Basha c. Singh				2016 QCCS 1564
JM 2497   SUPERIOR COURT
CANADA
PROVINCE OF QUEBEC
DISTRICT OF		MONTREAL
N°:	500-11-045126-139
DATE :	April 11, 2016
IN THE PRESENCE OF:			THE HONOURABLE JEAN-FRANÇOIS MICHAUD, J.S.C.
SASSON MICHAEL BASHA
Plaintiff
v.
HARJIT SINGH - and - KULVINDER SINGH BAGRI - and - 7030975 CANADA INC. - and - 6154736 CANADA INC. - and - 8378975 CANADA INC.
Defendants
JUDGMENT (Motion for an oppression remedy)

[1]          Sasson Michael Basha[1] (Basha) is asking this Court to declare that he is the owner of 25% of the issued and outstanding shares of 7030975 Canada inc. (Pro Global) and order Defendants to purchase and pay those shares which would be valued at $514,747.25. He is also seeking a condemnation of $50,000 for moral damages and the reimbursement of his legal fees.

[2]          Basha alleges that the Defendants have acted and conducted themselves in a manner that is oppressive and unfairly prejudicial to his interests.

1.            BACKGROUND

[3]          Basha worked at Nortel as a project manager before its collapse. He then moved on to the transport industry and, in 2009, joined Carmel, a company specialized in transporting containers. He started as an operational manager with the mandate to increase sales by implementing proper management processes. In 2011, he was promoted general manager.

[4]          In the course of his work at Carmel, Basha met Arvinder Paul Singh (Arvinder), Harjit Singh (Harjit) and Kulvinder Singh Bagri (Kulvinder) who were operating a transportation business under the company name of Pro Global. They specialized in moving containers with their own trucks for various clients and, amongst them, Carmel. At the end of 2010, Pro Global had revenues of $484,890 with a net income before taxes of $13,666[2].

[5]          Basha was unhappy at Carmel, having not received the bonuses he felt he was entitled to. He started to look at his options and one of them was to join Pro Global. After several discussions with the three shareholders, he entered into a verbal agreement in February 2011, the content of which is contested.

[6]          According to the three shareholders, Basha was to become a shareholder with 25% of the outstanding shares of Pro Global, once the company would have reimbursed its loans. At that time, Pro Global’s loans had no terms[3] of payment and totalled approximately $163,899[4]. Until then, Basha would act as general manager of Pro Global with a specific mandate to increasing business activities by bringing in new clients.

[7]          According to Basha, there were no such conditions. He was to become a shareholder from day one with the same percentage of shares as the other three. He admits that he was not entitled to any profits of the company until the shareholder loans would be repaid. However, this did not preclude him from becoming a shareholder.

[8]          In any event, Basha joined Pro Global in February 2011. They agreed that all decisions should be taken unanimously and voted themselves a salary of $60,000. Basha was appointed director and treasurer of Pro Global. His name was added as an authorized signatory on all the corporate banking accounts.

[9]          With Basha’s arrival and his list of contacts, the business grew rapidly. Basha put in place infrastructures similar to the ones at Carmel. Arvinder was appointed dispatcher and Pro Global started to hire subcontractors to transport the containers. Kulvinder and Harjit continued to perform their duties as truck drivers.

[10]       In August 2011, the parties retained the services of Cabinet Gamliel, a law firm, to update Pro Global’s minute book and draft a shareholders’ agreement. A professional services agreement was signed by Pro Global confirming the scope of this mandate[5].

[11]       Attorney Adam Eidelmann, who was handling this matter, met with Basha and Harjit on August 19 to discuss several issues[6]. He confirmed that the shareholders’ agreement was to capture the arrival of Basha as the fourth shareholder and director of Pro Global. He prepared a draft contract and sent it to Basha who was the point of contact for reasons of language since the other shareholders were less fluent in English. None of the parties kept a copy of the draft and, therefore, it was not filed in the Court record.

[12]       As to attorney Eidelmann, he left Cabinet Gamliel in 2012 and, since then, has not seen nor had access to his file. He remembers that the minute book was modified[7] although he does not recall exactly what was done nor if he issued shares certificates. He also mentioned that the loans to the shareholders were to be repaid without adding more details.

[13]       The federal and provincial registries were notified by attorney Eidelmann that Basha was appointed director of Pro Global as of February 1^st, 2011[8]. However, it is unclear as to whether the registries were also informed that Basha was the fourth shareholder since the format of the CIDREQ report does not allow for more than the name of the three principal shareholders of a corporation.

