Superior Court of Justice – Ontario
COMMERCIAL LIST
RE: ARTHUR CORBER, Applicant
AND
MICHAEL HENRY, FAIGIE KOPELMAN and 1192922 ONTARIO LIMITED, Respondents
BEFORE: Kimmel J.
COUNSEL: Bethanie Pascutto, for the Applicant Bradley Phillips, for the Respondents
HEARD: October 11, 2022
ENDORSEMENT (Oppression Remedy Appication #3)
1This is the third oppression remedy application that the applicant, Arthur Corber (“Corber”), has commenced in respect of 1192922 Ontario Limited (“119” or the “company”) that he owns together with the respondents (Michael Henry, (“Henry”), and Faigie Kopelman, (“Kopelman”)). Each has a one-third interest. Henry and Kopelman are a couple. They live in Toronto. Corber lives in British Columbia.
2The company was incorporated in 1997 for the sole purpose of purchasing a property located at 10-12 Isabella Street in the Yorkville neighbourhood of Toronto (the “Property”). The parties each invested $70,000 at the time.
3When the Property was purchased, and to this day, a restaurant that the respondents own a 50% interest in, The Artful Dodger (the “Restaurant”), was (and remains) the only tenant of the Property. The Property has increased in value significantly since the company purchased it. The mortgages have been paid off. Corber would like the Property to be sold and to cash out on his investment.
4Corber’s amended Notice of Application complains about decisions made by Henry and Kopelman, as the self-appointed sole officers and directors of the company since the second oppression application. Corber alleges these decisions were made with a view to harming him by reducing available funds for, and delaying, distributions to the shareholders. He also complains about the respondents’ decision not to sell the Property to a motivated purchaser, 2445580 Ontario Inc, a subsidiary of a private equity real estate investment firm operating as KingSett Capital (“KingSett”), that is redeveloping the city block in which the Property is situated.
5Corber seeks a declaration that the respondents’ actions are oppressive within the meaning of s. 248 of Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”), for an order winding-up the company and for the pro-rata distribution of its assets to the three shareholders. In the alternative, Corber asks the court to exercise its discretion under s. 248 of the OBCA to order a buy-out of his interest in the company. While the buy-out remedy was not expressly requested in the Notice of Application or the Amended Notice of Application, it is argued that this is a recognized alternative remedy to a winding-up order that the court can order if satisfied that there has been oppressive conduct.
6The respondents do not wish to sell the Property (or the company) and would like the Restaurant to continue operating. They maintain that all decisions that have impacted the inflow and outflow of monies from the company have been made with legitimate business purposes and objectives in mind. The salaries and special fees paid to themselves were justified, and all shareholders have been treated equally with respect to distributions, dividends and management fees. They also maintain that since the sole purpose of the company is to own and manage the Property, they cannot be criticized for not agreeing to sell the Property, which will lead to the inevitable winding-up of the company.
7The parties never signed a shareholders’ agreement. This has been the applicant’s biggest obstacle to overcome in his efforts to extricate himself from this company.
8The procedural history is important, for among other reasons, because the respondents brought a cross-application asking for Corber to be declared a vexatious litigant (under s. 140(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, (“CJA”)), given the now third oppression remedy application brought by Corber, another proceeding that he commenced in BC (initially focused on a dividend payment that he claimed not to have received, but expanded to encompass other issues) and for his failure to pay outstanding costs awards from prior litigation. They also ask for this oppression application to be dismissed as an abuse of process under rr. 21.01(3)(d) and 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
Procedural History
a) The First Oppression Application
9The first oppression application was commenced in April 2017 (CV-17-11767-00CL). In it, Corber sought various relief, including: to compel the sale of the Property, the winding-up and dissolution of the company, to impose a mandatory buy-sell arrangement between the parties, an accounting, damages of $800,000 for alleged breaches of contract and fiduciary and other duties and to require that the company enter into a formal lease with the Restaurant. The first oppression application was settled with the primary commercial outcome being that the corporation would (and did) negotiate a market rate lease with the Restaurant. There was a settlement agreement entered into at the time that addressed certain aspects of the parties’ rights and obligations. No releases were signed.
b) The Second Oppression Application
10Two years later, the second oppression application was commenced in 2019 (CV-19-00614920-00CL). In it, Corber again sought various relief, including, to compel the sale of the Property and the winding-up and dissolution of the company. Corber’s primary complaint at that time was the withholding of information from him and his exclusion from decision-making, including decisions about the sale of the Property in the face of increased (possibly over-market) offers, which Corber was a proponent of, and the respondents were resisting.
11The second oppression application was dismissed by Chiappetta J. (Corber v. Henry, 2019 ONSC 3518, 95 B.L.R. (5th) 120), with costs payable by Corber to the respondents in the amount of $66,148.84. This remains unpaid. Corber’s appeal of this decision was later dismissed by the Divisional Court (Corber v. Henry, 2020 ONSC 353), with costs payable by the applicant to the respondents in the amount of $15,600.00. This also remains unpaid.
c) The BC Small Claims Action
12Corber commenced an action in small claims court in BC on December 14, 2020 (the “BC small claims action”), complaining about a T5 he received in respect of a 2019 corporate dividend of $18,400.00 that he claimed not to have received.
