ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 09-44879
DATE: 2013/03/08
BETWEEN:
RICHARD GLOVER
Plaintiff
– and –
MICHEL PERRON
Defendant
Eric R. Williams, for the Plaintiff/Defendant by Counterclaim
Stephen J. Maddex, for the Defendant/Plaintiff by Counterclaim
AND BETWEEN
MICHEL PERRON
Plaintiff by Counterclaim
– and –
RICHARD GLOVER
Defendant by Counterclaim
HEARD: February 8, 2013
AMENDED REASONS FOR decision
(Amendments occur at para. 44 onwards)
Kane J.
[1] The plaintiff by counterclaim, Michel Perron (“Perron”), brings this motion for summary judgment.
[2] The defendant by counterclaim, Richard Glover (“Glover”), opposes the summary judgment motion and presented a cross-motion for production of documents.
[3] Perron in argument submitted that:
(a) There are no material facts in dispute or requiring a trial;
(b) The only issue requiring determination is the interpretation of the partnership agreement (“P.A.”) between Perron and Glover. It is submitted that the terms of the P.A. are clear and unambiguous and should be interpreted on this motion; and
(c) Accordingly, it is submitted that there is no genuine issue requiring a trial thereby entitling Perron to summary judgment with respect to his claims for an accounting and dissolution of the partnership.
[4] Perron in his summary judgment motion seeks an order:
(a) Dissolving Diamond Developments Ltd. (“Diamond”) at this point in time;
(b) That Diamond be dissolved according to the terms of the parties’ partnership agreement;
(c) For an accounting of the assets and liabilities of Diamond;
(d) That the net assets of the partnership be distributed to Glover and Perron, equally.
[5] Perron has filed no affidavit on this motion. Instead, an employee of his counsel’s firm filed two affidavits. Those affidavits attach copies of pleadings, documents and correspondence. Perron’s factum recites a list of facts to be drawn from these documents in order to introduce the business history between these men.
[6] There are a number of reasons why this motion for summary judgment is defective and must be dismissed.
CONFUSION BETWEEN THE PARTNERSHIP AND THE CORPORATION DIAMOND
[7] Perron in his factum seeks an order dissolving Diamond, the corporation. In argument and although not cited in Perron’s counterclaim or motion for summary judgment, Perron seeks the dissolution of the corporation on the basis of s. 35(f) of the Partnership Act, R.S.O. 1990, c. P-5, (the “Act”).
[8] There is no authority to dissolve a corporation under s. 35 of the Act.
[9] Section 218 of the Business Corporations Act, R.S.O. 1990, c. B-16 provides for an application to court to dissolve a corporation. Perron does not rely on the Business Corporations Act to dissolve Diamond. There are particular requirements in that legislation for a court ordered dissolution of a corporation, including how net proceeds are to be distributed which impacts the distribution sought herein.
[10] Section 35 of the Act provides that dissolution of a partnership may be brought on application. This proceeding consists of an action and a counterclaim. This distinction was not addressed in argument. Perron simply assumes that he can engage s. 35 of the Act by way of a motion for summary judgment in an action.
[11] In the counterclaim, Perron seeks:
(a) A termination of the partnership;
(b) An accounting of profits; and
(c) An indemnification against the creditors of the partnership.
[12] The relief sought in the summary judgment motion is different from and exceeds the relief sought in the counterclaim. Rule 20.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 states that a summary judgment motion may be brought on all or part of the relief sought in the statement of claim.
[13] Perron submits that paragraphs 4 and 12 of the P.A. state there can be no dissolution of the partnership unless the parties agree to the terms of dissolution in writing. Having never entered into such an agreement, Perron argues that the partnership continues to date. He now seeks termination of the P.A. as of this point in time.
[14] In his counterclaim, Perron alleges that:
(a) The relationship between Glover and Perron is one of partnership and pursuant to that partnership, Diamond and other companies were incorporated to operate under the partnership;
(b) For business and health reasons, Perron could not work for several months and was then prevented by Glover from returning to work. He states that he resigned as an Officer and Director of several companies including Diamond in April 2008; and
(c) Perron nonetheless alleges he provided services to the operating companies after April 1, 2008.
