First Madison Corp. et al. v. Shabinsky et al., (1992) 58 O.A.C. 241 (CA)

JudgeTarnopolsky, Finlayson and Arbour, JJ.A.
CourtCourt of Appeal (Ontario)
Case DateOctober 14, 1992
JurisdictionOntario
Citations(1992), 58 O.A.C. 241 (CA)

First Madison Corp. v. Shabinsky (1992), 58 O.A.C. 241 (CA)

MLB headnote and full text

First Madison Corporation Limited and Sybil Mirsky (plaintiffs/respondents) v. Sol Shabinsky (defendant/appellant)

(19810/84)

And Between:

Stephen Greenberg and Jocelyne Greenberg (plaintiffs) v. Sol Shabinsky and O.A.C. Holdings Limited, carrying on Business as the Ottawa Athletic Club (defendants)

(19336/84)

And Between:

The Glenview Corporation and Sol Shabinsky (plaintiff/appellant) v. Stephen Greenberg and Secorp Investments Ltd. (defendants/respondents) (42879/83)

And Between:

Sybil Mirsky, Lorne Greenberg, Reesa Greenberg, Stephen Greenberg, Norwood Interest Ltd., Glenview Investments (Ottawa) Ltd., Michael Greenberg Investments Ltd. and M.G.E. Holdings Ltd. (plaintiffs) v. Sol Shabinsky and the Glenview Corporation (defendants)

(File No. 507/89 C9852)

Indexed As: First Madison Corp. et al. v. Shabinsky et al.

Ontario Court of Appeal

Tarnopolsky, Finlayson and Arbour, JJ.A.

October 14, 1992.

Summary:

Shabinsky and Greenberg were joint ven­turers in numerous real estate ventures. Shabinsky was the manager. Later, Green­berg died and Shabinsky became one of the executors of Greenberg's estate. The other executors were also knowledgeable in regard to the local real estate market. The joint ventures continued with Greenberg's interest being held by the estate. First Madison Corp. Ltd. (FM) was owned by Greenberg's estate and Shabinsky. FM was used in the business as a trustee to hold money from various investors. FM, Greenberg's son, Shabinsky's son and two of Shabinsky's personal contacts invested $40,000 in a second mortgage. When the first mortgage went into default, Shabinsky used some of FM's funds to keep it in good standing for a time. Shabinsky also used some of FM's funds, as well as his own, to pay out the interests in the second mortgage held by his son and his personal contacts. Subsequently, the first mortgagee enforced its security and acquired the prop­erty. Shabinsky acquired the property from the first mortgagee and later resold it at a profit. The profit of $16,371 was credited by FM to his shareholder's account. FM, Greenberg's estate and Greenberg's son sued Shabinsky on the grounds, inter alia, that he breached his fiduciary duty as an executor and as a joint venturer by favouring some of the second mortgage investors in the pay out.

The trial court allowed the action and assessed damages. Shabinsky appealed and the plaintiffs cross-appealed.

The Ontario Court of Appeal allowed the appeal in part and dismissed the cross-appeals.

Company Law - Topic 2704

Shareholders - Liability of shareholders to company - Loans to shareholders - Rate of interest - A company had two share­holders, the Greenberg Estate and Shabin­sky - The company made a loan to Sha­binsky that was valued at $26,024.15 on the basis of an 8% rate of interest - The Greenberg Estate and the company later submitted that Shabinsky breached his fiduciary duty and that the interest on the loan should have been what the company was paying the bank on its loans, i.e., the prime + 2% - The recalculated value of the loan was $85,956.19 - The Ontario Court of Appeal dismissed the claim - The 8% interest rate was not related to any breach of fiduciary duty and a company was not obliged to charge shareholders the interest rate it was charged by outside lenders - See para­graphs 63 to 72.

Contracts - Topic 1505

Formation of contract - Consensus or agreement - Essential terms - What con­stitutes - Shabinsky and Cohen owned the Glenview Corporation (Glenview) - Sha­binsky agreed to purchase Cohen's ⅓ interest in Glenview - Greenberg was employed by Glenview as Shabinsky's executive assistant - Greenberg submitted that Shabinsky agreed to sell him Cohen's interest in Glenview - Shabinsky claimed that a binding agreement was never reached - Shabinsky submitted that there was never an agreement as to price or in regard to Greenberg's requirement that his rights as a minority shareholder be pro­tected - Greenberg sued for damages - The Ontario Court of Appeal dismissed the action - See paragraphs 49 to 62.

