Bateni v. Jamali, 2020 ONSC 1630

COURT FILE NO.: CV-14-00499552-0000 DATE: 20200522 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

BETWEEN:

ROY BATENI also known as MOHAMMAD ALI BATENI and 2287214 ONTARIO LTD. Plaintiffs – and – MASSOUD JAMALI also known as TOM JAMALI and CALEDON CHRYSLER DODGE JEEP RAM INC. Defendants

COUNSEL: A. Paul Gribilas and Jonathan Rosenstein, for the Plaintiffs David Conklin and Dan Block, for the Defendants

HEARD: September 30, October 1, 2, 3, 4; December 10, 11 and 12, 2019

L. A. PATTILLO J.:

Introduction

[1] This action arises out of the dealings between Roy Bateni (“Bateni”) and Massoud Jamali, also known as Tom Jamali (“Jamali”) between December 2010 and November 2013 concerning the acquisition and ownership of a Chrysler Canada new and used car dealership in Bolton, Ontario.

[2] Bateni and 2287214 Ontario Ltd. (“228”) claim against the defendants Jamali and Caledon Chrysler Dodge Jeep Ram Inc. (“Caledon Chrysler”) for damages for breach of contract or, in the alternative, for breach of fiduciary duty and diversion of corporate opportunities as well as for oppression pursuant to s. 248 of the Business Corporations Act, R.S.O. 1990, c.B.16 (“OBCA”). Bateni also claims against Caledon Chrysler, for wrongful dismissal.

[3] In order to expedite the trial, the parties were directed at a case conference to file affidavits of all witnesses. In response, the plaintiffs filed four affidavits and the defendants six together with reports from two experts. In light of the significant credibility issues between the parties, at a trial management conference, in advance of the trial, I directed that the parties call viva voce evidence from their main witnesses at trial, including their experts, with the right if requested, to cross-examine any of the affiants who did not testify in the event the affiant’s evidence was relied upon.

Background

[4] The following are my factual findings from the evidence, including the affidavits and documents.

[5] Bateni, whose legal name is Mohammad Ali Bateni, was born in Iran. In 1986, following three years of school in Austria, he decided to come to Canada rather than return to Iran where there was a war going on. While he initially landed in Vancouver, he very shortly ended up in Toronto. In 1988, after a number of odd-jobs, he started working for car dealerships selling new and used cars. In due course, he became a very successful new and used car salesman/manager.

[6] Between 1988 and 1997, Bateni worked for primarily Chrysler Canada dealerships in both new and used car sales as well as leasing. In 1997, he joined Willowdale Dodge, for the first year as Used Car Sales Manager and then for the next five years as General Sales Manager. In 2003, Bateni joined a group of Chrysler Canada dealerships where he became the Used Car Manager at the group’s Ontario Chrysler dealership until November 2010.

[7] 228 is a corporation incorporated under the OBCA and controlled by Bateni. It was incorporated by Bateni to hold his share interest in the Bolton Chrysler dealership.

[8] Jamali was also born in Iran. After escaping from Iran in 1985, he came to Canada in 1988 as a political refugee. After finishing Grade 13, he went to York University where he obtained a BSC in Chemistry in 1991. While in school, he started selling cars. Following graduation, Jamali continued to sell cars. By 1996, he was very successful in wholesaling motor vehicles.

[9] In 2003, Jamali, along with Hossain Totonchian (“Totonchian”) and Michael Croxton (“Croxton”), purchased Willowdale Dodge. They subsequently changed the name to North York Chrysler Jeep Dodge Ram Fiat (“North York Chrysler”). At the time of these events, Jamali was responsible for finances and used car sales at North York Chrysler.

[10] Totonchian is also from Iran. He came to Canada in 1982 and after attending university, started working in the automotive industry in 1986. He met Jamali in 1991. The two worked together for several years prior to becoming partners in North York Chrysler and were very close friends. Totonchian was Jamali’s best man at his wedding and described their relationship as “like brothers”. Totonchian was the General Manager of North York Chrysler.

[11] After leaving Ontario Chrysler in November 2010, Bateni decided to take some time off to consider his options. He also planned a lengthy vacation in Iran. Upon his return he wanted to become an owner in either a used car operation or a car dealership rather than continuing as an employee.

[12] Bateni and Jamali first met when Bateni worked at Willowdale Dodge and then again in 2003 when Bateni alerted Jamali to the fact Willowdale Dodge was for sale.

[13] In December 2010, Jamali, having learned that Bateni had left Ontario Chrysler, contacted him and they subsequently met at North York Chrysler. During the meeting, Bateni indicated that he wanted to get into an ownership position in the car business, either on his own or with others. Jamali raised the possibility of going into business together in a car dealership which Bateni indicated he was interested in.

[14] In addition to discussing the possibility of going into business together, at their initial meeting, Jamali, who knew Bateni had substantial experience and success in used car sales, asked if he would conduct an audit of North York Chrysler’s used car sales department to try to improve its profitability. Bateni agreed and worked on the audit for several days prior to submitting it to Jamali in early January 2011. Subsequently, Bateni’s recommended changes to the used car business were implemented, improving its profitability. Bateni never asked to be paid for his work and Jamali never offered.

[15] After their initial meeting, Bateni and Jamali met again in late December 2010 and drove to check out a possible location for a used car lot in northwest Toronto which turned out to be unsuitable. Totonchian accompanied them. Jamali told Bateni that Totonchian was his partner and would be included in the proposed new dealership. While Bateni knew that Totonchian was Jamali’s partner in North York Chrysler, it was the first time he understood Totonchian would be involved in the proposed dealership.

[16] During the trip, they discussed possible dealership locations and Bateni suggested considering the area of Bolton, which was one of the locations Jamali and Totonchian had also been considering.

[17] Thereafter, Bateni and Jamali had a number of meetings during which they agreed, given their experience and connections with Chrysler Canada, that they would pursue a Chrysler dealership. As Jamali was the dealer principal at North York Chrysler, Chrysler Canada would not permit him to be a dealer principal in another dealership. Accordingly, they agreed that Bateni would be the dealer principal and general manager of the new dealership.

[18] Bateni also told Jamali that he did not plan to invest any money but that he would contribute his time and experience for a reduced salary for his capital contribution and Jamali agreed with that. Jamali denies that there was any such discussion and says that he told Bateni that he would have to make a cash investment, but he cannot remember when or what was said.

[19] In terms of ownership, Bateni knew that Jamali would be the majority owner. He told Jamali he would like 40% ownership interest. In response, Jamali told him they would discuss it later, once everything was in place. There was no discussion of what Totonchian’s involvement in the new dealership would be.

[20] Jamali and Bateni also agreed that Jamali would concentrate on the details of pursuing the new dealership, including securing the location and dealing with Chrysler Canada and until the dealership was obtained, Bateni would go to work at North York Chrysler.

[21] When Bateni returned from Iran in or around mid-March 2011, he began work at North York Chrysler as the Used Car Sales Manager on a contract basis at a salary that was significantly less than he had been making at Ontario Chrysler.

[22] In turn, Jamali pursued a new dealership with Chrysler Canada. Through his contacts with Chrysler Canada, he learned that the Chrysler dealership in Bolton was having financial difficulties. He told Chrysler Canada that he was interested in obtaining the Bolton dealership if, and when, it became available.

[23] As a result, on April 28, 2011, Jamali received a letter from Chrysler Canada advising that Chrysler Canada would process Jamali’s application for a standard Sales and Service Agreement for Chrysler, Jeep, Dodge brands (“Dealer Agreement”) for the Caledon area provided that he has completed the requirements set out in the letter, including:

Prior to November 1, 2011: a) A location has been secured in Bolton which meets Chrysler’s current design criteria; and b) The entire “qualification package” including the nomination of a suitable General Manager will have been completed.

Prior to February 28, 2012: c) He has complied with all laws, regulations, including environmental and licensing requirements of the Province of Ontario; d) Arranged for a new vehicle line of credit of $3,000,000; and e) Have otherwise qualified for Chrysler’s standard Dealer Agreement.

[24] To assist in securing the Bolton dealership from Chrysler Canada, Jamali utilized the services of Roy Hartley (“Hartley”), a friend of his, to assist him. Hartley is a CA who has experience in the automotive industry and specifically in the finance departments of several car dealerships. He has done several tasks for Jamali, all he says without remuneration.

[25] Thereafter, Jamali, with the assistance of Hartley and a real estate agent, located property in the southern part of Bolton consisting of approximately 4.5 acres of land located at 12435 Highway 50 in Bolton (the “Property”). The Property was previously a Ford car dealership.

