Court File and Parties

Court File No.: CV-19-00615723-0000 Date: 2019-06-27 Ontario Superior Court of Justice

Between: AMMA MIDWIVES MOFFETT MIDWIFERY ALLIANCE PROFESSIONAL CORPORATION, Applicant – and – NATASHA ANU SINGH, FARIBA GILANPOUR, and MOJGAN NAMINIASL, Respondents

Counsel: Gustavo F. Camelino, for the Applicant Valerie Wise and Rozmin Mediratta, for the Respondent

Heard: May 2, 2019

Justice S. Nakatsuru

A. Overview

[1] This contract dispute is not a typical one. The Applicant, AMMA Midwives Moffett Midwifery Alliance Professional Corporation (“AMMA”) is a professional corporation carrying on a midwifery practice in Brampton, Ontario. Ms. Salimah Moffett is the sole shareholder, director, and officer of AMMA. AMMA began offering midwifery services to the public in March of 2014. The Respondents, Ms. Natasha Singh, Ms. Fariba Gilanpour, and Ms. Mojgan Naminiasl are midwives who worked at AMMA in the past but have since left. They wish to form their own midwifery practice group servicing the same area as AMMA. This has led to this dispute. A dispute in which both sides say raise matters of public importance about the public’s right to accessible and safe midwifery services.

[2] Yet at its heart, it remains a contractual dispute.

[3] Each of the Respondents signed an “Associate Midwife Agreement” with AMMA (the “Agreement”). These are fixed term contracts for a period of one year. Except for the term of the contract, the provisions are identical. In the Agreement, each Respondent is said to be independent contractors of AMMA. In the Agreement, a clause states that each Respondent, upon termination, must immediately give up their hospital privileges held at the Etobicoke General Hospital site of William Osler Health System (the “Hospital”). None of the Respondents have done so. They say they are entitled to keep these privileges since the privileges are held by each of them personally and not by AMMA. They take the position the clause does not apply to them and/or that it is unenforceable as an unreasonable restraint of trade. AMMA has brought this application to enforce this contractual obligation.

[4] There are three issues raised:

(i) Is the Respondent, Ms. Singh, required to withdraw her privileges given that her Agreement expired?

(ii) Are the Respondents’ privileges which are subject to the obligation to withdraw “held through” AMMA as per the clause in the Agreement?

(iii) Is the clause in the Agreement an unreasonable restraint of trade?

[5] The only remedy requested by AMMA is the specific performance of the relevant clause of the Agreement.

B. Summary of the Facts

1. Midwifery in Ontario

[6] Midwifery is a publicly funded service. Expecting mothers who become clients need not pay for the service. The Ontario Ministry of Health and Long-Term Care funds 100% of midwifery services through its agent, a Transfer Payment Agency (“TPA”). The TPA enters into three-year funding agreements with midwifery practice groups to fund the midwifery services provided by the partners or associates of such practice groups. The TPA funding agreement sets out things such as the geographical area within which a midwifery practice group is to provide service and a certain budgeted number of courses of care (client care) the group will be funded to provide.

[7] Midwives are registered with and regulated by the College of Midwives of Ontario pursuant to the Regulated Health Professions Act, S.O. 1991, c. 18. Generally, an individual midwife must join a midwifery practice group in order to be paid for their midwifery services. The funding from the Ministry of Health and Long-Term Care flows through the TPA to the practice group for all the courses of care provided by the midwife member of the practice group. The funds are distributed to the partners and associates in accordance with the individual contractual arrangements that the practice group has with those midwives. Without a funding agreement between the TPA and the practice group, the group or the individual midwives cannot be paid for the services it provides to its clients. In other words, a midwife not associated with a practice group cannot be remunerated for their services.

[8] To start a new midwifery practice group, an application must be submitted to the Ministry of Health and Long-Term Care through the TPA by September 30th of any calendar year. The application includes a defined geographical area the practice group proposes to serve, a budget proposing a specific number of billable courses of care, and the number of midwives the practice group is proposing it will provide. The decision to approve a new practice group is typically announced in the summer after the application has been submitted.

2. AMMA

[9] AMMA was formed in September of 2013 and began offering services to the public in March of 2014 as a funded practice group. Ms. Moffett is the founder and principal of AMMA. She received her Certificate of Registration as a midwife from the College of Midwives of Ontario in 2008.

[10] AMMA has entered into a number of successive contracts with the TPA. This funding agreement establishes a three-year budget for AMMA which is reviewed annually. Such a funding agreement can be terminated upon either party giving the requisite notice.

