CITATION: Glionna v. Stiller, 2015 ONSC 2431

COURT FILE NO.: CV-10-414705

DATE: 20150416

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANDREW GLIONNA and THERAPUTIX, THE WELLNESS CENTRE INC.

Plaintiffs

– and –

AARON STILLER

Defendant

A. Karapetyan, for the Plaintiffs

Self-represented

HEARD: May 20-23, 26, 2014

REASONS FOR JUDGMENT

W. matheson j.

[1] This action arises out of a failed business relationship between the plaintiff Andrew Glionna and the defendant, Aaron Stiller, who had originally embarked together to build the business of the corporate plaintiff, Theraputix - The Wellness Centre Inc.

[2] Mr. Glionna and Mr. Stiller began their business venture as close personal friends. Ultimately, their friendship and business relationship failed, giving rise to this action. However, the corporate plaintiff Theraputix did not fail. It continued in business. Mr. Glionna and Mr. Stiller were, from the outset, 50-50 shareholders in the corporate plaintiff and that remained the case at trial.

[3] The plaintiffs allege breach of fiduciary and claim lost profits of Theraputix. They also claim general and punitive damages, and damages for, or the return of, certain property.

[4] On consent, Mr. Glionna participated in the trial of this action by teleconference, to accommodate his physical disabilities. In addition to his own testimony, two people who previously worked for Theraputix were called as witnesses in the plaintiffs’ case, specifically John Rimando and Matt Sanchez. The defendant testified in his defence, and also called his mother, Renata Stiller, in relation to the money he borrowed to invest in a related company, among other things. While there was originally a counterclaim that included that investment, it was dismissed on consent prior to trial.

Inception of relationship

[5] Mr. Glionna and Mr. Stiller met when Mr. Glionna was in the Lyndhurst Centre for rehabilitation following an accident. Mr. Glionna had a spinal cord injury that rendered him a quadriplegic. Mr. Stiller is a registered physiotherapist and massage therapist. He was providing therapy to another patient at Lyndhurst, with whom Mr. Glionna shared a room. Mr. Glionna began to use Mr. Stiller for therapy as well.

[6] After Mr. Glionna was discharged from Lyndhurst, Mr. Stiller continued to provide therapy to him at Mr. Glionna’s home. They became close friends. They socialized. Mr. Stiller played with Mr. Glionna’s children. And he observed Mr. Glionna conducting his landscaping business despite his significant physical limitations. He thought that Mr. Glionna was a savvy businessman. Based upon the evidence at trial, I agree with that assessment.

[7] When Mr. Glionna and Mr. Stiller began their business venture together, Mr. Stiller was only 24. Despite Mr. Glionna’s attempt to inflate Mr. Stiller’s experience, I find that Mr. Stiller did not have comparable business experience. Although he was working to build a physiotherapy clientele, he was relatively inexperienced in business. Mr. Stiller had become interested in wellness and related therapies because his father had been seriously ill. He embarked on a career in this area because he wanted to help people.

[8] Mr. Glionna and Mr. Stiller started discussing opening a rehabilitation and wellness centre together in Toronto. Ultimately, Theraputix - The Wellness Centre Inc. was incorporated in August 2006. Mr. Glionna and Mr. Stiller were its two directors, and each was a 50% shareholder. Mr. Glionna was listed as Secretary and Treasurer and Mr. Stiller as President. However, both testified that when the business began, they ran it as a team with no specific division of responsibilities. While only Mr. Stiller was able to provide certain services, they were both involved in the operation of the business. As it was put in the agreed statement of facts filed on this trial, Mr. Glionna put in 80% of the capital and Mr. Stiller did 80% of the work.

[9] Theraputix was a multidisciplinary clinic offering many different therapies, including through the use of technology. Its first major technology purchase was a device called the Lokomat. Theraputix purchased a Lokomat in late 2006/early 2007 for approximately US$315,000. The purchase was mainly financed through a bank loan.

[10] Ultimately, Theraputix offered access to a range of technology as well as more conventional services. It was unique in Canada until 2011.

[11] From the outset, Mr. Stiller handled most of the day-to-day operations at Theraputix. However, Mr. Glionna came into the clinic regularly and he also worked from home. In 2009, four security cameras were installed in the clinic, which were accessible to Mr. Glionna from home. Access to the clinic using those cameras facilitated Mr. Glionna’s continued involvement in the clinic, even when he was not present in person.

New corporate structure

[12] In late 2008, Mr. Glionna and Mr. Stiller established a new structure for the business, with related changes to the financing arrangements of Theraputix. A second company was incorporated – Crudo Starke Inc. (“CSI”). At around this time, Mr. Glionna received a large settlement from his personal injury lawsuit, which he invested in CSI. With respect to shareholdings, Mr. Glionna had a 95% interest and Mr. Stiller had only a 5% interest. Mr. Glionna and Mr. Stiller were CSI’s two directors and officers. This time, Mr. Glionna was named as President and Mr. Stiller as Secretary and Treasurer.

[13] CSI repaid the Theraputix bank loan and line of credit and assumed ownership of the equipment at Theraputix, including the Lokomat. Theraputix then leased the equipment from CSI, and began paying monthly fees.

[14] Although the initial capital for CSI came from Mr. Glionna, it was Mr. Stiller’s belief that as he injected capital into CSI, his shareholdings would increase. He borrowed money from his family, and paid over $200,000 into CSI. His shareholdings were not increased. At the time, Mr. Glionna said he did not have time to deal with it. Later, he disputed the entitlement. This was one of the reasons for the discord that ultimately arose between these two friends.

