COURT FILE NO.: CV-18-27019 DATE: 20181101
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Nizar Naji and Naji Medicine Professional Corporation Plaintiffs – and – Allen Philip Denys, Denys Medicine Professional Corporation, 1974583 Ontario Inc., Jennifer Cruickshanks and Nicole Miller Defendants
COUNSEL: Tom Serafimovski, for the Plaintiffs Jay Strosberg, for the Defendants
HEARD: October 31, 2018
RULING ON MOTION FOR INJUNCTION
BONDY J.
A. BACKGROUND
1) Introduction
[1] The plaintiffs maintain that they have a valid right of first refusal (“ROFR”) to purchase the shares and/or assets of a medical clinic owned by one or more of the defendants before they can be offered to a third party. The defendants have entered into an agreement of purchase and sale for the shares and/or assets of the medical clinic with a third party. That agreement is scheduled to close November 15, 2018 (the “sale transaction”).
[2] On October 22, 2018, an ex parte interim injunction was granted by Patterson J. preventing the completion of that sale. Patterson J. ordered that his order be served on the defendants and that the matter would return October 30, 2018, so that the defendants could have an opportunity to be heard and a decision could be made as to whether or not to extend that injunction. The matter was actually returned the following day - October 31, 2018. This is the decision regarding the extension of that injunction and reasons for that decision, based upon a more complete record than the one before Patterson J.
2) The parties
[3] The plaintiff, Nizar Naji (“Dr. Naji”) is a licensed medical practitioner in the province of Ontario. Dr. Naji is an officer, director and operating mind of the other plaintiff Naji Medicine Professional Corporation (“Naji PCorp.”) through which he practices sleep medicine and respirology.
[4] The defendant, Allen Philip Denys (“Dr. Denys”) is also a licensed medical practitioner in the province of Ontario. He is an officer, director and operating mind of the defendant Denys Medicine Professional Corporation (“Denys PCorp.”). He practices sleep medicine and respirology through that corporation.
[5] Dr. Naji maintains that Dr. Denys is also an officer, director and operating mind of the defendant 1974583 Ontario Inc. (“197”). That corporation operates a clinic known as the “Windsor Sleep Disorders Clinic” (“the clinic”). This is the clinic which is at the centre of this litigation.
[6] Dr. Naji’s assertion as to Dr. Denys’ ownership of 197 however lacks harmony with other aspects of his own evidence. For example, the corporate profile report attached as an exhibit to his own affidavit shows the defendants, Jennifer Cruickshank (“Ms. Cruickshank”) and Nicole Miller (“Ms. Miller”), who are both daughters of Dr. Denys, are the officers and directors of 197. As another example, the letters of intent forwarded by Dr. Naji’s accountant on July 15, 2018 show Ms. Cruickshank and Ms. Miller as the shareholders of 197 and the vendors.
[7] Dr. Denys denies the assertion of ownership and maintains that he has never been an owner, officer, director, or operating mind of 197, and deposes that he does not have authority to bind 197. Dr. Denys also deposes that Ms. Cruickshank and Ms. Miller are also the sole shareholders of that corporation.
[8] For reasons which follow, I concluded that the truth as to Dr. Denys’ relationship with 197 more likely than not falls somewhere between those two positions.
3) The history of the relationship between the parties
[9] The evidence of both parties regarding the relationship up to about May or June of 2018 is remarkably similar.
[10] On June 3, 2013, Dr. Naji entered into an associate agreement with Denys PCorp. (the “original associate agreement”). Dr. Naji was initially operating under a restricted license. On May 8, 2014, he became a fully licensed medical professional in internal medicine and respirology. On December 15, 2016, he became fully licensed by the College of Physicians and Surgeons of Ontario (the “College”) in sleep medicine.
[11] Given Dr. Naji’s new status, the original associate agreement was re-negotiated and on April 4, 2018, a replacement association agreement (the “association agreement”) was entered into between Denys PCorp. and Naji PCorp. Those were the only two parties to either agreement. In other words, neither Dr. Naji nor Dr. Denys personally signed either of the agreements, nor did 197.
[12] According to that agreement, Dr. Naji carries on his practice from Dr. Denys’ office. He pays a fee equal to 20% of the medical fees charged and collected and in exchange Denys PCorp. is solely responsible for the expenses related to the office, including but not limited to employee wages and IT support.
