CITATION: Tayts v. Fox, 2026 ONSC 226
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
AMOS TAYTS
Plaintiff
– and –
GORDON FOX, HARVEY SHAPIRO, MAXIM ZAVET, LEVY ZAVET PROFESSIONAL CORPORATION, EMBLEM CANNABIS CORPORATION, EMBLEM CORP., KINDCANN.COM INC., MZ PRIME HOLDINGS LTD. and WHITE CEDAR PHARMACY CORPORATION
Defendants
John J. Adair and Jacqueline Houston, for the Plaintiff
Justin Necpal, for the Defendants
HEARD: June 2,3,4,5,6,9,10,11,12, July 25, 2025, and January 9, 2026
L. BROWNSTONE J.
Table of Contents
Introduction................................................................................................................................... 3
Issue One: Has Mr. Tayts established there has been a breach of contract and/or oppressive conduct under s. 241 of the Canada Business Corporations Act? If so, what is the appropriate remedy? 4
The parties............................................................................................................................. 4
Assessing the credibility and reliability of the evidence.................................................... 5
Genesis of the KindCann venture........................................................................................ 8
a) Peace Naturals..................................................................................................................... 9
b) Discussions between Mr. Tayts and Mr. Zavet about a medical cannabis enterprise....... 10
c) The Naicatchewenin First Nation discussions.................................................................. 10
d) The Paris, Ontario site....................................................................................................... 12
- The claims in contract and oppression.............................................................................. 14
e) Governing legal principles - contract................................................................................ 14
b) Governing legal principles - oppression............................................................................... 14
- The terms and expectations of the parties’ arrangements.............................................. 16
a) Mr Tayts was intended to be a co-founder........................................................................ 16
b) Mr. Tayts was to invest “sweat equity”............................................................................ 17
c) Mr. Zavet would incorporate a company to hold both his and Mr. Tayts’ shares in the cannabis venture 18
d) Mr. Zavet and Mr. Tayts came to a general agreement that Mr. Tayts would have between 15% and 25% of Mr. Zavet’s shares........................................................................................................ 20
e) Mr. Tayts contributed heavily to the venture in the manner expected of him.................. 24
Is there an enforceable contract between Mr. Tayts and Mr. Zavet, or between Mr. Tayts and the three personal defendants?......................................................................................................... 29
What were the parties’ reasonable expectations?............................................................ 30
Were Mr. Tayts’ reasonable expectations breached by conduct that constitutes “oppression”, “unfair prejudice” or “unfair disregard” of his interests?..................................................... 31
a) Allocation of shares........................................................................................................... 31
b) The events of late December 2014.................................................................................... 32
c) This conduct constitutes unfair disregard an unfair prejudice.......................................... 35
- To what remedies is Mr. Tayts entitled?........................................................................... 37
a) Is Mr. Tayts entitled to a remedy against any or all of Mr. Zavet, Mr. Shapiro, and Mr. Fox personally?................................................................................................................................ 37
b) To what remedy is Mr. Tayts entitled?............................................................................. 38
Issue Two: Has Mr. Tayts established that he is entitled to a remedy on the basis of unjust enrichment/quantum meruit? If so, what is the appropriate remedy?................................... 41
Issue Three: Were Mr. Tayts and Mr. Zavet in a solicitor-client relationship such that Mr. Zavet owed fiduciary obligations to Mr. Tayts? If so, did Mr. Zavet breach those obligations?............ 43
Disposition.................................................................................................................................... 49
Introduction
1The plaintiff, Amos Tayts, and the defendant Maxim Zavet, a lawyer, were friends. Mr. Zavet, and his firm Levy Zavet also acted for Mr. Tayts, Mr. Tayts’ wife, and Mr. Tayts’ businesses on several occasions.
2At the time the regulatory framework for medical cannabis was expected to expand, Mr. Tayts and, to a limited degree Mr. Zavet, had explored a medical cannabis venture with a third party, Peace Naturals. That foray did not end well for either Mr. Tayts or Mr. Zavet. The two friends then explored medical cannabis ventures together. They were introduced to the defendants Mr. Shapiro and Mr. Fox, former lawyers and business people with a successful history in many enterprises in the healthcare field.
3Ultimately a successful cannabis venture, to which I will refer throughout these reasons as KindCann, was launched. Mr. Zavet, Mr. Fox, and Mr. Shapiro were issued founder’s shares. Mr. Tayts was not.
4Mr. Tayts started this litigation. He seeks a declaration and remedies for breach of contract and/or oppression. In the alternative, Mr. Tayts seeks a restitutionary remedy based on quantum meruit and unjust enrichment. He also seeks damages for breach of fiduciary duty against Mr. Zavet and Levy Zavet Professional Corporation.
5The defendants deny that Mr. Tayts is entitled to any relief. They deny there was a contract with Mr. Tayts and therefore there cannot have been any breach of contract. Further, they argue he has not established any basis for a declaration that there has been oppressive behaviour and that therefore there is no basis upon which he is entitled to any remedies for oppression.
6While the defendants acknowledged at trial that Mr. Tayts had a reasonable expectation of receiving founder’s shares, they deny that he was entitled to 25% of Mr. Zavet’s shares. The number of shares he would receive was within Mr. Zavet’s unfettered discretion. Having failed to prove the existence of a contract for a specific percentage of shares as alleged, he is not entitled to any.
7In the alternative, the defendants argue Mr. Tayts failed to mitigate his damages when he did not take the shares in KindCann that Mr. Zavet did offer him. They argue the most Mr. Tayts is entitled to is a quantum meruit claim for recruiting services he provided to KindCann.
8Further, Mr. Zavet denies he was acting as Mr. Tatys’s lawyer in their pursuit of a cannabis venture, and denies he owed any fiduciary duties to Mr. Tayts.
9The court must determine the following issues:
Issue one: Has Mr. Tayts established there has been a breach of contract and/or oppressive conduct under s. 241 of the Canada Business Corporations Act R.S.C. 1985, c. C-44? If so, what is the appropriate remedy?
Issue two: Has Mr. Tayts established that he is entitled to a remedy on the basis of unjust enrichment/quantum meruit? If so, what is the appropriate remedy?
Issue three: Were Mr. Tayts and Mr. Zavet in a solicitor-client relationship such that Mr. Zavet owed fiduciary obligations to Mr. Tayts? If so, did Mr. Zavet breach those obligations? If so, what is the appropriate remedy?
10For the reasons that follow, I find Mr. Tayts is entitled to a remedy based on oppression. He is entitled to be compensated by Mr. Zavet as though he owned 15% of the total of Mr. Zavet’s shares in KindCann. I find he is entitled to the same relief, in this case from Mr. Zavet and MZ Prime, on his quantum meruit/unjust enrichment claim. I do not find that Mr. Zavet was Mr. Tayts’ lawyer, and I therefore find no breach of fiduciary obligation.
Issue one: Has Mr. Tayts established there has been a breach of contract and/or oppressive conduct under [s. 241](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-44/latest/rsc-1985-c-c-44.html#sec241_smooth) of the [Canada Business Corporations Act](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-44/latest/rsc-1985-c-c-44.html)? If so, what is the appropriate remedy?
11I will start with a review of the parties and my overall findings on their credibility and reliability. I will then consider the genesis of the KindCann venture, and the principles and factual findings relevant to assessing whether there was an agreement between the parties and what Mr. Tayts’ reasonable expectations were. I will then consider whether there was oppressive conduct.
1. The parties
12The plaintiff, Amos Tayts, owns and operates two businesses with his wife, Talya Lev-Mor. The first is a recruiting business with a focus in the healthcare field. The second is a business focussed on résumé writing.
13Mr. Tayts’s personal history is relevant to the unfolding of events. The following facts are not contested, and I accept them1. When Mr. Tayts was in high school, in a misguided effort to get money to help his struggling family, he agreed to bring marijuana from Jamaica into Canada. For this, he would be paid $10,000, a sum his father desperately needed.
14Mr. Tayts was caught and convicted of importing narcotics, for which he was sentenced to two years less a day of jail time. As a result of his jail sentence, Mr. Tayts did not complete high school.
15In adulthood, as noted, Mr. Tayts started and operated two successful businesses. He received a pardon for his criminal conviction.
16Mr. Tayts and Mr. Zavet grew up in the same neighbourhood but were not particularly friendly with each other as youth. They met again as adults and became friends in about 2007 or 2008.
17Mr. Zavet was a lawyer who, during the time period relevant to this litigation, practised through three firms: Porco Zavet, then Porco Zavet Levy, and finally Levy Zavet. He testified that his practice focused on real estate. Mr. Zavet owns 50% of the defendant MZ Prime Holdings, an Ontario corporation and the entity through which he purchased shares in the cannabis venture at the heart of this dispute. Mr. Zavet’s brother owns the other 50% of MZ Prime.
18The defendant Harvey Shapiro is a former lawyer with a history of successful ventures in the health care field.
19The defendant Gordon Fox is a close associate of Mr. Shapiro. The two joined forces in several enterprises, in which Mr. Fox provided advice and direction focused on compliance issues.
20Mr. Shapiro and Mr. Fox owned the defendant White Cedar Pharmacy Corporation, an Ontario corporation. White Cedar carried on business as a pharmacy that provided pharmaceutical services in northern Ontario to clinics who were treating patients with opioid habituation.
21The medical marijuana business at the heart of these proceedings was carried on through various federally incorporated corporations with variations of the name “KindCann”. Mr. Fox, Shapiro, and Zavet were each a director of one or more of the KindCann corporations. In December 2016, KindCann amalgamated with another corporation, went public, and was continued under the name Emblem Cannabis Corporation, a federally incorporated corporation.
2. Assessing the credibility and reliability of the evidence
22There is no written agreement between Mr. Tayts and any of the defendants. Therefore, a determination of what transpired between the parties, and any resulting rights and obligations, depends on a review of the written evidence that does exist and, to a large degree, on an assessment of the parties’ credibility.
23Assessing credibility is a complex task, well explained in the oft-cited case of Faryna v. Chorny, [1952] 2 D.L.R. 354, 4 W.W.R. (N.S.) 171 (B.C. C.A.) as follows:
The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject [the witnesses’] story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions (p. 357).
24Thus, a trial judge considers whether a witnesses’ evidence is consistent with other evidence and with the surrounding context or conditions to which the evidence relates. Consistency with other evidence, including documentary evidence, can be a significant factor. The plausibility of the evidence in context is important. Other issues affecting a credibility assessment may include whether a witness is argumentative when confronted with facts or suggestions that challenge her account or whether she is willing to make reasonable concessions, whether a witness is evasive or straightforward, and whether a witness has an interest in the outcome of the proceeding.
25The court must consider all the evidence and then explain “the complex intermingling of impressions that emerge after watching and listening to witnesses and attempting to reconcile the various versions of events”: R. v. Gagnon, 2006 SCC 17, [2006] 1 S.C.R. 621 at para. 20. The court may accept some, none, or all of a witnesses’ evidence: R. v. D.R., [1996] 2 S.C.R. 291 at para. 93.
26The court must also consider whether there are factors that affect the reliability of a witness’ evidence, such as the witness’ ability to observe the interactions at issue or the passage of time since the events occurred.
27What follows is my overall assessment of the credibility of the five main witnesses. I will explain the overall assessment by providing specific examples of the evidence. It will be helpful to set out these basic findings before I go through the evidence in more detail. I will provide other examples of the evidence that were important to my credibility findings when I make specific factual findings later in these reasons. Although I will refer expressly to some, but not all, of the evidence in explaining my conclusions, I have reviewed and considered all of it in reaching my determinations.
28I find Mr. Tayts to be a generally credible witness. He did not overstate his evidence. He was quick to acknowledge when he was uncertain, had made a mistake, or could not recall something. He did not undersell the contributions of others, and his instinct was to share credit for work done. For example, when he first discussed the two growers he recruited for the cannabis venture, he talked about the talent pool “we” had put together, then explained on further questioning that he was the one who had recruited them.
29Mr. Tayts was free in his praise for Mr. Zavet, which he offered unprompted. One example related to the group’s application to Health Canada. In order to be considered for a commercial license, an enterprise first had to be granted a “ready to build” letter from Health Canada. A lengthy application to Health Canada was required as a first step. I will refer to this application throughout these reasons as the Health Canada application. When discussing the shift from the group’s initial plans to partner with a First Nations group, to the ultimately successful plan at a different site that did not include the First Nations group, Mr. Tayts spontaneously offered that Mr. Zavet did “a great job” persuading Health Canada that the group should not have to start over with its application to government. Mr. Tayts testified that Mr. Zavet’s success at persuasion meant the parties did not have to redo work already done, thereby saving the project between six months and a year.
30When asked if he was reimbursed for payments to third parties, Mr. Tayts answered candidly that he was not sure. He did not overstate or inflate the fees he would have charged had he been providing only recruiting services to KindCann.
31Mr. Tayts was not defensive or evasive when confronted with text messages that did not reflect well on him, for example text messages in which he considered public action against Peace Naturals’ founder or complaints about Peace Naturals’ lawyer. He acknowledged that he was angry and did not know what to do or how to get his money back.
32I also found Ms. Lev-Mor to be a straightforward and truthful witness. Although she clearly shared her husband’s disappointment over how events unfolded, she did not overstate her evidence. She acknowledged freely that she did not know the specific arrangements that Mr. Tayts and Mr. Zavet had agreed to. She did not pretend to have more knowledge or background involvement than she did have. She was clearly a supportive spouse. However, I do not find that her status as Mr. Tayts’ spouse affected the truthfulness of her evidence, and I accept it.
33Mr. Shapiro was not a particularly helpful witness. His memory was admittedly hazy. He would on occasion offer answers that supported his versions of events that were non-responsive to questions asked. For example, when describing the sequence of events, he offered his view that the First Nations proposal was a discrete transaction, which was clearly the defendants’ position but was not responsive to the question asked. He offered up that the only person he dealt with was Mr. Zavet, again not in response to any related question, presumably to minimize Mr. Tayts’s involvement and advance the defendants’ narrative.
34I do not accept much of Mr. Zavet’s evidence. I find that Mr. Zavet twisted evidence to his benefit, and changed his evidence when it suited him to do so. His evidence was internally inconsistent. I find he minimized Mr. Tayts’ abilities and contributions to the project, and maximized his own putative generosity.
35In addition, Mr. Zavet’s answers were often vague. For example, Mr. Tayts sent Mr. Zavet an email in 2013 that said, “I think you and I should sit down and discuss our thing...”. Mr. Tayts’ email responded to one from Mr. Zavet that discussed “putting money into” the venture. Yet when asked about Mr. Tayts’ email, Mr. Zavet said “our thing” was the medical marijuana project. Clearly Mr. Tayts was referring to their financial agreement with respect to investing in that project, not the project in general. Mr. Zavet acknowledged in cross examination that this was three days after Mr. Zavet had sent correspondence about Mr. Tayts’s Peace Naturals dispute, and that he knew Mr. Tayts wanted to protect himself from a similar outcome in this venture.
