Court File and Parties

COURT FILE NO.: CV-18-00004479-00 (and CV-15-00005603-00) DATE: 2023 01 05 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Marijana Mudronja v. Eddy Mudronja and Mareddy Corporation

BEFORE: RSJ RICCHETTI

COUNSEL: D. Palmer for the Applicant, Marijana Mudronja M. Peters for the Respondents, Eddy Mudronja and Mareddy Corporation

HEARD: December 7, 2022

Endorsement

[1] Counsel need to learn how to use CaseLines, how to bookmark documents, how to upload documents to the correct bundle, and how to direct the court to CaseLines pages. Central West has been using CaseLines for well over a year and counsel seem not to want to or take time to learn to use CaseLines. Central West judges are refusing to hear matters where counsel cannot or refuse to properly do the above in CaseLines.

[2] This is one of those cases where most of the above was not done. Some documents were presented in “paper”, sometimes there was no reference to a CaseLines’ reference numbers, at other times, CaseLines’ reference numbers don’t work if the documents were filed in a different bundle.

[3] When reviewing the materials (before and after the hearing) and following submissions with references to unbookmarked Exhibits in an Affidavit or other documents, it became a herculean, if not an impossible task, to locate numbers. The amount of judicial additional time to find the documents counsel were referring to was enormous and a waste of time.

[4] This must not happen again.

The Long Background to This Motion

[5] Mr. Eddy Mudronja and Mrs. Marijana Mudronja are former spouses. The parties separated on November 27, 2007. Despite the passage of 15 years, their acrimonious and contentious litigation continues.

[6] Mareddy Corporation ("Mareddy") is a company which was incorporated by the parties during their marriage. Mareddy is essentially a property holding company. Mareddy owns the land and building located at 6880 Davand Road Drive, Mississauga, Ontario (the "Davand Property"). It is Mareddy’s most significant asset. Mrs. Mudronja owns forty percent (40%) of Mareddy’s common shares. Mr. Mudronja owns the remaining sixty percent (60%).

[7] A company named Jitsu Manufacturing Inc. ("Jitsu") operates out of the Davand Property. It is a tenant of Mareddy. Mr. Mudronja is the sole owner of Jitsu.

The Family Law Proceeding

[8] After a lengthy and highly contentious family law proceeding, the family law proceeding went to trial in 2014 before J. Seppi. See Mudronja v. Mudronja, 2014 ONSC 6217. As regards to the division of Mareddy, J. Seppi stated:

[21] Both parties undertook the process of hiring a business valuator to assess the date of separation (V-Day) values of Mareddy Corporation and Jitsu Manufacturing Inc. The applicant retained Jeffrey Marino, of Pettinelli, Mastroluisi Consulting Inc. (PMVI). The respondent retained Melanie Russell of Kalex Valuations Inc. (Kalex).

[22] Before trial the parties agreed on the value of Mareddy as provided by Kalex. Net of tax the V-Day value attributed to Mr. Mudronja for his 600 common shares of Mareddy by Kalex is $1,014,200.00. The net of tax V-Day value for Ms. Mudronja’s 400 common shares is assessed at $640,300.00.

[9] Justice Seppi also dealt with other financial issues between the parties such as support and equalization. The Final Order of J. Seppi was varied on consent by Order dated July 9, 2015.

[10] One would have expected that the Final Order would end the dispute between the parties. It did not.

The Ontario Business Corporations Act (OBCA) Proceedings

[11] In December 2015, Mr. Mudronja commenced an Application pursuant to s. 207 of the OBCA to separate the parties’ interest in Mareddy. Mr. Mudronja sought an order to purchase Ms. Mudronja’s shares in Mareddy or, in the alternative, an order winding up Mareddy. 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.

[7] In October 2018, Mrs. Mudronja commenced an Application under the OBCA seeking an order that Mr. Mudronja purchase her shares in Mareddy, or, in the alternative, that Mareddy be wound up. In the original Application, while Mrs. Mudronja 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 financial updates regarding the company and had denied her the ability to participate in the management of Mareddy. Mrs. Mudronja subsequently amended her Application to include a declaration that, as a shareholder, she has been oppressed by Mr. Mudronja.

[12] The OBCA Applications were also highly contentious. The OBCA Applications were returnable in late 2019.

