COURT FILE NOs.: 24-00725695-0000 and CV-24-00726845-0000 DATE: 2024-11-15
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Arif Al-Ali Applicant/Respondent on the Cross Application – and – Anwar Al-Ali, Poppa Corn Corporation and Ontario Popcorn Corp. Respondents/Applicants on the Cross Application
COUNSEL: Kimberly Potter, Carolyn Flanagan and David Wallace Dolson, for the Applicant/Respondent on the Cross Application Andrea J Sanche and Pavle Masic for the Respondents/Applicants on the Cross Application
HEARD: October 9, 2024
REASONS FOR JUDGEMENT
Merritt J.
OVERVIEW
1This matter involves two Applications.
2The first Application is an Application by Arif Al-Ali (Mr. Al-Ali Sr. or the “father”) for a declaration that the Respondent Anwar Al-Ali (Mr. Al-Ali Jr. or the “son”) breached his duties under a Continuing Power of Attorney for Property (the “POA”) and for an oppression remedy. Mr. Al-Ali Sr. seeks a declaration under s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”), and related relief.
3Mr. Al-Ali Sr. says that his son wrongly took more than half of his shares in Poppa Corn Corporation (“Poppa Corn”) and wrongly signed resolutions to remove him from his positions with Poppa Corn.
4Mr. Al-Ali Jr. says that on September 4, 2021, he and his father agreed that Mr. Al-Ali Jr. would receive 50% of the shares of Poppa Corn in return for work done in the family textile business in Romania (the “Agreement”) and that he had his father’s approval to use the POA as he did.
5Mr. Al-Ali Jr. brings a Cross-Application seeking, in effect, specific performance of the Romania Agreement and alternatively, damages for breach of the Agreement.
DECISION
6Mr. Al-Ali Jr. did not have his father’s instructions and wrongly executed transfers of his father’s shares in Poppa Corn to Mr. Al-Ali Jr.’s own company Ontario Popcorn Corp. (“Ontario Popcorn”) on August 1, 2024, and therefore the share transfers are void.
7Mr. Al-Ali Jr.’s conduct was oppressive under the OBCA.
8Mr. Al-Ali Jr. is not entitled to 50% of the shares of Poppa Corn in return for the work he did in Romania because he was paid in cash instead.
BACKGROUND FACTS
9Mr. Al-Ali Sr. worked in his father’s textile business from a young age. Mr. Al-Ali Sr.’s father started a number of family businesses, including Poppa Corn, which are now owned by Mr. Al-Ali Sr. and various family members. Mr. Al-Ali Sr. has helped his children including his eldest son, Mr. Al-Ali Jr., to obtain positions in family businesses.
10Poppa Corn is a concession supply business. It manufactures, packages, and distributes snack foods and accessories. It started out supplying popcorn, candy apples, drinks, cotton candy and such to concessions across Canada ranging from carnivals and fairs to organizations such as Maple Leaf Sports and Entertainment. It has evolved to supply concession items to the retail and e-commerce industries. Poppa Corn carries on business from premises owned by Mr. Al-Ali Sr. and his wife as joint tenants and leased to Poppa Corn.
11From 2016 until the events giving rise to this litigation, Mr. Al-Ali Sr. was a director of Poppa Corn, and its President and sole shareholder.
12Mr. Al-Ali Jr. was also director and General Director of Poppa Corn.
13Poppa Corn’s bank is the Royal Bank of Canada (the “Bank”), and Mr. Al-Ali Sr. is the sole guarantor on Poppa Corn’s line of credit and other liabilities to the Bank.
14Mr. Al-Ali Sr. started a textile business in Romania in 1997. Sometime in 2003 or 2004, he changed the name of the company to Anatex International SRL (“Anatex”). Around the same time, Mr. Al-Ali Jr. began travelling to Romania to work with his father at Anatex during his summer vacations from school. Mr. Al-Ali Jr. moved to Romania to work at Anatex full time when he graduated from school in 2006.
15Although Mr. Al-Ali Sr. agreed to pay his son a salary of $100,000 per year while he worked at Anatex, Mr. Al-Ali Jr. never asked for the salary and his father did not pay it.
16In 2008, Mr. Al-Ali Jr. got married, moved back to Canada, and worked for the Royal Bank of Canada until approximately 2010. During this time, Mr. Al-Ali Sr. paid his mortgage, condominium fees and taxes. In 2010, Mr. Al-Ali Jr. moved back to Romania and returned to work for Anatex.
17In 2014, Mr. Al-Ali Jr. returned to Canada. At the time, Mr. Al-Ali Sr. was overseeing the operations at Poppa Corn. At that time Poppa Corn was owned by Mr. Al-Ali’s brother Yahya Abbas and father, personally or via other companies. It was agreed that Mr. Al-Ali Jr. would take on the role of General Manager of Poppa Corn. Mr. Al-Ali Jr. started working for Poppa Corn on December 1, 2014 as General Manager (later changed to Managing Director) and he was paid a salary of $90,000 per year plus 20% of Poppa Corn’s profits.
18In October of 2016, Mr. Al-Ali Sr. became the sole shareholder of Poppa Corn.
