Reasons for Decision

Court and Parties

Court File No.: CV-20-00646376-00CL
Date: 2025-03-13
Ontario Superior Court of Justice (Commercial List)

Between:
Stefano G. Tripodi (Plaintiff/Defendant by Counterclaim)
– and –
Susglobal Energy Corp., 1415745 Ontario Inc. o/a Landfill Gas Canada Ltd., Travellers International Inc., 2270733 Ontario Inc. o/a Haute Inc., 1684567 Ontario Inc., and Marc Hazout (Defendants/Plaintiffs by Counterclaim)

Appearances:

• Jeffrey Radnoff, for the Plaintiff/Defendant by Counterclaim
• Max Munoz, for the Defendants and Plaintiffs by Counterclaim
• 1415745 Ontario Inc. o/a Landfill Gas Canada Ltd. not appearing

Heard: November 12, 13 and 14, 2024

Judge: Barbara Kimmel

The Action, the Counterclaim and Preliminary Orders

[1] Susglobal Energy Corp. ("Susglobal", the "company") has raised funds both privately and publicly but has suffered regulatory setbacks, and has become embroiled in litigation. For these (and other) reasons, the stock of Susglobal ("SNRG") has not performed to the expectations of the company's significant shareholder, director, president, executive chairman, and chief executive officer, the defendant Marc Hazout, nor to the expectations of his former friend and investor in Susglobal, the plaintiff Stefano Tripodi.

[2] Tripodi is suing Susglobal, Hazout and their affiliates [1] for negligent misrepresentation and oppression.

a. Tripodi claims to have suffered losses from the Susglobal shares he says he purchased in reliance upon alleged misrepresentations made by Hazout about: (i) the anticipated timing for the listing of Susglobal's shares on the NASDAQ, and (ii) the anticipated value of the shares once they started trading publicly on that exchange. Tripodi also alleges that he relied upon alleged misrepresentations from Hazout in his decisions not to sell his Susglobal shares between December 24, 2018 (once there was a market to do so on the Over the Counter QB Venture Market Exchange ("OTCQB")) and September 9, 2019 (when Tripodi says he stopped trusting and relying on Hazout).

b. Tripodi further claims that his interests as a shareholder were oppressed, unfairly prejudiced or unfairly disregarded and that his reasonable expectations were defeated by: (i) The alleged misrepresentations; and (ii) The amount of annual remuneration that Hazout has received directly and indirectly through his salary, share options and rent paid to his affiliated company. Tripodi complains that these benefits have all been funded from the proceeds of Susglobal's public share and debt offerings. This, despite there having been no net revenues generated from Susglobal's operations to date, and while the company's financial statements contain going concern notes.

[3] Tripodi originally claimed damages of $150,000 representing the price he paid for the more than 200,000 shares in Susglobal that he purchased. The claimed amount fell within the Rule 76 Simplified Procedure cap. At trial, Tripodi claimed a lesser amount of damages, representing the reduced value of the shares he purchased in Susglobal, net of gains he made on what he described as mitigating purchases and sales of Susglobal shares.

[4] The defendants asserted a counterclaim seeking damages of $500,000, which exceeded the Simplified Procedure cap. The counterclaim by the remaining defendants is for damages said to have arisen from the misuse of this litigation to embarrass and cause reputational harm to Hazout, and put pressure on Susglobal to settle. The defendants/plaintiffs by counterclaim contend that this action is an abuse of process.

[5] When Tripodi agreed that he would not pursue the fraud claim he had originally asserted, the defendants withdrew their objection to the Simplified Procedure trial process. That enabled the trial to be completed in three days, with much of the evidence in-chief being given through affidavits. All witnesses appeared to give viva-voce evidence and to be cross-examined at the trial.

[6] The following witnesses testified at trial:

a. The plaintiff, Stefano Tripodi;
b. The defendant, Marc Hazout;
c. The chief financial officer of Susglobal, Ike Makrimichalos; and
d. A neighbour and friend of Marc Hazout, Christopher Quigley.

Seventy-three numbered exhibits and four lettered exhibits were marked at the trial.

[7] At the outset of the trial, an order was made granting an amendment to the statement of claim to remove the fraud claim, and striking out the statement of defence of 1415745 Ontario Inc., o/a Landfill Gas Canada Ltd. Oral reasons were given at the trial and summarized in an endorsement dated November 12, 2024. The amendments to the statement of claim were not opposed by the remaining defendants, subject to the reservation of their right to make submissions regarding the original allegations of fraud that they contend are relevant to their counterclaim and to costs.