[11] When AMMA was originally formed, its midwives (who consisted of Ms. Moffett and her then partner) did not have any privileges at any hospital. Midwives can deliver babies in clients’ homes or in hospitals. However, they can only do hospital births in those hospitals in which they have privileges to do so. Since AMMA did not initially have any privileges, they were not able to offer a full course of care to its clients at the time. Ms. Moffett has testified about her efforts in the first two years of AMMA’s existence in order to obtain hospital privileges at the Hospital for the members of the AMMA practice group. These privileges were effective in November of 2015 on a temporary basis and were then converted to full privileges in January of 2016.

3. Privileges at the Hospital

[12] As typical with public hospitals in Ontario, each midwife applies for privileges at the Hospital. The Hospital has enacted By-Law No. 2 which pertains to privileges of health professionals including but not limited to midwives. This by-law sets out the procedure and requirements for the granting of hospital privileges to midwives. Once an application is received, the Medical Advisory Committee makes a recommendation and ultimately the Board of the Hospital decides whether to grant or deny privileges.

[13] A midwife’s privileges are granted for a year. At the Hospital, that year runs from January 1 to December 31. The midwife must apply for a renewal or a reappointment in December. The decision on reappointment is made following the same process as appointments. Until the Hospital Board makes the decision to reappoint or not, the midwife is allowed to maintain and exercise their privileges at the Hospital.

[14] Dr. Abou-Seido is the Chief of Obstetrics for the Hospital. The Respondents presented an affidavit from him. The Applicant takes no issue with the contents of the affidavit and did not cross-examine Dr. Abou-Seido. Dr. Abou-Seido averred that there are a limited number of spaces for midwives at the Hospital. Each individual midwife is given privileges based on her individual application for appointment which is re-evaluated annually for reappointment. The Hospital does not allocate membership to any one group of midwives and does not mandate membership in any particular practice group. If a new midwife applies, in addition to the individual application process, the Hospital undertakes a process for approval of the creation of a new midwife position. If any such spaces are created, the Hospital considers each individual application and does not consider external factors such as the hiring practices of any practice group. The Respondents’ privileges do not depend on their membership or association in any practice group.

[15] Ms. Moffett believes that AMMA is not in a position to obtain Hospital privileges for any replacement midwives for the Respondents until the three Respondents have formally withdrawn their privileges. This belief is based upon AMMA’s past experiences with departing midwives and emails exchanged with Dr. Abou-Seido in February of 2019. However Dr. Abou-Seido has not confirmed this understanding with Ms. Moffett and does not suggest so in his affidavit.

4. The Respondents, their Agreements, and their Privileges

[16] The Respondents are members of the College of Midwives of Ontario. Ms. Gilanpour started as a midwife in her native Iran in 1990. Ms. Naminiasl also started as a midwife in Iran in 1993. Ms. Singh became a midwife in 2012.

[17] Ms. Singh began working with AMMA in August of 2014. This was her first job as a general midwife. She signed a number of Agreements with AMMA for annual terms. Her final Agreement expired July 1, 2018, but by mutual agreement she stayed some additional months until October 1, 2018. Ms. Gilanpour started working with AMMA in April of 2015. Her final contract was September 1, 2018 to September 1, 2019, but she terminated it effective February 23, 2019. Ms. Naminiasl worked with AMMA only briefly. Her contract had a term from June 1, 2018 to June 1, 2019, but she terminated it effective February 23, 2019.

[18] The Agreements were drafted by AMMA. The Agreement each Respondent signed contained paragraph 5.22 which states (“IC” refers to the midwife as an “Independent Contractor”):

5.22 IC covenants and agrees that the IC will, forthwith upon termination of this Agreement for any reason, immediately take all steps necessary to withdraw her hospital privileges held at any institutions through the Practice Group, which privileges include, without limitation, birth centers and institutions with primary and courtesy privileges, by providing to such institutions notice in writing, with a copy of such notice to be delivered to the Practice Group, and by taking any other steps that are necessary.

[19] Initially this court application also involved paragraph 8.8 of the Agreement which prohibited the midwife from working or applying to practice groups in the same area or obtaining privileges in the same hospitals as AMMA. The Applicant has now agreed that it is an unenforceable restrictive covenant and is no longer relying on it.

[20] Each Respondent signed these Agreements. However, each testified that they did not read the Agreements carefully. Each testified that they were unaware that they had to resign their privileges in accordance with paragraph 5.22. None of the Respondents obtained independent legal advice regarding the Agreements although Ms. Moffett advised them they could do so. None of the Respondents felt that the Agreements were negotiable. Likewise, Ms. Moffett testified that paragraph 5.22, in particular, was not negotiable.

[21] Ms. Naminiasl left a temporary midwife job to secure the job with AMMA since it was in Toronto. She had not seen the Agreement before giving notice at her previous job. Ms. Naminiasl was familiar with the template Agreements used by the Association of Ontario Midwives [1] and believed that practice groups generally followed it. The template contains no provision requiring midwives to withdraw their privileges. Ms. Gilanpour testified that she did not pay attention to the provisions which she read quickly. She simply thought if she wanted the job, she had to sign the Agreement. Ms. Singh testified that since this was her first job as a general midwife and she trusted the owner, she just skimmed the Agreement.

