2023 QCCA 308, 2023 QCCA 308

2848-8542 Québec inc. c. 2848-9144 Québec inc. 2023 QCCA 308 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-029605-219 (500-11-055653-188) DATE: March 7, 2023 CORAM: THE HONOURABLE ROBERT M. MAINVILLE, J.A. STEPHEN W. HAMILTON, J.A. CHRISTINE BAUDOUIN, J.A. 2848-8542 QUÉBEC INC. APPELLANT/INCIDENTAL RESPONDENT – Defendant/Cross-Plaintiff v. 2848-9144 QUÉBEC INC. RESPONDENT/INCIDENTAL APPELLANT – Plaintiff/Cross-Defendant and PARK AVENUE AUTO PARTS CO. LTD.

IMPLEADED PARTY – Impleaded Party JUDGMENT [ 1 ] In the present matter, there is an appeal and an incidental appeal from the judgment rendered on June 16, 2021, by the Superior Court, district of Montreal (the Honourable David R. Collier), whereby he granted the Respondent’s application to homologate an oral agreement and dismissed the Appellant’s cross-application to order that the Respondent sell its shares, the whole with costs. [1] [ 2 ] The facts which are necessary to understand the judgment can be summarized as follows.

The Papathanossopoulos or Pappas family [2] (through the Appellant holding company) and the Stavropoulos family (through the Respondent holding company) each own 50% of the shares of Park Avenue Auto Parts Co. Ltd. The families are related: the Stavropoulos father (now deceased) was married to the Pappas father’s sister.

Park Avenue has been operating for over 50 years, and its sole business is now the ownership and management of a building, which is occupied by three commercial tenants. [ 3 ] The Respondent alleges that it received an oral offer in October 2016 from the Pappas father to either buy its shares in Park Avenue or sell the shares of the Appellant for 50% of the value of the building. Pursuant to this offer, an independent valuation of the building was conducted in November 2016, and it valued the building, without considering any potential contamination, at $1,395,000. That valuation was never contested.

The Respondent alleges that it orally accepted the Appellant’s offer to sell its shares in Park Avenue on February 7, 2017, and it asks the Superior Court to homologate the transaction. The Appellant objects to testimonial evidence being made of the oral agreement and argues that the Pappas father had no mandate to sell the shares.

It argues instead that it is being oppressed by the Respondent and asks the Superior Court to order that the Respondent sell its shares to the Appellant at market value or that there be a public auction of the shares of Park Avenue. [ 4 ] The judge dismissed the objection to the evidence and found that there had been an offer made by the Pappas father and accepted by the Respondent. He further found that the Pappas father had an explicit or tacit mandate or an apparent mandate to make the offer on behalf of the Appellant.

He ordered the Appellant to sell its shares in accordance with the terms of the offer. [ 5 ] On appeal, the parties raise several issues. There are two principal issues which are dispositive of this appeal: 1. Did the Appellant waive its right to object under

Article 2862 of the Civil Code of Quebec ( C.C.Q. ) to testimony seeking to prove the oral agreement by filing the transcript of its pre-trial examination of the Respondent’s representative Dimitrios Stavropoulos into the record, and 2. Did the Pappas father have a tacit or apparent mandate to make the offer on behalf of the Appellant? *** [ 6 ] The first issue relates to the proof of the oral agreement between the parties. The offer was made orally by the Pappas father in October 2016 and was accepted orally by the representatives of the Respondent on February 7, 2017. There is no written contract.

At trial, the Appellant consistently objected to any testimony seeking to prove the oral agreement, pursuant to

Article 2862 C.C.Q. :

2862. Proof of a juridical act may not be made, between the parties, by testimony where the value in dispute exceeds $1,500. 2862. La preuve d’un acte juridique ne peut, entre les parties, se faire par témoignage lorsque la valeur du litige excède 1 500 $. However, in the absence of proof in writing and regardless of the value in dispute, proof may be made by testimony of any juridical act where there is a commencement of proof; proof may also be made by testimony, against a person, of a juridical act executed by him in the ordinary course of business of an enterprise.

Néanmoins, en l’absence d’une preuve écrite et quelle que soit la valeur du litige, on peut prouver par témoignage tout acte juridique dès lors qu’il y a commencement de preuve; on peut aussi prouver par témoignage, contre une personne, tout acte juridique passé par elle dans le cours des activités d’une entreprise. [ 7 ] The objection was taken under reserve and was argued at the end of the trial. Essentially, the Appellant argued that the testimony was inadmissible under the first paragraph of

Article 2862 C.C.Q. , and the Respondent countered that the testimony was admissible under either the second paragraph of

Article 2862 C.C.Q. (commencement of proof) or under

Article 2861 C.C.Q. , which provides: 2861. Where a party has been unable, for a valid reason, to procure written proof of a juridical act, such

an act may be proved by any means. 2861. Lorsqu’il n’a pas été possible à une partie, pour une raison valable, de se ménager la preuve écrite d’un acte juridique, la preuve de cet acte peut être faite par tous moyens. [ 8 ] The judge dismissed the objection in the following manner: [11] The defendant’s objection is dismissed. 8542 waived its objection when it filed the transcript of the pre-trial examination of Dimitrios Stavropoulos into evidence prior to trial.