19In 2017, Mr. Al-Ali Sr. appointed Mr. Al-Ali Jr. to be a director of Poppa Corn and Mr. Al-Ali Jr. continued to be paid $90,000 per year plus 20% of Poppa Corn’s profits.
20The relationship between Mr. Al-Ali Sr. and Mr. Al-Ali Jr. has not always been smooth, to say the least. Both sides agree that there was “drama”. It is clear that the father and son were engaged in a heated and emotional conflict on and off over the years. Mr. Al-Ali Jr. has resigned on two or three occasions and Mr. Al-Ali Sr. has stepped in to assume oversight of the operations until he hired someone else, or Mr. Al-Ali Jr. returned.
21In or around September of 2021, the father and son had discussions about how much Mr. Al-Ali Jr. was owed for his work in Romania. They did not agree on the amount Mr. Al-Ali Jr. was to be paid. Mr. Al-Ali Jr. prepared a spreadsheet of amounts owing with a total of $1,028,000 USD and asked his father to pay him that amount.
22At the same time, there was consideration of selling Poppa Corn and negotiations with a potential buyer which included a Letter of Intent.
23As a result of the disagreement about how much Mr. Al-Ali Sr. owed Mr. Al-Ali Jr., Mr. Al-Ali Jr. resigned as a director and as Managing Director of Poppa Corn on September 3, 2021. Mr. Al-Ali Sr. did not accept the resignation.
24On September 4, 2021, Mr. Al-Ali Jr. also resigned from Anatex and demanded payment for his work in Romania.
25On September 4 or 5, 2021, the parties met to try to resolve the disagreement between them and entered into the Agreement. I say September 4 or 5 because although the Agreement is dated September 4, 2021, the exchange of text messages between father and son on September 5, 2021 suggests the Agreement was made on September 5, 2021. Nothing turns on whether the Agreement was reached on September 4 or 5, 2021.
26The Agreement is handwritten in Arabic. The parties agree on the translation of the Agreement. The Agreement provides as follows:
If the company is sold, Anwar will take 1,250 + 10% of the sale price company value.
If the company is not sold, Anwar will take 50% of it in return for his work in Romania.
Romania shall be run, and I will pay him 2,000 Canadian monthly.
If the company is not sold, Anwar will take his salary + 20% of the profits and the remaining will be divided 40% Anwar and 40% Arif.
09/04/2021
- If the company is sold for any amount more, then only the surplus is his.
27The Agreement is signed by Mr. Al-Ali Sr., his wife, and Mr. Al-Ali Jr.
28There is no dispute that the reference to 1,250 means $1,250,000.
29Mr. Al-Ali Sr. gave the POA to his son on September 20, 2021. It is undisputed that Mr. Al-Ali Sr. had capacity to manage his own property at all times.
30At this time Mr. Al-Ali Jr. also gave a Power of Attorney to his father but revoked it in 2022.
31Poppa Corn was not sold.
32There is no dispute that Mr. Al-Ali Jr. demanded payment for his work in Romania and his father paid him $1,250,000 for this work by way of a cheque dated September 21, 2021.
33Mr. Al-Ali Jr. asked his father to write a letter confirming that he had decided not to sell Poppa Corn. The letter is dated September 24, 2021.
34On September 27, 2021, Mr. Al-Ali Jr. wrote to Poppa Corn’s employees to advise them that he was leaving Poppa Corn.
35Mr. Al-Ali Jr. continued to receive salary from Poppa Corn from September to December 2021 even though he was not working at this time. Mr. Al-Ali Sr. ran Poppa Corn with a General Manager he hired from September 2021 until May 2022 when Mr. Al-Ali Jr. returned to Poppa Corn, at which time Mr. Al-Ali Jr.’s salary was increased to $156,000 plus 20% of Poppa Corn’s profits. The General Manager stayed on and Mr. Al-Ali Jr. became the Managing Director.
36The parties do not agree about various events in the years following 2021. It is not disputed that there was significant acrimony between father and son in the period leading up to August 1, 2024.
37On June 19, 2024, Mr. Al-Ali Jr. texted his father that he was not returning to Poppa Corn., and on June 26, 2024, Mr. Al-Ali Jr. formally resigned from his employment at Poppa Corn. Mr. Al-Ali Sr. stepped in to take over operations at Poppa Corn and hired a new General Manager.
38Immediately prior to August 1, 2024, Mr. Al-Ali Sr. was Poppa Corn’s sole shareholder, its director, and its President and Secretary.
39Immediately prior to August 1, 2024, Mr. Al-Ali Jr. was also a director of Poppa Corn, but he was not a shareholder nor an officer.
40Mr. Al-Ali Sr. did not resign as a director or officer of Poppa Corn, did not execute any share transfers, did not send or receive any notice of meeting of directors to consider any appointment of officers, and did not send or receive any notice of meeting of shareholders.
