COURT FILE NO.: CV 10-9024-00CL

DATE: 20130729

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

ALVARO D'ANTONIO

Shaun Laubman and Rocco DiPucchio, for the Plaintiff

Plaintiff

- and -

ELIO MONACO, ROKO DZEKO and 2167661 ONTARIO LIMITED

Jeffrey Kramer, for the defendant Elio Monaco

Defendants

HEARD: June 3,4,5,7,10,11,13 and 14, 2013

MESBUR J

Overview:

[1] Alvaro D'Antonio, Elio Monaco and Roko Dzeko were friends for more than thirty-five years. Sadly, their friendship has ended in large part because of a business deal they entered together. Mr. Dzeko was removed from the transaction in late 2008. Now Mr. D'Antonio and Mr. Monaco are embroiled in this oppression litigation in which they cannot even agree on the proportion of the shares each owns in the defendant 2167661 Ontario Limited. (216).

[2] D'Antonio asserts he owns two thirds of the shares, with Monaco holding only one third. Monaco takes the position their shareholdings are equal.

[3] D'Antonio says Monaco’s conduct has oppressed him, and he seeks relief under the provisions of the Ontario Business Corporations Act. (OBCA) He asserts that Monaco, as the sole officer and director of 216 has breached his fiduciary duties to the corporation by, among other things, failing to report the corporation’s income, failing to remit HST and GST, opening a second bank account into which he deposited income in order to hide it from both the company’s accountant and revenue authorities, and falsifying banking records. While Monaco does not deny this improper conduct, he says it does not constitute oppression.

[4] D'Antonio goes further and suggests Monaco has improperly paid himself exorbitant management fees. Monaco points to a signed property management agreement the parties signed, and says he has simply paid himself according to the terms of this agreement.

[5] The only thing the parties agree on is that they can no longer remain in business together. They disagree, however, on how their “corporate divorce” should be accomplished.

Factual findings:

[6] D'Antonio, Monaco and Dzeko were boyhood friends. D'Antonio has worked as an actor since graduating from university, but his primary occupation has been as a real estate investor. Monaco, too, has a long history of real estate investment, primarily in partnership with his two brothers. Dzeko works in the sign industry as a salesman for CBS.

[7] Although the three men were friends, they had never been in business together before, apart from some small business dealings Monaco and D'Antonio had had in Los Angeles more than twenty years ago. This changed in late 2007 when they became involved in the purchase of a property on Wickman Avenue in Etobicoke, adjacent to the Gardiner Expressway in west end Toronto. The parties refer to the transaction as the Wickman deal.

The Wickman deal

[8] Monaco and Dzeko became aware of a commercial property on Wickman Avenue, right next to the Gardiner Expressway. They learned that a minor variance had been obtained that would permit the erection of a large advertising billboard sign on the property. Because of the property’s location, a sign on it could generate significant revenue, making the property extremely valuable. Dzeko was aware of the potential because of his job with CBS. He and Monaco decided to explore the possibility of purchasing the property. Dzeko had the necessary sign experience and Monaco had the experience in commercial real estate. What they lacked was money to finance the deal. After failing to raise money elsewhere, they decided to approach their friend D'Antonio for financing.

[9] D'Antonio agreed. He committed to put up no more than $450,000 toward the deal. The friends negotiated with the vendor for a purchase price of $1.3 million with a vendor take back mortgage of $1 million at 5% interest only, for a five-year term, with annual balloon payments of $50,000. The mortgage would require only interest payments, with principal payments required on the anniversary date of the loan.

[10] The vendor take back was very important for the deal because, as Monaco explained, it would be very difficult for them to arrange bank financing with terms as favourable as these. What this meant was that D'Antonio’s funding would give them sufficient money to close, with about $150,000 or so left to carry the property while they took the necessary steps to build a sign. Since the plan was to flip the property quickly, Monaco reasoned that this arrangement with very little money down was the most beneficial for them.

[11] The parties made the offer to purchase Wickman, with 216 being the legal entity that would actually acquire the property. The plan was that D'Antonio, Monaco and Dzeko would be equal shareholders in 216. In fact, 216 was set up in this fashion, with Monaco as the sole registered shareholder of the shares, but holding one third of the shares in trust for D'Antonio and the other one third in trust for Dzeko. The parties executed the necessary trust agreements to reflect this. Monaco said that Dzeko did not want to be shown as an owner of 216 since this might put him in a position of conflict with his employer. D'Antonio, he said, had other reasons for wanting his shares in a trust. Although the three men were to be equal shareholders, only D'Antonio put up any money. In order to protect himself, he obtained significant security for his loans. First, he obtained a second mortgage from 216 on the Wickman property to secure the indebtedness. The mortgage stated it bore interest at 6%. This was never intended to be the actual interest rate. Later, amending documents were executed to reflect the true rate of interest, which was lower.

[12] Since D'Antonio was advancing money not only for his own piece of the deal but also for Monaco’s and Dzeko’s, he obtained security from them as well. First, each of Monaco and Dzeko signed promissory notes in favour of D'Antonio for one third of the money D'Antonio had advanced. The notes bore interest at 6%, and required monthly payments. On default, the entire balance of the note would immediately be due, without notice. The notes also provided that even if they were not in default, D'Antonio could demand payment in full if he provided 60 days’ written notice, as long as he did not make demand before February 1, 2009. What this meant is that D'Antonio could demand payment in full by April 1, 2009.

[13] In order to provide further security for the promissory notes, each of Dzeko and Monaco signed Share Pledging Agreements in favour of D'Antonio. If either was in default in his obligations under his promissory note, D'Antonio could give him written notice of default, and his shares would be forfeit in favour of D'Antonio.

[14] D'Antonio provided $445,000 toward the deal. He did so through two separate financial arrangements. First, he provided $306,000 through one of his lines of credit. That loan bore interest at the Bank of Montreal prime rate plus ½%. The interest on that part of the loan was paid by 216 on a monthly basis.

[15] The rest of the money, namely $139,000, came from a separate line of credit. As it turned out, D'Antonio always paid the interest on that part of the loan himself. As he explained it, 216 did not have the cash flow to pay, and it made no sense to require cash calls from the partners in order to cover this amount. It was assumed he would be repaid the interest in due course.

[16] Monaco testified that the purchase price of $1.3 million was well over the actual market price of the property. He believed, however, that with a sign in place, the property would be worth significantly more. Monaco immediately began to negotiate with Astral Media, one of the largest sign companies, to erect a sign on the Wickman property. The plan was to buy the property, develop the sign, and then sell at a profit.

[17] The plan did not work out in quite this fashion.

