CITATION: McInerney v. RJM Holdings Limited, 2019 ONSC 7179  
COURT FILE NO.: 5245/11 (Chatham)  
DATE: 20191211  
ONTARIO  
SUPERIOR COURT OF JUSTICE  
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BETWEEN:  
Cheryl Anne McInerney & Bruce  
McInerney  
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Raymond G. Colautti and Anita Landry, for  
the Plaintiffs  
Plaintiffs  
and –  
RJM Holdings Limited, Chilled Cork Inc. &  
Robert Joseph Myers  
Angus T. McKinnon and John B. Brennan,  
for the Defendants  
Defendants  
) HEARD: September 13, 20 and 21, 2018;  
January 7, 8, 9, 10 and 11, 2019; May 13,  
14, 15, 16, 17, 21 and 22, 2019  
REASONS FOR JUDGMENT  
VERBEEM J.:  
(I) THE NATURE OF THE PROCEEDINGS  
(a) Nature of the Action  
[1]  
Cheryl McInerney (“Cheryl”), a former employee and a current 50 percent shareholder of  
the defendant Chilled Cork Inc. (“CCI”), asserts that she was wrongfully dismissed in the  
summer of 2010. She also claims that she is entitled to remedies pursuant to s. 248 of the  
Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”), as a result of the  
defendants’ “oppressive” conduct both before and after her termination. She seeks  
damages and compensation, together with an order that her shares in CCI be purchased at  
an enhanced value.  
Page: 2  
[2]  
Bruce McInerney (“Bruce”) also maintains a wrongful dismissal claim, based on his  
express dismissal, in 2010, from his 13-month period of employment as a part-time,  
minimum wage employee of CCI.  
[3]  
[4]  
Some context is warranted.  
(b) Background  
In 2008, Cheryl and the defendant, Rob Myers (“Rob”), agreed to become “partners” in a  
restaurant business. Rob solicited Cheryl’s participation in the venture – a casual fine  
dinning restaurant, with catering and banquet services, located within the Retro Suites  
Hotel in downtown Chatham, Ontario. Rob indirectly owned the hotel, through the  
defendant RJM Holdings Limited.  
[5]  
[6]  
They agreed that they would be partners and split the profits “50-50”. They also agreed  
that in exchange for her ownership interest in the business, Cheryl, who had experience in  
operating her own restaurant, would be employed to manage the restaurant on a day-to-  
day basis and serve as a chef, for which she would be paid a salary.  
Rob, whose other business interests kept him away from Chatham for most of the year,  
would largely be an absentee owner. In accordance with financial estimates and  
projections made by Cheryl, the parties agreed that Rob would contribute all the capital  
required to build out, equip and furnish the restaurant and cover its initial start-up costs  
and its initial losses. The parties agreed that the monies advanced by Rob would be fully  
repaid before any profits were distributed. They also agreed that since he would make all  
of the financial contributions, Rob would retain ultimate control over its financial aspects.  
[7]  
[8]  
The “partnership” was ultimately structured in a corporate form, with Cheryl and RJM  
Holdings Limited, each being a 50 percent shareholder of CCI. Cheryl was appointed as  
CCI’s president. Rob and Cheryl comprised CCI’s board of directors.  
On behalf of themselves and CCI, Rob and Cheryl executed a number of documents that  
gave effect to the terms of their agreements with respect to CCI, including: a lease  
between CCI and Retro Suites; a general security agreement made by CCI in favour of  
RJM Holdings Limited; an asset purchase agreement between CCI and Cheryl/her sole  
proprietorship restaurant, the Natural Food Emporium (NFE); and a Contract of  
Employment between CCI, Cheryl and Rob, in his capacity as a shareholder of CCI.  
[9]  
In accordance with the asset purchase agreement, CCI assumed NFE’s liabilities, which  
totaled over $102,000, and it acquired its assets for the stated consideration of one dollar.  
[10] The Contract of Employment did not specify a fixed term for Cheryl’s employment,  
which began on January 1, 2009. Pursuant to the contract’s terms, among other things:  
Cheryl was to be employed in “the position of management”, for an annual salary of  
$50,000; Cheryl agreed that in carrying out her employment duties, she would comply  
with all reasonable instructions as may be given to her by Rob, on behalf of CCI; Cheryl  
agreed that she would work with the “representatives” retained by CCI to assist in its  
operations; and Cheryl’s employment could be terminated for specified cause.  
Page: 3  
[11] Through the employment contract, Cheryl also agreed that her “reporting relationships,  
duties and responsibilities” could be changed by Rob, on behalf of CCI, as he deemed  
appropriate, and that any such changes would not affect or change any other part of the  
employment agreement.  
[12] CCI commenced operations in 2009. Things did not go well. The actual costs to build  
out, equip and furnish CCI exceeded Cheryl’s estimates. As a result, by January 1, 2009,  
CCI had incurred related-party debt (owed to one of Rob’s other corporations) in excess  
of $350,000.  
[13] CCI consistently operated at a loss throughout 2009 and, ultimately, incurred an annual  
net operating loss of nearly $200,000, which was far in excess of Cheryl’s projections  
and Rob’s corresponding expectations. Rob was required to make significant monetary  
advances to CCI during 2009, to cover its ongoing losses. As a result, CCI’s related-  
party debt grew to nearly $545,000 by December 31, 2009.  
[14] Despite CCI’s poor financial performance, Cheryl indicates that Rob was kind, and  
treated her fairly throughout 2009.  
[15] Unfortunately, CCI’s financial performance remained sub-optimal in 2010. Despite Rob  
and Cheryl’s common interest in achieving profitability and Cheryl’s efforts in that  
regard, CCI continued to suffer operating losses, month after month. Cheryl became  
increasingly stressed over CCI’s losses, which she and Rob discussed, on a periodic  
basis.  
[16] Cheryl concedes that by mid-2010, CCI’s losses were unsustainable and “something had  
to be done”.  
[17] Similarly, by May 2010, Rob concluded that it was necessary to “bring in” another  
individual to assist Cheryl in managing the financial aspects of the restaurant.  
Ultimately, Greg Kazarian was retained to assume CCI’s bookkeeping duties and aspects  
of its financial controls. Mr. Kazarian did not replace Cheryl as CCI’s general manager  
and Cheryl continued to “run the restaurant”. Cheryl acknowledges that she understood  
the rationale for hiring Mr. Kazarian, but his presence made her feel “useless” and  
“demeaned”.  
[18] After reviewing CCI’s financial aspects, Mr. Kazarian determined, among other things,  
that its “wages and salaries” expenses were too high. He made recommendations with  
respect to salary reductions, and the termination of certain employees that he determined  
were redundant, including Cheryl’s husband Bruce, who worked on a part-time,  
minimum wage basis.  
[19] Rob maintains that until Mr. Kazarian made his recommendations, he was not aware that  
Bruce, whom Cheryl hired in June 2009, was an employee of CCI. He posits that during  
their discussions in 2008, he and Cheryl specifically agreed that Bruce was not to be  
involved in CCI. Cheryl disputes that assertion.  
Page: 4  
[20] Mr. Kazarian also recommended the imposition of tighter financial controls in CCI’s day-  
to-day operations.  
[21] Throughout June 2010, Rob, Cheryl, Mr. Kazarian, and CCI’s head chef, Michel Bonnot,  
met a number of times to discuss CCI’s financial position and Mr. Kazarian’s  
recommendations. During their meetings, Cheryl consistently appeared upset and  
emotional, particularly in response to the suggestion that Bruce be terminated.  
[22] Bruce was terminated on June 28, 2010, with three weeks pay in lieu of notice.  
Subsequently, Cheryl was distressed by his absence from CCI. She continued to attend  
work until July 9, 2010, when she “blew up” at Mr. Kazarian, accused him of “trying to  
take her job”, and left the restaurant. Cheryl has never returned to active employment at  
CCI, or active participation in its business and operations, despite remaining its president  
and a member of its board of directors.  
[23] With Rob’s approval, Mr. Kazarian corresponded with Cheryl on July 14, 2010,  
suggesting that she take two weeks off from work with pay, and that they meet,  
thereafter, to determine if she was ready to return to work. Cheryl did not respond  
directly. Instead, through Chef Bonnot, she provided CCI with a brief note from her  
family doctor indicating that she was “off work for medical reasons for at least one  
month”. Cheryl indicates that at the time, she felt depressed.  
[24] Unfortunately, Cheryl then misapprehended an advertisement placed by CCI in a local  
newspaper in late July for, among other things, a Red Seal chef. The advertisement was  
designed to find a replacement for Chef Bonnot, who, to Cheryl’s knowledge at the time,  
had announced his intent to retire from CCI in September 2010. Cheryl, who did not have  
a Red Seal, believed the advertisement was designed to replace her. Without speaking  
with anyone at CCI, including Rob, she concluded that she had been or was being –  
forced out of CCI.  
[25] On a few occasions in July 2010, Rob attempted to contact Cheryl to discuss her absence  
from, and anticipated return to, work, without success. He never received a response.  
Eventually, Chef Bonnot advised him that Cheryl had a prior history of depression, she  
was experiencing depressive feelings and she wanted her old restaurant (NFE) back.  
Cheryl previously advised Rob, that she missed her old restaurant.  
[26] As a result, Rob unsuccessfully attempted to contact Cheryl in early August 2010, to  
propose a solution to their circumstances. When he was unable to reach her directly, he  
left her a voicemail message, in which he suggested that CCI would pay her three months  
salary and he would provide her with additional financial assistance to “set up” her old  
restaurant. He invited her to contact him. Cheryl did not respond.  
[27] Cheryl attended a scheduled assessment with a nurse practitioner on August 30, 2010,  
during which she reported that she had been “pushed out of her restaurant business”,  
together with subjective symptoms of anxiety, which were improving. She appeared  
slightly depressed. She was diagnosed with an adjustment disorder. The nurse did not  
opine that she was incapable of engaging in active employment, at any time.  
Page: 5  
[28] Cheryl’s salary continued to be paid by CCI throughout July and August 2010. During  
that time: she did not return to active employment; she did not communicate a desire or  
intent to return to active employment; she did not respond to CCI’s numerous attempts to  
contact her, with respect to her absence from employment and her intentions to return to  
work; and she did not indicate that she needed more time off work. Cheryl concedes that  
she never advised CCI that she intended to return to work, at any time.  
[29] In early September 2010, Rob’s corporate counsel forwarded documents to Cheryl that, if  
executed, would give effect to the terms of Rob’s August 2010 proposal, including a  
document titled “Termination of Employment”. The terms of that document reflect,  
among other things, that: Cheryl resigned her employment; she was to be paid three  
months salary; and she would transfer her shares in CCI to RJM Holdings Limited, for  
one dollar. The defendants posit that Cheryl’s shares had no value at the time, because:  
CCI had, to that date, continuously operated at a substantial loss; and the value of its  
liabilities (including related-party debt) exceeded the value of its assets. In her evidence,  
Cheryl concedes that until CCI became profitable, the value of her 50 percent ownership  
interest was nil.  
[30] Cheryl did not sign the agreement and she did not respond to it, either directly or through  
counsel, even if to: advise that she had not resigned; posit that she had been expressly or  
constructively dismissed, at some point; or to communicate a desire or intention to return  
to work.  
[31] Cheryl attended on a psychiatrist for assessment at the end of September 2010, who  
opined that she had suffered a “narcissistic injury” and offered a formal diagnosis of  
adult life with mixed emotions”, with no evidence of a major depressive disorder. He  
did not identify any restrictions on her ability to work, at any time. He recommended  
limited counselling, which Cheryl did not pursue.  
[32] In October 2010, Bruce commenced a catering business as a sole proprietorship. Cheryl  
was active in its operations from its inception, cooking and making deliveries. After  
several months of involvement in that business, Cheryl purchased an existing restaurant,  
which she has operated as Zee’s Bistro, to the present.  
[33] CCI continued to operate after Cheryl’s departure in July 2010. It also continued to incur  
operating losses up to and including 2015, which were subsidized by its related parties  
(Rob’s other corporations). In 2012, Pete Tsirimbis became CCI’s general manager. He  
implemented a stage-based strategy to improve CCI’s menu, service model and  
atmosphere. He has also overseen: CCI’s addition of a private dining area and various  
renovations and upgrades to the restaurant’s interior; an improvement in the quality of  
CCI’s menu; and increased promotion and advertising.  
[34] CCI first achieved profitability in 2016, which has continued to date. Nonetheless CCI’s  
related-party debt has not been retired. According to its audited financial statements, CCI  
still owed a net related-party debt in excess of $450,000, as of December 31, 2017. No  
portion of CCI’s annual net income in 2016 and 2017 was distributed to its shareholders.  
Page: 6  
[35] CCI has never held director or shareholder meetings. Although Cheryl remains CCI’s  
president and a member of its board of directors, she has never called or requisitioned  
such meetings. Neither has Rob.  
[36] Apart from 2009, no resolutions have been passed exempting CCI from the audit  
requirements of the OBCA. Nonetheless, CCI did not produce audited financial  
statements to its shareholders. In the context of this proceeding, Cheryl secured an  
interlocutory order in 2014, appointing BDO as CCI’s auditor, dating back to 2009, and  
mandating the preparation of audited financial statements from 2009 to present, and  
ongoing.  
[37] After its appointment, BDO raised a concern over the disorganization and lack of  
completeness that plagued CCI’s storage of historical financial records and source  
documents. It also raised concerns over the general lack of consistency in CCI’s method  
of recording transactions in its books, which resulted from a turnover of six different  
bookkeepers in the five-year period pre-dating BDO’s appointment. As a result, BDO  
was unable to produce any financial statements for 2009-2011. BDO prepared draft  
financial statements for 2012-2015, and final audited statements for 2016 and 2017.  
(c) Cheryl’s Wrongful Dismissal Claim  
[38] In the context of the foregoing, Cheryl asserts that she was expressly or constructively  
dismissed from her employment. She seeks damages for wrongful dismissal based on a  
lack of reasonable notice, and aggravated damages based on the manner in which she  
alleges she was dismissed.  
[39] Cheryl testifies that beginning in 2010, Rob became a “devil”. She says that during their  
infrequent meetings in 2010, which were held in the presence of other staff members of  
both CCI and Retro Suites, Rob would demean and insult her and, generally, act in an  
aggressive manner. He then retained Mr. Kazarian, without notice to her, and  
“wrongfully demoted” her, by stripping her of financial reporting and control duties.  
Despite Rob’s assurance that she would continue to “run the restaurant”, she felt like she  
was “just an employee”.  
[40] Cheryl asserts that her depressive feelings increased in June 2010. When she raised  
certain concerns with Rob, he told her that she would have to personally fire Chef  
Bonnot, his wife Leslie (who was CCI’s bookkeeper at the time) and Bruce, or she  
herself would be fired.  
[41] Cheryl varyingly posits that she was terminated through: the change in her financial  
controls and reporting duties; the implementation of financial controls; the Red Seal  
newspaper ad; Rob’s early August 2010 proposal; and/or the documentation sent to her in  
early September 2010.  
[42] Cheryl was employed for approximately 18 months. She claims she was entitled to 24-  
months notice of termination and seeks damages in lieu thereof, together with aggravated  
damages.  
Page: 7  
[43] Rob asserts that by her conduct, Cheryl clearly and unequivocally resigned from her  
employment in the summer of 2010. He denies that he ever engaged in threatening or  
demeaning behaviour towards her. He never directed her to terminate anyone, including  
Bruce. He consistently interacted with Cheryl in an appropriate manner.  
[44] Rob asserts that in accordance with the Contract of Employment, Cheryl’s duties with  
respect to financial management and controls were changed in June 2010, but Cheryl  
remained in a position of management. The decision to change Cheryl’s duties was made  
only after CCI’s exceptional losses in 2009 and its continuing losses in the first half of  
2010, and after he and Cheryl had discussed the need to address CCI’s losses. Mr.  
Kazarian was retained to assist Cheryl, not to replace her.  
[45] After Cheryl left CCI in July 2010, Rob never heard from her again, despite numerous  
attempts to contact her. He never instructed anyone to terminate Cheryl and he did not  
do so himself. Cheryl never advised CCI that she intended to return to work and she  
refused to respond to its attempts to address the issue with her. Rob made his August 4,  
2010 proposal because he did not know what else to do, in response to Cheryl’s silence.  
Rob posits that he did not attempt to unilaterally impose his proposal. Documents were  
prepared in accordance with the proposal, but Rob appreciated that they would not gain  
effect unless Cheryl signed them. Cheryl never responded to any of the foregoing.  
[46] From a subjective perspective, Cheryl testifies that when she left CCI, she had  
determined that she “did not want to try anymore”, in relation to its operations. By early  
August 2010, she determined that she could not go back to CCI. Finally, by the end of  
August 2010 (before she received the termination agreement), she determined that she  
did not want to be Rob’s partner anymore.  
