ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MARIJANA MUDRONJA
Applicant/ Respondent
– and –
EDDY MUDRONJA and MAREDDY CORPORATION
Respondent/Applicant
Dalkeith Palmer, for the Applicant/Respondent on this motion
Monica Peters, for the Respondent/Applicant on this motion
HEARD: June 9, 2020
REASONS FOR DECISION
L. Shaw J.
introduction
1The applicant and respondent are former spouses. They married on November 22, 1986 and separated on November 27, 2007. For clarity purposes, I will be referring to the parties by their names and not as applicant and respondent, as there were two separate proceedings commenced by the parties.
2This application involves spouses who continue to own shares in a family-owned company after they separate. The parties have, unfortunately been involved in years of acrimonious litigation in connection with their matrimonial dispute. That acrimony continues in this action which involves their role as shareholders and not spouses.
3In 1994 Mr. Mudronja took over control of Jitsu Manufacturing Inc. (“Jitsu”), a company that manufactures automotive parts. In 1996, he incorporated Mareddy Corporation (“Mareddy”) to act as a real estate holding company. At the time of incorporation, Mr. Mudronja received 600 common shares and Ms. Mudronja 400 common shares. In 2001, Mareddy purchased property located at 6880 Davand Road Drive, Mississauga, Ontario (the “property”). Jitsu operates from the property and pays rent to Mareddy.
4There is no dispute that Ms. Mudronja was never involved in the operations or decision making of Mareddy. She was not employed by Mareddy nor did she receive any payment from it in the form of a dividend or any other payment.
5Following their separation, a trial was conducted in January 2014 over an 11-day period to deal with the issues that arose from their separation. In the decision of Seppi J. dated October 30, 2014, Mr. Mudronja was ordered to pay Ms. Mudronja an equalization payment of $1,796,550. In calculating Ms. Mudronja’s net family property, her common shares in Mareddy were valued, on consent, at $640,300 as at the date of separation. This figure was based on a business valuation report prepared by Kalex Valuations dated May 7, 2013, which in turn relied on a property valuation report prepared by Bosley Farr Associates Ltd. In that report, the property owned by Mareddy was valued at $3,900,000 as at November 27, 2007, which was the date of separation. It was also valued at $3,700,000 as at April 2013.
6Both parties commenced applications under the Ontario Business Corporations Act, R.S.O. 1990 c. B.16, as amended (“OBCA”) with respect to Mareddy after the matrimonial litigation ended. Mr. Mudronja commenced an application in December 2015 pursuant to s. 207 of the OBCA to separate the parties’ interest in Mareddy. He sought an order to purchase Ms. Mudronja’s shares in Mareddy or, in the alternative, an order winding up Mareddy. As will be reviewed in more detail in these reasons, little transpired in that litigation. In November 2019, Mr. Mudronja amended his application and deleted all claims other than for an order that he purchase Ms. Mudronja’s shares in Mareddy.
7Rather than filing a counter application, three years later, in October 2018, Ms. Mudronja commenced this application seeking an order that Mr. Mudronja purchase her shares in Mareddy, or, in the alternative, that Mareddy be wound up. In her original application, while she did not seek a declaration that she had been oppressed as a minority shareholder of Mareddy, she did plead that Mr. Mudronja failed to provide her with any updates regarding the company and had denied her the ability to participate in the management of Mareddy. She relied on ss. 207 and 248 of the OBCA. Section 248 deals with relief that can be granted when there is a finding that one shareholder has been oppressed by the other.
8Ms. Mudronja subsequently amended her application to include a declaration that as a shareholder she has been oppressed by Mr. Mudronja, the majority shareholder of Mareddy. The amended application was returnable on December 11, 2019. The amendment was made at some point prior to that return date.
9While these applications were slowly and laboriously winding through the court system, Ms. Mudronja was required to take steps to pursue Mr. Mudronja for the unpaid equalization payment owing to her in connection with the family law litigation. As a result, Mr. Mudronja was questioned at an examination-in-aid of execution on September 27, 2018. A further hearing was held before Barnes J. on July 3, 2019 in connection with the matrimonial litigation. Ms. Mudronja relies on findings made by Seppi J. and Barnes J. in their respective decisions and evidence from the examination-in-aid of execution for the purpose of supporting her claim of oppression and misconduct on the part of Mr. Mudronja.
iSSUE and position of the parties
10The parties have agreed that Mr. Mudronja will buy Ms. Mudronja’s shares in Mareddy. The issue in dispute is the date on which those shares are to be valued. The parties have agreed that the valuation of the property owned by Mareddy will be key determination in valuing Ms. Mudronja’s 40 percent interest in the company. As the value of the property has increased since Mr. Mudronja commenced this litigation in December 2015, a later valuation date favours Ms. Mudronja. Conversely, an earlier valuation date favours Mr. Mudronja, as he will not have to share the increased value of Mareddy, which is attributable to external market forces that have increased the value of the property.
11The issue of which valuation date to use raises a number of other interwoven issues as follows:
(a) As a minority shareholder, was Ms. Mudronja oppressed by Mr. Mudronja?
(b) Is Ms. Mudronja’s claim for oppression statute-barred?
(c) Was there delay in this litigation and who was the cause of the delay?
(d) What if any impact does either the alleged oppression or delay by either party have on determining the fair and just valuation date?
(e) What impact, if any, does Mr. Mudronja’s conduct in the matrimonial litigation have on Ms. Mudronja’s claim for oppression?
(f) What were the reasonable expectations of the parties regarding the date on which the shares are to be valued?
12Mr. Mudronja’s position is that the shares should be valued as at the date he commenced his application in December 2015. His position is that Ms. Mudronja’s claims for an oppression remedy under the OBCA are statute-barred, and in any event, any claims of oppression have no bearing on the valuation date to use.
13Ms. Mudronja asserts that the shares should be valued at the date of the hearing of the application and that Mr. Mudronja’s oppressive conduct, as a majority shareholder of Mareddy, is a relevant factor in determining a fair valuation date. It is also her position that the court should consider Mr. Mudronja’s conduct in the matrimonial litigation as part of his overall poor conduct.