[13] Historically, Dr. Denys had acted as the Medical Director and Quality Advisor (“MDQA”) for the clinic for 15 years. On April 3, 2018, Dr. Denys was advised by the College that he was the subject of a referral to the discipline committee. He states that as a result, the Ontario Health Insurance Plan (“OHIP”) ceased making payments to the clinic in respect of patients for whom he had reviewed the sleep results.
[14] His lawyer was able to negotiate an arrangement with OHIP that would require him to appoint or retain a new MDQA for the clinic and give him time to do so. In the meantime, Dr. Denys would continue to act as the MDQA for the clinic. In that way the clinic could continue to operate while the investigation was ongoing.
[15] Dr. Denys deposed that his daughters instructed him to approach Dr. Naji in that regard. In late April or early May 2018, Dr. Denys asked Dr. Naji to act as MDQA for the business. Consistent with that evidence, according to Dr. Naji, in mid-May 2018 Dr. Denys told Dr. Naji that he was considering selling the clinic. Dr. Naji states that Dr. Denys told him that he would allow him to bid on the clinic. According to Dr. Naji, that agreement was subject to a condition that he acted as MDQA without compensation. If he agreed to do so, Dr. Denys was to grant him an ROFR.
[16] There was consensus that further to that arrangement there were negotiations related to the granting of the terms and conditions of the proposed ROFR and the proposed arrangement for Dr. Naji to act as MDQA for the clinic. The parties also agree that several drafts were sent back and forth between the parties respective counsel.
[17] The parties, however, agreed that an agreement was never signed with respect to either the proposed ROFR or the proposed arrangement for Dr. Naji to act as MDQA for the clinic.
[18] The evidence of the parties as to what happened next is somewhat conflicted.
4) Dr. Naji’s version of the events after the restrictions were placed on Dr. Denys license
[19] I reiterate that it is Dr. Naji’s position that he agreed to act as MDQA, and that the right of first refusal was the consideration for him having done so but that an agreement was never reached as to the terms of that arrangement.
[20] One or more of the defendants were using a broker by the name of Robert Isaacson (“Mr. Isaacson”).
[21] According to Dr. Naji, through his accountant and pursuant to the ROFR, he submitted two letters of intent through Mr. Isaacson on July 15, 2018. The first was to buy the shares of the business for $2.8 million and the other was to buy the assets of the business for $3.2 million.
[22] Again, the parties agree that a consensus was never reached between the plaintiffs and the defendants with respect to any of these draft agreements.
[23] Dr. Naji, however, deposed that Mr. Isaacson told him that he had been advised by Dr. Denys that Dr. Denys had granted him a right of first refusal. This evidence is more fully considered below.
[24] Dr. Naji maintains that he and Dr. Denys reached an agreement on June 22, 2018 wherein he was granted an ROFR without any conditions related to him acting as MDQA for the clinic. He maintains that that arrangement was confirmed in three emails. The first was sent the following day on June 23, and the other two were sent September 15 and October 12, 2018.
[25] Later, in August, Dr. Denys provided Dr. Naji with a draft share and asset purchase agreement (the “draft SAPA”). On September 15, 2018, Dr. Naji submitted an offer. Again, the parties agree a consensus was never reached between the plaintiffs and defendants with respect to these documents.
[26] On October 10, 2018, Dr. Naji was advised by Mr. Isaacson that Dr. Denys had decided to sell the business to another party.
[27] According to Dr. Naji, he confronted Dr. Denys on that same day and told Dr. Denys he would be willing to match any price for the business and perhaps pay more. According to Dr. Naji, Dr. Denys said that he would consider his offer.
[28] Dr. Naji deposes that on October 17, 2018, he was told by Dr. Denys that the sale to the third party was not yet finalized. At that point, Dr. Naji offered to match the sale price offered by the third-party and pay an additional $200,000. According to Dr. Naji, Dr. Denys said that he was prepared to sell to him provided he could confirm the availability of sufficient funds to complete the transaction.
[29] Dr. Naji maintains that he provided Dr. Denys with evidence reasonably confirming the availability of funds to complete the transaction.
5) Dr. Denys’ version of the events after the restrictions were placed on his license
[30] Dr. Denys’ evidence as to the events which occurred after the negotiations with respect to the ROFR had begun is similar to that of Dr. Naji with some exceptions. The most notable are as follows.