The Banwait litigation

[18] The parties had discovered during their due diligence period that a Mr. Banwait had registered a sign lease on title to the Wickman property. They discussed the matter with both the vendor and their lawyers, and decided the Banwait lease was not a valid lease, and they would take their chances and close the deal anyway. Monaco explained that they assumed they would be able to continue to negotiate with Astral, even if Banwait decided to sue. In fact, Monaco negotiated a tentative deal with Astral to lease the sign for $150,000 per year and also lease the building on the property for an additional $75,000 a year.

[19] Banwait did sue. He sought specific performance of his sign lease, and also successfully obtained an injunction preventing 216 from taking any steps to try to enter into a sign lease with anyone else. This meant that Astral withdrew from negotiations. Instead of using the extra financing D'Antonio had provided to carry the property and construct a sign, the money had to be used for litigation costs, as well as carrying costs for the property instead. The financial noose the parties found themselves in grew tighter. 216 needed additional cash, and the only way to find it was through cash calls to the shareholders. Each, particularly Dzeko, struggled to come up with the necessary funds to meet the cash calls.

[20] Meanwhile, 216 had appealed the decision Banwait had obtained in his litigation. The appeal was scheduled for hearing on December 15, 2008.

Removing Dzeko from the deal

[21] As I have mentioned, the three friends were called on to make cash injections into 216 to meet its expenses, particularly its legal costs. Dzeko was having increasing difficulty meeting his obligations. With the appeal looming, and knowing they would have to pay more legal fees, the partners met to discuss what to do next.

[22] At this meeting, each of the partners knew he would have to contribute $11,000 in further cash to meet 216’s obligations, particularly the legal fees that would be owing as a result of the appeal. The meeting was heated, with much yelling and swearing. D'Antonio recorded the meeting on his cell phone, with the consent of the other two men. The recording shows them shouting at one another, hurling epithets. D'Antonio and Monaco told Dzeko he would have to come up with the money, or else. The upshot of the meeting was that Dzeko would have to pay his share of the cash call by December 15, 2008 or forfeit his interest in the deal.

[23] In the meantime, D'Antonio met with 216’s lawyer, who drew up two documents to deal with the Dzeko problem. D'Antonio and Monaco hoped that Dzeko would voluntarily give up his shares. To that end, the lawyer created a document called an “Ownership Alteration Agreement” from Dzeko to D'Antonio and Monaco. By this document, once Dzeko signed it, Dzeko’s shares would simply devolve to D'Antonio and Monaco equally.

[24] If Dzeko refused to sign, D'Antonio would serve Dzeko with a notice of default under his share pledging agreement, and D'Antonio would take over Dzeko’s shares. The lawyer prepared a Notice of Default from D'Antonio to Dzeko to accomplish that end.

[25] The men met again on December 13, 2008. Dzeko did not yet have the money. Eventually, he agreed to sign the Ownership Alteration Agreement in favour of D'Antonio and Monaco. By this agreement, if he did not pay his $11,000 share of the cash call by December 15, then his ownership interest in 216 would be decreased by the percentage the funds he actually advanced on December 15 bore to the $11,000 he owed. That percentage share would be assigned in equal shares to D'Antonio and Monaco. The document went on to state, “for clarity”, that if Dzeko was unable to pay any of his $11,000 contribution, then 100% of his interest in 216 would be transferred and divided equally between D'Antonio and Monaco.

[26] December 15 came and went. Dzeko never paid. Monaco says that as a result, he immediately became an owner of half of Dzeko’s shares, with D'Antonio becoming the owner of the other half. Thus, he says, he and D'Antonio were equal shareholders of 216 from December 15, 2008 onward.

[27] By this point, Monaco had not paid D'Antonio for his original one third interest in 216. He had paid nothing at this point for any of Dzeko’s shares. D'Antonio was prepared to wait only until the first anniversary of the deal, in April of 2009 to receive payment. He made this clear to Monaco, who confirmed he understood D'Antonio expected to be paid then. They described April 2009 as D'Antonio’s “drop dead date” for payment.

The property management agreement

[28] Monaco secured a tenant for part of the building sometime in late December 2008 or early January 2009. The offer to lease was in the name of an individual, in trust for a company to be incorporated. The yearly rental was $90,000, with the tenants providing a cash deposit of $1,500 with the offer. Among other things, the offer provided the tenant with nine months net rent free. I heard no explanation of why this would be the case, particularly since the offer requires the tenant to take the premises on an “as is” basis. Monaco did not suggest the tenants actually received a rent-free period.

[29] Monaco was extremely vague about who these tenants were, and what kind of business they might be operating in the premises. D'Antonio, for whatever reason, became suspicious it might be some kind of illegal drug operation. He wanted to distance himself from it.

[30] For this reason, D'Antonio says he wanted to enter into a property management agreement with Monaco whereby Monaco would be solely responsible for all legal compliance issues concerning the property. D'Antonio knew that Monaco felt he was spending far more time than originally contemplated in managing the property, and wanted to be compensated for it. D'Antonio suggested a fee of $500 per month would be appropriate. Monaco was disappointed with this suggestion. D'Antonio testified, and I believe him, that Monaco was being pressured by his brothers, who had participated in his part of the deal, and were anxious about the lack of any return on their investment. A property management agreement that provided payments to Monaco would appease them.

[31] The men agreed to a property management agreement for Monaco. D'Antonio wanted it to protect himself from liability concerning the shady tenants. Monaco wanted it to show his brothers he would be paid for the work he was doing on the property.

[32] D'Antonio originally drafted a little agreement that referenced a meeting between Monaco and D'Antonio in November 2008. First, it said Monaco would take 100% responsibility for all management issues at the property. Monaco would agree to be responsible for maintaining, showing and leasing out the property to prospective tenants. He would also agree to ensure that all zoning bylaws would be respected and no issues would arise with city inspectors. For these services, the initial draft provided that compensation would be decided in the new year, once the premises were leased out.

[33] This draft was not acceptable to Monaco. He was content with the outline of his responsibilities, but wanted a specific monthly fee referenced. He also insisted the document reference that management fees be payable from the date the transaction closed, namely in April of 2008.

[34] D'Antonio agreed. He amended the agreement to include the changes Monaco demanded. The agreement, as signed, is dated April 3, 2008, and provided a monthly property management fee of $2,500 to Monaco. Both men testified there was no intention that 216 would actually pay this amount. D'Antonio said it was because the amount was simply included to appease Monaco’s brothers. Monaco said it was because 216 didn’t have the money to pay at that time, but when it did, he would receive payment. I am not persuaded the two of them ever had the same understanding of what the document meant. I will have more to say about this is due course.

Settling with Banwait and making a deal with Astral

[35] 216’s appeal had been argued on December 15, 2008. The following day, the court issued its decision, dismissing the appeal. It was then the parties decided to go to mediation with George Adams, in an effort to settle their dispute with Banwait.