36I also found Mr. Zavet’s evidence to be inconsistent. For example, Mr. Zavet denied coming to an agreement with Mr. Tayts, saying that because he did not know who else was involved, or how much money would be involved, there was too much uncertainty to come to an agreement. He would have no idea of what specific amounts he could offer. Yet, he acknowledged that he offered Mr. Tayts specific amounts at various times, as early as the spring of 2013.
37A second example of his inconsistent evidence relates to why so little was committed to writing from and about Mr. Tayts. Mr. Zavet acknowledged many times that nothing was in writing because of Mr. Tayts’s concern about jeopardizing the project because of his criminal record. Yet, toward the end of his cross-examination, the following exchange occurred:
Q. And you say to Mr. Shapiro, “We are going to have a problem with Amos. I’ll tell you about it tomorrow,” right?
A. Yes.
Q. And then the next day, Mr. Shapiro writes you back. He says, “Unless you agreed to something in writing, there is nothing to be concerned about.” You see that?
A. Yes.
Q. And what he was effectively telling you is, Tayts has nothing in writing, you have nothing to worry about, right?
A. That’s what he says.
Q. And of course, one of the main reasons that Tayts has nothing in writing is because of his criminal conviction from when he was a teenager, right?
A. No.
38I find this was a consistent pattern of Mr. Zavet’s. He would disagree with propositions with which he had previously agreed when it was convenient for him to do so. He made efforts to provide answers that he thought would help him, as opposed to making efforts to provide truthful, consistent answers.
39I have reservations about Mr. Fox’s evidence as well. I find that Mr. Fox was willing to overstate evidence. For example, Mr. Fox testified that parties never agree on “splits” early in endeavours, because there are too many uncertainties. However, he later acknowledged that he had no idea what Mr. Tayts and Mr. Zavet had agreed to. Further, I note that the parties appear to have agreed on ownership percentages very early in their discussions with the Naicatchewenin First Nation, which is evidenced in a May 2013 agreement to which I will return below.
40I also found Mr. Fox to be, at times, argumentative in cross-examination. I approach his evidence with caution.
41For these reasons, where these witnesses’ evidence conflicts, I prefer the evidence of Mr. Tayts and Ms. Lev-Mor, except where I specifically state otherwise.
3. Genesis of the KindCann venture
42The KindCann venture was preceded by a failed opportunity, Peace Naturals, in which both Mr. Zavet and Mr. Tayts had some interest.
a) Peace Naturals
43Mr. Tayts shared office space with Mark Gobuty, who participated in the first medical marijuana regime under the Marijuana Medical Access Regulations (MMAR). In early or mid-2012, Mr. Gobuty, the founder of Peace Naturals, advised Mr. Tayts that the regulations regarding medical cannabis were going to change, and commercial licenses for marijuana production would become available under the Marijuana for Medical Purposes Regulations (MMPR). Mr. Gobuty wanted to seek a commercial license for Peace Naturals and asked Mr. Tayts for assistance. Mr. Tayts helped him find a grower.
44Mr. Tayts also travelled to Israel to learn about growth and use of cannabis there, invested $37,500 in the business that was to become Peace Naturals, and worked with Mr. Gobuty on research and a business model.
45Mr. Tayts considered himself, as was known to Mr. Gobuty, to be a co-founder of Peace Naturals. Mr. Tayts was to own shares in Peace Naturals that would be held by Ms. Lev-Mor.
46Mr. Tayts told Mr. Zavet about the opportunity and asked Mr. Zavet if he wished to invest in Peace Naturals. Mr. Zavet then corresponded with Mr. Gobuty about this possibility. Negotiations ensued. Mr. Gobuty, through Peace Naturals’ counsel, sent Mr. Tayts and Mr. Zavet a term sheet.
47Mr. Tayts and Mr. Zavet sent Mr. Gobuty’s counsel suggested changes to the term sheet. Mr. Gobuty changed his mind about having Mr. Tayts and Mr. Zavet involved in the business. As I will discuss below, Mr. Zavet assisted Mr. Tayts when things with Peace Naturals began to unravel, which was between about March and May of 2013.
48When the Peace Naturals opportunity collapsed, Mr. Tayts threatened to commence legal action against Mr. Gobuty and Peace Naturals, and to complain to the Law Society about their lawyer.
49The defendants argue that Mr. Tayts’ claims about Peace Naturals are telling. They state that he has a single playbook, in that he calls himself a co-founder by sweat equity when he is not one, and resorts to bully tactics to try to achieve his ends. They argue that Mr. Tayts threatens to engage in litigious and complaining behavior whenever he does not get his way, even when he is not entitled to the relief he seeks. They argue that this litigation should be viewed in the same light.
50I do not agree.
51I note that in one of the text exchanges about this issue between Mr. Tayts and Mr. Zavet, Mr. Zavet encourages Mr. Tayts to sue Mr. Gobuty. I also note that the two men both engaged in hyperbole about this issue. For example, at one point, Mr. Zavet texts “Lets firebomb his farm”.
52There is an email in the record that suggests that Mr. Tayts was up front with Mr. Gobuty about calling himself a co-founder. Mr. Zavet himself found that the Peace Naturals’ terms kept changing and Mr. Gobuty was, in his words, “erratic”.
53Mr. Tayts explained that he was angry with Mr. Gobuty and the situation with Peace Naturals. He did not pursue the strategies he bandied about with Mr. Zavet. Instead, he hired a litigation lawyer who retrieved his investment funds for him.
54I find that the failed venture with Peace Naturals has no bearing on Mr. Tayts’s position vis-à-vis KindCann. The relevance of that failed venture lies in understanding Mr. Tayts’s experience with medical marijuana, his desire to participate as a co-founder of a medical cannabis enterprise, and Mr. Zavet’s awareness of Mr. Tayts’ difficulties with Peace Naturals.
55I further find, after listening to all the evidence, that the defendants were intent on unfairly maligning and belittling Mr. Tayts whenever they felt they had found, or created, an opportunity to do so.
b) Discussions between Mr. Tayts and Mr. Zavet about a medical cannabis enterprise
56After the Peace Naturals opportunity fell through, Mr. Tayts and Mr. Zavet immediately started talking about pursuing a venture of their own under the MMPR regime.
57From the outset of their discussions, Mr. Tayts and Mr. Zavet agreed that Mr. Tayts would not appear as a shareholder or director of any entity they incorporated for their medical cannabis venture. Mr. Zavet knew this had also been true of Mr. Tayts’s planned investment in Peace Naturals, where the shares were to be held by Ms. Lev-Mor.
58This was because of Mr. Tayts’ criminal conviction. Although he had received a pardon, and Mr. Zavet believed Mr. Tayts could be a shareholder or director of a medical cannabis company, they agreed that to be safe his name would not appear on any documents, and he would not hold any shares directly in his name.
59I also find, for reasons explained below, that it was known by both Mr. Zavet and Mr. Tayts from the outset that Mr. Tayts would not be investing funds in their venture. He would earn his shares through “sweat equity”.
60The two friends spoke to various potential investors. Mr. Tayts spoke to a group in whom Mr. Zavet was not interested. Mr. Zavet and Mr. Tayts met with Gilbert Sharpe, a lawyer who had many connections in health care and who was interested in participating in a medical cannabis venture. Mr. Sharpe introduced Mr. Zavet to Mr. Shapiro and discussions ensued.
c) The Naicatchewenin First Nation discussions
61Mr. Shapiro was involved in several businesses in the health care filed. He and Mr. Fox had ownership interests in White Cedar. As noted, White Cedar is a pharmacy that provided pharmaceutical services in northern Ontario to clinics who treated patients with opioid habituation. White Cedar appears to have been important to KindCann’s success. Mr. Shapiro and Mr. Fox also had an established business relationship with the Naicatchewenin First Nation, situated near Fort Frances, Ontario.
62In the discussions with Mr. Shapiro, the first plan was to create a medical cannabis business in partnership with the Naicatchewenin First Nation. The growing site would be located in Northern Ontario on land owned by the First Nation.
63On May 13, 2013, when Mr. Zavet advised he was meeting with Mr. Shapiro to work out a deal, Mr. Tayts wrote: “I think you and I should sit down and discuss our thing before everything goes sour and one of us turns into mark or sam - just kidding”. Mark was a reference to Mark Gobuty.
64Mr. Tayts testified that after sending the email above, he and Mr. Zavet met. Mr. Zavet told him that the agreement was that Mr. Shapiro would have 50% of the business, the First Nation would have 20%, and Mr. Zavet would have 30%. Mr. Tayts would have 25% of Mr. Zavet’s 30%.
65Mr. Tayts, Mr. Zavet, Mr. Fox, Mr. Shapiro, and Jeremiah Windego, the CEO of Naicatchewenin Development Corp., the development arm of community investments owned by Naicatchewenin First Nation, signed an agreement dated May 27, 2013. Consistent with what Mr. Zavet had told Mr. Tayts, the agreement provided that the enterprise would be owned 50% by a corporation owned by Mr. Shapiro and Mr. Fox (called Northern FN), 20% by Naicatchewenin First Nation, and 30% by a corporation to be designated by Mr. Zavet.
66Mr. Tayts testified that he skimmed the agreement, and relied on Mr. Zavet telling him the agreement looked good as the basis for signing it.
67The agreement specified that Mr. Zavet’s group comprised Mr. Zavet and Mr. Tayts. Mr. Tayts testified that Mr. Zavet advised him that the best way for them to invest in the proposed transaction was through a corporation. I accept this evidence.
68Mr. Windego testified that he worked very closely with Mr. Tayts and Mr. Zavet and believed them to be partners. He understood that the corporation to be designated by Mr. Zavet, referred to in the May 2013 contract, was a corporation for Mr. Zavet and Mr. Tayts.
69Mr. Zavet acknowledged that the May 2013 contract that the parties signed was the second draft of the agreement. The first draft, which Mr. Shapiro had drafted and sent to Mr. Zavet the day before, did not bind Mr. Tayts. Mr. Zavet said he, Mr. Shapiro, and Mr. Fox discussed it and added Mr. Tayts.
70Mr. Zavet acknowledged that the agreement listed Mr. Tayts as a representative of Zavet, and acknowledged that Mr. Zavet expected that Mr. Tayts would be a shareholder in the corporation Mr. Zavet would designate. He testified that Mr. Tayts signed the agreement so that he would be bound by the non-compete clause. That clause prohibited all signatories from applying for a license for the production and distribution of marijuana in association with any other party for one year after the end of the agreement.
71Mr. Zavet’s evidence was that, at the time the May 2013 agreement was signed for the First Nations project, no role for Mr. Tayts was contemplated but he was going to be a shareholder.
72I reject this evidence. As I will explain in more detail below, Mr. Zavet consistently tried to minimize Mr. Tayts’s involvement in the project. Mr. Tayts is covered in the non-compete clause. He was required to sign the agreement. He had various roles assigned to him and made significant contributions to the venture, including with respect to finding talent and contributing to the Health Canada application, as discussed more fully below. If he were to play no role, there would be no reason for him to be a shareholder and no reason for him to be bound by the non-compete clause.
73Mr. Zavet testified that the agreement between him and Mr. Tayts in May 2013 was that Mr. Tayts would be an advisor, and would be compensated in shares. Mr. Zavet would decide how many shares Mr. Tayts would receive.
74Mr. Shapiro testified that he assumed Mr. Tayts and Mr. Zavet had some kind of arrangement, and he did not inquire into the details.
75Mr. Fox testified that he thought Mr. Tayts was a friend and advisor to Mr. Zavet and was to provide some recruitment services. However, he conceded in cross-examination that if Mr. Tayts’s involvement was limited to being a friend and a recruiter, it would make no sense for him to sign the May 2013 agreement.
76Mr. Tayts testified there was never any discussion of him being an “advisor” on the project. I accept Mr. Tayts’ evidence on this. I reject Mr. Zavet’s evidence that he told Mr. Tayts from the beginning that he would be involved only as an advisor. The evidence is clear, as will be explained in more detail below, that Mr. Tayts was always intended to be a founding shareholder of the group’s medical cannabis venture. He contributed to the venture well beyond providing some nebulous advisory services.
77I find none of the parties intended for Mr. Tayts to be merely an advisor.
78In October 2013, it became clear that it was impossible to arrange a sufficient power supply to the land to support the required operations. The proposed transaction with the Naicatchewenin First Nation therefore did not proceed.
d) The Paris, Ontario site
79The group, without the Naicatchewenin First Nation, remained committed to pursuing its medical cannabis venture. Mr. Zavet testified that Mr. Shapiro knew Mr. Tayts was interested in continuing his involvement, even after the First Nations facility was no longer an option. Mr. Zavet testified that at that time, Mr. Shapiro said that he and Mr. Zavet would be 50-50 partners in a new venture.
80They explored other properties, and found one in Paris, Ontario. Health Canada first told them they would have to restart their application, but Mr. Zavet convinced Health Canada otherwise.
81The defendants took the position that, after the First Nations project fell through, the new venture was an entirely new project. Mr. Zavet testified that it was “totally different.” Although they had the same Health Canada application, the parties were different, the splits were different, and the sites were different. He viewed it as a new project.
82I disagree. I find that Mr. Zavet, Mr. Tayts, Mr. Fox, and Mr. Shapiro intended to pursue a medical cannabis venture together. The arrangement with the Naicatchewenin First Nation was one way in which they considered pursuing the venture. When that proved not to be feasible, they moved to consider other options to pursue the same venture.
83I find that the group used much of the knowledge they had gained and relied on much of the work they had done from the spring of 2013 to ground their venture. They came up with the name KindCann when working with the Naicatchewenin First Nation. They first contacted Experchem Labs, who assisted them with the project, when working with the Naicatchewenin First Nation. They completed much of the Health Canada application while working with the Naicatchewenin First Nation.
84Mr. Zavet conceded in cross-examination that the 2014 offering memorandum for KindCann stated that the principals began their due diligence on May 1, 2013. He conceded, too, that Mr. Tayts performed some of that due diligence.
85Mr. Fox, as the person responsible for compliance, reviewed the offering memorandum to ensure it was accurate and complete. He agreed that he would not have permitted the offering memorandum to refer to work performed on a different venture as work performed by KindCann. He agreed that the due diligence for KindCann started in May 2013, as the offering memorandum said it did. He testified that the work done in the spring of 2013 was for the KindCann venture.
