Court File and Parties

Court File No.: CV-22-00003376-0000 Date: 2023 01 17 Ontario Superior Court of Justice

Between: Jennifer BLACK, Plaintiff And: MANDEVILLE PRIVATE CLIENT INC. & MANDEVILLE HOLIDING INC., Defendant

Third Parties: Janet BACCARANI and Doug BECK

Before: Ricchetti J.

Counsel: P. Fruitman and J. Landau, for the Plaintiff S. Kushneryk and A. Beale, for the Defendant and Third Parties

Heard: December 14, 2022

Reasons (Interlocutory Injunction)

The Motions

[1] The Plaintiff Jennifer Black seeks an interlocutory injunction:

a) An order for an interim, interlocutory and permanent injunction restraining the defendant from breaching its obligations to the plaintiff as set out in a Principal Agent Agreement (“PAA”) dated January 18, 2016, and amended on November 25, 2020;

b) A declaration that the PAA as amended is enforceable, with specific reference to the plaintiff’s right to continue acting as Discretionary Manager to the Majestic Access Funds (defined below), or as Majestic Asset Management, LLC (“Majestic”) directs;

c) An order for an interim and interlocutory injunction restraining the defendant from interfering with the plaintiff’s economic relationship with Majestic, including Majestic’s intention to appoint the plaintiff’s new firm as sub-advisor to the Majestic Access Funds;

d) An order for an interim, interlocutory and permanent injunction restraining the defendant upon any termination of the Fund Management Agreement as amended (defined below), from:

i. Moving, renaming, or otherwise altering the name or registration of the assets in the Majestic Access Funds;

ii. Taking any steps to terminate, vacate or otherwise close the Majestic Access Funds;

iii. Appointing any portfolio manager or transitioning the Majestic Access Funds to any portfolio manager other than the plaintiff; and,

iv. Taking any steps to communicate with unit holders and/or clients without receiving consent from the plaintiff and Majestic;

e) A declaration that the amount the plaintiff owes as Early Termination Payment under the PAA as amended is now $0 because the defendant terminated Raymond Sawicki’s employment.

The Cross-Motion

[2] The Defendants, Mandeville Private Client Inc. and Mandeville Holdings Inc. (collectively, “Mandeville”), seek an injunction:

a) Prohibiting the plaintiff, Jennifer Black (“Black”), and her agents, partners, employees and anyone else acting on her behalf, including her business partners Douglas Beck (“Beck”) and Janet Baccarani (“Baccarani”), (together, “Black and Agents”) from soliciting any Mandeville clients whose accounts are held under the representative code initially used by Black and Baccarani and now used by Black with assistance from Beck (the “Black Rep Code Clients”) and from providing any investment advice or ancillary services to the Black Rep Code Clients;

b) Prohibiting Black and Agents from facilitating the transfer of the Black Rep Code Clients to any other securities registrant or custodian;

c) Requiring Black and Beck to deliver to Mandeville all books and records relating to the Black Rep Code Clients in their power, possession or control, including records of communications with investor clients in any form, including by e-mail, text message or other form;

d) Prohibiting Black and Agents from interfering directly or indirectly with the contractual relations between Mandeville and Majestic Asset Management LLC (“Majestic”);

e) Requiring Black to deliver to Mandeville all books and records relating to the Majestic Access Balanced Income Fund, Majestic Access Private Income Fund and Majestic Access Growth Fund in her power, possession or control, including records of communications with investors in those investment funds in any form, including by e-mail, text message or other form;

f) Prohibiting Black and Agents from directly or indirectly using or disclosing confidential information belonging to Mandeville.

The Facts

The Parties and Overview

[3] Ms. Black is a financial management advisor, certified financial planner, certified investment manager and family enterprise advisor.

[4] Ms. Janet Baccarani is Ms. Black’s mother. Ms. Black and Ms. Baccarani worked in the financial industry prior to the sale of their financial business to Mandeville.

[5] Mr. Douglas Beck is also a financial advisor. Beck joined Mandeville in 2015.

[6] Mandeville is an investment dealer registered in Ontario and other jurisdictions of Canada. Mandeville is a dealer member of the Investment Industry Regulatory Organization of Canada (“IIROC”).

[7] Majestic Asset Management LLC (“Majestic”) is an asset management firm. It is an investment fund manager and investment advisor.

