Court File and Parties

COURT FILE NO.: CV-18-66804

DATE: February 8, 2023

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Donna Husack, Applicant

AND:

Evelyn Husack, Donald Husack, Dianne Parr and Doreen Wills, Respondents

BEFORE: MacNeil J.

COUNSEL: D. Sayer and A. Stikuts – Lawyers for the Applicant

R. MacGregor – Lawyer for the Respondent, Evelyn Husack

D. Waldman – Lawyer for the Respondent, Donald Husack

J. Diacur – Lawyer for the Respondents, Dianne Parr and Doreen Wills

HEARD: November 1 and 2, 2022 (by videoconference)

REASONS FOR DECISION

OVERVIEW

[1] By this application, Donna Husack (“Donna” or “the Applicant”) asks the court to determine whether she is entitled to dissent to the sale or transfer of assets held by a family-controlled corporation or, alternatively, whether a liquidator should be appointed to wind-up the company, among related relief.

[2] The Respondents, who are Donna Husack’s siblings and her mother, dispute that Donna has any dissent rights because all of the shareholders entered into a unanimous shareholders agreement wherein such rights were waived. They want the directors of the corporation, Evelyn Husack (“Evelyn”) and Donald Husack (“Donald”), to be permitted to manage the divestiture of the company’s remaining assets and its ultimate wind-up.

[3] All parties filed supporting affidavits and cross-examinations were held on those affidavits.

BACKGROUND

[4] The Respondent, Evelyn Husack, is the mother of the Applicant, Donna Husack, and the other Respondents, Donald Husack, Dianne Parr (“Dianne”) and Doreen Wills (“Doreen”).

[5] Frank Husack, Evelyn Husack’s husband and the father of Donna, Donald, Dianne and Doreen, passed away on February 21, 2008.

[6] The primary asset in Frank Husack’s estate was his shares in Frank Husack Holdings Inc., an Ontario holding corporation that had interests in a number of real estate joint venture projects and developments. Evelyn Husack had been an officer/director of the corporation for many decades. She was also an officer/director of another company owned by Frank Husack, known as 1815101 Ontario Inc., that held some other assets but those were liquidated prior to his death.

[7] The four children were transferred common shares of Frank Husack Holdings Inc. by way of a distribution from a family trust on April 17, 2006 (which was the deemed distribution date of 21 years). Each of them owns essentially 25% of the non-voting common shares.

[8] In his Last Will and Testament, Frank Husack appointed Evelyn Husack, the four children, and The Effort Trust Company, to be the estate trustees. He granted Evelyn Husack a veto, over and above the children, so that she could maintain control over the corporation after his passing. Specifically, clause 2 of the Will reads:

(a) I APPOINT my wife, EVELYN BESSIE HUSACK, my son, DONALD HUSACK, my daughter, DOREEN WILLS, my daughter DIANNE PARR and my daughter, DONNA HUSACK, or the survivor(s) of them, and THE EFFORT TRUST COMPANY, to be the Estate Trustees, Executors and Trustees of this my Will and I hereinafter refer to them as my “Trustees”.

(b) I DIRECT AND DECLARE that in all matters connected with the management of my Secondary Estate, a decision of a majority of my Trustees (if three or more persons be then acting as Trustees), of which majority EVELYN BESSIE HUSACK shall always be one, (if she then be acting as a Trustee), shall be deemed and taken to be to all intents and purposes the act of the whole and every deed or instrument of any nature or description executed by a majority of my Trustees, of which majority EVELYN BESSIE HUSACK shall always be one, (if she then be acting as a Trustee), at any time shall be valid, effectual and binding as if executed by all and may be acted upon by all parties transacting any business with my Trustees and shall be binding upon all persons claiming under this my Will and upon all other persons claiming to take any estate or interest under any deed or instrument.

[9] On May 1, 2010, Frank Husack Holdings Inc. and 1815101 Ontario Inc., were amalgamated by way of Articles of Amalgamation (“the Articles of Amalgamation”) to create a new corporation, also named Frank Husack Holdings Inc. (“FHH”). FHH is a holding corporation that holds the remaining assets of the estate of Frank Husack. Evelyn Husack signed the Articles of Amalgamation on behalf of both the former Frank Husack Holdings Inc. and 1815101 Ontario Inc., as the President of each.

[10] The Articles of Amalgamation provide that Evelyn Husack and Donald Husack are the new corporation’s two directors. The corporation is authorized to issue (a) an unlimited number of Class A Special shares, issuable in series; (b) an unlimited number of Class B Special shares; and (c) an unlimited number of common shares. Only Class B shares are permitted to vote and attend shareholder meetings. The Estate of Frank Husack, administered by Evelyn and the four children, owns the Class B voting shares, as well as the Class A non-voting preferential shares. The Class A preferential shares have a fixed value and are held by a Spousal Trust for Evelyn’s benefit, as they have priority distribution rights.

[11] The Articles of Amalgamation provide that the owners of the common shares – being the four children – are not entitled to receive notice, attend, or vote at any meetings of the shareholders of FHH except for meetings to authorize the wind-up of the corporation. The designation, rights, privileges, restrictions, and conditions attaching to the common shares are set out in Section “C” of the Articles and read as follows:

1. The holders of the common shares shall be entitled to receive dividends if, as and when declared by the board of directors of the Corporation out of the assets of the Corporation properly applicable to the payment of dividends in such amount and payable at such times and at such place or places in Canada as the board of directors may from time to time determine. Subject to the rights of the holders of any other class of shares of the Corporation entitled to receive dividends in priority to or rateably with the common shares, the board of directors may in their sole discretion declare dividends on the common shares to the exclusion of any other class of shares of the Corporation.

2. In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the holders of the common shares shall, subject to the rights of the holders of any other class of shares of the Corporation entitled to receive the assets of the Corporation upon such a distribution in priority to the common shares, be entitled to participate rateably in any distribution of the assets of the Corporation.

3. The holders of the common shares shall not be entitled to receive notice of or to attend any meeting of the shareholders of the Corporation and shall not be entitled to vote at any such meeting; the holders of the common shares shall, however, be entitled to notice of meetings of the shareholders called for the purpose of authorizing the dissolution of the Corporation or the sale of its undertaking or a substantial part thereof as provided for under Section 184(3) of The Business Corporations Act, 1990 as now enacted or as the same may from time to time be amended.

[12] Also on May 1, 2010, all of the shareholders and FHH entered into a unanimous shareholder agreement to govern certain of their rights as shareholders of the new corporation (“the Unanimous Shareholders Agreement”). There is no dispute that all of the parties to the Unanimous Shareholders Agreement entered into it voluntarily.

[13] In the Unanimous Shareholders Agreement, the term “Estate” is defined as “Evelyn Husack, in her capacity of Estate Trustee, Executrix and Trustee of The Estate of Frank Husack”. Evelyn was the only signatory of the Unanimous Shareholders Agreement on behalf of the Estate of Frank Husack. She contends that this was to reflect the fact that her late husband had given her the veto under his Will and, thus, all powers set out by the “Estate” could be enacted by her.

[14] By Section 3.01 of the Unanimous Shareholders Agreement, the Estate, as defined therein, was given the right to sell the assets of FHH in its sole discretion. It reads:

Notwithstanding the foregoing, the ESTATE shall have the right at its option to cause the Corporation to sell all or substantially all the assets owned by it to such person or persons at such time and upon such terms and conditions as the ESTATE in its sole and exclusive discretion considers advisable.

[15] Sections 5.01 and 8.01 provide that the shareholders will conduct themselves so as to give full effect to the Unanimous Shareholders Agreement. They read:

5.01 The Shareholders mutually covenant and agree that, so long as they (or their nominees) are directors, officers and/or shareholders of the Corporation and to the extent they are permitted by law to bind themselves to do so, they shall so vote and act or cause their proxies to so vote and act and shall cause their respective nominees as directors, to the extent that such nominees are permitted by law to bind themselves to do so, to so vote and act as to give full effect to the purpose and intent of this Agreement. The Corporation agrees to carry out the terms of this Agreement to the full extent that the Corporation has the power and capacity at law to do so.

8.01 All the parties hereto shall do, carry out and execute all such additional and further acts, matters, documents and other things as may be requisite and appropriate in order to properly and duly carry out the terms and conditions of this Agreement.

[16] Section 9.01 provides for the waiver of certain statutory shareholder rights as follows:

It is the intent of the parties that such provisions of The Business Corporations Act or any successor legislation granting rights to shareholders, which may be in conflict with the provisions of this Agreement, are hereby waived, and the provisions hereof shall govern their dealings among themselves (to the extent allowed by law).

