COURT FILE NO.: FS-23-38666
DATE: 2025-02-05
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lily Ror, Applicant
AND: Rolando Pires, Respondent
AND: Rovimat Group Inc., Added Respondent

BEFORE: M. Kraft
COUNSEL: James D. Singer, for the Applicant
No one appearing for the Respondent or Added Respondent
HEARD: February 4, 2025

ENDORSEMENT

Nature of the Motion

[1] The wife brings a motion to be removed as a Director of Rovimat Group Inc. (“Rovimat”), effective August 11, 2019, pursuant to the oppression remedies under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (“CBCA”). She also seeks to effect service of this motion on Kevin Pires (“Kevin”), the husband’s son from a previous marriage, also a Director of Rovimat.

[2] Currently, the wife is one of three Directors of Rovimat. The husband and Kevin are the other two Directors. The wife also holds a 1/3 interest in the shares of Rovimat. She asks to be removed as a Director of Rovimat effective August 11, 2019, on account of the husband’s conduct which she argues has unfairly prejudiced her as a Director resulting in exposing her to potential liability.

Issue to be Determined

[3] The issues for me to determine on this motion are:

a. Whether the wife has established on a balance of probabilities that the husband’s conduct in relation to Rovimat has amounted to “oppression” or “unfair prejudice” to or “unfair disregard” of her interests as a Director; and

b. If the answer to a. is yes, whether the remedy of removing her as a Director of Rovimat as of August 11, 2019 is appropriate.

Background

[4] By way of brief background:

a. The parties were married on July 10, 2001. They separated on January 20, 2021.

b. The husband has since moved to Portugal.

c. The corporate register confirms that Rovimat was incorporated on October 5, 2015 under the CBCA, at which time the wife was named one of two Directors, with the other director being Kevin. When Rovimat was incorporated the wife was a 50% shareholder with Kevin. Kevin has always been employed by Rovimat. The shareholdings and Directorship of Rovimat was established in this way because the husband had declared bankruptcy in 2015.

d. Rovimat was in the business of constructing custom homes.

e. In his Answer, the husband pled in paragraph 33 that:

“The Husband declared personal bankruptcy in 2015 and, as a result, he could not be a Director of Rovimat at incorporation, and the Wife was installed as a Director.”

f. On August 11, 2019, unbeknownst to the wife, the husband took steps to dissolve Rovimat.

g. On April 1, 2020, the husband filed “Articles of Revival” for Rovimat, again, unbeknownst to the wife, and her 50% interest was diluted such that she became a one-third shareholder, and one of three Directors, with the husband installed as a Director along with Kevin.

h. The wife had no knowledge that Rovimat had been dissolved or revived and only discovered this when she attended at the accountant’s office after the parties had separated and saw a Schedule 50 to the husband’s income tax return in June 2023.

i. The wife was never asked to sign or authorize any corporate documentation with respect to Rovimat.

j. It is agreed that the wife was completely uninvolved in Rovimat’s operations. Rovimat was always operated and controlled by the husband. The husband’s Answer sets out in paragraph 34:

“Prior to the separation, the Wife was not involved in Rovimat’s business. She had no role, formal or informal, in the company. She did not perform any services for the company, save for the occasional organization of paper bills into file folders at the home. All bookkeeping services were performed by a company bookkeeper.”

k. Rovimat’s company bookkeeper was the husband’s other son from a previous marriage, Matthew Pires.

[5] On October 10, 2024, the husband was ordered by Shore, J. to pay spousal support to the wife, retroactive to February 1, 2023, in the sum of $5,325 a month. The husband has failed to comply with this order and remains in Portugal. Shore, J. also ordered the husband to pay $8,000 in costs, which he ignored.

[6] In his pleading, the husband states that Rovimat ceased carrying on business and that he is now a “consultant” for a new company that constructs custom homes, called Brockton Builds, which is operated by his two sons, Kevin and Matthew.

[7] Brockton Builds’ office is located at the same address where the husband resided after separation before he left for Portugal. This address is currently where Matthew resides. The wife believes that Brockton Builds was incorporated to avoid paying creditors of Rovimat. The two companies carry on the same business of building custom homes.

[8] In accordance with the direction of Nakonechny, J. at a Settlement Conference, the wife was ordered to serve the husband’s son, Matthew, with this motion. This was an inadvertent error on the court’s part since it is Kevin, not Matthew, who is a Director of Rovimat with the wife. In any event, the wife served Matthew, as directed by Nakonechny, J. on January 14, 2025, by special service. The motion was originally returnable on January 30, 2025 but was rescheduled by the court. Accordingly, on January 21, 2025, the wife served a revised Notice of Motion with the new return date of February 4, 2025 on Matthew in person but he declined to open the door and, as a result, the revised motion materials with the new return date was slid under Matthew’s door. On January 7, 2025, the wife served Kevin by mail at his last known address registered with the government and at a second home address, being the address on his last pay stub address with the motion materials and she reserved the materials with the new return date on January 17, 2025. Further, the wife served the husband by email with these motion materials on January 22, 2025, given that he is in Portugal.

