2020 QCCA 567, 2020 QCCA 567

Naimer c. Naimer 2020 QCCA 567 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-028859-205 (500-11-048871-152) DATE: April 8, 2020 BEFORE THE HONOURABLE GENEVIÈVE MARCOTTE, J.A. BRAM NAIMER JOBRA INVESTMENTS LTD. APPLICANTS – Respondents v. DARREN NAIMER CLIFFORD NAIMER RESPONDENTS – Applicants and GESHAR INVESTMENTS LTD. GERALD NAIMER SHARON NAIMER 9298-3832 QUEBEC INC. IMPLEADED PARTIES – Impleaded parties and DE GRANDPRÉ CHAIT S.E.N.C.R.L.

IMPLEADED PARTY JUDGMENT [ 1 ] The Respondents Darren and Clifford Naimer are asking me to grant their Amended application for case management and for issuance of a safeguard order. Their application was prompted by a judgment rendered by a judge of this Court on March 19, 2020, which granted the Appellants Brian Naimer and Jobra Investments Ltd. leave to appeal of a judgment rendered by Justice Marie-Anne Paquette of the Superior Court on February 17, 2020 (“Paquette judgment”).

In the judgment granting leave, my colleague Manon Savard wrote: [4] …I may add that the scope of the issues between the parties is limited. The fact that leave to appeal is granted should not be an obstacle to the finalization of the transaction which could be done under reserve of the judgement of the Court of the appeal.

With the assistance of their attorneys, it seems, prima facie , that there is no reason not to do so. [1] [ 2 ] These comments have led the Respondents to seek a safeguard order to force the conclusion of the transaction and the immediate disbursement in their favour of all monies held in trust by De Grandpré Chait. [ 3 ] The Respondents allege that the requested safeguard order is also justified in light of Justice Paquette’s references to the oppressive nature of the Appellants’ conduct and their delaying tactics as regards the closing of the transaction.

The Respondents also refer to the earlier findings of Justice Robert Mongeon, in a judgment rendered on November 28, 2019 , [2] which judgment homologated the transaction concluded on June 7, 2019 after deciding on certain issues that were allegedly preventing the finalization of said transaction. These issues had to do with the tax treatment of the sum of 5.5 million dollars to be paid to the Respondents and their refusal to reimburse credit card expenses to the Appellants. [ 4 ] The Mongeon judgment was not appealed, although a Motion in rectification was presented and granted in part.

In his rectified judgment of December 17, 2019, Justice Mongeon denied the Respondents’ request for an order of provisional execution notwithstanding appeal, because they failed to demonstrate that they were likely to suffer serious or irreparable prejudice in the event of an appeal, given his award of a 3.5% annual interest charge calculated on the amount of $5.5 million that was owed to them as of July 25, 2019.

Justice Mongeon did however rectify his reasons to provide more clarity with respect to the award of interest. [ 5 ] Further to this judgment and although they did not appeal same, the Appellants still refused to proceed with the closing of the transaction, raising new issues to oppose it.

They claimed that Respondents had refused to honour the reimbursement of credit card expenses at the time of the closing despite the Mongeon judgment, and that they refused to return Union Lighting’s intellectual property (web domain names) and the shares in a holding company incorporated for the purpose of holding shares in a US company (Union Lighting USA) which formed part of the transaction. [ 6 ] This refusal led the Respondents to seek once again the Superior Court’s intervention, to enforce the execution of the

homologated transaction. This motion led to the Paquette judgment. [ 7 ] Before Justice Paquette, the first issue of contention pertaining to the reimbursement of credit card expenses was declared moot, as appears from paragraph 9 of her judgment: [9] There is no debate on the first item identified above. This issue is dealt with in the November 28, 2019 judgment.

Darren and Clifford agree to proceed with these payments, which amount to a little over $25,000 and which they will not let stand in the way of the $5.5 million payment which they are expecting since July 2019. [ 8 ] Justice Paquette decided however that the other issues that were raised by the Appellants to refuse to finalize the transaction were not included in this transaction and could not serve to delay same.

She insisted on the fact that such delay c unacceptable and unjustifiable financial restraints on Darren and Clifford, who had ceased to exercise all of their functions and powers within the companies and were no longer receiving any salary or any other form of remuneration. [ 9 ] She granted the Motion with costs against the Appellants and ordered that the closing documents in execution of the transaction be circulated within 10 days of the judgment, that the closing take place within 30 days of same and that the funds necessary for the closing be put immediately in trust with De Grandpré Chait. [ 10 ] The Appellants have since sought and obtained leave to appeal this judgment. [ 11 ] In support of their Amended application for case management and a safeguard order, the Respondents argue that all three judgments (Mongeon, Paquette and Savard) have indicated that there is no reason that the closing of the transaction cannot occur.

They claim that the appeal is of limited scope and that the Appellants show a lack of cooperation in refusing to go forward with it while the monies required for the closing of the transaction have been deposited in the trust account of De Grandpré Chait. [ 12 ] They further assert that, pursuant to the transaction agreement, they gave up their remuneration packages and have had to seek alternative employment and that their business is now being imperilled because of the closing, given that the payment of the sum of $5.5 million has not occurred.

