MOTION HEARD: 20150903 REASONS RELEASED: 20160419 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
ELENI CHILAKOS Plaintiff
- and-
LBC INTERNATIONAL INVESTIGATIVE ACCOUNTING INC., 3349756 CANADA INC. and 7766416 CANADA INC. Defendant
BEFORE: MASTER D. E. SHORT
COUNSEL: Jeffrey Radnoff, for the Plaintiff Alison R. Carr, for the Defendants
REASONS RELEASED: April 19, 2016
Reasons for Decision
I. Overview
[1] In 2010, the plaintiff commenced an action against her former employer LBC International Investigative Accounting Inc. (“LBC”) and an executive of the company for damages arising out of what was alleged to have been the constructive dismissal of the plaintiff “as a result of a poisoned work environment”. In the original pleading damages inter alia for alleged breaches of the Human Rights Code were asserted.
[2] Following a mediation, a mutually acceptable settlement appears to have been reached with respect to the employment related claims between the parties.
[3] Handwritten minutes of settlement were drafted at the mediation and subsequently a typed form of a Full and Final Release was executed. The date of the mediation was March 14, 2011.
[4] The agreement reached however, “carved out” any claims which the plaintiff might have with respect to her shares in companies having an ownership interest in her employer.
[5] Following the settlement, the plaintiff retained new counsel, who now seeks to amend the existing pleading to put forward a claim for an order declaring that the affairs of her employer and 3349756 Canada Inc. (“334”) “have been conducted in a manner that is oppressive or unfairly prejudicial or that unfairly disregards the interests of the plaintiff.” As a consequence she seeks to obtain leave to issue a fresh Statement of Claim asserting the alleged oppressive conduct and to obtain access to the financial records of the companies in order to support her claims.
[6] The proposed defendants take issue with certain proposed paragraphs contained in the draft provided to them.
II. The Parties
[7] The plaintiff is a certified professional accountant, chartered accountant residing in the province of Ontario. LBC is a federally incorporated, international accounting firm that provides investigative accounting services.
[8] The defendant, 334 is a corporation also incorporated under the laws of Canada and owns the outstanding shares of LBC.
[9] The plaintiff owns 4% of the shares of LBC, “through the holding company, 334”.
III. The Revised Pleading
[10] Following the March 2011 partial settlement, in April 2012, Ms Chilakos’ then current lawyers, circulated a proposed amended claim to counsel for the defendants. That version was never the subject of a motion to amend.
[11] The presently proposed draft Fresh as Amended Statement of Claim, with my emphasis added, asserts these claims particular to the action:
“(a) an order declaring that the affairs of 3349756 Canada Inc. ("334") and LBC International Investigative Accounting Inc. ("LBC") have been conducted in a manner that is oppressive or unfairly prejudicial or that unfairly disregards the interests of the plaintiff;
(b) an order rectifying the oppressive conduct and in particular, without limiting the forgoing, and without limiting the remedies of the plaintiff:
(i) An accounting to of all the financial operations of 334 and LBC since she became a shareholder.
(ii) Payment of all dividends, pro rata, with shareholders respect to all dividends declared by 334/LBC.
(iii) Access to all of the financial records of 334/LBC in order that the plaintiff may determine the fair market value of the shares of 334/LBC as of the date of trial or such other date as either agreed upon or determined by this Honourable Court.
(iv) an order requiring 334 and/or LBC to purchase the plaintiff's shares in 334/LBC at fair market value, without a minority discount, or at such other value as determined by this Honourable Court, as a the date of the trial, or such other date as either agreed upon or determined by this Honourable Court.” [my emphasis]
[12] Some of the subsequent proposed paragraphs, in the version of the pleading proposed some years later, refer to conduct that was related to the manner in which the plaintiff was treated qua employee, rather than qua investor. The defendants seek an order refusing those portions of the amendments sought.
[13] A lawyer at the defendants’ lawyers’ firm, filed an affidavit on this motion concerning the resolution of the previous employment related issues and the then proposed draft from her then counsel Mr. Fenn. The affidavit asserts:
“7. As was the understanding between the parties, paragraphs 9 and 12 of the Statement of Claim (which are paragraphs 17 and 20 of the amended statement of claim, enclosed with Fenn’s letter) were deleted in the draft Amended Statement of Claim circulated by Mr. Fenn.
