Ferne D’Addario contacted Computershare requesting detailed information about the shareholdings of the plaintiffs in EnGlobe, including the share certificate numbers and the dates on which any shares were transferred to CDS. A few hours later Kari Begg, an employee at Computershare, emailed Ms. D’Addario the requested information. At trial Ms. D’Addario stated that she had never received that email. It is difficult to reconcile that position taken by Ms. D’Addario with the absence of any follow-up by her to her initial October 21, 2005 email until many months later, in July, 2006. At trial Ms. D’Addario contended that her October, 2005 email was designed to verify Schedule “A” to the Pledge Agreement; the evidence shows that the more likely motivation for her email was to obtain the information needed to comply with a term of the court order.

[143] (Throughout July and August, 2006 Ms. D’Addario exchanged emails with Computershare attempting to ascertain whether Computershare had provided to Mr. Sansone the share certificate information found on Schedule “A” to the Pledge Agreement. Ultimately on September 19, 2006 EnGlobe’s counsel advised the D’Addarios’s lawyer that while Computershare had not provided share certificate information to Mr. Sansone, it had provided such information to EnGlobe “at its request”. EnGlobe’s counsel also provided a copy of the August 10, 2005 email from Mr. Busseri to Mr. Sansone transmitting that share certificate information. Ms. D’Addario testified that she first saw the Computershare Email when she read the September 19, 2006 letter from EnGlobe’s counsel.)

[144] On November 24, 2005 the D’Addarios filed their defence in the now consolidated proceeding. They asserted a crossclaim against EnGlobe solely for “an interlocutory injunction until the trial or other final disposition of this action restraining EMS from participating in or facilitating the transfer of the shares which are the subject matter of the [Pledge] Agreement”. In his April 20, 2007 affidavit Mr. D’Addario deposed:

This cross-claim was necessary given the press release which EMS had issued immediately after the commencement of Sansone’s Acton wherein EMS stated “EMS intends to meet all requirements of corporate law to comply with this requested transfer of shares.”

I. The settlement between EnGlobe and 310 Waste

[145] On or about November 14, 2005, EnGlobe filed its interim financial statements for the nine months ending September 30, 2005. Those financial statements showed a loss for the year to date of $12,585,939 and a deficit at the end of the period of $39,875,502. The management discussion and analysis also filed by EnGlobe on November 14, 2005 referenced the need to restructure its long-term debt and to secure an expanded bonding facility.

[146] In May, 2004, Mr. D’Addario, on behalf of EnGlobe, had signed a letter of intent to acquire all of the shares of 310 Waste Ltd., a waste transfer company in which Mr. Sansone had an interest. The letter of intent provided that in the event EnGlobe declined to proceed with the acquisition, it would pay the vendor a $100,000 break fee. The letter of intent contemplated the completion of the transaction by the end of August, 2004. The transaction did not proceed; Mr. D’Addario then stepped down as CEO of EnGlobe in September, 2004.

[147] By agreement dated November 17, 2005, EnGlobe, Mr. Sansone and 310 Waste recorded a settlement with respect to all disputes between the parties except those set out in the Sansone Pledge Action and the D’Addario Pledge Action. This document provided for the payment of $100,000 by EnGlobe to Sansone/310 Waste.

[148] Mr. Kaufman testified that Faskens intended to take action on behalf of 310 Waste to enforce the terms of the purchase agreement with EnGlobe. He recalled that Mr. Wilder, or someone at EnGlobe, told him the company would resist any such lawsuit because Mr. D’Addario had lacked board authorization to enter into the agreement. Mr. Kaufman stated that he took the position with EnGlobe that they could either litigate the issue or settle the matter and, in the result, a settlement was reached. On November 3 one of EnGlobe’s counsel emailed Mr. Kaufman a settlement agreement and release for the 310 Waste matter. Mr. Kaufman replied:

I am very surprised that my client is being put under such pressure. I have not previously been involved in this matter. I have had discussion recently with Alistair Crawley, counsel to Tony Busseri, re settling the 310/EMS issue referred to in para. 6 of the settlement agreement. He has not yet got back to me on this matter. Accordingly, it should be removed from the settlement. Notwithstanding, I believe Mr. Busseri and my client are anxious to settle this matter upon an acceptable payment being agreed upon.

[149] Mr. Round testified that he was aware that a settlement had been reached and he had received a draft copy of the settlement agreement from Aird & Berlis.

[150] Mr. Busseri denied that the 310 Waste settlement was a means of paying Mr. Sansone’s legal fees. He stated that starting in the summer of 2005 Mr. Sansone had represented that he was thinking about enforcing his company’s right to a $100,000 break fee. Mr. Brunetti also recalled being told orally by Mr. Sansone about EnGlobe’s break-fee obligation to 310 Waste. Mr. Busseri testified that the 310 Waste settlement was one of several which occurred around November 17, with another involving the settlement of litigation with Rom-Neg, a company whose principals Mr. Sansone knew and who had an interest in 310 Waste. According to Mr. Busseri, efforts by Mr. Sansone facilitated some of the other settlements. He regarded the settlements as a major benefit to the company, particularly since the recapitalization of EnGlobe through ONCAP depended on getting rid of existing litigation. Because of the assistance provided by Mr. Sansone in settling those other claims and saving the company money, Mr. Busseri was prepared to address the issue of the break fee in the 310 Waste purchase agreement. Mr. Busseri regarded the $100,000 paid to address the problem as money well spent.

[151] Although it seemed “absolutely likely” that Mr. Sansone planned to use the money to pay his legal fees, Mr. Busseri testified that from the company’s perspective, “that wasn’t our issue”, and he denied suggestions that the settlement with 310 Waste was simply an idea cooked up by EnGlobe as a way to pay the legal fees of Mr. Sansone.

[152] Mr. Wilder testified that the settlement cheque was made payable to 310 Waste, not to Faskens, although he may have been directed to send the cheque to the law firm since it represented Mr. Sansone, the principal of 310 Waste. Mr. Wilder understood that the payment represented both a settlement of the dispute with 310 Waste, as well as compensating Mr. Sansone for his assistance in settling other litigation involving the company.

[153] Mr. Kaufman recalled that he had worked out with his client, Mr. Sansone, that the settlement funds would be applied against Fasken’s fees, which they were.

[154] At trial Mr. Sansone testified that there had been some discussions with EnGlobe about how they could pay Mr. Sansone’s legal fees with Faskens. Mr. Sansone contended that a few meetings were held on the subject, and Mr. Busseri came up with a plan to use the break fee in the 310 Waste letter of intent, even though by that point of time 310 Waste had never made a demand for the break fee and the company was defunct as a result of a 2004 waste-yard fire. Mr. Sansone contended that EnGlobe paid the break fee to Faskens.

[155] Mr. Sansone testified that EnGlobe did not pay him anymore money after December, 2005. By the end of 2005 he had incurred $300,000 in legal fees, but he continued the litigation until 2009 and paid for those legal fees himself.

J. The OSC investigation into EnGlobe

[156] In April, 2005 the Ontario Securities Commission had notified EnGlobe that it was undertaking an investigation of potential market manipulation, options trading issues, and disclosure issues for a period of time during which Mr. D’Addario had headed the company. On December 9 Mr. D’Adarrio issued a press release claiming that the OSC had concluded its review and that “any issues raised by EMS subsequent to his termination have been addressed to the satisfaction of the OSC and the file has been closed”. That is not quite the way the OSC saw the matter, for it released its own press release later in December stating:

After reviewing the issues regarding D’Addario’s conduct while he was a director and officer of [EMS], Staff of the Commission sent D’Addario a warning letter on November 15, 2005, which stated, “It appears from our review that you did not act in good faith and with the best interests of the corporation in mind. Rather, you used your position as an officer and director of EMS to obtain benefits for yourself.”

VII. The December, 2005 settlement and ONCAP financing

A. The settlement between EnGlobe and the D’Addarios

A.1 The driver of the settlement

[157] During 2005 EnGlobe had been pursuing from ONCAP approximately $20 million in new financing. EnGlobe ultimately secured the financing and obtained shareholder approval for it on March 22, 2006, but as management disclosed in its proxy circular, ONCAP had insisted that a condition of the financing was for EnGlobe to obtain a cost-effective insurance package to provide ONCAP with protection for current and possible legal claims, including the D’Addario litigation. As events transpired such insurance could not be obtained at a reasonable cost, so ONCAP stated that it would not provide financing unless the D’Addario litigation was settled.

[158] In early December settlement discussions took place between EnGlobe and Mr. D’Addario, culminating in a December 12, 2005 settlement agreement. On December 19, 2005, EnGlobe announced that it had entered into a non-binding letter of agreement with ONCAP for approximately $20 million of new financing and also stated that “all litigation among the D’Addario Parties and EMS Parties” had been conditionally settled.

A.2 The terms of the settlement

[159] The Settlement Agreement identified eight of the pieces of litigation outstanding between the D’Addarios and the company and styled those proceedings as the “D’Addario Litigation”. The Agreement recited that the parties were desirous “of resolving any and all matters between any of them referred to in, relating to and/or connected with or which could have been referred to in … the D’Addario Litigation”. It also contained the following recital:

The undersigned are desirous of resolving any and all matters of any nature or kind whatsoever in existence as at the date hereof whether commenced or not, whether presently known or unknown, of every nature and kind whatsoever, whether or not in existence as at the date hereof, connected with or related to …the subject matter of the Financing (as defined herein) and/or relating to the subject matter of the Term Sheet (as defined herein) on the terms and conditions set out herein…

[160] Section 3 of the Settlement Agreement contained definitions of the terms “Financing” and “Term Sheet”:

The closing date referred to herein shall be at such time, if any, that …ONCAP…provides EMS with certified funds effecting the financing of EMS, the summary terms of which are referred to in the draft term sheet (the “Term Sheet”) attached hereto as Schedule “A” (the “Financing”), provided that such date shall not be later than March 31, 2006.

[161] Under the terms of the Settlement Agreement, if the ONCAP financing closed, then EnGlobe would pay the D’Addarios the sum of $1.7 million, with the funds directed to Ferne D’Addario. The defined D’Addario Litigation would be dismissed. The Agreement identified the various releases each party would be required to sign. Paragraph 23 of the Settlement Agreement stated:

From the date hereof, EMS and each of its officers and directors covenant and agree that none of them will intentionally assist or support Robert Sansone in the litigation in the Ontario Superior Court of Justice involving, among others, Roberto Sansone, which bears court file number 05-CL-6109, except as may be required by law or as necessary in order to defend EMS or Computershare Trust Company of Canada (the “Sansone Litigation”)…

[162] Before turning to the releases which formed part of the Settlement Agreement, it is worthwhile recalling that the only relief sought by the D’Addarios against EnGlobe in the Consolidated Pledge Action as at the date of the settlement was a request for an injunction “restraining EMS from participating in or facilitating the transfer of the shares which are the subject matter of the Agreement”.

A.3 The releases

[163] Attached to the Settlement Agreement were two mutual releases which the D’Addarios were required to sign. The first mutual release defined the “Sansone Litigation” as follows:

Roberto Sansone (“Sansone”), EMS, Frank, 130 and D’Addario Family Trust are parties to a consolidated action, being a proceeding bearing court file number 05-CL-6109, relating to an alleged consulting and pledge agreement and certain shares of EMS owned by Frank, 130 and the D’Addario Family Trust”.

The first release provided that all the parties to it released each other from any actions or claims:

…whatsoever, whether commenced or not, whether presently known or unknown, of every nature and kind whatsoever, whether or not in existence as at the date hereof, connected with or related to (i) the subject matter of any of the D’Addario Litigation…(v) the subject-matter of the Settlement Agreement…all save and except only for (a) those relating to a breach or an alleged breach of the Settlement Agreement and/or the Voting Agreement; and (b) those in the Sansone Litigation not otherwise released in this Full and Final Mutual Release (the “Claims Released”).

[164] The second release was a release from the D’Addarios in favour of EnGlobe and the financier, ONCAP. Under it the D’Addarios released EnGlobe and ONCAP from any and all actions and claims:

…whatsoever, whether commenced or not, whether presently known or unknown, of every nature and kind whatsoever, whether or not in existence as at the date hereof, connected with or related to (i) the subject matter of the Settlement Agreement; (ii) the subject matter of the Voting Agreement; (iii) the subject matter of the Financing (as defined in the Settlement Agreement); and (iv) the subject matter of the Term Sheet (as defined in the Settlement Agreement (the “Claims Released”).

