CITATION: Elsley v. Orescanin, 2015 ONSC 5061 C
Post# of 43064
Posted On: 12/13/2015 8:19:20 PM
CITATION: Elsley v. Orescanin, 2015 ONSC 5061
COURT FILE NO.: 8970/14
DATE: 2015/08/11
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N: .
Sandra Elsley and John Bordynuik Inc.
- and -
Plaintiffs ·
)
)
) Frederick Simon Hawa, for the Plaintiffs
)
)
)
)
)
)
)
)
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
The Honourable Justice T. Maddalena
) Mark Abradjian and Renata Kis, for the
) Defendants
)
)
)
)
)
)
)
)
)
) HEARD at Welland, Ontario:
) February 24, 2015
) February 27,- 2015 (half-day)
) May 15, 2015 (half-day)
RULING ON SUMMARY JUDGMENT MOTIONS
[1] For the various summary judgment motions before the court, the court reviewed 26 volumes of materials, including briefs of authorities and factums.
- 2 -
THE ISSUES OF THE PLAINTIFF/SUMMARY JUDGMENT MOTIONS OF THE PLAINTIFF
[2] The plaintiff Sandra Elsley (hereinafter referred to as "Elsley" seeks a declaratory order that she is the sole or majority shareholder of John Bordynuik Inc. of Delaware and as such is the legal assignee of John Bordynuik Inc. of Ontario's and John Bordynuik Inc. of Delaware's claims.
[3] In the event that Elsley is found not to be the sole or majority shareholder of John Bordynuik Inc. of Delaware, then Elsley seeks an order that she be granted leave to bring a derivative action on behalf of John Bordynuik Inc. of Ontario and of Delaware and an order granting Elsley leave to amend pleadings.
[4] In the event that Elsley is found not to be the sole or majority shareholder of John Bordynuik Inc. of Delaware, then for leave to amend her pleadings and to bring a claim for an oppression action against John Bordynuik Inc. This was not requested in the motion by Eisley, but was requested during submissions on her behalf.
[5] Elsley further seeks an order that Orescanin and/or Bordynuik pay to Eisley
$80 ,000.00 remaining unpaid on a loan made to Orescanin by John Bordynuik Inc. of Ontario. Elsley initially sought recovery of a $200,000.00 loan amount, out conceded during submissions that $120,000.00 had been repaid.
THE ISSUES OF THE DEFENDANT JOHN BORDYNUIK/SUMMARY JUDGMENT MOTIONS OF THE DEFENDANT
[6] The defendant John Bordynuik (hereinafter referred to as "Bordynuik" brings a motion dismissing Elsley's summary judgment motions against him for the recovery of
$200,000.00 related to the Orescanin loan. (Conceded to be $80,000.00 by Elsley)
[7] Bordynuik further brings a motion for summary judgment dismissing the remainder of the Elsley actions against him.
[8] Bordynuik brings a motion declaring Elsley a vexatious litigant.
[9] Bordynuik seeks a declaration that the .plaintiff Elsley has no authority to bring any action on behalf of the plaintiff John Bordynuik Inc., and further an order directing that Eisley has no right or authority to control John Bordynuik Inc. of Delaware.
[1O] Bordynuik seeks an order dismissing Elsley's summary judgment motion giving her authority to act on behalf of John Bordynuik Inc. pursuant to the steps she took to revive and appoint herself as director and officer of John Bordynuik Inc. of Delaware.
[11] Further, Bordynuik seeks an order declaring Elsley is not entitled to act on behalf of John Bordynuik Inc. Delaware or John Bordynuik Inc. of Ontario.
- 3 -
ORESCANIN SUMMARY JUDGMENT MOTION
[12] Further, Mildred Orescanin (hereinafter referred to as "Orescanin" brings a motion dismissing Elsley's summary judgment motion against her for the recovery of
$200,000.00 and granting Orescanin her summary judgment motion as she has repaid in full the $200,000.00 loan for which she obtained a release from Bordynuik.
GENERAL BACKGROUND
[13] The plaintiff Eisley is an individual residing in the City of Niagara Falls, Province of Ontario. The plaintiff Eisley had a romantic relationship with Bordynuik which Eisley says ended in 2009 and Bordynuik states ended in 2008.
[14] The defendant Bordynuik is an individual residing in the City of Niagara Falls, Province of Ontario.
[15] The defendant Orescanin is an individual residing in the City of Niagara Falls, Province of Ontario. She is a close family friend of Bordynuik and is sometimes referred to as "Aunt Millie".
[16] Bordynuik states Orescanin was a debtor to John Bordynuik Inc. of Delaware (hereinafter referred to as "JBI-Del" but the debt was repaid as of July 2011 after which time Orescanin was provided with a full and final release.
[17] All actions against the defendants John Popovacki, Brian Seburn, and Frank Coy have been discontinued by Elsley.
[18] Elsley had commenced a separate action in Ontario against Orescanin bearing Welland Superior Court File No. 8419/14. The above action was consolidated with the within action being 8970/14 for Welland Superior Court by court order dated the 5th of November 2014 .
[19] In 1990 Bordynuik was manager of research and development for the government of Ontario.
[20] Bordynuik incorporated John Bordynuik Inc. of Ontario (hereinafter referred to as "JBI-Ont" for the purpose of carrying on a tape-reading business.
[21] Bordynuik transferred intellectual property in the tape-reading technology to JBI- Ont.
[22] Bordynuik was also the inventor of Plastic #2 Oil ("P20", a process for turning waste pla.stic into ultraclean ultralow sulphur fuel.
- 4-
[23] Eisley was provided with 13.1% of shares of JBI-Ont and Bordynuik had 63%. The rest of the shares were distributed among 250 other shareholders. JBI-Ont is still a corporate entity in Ontario but has not carried on business since February 2009.
[24] Bordynuik wished to take JBI-Ont public on or about October 2008.
[25] Bordynuik later determined to make an initial public offering in the U.S. In approximately February 2009 , shares and assets of JBI-Ont were merged with a State of Delaware company called Expedite 2. The goal was that the Delaware company would eventually become a public company through a process that would comply with the U.S. Securities and Exchange Commission rules and regulations .
[26] The Delaware company was renamed John Bordynuik Inc. of Delaware.
[27] On February 10, 2009 the shareholders of JBI-Ont exchanged their shares of JBI-Ont for shares of JBI-Del.
[28] The JBI-Ont shareholders received a proportionate number of shares of JBI-Del.
[29] Eisley therefore received 7.750 million shares, i.e. 13.1% of the 58,621,250 issued and outstanding shares of JBI-Del. Bordynuik received 36,308,345 shares, i.e. 63% of the issued and entered shares.
[30] Due to a poor economy in 2009, efforts to take JBI-Del public were abandoned. Draft documents were prepared but not finalized .
[31] One of the important draft documents, which will be referred to later, was the Securities and Exchange Commission Form S1-Registration statement under the Securities Act of 1933.
[32] As of April 24, 2009 Bordynuik decided to go public using a pre-existing public company .
[33] Bordynuik acquired 310 Holdings Inc., a Nevada public reporting company, and renamed it John Bordynuik Inc. Nevada (hereinafter referred to as "JBI-Nev".
[34] Bordynuik paid Nicole Wright , the owner of 310 Holdings Inc., $80,000.00 in cash of personal money for 40,250 ,000 shares.
[35] Bordynuik arranged that shareholders of JBI-Del would have the ability to purchase the shares of the new corporation pursuant to the U.S. Securities and Exchange Commission rules and regulations.
[36] JBI-Nev now carries on the P20 process. Bordynuik was employed as its chief of technology. In 2015 Bordynuik now consults to the corporation.
- 5 -
[37] Some of the shareholders of JBI-Nev who had paid for shares at market value, as determined by the U.S. Securities and Exchange Commission rules and regulations, could - purchase a proportionate number of shares in JBI-Nev from the original shareholders of JBI-Nev.
[38] At issue in Elsley's summary judgment motions is Elsley's contention that the original shareholders of JBI-Del were to be provided with a proportionate number of shares in JBI-Nev. Bordynuik disputes this and states that the original shareholders of JBI-Del were not and could not be provided with a proportionate share in JBI-Nev .
[39] At issue further is the interpretation of a settlement agreement dated June 27, 2009 executed by Eisley and Bordynuik which will be referred to later. Also important to this issue is an email sent by Bordynuik dated June 24, 2009, which will also be referred to later.
[40] JBI-Del was administratively dissolved. Eisley revived JBI-Del and commenced acting as president of JBI-Del. She signed a certificate for renewal and revival of charter. Thereafter in approximately January 2014 Eisley appointed herself as officer and director of JBI-Del and JBI-Ont through shareholders and directors resolutions. The resolutions were executed January 1, 2014 and made retroactive to February 28, 2012. This was done after Eisley had received a legal opinion from Steven Goldberg, a lawyer licensed to practice law in the State of Delaware.
THE POSITION OF ELSLEY
[41] Eisley states that she is sole shareholder of JBI-Del or a majority holder of JBI- Del and, as such, had the right to revive JBI-Del from its dissolved status.
[42] Eisley submits, pursuant to the laws of the State of Delaware, she is appointed director and president of JBI-Del and pursuant to the laws of the Province of Ontario she is appointed director and president of JBI-Ont, a wholly-owned subsidiary of JBI Del.
[43] Elsley claims to be an assignee of all assets and causes of action which remained within JBI-Del and JBI-Ont.
[44] Elsley states she is a 13.1% shareholder of JBI-Ont and subsequently a 13,1% shareholder of JBI-Del, and that she should have remained a 13.1% shareholder of JBI Nev.
[45] JBI-Ont was merged with JBI-Del in February 2009 and the JBI-Del shareholders then became proportional interest · owners of JBI-Nev. Elsley claims she was only provided with less than one-half of one percent of the ownership in JBI-Nev, i.e. that is, 300,000 shares in JBI-Nev.
- 6 -
[47] Eisley states she was made aware that she was the controlling shareholder of JBI-Del during 2013, as a result of a legal opinion provided to her by Steven Goldberg, a corporate attorney licensed to practice law in the State of Delaware.
[48] Eisley initially stated she was the only remaining shareholder in JBI-Del but subsequently did acknowledge that other shareholders may have remained as shareholders of JBI-Del. However, she maintains that those shareholders would not affect her control and authority to direct JBI-Del since she, as majority shareholder, owned 7.450 million shares in JBI-Del.
[49] Bordynuik states that he retained ownership of 36,008,345 shares of JBI-Del while Eisley affirms that Bordynuik gave up all these shares in accordance with a settlement agreement of June 27, 2009 .
[50] Eisley states that she was advised by Bordynuik that, despite the 300,000 shares which she obtained in JBI-Nev (which she says represented less than one-half of one percent of the shares) that the balance of the shares in JBI-Nev would come on an intermittent quarterly basis. She states that she was to have owned 13.1% of the shares in JBI-Nev.
[51] Eisley states Bordynuik arranged for all the shareholders of JBI-Del to surrender their shares in JBI-Del and to receive their proportionate shares of JBI-Nev for a nominal sum.
[52] Eisley states she was provided with 300,000 shares in JBI-Nev instead of 7,750,000 . Thus, she argues she gave up 300 ,000 shares of JBI-Del but retained 7,450 ,000 in JBI-Del. Eisley further stated that all shareholders of JBI-Del, whether they took restricted or unrestricted shares of JBI-Nev, were subject to the requirement to surrender shares of JBI-Del so that all shareholde rs would be treated equally. In the settlement agreement dated June 27, 2009, which she also states she does not recall signing, Eisley submits that Bordynuik assured all shareholders that they would remain proportional shareholders of JBI-Nev and applied the same condition to himself.
[53] . Further, as Eisley is the owner of all or most of the shares in JBI-Del, and JBI-Del owns JBI-Ont in its entirety ,she is now entitled to take an assignment of JBI-Ont claims.
