2023 ONSC 480

Court File and Parties

COURT FILE NO.: CV-22-00678383-00CL DATE: 20230119

ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

BETWEEN:

R. BLANKENSTEIN ENTERPRISES LIMITED, ANNETTE R.B. HOLDINGS LTD., HARVEY F.B. HOLDINGS LTD., LAWRENCE H. B. HOLDINGS LTD., SHARON E.B. HOLDINGS LTD. AND 1430731 ONTARIO LIMITED Applicants

– and –

FIALKOV ENTERPRISES LIMITED, GERALD FIALKOV, HOWARD FIALKOV, JANET ABRAMSON, 1430730 ONTARIO LIMITED AND 8 GODSTONE ROAD LIMITED Respondents

Counsel: Aaron Blumenfeld, for the Applicants David S. Steinberg, for the Respondent Howard Fialkov John Adair and Sydney McIvor, for the Respondents Gerald Fialkov, Janet Abramson, Fialkov Enterprises Limited and 1430730 Ontario Limited

HEARD: November 3, 2022

Reasons for Decision

KIMMEL J.

Background to the Application

[1] The Blankenstein family, including the individual applicants and their holding companies (collectively, the “Blankensteins”) and the Fialkov family, including the individual respondents and their holding companies, except 8 Godstone Road Limited (collectively, the “Fialkovs”) jointly acquired over 75 properties dating back to the 1950s. In 2000, the two families re-organized and divided most of their holdings. At that time, they were unable to separate their interests in a few of their holdings, including a jointly owned 168-unit apartment building located at 8 Godstone Road in Toronto (the “Property”).

[2] The Property is 90 percent owned by the corporate defendant, 8 Godstone Road Limited (“Godstone Limited”), a company incorporated under Ontario’s Business Corporations Act, R.S.O. 1990 c. B-16 (“OBCA”). The Blankensteins (applicants) and the Fialkovs (respondents other than Godstone Limited) each own 50 percent of Godstone Limited.

[3] The remaining ten percent of the Property is indirectly and equally owned by the two families through other companies: the Blankensteins through 1430731 Ontario Limited (“731 Ontario”) and the Fialkovs through 1430730 Ontario Limited (“730 Ontario”). Each family directly or indirectly holds a 50 precent interest in the Property, which shall be referred to herein as their “50 percent interest.”

[4] There is no shareholders’, co-owners’ or other agreement that contractually prescribes the mechanics or terms for a purchase or sale by one family of the other family’s interest in Godstone Limited or the Property.

[5] The respondents Gerald Fialkov and Janet Abramson became embroiled in litigation with their brother, the respondent Howard Fialkov, (the “Fialkov Internal Dispute”) in January 2019.

[6] The Blankensteins began to consider separating the two families’ interests in the Property as hostilities from the Fialkov Internal Dispute were carrying over into dealings with the Property and its management (which the Blankensteins had historically been responsible for). There were without prejudice discussions about a separation of the two families’ interests over a few years. A March 2021 appraisal obtained by the Blankensteins in the context of these ongoing discussions valued the Property at $38.7 million.

[7] In late 2021, a trustee during litigation was appointed over the Fialkovs’ assets and holdings (including their 50 precent interest in the Property).

[8] On March 8, 2022, the Blankensteins offered to buy the Fialkovs’ 50 precent interest (or sell the Blankensteins’ 50 precent interest to the Fialkovs) for $24 million, based on an assumed value of $48 million. This was higher than the last appraisal, which had valued the property at $38.7 million in March 2021, one year earlier. The $24 million purchase price was not based on a market value appraisal at the time of the offer. The respondents did not agree to sell, or buy, in response to this offer, nor did they make a counter-offer.

[9] The Blankensteins thereafter commenced this application for the winding up of Godstone Limited, and for an order pursuant to s. 207 of the OBCA directing a buy-out of the Fialkovs’ 50 percent interest in that company as well as 730 Ontario’s 5 percent interest in the Property at a price to be set by a judge based on expert appraisal evidence as to fair market value (with no discount).

