CITATION: 1549858 Ontario Inc. v. 1549857 Ontario Inc., 2015 ONSC 1913
COURT FILE NO.: 696/14
DATE: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1549858 ONTARIO INC.
Applicant
– and –
1549857 ONTARIO INC. and MICHELLE LEE HYNES, in her capacity as Estate Trustee of the Estate of Robert Thomas Steele, deceased
Respondents
J. Greg Murdoch, for the Applicant
Steven W. Pettipiere, for the Respondents
-and-
Richard Woolfrey and Smith Valeriote Law Firm
Intervener
James Bennett, Counsel for the Interveners
HEARD: March 9, 2015
REASONS FOR JUDGMENT
LEMAY J.
[1] This Application is brought by 1549858 Ontario Inc. (hereinafter “858”) for an Order directing the Respondents to complete an agreement by the parties respective lawyers in which the shares of 1549857 Ontario Inc. (hereinafter “857”) in Steele Foods were to be transferred to 858. For the reasons that follow, the application is granted.
[2] I will begin by outlining the relevant background facts. I will then set out the positions of the parties, and my conclusions on each of those positions. In reaching my conclusions, I have reviewed and considered all of the cases that the parties filed.
Background
[3] Ronald and Margaret Steele (hereinafter “Ronald” and “Margaret”) had two children, Robert Steele (“Robert”) and Robin Hudman-Steele (“Robin”). The Steeles had licences for three Tim Hortons franchises in the Guelph area through their company, Steele Foods.
[4] Ronald and Robert each owned a holding company, 858 and 857 respectively. Each of these holding companies owned a portion of the shares of Steele Foods. In turn, Steele Foods held the licences for the three Tim Horton franchises. The licences for these franchises are issued by the TDL Group Corporation (“TDL”). The licences are subject to the franchise agreement with TDL.
[5] Ronald died on October 22nd, 2013. Robert died on March 21st, 2013. Each of them left Wills and named executors. I will now address the terms of the Wills, along with the other relevant facts.
a) The Terms of the Wills
[6] Robert had a primary and a secondary Will. His Secondary Last Will and Testament disposed of his interest in 857, and his former spouse, Ms. Michelle Lee Hynes (“Michelle”) was appointed the Executrix of this estate. Michelle was also the sole beneficiary of Robert’s shares in 857. On this motion, 857, Michelle and Robert’s Estate were all represented by Mr. Pettipiere. When I refer to counsel for the Estate, or to counsel for the Respondents, in these reasons I am referring to counsel for all three of these parties, Mr. Pettipiere.
[7] Ronald also had a primary and secondary Will. His Secondary Last Will and Testament disposed of his interest in 858. His son in law, Neil Hudman (“Neil”) was appointed the Executor of this secondary estate. Neil is Robin’s husband. Robin was the sole beneficiary of the shares in 858.
b) The Business Structure
[8] As noted above, 857 and 858 owned shares of Steele Foods which, in turn, held the licences for three Tim Horton’s franchises. However, the corporate relationships are not as simple as an even distribution of common shares.
[9] On the evidence before me, Steele Foods had issued some Class “A” special shares to 858. While some of those shares had been bought back, 858 still held 3495 Class “A” special shares, with a redemption value of $394,500.00. This number was not seriously challenged by the Respondents on this motion, and the Respondents did not advance any different information. Accordingly, I accept these numbers as proven.
[10] In addition, Steele Foods owed 858 shareholder loans of some $206,676.00 as of December 31, 2012. On the record before me, there does not appear to be any significant change in the value of this shareholder loan up to the date of the transaction. Again, this number was not seriously challenged by the Respondents on this motion, and the Respondents did not advance any different information. Accordingly, I accept these numbers as proven.
[11] In support of my conclusions in this regard, Mr. Woolfrey (the counsel for 857) also reviewed the various aspects of this transaction and concluded that “if any debt was calculated in the valuation, the common shares [of Steele Foods] would be valueless.” In other words, the value attached to the preferred shares and the shareholder loan mean that the common shares held by 857 had no value. This is a conclusion that is inescapable on the facts set out above.