14In determining the date to value the shares, Ms. Mudronja alleges that Mr. Mudronja has purposely delayed the litigation and that the delay should be considered as a factor in determining the valuation date, as his delay was part of an ongoing pattern of failing to disclose relevant information and documentation regarding Mareddy. Conversely, Mr. Mudronja alleges that it is Ms. Mudronja who has purposely and deliberately delayed these proceedings, knowing that the value of the property was increasing through market forces, thus increasing the value of her shares if valued at a later date.
REVIEW OF THE EVIDENCE
A) Procedural Background
15A great deal of the evidence and submissions focused on the delays in this litigation. Accordingly, I will review in some detail what was done or not done to advance the litigation to address the issue of delay and what, if any, impact it has on fixing the date to value Ms. Mudronja’s shares.
16Mr. Mudronja’s original application was commenced on December 11, 2015 and was returnable on January 14, 2016. The application was not intended to be heard that day but rather a date was going to be set for the hearing. The matter was set for a hearing on October 17, 2016. Mr. Mudronja’s application was only served in September 2016.
17In an email from Ms. Mudronja’s lawyer to Mr. Mudronja’s lawyer dated January 6, 2016, he indicated that he intended to bring an application on behalf of Ms. Mudronja and that it was anticipated a full day would be required for both applications to be heard. He also indicated that Ms. Mudronja did not oppose the sale of the property, but her concern was that she had a judgment for approximately $1.8 million in connection with the matrimonial litigation, which had to be satisfied against any payment received by Mr. Mudronja. Counsel also asked for particulars and a full accounting with respect to a $5 million mortgage from the TD Bank that had been registered on title to the property in March 2015.
18On September 13, 2016, ten months after the application was commenced and after she was served, Ms. Mudronja filed a notice of appearance. The hearing set for October 17, 2016 did not proceed because two weeks before the hearing, counsel for Ms. Mudronja indicated that he had been called into trial and requested an adjournment.
19In an email dated November 9, 2016 counsel for Ms. Mudronja wrote to counsel for Mr. Mudronja indicating that he intended to cross-examine Mr. Mudronja on his affidavit. Despite this request, cross-examinations were not scheduled or conducted until October 28, 2019, three years after Ms. Mudronja’s counsel expressed an intention to do so.
20In that same email, Ms. Mudronja’s lawyer also requested disclosure of a number of items listed in Ms. Mudronja’s affidavit sworn on November 8, 2016 in response to Mr. Mudronja’s application. In that affidavit, Ms. Mudronja swore that the “acts of Eddie towards me have been oppressive, unfairly prejudicial and/or have unfairly disregarded my interest in Mareddy as a shareholder.” She requested the following information:
Complete details of all liens and mortgages registered against the property;
A request for Mr. Mudronja to provide Ms. Mudronja with funds to obtain a commercial appraisal with respect to the property to ensure fair market value and to assist in determining list price; and,
For the applicant to provide complete details related to the sale of other property owned by Mareddy including, but not limited to, any and all listing agreements, listing prices and to provide a full accounting of the net sale proceeds.
21In her affidavit, Ms. Mudronja suggested using the firm Bosley Farr Associates Ltd. to conduct an appraisal of the property, as it was the company that prepared a report for the matrimonial litigation.
22In that same affidavit, Ms. Mudronja swore that Mr. Mudronja had sold property owned by Mareddy at 205 Mary Street in Brantford some years earlier and provided no accounting to her. She requested disclosure with respect to that sale. She also indicated that there was no distribution to the shareholders with respect to the financing received by Mareddy in March 2015. She also stated that Mareddy’s financial statements had never been provided to her, and she requested copies.
23Despite Ms. Mudronja’s assertions in her affidavit that Mr. Mudronja’s actions towards her as a shareholder were oppressive, unfairly prejudicial and/or unfairly disregarded her interest in Mareddy as a shareholder, she did not commence an application seeking relief as a shareholder until October 17, 2018.
24On November 11, 2016, Mr. Mudronja’s lawyer wrote to Ms. Mudronja’s lawyer confirming that the matter was adjourned to December 13, 2016. He confirmed that he would review the disclosure that had been requested and would advise what Mr. Mudronja agreed to provide. Despite this assurance, there was no response to any request for disclosure in the context of this litigation until May 30, 2019, 2.5 years after the original request.
25On November 17, 2016, Mr. Mudronja offered to purchase Ms. Mudronja’s shares in Mareddy. As the property was Mareddy’s only asset, he proposed that the appraiser who had completed an appraisal should prepare an updated appraisal that took into account repairs that had to be made to the building on the property.
26On November 22, 2016, Ms. Mudronja’s lawyer wrote to counsel for Mr. Mudronja and indicated that if they were unable to sort out the issue of the appraisal and the disclosure issues by the following week, he intended to cross-examine Mr. Mudronja.
27Mr. Mudronja obtained a report from Davroc & Associates dated December 8, 2016 regarding the repairs needed for the building. The repairs were estimated to cost just over $1 million.
28The hearing scheduled for December 13, 2016 was adjourned, on consent, to January 31, 2017. While Ms. Mudronja alleges the adjournment was necessary as Mr. Mudronja had not provided disclosure, the email from her lawyer dated December 14, 2016 does not indicate that was the reason for the adjournment, but rather that there were some ongoing discussions between the lawyers.
29The hearing scheduled for January 31, 2017 was adjourned because Ms. Mudronja retained a new lawyer just prior to the hearing. Ms. Mudronja’s new lawyer wrote to Mr. Mudronja’s lawyer in February and March 2017, proposing a meeting to discuss the matter.
30A new hearing date was scheduled for March 2, 2017 but the parties did not expect it to proceed because Ms. Mudronja’s new lawyer needed sufficient time to prepare.
31The hearing was next scheduled to proceed on April 20, 2017. Ms. Mudronja asserts that it was adjourned because Mr. Mudronja had not yet provided any disclosure or permitted an appraisal of the property. In the endorsement of McSweeney J., she indicated that the matter was being adjourned on consent and that the parties were making “concerted efforts to appraise the property in issue to resolve the dispute”.