[14]       The parties did not follow up on the draft shareholders’ agreement because they were too busy with their business and were not interested in spending more legal fees.

[15]       In the following months, Pro Global’s revenues continued to increase significantly. At the end of 2011, revenues amounted to $1,583,153, almost one million dollars more than the previous year, with a net income before taxes of $58,848[9]. These results were unquestionably due to the arrival of Basha.

[16]       In spite of the improved financial situation of Pro Global, none of the shareholders were prepared to advance more money to the company, which was still in need of funds, more particularly for the purchase of more platform chassis used for the transport of containers.

[17]       Instead, Harjit decided to purchase the required equipment with his own money, through 6154735 Canada Inc. (615), a company owned at that time by Kulvinder and his wife. Kulvinder and Harjit planned to rent the equipment to Pro Global.

[18]       After discussion, the four shareholders agreed that Pro Global would pay $5,000 every two weeks to 615 for the use of the said equipment. Once 615 would be fully reimbursed, the shareholders of Pro Global would either become shareholders of 615 or the equipment would be transferred to Pro Global. The payments started in February 2012.

[19]       The evidence is unclear as to when the equipment was purchased and for how much. However, it is admitted by all that there was an agreement to proceed that way.

[20]       The revenues of Pro Global continued to grow and, at the end of 2012, amounted to $1,953,646 with a net income before taxes of $70,226[10]. The shareholder loans were reduced to $101,271. It should be noted that Basha never lent money to Pro Global.

[21]       At one point, Basha believed that Pro Global should open an office in Toronto. He met with a bank in order to obtain the necessary funds. He presented the project to the other shareholders who refused it on the basis that they did not want to borrow more money.

[22]       In December 2012, they agreed to create a holding company, 8378975 Canada Inc. (837), which would become the sole shareholder of Pro Global. On the CIDREQ report[11], Basha’s name does not appear as a shareholder but his status is not disputed by the other shareholders.

[23]       The parties did not pursue their plan and 837 remained inactive.

[24]       At the beginning of 2013, Basha requested a raise of $20,000. All shareholders were then still earning $60,000 per year. Basha also asked that Pro Global lend him $20,000 for personal reasons.

[25]       On or about March 13, 2013, all shareholders agreed to increase their salary to $70,000 and to receive, as directors, an advance of $5,000 from Pro Global. Basha was disappointed because he believed the financial situation of the company would have allowed them to receive more.

[26]       On March 26, at 9:42 p.m., Basha sent an email to the other three shareholders and directors, informing them that he was resigning from his position as partner of Pro Global and 615, as of March 27, 2013[12]. He stated that his 25% ownership would be relinquished to the remaining partners at fair market value estimated at $150,000. No grounds were given to justify the obligation of the remaining shareholders to purchase his shares.

[27]       At that time, the shareholder loans amounted to approximately $100,000.

[28]       Three days later, Kulvinder replied that there were no documents to suggest that he was a shareholder of Pro Global or 615[13].

[29]       Few days later, at the beginning of April, Basha returned to work at Carmel with a salary of $80,000.

[30]       On May 14, 2013, a letter was sent by Basha’s attorney putting the other three shareholders on notice to pay his 25% ownership in Pro Global then valued at $375,000. Again, no details were provided to support Basha’s demand to be compensated for his shares.

[31]       In August, Basha filed a Motion for the issuance of a permanent injunction and Motion in oppression (Motion). This Motion was answered by a counter claim in which the Defendants are seeking $30,000 in damages, representing inconveniences and their legal fees, that would have been caused by Basha’s bad faith. They are also claiming $3,000 as punitive damages.

[32]       Shortly after Basha’s departure, the payments from Pro Global to 615 stopped. Kulvinder and Harjit became shareholders of 615 based on their prior agreement. The Court was not provided with the details of those transactions and, therefore, is unaware of the amount paid by Pro Gobal to 615, the dates of those payments, the description of the equipment involved or when the shareholding of 615 changed.

[33]       A few days before the trial, a settlement intervened between Arvinder and Basha whereby Basha agreed to discontinue his proceedings without costs against Arvinder while the latter admitted in a transaction document that Basha had a 25% ownership in Pro Global and 615[14].

[34]       Arvinder had been in dispute with the other two shareholders since March 2015[15]. They were not getting along and Arvinder became isolated. He ceased working for Pro Global and is using his own company to continue to operate in the transport industry.

[35]       After Basha left, Pro Global revenues started to decline. At the end of 2013, the revenues were at $1,628,472, at the end of 2014 at $1,309,715 and at the end of 2015 at $776,959[16].