13In the BC small claims action, Corber complained about the suspension of monthly management fees and the attribution of a dividend, among other things. That action was withdrawn by Corber in 2022 after the bank closed the company’s bank account, resulting in the release of the remaining funds and his receipt of the dividend monies.
14It was explained to Corber by the respondents that a change in the tax law made it inefficient from a tax perspective for the company to continue to pay monthly management fees to shareholders, so they were stopped after 2018. Instead, the company retroactively equalized the distributions among the shareholders (to account for what had been paid and/or taken by each of them and what was available for distribution at the end of the year) and accounted for these distributions as dividends in T5’s issued for 2019 to all three shareholders.
15The company held funds in a bank account in BC that Corber managed. In the spring of 2018, he decided to make distributions to the shareholders from this account without consulting Henry or Kopelman. The first time this happened, the monthly management fees paid to the shareholders ($2,900) were temporarily suspended to offset the “advances” made from this account. The second time this happened in the fall of 2018, the account was frozen.
16According to Henry and Kopelman, Corber’s 2019 dividends (in lieu of monthly management fees) were to be paid from the frozen account in BC. They say it was within Corber’s control to satisfy the bank so that the account could be unfrozen. No steps were taken to unfreeze the account, so the funds were not released to Corber until 2022 when the bank, on its own initiative, closed the account.
17By the time the BC small claims action was withdrawn, Corber had commenced his “third oppression application” in Ontario, that included some claims overlapping with claims in the BC small claims court action.
d) The Third Oppression Application
18This third oppression application was commenced on March 26, 2021 (while the BC small claims action was still pending). The relief sought is described above. It arises from the conduct and decisions of the respondents in connection with: corporate dividends, distributions, salaries and special fees, the rent to be charged to the Restaurant (during the COVID-19 pandemic) and their continued unwillingness to sell the Property to KingSett.
19The third application complains about many of the same types of corporate activities and decision making that were the subject of the previous court proceedings, although the specific complaints focus on later years.
20Since the second oppression application was decided, Corber has solicited a further offer to purchase the Property from KingSett (the developer of the adjacent properties) for $13.5 million. KingSett made an offer for that same amount at the time of the second oppression application. However, Corber believes this last one was the final offer from KingSett. Corber believes that the decisions of the respondents have resulted in the loss of the opportunity for the company to sell the Property at the recent high point in the Toronto real estate market, and that is among the complaints in the third oppression application.
21The focus of the alleged oppressive conduct in this third oppression remedy application is on the withholding or delay of distributions and other payments that Corber claims to be entitled to. Essentially, Corber contends that the respondents are intentionally suppressing or minimizing amounts paid out to shareholders to harm him, while finding other ways to “legitimately” divert cash flow to themselves, or their shareholder accounts.
22Conversely, Henry and Kopelman maintain that all shareholders are being treated equitably. With respect to any payments they have received or continue to receive that Corber does not, they rely on the court’s prior approval (in the second oppression application) of their right to indemnification (reimbursement) by the company for legal costs incurred by them personally in the context of the various legal proceedings commenced by Corber. They also rely on the court’s prior approval of the salaries they receive as officers of the company and of the entitlement to receive special fees for work undertaken on behalf of the company to respond to Corber’s persistent legal proceedings.
23As mentioned earlier, some of the complaints raised in this third oppression remedy application overlap with issues complained about in the BC small claims court action, such as complaints about the T5 for dividends not received, arising from the delay in the distribution of his 2019 dividend from the frozen account (approximately $16,000). Corber acknowledged during oral argument that this was clearly covered by the BC small claims action which was recently withdrawn on consent of the parties after the account was unfrozen and the funds were distributed.
24These now “settled” complaints are no longer being pursued as incidents of oppression in this third oppression application, although Corber still maintains that they are part of a pattern of oppressive conduct that he alleges led to the diversion of corporate profits to other purposes (such as wages/salaries to the respondents and reimbursement of their legal costs under corporate indemnities), delayed distributions of funds to him, and/or new ways of accounting for retained funds that prevent him from accessing them (e.g. leaving funds in the company as shareholder loans).
Summary of Issues and Outcome
a) The Issues to be Decided
25The court must decide the following issues raised by this application and the cross-application:
a. Have the respondents acted in a manner that is oppressive to or that unfairly prejudices or disregards the interests of Corber within the meaning of s. 248 of the OBCA?
i. If so, should:
The company be ordered to be wound-up; or
Should Henry and Kopelman be ordered to buy Corber’s interest in the company?
b. If not, does Corber’s conduct warrant a finding that:
this application is vexatious and an abuse of the court’s process under rr. 21 or 25.11; and/or
Corber is a vexatious litigant within the meaning of s. 140(1) of the CJA?
b) Summary of Outcome
26For the reasons that follow, both applications are dismissed.