(d) Cheryl’s Oppression Claim  
[47] In her capacity as a shareholder, Cheryl also asserts an oppression claim pursuant to s.  
248 of the OBCA. She claims her reasonable expectations as a shareholder were violated  
because, among other things: CCI did not employ her on a long-term basis; she did not  
participate in director and shareholder meetings; through the recording of management  
fee transactions, RJM Holdings secured a tax advantage that she did not share in; she has  
not shared in CCI’s profits; CCI began to produce audited financial statements, only after  
it was ordered to do so in the context of this proceeding; she was excluded from the  
management of CCI; and Rob did not deal with her in good faith.  
[48] Cheryl contends that Rob’s oppressive conduct commenced in 2009 and continues to  
date.  
[49] In her pleadings, Cheryl claims, among other things: a variety of orders, effectively,  
ousting Rob as an officer and director of CCI and appointing herself as sole officer,  
director and signing officer; an order extending the term of CCI’s lease with Retro Suites;  
and compensation for loss of profit, disgorgement of profits, and oppressive conduct in  
the amount of $5,000,000.  
Page: 8  
[50] At trial, Cheryl submits that the appropriate remedy for any oppression ought to include  
an ordered purchase of her shares at an enhanced value. She suggests a valuation date of  
December 31, 2017 (essentially, a date of judgment valuation). She has produced expert  
evidence valuing the shares under three different scenarios, premised on varying  
assumptions that, to a large extent, conflict with the content of CCI’s annual financial  
statements.  
[51] Depending on which scenario is used, the plaintiffs’ expert calculates the value of  
Cheryl’s shares to fall within one half of a total amount ranging from a low of $690,000  
to a high of $1.5 million, as of December 31, 2017.  
[52] The defendants assert that: Cheryl has failed to evidence the reasonable expectations that  
she asserts as a shareholder; many of her expectations are not “reasonable”, when  
measured against the parties agreements, past practice, reasonable commercial practice,  
and the availability of preventative steps; the defendants did not engage in conduct that  
falls within the scope of the oppression provisions of the OBCA; and to the extent that the  
failure to provide audited financial statements unfairly prejudiced Cheryl’s interests, that  
prejudice has already been address through the appointment and efforts of the court  
appointed auditor. Further remedial awards are, therefore, unnecessary.  
[53] To the extent that a remedial order is made pursuant to s. 248(3) of the OBCA, the  
defendants agree that it should include an order that Cheryl’s shares be purchased. They  
submit that, in all of the circumstances, the fairest valuation date would either be the date  
of the original alleged oppressive conduct (December 31, 2010) or the date the  
proceeding was commenced (December 31, 2011) (CCI’s year-end dates are used for  
convenience in valuation).  
[54] The defendant’s adduced evidence from an expert business valuator that indicates the  
shares of CCI were worth nil on either December 31, 2010 or December 31, 2011. She  
also opines that en bloc, the shares of CCI have a fair market value between $9,900 and  
$97,900, with a mid-point of $53,900, on December 31, 2017. Therefore, she estimates  
the value of Cheryl’s shares to be $26,950, as of that date. Unlike the plaintiff’s expert,  
she assumes the value of CCI’s related-party debt is consistent with the amount recorded  
in its 2017 audited financial statements, and that the best evidence of its historical  
revenue and wages expenses are its annual financial statements.  
(e) Bruce’s Wrongful Dismissal Claim  
[55] Bruce asserts a claim for damages for wrongful dismissal based on the termination of his  
13-month period of employment, as a part-time minimum wage employee of CCI. He  
claims to have been entitled to a three to six month notice period.  
(f) Other Claims Advanced by the Plaintiffs  
[56] Cheryl pleads a claim in unjust enrichment based on CCI’s acquisition of NFE’s assets,  
as part of her deal to become Rob’s partner. She maintains that CCI not only gained  
NFE’s assets and goodwill, it eliminated a source of major competition.  
Page: 9  
[57] Cheryl also pleads a claim for damages premised on Rob’s alleged fraudulent  
misrepresentations during their 2008 negotiations, that she would be an equal partner in  
the restaurant.  
[58] Bruce alleges that as a result of Rob’s fraudulent misrepresentations in 2008, he was  
induced to provide unpaid labour to CCI.  
(g) The Defendants’ Counterclaim  
[59] In submissions, although not in his pleadings, Rob claims to be entitled to $50,000 as a  
result of defamatory comments made by Cheryl, after she left CCI. The pleaded aspects  
of the defendants’ counterclaim are not pursued at trial.  
(h) Structure of these Reasons  
[60] Below, I will explain my reasons for dismissing the plaintiffs’ wrongful dismissal claims,  
together with the balance of the action, excepting Cheryl’s claim pursuant to s. 248 of the  
OBCA, as well as, my reasons for dismissing Rob’s submitted counterclaim. I will also  
explain why I am persuaded that Rob and CCI engaged in certain conduct that both  
violated Cheryl’s reasonable expectations qua shareholder and fell within the scope of s.  
248(2) of the OBCA and, as a result, a purchase of her shares should be ordered, as the  
parties mutually request. Finally, I will explain why the fairest valuation date for  
Cheryl’s shares is December 31, 2010, CCI’s year-end date in the year the original  
oppressive conduct, as found, occurred and as a result, the value of the shares is nil and  
the transfer should occur at nominal consideration.  
[61] I will begin my reasons by detailing the evidence adduced at trial, followed by a  
summary of the parties’ respective positions.  
[62] Thereafter, I will determine the issues by first resolving the conflicts in the evidence and  
making the necessary factual determinations concerning: the formation of the parties’  
deal; the validity and quantum of CCI’s related-party debt; and the contextual  
circumstances leading to Cheryl’s withdrawal from CCI.  
[63] I will then explain why, in my view, Cheryl was not expressly or constructively  
dismissed, but rather, through her conduct she resigned from her employment. I will also  
provisionally assess Cheryl’s damages for wrongful dismissal, including her claim for  
aggravated damages. Finally, I will assess Bruce’s damages for wrongful dismissal.  
[64] Next, I will dispose of Cheryl’s oppression claim by first determining the reasonableness  
of her asserted expectations as a shareholder, and whether any of them were breached by  
the defendants’ conduct in a manner consistent with s. 248(2) of the OBCA. I will  
explain why certain conduct by Rob, as found, does so. In determining the appropriate  
remedy, I accept the submission, by all affected parties, that a share purchase of Cheryl’s  
shares should be ordered. I will explain my determination that December 31, 2010 is the  
fairest valuation date and why I accept the opinion evidence that the shares have no value  
Page: 10  
as of that date. I will also explain, in a provisional assessment, why I accept the  
defendants’ expert evidence that Cheryl’s shares in CCI have a value of $26,950, if  
December 31, 2017 is selected as the valuation date.  
[65] Finally, I will explain my reasons for dismissing the balance of the plaintiffs’ claims and  
the defendants’ counterclaim.  
II)  
THE EVIDENCE  
The Nature of the Evidence  
[66] The plaintiffs called evidence from four witnesses: Cheryl; Bruce; Ferruccio Da Sacco;  
and James Tracey. Mr. Da Sacco is a member of the court appointed auditor, BDO. Mr.  
Tracey is, among other things, a certified business valuator who was qualified to provide  
expert opinion evidence with respect to the fair market value of CCI’s shares as of  
December 31, 2017.  
[67] The defendants adduced evidence from six witnesses: Rob; Greg Kazarian (CCI’s  
financial controller from 2010 to 2012); Stephanie Temesy (CCI’s bookkeeper from 2015  
to present); Peter Tsirimbis (CCI’s general manager from 2012 to present); Gerry Hockin  
(CCI’s former accountant and current consultant to the RM group of companies); and  
certified business valuator Lindsay Campbell, who was qualified to provide expert  
opinion evidence on the fair market value of CCI’s shares as of December 31, 2010, 2011  
and 2017, respectively.  
[68] Below, I will summarize the evidence of Cheryl, Bruce and Mr. Da Sacco, together with  
aspects of a number of the documentary exhibits to which they referred in their respective  
evidence. Following that, I will summarize the non-expert evidence adduced by the  
defendants. Finally, I will summarize the reports and viva voce evidence of both Mr.  
Tracey and Ms. Campbell.  
The Evidence Adduced on Behalf of the Plaintiffs  
Evidence of Cheryl Anne McInerney  
[69] Cheryl is married to her co-plaintiff, Bruce. Prior to her involvement with CCI, she had  
experience in the restaurant industry, in which she has worked intermittently, in varying  
capacities, since she was a teenager.  
[70] In July 2001, Cheryl purchased a cafeteria-style restaurant in downtown Chatham, known  
as the Natural Food Emporium (“NFE”), which served a lunch and a bistro dinner  
service. She operated NFE as a sole proprietorship. Bruce consistently provided unpaid  
labour services to NFE, performing various tasks on an as needed basis, including  
bookkeeping.  
[71] From a financial perspective, Cheryl indicates that NFE had “good years and bad years”  
in the seven-year period in which it operated. Bruce’s handwritten calculations of NFE’s  
net annual income in the years 2004 to 2008, inclusive, indicate that NFE had: a net loss  
Page: 11  
of $420.42 in 2004; a net income of $48,000 in 2005; a net loss of $2,072 in 2006; a net  
loss of $2,739 in 2007; and a net income of $11,459 in 2008.  
[72] Cheryl enjoyed operating NFE, which she did until December 31, 2008. On January 1,  
2009, she commenced employment as “the manager” and one of the chefs at a Chatham  
restaurant known as the Chilled Cork Inc. (CCI). Cheryl was also a 50 percent  
shareholder of CCI, together with RJM Holdings Inc., a corporation owned by Rob. Rob  
actively solicited Cheryl’s participation in the ownership and operation of CCI.  
[73] Cheryl and Rob first met in April 2008, when he walked into NFE’s kitchen, introduced  
himself and asked Cheryl if she wanted to open a restaurant at the Retro Suites, a hotel  
that he had developed in Chatham’s downtown core. She was intrigued. They met at the  
Retro Suites later that night, where Cheryl, Bruce and three of NFE’s other employees  
toured the empty restaurant shell. At the conclusion of the tour, the NFE employees left  
and Cheryl, Bruce and Rob discussed the nature of Rob’s proposed venture, which  
according to Cheryl’s original evidence, included, among other things, the following:  
1)  
Rob and Cheryl would be 50/50 partners in a restaurant business located in the  
Retro Suites. They would share the profits of the restaurant on an equal basis.  
Cheryl was aware that there would be no profits in the first few years of the  
restaurant’s operation and she advised Rob accordingly.  
2)  
3)  
Cheryl would be employed as the restaurant’s manager and she would be paid an  
annual salary of $50,000.  
Cheryl asked Rob if he required an executive chef for the restaurant because, in  
her words, she was only a cook. He responded in the affirmative and approved  
the hiring of a chef, at an annual salary of $60,000.  
4)  
Cheryl identified all of the kitchen equipment that needed to be purchased for  
CCI. Rob wanted her to personally select the kitchen equipment, as well as, the  
fixtures, furnishings and other capital assets, that the restaurant required.  
5)  
6)  
Rob wanted Cheryl to personally recruit and hire a chef.  
Rob advised Cheryl that he wanted her to oversee the restaurant’s “build out”  
because NFE was a clean restaurant and she was a hard worker.  
7)  
Rob described himself as Cheryl’s “angel investor” and told her that he intended  
to be a silent partner. He would not be involved in the restaurant’s day-to-day  
operation because he had no experience in that regard and he was otherwise too  
busy. He said they would be “rich”.  
8)  
Rob indicated that he would: financially contribute $50,000 for the restaurant’s  
start up; finance the purchase of CCI’s capital equipment; and maintain a  
$100,000 line of credit for the restaurant’s operation.  
Page: 12  
[74] At the conclusion of the meeting, Rob and Cheryl shook hands and Rob said: It’s a  
done deal”; “My handshake is my bond”; “I never go back on handshakes”; “We will be  
50/50 partners”; and “I don’t want to run the restaurant”.  
[75] After the meeting, Cheryl continued to operate NFE at its original location until the end  
of August 2008. In September 2008, she moved NFE’s equipment to CCI’s planned  
location in the Retro Suites and began to operate NFE there. At that time, there were still  
four years left on a five-year lease of NFE’s original operating premises. Rob did not  
assist her in terminating that lease.  
[76] The restaurant opened at the Retro Suites as “NFE/Chilled Cork”, in September 2008.  
Cheryl continued to run the business as a sole proprietorship until the end of 2008. CCI  
commenced operations on January 1, 2009.  
[77] Cheryl was not required to financially contribute to CCI’s development or its operation.  
She was CCI’s only general manager. She hired all of CCI’s original employees,  
including Bruce, whose job duties were similar to those he held with NFE, and included  
cleaning, stocking the bar, setting up the banquet room, and making purchases. Later in  
her evidence, Cheryl clarified that Bruce was originally not a paid employee of CCI. She  
did not discuss hiring Bruce with Rob because she thought Rob knew that Bruce had  
worked at NFE. Cheryl also hired her friend, Michel Bonnot, a Red Seal chef, as CCI’s  
executive chef. Before he was hired, Chef Bonnot met with both Rob and Cheryl. Cheryl  
also hired Chef Bonnot’s wife, Leslie, as CCI’s original bookkeeper.  
[78] In August 2009, the Retro Suites’ “business manager”, Ron LaRoche, provided Cheryl  
with correspondence dated August 17, 2009, from Rob’s lawyer, Dennis Asher, which  
enclosed several documents for Cheryl’s execution, including: an asset purchase  
agreement between Cheryl (as sole proprietor of NFE) and CCI; a commercial lease  
between CCI and Retro Suites; a resolution of CCI’s board of directors; a stock transfer  
register showing, among other things, that Cheryl received 50 class A shares in CCI and  
that she was elected CCI’s President as of August 17, 2009; a Directors Register that  
listed both Cheryl and Rob as directors; a Contract of Employment between Cheryl, Rob  
and CCI; a general security agreement made by CCI in favour of RJM Holdings Limited;  
and an Unanimous Shareholders Agreement (USA).  
[79] The relevant terms of the foregoing documents include:  
(a) The Commercial Lease  
“2.  
The term of this lease commences on January 1, 2009 and ends of  
December 31, 2014.  
4.  
5.  
(a) The Tenant shall pay the Landlord a “base rent” of forty eight  
thousand dollars ($48,000) plus GST per year in equal monthly  
installments of Four Thousand dollars ($4,000) …  
The following services and expenses are at the sole responsibility  
and expense of the Tenant:  
Page: 13  
(a) any and all upgrades to facility to enable and/or increase  
productivity to the business.  
7.  
The Tenant shall also be solely responsible for repairs or  
improvements to the structure and to the exterior and interior of the  
building for business purposes.”  
(b) The Contract of Employment  
Between Chilled Cork (Employer), Cheryl McInerney (Employee) and  
Rob Myers (Shareholder)  
“1.  
Employment and Term  
(1) The Employee is employed by the Employer in the position of  
management effective the 1st day of January, 2009 … In carrying  
out her duties the Employee will comply with all reasonable  
instructions as may be given by the Shareholder on behalf of the  
Employer.  
(3)  
The Employee agrees that her reporting relationships,  
duties and responsibilities may be changed by the Shareholder on  
behalf of the Employer as he deems appropriate. The Employee  
agrees that any of the changes which may occur pursuant to this  
paragraph will not affect or change any other part of this  
Agreement. The Employee will work with the representatives  
retained by the Employer to assist in the operation of the  
Employer.  
2
Remuneration and Benefits:  
(1) In consideration of your performance of the obligations  
contained in this Agreement, the Employer will:  
(a) pay the Employee a salary of $50,000 per annum  
subject to the normal statutory deductions commencing  
January 1, 2009 based upon full-time employment.  
(4)  
Termination:  
The Employee covenants and agrees that the Shareholder on behalf of the  
Employer may terminate this contract of employment without notice or  
pay in lieu of notice for cause. For the purposes of this agreement “cause”  
shall include:  
Page: 14  
(b) consistent poor performance on her part, after being advised as  
to the standard required, as determined in the sole discretion of the  
Shareholder on behalf of the Employer;”  
[Emphasis added.]  
(c) The General Security Agreement  
“Chilled Cork Inc. (the “Debtor”)  
RJM Holdings Limited (the “Secured Party”)  
1.  
The creation of security interest  
(1) for value received and as a general and continuing collateral  
security for the payment of Indebtedness (as defined below or as set out in  
Schedule “A”) … The Debtor hereby grants to the Secured Party a  
security interest in all of the Debtor’s personal property … and in the  
undertaking of the Debtor.  
Schedule “A”  
This agreement is to secure the liability of the Debtor to the Creditor in the  
amount of One Hundred Fifty Thousand Dollars ($100,000) [sic].”  
