Reasons for Decision

Introduction

Jonathan Rosenthal, in his personal capacity, brings a motion for summary judgment pursuant to rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg 194 (the “Rules”). Mr. Rosenthal seeks an order dismissing the claim by Paragon Protection Ltd. (“Paragon”) and Rosencrantz & Guildenstern Inc. (“R&G”), the plaintiffs, against him on the basis that Paragon and R&G are not proper complainants under s. 245 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”) to advance oppression remedy claims.

In the notice of motion, as alternative relief, Mr. Rosenthal seeks an order striking the claim against him in his personal capacity pursuant to Rule 21. However, as noted below, argument on this motion was limited to the issue of whether the plaintiffs are proper complainants under s. 245 of the OBCA.

Background

Overview

This motion was scheduled by endorsement of Justice Kimmel dated February 20, 2025. In that endorsement she wrote: “The grounds for summary judgment dismissing this claim are restricted to the question of whether the plaintiffs are proper complainants under ss. 245 of the Business Corporations Act (Ontario) to advance the s. 248 OBCA oppression remedy claims against Jonathan Rosenthal in his personal capacity.”

Accordingly, the issues to be addressed today are limited. However, the claim against Mr. Rosenthal personally is a part of a larger, complex dispute between the plaintiffs and the other defendants, which include Mr. Rosenthal in his capacity as trustee to his father Cyril Rosenthal’s estate. That dispute concerns ownership of the plaintiff Paragon and Cyril Rosenthal’s conduct as accountant for Paragon.

The claim against Mr. Rosenthal personally is made under the oppression remedy provisions of the OBCA and relates to Mr. Rosenthal's actions as a director of the corporate defendant Tamstu-Harjon Holdings of Canada Limited (“Tamstu”).

Mr. Rosenthal takes the position that the plaintiffs are not proper ‘complainants’ under the oppression remedy provisions of the OBCA and have no standing to bring the claim against him personally.

The plaintiffs admit that they are not current or former registered holders or beneficial owners of any securities of Tamstu and that they are not currently creditors of Tamstu. Rather, the plaintiffs assert that they are proper persons to be complainants as ‘potential’ creditors, with their status dependent on the underlying litigation.

The Parties

Mr. Rosenthal is a lawyer in good standing with the Law Society of Ontario. He is a defendant to this action both in his personal capacity and in his capacity as a trustee for the estate of his late father, Cyril Rosenthal (the “Estate”).

Cyril Rosenthal founded the defendant company, Tamstu, in 1973, and remained its sole shareholder and directing mind until his death on December 1, 2008.

Paragon is one of Canada’s largest privately owned and operated security companies. The plaintiff R&G is the sole registered shareholder of Paragon, which R&G purchased from another company, Centurion Investigation Ltd. (“Centurion”), in 1978 through a series of transactions.

The parties dispute whether in 1978, Tamstu acquired a 25% interest in Paragon. This is the core issue in dispute between the Estate, Tamstu, Paragon, and R&G. In 1978, at the same time that Paragon purchased Centurion, it entered into an agreement with Tamstu (the “Consultant Agreement”). The main dispute between the parties concerns the terms and enforceability of the Consultant Agreement.

Cyril Rosenthal left the residue of his Estate to five of his grandchildren, none of whom are Jonathan Rosenthal’s children. Jonathan Rosenthal became a trustee of the Estate on December 17, 2020. At the same time, he also became a director of Tamstu. It is not disputed that Jonathan Rosenthal has no personal interest in the outcome of the litigation.

The Litigation

On December 9, 2022, Tamstu commenced an application against Paragon, R&G, Ronald J. France (“RJ”), Donna France, and Bud Ralph claiming, among other things: the respondents engaged in conduct that was oppressive, unfairly prejudicial to, and unfairly disregarded Tamstu’s interests in Paragon; R&G and Paragon breached the Consultant Agreement; and Tamstu is entitled to an annual amount equal to 25% of the before-tax profit of Paragon.

After a series of case conferences in that application, on September 6, 2023, Paragon and R&G commenced an action against Tamstu, Jonathan Rosenthal and Benjamin Barrett as Estate trustees, and against Jonathan Rosenthal personally. The Tamstu application commenced in December of 2022 became a counterclaim to the September 2023 action commenced by Paragon and R&G.

