) ) JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC v. WILLIAM NISKER HOLDINGS INC., 2013 ONSC 5238

CITATION : JBN Medical Diagnostic Services et al v. 1527877 Ontario Inc et al, 2013 ONSC 5238 COURT FILE NO.: 08-0523 DATE: 2013/08/21 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC and WILLIAM NISKER HOLDINGS INC. Plaintiffs – and – 1527877 ONTARIO INC., 1449312 ONTARIO INC., FAUSTO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTH CENTRE INC and STRESA GRUPPO INC. Defendants ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Stuart M. Law, solicitor for the Plaintiffs/Defendants by Counterclaim Howard W.

Reininger, solicitor for the Defendants/Plaintiffs by Counterclaim – and between– 1449312 ONTARIO INC. FAUSTCO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTH CENTER INC and STRESA GRUPPO INC. Plaintiffs by Counterclaim – and – JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC., WILLIAM NISKER HOLDINGS INC., JOSEPH BERLINGIERI and WILLIAM NISKER ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Defendants by Counterclaim ) HEARD: July 18, 2013 The HONOURABLE MR. JUSTICE R. J. NIGHTINGALE

REASONS FOR JUDGMENT [ 1 ] The Plaintiffs bring this Motion for Judgment under Rule 49.09 of the Rules of Civil Procedure in the terms of an accepted offer to settle. [ 2 ] They also ask for a Declaratory Order under s. 97 of the Courts of Justice Act for various relief including an Order that the Defendants pay significant funds and transfer shares of Halton Family Health Centre Inc. to the Plaintiffs in accordance with the provisions of the settlement reached in December, 2012. [ 3 ] The Defendants bring a cross motion stating that upon payment of some but not all of the monies demanded by the Plaintiffs, the Plaintiffs should be required to execute a release in favour of the Defendants in a form requested by them and dismiss the action and counterclaim without costs.

Background [ 4 ] The Plaintiffs commenced this action in 2003 claiming damages against the Defendants alleging they misappropriated for themselves a business the Plaintiffs had set up with the individual Defendants as a healthcare centre. [ 5 ] Essentially, the allegation was that the Defendants Carnicelli and Dingfeld removed the business of the Defendant 1527877 Ontario Inc. equally owned with the Plaintiffs and switched it to their own solely owned company thereby depriving the Plaintiffs of their interest in the business and the income derived from it. [ 6 ] The action claimed damages, an accounting of the income derived and an order transferring 50% of the shares of the new corporate owner of the business, the Defendant Halton Family Health Centre Inc. to the Plaintiffs. [ 7 ] There were several motions and in excess of 25 days of examinations for discovery in the action which was set down for trial in June 2009.

A long trial in Hamilton was scheduled to commence on October 9, 2012. The Settlement [ 8 ] There does not appear to be any dispute among the parties that indeed a settlement was reached on September 26, 2012. [ 9 ] The Plaintiffs served a written offer to settle dated September 25, 2012 which stated as follows: “The Plaintiffs, Defendants by Counterclaim offer to settle the pending claim and counterclaim on the following terms and conditions: 1.

The Defendants, Plaintiffs by counterclaim shall pay to the Plaintiffs, Defendants by counterclaim the sum of $823,984.93 inclusive of all claims for principal, interest and costs calculated as follows: Consulting agreements $337,981.94 Prejudgment interest on consulting agreements 38,704.40 Undertaking agreement 66,000.00 Prejudgment interest on undertaking agreement 10,560.00 Punitive damages 100,000.00 Costs 350,000.00 Leaseholds ( 79,261.41) Total $823,984.93 2.

The Defendants, Plaintiffs by Counterclaim, shall pay to the Plaintiffs, Defendants by Counterclaim, and their costs on a full indemnity basis from the date of this offer to the date they accept it in writing. 3.

The Defendants, Plaintiffs by Counterclaim, shall transfer 50% of the issued and outstanding shares of Halton Family Health Inc. (but not the pharmacy) free and clear of any encumbrances and shall consent to an order that the Defendants, Plaintiffs by Counterclaim, or anyone of them, have held those shares in trust for the Plaintiffs, Defendants by Counterclaim, or any one of them since Halton Family Health Inc.’s date of incorporation. 4.