Summary of the Outcome

[8] For the reasons that follow, both the action and the counterclaim are dismissed.

The Parties and Their Relationship with Each Other

a) Tripodi

[9] Tripodi is a lawyer, mediator and arbitrator who was called to the bar of Ontario in 2003. He claims not to be a sophisticated investor, and to have relied in connection with his purchases of shares in Susglobal upon his friend Hazout. Hazout was older than Tripodi, and professed to have experience in business and with small cap public companies.

[10] Tripodi initially purchased 5000 restricted shares in Susglobal for USD $5,000.00 (CAD $6,383.50) in an Exempt Offering (defined below) on November 14, 2017, for which he received a physical share certificate. He was one of 50 participants in that Exempt Offering of Susglobal shares that raised USD $4,000,000.00 in the fall of 2017. Each subscriber paid the same amount as Tripodi, USD $1.00 per share.

[11] Tripodi warranted that he was an "accredited investor" under the United States' Securities Act of 1933, 15 U.S.C. § 77a, as an individual with net worth exceeding USD $1 million. Accredited investors are individuals presumed to be financially sophisticated enough to invest in securities through many of the offering exemptions provided for under United States securities laws without the full information that would ordinarily be contained in a prospectus. Tripodi had been trading in his own unmanaged trading accounts with the Bank of Montreal for many years prior to investing in Susglobal, and he continued to trade in other stocks after he purchased Susglobal shares. He was not an inexperienced investor in the stock market.

b) Susglobal and its Affiliates

[12] Susglobal was formed in December 2014. It began revenue generating operations on or around September 15, 2017.

[13] On September 25, 2017, Susglobal announced via press release, that it was making available, restricted common shares of Susglobal for USD $5.00 per share (the "Private Placement Offering"). The restricted common shares were being offered solely to accredited investors, defined under the Act.

[14] The Private Placement Offering for USD $5.00 per share was terminated on October 27, 2017, because of lack of uptake from investors. Tripodi claims not to have known about the failed private placement, although he does acknowledge receiving the investor presentation that was originally prepared for that Private Placement Offering.

[15] After the failed Private Placement Offering, the company decided to try and raise funds under a Rule 506(b) Exempt Offering at USD $1.00 that was made available only to accredited investors outside the United States (the "Exempt Offering"). Tripodi purchased his initial 5,000 restricted shares in Susglobal through the Exempt Offering.

[16] Hazout's evidence is that the company raised approximately USD $4 million from the Exempt Offering from over 50 subscribers, each of whom subscribed at the same USD $1.00 price. Tripodi's investment amounted to approximately 0.1% of the total capital raised through the Exempt Offering. Each investor under the Exempt Offering was required to sign a subscription agreement, including Tripodi.

[17] On December 11, 2018, Susglobal began trading on the OTCQB. Only the first 100 shares of Susglobal traded at USD $5.00 (a total of 100 x $5.00 = USD $500.00 of shares). The shares have since traded consistently at less than USD $1.

[18] Hazout testified that once Susglobal's shares started trading over the counter on the OTCQB, Susglobal retained legal and financial advisors in the United States to assist in uplisting Susglobal's shares to trade on the NASDAQ. He testified that Susglobal began working with US counsel in January 2019, and he was under the impression at that time that it would be a matter of months for the shares to be uplisted to the NASDAQ. Hazout shared his belief about the timing for listing on the NASDAQ with Tripodi.

[19] Hazout later came to understand that once the Susglobal shares were trading on the OTCQB, USD $4.00 was the minimum bid requirement for a company's stock to be uplisted on the NASDAQ. In the early period after the initial offering and when the shares were trading at approximately $0.85 per share, Susglobal contemplated a 1:5 share consolidation to increase the trading value of the shares to the $4 minimum bid requirement. The board of directors ultimately did not consider that to be in the best interests of the company or its shareholders because it was too dilutive and did not approve it, even though some shareholders were in favour of it.

[20] Eventually, Susglobal entered into a capital services advisory agreement in March of 2021. It filed its first application to register on the NASDAQ on January 13, 2022, and its second application on May 16, 2022, more than three years after Hazout had originally expected.

[21] Susglobal has filed its required quarterly 10K statements with the United States Securities and Exchange Commission ("SEC") (including audited financial statements), for all quarterly reporting periods since its first required reporting following the initial Exempt Offering that closed in the fourth quarter of 2017. Susglobal’s financials have been independently audited, first by SF Partnership LLP, and now MNP LLP, both Public Company Accounting Oversight Board-accredited auditors. The first quarterly report (for Q4 2017) was disclosed publicly in April 2018 after the audit of the 2017 year-end financial statements had been completed.