41On August 1, 2024, Mr. Al-Ali Jr. signed a share transfer and resolutions on behalf of Mr. Al-Ali Sr. and effected these changes under the authority of the POA and approved them in his capacity as a director. The resolutions included:
transferring half of the father’s Class A shares, half of the father’s class B shares and all of the father’s voting shares (i.e., the common shares) to Ontario Popcorn which is Mr. Al-Ali Jr.’s company;
removing Mr. Al-Ali Sr. as a director of Poppa Corn; and
reappointing Mr. Al-Ali Jr. as the sole director of Poppa Corn retroactive to January 5, 2017.
42On August 1, 2024, Mr. Al-Ali Jr. also removed his father as President and Secretary of Poppa Corn and appointed himself to these positions.
43Mr. Al-Ali Jr. did not discuss the changes in share ownership, or the resolutions set out in para. 41 above, with Mr. Al-Ali Sr. The documents were signed by Mr. Al-Ali Jr. without his father’s knowledge.
44On August 9, 2024, Mr. Al-Ali Sr. was notified by the Bank that his son had attempted to change the signing authority to remove his father’s access to the bank accounts and information. Mr. Al-Ali Sr. obtained a copy of a corporate profile report which his son had given to the Bank, and which reflected that Mr. Al-Ali Sr. has been removed as President and Director and Mr. Al-Ali Jr. was the sole Director, President, and Secretary.
45On August 9, 2024, Mr. Al-Ali Jr. sent an email to his father advising that he was no longer a voting shareholder, director, or officer. This email was copied to senior employees.
46On August 9, 2024, Mr. Al-Ali Jr. fired Poppa Corn’s General Manager. He also attempted to cancel a new line of production equipment which his father had ordered for Poppa Corn and for which deposits had been paid.
47On August 10, 2024, Mr. Al-Ali Jr. wrote to Anatex’s employees and its bank, the Bank of Romania. He told the Bank of Romania to remove his father from the bank accounts and told the employees to call the police if his father showed up at the Anatex warehouses.
48In response, Mr. Al-Ali Sr. took steps immediately. He executed a resolution accepting his son’s resignation of June 19, 2024, elected his other son Abbas Al-Ali as a director, removed Mr. Al-Ali Jr. from all offices, and elected himself as President and Secretary and Abbas Al-Ali as Vice President. He commenced the within Application and sought an urgent hearing date.
POSTIONS OF THE PARTIES
49It is Mr. Al-Ali Sr.’s position that his son acted without authority under the POA and wrongly effected the changes in para. 41 above. It is Mr. Al-Ali Jr.’s position that he had his father’s permission to use the POA when it was executed on September 20, 2021, and no further permission was required.
50Mr. Al-Ali Sr. says he agreed to pay his son $1,250,000 for the work he did in Romania. If Poppa Corn sold, he agreed to pay his son $1,250,000 for the work in Romania plus 10% of the selling price of Poppa Corn. If Poppa Corn did not sell, he would give his son 50% of Poppa Corn instead, because he would not have the cash from the sale of Poppa Corn to pay his son cash for the work in Romania. It is Mr. Al-Ali Sr.’s position that he paid his son in full for his work in Romania and therefore his son is no longer entitled to 50% of the shares of Poppa Corn.
51It is Mr. Al-Ali Jr.’s position that he is entitled to 50% of the shares of Poppa Corn pursuant to the Agreement.
THE EVIDENCE
52I note that in the affidavit of Mr. Al-Ali Jr. there is reference to a conversation with his brother Ali Al-Ali (“Ali”) who apparently recorded a telephone conversation with Mr. Al-Ali Sr. about the Agreement. The recording was not produced as evidence on the motion. The affidavit sets out information from Ali which is inadmissible hearsay on facts which are contentious, and I give it no weight. In any event, it appears that Mr. Al-Ali Sr. was simply re-iterating his position that he paid his son cash in lieu of transferring shares of Poppa Corn to him.
53There are many credibility issues between the parties, including: whether Mr. Al-Ali Sr. revoked his POA in 2022 by email when Mr. Al-Ali Jr. revoked his Power of Attorney, who is responsible for the success of Anatex, who is best suited to run Poppa Corn, the extent of Mr. Al-Ali Sr.’s involvement in the business of Poppa Corn, whether Mr. Al-Ali Jr. cut off his father’s access to financial information, or whether his father was disinterested, among other issues.
54Both father and son accuse each other of bad behaviour, and they also disagree about the events that have transpired since this litigation started.
55I need not resolve all of these issues to decide this case.
THE ISSUES
56There are three issues:
Did Mr. Al-Ali Jr. breach his duties under the POA?
Did Mr. Al-Ali Jr. act in a manner that was oppressive to, unfairly prejudicial to, or unfairly disregarded the interests of his father contrary to section 248 of the OBCA?
Did Mr. Al-Ali Sr. act in a manner that was oppressive to, unfairly prejudicial to, or unfairly disregarded the interests of his son contrary to section 248 of the OBCA?
Did Mr. Al-Ali Sr. breach the Agreement and is Mr. Al-Ali Jr. entitled to the declarations and related relief he seeks regarding the Agreement?
ANALYSIS
The POA
57Mr. Al-Ali Sr. says that on September 20, 2021, he gave the POA to his son at his son’s request for the purpose of finalizing the sale of Poppa Corn, and it was understood that the POA was to be used only for this purpose.