86Mr. Fox suggested this was consistent with his statement of defence in which the two ventures were stated to be completely separate. I do not accept this distinction. Again, the defendants attempt to re-cast facts to suit their current position. The offering memorandum, for good reason, portrayed the venture as a continuous project in many ways. This is not helpful to the defendants’ position in the litigation. However, that does not entitle them to try to alter the facts.
87It is simply disingenuous to suggest that there was a substantial rupture between the discussions with the Naicatchewenin First Nations and the work on the Paris property that rendered the next phase of the venture an entirely new one.
88The venture became intensive. They purchased a site, worked with Health Canada to meet its requirements, hired growers and consultants, sourced product, and built the facility. In late 2014, with the assistance of Jacob Securities, a private offering was completed.
89Health Canada conducted an inspection of the facility in early 2015, which the facility did not pass. The facility was successful in the second inspection of July 2015, after which KindCann received its production license.
4. The claims in contract and oppression
90Mr. Tayts claims that there was an agreement between him and the personal defendants that he would receive founder’s shares in Kindcann equivalent in number to 25% of Mr. Zavet’s founder’s shares. He further claims he had a reasonable expectation of receiving these shares and would have received them but for the oppressive conduct of Kindcann and/or its directors towards him.
91The factual foundation for these claims is largely overlapping and I will consider them together.
e) Governing legal principles - contract
92The governing legal principles relating to the contractual claim are clear. For there to be a binding contract, there must be a meeting of the minds on essential terms of a contract. The test on whether there was agreement between the parties is an objective one. Intention to create a binding agreement is a necessary but insufficient ingredient; there must also be sufficient certainty on the agreement’s essential terms: UBS Securities Canada, Inc. v. Sands Brothers Canada, Ltd., 2009 ONCA 328, 95 O.R. (3d) 93 at para. 47. If the essential terms are vague and incomplete, there will not be a binding contract: Canada Square Corp. et al. v. VS Services Ltd. et al. (1982), 130 D.L.R. (3d) 205 (C.A.) at p. 217 (Versafood).
93In the absence of a written document, the court may consider written and oral communications between the parties, their subsequent conduct, and the surrounding factual matrix to determine if a contract exists: Go Transport Ltd. v Moore, 2021 BCSC 1099 at para. 21.
94If there is an ascertainable and determinate intention to contract, the court will do its best to give effect to that intention: Versafood at p. 218 citing WN Hillas & Co. Ltd. v. Arcos Ltd., [1932] All E.R. 494, (1932) 147 L.T. 503 (H.L.).
b) Governing legal principles - oppression
95The relevant statutory provisions in the CBCA state:
241 (1) A complainant may apply to a court for an order under this section.
(2) If, on an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates
(a) any act or omission of the corporation or any of its affiliates 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 or any of its affiliates are or have been exercised in a manner
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of.
96The act defines “complainant” in s. 238 as:
(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 any of its affiliates,
(c) the Director, or
(d) any other person who, in the discretion of a court, is a proper person to make an application under this Part.
97I do not understand the defendants to dispute that Mr. Tayts falls within the definition of complainant. Mr. Tayts claims, in essence, to be a beneficial owner of shares. He claims to be the real owner of the property that was placed in Mr. Zavet’s (or MZ Prime’s) name alone. Mr. Tayts is properly a complainant under the Act: Csak v. Aumon (1990), 69 D.L.R. (4th) 567, [1990] O.J. No. 534 (Ont. H.C.). A promise that shares would be awarded, and work predicated on that promise, is sufficient to meet the statutory definition of a complainant for the oppression remedy: Larmon v. Synergy Hospitality Inc. (2004), 132 A.C.W.S. (3d) 479, 1 B.L.R. (4th) 244 (Ont. S.C.), Fedel v. Tan, 2010 ONCA 473, 101 O.R. (3d) 481.
98The oppression remedy focuses on harm to a stakeholder’s legal and equitable interests that are affected by the oppressive acts of a corporation or its directors: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560 at para. 45.
99The Supreme Court in BCE instructed that in interpreting the oppression provisions and applying them to the facts of a case, a court is first to look at the principles underlying the remedy and determine whether the complainant has established a breach of a reasonable expectation. If so, the court goes on to consider whether the conduct complained of amounts to “oppression”, “unfair prejudice” or “unfair disregard”: BCE at paras. 56, 68.
100The Court articulated the following guiding principles:
a) The oppression remedy is equitable in nature. It is to focus not on narrow legalities, but on what is fair, just, and equitable, given all the interests at play: paras. 58, 71;
b) The inquiry to be undertaken is fact-specific, and must take account of reasonable expectations and business realities in a particular context: para. 59;
c) The concept of reasonable expectations is objective and contextual. A stakeholder’s reasonable expectation does not automatically give rise to a remedy; the expectation must be reasonable in the entire context in which the expectations arise: para. 62;
d) Relevant factors in determining whether a reasonable expectation exists include “general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders”: para. 72;
e) Personal relationships such as friendships may be governed by different standards than relationships between arm’s length shareholders in a widely held corporation: para. 75;
f) Not every unmet expectation gives rise to a claim for oppression: para. 67;
g) The conduct captured by the oppression provisions was described as follows: “Oppression” carries the sense of conduct that is coercive and abusive, and suggests bad faith. “Unfair prejudice” may admit of a less culpable state of mind, that nevertheless has unfair consequences. Finally, “unfair disregard” of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders’ reasonable expectations: para. 67;
h) These are not watertight compartments: para. 91;
i) Squeezing out a minority shareholder is a recognised example of unfair prejudice: para. 93; and
j) Failing to deliver property belonging to the claimant is an example of unfair disregard: para. 94.
101As indicated, the facts relevant to the contract and oppression claims have a high degree of overlap. To ascertain whether there was an agreement and what the parties’ reasonable expectations were, I will review the communications between the parties, communications with third parties, and Mr. Tayts’ contributions. I will review these having regard to the context, including the business context, in which they occurred.
5. The terms and expectations of the parties’ arrangements
a) Mr Tayts was intended to be a co-founder
102From the outset of their plan to pursue a medical cannabis venture together, the parties engaged in communications about what the arrangements between them would be. Mr. Zavet acknowledged that the status of co-founder was important to Mr. Tayts from the beginning, and I find this to be true.
103Although at times he took that position that Mr. Tayts was merely an advisor, Mr. Zavet acknowledged that from the spring of 2013 to at least the summer of 2014 Mr. Tayts was consistently treated and referred to as a partner and founder. He agreed that Mr. Tayts would have a reasonable expectation that he would be treated as a founder and a partner.
104I have found above that Mr. Tayts was never told he was only an advisor, and was not a founder.
105On June 21, 2013, Mr. Zavet texted Mr. Tayts: “This is our baby. Jeremiah [Windego] and Harvey are along for the ride”.
106There were many instances in which Mr. Zavet and Mr. Tayts were together referred to as founders and partners. Mr. Kumer, a potential investor, expressed this understanding in an email of March 27, 2014. On that same date, Mr. Zavet expressed his desire to have someone represent Mr. Tayts on the board, given that Mr. Tayts may not have been able to obtain the requisite security clearance. Mr. Fox responded as follows: “Excellent point. The investors will see themselves as a different constituency from Mr. Zavet, Harvey and Amos.”
107On April 30, 2014, when the purchase of the Paris facility was completed, Mr. Zavet wrote to Mr. Shapiro, Mr. Fox, and Mr. Tayts “Congratulations everyone, we now own real estate…” Again, Mr. Tayts testified that he was never asked for money, or told that if he did not provide funds, he would not be a founder.
108On June 6, 2014, when Mr. Zavet received the “ready to build” letter from Health Canada, a very significant milestone for the project, he immediately forwarded it to Mr Shapiro, Mr. Fox, and Mr. Tayts, exclaiming: “We got it!”
109Mr. Zavet also acknowledged that Mr. Tayts was provided draft financial models for comment. He was given the opportunity to comment on initial drafts of the offering memorandum, prepared before the professionals were retained in October 2014. Mr. Fox acknowledged sending language to Mr. Tayts for his review.
110As late as December 4, 2014, Mr. Tayts still referred to Mr. Zavet, with Mr. Zavet’s knowledge, to third parties as his partner.
111When asked why he was including him on so much correspondence with Mr. Shapiro and Mr. Fox in the spring of 2014, MR. Zavet said he was keeping him abreast as a courtesy. I do not accept this evidence.
112Mr. Tayts was consistently treated and referred to as a co-founder of the venture. There is no plausible explanation for this other than that he was intended to be a co-founder. I find he was always considered a co-founder and was intended to be treated as such.
b) Mr. Tayts was to invest “sweat equity”
113I find that Mr. Tayts was never expected to invest capital into the venture, but was to earn his share in the venture through work or “sweat equity”.
114I say this for the following reasons.
115First, Mr. Tayts testified that he was never told he had to invest cash to obtain shares. The agreement was always that he would earn his shares by “sweat equity”. I accept this evidence.
116Second, Mr. Zavet himself testified that he intended Mr. Tayts’ share to be earned by sweat equity. Indeed, although initially testifying to a different state of awareness, Mr. Zavet conceded that he had sworn an affidavit in 2016 that based on discussions between him and Mr. Tayts, he was “conclusively aware” Mr. Tayts would not be in a position to contribute a financial investment in any medical marijuana enterprise. He agreed this was true from a very early stage in their discussions. He knew that Mr. Tayts wanted to be involved in the business, and that his contribution would be through “sweat equity”.
117Third, in September 2014, Mr. Tayts messaged Mr. Zavet explaining that he expected to receive some money from an aunt, and he wanted to put the money into KindCann. Mr. Zavet jokingly told him to put it into a competitor business and Mr. Tayts testified that Mr. Zavet never followed up with him to suggest he should put money into KindCann.
118Fourth, Mr. Zavet acknowledged that Mr. Tayts was providing assistance “[b]ecause he was going to get something – he was going to get some shares in the project, he was going to get some form of compensation for it”. He acknowledged in cross examination that it made commercial sense to enter into an agreement with Mr. Tayts in the spring of 2013, because Mr. Tayts brought a lot to the table. Mr. Zavet acknowledged that Mr. Tayts, at the beginning, had more knowledge and experience than did the others with respect to medical cannabis.
119Mr. Zavet said that in June 2014, when he was seeking funds from the others, he told Mr. Tayts that if he invested it would go a long way to securing his part in the project.
120I do not accept this evidence. I find it was always accepted and agreed that Mr. Tayts would earn his share of the business by investing work, not money. As will be set out below, I find that Mr. Tayts was investing that resource heavily.
121I find that Mr. Fox and Mr. Shapiro were also aware that Mr. Tayts was investing time, not money, to earn his founder’s shares. They knew that Mr. Tayts was not investing funds in the venture. They were, as a team, heavily involved in the financial matters of the business. It was obvious Mr. Tayts was not investing funds but was investing through “sweat equity”.
c) Mr. Zavet would incorporate a company to hold both his and Mr. Tayts’ shares in the cannabis venture
122Mr. Tayts and Mr. Zavet planned for Mr. Zavet to incorporate a company that would hold shares in the cannabis venture. I find that the parties agreed that Mr. Zavet would incorporate a company that would hold both Mr. Zavet’s shares and shares in trust for Mr. Tayts. That agreement was consistent throughout the entire period of the venture. It is evidenced by the following.
123First, the May 27, 2013, agreement with the Naicatchewenin First Nation provided that Mr. Zavet’s interest would be held by a corporation to be designated by Mr. Zavet.
124Second, in June 2013, after signing the May 27, 2013, agreement, Mr. Zavet and Mr. Tayts had the following text exchange:
Mr. Tayts: Your [sic] holding my shares in trust - no more of my name on anything pls - cool?
Mr Zavet: What shares :)-
Mr. Tayts: You know what I mean - that doc we signed cant be in a public domain with my name on it
Mr. Zavet: I know
125Mr. Zavet acknowledged that Mr. Tayts wanted reassurance because of what had happened with Mr. Gobuty and Peace Naturals. Mr. Zavet acknowledged that because Mr. Tayts had had a criminal conviction, they agreed that, out of an abundance of caution, Mr. Tayts’ name would not be on any documents. I pause here to note that there was no evidence that this would have created an issue with Health Canada. The evidence is that Mr. Zavet told Mr. Tayts he did not believe it would be a problem. The parties repeatedly expressed that they proceeded this way to be cautious.
126Mr. Zavet acknowledged that Mr. Tayts would believe from the text exchange above that Mr. Zavet was holding shares in trust for him. Indeed, Mr. Zavet testified that he intended to do so. Mr. Zavet testified said that once actual shares and structures were decided, he planned to hold Mr. Tayts’ shares in trust.
127Third, Mr. Zavet acknowledged that he determined that the best way for both of them to hold their assets in the medical marijuana venture was through a corporation.
128Fourth, in June 2013 Mr. Zavet provided a draft consulting agreement to Mr. Dinka. The agreement stated at its outset: “This Consulting Agreement is made and entered into this __ day of June, 2013, by and between Maxim Zavet in trust for a corporation to be named...and Steven Dinka…”
129Fifth, on July 22, 2013, Mr. Zavet wrote Mr. Tayts:
Okay we need to set up our corp .... 70% Max 25% Talya 5% Jeff ??
130“Talya” refers to Ms. Lev-Mor, and “Jeff” to Jeff Levy, Mr. Zavet’s law partner.
131The next day, July 23, 2013, Mr. Zavet asked for and received Mr Tayts’s full address of service “for our incorp”. Ms. Lev-Mor testified that she believed Mr. Zavet set up the corporation after this email.
132In January 2014, Mr. Tayts texted Mr. Zavet: “You and I should have a founder’s agreement for shares And then Harvey - I feel like we are getting arm wrestled at the last minute.” Mr. Zavet replied: “We will have a corp that is a founder and invests in this deal. Remember, we used Northern FNs cash and resources to get to the application”.
133All this evidence supports my finding that Mr. Zavet intended to incorporate a company that would hold shares in the cannabis venture on his own behalf and on behalf of Mr. Tayts.
d) Mr. Zavet and Mr. Tayts came to a general agreement that Mr. Tayts would have between 15% and 25% of Mr. Zavet’s shares
134There were also communications about the percentage of shares Mr. Tayts would receive. I find that Mr. Tayts and Mr. Zavet did not come to a firm agreement on the specific percentage. However, I find they had a general agreement that their collective shares would be split by Mr. Zavet having between 75 and 85% of their collective shares, and Mr. Tayts having between 15 and 25% of their collective shares.
135I rely on the following evidence in coming to this conclusion.
136Mr. Tayts testified that in about April 2013, Mr. Zavet and he agreed that the split of the shares between them would be 75% to Mr. Zavet, 25% to Mr. Tayts. Mr. Tayts testified that the agreement was made at Mr. Zavet’s home. He did not confirm it in an email.