The Defendants, Plaintiffs by Counterclaim, shall provide an accounting to the Plaintiffs, Defendants by Counterclaim, of all profits, dividends, management fees or payments of any kind received by them or derived by them from Halton Family Health Inc. since its date of incorporation and shall pay over to the Plaintiffs, Defendants by Counterclaim 50% of same. 5. The claim and all counterclaims shall be dismissed on a without costs basis. 6. No term of this offer is severable from any other term.

7. This offer shall be open for acceptance until one minute after the commencement of the trial unless withdrawn earlier in writing, at which time it shall expire. 8.

The December 9, 2010 offer to settle of the Plaintiffs, Defendants by Counterclaim, remains open for acceptance.” [ 10 ] This Plaintiffs’ offer was forwarded in a letter from their lawyer which in referring to paragraph 4 of the offer stated that they have sought the accounting all along and that if the Defendants took nothing out of Halton Family Health Center Inc., they should not have a problem with this item. [ 11 ] The Defendants, by letter from their counsel dated September 26, 2012, accepted this offer to settle on the following modified terms: “1.

The Defendants, Plaintiffs by Counterclaim (“Dingfeld/Carnicelli”) will pay to the Plaintiffs, Defendants by Counterclaim, (“Berlingeri/Nisker”) the sum of $823,984.93 inclusive of all claims for principal, interest and costs upon the completion of the accounting requested by Berlingeri/Nisker in paragraph 4 of their offer to settle dated September 25, 2012, the accounting to be completed by no later than December 15, 2012 and the payment to be made no earlier than November 30, 2012. 2.

Upon completion of the accounting, Dingfeld/Carnicelli shall pay Berlingeri/Nisker 50% of all profits, dividends, management fees or payments of any kind received by them or derived by them, but not including repayment of any loans made to Halton Family Health Inc. since the date of its incorporation, if any. 3.

Upon completion of the accounting and payment of funds aforesaid, Dingfeld/Carnicelli shall transfer to Berlingeri/Nisker 50% of the issued and outstanding shares of Halton Family Health Inc. free and clear of all encumbrances, which does not include an interest in any pharmacy and in particular does not include an interest in P.H. Jory Limited. 4.

Upon the transfer of shares aforesaid, the parties shall consent to an order dismissing the claim and counterclaim without costs and shall agree to sign a mutual release in a form satisfactory to all counsel which provides for the payments aforesaid and the transfer of shares without admission of liability.” [ 12 ] That letter of the Defendants’ counsel made it clear that the Defendants expected the Plaintiffs to do the accounting required under paragraphs 1 and 2 of its counteroffer, rather than their doing so: “However, should your clients’ accounting determine that they are entitled to any funds as described in the Offer to Settle from the date of incorporation to date, then payment will be made as hereafter set out.” [ 13 ] Plaintiffs’ counsel accepted the modification of the terms and conditions of the Defendants by their letter September 28, 2012 faxed to the Defendants counsel. [ 14 ] That letter stated the following: “Please be advised that the Plaintiffs/Defendants to the Counterclaim hereby accept the counteroffer of the Defendants/Plaintiffs by Counterclaim set out in your letter dated September 26, 2012 on the assurance of, and representations made, in your further letter of September 27, 2012.

This acceptance is given on the understanding that it is an implied term to paragraph 4 of the former letter that all funds payable under paragraphs 1 and 2 shall be paid before the parties would be required to give their consent to an order dismissing the claim and counterclaim or to enter a mutual release. We shall coordinate implementation steps with you in the very near future to complete the settlement…” [ 15 ] The Plaintiffs’ counsel advised the court on September 28, 2012 that the action had settled subject to implementation and the action could be removed from the long trial list.

The Defendants’ counsel provided no response to the letter of September 28, 2012 regarding the requirement that all settlement funds had to be paid before there would be a consent order dismissing the claim and counterclaim or a mutual release provided. [ 16 ] The dispute between the parties does not appear to be on the actual wording of the settlement terms at all but rather the

interpretation of certain provisions of the terms of the settlement and initially the form of release to be signed by the parties which release matter has now been resolved by them. I will deal with that in these reasons but in the meantime, the terms of the settlement are clear and the initial terms of the judgment will be issued as indicated in paragraph 73 of this decision.

Interpretation of Settlement Terms [ 17 ] The Plaintiffs’ request under

section 97 of the Courts of Justice Act is for a declaration that the accounting required under the settlement has been completed and for an order requiring the Defendants to pay the Plaintiffs the sum of $528,113 which they say is one- half of the amounts determined as being owing to them on the accounting.