[26] On May 10, 2011, Jamali, in trust for a company to be incorporated, entered into a lease for the Property with Inman Holdings Limited for a term of 20 years. The lease was conditional upon receiving an approval agreement from Chrysler Canada.

[27] On May 19, 2011, Jamali caused to be incorporated two companies under the OBCA: Caledon Hills Jeep Dodge Ram Inc. (“Caledon Hills”) and Caledon Chrysler Jeep Dodge Ram Inc. (“Caledon Chrysler”). Similar to the corporate structure at North York Chrysler, by incorporating two companies, Jamali intended that Caledon Chrysler would hold the lease for the Property and Caledon Hills would own and operate the business of the new dealership.

[28] By letter dated May 26, 2011, which was drafted by Hartley, Jamali formally applied to Chrysler Canada on behalf of Caledon Hills for the Bolton dealership. Jamali stated that notwithstanding the conditions yet to be fulfilled, it was hoped that the dealership could be opened by January 2012. Jamali advised that the Property had been secured but in order to finalize the lease, Chrysler Canada’s approval of the application was required. He also set out the timing of the proposed renovations to the Property and that he had had preliminary discussions with financiers. Finally, the letter enclosed a 19-page business plan.

[29] In particular, the letter stated, “The partnership structure, although not final, will have the undersigned with a minimum of 51% effective ownership and Hossein Totonchian with 29%. A third partner will join the Group at an ownership level for the first time (Roy Bateni) who will own 20%.”

[30] Later in the letter, Jamali spoke about Bateni as follows: “Although Hossein and I will take an active role in the operation of this new dealership it is our intention to put Ray’s [sic] name forward as being the third partner and General Manager. Roy will be responsible for the day to day operation of the business and be a full time employee. Roy’s experience in the industry is substantial and his commitment to this project is a complement to ours.”

[31] On June 3, 2011, Jamali, on behalf of Caledon Hills, applied to Ally Credit Canada Limited (“Ally Credit”) for a new and used vehicle floor plan financing package for the new dealership which Jamali said had been tentatively awarded “to the below noted principles [sic] in Caledon, Ontario.” Listing Jamali, Totonchian, and Bateni as the principals, with the same ownership percentages as in the application to Chrysler Canada, Jamali stated: “We are in the process of working with the partners and their legal counsel to finalize the corporate structure and prepare a Partnership Agreement.”

[32] On June 27, 2011, Chrysler Canada sent an email to Jamali requesting that Bateni provide an official Sales and Service Agreement in respect of the dealership application. On the same day, Bateni completed and signed the application which Jamali sent to Chrysler.

[33] Bateni says Jamali was involved in helping him fill out the application details, specifically telling him to put “TDB” in answer to amount invested and number of shares, answering “yes” to having a degree from Webster University in Austria (Bateni attended but left before graduating to come to Canada) and the amount of his North York Chrysler salary (which was inflated from the actual salary). Jamali says he had no involvement in Bateni filling out the application.

[34] On July 6, 2011, Chrysler Canada sent a letter addressed to Jamali, Totonchian and Bateni c/o North York Chrysler (the “Caledon Hills LOI”) advising that Chrysler Canada would enter into a standard Dealer Agreement with them for Chrysler, Jeep and Dodge brands in Bolton, Ontario provided they completed the requirements listed in the letter prior to January 31, 2012, which included:

a) Completing all requirements relating to Federal, Provincial and Municipal licenses, except those requirements relating to inspection of the physical premises of the dealership, if any. b) Providing working capital for use in the business of not less than $580,000 and net capital investment of not less than $825,000. c) Arranging for a new vehicle wholesale line of credit I the recommended amount of $3,500,000 for the sole purpose of purchasing Chrysler products. d) Completing a refresh of the facility at the Property. e) Otherwise qualifying for the standard Dealer Agreement.

[35] On July 8, 2011, Ally Credit sent a letter to Jamali, approving wholesale floor plan credit lines for Caledon Hills in the amount of $3,700,000 for 100 new vehicles and $1,500,000 for 100 used vehicles and subject to certain terms and conditions. Jamali accepted and confirmed the terms in the letter.

[36] On August 22, 2011, Caledon Chrysler entered into a lease for the Property with Inman Holdings Limited on the same terms and conditions as the May 10, 2011 lease. The lease cancelled the May 10, 2011 lease.

[37] Between April and December 2011, apart from completing the Dealer Application in June 2011, Bateni was not involved in any of the steps that Jamali took to secure the Chrysler dealership in Bolton. He was busy working full time at North York Chrysler and received very little information from Jamali. Bateni never saw the lease and never received or saw a copy of the May 26, 2011 application to Chrysler Canada or the July 6, 2011 Caledon Hills LOI from Chrysler Canada approving Caledon Hills’ application subject to conditions, although Jamali told him their application had been approved.

[38] During this period, Bateni had a number of conversations with Jamali about his ownership interest in the dealership. He said his expectation was that he would have a 40% interest and Jamali never disagreed with that. Jamali agreed that Bateni had raised his desire to have 40% and he neither said yes nor no.

[39] Bateni said he understood that Jamali wanted to be the majority owner and he was fine with that. At the same time, it was not clear to him as to what Totonchian’s involvement in the ownership would be. He asked Jamali several times about his ownership interest and each time Jamali put him off by telling him he was working on it and to be patient.

[40] Totonchian had also asked Jamali several times since Chrysler Canada’s acceptance of their application in early July 2011 for the shareholders agreement for Caledon Hills only to be told by Jamali time and again that he was working on it and not to worry. As he trusted Jamali, he wasn’t overly concerned.

[41] In early December 2011, Jamali invited both Bateni and Totonchian to lunch at a local restaurant to celebrate the Caledon Hills dealership. At the lunch, Jamali handed a sealed envelope to both Bateni and Totonchian which he said contained a draft shareholders agreement. Jamali asked that they not open the envelope until after they left the restaurant in order that they could enjoy the lunch. The draft agreement, which was prepared by Hartley, provided, among other things, for the same ownership of Caledon Hills that Jamali had told Chrysler Canada in the May 26, 2011 application: Jamali 51%; Totonchian 29% and Bateni 20%.

[42] When Bateni read the draft agreement after the lunch, he was very disappointed with his proposed allocation of 20% as he was expecting 40%. He went to see Jamali later that afternoon to ask why his 40% had been changed. Jamali told him that the biggest thing was to start the dealership and build it. They could always revisit Bateni’s ownership interest later. He told Bateni that they needed to trust each other. Bateni said that he was ok with Jamali’s response and he agreed to his 20% interest.

[43] When Totonchian read the draft agreement following his return to North York Chrysler after the lunch, he was extremely upset and disappointed. He felt betrayed. He felt that Jamali’s proposed share allocation of 51%/29% was contrary to their agreement which they had made at the time they purchased North York Chrysler in 2003. At that time, although they had always discussed being equal partners in the dealership, prior to the closing they agreed that Jamali would receive a 51% ownership interest, Totonchian 39% and Croxton 10% and that if they either built or purchased another dealership, Totonchian would receive 51% and Jamali 49%.

[44] Totonchian was fine with Bateni’s 20% interest. He recognized that with both he and Jamali busy at North York Chrysler, they needed someone to run the Bolton dealership. Further, it was what he had previously suggested to Jamali. His issue was with Jamali. He immediately went to Jamali’s office to speak with him. He said it “wasn’t a good conversation.” He became angry at Jamali’s response which was to say, “This is business” and that he should just sign the agreement so they could move forward with the dealership. He said Jamali didn’t deny their earlier agreement. Rather he responded by telling Totonchian he would get 51% of the next dealership. Totonchian responded that Caledon Hills was the “next” dealership.

[45] Jamali agreed that Totonchian was angry. He denied that there was any agreement as Totonchian alleged. In his view, because he had done all the work to secure the Bolton dealership, he should be the majority owner.

[46] Over the next several days, Totonchian had a number of discussions with Jamali about his shareholding but Jamali refused to budge from his 51%. By mid-December, however, Jamali appeared to soften his position and told Totonchian that the shareholders agreement needed to be signed or the Caledon Hills dealership would be at risk. Jamali told him that he would revisit the ownership interest between them once the shareholders agreement was signed which Totonchian understood to mean he would receive more shares.

[47] All parties understood that in order for the Caledon Hills dealership to open as soon as possible and meet Chrysler Canada’s conditions for the dealership, a shareholders agreement had to be reached and signed in order to be submitted to both the Ontario Motor Vehicle Industry Council (“OMVIC”) for the registration of Caledon Hills under the Motor Vehicle Dealers Act (“MVDA”) and to Chrysler Canada to obtain the Dealer Agreement.