58Mr. Al-Ali Jr. says his father gave him the POA to run Poppa Corn, to complete the proposed sale and to implement the terms of the Agreement.
59The POA is a continuing power of attorney for property. It appoints Mr. Al-Ali Jr. as his father’s attorney for, among other things, the sale, purchase, management, and mortgage of property, or any act or deed which he could do himself. The POA is not subject to any conditions or restrictions.
60On September 20, 2021, Poppa Corn also gave Mr. Al-Ali Jr. a Power of Attorney to do any and every act and deed and exercise every power on his own discretion and liability, that the company shall deem proper and advisable. This Power of Attorney was valid for one year.
61The parties agree that at all times, Mr. Al-Ali Sr. was capable.
62An attorney acting under a continuing power of attorney is always a fiduciary. The scope of the fiduciary duty turns on whether the donor is capable or not. If the donor is capable, the relationship is similar to one of agency and the attorney’s primary responsibility is to carry out the instructions of the donor as principal. The attorney must use his power only for the benefit of the donor and not for his own benefit. If the attorney acts without instructions he is in breach of his duty to carry out instructions: Richardson Estate v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65, at paras. 48-50.
63As set out above, on August 1, 2024, Mr. Al-Ali Jr. executed documents to transfer all voting shares in Poppa Corn to his own company, Ontario Popcorn Corp. He also transferred one half of the non-voting shares to himself. He says he did this to align the shareholdings of Poppa Corn with the terms of the Agreement. He acknowledges that the “one difference” is the voting shares. He says he transferred all of the voting shares to himself to ensure that his father could not reverse the changes he made. He says this was consistent with the understanding from the outset that he would control Poppa Corn. He also says that these changes are in the best interest of Poppa Corn as he acts in the best interest of Poppa Corn.
64Mr. Al-Ali Jr. submitted that the words “Anwar will take 50% of it” mean that he could use the POA to take 50% of the shares of Poppa Corn without notice. That is one possible interpretation. There are other possible interpretations. The words “will take” could mean he “will receive”, or they could mean he “will be satisfied with”. I note that the first clause of the agreement uses the same language: “Anwar will take 1,250”. I do not read these words to mean that the agreement contemplated Mr. Al-Ali Jr. using the POA to transfer the shares without his father’s knowledge having regard to the parties’ conduct. The evidence was that Mr. Al-Ali Sr. was responsible for management decisions regarding Poppa Corn and was generally consulted or copied on emails concerning the operations of Poppa Corn. Even if I am wrong and in September of 2021, Mr. Al-Ali Sr. did intend for his son to use the POA to take 50% of the shares of Poppa Corn without notice to him, by 2024 he had clearly changed his mind.
65Mr. Al-Ali Jr. admitted in cross examination that he made the decision to sign the share transfers and resolutions using the POA sometime in July of 2024 after he had given up all hope of reaching a solution with his father. He said he took the shares because he was entitled to them under the Agreement and to enforce the terms of the Agreement.
66He also admitted that he did not talk to his father about doing the share transfers and resolutions using the POA before he did it, other than when he told his father in a text message exchange on June 20, 2024 that he would get his money. This was in the context of Mr. Al-Ali Jr. resigning. He sent his father a copy of the Agreement and said, “You can give me my money, as you wrote in the paper and take my work”. Mr. Al-Ali Sr. replied saying the Agreement was cancelled when Mr. Al-Ali Jr. left in September 2021 and Mr. Al-Ali Jr. replied: “okay that’s fine, I’ll get my money”.
67Mr. Al-Ali Jr. admitted he did not ask his father if he could remove his father as a director, President, or Secretary of Poppa Corn. He did not ask his father if he could make himself President and Secretary of Poppa Corn in his father’s place.
68Mr. Al-Ali Jr. admitted that the reason he did not tell his father that he intended to transfer the shares and execute the resolutions was that he expected his father would have said no.
69Mr. Al-Ali Jr. admitted he took all of the common shares, which are the only shares with voting rights, so that he could have control of Poppa Corn. He said he did this because his father verbally told him he had full control of Poppa Corn.
70Mr. Al-Ali Jr. went well beyond enforcing the Agreement; he took all of the common shares, he replaced his father as Director, President and Secretary of Poppa Corn, he notified the Bank to remove his father and brother, changed passwords, put a hold on credit cards, he wrote to all employees cutting off his father and brother’s access to information, and he fired his brother, all without any prior discussion with his father.
71Mr. Al-Ali Jr. also wrote to Anatex’s bank contact, accountant, lawyer, and office manager and attempted to remove his father’s ability to represent Anatex, remove his father from Anatex’s bank accounts and remove his father’s signing authority with respect to Anatex. Mr. Al-Ali Jr. admitted under cross examination that the steps he took regarding Anatex were not in furtherance of the Agreement and he “might have jumped a bit”. He said that this was his response to his father telling him that he was going to take Mr. Al-Ali Jr. out of his will.
72Regardless of how strong Mr. Al-Ali Jr. believed his rights under the Agreement to be, on August 1, 2024, he clearly knew that he did not have his father’s permission to transfer the shares and execute the resolutions. He simply took matters into his own hands and transferred the shares and executed the resolutions without his father’s permission. Mr. Al-Ali Jr. was not entitled to impose his own view of his contractual entitlements on his father by exercising the POA to take the shares and execute the resolutions and expel his father from Poppa Corn.