2.            ISSUES

[36]       Does Basha qualify as a complainant under the Canada Business Corporations Act (CBCA)?[17]

[37]       Does Basha hold 25% of the shares in Pro Global?

[38]       If Basha should be considered a shareholder of Pro Global, is he entitled to be paid by the Defendants the value of his shares?

[39]       What is the value of Basha’s ownership in Pro Global?

[40]       Are the Defendants entitled to be compensated for their alleged damages?

3.            THE LAW

[41]       Basha’s recourse is based on sections 238 and 241 of the CBCA.

238 In this Part,

[...]

complainant means

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

(b)  a director or an officer or a former director or officer of a corporation or 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.

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.

[…]

[42]       Section 241 establishes the grounds upon which the Court may exercise its discretionary power to rectify oppressive or unfairly prejudicial conduct, and provides for a non-exhaustive list of the remedies it may grant.

[43]       In BCE Inc. v. 1976 Debentureholders[18], the Supreme Court of Canada described the oppression remedy as one focussing on:

[45] [...] harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors. This remedy is available to a wide range of stakeholders - security holders, creditors, directors and officers.[19]

[44]       The Supreme Court went on to observe that the oppression remedy, being an equitable remedy, “gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair”[20]. The Court added that “oppression is fact-specific”, and that “[w]hat is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another.”[21]

[45]       In considering a claim for oppression, courts should conduct the following two-pronged inquiry:

[68] In summary, the foregoing discussion suggests conducting two related inquiries in a claim for oppression: (1) Does the evidence support the reasonable expectation asserted by the claimant? and (2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest?[22]

[46]       With respect to the first prong of the test, the Supreme Court elaborated as follows on the concept of reasonable expectations: 

[62] As denoted by “reasonable”, the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be “just and equitable” to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.[23]

(this Court's emphasis)

[47]       Factors identified by the Supreme Court as useful in determining the existence of a reasonable expectation include: commercial practices, the nature and size of the corporation, personal relationships between the claimant and other corporate actors, past practice among shareholders of a closely held corporation, preventive steps the claimant could have taken to protect itself against the alleged prejudice, and shareholders’ agreements.

[48]       BCE makes the important point that the failure to meet a reasonable expectation does not, on its own, entitle a complainant to a remedy under s. 241 CBCA. The second prong of the test requires the complainant to demonstrate that the failure to meet this expectation involved “unfair conduct” and “prejudicial consequences” within the meaning of s. 241. In the words of the Supreme Court:

[93] The CBCA has added “unfair prejudice” and “unfair disregard” of interests to the original common law concept, making it clear that wrongs falling short of the harsh and abusive conduct connoted by “oppression” may fall within s. 241. “Unfair prejudice” is generally seen as involving conduct less offensive than “oppression”. Examples include squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a “poison pill” to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors’ fees higher than the industry norm.[24]

[49]       Author Paul Martel describes the oppressive remedy under the CBCA in the following terms:

    Le recours de l’article 241, recours d’équité, est ouvert non seulement dans les cas d’abus des droits du plaignant, ce qui implique des éléments de dureté et de manque de probité et traduit l’expression anglaise «oppression», mais aussi, et c’est là que la loi fédérale a innové par rapport au droit anglais, dans les cas où, même en l’absence d’illégalité ou de fraude, il est porté atteinte à ces droits ou qu’il n’en est pas tenu compte. La Loi utilise l’expression «se montre injuste» (en anglais, «unfairly») pour décrire ces deux autres catégories de circonstances. Les mots «unfairly disregard» ont été interprétés comme signifiant «to unjustly and without cause (...) pay no attention to, ignore or treat as of no importance the interests of security holders (...)».  

Comme l’a bien souligné le juge Gomery dans l’affaire Journet:

«... it is no longer a question only of oppression: now the Court is asked to judge upon the fairness of the actions of management».

    La conduite reprochée doit, à tout le moins, impliquer «a visible departure from the standards of fair dealing and a violation of the conditions of fair play».