They also ask for an order requiring the Defendants to transfer 50% of the shares of Halton Family Health Centre Inc. in accordance with the settlement. [ 18 ] The Defendants oppose that request and their cross-motion takes the position that no further monies are owing to the Plaintiff on the accounting and in particular the $528,113 amount submitted by the Plaintiffs. [ 19 ] The dispute revolves around the

interpretation of the words of paragraph 2 of the settlement agreement regarding the accounting to the Plaintiffs “ of all profits, dividends, management fees or payments of any kind received by them or derived by them, but not including repayment of any loans made to Halton Family Health Inc. since the date of its incorporation.” [ 20 ] The Plaintiff’s position is that the Defendants ”received” or “derived” $1,056,226 of such funds of which it is entitled to half; the Defendants position is that they did not and the Plaintiffs are entitled to nothing more.

[ 21 ] The evidence on these motions consisted of the affidavits and transcripts of the cross examination of Nicholas Mastroluisi, the Plaintiffs chartered accountant and business valuator expert who completed the accounting and the affidavit of Tanisha Hinds, the law clerk providing the details of the settlement offers. [ 22 ] The Defendants provided the affidavits of the Defendant Werner Dingfeld and the transcript of his cross examination. [ 23 ] The parties agreed that this court could and should make the decision on those issues based on the evidence before the court which in my view would be somewhat similar to an application for a determination of rights that depend on the

interpretation of a contract under rule 14.05 of the Rules of Civil Procedure. This court accordingly proceeded on that basis. Evidence of Nicholas Mastroluisi [ 24 ] The Plaintiff’s expert business valuator provided his report and independent expert’s certificate under rule 53. He admittedly had done some accounting work for the Plaintiffs in the past.

However, I am satisfied on reviewing his affidavit and the transcripts of his cross examination that he attempted to and in fact fulfilled his required duties as an independent expert to provide an unbiased opinion when he conducted his examination of the books and records of the Defendants for the purpose of completing the required accounting. [ 25 ] Mr. Mastroluisi had considerable expertise and experience in conducting audits and accounting of funds of large and small corporations and for a number of other clients in the past in his professional capacity.

He also has the required educational background and certificates expected of such an expert so that he could be properly qualified and trained to conduct his work requested in this matter. He obtained a Masters of Business Administration in 1981, qualified as a chartered accountant in 1983 and as a chartered business evaluator in 1984. He received his specialty qualification in business valuations with the Institute of Chartered Accountants of Ontario in 2001. He is an adjunct professor of accounting and financial and management services at DeGroote School of Business at McMaster University.

He has been qualified as an expert witness on numerous occasions in accounting, income taxation, valuations and income determination in the Ontario Superior Court of Justice and provides frequent presentations on taxation and valuation matters. [ 26 ] I accept his credentials as an expert witness duly qualified to give his opinion with respect to the issues of auditing and performing an accounting of the Defendants’ financial books and records for the purpose of determining the profits, dividends, management fees and payments received or derived by the Defendants in the Halton Family Health Centre Inc. business, including any loans made to Halton Family Centre. [ 27 ] Mr.

Mastroluisi was aware of the allegation that the Defendants had misappropriated a medical centre business opportunity of which they and the Plaintiffs were each supposed to own one half.

He was also aware that the Defendants continued that misappropriated business as the Defendant Halton Family Health Centre Inc. which company the Defendants incorporated for this purpose only 14 days after they were served with the Statement of Claim in this action. [ 28 ] He reviewed the relevant books and records of Halton Family Health and concluded that the Defendants had received or derived the sum of $228,807 in professional fees and that management and administrative fees were paid by Halton Family Health to a company called Medico One Ltd. in the amount of $827,420 for a total of $1,056,226.00.

He concluded that the Defendants must pay one half of that total to the Plaintiffs of $528,113 in accordance with the settlement terms in accordance with the settlement terms. Professional Fees [ 29 ] There is no dispute that this $228,807 amount was paid by the Defendant Halton Family Health Inc. as legal and accounting fees to defend this misappropriation action claim against the Defendants.

