Court File and Parties

COURT FILE NO.: 93596/15 (Oshawa) DATE: 20170310 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Carol Laakso Plaintiff

– and –

Tina B. Ranalli, David Brunning, Carlo Fascio, First Defense Absorbents Inc., and 2360617 Ontario Inc. Defendants

Counsel: Jonathon Burshtein, for the moving parties Paul Mack, for the responding party

Heard: March 2, 2017

Bale J.:

Background

[1] The defendant 2360617 Ontario Inc. (236Ontario) was incorporated in February of 2013. Initially the shareholders were Tina Ranalli (45%), Carol Laakso (45%), and David Brunning (10%). Although not incorporated as such, the business name used by the corporation was “First Defence Absorbents Inc.” The use of this name creates some confusion, because Ranalli later incorporated a new company with the same name. Where I refer to “the defendants” below, I am referring to all of the defendants, except the “new” First Defense Absorbents Inc. (“First Defence”), and except David Brunning, who does not appear from the evidence to have been involved in the facts underlying this action. When I refer to “Laakso” below, I am referring to Carol Laakso, and not to her husband, Stephen Laakso.

[2] On September 10, 2013, as a result of irreconcilable differences between Mrs. Laakso and Mr. Laakso, on the one hand, and Ms Ranalli and her husband Carlo Fascio, on the other, it was agreed that Ranalli would purchase Laakso’s interest in 236Ontario. At the same time, the parties agreed to the following additional terms:

• that the defendants would pay the amount owing on 236Ontario’s BMO line of credit;
• that the defendants would pay $80,000 to SpilKleen (a business owned by Mr. Laakso) for equipment supplied by Spilkleen, and used in 236Ontario’s business; and
• that the defendants would obtain, and provide to Mrs. Laakso, a release of her guarantee of the lease of the business premises.

The agreement was oral, and the terms were never reduced to writing.

[3] In this action, the plaintiff claims:

• a declaration that the business and affairs of 2360617 Ontario Inc. have been carried on or conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards, her interests as a security holder, creditor, director or officer of the corporation;
• a declaration that First Defense Absorbents Inc. is a trustee of all of the assets of 2360617 Ontario Inc., and that she has a 45 per cent interest in those assets;
• damages for conspiracy, breach of fiduciary duty, and oppression in the amount of $300,000;
• punitive damages in the amount of $200,000; and
• other and ancillary relief, pursuant to section 248 of the Business Corporations Act.

[4] On this motion, the defendants Tina Ranalli, Carlo Fascio and First Defense Absorbents Inc. move for summary judgment dismissing the action against them. First, they argue that the action is statute-barred by section 4 of the Limitations Act, 2002. Second, they argue that as a result of the agreement pursuant to which Carol Laakso sold her shares in 236Ontario to Ranalli, Laakso is no longer a shareholder, and is entitled only to enforce the share sale agreement, in an action for breach of contract.

[5] The action was commenced on October 28, 2015. Accordingly, it was statute-barred, if Carol Laakso knew, or ought to have known, the facts upon which her claim is based, on or before October 27, 2013.

[6] On the first issue, Laakso argues that she did not know the facts upon which her claim is based, within the requisite time period. On the second, she argues that Ranalli breached the share sale agreement, and that as a result, she remains a shareholder of 236Ontario.

[7] On the first issue, I agree that the oppression claim is statute-barred. On the second issue, I agree that Laakso is no longer a shareholder, but she remains a creditor of 236Ontario, and but for the limitations issue, would be entitled to maintain an oppression application. Of course, as a creditor, only, the relief available would be limited by the amount owed to her.

[8] On November 4, 2013, counsel for Carol Laakso and Stephen Laakso wrote what can only be described as a demand letter to Carlo Fascio, David Brunning, and Tina Ranalli. In order to explain its effect, it is unfortunately necessary to quote extensively from the letter.

[9] Counsel begins by describing what his clients say the assets of 236Ontario were, and then makes the following allegations:

It is not my role, or intention, to provide you with any legal advice.

That being said, I will take the opportunity to outline my advice to my clients. Such advice, of course, is based on information presently available to us. Some of such information may be incorrect, and to that extent, my advice to my clients will need to be modified. In that regard, if you wish to correct any of the information set out below, please feel free to do so.

On the basis of the foregoing (and subject to the possibility that some of the information contained herein may be subject to correction by you), I am obliged to advise my clients that they should commence legal proceedings against each of you under section 248 of the Ontario Business Corporation Act, and for breach of fiduciary duty, among other matters. On that basis, it is my advice that they should also seek an injunction to prevent each of you, whether individually or together or in conjunction with others, from acting in the manner described in this letter.

It came as a total surprise, then, to (very recently) learn that Tina breached her fiduciary obligations in the basest manner possible, by (on September 6, 2013) incorporating a new company under the name “First Defense Absorbents, Inc.” Not only was this action extremely improper – from a moral as well as legal perspective – but, she has appropriated the common law trademark of the Corporation.

