COURT FILE NO.: CV-19-0302-000 DATE: 2019-06-24

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

RAINY RIVER FIRST NATIONS and NAICATCHEWENIN FIRST NATION M. Holervich, for the Applicants Applicants

• and -

RAINY LAKE TRIBAL RESOURCE MANAGEMENT INC., COUCHICHING FIRST NATION, MITAANJIGAMING FIRST NATION, NIGIGOONSIMINIKAANING FIRST NATION, SEINE RIVER FIRST NATION S. Crowe, for the Respondents Respondents

HEARD: June 13, 2019, at Thunder Bay, Ontario Mr. Justice D.C. Shaw

Decision On Motion

[1] The two applicant First Nations and the four respondent First Nations are equal shareholders of the respondent corporation, Rainy Lake Tribal Resource Management Inc. (the “Corporation”).

[2] The two applicant First Nations (the “applicants”) bring a motion to restrain the four respondent First Nations (the “respondents”) from distributing any monies from the Corporation to any of the Corporation’s shareholders pending further order of the court.

[3] The motion was served with an application which claims relief under the oppression remedies of s. 248 of the Ontario Business Corporations Act.

Background

[4] Since 2013, the six First Nations have been working to bring an end to their existing business relationships held through several entities, one of which is the Corporation.

[5] On May 15, 2019, the respondents caused a shareholders’ meeting to be held on June 6, 2019. Notice of the meeting was given by way of an e-mail from Peter Moen, an employee of the Corporation. The e-mail set out the agenda for the meeting:

Agenda

• Memorandum of Agreement between First Nations, RLTRMI and Resolute Forest Products;
• Allocation of Free Cash Flow Payments.

[6] All six First Nations attended the shareholders’ meeting. At the meeting, it was resolved that an allocation of free cash flow payments of $472,696 was to be made to the respondents, based on contractual commitments with Resolute Forest Products. The applicants opposed the payout.

[7] Subsequent to the meeting, and following service of the within motion to restrain the distribution of funds from the Corporation, the respondents deposited one third of the free cash flow payments, namely $157,565, plus an additional $25,000 for potential costs, interest and disbursements, for a total of $182,566, into the trust account of the respondents’ solicitors. The solicitors have undertaken to hold these monies in trust, pending resolution of the free cash flow payment issue or further order of the court.

[8] The evidence on the motion is that prior to disbursement of the $472,696, the bank balance of the Corporation was $1,229,085.

[9] After the motion was served, the applicants received the draft financial statements of the Corporation as of March 31, 2019.

Submissions - Applicant

[10] The applicants submit that this is a corporate governance issue. They submit that there was inadequate notice of the shareholders’ meeting.

[11] They refer to Article 11.4 of the Corporation’s By-law which, inter alia provides:

Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditors reports, election of directors and reappointment of the current auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment therein and shall state the text of any special resolution to be submitted to the meeting.

[12] The applicants submit that the agenda item of “Allocation of Free Cash Flow Payments” provided insufficient detail to permit the applicants to form a reasoned judgment on the question. They submit that the notice did not disclose how much the payment would be, how much cash would be left in the Corporation after the payment, what the current financial condition of the Corporation was and whether it would result in claims by unpaid creditors.

[13] The applicants state that their request for an order restraining the distribution of funds is made under s. 248(3) of the Ontario Business Corporations Act.

[14] Section 248(2) provides that when a court is satisfied that any act of a corporation effects or threatens to effect a result that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of a shareholder, the court may make an order to rectify the matters complained of.

[15] Section 248(3) provides that in connection with an application under s. 248, the court may make any interim or final order it thinks fit, including:

a) an order restraining the conduct complained of.

[16] The applicants submit that the three stage test for an interlocutory injunction set out in RJR-MacDonald Inc. v. Canada (Attorney-General), [1994] 1 S.C.R. 311, namely, a serious question to be tried, irreparable harm that cannot adequately be compensated for by damages, and balance of convenience, is not applicable to a motion under s. 248(3). They submit that under s. 248(3), the court has a wide discretion that is not constrained by the RJR-MacDonald test.

Submissions - Respondents

[17] The respondents submit that the applicants are seeking an injunction and that the three stage RJR-MacDonald test for an interlocutory injunction must be met.

[18] The respondents submit that any oppression issues should be dealt with on the application, not on this motion.

[19] The respondents submit that the discretion of the court under s. 248(3), including a restraining order, is only triggered if s. 248(2) is satisfied.

[20] The respondents submit that the applicants have not established oppression. The applicants had notice of the meeting and of the question of the allocation of free cash flow payments, they attended the meeting and although they voted against the allocation, a majority of shareholders were entitled to make the decision. Any entitlement of the applicants to a one-third share of the allocation has been protected by the monies held in trust. The respondents further submit that the applicants have the financial disclosure they were seeking in the form of the March 3, 2019 draft financial statement.

[21] The respondents submit that the applicants have not established irreparable harm.

Submissions- Applicants’ Reply

[22] The applicants respond that the monies in trust does not protect their one third interest in the company as a whole. Although the applicants now have the March 31, 2019 draft financial statement, they submit that they have no information regarding creditors.