[22] 1684567 Ontario Inc. (“168 Ontario”) is an Ontario corporation and a wholly-owned subsidiary of Susglobal Energy Belleville Ltd., which is a wholly-owned subsidiary of Susglobal Energy Canada Corp. Susglobal Energy Canada Corp., is a wholly-owned subsidiary of Susglobal.

c) Hazout and his Affiliates

[23] Hazout is a businessman. He is one of the founders of Susglobal. He is also one of the company’s directors, its President, and its Chief Executive Officer. Susglobal is not the first public company that Hazout has been involved with.

[24] The defendant, Travellers International Inc., is a private equity firm headquartered in Toronto. It is an Ontario holding company through which Hazout conducts his consulting services and trading. 2270733 Ontario Inc. o/a Haute Inc. ("Haute") is Hazout's company through which he holds real estate, including the head office space leased to Susglobal.

[25] Hazout is also a significant shareholder of Susglobal. He testified that he held more than 32 million shares as of the date of the trial, in addition to the options he holds to purchase more shares. He testified that he has never sold any of his Susglobal shares. These have been accumulated by him since the company was founded.

d) The Relationship Between Tripodi and Hazout

[26] Tripodi and Hazout met in 2014.

[27] While Hazout downplays the nature of the personal relationship between himself and Tripodi, having considered all the evidence I find that they were neighbours and friends. They had no business relationship aside from Tripodi's investments in Susglobal and the occasional assistance Tripodi provided to Hazout to notarize documents for Susglobal.

[28] They socialized and supported each other: Tripodi providing informal legal advice on personal litigation matters and Hazout providing personal advice and suggestions about stocks based on Hazout’s own investments.

[29] That said, and despite Tripodi’s assertion to the contrary, I do not find Hazout to have been in a position of power, influence or control over Tripodi. They were peers, even though Hazout was older. Hazout was not in a fiduciary relationship with Tripodi.

Tripodi's SNRG Share Purchases and Sales and Claimed Trading Losses

[30] Tripodi purchased and sold shares in Susglobal, as follows:

a. 5,000 restricted shares in an initial exempt offering in November 2017 before the company went public. He still holds those shares because he claims his broker will not sell physical shares for him.

b. After the company first started trading on the OTCQB, Tripodi purchased 185,500 shares between December 24, 2018 and the end of September 2019. Tripodi continued to purchase shares during this period, in which the Company published two sets of annual financial statements that contained going concern notes with no disclosed profits from operations and while the Company remained listed only on the OTCQB and had not been uplisted to the NASDAQ.

c. Between October 2019 and October 2024, Tripodi purchased and sold shares in his USD account with a net gain of USD $8,251.57 (at a 1.40 exchange rate equivalent to CDN $11,552.20). The value of the remaining shares held in Tripodi’s USD trading account was estimated to be CDN $6,261.78 (based on a share price of USD $0.034 as at November 13, 2024 [i.e. 131,550.00 x 0.034 x1.40: number of shares x price per share x exchange rate]. Tripodi made a total gain of CDN $17,813.98 on the purchases and sales of Susglobal shares in Tripodi’s USD account.

d. In 2019 and 2020, Tripodi purchased shares in Susglobal in his Canadian account at a cost of CAD $94,268.03. The value of the shares held in Tripodi’s Canadian account as at November 13, 2024 was estimated to be CDN $7,761.28 (163,052 x 0.034 x 1.4: number of shares x price per share x exchange rate). This translates into a total net loss of $86,506.76 in the CDN trading account.

e. As of the trial, Tripodi was holding 294,602 shares in his trading accounts (per above) plus he was still holding the 5,000 restricted shares he originally purchased for which he has a paper share certificate, valued at $170 (5000 x .034 = $170).

[31] As of the closing of the trial, Tripodi’s claimed net trading losses amounted to CDN $68,862.80: $86,506.78 – ($17,813.98 + 170)).

[32] Tripodi says it was only in September 2019 that he decided that he could no longer trust Hazout and started to sell his Susglobal shares in the open market. He says that if he had sold all of the SNRG shares he owned as of September 30, 2019 the shares in his trading accounts would have been sold for USD $7,791 (185,500 shares x USD $0.042 share price as of October 1, 2019), which would have resulted in a greater loss than now claimed. Tripodi describes his trades of SNRG shares after September 2019 in his USD trading account to be mitigating trades, which he credits against his claimed damages (equivalent to CDN $17,813.98, as calculated above).