[48] OMVIC administers and enforces the MVDA, its regulations and code of ethics and, in particular, deals with the registration of anyone who wishes to engage in the trade of motor vehicles.

[49] On December 20, 2011, Jamali, Totonchian and Bateni, along with Totonchian’s wife Tana, and Hartley met at North York Chrysler and signed the shareholders agreement, essentially in the same form which Jamali had presented at their earlier lunch (the “Caledon Hills SA”). It provided, among other things, for the 51%, 29% and 20% share allocation. For tax reasons, both Jamali and Totonchian’s interests in Caledon Hills were held by corporations owned by their wives. Bateni’s interest was held by 228.

[50] On December 22, 2011, Chrysler Canada wrote a letter marked “Confidential” to the attention of OMVIC c/o Totonchian, Jamali and Bateni advising that Bateni had been approved as a dealer for the sales locality of Bolton with a targeted opening date of February 2012, that the ownership would be held by Totonchian, Jamali and Bateni and that Chrysler Canada approved of the ownership team operating the dealership and was committed to it.

[51] On December 30, 2011, Hartley delivered Caledon Hills’ business application to OMVIC for registration under the MVDA. The application included the Caledon Hills SA and Chrysler Canada’s December 22, 2011 letter approving Bateni as a dealer and the proposed ownership team.

[52] Following the Christmas holidays, and despite Jamali’s undertaking to renegotiate the share percentages between he and Totonchian, it quickly became apparent to Totonchian that Jamali had no such intention and was not prepared to relinquish his 51%. Totonchian decided that he no longer wanted to be partners with Jamali. Their dispute escalated to the point that it became clear, not only to Bateni, but to the other employees of North York Chrysler.

[53] Although Bateni tried to speak with Jamali about raising his 20%, Jamali deflected the conversation. When Bateni asked about the dispute with Totonchian, Jamali told him that he would deal with it.

[54] On or about January 6, 2012, Caledon Hills, by its solicitor, filed a Notice of Change with the Ministry of Government Services providing that on December 1, 2011, Jamali resigned as President and Bateni was appointed President. Jamali was shown as Chairman. Further, in addition to Jamali who was elected a director on May 19, 2011, Bateni, Tana Totonchian (Totonchian’s wife) and Tatiana Aguirre (Jamali’s wife) were each elected directors of Caledon Hills on December 1, 2011.

[55] In mid-January 2012, Jamali and Totonchian received an email from Chrysler raising questions about Caledon Hills’ share structure and requesting copies of corporate documents. Also, on January 17, 2012, OMVIC sent a response letter to Hartley setting out some issues it had in respect of the Caledon Hills application for registration. In particular, it requested clarification in respect of concerns relating to Jamali and his wife and their involvement in companies that had tax issues.

[56] In January 2012, in anticipation of the opening of the new dealership, Caledon Hills ordered 87 new cars from Chrysler Canada.

[57] In mid-January 2012, as a way of resolving their dispute, Jamali proposed that Totonchian sell him his interest in North York Chrysler and he would give up his interest in Caledon Hills. At the end of January, Totonchian accepted Jamali’s proposal.

[58] By the end of February 2012, the issues between Jamali and Totonchian and, specifically, how much Totonchian’s interest in North York Chrysler was worth, were still not resolved. At Jamali’s request, Croxton prepared a valuation of North York Chrysler but Totonchian felt that it was too low and was not prepared to sell his shares based on it. His view was Jamali manipulated the most recent financial statements in order to lowball the price he was prepared to pay for Totonchian’s shares. After three years of solid profits, the dealership showed substantial losses in December 2011, and January and February 2012. When he asked Jamali about it, Jamali said he had increased fixed expenses and maximized losses for the last quarter in order for North York Chrysler to pay less tax and get Chrysler Canada to lower its dealer sales incentive targets.

[59] On March 7, 2012, OMVIC sent a lengthy email to Hartley setting out OMVIC’s terms and conditions for registration of Caledon Hills. In a subsequent email to Jamali and Totonchian and others (not Bateni) on the same day, Hartley described OMVIC’s position as a “win!!!” and that Caledon Hills could go ahead with the current structure set out in the application.

[60] In anticipation of taking over Jamali’s interest in Caledon Hills, in March 2012, Totonchian spoke to Bateni to advise him generally about what was happening and asked him if he would still be interested in being involved in Caledon Hills if Totonchian became the owner. Bateni told him he would.

[61] On March 12, 2012, in an email to Jamali and Totonchian, Hartley noted that the ownership structure of Caledon Hills and the issues surrounding that “really need to be addressed and finalized (as quickly as possible)” and that without the final ownership structure, the entire application may be at risk.

[62] On March 21, 2012, Jamali wrote an email to Totonchian stating that as it did not appear they were making any progress on the ownership structure of Caledon Hills, he intended to proceed on his own and seek OMVIC’s approval of him as the sole owner of Caledon Hills. Totonchian responded quickly indicating his deep disappointment in Jamali’s conduct and advising that he intended to retain a lawyer to deal with the issue. They stopped talking to one another.

[63] At some point, Chrysler Canada became aware of the dispute between Jamali and Totonchian over their respective ownership interests in Caledon Hills and/or North York Chrysler.

[64] On March 28, 2012, Chrysler Canada wrote an email to Jamali and Totonchian stating that due to the “prolonged managerial issues and delays at Caledon Hills”, the 87 vehicles Caledon Hills had ordered would either be sent and invoiced to North York Chrysler or forfeited back to Chrysler Canada. Rather than discuss the response with Totonchian or Bateni, Jamali unilaterally returned the vehicles to Chrysler Canada.

[65] On March 30, 2012, Jamali and Totonchian met with the Dealer Network Manager and others from Chrysler Canada at North York Chrysler concerning the Caledon Hills application. At Jamali’s request, Chrysler Canada agreed to meet with each of them separately. Bateni was not told of the meeting or invited to it. Chrysler Canada informed them that if the ownership dispute in Caledon Hills was not resolved by April 10, 2012, the Caledon Hills LOI would be rescinded.

[66] Following that meeting, Chrysler Canada wrote a letter to Jamali and Totonchian (not Bateni) noting that all parties at the meeting were in agreement that the requirements and timelines set out in the Caledon Hills LOI had not been met and advising that Chrysler Canada would be rescinding the Caledon Hills LOI effective April 10, 2012, “should all of the undertakings as well as requests for information not be completed and delivered to the undersigned.”

[67] While Bateni was aware of the dispute between Jamali and Totonchian, he was not aware of the level to which it had risen or of Chrysler Canada’s March 30, 2012 letter.

[68] In early April 2012, in order to attempt to resolve the dispute between them Totonchian asked Croxton if Jamali was prepared to sell him his 51% interest in North York Chrysler based on Croxton’s earlier valuation. Although Croxton said he’d pass the inquiry on to Jamali, Jamali never responded to Totonchian.

[69] Rather than attempt to resolve the shareholding issue with Totonchian in order to meet Chrysler Canada’s deadline, on April 2, 2012 Jamali wrote a letter to Chrysler Canada (on Caledon Hills letterhead), applying for the Bolton dealership on behalf of Caledon Chrysler. The letter which was prepared by Hartley, was almost identical to Caledon Hills’ application letter of May 26, 2011 except that it incorporated much of the work already done by Caledon Hills in respect of the dealership. Further, Jamali stated that the ownership structure “although not final, will have the undersigned with a minimum of 51% effective ownership and partners to be named later who will own in combination, the remainder.” Finally, Jamali noted that a general manager will be named at a future date.

[70] Also, on April 2, 2012, Totonchian sent an email to Chrysler Canada seeking an indication if he could obtain approval as a principal for either North York Chrysler or Caledon Hills. Chrysler Canada deflected the inquiry, noting that nothing could be done until the letter of intent for Caledon Hills was cancelled and the Bolton dealership became available.

[71] On April 10, 2012, Chrysler Canada wrote a letter to Jamali and Totonchian confirming that effective at 5:00 pm that day, the Caledon Hills LOI was rescinded. Once again, Bateni did not receive a copy of the letter.

[72] On April 15, 2012, Bateni wrote an email to Jamali regarding an issue which had arisen with Totonchian over Jamali’s involvement in his pay-plan at North York Chrysler. He noted that as per Jamali’s request he had stayed away from the “current crisis” between them and that he had made it very clear to Totonchian that he did not want to get involved. He concluded by hoping that the two of them could resolve their dispute as soon as possible before it affected their business.