The Term Sheet specified that part of the $20 million in financing would be used to pay the settlement with Frank D’Addario of $1.7 million. The Term Sheet identified, as a condition of closing:

Our satisfaction in our sole discretion, that all claims outstanding with respect to Frank D’Addario (and other D’Addarios)(including the appeal vote count from the Shareholders Meeting) against EMS and its Directors and Employees, will be fully and finally settled on or before closing and full and final releases in satisfactory form are delivered.

A.4 The Voting Agreement

[165] The D’Addarios also entered into a Voting Agreement dated December 12, 2005 under which they agreed to vote their shares in support of the ONCAP financing.

[166] Mr. D’Addario testified that he read the settlement documents and consulted his lawyers about them.

A.5 How EnGlobe understood and reported the settlement

[167] The Management Proxy Circular for the March 22, 2006 shareholders meeting reported that 10 lawsuits were outstanding between the company and the D’Addarios, and the result of the December negotiations was the “entering into of a conditional settlement to end the D’Addario Litigation”. In identifying the reasons why shareholders should support the ONCAP financing, management stated:

The successful closing of the ONCAP Financing will result in the settlement of all D’Addario Litigation. This clarifies the Company’s exposure in respect of its existing liabilities and eliminates the significant costs associated with continuing such litigation.

In a February 10, 2006 affidavit filed in response to a contempt motion brought by Mr. Sansone against EnGlobe, Mr. Busseri deposed:

ONCAP made it a condition precedent of the Financing that all outstanding litigation involving EMS, the D’Addario Parties and certain parties related to the D’Addario Parties and EMS be resolved. This was ultimately achieved through a complex settlement agreement, which is conditional upon the Financing closing by March 31, 2006.[^18]

[168] In a February 28, 2008 affidavit in support of a motion to dismiss this action, Mr. Busseri deposed about his understanding of the scope of the December, 2005 settlement:

EMS believed that it had resolved all of its disputes with D’Addario when it entered into a global settlement agreement and made payment to his wife, Ferne D’Addario, of $1.7 million. Although the global settlement did not include the Sansone litigation, D’Addario consented to the dismissal of the remaining action against EMS and Computershare in June 2006. He did so in circumstances in which he had already raised but not pursued his conspiracy allegations against EMS in the context of his dispute with Sansone.[^19]

[169] On a May 29, 2008 examination Mr. Busseri explained further:

Q. 23 …What was the object of [the December, 2005] settlement?

A. …A condition precedent to that financing happening or closing would be that the 10 or 11 pieces of litigation relative to – that included Mr. D’Addario and other related companies and officers and directors of EMS at that time be settled. That was the objective.

Q. 24. The objective then was not to settle the Sansone litigation, correct?

A. The objective was to settle the pieces of litigation that were settled as a result of the settlement agreement.

Q. 25. Which did not include the action commenced by Mr. Sansone?

A. That would be correct because it wasn’t settled.

Q. 26. And it would also include the action commenced by Mr. D’Addario against Mr. Sansone and others, correct?

A. That there including EMS so obviously no.

Q. 27 & 28. Those matters were still outstanding, correct after December of 2006…Those two pieces of litigation which were consolidated?

A. I would guess so. I don’t stay in touch with what’s going on with those pieces of litigation.[^20]

B. Efforts by Mr. Sansone to challenge the settlement

B.1 The motion before C. Campbell J. to prevent the D’Addarios from voting the disputed shares

[170] When Mr. Sansone learned of the settlement, including the agreement by the D’Addarios to vote their shares in favour of the ONCAP financing, he brought a contempt motion alleging that the D’Addarios had breached the injunction of October 18, 2005 which restrained them from selling or in any way encumbering their EnGlobe shares. In the result, by reasons dated February 15, 2006, C. Campbell J. varied the October injunction order to prevent the D’Addarios from voting their shares.

[171] In support of his motion Mr. Sansone filed a lengthy affidavit sworn February 2, 2006. In his affidavit Mr. Sansone struck an adversarial tone against EnGlobe and disclosed many of the interactions which he and his lawyers had had with the company in 2005. Mr. Sansone attached a large volume of email correspondence to his affidavit. Mr. D’Addario admitted that he had read the affidavit at the time. As a result, in February, 2006, Mr. D’Addario was aware of the following information and allegations disclosed by Mr. Sansone in his affidavit:

(i) The June, 2005 emails in which Mr. Busseri informed Mr. Sansone about the terms upon which EnGlobe was prepared to settle with the D’Addarios;

(ii) “From the outset, EMS encouraged, and in fact agreed to provide funding in support of the pursuit of my claims against the D’Addario Defendants”;

(iii) “EMS was both directly, and through its counsel, in regular contact with me and my counsel, in an attempt to encourage me to move forward quickly with my action against the D’Addario Defendants”;

(iv) A significant number of the emails which passed between counsel for EnGlobe and Mr. Sansone from September 23 until December 6, 2005, including Mr. Wilder’s “suggestion” email of September 23 and his “please provide me with an update” one of September 30. The emails also disclosed some of the negotiations concerning the 310 Waste settlement and the fact that “closing proceeds” would be delivered to Mr. Sansone;

(v) “EMS promised, on several occasions, to reimburse me for the legal fees that I was incurring as I pursued the D’Addario Defendants. Tony Busseri who was the President and CEO of EMS had several conversations with me about how EMS would provide this funding”;

(vi) “EMS supported me for a number of reasons, the principal one of which was that if I succeeded, then in accordance with the terms of the Consulting and Share Pledge Agreement, all litigation commenced by the D’Addario Defendants against EMS would come to an end”;

(vii) “Busseri wanted to purchase the Pledged Shares from me at the conclusion of the action. I have attached a copy of Busseri’s offer to purchase those shares…to this Affidavit. Busseri advised me that ONCAP, the same company that now apparently intends to gain control of EMS through a proposed refinancing, was going to fund Busseri’s acquisition of the Pledge Shares”;

(viii) “Busseri contacted me upon receipt of the dissident’s [November 10, 2005] requisition and encouraged me to move as quickly as possible to bring a motion to amend the Injunction Orders so that I would have the right to vote the Pledged Shares in favour of EMS’s existing Board of Directors. He was insistent that the matter be dealt with before any shareholders meeting could occur”;

(ix) “In order to allow me to do so, and in accordance with EMS’s agreement to reimburse me for the costs of this litigation, on November 18, 2005, EMS paid me the sum of $100,000, which was structured as a payment in settlement of certain claims outstanding against EMS”;

[172] Mr. Busseri filed a February 10, 2006 affidavit which, in part, responded to the allegations made by Mr. Sansone. In his affidavit Mr. Busseri denied that EnGlobe had agreed to provide funding to Mr. Sansone to pursue his claim against the D’Addarios or that the November, 2005 payment of $100,000 was merely structured to look like a settlement with 310 Waste, when in fact it was designed to fund Mr. Sansone’s lawsuit against Mr. D’Addario.[^21] Mr. Busseri went on to depose that:

(i) “in September/October, 2005, EMS perceived the claim by Sansone against the D’Addario Parties as a positive development from the perspective of EMS”; and,

(ii) He had proposed that Mr. Sansone “enter into a non-binding agreement to sell the D’Addario Shares to myself or a third party with whom I would partner”.[^22]

[173] The February 13, 2006 Factum filed by the D’Addarios in opposition to Mr. Sansone’s motion referred to Mr. Sansone’s evidence that (i) EnGlobe had agreed to fund his claims against the D’Addarios; (ii) EnGlobe had been “directing and financing Sansone’s litigation against the D’Addarios”; (iii) EnGlobe had been insisting that Mr. Sansone “move as quickly as possible to bring a motion to amend the Injunction Orders so that [Sansone] would have the right to vote the Shares prior to the Special Shareholders Meeting”; and, (iv) EnGlobe had agreed to “purchase” the Shares from Sansone upon the completion of the action.[^23]

[174] The Factum, prepared by the Bennett Jones firm, then counsel to the D’Addarios, also alleged that EnGlobe had been directing Mr. Sansone’s Pledge Agreement litigation in order to oppress the D’Addarios as minority shareholders of the company:

While the details of the agreement between Sansone and EMS are not known to the D’Addario Defendants, it appears that Sansone pursued this litigation for the primary purpose of providing EMS the means to oppress a group of minority shareholders, the D’Addario Defendants, and to strip them of the Shares so that they could eventually be transferred to EMS. EMS “encouraged” Sansone in the ligation and then gave further instructions to Sansone to restrain the D’Addario Defendants’ voting rights even though Sansone had exhibited no prior intention to enforce those rights himself.
This plot between Sansone and EMS smacks of maintenance and champerty. Although EMS is not a stranger to this litigation, EMS’ only involvement should have been limited to its role as the issuer of the Shares, which are in dispute. EMS has directed Sansone’s actions and used this litigation as a front to promote its own highly suspect agenda. (emphasis added)

[175] The extent of the D’Addarios’ knowledge at that time about the dealings between Mr. Sansone and EnGlobe are shown by an email Ferne D’Addario sent to an EnGlobe director, Mr. Kevin O’Leary, on February 24, 2006 (which she copied to her husband):

Further to our telephone conversation of a few moments ago, I believe you should be aware that EMS did play a role in Sansone’s claim. Sansone has made documents public that clearly show EMS lawyers at Aird & Berlis strategizing with Sansone’s lawyers at Fasken Martineau regarding the fraudulent claim.

Prior to our being aware of Sansone’s intention with the documents signed by Frank after being threatened with a gun, Wilder, Chalmers and Busseri were actively orchestrating the claim, who to notify, and timing. Busseri was offering to purchase the shares from Sansone if he was successful in getting them from us by way of this fraudulent claim. It was EMS lawyers who suggested that Sansone attack the voting rights. A few of the documents have been attached for your referral.

B.2 The motion before Mesbur J. to tie up the settlement funds

[176] EnGlobe released a Management Proxy Circular dated March 1, 2006 for the Special Meeting of Shareholders to consider and approve the ONCAP financing. The financing included convertible debentures and entitled ONCAP to at least 62% of the equity of EnGlobe.

[177] Mr. Sansone then brought a motion to require the payment into court of the $1.7 million settlement due to the D’Addarios. In her March 21, 2006 affidavit filed in opposition to the motion Ferne D’Addario described her understanding of the settlement as follows:

After settlement discussions, an agreement was reached whereby EMS would pay the total sum of $1.7 million in relation to the settlement of all outstanding litigation to the various “D’Addario Parties”.
In any event, after a very difficult period, the parties have managed to put this litigation behind them. This settlement will allow us to move forward with the only remaining litigation being Mr. Sansone’s claim…(emphasis added)

[178] At a meeting held on March 22, 2006, the shareholders of EnGlobe voted in favour of the ONCAP agreement.

[179] Mr. Sansone’s payment into court motion was then heard by Mesbur J. on April 4, 2006. In the course of her April 11 reasons Mesbur J. stated that “there is no question there is a serious case to be tried concerning the validity of the [Pledge Agreement], and the entitlement to the shares,” but she was “not satisfied that the plaintiff has established a strong prima facie case” – “…I have nothing to persuade me that the plaintiff’s version of the facts is more likely to prevail than the defendants’.” Mesbur J. dismissed Mr. Sansone’s motion.

[180] In his April 20, 2007 affidavit (para. 24) Mr. D’Addario deposed that during the course of negotiations “we tried to include the Sansone Action in the settlement, but EMS refused.” Mr. D’Addario made that statement in the context of contending that the settlement he reached with EnGlobe did not cover any claims he could assert against the company in relation to the Sansone Pledge Agreement. That statement was misleading since the December 8, 2005 email exchange to which Mr. D’Addario referred showed that the opposition of the company related to its unwillingness to pay any money to Mr. Sansone as part of its settlement with the D’Addarios.

[181] In May, 2006, the D’Addarios received the $1.7 million payable to them under the settlement agreement with EnGlobe.

C. Other developments in the Sansone/D’Addario Pledge Agreement litigation

[182] On March 29, 2006, Mr. D’Addario was cross-examined on the October 16, 2005 affidavit he had sworn in support of the October Injunctions. He was asked specifically about the source of the share certificate list which was appended to the Pledge Agreement with Mr. Sansone:

Q. 534. Page 171 with the record behind tab “A” of Mr. Sansone’s affidavit, did you provide that list of your shares to Mr. Sansone?