32In August 2017, Mr. Mudronja offered to buy Ms. Mudronja’s shares, using the value assessed in the family law litigation. Unbeknownst to Ms. Mareddy, when this offer was made, Mr. Mareddy had obtained a property appraisal report from Hendren Mitchell Real Estate Appraisals in July 2017. The appraisal valued the property at $7.1 million. Accordingly, Ms. Mudronja’s shares would be valued at closer to $2.8 million, rather than the $640,000 figure that was used in the family law litigation to value the shares as at the date of separation in November 2007.
33In May 2019, two years later, the appraisal report that Mr. Mudronja obtained was first disclosed and provided to Ms. Mudronja’s lawyer.
34In October 2017, Ms. Mudronja retained her current counsel. On October 13, 2017, Ms. Mudronja’s counsel informed Mr. Mudronja’s counsel that he was recently retained and that he understood that an application was currently returnable on January 10, 2018. He indicated that cross-examinations needed to be conducted and that he intended to serve a cross-application record shortly. He suggested that the application be adjourned. He did not file any material for another year. Furthermore, no steps were taken to cross-examine Mr. Mudronja.
35On November 7, 2017 Ms. Mudronja’s counsel wrote again to counsel for Mr. Mudronja indicating that before parties could discuss settlement in any serious manner his client wished to have a business valuation done. On November 9, 2017, counsel for Mr. Mudronja responded, indicating that his client had no objection to Ms. Mudronja arranging an appraisal of the property, but that it might be premature because an environmental assessment was being obtained.
36On November 20, 2017, Ms. Mudronja’s counsel wrote to counsel for Mr. Mudronja, again indicating that the property needed to be appraised. He also requested an accounting with respect to other property sold by Mareddy, and particulars with respect to any mortgages registered on title. This was the same request for disclosure made one year earlier in November 2016, to which Mr. Mudronja had not replied.
37The hearing date scheduled for January 10, 2018 was adjourned, on consent. In the endorsement of Price J. from that date, he indicated that the parties collectively moved to adjourn the application. The matter was scheduled to proceed on September 12, 2018 for a two-hour hearing.
38On March 1, 2018 counsel for Mr. Mudronja wrote to Ms. Mudronja’s counsel asking if Ms. Mudronja was going to be arranging for an appraisal.
39On April 29, 2018 counsel for Ms. Mudronja wrote to counsel for Mr. Mudronja indicating that he wanted to bring a cross-application on September 12, 2018, but was told by the court that both applications could not be heard on the same day. He therefore scheduled a hearing for March 26, 2019 and indicated that a Notice of Application would be served shortly. He suggested that both applications he heard one after the other on the same date. He stated that if counsel for Mr. Mudronja wanted to proceed on September 12, 2018, he intended to cross-examine Mr. Mudronja on his affidavit.
40The September 12, 2018 application was adjourned to March 7, 2019. Again, no steps were taken to cross-examine Mr. Mudronja.
41On September 27, 2018 Mr. Mudronja attended at an examination-in- aid of execution with respect to the unpaid equalization payment he owed to Ms. Mudronja. During that examination, Mr. Mudronja’s evidence was that he believed the property was worth $5 to $7 million. During that examination, Mr. Mudronja was asked questions about Mareddy, and there were a number of refusals for information and documentation. No motion was brought in connection with those refusals.
42On October 19, 2018, Ms. Mudronja commenced this application.
43On February 25, 2019, Mr. Mudronja retained his current counsel.
44According to Ms. Mudronja, between March 1 and 12, 2019 there were discussions between counsel regarding the value of the property.
45The March 7, 2019 hearing date did not proceed because it was not confirmed. Thereafter, there was an exchange of email between counsel regarding setting a timetable for the applications.
46On April 18, 2019, Ms. Mudronja served her Amended Notice of Application and Application Record on Mr. Mudronja. The application was returnable on December 11, 2019. Counsel for the parties agreed to a timetable that included Mr. Mudronja serving his response by May 30, 2019. He failed to do so.
47On May 30, 2019, counsel for Mr. Mudronja wrote to counsel for Ms. Mudronja, attaching Mareddy’s financial statements for 2016 to 2019 and the property appraisal that Mr. Mudronja obtained from Hendren Mitchell Real Estate Appraisals in July 2017. Counsel for Mr. Mudronja also raised the issue of the date the shares would be valued. The parties agreed to conduct cross-examinations.
48In correspondence dated June 16, 2019, counsel for Ms. Mudronja indicated that his client was arranging to have an appraisal and business valuation conducted to determine the value of her shares. He also indicated that the shares should be valued as of the current date. He requested that Mr. Mudronja file responding materials and suggested dates for cross-examinations in July 2019.
49Counsel for Ms. Mudronja wrote to counsel for Mr. Mudronja on August 8, 2019, requesting 31 items of information and disclosure regarding Mareddy in order to conduct a valuation of Mareddy.
50Counsel for Mr. Mudronja responded to the request for disclosure on September 17, 2019, indicating that her client was out of the country and would provide a response upon his return. She also asked about the status of the appraisal Ms. Mudronja was arranging.
51Counsel for Mr. Mudronja emailed counsel for Ms. Mudronja on October 8, 2019, indicating that her client was working on responding to the request for information. She also indicated that she would serve her client’s affidavit shortly, and requested that the two applications be heard at the same time.
52On October 24, 2019, counsel for Mr. Mudronja wrote to counsel for Ms. Mudronja, providing answers and responses to the 31 items listed in the August 8, 2019 letter.
53On October 31, 2019, Mr. Mudronja served his responding affidavit. This was five months past the date that the parties had agreed to file the material.
54Ms. Mudronja arranged for an appraisal of the property. According to the report dated November 4, 2019 from Colliers International, the property has a value of $7,904,000. A copy of the appraisal was sent to Mr. Mudronja’s counsel on November 20, 2019.
55On November 11, 2019, counsel for Ms. Mudronja requested further disclosure regarding Mareddy.
56On November 20, 2019, counsel for Ms. Mudronja emailed counsel for Mr. Mudronja and indicated that it was unlikely that the December hearing could proceed because he had not yet conducted an examination of Mr. Mudronja.
57On October 21, 2019, counsel for Mr. Mudronja emailed counsel for Ms. Mudronja asking for consent to have the two applications heard on the same day and proposed scheduling cross-examinations by the end of November 2019. Dates were set for November 25-26, 2019 for both parties to be cross-examined. Only the cross-examination of Mr. Mudronja was conducted.
