COURT FILE AND PARTIES

COURT FILE NO.: CV-14-10473-00CC

DATE: 2014-03-21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mikhail (Mike) Kushevsky and 2371306 Ontario Inc., Plaintiffs

AND:

Michael Tulman, 2370324 Ontario Inc., Gregory (Gary) Lipovetsky, 2370327 Ontario Inc. and Bestie Inc., Defendants

BEFORE: Regional Senior Justice Morawetz

COUNSEL:
Mr. R. Avery Zeidman, for the Plaintiffs (Moving Parties)

Nancy Shapiro, for the Defendants (Responding Parties)

HEARD AND ENDORSED: March 17, 2014

REASONS: March 21, 2014

reasons FOR DECISION

[1] On March 17, 2014 I endorsed the record as follows: “The motion for injunctive relief is dismissed. Reasons will follow.” These are the reasons.

[2] Mr. Mikhail Kushevsky and 2371306 Ontario Inc. (“Kushevesky Co.”) (collectively, the “Plaintiffs”) brought this urgent motion for an interim and interlocutory injunction restraining the Defendants from implementing or attempting to implement a sale of the corporate Plaintiff’s shares, pursuant to the terms of the unanimous shareholders agreement between the parties executed as of May 9, 2013 (the “USA”).

[3] The motion arose as a result of a shareholders dispute in Bestie Inc. between the numbered companies that are parties to this action, with each of the individual parties being principals of their numbered holding companies.

[4] The Plaintiffs contend that the Defendants improperly called a shareholders meeting on November 21, 2013, during which they purportedly terminated the directorship and employment of Mr. Kushevsky and served him with a Call Notice demanding that Kushevsky Co. sell its one-third ownership of shares in Bestie to the other corporate Defendants.

[5] On February 18, 2014 the Defendants scheduled a closing date of March 17, 2014 for the share sale.

[6] A Statement of Claim was subsequently issued in which the Plaintiff’s contest the closing and the treatment of the Plaintiffs.

[7] From February 18, 2014 to March 14, 2014 there were multiple communications between the parties. But the Plaintiffs contend that the Defendants took no steps whatsoever to indicate they were proceeding with the closing in light of the court action that has been commenced.

[8] On the afternoon of March 14, 2014, the business day prior to the scheduled “closing”, the Defendants advised the Plaintiffs that the share sale was going to close on March 17, 2014 and refused to consent to any adjournment or extension.

[9] The motion seeks an injunction to prevent the Defendants from going through with the share sale closing pending a trial. The Plaintiffs advise that they are not seeking to preserve the situation that existed prior to November 21, 2013, when material corporate changes were implemented by the Defendants. Rather, the Plaintiffs advise that they are seeking to preserve the status quo of ownership of shares in Bestie since its incorporation, to prevent what they consider to be irreparable harm that the share sale closing would cause.

[10] Bestie was incorporated by Mr. Kushevsky, Mr. Tulman, and Mr. Lipovetsky, as principals, to be an online business which indexes products available by internet retailers and directs registered member traffic to those retailers in exchange for a commission of product sales paid by the retailer or a member of their affiliate network to whom traffic is directed.

[11] At all material times, each of Kushevsky Co., Tulman Co. (the holding company of Mr. Michael Tulman), and Lipovetsky Co. (the holding company of Mr. Gregory Lipovetsky), owned 100 of the 300 issued outstanding common shares in Bestie.

[12] Each of the shareholders advanced $200,000 to Bestie for seed capital.

[13] The Plaintiffs contend that prior to November 2013, no party expressed any major or fundamental issue with any other party continuing their role in Bestie in the same capacity they had since its commencement.

[14] The Plaintiff contends that on November 13, 2013, Mr. Tulman sent notice to the other shareholders of his desire to call a shareholders meeting on November 21, 2013. The Plaintiff contends that the Notice was not sent in accordance with the provisions of the USA, but does acknowledge that the notice came to his attention on November 13, 2013.

[15] During the meeting, the Plaintiff contends that Messrs. Tulman and Lipovetsky unilaterally terminated Mr. Kushevsky’s employment with Bestie as a Director and as the Chief Technology Officer forthwith and without notice.

[16] The Defendants then initiated steps to purchase Kushevsky Co.’s shares in Bestie. On February 13, 2014 a valuation report prepared by PricewaterhouseCoopers was provided to the Plaintiffs. On February 18, 2014 the Defendants set a purchase price and a March 17, 2014 closing date.

[17] The Plaintiffs have prepared a Statement of Claim which was issued on the Commercial List. An initial scheduling appointment was attended by counsel for both parties on February 28, 2014.

[18] The Plaintiffs contend that due to a lack of communication from opposing counsel about the March 17 closing, and because of the Defendants submitting to the jurisdiction of the Superior Court of Justice (subject only to their right to argue arbitration instead was required by the USA), they reasonably concluded that the Defendants would not pursue the closing on March 17, 2014.

[19] On March 14, 2014, the closing check-list and draft closing documents were provided to Plaintiffs’ counsel.

[20] The Plaintiffs contend that the Defendants’ lawyers also refused to extend the closing date as requested by the Plaintiffs.

[21] Surprisingly, neither party advised the Court at the scheduling appointment held on February 28, 2014, that a “deemed” closing date had been set for March 17, 2014.