27Having considered the complaints raised on this third oppression application, and even though they are dressed up as new complaints arising in a later time period, they amount to essentially complaints about the same things as were the subject of the second oppression application and/or the BC small claims action.
a. In the latter respect, it was conceded in oral argument that no relief is now being sought in respect of the complaints that overlap with the BC small claims action that was withdrawn while this application was pending.
b. In the former respect, although issues on this application may be “new” in the sense that they are complaints about things that occurred after the second oppression application was decided, they are, for the most part, complaints about the same things that the court has already found do not amount to oppression within the meaning of s. 248 of the OBCA.
28The court’s reasons for dismissing this third oppression application are similar to the reasons for this court’s dismissal of the second oppression application, found at paragraph 7 of the decision of Chiappetta J, as follows:
[7] In my view, the application is properly dismissed. The evidentiary record fails to demonstrate oppressive or unfair conduct. Nor does it substantiate lack of business judgment by the respondents as directors. Rather, the evidence reflects that the parties disagree on the way forward for the business of the corporation. The disagreement does not amount to oppression, nor does it paralyze the operations of the corporation. The applicant has been outvoted as a consequence of being one of an odd number of shareholders in a single purpose corporation, operating without a shareholders’ agreement.
29The same considerations, with respect to what amounts to similar complaints about similar decisions being made in the context of the same corporate structure, apply in this third oppression remedy application, and lead to the same outcome: that the application is dismissed.
30As for the cross-application for a declaration that Corber is a vexatious litigant, despite having many of the hallmarks of other cases in which such a declaration has been made, overall, the circumstances do not warrant such a finding, yet.
31However, Corber’s unwillingness to accept the court’s rulings and findings has resulted in a re-hashing of the same complaints and repeated, misguided, attempts to use the oppression remedy to address what are really complaints about his status as a minority shareholder in a closely held private company with no shareholders’ agreement. This cannot continue to go unchecked. Actions of majority shareholders can be subject to scrutiny and sometimes lead to findings of oppression in the corporate context, but not when they are undertaken for valid business purposes and in accordance with the company’s governing by-laws and statutes.
32Without going so far as to declare Corber a vexatious litigant at this time, I am requiring, as a term of the order dismissing these applications, that he may not commence any further proceedings in Ontario in relation to the company, its officers, directors and other shareholders without first obtaining leave of this court to do so. Before leave is granted, Corber must demonstrate to the court that the subject matter of his complaint has not already been considered and addressed in previous court proceedings, including this one, and that it is something that could, if proven, constitute a valid cause of action.
33Corber should take this as a precautionary warning that he has come to the end of the line in terms of the complaints that have already been litigated and decided. Judicial resources are scarce, litigation is expensive, and the court at some point must act as a gatekeeper to ensure that the court’s process is being respected and used for legitimate purposes.
c) The Court’s Observations
34That said, from the court’s vantage point, all three shareholders would be better off not to be financially tied to each other. It is hard to imagine any of them would disagree with that. In the absence of a finding of oppression, the court will not order a buy-out of Corber’s interest in the company, but if there is any possibility of securing financing that might enable a buy-out of Corber’s interest based on an independent appraisal, even if not at the highest and best price that Corber had hoped for, a compromise for peace on both sides would be well advised.
35Transparency on the part of the directors and majority shareholders is essential. Corber is entitled to be treated fairly and equitably, to appropriate financial disclosure (as required by law) and to have explained to him the basis for any differences in the monies received from the company by the three investors. I am not suggesting that this has not been provided by the respondents, even if not always immediately. However, it would not be surprising to the court that the current state of affairs has been, or has the potential to be, a breeding ground for a breakdown in effective and timely communication between the parties.
36The parties are encouraged to communicate directly and transparently with each other, or through intermediaries, and to resort to the court only as a last resort. This is an untenable situation that the parties need to find a business solution to. Continued litigation is not a practical or economical solution.
Prior Court Decisions and Findings
37The respondents rely heavily upon the prior decisions and findings of this court in the second oppression application and its appeal to the divisional court, with good justification. Some of the more pertinent passages from those decisions are re-produced below for ease of reference.
38The following findings were made by Chiappetta J in the second oppression application (in addition to paragraph 7, quoted above):
[37] Corber states that it was oppressive conduct for the respondents to ignore the 2019 Offer and to refuse to conduct due diligence into its merits. The offer was over double the property’s appraised value, and the property’s value will plummet after KingSett's development plans are approved. The respondent’s failure to consider the offer was a result of their preference of the Dodger's interests at the expense of 119’s.
[38] I find that 119 and the Dodger were intertwined from 119’s inception. 119 was incorporated to purchase the property that housed the Dodger, a business partially owned by the respondents. There could be no reasonable expectation that the respondents would completely ignore the interests of the Dodger. Rather, it would be reasonable to expect that the respondents would consider the interests of the Dodger as a stakeholder, as they are permitted to do as part of their business judgment. There is no evidence that the respondents’ ownership of the Dodger unduly influenced their conduct or business judgment to the detriment of 119 or Corber. 119 and Corber have benefitted from the relationship. The property’s mortgage was paid off in 2007. The asset has been unencumbered for twelve years. Since 2007, profits from the rent of a stable tenant have been distributed directly to the shareholders. Each shareholder has accrued in excess of $550,000 by way of distributions alone. The principal form of relief sought by Corber is to have the court order the sale of the property. But for Corber’s bald statement and his purported 1997 handwritten note reading “selling in future ... how long?” there is no evidence to suggest that selling the property when the property appreciated and the parties approached retirement was a reasonable expectation of the shareholders. The respondents deny that it was. Further, without a unanimous shareholder agreement, there can be no reasonable expectation that 119 would be wound up and its business terminated.
