COURT FILE NO.: FS-15-406360

DATE: 20190731

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LAWRENCE KIM

Applicant

– and –

KLARA KIM

Respondent

James H. Herbert, for the Applicant

Young H. Lee, J. Hur and C. Kim for the Respondent

HEARD: July 9, 2019

M. D. FAIETA j.

REASONS FOR DECISION

INTRODUCTION

[1] The Applicant, Lawrence Kim, and the Respondent, Klara Kim, are an elderly couple that have been separated for about five years. They are the sole, equal shareholders of 1045466 Ontario Limited (“104”) as well as its sole officers and directors. 104 owns a commercial property whose municipal address is 287 Bridgeland Avenue, Toronto (the “Bridgeland Property”). One of its tenants, KT Web, is a corporation that whose shares are equally owned by their son Thomas Kim (“Thomas”) and his spouse Cristina Kim (“Cristina”). KT Web is in the printing business. Amongst other things, it prints the Korea Times newspaper (the “Newspaper”). The rent paid by KT Web is below market rates.

[2] On February 5, 2019 the parties agreed to an Order that requires the Bridgeland Property to be sold under court supervision and that obliges both parties to cooperate with the sale.

[3] On behalf of 104, the parties have entered into an agreement to sell the Bridgeland Property for $12.9 million. There are several conditions of sale. One of the conditions of sale requires 104 and the purchaser to agree on an amended lease at market rent for KT Web. Thomas and KT Web refuse to amend the lease. Lawrence states that the sale will not close unless complies with the condition or delivers vacant possession. Rather than negotiate a waiver of this condition possibly through an abatement in the purchase price, which appears to be a sensible solution that is acceptable to the purchaser, Lawrence submits that 104 should evict the tenant on the basis that KT Web is in arrears of rent. Klara submits she was responsible for the management of the property and that KT Web has for some time paid an amount for rent that was below the amount required to be paid by the lease. Klara doubts that KT Web can now be evicted given that 104 acquiesced over the years in receiving less rent than the stated amount of rent owed under the lease and states that it would amount to perjury to deny her and 104’s acquiescence.

[4] Lawrence submits that Klara’s refusal to sign a direction authorizing the engagement of litigation counsel to evict KT Web fails to comply with her obligation to cooperate with the sale as provided by the Consent Order and is as oppressive to his interests as shareholder of 104 and asks that this court, pursuant to section 248 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended (“OBCA”), give him control of the sale process so that he can take appropriate steps to close the sale agreement which, if necessary, may include the eviction of KT Web.

[5] For reasons described below, I have dismissed this motion.

BACKGROUND

[6] The Applicant, Lawrence Kim, is 78 years old. The Respondent, Klara Kim, is 75 years old. In September, 1969 they were married in South Korea. There are two children of the marriage: Thomas, age 49 and Catherine, age 45. The Applicant was a newspaper reporter in South Korea and shortly after he came to Canada, he founded Hankook Ilbo & The Korea Times Limited (“KTL”). KTL carries on business under the business name, The Korea Times. The Newspaper is the largest Korean newspaper in Toronto. Each of the four members of the family are equal shareholders of KTL. The building on the Bridgeland Property houses KTL as well as four tenants who collectively pay about $600,000 per year in rent. 104 also derives income from solar panels of about $240,000 per year which was installed at a cost of $2 million.

[7] The parties separated in September, 2014. The Applicant commenced this proceeding in 2015 for a divorce. In her Answer, the Respondent claims, amongst other things, support, equalization of net family property, freezing of assets and the sale of family property.

[8] Klara’s Financial Statement, dated February 16, 2016, estimates the market value of her interest in all property owned on the date of separation (September 10, 2014) at about $2 million without placing a value on her 25% interest in KTL or 50% interest in 104. In his Reply, dated March, 2016, Lawrence states that KTL has been his life’s work. KTL is not currently profitable and its continued viability is in question. Lawrence’s Financial Statement, dated March 23, 2016, estimates the market value of his interest in all property owned on the date of separation at about $1.7 million once again without placing a value on his 25% interest in KTL or 50% interest in 104. He filed a further Financial Statement, dated November 9, 2018 which estimates the market value of his interest in all property owned on the date of separation at about $2.4 million without placing a value on his 25% interest in KTL or 50% interest in 104.

[9] The parties attended numerous case conferences and settlement conferences: December 7, 2016, December 4, 2017, April 20, 2018, May 2, 2018, August 10, 2018.

The Marriage Separation

[10] The parties’ separation has been acrimonious.

[11] Lawrence states that he moved the Newspaper out of the Bridgeland Property to a new location in Thornhill, Ontario. One reason for the move was because there was conflict between his new partner, Rosa Lee, who had worked there and Klara.

[12] Lawrence states that his role in the management of 104 has been gradually reduced since his separation from Klara. He has no knowledge or control of rents from tenants and the solar panel. Klara controls the rents and she does not account to him for rents or solar panel income. Klara listed part of the Bridgeland Property for rent in 2017 without consulting Lawrence.

[13] Lawrence states that the parties have been unable to cooperate with respect to the running of 104 and are deadlocked.

Bridgeland Property

[14] 104 purchased the Bridgeland Property in 1995 for $935,000.00. Shortly after this purchase KTL moved into the Bridgeland Property and became its main tenant. Extra space within the building was leased to arm’s length tenants.

[15] Lawrence states that prior to their separation in September, 2014, he and Klara were able to cooperate in the management of 104 which included paying the carrying costs of the Bridgeland Property, collecting rents and, finding new tenants. Klara is not collecting rent from KT Web. KT Web has a written lease with 104 dated February 1, 2010 for the lease of 35,000 square feet for a term of 8 years with an option to renew for a further five years at a base rent of $3.00 per square foot. He states that the monthly rental payment was $11,300.00. He references a one-page document on 104 letterhead, prepared by Klara, which states that the outstanding rent balance for KT Web as of August, 2018 was $79,100.00 as “the actual amount of rent is $18,285.71 but he paid $11,300.00 a month (including tax).