The Family Law Proceedings Continue

[13] While the two OBCA Applications were being deal with, the parties continued to have a dispute over the amount of the equalization payment outstanding under the Seppi J. Final Order. These motions were heard and disposed of by J. Barnes on November 25, 2019. See Mudronja v. Mudronja, 2019 ONSC 6811. Both parties appealed to the Court of Appeal. See Mudronja v. Mudronja, 2020 ONCA 569.

Returning to the OBCA proceedings

[14] The OBCA proceedings came before J. Shaw on December 11, 2019.

[15] On December 11, 2019, the parties agreed that Mr. Mudronja would buy Ms. Mudronja’s shares in Mareddy. As a result, the winding up of Mareddy was no longer an issue. Also, this would result in the resolution of the OBCA proceedings on the basis that both parties requested – Mr. Mudronja buy out Mrs. Mudronja’s interest in Mareddy. The only issue was – how much? The answer to this question was dependent on two factors – the valuation date and a valuation as of that date.

[16] The parties agreed on a two-step judicial process. The first step was to have the court determine a valuation date. Mr. Mudronja wanted a valuation date of 2015 (the date of his OBCA Application). Mrs. Mudronja wanted a later date – the date of the hearing.

[17] Once the court determined a valuation date, the second step was to proceed with the valuation of Mareddy as of that date.

[18] This bifurcated process made sense since, until a valuation date was determined, valuations could not be obtained from the experts.

[19] This resolution became a court order of J. Shaw.

[20] The parties agreed that the valuation of the Davand Property owned by Mareddy was the most significant issue in valuing Ms. Mudronja’s 40 percent interest in the company.

June 9, 2020 - Justice Shaw’s Determination of the Valuation Date

[21] The first step of the resolution finally came before J. Shaw in June 2020, although there were a number of issues along the way.

[22] Requested disclosure was exchanged. Affidavits were filed. Cross examinations took place. Issue of the lack of financial disclosure were raised. Shaw J. determined that financial disclosure by Mr. Mudronja had been lacking, it was finally resolved by May 2019. See paras. 18 – 78 of J. Shaw’s Reasons below.

[23] On June 9, 2020, the hearing on the valuation date was heard by J. Shaw. (See Mudronja v. Mudronja, 2020 ONSC 7932). There was only one issue to be decided that day:

[67] The 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.

[24] The positions of the party were clearly set out.

[12] Mr. 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.

[13] Ms. 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. (emphasis added)

[25] It was the position of Mrs. Mudronja that Mr. Mudronja’s lack of financial disclosure was relevant to the selection of a fair valuation date. Accordingly, she sought a valuation date as of the hearing date (2020).

[26] Justice Shaw determined the valuation date would be the Mareddy corporate year-end in 2017.

[130] In 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.

July 19, 2021 - Justice Fowler Byrne Production Order

[27] Now, the matter was to proceed to the second stage – determining a value as at 2017 year-end. Not surprisingly, the proceeding continued to be highly contentious.

[28] Mrs. Mudronja sought further financial disclosure from Mr. Mudronja in advance of the hearing to determine the value of Mareddy at its 2017 corporate year end. It is important to note that this was “additional” financial disclosure that had not been previously asked for by Mrs. Mudronja’s counsel.

[29] In reasons released July 19, 2021, Justice Fowler-Byrne made an extensive production Order with a detailed timeline.

[15] Upon reviewing the decision of Shaw J., I agree that she found oppression in Eddy’s lack of disclosure from at least 2016 but stated it did not impact the value of the shares. I do not agree that other than the value of the shares themselves, Shaw J. has adjudicated in a final basis all other issues pleaded. As agreed, as a first step, she decided the issue of the valuation date. In the endorsement of December 30, 2019, does not state that only other issue is the value of the shares.

[17] Accordingly, I am to determine in this motion, not only what documentation is necessary for the valuation, but what documentation is necessary for an accounting.

[18] Eddy claims that the relief sought by Marijana should have been brought under s.161 of the Ontario Business Corporations Act which is where she would seek an investigation. Otherwise, she is not entitled to the relief sought.

August 2021 to January 2022 - Further Production Disputes

[30] By August 2021, the issue of productions has still not been resolved.

