2017 QCCA 1349, 2017 QCCA 1349

Pasta Romana Foods Inc. c. De Rosa 2017 QCCA 1349 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-027034-172 (500-11-052654-171) MINUTES OF THE HEARING DATE: September 11, 2017 THE HONOURABLE NICHOLAS KASIRER, J.A. PETITIONERS COUNSEL PASTA ROMANA FOODS INC. BERNARD FILIPPONNE RITA GUALTERI MICHAEL FILIPPONNE PATRICK FILIPPONNE Mtre KARIM RENNO Mtre DAVID PLOTKIN ( Renno Vathilakis inc.) RESPONDENTS COUNSEL VINCE DE ROSA 801 ASSETS INC.

Mtre BARRY LANDY Mtre CORINA MANOLE ( Spiegel, Sohmer, inc.) DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of proceedings on September 1 st , 2017 by the Honourable Louis Gouin of the Superior Court, District of Montreal. (Art. 31, al. 2 and 357 C.C.P. ) Clerk: Mihary Andrianaivo Courtroom: RC.18

HEARING 9:30 Start of the hearing. Opening comments by the Judge. 9:33 Submissions by Mtre Renno. 9:56 Submissions by Mtre Landy. 10:20 Rebuttal by Mtre Renno. 10:28 The hearing has been postponed until 14:00 today for judgment delivery. The parties’ attendance is not required. 10:29 Recess. 14:00 Resumption of the hearing. BY THE JUDGE : Judgment – See page 3. 14:01 End of the hearing. Mihary Andrianaivo Clerk BY THE JUDGE JUDGMENT [ 1 ] In connection with an action brought for redress of alleged oppression under the

Canada Business Corporations Act [1] , the petitioners seek leave to appeal from a judgment rendered in the course of proceedings by the Superior Court, District of Montreal (the Honourable Mr Justice Louis Gouin), on September 1, 2017, which judgment granted in part a safeguard order requested by the respondents. [ 2 ] The petitioners submit that the judge erred in law and in fact, in particular by ruling ultra petita in respect of numerous conclusions of the safeguard order; by trenching on the merits of the originating proceeding; by issuing the safeguard order for an indeterminate period of time, in contravention to the applicable jurisprudence; by causing a situation of fact that is highly prejudicial to the petitioners that cannot be remedied by final judgment; and by failing to consider key aspects of the evidence presented by the petitioners, including their affidavits and certain exhibits.

The petitioners also ask to suspend provisional execution of the judgment. *** [ 3 ] In their application for the safeguard order, the respondents alleged that a share purchase agreement adduced by the petitioners was in fact signed by a person who had no authority to do so on the respondents’ behalf. In their view, the agreement is null and void.

The safeguard order was requested to stop the petitioners from conducting business as if the settlement were valid. [ 4 ] The judge, who had previously granted a safeguard order between the same parties to apply until September 15, 2017 (the “Ordonnance-Gouin”), was harsh with the petitioners. He held that it appeared evident to him that the petitioners had taken action based on the alleged agreement to which the respondents had not consented.

It also appeared evident that the petitioners “manipulent la trame factuelle et interprètent à leur guise les écrits et documents échangés entre les parties, ou hors la connaissance des Défendeurs [respondents]”. He concluded that the respondents had shown that the requirements for a safeguard order were met: “Tout cela dépasse l’entendement.

L’apparence de droit est clairement en faveur des Défendeurs et l’urgence est incontestable, vu les actes et gestes que posent les Demandeurs en contravention de l’Ordonnance-Gouin”. [ 5 ] The judge rendered a safeguard order containing measures from the Ordonnance-Gouin with, as he explained, new measures in order to return the parties to the situation in which they were at the time the Ordonnance-Gouin was rendered. The order stands “until the Court has adjudicated on the validity of the impugned Agreement [the share purchase agreement] dated August 9, 2017”.

*** [ 6 ] In the present case, the petitioners have made their submissions on the premise that the application for leave is governed by

article 31 C.C.P. They face the task of showing that the judgment causes them irremediable prejudice within the meaning of that term and that it is in the interest of justice that leave be granted [2] . [ 7 ] Leave to appeal from judgments that grant or refuse safeguard measures is granted sparingly given the nature of the order and the circumstances in which they are rendered. It is often said that because these judgments are discretionary in character and their effects temporary in duration, leave should only be granted in exceptional circumstances [3] .

In general, a prima facie weakness in the judgment must, at a minimum, be shown to justify leave [4] . [ 8 ] To that should be added that the proceedings in this case are taken under

section 241 of the

Canada Business Corporations Act , with what has been recognized as providing judges in like circumstances particularly wide – though not unfettered – powers [5] . [ 9 ] In my view, there are no exceptional circumstances that would justify granting leave here.