58Counsel for Ms. Mudronja emailed counsel for Mr. Mudronja on November 21, 2019, indicating that he did not have any problem with the matters being heard on the same day, but his concern was that they would require a full day, while the matter was only booked for a half-day.
59Counsel for Mr. Mudronja emailed counsel for Ms. Mudronja on November 21, indicating that she would not consent to a further adjournment.
60Ms. Mudronja served and filed a supplementary application record dated December 4, 2019.
61The matter was before me on December 11, 2019. The date had been scheduled since April 2019. It was a fixed long hearing date. Ms. Mudronja’s counsel indicated he was seeking an adjournment as there were outstanding undertakings and refusals from the cross-examination of Mr. Mudronja that was conducted on November 25, 2019. Mr. Mudronja opposed the adjournment. Both parties accused the other of delay.
62The evidence before me that day was an affidavit sworn by Ms. Mudronja on April 10, 2019 in support of her application and an affidavit from Ms. Reis, a law clerk who worked for Ms. Mudronja’s lawyer, sworn December 4, 2019. Mr. Mudronja’s responding affidavit sworn October 28, 2019 and an affidavit sworn by Ilona Hrubant, a legal assistant with Mr. Mudronja’s lawyer, sworn November 29, 2019, were also before me. In accordance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Mr. Mudronja served and filed a factum. Ms. Mudronja did not file a factum for that appearance.
63Counsel for Mr. Mudronja argued that the threshold issue to determine was the date to value Ms. Mudronja’s shares, as the parties had agreed that she would sell her shares to Mr. Mudronja. After a full day of submissions, the matter was adjourned to March 16, 2020. In my reasons, I addressed concern with parties fixing dates for long hearings, and then appearing on the day of the hearing to request an adjournment.
64As the Superior Court of Justice had suspended its operations due to COVID-19, the March 16, 2020 date was adjourned to June 9, 2020. The matter proceeded that day by Zoom. Before the matter was heard, Ms. Mudronja filed two further affidavits sworn February 4 and 6, 2020. A further affidavit sworn by Ms. Hrubant on February 20, 2020 was also filed.
B) Ms. Mudronja’s Role with Mareddy
65The evidence is not disputed that Ms. Mudronja was never involved in any capacity with the operation of Mareddy, although she was a 40 percent shareholder. According to Ms. Mudronja, she never had a say in the governance of Mareddy, was never given any records or financial documents, never received a dividend, never attended a shareholder’s meeting, was never given copies of the corporate minutes and never received any updates from Mareddy’s corporate lawyer.
66There is no dispute that Ms. Mudronja was aware of a shareholder’s meeting that was scheduled for March 9, 2009. In her material, she filed a letter she wrote on March 6, 2009 to counsel for Mr. Mudronja advising that she did not plan to attend that meeting and she was aware that changes to the board of directors was going to be discussed. At the meeting she was removed from the board of directors of Mareddy.
Analysis
67The parties have agreed that Mr. Mudronja will purchase Ms. Mudronja’s common shares in Mareddy. The sole issue I have been asked to determine is the date those shares are to be valued. Both parties have relied upon jurisprudence dealing with the selection of valuation dates in oppression remedy cases under the OBCA.
68Before reviewing this jurisprudence and the governing legal principles, I will address the delay claims made by each party, as this was much of the focus in the written materials and submissions.
i) Delay
69In my view, the delays in these proceedings, which includes Mr. Mudronja’s application, were the fault of both parties. I cannot conclude that one party was more at fault than the other, although I am concerned that Ms. Mudronja did not commence her application until October 2018 – almost three years after her lawyer indicated that she would be commencing a proceeding. Overall, based on my review of the procedural history of the litigation as set out herein, both parties were less than diligent in pursuing the litigation.
70While there were a number of hearing dates set and adjourned, all such adjournments were on consent. The only contested adjournment was in December 2019, when the matter was first before me.
71In my view, Mr. Mudronja contributed to the delay through his failure to respond to Ms. Mudronja’s request for disclosure in a timely fashion. It was not until Mr. Mudronja retained his current counsel that disclosure regarding Mareddy was provided in May 2019. There were a number of letters and emails from Ms. Mudronja’s lawyers requesting financial information from Mareddy from the outset of the litigation in 2016. The requests were essentially ignored. During this time, Ms. Mudronja owned 40 percent of the common shares in Mareddy yet, as a shareholder, she was not provided with any financial records. She was entitled to that disclosure not only as a shareholder but also as a litigation in this action.
72I do not accept Mr. Mudronja’s submission that the proper way to obtain the disclosure was to schedule cross-examinations and serve a Notice of Examination. He argues that given the acrimonious relationship between the parties, it was to be expected that disclosure would only be produced following the Rules of Civil Procedure. That was not, however, communicated to Ms. Mudronja. In fact, in November 2016, Mr. Mudronja’s lawyer said his client was reviewing the request for disclosure and would advise what Mr. Mudronja agreed to provide. Furthermore, Mr. Mudronja’s current lawyer provided disclosure in May 2019 prior to scheduling cross-examinations. At no time was it communicated to Ms. Mudronja that Mr. Mudronja would not provide any disclosure other than in accordance with the Rules or until such time as cross-examinations were scheduled and a notice served on him. If that was his position regarding the requests for disclosure, it ought to have been communicated to Ms. Mudronja at the outset and each time she made requests for disclosure from him regarding Mareddy.
73Furthermore, although the parties were immersed in litigation for years, as a majority shareholder Mr. Mudronja ought to have responded to Ms. Mudronja’s request for financial disclosure from Mareddy even though it had not been provided to her prior to their separation.
74Ms. Mudronja also contributed to the delay. Her position throughout the litigation has been that she required an updated appraisal of the property. She took no steps to secure an appraisal until October 2019–four years after Mr. Mudronja commenced the litigation. Although she alleges that Mr. Mudronja prevented her from obtaining an appraisal, there are letters from Mr. Mudronja’s lawyer as early as June 6, 2017, asking when the appraiser was going to be attending at the property so that arrangements would be made for that attendance. A further letter was sent by Mr. Mudronja’s lawyer on March 1, 2018, again asking when Ms. Mudronja’s appraiser would be attending at the property. There is no evidence that Mr. Mudronja prevented Ms. Mudronja from obtaining an updated property valuation since this litigation was commenced.
