



COURT OF APPEAL FOR ONTARIO

CITATION: Zachary Timoon Dentistry Professional Corporation
    v. Tonino Ciocca Dentistry Professional Corporation, 2015 ONCA 812

DATE: 20151125

DOCKET: C59901

Epstein, van Rensburg and Hourigan JJ.A.

BETWEEN

Zachary Timoon Dentistry Professional Corporation
    and Dr. Zachary Timoon

Respondents

and

Tonino Ciocca Dentistry Professional Corporation
    and Dr. Tonino Ciocca

Appellants

William H. Fysh for the appellants

Michael Burgar for the respondents

Heard: November 10, 2015

On appeal from the order of Justice J. Robert MacKinnon of
    the Superior Court of Justice, dated December 10, 2014, with reasons reported
    at 2014 ONSC 7171.

van Rensburg J.A.:

Overview

[1]

This appeal concerns the termination of a business relationship between
    two dentists. The relationship was governed by a joint venture agreement, which
    provided for termination on notice, but was silent as to the consequences of
    termination. In these circumstances, did the application judge err in excluding
    the appellant Ciocca from the practice and providing for the sale of his
    interest to the respondent Timoon?

[2]

For the reasons that follow, the answer to that question is no, and I
    would accordingly dismiss the appeal.

Facts

[3]

The individual parties are dentists who began to practise together in
    Newmarket in 2003. In September 2005, they entered into a joint venture general
    dentistry agreement (JVA) through their professional corporations, the
    corporate parties. The JVA provided for termination of the joint venture on 90
    days notice, but did not address the effect of termination, such as providing
    for dissolution or a buy-out by either party of the others interest.

[4]

From 2007 until 2010, the appellant Ciocca pursued training in New York,
    with the intention of establishing himself in a separate location as a
    prosthodontic specialist. In September 2011, he purchased a building and
    developed two separate clinics in Newmarket for his new speciality. The new
    clinics opened in September 2013.

[5]

From the time he began his specialist training, Ciocca continued to work
    one day a week in the parties general dentistry practice, receiving a draw of
    $10,000 per month. The financial statements for the practice allocated net
    income respectively 70%/30% to Timoons and Cioccas professional corporations.

[6]

As the application judge observed, it was the parties understanding
    that their joint venture would terminate, that Ciocca would withdraw from the
    practice, that they would finalize their financial dealings and that the two
    would go their separate ways. Ciocca acknowledged his intention to sell his
    interest to Timoon and leave the practice. However he was reluctant to do so
    until his specialty practice had become sufficiently profitable.

[7]

In March 2014, Timoon gave notice of termination pursuant to the JVA,
    with an effective date of June 30, 2014. Soon thereafter, Timoon sought to
    exclude Ciocca from the practice, but Ciocca resisted. Ultimately, they
    returned to their earlier schedule, with Timoon working three days a week in
    the practice, and Ciocca one day a week.

[8]

While the parties agreed that Ciocca would leave the practice and be
    bought out by Timoon, they disagreed as to whether Ciocca had become overdrawn
    over time, whether an adjustment to Timoons compensation was necessary because
    he had income-split with his spouse, and the impact of any necessary financial
    adjustments on Cioccas buy-out rights. In other words, their dispute was financial.

[9]

On May 28, 2014, Timoon applied to the court under rule 14.05(3)(d) of
    the
Rules of Civil Procedure
for an order terminating the joint
    venture, excluding Ciocca from the business and declaring him sole owner of the
    dental business. Ciocca did not oppose the right to terminate or the effective
    date of the termination. However he opposed Timoons right to assume sole
    ownership of the dental practice. At the time of the application, there had
    been no valuation of the practice. Ciocca asserted before the application judge
    and on appeal that he would sell to Timoon only once his prosthodontic practice
    was sufficiently profitable, and that he should not have to leave the practice
    until all of the parties financial arrangements had been resolved.

Decision of the Application Judge

[10]

The
    application judge declared the joint venture terminated effective June 30,
    2014. He declared Timoon to be the sole owner of the dental practice to the
    exclusion of Ciocca and that Timoon had the sole right to use the business name
    Newmarket Dental Group. He granted other relief, effectively excluding Ciocca
    from any ongoing involvement in the dental practice, prohibiting his
    solicitation and acceptance of current patients from the practice, and
    requiring the parties to cooperate in the transfer to Timoon of the ownership
    interests, assets and liabilities related to the dental practice. The
    application judge directed all outstanding financial disputes to proceed by
    further application or other civil process. Such disputes would include
    calculation of the buy-out value payable by Timoon to Ciocca based on the June
    30, 2014 valuation date, and past accounting adjustments, if any, that would be
    fair or reasonable to deal with the past work inequality concerns raised by
    Timoon and the income-splitting issue raised by Ciocca.