A. Absolutely not.

Q. 535. Any idea where he could get something like that?

A. Probably from EMS. He works for EMS.

[183] When the $1.7 million settlement was paid to the D’Addarios EnGlobe still remained a party to the Consolidated Pledge Action because the D’Addarios initially had sought an injunction restraining EnGlobe from transferring the disputed shares to Mr. Sansone. Of course the October, 2005 consent injunction orders had intervened, rendering the pleaded injunction claim against EnGlobe moot for all practical purposes.

[184] In early May, 2006 the lawyers for Mr. D’Addario circulated a timetable for the conduct of further steps in the Consolidated Pledge Action. EnGlobe then moved to get out of the action. By notice of motion dated May 25, 2006, EnGlobe moved for an order dismissing, inter alia, the D’Addarios’ crossclaim against it on the basis that “the Campbell Order and the Roy Order effectively dispose of the relief claimed by the Frank Defendants against EMS in the Crossclaim.” An offer to settle the motion on a “no costs” basis accompanied the notice of motion.

[185] Mr. D’Addario’s initial response was to refuse. He explained his position in his May 28, 2006 email to Mr. Busseri and others:

I have advised my lawyers, Bennett Jones not to consent to remove EMS from the Sansone litigation. We have recently become well aware of members of the Board dealing with Sansone against the D’Addario parties in their involvement with what we believe to be the strategic planning of his claim, and we do not take this lightly. Please refer to the Feb 06, 2006 Sansone affidavit, as instance of many public documents. My lawyers have been instructed to conduct an internal investigation of all related dealings the various members of the Board of EMS had with the Sansone parties, including the events surrounding the extortion of August 24, 2005.

We will advise upon completion of our investigation. (emphasis added)

[186] Negotiations obviously ensued between the parties, although evidence of their content was not placed before me. Nonetheless, on June 22, 2006, C. Campbell J. granted a consent order in the Consolidated Pledge Action. The recital to the order read:

THIS MOTION, made by the Defendants (Defendants to Crossclaim), Environmental Management Solutions Inc. (“EMS”) and Computershare Trust Company of Canada (“Computershare”), for, inter alia, an order dismissing all claims against EMS and Computershare was read this day at the Court House at 393 University Avenue, Toronto.

The second operative paragraph of the consent order read as follows:

THIS COURT ORDERS that the crossclaim by the Defendants…Frank D’Addario, 1301965 Ontario Inc. and D’Addario Family Trust…against EMS be and the same is hereby dismissed on a without costs basis.

The order went on to require EMS to respond to document production requests by Mr. Sansone or Mr. D’Addario and to consent to the examination of a representative under Rule 31.10.

[187] Mr. D’Addario acknowledged that he had discussed the order with his counsel before agreeing to it.

VIII. The history of this proceeding

A. Commencement of this proceeding in November, 2006

[188] The plaintiffs commenced this lawsuit on November 9, 2006, one and one-half years after the proxy fight they lost at the April, 2005 Shareholders Meeting. Their claims in large part rest upon events which they alleged took place from May, 2005 through to the end of that year. Mr. D’Addario testified that it was his receipt in September, 2006 of a copy of the August, 2005 Computershare Email which prompted him to commence this action.

[189] In their Statement of Claim issued on November 9, 2006 the plaintiffs advanced the following major claims against the EnGlobe Defendants:

(i) The EnGlobe Defendants conspired with Mr. Sansone to deprive the plaintiffs of their share ownership in EnGlobe “by fraud, deceit and extortion”.[^24] The conspiracy involved the EnGlobe Defendants wrongfully obtaining detailed information about the plaintiffs’ shareholdings in EnGlobe and then providing it to Mr. Sansone whom, they knew, would use it to obtain the plaintiffs’ shares in EnGlobe “by fraud, deceit and extortion” and then transfer those shares to Mr. Busseri, allowing “Busseri and [EnGlobe] to obtain total control of the company as well as defeat any more Dissident Shareholders”;[^25]

(ii) In furtherance of the conspiracy, the plaintiffs alleged, (i) Sansone and the EnGlobe Defendants created a phony Consulting and Share Pledge Agreement between Sansone and Mr. D’Addario, (ii) Sansone’s brother, Giuseppe, pulled a gun on Mr. D’Addario on August 24, 2005 and forced him to sign some documents extending Mr. Sansone’s right to a commission, and (iii) Sansone and the EnGlobe Defendants then co-operated to initiate litigation against the plaintiffs which froze their shareholdings in EnGlobe;[^26]

(iii) The plaintiffs also alleged that this conduct constituted “an unlawful interference with the plaintiffs’ economic interests”.[^27]

B. The 2008 amendment to Mr. D’Addario’s claim

[190] The plaintiffs amended their Statement of Claim over a year later, on May 27, 2008. The amendment was limited to putting forth an alternative pleading that Mr. Busseri was acting on his own behalf without authority from EnGlobe. The asserted claim remained the same – conspiracy to act by fraud, deceit and extortion to deprive the plaintiffs of their shareholdings and wrongful interference with their economic interests.

C. Mr. D’Addario settles with Mr. Sansone

[191] In October, 2009, Mr. D’Addario and Mr. Sansone agreed to discontinue the actions brought against each other with prejudice. Nominal consideration ($2.00) apparently supported the settlement. The Minutes of Settlement provided that the D’Addario Parties and Mr. Sansone would execute Full and Final Releases, and that Mr. Sansone would cooperate with respect to the continued present litigation by providing documentation and making himself available as a witness for the D’Addario Parties. The Minutes also provided that the D’Addarios would “diligently prosecute” this action against EnGlobe and Mr. Busseri.

[192] The D’Addarios executed a very broad release in favour of Mr. Sansone, releasing him from all claims “howsoever arising whether or not known or anticipated, which heretofore may have been or may hereafter be sustained by the [D’Addarios], as a consequence of any agreement or dealings between the parties.

[193] Mr. D’Addario sold a number of Englobe shares after November 2009.

[194] Three key disputes infused the litigation between Mr. D’Addario and Mr. Sansone which ultimately settled:

(i) Was the Pledge Agreement a valid and binding agreement or a document fraudulently prepared by Mr. Sansone?

(ii) What were the terms of the July 27, 2005 “Napkin Agreement” between the parties; more specifically, did Mr. Sansone later alter the “Napkin Agreement” to insert language to which Mr. D’Addario had not agreed?

(iii) When the parties met on the evening of August 24, 2005, did Mr. Sansone’s brother pull a gun on Mr. D’Addario and force him to sign some documents, including an agreement to extend the life of the “Napkin Agreement”?

As noted, the evidence of Mr. D’Addario and Mr. Sansone on these points was diametrically opposed.

[195] A trial judge labours under an obligation to make factual findings on conflicting evidence with respect to material facts that are essential to a proper determination of the issues before him.[^28] In 2009 Mr. D’Addario settled with Mr. Sansone; he now asks the Court to adjudicate his claim against the EnGlobe Defendants who were not parties to the alleged Pledge, Napkin and Extension Agreements. Plaintiffs’ counsel submitted that his clients were not asking me to make any findings about what happened on the evening of August 24, 2005. In my view neither the validity of the Pledge Agreement, the validity or terms of the Napkin Agreement, the validity of the Extension Agreement, nor the events of the evening of August 24, 2005 are material facts essential to the proper determination of the issues as between Mr. D’Addario, on the one hand, and EnGlobe and Mr. Busseri, on the other. Therefore I conclude I need not make factual findings in respect of those matters.

D. EnGlobe goes private

[196] By press release dated November 12, 2010, EnGlobe provided its third quarter results and also announced that it and ONCAP had entered into an arrangement agreement pursuant to which ONCAP, together with certain management shareholders, proposed to acquire all of the common shares of EnGlobe not then owned by them at a price of 26.5¢ per share. The Management Proxy Circular with respect to the going private transaction was sent out on November 25, 2010.

[197] The meeting of shareholders to consider the approval of the going private transaction was held on December 23, 2010. Mr. D’Addario voted against the transaction, but did not exercise his dissent rights. On January 10, 2011, EnGlobe announced that it had obtained the final sanction order of the Quebec Superior Court for the transaction and announced its closing on January 13, 2011. The Plaintiffs received 26.5¢ per share for all the shares of EnGlobe owned by them at that time.

E. The 2010 amendments to the plaintiffs’ claim

[198] On October 14, 2010, the plaintiffs amended their claims in several ways:

(i) The plaintiffs now asserted that Mr. Sansone had acted as EnGlobe’s agent and that the company was responsible for his acts;

(ii) The plaintiffs expanded the nature of the conspiracy they alleged to assert that it included “misrepresentation, oppressive conduct or other unlawful conduct”, and they plaintiffs sought damages under the oppression relief provisions of the Canada Business Corporations Act;

(iii) Although the plaintiffs withdrew their allegation that the EnGlobe Defendants had participated in the creation of the phony Consulting and Share Purchase Agreement, they contended that the EnGlobe Defendants had provided information to Mr. Sansone about the share certificates held by the plaintiffs knowing that he would fabricate a schedule containing such information and attach it to the Pledge Agreement. They also asserted that EnGlobe had represented to Mr. Sansone that it would assist in transferring those shares to Mr. Sansone as soon as he had declared Mr. D’Addario in default under the Agreement;

At trial, the plaintiffs withdrew their allegations against the EnGlobe Defendants relating to the August 24 “drawn gun” meeting.[^29] Plaintiffs’ counsel advised that his clients were not asking the court to make a finding whether or not that event had occurred.

[199] With that review of the evidence, let me now turn to examine the issues raised at trial.

IX. First Issue: Did EnGlobe engage in oppressive conduct against the plaintiff minority shareholders which resulted in depriving them of the use of their shares?

[200] Although the plaintiffs have asserted claims against the EnGlobe Defendants sounding in oppression under section 241 of the Canada Business Corporations Act and conspiracy to deprive them of their share ownership, and while the particulars of the allegations advanced in support of the two claims, it became apparent during the trial that the plaintiffs regarded their oppression claim as their primary one. Accordingly, I will deal with the oppression claim first, and then with the pleading of conspiracy.

A. The general legal framework governing oppression claims

[201] In Harris v. Leikin Group[^30] I attempted to summarize the principles concerning the oppression remedy under the OBCA, which apply equally to claims under section 241 of the CBCA:

[295] The oppression remedy contained in section 248 of the OBCA is an equitable remedy which seeks to ensure fairness and which gives courts a broad, equitable jurisdiction to enforce not just what is legal, but what is fair. In considering oppression claims courts must look at business realities, not merely narrow legalities. At the same time the remedy is very fact-specific – what is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play.

[296] In BCE Inc. v. 1976 Debentureholders the Supreme Court identified the two inquiries which a court must make in considering an oppression claim: (i) Does the evidence support the reasonable expectation asserted by the claimant? and (ii) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms "oppression", "unfair prejudice" or "unfair disregard" of a relevant interest?

[297] The reasonable expectations of specified stakeholders is the cornerstone of the oppression remedy. Fair treatment - the central theme running through the oppression jurisprudence - is most fundamentally what stakeholders are entitled to "reasonably expect".

[298] The concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive - the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.

[299] The onus lies on the claimant to identify the expectations that he or she claims have been violated by the conduct at issue and establish that the expectations were reasonably held. Factors which a court may consider in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders.