(d) The Unanimous Shareholders Agreement  
Article 3 Operation and Control of the Corporation  
3.1 The parties hereto shall cause such meetings of Directors and  
Shareholders of the Corporation to be held, votes to be cast, resolutions to  
be passed, by-laws to be passed, documents to be executed and all things  
and acts to be done to ensure the following continuing arrangements with  
respect to the operation and control of the Corporation:  
(a) The Board of Directors of the Corporation shall be composed of  
two (2) members namely Cheryl and Rob  
(c) without the prior written consent of Shareholders holding, in  
aggregate, not less than 51% of the total number of issued shares;  
Page: 15  
(i) there shall be no change in the number of Directors of  
the corporation;  
Article 4 Restrictions on the Issue and Transfer of Shares  
4.1 Restrictions  
(b) no shareholder shall sell, assign, transfer, dispose of, gift,  
donate, grant, mortgage, pledge, hypothecate, charge or otherwise  
encumber or deal with any Shares now or hereafter owned or held  
by such Shareholder or any interest in any such Shares.  
Article 5 Buy/Sell Arrangements  
5.1 The purchase and sale provisions of section 5.2 hereof shall apply on  
the happening of any one of the following events:  
(b) The death of any Shareholder;  
(d) The insolvency or bankruptcy of any Shareholder (at the  
option of the Board of Directors of the Corporation exercised by  
giving written notice to such Shareholder);  
(e) In the case of Cheryl, if Cheryl for any reason whatsoever,  
ceases to be an employee of the Corporation (at the option of the  
Board of Directors of the Corporation exercised by the giving of  
written notice to Cheryl)  
and the Shareholder, who has given notice, who has died or been  
found incompetent, become insolvent or bankrupt, or Cheryl upon  
ceasing to be an employee of the Corporation and having received  
written notification from Rob, shall hereinafter in this section be  
referred to as the “Retiring Shareholder …”  
5.2 The Corporation shall purchase all the Shares of the Corporation held  
by Retiring Shareholder on the following terms and conditions:  
(a) the aggregate purchase price for such Shares (the “Purchase Price”)  
shall be:  
Page: 16  
- an amount equal to the Prescribed Value of the Corporation (as defined  
in annexed Schedule “A”) multiplied by the number of Shares held by the  
Retiring Shareholder and divided by the total number of Shares  
outstanding on the Termination Date.  
[Emphasis added.]  
Schedule “A” to the proposed Shareholders Agreement provided that the “Prescribed  
Value of the Corporation” for the purposes of a buyout would be:  
“(b) if there is no written agreement as to the Prescribed Value of the  
Corporation or if such written agreement has elapsed as foresaid, then an  
amount equal to the fair value of One Hundred Percent (100%) of the  
Common Shares as determined by Corporation’s Accountant whose  
determination shall be final and binding upon the surviving  
Shareholders, the Retiring Shareholder, the Corporation and their  
respective heirs, legal personal representatives, successors and assigns.  
[80] Cheryl did not sign the documents immediately upon receipt because she was “always  
too busy to look at them”. Both Mr. Asher and Mr. LaRoche repeatedly followed up with  
her in that regard. She did not read any of the documents, but she eventually signed all of  
them, except the USA. Cheryl explains that she did not receive legal advice before she  
signed the documents because when she originally met with Rob in 2008, he told her that:  
she did not need to retain a lawyer; she could trust him; and a lawyer would just cost her  
money.  
[81] Cheryl originally testified that she eventually signed the documents (except the USA)  
despite not reading them or understanding their content because Rob and Mr. LaRoche  
kept “bugging her to sign”. Anytime that she talked about getting a lawyer, Rob told her  
that she did not need one. Cheryl maintains that she needed someone to “walk her  
through” the documents, but she did not contact Mr. Asher to advise him that she did not  
understand the documents.  
[82] On November 9, 2009, Cheryl read and signed a “waiver and acknowledgment”, that was  
prepared by Mr. Asher and directed to Mr. Asher, RJM Holdings Limited, CCI, and Rob.  
That document confirms that she transferred her restaurant business (NFE) to CCI in  
exchange for 50 percent of CCI’s shares, as well as Cheryl’s understanding that: CCI  
would pay rent to RJM Holdings Limited in the amount of $4,000 per month; she would  
enter into an employment agreement with CCI; she and Rob would enter into a USA with  
respect to CCI; and CCI would grant a security interest over all of its assets in favour of  
RJM Holdings Inc.  
Page: 17  
[83] Finally, through the “waiver and acknowledgement”, Cheryl confirmed that Mr. Asher  
had advised her to obtain independent legal advice with respect to the CCI transaction  
and she declined to do so. In her evidence, Cheryl states that she never spoke with Mr.  
Asher about obtaining independent legal advice. When she read that portion of the  
waiver and acknowledgement, she reasoned that she had already signed the documents  
that were enclosed with Mr. Asher’s August 2009 correspondence, so she signed the  
waiver and acknowledgment and returned it to Mr. LaRoche.  
[84] Cheryl allows that during the course of their ongoing discussions in 2008, she advised  
Rob that she projected that CCI could generate a million dollars in revenue in 2009.  
Ultimately, it did not do so. CCI incurred a substantial loss in its first year of operation.  
Rob was angry that the business was not profitable. Eventually, Rob began to hold staff  
meetings with Cheryl, Nancy Labadie (the general manager of Retro Suites), Ron  
LaRoche and Chef Bonnot. Cheryl’s evidence concerning the commencement of those  
meetings and Rob’s demeanour during the meetings evolved over the course of her  
evidence.  
[85] Originally, Cheryl testified that the meetings, which were held approximately once every  
three months, made her nervous. During the meetings, Rob would rant and rave, throw  
papers around, and “talk down” to the other attendees. He refused to listen to any of  
Cheryl’s “cost cutting” suggestions and he dismissed all of the efforts that Cheryl had  
made to reduce CCI’s expenses. He consistently reiterated that he wanted them to “make  
money”, but he never offered any suggestions of his own, in that regard.  
[86] In order to address Rob’s concerns, Chef Bonnot voluntarily reduced his salary from  
$60,000 to $45,000 and Cheryl reduced the number of CCI’s staff, while increasing the  
number of hours that she worked from 55 hours per week to 70 hours per week. Working  
with Retro Suites marketing director Mr. LaRoche, Cheryl engaged in various efforts to  
increase CCI’s sales. Some of her ideas worked and some did not. Rob remained  
unsatisfied. He never made Cheryl feel that she was improving in her management of  
CCI.  
[87] CCI continued to suffer operating losses throughout the first half of 2010, prompting  
Chef Bonnot to voluntarily reduce his annual salary further, to $35,000. Cheryl believed  
that the restaurant was showing some financial improvements in the period from April to  
June 2010. She presented the numbers to Rob, who laughed at her and told her that she  
was stupid.  
[88] Sometime in mid-2010, an individual named Greg Kazarian began to work as a  
bookkeeper for the Retro Suites Hotel. A few weeks after he started, Mr. LaRoche  
advised Cheryl that Rob wanted her to arrange for Leslie Bonnot to train Mr. Kazarian on  
CCI’s bookkeeping system. Cheryl acknowledges that Mr. LaRoche asked her to do so  
on a number of occasions and she consistently refused. She felt that it was unfair that Rob  
decided to have someone else engaged in CCI’s bookkeeping, without involving her in  
the decision.  
Page: 18  
[89] Cheryl then testified to the content and circumstances of correspondence that she  
authored to Rob in mid-2010. She maintains that when she was originally asked to have  
Ms. Bonnot review CCI’s bookkeeping system with Mr. Kazarian, Rob was out of the  
country and she did not know how to reach him. As a result, she wrote correspondence to  
Rob, which she originally testified she mailed to his residence on July 8, 2010 (the letter  
bears a handwritten date of “July 8”). Later, she conceded that that aspect of her evidence  
was inaccurate. She then suggested that she forwarded the correspondence to Rob at the  
end of June 2010.  
[90] In her correspondence, Cheryl, among other things:  
(a) discloses that Rob has never made her feel like a “partner” and her belief that  
he “probably never will”;  
(b) alleges that at each of their meetings, Rob said that he felt like he had been  
“fucked”;  
(c) discloses that she feels like she has been “fucked”;  
(d) discloses that she “jumped way too fast” at Rob’s proposal; that she trusted  
Rob, despite people telling her not to do so; and reiterating that he said he was  
her “angel”;  
(e) asserts that she received nothing in exchange for moving her restaurant and  
client-base to CCI’s location and she was left with nothing;  
(f) particularizes her debt, related to the lease of NFE’s former operating  
premises;  
(g) discloses her ongoing efforts to make CCI a success;  
(h) alleges that the parties agreed that CCI would make payments with respect to  
a truck that Bruce and Cheryl owned;  
(i) disclosed that when Bruce works for CCI, he “only charges for some of his  
hours and only gets minimum wage”;  
(j) confides that she missed her old bistro restaurant, where she and Bruce were  
happy and “the stress was all ours”;  
(k) attributes CCI’s 2009 financial losses to a recession;  
(l) confirms that she wanted CCI to become profitable;  
(m)discloses that at each of their meetings, Rob destroys “more and more” of her  
self esteem;  
Page: 19  
(n) expresses that she and Rob did not talk like “real partners” about CCI’s issues  
and reasonable solutions to them;  
(o) identifies CCI’s “salary costs” as its biggest issue and that its sales needed to  
increase;  
(p) accepts Rob’s rationale for involving Mr. Kazarian in CCI’s operation, but  
expresses concern that she was not advised, in advance, of his intended role;  
(q) confirms that in 2009, CCI paid her a salary in excess of the $50,000 amount  
set out in her employment contract, and justifies the additional amount as  
being the difference between the salary that she ought to have been paid by  
CCI for the period of September 2008 to December 2009, less NFE’s net  
annual income in 2008;  
(r) acknowledges that some of her personal expenses were paid by CCI in 2009,  
which she attributed to the failure of CCI’s bookkeeper to properly segregate  
personal receipts that Cheryl provided to her;  
(s) acknowledges that CCI’s financial performance in 2009 was “bad” and worse  
than she thought, but expresses her belief that its performance in 2010 was  
improving;  
(t) expresses her hope that Mr. Kazarian would be able to determine other ways  
to improve CCI’s financial performance, without affecting quality and service;  
(u) expresses her desire to work together with Rob, “as partners”.  
[91] In recounting the content of the letter during her evidence, Cheryl testified that in every  
meeting that she had with Rob, he told her that he “felt like he was being fucked” and he  
would not listen to her. He would also tell her that: she was dumb; she did not know  
what she was doing; and he could not believe that she owned a restaurant. In some of the  
meetings, Rob told Cheryl that she was not worth her pay. He threatened that if she did  
not start showing a profit, he would “get rid of her”. She felt like she could never make  
Rob happy. During the meetings, she often cried in front of Rob and other staff members.  
Despite what he told her in their initial meeting in April 2008, Rob was never her angel  
and he did not treat her well. If she had known “how Rob truly was” she would never  
have gone into business with him.  
[92] Shortly after giving the foregoing aspects of her evidence, Cheryl testified to a differing  
narrative concerning Rob’s demeanour. Specifically, during CCI’s initial operations and  
throughout 2009, Rob was always “nice” and “kind” towards her. His demeanour only  
changed in 2010, after CCI did not achieve profitability in its first year of operation.  
[93] Cheryl deposed to a number of other issues that she experienced while operating CCI,  
including the following. When she left NFE’s former location, she ultimately found a  
tenant to sublet that premises for four years but she continued to service a loan associated  
with renovations at the former premises. She also had to pay a lawyer to assist her in  
Page: 20  
getting out” of her lease. She asked Rob for help with her lease-related issues and he  
told her that she should offer the landlord $10,000.  
[94] Cheryl personally owned a truck that CCI used in its business, for liquor pick-ups and  
deliveries. Initially, she caused CCI to make all of the payments related to the truck.  
Eventually, she resumed personal payment of the truck expenses, in an effort to assist  
CCI achieve profitability.  
[95] Based on the number of hours that she worked and her $50,000 annual salary, Cheryl  
estimates that she was paid approximately $12 per hour while she was employed by CCI.  
In addition, Bruce worked a number of hours that were not recorded and for which he  
was not paid.  
[96] Cheryl authored the “July 8” correspondence, because she wanted Rob to understand that  
she felt like she was losing her self esteem. She expected that after he received it, he  
would talk to her “one on one”. She wrote it to ask Rob for a “chance” and to advise him  
that she was trying to make things better, and that she was striving to achieve  
profitability. Through a patently leading question, Cheryl confirmed that she felt  
“vulnerable”, in relation to Rob.  
[97] Cheryl’s correspondence also refers to Mr. Kazarian’s arrival. Cheryl explains that Mr.  
Kazarian was on site at the Retro Suites for a couple of weeks before she met him. After  
two weeks, Mr. LaRoche introduced him to Cheryl as an “overseer” and indicated that  
Rob wanted him to “take over” CCI’s financial books. Cheryl testifies that Mr.  
Kazarian’s arrival made her feel “useless and demeaned”.  
[98] Cheryl explains that in her correspondence, the statement, “I don’t steal”, refers to “an  
accusation” by Rob that CCI had paid some of her personal expenses.  
[99] Cheryl acknowledges that the total amount of the salary that CCI paid her in 2009,  
exceeded her contracted annual amount of $50,000. She reasons that she was entitled to  
compensation from CCI for the period of September to December 2008, when she  
operated NFE at the Retro Suites location. As a result, in 2009, she caused CCI to pay her  
an additional $4,443.  
[100] As soon as Rob received Cheryl’s correspondence in early July 2010, he summoned her  
to a meeting at the offices of the RM group of companies. When she arrived, Rob advised  
her that as a result of her correspondence, she was personally required “to fire” Chef  
Bonnot, Bruce, and Leslie, and if she did not do so, she would lose her job. Rob also  
advised her that Mr. Kazarian was now going to assume control over all aspects of CCI’s  
management and if she “did not like it, she could leave” and he would “even throw a little  
money” at her. Cheryl cried and told Rob that she needed to keep her job. He told her to  
make a decision by the following day.  
[101] Later that day, Cheryl met with Bruce, Chef Bonnot and Leslie Bonnot and advised them  
about her meeting with Rob. The following day, Chef Bonnot, Leslie and Bruce went to  
work at CCI. Cheryl spoke with Rob and convinced him to retain Chef Bonnot at a wage  
rate of $17 per hour. However, Rob imposed a “new rule” that spouses were no longer  
Page: 21  
permitted to work together at CCI. As a result, he told Cheryl that Leslie Bonnot and  
Bruce had to be terminated within two weeks.  
[102] The following day, Cheryl met with Rob, Mr. Kazarian and Chef Bonnot in CCI’s  
banquet room. Rob announced that effective immediately, Bruce and Leslie were  
terminated and Mr. Kazarian was “taking over the business”. Rob took Cheryl’s CCI  
“credit card” and removed her cheque signing authority. He advised her that Mr.  
Kazarian would provide her with $100 float that could be topped up, if she submitted  
receipts for expenditures. Rob advised Cheryl that he wanted her to continue “cooking  
food” and “running the restaurant”. Cheryl’s office was relocated to a smaller desk in an  
office/storage room. Mr. Kazarian was to assume responsibility for purchasing supplies.  
[103] Leslie and Bruce were fired immediately after the meeting. Cheryl began losing sleep and  
crying all the time. She felt that she had been reduced to “just an employee”.  
[104] In the days that followed, Cheryl eventually “lost it” and confronted Mr. Kazarian in the  
restaurant during its operating hours. She yelled at him and accused him of trying to take  
her job. He advised her that was not the case. She began to cry and ran out of the  
restaurant. She testified that after she confronted Mr. Kazarian, she could not “go back”  
to CCI. She was sad and constantly crying. She felt that “everything had been taken  
away from” her. CCI was “all she had” but Rob made her feel that her efforts to operate  
it were “terrible”. She “just didn’t want to try anymore”. She felt that “they were trying  
to take [her] life away”.  
[105] Eventually, Mr. Kazarian sent Cheryl correspondence, dated July 14, 2010, in which he  
reiterated that she had stated that she was “depressed” and “needed time”. Mr. Kazarian  
suggested that she take two weeks off work with pay. He also proposed meeting with her  
on or about July 28, 2010, to discuss whether she was ready to return to work.  
[106] As Mr. Kazarian suggested, Cheryl remained off work for two weeks, during which she  
“mostly stayed in bed”. She eventually attended on her family physician who prescribed  
medication for “depression” and sleep difficulties. On July 20, 2010, her family  
physician wrote a note endorsing that she was “off work for medical reasons at least a  
month”.  
[107] On July 21, 2010, Cheryl read an advertisement placed by CCI in a local newspaper  
seeking, among other positions, a Red Seal chef, to supervise cooks and kitchen staff.  