[36] Mediation succeeded. Banwait agreed to settle for $550,000. The issue was how to fund the settlement. Monaco had been able to revive the deal with Astral on very favourable terms. Monaco testified he approached Astral with a proposal that they prepay the first year of lease payments, and also provide a “signing bonus” to 216. Astral agreed. In all, they paid $593,000 up front. After 216 had taken care of its obligations to Banwait and legal fees, it had roughly $70,000 left over to meet ongoing expenses until Astral began to make monthly payments on the lease.

[37] The Astral lease was an excellent deal. Although Astral had originally proposed not only to erect a sign and pay a rental fee, but also to lease the building, they abandoned the idea of leasing the building while the Banwait injunction was in place. Nevertheless, Astral agreed to pay what they otherwise would have paid for the building and added it on to the rental for the sign lease. As a result, Astral agreed to pay $235,000 per year commencing June 1, 2009 for the first year of their lease, increasing by 2% a year throughout the twenty year term of the lease. In addition, Astral would pay the necessary GST/HST on the rental payments, over and above the rental set out in the lease.

[38] Monaco was concerned about taxes that would have to be paid on the first year of prepaid income and signing bonus from Astral. He reasoned that what 216 had actually purchased was land with a sign lease. He came up with a plan of capitalizing the Astral balloon payment, and adding it to the acquisition cost of the land. Although this was the plan, it was not actually reflected on the financial statements of 216. 216 did not declare the prepaid rent or signing bonus as income, either. Monaco used the HST on the rent to cover 216’s operating costs.

April 2009 comes and goes

[39] D'Antonio was hoping to be repaid in April of 2009, on the first anniversary of 216 acquiring the property. He referred to this as the “drop dead date” for payment. Monaco knew this, but said he didn’t have the money to pay. At this point, the parties were still in the midst of trying to finalize matters with both Banwait and Astral. There was no positive cash flow yet.

[40] Monaco was also having difficulty collecting money from some other deals he was involved in. D'Antonio made no specific demands for payment, but did make it clear to Monaco that he wanted to be paid. He did not, however, exercise any of his rights under his security agreements. Things continued as before.

Things begin to improve for 216

[41] Once the Banwait litigation was settled, Astral prepaid its rent for the first year, together with the signing bonus, and began to build its sign. The sign was one of the first LED signs erected next to the Gardiner, and gave Astral an early entry into this competitive marketplace.

[42] Tenants were found for the building as well. In September of 2009, 216 entered into a two year lease for 5,000 square feet of the building with a new tenant. The first year of the lease would generate $48,000 of rental income, with the second yielding $54,000. 216 found a tenant for the rest of the premises, too. By June 1, of 2010 Astral would be making monthly lease payments, and significant cash flow would be in place. Finally, 216 would have secure revenue sources. The summer of 2010 should have marked the start of financial serenity and security for Monaco and D'Antonio. It was not to be.

The July 16 conversation

[43] D'Antonio became more and more concerned about Monaco’s behaviour, particularly since Monaco had not paid him anything – either for Monaco’s original one third interest in 216, or for Dzeko’s shares. D'Antonio testified he had a lengthy and heated conversation with Monaco on July 16, 2009. D'Antonio’s telephone records confirm a lengthy call from D'Antonio’s phone to Monaco’s telephone number. I believe D'Antonio when he says they had a lengthy conversation in which he made his concerns clear, including his frustration at not having been paid.

[44] D'Antonio testified, and I believe him, that Monaco told him he could have Dzeko’s shares, but would have to pay Monaco for them – even though he, himself, had not yet paid for them. This was the last straw for D'Antonio. D'Antonio says that he then made it clear in this conversation that Monaco had somehow forfeited Dzeko’s shares for failure to pay, and was at risk of losing his own shares if he did not pay D'Antonio for them. Monaco says he has no recollection of any of this.

[45] I have no doubt the men had a heated conversation on July 16. I have no doubt the issue of money came up – after all, Monaco knew that D'Antonio had expected to be paid back in April, and had received nothing. I have no doubt D'Antonio threatened Monaco that he had forfeited Dzeko’s shares. Saying it, however, does not make it so. The Ownership Alteration Agreement had effectively vested half of Dzeko’s shares in Monaco and the other half in D'Antonio. The Ownership Alteration Agreement did not provide for any requirement that Monaco pay for Dzeko’s shares, or any timetable for his doing so. It seems to me there would be no legal basis for D'Antonio simply to assert that he now owned all of Dzeko’s shares.

Meeting in the coffee shop

[46] D'Antonio says he and Monaco met a second time in the fall of 2009. He says they met in a coffee shop. During the course of this meeting, D'Antonio says Monaco confirmed to him he (that is Monaco) no longer owned Dzeko’s shares. D'Antonio says Monaco also promised he would “take care” of D'Antonio. The genesis of this promise, he says, was first, Monaco recognizing that D'Antonio should have been paid in April, and payment was now long overdue; second, D'Antonio was only receiving the same interest rate on his funds as he was paying at the Bank of Montreal, while Monaco was apparently receiving 12% on money he had lent out. D'Antonio says Monaco conceded this was not fair. Third, D'Antonio also alleges Monaco told him he was receiving late payment penalties on money he had lent, and said it would only be fair if D'Antonio were similarly compensated.

[47] D'Antonio says he understood Monaco would “take care” of him by compensating him for what he called the “interest differential” and late payment penalties. D'Antonio refers to this promise as a promise of “future considerations”. He says he trusted his friend to make good on these promises. He says by this point it was absolutely clear between him and Monaco that Monaco no longer owned any of Dzeko’s shares.

[48] Monaco takes the position he would never meet to discuss business in a coffee shop. He points out that he speaks in a very loud voice and usually shouts and swears. He clearly showed this tendency in his testimony at trial. Nevertheless, I find it more likely than not the men had a meeting in the coffee shop, and D'Antonio aired his grievances with Monaco yet again. The thrust of D'Antonio’s position was his frustration in not being paid, and some of the decisions that Monaco was taking in relation to 216.

[49] I also have no doubt Monaco would have tried to appease D'Antonio, and may have said he would take care of him. I do not believe he ever made specific promises in that regard. I do not believe, however, that Monaco ever said he had given up Dzeko’s shares. D'Antonio may have alleged this; Monaco never agreed. I also have no doubt Monaco paid little or no attention, and has forgotten whatever his former friend said to him. D'Antonio thought he was being clear. He was being ignored. Certainly, no agreement was created at either of the meetings the parties had. The men shouted at each other, and put forward their positions. They did not agree on anything. Conflict between them accelerated.