Discussion

[23] The test for injunctive relief where the claim is made under s. 248(3) of the Ontario Business Corporations Act was reviewed by Pepall J. (as she then was) in Le Maitre Ltd v. Segeren, 2007 Carswell Ont 3226 (S.C.J.).

[24] In Le Maitre, the applicants submitted that to grant an interim remedy under s. 248(3) the court need only be satisfied that a strong prima facie case for oppression had been made out and that principles such as irreparable harm, balance of convenience and undertakings as to damages were inapplicable.

[25] The respondents in that case submitted that the three stage RJR-MacDonald test for an interlocutory injection was applicable.

[26] At para. 30 of Le Maitre, Pepall J. stated:

It seems to me that generally the principles for the granting of interlocutory injunctive relief should be applicable to section 248(3) interim relief that is in the nature of an injunction. This is in the interest of predictability and certainty in the law. As such, typically, a moving party should not expect to obtain interlocutory injective relief unless it is able to successfully address the factors to be considered on such a motion. That said, there may be some circumstances where interim relief pursuant to section 248(3) is merited absent all of the traditional considerations associated with an interlocutory injection. The dictates of fairness may be so overwhelming that it may be appropriate to forego compliance with any one or all of the balance of convenience, irreparable harm or an undertaking as to damages. In my view, such an approach is consistent with the broad nature of the oppression remedy, the language of section 248(3), and with cases such as: [citations omitted]

[27] In the recent decision of Lakhani v. Gilla Enterprises Inc, 2019 ONSC 1727 at para. 37, Perell J. referred to the above passage in Le Maitre as authority for the proposition “… that except in rare circumstances and, generally speaking, the principles for granting interlocutory relief should be applicable when injunctive relief is sought in the context of an oppression remedy.”

[28] I accept this statement of the law.

[29] In my view, the circumstances of this case are not so exceptional as to warrant departing from the traditional tripartite test for an interlocutory injunction.

[30] Although the applicants dispute the details of the notice of shareholder’s meeting which they attended, and disagree with the decision of the majority of shareholders at that meeting, their share of the free cash flow payment which was paid out is protected by the monies held in trust.

[31] The payment of $472,696 was made out of a bank account that had a balance of $1,229,085. There is no evidence that the payment has left the Corporation or its directors or shareholders subject to claims by creditors.

[32] The injunctive relief sought by the applicants on a temporary basis is the essence of the relief sought on the main application. The injunctive relief claim is made without a hearing of the substantive application on its merits.

[33] The crux of the test for interlocutory injunctive relief in this case is whether the applicants have established that they will suffer irreparable harm that cannot be adequately compensated by damages.

[34] In RJR-MacDonald, at para. 64, irreparable harm was described as “…harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other.”

[35] If damages would be an adequate remedy and the defendant is in a financial position to pay them, an interlocutory injunction should not be granted.

[36] The applicants have not established that they will suffer irreparable harm if an injunction is not granted. The harm complained of is monetary.

[37] Although the applicants frame this as a governance issue, the bottom line is that they dispute the payment out of monies from the Corporation’s bank account.

[38] The affidavit of Chief Wayne Smith of the Naicatchewenin First Nation makes this clear:

I believe that the distribution of monies as aforesaid to only some and not all of the shareholders of RLTRM is unfairly prejudicial and oppressive to the two (2) applicant First Nations shareholders, given the inadequate notice provided for the June 6 meeting of shareholders, and the failure to provide the requested financial disclosure for RLTRM.

[39] There is no other evidence of harm, let alone irreparable harm.

[40] The harm complained of can be quantified in damages. The collection of any damages to which the applicants may be entitled is secured by the monies held in trust by the respondents’ solicitors. If, for reasons not apparent, damages were to exceed the one third of the payout held in trust, the evidence on this motion shows that the Corporation itself has significant funds remaining in its account.

[41] The motion for an interim order restraining the respondent from distributing any monies from the Corporation to any of its shareholders is therefore dismissed.

[42] If the parties are unable to agree on costs, the respondents shall deliver written reasons, not exceeding five pages, exclusive of any Bill of Costs, within 20 days. The applicants shall deliver responding written reasons, not exceeding five pages, exclusive of any Bill of Costs which they may wish to file for comparison purposes, within 20 days of service of the respondents’ submissions, failing which costs shall be deemed to be resolved.

“original signed by”

The Honourable Justice D. C. Shaw

Released: June 24, 2019

COURT FILE NO.: CV-19-0302-000 DATE: 2019-06-24 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: RAINY RIVER FIRST NATIONS and NAICATCHEWENIN FIRST NATION Applicants - and - RAINY LAKE TRIBAL RESOURCE MANAGEMENT INC., COUCHICHING FIRST NATION, MITAANJIGAMING FIRST NATION, NIGIGOONSIMINIKAANING FIRST NATION, SEINE RIVER FIRST NATION Respondents DECISION ON MOTION Shaw J. Released: June 24, 2019 /lvp