Cheryl concluded the purpose of the advertisement was to find someone to replace her at  
CCI. She became more depressed and felt worthless.  
[108] On August 4, 2010, Cheryl received a voicemail message from Rob, which she  
transcribed as follows:  
Hi Cheryl Rob Myers here. I’ve talked [with] Michél [Chef Bonnot] & I  
believe I’ve come up [with] something as a solution so I’ll give you three  
months pay & if you need some help setting up your old Restaurant I’ll  
help you out a little. Obviously this is not going to work between us. So  
I’ve got Dennis Asher drafting up some paper work you’ll have to sign  
Page: 22  
off on. If you have any questions since I can’t get a hold of you give me  
a call at [phone number]. Talk to you later.  
[109] Cheryl did not respond to Rob’s proposal.  
[110] On August 30, 2010, Cheryl attended on registered nurse practitioner Joan Brisley at the  
Chatham-Kent Health Alliance Mental Health and Addictions Program, who  
subsequently authored a report to consulting psychiatrist Dr. Fairburn. In her report, she  
recorded Cheryl’s subjective report that she started feeling depressed six weeks earlier  
after, among other things, a “wrongful demotion” at CCI and a “loss of investment in her  
restaurant business”. She had previously been prescribed paxil by her family doctor,  
which was helping. She had specified anxiety, but no panic. Her past psychiatric history  
was noted to include the loss of a child at a young age, which resulted in feelings of  
loneliness and depression. She also had a family history of depression. The nurse  
practitioner diagnosed Cheryl with an “adjustment disorder”. Cheryl was not diagnosed  
with a depressive disorder. Cheryl did not follow the nurse’s recommendation that she  
engage in a “few sessions” of counselling, reasoning that she had strong support from her  
family. No limitations on Cheryl’s ability to work were expressly endorsed.  
[111] Cheryl maintains that she provided copies of all the medical documentation that she  
received to Chef Bonnot, with the expectation that he would provide it to Mr. Kazarian.  
[112] At the end of August or beginning of September 2010, Cheryl received a package of  
documents through Chef Bonnot, which were prepared by Mr. Asher and included: a  
“Termination of Employment” agreement; a Resolution of CCI’s Shareholders; and a  
Share Transfer Agreement all dated August 31, 2010. The documents, which required  
Cheryl’s signature to gain effect, essentially record that she resigned as an employee of  
CCI and affected a transfer of all of her shares in CCI to RJM Holdings Limited for  
consideration of one dollar. Cheryl neither requested nor executed the documents.  
[113] On September 24, 2010, Cheryl was assessed by psychiatrist Dr. Fairburn at the request  
of her family physician, who authored a report dated September 24, 2010. The parties  
agree that Dr. Fairburn is qualified to express the opinions set out in the report. Dr.  
Fairburn formally diagnosed Cheryl with “adult life with mixed emotion”. He did not  
diagnose an adjustment disorder and he expressly opined that there was no evidence that  
Cheryl presented with a major depressive disorder. He opined that her prognosis was  
excellent. Cheryl accepted a referral for some counselling, but she ultimately did not  
attend for same.  
[114] After attending on Dr. Fairburn, Cheryl continued to feel depressed. She did not leave  
her home until October 2010. She never returned to CCI and eventually, CCI stopped  
paying her salary.  
[115] In October 2010, Bruce started a business, as a sole proprietor, under the name Healthy  
Choice Catering. From its inception, Cheryl actively participated in the business by  
cooking and engaging in “prep work”. She continued to work in that capacity until she  
Page: 23  
opened a new restaurant in Chatham at the end of July 2011, under the name “Zee’s  
Bistro”, which she has continued to operate, up to the present.  
[116] Since July 2011, Cheryl has acted as the sole proprietor and main cook at Zee’s Bistro.  
She is also responsible for all employee hiring, firing, and scheduling. In order to start  
that business, she purchased an existing restaurant in April 2011, which she fully  
renovated. After sustaining a net loss of $79,515 in 2011, Zee’s Bistro has achieved  
profitability in each year of its operation.  
[117] Zee’s Bistro does not “compete” with CCI. CCI is a fine dining restaurant. Zee’s Bistro,  
which is located approximately eight kilometres from CCI, is a small bistro-style  
restaurant that serves pita sandwiches and soup for lunch and fresh homemade food for  
dinner.  
[118] Cheryl confirms that Bruce was unable to drive, owing to a licence suspension, while the  
Healthy Choice Catering business was active. As a result, she not only performed all of  
the cooking for that business, she also did all of the driving associated with its deliveries  
and catered events. She concedes that that business “made some money” and continued to  
operate until she opened Zee’s Bistro. She confirms that neither she nor Bruce have  
produced or disclosed any financial information for the Healthy Choice catering business  
in the context of this litigation.  
[119] After the commencement of this action, Cheryl received two letters from Rob. The first,  
dated July 19, 2012, and addressed to both Cheryl and Bruce, provides as follows:  
I want to extend a courtesy to the both of you, along with your lawyer, to  
notify you that I, my family, and the RM group of companies, have every  
intention of fully defending your lawsuit, and will also pursue a  
counterclaim against the both of you. Be aware that I will not make any  
settlement offer since I find this lawsuit to be totally unjustified.  
Cheryl, you were a very hard worker but please refer back to our original  
agreement and you will see that Bruce was never to be a part of the  
business. When it came to my attention that The Chilled Cork was losing  
money due to late government payments and penalties, extremely high  
food and labour costs and a multitude of issues, I reviewed our business  
operations with my CFO Gerry Hockin, along with our accountants from  
Deloitte. This is when I discovered the self-imposed increase in your  
personal salary, the unapproved addition of Bruce onto our payroll, along  
with many other operating issues that proved to me that we would not  
have a viable business if you were allowed to continue operating it like  
this.  
The business paid out several months of your salary even though you did  
not come into the restaurant for an extended absence. Further, I  
personally paid out over two-hundred thousand dollars ($200,000) in  
losses at The Chilled Cork while under your management. Until now, I  
Page: 24  
have never asked you to assume your half of the responsibility for your  
share of these losses. At this point, I will now pursue our counterclaim  
against you for a breach of contract, and I insist that you immediately  
stop slandering me and my family’s good name in your restaurant!  
Several friends and clients have been engaged in some of your libelous  
discussions in your new establishment and then reported back to us to  
make us aware of your defamatory comments. This needs to stop now!  
Please take my notice very seriously. If you continue with your lawsuit  
and your slanderous comments about me and my family, I will get very  
active in pursuing compensation from the both of you for losses and the  
damage you are attempting to cause to the Myers family. It would also be  
a shame if the local media were to catch hold of details about this lawsuit  
and counterclaim as I can’t imagine it would be good for your reputation  
and business.  
Cheryl, please understand that I am not in any way wishing to put  
personal pressure or hardship onto you but you will leave me little choice  
but to take actions of my own if you continue moving forward with your  
lawsuit. I will expect your reply within 15 days of this date and I  
recommend that you obtain very sound advice when making your  
decision. I have copied both of RM’s in-house counsel on this memo, as  
well, as they are handling this situation on my behalf.  
[120] In response to the content of that correspondence, Cheryl testifies that: she never agreed  
that Bruce would not be involved in CCI’s operations; she never unilaterally increased  
her salary at CCI; she met with Gerry Hockin once in 2009; she never defamed Rob or  
his family she was upset with Rob but did not say anything defamatory about him; and  
she has no knowledge concerning the $200,000 losses that Rob described. Cheryl viewed  
Rob’s correspondence as a “threat” which made her feel “horrible”.  
[121] Rob wrote a second undated letter which he delivered to Zee’s Bistro in August 2017.  
That correspondence provides as follows [paragraph breaks inserted for ease of reading]:  
Cheryl,  
I have been monitoring this foolish lawsuit brought by you and Bruce,  
along with your shameless lawyers who have taken this contingency  
case on your behalf in order to try to extort some money from me. Now  
that you all have received the final audited BMO [sic] report, you know  
that due to your management of the Chilled Cork and all of the games  
that you and Bruce played while in charge, it caused a loss to the  
Chilled Cork of $202,485, of which you owe half.  
As has always been the fact, while you were in charge of running the  
Chilled Cork, this restaurant continually lost significant money from  
your operational guidance. I’ve been told of client purchases that were  
Page: 25  
never deposited into the company bank account! Bruce, who by the  
way was never to be an employee or any type of associate with the  
Chilled Cork as you originally agreed to, was purchasing all types of  
wine and other items that you allowed him to purchase even though he  
was never allowed to; as a result, all kinds of money was wasted. I  
believe we will be able to get old staff and even relatives of yours to  
testify that I was abused financially by you, Bruce, and high-paid  
friends that you hired without any type of approval from me.  
I frankly don’t care how you are currently operating your business now,  
but at some point I will most likely need to inform the CRA and an  
accounting firm to investigate your current operation in order to  
confirm for me your ability to pay me back money that will be due  
from you.  
You and the lawyers, who you obviously have had working on a  
contingency fee, have caused me serious damage, both to my reputation  
in town and in legal costs that I will insist to my lawyers that I recover.  
I am sure at that point you will not be able to have your lawyers defend  
you on a contingency basis, and in fact you will have to pay the same  
type of legal fees that I have been paying all along in defending my  
innocence.  
As the latest report will confirm from BDO and as has been stated from  
day one by the nationally recognized accounting firm Deloitte, the  
operations from Chilled Cork until 2015 show a deficit of $202,485,  
which you as a shareholder are responsible for half of, i.e. $101,242.  
This very clearly shows that the shares of the Chilled Cork are not  
worth any money and in fact are a liability that you currently are  
responsible for.  
The gamble that your lawyers have taken in hopes of extorting me has  
backfired on both you and them, and you will be left with the  
consequences to bear. In order for you to end this frivolous lawsuit and  
move on with your lives at Z’s potentially without an investigation, I  
am prepared to make you a final offer to end this foolishness. This offer  
is good for five days only from the date of this letter or I will  
aggressively pursue monies owing to me from both you and Bruce, and  
I will aggressively go out to prove that these Windsor lawyers have  
never been paid any type of fee from you to date, which could make for  
some interesting press. The terms of the offer are as follows:  
#1. You immediately drop this case;  
#2. You pay the Chilled Cork $30,000 to cover a small portion of the  
legal costs that it has incurred;  
Page: 26  
#3. You pay half of the BMO [sic] auditing fee of $23,500; and  
#4. You immediately stop your comments about myself, the Chilled  
Cork, the Retro Suites and any of my family members and sign a gag  
order.  
If you do not accept this offer within the next 5 days, I will instruct my  
internal and outside legal counsel to take the following actions in a  
lawsuit against you and Bruce personally to the fullest outcome  
possible.  
#1. We will seek repayment of $101,242 from you to pay for your  
responsibility of your portion of the deficit [owing] to Chilled Cork.  
#2. We will also seek to recover $101,242 from you to pay for some of  
the damages caused by you for you opening Z’s, as this is in direct  
competition with the Chilled Cork and is in breach of your employment  
contract with the Chilled Cork. You have damaged the Chilled Cork’s  
ability to run a profitable restaurant, both by direct competition and by  
harming both its reputation and my own lawsuit rumors you have  
circulated within our community.  
#3. We will also recover the thousands of dollars you have forced me to  
spend in legal fees to date to defend my innocence.  
As I have seen many times in the past, legal firms find people like you  
and see people who appear to be fairly wealthy and believe that with  
enough hassle, innocent people like myself will pay some money out  
just to settle an issue and make it go away. If I had been unfair to you  
or mistreated you in any way, I would have settled this long ago, but  
this is not the case. In fact with all that happened in the past and the  
large amount of money that you lost of mine, I feel that it has been kind  
of me not to pursue you for some of the losses that you caused me as  
the BDO report shows. This report directly contradicts your lawyers’  
position, and hopefully your lawyers will finally realize that they have  
no chance of winning any money out of this suit and that at this point, if  
this is not settled, we will become very aggressive in seeking the  
amounts outlined above even if you are forced into bankruptcy.  
I am totally disgusted by this situation and refuse to be extorted by you  
or your lawyers ever. My justice will prevail. I recommend you proceed  
cautiously, and I hope that both you and your lawyers will realize that I  
refuse to pay them any money, so get some good advice.  
Rob Myers  
[122] Cheryl viewed the foregoing correspondence as an attempt to scare and intimidate her.  
Page: 27  
[123] As a shareholder of CCI, Cheryl was never provided with annual audited or unaudited  
financial statements, on a contemporaneous basis. She has never agreed to exempt CCI  
from its obligation to produce audited financial statements to its shareholders. She has  
never attended a CCI shareholder meeting. She has never requested a shareholder  
meeting because she feels intimidated by Rob.  
[124] In cross-examination, Cheryl concedes that she is not a chef and she does not have a  
“Red Seal”. She has no formal training in restaurant management. Despite her evidence  
that based on “her experience” in the restaurant industry, start-up restaurants usually lose  
money in their first few years of operation, Cheryl concedes that she had never been  
involved in a start-up restaurant before CCI. She also confirms that NFE lost money in  
three out of four years of operation during the period of 2004 to 2007. She does not  
recall advising Rob about NFE’s historic lack of profitability, during their 2008 meetings.  
[125] Unlike Cheryl, Bruce does not have a long history working in restaurants. When Cheryl  
first met Bruce, he worked as a massage therapist. Following that he worked in a factory  
setting. Eventually, he was laid off and began to help out at NFE.  
[126] Cheryl confirms that in her initial 2008 discussions with Rob, he described the type of  
restaurant he wanted to open and the type of food he wanted to serve. From their  
discussions, she understood that CCI would offer a “finer” dining experience than the one  
offered by NFE and that CCI would be located in a boutique hotel. CCI was a larger  
restaurant than NFE and its service and presentation were intended to be “upscale”.  
Unlike NFE, CCI would serve breakfast, in addition to lunch, and dinner. CCI’s seating  
capacity was greater than NFE and, unlike NFE, it had a separate bar area and separate  
banquet facilities.  
[127] In the context of the foregoing, Cheryl acknowledges that she knew that managing CCI’s  
operations was going to be a challenge, but she viewed it as an opportunity to “up her  
game and to make more money”. Her potential involvement with CCI also afforded her  
an opportunity to become a 50 percent owner of the restaurant, without making any  
financial contribution or guaranteeing any loans. Instead, her “knowledge and services”  
would earn her 50 percent of the business. She acknowledges that until CCI became  
profitable, the value of her 50 percent ownership interest, was nil.  
[128] Cheryl then re-visited her evidence concerning her first meeting with Rob, which  
changed to some extent. Specifically, she testified that she advised Rob that the restaurant  
would not be profitable in its first year of operation and may not be profitable in its  
second year of operation. She did not say anything about expected profitability in its  
third year. During their initial meeting, Cheryl and Rob did not discuss: what would  
happen if the restaurant was unprofitable and Rob was required to advance additional  
funds to cover its losses; or what would happen if Cheryl became sick and was unable to  
work. Cheryl concedes that Rob never guaranteed that she would remain employed with  
CCI for a period of ten or 15 years. However, Cheryl felt that their “partnership  
agreement” would bind her to the restaurant.  
Page: 28  
[129] During her first meeting with Rob, Cheryl had no means to estimate: the revenue or  
losses that CCI would likely generate in its first year; the costs of the build out of the  
restaurant; or the estimated costs for the restaurant’s furnishings and equipment. She  
maintains that during that meeting, Rob advised her that: she did not need a lawyer; he  
trusted her; and she should trust him. She agrees that nothing was finalized between  
them during their initial meeting, but they shook hands.  
[130] Throughout the spring and summer of 2008, Rob and Cheryl had several other meetings  
concerning CCI, during which she never advised him about NFE’s general lack of  
profitability. As CCI’s operating premises were being built out, Cheryl was aware that  
the “costs of the build out” and the kitchen equipment and furnishing necessary for CCI’s  
operation would be financed through Rob, at first instance and repaid by CCI. She  
acknowledges that at some point Rob set up a $100,000 line of credit, but she is uncertain  
if it was through a financial institution or one of his other companies.  
[131] Sometime after their initial meeting, Cheryl advised Rob that CCI could generate a  
million dollars of revenue in its first year of operation. She also provided him with  
projections for the anticipated expenses associated with CCI’s active operation. Despite  
Cheryl’s first year revenue projection, CCI recorded a total revenue of $778,125 in 2009  
and $722,427 in 2010. Further, CCI’s 2010 revenue included “management fees” payable  
by RJM Holdings, recorded in the amount of $150,000. As a result, its actual revenue  
from operations in 2010, was approximately $572,427.  
[132] Cheryl “believes” that in 2008, she provided Rob with a projection that CCI would “lose”  
approximately $50,000 in its first year. She concedes that she understood that to the  
extent that CCI operated at a loss and the loss was “covered” through Rob (or one of his  
companies), CCI would eventually have to repay Rob (or one of his companies). She  
also understood that CCI would have to repay Rob for the costs of its build out,  
equipment, fixtures and furnishings.  