    Pour déterminer s’il y a ou non un «préjudice injuste» à réparer, le tribunal doit s’efforcer de respecter un équilibre entre, d’une part, la protection des intérêts du plaignant et, de l’autre, la liberté d’action des dirigeants de l’entreprise, et la latitude qu’ils ont de poser dans son intérêt des gestes qui affectent le plaignant ou ne tiennent pas compte de ses intérêts. Il doit aussi tenir compte du pouvoir dont peut disposer le plaignant de faire lui-même cesser ce préjudice, par exemple en exerçant son droit de vote comme actionnaire ou comme administrateur.[25]

4.            ANALYSIS

4.1.        Status of Basha as a “complainant”

[50]       Both parties have cited authorities relating to the question of whether Basha qualifies as a “complainant” under s. 238 CBCA.[26]

[51]       The Court shares the view expressed in the matter of Larmon c. Synergy Hospitality Inc.[27] that an applicant, who is a recipient of an oral promise that he would receive a 25% shareholder interest in a company and who acted upon that promise to the benefit of that company, is a proper person to make an application as a “complainant”.

[52]       That is the case for Basha.

[53]       In addition, the parties acted, as we will see below, as if Basha was already a shareholder. The fact that the steps to finalize the shareholders’ agreement had been suspended should not prevent Bashat to exercise his rights as a “complainant”.

[54]       In any event, it is admitted that Basha was a director of Pro Global at the time and, therefore, that he qualifies as a “complainant” under paragraph (c) of the definition of that term in s. 238.

[55]       Hence, the dispute between the parties can be broken down into two questions: the first relates to the status of Basha as a shareholder of Pro Global, and the second is whether oppression or unfair prejudice has been shown so as to entitle Basha to the remedy he is seeking.

4.2.        Status of Basha as a shareholder of Pro Global

[56]       Based on the evidence presented, the Court concludes that it was the parties’ intention that Basha would become both a director and a 25% shareholder of Pro Global immediately upon joining the company as an employee.

[57]       The parties gave a mandate to Cabinet Gamliel to draft a shareholders’ agreement and attorney Eidelmann confirms that the status of Basha as the fourth shareholder was never in dispute. The fact that this agreement was never finalized does not constitute, under the present circumstances, an obstacle. The parties agreed to put on hold this process but never to postpone accordingly the recognition of Basha’s status as a shareholder.

[58]       The federal and provincial registries were notified that Basha had been a director of Pro Global from the date of his joining the company, on February 1, 2011. This is consistent with Basha’s position that the agreement between the parties involved his joining the company as a shareholder, director, and employee.

[59]       Also, the fact that Bash became an equal shareholder of 837, which was to be the holding company of Pro Global, confirms Basha’s status as a partner in the business.

[60]       Furthermore, it seems unlikely that Basha would have left a gainful employment at Carmel to work for an equivalent salary at Pro Global, a company with lower revenues and an uncertain future, had he not been offered additional benefits.

[61]       It seems equally unlikely that Basha would have shared contacts and knowledge to drastically increase Pro Global’s sales while putting himself at the mercy of the Defendants’ good will to make him a shareholder. In such a scenario, the Defendants could have postponed the repayment of their loans, thereby postponing indefinitely the time at which Basha could become a shareholder of the company.

[62]       The evidence does not support the contention put forward by the Defendants that Basha would become a shareholder of Pro Global only after repayment in full of the shareholders’ loans to the company. The loans totalled approximately $160,000 at the time the mandate was given to Cabinet Gamliel and no imminent reimbursement was planned. It does not make sense to formalize Basha’s status as a shareholder and engage the services of a law firm when it ought to have been apparent that these loans would not soon be repaid.

[63]       The Court notes that Basha’s acknowledgement that the original agreement included a stipulation whereby the individual Defendants’ loans would have priority is in no way inconsistent with the agreement that he would become a shareholder of Pro Global immediately upon joining the company.

[64]       Having found that the parties' agreement was that Basha would, upon joining the company as an employee, become not only a director, but also a shareholder, the Court concludes that Basha is entitled to a declaration to that effect, irrespective of any finding of oppression.

4.3.        Absence of conduct that is oppressive, unfairly prejudicial, or unfairly disregards basha’s interest

[65]       The key issue in the present case is whether the Defendants’ conduct vis-à-vis Basha constitutes “oppression” within the meaning of s. 241 CBCA.

[66]       Based on the evidence, the Court is unable to find any conduct that could be characterized as “oppressive”, “unfairly prejudicial” or as having “unfairly disregarded” Basha’s interests.

[67]       The event which precipitated this litigation can be traced to Basha’s decision to leave Pro Global in March 2013. This was a voluntary and unilateral decision taken by Basha, and one which took the Defendants by surprise, coming, as it did, shortly after Basha had agreed with the individual Defendants that salaries would be increased to $70,000 and that they would each received an advance of $5,000.