He concluded that as the Defendants paid a total of $545,820 in total legal fees in this action, the Defendant Halton Family Health paid 42% of that amount, or $228,807, even though it was only one of the six Defendants in this action. [ 30 ] However, he also concluded that these professional legal and accounting fees paid by the Defendant Halton Family Health were not proper expenses of it or for the purpose of earning an income but rather they constituted a personal benefit to the other Defendants because this litigation was essentially a shareholder dispute over the illicit transfer of the company’s business.

Accordingly, these were fees the other co-Defendants should have paid in their entirety themselves. [ 31 ] He conceded in cross-examination that the professional fees paid by a corporation as a Defendant in a lawsuit may in some circumstances be a proper expense of that corporation but it was his opinion that the professional legal and accounting fees in defending this action were not proper expenses because the action concerned shareholders and ownership of the business and was not money spent to earn an income.

These were payments that were not business related but were an outlay for the other Defendants and hence personal to them. Werner Dingfeld [ 32 ] The Defendant, Mr. Dingfeld, in his affidavit material simply stated that Mr.

Mastroluisi’s report was clearly in error because these payments Mastroluisi characterized as benefits were not in fact benefits as defined in terms of settlement or payments received by the Defendants or on their behalf. [ 33 ] He stated that he also has been a chartered accountant for 30 years but provided no evidence of his expertise and in fact stated he was no longer actively involved on a full-time basis in public accounting. He refused on his cross examination to state how many hours a week he actually worked as an accountant or how many hours he actually worked as one in 2011 and 2012.

He refused to advise how much accounting he actually did for clients or how much time he spent in professional development or even what he considers to be the practice of accounting. He provided no independent expert certificate as is required under the rules to give an independent expert opinion. Obviously he could not do so as he could not be fair and objective and nonpartisan especially as he was being sued for a substantial amount of funds in this action. There is no evidence in any event that he has ever been qualified to give expert evidence in

business evaluations, auditing and accounting in this court or any other court. [34] Last but not least, he is the one who caused the Defendant Halton Family Health Inc. to be incorporated just two weeks afterthe Statement of Claim in this action was served on him. [35] He simply stated that although there were six named Defendants in the action, Halton Family Health was the primaryDefendant and that the amount “it paid towards the cost of litigation was more than reasonable in the circumstances”.

He suggests themoney used by Halton Family Health to pay the professional fees came from loans made to Halton Family Health by the otherDefendants or related corporations. [36] He suggested that the best position the Plaintiffs could take was that the professional fees paid by the Defendant HaltonFamily Health Centre should be treated as repayment of some of the loans made to that company by the Defendants or corporations inwhich the other Defendants have an interest.

The suggestion was that because the settlement terms specifically provide the moneyreceived in respect of “repayment of loans” are not to be considered, these monies should not be due and owing to the Plaintiffs. [37] Were these payments of $228,807 by the Defendant Halton Family Health Centre for legal and accounting fees in defendingthis action “profits, dividends, management fees or payments of any kind received by the Defendants or derived by them”? [38] There is no question that the other co-Defendants benefited significantly from these payments made by Halton Family Healthin a share that was far greater than what would be the expected compared to the total costs actually incurred by all the Defendants. [39] More importantly, the other five Defendants in fact benefitted from the entire payment of the $228,807 by Halton FamilyHealth Inc. which was the company set up by those same Defendants to conduct the business improperly converted from the Plaintiffs.

In effect, Halton Family Health Centre was not really a separate unrelated Defendant; it was really the alter ego of Dingfeld andCarnicelli and they should not be able to now say that Halton Family Health bears a responsibility for some of these legal fees to theprejudice of the Plaintiffs. [40] It is not insignificant that it was the Defendants who insisted as part of the settlement proposal which was accepted that thePlaintiffs were required to hire the appropriate expert to examine the Defendants books and conduct the accounting.

The Defendantschose not to proceed with their own accounting or the hiring of their own independent business valuator expert and did not even do so forthe purpose of examining or challenging the Plaintiff’s expert report or provide evidence to the contrary on this motion. [41] The Plaintiffs’ expert provided his opinion based in my view on a proper analysis of the financial records of the Defendantsand the application of appropriate accounting and business principles in arriving at that conclusion. I choose to accept his evidence overthat of Mr. Dingfeld especially where it conflicts with Mr.