137Mr. Zavet’s evidence on this issue was largely, but not completely, consistent. He testified that he and Mr. Tayts never agreed to the precise split between them. He said that their agreement was that Mr. Zavet could determine, in his sole discretion, the number of shares Mr. Tayts would receive.
138Mr. Zavet testified that he could not offer a split in May 2013 given that Mr. Tayts was not proceeding with an investment. I do not accept this evidence, Mr. Zavet conceded that he had agreed to a split with Mr. Fox and Mr. Shapiro in June 2014 (which was renegotiated at the time of the private placement). He regularly offered Mr. Tayts different splits, which will be evident below.
139Mr. Fox similarly testified that parties do not agree on “splits” early in endeavours, because there are too many uncertainties. Splits are agreed to when there is a triggering event. I do not accept this evidence and find it has no bearing on whether there was an agreement in this case. First, Mr. Fox acknowledged that this was based on his experience dealing with sophisticated parties in sophisticated transactions. He acknowledged he had no idea what Mr. Tayts and Mr. Zavet agreed to. Second, I note that the parties appear to have agreed on ownership percentages very early in their discussions with the Naicatchewenin First Nation, which is evidenced in the May 2013 agreement.
140At one point in cross examination, Mr. Zavet conceded that in the spring of 2013, perhaps he and Mr. Tayts had agreed on the idea of a 75/25 split, but they went back and forth even after that on different proposed splits. There was to be an imbalance in the split because Mr. Zavet was putting up money and Mr. Tayts was not. He agreed with the suggestion that “they’d start with 75-25”, which could be renegotiated down the road. I do not find this evidence determinative of the issue of whether there was a firm agreement on the share split between them. This evidence is inconsistent with the rest of Mr. Zavet’s evidence, and significant portions of other evidence, as I will review below.
141As noted in paragraph 129 above, Mr. Zavet sent a text message in July 2013 in which he proposed 70% of shares would go to Mr. Zavet, 25% to Ms. Lev-Mor, and 5% to his law partner. Mr. Tayts responded, “call me”. He agreed there is no written response to that proposal. He believes the resulting telephone call was about Mr. Levy’s participation. Mr. Tayts did not suggest that he contacted Mr. Zavet and reminded him that they already had an agreement of 75/25 between them.
142Mr. Tayts testified that he did not follow up with Mr. Zavet for the next several months because he thought the agreement was done, and he would maintain his 25% of their collective shares.
143Mr. Tayts testified he was not concerned that he did not have a written agreement by the fall of 2013 when he was travelling to conferences for the venture, because Mr. Zavet was his lawyer, they had agreed on a 75/25 split, and Mr. Tayts trusted Mr. Zavet.
144In December 2013, when the group was looking at the Paris facility, Mr. Zavet and Mr. Tayts had the following text exchange:
Mr. Zavet: I think I figured out how to make it work financially
Mr. Tayts: I’m ready – weekends included
Mr. Zavet: Basically we would invest in purchasing the building. And we would get paid from investment.
Mr. Tayts: What about capital for building inside?
Mr. Zavet: Financed. Everything else financed. Not our money.
145In early 2014, Mr. Zavet wrote to Mr. Tayts: “What u think: Max co 40% (Amos 15%) Harvey co 35% MZ and kumerco 25%,” because a potential investor named Mr. Kumer was interested in participating. “For equal start up cost 1000000”. Again Mr. Tayts responded: “Call me.”
146Mr. Tayts acknowledged this was a different agreement and it should have said that Mr. Tayts would received 10%, not 15%, which would constitute 25% of Max’s portion. He acknowledges he did not write back to Mr. Zavet to correct him. However, that arrangement never came to pass as Mr. Kumer did not invest in the project.
147On March 14, 2014, Mr. Zavet and Mr. Tayts had the following email exchange:
Mr Tayts: we need to put a partnership agreement together, shareholder etc. before the money comes in
Mr. Zavet: I role out of pocket brooo see my email, I’m 100k in!!
Mr. Tayts: your [sic] going to get all that money back
Mr. Zavet: That’s what the OM [Offering Memorandum] is all about… Im [sic] so antsy about the ready build…
Mr. Tayts: That’s an agreement for investment not for the founders [referring to the Offering Memorandum]
148Mr. Zavet testified that they did not come to an agreement after this text exchange and the offering memorandum referred to in that exchange did not proceed. Rather, things kept changing, including the participants and the amount of money they needed to raise.
149On May 8, 2014, Mr. Sharpe and Mr. Tayts had a conversation, the transcript of which was adduced in evidence. The two discussed the project’s progress and Mr. Sharpe expressed his hope that he would not “be forgotten in all this”. He expressed full trust in Mr. Tayts and Mr. Zavet. Mr. Sharpe also cautioned Mr. Tayts about the importance of getting things in writing from Mr. Shapiro. The two had the following exchange:
Sharpe: ... and if he agrees, then maybe ... I mean I don't know the arrangement and whether you guys set up a company and your partnership agreement and all of that but certainly 1 was never asked to participate, obviously.
Tayts: Well we haven't got all our ducks in a row yet. We haven't finished anything like in terms of a finalized ‘cause Max and I also haven't come to an agreement, so we haven't even [...]
Shape: Oh.
Tayts: Yeah, so we're, we're ah, you know, we're kind of we're working all that stuff out. But we haven't done anything. Sc I can tell you that you're gonna be involved.
150Mr. Zavet points to this conversation as evidence that he and Mr. Tayts did not have an agreement as of May 2014. Mr. Tayts testified that he meant they did not yet have a written agreement or established corporation for the investment. I do not accept that explanation. I find the statement to be broader than a written agreement, I find that the parties had not come to a firm agreement on the percentage splits by this date.
151In June 2014, Mr. Tayts and Ms. Lev-Mor were at their accountant’s office. Ms. Lev-Mor sent Mr. Zavet the following email:
We are in the process of organizing some corp structures. What's the structure with Amos or if you are using my name for KindCann so I can explain to our accountant. I know nothing is set yet. Just need to know what you are thinking. Director, board or just shareholder. Voting non voting etc.
152Mr. Zavet responded: “I would like him to be a director but he needs to pass the security clearance. He will have voting shares, the amount we haven't finalized yet, depends on how much we raise.”
153Ms. Lev-Mor testified that she stated she knew “nothing is set yet” because she knew they did not have a shareholder’s agreement yet. The accountant was asking whether Mr. Tayts would be on the board and have voting shares, so she posed the questions to Mr. Zavet. Her evidence was that they relied on Mr. Zavet as a professional and as their lawyer to determine the appropriate structure for Mr. Tayts’ investment.
154Mr. Tayts did not recall whether he spoke to Ms. Lev-Mor about the email before she sent it, or reviewed it, or knew that she was going to send it. He believes the questions she posed came from the accountant as they were doing some tax planning, and they were together in the accountant’s office. Mr. Tayts testified that when he saw Mr. Zavet’s response, he was focused on the security clearance aspect, not the 25/75 split.
155I find this to be implausible. Here, Mr. Zavet has clearly stated that the parties have not finalised the amount of shares Mr. Tayts would have in the venture. I find it unlikely Mr. Tayts would focus more on the security clearance than on this statement had the statement been incorrect. I find it much more likely that, if Mr. Tayts believed they had reached a firm agreement on percentages by this date, he would have said so in response, even if by telephone call.
156As noted above in paragraph 108, in early June of 2014 the parties received the ready to build letter from Health Canada. This was a significant milestone for the project. Once the ready to build letter was obtained, funds had to be raised. Mr. Zavet acknowledged that he did not know how much money had to be raised because they did not know how much it would cost to build the facility. Because they did not know how much money would need to be raised, they did not know what kind of dilution they would be facing when they did a capital raise. He testified that they did not know exactly who would be involved as early investors other than himself, Mr. Shapiro and Mr. Fox.
157Mr. Zavet acknowledged that he made a variety of proposals to Mr. Tayts between the spring of 2013 and the summer of 2014, in which Mr. Tayts would receive between 15 and 25% of Mr. Zavet’s portion of shares.
158Mr. Zavet acknowledged that in 2013 and 2014, Mr. Tayts reached out to him many times seeking assurance that his interest was protected, and that Mr. Zavet provided that assurance every time.
159Mr. Tayts was cross-examined on the evolution of his claim. The defendants’ theory is that this evolution demonstrates there never was an agreement, or it would have been clearly and consistently pleaded throughout the litigation.
160The initial claim was issued in March 2015. In it, Mr. Tayts claimed he would be entitled to a 12.5% ownership interest in the business. Mr. Tayts explained that he believed Mr. Zavet had 50% of the business, so his 25% share of that would be 12.5%. However, Mr. Tayts knew by this stage that Mr. Zavet did not have a 50% interest in the business. Whatever the math may be, I accept that, had Mr. Tayts believed there was a firm 75/25 split agreed to, it would have been pleaded as such in his original claim.
161At times, Mr. Tayts alleged there was an agreement between all four personal parties; at other times, he alleged that his agreement was with Mr. Zavet alone. Mr. Tayts acknowledged that the claim alleged a four-party deal. In his evidence at trial, Mr. Tayts was equivocal on whether he continued to allege a four-party deal, and stated his agreement was a 75/25 split with Mr. Zavet.
162In June 2015 the statement of claim was amended, but not on the issue of the entitlement alleged. In 2019, a fresh as amended claim was delivered. That pleading alleged the formation of an agreement between Mr. Tayts and Mr. Zavet in April 2013. Mr. Tayts testified that he thought “we” had an agreement with Mr. Fox and Mr. Shapiro. However, he acknowledged having testified on his examination for discovery that he did not recall any agreement with Mr. Shapiro or Mr. Fox with respect to KindCann, and that he did not speak to Mr. Shapiro or Mr. Fox about the agreement with Mr. Zavet.
163Having heard all the evidence, I conclude that Mr. Fox and Mr. Shapiro were not fully informed about the details of the arrangement between Mr. Zavet and Mr. Tayts. I find that Mr. Shapiro and Mr. Fox knew that Mr. Tayts was considered a founder, and I find that they considered him a founder. This is evident in the communications. I find that Mr. Shapiro and Mr. Fox viewed Mr. Tayts and Mr. Zavet as a team. The details and terms of the arrangement between Mr. Zavet and Mr. Tayts were an issue for Mr. Zavet and Mr. Tayts to work out. Mr. Shapiro and Mr. Fox would honour whatever arrangement Mr. Zavet asked them to honour about the allocation of shares between Mr. Tayts and Mr. Zavet.
164As noted above, Mr Zavet testified that the number of shares that he would give to Mr. Tayts was entirely within his unfettered discretion. However, he testified that he was never going to give Mr. Tayts one or two percent, he “was always going to be reasonable”. Crucially, he agreed that his proposals that were between 15 and 25% were what he meant by being fair and reasonable.
165Based on the evidence above, I find Mr. Tayts and Mr. Zavet agreed, and Mr. Tayts expected, that Mr. Tayts would be compensated by being allocated founder’s shares, or the equivalent of founder’s shares held in trust through MZ Prime, in the ultimate venture. I find Mr. Tayts expected he would receive between 15% and 25% of the total shares held directly or indirectly by Mr. Zavet.
e) Mr. Tayts contributed heavily to the venture in the manner expected of him
166As noted above, I find that Mr. Zavet and Mr. Tayts agreed from the outset that Mr. Tayts’s interest in the enterprise would be earned through “sweat equity”, not the investment of capital.
167Mr. Tayts worked on the venture from its earliest days until the relationship fell apart in the last days of 2014 and first days of 2015. As Mr. Zavet acknowledged, Mr. Tayts came into the project with more knowledge and experience than the others with respect to medical cannabis.
168Mr. Tayts started the project plan to support their initial business plan. In April 2013 Mr. Tayts created a power point presentation setting out their vision, work plans, financials, and the opportunity for proposed investment. He testified that he did not include himself among the strategic board of directors because he did not want his name on documents, and thought it would be better if more prominent people were on the board. I accept that Mr. Tayts’ name was not included in documentation for this reason.
169Mr. Tayts and Ms. Lev-Mor both testified it was as though he was working two jobs. His text messages from the spring of 2013 say the same. Ms. Lev-Mor also testified that she had some concern that he was not putting as much time into their recruitment business as was required. However, she was excited for him to be working towards this, and expected that he would have an ongoing role in growing the new enterprise that he helped found.
170Mr. Windego testified that Mr. Tayts came twice to the potential site near Fort Frances.
171Mr. Tayts acknowledged that he did not keep track of his hours, as it never occurred to him to do so. He estimated he spent 3500 hours on the project.
172I accept this evidence from both Mr. Tayts and Mr. Lev-Mor, neither of whom was prone to exaggeration.
173Mr. Tayts sourced and recruited experienced growers. One of these was Mr. Stephen Dinka, who was the director of production at Canada’s only licensed producer of medicinal cannabis during Health Canada’s MMAR program (the program that preceded the MMPR program). Mr. Dinka testified that he chose to join KindCann in part because Mr. Tayts had knowledge and insight into the cannabis industry, and his experience with Peace Naturals lent some credibility to the opportunity. Mr. Dinka testified that there was a limited pool of people with his skill set and background. He advised Mr. Zavet, when negotiating the employment agreement, that he viewed himself as key to KindCann success. Mr. Dinka was heavily involved in contributing to the completion of the facility, the standard operating procedures, collaboration with the team, the Health Canada inspections come and ultimately the production of cannabis.
174Indeed, in the fall of 2014, Kindcann touted their trained and academically qualified growers as one of three distinguishing features that set KindCann apart from other medical cannabis ventures. Mr. Fox acknowledged that Mr. Dinka was an important contribution to KindCann’s success.
175Mr. Dinka testified that he collaborated with Mr. Tayts and Mr. Zavet about the type and source of cannabis to use for propagation. Mr. Tayts had some knowledge and insight into these issues.
176Mr. Shapiro, Mr. Zavet, Mr. Tayts and Mr. Dinka traveled to Denver to explore the legal cannabis market there. They visited production facilities and dispensaries, and tried to learn various techniques that could be applicable to KindCann. Mr. Tayts was involved with making connections with some of the parties with whom they toured and met.
177Mr. Dinka understood Mr. Tayts to be part of the founding group of the company. Mr. Dinka observed that Mr. Tayts seemed to be participating in the full scope of activities and was one of the two people with whom Mr. Dinka primarily interacted, the other being Mr. Zavet. Mr. Dinka’s understanding was that Mr. Shapiro and Mr. Fox were providing the financial backing for the venture being explored by Mr. Zavet and Mr. Tayts.
178Mr. Dinka acknowledged that he interacted with both Mr. Zavet and Mr. Tayts and testified that it was Mr. Zavet who was the primary contact on the Health Canada application.