[41] In conclusion, the evidence does not show that the respondents acted in a way that was oppressive, or that unfairly prejudiced or disregarded the interests of the applicant. Their actions were reasonably required in the interests of the corporation, and were in line with what Corber could reasonably expect in the circumstances, given that he knew that the respondents had a relationship with and a duty to the Dodger, and the intended purpose of the corporation was to rent the property to the Dodger.
[46] There are three shareholders of 119 with equal votes. Two can outvote one on any matter. The majority of shareholders have voted against the sale of the property to KingSett. The disagreement has not paralyzed the business of 119. It was a function of the business judgment exercised by the directors and does not offend the objectives or reasonable expectations held by the shareholders at the commencement of the company. There is no basis for the relief sought. The application is dismissed.
39The following findings were made by Patillo J. in the Divisional Court’s dismissal of the applicant’s appeal of the second oppression application:
[58] Addressing the allegation that the respondents had improperly withheld distributions to Corber after November 2018, the application judge noted that Corber had unilaterally and without notice withdrawn $9,000 from the Corporation’s bank account resulting in the account being frozen. To resolve that action, the respondents withheld Corber’s distributions for three months.
[59] While the $9,000 was improperly withdrawn by Corber in March 2018, following which the respondents withheld Corber’s monthly distribution for three months, his monthly distribution of $2,900 was resumed once the $9,000 had been accounted for. However, as noted, Corber’s unilateral action in September 2018 of writing and then cashing a cheque to himself for $20,000 followed by another cheque for $4,100 in October 2018, resulted in the respondents again suspending payment of Corber’s monthly distribution amount of $2,900 from November 2018.
[60] While the application judge was mistaken as to the reason the respondents withheld Corber’s distributions after November 2018, given the evidence concerning Corber’s actions, that mistake is neither palpable nor overriding in my view. Corber’s distributions were stopped because of his unilateral action in paying himself $20,000 and $4,100 from 119. Those actions not only negatively impacted 119, they were in breach of his duty as an officer and director and they were also in breach of 119’s by-laws and the 2017 Application settlement agreement.
[61] Corber submits that the respondents’ actions at the January 30, 2019 directors’ meeting removing him as an officer and awarding themselves salaries were oppressive, unfairly prejudicial to him and unfairly disregarded his interests as a shareholder and an officer.
[62] In addressing the allegation concerning the wages, the application judge stated, in part, at para. 32 of her reasons: ... The timing of this decision was not ideal. It does not amount to oppressive conduct however. I accept that the work of running 119 had become a full-time job for the respondents. Corber did not contribute to the work. It is a reasonable expectation that the employees carrying the weight of the business of the corporation would receive relatively modest salaries.
[63] The application judge recognized the optics of the respondents’ decision to pay themselves wages for the first time during the dispute with Corber. At the same time, there was evidence to support her conclusion that the respondents’ decision to pay themselves wages for the work they did for 119 in 2018 was not oppressive. Kopelman deposed that running 119 had become a full-time job for the respondents as a result of Corber’s actions and the increased offers from developers. Further, the wages they awarded themselves were modest in the circumstances.
[68] In reaching her conclusion to dismiss Corber’s application, the application judge addressed all the expectations that Corber raised, both in his affidavit and cross-examination and considered them having regard to the evidence and the issues before her. She did not mischaracterize any of the expectations or the evidence. Having regard to the evidence and her reasons for decision, I am satisfied that the application judge not only made no palpable and overriding error in coming to her conclusion, she also made no error of law. The appeal is therefore dismissed.
Analysis
a) The Third Oppression Application
The Oppression Remedy
40The oppression remedy is set out in s. 248(2) of the OBCA. It provides that, where the court is satisfied that in respect of a corporation or any of its affiliates,
a. any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;
b. the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or
c. the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any securityholder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.
41Where a complainant meets the requirements of s. 248(2), the remedies available are very broad and include a court-ordered buyout of shares (s. 248(3)(f)).
42The oppression remedy protects the objectively determined reasonable expectations of corporate stakeholders. Conduct will be found to be in breach of s. 248 of the OBCA if:
a. That conduct breached the reasonable expectations of the applicant; and
b. The breach amounts to oppression, unfair prejudice, or an unfair disregard of a relevant interest.
See BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at paras. 56 and 68.
43The oppression remedy protects reasonable expectations and interests, rather than legal rights, particularly in a closely held corporation: see BCE, at paras. 61-64.