[31] The first is that Dr. Denys denies having the authority to bind 197. Consistent with that proposition, neither the June 3, 2013 original associate agreement nor the April 4, 2018 new association agreement take into consideration the clinic owned by 197, nor was 197 a party to either of those agreements.
[32] The second is that the offers to purchase being negotiated were just that, offers to purchase. Those offers had nothing to do with the exercise of an ROFR.
[33] The third is that Dr. Denys’ willingness to grant an ROFR was always conditional on Dr. Naji executing an acceptable agreement to act as the MDQA of the sleep clinic, and assigning the necessary forms and documents required by the Ministry to approve him as the MDQA for the clinic. I reiterate the parties agree that neither happened.
[34] Consistent with that proposition, on August 3, 2018, Dr. Denys’ lawyer sent Dr. Naji’s lawyer an email which states:
“… Our client is prepared to give your client a ROFR for 10 days, so long as your client is prepared to be the MDQA of the Sleep Clinic until the earlier of February 1, 2019 and the date the shares of the Sleep Clinic are sold.”
[35] Also consistent with that proposition, there is an email from Dr. Denys’ counsel to Dr. Naji’s counsel dated September 17, 2018, which unequivocally states that Dr. Naji had not agreed to sign an agreement that he act as MDQA of the clinic. There is no return correspondence denying that the assertion.
[36] The fourth also relates to the August 3, 2018 email. I reiterate, that email contains an offer for an ROFR. Dr. Denys maintains the offer is inconsistent with the existence of another ROFR at that point in time.
[37] The fifth is that Dr. Denys maintains that he and his daughters had concerns about Dr. Naji’s financial ability to complete a transaction, concerns which were never resolved. Consistent with that assertion, what Dr. Naji maintains is confirmation of his financial ability to purchase is actually confirmation that an individual named Mohammed Qasi and an entity named Ciena Group were interested in a partnership with Dr. Naji. In other words, it was they rather than Dr. Naji who had the necessary funds available to complete the transaction. Dr. Denys knew nothing about either Mohammed Qasi or Ciena Group and accordingly took the position he and his daughters had no way of testing the veracity of that information, or the ability of that combination of purchasers to receive Ministry approval for the purchase.
B. ANALYSIS
1) Introduction
[38] The test to be applied where an interlocutory injunction is sought was first summarized in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.), and then modified in RJR-MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311.
[39] The test has three components:
i. there is a serious issue to be tried; ii. there will be irreparable harm not compensable in monetary damages if the requested injunction is not granted; and iii. The balance of convenience favors granting the injunction.
[40] The three steps are to be considered as a whole: see Bell Canada v. Rogers Communications Inc. (2009), 2009 ONSC 39481, 76 C.P.R. (4th) 61 (Ont. S.C.), at para. 29.
[41] To be clear, it is not necessary to follow the consecutive steps set out in the American Cyanamid judgment in an inflexible way; nor is it necessary to treat the relative strength of each party’s case only as a last step in the process: see Apotex Fermentation Inc. v. Novopharm Ltd. (1994), 95 Man. R. (2d) 241 (C.A.).
2) The issues to be tried
a) The issues
[42] The “serious issue to be tried” threshold is very low, ordinarily requiring an applicant to establish little more than that the case is not frivolous or vexatious. The issues between the parties are quite narrow.
[43] The threshold issue is simple and straightforward. That is, whether or not Dr. Naji was actually granted a valid ROFR. If there was no right of first refusal, the offer to purchase accepted by the vendors of 197 would not have entitled the plaintiffs to an offer to purchase or specific performance: see 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, 130 O.R. (3d) 641, at para. 23; and Harris v. McNeely (2000), 47 O.R. (3d) 161 (C.A.), at para. 12.
[44] If there was no valid ROFR, the plaintiffs would at best be entitled to damages. Injunctions are to be granted only where damages would provide an inadequate remedy. As was stated in London & Blackwall Railway Co. v. Cross (1886), 31 Ch. D. 354 (C.A.), at p. 369, “The very first principle of injunction law is that prima facie you do not obtain injunctions to restrain actionable wrongs, for which damages are the proper remedy”: see also Dowell v. Mengen Institution (1983), 72 C.P.R. (2d) 238 (Ont. H.C.), at p. 241.
[45] There was argument from both sides as to whether or not Dr. Denys was an officer and/or Director and/or the operating mind of 197.
