Court File and Parties

COURT FILE NO.: CV-17-082 (Orangeville) DATE: 2022 03 22

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

1947755 ONTARIO LTD. Plaintiff Adam Jarvis for the Plaintiff

- and -

GASPARE CARUSO, NATIONAL BANK OF CANADA, and SUKHJINDER BHANGU Defendants Matthew Kersten, for the Defendant, Gaspare Caruso Kirsten Mercer for the Defendant, Sukhjinder Bhangu

HEARD: March 15, May 26, June 8, 22 and 23, 2021, by video-conference

REASONS FOR DECISION

(CORPORATE CHALLENGE)

Emery J.

[1] There are several proceedings involving the plaintiff, 1947755 Ontario Ltd. (“194”) in which Robert Bortolon is a looming presence, but not as a party. This action is one of them.

[2] In this action, 194 claims that the defendant, Gaspare Caruso, wrongfully withdrew $86,000 from the corporate account at National Bank of Canada. Mr. Caruso defends himself on the basis that he was the sole director of 194 at the time. As the sole director, he takes the position that he was legally entitled to withdraw funds from the corporation as a corporate act. Mr. Caruso has brought this motion under Rules 20 and 21 alternatively to have the action dismissed (the “Caruso motion”).

[3] Mr. Sukhjinder Bhangu is a lawyer who has also been named as a defendant. Mr. Bhangu was the real estate lawyer acting for 194 on a refinancing that generated funds deposited to the corporate account, including the $86,000. In the course of his representation, Mr. Bhangu declined to take instructions from Robert Bortolon, who held himself out as a director of 194 after January 27, 2017.

[4] National Bank has been let out of the action.

[5] 194 claims damages against various defendants, including the defendant Doug Laframboise, in a related action commenced in Orangeville under Court File No. CV-19-13 (“19/13”). The action in 19/13 arises from the refinancing of 142 King Street in Bolton, which is 194’s sole asset (the “mortgage action”). The mortgage action overlaps the claims made in the Caruso action because it puts in issue the withdrawal of the same funds as well as other moneys generated under the mortgage.

[6] Mr. Laframboise is a lawyer who at one time represented Mr. Caruso, and perhaps even 194. Mr. Laframboise currently represents the other defendants in the mortgage action, as well as himself as a named defendant. He has brought a motion in the mortgage action on behalf of all defendants to find Robert Bortolon in contempt. The contempt motion is brought on grounds that Robert Bortolon was allegedly behind the statement of claim issued on January 24, 2019 to commence that action. The defendants allege Robert Bortolon breached an outstanding order prohibiting him or any corporation under his control from bringing or continuing an action without leave.

[7] In the alternative, Mr. Laframboise seeks an order expunging the first iteration of the statement of claim by which the mortgage action was commenced.

[8] These are the reasons for the decision in both motions. They have been decided on the record filed in respect of the two motions as they were heard by me one after the other, share the same factual history, and have issues in common concerning the corporate governance of 194. Each motion, however, has been decided on the submissions made on the issues particular to that motion.

The Litigation Landscape

[9] The Caruso action and the action in 19/13 are among several proceedings commenced in Orangeville involving 194, Mr. Laframboise or Robert Bortolon. I have been hearing all motions brought in four of those proceedings as the designated judge under Rule 37.15 since May 2019. Those proceedings under this management umbrella are:

a. This action, in which 194 as plaintiff claims the return of, or damages for, funds withdrawn from the corporate account at National Bank of Canada by Mr. Caruso (also referred to as the action in “82/17”);

b. The mortgage action, also commenced by 194 as plaintiff, in 19/13;

c. An application commenced by 194 against 1883203 Ontario Inc., John Visaretis and Gaspare Caruso to discharge a second mortgage registered by 1883203 Ontario Inc. against title to the property in Court File No. CV-19-130 (“19/130”); and

d. An action commenced by Mr. Laframboise against 194 and others in Court File No. CV-18-208 (“18/208”).

[10] In my Endorsement released on July 14, 2020, I organized three sets of motions and the sequence in which they would be heard. The parties are currently working through the first set of motions. The motions heard on March 15, May 25, June 8, 22 and 23, 2021, all shared the theme of determining what individual was, or was not, the lawful director of 194 at specific points in time since 194 was incorporated.

[11] There are two other actions in which orders have been made that are relevant to the present motions. In an action commenced in Milton Court File No. 4561/17 by Business Development Bank (“BDC”) against Robert Bortolon and his company Cavalon, Inc., Seppi J. made an Order dated May 14, 2018, declaring Robert Bortolon a vexatious litigant. The order prohibited Robert Bortolon or any corporation he controls from commencing or continuing any action without leave. And in an action commenced at Orangeville in Court File No. CV-20-59 (“20/59”), Mr. Caruso made a claim that Robert Bortolon, his brother Dean Bortolon, John Hanna Nissan and Martin Citron deprived him of his shares in 194. On a motion by the defendants in 20/59, Lemon J. granted summary judgment dismissing the action upon finding that the action was commenced after the applicable limitation period had expired. That decision was upheld on appeal at 2021 ONCA 842.

The Caruso Motion

[12] The central issue I have been asked to determine on the Caruso motion is whether Gaspare Caruso was the sole director in February 2017, when he withdrew $86,000 from the corporate bank account. Mr. Caruso also claims that he was the sole shareholder in 194 at the time. He submits that these findings will in turn lead the court to conclude that he did not act wrongfully when he withdrew those funds.

[13] The evidence on which the parties rely to prove whether Mr. Caruso was a director or a shareholder of 194 at material times to the action are derived from various filings spread throughout the greater litigation. For ease of reference, I am setting out the position and summary of evidence of Mr. Caruso and 194.

The Caruso Position

[14] Mr. Caruso incorporated 194 and became the first director of the corporation on December 31, 2015. Mr. Caruso has given affidavit evidence that Mr. Laframboise prepared the Articles of Incorporation and registered those Articles on his behalf. Elsewhere, Robert Bortolon has given evidence in an affidavit that Mr. Laframboise was acting under his direction when the Articles of Incorporation were filed to incorporate 194. While it is unclear which of Mr. Caruso or Robert Bortolon was instructing Mr. Laframboise, there is no dispute that 194 was incorporated as a vehicle to purchase the property municipally known as 138 & 142 King Street East, in Bolton (together, “142 King St.” or the “property”).

[15] 142 King St. was at one time owned by Cavalon, Inc., a corporation owned or controlled by Robert Bortolon. Robert Bortolon and Gaspare Caruso knew one another as they and one Vincent Porchelli each owned one third of 2365222 Ontario Limited operating as Auto Body Collision Repair, otherwise known as Autometric Autobody. Not surprisingly, Autometric Autobody operated out of 142 King St.