44What constitutes reasonable expectations for the purposes of the oppression remedy was extensively canvassed by the Supreme Court of Canada in BCE (at paras. 59, 61-78). The following points are pertinent.
a. Fundamentally, a stakeholder has a reasonable expectation of fair treatment.
b. Reasonable expectations may not be solely found in written agreements between the parties.
c. A protected expectation must be one that could be said to have been part of the “compact” of the shareholders. This may be determined with regard to general commercial practice, the nature of the corporation, the relationship between the parties, past practice, steps the claimant could have taken to protect itself, representations and agreements.
d. The reasonableness of any particular expectation asserted must be considered and evaluated objectively, with regard to the “facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.”
e. Reasonable expectations are not static and may evolve over time.
45To make a successful oppression claim, a complainant must:
a. Identify the expectation(s), that he or she claims have been violated by the conduct at issue;
b. establish that the expectations were reasonably held; and
c. demonstrate that the defendants’ failure to meet this expectation:
i. caused detrimental consequences; and
ii. that it amounted to “oppression,” “unfair prejudice,” or “unfair disregard” of a relevant interest.
See BCE at paras. 70 and 95.
Alleged Oppressive Conduct by the Respondents
46When pressed during oral argument, the alleged oppressive conduct of the respondents was identified as:
a. A concerted effort by Henry and Kopelman to reduce or eliminate distributions to all shareholders, but with disproportionate implications for Corber, through:
i. tying his dividend payments to the unfreezing of the BC bank account;
ii. accounting for distributions in shareholder loan accounts, rather than actually paying them out;
iii. resolving not to pay dividends in 2020 and beyond;
iv. resolving to use some of the available funds to pay special fees to themselves for their work on behalf of the company to respond to Corber’s litigation; and
v. accounting for their entitlement to be indemnified and reimbursed for legal fees incurred through shareholder loans and then making distributions to equalize the shareholder loan accounts,
all leading to higher amounts being paid out to Henry and Kopelman than to Corber.
b. The failure to negotiate with KingSett when it made a “final” offer to buy the Property, thereby preventing the realization of those profits for the benefit of all shareholders, predicated on an alleged reasonable expectation held by Corber to access profits for his retirement.
No Reasonable Expectation That the Property Would be Sold and Profits Would be Distributed
47With a focus on what Corber claims to have reasonably expected, it has already been determined that he did not hold an objectively reasonable expectation that the Property would be sold as he approached (or was in) his retirement. At paragraph 38 of the second oppression application decision, Chiappetta J. concluded:
[38] The principal form of relief sought by Corber is to have the court order the sale of the property. But for Corber’s bald statement and his purported 1997 handwritten note reading “selling in future … how long?” there is no evidence to suggest that selling the property when the property appreciated and the parties approached retirement was a reasonable expectation of the shareholders. The respondents deny that it was. Further, without a unanimous shareholder agreement, there can be no reasonable expectation that 119 would be wound up and its business terminated.
48No additional objective evidence was tendered on this third oppression application to support a finding that there was an objective, reasonable expectation of the shareholders of the company that the Property would be sold. I am led to the same conclusion as this court reached in 2019: It has not been established that there was an objective, reasonable expectation that that the company would be wound up and its business (the Property) would be sold upon Corber (or the others) deciding to retire or reaching some particular age.
49Some new arguments were made in this third oppression application that were not previously made, which I will address briefly.
50Although asserted in Corber’s factum, there is no basis upon which the court could find that the company was de facto a bare trustee holding the Property for the benefit of the shareholders so as to give them additional rights that property owners might enjoy (for example, to seek an order for partition and sale under ss. 2 and 3 of the Partition Act, R.S.O. 1990, c. P.4). Nor does the applicant’s attempt in his factum to characterize the company as an incorporated partnership line up with the contemporaneous evidence. The evidence is to the contrary: the company has been operated as a company, filed tax returns, and passed resolutions. I was not directed to any evidence that the corporate formalities have not been respected.
51On the second oppression application, this court concluded that the failure of the company to negotiate a sale of the Property so that the profits could be realized for the shareholders did not defeat Corber’s reasonable expectations as a shareholder of the company. In an effort to differentiate the latest KingSett offer, that was for the same price as its previous offers, Corber describes this offer to have been KingSett’s “last” offer.
52First, it is noted that no evidence was tendered from KingSett to indicate that when it was made this was indeed KingSett’s final offer. Similar concerns were raised on the second oppression application about the prospect of there being no further offers, and yet KingSett extended and renewed its offer. Corber’s speculation and an email to his counsel dating back to January 2022 indicating that there “will likely be a point of no return” is not definitive evidence and, to the extent it is based on something KingSett said, it would be hearsay. A late-filed affidavit from a law clerk at the law firm for the applicant attaching a letter from KingSett indicating that the development was proceeding without the Property was objected to by the respondents. In any event, this is not persuasive evidence that there will be no further offers, even if admissible.
53More to the point, the availability of another offer to purchase the Property, whether from KingSett or another developer, is not material to my decision on this third oppression application. The company’s only purpose is to own the Property and rent it to the Restaurant. That is the reason it was established and how it has operated. I am not aware of the existence of a duty on directors of a closely held single-purpose company to maximize shareholder value by selling the only asset that the company owns to the highest bidder (which would lead to the inevitable winding up of this single purpose company), even in a seller’s market.