[8] At a result of a sale of their financial business to Mandeville in 2016, Ms. Black and Ms. Baccarani became agents of Mandeville pursuant to written Principal Agent Agreements. Thereafter, Ms. Black provided wealth management and investment and financial advisory services as an agent of Mandeville and as a Mandeville sponsored securities registrant from January 18, 2016 to November 30, 2022.

[9] Ms. Baccarani resigned from Mandeville in 2021.

[10] Ms. Black and Mr. Beck tendered their resignations from Mandeville on October 31, 2022, effective November 30, 2022.

[11] Ms. Black refers to Ms. Baccarani and Mr. Beck as “her partners” in a new financial business. Ms. Black, Ms. Baccarani and Mr. Beck, “now plan to also provide investment advisory services outside of” Mandeville. They seek to transition the Majestic Funds (defined below) to their new financial business and, of course, other clients of Mandeville to their new financial business.

[12] If Ms. Black can transition the Majestic Funds to her new business, it gives her the right to deal with the Majestic Funds and hence, the “clients” investments in those funds. Accordingly, Ms. Black’s motion seeks an injunction to prevent Mandeville from objecting to or preventing a transfer of the Majestic Funds to her new business. As colloquially put by Ms. Black’s counsel – “to get out of the way”.

[13] As for Mandeville’s cross-motion, Mandeville seeks an injunction prohibiting Ms. Black from soliciting clients of Mandeville pursuant to a non-solicitation provision in a Non-Competition and Non-Solicitation Agreement (“NCNSA”) that was executed when Ms. Black sold her financial business to Mandeville.

[14] There are two types of “clients” at issue in this proceeding: “clients” with investor monies in trading accounts, and “clients” with their investments in advisor managed funds (the latter being the “Majestic Funds”). Ms. Black’s motion relates only to “clients” who have invested their monies in the Majestic Funds. Mandeville’s motion, on the other hand, relates to both types of “clients”.

The Sale of Ms. Black’s Business in 2016

[15] Around 2015 or 2016, Ms. Black and Ms. Baccarani decided to sell their financial business to Mandeville and join Mandeville as agents.

[16] Importantly, Mandeville bought Ms. Black and Ms. Baccarani’s book of business. Ms. Black and Ms. Baccarani then became Mandeville agents as of January 18, 2016.

[17] As part of Mandeville’s purchase in January 2016, Ms. Black and Ms. Baccarani entered into four related agreements with Mandeville. The two significant ones are the Principal Agent Agreements and the Non-Competition and Non-Solicitation Agreements.

[18] The Principal Agent Agreement between Ms. Black and Mandeville dated January 18, 2016, provides in part:

Dear Jennifer:

As you know, Mandeville Private Client Inc. ("MPC") is a member of the Investment Industry Regulatory Organization of Canada ("IIROC"). In accordance with IIROC's Rule 39.4 governing and permitting its Member firms and persons conducting securities related business within the meaning specified in IIROC Rule 39.2 ("Securities Related Business") on behalf of the Member to have a principal and agent relationship and its further requirement that all Members enter into an agreement in writing with their sales representatives using a principal/agent relationship, MPC is pleased to engage you as an agent and to sponsor your registration with IIROC on the following terms and conditions (the "Agreement"):

1. Your Relationship with MPC

You acknowledge and agree that subject to the terms and conditions contained in this Agreement, you are MPC's agent solely for the purpose of:

(i) the purchase and sale of securities ("trading"), including mutual funds and alternative structure products, within both commission-based (transactional) accounts and fee-based and managed accounts; and

(ii) as it relates to fee-based and managed accounts, the provision of services in respect of the investment advice, account administration and service and ancillary services (i.e. research, analysis or reports) provided by you in respect of the assets held by the clients within those fee-based and/or managed accounts. You acknowledge that your relationship with MPC may be subject to change as set out in Subsection 16(d) of this Agreement…

2. (b) You acknowledge that the Rules require you to devote your full time and attention to your practice as a MPC advisor . If you have any outside business or activities that you wish to carry on, you agree that such activities must be pre-approved by MPC in writing and if necessary by your governing Securities Commission(s) and/or IIROC…

4(a) You agree that products sold in MPC's associated branches, as applicable, all business or professional activities in respect of which you are licensed through MPC shall be conducted in the name of MPC, must flow through MPC and be carried on the books and records of MPC and you shall not conduct any business or professional activities with or in respect of any person other than MPC …

4 (f) You agree that MPC shall be and remain liable to clients (and other third parties) for your acts and omissions relating to MPC business as if you were an employee of MPC, subject however to any defense available to MPC under any and all applicable law…

6 (b) You agree to conduct all business governed by the Agreement in the name of MPC or a business or trade or style name owned by MPC . If you wish to use any other business or style or trade name, you must obtain the prior written approval of MPC, and its use must be in accordance with the Rules.