During Dimitrios’ examination held on February 1, 2020, 8542’s lawyer questioned him about the parties’ discussions leading to the alleged verbal agreement, including the plaintiff’s allegations that the parties agreed to obtain an appraisal of Park Avenue’s building, to accept the appraiser’s value for the purpose of a share sale, and that Andrew offered to sell 8542’s shares to the Stravopolous family or, at their option, to purchase their shares. [12] Dimitrios’ pre-trial testimony covered the same subject matter that the plaintiff’s lawyer objected to at trial.

By that time, however, the objection was too late. […] [14] By filing the examination transcript the defendant has waived its objection based on

article 2862 CCQ. Consequently, the defendant’s objections, taken under reserve at trial, are dismissed. The Court will admit the testimony of the plaintiff’s witnesses regarding the alleged verbal agreement reached with the defendant. [Reference omitted] [ 9 ] The issue of whether the Appellant had waived its right to object under

Article 2862 C.C.Q. when it filed the transcript of its pre- trial examination of Dimitrios Stavropoulos into the record was not raised or debated during the trial. The judge raised the issue on his own in the judgment. [ 10 ] This is not appropriate. The judge should have given the parties the opportunity to make submissions on the issue under

Article 323 C.C.P. : 323. A judge who, after taking a case under advisement, notes that a rule of law or a principle material to the outcome of the case was not debated during the trial must give the parties an opportunity to make submissions in the manner the judge considers most appropriate. 323.

Le juge qui a pris une affaire en délibéré doit, s’il constate qu’une règle de droit ou un principe n’a pas été discuté au cours de l’instruction et qu’il doit en décider pour trancher le litige, donner aux parties l’occasion de soumettre leurs prétentions selon la procédure qu’il estime la plus appropriée. [ 11 ] The failure to do so constitutes a breach of the adversarial principle as codified in the second paragraph of

Article 17 C.C.P. : 17. In any contentious matter, the court, even on its own initiative, must uphold the adversarial principle and see that it is adhered to until the judgment and during execution of the judgment. It cannot base its decision on grounds the parties have not had the opportunity to debate. 17. Dans toute affaire contentieuse, les tribunaux doivent, même d’office, respecter le principe de la contradiction et veiller à le faire observer jusqu’à jugement et pendant l’exécution.

Ils ne peuvent fonder leur décision sur des moyens que les parties n’ont pas été à même de débattre. [ 12 ] The Appellant suggested that pursuant to the Court’s judgment in L.M. c. J.M. , the consequence of this breach is the nullity of all subsequent proceedings (“ la nullité de toutes les procedures subséquentes ”). [3] That would mean treating the judgment of the court below as a nullity and sending the case back to give the parties the opportunity to make submissions on the waiver issue. In L.M. c.

J.M. the trial judge had ordered a proceeding to be split without giving any of the parties an opportunity to make submissions on the matter. In the present case, however, the question of the admissibility of the testimony to establish the oral agreement between the parties was abundantly discussed. Though the issue of whether the Appellant had waived its right to object when it filed the transcript of the pre-trial examination was not specifically raised or debated during the trial, it is closely related to the admissibility issue. Further, the Appellant

recognizes that no further proof is necessary to decide the waiver issue and that it could make before the Court all the submissions that it should have been allowed to make before the judge.

In these circumstances, the Court may proceed to render judgment on the waiver issue in light of the submissions made by the parties before us. [ 13 ] In our view, the judge’s conclusion on the waiver issue is well-founded. [ 14 ] The Appellant argues that it did not waive its right to object by filing the pre-trial examination of Dimitrios Stavropoulos because it did not ask directly about the oral agreement, and it cannot be held to have waived its right to object by failing to object to answers that he gave that were not responsive to the questions or that went beyond the scope of the questions. [ 15 ] With respect to the questions asked, it is true that the Appellant generally did not ask directly about the oral agreement.

However, there are at least two questions where it did so. First, on page 20 of the transcript, the Appellant asked about the details of the financing that formed part of its offer to sell its shares in Park Avenue: Q. So what is alleged in the procedure is that Mr. Adrianos [the Pappas father] accepted to finance the purchase of the sale. Can you just give some details regarding the financing that was —- A. Details regarding the financing were pretty simple. It was an uncle, at the time, speaking to a nephew.