[16] Cavalon, Inc. had granted a first mortgage of the lender, BLG Canada LLC (“BLG”) against the property and had fallen into default under that mortgage by 2015. BLG brought power of sale proceedings to sell 142 King St. to enforce its security. The balance owed by Cavalon, Inc. under the BLG mortgage at the time may have been as much as $975,000, including interest and legal fees, but there is also evidence that the final payout to BLG was approximately $350,000.

[17] On or about November 11, 2016, Mr. Caruso signed the Agreement of Purchase and Sale on behalf of 194 to purchase the property from BLG. To close the purchase, Mr. Caruso made three mortgage applications in the name of 194 to obtain the financing necessary to purchase 142 King St. He ultimately arranged a $500,000 mortgage from Skylark Mortgages (now a defendant in 19/13) at an interest rate of 10% interest annually. 194 also used $122,926 from the proceeds of an insurance claim owed to Autometric Autobody towards the purchase price.

[18] Mr. Caruso states that he was required to personally guarantee the mortgage to Skylark Mortgages. Mr. Caruso states that he signed all mortgage documents as the sole director and the president of 194.

[19] Mr. Caruso has maintained throughout the action that he was the sole shareholder of 194, despite the absence of paperwork issuing those shares. He states that he incorporated 194 with that belief, signed the mortgage documents with himself as guarantor of the corporation’s obligations and opened the corporate bank account at National Bank. In his mind, 194 was his company.

[20] On cross-examination, Mr. Caruso stated that he had signed a document Robert Bortolon drafted and put in front of him to sign on December 2, 2016. This document, bearing the title “Resolution of the Sole Director of 1947755 Ontario Ltd.” was directed to “The sole shareholder thereof”. It was resolved by this resolution that 50%, or 500 shares in the capital of the corporation be issued to Dean Bortolon, described as the “subscriber” pursuant to a subscription, for $15,000. Notwithstanding the mathematical error, Mr. Caruso submits there is no evidence that Dean Bortolon subscribed for those shares or that he ever paid the subscription price to the corporation. Mr. Caruso has asked the court to note that 194 did not even have a bank account in which to deposit funds at the time.

[21] 194 maintains that Bortolon Holdings Inc., owned all the shares in 194 until this subscription. Bortolon Holdings Inc. is owned by either Robert Bortolon or Dean Bortolon. There is no evidence that Bortolon Holdings Inc. ever subscribed to 194 for shares, or that it paid any subscription price to the treasury of the corporation. There is no evidence that any shares were ever issued to Bortolon Holdings Inc., except for an entry in the shareholders’ register kept by Robert Bortolon.

[22] On January 27, 2017, Robert Bortolon, acting alone or with his brother Dean Bortolon, signed a set of minutes in a special meeting of shareholders at which Mr. Caruso was removed as the sole director of 194. Mr. Caruso first discovered he had been removed as director of 194 when he took steps to put a second mortgage on the property in 2018. Prior to this time, Mr. Caruso states that he had never received any notice of his removal.

[23] There are actually two sets of minutes dated January 27, 2017 that contain a resolution removing Mr. Caruso as the sole director. 194 asserts that Mr. Caruso was removed as director and replaced by Robert Bortolon pursuant to the Minutes and Resolution of the Shareholders at a shareholders’ meeting on January 27, 2017 (the “Bortolon minutes”). The Bortolon minutes recite that the meeting was convened by Dean Bortolon, described as the majority shareholder, who acted as chair. According to this set of minutes, Dean Bortolon represented himself as the holder of 100% of the issued and outstanding shares, and a quorum for the meeting was therefore present.

[24] Later in this litigation, Mr. Caruso received another set of minutes containing resolutions dated January 27, 2017, from a meeting called and chaired by Dean Bortolon. In the second set of minutes, Mr. Caruso was removed as a director of 194. However, in this set of minutes, the corporation resolved to appoint one Frank Carbone as the director and president to replace him (the “Carbone minutes”). Mr. Caruso received the Carbone minutes in or around July 2019, not from Robert Bortolon or 194, but from Tina Siino, a law clerk in the Laframboise law office.

[25] The Bortolon minutes provided a signing line for “Dean Bortolon/Robert Bortolon”. The signatory indicated beneath the signature line is, “Robert Francis Bortolon Attorney in fact, by the Power of Attorney granted by Dean Bortolon, Sole Shareholder”.

[26] The Carbone minutes are signed in the name of “Dean Bortolon Sole Shareholder”.

[27] Dean Bortolon is a chiropractor in Kelowna, British Columbia. In November 2020, Dean Bortolon stated at an examination for discovery in 18/208 that he did not sign those documents. He testified that he knew nothing with respect to the operation of 194’s business, including its purchase of the property, or the business of its directors.

[28] Mr. Caruso submits that one or both the Bortolon minutes and the Carbone minutes are null and void for the following reasons:

a) No notice of the alleged special shareholders’ meeting that may have taken place on January 27, 2017 was given to him;

b) The alleged meeting was not held at 194’s registered head office address located at 2 Yvonne Ave., North York, Ontario M3L 1C7 (as provided in 194’s Articles of Incorporation). Instead, the meeting was allegedly held in Bolton (as stated in the Bortolon minutes and the Carbone minutes);

c) Mr. Caruso was not in attendance at the alleged meetings;

d) The alleged meeting was not called in good faith;

e) Mr. Caruso was not provided with any details of the issues to be dealt with at the alleged meeting; and

f) Mr. Caruso was not provided an opportunity to respond to the allegations that he “has engaged in certain unlawful conduct which is against the best interests of [194]”, as stated in either set of minutes.

[29] Contrary to the allegations that 194 has made against him, Mr. Caruso contends that Robert Bortolon fraudulently created the Bortolon minutes and the Carbone minutes with a view to obtaining access to funds and assets belonging to 194 himself.

[30] Throughout this action, John Hanna Nissan has been acting as the sole officer and director of 194. Mr. Nissan has filed evidence in this litigation that he purchased all issued and outstanding shares in 194 from Dean Bortolon and Bortolon Holdings Limited (or Martin Citron) in January 2018. Mr. Nissan was recognized as the sole director of 194 during the ongoing litigation in an Order made by Petersen J. on July 29, 2019.

[31] Adam Jarvis acts as counsel for 194 in this action. While Mr. Caruso submits that Mr. Jarvis did not disclose the Carbone minutes to him, Mr. Jarvis provided a copy of the Carbone minutes to Mr. Bhangu in an email dated January 29, 2017. Mr. Caruso argues that it was around this time that Robert Bortolon was making attempts to obtain control of 194 and its assets.