[68]       In his email[28] announcing his departure and in his letter of demand[29], Basha never raised any issues of oppression or facts showing that he had been unfairly treated.

[69]       Also, in his Motion, Basha alleges that he resigned as an officer and director of Pro Global because of the deteriorating relationship and divergent views between the other shareholders and himself:

53.  On March 26, 2013, in culmination of the deteriorating relationship and divergent views with respect to the finances and growth of Pro Global and the other entities, Plaintiff sent an email correspondence to the Original Shareholders resigning in his capacity as officer and director of Pro Global and offering to sell his share interest in Pro Global to the Original Shareholders, as more fully appears from a copy of said email correspondence, EXHIBIT P-7, a copy of which is communicated to Defendants with the Defendants with the service hereof;[30]

[70]       Again, during the trial, he admits that his decision was based on the fact that Pro Global was not a good place to work anymore:

This is more about sort of frustration. I just wanted to basically stop being in this company, yes.[31]

[71]       An application for an oppressive remedy under the CBCA is not intended to allow a court to intervene in the matters of a company when the work atmosphere is unfriendly or when the directors or shareholders have different views. The applicant needs to show an unfair prejudice or an unfair disregard to his interests. This implies “a visible departure from the standards of fair dealing and a violation of the conditions of fair play.”[32]

[72]       Basha did not meet that burden. Quite to the contrary, all decisions were taken by all with full knowledge of all the relevant facts. It is not because he did not obtain the raise he expected for as an employee nor the personal loan he sought from the company that Basha, as a shareholder, director or employee, was being oppressed.

[73]       The same applies to the project of opening an office in Ontario. The dismissal of that idea by the other directors and shareholders was not unreasonable. There is no evidence that Basha’ interest was affected in any way by this issue.

[74]       Overall, Basha did not produce any evidence that would demonstrate that he was unfairly treated by the other shareholders. The Defendants never paid themselves dividends nor did they advantage themselves in any way to the detriment of Basha.

[75]       The fact that several pieces of equipment were purchased by 615, using funds provided personally by Harjit, for the benefit of pro Global, does not, in the eyes of the Court, constitute “oppression” within the meaning of the CBCA.

[76]       These transactions took place in the summer of 2011, and were brought to the attention of Basha and the other individual Defendants. They all agreed that Pro Global would pay $5,000 every two weeks to 615 for the use of this equipment. The payments started in February 2012 with the full knowledge and consent of all shareholders and directors.

[77]       Shortly after Basha’s resignation, Pro Global ceased the payments and the shareholding of 615 was modified to add Arvinder and Harjit as shareholders, as agreed by all the previous year. If Basha had been more patient, he would have witnessed that change and would also have become a shareholder of 615.

[78]       In addition, the parties had agreed to suspend the finalization of the shareholders’ agreement. There is no evidence that Basha wanted to reactivate this file and to formalize his status as shareholder before he decided to leave Pro Global. The non-execution of a shareholders’ agreement by mutual consent of all shareholders may not be considered as oppressive vis-à-vis one shareholder.

[79]       Basha argues that Defendants’ refusal to recognize his status as a shareholder after his resignation constitutes oppression. He refers to author Paul Martel who identified conduct that courts have recognized as oppressive:

·           Le refus de reconnaître au plaignant le statut d’actionnaire, d’administrateur et de dirigeant auquel il a droit en vertu d’une entente contractuelle, ou de violer son attente raisonnable d’être traité également.

·           Le refus injustifié de la société et ses administrateurs d’autoriser le transfert des actions au plaignant.

[…]

·            Le fait de détourner des biens, des fonds, des profits ou des occasions d’affaires au bénéfice des majoritaires, d’une autre société contrôlée par les majoritaires ou des personnes liées à eux.[33]

(this Court's emphasis)

[80]       Basha also places reliance on Lemire v. Nault[34] where the plaintiff was seeking damages for wrongful dismissal, recognition of his status as a shareholder, as well as an order compelling the company to buy back his shares. The Court granted the relief sought, finding that the defendants’ conduct had amounted to oppression. 

[81]       However, a distinction must be made between the facts in Lemire and those at issue in the present case, particularly with regards to the event that triggered the complainant’s exclusion from the company. Unlike the complainant in Lemire, who had been unfairly dismissed, it is the complainant in the present case, Basha, who made the voluntary and unilateral decision to resign his position at the company, confronting the Defendants with a fait accompli. It may even be argued that the unexpected withdrawal of Basha from Pro Global and his return to Carmel may constitute oppressive conduct by Basha towards the other shareholders of Pro Global.

