In Hrvoic v. Hrvoic, the Court agreed with the trial judge’s findings that the wife was a 50% owner of the family business established with her husband during the marriage. The trial judge’s order requiring the husband to buy out the wife’s interest at half the determined value of the business was upheld. The Court addressed the husband’s argument that the wife should have been disentitled to a remedy under the “unclean hands” doctrine because she had unilaterally removed funds from the business. The Court held that conduct that may leave a party with “unclean hands” does not automatically disentitle a party to any relief. Equitable principles are not based on the application of strict rules. Rather, they are discretionary and must be applied on the basis of the circumstances of each case.

Other topics covered in short decisions this week included wills and estates, litigation guardians, extension of time to appeal and the quashing of an appeal for want of jurisdiction.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Hrvoic v. Hrvoic, 2023 ONCA 508

Keywords: Corporations, Shareholders, Family Law, Property, Remedies, Oppression, Equitable Defences, “Clean Hands” Doctrine, Civil Procedure, Limitation Periods, “Appropriate Means”, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 5, Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, Bolianatz Estate v. Simon, 2006 SKCA 16, Dering v. Earl of Winchelsea (1787), 1 Cox 318, 2 E.R. 1184, BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 77 O.R. (3d) 161 (C.A.), Toronto (City) v. Polai, [1970] 1 O.R. 483 (C.A.), aff’d [1973] S.C.R. 38, Sorrento Developments Ltd. v. Caledon (Town), 2005 CanLII 2549 (Ont. C.A.),  Grant Thornton LLP v. New Brunswick, 2021 SCC 31

Short Civil Decisions

Javid Estate v. Watson, 2023 ONCA 511

Keywords: Wills and Estates, Codicils, Estate Trustees, Beneficiaries, Civil Procedure, Payment into Court

Mouralian v. Groleau, 2023 ONCA 513

Keywords: Civil Procedure, Litigation Guardians,  Substitute Decisions Act, 1992, S.O. 1992, c. 30, ss. 6 and 45, Rules of Civil Procedure, r. 7.04(1)

Faraone v. Hitti, 2023 ONCA 512

Keywords: Real Property, Residential Tenancies, Civil Procedure, Appeals, Extension of Time, Abuse of Process, Rizzi v. Mavros, 2007 ONCA 350, 85 O.R. (3d) 401, Kaiman v. Graham, 2009 ONCA 77

Alami v. Haddad, 2023 ONCA 510

Keywords: Civil Procedure, Appeals, Jurisdiction

College of Physicians and Surgeons of Ontario v. Kilian, 2023 ONCA 515

Keywords: Regulated Professions, Doctors, Administrative Law, Civil Procedure, Interveners, Costs, Substantial Indemnity

CIVIL DECISIONS

Hrvoic v. Hrvoic, 2023 ONCA 508

[Feldman, Benotto and Roberts JJ.A.]

Counsel:

G. Sidlofsky, for the appellant
D. Taub and S. Mosonyi, for the respondent

Keywords: Corporations, Shareholders, Family Law, Property, Remedies, Oppression, Equitable Defences, “Clean Hands” Doctrine, Civil Procedure, Limitation Periods, “Appropriate Means”, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 5, Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, Bolianatz Estate v. Simon, 2006 SKCA 16, Dering v. Earl of Winchelsea (1787), 1 Cox 318, 2 E.R. 1184, BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 77 O.R. (3d) 161 (C.A.), Toronto (City) v. Polai, [1970] 1 O.R. 483 (C.A.), aff’d [1973] S.C.R. 38, Sorrento Developments Ltd. v. Caledon (Town), 2005 CanLII 2549 (Ont. C.A.),  Grant Thornton LLP v. New Brunswick, 2021 SCC 31

facts:

The parties were married in 1992 and separated in 2010. During their marriage they founded a highly successful manufacturing company that made specialized sensors to measure the earth’s magnetic field. The shareholdings in issue have been held since 2000 by a holding company, 1427830 Ontario Corporation (“142”), pursuant to a rollover.