[32] On or about February 10, 2020, Mr. Jarvis served the Affidavit of Documents of 194 sworn by Mr. Nissan on Ryan Hanna, Mr. Caruso’s former counsel. In the Index of Volume 2 of the Affidavit of Documents, under “Documents Provided by Bhangu” and listed at Tab 143, is an email ostensibly from Dean Bortolon to Mr. Bhangu on January 29, 2017, at 9:19 p.m. Mr. Caruso submits that the email was in fact sent by Robert Bortolon. He argues this email is significant because it refers to the following attachments: (1) “Shareholder Special Meeting and Resolution.pdf”; and (2) “Resolution issuing Dean Bortolon 50% shares.pdf”.

[33] While the Carbone minutes are attached at Tab 142, there is no indication those documents are the same as those referenced in this email.

[34] In paragraph 31 of the statement of claim, 194 states that National Bank was also sent a copy of “the shareholders resolution removing Caruso as initial director and incorporator” and instructed to “freeze the account” on January 29, 2017. However, 194 does not plead as a material fact which resolution was sent to National Bank on that date, or by whom.

[35] National Bank’s statement of defence sets out the fact that it received an email from Dean Bortolon on February 11, 2017 representing himself as the sole shareholder of 194. National Bank pleaded that this email enclosed “purported minutes” from a meeting of shareholders on January 27, 2017. The minutes National Bank received from Dean Bortolon in that email reflected that an individual by the name of Frank Carbone had been appointed a director and president of 194 to replace Mr. Caruso.

[36] At the examination of Robert Bortolon on March 1, 2021, Mr. Caruso’s current counsel, Matthew Kersten, produced an electronic copy of the email from Dean Bortolon to Mr. Bhangu as part of a larger chain of correspondence. Mr. Kersten had received this email in that chain from Tina Siino the night before. The only difference between the email disclosed by Mr. Jarvis on behalf 194 and the email obtained from Ms. Siiono, was that the electronic version of the email included the Carbone minutes as attachments.

[37] Kirsten Mercer, as Mr. Banghu’s counsel, produced the emails contained in Mr. Bhangu’s unsworn Affidavit of Documents after obtaining the consent of 194 and Mr. Caruso. At the motion, Mr. Caruso advised the court that these emails are the same documents that Mr. Jarvis reproduced in 194’s Affidavit of Documents.

[38] Upon reviewing the documents produced by Ms. Mercer, Mr. Kersten confirmed that Mr. Bhangu’s copy of the email also attached the Carbone minutes.

[39] In addition to challenging each set of minutes containing resolutions that remove him as a director, Mr. Caruso contests the legitimacy of the following documents:

a) The Share Certificate dated January 1, 2016, purportedly issuing shares in 194 to Bortolon Holdings Ltd.;

b) An unsigned Certificate and Consent to Act as a Director and Waiver of Conflict, dated December 2, 2016;

c) Resolution of the Sole Director of 194, dated December 2, 2016;

d) Resolution of the Shareholder of 194, dated November 10, 2017; and

e) Share Purchase Agreement between John Hanna Nissan (“Nissan”), Dean, Bortolon Holdings and 194, dated January 31, 2018.

The Position of 1947755 Ontario Ltd.

[40] On December 31st, 2015, 194 was incorporated by its lawyer, Doug Laframboise at the direction of Robert Bortolon. The original director was Mr. Caruso.

[41] Mr. Caruso admits to executing a director’s resolution on December 2, 2016, issuing 500 shares in 194 to Dean Bortolon. 194 maintains that Dean Bortolon had always been the shareholder of 194 until January 2018, at which time he sold all outstanding and issued shares he held to Mr. Nissan.

[42] 194 also refers to a document Mr. Caruso executed on January 18, 2017, which confirms Mr. Caruso agreed to act only as a temporary director upon the incorporation of 194 for the purposes of facilitating the purchase of the property, and to open a bank account for the corporation.

[43] Mr. Caruso and Mr. Laframboise attended at a branch of National Bank on January 23, 2017 to open an account for 194. The bank account was opened on the expectation that 194 would be depositing the surplus of funds borrowed under the mortgage once the balance owing to BLG and closing expenses had been paid. Mr. Caruso, described as President, and Mr. Laframboise were both shown as signing authorities on the account.

[44] The closing date for the purchase of the property and the advance of funds under the Skylark mortgage was scheduled for January 25th, 2017. Prior to the closing, Mr. Laframboise, sent a text message to Robert Bortolon on January 23rd, 2017 at 4:29 p.m., advising him to “keep Caruso away from the funds.”

[45] In February 2017, Mr. Caruso provided a copy of the resolution dated December 2, 2016, to Mr. Laframboise. Mr. Caruso then retained David Pomer to investigate the corporate governance and share structure of 194. In response to an inquiry, Mr. Laframboise delivered a copy of the resolution to Mr. Pomer.

[46] Mr. Caruso sent an email to National Bank on the afternoon of February 14th, 2017 to advise as follows:

Attention Margret Grey personal Banker

Please take this legal notice any checks or transactions from 1947755 Ontario Limited must be approved/authorized by me Gaspare Caruso, president, sole officer and director. No personal information shall be given to anyone without my authorization.

I have also retained legal counsel David M. Palmer contact 416 213-7450

[47] The next day, Mr. Caruso emailed the National Bank stating that he was closing the account due to all the confusion surrounding 194.

[48] Mr. Caruso was cross-examined on the aforementioned email chain and stated the reason for sending the email to the National Bank in February 2017, was that “Bortolon was trying to tell them that I wasn't director or any part of this”.

[49] On July 29, 2019, counsel for the parties appeared before Petersen J. to speak to the application in 19/130. The parties also addressed the motion 194 had brought to remove Mr. Pomer as lawyer of record for Mr. Caruso. At that appearance, Mr. Nissan was recognized as the sole director of 194 during the litigation. In his affidavit sworn July 23rd, 2019 and filed for that attendance, Mr. Caruso swore that he only held 50% of the shares in 194.

[50] Mr. Caruso made the following admissions when he was cross-examined on November 14, 2019 that the following documents do not exist:

a) Any share certificates in his name;

b) A subscription agreement or share purchase agreement in his name; and

c) Any evidence of providing any monies or payment on account of the purchase of shares in 194 Ltd.

[51] Mr. Caruso admits to taking approximately $86,000.00 from the bank account of 194. 194 also alleges that Mr. Caruso granted a second mortgage to 1883203 Ontario Inc. and registered against title to the property as a fraudulent mortgage in early 2019 (giving rise to the application in 19/130). To date, Mr. Caruso has not accounted for the funds obtained under the second mortgage.