Loan to Orescanin
[54] JBi-Ont lent Orescanin $200,000 .00. The loan remained an asset of JBI-Ont and JBI-Del and was therefore assigned to Eisley. After review of documents produced by Orescanin, Eisley conceded during submissions , the amount outstanding was not
$200,000 .00, but $80,000.00.
[55] Elsley states she became aware that the alleged repayment of the loan had been released by Bordynuik, even though it was not repaid when she asserted control over JBI-Del.
- 7-
[56] Eisley claims the alleged $80,000.00 payment remaining on the Orescanin loan has not been directed to JBI-Ont but directed to the account of JBl-lnc. So she claims those monies have been misdirected by Bordynuik to JBI-Nev and not to JBI-Del.
The Goldberg Affidavit
[57] JBI-Del was administratively dissolved on March 1, 2012. Eisley stated that Bordynuik did not maintain JBI-Del and failed to pay the taxes.
[58] Eisley maintained the right to revive it and thus was appointed officer and direct of JBI-Del and of its wholly-owned subsidiary JBI-Ont. She maintains she had power to direct and control these companies, given her majority shareholdings.
[59] Eisley refers to the affidavit of Steven Goldberg, sworn November 4 , 2014. Mr. Goldberg opines that pursuant to Delaware law, Eisley may revive JBI-Del from its dissolved status, discharge John Bordynuik, and appoint herself as officer and director and conduct the affairs of JBI-Del and JBI-Ont, provided she was a majority shareholder.
[60] Eisley maintains that her legal counsel in Delaware had indicated that the resolutions and actions taken by Eisley would qualify her to direct the corporation and appoint herself as officer and director.
PIPE (Private Investment in Public Equity) versus Non-PIPE Participant
[61] Eisley states that John Bordynuik makes an artificial distinction between PIPE shareholders and non-PIPE shareholders of JBI-Del. Eisley maintains that all were common shareholders. Common shares were issued by the treasury of JBI-Del to proportionately compensate all shareholders of JBI-Ont. Eisley indicates this distinction is artificial, discriminatory and prejudicial, and is to the detriment of the shareholders.
[62] Eisley states that despite Bordynuik asserting that non-PIPE shareholders were not eligible for their full proportion of JBI-Nev shares, she alleges in fact Bordynuik himself took his full proportionate shares in the Nevada stock. Even though he was a non-PIPE shareholder, he did get his proportionate share (albeit restricted) of JBI-Nev sh-ares.
[63] Bordynuik asserts that those who h·ad shares prior to the 3 million public offering were not entitled to a proportionate transfer of interest in JBI-Nev. Eisley states this is the fiction that Bordynuik created for his own benefit and for the detriment of Eisley. Eisley asserts that this distinction was made during the course of this litigation to prevent Elsley's control of JBI-Del.
- 8 -
The Limitation Period Defence by Eisley
[64] Eisley maintains that it was not until the beginning of 2012 when she actually realized that she had a claim for 13.1% of JBI-Nev. It was only during the course of the litigation for the 13.1% share of JBI-Nev that she had become aware that she was the sole or majority owner of JBI-Del and JBI-Ont. Therefore, any limitation period should only commence thereafter . Further, Eisley noted that from approximately 2008 until February 2012 Bordynuik was the sole director and officer of JBI-Del and Eisley had no way of knowing that Bordynuik was embarking what she termed as "illegal disposition" of JBI-Del's property.
[65] Eisley further claims she did know of the claim for the $200,000.00 until Orescanin submitted her statement of defence in approximately February of 2012. Further, many of the facts did not become available to Eisley until she revived the company in January 2014.
THE POSITION OF BORDYNUIK
[66] Bordynuik disputes that he gave up his shares in JBI-Del. He states he has always remained the majority shareholder of JBI-Del.
[67] Bordynuik states he did not take a proportionate share of JBI-Nev from his JBI Del shares. He was unable to do so as this was contrary to the U.S. Securities law as he did not acquire shares in JBI-Del on a sufficient cost basis.
[68] In fact, he used personal funds of $80,000.00 to purchase the controlling shares of JBI-Nev. He had restricted shares in JBI-Nev purchased with personal funds. He also took 300,000 shares of JBI-Nev from JBI-Del and kept the rest of the shares in JBI-Del. He states that it is inaccurate to state that he gave up shares of JBI-Del. The settlement agreement, dated June 27, 2009 , stating that, "John Bordynuik affirms these are the same conditions of the restricted stock he owns in 310 Holdings" applies only to the preceding bullet point of that agreement.
[69] Both the email dated June 24, 2009 and the settlement agreement dated June 27, 2009 confirm, according to Bordynuik, that he did not give up shares in JBI-Del.
[70] Bordynuik claims to retain his full shares of JBI-Del, thus Elsley would have no authority to execute the resolutions that she did and/or to revive and take control of JBI Del and JBI-Ont.
The Settlement Agreement
[71] In June 2009 Bordynuik and Eisley attended a mediation in the hopes that any outstanding matters could resolve. In fact the mediation failed, but on or about June 27, 2009 Eisley and Bordynuik executed the settlement agreement. The settlement
- 9 -
agreement was a full and final settlement of any claims that Eisley had against JBI-Del, JBI-Ont, JBI-Nev or Bordynuik.
[72] As part of the agreement, Eisley would choose whether she wished to accept 300 ,000 unrestricted shares of JBI-Nev and retain the rest of her shares in JBI-Del or take restricted shares of JBI-Nev and give up all shares in JBI-Del. It is clear that Eisley chose to take 300,000 unrestricted shares in JBI-Nev, which shares were provided to her. Bordynuik's position is that Eisley has settled and released the defendants , JBI Nev, JBI-Ont and/or JBI-Del from any cause of action relating to shares, and this is set out in the settlement agreement. ·
[73] Bordynuik's position is that this is a full and final agreement , and that Eisley was fully aware at all times of its existence. She cannot deny having knowledge of it as shortly after the agreement she had the involvement of accountants and counsel to assist her with various court proceedings she had undertaken.
[74] Bordynuik maintains further that Eisley was not the majority or sole shareholder of JBI-Del when she purported to appoint herself director and officer of JBI-Del. Bordynuik maintains in all instances that he retained his 36,008,345 shares in JBI-Del.
[75] Bordynuik also states that it is very clear from the share ledger of JBI-Del that there were other shareholders of JBI-Del at the time that Eisley purported to revive it. Nevertheless, she did not call a meeting of shareholders when she unilaterally appointed herself director and officer of JBI-Del.
The Orescanin Loan
[76] Bordynuik maintains that the deposit record encloses an account statement of JBI-Del from Meridian Credit Union that sets out that $120,000.00 of payments were received by JBI-Del and was repaid by Orescanin . Further, the additional $80 ,000 .00 was paid by cheque by Orescanin and the deposit record was produced. Bordynuik states that pursuant to the _ repayment of the full debt by Orescanin, on or about July 7, 2011 , Bordynuik executed · a release on behalf of JBI-Del to Orescanin. Bordynuik states that, regarding the $80,000.00 payment, there is an HSBC bank-stamped confirmation that an $80,000.00 cheque was deposited to JBl's HSBC account noted as received by HSBC on April 29, 2010 . Bordynuik states that other cheques also payable to JBI Inc. were deposited to the Delaware account, so no monies, at any time, were misdirected as alleged by Eisley.
[77] Bordynuik confirms that Orescanin was forgiven the exchange rate shortfall of approximately $1,863.00 .
[78] There is no dispute in the evidence that Bordynuik was officer and director of JBI Ont and JBI-Del as at July 2011 when the release was executed. F_urther Bordynuik notes that the Orescanin release was provided 2.5 years prior to the start of the action . by Eisley.
- 10 -
PIPE versus Non-PIPE Shareholders
[79] Bordynuik was seeking to take JBI-Ont public in approximately October 2008.
[80] In February of 2009 a "share swap" was done so that shares and assets of JBI- Ont were merged with the Delaware company called Expedite 2, which eventually became JBI-Del.
[81] The aim was that JBI-Del would become a public corporation through a process in accordance with the U.S. Securities and Exchange Commission rules and regulations.
[82] JBI-Ont was still a corporation but has not carried on business since February 2009.
[83] In· the context of taking JBI-Del public, Bordynuik had prepared a draft S1 document in accordance with the Securities and Exchange Commission rules and regulations. Later, Bordynuik decided to take the shareholders of Delaware public by purchasing a public ready corporation. He arranged that shareholders of JBI-Del would have an opportunity to purchase shares in the new corporation.
[84] The original shareholders of JBI-Del were not provided with a proportionate share in JBI-Nev.
J
[85] In the summer of 2008 JBI-Del began raising funds for a public offering. The , transaction was $3 million PIPE investment regulated by the U.S. Securities and Exchange Commission. Eisley was involved with JBI-Del at this time.
[86] Not all investors of JBI-Ont or JBI-Del participated in the PIPE but all had the option to do so. Eisley did not participate in the PIPE.
[87] All PIPE participants purchased their shares at a regulated price.
[88] Non-PIPE participants could purchase shares significantly less than the regulated prices.
[89] Therefore the ·non-PIPE shareholders were treated differently to ensure compliance with Securities law.
[90] The PIPE shareholders could cancel JBI-Del shares and purchase unrestricted shares of 310 Holdings Inc. from the original 310 Holdings shareholder . The foundrng shareholders of JBI-Del or JBI-Ont were not permitted to take proportionate unrestricted shares in JBI-Nev as a result of the Securities regulations. Therefore, Bordynuik states that the distinction between PIPE and non-PIPE shareholders is an actual and real distinction and not artificially created by Bordynuik. Bordynuik states that the important consideration in determining if a shareholder could take a proportionate share of JBI-
- 11 -
shareholders of JBI-Del or JBI-Ont were not permitted to take proportionate unrestricted shares in JBI-Nev as a result of the Securities regulations. Therefore, Bordynuik states that the distinction between PIPE and non-PIPE shareholders is an actual and real distinction and not artificially created by Bordynuik. Bordynuik states that the important consideration in determining if a shareholder could take a proportionate share of JBI Nev was their cost base for acquiring the Delaware shares. This was all necessary and real to comply with U.S. securities legislation
[91] Generally , those who purchased shares at a low cost base per share were not allowed proportionate unrestricted shares in JBI-Nev. However , if JBI-Del shares were purchased at a reasonab le cost base then the shareholders could take proportionate JBI-Nev shares.
[92] Elsley's shares in JBI-Del and JBI-Ont were acquired at a low cost base. Bordynuik's shares in JBI-Del were also acquired at a low cost base.
[93] Thus, Eisley could take her proportionate shares of restricted shares in JBI-Nev or take 300,000 unrestricted shares of JBI-Nev. This option is set out in the settlement agreement dated June 27, 2009 .
[94] According to the agreement the acceptance of either of these was a full and final settlement of any issues with Eisley.
[95] Consistent with the Securities and Exchange Commission rules, Eisley knew since the summer of 2009 that she was not entitled to additional shares in JBI-Nev than that was provided to her and which she accepted via the settlement agreement.
Email of June 24, 2009
[96] The email of June 24, 2009 sent by Bordynu1k to all PIPE shareholders explains to the PIPE shareholders how they could receive proportionate JBI-Nev shares. The distinction between those who did participate in the PIPE and those who did not is clearly set out. The email distinguishes that any shareholder who did not participate in the $3 million private investment can only receive a maximum of 300,000 free trading shares of JBI-Nev. The rest of the shares would remain in JBI-Del. Further, the draft Securities and Exchange Commission Form S-1 clearly shows Eisley with a remainder of 7,450,000 shares and Bordynuik with a remainder of 36,008,345 in JBI-Del.
The Goldberg Affidavit
[97] Mr. Goldberg's affidavit is not a proper expert's report. It relies on information received directly from Eisley. Goldberg assumes that the sole or majority shareholder was Elsley when she took steps to revive JBI-Del. The entire opinion is based on evidence provided by Eisley and it is not an independent ·review. It does not have attached to it a certificate of the.role of the expert.