Dingfelds. [42] The words “derived from” are defined in the concise Oxford English dictionary as “have as a root or origin; originate from”.To “derive something from” means to obtain something from. This definition and common sense suggests that the remaining co-Defendants certainly received or at least derived a benefit by the payment of these funds paid by their alter ego Defendant Halton FamilyHealth which they should have paid themselves. [43] I am mindful of the principles of interpreting a commercial contract such as this settlement noted in the Ventas, Inc v.

Sunrise Senior Living Real Estate Investment Trust (2007) 2007 ONCA 205 , 85 O.R. (3rd) 254 as follows:

a) as a whole, in a manner that gives meaning to all of its terms and avoids an

interpretation that would render one or more of its termsineffective;

b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon thecardinal presumption that they intended what they have said;

c) with regard to the objective evidence of the factual matrix underlining the negotiation of the contract, but without reference to thesubjective intention of the parties; and (to the extent there is any ambiguity in the contract);

d) in a fashion that accords with sound commercial principles and good business sense and that avoids a commercial absurdity. [44] Moreover, a court should consider the entire document and the nature of the relationship created by the agreement and notdissect the written agreement into isolated components and then interpret them in a way that does not make sense given the overallwording of the document and the relationship of the parties. The Plan Group v.

Bell Canada 2009 ONCA 548. [45] The intention of the parties and certainly from the Defendants was that they wished the Plaintiffs and their experts to examinethe books and provide the accounting of the funds that may be owing to the Plaintiffs in accordance with the settlement documents.There is no dispute the Plaintiffs’ expert had the benefit of all of the relevant financial documents. [46] The alter ego status of Halton Family Centre and common sense, with no strain on the version of the words used in thesettlement, cause me to conclude that these funds for professional legal and accounting fees of $228,303 paid by Halton Family HealthInc. was a payment derived by the Defendants and are properly owing to the Plaintiffs under the settlement agreement. [47] In addition, I accept the evidence of Mr.

Mastroluisi that the fact that the Defendant or their related companies loaned moneyto Halton Health Family to pay those fees is irrelevant. I conclude as well that if monies were so issued, the loan made and benefitsreceived do not constitute a “repayment of loan made to Halton Family Health Inc” within the contemplation of the settlement terms. Management and Administrative Fees paid to Medico One in the amount of $827,420 [48] Mr. Mastroluisi noted in his examination four invoices from a company called Medico One Ltd. to Halton Family Health

Centre Inc. as follows: September 30, 2008 $210,000 September 30, 2009 $210,000 September 30, 2010 $224,700 September 30, 2011 $162,720 Total $827,420 [ 49 ] The invoices simply state they are for “professional services rendered by Medico One Ltd to Halton Family Health Centre Inc.” [ 50 ] The Defendants initially refused to answer Mr. Mastroluisi’s question as to who the shareholders of Medico One were but on Mr. Dingfeld’s cross examination, he admitted that 75% of Medico One was owned by the Ubertas Inc. and that he and the Defendant, Carnicelli own 53.3% of Ubertas Inc. [ 51 ] The evidence of Mr.

Dingfeld was that Medico One provided senior management services for Halton Family Health, assisted it to recruit doctors and with management of its staff of approximately 80 employees. [ 52 ] Dingfeld’s evidence was rather evasive when he suggested that 50% of the time spent by the nine Medico One employees was spent on Halton Family Health matters even though Medico One serviced up to three other medical centres. He admitted he could not tell how much work it did for Halton Family Health or those others. [ 53 ] Mr.

Mastroluisi confirmed that all four of these invoices were included in the category as long-term debt of Medico One with only the first 2008 invoice initially shown in Halton’s current accounts payable but which was moved out subsequently. It was initially recorded as an expense and a corresponding amount was added by Medico One to its trade accounts payable account which was a proper method of recording a trade payable.

Halton’s books noted that subsequently the balance owing in its trade accounts payable was cancelled and it replaced it with an additional amount to its long-term loans payable account. [ 54 ] Mr. Mastroluisi’s evidence was clear that in his opinion Halton Family Health effectively paid the first Medico One invoice by issuing Medico One long-term debt. [ 55 ] Mr. Mastroluisi noted that the remaining three invoices were not treated on the books initially as current accounts payable as they should have been but were immediately classified as long term debt by Mr.

Dingfeld who made that decision himself as he was in charge of the financial management of both Halton Family Health and Medico One. He provided no supporting documents to explain this. [ 56 ] Mr. Mastroluisi was clear in his evidence notwithstanding Mr. Dingfeld’s actions that nothing changed from a public accounting perspective and each invoice was a current accounts payable for management services rendered in respect of that year. He concluded that Mr.