(emphasis added)

[19] The NCNSA dated January 18, 2016, provides in part:

3.1 The Advisor agrees that he will not , during the Term, within the Restricted Territory , directly or indirectly , in any manner whatsoever, including either individually, in partnership, jointly or in conjunction with any other person, whether as an employee, consultant, independent contractor, principal, agent, director, officer, owner or shareholder:

(a) induce any person who is an advisor, agent, salesperson, contractor, customer , supplier or dealer of MHI [Mandeville Holdings Inc.] as of the date on which the Advisor stops providing services for MHI, to terminate such relationship, to leave, to stop selling to, or stop buying from, or otherwise to cease or reduce its dealing with MHI or any of MHl's affiliate s; or

(b) solicit for employment or solicit for contract for the services of any person who is in the service of MHI (whether as an employee or otherwise) as of the date on which the Advisor stops providing services for MHI.

4.1 The Advisor agrees that the restrictions set forth in this Agreement are fair and reasonable and are reasonably required for the protection of MHl's initial and ongoing conduct of its business.

4.2 The Advisor understands that MHJ will suffer irreparable harm in the event that he breaches any of the obligations set out in this Agreement and that monetary damages would be inadequate to compensate for the breach. Accordingly, the Advisor agrees that, in the event of a breach or threatened breach by him of any of the provisions of this Agreement, MHI, in addition to and not in limitation of any other rights, remedies or damages available to it at law or in equity, shall be entitled to an interim injunction, interlocutory injunction and permanent injunction in order to prevent or to restrain any such breach by him.

4.3 The Advisor further agrees that i n the event of a breach by him of any of the provisions of this Agreement, MHI, in addition to and not in limitation of any other rights, remedies or damages available to it at law or in equity, shall also be entitled to an immediate return of all Shares issued to the Advisor pursuant to the Asset Purchase Agreement, in exchange for which the Advisor will be paid the lessor of five cents ($0.05) per Share or $1,500.

(emphasis added)

[20] While Ms. Black alleges that Mandeville told her it would not try to enforce the NCNSA, there is no amended document in accordance with the entire agreement clause and there is no other proof of this inconsistency with the written NCNSA. It makes little sense that Mandeville would have Ms. Black execute the NCNSA but tell her they wouldn’t enforce it. This is bald assertion by Ms. Black.

The New Relationship

[21] The new relationship between Ms. Black, Ms. Baccarani, Mr. Beck and Mandeville appears to have worked well for some time.

[22] While engaged at Mandeville, Ms. Black was a Mandeville agent and the business she conducted with clients were on behalf of Mandeville. Mandeville sponsored Ms. Black’s securities registration from January 18, 2016 to November 30, 2022. As a dealing representative of Mandeville, she provided wealth management, insurance advice and financial planning services as a Mandeville sponsored registrant.

[23] While at Mandeville, Ms. Black and Ms. Baccarani provided their financial advisory services using the trade name “Access”.

The Advisor Managed Funds

[24] In 2019, a new line of business was considered: an advisor managed funds (the “Funds”). The Funds would create one or more funds which pooled client assets into a common fund and buying securities or other assets could occur within that fund. The clients would receive “units” in that fund.

[25] In order to meet regulatory requirements, the Funds needed to have an Investment Fund Manager (“IFM”). The IFM would be responsible for appointing advisors, administrators and auditors. Mandeville approached Majestic to be the IFM. Mandeville and Majestic entered into a Fund Management Agreement on April 7, 2020. This agreement established three advisor managed funds (the “Majestic Funds”). Majestic would be the IFM and Portfolio Manager (PM). Mandeville would be the Sub-Advisor and appoint its agents to be the portfolio advisors.