Paragraph 64 of the now proposed Amended Statement of Claim contains the allegations that are contained in paragraphs 9 and 12 of the statement of claim which Ms. Chilakos former counsel proposed to delete in accordance with the Minutes of Settlement.
It was not until Mr. Radnoff was retained by Ms. Chilakos in 2014, three (3) years after the mediation, that the allegations of wrongful dismissal and sexual harassment appeared in the proposed Amended Statement of Claim.”
[14] Counsel from the earlier matter goes on to assert specifically:
“11. All issues with respect to Ms. Chilakos’ dismissal from LBC and allegation of sexual harassment have been settled and released by Ms. Chilakos and it was understood that these allegations would be removed from the Statement of Claim.”
[15] Without in any way dealing with any privilege waiver issues that may later arise, I allowed the defendants to rely upon the contents of this affidavit over the objections of Plaintiff’s counsel. In my view its contents helped to frame the issue before me.
[16] In contrast, the plaintiff’s original Notice of Motion before me contained no affidavit supporting or justifying the proposed amendments. However, the supplementary motion record filed in response does contain an affidavit sworn by the plaintiff. It reads in part:
“4. I do not wish to disclose the Minutes of Settlement, however, for the sole purpose of this motion, the Minutes of Settlement provided for the following with respect to amendments to the initial statement of claim:
(a) Amending the statement of claim to remove [the executive] as a Defendant;
(b) Amending the statement of claim to add 334 as a Defendant and to provide greater particulars of the share claim;
(c) Amending the statement of claim to acknowledge payment of $98,000.00 by LBC towards the value of the shares which are the subject of the share claim.
- I am seeking leave to amend the claim to add greater particulars of the share claim.” [my emphasis]
[17] What the affidavit does not assert is any understanding of an entitlement to be able to include references to the substance of employment related components of the plaintiff’s original pleading in support of the relief now sought.
IV. Interpreting the Settlement
[18] Counsel referred me to the Supreme Court of Canada’s 1998 decision in Eli Lilly & Co. v. Novopharm Ltd., 1998 SCC 791, [1998] S.C.J. No. 59; [1998] A.C.S. no 59; [1998] 2 S.C.R. 129; [1998] 2 R.C.S. 129; 161 D.L.R. (4th) 1; 227 N.R. 201; J.E. 98-1562; 80 C.P.R. (3d) 321;; 80 A.C.W.S. (3d) 871; 1998 CarswellNat 1061; 1998 CarswellNat 1062.
[19] In that case Justice Iacobucci considered the approach to the interpretation of an agreement between parties. In particular he addressed the finding of the original trial judge based upon the Supreme Court’s decision in: Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 SCC 10, [1980] 1 S.C.R. 888:
54 The trial judge appeared to take Consolidated-Bathurst to stand for the proposition that the ultimate goal of contractual interpretation should be to ascertain the true intent of the parties at the time of entry into the contract, and that, in undertaking this inquiry, it is open to the trier of fact to admit extrinsic evidence as to the subjective intentions of the parties at that time. In my view, this approach is not quite accurate. The contractual intent of the parties is to be determined by reference to the words they used in drafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time. Evidence of one party's subjective intention has no independent place in this determination.
55 Indeed, it is unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face. In the words of Lord Atkinson in Lampson v. City of Quebec (1920), 54 D.L.R. (4th) 344 (P.C.), at p. 350:
. . . the intention by which the deed is to be construed is that of the parties as revealed by the language they have chosen to use in the deed itself .... [I]f the meaning of the deed, reading its words in their ordinary sense, be plain and unambiguous it is not permissible for the parties to it, while it stands unreformed, to come into a Court of justice and say: "Our intention was wholly different from that which the language of our deed expresses. . . ."