[82]       The same distinction could be made between the present case and the facts that led the Court to grant relief in Ouellet v. Usinage JV Tech Inc.[35]. It suffices to reproduce the following findings:

[78]  Le refus des défendeurs va à l’encontre des attentes raisonnables du demandeur. La preuve démontre que le demandeur était en droit de s’attendre à la reconnaissance du statut par l’émission d’actions. Il était abusif que les défendeurs mettent le demandeur à la porte de la façon qu’ils l’ont fait sans lui payer ce à quoi il a droit.

[79]  Le refus de reconnaître le statut d’actionnaire du demandeur dans le présent contexte est un geste oppressif et constitue un abus.[36]

(this Court's emphasis)

[83]       Basha has also cited MacDonald v. Master Cartage Inc.[37], a decision of the Ontario Superior Court of Justice (Divisional Court) affirming a decision of Justice Farley holding that the complainant, a partner in a small family-run business, had suffered oppression. The Divisional Court cited the following excerpt from the trial judge's ruling who confirmed that the applicant had been terminated:

By virtue of the plaintiff’s equity interest being denied and his status as an officer and director disputed, by the very nature of this, there is oppression - he was designated, in effect, a non-person in this organization. His termination as an employee and manager was merely icing on the cake with respect to that matter.[38]

[84]       If unjustified dismissal of an employee-shareholder is considered oppressive, the unjustified resignation of that same employee-shareholder may form the basis of oppressive conduct.

[85]       Here, Basha was not terminated nor was he ever asked to leave. On the opposite, his decision to resign was his own and took the other shareholders by surprise. Under those circumstances, Basha was not victim of oppression within the meaning of the Act.

[86]       Moreover, Basha is asking for the payment of his shares while it is admitted by all that he would not be entitled to any profit until the shareholders’ loans would be reimbursed. At the time of his resignation, the loans totalled approximately $100,000. It would be contrary to the parties’ intention that Basha, in absence of unfair treatment, received any value for his shares while the company still owed money to the founding shareholders.

[87]       The fact that the Defendants refused to recognize his ownership of 25% in Pro Global after his resignation is ill founded in law but understandable in fact.

[88]       Basha never discussed with the other shareholders the conditions of his departure. He notified them at 9:42 p.m. that his resignation would be effective the following day. Not only this is unacceptable but he also demanded that the shareholders pay him what he considered to be the value of his shares, $150,000[39]. His behaviour was not justified and had no legal grounds.

[89]       The Defendants were under pressure following Basha’s departure. He had abandoned the company and was claiming from them a significant amount of money. Basha, who had become a key element of Pro Global, was putting the future of their business in jeopardy.

[90]       The Court adds that the Defendants’ argument that Bahsa was not a shareholder did not render their defence frivolous. The Defendants had other means of defence, such as the absence of oppression. In the present circumstances, their contestation of Basha’s status, after he had left the company, does not constitute oppression within the meaning of the Act.

[91]       Having found no evidence of oppressive conduct, the Court sees no legal basis on which to grant the relief sought by Basha and order the company, or the other shareholders, to buy back his shares.

[92]       On this issue, Author Martel writes:

                         L’actionnaire, propriétaire de ses actions, ne peut en effet être contraint de céder sa propriété, sauf dans les cas prévus par la loi, comme par exemple l’article 206 de la Loi canadienne sur les sociétés par actions relatifs à l’acquisition forcée d’actions lors d’une offre d’achat visant à la mainmise, et à l’article 81 du Règlement sur les sociétés par actions permettant la vente forcée d’actions dans les sociétés par actions à participation restreinte; de même, la société ne peut être contrainte d’acquérir des actions qu’elle a émises, sauf lorsque la loi le prévoit, comme par exemple les articles 190 et 241 de la Loi canadienne sur les sociétés par actions, relatifs à l’acquisition forcée d’actions par la société à la suite de l’exercice d’un droit de dissidence ou d’une ordonnance du tribunal en vertu d’un «recours pour oppression». Toutefois, rien n’empêche une partie de s’engager, par contrat, à acquérir un bien ou d’en disposer dans des circonstances et à des termes et conditions prédéterminés, et dans ce cas elle est tenue de respecter cet engagement. C’est ainsi que les actionnaires et la société peuvent prévoir, au moyen de clauses d’achat-vente d’actions dans une convention entre actionnaires, l’offre et l’achat obligatoires d’actions dans certaines circonstances telles le décès ou le retrait des affaires d’un actionnaire. Le privilège de rachat, décrit dans les statuts, constitue une autre forme d’engagement à caractère quasi contractuel liant tant la société que l’actionnaire à compter de l’émission ou de la cession des actions à l’actionnaire. […] [40]

[93]       In Miklos v. Thomasfield Holdings Ltd.[41], the Ontario Supreme Court refused the right to the applicants to demand the payment of their shares, in absence of any oppressive acts: 

[109]  When these extraneous circumstances are set to one side, the question is whether the refusal to make the requested offer to the applicants is oppressive to the interests of the applicants as shareholders.