No apparent weakness has been shown in that the judgment satisfies, on my reading, the requirements for granting a safeguard order recently restated by this Court: a situation of urgency; a sufficient colour of right for the respondents; the requisite harm if the safeguard were to be denied; and the balance of inconvenience favouring the order [6] . [ 10 ] I am not convinced that the judge’s conclusions are ultra petita or that the order trenches on the merits in manner that justifies leave. It is true that the conclusions in the motion and those in the judgment are not identical.

That said, when the application for the safeguard is read as a whole, the conclusions conform to the conservatory vocation of the safeguard order solicited [7] . As the judge explained, the thrust of the request was that the parties be put back in the situation they were prior to the Ordonnance-Gouin, with new constraints in light of the petitioners’ conduct since then. [ 11 ] As to the applicable criteria, I disagree with the petitioners that the judge failed to call for a demonstration of irremediable prejudice and urgency as prerequisites to his order.

The judge’s view that by conducting themselves as if the settlement agreement was valid, petitioners caused harm to the respondents, is a reasonable one. His judgment makes plain his view that it was urgent to stop this conduct. [ 12 ] The argument that the judge erred by granting a safeguard order for an indeterminate period of time is rejected. It is well known that, as a general rule, a safeguard order, which shares characteristics with the provisional interlocutory injunction, should be limited in time and not of prolonged duration [8] .

I note first that, strictly speaking, the order is not indeterminate in time here: it is designed to apply only for a portion of the proceedings in oppression, i.e . the time required to decide whether the alleged settlement agreement is valid. In the exercise of his discretion to rule on the safeguard request in an oppression context, and in light of the particular circumstances he described in the judgment, the time limit placed on the order is not unreasonable and does not constitute grounds for leave.

To be sure, the judge might have managed the file otherwise, creating a specified date for the end of the order and requiring the parties to set a timetable for the proceedings. But the Court of Appeal is not well placed to second-guess the judge on these matters. [ 13 ] To paraphrase the Court’s reasoning in a recent case, the petitioners’ preoccupation that the safeguard order might extend beyond the time limit alluded to in

article 158 (8°) C.C.P., or amount to a veritable interlocutory injunction, is a legitimate one but not fatal to the validity of the order [9] .

The parties appeared to have cooperated to some extent at the time the conditions for the order were fixed; that same cooperation, especially with experienced counsel on both sides, is to be expected going forward (article 20 C.C.P.). [ 14 ] The petitioners contend that the effect of the safeguard order is to give respondent de Rosa “complete veto rights” over the conduct of the affected companies, thereby causing them prejudice that cannot be remedied by the final judgment.

For the petitioners, this changes the status quo, as Mr de Rosa had no such authority before that time. [ 15 ] It is true that requiring Mr de Rosa’s prior written consent for transactions mentioned in paragraphs P and O of the order could have an effect on the manner in which the companies do business while the safeguard order is in place. I note however that the judge was careful to limit this restriction to transactions “outside the normal course of business”. The same caveat applies in respect of the duty of confidentiality in paragraph L.

I observe as well that in the June 12, 2017 Ordonnance-Gouin, the judge had already ordered that Mr de Rosa have ultimate signing authority in respect of Pasta Romana Foods Inc. and 9886753 Canada Inc. (para. [14] of the Ordonnance- Gouin). Overall, I see here an appropriate concern on the judge’s part to maintain the status quo while putting in place measures that would protect the respondents’ apparent rights until the validity of the agreement has been determined.

This can reasonably be viewed as a proper exercise of his discretion, especially in light of his factual determination as to the conduct of the petitioners since the June 12, 2017 order. [ 16 ] Even if the order were seen to cause the requisite prejudice to the petitioners, I do not think that it is in the interest of justice to grant leave. The judge examined the circumstances and put in place measures to correct what he saw an apparent violation of the respondents’ rights in the short term.

This is a routine exercise of a judge’s discretionary authority under the Code of Civil Procedure that need not be reviewed on appeal. [ 17 ] Notwithstanding the able pleading of counsel, none of the petitioners’ other arguments justifies granting leave. [ 18 ] The request to suspend provisional execution of the judgment is also refused, because without object. FOR THE FOREGOING REASONS , the undersigned: [ 19 ] DISMISSES the application for leave to appeal and for suspension of provisional execution of the judgment of the Superior Court, with legal costs.

NICHOLAS KASIRER, J.A.