56 When there is no ambiguity in the wording of the document, the notion in Consolidated-Bathurst that the interpretation which produces a "fair result" or a "sensible commercial result" should be adopted is not determinative. Admittedly, it would be absurd to adopt an interpretation which is clearly inconsistent with the commercial interests of the parties, if the goal is to ascertain their true contractual intent. However, to interpret a plainly worded document in accordance with the true contractual intent of the parties is not difficult, if it is presumed that the parties intended the legal consequences of their words. This is consistent with the following dictum of this Court, in Joy Oil Co. v. The King, 1951 SCC 41, [1951] S.C.R. 624, at p. 641:
. . . in construing a written document, the question is not as to the meaning of the words alone, nor the meaning of the writer alone, but the meaning of the words as used by the writer.
57 In my view, there was no ambiguity to the contract entered into between Apotex and Novopharm. No attempt was made to disguise the true purpose of the arrangement, or the circumstances surrounding its drafting. … Accordingly, it cannot properly be said, in my view, that the supply agreement contains any ambiguity that cannot be resolved by reference to its text. No further interpretive aids are necessary.
[20] In the case before me I find there is no ambiguity in the agreement reached by the parties with respect to the resolution of the employment related issues. The relief claimed in the proposed pleading does not depend or rely on the disputed paragraphs. I am satisfied that the paragraphs amount to surplusage which is neither necessary nor appropriate in the oppression related pleading.
V. Settlement Documents
[21] I come to this conclusion relying on the documents themselves. When unnecessary to that conclusion, I find the evidence of counsel and the previous drafts consistent with my conclusion.
[22] The parties clearly were both privy to the settlement documents but have agreed to having that documentation which was filed on the motion, sealed to protect their mutual privacy.
[23] While not disclosing the specifics of their resolution I do note portions of the those documents which I feel are relevant to this motion
[24] In order to evaluate the parties’ positions, I considered copies of the hand written minutes of settlement executed at the conclusion of the mediation and the subsequent typed release.
[25] In addition to referring to the above points raised in paragraph 4 of the plaintiff’s affidavit, the handwritten document included the following in the list of contemplated pleading amendments at the time of the partial settlement:
“d) amending the Statement of Defence regarding the Share Claim…”
[26] The handwritten document provides a definition of the Share Claim:
“…the parties will consent to an Order:
…b) dismissing that part of this action against LBC which does not involve the purchase of the shares the Plaintiff purchased in the Numbered Company (“the Share Claim”) without costs;” [my emphasis]
[27] The first paragraph of the typed version of the full and final release provided in its first paragraph, for a release by the plaintiff of the then defendants “from any and all actions, causes of action, contracts and covenants, whether express or implied, claims and demands for damages, indemnity, costs, interest, loss or injury of every nature or kind whatsoever arising, which the Releasor may heretofore have had, may now have or may hereafter have in any way relating to the hiring, the employment, or the termination of the employment of the Releasor by the Releasees …”[my emphasis throughout]
[28] The paragraph of the full and final release containing the foregoing terms does have at its conclusion a handwritten addition, which was initialed by the plaintiff. The addition, with my emphasis reads:
“… With the exception of the value of the Releasor’s four (4) shares of 3349756 Canada Inc., which is a holding company holding seventy-five (75) class A common shares of LBc International Investigative Accounting Inc.”
VI. Oppression Remedy
[29] Paragraph 1 of the proposed pleading seeks only oppression related relief and recovery of the value of the Plaintiff’s shares. Although not as yet specifically pleaded, I observe that the Canada Business Corporations Act, R.S.C. 1985, c. C-44 at Part XX deals with “Remedies, Offences and Punishment”. As federal corporations, that Act applies to both proposed corporate defendants.
[30] In particular that Act deals in Section 241 with an application to court with respect to alleged oppression. That section, with my emphasis, reads:
- (1) A complainant may apply to a court for an order under this section.
Grounds
(2) If, on an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates
(a) any act or omission of the corporation or any of its affiliates effects a result,
(b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or
(c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of.