[46] I reiterate, the corporate profile search demonstrates that Dr. Denys is neither an officer nor a director of that corporation. That said, Dr. Denys’ own affidavit leaves the impression that he was the principal negotiator for 197, and that he had been given authority to act in that capacity by his two daughters. Consistent with that observation, Mr. Isaacson who had been retained by Dr. Denys and his two daughters to find potential purchasers for the practice sent an email on October 10, 2018. In that email Mr. Isaacson states “Dr. Denys has made the decision to sell the Windsor Sleep Disorders Clinic to another party.”
[47] In summary, on the less than complete evidentiary record before me, I conclude that it is more likely than not that Dr. Denys held himself out to have the authority to bind 197, and that his daughters had potentially given him that authority.
[48] Notwithstanding that conclusion, I find that issue to be somewhat of a red herring. I say that because, as said above, the central and threshold issue for trial is whether or not Dr. Denys or anyone else on behalf of 197 actually had a meeting of the minds with Dr. Naji as to the granting of an ROFR.
[49] Prior to leaving this issue, I am aware that the trial judge may come to a different conclusion on this and other issues because of the limitations of the evidentiary record before me. For example, neither Dr. Naji nor Dr. Denys were cross-examined as to this issue. Further, there was no evidence from either Ms. Cruickshank or Ms. Miller who, as I said above, were the officers, directors and shareholders of 197.
b) Viability of the plaintiffs’ claim
Introduction
[50] A preliminary assessment of the relative strength of the plaintiffs’ case is a relevant factor, which I agree is appropriately considered in conjunction with the serious issue factor: see Boehringer Ingelheim (Canada) Ltd. v. Pharmacia Canada Inc. (2001), 12 C.P.R. (4th) 317 (Ont. S.C.), at para. 37.
[51] I do not find the plaintiffs’ case at all strong. However, I am not convinced that it is frivolous or vexatious.
[52] I begin with the observation that neither the June 3, 2013 original associate agreement nor the April 4, 2018 association agreement address the clinic which is owned by 197. It is not even a party to either agreement. Rather, the agreements focus on the medical sleep medicine and respiratory medicine practices which are owned by the two doctors and/or their professional corporations. In other words, there is nothing inherent in the relationship between the parties which would suggest that Dr. Naji had any right to purchase the clinic other than any right arising from an agreement reached after April 4, 2018.
[53] I reiterate the parties agree that despite several draft agreements being exchanged by counsel, a written ROFR was never entered into. The parties also agree that the documents required for Mr. Naji to act as the MDQA were never completed or sent to the Ministry.
[54] As said above, the plaintiffs’ entire case is based upon the proposition that an oral agreement was made between Dr. Naji and Dr. Denys on June 22, 2018, and that that agreement is evidenced by emails from Dr. Naji and/or his lawyer to Dr. Denys and/or his lawyer dated June 23, 2018, September 15, 2018, and October 12, 2018.
[55] Prior to engaging in an analysis of the evidence as to that proposition, I find it important to observe that there were two sets of negotiations ongoing simultaneously.
[56] One set of negotiations relate to Dr. Naji’s ongoing attempts to purchase either the shares or the assets of the clinic. As said, there were several documents, and amendments to documents, passed back and forth between counsel further to that end but no agreement was ever reached. Further, they had nothing to do with an ROFR. Accordingly, I find that the evidence related to these negotiations is for the most part also somewhat of a red herring.
[57] The other set of negotiations related to a right of first refusal. As said above, these negotiations go to the very heart of the issues between the parties.
Introduction to the evidence related to the existence of an ROFR
[58] Again, it is clear from the evidentiary record that there were negotiations as to an ROFR, and as to Dr. Naji being the MDQA of the clinic.
[59] As said, there was no evidence provided other than Dr. Naji’s bald assertion as to the existence of an oral ROFR, together with his assertion that Dr. Denys’ broker, Mr. Isaacson, told him that Dr. Denys acknowledged having granted a right of first refusal.
[60] I find that Dr. Naji’s evidence as to the existence of a valid ROFR problematic for the following overarching reasons.
The condition that Dr. Naji agreed to act as MDQA of the sleep clinic as consideration for the granting of the ROFR
[61] The first reason the evidence is problematic relates to the very cogent evidence that throughout the negotiations Dr. Naji agreeing to be the MDQA of the clinic was both the consideration for the ROFR and a condition precedent to the granting of the ROFR. I say again, there is consensus that condition was never complied with or fulfilled by Dr. Naji. To the contrary, all of the evidence supports the opposite conclusion. The following are examples.
