COURT FILE NO.: CV-20-84935-9
DATE: 20201218
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
11766554 CANADA INC.
Applicant
– and –
TINGZ RESTAURANT BAR LTD. and JIHAD SAMAHA
Respondents
Samuel Michaels for the Applicant, (Responding Party)
Brian C. Elkin for the Respondents (Moving Parties)
HEARD: December 11, 2020
reasons for decision
R. smith j.
[1] The moving parties, Tingz Restaurant Bar LTD. (“Tingz”) and Jihad Samaha (“Samaha”) – collectively referred to as “Tingz” – seek an interlocutory injunction prohibiting 11766554 Canada Inc. (“117”) and Jae-Anthony Dougan-Holder (“Dougan-Holder”) – collectively referred to as “Dougan-Holder” – from opening or operating a Caribbean fusion pop-up kitchen at 61 York Street, or engaging in any other activity that competes with or causes harm to the moving parties; and prohibiting 117 and Dougan-Holder from using any of Tingz’s confidential information including its branding, themes, ideas and recipes.
[2] Tingz has issued a new application adding Jae-Anthony Dougan-Holder to the style of cause. The two applications were joined at the hearing.
[3] Samaha owns 51% of the shares of Tingz and Dougan-Holder owns a majority (60%) of the shares of 117. David Amar owns 40% of the shares of 117. Sometime in February of 2020 the parties agreed to open a Caribbean fusion restaurant called Tingz located at 55 York Street, in the City of Ottawa. Dougan-Holder was the chef at Tingz and David Amar (“Amar”) looked after the front end of the restaurant.
[4] Samaha, 117, and Tingz signed a unanimous shareholder agreement (“USA”) containing a deadlock provision, a non-competition provision and other terms. Dougan-Holder recently resigned as a director of Tingz and planned to open a kitchen selling Caribbean food in a ByWard Market Ghost Kitchen located at 61 York Street, which is in very close proximity to Tingz restaurant at 55 York Street.
[5] Dougan-Holder opposes the granting of an interim injunction on the grounds that Tingz has not made out a prima facie case, has not shown irreparable harm that cannot be compensated for in damages, and that the balance of convenience favours refusing to grant an interim injunction.
Analysis
[6] The legal test to meet to obtain an interlocutory injunction was set out by the Supreme Court in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, namely:
a) Whether the moving party has presented a case which is not frivolous or vexatious and causes a serious issue to be tried;
b) Whether damages will provide the moving party with an adequate remedy or whether it could suffer irreparable harm if the injunction were refused, and
c) Whether there is a doubt as to the adequacy of the respective remedies, the court should focus on the balance of inconvenience, assessing the relative effect of the granting or refusal of the injunction on each of the parties.
Serious Issue to be Tried or Strong Prima Facie Case
[7] Dougan-Holder submits that Tingz is seeking a mandatory interim injunction and that the appropriate test is that the moving party must demonstrate a strong prima facie case that it will succeed at trial. With respect, I do not agree with this submission. A mandatory interlocutory injunction is not being sought, as Tingz does not seek to have Dougan-Holder take any positive steps, but rather seeks to prohibit him from setting up what is alleged to be a competing Caribbean fusion restaurant contrary to the non-competition terms of the USA and contrary to Dougan-Holder’s fiduciary duties as a director of Tingz.
[8] The first part of the test to obtain a prohibitory injunction is relatively low and only requires the moving party to show a serious issue to be tried, as set out in RJR-MacDonald.
[9] In this case, 117 and Samaha signed a unanimous shareholder agreement dated February 28, 2020, which contained deadlock provisions at article 6(5) and a non-competition term at article 11(3)(a). The non-competition clause states that, for 24 months after the shareholder ceases to hold shares, he shall not directly or indirectly engage anywhere in Ottawa in any activity which would reasonably be foreseen to be competing with the activities of Tingz.
[10] Dougan-Holder did not sign the unanimous shareholder agreement in his personal capacity, but rather on behalf of 117. However, the question of whether Dougan-Holder held himself out as the face of 117 and is personally liable is a serious issue to be determined. Dougan-Holder commenced this application seeking to strike the non-competition provision of the USA, which his counsel had drafted, indicating that he believed he is bound by this non-competition provision.
[11] In addition, Dougan-Holder was a director of Tingz and owed it a fiduciary duty not to take actions that would cause it harm. In Matic et. al. v. Walder et. al., 2016 MBCA 60, the Manitoba Court of Appeal held that a director’s fiduciary duty had been breached when the director diverted a corporate opportunity to his own benefit. A director of a corporation has a fiduciary duty to act honestly and in good faith with a view to the best interests of the corporation. Dougan-Houlder resigned as a director of Tingz several days before this motion was heard, but after he had made plans to setup a kitchen selling Caribbean food in very close proximity to 55 York Street.
[12] In Canadian Aero Service Ltd. v. O’Malley, 1973 CanLII 23 (SCC), [1974] S.C.R. 592 the court held that a director of a corporation had a duty to avoid a conflict of interest with the corporation. Opening a restaurant which sells the same food almost next door to Tingz would be a conflict of interest.
[13] The area of the whole City of Ottawa, the entirety of which is covered by the non-competition clause, is probably an unreasonable restriction as it covers an excessively large area. This non-competition clause would not likely be enforceable if this were an employee-employer relationship. In this case, the parties are agreeing to terms in a business context and as a result, the enforceability of this clause raises a serious issue to be decided.
Irreparable Harm
[14] A reasonable person, when considering Dougan-Holder’s proposal to set up a kitchen in a stall in very close proximity to Tingz’s location, selling the same type of Caribbean food, with the same chef who was well known and has a large social media following of approximately 20,000 individuals, would conclude that Dougan-Holder’s actions would cause harm to Tingz.
[15] It is likely that Tingz will be forced to close its business as a result of the loss of customers to Dougan-Holder’s kitchen. Allowing Dougan-Holder to set up a competing business in such close proximity would cause irreparable harm to Tingz, which is not compensable in damages.
[16] I therefore conclude that Tingz has demonstrated that it will suffer irreparable harm to its business operation if an interlocutory injunction is not granted.
Balance of Convenience
[17] I am also satisfied that the balance of convenience favours Tingz’s request to maintain the status quo until the deadlock provisions involving Tingz, Samaha and Dougan-Holder under the USA are resolved. I make this finding for the following reasons:
a) Dougan-Holder’s proposal is to set up a kitchen selling similar Caribbean food in very close proximity to Tingz, (approximately a block away) for his personal benefit. It is reasonably foreseeable that it will cause serious harm to Tingz;
b) Dougan-Holder was a director of Tingz until very recently and owed a fiduciary duty to Tingz not to cause it harm;
c) Dougan-Holder agreed to the non-competition terms, drafted by his lawyer, less than a year ago, and he brought this application seeking to strike down the non-competition terms;
d) The balance of convenience would probably be different if Dougan-Holder had planned to set up a similar business a reasonable distance from 55 York Street, such that his actions would not cause serious harm to Tingz, even if a similar restaurant was located within the City of Ottawa.
Disposition of Motion
[18] For the above reasons the prohibitory interlocutory injunction sought by the moving parties is granted.
Costs
[19] The parties may make submissions on costs by January 8, 2021.
Released: December 18, 2020
COURT FILE NO.: CV-20-84935-9
DATE: 20201218
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
11766554 CANADA INC.
Applicant
– and –
TINGZ RESTAURANT BAR LTD. and JIHAD SAMAHA
Respondents
REASONS FOR JUDGMENT
Honourable Justice Robert J. Smith
Released: December 18, 2020