[16] Lawrence also states that Klara is not collecting rent from KT Web. KT Web is controlled by Thomas Kim. KT Web has a written lease with 104 dated February 1, 2010 for the lease of 35,000 square feet for a term of 8 years with an option to renew for a further five years at a base rent of $3.00 per square foot. He states that the monthly rental payment was $11,300.00. He references a one-page document on 104 letterhead, prepared by Klara, which states that the outstanding rent balance for KT Web as of August, 2018 was $79,100.00 as “the actual amount of rent is $18,285.71 but he paid $11,300.00 a month (including tax)”.

[17] In response, Klara states that:

• “There was a common understanding of each person’s main role in managing the group of companies. Lawrence managed the publishing and editorial business of the newspaper; Thomas, since 2004, managed the printing business of KT Web. I managed 104 and the Bridgeland Property since purchasing it in 1995”;
• “Lawrence was rarely involved in the management of 104 except for signing some documents when I asked him to. His biggest involvement in the management of 104 was when he stubbornly insisted on the installation of the solar panels on the roof of the Bridgeland Property even though it was overpriced and not economical”;
• “KT Web does pay rent however there are some arrears. KT Web may owe one months’ rent right now”;
• Lawrence unilaterally moved the Newspaper out of the Bridgeland Property in February 2017. This move violated the Newspaper Lease which shows the first expiry as December 31, 2013 with a five-year renewal term ending December 31, 2018. Lawrence’s only interest has been to please Rosa without thinking of how the businesses affect everyone in the family; and
• Lawrence did not care for any rents, lease agreement or legalities of 104. I made do with the informal tenancies of the Newspaper and KT Web for the sake of our family businesses. That was the common understanding and that was always my highest duty to all the family businesses and our family.

[18] In a later affidavit sworn June 25, 2019, Lawrence states that the operative lease between 104 and KT Web is dated January 1, 2010. The monthly rent owing under the 2010 Lease is $23,333.00. KT Web currently pays $11,300 per month in rent. He also states that Thomas and Cristina have a strong wish to own the Bridgeland Property. They have taken the position with Lawrence, Klara and Catherine that the Bridgeland Property should be sold to them at a price far below fair market value. In September, 2018 Klara offered to purchase Lawrence’s share of 104 and Korean Broadcasting Corporation of Canada for $1.5 million. Lawrence states that Thomas has incentive to block the sale of the Bridgeland Property to a third party as a sale would frustrate his desire to acquire it. He believes that Thomas has exerted pressure on his mother, Klara, to block the sale to GTA.

[19] In response, Klara states that the actual rent paid by KT Web to 104 has been about $10,000 plus HST per month. Lawrence never complained prior to this proceeding that KT Web has rent arrears as “it wasn’t necessary because it was within our family”.

Motion for the Court Supervised Sale of the Bridgeland Property

[20] By notice of motion dated November 15, 2018, Lawrence brought a motion returnable on January 10, 2019, for an order that the Bridgeland Property be listed for sale and sold under supervision of the court and that upon closing of the sale, the net proceeds of the sale of the Bridgeland Property be distributed as follow: $200,000 to each party with the balance to be held in trust pending written agreement of the parties or court order.

[21] In his supporting affidavit Lawrence states that he does not wish to continue to operate a commercial building at this stage of his life. He wishes to realize on his investment. He believes that the Bridgeland Property has a fair market value of $5 million based on comparable sales. He states that the Bridgeland Property should be sold and thus make it easier for the parties to settle the division of the family property.

Listing of the Bridgeland Property

[22] On November 18, 2018, Lawrence and Klara, on behalf of 104, listed the Bridgeland Property for sale with a real estate agent for $16 million. They received an offer of $12.5 million from GTA Development Corporation (“GTA”). Lawrence and Klara were unable during late 2018 to agree on a sale price with GTA. At that time, Lawrence stated that he believes that Klara is under pressure from their son Thomas to either refuse to sell the building or to impose unreasonable conditions so that no purchaser would buy the Bridgeland Property.

[23] Lawrence states that Klara has suggested that 104 enter into a long-term lease with KT Web at a favourable rent in order to bind a purchaser. He believes that such lease would significantly reduce the value of the Bridgeland Property. Lawrence believes that Klara’s suggestion is the result of pressure from her son Thomas. Lawrence further states that he believes that Klara will not sign a reasonable offer and the sale of the Bridgeland Property will be frustrated without a court order for sale.

Klara’s Response to Lawrence’s Motion for an Order requiring the Court Supervised Sale of the Bridgeland Property

[24] In her reply affidavit Klara states that:

• My preference is to keep the Bridgeland Property and continue managing it, but I have no plan to hold it forever. I am reasonable and will sell for the right price that I believe will protect the interests of my family;
• Catherine and Lawrence told me and I truly believed that the price for the land alone of the Bridgeland Property was worth $13 million based on an estimate from the listing agent, Pamela Felgate. Based on this information, I signed the listing agreement for $16 million;
• “I am thinking of what is best for my family and I am doing my due diligence to ensure that whatever we do with respect to the Bridgeland property is a good outcome for both Lawrence and my family”;
• “I believe that Lawrence does not care about the complex nature of my family concerns and is over-simplifying everything as usual just to get what he wants – a sale of the Bridgeland Property on his terms alone so that he has cash to spend on Rosa”; and
• She seeks an order that permits her to buy out Lawrence’s shares in 104 based on a value established by an independent qualified appraiser.

Consent Order permitting Klara and Lawrence an opportunity to enter a binding agreement for the sale of the Bridgeland Property failing which the property shall be sold under court supervision

[25] On February 5, 2019, the following Order was granted on consent of the parties (the “Consent Order”). It includes the following terms:

• Klara shall have until March 5, 2019 to make an offer to purchase Lawrence’s shares in 104;
• If Klara and Lawrence do not reach a binding agreement for Klara to purchase Lawrence’s shares in 104 by March 5, 2019, then the Bridgeland Property shall be sold under the supervision of the court. Any dispute with respect to the sale shall be resolved on motion to the court. Both parties shall cooperate with the sale of the Bridgeland Property. Upon closing, Klara and Lawrence shall each receive $200,000 from the net proceeds of sale and that the balance of the net proceeds be held in trust by the real estate lawyer handling the transaction pending further court order or agreement of the parties. 104, Hankook Ilbo, KTL and Korea Times Daily Inc shall be added as respondents to this Application. Lawrence shall be permitted to amend his Application; and
• Lawrence is permitted to amend his Application in accordance with a draft amended Application attached to the draft Order and Klara shall be permitted to deliver an amended Answer.

