



COURT OF APPEAL FOR ONTARIO

CITATION: Soraya v. Claron Technology Inc., 2017 ONCA 935

DATE: 20171130

DOCKET: C63201

Sharpe, Benotto and Roberts JJ.A.

BETWEEN

Reuven Soraya

Applicant

(Respondent in Appeal)

and

Claron Technology Inc.

Respondent

(Appellant in Appeal)

Robert Cohen and Christopher Selby, for the appellant

John Adair, for the respondent

Heard and released orally: November 29, 2017

On appeal from the judgment of Justice Glenn A. Hainey of
    the Superior Court of Justice, dated November 14, 2016.

REASONS FOR DECISION

[1]

This appeal involves the claim of the respondent employee under his
    employment contract that included stock options. The application judge found
    that the Lexmark sale of part of the appellants business amounted to the sale
    of all or substantially all of the assets of the Company constituting a
    triggering event that caused the respondents remaining 20,000 unvested
    options to vest under the appellants Option Plan.

[2]

The appellant raises five grounds of appeal.

1.

Did the application judge err in finding that the respondent was
    entitled to the benefit of the appellants Option Plan?

[3]

The appellant contends that as the respondent did not receive a copy of
    the Option Plan when he was hired and did not obtain a copy until after the
    sale alleged to constitute a triggering event, he is not entitled to benefit
    from it.

[4]

We disagree. This was a factual issue to be determined by the
    application judge. When he was hired, although he was not given a copy, the
    respondent was told that the appellant had a great stock option plan. That
    indicated that an Option Plan did in fact exist. The position taken by the
    appellant with respect to the respondent following the Lexmark sale was
    completely inconsistent with the contention that the Option Plan did not form
    part of the appellants employment contract. The appellant dealt with both the
    respondent and other employees on the basis that the provisions of the Option
    Plan governed and it was only after this litigation commenced that it took the
    position vis-à-vis the respondent that it was a non-binding draft. There was
    ample evidence to support the application judges finding that the Option Plan
    was binding on the company.

2.

Did the application judge err in finding that there was a triggering
    event and in rejecting the appellants Boards determination that the sale to
    Lexmark did not constitute a triggering event?

[5]

The appellant submits that the Lexmark transaction was not a triggering
    event under the Option Plan for two reasons.

[6]

First, the appellant argues that the sale to Lexmark was not a sale of
    all or substantially all of the assets of the Company.

[7]

We agree with the respondent that this was a factual question and that
    there was ample evidence to support the application judges finding that the
    sale to Lexmark represented 87 to 89% of the value of the appellants assets
    and therefore amounted to a triggering event. The respondents evidence as to
    the value of the assets sold was supported by the only expert witness called on
    the point.  Both Gatti and Doron, the co-CEOs and beneficial owners of Claron,
    had previously made statements giving the remaining part of Claron a value
    consistent with the experts opinion.

[8]

Second, the appellant argues that the application judge erred by failing
    to apply terms in the Option Plan making the determinations of the Board
    final, conclusive and binding and not subject to any dispute by any
    participant. In our view, the application judge properly applied the decision
    of this Court in
Marshall v. Bernard Place Corp.
[2002] OJ No 463
    (C.A.), holding that sole discretion clauses of this nature do not confer
    absolute discretion but rather must be exercised honestly and in good faith.
    The only members of the Board were Gatti and Doron. The application judge found
    that they would personally benefit from rejecting the respondents contention
    that a triggering event had occurred and that their determination that there
    had not been a triggering event was not made in good faith. Again, that finding
    was plainly open to the application judge on this record.

3.

Did the application judge err in failing to find that the respondent did
    not properly exercise his options?

[9]

The appellant submits that the respondent failed to exercise his options
    in the required manner. When the appellants counsel provided notice that he
    was exercising his options, the required payment was not made. Payment was
    eventually made, but the appellant argues that there were strings attached as
    the letter enclosing payment specified that if the appellant cashed the cheque,
    it would be taken to have accepted the respondents position that all 40,000
    shares had vested.

[10]

We
    do not agree that by taking this position, the respondent imposed an improper
    condition on the payment. He was simply making clear the consequences of
    accepting the payment.

[11]

The
    appellant now concedes that as the respondent made the payment prior to the
    expiry of the notice period ordered by the application judge, the options had
    not expired.

[12]

The
    application judge did not err with respect to the alternate ground on this
    issue, namely, that if necessary, he would grant relief from forfeiture. We
    agree with the respondent that the assertion that this remedy is unavailable
    because the respondent did not strictly comply with the terms of the Option
    Plan is inconsistent with the legal basis for the remedy, namely to relieve a
    party from strict compliance.

4.

Did the application judge err in finding that the appellant had
    discharged his duty to mitigate his claim for wrongful dismissal?

[13]

The
    appellant contends that the respondent should have mitigated his damages by
    accepting employment with Lexmark. Gatti had dismissed the respondent and had
    questioned his integrity. Gatti became a senior officer in the company in which
    the respondent would have been employed. In these circumstances, it was open to
    the application judge to conclude that it was reasonable for the respondent not
    to seek employment with Lexmark.

5.

Did the application judge err in requiring the appellant to purchase the
    respondents options through Claron Holdings Inc., a non-party?

[14]

The
    appellant had purchased the options of the other employee option holders
    through Claron Holdings Inc. so that the employees gains would be considered
    capital gains for income tax purposes. In a supplementary endorsement settling
    the terms of the judgment, the application judge required the appellant to
    acquire the respondents options through Claron Holdings Inc. The appellant
    argues that the application judge erred by making an order on an issue that was
    not pleaded and against a non-party.

[15]

We
    disagree. Doron and Gatti, who beneficially owned and controlled the appellant,
    chose to use Claron Holdings Inc. as a vehicle to satisfy the appellants obligations
    under the Option Plan when dealing with its other employees and there was no
    reason to treat the respondent differently. There was evidence from which the
    application judge was entitled to infer that Doron and Gatti were the
    beneficial owners of and controlled Claron Holdings Inc. The application judge
    did not err in holding that their conduct amounted to oppression under the
    Ontario
Business Corporations Act

R.S.O. 1990, c. B.16.

Disposition

[16]

Accordingly, the appeal is dismissed with costs to the respondent fixed
    at $25,000 inclusive of taxes and disbursements.

Robert
    J. Sharpe J.A.

M.L.
    Benotto J.A.

L.B.
    Roberts J.A.