[22] AMMA interfaced with the Hospital to assist in obtaining privileges for the Respondents. Emails were written by AMMA on their behalf. As an example, Ms. Moffett wrote to Ms. Naminiasl in May of 2018 that if she accepted the position, Ms. Moffett would send her information and resume to the Chief of Obstetrics at the Hospital. Ms. Naminiasl asked Ms. Moffett to have her resume forwarded and to request that the Hospital send the privilege package to her.

[23] Since leaving AMMA, none of the Respondents have withdrawn their privileges from the Hospital despite Ms. Moffett’s repeated request that they do so. Both Ms. Singh and Ms. Gilanpour have applied for reappointment of their privileges at the Hospital for the calendar year 2019. Ms. Naminiasl only had “temporary” privileges so she is in a different situation. However, she has met with Dr. Abou-Seido and the necessary paperwork was done for her application for privileges to proceed. The Hospital has not yet made a decision about the Respondents’ privileges. The Respondents have told the Hospital that they are no longer with AMMA.

[24] On September 30, 2018, the Respondents made an application to the TPA to establish a midwifery practice group to compete with AMMA. The proposed service area for the midwifery group includes the Hospital. It also includes the Brampton Civic Hospital, Peel Memorial Hospital, and Headwaters HealthCare Centre in Orangeville. The decision about this application is still pending.

[25] Since leaving AMMA, Ms. Singh secured a midwife position at the Sages-Femmes Rouge Valley midwifery clinic servicing clients at Scarborough hospitals. Ms. Naminiasl is at a practice group serving clients at Hamilton hospitals.

C. Position of the Parties

[26] The position of AMMA on this application is straightforward. It submits that paragraph 5.22 requires each Respondent to surrender their privileges at the Hospital immediately upon their leaving AMMA. They have not done so. AMMA submits that I should order that they do. AMMA submits that paragraph 5.22 is important since the failure of departing midwives to give up their privileges at the Hospital, makes those privileges unavailable to AMMA. Given the limited midwifery slots at the Hospital, this situation threatens the survival of AMMA. This is especially so since the TPA has recently raised questions regarding the viability of AMMA if they do not have sufficient midwives with privileges at the Hospital. Historically, midwife members who left AMMA have given up the privileges and these privileges have been given to newly retained midwives on a replacement basis. For all intents and purposes, the Respondents cannot use their Hospital privileges as they are not attached to a practice group that is authorized to practice in the service area in which the Hospital is located. Thus, they will not be paid for any work done in the Hospital. AMMA submits that the Respondents have raised collateral matters about the quality and professionalism of the services provided by AMMA, some of which are subject to current investigations by third parties, as a part of a campaign by the Respondents to have AMMA removed from the scene, either by the College of Midwives of Ontario or the TPA, in order to clear the way to have their own midwifery practice group approved by the TPA.

[27] The Respondents make the three arguments that I have already alluded to. First, it is submitted that Ms. Singh is not required by paragraph 5.22 to withdraw her privileges. Her Agreement expired. It was not terminated. Paragraph 5.22 only applies when the Agreement is terminated. Unlike Ms. Naminiasl and Ms. Gilanpour, there was no termination of Ms. Singh’s Agreement. Thus, the triggering event for paragraph 5.22 did not occur. Second, it is submitted that given that each Respondent held her privileges at the Hospital personally, none of these privileges were held through AMMA as required by paragraph 5.22. Thus, their privileges are not subject to the contractual obligation to surrender upon termination. Finally, the Respondents submit that paragraph 5.22 is a restrictive covenant; the effect of its operation is to lessen competition. This restrictive covenant is neither reasonable between the parties nor reasonable in the public’s interest. Regarding the former, applying the more rigorous scrutiny test applicable to such contracts, the covenant is ambiguous, unreasonable in terms of the expectation of the parties, unlimited in its scope of prohibition, and far exceeds what is necessary to protect the legitimate business interests of AMMA. They argue that the effect and intent of the clause is to absolutely bar any competitive midwifery practice group from setting up in Brampton with privileges at the Hospital. Regarding the latter, it is here that the Respondents challenge the quality of the services offered by AMMA alleging it is not a viable practice group. They submit that by providing the public in the area with another midwifery option would only enhance the public interest. Conversely, enforcing the clause would mean the Respondents would not be able to have their practice group funded which would be contrary to the public’s interest in providing access to quality midwifery services.

[28] In response, AMMA disputes that paragraph 5.22 properly interpreted supports the first two arguments of the Respondents. AMMA submits that there is no power imbalance to be concerned with on the facts. AMMA further submits that the clause does not restrain trade. Alternatively, if it is found to be a restrictive covenant, it is a reasonable one.

