2021 QCCA 732, 2021 QCCA 732

Naimer c. Naimer 2021 QCCA 732 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-028859-205 (500-11-048871-152) DATE: 4 mai 2021 CORAM: THE HONOURABLE FRANÇOIS DOYON, J.A. GENEVIÈVE MARCOTTE, J.A. LUCIE FOURNIER, J.A. BRAM NAIMER JOBRA INVESTMENTS LTD. APPELLANTS – Defendants/Cross-Claimants v. DARREN NAIMER CLIFFORD NAIMER RESPONDENTS – Plaintiffs/Cross-Respondents and GESHAR INVESTMENTS LTD. GERALD NAIMER IMPLEADED PARTIES – Defendants and SHARON NAIMER 9298-3832 QUÉBEC INC.

IMPLEADED PARTIES – Impleaded Parties JUDGMENT [ 1 ] On June 7, 2019, the parties signed a transaction to put an end to multiple pending legal proceedings before the Superior Court, including an appeal that was still pending against a judgment rendered in 2018 by the Superior Court.

Pursuant to the transaction, respondents Darren and Clifford Naimer were to relinquish all rights in their shares of Geishar Investments Inc. and Union Lighting Inc. to their brother Bram Naimer for $2,750,000 each and to withdraw from the companies, with no additional payments, which they both did. [ 2 ] After a seven-day trial, on November 28, 2019, Mongeon, J.S.C. rendered a judgment (rectified on December 17, 2019). He homologated the transaction, decided on some of its terms and conditions, and made orders in accordance with the

Canada Business Corporations Act (CBCA). Justice Mongeon stated that “(t)he essence of the transaction and the driving force behind it, was to severe ( sic ) all business ties between Darren and Clifford (Naimer) on the one part, and Bram, Gerald and Sharon (Naimer), on the other part, who had been opposed in many conflicts before and outside the Courts for more than a decade”. [ 3 ] When the parties were heard before Justice Mongeon, they had not finalized the transaction since they could not agree on some terms and conditions, essentially due to the impact of its paragraph 4.

According to this paragraph, the parties were allowed to “evaluate the most tax efficient manner to them in which to effect the transactions”, but with no adverse tax consequences for any other party. The vendors wished to treat the proceeds of the sale of their shares as a capital gain while the purchaser wished to pay the $5.5 million by way of dividends.

In homologating the transaction, Justice Mongeon decided on the tax structure of the transaction, and held that Bram Naimer’s decision to refuse or delay the payment of $2,750,000 to each of his brothers amounted to oppressive conduct under the CBCA, as the amount had to be paid no later than 30 days after the closing of the transaction.

He declared and ordered as follows: 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.;

[ 4 ] At that point, there appeared to be no more obstacles to the closing of the transaction as its terms and scope had been determined and there was no appeal from this judgment.

Nevertheless, the transaction did not close as new issues were raised by the appellants to oppose it, namely: (1) the control of the web domain names, (2) the personal property left in storage by the respondents at the premises of Union Lighting and (3) the transfer of the shares held by the respondents in 8710198 Canada Inc., a holding company of all the shares in the capital of Union Lighting USA Inc., which in turn holds a 50% partnership interest in Union USA LLC. [ 5 ] This refusal led the respondents to seek the Superior Court’s intervention.

On February 7, 2020, they filed a Motion to Seek Judicial Intervention to Enforce the Execution of a Homologated Transaction Relating to the Oppression Remedy , asking the court to order that the closing of the transaction proceed. [ 6 ] The case was fixed for a one-hour hearing before Paquette, J.S.C. on February 12, 2020. At the time, the appellants underlined that they had been served with the motion only two days prior to the hearing and that they had not had the opportunity to examine on affidavit or bring evidence.

They briefly explained that the transfer of the respondents’ shares in 8710198 Canada Inc. had not been specified as such in the transaction as a result of an oversight. They argued that to exclude this transfer from the transaction would be inconsistent with their undertaking to indemnify the respondents from any liability arising in connection with Union Lighting USA as provided for at paragraph 18 of the transaction.