The handwritten “invoice”

[50] At some point, Monaco drew up a handwritten document which D'Antonio labelled “Property Mgment”. D'Antonio refers to this document as an “invoice”. The document sets out the following:

Apr 08 – Mar 09

1 yr @ $2,500.00

Apr 09 Mar 10

1 yr $2,000

Apr 10 Mar 11

[51] These figures are all in Monaco’s handwriting. Monaco takes the position he created this document right after he and D'Antonio met with Dzeko on December 13, 2008, essentially at the same time as they signed the property management agreement and agreed Dzeko would forfeit his shares if he failed to pay the cash call. D'Antonio says Monaco presented it to him much later, at a meeting they had in 2010. In my view, it is much more probable the document was created in 2010. I say this for a number of reasons.

[52] First, following the December 13 meeting in 2008 Dzeko still had two days to come up with his share of the cash call. It was thus unclear whether he would remain in the deal or not. If he did, then presumably he would participate in any decision about property management fees.

[53] Second, in December of 2008 the property was in a losing position, subject to an injunction, untenanted, and with no cash flow. It would make no sense to project future management payments, particularly when one of the options the parties were considering was whether to sever off the sign portion of the property and sell the balance of the property. In that circumstance, there would be no property requiring management at all.

[54] It is far more likely that the handwritten document had its genesis in a meeting between Monaco and D'Antonio in March of 2010. By this point Astral had erected its sign, had prepaid the first year of rental, and would soon begin to make significant monthly rental payments. The building was tenanted, with tenants who were making monthly payments. With positive cash flow on the horizon, it makes sense that Monaco would have presented his proposal for actual payment of management fees for the period up to March of 2010 at a meeting around then. I therefore conclude he presented the handwritten document to D'Antonio at this time. While D'Antonio calls it an “invoice”, I see it as nothing more or less than Monaco’s indicating what he expected to be paid for his services. I note that the figures he set out in this document were less than the figures in the property management agreement they actually signed.

[55] Monaco also made it clear that since 216 would have cash, he intended to pay himself for past property management fees. D'Antonio did not agree with this plan, and made his position clear to Monaco.

Issues over the summer of 2010

[56] D'Antonio has always banked at the Bank of Montreal. Since he was providing the financing for the deal, he wanted 216’s bank account to be maintained at his bank. Accordingly, 216’s account was established there. The original plan was to have both D'Antonio and Monaco sign all cheques. For whatever reason, it took some time for D'Antonio to get around to coming into the bank to do the necessary paperwork. Until then, Monaco had had sole signing authority for 216. He had provided the vendors of the property with a series of post-dated cheques for the monthly payments due for the first year of the vendor take back mortgage. He did not want the two signature policy to go into effect until all those cheques had cleared. It would be a nuisance to have to arrange for a second signature. Nevertheless, by the summer of 2010 the banking arrangements at BMO were changed to require signatures from both D'Antonio and Monaco.

[57] In the meantime, Monaco decided to set up another bank account for 216. He did this without consulting D'Antonio. He did this at the Canadian Imperial Bank of Commerce, where he banks. He established the account to receive the sign income from Astral. Only Monaco has signing authority on this account.

[58] Monaco decided to deposit all of the significant Astral sign income, including HST, into the CIBC account. His plan was not to record any of this income as income of 216 or remit any of the HST to the taxation authorities. He told D'Antonio of his plan. D'Antonio was extremely upset about Monaco’s plan to hide income and told him not to do it. Monaco did not agree.

[59] Since Monaco controlled the CIBC bank accounts, and made all the deposits to it, he could describe transactions as he wished. This is precisely what he did. He failed to declare the cash income he had collected from the original tenants. He falsified the CIBC deposit books to hide income. He recorded Astral sign income as “advances from shareholders”, instead of income. He candidly admitted he did so in order to mislead 216’s accountants.

[60] D'Antonio was vocal in his objection to these tactics. Monaco ignored his concerns.

Monaco decides to pay himself accrued property management fees

[61] By the fall of 2010 Astral had begun to make monthly payments under the sign lease, and the building was fully tenanted. Monaco was diverting the Astral rent and HST payments into the CIBC account. He was not declaring the Astral rent as income and was using the HST payments from Astral to tend to 216’s cash flow needs. He decided the time was right to pay himself what he called “accrued” property management fees under the property management agreement. Although Monaco described the property management fees in this way, at no time were they ever shown on 216’s financial statements as an accruing liability.

[62] The property management agreement had been signed in the fall of 2008, with payments to be retroactive to April 3, 2008. Monaco told D'Antonio he intended to pay himself the fees. D'Antonio testified that he objected, saying they had never agreed to fees at that level, even though that is what the management agreement provided. He says the property management agreement was signed to give him comfort concerning the dodgy tenants, and to give Monaco comfort in relation to his brothers’ concerns about the deal as a whole. D'Antonio says he and Monaco never intended 216 actually to pay Monaco the amounts set out in the agreement. He made his position clear to Monaco. I accept D'Antonio’s evidence.

[63] Notwithstanding D'Antonio’s objections, Monaco has paid himself $142,000 for property management fees. Even in the face of this litigation, Monaco has refused to retain an independent property manager for 216. He continues to pay himself management fees. This is where matters stand today.

[64] Monaco testified that he waited until 216 had sufficient funds to make the payments, and until that time had simply accrued the management fees. As I have said, the 216 financial statements have no record of any such accrued expense.

[65] D'Antonio says even if the property management agreement is valid, the fee provided in it bears no relation to the fair market value of the services Monaco actually provided to 216. D'Antonio obtained a quotation from Summa Property Management Inc., a property management company he uses for some of his other projects. They quote a fee of about $500 to $700 per month for basic services, with additional fees for such things as snow removal, construction supervision, landscaping and the like. All in, D'Antonio estimates a third party would charge about $1,100 or so for all the services Monaco provided.

[66] Monaco conceded that in his experience (which is considerable) one would have to pay a third party independent property manager about $1,000 to $1,400 per month to provide the same services to 216 as Monaco had provided. He said, however, that he should be paid more because as an owner he brought more care and attention to this role than an independent third party would. He thus argues the $2,500 per month fee in the property management agreement is completely appropriate. While I am sure Monaco believes this, I have no independent evidence to corroborate his statement. I have no evidence he spent any more or less time managing the project than an independent property manager would have. I have no evidence that as an owner he brought any more skill and attention to the job than an independent property manager would have. All this leads me to conclude that 216 would have had to pay an independent property manager about $1,200 per month to do the same work Monaco did.