Issues on Appeal

[11]

On
    appeal, Ciocca argues that the application judge exceeded his jurisdiction in
    making the mandatory orders and declarations transferring ownership to Timoon
    and placing restrictions on him. He claims that the application judge had only
    two available options - terminate the joint venture and dissolve or liquidate
    the practice (which was not sought by either party and which Ciocca
    specifically did not seek), or refuse to divest Ciocca of his ownership
    interest until the parties had negotiated an acceptable buy-out.

[12]

Ciocca
    also asserts that, while the application judge had the authority to terminate
    the joint venture, he exceeded his authority under Rule 14 in excluding Ciocca
    as an owner. Ciocca claims that he is entitled to maintain his ownership
    interest, including his right to work in the practice and to share in all of
    the financial attributes of ownership, pending the resolution of the parties
    financial issues and the buy-out of his interest by Timoon. Finally, Ciocca
    takes issue with the application judges order that the parties financial
    issues be determined in other proceedings, and not by trial within the
    application.

[13]

Timoon
    asserts that the application judge effected a practical result that was open to
    him on the record, including Cioccas clear and unequivocal evidence that, for
    years leading up to Timoons notice of termination, he intended to leave the
    practice and be bought out by Timoon. Further, the only real issues between the
    parties are financial, and Cioccas right to pursue any and all financial
    claims is expressly preserved.

Analysis

[14]

I
    do not agree with the appellants arguments.

[15]

First,
    the application judge had the jurisdiction to make the order in question. There
    were no disputed facts with respect to the termination of the joint venture,
    and the appellants agree that the effective date of termination was June 30,
    2014. It was also not disputed that, although the JVA was silent on the
    question of how termination would be effected, Timoon would purchase Cioccas
    interest. As Cioccas counsel confirmed, there was never any question of
    winding up the practice. With these acknowledged facts, the question was what
    relief was required to give effect to the contractual right of termination and
    the parties common intention that Ciocca would leave the practice and be
    bought out by Timoon.

[16]

Second,
    there is no basis for the approach Ciocca advocates  that is, recognizing an
    ongoing ownership interest that would permit him to continue to participate in
    the practice as before, while the financial issues are determined. This would
    nullify the termination provision in the JVA, or at least make the termination
    meaningless.

[17]

The
    application judge made the order that was just and reasonable in the
    circumstances and that was open to him on the evidence. Once the joint venture
    was terminated with the common intention that Ciocca would be bought out, there
    was no basis for Cioccas continued involvement in the practice: indeed, the
    evidence demonstrated that the conflict between the two dentists was disruptive
    to the practice, and ultimately could affect the value of the business, its
    continued viability and Cioccas pay-out. On this record, it is clear that termination
    of Cioccas ownership interest was required to give business efficacy to the
    JVAs termination provision and advanced the parties common intention. As a
    practical matter, the only issue between the parties was financial  the
    purchase price for Cioccas interest, and the adjustments, if any, to the
    income allocation for the preceding years. As such, I see no error in the
    application judges approach to the issues and in the order he made.

[18]

As
    for the financial issues, counsel for the appellants argued that Ciocca should
    be entitled to assert claims for loss of profits as owner after June 30, 2014 
    up to the date of the application judges decision, and even beyond. In view of
    the broad statement of respondents counsel that all claims the appellants
    might choose to advance remain open, and having rejected the arguments on
    appeal, I consider it advisable to provide clarification to resolve any
    potential ambiguity raised by the terms of the order respecting what claims
    might remain open. While para. 1 of the order terminates the joint venture as
    of June 30, 2014, para. 4 simply declares Cioccas ownership interest
    terminated, without an effective date. However, when read in context, para. 4
    must be understood as terminating Cioccas ownership interest effective the same
    date as the termination of the joint venture; that is, June 30, 2014.

[19]

First,
    this is consistent with para. 17 of the application judges reasons, and
    second, para. 8 of the order directs that the valuation of Cioccas interest
    for the purpose of the buy-out is at June 30, 2014. Accordingly, for the
    purpose of the determination of the financial issues, both the joint venture
    and Cioccas ownership interest are terminated effective June 30, 2014. The
    value of his interest, including goodwill, is to be determined as of that date.

[20]

Finally,
    I would not give effect to the appellants argument that the application judge
    erred in directing a further proceeding to determine the financial issues, if
    necessary, rather than directing the trial of an issue in the application. In
    the circumstances of this case, I am not persuaded that there would be any
    material advantage to directing a trial in the application of the financial
    issues; indeed, the application judges order provides for greater flexibility
    in the parties choice of dispute resolution process. I also observe that, now
    that the parties have certainty respecting the effective date of termination of
    both the joint venture and Cioccas ownership interest, which is also the date
    of valuation for Timoons buy-out of this interest, they are well-equipped to craft
    their own resolution of their financial issues. The parties are strongly
    encouraged to do so in order to avoid the delay and expense of further legal
    proceedings.

Disposition

[21]

The
    appeal is accordingly dismissed. Costs to the respondents fixed at $15,000,
    inclusive of HST and disbursements.

Released: (G.E.) November 25, 2015

K. van Rensburg J.A.

I agree Gloria Epstein
    J.A.

I agree C.W. Hourigan
    J.A.