To put it simply, it should be as apparent to you as it will be to a Judge that you have used my clients’ funds to start up a business, pay for a telephone number – and then (in a new corporate form) claimed to be the company with which customers or potential customers were always dealing.

As part of the piracy of the corporate identity, you are now using these corporate assets – the website and email addresses – for your own purposes. For example, I refer you to an email from Carlo, dated October 22, 2013 – in which Carlo refers to “the new entity” and signs on behalf of “First Defense Absorbents Inc.”, identifying both his e-mail address and the website as part of this “new entity”!

In his October 22, 2013 e-mail, Carlo has the audacity to state the following “the lease has been assumed by the new entity and Carol will be released as per our agreement with the landlord”. Please understand the following:

(a) It is the Corporation, not the “new entity”, which is entitled to possession of those premises;

(b) The Corporation has not agreed to the “new entity” either taking possession of, or assuming, the lease;

(c) Worse, Carol Laakso continues to be liable on the lease for the premises into which the “new entity”, like a squatter, has moved.

We note that, in addition to the equipment belonging to the Corporation, back in May 20, 2013, there was almost $12,000 of inventory. We expect that such amount is higher now than it was then. We also expect that such inventory has simply been “adopted” by the new entity.

We look forward to cross-examining each of you to determine exactly what has been done over the months in which the Corporation was being developed.

We understand that a new bank account has been set up by the “new entity” – under the name, of course, “First Defense Absorbents, Inc.” This information was confirmed in a recent meeting between you and Steve Laakso.

With all the many hours of work about which Dave Brunning complained, we have no doubt that there has been considerable research and development. Such research and development belongs to the Corporation – not to a new entity owned by all or some of you.

Unfortunately, you are not permitted to simply take advantage of such customer development and slip it into a “new entity” owned by some or all of you, thereby cutting out the 45% shareholder who has provided most of the funding.

It is our clients’ understanding that both suppliers and customers, introduced by SpilKleen, have been contacted by you on behalf of the “new entity”.

It appears that once you felt that you had everything “lined up” for the “new entity”, your plan was to attempt to remove yourselves from the Corporation.

We understand that you have refused to provide any financial data beyond August 31, 2013. However, as so much of the Corporations’ property has been simply taken by you under the umbrella of such “new entity”, all financial and other material data about the “new entity” should also be disclosed.

As we have advised, we are retained to commence legal proceedings against you in the very near future.

That being said, our clients are prepared to listen to any explanations that you might have – or clarification of the information on which we are presently working.

Failure to full cooperate, and fully divulge, the various manners in which you have abused the trust of my clients will result in injunctive proceedings, in which you will be cross-examined, under oath.

KINDLY GOVERN YOURSELVES ACCORDINGLY.

Discussion

[10] Determining whether someone has discovered a claim is a fact-based analysis. The question to be determined is whether the prospective plaintiff knows enough facts upon which to base a claim against the defendant. If the plaintiff does, then the claim has been discovered, and the limitation period begins to run: Lawless v. Anderson, 2011 ONCA 102, at para. 23.

[11] Under section 248 of the Business Corporations Act, a complainant may apply to the court, not only if the powers of the directors have actually been exercised in an oppressive manner, but also if those powers “are threatened to be exercised” in an oppressive manner.

[12] There is no evidence that any of the allegations made in the letter of November 4, 2013 were based upon information received by Mrs. Laakso or Mr. Laakso between October 27, 2013 and November 4; and accordingly, it would appear on the face of the letter that the information upon which the allegations were based was known to them no later than October 27.

[13] However, Laakso argues that there is no evidence that any assets transferred from 236Ontario to First Defense were transferred before October 28, 2013. She goes on to argue that her lawyer’s letter of November 4, 2013 was based upon mere suspicion, and that groundless suspicion cannot start a limitation period running, in relation to events that have not yet occurred. I agree with the logic, but not with the premises upon which the argument proceeds. There is, in fact, evidence that the conduct complained of occurred before October 28, 2013, and the letter of November 4, 2013 was based upon evidence, and not mere suspicion.

Evidence of conduct complained of occurring before October 28, 2013

[14] Laakso relies upon various paragraphs in the letter of November 4, 2013 which invited Fascio, Brunning, and Ranalli to refute the allegations contained in the letter, if they were incorrect, and argues that this is evidence that the allegations were based upon suspicion rather than knowledge. However, the import of those paragraphs is surely that the writer was prepared to consider evidence to the contrary, and not that he doubted the truth of the allegations made. In any event, in order for a limitation period to begin running, it is not necessary that the person with the claim be certain of the facts upon which she or he intends to rely.

[15] In an affidavit filed in support of this motion, Carlo Fascio says that beginning in late August, and “over the next few months, the parties took steps to wind down the affairs of 236 Ontario” (“winding down” presumably being some sort of informal “winding up”). In her responding affidavit, Laakso says that she was not aware of any steps to wind down the corporation. However, even if that were true, Fascio’s statement is evidence that the course of conduct complained of by Laakso began well before October 28, 2013.