75Ms. Mudronja also expressed her intention to cross-examine Mr. Mudronja since January 2016, yet waited until November 2019, almost four years later, to cross-examine Mr. Mudronja. No adequate explanation was given about why there was such a lengthy delay.
76While Mr. Mudronja criticizes Ms. Mudronja for not conducting his cross-examination until November 25, 2019, he did not serve his responding affidavit in Ms. Mudronja’s application until October 31, 2019. While the hearing date on December 11, 2019 had been scheduled since April 2019, Mr. Mudronja waited until approximately six weeks before the hearing date to serve his material. While the material was served in compliance with the Rules, it left limited time to schedule and conduct the cross-examination. In my view, as the issue in dispute was outstanding since December 2015, when Mr. Mudronja commenced his application, he could have and should have filed his responding affidavit on a timelier basis to avoid any further delays.
77Both parties changed counsel during the litigation, which also contributed to delays because hearings were adjourned when new counsel was retained.
78In reviewing the history of the litigation, my view is that the conduct and attitude of both parties suggests little regard for the court’s process. Prior to the onset of COVID-19, there were significant challenges and pressures on judicial and courtroom resources, particularly in the Central West region. Long hearing dates are not available for many months. In this matter, the parties secured more than one long hearing date. Rather than working in a concerted manner to ensure all pleadings were exchanged and questioning completed, they demonstrated a rather cavalier attitude and agreed to a number of adjournments of the long hearing date at the last minute. When there are so many litigants seeking access to justice in a timely fashion, parties must understand the importance of setting long hearing dates and being ready to proceed on that date. Those dates should not be set if the parties are indifferent as to whether the matter proceeds.
79When I review all of the evidence, I find that both parties failed to act diligently in pursuing the litigation and both are equally responsible for any delay.
ii) The Matrimonial Litigation
80For the purpose of this proceeding, it is important to be mindful that it is Ms. Mudronja’s position as a shareholder in Mareddy for which she seeks relief. That is distinct, separate and apart from her being the former spouse of Mr. Mudronja. There are various allegations about Mr. Mudronja’s conduct in the family law litigation that I do not consider relevant in assessing his conduct as a majority shareholder.
81In her reasons, Seppi J. made findings regarding Mareddy and Mr. Mudronja’s conduct that are relevant. At paragraph 12, Seppi J. noted that Mr. Mudronja caused Mareddy to sell property located at Mary Street in 2010 for $1,380,000. Seppi J. found that this sale violated a preservation order issued in the family law matter. At paragraph 13, she found that Mr. Mudronja did not account for or provide any of the proceeds to Ms. Mudronja, who she noted is a 40 percent shareholder in Mareddy, “despite her numerous requests for her share and an accounting.” Seppi J. also noted that Mr. Mudronja removed Ms. Mudronja from the Mareddy Board of Directors.
82During his submissions, counsel for Ms. Mudronja referenced many other findings made by Seppi J. as they relate to Mr. Mudronja’s conduct. Those findings were made in connection with his operation of Jitsu, such as failing to provide reliable monthly financial statements and putting personal expenses through the business. None of those findings, however, are relevant, as they do not relate to findings dealing with Mareddy. Furthermore, allegations of Mr. Mudronja’s alleged misconduct in either the matrimonial proceeding or subsequent failure to pay the equalization payment are in connection with his role as a spouse and not his role as a majority shareholder of Mareddy.
83In addition, Ms. Mudronja filed as part of her application the entire transcript from the examination-in-aid of execution questioning of Mr. Mudronja conducted in September 2018, which dealt with the matrimonial litigation. That is a separate proceeding, and reliance on evidence from that questioning in this action is not permitted because it is a violation of Rule 30.1 of the Rules of Civil Procedure, known as the deemed undertaking rule.
84According to Rule 30.1, parties and their lawyers are deemed to undertake not to use any evidence or information to which the rule applies for any purpose other than those of the proceeding in which the evidence was obtained. The Rule relates to evidence obtained through documentary discovery, examination for discovery, inspection of property, medical examination and examination by written questions. By extension, I find that it also applies to a questioning-in-aid of execution to enforce a judgement.
85Ms. Mudronja relies on Mr. Mudronja’s refusal during that questioning to provide various financial records relating to Mareddy and argues that his failure to do so is further evidence of his oppressive conduct as a shareholder in this action. That evidence is not admissible. In addition to it being a violation of the deemed undertaking rule, this is an application that involves the role of the parties as shareholders and not as former spouses engaged in acrimonious litigation. While it is understandable that the boundaries between someone as a former spouse versus as shareholder may be easily blurred, the relief being sought in this proceeding is pursuant to the OBCA, and it is only conduct as a shareholder that I consider relevant: Chiaramonte v. World Wide Importing Ltd., 1996 CarswellOnt 1347, at. para. 29. It is not relevant whether Mr. Mudronja has or has not paid the equalization payment owing to Ms. Mudronja in this proceeding. What is relevant is that as a shareholder, she was not, until recently, provided with any financial records relating to Mareddy.
86Accordingly, evidence that Mr. Mudronja failed to produce documents when requested in that questioning is not admissible in this proceeding and I have not considered it in these reasons.
iii) The Appraisal
87I will address the issue of the appraisal Mr. Mudronja obtained in July 2017 regarding the value of the property. According to that report, the property has a value of $7.1 million as of July 4, 2017. This report was not provided to Ms. Mudronja until May 2019. Ms. Mudronja asserts that Mr. Mudronja’s failure to provide her with a copy of the appraisal is further evidence of his oppressive conduct. Furthermore, she asserts that when he offered to buy her shares in August 2017 for the value assessed in the matrimonial litigation, he did so knowing that the property had increased in value and that her shares would therefore be worth substantially more than assessed in the family law litigation. This, she argues, is further evidence of his misconduct.