[26] Lawrence filed an amended Application on March 25, 2019. Amongst other things, it states that Lawrence seeks the following order:

• That the Bridgeland Property be listed for sale;
• That the sale be conducted under the supervision of the court and that the court app;
• That 104 be added as a party;
• If necessary, a declaration that Klara has treated Lawrence in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of Lawrence Kim as defined in sections 207 and 248 of the OBCA;
• As a remedy for the oppressive conduct, an order for the sale of the Bridgeland Property or alternatively, an order that Klara buy Lawrence’s shares in 104 based on a value established by a qualified appraiser; and
• If necessary, an order winding up 104 pursuant to section 207 of the OBCA.

[27] In the amended Application, Lawrence alleges:

• Prior to separation in September 2014, the parties were able to cooperate in the management of 104. They ran 104 informally. They did not have formal shareholder or directors meetings. They developed an understanding and practice that they would manage the Bridgeland Property jointly. They jointly managed 104 which included paying the carrying costs of the building, collecting rents from tenants finding new tenants, negotiating for the installation for solar paneling on the rooftop and maintaining the building;
• Lawrence had a reasonable expectation that he would always be involved in the management of the Bridgeland Property; and
• Lawrence states that he and Klara have ceased to cooperate with respect to the running of the Bridgeland Property. They are deadlocked. Since separation, Klara has taken control of the Bridgeland Property and Lawrence has no knowledge or control of rents from tenants and no role in acquiring new tenants and no role in paying for the carrying costs or maintenance of the property. Given their acrimonious separation, it is not possible for the parties to operate the Bridgeland Property and due to their separation, it is inevitable that the property will be sold.

[28] The parties did not reach a binding agreement with one another for Klara’s purchase of the Bridgeland Property by March 5, 2019.

[29] On March 25, 2019, Klara delivered an Amended Answer which, amongst other things, seeks an order;

• that 104, KTL and the Korea Times Daily Inc. be added as parties;
• a declaration that KTL and/or Lawrence has acted in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards Klara’s interests in KTL pursuant to s. 207 of the OBCA; and
• an order requiring Lawrence and KTL to disclose its relationship with Daily and whether Lawrence has diverted any assets or aspects of KTL’s business to Daily.

[30] In her Amended Answer, amongst other things, Klara specifically disputes Lawrence’s allegations regarding 104. She states:

• Klara continues to manage 104 and the Bridgeland Property after separation in the same manner as before separation. Contrary to Lawrence’s allegations, Klara has always managed all aspects of the Bridgeland Property and did not account to Lawrence before nor after separation. Lawrence was at all times pre-occupied on his role of managing KTL;
• There is no deadlock with respect to 104 and the Bridgeland Property. The parties have been in discussions and negotiations. On March 5, 2019, Klara made an offer to buy out Lawrence’s shares in 104. On March 8, 2019, the parties met and signed another agreement to list the Bridgeland Property for sale at $13.8 million and signed back an offer to a potential buyer for $13.5 million;
• Klara has acted in good faith with respect to Lawrence’s interest in 104 and has always been willing to discuss and negotiate;
• Klara states that she has not received any income or dividends from KTL since separation. Lawrence has not accounted to her for any business or management related to KTL; and
• On January 28, 2019, Klara became aware that Lawrence had incorporated a company, Korea Times Daily Inc., in June, 2018 and that Lawrence is the sole shareholder, officer and director of Daily. Daily operates with the same address and telephone number as KTL.

Lawrence’s Motion for an Order to Dispense with Klara’s Signature on the Agreement of Purchase and Sale

[31] By notice of motion dated April 15, 2019, Lawrence brought a motion returnable on April 25, 2019, for:

• An order dispensing with the signature of Klara Kim on the Agreement of Purchase and Sale between 104 and GTA dated April 10, 2019;
• An order dispensing with the signature of Klara on any closing documents related to the sale of the Bridgeland Property; and
• An order giving Lawrence sole authority to act for 104 on the sale of the Bridgeland Property.

[32] Lawrence’s affidavit, sworn April 15, 2019, states:

• On April 20, 2019, GTA and Lawrence agreed on a price of $12.9 million for the sale of the Bridgeland Property;
• GTA has an interest in a contiguous property and, as a result, the Bridgeland Property is worth more to GTA than to other purchasers;
• My real estate agents, Rita Chemillian and Patricia Felgate, tell me and I agree that the proposed sale price of $12.9 million is fair;
• On April 11, 2019, Klara told Lawrence that she would not sign the APS; and
• Lawrence believes that Klara is under pressure from their son Thomas to not sell the Bridgeland Property as he enjoys a favourable rent and does not want it sold.

Klara signs the APS with GTA

[33] On April 15, 2019, Klara signed the APS with GTA on behalf of 104. The motion returnable on April 25, 2019 did not proceed.

[34] Article 2.4(b) of Schedule “A” to the APS states:

Completion of this transaction of purchase and sale contemplated in this Agreement is subject to the following conditions precedent, each of which is inserted for the sole and exclusive benefit of the Purchaser, namely:

(b) that on or before the Purchaser’s Condition Date, the Purchaser and the Vendor shall have agreed on the form and content of an amended and restated lease at market rents for all non-arm’s length leases at the Property, including, without limitation, the lease with the printing company at the Property shown in the rent roll as KT Web Printing. …

The conditions precedent set for in this Section 2.4 are for the sole benefit of the Purchaser, and may be waived in whole or in part by the Purchaser, in its sole and unfettered discretion, by notice in writing to the Vendor prior to the applicable dates set out therein, in the event that all of the conditions precedent set forth in Subsections 2.4(a) are not satisfied or waived as herein provided by notice in writing on or before the Purchaser’s Condition Date, this Agreement shall cease and terminate, neither the Vendor nor the Purchaser having further rights hereunder, the one against the other, and the First Deposit, together with all interest earned thereon shall forthwith be returned to the Purchaser, without deduction. … (the “Market Rent Condition”)

[35] Lawrence and Klara agreed to retain Boo Yon Won to act for 104 on the sale of the Bridgeland Property. Ms. Won received a deposit of $250,000 from GTA on April 23, 2019.