- 12 -
[99] Goldberg assumes, therefore, that,Elsley owns and controls all of JBI-Del and JBI-Ont.
The Limitations Act
[100] Bordynuik states that Elsley sought advice from and retained counsel to represent her interests regarding issues in this lawsuit and others as early as 2009 and 2010. By 2010 she had counsel and was corresponding with counsel on the issues and therefore ought to have been aware of any suggested claims or actions by 2010.
[101] Further, Bordynuik states she had retained counsel to assist her with the settlement agreement of June 27, 2009 . Her first counsel was a Mr. Christopher Little. There were over 30 pages of emails disclosed between her and this counsel between 2010 and 2011.
[102] Also, Bordynuik also states there was information publically available to Elsley regarding various documents registered online as early as February 2009 . This information was accessible to anyone on the web to review at any time. This was on the "EDGAR" website, a U.S., Securities website which publishes information on public companies. Eisley failed to access EDGAR until sometime in 2014 which was some five years after it was available to her. ·
[103] Accordingly, Bordynuik states Eisley is well beyond the two-year limitation period and Elsley's actions against Bordynuik and any of the JBI companies and Orescanin are statute barred having been discovered or reasonably discoverable since June 2009.
LAW AND ANALYSIS
[104] Rule 20.04(2)(a) provides as follows :
20.04(2) The court shall grant summary judgment if,
(a) The court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence;
[105] Rule 20.04(2.1) provides that in determining an issue requiring a trial, the court has additional powers to weigh the evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. The court under the new rule has also discretion to hear oral evidence.
[106] The Supreme Court of Canada in Hryniak v. Mauldin, [2014] SCJ No. 7, has revised the previous summary judgment rules. At para. 66 of Hryniak the Supreme Court of Canada stated as follows:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence
- 13 -
before her, without using the new fact-finding powers. There will be no genuine
r
issue requiring a trial if the summary judgment process provides her with the
evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[107] However, still applicable to the summary judgment rules is that the moving party still has to "lead trump or risk losing". The court can and should consider that the parties will always put their best foot forward and all the evidence is before the court.
Gpldberg Affidavit
[108] The plaintiff Eisley relies on Goldberg as an expert in rendering an opinion as to whether Eisley is sole director and shareholder and president of JBI-Del and JBI-Ont and had the ability to revive JBI-Del.
[109] Goldberg opines that Eisley, as sole director and officer, could properly file the certificate of revival for JBI-Del. Goldberg made the assumption , as noted in his affidavit, that at the time of rendering his opinion, Eisley still had 7,450 ,000 shares of common stock of JBI-Del and that she was the majority shareholder. Goldberg's opinion is also based on the assumption that Bordynuik surrendered all of his shares of JBl-Del for cancellation and received a similar number of shares in JBI-Nev.
[11O] However, the fundamental assumptions made by Goldberg are indeed the very issues before the court on these summary judgment motions. Further, Goldberg was not provided with documents that would or could tend to show that Eisley was not the majority shareholder. For example, he was not provided with the S-1 draft documentation. He was further not provided with the shareholders ledger of JBI-Del which indeed showed other shareholders in addition to Eisley.
[111] Further, there is no expert's certificate attached to the opinion provided by Goldberg, however, this alone is not fatal.
[112] His opinion assumed that the corporation on February 29, 2012 did not have any directors. He further assumed that Elsley could act, provided she held a majority of the issued and outstanding shares entitled to vote, and further that she is either the sole shareholder or holder of the majority of the issued and outstanding shares entitled to
vote.
- 14 -
[113] Given the fundamental assumptions made by Goldberg and the fact that these are at the very centre of the issues before the court, the court attaches little or no weight to the opinion provided by Goldberg.
The Settlement Agreement Dated June 27, 2009
[114] The settlement agreement is central to the issues in the motions before me. The settlement agreement clearly provided two choices to Eisley. She could accept 300,000 unrestricted free trading shares of JBI-Nev and retain the rest of her Delaware shares, or take 7,775,000 restricted shares of JBI-Nev and give up her Delaware shares. There is no dispute that Eisley chose to receive 300,000 unrestricted shares in JBI-Nev which could be freely sold.
[115] Accordingly , based on the agreement , Eisley has settled and released JBI-Nev , JBI-Del and JBI-Ont from any cause or causes of action. This release is set out in the settlement agreement.
[116] If the settlement agreement is valid and binding, then Elsley's action cannot succeed.
[117] The court agrees with the interpretation of the agreement proffered by Bordynuik that where the agreement states , "John Bordynuik affirms these are the same conditions of the restricted stock he owns in 310 Holdings Inc." that that refers to the preceding point which states, "You will not be allowed to OTC your shares and will not be permitted to sell your shares on the open market." He is affirming that these same conditions apply to his shares in JBI-Nev. This is all under the heading noted as: "If you choose the restricted stock, you are hereby advised of the following."
[118] Thus, Bordynuik's already owned shares in JBI-Nev would carry the same restrictions. If Eisley took the restricted shares option, then these are the same restrictions as the shares he already had, but this does not mean he gave up his JBI Del shares.
[119] I am of the view that the agreement was not intended to assert that Bordynuik would give up his JBI-Del shares to obtain JBI-Nev shares, as he already had purchased, with his own funds, JBI-Nev shares directly from Nicole Wright.
[120] It is undisputed in the evidence that Bordynuik personally used $80,000.00 of his own funds to purchase 40,250,000 control affiliate shares in 310 Holdings Inc. which · subsequently became JBI-Nev. ·
[121] There is nothing in the evidence to support Elsley's assertions that shareholders of JBf-Del were to be provided with a proportionate share of JBI-Nev shares , and therefore her entitlement to 7,450 ,000 shares in JBI-Nev, having already received 300,000 unrestricted shares.
- 15 -
PIPE versus Non-PIPE
[122] The evidence which I accept is that in the summer of 2008 JBI-Del began raising funds for a public offering. The transaction was for a 3,000,000 PIPE (Private Investment in Public Equity) regulated by the Securities and Exchange Commission. Not all of the investors in JBI-Del participated in the PIPE; Eisley did not participate. According to the evidence , all PIPE participants purchased shares at a regulated price. Non-PIPE participants purchased shares at significantly less per share. The non-PIPE shareholders were treated differently than the PIPE shareholders due to the Securities and Exchange Commission legislation and regulations. Only the PIPE shareholders were permitted to cancel JBI-Del shares and purchase unrestricted shares of JBI-Nev from the original shareholders.
[123] The founding shareholders of JBI-Ont and JBI-Del were not permitted to take proportional unrestricted shares of JBI-Nev. This was in accordance with the Securities law.
[124] Thus, investors who purchased their shares at a low cost base (below market value) per share were not allowed to take proportionate unrestricted shares in JBI-Nev.
[125] If JBI-Del shares were purchased at market value, the investor was permitted to take proportionate shares in JBI-Nev.
[126] Accord ing to the evidence, Elsley's shares in JBI-Del were acquired at a low cost base. Bordynuik's were also acquired at a low cost base.
[127] Eisley was not part of the PIPE. She was not entitled to take unrestricted shares proportion_ately due to rules _of U.S. Securities and Exchange Commission . Neither was Bordynuik. The difference is that Bordynuik received his shares by paying for them from personal funds.
[128] Therefore, Elsley could take her proportionate share in restricted shares of JBI Nev or take 300 ,000 unrestricted shares of JBI-Nev. There is nothing presented to refute this.
Email June 24, 2009
[129] In addition to the settlement agreement, the email of John Bordynuik, dated June 24, 2009, states to shareholders, that if they "figured out" what he was doing, then "good" for them, but after June 2009 there would be only two options referred to above.
[130] In Bordynuik's email dated June 24, 2009 to other PIPE shareholders he explains why his shares are different. He purchased them before and others could have done the same. However, to do so later would then be contrary to the U.S. Securities and Exchange Commission rules against insider trading .
- 16 -
[131] It is undisputed that Bordynuik purchased 40,250 ,000 shares of JBI-Nev for
$80,000.00 of personal funds in April 2009. These shares in JBI-Nev had restrictions, pursuant to U.S. securities rules, but giving up JBI-Del shares was not one of the restrictions.
[132] If Eisley had purchased her shares in the same way, she would be treated the same.
[133] All non-PIPE shareholders were provided the option to receive restricted shares in the JBI-Nev or to take 300,000 unrestricted freetrading shares. The rest of their shares would remain in JBI-Del.
[134] There is no evidence to support Elsley's claims that all shareholders , whether PIPE or non-PIPE, were required to surrender their shares in JBI-Del when they took JBI-Nev shares.
[135] Eisley also claims Bordynuik took 63% interest from Nicole Wright, so as such was obligated to surrender 63% of shares in JBI-Del. There is no evidence presented by Eisley in support of this assertion. In fact, this interpretation is clearly repudiated by the evidence. If Eisley had any such credible evidence, she would be required to present it. She has not done so. This is not an issue requiring a trial.
[136] There is no basis for Elsley's claim that, having received 300,000 unrestricted free trading shares in 2009 , she is now entitled to 13.1% interest in JBI-Nev. This is not an issue requiring a trial.
Revival of JBI-Del
[137] Eisley did admit in her evidence that if Bordynuik did not transfer or forfeit his shares in JBI-Del she would have no authority to revive the corporation and execute the resolutions. Thus, if Bordynuik is found to be a shareholder of JBI-Del, then Eisley has no status.
[138] Eisley did execute a resolution dated January 1, 2014 whereby she proceeded to cancel Bordynuik's 36,008,345 shares in JI-Del. Strangely, this resolution was not one of the documents provided to Mr. Goldberg for his opinion. Secondly, one may ask, if in fact Eisley was satisfied that Bordynuik did not own any shares, then why is this resolution cancelling his shares even necessary?
[139] In fact, it is very clear from the share ledger and the draft S-1 of JBI-Del that John Bordynuik was the owner of 36,008,345 shares and Sandra Eisley was the owner of 7,450,000 along with other minority shareholders.
[140] Further, Iconclude Eisley had no ability to revive JBI-Del. Bordynuik remained its majority shareholder with 36,008,345 shares.
- 17 -
[141] On the balance of probabilities, and considering the settlement agreement, the email of June 24, 2009 , the share ledgers that were available, the dr:aft S-1 document (clearly showing that after receiving shares in JBI-Nev, Bordynuik was left with 36,008,345 shares in JBI-Del and Elsley with 7,450,000) , I conclude there is no issue requiring a trial concerning these matters.
[142] Further, I am not persuaded that there is any credible evidence to support that Eisley is now entitled to 13.1% of shares in JBI-Nev. If evidence exists, it has surely not been produced. In a summary judgment motion the parties are required to lead all their evidence.
[143] . The settlement agreement is crystal clear on its face. Eisley received the 300,000 unrestricted shares in JBI-Nev in full and final settlement of her claims. I do not find that this is an issue requiring a trial.
[144] Accordingly, the summary judgment motions brought by Eisley are dismissed and the summary judgment motion of Bordynuik in relation to JBI-Del is allowed. Therefore, I find that Bordynuik is the owner of 36,008 ,345 shares in JBI-Del and, as such, is the majority shareholder.
[145] Thus Elsley's motion granting her authority to act on behalf of JBI-Del and JBI Ont is dismissed, and Eisley is not entitled to act on behalf of JBI-Del or JBI-Ont.
ORESCANIN LOAN
[146] Elsley has conceded that $120 ,000.00 of the $200,000 .00 Orescanin loan has been repaid. However, Elsley still claims that $80,000.00 has been misdirected and remains outstanding. The $120,000.00 loan was repaid by bank drafts and $80,000.00 was repaid by cheque. In evidence, there is a bank stamped confirmation that an
$80 ,000.00 cheque was deposited to the account of JBI lnc.'s HSBC account. Eisley states that the $80,000.00 was misdirected to the HSBC account of JBI-Nev instead of JBI-Del. I am satisfied that Orescanin has produced all bank records to confirm that all
$200,000.00 has been repaid. There is no evidence payments have been misdirected. I find that the $80,000.00 was directed to the JBI-Del account.