[133] As a 50 percent “partner”, Cheryl testifies that she expected to receive one-half of CCI’s  
profits, but if the restaurant failed she did not expect to pay one-half of its losses. She  
expected that if the business failed she would lose her job.  
[134] Cheryl indicates that she and Rob discussed all of the foregoing issues over the course of  
various meetings held between them in 2008. It was only after those discussions that  
Cheryl accepted Rob’s proposal, which was some time in the mid-summer of 2008. In so  
doing, she agrees that she and Rob proceeded with their deal on the understanding that:  
based on her estimates and projections, the restaurant could be built out, equipped and  
furnished for $100,000; and they anticipated a combined total of $50,000 in start-up costs  
and operating losses, in CCI’s first year of operation.  
[135] Prior to Cheryl accepting Rob’s proposal to be a “50 percent” partner in the restaurant,  
she and Rob did not discuss: the specific repayment terms for capital expenditures that he  
made on behalf of CCI; who would be responsible for “covering” any of CCI’s losses in  
excess of $50,000, during its first year of operation; whether Rob would share in NFE’s  
losses or profits during the period of September 2008 to December 2008; who would be  
Page: 29  
responsible for NFE’s lease obligations related to its former operating premises; who  
would be responsible for payments associated with the truck that Cheryl and Bruce  
owned; or whether CCI would assume NFE’s liabilities. Cheryl denies that in 2008, Rob  
clearly advised her that Bruce was not permitted to work at CCI.  
[136] Cheryl maintains that when she accepted Rob’s proposal, he advised her again, that she  
did not need to consult a lawyer with respect to their business transactions.  
[137] Between September 2008 and December 2008, Cheryl continued to operate NFE (under  
the name “The Chilled Cork”) as a sole proprietorship from CCI’s intended operating  
premises at the Retro Suites Hotel. In that period, on behalf of CCI, she hired Chef  
Bonnot and his wife Leslie, both of whom were over 60 years old at the time. Leslie  
Bonnot and Bruce jointly maintained NFE’s financial books and records during the  
period between September 2008 and December 2008.  
[138] Cheryl endorsed as accurate, documentation prepared by Bruce, indicating that NFE’s net  
annual income for 2008 was $11,459.85 and its gross revenue was $526,345. Cheryl  
attributes NFE’s substantial growth in sales during 2008, to its move to the Retro Suites  
premises, where it enjoyed a greater seating capacity and higher meal prices. NFE’s  
expenses correspondingly increased after the move because it hired more staff, and spent  
more money on groceries and other sundry matters. Cheryl agrees that NFE did not pay  
rent to Retro Suites Hotels or Rob for the use of its operating space from September 2008  
to December 2008. Beginning January 1, 2009, CCI was obligated to pay Retro Suites  
$4,000 per month, for that space.  
[139] Cheryl concedes that Rob did not share in any of NFE’s net income of $11,459 in 2008  
because, in her view, their “50/50 deal” did not apply to NFE.  
[140] Cheryl agrees that Retro Suites advanced $35,000 to NFE in 2008, to be used as start-up  
capital for CCI. She also concedes that the $35,000 loan made by Retro Suites to NFE  
does not appear in NFE’s “financial statements” for that year. Similarly, NFE’s 2008  
financial statements do not record any liability for amounts that NFE owed on account of  
its 2008 unremitted employee source deductions, which totalled in excess of $36,000.  
[141] In November of 2008 Cheryl sublet NFE’s old operating premises, but the subtenant did  
not pay rent. As a result, Cheryl retained a lawyer to assist her with her lease issues.  
[142] Cheryl agrees that as of January 1, 2009, when CCI commenced its operations, she and  
Rob had still not had discussions with respect to: the re-payment of the $35,000 loan  
made by Retro Suites to NFE; who was responsible for payments on Cheryl’s and  
Bruce’s truck; who was responsible for payment of NFE’s liabilities; and who would be  
responsible for covering CCI’s losses in the event that they exceeded $50,000, in its first  
year.  
[143] Beginning on January 1, 2009, both Leslie Bonnot and an “outside bookkeeper” named  
Denise Brouwer were responsible for CCI’s bookkeeping functions. Ms. Brouwer  
periodically attended CCI to make entries and prepare month-end statements, which she  
continuously did during the period from January 1, 2009 to May 2010. Cheryl had full  
Page: 30  
access to CCI’s financial records throughout 2009, she received monthly financial  
reports, and she had access to a computer, through which she could review specific  
journal entries.  
[144] Contrary to an assumption made by the plaintiffs’ business valuation expert, (which I will  
review later in these reasons), Cheryl testifies that it would be wrong to assume that  
CCI’s 2009 annual recorded sales were inaccurate. She denies that CCI made an  
additional $189,000 in unrecorded sales in 2009.  
[145] Cheryl confirms that from the commencement of its active operations, on January 1,  
2009, CCI operated with a point of sale (“POS”) system, whereby information with  
respect to “restaurant sales” of food and beverages were inputted immediately into the  
restaurant’s accounting software, whenever an order was placed. Similarly, credit card  
payments, which accounted for 55 to 65 percent of the payments for CCI’s food and  
beverage sales, were inputted directly into its POS system, in real time. All of CCI’s  
sales and expenses were recorded in its books and records in 2009. During her evidence,  
Cheryl also reviewed CCI’s 2009 financial statements (Notice to Reader) prepared by its  
then accountant, Horne LLP, and confirmed that to the best of her knowledge, those  
financial statements accurately record all of CCI’s sales (revenue) and expenses in 2009,  
which reveal among other things a total gross annual revenue of $778,125.  
[146] Throughout 2009, Cheryl received monthly financial reports and an annual financial  
report prepared by CCI’s accountant, which she contemporaneously reviewed. The  
reports always appeared to be accurate. She confirms that CCI incurred an operating loss  
of $195,001 in 2009, which she acknowledges is “way more” than the $50,000 loss that  
she says she estimated in 2008.  
[147] In this proceeding, Cheryl challenges the validity and quantum of CCI’s recorded debt  
owed to its related parties (Rob, Retro Suites and RJM Holding Inc.). During her cross-  
examination, Cheryl reviewed a copy of CCI’s financial records that record the opening  
balances of its related-party debt as of January 1, 2009, specifically: a $188,439 debt  
associated with related-party funded purchases of CCI’s kitchen equipment in 2008; an  
approximate $56,000 debt associated with related-party funded purchases of CCI’s  
furnishings and fixtures in 2008; and a debt of $97,938 for related-party expenditures to  
build out CCI in 2008. Cheryl verified the accuracy of the kitchen equipment and  
furnishing costs, noting that she was personally involved in those purchases. Cheryl  
initially disputed CCI’s obligation to pay for the build out of the restaurant, reasoning  
that the improvements were made to “Rob’s building”. However, she did not dispute the  
accuracy of the recorded amount spent to affect the build out.  
[148] Cheryl confirms that as of December 31, 2009, she was aware that CCI was indebted to  
its related parties in the amount of $544,000. Although she states that she does not think  
that the value of the build out costs ought to have been included in CCI’s 2009 related-  
party debt (approximately $100,000), she never shared that position with Rob in 2009 or  
2010. Cheryl agrees that even excluding the amount of the debt related to the restaurant’s  
build out, CCI owed at least $444,000 in related-party debt as of December 31, 2009,  
which she concedes had to be repaid to Rob.  
Page: 31  
[149] Further, in addition to the amount of $35,000 that was advanced by Retro Suites to NFE  
in 2008, Cheryl accepts as accurate, financial records that indicate that Retro Suites  
advanced additional amounts of $50,000 to CCI on March 30, 2009, $25,000 to CCI on  
March 31, 2009, and $25,000 to CCI on April 23, 2009, to fund its ongoing operating  
losses. As a result of the foregoing, she agreed that CCI owed Retro Suites a total  
additional amount of $135,000.  
[150] Finally, Cheryl does not dispute the accuracy of CCI’s financial records that indicate that  
Rob advanced, by way of loan, a further $16,000 to CCI on June 30, 2009 to cover its  
“payroll” expenses.  
[151] Turning to the documents prepared by Mr. Asher in 2009, in cross-examination, Cheryl  
originally reiterated that she did not read any of them before she executed them in  
October 2009. Bruce may have read the documents before she signed them. Contrary to  
her original evidence that Rob kept “bugging her” to sign the documents after she  
received them, in cross-examination Cheryl concedes that she did not speak to Rob from  
the time she received the documents in August 2009, until the time she, ultimately,  
signed them, in October 2009. Instead, her communication with respect to the status of  
her execution of the documents was only with Mr. LaRoche. Similarly, contrary to her  
original evidence, Cheryl concedes in cross-examination that she could not recall if Rob  
told her not to get a lawyer after she received the documents that Mr. Asher prepared in  
2009.  
[152] Although she originally testified that she did not read the Asher documents because she  
was “too busy”, she modified her evidence in cross-examination and indicated that she  
tried to read the documents, but they were too complicated, so she set them aside. Despite  
her difficulties with the documents’ complexities, she never considered: contacting Rob  
or Mr. Asher for an explanation; or contacting the lawyer who assisted her with the lease  
issues, or any other lawyer, for legal advice.  
[153] In reviewing the asset purchase agreement during the course of her cross-examination,  
Cheryl concedes that although the initial “purchase price” payable to the vendor (Cheryl)  
of NFE’s “assets” is expressed as $102,238, elsewhere in the agreement, the purchase  
price for NFE’s assets is specified as $1. She agrees that NFE’s balance sheet, as of  
December 31, 2008, reflected its total current liabilities as $102,348.25, which is  
consistent with the stated purchase price payable in the asset purchase agreement. Cheryl  
acknowledged her understanding that the effect of the asset purchase agreement was that  
CCI acquired all of NFE’s (Cheryl’s) liabilities as of December 31, 2008 and purchased  
its actual “assets” for $1.  
[154] Prior to August 2009, Cheryl understood that CCI was required to sign a lease with the  
Retro Suites Hotel, for a five-year term. She also understood that if the lease was not  
renewed, CCI would either have to move its location or close its business at the end of  
the lease term.  
[155] Cheryl understood that she and Rob were required to execute a shareholder agreement  
(i.e. the “partnership agreement”) with respect to CCI. Mr. Asher provided Cheryl with a  
Page: 32  
draft shareholder agreement in August 2009, which contained, among other things, a  
buy/sell provision with respect to the shares held by RJM Holdings and Cheryl, as well  
as, specific restrictions on persons eligible to purchase CCI shares from the shareholders.  
During her cross-examination, Cheryl reviewed those provisions and agreed that “it  
makes sense” that the shares of a CCI shareholder would be purchased in the event that  
the shareholder became a bankrupt, died or was mentally incompetent. She also agreed  
that as the “partner” directly involved in CCI’s operation, it made sense that her shares  
would be purchased in the event that she was permanently incapacitated from operating  
CCI because of injury. However, Cheryl “did not know” if it made sense for her shares to  
be bought out in the event that she ceased to be an employee of CCI. Cheryl has no  
specific recollection as to why she did not sign the USA at the time she signed all of the  
other documentation prepared by Mr. Asher.  
[156] During 2009 and the first half of 2010, Cheryl worked with the Retro Suites’ manager,  
Nancy Labadie, and the Retro Suites marketing director, Mr. LaRoche to develop  
strategies to increase CCI’s revenue and decrease its expenses. Despite their efforts, CCI  
remained unprofitable.  
[157] Cheryl continued to manage CCI’s operations during the first half of 2010. During that  
time, all of its sales were appropriately reported and recorded in its accounting software.  
She disputes any suggestion that CCI had unrecorded sales during the first half of 2010.  
Cheryl continued to receive and review monthly financial statements during the first half  
of 2010. They always appeared accurate and she had no concerns that they understated  
CCI’s sales.  
[158] CCI continued to consistently lose money in the first half of 2010. During that period of  
time, CCI’s sales were low and its wages and costs of goods were “too high”. Cheryl did  
not have the financial resources to cover any of CCI’s losses herself. Instead, all of its  
losses were “covered” by Rob.  
[159] In the foregoing context, Cheryl testifies that Rob went from being her “angel” in 2009 to  
a “devil”, beginning in January 2010. Contrary to her original evidence, in cross-  
examination Cheryl confirms that Rob did not engage in demeaning, insulting or  
aggressive behaviour until 2010. She agrees that by the first half of 2010, CCI’s losses  
were not sustainable. She understands why Mr. Kazarian “had to be brought into” CCI’s  
operation in mid-2010, to address its financial issues and she agrees that “something had  
to be done”, at that time to address CCI’s ongoing losses.  
[160] Cheryl asserts that prior to June 2010, she had good ideas about improving the restaurant  
and she thought the business would have improved, but none of her ideas worked out.  
Cheryl had meetings with Rob in the first quarter of 2010. She perceived that he did not  
support her ideas or efforts. Cheryl asserts that part of the reason that she became  
depressed in 2010 was CCI’s mounting losses and her perception of Rob’s criticism, in  
response.  
[161] Cheryl had no issues with accessing CCI’s financial records up until June 2010. She  
never requested audited financial statements for CCI prior to June 2010. She had no  
Page: 33  
access to CCI’s financial statements or records after June 2010. She had no personal  
knowledge of CCI’s income and expenses from June 2010 to December 2018. She has  
no personal knowledge that CCI engaged in any unreported or unrecorded sales in the  
period between 2010 and 2018.  
[162] Originally in her cross-examination, Cheryl maintained that she mailed her  
correspondence dated “July 8” to Rob sometime in July 2010, before she met with him at  
the RM group offices. Cheryl was then directed to correspondence, dated June 28, 2010,  
addressed to Bruce, advising him of his termination (signed by Mr. Kazarian) and a  
record of employment for Bruce recording his last day of work as June 28, 2010. At that  
point, Cheryl conceded that her own correspondence was likely written prior to June 28,  
2010. However, she does not believe that it was written subsequent to a meeting that she  
had with Rob, Chef Bonnot, and Mr. Kazarian, in which issues including her 2009 salary  
and corporate payment of her personal expenses were discussed, even though she  
acknowledges that her correspondence appears to respond to those issues. She believes  
that the meeting in which those issues were discussed, occurred after she met with Rob  
alone at the RM group offices.  
[163] Cheryl does not specifically recall the last day that she worked at CCI but she believes it  
may have been “around” July 1, 2010. Once she left CCI in July 2010, she did not  
contribute any further ideas or effort to its operation or business. She has no knowledge  
of the various and extensive renovations that have occurred at the restaurant, over the  
course of time, since 2010.  
[164] After Cheryl left CCI in early July 2010, Mr. Kazarian sent her correspondence dated  
July 14, 2010, suggesting that she take two weeks off work. By that time, Cheryl was  
aware that Chef Bonnot planned to retire in September, 2010. She then attended on her  
family physician who recommended that she take a further month off work, which  
extended her absence from CCI to the end of August 2010. Despite knowing that Chef  
Bonnot’s retirement was imminent, Cheryl agrees that she did not mail her doctor’s notes  
for time off to Mr. Kazarian or Rob. Instead, she provided copies to Chef Bonnot and  
assumed that he provided them to either Mr. Kazarian or Rob.  
[165] Cheryl agrees that she never contacted Rob or Mr. Kazarian to advise them that she was  
too depressed to return to work at CCI or that she was taking further time off work.  
Cheryl concedes that between the time that she left CCI in early July 2010 and August  
30, 2010, she never expressed an intention to return to employment at CCI, to anyone on  
behalf of CCI, or at all.  
[166] At the end of July 2010, someone showed Cheryl a copy of CCI’s newspaper  
advertisement, soliciting applicants for various positions including “a chef with a Red  
Seal”, which she did not have. She does not recall if she specifically read the “Red Seal”  
phrase in the advertisement.  
[167] Cheryl acknowledges that in the letter that she forwarded to Rob in June 2010, she stated,  
among other things, that she missed her old bistro. She agrees that through his August 4,  
Page: 34  
2010 message Rob offered to help her set up her old restaurant, however, she never  
responded to him.  
[168] At the time Cheryl saw nurse practitioner Brisley on August 30, 2010, she had already  
consulted with her current litigation counsel. She advised the nurse practitioner that she  
was angry at Rob and that she felt that he had demeaned her and that he had “pushed her  
out” of CCI’s operations. She agrees that by August 30, 2010, from a mental perspective,  
she no longer wanted to be Rob’s partner.  
[169] Cheryl subsequently attended on psychiatrist, Dr. Fairburn, on September 24, 2010. Prior  
to commencing this litigation, Cheryl did not advise either Rob or Mr. Kazarian that she  
had done so. Cheryl agrees that when she attended on Dr. Fairburn, she reported that her  
depressive symptoms had improved with the use of medication and they were less severe.  
Overall, she reported an approximate 50 percent improvement. Dr. Fairburn ruled out a  
diagnosis of major depressive disorder and stated that she had suffered a “narcissistic  
injury”. Cheryl did not know what that term meant, when she reviewed his report. Dr.  
Fairburn also changed her medication and arranged a follow-up two weeks later.  
