SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO: CV-12-462892
DATE: 20130708

Parties

RE: Rocchino Tatangelo
Applicant

• and -

Tatangelo’s Wholesale Fruits & Vegetables Ltd., J.D. Tatangelo Enterprises Inc., John Tatangelo and Frank d’Angelo
Respondents

BEFORE: The Honourable Mr. Justice Kevin Whitaker

COUNSEL:
David S. Wilson,
for the Applicant

Gregory M. Sidlofsky,
for the Respondent John Tatangelo

Frank D’Angelo,
Self-Represented

HEARD: July 5, 2013

E N D O R S E M E N T

[1] This is an application for an oppression remedy under section 248 of the Ontario Business Corporations Act (the “Act”) and an order under the Partition Act for the sale of the building in which the business operates.

[2] The request for an oppression remedy is contested. The parties agree the property should be sold, but disagree on the terms and protocol for the sale.

[3] The applicant seeks a variety of oppression remedies in the alternative, set out in paragraph 1 of the applicant’s factum. Essentially, the applicant seeks compensation from John for the value of his shares in the business, failing which, a wind-up of the business.

[4] This is a small family business. The two principals, John and Rocco, are brothers. Each holds 50% of the shares. John, Rocco and their brother, Frank, each own a third of the property. The business occupies the property.

[5] John started the business in 1981 and Rocco joined in 1984.

[6] The brothers have had a falling out and Rocco now wishes to leave the business and be compensated for his interest.

[7] There is no shareholder agreement to govern how a shareholder may leave the business.

[8] Since 1987, Rocco has suffered from ALS. This is a severely debilitating and progressive neurological disease. He is now confined to a bed with the use of a feeding tube and respirator. Rocco can only communicate by blinking his eyes or by using a spelling board. His wife is his power of attorney.

[9] Rocco remains mentally capable but not able to care for himself.

[10] Rocco stopped working at the business in March 2008 after which he went on long term disability leave, no longer able to perform any work.

[11] The parties agree on the appropriate principles which apply to the application under the Act;

(i) these cases are fact driven;

(ii) the purpose of a remedy under section 248 is to protect the reasonable expectations of complainants (those with an interest in the corporation as identified in section 248(2));

(iii) the applicant must show the evidence supports his reasonable expectations;

(iv) if so, the evidence must establish the reasonable expectations were violated by conduct that was oppressive, unfairly prejudicial or in unfair regard of a relevant interest;

(v) any oppression remedy granted must relate and be responsive to the nature of the conduct which is the substance of the complaint.

[12] The essential feature of the complaint is Rocco’s allegation that John is running the business for the benefit of himself and his family (himself, wife and adult son) and correspondingly, not to the benefit of Rocco or his family.

[13] More particularly, Rocco says:

(i) John fired Rocco’s wife, Rita, who used to do the bookkeeping for the business;

(ii) there are undisclosed cash transactions in sales and rent to the sole benefit of John;

(iii) John uses company vehicles without authorization and for his sole benefit;

(iv) John has not met his financial disclosure obligations;

(v) John has cancelled the company’s benefit plans; and

(vi) John attempts to make the business look worse than it is, to conceal the cash transactions.

[14] John and Rocco each have a one million dollar life insurance policy with London Life. The company is listed as sole beneficiary. There is a disagreement as to how the company would use the proceeds in the event of one or both of their deaths.

[15] Other than the decline in business, nothing else has changed since 2008 when Rita was in charge of bookkeeping before she left the company. Rita admitted in her cross examination that John and his wife were doing nothing wrong or inappropriate and deserved to be paid for their work, currently being done.

[16] The business may be in a slow decline, however, John is hopeful that this will turn about.

[17] The expectation of the applicant to put it simply, is that the company was to be used to support and maintain the families of the two principals whether or not they contributed anything to the business and further, that either party may unilaterally withdraw their equity in the business.

[18] It is not disputed that Rocco, his wife and son perform legitimate work for the company and are paid appropriately for their work. Last year in 2012, the three earned a combined 160 thousand dollars. No one in the applicant’s family performed work for or was paid money from the company.

[19] The company may continue to use practices that were in place before 2008 dealing with cash transactions. These practices only became an issue for Rocco after Rita left the company.

[20] Rocco has failed to establish expectations that are reasonable. There are other appropriate ways to address the concerns of the applicant either by request for documentary disclosure under the Act or by way of a wrongful dismissal action.

[21] The parties could have provided for the withdrawal of a shareholder by shareholder agreement, but apparently chose not to.

[22] Rocco’s objectives are understandable; he wishes to maintain some support for his family from the business that was the family business, half of it still owned by him. The difficulty is that there is no entitlement that permits him to unilaterally decide to cash in his interest - and leave the business.

[23] Even if I were to find that the reasonable expectations were made out and the conduct fell into the categories enumerated in section 248(2) of the Act, winding down the business is not an appropriate oppression remedy in these circumstances, as the remedy must deal with and arise in the context of the particular problem posed. As I have indicated earlier, there could have been a wrongful dismissal action or other relief sought under the Act for disclosure.

[24] The request for the oppression remedy under section 248(1) of the Act is dismissed.

[25] With respect to the sale of the property, I refer to the terms of sale set out in paragraph 96 of the respondent’s factum, at subparagraphs (a) to (n).

[26] Paragraphs (a) to (m) with the exception of (k), will apply in the sale of the property.

[27] Paragraph (k) is only to be engaged in circumstances where an offer considered by the agent to be serious, is in the agent’s hands.

[28] Paragraph (n) applies with a holdback of $80,000.

[29] Brief submissions as to costs shall be made in writing within 10 days.

[30] Order accordingly.

Whitaker J.

DATE: July 8, 2013