Because he saw that we were being late and, you know, we were discussing it between us, and this and that, he turned to us and he said, "Look, I know there was a crisis in Greece, and I know that you're still running around with kids and scholarships, and this and that. If you need financing, I'm here, because I'm liquid right now. I can finance you at the prime rate, and when you get yourselves together, we can figure it out." But this was -this, I saw as his interest you know, unload this, get rid of this thing. And so I said, "Fine, thank you very much." I advised my relatives of that, and that was it.

That factored in, of course, in our consideration. [ 16 ] On page 22, the Appellant asked what happened during the meeting on February 7, 2017, when the Respondent accepted the offer: Q. And can you explain what happened during this meeting, on February seven (7)? A. Yes. I was there, my brother was there, Stephanos, Adrianos Papathanasopoulos [the Pappas father] was there, Maître Basile Angelopoulos was there.

And you know, he said, "Okay, what's your decision?" And we said, "We're buying." And at that point in time, my uncle turned around and he said, "Look, you know, I've looked up my stuff again and I can't finance you. I can only finance you half." And I said, "That' s not an issue." And then he said, "Look, probably no financing" and I said, "Look, Uncle Adrianos, I've already settled this. This is already sorted out. We have the financing that we need. Thank you very much.

It's not an issue right now." And then he blew his top. [ 17 ] Further, there are other instances where the question did not ask directly about the oral agreement, but the answer included testimony about the oral agreement.

The party asking the questions is not bound by answers that are not responsive or go beyond the scope of the questions. [4] However, the Appellant chose to produce the complete transcript, without redacting any questions or answers, and without objecting or including any kind of reserve with respect to any of the answers. [ 18 ] The decision to produce the transcript of an examination that includes testimony relating to the oral agreement without any objection or any kind of reserve constitutes a waiver of the right to object to further testimony on that issue. [5] By producing some testimony on the issue, the Appellant effectively opens the door to further testimony. [6] [ 19 ] It is therefore not necessary to consider the arguments with respect to the existence of a commencement of proof or the possible application of

Article 2861 C.C.Q. [7] *** [ 20 ] On the second issue, the judge concluded that either the Pappas father had “an explicit or tacit mandate from his children to negotiate with the Stavropoulos family” [8] or “the Pappas children allowed the Stavropoulos family to believe that Andrew was acting on their behalf during the family discussions” [9] , such that he had an apparent mandate under

Article 2163 C.C.Q. [ 21 ] The Appellant argues that there was no evidence of an express mandate and that the Pappas father did not occupy any formal role within the Appellant from which one could infer a mandate. He transferred his shares to his children and ceased acting as an officer or director of the Appellant around 2009. [ 22 ] In London Life Insurance Company c.

Long , the Court set out the test for establishing an apparent mandate: [10] [203] Bref, pour vérifier si la théorie du mandat apparent bénéficie à celui qui poursuit en responsabilité civile délictuelle pour la faute commise par un mandataire apparent, tenant en compte tous les enseignements qui précèdent, il y a lieu de faire usage d’une grille d’analyse en quatre points : (1) l’absence de mandat ou de pouvoir de représentation du mandataire apparent; (2) la bonne foi du réclamant (le volet subjectif de la bonne foi); (3) une croyance légitime chez le réclamant voulant que le mandataire apparent ait été mandataire ou qu’il ait réellement détenu le pouvoir de représentation (le volet objectif de la bonne foi); (4) une croyance légitime qui découle d’actions ou d’omissions du mandat apparent. [ 23 ] The Appellant argues that the third and fourth criteria are not met, in that the Respondent failed to verify the Pappas father’s authority to act on behalf of the Appellant and neither the Appellant nor the Pappas children contributed to the Respondent’s belief that the father had an apparent mandate. [ 24 ] Determining whether there was an apparent mandate is a question of fact. [11] The judge concluded as a matter of fact that the children had given the father a mandate to represent the Appellant.

This conclusion is well supported by the evidence set out by the judge in paragraphs 45 to 52 of his judgment:

[45] Sophia testified that discussions with the Stavropoulos family began in 2015 with a view to ending the co-ownership of Park Avenue. Sophia participated in these early discussions with her father. Her testimony is consistent with that of Dimitrios, who stated that it was Andrew [the Pappas father] who initiated the discussions with Helen and pursued them thereafter.

The Pappas children did not contest Dimitrios’ assertion that Andrew was bothered by the co-ownership question and did not want to leave the “hot potato” to his children. [46] Sophia testified that in 2015 Andrew made a written offer to the Stavropoulos family to end their partnership. She did not produce the writing or elaborate on its contents. [47] Sophia knew her father was talking to her aunt and cousins about parting ways. Her brother Stephanos must also have known.