54Absent a corporate justification, the court will not order the sale of a corporate asset and the effective winding-up of a company. To make such an order under the oppression remedy would require some established reasonable expectation having been breached and some unfairness to the applicant that drives the court to conclude that such an extreme outcome is the only effective remedy.
55This typically only arises in situations of a deadlocked company, which is not the situation in this case (as the court determined in the second oppression application at paragraph 7, confirmed by the Divisional Court): see Animal House Investments Inc. v. Lisgar Development Ltd. (2007), 2007 82794 (ON SC), 87 O.R. (3d) 529 (S.C.), at paras. 57, 59; see also Ebrahimi v. Westbourne Galleries Ltd., [1973] AC 360 at 379 (HL).
56The types of circumstances that existed in cases relied upon by the applicant, such as Falus v. Martap Developments 87 Ltd., 2012 ONSC 2301, 2 B.L.R. (5th) 292, aff’d 2013 ONSC 4115, 17 B.L.R. (5th) 49; Hicks v. Pacific Canada Resources Inc., 2011 ONSC 3720, 88 B.L.R. (4th) 236; and Brockhedge Investment Group (1) Inc. v. Campus Court Developments Ltd., 2013 ONSC 1578, 13 B.L.R. (5th) 327 relied upon by the applicant, do not exist here.
Expectation of Fair Treatment Regarding Distributions Has Been Met
57It is objectively reasonable for a shareholder, including a minority shareholder in a privately held company such as Corber, to expect to be treated fairly, on equal and proportionate terms with the other shareholders of the same class of shares.
58The evidence discloses that, based upon accounting advice received, a new method of “distributions” after 2018 was adopted by the directors, by way of either shareholder loan repayment, and/or dividend payments to shareholders, made annually, rather than monthly. All shareholders (including Corber, who was treated no differently than the others):
a. Received a dividend payment in 2018;
b. Received a dividend payment in 2019 which as per a duly voted Shareholder's Resolution, was paid to each of the shareholder’s loan accounts;1
c. Did not receive a dividend payment in 2020 because of reduced rent from the Restaurant during the COVID-19 pandemic and increased legal fees; and
d. Received a dividend payment in 2021.
59Corber has not satisfied the court that there was anything oppressive, unfairly prejudicial or that unfairly disregarded his interests in the timing or manner of these distributions, having regard to all the circumstances at the time the decisions were made.
No Preferential Treatment for Reimbursement of Litigation Expenses
60Based on the findings and conclusions in the second oppression application, Henry and Kopelman, as the directors of the company, initially voted to require the company to reimburse them for the out-of-pocket legal expenses they incurred, less the $81,748.84 payable by Corber pursuant to the costs ordered against him. The company’s by-law 6.02 (a) allows the company to reimburse directors and officers for costs etc. incurred in connection with an action, suit or proceeding in respect of the execution of the duties of their office. In the course of oral argument, Corber’s counsel confirmed that this reimbursement payment was no longer being challenged as oppressive.
61Pursuant to Article 6.03 of the company’s by-laws, “a resolution passed by a majority ... shall be as valid and binding ... upon all shareholders as though it had been approved, ratified or confirmed by every shareholder”. A board resolution was passed that authorized the repayment of part of the shareholders loans to Henry and Kopelman. By November 2020, they had outstanding loans to the company in excess of the sums loaned by Corber (due to the fact that they had advanced funds to pay for legal expenses to defend the previous court proceedings initiated by Corber that they were entitled to be reimbursed for).
62The payment of $45,915 to each of them simply equalized the sums owing to all shareholder loans. In other words, now all three shareholders (or their respective holding companies) are each equally owed $122,385.00 by the company. Corber has not satisfied the court that there was anything oppressive, unfairly prejudicial or that unfairly disregarded Corber’s interests arising out of the distributions.
No Unfair Treatment Due to Salaries and Special Fees
63Corber’s complaints about the outcome of shareholders’ and directors’ meetings, at which the payment of salaries and special fees to Henry and Kopelman was approved, are reminiscent of the same arguments he raised (and lost) in respect of a shareholders’ meeting in January 2019. On appeal, the Divisional Court upheld the findings at first instance that these did not amount to oppressive conduct (at paras. 62-63) because:
[62] In addressing the allegation concerning the wages, the application judge stated, in part, at para. 32 of her reasons: ... The timing of this decision was not ideal. It does not amount to oppressive conduct however. I accept that the work of running 119 had become a full-time job for the respondents. Corber did not contribute to the work. It is a reasonable expectation that the employees carrying the weight of the business of the corporation would receive relatively modest salaries.
[63] The application judge recognized the optics of the respondents’ decision to pay themselves wages for the first time during the dispute with Corber. At the same time, there was evidence to support her conclusion that the respondents’ decision to pay themselves wages for the work they did for the Corporation in 2018 was not oppressive. Kopelman deposed that running the Corporation had become a full- time job for the respondents as a result of Corber’s actions and the increased offers from developers. Further, the wages they awarded themselves were modest in the circumstances.
64In this third oppression application, Corber focusses his complaints on the $12,000 special fee that the shareholders (with Corber absent) and directors approved by resolution to pay Henry and Kopelman each in June 2021. This payment was in addition to their salaries of $10,000 and $15,000, respectively.
