Lasheras v. Antonymuthu, 2019 BCPC 215

Citation: Lasheras v. Antonymuthu 2019 BCPC 215 Date: 20190903 File No: 18-60298 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: LANCE MARTIN LASHERAS CLAIMANT AND: ROMALD GEOFFREY ANTONYMUTHU pka ROMAL GEOFFERY ANTYONYNYMUTHU, DAVID JAMES ROCKWELL and GFZ STUDIOS INC. DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE W. LEE Appearing in person: L. Lasheras Appearing in person and on behalf of GFZ Studios Inc.: R. Antonymuthu Place of Hearing: Vancouver , B.C. Date of Hearing: August 27, 2019 Date of Judgment: September 3, 2019 INTRODUCTION

[ 1 ] The Claimant brings an action for damages in relation to a Shareholder Agreement dated March 3, 2016. [ 2 ] The named defendants are Romald Geoffrey Antonymuthu, David James Rockwell and GFZ Studios Inc. Prior to trial, Mr. Lasheras and Mr. Rockwell confirmed that the claim against Mr. Rockwell had been settled. The trial proceeded against the remaining defendants. [ 3 ] The Notice of Claim seeks damages for breach of contract, negligent misrepresentation and unjust enrichment. THE EVIDENCE [ 4 ] In July 2015, Mr. Lasheras was hired by Mr.

Antonymuthu to work for GFZ Studios Inc. as a social media manager and a software developer. [ 5 ] At the time, GFZ Studios had a business property called Virch, referred to by the claimant as an “IP” or intellectual property. Virch was not an existing company at the time. It was described as simply an idea although it appears that Virch was intended to be a business operated by GFZ Studios. [ 6 ] Mr. Lasheras had been working on an animated television series called “The Last Broadcast from Earth” and there were hopes it would be broadcast by the television channel APTN. That possibility did not occur though. Mr.

Antonymuthu then proposed that Virch be put forth as the broadcaster for the show, which in turn may allow the project to qualify for funding from the Canadian Media Fund (CMF). Virch was in fact approved as a digital distributor, allowing for CMF funding. This occurred in approximately November 2015. [ 7 ] In December 2015, it was decided to incorporate Virch into a separate legal entity called Virch TV Inc. Mr. Lasheras said that Mr. Antonymuthu asked him to invest $50,000 into the new company in exchange for shares in Virch TV Inc. The parties would proceed with a venture whereby Mr.

Lasheras’ company, Soler Pictures Inc., would own the rights to The Last Broadcast from Earth. Soler Pictures would commission GFZ Studios to produce the animated series. Virch TV Inc. would hold the broadcast rights for the show. [ 8 ] Discussions then followed regarding a purchase by Mr. Lasheras of shares in Virch TV Inc. David Rockwell was handling the bookkeeping for GFZ. He said he spoke to Mr. Lasheras’ lawyer about Mr. Lasheras’ planned contribution of $50,000. According to Mr.

Rockwell, the lawyer was told that from the $50,000, $25,000 would be paid to GFZ Studios to be applied toward some $120,000 in costs incurred by GFZ Studios to develop Virch TV. Mr. Rockwell also told the lawyer that $16,000 would be paid to Soler Pictures as the licence fee for The Last Broadcast on Earth. According to Mr. Rockwell, this discussion occurred before Mr. Lasheras signed the share purchase agreement. [ 9 ] On March 3, 2016, Mr. Lasheras entered into three separate agreements. [ 10 ] The first agreement was the Shareholder Agreement dated March 3, 2016.

The other parties to the agreement were GFZ Studios Inc., Mr. Antonymuthu, David James Rockwell and Virch TV Inc. The

preamble of the Shareholder Agreement referred to the “T and L Agreement” as being the proposed agreement between GFZ Studios Inc. and Virch TV Inc. under which the assets and technology owned by GFZ Studios would be transferred to Virch TV Inc. In exchange, Virch TV would assume a loan to GFZ in an unspecified amount of no greater than $150,000. [ 11 ] Clause 2(

b) and

Schedule A of the Shareholder Agreement provided that, with the exception of the T and L Agreement, any single capital expenditure by Virch TV Inc. in excess of $25,000 required the consent of shareholders having no less than 65% of the issued and outstanding company shares. [ 12 ] Clause 38 of the Shareholder Agreement stated that this was the entire agreement and that “there are no conditions, warranties, representations, agreements, express or implied, relating to such matters.” [ 13 ] The second agreement was a Memorandum of Understanding dated March 3, 2016. The parties were Mr.