[15] Glover seeks in his Statement of Claim (“Claim”):
(a) A declaration that as of April 1, 2008, the partnership between Glover and Perron came to an end;
(b) A declaration that all right, title and interest in the partnership assets be transferred to Glover in exchange for the sum of $1.00;
(c) A declaration that all shares held by Glover in trust for Perron in Diamond be transferred to Glover as of April 1,2008; and
(d) An order as of April 1, 2008, that Perron is no longer an officer, director or employee of Diamond.
[16] Glover in the Claim alleges that Perron, in consequence of the partnership, became a shareholder, officer and director of Diamond.
[17] Glover denies the allegation of Perron being forced to leave for health reasons. Glover denies Perron provided services to the partnership after April 1, 2008.
[18] Glover alleges that Perron resigned and abandoned the partnership on April 1, 2008, did no further work contrary to the P.A. and has been gainfully employed or conducting business elsewhere since that time.
[19] Glover was unsuccessful on his 2010 motion for summary judgment before Annis J. based on his allegation that the parties entered into a binding agreement in April, 2008, by which Perron resigned and sold his interest to Glover for $1.00. Part of that motion sought a dissolution. The dissolution portion of this motion was partially argued but then adjourned for completion of argument. That has never occurred.
[20] Perron argues that because the partnership pursuant to sections 4 and 21 of the P.A. may only be dissolved by written agreement and no such agreement exists, Glover’s argument that Perron unilaterally retired or withdrew from the partnership in 2008 is not conduct which can be relied upon as grounds to dissolve the partnership retroactively. As such, Perron argues no issue requiring a trial exists as to dissolution of the partnership prior to today.
[21] As held, dissolution of Diamond is not available under s. 35 (f) of the Act. Notwithstanding that conclusion, s.35 (f) of the Act relied upon states:
- (1) On application by a partner, the court may order a dissolution of the partnership,
(f) when in any case circumstances have arisen that in the opinion of the court render it just and equitable that the partnership be dissolved.
[22] What would be just and equitable in this case includes consideration of what should be the date of any dissolution. The dismissal by Annis J. based on the absence of a written agreement does not determine the court’s determination of whether there should be a dissolution and if so, as of what date.
[23] The court under s. 35 (f) of the Act may dissolve a partnership prior to the date of trial if the facts and events establish that an earlier date would be just and equitable, see Kucher v. Moore, [1991] 3 B.L.R. (2d) 50 (Ont. Gen. Div.).
[24] Perron is incorrect therefore to argue that the there are no facts in dispute requiring determination of when this partnership should be dissolved. Past events, which are disputed, are relevant both as to whether a dissolution should be ordered and if so, as to what date.
[25] The P.A., the pleadings and the facta, inappropriately refer to and treat the business and assets of Diamond interchangeably with the business and assets of the partnership.
[26] These parties in argument state that the development business of Diamond was conducted and owned by them in partnership.
[27] Section 2 of the Act states:
- Partnership is the relation that subsists between persons carrying on a business in common with a view to profit, but the relation between the members of a company or association that is incorporated by or under the authority of any special or general Act in force in Ontario or elsewhere, or registered as a corporation under any such Act, is not a partnership within the meaning of this Act. (Emphasis added)
[28] The P.A. is less than clear on the relationship between the partnership and the corporation.
[29] Glover and Perron are the only parties to the P.A. The corporation is not a party.
[30] Perron and Glover agree in the P.A. to enter into a partnership, the business of which shall be the construction of different projects under the name Diamond Developments Ltd. That name is to be registered under the Business Names Act, unless incorporated.
[31] The P.A. however is silent as to whether the development business will be carried on in the corporation, the partnership or both.
[32] The evidence does not establish whether Glover and Perron are parties to a shareholder agreement regarding their shares in Diamond. The P.A. is silent as to what happens to the shares of Diamond upon dissolution of the partnership.
[33] The assets of a corporation are owned by that corporate entity. They are not owned by the shareholders of that corporation, by a partnership between Perron and Glover or by the partners personally.
[34] Counsel advised that things such as the financial statements, tax returns or land title evidence as to who was the registered owner and who was the grantor of title of the units constructed, which may enlighten in what capacity the business was carried on, is not in evidence on this motion.
[35] The P.A. does not state what the impact of dissolution of partnership will be on the corporation or the status of directors, officers and shareholders of the corporation upon dissolution of the partnership.
[36] Perron on this motion is seeking to dissolve a corporate legal entity and access its assets. The relationship between this partnership, the corporation and the ownership of assets in issue in seeking to dissolve the corporation, is not in evidence.