The claim against Jonathan Rosenthal personally is contained at para 58 of the plaintiffs’ Statement of Claim which reads:

58. The Plaintiffs further state that Tamstu, and Jonathan Rosenthal (“Jonathan”), have acted in a manner that is oppressive and that unfairly disregards the reasonable expectations of the Plaintiffs. The Plaintiffs state that Jonathan, in connection with Tamstu, engaged in a campaign to disrupt and to threaten to disrupt the management of Paragon, including its day to day operations, and to question and disrupt management decisions to which he and Tamstu have no authority. The Plaintiffs state that Jonathan, through Tamstu, either directly, or through persons engaged by Tamstu, interfered with, or threatened to interfere with, the Plaintiffs’ professional advisors, including subjecting them to unreasonable demands on the basis of a false narrative intended to prejudice the ongoing business affairs of the Plaintiffs.

Mr. Rosenthal served Paragon and R&G with a Demand for Particulars on October 17, 2023, seeking particulars of the claim against him personally. Paragon and R&G delivered their Response to Demand for Particulars on October 26, 2023, in which they pleaded further details of the allegations against Mr. Rosenthal personally.

On April 24-26, 2024, RJ was examined for discovery in his personal capacity and as a representative for Paragon and R&G. In that context, RJ's counsel confirmed that Paragon was not a current creditor of Tamstu, but depending upon the interpretation given to the Consultant Agreement (which is at issue in the litigation) Paragon could be a creditor of Tamstu and would have a claim in that capacity – as potential creditor. However, it is common ground that outside of the issues at play in this litigation, neither Paragon nor R&G are creditors of Tamstu.

Issue

The issue on this motion is whether or not there is a genuine issue requiring a trial as to whether the plaintiffs are proper complainants under the OBCA oppression remedy provisions with respect to the alleged oppression claim against Mr. Rosenthal as a director of Tamstu.

Analysis

Test for Summary Judgment

Rule 20.04(2)(a) provides: “The court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence”.

Rule 20.04(2.1) sets out the court’s powers on a motion for summary judgment as follows:

In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

There is no genuine issue requiring a trial when the Court is able to reach a fair and just determination on the merits of the motion. This will be the case where the process (1) allows the court to make necessary findings of fact; (2) allows the Court to apply the law to the facts; and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result: see Hryniak v. Mauldin, 2014 SCC 7, para 49; Moffitt v. TD Canada Trust, 2023 ONCA 349, para 39.

While Mr. Rosenthal bears the onus on this motion of establishing that there is no genuine issue requiring a trial, all parties, including the plaintiffs, have an evidentiary burden and must put their best foot forward with respect to the existence of material issues to be tried: Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785, aff’d 2016 ONCA 753, paras 48 and 51.

There is no requirement that the defendant put forward any evidence, however, the Court is entitled to assume that all of the evidence that any party would intend to lead at trial in relation to the issue before the Court has been raised. I am not prepared, as urged by the Plaintiffs, to find that any adverse inference should be made against Mr. Rosenthal because he did not personally provide an affidavit. The potential conduct of Mr. Rosenthal is not presently at issue – rather, the issue before me is limited to whether the plaintiffs are proper complainants.

Partial Summary Judgment

I am mindful that partial summary judgment should only be granted in the clearest of cases where there are issues that can be readily bifurcated, and which do not give rise to risks of delay, expense, inefficiency, and inconsistent findings: see Malik v. Attia, 2020 ONCA 787, para 62.

The plaintiffs claim that Mr. Rosenthal is involved in the litigation as estate trustee of his father’s estate in any event, so there will be no difference to the conduct of the litigation if the claim against him personally continues or not. I do not agree. The prosecution of the litigation will be less expensive and will be narrowed if the claim against Mr. Rosenthal personally is dismissed. Mr. Rosenthal will not be required to participate in his personal capacity, with separate counsel, at the full trial of the broader dispute between the plaintiffs and the other defendants.

The plaintiffs also claim that there will be risks of inconsistent findings as oppression is also claimed against Tamstu directly. In this respect, Mr. Rosenthal only became a director of Tamstu in December of 2020. As such, claims against him for oppression can only relate to his conduct as director following his appointment. The claims for oppression against Tamstu relate to conduct dating prior to Mr. Rosenthal’s role as director and conduct prior to Cyril Rosenthal’s death and the payment of consulting fees when allegedly there were no consulting services being provided.

I am satisfied that the issue to be litigated on this motion meets the objectives of proportionality, efficiency, and cost-effectiveness, with limited risk of duplicative or inconsistent findings: see NDrive, Navigation Systems S.A. v. Zhou, 2022 ONCA 602, para 21. This is consistent with Justice Kimmel’s endorsement of February 20, 2025, referenced above, where she performed the triage function and permitted this limited summary judgment motion to proceed.

