Executive Summary: Key Legal and Evidentiary Issues

• Existence and terms of an oral partnership between two brothers to operate a milk delivery business, including equal sharing of net after-tax profits and joint management through a numbered company.
• Characterization of the controlling brother’s exclusionary conduct, diversion of profits, and use of corporate funds for personal expenses as oppression under s. 248 of the Ontario Business Corporations Act, breach of contract, breach of fiduciary duty, and unjust enrichment.
• Reliance on an inspector’s forensic accounting report to reconstruct corporate income, identify diverted funds, and quantify net profits and shareholder receivables over the contract period.
• Methodology for calculating the innocent partner’s damages, including whether profits and various adjustments should be treated on a net after-tax basis and how to treat the respondent’s separate business income.
• Scope of appellate review over factual findings, credibility assessments, prejudgment interest, and costs, including alleged judicial bias and whether the trial judge was functus officio when amending his damages calculations.
• Procedural limits on late cross-appeals and the Court of Appeal’s decision to confine the cross-appeal to a narrow issue about the correctness of the post-judgment damages recalculation.

Background and business relationship

Two brothers, Abdul Razak Alyousef (Abdul) and Anes Alyousef (Anes), jointly pursued a lucrative opportunity to deliver milk for a large dairy distributor, The Milkman Inc. The business was operated through a numbered Ontario corporation, 2390247 Ontario Inc. (239). The trial judge found that Abdul and Anes had agreed orally to form a partnership, implemented through 239, to carry on this milk delivery venture. Each brother was to hold a one-half beneficial interest in the business, share net profits and losses after tax equally, and manage 239 by consensus over the life of the Milkman contract. As part of this arrangement, the brothers agreed to “roll in” their pre-existing delivery businesses into 239 so that all of the milk delivery activity related to the Milkman contract would be conducted and accounted for within that corporate vehicle. The Milkman contract began in October 2013 and was intended to run for five years, with possible renewals. Under the contract, 239 was to provide or assume leases for trucks used in transporting the Milkman’s products. The operation was largely cash-based: deliveries were recorded in a receivables ledger and invoiced to the Milkman after payment. In practice, the trial judge found that 239 and another numbered company associated with Anes, 2296411 Ontario Inc. (229), were treated interchangeably for business purposes, and their operations and profits were intertwined.

Breakdown of the partnership and exclusion from the business

The relationship between the brothers deteriorated quickly. On November 30, 2013, after an argument, Anes locked Abdul out of the business premises and continued to run the milk delivery operation without him, using 239 and 229. Anes, his wife, Zainab Almelli, and their sons took over the business’s operations and were paid substantial salaries. The court found that corporate funds were also used for their personal expenses, including travel, jewelry, and sports equipment, effectively diverting business income to the family while excluding Abdul from both participation and profit. The trial judge concluded that Anes had “rolled” 229 into 239, assigning trucks and leases from 229 to 239 and failing to maintain clear separation in records between the two corporations. This lack of separation became central to the later financial reconstruction of profits and losses. Although the Milkman contract was supposed to run for five years, the work for 239 came to an end by December 2017 when the Milkman lost a major client and no longer required 239’s services.

Inspector’s report and financial reconstruction

To untangle the finances, the Superior Court appointed Fuller Landau Group Inc. as an inspector under s. 161 of the Ontario Business Corporations Act to investigate and report on the business and financial affairs of 239. The inspector’s August 21, 2017 report became the backbone of the trial judge’s damages analysis. Relying on this report, the judge reconstructed the net after-tax profits and losses of the business from October 2013 to December 2017 (the “contract period”). He began with 239’s after-tax profit of $429,622 for the entire period, then deducted a 2017 net loss of $154,845 to arrive at a net profit of $274,777. Because Anes had not distinguished between 239 and 229’s finances, the judge treated 229’s net income of $67,251 as part of the same overall enterprise, adding it into the calculation. The judge also deducted $63,000 representing business income Abdul had earned from other activities during the contract period, treating that as income Abdul had derived independently of the partnership venture.