[15] During the period from 2006 to late 2009, Mr. Glionna and Mr. Stiller jointly managed the Theraputix clinic. The relationship between them was good and Theraputix was doing better each year. In early 2009, Mr. Glionna and Mr. Stiller began a third company together – Robotic Therapy Equipment Inc. (“RTE”) – as a subsidiary of CSI. Again, they were RTE’s first directors. At least at the outset, the primary purpose of this company was to become the Canadian sales agent for the Lokomat in Canada. Obviously, success for this company would mean that the Lokomat would become more widely available at clinics in Canada.

[16] The Lokomat was manufactured by Hocoma, a Swiss company. Mr. Glionna and Mr. Stiller were successful in their attempt to have RTE become its sales agent for Canada. Mr. Stiller began to spend a significant amount of his time pursuing potential Canadian purchasers of the Lokomat, and less time on Theraputix.

[17] Beginning in late 2009, problems began to surface. In the period that followed, there were a number of matters about which Mr. Glionna and Mr. Stiller gave different accounts in their trial testimony. To the extent that there are issues of credibility, I prefer the evidence of Mr. Stiller regarding what transpired between him and Mr. Glionna. In his trial testimony, Mr. Stiller was straightforward, admitted to what he had done, admitted to what he did not know and gave an account of this increasingly difficult relationship that more directly accords with the historical documents. In contrast, Mr. Glionna tended to overstate matters, was combative in cross-examination and advanced blunt opinions and conclusions without the factual information to back them up. The history of events also showed his tendency to make aggressive allegations, without careful inquiry or regard for the facts. In sum, in assessing the weight to be accorded to Mr. Glionna’s testimony, not in isolation, but in the context of all the evidence, I do not find him to be a reliable witness.

Problems in 2010

[18] Heading in to 2010, Mr. Glionna developed a pressure wound. He still attended the clinic, but less frequently, and worked more from home. In January 2010, Mr. Glionna’s wound became infected and ultimately very serious. Mr. Stiller urged Mr. Glionna to go to the hospital. Ultimately, Mr. Glionna did so, and was given antibiotics, but for a period of time he was critically ill.

[19] By March 7, 2010, when his health had improved, Mr. Glionna was able to and did go in to the clinic. He did an “inspection” of the premises and was dissatisfied with many of the things he saw. He identified over 45 items that required attention. He made a detailed list, which paints a picture of the poor state of the clinic at the time. He sent the detailed list of problems to the clinic manager, Shahira Bhimani. It was she, not Mr. Stiller, who was responsible to see that the clinic was presentable and ready for work.

[20] After he visited the clinic, Mr. Glionna also called Mr. Stiller. He learned that a complaint had been made to the College of Physiotherapists of Ontario (“CPO”). Mr. Glionna already knew that a Theraputix client had complained in late 2009 about treatment received at the clinic from Ms. Bhimani, who was also a physiotherapist at the clinic. He regarded it as a problem for Ms. Bhimani, not the clinic. The same client had now complained to the CPO.

[21] Mr. Stiller was treating the complaint to the CPO as a problem for the clinic. In their discussion after Mr. Glionna’s inspection, Mr. Glionna “used a few expletives” with Mr. Stiller and told him he should let Ms. Bhimani take care of it. Mr. Glionna was also under the misimpression that improper steps were being taken to get the clinic’s files ready for a CPO inspection. At trial, the plaintiffs failed to prove that any improper steps were taken by Mr. Stiller.

[22] Mr. Glionna and Mr. Stiller’s relationship had begun to break down. Mr. Glionna was unhappy with the way the business was running and with the handling of the CPO complaint. Mr. Stiller was struggling under the stress of doing most of the day-to-day work as between them, working hard to find prospects for the Lokomat machine, receiving no increased shares in CSI, and being under serious personal and financial pressure.

[23] In the period from Mr. Glionna’s clinic “inspection” in early March through November of 2010, Mr. Glionna was able to conduct business. No medical evidence was introduced to the contrary. The documentary evidence shows that Mr. Glionna was able to and did participate in negotiations, consult legal counsel, deal with business and other financial issues, reach agreements and assert his point of view in this period of time.

[24] Mr. Glionna and Mr. Stiller decided to part ways. In late March, they reached what was described as an agreement in principle, which was recorded in a document dated April 8, 2010. It contemplated that Mr. Glionna would sell all of his shares of Theraputix to Mr. Stiller, and Mr. Stiller would take on full responsibility for Theraputix. It further contemplated that Mr. Glionna would receive Mr. Stiller’s shares in CSI. Lastly, it contemplated that Mr. Glionna would sell his shares in RTE to Mr. Stiller. It was contemplated that this would all be completed by the end of May 2010. Key terms, such as price, were to be negotiated.

[25] Mr. Stiller needed capital in order to purchase Mr. Glionna’s shares in Theraputix. He approached Mr. Berto, a real estate broker who he and Mr. Glionna had used to obtain a lease of the clinic premises. Mr. Berto had access to capital. Mr. Stiller persuaded Mr. Berto to join him in the purchase of Theraputix. Mr. Berto then became involved, to the knowledge of Mr. Glionna.