Dingfeld’s action of not posting the last three Medico One invoices as current trade accounts payable was irrelevant and incorrect from the public accounting standards viewpoint. He concluded that all four Medico One invoices were paid by Halton Family Health. [ 57 ] He was quite clear in his evidence that supplier invoices and other debts of the company don’t have to be paid by cash or cheque. Common examples include payment of dividends, bonuses and business expenses made by a shareholder on behalf of the corporation.

They could also be paid by renegotiating terms of the debt such that the debt was considered paid which was a very common practice in business and for accountants who are taught that practice in university programs.

He has done this himself in his practice 100 times in the last six months. [ 58 ] He concluded that Halton Family Health offered and Medico One agreed to accept long-term debt in lieu of cash which was consideration resulting in the accounts payable being constructively paid as a long-term debt that had totally different repayment terms. [ 59 ] He noted that the income tax returns of Halton confirmed management’s understanding that these invoices were paid otherwise they were wrong in numerous years.

Its books and records did not show the Medico One invoices as outstanding trade accounts payable because they have been paid. In addition, its accrued liabilities which can often include trade payables did not include the Medico One invoices.

Accordingly, the $826,420 for those accounts payable were therefore paid. [ 60 ] He concluded that in effect Hamilton Family Health paid Medico One on the accounts and Medical One reloaned the money to Halton which eliminated the current trade accounts payable by issuing long-term debt. [ 61 ] It was significant that Halton Family Health benefited by claiming these invoices as expenses. That decreased the income in 2011 and increased the losses from 2008 to 2010.

He stated that Halton Family Health has or will benefit from income tax deductions in the amount of $827,420 including the ability to carry forward the loss balance to reduce income in future years. It saved income tax by reducing future taxable income. [ 62 ] Mr. Dingfeld’s affidavit evidence in response to Mr. Mastroluisi’s report and conclusions was simply that these management and administrative fees to Medico One were clearly indicated as having been accrued, but have not been paid.

His position was that they were unlikely to ever be paid since the corporation has never made any profit and has in fact received loans in excess of $5 million to allow it to pay its expenses. [ 63 ] He stated that the majority of these outstanding loans were made by the Defendants or corporations owned or controlled by

them and that these invoices of Medico One were not payments to the Defendants in accordance with terms of settlement but were excluded as they were “repayment of loans” and not considered as benefits received by the Defendants. [ 64 ] I do not accept that evidence and position for the following reasons. [ 65 ] Mr. Dingfeld’s affidavit and sworn evidence on his cross examination that Halton Family Health had never made a profit was simply wrong. It made a profit in 2011 and 2012 as noted by Mr.

Mastroluisi. [ 66 ] As noted above, the Defendants provided no expert evidence including from its own accountants to contradict the clear, sound and logical opinion evidence of Mr. Mastroluisi and his explanation of his use of well-known basic accounting principles in coming to his conclusion. I again do not accept the evidence of Mr. Dingfeld especially when it is in conflict with the evidence of Mr.

Mastroluisi. [ 67 ] Moreover, it was the Defendants who insisted that the Plaintiffs’ expert conduct the accounting obviously expecting that expert to use the appropriate applicable accounting principles which I find that he did. The actual wording was: “However, should your clients accounting determine that they are entitled to any funds in the offer to settle, from the date of incorporation to date, and then the payment will be made as hereinafter set out.” [ 68 ] They obviously did not like Mr.

Mastroluisi’s conclusion and have tried to suggest that they were not obligated to pay any of the settlement funds which were payable upon completion of the accounting. The position of the Defendants in their lawyer’s letter of December 18, 2012 that “obviously the accounting has not been completed as Mr. Mastroluisi’s report comes to the erroneous conclusion that your clients are entitled to additional funds” is simply without merit. [ 69 ] Mr.

Mastroluisi’s opinion was that the settlement terms “but not including repayment of any loans made to Halton Family Health Inc. since its date of incorporation, if any” made no difference to his report. He noted that Halton Family Health had, for example, borrowed $100,000 from a numbered company in 2006 and paid that down in subsequent years which was simply an actual repayment of a debt which was irrelevant to him. It was not a benefit to either party one way or the other as he stated.