[12] The only other information I had on the valuation of Steele Foods was Mr. Woolfrey’s statement that he had a business valuation on Steele Foods as of January 31, 2012 stating that the value of the business was between $689,000.00 and $795,000.00. I will have more to say about this in the section on TDL’s position below.
c) The Negotiations in 2013 and 2014
[13] The parties commenced negotiations in late 2013 over the disposition of the shares in Steele Foods. The parties were agreed that Michelle and Robin did not wish to work together, and the assets should be transferred to 858, which was controlled by Robin at this point.
[14] However, the parties had a dispute over the valuation of the shares, and the amount to be paid on the transaction. Negotiations continued in the spring and early summer of 2014. Ultimately, on or about August 1st, 2014, Mr. Woolfrey, then counsel to 857, delivered an offer letter to Mr. Schumacher, counsel for 858. It was an offer for 857 to sell its interest in Steele Foods to 858 for the sum of $10,000.00.
[15] This offer was made after Mr. Woolfrey was in possession of the financial statements for Steele Foods from 2008 to 2012 inclusive, as well as other documentation relating to the transaction.
[16] In argument, counsel for the Respondents made much of the fact that this was a “without prejudice” offer. He asserted that without prejudice meant, in this case, that the dollar amount offered by Mr. Woolfrey would be subject to other considerations. Those other considerations were not detailed. I am of the view that the phrase “without prejudice” generally refers to the fact that the offer is confidential and cannot be referred to or relied upon at trial or in other proceedings if it is not accepted. To place a different, broader, meaning on the phrase “without prejudice” would, in this case, require either more specific wording in the letter or evidence of specific discussions between counsel.
[17] Mr. Schumacher responded to this offer on August 5th, 2014 by e-mail and advised that 858 was prepared to “settle this matter in exchange for payment of $10,000.00”. This letter goes on to say that, unless they hear otherwise, they will structure the transaction so that 858 will buy the shares from 857. A target closing date for the transaction of August 13th, 2014 is then proposed by Mr. Schumacher.
[18] Mr. Woolfrey’s office did not raise any concerns about structuring this agreement as a share transaction. There was also an exchange of closing documentation prior to August 14th, 2014. This is the date when it was expected (at least by Mr. Woolfrey and Mr. Schumacher) that Michelle would be attending at Mr. Woolfrey’s office to sign the closing documents.
[19] The e-mail exchanges involved counsel for TDL, who advised that TDL consented to the transaction, and wanted their consent included in the closing documentation.
[20] The final email exchanges came from Mr. Woolfrey’s law clerk, Lisa Palmer. In an exchange on August 13th, 2014, Ms. Palmer copied Mr. Woolfrey on the closing documentation, confirmed he was out of the office, and outlined some changes that were being sought to the closing documentation. The next morning, Ms. Palmer asked counsel for 858 if the documentation could be completed that morning as Michelle was coming into sign the documentation. Based on these exchanges, it appears that the terms of the agreement, including a number of questions relating to the closing documentation, were resolved.
[21] Ultimately, Michelle refused to sign the closing documents. She states that she had never, in her role as Estate Trustee, agreed to $10,000.00 as the price for the shares, although it is clear on the record that counsel for the Estate, Mr. Woolfrey, had offered this amount. In argument on this motion, counsel for the Estate stated that there were other issues that were “essential terms” that were not agreed to by the parties. I will return to this issue below.