[36] Lawrence and Klara were able to negotiate certain changes to the APS following the exercise of the Solicitor Review Condition found in Schedule “F” of the APS. Both Lawrence and Klara signed the Amended APS on May 3, 2019 which deleted Schedules A-E of the APS and replaced them with a new Schedule “A”. The Market Rent Condition remains present in the new Schedule “A” to the Amended APS.

[37] Article 4.1 of the Amended APS requires 104 to use best efforts to obtain an Estoppel Certificate from each tenant including KT Web within 10 days of the execution of the Amended APS.

GTA’s Inspection and 2013 KT Web Lease

[38] On May 9, 2019, Sandy Minuk, the principal of GTA, did a walk through the Bridgeland Property. During the walk through, Cristina gave Sandy a “new lease” between 104 and KT Web, dated January 1, 2013 (the “2013 Lease”).

[39] The period of the 2013 Lease is the 2013 calendar year and it contains 19 options to renew, which would take the lease to December 31, 2032. It provides for a rent of $18,277 per month, which is lower than the rent of $23,333 under the 2010 lease.

[40] Lawrence states that:

• the purpose of giving the 2013 Lease to Sandy was to scare off GTA from closing the deal given the many options to renew;
• the 2013 Lease is commercially unreasonable. It calls for a very long rental period but no provision for the escalation of rents, except a 50 cent per square foot increase in 2023; and
• the 2013 Lease it is invalid as he did not sign it nor was he aware that it had been signed.

[41] On June 20, 2019, Ms. Won sent the following email to Lawrence, Klara and their lawyers which states that:

I spoke to Daniel Michaels this morning. On an informal basis, I asked Daniel Michaels to canvas with the Buyer to see if the Buyer would be willing to waive the KT lease condition, proceed with the sale by assuming the 2013 lease, and enforce the lease against KT after closing.

Daniel Michaels spoke to his clients, and they have an idea of their own:

We close with an estoppel from KT acknowledging the 2011 lease as the valid lease. We give a purchase price abatement to the buyer in the amount equal to the difference between the market rent and the rent under the lease. There are some issues with this suggestion:

• We had delivered the 2011 lease to the buyers initially. Thomas and Cristina “ambushed” the buyers during their first site visit and delivered the 2013 lease in an envelope. Without an “incentive”, I am not sure that Thomas or Cristina would sign a tenant estoppel acknowledging the 2011 lease as the lease in force;
• We may be paying (or giving a credit to the buyer) a substantial sum (depends on what the “market rent” is;
• Thomas and Cristina still run the risk of being evicted from the building, if they fail to pay or otherwise comply with the terms of the lease.

Please let me know how the clients wish to proceed.

[42] The above email references a lease between 104 and KT Web made in 2011. The only two written leases made by those parties that were provided to court were made in 2010 and 2013.

Discussions to Facilitate the Closing of the Sale of Bridgeland Property to GTA

[43] On May 23, 2019, Ms. Won sent a further email to Lawrence, Klara and their lawyers:

I just spoke to Mr. Kim and Mrs. Kim on a conference call. During the call, Ms. Kim advised me that she had a conversation with their son Thomas Kim yesterday.

According to Ms. Kim:

• KT Web Printing is occupying approximately 28,000 plus certain space in the lower floor for storage;
• Thomas is interested in re-configuring this leased space so that KT Web Printing only occupies approximately 15,000 square feet;
• He anticipates that the cost of relocating KT Web Printing’s equipment would be approximately $20,000 to $50,000;
• KT Web Printing currently does not have the cash to pay for the moving of its equipment;
• There may be additional costs involved in partitioning the spaces;
• He would be interested in signing a new lease with the buyer for 15,000 square feet at the current rent;
• Mr. Kim and Mrs. Kim are willing to help Thomas finance the moving cost, although their preference is to do so from the sale closing proceeds;
• My recommendation is that I talk to Thomas and Cristina’s lawyer to confirm the above;
• I would like to obtain from their lawyer a plan showing the proposed reconfiguration;
• With the draft plan, I would like to approach the Buyer’s lawyer to see if they are agreeable to leasing 15,000 square feet to KT Web Printing with the balance of the space to be provided in a vacant condition;
• I imagine the Buyer may agree to the foregoing but may ask for: o A purchase price abatement; or o A credit in their favour for the cost of reconfiguration; o A rental rate from KT Web Printing that is higher on a per square foot basis than the current rate;
• I have Mr and Mrs Kim’s instructions to go ahead and approach Thomas and Cristina’s lawyer;
• I will contact her tomorrow

Before I do, if anyone has any comments, questions or other ideas, then please let me know.

[44] On June 3, 2019, Melissa Nowak, the lawyer for Thomas and Cristina, advised Ms. Won that her clients were unwilling to consider a meeting until they received a copy of the APS.

[45] On June 5, 2019, Ms. Won met with GTA’s representatives without Lawrence and Klara. Her email to the parties states:

During the meeting, we talked about:

1. KT Web and Printing Lease. We now know that the buyer would prefer to have vacant possession. They are willing to entertain a new lease with KT, but does not want to be bound to a long term lease (3-5 years was mentioned by Sandy Minuk). They think the current market rent there is between $6-8 net. KT currently pays $3.5. They talked about increasing it by a dollar or two a square foot, but they also said $14,000 in annual rental income is not a big deal for them. If it is a reduced space, they would like to “walk-it-out” with KT to know what space KT want to occupy. They think that KT would like access to the loading dock (Ms. Kim mentioned that this may not be the case). The impression they gave us is that the longer the term of the lease, the closer to the market rent they would want to see. Looks like 5 years would be the outside of what they are willing to give.