[147] Further, it is not disputed that Orescanin was forgiven the exchange rate shortfall of $1,863.00.
[148] Based upon all of the evidence and all the bank drafts produced, as well as the cancelled cheque records produced and the deposit ledgers produced, I conclude that the $200,000.00 was fully repaid. There is no evidence produced by Elsley to suggest the debt was not repaid in full. Bordynuik, at all times, had authority to bind the corporations and provide releases to Orescanin. There is no contrary evidence. Therefore, there is no issue requiring a trial.
- 18 -
[149] Therefore, Elsley's claim for the $200,000.00 debt is dismissed. Summary judgment is granted in favour of Orescanin regarding the $200,000.00 repaid loan. In acc.ordance with the full repayment , a full and final release was provided by Bordynuik on July 7, 2011. He had full and undisputed authority at that time to execute that final release which remains in full force and effect.
[150] Further, the Limitations Act is applicable but it is not necessary to detail the particulars as I am persuaded that the full amount of the loan has been repaid and an appropriate release provided. There is no issue requiring a trial.
LIMITATION DEFENCES - CLAIMS AGAINST BORDYNUIK
[151] Elsley and Bordynuik executed the settlement agreement on June 27, 2009. Emails produced by Elsley to various counsel indicate that as early as 201O she knew or ought to have known regarding any potential claims.
[152] She has known since at least 2009 that she is not entitled to additional shares. The evidence suggests Elsley sought legal advice from July 2009 through to November 2011. I find there are 30 pages of emails in evidence between Elsley and Chris Little, her U.S. counsel, between 2010 and 2011 dealing with issues raised by Elsley concerning matters before the court. In addition to Steven Goldberg, she also had a lawyer , Sharon Mitchell, representing her in Delaware. Ms. Mitchell prepared the resolutions regarding JBI-Del and JBI-Ont.
[153] Eisley sold the 300,000 unrestricted shares, but has done nothing since 2009 or 2010. In 2014 she decided to commence litigation claiming entitlement to 7,450,000 shares in JBI-Nev. Eisley has claimed she did not understand the agreement, and she was under duress, at times did not recall signing it and claiming she would be seeking a forensic handwriting expert (not yet done). There is no credible evidence to support such claims. These claims have no air of reality. In effect, she did nothing for approximately three years and in 2014 she moved for summary judgment , well beyond the applicable limitation period.
[154] Furthermore, all JBI-Del and JBI-Nev filings are on the website at EDGAR. Elsley took no steps to review or start actions earlier even though she knew or ought to have known regarding all filings online.
[155] As to Elsley's argument that new facts became available to her, I agree that this does not recommence the limitation period. I find that Elsley could have known or should have known as early as June 2009 or early 2010 regarding any of her potential claims. Yet, she started this action in 2014. Thus her actions are statute-barred as she has not diligently pursued her claims. However, even prior to the limitation issue, I find that there is no genuine issue regarding a trial concerning matters raised herein by Eisley.
- 19 -
[156] Eisley is not the majority shareholder of JBI-Del and without full and majority ownership she cannot make her claims. There is no issue requiring a trial. Her total rights are contingent on Bordynuik not owning his shares in JBI-Del. Thus, given that John Bordynuik is the majority shareholder of JBI-Del, Eisley has no status.
ELSLEY AS VEXATIOUS LITIGANT
[157] Section 140 of the Courts of Justice Act, RSO 1990, c C.43, states as follows:
140. (1) Where a judge of the Superior Court of Justice is satisfied, on application, that a person has persistently and without reasonable grounds,
(a) instituted vexatious proceedings in any court; or
(b) conducted a proceeding in any court in a vexatious manner,
the judge may order that,
(c) no further proceeding be instituted by the person in any court; or
(d) a proceeding previously instituted by the person in any court not be continued ,
except by leave of a judge of the Superior Court of Justice.
[158] It is clear that declaring an individual a vexatious litigant is an unusual order and usually made as a last resort.
[159] In the case of Mohammed v. Goodship, [2013] O.J. No. 3610 the court noted at para. 26 as follows:
In any event, an order under section 140 of the CJA is not made lightly by the court; they are unusual orders which are made as a last resort, where the conduct of the litigant demonstrates that there is a history of vexatious proceedings commenced and behaviour that includes attempts to re litigate matters that have already been the subject of a judicial
determination and failure to pay costs orders made against the litigant.
[160] Further, in the case of Dysart (Township) v. Mohammed, [2007] O.J. No. 4139 , the court recited at para. 20 a summary of vexatious proceedings, which include the following:
(a) The bringing of one or more actions to determine an issue which has already been determined by a court of competent jurisdiction constitutes a vexatious proceeding;
(b) Where it is obvious that an action cannot succeed, or if the action would lead to no possible good, or if no reasonable person can reasonably expect to obtain relief, the action is vexatious ;
- 20 -
(c) Vexatious actions include those brought for an improper purpose, including the harassment and oppression of other parties by multifarious proceedings brought for purposes other than the assertion of legitimate rights;
(d) It is a general characteristic of vexatious proceedings that grounds and issues tend to be rolled forward into subsequent actions and repeated and supplemented, often with actions brought against the lawyers who have acted for or against the litigant in earlier proceedings;
(e) In determining whether proceedings are vexatious , the court must look at the whole history of the matter and not just whether there was originally a good cause of action;
(f) The failure of the person instituting the proceedings to pay the costs of unsuccessful proceedings is one factor to be considered in determining whether proceedings are vexatious;
(g) The respondent's conduct in persistently taking unsuccessful appeals from judicial decisions can be considered vexatious conduct of legal proceedings.
[161] The main focus of the motions before me have dealt with Elsley's relation to and ability to control JBI Del, her shareholdings in JBI-Del and JBI-Nev, and if she has standing as assignee of JBI-Ont's and JBI-Del's claims. The motions have also dealt with the $200,000.00 Orescanin loan which has been repaid and whether Elsley's claims are statute barred.
[162] The multiplicity of various actions commenced by Eisley, for certain, have been referred to and detailed but have not been the centerfold of the evidence before me.
[163] On this issue, therefore , Iconclude that a trial is required.
OPPRESSION REMEDY
[164] Eisley did not initially claim an oppression remedy in her motions before the court. It was only in her submissions at the end, almost as an afterthought, that this relief was claimed.
[165] In my view, she has not provided any credible evidence that would support such a claim.
[166] A summary judgment motion requires that parties put all their evidence forward or risk losing. Eisley has failed to meet the evidentiary burden. Therefore, this claim is therefore dismissed.
- 21 -
500,000 CLAIM BY ELSLEY
[167] Bordynuik brings a cross-motion to dismiss this claim by Elsley against him.
[168] I have already determined Elsley has no status to bring such a claim forward against JBI-Ont or JBI-Del. I am satisfied that the monies in question (i.e. 500,000) were transferred from JBI-Ont to JBl-Del as part of the merger process.
[169] This is not an issue requiring a trial.
[170] Elsley has no status to bring such a claim, and her claim is therefore dismissed.
SUMMARY OF ORDERS MADE
[171] A summary of orders made is as follows:
1. Elsley's claims for summary judgment against Bordynuik are dismissed.
2. Elsley has no standing to bring any claims on behalf of JBI-Ont, JBI-Del or JBI-Nev.
3. Eisley is not a majority shareholder of JBI-Oel.
4. Elsley's summary judgment motion against Orescanin and Bordynuik for
$80,000.00 (originally for $200,000.00) is dismissed.
5. Elsley's request for leave to bring a derivative action or an oppression remedy is dismissed.
6. Orescanin's summary judgment motion for dismissal of Elsley's claim is granted.
7. Bordynuik's summary judgment motions to dismiss Elsley's claims are granted, save and except Bordynuik's claim against Elsley as a vexatious litigant, which shall continue to trial.
COSTS
Released: August 11, 2015
CITATION: Eisley v. Orescanin, 2015 ONSC 5061
COURT.FILE NO.: 8970/14
DATE: 2015/08/11
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Eisley and John Bordynuik Inc.
Plaintiffs
- and -
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Plaintiffs
RULING ON SUMMARY JUDGMENT MOTIONS
Maddalena J.
Released: August 11, 2015
CITATION: Elsley v. Orescanin, 2015 ONSC 6661
COURT FILE NO.: 8970/14
DATE: 2015/10/27
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Eisley and John Bordynuik Inc.
Plaintiffs
- and -
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
ENDORSEMENT ON COSTS
Maddalena J.
Released: October 27 , 2015
- 2 -
[4] The defendants Bordynuik and Orescanin seek costs against the plaintiff Elsley personally, on a substantial indemnity basis, fixed in the amount of $87,821.79 inclusive of disbursements and HST.
[5] The plaintiff Eisley requests that there be no order as to costs.
[6] Rule 57 of the Rules of Civil Procedure sets forth the factors to be considered by the court in exercising its discretion under s.131 of the Courts of Justice Act.
[7] Further, Rule 20.06 also deals with costs sanctions on a summary judgment motion.
[8] Bordynuik and Orescanin were both successful on their respective summary judgment motions and are therefore entitled to costs against the plaintiff personally .
[9] The plaintiff Elsley made serious allegations of improper and fraudulent conduct against the defendants Orescanin and Bordynuik.
[1O] Ultimately, the court found that these allegations were unfounded.
[11] Further, the court found the plaintiff Eisley inappropriately took steps to declare herself to be the sole, controlling, or majority shareholder of JBI-Delaware. She did so without seeking the assistance of the court in the first instance.
[12] Also , she did not, conveniently, submit all documents that were available to her in relation to this claim, once her claim was challenged by Bordynuik. It was left to Bordynuik to disclose further documents which ultimately successfully challenged her claim.
[13] I adopt the reasoning of the Court in Hamilton v. Open Window Bakery Ltd.,
[2004] 1 S.C.R. 303.
[14] At para. 26 of the decision , the Court concludes as follows:
In Young v. Young, [1993] 4 S.C.R. 3, at p. 134, Mclachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs "are generally awarded only where there has been [page 313] reprehensible, scandalous or outrageous conduct on the part of one of the parties". An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient
- 3 -
to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and client scale are appropriate: see, generally , M.M. Orkin, The Law of Costs (2nd ed. (loose-leaf)) , at para. 219. -
[15] Further, I find in this case, as set out by the defendants in their costs submissions, Elsley was specifically advised in her cross-examination held February 9, 2015 (Questions 75 - 77) of the costs consequences of an unproven fraudulent claim. Eisley acknowledged that if the court did not accept her allegations of fraud and misrepresentat ion by the defendants , she would be ordered to pay substantial indemnity costs.
[16] Under all of these circumstances , it is appropriate to order costs against Elsley personally. These costs are to be paid on a substantial indemnity basis. Accordingly , the costs payable by Eisley personally to the defendants on a substantial indemnity basis are fixed in the amount of $87,000 .00 inclusiv of disbrs ments and HST, payable within 30 days.
Released: October 27, 2015
CITATION: Elsley v. Orescanin, 2015 ONSC 6661
COURT FILE NO.: 8970/14
DATE: 2015/10/27
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Elsley and John Bordynuik Inc.
- and -
Plaintiffs
)
)
) Frederick Simon Hawa, for the Plaintiffs
)
)
)
)
)
)
)
)
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
The Honourable Justice T. Maddalena
) Mark Abradjian and Renata Kis, for the
) Defendants
)
)
)
)
)
)
)
)
)
ENDORSEMENT ON COSTS
[1] I heard this summary judgment motion at Welland, Ontario on February 24, February 27, and May 15, 2015.
[2] I delivered written reasons on August 11, 2015.
[3) I have now received written costs submissions from both parties which I have
·reviewed.
COURT FILE NO.: 8970/14
DATE: 2015/08/11
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N: .