[10] No valuation date was specified in the Notice of Application issued on March 15, 2022. However, it was subsequently suggested, in the supporting affidavit sworn in August 2022, that it would be most just and fair for the appraisal date to be as close as possible to the transaction date (e.g. the date of closing of any court ordered buy-out).

[11] While Howard initially indicated a willingness to sell the Property on the open market, this was conditional upon Gerald and Janet also agreeing to sell. Gerald and Janet did not provide a position with respect to the proposed buy-out until September 24, 2022. At that time, their counsel advised that they were opposing it.

[12] On September 19, 2022, there was a partial settlement of the Fialkov Internal Dispute. The Blankensteins were advised of this on September 22, 2022. Limited disclosure of the settlement terms was made, including that Gerald and Janet had agreed to purchase Howard's interests in the Fialkov family businesses, which include Fialkov Enterprises Ltd. and 730 Ontario, based on a valuation date of March 31, 2022.

[13] The complete terms of the settlement of the Fialkov Internal Dispute and litigation were not initially disclosed. Counsel did disclose on October 13, 2022 that the partial settlement agreement provides that, if the Fialkovs agree to sell their interests in the Property to the Blankensteins, they may raise a damages claim against each other, to the extent there is any loss arising from the use of a valuation date in the Blankensteins’ application that is different from March 31, 2022.

[14] On October 13, 2022, for the first time, the Fialkovs made an offer to sell their 50 percent interest to the Blankensteins at fair market value, without a minority discount. That offer was conditional upon a valuation date of March 31, 2022, at a price to be based on expert appraisal evidence as to the value as at that date.

[15] After the Fialkovs changed their position and agreed to be bought out at a valuation date that was at the peak of the Toronto real estate market in March 2022, the Blankensteins advised that they would be requesting that the court set the valuation date for the buy-out to be January 1, 2023 (targeting a transaction in the first quarter of 2023), failing which they would be seeking an order for the partition and sale of the Property on the open market in lieu of a buy-out (while preserving the right of any owner of the Property to bid in that public sale process). This is reflected in an Amended Notice of Application dated October 11, 2022.

[16] In their responding factum dated October 31, 2022, the Fialkovs indicated that they were unconditionally prepared to sell their interests to the Blankensteins and that they will accept a valuation date set by the court (although they continued to advocate for a March 31, 2022 valuation date).

[17] The Blankensteins and the Fialkovs both recognize that the sale of the Property on the open market will involve additional expenses in the hundreds of thousands of dollars. They agree that they all would be better off with a private buy-out that avoids those expenses and can be implemented more quickly as it will not require the hiring of a broker, the assembly of a data room, and a marketing and bid process.

[18] However, the Blankensteins would still prefer a public sale to a court ordered buy-out by them of the Fialkovs’ 50 percent interest if the court is inclined to fix the valuation date in March 2022, as the Fialkovs are requesting.

What is Agreed and What Remains to be Decided

[19] It is clear from the submissions of the parties [1] that there has been an irreconcilable breakdown in the relationship between the second generation of the two families (in addition to whatever remains of the non-settled aspects of the Fialkov Internal Dispute). This has been brewing for years, as stated in the Blankensteins’ March 8, 2022 offer:

[I]t appears that all three Fialkov siblings have agreed on at least one thing: they cannot and will not in the future carry on in business together. Rather, they need to be separated in their ownership of properties. The time has come for the same result to apply to the Godstone Property. That property is indirectly owned as to 1/6 by each of Gerry, Janet and Howie. As the three Fialkov siblings will not stay in business together, it follows that they also cannot remain in business together with the Blankenstein family.

[20] These families agreed long ago to separate most of their business interests. The time has come to separate their interests in Godstone Limited and the Property. On that the parties now appear to agree. Even though the Fialkovs say they would rather not sell, they have not offered or indicated any willingness or ability to buy-out the Blankensteins, nor have they suggested that the current situation is sustainable.

[21] The parties agree that s. 207(1)(b)(iv) of the OBCA has been triggered. In the circumstances, I find that it would be just and equitable for the court to order the winding-up of Godstone Limited if no other resolution to the irreconcilable breakdown in the relationship between the second generation of the two families is determined to be appropriate.