179Mr. Tayts travelled to conferences in Germany and Amsterdam to source genetically appropriate cannabis. He provided computer support systems through his corporation’s system at no expense to KindCann. Text messages from Mr. Zavet to the others confirm that Mr. Tayts was working on record keeping, which Mr. Tayts explained included ensuring compliance with Health Canada regulations.
180Mr. Zavet testified that Mr. Tayts’s contributions started to drop off quite a bit around mid-2014. They needed to raise money and although Mr. Tayts wanted to bring investors to the table, he did not.
181In cross-examination, Mr. Zavet acknowledged that he knew from the outset that Mr. Tayts would not participate in aspects of the project such as construction, and would not have his name on the Health Canada application or be involved with the private placement, because of his criminal conviction. Mr. Zavet also acknowledged that Mr. Tayts was involved in the Health Canada application. He confirmed that the reason Mr. Tayts’s name was not on the application was because of his criminal record, not because he did not contribute to the application. Mr. Windego also testified that the application work was split between him, Mr. Zavet, and Mr. Tayts.
182I find that Mr. Tayts had significant input into the Health Canada application, as is evidenced by his testimony and by a chart prepared by Mr. Zavet in June 2013.
183Mr. Zavet conceded that Mr. Tayts continued to be involved in other ways, such as continued recruiting efforts, discussions about branding and naming of strains, discussions about the kinds of product KindCann would sell, sourcing product, and spearheading potential options for web integration. Mr. Tayts continued these efforts until the relationship soured. Mr. Zavet acknowledged these were the kinds of efforts Mr. Tayts was always expected to undertake. He agreed that it was expected from the outset that Mr. Tayts was not contributing funds, and that his activity would remain in the background.
184Mr. Zavet acknowledged in cross examination that Mr. Tayts also participated in developing the network of contacts that were touted as important in KindCann’s investor material. Also flagged as significant in these materials were two people that Mr. Tayts had recruited for KindCann.
185Mr. Zavet agreed that Mr. Tayts discussed the best methods for growing with the growers, was looking at properties, and was involved in KindCann’s selection of strains, branding exercises, and financial modelling at least in late 2013. Mr. Zavet agreed that Mr. Tayts was involved in most of the elements that were important enough to be included in the investor presentation.
186Mr. Tayts also worked on financial models for the venture. In 2014, he paid third parties who were performing media and marketing work for the project.
187Mr. Shapiro testified that he would defer to Mr. Zavet about the work Mr. Tayts actually performed for KindCann, because Mr. Zavet worked more closely with Mr. Tayts than did Mr. Shapiro.
188I find both Mr. Zavet and Mr. Fox tried to minimize Mr. Tayts’s contributions to the business. I find their statements vastly understate Mr. Tayts’s contributions.
189For example, when asked what Mr. Tayts was doing in the spring and summer of 2013, including the time when the Health Canada application was being pursued, Mr. Zavet said, “He was helping me” by “making a lot of calls; he was great at googling and – and finding information”. These statements were made pejoratively.
190The application was a complex, involved process. Mr. Zavet acknowledged that Mr. Tayts was involved, but again minimized that involvement. He testified that Mr. Tayts “attempted” to do some record-keeping analysis and searched for potential talent. Mr. Zavet agreed that Mr. Tayts continued to do this work for the revised application after the First Nations project fell through, but said it was to a lesser degree.
191While it is true that Mr. Zavet was the senior person in charge on the Health Canada application, and that Mr. Tayts’s name did not appear on the application, I have already noted Mr. Zavet’s acknowledgement that this was because of Mr. Tayts’s criminal conviction.
192Further, while Mr. Zavet had acknowledged that Mr. Tayts, at the beginning, had more knowledge and experience than the others with respect to medical cannabis, he testified that by late 2014, he concluded that “there was really nothing that special about what he had provided.” I find this is a justification provided in hindsight by Mr. Zavet to support his position. I do not accept it.
193Mr. Fox, too, minimized Mr. Tayts’ involvement. He testified that Mr. Tayts “was not involved in the business at all”. He stated that the rest of the group was there every day. Yet this is inconsistent with Mr. Shapiro’s evidence. Mr. Shapiro testified that he had very little involvement operationally. Mr. Fox also acknowledged that he made the statement that Mr. Tayts was not involved even though he was unaware of whether Mr. Tayts had contributed to the Health Canada application, the naming of Kindcann and marketing or branding issues, nor did he know about Mr. Tatys’s background knowledge or contacts. I firmly reject Mr. Fox’s statement that Mr. Tayts “was not involved in the business at all”.
194I find Mr. Fox made this statement to support the defendants’ position and to try to decrease the value of Mr. Tayts’ contribution.
195Two issues in dispute were who decided to retain Experchem, a lab that assisted with the Health Canada application, and who generated the name KindCann. Although perhaps minor issues, the dispute illustrates Mr. Zavet’s continued attempts to downplay Mr. Tayts’ contributions.
196The first mention of Experchem appears in an email of June 21, 2013. Mr. Tayts emailed Mr. Zavet with a link to Experchem Lab, and stated in the body of the email that Experchem would be able to assist when the venture was ready to require the kind of help Experchem could offer. Mr. Tayts said he was familiar with Experchem because it worked with an association of his. The parties agree that Experchem assisted with the application.
197Mr. Windego testified that Mr. Tayts brought Experchem to the project when he was involved with it, but acknowledged on cross examination that he did not know if Mr. Tayts made the first contact with Experchem.
198Mr. Zavet denied that Mr. Tayts first suggested the team use Experchem’s services. Mr. Zavet testified that Health Canada recommended Experchem to him. It is true that Health Canada sent Mr. Zavet a list of laboratories, and Experchem was among them. This was two months after Mr. Tayts’s email suggesting Experchem would be useful when the time came. Further, although Mr. Zavet testified that he had a crystal-clear recollection of contacting Experchem, the evidence revealed that he sent the Health Canada list of labs to Mr. Tayts, and asked him to make calls based on the list. Mr. Zavet ultimately conceded that Mr. Tayts initially identified Experchem and called them after the Health Canada list was received. Mr. Zavet’s contact with Experchem came later.
199I find that Mr. Tayts initially suggested the parties use Experchem. I find Mr. Tayts made the initial contact with Experchem.
200Mr. Tayts also testified he came up with the name KindCann.
201Mr. Windego testified that Mr. Tayts suggested the name.
202Mr. Zavet testified that it was a collaborative process that resulted in the name KindCann and that ultimately it was his decision to use the name. In cross examination he conceded that he did not remember coming up with the name. He acknowledged Mr. Tayts used the name in materials as early as April 2013.
203I find that Mr. Tayts was the person who initially suggested the name KindCann.
204These are examples of Mr. Zavet attempting to minimize Mr. Tayts’ involvement in and contribution to the project. I do not accept his evidence, and I find his evidence to be part of a pattern of trying to bend facts to fit a narrative that helps his case.
205Indeed, ultimately, Mr. Zavet conceded that the important and difficult issues when they entered the business arena of medical marijuana production under the new regime included finding genetics, navigating the regulations, finding people who could grow successfully on the required scale, obtaining the ready to build letter and license from Health Canada, and learning the market. They travelled to other places in their efforts to learn and solve these issues. These were all activities in which Mr. Tayts was involved. Mr. Zavet also acknowledged that Mr. Tayts had travelled to Israel to learn from their industries’ practices, did market research, and had experience recruiting in health care.
206Ultimately, Mr. Zavet conceded that Mr. Tayts was working extremely hard to try to make KindCann work.
207I find that from the beginning, before Mr. Zavet and Mr. Tayts met Mr. Shapiro and Mr. Fox, and continuing thereafter, Mr. Tayts made significant contributions to the enterprise.
208I find Mr. Tayts delivered the precise contributions to the project that he was expected to make.
6. Is there an enforceable contract between Mr. Tayts and Mr. Zavet, or between Mr. Tayts and the three personal defendants?
209Mr. Tayts argues there is an enforceable contract between him and Mr. Zavet, or between him, Mr. Zavet, Mr. Fox, and Mr. Shapiro, that he was to receive 25% of Mr. Zavet’s founder’s shares.
210Mr. Tayts relies on Hunt River Camps / Air Northland Ltd. v. Canamera Geological Ltd. (1998), 168 Nfld. & P.E.I.R. 207, 84 A.C.W.S. (3d) 482 (N.L. C.A.) at para. 32 for the proposition that “the fact that the parties have performed some of their obligations will often make it unrealistic to argue that the contract did not come into existence.” I do not read that case with dispensing with general contractual requirements that there be some degree of certainty of terms.
211Mr. Tayts also relies on Summers v. Sawyer, [2005] O.J. No. 3672, 142 A.C.W.S. (3d) 251 (Ont. S.C.), Peterson v. Soyka, 2014 ABCA 179, 373 D.L.R. (4th) 372 and Bateni v. Jamali, 2020 ONSC 1630 aff’d 2023 ONSC 1761 (Div. Ct.), all cases in which oral contracts were found to exist and were enforced by the court. There is no doubt that oral contracts may be enforced. However, it is a fact-specific determination as to whether a contract existed. I accept that non-essential terms may be crudely expressed or ambiguously expressed, and the court may still find a contract. Sufficient terms may still be ascertainable. I accept that the conduct of the parties can be taken into account in determining whether a contract exists.
212I do not accept the defendants’ arguments that there was sufficient uncertainty about the services Mr. Tayts was to perform or the type of shares to be issued to negate an agreement. I find there was sufficient certainty about the services Mr. Tayts was to provide.
213I accept Mr. Tayts’ acknowledgment in cross-examination that there were no discussions about how the shares would be acquired. However, I find that the structure of the issuance of shares were details that did not affect the meeting of the minds that Mr. Tayts was to receive founder’s shares. Mr. Tayts performed the services required of him on the basis that he would receive founder’s shares in return for those services. This is sufficiently certain in the context of this case.
214There remains another essential term. Mr. Tayts asks the court to enforce a contract he says existed for a specific percentage, 25%, of Mr. Zavet’s shares. The percentage of shares is an essential term of the contract he seeks to enforce. Indeed, in his written argument at paragraph 123 Mr. Tayts concedes that the “essential terms are the agreement to work together and the share of ownership.”
215I have found, as explained above, that the second of these terms was not agreed to between the parties. There is therefore no binding agreement between the parties.
216However, in my view that does not end the inquiry. There is the matter of Mr. Tayts’ reasonable expectations and the availability of a remedy under the oppression provisions of the CBCA.
7. What were the parties’ reasonable expectations?
217As noted at paragraph 100 above, reasonable expectations are to be assessed on an objective, contextual basis. The factors to consider include general commercial practice, the nature of the corporation, the relationship between the parties, past practice, steps the claimant could have taken to protect itself, representations and agreements, and the fair resolution of conflicting interests between corporate stakeholders
218My task is made easier by the defendants’ acknowledgement that Mr. Tayts had a reasonable expectation of receiving founder’s shares. Even absent that acknowledgement I find this reasonable expectation is clear and obvious on the evidence I have reviewed above.
219Mr. Tayts’ expectation was objectively reasonable in the circumstances. Mr. Tayts was contributing to KindCann in exactly the ways that were expected of him to the venture. He continued to do so throughout the life of the venture, until the events of the end of December 2014.
220These expectations were established in the context of Mr. Tayts’ personal relationship with Mr. Zavet, whom he knew and trusted. They had a close personal relationship throughout the time of their work together on KindCann. The relationships between Mr. Zavet, Mr. Tayts, Mr. Fox, and Mr. Shapiro were largely informal relationships.
221Taking into account the nature of the business as a venture in relatively uncharted territory, the relationship between the parties which was close and informal, the discussions and representations set out above, and the continued and significant contributions made by Mr. Tayts, I have no hesitation in finding that Mr. Tayts had a reasonable expectation that he would receive between 15% and 25% of Mr. Zavet’s founder’s shares.
222I find Mr. Shapiro and Mr. Fox knew that Mr. Tayts was a founder. I find that they knew this meant Mr. Tayts would have a reasonable expectation of receiving founder’s shares. I also find Mr. Tayts had a reasonable expectation of being involved in, and apprised of, the share allocation discussions, given his reasonable expectation of receiving founder’s shares.
223I note that Mr. Tayts did little to protect his position for two reasons. First, he did not think it was necessary as he trusted Mr. Zavet. Second, when he did raise issues about agreements and paperwork, he was repeatedly reassured by Mr. Zavet. I find his failure to take more steps to protect his interests has no significance given these facts.
224Having found Mr. Tayts had these reasonable expectations, I must consider whether these expectations were breached, and whether the conduct complained of amounts to “oppression”, “unfair prejudice” or “unfair disregard” of Mr. Tayts’ interests.
8. Were Mr. Tayts’ reasonable expectations breached by conduct that constitutes “oppression”, “unfair prejudice” or “unfair disregard” of his interests?
a) Allocation of shares
225In the fall of 2014, Jacob Securities and Brant Securities were hired to seek investors for KindCann. Mr. Tayts was not copied on communications with the two firms, and had no role in that process, although Mr. Zavet provided him with some information about its progress.
226Around this time, Mr. Zavet, Mr. Shapiro and Mr. Fox were negotiating the allocation of Kindcann shares between them. Mr. Tayts was excluded from the communications between Mr. Shapiro, Mr. Fox, and Mr. Zavet.
227The negotiations between Mr. Zavet, Mr. Fox, and Mr. Shapiro were difficult. Mr. Zavet sought a greater percentage of the business than Mr. Fox and Mr. Shapiro thought fair. Mr. Zavet’s request for a larger percentage was rebuffed. Mr. Zavet acknowledged that over the life of the project, his own share had decreased from 60/40 to 50/50 to 1/3 for each of Mr. Zavet, Fox and Shapiro. He acknowledged he was quite upset about this decrease.
228Mr. Shapiro’s evidence was that each of him, Mr. Fox, and Mr. Zavet could deal with their own founder’s shares however they wished. The decision about each person’s founder’s shares would then be implemented by KindCann. For example, he and Mr. Fox decided that a portion of their shares would go to the two people who invested in the Paris real estate, who were known to them. KindCann therefore issued founder’s shares to those two investors. Mr. Zavet could require KindCann to issue however many of his founder’s shares he wished to Mr. Tayts. Mr. Shapiro testified that he dealt with Mr. Zavet, not Mr. Tayts, and did not inquire about the nature of their arrangement with each other.
229I accept this evidence, but I found that Mr. Shapiro and Mr. Fox knew that Mr. Tayts was entitled to founder’s shares. I note there was discussion between Mr. Shapiro, Mr. Fox, and Mr. Zavet about shares for Mr. Tayts. One proposal was that Mr. Tayts would get 7000 shares, 2000 of which would come from Mr. Zavet. Mr. Fox recognised the necessity to accommodate Mr. Tayts in an email dated November 12, 2014.