[52] Since the alleged conversion of the $86,000.00 in February 2017, Mr. Caruso has not had any involvement with the management or operations of 194 other than to register the second mortgage.

Issues and Analysis

[53] Mr. Caruso brings his motion for the dismissal of the action him under Rules 20 and 21, while invoking s. 248 of the Ontario Business Corporations Act (the “OBCA”) to support his position.

[54] The first question to answer is which of these procedures, if any, are appropriate to resolve the claim made by 194 on a motion.

[55] The second question is whether, if at all, there is no genuine issue shown on the record requiring a trial.

[56] If not, the third issue to decide is the substantive question: was Mr. Caruso in a position of corporate authority to withdraw funds for a legitimate purpose from 194’s corporate account.

1. The Appropriate Procedure for this Motion

[57] Initially, Mr. Caruso brought a motion that was framed as an oppression remedy claim in all but name. I adjourned that motion with a direction that it be framed properly, on proper grounds and with the appropriate evidence to seek the relief Mr. Caruso now requests.

[58] This motion, now in the form of the Amended Notice of Motion, is brought for the summary disposition of the claim 194 has made against Mr. Caruso. In this respect, he has brought the motion for summary judgment under Rule 20 and has filed evidence in support of the motion. He has also brought the motion under Rule 21 that generally does not permit evidence, without leave. See Matharu v. Manheim, 2014 ONSC 3459, at para. 9 to 11.

[59] Mr. Caruso has claimed relief on this motion as an oppressed director or shareholder under s. 248 of the OBCA. In my view, that approach is not appropriate here as Mr. Caruso has made no counterclaim in this action for that relief. A party must be a complainant within the meaning of that term under s. 245 of the OBCA to bring an application or action to make a claim for an oppression remedy. I do not consider it appropriate to use the oppression remedy as a defence in a corporate fight, at least not in these circumstances.

[60] It is fundamental to the litigation process that lawsuits be decided within the boundaries of the pleadings. Labrosse J.A. explained it this way in 460635 Ontario Limited v. 1002953 Ontario Inc. at para. 9:

. . . The parties to a legal suit are entitled to have a resolution of their differences on the basis of the issues joined in the pleadings. A finding of liability and resulting damages against the defendant on a basis that was not pleaded in the statement of claim cannot stand. It deprives the defendant of the opportunity to address that issue in the evidence at trial . . . [page273]

[61] On this motion, Mr. Caruso asks the court for various orders without having pleaded any such relief or setting out the allegations of material facts that support the position he is taking in his statement of defence. In particular, Mr. Caruso has not pleaded the relief he has requested in the Amended Notice of Motion:

(a) a determination as to who the current owner and director of 194 is;

(b) a declaration that he is the sole shareholder of 194, or in the alternative, an order requiring 194 to issue shares to him;

(c) orders seeking declaratory relief for the purposes of nullifying resolutions, shares and corporate documents pertaining to 194 and its shareholders;

(d) a declaration that any transaction effect by Robert Bortolon as President be rendered a nullity;

(e) a declaration that he was removed from 194 in a manner that was oppressive, unfairly prejudicial to or that unfairly disregards his interests as a shareholder or director; and

(f) an order removing John Hanna Nissan as director of 194 and nullifying his share purchase agreement.

[62] These deficiencies are compounded by the fact that Mr. Caruso has failed to join individuals to whom those claims relate, including Robert Bortolon, Dean Bortolon and Mr. Nissan. 194 submits that Mr. Caruso has chosen not to name these individuals as parties to this action because he had already made those claims in the action commenced under 20/59 that Lemon J. has now dismissed. Mr. Caruso is therefore precluded from raising the same issues because of this failure to plead them: Tsp-Intl Ltd. v. Mills.

[63] This motion is brought in the context of the claim made by 194 to recover $86,000 from Mr. Caruso. His main defence is essentially that he had legal authority to withdraw those funds as a director of the corporation at all material times. To examine the issues through the lens of Rule 21 when Mr. Caruso and 194 have already filed evidence on the motion for summary judgment, and then to decide what part of the motion should be subject to evidence and what part should not, is inefficient. Adopting this approach would also be contrary to the principle of interpretation of the Rules under Rule 1.04 to interpret the Rules in a manner that is just, and the most expedient and least inexpensive to adjudicate the dispute on its merits.

[64] It is therefore appropriate to consider Mr. Caruso’s motion as a motion for summary judgment.

2. Process on a Motion for Summary Judgment

[65] The Supreme Court of Canada set out the principles the court is to apply on motions for summary judgment in Hryniak v. Mauldin, 2014 SCC 7. In Mayers v. Khan, 2017 ONSC 200 (aff’d at 2017 ONCA 524), Glustein J. summarized the Hryniak principles as follows:

i) Summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims. It is no longer merely a means to weed out unmeritorious claims but rather a "legitimate alternative means for adjudicating and resolving legal disputes" (Hryniak, at paras. 5 and 36);

ii) An issue should be resolved on a motion for summary judgment if the motion affords a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial (Hryniak, at paras. 4 and 49);

iii) On a motion for summary judgment, the judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the judge and without using the judge's fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2) (Hryniak, at para. 66); and

iv) The standard for determining whether summary judgment will provide a fair and just adjudication is not whether the procedure is as exhaustive as a trial, but rather "whether it gives the judge confidence that [the judge] can find the necessary facts and apply the relevant legal principles so as to resolve the dispute" (Hryniak, at para. 50). A judge must be confident that he or she can fairly resolve the dispute (Hryniak, at para. 57).

[66] In paragraph 66 of Hryniak, Karakatsanis J. provided the following roadmap for the analytical approach on a motion for summary judgment:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[67] The changes to the Rules for summary judgment motions in 2010 and the decision of the Supreme Court’s decision in Hryniak have not resulted in a disregard of previous case law relevant to summary judgment that remains undisturbed. This retention includes well-known features such as the principle that the parties must put their best foot forward, i.e., “lead trump or risk losing”. As Perell J. commented in Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008 on the reason for this requirement at para. 47:

… Hryniak v. Mauldin does not alter the principle that the court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trail. The court is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties will respectively present at trial. The onus is on the moving party to show that there is no genuine issue requiring a trial, but the responding party must present its best case or risk losing.

[68] The Court of Appeal explained in Broadgrain Commodities Inc. v. Continental Casualty Company, 2018 ONCA 438 that on a summary judgment motion, the court will assume that all necessary evidence has been tendered. A motion judge is entitled to presume that the evidentiary record is complete and there will be no further evidence available if the claim went to trial. A motion judge is not required to resort to the summary judgment enhanced fact finding powers under Rule 20.04 (2.1) or (2.2) to backfill evidentiary shortcomings.