[31] The matter finally came before this court on November 16, 2021. In order to bring the production issue to an end, so that the second stage could proceed, a further and final production exchange order was to be made along with a case management order. This court set out a process and ordered that any outstanding and unresolved disclosure issues be dealt with by me on January 28, 2022.

[32] The hearing did not proceed on that date, but it did proceed on March 17, 2022. This court ordered that there were no outstanding productions made in compliance of this court’s November 16, 2021. This court ordered the second stage - the valuation of Mareddy, proceed to a hearing.

April/May 2022 - Justice McGee’s Determination of the Fair Market Value

[33] On April 19, 20, 21, 22, and May 18, 2022, Justice McGee presided at a 5-day trial of the valuation issue.

[34] Justice McGee determined (See Mudronja v. Mudronja, 2022 ONSC 5085) that Mrs. Mudronja’s 40% interest in Mareddy was valued at $1,832,054.60 as of the 2017 corporate year end (plus prejudgment interest).

[6] For the reasons set out below, I find that Eddy has acted oppressively, and I set the purchase amount of Marijana’s common shares in Mareddy at $1,832,054.60, plus prejudgement interest.

[48] The disclosure ordered by Justice Fowler Byrne allowed Marijana to learn more about the particulars of the financing secured on title to the Davand property. As set out in Mr. Pont’s report, there was a refinancing of the property in fiscal year 2016 pursuant to a Credit Facility Agreement made between the TD Bank (Lender) and Mareddy and Jitsu (Borrowers) dated January 27, 2015 (the “TD Credit Facility.”) Monies secured on title to the Davand property were advanced to Jitsu as a working capital injection pursuant to the security terms set out within the TD Credit Facility.

[35] Justice McGee found that Mr. Mudronja had committed acts of oppression (para. 87 and 91). As a result of the finding of oppression, J. McGee adjusted the fair market value of Mareddy, as of the 2017 corporate year end, to take the oppression into account:

[102] When considering all the circumstances, I find that fairness can be achieved in these circumstances by two adjustments to Mr. Pont’s valuation. First, there shall be no discount on the monies owing to Mareddy from Jitsu, and second there shall be no minority/illiquidity discount. The first recognizes the advantage to Jitsu in receiving interest free injections of working capital without a repayment schedule, and the second ameliorates the longstanding below market rent that has been paid by Jitsu. The result is a fair value for the minority shares drawn almost exclusively from the fair market value of the Davand property as of January 31, 2017.

[103] I therefore set the fair value of Marijana’s 400 common shares on January 31, 2017 at $1,832,054.60 being 40% of the midpoint ($4,580,136.50) of the fair market values of $4,632,273 and $4,528,000 of the Davand property as determined by each of the valuators.

[36] Mrs. Mudronja sought to have J. McGee change the Mareddy 2017 valuation date. Justice McGee declined to do so. I have doubts whether J. McGee had the jurisdiction to change the valuation date. In any event, it makes no difference to the outcome of this motion. See paras. 105 to 108.

[37] Instead, Justice McGee suggested a possible R. 59.06 motion:

[109] Rule 59.06(a) of the Rules of Civil Procedure permits a party to have an Order set aside or varied on the ground of fraud or of facts arising or discovered after the Order was made. The Rule further permits suspending the operation of an Order and obtaining relief other than that originally awarded.

[110] Should either party seek to set aside, vary, or suspend Justice Shaw’s December 17, 2020 Order or should Eddy fail to pay the amount for Marijana’s shares as determined in these reasons, the next step in the proceeding shall be a Pre-Trial on the remaining claims within this Application, which include each party’s claim for the winding up of Mareddy pursuant to Section 207 of the Business Corporations Act.

[38] With the greatest of respect for Justice McGee, I fail to see that there anything left to the OBCA applications. Both parties sought to have Mr. Mudronja buy out Mrs. Mudronja’s shares. The valuation date is set. The value is set. Subject to any decision by the Court of Appeal, provided that Mr. Mudronja pays to Mrs. Mudronja the amount determined by Justice McGee in exchange for Mrs. Mudronja’s 40% shares in Mareddy as of 2017, there is nothing left to the OBCA Applications to go to trial. Mrs. Mudronja would no longer be a shareholder in Mareddy. Both parties agreed to this process to resolve the OBCA proceedings, expressly including the winding up. The allegations of oppression have already been dealt with by the parties’ settlement, the selection of a valuation date and determining the fair value to be paid to Mrs. Mudronja.