[67] When the property management agreement was signed, 216 had no tenants and no revenue. It was subject to an outstanding injunction, and was involved in expensive litigation. It is preposterous to think the parties intended a fee of $2,500 per month to be appropriate in these circumstances. It is much more credible to accept D'Antonio’s explanation that Monaco needed an agreement to appease his brothers, and D'Antonio needed the agreement to protect himself against any potential illegal activity from the first tenants. Neither ever intended 216 to pay property management fees at this level.

[68] I find the parties never intended 216 to be bound to pay the fees set out in the property management agreement. Monaco testified that the parties generally paid no attention to written legal documents. I believe him. I therefore conclude that the parties had no intention of being bound by the property management agreement, although D'Antonio certainly conceded Monaco was entitled to be paid for the extra property management work he was doing at the property. Monaco should be paid, but only a reasonable fee for the work he actually performed. As I have said, on the basis of D'Antonio’s evidence, the estimate he obtained from the independent property manager and Monaco’s own testimony I find a reasonable fee for Monaco’s work is $1,200 per month.

[69] Things were going from bad to worse between Monaco and D'Antonio. It is somewhat ironic that while 216 was struggling and its future was uncertain the parties worked together well with a view to their joint benefit in the corporation. It was really only when 216’s financial fortunes improved, with a potentially lucrative future that they fell out with one another.

[70] Finally, in 2010 Monaco made some payments to D'Antonio on account of what he owed for his shares.

Payments from Monaco

[71] April 3, 2009 had come and gone with no payment from Monaco. Monaco was clear that he understood April 3, 2009 was a “drop dead” date, that is to say, the date on which he knew D'Antonio expected to be paid. Monaco did not have the money to pay on April 3, 2009. He says he explained his position to D'Antonio, and D'Antonio knew that Monaco would pay him as soon as he had the money.

[72] On November 12, 2009 Monaco suddenly issued a cheque for $100,000 to D'Antonio. The cheque was not accompanied by any cover letter, setting out what it was for. The cheque has nothing written on its face to indicate its purpose. Monaco said nothing to D'Antonio about what the cheque was for; he simply gave the cheque to D'Antonio, who promptly cashed it. D'Antonio did not say anything to Monaco about what he understood the payment to represent.

[73] Several months later, on March 2, 2010, nearly a year after the drop dead date Monaco issued a second cheque for $100,000 to D'Antonio. As with the first cheque, nothing passed between the parties in writing to indicate what the cheque was for, or for what D'Antonio was receiving it. They did not discuss what the payment represented. Again, D'Antonio simply cashed the cheque.

[74] D'Antonio says it was “perfectly clear” by this point that Monaco no longer had Dzeko’s shares, and Monaco was simply paying D'Antonio what he owed D'Antonio for his one third share in 216 together with money for “future considerations”, or some such thing. As D'Antonio saw it, the $200,000 represented the $150,000 Monaco owed him for his one third share of 216, and the $50,000 balance represented “future considerations”. D'Antonio said because Monaco had promised to “take care of” D'Antonio because of the delay in payment, he assumed the extra $50,000 was for this purpose.

[75] Monaco says he was paying on account of the $222,500 he owed for his own shares and half of Dzeko’s shares. He testified he held back $22,500 so he would have some leverage to force D'Antonio to discharge his second mortgage on the Wickman property, as well as force him to go to the lawyer so they could regularize their shareholdings and enter into a shareholders’ agreement. Again, nothing in writing passed between the parties either to confirm or deny this. They did not even discuss it.

[76] I find it astonishing that Monaco would pay D'Antonio $200,000 without anything in writing, or even written on the cheques to indicate what the money was for. It is equally astonishing neither of them would have said anything to the other about what the money was for. Although it is astonishing, it is nevertheless what occurred. It clearly represents the somewhat informal way in which the parties dealt with each other.

[77] It strains credulity, even given the informalities between the parties, that Monaco would have paid D'Antonio anywhere near $50,000 as some kind of additional compensation. I have no doubt Monaco made vague promises of “taking care” of D'Antonio because of the delays in payment. Monaco had made a similar promise to the real estate agent Gogek in relation to the first, aborted Astral lease deal. There, Monaco paid Gogek $4,000 for his efforts in obtaining the first Astral proposal that was held up because of the Banwait litigation. I simply cannot see that Monaco would ever have paid what would have been a 33% premium on what he owed D'Antonio, simply out of the goodness of his heart.

[78] I therefore conclude that Monaco intended the $200,000 to be on account of paying what he owed D'Antonio for both his own one third share of 216 and half of Dzeko’s one third share. I do not accept that $50,000 was for “future considerations”. Monaco did not, however, pay for Dzeko’s shares in full.

[79] Monaco testified that when he paid D'Antonio the second $100,000 in November of 2010 he had sufficient funds to pay what he saw as the “remaining” $22,500 he owed to acquire half of Dzeko shares. Nevertheless he decided not to pay that amount. He wanted to hold the money back as “leverage” to force D'Antonio to discharge his second mortgage, and regularize the shareholdings in 216 to reflect that he and D'Antonio were equal shareholders. He also wanted to negotiate a shareholders’ agreement of some kind. Finally, Monaco took the position he would not add D'Antonio as a signing officer on the CIBC bank account until all these things had occurred.

This lawsuit begins and Monaco later “tenders”

[80] D'Antonio was at his wits end with how Monaco was managing 216, and ignoring his concerns. He sought legal advice and started this action in late 2010, although Monaco was not served until later in January, 2011. Even though it was clear in the pleadings that D'Antonio took the position either he owned 2/3 of 216 or alternatively he was still owed money, Monaco took no steps to try to pay what he characterized as the remaining $22,500 until two months before trial, in April of 2013. He did not pay the money into court. Through his lawyer, he tendered a cheque for $22,500 in April of this year, together with a discharge of D'Antonio’s second mortgage. Monaco had no explanation for why he had failed to do this earlier.

[81] For his part, D'Antonio refused to accept the money or execute the discharge. He says, first, that Monaco is simply a one third owner of 216, and owes him nothing further on account of his shares. Second, he says that even if the money Monaco paid was to acquire half of Dzeko’s shares, he lost the opportunity to pay the balance by taking too long to pay. D'Antonio says it is unreasonable for him to be required to accept final payment tendered years after the due date under the promissory note, and even after the final payment was due under his second mortgage.

Management bonuses

[82] As I have said, since 2010 the parties have enjoyed positive cash flow from their investment. The vendor take back mortgage has been reduced to $750,000 by the annual $50,000 principal payments. Astral is paying its rent for the sign, and the building tenants are making their payments. As a result, there has been excess money available for 216, over and above its necessary monthly obligations.

[83] Monaco, who has managed 216’s affairs, has paid out the excess funds to himself and D'Antonio in equal shares. He has characterized the money as “management bonuses”. He did not consult with D'Antonio about whether this was the most tax-effective way to do this; he simply went ahead and did so.