[69] On a motion for summary judgment, a self-serving affidavit is not sufficient to create a genuine issue for trial in the absence of detailed facts and supporting evidence. See Guarantee Co. of North America v. Gordon Capital Corp. at para. 31, and Grewal v. Khaira et al., 2021 ONSC 4908, at para 25.

[70] Both 194 and Mr. Caruso welcome the opportunity to have the court determine the legal control over 194 as of February 2017. This in turn requires an examination of the resolutions allegedly passed by a lawful authority for the corporation on January 27, 2017. John Hanna Nissan, purportedly the current sole shareholder of 194, and Mr. Caruso have each filed evidence drawn from the materials filed throughout the litigation. The court is entitled to assume that the parties have filed all relevant evidence available on the matters in dispute for the court to make certain findings and to decide the motion.

3. Did Mr. Caruso Have Authority to Take Corporate Funds?

[71] The conflicting evidence and credibility issues running through the evidentiary record are the product of the plethora of sources from which evidence has been taken, and the self interest of each of the individuals involved, including Robert Bortolon. There are inconsistencies in the evidence given by affiants, between documents and within particular documents themselves. In the face of these crosswinds of evidence and interests, I intend to make findings that can be made on reliable evidence and law and make such orders as are necessary to resolve factual disputes. It is important to also make clear that, despite the requests of the parties to answer larger questions about the ownership and control of 194, I am only making findings on the facts necessary to deal with 194’s claim or Mr. Caruso’s defence in this action.

Corporate Authority for 194

[72] The logical starting point for the governance of an Ontario corporation is found in the Articles of Incorporation for that corporation.

[73] There is no dispute that Mr. Caruso was the sole incorporator shown on the Articles of Incorporation filed on December 31, 2015. As the incorporator, Mr. Caruso became the first director under s.119 of the OBCA. Section 119 further provides that the first director remains in office until the first meeting of shareholders, at which time a board of directors is elected.

[74] There is no evidence that 194 was formally organized after incorporation. There are no by-laws, organizing minutes, resolutions for the election of directors or officers of the corporation or to issue shares. As there was no subscription for shares, there were no shareholders in the sense that shares were issued, and outstanding. There is certainly no shareholders’ agreement in evidence.

[75] The ownership of the corporation through shares in 194 has been in dispute since the corporation was formed to purchase 142 King Street. Much of the evidence filed by 194 on the motion comes from Mr. Nissan. However, Mr. Nissan did not become a shareholder of any description in 194 until January 2018. Admittedly, he has no direct evidence of the shareholders or directors of 194 prior to his involvement.

[76] Mr. Nissan states in his affidavit that on January 1, 2016, Mr. Caruso issued a share certificate to Bortolon Holdings Inc., a corporation purportedly owned by Dean Bortolon. Later that year, on December 2, 2016, Mr. Caruso purportedly signed a resolution for the corporation to issue 500 shares to Dean Bortolon to become a 50% shareholder.

[77] If Robert Bortolon led Mr. Caruso to believe he held an ownership stake in 194, he was followed by Dean Bortolon as a putative shareholder, and now Mr. Nissan.

[78] This brings the case around to the resolutions of the corporation that were allegedly passed at a shareholders’ meeting on January 27, 2017. There are two competing resolutions that seek to accomplish the same thing by appointing directors other than Mr. Caruso. The first resolution sought to appoint a gentleman by the name of Frank Carbone as the director and President of 194 (the “Carbone resolution”). The other resolution, also dated January 27, 2017, apparently appointed Robert Bortolon as a director and the President (the “Bortolon resolution”). Whether a properly constituted meeting of shareholders was called or conducted to pass either resolution is a necessary question that requires an answer.

The Shareholders’ Meeting on January 27, 2017

[79] A director of a corporation is entitled to receive notice of, and to attend and be heard at every meeting of shareholders under s. 96 of the OBCA. Where the purpose of the meeting of shareholders is to discuss special business, s. 96 also requires that a notice of a special shareholders meeting and a description of the business be given. Section 96 reads as follows:

Notice of shareholders’ meetings

96 (1) Notice of the time and place of a meeting of shareholders shall be sent, in the case of an offering corporation, not less than twenty-one days and, in the case of any other corporation, not less than ten days, but, in either case, not more than fifty days, before the meeting,

(a) to each shareholder entitled to vote at the meeting;

(b) to each director; and

(c) to the auditor of the corporation. R.S.O. 1990, c. B.16, s. 96 (1).

(2) A notice of a meeting is not required to be sent to shareholders who were not registered on the records of the corporation or its transfer agent on the record date determined under subsection 95 (2) or (3), but failure to receive a notice does not deprive a shareholder of the right to vote at the meeting. R.S.O. 1990, c. B.16, s. 96 (2).

(3) If a meeting of shareholders is adjourned for less than thirty days, it is not necessary, unless the by-laws otherwise provide, to give notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned. R.S.O. 1990, c. B.16, s. 96 (3).

(4) If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of thirty days or more, notice of the adjourned meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for an aggregate of more than ninety days, section 111 does not apply. R.S.O. 1990, c. B.16, s. 96 (4).

Special business

(5) All business transacted at a special meeting of shareholders and all business transacted at an annual meeting of shareholders, except consideration of the minutes of an earlier meeting, the financial statements and auditor’s report, election of directors and reappointment of the incumbent auditor, shall be deemed to be special business. R.S.O. 1990, c. B.16, s. 96 (5).

(6) Notice of a meeting of shareholders at which special business is to be transacted shall state or be accompanied by a statement of,

(a) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon; and

(b) the text of any special resolution or by-law to be submitted to the meeting. R.S.O. 1990, c. B.16, s. 96 (6).

[80] Further, s. 123 entitles a director who, (a) resigns, (b) receives a notice or otherwise learns of a meeting of shareholders called for the purpose of removing him or her from office, or (c) receives a notice or otherwise learns of a meeting of directors or shareholders at which another person is to be appointed or elected to fill the role of the office of director, to submit to the corporation a written statement giving the reasons why he or she opposes any proposed action or resolution, as the case may be.

[81] In Glass v. 618717 Ontario Inc., 2012 ONSC 535 (SCJ), D.M. Brown J., as he then was, summarized his findings at para. 201 that the wrongful exclusion of a director/co-shareholder from a shareholders meeting by another director/co-shareholder was oppressive of the excluded director/co-shareholder’s interests, in that case as a shareholder. The Court also found that the purported election at the meeting of a new board of directors was null and void, with the result that the purported removal of the excluded director was null and void and amounted to oppressive conduct.