[22] A common alternative remedy to an order for the winding-up and dissolution of a company is an order directing one party to buy-out the interest of another at fair market value: see Muscillo v. Bulk Transfer Systems, Inc., 61 B.L.R. (4th) 92 (Ont. S.C.), at paras. 22-26, 52; Cocov v. Gorgiev, 2011 ONSC 2778 at paras. 7-9, 11.

[23] The parties agree that it is appropriate for the court to order a buy-out under s. 207 of the OBCA. The court has a discretionary power under s. 207(2) of the OBCA to fashion any remedy that it considers to be just and equitable, including any of the remedies under s. 248. In this case, while a winding-up order could be made, I consider it to be just and equitable to make an order consistent with what the parties appear now to agree upon, directing that the Blankensteins acquire the entirety of the Fialkovs’ 50 percent interest at fair market value (without a minority discount) based on expert appraisal evidence. [2]

[24] The contentious issue that remains for the court to determine on this application is the valuation date to be used for any buy-out of the Fialkovs’ 50 percent interest in Godstone Limited and the Property.

Analytical Framework for the Determination of the Valuation Date

[25] The parties agree that in determining a valuation date for the purpose of a buy-out “the court should select the fairest date based on the particular facts. There is no rigid rule or formula. Rather, all of the circumstances of the cases must be considered in making the decision”: Booth v. Alliance Windsor Insurance Brokers Inc., 2007 ONCA 805, 40 B.L.R. (4th) 238, at para. 12. See also M. McIsaac Family Holdings Ltd. v. Tolam Holdings Ltd., 2020 BCCA 371, 44 B.C.L.R. (6th) 265, at paras. 130-131, 133-136.

[26] The parties agree that their reasonable expectations are relevant and may be considered in the analysis. This can be justified, by analogy, to the court’s determination that one of the factors to consider in fashioning a remedy for the dissolution and winding-up of a partnership is the objective goals of the parties and what they expected to receive out of their interest in the partnership: see Tutkaluk v. Musa, 21 B.L.R. (4th) 290 (Ont. S.C.), at paras. 16-19.

The Positions of the Parties

a) The Applicants

[27] The Blankensteins contend that a current valuation date (i.e., the date of appraisals to be obtained or as proximate to the actual transaction date as possible) would be the fairest date and would best balance the interests of the parties. They rationalize that valuation date as the closest proxy to (a) the date when the applicants will pay for the Fialkovs’ 50 percent interest; and (b) the sale date on which a sale would take place if ordered pursuant to the Partition Act.

[28] The Blankensteins maintain that the real property market in Toronto has declined since they originally offered to buy-out the Fialkovs’ 50 percent interest and commenced this application. The Blankensteins contend that they should not be prejudiced and required to pay a price to buy-out the Fialkovs that is above the current market value of the Property. The delay in the buy-out was caused entirely by the Fialkovs’ failure to accept the Blankensteins’ offer when it was made earlier in 2022 and, as a result, the Fialkovs should bear the market consequences of that.

[29] Where a decline in share value since the commencement of an application is due to general economic conditions, the applicants argue that it would be unfair to place that burden on purchasing shareholders. That unfairness can be addressed by imposing a later valuation date than the date that the application was commenced: see McIsaac, at para. 138, citing Runnalls v. Regent Holdings Ltd., 2010 BCSC 1106, 12 B.C.L.R. (5th) 364.

[30] The applicants further argue that it would be equally unfair for the Fialkovs to get the benefit of the high-water mark in the real estate cycle in March 2022, after having ignored offers that were made to them and that they could have taken advantage of at that time. Now, with the benefit of hindsight, they may regret not having been more responsive, but they should not be rewarded for that.

[31] The Blankensteins have tried since 2019 to obtain the Fialkovs’ agreement on terms for a separation of their interests and have been prepared throughout to pay the Fialkovs fair market value, with no minority discount, for their 50 percent interest. The Fialkovs did not, however, meaningfully engage with the Blankensteins about a buy-out until shortly before this hearing.

