Court File and Parties

COURT FILE NO.: CV-10-0365-00 DATE: 2023-03-07

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: GERALD WITILUK and THE TRUSTEES OF THE GERALD WITILUK FAMILY TRUST

v.

JACK WITILUK, JEFFREY WITLUK, RYAN WITILUK, THE TRUSTEES OF THE JACK WITILUK FAMILY TRUST, DENTRO HOLDING COMPANY LTD., BALMORAL PARK ACURA INC., 539159 ONTARIO LIMITED, JAKE’S SPEED SHOP INC. AND PHASE 2 VENTURES INC.

HEARD: February 28, 2023

BEFORE: Fitzpatrick J.

COUNSEL: C. Shammas, for the Plaintiffs responding party M. Holervich, for the Defendants moving party

Endorsement on Motion

[1] The defendants move an interim or final Order authorizing the transfer of the shares held by the Jack Witiluk Family Trust (the "Trust") in Phase 2 Ventures Inc. ("Phase 2"), from the Trust to each of Jeffrey Witiluk and Ryan Witiluk. The Plaintiffs oppose motion.

[2] In my view, the Plaintiffs’ opposition to the motion has no merit. The motion is allowed with costs payable forthwith by Gerry to Jack for the following reasons.

Background

[3] This litigation has been going on since 2010. Thirteen years. I have been case managing this file since 2015. I have written several decisions involving these parties. There is no question the pandemic has slowed this file down. However, the length of time this matter has gone on speaks volumes. This file also is one of those unenviable “Frankenstein-type” creatures that has both a large paper component and a large electronic component in the court file. CSD has yet to build an electronic orders and endorsements bundle in Caselines. I am confident our court staff will remedy that problem in short order.

[4] The most recent substantive decision on this matter was one I wrote in 2019. It was a contempt motion by the plaintiffs seeking among other things an order for the imprisonment of one of the defendants, Witiluk v. Witiluk, 2019 ONSC 2275. It contains a statement of the background of the facts concerning this litigation at paragraphs 2 through 5. I repeat and rely on those paragraphs. This is a matter involving a closely held private family corporations. The parties do not have a shareholders’ agreement. That also speaks volumes about the degree of informality of this relationship. It also creates context that cannot be ignored when the parties come to court seeking relief.

[5] In my view, this motion is of a very narrow focus. It is not a summary judgment motion. It is not a motion that is going to have any adverse or positive impact on the trial of this matter. It is simply a request to transfer shares in the defendants’ side of a Phase 2, a corporation owned 50/50 by the family trusts of the main combatants in this litigation. Phase 2 was incorporated in September 2003. The Jack Trust and Gerald Trust are each 50% shareholders of Phase 2.

[6] In the decision set out above, I specifically expressed my displeasure for the conduct of the plaintiffs at paragraphs 39 through 41. I expressed the view that the plaintiffs’ conduct was dogmatic rather than pragmatic on that motion. Four years on, I make the same observation about the plaintiffs’ position on this motion.

[7] The plaintiffs oppose the relief for a number of reasons. I will set out the reasons and then explain why each has no merit.

[8] I begin with what might have been possibly a persuasive argument of the plaintiffs. The plaintiffs assert that somehow this transfer would result in some further prejudice or oppression of the plaintiffs. The only “evidence” in support of this position is what I see as a number of bald statements in the affidavit material by Gerry. He says at paragraphs 18 through 21 of his affidavit:

18. My shares in the Defendant corporations and the Gerald Trust's shares in Phase 2 have been tied up throughout the litigation, which commenced in 2010, I am unable to plan my own affairs or engage in any meaningful estate planning until this litigation is resolved. Further, I have not received any income from the Defendant corporations in several years and I am realistically unable to sell my shares to anyone else.

19. On the other hand, Jack, Jeff and Ryan have excluded me from the business and are receiving income from the business in the form of salary, management bonuses and other benefits.

20. It is not fair that they are able to do all this and also transfer their shares amongst themselves, while the shares that I and the Gerald Trust own are tied up until the litigation ends.

21. I also fail to see how Jeff being an owner of Phase 2 will benefit the business. Jeff is a beneficiary of the Jack Trust and has still paid himself excessive salaries, management bonuses and other benefits. In addition, Jack has been an owner of all of the Defendant corporations and has operated them in a manner that has excluded or disregarded my interests.

[9] Gerry invokes pragmatism when he perceives his interests to be impacted but his position is completely unrealistic when it comes to the interests of the defendants. I do not see anything in the affidavit material that would suggest Gerry is prevented in any way from selling his shares or transferring them to his children if he wants. This action by Jack does nothing to affect Gerry’s shares in his own family trust. A change in ownership does nothing to change, excuse, justify or condemn the past actions of the corporations that are the subject of this oppression complaint. Those actions will be dealt with at trial. Gerry started this litigation because he felt he was the target of oppressive conduct that adversely affected the value of his shares. He wants to sell his shares. The proposed transfer by the defendants does nothing to adversely impact or impede Gerry’s ability to deal with his shares or obtain remedy in this Court.

