Executive Summary: Key Legal and Evidentiary Issues

• Conflict of interest by Walter and Gordon as directors of Wegmart in favouring tenant Southern Supplies, including non-collection of rent and breach of statutory duties under the Ontario Business Corporations Act (OBCA).
• Exclusion of Leeanna and Joanne from corporate governance through failure to call annual shareholders’ meetings, provide information, and involving them only via fabricated minutes and resolutions that did not actually occur.
• Non-compliance with statutory financial reporting, including failure to obtain audited financial statements from 2018 onward in the absence of any waiver by all shareholders.
• Discretionary oppression remedies ordered under s. 248(2) OBCA, including removal and replacement of directors and the appointment of auditors, rather than the more drastic remedy of winding up.
• Substantial indemnity costs awarded against Walter and Gordon based on their reprehensible conduct, litigation “stonewalling,” and the necessity of expert evidence to uncover financial irregularities.
• Attempted reliance on a new two-year limitation defence at the appellate stage to narrow the period for audited statements, which was refused because it was raised too late and the record was inadequate.

Background and family corporate structure

Wegmart Ltd. is a real estate holding company that owns two properties in Oshawa and Belleville. Those properties are leased to Southern Supplies Ltd., a successful HVAC and sheet metal business founded by the siblings’ father, Walter Libby Sr. Southern Supplies is operated by the sons, Walter and Gordon Libby, who also hold a minority share interest in that operating company. Upon the death of Walter Sr. on January 4, 2018, ownership of Wegmart passed in equal 25% shares to his four children, Leeanna Meier, Joanne Libby, Walter Libby and Gordon Libby. In contrast, Walter Sr. left Southern Supplies solely to the two sons, Walter and Gordon. Since their father’s death, Walter and Gordon have been the only directors and officers of Wegmart, despite all four siblings being equal shareholders. Wegmart’s role is to own and manage the rental properties, while Southern Supplies is the tenant and operating business.

Allegations of oppression and conflicts of interest

Leeanna and Joanne brought an oppression application under s. 248(2) of the OBCA alleging that their brothers, as directors of Wegmart, conducted the affairs of the company in a manner that was oppressive, unfairly prejudicial to them, and unfairly disregarded their interests as shareholders. A central theme was conflict of interest: Walter and Gordon were directors and officers of Wegmart while simultaneously being shareholders, directors and officers of Southern Supplies, Wegmart’s tenant. They did not declare or properly manage this conflict. The sisters alleged that Walter and Gordon failed to obtain market rent from Southern Supplies and did not actually collect rent, thereby preferring Southern Supplies’ interests over those of Wegmart. Although some rent was booked as a receivable in Wegmart’s financial statements, no rent was in fact paid, and not all years even recorded such receivables. The sisters also alleged that Walter and Gordon breached fiduciary duties and statutory duties by instructing Wegmart’s accountants to prepare financial statements that were incorrect and unfairly benefited the brothers.

Corporate governance failures and exclusion of minority shareholders

Beyond conflicts of interest and rent issues, Leeanna and Joanne were effectively shut out of Wegmart’s governance. Walter and Gordon failed to call annual shareholders’ meetings as required by s. 94 of the OBCA, despite repeated requests from their sisters to convene meetings and provide corporate information. Instead of proper meetings, the brothers created minutes of shareholders’ meetings that never actually took place and prepared resolutions purporting to have been passed by all shareholders, even though Leeanna and Joanne had not participated. There were also unresolved questions about the financial statements, which had not been put before the sisters for approval. This pattern of conduct reinforced the oppression claim: the brothers were running Wegmart unilaterally while using the corporate machinery (minutes, resolutions and accounts) in a way that excluded the equal shareholders, Leeanna and Joanne.

Failure to obtain audited financial statements

Under ss. 148–149 of the OBCA, Wegmart was required to have its financial statements audited annually unless all shareholders validly waived that requirement. Leeanna and Joanne never waived the audit requirement. Despite this, Walter and Gordon failed to obtain audited financial statements for Wegmart from 2018 onward. This was particularly significant because Wegmart’s only substantial business involved renting properties to Southern Supplies, a company controlled by Walter and Gordon. The absence of audits made it more difficult for Leeanna and Joanne to verify whether proper rent was being charged and collected and whether the company’s finances fairly reflected Wegmart’s true position.

Cross-application for winding up and the first-instance remedies

In response to the oppression application, Walter and Gordon launched a cross-application seeking an order to wind up Wegmart under s. 207(1)(b)(iv) of the OBCA. They argued that the intense animosity among the siblings and the breakdown in their relationship rendered Wegmart’s continued operation under the existing ownership structure impossible. Considerable evidence was filed on both sides, including expert evidence relating to the financial records. By the time of the 2025 hearing, Walter and Gordon were no longer seriously disputing most of the oppression allegations, although they did not formally admit them. The application judge found that Walter and Gordon had indeed engaged in oppressive and unfairly prejudicial conduct. The court held that they acted as Wegmart directors without declaring conflicts of interest, failed to collect rent from Southern Supplies, failed to call annual shareholders’ meetings, fabricated minutes and resolutions, and did not obtain audited financial statements. Having made these findings, the judge granted the oppression relief requested by Leeanna and Joanne. Walter and Gordon were removed as directors of Wegmart, and Leeanna and Joanne were appointed in their place. The judge also ordered that auditors be appointed to prepare audited financial statements for Wegmart commencing with the 2018 financial year onward so that the company’s accounting could be regularized, accurate and reliable. The cross-application for a winding up was dismissed. Applying principles from cases such as Animal House Investments Inc. v. Lisgar Development Ltd., the application judge concluded that mere quarrelling or incompatibility among family shareholders is not, on its own, sufficient to justify an equitable winding up. The brothers had themselves created the circumstances of conflict through their oppressive conduct. The judge emphasized that a winding up is a remedy of last resort and that more tailored measures—replacing the directors and imposing audit requirements—could fairly address the oppression while preserving the company.