d) The Expectations of TDL
[22] One of the issues that arises in this case is the expectations of TDL. Both parties now have copies of the licence agreement between TDL and Steele Foods. I was not provided with this agreement. However, I was advised of some of the key terms of this agreement, which include the following:
Excerpts from the TDL Group Corp. Standard License Agreement:
Section 11.01 – Restrictions on Licensee’s Right to Transfer: The Licensee acknowledges that the rights and duties set forth in this Agreement are personal to the Licensee and that the Licensor has granted this license in reliance on the Licensee’s business skill and financial capacity. The Licensee therefore covenants with the Licensor as follows:
(a) in the event the Licensee wishes to sell, assign, transfer, convey or give away the Tim Hortons Shop business carried on at the Premises pursuant to this Agreement during the first five (5) years of the term hereby granted, the Licensee shall do so only by offering to resell the Tim Hortons Shop business to the Licensor at the depreciated value of the furniture, equipment, signs and improvements and “depreciated value” shall be as herein defined in subparagraph 12.02 (i). The Licensor shall have the option of repurchasing said business in accordance with the subsection within thirty (30) days of receipt of written notice from the Licensee advising it wishes to see the business. In the event the Licensor does not exercise its option to repurchase the business in accordance with this subsection, the Licensee shall have the right to sell the business to a third party at the purchase price set out in this subsection and in accordance with the terms of Section 11.02; and
(b) subject to the restriction set out in Section 11.01 (a) and except as otherwise provided in this Article, neither the Licensee, nor any partner, if this Licensee is a partnership, nor any shareholder, if the Licensee is a corporation , without the Licensor’s prior written consent, shall, by operation of law or otherwise, sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber to any person, persons, partnership, association or corporation, any interest in this Agreement, or any interest in this license granted hereby, or any interest in any proprietorship, partnership or corporation which owns any interest in the license, nor offer, permit or suffer the same. Any purported assignment or transfer not having the written consent of the Licensor shall be null and void and shall constitute default hereunder allowing the Licensor to immediately terminate this Agreement without prior notice or opportunity to cure such default.
[23] These terms, and the other provisions I was referred to, make it clear that TDL has the ability to determine the purchase price for the assets of a franchise. The materials filed on the Application included an e-mail from corporate counsel at TDL, which valued Steele Foods’ three franchises at a total of $487,500.00. In making these valuations, TDL does not factor in profit or goodwill.
[24] Both Mr. Woolfrey and Mr. Schumacher’s materials agree that they had discussions with TDL’s counsel, and were advised that TDL would not consent to the transfer of shares from 857 to 858 unless TDL’s valuations of the franchises were used.
[25] Respondents’ counsel stated that he disputed the authority of TDL to value the business. He argued that the salaries being paid out of Steele Foods were far and above the fair market value of the salaries. As a result, he argued that this affected the value of the shares in Steele Foods. I reject this argument. The fact that salaries were being overpaid does not affect the right of TDL to value the licences in accordance with the franchise agreement.
[26] There was also some dispute about whether the Respondents had received a complete copy of the TDL franchise agreement. Ultimately, this was resolved by Applicant’s counsel advising that the agreement had been provided to the Respondents before the hearing of the motion. I received this information from Applicant’s counsel during the course of the Respondents counsel’s argument.
[27] Finally, the Respondents did not file any documentation to challenge TDL’s interpretation of the franchise agreement or of TDL’s valuation of the business. As a result, there is no basis on this record for the Respondents’ argument that TDL could not set the value of the franchises. There is also no basis for finding that the value of the Steele Foods shares should be based on any different numbers than what I was provided with.
[28] TDL has valued the business at just less than $500,000.00. The business owes 858 just over $600,000.00 through a combination of preferred shares and a shareholder loan. In other words, on the material before me the common shares of Steele Foods have no discernable value other than the fact that they presumably give the holder votes in governing the affairs of the company.
e) The Meetings Between the Respondents and Mr. Woolfrey
[29] Considerable information was provided to the Court about the meetings between Michelle, as Executrix and beneficiary of the shares in 857, and legal counsel to 857, Mr. Woolfrey. Given my disposition of the matter, it is not necessary for me to make findings of fact in this respect, but I will briefly set out the positions of the parties for completeness.
[30] Mr. Woolfrey states that he was instructed to make an offer of $10,000.00 as a result of meetings and a telephone call on August 1st, 2014. Michelle states that she never gave such instructions, as she thought that the offer, or even an offer of $25,000.00, was a “joke”.