88The valuation report was obtained by Mr. Mudronja as part of the litigation. Litigation privilege protects the right of a party to consult an expert without disclosing its communication with the expert or the expert’s opinion unless the party intends to rely on that opinion at the hearing: Miller v. Optimum Insurance Company Co., 2008 CarswellOnt 4392, at para. 19. The rules with respect to the disclosure of documents and affidavit of documents applies to actions and not applications.
89I am concerned with the disclosure of settlement offers. Ms. Mudronja should not have disclosed any offer made by Mr. Mudronja to settle this matter. I place no reliance on any such offer. She argues that the purpose of disclosing the offer was not to use it in any substantive way but as a further example of Mr. Mudronja’s misconduct for making an offer knowing that a more recent property appraisal significantly increased the values of Ms. Mudronja’s shares in Mareddy.
90In my view, Mr. Mudronja, as a party to this litigation, cannot be faulted for making a settlement offer using a valuation date for the shares as at the date of separation. It was open to Ms. Mudronja to secure her own valuation of the property, which she subsequently did, in order to assess Mr. Mudronja’s offer. Furthermore, Ms. Mudronja did not have to accept the date of separation as the date to value the shares. Based on her position that an updated property valuation and business appraisal was necessary, she clearly rejected the date of separation as the date to value her shares.
iv) The Oppression Remedy and the Limitation Period
91Generally, minority shareholders who are dissatisfied with corporate behaviour may apply under the OBCA for various remedies, including the oppression remedy. The oppression remedy is an equitable and flexible remedy that gives courts broad discretion to alleviate unfair treatment of minority shareholders by the corporation and/or its majority shareholders. Pursuant to s. 248(3) of the OBCA, the court may make any interim or final order it deems fit in an application brought pursuant to the oppression remedy provisions of the Act. The court can make a wide range of orders pursuant to this section if it finds that there has been conduct that is oppressive, unfairly prejudicial, or disregards the interest of any shareholder.
92The reasonable expectation of the shareholder to be treated in a certain way is the cornerstone of the oppression remedy: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 61. The question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue and the entire context, including the fact that there may be conflicting claims and expectations: BCE, at para. 62. The remedy is based on concepts of fairness and equity, rather than on legal rights. Not all conduct that is harmful to a stakeholder will give rise to a remedy for oppression as against the corporation: BCE, at para. 71.
93The claimant must first identify the expectations that he or she claims have been violated by the conduct at issue and establish that the expectations were reasonably held. Some factors useful in determining whether a reasonable expectation exists include the following: commercial practices; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders: BCE, at paras. 70-72.
94Once the claimant establishes the first element of an action for oppression – reasonable expectations – the claimant must then show that the failure to meet this expectation involved unfair conduct and prejudicial consequences: BCE, at para. 89.
95For minority shareholders in a private company without a shareholder agreement, the following are some general reasonable expectations:
The directors and officers will conduct the affairs of the corporation in accordance with their statutory and common law duties to do so;
The minority shareholder will be entitled to receive annual financial statements of the corporation and have access to the books and records of the corporation to a limited extent contemplated by the OBCA;
The minority shareholder will be entitled to attend an annual meeting of the corporation for the purposes of receiving the annual financial statements, electing the directors and auditors, or will participate in the approval of those matters by way of shareholders resolution;
The minority shareholder will participate in any fundamental transactions involving the corporation where approval is required under the OBCA; and
The minority shareholder will receive their pro rata entitlement dividends and other distributions payable for common shares at the same time as other shareholders.
96Different fact scenarios and contexts create different reasonable expectations on the part of the minority shareholders: Senyi Estate v. Conakry Holdings Limited Ltd., 2007 CanLII 20102 (ON SC), [2007] O.J. No. 2146, at para. 9. Furthermore, shareholder expectations may not be static over time: Chiaramonte, at para. 30.
97Upon a finding of oppression, the relief that can be granted under s. 248 of the OBCA is broad and there is judicial discretion to craft the most appropriate remedy. Remedies include restraining the offending conduct, winding up the corporation or directing a corporation to purchase a minority shareholder’s shares.
98Both parties have also relied on s. 207 of the OBCA, which does not require a finding of oppression in order for the court to grant relief in situations where there has been a breakdown in the relationship between shareholders. While the section refers to an order to wind up the corporation, under subsection 207(2), the court may, in a wind up application, grant any of the remedies under s. 248(3), which includes many, less drastic remedies, such as one shareholder buying another shareholder’s shares. This was the relief granted in Belman v. Belman, 26 O.R. (3d) 56, 1995 CanLII 7220 (Ont. S.C.). In that case, the shareholders were spouses who operated the business. The court ordered that pursuant to s. 207, the wife was to buy the husband’s shares in the business because they could no longer operate it together.
99While in Belman the respondent husband opposed the relief, in this matter the parties agree on the remedy but perhaps not on the process of achieving that remedy. Ms. Mudronja’s position is that the relief is warranted because she was oppressed as a minority shareholder and that this is a factor to consider in determining the date on which the shares are to be valued. Conversely, Mr. Mudronja disputes that there was any oppression or, in the alternative, that the claim is out of time. He relies on s. 207 of the OBCA to support the remedy the parties have agreed upon and urges the court not to consider any allegations of improper conduct in determining the date the shares are to be valued.
100I will first address whether there is sufficient evidence to determine if Ms. Mudronja, as a minority shareholder, was oppressed. This involves an analysis of reasonable expectations. Ms. Mudronja’s evidence is that since Mareddy was incorporated, she has not:
(a) Had the opportunity to have any say or governance of Mareddy;
(b) Been provided any records or financial documents with respect to Mareddy;
(c) Received any dividends from Mareddy;
(d) Had the opportunity to attend any shareholder meetings;
(e) Been provided with any copies of the corporate minutes of Mareddy;
(f) Received any updates or had any contact from any corporate lawyer for Mareddy.
101Based upon the evidence before me, after Mr. Mudronja commenced his application, Ms. Mudronja’s request for financial documents and information regarding the operation of Mareddy in November 2016 were essentially ignored until May 2019 when financial disclosure including income tax returns were produced. In my view, it is reasonable for a minority shareholder to expect to receive financial disclosure, upon request, even if it had not been requested or provided in the past. Reasonable expectations are not static. After the parties separated, it was reasonable for Ms. Mudronja to expect that if she requested, she would be provided with disclosure even though this may not have been her reasonable expectation before they separated. Mr. Mudronja’s failure to respond was oppressive conduct.