Sandra Elsley and John Bordynuik Inc.
- and -
Plaintiffs ·
)
)
) Frederick Simon Hawa, for the Plaintiffs
)
)
)
)
)
)
)
)
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
The Honourable Justice T. Maddalena
) Mark Abradjian and Renata Kis, for the
) Defendants
)
)
)
)
)
)
)
)
)
) HEARD at Welland, Ontario:
) February 24, 2015
) February 27,- 2015 (half-day)
) May 15, 2015 (half-day)
RULING ON SUMMARY JUDGMENT MOTIONS
[1] For the various summary judgment motions before the court, the court reviewed 26 volumes of materials, including briefs of authorities and factums.
- 2 -
THE ISSUES OF THE PLAINTIFF/SUMMARY JUDGMENT MOTIONS OF THE PLAINTIFF
[2] The plaintiff Sandra Elsley (hereinafter referred to as "Elsley" seeks a declaratory order that she is the sole or majority shareholder of John Bordynuik Inc. of Delaware and as such is the legal assignee of John Bordynuik Inc. of Ontario's and John Bordynuik Inc. of Delaware's claims.
[3] In the event that Elsley is found not to be the sole or majority shareholder of John Bordynuik Inc. of Delaware, then Elsley seeks an order that she be granted leave to bring a derivative action on behalf of John Bordynuik Inc. of Ontario and of Delaware and an order granting Elsley leave to amend pleadings.
[4] In the event that Elsley is found not to be the sole or majority shareholder of John Bordynuik Inc. of Delaware, then for leave to amend her pleadings and to bring a claim for an oppression action against John Bordynuik Inc. This was not requested in the motion by Eisley, but was requested during submissions on her behalf.
[5] Elsley further seeks an order that Orescanin and/or Bordynuik pay to Eisley
$80 ,000.00 remaining unpaid on a loan made to Orescanin by John Bordynuik Inc. of Ontario. Elsley initially sought recovery of a $200,000.00 loan amount, out conceded during submissions that $120,000.00 had been repaid.
THE ISSUES OF THE DEFENDANT JOHN BORDYNUIK/SUMMARY JUDGMENT MOTIONS OF THE DEFENDANT
[6] The defendant John Bordynuik (hereinafter referred to as "Bordynuik" brings a motion dismissing Elsley's summary judgment motions against him for the recovery of
$200,000.00 related to the Orescanin loan. (Conceded to be $80,000.00 by Elsley)
[7] Bordynuik further brings a motion for summary judgment dismissing the remainder of the Elsley actions against him.
[8] Bordynuik brings a motion declaring Elsley a vexatious litigant.
[9] Bordynuik seeks a declaration that the .plaintiff Elsley has no authority to bring any action on behalf of the plaintiff John Bordynuik Inc., and further an order directing that Eisley has no right or authority to control John Bordynuik Inc. of Delaware.
[1O] Bordynuik seeks an order dismissing Elsley's summary judgment motion giving her authority to act on behalf of John Bordynuik Inc. pursuant to the steps she took to revive and appoint herself as director and officer of John Bordynuik Inc. of Delaware.
[11] Further, Bordynuik seeks an order declaring Elsley is not entitled to act on behalf of John Bordynuik Inc. Delaware or John Bordynuik Inc. of Ontario.
- 3 -
ORESCANIN SUMMARY JUDGMENT MOTION
[12] Further, Mildred Orescanin (hereinafter referred to as "Orescanin" brings a motion dismissing Elsley's summary judgment motion against her for the recovery of
$200,000.00 and granting Orescanin her summary judgment motion as she has repaid in full the $200,000.00 loan for which she obtained a release from Bordynuik.
GENERAL BACKGROUND
[13] The plaintiff Eisley is an individual residing in the City of Niagara Falls, Province of Ontario. The plaintiff Eisley had a romantic relationship with Bordynuik which Eisley says ended in 2009 and Bordynuik states ended in 2008.
[14] The defendant Bordynuik is an individual residing in the City of Niagara Falls, Province of Ontario.
[15] The defendant Orescanin is an individual residing in the City of Niagara Falls, Province of Ontario. She is a close family friend of Bordynuik and is sometimes referred to as "Aunt Millie".
[16] Bordynuik states Orescanin was a debtor to John Bordynuik Inc. of Delaware (hereinafter referred to as "JBI-Del" but the debt was repaid as of July 2011 after which time Orescanin was provided with a full and final release.
[17] All actions against the defendants John Popovacki, Brian Seburn, and Frank Coy have been discontinued by Elsley.
[18] Elsley had commenced a separate action in Ontario against Orescanin bearing Welland Superior Court File No. 8419/14. The above action was consolidated with the within action being 8970/14 for Welland Superior Court by court order dated the 5th of November 2014 .
[19] In 1990 Bordynuik was manager of research and development for the government of Ontario.
[20] Bordynuik incorporated John Bordynuik Inc. of Ontario (hereinafter referred to as "JBI-Ont" for the purpose of carrying on a tape-reading business.
[21] Bordynuik transferred intellectual property in the tape-reading technology to JBI- Ont.
[22] Bordynuik was also the inventor of Plastic #2 Oil ("P20", a process for turning waste pla.stic into ultraclean ultralow sulphur fuel.
- 4-
[23] Eisley was provided with 13.1% of shares of JBI-Ont and Bordynuik had 63%. The rest of the shares were distributed among 250 other shareholders. JBI-Ont is still a corporate entity in Ontario but has not carried on business since February 2009.
[24] Bordynuik wished to take JBI-Ont public on or about October 2008.
[25] Bordynuik later determined to make an initial public offering in the U.S. In approximately February 2009 , shares and assets of JBI-Ont were merged with a State of Delaware company called Expedite 2. The goal was that the Delaware company would eventually become a public company through a process that would comply with the U.S. Securities and Exchange Commission rules and regulations .
[26] The Delaware company was renamed John Bordynuik Inc. of Delaware.
[27] On February 10, 2009 the shareholders of JBI-Ont exchanged their shares of JBI-Ont for shares of JBI-Del.
[28] The JBI-Ont shareholders received a proportionate number of shares of JBI-Del.
[29] Eisley therefore received 7.750 million shares, i.e. 13.1% of the 58,621,250 issued and outstanding shares of JBI-Del. Bordynuik received 36,308,345 shares, i.e. 63% of the issued and entered shares.
[30] Due to a poor economy in 2009, efforts to take JBI-Del public were abandoned. Draft documents were prepared but not finalized .
[31] One of the important draft documents, which will be referred to later, was the Securities and Exchange Commission Form S1-Registration statement under the Securities Act of 1933.
[32] As of April 24, 2009 Bordynuik decided to go public using a pre-existing public company .
[33] Bordynuik acquired 310 Holdings Inc., a Nevada public reporting company, and renamed it John Bordynuik Inc. Nevada (hereinafter referred to as "JBI-Nev".
[34] Bordynuik paid Nicole Wright , the owner of 310 Holdings Inc., $80,000.00 in cash of personal money for 40,250 ,000 shares.
[35] Bordynuik arranged that shareholders of JBI-Del would have the ability to purchase the shares of the new corporation pursuant to the U.S. Securities and Exchange Commission rules and regulations.
[36] JBI-Nev now carries on the P20 process. Bordynuik was employed as its chief of technology. In 2015 Bordynuik now consults to the corporation.
- 5 -
[37] Some of the shareholders of JBI-Nev who had paid for shares at market value, as determined by the U.S. Securities and Exchange Commission rules and regulations, could - purchase a proportionate number of shares in JBI-Nev from the original shareholders of JBI-Nev.
[38] At issue in Elsley's summary judgment motions is Elsley's contention that the original shareholders of JBI-Del were to be provided with a proportionate number of shares in JBI-Nev. Bordynuik disputes this and states that the original shareholders of JBI-Del were not and could not be provided with a proportionate share in JBI-Nev .
[39] At issue further is the interpretation of a settlement agreement dated June 27, 2009 executed by Eisley and Bordynuik which will be referred to later. Also important to this issue is an email sent by Bordynuik dated June 24, 2009, which will also be referred to later.
[40] JBI-Del was administratively dissolved. Eisley revived JBI-Del and commenced acting as president of JBI-Del. She signed a certificate for renewal and revival of charter. Thereafter in approximately January 2014 Eisley appointed herself as officer and director of JBI-Del and JBI-Ont through shareholders and directors resolutions. The resolutions were executed January 1, 2014 and made retroactive to February 28, 2012. This was done after Eisley had received a legal opinion from Steven Goldberg, a lawyer licensed to practice law in the State of Delaware.
THE POSITION OF ELSLEY
[41] Eisley states that she is sole shareholder of JBI-Del or a majority holder of JBI- Del and, as such, had the right to revive JBI-Del from its dissolved status.
[42] Eisley submits, pursuant to the laws of the State of Delaware, she is appointed director and president of JBI-Del and pursuant to the laws of the Province of Ontario she is appointed director and president of JBI-Ont, a wholly-owned subsidiary of JBI Del.
[43] Elsley claims to be an assignee of all assets and causes of action which remained within JBI-Del and JBI-Ont.
[44] Elsley states she is a 13.1% shareholder of JBI-Ont and subsequently a 13,1% shareholder of JBI-Del, and that she should have remained a 13.1% shareholder of JBI Nev.
[45] JBI-Ont was merged with JBI-Del in February 2009 and the JBI-Del shareholders then became proportional interest · owners of JBI-Nev. Elsley claims she was only provided with less than one-half of one percent of the ownership in JBI-Nev, i.e. that is, 300,000 shares in JBI-Nev.
- 6 -
[47] Eisley states she was made aware that she was the controlling shareholder of JBI-Del during 2013, as a result of a legal opinion provided to her by Steven Goldberg, a corporate attorney licensed to practice law in the State of Delaware.
[48] Eisley initially stated she was the only remaining shareholder in JBI-Del but subsequently did acknowledge that other shareholders may have remained as shareholders of JBI-Del. However, she maintains that those shareholders would not affect her control and authority to direct JBI-Del since she, as majority shareholder, owned 7.450 million shares in JBI-Del.
[49] Bordynuik states that he retained ownership of 36,008,345 shares of JBI-Del while Eisley affirms that Bordynuik gave up all these shares in accordance with a settlement agreement of June 27, 2009 .
[50] Eisley states that she was advised by Bordynuik that, despite the 300,000 shares which she obtained in JBI-Nev (which she says represented less than one-half of one percent of the shares) that the balance of the shares in JBI-Nev would come on an intermittent quarterly basis. She states that she was to have owned 13.1% of the shares in JBI-Nev.
[51] Eisley states Bordynuik arranged for all the shareholders of JBI-Del to surrender their shares in JBI-Del and to receive their proportionate shares of JBI-Nev for a nominal sum.
[52] Eisley states she was provided with 300,000 shares in JBI-Nev instead of 7,750,000 . Thus, she argues she gave up 300 ,000 shares of JBI-Del but retained 7,450 ,000 in JBI-Del. Eisley further stated that all shareholders of JBI-Del, whether they took restricted or unrestricted shares of JBI-Nev, were subject to the requirement to surrender shares of JBI-Del so that all shareholde rs would be treated equally. In the settlement agreement dated June 27, 2009, which she also states she does not recall signing, Eisley submits that Bordynuik assured all shareholders that they would remain proportional shareholders of JBI-Nev and applied the same condition to himself.
[53] . Further, as Eisley is the owner of all or most of the shares in JBI-Del, and JBI-Del owns JBI-Ont in its entirety ,she is now entitled to take an assignment of JBI-Ont claims.
Loan to Orescanin
[54] JBi-Ont lent Orescanin $200,000 .00. The loan remained an asset of JBI-Ont and JBI-Del and was therefore assigned to Eisley. After review of documents produced by Orescanin, Eisley conceded during submissions , the amount outstanding was not
$200,000 .00, but $80,000.00.
[55] Elsley states she became aware that the alleged repayment of the loan had been released by Bordynuik, even though it was not repaid when she asserted control over JBI-Del.