D. Ms. Singh’s Agreement Expired and Was Not Terminated

[29] Unlike Ms. Gilanpour and Ms. Naminiasl, Ms. Singh did not resign her position with AMMA. Ms. Singh’s Agreement with AMMA ended July 1, 2018. In June of 2018, Ms. Moffett met with Ms. Singh and advised her that AMMA would not be extending her contract. Ms. Moffett said she would allow Ms. Singh to stay until September and that she should look for employment in the meantime. On or about September 4, 2018, Ms. Moffett inquired about the job search. Ms. Singh had not been able to find employment. It was agreed that she could continue to work for few more months. After the meeting, Ms. Singh decided to leave on October 1, 2018, and she advised Ms. Moffett of this by email. The previous Agreement had therefore expired.

[30] Ms. Singh submits that paragraph 5.22 does not apply to her. The requirement that she surrender her privileges at the Hospital is only triggered by the “termination” of the Agreement. She argues that her contract with AMMA simply expired and did not terminate.

[31] “Terminate” or “termination” is not defined in the Agreement. In my opinion, the use of the word “termination” in paragraph 5.22 is ambiguous whether it includes expiration of the Agreement for the following reasons.

[32] First of all, while the clause “for any reason” sets potentially broad parameters to what is meant by termination, this does not in and of itself include or preclude expiration. Such a broad clause may be meant to denote terminations that are done with cause or without cause or with or without proper notice. Additionally, its use can be intended to capture both termination by the midwife or AMMA.

[33] Secondly, there is the context of its use within the Agreement. Paragraph 5.22 is set within a section headed “Responsibilities”. Aside from payments, most of the 22 paragraphs of this section deal with the responsibilities of the midwife and the powers of the Director (Ms. Moffett). Most of these responsibilities deal with matters that happen during the lifetime of the Agreement.

[34] Thirdly, the word “termination” is used in a number of other areas of the Agreement. The word is used sometimes in a way where it clearly excludes expiration, sometimes in a way that could include expiration, or is unclear. These are the provisions [emphasis added]:

4. Terms of Agreement

4.2 At least 90 days prior to the termination of this agreement, the Director and the undersigned IC shall meet to discuss the renewal of this agreement.

5. Responsibilities

5.3 The undersigned IC agrees that, after termination or expiration of this Agreement, the IC remains responsible for any lawful obligations incurred before withdrawal. For greater certainty such lawful obligations include, but are not limited to, all clinical obligations of the undersigned IC pursuant to College Rules and any lawful obligations arising out of her association with the Practice Group.

5.21 The IC covenants and agrees that he or she shall not, during the Agreement and for a period of 12 months after the termination of the Agreement, directly or indirectly solicit, interfere with or endeavor to direct or entice away from the Practice Group any client of the Practice Group or any employees, associates or independent contractors of the Practice Group.

6. Performance Review

6.2 In the event the results of any of the IC’s performance reviews are not satisfactory to the Director in their sole and absolute discretion, the Director may terminate this Agreement on 14 days written notice to the IC.

8. Termination

8.1 Notwithstanding Section 6.2, the Director may terminate this Agreement, without reason, on 30 days written notice or such longer time as may be mutually agreed.

8.2 The Director may immediately terminate this Agreement if, in the opinion of the Director, the undersigned IC has, by omission, commission or any other manner whatsoever, put a client or clients at risk. Such termination shall be effective prior to a decision being made by the College and, as set out in Section 7.4, such decision is not reviewable pursuant to the Dispute Resolution provisions in Section 7 of this Agreement. Notice of such termination shall be given in writing.

8.3 This Agreement may be terminated immediately by Director for any breach of this Agreement by the IC. Notice of termination shall be given in writing.

8.4 In the event of the termination of this Agreement, the Practice Group shall pay the terminated IC or, in the event of her death pay to her estate, any moneys held by the Practice Group for the benefit of such IC.

8.5 The undersigned IC may terminate this Agreement after giving 90 days’ notice to the Director or such shorter period of notice as may be mutually agreed. Such notice of termination shall be given in writing.

8.6 The fees, benefits and disbursements for the undersigned IC are contingent upon continuation of the Funding Agreement. In the event the Funding Agreement is terminated or that funds for the undersigned IC are not forthcoming from the TPA, the Director may terminate this Agreement on whatever period of notice is appropriate in view of the circumstances. Such notice of termination shall be given in writing.

8.7 Upon termination of this Agreement, with or without cause, with or without notice, the IC shall not make any financial claim for the prenatal care that she might have provided for client who are due or will be giving birth after termination of this contract.