230In November 2014, Mr. Zavet provided Mr. Tayts with a letter he could send to potential investors. It was accompanied by a capitalization table that showed shares being issued to Mr. Fox and Mr. Shapiro, Mr Zavet, and Jacob Securities. Mr. Tayts testified he was not concerned that his name was not there because throughout, the agreement had been that his name was not to appear on documents. He found the document somewhat confusing. The document showed that Mr. Zavet would receive 284,211 founder’s shares.
231Mr. Zavet acknowledged that in the offering memorandum and the capitalization table prepared by Jacob Securities, no provision was made for Mr. Tayts. He testified that nonetheless, he intended to give Mr. Tayts a reasonable number of shares.
232As will be seen below, Mr. Zavet ultimately offered Mr. Tayts 2.46% of his shares.
b) The events of late December 2014
233On December 22, 2014, Mr. Zavet texted Mr. Tayts “Looks like we’re getting this financing done. Xmas miracle”. On December 23, Mr. Zavet texted Mr. Tayts’ “Okay I worked it out. You will get at least 7000 founders shares. Worth 70k. And I am putting a 100k of pref shares for you in [trust]”. Within Mr. Tayts responses he said, “Thank you btw.”
234Mr. Tayts testified that he did not know what “pref shares” meant. He thought the $70,000 was one quarter of Mr. Zavet’s investment, which was $280,000.
235Mr. Zavet testified that he felt the 7,000 shares plus the $100,000 worth of preferred shares, which, he testified, was $170,000 of value, reflected the value of their respective contributions.
236In his examination in chief, Mr. Zavet said this amounted to $170,000 of value and was a fair number to provide Mr. Tayts at no cost. Mr. Zavet intended to buy preferred shares in addition to his founder’s shares, and testified he wanted to give $100,000 worth of preferred shares to Mr. Tayts to recognize him for the contribution he made. Mr. Zavet confirmed in cross-examination that he recalled going through that thought process and coming to that conclusion, and he viewed this as fair to Mr. Tayts.
237However, when confronted with the transcript of his examination for discovery, he acknowledged testifying in discovery that his definite intention at that time was that Mr. Tayts would have to pay for the preferred shares, hopefully when he received funds from his aunt in Israel. He stated at trial that he has had more time to think about it since his examination for discovery, and he believes his “statement in this court is more true.”
238Mr. Zavet had earlier fairly conceded that his memory was better at the time of discovery in other respects.
239I do not accept Mr. Zavet’s evidence that he intended to give Mr. Tayts $100,000 worth of preferred shares at no cost to Mr. Tayts. I find Mr. Zavet intended to give Mr. Tayts only 7,000 founder’s shares, and would require Mr. Tayts to pay for the $100,000 worth of preferred shares if he wanted them. This conclusion is further supported by Mr. Zavet’s evidence on re-examination, when he clarified that he would have had to purchase those preferred shares. I find he had no intention of spending $100,000 of his own money to purchase preferred shares for Mr. Tayts.
240Further, Mr. Zavet acknowledged in cross-examination that the actual value ascribed to the founder’s shares at the time was not $10 per share, but about $0.75 a share, so that the 7,000 shares were “worth” about $5,000, not $70,000. The $10 per share figure referred to the perceived, or pre-money value, of Kindcann, which was $10,000,000. For Mr. Tayts’ 7,000 shares to be worth $70,000 at that moment would mean that Mr. Zavet’s shares were then worth over $2,840,000. On either value, the percentage he offered to Mr. Tayts remained the same, less than 2.5% of his shares.
241I find Mr. Zavet, in his proposed calculation of what he was offering Mr. Tayts, intentionally tried to inflate the value he was offering Mr. Tayts to make it appear to be a more generous and reasonable offer than it actually was.
242On December 31, 2014, Mr. Tayts wrote: “I still want to get this resolved today and not get it put off as usual. Pls confirm a time for us today to meet at your office.” Mr. Zavet did not want to meet that day. The following texts were exchanged:
Mr. Tayts: “Ok can you email me the shareholder info and structure of the company’s – […] I’m in the dark – feeling like I’m getting gobutied [a reference to Mark Gobuty] again – I need that info right asap”.
Mr. Zavet: I sent you all the term sheets at least a month ago. I’ll resend now.
Mr. Tayts: There’s nothing there with Mine or Talya’s name on it
Mr. Zavet: Because it’s coming from my shares
Mr. Tayts: Right so where is my name? You would be assigning those shares to my name.
243Mr. Tayts went on to ask for a share breakdown. He testified that he wanted to see the breakdown in a shareholder’s agreement which Mr. Zavet had promised him several times.
244Mr. Zavet responded by email. He set out the share breakdown and said:
I understand you will not think this is fair, and this is not the best deal for me either considering the amount of work and money I put in. For those founder shares that I got reflect in proportion to the amount of money put into the project by everyone so for example:
Harvey, Gord and Crew: $707,752.33
MZ Prime Ltd.: $317,732.86
Total Money put up (before raise): $1,024,985.19
In conclusion, tell me what you feel you are entitled to based on the amount of work and service you put into the project? If you want half my share, I will offer you 142,105.5 shares for half the money I put up being $158,616.43, but I need this money by end of day Friday. There is nothing I can do about this deal anymore except offer you another opportunity to put up some real cash.
245Mr. Tayts replied:
I put the whole grow team together, I brought shoppers to the table. My grow team is what you sold to the investors.
I really didn't expect an answer from you to be so rude to tell me by Friday pay me this. I've never treated you with that much disrespect.
This should have been discussed with Gord, Harvey and me and you. Not me being left out.
At the last hour you scrapped 2 years of discussions of founders shares and never thought to discuss it with me and everyone.
I have 2 years of emails and work proving my work and all the talk.
I really want to deal with this amicably because I know you got strong armed by Harvey and Gord and I'm the one getting screwed.
That entire grow team. My fee is 30% of total compensation. That's over the $150k. Want me to pay you by Friday. I'll send you an invoice for all the people I recruited - pay me by Friday. That's over $200k. I haven't been compensated for my work. So that entire team can disappear by Friday.
I'm a cofounder of the company and you completely kicked me out.
Plus I've called Harvey twice in the last 3 months and he never returned my call further proof that you've just used me.
We should sit down with Gord and Harvey and explain the situation and iron out all the details by Friday. Lol
246Mr. Zavet responded by emphasizing the work and money he had put into the business, minimizing the grow team’s qualifications, and indicating Mr. Tayts had nothing to lose. He wrote:
I offered you 7000 founder shares because at the end of the day that is all I can afford and what I believe is fair in the circumstances.... you cannot expect to be the founder and own a significant amount of the company without taking any risk, business just does not work that way.... we were accumulating massive debt... and were very close to becoming bankrupt and I would have lost all of my savings plus a year worth of law practice that I could never get back.
247The defendants argue that the failure of Mr. Tayts to raise his 25/75 split here is telling and is evidence that he did not believe such an agreement existed.
248Mr. Tayts explained that he was in shock and that he did not have the kind of money that Mr. Zavet was asking for. He did not view Mr. Zavet’s e-mail as a negotiation or a good faith offer, but as an ultimatum that had nothing to do with the deal that they had, which was never for 50%. Mr. Tayts testified that when he did see the share breakdown, he was very angry. He thought the suggestion that he had nothing to lose was absurd and an insult. He had put in a lot of time and energy and contributed to getting the company to where it needed to be. He had sacrificed his time and his own business, and agreed not to compete against this business. This was the first time he had been told he could not be a founder unless he put money in. He did not respond because he did not understand, he felt tremendous pressure and anxiety, and did not know what to do. Mr. Zavet knew Mr. Tayts did not have the necessary money to accept his ultimatum.
249Mr. Zavet denies this was a bad faith offer on his part. He acknowledges he was angry and only provided Mr. Tayts with one business day to pay him funds. He maintains he was open to discussion.
250Later that day, on December 31, 2014, at 7:39 PM, Mr. Zavet wrote to Mr. Fox and Mr. Shapiro saying, “we're going to have a problem with Amos...”. Mr. Shapiro responded “Unless you agreed to something in writing there is nothing to be concerned about. [H]e was not involved with us in anything material. If he is unhappy, his problem.”
251Mr. Tayts expressed his view that when he saw this e-mail, it confirmed that Mr. Zavet had taken advantage of him by leveraging their relationship. He did not respond to Mr. Zavet’s suggestion that they chat. Several months letter, he started this litigation.
c) This conduct constitutes unfair disregard an unfair prejudice
252As noted, the defendants concede Mr. Tayts had a reasonable expectation of receiving founder’s shares. However, they argue that the oppression case “follows the result” of the contract case. Because Mr. Tayts has not proven there was a contract for 25% of Mr. Zavet’s shares, he has not proven his case and is entitled to no shares. Second, they argue that the misconduct of which Mr. Tayts complains were not actions of the corporation. The oppression remedy is therefore unavailable to Mr. Tayts.
253I disagree. I find that Mr. Tayts had a reasonable expectation of receiving founder’s shares. This is not contentious. As noted above, fairness is the theme running through this equitable remedy. There would be no need for an oppression remedy if there was a complete overlap between it and the law of contract.
254Mr. Zavet’s own evidence was that he intended for Mr. Tayts to receive a fair number of shares. He acknowledged that this fair number was not one or two percent. Indeed, he testified that, by his calculation, Mr. Tayts’ contributions by the fall of 2014 would be reasonably compensated by recognising $175,000 of contribution. As conceded by Mr. Zavet, the discussions between him and Mr. Tayts were in the realm of Mr. Tayts having a proportion of shares equivalent to 15-25% of Mr. Zavet’s shares.
255As noted by the Supreme Court of Canada in BCE at para. 64:
Directors or other corporate actors may make corporate decisions or seek to resolve conflicts in a way that abusively or unfairly maximizes a particular group’s interest at the expense of other stakeholders. […] Fair treatment — the central theme running through the oppression jurisprudence — is most fundamentally what stakeholders are entitled to “reasonably expect”.
256I also disagree with the defendants’ argument that the actions complained of were not those of KindCann. This was not a purely personal dispute between Mr. Zavet and Mr. Tayts. Mr. Zavet, Mr. Shapiro, and Mr. Fox were acting as directors of Kindcann when they discussed and agreed to the share allocation. The founders, other than Mr. Tayts, gathered to allocate the founder’s shares. They knew that Mr. Tayts was, and had always been considered to be, a founder. They knew he was working for KindCann. Mr. Shapiro and Mr. Fox knew about, and discussed, Mr. Tayts’ shares with Mr. Zavet. They knew he was entitled to founder’s shares. They took their cues from Mr. Zavet with respect to the degree of Mr. Tayts’ entitlement. But they collectively excluded Mr. Tayts from all discussions about the allocation of founder’s shares. They discussed providing him with a small number of shares. Yet he was granted none. Allocating shares of the corporation is conducting the business or affairs of the corporation within the meaning of the CBCA.
257Mr. Zavet denied that Mr. Tayts was intentionally excluded; he stated that he was excluded because he had no role to play in this part of the transaction. However, this was not their historical practice. For example, when Mr. Kumer was considering investing in January 2014, Mr. Zavet discussed potential splits with Mr. Tayts before discussing it with Mr. Kumer and the rest of the group.
258When advised that there would be a problem with Mr. Tayts, Mr. Shapiro indicated that if there was nothing in writing, there was no need to worry. While Mr. Zavet held the most detail as to Mr. Tayts’ expectations, all remaining founders knew that Mr. Tayts held a reasonable expectation of receiving a fair and equitable number of founder’s shares. Yet they acted to exclude him from discussions about the allocation, to collectively minimize his contributions, and to fail to engage in any meaningful, fair inquiry and discussion amongst themselves about the extent of his entitlement. Mr. Zavet, Mr. Fox, and Mr. Shapiro all knew that Mr. Tayts was a founder and was entitled to founder’s shares, even if the shares were to come from Mr. Zavet’s portion.
259In addition, the parties acknowledged that KindCann would honour arrangements between the parties about the issuance of founder’s shares. Yet they turned a blind eye to Mr. Tayts and his entitlement.
260This is not a mere private contractual matter.
261I accept that Mr. Zavet made extensive contributions to KindCann, in terms of both financial and work investment. I accept that as time went on, Mr. Zavet came to appreciate the reality of the size of the contribution he was required to make. The venture proved more difficult and complex than he had anticipated. He was required, perhaps, to provide more work for less of a share in KindCann than he originally accepted. I accept too, as does Mr. Tayts, that Mr. Zavet, Mr. Shapiro, and Mr. Fox were instrumental in KindCann’s success. I accept that they had funds at risk in the project and Mr. Tayts did not.
262These business and contextual realities would reasonably have pushed Mr. Tayts’ entitlement toward the lower end of Mr. Tayts’ expectations. But that lower end was nowhere near, as conceded by Mr. Zavet, 2.5%. The lower end of their discussions, and Mr. Tayts’ reasonable expectations considering his contributions and the parties’ discussions, was 15% of Mr. Zavet’s shares. That lower end also reflects that Mr. Zavet received a smaller interest in the entire project than that which he had at times hoped for.
263As noted, not every unmet expectation gives rise to a claim for oppression. However, where there is unfair prejudice, and unfair disregard of a complainant’s rights, a claim will exist. As noted in paragraph 100 above, “unfair prejudice” may require a less culpable state of mind than coercive or abusive conduct that amounts to oppression, and capture conduct that nevertheless has unfair consequences. “Unfair disregard” of interests extends to ignoring an interest as being of no importance, contrary to the stakeholders’ reasonable expectations.
264As also noted in paragraph 100 above, squeezing out a minority shareholder is unfair prejudice. Failing to deliver property is unfair disregard. I find that Mr. Fox, Mr. Shapiro, and Mr. Zavet squeezed out Mr. Tayts. They excluded him from the share allocation discussions and failed to provide him with founder’s shares to which he was entitled.
265I find Mr. Tayts has proved, on a balance of probabilities, that Mr. Zavet, Mr. Shapiro, Mr. Fox, and KindCann engaged in conduct and exercised their powers in a manner that was unfairly prejudicial to and unfairly disregarded Mr. Tayts’s interests, as defined in the CBCA, and that Mr. Tayts is entitled to a remedy for their oppressive conduct.
9. To what remedies is Mr. Tayts entitled?
a) Is Mr. Tayts entitled to a remedy against any or all of Mr. Zavet, Mr. Shapiro, and Mr. Fox personally?
266Neither KindCann nor its successor corporations exist today. Mr. Tayts does not seek a remedy against KindCann or Emblem because any such remedy would be merely theoretical. The question is whether any or all of Mr. Zavet, Mr. Shapiro or Mr. Fox is personally liable to Mr. Tayts.