[39] I agree that a R. 59 motion is available in law to this court to set aside or vary J. Shaw’s Order.

[40] There is on serious concern, that such an order, if granted, would render the trial of the issue before J. McGee moot, and unless a new valuation date was set (although there is no evidence on this motion that would allow me to judicially select such a new date), the trial of the issue before J. Shaw would also be moot. Both would have to be re-done. Accordingly, any R. 59.06 motion should have been dealt with before J. McGee’s hearing.

[41] Nevertheless, let me consider the merits of this motion by Mrs. Mudronja to vary or set aside the J. Shaw Order.

The Motion

[42] There is no dispute that Mrs. Mudronja seeks to have a later valuation date because of the significant increase in the value of Mareddy post 2017. She sought the later date (2020) before J. Shaw. That was denied. That was the same position Mrs. Mudronja sought before J. McGee. But J. McGee did not consider she had jurisdiction to do so. I agree that the sole issue before J. McGee was to determine a fair and just valuation for Mareddy in all the circumstances.

[43] On September 27, 2022, Mrs. Mudronja brought a motion seeking:

1. An Order varying or setting aside the Order of Justice Shaw’s Order, dated December 17, 2020 with respect to the valuation date as determined by Her Honour;
2. An Order setting a new valuation date for the subject Business to the date of January 31, 2022, or alternatively to the date of the commencement of the hearing before Justice McGee on April 19, 2022;

[44] Mrs. Mudronja relies on:

a) Rule 59.06(2)(a); b) S. 248 of the OBCA; c) Deliberate failure to disclose relevant evidence at the hearing before J. Shaw; d) Learning subsequently, that Mr. Mudronja had destroyed documents.

[45] Essentially, the position of Mrs. Mudronja is set out in the factum:

Since the VDM [the valuation date hearing before J. Shaw], Marijana has found out that Eddy failed to disclose relevant information to the court at the hearing before Justice Shaw. Eddy acknowledged in an affidavit sworn after the VDM that he in fact directed the destruction of corporate records prior to the hearing of the VDM.

It is Marijana’s position that Eddy’s failure to disclose to Justice Shaw that he destroyed relevant corporate documents could have caused Her Honour to make a different order as it pertains to a fair valuation date. She also contends that Eddy’s failure to disclose to Justice Shaw that he misused Mareddy’s assets for his exclusive benefit or the benefit of his corporation Jitsu Manufacturing Inc. (“Jitsu”), might have caused Justice Shaw to reach a different conclusion with respect to a fair valuation date.

Marijana also contends that Eddy’s continued oppressive conduct warrants a remedy requiring Eddy to purchase Marijana’s shares in Mareddy at a value that is more current rather than one fixed for January 31, 2017.

[46] The Davand Property’s value significantly increased after 2017.

[47] Mrs. Mudronja submits that Mr. Mudronja, in his September 16, 2021 Affidavit, admitted Mr. Mudronja directed the destruction of relevant documents in May 2017. It is important to note that Mrs. Mudronja nevertheless, after this alleged disclosure, proceeded with the trial of the issue before J. McGee to determine a valuation of Mareddy. Unhappy with the result before J. McGee and her refusal to alter the valuation date, Mrs. Mudronja brings this motion.

The Law

[48] Orders, such as those made by J. Shaw and J. McGee, are intended to be final, subject of course to a very limited jurisdiction of this court under R. 59.06. The appellate court has broader jurisdiction. It is obvious, but nevertheless needs to be said, this court is not a court with appellate jurisdiction regarding J. Shaw’s Order (nor J. McGee’s Order).

[49] Rule 59.06 provides as follows:

(1) An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding.

(2) A party who seeks to, (a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made; (b) suspend the operation of an order; (c) carry an order into operation; or (d) obtain other relief than that originally awarded, may make a motion in the proceeding for the relief claimed.

[50] The onus is on the party seeking to set aside the order or vary it under R. 59.06.

