One sibling took advantage of his sister’s 'vulnerability'
The Ontario Court of Appeal has ruled against a sibling who took advantage of his sister's "vulnerability," resulting in unjust enrichment and breach of fiduciary duty.
In Aiello v. Bleta, 2023 ONCA 525, Bertha Aiello and Leroy Bleta are siblings fighting over the companies their late father bequeathed. The deceased owned three companies—Floriri Village Investments Inc., Niazi Holdings Inc., and Korce Group Ltd.
The siblings ' relationship deteriorated after their father's death. In 2014, they reached an agreement, but Bleta claimed there was no agreement regarding the ownership of the companies. He asserted that the agreement only provides for a temporary division of management responsibilities.
On the other hand, Aiello argued that there was an agreement on ownership of the companies, such that Aiello would obtain exclusive ownership of Floriri. Furthermore, she asserted that Bleta beached the terms of the agreement and his fiduciary duty to Aiello and that Bleta was unjustly enriched at Aiello's expense.
During the trial, Aiello sought a declaration that she was the beneficial owner of Bleta's shares in Floriri. The trial judge granted judgment in favour of Aiello, finding that the parties agreed that Aiello would own and manage the Floriri company. In contrast, Bleta would own and manage the Niazi and Korce properties. The judge further held that Aiello was vulnerable to Bleta, that he owed her a fiduciary duty, and was unjustly enriched at her expense.
Bleta appealed the trial judge's decision, arguing that the judge made an error in finding that there was an agreement as to ownership of the companies and that Bleta was unjustly enriched at Aiello's expense. Furthermore, Bleta argued that the trial judge made an error in finding that Bleta was in a fiduciary relationship with Aiello and that he breached such duty.
Ownership
Bleta argued principally that the trial judge committed an error in holding that the agreement between the parties was an agreement regarding ownership of the companies. He claimed that after a disagreement between the siblings, negotiations took place to split management between them. However, Bleta claimed that significant terms of their agreement were unresolved, making the arrangement more of an "agreement to agree."
The trial judge ruled that Aiello and Bleta agreed on specific terms, with Bleta releasing his interest in Floriri shares in exchange for Aiello relinquishing her interest in another entity.
The trial judge's findings were supported by evidence of Bleta's subsequent actions that demonstrated ownership control and both parties conducting themselves in a manner consistent with a binding agreement. The trial judge dismissed Bleta's claim that there was no ownership agreement and that he was not unjustly enriched.
Breach of fiduciary duty
Bleta challenged the trial judge's opinion that "Bleta took advantage of his sister's vulnerability and attempted to exercise control by acting in an intimidating manner."
Bleta argued that the trial judge committed an error in law by failing to establish that there was an undertaking that Bleta use any discretionary powers he had on Aiello's behalf. However, the trial judge explained that a fiduciary duty may be found without an express undertaking, where the alleged fiduciary had some scope to exercise discretion or power, could exercise that power unilaterally to the detriment of the other party's legal or practical interests, and the other party was vulnerable to the exercise of that power of discretion.
The court stressed that for fiduciary duty, the existence of a fiduciary undertaking on the part of the alleged fiduciary remains a necessary condition. However, the court also said, "This does not mean that an express undertaking is required. Rather, the fiduciary's undertaking may be implied in the particular circumstances of the parties relationship."
The appeal court found that the relationship between the siblings was such that there was an implied understanding that Bleta would act in accordance with his duty of loyalty to his sister. Both Bleta and Aiello conceded that they trusted each other. The trial judge accepted Aiello's testimony that she trusted Bleta because of his superior position in the family business and the fact that he was a lawyer. The trial judge also accepted that she took unquestioning direction from him upon her father's death, just as she had done with her father when he was alive.
Furthermore, the court pointed to the trial judge's findings that Bleta knew Aiello was vulnerable, and there were instances when Aiello's vulnerability was exploited. Accordingly, the court found no reason to interfere with the trial judge's determination that Bleta breached his fiduciary duty to Aiello.
The appeal court said there was no palpable and overriding error in finding that there was an agreement on ownership of the companies and that Bleta was unjustly enriched by his breach of the agreement. Accordingly, the court dismissed the appeal.