The respondent wife was the lead for sales, marketing and business development until the appellant husband terminated her employment without notice and for cause on March 2, 2020. The appellant is an engineer and geophysicist and the president of the manufacturing company. Until the termination of her employment, the respondent was the secretary of the manufacturing company. At the appellant’s direction, following separation, the appellant and respondent were always paid equal compensation and equal dividends from the company until the termination of her employment.

The appellant filed an application which was tried together with the respondent’s action for a declaration, among other heads of relief, that she owned 50% of the company’s common shares. The trial judge determined that the appellant and respondent held equal shareholdings and valued them at $10,800,000. She ordered that the appellant purchase the respondent’s common shares for $5,400,000.

issues:

1. Did the trial judge err in concluding that the parties held equal shareholdings pursuant to an agreement?
2. Did the trial judge err in her valuation of the shareholdings of the company?
3. Did the trial judge misinterpret and misapply the “clean hands” doctrine in granting the respondent a remedy?
4. Did the trial judge misinterpret and misapply the test for the commencement of the applicable limitation period?
5. Did the trial judge err in failing to address the appellant’s counterclaim?

holding:

Appeal dismissed.

reasoning:

1. Did the trial judge err in concluding that the parties held equal shareholdings pursuant to an agreement?

No. The Court noted that the evidence before the trial judge included an agreement between the appellant and respondent that the shareholdings would be divided 50/50, the appellant would take the necessary steps to reflect the shareholdings as 50/50, there would be equal compensation and dividends following the end of the marriage, and that the respondent did not to pursue equalization of net family property in the matrimonial proceedings because she believed she was a 50% shareholder of 142, their most valuable asset.

The Court agreed that these were all factual findings the trial judge was entitled to make based on the record before her, and saw no reason to interfere with them on appeal.

The Court agreed with the trial judge’s rejection of the appellant’s argument that the equal dividends reflected the parties’ equal shareholdings of Class D Special Shares. As the trial judge observed, the corporate records did not indicate that Class D Special Shares had ever been issued and that, in any event, the articles of incorporation provided that the holder of the Class D Special Shares would be entitled to payment “out of any or all profits or surplus lawfully available for dividends remaining after payment of dividends on Common Shares” (emphasis in original). These findings supported the trial judge’s conclusion that the dividends that were paid to the respondent and the appellant had to be those paid on the common shares in accordance with the 50/50 shareholdings found by the trial judge.

2. Did the trial judge err in her valuation of the shareholdings of the company?

No. The Court disagreed with the appellant’s argument that the trial judge erred in failing to give effect to his expert opinion that the trial judge indicated she preferred. The Court noted that the trial judge accepted some but not all of each experts’ evidence. Although generally preferring the approach of the appellant’s expert, the trial judge did not reject the opinion of the respondent’s expert. The trial judge determined that the value of the shareholdings should be more than the opinion of value of the appellant’s expert, but less than the opinion of value proffered by the respondent’s expert. There was no basis to interfere with the trial judge’s decision.

3. Did the trial judge misinterpret and misapply the “clean hands” doctrine in granting the respondent a remedy?

No. The “clean hands” doctrine does not automatically disentitle a party with “unclean hands” from obtaining any relief. Equitable principles are not based on the application of strict rules, but are applied at the judge’s discretion and are “crafted in accordance with the specific circumstances of each case”: Pro Swing Inc. The Court noted that the trial judge carefully considered the circumstances surrounding the withdrawals of funds from the corporation made by the respondent that were cited by the appellant as the basis for the suggestion that the respondent had “unclean hands”.

The Court agreed with the trial judge’s factual findings that the respondent’s withdrawal of the $150,000 from her shareholder loan account with the company was legitimate and in keeping with the long-standing compensation practice followed by both the appellant and respondent. According to the company’s accountant, both parties made withdrawals that would be reconciled at year-end.