[17] Section 10.01 is an entire agreement clause. It reads:

This Agreement constitutes the entire agreement between the parties with respect to the Corporation and their participation therein, except as herein stated and in the instruments and documents to be executed and delivered pursuant hereto, and contains all the representations, undertakings and agreements of the respective parties. There are no verbal representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

[18] Evelyn Husack’s evidence is that, while the Articles of Amalgamation clearly state that the common shareholders do not have the right to vote at or attend shareholders meetings, she suggested early on in the management of FHH, after Frank's passing, that they all have informal meetings to keep everyone up to date. These meetings were extended as a courtesy only. The meetings took place from 2009 to 2014. Donald and Evelyn would advise the shareholders of the general updates regarding FHH. They would also make their recommendations and ask for input but there were never any formal votes to approve their decisions. The meetings were informally scheduled and took place two times per year. (Donna Husack asserts that these meetings were held quarterly.) Unfortunately, over time, Donna's personal conflicts with her siblings (unrelated to FHH) started to interfere with Evelyn and Donald's ability to govern and control the meetings. Ultimately, Evelyn decided it was no longer advisable to hold the meetings, especially when they were not actually required under the Articles of Amalgamation.

[19] Evelyn Husack’s evidence is that, despite her reaching out, Donna Husack has refused to communicate directly with Evelyn since 2014. Donna admits that Evelyn has reached out to her on certain occasions. However, Donna attests that whenever she has tried to discuss her concerns over issues relating to FHH, her mother has shut down the conversation. (Evelyn denies this.) Donna’s evidence is that when she has tried to speak with Donald Husack about FHH, he has been belligerent and dismissive.

[20] Donna Husack commenced the within application on September 17, 2018. It was subsequently amended twice.

[21] In 2019, Evelyn Husack sought to have the four children mediate the issues between them. The mediation did not occur as Donald Husack decided not to proceed. As a result, Evelyn called a formal meeting of the trustees of Frank Husack’s estate to determine how the trustees wished to proceed with the remaining assets and the operations of FHH. Her evidence is that she called the meeting because she had turned 90 years old and it was clear to her that the children would not agree on how FHH should be run or whether they still wanted to be in business together. The meeting was held on August 28, 2019 (“the 2019 Trustees’ Meeting”).

[22] Prior to the 2019 Trustees’ Meeting, The Effort Trust Company executed and delivered a renunciation as an estate trustee, as of August 26, 2019.

[23] At the 2019 Trustees’ Meeting, a vote was held whereby all of the estate trustees, except Donna Husack, voted in favor of liquidating the assets of FHH and winding up the corporation (“the Trustees’ Resolution”). The decisions made at the meeting were confirmed in minutes.

[24] The signed “Resolution of the Trustees of the Estate of Frank Husack” made at the 2019 Trustees’ Meeting refers to the Unanimous Shareholders Agreement and resolves that:

1. The Estate directs a sale of all assets and a wind-up of Frank Husack Holdings Inc;

2. The Estate directs that:

(a) the PWC valuation from 2017 be relied upon as a starting point and updated for a 2019 valuation of the Assets of the Company. That Donald and/or Evelyn Husack shall provide all necessary information to PWC for the purposes of this report, and that the Corporation pay for the costs of this report;

(b) a third party be appointed within 60 days to market, negotiate and assist in the sale of the assets. Each of the Trustees shall provide their recommendations on the third party within 45 days from today, and the Trustees shall advise in writing and/or by email who they approve within 14 days thereafter;

3. The Trustees resolve and direct that the within Trustees’ Resolution is binding upon their respective heirs, assignees, appointees, estate trustees, agents and/or powers of attorney.

[25] It is Donna Husack’s evidence that she voted against the liquidation/asset sale resolution because she did not believe there was a rational reason why FHH should be wound up. She explained her reasoning as follows:

FHH is profitable as a going concern (although I believe it could be much more profitable with more competent management) and it could continue operating and generating significant passive income indefinitely. The value of FHH has grown steadily since my father's passing and it would continue to grow if the other trustees were not intent on shutting down the business to suit their short-term personal needs instead of protecting FHH's long-term prospects for steady income and growth.

She further stated that she was “very concerned that a liquidation will fetch a low price for FHH’s assets and create a risk of litigation between FHH and the business partners with whom it owns properties”.

[26] At the 2019 Trustees’ Meeting, Donald Husack advised the other shareholders that the property 80 Carling Street, of which FHH owned a partial interest, was for sale. Donna Husack learned around October 2019 that FHH had sold 80 Carling Street, without retaining anyone to manage the liquidation of the corporation.

[27] By letter dated September 24, 2019, counsel for Donna Husack advised the other shareholders that Donna intended to dissent to the liquidation of FHH.

[28] In or about mid-October 2019, after the names of nominees had been submitted, a majority of the estate trustees selected PricewaterhouseCooper LLP (“PWC”) to manage the FHH asset sales.

[29] A shareholders’ meeting was called for December 18, 2019 by teleconference. An agenda was delivered which listed the topics to be discussed as follows:

1. Call to Order and Quorum.

2. Approval of the Joint Directors and Shareholders Resolution for the sale of all assets of Frank Husack Holdings Inc.

3. Presentation of the PWC Asset Valuation Report.

4. Presentation of tax advice for Shareholders of Frank Husack Holdings Inc. by corporation’s solicitor and accountant.

5. Shareholder Donna Husack’s intention to dissent under the Ontario Business Corporation’s Act.

[30] Prior to the meeting, on December 11, 2019, a Draft special resolution of shareholders was circulated by Evelyn Husack’s legal counsel. The resolution contemplated that the shareholders of FHH approve and ratify the sale of all of the assets of FHH in accordance with Section 3.01 of the Unanimous Shareholders Agreement; and included a preamble paragraph that recognized that the common shareholders would be entitled to notice of and vote at any meeting of the shareholders regarding the sale of FHH’s undertaking or a substantial part thereof as provided for under s. 184(3) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“the OBCA”). The Draft resolution also indicated that the estate trustees had directed that PWC is appointed to assist the Estate in the marketing, negotiation and sale of all of the corporation’s assets.

[31] Donna Husack's evidence is that discussion at the meeting was primarily about the tax advice that had not yet been prepared; the shareholders did not talk about dissent rights. The vote on the special resolution was adjourned until January 30, 2020 to allow for the valuation report and tax planning advice to be completed and provided to the shareholders.

[32] The January 30, 2020 meeting never happened though. By January 27th, the shareholders still had not received the PWC valuation report or the tax planning advice that had been discussed and expected. Donald Husack advised Dianne Parr and Doreen Wills’ lawyer that FHH’s solicitor, Thomas Rocchi (“Mr. Rocchi”), and an accountant who was anticipated to provide tax advice, would not be attending the meeting. He indicated that Andrew Jubenville (“Mr. Jubenville”), FHH’s accountant, would give a “safe income” calculation. Counsel for Dianne and Doreen advised by email that they would not participate in the meeting. Although Evelyn Husack’s lawyer offered to adjourn the meeting, Donald told everyone the meeting was cancelled. No further shareholder meeting took place.

[33] In or about January 2020, Evelyn Husack and PWC negotiated a retainer agreement to assist with the sale of the assets of FHH. The draft PWC retainer was prepared by March 2020. While the initial plan was to then commence with the selling of FHH assets, the COVID-19 pandemic began in March 2020 and so Evelyn decided to hold off.

[34] On February 21, 2020, Evelyn Husack's lawyer, Richard MacGregor (“Mr. MacGregor”), sent a letter to Donna Husack’s counsel wherein he stated that no special shareholders meeting would be called at that point. In his letter, Mr. MacGregor stated, in part:

The Unanimous Shareholder’s [sic] Agreement (“USA”) from May, 2010 binds all shareholders to carry out the effect and purpose of the USA, and pursuant to s.3.01 therein the Estate Trustees have bound the shareholders and the corporation. Furthermore, Section 9 therein waives any conflicts found in the OBCA and specifically states that the USA must prevail. As we had been expressing to date it is our view that the estate trustee’s [sic] resolution is binding on the non-voting common shareholders and corporation, and it is not up for reconsideration at this point. Once an offer to purchase has been obtained, a further meeting can be convened if necessary.

[35] By e-mail sent on February 21, 2020, Donald Husack wrote to the other shareholders stating:

Further to Mr MacGregers [sic] letter of today's date. I did inform Mr MacGregor and my mother that I will no longer be taking an active roll [sic] in the Direction of Frank Husack Holdings. I need to spend more time on my own business interests. The new direction of the Frank Husack Holdings advocated by Mr. MacGregor relies more on legality’s [sic] and less on personal relationships and that is not something that I feel I am qualified for.