Lasheras, GFZ Studios Inc., Mr. Antonymuthu, David James Rockwell and Virch TV Inc. The Memorandum of Understanding stated that GFZ Studios Inc. developed an “IP” called Virch, which GFZ Studios would transfer to Virch TV Inc. for the following consideration, as described in the Memorandum:

a) The capitalized cost incurred in developing VIRCH as December 31, 2015 will be transfer to VIRCH TV as a Loan from GFZ; and

b) VIRCH TV will issue GFZ 87,500 Common Shares. The issue price of $26,500 will be debited to Loan on behalf of GFZ. [ 14 ] Clause 2.01 of the Memorandum of Understanding stated: VIRCH TV will enter into Share Purchase Agreement whereby Lasheras will be offered 100,000 Common Shares for the purchase price $50,000. [ 15 ] The Memorandum went on to state that Mr. Lasheras would hold 40% or 100,000 Common Shares, Mr. Antonymuthu would hold 35% or 87,500 Common Shares, GFZ Studios Inc. would hold 20% or 50,000 Common Shares and Mr.

Rockwell would hold 5% or 12,500 Common Shares. [ 16 ] The third agreement was a Share Purchase Agreement between Mr. Lasheras and Virch TV Inc. dated March 3, 2016. Pursuant to this agreement, Mr. Lasheras paid $50,000 for 100,000 common shares in Virch TV Inc. The Share Purchase Agreement did not stipulate how the $50,000 was to be used. Clause 9 of the Share Purchase Agreement stated that the agreement “constitutes the entire agreement between the parties hereto.” The clause goes on to say that there are no verbal statements or representations between the parties.

[ 17 ] Mr. Lasheras said that the $50,000 was transferred to Virch TV Inc. on March 3, 2016. [ 18 ] On March 4, 2016, Virch TV Inc. withdrew $25,000 from its bank account. On the same day, the sum of $25,000 was deposited into the GFZ Studios’ bank account. Mr. Lasheras said this transfer came from his $50,000. Mr. Antonymuthu would not admit this but also did not produce any evidence to contradict Mr. Lasheras. I find that the $25,000 deposit into the bank account of GFZ Studios came from Virch TV Inc. as a result of the payment of $50,000 from Mr. Lasheras to Virch TV Inc.

This is based on the timing of the withdrawal and deposit of the funds. [ 19 ] Mr. Lasheras said that since the transfer of the funds, Virch TV changed to a smaller office location. He said he was left to virtually run Virch TV from his home using equipment supplied by Virch TV. Mr. Lasheras said he made many inquiries about where the $50,000 investment went to but those inquiries were left unanswered. [ 20 ] In December 2016, Mr. Lasheras said he was told by Ms.

Antonymuthu that the money, or at least a large part of it, was used to pay GFZ Studios for work done prior to the transfer of the $25,000. [ 21 ] In January 2017, Mr. Lasheras said he viewed a financial statement for Virch TV Inc. which disclosed that Virch TV owed a large amount of money to GFZ Studios, and that Virch TV was in debt. [ 22 ] Mr. Lasheras eventually asked Mr. Antonymuthu to be bought out of Virch TV Inc. Mr. Antonymuthu agreed but there was no discussion about a purchase price or when the purchase would occur. By the end of June 2017, Mr. Antonymuthu was no longer responding to the claimant.

This law suit was filed a few months later. [ 23 ] Mr. Antonymuthu testified that from the $50,000 investment made by Mr. Lasheras, $16,000 was paid to the claimant’s company Soler Pictures, $25,000 was paid toward the T and L loan amount referred to in the Shareholder Agreement and the remaining $9,000 was used to pay for operating costs. Mr. Antonymuthu could not explain what “T and L” referred to, although he said it dealt with the loan that Virch TV Inc. owed to GFZ Studios. This was referred to in the Shareholder Agreement. [ 24 ] Mr. Antonymuthu said he was not involved in any discussions with Mr.

Lasheras or his lawyer about how the $50,000 investment was to be spent. ANALYSIS [ 25 ] Mr. Lasheras took the position that his $50,000 investment should have been used to pay for the ongoing operations of Virch TV Inc. and not to pay off debts owed to GFZ Studios. [ 26 ] The Notice of Claim seeks damages for breach of contract, negligent misrepresentation and unjust enrichment. At trial though, Mr. Lasheras argued that there existed an implied duty for the defendants to act in good faith, and he claimed damages for breach of this duty. [ 27 ] Mr.

Lasheras relied upon the decision Bhasin v Hrynew , 2014 SCC 71 , where the corporate defendant was found to have not acted honestly when making a decision whether to renew a contract with the plaintiff. The Supreme Court of Canada stated the following: [92] I conclude that at this point in the development of Canadian common law, adding a general duty of honest contractual performance is an appropriate incremental step, recognizing that the implications of the broader, organizing principle of good faith must be allowed to evolve according to the same incremental judicial approach. [93] A

summary of the principles is in order:

(1) There is a general organizing principle of good faith that underlies many facets of contract law.