73Even if Mr. Al-Ali Sr. agreed to transfer 50% of the shares in Poppa Corn in September of 2021, he could change his mind because he had the legal capacity to do so, and as agent, Mr. Al-Ali Jr. was obligated to act only in accordance with his father’s instructions and not for his own benefit without his father’s full knowledge and consent: Richardson Estate v. Mew, 2009 ONCA 403, at para. 49. He breached his fiduciary obligations by exercising the POA for his own benefit and for his own personal interest without being expressly authorized to do so: Howlader v. Alamgir, 2006 ONSC 21592, at para. 71.
74Even if I were to accept that the father only changed his mind about the Agreement on June 20, 2024, it does not change the fact that as of August 1, 2024, Mr. Al-Ali Jr. did not have his father’s instructions to use the POA as he did, and he knew it. The exchange of text messages on June 20, 2024 makes it clear that Mr. Al-Ali Jr. knew that his father did not agree that he was entitled to shares in Poppa Corn under the Agreement.
75In addition, Mr. Al-Ali Jr.’s conduct went far beyond the terms of the Agreement as set out above. Mr. Al-Ali Jr’s conduct in taking all of the voting shares and his admission that he did so to ensure that his father could not reverse the share transfers and resolutions confirms that he knew he acted without his father’s instructions, knowledge or consent. For clarity, I do not accept that Mr. Al-Ali Sr. changed his mind about the Agreement on June 20, 2024. My findings and decision about the Agreement are set out below.
76Given that Mr. Al-Ali Jr. did not have authority to transfer the shares to himself, he also did not have corporate authority to execute the resolutions.
Son’s Oppression of Father
77I also find that Mr. Al-Ali Jr.’s acts in transferring the shares and executing the resolutions on August 1, 2024 were oppressive under the OBCA.
78In determining Mr. Al-Ali Sr.’s reasonable expectations, I can consider familial discord: Castillo v. Xela Enterprises Ltd., 2016 ONSC 6088, at para. 41, as well as the other factors set out in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560 at paras. 72-82.
79In Castillo v. Xela Enterprises Ltd., 2015 ONSC 6671, at paras. 53-54, the court found that a family member was entitled to expect honesty from her other family members in their dealings with her corporate interests, and that her secret removal as a director was borne out of a family dispute that had nothing to do with the corporation.
80I find that the father’s expectation as sole shareholder was that his son, acting as a director of Poppa Corn, would consult with him and obtain his permission before acting on the POA to transfer the shares and execute the resolutions on August 1, 2024.
81I find that this expectation was reasonable having regard to the relationship between the parties, and the entire context including the fact that Poppa Corn was a small family business, the nature of the interactions between father and son over the years, their working relationship, and the conflict between them. The son knew that his father’s position was that he had been fully compensated for his work in Romania and that he was no longer owed 50% of the shares of Poppa Corn.
82There is no doubt that involuntary appropriation of a shareholding interest is oppressive conduct: Matuk v. Vannelli, 2024 ONSC 4942, at para. 111.
83Mr. Al-Ali Jr.’s conduct in transferring the shares and executing the resolutions ousting his father from the company, in the secretive manner he did, knowing that his father would not agree, violated his father’s reasonable expectations and was unfair, prejudicial to and oppressive of his father’s interests as a shareholder, director and officer of Poppa Corn.
84The share transfers were not in accordance with ss. 122 and 123 of the OBCA which require notice to directors of shareholder’s meetings and, if the purpose is to remove the director, they are entitled to make a statement at the meeting.
85The share transfers were also not in accordance with the restrictions in Poppa Corn’s Articles of Incorporation, which required a meeting of the Directors, an instrument signed by a majority of the Directors or consent of at least 51% of the voting shareholders.
86Considering the entire context set out above, as the sole shareholder and a director, Mr. Al-Ali Sr. had a reasonable expectation that his son would not oust him from Poppa Corn.
87Mr. Al-Ali Jr.’s actions in excluding his father from the banking relationship, telling the employees not to give his father any information, and opening a secret bank account were all oppressive.
88Mr. Al-Ali Jr. did not act in the best interests of the corporation, having regard to all relevant considerations, including the need to treat his father in a fair manner, commensurate with the corporation’s duties as a responsible corporate citizen: BCE Inc., at para. 82.
89Mr. Al-Ali Jr.’s wrongful conduct caused Mr. Al-Ali Sr. to lose all of his shares in Poppa Corn, including his voting shares and his positions as director and officer of Poppa Corn.
Remedy
90Where the attorney uses a power of attorney to wrongfully execute a transfer of the donor’s property to themselves, the transfer is void: Reschetnyk v. Waslyk, [1999] O.J. No. 4550 (Ont. S.C.), at para. 13, citing Elford v. Elford (1922), 64 S.C.R. 125 (S.C.C.).