2. Solar panel. They want to know what’s going on there. They want to know if the credit received from Toronto Hydro was being absorbed by KT (subsidy to KT)? …

3. They feel the environmental site assessment delivered by us was inadequate (vis-à-vis the bore holes and the ground water testing). They would commission a new ESA as the transaction progresses. They said they anticipate the new ESA to uncover issues, and that those issues mean costs for environmental remediation. The cost of such environmental remediation could be high, and the buyer would not be interested in bearing it alone. They would be looking to the seller to contribute (ie. $$$). If this is a non-starter for the seller, they would like to know now. This would be a deal killer for them.

4. They want the DD clock to be re-set. In other words, 60 days from the date the KT lease is resolved.

They voiced that they are very motivated to buy. … [Emphasis added]

[46] On June 5, 2019, Ms. Won provided a copy of the APS to Ms. Novak with certain financial terms redacted. Her email to Ms. Nowak states:

During a meeting we had today with the buyer and buyer’s lawyers, the buyer made it clear that the buyer was flexible and would be happy to negotiate a revised lease, provided that your client negotiates in good faith and reasonably (for a reduced space, if your client so requests), for a term of 3 to 5 years or to accept vacant possession of your client’s space.

As you and I both know your client is in default under their lease (whether the valid lease is the 2010 lease or the 2013 lease). And as we both know, the only reason my client has not yet enforced the lease against your client is that my client is controlled by the parents of your client. When my client’s transaction closes, your client will be facing a landlord controlled by unrelated, dispassionate businesspersons.

The buyer also told us that if your client would like to vacate and needs some time (up to 12 months) following the closing in order to relocate or wind down your client’s business, the buyer would be wiling to accommodate your client, so long as a termination agreement is in place on terms reasonable to the buyer.

My client’s principals are of the view that it would be in your client’s best interest to seize this opportunity and proactively either negotiate a new lease with the buyer or negotiate a termination agreement with the buyer or my client.

If your client is interested in negotiating a new lease with the buyer or a termination agreement, then please prepare a draft offer to lease or a draft termination agreement and send the draft to me. I will relay your draft to the buyer for their consideration.

Please remember that the buyer will not entertain terms that are not arm’s length. [Emphasis added]

[47] On June 12, 2019, Mr. Lee, counsel for Klara, sent the following to Lawrence, Mr. Herbert and Ms. Won:

To clarify, I’m not advocating a softer approach regarding KT Web – that’s a misapprehension shared by Mr. Kim and Mr. Herbert. For Mrs. Kim and myself, it’s not a question of being softer or aggressive. Mrs. Kim’s anxiety is for truthfulness, fairness and accuracy. The absolute truth is that all of the dealings amongst the Kim family members have not been at arm’s length and it’s illusory to stand self-righteously on the letter of contracts that were not contemplated to be enforced. The same can be applied to Kore Times unilaterally abandoning the lease at the building years ago. Mrs. Kim cannot in good conscience give less than truthful evidence of the essential nature of the lease arrangements with KT Web. Mrs. Kim does not want to be the instigator of court action against her child based only a paper contract without substance. She will not bear false witness, especially against her own child. … [Emphasis added]

[48] On June 14, 2019, Ms. Won contacted Ms. Nowak to ask whether Thomas and Cristina would be agreeable to a meeting with the landlord and their solicitors to discuss KT’s future in the building.

[49] On June 14, 2019, Ms. Won sent the following email to the parties and their lawyers:

As Mr. Lee suggested, could we have a meeting with everyone (both Mr. Kim & Mrs. Kim, Thomas & Cristin (and Catherine)) with all their lawyers to talk about this transaction?

During the meeting, I would like to remind everyone that the buyer can waive the KT lease condition and proceed with closing. There are no conditions left in the seller’s favour to walk away from the sale. I received the impression during the meeting with the buyer last week that the buyers are motivated. If all other conditions are satisfied, there is a genuine likelihood that the buyers may choose to waive the KT lease condition and close regardless. This may be KT’s best (and perhaps last) chance to have a say about their future in the building.[Emphasis added]

[50] Ms. Nowak once again advised Ms. Won on June 17, 2019 that she had contacted her clients and that KT Web was “not interested in meeting at this time”.

[51] By letter dated June 18, 2019, Lawrence’s lawyer, Mr. Herbert, demanded that Klara sign a direction authorizing the engagement of litigation counsel to evict KT Web. His letter states:

Mr. Kim and I are not satisfied with the progress of this transaction.

The key impediment to closing is the KT Web lease.

We believe that we have given KT Web sufficient time and opportunity to enter into an agreement with the purchaser. KT Web appears uncooperative. From our point of view, Ms. Nowak’s email to Ms. Yon of June 17, 2019 was the “last straw”.

We have given KT Web a chance to make a deal with the purchaser and they have spurned the opportunity. It is time to evict KT Web.

I enclose a Direction to Ms. Yon to proceed with an eviction, signed by Lawrence Kim.

We are prepared to give Klara until 4:30 pm on Thursday, June 20, 2019 to sign the Direction and send it to Ms. Won. Should she refuse to do so, Mr. Kim will bring a motion for, inter alia, an order granting to him control of the sale on behalf of 104. …

[52] On June 20, 2019, Daniel Michaels sent an email to Ms. Won asking for an update and stated:

We would like to see a proposal from your client and the tenant by next Wednesday (June 26) that attempts to resolve our concerns based on our conversations from two weeks ago. My clients have expressed to me that if they don’t receive an acceptable proposal by then, they will look to terminate the agreement, entre into mutual releases and ask for the deposit back.

[53] As of the date of the hearing of this motion, GTA had not terminated the Amended APS.