[37] It is not uncommon that land developers like Glover and Perron, incorporate a separate corporation for and to carry out a property development. There is a host of reasons for doing this including the protection of individuals afforded through incorporation as well as beneficial tax rates.
[38] It is problematic however if two or more individuals as developers incorporate and conduct property development in a corporation and then, by agreement, disregard that corporate entity and its ownership of assets and threat such as assets of a partnership.
[39] The parties may wish to ignore this distinction but a court should not when that issue is squarely before the court. This is particularly the case on a summary judgment motion when the evidence as to whether the corporation or the partnership carried on the business and which of those owned the assets, is not in evidence.
[40] This court is being asked to dissolve a corporation and to distribute partnership assets without knowing the background of this relationship or how the corporation interfaced with the partnership. It would be inappropriate to grant those orders without that evidence.
[41] Perron on this motion also seeks an accounting of the corporation, not the partnership. Perron then seeks an order that the partnership assets be split equally between the parties. This court is not prepared to grant sequential orders against two different entities without knowing on what basis and in what form the business was carried on.
[42] This summary judgment motion is dismissed for the above reasons.
GLOVER CROSS-MOTION
[43] Glover brings a cross-motion for production by Perron of his personal income tax returns, from 2006 to date and Perron’s medical reports and records from 2004 to date.
[44] In its original reasons, this court understood incorrectly that Perron did not respond to this cross-motion by way of affidavit or factum. The Motion Record of Michel Perron In Response To Motion to Compel In Writing and Perron’s Factum In Response to Motion To Compel In Writing were not brought before this court at the time of argument of Perron’s motion for summary judgment.
[45] The court has now reviewed this reply motion record and reply factum. Counsel for Perron in submissions made no reference to either of these documents, nor to Glover’s submission that the documents required by him are necessary.
[46] The above reply motion record contains an affidavit from counsel’s assistant which attaches as exhibits numerous documents including correspondence. Perron’s factum, as occurred on the summary judgment motion, makes argument as to what facts or conclusions are to be drawn from these documents rather than Perron making those interpretations in an affidavit.
[47] Perron alleges that he was forced for health reasons to stop working in the partnership business for a period of time.
[48] Glover argues that Perron merely walked away from the business and disputes Perron’s alleged ill health. At the time, Glover wished Perron a speedy recovery.
[49] Under the Act, the court is being asked to dissolve a partnership and in so doing, determine the appropriate date of dissolution. Any health reasons preventing Perron from working as alleged, will refute the allegation he simply abandoned the partnership business. The absence of health problems may impact the court’s determination as to the appropriate date of dissolution.
[50] A Rule 20 summary judgment motion may be brought on all or part of the claim. Perron’s summary judgment motion seeks dissolution and division of residual assets. It does not seek judgment on his claim for damages for wrongful dismissal from his employment which is part of his claim. Perron in his responding factum to Glover’s motion for production states “the only claim remaining in this case is Perron’s claim for dissolution of the partnership along with an accounting of the net profit of Diamond”. From that, this court is now asked to draw the conclusion that Perron has withdrawn his claim for wrongful dismissal.
[51] Regardless of the withdrawal of the claim for wrongful dismissal, Perron shall produce copies of his health records, including his physician’s notes, medical reports, prescriptions and medical treatments for the period 2008 to 2010. His health and inability to work remain relevant as to the appropriate date of dissolution.
[52] If Perron abandoned the business to work elsewhere, that may constitute a breach of the P.A.’s requirement that these parties devote their full time and attention to the business. That may well impact the date of dissolution. Income tax returns will show what income, if any, was earned outside of this business. Perron accordingly shall produce a copy of his personal income tax returns, attachments thereto and the Notice of Assessment received for the tax years, 2008, 2009 and 2010.
COSTS
[53] Subject to offers to settle this motion, Glover normally should be entitled to costs on a partial indemnity basis. The parties may however seek an order as to costs via short written submissions within two weeks of the date hereof.
Kane J.
Released: March 8, 2013
COURT FILE NO.: 09-44879
DATE: 2013/03/08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RICHARD GLOVER
Plaintiff
– and –
MICHEL PERRON
Defendant
AND BETWEEN
MICHEL PERRON
Plaintiff by Counterclaim
– and –
RICHARD GLOVER
Defendant by Counterclaim
AMENDED REASONS FOR DECISION
Kane J.
Released: March 8, 2013