267Under s. 241(3) of the CBCA, the court has broad, but not limitless, discretion to fashion an appropriate remedy. The order must be tailored to rectify the complaint; the oppression remedy is corrective in nature: Wilson v. Alharayeri, 2017 SCC 39, [2017] 1 SCR 1037 at para. 27. One of the enumerated possible remedies is an order compensating the aggrieved person.
268In Wilson, the Supreme Court of Canada upheld and expanded upon the test for imposing personal liability for oppression on officers and directors set out by the Court of Appeal for Ontario in Budd v. Gentra Inc.. There, the Court of Appeal set out two preliminary requirements: first, that the officer or director against whom an order is sought must be implicated in the oppressive conduct. Second, the order must be fit in all the circumstances: Wilson at paras. 31, 47. Both elements of the test must be satisfied in order for liability to be imposed: Wilson at para. 48.
269Whether an order is fit depends on several factors. The oppression remedy must be a fair way of dealing with the situation: Wilson at para. 49. I consider the most relevant of the enumerated indicia of fairness in this case is whether the parties obtained a personal benefit from their conduct or increased their control of the corporation by their conduct: Wilson at paras. 32-33, 49. Finding bad faith may militate strongly in favour of personal liability, but is not a necessary pre-condition to imposing liability: Wilson at para. 41.
270I have already found above that the allocation of shares was conduct in respect of the affairs of the corporation, not personal conduct.
271I find that Mr. Zavet acted in bad faith toward Mr. Tayts and obtained a personal benefit. Mr. Zavet was the one, as I have set out above, who had the detailed knowledge of Mr. Tayts’ reasonable expectations. I have found that Mr. Tayts’ shares were to come from those allocated to Mr. Zavet. By not honouring Mr. Tayts’ reasonable expectations, Mr. Zavet benefitted by keeping Mr. Tayts’ shares for his own benefit. I find it fair and fitting that an order be made against Mr. Zavet personally.
272I have found that Mr. Shapiro and Mr. Fox engaged in conduct that was oppressive within the definition of the CBCA. I need not decide here whether that conduct crosses the threshold to amount to bad faith, because, even if it does, I do not view it as fitting than an order be made against them personally. I do not accept the argument that they benefited from the failure to allocate shares to Mr. Tayts. While they considered providing Mr. Tayts shares from treasury, the general understanding was that Mr. Tayts’ shares would come from Mr. Zavet’s allocation. Mr. Shapiro and Mr. Fox’s positions would be unchanged.
273I have also found that Mr. Shapiro and Mr. Fox would have allocated as many as Mr. Zavet’s founding shares to Mr. Tayts as Mr. Zavet requested. I therefore do not find it fitting that an order for compensation be made against them personally.
b) To what remedy is Mr. Tayts entitled?
274I have found that Mr. Tayts’ reasonable expectation was to receive 15% of Mr. Zavet’s founder’s shares. I have found it appropriate that Mr. Zavet be personally responsible for his and the corporation’s oppressive conduct in failing to meet Mr. Tayts’ reasonable expectations.
275Mr. Zavet received 284,211 of the 1,000,000 founder’s shares, so Mr. Tayts should have received 42,632 shares. Mr. Zavet purchased shares in addition to his founder’s shares. I find these “extra” shares he purchased are irrelevant to Mr. Tayts’ claim. There is no suggestion that the discussions, agreements, and expectations of the parties went beyond the allocation of founder’s shares.
276In August 2016, Mr. Zavet sold shares to his law partner. I find this sale is irrelevant to Mr. Tayts’ damages calculations. Mr. Zavet made this sale to compensate Mr. Levy for “picking up the slack” in their law practice while Mr. Zavet was occupied with KindCann, and because he and Mr. Levy were friends.
277A few days after Mr. Zavet’s sale to Mr. Tayts, there was a 20:1 stock split. Mr. Tayts should and would have had 852,633 shares in KindCann in August 2016.
278KindCann went public on December 6, 2016, and continued under the name Emblem. The founder’s ownership interests in KindCann were converted to ownership interests in Emblem on December 6, 2016, at a rate of 1:1. Emblem began trading on the TSXV on December 12, 2016.
279Mr. Tayts therefore would have had 852,633 shares in Emblem on December 6, 2016.
280Ten per cent of the founder’s shares were immediately tradeable. Escrow provisions applied to the remainder of the shares, so that 15% were released and able to be sold every six months thereafter.
281According to this schedule, the last of the founder’s shares would be released from escrow on December 6, 2019.
282However, on March 14, 2019, the founders’ ownership interests in Emblem Corp. were converted to ownership interests in Aleafia at a rate of 1:0.8377 as part of an acquisition. There is no evidence that this had any impact on the escrow schedule. I am therefore prepared to assume that schedule would have continued unchanged.
283Mr. Tayts retained Mr. Jacob Dwhytie, a chartered business valuator and economist at PricewaterhouseCoopers. Mr. Dwhytie was qualified to testify as an expert in financial and economic analysis, including with respect to the analysis and valuation of securities, and was permitted to provide opinion evidence in this area.
284Mr. Dwhytie traced as much information as was possible using public records in the SEDI database. He was also provided some, but incomplete, information about the defendants’ share sales.
285Mr. Dwhytie quantified the market value and intrinsic value, or difference between the market price and the conversion price, of the personal defendants’ direct and indirect ownership interests.
286Mr. Zavet, Mr. Fox, and Mr. Shapiro all made their first public sale of shares on January 16, 2017, when Emblem shares were trading at $4.33.
287Mr. Tayts testifies he would have sold his portion of founder’s shares, had he received them, in December 2016, because he was not part of the company anymore and would not wish to be involved.
288The defendants argue it is more likely that Mr. Tayts would have kept his shares until after the Aleafia transaction. They argue that the personal defendants kept most of their shares for this length of time, and it is realistic to think Mr. Tayts would have done so as well.
289I reject Mr. Tayts’ evidence that he would have sold all his shares in December 2016. First, had he received 15-25% of Mr. Zavet’s shares, there would have been no reason for him to not be part of KindCann. Second, there were restrictions on the percentage of founder’s shares that could be sold at any one time. Mr. Dwhytie confirmed that such a schedule is common with founder’s shares, and that Mr. Tayts’ founder’s shares would have been subject to the same schedule. I view Mr. Tayts’ evidence as more conjecture than historical fact: Fuller v. Aphria Inc., 2020 ONCA 403at para. 88.
290I also reject the defendants’ suggestion that Mr. Tayts would have maintained his shares until after the Aleafia transaction occurred, selling them between 2019 and 2022. This, too, is conjecture. The evidence of when the defendants disposed of their own shares was, at best, incomplete.
291Both sides took positions that were maximally beneficial to their respective positions. I have rejected both positions as being divorced from the realities of the situation. I have determined the following to be the most likely outcome, one that is fair and results in neither a windfall overcompensation nor a de minimis result.
292I find it most likely that Mr. Tayts would have sold his first 10% of founder’s shares when the others made their first sale, shortly after they were able to do so in accordance with the escrow provisions. I find the most likely and plausible course of conduct for Mr. Tayts would have been to sell his shares as they were released from escrow. Mr. Tayts was in a different financial position than were the other three personal defendants. After all, he did not have funds to invest in KindCann, only sweat equity. He very clearly told Mr. Zavet he did not have the funds available to purchase half of Mr. Zavet’s interest in December 2014. The evidence supports a finding that he needed funds more than did the other personal defendants, that he had never risked funds as he had never been in a position to do so, and I find he would have taken his funds out as he was able to. I find this to be a more likely course of conduct than that proposed by either party.
293As note above, Mr. Tayts would have had 852,633 shares of Emblem in January 2017. I find he would have sold his shares in accordance with the following schedule. I have taken the closing share price of the dates in question from the report of Mr. Dwhytie, evidence upon which the parties agreed I could rely.
| Date | Number of shares | Closing share price |
|---|---|---|
| January 16, 2017 | 85,263 | $4.33 |
| June 6, 2017 | 127,894 | $1.62 |
| December 6, 2017 | 127,894 | $1.68 |
| June 6, 2018 | 127,894 | $1.52 |
| December 6, 2018 | 127,894 | $0.93 |
294On March 14, 2019, Mr. Tayts would have had his remaining 255,788 shares in Emblem converted to Aleafia shares at a rate of 1:0.8377, with the result that he would have had 214,273 shares in Aleafia.
295The Aleafia share sales would have been:
| Date | Number of shares | Closing share price |
|---|---|---|
| June 6, 2019 | 107,136 | $1.31 |
| December 6, 2019 | 107,137 | $0.64 |
296I find Mr. Tayts would have received total proceeds of $1,313,495.13.
297Finally, I reject the defendant’s submission that Mr. Tayts failed to mitigate his damages when he did not accept Mr. Zavet’s offer of shares. I have found that Mr. Tayts was entitled to 42,632 shares, a greater-than-six times multiple of what Mr. Zavet offered him. He was not required to accept Mr. Zavet’s offer, which I have found did not include a “gift” of $100,000 worth of preferred shares.
Issue two: Has Mr. Tayts established that he is entitled to a remedy on the basis of unjust enrichment/quantum meruit? If so, what is the appropriate remedy?
298I also find Mr. Tayts is entitled to a restitutionary remedy.
299Quantum meruit is a discrete cause of action, separate from a contract claim. It does not require an explicit agreement to compensate for services rendered. Rather, “[i]t suffices if the “services in question were furnished at the request, or with the encouragement or acquiescence, of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services”: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324, 282 D.L.R. (4th) 697 at paras. 95, 99, citations omitted.
300As described by the Court of Appeal, a quantum meruit claim “contemplates a remedy for unjust enrichment or unjust benefit”: Consulate Ventures at para. 95, citations omitted. It is one category of unjust enrichment claims: Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 at para. 74.
301A successful claim for unjust enrichment requires the plaintiff to prove the defendants have been enriched or received a benefit, the plaintiff has been correspondingly deprived, and there is no juristic reason therefor.
302An award based on quantum meruit or another form of unjust enrichment is an equitable remedy that must be adapted to the requirements of fairness in the circumstances of each case. The remedy may be monetary or proprietary. However, a monetary remedy is not restricted to a fee-for-service calculation where there has been unjust enrichment: Kerr at para. 58. A remedy may be assessed by the cost to the plaintiff of providing the service, the market value of services provided, or the value placed on the benefit by the recipient. An unjust enrichment claim may also lead to a proprietary remedy through the imposition of a constructive trust: Soulos v. Korkontzilas, [1997] 2 S.C.R. 217 at para. 25.
303I have above rejected the defendants’ argument that Mr. Tayts contributed to the Naicatchewenin First nations project, not that of KindCann. In written closing argument, the defendants’ position is somewhat modified in that they acknowledge Mr. Tayts made some contributions to “the initial organization” of KindCann.
304As noted above, I find the defendants’ attempted distinction between the two ventures disingenuous and self-serving. I do not accept it. I have found that Mr. Tayts made significant contributions to the venture that was KindCann.
305I have also rejected the defendants’ attempts to minimize Mr. Tayts’ contributions to KindCann, repeated once more in their quantum meruit argument. I have accepted Mr. Tayts’ evidence that, at least for a time, it was as though he was working an extra full-time job.
306The defendants argue that, on his own estimate, Mr. Tayts provided services worth about $200,000. I note that on Mr. Zavet’s own evidence, he said that providing Mr. Tayts with 7,000 founder’s shares and $100,000 worth of preferred shares, with a value of $170,000 in December 2014, would have been fair.
307I acknowledge that after December 2014, the defendants continued to expend extensive time and effort into KindCann. I acknowledge that KindCann was unsuccessful in its first Health Canada inspection. I acknowledge, too, that Mr. Zavet spent more time and effort on KindCann for a lower percentage of the venture than he anticipated in the early days of the venture in the spring of 2013.
308However, as of October to December 2014, the time at which the capital was being raised and founder’s shares were being allocated, Mr. Tayts had been deprived of the value of a tremendous amount of his work. I find that Mr. Zavet and MZ Prime were the parties that were unjustly enriched by this work. This is because as far as Mr. Shapiro and Mr. Fox were concerned, Mr. Zavet and Mr. Tayts were collectively required, as a team, to provide certain services and produce certain results for KindCann. When Mr. Tayts provided services, it meant that Mr. Zavet did not have to provide them. It was with Mr. Zavet’s encouragement, acquiescence, and constant reassurances that Mr. Tayts continued to provide his work. Mr. Zavet was aware of, and the beneficiary of, the work that Mr. Tayts did. MR. Zavet took his founders’ shares through MZ Prime. Therefore, MZ Prime was enriched by receiving shares to which Mr. Tayts was entitled. There was no contractual or other juristic reason for this enrichment and deprivation.
309Accordingly, I find that Mr. Tayts is entitled to the same remedy through the quantum meruit/unjust enrichment analysis as he is entitled to under the oppression analysis. In the case of his unjust enrichment claim, however, MZ Prime is equally responsible, as it was the entity holding Mr. Tayts’ shares.
Issue three: Were Mr. Tayts and Mr. Zavet in a solicitor-client relationship such that Mr. Zavet owed fiduciary obligations to Mr. Tayts? If so, did Mr. Zavet breach those obligations?
310Mr. Tayts claims Mr. Zavet was his lawyer and owed him fiduciary duties, which he breached. He claims Mr. Zavet was his “go-to” lawyer for matters from 2009-2014.
311Mr. Zavet states that he acted for Mr. Tayts and Ms. Lev-Mor on some discrete real estate or real-estate-related transactions. Beyond that scope, he would refer them to another lawyer or suggest they get another lawyer. He did not have any ongoing solicitor-client relationship with them.
312The parties agree that whether a solicitor-client relationship exists is a fact-specific inquiry, and both parties refer to cases that have relied on the indicia set out in Jeffers v. Calico Compression Systems, 2002 ABQB 72, 314 A.R. 294. There, the court stated at para. 8:
It is not necessary that a person formally retain a lawyer by way of letter or other document before a solicitor / client relationship can be found. Nor is it necessary that there be an account rendered by the lawyer to the complaining party or that an account be paid by the complaining party to the lawyer. While I have not seen any case which sets out all of the indicia of a solicitor / client relationship, a number of cases, including UCB Sidac International Ltd. v. Lancaster Packing Inc. (1993), 51 C.P.R. (3d) 449 (Ont.Gen.Div), Guardian Insurance Co. of Canada v. 379227 Alberta Ltd. (1999), 1999 ABQB 637, 251 A.R. 334 (Q.B.) and Filipovic v. Upshall (2000), 133 O.A.C. 151 (C.A.), do discuss certain indicia which may or may not determine that such a relationship does exist. These indicia include: a contract or retainer; a file opened by the lawyer; meetings between the lawyer and the party; correspondence between the lawyer and the party; a bill rendered by the lawyer to the party; a bill paid by the party; instructions given by the party to the lawyer; the lawyer acting on the instructions given; statements made by the lawyer that the lawyer is acting for the party; a reasonable expectation by the party about the lawyer’s role; legal advice given; and legal documents created for the party. Not all indicia need to be present. As Madam Justice Romaine stated in Guardian Insurance, supra, the question appears to be whether a reasonable person in the position of a party with knowledge of all the facts would reasonably form the belief that the lawyer was acting for a particular party.