[54] On June 21, 2019, Mr. Lee responded to Mr. Herbert of June 18, 2019 as follows:

… The fact that KT Web, inexplicably, does not want to come to the table for its own interests is unreasonable and incomprehensible. However, that does not change the fundamental conclusion set out in the above quote that Mrs. Kim will not collude or participate in a legal action against KT Web. Mrs. Kim is profoundly heart-broken that her whole family has broken down to be unable to talk to each other. Even Mr. Kim saw Thomas and Cristina last weekend, apparently without a word about the KT web lease issue. And yet Mr. Kim has no qualms about calling in attack litigators on his own son and threatening his only source of income, without a word or notice to Thomas’s face. The whole Kim empire of businesses, with Hankook Ilbo at the centre, was created over kitchen table talk and mostly bare written documents of convenience, without the weight of substance or legitimate enforce-ability. It is not a simple matter of wanting to do what we desire. Who will provide the affidavit or viva voce evidence to present to a court supporting the lease(s). Mrs. Kim will not risk perjuring herself or bear false witness. Will Mr. Kim? …

Hence we adopt the view suggested in Ms. Won’s email yesterday at 13:21:

We close with an estoppel from KT acknowledging the 2011 lease as the valid lease. We give a purchase price abatement to the buyer in the amount equal to the difference between the market rent and the rent under the lease. There are some issues with this suggestion:

• We had delivered the 2011 lease to the buyers initially. Thomas and Cristina “ambushed” the buyers during their first site visit and delivered the 2013 lease in an envelope. Without an “incentive”, I am not sure that Thomas or Cristina would sign a tenant estoppel acknowledging the 2011 lease as the lease in force;
• We may be paying (or giving a credit to the buyer) a substantial sum (depends on what market rent is);
• Thomas and Cristina still run the risk of being evicted from the building, if they fail to pay or otherwise comply with the terms of the lease.

BUT subject to the following notes:

1. We need to insist on KT Web providing an estoppel for whatever they deem correct

2. The buyer has to accept after they see what the estoppel says

3. Any credit or abatement by the seller has to be subject to negotiated agreement

4. We also need to disclose immediately the existing environmental study, for the buyer to be aware and not put the seller at risk of damages for lack of disclosure or misrepresentation; [Emphasis added]

Challenges to the Completion of the APS

[55] Lawrence describes several challenges to the completion of the APS with GTA.

[56] First, although Klara and her lawyer have encouraged Thomas to negotiate a new lease. KT Web refuses to negotiate a new lease. He states that “Thomas refuses to play ball with Klara and me”. I also no

[57] Second, he believes that GTA is on the verge of walking away from the APS. He refers to an email to Ms. Won received from Daniel Michaels, the lawyer for GTA, on June 20, 2019 that threatening to terminate the Amended APS if the KT Web lease issue had not been resolved by June 26, 2019. I note that no such action was taken as of the date that this motion was heard.

[58] Third, the solar roof panels located on the roof of the Bridgeland Property are owned by the Korean Broadcasting Corporation, not 104. He states that there are “some complications” in having the solar panel system conveyed to GTA by KBC. He states that he and Klara can overcome this impediment as they are shareholders of KBC and can convey the solar panels.

[59] Fourth, there are potential environmental issues with respect to the Bridgeland Property. GTA has indicated that it will do “bore hole” testing and other environmental testing during the due diligence period. If there are environmental issues, Lawrence is confident that he can “make a deal” with GTA if necessary.

[60] Klara submits that the eviction of KT Web will not guarantee the closing of the sale to GTA given the other outstanding conditions identified above.

Lawrence’s Motion for an Order designating him as the sole decision maker for 104 in relation to the APS

[61] Lawrence’s motion, dated June 26, 2019, is before me for determination. He seeks the following relief:

• An order designating Lawrence as the sole decision maker for 104 in relation to the marketing and sale of the Bridgeland Property;
• An order that Lawrence have sole authority to give instructions to the real estate lawyer handling the transaction on behalf of 104 and any further lawyer retained by 104;
• An order authorizing Lawrence to sign on behalf of 104 any agreement of purchase and sale, amending agreement, any lease with KT Web and any other documents necessary to close the sale of the Bridgeland Property;
• An order authorizing Lawrence to sign on behalf of the Korean Broadcasting Corporation any document suggested by the real estate lawyer Boo Yon Won; and
• An order that Klara has no authority or decision-making power with respect to the sale of the Bridgeland Property.

[62] The sole issue before the court is whether it is appropriate to issue an interim order that prohibits Klara from exercising any control over the sale of the Bridgeland Property including taking steps to evict KT Web from the Bridgeland Property in order to complete its sale.

LAWRENCE’S POSITION

[63] Lawrence submits that his motion is brought pursuant to:

(1) the Consent Order and, in particular, its provisions which provide that: (a) the Bridgeland Property is to be sold under the supervision of the court; (b) any dispute with respect to the sale be resolve on motion to the court; (c) that both parties cooperate with the sale of the Bridgeland Property; and

(2) Subsection 248(3) of the OBCA which permits the issuance of an interim order.

[64] Lawrence submits that an interim order should be granted under s. 248(3) of the OBCA giving Lawrence the control of the sale because:

(1) The sale is in the interest of the corporation (a 13-fold increase in value);

(2) KT Web/ Thomas Kim are obstructing the sale; and

(3) Klara refuses to take the necessary steps to close the deal; in particular, she refuses to evict KT Web/Thomas.

[65] He further submits that such steps include authorizing the commencement of eviction proceedings against KT Web given that its’ rent is in arrears as this may result in the eviction of KT Web and thus eliminate the risk that the sale of the Bridgeland Property will not close because of 104’s failure to comply with the Market Rent Condition.

KLARA’S POSITION

[66] Klara submits that Lawrence cannot reasonably expect that:

• 104 should complete the sale of the Bridgeland Property under any circumstances and at any cost;
• Commencing an eviction proceeding against KT Web would be consistent with Lawrence’s fiduciary duty to 104 to act in its best interests when there is strong evidence to the contrary; and
• Taking away the decision-making power of 104’s long time acting director and controlling mind, Klara, would result in a just and equitable solution resolving the current issue faced by 104.

[67] Klara further submits that there has been no conduct that was oppressive, unfairly prejudicial or amounts to an unfair disregard of Lawrence’s interests.

[68] Klara further submits that Lawrence is not entitled to equitable relief given his conduct.

ANALYSIS

[69] The Consent Order provides that both parties are to cooperate with respect to the sale of the Bridgeland Property and that such sale shall be under the supervision of this court with any disputes resolved on motion. I do not find that the Consent Order provides independent legal authority for the interim order sought by Lawrence. As a result, I turn to address whether an interim order under s. 248 of the OBCA should be granted.