8.8 The IC covenants and agrees that the IC will not, for a period of one year after the date of termination of this Agreement for any reason: (i) contact or solicit the Transfer Payment Agency or any employees, associates or contractors of the Practice Group in respect of establishing a midwifery clinic within the Service Area, as such term is defined in the Funding Agreement, or in respect of joining another midwifery clinic within the Service Area; nor shall the Vendor (sic) contact or solicit any clients or potential clients (being individuals who have had contact with the Practice Group in respect of midwifery services within the previous 12 months) of the Practice Group, for a period of one year following the date of any such termination, or (ii) contact or solicit hospitals at which the Practice Group and its representatives have privileges or hospital which the Practice Group has, in the previous 12 months, contacted for the purposes of obtaining privileges for the Practice Group or its representatives; provided, however, that the IC shall be permitted to obtain hospital privileges as an associate of any midwifery clinic in which the IC has no ownership interest.

9. General

9.4 The parties agree that arranged absences of less than one year for purposes including, but not limited to, maternity leave, sabbaticals for education and disability do not constitute termination of this Agreement. Any such arranged absences shall be pursuant to a written agreement. Absent express consent, any such arranged absences shall not extend beyond the term of the Agreement. For greater certainty such arranged absences, off-time or leaves do not include vacations or normal off-times.

[35] There is no one consistent use of the word “termination” in the Agreement. Some provisions such as paragraphs 5.3, 8 and 9.4, use the term in a way that excludes expiration of the Agreement. On the other hand, paragraphs 4.2 and 5.21 would seem to include it. Paragraph 5.22 itself could be interpreted in either fashion given that the parties could have reasonably wanted the midwife to resign hospital privileges either at the expiry of the Agreement or upon the dismissal or resignation of the midwife.

[36] In my view, there is genuine ambiguity in interpreting paragraph 5.22 after assessing the contract as a whole. Objectively, there are two reasonable interpretations of the word in the context of paragraph 5.22.

[37] One is that argued for by AMMA: in order to protect the interest they claim in the hospital privilege held by a midwife, regardless of the reason, when that midwife no longer works for AMMA, the midwife is contractually obligated to resign her privileges. This would apply even when the Agreement expires.

[38] However, another interpretation of 5.22 is also reasonable given the factual matrix of the Agreement. This Agreement is a fixed term one year contract. The privileges at the Hospital are also renewed on an annual basis. If a midwife of AMMA does not have her Agreement renewed and it expires, then there may be a period of time where it is conceivable that the midwife will continue to have privileges at the Hospital without being associated with AMMA. However, given the factual circumstances regarding the reappointment process, this will not likely be for an extended period of time. Both the Agreement and privileges are renewed annually. Further, the parties to the Agreement would know in advance when both Agreement and privileges would expire and be up for renewal. Thus, they would be in a position to plan for such events. I note further that paragraph 5.3 requires the associate to continue to professionally provide midwife services to AMMA’s clients even after she leaves the practice group. This may include services at the Hospital that would require the midwife to continue having privileges there. This would benefit both parties.

[39] When the Agreement is unilaterally terminated by either party, the circumstances can be different. Here, the period of time can be significantly longer, up to a year if the midwife resigns or is fired early on in the life of the Agreement. Additionally, even with the appropriate notice period for resignation/dismissal, such an event could result in challenges to AMMA in its smooth and safe operation of the practice group. As counsel for AMMA submitted, an intended purpose of the clause could be to protect AMMA from very transient and potentially mischievous midwives who gain a position and privileges and then soon depart. While the parties may still wish to ensure ongoing care by the departing midwife for existing clients in the Hospital, circumstances of the departure may warrant a more immediate and final dissolution of the relationship between AMMA and the midwife. In this situation, paragraph 5.22 would provide AMMA an opportunity to regain its Hospital privileges and limit any prejudice such an unexpected departure may cause.

[40] In assessing these competing interpretations, I find it clear that there is a significant power imbalance between AMMA and the Respondent. I appreciate that Ms. Singh and Ms. Moffett are both midwives; they are educated and experienced health professionals. That said, Ms. Singh’s employment at AMMA was her first job. Reasonably, she trusted Ms. Moffett. Furthermore, the power imbalance that existed at the time of the Agreement is similar to that between employer/employee. In this case, realistically a midwife can only practice their profession if they are associated with a practice group that is funded by the TPA. Thus, it is by signing the Agreement with AMMA that Ms. Singh could be remunerated, similar to the situation of an employee. The Agreement also specified terms and conditions that reflect a traditional employer/employee relationship. Even though the contract is not an employment contract, it is analogous to one and the rationale for interpreting contracts in a way favourable to the Respondents is appropriate: Amberber v. IBM Canada Ltd., 2018 ONCA 571, [2018] O.J. No. 3370 (C.A.) at paras. 43-44; IRIS The Visual Group Western Canada Inc. v. Park, [2017] B.C.J. No. 1634 (C.A.) at para. 47. In addition to the nature of the relationship, there was no negotiation and the provision was essentially a take-or-leave-it one. Ms. Moffett admitted this in cross-examination. I find that the contra preferentem rule should apply.

