



COURT OF APPEAL FOR ONTARIO

CITATION: Zhao v. Li, 2020 ONCA 121

DATE: 20200213

DOCKET: C66660

Feldman, Brown and Zarnett JJ.A.

BETWEEN

Rong Jie Zhao

Plaintiff (Appellant)

and

Yuan Li a.k.a. Mark Li

Defendant (Respondent)

Jean-Alexandre De Bousquet, for the appellant

Shini Bhatt, for the respondent

Heard: January 24, 2020

On appeal from the order of Justice Heather McArthur of
    the Superior Court of Justice, dated February 20, 2019, with reasons reported
    at 2019 ONSC 917.

Zarnett J.A.:


I.

Introduction

[1]

The appellant appeals the summary judgment that dismissed
    her action against the respondent as having been commenced after the applicable
    limitation period expired. The resolution of the appeal turns on how the
    limitation period under s. 4 of the
Limitations Act, 2002
, S.O. 2002,
    c. 24, Sched. B,
[1]
applies to oppression remedy claims under the Ontario
Business Corporations
    Act
, R.S.O. 1990, c. B.16 [
OBCA
],
[2]
when the claims arise from a
    series of oppressive acts alleged to have occurred at different times.

[2]

The appellants principal submission is that
    even if some of the oppressive acts or omissions complained of in her statement
    of claim were discoverable more than two years before she commenced her action,
    one of them was not, namely the dissolution of the corporation in which the
    appellant held shares without any authorization from its shareholders or any
    notice to her. She submits that because of this her action, or at least the
    claim about the corporate dissolution, ought to have been allowed to continue
    to trial.

[3]

I agree with the appellant that the corporate
    dissolution claim was not statute barred. However, the motion judges
    conclusion was correct with respect to the other claims in the action  they are
    statute barred. I would therefore allow the appeal in part.


II.

The Facts

[4]

2102097 Ontario Inc. (the Corporation) was
    incorporated in May 2006 pursuant to the
OBCA
. It carried on a dry
    cleaning business under the name Perfect Cleaner from rented premises on
    Mount Pleasant Road in Toronto. The respondent and two other individuals were
    its original shareholders. The respondent owned 42.59% of the shares, Mr. Bing
    Wang owned 17.59%, and a third shareholder owned 39.81%.

[5]

The appellant purchased the third shareholders
    shares, representing a 39.81% interest in the Corporation, for $104,000 in
    February 2010.

[6]

On February 12, 2010, the appellant, the
    respondent, and Mr. Wang, met and reached a number of agreements, including the
    following:

·

The
    appellant had a 39.81% ownership interest in Perfect Cleaner and would assume
    responsibilities for quality control and human resources;

·

The
    respondent had a 42.59% ownership interest in Perfect Cleaner and would serve
    as President and Director. He would be responsible for running the day to day
    operations of the business, including the responsibility of handling all
    financial matters, in the interest of and for the benefit of all owners;

·

The
    third owner, Mr. Wang, had a 17.59% ownership interest in Perfect Cleaner;

·

The
    appellant would have voting rights, receipt of dividends and entitlement to
    the value of Perfect Cleaner upon event of its dissolution or winding up;

·

The
    appellant would be paid wages for her work at the business;

·

The
    consent of 50% or more of the shareholders would be required to pass
    resolutions; and

·

All
    three shareholders expressed an intention to sell the business for $250,000  $300,000,
    if such an offer ever became available.

[7]

The appellant did not receive back any part of her
    investment. She received no dividends or other payments.

[8]

In June 2010, the respondent was charged with
    assault and uttering a death threat against the appellant. As a result, the
    appellant did not attend Perfect Cleaners premises until the respondent signed
    a peace bond in March 2011. Between March and August 2011, the appellant
    regularly attended and checked on the business. Although she testified that the
    business seemed to be operating normally and she did not see any indication of issues
    or problems, the motion judge noted that there were contrary indications.

[9]

In June and July 2011, the respondent told the
    appellant that he had stopped paying rent on the premises because the business
    could not afford it. In the summer of 2011, a representative of the landlord also
    told the appellant that rent was in arrears. The appellant testified that she
    did not believe the respondent or the landlord.

[10]

In July 2011, the appellant was told by the
    respondent of a proposed sale of the business for $20,000 to which she agreed,
    subject to Mr. Wang being consulted. She heard nothing further about the proposed
    sale. The motion judge observed that it made little sense for the appellant to
    have agreed to such a sale unless there were financial difficulties in the
    business.

