Court File and Parties

CITATION: Zhao v. Zhao, 2017 ONSC 954

COURT FILE NO.: CV-11-9459-00CL CV-12-9609-00CL

DATE: 20170224

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Pingbo Zhao and 7111703 Canada Inc., Applicants

AND:

Pingyuan Zhao and 51.ca Inc. and 2194467 Ontario Inc. and 2258797 Ontario Inc., Respondents

AND RE: Pingyuan Zhao and 51.ca Inc. and 2194467 Ontario Inc., Applicants

AND:

Pingbo Zhao, Respondent

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL: Gregory Sidlofsky, for the Applicant Pingbo Zhao

Igor Ellyn, for the Respondents

HEARD: July 15, 2015

eNDORSEMENT

[1] The applicant, Pingbo Zhao (the “applicant”), brought a motion seeking production of the financial statements of 51.ca.Inc., 2194467 Ontario Inc. and 2258797 Ontario Inc. (collectively, the “Companies”) for fiscal 2014. At the conclusion of the hearing of the motion, the Court advised the parties that the motion was denied for written reasons to follow. This Endorsement sets out the Court’s reasons for this decision.

[2] The applicant brought this motion within this proceeding in which he seeks, among other things, a remedy for alleged oppression under section 248 of the Business Corporations Act, R.S.O. 1990, c.B. 16 (the “OBCA”). As such, he brought this motion in his capacity as a litigant in these proceedings. The parties had completed the submission of evidence in this trial. Closing submissions were scheduled to be presented in approximately two weeks after the hearing of the motion.

[3] Section 154 of the OBCA provides that annual financial statements shall be placed before the annual meeting of a corporation within certain time frames. Under section 253 of the OBCA, the applicant could seek an order of the court requiring the Companies to comply with this provision. However, the applicant is not proceeding under this provision on this motion, presumably because he seeks more immediate delivery of the fiscal 2014 financial statements.

[4] Instead, the applicant relies on sections 140(1) and (2) and section 145 of the OBCA, as well as section 248(3) of the OBCA, as the basis for the order sought. I do not think he is entitled to production of financial statements under these provisions for the following reasons.

[5] First, insofar as he relies on section 248(3), that provision requires demonstration of a strong prima facie case of oppression as a condition of the granting of relief thereunder. The Court had not made such a finding in this proceeding up to the date of the hearing of the motion.

[6] Second, neither of sections 140 or 145 provides for the production of financial statements. Section 140 does not address production or review of financial statements. Section 145, or more properly section 144, deals with shareholder review of records of a corporation. However, neither provision entitles a shareholder to receive financial statements.

[7] Lastly, this motion is fundamentally a mid-trial motion for further production. As the action has proceeded to trial, leave of the Court is required to bring any further motions. I do not think leave should be granted for the reason that the financial statements will have no probative value in this proceeding.

[8] As mentioned, the parties have finished submitting their evidence. This includes their respective expert reports, which address damages based on earlier financial statements of the Corporations. The Court could not use the financial statements for fiscal 2014 by themselves to calculate damages as of the end of fiscal 2014. The parties would need to provide supplementary reports from each of their experts which would, in turn, require leave of the Court to re-open the evidence at trial.

[9] Further, there is nothing that prevents the applicant from arguing in his closing submissions that a later date should be used for the calculation of damages as a matter of law. In the event the applicant was successful in establishing his oppression case in this proceeding, the Court could establish a process for the determination of the applicant’s damages on such basis if it were prepared to grant such relief. I note further that, in the event the applicant is successful in establishing his oppression case, the applicant is not limited to arguing for a date as of the end of fiscal 2014 and may wish to argue for an even later date.

[10] Accordingly, the motion is denied without prejudice to the right of the applicant to bring a motion in his capacity as a shareholder of the Companies seeking compliance with section 154 of the OBCA at any time if it so chooses.

[11] Costs in the amount of $2,900, on an all-inclusive basis, are awarded in favour of the respondents payable forthwith.

Wilton-Siegel J.

Date: February 24, 2017