[33] The original amount claimed in the statement of claim of $150,000 was said to reflect the amounts Tripodi invested in Susglobal. That did not account for the current value of the shares he still holds or the profits that Tripodi earned on the mitigating trades that he says he engaged in after September 2019. The net claim of $68,862.80 advanced at the trial does reflect these credits.

The Claims and Defences

[34] When this action was first commenced, Tripodi claimed the following in his Statement of Claim:

a. damages for fraud and misrepresentation in the amount of $150,000.00;
b. a tracing order with regards to all amounts that have been wrongfully taken from Susglobal Energy Corp., by the other defendants or persons, and judgment for that amount;
c. an order declaring that the affairs of the defendant corporations have been conducted in a manner that is oppressive, or unfairly prejudicial, or that unfairly disregards the interests of the plaintiff and an order rectifying the oppressive conduct, and in particular without limiting the forgoing, and without limiting the remedies of the plaintiff:
i. an order requiring any and/or all of the defendants to pay to the plaintiff the amount, plus interest that he invested in Susglobal;
ii. an order granting leave for the plaintiff to register a certificate of pending litigation against the property described at Schedule "A" to the Statement of Claim [Hazout’s personal residence];
iii. an interim, interlocutory and final order restraining the defendants from dealing with their assets in the nature of a Mareva injunction;
iv. an order of punitive damages in the amount of $50,000 to punish them for stealing money from the operations of Susglobal and being deceitful to the investors of Susglobal with respect to the use of the funds that they invested in Susglobal; and
v. an order for pre and post judgment interest and costs.

[35] The amended statement of claim (“statement of claim”) replaced the $150,000 claim for damages for fraud and misrepresentation with a claim for oppression and misrepresentation. Tripodi’s claims remained otherwise unchanged through to the end of the trial. Tripodi continued to assert at the trial that he was the victim of a "ponzi-type scheme”.

[36] In the statement of defence and counterclaim, the defendants deny that they made any of the alleged misrepresentations. They maintain that at all material times, they complied and continue to comply with their disclosure requirements under the OTCQB and the Act. They maintain that any information that Tripodi relied upon for his share purchases was available to all prospective shareholders of Susglobal as a result of Susglobal's Securities & Exchange Commission Edgar Filings, other publicly available financial or other disclosure made by Susglobal, and/or as a result of Tripodi's legal work for the company.

[37] In their counterclaim, the defendants assert that the statement of claim makes false and malicious allegations against them. They further allege that it seeks extraordinary relief in the form of, among other things, a Mareva injunction and the registration of a certificate of pending litigation on Hazout's personal residence, in an attempt to extract money from the defendants and/or harm the reputation of the Defendants. In particular, Tripodi's claim makes baseless allegations against Hazout with respect to alleged misappropriation of funds in respect of the purchase of Hazout's primary residence, a property that was purchased almost two years prior to the formation of Susglobal.

[38] The defendants contend that these claims were designed to exert settlement pressure on them, with full knowledge that as a fully reporting issuer, Susglobal would be vulnerable to market losses as a result of the claim and its directors and officers subject to severe reputational risk. On account of this, they claim $250,000 in general damages and $250,000 in punitive damages.

[39] There was evidence at trial about public physical and verbal assaults by Tripodi in September and October 2019, during which various threats were made, said to be consistent with the course of conduct described in the counterclaim, designed to embarrass Hazout and damage his reputation. No specific damages are claimed for the assaults.

Analysis

The remainder of the decision, including the detailed analysis of the misrepresentation and oppression claims, the counterclaim, and the court's findings, follows as in the original text.

Endnotes

[1] At the outset of the trial the Statement of Defence of 1415745 Ontario Inc., o/a Landfill Gas Canada Ltd. was struck and default judgment was granted. That defendant is owned by the former chief executive officer of Susglobal, Gerald Hamaliuk.

[2] Tripodi also advanced a theory at trial that the “buy” recommendations were made by Hazout for personal gain, because he was a significant shareholder and Tripodi’s purchases on the open market would increase the value of Hazout’s shares. I assume this was in furtherance of the alleged breach of fiduciary duty (for personal gain) but I do not understand the premise of the argument, that Tripodi’s purchases of Susglobal shares on the open market would benefit Hazout as a shareholder who was continuing to hold his shares (his evidence being that he has never sold any of his Susglobal shares). No evidence or authority was provided for this assertion. I do not accept it but it is not directly relevant to the outcome of this case in any event.