The parties’ positions:

[84] D'Antonio takes the position Monaco has breached his fiduciary obligations to 216. He says Monaco’s conduct has been oppressive toward him as a shareholder and creditor of 216. He says he is entitled to a remedy for that oppressive conduct.

[85] D'Antonio also says that Monaco failed to live up to his obligation to pay promptly for one half of Dzeko’s shares, and therefore D'Antonio owns all of Dzeko’s interest in 216. D'Antonio therefore takes the position he owns two thirds of 216, while Monaco owns only one third. Alternatively, D'Antonio says that if Monaco’s payment of $200,000 was on account of both Monaco’s shares and half of Dzeko’s shares, Monaco has failed to pay the entire purchase price for the Dzeko shares, and has lost any reasonable opportunity to do so. He therefore takes the position, in the alternative, that Monaco share of 216 should be proportionate to his contribution to the overall financing D'Antonio contributed. In either case, D'Antonio says that Monaco should only be entitled to receive that proportion of the management bonuses that reflect his proportionate interest in 216.

[86] Last, D'Antonio takes the position the property management agreement is unenforceable, and was never intended to bind 216 to make such payments to Monaco. He does concede, however, that Monaco is entitled to be paid a reasonable sum for the property management services he provided to 216.

[87] Monaco denies oppression (although he concedes he has breached his fiduciary obligations to the corporation), but agrees he and D'Antonio cannot continue in business together.

[88] Monaco takes the position he owns one half of 216, and simply owes D'Antonio the balance of the purchase price, namely $22,500. Because he is a half owner of 216, he says he is entitled to keep the management bonuses that were paid to him. Monaco says the property management agreement binds 216, and he was, and remains, entitled to all the property management fees he has charged to 216.

[89] Both parties agree they cannot continue as business partners, but they do not agree on how they should effect a “divorce” between them. D'Antonio suggests the court should impose a “shotgun” on the parties, with Monaco, as the insider, being required to tender a buy/sell proposal. Monaco says a shotgun is inappropriate (notwithstanding that is what he seeks in his counterclaim.) He takes the position a “sealed bid” process is the preferred methodology, with each party submitting a sealed offer to purchase the other’s shares, and the court awarding the sale to the higher bidder.

Discussion:

[90] The questions for the court to answer can be roughly described as follows:

a) Has Monaco breached his fiduciary obligations to 216 and has D'Antonio been oppressed?

b) What percentage interest do each of D'Antonio and Monaco beneficially own in 216, and what percentage of the management bonuses is each entitled to?

c) Is the property management agreement enforceable, and should Monaco have paid himself?

d) What is the appropriate method to grant the parties a corporate “divorce”?

Breach of fiduciary duty and oppression

[91] Monaco is 216’s sole director and officer. Directors owe a fiduciary duty to the corporation they serve. Directors must act honestly and in good faith, with a view to the best interests of the corporation. They must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

[92] Monaco has breached his fiduciary obligations to 216 by failing to report its income properly, falsifying 216’s accounting books and records, and failing to report 216’s true income, and failing to remit proper GST/HST amounts. Monaco concedes he has breached his fiduciary obligations to 216. He denies, however, that this constitutes oppression under the OBCA. I disagree.

[93] First, authorities suggest that “where a breach of fiduciary duty has occurred, the test for oppression has also been met.” [^1] It seems to me that any shareholder would have a reasonable expectation that a company’s directors would fulfil their fiduciary duties and would act honestly and in good faith with a view to the best interests of the corporation. Breach of those duties must be a breach of a shareholder’s reasonable expectations. Shareholders’ reasonable expectations lie at the heart of the oppression remedy.

[94] Second, even without his breach of fiduciary duties, I am satisfied D'Antonio has both exercised his powers as director, and carried on the business of 216 in a manner that is oppressive to the interests of D'Antonio.

[95] Section 245 of the OBCA defines a “complainant” under the oppression provisions of the statute to include a registered holder, or beneficial owner of a security in the corporation. There is no question D'Antonio falls into the definition of complainant, and therefore has status to seek a finding of oppression.

[96] Section 248 deals with oppression, and gives the court broad discretion to remedy the matters complained of. To find oppression, the court must be satisfied:

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation...

[97] The seminal decision on oppression (amongst other things) is the Supreme Court of Canada’s decision in BCE Inc. v. 1976 Debentureholders,[^2] whose principles are often quoted. There, the court held that in order to assess a claim for oppression, the court must answer two questions: first, does the evidence support the reasonable expectations the claimant asserts, and second, 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?

[98] Monaco is the person who has carried out or conducted all the business or affairs of 216. Monaco is the sole director of 216, and is the only one to exercise powers of the corporation. The issue is whether Monaco’s actions have been oppressive, unfairly prejudicial or unfairly disregard the interests of D'Antonio, who is both a security holder and creditor of 216.

[99] What were D'Antonio’s reasonable expectations in relation to the conduct of the business of 216? He made it clear to Monaco that he expected the affairs of 216 to be conducted in accordance with the law. He expected 216 to properly declare its income and GST/HST obligations. He made this absolutely clear to Monaco when Monaco told him of his plan to hide income.

[100] D'Antonio expected the books and records of 216 to be properly maintained. This was a reasonable expectation that Monaco ignored, both when he hid income and when he falsified deposit books to record income as shareholder advances instead.

[101] D'Antonio made it clear to Monaco that he objected to 216’s paying Monaco property management fees as set out in the property management agreement. Nevertheless, Monaco ensured that he alone controlled the CIBC account so he could ignore D'Antonio’s position and pay himself the property management fees as he wished.

[102] Even in the face of D'Antonio’s clear objection to Monaco continuing to manage the property, and in the face of this litigation, Monaco still refused to step back from his management role, and permit an independent property manager to manage the property at less cost to the corporation. I see this all of this a breach of his obligations to the corporation. Instead, Monaco put his own financial interests ahead of those of 216. All of Monaco’s actions were taken in the clear knowledge of D'Antonio’s contrary reasonable expectations, and in clear violation of them.

[103] Monaco explains his position by saying that since he is half owner of 216, therefore only one half of any excessive fees would be borne by D'Antonio, and are de minimus. The issue is not the amount of the excessive fee or its impact on a shareholder; instead, it is Monaco’s overall attitude which indicates his inability or unwillingness to put the interests of the corporation ahead of his own. It also indicates his willingness to ignore the clear wishes and expectations of the other shareholder.

[104] When I look at Monaco’s clear breaches of fiduciary duty in the context of D'Antonio’s clear position that Monaco should cease these activities, I can only conclude D'Antonio’s reasonable expectations have been thwarted. D'Antonio has made out a case of oppression.