[32] The Blankensteins ask that the court set a valuation date on or after January 1, 2023, as close as possible to the actual acquisition date. In the meantime, any ownership benefits (profits, dividends etc. that may have been paid out, or retained in Godstone Limited) would accrue to the Fialkovs during the intervening period.

b) The Respondents

[33] The Fialkovs ask the court to set the valuation date as March 15, 2022, or March 31, 2022, being the end of the month in which this application was issued.

[34] They maintain that setting a later valuation date, closer to the transaction date, allows the Blankensteins to unfairly take advantage of a temporary downturn in the Toronto real estate market to obtain what amounts to a discounted purchase price. They contend that a March 2022 valuation date is fairest because it:

a. Is tied to the commencement of this application, from which the court derives the jurisdiction to make the order and has been observed to be a sensible starting point for the determination of a valuation date (see McIsaac, at paras. 133-141);

b. Is consistent with the Blankensteins’ last offer to buy-out the Fialkovs’ 50 percent interest, made in March 2022 and suggested at the time it was made to have been “fair” (although the Fialkovs do not accept that the value of that offer reflected the fair market value of the Property at that time);

c. Is consistent with the stated intention of the Blankensteins to continue owning the Property “indefinitely in the future” and is a fair way to reflect the inherent long-term and expected income and appreciation in value that the Blankensteins will enjoy (and the Fialkovs will not), despite the temporary market down-turn.

[35] The Fialkovs accuse the Blankensteins of making an opportunistic offer to buy their 50 percent interest in early March, just as the Bank of Canada began to implement the anticipated increases in its prime interest rate, that were expected to drive property values down.

Analysis

[36] Ultimately both sides agree that the question of what is just, equitable and fair comes down to who should bear the burden of the downturn in the market since the applicants first offered to buy the respondents’ 50% interest and then brought an application seeking an order for a buy-out back in early March 2022.

[37] No evidence was presented on this application about what the decline in the value of the Property actually has been since March 2022. No recent valuation evidence is before the court. All parties agree that even without direct evidence about the decline in the fair market value of the Property, I can take judicial notice of the general market decline for purposes of making the decision of what the fair valuation date should be.

[38] The different positions are a function of the different perspectives: has there been a temporary downturn in the market since March 2022 or has there been a market re-set to adjust for an over-inflated market that peaked in March 2022?

[39] No one has a crystal ball that can accurately predict what will happen in the Toronto real estate market in the coming years or how long the market decline will persist. However, no one is suggesting it will be an irreversible/permanent decline in value.

[40] If the Blankensteins hold the Property for the long term, it is reasonable to expect that the value of the Property will eventually go up, but it could still drop further and remain depressed for an unknown period of time.

[41] This is not a situation where the buy-out is being ordered because of one side’s misconduct. However, the Fialkov Internal Dispute and the inevitable need for them to separate their own interests has dictated the need for, and timing of, the buy-out. That dispute precipitated the discussions about a buy-out but also paralyzed the Fialkovs’ ability to deal with their 50 percent interest, whether as sellers or buyers. It was reasonable for the Blankensteins to commence this application once it became apparent that a negotiated buy-out while that other litigation was pending would be unlikely.

[42] The Blankensteins attribute the timing of this application to the appointment of a trustee during litigation over the Fialkovs’ properties in late 2021 in the context of the Fialkov Internal Dispute and ongoing litigation.

[43] The Fialkovs’ submission that the Blankensteins brought this application strategically at the height of the market is not entirely logical. If anything, the proposed increases in the Bank of Canada interest rates (which had been previously announced) and the anticipated negative impacts on the real estate market might have been a disincentive for an applicant seeking a buy-out in March 2022. What if, for example, the Fialkovs immediately consented to the application? The Blankensteins would be locked into a purchase price at the market’s zenith. Logic would suggest waiting for the property values to drop if this was anticipated, rather than commencing the application at the height of the market.

[44] If anything, it is the Fialkovs, not the Blankensteins, who are being strategic. Now that they have a partial settlement of the Fialkov Internal Dispute, which initially prevented them from agreeing to the buy-out proposal and has delayed any such transaction, they are asking the court to order a valuation date that, with the benefit of hindsight, is at the peak of the real estate market in March 2022.

