ONTARIO – Jurisdiction of Superior Court of Justice over oppression cases – The Court does not have continuing jurisdiction to set aside a final order or replace it with an order for a new valuation date. Where the Court has determined an oppression application, including the valuation date and the share value, the order is final before that Court, subject to only a very limited jurisdiction under Rule 59.06. The consequences of allowing a party to reargue a case to obtain a more favourable valuation date under Rule 59.06 would be that orders are not final.

Mudronja v. Mudronja 2023 ONSC 141
2023 ONSC 141 (January 5, 2023)
 ONSJ (Ricchetti RSJ)

Background

The parties were former spouses who held shares in Mareddy Corporation (“Mareddy”), which they incorporated during their marriage. Ms. Mudronja owned 40% of the common shares. Mr. Mudronja owned 60%. Outside the family law proceedings, the parties each commenced applications under the OBCA to separate their interests in Mareddy. (paras. 5-6)

The OBCA proceedings came before Justice Shaw in December 2019. The parties agreed that Mr. Mudronja would buy Ms. Mudronja’s shares, which would resolve the OBCA proceedings. The sole issue was the purchase price. The parties agreed that the valuation date and valuation as at that date would be determined in a two-step judicial process. (paras. 14-17)

In the first stage, Justice Shaw determined the valuation date to be the Mareddy corporate year-end in 2017 following a hearing in June 2020. (para. 26) (Shaw J. decision: 2020 ONSC 7932)

The second stage of the OBCA proceedings, a hearing to determine the fair market value of the shares, came before Justice McGee in April and May 2022. McGee J. presided over a 5-day trial of the valuation issue and determined that the value of Ms. Mudronja’s 40% interest in Mareddy was $1,832,054.60 plus prejudgment interest. (paras. 33 and 34)

At that hearing, Ms. Mudronja sought to have the court change the valuation date; however, the court declined to do so on the basis that the sole issue on the motion was to determine a fair and just valuation for Mareddy. (para. 36) (McGee J. decision: 2022 ONSC 5085)

Rule 59.06 Motion Before RSJ Ricchetti

Ms. Mudronja then brought a motion under Rule 59.06, which was heard by RSJ Ricchetti in December 2022. While the Court agreed that a Rule 59 motion was available in law to the Superior Court to set aside or vary Justice Shaw’s order, RSJ Ricchetti held that any Rule 59.06 motion should have been dealt with before the hearing before Justice McGee, writing: “…such an order, if granted, would render the trial of the issue before J. McGee moot, and unless a new valuation date was set (although there is no evidence on this motion that would allow me to judicially select such a new date), the trial of the issue before J. Shaw would also be moot. Both would have to be re-done.” (paras. 38-40)

RSJ Ricchetti went on to consider the merits of Ms. Mudronja’s motion to vary or set aside the Order of Justice Shaw with respect to the valuation date and for the court to order a new valuation date. The motion was dismissed on the basis that:

1. Orders such as those made by Justices Shaw and McGee are intended to be final, subject only to the very limited jurisdiction of the Superior Court of Justice under Rule 59.06. While a final order is subject to the broader jurisdiction of the appellate court, the SCJ is not a court with appellate jurisdiction regarding such orders. ( 48)
2. The real motivation for the motion was that Ms. Mudronja wanted the court to vary the valuation date to allow her to benefit from the appreciation in value of the commercial property held by the corporation. While Ms. Mudronja took the position before Justice Shaw that the valuation date should be the date of the application was heard, she now sought to have a later valuation date set because the property had increased in value. (58-60)
3. The consequences of accepting Ms. Mudronja’s argument would be that orders are not final. (62)
4. The court does not have continuing jurisdiction over oppressions cases; to hold otherwise would result in the SCJ “usurping appellate jurisdiction after having made decisions on the determination of the valuation date and the trial of the issue in deciding the value of Mareddy on the determined valuation date”. ( 66-67)
5. “There is nothing in the OBCA nor in the Rules of Civil Procedure, which gives this court’s (stet) continued jurisdiction.” (69)

RSJ Ricchetti found no evidentiary basis for Ms. Mudronja’s fraud allegations over the way in which Mr. Mudronja obtained the Shaw order. (para. 72)

The court also found no merit in Ms. Murdonja’s allegations that Mr. Mudronja failed to disclose corporate financial records or other relevant material evidence before Justice Shaw or that such evidence was “deliberately destroyed” on the basis that:

1. The documents complained of were requested by her counsel after the hearing before and decision of Justice Shaw; (74)
2. The documents were in fact disclosed at the hearing before Shaw J. (80-81); and
3. Allegedly “deliberately destroyed” documents did not meet the test for new evidence. Those documents were historical financial statements that were not required to be retained because they were older than 6 years, and the destruction of which Mr. Mudronja acknowledged he authorised prior to commencement of the OBCA proceeding when Ms. Mudronja was a director who could herself have requested them. There was also no evidence that these historic records would have had any bearing on Justice Shaw’s determination of a fair and equitable valuation date (84-85 and 87-92).