Ownership

[105] In the beginning, Dzeko, Monaco and D'Antonio each owned one third of the shares in 216. Dzeko’s and Monaco’s shares were subject to share pledging agreements in favour of D'Antonio. Although Dzeko and Monaco owned one third of the shares each, neither had paid for his shares. D'Antonio had advanced all the money for the deal, and Dzeko and Monaco each signed a promissory note in D'Antonio’s favour, promising to pay him one third of what he had advanced.

[106] When Dzeko was unable to meet the cash call in the fall of 2008, D'Antonio had a choice. Dzeko was in default in his obligations to D'Antonio, because he had made no payments at all under the promissory note. D'Antonio could have exercised his rights under Dzeko’s share pledging agreement, issued a notice of default, and seized Dzeko’s shares. That, of course, would have made D'Antonio obliged to shoulder two thirds of 216’s obligations at a time when the deal was looking grim.

[107] D'Antonio created another option – the Ownership Alteration Agreement. It transferred Dzeko’s shares equally to D'Antonio and Monaco if Dzeko failed to pay his $11,000 on December 15, 2008. Dzeko failed to pay. I therefore conclude that Monaco became the beneficial owner of half of Dzeko’s shares, subject to his implied obligation to pay for them.

[108] While Monaco concedes that he had to pay for the shares, he takes the position there was no limitation on when he had to pay. For his part, D'Antonio seems to take the position that when Monaco did not pay, somehow the shares “reverted” back to D'Antonio. There is no legal basis for this assertion.

[109] It seems to me that had D'Antonio wanted to obtain Monaco’s shares, he would have to exercise his rights under Monaco’s share pledging agreement. The problem with exercising rights under the share pledging agreement is that Monaco only pledged his original 100 shares. He did not enter into a similar agreement in relation to the Dzeko shares. That said, however, D'Antonio could have exercised his rights against 50 of Monaco’s pledged shares, and obtained the same result of acquiring 200 shares of the total 100 issued shares of 216.

[110] D'Antonio did none of this. Instead, the parties seem to want to rely on legal documents when it suits them, but otherwise they pay no attention to them. For example, the mortgage in favour of D'Antonio had an interest rate on its face if 6%, the parties agreed that rate was simply inserted into the document so there would be something there. They never intended 216 to pay that rate; instead, they entered into an amending agreement to reflect the actual rate to be paid.

[111] Monaco testified they never paid any attention to legal documents, except, of course, the management agreement which he now seeks to enforce. Similarly, D'Antonio went to the trouble of having his lawyer draw up the Ownership Alteration Agreement whereby he and Monaco took over Dzeko’s shares. Now, however, he suggests that document is meaningless, and he could simply take over Monaco’s portion of Dzeko’s shares when he decided he was tired of waiting to be paid.

[112] The Ownership Alteration Agreement has no specific provision concerning when Monaco would have to pay for Dzeko’s shares. I conclude, therefore, he would have to pay within a reasonable period of time. D'Antonio accepted payments from Monaco as late as March 2010. That would set out a reasonable time frame for payment.

[113] Monaco took no steps, however, to pay D'Antonio the balance. He did nothing when he received the claim. He did nothing for more than two years, during the currency of the litigation. He did not even pay the money into court. It seems to me that waiting to pay for at least three years after the debt was due is simply too long, particularly when the creditor has made it clear it will no longer accept the money. I recognize that the law has long held that a debtor, following a proper demand for payment, must be allowed a reasonable time to raise the necessary funds to pay.[^3] More than two years following service of the claim is beyond reasonable. Monaco has lost any right at this late date to tender payment for the balance he owes.

[114] In my view, Monaco is entitled to an interest in 216 equivalent only to the proportion of the funds he actually paid. He was to pay $222,500 to obtain a 50% interest in 216. He has paid only $200,000, and has lost his opportunity to pay the balance. I therefore conclude he has acquired only 45% of 216, making D'Antonio the owner of 55%. D'Antonio seems to suggest that Monaco also has an obligation to pay a portion of the interest D'Antonio has carried on the $139,000 part of the funds he advanced. As I see it, this obligation, like the interest obligation on the original $306,000 advance, is 216’s obligation. An order will therefore issue requiring 216 to make this payment to D'Antonio.

Management bonuses/fees

[115] Once 216 began to have positive cash flow, Monaco paid out 216’s excess funds to him and D'Antonio in equal shares, characterizing them as management bonuses or fees. Since I have determined that Monaco owns only 45% of 216, but received 50% of the management bonuses he must repay the excess he has received to 216, which in turn must pay that amount to D'Antonio.

The property management agreement and payments to Monaco

[116] Monaco took advantage of the opportunity he saw and created. He deposited the Astral rent and GST in the CIBC account to hide it as income. He ensured D'Antonio did not have signing authority on the CIBC account, so he could write himself cheques for property management fees with impunity. He knew if D'Antonio had signing authority on the CIBC account, D'Antonio would never agree to pay the fees to Monaco. Monaco also knew D'Antonio would never agree to pay property management fees out of the Bank of Montreal account, where both signatures were required.

[117] Monaco strikes me as a savvy businessman with more than a passing knowledge of accounting practices. He knew how to hide the Astral income. He came up with idea of capitalizing the Astral rent prepayment and signing bonus, and adding them to the acquisition cost of Wickman, although the financial statements do not actually reflect this. He did this, he says, to avoid paying income tax on the first year’s rental and bonus from Astral. Monaco was clear in his goal of reducing 216’s income in order to reduce or eliminate any taxes. Nevertheless he failed to record his property management fees as accrued expenses anywhere in 216’s books and records.

[118] I accept D'Antonio’s evidence that the property management agreement document was prepared to protect D'Antonio from any potential liability concerning tenants who might be engaging in illegal activity, and to provide Monaco’s brothers with some comfort that he was being paid for his services. I therefore conclude the management agreement was never intended to bind 216, which, in any case, had never executed the agreement.

[119] The amount set out in the property management agreement is completely disproportionate to any reasonable fee for such services. There is no reason why, in 2008, when 216 was embroiled in litigation, with no tenants and no income, it would agree pay fees at this level. Monaco and D'Antonio never intended that 216 actually pay Monaco to manage the property at the rates set out in the document. The property management agreement is therefore not binding.

[120] Monaco will therefore have to repay all the property management fees he has received. I recognize, as does D'Antonio, that he has provided property management services to 216, and should be properly compensated for them. I set reasonable compensation at $1,200 per month, from April 3, 2008 until August 31, 2013. Monaco may set off this reasonable compensation against the amounts I have ordered him to repay.