[26] On May 4, 2010, in preparation for the planned acquisition of Theraputix, a new company was incorporated by Mr. Berto called Aim 2 Walk Inc. (“Aim2Walk”). Mr. Berto was the sole incorporating director. Mr. Stiller was not an officer, director or shareholder because of his position in Theraputix. That had to await the conclusion of the acquisition.

[27] Over this period, the now obviously dysfunctional relationship between Mr. Glionna and Mr. Stiller was affecting Theraputix’s business. Mr. Stiller and Mr. Berto’s plan was to rebrand the clinic once the purchase was complete and use the new name, Aim2Walk, to achieve a new start.

[28] The parties agree that at least two offers to purchase were made to Mr. Glionna, neither of which he found acceptable. There is documentation that shows more than two attempts to arrive at terms in the May/June timeframe. Of course, Mr. Glionna was free to reject those offers. He found the terms, which involved only a small upfront cash payment, unsatisfactory.

[29] At trial, Mr. Glionna relied on an email exchange in early May 2010 as an indication of the amount of money he expected to receive. In the email exchange Mr. Glionna asked Mr. Stiller for the basic outline of his new option, to which Mr. Stiller replied that he would “get [Mr. Glionna] out dollar for dollar with a lot of juice”. Of course, that email was not an offer. Although Mr. Glionna now seeks to rely on it, at the time his reply was: “what exactly does that mean”.

[30] In June 2010, Mr. Glionna and Mr. Stiller retained a business consultant they had previously used to evaluate the state of Theraputix’s business and advise them of the value of the clinic. The consultant found it difficult to assess the value of the business, but a report was prepared. That report was not tendered in evidence at trial.

[31] Mr. Glionna was aware of Mr. Berto’s involvement with respect to the potential purchase of Theraputix. He was also aware that Mr. Berto proceeded to do due diligence at the clinic, including discussions with staff. However, Mr. Berto was not required to sign a non-disclosure or other confidentiality agreement. Nor does it appear that any of the staff or other service providers who worked at Theraputix were required to sign confidentiality agreements or agreements not to compete.

[32] Attempts to complete the proposed acquisition of Theraputix stumbled along into the fall of 2010. An agreement was never reached. But the difficult process of attempting to deal with the severance of the business relationship between these two individuals took up a considerable amount of Mr. Stiller’s time and caused discord between them.

[33] From the trial testimony, it is apparent to me that throughout this negotiation period Mr. Stiller continued to have a level of trust in Mr. Glionna that was not called for in the circumstances. Because of that level of trust, and because of his naïveté and lack of business experience, Mr. Stiller did not take steps to protect himself despite the fact that, in these negotiations, Mr. Glionna and Mr. Stiller were adverse in interest.

[34] Mr. Stiller would have been well advised to get legal advice to protect himself. Instead, he only used the company’s lawyers (to the knowledge of Mr. Glionna) to draft documents that reflected what he believed Mr. Glionna and he had or would agree to. He did not seek out his own legal advice about the terms, the negotiation, his own obligations, or how to protect himself. In contrast, Mr. Glionna did have and did consult with his own legal counsel.

[35] This continued to be a very difficult period in the relationship between these two now former friends. From Mr. Stiller’s standpoint, during the periods where they were getting along, progress would be made with respect to the steps needed to purchase the shares in Theraputix and deal with the other corporate relationships. However, those periods were interrupted by arguments and discord. Mr. Stiller began asking Mr. Glionna to do more for the clinic and indicating he would do less. To the extent that morale at the clinic suffered, and Theraputix’s business suffered, I find that Mr. Glionna and Mr. Stiller were equally responsible.

[36] Although the original agreement in principle contemplated a deal that encompassed all three companies, as negotiations floundered the parties began to discuss the various businesses individually. Mr. Berto also became involved in RTE, which the March agreement in principle contemplated would also be acquired by Mr. Stiller.

[37] In late June, Mr. Stiller and Mr. Berto planned a trip to visit Hocoma as part of the plan that Mr. Stiller would take over RTE. It was Mr. Stiller who was spending the time looking for and developing potential Lokomat sales. I accept Mr. Stiller’s evidence that Mr. Glionna was aware of the planned trip. Mr. Stiller tried, unsuccessfully, to come to an agreement with Mr. Glionna about RTE before they left. Despite their frustration with Mr. Glionna, Messrs. Stiller and Berto met their obligation to meet with Hocoma, but on June 30, 2010 Mr. Stiller wrote to Hocoma saying that given his partnership problems he could not continue providing services at past levels. Mr. Glionna was angry about the trip, but a few weeks later negotiations about RTE resumed.

Disputed agreements

[38] Mr. Stiller testified that he and Mr. Glionna came to an agreement dated July 16, 2010 regarding RTE. The document describes a basic business deal regarding that company. Mr. Stiller testified that due to Mr. Glionna’s physical limitations, he sometimes signed for Mr. Glionna with his permission. He testified that he did so in this instance. Mr. Glionna later denied making that agreement altogether.

[39] The July 16, 2010 agreement addressed commissions on sales of the Lokomat that Mr. Stiller had underway, among other things. The commission on a sale to McMaster University was especially important because that sale had already been made. As matters unfolded, disputes about RTE commissions contributed to the increasingly difficult situation Mr. Stiller found himself in, and to the actions he took later in 2010 that are the subject of this action.