102Mr. Mudronja argues that Ms. Mudronja’s application for declaratory relief that as a minority shareholder she was oppressed is statute-barred and therefore any claims regarding oppression should be disregarded for the purpose of setting the date on which the shares should be valued.
103It is not in dispute that the two-year limitation period as set out in the Limitations Act, 2002, S.O. 2002, c.24, Sched. B, applies to claims of oppression. Discoverability is the key factor in determining when a limitation period begins to run. An oppression claim ought to be brought within two years of being discovered by a reasonably prudent person: Maurice v. Alles, 2016 ONCA 287.
104In reliance on the two-year limitation period, Mr. Mudronja argues that based on the findings of Seppi J. in October 2014, Ms. Mudronja was aware that the Mary Street property had been sold by Mareddy and that she had not received any response to her request for disclosure or her share of any proceeds from the sale. She had also been removed from the Board of Directors in 2009. Accordingly, any claims of oppression based on being excluded from Mareddy and for a lack of disclosure were discoverable at the latest in October 2014, when Seppi J. made these findings. As such, Ms. Mudronja’s claim for relief from oppression ought to have been commenced within two years from that date.
105In Alles, the Court of Appeal made a distinction between ongoing oppressive conduct and discrete oppressive acts. In Alles, the court commented that a party that engages in a series of oppressive acts can always make the argument that it is all part of the same corporate malfeasance and that the limitation period runs with the discovery of the first oppressive act. If there are new acts of alleged oppressive conduct, that are distinct from the ongoing oppressive conduct, the limitation period starts to run from the date of those separate and distinct acts. The court found that it would be contrary to the OBCA for a party to have acted in an oppressive manner and, if no oppression remedy application is commenced, he or she could take additional oppressive steps in furtherance of or based upon the initial oppressive conduct, with the limitation period only applying to the original oppressive conduct: at paras. 43-55.
106I am not prepared to make a finding that Ms. Mudronja’s claim is barred by the expiration of the two-year limitation period. In my view, Mr. Mudronja’s failure to provide any financial records from Mareddy when requested, after he commenced his application, constitutes a distinct oppressive act that is separate from the acts of failing to provide disclosure regarding the sale of the property on Mary Street in 2010 and excluding Ms. Mudronja from Mareddy’s Board of Directors in 2009. The evidence is that Ms. Mudronja sent out her request for disclosure from Mareddy, including production of financial statements, in her affidavit sworn November 8, 2016.
107In any event, as will be reviewed below, my finding of oppression has little bearing on the valuation date to be selected.
v) The Valuation Date
108Having found: 1) that both parties are responsible for delay in this litigation; 2) that Mr. Mudronja’s conduct in the matrimonial litigation is not relevant to claims advanced against him as a shareholder; 3) that Ms. Mudronja’s claim for oppression is not out of time; and 4) that there is evidence of oppressive conduct, the next issue is how these findings impact the date to select to value Ms. Mudronja’s shares.
109There is no dispute that the value of Ms. Mudronja’s shares has increased since the application was commenced, as a result of the increased value of the property. There is no evidence that the value of the shares has increased as a result of any efforts on the part of Mr. Mudronja in operating Mareddy, which he describes as a holding company with the sole purpose of owning the property from which Jitsu operates. The issue is whether, in all of the circumstances and based on my findings as set out herein, the shares should be valued on a date in which both parties share in the increased value of the property or whether the shares should be valued at an earlier date, in which case only Mr. Mudronja would benefit from the increased value of the property.
110There have been many cases that have addressed the issue of the date on which shares are to be valued in oppression remedy claims involving family owned corporations. In Bellman, the husband and wife jointly owned and operated a corporation that provided continuing education programs. After the parties separated, the husband alleged that the wife was having an affair and could no longer work with her. The wife relied on s. 207 of the OBCA and requested an order that she be allowed to buy out the husband’s shares. The husband objected and said that they could still jointly operate the business. After reviewing the evidence, the court found it was just and equitable to force the husband to sell his shares to the wife pursuant to s. 207 of the OBCA.
111With respect to the date to value the husband’s shares, the wife argued that the date of the application in June 1994 was the date to use. The court noted that the opposing view was that the shares should be valued as at the date of the hearing in October 1995. In considering these two options, the court found that the profit for the year ending in 1995 was attributable to the wife’s efforts in running the business, but that the parties had always run the company jointly and viewed themselves as partners. The court also noted that there was no claim for oppression against the husband or allegations of misconduct. After considering these factors, the court fixed the valuation date at the year end of July 1995. The court found that the relief sought under the OBCA was an equitable remedy within the discretion of the court where it considers such relief to be just and equitable. The court found that this discretion also extended to the date on which the shares were to be valued: at para. 105.
112While the facts in Bellman are distinguishable because the parties in this matter did not run the business jointly, it is important to note the court’s view on the discretionary nature of the relief and that the court can order the sale of shares from one shareholder to the other without a finding of oppression.
113In Proulx v. 2006550 Ontario Inc., 2005 CarswellOnt 6911, the husband was the majority shareholder of a company. Prior to their separation, the wife received income by way of income splitting, salary and bonus. After the parties separated, the husband prevented the wife from receiving any other benefits from the company. The wife applied under s. 248 of the OBCA for relief as a minority shareholder. The court found that the husband’s conduct was oppressive and ordered him to buy his wife’s shares at fair market value. In making a finding of oppression the court found that based on the pre-separation history, the wife had a reasonable expectation that she would continue to benefit from the company.
114With respect to the remedy, the court found that in a small, closely-held family corporation, it was a reasonable expectation of the wife that her shares would be purchased by the majority shareholder upon a marital separation.
115With respect to the date of valuation of the shares, the court commented that the date of the application was the “normal” date for valuation, subject to other evidence suggesting a different date: at para. 63. The court found there was no evidence to deviate from this date for valuation.
116It is important to note that in Proulx, the value of the shares had decreased by the date the application was heard. The court noted that the wife had lost the benefits of receiving any of the profits of the corporation or benefitting from the growth in value of her shares. At the same time the court noted that the husband’s conduct had compromised the value of the shares. Accordingly, using the earlier valuation date benefitted the wife.