91Mr. Al-Ali Sr. is entitled to a declaration that the August 1, 2024 share transfers are void. The resolution removing Mr. Al-Ali Sr. as a director was invalid because he remained a shareholder; he was entitled to notice of any meeting to conduct business leading to the execution of the resolutions. The actions taken by Mr. Al-Ali Jr. as the purported sole director of Poppa Corn were also unauthorized. This includes removal of Mr. Al-Ali Sr. as director, President and Secretary, revocation of his banking authority and removal of Abbas Al-Ali as a director and Vice-President of Poppa Corn: Matuk, at paras. 87-88.
92I order that all of the shares transferred to Mr. Al-Ali Jr.’s company Ontario Popcorn on August 1, 2024 be transferred to Mr. Al-Ali Sr.
93Under ss. 248(2) and (3) of the OBCA, the court is given broad remedial powers to make orders to rectify the oppressive conduct.
94Mr. Al-Ali Sr. is entitled to a declaration that Mr. Al-Ali Jr. exercised his powers as a director of Poppa Corn in a manner that was oppressive to Mr. Al-Ali Sr.
95Mr. Al-Ali Sr. is entitled to an order directing rectification of the corporate records of Poppa Corn, so they reflect that he is a director, President and Secretary, and that Abbas Al-Ali is a director and Vice-President of Poppa Corn.
96Mr. Al-Ali Sr. is entitled to an order requiring the Respondents to identify to him all of Poppa Corn’s current bank accounts and to provide him with signing authority over said bank accounts.
97Mr. Al-Ali Sr. is entitled to an order requiring Mr. Al-Ali Jr. to return the corporate key to his father and/or cooperate in acquiring a new corporate key for Poppa Corn.
98Mr. Al-Ali Sr. is entitled to an order that ownership of the domain name www.poppacorn.ca be transferred from Mr. Al-Ali Jr. to Poppa Corn.
99Mr. Al-Ali Sr. also seeks a declaration that his son is no longer a director of Poppa Corn.
100Courts hearing oppression claims are not to interfere with the affairs of a corporation lightly. Courts, even if satisfied that oppression has occurred and some relief is justified, are to fashion the relief “with a scalpel, and not a battle axe.” In approaching a remedy, the court will interfere as little as possible and only to the extent necessary to redress any unfairness: Naneff v. Con-Crete Holdings Ltd. (1995), 23 O.R. (3d) 481 (Ont. C.A.), at para. 32; Libfeld v. Libfeld, 2021 ONSC 4670, at para. 451.
101It is not necessary for me to remove the son as a director to redress the unfairness to the father. Of course, this is without prejudice to the rights of the shareholders to elect a new board of directors in accordance with proper corporate governance.
The Agreement
102Contractual interpretation involves a search for the objective intention of the parties based upon the words they used. A court cannot consider evidence of the parties’ subjective intentions: Corner Brook (City) v. Bailey, 2021 SCC 29, [2021] 2 S.C.R. 540, at para. 25; Alberta Union of Provincial Employees v. Alberta Health Services, 2020 ABCA 4, 441 D.L.R. (4th) 403, at paras. 26-31.
103In Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, the Supreme Court of Canada set out the modern framework for contractual interpretation. Interpretation of contracts requires a practical, common-sense approach. The court must read the contract 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: Sattva, at para. 47.
104The contextual factors include the purpose of the agreement and the nature of the relationship created by it: Sattva, at para. 48.
105In looking at the surrounding circumstances, the goal is to understand the mutual and objective intentions of the parties: Sattva, at para. 57.
106Where there is ambiguity, a court may have regard to the parties’ subsequent conduct: Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. (1995), 24 O.R. (3d) 97 (Ont. C.A.), at para. 23; Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, 424 D.L.R. (4th) 588, at paras. 62-32; London Medical and Dental Building Ltd. v. Middlesex Condominium Corp. No. 83, 2016 ONSC 6141, at paras. 93-95; Newman v. Beta Maritime Ltd., 2018 BCSC 1442, at paras. 31-32; Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512.
107The Agreement has four main provisions, only two of which can apply at any one time; which two apply depends on whether Poppa Corn is sold. The provision in dispute is the second clause which provides: “If the company is not sold, Anwar will take 50% of it in return for his work in Romania.”
108Mr. Al-Ali Jr. admits that on September 4, 2021, he resigned from Anatex and made a demand for $1,028,000 USD which was the amount he and his father agreed he would be paid for his work in Romania. He also admits that his father paid him $1,250,000 by cheque which he accepted. However, it is his position that even though he was paid for his work in Romania, he is still entitled to 50% of Poppa Corn.
109There was an exchange of text messages between father and son on September 4, 2021, which is the day the Agreement was signed. The exchange starts with the son providing a list of amounts his father spent on him over the years, totaling $420,000. The father says he doesn’t want any of that money and says he will pay his son what is fair for the work in Romania. The son responds saying he wants 10% of the selling price of Poppa Corn, or 20% if he stays on for 5 or 10 years. The father responds offering $725,000 USD and 20% of the selling price and the son gets the money when the sale is complete. The son responds, “Romania that is not fair and I don’t accept”. He says he can’t continue to work at Poppa Corn and has resigned. He offers to pay his father $426,000 CAD from the final amount. The son then provides the final calculation for what he says is owing for Romania, being $1,028,000 USD, and says he is not involved anymore.