[110]  It is to be noted that this situation, when considered without reference to the extraneous circumstances, is virtually a case of the minority shareholder simply making a demand upon the corporation to be bought out at a price determined to be the fair value, in the absence of any statutory, contractual or other right to call for such a purchase. It reflects the problem that any minority shareholder has in a closely held company. That problem is exacerbated where the company’s articles impose restrictions on the transfer of the shares. […]

[…]

[112]  The refusal to make the offer denies to the applicants an opportunity that might well be very beneficial to them as minority shareholders. If the offer were made, it seems the price might have to be an amount well in excess of the $205 offered. The applicants submitted that the fair market value might be in the order of $700 per share. The respondents did not address the amount of the fair value.

[113]  The fact that the refusal denies to the applicants a possible beneficial opportunity in respect of their shares does not necessarily mean that it does harm to their interests as shareholders for purposes of s. 248. Their interests as shareholders are that they should be able to enjoy the rights attaching to their shares. One right that accompanies shares is the right to sell them (subject to any restrictions of the kind considered above or restrictions imposed in another way, e.g., by statute). Shares can be created with rights to call on the company to repurchase them, but the applicants’ shares are not of this kind. There is no inherent right to require the company to purchase the shares which the applicants own, so the refusal to offer to purchase does not affect the applicants’ ability to enjoy their share rights.

[114]  By the same reasoning the refusal to make an offer does not disregard their interests. It disregards their wish to sell at the highest price possible. But that wish is to be distinguished from what is their proper interest. Their proper interest, with respect to their shares, is not to be disabled from selling at the highest price possible. A refusal to offer to buy does not interfere with that interest.

(this Court's emphasis)

[94]       The Pro Global minute book was not produced nor were its articles of incorporation. Also, the parties had not yet entered into a shareholders’ agreement. Therefore, in the absence of any contractual rights, Basha cannot demand to be paid for his shares. There are no rules which oblige the parties to purchase or sell their shares.

[95]       In sum, not only Basha has failed to demonstrate the existence of a conduct falling within the terms of the CBCA, but also there are no legal grounds that would allow this Court to order the Defendants to buy his shares. Basha is nevertheless entitled to a declaration confirming his status as a 25% shareholder of Pro Global, consistent with the Court’s findings of fact as regards the initial agreement between the parties.

[96]       The Court will also declare that  Basha hold 25% of the issued and outstanding shares of 615 since it was the intent of the parties that they all become shareholders of that company once Pro Global finishes to pay the bi-weekly instalments which was done after Basha’s departure. Arvinder and Harjit did become shareholder of 615 and so should Basha. That was their agreement.

[97]       The financial situation of Pro Global and 615 has significantly worsened since Basha’s departure. The revenues and the net income have decreased as follows[42]:

	2013	2014	2015
Total revenues	$1,623,763	$1,276,114	$776,959
Net income after taxes	$120,077	$33,495	-$21,536

[98]       The business is no longer profitable and the situation is unlikely to change.

[99]       However, it was Basha’s decision to leave the business without giving a proper notice. His hasty departure and the litigation that ensued are probably the causes for Pro Global’s downfall.

[100]    The result of this matter is likely to be unsatisfactory for the parties since they end up as shareholders of Pro Global and 615 without a common desire to operate the business as well as being wounded by this litigation. Nonetheless, in the absence of oppression within the meaning of the Act, this Court cannot interfere in the parties’ business. As the Ontario Supreme Court states in Miklos[43], “it reflects the problem that any minority shareholder has in a closely held company.”

[101]    The parties have adduced no evidence as to how the Pro Global business has been managed since Basha’s departure except for the litigation initiated by Arvinder. It appears that this litigation has been inactive since an interim order was issued on March 27, 2015[44]. If the parties cannot agree on a solution, they can always proceed with the dissolution or the liquidation of Pro Global and 615.

4.4.        The value of Basha’s ownership

[102]    Despite its findings, this Court will nevertheless comment the expert report filed by Basha regarding the value of his shares in Pro Global.