Powers of court
(3) In connection with an application under this section, the court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing,
(a) an order restraining the conduct complained of;
(d) an order directing an issue or exchange of securities;
(f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder;
(h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract;
(i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by section 155 or an accounting in such other form as the court may determine;
(j) an order compensating an aggrieved person;
[31] I do not find the challenged paragraphs asserting grounds that would impact upon the relief sought at this stage. The nature of remedies available under the statute were canvassed in 2008 by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69; [2008] 3 S.C.R. 560; 52 B.L.R. (4th) 1;301 D.L.R. (4th) 80; 71 C.P.R. (4th) 303.
[32] In its reasons the Court sets out what must be shown to establish the right to a remedy under s. 241, and then reviews the conduct complained of in the light of those requirements. The following extract guides my conclusions on this motion:
(1) The Law
53 Section 241(2) provides that a court may make an order to rectify the matters complained of where
(a) any act or omission of the corporation or any of its affiliates effects a result,
(b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or
(c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer....
54 Section 241 jurisprudence reveals two possible approaches to the interpretation of the oppression provisions of the CBCA: M. Koehnen, Oppression and Related Remedies (2004), at pp. 79-80 and 84. One approach emphasizes a strict reading of the three types of conduct enumerated in s. 241 (oppression, unfair prejudice and unfair disregard): see Scottish Co-operative Wholesale Society Ltd. v. Meyer, [1959] A.C. 324 (H.L.); Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1976 BCSC 238, 1 B.C.L.R. 36 (S.C.); Stech v. Davies, 1987 ABQB 3170, [1987] 5 W.W.R. 563 (Alta. Q.B.). Cases following this approach focus on the precise content of the categories "oppression", "unfair prejudice" and "unfair disregard". While these cases may provide valuable insight into what constitutes oppression in particular circumstances, a categorical approach to oppression is problematic because the terms used cannot be put into watertight compartments or conclusively defined. As Koehnen puts it (at p. 84), "[t]he three statutory components of oppression are really adjectives that try to describe inappropriate conduct .... The difficulty with adjectives is they provide no assistance in formulating principles that should underline court intervention."
55 Other cases have focused on the broader principles underlying and uniting the various aspects of oppression: see First Edmonton Place Ltd. v. 315888 Alberta Ltd. (1988), 1988 ABQB 168, 40 B.L.R. 28 (Alta. Q.B.), var'd (1989), 1989 ABCA 222, 45 B.L.R. 110 (Alta. C.A.); 820099 Ontario Inc. v. Harold E. Ballard Ltd. (1991), 3 B.L.R. (2d) 113 (Ont. Div. Ct.); Westfair Foods Ltd. v. Watt (1991), 1991 ABCA 122, 79 D.L.R. (4th) 48 (Alta. C.A.).
[33] The Court continues setting out its support of a combined approach in evaluating possible oppression:
56 In our view, the best approach to the interpretation of s. 241(2) is one that combines the two approaches developed in the cases. One should look first to the principles underlying the oppression remedy, and in particular the concept of reasonable expectations. If a breach of a reasonable expectation is established, one must go on to consider whether the conduct complained of amounts to "oppression", "unfair prejudice" or "unfair disregard" as set out in s. 241(2) of the CBCA.
57 We preface our discussion of the twin prongs of the oppression inquiry by two preliminary observations that run throughout all the jurisprudence.
58 First, oppression is an equitable remedy. It seeks to ensure fairness - what is "just and equitable". It gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair: Wright v. Donald S. Montgomery Holdings Ltd. (1998), 1998 ONSC 14805, 39 B.L.R. (2d) 266 (Ont. Ct. (Gen. Div.)), at p. 273; Re Keho Holdings Ltd. and Noble (1987), 1987 ABCA 84, 38 D.L.R. (4th) 368 (Alta. C.A.), at p. 374; see, more generally, Koehnen, at pp. 78-79. It follows that courts considering claims for oppression should look at business realities, not merely narrow legalities: Scottish Co-operative Wholesale Society, at p. 343.