[73] On April 19, 2012, Jamali advised Chrysler Canada that Moise Sahakian (“Sahakian”), the then fixed operations manager responsible for the parts and service departments at North York Chrysler, would be the general manager at Caledon Chrysler. Jamali recruited Sahakian on the understanding that he could be replaced by someone else in due course. Sahakian never became the general manager at Caledon Chrysler.

[74] On April 25, 2012, Chrysler Canada issued a letter to Jamali, advising that Chrysler would enter into a standard Dealer Agreement for Chrysler, Jeep and Dodge brands with Caledon Chrysler for Bolton provided he had completed the requirements within the time periods listed in the letter (“Caledon Chrysler LOI”). The requirements in the Caledon Chrysler LOI were virtually identical to those in the Caledon Hills LOI except for the time lines. Jamali signed and accepted the letter.

[75] On April 27, 2012, Jamali, on behalf of Caledon Chrysler, applied to Ally Credit for a new and used vehicle floor plan financing package. Jamali stated that it was his intention that he would own 100% of the business. Jamali also indicated that, although it had not been finalized, it was his intention to hire a general manager to have day to day responsibility for the business. Ally Credit approved Caledon Chrysler’s application on May 16, 2012, on the same terms and conditions as its July 8, 2011 approval for Caledon Hills.

[76] On April 28, 2012, Caledon Hills wrote a letter to OMVIC signed by Jamali, Tatiana Aguirre and Bateni stating that based on Chrysler’s letter of April 10, 2012 rescinding its letter of intent, Caledon Hills was abandoning its application for registration. Bateni was aware that Chrysler Canada had terminated the Caledon Hills LOI but was not aware of Caledon Chrysler’s subsequent application for the Bolton dealership.

[77] On May 16, 2012, OMVIC issued a certificate of registration for Caledon Chrysler.

[78] Between May and June 18, 2012, Hartley, with the assistance of others, worked on setting up the Bolton dealership at the Property, including hiring employees. The Bolton dealership officially opened under the name of Caledon Chrysler on June 18, 2012.

[79] Up until late May 2012, Bateni continued to work at North York Chrysler and was not involved in setting up the Bolton dealership, which he understood was still going to be owned and operated by Caledon Hills. It was Bateni’s intention to take a short vacation prior to starting work at the Bolton dealership as its general manager.

[80] Bateni says that he learned from Jamali around the end of April 2012 that Totonchian would no longer be a shareholder in Caledon Hills. Jamali would not tell Bateni what had happened with Totonchian, telling him it was not important. Bateni felt that with Totonchian no longer part of the ownership, his interest in Caledon Hills would accordingly be increased to the 40% he had requested. When he approached Jamali with that request, he said Jamali agreed and told him he would need some time to prepare the paperwork.

[81] Jamali agreed that Bateni raised the request with him but did not say yes or no.

[82] On May 23, 2012, Bateni and Jack Frymer (“Frymer”), a lawyer he retained, met with Jamali and Hartley at Frymer’s office. The evidence from both sides as to what occurred at that meeting is very different. Bateni and Frymer say it was a general meeting and what was discussed was the June opening of the Bolton dealership. Hartley and Jamali say that Jamali called the meeting to determine whether Bateni wanted to be the general manager of Caledon Chrysler and if he wanted to be a 20% shareholder. What is clear is that there was no agenda and no notes from any party. They also agree they discussed Bateni’s desire to obtain an additional 20% ownership.

[83] Initially, in an answer to an undertaking, Frymer had only a general recollection of the meeting. When he saw Harley’s detailed answer to an undertaking as to what Hartley recollected was discussed at the meeting, he took great issue with Hartley’s recollection. While I have some concern with respect to Frymer’s “refreshed” recollection in so far as it involves specific discussions, I have no concern in accepting his rejection of Harley’s rendition of the meeting as it is so contrary to Bateni’s understanding at that time of his dealings with Jamali that it would have provoked a record and subsequent discussions. As a result, I don’t accept either sides version of what occurred at the May 23, 2012 meeting.

[84] I find, however, that the draft shareholders agreement that Hartley was working on at Jamali’s request in the few days leading up to the May 23rd meeting was not given to Bateni and Frymer before, during or following the meeting.

[85] On June 4, 2012, Jamali exercised the shotgun provision in his shareholders agreement with Totonchian concerning North York Chrysler. Totonchian subsequently agreed to sell his shares in North York Chrysler to Jamali and Croxton thereby ending their dispute.

[86] Between May 28, 2012 and June 19, 2012, Bateni and Jamali exchanged and negotiated the terms of both Bateni’s employment compensation and share purchase in Caledon Chrysler. Four proposals were exchanged reflecting changes to Bateni’s compensation. Bateni agrees that the terms of his pay plan set out in the fourth proposal dated June 19, 2012 were agreed to. He disputes, however, that the first part of the proposal concerning his acquisition of what he termed was an additional 20% of the shares was agreed to by him.

[87] After Bateni started work at Caledon Chrysler, he regularly asked Jamali about a new shareholders agreement to replace the Caledon Hills SA given that Totonchian was no longer involved. On April 18, 2013, after many requests by Bateni to Jamali, Hartley sent Jamali and Bateni a draft shareholders’ agreement in respect of Caledon Chrysler. The draft provided that the ownership in Caledon Chrysler would be Jamali 80% and Bateni 20%. It was also quite different from the Caledon Hills SA. In particular, it provided for put and call rights to Jamali exercisable anytime during the first 36 months to either sell all or a portion of his shares to Bateni or to purchase all of Bateni’s shares. Bateni had no such right.

[88] Bateni was unhappy with his 20% as he felt that Jamali had agreed he would get 40% given Totonchian was no longer involved. He was also concerned with the one-sided nature of the shareholder agreement in Jamali’s favour. He retained Frymer to assist him.

[89] When Bateni raised his concerns with Jamali, rather than discuss them directly, Jamali asked John Stanford (“Stanford”), the then part-time Chief Financial Officer at North York Chrysler to speak with Bateni about the standard terms of a shareholder agreement where one shareholder has a controlling interest. Although they met several times, Bateni’s concerns with the draft agreement remained.

[90] In the absence of making any headway with Jamali in respect of the draft shareholders agreement over the next few months, on July 19, 2013, Bateni sent Jamali an email setting out a number of his concerns with the draft shareholders agreement. In respect of his ownership interest, he reduced his demand from 40% to 33-1/3%.

[91] Although Jamali indicated that he would respond to Bateni “in the next little while”, he did not respond until November 1, 2013. In his email, Jamali told Bateni that he had lived up to his end of the bargain and that Bateni still had an opportunity to purchase up to 20% of the dealership. Further, he considered the draft shareholders agreement to be fair and did not require any substantive changes. Finally, he told Bateni that he had until December 31, 2013 to decide whether he still wanted to proceed with the purchase of shares in Caledon Chrysler.

[92] Bateni was angry and disappointed with Jamali’s position. He sent him a long email on November 7, 2013, again setting out his position and stating that Jamali’s position of ‘take it or leave it’ was “completely contrary to what was discussed between us over the last couple of years.” He asked Jamali to reconsider his response and “come up with a position which more closely approximates our mutual understanding as previously discussed.” Jamali responded by saying they should have a meeting which he’d set up after Stanford returned on November 25, 2013.

[93] On November 12, 2013, Bateni and Jamali were both at a car auction. Bateni says he tried to speak with Jamali, but he told him to wait until the end of November. When Bateni said that they needed to get the situation resolved quickly because it was distracting and unproductive and they could not continue to have a cloud hanging over the dealership, Jamali just walked away from him.

[94] Jamali says that they just said hi to each other as he was focused on the auction.

[95] On the way back to the dealership, Bateni says he called Jamali. Jamali was irritated with the call. Bateni described Jamali’s tone as hostile, offensive and insulting towards him. Bateni became angry too and conceded that he was probably offensive to Jamali. The call did not end well. He denied that he told Jamali that he quit.

[96] Jamali says that Bateni called him later that day when he was at North York Chrysler. Bateni was upset and started swearing and screaming. He accused Jamali of not being a man of his word. Jamali told him that what he’d offered was his business plan and he was not willing to change. He said that Bateni told him he quit and wasn’t coming back to which he responded: “It’s your decision. You got to make it, not me.” Although later in his evidence Jamali said that he accepted Bateni’s resignation, in cross-examination, he agreed that the extent of his response was to say: “that’s the decision you are making”.

[97] The next day Bateni did not show up for work. Jamali said that in the absence of not hearing from him, he sent Bateni a long email setting out his position which was prepared with the help of both Hartley and Stanford. The email, which contradicts his evidence that he accepted Bateni’s resignation the previous day, concludes: “I accept your resignation, for immediate effect, as General Manager of the CCI operation as tendered and hereby formally withdraw the offer of partnership of the dealership.”