[9] I am satisfied that the husband, Matthew and Kevin have all been served with these motion materials. No one appeared for Rovimat. At one point in these proceedings, Rovimat was represented by Lenzner Slaght. On September 3, 2024, Rovimat filed a Notice of Change in Representation and the husband indicated he decided to act in person. The husband did not appear on the motion. No responding motion materials were filed. Service on Kevin by the wife is hereby effected.

The Law

[10] Pursuant to s.108(1) of the CBCA, a director of a corporation ceases to hold office when the director (a) dies or resigns; (b) is removed in accordance with s.109; or (c) becomes disqualified under subsection 105(1).

[11] A resignation of a director is effective at the time a written resignation is sent to the corporation or at the time specified in the resignation, whichever is later: s.108(2) of the CBCA.

[12] It has been open to the wife, therefore, to resign as a Director of Rovimat at any time. She has not done so, presumably, because she seeks to be removed as a Director effective to August 11, 2019, which is about 18 months prior to the parties’ separation, and wants to ensure that her liability is limited to that date.

[13] Every director and officer of a corporation in exercising their powers and discharging their duties shall (a) act honestly and in good faith with a view to the best interests of the corporation, and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances: s.122(1) of the CBCA.

[14] To claim the remedies sought in this motion, the wife must fall within the definition of “complainant” as set out in s. 238 of the CBCA, which she does since a “complainant” means (b) a director or an officer or a former director or officer of a corporation of any of its affiliates.

[15] The statutory grounds under which an oppression remedy can be made requires that the “court is satisfied that in respect of a corporation…(a) any act or omission of the corporation effects a result; (b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (c) the powers of the directors of the corporation…are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of any …director.”

[16] The Court “may make any interim or final order it thinks fit including, without limiting the generality of the foregoing… (k) an order directing rectification of the registers or other records of a corporation under s. 243.”

[17] In an application under s. 243, the court may make any Order it thinks fit, including, without limiting the generality of the foregoing, (a) an order requiring the registers or other records of the corporation to be rectified.

[18] When dealing with a close corporation, the Court may have regard to the relationship between the shareholders and not simply legal rights as such. In addition, the Court must look at the bona fides of the corporate transaction in question to determine whether the act of the corporation is effects a result which is oppressive or unfairly disregards the interests of a shareholder (of which the wife is one) or by inference a Director (included as a “complainant”).
See Ferguson v. Imax Systems (1983), 1646 (ONCA), pp. 12-13.

[19] Where it is found that the business or affairs of the corporation have been carried out in a manner that is oppressive or unfairly disregards the rights of a complainant, the Court can make an Order to rectify the matter complained of. The Court is given a broad discretion in this regard, since s. 248(3) permits the Court to make an interim or final order it considers appropriate and lists a non-exhaustive list of potential orders.
See Fuentes v. Camino Construction Inc. et al., 2021 ONSC 2967, paras 40-42.

[20] The test for establishing oppression was recently reviewed by Sah, J. in Howard v. Howard et al., 2024 ONSC 42, paras 17-24, which I adopt below:

[17] The Supreme Court of Canada set out the test for establishing oppression in the case BCE Inc. v. 1976 Debentureholders, 2008 SCC 69. The test articulated in BCE is summarized as follow:
a. Does the evidence support the reasonable expectations asserted by the claimant?
b. Does the evidence establish that reasonable expectations were violated by conduct falling within the terms “oppression”"unfair prejudice” to or “unfair disregard” of a relevant interest?
See BCE, at para. 68.

[18] Oppression generally turns on particular expectations arising in particular situations. See BCE, at para. 70.

[19] Reasonable expectations are fact-specific in nature and sometimes include general commercial practices, the nature of the corporation, the relationship between the parties, past practices, steps the claimant could have taken to protect itself, representations and agreements, and the fair resolution of conflicting interests between corporate stakeholders. See BCE, at paras. 70 and 72.

[20] When assessing reasonable expectations, a claimant must demonstrate that a failure to meet reasonable expectations involved unfair conduct and prejudicial consequences. Not every failure to meet a reasonable expectation will give rise to equitable oppression remedies. The conduct must fall within the concept of “oppression”, “unfair prejudice” to or “unfair disregard” of a claimant’s interests. See BCE, at para. 89.

[21] Oppression is generally associated by conduct described as burdensome, harsh and wrongful, a visible departure from standards of fair dealing, or an abuse of power. It is the most serious of the three listed offences.

[22] Unfair prejudice describes a less offensive conduct, such as squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratio, preferring some shareholders with management fees, and paying higher director’s fees than the industry norm. See BCE, at para. 93.

[23] Unfair disregard is the least serious offense and can include favouring a director by failing to properly prosecute claims, improperly reducing shareholder dividends, or failing to deliver property belonging to a claimant. See BCE, at para. 94.

[21] Where it is found that the business or affairs of the corporation have been carried out in a manner that is oppressive or unfairly disregards the rights of a complainant, the Court can make an Order to rectify the matter complained of. The Court has broad, equitable jurisdiction to enforce not just what is legal but what is fair. Oppression is an equitable remedy. It seeks to ensure fairness—what is “just and equitable”. See BCE, at para. 58.