[16] On the cross-examination of Carlo Fascio on his affidavit, he was asked “what elements of the claim” were discoverable before October 28, 2013. While at the time, he took the question “under advisement”, in his answers to undertakings, he said that the elements discoverable before October 28, 2013 “were all those allegations set out in the November 4, 2013 letter of Paul Mack.” If the facts alleged in the letter were discoverable before October 28, then they must have occurred before that date – this would appear to be an admission that they had, in fact, occurred.

Evidence upon which letter of November 4, 2013 was based

[17] In her affidavit filed on this motion, Carol Laakso says that “by mid-late August 2013, I was unable to get any real information about the financial condition of the Corporation – or a clear understanding of all of its assets.” Failure of the defendants to provide financial information is one example of the conduct alleged, in this action, to be oppressive.

[18] In an affidavit sworn on November 27th, 2013, in related litigation, Stephen Laakso gave evidence that: “On October 17 or 18, 2013, I learned to my shock that Tina incorporated (on September 6, 2013) another company under the name “First Defence Absorbents Inc.” In her affidavit, Carol Laakso says that on October 17, 2013, her husband called their lawyer to advise him about the new corporation, and that their lawyer conducted a corporate search and confirmed that Ranalli had, in fact, incorporated First Defense.

[19] In the same affidavit, Mr. Laakso said that he had been advised by Rocco Sarano that the “new entity” had set up a separate bank account. According to Mr. Sarano’s evidence filed on this motion, this occurred on September 29, 2013. Sarano also says that Mr. Laakso advised him on that date that “there were some issues, and that he was taking legal measures.” Carol Laakso seems to have forgotten what they learned from Mr. Sarano: in her affidavit, she says that on September 29, “there was no reason for anyone to assume” that it was a new corporation that had set up the new bank account. In his affidavit, Mr. Laakso went on to say: “When we learned about the actions taken by the Ranalli Group, our lawyer, Mr. Paul Mack, sent a letter to Tina, Carlo and David, outlining the impropriety of their actions” (referring to the letter of November 4, 2013).

[20] In an e-mail to Stephen Laakso dated October 22, 2013, Carlo Fascio advised that the lease had been assumed by the “new entity” (First Defence), that utilities, source deductions and workers compensation had all been assumed by the new entity, with account numbers to reflect the change, and that new production lines were being set up. In her affidavit, Carol Laakso says she didn’t care what the defendants did, so long as the share sale was completed. However, in this action, she is claiming half a million dollars in damages as a result of what they did, and it was on the basis of all of this information, and deductions made from it, that her lawyer wrote his letter of November 4, 2013. Such a lack of concern is difficult to reconcile with the fact that based upon this information, Laakso shortly thereafter instructed her lawyer to send a thirteen-page letter alleging “gross breaches of [their] fiduciary duties, and appropriation of corporate asssets”, and putting Ranalli and Fascio on notice that he had been retained to sue them.

Disposition

[21] In the circumstances outlined above, there can be no doubt but that Carol Laakso was aware, before October 28, 2013, of the facts upon which her oppression claims are based, and as a result, the action will be dismissed, subject to the following exception.

[22] As indicated early on in these reasons, the share sale agreement required the defendants to pay the amount owing on 236Ontario’s BMO line of credit. They failed to do so, and as a result, Carol Laakso was required to pay the balance owing of $30,130.07, which she did on October 10, 2014, pursuant to her guarantee. These facts are admitted by the defendants, and in fact, it was their position that a claim for this amount was the only relief available to Laasko. This claim is not statute-barred – the cause of action arose on the date upon which Laakso paid the amount owing. The defendants will therefore be held jointly and severally liable to Laakso for that amount.

[23] In addition to the amount paid on the line of credit, Carol Laakso claims that she incurred legal fees of $4,600 “in respect of indebtedness to Bank of Montreal.” However, there is no evidence on the record to support the claim, and it will therefore be dismissed.

[24] In her statement of defence, Tina Ranalli pleads that Carol Laaskso wrongfully diverted a sum of $2,695.05 from the 236Ontario bank account by paying from that account, an expense incurred by SpilKleen. As a result, she pleads, that amount should be deducted from the amount for which Laakso is entitled to be indemnified. However, one would have thought that if anything is owed to 236Ontario in relation to the invoice in question, it would be owed by Spilkleen, and there is no evidence on the record to support a claim that Laakso is personally liable to the defendants for that amount. The claim for set-off will therefore be dismissed.

[25] In the end result, and for the reasons given, the defendants Tina Ranalli, Carlo Fascio and 236 Ontario Inc. shall pay the sum of $30,130.07 to the plaintiff, with prejudgment interest from October 10, 2014, and the action shall otherwise be dismissed.

[26] If the parties are unable to agree on costs, or prejudgment interest, I will consider brief written argument provided that it is delivered to my assistant at Judges’ Reception, Sixth Floor, Durham Region Courthouse, no later than March 31, 2017.

Released: March 10, 2017