117In Booth v. Alliance Windsor Insurance Brokers Inc., 2007 ONCA 805, [2007] O.J. No. 4558, the minority shareholder commenced an action and sought a declaration that the majority shareholders acted in an oppressive manner. He sought an order that the majority shareholders purchase his shares. He was also terminated from his employment with the company. The majority shareholders defended. They did not admit oppression or agree to purchase the plaintiff’s shares. After a trial, in May 2006 the judge ordered that the defendants buy the plaintiff’s shares to be valued as at September 2005, which was the most recent year-end of the corporation.
118On appeal, the defendants argued that the shares ought to be valued as at the date the application was commenced.
119In determining the date to value the shares, the court found that there is no rigid rule as to what valuation date is to be used and all of the circumstances must be considered: at paras. 12-15.
120The court upheld the trial judge’s findings and noted that the minority shareholder’s oppression began when he was terminated. The court found that he reasonably expected a long-term relationship with the corporation. The court also found that the corporation continued to receive benefits from the work the plaintiff performed after his employment was terminated.
121The court also found that the majority shareholders defended the claim and continued with their oppressive conduct by excluding the plaintiff’s participation in the business and in this way attempted to appropriate the corporation’s growth rather than share it with all shareholders.
122What these cases demonstrate is that the court will consider all of the circumstances, including any finding of oppression, in determining the date shares are to be valued. It is important to note that in each of these cases, the minority shareholder had been receiving benefits from the company and/or was working for the business. In this case, Ms. Mudronja’s evidence is that she never worked for Mareddy or received any financial benefit from it. In my view, these are factors to consider in setting a fair and just date to value the shares.
123Mr. Mudronja asserts that the date of the application is typically the date used to value shares and that the onus is on Ms. Mudronja to provide compelling reasons as to why another date should be selected. He argues that based on the evidence, it is not just and equitable to deviate from the norm, which is to value the shares as at the date he commenced his application.
124In my view, there is no onus on Ms. Mudronja to provide “compelling evidence” as to why her shares should be valued on a date other than the date that Mr. Mudronja commenced his application. The test is what the most just and equitable date is to value the shares, having regard to all of the circumstances. In that regard, the reasonable expectations of the parties should also be considered.
125It is important to be mindful that a remedy granted for oppression is not meant to penalize the party who has committed the oppressive act, but rather to remedy the oppression. With respect to the oppressive conduct claim relating to lack of disclosure, that was remedied when Mr. Mudronja provided the financial disclosure, although late in this litigation. As such, I do not consider the oppressive conduct to be a significant factor in determining the date to value Ms. Mudronja’s shares. I also do not consider the evidence of Mudronja’s conduct in the matrimonial litigation to be a factor in this action commenced under the OBCA. Furthermore, there is no evidence that Mr. Mudronja has taken any steps that have had a negative impact on the value of Ms. Mudronja’s shares.
126In determining the just and fair date to value the shares, one of the questions is whether it was the reasonable expectations of the parties that Ms. Mudronja’s shares would be valued as at the date of the hearing, as she proposes, thereby sharing in the growth of the value of the property. In that regard, I find as a relevant factor that both parties requested valuations of the property prior to the date of the hearing. Ms. Mudronja was requesting a valuation from the outset of the litigation, whereas Mr. Mudronja obtained a valuation in July 2017. He did not ask that the property be valued as at December 2015, which suggests he did not have a reasonable expectation that the shares be valued as at that date. The report Ms. Mudronja obtained values the property as at 2019.
127I have also considered the evidence that Ms. Mudronja never played a role in Mareddy or received any financial benefit from it. Those are also factors in assessing reasonable expectations.
128Post-separation, and since these applications were commenced, there was no ongoing oppression by excluding Ms. Mudronja from Mareddy because she was never part of Mareddy. She never participated in or contributed to the growth of Mareddy. Those were factors the courts in the cases above reviewed.
129Ms. Mudronja relied on jurisprudence that considered valuation dates in the context of family law litigation. I do not consider those cases to be of much assistance, given the distinct statutory regime that governs how and when assets are to be valued upon marriage breakdown.
130In my view, considering all of the circumstances and the reasonable expectations of the parties, I find that the fair and just date to value the shares is at the corporate year-end in 2017, whatever date that falls on, as it was not in evidence before me. That date is selected because, by then, Mr. Mudronja offered to purchase Ms. Mudronja’s shares. Ms. Mudronja retained her current lawyer in October 2017. By that date, she had been served with Mr. Mudronja’s materials for over one year and had more than ample opportunity to commence her application. She was aware that Mr. Mudronja was seeking to buy her shares in Mareddy, a company with which she was never involved.
131This is not a case where Ms. Mudronja has been unfairly prejudiced, as in the cases described above where the minority shareholder was deprived of benefits from the corporation that they had been receiving before being essentially ousted from the corporation. Furthermore, she made no contributions to the company since it was incorporated. In my view, it is not a reasonable expectation that she would then share in the increased value in Mareddy’s shares, which is attributable to market forces.
132I am also not prepared to use the date that Mr. Mudronja commenced his application, as I find his conduct of failing to provide disclosure within this litigation to be a factor, I consider relevant to determining the fair and just date to value the property. Furthermore, the expert he retained valued the property in July 2017, and not the date he commenced his application, suggesting that even his expectations were not commensurate with a date of application valuation.
133Furthermore, there is no evidence that the value of Mareddy’s shares have increased as a result of Mr. Mudronja’s efforts. The evidence before me is that the increased value is due to market forces increasing the value of the property owned by Mareddy. Had the increased value been solely attributable to his work, I may have been inclined to agree that the valuation date should have been the date he commenced his application. However, when I factor in his very late disclosure as a party to this litigation, and the reason the shares have increased in value, I find that the most just and equitable date to value the shares is as at the corporate year-end for Mareddy in 2017.
134Without considering offers to settle, it is unclear to me who might be the successful party on this hearing. If the parties cannot agree on whom is entitled to costs or quantum, they may file their costs outline and any relevant offers to settle by February 1, 2021.
L. Shaw J.
Date: December 17, 2020