[170] Cheryl returned to Dr. Fairburn, as scheduled, and reported further improvement (a report  
of that attendance was not adduced as evidence). Although Dr. Fairburn recommended  
that Cheryl participate in counselling, she declined because she had a strong supportive  
network. She acknowledges that according to Dr. Fairburn, her prognosis was excellent.  
Dr. Fairburn then returned her to the care of her family physician. Cheryl cannot recall if  
she attended on Dr. Payne for any further psychological issues.  
[171] Cheryl acknowledges that she was angry over the manner in which she perceives she was  
treated by Rob and she disclosed her feelings to her friends, family members and CCI’s  
employees. Cheryl also agrees that she told CCI’s employees that Rob was a “cheat”.  
[172] By the time Zee’s Bistro was operating in 2011, Cheryl had recovered from her  
depressive feelings, but she remained angry at Rob and she did not want to be part of  
CCI.  
[173] Cheryl has been represented by legal counsel in respect of her dispute with Rob since  
mid-2010. Yet, she never requested audited financial statements for CCI prior to 2014  
and she was not aware of her ability to call shareholder or director’s meetings for CCI,  
nor her ability to have a proxy attend such meetings.  
[174] With respect to Bruce’s status as an employee of CCI, Cheryl confirms that, like any  
other employee, his hours were scheduled by her. Bruce was required to confirm, on a  
time sheet, that he worked the hours for which he was scheduled and for which he was  
subsequently paid.  
[175] In re-examination, Cheryl indicates that Bruce actively worked at CCI and Rob was  
present, at times, while Bruce was working. Rob never expressed an objection to her, in  
that regard.  
Page: 35  
[176] Cheryl believes that NFE’s 2008 unremitted employee source deductions accrued during  
the period of time that it was operating at the Retro Suites. Bruce and Leslie Bonnot  
were responsible for making source deduction remittances at that time.  
[177] CCI’s monthly financial statements from January 1, 2009 to May 2010 were prepared by  
Denise Brouwer. Cheryl did not review them before they were finalized. She believes  
that Rob also had access to CCI’s financial records and that he also received monthly  
statements.  
[178] CCI’s POS system was not used for CCI’s room service sales or its banquet sales. Sales  
of that nature were manually added to CCI’s records. A percentage of all banquet sales  
had to be paid to Retro Suites because banquets were held in the Retro Suites’ operating  
premises, rather than CCI. Generally, one-third of CCI’s revenue was derived through  
banquet sales and two-thirds of its revenue was derived through restaurant sales.  
Evidence of Bruce McInerney  
[179] Bruce’s post-secondary education includes three years of university study. He has  
worked intermittently in the restaurant industry since he was a teenager, including in a  
managerial capacity. Eventually, he secured employment at a Navistar plant. Cheryl  
purchased NFE in August 2001 and took over its operation in September 2001. Bruce  
was laid off from Navistar at the time. Cheryl consistently acted as NFE’s owner,  
manager, and cook throughout its operation. Bruce performed various unpaid tasks for  
NFE, including cleaning, some cooking, bar stocking, deliveries, and bookkeeping  
functions.  
[180] Cheryl financed the purchase of NFE through a loan. Bruce anticipated that NFE would  
become profitable within three to five years of its acquisition, once the loan was repaid.  
NFE first became profitable in 2005 (with a net income of $48,344.98), which Bruce  
attributes, in part, to increased catering sales and a reduction in its expenses. In 2006,  
NFE’s expenses grew and its sales dropped. As a result, the business suffered a net loss in  
2006, as well as in 2007.  
[181] During the period from September 1, 2008 to December 31, 2008, NFE operated from  
CCI’s planned location at the Retro Suites Hotel. NFE’s sales increased significantly at  
the new location and its gross revenue for 2008 totalled over $500,000. NFE earned a  
recorded net income of $11,459 in 2008.  
[182] Cheryl became involved with Rob in April 2008. While attending NFE for lunch, Rob  
walked into its kitchen and, in Bruce’s presence, asked Cheryl if she wanted to move her  
business down the street. Prior to that time, Bruce did not know Rob. That evening,  
Bruce and Cheryl met with Rob in a restaurant shell located in the Retro Suites Hotel.  
Rob explained the general layout of the kitchen and his concept for the restaurant, which  
would seat 50 to 60 people. Rob indicated that he would be a “silent partner” and Cheryl  
would act as its “operating partner”. If required, Rob would help out financially. At the  
end of the meeting, Rob asked if they had a deal and Cheryl and Rob shook hands. Rob  
and Cheryl had several subsequent meetings in 2008, some of which Bruce attended.  
Page: 36  
[183] Bruce continued to work for NFE after it moved to the new location in 2008. Beginning  
on January 1, 2009, he “worked” for CCI. He did not have an official title and simply did  
“whatever was needed”, including washing dishes, tending bar, cleaning the restaurant,  
ordering for the bar, and some cooking.  
[184] Bruce maintained NFE’s financial records for the period from September 1 to December  
31, 2008. He attempted to maintain CCI’s financial records for January and February  
2009, utilizing the same practices that he used at NFE. He was, in his words, “over [his]  
head”, in attempting to do so and “[he] had no idea what [he] was doing”. During the  
course of a meeting held in January 2009, Rob advised him that he needed to engage in  
more detailed bookkeeping, to which Bruce replied, “I don’t know how to do anything  
more.” Rob then arranged for Denise Brouwer to perform CCI’s bookkeeping duties.  
[185] Bruce did not receive any remuneration for the initial work that he performed for CCI.  
He maintains that he worked 60 to 80 hours a week from September 1, 2008 until the  
time he tendered his “resignation” from CCI in April 2009. He testifies that he was not  
“fired” from CCI in April 2009, but he was not willing to remain there because Rob was  
belligerent. Bruce did not condone the manner in which Rob treated the staff members of  
CCI and Retro Suites, respectively, whom he would routinely “yell at” and demean  
during staff meetings. Rob became upset that CCI was not making any money, despite  
assurances from both Cheryl and Chef Bonnot that it took time for a restaurant to do so.  
[186] Shortly before he resigned in April 2009, Bruce attended a meeting with Rob, Rob’s  
wife, the manager of the Retro Suites, Denise Brouwer, Gerry Hockin (Rob’s financial  
advisor), Cheryl, Chef Bonnot and Leslie Bonnot. The night before the meeting, Bruce  
advised Cheryl that he had to leave CCI because he did not have a good feeling about  
Rob.  
[187] During the meeting, Denise Brouwer presented a revised version of CCI’s financial  
statements for February 2009, which Bruce had originally prepared. Bruce thought the  
recorded financial results were good. Rob did not. Rob yelled at the Retro Suites staff.  
He then turned his attention to CCI’s staff and yelled and complained that the restaurant  
was losing money. Cheryl and Bruce advised Rob that it typically took three to five  
years for a restaurant to become profitable. Gerry Hockin agreed and estimated that  
profitability, usually, requires a two to four year time-frame. Eventually, during the  
meeting, Bruce told Rob that effective immediately he would no longer be at CCI and  
because he was never paid, it would not cost Rob anything. Cheryl did not testify to any  
of these events.  
[188] By the end of June 2009, both Cheryl and Chef Bonnot advised Bruce that they needed  
him to return to CCI, on a periodic basis, to perform unspecified tasks. Accordingly,  
Bruce agreed to return to CCI on an “as needed basis”. He was formally hired by Cheryl  
as an employee of CCI and he was paid $15 per hour. He performed various tasks  
including: cooking; waiting tables; bussing tables; cleaning; bartending; washing dishes;  
and doing some deliveries and catering.  
Page: 37  
[189] Initially, Cheryl and Bruce used their own vehicle to make deliveries on behalf of CCI.  
During the first five months of CCI’s operation, Rob and/or CCI made all the payments  
related to the vehicle, including insurance. However, after the April 2009 meeting, Rob  
decided that he did not want Bruce and Cheryl to use their personal vehicle in the  
business. As a result, Cheryl and Bruce resumed making the necessary vehicle-related  
payments, themselves. This aspect of his evidence conflicts with Cheryl’s evidence that  
she decided to take over the payments to increase CCI’s profitability.  
[190] Bruce believes that he continued to be paid $15 per hour into the early part of 2010. At  
that time, he agreed to reduce his wage rate to $10.25 per hour because CCI was losing  
money. He worked a total of 551.25 recorded hours between June 2009 and June 28,  
2010, the date that he was terminated. Rob justified his termination on the basis of a  
policy that family members could not work together. To Bruce’s knowledge, the policy  
did not exist before his termination and Rob’s wife, daughter, and son-in-law all worked  
for the Retro Suites Hotel.  
[191] Cheryl experienced significant difficulty after Bruce’s June 2010 termination. Without  
consulting Cheryl, Rob “took over” CCI’s operation. He hired Mr. Kazarian to manage  
CCI. Together, they stripped Cheryl of her signing authority on CCI’s cheques and  
confiscated her CCI debit card. Cheryl’s emotional distress was compounded by Bruce’s  
absence from CCI because she relied on Bruce “to do everything”. Eventually, Cheryl  
became sad and depressed. She told Bruce that she felt like she was “losing a child”.  
Cheryl eventually attended on her family doctor who referred her to a specialist.  
[192] Chef Bonnot left CCI in September 2010. Thereafter, he engaged in renovation work for  
hire. Bruce assisted Chef Bonnot with his renovation work, for which he was paid. He  
offered no further details in that regard.  
[193] In the fall of 2010, Bruce and Cheryl opened a catering business, which they originally  
operated from their home. The business, Healthy Choice Catering, was put solely in  
Bruce’s name. After two months, Bruce rented an operating premises for Healthy Choice  
Catering. Chef Bonnot and Leslie Bonnot assisted them with that business.  
[194] In April 2011, Cheryl purchased a building housing a restaurant, which she intended to  
renovate. Her restaurant, Zee’s Bistro, opened at that location in July 2011. Since that  
time, Bruce and Cheryl have both worked at Zee’s Bistro in the same capacities that they  
did when they operated NFE.  
[195] In cross-examination, Bruce indicates that “Healthy Choice Catering” was put in his  
name because Cheryl was not sure if she could run the business, based on the way she  
felt. Bruce also agrees that putting the business solely in his name ensured that no  
income from the business was attributed to Cheryl, beginning in October 2010. Bruce is  
not aware that in the context of their wrongful dismissal actions, he and Cheryl were  
required to disclose all of their sources of income during the period of time that they were  
obligated to mitigate their damages. Bruce agrees that neither he nor Cheryl disclosed any  
documentation with respect to the Healthy Choice Catering business in their affidavit of  
Page: 38  
documents. He explains that they only ran that business for a year and it was not  
something that he thought about.  
[196] Bruce agrees that between 2001 and 2008 he did not earn any personal income. Although  
he performed services for NFE, he was not paid. He confirms that NFE lost money in  
2004, 2006 and 2007. He originally denied that NFE actually lost income in 2008, and he  
continued to assert that he accurately recorded its net income to be slightly in excess of  
$11,000. He then conceded that NFE’s financial records, which he prepared, did not  
include its liability arising from the $35,000 loan made to it by Retro Suites Hotel in  
2008.  
[197] Bruce also agrees that in the fall of 2008, he was responsible for ensuring that all source  
deductions for NFE’s employees were remitted to the government. After NFE moved to  
the Retro Suites premises, its employee salaries increased by approximately $120,000.  
Bruce agrees that he failed to make monthly employee remittances totalling over $36,700  
during the months of September to December 2008, inclusive. He deducted those  
amounts from NFE’s employees’ cheques, but he did not render payments to the  
government.  
[198] When he calculated NFE’s net income for 2008, he did not record or take into account its  
liability, in excess of $36,000, on account of unremitted employee deductions. He agrees  
that if that liability was considered, NFE would have a calculated net loss of at least  
$25,000 in 2008. Eventually, Bruce conceded that NFE did not make a profit in 2008.  
Finally, he conceded that contrary to his prior evidence, during the entirety of its  
operation (2001 to 2008), NFE only made a profit in one year, 2005.  
[199] Bruce’s licence to drive was suspended in February 2010. He remained involved in  
delivery services for CCI after that time, but he did not drive. His licence suspension was  
still in effect in October 2010, when he started the Healthy Choice “catering business”.  
He was involved in catering deliveries on behalf of Healthy Choice Catering, but other  
individuals drove.  
[200] After he was hired in June 2009, Cheryl and Chef Bonnot scheduled the hours that he  
worked at CCI. Bruce denies that he was paid for every hour that he was scheduled to  
work at CCI, but on specific inquiry he could not recall the number of hours for which he  
was not paid. Bruce then testified to the accuracy of his record of employment from CCI,  
disclosing that he worked an average of 27 hours per week in his last six months of  
employment in 2010. Bruce agrees that until he commenced this litigation, he never  
complained that he worked hours at CCI for which he was not paid.  
[201] In cross-examination, Bruce reaffirmed that beginning in January 2009, Rob held  
monthly meetings with respect to CCI’s operation, in which he exhibited a poor  
demeanour and demanded CCI become profitable. Bruce was referred to Cheryl’s  
evidence that meetings of that nature first occurred in 2010. Bruce disagrees with  
Cheryl’s evidence and reiterated that Rob’s hostile conduct began in 2009. Bruce also  
disagreed with Cheryl’s evidence that it was only at the beginning of 2010, that Rob went  
from being an angel to being a devil. Bruce maintains that Rob consistently  
Page: 39  
demonstrated a belligerent demeanour towards him, Cheryl and CCI staff, beginning with  
a meeting held on January 31, 2009. After that time, Rob consistently yelled at staff and  
demanded they make money. As a result, Bruce privately told Cheryl that she could not  
trust Rob.  
[202] Bruce is not aware of any evidence that CCI made any unrecorded sales, at any time. He  
does not suggest that the amount of $778,125 recorded as CCI’s annual revenue in its  
2009 financial statements, is inaccurate. He is not aware of any misallocation of wages  
between CCI and Retro Suites, at any point in time.  
[203] Bruce has never met Dennis Asher. Bruce believes that he saw a copy of Mr. Asher’s  
correspondence addressed to Cheryl, contemporaneous with its date of August 17, 2009.  
He confirms that Cheryl received that correspondence after he told her that she could not  
trust Rob. Bruce believes that he may have discussed the correspondence with Cheryl and  
he confirms that both he and Cheryl read the correspondence and the enclosures that Mr.  
Asher sent, but they did not understand the documentation.  
[204] Bruce did not suggest that Cheryl obtain independent legal advice concerning the  
documents, even though he had already told her that she could not trust Rob. Bruce  
explains that in April 2008, Rob told Cheryl that she did not need a lawyer and that she  
could “trust him”, and nothing had changed since that time. Bruce’s evidence then  
shifted on the point and he acknowledged that something had changed since April 2008,  
specifically based on meetings that he had attended, he had cautioned Cheryl that she  
could not trust Rob.  
[205] Bruce agrees that in 2008, Rob and Cheryl made a deal by which she would manage CCI  
and provide cooking services in exchange for an annual salary in the amount of $50,000.  
She would not be required to financially contribute to the business. Instead, Rob would  
pay all of the costs associated with establishing and operating the restaurant, and he  
would eventually be repaid by the business for the amounts he paid. Bruce agrees that  
the employment contract Mr. Asher forwarded to Cheryl provides that Cheryl would be  
paid $50,000 per year, consistent with the terms to which Rob and Cheryl agreed.  
[206] Bruce confirms that during their 2008 discussions, Rob and Cheryl agreed that CCI  
would pay the sum of $48,000 per year to Retro Suites as rent for the operating premises  
it was leasing from Retro Suites. He agrees that the lease forwarded by Mr. Asher in  
August 2009, is consistent with that amount.  
[207] Bruce confirms that Cheryl and Rob agreed that Rob would be repaid for any amount that  
he invested for the start-up of CCI.  
[208] Bruce agrees that he saw the draft USA after it was sent to Cheryl. He understood that it  
dealt with share allocation and buy/sell arrangements for Cheryl and Rob’s (RJM  
Holdings) shares. He does not recall whether that was the only document that Cheryl did  
not sign.  
[209] Bruce does not know why he was listed as a vendor on the original asset purchase  
agreement that Mr. Asher forwarded, but his name was struck out before it was signed.  
Page: 40  
[210] When Bruce worked at CCI, he enjoyed free meals and occasionally free alcoholic  
beverages. He agrees that on a social basis, he regularly attended at CCI more often than  
his scheduled hours.  
[211] Through Cheryl, Bruce may have been aware that CCI was continuously losing money in  
2009. He was not aware that Rob was “covering” CCI’s operating losses. He was aware  
that CCI was continuously losing money in 2010, but he did not consider whether those  
operating losses were “covered” by Rob.  