110The father and son were negotiating about a fair compensation for the work done by the son in Romania. The father offered $725,000 and 20% of the sale price. The son said that was not fair and asked for $1,028,000, which is what he felt he was owed less amounts paid by his father over the years, totaling the $426,000.
111Later that day they entered into the Agreement.
112The text exchange is consistent with the conclusion that the Agreement was intended to compensate the son for the work done in Romania, either by way of a cash payment in the event that Poppa Corn sold, or by way of ownership of 50% of the shares in Poppa Corn if it did not sell.
113It was Mr. Al-Ali Sr.’s evidence that if Poppa Corn was not sold, Mr. Al-Ali Jr. would be given 50% of Poppa Corn because Mr. Al-Ali Sr. would not have cash on hand from the sale to pay his son for the work in Romania. This evidence was not challenged on cross examination.
114Mr. Al-Ali Jr. says that on January 23, 2022, he, his father, his brother Abbas Al-Ali, and two of his other brothers (Ali and Sajad) met. He says that at this meeting, Mr. Al-Ali Sr. acknowledged the Agreement and that he had breached it.
115Mr. Al-Ali Sr. denies that he acknowledged the Agreement or breaching it. It was his evidence that there were no discussions regarding the Agreement after 2021 until 2024.
116None of Abbas Al-Ali, Ali or Sajad gave evidence on the motion.
117Mr. Al-Ali Jr. says that when he returned to Poppa Corn in May of 2022, he and his father implemented the fourth clause of the Agreement and had several conversations between May 2022 and November 2023 about putting into effect the share transfer set out in the second clause of the Agreement.
118Mr. Al-Ali Jr. admits he did not get 40% of the profits as stated in the fourth clause of the agreement. He explains this by saying his share of the profit was reinvested in Poppa Corn.
119Mr. Al-Ali Sr. denies this. He says that he increased his son’s salary to $156,000 and that his son continued to receive 20% of the profits as he had from the outset.
120It is not clear whether any other terms of the agreement were implemented. There was no evidence that Mr. Al-Ali Jr. continued to run Romania or that he was paid $2,000 CAD per month to do so.
121Mr. Al-Ali Jr. says that on June 19, 2024, he told his father he intended to resign from Poppa Corn and reminded him of the Agreement. He says that his father told him that the Agreement had been terminated when he resigned as Managing Director in September 2021.
122The second clause of the agreement says that if Poppa Corn is not sold, the son will get 50% of the shares in Poppa Corn in return for his work in Romania (emphasis mine). It does not say that he will be paid the amount he demanded in cash plus 50% of the shares of Poppa Corn.
123The effect of Mr. Al-Ali Jr.’s position is that, in effect, I would be reading in a term in the second clause of the agreement that if Poppa Corn did not sell, he would be paid $1,250,000 in cash for his work in Romania in addition to getting 50% of Poppa Corn.
124It is contrary to common sense that Mr. Al-Ali Sr. would both pay his son in full for the work done in Romania and give him 50% of the shares of Poppa Corn.
125Mr. Al-Ali Jr. has offered no explanation as to why, if Poppa Corn was not sold, he would be entitled to both the $1,250,000 USD for his work in Romania and 50% of Poppa Corn.
126I do not find that Mr. Al-Ali Sr.’s position has been inconsistent. He says he agreed to pay his son for his work in Romania. Initially, when they were considering selling Poppa Corn, they entered into the Agreement which provided for two scenarios: under the first scenario Poppa Corn would be sold and the son would be paid $1,250,000 in cash; under the second scenario Poppa Corn would not be sold and the son would get 50% of Poppa Corn as compensation for his work in Romania. When Poppa Corn was not sold, and Mr. Al-Ali Jr. intended to leave Poppa Corn, he demanded payment in cash for his work in Romania and his father paid him $1,250,000, thus satisfying his obligation to compensate his son for his work in Romania.
127I find that the meaning of the Agreement is that the father and son agreed that the son would either be paid cash from the sale or get shares in Poppa Corn, but not both. This interpretation is consistent with the wording of the Agreement and takes into consideration the context of father and son trying to settle the son’s claim for compensation for work in Romania while at the same time contemplating the sale of Poppa Corn.
128Mr. Al-Ali Jr. admits that he demanded payment for his work in Romania and his father paid for this work by way of a cheque dated September 21, 2021.
129I accept Mr. Al-Ali Sr.’s evidence that on September 20, 2024, after he told his son that he decided not to sell Poppa Corn, Mr. Al-Ali Jr. demanded payment for his work in Romania.
130It would not make sense for the father to pay his son in full for the work in Romania and give him 50% of the shares of Poppa Corn. I do not accept Mr. Al-Ali Jr.’s suggestion that he was entitled to both payment of the amount he demanded for his work in Romania and 50% of the shares in Poppa Corn for his work in Romania.
131I accept Mr. Al-Ali Sr.’s evidence that he paid his son in cash for his work in Romania instead of giving him 50% of the shares of Poppa Corn.