[82] Mr. Caruso was not given any notice of the alleged shareholders’ meeting that took place on January 27, 2017 to which both the Bortolon minutes and the Carbone minutes refer. He was not provided a statement as to the nature of the special business to be transacted, the text of any special resolution or by-law to be submitted, or the opportunity to submit a written statement to dispute his removal at the meeting. As a consequence, the alleged shareholders’ meeting was not duly convened and any business transacted was contrary to the requirements of s. 96.

[83] The failure of Dean Bortolon, or Robert Bortolon acting on behalf of Dean Bortolon to give notice to Mr. Caruso of the shareholders meetings on January 27, 2017, is a sufficient ground to set aside the resolutions allegedly passed that evening.

Proxies and quorum

[84] There were further irregularities surrounding the constitution of the meeting on January 27, 2017 that undermine the validity of business conducted on January 27, 2017. Section 101 of the OBCA provides that, unless the by-laws provide otherwise, there is a quorum for a meeting of shareholders if the holders of a majority of the shares entitled to vote at the meeting are present in person or represented by proxy. There is conflicting evidence before the court that Dean Bortolon was even at the meeting on January 27, 2017, and no proxy or power of attorney giving Robert Bortolon his proxy or power to vote his shares is in evidence.

[85] Section 101 (3) further allows the shareholders present at a meeting may adjourn the meeting to a fixed time and place in the event there is no quorum present, but may not transact any other business.

[86] The Carbone minutes state that Dean Bortolon “represents fifty (50) percent of the issued and outstanding shares and represented quorum for the meeting”. The presence of a shareholder with a 50% share of the corporation would not constitute a quorum of shareholders within the meaning of the OBCA. Even if Dean Bortolon was a shareholder of 194, he was not to transact any business other than to adjourn the meeting to a fixed time and place. Bortolon Holdings Inc. is not shown as present at the meeting, and Dean Bortolon did not adjourn the meeting on January 27, 2017 for lack of a quorum.

[87] The Bortolon minutes stated that Dean Bortolon “represents one hundred (100) percent of the issued and outstanding shares and represents quorum for the meeting”. Other than the Carbone minutes and the shareholders’ register, no evidence (other than letters and emails between lawyers after the event) was produced to show that Dean Bortolon was actually issued any shares, let alone one hundred (100) percent of 194’s shares. Accordingly, there was no quorum of shareholders under the Bortolon minutes and Dean Bortolon had no authority to transact any business on behalf of the corporation.

[88] The inconsistency between the Carbone minutes and the Bortolon minutes raises the suspicion that Robert Bortolon was behind each set of minutes to a likelihood that he was instrumental in their creation. The evidence is uncontroverted that at the very least, Robert Bortolon signed the Bortolon minutes. I draw the inference from the evidence that he signed a similar document at the same place on the same date that is likely he signed the Carbone minutes as well

[89] I also draw the inference from the surrounding evidence that Robert Bortolon sent the Carbone minutes to Mr. Bhangu as the real estate lawyer for 194 and to National Bank to suspend the account before Mr. Carbone had the opportunity to consent to his appointment as a director. Section 119 (9) of the OBCA specifies that an appointment as a director is not effective unless the person appointed consents in writing. There is no evidence before the court that Mr. Carbone gave that consent. I draw the further inference from that evidence that Mr. Carbone refused, or was not willing to give his consent. This turn of events lead to the creation of the second set of minutes appointing Robert Bortolon to office. There is no direct evidence on the record that Robert Bortolon accepted the appointment as director or as an officer of 194, a requirement under s. 119(9) of the OBCA.

[90] Pursuant to the OBCA, each director named in the articles shall hold office from the date of incorporation until the first meeting of shareholders. The first director of a corporation named in the articles has all the powers and duties and is subject to all the liabilities of directors. If directors are not elected at a first meeting of shareholders, the incumbent director continues in office until his successors are elected.

[91] Mr. Caruso became the first director of 194 under the company’s Articles of Incorporation. Pursuant to ss. 119(1) and (7) of the OBCA, Mr. Caruso would hold office as a director until the first meeting of shareholders and would continue in office until his successors were elected. Although Mr. Caruso may have agreed to his own appointment on an interim basis, he clearly gave his consent to act as a director by signing the Articles of Incorporation, and confirmed that consent in his motion materials. He therefore accepted that appointment under s. 119 (10) and remained a director of the corporation after January 27, 2017.

Resolution in writing

[92] A resolution dealing with all matters required by the OBCA to be dealt with at a meeting of shareholders may be resolved in writing if signed by all the shareholders or their attorney authorized in writing entitled to vote at that meeting. The resolution in writing is as valid as if it had been passed at a meeting of the shareholders.

[93] While s. 104 of the OBCA permits resolutions in writing in lieu of a meeting of the shareholders if certain conditions are met, it is evident from either set of minutes that Robert Bortolon or Dean Bortolon did not satisfy the conditions to make those resolutions in writing.

[94] The Carbone minutes are only signed in the name of Dean Bortolon, who is stated as representing fifty (50) percent of 194’s issued and outstanding shares. The holder of the other 50% of the shares in 194 was neither identified in the minutes, or shown voting those shares.

[95] If the Bortolon minutes are relied upon for evidence of the resolution, Dean Bortolon is shown as the 100% owner of shares in 194, which is inconsistent with the Carbone minutes and the resolution dated December 2, 2016 that both show he only holds 50% of those shares. This inconsistency, compounded by the absence of any evidence that Dean Bortolon signed the Bortolon minutes himself or by an attorney, leaves the court with no alternative but to conclude on the balance of probabilities that no resolution in writing was signed by all shareholders.

Issue Estoppel

[96] 194 submits that certain findings made by Lemon J. on the motion in 20/59 operate as an estoppel on the issues of corporate authority Mr. Caruso argues on this motion.

[97] The test for the application of issue estoppel was stated by the Supreme Court of Canada in Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248, at p. 254 to be:

(a) that the same question has been decided;

(b) that the judicial decision which is said to create the estoppel was final; and,

(c) that the parties to the judicial decision or their privies were the same persons as the parties.

[98] I am urged by 194 to accept the following facts, based on the conclusions reached by Lemon J. in 20/59:

(i) Mr. Caruso was removed from 194 Ltd on January 27th, 2017;

(ii) Mr. Caruso was aware of his removal in February of 2017; and

(iii) As such, Mr. Caruso’s claims pertaining to his removal from 194 Ltd. as a director and alleged shareholder are statute barred by operation of the Limitations Act, 2002.