They asked for permission to bring evidence of the intention of the parties to include the transfer of the US shares in the transaction. [ 7 ] Justice Paquette denied their request, adjourned the hearing and took the matter under advisement. Later that day, the appellants’ attorney wrote to the judge renewing their request to bring evidence and included a copy of a Memorandum of Agreement concluded in 2016 between Bram Naimer, Joanna Yufe, Clifford Naimer and Darren Naimer ( the 2016 Memorandum of Agreement ), which contained the following clause: 3.

If, pursuant to either the final judicial resolution of the Litigation, or an out of court Settlement of the Litigation, as the case may be, there are changes made to the ownership of the UL Shares, then the parties hereto agree that, immediately after the Resolution Date, they shall cause the same changes to be effected with respect to the Corporation Shares, provided that in no instance shall any consideration be paid to Bram Naimer, Clifford Naimer, Darren Naimer and Joanna Yufe if the Corporation Shares are to be transferred, redeemed, or repurchased as a result thereof. [ 8 ] The 2016 Memorandum of Agreement also defined the term “Litigation” as the “pending litigation (…) among the parties hereto as to the rightful ownership by Clifford Naimer, Darren Naimer and Joanna Yufe of their shares in the capital of Union Lighting (…)”. [ 9 ] On February 17, 2020, Justice Paquette rendered her decision.

She did not address the additional request to file the 2016 Memorandum of Agreement . [ 10 ] She wrote that the three new issues raised by the appellants did not form part of the transaction as follows: [10] The 3 other items were never raised in the course of the seven-day-trial on the execution of the Transaction, held to undo the knots which prevented the parties from completing the deal.

If they were part of the Transaction and of any importance to the materialization same, they should have been raised at the time. (…) [13] Hence, these 3 other items do not form part of the Transaction and shall not stand in the way of the finalization of the deal. [14] The Defendants’ decision to raise, at this stage, these three new issues is in line with the finding of oppressive conduct highlighted in the November 28, 2019 Judgment: [117] (…) I perceive that the undue and oppressive attitude of Bram in the manner in which he is executing the Transaction is the cause of undue delay in closing this deal.

This must stop. (…) [123] (…) Bram is unduly retarding the closing of the Transaction under the pretext of an absence of consensus on the manner in which the payment of the shares should take place, he creates a situation which is unfairly prejudicial upon his brothers.

I, therefore, believe that the only way to rectify the oppressive conduct of Bram is to impose a closing date from which the $5.5 million will start to bear interest. (…) [147] (…) In not paying or making available the sum of $5.5 million as provided in paragraph 3 of the Transaction, Bram Naimer is acting in a manner which is unfairly prejudicial to the reasonable expectancies of the Plaintifs, thus causing a situation which constitutes oppression to the Plaintiffs. [15] Darren and Clifford Naimer stepped down from their positions with Geshar and Lighting more than eight months ago and receive no salary or remuneration from these entities since then. (…) [18] The prolonged delay in the finalisation of the Transaction results in unacceptable and unjustifiable financial restraints on Darren and Clifford Naimer. [19] The matter has to come to an end.

The Court will not entertain any further attempt by the Defendants to delay the closing of the Transaction and to delay the payment to the Plaintiffs.

[ 11 ] Consequently, she ordered that the closing of the homologated transaction take place within 30 days and that the funds be put in trust immediately. [ 12 ] On appeal, the appellants argue that the Superior Court could not rule on the substance and merits of the transaction and that, in any event, it did not properly exercise it discretion.

Moreover, they add a new argument: the Superior Court had no jurisdiction to hear and decide the application because one of the matters dealt with in the transaction was the settlement of a pending appeal over which only the Court of Appeal has jurisdiction. [ 13 ] As to the argument on jurisdiction, the appellants cannot rightfully argue that the pending appeal was an impediment to the implementation of the agreement given the terms of the transaction which confirm their intention “to put an end to all of the above pending legal proceedings” which included the pending appeal.