[202] In BCE Inc. v. 1976 Debentureholders[^31] the Supreme Court of Canada made the following observations about the oppression remedy:

(i) Actual unlawfulness is not required to invoke the oppression remedy; it applies "where the impugned conduct is wrongful, even if it is not actually unlawful". The remedy is focused on concepts of fairness and equity rather than on legal rights. In determining whether there is a reasonable expectation or interest to be considered, the court looks beyond legality to what is fair, given all of the interests at play;[^32]

(ii) Even if reasonable, not every unmet expectation gives rise to an oppression claim. The section requires that the conduct complained of amount to "oppression", "unfair prejudice" or "unfair disregard" of relevant interests. "Oppression" carries the sense of conduct that is coercive and abusive, and suggests bad faith. "Unfair prejudice" may admit of a less culpable state of mind, that nevertheless has unfair consequences. Finally, "unfair disregard" of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders' reasonable expectations;[^33]

(iii) As in any action in equity, wrongful conduct, causation and compensable injury must be established in a claim for oppression;[^34] and,

(iv) The concepts of oppression, unfair prejudice and unfairly disregarding relevant interests are adjectival. They indicate the type of wrong or conduct that the oppression remedy is aimed at. However, they do not represent watertight compartments, and often overlap and intermingle.[^35]

[203] In concluding their discussion of the factors which a court should examine in determining whether a reasonable expectiation exists, the Supreme Court of Canada stated:

The cases on oppression, taken as a whole, confirm that the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. There are no absolute rules. In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation's duties as a responsible corporate citizen.[^36]

[204] In the BCE case the Supreme Court of Canada also observed that conduct which effects a result that is unfairly prejudicial to the interests of any security holder could include the squeezing out of a minority shareholder.[^37]

[205] Although evidence of bad faith as to motive could be relevant to an inquiry as to whether conduct was unfairly prejudicial, acts may effect an unfair result in the absence of bad faith.[^38] Oppressive conduct may result from a single act, or from the cumulative effect of several acts each of which, standing alone, would not have constituted the breach of a shareholder’s reasonable expectation.[^39]

B. Specifics of the reasonable expectations of the plaintiffs and the allegation of their breach

[206] The Further Statement of Claim did not describe expressly the reasonable expectations which the plaintiffs alleged the EnGlobe Defendants had breached. However, the plaintiffs did so in their written and oral final arguments. In paragraph 113 of their final Memorandum of Argument the plaintiffs articulated the nature of their reasonable expectations and the particulars of the alleged breaches by the EnGlobe Defendants:

In summary, the oppression claim against EnGlobe and Busseri is that they acted in a manner that had the cumulative effect of unfairly prejudicing and unfairly disregarding the reasonable expectations of the Plaintiffs by, inter alia:

(a) Preferring the interest of the majority over the dissident minority;

(b) Assisting, funding and encouraging a non-shareholder to pursue litigation;

(c) Preventing and obstructing the lawful exercise of shareholder rights, including: the right to participate in proxy battles, communicating with other minority shareholders for the purposes of changing the course of the company’s direction and management;

(d) Taking active steps to freeze the Plaintiffs’ shares in the company, resulting in precluding the Plaintiffs from voting shares at shareholder meetings, and requisitioning shareholder meetings;

(e) Participating and assisting a third party to prevent the Plaintiffs from selling their shares;

(f) Disclosing confidential information of the Plaintiffs, specifically share certificate numbers, for the purpose of assisting third party who has a contract dispute with the Plaintiffs to use the court to seize and freeze the Plaintiffs’ shares;

(g) Seeking confidential information of the Plaintiffs from the transfer agent for the purpose of assisting third party with contractual dispute with Plaintiffs to use the court to seize and freeze the Plaintiffs’ shares;

(h) Seeking, selecting and funding legal counsel of third party with contractual dispute with Plaintiffs to use the court to seize and freeze the Plaintiffs’ shares;

(i) Instructing corporate counsel to work and encourage third party adverse in interest to Plaintiffs to pursue litigation against Plaintiffs, including reviewing notices; and,

(j) Providing access to third party adverse in interest to copy Plaintiff’s signature for purpose of assisting in purported Consulting and Share Pledge Agreement.[^40]

[207] When taken together, these allegations first require an examination of, and the making of findings of fact in respect of, the conduct of the EnGlobe Defendants concerning: (i) the provision of shareholder information contained in the Computershare Email and, (ii) its involvement in the Sansone Pledge Action. Let me now turn to the task of making those findings of fact.

[208] But before I do, let me note that most of the conduct about which the D’Addario plaintiffs complained in what remains of this action was conduct to which they were not privy at the time the events took place. Consequently, neither Frank D’Addario nor Ferne D’Addario could offer much in the way of direct evidence about those events. Given that state of affairs, the credibility of their evidence becomes important only in respect of a small number of matters touching on their oppression or conspiracy claims.

C. Findings of fact

C.1 Providing information about the D’Addario shareholdings

[209] There is no doubt that on August 10, 2005, Mr. Busseri, the CEO of EnGlobe, responded to an inquiry from Mr. Sansone as to whether Mr. D’Addario still owned shares in EnGlobe by asking corporate counsel, Mr. Wilder, to find out the answer, and then transmitting to Mr. Sansone the August 10, 2005 email which corporate counsel had received from Computershare.

[210] Mr. Busseri admitted, and I find, that when he forwarded the Computershare Email to Mr. Sansone he knew Mr. Sansone had mentioned that Mr. D’Addario owed him some money and he had an interest in the D’Addario shares. Although Mr. Busseri denied that at the time he knew Mr. Sansone would use the information in the Computershare Email to pursue the D’Addario shares, I do not accept that evidence. Common sense tells us that if someone asks us for information he does not have, there usually is a reason or purpose for the request. I find that Mr. Busseri knew that Mr. Sansone was requesting the information in the context of and for the purpose of some disagreement he had with Mr. D’Addario. By the same token, I find that as of August 10, 2005 Mr. Busseri was not aware of what specific use Mr. Sansone planned to make of the information, nor did he know that Mr. Sansone might sue Mr. D’Addario. Indeed, a week later Mr. Busseri participated in a meeting with Mr. Sansone and Mr. DiFruscio where they discussed a possible purchase of the D’Addario shares by Mr. Busseri.

[211] I completely reject the evidence given at trial by Mr. Sansone that it was Mr. Busseri who prepared and gave him the Schedule “A” to the Pledge Agreement which replicated the information contained in the Computershare Email. At paragraphs 62 to 74 above I set out in detail the evidence given by Mr. Sansone during the course of this proceeding and the Consolidated Pledge Action about the origins of Schedule “A”. Prior to his late 2009 settlement with Mr. D’Addario Mr. Sansone had deposed that Mr. D’Addario was the source of Schedule “A”. Following the settlement Mr. Sansone, in effect, recanted that sworn evidence and then contended that the Schedule “A” – indeed the entire Pledge Agreement – came from Mr. Busseri.

[212] It was a term of his 2009 settlement with Mr. D’Addario that Mr. Sansone “cooperate, to the extent not prohibited by law, including the provision of documentation in his possession on request and make himself available as a witness with the D’Addario parties with respect to the continued litigation” against EnGlobe. In furtherance of that contractual obligation Mr. Sansone provided an October 19, 2009 affidavit and testimony at trial in which he effectively recanted his previous testimony. But having recanted his evidence by swearing his October 19, 2009 affidavit, Mr. Sansone, in a later undertaking response, re-affirmed the version of events he had just recanted. Given the huge differences between Mr. Sansone’s pre and post-settlement testimony on material points concerning EnGlobe’s role in his claim against Mr. D’Addario and his subsequent oscillation back and forth as to which was the true version of events, it would be dangerous to accept Mr. Sansone’s post-settlement evidence without support from other sources of evidence. None exist. Consequently, I reject the evidence given by Mr. Sansone that Schedule “A” originated with Mr. Busseri, and I prefer and accept Mr. Busseri’s evidence that he did not see a copy of the Pledge Agreement until after Mr. Sansone met with corporate counsel, Mr. Wilder, in early September and Mr. Wilder had transmitted to Mr. Busseri and Mr. Harris copies of documents provided by Mr. Sansone, including the Pledge Agreement.

C.2 Funding the Sansone Pledge Action

[213] Although, as stated by Mr. Busseri, in early September, 2005 Mr. Sansone had suggested that EnGlobe should fund the lawsuit he intended to bring against Mr. D’Addario, I reject Mr. Sansone’s evidence that EnGlobe agreed to do so. Mr. Sansone’s testimony on this point stands at odds with that given by Messers. Busseri, Wilder and Kaufman. I accept Mr. Kaufman’s evidence that Faskens would not be prepared to accept a retainer in which a public company funded the lawsuit of a stranger to the company. I find that when Mr. Sansone retained the Faskens firm, no arrangement existed under which EnGlobe would pay Fasken’s fees. As Mr. Sansone wrote in his September 12 email to Mr. Kaufman, he, not EnGlobe, would drop off a retainer cheque.

[214] Mr. Sansone commenced his Sansone Pledge Action on October 13, 2005. I find that as of that date EnGlobe had not paid any legal fees incurred by Mr. Sansone, nor had it promised to pay any such fees.

[215] In November, 2005, after the commencement of the Sansone Pledge Action, EnGlobe paid Mr. Sansone $100,000 by way of settlement of the 310 Waste claim. The plaintiffs submitted that styling the payment as a settlement was really a smokescreen; what EnGlobe really was doing was to fund the Sansone Pledge Action. I do not accept that submission for two reasons.

[216] First, the evidence was clear that by the fall of 2005 EnGlobe’s desperate financial condition had put it in settlement mode because without getting rid of legacy lawsuits and litigation claims, EnGlobe could not secure the funding it needed. That context prompted EnGlobe to settle with the D’Addarios in December, 2005, notwithstanding that a mere six months before the company’s Chair had said he would never give Mr. D’Addario “one lousy cent”. The same context, the evidence showed, spurred EnGlobe to settle the Rom-Neg litigation,[^41] a settlement which Mr. Sansone helped bring about. Mr. Busseri testified that for several months Mr. Sansone had been reminding him of the company’s failure to go through with the 310 Waste purchase agreement or pay the $100,000 break fee. I have no doubt that Mr. Sansone was angling for EnGlobe to pay him something for the aborted 310 Waste deal; the evidence revealed that Mr. Sansone sought to extract something for himself from every business relationship he cultivated. I accept Mr. Busseri’s testimony that EnGlobe decided to pay the $100,000 in part in settlement of the 310 Waste break-fee claim, but also in part in consideration of Mr. Sansone’s assistance in settling the Rom-Neg litigation. In sum, I find that a commercial basis existed for the payment of $100,000 to Mr. Sansone in the 310 Waste settlement; it was not a sham deal as suggested by the plaintiffs.

[217] At the same time, it is clear that when that settlement was made EnGlobe knew that Mr. Sansone had incurred significant legal fees for the Sansone Pledge Action and thought it likely that Mr. Sansone would use the 310 Waste settlement funds to pay his legal fees. Mr. Busseri acknowledged as much in his testimony.

[218] Second, although at trial Mr. Sansone testified that he would not have commenced the Sansone Pledge Action without a funding commitment from EnGlobe, I reject that evidence. In addition to the reasons already given, the evidence disclosed that following the December, 2005 settlement between EnGlobe and the D’Addarios, Mr. Sansone actively pursued his litigation against Mr. D’Addario, all the while complaining that EnGlobe had let him down. Mr. Sansone testified that after 2005 there were another 12 court attendances, all of which he paid for himself. Such evidence supports a finding that the decision to commence and to continue the Sansone Pledge Action was Mr. Sansone’s alone.

C.3 Providing assistance to the Sansone Pledge Action

[219] I set out in considerable detail above in paragraphs 97 to 132 the evidence about the communications between Mr. Sansone’s counsel at the Faskens firm and counsel for the company, as well as counsel for Mr. Busseri. From that evidence I make the following findings of fact:

(i) When Mr. Busseri learned in late August, 2005 that Mr. Sansone was contemplating an action against Mr. D’Addario, he had either Mr. Wilder or Mr. Crawley tell Mr. Sansone that he would have to secure his own counsel. Mr. Crawley, Mr. Busseri’s personal lawyer, provided Mr. Sansone with the names of two possible counsel and Mr. Sansone chose Mr. Kaufman at Faskens;

(ii) Between the time of the Fasken’s retainer in early September, 2005 and the commencement of the Sansone Pledge Action on October 13, 2005, both Mr. Busseri and EnGlobe’s corporate counsel, Mr. Wilder, encouraged Mr. Sansone to proceed with his intended lawsuit;

(iii) I accept that the motivation for this encouragement by EnGlobe was that stated by Mr. Busseri in the following portions of his evidence:

If the shares were in hands other than Mr. D’Addario’s, in hands that friendly to the company, it definitely could help in saving the company.

Andrew [Wilder] had taken instruction from myself to stay close with Mr. Sansone’s counsel because this would not be a bad outcome for the company.