[212] During the first six months of 2010, Cheryl became more and more stressed by CCI’s  
continuing losses because she was accustomed to success as a restauranteur. Cheryl  
suffered additional stress as a result of Bruce’s termination and the mid-2010 change in  
her duties. Ultimately, her stress led to depression. Cheryl was upset by the loss of  
Bruce’s job, Rob’s assertion that she was overpaid in 2009, and Rob’s assertion that she  
was using CCI money to pay for her personal expenses. He does not know whether  
Cheryl and Rob discussed the latter points during a meeting.  
[213] Cheryl did not return to CCI after her departure in July 2010. Bruce does not know if  
Cheryl ever responded to inquiries from Mr. Kazarian concerning her return to work.  
[214] Cheryl’s condition began to improve in September of 2010 and by October of 2010 she  
was “doing more”. Even so, she remained angry with Rob and felt that she was  
“cheated” by him. Bruce was also angry with Rob, but not to the same extent as Cheryl.  
He denies that he told other people that Rob cheated Cheryl or stole her restaurant.  
Evidence of Ferruccio Da Sacco  
[215] In November 2014, Cheryl moved for the appointment of BDO as CCI’s auditors and an  
order compelling the completion of audited financial statements for CCI dating back to  
2009. By order dated November 25, 2014, Carey J. granted that relief and further  
directed, among other things:  
This Court Orders that any accountants who are employed or contracted  
for by ‘RM Auctions’ or RJM Holdings and related companies, including  
Gerry Hockin and Deloitte LLP be disqualified as the auditor for Chilled  
Cork Inc.  
[216] The order contemplated that audited financial statements for the years 2009 to 2014  
would be provided by January 30, 2015.  
[217] Mr. Da Sacco, who is both an accountant and a designated “assurance specialist” oversaw  
BDO’s audit efforts. He was summonsed as a witness by the plaintiffs. He did not  
discuss his anticipated evidence with counsel for the plaintiffs or the defendants, prior to  
trial.  
[218] BDO Senior Manager, Annette Fletcher, who was not called as a witness by any party,  
was responsible for planning the CCI audit and performing the majority of the work with  
Page: 41  
respect to same. Her work was consistently subject to Mr. Da Sacco’s review and  
approval.  
[219] As CCI’s court appointed auditor, BDO was responsible for expressing an opinion on its  
financial statements. Its audit efforts were designed to provide a reasonable assurance  
that CCI’s financial statements were free of material misstatement, whether caused by  
error or fraud.  
[220] After BDO’s appointment, the plaintiffs rejected BDO’s initial suggestion that it conduct  
its audit efforts through specified audit procedures, directed at any specific areas of  
concern held by the plaintiffs. Instead, the plaintiffs sought a complete historical audit of  
CCI dating back to 2009.  
[221] In preparation for CCI’s audit, BDO developed an audit plan informed by a risk-  
assessment approach, in which CCI’s historical financial statements (including any  
anomalies therein) and its financial “controls” (or lack thereof), among other things, were  
examined to determine respective “levels of risk of material misrepresentation”, across  
various aspects of CCI’s financial reporting.  
[222] In arriving at an audit plan, auditors typically utilize “preliminary” analytical tools to  
identify possible areas of concern, which can include industry “rules of thumb”. In that  
regard, it is generally expected that, as a rule of thumb, one-third of a restaurant’s sales  
will equal its kitchen-related wages and salaries and one-third of its sales will equal its  
food-related costs. The remaining one-third of sales consists of gross profit from which  
management and “front of house” salaries and all other operating expenses are deducted.  
“Rules of thumb” are developed from experience and relevant industry data. The  
available industry data for restaurants is predominantly generated from the United States,  
where both food and labour costs are, typically, lower than they are in Canada.  
[223] Mr. Da Sacco cautions that: “rules of thumb” are only a starting point in identifying  
potential audit-risk areas; when rules of thumb are used, the data should be based on  
industry comparators that are similar to the entity being audited, which in the case of  
restaurant would include a consideration of its location and its type business; and an  
individual restaurant’s financial performance may deviate from a “general rule of  
thumb”, in the absence of fraud or error.  
[224] After its appointment, BDO quickly determined that it was not possible to complete an  
audit for all of the years contemplated by Carey J.’s order because the availability of  
source documentation related to CCI’s several thousands of financial transactions in 2009  
and 2010, was “spotty at best”. Some of that documentation was not available because it  
was damaged in a fire at the Retro Suites Hotel (where the records were stored) in  
September 2010. BDO also determined that it could not perform an audit for CCI’s 2011  
fiscal year because of the absence of adequate source documentation.  
[225] One of the most significant challenges that BDO faced in its attempt to produce audited  
financial statements for the years specified in Carey J.’s order, arose from the high degree  
of turnover in CCI’s bookkeeping personnel from 2011 to 2015, which led to a lack of  
Page: 42  
consistency in the manner in which transactions were recorded in CCI’s financial records  
(even in the same fiscal year).  
[226] BDO’s audit efforts with respect to CCI’s years 2012 to 2014 were also impaired by the  
lack of availability of certain source documentation and the disorganized manner in  
which CCI’s available source documentation was stored (with documentation related to  
several years being mixed and stored together).  
[227] Mr. Da Sacco concluded that audited financial statements for the years 2012 to 2014  
could not be produced until CCI properly organized its records. As a result, he “pulled”  
his staff from the field (“CCI’s operating premises”) and Ms. Fletcher forwarded  
correspondence to CCI and the parties’ respective counsel, in which she advised that  
BDO would not proceed with any further audit-related efforts until CCI provided certain  
records that she specifically identified. Those records included documentation related to  
revenue recorded outside of CCI’s POS system, most notably for revenue generated from  
CCI’s banquet sales, which was traditionally collected, at first instance, by the Retro  
Suites Hotel.  
[228] The production of the organized records sought by BDO, was delayed as a result of  
another change in CCI’s bookkeeper position, in early 2015.  
[229] In February 2015, BDO again proposed to the parties’ counsel that specified auditing  
procedures be undertaken to address the parties’ specific concerns with respect to CCI’s  
financial statements. In response, the plaintiffs indicated that they wanted the audit to  
proceed in the manner ordered by Carey J.  
[230] By January 2017, BDO had not yet completed its audit with respect to the years 2012 to  
2015, despite what Mr. Da Sacco describes as the very helpful and consistent efforts of  
Stephanie Temesy, who has been employed as CCI’s bookkeeper since October 2015. As  
a result, in January 2017, Desotti J. directed BDO to produce draft correspondence setting  
out BDO’s expectations about the type of statements it could produce, based on the  
information that it had received to date. In response, Mr. Da Sacco delivered draft  
correspondence dated April 7, 2017, in which he appended draft financial statements for  
the years 2012 through 2015, inclusive, together with draft qualified audit reports (which  
did not express audit opinions) for those respective years. Neither the financial statements  
nor the audit reports were ever finalized.  
[231] Mr. Da Sacco testifies that through its audit work, BDO did not discover any evidence of  
fraud, related to CCI’s historical financial statements. BDO also did not find any  
evidence of: intentional destruction of documentation related to CCI’s financial  
transactions; evidence that CCI’s computer files had been “wiped clean”; evidence that  
banquet events occurred without revenue being recorded to CCI; or evidence that  
“someone was running a second set of books”. Instead, most of BDO’s concerns as  
expressed in his April 2017 correspondence, arose from irregularities in CCI’s  
bookkeeping procedures.  
Page: 43  
[232] Mr. Da Sacco also confirms that CCI’s accountant Deloitte LLP, did not report any fraud  
or suspected fraud to BDO, in circumstances in which it would have been expected to do  
so, had it been aware of any such activity. In addition, no person involved in the  
operation of CCI, reported any fraud or suspected fraud to BDO. In the result, the only  
individuals who expressed a concern about possible fraud, in this instance, were the  
plaintiffs’ counsel.  
[233] In both his April 2017 correspondence and his evidence, Mr. Da Sacco summarized the  
difficulties that BDO experienced in conducting its audit. First, CCI employed five  
different bookkeepers during the period of 2012 to 2017. BDO was provided with  
explanations for the various changes in CCI’s bookkeeping staff, none of which caused  
Mr. Da Sacco concern. However, the turnover in CCI’s bookkeepers led to a lack of  
consistency in the manner in which transactions were recorded in CCI’s financial records,  
with each bookkeeper using their own method to post entries.  
[234] Second, BDO’s progress was also slowed as a result of difficulty it experienced in  
obtaining a “backup” of CCI’s bookkeeping software, which was mainly a function of the  
amount of time that had elapsed between the original contemporaneous completion of  
CCI’s annual financial statements and BDO’s subsequent audit efforts. Eventually, BDO  
developed a “work around” by exporting the requisite data to spreadsheet software.  
[235] Third, the volume of CCI’s financial transactions in each of the subject years was “vast”  
(i.e. thousands of annual transactions and associated documentation) and required BDO  
to engage in substantial efforts to set up testing for each respective year end. Mr. Da  
Sacco observes that Ms. Temesy was very helpful in responding to BDO’s requests for  
assistance, including locating specific information that BDO required to verify historical  
bookkeeping entries.  
[236] Fourth, based on the historical nature of its engagement (i.e. auditing several past years at  
once), BDO was not physically present to observe CCI’s inventory count at the end of  
each of the years subject to audit. As a result, it was necessary to qualify its statement for  
each year, on that basis.  
[237] Finally, BDO’s audit-related efforts were slowed and influenced by missing and  
disorganized source documents. In his April 2017 correspondence, Mr. Da Sacco  
observes that there were numerous items posted in CCI’s bookkeeping records that BDO  
was unable to verify, as there was no supporting documentation or the documentation  
differed from the posted entries (i.e. during data entry there were transposition errors,  
omissions, etc.).  
[238] However, in his evidence, Mr. Da Sacco agrees that in his experience it is quite unusual  
for a small, privately held restaurant business to request retroactive multi-year audited  
financial statements, or audited statements at all. In his experience, small, privately-  
controlled restaurant businesses, typically, maintain less organized records and have less  
financial controls in place than entities that maintain segregated accounting departments  
and are otherwise “set up” to be audited on an annual basis.  
Page: 44  
[239] Mr. Da Sacco confirms that in circumstances in which a small, privately held restaurant  
business is subject to a retroactive multi-year audit, it is foreseeable that: there may be  
missing source documentation; there may be missing reconciliations; there may have  
been a change in the entity’s accounting system; a former bookkeeper may no longer be  
employed by the entity; and there may be difficulties with management recalling  
explanations for past variations in the entity’s financial records.  
[240] Turning to the results of BDO’s audit work, it identified an issue related to CCI’s  
reported revenue from banquet sales that was common in each of the years that BDO  
originally reviewed (2012-2015). Specifically, CCI’s banquet sales involved inter-  
company transactions between the Retro Suites Hotel and CCI, in which Retro Suites  
collected all revenue, at first instance, and all food and beverage sales related to the  
banquet events were, subsequently, to be paid by Retro Suites to CCI.  
[241] BDO was able to review inter-company invoices related to banquet events, which broke  
down CCI’s portion of the revenue. BDO was also able to reconcile that stated revenue  
with CCI’s recorded receivables due from Retro Suites. However, BDO was not able to  
verify if Retro Suites received more, the same, or less “cash” than the amounts disclosed  
on the “banquet event contracts” related to such sales. In his April 2017 correspondence,  
Mr. Da Sacco indicates that as a result of BDO’s inability to verify if cash was received  
by Retro Suites for banquet transactions, the risk of unreported revenue, as a result of  
subsequent adjustments to the sale was high (because it was not possible to verify the  
amount of the sale to the actual payment made to CCI).  
[242] At trial, Mr. Da Sacco clarified that BDO was able to verify the amounts that CCI  
invoiced to Retro Suites for the food and beverage supplied at banquets and it was able to  
verify that Retro Suites actually paid CCI the invoiced amounts, which were, typically,  
premised on the customer’s contract for the event. However, Retro Suites (as distinct  
from CCI) did not provide BDO with copies of cheques, credit card statements, or other  
documentation evidencing that the amount that the customer actually paid to Retro  
Suites, at first instance, to ensure that it was the same as the original contract amount.  
Therefore, BDO was unable to confirm that CCI was ultimately paid the amount it was  
entitled to receive for the event. Although CCI was correctly paid the invoice price,  
BDO could not rule out that Retro Suites did not charge more or less for the event.  
[243] In his evidence at trial, Mr. Da Sacco states that the significance of the foregoing issue,  
together with each of the other areas of concern expressed by BDO, was the subject of  
judgment, and the result of the issue could range from understated revenue, to accurately  
stated revenue with a poor audit trail, to overstated revenue. BDO was unable to provide  
any further clarification in that regard.  
[244] On a different issue, in his April 2017 correspondence, Mr. Da Sacco correctly observed  
that in the years 2010 to 2013, inclusive, CCI recorded as revenue, management fees  
payable to it, by its related party, RJM Holdings ($150,000 in 2010; $285,000 in 2011;  
$100,000 in 2012; and $50,000 in 2013). From BDO’s perspective, it was unclear  
whether the fees were for services rendered or an adjustment for tax purposes. In order to  
Page: 45  
normalize CCI’s revenue in those years, BDO did not include any management fee  
income in its calculations of CCI’s revenue.  
[245] Mr. Da Sacco confirms that over the course of the period from 2012 to 2015, CCI’s  
annual cost of sales as a percentage of revenue, ranged from a low of 84.95 percent  
(2014) to a high of 88.1 percent (2015). Mr. Da Sacco did not believe that those  
percentages caused any audit concern, even when considering the “1/3 - 1/3 - 1/3 rule of  
thumb”. Mr. Da Sacco states that the “one-third” general benchmark for “wages” is only  
premised on direct wages and salaries related to kitchen staff. In the benchmark analysis,  
front of house wages and salaries, indirect management expenses, and all other operating  
expenses have to be deducted from the remaining one-third of the restaurant’s revenue.  
In the result, he did not view CCI’s historical recorded cost of sales to be an audit  
concern.  
[246] BDO prepared financial statements for CCI for 2012, but it did not express an opinion on  
them. In his April 2017 correspondence, Mr. Da Sacco identified issues concerning  
BDO’s attempt to provide an audit opinion for 2012, which included: missing invoices  
for certain inventory; identified difficulties with CCI’s controls related to inputting POS  
summary data into its bookkeeping system (which could have resulted in understated,  
accurate, or overstated revenue); some missing invoices with respect to CCI’s expenses,  
which were otherwise verified through ledger entries and evidence of payment; BDO’s  
inability to review Retro Suite Hotel’s source documentation with respect to banquet  
sales; lack of documentation and proper segregation in a “Chilled Cork’s sales discounts”  
account (which did not constitute proper audit evidence); and lack of monthly  
reconciliations for related-party balances, which resulted in an inability to verify the  
balances.  
[247] Mr. Da Sacco confirms that as at December 31, 2012, CCI’s financial statements showed  
a receivable owing from RJM Holdings in the amount of $356,916 (for booked  
management fees) and an amount payable by CCI to Retro Suites Hotel in the amount of  
$586,874. The general ledger details obtained by BDO from Retro Suites Hotel, as at  
December 31, 2012, supported most of that final balance, but it did not fully reconcile  
with the amount recorded in CCI’s financial statements. BDO was unable to obtain RJM  
Holdings’ general ledger details prior to its April 2017, correspondence. Mr. Da Sacco  
also observed that the relevant related parties had different year ends, which could have  
resulted in unreconciled balances, as at CCI’s year end.  
[248] In his April 2017 correspondence, Mr. Da Sacco observes that in its preparation of CCI’s  
financial statements for 2013 to 2015, it encountered similar issues to those it  
encountered with respect to 2012, specifically, among other things: BDO was not present  
for CCI’s respective year-end inventory counts; certain source documentation related to  
BDO’s revenue and expense entry testing was not available; and BDO did not have  
access to Retro Suites Hotel’s records to confirm the total amounts that it received for  
banquet sales, and whether it varied from the event contract amounts.  
[249] On the issue of related-party transactions, the financial statements prepared by BDO  
record that CCI maintained a receivable from RJM Holdings in the amount of: $462,704  
Page: 46  
in 2013; $408,464 in 2014; and $354,224 in 2015. Further, CCI owed a payable to Retro  
Suites Hotel in the amount of: $755,899 in 2013; $720,694 in 2014; and $755,524 in  
2015. Mr. Da Sacco indicates that BDO did not find any material errors in testing  
transactions related to those accounts relative to the years 2013 to 2015, inclusive. In  
April 2017, BDO did not have supporting documentation available to verify the opening  
balances of the respective related-party accounts in 2013, which were carried forward to  
subsequent years.  
[250] As a result of the foregoing, BDO was not able to express an opinion with respect to  
CCI’s financial statements for the years 2013 to 2015 inclusive. In addition, the financial  
statements for the years 2012 to 2015, which accompanied Mr. Da Sacco’s April 7, 2017  
correspondence, were prepared in draft form only.  
