SCI Systems Inc. v. Gornitzki Thompson & Little Co. et al., (1998) 110 O.A.C. 160 (DC)

• Judge: Farley, Coo and Chapnik, JJ.
• Court: Ontario Court of Justice General Division (Canada)
• Case Date: June 03, 1998
• Jurisdiction: Ontario
• Citations: (1998), 110 O.A.C. 160 (DC)

SCI Systems v. Gornitzki Thompson (1998), 110 O.A.C. 160 (DC)

MLB headnote and full text

Temp. Cite: [1998] O.A.C. TBEd. JN.003

SCI Systems Inc. (applicant/respondent in appeal) v. Gornitzki Thompson & Little Company Limited and GTL Securities Inc., GTL Trading Limited, GTL Services Limited, Amalog Control Services Inc., John Thompson, Jacob Gornitzki and Paul F. Little (respondents/appellants in appeal)

(Court File No. Div. Ct. 474/97)

Indexed As: SCI Systems Inc. v. Gornitzki Thompson & Little Co. et al.

Ontario Court of Justice

General Division

Divisional Court

Farley, Coo and Chapnik, JJ.

June 5, 1998.

Summary:

SCI Systems transferred shares to GTL Co. and another in exchange for a promissory note in favour of SCI. The note was due on June 28, 1991. GTL was unable to pay the note. SCI obtained default judgment against GTL. SCI applied under s. 248 of the Busi­ness Corporations Act alleging oppressive conduct by GTL. SCI alleged that GTL transferred assets to its three direc­tors/shareholders and other companies owned by them before and after June 28, 1991 and underwent a reorganization. As a result GTL was unable to repay the note.

The Ontario Court (General Division), in a decision reported 29 O.T.C. 148, allowed SCI's application. The court held that the transactions amounted to oppressive conduct. The court ordered the directors and their other companies to pay GTL's indebtedness to SCI. The court awarded SCI costs in supplementary reasons (see 30 O.T.C. 159). The directors and the other companies appealed.

The Ontario Divisional Court dismissed the appeal subject to adjusting the remedy against some of the affiliated companies to reflect the amount of money or money's worth they received from GTL.

Company Law - Topic 3846

Dividends - Bars - Impairment of capital - SCI Systems transferred shares to GTL Co. (GTL) and another in exchange for a promissory note in favour of SCI - The note was due on June 28, 1991 - GTL was unable to pay the note - SCI obtained default judgment against GTL - SCI applied under s. 248 of the Business Cor­porations Act alleging oppressive conduct by GTL - SCI alleged that GTL trans­ferred assets to its three directors/share­holders (dividends) and affiliated com­panies before and after June 28, 1991 and underwent a reorganization - As a result GTL was unable to repay the note - The Ontario Divisional Court affirmed that the transactions amounted to oppressive con­duct - The court ordered the directors and their other companies to pay GTL's in­debtedness to SCI - The award against the affiliated companies was based on the amount of money or money's worth they received from GTL.

Company Law - Topic 4198

Directors - Liability of directors - For ordering or authorizing acts complained of - [See Company Law - Topic 3846 ].

Company Law - Topic 9764

Actions against corporations and directors -Creditors' actions - Complainant defined - SCI Systems transferred shares to GTL Co. (GTL) and another in exchange for a promissory note in favour of SCI - The note was due on June 28, 1991 - In De­cember 1990, GTL paid dividends to its three directors/shareholders - As a result GTL was in a deficit position - GTL also transferred assets to affiliated companies - GTL was unable to repay the note - SCI obtained default judgment against GTL - SCI applied under s. 248 of the Business Corporations Act alleging oppressive con­duct by GTL - An issue arose as to whether SCI was a "complainant" under s. 245 of the Business Corporations Act - The Ontario Divisional Court affirmed that SCI was a complainant - See paragraph 1.

Company Law - Topic 9781

Actions against corporations and directors -Action for oppressive conduct - When available - [See Company Law - Topic 3846 ].

Company Law - Topic 9785

Actions against corporations and directors -Action for oppressive conduct - Oppression, prejudice or disregard of interests - [See Company Law - Topic 3846 ].

Company Law - Topic 9797

Actions against corporations and directors -Action for oppressive conduct - Order for compensation - [See Company Law - Topic 3846 ].

Cases Noticed:

Brant Investments Ltd. et al. v. KeepRite Inc. et al. (1991), 45 O.A.C. 320; 3 O.R. 289 (C.A.), refd to. [para 3].

Naneff v. Con-Crete Holdings Ltd. et al. (1995), 85 O.A.C. 29; 23 O.R.(3d) 481 (C.A.), refd to. [para. 5].

PMSM Investments Ltd. v. Bureau (1995), 25 O.R.(3d) 586 (Gen. Div.), refd to. [para. 5].

Counsel:

Peter R. Jervis and Michael Meredith, for the respondent;

Joel Goldenberg, for the appellants.

This appeal was heard on June 3, 1998, at Toronto, Ontario, by Farley, Coo and Chapnik, JJ., of the Ontario Divisional Court. On June 5, 1998, the court released the follow­ing oral decision.