[40] A disputed contract regarding RTE forms an important part of the background to Mr. Stiller’s later conduct. There are two versions of a document entitled “Share Purchase Agreement”. Both are signed. Messrs. Glionna and Stiller agree that they signed a form of this agreement on August 24, 2010, but disagree about which version is the actual agreement.

[41] Both versions of this purported agreement are dated August 24, 2010, and both show signatures of Mr. Stiller and Mr. Glionna and a witness, Mr. Glionna’s personal care worker. The content on the signature pages is the same. However, there are material differences in the terms set out on other pages of the two versions of the document.

[42] One version of the purported agreement refers back to the above July 16, 2010 agreement. Mr. Glionna disputes that version, just as he disputes the July 16, 2010 agreement itself. However, the other version – the one advanced by Mr. Glionna – instead refers to another August 24, 2010 agreement. No other agreement of that date has been produced. And at trial, Mr. Glionna said he had no idea what that agreement was. Yet, he maintains that the version that incorporates this non-existent agreement is the correct version of the agreement.

[43] As well, on Mr. Glionna’s version, there is a different paragraph before clause 2, regarding the important topic of commissions. Mr. Glionna’s version also says he is to receive 100% of the commission of the McMaster University project, while Mr. Stiller’s version says only 66%. On this point, the version the company’s law firm had sent for signing said 66%. Someone had to have changed it.

[44] Mr. Stiller admits he does not know how the document was changed. He did not change it. Mr. Stiller testified that the company’s law firm provided the document to him and he forwarded it to Mr. Glionna by email. He testified that he took copies for signing to Mr. Glionna’s home, where they signed two original copies. Mr. Stiller testified that he went to the washroom for about five minutes, he came back and took at least one original copy. He did not check it. He sent it to Hocoma, which was awaiting a copy to move forward. He later learned that the version he sent to Hocoma was different from the form of agreement he believed he had signed. The version sent to Hocoma is the version Mr. Glionna now relies upon.

[45] The other original was sent to the company’s law firm. Mr. Stiller does not recall if he took care of that or not. That version aligns with the form of document the law firm originally sent, and is the version Mr. Stiller relies upon. Mr. Stiller wonders, in hindsight, if the pages were changed by Mr. Glionna when Mr. Stiller was out of the room.

[46] Not knowing at that time about the issue with different versions of the Share Purchase Agreement, Mr. Stiller moved forward. An agreement was signed with Hocoma, retroactive to August 24, 2010. That agreement provided that 100% of the McMaster commission would go to CSI, which Mr. Stiller believed was just an intermediate step before one third of that commission would come to him.

[47] Despite all the problems, Mr. Stiller was still trying to move forward with the acquisition of Theraputix and launch of Aim2Walk. As specifically set out in both versions of the August 24, 2010 document, that agreement was in contemplation of a purchase by Mr. Stiller of Mr. Glionna’s shares in Theraputix.

Events leading up to departure

[48] The activities that the plaintiffs’ claim were breaches of fiduciary duty began in August of 2010. Mr. Glionna testified that in August 2010 he saw Aim2Walk mentioned in a television commercial for Three to Be, an organization that supports research, education and therapy for children with neurological disorders. He also testified that he saw an Aim2Walk website that he believed used photos of the Theraputix clinic, however, he did not print out screen shots from the website or otherwise prove this allegation at trial.

[49] In the period of August 2010 through to Mr. Stiller’s resignation in October 2010, Mr. Stiller took some steps that he should not have taken, in that the purchase of Theraputix had not yet occurred.

[50] On September 20 through 22, 2010, Mr. Stiller exchanged emails with a potential Aim2Walk client. In that email exchange, Mr. Stiller’s contact information showed him as the President of Aim2Walk, which he was not, gave his cell number used for Theraputix and intimated that Aim2Walk was open at another location, which it was not. He and Mr. Glionna had words in that regard. Mr. Berto and Mr. Stiller also attended a Three to Be event on behalf of Aim2Walk as sponsors and Aim2Walk committed to contributing significant funds to the Three to Be project.

[51] On September 24, 2010, Mr. Stiller learned that Hocoma had finally paid CSI the commission for the McMaster sale. The commission was over US$100,000. Mr. Stiller spoke to Mr. Glionna, who deferred making arrangements to transfer part of those funds to Mr. Stiller on the basis that they should first do their deal on Theraputix. The failure to transfer that commission drove a “massive wedge” between them, as described by Mr. Stiller.

[52] Mr. Stiller broke under the stress. On October 2, 2010, he removed his personal belongings from the clinic. He also wrote himself a cheque for $2,300 and took some equipment: a soft tissue laser, a multiuse modality machine/IFC/Ultrasound combo and ten folding chairs that he submitted he had borrowed from his family.

[53] John Rimando, a massage therapist who worked at Theraputix at the time, noticed that Mr. Stiller’s credentials were no longer hanging on the office wall when he arrived at the clinic on October 2, 2010. He prepared an email to Mr. Glionna with that information and noted the equipment that he thought was missing.

[54] On October 4, 2010, Mr. Stiller sent an email to Mr. Glionna stating that Mr. Glionna had not provided him with his share of the McMaster commission and was not communicating with him. He said he therefore had no choice but to resign and would leave the clinic in Mr. Glionna’s capable hands. He testified that he felt that Mr. Glionna was negotiating in bad faith and there was nothing more Mr. Stiller could do, with no money coming in from anywhere.