[31] Michelle then had conversations with Lisa Palmer (“Ms. Palmer”) and an appointment was allegedly arranged for August 14th, 2014. It is not clear to me what the purpose of that appointment was on the record that I have, as Michelle’s Affidavit seems to deny that there was ever an appointment.
[32] In any event, as a result of discussions between Mr. Woolfrey’s office and Michelle, no documents were actually signed on August 14th, 2014. I make no conclusions on whether Mr. Woolfrey had actual authority in this case.
Legal Issues
[33] There are four issues that must be considered in this case, as follows:
a) Did Mr. Woolfrey have actual or apparent authority to negotiate an agreement disposing of 857’s interest in Steele Foods?
b) Do I need to resolve the issue of whether Mr. Woolfrey had actual authority to negotiate any alleged agreement in this case? If so, how do I resolve that question?
c) If Mr. Woolfrey had either actual or apparent authority, was an agreement achieved?
d) If an agreement was achieved, should it be set aside on the basis that a real injustice would occur if the settlement agreement was enforced?
[34] For the reasons that follow, I have determined that Mr. Woolfrey had apparent authority to negotiate the agreement to dispose of 857’s interest in Steele Foods, and that an agreement was achieved. There is no basis to set aside that agreement. However, I am not prepared to finally dispose of the question of whether Mr. Woolfrey had actual authority to negotiate an agreement.
[35] My reasons for the conclusions that I have reached on each issue follow.
Issue #1- Mr. Woolfrey’s Apparent Authority
[36] This is a question that is not seriously disputed by the Respondents. The Applicant points to the decision of the Ontario Court of Appeal in Scherer v. Paletta (1966 CanLII 286 (ON CA), [1966] 2 O.R. 524 at 526), where Evans J.A. stated:
The authority of a solicitor arises from his retainer and as far as his client is concerned it is confined to transacting the business to which the retainer extends and is subject to the restrictions set out in the retainer. The same situation, however, does not exist with respect to others with whom the solicitor may deal. The authority of a solicitor to compromise may be implied from a retainer to conduct litigation unless a limitation of authority is communicated to the opposite party. A client, having retained a solicitor in a particular matter, holds that solicitor out as his agent to conduct the matter in which the solicitor is retained. In general, the solicitor is the client's authorized agent in all matters that may reasonably be expected to arise for decision in the particular proceedings for which he has been retained. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound as regards third persons by every act done by the agent which is incidental to the ordinary course of such business or which falls within the apparent scope of the agent's authority.
[37] In this case, it is clear from Mr. Woolfrey’s August 1, 2014 e-mail that he had apparent authority to offer to sell 857’s shares in Steele Foods for $10,000.00. It is equally clear from the subsequent correspondence that Mr. Woolfrey and his office had apparent authority to negotiate the terms of this agreement. Indeed, his clerks were actively engaged in finalizing the specific terms of the agreement between August 1, 2014 and August 14th, 2014.
[38] Counsel for the Respondents does not dispute that Mr. Woolfrey had apparent authority to enter into an agreement. However, he disputes the fact that Mr. Woolfrey’s staff had the apparent authority to discuss the terms of that agreement. Counsel for the Respondents argues that it was only Mr. Woolfrey who could negotiate over the terms of the agreement. Mr. Pettipiere asserts that the fact that Mr. Woolfrey was not personally involved in every exchange of documents makes the entire transaction void.
[39] This is not a sustainable position for several reasons. First and foremost, Mr. Woolfrey (like most other lawyers) has staff assisting him in the administration of the files that he is responsible for. The mere fact that staff carry out a lawyer’s instructions does not void those instructions. The practice of law and the administration of the Courts would grind to a halt if the lawyer who had carriage of a file had to personally attend to every single step of administering that file.