As a director of Park Avenue, Stephanos must have known that the company had paid for the building evaluation in November 2016. [48] Sophia and Stephanos also knew their father had retained a lawyer. They claim, however, that when Andrew attended at Mtre Angelopoulos’ office he was only authorized to discuss Park Avenue’s continuance under

Part 1A of the Business Corporations Act . This is not credible. The company’s continuance was a purely administrative matter that did not require the parties to meet at a lawyer’s office. [49] It is not surprising that Andrew would speak on behalf of his children. Despite the children’s nominal involvement in the family business after 2011, Peter and Andrew continued to run Park Avenue. It is only when Peter died in 2015 that Andrew raised the problem of co-management. For his part, Andrew never relinquished control on behalf of the Pappas family.

When the two families feuded in 2018, Stephanos appointed his father as Park Avenue’s third director to break the deadlock. [50] Dimitrios testified that Andrew continued visiting Park Avenue’s tenants after the discussions aborted in 2017, threatening not to renew their leases. In doing this, Andrew asserted the same authority as he had for the previous 50 years. [51] In the Court’s opinion, the two families recognized that Andrew represented the Pappas family interest in Park Avenue. The fact that Andrew had transferred the shares in his holding company to his children in 2009 did not change this.

Andrew continued to defend his business and the interests of his children. [52] During the months of back-and-forth discussions between Andrew, Helen and Dimitrios, there is no evidence that Sophia or Stephane Pappas ever advised the Stavropoulos family that Andrew was not authorized to speak on their behalf. [ 25 ] The Appellant fails to demonstrate any manifest and overriding error in this analysis. *** [ 26 ] The Court will therefore dismiss the appeal and order the sale of the shares pursuant to the oral agreement.

Once the Court does so, there is no need to consider the Appellant’s cross-application seeking the sale of the shares as a remedy for oppression. [ 27 ] The only remaining issues are the modalities of the sale and in particular the effective date of the sale. This will be relevant to the question of whether the purchase price bears interest after February 7, 2017, and whether there is any obligation to reimburse any dividends received after February 7, 2017. [ 28 ] The Respondent in its proceedings did not specify the date on which it sought to have the sale take place and took no position on retroactivity.

The judge raised the question of the money sitting in the bank account with the parties at trial, but the Respondent’s lawyer responded that the parties did not contemplate this matter when negotiating the agreement. The judge did not expressly address these issues in his judgment. He essentially adopted the Respondent’s conclusions, declaring that the agreement entered into by the parties on February 7, 2017, was a transaction, homologating it and ordering the Appellant to sell the shares to the Respondent within 60 days of the judgment upon payment by the Respondent of $697,500.

The judgment does not order the payment of interest on the purchase price. The judgment does not either address the question of the dividends which, notwithstanding the litigation and the appeal, have continued to be paid out to the parties as shareholders of Park Avenue.

The parties informed the Court at the hearing that the dividend paid in March 2022 was paid under reserve of the appeal, but they did not make any submissions as to how to resolve the issue. [ 29 ] In these circumstances, it is appropriate that the Court render a clear judgment to avoid future litigation on the issues of the interest which may be owed on the sale price and the dividends. The Court will order that the sale take place within 60 days of the present judgment, and that the sale be effective on the date on which the Respondent pays the purchase price.

This means that the purchase price does not bear interest, and that the Appellant is entitled to keep any dividends paid or accrued prior to the effective date of the sale. FOR THESE REASONS, THE COURT: [ 30 ] DISMISSES the appeal, with costs; [ 31 ] MODIFIES paragraph [63] of the judgment in first instance and adds paragraph [63.1] as follows: [63] ORDERS 2848-8542 Québec inc. to sell to 2848-9144 Québec inc., within 60 days of the judgment of the Court of Appeal, all of its shares in the capital stock of Park Avenue Auto Parts Co.

Ltd. upon payment by 2848-9144 Québec inc. of $697,500; [63.1] DECLARES that the sale is effective on the date on which 2848-9144 Québec inc. pays the purchase price, such that 2848-8542 Québec inc. is entitled to keep any dividends paid or accrued prior to the effective date of the sale; [ 32 ] DISMISSES the incidental appeal, without costs.

ROBERT M. MAINVILLE, J.A. STEPHEN W. HAMILTON, J.A. CHRISTINE BAUDOUIN, J.A. Mtre Christophe Perron-Martel FORCE-LÉGAL For Appellant/Incidental Respondent Mtre Steve Whitter Mtre Costa Saisanas SAISANAS ATTORNEYS For Respondent/Incidental Appellant Date of hearing: Febuary 22, 2023