313Mr. Tayts also argues that Mr. Zavet was in an ongoing solicitor-client relationship with him. Mr. Zavet was “his lawyer” whom he consulted regularly about a variety of matters in the years leading up to their medical marijuana venture. He argues that this created an ongoing solicitor-client relationship that subsisted at the time of their venture: Weir v. Law Society of New Brunswick, 2017 NBCA 18, 278 A.C.W.S. (3d) 641; Cassey v. Morrison(1989), 67 O.R. (2d) 65, [1989] O.J. No. 24 (Ont. H.C.), aff’d on this issue (1993), 1993 8566 (ON CA), 15 O.R. (3d) 223, [1993] O.J. No. 4127 (Ont. C.A.).
314With this framework in mind, I will review the relationship between the parties.
315Mr. Zavet practiced through a firm called, at various times, Porco Zavet, Porco Levy Zavet, and Levy Zavet Professional Corporation. He testified that his practice was centred on real estate, largely focused on residential closings, and that Mr. Levy worked on small to medium sized corporate issues, contracts, trademarks, and wills and estates.
316Mr. Tayts testified that he was unaware of Mr. Zavet’s specialty.
317Mr. Zavet or his firm provided consultations or services to Mr. Tayts and/or his family and his businesses starting in 2009. I will review them in sequence.
2009
318In late 2009, Mr. Zavet, through Porco Zavet, assisted Mr. Tayts’ corporation in a dispute it was having with a client. Mr. Zavet stated he had no memory of this transaction. The correspondence makes it clear that Mr. Tayts was obligated to sign a release as part of the resolution of the dispute, and Mr. Zavet agreed that it would have been his usual practice to explain a release to a client. He acknowledged this was not a real estate issue, and stated that by 2012 he restricted his practice to real estate.
2010
319A few months later, in March 2010, Mr. Zavet drafted Powers of Attorney for Ms. Lev-Mor to act as her father’s attorney.
320In about 2010 Mr. Zavet acted for Mr. Tayts and Ms. Lev-Mor on the closing of their house sale.
2011
321In June 2011, Mr. Zavet assisted Mr. Tayts and Ms. Lev-Mor with legal matters related to a condominium.
2012
322In February 2012 Mr. Zavet was asked for advice about a business contract by Ms. Lev-Mor.
323In March 2012, Mr. Zavet connected Mr. Tayts with Mr. Zavet’s partner, Jeff Levy (the firm was by now Porco Levy Zavet) who drafted wills and powers of attorney for Mr. Tayts and Ms. Lev-Mor.
324In April 2012, at Mr. Tayts’ request, Mr. Zavet provided advice regarding a dispute with a business client and possible remedies for breach of contract.
2013
325Between March and May 2013, Mr. Zavet engaged in discussions on Mr. Tayts’ behalf with the lawyer for Peace Naturals. First, he was corresponding about the term sheet for his and Mr. Tatys’s involvement in Peace Naturals. Mr. Zavet explained the term sheet to Mr. Tayts at opposing counsel’s suggestion.
326Then, when the agreement with Peace Naturals deteriorated, Mr. Tayts sought a return of the funds he had provided and/or a small percentage of Peace Naturals shares. Mr. Zavet corresponded with Peace Naturals’ counsel in an attempt to resolve the dispute. When the matter did not resolve, he advised Mr. Tayts he needed a litigator to help him.
2014
327In June 2014, Mr. Zavet’s partner, Mr. Levy, performed trademark work for Mr. Tayts’s business.
328Mr. Tayts called Professor Allan Hutchinson, whom he proposed to qualify to provide expert opinion evidence in the area of professional and ethical obligations of lawyers. The defendants objected to Professor Hutchinon being called on the bases that a) the court does not need this expert evidence – it is the type of determination courts are routinely called upon to determine, within their own knowledge – and b) Professor Hutchinson’s report is advocacy, not impartial expertise. I made the following ruling in respect of the admissibility of Prof. Hutchinson’s evidence:
The rules of professional conduct may have some relevance to a determination of the existence of a solicitor-client relationship and the breach of fiduciary duty. The rules will not be determinative of either issue.
In accordance with the Teskey v. Canadian Newspapers Co. (1989), 68 OR (2d) 737, 59 D.L.R. (4th) 709 (Ont. C.A.) case, I will permit the opinion evidence of Mr. Hutchinson to be called, as it pertains to the expectations set out by the Rules of Professional Conduct. He may not testify about fiduciary obligations or whether there was a solicitor client relationship, but he may provide his opinion about how the rules of professional conduct apply to facts and affect those issues. Counsel may argue in closing about the effect of this evidence on the issues of whether there is a solicitor-client relationship, and whether fiduciary obligations were owed and breached.
I do not find that the opinions as expressed in the report amount to advocacy or impartiality to the degree that leads to disqualification.
329In Teskey, the Court of Appeal held that expert evidence on the Rules of Professional Conduct ought to have been admitted by the trial judge. The trial judge had refused to admit the evidence because it was his view that it contained conclusions of law and usurped the function of the trial judge. The Court of Appeal held that “[p]rofessional standards of conduct are not rules of law but rather reflect what members of a profession have decided is proper or improper.” I therefore limited the scope of Profession Hutchinson evidence to the expectations set out by the rules.
330Professor Hutchinson testified that the rules indicate that a solicitor-client relationship can be established and terminated without formality, and the objective evidence relevant to the reasonable expectations of the parties should be considered. The onus is on the lawyer to ensure the client knows what the relationship is. There are duties that survive the end of the lawyer-client relationship. The rules are made to protect the interests of clients, who are vulnerable to a lawyer’s knowledge and expertise.
331Professor Hutchinson testified that the general approach of the rules is to discourage lawyers from doing business with clients. If a lawyer does pursue business with a client, the lawyer should ensure the client receives independent legal advice. In the case of a former client, the lawyer is to clarify that the business relationship is not a lawyer-client relationship. A lawyer is also required to ensure there are no misunderstandings of the roles if they enter into business with a current client. Professor Hutchinson acknowledged that it can be very difficult to say when a current client becomes a former client. A determination depends on all the facts and surrounding context.
332As noted in my ruling made during trial, the Rules of Professional Conduct are not determinative of whether a solicitor client relationship exists, whether duties are owed, and what those duties are. They are factors that may be considered, but ultimately, I must make the decision on these issues in light of all the facts that I find based on the evidence I heard.
333I turn now to the indicia of whether a lawyer-client relationship exists.
334No written retainer agreements were produced for any of the work provided by Mr. Zavet or his firm. I reject Mr. Zavet’s suggestion that agreements existed for the specific legal work he did for Mr. Tayts and Ms. Lev-Mor, despite the fact that he was unable to find or produce them. I find that no written retainer agreements existed.
335Mr. Tayts agreed he did not pay Mr. Zavet for the assistance Mr. Zavet provided with Peace Naturals. He advised that he would go to Mr. Zavet with legal problems and sometimes Mr. Zavet would bill him, sometimes he would not. Mr. Tayts acknowledged the only time the word “hire” appeared in his messages to Mr. Zavet was with respect to the trademark work in 2014.
336Mr. Zavet did not open a file for Mr. Tayts with respect to KindCann. As noted above, there was no retainer letter, which I view as a neutral factor. Mr. Zavet was unable to produce retainer agreements even for real-estate files when he was clearly retained.
337The meetings that occurred between Mr. Zavet and Mr. Tayts with respect to KindCann were meetings to discuss the progress of the business and the arrangement between them. They did not involve Mr. Zavet providing advice to Mr. Tayts in any substantive way. Mr. Tayts acknowledged he did not receive any formal written memoranda or legal advice from Mr. Zavet with respect to KindCann. The closest Mr. Zavet came to providing legal advice was to express his view that the best way for them to hold shares in the venture was through a corporation. Mr. Zavet did not take instructions from Mr. Tayts. No bills were rendered or paid.
338Mr. Tayts relied in part on a transcript of a conversation between him and Mr. Zavet in October 2014 to support his argument that he viewed Mr. Zavet as his “go to” lawyer. In that conversation. Mr. Tayts was explaining that he had received some information from a cannabis company. Mr. Tayts had signed a confidentiality agreement in respect of the information but sent it to Mr. Zavet because “he’s my lawyer” and he wanted Mr. Zavet to see it. The transcript of their telephone call reads:
Mr. Tayts: […] I signed an NDA but I'm going to forward to you, just because you're my lawyer, I guess I can send it to you right, I can send this to you right?
Mr. Zavet: Yes.
339The audio recording of that call was put to Mr. Tayts in cross examination. Mr. Tayts agreed that he was excited about the information and wanted to send the information covered by the NDA to Mr. Zavet. In cross examination, it was suggested to Mr. Tayts that he laughed when he said Mr. Zavet was his lawyer, and made the comment in jest, as a way to get around the NDA.
340The defendants rely heavily on this evidence to support their argument that Mr. Tayts should not be believed, that his reference to Mr. Zavet as his “go to” lawyer was contrived, and that the audio recording reveals this lack of credibility.
341I find the audio recording unhelpful in establishing whether there was a lawyer-client relationship. It is true that Mr. Tayts laughed slightly when saying Mr. Zavet was his lawyer, but I do not find he was entirely joking. He wanted confirmation from Mr. Zavet that he would not be in trouble for forwarding the NDA to him. The reason he would not be in trouble was Mr. Zavet’s status as a lawyer, if not his lawyer.
342It is notable is that Mr. Zavet answered “yes”. He did not say he was not Mr. Tayts’ lawyer. Instead, he provided comfort to Mr. Tayts that he would not be in trouble for sending Mr. Zavet the non-disclosable information because Mr. Zavet was a, if not his, lawyer.
343Mr. Tayts relies heavily on the case of John Doe v. MacDonald, 2015 ONSC 4850, aff’d 2016 ONCA 319 for the proposition that ambiguities about the existence, as well as the scope, of a retainer are to be resolved in favor of the client. I do not read the case as providing quite such a sweeping pronouncement. In Doe, there was no dispute that the parties were in a lawyer-client relationship. The question was whether the oral retainer agreement provided that services would be delivered on a pro bono or contingency basis. In that context, the law is clear. There is a heavy burden on a lawyer who wishes to convince the court of the terms of his oral retainer (see, for example, Ellyn Barristers v. Stone, 2007 ONCA 565, [2007] O.J. No. 3114. The case does not extend that proposition to determining whether a retainer agreement exists.
344I accept that there is a policy rationale for giving significant weight to a client’s, or putative client’s, understanding of whether a retainer exists. The lawyer, who has knowledge, experience, and professional obligations, is the person who is in the position to clarify the existence and terms of the relationship.
345The telephone conversation was an opportunity for Mr. Zavet to explain that he was not Mr. Tayts’s lawyer for this venture, and he failed to do so. Mr. Zavet could and should have been clearer. However, the question for this court is not whether Mr. Zavet complied with professional rules and standards at large. The question is whether he was Mr. Tayts’s lawyer and therefore owed him fiduciary duties in the KindCann venture.
346Mr. Tayts acknowledged in cross examination that he was not suggesting that, in the KindCann venture, he believed Mr. Zavet was pursuing Mr. Tayts’ interests to the exclusion of those of Mr. Zavet, or placing Mr. Tayts’ interests above his own. Rather, they were pursuing the venture together. He thought their interests were the same.
347I find Mr. Zavet had a history of providing occasional formal and informal to Mr. Tayts and, at times, Ms. Lev-Mor. As Mr. Zavet described it, “I had a very friendly relationship with them. I didn't bill them for every second of my time. I was open as any, I think you would be to your friends to help them in - in certain situations and to direct them to the right place.”
348I accept that a lawyer who provides regular services to a client may be found to be in an ongoing solicitor-client relationship with that client. While Mr. Zavet could have, and should have, been clear and specific about this, his failure to do so does not create a solicitor-client relationship where one did not exist. On the facts before me, I do not find that Mr. Tayts formed the belief that he had an ongoing relationship with Mr. Zavet for legal services. I do not find that Mr. Tayts believed that Mr. Zavet was his lawyer in respect of KindCann. I do not find that a reasonable person in Mr. Tayts’ position would form this belief. I do not accept as true that Mr. Tayts believed that Mr. Zavet had agreed to render legal services to him in the KindCann venture: Galambos v. Perez, 2009 SCC 48, [2009] 3 SCR 247.
349I therefore do not find that Mr. Zavet was Mr. Tayts’s lawyer for the purposes of, or at the time of, the KindCann venture.
350I find that that Mr. Tayts was a client of Mr. Zavet’s for discrete real estate and power of attorney transactions. While Mr. Zavet provided some negotiating assistance to Mr. Tayts in respect of Peace Naturals, when it was clear that formal legal representation was required, Mr. Tayts went elsewhere. Mr. Tayts was therefore a former client, and Mr. Zavet had a duty not to misuse any confidential information that he received as Mr. Tayts’ lawyer to Mr. Tayts’ detriment: Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649 at paras. 23-24.
351I find that Mr. Zavet did not do so. The information that Mr. Zavet had about Mr. Tayts that was sensitive was not gained in the course of the provision of legal services by Mr. Zavet to Mr. Tayts. Nor did he use any information he did gain as Mr. Tayts’ lawyer against Mr. Tayts.
352Given my findings in this section, Mr. Zavet did not owe Mr. Tayts fiduciary obligations as Mr. Tayts’ lawyer. There is therefore no breach of fiduciary obligation.
Disposition
353Based on my findings above, Mr. Tayts is granted judgment against Mr. Zavet and MZ Prime in the amount of $1,313,495.13 for Mr. Tayts’ claims in oppression and unjust enrichment.
354The remainder of Mr. Tayts’ claim is dismissed.
355The parties are encouraged to agree upon costs. If they are unable to do so, Mr. Tayts may make submissions of no more than five double-spaced pages, plus a bill of costs and any offers to settle, by January 27, 2026. The defendants may provide responding submissions with same page limits by February 10, 2026. There will be no reply submissions without leave. Submissions may be sent to my judicial assistant at Katie.Ray@ontario.ca.
356I close by thanking counsel for their able and professional representation of their respective clients.
L. Brownstone J.
Released: January 13, 2026