Substantial indemnity costs and the role of experts

Following the merits decision (the Oppression Decision), there was a separate Costs Decision. Leeanna and Joanne sought substantial indemnity costs. The application judge granted their request, awarding them $231,878 in costs, all inclusive, on a substantial indemnity basis. In reaching this result, the judge recognized that substantial indemnity costs are exceptional and typically reserved for conduct that merits sanction. Citing authorities such as Davies v. Clarington, the judge characterized the brothers’ conduct as reprehensible. The sisters had been forced to bring and fully litigate the oppression application, their attempts to settle had been rebuffed, and the brothers had “opposed everything” and effectively stonewalled, including by advancing an unwarranted cross-application for a winding up. The judge also addressed the time spent and the disbursements, particularly the costs of expert evidence. Although the expert reports were not heavily cited in the oppression merits reasons, they were found to be a necessary part of the investigation that revealed irregularities in Wegmart’s financial records, including incomplete information and the failure to record rent. This underpinned the conclusion that the expert disbursements were reasonable and recoverable as part of the substantial indemnity costs award.

Appeal issues before the Divisional Court

Walter and Gordon appealed to the Divisional Court. Importantly, they did not challenge the findings of oppression themselves. Instead, the appeal was confined to three issues: whether the application judge erred in refusing to order a winding up of Wegmart; whether the substantial indemnity costs award and its quantum were in error; and whether, for the first time on appeal, they could raise a two-year limitation defence to restrict the period for which audited financial statements had to be prepared. On the winding-up issue, the appellants argued that the application judge wrongly relied on Animal House and should have granted a winding up given the siblings’ entrenched animosity. The Divisional Court rejected this argument, noting that Animal House involved a similar family-owned corporate context and that the factual differences did not undermine the applicable principles. The court held that the application judge had correctly treated a winding up as a remedy of last resort, had considered all relevant authorities, and had properly appreciated that Walter and Gordon’s own misconduct could not be used as a platform to demand the drastic remedy of winding up. On costs, Walter and Gordon argued that substantial indemnity costs were not justified, that the time spent was excessive, and that the expert disbursements should not have been allowed. The Divisional Court found no legal error or palpable and overriding error in the application judge’s reasoning. The judge had properly considered the objectives of costs, the complexity and duration of the case, the sisters’ onus in proving oppression, and the brothers’ litigation conduct. The substantial indemnity award of $231,878 was upheld.

Attempted limitation defence regarding audited financial statements

The third issue concerned the order requiring audited financial statements for Wegmart from the 2018 financial year onward. The oppression application was commenced in 2023. On appeal, Walter and Gordon argued that a two-year limitation period under the Limitation Act, 2002 should apply, with the result that audits should only be required starting with the 2020 financial year (for which audits would have been due in 2021). They relied on the Court of Appeal decision in Lagana v. 2324965 Ontario Inc. and asserted that the audited-statements claim was out of time for earlier years. This limitation argument had not been raised before the application judge. The Divisional Court applied the general rule from R. v. Reid that new issues are ordinarily not permitted for the first time on appeal. The court was not persuaded that the failure to raise the limitation issue earlier was excusable, especially since the Divisional Court’s own decision in Lagana (later upheld by the Court of Appeal) had already made it clear, more than a year before the hearing below, that a two-year limitation period can apply to claims for audited financial statements. The evidence in the record was also insufficient to adjudicate the limitation issue properly. There was no clear evidence of when Leeanna and Joanne were actually registered as shareholders following their father’s death, only that their shareholder status was effective as of the date of death. There was likewise no evidence of when audited financial statements for 2018 should have been completed, which would be crucial for fixing the presumptive start date of any limitation period. Additionally, the respondents raised discoverability under s. 5(1) of the Limitation Act, 2002, arguing that they would have led evidence to displace any presumptive limitation start date. The Divisional Court noted that neither Lagana nor the appellate decisions it referenced clearly eliminated discoverability in this context; indeed, the Superior Court decision in Lagana appeared to accept that the limitation period starts when the claim is discovered. In light of these evidentiary gaps and legal uncertainties, the court declined to grant leave to raise the new limitation issue on appeal.

Outcome of the appeal and overall result

The Divisional Court dismissed the appeal in its entirety. The refusal to wind up Wegmart was upheld, as was the set of oppression remedies granted at first instance: the removal of Walter and Gordon as Wegmart’s directors, the appointment of Leeanna and Joanne as new directors, and the order requiring audited financial statements from the 2018 financial year onward. The substantial indemnity costs award of $231,878 in favour of Leeanna and Joanne from the first-instance proceedings was also affirmed. For the appeal itself, the parties agreed that, if the respondents were successful, they would receive costs in the amount of $35,000, all inclusive. The Divisional Court ordered those appeal costs accordingly. Taken together, Leeanna Meier and Joanne Libby are the successful parties across both levels of proceedings, and the total monetary amount ordered in their favour for costs is $266,878 (comprising $231,878 at first instance plus $35,000 on appeal), with no separate damages award specified.