Court File and Parties

Court File No.: 1178/20 Date: 2020-05-11 Superior Court of Justice - Ontario

Re: Aiman NADA, Applicant And: Atef BESADA, Andrew BESADA, Adel SOLIMAN, BSN Drugs Limited, Respondents

Before: Gray J.

Counsel: Fay Hassaan, for the Applicant John Adair, for the Respondents

Heard: May 8, 2020

Endorsement

[1] This is a motion for an interlocutory injunction in the context of an application under s. 248 of the Business Corporations Act for an oppression remedy. It was heard by teleconference during the COVID-19 pandemic.

[2] The matter arises out of the ownership and operation of a corporation, BSN Drugs Limited, that runs a drug store in Milton. Fifty percent of the shares of the corporation are owned by the applicant, and twenty-five percent are owned by each of two of the personal respondents. The drug store is profitable, and has been in operation under the current ownership structure for about 12 years. The applicant, a pharmacist, basically runs the drug store and the personal respondents, at least one of whom is also a pharmacist, essentially look after the business end, such as looking after the lease. The applicant and two of the personal respondents are the directors and officers of the corporation.

[3] Arrangements for running some aspects of the business have, to put it mildly, been loose. It was agreed that the applicant would be paid $50 per hour as compensation for his work in running the drug store, and profits would be shared according to shareholdings. Until recently, draws against profits have been distributed to two of the personal respondents in the amount of $5,000 per month each, and to the applicant in the amount of $10,000 per month. This has been recently changed to $6,000 and $12,000. Applicant would requisition his pay based on what he said his hours of work were, and in addition he claimed a fairly large car allowance. Cheques for these amounts were prepared by the bookkeeper, and were signed by the applicant, who had signing authority.

[4] Disputes arose. Discussions ensued as to the prospect that the applicant would be bought out by the personal respondents. They had wildly divergent views as to an appropriate purchase price.

[5] The personal respondents took a closer look at the finances of the corporation. Among other things, they discovered what they thought were two matters of particular concern: the applicant had been claiming compensation for what they thought was an excessive and inflated number of hours of work; and, more alarmingly, that the corporation had been paying around $100,000 per year to something called "Freedom Pharmaceuticals" for apparent relief pharmacist services. It turned out that Freedom Pharmaceuticals was owned by the applicant himself. It appeared to the respondents that the applicant was engaged in surreptitious self-dealing.

[6] The applicant takes the position that he actually worked all of the hours claimed; that the car allowance was properly paid; and that he made no attempt to hide Freedom Pharmaceuticals or the payments made to it, and that the respondents and the bookkeeper knew about it or through reasonable diligence should have known.

[7] The respondents did three things: they changed the signing authority on the corporation's bank account, so as to exclude the applicant; they suspended his employment with pay; and they engaged a workplace investigation lawyer to investigate the corporation's affairs. They paid the retainer for the lawyer out of the corporation's funds, on the theory that his retainer is for the benefit of the corporation. I will have more to say about that later.

[8] There is disputed evidence about attendances at the drug store by the respondents. The applicant asserts that they descended on the drug store and threatened and intimidated him. The respondents say they attended to seek reasonable information and were told, in effect, "talk to my lawyer".

[9] The applicant has applied for relief under s. 248 of the Business Corporations Act, and in that context has moved for injunctive relief. He requests an order suspending the respondents' voting rights as directors and officers of the corporation; orders prohibiting them from attending the place of business and/or harassing him and/or obstructing the business; requiring that all corporate cheques be signed only by him; an order that he be maintained in the corporation's employ; and an order that the respondents be restrained from removing him from the board of directors or his position as an officer.

[10] The applicant paid the retainer for his counsel to pursue this litigation out of the corporation's funds. I will have more to say about that later.