[36] Donald Husack wrote again to the other shareholders, by email dated May 4, 2020, stating, in part:

… The problem I am having now and the reason for this letter is that because of recent events management can no longer rely on the 2017 and the 2019 appraisals of Frank Husack Holdings. I have serious concerns that conditions of this Resolutions [sic] cannot be met without elevated risk to management. It is my opinion that in light of recent events that the shareholders meet and vote on a new resolution that take into consideration the new business landscape.

Should the Trustee [sic] of Frank Husack Holding not be willing to call another meeting to discuss to [sic] the liquidation of the company's assets please take this letter as my resignation from the positions of Secretary and Treasurer of both Frank Husack Holding and Sunshine Construction Inc. It is my opinion that by continuing on with the Aug. 26/19 Resolution that the company will be exposed to needless risk and may cause years of litigation damaging values and jeopardize the orderly wind up of the company.

Also, if my resignations are accepted, Evelyn Husack is over 90 years old and should not hold all 3 positions, President, Secretary and Treasurer, so the other shareholders will have to take on the responsibility’s [sic] of these positions and be responsible to all of the shareholders and the conduct of the business as is required.

As always and as previously expressed I support a negotiated settlement regarding the dissolution of the company if that is possible.

[37] On or about June 1, 2020, Evelyn Husack signed the retainer with PWC for it to begin assisting with selling the assets. However, by November 2020, Evelyn came to the conclusion that PWC was not effective in finding purchasers. Being unhappy with the lack of progress, on February 17, 2021, she emailed PWC to advise that the retainer was being terminated and to ask for the return of the blue book of all of FHH’s property information. Evelyn Husack’s evidence is that, having a veto of the estate trustees and in her capacity as a director of FHH, she believes she was authorized to make that decision using her best business judgment.

[38] On August 12, 2020, Mr. Rocchi notified the common shareholders that Evelyn Husack had decided to disburse the entirety of the sale proceeds of the 80 Carling Street property as a dividend to the common shareholders (“the Carling Dividend”). Donna Husack attests that the issuing of the Carling Dividend and the inability of the shareholders to arrange for the transfer of their common shares to holding companies resulted in her paying unnecessary taxes on her portion that should have been deferred through the holding company structure that FHH’s solicitor had recommended. It is Donna’s evidence that, to make such a transfer, the Unanimous Shareholders Agreement should be updated to allow for the common shares to be held by holding companies instead of individuals while maintaining the same restrictions on transfers that currently exist in the Unanimous Shareholders Agreement.

[39] On August 20, 2020, counsel for Donna Husack emailed the Respondents’ advisors that Donna intended to set up a holding company for her FHH shares. Her lawyer also requested that the relevant accounting calculations (safe income, refundable tax, etc.) be provided once prepared. Counsel for Dianne Parr and Doreen Wills also indicated that they wanted to transfer their shares to holding companies on a tax deferred basis.

[40] On August 25, 2020, Mr. Rocchi provided the first version of a proposed new draft shareholders agreement to the shareholders.

[41] On September 23, 2020, Mr. Rocchi sent the shareholders an email advising that the Carling Dividend would be paid October 15, 2020. The next day, September 24th, Mr. Jubenville advised the shareholders that, if the Carling Dividend was to be paid from FHH’s capital dividend account, “there would likely be minimal tax benefit to having holding companies in place”.

[42] Despite the parties not having a new shareholders agreement in place, Evelyn Husack had the Carling Dividend issued on October 14, 2020. Donna Husack’s evidence is that Mr. Jubenville’s advice was wrong and, if she had been able to receive the dividend through a holding company, she would have saved approximately $15,000 in income taxes because the dividend was not issued from the capital dividend account but was “issued as a taxable dividend with refundable tax”. Donna Husack seeks to recover that tax loss in this proceeding.

[43] Donna Husack’s evidence is that, following the issuance of the Carling Dividend, the shareholders tried to continue to negotiate a new shareholders agreement – for which Donna proposed a provision expressly setting out dissent rights – but it ultimately stalled. Part of the reason for that is the parties disagreed on whether the common shareholders’ dissent rights should be reflected in the new shareholders agreement. As well, she states that Evelyn Husack and Evelyn’s lawyer were slow to respond with comments on the proposed new agreement. (Evelyn denies this.)

[44] By e-mail dated March 9, 2021, Evelyn Husack’s lawyer emailed the estate trustees-shareholders to advise that Evelyn Husack had terminated the PWC retainer and made contact with a real estate broker, Blair Blanchard Stapleton (“BBS”), to assist with the sale of the properties. He set out the commission to be earned and advised that Evelyn would instruct BBS to begin its efforts with the Fennell Ave. property.

[45] On March 11, 2021, Donna Husack's lawyer, Denise Sayer (“Ms. Sayer”), wrote to the lawyer for Evelyn Husack expressing concern about the termination of PWC and the retaining of BBS instead. She stated that PWC was appointed by a majority vote of the estate trustees and she questioned Evelyn’s authority to terminate PWC and change the retainer unilaterally. Ms. Sayer explained that her client was “concerned that a real estate agent does not have the expertise needed to liquidate a multi-million dollar business in a tax-efficient fashion and sell part interests in the properties that FHH holds as a joint venture partner without causing litigation between FHH and the majority owners”. She requested a copy of the retainer agreements for both PWC and BBS.

[46] Subsequently, through 2021 and 2022, Evelyn Husack and Donald Husack, with the assistance of BBS, proceeded to sell three of the properties. Two of the properties sold for a price above the value appraised by PWC.

[47] The three remaining properties – Convent Glen, Glenmore Landing, and Battleridge – have been and are anticipated to be more involved to sell because FHH has only a partial interest in them and one of the properties is environmentally contaminated. As a result, Evelyn Husack has proposed an alternative plan whereby she would:

a. attempt to sell the 5% shares of Convent Glen and Glenmore Landing to the other owners pursuant to the co-ownership agreements. If they do not wish to purchase them, then she would divide FHH’s shares and transfer them in kind to each of the four children, so that they will each retain a 1.25% interest in those ventures. Since the property is purely passive income, this will permit each child to retain the benefit of that income, but not be tied to one another through FHH (“the Transfer In Kind Plan”);

b. continue to distribute dividends of the cash/investments to each child, and retain a holdback necessary in FHH until Convent Glen and Glenmore Landing are transferred, and until all taxes for the sales of Fennell and Queenston have been paid;

c. attempt to sell Battleridge to the co-owner. If such a sale cannot be completed, to consider a partition/sale application, or allow one or more of the children to purchase FHH’s interest at fair market value; and,

d. wind up the corporation with the assistance of corporate counsel.

ISSUES

[48] The main issues to be determined on this application are:

(a) Do the common shareholders have a right under s. 184(3) of the OBCA to dissent to the sale of FHH’s assets?

(b) Has Donna Husack made out a claim for oppression?

(c) Should a liquidator be appointed to wind-up FHH?

(d) Is Donna Husack entitled to damages for the issuance of the Carling Dividend?

[49] Each of these issues is addressed in turn below.

Without Prejudice Communications

[50] At the hearing, counsel for Dianne Parr and Doreen Wills, Mr. Diacur, raised an issue about the admissibility of certain “without prejudice” emails sent by their former counsel, J. Armstrong Gates, which were included in the Applicant’s record. Mr. Diacur objected to the admission of the emails dated December 13, 2019, December 17, 2019, December 23, 2019 and January 27, 2020, on the ground that privilege had not been waived.

[51] In Slack v. Slack, 2001 CarswellOnt 457 (Ont. S.C.J.), at paras. 55-56, the Court held that simply using the words “without prejudice” does not automatically protect a document from disclosure. Rather, the document must have been written for the purposes of effecting or attempting to effect a settlement. If it was not, then no privilege attaches. The rationale for the without prejudice privilege is to enable parties to freely and openly discuss the potential for a settlement and to be able to do so without the risk that admissions and positions taken will be used against a party at trial.

[52] I find that, while litigation was ongoing at the time the impugned emails were written, they do not disclose any communications made by Ms. Armstrong Gates for the purpose of trying to reach a resolution or settlement. Rather, they are primarily focused on arranging/managing the agendas for upcoming shareholders’ meetings and what the minutes of the December 2019 meeting would contain. Thus, no privilege attaches to the emails and they are admissible.

ANALYSIS

(a) Do the common shareholders have a right under [s. 184(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html) of the [OBCA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html) to dissent to the sale of FHH’s assets?

Position of Donna Husack

[53] It is Donna Husack’s position that clause C(3) of the Articles of Amalgamation expressly recognizes the right of the common shareholders to notice under s. 184(3) of the OBCA and implicitly recognizes their right to vote at a meeting that occurs to consider the sale of all or substantially all of FHH’s assets. She contends that the Unanimous Shareholders Agreement did not waive the rights of dissent as found in sections 184 and 185 of the OBCA.