[98] Bateni’s lawyer sent Jamali a letter the following day, November 14, 2013 which stated, in part, that Bateni never intended to, nor did he resign from his position as General Manager at Caledon Chrysler and that he would return to the dealership on November 15, 2013 to continue as General Manager.

[99] When Bateni attended at Caledon Chrysler on November 15, 2013, he was met by his staff and told that Jamali had directed them to tell him to leave or the police would be called. Bateni collected his personal belongings and left the Property.

Position of the Parties

a) Bateni and 228

[100] Bateni submits that in early 2011, he and Jamali orally agreed that he would work as the dealer principal and general manager in a car dealership to be established by them in return for a 40% ownership interest in the dealership which he would earn through “sweat equity”. Subsequently, Bateni went to work at North York Chrysler at a reduced salary while Jamali pursued the dealership.

[101] In the alternative, Bateni submits that in December 2011, he and Jamali agreed he would receive 20% of the shares of Caledon Hills, the corporation which in the interim Jamali had incorporated and had applied for a Chrysler dealership in Bolton, and that they would discuss Bateni obtaining a further interest. The agreement with respect to 20% interest was subsequently confirmed in writing in the Caledon Hills SA.

[102] Bateni submits that Jamali subsequently breached the agreement by obtaining the Bolton Chrysler dealership without including him, denying him his 40% interest. He further submits that Jamali and Caledon Chrysler’s conduct in obtaining the Bolton Chrysler dealership was oppressive and unfairly prejudicial to his and 228’s interest as officers and shareholders of Caledon Hills.

[103] Finally, Bateni submits that he was wrongfully dismissed by Caledon Chrysler on November 15, 2013.

b) Jamali and Caledon Chrysler

[104] Jamali submits that while they discussed Bateni becoming involved as an owner and general manager of a new Chrysler dealership, no agreement was ever reached between them that Bateni could earn any interest in the Bolton dealership opportunity through “sweat equity”, let alone 40%.

[105] Jamali further submits that the Caledon Hills SA is merely an agreement to agree concerning the share ownership of the parties and is therefore not an effective or binding agreement. Further, even if the Caledon Hills SA is a binding agreement, it does not provide Bateni with an ownership interest in Caledon Chrysler.

[106] Jamali submits that neither Bateni nor 228 have a claim for oppression against Caledon Chrysler as neither are shareholders or officers of Caledon Chrysler.

The Issues

[107] Based on the positions of the parties, the issues to be decided are as follows:

1. Is there an agreement between Bateni and Jamali concerning the Bolton Chrysler dealership;
2. If there is an agreement, what are its terms;
3. If there was an agreement, was it breached;
4. Is the oppression remedy engaged;
5. Was Bateni wrongfully dismissed from Caledon Chrysler; and
6. What are Bateni and/or 228’s damages.

Discussion

The Evidence

[108] Prior to dealing with the above issues, a brief word concerning my assessment of the main witnesses based on their evidence and the documents.

[109] I accept most of Bateni’s evidence, particularly concerning his dealings with Jamali. I recognize that he was not a good witness. He often did not answer the questions and was argumentative at times. English, however, is not his native language and that likely was an issue particularly when it was clear the courtroom experience was new to him.

[110] Most importantly, I accept that up until sometime in 2013, Bateni trusted Jamali completely. Following many years as an employee, Bateni’s goal following his employment at Ontario Chrysler was to leverage his success as a car salesman into an ownership interest in a car dealership. Jamali, a fellow Iranian who had done that, offered him the opportunity. While he is a very successful used car salesman however, he was not very knowledgeable or experienced in commercial matters in general. In my view, Jamali took advantage of that.

[111] I also accept Totonchian’s evidence concerning his dealings with Jamali. In my view, he was fair and straight forward in giving his evidence and he had moved on from any issues he had with Jamali. Nor did Jamali take issue with much of Totonchian’s evidence of what transpired between them. While Jamali denied their 2003 agreement concerning ownership of their next dealership, his dealings with Totonchian including his remark that Totonchian would get 51% of the next dealership together with his often-repeated response that it was “not my business model” indicated otherwise in my view.

[112] It follows that I do not accept Jamali’s evidence of what transpired in respect of his dealings with either Bateni or Totonchian. Jamali was also not a good witness. His memory was selective; he remembered key points but more often had no recollection. His evidence of his discussions with Bateni was often based on “would have” or “I believe”.

[113] Based on his testimony, together with the documents, his dealings with Bateni and Totonchian and his actions in securing the Bolton dealership using Caledon Chrysler, I have concluded that Jamali is a shrewd, tough, ambitious business person whose word is not his bond.

[114] I also consider him to be manipulative and deceitful. He kept Bateni and Totonchian in silos, dealing separately with each of them both before and after the Caledon Hills SA to achieve his goal of control of the new dealership. He made promises he had no intention of keeping. He was also prepared to sacrifice his long-time friend and business partner to obtain his goal.

[115] In my view, Jamali took advantage of Bateni and his expertise from the outset as he understood he needed him to act as dealer principal and general manager for a second dealership. When he realized that was no longer the case, he simply dropped him. Once he had sole control of the dealership through Caledon Chrysler, he was only prepared to let Bateni get involved on his terms which were quite different than their Agreement and the Caledon Hills SA.

1 & 2. Was there an agreement between Bateni and Jamali regarding the Bolton Chrysler dealership and, if so, what are its terms?

[116] As a result of their discussions in December 2010 and early 2011, I am satisfied that Bateni and Jamali entered into an oral agreement that they would seek to obtain a new and used car dealership from Chrysler Canada in Bolton (the “Agreement”).

[117] The Agreement was not reached at one meeting but over a series of meetings between the two and culminating with the Caledon Hills SA. The terms of the Agreement were:

• Jamali would be the majority owner and Bateni would have an ownership interest which was ultimately settled at 20% on the signing of the Caledon Hills SA;
• Bateni would be the dealer principal and general manager of the business;
• Jamali would be responsible for obtaining the dealership from Chrysler Canada and Bateni would go to work at North York Chrysler at a reduced salary until the new dealership was ready to open; and
• Bateni’s ownership interest would be paid for through his “sweat equity”, which they understood to mean that Bateni would pay for his capital contribution to the dealership by receiving a lower salary from the dealership than he would otherwise receive given his experience and success.

[118] While Bateni understood that Totonchian would also have an ownership interest in the business, he did not know to what extent until the Caledon Hills SA.

[119] I do not accept Bateni’s position that he and Jamali agreed at the outset that he would have 40% of the new business. The evidence does not establish that they agreed prior to the Caledon Hills SA what Bateni’s ownership interest would be, let alone a 40% ownership interest. At best, Bateni’s evidence is that he mentioned to Jamali that he would like 40% and Jamali never said no. Rather, Jamali’s reply was to the effect that they would sort out the details later, after everything was in place. Their agreement as to Bateni’s ownership interest came when they signed the Caledon Hills SA.

[120] Jamali denies that they ever agreed that Bateni’s capital contribution would be through sweat equity. However, I prefer Bateni’s evidence on the point based on the following:

• Bateni told Jamali at the outset that he did not want to provide any cash towards the business;
• Jamali says that he spoke with Bateni “several times”: about the need to contribute cash to the business. Given that he didn’t speak with Bateni concerning the amount of his ownership interest, I don’t accept that he ever spoke with Bateni about the need to contribute capital;
• At the outset, when they agreed to Bateni’s capital contribution being by way of reduced salary, Bateni’s involvement in the new dealership was important to Jamali. Apart from Bateni’s proven experience and expertise, Jamali needed him to be the dealer principal and general manager;
• At his last job at Ontario Chrysler, Bateni earned an average of $250,000 a year in 2008 and 2009. In 2010, up to his departure from Ontario Chrysler at the end of October 2010, he earned $313,821. His salary at North York Chrysler and later at Caledon Chrysler was less than half of what he had been previously earning.

[121] While Bateni might not have been under paid at North York Chrysler or Caledon Chrysler compared to what Jamali was paying his other employees, he was clearly being paid significantly less than he had been earning before at Ontario Chrysler.

[122] Nor does the fact that Jamali and Bateni did not agree on the amount of sweat equity required affect the Agreement. The fact that Bateni’s capital contribution would be through a reduced salary was an essential term of the Agreement. The details of the amount and how that contribution would be calculated could be determined later.