- 7-
[56] Eisley claims the alleged $80,000.00 payment remaining on the Orescanin loan has not been directed to JBI-Ont but directed to the account of JBl-lnc. So she claims those monies have been misdirected by Bordynuik to JBI-Nev and not to JBI-Del.
The Goldberg Affidavit
[57] JBI-Del was administratively dissolved on March 1, 2012. Eisley stated that Bordynuik did not maintain JBI-Del and failed to pay the taxes.
[58] Eisley maintained the right to revive it and thus was appointed officer and direct of JBI-Del and of its wholly-owned subsidiary JBI-Ont. She maintains she had power to direct and control these companies, given her majority shareholdings.
[59] Eisley refers to the affidavit of Steven Goldberg, sworn November 4 , 2014. Mr. Goldberg opines that pursuant to Delaware law, Eisley may revive JBI-Del from its dissolved status, discharge John Bordynuik, and appoint herself as officer and director and conduct the affairs of JBI-Del and JBI-Ont, provided she was a majority shareholder.
[60] Eisley maintains that her legal counsel in Delaware had indicated that the resolutions and actions taken by Eisley would qualify her to direct the corporation and appoint herself as officer and director.
PIPE (Private Investment in Public Equity) versus Non-PIPE Participant
[61] Eisley states that John Bordynuik makes an artificial distinction between PIPE shareholders and non-PIPE shareholders of JBI-Del. Eisley maintains that all were common shareholders. Common shares were issued by the treasury of JBI-Del to proportionately compensate all shareholders of JBI-Ont. Eisley indicates this distinction is artificial, discriminatory and prejudicial, and is to the detriment of the shareholders.
[62] Eisley states that despite Bordynuik asserting that non-PIPE shareholders were not eligible for their full proportion of JBI-Nev shares, she alleges in fact Bordynuik himself took his full proportionate shares in the Nevada stock. Even though he was a non-PIPE shareholder, he did get his proportionate share (albeit restricted) of JBI-Nev sh-ares.
[63] Bordynuik asserts that those who h·ad shares prior to the 3 million public offering were not entitled to a proportionate transfer of interest in JBI-Nev. Eisley states this is the fiction that Bordynuik created for his own benefit and for the detriment of Eisley. Eisley asserts that this distinction was made during the course of this litigation to prevent Elsley's control of JBI-Del.
- 8 -
The Limitation Period Defence by Eisley
[64] Eisley maintains that it was not until the beginning of 2012 when she actually realized that she had a claim for 13.1% of JBI-Nev. It was only during the course of the litigation for the 13.1% share of JBI-Nev that she had become aware that she was the sole or majority owner of JBI-Del and JBI-Ont. Therefore, any limitation period should only commence thereafter . Further, Eisley noted that from approximately 2008 until February 2012 Bordynuik was the sole director and officer of JBI-Del and Eisley had no way of knowing that Bordynuik was embarking what she termed as "illegal disposition" of JBI-Del's property.
[65] Eisley further claims she did know of the claim for the $200,000.00 until Orescanin submitted her statement of defence in approximately February of 2012. Further, many of the facts did not become available to Eisley until she revived the company in January 2014.
THE POSITION OF BORDYNUIK
[66] Bordynuik disputes that he gave up his shares in JBI-Del. He states he has always remained the majority shareholder of JBI-Del.
[67] Bordynuik states he did not take a proportionate share of JBI-Nev from his JBI Del shares. He was unable to do so as this was contrary to the U.S. Securities law as he did not acquire shares in JBI-Del on a sufficient cost basis.
[68] In fact, he used personal funds of $80,000.00 to purchase the controlling shares of JBI-Nev. He had restricted shares in JBI-Nev purchased with personal funds. He also took 300,000 shares of JBI-Nev from JBI-Del and kept the rest of the shares in JBI-Del. He states that it is inaccurate to state that he gave up shares of JBI-Del. The settlement agreement, dated June 27, 2009 , stating that, "John Bordynuik affirms these are the same conditions of the restricted stock he owns in 310 Holdings" applies only to the preceding bullet point of that agreement.
[69] Both the email dated June 24, 2009 and the settlement agreement dated June 27, 2009 confirm, according to Bordynuik, that he did not give up shares in JBI-Del.
[70] Bordynuik claims to retain his full shares of JBI-Del, thus Elsley would have no authority to execute the resolutions that she did and/or to revive and take control of JBI Del and JBI-Ont.
The Settlement Agreement
[71] In June 2009 Bordynuik and Eisley attended a mediation in the hopes that any outstanding matters could resolve. In fact the mediation failed, but on or about June 27, 2009 Eisley and Bordynuik executed the settlement agreement. The settlement
- 9 -
agreement was a full and final settlement of any claims that Eisley had against JBI-Del, JBI-Ont, JBI-Nev or Bordynuik.
[72] As part of the agreement, Eisley would choose whether she wished to accept 300 ,000 unrestricted shares of JBI-Nev and retain the rest of her shares in JBI-Del or take restricted shares of JBI-Nev and give up all shares in JBI-Del. It is clear that Eisley chose to take 300,000 unrestricted shares in JBI-Nev, which shares were provided to her. Bordynuik's position is that Eisley has settled and released the defendants , JBI Nev, JBI-Ont and/or JBI-Del from any cause of action relating to shares, and this is set out in the settlement agreement. ·
[73] Bordynuik's position is that this is a full and final agreement , and that Eisley was fully aware at all times of its existence. She cannot deny having knowledge of it as shortly after the agreement she had the involvement of accountants and counsel to assist her with various court proceedings she had undertaken.
[74] Bordynuik maintains further that Eisley was not the majority or sole shareholder of JBI-Del when she purported to appoint herself director and officer of JBI-Del. Bordynuik maintains in all instances that he retained his 36,008,345 shares in JBI-Del.
[75] Bordynuik also states that it is very clear from the share ledger of JBI-Del that there were other shareholders of JBI-Del at the time that Eisley purported to revive it. Nevertheless, she did not call a meeting of shareholders when she unilaterally appointed herself director and officer of JBI-Del.
The Orescanin Loan
[76] Bordynuik maintains that the deposit record encloses an account statement of JBI-Del from Meridian Credit Union that sets out that $120,000.00 of payments were received by JBI-Del and was repaid by Orescanin . Further, the additional $80 ,000 .00 was paid by cheque by Orescanin and the deposit record was produced. Bordynuik states that pursuant to the _ repayment of the full debt by Orescanin, on or about July 7, 2011 , Bordynuik executed · a release on behalf of JBI-Del to Orescanin. Bordynuik states that, regarding the $80,000.00 payment, there is an HSBC bank-stamped confirmation that an $80,000.00 cheque was deposited to JBl's HSBC account noted as received by HSBC on April 29, 2010 . Bordynuik states that other cheques also payable to JBI Inc. were deposited to the Delaware account, so no monies, at any time, were misdirected as alleged by Eisley.
[77] Bordynuik confirms that Orescanin was forgiven the exchange rate shortfall of approximately $1,863.00 .
[78] There is no dispute in the evidence that Bordynuik was officer and director of JBI Ont and JBI-Del as at July 2011 when the release was executed. F_urther Bordynuik notes that the Orescanin release was provided 2.5 years prior to the start of the action . by Eisley.
- 10 -
PIPE versus Non-PIPE Shareholders
[79] Bordynuik was seeking to take JBI-Ont public in approximately October 2008.
[80] In February of 2009 a "share swap" was done so that shares and assets of JBI- Ont were merged with the Delaware company called Expedite 2, which eventually became JBI-Del.
[81] The aim was that JBI-Del would become a public corporation through a process in accordance with the U.S. Securities and Exchange Commission rules and regulations.
[82] JBI-Ont was still a corporation but has not carried on business since February 2009.
[83] In· the context of taking JBI-Del public, Bordynuik had prepared a draft S1 document in accordance with the Securities and Exchange Commission rules and regulations. Later, Bordynuik decided to take the shareholders of Delaware public by purchasing a public ready corporation. He arranged that shareholders of JBI-Del would have an opportunity to purchase shares in the new corporation.
[84] The original shareholders of JBI-Del were not provided with a proportionate share in JBI-Nev.
J
[85] In the summer of 2008 JBI-Del began raising funds for a public offering. The , transaction was $3 million PIPE investment regulated by the U.S. Securities and Exchange Commission. Eisley was involved with JBI-Del at this time.
[86] Not all investors of JBI-Ont or JBI-Del participated in the PIPE but all had the option to do so. Eisley did not participate in the PIPE.
[87] All PIPE participants purchased their shares at a regulated price.
[88] Non-PIPE participants could purchase shares significantly less than the regulated prices.
[89] Therefore the ·non-PIPE shareholders were treated differently to ensure compliance with Securities law.
[90] The PIPE shareholders could cancel JBI-Del shares and purchase unrestricted shares of 310 Holdings Inc. from the original 310 Holdings shareholder . The foundrng shareholders of JBI-Del or JBI-Ont were not permitted to take proportionate unrestricted shares in JBI-Nev as a result of the Securities regulations. Therefore, Bordynuik states that the distinction between PIPE and non-PIPE shareholders is an actual and real distinction and not artificially created by Bordynuik. Bordynuik states that the important consideration in determining if a shareholder could take a proportionate share of JBI-
- 11 -
shareholders of JBI-Del or JBI-Ont were not permitted to take proportionate unrestricted shares in JBI-Nev as a result of the Securities regulations. Therefore, Bordynuik states that the distinction between PIPE and non-PIPE shareholders is an actual and real distinction and not artificially created by Bordynuik. Bordynuik states that the important consideration in determining if a shareholder could take a proportionate share of JBI Nev was their cost base for acquiring the Delaware shares. This was all necessary and real to comply with U.S. securities legislation
[91] Generally , those who purchased shares at a low cost base per share were not allowed proportionate unrestricted shares in JBI-Nev. However , if JBI-Del shares were purchased at a reasonab le cost base then the shareholders could take proportionate JBI-Nev shares.
[92] Elsley's shares in JBI-Del and JBI-Ont were acquired at a low cost base. Bordynuik's shares in JBI-Del were also acquired at a low cost base.
[93] Thus, Eisley could take her proportionate shares of restricted shares in JBI-Nev or take 300,000 unrestricted shares of JBI-Nev. This option is set out in the settlement agreement dated June 27, 2009 .
[94] According to the agreement the acceptance of either of these was a full and final settlement of any issues with Eisley.
[95] Consistent with the Securities and Exchange Commission rules, Eisley knew since the summer of 2009 that she was not entitled to additional shares in JBI-Nev than that was provided to her and which she accepted via the settlement agreement.
Email of June 24, 2009
[96] The email of June 24, 2009 sent by Bordynu1k to all PIPE shareholders explains to the PIPE shareholders how they could receive proportionate JBI-Nev shares. The distinction between those who did participate in the PIPE and those who did not is clearly set out. The email distinguishes that any shareholder who did not participate in the $3 million private investment can only receive a maximum of 300,000 free trading shares of JBI-Nev. The rest of the shares would remain in JBI-Del. Further, the draft Securities and Exchange Commission Form S-1 clearly shows Eisley with a remainder of 7,450,000 shares and Bordynuik with a remainder of 36,008,345 in JBI-Del.
The Goldberg Affidavit
[97] Mr. Goldberg's affidavit is not a proper expert's report. It relies on information received directly from Eisley. Goldberg assumes that the sole or majority shareholder was Elsley when she took steps to revive JBI-Del. The entire opinion is based on evidence provided by Eisley and it is not an independent ·review. It does not have attached to it a certificate of the.role of the expert.
- 12 -
[99] Goldberg assumes, therefore, that,Elsley owns and controls all of JBI-Del and JBI-Ont.
The Limitations Act
[100] Bordynuik states that Elsley sought advice from and retained counsel to represent her interests regarding issues in this lawsuit and others as early as 2009 and 2010. By 2010 she had counsel and was corresponding with counsel on the issues and therefore ought to have been aware of any suggested claims or actions by 2010.