[54] Subsections 184(3) to (8) of the OBCA provide:

Sale, etc., requires approval of shareholders

184(3) A sale, lease or exchange of all or substantially all the property of a corporation other than in the ordinary course of business of the corporation requires the approval of the shareholders in accordance with subsections (4) to (8).

Notice

(4) The notice of a meeting of shareholders to approve a transaction referred to in subsection (3) shall be sent to all shareholders and shall include or be accompanied by,

(a) a copy or summary of the agreement of sale, lease or exchange; and

(b) a statement that a dissenting shareholder is entitled to be paid the fair value of the shares in accordance with section 185, but failure to make that statement does not invalidate a sale, lease or exchange referred to in subsection (3).

Shareholders may authorize sale, etc.

(5) At the meeting referred to in subsection (4), the shareholders may authorize the sale, lease or exchange and may fix or authorize the directors to fix any of the terms and conditions thereof.

Right to vote separately

(6) If a sale, lease or exchange by a corporation referred to in subsection (3) would affect a particular class or series of shares of the corporation in a manner different from the shares of another class or series of the corporation entitled to vote on the sale, lease or exchange at the meeting referred to in subsection (4), the holders of such first mentioned class or series of shares, whether or not they are otherwise entitled to vote, are entitled to vote separately as a class or series in respect to such sale, lease or exchange.

When approval effective

(7) The approval of a sale, lease or exchange referred to in subsection (3) is effective when the shareholders have approved the sale, lease or exchange by a special resolution of the holders of the shares of each class or series entitled to vote thereon.

Approval by directors

(8) The directors of a corporation may, if authorized by the shareholders approving a proposed sale, lease or exchange, and subject to the rights of third parties, abandon the sale, lease or exchange without further approval of the shareholders.

[55] Section 185 of the OBCA sets out the rights of dissenting shareholders. It reads, in part:

Rights of dissenting shareholders

185(1) Subject to subsection (3) and to sections 186 and 248, if a corporation resolves to,

(e) sell, lease or exchange all or substantially all its property under subsection 184(3),

a holder of shares of any class or series entitled to vote on the resolution may dissent.

Shareholder’s right to be paid fair value

(4) In addition to any other right the shareholder may have, but subject to subsection (30), a shareholder who complies with this section is entitled, when the action approved by the resolution from which the shareholder dissents becomes effective, to be paid by the corporation the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the day before the resolution was adopted.

[56] Donna Husack submits that dissent rights are typically available where there is a fundamental change in the nature of the corporation’s business. In this case, there has been such a change since, pursuant to the Trustees’ Resolution, FHH is going to cease operating completely and, under the Transfer In Kind Plan, Donna could be forced to directly own a 1.25% interest in one or two properties instead of a 25% interest in FHH as a diversified real estate holding company. She argues that the purpose of the OBCA dissent rights is to ensure that a shareholder is not “locked in” when a corporation is taken in a new direction with which the shareholder does not agree, and that this purpose is particularly important in private companies.

[57] It is contended that the dissent rights apply whether one considers the plan from the Trustees’ Resolution or the Transfer In Kind Plan since both are clearly a sale or exchange of all of the corporation's assets under section 184(3) and since the Transfer In Kind Plan will treat the Estate’s voting shares differently from the common shares (because the common shares will receive real property but the voting shares will not). Under s. 184(6), that difference in treatment extends voting rights for approving the Transfer In Kind Plan to include the common shareholders, despite their otherwise non-voting status.

[58] Donna Husack submits that there is no term in the Unanimous Shareholders Agreement expressly opting out of the OBCA dissent regime. Section 3.01 of the Unanimous Shareholders Agreement simply gives the Estate the right to trigger disposition of all FHH assets. She argues that the dissent rights granted by the OBCA cannot be ousted without clear and express language, and that there is no such language in the Unanimous Shareholders Agreement. In support of this, she relies on Armak Chemicals Ltd. v. Canadian National Railway Co., 1991 CarswellOnt 839 (Ont. C.A.), at paras. 47-48; and Bell Canada v. Plan Group Inc., 2012 ONSC 42, at paras. 40-44.

[59] It is submitted by Donna Husack that the Respondents’ interpretation of Section 3.01 of the Unanimous Shareholders Agreement – that is, that it overrides the OBCA's dissent rights – creates an inconsistency with clause 3(C) of the Articles of Amalgamation, and that if her interpretation is accepted, there are no inconsistencies.

Position of the Respondents

[60] The Respondents take the position that, by the Unanimous Shareholders Agreement: Evelyn Husack, was expressly granted the authority under Section 3.01 to sell any and all of the assets of FHH in her sole, exclusive and absolute discretion; the dissent rights conferred to the shareholders under the OBCA have been waived; and all of the shareholders are obligated to fully cooperate and “act as to give full effect to the purpose and intent of” the Unanimous Shareholders Agreement. The Unanimous Shareholders Agreement contains an entire agreement clause and so none of the shareholders are entitled to rely on any other representations, undertakings or agreements of any kind between the parties respecting the corporation’s affairs, including any terms found in the Articles of Amalgamation.

[61] The Respondents contend that the Unanimous Shareholders Agreement is the only document that governs the affairs of FHH and it has express language designed to prevail in the event of any conflicts arising with the OBCA. Prior to signing the Unanimous Shareholders Agreement, Donna Husack had the opportunity to obtain legal advice and she did obtain some informal legal advice. She did not request that the continuation of dissent rights be made a part of the agreement. She only raised an entitlement to dissent rights in September 2019, nine years after the Unanimous Shareholders Agreement was signed.

[62] Evelyn Husack’s evidence is that she has never agreed that Donna Husack has a right to dissent. Evelyn submits that the relief under the OBCA cannot limit, restrain, interfere with, or otherwise affect the veto power granted to her under her late husband’s Will. She asserts that she was granted the authority to make the decisions of the Estate under the Unanimous Shareholders Agreement and this was to prevent deadlock between the four children.

[63] The Respondents further submit that the parties’ discussions about dissent rights, that took place in the context of this litigation, are not admissible to alter the Unanimous Shareholders Agreement, especially since there is no ambiguity in the Unanimous Shareholders Agreement. If subsequent conduct is to be considered, the clearest piece of evidence is Donna Husack's attempt to enshrine dissent rights in a new shareholder agreement as this demonstrates that Donna knew she did not have dissent rights.

[64] In the alternative, the Respondents argue that if the right to dissent was not waived, the right has not been triggered. FHH is essentially a passive real estate holding company with limited day-to-day business. Its purpose is to create wealth to distribute to the Husack family. It is not reasonable that the shareholders would have to hold on to the real estate assets indefinitely and never be able to realize upon the investments. It is reasonable that the shareholders expected that the assets could be sold. By the Unanimous Shareholders Agreement, the shareholders agreed that the assets could be sold in the sole and unfettered discretion of Evelyn Husack (as the Estate). From a qualitative approach, they contend that it cannot be said that the sale of FHH assets is contrary to the corporation’s purpose, especially where FHH holds and continues to hold significant cash and cash-like assets. That is, FHH’s sale of assets is not out of the ordinary course of its business, considering its purpose.

[65] The Respondents submit that, for the same reasons why the dissent rights have been waived, the liquidation provisions of the OBCA have also been waived and do not apply. Alternatively, they argue that FHH has not yet reached the wind-up stage to trigger liquidation. FHH still owns properties and holds significant financial assets. When the wind-up stage is reached, a vote can be held and a liquidator can be appointed pursuant to the voluntary liquidation provisions of the OBCA.

Discussion

[66] I find that the ordinary course of business of FHH is to hold and manage properties, including rental properties, to make a profit for the purpose of supporting Evelyn Husack and of creating an inheritance for the four children. There is no evidence before me that the usual business of FHH is to sell properties.

[67] The Respondents submit that, using the qualitative approach, this court should find that, since FHH is essentially a passive real estate holding company whose shares were intended as the inheritance of the four children, the sale of its assets does not “strike at the heart of” its existence: see Amaranth LLC v. Counsel Corporation, 2007 Can LII 1884 (ON SC), at para. 19. I do not accept the Respondents’ argument in this regard. On a qualitative basis, it is clear that the sale of all of FHH’s properties, even one by one, will result in the termination of the corporate business and that that is the intended outcome. Accordingly, I find that the sale of all or substantially all of FHH’s assets, as resolved in the Trustees’ Resolution, triggers rights under s. 184(3) of the OBCA which apply unless they have been waived. The question to be determined then is whether the shareholders’ dissent rights that flow from s. 184(3) have been waived in the Unanimous Shareholders Agreement.