Q. You wanted to ensure that EMS was monitoring this and making sure it was moving forward?

A. Correct.

(iv) Mr. Wilder on occasion made suggestions to Faskens about how to proceed. I find that while Faskens received those suggestions, both Mr. Kaufman and Mr. Round decided independently about how they would advance their client’s claim. I accept the evidence of Mr. Kaufman and Mr. Round that it was they who decided what steps to take in the litigation and they were not subject to direction from EnGlobe or its corporate counsel – as Mr. Round testified, Faskens was ignoring EnGlobe to the extent they could;

(v) Mr. Sansone’s counsel at Faskens specifically cautioned him against entertaining Mr. Busseri’s share purchase offer. In the result, Mr. Sansone followed his counsel’s advice;

(vi) Prior to the commencement of the Sansone Pledge Action Faskens had received (i) the original of the Pledge Agreement from Mr. Crawley, at the request of Mr. Sansone, and (ii) a copy of the Computershare Email from Mr. Wilder;

(vii) EnGlobe did not participate in the drafting of, nor did it see advance drafts of, the October 12, 2005 notice letters sent out by Faskens to a number of brokerage firms alerting them to Mr. Sansone’s claim against the D’Addario shares. The evidence of Mr. Round and Mr. Wilder was ad idem on this point; no email passing between them suggested the contrary;

(viii) EnGlobe did not participate in the drafting of, nor did it see advance drafts of, the October 12, 2005 demand letter sent by Faskens to Mr. D’Addario;

(ix) EnGlobe did have some understanding that Faskens would be sending it a letter regarding Mr. Sansone’s claim against the D’Addario shares – Mr. Busseri’s October 13 email to Mr. Sansone disclosed that understanding. However, I find that EnGlobe did not participate in the drafting of, nor did it see advance drafts of, the October 13, 2005 letter sent by Faskens to EnGlobe, Computershare and CDS;

(x) Finally, the uncontradicted evidence supports a finding that EnGlobe did not participate in the drafting of, nor did it see advance drafts of, the October 17, 2005 Statement of Claim issued in the Sansone Pledge Action.

C.4 Providing copies of Mr. D’Addario’s signatures to counsel for Mr. Sansone

[220] In its final argument the plaintiffs contended that EnGlobe engaged in oppressive conduct by providing Mr. Sansone with access to copies of Mr. D’Addario’s signatures for the purpose of the Consolidated Pledge Action. I did not review the evidence on that point earlier in these Reasons, so let me do so now.

[221] After the commencement of the Sansone Pledge Action Faskens made requests of EnGlobe to produce certain documentation which the firm considered relevant to its client’s action. The rationale for making such informal requests was articulated by Mr. Round in his November 30, 2005 email to Aird & Berlis:

In my view, any consulting agreement of the kind that we seek would be producible under the Rules as being a document relevant to issues raised in the action.

Aird & Berlis produced some documents, but declined to produce others.

[222] Mr. Round testified that at one point Faskens asked EnGlobe for specimens of Mr. D’Addario’s signature which they could provide to their document expert in order to comment on the signatures shown on the Pledge Agreement. EnGlobe made some available. Mr. Busseri confirmed that on the advice of EnGlobe’s counsel he arranged to make available to Mr. Sansone documents signed by Mr. D’Addario for use as specimen signatures. Mr. Busseri instructed an EnGlobe employee, Brian Brunetti, to make the documents available in a boardroom for Mr. Sansone’s inspection. Mr. Brunetti testified that he met with Mr. Sansone at the EnGlobe offices, supervised his review of documents bearing Mr. D’Addario’s signatures, and permitted Mr. Sansone to remove some to take to his lawyer. This took place sometime in late October or early November, 2005, a time at which Mr. Brunetti was aware that Mr. Sansone had started litigation against Mr. D’Addario over his shareholdings in EnGlobe. I accept this evidence as an accurate statement of those events.

D. Analysis

D.1 The reasonable expectations asserted by the plaintiff shareholders

[223] The plaintiffs submitted that a shareholder of a company can reasonably expect to be able to vote his shares at a shareholders meeting as he sees fit without the company subsequently taking steps surreptitiously to freeze him out. The plaintiffs argued that the EnGlobe Defendants breached that reasonable expectation by (i) providing private shareholder information about the D’Addarios to a person adverse in interest to them and (ii) directing the Sansone Pledge Action against the D’Addarios.

D.3 Shareholder information

[224] The D’Addarios submitted that as shareholders of EnGlobe they had a reasonable expectation that the company would not disclose private, confidential information about their shareholdings to a third party where the third party intended to make a claim against those shares. Unfortunately the plaintiffs did not develop in detail their legal argument on this point.[^42]

[225] The starting point of the analysis must be the governing corporate statute, the CBCA. Section 20(1) of the CBCA requires a corporation to maintain records which contain, inter alia, a securities register that complies with section 50. That section specifies the content of a securities register:

(1) A corporation shall maintain a securities register in which it records the securities issued by it in registered form, showing with respect to each class or series of securities

(a) the names, alphabetically arranged, and the latest known address of each person who is or has been a security holder;

(b) the number of securities held by each security holder; and

[226] Access to the information contained in a CBCA corporation’s securities register is governed by section 21 of the Act. Section 21 identifies two types of information in a corporation’s securities register to which access may be sought. The first type of information is a “basic list” of shareholders. Section 21(3) enables a shareholder, creditor or any other person to require a distributing corporation, such as EnGlobe, or its transfer agent, such as Computershare, to furnish it with a basic shareholders’ list:

(3) Shareholders and creditors of a corporation, their personal representatives, the Director and, if the corporation is a distributing corporation, any other person, on payment of a reasonable fee and on sending to a corporation or its agent or mandatary the affidavit referred to in subsection (7), may on application require the corporation or its agent or mandatary to provide within 10 days after the receipt of the affidavit a list (in this section referred to as the “basic list”) made up to a date not more than 10 days before the date of receipt of the affidavit setting out the names of the shareholders of the corporation, the number of shares owned by each shareholder and the address of each shareholder as shown on the records of the corporation. (emphasis added)

[227] As can be seen, under the CBCA any person may require a distributing corporation, or its transfer agent, upon meeting application requirements, to provide a basic list of shareholder information which identifies the shareholders by name and address and states the number of shares owned. A “basic list”, however, would not contain section 50(1)(c) securities information – i.e. the date and particulars of the issue and transfer of each security. In light of the statutory right of access to a “basic list”, no shareholder of a CBCA distributing corporation could have a reasonable expectation that information contained on a “basic list” would be treated by a corporation as private or confidential, but a shareholder would have a reasonable expectation that a corporation, or its transfer agent, would provide such information to “any other person” only if the conditions of access specified in sections 21(3) and (7) were met. In the present case whether Mr. Sansone complied with the conditions of access to obtain such information about the D’Addario Shares is not relevant since the Management Proxy Circular for the April Shareholders Meeting disclosed such information in any event.[^43]

[228] Section 21(1) gives a right of access to a broader type of shareholder information of a distributing corporation, but by a different means – the inspection and extraction of information by the requesting party:

(1) Subject to subsection (1.1), shareholders and creditors of a corporation, their personal representatives and the Director may examine the records described in subsection 20(1) during the usual business hours of the corporation, and may take extracts from the records, free of charge, and, if the corporation is a distributing corporation, any other person may do so on payment of a reasonable fee.

(1.1) Any person described in subsection (1) who wishes to examine the securities register of a distributing corporation must first make a request to the corporation or its agent or mandatary, accompanied by an affidavit referred to in subsection (7). On receipt of the affidavit, the corporation or its agent or mandatary shall allow the applicant access to the securities register during the corporation’s usual business hours, and, on payment of a reasonable fee, provide the applicant with an extract from the securities register. (emphasis added)

[229] So, the date and particulars of the issue and transfer of each security (s. 50(1)(c)), which would include the share certificate number, the date of issue of a share certificate, and the date of any transfer of the shares represented by a share certificate, are available, in the case of a distributing corporation, on request to the corporation, or its transfer agent, made in the prescribed form by a shareholder or creditor of a company, or “any other person”. Accordingly, a shareholder of a CBCA distributing corporation does not enjoy a reasonable expectation that the company, or its transfer agent, will refuse to disclose to a non-shareholder or non-creditor information concerning his share certificate numbers, dates of share issuance and dates of share transfer. A shareholder would enjoy a reasonable expectation that the distributing company, or its transfer agent, would make such information available only if the requesting party complied with the application process set out in section 21 of the CBCA.

[230] The complaint of the plaintiffs focused on the transmittal of the August 10 Computershare Email by Mr. Busseri to Mr. Sansone. That email contained information provided by Computershare, the company’s transfer agent, concerning the number of shares owned by the D’Addarios, their share certificate numbers and the dates of issuance or transfer. As section 21 of the CBCA makes clear, the substantive information about the D’Addario shares contained in the Computershare Email was not confidential – it was available to “any other person”, such as a Mr. Sansone, in the case of a distributing corporation, such as EnGlobe.

[231] That said, Mr. Busseri’s transmittal of the information to Mr. Sansone by email did not accord with the request process prescribed by section 21 of the CBCA. EnGlobe should not have used the informal means of an email to respond to an oral request by Mr. Sansone for information about the D’Addario shares. To that extent EnGlobe’s conduct breached the reasonable expectation of a shareholder that the company would follow the disclosure mechanisms specified in section 21 of the CBCA.

[232] But did such a breach of the reasonable expectation of complying with the statutory disclosure process constitute conduct by Englobe, or its CEO, which fell within the terms "oppression", "unfair prejudice" or "unfair disregard" of a relevant interest? In my view it did not for two reasons.

[233] First, I find it difficult to characterize the manner of release of information as oppressive or unfair when the person could otherwise have obtained the information. Now I recognize that one aspect of the disclosure mechanics established by section 21 consists of the requirement that the person seeking the shareholder information provides an affidavit containing the information prescribed by section 21(7). That includes a statement that the requesting party will not use the information obtained except as permitted under subsection 21(9) which reads as follows:

(9) A list of shareholders or information from a securities register obtained under this section shall not be used by any person except in connection with

(a) an effort to influence the voting of shareholders of the corporation;

(b) an offer to acquire securities of the corporation; or

Mr. Busseri released the information in the Computershare Email to Mr. Sansone without securing such an affidavit from him. When Mr. Sansone requested the information Mr. Busseri had understood that some dispute existed with Mr. D’Addario over fees and some security in Mr. D’Addario’s shares, and I have found that Mr. Busseri must have known that Mr. Sansone likely would use the information in that dispute. However, I also accept Mr. Busseri’s evidence that he really did not give the matter much thought and simply forwarded the Computershare Email to Mr. Sansone. While it was a mistake for EnGlobe to release the information to Mr. Sansone by the means that it did and without obtaining the required affidavit from him, I do not regard that mistake as rising to the level of oppressive or unfair conduct.

[234] Second, there was no evidence of any harm or detriment to the D’Addario shareholders caused by the informal means by which EnGlobe released the information to Mr. Sansone.[^44] How did Mr. Sansone and his counsel use the information in the Computershare Email? I stated previously that in light of the 2009 settlement between Mr. D’Addario and Mr. Sansone, it was not necessary for me to make findings of fact about the validity of the Pledge Agreement. I have found, as a fact, that Mr. Busseri or EnGlobe did not prepare the Pledge Agreement or the Schedule A thereto; I have rejected Mr. Sansone’s evidence to the contrary. I have also found that Mr. Busseri and EnGlobe did not see the Pledge Agreement, with its Schedule A, until September 2, 2005, following Mr. Wilder’s interview of Mr. Sansone. However, there is no dispute that EnGlobe sent the Computershare Email to Mr. Sansone on August 10, 2005 and to his counsel on September 22, 2005.

[235] On September 19, 2005 Faskens filed several PPSA registrations in respect of the Pledge Agreement.[^45] None of them used the share certificate or transfer information contained in the Computershare Email.

[236] October 12, 2005 Faskens sent demand letters to several brokers informing them of Mr. Sansone’s claim under the Pledge Agreement, and on October 13 Faskens sent letters to EnGlobe, Computershare and CDS informing them of the claim. A copy of the Pledge Agreement was attached to those letters. A day before sending out the October 12 notice letters Mr. Kaufman had emailed Mr. Sansone that “no one knows with any degree of certainty where the shares are”. Although some letters to a few of those brokers referred to the number of EnGlobe shares which Faskens thought might be in their hands, that information came from a document previously provided by Mr. D’Addario to Mr. Sansone, not from the Computershare Email.[^46]

[237] What happened as a result of those October 12 and 13 demand letters? Nothing. No person took any steps to freeze any D’Addario shares which they were holding. EnGlobe issued a press release on October 14, but took no steps in connection with the shares issued to the D’Addarios. Consequently, notwithstanding the flawed process by which EnGlobe released shareholder information to Mr. Sansone, no harm was caused to the D’Addarios by reason of such release.

