Court File and Parties

COURT FILE NO.: CV-22-00681332 DATE: 20241031 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Anthony Mellace, Giancarlo Mellace, Domenico Mellace Applicants – and – Ida Dana Mellace aka Dana Mellace and 1225056 Ontario Inc. Respondents

Counsel: Enzo Di Iorio and Gleb Matushansky, for the Applicants Maria Grubisic, Amrita Mann, and Pathik Baxi, for the Respondents

HEARD: June 5 and 12, 2024

Justice J. S. Shin Doi

I. Introduction

1This is a dispute about a family company (the “Corporation”) that holds and leases real estate. The Applicants are the father and sons of a family and the Respondents are the mother and the Corporation.

2The Applicants seek partial determination of the issues in their Application, in particular, validation of a meeting of the shareholders of the Corporation held on June 28, 2022, and a declaration that the sons, Anthony Mellace (“Anthony”) and Giancarlo Mellace (“Giancarlo”) are the beneficial owners of the property municipally known as 149 Cunningham Drive, Alliston, Ontario (the “Alliston Property”). The Respondents bring a cross-application, arguing that Anthony and Giancarlo are not shareholders.

3I find that Anthony and Giancarlo are shareholders of the Corporation. I find that the meeting of the shareholders of the Corporation held on June 28, 2022, was valid and binding. I declare that Anthony and Giancarlo are the beneficial owners of the Alliston Property.

II. Facts

4Mr. Domenic Mellace and Mrs. Dana Mellace won the lottery and used their winnings to start a business.

5Mr. Mellace incorporated the Corporation pursuant to the Business Corporations Act, R.S.O. 1990, c. B. 16 by Certificate and Articles of Incorporation dated February 26, 1997. The Corporation was authorized to issue an unlimited number of shares of one class to be designated as common shares. The first officer, director, and shareholder of the Corporation was Mr. Mellace. One thousand common shares were issued to Mr. Mellace on February 26, 1997.

6There are two different versions of the Minute Book of the Corporation. The Applicants and the Respondents produced excerpts from the Minute Book. Mrs. Mellace produced a Shareholder’s Ledger that states that on February 1, 2000, the Corporation issued 200 class B shares to each of Anthony and Giancarlo, and 1800 common shares to Mrs. Mellace. The Shareholder’s Ledger also states that on February 26, 1997, the Corporation issued 1800 common shares to Mr. Mellace.

7The Applicants, on the other hand, produced a Shareholders’ Register which they state was found in a Minute Book hidden under the master bed in Mrs. Mellace’s home and photographed by Anthony on July 7, 2021. The Shareholders’ Register that states that on February 1, 2000, 1000 common shares were issued to each of Anthony, Giancarlo, and Mrs. Mellace. In the year 2000, Anthony was 4 years old, and Giancarlo was 8 years old. (Anthony was born on March 24, 1996, and Giancarlo was born on April 22, 1992.)

8It is written in pencil in the Shareholders’ Register that the Corporation issued Mr. Mellace 1001 common shares, Mrs. Mellace 1001 common shares, Anthony 999 common shares, and Giancarlo 999 common shares. The Applicants dispute that the January 7, 2009 issuance occurred and allege that Mrs. Mellace intentionally manipulated certain documents.

9On May 1, 2007, the shareholders appointed and elected Mr. Mellace as President and Ms. Mellace as Secretary-Treasurer of the Corporation to hold office until their successors are elected and appointed. The resolution of the shareholders was signed by Mr. Mellace for himself and each of his sons, Anthony, and Giancarlo, and Mrs. Mellace.

10On September 9, 2011, Mr. Mellace resigned as President and Director of the Corporation. The resignation was accepted by the shareholders, and Mr. Mellace signed the acceptance on behalf of himself, Anthony, and Giancarlo. Mrs. Mellace also signed as a shareholder. The signature lines state, “Domenic Mellace in trust for Giancarlo Mellace” and “Domenic Mellace in trust for Anthony Mellace”.

11The resignation of Mr. Mellace as President was also accepted by Mrs. Mellace in her capacity as the sole director, and she was appointed President of the Corporation. Since September 9, 2011, Mrs. Mellace has been the sole director and officer of the Corporation.

12For the tax year ending January 31, 2020, the Corporation filed Shareholder Information indicating that Mr. Mellace and Mrs. Mellace each owned 50% of the issued and outstanding common shares.

13On July 15, 2021, Mr. Mellace and Mrs. Mellace separated. Mrs. Mellace remained in the matrimonial home where the Corporation’s minute book was stored.

14On May 2, 2022, Anthony and Giancarlo requisitioned a special meeting of the shareholders to remove Mrs. Mellace as a director of the Corporation and elect Anthony as a director. On June 13, 2022, Mr. Mellace, Anthony, and Giancarlo gave notice of the special meeting of the shareholders to be held on June 28, 2022.

