) ) THOMAS FALUS Applicant (Appellant) – v. –, 2013 ONSC 4115

CITATION: Falus v. Martap Developments 87 Limited, 2013 ONSC 4115 DIVISIONAL COURT FILE NO.: 411/12 DATE: 20130613 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT SWINTON, HERMAN AND LEDERER JJ. BETWEEN: ) ) THOMAS FALUS Applicant (Appellant) – and – MARTAP DEVELOPMENTS 87 LIMITED,VINCE BENEDETTO, ANTOINETTEBENEDETTO, ANDREW BENEDETTO,PAUL BENEDETTO and JULIAMCGEOWN Respondents )) )))) )))))))) Michael J. W. Round, for the Appellant Ronald B.

Moldaver, Q.C., for theRespondents, Vince Benedetto, AntoinetteBenedetto, Andrew Benedetto, Paul Benedettoand Julia McGeown ) ) HEARD at Toronto: June 13, 2013 SWINTON J. (ORALLY) [1] The application judge had a broad discretion as to whether to order the winding-up of the corporation or order otherequitable relief pursuant to s. 207(1)(b)(iv) and 207(2) of the Business Corporations Act, R.S.O. 1990, c. B. 16.

He set out the correctlegal principles, noting the courts usually intervene where there has been a breakdown in mutual confidence such that the parties cannotwork together as mutually contemplated or a party’s ability to exercise his legal rights in the governance of the corporation has beenimpaired. [2] In particular, the application judge quoted from the decision of Wilton Siegel J. in Animal House Investments Inc. v. LisgarDevelopment Ltd. (2007), (ON SC), 87 O.R. (3d) 529 (S.C.J.) [upheld (ON SCDC), [2008] O.J.No. 2240 (Div.

Ct.)] at para. 46 of his Reasons, emphasizing the following sentence: Accordingly, incompatibility is significant only insofar as it has resulted in a state of affairs in which the reasonable expectations of theparties are unattainable and from which the Court can reasonably infer that the business arrangement between the parties has beenrepudiated or terminated. [3] The application judge found that the disagreement between the parties had not impaired the operations of the corporation norimpaired the ability of either shareholder to exercise his legal rights in the governance of the corporation.

He rejected the appellant’sargument that he had a reasonable expectation that he would only have to deal with Vince in the management and affairs of thecorporation, basing his conclusion on the failure of the parties to deal with retirement or withdrawal at the time of the incorporation ofthe company, the long-term nature of the corporation’s business and Tom’s agreement to allow Vince’s children to participate in thecorporation’s governance. [4] The appellant argues that the application judge erred in failing to consider what the parties would have contemplated with

respect to retirement or exit had they turned their minds to this issue in 1987. He also argues that the application judge should have taken into account the Partnership Act exit provisions. [ 5 ] In our view, there was no legal error. The application judge correctly held that the Partnership Act did not apply, as he was dealing with dissolution of a corporation.

However, he did consider cases in which the courts have intervened in the affairs of a partnership operating in the guise of a corporation. [ 6 ] A full and complete reading of the Reasons of the application judge leads to the conclusion that he appropriately considered the reasonable expectation of the parties at the time of incorporation and through the years of the corporation’s operations. [ 7 ] The application judge had a broad discretion whether to grant the equitable relief sought.

He found there was no irreconcilable conflict or exclusion from management and no reasonable expectation of the parties over the life of the corporation that there would be a wind-up or a forced sale of shares if either of the original parties no longer wished to remain active in the business. Accordingly, he concluded that the relief sought should not be granted. [ 8 ] The appellant has not demonstrated any palpable and overriding error of fact nor any error of law. Therefore, the appeal is dismissed.

COSTS [ 9 ] I have endorsed the back of the Appeal Book, “This appeal is dismissed for oral reasons delivered in court today. Costs to the respondent fixed at $6,000 all inclusive.” SWINTON J. HERMAN J. LEDERER J. Date of Reasons for Judgment: June 13, 2013 Date of Release: June 19, 2013 CITATION : Falus v. Martap Developments 87 Limited, 2013 ONSC 4115 DIVISIONAL COURT FILE NO.: 411/12 DATE: 20130613 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT SWINTON, HERMAN AND LEDERER JJ. BETWEEN:

THOMAS FALUS Applicant (Appellant) – and – MARTAP DEVELOPMENTS 87 LIMITED, VINCE BENEDETTO, ANTOINETTE BENEDETTO, ANDREW BENEDETTO, PAUL BENEDETTO and JULIA MCGEOWN Respondents ORAL REASONS FOR JUDGMENT SWINTON J. Date of Reasons for Judgment: June 13, 2013 Date of Release: June 19, 2013