[68] Section 108 of the OBCA provides for written agreements between shareholders, such as the Unanimous Shareholders Agreement. Section 108 reads, in part:

Agreement between shareholders

108 (1) A written agreement between two or more shareholders may provide that in exercising voting rights the shares held by them shall be voted as therein provided.

Idem

(2) A written agreement among all the shareholders of a corporation or among all the shareholders and one or more persons who are not shareholders may restrict in whole or in part the powers of the directors to manage or supervise the management of the business and affairs of the corporation.

[69] Generally speaking, any person can enter into a binding contract to waive the benefits conferred on him by statute, unless it can be shown that it would be contrary to public policy to allow such an agreement: see Ontario (Human Rights Commission) v. Etobicoke (Borough), 1982 CanLII 15 (SCC), [1982] 1 S.C.R. 202 (S.C.C.), at para. 19.

[70] If parties wish to contract out of a statutory provision, it must be done by clear and direct language: see Syncrude Canada Ltd. v. Hunter Engineering Co., 1989 CanLII 129 (SCC), [1989] 1 S.C.R. 426 (S.C.C.), at para. 37.

[71] In interpreting contracts, effect must be given to the intention of the parties based on the words they have used. If the words have a plain meaning, they should be given that meaning. The Supreme Court of Canada has directed that a contract is to be read “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. … The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement.” Evidence of surrounding circumstances “should consist only of objective evidence of the background facts at the time of the execution of the contract … that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting”: see Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, at paras. 47, 48, 57 and 58.

[72] Here, the Unanimous Shareholders Agreement is not a long or complicated document. The language used in both Sections 3.01 and 9.01 is clear and unambiguous. The shareholders put their minds to granting Evelyn Husack sole discretionary power to sell FHH’s properties. Donna Husack cannot succeed in her argument that she continues to have dissent rights under the OBCA in the face of the Unanimous Shareholders Agreement and, especially, Section 3.01, which addresses the very situation contemplated by s. 184(3).

[73] Subsection 184(3) of the OBCA provides that the sale of all or substantially all the property of a corporation requires the approval of the shareholders in accordance with subsections (4) to (8). That provision directly conflicts with Section 3.01 of the Unanimous Shareholders Agreement, which provides that the only approval required to sell all, or substantially all, of the assets owned by FHH is that of Evelyn Husack, as the Estate. By Section 9.01 of the Unanimous Shareholders Agreement, the shareholders expressly waived any provisions of the OBCA granting rights to shareholders “which may be in conflict with” the provisions of the Unanimous Shareholders Agreement and agreed that the provisions of the Unanimous Shareholders Agreement would govern their dealings amongst themselves.

[74] I find that it was within the reasonable expectation of the parties that the rights under s. 184(3) of the OBCA would not apply to the benefit of the shareholders upon signing the Unanimous Shareholders Agreement. The language of Sections 3.01 and 9.01 is sufficiently clear to oust the dissent rights stemming from s. 184(3).

[75] If Donna Husack’s argument was accepted, then s. 184(7) of the OBCA would apply and the approval of a sale of FHH’s assets would be effective only when all of FHH’s shareholders have approved the sale by a special resolution. This is directly contrary to Section 3.01, which provides that the Estate can decide to sell in its sole discretion, and would render Section 3.01 meaningless.

[76] While I acknowledge that a purpose of section 185 of the OBCA is to ensure that a shareholder is not “locked in” when the corporation takes a new direction with which the shareholder does not agree, it remains that s. 185 can be waived. Counsel for Donna Husack did not place any authority before me that says otherwise.

[77] Section 9.01 specifically refers to the Business Corporations Act and alerts the shareholder that they are giving up a statutory right. I am not persuaded that there is any reason not to give effect to Section 9.01 in the circumstances.

[78] The Supreme Court of Canada held in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, at paras. 122 and 123, that the assessment of an exclusion clause entails the following:

122 The first issue, of course, is whether as a matter of interpretation the exclusion clause even applies to the circumstances established in evidence. This will depend on the Court's assessment of the intention of the parties as expressed in the contract. If the exclusion clause does not apply, there is obviously no need to proceed further with this analysis. If the exclusion clause applies, the second issue is whether the exclusion clause was unconscionable at the time the contract was made, “as might arise from situations of unequal bargaining power between the parties” (Hunter, at p. 462). This second issue has to do with contract formation, not breach.

123 If the exclusion clause is held to be valid and applicable, the Court may undertake a third enquiry, namely whether the Court should nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy, proof of which lies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts. [Emphasis in original.]

[79] There is no evidence before me to establish that Sections 3.01 and 9.01 were unconscionable terms at the time the parties made the Unanimous Shareholders Agreement. FHH is a closely-held, family-run corporation that is intended to be managed and operated in accordance with the last Will of Frank Husack and the veto granted to Evelyn Husack therein. The terms of the Unanimous Shareholders Agreement reflect this intention. There is no basis to suggest that its terms were inherently unfair in the context of this family and its business. Donna Husack has not argued that she did not understand or agree with the Unanimous Shareholders Agreement when she signed it. She had the opportunity to seek legal advice before signing the agreement.

[80] Donna Husack also has not established that there is any overriding public policy reason not to enforce Sections 3.01 or 9.01. And no caselaw was placed before me that holds that a waiver or contracting out of sections 184 or 185 of the OBCA is contrary to public policy.

[81] I am further of the view that Sections 5.01 and 8.01 of the Unanimous Shareholders Agreement support the enforcement of Sections 3.01 and 9.01 in that, by these provisions, Donna Husack and the other shareholders bound themselves to give full effect to the purpose and intent of the Unanimous Shareholders Agreement and to do such acts as may be required to carry out its terms and conditions.

Subsequent Conduct

[82] Donna Husack asks this court to consider the parties’ discussions and willingness to consider her dissent rights as support for the existence of such rights and that, by their conduct, the Respondents should be deemed to have accepted her rights in this regard.

[83] I do not agree. The fact that the parties engaged in talks about Donna Husack having potential dissent rights, even to the point that a draft revised shareholders agreement was circulated that included such rights, is not proof that (i) she has such rights; or (ii) that the Respondents agreed that she has such rights. I am of the view that these discussions were made with an eye towards trying to reach a settlement or resolution of the issues in dispute between the parties. No agreement was reached by the parties that such rights exist.

[84] In any event, the subsequent conduct relied on by Donna Husack is some nine years after the Unanimous Shareholders Agreement was signed. Pursuant to Sattva, conduct of the parties subsequent to the execution of the contract is not part of the factual matrix to be considered when interpreting the contract and determining the parties’ intention as expressed in the contract’s terms.

[85] Moreover, given my finding that Sections 3.01 and 9.01 are not ambiguous, there is no need or room to consider the conduct of the parties subsequent to the signing of the Unanimous Shareholders Agreement: see Dunn v. Chubb Insurance Company of Canada, 2009 ONCA 538, at paras. 33-34; and Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, at paras. 62-65.

Entire Agreement

[86] I find that the Unanimous Shareholders Agreement was entered into subsequent in time to the Articles of Amalgamation, since the new corporation FHH had to be in existence in order for it to be a party to the Unanimous Shareholders Agreement.

[87] Given the entire agreement clause found in Section 10.01 of the Unanimous Shareholders Agreement, Donna Husack cannot rely on clause C(3) of the Articles of Amalgamation for her dissent rights since the Articles do not fall within the Section 10.01 exception of being an instrument or document “to be executed and delivered pursuant hereto” the Unanimous Shareholders Agreement. Accordingly, I find that clause C(3) of the Articles of Amalgamation does not apply to the extent it is in conflict with Section 3.01 of the Unanimous Shareholders Agreement.

Conclusion

[88] For all of these reasons, I conclude that Donna Husack does not have dissent rights under s. 184(3) of the OBCA as it relates to the sale of FHH’s properties at Evelyn Husack’s direction and pursuant to Evelyn’s powers under Section 3.01 of the Unanimous Shareholders Agreement.

[89] I wish to make clear that my conclusion in this regard only applies to the sale of FHH’s assets. That is, to the extent Evelyn Husack and/or the directors wish to embark on a plan to divest FHH’s assets in some manner other than a sale, for instance, by way of the Transfer In Kind Plan, it is my view that Section 3.01 of the Unanimous Shareholders Agreement does not apply. The evidence before me does not establish that a “transfer in kind” transaction was contemplated by the shareholders when entering into the Unanimous Shareholders Agreement. Further, I find that the language of the Unanimous Shareholders Agreement does not provide Evelyn Husack with authority to unilaterally impose or cause such a transfer or exchange onto the common shareholders, without their approval.