[55] Mr. Stiller’s email said that it should be taken as his formal resignation, although he did not specifically mention resigning as a director. He asked that Mr. Glionna immediately address the $260,000 owing to him for his shareholder contributions in CSI, his share of the McMaster deal, and a reconciliation of the monies owed to him for salary and services for the past two years from Theraputix, which he had yet to receive. He did not receive any of these amounts.

[56] I accept Mr. Stiller’s evidence that he intended, by his October 4, 2010 email, to resign completely from Theraputix. He did not know he needed to do more to formally resign. When he learned in January 2012 that his email was insufficient for a formal resignation as a director and officer, he provided a formal signed resignation dated January 10, 2012. However, from the standpoint of ongoing management and decision-making at Theraputix, he was out as of October 2010. Accordingly, the plaintiffs did not attempt to involve him in the governance of Theraputix after that time.

Steps taken after departure

[57] After Mr. Stiller’s departure, Mr. Glionna contacted the police and reported the items that had been removed from the clinic as stolen. The police wanted ownership information before proceeding. All of the items appear on an inventory that was prepared after Mr. Stiller left, at Mr. Glionna’s request. All of the equipment is described on that inventory as the property of CSI. This accords with the structure put in place when CSI was incorporated. Nonetheless, Mr. Glionna told the police that the laser was in his personal name. The police pursued the laser only and Mr. Stiller returned the laser in 2010.

[58] Mr. Glionna also launched a complaint against Mr. Stiller with the College of Massage Therapists of Ontario, making serious allegations. After a thorough investigation, the College decided to take no further action, observing that the complaint appeared to stem from a business dispute between professional colleagues. Indeed, the College found that Mr. Glionna had failed to provide evidence to substantiate the serious allegations made against Mr. Stiller.

[59] Mr. Glionna also testified that after Mr. Stiller left he found problems on the financial side of the business, including unpaid bills and withholding tax. However, the trial evidence shows that there were financial problems going back at least to July of 2010, when Mr. Stiller urged Mr. Glionna to arrive at a plan to deal with a business with unpaid bills and other financial problems.

[60] Aim2Walk ultimately opened at a different location in early 2011, and also got a Lokomat. It became a direct competitor of Theraputix. Mr. Stiller was not a co-founder or shareholder, officer or director. He primarily provided massage services. But he also helped to set up the business and gave direction regarding the business. Further, Mr. Stiller accepts that in some documents either he or others described him as President, as a director or as an owner of Aim2Walk. These descriptions, only some of which were made by Mr. Stiller, were inappropriate attempts by him and others to overstate his role for the purpose of marketing.

[61] At trial, the plaintiffs unsuccessfully sought to establish that Mr. Stiller improperly caused employees, independent contractors and the majority of clients of Theraputix to leave for Aim2Walk. Matt Sanchez and Mr. Rimando were two of the people the plaintiffs allege were solicited by Mr. Stiller for Aim2Walk.

[62] Mr. Sanchez is a registered physiotherapist who worked at Theraputix from time to time as an independent contractor. It was never his only job. In October 2010, Mr. Sanchez emailed Mr. Glionna and Mr. Stiller giving notice of his intention to leave, with no fixed departure date. He did so because he did not see a future for himself at Theraputix. He ultimately wanted to own a clinic. In mid-November 2010, Mr. Berto contacted Mr. Sanchez to ask if he wanted to help out at Aim2Walk. Mr. Sanchez initially said no due to the long drive. However, in December 2010 he began to work for Aim2Walk on a part-time basis. He became a 10% owner in March 2011. The other owners were Mr. Berto with 87% and Jesse Lown with 3%. Jesse Lown was previously an acupuncturist at Theraputix.

[63] Mr. Rimando was looking for a job in 2011 and he reached out to Mr. Sanchez directly in April of that year. He was looking for a new job. He left Theraputix because he only worked there one day a week and wanted to work full time during the summer, but Theraputix had already hired someone else for that period.

[64] I found both Mr. Sanchez and Mr. Rimando to be straightforward, responsive and credible witnesses. Both explained why they left Theraputix. I conclude that neither of them left Theraputix because of Mr. Stiller.

[65] Other staff and independent contractors left Theraputix, but the plaintiffs have failed to prove that any of the staff or independent contractors who provided services at Theraputix and left for Aim2Walk did so as a result of overtures from Mr. Stiller.

[66] Twelve clients of Theraputix also left and began to attend at Aim2Walk in the relevant time period. No evidence was called from any of these individuals about why they may have chosen to make the change. There could have been any number of reasons, such as the poor condition of the Theraputix clinic that Mr. Glionna had noted months earlier. I accept Mr. Stiller’s evidence that he did not tell any clients that he was moving, or otherwise encourage any Theraputix clients to leave. At trial, he testified that they probably learned of Aim2Walk from either Matt Sanchez or Jesse Lown.

[67] Thus, while Mr. Stiller did not become an officer, director or employee of Aim2Walk, and did not improperly encourage clients, employees or service providers of Theraputix to go to Aim2Walk, he did do marketing and consulting for Aim2Walk, assisting it in setting up its clinic. He also provided services himself, as a massage therapist.

[68] In reaching my conclusions about credibility, I have taken into account the evidence that Mr. Stiller misstated his role in Aim2Walk. Mr. Sanchez did as well, mainly on social media. Obviously, they ought not to have done so. I have taken all of the evidence into account, including the admissions of these witnesses at trial.