[103]    The report[45] was prepared by accountant Ugo Cloutier who estimated the net present value of Pro Global shares at $2,058,989, as of December 31^st, 2012.

[104]    To arrive at this conclusion, Mr. Cloutier considered the revenue growth from 2010 to 2012 :

2010	2011	2012
$484,891	$1,483,153[46]	$1,953,646

[105]    He then extrapolated these past revenues to determine the future total revenues over a period of 10 years by assuming the following growth:

	2013	2014	2015
Total revenues	$2,750,000	$3,750,000	$5,000,000
Net income after taxes	$110,000	$150,000	$200,000

[106]    Based on the assumption that Pro Global revenues would have continued to increase each year over a period of 10 years, he concludes that the value of the shares is $2,058,989.

[107]    Mr. Cloutier’s mandate was to estimate the value as of December 31^st, 2012. However, a key element of the past growth of Pro Global is the contribution of Basha. He was the one who had the contacts and the management skills. He was responsible for the revenue increases from $484,891 in 2010 to $1,953,646 at the end of 2012.

[108]    When Basha asked for the payment of his shares, he had already left the company and his departure had a significant negative impact on the value of Pro Global shares. They cannot be evaluated as if Basha was still part of the company.

[109]    Therefore, Mr. Cloutier’s assumptions are incorrect. His projections are purely theoretical and do not take into consideration the absence of Basha who was a key figure of Pro Global.

[110]    The Defendants produced a report prepared by an accountant[47], Florin Dumitrescu. The purpose of that report was not to estimate the value of the shares but simply to discredit Mr. Cloutier’s methodology. This exercise was not useful.

[111]    In any event, the Court concludes that the value of the shares has not been established in a satisfactory manner by the parties. Reviewing the financial statements of Pro Global produced after Basha’s departure, the Court observes that the shares are likely to have a nominal value.

4.5.        The Defendants’ claim for damages

[112]    The Defendants are claiming $30,000 for the legal fees they have incurred to contest Basha’ Motion as well as $3,000 in punitive damages.

[113]    They alleged that Plaintiff’s Motion was introduced in bad faith and in an abusive manner. They had to incur legal fees to protect their rights.

[114]    As explained by the Court of Appeal in the matter of Viel v. Entreprises immobilières du terroir Ltée [48], legal fees can be claimed only in presence of procedural abuse:

[76]  Je formule la question qui nous est posée comme suit : la conduite répréhensible, abusive et de mauvaise foi d'une partie sur le fond du litige permet-elle en soi à la partie adverse de réclamer les honoraires extrajudiciaires de son avocat à titre de dommages-intérêts ?

[77]  Soit dit avec égards, les principes de la responsabilité civile m'incitent à apporter une réponse négative à la question posée.  En principe et sauf circonstances exceptionnelles, les honoraires payés par une partie à son avocat ne peuvent, à mon avis, être considérés comme un dommage direct qui sanctionne un abus sur le fond.  Il n'existe pas de lien de causalité adéquat entre la faute (abus sur le fond) et le dommage.  La causalité adéquate correspond à ou aux événements ayant un rapport logique, direct et immédiat avec l'origine du préjudice subi.  Seul l'abus du droit d'ester en justice peut être sanctionné par l'octroi de tels dommages.  Il m'apparaît erroné de transformer l'abus sur le fond en un abus du droit d'ester en justice dès qu'un recours judiciaire est entrepris.  Quelques explications s'imposent.

[115]    In the present matter, Basha did not use the procedures abusively and there is no ground to claim punitive damages. His Motion raised many issues, some of which will only be granted in part. Therefore, the Defendants’ counter claim will be dismissed.

5.            COSTS

[116]    The documents produced by the parties’ experts were not useful and had no impact on the conclusions of this judgment. The parties will assume their own expert fees as well as their own legal costs, considering the divided outcome of the proceedings.

FOR THESE REASONS, THE COURT:

[117]    GRANTS in part Plaintiff’s Motion;

[118]    DECLARES that Sasson Michael Basha hold 25% of the issued and outstanding shares of 7030975 Canada Inc (Pro Global) and of 6154736 Canada Inc.;

[119]    DISMISSES the Defendants’ counter claim;

[120]    WITHOUT costs.

		__________________________________ JEAN-FRANÇOIS MICHAUD, J.S.C.
Mtre. Bernard Kao
Attorney for Plaintiff
Mtre. Victor Boti
Attorney for Defendants
Dates of hearing:	January 12, 13 and 26, 2016