132When the son demanded his money in September of 2021 and the father paid him $1,250,000, they made a new agreement regarding how the son was to be compensated for his work in Romania which superseded the Agreement. The father’s obligation to compensate his son for his work in Romania was satisfied and the Agreement came to an end.
Limitation Period
133I have found that Mr. Al-Ali Sr. did not breach the Agreement. If I am wrong and he did breach the agreement, the limitation period has expired on Mr. Al-Ali Jr.’s claims in any event.
134The limitation period for commencing proceedings with respect to claims is two years from when the claim was discovered: s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the “Limitations Act”).
135Section 5 of the Limitations Act contains the discoverability provisions.
136Mr. Al-Ali Jr. says in his affidavit sworn August 26, 2024 that there was a meeting on January 22, 2022 where his father acknowledged the Agreement and that he had breached it. If this is true, Mr. Al-Ali Jr. knew on January 22, 2022 that his father had breached the Agreement. A reasonable person with Mr. Al-Ali Jr.’s abilities and in the circumstances would have known that the breach would cause him loss and a proceeding would be an appropriate means to seek a remedy: Limitations Act, s. 5.
137In paragraphs 42 and 43 of his affidavit, Mr. Al-Ali Jr. references the meeting on January 22, 2022. Paragraph 44 of Mr. Al-Ali Jr.’s affidavit reads as follows:
At that meeting, Arif acknowledged the Agreement and acknowledged that he had breached it.
138Under cross examination, Mr. Al-Ali Jr. tried to suggest that the affidavit does not mean what it clearly says. He suggested that the statements in his affidavit referred to in para. 137 above mean that his father breached his agreement to sell Poppa Corn. This explanation does not make sense and Mr. Al-Ali’s evidence in this regard is not credible.
139The Agreement specifically contemplated alternate scenarios; one where Poppa Corn would be sold and one where Poppa Corn would not be sold.
140If there was a prior oral agreement to sell the company, the Agreement constituted a new agreement and superseded any prior oral agreement.
141It does not make sense that Mr. Al-Ali Jr. would be talking about his father breaching the prior oral agreement in the context of this Application which concerns the Agreement.
142I do not accept this evidence because it is contrary to the plain language of the affidavit and also because the Agreement specifically contemplated a situation where the company would not be sold.
143I find that Mr. Al-Ali Jr. was referring to the Agreement in paragraph 44 of his affidavit and that he knew in January that his position was that his father had breached the Agreement.
144Mr. Al-Ali Jr. knew on the day of the meeting on January 22, 2022 that his father had breached the Agreement and that he had suffered injury, loss, or damage. Therefore, the limitation period ran from January 22, 2022.
145Mr. Al-Ali Jr.’s Notice of Application was issued on September 3, 2024. The limitation period had expired in January of 2024. Therefore, Mr. Al-Ali Jr.’s claims are statute barred.
Father’s Oppression of Son
146The son alleges that his father oppressed his interests by not selling the business, by misappropriating funds from Poppa Corn, and by not honouring the Agreement.
147I do not find that Mr. Al-Ali Jr.’s expectation was reasonable. It was not reasonable for him to expect that his father would give him 50% of the shares of Poppa Corn as compensation for his work in Romania after having paid him $1,250,000 when he demanded to be paid cash for his work in Romania.
148I do not find that Mr. Al-Ali Jr.’s expectation that his father would sell Poppa Corn was reasonable. The Agreement itself is evidence that two alternate scenarios were being contemplated. I do not accept the son’s evidence that his father “scuppered” the sale of the business. Mr. Al-Ali Sr. explained that he did not sell the business because a significant portion of the purchase price was to be paid over time, and there was a risk he would not be paid the balance owing over time. There was a condition that his son stay on working at Poppa Corn, initially at a very high salary of $400,000 per year which was then lowered to $125,000. Mr. Al-Ali Sr. was concerned that the new owners would fire his son and not make the future payments.
149I do not find that Mr. Al-Ali Sr. misappropriated funds from the corporation. It was his evidence that he made loans to Poppa Corn and was repaid. In fact, the son signed the cheque which he now claims represented misappropriated funds. There was no evidence to support the allegation of misappropriation of funds and no evidence to refute the father’s claim that he lent money to Poppa Corn. I do not give effect to the son’s allegations of misappropriation of funds.
150For the reasons set out above, I do not find that Mr. Al-Ali Sr. resiled from the Agreement.
151In any event, the oppression remedy only protects a complainant’s interest as a shareholder, director, or officer. The son’s expectations regarding his entitlements under the Agreement were personal expectations he had as a contracting party, not as a director.
COSTS
152I encourage the parties to agree on costs. If they cannot agree, I will consider brief written submissions. These costs submissions shall not exceed five pages in length (not including any bills of costs or offers to settle). Any party claiming costs shall file their written submissions within ten days of the date of these reasons. Any responding submissions shall be delivered within five days of receipt of the other party’s costs submissions. Any reply to submissions shall be delivered within three days of receipt of responding submissions and shall be no more than three pages long. Costs submissions shall be uploaded to CaseCenter and delivered to me by way of email to my Judicial Assistant.
Merritt J.
Released: November 15, 2024