(b) Has Donna Husack made out a claim for oppression?

[90] Section 248 of the OBCA provides for an oppression remedy for shareholders whose interests are being unfairly prejudiced. It reads, in part:

248 (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.

(2) Where, upon an application under subsection (1), 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 security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.

Position of Donna Husack

[91] It is submitted that Donna Husack’s interests as a shareholder have been prejudiced by the other shareholders, particularly Donald Husack, in a number of ways, including that:

a. They have violated her expectations regarding the frequency of shareholder meetings and the receipt of information, updates and notifications to shareholders, including professional and legal advice;

b. They have contemplated and discussed changes to the Unanimous Shareholders Agreement, including advice received in August 2014 from Ira Greenspoon (“Mr. Greenspoon”), a lawyer recommended by Doreen Wills, all without Donna’s knowledge or involvement;

c. They have continued to meet without her and that she is the only shareholder who is excluded from governance discussions;

d. They have ignored all of the OBCA requirements relating to liquidating a company, such as holding a special shareholder meeting, recognizing her dissent rights, appointing a liquidator, and holding meetings to give the shareholders progress reports;

e. They have misled her to believe that the liquidation was not moving forward and, in the meantime, sold the company's largest assets behind her back;

f. Evelyn Husack improperly issued the Carling Dividend;

g. Evelyn Husack unilaterally terminated PWC and appointed BBS to fulfill the role of liquidator;

h. They have not given her complete notice or full information about the sales of FHH properties; and,

i. the company and its directors are either unwilling or unable to establish a functional process for a shareholder vote and management of an asset sale, liquidation, or buyout.

[92] Donna Husack seeks a declaration that the Respondents have carried on or conducted the business and affairs of FHH in a manner that is oppressive to her interests as a shareholder. She also seeks a declaration that Evelyn Husack and Donald Husack have exercised their powers as directors in a manner that is oppressive to her.

[93] Because of the parties’ past practice of holding shareholder meetings to discuss important business decisions, Donna Husack submits that she had a reasonable expectation that a decision to sell FHH assets would be made collaboratively in order to avoid an improvident sale of any major assets. She argues that, because of the lack of transparency and corporate governance, it is not possible for her to know whether FHH’s assets are being sold at an appropriate price and she has no means of assessing whether the PWC valuation reports are accurate.

Position of the Respondents

[94] Evelyn Husack and Donald Husack dispute that Donna Husack’s interests have been affected in a manner that triggers the OBCA’s oppression remedies. They submit that Donna Husack has been sent all of the financial statements she has requested over the years, and that Donna has been provided with the same general information and documents provided to Dianne Parr and Doreen Wills, if not more because of her information requests. Donna has never been excluded from meetings that have taken place. Evelyn Husack denies that there have been any decisions made by her or Donald that required a “special resolution” as contended by Donna.

[95] Evelyn Husack and Donald Husack submit that FHH’s assets have increased substantially in value over the years since Frank Husack's passing and have generated significant gains. The profits are typically reinvested into the corporation. There have only been a few dividend payments and they were made to all of the children in a fair manner and the dividends were not made for any improper purpose.

[96] With respect to Mr. Greenspoon, it is submitted that a shareholders’ meeting was held on April 11, 2014, wherein Doreen Wills was asked by all of the shareholders, including Donna, to obtain a second opinion on the proposed new shareholders agreement. Doreen retained Mr. Greenspoon who then attended a meeting of the shareholders in August 2014 to give his opinion. Donna was invited to that meeting but was unable to attend. Mr. Greenspoon was paid $1,050.23 for his services. That was the extent of Mr. Greenspoon’s involvement with FHH.

[97] Evelyn Husack submits that Donna Husack had appropriate notice that Evelyn and Donald would be attempting to sell all of the assets of the corporation, as Donna was at the 2019 Trustees’ Meeting. After the passing of the Trustees’ Resolution, they obtained a valuation report of the real estate assets of FHH which was completed by PWC on or about January 30, 2020, as at the valuation date of November 15, 2019. That report was distributed to everyone. The directors further requested PWC to value the shares of the corporation as a whole which valuation was completed on or about February 3, 2020, and a copy was provided to Donna and the other shareholders in February 2020.

[98] Evelyn Husack asserts that she was not required to call a shareholders’ vote to terminate PWC and retain BBS. She was acting pursuant to the Trustees’ Resolution which requires her to sell the assets and carry out the wind-up of FHH; and she has the power to do so by virtue of the veto she holds under Frank Husack’s Will to control the FHH voting shares.

[99] Donald Husack’s evidence is that, while he had a difference of opinion from Evelyn Husack in early 2020 about continuing with the liquidation, he never formally resigned as a director and officer of FHH. In the end, Evelyn agreed to wait for the end of the pandemic to continue the liquidation process, at which time FHH had had two years of decent profits, FHH’s properties were fully leased and rent was consistent. He states that the disagreement between him and Evelyn Husack has since been resolved and they are both in favour of liquidation, as are Dianne Parr and Doreen Wills, since it is clear that the family can no longer engage in business together.

[100] Donald Husack states that when he makes an announcement to the other shareholders, he intends for them to rely on what he says even if he has not signed every bit of paperwork that would relate to it. He has acknowledged that the directors did not ever prepare a business plan, explaining that “the company was very simple” and that it prepared a year-end statement but that statement did not contain management discussion and analysis.

[101] It is submitted on behalf of Dianne Parr and Doreen Wills that they have never been officers or directors of FHH, have never had de facto control of the company and do not have control over any corporate information. As such, they cannot be found to have acted oppressively toward Donna Husack’s shareholder interests. They deny that they have ever managed the Queenston property.

[102] Dianne Parr and Doreen Wills also argue that the limitation period had expired on many of the oppression claims advanced by Donna Husack, before the Application was issued or amended. They submit that many of the acts identified by Donna as being oppressive are separate acts that occurred at different times and were known to her more than two years before the issuance of the within Application. They rely on Zhao v. Li, 2020 ONCA 121, at paras. 29-32, wherein the Ontario Court of Appeal held that claims arising from singular discrete acts of oppression (in a series of such acts) that are discoverable more than two years before an action are barred by s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

Discussion

[103] In BCE Inc., Re, 2008 SCC 69, at paras. 68, 70 and 89, the Supreme Court of Canada set out a two-part test to establish a claim for oppression: (i) Does the evidence support the reasonable expectation asserted by the claimant? and (ii) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest?

[104] The source of oppression must be from within the corporation. While the source can be another shareholder, that shareholder must effectively control corporate decision-making: see Stern v. Imasco Ltd., 1999 CanLII 14934 (ON SC), at para. 98.

Dianne Parr and Doreen Wills

[105] With respect to Dianne Parr and Doreen Wills, specifically, I find that they had, and have, no control over the management or administration of FHH or information in the possession of the corporation. They are not directors or officers. They also did not control Donna Husack's access to information regarding the corporation or its assets. Further, contrary to Donna Husack’s stated concerns, the evidence does not establish that they were secretly managing the Queenston property for FHH. Accordingly, I decline to make any finding of oppressive conduct as against them.

Reasonable Expectations

[106] I find that Donna Husack has not established that she has a reasonable expectation, as a common shareholder of FHH, to participate in quarterly meetings, to receive ongoing notice and fulsome information about or belonging to FHH, or to provide input into decisions about the management of the corporation or the sale of its assets.

[107] The evidence is that early on, following Frank Husack’s passing, Evelyn Husack wanted to hold regular meetings to keep the four children informed and to solicit their opinions. By Fall 2014, however, the ability of the parties to hold productive and effective meetings had deteriorated because of Donna’s strained, and at times estranged, relationship with other family members and so these meetings stopped.

[108] FHH is a small, family-run corporation, in respect of which Evelyn Husack, in particular, has been given broad unilateral powers to make certain decisions by virtue of the Unanimous Shareholders Agreement. As with many such corporations, the governance of FHH is relatively informal. It is controlled by two directors who have the power to direct and manage the affairs of the corporation without input from the common shareholders. The intention of the Articles of Amalgamation and the Unanimous Shareholders Agreement are both to limit and/or restrict the involvement and rights of the common shareholders. The Supreme Court of Canada has held that “shareholder agreements may be viewed as reflecting the reasonable expectations of the parties”: see BCE Inc., Re, at para. 79.

[109] Donna Husack also has not established that there is a general right of common shareholders to receive notice or copies of the information and/or advice received by the corporation and its directors from the corporation’s financial and legal advisors.