[22] The Court is given a broad discretion in this regard, including but not limited to: restraining the conduct complained of, appointing directors in place of, or in addition to, all or any of the current directors, regulating corporate affairs by amending the articles and by-laws or creating/amending a unanimous shareholder agreement, varying or setting aside a transaction or contract, winding up the corporation, directing an investigation, and requiring a corporation to produce financial statements or an accounting.

Application of the Law to the Facts

[23] The wife seeks to be removed as a Director of Rovimat because she is very concerned about exposure to personal liability given the irresponsible manner in which the husband has operated Rovimat, which has unfairly prejudiced her, as follows:

a. The husband ran up corporate debt and depleted Rovimat’s two CIBC bank accounts between the date of separation and July 2023 to the tune of about $367,000. The wife never received any of these monies, despite being a 1/3 shareholder.

b. Without the wife’s knowledge, the husband applied for and obtained a Covid loan from the government of $40,000, which is reflected on Rovimat’s books for the last year of financial statement, for fiscal year 2021. The wife does not know if the husband took out the second government available Covid loan of $20,000. The husband received these funds.

c. Without the wife’s knowledge, the husband has not remitted HST collected by Rovimat to the CRA. As of March 8, 2024, the HST arrears for Rovimat are $13,143.77. The wife believes the husband received the HST.

d. Without the wife’s knowledge, the husband has not remitted employee deductions to CRA. As of March 9, 2024, employee remittance arrears for Rovimat are $1,267.17. The wife believes that the husband has paid these employee deductions to himself and/or to his two sons, either Kevin as a Director or Matthew as the corporate bookkeeper.

e. Without the wife’s knowledge, the husband has failed to file T4 for Rovimat or income tax returns since 2022.

[24] In June 2023, the husband made a few small payments towards Rovimat’s VISA but by the end of July 2023, the corporate card was maxed out at its limit. On July 24, 2023, the wife attended at Rovimat’s CIBC bank and with the approval of the account manager, she withdrew $19,000 from Rovimat’s account to cover the corporate Visa balance, at which time she telephoned the husband and advised what she had done. The wife deposes that she told the husband if he paid off the Rovimat card and cancelled it, she would pay him back the $19,000. According to the wife, the husband threatened her that he could cause her credit to take a much larger hit by running up further Rovimat governmental debt, for which she would be personally liable as a Director.

[25] Essentially, the husband appointed the wife as a Director of a revived corporation that she never knew was extinguished or revived, with her share ownership having been diluted from 50% to 33%. In filing the Articles of Revival (Form 15), the husband would have had to certify that the request to revive the company was made in “good faith.” I am persuaded that not having notified the wife of the dissolution and subsequent revival of Rovimat, it cannot have been filed in good faith.

[26] I am satisfied on the evidence before me that the wife has identified expectations as a Director of Rovimat that she claims have been violated by the husband’s conduct, particularly, since his conduct has had the effect of exposing her to liability as a Director of Rovimat. When the husband signed the Articles of Revival of Rovimat he did not do so in “good faith.”

[27] Based on the evidence before me, I am persuaded that the husband’s conduct has resulted in unfair prejudice to the wife, because his failure to communicate, or otherwise advise her that he was dissolving Rovimat, and then reconstituting the shareholding and Directors of Rovimat was not done in good faith, nor did he exercise the care and diligence that a reasonably prudent person would exercise in comparable circumstances, as required by him to do under s.122 of the CBCA. The husband’s actions have resulted in unfair consequences to the wife by exposing her to personal liability for corporate debt starting on August 11, 2019, when he dissolved the company. Similarly, I can conclude that the husband’s conduct constitutes an unfair disregard of the wife’s interests. The husband’s failure to file corporate financial statements and income tax returns or pay employee deductions and HST suggests that he disregards the wife’s liabilities and role as a Director, and this is contrary to the wife’s reasonable expectations.

[28] I am satisfied that the remedy sought by the wife that she be removed as a Director effective August 11, 2019, when the husband first dissolved Rovimat is necessary to satisfy the wife’s reasonably held expectations.

[29] The wife asks for costs of this motion. The Bill of Costs for the wife shows fees incurred of $5,645 on a full indemnity basis. This does not include the preparation or attendance at the motion, which the wife’s counsel estimated to be a further 2 hours and 45 minutes, at his hourly rate of $525. The wife was entirely successful on the motion and is presumptively entitled to costs: r. 24(1) of the Family Law Rules.

[30] There is no provision in the Family Law Rules that provides for a general approach of “close to full recovery” costs. Rather, rule 24(1) set out the appropriate considerations in fixing the quantum of costs: Beaver v. Hill, 2018 ONCA 840, para 11.

[31] I find that the time spent by the wife’s counsel is reasonable and proportionate to the issues argued.

ORDER

[32] This court makes the following order:

a. Effective August 11, 2019, the wife shall be and is hereby removed as a director of Rovimat Group Inc. and the records of Rovimat Group Inc. shall be amended accordingly.

b. The husband shall pay the wife costs of this motion, fixed in the sum of $5,800, inclusive of HST, payable within 30 days.

M. Kraft
Date: February 5, 2025