The Oppression Remedy

[70] The oppression remedy under s. 248 of the OBCA provides that a shareholder, officer, director or other stakeholder of a corporation, may, when the affairs of a corporation, or the powers of a director of the corporation, are being performed in a manner that is oppressive, unfairly prejudicial or that unfairly disregards the interests of the complainant stakeholder, apply to the court for an order to rectify matters in any way the court sees fit.

[71] In BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, the Supreme Court of Canada outlined the following principles:

• To establish a claim for the oppression remedy, a complainant must show that: (1) the evidence supports the reasonable expectation asserted by the complainant: BCE Inc., para. 68. (2) the reasonable expectation was violated by conduct that amounts to “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest: para. 68
• The oppression remedy is an equitable remedy. As a result, the court may enforce not just what is legal but what is fair having regard for business realities. Further, what is fair is judged by the reasonable expectations of the stakeholders just and equitable and the relationships at play: paras. 58-59.

Reasonable Expectations

[72] Lawrence submits that he holds the following “reasonable expectations”.

Lawrence will have a say in the operation of 104 and the Bridgeland Property

[73] Lawrence and Klara are both 50% shareholders of 104. Klara states that Lawrence does have a say in the operation of 104 as an equal shareholder and has conducted himself as such without impairment.

Klara will abide by the Consent Order and in particular the provision which states that “... both parties cooperate with the sale of [the Bridgeland Property]”

[74] Klara agrees.

Klara will take the necessary steps to close the sale to GTA

[75] Klara agrees.

[76] Lawrence states that Klara has presented no plausible alternative solutions to Lawrence’s strategy of evicting KT Web in order to close the sale to GTA. Lawrence states that KT Web has repeatedly refused to negotiate a new lease in order to satisfy the Market Rent Condition. Lawrence disputes Klara’s assertion that she has done everything in her power to resolve the KT Web lease issue.

[77] Lawrence states that the Market Rent Condition requires a new lease to be negotiated with KT Web however KT Web has made it impossible to fulfill that condition by refusing to negotiate. Lawrence states that KT Web’s refusal to negotiate a new lease has left it in a position where it needs to evict KT Web in order to close the sale.

Klara will not sit back and allow KT Web/Thomas to block the sale, especially when the sale price is 13 times the sale price in 1995

[78] Klara states that she has not been sitting back. She has been trying to arrange and encourage negotiations and other means for the Market Rent Condition to be satisfied. The failure of her efforts does not mean that she has allowed her son to block the sale.

Klara will honour her fiduciary duty to act in the interests of 104 and that she will not favour the interests of KT Web/ Thomas over the interests of 104

[79] Klara agrees. Further discussed below.

Commencing an eviction proceeding against KT Web would be consistent with Lawrence’s fiduciary duty to 104 to act in its best interests as he believes that an eviction proceeding is a condition precedent to closing the sale to GTA

[80] Klara disagrees. She questions the grounds for Lawrence’s belief that the sale of the Bridgeland Property to the GTA under the current APS is the most “favourable” and in the best interests of 104. She states that if the Bridgeland Property is not sold, then it may increase in value more than other means if the cash value of the property is received now.

[81] Lawrence states that the sale price is favourable as it is thirteen times what they paid for the Bridgeland Property. He states that he does not wish to hold the building any longer given his age in the hopes of a further capital gain. He wishes to realize the capital gain now.

Taking away Klara’s decision-making power in respect of 104 would be just and equitable as she favour the interests of KT Web / Thomas over 104’s interests.

[82] Klara states that her decision not to pursue the eviction of KT Web is due to potentially enormous legal and commercial consequences which may negatively affect 104. She suggests that the merit of an eviction proceeding is dubious for several reasons: (1) which KT Web lease governs?; (2) what lease terms apply to the eviction? (3) the doctrines of estoppel and laches may apply given that 104 (including Lawrence) unilaterally acquiesced to KT Web’s underpayment of rent; (4) given that Klara managed 104 and the Bridgeland Property, what evidence will Lawrence rely upon to establish the governing lease between 104 and KT Web as well as the facts to support the eviction?

[83] Lawrence states that if the interim order is granted, he would approach KT Web again to renegotiate a new lease, failing which he would commence eviction proceedings.

The Test for the Issuance of an Interim Order under [s. 248(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html#sec248subsec3_smooth) of the [OBCA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html)

[84] The relief sought by Lawrence, namely, to give him exclusive control of the sale of the Bridgeland Property to GTA, amounts to a request for an interim injunction that prohibits Klara from exercising any decision-making functions as an officer and director of 104 in relation to the completion of that sale.

[85] I adopt the view expressed by Justice Pepall, as she then was, in Le Maitre Limited v. Segeren 2007 CanLII 18735 (ON SC), [2007] O.J. No. 2047, that the three part test for an interlocutory injunction described in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 applies when an interim injunction is sought under s. 248(3) of the OBCA unless the dictates of fairness are “… so overwhelming that it may be appropriate to forego compliance with any one or all of the balance of convenience, irreparable harm or an undertaking as to damages”. In my view the question is ultimately whether it would be “just and equitable” to grant interim injunctive relief under s. 248 of the OBCA.

[86] Although she expressed some initial reluctance to the sale, Klara agreed to list the Bridgeland Property for sale in November, 2018 for $16 million. An offer to purchase was received from GTA for $12.5 million and Klara refused to accept as she felt that the Bridgeland Property had a value of $13 million based on what her real estate agent had told her. On February 9, 2019, Klara agreed to the Consent Order which permitted her to make an offer to Lawrence to buy his interest in 104 and, if unsuccessful, that the Bridgeland Property be sold under court supervision. On March 5, 2019 Klara made an offer to purchase Lawrence’s interest in 104 which he refused. On March 8, 2019 Klara and Lawrence agreed to re-list the Bridgeland Property for sale at $13.8 million. In about early April, 2019, Lawrence signed GTA’s offer to purchase the Bridgeland Property for $12.9 million. Klara signed the offer a few days later on April 15, 2019. Klara and Lawrence agreed to sign an Amended APS which added certain terms for 104’s benefit as a result of their exercise of the Solicitor Review Condition in the APS. The Market Rent Condition remained in the Amended APS. None of the above behaviour supports the view that Klara favoured KT Web’s interests over 104’s interests.