[62] Beginning with Dr. Naji’s affidavit, sworn October 26, 2018, he deposes that “the conditions requested by Dr. Denys in the draft MOUs were too onerous and not acceptable to me.” The term MOUs refers to the memorandums of understanding/agreement related to the ROFR and Dr. Naji being the MDQA of the clinic. In other words, according to Dr. Naji’s own evidence there was no meeting of the minds as to him becoming the MDQA.
[63] Consistent with that evidence, Stephen Chiefetz (“Mr. Chiefetz”), who was Dr. Denys’ counsel during negotiations with Dr. Naji’s lawyer, deposed that Dr. Naji refused to sign the agreement unless the percentage of his billing payable to Denys PCorp. was reduced from 20% to 10%. In other words, according to Mr. Chiefetz there was no meeting of the minds.
[64] Consistent with that evidence, there is an email from Dr. Denys’ counsel to Dr. Naji’s counsel dated September 17, 2018, which unequivocally states that Dr. Naji had not agreed to sign an agreement that he act as MDQA of the clinic. Further, Dr. Denys maintains that it was necessary for Dr. Naji to sign forms and documents required by the Ministry to approve him as the MDQA for the clinic. There was consensus these documents were neither prepared nor signed by Dr. Naji, and consequently according to Dr. Denys there was no meeting of the minds.
[65] In other words, the evidence of Dr. Naji, Dr. Denys, and Mr. Chiefetz all support the conclusion that there had never been a meeting of the minds as to the MDQA.
The emails
[66] As said, the June 23, 2018 email is central to Dr. Naji’s position. That email states:
“I am hoping that my offer will be satisfactory, but if in case you feel my bid is unsatisfactory and then you receive another bid afterwards, you kindly agreed to let me know of that bid or the last bid and I will try to match it with a final bid.”
[67] Dr. Naji suggests this his email is consistent with and confirms the existence of an ROFR.
[68] That email however goes further, and Dr. Naji agrees to assist managing the lab and acting as interim director if he is still needed until the process is completed.
[69] I make the following observations as to that email and Dr. Naji’s position as to the inferences that should be drawn from it.
[70] The first observation is that when that and the other two emails, relied upon by Dr. Naji, are read in their entirety and in the context of the email chains in which they are found, those emails tend to support the proposition that Dr. Naji agreeing to act as the MDQA was always a condition precedent to, and the consideration for the granting of an ROFR.
[71] For example, as said previously, the June 23, 2018 email states that Dr. Naji agrees to assist managing the lab and acting as interim director if he is still needed until the process is completed. In other words, Dr. Naji is aware of a link between him acting as MDQA and the ROFR.
[72] Consistent with that observation, the June 23, 2018 email is followed by an email from Dr. Denys lawyer dated August 3, 2018, offering Dr. Naji a right of first refusal on the condition that he is prepared to be the MDQA. There are two aspects of that August 3, 2018 email that are important. One aspect is that Dr. Denys clearly continues to consider the MDQA as a condition precedent and consideration for the granting of the ROFR. The other aspect is that it defies common sense that Dr. Denys would offer Dr. Naji an ROFR if one was already in existence.
[73] Further, only four days prior to that June 23, 2018 email, Dr. Denys’ lawyer sent a draft agreement relating to the ROFR which clearly provides that the granting of the ROFR is conditional upon “Dr. Naji being approved in writing to be the medical Director and quality advisor of the sleep clinic.” In other words, that condition and requisite consideration were clearly expressed in writing both before and after Dr. Naji states that the oral agreement was reached.
[74] As to the September 15, 2018 email, a return email dated September 17, 2018 states that while an ROFR was discussed it was conditional on Dr. Naji becoming the MDQA, and he had never agreed to do so. In other words, that email further supports the theme that the MDQA was a condition precedent to and consideration for the ROFR, and confirms that there had never been a meeting of the minds with respect to either.
[75] As to the October 12, 2018 email, Dr. Denys’ lawyer wrote a return email on October 15, 2018 reiterating that although the ROFR had been discussed it was conditional on Dr. Naji becoming the MDQA for the clinic, and that he had never agreed to do so.
[76] In an October 19, 2018 email Dr. Naji states, “I am happy to be the director immediately if you still need me.” Again, that confirms that Dr. Naji appreciated the important link between acting as medical director and the ROFR.