[69] The trial evidence showed that while there were differences between the two clinics, Aim2Walk had similar equipment and services. However, there was little evidence called about what actually happened at either clinic after Mr. Stiller left Theraputix.

[70] The plaintiffs did not introduce evidence about what steps were taken at Theraputix after October 2010 other than some specific interactions regarding departing employees and contractors. Evidence was not put forward demonstrating any problems at the Theraputix clinic caused by the absent equipment, for example. Evidence was not put forward of any difficulties replacing personnel in a timely way. Evidence was not put forward suggesting any difficulties in replacing Mr. Stiller. There is little evidence before me about what steps Theraputix took to address its business after October of 2010, let alone in the period through August of 2011 for which damages are now claimed.

[71] Mr. Stiller did candidly agree that since it was he who was working to bring in new clients to the clinic, his absence would have a significant impact on revenue. However, even Mr. Glionna testified that Theraputix attracted clients in a number of other ways, including by word of mouth, the internet and drive-by appearance.

[72] The plaintiffs did put forward the Theraputix profit/loss statements for its relatively short history, covering the financial years ended August 2007 through August 2011. These figures show a new business with substantial losses in the first two years (about $288,000 in total for the first two years), a very small profit in year 3 (about $5,000), an increase in year 4 ending in August 2010 (about $42,000) and a substantial loss in the year ended August 2011 (about $84,000). Evidence was not put forward explaining most aspects of the profit/loss picture for Theraputix or demonstrating that the clinic’s profit/loss picture in 2011 was caused by Mr. Stiller’s impugned conduct.

Discussion

[73] At the conclusion of trial, plaintiffs’ counsel sought relief based on fiduciary duty only. There are other claims made and related relief sought in the amended statement of claim that were not pursued at trial.

[74] With respect to fiduciary duty, the plaintiffs rely upon fiduciary duties at common law and as encompassed in s. 134(1) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”).

[75] In argument, the plaintiffs did not distinguish between the duties owed to the corporate plaintiff and to Mr. Glionna personally. However, those distinctions must be made.

Fiduciary duty

[76] There is no question that as a director and officer of the plaintiff company, the defendant had fiduciary duties to the plaintiff company. The statutory fiduciary duty is set out in s. 134(1)(a) of the OBCA. It required that in the exercise of his powers and duties, Mr. Stiller act honestly and in good faith with a view to the best interests of Theraputix.

[77] The plaintiffs also rely upon Canadian Aero Service Ltd. v. O’Malley, 1973 23 (SCC), [1974] S.C.R. 592 (“Canaero”) to flesh out the nature and scope of the fiduciary duty. As set out in the case, there is no question that it generally “betokens loyalty, good faith and avoidance of a conflict of duty and self interest”: at p. 606. In that regard, it precludes a director or senior officer like Mr. Stiller from obtaining for himself, either secretly or without the approval of the company, any property or business advantage either belonging to the company or for which it had been negotiating. It further precludes the diversion of any of the company’s business opportunities either to the fiduciary personally or to another business. It precludes a director or senior officer from divulging confidential information received in his or her capacity as a director or senior officer. It precludes the use of company confidential information for the fiduciary’s own benefit or for the benefit of another company.

[78] The Court in Canaero emphasized that these obligations should be applied strictly against directors and senior management: at p. 607. This was also emphasized by the Supreme Court in Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 S.C.R. 217. This high standard of loyalty and good faith certainly required that Mr. Stiller act in the best interests of Theraputix, not in his own interests or in the interests of Aim2Walk.

[79] Mr. Stiller had these duties at least until the time of his resignation on October 4, 2010. The Court in Canaero also emphasized that the extent to which the above fiduciary duties survive termination of the relationship will depend on the circumstances of the case: at pp. 607-608.

[80] Dealing first with the conduct before Mr. Stiller’s resignation, certain steps taken by him were not a breach of fiduciary duty. After agreeing in principle that Mr. Stiller would acquire the company, and with the knowledge of Mr. Glionna, it was not a breach to be involved in the inception of Aim2Walk for the purpose of acquiring Theraputix or to take steps in furtherance of the acquisition. The potential acquisition remained a goal throughout the period.

[81] However, in the few months prior to resigning, Mr. Stiller took steps that were a breach of his fiduciary duties to Theraputix. He participated in some marketing for Aim2Walk. He also communicated with a potential client on behalf of Aim2Walk when that person would have been an appropriate client of Theraputix. Further, it was obviously not in the best interests of Theraputix to leave abruptly and take equipment with him. In addition, even if Mr. Stiller was owed the $2,300, and I find he was, he ought not to have written himself a cheque in that manner when the company had other outstanding bills that needed to be paid.

[82] With respect to the period following his departure, I find that Mr. Stiller did have continuing fiduciary obligations to Theraputix. The plaintiffs are seeking damages for the period until the end of the financial year, specifically, August 2011. I find that period is appropriate for Mr. Stiller’s continuing fiduciary duties.

[83] In that period, it was a breach of fiduciary duty for Mr. Stiller to assist Aim2Walk in setting up its clinic. As of the time of Mr. Stiller’s departure from Theraputix, it was apparent that if Aim2Walk opened a clinic it would be a competitor of Theraputix. Mr. Stiller was not free to help a competitor set up its business in this period.