[11]

On September 3, 2011, the appellant attended
    Perfect Cleaners premises. She found a new dry cleaning business operating
    there under a different name. The person in charge of the new business, described
    by the appellant as the new owner, told her he had purchased the business
    from the landlord.

[12]

In her affidavit, the appellant testified that
    she was confused and shocked by this development. She deposed to a list of
    things that she thought might have occurred consistent with her still receiving
    value from the business including, for example, the business having moved locations
    or having entered into a sublease. However, none of these possibilities were
    based on anything the respondent, with whom she did not communicate, told her.

[13]

Between September and December 2011, the
    appellant inquired of friends about what she could do to find out what happened
    to her business. In February 2012, she learned that she could obtain a corporate
    profile report. On February 25, 2012, she obtained one that revealed the
    respondent had filed Articles of Dissolution for the Corporation on October 12,
    2011. The appellant had not given consent to a corporate dissolution.

[14]

Further, in December 2011, the appellant was
    directed by the Canada Revenue Agency to pay tax on a dividend she allegedly
    received from Perfect Cleaner, although she had received no such dividend. In
    January 2012, she sued the respondent in Small Claims Court and obtained
    judgment against him for the amount of the alleged dividend ($2,883).


III.

This Action

[15]

On October 31, 2013, the appellant commenced
    this action claiming damages, punitive damages, and an accounting and tracing
    of revenues and sale proceeds generated by the Corporation. The statement of claim
    references various legal theories including breach of contract, breach of
    trust, unjust enrichment, and the oppression remedy in the
OBCA.
The
    argument before us proceeded on the oppression remedy basis and there was no
    suggestion the limitation period analysis would be more favorable to the appellant
    if another legal theory were considered. Accordingly, I approach the matter on
    the basis that the oppression remedy is the theory on which the appellant is
    proceeding.

[16]

The statement of claim essentially pleads three
    acts or omissions of the respondent that underpin the claims alleged:

a)

the respondent unilaterally dissolved the business without the approval,
    authority, or knowledge of the appellant (the corporate dissolution claim);

b)

the respondent failed to pay proceeds of any sale or transfer of the
    business, including the value of any assets owned by the business at the time
    of the sale or transfer, to the appellant (the sale claim); and

c)

the respondent failed to account for or pay any profits of the business
    to the appellant since June 2010 (the profits distribution claim).


IV.

The
    Motion Judges Decision

[17]

The respondent moved successfully for summary
    judgment on the sole basis that the action was brought after the expiration of
    the applicable limitation period and was thus statute barred.

[18]

The evidence before the motion judge disclosed
    factual disputes about the merits of the appellants claims. For example, the
    respondent disputed that an unauthorized sale was the reason Perfect Cleaner
    was not operating from its premises as of September 3, 2011. He asserted the
    business had been forced to close for financial reasons. In reaching her
    conclusion that summary judgment should be granted, the motion judge found the
    record to be sufficient to make the necessary findings of fact and apply the
    law to them to decide the limitation period issue. She considered the factual
    issues that were in dispute to be irrelevant to the limitation period issue. Essentially,
    she considered the limitations issue on the assumption that the appellant would
    be able to prove the facts she alleges to support her claims.

[19]

The motion judge applied the test in s. 5(1) of
    the
Limitations Act, 2002
to the question of when the appellants
    claims were discovered or ought to have been discovered.
[3]
She found that by September 3,
    2011, the appellant knew or ought to have known that she had suffered injury,
    loss, or damage because she knew at that point that Perfect Cleaner was gone, a
    new dry cleaning business with new owners was operating at the premises, and
    she had received no money from any sale or transfer of the business or any
    dividends from Perfect Cleaners operations. She also knew or ought to have
    known by that date that the injury, loss, or damage was caused by or
    contributed to by the respondents acts or omissions because he was responsible
    for Perfect Cleaners day to day operations and financial matters. The
    appellant also knew or ought to have known by that date that a legal proceeding
    was the appropriate means to seek a remedy for her injury, loss, or damage.

[20]

Accordingly, the motion judge held that the
    limitation period in s. 4 of the
Limitations Act
,
2002
had expired before the
    action was commenced, and she granted summary judgment dismissing the action.


V.

Analysis

(1)

The Issues

[21]

The appellant submits that the motion judges
    analysis ignores her corporate dissolution claim. She argues that the
    unilateral dissolution of the Corporation was an oppressive act that was not
    discoverable as of September 3, 2011. Articles of Dissolution were filed by the
    respondent only on October 12, 2011. The appellant discovered the dissolution
    in February 2012. The motion judge made no finding that a reasonable person
    would have discovered the dissolution earlier; she made no finding that the
    appellant knew or ought to have known about the dissolution by October 30,
    2011, that is, more than two years before the action was commenced.