[45] The partial settlement of the Fialkov Internal Dispute recognizes that the delay in their response to this application may result in a later valuation date, and possibly a lower valuation and corollary purchase price. That will be a matter for them to sort out amongst themselves but is not a justification for ordering the valuation date in March 2022.

[46] In theory, the court has several possible options in fixing a valuation date:

a. The date of wrong-doing (oppression, breach of duty or the like), if the order for a buy-out is predicated on the conduct of one of the parties (which it is not in this case);

b. The date the application was commenced (March 15, 2022, or the end of that month);

c. The date the Fialkovs agreed unconditionally to be bought out (October 31, 2022);

d. The date of the application hearing (November 3, 2022);

e. The date of the decision on the application hearing (today);

f. A future (unknown) date that is proximate to the anticipated closing of the buy-out transaction, when the appraisals are undertaken.

[47] None of the suggested valuation dates is tied to any identified corporate or fiscal justification. [3] While the starting point may be the application date (see McIsaac, at para. 133), it is not the end point. The McIsaac case itself recognized that the court may find another date to be the fairest date.

[48] The applicants say January 2023 (or later, coming as close to the transaction date and date of actual separation as possible) is the most just, equitable and fair date to balance the prejudice of the market downturn since March 2022 (roughly ten months). No one knows how long the downturn will last, but the parties themselves all acknowledge that it could persist for a few years at least. This approach might have a superficial attractiveness of pinpointing a valuation date at some point during (rather than at the beginning of) the period of the market downturn, but it remains arbitrary and speculative.

[49] There are logistical and practical problems with picking a future valuation date. Applicant’s counsel was unable to identify any cases that ordered a valuation date after the trial or hearing. While the respondents did not challenge the court’s jurisdiction to order a future valuation date, they noted it would be unprecedented. Without a specific reason (for example, fiscal year end) for a future valuation date, I am not persuaded that it would be fair to either party to subject them to continuing market uncertainty and potential fluctuations after the decision has been rendered.

[50] In a case like this where the buy-out is not being ordered as a remedy for a breach of some sort, there is no “innocent” party who might get the benefit of a presumed valuation date, such as in breach of contract cases where the date of the breach is the starting point for the assessment of damages to be paid to the innocent party: see Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, 161 O.R. (3d) 469, at paras. 22-27 and 35.

[51] Up until they filed their factum, while Howard said he was wiling to sell, Gerald and Janet were not prepared to agree to a sale until they knew what the eventual resolution of the Fialkov Internal Dispute would be. That was determined (sufficiently for purposes of this application) on September 19, 2022 when they partially settled the Fialkov Internal Dispute. However, they then did not state unequivocally that they would sell to the Blankensteins (in fact they said the opposite) until they delivered their joint responding factum on October 31, 2022, after the application had been amended and they were facing the prospect of public sale and associated costs etc.

[52] The Fialkov Internal Dispute was the most significant factor that has influenced the timing of this application and the respondents’ position, and they were the ones ultimately in control of when it settled, paving the way for the buy-out. It is not fair for them to retroactively dictate a valuation date most favourable to them that corresponds with the peak of the real estate market over the entire period in which the parties have been discussing separating their interests.

[53] The earliest fair valuation date in the circumstances of this case would be the date the respondents delivered their factum indicating a willingness to be bought out on whatever valuation date the court determines to be fair (that was on October 31, 2022). The date of the hearing is the most neutral of these historic dates, which was not entirely in the control of one side or the other.

[54] I find the fairest valuation date for the buy-out of the Fialkovs’ 50 percent interest by the Blankensteins to be the date of the hearing of this application, November 3, 2022. Any delay after that until my decision is released is attributable to my calendar and case load and should not be a consequence borne by either party (nor am I aware of what has happened in the Toronto real estate market in this intervening time frame).