59 Second, like many equitable remedies, oppression is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another. [my emphasis]
[34] Looking at the context of the claims asserted in the continuing Statement of claim it seems to me that the reasonable expectation of the stakeholders was that the employment related claims were now moot. It seems to me that the intent of the parties was that the only remaining obligation related to the valuation, payment, and transfer of the Plaintiff’s interest in the corporate entities. The Supreme Court addresses the nature of claims against such entities in BCE Inc.:
60 Against this background, we turn to the first prong of the inquiry, the principles underlying the remedy of oppression. In Ebrahimi v. Westbourne Galleries Ltd., [1973] A.C. 360 (H.L.), at p. 379, Lord Wilberforce, interpreting s. 222 of the U.K. Companies Act, 1948, described the remedy of oppression in the following seminal terms:
The words ["just and equitable"] are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure.
61 Lord Wilberforce spoke of the equitable remedy in terms of the "rights, expectations and obligations" of individuals. "Rights" and "obligations" connote interests enforceable at law without recourse to special remedies, for example, through a contractual suit or a derivative action under s. 239 of the CBCA. It is left for the oppression remedy to deal with the "expectations" of affected stakeholders. The reasonable expectations of these stakeholders is the cornerstone of the oppression remedy.
62 As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.
63 Particular circumstances give rise to particular expectations. Stakeholders enter into relationships, with and within corporations, on the basis of understandings and expectations, upon which they are entitled to rely, provided they are reasonable in the context: see 820099 Ontario; Main v. Delcan Group Inc. (1999), 1999 ONSC 14946, 47 B.L.R. (2d) 200 (Ont. S.C.J.). These expectations are what the remedy of oppression seeks to uphold.
64 Determining whether a particular expectation is reasonable is complicated by the fact that the interests and expectations of different stakeholders may conflict. The oppression remedy recognizes that a corporation is an entity that encompasses and affects various individuals and groups, some of whose interests may conflict with others. Directors or other corporate actors may make corporate decisions or seek to resolve conflicts in a way that abusively or unfairly maximizes a particular group's interest at the expense of other stakeholders. The corporation and shareholders are entitled to maximize profit and share value, to be sure, but not by treating individual stakeholders unfairly. Fair treatment - the central theme running through the oppression jurisprudence - is most fundamentally what stakeholders are entitled to "reasonably expect".
[35] In this case the plaintiff is entitled to reasonably expect what is fair without reopening issues that were settled in the expectation that it was possible to still address in an action, what the signed settlement document described in part as “any related claims, for loss or injury of every nature or kind whatsoever arising, which the Releasor may heretofore have had, may now have or may hereafter have in any way relating to the hiring, the employment, or the termination of the employment of the Releasor by the Releasees”.
VII. Applicable Rules
[36] In addressing the entitlement to amend in this case I am firstly guided by Rule 1.04 which directs that the Rules “shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” As well the rule requires proportionality. I am required in applying those rules, to make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[37] Here leaving the proposed portions for discovery and to be addressed at trial will add cost and further delay which in my view is likely to be entirely wasted. Potential “costs consequences” are not enough in this case.
[38] I apply these general principles in interpreting the application of Rules 25 and 26. Rule 25.11 directs:
25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
(a) may prejudice or delay the fair trial of the action;
(b) is scandalous, frivolous or vexatious; or
(c) is an abuse of the process of the court.
[39] For the foregoing reasons I interpret this rule (applying rule 1.04 (2) if necessary) to permit a disallowance of an amendment rather than having to allow it and then strike it under rule 25.11.
[40] In coming to this conclusion I am aware of the direction found in Rule 26.01
On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[41] Courts still refuse to permit amendments to assert claims that are patently statute barred. By analogy I am treating the proposed amendments as contractually barred.
VIII. Disposition
[42] Leave to issue the proposed Fresh as Amended Statement of Claim as contained in the Plaintiff’s Motion Record is thus granted but in a form that does not include paragraphs 10, 11, 12 and 18(d) which shall be excised and the pleading consequentially renumbered.
[43] Thus I am satisfied that the plaintiff’s motion should only be allowed with respect to the uncontested portions of the fresh pleading. As a consequence I feel as a result of the lack of success on the contested portions this is an appropriate case to award costs against the plaintiff, which I am fixing at $3500 (plus HST) payable to the defendant corporations within 90 days.
Released: April 19, 2016,
R.133/DS ___________ _________ Master D. E. Short