Court of Appeal for Ontario

Date: 2017-12-22 Docket: C63787

Judges: Doherty, Benotto and Miller JJ.A.

In The Matter Of Spectrum Health Care (GP) Inc.

And In The Matter Of Spectrum Health Care Employeeco Inc.

Between

Lori Lord Applicant (Respondent in Appeal)

and

Clearspring Spectrum Holdings L.P. (As Successor in Interest to Callisto Capital III L.P.) and Clearspring Capital Partners (US) L.P. (Formerly Callisto Capital (US) III L.P.)

Respondents (Appellants)

Counsel

Arthur Hamilton and Jed Blackburn, for the appellants

Robert Staley, Alan Gardner and William Bortolin for the respondents

Heard: December 18, 2017

On appeal from: the judgment of Justice Fred Myers of the Superior Court of Justice, dated April 12, 2017.

Reasons for Decision

[1] The parties to this appeal were involved in a commercial dispute concerning the operations of Spectrum Health Care – a company co-founded by the respondent Lori Lord. They signed a Governance Agreement which gave Lord certain rights concerning the replacement of members of the Board of Directors of Spectrum. Her application to the Superior Court to enforce those rights was granted.

[2] The respondents appeal submitting that the application judge: (i) erred in interpreting the contract; (ii) should have stayed the application in accordance with the arbitration clause in the shareholders' agreement; and (iii) erred in his alternative findings regarding the oppression remedy and interim injunction.

[3] When interpreting the Governance Agreement, the application judge considered the "factual matrix" of the agreement, the inter-relationship of the parties and the shareholders' agreement. He concluded that the appellants were in breach of their obligation under the Governance Agreement. He also concluded that there was no conflict with the shareholders' agreement. The Governance Agreement was a stand-alone document independent of the shareholders' agreement. On that basis, the arbitration clause did not apply. Although his interpretation of the Governance Agreement was sufficient to resolve the issue, he went on to determine, in the alternative, that Lord's oppression remedies would apply. Further, he concluded that had he sent the matter to arbitration, he would have issued an interim injunction.

[4] The threshold issue here is the application judge's interpretation of the Governance Agreement.

[5] In our view, the application judge did not err in his interpretation of the Governance Agreement. He made clear, thorough and extensive findings of fact which he correctly applied to the law. We see no palpable and overriding error or mistake of law.

[6] Nor did the application judge err with respect to the alternate remedies. He concluded that an injunction was appropriate because damages would be impossible to calculate and proof of damages would be "well-nigh impossible". We also agree with his analysis as to the oppression remedy. Lord had the reasonable expectation that the commitments made by the respondents would be honoured and failure to do so would prejudice her.

[7] Accordingly, the appeal is dismissed.

[8] If the parties do not agree on costs, they may provide brief written submissions by January 15, 2018.

Doherty J.A.

M.L. Benotto J.A.

B.W. Miller J.A.