Are the Plaintiffs Proper Complainants?

The oppression remedy in s. 248 of the OBCA provides a wide-ranging discretion to the Court to rectify matters where the Court is satisfied by a complainant that the corporation has acted in a manner that is “oppressive…or unfairly disregards the interests of any security holder, creditor, director or officer of the corporation.” The oppression remedy is available to “complainants” as defined in s. 245.

In order to have standing under the OBCA oppression remedy, a party must qualify as a “complainant” under the OBCA. Under s. 245(2) of the OBCA:

“complainant” means,

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or of any of its affiliates,

(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part.

The plaintiffs admit that they do not qualify as a complainant under 248(2)(a) or (b). Therefore, they rely on the discretion of the Court under 248(2)(c) to claim they are a proper person to make an application.

In Royal Trust Corporation of Canada v. Hordo, [1993] OJ No 1560 (Gen Div), para 14, Justice Farley noted that although creditors are not complainants as of right, the Court may use its discretion under 245(2)(c) to grant a creditor the status of complainant. He cautioned, however, that this should not be done routinely. Rather, he considered five criteria to conclude that a claimant was not a “proper person” to seek an oppression remedy:

a. The claimant was not a creditor when the oppression occurred;
b. The claimant’s interest in the affairs of the corporation was remote;
c. The complaints were unrelated to the circumstances giving rise to the alleged debt or the creditor is not proceeding in good faith;
d. The claimant was not in a position analogous to that of a minority shareholder; and
e. The claimant had no particular legitimate interest in the manner in which the affairs of the company are managed.

Justice Farley also noted that a person who may have a contingent interest in an uncertain claim for unliquidated damages is not a creditor: see Royal Trust Co at para 15.

A claim as a creditor based on the very litigation in which the claim for oppression is made, has been found to be insufficient to establish a plaintiff as a proper complainant. Rather, the plaintiff, to be a proper complainant must be a creditor at the time of the alleged oppression: see Apotex Inc. v. Laboratories Fournier S.A., paras 40-41, 41-43 and Torres v. MGL Properties Ltd., 2021 ONSC 8239, para 23.

Here, with respect to the claim of oppression against Mr. Rosenthal, the plaintiffs put forward their claim as one arising because Mr. Rosenthal ignored the course of conduct of Tamstu over more than a decade in respect of the Consultant Agreement, and put himself in the position as a director of Tamstu for the express purpose of commencing litigation against Paragon and R&G which was contrary to the established course of conduct of the parties and the Consultant Agreement. The plaintiffs' claim for oppression against Mr. Rosenthal—as they expressed it—is that Mr. Rosenthal directed Tamstu to breach the Consultant Agreement and commenced litigation with claims made directly against the officers and directors of Paragon in an attempt to interfere with Paragon itself.

Although the plaintiffs claim the relationship between Paragon and Tamstu is an unusual one, their complaint focuses on the litigation commenced by Tamstu against Paragon. This is not the type of interest that is analogous to that of a minority shareholder which was referenced in Royal Trust Co. Rather, this is precisely the type of circular reasoning warned against in Apotex at paras 41-43.

In considering the factors referenced in Royal Trust Co, there is no clear evidence before me as to what the reasonable expectations of Paragon or R&G were that were violated by Mr. Rosenthal’s conduct as a director of Tamstu. As counsel articulated during the hearing, the reasonable expectation was that Mr. Rosenthal would not cause Tamstu to violate the Consultant Agreement and commence the litigation referred to above. Even if I accept that there is evidence of that expectation (which I was not referred to during the hearing), that expectation is not one analogous to that of a minority shareholder that is properly the subject of oppression remedy relief. Rather, if that is all that were required for a claim of oppression, every claim for breach of contract would be elevated to that of a claim for oppression.

Accordingly, I am not persuaded that, based on the record before me, there is a triable issue as to whether plaintiffs are proper complainants for purposes of s. 245 of the OBCA. As such, the plaintiffs cannot assert a claim for oppression remedy against Mr. Rosenthal as a director of Tamstu.

Disposition

For the reasons set out above, I grant Mr. Rosenthal’s motion for summary judgment.

If the parties are not able to resolve costs of this matter, Mr. Rosenthal may email a costs submission of no more than three double-spaced pages to the Commercial List Office within 15 days of the date of this endorsement. Paragon and R&G may deliver responding submissions of no more than three double-spaced pages within 15 days following the delivery of Mr. Rosenthal’s submissions. No reply submissions are to be delivered without leave.

The Honourable Justice Jane Dietrich
Date: June 24, 2025