They allege that the Appellants’ refusal to close the transaction is affecting their ability to earn a living and to fulfill their obligations to their employees and suppliers and that this will “most undoubtedly cause their company to go bankrupt because there is a lack of available funding”. This is in addition to the COVID-19 crisis which has delayed the opening of their business to the end of the month. [ 13 ] The Appellants contest the Amended Application which, in their view, fails to allege a proper appearance of right as well as any urgency or any serious or irreparable prejudice.

They insist on the fact that no affidavit has been filed in support of the allegations of potential bankruptcy while the allegation of the risk of an unsuccessful business is not sufficient to justify imposing the closing of a transaction which must be concluded in its entirety (as opposed to a partial transaction).

They claim that there is even less urgency given that the COVID pandemic that has caused all non-essential businesses to be put on hold for the next month. [ 14 ] As for the demonstration of an appearance of right, they argue that the Respondents have failed to explain why they have not turned over the shares that they own in the US company (via the Canadian holding company) while this was central to the conclusion of the transaction and why they have not returned to Union Lighting its intellectual property (web domain names) and have not repaid the expenses that they undertook to reimburse before Justice Paquette. [ 15 ] The Appellants further argue that the obligations arising from a prior agreement concluded between the parties (the 2016 USA Agreement) form part of the transaction which is a “clear package deal” to severe all business ties between the parties and cannot be carved out of certain of its elements.

They assert that, without the whole package including the return of the shares held in the US company, the deal would never have been done. As a result, the fact that the appeal is of a limited scope as it relates to the inclusion of the Respondents’ obligations to turn in the US shares along with the return of the intellectual property belonging to Union Lighting and the reimbursement of expenses by the Respondents, does not allow for a partial closing to take place.

This is even more so given that the Respondents do not have “clean hands”, having failed to honour their undertaking to reimburse the expenses or to return the intellectual property belonging to Union Lighting. [ 16 ] Generally, in order to successfully obtain a safeguard order, the Respondents must demonstrate that they have an apparent right to the order sought, that they will suffer serious and irreparable prejudice, that the balance of convenience favours the granting of their application and that the situation is urgent. [3] [ 17 ] In this case however, consideration must be given to the fact that the Application is more in the nature of a partial execution or an attempt to enforce conclusions which are not contested in appeal in accordance with

article 355 C.C.P. , than a safeguard order per se . [ 18 ] That being said, I do not find the Appellants’ arguments regarding the absence of an appearance of right or the impossibility to severe the “package deal” to be compelling.

The judgment in homologation rendered by Justice Mongeon which has acquired the status of “chose jugée” supports the Respondents’ right to claim the enforcement of the explicit terms of the transaction, including the payment of the sum of $5.5 million. [ 19 ] The Appellants claim that there are other obligations which although implicit were crucial to the deal and that the Respondents have failed to honour these obligations which the Paquette judgment omits to recognize as forming part of the transaction.

The Appellants have successfully argued before my colleague Savard that an appeal is justified and have obtained leave to appeal, as a result. Yet, while these implicit obligations may be imposed in the future in the event of a successful outcome in appeal, they do not, in the interim, justify delaying any further the closing of the uncontested portion of the transaction any further. [ 20 ] The amount of the $5.5 million payment to the Respondents is not contested and does not stand to be modified by an eventual judgment of this Court.

In my view, it is entirely possible to carve out the limited issues that stand to be debated in appeal concerning the return of the intellectual property of Union Lighting (web domain names) and the return of the US shares (held through the Canadian holding company).

[ 21 ] The partial transaction should therefore serve to address all of the express terms of the transaction agreement that was homologated by the judgment of Justice Mongeon in November 28, 2019, including the reimbursement of the credit card expenses, in the manner provided in the Mongeon judgment [4] and as agreed by the parties before Justice Paquette, as pointed out in her judgment. [5] [ 22 ] As far as the allegations of urgency and serious and irreparable prejudice are concerned, the Appellants rightfully point out that no affidavit has been filed to support the contention that “the lack of funding risks the success of their business” or that the lack of cooperation of the Appellants will “most undoubtedly cause their company to go bankrupt because there is lack of available funding”.

The Appellants also point out that Justice Mongeon refused to grant provisional execution notwithstanding appeal in his rectified judgment dated December 17, 2019, insisting on the fact that the proper remedy for the delay or non-payment of a sum of money is interest and that there was no irreparable harm suffered by the Respondents. [ 23 ] I must emphasize that the analysis of serious and irreparable harm conducted by Justice Mongeon, which is not binding in appeal, was done at an earlier time and in different circumstances where the appeal envisaged was that of his judgment.

However, we are now at a stage where the execution of the transaction of agreement, insofar as its express terms are concerned, is not challenged under appeal. [ 24 ] In such circumstances, the lack of an affidavit is not a sufficient reason to deny the Respondents the right to order that the uncontested portions of the transaction be completed, especially in light of the qualification of Appellant Bram’s oppressive conduct in the Mongeon judgment [6] and in light of the self-evident nature of the allegations of serious financial restraints which were also pointed out by Justice Paquette in her judgment.