[10] I see zero prejudice to Gerry’s ongoing position in this litigation from Jack being able to transfer his shares as proposed. Gerry’s position, as bad as he complains it is, will not be affected by this proposed transaction. Gerry acknowledges this type of transfer was contemplated at some point in any event when the family trust share structure was put together in 2003. The owners of the shares are Family Trusts. These are vehicles designed to transfer wealth intergenerationally. They are designed to have shares move from one generation to the next at some point. Parents usually anticipate predeceasing their children. Death of the parent would lead to a transfer. I agree with the submissions of the defendants that this proposed transaction was within the reasonable contemplation of both parties when the share structure was put in place. Jack is transferring his shares to his sons. Just as originally contemplated.

[11] Other significant aspects of the reasonable contemplation of the parties at first instance are still much in dispute in this matter. However, I do not agree with the submission of Gerry that all reasonable expectations of these shareholders are so inextricably intertwined that Jack’s request on this motion should be declined.

[12] Further I do not share Gerry’s assessment that Jeff and Ryan holding the shares will negatively impact Gerry. I agree with the submission of Jack that transfer of the shares to Jeff Witiluk who has been managing the active Mitsubishi dealership business owned by Phase 2 makes objective business sense. Someone with “skin in the game” usually acts in the best interests of the enterprise at issue. Gerry takes the position that his shares should be valued at date of trial. Jeff and his interests in maximizing the economic results and value of Phase 2 appear to be aligned.

[13] Second, the defendants argue Jeff Witiluk has not been properly appointed the sole director of Phase 2. Jeff’s appointment happened in 2004. The issue was raised in the initial pleadings of this action. Gerry’s Family Trust did not consent to Jeff’s appointment. This is still a live issue in the litigation. However, it has never been expressly subject of any motions or discussions that I recall in the case management process thus far. There is no evidence of any other problem, legal or operational, that has resulted from this situation other than giving Gerry a technical vehicle to oppose something his brother wants to do.

[14] Phase 2’s articles of incorporation require board approval for any share transfer. Gerry argues therefore the share transfer proposed by the defendants cannot go forward as the composition of the Board is contested. Further section 132 of the Ontario Business Corporations Act requires a director to recuse themselves from a vote on the contract if they are a party to that contract.

[15] Technically the plaintiffs are correct in this position. However, this technical position can be overborne by a discretionary power given to the Court elsewhere in the Ontario Business Corporations Act. I agree with the submissions of the defendants that the OBCA is purposeful and remedial legislation. In my view, I have a discretion as the result of the provisions of section 248(3) of the OBCA to make any order on motion that I see as just as this is an oppression remedy case. I also think in the context of thirteen-year-long litigation I have an appreciation of what is going on here. It is time for a recognition that combative positions simply for their own sake should not be permitted to prevail in civil litigation.

[16] I appreciate Jack has not expressly claimed this relief in any pleading to date. His motion was served in the spring of 2022. This technical problem could be remedied by issuance of a counterclaim. In the context of this litigation, I am not prepared to have this technicality, nor the technical problems of Jeff’s sole directorship that have sat unresolved since 2004 prevent what appears on the evidence before me on this motion to be a routine and uncontroversial business transaction without impact to the plaintiffs.

[17] Practically the contest over Jeff’s role as director could have been remedied by someone else, mutually agreed by the parties, being appointed sole director many many years ago. This of course would require cooperation between the parties.

[18] I see this aspect of the opposition to the motion as being technically correct, but without any other merit. Despite the able arguments of counsel for Gerry, his affidavit material does not make any material complaint that I can discern other than to suggest that once Jack took steps to remove Gerry and his children from the business, “all plans went out the window”. In my view, just because someone says things are out the window, does not grant the alleged aggrieved party carte blanche to unreasonably control aspects of the acts of the opposition that do not demonstrably impact the alleged aggrieved person.

[19] On this motion Jack asks for permission on a narrow point. Gerry asks rhetorically “why now”. Jack responds “why not”. In this litigation, in the context of this longstanding battle that realistically will not see the trial door until 2024 (if they are very lucky), I do not see this proposed relief as representing unfairly oppressive conduct to Gerry. I am making a narrow finding on a narrow matter. It does not bind the trial judge in any material way. It is an act of discretion on motion. I appreciate Jack has raised the issue of a twenty-one year period expiring in 2024 with respect to his trust. This argument was not fully developed on this motion. On the other hand, overall, I did not find Gerry’s resistance to the motion to be grounded in any realistic position that would lead me not to exercise discretion in favour of the moving parties.

[20] For these reasons order to go as follows;

1. The transfer of shares held by the Jack Witiluk Family Trust (the Trust) in Phase 2 Ventures Inc. is hereby authorized from the Trust to each of Jeffery Witiluk and Ryan Witiluk.
2. Costs are payable in the amount of $4,000.00 inclusive of HST and disbursements forthwith by Gerald Witiluk to Jack Witiluk personally.

[21] I make the above costs award personal to the parties because I know they are the main actors here. They are calling the shots and they should be responsible for the costs of today. Also, counsel gave me these numbers for costs before the motion commenced. In my view it is a reasonable quantum on a partial indemnity basis given the issues on this motion.

“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick

DATE: March 7, 2023