[251] Mr. Da Sacco testifies that he authored his April 7, 2017 correspondence in an effort to  
solicit additional information and explanations from CCI’s management on the issues  
raised therein. However, he concedes that his letter does not contain a specific request  
that management provide any additional information or explanations. Further, the  
correspondence is only addressed to counsel for the parties in the litigation (not CCI  
management). By its terms, it does not request a response. Instead, the correspondence  
concludes by inviting counsel to contact Mr. Da Sacco, if they have any questions with  
respect to its content.  
[252] BDO did not receive a response to its April 7, 2017, correspondence from CCI  
management. There is no evidence that Mr. Da Sacco or other members of BDO  
engaged in any follow-up communication with CCI management to obtain further  
information or explanations addressing the issues set out in the correspondence. Rather,  
Mr. Da Sacco testifies that he had little to no communication with CCI after May 1, 2017,  
until some time in May 2018. As a result, the 2012 to 2015 financial statements that  
BDO prepared, remain in draft form.  
[253] Notably, in relation to CCI’s years 2012 to 2015, Mr. Da Sacco did not identify: the  
existence of any sales made by CCI that were not recorded in its financial statements; any  
portion of CCI’s labour costs that were improperly allocated between CCI and its related  
parties, including Retro Suites; or any aspects of CCI’s recorded related-party debt that  
were appropriately calculated as being nil.  
[254] In August 2018, BDO delivered draft audited financial statements for CCI’s fiscal years  
2016 and 2017. The final version of each set of financial statements was provided to  
CCI’s management in mid-December 2018 (after the commencement of trial). In both  
instances, BDO opined that the audit evidence that it obtained was sufficient and  
appropriate to provide an audit opinion.  
[255] In his evidence, Mr. Da Sacco confirms that no “audit issues” arose with respect to CCI’s  
sales, cost of sales, or expenses in 2016 or 2017. Further, after April 2017, BDO had  
satisfied itself that the related-party balances recorded in CCI’s 2016 and 2017 financial  
statements were accurate and had originated from transactions occurring in the normal  
course of business. Specifically, in preparing CCI’s 2016 and 2017 audited statements,  
Page: 47  
BDO was able to work with Deloitte LLP to fully reconcile the previously unverified  
amounts set out in CCI’s journal entries concerning its related-party indebtedness. In that  
process, BDO examined the ledgers of both CCI and its related parties (Retro Suites and  
RJM Holdings), and thereafter, it received signed confirmations attesting to the amounts  
owed between CCI and its related parties.  
[256] Subject to a single qualification that BDO was not physically present to verify, CCI’s  
year-end inventory counts in 2016 and 2017 (and the possible effects arising therefrom),  
BDO opined that the 2016 and 2017 financial statements “presented fairly, in all material  
respects, the financial position of CCI as of December 31, 2016 and December 31, 2017,  
respectively, and the results of its operations and the statement of cash flows for the years  
then ended” (in accordance with Canadian accounting standards for private enterprises).  
Mr. Da Sacco agrees that the 2016 and 2017 audited financial statements provide the best  
and most reliable evidence of CCI’s actual sales/revenue in those years.  
[257] The main difference between BDO’s ability to perform auditing functions related to  
CCI’s fiscal years 2016 and 2017, and its ability to do so with respect to former years,  
was the overall improvement in the quality of CCI’s bookkeeping. Ms. Temesy  
maintained accurate and proper accounting systems, which were reconciled on a daily  
basis. BDO observed a year over year improvement in the quality of CCI’s bookkeeping  
even before Ms. Temesy was hired in 2015, however, she was meticulous in daily  
reconciliation. Mr. Da Sacco concedes it is possible that CCI’s bookkeeping improved  
once its management became aware that the company was subject to audit.  
[258] Mr. Da Sacco confirms that CCI’s recorded “wage expenses” rose from $610,000 in 2015  
to $714,000 in 2016, and subsequently to $819,000 in 2017. He confirms that during the  
course of the audit process, members of BDO had discussions with CCI’s management  
that satisfied BDO that all of the “wages expenses” reflected in CCI’s financial  
statements in 2016 and 2017 were related to work performed on behalf of CCI, as  
opposed to related parties, including Retro Suites Hotel.  
[259] Mr. Da Sacco was also referred to an increase in the amounts recorded for CCI’s “repairs  
and maintenance expenses” from $22,560 in 2015 to $28,401 in 2016, and subsequently  
to $44,195 in 2017. Mr. Da Sacco confirms that an analysis was performed during the  
audit process to ensure the appropriateness of amounts being claimed as expenses, as  
opposed to capital expenditures, together with an analysis of the basis for the year-over-  
year increases in the amount of recorded repairs and maintenance expenses. He remained  
satisfied that the 2016 and 2017 financial statements, in that respect, fairly presented the  
financial position of CCI.  
[260] The 2016 and 2017 qualified audited financial statements also provide greater clarity with  
respect to the amounts of the related-party balances owed to and by CCI. Specifically, in  
a note to its 2016 financial statements, BDO indicates that CCI owed RJM Holdings:  
$378,848 at the end of 2015; and $426,848 at the end of 2016. Further, the statements  
indicate that CCI owed Retro Suites Hotel $6,452 at the end of 2015, and Retro Suites  
Hotel owed CCI $124,356 at the end of 2016. BDO also determined that at the end of  
both 2015 and 2016, CCI owed $16,000 to Rob Myers, personally. All of the related-  
Page: 48  
party amounts owed to and by CCI were determined by BDO, to have arisen from  
transactions occurring in the normal course of business.  
[261] Similarly, BDO determined that at the end of 2017, CCI owed RJM Holdings $450,343  
and it owed $16,000 to Rob Myers, personally. Further, the Retro Suites Hotel owed CCI  
$9,271, at the end of 2017. All of the foregoing amounts were verified by BDO, and  
Mr. Da Sacco confirms that they were accurately recorded.  
[262] Mr. Da Sacco was questioned on what appeared to be a “wide swing” from an amount  
that was recorded as a receivable owed by RJM Holdings to CCI in prior year financial  
statements, to a payable owed by CCI to RJM Holdings in 2015 and afterwards, and a  
corresponding swing from a payable owed by CCI to Retro Suites Hotel in earlier years,  
to a receivable owed by Retro Suites Hotel to CCI in 2016 and afterwards. Mr. Da Sacco  
acknowledged the apparent “variance” in related-party account balances, but he observed  
that the net totals with respect to CCI’s related-party obligations remained the same.  
[263] He further explained, with reference to e-mail correspondence that he forwarded to  
counsel for the parties in this litigation, on September 12, 2018, that prior to CCI’s 2016  
audit, BDO engaged in further efforts to confirm the recorded inter-company balances  
between CCI and Retro Suites Hotel and CCI and RJM Holdings. Working with RJM  
Holdings’ financial officer, and RJM Holdings’ external accountant Deloitte LLP, BDO  
was able to reconcile the related-party balances with the appropriate related-party  
companies (i.e. RJM Holdings and Retro Suites Hotel). Through that process, BDO  
determined that as a result of a corporate reorganization, the amount of $749,722.24 that  
was previously recorded as owing to the Retro Suites Hotel and owed by CCI was  
appropriately owed to RJM Holdings.  
[264] It remains that although there was a “swing” in individual related-party balances, once  
BDO worked with Deloitte LLP to reconcile the previously recorded but unverified  
amounts (including the opportunity to examine the ledgers of both RJM Holdings and  
Retro Suites Hotel), BDO was able to group the appropriate related-party accounts  
together for financial statement presentation purposes. Importantly, after that exercise  
was complete, the net totals of CCI’s related-party indebtedness remained the same.  
[265] As a result of its ability to liaise with Deloitte LLP and confirm the appropriate allocation  
of related-party balances, BDO issued revised draft financial statements for CCI’s year-  
ended December 31, 2015, in which the grouping/presentation of related-party balances  
was consistent with the allocation set out above. Specifically, once BDO verified the  
related party balances and attributed them accordingly, it determined that at the end of  
2015, CCI owed: $378,848 to RJM Holdings; $6,452 to Retro Suites Hotel; and $16,000  
to Rob Myers, personally, still yielding a total related-party balance net payable by CCI  
in the amount of $401,300, consistent with the amount recorded in the original 2015 draft  
financial statement prepared by BDO.  
[266] Mr. Da Sacco indicates that “confirmations” of related-party balances were executed on  
behalf of RJM Holdings and Retro Suites Hotel and by Rob Myers, personally.  
Confirmations of that type are common and designed to ensure that the individuals  
Page: 49  
executing them accept and assume responsibility for the accuracy of the amounts set out,  
therein.  
[267] In Mr. Da Sacco’s view, subject only to an inventory scope limitation, BDO’s audited  
financial statements for CCI for 2016 and 2017 provide a reasonable assurance of CCI’s  
financial position, as set out therein, including all related-party balances.  
The Evidence Adduced by the Defendants  
[268] Below, I will summarize the evidence of the non-expert witnesses called by the  
defendants and aspects of the exhibits to which they referred.  
Evidence of Robert Meyers  
[269] Rob, who was born in Chatham-Kent, is 63 years old. He owns the defendant  
corporation, RJM Holdings Limited. In addition, he actively operates an international  
classic car restoration business, through the corporation RM Auto Restoration Ltd. and an  
international classic car auction business, through the corporation RM Sothebys. He also  
owns and operates a Harley Davidson dealership, in the Chatham-Kent area. Rob has  
enjoyed exceptional success in his classic car-related businesses, which are highly  
regarded on an international scale. Indirectly, through RJM Holdings, he is also the  
former owner of the Retro Suites Hotel. In 2013, Rob’s daughter, Jessica Myers, acquired  
ownership of the Retro Suites Hotel from RJM Holdings.  
[270] Rob has consistently maintained his principal residence in the Chatham area, where he is  
heavily involved in local charities. Nonetheless, owing to the nature of his “classic car”  
businesses, Rob is required to travel away from the Chatham area for approximately 35 to  
40 weeks a year, a schedule that he has maintained for the past 30 years.  
[271] Turning to the development of the Retro Suites Hotel, in the early 1990’s, Rob purchased  
a series of 12 buildings, in poor repair, that formed a city block in the downtown  
Chatham core. He substantially renovated those properties and developed them into a  
boutique hotel, named The Retro Suites Hotel. The hotel, which opened with only a few  
rooms, in approximately 1993, served as both an anchor and a catalyst for the  
revitalization of the Chatham downtown core. By 2008, the hotel featured 22 unique  
suites, which grew to approximately 50 suites by the time of trial. By 2008, Rob had  
invested approximately six to eight million dollars to renovate and develop the Retro  
Suites. That amount had grown to approximately 13 to 15 million dollars by the time of  
trial.  
[272] CCI is located in the Retro Suites Hotel. RJM Holdings Inc. and Cheryl each own 50  
percent of CCI’s shares. Rob first met Cheryl in 2008, as a result of periodically  
attending her “sandwich shop” for lunch. He felt that she ran a clean shop, and as a result,  
he approached her in the spring of 2008, and asked her if she was interested in opening a  
restaurant in the Retro Suites’ facilities. She expressed her interest and discussions  
between them followed.  
Page: 50  
[273] During the summer of 2008, Rob and Cheryl had approximately eight to ten meetings  
about the proposed restaurant. Early in their discussions, Rob advised Cheryl that they  
would be partners in the business, he took her on a tour of the hotel and he showed her  
the restaurant’s proposed operating space. Cheryl provided Rob with an estimate of the  
anticipated costs to build out a kitchen and dining area in the existing restaurant shell.  
Cheryl also advised Rob that: she estimated the restaurant would generate one million  
dollars in revenue in its first year of operation; and although she did not expect that the  
restaurant would generate a profit in its first year, she did not expect it to run at a loss.  
[274] Cheryl also provided Rob with a budget of $150,000 to “open the restaurant”, which  
included the costs associated with the purchase of new kitchen and dining room  
equipment, fixtures and furnishings. Rob was prepared to advance that amount, with an  
expectation, of which Cheryl was aware and to which she agreed, that he would be fully  
repaid by the business. Rob also expected that he would fund the costs of the restaurant’s  
build out, at first instance, and that, similarly, he would be repaid. Cheryl agreed to the  
foregoing and it became part of their business plan. Cheryl was not expected to make any  
financial contributions towards the costs associated with building out and opening the  
restaurant. Rob and Cheryl also agreed that the restaurant would pay $4,000 per month  
for rent to the Retro Suites.  
[275] In his evidence, Rob confirmed the accuracy of the aspects of CCI’s financial records that  
record the various amounts that he advanced, through his other corporations, to or on  
behalf of CCI, in order to build out, equip, and furnish the restaurant in 2008, all of which  
total approximately $353,000.  
[276] Pursuant to an agreement he made with Cheryl in 2008: Cheryl was supposed to operate  
the restaurant; be its chef; and receive an annual salary of $50,000; Rob and Cheryl were  
to be partners in the restaurant and split its profits, on an equal basis, after the costs  
associated with building out, equipping and furnishing the restaurant were repaid. They  
did not discuss her anticipated tenure as an employee.  
[277] Since Rob was making all of the financial contributions that the business required, he and  
Cheryl agreed: that in the event of a future disagreement, he would have the “final say”;  
he would have the “final say” over all of the business’s financial aspects and  
expenditures; and he would retain control over the venture. Cheryl would be responsible  
for operating the restaurant. Before they reached their “deal”, Rob advised Cheryl that he  
did not want Bruce involved in the proposed restaurant because he had previously  
observed Bruce “drinking”, instead of working at Cheryl’s restaurant (NFE).  
[278] Cheryl and Rob shook hands on a “deal” consistent with the foregoing, in the late  
summer or early fall of 2008. From Rob’s perspective, their handshake signified that  
they had a “deal”.  
[279] At the time they reached their agreement in 2008, Rob held an expectation that if Cheryl  
left the restaurant within a couple of years of its initial operation and he had not been  
fully repaid for his initial investment, their deal would be “cancelled”. Rob never  
committed to funding CCI’s operating losses on an indefinite basis.  
Page: 51  
[280] In 2008, Rob also expected that NFE would be responsible for its own liabilities. In the  
fall of that year, Cheryl moved NFE’s operation to the Retro Suites Hotel premises where  
she continued to operate it, until CCI obtained its liquor licence in early 2009. RJM  
Holdings Limited advanced a substantial amount of money to NFE in 2008.  
[281] In January 2009, CCI commenced operations in the Retro Suites Hotel. Rob’s lawyer,  
Dennis Archer, prepared documentation to formalize the “deal” that Cheryl and Rob  
agreed to in 2008. Owing to “lawyer delays” the documentation was not ready for  
execution until August 2009. Cheryl never indicated that she wanted to make changes to  
any of the documents prepared by Mr. Asher.  
[282] Rob testifies that he never advised Cheryl that she did not require a lawyer or legal advice  
with respect to the documents that Mr. Asher prepared, nor did he engage in any efforts  
to dissuade her from obtaining a lawyer. Cheryl never advised him that the documents  
that Mr. Asher prepared were inconsistent, or did not reflect, the terms of the deal to  
which they had previously agreed.  
[283] Rob was directed to various aspects of the documentation prepared by Mr. Asher  
including Cheryl’s Contract of Employment, to which he was also a party in his capacity  
as a “shareholder” of CCI. Cheryl never indicated that she disagreed with any of the  
terms of the employment contract, which she ultimately signed. Rob assumed that Cheryl  
also signed the USA that contained “buy/sell provisions” with respect to CCI’s shares.  
He later learned that she had not done so. Cheryl never indicated that she disagreed with  
the terms of the USA and she never expressly sought to change its proposed terms.  
[284] Once it began to operate, CCI continuously incurred monthly operating losses and RJM  
Holdings was required to advance additional monies to CCI, to fund its expenses.  
Although Rob was unable to obtain specific information with respect to CCI’s financial  
performance in 2009, on a contemporaneous basis, he knew that it “lost a lot of money”.  
Based on Cheryl’s representations in 2008, CCI’s operating losses in 2009 were beyond  
Rob’s expectations.  
[285] Owing to his travel schedule, Rob rarely attended CCI in 2009. Cheryl managed the  
restaurant on a day-to-day basis and they had occasional meetings throughout the year.  
Rob denies that during a 2009 meeting, he yelled at a bookkeeper and other staff  
members and slammed things on a table. Rob concedes that he has a “loud voice” and, at  
times, people think that he yells. Nonetheless, Rob has never: yelled at Cheryl; insulted  
her; or called her silly or stupid.  
[286] Early in CCI’s operation, Rob learned that without discussing the issue with him, Cheryl  
hired her friend, Michel Bonnot, as CCI’s chef, at a salary of $75,000 per year. Rob was  
puzzled by her decision because Cheryl was supposed to be the restaurant’s chef.  
[287] During the times that Rob periodically visited CCI, he would often see Bruce drinking at  
the bar. He did not believe that Bruce was employed by CCI because he and Cheryl had  
previously agreed that Bruce would no