[51] “Rule 59.06 is not an invitation to reargue cases endlessly or an invitation to raise new issues after a decision has been rendered. The rule provides a mechanism for re-opening a hearing under very strict conditions. As this court has previously remarked, it is “not a do-over”” (para. 34). See Berge v. College of Audiologists and Speech Language Pathologists of Ontario, 2019 ONSC 3351. See also Midland Resources Holding Limited v. Shtaif, 2018 ONCA 33 at para. 7.

[52] Under Rule 59.06(2), the moving party must establish the following two-part test to have an order set aside or varied on the basis of newly discovered evidence or facts:

(1) The evidence “might” probably have altered the judgment. Although, in Dawi v. Armstrong (1992), 17 CPC (3d), 196 (O.C.G.D.) [affd. (1993), 17 C.P.C. (3d), 196 (Ont. C.A.)] the court used the words “would have probably changed the result” ; and (2) That the evidence could not with reasonable diligence have been discovered sooner.

See Gupta v. 2075750 Ontario Inc., 2021 ONSC 2272.

[53] For the reasons set out below, whether the test is “might probably” or “would have probably” (if there is a difference), makes no difference in this court’s decision on this motion.

[54] The court in Tsaoussis (Litigation Guardian of) v. Baetz, sets out the following factors to be considered:

a) Whether the new evidence could not have been put forward by the exercise of reasonable diligence at the original proceedings? b) The cogency of the new evidence; c) Any delay in moving to set aside the previous judgment or order; d) Any difficulty in re-litigating the issues; and e) Any prejudice to other parties or persons who may have acted in reliance on the judgment.

Position of Mrs. Mudronja

[55] Essentially, Mrs. Mudronja submits the following:

a) This court has continuing jurisdiction over OBCA Oppression Remedies:

It is therefore submitted that if a majority shareholder continued to oppress a minority shareholder after the rendering of an order affecting their respective shareholder’s interest, as is the case in the instant matter, it is open to the court to vary the order to achieve fairness. (para. 35 of Mrs. Mudronja’s factum)

b) Mr. Mudronja committed fraud:

No specific submissions were made on this ground in either the factum or during oral submissions. See paras. 31 and 32 of Mrs. Mudronja’s factum.

c) Mr. Mudronja failed to disclose destroyed Financial Records of Mareddy:

Although Eddy was able to persuade the court that he had provided all requested financial records to the court, he in fact misrepresented the true state of affairs to the court. He lied.

At the time the motion was argued before Justice Shaw, Eddy knew that he had caused the destruction of financial records in May 2017. This information only came to light when Eddy was ordered by Justice Fowler-Byrne to produce further financial or corporate records. (paras. 39 and 40 of Mrs. Mudronja’s factum)

d) Mr. Mudronja failed to disclose other relevant material evidence before J. Shaw.

Position of Mr. Mudronja

[56] Mr. Mudronja submits there is no merit to this motion.

[57] Mr. Mudronja produced all documents sought by Mrs. Mudronja prior to the J. Shaw hearing. Further, Mr. Mudronja points to evidence before J. Shaw that the evidence, now complained of, had in fact been disclosed to Mrs. Mudronja prior to the hearing.

Analysis

[58] The real motivation for this motion is that Mrs. Mudronja wants this court to exercise its “discretion” to vary “the valuation date to allow Marijana to benefit from the appreciation in the value of the commercial property, which has significant increased in value.”

[59] Mrs. Mudronja is unhappy with the results. Why? The Property (the Davand Road Property being the main asset owned by Mareddy) was valued at $6,800,000 as at January 31, 2017. Mrs. Mudronja alleges that the same Property is valued at $14,430,000 as at January 31, 2022. 40% of this increases value is a lot of money.

[60] Before J. Shaw, Mrs. Mudronja’s position was that the valuation date be the date of the hearing of the application. See para. 13 of the J. Shaw Reasons. Now, Mrs. Mudronja seeks to have a valuation date set now - having produced an appraisal of the Property in early 2022.

