Conduct not sufficient to justify costs order

Ontario civil | Business Associations | Specific matters of corporate organization | Shareholders

Applicant company (B Ltd.) was engaged in development and implementation of cryptographic technologies and blockchain based solutions. B Ltd. was formed by reverse takeover implemented by respondent individual B, and company MCI. Disputes arose over agreements for investments and share transfers. B Ltd. and individual shareholders A and W’s (collectively B Ltd.) application for oppression remedies was granted in part. B, in his capacity as CEO of B Ltd., had breached his fiduciary duties and caused affairs to be conducted in oppressive manner that unfairly disregarded and was unfairly prejudicial to B Ltd. and its shareholders. B and MCI were ordered to repay $561,373 that had been misappropriated from B Ltd. and to pay B Ltd.’s costs of $225,956.87 on partial indemnity basis. In event that repayment of misappropriated funds was not repaid, it was ordered that B Ltd. could cancel shares held by MCI of equivalent value. As funds were not repaid, B Ltd. applied to vary relief claimed to require buyout of MCI’s investment shares in B Ltd. at fair market value or alternatively, to vary value of cancelled share to $.05 per share as opposed to $.09’ per share; B Ltd. also applied for cancellation of MCI’s shares akin to misappropriated funds based on difficulty collecting costs. Application granted in part. As judgment had not yet been issued and entered, court had jurisdiction to vary its terms. However, amendment to reasons as requested by B Ltd. for buyout was refused and remedies were appropriate to address oppressive conduct found. B Ltd.’s request to seek order to buyout balance of MCI’s shares, given valuation of $.05 per share was equivalent to their initial request for cancellation of shares. While oppression remedy offered flexible remedy, B Ltd.’s request for additional relief was not one which should be granted to avoid new proceeding where evidence would be same. Issues were res judicata to parties involved. Reasons were amended to reflect cancellation of B Ltd. shares held by MCI to redress misappropriation from B Ltd. of $561,313 at fair market value at $.05 per share as opposed to $.09. B Ltd. to advise of number of exact shares for cancellation at $.05 per share valuation. Order as to costs refused at MCI’s conduct was not sufficient to justify such order; B Ltd. understood risks involved in commencing application against foreign respondents. However, MCO would not be entitled to vote any of its B Ltd. shares at shareholders meeting until it paid B Ltd.’s costs.

Arend v. Boehm (2018), 2018 CarswellOnt 10590, 2018 ONSC 4084, L.A. Pattillo J. (Ont. S.C.J.); additional reasons (2017), 2017 CarswellOnt 17756, 2017 ONSC 3582, L.A. Pattillo J. (Ont. S.C.J.).

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