[55] This valuation date also strikes the appropriate balance of the equities and reasonable expectations of the parties. A fair market valuation is not static. The use of the Property and the income it earns, among other things, may be considered in the valuation process. While the Fialkovs may not have wanted to sell, the sale is a function of the Fialkov Internal Dispute and, in that context, they reasonably expected various holdings to be liquidated. If the Fialkovs want to preserve an expectation of appreciation over a long-term hold, then, as the Blankensteins have said, they could have been the buyers. However, the Fialkovs have not asked to be.

[56] Conversely, since the Blankensteins expect to hold the Property, the impact of value fluctuations within the narrow time frame debated are diluted (we are dealing with less than a year between the competing valuation dates).

[57] This approach of balancing the expectations of the parties and their interests is most appropriate in a case such as this where there is no moral or equitable high ground on which to presumptively favour one side or the other in the choice of the fairest valuation date. The November 3, 2022 valuation date selected is a fair reflection of the balancing of expectations and interests.

[58] The applicants ask the court to pick a date more favourable to them, relying upon Handley Estate v. DTE Industries Limited, 2018 ONCA 324, 421 D.L.R. (4th) 636, at paras. 39-45 and more recent decisions of the Court of Appeal (such as Tallman Truck Centre Ltd. v. K.S.P. Holdings Inc., 2022 ONCA 66, 466 D.L.R. (4th) 324, leave to appeal refused, [2022] S.C.C.A. No. 170, affirming Tallman Truck Centre Ltd. v. K.S.P. Holdings Inc., 2021 ONSC 984) to ask the court to decline to exercise its discretion in selecting any valuation date that favours the Fialkovs. In support of their position, the applicants argue that the Fialkovs failed to make timely disclosure of the settlement of the Fialkov Internal Dispute and litigation, which the applicants say has directly affected the litigation landscape in this proceeding as it is that settlement that caused the Fialkovs to change their position, agree to a buy-out and insist upon the March 31, 2022 valuation date.

[59] While the cases make it clear that there is an obligation of immediate disclosure of settlement agreements between and amongst parties that “change entirely the landscape of the litigation”, I was not directed to any authority in which that duty has been extended to capture disclosure about the settlement of different litigation. That principle has traditionally been considered with respect to disclosure of settlements among some, but not all, parties within the same litigation.

[60] Nor would the typical recourse imposed for a failure to make timely disclosure (a stay of a proceeding or striking out of pleadings) be applicable here. I was not directed to any authority in which the non-disclosure of a settlement was used to tip the scales of equity in the court’s exercise of a discretion against the non-disclosing party. There is a further consideration of whether a delay in disclosing the settlement between September 19 and 22, 2022 (with a further delay in the disclosure of certain specific terms until October 13, 2022) is unreasonable. I am not persuaded to move the valuation date later than November 3, 2022 based on the principles derived from the Handley and subsequent lines of cases.

[61] That said, the existence of the Fialkov Internal Dispute and the terms of its settlement, have been factored into the analysis of the fair valuation date in other ways (discussed above).

Applicants’ Alternative Relief Requesting an Order for the Sale of the Property

[62] The applicants have throughout been prepared to buy-out the Fialkovs on fair terms, with no minority or other discount, but not with a March 2022 valuation date that they claim financially prejudices them.

[63] The applicants say that if the court is considering selecting the March 15 or 31, 2022 valuation date proposed by the respondents, they would prefer that the court grant their alternative relief for a court ordered partition and sale of the Property through a public sale process, instead of a buy-out. During oral argument, counsel for the applicants indicated that the request for an order for a public sale would not need to be decided if the court chose the hearing date as the valuation date. Since that is the valuation date ordered, the request for alternative relief does not need to be determined.

[64] There is no question that the court has the jurisdiction to order the public sale of the Property under both the Partition Act (the applicant, 731 Ontario, being a 5 percent owner of that Property) and under s. 207 of the OBCA.

[65] The applicants assert that as co-owners they have a prima facie right to a sale of the Property under ss. 2 and 33 of the Partition Act, which must be granted unless there is malicious, vexatious or oppressive conduct: see Latcham v. Latcham, 27 R.F.L. (5th) 358 (Ont. C.A.), at para. 2. See also Brienza v. Brienza, 2014 ONSC 6942, at paras. 22-26. The respondents acknowledge that the applicant, 731 Ontario, had the right to bring such an application and request this relief.