In my view, this type of loan transaction is what was likely intended by the parties in the settlement agreement as being excluded. It is significant that it was the Defendants who included that provision in the settlement and if they wanted to make it clear that they intended the Medico One invoices arrangements noted in their financial statements to be considered as an actual “repayment” made to Halton Family Health, and therefore excluded, they could have said so.

They did not. [ 70 ] The Plaintiffs suggested that the treatment of the Medico One invoices in the financial statements as long-term debts, if they shouldn’t have been, was a matter of Revenue Canada to deal with. Mr. Mastroluisi disagreed and confirmed he had to look at all of the various factors to draw his conclusion and couldn’t ignore one or the other. He concluded that Medico One derived the benefit from this even if payment wasn’t actually made. Mr. Dingfeld and Mr. Carnicelli had significant shareholding ownership in Medico One and accordingly they benefitted.

As it was obviously a non-arm’s-length company, he concluded that this payment to Medico One was the same as payments to the Defendants in the action. I agree with his opinion and accept his evidence. [ 71 ] For these reasons and by applying the same principles of interpreting the terms of this settlement agreement referred to above, I find that the sum of $827,420 is properly included as management fees and payments of any kind received by the Defendants or derived by them and are not repayment of any loans made to Halton Family Health Inc. in accordance with terms of settlement of the parties.

Costs of Accounting [ 72 ] The Plaintiff asked that the Defendants be ordered to pay one-half of the approximate $12,000.00 costs incurred to complete the accounting. The settlement required the Plaintiffs to do so and nothing was provided for any contribution by the Defendants towards those costs and it is not appropriate that they be awarded as damages in this action and I decline to do so.

Conclusion [ 73 ] The Plaintiffs’ motion for judgment is allowed and judgment will issue in accordance with paragraphs 1 to 4 of the settlement letter of the Defendants of September 26, 2012 subject to including the relevant provision of paragraph 4 of the Plaintiffs letter of September 25, 2012 and a declaration that the required accounting under the settlement has been completed. If the parties wish further input or require further directions on the form of the Judgment, the draft of which I have included as

Schedule A, they can arrange for that with the Trial Co-ordinator in Hamilton. [ 74 ] Parayeski J. in April 2013 ordered that the Defendants immediately pay the sum of $823,984.93 owing under the first term of the settlement plus interest at 4% per annum commencing December 15, 2012 to the Plaintiffs. The parties agreed that, pending the hearing on these matters, those funds be paid into court which has been done.

Accordingly, those funds presently in court are to be paid out immediately to the Plaintiffs inclusive of all interest thereon. [ 75 ] In addition, the Defendants shall pay to the Plaintiffs the sum of $528,113 being 50% of the funds owing to the Plaintiffs on the accounting obtained pursuant to paragraph 2 of the terms of settlement of the parties plus interest at 4% per year thereon commencing on December 15, 2012. [ 76 ] The Defendants shall transfer to the Plaintiffs 50 % of the issued and outstanding shares of Halton Family Health Centre Inc. free and clear of all encumbrances forthwith. [ 77 ] The parties have now agreed on the form of the release to be signed by the parties in accordance with the terms the settlement.

That release attached as

Schedule B shall be signed by them.

[ 78 ] The cross-motion of the Defendants is dismissed. [ 79 ] Absent any relevant written offers to settle, the Plaintiffs would normally be entitled to their costs of their motion and defending the cross-motion on a partial indemnity basis. If the parties cannot agree on the issue of costs including quantum, the Plaintiffs will provide their written submissions of no more than three pages in length plus a bill of costs within 10 days from the date of this order with the Defendants to similarly respond within 10 days thereafter. The Honourable Mr. Justice R. J. Nightingale Released: August 21, 2013

SCHEDULE “A” ONTARIO SUPERIOR COURT OF JUSTICE The Honourable Mr. Justice ) Wednesday, the 21 st day of ) R. J. Nightingale ) August, 2013 B E T W E E N: JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC and WILLIAM NISKER HOLDINGS INC. Plaintiffs And 1527877 ONTARIO INC., 1449312 ONTARIO INC., FAUSTCO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTHE CENTRE INC. And STRESA GRUPPO INC. Defendants AND BETWEEN:

1449312 ONTARIO INC., FAUSTCO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTHE CENTRE INC. And STRESA GRUPPO INC. Plaintiffs by Counterclaim And JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC, WILLIAM NISKER HOLDINGS INC., JOSEPH BERLINGIERI And WILLIAM NISKER Defendants by Counterclaim JUDGMENT This Motion made by the Plaintiffs/Defendants by Counterclaim and Cross-Motion by the Defendants /Plaintiffs by Counterclaim was heard on the 18 th day of July, 2013 at Hamilton, Ontario and was reserved for decision until today’s date.