[22] The Plaintiffs further contend that the Defendants breached the terms of the USA by, among other things:

(i) purportedly proceeding with directors and/or shareholders meeting and purportedly passing resolutions and/or by-laws of the corporation without prior written notice to or waiver of same by Kushevsky and/or Kushevsky Co.;

(ii) terminating Kushevsky’s employment contrary to the terms of section 4.1(a) of the USA;

(iii) refusing to pay Kushevsky any salary or remuneration contrary to section 4.2 of the USA;

(iv) failing to remediate their breaches of the USA in accordance with section 7.3(b) after receiving notice of such breaches on December 3, 2013;

(v) failing to abide by their obligations pursuant to sections 7.3, 7.4 and 7.5 of the USA and breaching or causing an anticipatory breach of the USA by refusing to recognize the validity of the Emergency Call Notice served upon them by the Plaintiffs on or about December 19, 2013;

[23] In the Statement of Claim, the Plaintiffs claim damages under a number of headings including Intentional Breach of the Plaintiffs’ Right to Privacy, Aggravated Punitive Damages, Damages for Accrued Salary, Bonuses and/or Vacation Pay, and Damages for Wrongful Dismissal.

[24] The Plaintiffs also seek an order that an independent valuation of Bestie be conducted and that:

(i) the respective Defendant shareholders of Bestie be required to buy from the corporate Plaintiff its shares in Bestie without a minority discount in accordance with the valuation; or

(ii) the corporate Plaintiff be required to purchase the shares of the respective Defendant shareholders of Bestie at the Emergency Call Price as determined by discounting the valuation accordingly.

The Test for an Interim and Interlocutory Injunction

[25] In its factum, the Plaintiffs submit that the test that the Plaintiffs must meet in order for the Court to grant the interlocutory injunction is set out in RJR-MacDonald v. Canada (AG), 1994 117 (SCC), [1994] 1 S.C.R. 311. The following question must be answered affirmatively: (a) is there a serious question to be tried? (b) will the plaintiff suffer irreparable harm if the injunction is not granted, which cannot be adequately compensated in damages? and, (c) does the balance of convenience favour granting an injunction?

[26] At paragraphs 42-46 of their factum, the Plaintiffs list over six pages of various incidents of varying degrees that when considered together could be interpreted as demonstrating that there is a serious issue to be tried.

[27] For the purposes of determining this motion, I accept that the Plaintiff have established that there is a serious issue to be tried. Thus, the first component of the test has been met.

[28] However, in my view, the Plaintiff has not established that it will suffer irreparable harm if the injunction is not granted, which cannot be adequately compensated in damages. The failure to satisfy the second part of the test allows me to conclude that the motion must be dismissed.

[29] Simply put, the requested relief set out in the Statement of Claim can be, in my view, compensated for in damages. In fact, that is the remedy that the Plaintiff seeks as a result of the activities of the Defendants.

[30] Even if it is established that the Plaintiff is entitled to purchase the shares of the respective Defendant shareholders of Bestie at the Emergency Call Price as determined by an independent valuator and discounting the valuation accordingly, this calculation can be determined at trial. There is nothing preventing a qualified valuator from determining this calculation. As a result, if this is the remedy that is ultimately granted, there is no irreparable harm that can be demonstrated (see: Kuksis v. Physical Planning Technologies Inc. (2004), 2004 36070 (ON SC), 50 B.L.R. (3d) 273 (S.C.J.)).

[31] Alternatively, if the Plaintiff is successful in obtaining an order that an independent valuation be conducted and that the Defendant shareholders of Bestie be required to buy from the corporate Plaintiff its shares in Bestie without a minority discount in accordance with the valuation, this calculation can also be determined by a properly qualified valuator.

[32] Having arrived at this conclusion, the motion must be dismissed.

[33] At the conclusion of argument, I requested submissions on costs.

[34] This is a case where costs follow the event.

[35] Ms. Shapiro submitted a Bill of Costs requesting costs on a full indemnity basis in the amount of $11,849.50, plus a counsel fee for the attendance on the motion. Alternatively, the request was made for costs on a partial indemnity basis of $7,487.00 plus a counsel fee for the attendance on the motion. In my view, this not a case for costs on a full indemnity basis.

[36] With respect to the claim for partial indemnity, I have considered the general principles set forth in Rule 57.01 together with the principles set forth in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

[37] I would like to emphasize Rule 57.01(1)(e), namely the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding. I noted earlier that, at the 9:30 a.m. scheduling appointment held on February 28, 2014 before Wilton-Siegel J., neither party brought to the attention of the Court the pending “closing” scheduled for March 17, 2014. In my view, this was a breach of the expected conduct on the Commercial List which emphasizes “communication, cooperation and common sense”. In my view, had Wilton-Siegel J. been advised of the pending closing, it is quite likely that this dispute would have proceeded in a far more organized manner than an emergency “walk-on” motion.

[38] Costs are fixed in the amount of $5,000, inclusive of disbursements and HST which amount is to be deducted from the amount being paid on closing. This reduction in the amount requested reflects my view on the conduct of the parties, and represents a fair and reasonable amount to be paid by the Plaintiffs. Costs are payable within 30 days.

Morawetz, R.S.J.

Date: March 21, 2014