[77] Finally, the October 12, 2018 email offers to pay $200,000 more than the offer Dr. Denys was then considering. With the greatest of respect, it defies common sense that Dr. Naji would pay an additional $200,000 for the clinic if he honestly believed that there was an enforceable ROFR in place at the time.
The statement Dr. Naji attributes to Mr. Isaacson
[78] Dr. Naji deposes Mr. Isaacson confirmed with him that Dr. Denys had given him an ROFR. That evidence purports to be based upon knowledge and belief. There are two problems with that evidence.
[79] One problem is that while I am aware that Rule 39.01(4) provides a permissive exception to the application of the hearsay rule to such evidence, that exception is subject to limitations. In this case Dr. Naji is saying that Mr. Isaacson said that Dr. Denys said that there was an ROFR. That evidence is clearly "double hearsay" tendered as proof of what Dr. Naji maintains Dr. Denys said. Accordingly the evidence does not come within the Rule 39.01(4) exception to the rule against hearsay evidence: see Airst v. Airst, [1999] O.J. No. 5866 (C.A.), 1999 CarswellOnt 362 (C.A.), at para. 6. As a result I did not give that evidence any weight.
[80] The other problem is that Mr. Isaacson denies having made that statement.
The lack of specifics as to the ROFR
[81] Neither of Dr. Naji’s affidavits offer any insight into precisely when the ROFR was granted, or the terms and conditions of the ROFR, or the consideration actually provided by Dr. Naji. As said above, there is only Doctor Naji’s bald assertion as to an oral agreement having been reached.
Conclusions as to the viability of the plaintiffs’ case
[82] In summary, the evidentiary record tends to support Dr. Denys’ assertion that Dr. Naji acting as MDQA for the clinic was both a condition precedent and the consideration for the granting of an ROFR, and does not support Dr. Naji’s assertion that Dr. Denys abandoned that condition and made an oral agreement to grant the ROFR apparently without consideration. If true, it necessarily follows that the failure of the parties to come to a meeting of the minds regarding the MDQA is fatal to Dr. Naji’s claim to the existence of an enforceable ROFR.
[83] To be clear, that is a preliminary assessment of the merits, based on a less than complete evidentiary record. Accordingly, I am not making findings of fact in that regard. Those issues will ultimately be left to the trial judge who will have a full evidentiary record before her or him.
[84] I summarize with an observation from RJR-MacDonald, at pp. 337-38, that:
The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case…Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.
See also: Sobeys Capital Inc. v. Sentinel (Sherbourne) Land Corp., 2014 ONSC 7090, at para. 20, citing Robert J. Sharpe, Injunctions and Specific Performance, 4th ed (Toronto: Canada Law Book, 2012) at pages 2-29 to 2-31.
[85] In this case, notwithstanding the significant weakness in Dr. Naji’s claim, the evidence falls short of establishing that the motion is either frivolous and/or vexatious. It follows that I must proceed to consider the second and third tests.
3) Irreparable Harm
[86] Irreparable harm is described as follows in RJR-MacDonald, at p. 341.
‘Irreparable’ refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision…where one party will suffer permanent market loss or irrevocable damage to its business reputation…or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined…The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration. [Citations omitted.]
[87] It is well-settled that evidence of irreparable harm must be clear and not speculative: see Bell Canada, at para. 38; Kanda Tsushin Kogyo Co. v. Coveley, [1997] O.J. No. 56, 96 O.A.C. 324 (Div. Ct.) at para. 14.
[88] At paragraph 36 of Dr. Naji’s affidavit, sworn October 21, 2018, he identifies what he characterizes as irreparable harm. There he states:
I have spent over five years building my practice in the business. The nature of the industry is such that my patients will continue their relationship with Windsor Sleep Disorder Clinic even if I am gone. Approximately 70-80% of my income is derived from my practice at Windsor sleep disorders clinic. If I am effectively expelled from the business, I will have to start my career all over again.
[89] Patterson J.’s endorsement reflects that proposition. He states that the “applicant has an active medical practice with the defendants and has been given a notice of termination effective December 11, 2018 which will require the applicant to start a new practice”.
[90] I begin by agreeing, that result is potentially consistent with the concept of irreparable harm referred to in RJR-MacDonald.
[91] There are, however, several problems with the proposition that Dr. Naji will actually suffer the irreparable harm that he says he will.