[110] It may very well be that Donna Husack, as an estate trustee of Frank Husack’s estate, is entitled to more information than she has been receiving. But, as a common shareholder of FHH, I am not persuaded that she has proven a reasonable expectation to more information than she has received.

[111] I conclude that the evidence before me does not support the reasonable expectations asserted by Donna Husack.

No Prejudicial Consequences

[112] Even if I am wrong in this regard, I find that Donna Husack has not met the second element of an action for oppression since she has not shown that the failure to meet her expectations involved unfair conduct and prejudicial consequences.

[113] For relief to be available to Donna Husack under the oppression provisions, she must establish conduct that was unfairly prejudicial to, or that unfairly disregarded, her interests: see Brant Investments Ltd. v. KeepRite Inc., (1987), 1987 CanLII 4366 (ON SC), 60 O.R. (2d) 737 (Ont. H.C.), at paras. 108-109; aff’d (1991) 2 O.R. (3d) 289 (Ont. C.A.).

[114] In considering the meaning of “unfairly prejudicial”, the court in Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1976 CanLII 238 (BC SC), 1 B.C.L.R. 36 (B.C.S.C.), at paras. 37-39, held:

37 There has been no interpretation, in this context, of the words "unfairly prejudicial". Turning to the dictionaries for assistance, I find the following definitions in the Shorter Oxford English Dictionary, 3rd ed.:

Prejudice ... I. Injury, detriment, or damage, caused to a person by judgment or action in which his rights are disregarded; hence, injury to a person or thing likely to be the consequence of some action ...

Prejudicial ... I. Causing prejudice; detrimental, damaging (to rights, interests, etc.) ...

Unfair ... Not fair or equitable; unjust ... Hence, unfairly.

38 It is significant that the dictionary definitions support the instinctive reactions that what is unjust and inequitable is obviously also unfairly prejudicial.

39 In considering the whole effect which should be given to the expression "unfairly prejudicial" in the light of these definitions, and of the rule summarized above, I agree that it must be borne in mind that the consequences in question must flow to the applicant as a member, and not as a director or employee. Prejudicial, according to the dictionary, means detrimental or damaging to his rights, interests, etc. The question then is: does the applicant have some rights or interests as a shareholder in respect of which he has been unfairly prejudiced?

[115] Diligenti has been followed by courts in Ontario: see, for example, Stapleton v. Fleming Feed Mill Ltd., 2001 CarswellOnt 3752, (2001) 2001 CanLII 28389 (ON SC), 18 B.L.R. (3d) 280 (Ont. S.C.J.); and Sexsmith v. Intek Inc., 1993 CarswellOnt 4049, [1993] O.J. No. 711 (Ont.Ct.(Gen.Div.)).

[116] Thus, for Donna Husack to be successful in her oppression claim, she must show that FHH has engaged in conduct that has resulted in injury, detriment or damage to her shareholder interests.

[117] Based on the record before me, I do not find that Evelyn Husack and/or Donald Husack have acted or made decisions, to date, that have been unfairly prejudicial to Donna Husack’s interests as a shareholder.

[118] The evidence does not establish that there was a course or pattern of secret meetings of shareholders held to the exclusion of Donna Husack. All of the common shareholders have the same limitations attached to their shares and have been treated in generally the same manner. Dianne Parr and Doreen Wills have also complained about a lack of information. And while it may be that, over the years, Dianne or Doreen has received some informal updates from their mother, Evelyn Husack, or from Donald Husack that Donna did not, in my view, that was not the result of any deliberate intention on the part of the Respondents but simply a function of the family dynamics at particular times, since at least 2014.

[119] A number of emails sent by Donald Husack, as found in the record, indicate that he was looking for a resolution whereby all shareholders would benefit equally whether someone was bought out or whether the assets were liquidated; and that he was “committed to getting maximum value from the portfolio and distribute it according to the wishes set up in the Will”. Evelyn Husack’s evidence indicates that she wants to ensure all of the children are treated in a like manner and fairly.

[120] With respect to the shareholders’ meeting with Mr. Greenspoon, the evidence shows that Donna Husack was aware of the meeting but was unable to attend. Since no new shareholders agreement based on Mr. Greenspoon’s advice was ever finalized, this meeting was inconsequential to Donna’s shareholder interests.

[121] I acknowledge Donna Husack’s concern about Donald Husack emailing Mr. Rocchi, on September 30, 2014, about changes he wanted made to the shareholders agreement in accordance with suggestions received from Mr. Greenspoon. However, the emails in the record indicate that shortly thereafter, also on September 30, 2014, he emailed the other shareholders forwarding his comments. That same day, Donna Husack then emailed the Respondents, including Mr. Rocchi, asking questions about the proposed changes. Mr. Rocchi responded to everyone and set out his concerns with the proposal. Comments were then exchanged between the parties and Mr. Rocchi was asked to draft what he thought should be changed with the shareholders agreement to address a buy-out formula should it be needed after Evelyn Husack’s passing. Donna Husack was included in these communications, along with other shareholders.

[122] While the PWC valuation reports were not received when expected, there is no evidence that it was due to any conduct by Evelyn Husack or Donald Husack.

[123] With respect to the payment of dividends, clause C(1) of the Articles of Amalgamation provides that it is for the board of directors alone to declare, out of the assets of FHH, the payment of dividends in such amount and payable at such times as the board determines. The evidence shows that five dividend payments were made from 2017 to 2022, with the first one being to all shareholders and the remaining four being made to the four children, with Donna receiving the same amount as Dianne and Doreen, which was nominally greater than the amount paid to Donald. There was no evidence that the dividend payments negatively impacted FHH or its liquidity. I was not made aware of any shareholder right that requires a corporation to structure its dividend payments so as to reduce the tax consequences to its shareholders.

[124] Donna Husack has not established that she has suffered any detriment as a result of the directors’ management of FHH. She has not filed any expert opinion evidence that suggests the FHH directors have acted improperly or negligently or that the company’s financial assets have not been properly managed. Nor is there any evidence of the directors personally benefiting by any of their actions or seeking to take advantage for personal gain or profit.

[125] With respect to the three properties that were sold by FHH, reasonable steps were taken to conduct the sales, including the retaining of a third party to assist with the sales. Pursuant to the Unanimous Shareholders Agreement, it was within Evelyn Husack’s sole discretion to decide the sale price and she was not required to seek any further approval from the other trustees-shareholders. The evidence before me shows that the Fennell and Queenston properties were sold for an amount above their appraised value, which appraisals were obtained from PWC. Donna Husack did not file any valuation report of her own nor any appraisals of the assets of FHH that suggest the properties were sold for under fair market value. In my view, the sales were not unfair to Donna Husack as a shareholder and did not result in her being treated in a prejudicial manner.

[126] While Donna, Dianne and Doreen all claim that more information would have assisted them in being kept informed as to what was happening, there is no evidence of an injustice done to them as shareholders as a result of the lack of information shared. The common shareholders had no right of notice of a sale, nor a right of dissent. It is clear that there was nothing for the common shareholders to do in terms of the asset sales, and that the sales would have occurred in any event. Therefore, failing to give over more information to them did not result in the unfair disregard of their shareholder interests.

[127] Finally, there is no allegation made by Donna Husack, and no evidence to establish, that she was owed a fiduciary duty by Evelyn Husack or Donald Husack, or that either of them had undertaken to protect her interests in some special way.

Conclusion

[128] For all of these reasons, I conclude that there has not been oppressive conduct on the part of the Respondents within the meaning of s. 248 of the OBCA. Donna Husack’s claims in this regard are dismissed.

(c) Should a liquidator be appointed to wind-up FHH?

Position of Donna Husack

[129] Donna Husack's evidence is that, while her preference remains that FHH should not be wound up at all, if the liquidation is to continue, she requests that the court appoint a liquidator or direct FHH to comply with the voluntary wind-up provisions found in sections 193 to 205 of the OBCA.

Position of the Respondents

[130] The Respondents’ position is that the court should dismiss the application and order that Evelyn Husack is within her rights to continue with the sale/distribution of the remaining assets of FHH and the ultimate wind-up of the corporation, pursuant to the Trustees’ Resolution. They oppose the appointment of a liquidator and submit that one can be voluntarily appointed should the directors decide that they would like the assistance of one.

[131] Evelyn Husack submits that an independent liquidator is not needed at this point in time. The properties currently remaining to be sold are co-owned assets, and simply require soliciting third party offers, and involve rights of first refusal to the other owners. Alternatively, FHH can transfer, in kind, and sever its interest to each child, who would get a 1.25% interest. FHH already has a corporate solicitor and accountant who can advise the directors on tax liabilities, and what is owed to the Spousal Trust.