Moreover, the appellants admit, at paragraph 11 of their written arguments, that the “appeal is now settled” as a result of the transaction. The argument has no merit and must be dismissed. [ 14 ] As far as the argument that the Superior Court could not rule on the substance and merits of the transaction is concerned, it must also be set aside. [ 15 ]

Article 657 of the Code of Civil Procedure , in conjunction with the powers granted to the Superior Court by the CBCA, allowed the Superior Court to rule on these issues and to facilitate the judgment’s execution in the manner that is most advantageous for the parties and most consistent with their interests. These powers give the court the authority to interpret such a ruling that necessitates its intervention. [ 16 ] The real issue here is the manner in which these powers were exercised in the case at hand.

Justice Paquette essentially refused to consider the arguments raised before her or to allow evidence to be made in support thereof, on the basis that these arguments should have been raised earlier before Justice Mongeon. Her reasons stop short of any form of analysis of the substance of the three “new” issues submitted.

Yet, she stated that these issues do not form part of the transaction. [ 17 ] As it turns out, it seems that at least two of these issues did form part of the transaction as the parties finally agreed to address them in the context of the partial closing that took place further to a judgment rendered by a judge of this Court on April 8, 2020.

There is therefore only one outstanding issue in appeal: the transfer of the respondents’ shares in 8710198 Canada Inc. [ 18 ] The appellants argue that this Court is in a position to consider the evidence that was filed in their brief in support of the proposition that the parties always intended to include the transfer of shares in 8710198 Canada Inc. as part of the transaction at no additional consideration. They have asked for permission to file before this Court the evidence that was refused by Justice Paquette.

Their application was granted by another bench of the Court which deferred the determination of the admissibility of such evidence to this bench. [ 19 ] The respondents argue that this additional evidence does not qualify as new evidence and that Justice Paquette was correct in denying the appellants’ request at the hearing. They also contend that the 2016 Memorandum of Agreement is no longer in force and never formed part of the transaction.

They also claim that they never would have agreed to transfer their shares in 8710198 Canada Inc. in accordance with the 2016 Memorandum of agreement , at no additional consideration.

They also argue that the agreement is no longer in force. [ 20 ] This last position seems somewhat hard to reconcile with the essence of the transaction which was summarized by Justice Mongeon as being driven by the desire “to severe ( sic ) all business ties” between the parties, as well as with paragraph 18 of the transaction. [ 21 ] That being said, at this stage, while the evidence is certainly admissible for the purpose of the appeal, it would be imprudent for this Court to venture to interpret the 2016 Memorandum of agreement in relation to the transaction or to conclude that the transfer of the shares in 8710198 Canada Inc. formed part of the transaction without the benefit of properly administered evidence on these issues.

The appellants should be afforded the possibility to adduce this additional evidence before the Superior Court while the respondents are given the opportunity to respond to same. [ 22 ] For this reason, the Court will grant the appeal for the purpose of ordering the return of the file to the Superior Court so as to allow the parties to adduce this evidence in order to determine whether or not the transfer of the respondents’ shares in 8710198 Canada Inc. formed part of the 2019 homologated transaction.

FOR THESE REASONS, THE COURT: [ 23 ] DECLARES that the new evidence is admissible for the purpose of the appeal; [ 24 ] DISMISSES the Motion to Strike Portions of the Appellants’ Memorandum ; [ 25 ] GRANTS the de bene esse Application for leave to appeal; [ 26 ] GRANTS the appeal for the purpose of ordering the return of the file to the Superior Court to address the issue of the transfer of the respondents’ shares in 8710198 Canada Inc. in the context of the 2019 homologated transaction; [ 27 ] Without legal costs. FRANÇOIS DOYON, J.A.

GENEVIÈVE MARCOTTE, J.A. LUCIE FOURNIER, J.A. Mtre Max R. Bernard LCM AVOCATS For the Appellants Mtre Brian Randall Mitchell MITCHELL For the Respondents Date of hearing: April 21, 2021