[87] The Market Rent Condition requires that 104 and GTA agreeing on the form and content of an amended and restated lease at market rents for all non-arm’s length leases. 104’s lease with KT Web, whether the 2010 Lease or the 2013 Lease, is a non-arm’s length lease. There appears to be nothing in KT Web’s lease of the Bridgeland Property that requires it to enter a new lease at market rent in these circumstances which likely explains why KT Web has refused to discuss or enter a new lease at market rent.

[88] In mid-May, 2019, Klara spoke with her son Thomas regarding a new lease. She learned that KT Web would be interested in signing a new lease with GTA for about one half of the space that it currently rents however he could not afford the cost of moving printing equipment to the main floor and partitioning space on the ground floor. When 104’s lawyer followed up with KT Web, she learned in early June, 2019 that KT Web was unwilling to either enter a new lease or terminate its existing lease.

[89] Lawrence submits that delivering vacant possession will satisfy the Market Rent Condition however that is not apparent from the language of that condition. In fact, the time for satisfaction of that condition may well have passed by now. However, with the agreement of GTA there may be a number of solutions, including some outlined above in correspondence from various lawyers, that may be acceptable to GTA other than strict compliance with the Market Rent Condition such as: (1) delivering vacant possession, whether by eviction or by agreement (and presumably with financial assistance from 104); (2) GTA’s waiver of the Market Rent Condition without compensation if all other conditions are satisfied (which Ms.. Won thought was a “genuine possibility” on June 14, 2019); (3) GTA’s waiver of the Market Rent Condition in exchange for 104 a reduction in the price to be paid by GTA for the Bridgeland Property.

[90] Lawrence’s position is that there are no other “plausible strategies” to closing the sale to GTA other than by delivering vacant possession by means of eviction. I have outlined other self-evident options, some of which do not require KT Web’s agreement, however they appear to be approaches that Lawrence would prefer to avoid as he has not discussed them in his affidavits nor is there evidence that he has explored these other options with Klara, GTA and KT Web. Lawrence’s reasonable expectation that Klara will take necessary steps to close the sale also applies to him and thus these other options must be seriously considered rather than implicitly being dismissed as “implausible”.

[91] Eviction proceedings may, if successful, be the cheapest strategy but I accept Klara’s submission that it may not be a successful strategy unless she were to mis-state events regarding the non-arm’s length dealings between KT Web and 104. She states it is for that reason she has refused to authorize the commencement of eviction proceedings. There is no reasonable expectation that Klara should support the advancement of an eviction proceeding of dubious merit in order to close the sale.

[92] The following statement of principle by Justice Chozik in Marot v. Marot, 2019 ONSC 866, at para.56, is equally applicable here:

I also conclude that the wife's opposition to the husband's decision-making is not oppressive, unfairly prejudicial or amounting to unfair disregard. As a director of Injasuti, the wife has a fiduciary duty to act in the best interests of the company. She also has a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances. The wife is entitled to, indeed she is obliged to, use her judgment to make decisions in the best interest of the corporation. The court is obliged to give deference to the business decisions of a director so long as those decisions lie within a range of reasonable alternatives. In my view, the wife's refusal to approve the Term Letter falls within a reasonable business alternative.

[93] The first requirement of the three-part test is that the moving party must show that there is a serious question to be tried. In other words, the claim must not be frivolous or vexatious. I am not satisfied that there is a serious issue to be tried regarding whether Klara’s refusal to authorize that 104 commence eviction proceedings against KT Web amounts to oppressive conduct within the meaning of s. 248 of the OBCA as her refusal was a reasonable business decision that is owed deference.

[94] In any event, in all the circumstances, I find that it would not be “just and equitable” to remove Klara from her decision-making role at 104 in respect of the sale.

Lack of “Clean Hands”

[95] Klara cites several reasons why Lawrence should be disqualified from obtaining this equitable relief.

[96] First, Klara submits that Lawrence acted in an oppressive manner when he unilaterally moved the Newspaper out of the Bridgeland Property without proper authorization and in breach of its lease with 104. She dismisses Lawrence’s reply that he did so for “legitimate business reasons” as grossly inadequate and self-serving.

[97] Second, Klara also states that Lawrence has disregarded all necessary steps that are needed to be taken before he can demand the authorization of an eviction proceeding against KT Web.

[98] Third, Klara submits that Lawrence improperly disclosed this motion to GTA without the authorization of Klara, her lawyer or 104’s lawyer. She states that his unauthorized disclosure to GTA has resulted in GTA hardening its position and eliminated other options to further negotiate with respect to the KT Web lease without having to vacate the premises.

[99] Fourth, Lawrence attempted to surreptitiously appoint his own personal counsel as the lawyer for 104 in the sale of the Bridgeland Property.

[100] Lawrence does not deny these allegations. Instead he submits that it is too late for Klara to raise a “clean hands” argument given that she has already consented to equitable relief sought by Lawrence when she agreed, on February 5, 2019, to the Consent Order requiring the sale of the Bridgeland Property under court supervision. He states that the interim order merely seeks to implement the Consent Order.

[101] In my view, all of the above considerations are relevant on this motion for equitable relief given that he has previously put his own interests ahead of 104’s interests, particularly in relation to Lawrence’s unilateral decision to move the Newspaper from Bridgeland Property in breach of its lease with 104. Even if I had been prepared to grant the interim injunctive relief sought, I would have declined to do so as I find that Lawrence does not come to court with “clean hands” in seeking this interim order.

CONCLUSIONS

[102] Motion dismissed. I ask that the parties make every effort to settle the issue of costs failing which I direct that: 1) Klara deliver her costs submissions by August 7, 2019; 2) Lawrence deliver his responding submissions by August 14, 2019; 3) Klara deliver reply submissions by August 21, 2019. Each submission shall be no more than five pages not including any settlement offers or outline of costs.

Mr. Justice M. D. Faieta

Released: July 31, 2019

COURT FILE NO.: FS-15-406360

DATE: 20190731

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LAWRENCE KIM

Applicant

– and –

KLARA KIM

Respondent

REASONS FOR DECISION

Mr. Justice M. D. Faieta

Released: July 31, 2019