[123] Jamali submits that Bateni’s subsequent actions in discussing and then agreeing with the purchase plan for a 20 % interest in Caledon Chrysler and not raising the alleged prior agreement support his position that there was never any agreement that Bateni would obtain his interest in Caledon Hills through sweat equity.

[124] I disagree. In my view, Bateni’s actions during his subsequent negotiations with Jamali regarding Caledon Chrysler must be considered in the context in which they occurred. Bateni had no knowledge of Jamali’s actions in effectively causing the Caledon Hills LOI to be rescinded and then obtaining the dealership for Caledon Chrysler without his involvement. From his perspective, the earlier agreement had ended. In my view, his actions were based more on his desire to be an owner of the dealership than on an understanding of his legal rights

[125] Following their Agreement, both Bateni and Jamali acted in accordance with it. Bateni went to work at North York Chrysler for a significantly reduced salary than what he’d been receiving at Ontario Chrysler. For his part, Jamali began taking steps to obtain a Chrysler Canada dealership in Bolton.

[126] In that regard, Jamali spoke to Chrysler Canada about obtaining a dealership in Bolton and subsequently received conditional approval from Chrysler Canada to apply for the dealership; he arranged to secure the Property; caused both Caledon Hills and Caledon Chrysler to be incorporated, the former to operate the dealership, the latter to hold the Property; and he made a formal application on behalf of Caledon Hills for the dealership in Bolton. That application stated, in part, that the owners of the dealership would be himself at 51%, Totonchian, 29% and Bateni, 20% and that Bateni would be the general manager of the dealership.

[127] On July 6, 2011, Chrysler Canada issued the Caledon Hills LOI approving its application, subject to various conditions to be met by specific dates. Of particular relevance was the condition to complete all requirements relating to Federal, Provincial and Municipal licenses by January 31, 2012, foremost of which was OMVIC registration of the dealership.

[128] Following the Chrysler LOI, Jamali continued to work towards satisfying the conditions including securing new and used car financing for Caledon Hills and causing Caledon Chrysler to enter into a lease for the Property.

[129] It was not until early December 2011, however, that Jamali provided Bateni and Totonchian with a draft of a proposed shareholders agreement for Caledon Hills. The draft provided for the same percentage ownership of Caledon Hills as Jamali had sent to Chrysler Canada back in May 2011.

[130] I don’t accept Jamali’s evidence that the reason he waited so long to advise both Bateni and Totonchian of their ownership interests in Caledon Hills was because he wanted to have all the steps for the dealership completed. In fact, all of the steps except the shareholders agreement were completed by August 2011, some four months earlier. It also makes no sense that he did not speak to Totonchian, his long-time partner and friend, about his ownership interest, before the December lunch.

[131] Jamali denied that he delayed telling Bateni and Totonchian their ownership interests because he knew they would be unhappy. He said he expected they both would be “very happy”. I don’t believe him. He clearly anticipated they both would be disappointed or worse given his delay in telling them and the way he orchestrated the lunch.

[132] In my view, Jamali purposefully left the issue of the ownership interests in Caledon Hills to December to facilitate Bateni and Totonchian’s agreement to the share percentage that he was offering them in Caledon Hills. He didn’t want Totonchian or Bateni to open their envelopes containing the draft agreement until after their lunch because he knew both would be disappointed or upset when they saw the ownership interest, he was proposing for each of them. At the same time, Chrysler Canada’s deadline for the OMVIC registration which required a shareholders’ agreement was January 31, 2012 and Hartley was saying the OMVIC application had to be filed by the end of the year to meet that deadline.

[133] In fact, Bateni was disappointed with 20% given he’d expected 40% based on his discussions with Jamali and Jamali’s response which Bateni interpreted as his agreement. And Totonchian was more than upset when he saw his proposed 29%. He felt betrayed by Jamali, based on their earlier agreement. As noted, I accept Totonchian’s evidence of his prior agreement with Jamali.

[134] Jamali subsequently used the need to apply for OMVIC registration by the end of December to obtain registration by it by January 31, 2012, with the prospect of losing the Bolton dealership together with his undertaking to both Totonchian and Bateni to revisit their share allocations to get both Bateni and Totonchian to sign the Caledon Hills SA on December 20, 2011. In fact, however, Jamali never had any intention of changing the share allocations of either Bateni or Totonchian.

[135] As noted, Jamali submits that the Caledon Hills SA is not binding because it is an agreement to agree. It is well established that an agreement to agree is not binding: Bawitko Investments Ltd. v. Kernals Popcorn Ltd., [1991] O.J. No. 495, 53 O.A.C. 314 (C.A.). However, that is not what the Caledon Hills SA was. In signing it, the parties, including Jamali, were clearly in agreement with its terms. It is a binding agreement.

[136] Both Jamali and Hartley who were at the December 20, 2011 meeting when the Caledon Hills SA was signed said that the parties agreed to sign it on the basis that it would be filed with OMVIC and they would continue to work on the share structure. To the extent that they are suggesting that there was no agreement on the share percentages in the agreement, I do not that characterization. Clearly Jamali agreed with the share percentages as he never deviated from that position.

[137] Both Bateni and Totonchian testified that when they (or in Totonchian’s case, his wife) signed the Caledon Hills SA, they considered it to be binding and that it reflected their ownership interests at the time. (The transcript indicates that Bateni said he considered the Caledon Hills SA “non-binding” but my note of his evidence is that he considered it binding. In my view, my note is correct as it is more consistent with Bateni’s overall evidence on the point.) While they accepted Jamali’s promise to continue discussing their ownership interests, they understood that their percentage in the Caledon Hills SA was their ownership interest in Caledon Hills at that time.

[138] Further, in submitting the Caledon Hills SA to OMVIC for the registration of Caledon Hills as a car dealer, the parties represented to OMVIC, the government regulator of car dealers, who the shareholders were and what their interests were in Caledon Hills. To say the Caledon Hills SA was merely an agreement to agree and not binding effectively amounts to misrepresentation or worse to the government regulator which I find was not the parties’ intention.

[139] Despite his evidence, Hartley, although not a lawyer, clearly understood that the Caledon Hills SA was a binding agreement. In an email to Jamali on April 4, 2012, setting out some of the steps required in respect of Caledon Chrysler’s April 2, 2012 application to Chrysler Canada, Hartley stated: “I also believe the current partnership agreement (between Tana, Tatiana and Roy) needs to be terminated. That is something for a lawyer … not my expertise.” Jamali took no steps in respect of that advice.

[140] Subsequently, Chrysler Canada’s January 31, 2012 deadline came and went solely because the dispute between Jamali and Totonchian over the latter’s ownership interest in Caledon Hills was not resolved. In fact, the dispute quickly evolved into the separation of the two partners from North York Chrysler.

[141] At the same time, however, there was no issue over Bateni’s share percentage in Caledon Hills. Although he wanted more than 20%, he never discussed it with Jamali who was focused on resolving his issues with Totonchian.

3. Was the Agreement breached?

[142] In my view, Jamali’s actions in effectively causing the Caledon Hills LOI to be rescinded by Chrysler Canada followed by his application on behalf of Caledon Chrysler excluding Bateni as both an owner and general manager was a breach of the Agreement.

[143] While Jamali and Totonchian agreed that Totonchian would sell his interest in North York Chrysler to Jamali who would in turn give up his interest in Caledon Hills, the two could not come to an agreement concerning the value of North York Chrysler. In mid-March 2012, following OMVIC’s resolution of its issues with Jamali’s interest in Caledon Hills, Jamali reneged on their agreement and advised Totonchian that he intended to proceed with the Bolton dealership application on his own.

[144] There is no issue that the failure of Jamali and Totonchian to reach an agreement concerning Totonchian’s interest in Caledon Hills was the reason why Chrysler Canada rescinded the Caledon Hills LOI on April 10, 2012. In my view, based on the evidence, I find that the reason they couldn’t agree was because Jamali failed to negotiate with Totonchian in good faith.

[145] Further, having precipitated the rescission of the Caledon Hills LOI, Jamali, before it was rescinded and without any notice to Bateni, submitted an application to Chrysler Canada for the Bolton dealership in the name of Caledon Chrysler without including Bateni as either an owner or the general manager. In so doing, Jamali breached the Agreement with Bateni. In doing so, I am of the view he acted in bad faith.

[146] I am also satisfied on the evidence that in the absence of Jamali’s actions, Caledon Hills would have obtained the Bolton dealership from Chrysler Canada. Much of the work to satisfy Chrysler Canada’s requirements had been done by Caledon Hills. It had obtained the Property, financing and OMVIC approval. All that was missing was a resolution of the ownership dispute between Jamali and Totonchian. When Jamali switched to Caledon Chrysler, he utilized all of the steps that Caledon Hills had taken enabling him to fast track the approval.