[101] Further, Bordynuik states she had retained counsel to assist her with the settlement agreement of June 27, 2009 . Her first counsel was a Mr. Christopher Little. There were over 30 pages of emails disclosed between her and this counsel between 2010 and 2011.
[102] Also, Bordynuik also states there was information publically available to Elsley regarding various documents registered online as early as February 2009 . This information was accessible to anyone on the web to review at any time. This was on the "EDGAR" website, a U.S., Securities website which publishes information on public companies. Eisley failed to access EDGAR until sometime in 2014 which was some five years after it was available to her. ·
[103] Accordingly, Bordynuik states Eisley is well beyond the two-year limitation period and Elsley's actions against Bordynuik and any of the JBI companies and Orescanin are statute barred having been discovered or reasonably discoverable since June 2009.
LAW AND ANALYSIS
[104] Rule 20.04(2)(a) provides as follows :
20.04(2) The court shall grant summary judgment if,
(a) The court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence;
[105] Rule 20.04(2.1) provides that in determining an issue requiring a trial, the court has additional powers to weigh the evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. The court under the new rule has also discretion to hear oral evidence.
[106] The Supreme Court of Canada in Hryniak v. Mauldin, [2014] SCJ No. 7, has revised the previous summary judgment rules. At para. 66 of Hryniak the Supreme Court of Canada stated as follows:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence
- 13 -
before her, without using the new fact-finding powers. There will be no genuine
r
issue requiring a trial if the summary judgment process provides her with the
evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[107] However, still applicable to the summary judgment rules is that the moving party still has to "lead trump or risk losing". The court can and should consider that the parties will always put their best foot forward and all the evidence is before the court.
Gpldberg Affidavit
[108] The plaintiff Eisley relies on Goldberg as an expert in rendering an opinion as to whether Eisley is sole director and shareholder and president of JBI-Del and JBI-Ont and had the ability to revive JBI-Del.
[109] Goldberg opines that Eisley, as sole director and officer, could properly file the certificate of revival for JBI-Del. Goldberg made the assumption , as noted in his affidavit, that at the time of rendering his opinion, Eisley still had 7,450 ,000 shares of common stock of JBI-Del and that she was the majority shareholder. Goldberg's opinion is also based on the assumption that Bordynuik surrendered all of his shares of JBl-Del for cancellation and received a similar number of shares in JBI-Nev.
[11O] However, the fundamental assumptions made by Goldberg are indeed the very issues before the court on these summary judgment motions. Further, Goldberg was not provided with documents that would or could tend to show that Eisley was not the majority shareholder. For example, he was not provided with the S-1 draft documentation. He was further not provided with the shareholders ledger of JBI-Del which indeed showed other shareholders in addition to Eisley.
[111] Further, there is no expert's certificate attached to the opinion provided by Goldberg, however, this alone is not fatal.
[112] His opinion assumed that the corporation on February 29, 2012 did not have any directors. He further assumed that Elsley could act, provided she held a majority of the issued and outstanding shares entitled to vote, and further that she is either the sole shareholder or holder of the majority of the issued and outstanding shares entitled to
vote.
- 14 -
[113] Given the fundamental assumptions made by Goldberg and the fact that these are at the very centre of the issues before the court, the court attaches little or no weight to the opinion provided by Goldberg.
The Settlement Agreement Dated June 27, 2009
[114] The settlement agreement is central to the issues in the motions before me. The settlement agreement clearly provided two choices to Eisley. She could accept 300,000 unrestricted free trading shares of JBI-Nev and retain the rest of her Delaware shares, or take 7,775,000 restricted shares of JBI-Nev and give up her Delaware shares. There is no dispute that Eisley chose to receive 300,000 unrestricted shares in JBI-Nev which could be freely sold.
[115] Accordingly , based on the agreement , Eisley has settled and released JBI-Nev , JBI-Del and JBI-Ont from any cause or causes of action. This release is set out in the settlement agreement.
[116] If the settlement agreement is valid and binding, then Elsley's action cannot succeed.
[117] The court agrees with the interpretation of the agreement proffered by Bordynuik that where the agreement states , "John Bordynuik affirms these are the same conditions of the restricted stock he owns in 310 Holdings Inc." that that refers to the preceding point which states, "You will not be allowed to OTC your shares and will not be permitted to sell your shares on the open market." He is affirming that these same conditions apply to his shares in JBI-Nev. This is all under the heading noted as: "If you choose the restricted stock, you are hereby advised of the following."
[118] Thus, Bordynuik's already owned shares in JBI-Nev would carry the same restrictions. If Eisley took the restricted shares option, then these are the same restrictions as the shares he already had, but this does not mean he gave up his JBI Del shares.
[119] I am of the view that the agreement was not intended to assert that Bordynuik would give up his JBI-Del shares to obtain JBI-Nev shares, as he already had purchased, with his own funds, JBI-Nev shares directly from Nicole Wright.
[120] It is undisputed in the evidence that Bordynuik personally used $80,000.00 of his own funds to purchase 40,250,000 control affiliate shares in 310 Holdings Inc. which · subsequently became JBI-Nev. ·
[121] There is nothing in the evidence to support Elsley's assertions that shareholders of JBf-Del were to be provided with a proportionate share of JBI-Nev shares , and therefore her entitlement to 7,450 ,000 shares in JBI-Nev, having already received 300,000 unrestricted shares.
- 15 -
PIPE versus Non-PIPE
[122] The evidence which I accept is that in the summer of 2008 JBI-Del began raising funds for a public offering. The transaction was for a 3,000,000 PIPE (Private Investment in Public Equity) regulated by the Securities and Exchange Commission. Not all of the investors in JBI-Del participated in the PIPE; Eisley did not participate. According to the evidence , all PIPE participants purchased shares at a regulated price. Non-PIPE participants purchased shares at significantly less per share. The non-PIPE shareholders were treated differently than the PIPE shareholders due to the Securities and Exchange Commission legislation and regulations. Only the PIPE shareholders were permitted to cancel JBI-Del shares and purchase unrestricted shares of JBI-Nev from the original shareholders.
[123] The founding shareholders of JBI-Ont and JBI-Del were not permitted to take proportional unrestricted shares of JBI-Nev. This was in accordance with the Securities law.
[124] Thus, investors who purchased their shares at a low cost base (below market value) per share were not allowed to take proportionate unrestricted shares in JBI-Nev.
[125] If JBI-Del shares were purchased at market value, the investor was permitted to take proportionate shares in JBI-Nev.
[126] Accord ing to the evidence, Elsley's shares in JBI-Del were acquired at a low cost base. Bordynuik's were also acquired at a low cost base.
[127] Eisley was not part of the PIPE. She was not entitled to take unrestricted shares proportion_ately due to rules _of U.S. Securities and Exchange Commission . Neither was Bordynuik. The difference is that Bordynuik received his shares by paying for them from personal funds.
[128] Therefore, Elsley could take her proportionate share in restricted shares of JBI Nev or take 300 ,000 unrestricted shares of JBI-Nev. There is nothing presented to refute this.
Email June 24, 2009
[129] In addition to the settlement agreement, the email of John Bordynuik, dated June 24, 2009, states to shareholders, that if they "figured out" what he was doing, then "good" for them, but after June 2009 there would be only two options referred to above.
[130] In Bordynuik's email dated June 24, 2009 to other PIPE shareholders he explains why his shares are different. He purchased them before and others could have done the same. However, to do so later would then be contrary to the U.S. Securities and Exchange Commission rules against insider trading .
- 16 -
[131] It is undisputed that Bordynuik purchased 40,250 ,000 shares of JBI-Nev for
$80,000.00 of personal funds in April 2009. These shares in JBI-Nev had restrictions, pursuant to U.S. securities rules, but giving up JBI-Del shares was not one of the restrictions.
[132] If Eisley had purchased her shares in the same way, she would be treated the same.
[133] All non-PIPE shareholders were provided the option to receive restricted shares in the JBI-Nev or to take 300,000 unrestricted freetrading shares. The rest of their shares would remain in JBI-Del.
[134] There is no evidence to support Elsley's claims that all shareholders , whether PIPE or non-PIPE, were required to surrender their shares in JBI-Del when they took JBI-Nev shares.
[135] Eisley also claims Bordynuik took 63% interest from Nicole Wright, so as such was obligated to surrender 63% of shares in JBI-Del. There is no evidence presented by Eisley in support of this assertion. In fact, this interpretation is clearly repudiated by the evidence. If Eisley had any such credible evidence, she would be required to present it. She has not done so. This is not an issue requiring a trial.
[136] There is no basis for Elsley's claim that, having received 300,000 unrestricted free trading shares in 2009 , she is now entitled to 13.1% interest in JBI-Nev. This is not an issue requiring a trial.
Revival of JBI-Del
[137] Eisley did admit in her evidence that if Bordynuik did not transfer or forfeit his shares in JBI-Del she would have no authority to revive the corporation and execute the resolutions. Thus, if Bordynuik is found to be a shareholder of JBI-Del, then Eisley has no status.
[138] Eisley did execute a resolution dated January 1, 2014 whereby she proceeded to cancel Bordynuik's 36,008,345 shares in JI-Del. Strangely, this resolution was not one of the documents provided to Mr. Goldberg for his opinion. Secondly, one may ask, if in fact Eisley was satisfied that Bordynuik did not own any shares, then why is this resolution cancelling his shares even necessary?
[139] In fact, it is very clear from the share ledger and the draft S-1 of JBI-Del that John Bordynuik was the owner of 36,008,345 shares and Sandra Eisley was the owner of 7,450,000 along with other minority shareholders.
[140] Further, Iconclude Eisley had no ability to revive JBI-Del. Bordynuik remained its majority shareholder with 36,008,345 shares.
- 17 -
[141] On the balance of probabilities, and considering the settlement agreement, the email of June 24, 2009 , the share ledgers that were available, the dr:aft S-1 document (clearly showing that after receiving shares in JBI-Nev, Bordynuik was left with 36,008,345 shares in JBI-Del and Elsley with 7,450,000) , I conclude there is no issue requiring a trial concerning these matters.
[142] Further, I am not persuaded that there is any credible evidence to support that Eisley is now entitled to 13.1% of shares in JBI-Nev. If evidence exists, it has surely not been produced. In a summary judgment motion the parties are required to lead all their evidence.
[143] . The settlement agreement is crystal clear on its face. Eisley received the 300,000 unrestricted shares in JBI-Nev in full and final settlement of her claims. I do not find that this is an issue requiring a trial.
[144] Accordingly, the summary judgment motions brought by Eisley are dismissed and the summary judgment motion of Bordynuik in relation to JBI-Del is allowed. Therefore, I find that Bordynuik is the owner of 36,008 ,345 shares in JBI-Del and, as such, is the majority shareholder.
[145] Thus Elsley's motion granting her authority to act on behalf of JBI-Del and JBI Ont is dismissed, and Eisley is not entitled to act on behalf of JBI-Del or JBI-Ont.
ORESCANIN LOAN
[146] Elsley has conceded that $120 ,000.00 of the $200,000 .00 Orescanin loan has been repaid. However, Elsley still claims that $80,000.00 has been misdirected and remains outstanding. The $120,000.00 loan was repaid by bank drafts and $80,000.00 was repaid by cheque. In evidence, there is a bank stamped confirmation that an
$80 ,000.00 cheque was deposited to the account of JBI lnc.'s HSBC account. Eisley states that the $80,000.00 was misdirected to the HSBC account of JBI-Nev instead of JBI-Del. I am satisfied that Orescanin has produced all bank records to confirm that all
$200,000.00 has been repaid. There is no evidence payments have been misdirected. I find that the $80,000.00 was directed to the JBI-Del account.
[147] Further, it is not disputed that Orescanin was forgiven the exchange rate shortfall of $1,863.00.