[41] Thus, I find the interpretation more favourable to Ms. Singh should be preferred. I conclude that there is no contractual obligation on Ms. Singh to withdraw her Hospital privileges. The application against her is dismissed.

E. Interpretation of “Held Through…The Practice Group”

[42] The Respondents submit that the evidence is undisputed that the privileges are held by each midwife individually. As Dr. Abou–Seido averred, each individual midwife is provided with privileges based on her own application for appointment and the Hospital does not allocate privileges to any particular group of midwives like AMMA. Consequently, the Respondents argue that these privileges are not “held through” AMMA as contemplated by paragraph 5.22 and therefore they are not required to take all steps to withdraw them.

[43] I do not accept this argument.

[44] The issue is not whether the privileges are in fact held by AMMA as opposed to held by the Respondents (AMMA does not dispute this). Rather, the issue is what privileges the parties intended to be captured by reference to this phrase in this provision.

[45] In my view, to accept the Respondents’ interpretation would denude paragraph 5.22 of any effect. The factual matrix is that these privileges are not held by AMMA but are individually held by the midwife. If the Respondents’ position is accepted, there would never be any privileges subject to the requirement under the paragraph to withdraw.

[46] Each one of the Respondents, including Ms. Singh, obtained their privileges at the Hospital once they began working for AMMA. They did not have such privileges before. The offer of the contract was not made conditional on the Respondents obtaining such privileges in advance. The evidence also establishes that while each Respondent applied individually for the privileges, AMMA did not stand idly by but assisted, at least in the initial application, the Respondents in obtaining the privileges.

[47] Furthermore, the Agreement itself contemplates that AMMA would have involvement in obtaining the privileges for the midwife. The Agreement defines “hospital” to mean William Osler Health System, Brampton Civic Hospital where the Practice Group is working to obtain privileges and any other hospital at which the Practice Group obtains privileges.

[48] I agree with AMMA that if paragraph 5.22 were meant to exclude the type of privileges held by the Respondents, it would have specified privileges held “by” AMMA and not a term such as “through”. By the use of this phrase, the Agreement intended to capture the privileges held by the midwife obtained for the purpose of the midwifery work done for AMMA under the Agreement. It recognizes that the privileges are held by the individual midwife and not AMMA. It also recognizes that AMMA assisted the midwife in gaining such privileges by not only administratively facilitating the application process but also by providing the midwife with a position with AMMA, a TPA funded practice group. Without such a position, there would be no remunerative reason for a midwife to apply for privileges.

[49] Thus, I find that the privileges held by the Respondents are the type of privileges contemplated by paragraph 5.22.

[50] On the interpretation of paragraph 5.22, the Respondents make one other argument. They submit that paragraph 5.22 requires only notification to the Hospital they are no longer associated with AMMA. In my opinion, this argument ignores the plain wording of the paragraph. The paragraph requires that they immediately withdraw their hospital privileges by giving notice in writing to the Hospital along with all other steps necessary to do so. It requires far more than just written notice.

[51] Therefore, I reject this argument.

F. The Paragraph Does Not Operate as a Restraint of Trade

[52] The Respondents submits that paragraph 5.22 is a covenant in the restraint of trade and is unreasonable. As a result, it should not be enforced. Before assessing the reasonableness of the paragraph, the first question that needs to be answered is whether it is such a restrictive covenant.

[53] Unlike many common restraint of trade covenants, paragraph 5.22 contains no prohibition or penalty. By its terms, the Respondents are not prohibited from or penalized by competing with AMMA in any way. They are simply required to surrender the privileges they held through AMMA. They are in every way free to compete with AMMA even within the same catchment area that AMMA services.

[54] The Respondents submit that the class of contracts considered to be “in restraint of trade” is fluid and not closed. Whether a particular provision operates in restraint of trade is determined not merely by the form of the clause but by the effect of the clause in practice. In the case at bar, it is submitted that paragraph 5.22, by requiring the Respondents to withdraw their privileges at the Hospital, would lead to their new practice group not being approved by the TPA. Thus, enforcing this covenant will mean that the Respondents will be prevented from competing with AMMA in providing midwifery services at the Hospital altogether and for an indeterminate period of time.