[61] Mrs. Mudronja acknowledges that “the increase in value of the Property was simply as a result of the market forces and had absolutely nothing to do with Eddy’s efforts.” The difficulty with this position is that the increase had absolutely nothing to do with Mrs. Mudronja’s efforts either. Mrs. Mudronja has not been involved with Mareddy since 2009. In fact, if anything, Mr. Mudronja’s decision to continue to hold the Property, rather than sell it, had a greater influence on the wealth created by the appreciation. Real estate markets go up and go down. In this case Mrs. Mudronja like most litigants, with an interest in real estate, want to “ride the up” but one wonders whether a similar claim would have been brought when the real estate market “slides down”.

[62] The consequence of accepting Mrs. Mudronja’s position is that orders are not final and if the real estate market goes down, does the court entertain a later motion by Mr. Mudronja to re-value the Davand Property and recover the amount to be paid to Mrs. Mudronja?

[63] The process agreed to by these parties was to select a fair and equitable date for the valuation of Mareddy, taking into account all of the circumstances. That is what J. Shaw did on June 9, 2020. Justice Shaw decided it was the 2017 corporate year end.

[64] But the real estate market has gone up considerably since that date. Hence, the attempt to vary the valuation date before J. McGee, in current appeals to the Court of Appeal and again before this court.

[65] Mrs. Mudronja blames Mr. Mudronja for delaying the hearings. I do not accept this. Mrs. Mudronja didn’t bring her OBCA Application until 2018, almost 3 years after Mr. Mudronja brought his OBCA Application in 2015 seeking to buy Mrs. Mudronja “out” of Mareddy or to wind up the company (i.e., that it be sold). The delay, if any, was caused by Mrs. Mudronja.

The Court’s Alleged Continuing Jurisdiction over Oppression Cases

[66] Mrs. Mudronja submits that this court has continuing jurisdiction over oppression cases to essentially do what is fair and equitable.

[67] I reject this submission. Essentially, this court would be usurping appellate jurisdiction after having made decisions on the determination of the valuation date and the trial of the issue in deciding the value of Mareddy on the determined valuation date. Neither order contemplates a continuing ability of this court to vary or set aside either order, absent a successful motion under R. 59.06.

[68] At the heart of this submission is Mrs. Mudronja’s claim for oppression. However, this court has already found Mr. Mudronja’s oppressive conduct and took it into account. First, by J. Shaw in determining the fair and equitable valuation date. Second, by J. McGee in assessing a fair value at that valuation date. This court cannot continue to entertain further and continuous claims for additional remedies by Mrs. Mudronja until she receives a valuation she likes.

[69] There is nothing in the OBCA nor in the Rules of Civil Procedure, which gives this court’s continued jurisdiction.

[70] The Court of Appeal does have the jurisdiction and can determine if there were any legal errors in the J. Shaw Order.

[71] The submission that this court could rely on some inherent jurisdiction simply set aside J. Shaw’s Order and/or replace that order with a new valuation date has no merit.

Fraud

[72] There is no evidentiary basis to find fraud in these circumstances as there is no evidence in the way Mr. Mudronja obtained the J. Shaw Order. See Royal Bank of Canada v. Korman, 2010 ONCA 63 at para. 20.

Destruction and Discovery of Mareddy Financial Records and withholding other Relevant Information

[73] I reject this submission. It has no merit. There are many reasons to reject this submission.

The documents in question were requested after the J. Shaw hearing

[74] The documents complained about by Mrs. Mudronja are documents requested by Mrs. Mudronja’s counsel AFTER J. Shaw’s hearing and decision.

[75] Mrs. Mudronja had, prior to the hearing before J. Shaw, requested certain Mareddy financial documentation from Mr. Mudronja. The Mareddy financial documentation requested by Mrs. Mudronja for the J. Shaw’s hearing were provided to Mrs. Mudronja prior to J. Shaw’s hearing. Justice Shaw refers to the fact that Mr. Mudronja provided the disputed financial disclosure by May 2019 – well before the J. Shaw hearing on June 9, 2020. See para. 125 of J. Shaw’s Reasons:

[125] It 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….

[76] The documents Mrs. Mudronja refers to as “evidence subsequently discovered” arise from Mrs. Mudronja subsequent request for additional financial documentation after the J. Shaw hearing and Order. Justice Fowler Byrne ordered “additional documentation”. Mrs. Mudronja now submits that the financial documents subsequently ordered by J. Fowler Byrne disclose more financial information. There is an obvious problem. Mrs. Mudronja didn’t ask for the financial records for the purpose of the valuation date hearing before J. Shaw. The lack of financial information was NOT an issue before J. Shaw at the hearing.