The Court noted that the trial judge did not condone the respondent’s unauthorized withdrawal of the $600,000 from the appellant’s line of credit, which the respondent repaid. However, the trial judge exercised her discretion to grant the respondent relief, having regard to all the circumstances, including the appellant’s conduct that she found precipitated the respondent’s wrongful act. The Court held that the trial judge’s reasoning showed that she did not simply excuse the respondent’s conduct because of the appellant’s conduct but situated the respondent’s conduct in the context of all the relevant circumstances. The Court held there was no basis to interfere with the trial judge’s decision not to invoke the “unclean hands” doctrine as a basis to deny the respondent any relief.

4. Did the trial judge misinterpret and misapply the test for the commencement of the applicable limitation period?

No. The Court was not persuaded that the trial judge made any error in finding the claim was not statute-barred. The trial judge properly referenced and applied the provisions of s. 5 of the Limitations Act, 2002 (the “Act”) and her decision was in keeping with the applicable governing principles articulated by the Supreme Court in Grant Thornton.

The trial judge considered when the respondent discovered or ought to have discovered through the exercise of reasonable diligence the material facts on which her claim was based. The trial judge then considered under s. 5(1)(iv), when the respondent first knew that “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”. The Court noted that the trial judge’s holding that the respondent had rebutted the presumption under s. 5(2) of the Act (that she knew of her claim “on the day the act or omission on which the claim is based took place”) was clear from the trial judge’s reasons. The finding was in keeping with the approach taken in Grant Thornton, as the trial judge’s rejection of this presumption indicated that based on her findings, she found that the respondent could not have drawn “a plausible inference of liability” until she knew that the appellant had not amended the corporate documentation to designate her as a 50% shareholder.

5. Did the trial judge err in failing to address the appellant’s counterclaim?

No. The Court held that counterclaim had no merit. As evidenced by the appellant’s correspondence with his bank, the appellant admitted on his cross-examination that his bank had agreed to reverse the interest originally charged on the respondent’s $600,000 withdrawal. He had therefore not proven any loss.

SHORT CIVIL DECISIONS

Javid Estate v. Watson, 2023 ONCA 511

[Pardu J.A. (Motions Judge)]

Counsel:

L. J. in her capacity as Estate Trustee of the Estate of A. J.
R. K. Watson and P. Robson, for the moving parties
M. A. Swadron, for the responding party

Keywords: Wills and Estates, Codicils, Estate Trustees, Beneficiaries, Civil Procedure, Payment into Court

Mouralian v. Groleau, 2023 ONCA 513

[Gillese J.A. (Motion Judge)]

Counsel:

N. M., acting in person
M. Morden, for the responding party

Keywords: Civil Procedure, Litigation Guardians,  Substitute Decisions Act, 1992, S.O. 1992, c. 30, ss. 6 and 45, Rules of Civil Procedure, r. 7.04(1)

Faraone v. Hitti, 2023 ONCA 512

[Gillese J.A. (Motion Judge)]

Counsel:

R. H., acting in person
A. Zweig, for the responding parties

Keywords: Real Property, Residential Tenancies, Civil Procedure, Appeals, Extension of Time, Abuse of Process, Rizzi v. Mavros, 2007 ONCA 350, 85 O.R. (3d) 401, Kaiman v. Graham, 2009 ONCA 77

Alami v. Haddad, 2023 ONCA 510

[Miller, Harvison Young and Favreau JJ.A.]

Counsel:

M. H. A., acting in person
C. Baker, for the respondent
Keywords: Civil Procedure, Appeals, Jurisdiction

College of Physicians and Surgeons of Ontario v. Kilian, 2023 ONCA 515

[Harvison Young J.A. (Motion Judge)]

Counsel:

A. Sherazee, for the moving parties/proposed interveners/appellants
P. Wardle and E. Rankin, for the responding party/applicant/respondent
P. Slansky, for the responding party/respondent/respondent

Keywords: Regulated Professions, Doctors, Administrative Law, Civil Procedure, Interveners, Costs, Substantial Indemnity

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.