[55] In urging upon me to consider the effect of the clause rather than focusing on the form of it, the Respondents have relied on the decision of Brown J. (as he then was) in Levinsky v. T.D. Bank and TD Securities Inc., 2013 ONSC 5657. In that case, the plaintiff had worked for the defendant as an investment banker. He participated in a compensation plan which provided that if he resigned from his employment, he would forfeit shares previously allocated to him but which had not yet matured and paid out. When the plaintiff did resign, he sued for his entitlement for past years’ share allocations alleging the forfeiture on resignation provision in his plan was in the nature of a restrictive covenant. The defendant argued that the compensation was only payable if the employee met the vesting requirements as of the date of maturity which included him being still an employee of the defendant. Brown J. ultimately held that provision did not constitute an unreasonable restraint of trade. In analyzing the relevant provision, he discussed the general legal principles to be applied. In the course of doing so, he referred to the Privy Council case of Stenhouse Australia Ltd. v. Phillips, [1974] A.C. 391 and made the following statement of the law that the Respondents chiefly rely on (at para. 50):

Whether a particular provision operates in restraint of trade falls to be determined not merely by the form of the clause, but by the effect of the clause in practice. So, for example, where a clause on its face contained no direct covenant to abstain from any form of competition, but did require the former employee to share profits with his former employer on any new business written following his resignation, the clause operated to cause the employee to refuse business he otherwise would take, thereby constituting a restraint of trade.

[56] I will return to discuss this case further.

[57] There are two approaches when it comes to assessing whether an impugned provision amounts to a restraint of trade. These approaches were referred to by Lowry J.A. in Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97 as the “formalistic” approach and the “functional” approach. In an admirable review of the law, Lowry J.A. assessed the relative merits of these two strands of competing authority. While dissenting in the result, his reasoning on this issue was approved of by the majority. Lowery J.A. settled on the functionalist approach (at para. 42):

… In my view, the functionalist approach established in English law is to be preferred as the legal basis for determining whether clauses that burden employees with financial consequences, whether by payment or forfeiture, they would not otherwise have for engaging in post-employment competition constitute a restraint on trade. In the words of Lord Wilberforce, it is a matter of the effect of the clause in practice over its form.

[58] While I am drawn to such an approach for the principled reasons given by both Brown J. and Lowry J.A., this is not the law in Ontario. In a review of the authorities supporting the “formalistic” approach, Lowry J.A. refer to this state of the law in this province (at paras 35-38):

On the other hand, however, is authority stemming from Ontario, which favours the formalistic approach. Inglis v. The Great West Life Assurance Co., [1941] O.R. 305 (C.A.), appears to stand as the only provincial court of appeal decision on the point in this country. The Ontario Court of Appeal held there to be no restraint where the continuation of commissions payable to a departed employee was subject to the employee not becoming connected with another life insurance company, as he did. The conclusion was stated as follows (p 311):

The Court is also agreed that clause 17 is not in restraint of trade. The plaintiff was not thereby precluded from himself cancelling the agreement or from going anywhere and doing anything he chose to do, and there was no restraint of any kind on his activities. He voluntarily joined the staff of the Monarch Life Company with the agreement before him and with its provision definitely there stated, and he is bound by his own agreement.

This logic has been followed and expanded upon. In Renaud v. Graham, [2009] O.J. No. 597 (Div. Ct.), based on Inglis, a trial court determination that a clause providing a pre-estimate of real estate agent training costs to be repaid in the event of post-employment competition with the employer did not constitute a restraint of trade was upheld.

Earlier in Nortel Networks Corp. v. Jervis, [2002] O.J. No. 12, consideration was given to the enforceability of a plan offering annual stock options to employees, with provision for payments to be made to the employer if an employee accepted competitive employment within a year of an option being exercised. Citing Inglis, the subject clause was held not to be a restraint of trade because an employee "was not precluded from going elsewhere or from doing whatever he chose to do" (para. 32).

[59] This brings me back to Levinsky. Brown J. expressly stated he was bound by Inglis. No less, I am bound by Inglis. That said, Brown J. did go on to decide that the provision he was dealing with neither on its face nor in its practical operation acted as a restraint of trade. Although a functional approach was referred to by Brown J., (and no doubt found favour with him), I find the binding authorities in this jurisdiction require that the primary focus remain on the wording of the provision. While the wording of the provision requires an understanding of the effects that may arise (i.e. does the wording restrain any activities), a “formalistic” approach does not entail an investigation into the practical effects of the provision’s operation in the factual circumstances of the individual case.

[60] In applying this analysis, I conclude that paragraph 5.22 is not a restrictive covenant that restrains trade. All that the paragraph does is to require the Respondents to withdraw their privileges. As previously noted, the Respondents are not prohibited from or penalized by competing with AMMA in any way by it. In addition, it does not constrain in any way their ability to apply for privileges at the Hospital. [2] They can apply for such privileges along with any new midwife who contracts with AMMA after the Respondents’ departure. Like in Levinsky, the obligation to withdraw their privileges are tied to the event of termination, not to the Respondents’ conduct following the end of their contractual relationship with AMMA.