[147] Nor does Jamali’s subsequent offer to Bateni to become a 20% shareholder in Caledon Chrysler cure the breach. Jamali required that Bateni pay for his 20% interest which was contrary to their Agreement and sign a shareholders’ agreement that was contrary to their earlier Caledon Hills SA.

[148] I find that Jamali’s actions resulting in Bateni being deprived of his agreed 20% ownership interest in the Bolton Chrysler dealership were a breach of the Agreement.

4. Is the Oppression Remedy Engaged?

[149] What is commonly referred to as the oppression remedy is set out in s. 248 of the OBCA. It provides that a “complainant” may apply to the court for an order which the court can grant in circumstances where a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result; b) the business or affairs of the corporation or any of its affiliates have been or are threatened to be carried on or conducted in a manner; or c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be 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 of the corporation.

[150] The test for oppression is set out by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560 at para. 68 and involves a two-pronged inquiry: 1) does the evidence support the reasonable expectation(s) asserted by the claimant; and 2) does the evidence establish that the reasonable expectation(s) was/were violated by conduct that was oppressive, unfairly prejudicial or unfairly disregarded?

[151] The plaintiffs plead that in refusing to deal fairly and in good faith with them as a director/officer and shareholder respectively of Caledon Hills and specifically Jamali and Caledon Chrysler’s actions resulting in Caledon Hills obtaining the Chrysler Bolton dealership, their conduct was oppressive and was unfairly prejudicial and disregarded Bateni’s interests as an officer and director and 228’s interests as a shareholder of Caledon Hills.

[152] Jamali submits that neither Bateni nor 228 are shareholders of Caledon Chrysler and are therefore not complainants within the meaning of the OBCA. While I agree that neither are shareholders of Caledon Chrysler, both Bateni as an officer and director and 228 as a shareholder of Caledon Hills are complainants. Further, given that Jamali was the Chairman, a director and owned 51% of Caledon Hills and is also the majority owner and controlling mind of Caledon Chrysler, the two companies are affiliates within the meaning of s.1(4) of the OBCA.

[153] In am satisfied that Bateni and 228’s expectations that Jamali would act in accordance with the Caledon Hills SA and would deal fairly and in good faith with them in respect of their interests in Caledon Hills and its application for the Bolton dealership are reasonable. I also consider that their expectations that Caledon Hills would obtain the Chrysler dealership in Bolton and that 228 would own 20% of the dealership and Bateni would be the dealer principal and general manager are reasonable.

[154] Based on the evidence as I have found it, I am satisfied that Jamali, by his actions, both in causing the Caledon Hills LOI to be rescinded while at the same time causing Caledon Hills affiliate Caledon Chrysler to obtain the Bolton dealership thereby terminating its opportunity to obtain the Bolton Chrysler dealership, and with it 228’s ownership interest in Caledon Hills violated Bateni’s and 228’s reasonable expectations. Further, I am satisfied that Jamali’s actions in that regard were oppressive and were clearly prejudicial to and disregarded the interests of Bateni and 228.

5. Was Bateni Wrongfully Dismissed?

[155] As noted, on November 12, 2013, Bateni and Jamali had a heated telephone conversation after they had been at a car auction. I accept Bateni’s evidence that while he got upset during the call, he never told Jamali that he resigned from his position as general manager of Caledon Chrysler.

[156] Jamali submits that emails leading up to the November events which indicate that Bateni was frustrated with Jamali’s position concerning his involvement in the ownership of Caledon Chrysler and particularly a November 11th email to his lawyer indicating that he was thinking of leaving the dealership in the next few days, support the inference that Bateni resigned.

[157] Thinking about it and actually doing it, however, are two different things.

[158] In order for a resignation to be effective, it must be clear and unequivocal. To be clear and unequivocal, the resignation must objectively reflect an intention to resign, or conduct evidencing such intention. Further, whether words or action equate to a resignation must be determined contextually. See: Kieran v. Ingram Micro Inc., [2004] O.J. No. 3118 (C.A.), 189 O.A.C. 58 at paras. 27 and 30.

[159] Given the context in which the telephone conversation between Bateni and Jamali took place, even if Bateni did say he was resigning, I do not consider that it was “clear and unequivocal”, notwithstanding his earlier email to his lawyer. It was clearly said during a very heated telephone conversation during which it would have been clear to Jamali from their interaction at the auction that Bateni was frustrated with his refusal to discuss Bateni’s issues directly with him.

[160] In any event, as noted in Kieran at para. 34, an employee may resile from a resignation provided the employer has not relied on it to his detriment. Bateni’s lawyer letter of November 14, 2013 to Jamali clearly indicates that Bateni did not resign and had no intention of resigning. Further, there is no evidence that Caledon Chrysler suffered any detriment from Bateni’s “resignation” prior to Jamali receiving that letter and Bateni returning to work the following day.

[161] Accordingly, I find that Jamali’s actions in preventing Bateni from returning to Caledon Chrysler on November 15, 2013 to resume his role as general manager was a breach of Bateni’s employment contract with Caledon Chrysler.

6. Damages

i. Wrongful Dismissal

[162] In respect of Bateni’s wrongful dismissal claim, Bateni was able to secure employment following his dismissal within four months, albeit at a lesser position than he had at Caledon Chrysler. Consistent with the fact that he agreed to a reduction in salary at Caledon Chrysler, he earned more at his new job despite it being a lesser position.

[163] The parties have agreed that Bateni’s damages in respect of his wrongful dismissal claim are $26,000.

ii. Breach of Contract/Oppression

[164] In respect of the claims for breach of contract and oppression arising out of the loss of his 20% interest in Caledon Hills, Bateni submits that he should receive the value of his lost interest, based on the value of Caledon Chrysler either as at the date of breach (December 31, 2013) in accordance with the valuation of his expert, Mr. Paul Gill or by a new valuation as at the date of trial.

[165] In response, Jamali submits that in the event that Bateni is found to be entitled to an amount equal to 20% of value of Caledon Chrysler’s shares, the value should be calculated as at November 13, 2013, the date of Bateni’s termination, as provided for in the Caledon Hills SA. Given the proximity to year end, Jamali agrees that the valuation date should be December 31, 2013.

[166] I agree that damages for breach of contract are assessed as at the date of the breach, which is November 13, 2013.

[167] In respect of the remedy for oppression, s. 248(3) of the OBCA gives the court a wide discretion to make “any interim or final order it thinks fit” in providing a remedy for oppressive conduct including subparagraph (j), an order compensating the aggrieved person.

[168] In Wilson v. Alharayeri, 2017 SCC 39, [2017] S.C.R.1037, the Court considered when personal liability of a director can be imposed under s. 241(3) of the Canada Business Corporations Act (“CBCA”), (identical to the wording in s. 248(3) of the OBCA). At paras. 26 and 27 of the decision, the court noted that the broad discretion to fashion a remedy for oppression under s. 241(3) of the CBCA was not limitless. Rather, the remedy should go no further than necessary to correct the injustice or unfairness between the parties.

[169] Wilson v. Alharayeri also confirmed the Ontario Court of Appeal decision in Budd v. Gentra Inc., (1998) 43 B.L.R. (2D) 27, that in order for a director to be personally liable for a monetary order under the oppression remedy, the director must be implicated in the oppressive conduct and the order must fit the circumstances. It noted that one of the elements leading to a situation where it would be fit to impose personal liability is the presence of bad faith.

[170] In my view, the most appropriate and fairest way to compensate Bateni and 228 for both Jamali’s breach of contract and Jamali’s and Caledon Chrysler’s oppressive conduct is to award Bateni and 228 the value of the loss of their 20% interest in Caledon Hills in accordance with the provisions of the Caledon Hills SA. Had Caledon Hills proceeded to obtain the Bolton Chrysler dealership, the Caledon Hills SA would have applied in respect of the valuation and purchase of 228’s shares.

[171] Article 10 of the Caledon Hills SA provides, in part, that upon Bateni’s termination of employment by the Corporation, Aguirre (Jamali) shall be entitled to acquire all of Bateni’s shares at a purchase price in the amount of 120% of the amount determined in accordance with Article 13. Article 13 provides that the fair market value of the shares of the Corporation shall be determined “as at the last day of the month preceding that in which the event giving rise to the transaction of purchase and sale occurs” and that there is no minority discount.