15On June 27, 2022, Mrs. Mellace’s counsel objected to the meeting given the dispute as to whether Anthony and Giancarlo were shareholders.

16The meeting proceeded as recorded by the Meeting Minutes of June 28, 2022. Mr. Mellace, Anthony, and Giancarlo attended the meeting and removed Mrs. Mellace as a director and appointed Anthony as the sole director. Then, by resolution of the sole director, Anthony removed Mrs. Mellace as President, Secretary and Treasurer, and appointed himself as President, and Giancarlo as Secretary and Treasurer.

17The Corporation’s assets include five leased properties in Alliston and Angus, Ontario. The Corporation carries on the business of purchasing, renovating, leasing, and selling properties.

III. Analysis

Are Anthony and Giancarlo shareholders of the Corporation?

18Anthony and Giancarlo are shareholders of the Corporation as evidenced by the share certificates, resolutions, and banking documents.

19There is a share certificate dated February 1, 2000, in the Minute Book of the Corporation certifying that Anthony is the registered holder of 1000 common shares. There is also a share certificate dated February 1, 2000, certifying that Giancarlo is the registered holder of 1000 common shares.

20The resolutions of the shareholders dated May 1, 2007, and September 9, 2011 include signature lines for each of Giancarlo and Anthony indicating that they are shareholders of the Corporation. Given that they were children at the time, Mr. Mellace signed the resolutions on their behalf.

21Anthony and Giancarlo applied for a CIBC mortgage against the New Tecumseth property in April 2021. The CIBC Business Information Record (for Non-Personal Mortgages) issued on April 6, 14, 2021 lists Anthony, Giancarlo, Mr. Mellace, and Mrs. Mellace as owners of the business, having 25% equity ownership.

22Mrs. Mellace argues that there are only two shareholders, the parents, who each hold 50% equity interest. Mrs. Mellace further argues that she never saw the share certificates. Mrs. Mellace questions the authenticity of the corporate resolutions. She explains that she only heard about shareholdings after her separation from Mr. Mellace. I find that this is not credible given the excerpts of the Minute Book produced by Anthony and Giancarlo which Anthony swears were found hidden under the master bed in Mrs. Mellace’s room and photographed by him. Anthony states that Mrs. Mellace had locked out Mr. Mellace from his office in the matrimonial home where the corporate documents were kept, and that Mrs. Mellace was known to hide documents throughout the matrimonial home.

23It is problematic that the 2018 tax returns of Anthony and Giancarlo do not indicate shareholdings and dividends received from the Corporation. Also, the January 31, 2020 and January 31, 2021 Canada Revenue Agency, Shareholder Information indicates Mr. Mellace and Mrs. Mellace are the only shareholders, each holding 50% of the commonshares. However, it is plausible that Mr. Mellace or Mrs. Mellace prepared the tax returns and filings with the Corporation’s accountant without the involvement of Anthony and Giancarlo.

24The Respondents’ argument that Anthony and Giancarlo are Class “B” shareholders without voting rights is weak. In the Articles of Incorporation for the Corporation, there is only one class of shares, common shares. There is no designation of Class “B” shares authorized to be issued by the Corporation. The Respondents state that they relied on the Shareholders Register but they concede that the transaction to issue Class “B” shares was never implemented or authorized and there was no amendment to the Articles of Incorporation to create that class. This suggests that the excerpts of the Minute Book produced by the Respondents is inaccurate.

25Based on the evidentiary record, I find on the balance of probabilities that Anthony and Giancarlo are shareholders of the Corporation, each holding 1000 common shares.

Is the Shareholders’ Meeting which was held on June 28, 2022, valid and binding?

26The Shareholders’ Meeting held on June 28, 2022, is valid and binding.

27Subsection 105(1) of the Business Corporations Act allows shareholders to requisition the directors to call a meeting of shareholders. Subsection 105(3) provides that the directors shall call a meeting to transact business stated in the requisition. Subsection 105(4) provides that if the directors do not within twenty-one days after receiving the requisition call a meeting, any shareholder who signs the requisition may call the meeting.

28By-law No. 1 relating generally to the conduct of the business and affairs of the Corporation does not set out the process for calling meetings of the shareholders other than an annual meeting. By-law No. 1 only sets out the method of notice and location of the meeting. Section 4.02 provides that meetings of the shareholders shall be held at the registered office of the Corporation or at such other place within or outside of Ontario as the Board may determine. Section 5.01 permits notice by pre-paid mail.

29Pursuant to the Business Corporations Act, Mr. Mellace, Anthony, and Giancarlo served a Requisition for Special Meeting of Shareholders dated May 2, 2022, to the Corporation and Mrs. Mellace on May 16, 2022. The Requisition states that the shareholders requisition the Director of the Corporation to call a special meeting of the shareholders to consider and, if though fit, to pass a special resolution to: (a) remove Mrs. Mellace as a director of the Corporation and elect Anthony as a director of the Corporation.