[61] Alternatively, if I took a more functional approach to the issue, my conclusion would still remain the same. I appreciate that there is a limited number of such privileges at the Hospital. Although the evidence does not say one way or another, I can readily guess that practically speaking a renewal application may be viewed more favourably then a new application. Certainly that is the perception of the Respondents. However, any new midwife who comes to work for AMMA will be making new applications as well since the withdrawn privileges do not belong or are allocated to AMMA. Important in this case is that it is the Hospital that makes the decision based upon the criteria found in Article 1.4. of its By Law No. 2 Professional Staff By-Laws This criteria is not appreciably different from the criteria for reappointment under Article 1.8. Further, Dr. Abou-Seido confirms that each applicant is assessed as an individual without consideration of any practice group affiliation or external consideration. He confirms that the renewal of the Respondents’ privileges are not contingent on membership in AMMA or any external practice group. I appreciate Ms. Moffett’s view is that based on her experience, the privileges given up by departing midwives of AMMA were taken up by new associates. But there may be other unrelated reasons why this has been the case. I do not accept that the Hospital permits AMMA to simply substitute departing midwives with their replacements. Dr. Aboul-Seido’s evidence and the By Law are clear and are to be preferred. Based on the evidence, I therefore find that the Respondents are not at any significant competitive disadvantage in applying for privileges if they are required to withdraw their present privileges than are other applicants.

[62] Another consideration is the purpose behind paragraph 5.22. While this is not decisive on a functional analysis which focuses on the effect of the clause, it still remains relevant. In this case, I accept AMMA’s position that the purpose of paragraph 5.22 is not to lessen competition. There are only a limited number of midwife privileges at the Hospital. If the Respondents or any departing midwife can hold onto their privileges, then there is one less vacant position available. While I find that AMMA cannot simply substitute midwives, it is just common sense that in the Hospital world of limited midwife privileges, if the Respondents hold on to their privileges, there are three less positions new AMMA midwives can apply for.

[63] The consequences of not withdrawing one’s privileges may be especially acute if a midwife was terminated for cause early on. Perhaps, even after just starting at AMMA. A spot at the Hospital is then taken by that midwife for a period of up to a year. That spot would thereby be unavailable for another midwife at AMMA to apply for. This could pose a threat to the operation of AMMA in terms of its ability to offer full services to potential clients and to attract new midwives. To make matters worse, as in the case of the Respondents, because they are not with a practice group serving the catchment area, these privileges are unlikely to be used by them since any services performed would not be paid for by the TPA.

[64] The Respondents counter with the argument that the fact they have to give up their privileges will endanger their application with the TPA for the funding of their new practice group. Fundamentally, this is what the Respondents say is the effect that lessens competition. However, I cannot accept this argument for a number of reasons. First, as I have determined, this functional approach to the analysis of a purported restraint of trade clause, although it is appealing in principle, has not been accepted in Ontario. Secondly, any effect the provision may have on a successful application to the TPA is collateral and remote from the operation of paragraph 5.22. Thirdly, I am not satisfied that the Respondents have established on the evidence that it is more likely than not that the withdrawal of their privileges would have such a negative effect on their application with the TPA. While their fears are understandable, that risk is essentially speculative and based mainly on the subjective concerns of the Respondents. The only other evidence expressly referred to by the Respondents to support this is one email exchange dated February 25-26, 2019, between Ms. Moffett (not the Respondents) and the director of the midwifery program about obtaining information about AMMA’s situation. I find this of little probative value in proving that the TPA is unlikely to grant the Respondents funding of their proposed group if they are forced to abide by paragraph 5.22. I note that when AMMA was first granted TPA funding, it had no privileges.

[65] For these reasons, I find that paragraph 5.22 does not operate as a restraint of trade. It is therefore unnecessary for me to consider the reasonableness of it.

G. Conclusion

[66] In conclusion, the application as against Ms. Singh is dismissed. She is entitled to keep her privileges at the Hospital. The application as against Ms. Gilanpour and Ms. Naminiasl is allowed. They are to immediately take all steps necessary to withdraw their Hospital privileges held at the Hospital.

[67] I wish to be clear about my order regarding Ms. Gilanpour and Ms. Naminiasl. Given I have heard that the issue of their privileges will likely be decided by the Hospital sometime in the summer months, if any of the Respondents have had their privileges renewed while awaiting the release of my decision, they are not required to surrender such privileges. The Respondents gave notice to the Hospital that they are no longer with AMMA. Any renewal of the privileges by the Hospital while this decision was on reserve would have been done on their own merits. Such new renewed privileges are not held through AMMA and do not fall within paragraph 5.22.

[68] I would encourage the issues of costs be resolved between the parties. If it cannot, I will entertain written submissions, each one limited to two pages excluding any attachments (any Bill of Costs, Costs Outline, and authorities). AMMA shall file within 10 days of the release of these reasons. The Respondents shall file within 7 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru

Released: June 27, 2019

Footnotes

[1] The template of this association specifically states that practice groups may change them.

[2] This is unlike paragraph 8.8 which clearly does restrain their activities.