(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations. [ 28 ] Thus, there is implied in every contract a duty of honest performance; that the parties are required to be honest with each other when performing their contractual relations.

The case does not create a new implied term of a contract but rather sets out a minimum standard for the performance of a contract. [ 29 ] I must now turn to the very contractual obligations imposed on the defendants to determine if those obligations were honestly performed. [ 30 ] Mr. Lasheras contends that his $50,000 should only have been used for the operation of Virch TV Inc. He argues that $25,000 should not have been used to repay costs incurred by GFZ Studios prior to the share purchase. [ 31 ] In reviewing the three agreements entered into by Mr.

Lasheras, there is nothing that dictates how the $50,000 investment was to be spent. [ 32 ] Clause 2(

b) and

Schedule A of the Shareholder Agreement does state that, with the exception of the T and L Agreement, any single capital expenditure by Virch TV Inc. in excess of $25,000 required the consent of shareholders having no less than 65% of the issued and outstanding company shares. This

section does not apply here since it deals with “any single capital expenditure by Virch TV Inc. in excess of $25,000” and the payment to GFZ Studios was not in excess of $25,000.

[33] Mr. Lasheras argues that the payment is at the maximum limit of the amount not requiring shareholder approval and suggeststhat this is an indication of bad faith. However, there was no other evidence to support this allegation. I am not prepared to find that therewas an absence of good faith simply because $25,000 was paid to GFZ Studios. Likewise, the mere payment of $25,000 is not, on itsown, evidence that the contractual obligations were not being performed honestly. There needs to be more that just the mere payment tosupport such an allegation. [34] In addition, Mr.

Antonymuthu’s evidence was that the payment of $25,000 was toward the T and L loan amount and was madepursuant to the T and L Agreement. He argued that this was an exception to the requirement for shareholder approval. Both theShareholder Agreement and the Memorandum of Understanding referred to the loan to GFZ. By the terms of the ShareholderAgreement, a repayment of that loan did not require shareholder approval. [35] I conclude that there is no basis to find that the defendants broke any implied duty of honest performance.

The payment of$25,000 was in accordance with the terms of the Shareholder Agreement. [36] I will turn now to the clams referred to in the Notice of Claim. The first is a claim for breach of contract. [37] In my view, Mr. Lasheras is actually asking me to impute a term into the Shareholder Agreement that the $50,000 is only to beused for ongoing costs and not to repay debts. However, clause 38 of the Shareholder’s Agreement provides that there are no agreementsother than that set out in writing and I am not prepared to impute such a term. The Bhasin case relied upon by Mr.

Lasheras stands for theproposition that there is an implied duty of honest performance of any contractual obligations. In other words, it deals with how existingcontractual obligations must be performed. The case does not say that new contractual obligations can be imputed into a contract. [38] As I have stated, there is no term, whether express or implied, in the agreements between the parties that dictates how the$50,000 is to be spent. The payment of $25,000 without shareholder approval was permitted pursuant to the terms of the ShareholderAgreement.

I conclude that there is no basis for a breach of contract claim. [39] The second claim set out in the Notice of Claim is for damages due to negligent misrepresentation. No evidence was given ofany negligent representations made to Mr. Lasheras by the defendants. Mr. Rockwell’s evidence in fact was that he told Mr. Lasheras’lawyer that from the $50,000, $25,000 would be paid to GFZ to be applied toward development costs and a further $16,000 would bepaid to Soler Pictures as the licence fee for the “Last Broadcast on Earth”. Whether Mr. Lasheras’ lawyer informed Mr.

Lasheras of thisinformation is a matter between the two of them. There is no evidence of any misrepresentation and so the claim for negligentmisrepresentation is dismissed. [40] The last claim by Mr. Lasheras was that there was an unjust enrichment. For unjust enrichment to exist there must be, accordingto the decision Harraway v. Harraway, 2009 BCCA 561 , the following: 1. An enrichment of the defendant; 2. A corresponding deprivation of the plaintiff; and 3. An absence of juristic reason for the enrichment. [41] On the facts of the case, Mr. Lasheras paid $50,000 for 100,000 common shares in Virch TV Inc.

He was accordingly notdeprived by the payment because he received the shares in return for the payment. Furthermore, the payment was made pursuant to theterms of the Shareholder Agreement and the Share Purchase Agreement and thus there existed a juristic reason for the payment. There isno basis for a claim in unjust enrichment. [42] Lastly, I note that I did not hear any evidence about the current value of Mr. Lasheras’ shares in the company. As such, therehas been no proof of any losses suffered by Mr. Lasheras. RESULT [43] The claim of Lance Martin Lasheras is dismissed. [44] Mr.

Lasheras will pay to the defendants the sum of $50 representing the court filing fee for their Reply. _____________________________ The Honourable Judge Lee Provincial Court of British Columbia