[11] Kurz J. gave leave for this motion to be heard during the COVID-19 pandemic, subject to certain terms that were agreed to. They are: corporate cheques will require 2 signatures, one of which will be that of the applicant; the respondents are not to enter the pharmacy; and should respondents require any records from the pharmacy, they shall arrange it through counsel. The parties also undertook not to change the corporate structure, or to attempt to change the applicant's employment status.

[12] The ordinary tests for an interlocutory injunction are set out in RJR-Macdonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311:

(a) there must be a serious issue to be tried;

(b) the moving party will suffer irreparable harm if the injunction is not granted; and

(c) the balance of convenience favours the moving party.

[13] Counsel for the respondents submits that in a case where oppression remedies are sought, the test under the first criterion is whether the applicant has a strong prima facie case, rather than whether there is a serious issue to be tried. He relies primarily on the decision of Blair J., as he then was, in Gazit (1997) Inc. v. Centrefund Realty Corp., [2000] O.J. 3070 (S.C.J.), at para. 77.

[14] I am not certain that I agree entirely with that submission. Ordinarily, the serious issue test applies unless the effect of the order, while interlocutory, is final in practical terms, in which case the court will insist on the showing of a stronger case. An example would be a picketing injunction. To the extent that an interlocutory order requested in an oppression case approaches terms that are more or less final, I agree that a strong prima facie case must be shown. However, to the extent that an order is requested that simply keeps matters in status quo until the underlying litigation is disposed of, I think the appropriate test remains whether there is a serious issue to be tried.

[15] In this case, the applicant requests orders that go far beyond what is necessary to maintain any semblance of the status quo. In effect, he seeks to exclude the respondents entirely, and seeks to accomplish through the court process what he accuses the respondents of doing.

[16] The underlying dispute is, in reality, the settling of the appropriate terms for a buyout. The main issue is the price. The parties have exchanged names of potential valuators, but have not agreed on one. I doubt that this issue is actually before me. However, the parties have agreed that if they have not agreed on a valuator within two weeks, I will name one. After the expiry of two weeks, if they have not agreed on a valuator, each party shall have three days to file written submissions not to exceed three pages, in which each party will propose three valuators, together with a curriculum vitae for each proposed valuator. The fees and disbursements of the valuator shall be paid by the corporation.

[17] I do not think it is appropriate to make any other order of a final nature at this point. Armed with the opinion of the valuator, the parties will have an opportunity to negotiate. They should have a reasonable period to do so, after which they can pursue the litigation if they are unsuccessful.

[18] I order that the applicant refund the corporation the amount of the retainer he has paid counsel. I also order that the respondents refund the corporation the retainer they paid to the investigating counsel, and that they pay any other fees and disbursements unless and until the court orders otherwise. The decision to retain the lawyer was made by the respondents, and the applicant had no input into who the lawyer would be. It may be that down the road the applicant, or the court, can be persuaded that his fees and disbursements are an appropriate corporate expense, but that remains to be seen.

[19] As an interim measure, I order the following, to expire on agreement of the parties or, at the latest, July 31, 2020, unless extended by the court:

(a) all corporate cheques will require 2 signatures, one of which must be that of the applicant;

(b) all financial transactions shall be by cheque, unless the parties consent in writing;

(c) disclosure of records of the pharmacy and/or the corporation shall be through counsel;

(d) the respondents shall not attend at the pharmacy except on consent in writing or pursuant to a court order;

(e) neither party shall attempt to change the corporate structure;

(f) neither party shall attempt to change the applicant's employment terms.

[20] I entertained costs submissions at the hearing. The applicant has achieved some modest temporary relief, most of which had already been imposed by Kurz J., and most of which had been agreed to in advance by the respondents. He did not come close to achieving the relief sought in the Notice of Motion. In the circumstances, I am prepared to award some costs to the respondents. I order that the applicant pay costs to the respondents, fixed in the amount of $10,000, all-inclusive, within 30 days.

(Original signed by)

Gray J.

Date: May 11, 2020