[40] I accept that there are circumstances where a lawyer will have to carry out tasks personally. I also accept that there could be circumstances where a lawyer’s staff will attempt to carry out improper instructions, and those instructions will be void. That is not this case. In this case, Mr. Woolfrey was copied on the e-mails between his clerks and counsel for 858. Although he might not have been able to read the attachments to all of the e-mails, he was aware of the transaction, and appears to have approved its essential terms. The fact that his staff were working with Mr. Schumacher’s staff to memorialize those terms in writing does not mean that a contract was not formed.
Issue #2- Did Mr Woolfrey Have Actual Authority?
[41] Counsel for Mr. Woolfrey urges me to answer this question on the basis that they were granted intervener status by Price J. for the express purpose of resolving this issue. I have read the endorsement of Price J., and I do not read it as requiring a resolution of this issue. Instead, Price J. was concerned with the question of ensuring that a complete record was before this Court. That was achieved.
[42] There is insufficient material before the Court to answer the question of whether actual authority to offer $10,000.00 existed. For example, there are no cross-examinations of either Mr. Woolfrey or his clerk, and the cross-examinations of Michelle and of Barry Hynes (her husband, hereinafter “Barry”), do not squarely address these issues. In that regard, I note that this case is distinguishable from the facts in Srajeldin v. Ramsumeer (2013 ONSC 6178), which I was referred to in argument.
[43] Finally, given the manner in which I have resolved the remainder of this action, this question does not need to be answered and I decline to do so.
Issue #3- Was An Agreement Achieved?
[44] Yes.
[45] In assessing whether an agreement was achieved, both parties cited Olivieri v. Sherman ((2007) 2007 ONCA 491, 86 O.R. (3d) 778 (C.A.)). That case states, at paragraph 41, :
A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement: Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CanLII 2734 (ON CA), [1991] O.J. No. 495, 79 D.L.R. (4th) 97 (C.A.), at pp. 103-04 D.L.R.
[46] This raises two questions. First, whether there was mutual intent; second, whether the parties had reached agreement on the essential terms of the deal.
[47] With respect to mutual intent, Olivieri states (at paragraph 44):
The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject.
[48] The words and acts of the parties (or at least their agents) clearly suggest that they had the intent to form a contract. A price was agreed upon, the form of the transaction (share sale) was also agreed upon, and the closing documentation was completed. It is simply not open for the Respondents to argue that there was no mutual intent in this case.
[49] In terms of the essential terms, my consideration starts with Bawitko Investments Ltd. v. Kernels Popcorn Limited ((1991) 1991 CanLII 2734 (ON CA), 79 D.L.R. (4th) 97. At page 12, the Court stated:
When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.
[50] Determining whether the parties have agreed on the essential terms of a contract must be done on a case-by-case basis. In this case, counsel for the Respondents pointed to the following as essential terms that had not been agreed to by the parties:
a) The closing date for the transaction. As a related question, there was the issue of whether time was of the essence in completing the transaction.
b) Whether the transaction was going to be structured as a share sale.
c) What conditions and warranties were to be included in the agreement. When asked, counsel for the Respondents was unable to specifically identify conditions and warranties that were missing.
d) The nature of the releases granted between the parties. Again, on this issue, counsel for the Respondents was unable to specifically identify problems with the releases.
e) Choice of law. Counsel for the Respondents pointed out to me that TDL is an international corporation with its head office in another jurisdiction or that the choice of law may not be clear.
[51] The materials filed with me address the first two issues. It was the desire of the Applicants to complete this transaction as quickly as possible. Further, under the licencing agreement with TDL, the transaction should have been completed a significant time ago and TDL arguably had the authority to rescind the licenses. As a result, the closing date was to be as soon as possible, and time was of the essence. I am fortified in this conclusion by the fact that renovations to at least some of the store premises had been outstanding for some time when the transaction was negotiated. In any event, however, neither of these appear to have been essential terms, and the parties had set August 14th, 2014 as a tentative date for closing. The parties also exchanged materials in advance of that date.