Diverted funds and adjustments to income

The trial judge then incorporated several adjustments recommended by the inspector to reflect funds improperly diverted or omitted from 239’s income over the contract period. These included $130,000 in what were found to be excessive or unjustified wages paid to Zainab and the sons, $60,600 in personal credit card charges paid by 239 for family expenses, $18,492 in “unreconciled cash” not deposited to 239’s bank account, a shareholder receivable of $60,127 representing withdrawals by Anes owed back to 239, and $400,000 in unbilled and unpaid accounts receivable for services rendered to the Milkman that should have been recorded as income. After starting with 239’s net after-tax profit of $274,777, adding 229’s $67,251, adding these five categories of diverted or omitted amounts totalling $669,219, and subtracting Abdul’s separate $63,000 in business income, the trial judge arrived at total net profit for the contract period of $948,246. Abdul’s 50 percent share of this net profit was calculated at $474,123. In addition, the judge awarded Abdul prejudgment interest from the date the action was commenced and costs of $15,820. The exact dollar figure of prejudgment interest was not specified in the appellate reasons, and later appellate discussion indicates that the final quantum of damages might require adjustment to reflect proper tax treatment.

Legal characterization: partnership, oppression, and fiduciary breach

Legally, the Superior Court characterized the relationship as a partnership embodied through 239. The court applied s. 2 of the Partnerships Act, which defines a partnership as “the relation that subsists between persons carrying on a business in common with a view to profit,” and drew on the Supreme Court of Canada’s indicia of partnership in Continental Bank Leasing Corp. v. Canada. These indicia include contributions to a common undertaking, a joint property interest, sharing of profits and losses, mutual management rights, and related financial arrangements. The trial judge found that the brothers satisfied these criteria: they contributed assets and effort to the Milkman opportunity, shared beneficial ownership of 239, agreed to share profits and losses equally, and intended to manage the enterprise together. The absence of partnership tax filings or joint bank accounts was attributed to Anes’s exclusion of Abdul and denial of the partnership, not to the absence of a partnership in substance. The court further held that Anes’s conduct—locking Abdul out, diverting corporate funds to himself and his family, and using company resources for personal expenses—amounted to oppressive conduct under s. 248 of the OBCA. It also constituted breach of contract (the oral partnership agreement), breach of fiduciary duty owed between partners and corporate fiduciaries, and unjust enrichment. The damages award was structured as an oppression remedy, calculated to provide Abdul with his 50 percent entitlement to the net after-tax profits of the venture over the entire contract period, taking into account both the actual corporate financial statements and the adjustments for diverted benefits.

Issues on appeal and standard of review

Anes, Zainab, and the corporate defendants appealed to the Court of Appeal for Ontario on multiple grounds. They challenged the finding that there was an oral partnership to jointly operate the Milkman venture and argued that the trial judge had failed to properly articulate a credibility analysis. They also attacked the award of prejudgment interest from the date the action commenced, alleged that the judge appeared biased, and disputed the trial costs award. At the appellate level, these grounds were viewed as attempts to re-litigate factual determinations on witness credibility and the assessment of evidence. The Court of Appeal emphasized the deferential standard of review for such findings and held that the trial judge was entitled to prefer Abdul’s evidence where it conflicted with that of the appellants. It found no misapplication of the legal test for partnership formation and no reversible error in the factual findings that established the partnership’s existence. The court also rejected any suggestion of judicial bias, reiterating the high threshold necessary to displace the presumption of judicial integrity and impartiality and finding nothing in the record to support such a claim.