Discussion

[132] With respect to Donna Husack’s request to be appointed as a director of FHH while she remains a shareholder, I find that she has not met the very high onus required to remove either Evelyn Husack or Donald Husack, or have herself appointed, as a director of FHH. As the Ontario Court of Appeal stated in Stelco Inc., Re, 2005 CanLII 8671 (ONCA), 75 O.R. (3d) 5, at para. 55, citing with approval C. Campbell J. in Catalyst Fund General Partner I Inc. v. Hollinger Inc., 2004 CanLII 40665 (ON SC), 2004 CarswellOnt 4772, 1 B.L.R. (4th) 186 (para. 68):

Director removal is an extraordinary remedy and certainly should be imposed most sparingly. As a starting point, I accept the basic proposition set out in Peterson, “Shareholder Remedies in Canada”:

SS. 18.172 Removing and appointing directors to the board is an extreme form of judicial intervention. The board of directors is elected by the shareholders, vested with the power to manage the corporation, and appoints the officers of the company who undertake to conduct the day-to-day affairs of the corporation. [Footnote omitted.] It is clear that the board of directors has control over policymaking and management of the corporation. By tampering with a board, a court directly affects the management of the corporation. If a reasonable balance between protection of corporate stakeholders and the freedom of management to conduct the affairs of the business in an efficient manner is desired, altering the board of directors should be a measure of last resort. The order could be suitable where the continuing presence of the incumbent directors is harmful to both the company and the interests of corporate stakeholders, and where the appointment of a new director or directors would remedy the oppressive conduct without a receiver or receiver-manager. [Emphasis in Stelco Inc., Re.]

[133] I accept Donald Husack’s submission that he remains a director of FHH since he has never formally resigned from that position. Subsection 121(2) of the OBCA provides that a director’s resignation becomes effective “at the time a written resignation is received by the corporation or at the time specified in the resignation, whichever is later”. In my view, Donald’s email sent to the other shareholders on May 4, 2020, was an expression of his frustrations at that particular time and not a formal resignation letter; and there is no evidence showing that FHH or any of the other shareholders accepted his supposed resignation.

[134] I have not found oppressive conduct on the part of the directors of FHH. I also do not find that the presence of Evelyn Husack or Donald Husack has been harmful to FHH or the shareholders’ interests, to date. Having said that, the evidence establishes that Evelyn Husack has never before been involved in a corporate liquidation like what is required to wind-up FHH. She also admitted that she did not get tax advice before the corporation started the liquidation, and that she has not received advice on the tax implications for FHH if it sells its shares in the remaining properties to the co-owners or for FHH and the shareholders if shares are divided up to each of the four children or properties are transferred to them “in kind”. On cross-examination, Evelyn stated that the directors considered that Mr. Jubenville is an accountant and could provide all the advice needed so she did not think that a legal opinion with respect to tax consequences was necessary. However, Evelyn admitted that having an independent manager would reduce the pressures and stress for her. The only reason she gave for not retaining an independent manager was because “it’ll cost money and why should we spend it. There’s only three properties left”. The record also shows that, in past communications, Donald Husack has stated his own concerns about potential liability on the directors and impact on shareholders, and expressed that in some aspects he does not feel qualified to complete the wind-up of FHH.

[135] I find that neither Evelyn Husack nor Donald Husack has the necessary skillset or experience to wind-up FHH on their own. Further, no evidence has been placed before me to establish that FHH’s solicitor and accountant have all of the expertise between them needed to responsibly wind-up the corporation. The minutes of the 2019 Trustees’ Meeting show that the shareholders were concerned about tax implications and felt that a specialist was needed to provide advice on the proposed options for winding-up FHH. Evelyn Husack agreed that the tax implications of the liquidation were “probably” part of the reason why the trustees voted to have a third party involved in the liquidation. Mr. Rocchi had previously advised the FHH directors that tax advice was needed “now” with respect to the proposed liquidation plans. Evelyn Husack and Donald Husack have not provided any rational explanation for why they have not sought out and obtained such tax advice. Their reluctance to engage appropriate professionals – especially in the face of Mr. Rocchi’s comments that advice is warranted – is concerning.

[136] In all of the circumstances, I am satisfied that an outside professional, who is not solely a real estate professional, is needed to properly conduct the wind-up of FHH. The properties that remain are co-owned with others and one property is contaminated. As a result, unless the properties are purchased by a co-owner, the sale of such properties is not likely to be a straight-forward transaction. As well, there will be tax consequences to both FHH and the shareholders for which advice should be obtained so that informed decisions can be made.

[137] In my view, the Trustees’ Resolution effectively directs a “voluntary winding up” of FHH and it reflects the concerns of the estate trustees that professional assistance is required to complete the liquidation. (Contrary to Donna Husack’s assertions though, I do not agree that the Trustees’ Resolution required or directed the appointment of a liquidator in the sense of removing Evelyn’s oversight and powers. Rather, it directed that a third party be retained to assist in selling the assets of FHH. As the directors of FHH, Evelyn Husack and Donald Husack continued to be able to exercise all of their powers as directors.)

[138] Given the dual nature of the parties’ roles as both the estate trustees of Frank Husack’s estate and the shareholders of FHH, I agree with the Respondents’ position that a special resolution of the shareholders to wind-up the corporation is a mere formality since it is a “foregone conclusion” that the shareholders will vote to sell the assets of the corporation in the same manner as they did on the Trustees’ Resolution. In these circumstances, I conclude that the Trustees’ Resolution is binding on the directors and shareholders of FHH as they are required to take all reasonable steps to pursue the intent of that resolution. Since the shareholders are bound to vote to wind-up FHH, this means that s. 193 of the OBCA is engaged. Section 193 provides, in part:

Voluntary winding up

193(1) The shareholders of a corporation may, by special resolution, require the corporation to be wound up voluntarily.

Appointment of liquidator

(2) At such meeting, the shareholders shall appoint one or more persons, who may be directors, officers or employees of the corporation, as liquidator of the estate and effects of the corporation for the purpose of winding up its business and affairs and distributing its property, and may at that or any subsequent meeting fix the liquidator’s remuneration and the costs, charges and expenses of the winding up.

[139] I do not accept the Respondents’ submission that the liquidation, or winding-up, provisions of the OBCA have also been waived by the Unanimous Shareholders Agreement. There is no specific reference in the Unanimous Shareholders Agreement to a liquidation or wind-up of the corporation. Rather, in my view, the provisions of the Unanimous Shareholders Agreement focus on the sale/purchase and transfer of shares and assets in a manner that reflects the corporation as a going concern. And while Section 3.01 does provide for the possible sale of all of the corporation’s assets, it does not address the disposition of all of the shares of the shareholders. A winding-up of a corporation involves more than just the sale of its assets.

[140] Given the Trustees’ Resolution, therefore, the shareholders must pass a special resolution authorizing the winding up of FHH, in accordance with s. 193(1) of the OBCA. Then, by virtue of s. 193(2), a liquidator is required to be appointed by the shareholders. I direct that neither Evelyn Husack nor Donald Husack shall be appointed as the liquidator, however, since they lack the necessary experience and skillset to deal with the potential financial, tax and legal implications and consequences that FHH and its shareholders may face in liquidating the corporation. Section 193(4) then requires notice of the special resolution to be filed.

(d) Is Donna Husack entitled to damages for the issuance of the Carling Dividend?

[141] I earlier found that the dividend payments made to the shareholders were lawfully determined and authorized by the board of directors within its authority under clause C(1) of the Articles of Amalgamation.

[142] Donna Husack has not established any right of a shareholder to be able to engage in tax planning prior to the issuance of a dividend, and to require the corporation to abide by that tax planning, that has been breached.

[143] Accordingly, I decline to grant any damages to Donna Husack for compensation of $15,000.00 for the issuance of dividends to her by FHH.

DISPOSITION

[144] In the result, I conclude that the following orders and directions are appropriate:

a. The application for an oppression remedy and for damages is hereby dismissed.

b. The parties are directed to comply with sections 193 to 205 of the OBCA that apply to corporations being wound up voluntarily.

c. As it relates to s. 193(2) of the OBCA, within 30 days of the release of this decision to the parties, the shareholders shall appoint an independent liquidator for the purpose of winding up FHH’s business and affairs and distributing its property, but neither Evelyn Husack nor Donald Husack shall be appointed as the liquidator(s).

d. All parties and their agents shall fully cooperate with the liquidator, including by providing all relevant documents as determined by the liquidator. None of them will act or omit to act in any way that affects the integrity of the sale process(es) or the wind-up of FHH.

COSTS

[145] In my view, success was divided between the parties. I find that it is fair and reasonable in the circumstances that each of the parties bear their own costs.

MacNEIL, J.

Released: February 8, 2023