Upon reading the Notice of Motion, Affidavit of Tanisha Hines sworn January 10, 2013, amended Notice of Motion, Affidavits of Nicholas Mastroluisi sworn February 13 and March 6, 2013, the Notice of Cross-Motion and Affidavits of Werner Dingfeld sworn January 18 and 21 st 2013, the answers to undertakings of Mr. Mastroluisi and Mr. Dingfeld, and the factums of the parties, and upon hearing submissions of Counsel for the Plaintiffs and for the Defendants, 1.

THIS COURT ORDERS that the Defendants pay to the Plaintiffs the sum of $823,984.93 inclusive of all claims for principal, interest and costs upon the completion of the accounting requested by the plaintiffs referred to in paragraph 2 herein . 2.

THIS COURT ORDERS that the Defendants shall provide an accounting to the Plaintiffs of all profits, dividends, management fees or payments of any kind received by them or derived by them from Halton Family Health Inc. since its date of incorporation, but not including repayment of any loans made to Halton Family Health Inc. since its incorporation, and upon completion of the accounting, shall pay over to the Plaintiffs 50% of same.

The accounting shall be completed by the plaintiffs no later than December 15, 2012 and the payment made by the defendants referred to in paragraph 1 no earlier than November 30, 2012. 3. THIS COURT ORDERS that upon the completion of the accounting and payment of funds aforesaid, the Defendants shall transfer to the Plaintiffs 50% of the issued and outstanding shares of Halton Family Health Inc. free and clear of all encumbrances which does not include an interest in any pharmacy and in particular does not include an interest in P.H. Jory Limited.

4. THIS COURT DECLARES that the accounting referred to in paragraphs 1 to 3 herein was completed as of December 15, 2012. 5. THIS COURT ORDERS accordingly that the amount referred to in paragraph 1 herein shall be paid by the Defendants as of December 15, 2012 together with interest thereon at 4% per year from that date and that the funds that have been paid into Court related to that amount in paragraph 1 be paid to the Plaintiffs forthwith inclusive of any accumulated interest thereon. 6.

THIS COURT ORDERS accordingly that the Defendants pay to the Plaintiffs the sum of $528,113 pursuant to paragraph 2 herein plus interest thereon at 4% per year commencing December 15, 2012. 7. THIS COURT ORDERS accordingly that the Defendants transfer to the Plaintiffs 50% of the issued and outstanding shares of Halton Family Health Centre Inc. free and clear of all encumbrances. 8. THIS COURT ORDERS that the form of the mutual release agreed to by the parties as noted in

schedule B attached shall be signed by them. 9. THIS COURT ORDERS that the Counterclaim shall be dismissed. 10. THIS COURT ORDERS that the issue of costs of this Motion and Cross-motion will be decided after written submissions from the parties. This judgment bears interest at the rate of 3 % per year from its date. __________________________________________ CITATION : JBN Medical Diagnostic Services et al v. 1527877 Ontario Inc et al, 2013 ONSC 5238 COURT FILE NO.: 08-0523 JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC and WILLIAM NISKER HOLDINGS INC.

Plaintiffs – and – 1527877 ONTARIO INC., 1449312 ONTARIO INC., FAUSTO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTH CENTRE INC and STRESA GRUPPO INC. Defendants

– and between– 1449312 ONTARIO INC. FAUSTCO CARNICELLI, WERNER DINGFELD, HALTON FAMILY HEALTH CENTER INC and STRESA GRUPPO INC. Plaintiffs by Counterclaim – and – JBN MEDICAL DIAGNOSTIC SERVICES INC., JOJAZ HOLDINGS INC., WILLIAM NISKER HOLDINGS INC., JOSEPH BERLINGIERI and WILLIAM NISKER Defendants by Counterclaim ________________________________________________ REASONS FOR JUDGMENT ________________________________________________ The Honourable Mr. Justice R. J. Nightingale Released: August 21, 2013