30Mrs. Mellace did not call a meeting within twenty-one days after receiving the Requisition. Accordingly, pursuant to s. 105(4), Mr. Mellace, Anthony, and Giancarlo were permitted to call a meeting and served a Notice of Special Meeting of Shareholders on Mrs. Mellace by pre-paid mail, with a copy to the Corporation. The Notice of Special Meeting of Shareholders dated June 13, 2022, indicates that a special meeting of the shareholders of the Corporation would be held on June 28, 2022 by video conference. Attached to the Notice is a special resolution that Mrs. Mellace would be removed as a director of the Corporation and that Anthony would be confirmed and elected as a director.

31Mrs. Mellace through her counsel confirmed receipt of the Notice and objected to the meeting by email dated June 27, 2022. By return email dated June 27, 2022, the Applicants through their counsel confirmed that they intended to proceed with the meeting. The Applicants further explained that they had served a Notice of Application on the Respondents on May 20, 2022, and argued that Mrs. Mellace and the Corporation deliberately evaded service.

32The Respondents argue that Anthony and Giancarlo are not shareholders of the Corporation and that the Applicants have not met the burden of proving they have been oppressed by the Respondents. However, the Respondents do not dispute that Mr. Mellace is a shareholder. Even if Anthony and Giancarlo were not shareholders, the Requisition and the Notice are still valid because Mr. Mellace signed both documents as a shareholder. Mr. Mellace, on his own, is entitled to requisition the sole director, Mrs. Mellace, to call the meeting, and proceed with calling a meeting if one has not been called by Mrs. Mellace within twenty-one days.

33The Respondents argue that the relief sought is inherently injunctive as its effects would restrain Mrs. Mellace and prevent her from carrying out her duties as an officer and director of the Corporation and would prevent her from exercising possession of the Cunningham Property. I disagree. Mr. Mellace complied with the corporate governance process to call a meeting pursuant to the Business Corporations Act, s. 105.

34The Applicants served their Notice of Application issued on May 17, 2022. Mrs. Mellace served her Notice of Application issued on October 14, 2022. Mrs. Mellace could have sought an interim and/or interlocutory order that all the corporate governance actions or measures taken are of no force or effect; and prohibit the Applicants from exercising their powers but did not do so.

35I find that the Applicants complied with the corporate governance process and gave proper notice of the Shareholders’ Meeting to Mrs. Mellace and the Corporation, and therefore, the Shareholders’ Meeting is valid and binding.

Who are the beneficial owners of the Alliston Property?

36I find that Anthony and Giancarlo are the beneficial owners of the Alliston Property.

37Mrs. Mellace, Anthony, and Giancarlo have been the registered owners of the Alliston Property since 2015. The Loan Notes dated May 13, 2014, states “The parents are supporting their children to start with their first home purchase and to invest their money effectively based on the long history of the parents and children banking at this branch…” It is clear in the Loan Notes that Mrs. Mellace went on title to assist Anthony and Giancarlo in obtaining the mortgage on the Alliston Property.

38Mrs. Mellace admits that Anthony and Giancarlo are on title but states that they were added as part of the mortgage application. The Loan Notes prepared by the third-party bank, which I find reliable, contradict Mrs. Mellace’s argument. There is also additional evidence that contradicts Mrs. Mellace’s position. There is a text message from Mrs. Mellace from August 2021 in which Mrs. Mellace stated to Anthony, “You both wanted to sell [the Alliston Property] and I totally agreed with whatever you guys wanted…Whatever you guys want to do just let me know and we can do it.” The text message clearly indicates Anthony and Giancarlo’s beneficial interests in the Alliston Property.

39Mrs. Mellace argues that she made the down payment for the Alliston Property and has at all material times been the only person to pay for the maintenance of it and its mortgage. Anthony and Giancarlo explain that a joint account was opened with Mrs. Mellace for the administration of rents, Mrs. Mellace had sole signing authority because Anthony and Giancarlo were busy with school, and they were surprised to learn that Mrs. Mellace unilaterally closed and depleted the joint account without Anthony and Giancarlo’s authorization.

40I find Anthony and Giancarlo’s explanations credible given the Loan Notes and text messages produced. I find on a balance of probabilities that Anthony and Giancarlo are the beneficial owners of the Alliston Property.

Disposition and Costs

41The Application was adjourned twice and heard six months after it was initially scheduled to allow for a sufficient evidentiary record and cross-examinations. Based on the evidence, I find on a balance of probabilities that Anthony and Giancarlo are shareholders of the Corporation, that the meeting of the shareholders of the Corporation held on June 28, 2022, was valid and binding, and Anthony and Giancarlo are the beneficial owners of the Alliston Property.

42If the parties are unable to agree on costs, the parties may make written submissions as to costs, up to five (5) pages in length within 30 days.

JUSTICE J.S. SHIN DOI

Released: October 31, 2024