[99] Lemon J. was also satisfied that the following facts had been laid out on the motion before him to reach those conclusions:

a. 194 was incorporated on December 31, 2015 and Mr. Caruso was shown as a director;

b. Mr. Caruso signed the Direction on January 18, 2017, giving his consent to act as the temporary officer of 194, for the exclusive purpose of closing the purchase of the property and opening a bank account for 194;

c. There is documentation confirming that Mr. Caruso was removed as a director for the corporation on January 27, 2017;

d. Mr. Caruso sent a text to Robert Bortolon to object to his conduct. This email was followed up by a letter from Mr. Pomer, as counsel for Mr. Caruso;

e. Robert Bortolon wrote to Mr. Pomer expressing his view that Mr. Caruso was never a shareholder; and

f. A finding that this group of documents show that Mr. Caruso was aware of the alleged injury, loss or damage by February 17, 2017.

[100] Lemon J. further notes a Request to Admit served by the defendants in that action, which was never answered. Therefore, Mr. Caruso was deemed to have admitted the following facts in that action:

a. He was never issued any share certificates in 194;

b. He executed the resolution dated December 2, 2016, issuing 500 shares of 194 to Dean Bortolon; and

c. David Pomer acted as his agent and counsel in February and March 2017.

[101] On that evidence, Lemon J. concluded that Mr. Caruso was aware of the material facts on which he brought the claim as a deprived shareholder and that he was represented by counsel more than two years prior to issuing his claim. Whether he was defrauded of his shares or not, Lemon J. held that Mr. Caruso failed to bring his action within the appropriate time and the claim was statute barred.

[102] In 20/59, Mr. Caruso was the plaintiff and the defendants were Mr. Nissan, Martin Citron, Robert Bortolon and Dean Bortolon. Except for 194, around which the dispute revolved in 20/59, the parties in that action the same parties on the corporate issues in this action.

[103] The Order of Lemon J. is a final decision of the Superior Court of Justice and Mr. Caruso’s claim in that action was dismissed with costs. The findings made by Lemon J. to reach that result are binding on the parties in this action. The disposition of the action in 20/59, although based on the expiry of a limitation period, is consistent with the finding that Mr. Caruso was never a shareholder of 194 on the evidence before the court on this motion.

[104] The action in 20/59 was commenced by Mr. Caruso in 2020, well after 194 had the statement of claim issued in this action, but before he brought a motion to have the default judgment originally obtained against him set aside. Mr. Caruso did not bring any motion to have the action in 20/59 consolidated with this action at the time.

[105] As a defence to theft, conversion or embezzlement of the $86,000 in this action, Mr. Caruso asserts that he was the sole director, shareholder, and officer of 194, and therefore permitted to access the funds of 194. However, Mr. Caruso admitted the following facts concerning the shareholder issue on cross-examination:

(a) he has no share certificate issued to him;

(b) he has no subscription agreement;

(c) he has never filed taxes with CRA disclosing his alleged ownership in

(d) he has never paid monies for shares in 194; and

(e) he had no involvement with 194 after taking the $86,000 from 194’s bank account.

[106] Mr. Caruso has laboured under the misapprehension that acting as the incorporator of 194 automatically made him an owner of the corporation. He has conflated the role of a director with the rights and benefits of becoming a shareholder. This misapprehension was likely a product of two prevailing circumstances.

[107] First, it was likely due to his prior business relationship with Robert Bortolon with whom he was a one third owner of Autometrics Autobody at 142 King St. When Cavalon, Inc. was in danger of losing the property to the first mortgagee, Mr. Caruso signed an agreement with Robert Bortolon and Marcello Codispoti dated November 30, 2015. Under this agreement, the three of them agreed to incorporate a corporation to purchase the property and which they would own equally. Mr. Caruso has made no claim based on this agreement.

[108] Mr. Caruso gave answers to questions on his cross-examination that illustrate this mistaken belief. On November 14, 2019, Mr. Caroso answered as follows:

199. Q. It doesn’t make sense. Sitting here today, is it your position you are 100 per cent shareholder? You own 100 per cent of all shares of 194?

A. I don’t know, but I believe at the time I was. I never ---

200. Q. At the time? What time?

A. At the time I incorporated the company.

201. Q. Okay. Yes. “At the time of incorporation, I’m a 100 per cent shareholder”?

A. Right.

[109] At his further cross-examination on February, 22, 2021, Mr. Caruso gave the following answer to a question about whether he was ever issued share certificates by 194:

11. Q. So Mr. Caruso, I’ve gone over all the paperwork and I’m trying to confirm what’s not on the record. And my first question to you, sir, is, you were never issued any share certificates from 194, is that correct, Mr. Caruso?

A. I would never expect me to issue myself shares. They were my 194 shares that I owned.

[110] The second circumstance leading to Mr. Caruso’s impression that he owned shares because he incorporated 194 relates to the questionable legal advice he may have received, if he was advised at all about how shares in a privately held corporation are issued and held. It is clear from his evidence that Mr. Caruso never subscribed to 194 to have shares issued to himself under s. 23 (1) of the OBCA.

[111] This in turn leads to a consideration of what shares were issued, and to whom leading up to February 2017. This issue is relevant to the accountability of Mr. Caruso as a director, and to whom he owed a duty to act honestly and in the good faith with a view to the best interests of the corporation under s. 134. It is also relevant because it may determine if any shareholder had the right to call the shareholders meeting for January 27, 2017.

[112] Mr. Caruso acknowledges that there are no documents contained within the minute book of 194 which refers to him as a shareholder. He also acknowledges that the shareholders register of 194 shows that Dean Bortolon and Bortolon Holdings Ltd., were shareholders of 194.

[113] Mr. Caruso’s evidence pertaining to the execution of documents to issue shares in 194 is, as the 194 factum put it, “wildly inconsistent.” Mr. Caruso’s evidence varies as follows:

(a) The December 2, 2016 resolution is valid and accurate;

(b) Robert Bortolon committed a fraud and forged Caruso’s signature on the resolution dated December 2, 2016;

(c) Mr. Caruso never signed the December 2, 2016 resolution;

(d) Mr. Caruso never saw the December 2, 2016 resolution; and

(e) Mr. Laframboise advised him of the legal consequences of the resolution in February of 2017.

[114] Despite the positions he has taken to hold 194 to the proof of any other director or its shareholders, Mr. Caruso has not provided a document as evidence he was ever a shareholder himself.

[115] In Glass v. 618717 Ontario Inc., the Court found that s.139 of the OBCA imposes “a very strong presumption that the information recorded in a minute book is proof of the facts stated therein”. By operation of s.139 of the OBCA, Mr. Caruso bears the onus of rebutting the presumption that he was a shareholder and that Dean Bortolon was not. Mr. Caruso has not succeeded in rebutting that presumption.