[84] This was not a case where the fiduciary was entirely oblivious to his obligations: contra, Medhurst Hogg Sobottka Leong & Associates Ltd. v. Mutual Gain Inc., [1999] O.J. No. 3409. Mr. Stiller knew he could not be an officer, director or shareholder of Aim2Walk and did not become one. He knew he could not solicit employees, clients or service providers of Theraputix and did not do so. However, the Aim2Walk clinic, once opened, was very similar to Theraputix. Mr. Stiller ought not to have assisted Aim2Walk in setting up a similar clinic.

[85] With respect to obligations regarding company confidential information, the plaintiffs have failed to establish that the business model used by Theraputix was confidential or any aspect of it was imparted in circumstances that gave rise to confidentiality obligations. This is especially significant here, where the actual owners of Aim2Walk all had previous access to Theraputix and its business model without any confidentiality obligations at all.

[86] Lastly, there is evidence that Mr. Stiller provided massage services to clients at Aim2Walk. I do not find that providing these routine services gave Aim2Walk any competitive advantage such that he should not have provided the services.

[87] In summary, I find that Mr. Stiller did breach his fiduciary obligations to Theraputix both before and after his departure in October 2010, though not in all the respects alleged by the plaintiffs.

Claimed fiduciary duty to Mr. Glionna

[88] The plaintiffs have not put forward authority or arguments in support of the claim that a fiduciary duty was owed to Mr. Glionna personally. It appears from the pleadings that Mr. Glionna may have been asserting a fiduciary duty to him personally based on the law of confidential information. If so, Mr. Glionna has failed to establish that he imparted confidential information of his own to Mr. Stiller that would give rise to such an obligation to him personally, separate from Theraputix.

[89] The claim brought by Mr. Glionna therefore fails because he has not established a fiduciary duty owed to him, rather than to Theraputix.

Remedy

[90] The principles that apply to determining the appropriate remedy for a breach of fiduciary duty are well-established: “Fiduciary relief is equitable in nature. The remedies for breach of fiduciary duty are discretionary. They are dependent on all the facts before the court, and designed to address not only fairness between the parties, but also the public concern about the maintenance of the integrity of fiduciary relationships”: Mady Development Corp. v. Rossetto, 2012 ONCA 31, at para. 18, citing McBride Metal Fabricating Corp. v. H.W. Sales Company Inc. (2002), 2002 41899 (ON CA), 59 O.R. (3d) 97 (C.A.) at para. 30.

[91] As summarized in Mady at para. 19: “Fiduciary relief is aimed at two goals: restitution and deterrence. Restitution is aimed at returning a beneficiary to the position he would have been in but for the fiduciary’s breach. The goal of deterrence, or as it is sometimes referred to, the prophylactic purpose, is to prevent fiduciaries from benefitting from their wrongdoing and maintain the integrity of the fiduciary relationship. A remedy for breach of fiduciary duty can be aimed at one or both of these purposes. The role each one plays is a function of the particular facts of the case.”

[92] In this case, the plaintiffs seek the following relief:

(1) compensation for the equipment taken on departure;

(2) lost profits of Theraputix for the year ended August 2011;

(3) general damages for loss of goodwill of Theraputix; and,

(4) punitive damages.

[93] Other claims were advanced in the pleadings, such as claims for relief under s. 248 of the OBCA. However, this and other relief in the pleadings was not sought in argument at the conclusion of the trial.

(1) Equipment

[94] Mr. Stiller must pay for the equipment that he took when he left in October 2010, other than the laser, which was returned. In that regard, I find that he took the laser and the combo unit. With respect to the folding chairs, Mr. Stiller did submit that he had borrowed them from his family, but he did not actually testify to that effect. On the evidence, both the combo unit and the chairs were the property of CSI. Theraputix was leasing them and although I was given little evidence about those arrangements, it is reasonable to infer that Theraputix was responsible for that equipment.

[95] I accept Mr. Stiller’s evidence that he did not take a TENS unit. There is also the matter of the hot tub. Mr. Glionna contends that Mr. Stiller took a hot tub. In cross-examination, Mr. Glionna admitted that they had agreed to provide it to a specific family before Mr. Stiller left the clinic. The evidence then diverges. Mr. Glionna says it was a loan, where Mr. Stiller testified that it was given to them outright with the concurrence of Mr. Glionna. I prefer Mr. Stiller’s evidence.

[96] There is evidence of the original purchase price of the equipment that Mr. Stiller did take, and did not return, specifically the combo unit and chairs. The evidence is that the purchase price of those items totaled $5,200. However, there is no evidence before me of the value of that property at the time it was removed. For example, there was no evidence of the amount carried on the books of CSI for those items, nor any evidence of any amount Theraputix had to pay to CSI, if anything, for the loss. Given ordinary depreciation, the value would ordinarily be less, and potentially substantially less than the original purchase price. In all the circumstances, I order that Mr. Stiller pay 50% of the original cost of those items, totalling $2,600.

[97] I note that the plaintiffs did not seek an order in relation to the $2,300 cheque the defendant wrote to himself on his departure. Perhaps this was done because monies were owing to Mr. Stiller.

(2) Lost profits

[98] Theraputix has elected to seek its lost profits rather than an accounting or disgorgement of profits of Aim2Walk. It seeks lost profits for its year ended August 2011.

[99] No expert evidence was tendered with respect to the claim for lost profits. The evidence that was introduced falls far short of what would be required to demonstrate and quantify any lost profits caused by the defendant’s breaches of fiduciary duty as opposed to the many other actual and potential reasons for those losses. For example, the plaintiffs failed to establish that Mr. Stiller solicited clients away from Theraputix. But a large proportion of its clients did leave, which would obviously have an impact on profitability.