65As of June 2021 Corber had earlier initiated the BC small claims action and had served the Notice of Application for this third oppression application in late March/early April 2021. Kopelman’s evidence that she spent at least 85-100 hours in 2021 addressing these new legal proceedings is not refuted.
66All of this appears to be consistent with the corporate requirements and prior findings that it was not oppressive for directors and officers to be compensated for extraordinary time and effort spent to defend the conduct of the company’s business and affairs. Further, the amount of this special fee is less than was paid previously and appears to be reasonable having regard to the evidence about the time that was spent on these extraordinary (out of the normal course of business) activities.
67Corber argues that when this was approved the first time it was considered a one-off occurrence and should not have turned into a recurring payment of annual salaries, supplemented by special payments, to Henry and Kopelman. However, I find that the existence of continuing litigation commenced by Corber, such as the BC small claims action and the third oppression application, provide sufficient justification for these special payments to have continued beyond the first time.
68Conversely, it is not objectively reasonable for a shareholder, including a minority shareholder in a privately held company such as Corber, to expect to be paid for his time and effort spent suing the company and the other shareholders (unsuccessfully) or to expect to be reimbursed for his costs of such. Thus, the fact that Corber did not receive equivalent payments does not amount to oppression.
69Nor does it violate the objectively reasonable expectations of a minority shareholder in a privately held company for the other shareholders who are forced to put their time and effort and money into responding to such claims:
a. To be compensated for their time as this court has already found in the second oppression application; and
b. To be reimbursed for their costs, particularly when there is a corporate indemnity by-law that provides for them to be indemnified and reimbursed (see next section below).
70Although not specifically highlighted, one conceivable basis for criticism is the decision for half of the amount to have been paid to Henry when the evidence indicates that Kopelman was the one who completed the work. However, in the context of a closely held company, the overall amount of this special fee is reasonable, even if split between Henry and Kopelman for work primarily done by Kopelman. Vis à vis Corber, I do not consider the payment of the total amount of $24,000 in special fees for extra time and effort expended by the company’s officers to respond to two new pieces of litigation in two provinces to be unreasonable or oppressive.
What Would be Reasonable Expectations?
71This is not the first time that this court has had to consider the question of what objectively reasonable expectations a shareholder in Corber’s position might have. Wilton-Siegel J. considered this in Senyi Estate v. Conakry Holdings Ltd. (2007), 2007 20102 (ON SC), 36 B.L.R. (4th) 309 (Ont. S.C.), at para. 9 (followed in Wilfred v. Dare et al., 2017 ONSC 1633, 137 O.R. (3d) 512, at paras. 66-74):
In the present circumstances, the applicant has inherited a minority common share position in a private company for which there is no shareholders’ agreement. What are the reasonable expectations of a shareholder in such circumstances? I think they are limited to the following five general expectations: (1) that the directors and officers will conduct the affairs of the corporation in accordance with the statutory and common law duties required of them in such capacities; (2) that the shareholder will be entitled to receive annual financial statements of the corporation and to have access to the books and records of the corporation to the limited extent contemplated by the Act; (3) that the shareholder will be entitled to attend an annual meeting of the corporation for the limited purposes of receiving the annual financial statements and electing the directors and auditor of the corporation, or will participate in the approval of such matters by way of a shareholder resolution; (4) that a similar approval process will be conducted in respect of fundamental transactions involving the corporation for which such approval is required under the Act; and (5) that the shareholder will receive the shareholder’s pro rata entitlement to dividends and other distributions payable in respect of the common shares of the corporation as and when paid to all of the shareholders.
72To the extent that Corber wanted to avail himself of these rights and opportunities, they have been afforded to him. This has been demonstrated through the deconstruction and explanation of the various payments he originally complained.
73This process has demonstrated that Corber’s reasonable expectations have been met. Henry and Kopelman have not acted in a manner that was oppressive to or that unfairly prejudiced or disregarded Corber’s interests.
No Grounds Upon Which to Order a Purchase of Corber’s Shares
74Absent a finding of oppression, the court has neither the authority nor the inclination on the facts of this case to order the company or the other shareholders to buy him out. It is open to the company and/or other shareholders to negotiate with Corber to purchase his shares.
75However, it is noted that when the board considered doing it in July 2021 the value that was ascribed for that purpose (based on assessments tied to the rental income under the lease that Corber renegotiated with the Restaurant) was considered to be far less than what Corber is looking for. Thus, it is not clear that a negotiated purchase will be achievable unless expectations are adjusted.
b) The Vexatious Litigant Application
76A vexatious litigant, according to s. 140(1) of the CJA, is one who has persistently and without reasonable grounds, (a) instituted vexatious proceedings in any court; or (b) conducted a proceeding in any court in a vexatious manner.
77In these circumstances a judge may order that no further proceedings be instituted by the person in any court, or that a proceeding previously instituted by the person in any other court not be continued, except by leave of a judge of the Superior Court of Justice.