[92] The first is that the harm described is nothing more than a bald assertion. As outlined, the evidence of irreparable harm must be clear and not speculative. As Allen J. noted in International Relief Fund for the Afflicted and Needy (Canada) v. Canadian Imperial Bank of Commerce, 2013 ONSC 4612, at para. 35, “[O]n a motion on a paper record the information is only as valuable as the underlying support for the information”.
[93] When it comes to that paper record, “[a]ssumptions, speculations, hypotheticals, and arguable assertions unsupported by evidence carry no weight”: see Glooscap Heritage Society v. Minister of National Revenue, 2012 FCA 255, at para. 31; Dywidag Systems International, Canada Ltd. v. Garford Pty Ltd., 2010 FCA 232, at para. 14; Stoney First Nation v. Shotclose, 2011 FCA 232, at para. 48; and Canada (Attorney General) v. Canada (Information Commissioner), 2001 FCA 25, at para. 12.
[94] The second and perhaps most important is that the third-party purchaser, Dr. Satyendra Sharma (“Dr. Sharma”), offered to honour Dr. Naji’s Association agreement dated April 4, 2018, with the exception that the fee sharing amount be increased from 20% to 25%.
[95] There is consensus that the offer was committed to writing and sent to Dr. Naji’s solicitor by Dr. Sharma’s solicitor, and that Dr. Naji had not accepted.
[96] In other words, Dr. Sharma was prepared to offer an arrangement which would have avoided the very irreparable harm cited by Dr. Naji and relied upon by Patterson J. in reaching his decision. Dr. Naji refused that offer.
[97] I am aware that Dr. Naji’s share of the overhead would have increased by 5%. However, taking Dr. Naji’s case at its best, and presuming an ROFR actually exists, which I reiterate I have good reason to doubt, the gap between 20% and 25% could have been bridged by a judgment for damages. As said above, an injunction is not available where the appropriate remedy is damages.
[98] I am also aware that counsel for Dr. Naji expressed concerns as to the bona fides of Dr. Sharma. He suggested that Dr. Sharma could sign the agreement with Dr. Naji and then cancel it immediately after closing the sale transaction.
[99] I make the following observations as to that proposition. The first is that it is nothing more than speculation. The second is that Dr. Sharma offered a logical reason to honour the association agreement, that is, a belief that it would be beneficial for Dr. Naji to continue to treat patients for the sake of continuity. The third is that it defies common sense that Dr. Sharma would have insisted on an increase of 5% in Dr. Naji’s share of the expenses if it was simply a trick. The fourth is that Dr. Naji would no doubt have had a cause of action if Dr. Sharma acted in such a high-handed fashion.
[100] After rejecting that offer, Dr. Naji made a different claim as to irreparable harm. In his affidavit, sworn October 26, 2018, Dr. Naji states that he will suffer irreparable harm because “the Sleep Clinic is quite unique”. I have difficulty with this assertion for two reasons.
[101] The first and most obvious difficulty is the timing of the assertion. It was not until Dr. Sharma offered Dr. Naji an association agreement which addressed his original position as to irreparable harm that he saw fit to make this claim.
[102] The second difficulty is in relation to the quality of evidence supporting that proposition. While there is a description of the facility and its operation, there is no evidence as to why the clinic is unique. There is, for example, no evidence as to why Dr. Naji could not simply build another sleep clinic next door to the existing one. As said above, the evidence as to irreparable harm must be clear and not speculative.
[103] For all of these reasons, I find that the plaintiffs have not satisfied the onus upon them to demonstrate the sort of irreparable harm anticipated in RJR-MacDonald.
[104] Prior to leaving this issue, I am aware that defendants’ counsel maintains that there could be no irreparable harm from the cancellation of the agreement between Naji PCorp. and Denys PCorp. because that agreement was subject to termination without notice for cause, or on 60 days of notice without cause. In other words, he argues that the potential loss of livelihood by Dr. Naji is not something new.
[105] I disagree with that proposition.
[106] Taking Dr. Naji’s case at its best and presuming the existence of a valid ROFR, the exercise of that ROFR would have rendered the association agreement obsolete and also avoided any harm which could have resulted from the cancellation of that contract.
4) Balance of Convenience
a) Introduction
[107] The balance of convenience goes to the damage each party alleges it will suffer: see RJR-MacDonald, at p. 348.
b) The convenience of the plaintiffs
[108] From the standpoint of Dr. Naji, I find that in these very unique circumstances, paradoxically, the balance of convenience weighs in favour of dismissing his motion for injunction.