[238] The harm about which the plaintiffs complain in this action – the freezing of their shares – resulted not from any demand letters, but from a consent order put in place following the commencement of the Sansone and D’Addario Pledge Actions. During the trial I asked counsel for the plaintiffs how his clients could complain that the freezing of their shares was caused by the conduct of EnGlobe when the freezing resulted from a consent order agreed to by Messrs. D’Addario and Sansone to which EnGlobe was not a party? Plaintiffs’ counsel submitted that Mr. D’Addario had no choice but to consent.

[239] The evidence does not bear out that submission. The evidence set out in paragraphs 133 to 138 above supports a finding that the October 18, 2005 consent injunction was the product of negotiations between counsel for Mr. D’Addario and Mr. Sansone. As counsel for the D’Addarios wrote in his February, 2006 factum:

Counsel for both parties had the opportunity to review the draft Injunction Orders and make any required changes, which they did. The Injunction Orders reflect the real intentions of the parties. (emphasis added)

[240] In sum, the freezing of their shares about which the plaintiffs complain in this action resulted from their informed consent to an injunction in litigation between themselves and Mr. Sansone, not from any conduct of EnGlobe or Mr. Busseri.

[241] But, submit the plaintiffs, the Sansone Pledge Action really was directed by EnGlobe, so the effect of the October 18 freezing order actually resulted from EnGlobe’s conduct. I do not accept that submission, and I will now explain why.

D.4 Allegations that EnGlobe directed the Sansone Pledge Action

[242] I accept, as a general proposition, the plaintiffs’ assertion that it is reasonable for a shareholder of a company to expect that the company will not fund and direct a lawsuit by another person which seeks to limit the shareholder’s ability to exercise the voting rights attaching to its shares.[^47] The evidence, however, does not support a finding that EnGlobe breached that reasonable expectation.

[243] Let me summarize the findings of fact which I made in paragraphs 213 to 219 above: (i) the decision to sue Mr. D’Addario on the Pledge Agreement was made by Mr. Sansone alone, not by EnGlobe or not jointly by EnGlobe and Mr. Sansone; (ii) EnGlobe did not agree to fund the Sansone Pledge Action; (iii) Mr. Sansone decided to proceed with his action irrespective of whether EnGlobe funded it or not; (iv) independent counsel represented Mr. Sansone in his action and it was independent counsel who directed the content and the conduct of the Sansone Pledge Action; and (v) Faskens drafted and issued the relevant demand and court documents without consulting or seeking directions from EnGlobe. Those findings of fact cannot support the position advanced by the plaintiffs that EnGlobe funded and directed the Sansone Pledge Action.

[244] What they do support is the conclusion that once EnGlobe became aware of Mr. Sansone’s intention to sue Mr. D’Addario, it saw a potential benefit to the company of such litigation, so it made inquiries about how far along preparation had proceeded and it encouraged Mr. Sansone to proceed. Mr. Busseri could not have put the matter more bluntly in his testimony:

If the shares were in hands other than Mr. D’Addario’s, in hands that friendly to the company, it definitely could help in saving the company.

Andrew [Wilder] had taken instruction from myself to stay close with Mr. Sansone’s counsel because this would not be a bad outcome for the company.

Q. You wanted to ensure that EMS was monitoring this and making sure it was moving forward?

A. Correct.

[245] Was that a prudent course of action for EnGlobe to have taken? Perhaps not. Companies should distance themselves from private fights between others. Was it an understandable course of action? Certainly.[^48] As courts have stressed, the concept of reasonable expectations and their breach is objective and contextual. The evidence indicates that during the material period of time EnGlobe was making decisions in the following financial and corporate context:

(i) During the summer and fall of 2005 Frank D’Addario and EnGlobe stood in an adversarial relationship. Significant litigation had accumulated between them. Mr. D’Addario was appealing the decision of C. Campbell J. which refused to reverse the results of the April Shareholders Meeting. Mr. D’Addario was threatening to requisition a further shareholders meeting to conduct another proxy fight. Throughout both sides were represented by counsel;

(ii) During the same period of time EnGlobe was in real financial difficulty. On August 15, 2005 EnGlobe reported a net loss of $13.7 million for the first half of the year, a deficit of $40.9 million, and that it was in breach of certain debt covenants. In June its CEO, Mr. Busseri, had reported to the Board that the company had to consider seriously the option of filing under the CCAA;

(iii) The large and continuing volume of litigation with the D’Addarios was consuming significant corporate resources and deflecting management from the task of running the company’s business; and,

(iv) Efforts by the company to resolve its differences with the D’Addarios had failed, with the company regarding as too rich the amounts demanded by the D’Addarios to settle the litigation or to buy-out their shares.

That was the context in which Mr. Busseri was making decisions and giving directions to Mr. Wilder, the corporate counsel, to “stay close” to Mr. Sansone’s counsel.

[246] But, Mr. Sansone was represented by his own counsel, Faskens, who took instructions from him, not from EnGlobe, and who directed the content and timing of the Sansone Pledge Action. Faskens tried to ignore many of the unsolicited communications from Mr. Wilder and they cautioned Mr. Sansone against entering into a share purchase agreement with Mr. Busseri, advice which he followed. At the end of the day the Sansone Pledge Action, and the resulting October 18 consent injunction which froze the D’Addario shares, were the products of independent action by Mr. Sansone and his counsel, not joint conduct with EnGlobe or conduct directed by EnGlobe.

[247] Both before and after the commencement of the Sansone Pledge Action Faskens had asked EnGlobe’s counsel for certain information. EnGlobe provided some, and declined to produce others. The evidence disclosed that EnGlobe and Faskens were dealing with this issue on the basis of the relevancy of the information to the action, and they took different views on certain documents. Given that under our Rules of Civil Procedure a non-party can be required to produce relevant documents, it really is a matter of business judgment to be exercised in the specific circumstances of each request as to whether a corporation volunteers information to a litigant in response to a request or requires the litigant to obtain a court order. Of course both Mr. Sansone and Mr. D’Addario named EnGlobe as a party to their respective actions, so following their commencement of these proceedings EnGlobe was subject to the production obligations imposed by the Rules on a party.

[248] For those reasons I conclude that EnGlobe’s conduct in seeking information about the status of the preparation of the Sansone Pledge Action, the encouragement offered, particularly by Mr. Busseri to Mr. Sansone, and the provision of some information from EnGlobe’s counsel to Faskens did not breach the reasonable expectation of a shareholder of a company that the company would not direct or fund a lawsuit by another person which seeks to limit the shareholder’s ability to exercise the voting rights attaching to its shares

D.5 Other allegations of oppressive conduct

[249] In final argument the plaintiffs also pointed to other conduct of EnGlobe which they submitted was oppressive. First, they contended that requests made by Mr. Wilder, EnGlobe’s corporate counsel, to Faskens for information about any witnesses who could substantiate the version of the August 24 events given by Mr. Sansone’s brother in fact was for the purpose of furthering Mr. Sansone’s action against Mr. D’Addario, not for any internal EnGlobe investigation.

[250] Mr. Wilder had emailed Faskens on September 30 asking if there had been “any progress on speaking with one of the guys Rob says can substantiate that Joe [Sansone] was at Tass’s [restaurant] at the relevant times?” Mr. Wilder repeated this request in an October 7 email to Faskens in which he wrote:

EMS has an obligation to fully investigate the allegations of Mr. D’Addario. As you are aware, we met with Mr. Sansone and prepared a memorandum based upon his advice, which we shared with you. What remains open is evidence from witnesses that can corroborate that Joe was at Tassa – this needs to be done soon, as memories fade.

[251] Mr. Wilder testified that he made those inquiries in order to tie up loose ends in the investigation he had been conducting since the EnGlobe Board had received Mr. D’Addario’s email of August 27 in which he alleged that he had been threatened at gun-point to sign documents. The plaintiffs submitted that I should not believe Mr. Wilder on this point. I disagree. The evidence disclosed that EnGlobe, having received Mr. D’Addario’s chronology of the events of August 24, thought it should conduct some investigation into them. Mr. Wilder directed that investigation and prepared an initial report. His request of Faskens for further information was consistent with his role in that investigation. More importantly, I have difficulty understanding how a request for information by EnGlobe’s counsel to Faskens could be transformed, in argument by the plaintiffs, into a request made by corporate counsel for the benefit of Mr. Sansone when he had his own counsel, Faskens, preparing his claim. The plaintiffs’ allegation on this point makes no sense.

[252] Finally, the plaintiffs submitted that EnGlobe was under an obligation to its shareholder, Mr. D’Addario, to perform “due diligence” on the validity of the Pledge Agreement and that by failing to do so EnGlobe was willfully blind to the preposterous nature of Mr. Sansone’s claim against Mr. D’Addario. I do not accept this argument. I repeat my findings set out above – the Sansone Pledge Action was the result of decisions made by Mr. Sansone with the assistance of his independent counsel. EnGlobe did not act to give any effect to the Pledge Agreement. No conduct of the EnGlobe Defendants caused Mr. D’Addario the harm about which he complains – the freezing of his shares – and it is the conduct of EnGlobe which must be the focus of any oppression analysis.

D.6 The cumulative effect of the conduct complained about

[253] I have concluded that the specific acts of the EnGlobe Defendants, when looked at separately, did not constitute oppressive or unfair conduct. Stepping back and looking at them together as a whole, does that picture change? In my view it does not. The harm about which the plaintiffs complain – the freezing of their shares – resulted from a court order to which they consented in the context of an action brought by Mr. Sansone, who was represented by independent counsel. EnGlobe did not direct Mr. Sansone to start that litigation; it did not enter into an agreement with him that he should sue Mr. D’Addario; it did not agree to fund the litigation; it did not direct the litigation. The conduct of the EnGlobe Defendants, when looked at either singly or cumulatively, did not effect an oppressive or unfair result on the plaintiffs. I therefore dismiss their claim under section 241 of the CBCA.

X. Second Issue: Did EnGlobe conspire with Mr. Sansone with the intention of depriving the plaintiffs of the use of their shares by fraud or deceit?

[254] Relying on the same allegations of fact as underpinning their oppression claim, the plaintiffs contended that the EnGlobe Defendants conspired with Mr. Sansone with the intention of depriving them of the use of their shares by fraud or deceit.

[255] The law has long recognized that a combination wilfully to do an act causing damage to a man in his trade or other interests is unlawful and actionable as a conspiracy if damage in fact is caused.[^49] This is so whether the means used by those acting in combination are lawful or unlawful; as long as the predominant purpose of the combination was to cause injury to the plaintiff and damage resulted, the conduct is actionable.[^50]

[256] In light of the findings of fact set out above in my analysis of the plaintiffs’ oppression claim, this part of the plaintiffs’ claim also must fail – EnGlobe was not party to any agreement with Mr. Sansone to cause injury to Mr. D’Addario.

[257] Although my conclusion that the plaintiffs have failed to prove their pleaded oppression and conspiracy claims is sufficient to dispose of their action, in the event of appellate review of my conclusion I think it necessary to address the three defences advanced by the EnGlobe Defendants, together with the issue of damages.

XI. Third Issue: Did the plaintiffs release their claims under the December, 2005 settlement?

[258] EnGlobe pleaded that the claims advanced by the plaintiffs were subject to the terms of the Releases they executed as part of the December, 2005 settlement with EnGlobe and therefore it is an abuse of process for the plaintiffs to pursue claims previously released. I do not accept this submission for the following reasons.

[259] EnGlobe paid the D’Addarios $1.7 million under the December, 2005 settlement agreement. No doubt EnGlobe thought that the settlement would bring an end to litigation with the D’Addarios. As noted above,[^51] in its March, 2006 Management Proxy Circular EnGlobe stated that the successful closing of the ONCAP Financing would result in the settlement of all D’Addario Litigation. Also, in a February 10, 2006 affidavit, Mr. Busseri deposed that ONCAP had required, as a condition precedent of financing, that “all outstanding litigation involving EMS, the D’Addario Parties and certain parties related to the D’Addario Parties and EMS be resolved.” Given that by May, 2006, when the settlement funds were paid, the only request for relief left in the Consolidated Pledge Action against EnGlobe was an order preventing EnGlobe from transferring the disputed shares to Mr. Sansone and that relief had been rendered moot by the October 18 injunction, I can understand why EnGlobe reasonably thought that by paying $1.7 million to the D’Addarios they would not see them again across the litigation table.

