



COURT OF APPEAL FOR ONTARIO

CITATION: Koubi v. Hascalovici, 2016 ONCA 867

DATE: 20161117

DOCKET: C60785

Strathy C.J.O., Pardu and Brown JJ.A.

BETWEEN

Rom Koubi and 1355863 Ontario Inc.

Plaintiffs (Appellants)

and

Avi Hascalovici
and Michael Averbuch

Defendants (Respondent)

Mark A. Klaiman, for the appellants

Jamie J. VanWiechen, for the respondent


Heard: November 10, 2016

On appeal from the judgment of Justice Robert Charney of
    the Superior Court of Justice, dated June 25, 2015, with reasons reported at
    2015 ONSC 4132.

ENDORSEMENT

[1]

The appellants, Rom Koubi and 1355863 Ontario
    Inc. (the Corporation), appeal the trial judges dismissal of their action as
    against the respondent, Avi Hascalovici. In their action, the appellants
    claimed the respondent was liable personally for the sum of approximately $108,000,
    which represented one-half of the indebtedness of the Corporation at the time
    it ceased business.

[2]

Koubi had set up the Corporation to manufacture
    and sell powder-compacting presses in accordance with a technology developed by
    his father. Koubi persuaded Hascalovici to join him in the business. There was
    no dispute the business was operated through the Corporation and that Koubi and
    Hascalovici were equal shareholders.

[3]

When the Corporation needed operating funds, it
    entered into a loan agreement with Finance Tax and Insurance Co-ordinators
    (FTIC), a company controlled by Koubis in-laws. The two advances made by
    FTIC under the loan agreement constituted most of the Corporations
    indebtedness at the time it ceased operations. The FTIC loan was unsecured;
    neither Koubi nor Hascalovici provided a personal guarantee of the
    Corporations obligations under the loan.

[4]

When the Corporation ceased operations, Koubi
    sued Hascalovici for half of the Corporations liabilities on the basis that
    Hascalovici had agreed with Koubi that they each would be responsible
    personally for half of the Corporations debt. The trial judge dismissed the
    claim.

[5]

The appellants recognize their appeal involves
    questions of mixed fact and law and, as a result, the standard of review is
    that of a palpable and overriding error.

[6]

The appellants advance two main grounds of
    appeal.

[7]

First, the appellants submit that if two parties
    agree they will share equally in the profits of a business, it is axiomatic
    that they should equally be responsible for the debt. They contend, in effect,
    that the trial judge failed to follow that axiom.

[8]

The trial judge dealt with that argument at
    para. 58 of his reasons, holding:

It is a basic principle of corporate law
    that shareholders, as such, have limited liability. In the absence of a
    personal guarantee given by a shareholder, a shareholder in his capacity as
    such is not liable for any act or liability of a corporation because the
    corporation is a separate legal entity.

[9]

That is a correct statement of the law: see
    Ontario
Business Corporations Act
, R.S.O.
    1990, c. B.16, s. 92(1). To find that the shareholders of a corporation have
    departed from that basic principle, a claimant would have to establish the
    shareholders had agreed to assume personal liability for corporate debt.

[10]

Which leads to the appellants second ground of
    appeal.  They submit the trial judge committed palpable and overriding errors
    of fact by failing to consider or give effect to what they contend were
    admissions by Hascalovici that he personally would be responsible for half of
    the debt of the Corporation.

[11]

The trial judge conducted a detailed review of
    the evidence regarding the dealings between Koubi and Hascalovici concerning
    their obligations as shareholders of the Corporation. During that review, he
    considered the evidence the appellants point to as admissions by Hascalovici of
    personal liability for half of the Corporations debts: see paras. 16, 17, 32,
    40, 42, 45, 46 and 67.

[12]

Placing that evidence in the context of the
    evidence as a whole, the trial judge made two key findings: (i) both Koubi and
    Hascalovici understood that by proceeding as shareholders in a corporation,
    they were limiting their personal liability (para. 61);  and (ii) the totality
    of the agreement between the shareholders was contained in the minutes of the
    February 5 and 24, 2010 meetings, which did not contain any suggestion that
    either party thought that he was departing from the standard form of limited
    corporate liability and agreeing to be personally liable for all of the
    corporations debts and liabilities: paras. 62 and 64.

[13]

Ample evidence supported those key findings of
    the trial judge. We see no palpable and overriding error.

[14]

The appeal is dismissed.

[15]

The appellants shall pay the respondent its
    costs of the appeal fixed at $11,000, inclusive of disbursements and HST.

G.R. Strathy C.J.O.

G. Pardu J.A.

David Brown J.A.