Equity - Topic 3650

Fiduciary and confidential relationship - Breach of fiduciary relationship - Joint ventures - Shabinsky and Greenberg were involved in real estate joint ventures - Shabinsky was the manager and enjoyed considerable autonomy - Greenberg died -Shabinsky became one of the executors of Greenberg's estate - The joint ventures continued as before except that Green­berg's interest was held by the estate - First Madison (FM) was owned by the estate and Shabinsky - FM, Greenberg's son, Shabinsky's son and two of Sha­bin­sky's personal contacts invested in a sec­ond mortgage - Later, the investment went bad and the estate, FM and Green­berg's son sued Shabinsky for breach of his fiduciary duty as an executor of the estate and as manager - The Ontario Court of Appeal found that Shabinsky breached his fiduciary duty to the mortgage investors - See paragraphs 17 to 47.

Executors and Administrators - Topic 2002

Duties and powers of executors and ad­ministrators - General - Fiduciary duties -[See Equity - Topic 3650 ].

Joint Ventures - Topic 1402

Relations between parties - General - Fiduciary - [See Equity - Topic 3650 ].

Joint Ventures - Topic 1524

Relations between parties - Respecting performance of services - Parties liable - Managers - [See Equity - Topic 3650 ].

Practice - Topic 7456

Costs - Solicitor and client costs - En­titlement to - Executors - Claims against - Shabinsky and Greenberg were involved in real estate joint ventures - Shabinsky was the manager - Greenberg died - Shabinsky became one of the executors of Greenberg's estate - The joint ventures continued as before except that Green­berg's interest was held by the estate - Later, the parties fell out and the benefici­aries et al. alleged breach of fiduciary duty by Shabinsky both as a trustee and as a joint venturer - Shabinsky initially declined to cooperate - However, by the time of the trial, Shabinsky had made significant concessions - The beneficiaries applied for solicitor and client costs - The Ontario Court of Appeal awarded costs at trial to the beneficiaries et al. on a party and party basis - See paragraph 73.

Cases Noticed:

Regal (Hastings) Ltd. v. Gulliver and others, [1967] 2 A.C. 134, refd to. [para. 12].

National Trust v. Osadchuk et al., [1943] S.C.R. 89, refd to. [para. 12].

Peso Silver Mines Ltd. v. Cropper, [1966] S.C.R. 673, refd to. [para. 12].

Harris v. Lindeborg, [1931] S.C.R. 235, consd. [para. 14].

Wonsch Construction Co. et al. v. Danzig Enterprises Ltd. et al. (1990), 42 O.A.C. 195; 1 O.R.(3d) 382 (C.A.), consd. [para. 15].

Guerin v. Canada, [1984] S.C.R. 335; [1984] 6 W.W.R. 481; [1985] 1 C.N.L.R. 120; 55 N.R. 161; 13 D.L.R.(4th) 321; 36 R.P.R. 1; 20 E.T.R. 6; 59 B.C.L.R. 301, dist. [para. 43].

Authors and Works Noticed:

Ellis, Fiduciary Duties in Canada (1988), p. 13-3 [para. 14].

Trietel, The Law of Contract (8th Ed. 1991), pp. 48-49 [para. 59].

Counsel:

John P. Nelligan, Q.C., and Dougald E. Brown, for the appellants Sol Shabinsky and the Glenview Corp.;

David W. Scott, Q.C., and Kevin P. Near­ing, for the respondents.

This appeal was heard on August 20 and 21, 1992, by Tarnopolsky, Finlayson and Arbour, JJ.A., of the Ontario Court of Appeal. The decision of the court was given by Finlayson, J.A., who released the follow­ing judgment on October 14, 1992.

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1 practice notes
  • Chitel v. Bank of Montreal, [2002] O.T.C. 379 (SC)
    • Canada
    • Ontario Superior Court of Justice of Ontario (Canada)
    • April 4, 2001
    ...323 ; 206 A.R. 321 ; 156 W.A.C. 321 ; 152 D.L.R.(4th) 411 , refd to. [para. 165]. First Madison Corp. et al. v. Shabinsky et al. (1992), 58 O.A.C. 241 (C.A.), dist. [para. Harris v. Lindeborg, [1931] S.C.R. 235 , dist. [para. 169]. Wonsch Construction Co. et al. v. Danzig Enterprises Lt......
1 cases
  • Chitel v. Bank of Montreal, [2002] O.T.C. 379 (SC)
    • Canada
    • Ontario Superior Court of Justice of Ontario (Canada)
    • April 4, 2001
    ...323 ; 206 A.R. 321 ; 156 W.A.C. 321 ; 152 D.L.R.(4th) 411 , refd to. [para. 165]. First Madison Corp. et al. v. Shabinsky et al. (1992), 58 O.A.C. 241 (C.A.), dist. [para. Harris v. Lindeborg, [1931] S.C.R. 235 , dist. [para. 169]. Wonsch Construction Co. et al. v. Danzig Enterprises Lt......

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