[260] However, the Releases signed by the parties carefully described the litigation which was being settled, and the Consolidated Pledge Action was not included, a point Mr. Busseri conceded on his May 29, 2008 examination.[^52] I acknowledge that an argument could be made that because, in the second release from the D’Addarios, they agreed to release all claims connected with “the subject matter of the Term Sheet” and the Term Sheet, in turn, contained a condition that “all claims outstanding with respect to Frank D’Addario…against EMS…will be fully and finally settled”, then the D’Addarios also had released their claims in the Consolidated Pledge Action.[^53] That general language, however, must give way to the specific language of the first mutual release which contained a precise list of the settled litigation, and the Consolidated Pledge Action did not form part of that list.

A. Positions of the parties

[261] In May, 2006 EnGlobe moved to dismiss the claim against it in the Consolidated Pledge Action because “the Campbell Order and the Roy Order effectively dispose of the relief claimed by the Frank Defendants against EMS in the Crossclaim.” Mr. D’Addario initially opposed that relief for reasons set out in his May 28, 2006 email. Ultimately, however, Mr. D’Addario consented to the June 22, 2006 order of C. Campbell J. dismissing the Consolidated Pledge Action against EnGlobe.

[262] EnGlobe took the position in its defence that the doctrine of res judicata barred the claims of the plaintiffs because the claims asserted were raised, or could have been raised, by the plaintiffs against EnGlobe in the Consolidated Pledge Action which was the subject of the consent dismissal order. The plaintiffs disagreed, arguing that the consent order could not operate as res judicata because it did not involve any adjudication on the merits and, in any event, the causes of action pleaded in this action are based on information that came to light after the consent order and so properly found a new cause of action.

B. The governing principles of law

B.1 Cause of action estoppel

[263] For a prior judicial decision to operate as a cause of action estoppel, several conditions must exist:

(i) the prior decision was a final decision pronounced by a court of competent jurisdiction over the parties and the subject-matter;

(ii) the decision was, or involved, a determination of the same cause of action as that sought to be advanced in the new proceeding; and,

(iii) the parties to the prior proceeding or their privies are the same persons as the parties to the present action or their privies.[^54]

[264] The 1843 case of Henderson v. Henderson[^55] contained the classic statement of the principle of cause of action estoppel:

I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.[^56]

[265] Recent years have seen some refinement of the broad principle articulated in Henderson v. Henderson. In Freedman v. Reemark Sterling I Ltd. our Court of Appeal adopted the analysis undertaken by Cromwell J.A. (as he then was) in Hoque v. Montreal Trust Co.:

The submission that all claims that could have been dealt with in the main action are barred is not borne out by the Canadian cases. With respect to matters not actually raised and decided, the test appears to me to be that the party should have raised the matter and, in deciding whether the party should have done so, a number of factors are considered.

Some of the cases involve attempts to rely on new evidence to support a claim previously litigated. In such cases, the courts are concerned whether the new evidence could have been available in the first action with reasonable diligence…

Some of the cases are concerned with whether the second action alleges a cause of action which is distinct from that asserted in the first action…

Another group of cases holds that cause of action estoppel applies where the second action alleges a new legal basis for claims arising out of facts and relationships that have been the subject of the earlier litigation…

There are other cases which turn on that principle that all of the matters necessary to the making of a final order may not be challenged except by appeal or other direct review.

Other cases turn on abuse of process, which Lord Keith in Arnold thought to be the true basis of the rule. These decisions are founded on the conclusion, in light of all the circumstances, that the subsequent litigation is an attempt to use the Court's process "to delay and frustrate the course of justice": Bank of Montreal v. Prescott (1994), 1994 714 (BC CA), 1 B.C.L.R. (3d) 304 (C.A.).

Although many of these authorities cite with approval the broad language of Henderson v. Henderson, supra, to the effect that any matter which the parties had the opportunity to raise will be barred, I think, however, that this language is somewhat too wide. The better principle is that those issues which the parties had the opportunity to raise and, in all the circumstances, should have raised, will be barred. In determining whether the matter should have been raised, a court will consider whether the proceeding constitutes a collateral attack on the earlier findings, whether it simply asserts a new legal conception of facts previously litigated, whether it relies on "new" evidence that could have been discovered in the earlier proceeding with reasonable diligence, whether the two proceedings relate to separate and distinct causes of action and whether, in all the circumstances, the second proceeding constitutes an abuse of process.[^57](emphasis added)

[266] In Freedman the Court of Appeal stated that an effort to impose a new legal concept on the same facts by using the label of a different cause of action will engage the defence of cause of action estoppel.[^58]

[267] When undertaking an examination of a plea of cause of action estoppel, a court must focus on the cause of action asserted in the prior proceedings in relation to that pleaded in the current action.[^59] The term “cause of action” refers to a set of facts giving rise to a legal claim or entitlement.[^60] The materials which a court may look at in order to determine what cause of action was advanced in a prior proceeding are not limited to the pleadings or judgment, but may include other evidence.[^61]

[268] A consent judgment or order may raise a cause of action estoppel – “it is as binding and conclusive between the parties and their privies as any other judgment (subject, perhaps, to certain exceptions in cases of fraud or mistake)”.[^62] The rationale for this principle was expressed by the Court of Appeal in Ontario Sugar Co. (Re):

“… The basis of the estoppel is that, when parties have once litigated a matter, it is in the interest of the state that litigation should come to an end; and if they agree upon a result, or upon a verdict, or upon a judgment, or upon a verdict and judgment, as the case may be, an estoppel is raised as to all the matters in respect of which an estoppel would have been raised by judgment if the case had been fought out to the bitter end."[^63] This statement of the law was not only not questioned, but apparently was fully accepted, by the Court of Appeal which affirmed his decision. Lord Herschell L.C., said (p. 50): "The truth is, a judgment by consent is intended to put a stop to litigation between the parties just as much as is a judgment which results from the decision of the Court after the matter has been fought out to the end." He added: "I think it would be very mischievous if one were not to give a fair and reasonable interpretation to such judgments, and were to allow questions that were really involved in the action to be fought over again in a subsequent action." A passage well worth bearing in mind in dealing with a question of this nature.[^64]

[269] The plaintiffs pointed to two cases to support their argument that consent orders do not possess the same finality for purposes of cause of action estoppel. The case of Catalyst Fund General Partner I Inc. v. Hollinger Inc.[^65] does not support the plaintiffs’ contention because C. Campbell J. clearly stated that “a consent order may operate as a res judicata with respect to the causes of action settled by the consent order.” In that case the court did state that a final order, including a consent order, might be set aside, but a motion to vary does not engage the same considerations as res judicata.” Similarly, the decision of Nordheimer J. in Lawyers’ Professional Indemnity Co. v. Geto Investments Ltd.[^66] was decided on the basis that the new action seeking to set aside a previous consent order on the basis that it was secured by fraud could proceed since fraud is a ground on which such orders may be set aside. It is true that although elsewhere in obiter in his decision Nordheimer J. suggested that unless a consent order contained some adjudicative aspect the doctrine of res judicata could not flow from the order, it is apparent that the court did not have before it the decision of the Supreme Court of Canada in Ontario Sugar Co. (Re) which held that cause of action estoppel could flow from a consent order, nor the decision of the Supreme Court of Canada in R. v. Riddle. Although that was a criminal law case which considered the issue of whether the plea of autrefois acquit was available when the charge was dismissed in the earlier proceeding following the non-appearance of the informant and the refusal of an adjournment, the Court stated:

The term "on the merits" does nothing to further the test for the application of the bis vexari maxim. There is no basis, in the Code or in the common law, for any super-added requirement that there must be a trial "on the merits". That phrase merely serves to emphasize the general requirement that the previous dismissal must have been made by a court of competent jurisdiction, whose proceedings were free from jurisdictional error and which rendered judgment on the charge.[^67]

Accordingly, I see neither case cited by the plaintiffs as departing from the well-established principle that a consent order may support a plea of res judicata cause of action estoppel.

C. Application to the facts of this case

[270] Turning to the present case, the June 22, 2006 consent order of C. Campbell J. in the Consolidated Pledge Action was a final one, and the parties in that action asserting a claim against EnGlobe were the same as those in the present – i.e. the D’Addario Plaintiffs. Although Mr. Busseri was not named as a party in the first proceeding, as the CEO of EnGlobe he stands as one of its privies. Indeed, in the present action the plaintiffs pleaded that EnGlobe is vicariously liable for the actions of Mr. Busseri. That then leaves the issue of whether the June 22, 2006 consent order involved a determination of the same cause of action the plaintiffs seek to advance against the EnGlobe Defendants in this proceeding.

C.1 Cause of action asserted in the initial proceeding (05-CL-6109)

[271] In the prior proceeding the plaintiffs asserted claims against EnGlobe in two pleadings – the October 17, 2005 Statement of Claim in the D’Addario Pledge Action, and then in their November 24, 2005 Statement of Defence, Counterclaim and Crossclaim in the Consolidated Pledge Action.

[272] As noted above, a “cause of action” involves a set of facts giving rise to a legal claim. Accordingly, in trying to ascertain what cause of action is alleged, one must focus on the allegations of fact, not the prayer for relief. As Master Funduk so aptly put it:

The remedy does not determine the cause of action. It is the other way around. The cause of action, if established, determines the remedy.[^68]

[273] What then were the facts alleged against EnGlobe in the October 17, 2005 Statement of Claim? In summary they were:

(i) Frank D’Addario never signed the Pledge Agreement;

(ii) His signature on the Pledge Agreement had been forged “by Sansone and/or EMS and/or an unknown third party at the request of Sansone and/or EMS” (para. 20);

(iii) Alternatively, the signature page of the document executed under duress by Mr. D’Addario on August 24, 2005 “was fraudulently attached by Sansone and/or EMS to the Agreement” (para. 21).

In terms of relief, the D’Addario plaintiffs sought a declaration that the Pledge Agreement was null and void, as well as injunctions against both Mr. Sansone and EnGlobe preventing any dealing with the shares prior to trial.

[274] Mr. D’Addario swore three affidavits before filing his November 24, 2005 Statement of Defence in the consolidated proceeding. In those affidavits he recounted:

(i) the events surrounding his removal as CEO of EnGlobe, the proxy fight, and the extensive litigation between the D’Addarios and EnGlobe, including his challenge to the results of the vote at the April Shareholders Meeting;

(ii) the attempts by EnGlobe to force him to sell his shares: “The fraudulent contract now being circulated by Roberto Sansone is the latest attempt by him and EMS to take our shares”;[^69]

(iii) the settlement discussions undertaken during the summer of 2005 with EnGlobe involving Mr. Sansone;

(iv) the July 27, 2005 “Napkin Agreement”;

(v) the August 24, 2005 “drawn gun” meeting with Mr. Sansone and his report of those events to the EnGlobe Board;

(vi) his denial of entering into the Pledge Agreement; and,

(vii) the October 14, 2005 press release issued by EnGlobe.

[275] Pursuant to the direction to consolidate the Sansone and D’Addario Pledge Actions, the plaintiffs re-asserted their claims in their November 24, 2005 Statement of Defence in which they repeated most of the allegations of fact asserted in their initial pleading. However, the plaintiffs dropped their allegation that Mr. D’Addario’s signature on the Pledge Agreement had been forged by Mr. Sansone and/or EMS and, instead, alleged that it had been forged by “Sansone or an unknown third party at the request of Sansone”. They also altered, in the same way, their earlier allegation that Mr. Sansone and/or EMS had attached fraudulently Mr. D’Addario’s signature to the Pledge Agreement.

[276] Mr. D’Addario subsequently swore one further affidavit – January 11, 2006 – before the June consent order, but he made no allegation of fact against EnGlobe in it.

C.2 Cause of action asserted in the present proceeding (06-CV-321918PD1/CV-10/8995-00CL)

[277] In his October 16, 2005 affidavit in the initial action Mr. D’Addario deposed that the “fraudulent contract now being circulated by Roberto Sansone is the latest attempt by him and EMS to take our shares”. The allegation that EnGlobe and Mr. Sansone worked together to deprive the plaintiffs of their shares also is the foundational allegation in the present proceeding. The plaintiffs’ present action repeats the facts asserted in the initial Consolidated Pledge Action, makes additional allegations of facts, and uses two new legal theories to describe those facts – oppression and conspiracy to injure. The plaintiffs submitted that the additional facts asserted in this action disclose that the present proceeding advances new and different causes of action. Yet, as the lengthy review of the evidence set out earlier in these Reasons shows, before agreeing to the June, 2006 consent order Mr. D’Addario knew the facts he now points to as “new facts”. I think the most practical way to examine the parties’ positions is to depict graphically those allegations of additional “new facts” contained in the present Further Amended Statement of Claim with the facts known to the plaintiffs at the time of the June consent order.[^70] The table below attempts to do so:

“New Fact” pleaded in the Further Amended Statement of Claim (“FASC”)

Was that fact or allegation known to the plaintiffs before the June, 2006 Consent Order?