[22]

In her factum, the appellants position was
    essentially that the entire action, for all three pleaded acts or omissions,
    ought to have been allowed to proceed. In oral argument, the appellant focused
    on the position that even if other claims in the action were statute barred,
    the corporate dissolution claim ought to be allowed to proceed.

[23]

The respondent argues that the motion judge
    reached the right conclusion and the result below should be unaffected by the
    date of the corporate dissolution or its discoverability.

(2)

Discussion

[24]

Neither counsel cited any case law that dealt
    with the application of the limitation period when an alleged series of
    oppressive acts committed at different times are at issue. During oral argument,
    the panel asked counsel about this courts decision in
Maurice v. Alles
,
    2016 ONCA 287, 130 O.R. (3d) 452, which deals with this question.

[25]

For ease of analysis, I begin with a discussion
    of the principles derived from
Maurice
, and why they apply here. I
    then turn to the question of whether the entire action can proceed because of
    the timing of the corporate dissolution. I then consider the question of
    whether the corporate dissolution claim alone should have been allowed to
    proceed.


(i)

The Principles

[26]

Maurice
concerned an application under the oppression remedy in the
OBCA
that
    had been dismissed on a limitation period basis. The motion judge had found
    that there was oppressive conduct discoverable more than two years before the
    application was commenced. This court reversed the decision, holding that since
    there was oppressive conduct complained of that occurred within two years of
    the commencement of the application, the claim could continue with respect to
    that later conduct.

[27]

In so concluding, the court held that s. 4 of
    the
Limitations Act, 2002
applies to claims under the
OBCA
oppression remedy, and therefore, an action for oppression must be commenced within
    two years of the discovery of a potential claim for oppression: at paras. 3 and
    43. In considering how that rule applied when oppressive conduct is alleged to
    have occurred over a period of time, the court noted a divergence of case law
    regarding the application of the limitation period to cases of ongoing
    oppression: at paras. 36-42. But on the facts, the court held that the series
    of oppressive acts complained of did not constitute ongoing oppression, and accordingly,
    it was not necessary to define the exact limitation period consequence of a
    finding of ongoing oppression. What the court did establish is the approach to
    be followed where singular discrete oppressive acts committed at various times are
    alleged.

[28]

Maurice
stands
    for the proposition that where what is complained of is a series of singular discrete
    acts of oppression over a period of time, claims arising from the acts committed
    or discoverable within two years of the action are not statute barred, even if
    the series of acts commenced, and claims for earlier oppressive acts in the
    series were discoverable, more than two years prior to the commencement of the action.
    A later oppressive act, even if based on or in furtherance of earlier
    oppressive acts, gives rise to a new cause of action because it is new
    oppressive conduct: at paras. 3 and 50-54.

[29]

Although not expressly stated in
Maurice
,
    it follows that claims arising from singular discrete acts of oppression (in a series
    of such acts) that are discoverable more than two years before an action are
    statute barred. As a result, a series of singular discrete acts of oppression that
    stretches over a period of time may result in some claims for oppression
    arising from earlier acts in the series being statute barred while claims arising
    from later acts in the series are not.


(ii)

Is this a case alleging singular discrete oppressive acts?

[30]

In my view, the approach in
Maurice
applies
    because, as was the case there, what is alleged here are singular discrete
    oppressive acts, rather than ongoing oppression. I reach that conclusion for
    the following reasons.

[31]

A failure to distribute profits is the alleged
    act that underpins the profits distribution claim. It is said to have occurred beginning
    in June 2010. A different act, an unauthorized transfer or sale of the business
    without at the time of sale accounting for the proceeds, is the alleged act that
    underpins the sale claim. That act is said to have occurred sometime before
    September 3, 2011. A still different act, the unauthorized dissolution of the
    Corporation, is the alleged act that underpins the corporate dissolution claim.
    It occurred in October 2011.

[32]

These are each singular discrete oppressive
    acts, because they are different acts occurring at different times and because none
    of them is dependent upon either of the others having happened for oppression
    to be said to have occurred. If the respondent had failed to distribute profits
    but neither transferred the business nor dissolved the Corporation, the
    appellant would, upon discovery, have had an oppression claim for failure to
    distribute profits. Similarly, if the respondent had only sold the business and
    kept sale proceeds, or if he had only dissolved the Corporation, the appellant
    would still have an oppression claim for these singular discrete acts, even if
    none of the others occurred. As
Maurice
points out, conduct may
    consist of singular discrete acts of oppression even where  the later
    oppressive conduct was based on or in furtherance of the earlier oppressive conduct:
    at paras. 3 and 48-54.