[100] The plaintiffs relied upon the profit and loss statements of Theraputix for the years ended August 31, 2007 through August 31, 2011. There is no question that these statements show that Theraputix moved from a position of a substantial loss at year ended 2007 to a small profit of $42,195 at year ended August 2010. $42,195 was the most annual profit earned over the life of the business up until that time.

[101] Despite the paucity of evidence, the plaintiffs ask that damages for lost profits be awarded in the amount of $164,000, comprised of $84,000 for the business loss at year ended August 2011 plus an additional $80,000 of lost profits for the same year.

[102] The plaintiffs ask me to conclude that but for the defendant’s breaches of fiduciary duty, Theraputix’s profits would have increased by about $40,000. They do so because in the prior year, profits increased by about that amount. This “back of the envelope” approach is completely unsatisfactory. The profits of Theraputix could have been affected by too many factors. Nor does this optimistic picture of the business accord with the problems with the clinic quite apart from the specific breaches of fiduciary duty that I have found here.

[103] The improper steps taken by Mr. Stiller could still have had an impact on the revenues of Theraputix. That impact has not been adequately quantified, but even if it had been, it does not address the equally important question of the expenses of the business, which must be addressed to arrive at profit figures. It also does not address the client, staff and other departures, which were not caused by Mr. Stiller, yet could also have had an impact on the profit picture for Theraputix.

[104] In response to this absence of evidence, the plaintiffs rely on Islip v. SSI Equipment Inc. (2009), 2009 32704 (ON SC), 60 B.L.R. (4th) 77 (Ont. S.C.J.). In paragraph 115 of that decision, the Court quotes with approval an excerpt from Waddams, The Law of Damages, which observes, among other things, that lost business profits “must always be more or less a matter of estimate, because it is impossible to ascertain, with arithmetical position, what in the ordinary course of business would have been the amount of the [plaintiff’s] sales and profits.” I agree with this general observation, but it does not relieve the plaintiffs of their obligation to prove lost profits on a balance of probabilities. It is notable that in the Islip case, both sides introduced expert evidence regarding lost profits.

[105] The deficiency in the plaintiffs’ case is not a matter of failing to prove lost profits with “arithmetical precision”. They have failed to prove even basic components required to demonstrate that any lost profits were caused by the defendant’s breaches of fiduciary duty. Similarly, it is insufficient to simply say that equipment ordinarily used at the clinic was taken and therefore there must have been lost profits. The plaintiffs have failed to prove that any services were actually affected by the absence of that equipment, let alone any impact on profits.

[106] Having regard for all the evidence, I conclude that the plaintiff company has failed to prove its claim for $164,000 in lost profits. I accept, however, that Mr. Stiller’s breaches had some impact, even though the major items were not proved. Further, fairness and the importance of fiduciary duties leads me to conclude that there should be some damages awarded to Theraputix both on a restitutionary basis and for deterrence. In the exercise of my discretion I conclude that Mr. Stiller should pay $10,000 in damages in that regard, in addition to the award regarding the equipment. Given the severe impact of this whole course of events on Mr. Stiller, I do not think a higher award is called for on the basis of deterrence.

(3) Goodwill

[107] The plaintiffs also claim general damages, on the footing that there should be some compensation for loss of goodwill of the business in addition to lost profits. They seek the arbitrary figure of $50,000, with neither case authority nor any financial evidence to support that figure as a moniker for loss of goodwill in excess of lost profits. I see no basis for an award of general damages in this case.

(4) Punitive damages

[108] Lastly, the plaintiffs sought punitive damages in the amount of $10,000. Punitive damages are awarded where there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 94.

[109] The defendant’s conduct in this case does not come close to meeting the threshold for punitive damages. It is certainly the case that the defendant breached his fiduciary duties. But he tried to meet his obligations, albeit partly unsuccessfully. His actions, though wrong, were born of extreme pressure and questionable conduct by Mr. Glionna. This does not excuse the defendant, but it is also not high-handed, malicious, arbitrary or highly reprehensible misconduct.

[110] Further, an award of punitive damages ought to be imposed only where other damages are insufficient to accomplish the objectives of retribution, deterrence and denunciation: Whiten v. Pilot Insurance Co., at para. 94. Given the importance of fiduciary obligations, I have already made an award that encompasses these objectives to the extent called for in this case.

[111] I therefore conclude that there should be no award of punitive damages.

Judgment

[112] I therefore make the following orders:

(i) Theraputix shall have judgment against the defendant for $12,600; and,

(ii) the claim by Mr. Glionna is dismissed.

[113] There remains the issue of costs, including costs of the action and costs of the counterclaim (which were reserved to me), as well as pre-judgment interest. If the parties are unable to agree on these matters, the plaintiffs shall make their submissions by delivering brief written submissions together with any bill of costs by May 8, 2015. The defendant may respond by delivering brief written submissions by May 29, 2015.

Justice W. Matheson

Released: April 16, 2015

CITATION: Glionna v. Stiller, 2015 ONSC 2431

COURT FILE NO.: CV-10-414705

DATE: 20150416

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANDREW GLIONNA and THERAPUTIX, THE WELLNESS CENTRE INC.

Plaintiffs

– and –

AARON STILLER

Defendant

REASONS FOR JUDGMENT

Justice W. Matheson

Released: April 16, 2015