[77] Mrs. Mudronja does not provide any evidence, that there existed any financial documentation requested by Mrs. Mudronja prior to the J. Shaw hearing, that was not provided by Mr. Mudronja before the hearing before J. Shaw.

[78] Even if this allegation is true, to now suggest that this additional financial documentation was not provided is not the fault of Mr. Mudronja but rather Mrs. Mudronja for not requesting the financial documentation before the valuation date hearing.

[79] More importantly, as set out below, much of the allegedly undisclosed financial documentation specifically complained about, were in fact disclosed and formed part of the evidentiary record before J. Shaw.

The documents in question had been disclosed before the J. Shaw hearing

[80] The two significant financial documents that Mrs. Mudronja relies on, as not being produced by Mr. Mudronja prior to the J. Shaw hearing, were in fact included in the evidentiary record before J. Shaw.

[81] To be specific:

a) Mrs. Mudronja claims that she was not aware of the TD Credit Facility terms until receipt of the additional financial documentation. However, the TD Credit Facility Agreement was appended to Mr. Mudronja’s Affidavit sworn October 28, 2019 (7 months before the J. Shaw hearing) and therefore part of the evidentiary record for the hearing before J. Shaw. This document was also available for the subsequent cross-examination of Mr. Mudronja.

b) Mrs. Mudronja claims that “Eddy failed to disclose” and “recklessly and deliberately kept” the 2018 Lease [between Mareddy and Jitsu] from Justice Shaw and Mrs. Mudronja. However, the 2018 Lease was appended to Mr. Mudronja’s Affidavit sworn October 28, 2019, and therefore part of the evidentiary record for the hearing before J. Shaw. This document was also available for the subsequent cross-examination of Mr. Mudronja.

The “destroyed” documents were not “deliberately destroyed”

[82] Let me now turn to the allegations of “destroyed documents”. Mrs. Mudronja alleges that Mr. Mudronja “deliberately destroyed” financial statements of Mareddy.

[83] The “new evidence” relied on by Mrs. Mudronja was that Mr. Mudronja in his September 16, 2021 Affidavit first disclosed that certain financial documents were no longer available as having been destroyed. Mrs. Mudronja goes on to state that, when Mr. Mudronja was cross-examined on this statement in the affidavit, Mr. Mudronja acknowledged having done so.

[84] The fact is that Mr. Mudronja, in 2017, authorized the destruction of historical financial statements, meaning those older than 6 years going back to pre-2010. The Mareddy financial statements from 2010 onwards were available and had already been provided to Mrs. Mudronja. And were provided a second time when requested.

[85] It is important to note several facts:

a) There is no law requiring financial records more than 6 years old to be retained; b) This authorization was provided before Mrs. Mudronja’s OBCA proceeding had been commenced; c) Mrs. Mudronja was a director of Mareddy until 2009, with rights to obtain financial records of Mareddy if requested; d) As set out in J. Seppi’s reasons, both Mr. and Mrs. Mudronja had retained experts and had provided valuations for Mareddy. It is hard to imagine that all relevant financial documents for the valuation of Mareddy had not already been provided and available to both parties; AND e) There is no evidence that pre-2010 Mareddy financial statements would have had any bearing on what a fair and equitable valuation date would be for J. Shaw’s determination.

[86] Also important, is that Mrs. Mudronja’s counsel, on August 8, 2019, for the purpose of preparation of the valuation date hearing, only requested Mareddy’s financial statements from 2010 onwards. These were delivered for a second time in October 2019 to Mrs. Mudronja. Now, Mrs. Mudronja complains that the pre-2010 Mareddy financial statements had been destroyed by Mr. Mudronja in 2017 and could probably have altered the valuation date selected by J. Shaw. This submission is rejected.

[87] Further, and equally important, is the fact that pre-2010 Mareddy financial documents were no longer available was revealed by Mr. Mudronja in his Affidavit of October 28, 2019 at para. 19, whereby he advised that “[g]iven the passage of time, Mareddy no longer had an exact record from [prior] 2010.”