[52] Then, on the issue of whether it was to be a sale of shares, I would note that the correspondence from Mr. Schumacher suggests that he would treat it as a sale of shares unless he heard otherwise. There was subsequent correspondence from Mr. Woolfrey’s office that included suggested changes to the closing documentation, but there was no issue raised about this transaction being a sale of shares.
[53] Mr. Pettipiere argued that there could be significant financial implications depending on how the transaction was structured. As a result, he argued, the failure to explicitly agree on how this transaction was to be structured means that the parties did not have a meeting of the minds.
[54] This argument suffers from a number of fatal flaws. First, and foremost, the parties did agree (in part by silence) that this was to be a sale of shares. Second, the value of the shares is so minimal that the structuring of the transaction is not likely to have significant financial implications. Third, if there were different financial implications from structuring the transaction differently, it was up to the Respondent to provide the Court with something (be it evidence, law, past practice, etc.) to show the different financial implications of the different forms this agreement could have taken.
[55] The Respondents failed to provide any of this evidence. Instead, they make bald assertion that there are significant financial implications to how this transaction was structured. Given the value of the transaction, the Respondents should have provided additional information to the Court to support their assertion. The lack of that information, combined with the other problems that I have identified, means that this argument must fail.
[56] The third and fourth issues and conditions and warranties can be addressed together. The Respondents assert that neither of these were addressed in the agreement, and they were essential terms. There can be disagreement over the meaning of the phrase “essential terms”. However, at a minimum, where there is apparent offer and acceptance, a party that claims that an “essential term” has not been agreed to must be able to articulate what that term should have been (or could have been) and why an agreement on the missing term is essential to the transaction. In the absence of this information, it is not open to the Court to accept that the missing term is “essential” within the meaning of the case law.
[57] The Respondents have not explained what was missing or why it was essential with respect to either the issues of conditions and warranties or the releases. If the Respondents cannot point to a specific problem with either of these issues, then their arguments on these points must fail as well.
[58] Then there is the issue of the “choice of law”. Mr. Pettipiere argues that TDL is an international company and so we do not know what legal regime this transaction would have been governed by. There is no merit to this argument either. The transaction is obviously governed by the laws of Ontario. The Franchise agreements were made in Ontario, about franchise locations in Ontario, with an Ontario Company. Further, the share transaction (which TDL is not a direct party to) was made between two Ontario companies that were under the administration of Executor/Executrix that were appointed under the authority of the Ontario Courts. This transaction would have obviously been governed by Ontario law.
[59] Finally, it is worth noting that Michelle was asked on her cross-examination as to whether there was anything, other than the price, that was objectionable about the closing documents. She refused to answer this question. Had there been something actually objectionable, she (or her counsel) would have pointed to specific provisions at a time when she could have been cross-examined about why the provisions were objectionable. Instead, she refused to answer the question, and counsel for the Respondents then advanced arguments that were not subject to cross-examination.
[60] The issues that were raised above were not essential terms. Instead, they were issues that were raised after the fact by the Respondents in order to resile from a binding agreement. I give no force to any of the Respondents’ positions on these issues.
Issue #4- Should An Agreement Be Set Aside?
[61] No.
[62] My consideration of this issue starts with the decision of this Court in Ruder v. 1049077 Ontario Ltd. (2014 ONSC 4389). In that case, the Court set out the factors to use in deciding whether to set an agreement aside (at paragraph 5):
- The evidence of mistake;
- The reasonableness of the agreement;
- The prejudice to the party seeking to uphold the settlement if it is not enforced;
- The prejudice to the party seeking to set aside the settlement if is enforced in relation to the prejudice to the party who seeks to uphold the settlement if it is not enforced; and
- The effect on third parties if it is not enforced.
[63] The Court goes on to note (at paragraph 6) that “as a matter of public policy, a settlement ought to be enforced unless enforcement would create a real risk of clear injustice.” In this case, I see no clear risk of an injustice. Indeed, all of these factors support the enforcement of this transaction.