Findings on the Caruso Motion

[116] I am confident on the current evidentiary record that I am able to make the following findings:

1. Gaspare Caruso was the first director of 194;

2. The purported shareholders’ meeting on January 27, 2017 was called without notice and did not comply with the OBCA. The resolutions produced from that meeting purporting to remove Gaspare Caruso as a director are null and void and of no effect;

3. Gaspare Caruso remained a director of 194 in February 2017; and

4. Gaspare Caruso was not, and never has been a shareholder in 194.

[117] The issue of whether Mr. Caruso wrongfully withdrew the $86,000 from the account of 194 at National Bank, even though he was a director, is a finding I cannot make on the current record. Moreover, I cannot determine what entities or individuals held shares of 194 in February 2017. Those shareholders or their successors, if any, may have taken corporate steps to make Mr. Caruso account for those funds.

[118] I am therefore exercising my discretion under Rule 20.04 (2.2) to require a hearing at which hear oral evidence may be given on those issues. This hearing, also known as a “mini-trial,” is necessary for me to determine whether there is no genuine issue to decide this motion, or if a trial is required.

Conclusion

[119] For the reasons given, I make the following orders:

a. The motion of the defendant Gaspare Caruso in this action is adjourned to a hearing under Rule 20.04 (2.2) for one day before me on the following issues:

i) Who were the shareholders of 194 entitled to call a special shareholders meeting, or to sign a resolution as of January 27, 2017?

ii) Even though Mr. Caruso was a director of 194 when he withdrew funds from the corporate account in February 2017, did he “embezzle” those funds from 194? and

iii) Did any shareholder or director subsequently ratify the withdrawal or waive any breach of duty by Mr. Caruso for withdrawing those funds?

b. Mr. Caruso as the moving party shall be entitled to call witnesses to testify for no more than two hours in total, including his own evidence. 194 as the responding party shall then be entitled to call witnesses to testify for no more than two hours in total. The balance of the time is reserved for questions from the court;

c. The costs claimed by 194 and Mr. Caruso respectively in this action and for this motion and the preliminary motion on March 15, 2021 are reserved to the ultimate disposition of the Caruso motion.

The Contempt Motion Against Robert Bortolon

[120] The defendants, led by Mr. Laframboise as a defendant and as counsel for the other defendants in 13/19, brought a motion to find Robert Bortolon in contempt for commencing that action in the name of 194, contrary to an Order made by Seppi J. in the BDC action.

[121] After filing materials and amended notices of motion culminating with the Fifth Amended Notice of Motion, Mr. Laframboise made the concession at the hearing of the contempt motion on behalf of all moving parties that he has no issue with the Fresh as Amended Statement of Claim issued by Mr. Jarvis as counsel for 194. He stated that if the initial statement of claim is expunged, he will be satisfied the contempt had been purged. Mr. Laframboise advised the court that having the initial statement of claim struck or expunged was the motivation behind the motion all along. This change of position effectively shifts the focus of the motion from Robert Bortolon to the plaintiff.

[122] Robert Bortolon takes no position on the motion to expunge, provided he is not found in contempt. I would not have found Robert Bortolon in contempt in any event as the evidence filed for the motion does not show beyond a reasonable doubt that he was instrumental in the commencing of the action in 19/13, or that he somehow breached the order made by Justice Seppi. Nor did I read or hear convincing evidence that Robert Bortolon played any role in having the action commenced in the name of 194, or even that he provided information to Mr. Nissan. When the statement of claim was issued in January 2019, Mr. Nissan was already the director and president of 194.

[123] 194 opposed the motion to expunge in any event, and it proceeded as a contested matter.

[124] The motion to expunge the initial statement of claim is brought under Rule 25.11. The court is given the power under Rule 25.11 to strike out or “expunge” all or part of any pleading. From a plain reading of the rule, it is evident that:

a. The power of the court to make an order expunging a document or pleading is discretionary;

b. The court must find the circumstances that fit within the three categories to have grounds set out in the rule to exercise that discretion; and

c. The order may be made with, or without, leave to amend.

[125] There is little authority to guide this court on what is meant by the term “expunge” to explain what the effect would be to order that a document or pleading be “expunged”. Blacks’ Law Dictionary, Ninth Edition (2009) defines what is meant to expunge as a verb in the following terms:

1. To erase or destroy (i.e. the trustee wrongfully expunged the creditor’s claim against the debtor); or

2. In parliamentary law, to declare (a vote or other action) null and outside the record, so that it is noted in the original record as expunged and redacted from all future copies.

[126] In York Condominium Corporation No. 21 v. All Unit Owners and Mortgagees of Record of York Condominium Corporation No. 21, 2021 ONSC 4600, Sanfilippo J. heard a motion to strike out or expunge parts of an affidavit filed in support of a Notice of Application to amend the Declaration of a condominium corporation, as well as the paragraphs in the Notice of Application itself. Sanfilippo J. considered the powers of the court under Rule 25.11 to strike or expunge those parts of the affidavit or Notice of Application as interchangeable, an approach appropriate for that motion. The distinction between the two orders was immaterial in the final analysis as he exercised his discretion and declined to expunge any part of either document because the moving party had failed to show that those parts were scandalous, vexations or an abuse of process. As D.M. Brown J. wrote in 1196303 Ontario Inc. v. Glen Grove Suites Inc., 2012 ONSC 758, the court should only make an order on a pre-emptive motion limited to the “rarest and most extraordinary of cases.”

[127] Lax J. made an order expunging a statement of claim containing confidential information resulting from communications between a lawyer and his client as an abuse of process in Manning v. Epp, affirmed at 2007 ONCA 390. A document or pleading that is in whole or in part, an abuse of process can be expunged under the Rule 25.11 for that reason.

[128] There is nothing in the evidence supporting the motion to expunge the statement of claim that it is scandalous, vexatious or an abuse of process. The same material the defendants rely upon to ask for a contempt order was relied upon for the motion to expunge. The evidence in that material was directed toward the breach of an order for commencing the action in the first place, and not the contents of the statement of claim. I do not see this motion as amounting to one of the “rarest and most extraordinary of cases” to expunge the earlier iteration of a claim that is no longer under challenge in its current form.

[129] The moving defendants have failed to satisfy the court there are any grounds to expunge the initial claim so that it is removed from the court record as though it has been erased or redacted.

[130] The motion of the moving parties is dismissed in its entirety.

[131] The timetable for submissions on costs is set out in the Endorsement on the contempt motion that accompanies the release of these Reasons.

Released: March 22, 2022 Emery J.