[88] Therefore, this alleged “destroyed documentation” is not new evidence. It was known prior to the hearing before J. Shaw.

[89] This authorization to destroy the historical financial documentation greater than 6 years old does not, in these circumstances, constitute spoliation nor fraud by Mr. Mudronja. There was no “deliberate destruction” of relevant documents to defeat Mrs. Mudronja’s claim since she hadn’t started her OBCA proceeding yet.

[90] Nor does Mrs. Mudronja set out how the alleged “destroyed documents” meet the test that this evidence might or could probably have changed the result of the hearing before J. Shaw.

[91] Simply by Mrs. Mudronja making an assertion she believes it might have made a difference, is not sufficient to meet the test:

lt is my belief that Eddy deliberately kept that information from the court, and also from me. lt is also my fervent belief that had that information been before Justice Shaw it might have caused her to determine a different valuation date - a date much closer to the date of the eventual hearing of the full Application.

[92] I find this submission has no merit.

The Two Step Process was on Consent

[93] The parties agreed to the two-step process in 2019. Had both parties agreed to wind up Mareddy, the Property would have been sold. Instead, Mrs. Mudronja agreed that Mr. Mudronja would keep Mareddy and she would get the value of her shares (i.e. the value of the Property) at a valuation date to be decided by the court.

[94] To allow Mrs. Mudronja the relief that she seeks to obtain the value of the Property to 2022, is inconsistent with her agreement regarding the OBCA proceedings resolution. It is also inconsistent with the position before J. Shaw at the hearing to set a “valuation date of the hearing”.

[95] There could not have been a reasonable expectation, at the time of the consent to the two-step process, that Mrs. Mudronja would continue to share in any increase in the market value of the Property.

Increasing Market Value of the Property is NOT new evidence

[96] I am not persuaded that an increase in the market value of the Property, subsequent to J. Shaw’s Order, is “newly discovered evidence” so as to engage R. 59.06. Similar to the comment in Mujagic v. Kamps, 2015 ONCA 360, setting aside or varying orders on this basis would create “unacceptable uncertainty” to the finality of orders.

Delay in bringing this motion

[97] Even accepting Mrs. Mudronja’s evidence and position, the evidence now complained of by Mrs. Mudronja was known at the latest, on September 16, 2021 (see para. 21 of Mrs. Mudronja’s factum).

[98] This motion was brought, after more than one year.

[99] It was also brought after J. McGee heard the trial of the issue (including the evidence now raised as new evidence) and rendered her decision.

[100] Being unhappy with J. McGee’s decision and J. McGee’s refusal to change the valuation date, Mrs. Mudronja now seeks to attack the J. Shaw Order.

[101] Delay is highly significant in this case as a reason for dismissing the motion.

Reliance on the J. Shaw Order

[102] There was reliance by both parties on the J. Shaw Order for almost two years. Both parties hired experts, obtained valuations, prepared for and attended a 5-day trial.

[103] To have to start over would be a very large financial burden on Mr. Mudronja, not to mention the fact that it took 7 years from the time Mr. Mudronja brought his OBCA proceeding to have the matter decided. Lengthy trials (over one week), which are ready to proceed now, are now being scheduled for early 2025.

Conclusion

[104] I am not satisfied that Mrs. Mudronja has met her onus. She has failed to establish this is new evidence or that it is new evidence not known or could not have been obtained through due diligence before J. Shaw’s hearing. Nor has Mrs. Mudronja shown that this evidence might or could probably have changed J. Shaw’s decision as Mrs. Mudronja has not shown that the alleged new evidence nor the destroyed evidence was relevant to the valuation date issue before J. Shaw.

[105] In any event, I would not have exercised my discretion in these circumstances.

[106] Mrs. Mudronja’s motion is dismissed.

Costs

[107] Mr. Mudronja shall deliver, within 2 weeks, written submissions with a maximum 5 pages, together with any Offers to Settle and authorities.

[108] Mrs. Mudronja shall deliver, within 2 weeks thereafter, written submissions with a maximum of 5 pages, together with any Offers to Settle and authorities.

[109] There shall be no reply submissions.

[110] All submissions must be filed and uploaded to the proper CaseLine’s bundle – December 7, 2022 Motion.

RSJ RICCHETTI Released: January 05, 2023