[148] Based upon all of the evidence and all the bank drafts produced, as well as the cancelled cheque records produced and the deposit ledgers produced, I conclude that the $200,000.00 was fully repaid. There is no evidence produced by Elsley to suggest the debt was not repaid in full. Bordynuik, at all times, had authority to bind the corporations and provide releases to Orescanin. There is no contrary evidence. Therefore, there is no issue requiring a trial.
- 18 -
[149] Therefore, Elsley's claim for the $200,000.00 debt is dismissed. Summary judgment is granted in favour of Orescanin regarding the $200,000.00 repaid loan. In acc.ordance with the full repayment , a full and final release was provided by Bordynuik on July 7, 2011. He had full and undisputed authority at that time to execute that final release which remains in full force and effect.
[150] Further, the Limitations Act is applicable but it is not necessary to detail the particulars as I am persuaded that the full amount of the loan has been repaid and an appropriate release provided. There is no issue requiring a trial.
LIMITATION DEFENCES - CLAIMS AGAINST BORDYNUIK
[151] Elsley and Bordynuik executed the settlement agreement on June 27, 2009. Emails produced by Elsley to various counsel indicate that as early as 201O she knew or ought to have known regarding any potential claims.
[152] She has known since at least 2009 that she is not entitled to additional shares. The evidence suggests Elsley sought legal advice from July 2009 through to November 2011. I find there are 30 pages of emails in evidence between Elsley and Chris Little, her U.S. counsel, between 2010 and 2011 dealing with issues raised by Elsley concerning matters before the court. In addition to Steven Goldberg, she also had a lawyer , Sharon Mitchell, representing her in Delaware. Ms. Mitchell prepared the resolutions regarding JBI-Del and JBI-Ont.
[153] Eisley sold the 300,000 unrestricted shares, but has done nothing since 2009 or 2010. In 2014 she decided to commence litigation claiming entitlement to 7,450,000 shares in JBI-Nev. Eisley has claimed she did not understand the agreement, and she was under duress, at times did not recall signing it and claiming she would be seeking a forensic handwriting expert (not yet done). There is no credible evidence to support such claims. These claims have no air of reality. In effect, she did nothing for approximately three years and in 2014 she moved for summary judgment , well beyond the applicable limitation period.
[154] Furthermore, all JBI-Del and JBI-Nev filings are on the website at EDGAR. Elsley took no steps to review or start actions earlier even though she knew or ought to have known regarding all filings online.
[155] As to Elsley's argument that new facts became available to her, I agree that this does not recommence the limitation period. I find that Elsley could have known or should have known as early as June 2009 or early 2010 regarding any of her potential claims. Yet, she started this action in 2014. Thus her actions are statute-barred as she has not diligently pursued her claims. However, even prior to the limitation issue, I find that there is no genuine issue regarding a trial concerning matters raised herein by Eisley.
- 19 -
[156] Eisley is not the majority shareholder of JBI-Del and without full and majority ownership she cannot make her claims. There is no issue requiring a trial. Her total rights are contingent on Bordynuik not owning his shares in JBI-Del. Thus, given that John Bordynuik is the majority shareholder of JBI-Del, Eisley has no status.
ELSLEY AS VEXATIOUS LITIGANT
[157] Section 140 of the Courts of Justice Act, RSO 1990, c C.43, states as follows:
140. (1) Where a judge of the Superior Court of Justice is satisfied, on application, that a person has persistently and without reasonable grounds,
(a) instituted vexatious proceedings in any court; or
(b) conducted a proceeding in any court in a vexatious manner,
the judge may order that,
(c) no further proceeding be instituted by the person in any court; or
(d) a proceeding previously instituted by the person in any court not be continued ,
except by leave of a judge of the Superior Court of Justice.
[158] It is clear that declaring an individual a vexatious litigant is an unusual order and usually made as a last resort.
[159] In the case of Mohammed v. Goodship, [2013] O.J. No. 3610 the court noted at para. 26 as follows:
In any event, an order under section 140 of the CJA is not made lightly by the court; they are unusual orders which are made as a last resort, where the conduct of the litigant demonstrates that there is a history of vexatious proceedings commenced and behaviour that includes attempts to re litigate matters that have already been the subject of a judicial
determination and failure to pay costs orders made against the litigant.
[160] Further, in the case of Dysart (Township) v. Mohammed, [2007] O.J. No. 4139 , the court recited at para. 20 a summary of vexatious proceedings, which include the following:
(a) The bringing of one or more actions to determine an issue which has already been determined by a court of competent jurisdiction constitutes a vexatious proceeding;
(b) Where it is obvious that an action cannot succeed, or if the action would lead to no possible good, or if no reasonable person can reasonably expect to obtain relief, the action is vexatious ;
- 20 -
(c) Vexatious actions include those brought for an improper purpose, including the harassment and oppression of other parties by multifarious proceedings brought for purposes other than the assertion of legitimate rights;
(d) It is a general characteristic of vexatious proceedings that grounds and issues tend to be rolled forward into subsequent actions and repeated and supplemented, often with actions brought against the lawyers who have acted for or against the litigant in earlier proceedings;
(e) In determining whether proceedings are vexatious , the court must look at the whole history of the matter and not just whether there was originally a good cause of action;
(f) The failure of the person instituting the proceedings to pay the costs of unsuccessful proceedings is one factor to be considered in determining whether proceedings are vexatious;
(g) The respondent's conduct in persistently taking unsuccessful appeals from judicial decisions can be considered vexatious conduct of legal proceedings.
[161] The main focus of the motions before me have dealt with Elsley's relation to and ability to control JBI Del, her shareholdings in JBI-Del and JBI-Nev, and if she has standing as assignee of JBI-Ont's and JBI-Del's claims. The motions have also dealt with the $200,000.00 Orescanin loan which has been repaid and whether Elsley's claims are statute barred.
[162] The multiplicity of various actions commenced by Eisley, for certain, have been referred to and detailed but have not been the centerfold of the evidence before me.
[163] On this issue, therefore , Iconclude that a trial is required.
OPPRESSION REMEDY
[164] Eisley did not initially claim an oppression remedy in her motions before the court. It was only in her submissions at the end, almost as an afterthought, that this relief was claimed.
[165] In my view, she has not provided any credible evidence that would support such a claim.
[166] A summary judgment motion requires that parties put all their evidence forward or risk losing. Eisley has failed to meet the evidentiary burden. Therefore, this claim is therefore dismissed.
- 21 -
500,000 CLAIM BY ELSLEY
[167] Bordynuik brings a cross-motion to dismiss this claim by Elsley against him.
[168] I have already determined Elsley has no status to bring such a claim forward against JBI-Ont or JBI-Del. I am satisfied that the monies in question (i.e. 500,000) were transferred from JBI-Ont to JBl-Del as part of the merger process.
[169] This is not an issue requiring a trial.
[170] Elsley has no status to bring such a claim, and her claim is therefore dismissed.
SUMMARY OF ORDERS MADE
[171] A summary of orders made is as follows:
1. Elsley's claims for summary judgment against Bordynuik are dismissed.
2. Elsley has no standing to bring any claims on behalf of JBI-Ont, JBI-Del or JBI-Nev.
3. Eisley is not a majority shareholder of JBI-Oel.
4. Elsley's summary judgment motion against Orescanin and Bordynuik for
$80,000.00 (originally for $200,000.00) is dismissed.
5. Elsley's request for leave to bring a derivative action or an oppression remedy is dismissed.
6. Orescanin's summary judgment motion for dismissal of Elsley's claim is granted.
7. Bordynuik's summary judgment motions to dismiss Elsley's claims are granted, save and except Bordynuik's claim against Elsley as a vexatious litigant, which shall continue to trial.
COSTS
Released: August 11, 2015
CITATION: Eisley v. Orescanin, 2015 ONSC 5061
COURT.FILE NO.: 8970/14
DATE: 2015/08/11
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Eisley and John Bordynuik Inc.
Plaintiffs
- and -
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Plaintiffs
RULING ON SUMMARY JUDGMENT MOTIONS
Maddalena J.
Released: August 11, 2015
CITATION: Elsley v. Orescanin, 2015 ONSC 6661
COURT FILE NO.: 8970/14
DATE: 2015/10/27
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Eisley and John Bordynuik Inc.
Plaintiffs
- and -
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
ENDORSEMENT ON COSTS
Maddalena J.
Released: October 27 , 2015
- 2 -
[4] The defendants Bordynuik and Orescanin seek costs against the plaintiff Elsley personally, on a substantial indemnity basis, fixed in the amount of $87,821.79 inclusive of disbursements and HST.
[5] The plaintiff Eisley requests that there be no order as to costs.
[6] Rule 57 of the Rules of Civil Procedure sets forth the factors to be considered by the court in exercising its discretion under s.131 of the Courts of Justice Act.
[7] Further, Rule 20.06 also deals with costs sanctions on a summary judgment motion.
[8] Bordynuik and Orescanin were both successful on their respective summary judgment motions and are therefore entitled to costs against the plaintiff personally .
[9] The plaintiff Elsley made serious allegations of improper and fraudulent conduct against the defendants Orescanin and Bordynuik.
[1O] Ultimately, the court found that these allegations were unfounded.
[11] Further, the court found the plaintiff Eisley inappropriately took steps to declare herself to be the sole, controlling, or majority shareholder of JBI-Delaware. She did so without seeking the assistance of the court in the first instance.
[12] Also , she did not, conveniently, submit all documents that were available to her in relation to this claim, once her claim was challenged by Bordynuik. It was left to Bordynuik to disclose further documents which ultimately successfully challenged her claim.
[13] I adopt the reasoning of the Court in Hamilton v. Open Window Bakery Ltd.,
[2004] 1 S.C.R. 303.
[14] At para. 26 of the decision , the Court concludes as follows:
In Young v. Young, [1993] 4 S.C.R. 3, at p. 134, Mclachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs "are generally awarded only where there has been [page 313] reprehensible, scandalous or outrageous conduct on the part of one of the parties". An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient
- 3 -
to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and client scale are appropriate: see, generally , M.M. Orkin, The Law of Costs (2nd ed. (loose-leaf)) , at para. 219. -
[15] Further, I find in this case, as set out by the defendants in their costs submissions, Elsley was specifically advised in her cross-examination held February 9, 2015 (Questions 75 - 77) of the costs consequences of an unproven fraudulent claim. Eisley acknowledged that if the court did not accept her allegations of fraud and misrepresentat ion by the defendants , she would be ordered to pay substantial indemnity costs.
[16] Under all of these circumstances , it is appropriate to order costs against Elsley personally. These costs are to be paid on a substantial indemnity basis. Accordingly , the costs payable by Eisley personally to the defendants on a substantial indemnity basis are fixed in the amount of $87,000 .00 inclusiv of disbrs ments and HST, payable within 30 days.
Released: October 27, 2015
CITATION: Elsley v. Orescanin, 2015 ONSC 6661
COURT FILE NO.: 8970/14
DATE: 2015/10/27
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sandra Elsley and John Bordynuik Inc.
- and -
Plaintiffs
)
)
) Frederick Simon Hawa, for the Plaintiffs
)
)
)
)
)
)
)
)
Mildred Orescanin, Trustee for IP Trust and Shirley Bordynuik, Trustee for Corp 1683091 and Shirley Bordynuik, Trustee for John Bordynuik Inc. and John Popovacki and Brian Seburn and Frank Coy and John Bordynuik and John Doe and Others
Defendants
The Honourable Justice T. Maddalena
) Mark Abradjian and Renata Kis, for the
) Defendants
)
)
)
)
)
)
)
)
)
ENDORSEMENT ON COSTS
[1] I heard this summary judgment motion at Welland, Ontario on February 24, February 27, and May 15, 2015.
[2] I delivered written reasons on August 11, 2015.
[3) I have now received written costs submissions from both parties which I have
·reviewed.
(0)
(0)Plastic2Oil, Inc. (PTOI) Stock Research Links
Scroll down for more posts ▼