78The term “vexatious proceedings” was defined by Chief Justice Howland in Foy v. Foy (No. 2) (1979), 1979 1631 (ON CA), 26 O.R. (2d) 220 (C.A.) in the context of the Vexatious Proceedings Act, the predecessor to s. 140 of the CJA, as follows:
The word “vexatious” has not been clearly defined. Under the Act the legal proceedings must be vexatious and must also have been instituted without reasonable ground. In many of the reported decisions the legal proceedings have been held to be vexatious because they were instituted without any reasonable ground. As a result the proceedings were found to constitute an abuse of the process of the Court. An example of such proceedings is the bringing of one or more actions to determine an issue which has already been determined by a Court of competent jurisdiction.
79The respondents contend that Corber’s actions have the characteristics typically encountered with vexatious litigants (see, Gao v. Ontario WSIB, 2014 ONSC 6497, 37 C.L.R. (4th) 7, at para. 14), such as:
a. The commencement of multiple proceedings in an effort to determine already determined issues;
b. Rolling forward grounds and issues from prior proceedings;
c. Persistent pursuit of unsuccessful appeals;
d. Failure to pay cost awards;
e. Bringing proceedings for a purpose other than the assertion of legitimate rights; and,
f. Bringing proceedings where no reasonable person would expect to obtain the relief sought.
80Corber is close to the line, but I am prepared to give him some leeway. The primary focus of the outcome of his first oppression application (that was settled) was a valid concern that was rectified regarding the conflict of interest arising from the interest that Henry and Kopelman have in the Restaurant and the favourable rent terms that the Restaurant enjoyed, at the expense of the company, until it was agreed that the lease would be re-negotiated. Unfortunately, that legitimate concern appears to have tainted Corber’s view now of all the respondents’ actions, presumed to be for their benefit and at his expense. Those suspicions have not been borne out in the subsequent proceedings.
81I am not persuaded that Corber’s motives in pursuing the various proceedings were for improper purposes or to harass the respondents. Although not established on the evidence, he felt they were intentionally depriving him of distributions that he thought he was entitled to. As for the unpaid costs awards, Corber has made it clear that he is prepared to have those outstanding amounts paid out of distributions to which he becomes entitled.
82As frustrated as he may be, Corber needs to understand that he does not have an equal say in how the company is run (based on his percentage shareholding) and that, as a minority shareholder with no shareholders’ agreement, his ability to force the sale of the Property, the winding-up of the company or the purchase of his shares is extremely circumscribed.
83While I will not at this time make an order under s. 140 of the CJA on the basis of a finding that Corber is a vexatious litigant I will nonetheless require, as a term (under r. 38.10(1)(a)) of the order dismissing the vexatious litigant application, that he be required to seek leave of the court before commencing any other proceedings or asserting any other claims in Ontario in relation to the company, its officers, directors and other shareholders.
84The imposition of this leave requirement is also consistent with the court’s authority under r. 57.03(2) and/or r. 60.12, for so long as Corber’s previous and long outstanding cost awards remain unpaid.
85Before leave is granted, Corber will have to demonstrate to the court that the subject matter of his complaint has not already been considered and addressed in the previous court proceedings, including this one, and that it is something that could, if proven, constitute a valid cause of action.
86The relief sought by the respondents Henry and Kopelman under rr. 21 and 25.11 are dependent upon on a finding (that has not been made) that this third oppression application was vexatious and an abuse of the court’s process. Such a finding has not been made.
87In any event, reliance on these rules appears to be an afterthought, especially considering how long the respondents waited to raise them after the commencement of the application (whereas these rules are typically relied upon for pleadings motions early on in a proceeding). In any event, I do not believe it has come to this point, yet. I decline to make those orders, even though I am dismissing the oppression application.
Costs and Final Disposition
88Both the applicant’s and respondents’ applications are dismissed.
89The bills of costs filed indicate a large gap in the amounts expended on these applications: the applicant claims $75,000 on a full indemnity basis, whereas the respondents claim $45,000 on a full indemnity basis. When asked for their “pay or be paid” number, the applicant suggested $30,000 and the respondents suggested $40,000.
90Having regard to the outcome of the two applications, and the other relevant factors, and in the exercise of my discretion under r. 57 and s. 131 of the CJA, I am not inclined to award costs to either side. To the extent that the cross-application was duly authorized by the corporation, its share of the cost of bringing that application can be paid by the company.
91The cost of the respondents’ defence of the oppression application will be borne by the company – the indemnity provisions allow for that and I consider it to be appropriate in the circumstances, with the result that Corber will indirectly be paying one-third of those costs.
92I consider this to be a fair outcome in the circumstances. Although both applications were dismissed, Corber’s application would have been the focus of more time and expense, so having him pay indirectly for some of the respondents’ costs of that application is not unreasonable.
93Corber shall bear his own costs of both applications.
94If there were settlement offers or other considerations that were not before the court at the hearing of these applications that either side wishes to make submissions about to change the court’s preliminary determination of no costs being paid directly as between the moving and responding parties on these applications, a case conference can be scheduled before me through the commercial list office. If no case conference is scheduled within 30 days of the release of this endorsement the court’s decision on costs will be deemed to be final on the 31^st^ day following the release of this endorsement.
95This 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, although any party may do so by following the procedure under r. 59, if so advised.
Kimmel J.
Date: January 3, 2023