Prejudgment interest and costs

On prejudgment interest, the appellants argued that it was wrong to allow interest from the date the action commenced, asserting that interest could not attach to profits before they existed and that interest should have been computed year by year. The Court of Appeal noted that the trial judge had wide discretion under s. 130(1) of the Courts of Justice Act to determine prejudgment interest, including allowing interest for a period other than that prescribed in s. 128. It accepted that the trial judge’s earlier endorsements were not final determinations and that he had ultimately chosen a global approach: he awarded damages based on the net amount owing to Abdul over the entire contract period, after factoring in the 2017 loss and Abdul’s other business earnings, and determined that starting prejudgment interest from the date the action was commenced (2015) was reasonable. Given that the damages reflected an integrated multi-year net calculation rather than separate annual entitlements, the Court of Appeal held that a rolling, year-by-year interest calculation was neither practicable nor required. On costs, the appellants argued that Abdul’s alleged misrepresentation of his other business income should disentitle him to costs under the “clean hands” principle. The trial judge had already rejected this argument and awarded Abdul $15,820 in costs. The Court of Appeal found no error in that discretionary decision, holding that any misstatements did not rise to the level of misconduct warranting a denial of costs.

Cross-appeal and procedural limits

Abdul attempted to advance additional issues via a cross-appeal, including challenging the trial judge’s reliance on the Fuller Landau report and arguing that transfers of assets to Zainab and related parties constituted fraudulent conveyances. However, he had not properly filed a notice of cross-appeal within the time required by the Rules of Civil Procedure, and his late attempt encompassed issues that did not arise from the appellants’ own grounds of appeal. The Court of Appeal analysed whether to grant an extension of time for these new grounds, considering the length and explanation for delay, any prejudice to the appellants, and the merits of the proposed cross-appeal. It concluded that the first two proposed grounds should not be entertained: there was unexplained delay, the appellants had not had a proper opportunity to respond with a complete record, and the trial judge’s reasons suggested that those issues lacked sufficient merit to justify reopening. However, the court allowed Abdul to advance a narrow third ground related to the trial judge’s post-judgment amendment to the damages calculation, as that issue could be decided on the existing appellate record and had arguable merit.

Post-judgment amendment of damages and the tax question

Seventeen months after his August 28, 2023 judgment, the trial judge issued amended reasons on January 13, 2025, correcting several errors in his original damages calculation. He replaced an incorrect net profit figure, removed retained earnings improperly treated as income, and adjusted the deductions for income taxes and Abdul’s business income, ultimately arriving at the $948,246 total net profit and Abdul’s 50 percent share of $474,123. These corrections followed written submissions from the appellants, and the trial judge explicitly stated he was not functus officio on the damages, prejudgment interest, and costs issues. The Court of Appeal upheld the judge’s ability to make these corrections but identified a remaining problem: while the judge had moved to a net after-tax approach for 239’s core income, he appeared not to have considered income tax effects consistently on three key components—the $669,219 of additional amounts added to 239’s income, 229’s profits, and the $63,000 in Abdul’s separate business income. The appellate court observed that all amounts forming part of 239’s income should have been reduced by the income tax that would have been payable if they had been properly reported at the time, and that 229’s net profits for the contract period likewise required adjustment for income taxes actually paid. It also noted that the record did not clearly show whether the $63,000 attributed to Abdul was gross or after tax. Because these questions could significantly affect the final net after-tax profit figures, the Court of Appeal requested further written submissions, including revised calculations of net profits after tax for each year from 2013 to 2017, before settling the final damages amount.

Overall outcome and monetary relief

In the result, the Court of Appeal dismissed the appellants’ appeal in its entirety and rejected most of the respondent’s cross-appeal, except for the narrow issue concerning the correctness of the post-judgment damages recalculation. The appellate court confirmed the key liability findings: the existence of an oral partnership to pursue the Milkman contract, the equal sharing of net after-tax profits and losses, the oppressive and fiduciary-breaching conduct by Anes and the corporate defendants, and Abdul’s entitlement to an oppression remedy measured by 50 percent of the net after-tax profits for the contract period. As matters stand on the face of the appellate reasons, Abdul is the successful party. He has obtained an award of damages calculated at $474,123 for his share of partnership and corporate profits, plus trial costs of $15,820, together totalling $489,943, with additional prejudgment interest ordered from the commencement of the action. The Court of Appeal has signalled that the precise damages figure may change once the income tax adjustments are finally worked out, and the exact dollar amounts of prejudgment interest and any adjusted net-after-tax profits cannot yet be determined from the reasons alone.