[109] On October 26, 2018, Dr. Naji deposed that he would continue with the litigation. Accordingly, there are two scenarios which would result in the very harm that Dr. Naji states that he seeks to avoid if the injunction is granted and the litigation continues.
[110] I begin with the observation that Dr. Denys has terminated Dr. Naji’s association agreement according to the terms of that agreement. In other words, he was within his rights to do so.
[111] As a result, Dr. Naji will not have the right to work from that clinic as the litigation is ongoing if the injunction is granted.
[112] There are two adverse results to Dr. Naji as a result. One is that presuming the clinic continues to operate during the course of litigation, and presuming Dr. Naji’s evidence as to his clients lack of loyalty to him is correct, he is at risk of losing his patients, especially if he is unsuccessful in the litigation, which for the reasons above I find quite likely. The other adverse result is that Dr. Naji would lose his livelihood from those patients while the litigation is ongoing.
[113] In addition, as of today, Dr. Denys continues to act is the MDQA of the clinic pursuant to the interim arrangement reached with the Ministry. In other words, the Ministry may be within its jurisdiction to revoke that interim agreement and stop making payments for work conducted through the clinic if it loses confidence in 197’s ability to dispose of the clinic. In that case, the clinic would close and again Dr. Naji could lose his livelihood if the injunction is granted, even if he is ultimately successful in the litigation.
c) The convenience of the defendants
[114] From the standpoint of the defendants, if the injunction is granted the third-party purchaser will be in a position to either walk away from the sale transaction, or sue the defendants for specific performance and/or damages for the failure to close the transaction.
[115] Presuming the latter, the litigation will no doubt be lengthy. That is because the existence of the injunction would foreclose any opportunity for meaningful negotiations in litigation with Dr. Sharma until the litigation Dr. Naji is completed.
[116] In the meantime, I reiterate that the clinic could be without a MDQA. As said, the ministry may not allow Dr. Denys to continue to fulfil those duties. If the clinic remained without a MDQA it would potentially have to cease operations, and if so, Dr. Denys would lose his livelihood and his daughters would lose much of the value of their clinic.
[117] Further, the ability of the defendants in this action to comply with an order for specific performance and/or damages in the inevitable action from the third-party purchaser would be stifled.
d) Conclusions as to the balance of convenience
[118] In the very unique circumstances of this case, ironically, the balance of convenience test seems to favour dismissing the application for an injunction from the standpoint of both the plaintiffs and the defendants.
5) Conclusions
[119] In summary, I find that the plaintiffs have a very weak case, they have failed to demonstrate irreparable harm in the sense anticipated in RJR-MacDonald, and the balance of convenience favours dismissing the motion for injunction. As a result, I find it appropriate to do so.
C. ORDER
[120] For all of the above reasons:
THIS COURT ORDERS that the interim injunction granted by Patterson J. on October 22, 2018, is terminated;
THIS COURT ALSO ORDERS that the plaintiffs’ request to continue the injunction is denied;
THIS COURT ALSO ORDERS that in the event that the parties are unable to agree on costs for this motion and the motion before Patterson J. within seven (7) days of the release of this decision, then Costs submissions shall be in writing on the following basis:
The defendants’ counsel shall serve costs submissions and a "Cost Outline" as provided for in Rule 57.01(6) (using Form 57(b)) upon the plaintiffs’ counsel within fourteen (14) days. Such written argument shall be no more than five (5) pages in length. In the event the foregoing is not complied with within that time period, the defendants shall be deemed to have waived their right to do so.
The plaintiffs’ counsel shall have a further ten (10) days to provide a response to counsel for the defendants. Such response is to be no more than three (3) pages in length. In the event the foregoing is not complied with within that time period, the plaintiffs shall be deemed to have waived their right to do so.
Counsel for the defendants shall have five (5) further days to provide a reply to counsel for the plaintiffs. Such reply is to be no more than one (1) page in length. In the event the same is not complied with within that time period, the defendants shall be deemed to have waived their right to do so.
Once all of those steps have been completed, council for the defendants shall provide all the submissions to the court through Trial Co-ordination.
The costs submission shall be double-spaced and use a "Times New Roman" font no smaller than 12 pitch. All references to the length of submissions exclude Bills of Costs and Costs Outlines and any Offers to Settle.
“original signed and released by Bondy J. ”
Justice Christopher M. Bondy Released: November 1, 2018