(iii)

Does the date of the corporate dissolution or when it was
    discovered mean the entire action can proceed?

[33]

Against this backdrop, I turn to the effect of
    the date of the corporate dissolution, and when it was discovered and
    discoverable, on the motion judges conclusions. I agree with the respondent
    that neither the date of the corporate dissolution, nor when it was or ought to
    have been discovered, entails the conclusion that the
entire
action
    should have been viewed as commenced within the limitation period and not
    statute barred.

[34]

The motion judge noted the appellants evidence
    that it was only upon learning, in February 2012, that the respondent had filed
    Articles of Dissolution that she realized that he was no longer operating
    Perfect Cleaner for the interest of the three owners. The motion judges
    findings implicitly reject this evidence in so far as it was advanced to
    support the view that
none
of the three claims in the action were
    statute barred. Even though the motion judge did not deal with whether the
    dissolution was a singular discrete act of oppression occurring after September
    3, 2011, the failure to do so does not undermine her conclusion to the extent
    it applies to the discoverability, more than two years before the action was
    commenced, of the sale claim and the profits distribution claim.

[35]

The motion judge appropriately focused on the
    facts of which the appellant was aware as of September 3, 2011. By then she was
    aware that Perfect Cleaner was no longer operating out of its leased premises
    and a new owner was operating a similar business from its premises. The
    appellant had been provided with no explanation by, or had given no authority
    to, the respondent, who had handled the Corporations day to day operations and
    all financial matters, for any of that to occur. By September 3, 2011, the
    appellant was also aware that she had not received payments of any of
    Corporations profits. The motion judge was entitled to find, from these facts,
    that the sale claim and the profits distribution claim were discoverable by
    September 3, 2011.

[36]

That the sale claim and the profits distribution
    claim are founded on discrete acts of oppression serves to rebut the contention
    that they were only discoverable when the later alleged oppressive act, the
    dissolution of the Corporation, occurred. The appellant did not need to know
    that the Corporation was dissolved to discover that she had a potential claim for
    oppression for an improper transfer or sale of the business, or a potential claim
    for oppression for a failure to pay profits. Whether the Corporation continued
    to exist or not, the sale claim and the profits distribution claim were
    actionable. The limitation period is not extended for acts of oppression that
    are actionable in themselves simply because a later singular discrete act of
    oppression occurs. As
Maurice
provides: Courts must be careful not to
    convert singular oppressive acts into ongoing oppression claims in an effort to
    extend limitation periods. To do so would create a special rule for oppression
    remedy claims: at para. 49.

[37]

Nor is the limitation period extended because a complainant
    hopes that the oppression will be remedied:
Maurice
, at paras. 46-49. The
    motion judge was correct to focus on the alleged failure of the respondent to
    distribute profits and the alleged acts or omissions that resulted in the
    business not operating from its premises, which were known to the appellant as
    of September 3, 2011. And the motion judge was entitled to not give effect to
    the appellants assertions that she hoped to find, notwithstanding that the
    business had been closed without notice or explanation, the business operating
    elsewhere or that the respondents failure to account for profits or any sale
    proceeds might be remedied. This is not a case where the possibilities the
    appellant adverted to were based upon anything represented to her by the
    respondent on or after September 3, 2011.

[38]

Thus, the motion judges determination that the
    appellants claims were discoverable  that the appellant knew or ought to have
    known of the elements in s. 5(1) of the
Limitations Act, 2002
in
    respect of them  and that they should be dismissed as statute barred, should
    stand in respect to the sale claim and profits distribution claim. It was
    grounded in the record and is not the product of any legal error. It is entitled
    to deference from this court:
Hryniak v. Maudlin
, 2014 SCC 7, [2014] 1
    S.C.R. 87, at paras. 80-81;
Kassburg v. Sun Life Assurance

Company
    of Canada
, 2014 ONCA 922, 124 O.R. (3d) 171, at paras. 44 and 52.


(iv)

Is the corporate dissolution claim statute barred?

[39]

The remaining question is whether the claim for
    the alleged oppressive act of unilaterally dissolving the Corporation in which
    the appellant was a shareholder, without notice to or authorization from her, ought
    to have been allowed to continue. The motion judge did not separately address
    this question. In my view, the corporate dissolution claim should have been
    allowed to proceed.

[40]

I do not accept the respondents argument that
    once the appellant was able to discover that any oppressive acts had occurred,
    that started the limitation period clock for future acts of oppression, such
    that the corporate dissolution claim became statute barred when the sale claim
    and profits distribution claims did.