[66] However, the parties also agree that a public sale of the Property would be disadvantageous to all. The reasons for this, and for their preference for a buy-out, are summarized in the joint factum of the respondents as follows:

A public sale is not advantageous to the parties and would introduce unnecessary costs, taxes, and risks for all parties. As the Fialkovs have consented to a buy-out by the Blankensteins, which is the primary relief sought, those burdens can be avoided.

[67] The applicants argue that the discretionary remedy under s. 207 of the OBCA cannot override the right of the applicant, 731 Ontario, to an order under the Partition Act. 731 Ontario holds title directly in the Property and is not a shareholder in Godstone Limited.

[68] If I needed to decide this request for alternative relief, I would have agreed with the respondents. Once s. 207 has been triggered, as it was earlier in these reasons, the appropriate remedy is a matter of discretion for the court, and no longer at the election of the applicants. The court could order a public sale of the Property but is not obliged to on the terms the applicants have specified (e.g. only if a valuation date that they accept is selected for a buy-out). It is not open to the applicants to hedge their bets to the very end and argue that if the fairest valuation date ordered by the court in its discretion is not entirely to their liking, then they will “elect” to request a public sale.

[69] However, this need not concern the applicants because there is no reason for the court to order a public sale (pursuant to s. 207 of the OBCA and/or under the Partition Act) where the parties agree that a public sale is not in either side’s economic interests and where the court has been able to determine the fairest valuation date for a buy-out.

Logistics and Implementation

[70] The parties are confident that they will be able to work out a process for obtaining appraisals and using those appraisals to determine the fair market value of the Property upon which to base the price for the buy-out. They are ordered and directed to agree upon this process and implement it (e.g. to begin with, retain appraisers and instruct them to prepare the fair market valuations as at November 3, 2022) as soon as possible, and by no later than February 15, 2023.

[71] If, after the parties have established their implementation process and obtained their respective appraisals, they are unable to agree on the price for the buy-out or any other aspects of the steps that will be required to achieve the final separation of their interests in Godstone Limited and the Property, they may arrange to attend a case conference before me for further directions. That determination of whether a further hearing is required will depend on the nature and extent of the points of disagreement. It should not be presumed that a further hearing will necessarily be scheduled. Directions may be provided at the case conference without a further hearing.

Costs

[72] The parties exchanged bills of costs and agreed that partial indemnity costs fixed in the all-inclusive amount of $50,000 would be a reasonable amount for the losing side to pay the winning side. This was broken down as follows:

a. $50,000 would by paid to the applicants by the respondents if the valuation date was January 1, 2023 or later; or

b. $25,000 would be paid by the applicants to each group of respondents if the valuation date was set at March 15 or 31, 2022.

[73] If the court does not pick one of dates that the parties asked for, the respondents submit that each party should bear their own costs. The costs of this application should be treated, in effect, as a part of the transaction costs.

[74] The applicants maintain that even if their valuation date was not selected, the application was necessary because of the Fialkov Internal Dispute and the unwillingness of Gerald and Janet to negotiate until it was resolved. So, the applicants should still be entitled to be paid some costs.

[75] The November 3, 2022 valuation date is not a date any party suggested. However, I agree with the applicants that they were forced to incur costs to bring this application because of the Fialkov Internal Dispute and that the applicants should be paid some costs.

[76] Having regard to the applicable factors under r. 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (including without limitation, that the applicants were not entirely successful on all issues) and in the exercise of my discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, I fix the partial indemnity costs of the applicants in the amount of $25,000 and order that the respondents shall jointly and severally pay the applicants those costs. Those costs can be paid as part of the closing adjustments on the buy-out transaction.

[77] This endorsement and the orders and directions contained in it shall have the immediate effect of a court order without the necessity of a formal order being taken out. Any party may take out a formal order by following the procedure under r. 59.

Kimmel J.

Released: January 19, 2023