EnGlobe and Sansone entered into a consulting agreement in July, 2005 (FASC, 13)

Yes.

D’Addario October 16/05 affidavit: EMS engaged Sansone as Director, Business Development; business card attached.

Chalmers August 31, 2005 letter to Burden referred to the consulting agreement.[^71]

Sansone tried, as EnGlobe’s agent, to negotiate the sale of the D’Addario Shares to Busseri (FASC, 15)

Yes.

D’Addario August 27, 2005 email to EnGlobe Board.

Sansone, February 2, 2006 affidavit recounted contact with D’Addario to sell his shares including the Napkin Agreement

Busseri saw the Share Pledge Agreement in July, 2005 and told Sansone to amend the Schedule “A” to show share certificate information (FASC, 18)

Yes.

Pleaded in paras. 20 and 21 of the original Statement of Claim in the D’Addario Pledge Action.

Mr. Busseri denied that allegation and I have accepted his evidence.

Busseri sent Sansone the ComputerShare Email in August, 2005 to create a new, fabricated Schedule “A” (FASC, 19, 20, 21)

Yes.

On his cross-examination conducted March 29, 2006 Mr. D’Addario stated that Mr. Sansone probably got Schedule “A” from EMS.[^72]

An exhibit to Sansone’s Feb. 2/06 affidavit (Ex. DD) contained an Aird & Berlis email to Faskens advising that CDS held the share certificates.[^73]

Busseri knew of Sansone’s intention to meet D’Addario on August 24, under false pretences, to obtain his signatures (FASC, 22)

No, but Busseri denied this allegation and I have accepted Busseri’s evidence.

Sansone registered the Pledge Agreement under the PPSA (FASC, 27(a))

Yes.

The Faskens October 12, 2005 demand letter to D’Addario.

EnGlobe helped Sansone to find legal counsel (FASC, 27(c))

Yes.

Sansone Feb. 2/06 affidavit: EMS encouraged his pursuit of claims against plaintiffs.[^74]

EnGlobe agreed to pay Sansone’s legal fees (FASC, 27(d))

Yes.

Sansone Feb. 2/06 affidavit: EMS encouraged his pursuit of claims against the plaintiffs. Busseri denied this in his Feb. 10/06 affidavit.[^75]

Counsel for EnGlobe and Sansone co-ordinated the Sansone Pledge Action (FASC, 27(e))

Yes.

Sansone Feb. 2/06 affidavit: EMS encouraged his pursuit of claims against plaintiffs.

D’Addario February 13, 2006 Factum, paras. 60 and 63.

10.

Busseri offered to buy any shares Sansone secured through his litigation with D’Addario (FASC, 28, 29)

Yes.

Sansone Feb. 2/06 affidavit, para. 91; Busseri Feb. 10/06 affidavit.

[278] The plaintiffs’ present action advances claims that EnGlobe oppressed their interests as shareholders and EnGlobe conspired with Mr. Sansone to cause economic harm to the interests of the plaintiffs as shareholders. The record disclosed that the plaintiffs, or their counsel, had made precisely those allegations several times before the June 2006 Consent Order:

(i) Frank D’Addario, October 16, 2005 affidavit: the “fraudulent contract now being circulated by Roberto Sansone is the latest attempt by him and EMS to take our shares”;

(ii) Ferne D’Addario: February 24, 2006 email to Kevin O’Leary:

“I believe you should be aware that EMS did play a role in Sansone’s claim. Sansone has made documents public that clearly show EMS lawyers at Aird & Berlis strategizing with Sansone’s lawyers at Fasken Martineau regarding the fraudulent claim.

(iii) The D’Addario’s counsel, Bennett Jones, in their February, 2006 factum:

“it appears that Sansone pursued this litigation for the primary purpose of providing EMS the means to oppress a group of minority shareholders, the D’Addario Defendants, and to strip them of the Shares so that they could eventually be transferred to EMS. EMS “encouraged” Sansone in the ligation and then gave further instructions to Sansone to restrain the D’Addario Defendants’ voting rights even though Sansone had exhibited no prior intention to enforce those rights himself…This plot between Sansone and EMS smacks of maintenance and champerty.”

(iv) Finally, in May, 2006 Mr. D’Addario initially resisted consenting to the June 2006 Consent Order precisely because he thought EnGlobe had worked together with Mr. Sansone on the Sansone Pledge Action:

We have recently become well aware of members of the Board dealing with Sansone against the D’Addario parties in their involvement with what we believe to be the strategic planning of his claim, and we do not take this lightly. Please refer to the Feb 06, 2006 Sansone affidavit, as instance of many public documents.

[279] In sum, the plaintiffs’ prior action contained the key factual allegations repeated in the present action. Of the “new”, or additional facts, asserted by the plaintiffs as supporting a distinctive new cause of action, all were known to them prior to June, 2006, save and except that the plaintiffs had not seen the Computershare Email. Moreover, the plaintiffs had informed EnGlobe that they believed the company had worked together with Mr. Sansone to oppress their interests as minority shareholders and to conspire to injure their economic interests. So why did they consent to the June order? I think the answer is evident from the record – the plaintiffs had received $1.7 million from EnGlobe to settle their litigation and they knew that even though the Consolidated Pledge Action was not named in the settlement releases, the intent, or the spirit of the settlement, was that the litigation war between the D’Addarios and EnGlobe would come to an end. So they took the money.

[280] What about the Computershare Email? Did the receipt of that document by the plaintiffs in September, 2006 give rise to a new cause of action? It did not, for two reasons. First, the only usable information contained in the Computershare Email was that by 2004 the shares of the plaintiffs by and large were in the hands of CDS. That information had been conveyed by Mr. Chalmers to Mr. Round in his October 17, 2005 email which was attached to Mr. Sansone’s February 2, 2006 affidavit which Mr. D’Addario admitted he had read. It was information already known to the plaintiffs.

[281] Second, it is evident that prior to June, 2006 the plaintiffs had formed the view, based on available evidence, that EnGlobe had engaged in oppressive conduct against them and that EnGlobe had joined with Mr. Sansone in an effort to harm their economic interests. They therefore possessed sufficient evidence to assert those claims against the EnGlobe Defendants. Their receipt of the Computershare Email in September, 2006 simply provided them with one additional piece of evidence to support the claims which they had already articulated.[^76]

[282] Consequently, I conclude that by June, 2006 the plaintiffs had had ample opportunity to raise the issues of oppression and conspiracy to injure. Indeed, they specifically raised the issues in the D’Addario Pledge Action, as well as in their affidavits and factums in the Consolidated Pledge Action. The plaintiffs, who throughout were represented by counsel, had the opportunity to raise the issues advanced in this present action in the prior action and, if they had intended to pursue those allegations, they should have done so in the prior action. It is evident that they did not do so because they had negotiated a very healthy settlement with EnGlobe which they did not want to endanger. As Ferne D’Addario put it in her March 21, 2006 affidavit:

In any event, after a very difficult period, the parties have managed to put this litigation behind them. This settlement will allow us to move forward with the only remaining litigation being Mr. Sansone’s claim…

The EnGlobe Defendants have successfully established that the principle of cause of action estoppel bars the issues pleaded by the plaintiffs in the present action.

C.3 Conclusion

[283] Had I found that the plaintiffs had established their oppression and conspiracy claims, I would have dismissed their action in any event on the basis of res judicata cause of action estoppel.

XIII. Fifth Issue: Are the oppression claims asserted by the plaintiffs under section 241 of the CBCA statute-barred?

A. Positions of the parties

[284] The plaintiffs did not amend their claim until October 14, 2010 to plead a claim under section 241 of the CBCA. That was well more than two years after the events about which they complained. Both EnGlobe Defendants pleaded that the oppression claim was statute-barred by the Limitations Act, 2002. The plaintiffs argued that they did not discover their oppression claim until they received certain productions from Mr. Sansone in late 2009 as a result of the settlement.

B. The governing law

[285] Section 4 of the Limitations Act, 2002 states that unless the Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. That section applies to oppression actions.[^77] Section 5 provides:

(1) a claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means

I. Overview

II. The parties

A. EnGlobe

B. Frank D’Addario and the other plaintiffs

C. Tony Busseri

D. Robert Sansone

III. The evidence

IV. The structure of these Reasons

V. The events leading up to and concerning the April 29, 2005 shareholders’ meeting

A. The proxy fight

B. The March 1, 2005 Consulting Agreement and Share Pledge Agreement

VI. The evidence about events from after the April, 2005 AGM to the December, 2005 settlement between EnGlobe and the D’Addarios

A. April, 2005 AGM to the end of June, 2005

B. July, 2005

B.1 EnGlobe contracts with Mr. Sansone’s company

B.2 Mr. D’Addario fails in his litigation efforts to review the vote at the April shareholders’ meeting

B.3 Further discussions to buy the D’Addario EnGlobe shares

C. August, 2005

C.1 Disclosure of the Pledge Agreement to EnGlobe

C.2 The ComputerShare email: August 10, 2005

C.3 Further discussions concerning a purchase of the D’Addario shares

C.4 Continued efforts by Mr. D’Addario to requisition another shareholders’ meeting

D. The August 24 encounter and response by EnGlobe

E. September, 2005 to October 12, 2005: the prelude to Sansone’s litigation against D’Addario

E.1 Mr. Sansone retains the Faskens firm

E.2 The preparation of Mr. Sansone’s lawsuit against Mr. D’Addario

September 12

September 14

September 19

September 22

September 23

September 30

First week of October

October 7

October 11

F. October 12 to October 17: the demands

G. The October 18, 2005 injunction orders

H. The consolidation of the Sansone and D’Addario Pledge Actions

I. The settlement between EnGlobe and 310 Waste

J. The OSC investigation into EnGlobe

VII. The December, 2005 settlement and ONCAP financing

A. The settlement between EnGlobe and the D’Addarios

A.1 The driver of the settlement

A.2 The terms of the settlement

A.3 The releases

A.4 The Voting Agreement

A.5 How EnGlobe understood and reported the settlement

B. Efforts by Mr. Sansone to challenge the settlement

B.1 The motion before C. Campbell J. to prevent the D’Addarios from voting the disputed shares

B.2 The motion before Mesbur J. to tie up the settlement funds

C. Other developments in the Sansone/D’Addario Pledge Agreement litigation

D. The June 22, 2006 consent dismissal of claims against EnGlobe

VIII. The history of this proceeding

A. Commencement of this proceeding in November, 2006

B. The 2008 amendment to Mr. D’Addario’s claim

C. Mr. D’Addario settles with Mr. Sansone

D. EnGlobe goes private

E. The 2010 amendments to the plaintiffs’ claim

IX. First Issue: Did EnGlobe engage in oppressive conduct against the plaintiff minority shareholders which resulted in depriving them of the use of their shares?

A. The general legal framework governing oppression claims

B. Specifics of the reasonable expectations of the plaintiffs and the allegation of their breach

C. Findings of fact

C.1 Providing information about the D’Addario shareholdings

C.2 Funding the Sansone Pledge Action

C.3 Providing assistance to the Sansone Pledge Action

C.4 Providing copies of Mr. D’Addario’s signatures to counsel for Mr. Sansone

D. Analysis

D.1 The reasonable expectations asserted by the plaintiff shareholders

D.3 Shareholder information

D.4 Allegations that EnGlobe directed the Sansone Pledge Action

D.5 Other allegations of oppressive conduct

D.6 The cumulative effect of the conduct complained about

X. Second Issue: Did EnGlobe conspire with Mr. Sansone with the intention of depriving the plaintiffs of the use of their shares by fraud or deceit?

XI. Third Issue: Did the plaintiffs release their claims under the December, 2005 settlement?

XII. Fourth Issue: Does the June, 2006 Consent Order bar the claims of the plaintiffs on the basis of res judicata cause of action estoppel?

A. Positions of the parties

B. The governing principles of law

B.1 Cause of action estoppel

B.2 The effect of a consent order

C. Application to the facts of this case