[41]

The respondents argument is rebutted by the
    holding in
Maurice
that where a party engages in a series of
    oppressive acts, singular discrete oppressive acts occurring or only
    discoverable within two years of the commencement of the action are not statute
    barred:
Maurice
, at paras. 3 and 50-53. The court in
Maurice
explained
    why this is so at paras. 52 and 54:

A party that engages in a series of oppressive acts can always
    make the argument that it is all part of the same corporate malfeasance and
    that the limitation period begins to run with the discovery of the first
    oppressive act. In analyzing that conduct, courts must have regard to the
    remedial nature of the oppression remedy and the fact that any threatened or
    actual conduct that is oppressive, or unfairly prejudicial to, or unfairly
    disregards the interests of any complainant can constitute a discrete claim of
    oppression. The oppression remedy section of the
OBCA
is drafted in the
    broadest possible terms to respond to the broadest range of corporate
    malfeasance.



The practical effect of  [such an argument] is that where a
    party is alleged to have acted in an oppressive manner and no oppression remedy
    application is commenced as a consequence, he or she is free to take additional
    oppressive steps in furtherance of, or based upon, the initial oppressive conduct.
    That reasoning is contrary to the broad purposive interpretation that must be
    afforded this statutory cause of action: see
BCE Inc. v. 1976
    Debentureholders
, 2008 SCC 69, [2008] 3 S.C.R. 560, at para.
58
;
Rea v.
    Wildeboer
,
2015 ONCA 373
, 126
    O.R. (3d) 178, at para.
33
; and
Unique
    Broadband Systems, Inc. (Re)
,
2014 ONCA 538
, 121
    O.R. (3d) 81, at para.
107
.

[42]

Just as the other claims in the action do not
    depend, for their viability, on the later corporate dissolution, a claim
    concerning the dissolution of the Corporation without notice or shareholder
    authorization is a claim for a singular discrete act of oppression that is
    actionable even if the sale claim and profits distribution claim are statute
    barred.

[43]

The corporate dissolution claim was not
    discoverable on September 3, 2011 as the corporate dissolution had not yet
    occurred. Nor does it follow from the motion judges findings that the
    corporate dissolution claim should have been discovered before October 30,
    2011.

[44]

In oral argument, the appellant offered some
    basis for why the appellant might have been prejudiced by the corporate
    dissolution independent of any prejudice or loss that is connected to the other
    statute barred claims. There may have been actual or potential value in the
    Corporation that was lost due to the dissolution or assets held on dissolution
    that were wrongfully withheld from shareholders. It would not be appropriate to
    speculate on the remedies that might be available to the appellant if an
    oppressive corporate dissolution is found to have occurred. The respondent
    obtained summary judgment on the basis of the limitation period, not on the
    basis that there was no genuine issue requiring a trial concerning the remedy
    that would be available if any act of oppression were found.


VI.

Conclusion

[45]

Accordingly, I would allow the appeal in part,
    and set aside the summary judgment dismissing the appellants action to the
    extent that the action claims that the dissolution of the Corporation was
    oppressive and seeks remedies available under the oppression remedy in the
OBCA
for that conduct. I would otherwise dismiss the appeal.

[46]

Success on the appeal was divided. I would not
    order any costs.

Released: K.F February 13, 2020

B. Zarnett J.A.

I agree. K. Feldman J.A.

I agree. David Brown J.A.





[1]
Section 4 of the
Limitations Act, 2002
states that no action in respect
    of a claim may be commenced more than two years after the claim was discovered.



[2]
Section 248 of the
OBCA
provides in part that a shareholder or former
    shareholder may apply to the court for a remedy when the powers of the
    directors of a corporation have been exercised in a manner that is oppressive,
    unfairly prejudicial, or that unfairly disregards the interests of the
    shareholder. A broad range of relief is available.



[3]
Section 5(1) of the
Limitations Act, 2002
provides:

A claim is discovered on
    the earlier of,

(a) the day on which the
    person with the claim first knew,

(i) that the injury, loss
    or damage had occurred,

(ii) that the injury, loss
    or damage was caused by or contributed to by an act or omission,

(iii) that the act or
    omission was that of the person against whom the claim is made, and

(iv) that, having regard
    to the nature of the injury, loss or damage, a proceeding would be an
    appropriate means to seek to remedy it; and

(b) the day on which a
    reasonable person with the abilities and in the circumstances of the person
    with the claim first ought to have known of the matters referred to in clause
    (a).