[121] Given my findings of breach of fiduciary duty and oppression, it is no longer appropriate for Monaco to act as property manager for 216. Therefore, effective September 1, 2013 an independent property management company must be retained to manage the property until such time as the balance of the provisions of this judgment has been carried out. If Summa Property Management Inc. is prepared to take on the task of management, they will be awarded the property management contract under the terms of their proposal of May 9, 2011. If not, the parties will choose another independent property management company to do so. Failing agreement, each party will submit a written proposal for a property manager to me within one week of the release of these reasons, and I will choose one of them to manage the property.

Remedy

[122] This leaves the question of the appropriate remedy for oppression. Section 148 of the OBCA gives the court broad discretion in terms of crafting an appropriate remedy in cases of oppression. The real question is how to extricate the parties from one another, and how to manage 216 until that has been accomplished.

[123] First, as far as temporary management is concerned, given Monaco’s breaches of his fiduciary obligations to 216 and his oppression of D'Antonio, he cannot continue to manage 216. He must be removed as its sole officer and director, and D'Antonio must replace him.

[124] Second, as I have already mentioned, Monaco should not continue as property manager. An independent property management company must be hired to replace him.

[125] Last, since the parties do not want to wind up 216, the only option is for one of the shareholders to buy out the other. In that regard, I prefer D'Antonio’s suggestion of a shotgun, with Monaco making the buy/sell offer. I say this because Monaco has been managing 216 and has effectively excluded D'Antonio from its operations. I consider him to be an insider, with a better idea of what 216 is really worth. This is the path the court followed in Sangha v. Reliance Investment Group Ltd.[^4] in order to ensure there is a fair price established to the corporation’s shares.

[126] Our court followed a similar path in Classic Organ, where the court determined that a buy/sell was minimally intrusive, met the parties’ reasonable expectations for a manageable exit mechanism that favours neither, and was the most cost effective and accurate way of putting a fair value on the corporation.

[127] The most compelling reason for choosing the buy/sell mechanism is the one the British Columbia Court of Appeal articulated in Safarik v. Ocean Fisheries Ltd.(No. 2) [^5] where it said: “I have concluded that the individual shareholders, because they are insiders ... should have the onus put upon them to fix a fair price. I know of no better way to have a man put a fair value on what he owns, he knowing all the facts about its worth, than to require him to say what he will sell it for.”

[128] Here, Monaco has managed the affairs of 216 as if it were his own. He has excluded D'Antonio from its operations. He can only be seen as an insider, with better knowledge of what 216 is worth. For the same reasons as articulated above I conclude a buy/sell, with Monaco making the offer, is the best option here.

Conclusion:

[129] For these reasons, judgment will issue in the following terms:

a) Declaring that Monaco has exercised his power and authority as a director, officer and shareholder of 216 in a manner that is oppressive, unfairly prejudicial to or that unfairly disregarded D'Antonio’s interest as s shareholder and creditor of 216;

b) Declaring that the business or affairs of 216 have been and/or are being carried on in a manner that is oppressive, unfairly prejudicial or that unfairly disregarded the interests of D'Antonio as shareholder and creditor;

c) Declaring that Monaco has breached his common law, statutory and fiduciary duties and duty of good faith owed to D'Antonio and to 216;

d) Removing Monaco as sole director and officer of 216 and appointing D'Antonio in his stead;

e) Declaring that D'Antonio is the beneficial owner of 55% of the shares of 216, and Monaco is the beneficial owner of 45% of the shares of 216;

f) Requiring Monaco to repay to 216 that portion of the management bonuses he received from 216 that exceed his 45% interest in the corporation;

g) 216 will then pay the repaid amount to D'Antonio, so that he will have received 55% of the management bonuses, and Monaco will have received 45%;

h) Requiring Monaco to repay to 216 the property management fees he has received from 216 for the period from April 3, 2008 to August 31, 2013;

i) Requiring 216 to pay to Monaco property management fees for the period April 3, 2008 to August 31, 2013 in the amount of $1,200 per month;

j) Requiring 216 to pay to D'Antonio an amount equal to all the interest D'Antonio has paid on the $139,000 portion of the funds he advanced to finance the Wickman deal;

k) Requiring Monaco to deliver an offer to purchase D'Antonio’s shares in 216 or to sell his shares in 216 to D'Antonio at a fixed price per share. This “buy/sell” offer shall be delivered within 30 days of the release of these reasons. D'Antonio will respond to the buy/sell in writing within 7 days of receiving the buy/sell offer, indicating whether he intends to purchase Monaco’s shares at the share price listed in the buy/sell, or whether he intends to sell his shares to Monaco at the share price listed in the buy/sell;

l) Whichever party is the purchaser as a result of the process set out above, he will close the transaction within 14 days of D'Antonio’s responding to the buy sell, by delivering a certified cheque for the purchase price to the seller. The purchaser will be responsible for all closing costs and legal fees incidental to completing the transaction, including, without limitation, the costs of any corporate documentation required to effect the share purchase;

m) On closing, D'Antonio will deliver to 216 a discharge of his second mortgage on the property so that it can be registered;

n) Monaco will indemnify and save harmless D’Antonio and 216 from any penalties, adjustments and interest in connection with or arising from the underreporting of 216’s income in the years 2008 – 2012 and the failure to properly remit GST/HST for 216 in those same years.

[130] On the question of costs, it seems to me success has been somewhat divided. Monaco has enjoyed significant success on the ownership issue, while D'Antonio has succeeded on the questions of oppression/breach of fiduciary duty, the property management agreement and ultimate remedy. That would usually result in no order as to costs or reduced costs for the plaintiff.

[131] If the parties are unable to agree on the issue of costs, or if there are settlement offers that might bear on the question, they may make brief written submissions to me within three weeks of the release of these reasons. Submissions are to be no more than three pages in length, and will include a bill of costs, with particulars of each lawyer’s year of call and actual billing rate to his client. Submissions will also include copies of any settlement offers that might have an impact on the costs issue.

___________________________

MESBUR J

Released: 20130729

[^1]: See Classic Organ Co. v. Artisan Organ Ltd., 1997 CarswellOnt 1773 (S.C.J.) at paragraph 29, and the authorities referred to there [^2]: 2008 SCC 69, [2008] 3 S.C.R. 560 [^3]: See, for example, Kavcar Investments Ltd. v. Aetna Financial Services Ltd. 1989 CarswellOnt 191 (O.C.A.), quoting Ronald Elwyn Lister Ltd. v. Dunlop Can. Ltd. 1982 19 (SCC), [1982] 1 S.C.R. 726 (S.C.C.) [^4]: 2012 CarswellBC 2435 (B.C.S.C.) [^5]: (1996) 1996 10202 (BC CA), 17 B.C.L.R.(3d) 354 (B.C.C.A.)