[172] In the circumstances, I find it is appropriate to value Bateni and 228’s lost 20% interest in Caledon Hills either as a result of breach of contract or oppression by valuing Caledon Chrysler. As I have found, but for Jamali’s actions in causing Caledon Chrysler to apply for the Caledon Chrysler dealership, Caledon Hills would have been successful in obtaining and operating the Chrysler Bolton dealership in the same identical manner as Caledon Chrysler has. In obtaining the dealership, Caledon Chrysler simply stepped into the shoes of Caledon Hills. In my view, the value of Caledon Chrysler is equivalent to what the value of Caledon Hills would have been, absent Jamali’s actions.

[173] Both Bateni and Jamali retained valuation experts to determine the fair market value of Caledon Chrysler. As noted, Bateni and 228 retained Paul Gill, a partner with BDO Canada LLP, in its Transaction Advisory Services, Valuation Group. In response, Jamali and Caledon Chrysler retained Jason R. Kwiatkowski, the President of Valuation Support Partners Ltd. (“VSP”).

[174] Mr. Gill obtained his Chartered Accounting designation in 2002 and became a Chartered Business Valuator in 2003. In 2008, he became an Accredited Senior Appraiser, Business Valuations, from the American Society of Appraisers. From 2003 to 2012, he was with KPMG US and KPMG Canada Valuation Services. From 2012 to 2017, when he joined BDO Canada, he was Vice President, OMERS Private Markets, Finance and Valuations. He has conducted over 2,000 valuations, over 50 of which were valuations of existing car dealerships across Canada but mostly in the Greater Toronto Area.

[175] Mr. Kwiatkowski became a CA in 1998 and obtained his designation as a Chartered Business Valuator in 2000. In 2005 he received his Accredited Senior Appraiser designation from the American Society of Appraisers. He has been engaged in business valuations and litigation support since 1999. From 2005 to 2011, he was at BDO Canada in Valuations and Litigation Support. In 2017, he left BDO to start VSP. He has authored a number of publications, primarily on business valuations. He has previously done three valuations of car dealerships.

[176] Based on both education and experience, I was satisfied that both Mr. Gill and Mr. Kwiatkowski could provide expert opinion evidence to the court in the area of business valuations and specifically in respect to car dealerships.

[177] Mr. Gill prepared an estimated valuation of Caledon Chrysler as at two dates: December 31, 2013 and December 31, 2016. His opinion as to the value of the shares of Caledon Chrysler at those dates is:

December 31, 2013 – High: $1,270.000; Low: $850,000; Midpoint: $1,060,000. December 31, 2016 – High: $4,090,000; Low: $3,750,000; Mid: $3,920,000.

[178] Mr. Kwiatkowski undertook a valuation of Caledon Chrysler as at December 31, 2013 and December 31, 2017. His opinion as to the valuation of Caledon Chrysler at those dates is:

December 31, 2013 – High: $560,000; Low: $468,000; Midpoint: $514,000. December 31, 2017 – High: $1,468,000; Low: $1,233,000; Mid: $1,231,000

[179] Both Mr. Gill and Mr. Kwiatkowski agreed that in respect of the December 31, 2013 valuation, as Caledon Chrysler had only been in operation for 18 months and had not achieved a stable earnings level, that the discounted cash flow methodology (“DCF”) was the proper approach to valuation. DCF involves estimating the projected future cash flows to be generated by the business and then applying a discount rate to arrive at a value as at the valuation date.

[180] In applying a DCF approach, both experts also agreed on the projected sales numbers for the projected five years and the discount rate to be applied. Their major points of disagreement arise from the following assumptions:

i. Mr. Kwiatkowski used a gross margin % of 9.3 whereas Mr. Gill used 10 and 11%. ii. Mr. Kwiatkowski used a ramp up of pre-tax operating income margin beginning with 0.0% in 2013 and 0.4% in 2014; 0.9% in 2015; 1.3% in 2016; to the industry average of 1.7% for 2017 and the terminal year. Mr. Gill began with 0.2% in 2013, followed by 1.6% in 2014 and thereafter used 1.7% for 2015 through to the terminal year. iii. Mr. Gill made a compensation adjustment regarding Jamali’s compensation whereas Mr. Kwiatkowski felt that was inappropriate as it is taken into account in the industry average net earnings margin of 1.7%.

[181] Mr. Gill’s response to Mr. Kwiatkowski’s assumptions is as follows:

i. Mr. Kwiatkowski’s gross margins through the forecast period are based primarily on historical levels realized in the infancy of Caledon Hills and in Mr. Gill’s opinion are too low and not representative of what the company would earn going forward. ii. Mr. Kwiatkowski’s assumption concerning operating margins is also too low. Mr. Gill believes that they understate the earnings that can be achieved by Caledon Hills in the immediate years of the forecast. He believes that the third year of operations higher margins from service and maintenance provide significant opportunities in profit margin potential. iii. Mr. Gill believes that a company-specific adjustment is required to Jamali’s compensation in order to approximate what the market would pay for the services provided given he does not participate in everyday operations.

[182] Mr. Kwiatkowski also concluded that a minority discount of between 20% and 30% should be applied to the valuation of Bateni’s interest but, as noted, Article 13 of the Caledon Hills SA specifically excludes the application of a minority discount.

[183] I accept Mr. Gill’s opinion concerning his estimate of the fair market value of Chrysler Caledon’s shares as at December 31, 2013. In my view, I consider his assumptions to be more appropriate given his reasons for applying them coupled with his experience in valuing automotive dealerships.

[184] Accordingly, I find, based on the mid-point of Mr. Gill’s December 31, 2013 valuation, that the fair market value of Caledon Chrysler’s shares is $1,060,000. Bateni’s 20% is therefore worth $212,000. Finally, 120% of 212,000 is $254,400.

[185] In light of my conclusion that the December 31, 2013 valuation should apply, I do not need to address the valuations by Mr. Gill as at December 31, 2016 and Mr. Kwiatkowski as at December 31, 2017. In any event, I did not find them relevant as they dealt with different dates, neither of which corresponded with the date of trial. That said, I preferred the valuation methodology employed by Mr. Gill than that used by Mr. Kwiatkowski in the later valuation.

[186] In reaching his December 31, 2016 valuation, Mr. Gill valued Caledon Chrysler on a going concern based on an income approach, specifically using a capitalized cash flow valuation methodology which is a present value calculation of the future operating cash flow expectations of the business.

[187] In contrast, for his December 31, 2017 valuation, Mr. Kwiatkowski utilized the Blue Sky Multiple method which he characterized as “the standard valuation approach utilized in the auto dealership industry by third party purchasers”.

[188] I do not agree that Mr. Kwiatkowski’s Blue Sky Multiple valuation approach is appropriate to value Caledon Chrysler. It is not an accurate estimate of fair market value. Given his experience in valuing auto dealerships, I accept Mr. Gill’s evidence that the Blue Sky Multiple is not an appropriate valuation method to approximate Caledon Chrysler’s value. It is at best a rule of thumb approach to valuation.

[189] Further, as Mr. Gill points out, in determining it Mr. Kwiatkowski adjusted Caledon Chrysler’s ratio of used cars to new cars to approximate an average dealership which, in my view, does not reflect how a purchaser would value the business. Further, it has the effect of turning Caledon Chrysler into an unprofitable dealership.

[190] It follows that I accept Mr. Gill’s method of valuing Caledon Chrysler as a going concern post 2013 using the capitalized cash flow valuation methodology.

Conclusion

[191] For the above reasons, the action is allowed in respect of breach of contract (Bateni), oppression (Bateni and 228) and wrongful dismissal (Bateni).

[192] Caledon Chrysler shall pay to Bateni $26,000 for damages for wrongful dismissal of his employment.

[193] Jamali is liable to Bateni for breach of contract in the amount of $254,400.

[194] In addition, Caledon Chrysler and Jamali are liable to Bateni and 228 in respect of oppression in the amount of $254,400. As I have found, Jamali’s actions in causing Caledon Chrysler to obtain the Chrysler Caledon dealership in my view clearly smack of bad faith. Based on the reasoning in Wilson v. Alharayeri, 2017 SCC 39, I am satisfied Jamali should be personally liable for the oppression damages jointly and severally with Caledon Chrysler.

[195] As the plaintiffs are not entitled to be paid $254,400 twice, I direct that they must make an election, within 30 days of the release of these reasons as to whether they shall receive damages for breach of contract or oppression. In the absence of an election within the 30 days, damages shall be awarded based on Bateni’s breach of contract claim.

[196] The parties are encouraged to discuss and agree on costs. In that regard, they shall exchange Cost Outlines within ten days and prior to any discussions. In the event an agreement on costs is not reached within 30 days, the parties shall arrange a conference with me by call or video through the Commercial List office to discuss the resolution of costs.

L. A. Pattillo J.

Released: May 22, 2020