[64] In reaching this conclusion, I return to one of the key facts in this case. On the evidence before me, TDL was (and is) only prepared to allow for the sale of the shares in Steele Foods between 857 and 858 on the basis of TDL’s valuation of the franchises. Apart from the legal problems with the Respondents’ argument on this point, there is the very practical problem of what effect setting aside this agreement would have.
[65] As I noted above, based on TDL’s valuation, the shares of Steele Foods that 857 holds have no real value. If Steele Foods transferred the licences to a third party, TDL would only let them be sold for $487,500.00. After Steele Foods satisfied the debts it owed, and paid out the preferred shares, there would be nothing left for the common shareholders.
[66] I acknowledge the business valuation that Mr. Woolfrey received. However, that business valuation was not before me, and did not address the value that TDL put on these franchises. Given the fact that the franchise agreement governs this transaction, there is no basis to substitute a different value for these franchises.
[67] In the circumstances, $10,000.00 is a commercially reasonable amount to have paid for these shares. On the materials filed before me, Michelle and Barry’s belief that 857’s shares in Steele Foods were worth between $100,000.00 and $250,000.00 has no basis in fact or law.
[68] The Respondents asserts that it would suffer prejudice if this transaction was not set aside. I see no basis for this claim, as the value that has been set for the shares is reasonable, and the Respondents had the necessary materials in its’ possession, or at least the possession of its’ lawyer, to make these determinations. Indeed, Respondents’ counsel conceded, somewhat reluctantly, in argument that he was in possession of the entire franchise agreement with TDL. He did not file that agreement, and pointed to nothing in it that would support the Respondents’ position on any of the issues argued before me.
[69] The licence agreement with TDL requires that transfers be completed within three months of the death of one of the licence holders, or the licences can be revoked. Given that it is the Applicant that wishes to continue on with the licences, the prejudice in failing to complete this transaction falls mostly, if not entirely, on the Applicant’s side.
[70] For these reasons, I give no effect to the Respondents’ argument on this point either.
Conclusion
[71] In the result, I am persuaded that a transaction was entered into between 857 and 858 to transfer the shares of Steele Foods from 857 to 858 for the consideration of $10,000.00. This was to be a transaction where shares were to be sold.
[72] As a result, I direct that 857 transfer the shares of Steele Foods in its possession to 858 on the following terms:
- 858 will pay the sum of $10,000.00 as consideration for the shares to 857 upon closing.
- Michelle Lee Hynes will execute any and all documents necessary to give effect to the agreement between the parties.
- Any issues relating to the sale of the shares are to be resolved in accordance with the documentation exchanged between the parties on (or immediately prior to) August 14th, 2014.
- Any issues that cannot be resolved between the parties respecting the terms of this transfer can be addressed to me by making an appointment with me to resolve them through the Trial Coordinator in Brampton.
[73] With respect to paragraph (d) of the above Order, that there should be no issues between the parties that require my assistance. I have provided comments on the issues raised by Mr. Pettipiere as the “essential terms” that were not resolved. They are neither essential terms nor, really, matters in dispute. I would, therefore, expect the parties to be able to resolve these issues without the assistance of the Court.
[74] If costs cannot be agreed to between the parties, then the Applicant and the Intervener are directed to make their costs submissions (limited to three pages double spaced exclusive of the bill of costs or any cases) within fourteen (14) days of the date of this decision. The Respondents will have fourteen (14) additional days to file its responding costs submissions (limited to three pages double spaced exclusive of the bill of costs or any cases).
[75] There will be no reply submissions on costs without leave of the Court.
LeMay J.
Released: March 25, 2015
CITATION: 1549858 Ontario Inc. v. 1549857 Ontario Inc., 2015 ONSC 1913
COURT FILE NO.: 696/14
DATE: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1549858 ONTARIO INC.
Applicant
– and –
1549857 ONTARIO INC.
Respondent
-and –
Richard Woolfrey and Smith Valeriote Law Firm
Intervenor
REASONS FOR JUDGMENT
LeMay J.
Released: March 25, 2015