The lack of funding of the Respondents’ business as a result of being “indefinitely” deprived of the payment of substantial sums of money while having forgone any further remuneration or salary, combined with the COVID pandemia militates in favour of granting the order rather than the opposite, as the situation can only logically aggravate the financial pressure brought upon the Respondents.

The delay to proceed to the closing is undoubtedly seriously affecting the Respondents, while the partial transaction envisaged is not likely to have any detrimental effect on the Appellants. [ 25 ] As far as the “clean hands theory’ is concerned, I acknowledge that Respondents cannot seek the closing of the transaction on the uncontested portions or the express terms of the agreement while refusing to reimburse the credit card expenses which they had recognized owing before Justice Paquette (further to the Mongeon judgment) and which they asserted should not stand in the way of the $5.5 million payment.

For this reason, the reimbursement of expenses as undertaken before Justice Paquette must form part of the partial transaction to be completed. [ 26 ] A separate conclusion will also be included in this judgment to specifically cover the use of the Union Lightning web domains pending the appeal.

The Respondents should not be allowed to use the web domain names while awaiting the debate in appeal on the issue of their return to the Appellants. [ 27 ] At the hearing, De Grandpré Chait, whose legal services have been retained for the purpose of drafting the closing documents, represented that a delay of up to 10 business days will be required to finalize the transaction. They also confirmed that they currently hold the monies pertaining to the transaction in their trust account.

The conclusions of this judgment will take into account their representations and will also provide for a complete transaction to take place, once judgment is rendered or the case is settled in appeal, whichever occurs first. [ 28 ] Lastly, from a case management perspective, and out of concern for the Appellants’ expressed wish for a complete resolution of all issues opposing the parties (and a clean break of all business ties) within the best delays, I invite both parties to honour their undertaking made at the time of the hearing to file their respective memorandum within the time frame ordered by the Savard judgment, recalculated from the date of this judgment, to ensure that a hearing is scheduled on the merits in the most expedient fashion.

FOR THESE REASONS, THE UNDERSIGNED: [ 29 ] GRANTS the Respondents’ Amended Application in part; [ 30 ] ORDERS that, notwithstanding the appeal, the parties proceed to the closing of a partial transaction to be prepared by De Grandpré Chait, no later than ten (10) business days following this judgment, in accordance with the terms of the transaction agreement dated June 7, 2019, as homologated by the judgment rendered by Justice Robert Mongeon on November 28, 2019 (rectified on December 17, 2019) and in accordance with the conclusions of said judgment as reproduced below, including the payment by the Appellant Bram Naimer to the Respondents of the sum of $5.5 million together with interest as provided for in said judgment and the reimbursement by the Respondents to the Appellants of the credit card expenses as provided for in said judgment and undertaken before Justice Paquette (as confirmed in the Paquette judgment rendered on February 17, 2020): DECLARES that the tax treatment of the aggregate consideration payable to Darren and Clifford Naimer in exchange for their shares in Geshar Investments Inc. and Union Lighting Inc. shall be in accordance with Table 5 of the Lacharité Report (P-22); DECLARES that the parties shall resolve the various “personal” and “office” expenses incurred by Darren and Clifford Naimer through the Union Lighting credit cards issued in their respective names in accordance with the usual practice outlined in Exhibit D-4; ORDERS Bram Naimer to pay or cause to be paid to Darren and Clifford Naimer, as their respective interests may appear, the sum of $5,500,000.00 together with interest at the rate of 3.5% per annum (simple and not compounded) calculated as and from July 25, 2019, until final payment, in the manner provided in Table 5 of the Lacharité Report D-22, it being understood however that the Geshar Investments dividends due to the Plaintiffs and included in the $5.5 million aforesaid shall be payable by Geshar Investments Ltd.; [ 31 ] ORDERS that the partial transaction be executed under reserve of a final and complete transaction to be executed once the judgment of the Court of Appeal is rendered on the merits or an out of court settlement is reached on the issues in appeal, whichever occurs first; [ 32 ] ORDERS that the monies owed to the Respondents in accordance with the conclusions of the Mongeon judgment reproduced

above and deposited in De Grandpré Chait’s trust account be paid to the Respondents upon the closing of the partial transaction; [ 33 ] ORDERS that the Respondents refrain from using the Union Lighting web domain names until judgment is rendered on the merits by the Court of appeal or an out of court settlement is reached on the issues in appeal, whichever occurs first; [ 34 ] SUGGESTS that the parties proceed to file their respective memorandum within the delay contemplated by the authorizing judge calculated from the date of the present judgment so as to allow the matter to be fixed for hearing at the earliest date; [ 35 ] THE WHOLE with legal costs against the Appellants.

GENEVIÈVE MARCOTTE, J.A. Mtre Max R. Bernard LCM Avocats For Applicants Mtre Brian Randall Mitchell Mitchell Lawyers/Avocats For Respondents Mtre Danielle Marcovitz IMK For Impleaded parties Mtre Martin Daniel Boily De Grandpré Chait For Impleaded party Date of hearing: April 3, 2020