[26] As the project were about to or had started to operate, there were other agreements executed between Mandeville and Majestic. Those included:

a) the Fund Management Agreement;

b) an Amendment to the Fund Management Agreement (“Amendment No. 1”); and

c) a Sub-Advisory Agreement;

[27] To establish and operate the Majestic Funds, Mandeville was required to obtain regulatory approval. This included approval of an Offering Memorandum which contained the following:

The Sub-Advisor

Mandeville has been appointed by Majestic as the sub-advisor of the Funds and will provide investment advisory services to the Investment Advisor and the Funds in respect of the Funds’ investment portfolios. Mandeville is a registered investment dealer member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and is authorized, as per IIROC’s Dealer Member Rules, to engage in discretionary portfolio management. Mandeville will, in its sole discretion, appoint one or more of its registered representatives who have been designated and approved by IIROC to provide discretionary portfolio management (“Mandeville RRPMs”, and each a “Mandeville RR-PM”) in connection with the provision of the investment advisory services of Mandeville to each Fund. Mandeville carries out its activities from Burlington, Ontario. See “Management of the Funds – The Sub-Advisor”…Registered Representatives of the Sub-Advisor

Mandeville will appoint one or more registered representatives to provide discretionary investment management services to each Fund. Each such individual must adhere to Mandeville’s internal policies and procedures providing for a supervisory and risk management framework. Mandeville’s internal policies and procedures have been reviewed by IIROC and meet best practices identified by Mandeville for discretionary investment management services.

[28] While at Mandeville, Ms. Black was involved in the discussions, set-up and operation of the Majestic Funds. But she did so as a Mandeville agent. Ms. Black was not a party to any of the Majestic Funds’ Agreements.

[29] Let me describe the Majestic Funds Agreements between Majestic and Mandeville.

November 25, 2020 Sub-Advisory Agreement between Majestic and Mandeville

[30] The preamble to the Sub Advisory Agreement between Majestic and Mandeville, dated November 25, 2020, sets out the purpose and terms of the agreement:

WHEREAS Mandeville has created and established a novel program which will allow certain of its Registered Representatives who have been designated and approved by IIROC to provide discretionary portfolio management (“Mandeville RR-PMs”) to unitize their practices by allowing them to put a portion of their discretionary assets under management in a “fund ” (the “Mandeville Advisor Managed Funds” and each, a “Fund”);

AND WHEREAS Mandeville approached Majestic to participate in the Mandeville Advisor Managed Funds program whereby Majestic would act as the investment fund manager and investment advisor of the Mandeville Advisor Managed Funds and would appoint Mandeville as the sub-advisor of the said funds, to which Majestic has agreed ;

AND WHEREAS, pursuant to the Trust Agreement, the Trustee has appointed the Manager as manager for the Funds, providing the Manager with the responsibility and power to, notably, manage and direct the investments of the Funds and provide investment advisory and portfolio management services in respect of the assets and property of the Funds (collectively, the “Assets”);

WHEREAS the Trust Agreement authorizes the Manager to retain the Sub-Advisor for the purposes of providing investment advisory services to the Manager and the Funds in respect of the Funds’ investment portfolios , and the Sub-Advisor wishes to be retained by the Manager for such purposes;

(emphasis added)

[31] The Sub-Advisory Agreement gave Mandeville the responsibility to appoint a Registered Representatives-Portfolio Manager (“RR-PM”) for the operation of the Majestic Funds.

[32] Of particular note, the Sub-Advisory Agreement remains “in force until terminated by the Sub-Advisor.” The Sub-Advisory Agreement does not provide for a right or mechanism for Majestic to change the Sub-Advisor or terminate the Sub-Advisory Agreement (except for specified grounds of default, none of which are alleged in this proceeding).

November 25, 2020 Amendment No. 1 to the Fund Management Agreement

[33] The following provision is relevant to these motions:

6.7 MAJESTIC, on its own behalf and on behalf of any affiliated entity, agrees that it will not, during the term of this Agreement and for a period of 2 years thereafter, act as an IFM or PM for any investment fund or other pooled investment vehicle for which any Designated Advisor provides investment management or investment advisory services. For certainty, a Designated Advisor is a former registered representative of MANDEVILLE who was previously appointed by MANDEVILLE pursuant to Section 1.1(c) above to serve as a portfolio advisor of a Fund or Funds . MAJESTIC confirms and agrees that the restrictions contained in this Section are lawful, reasonable and no broader than necessary to protect the legitimate business interests of MANDEVILLE, including the time and expense incurred and resources dedicated by MANDEVILLE in entering into, and establishing the arrangements, under the Agreement.

(emphasis added)

[34] Essentially, this amendment prevented Majestic from engaging a former Mandeville RR-PM during the terms of the Fund Management Agreement and two years thereafter.

Amendment to Ms. Black’s Principal Agent Agreement

[35] Mandeville and Ms. Black executed a letter agreement dated November 25, 2020, amending the Principal Agent Agreement. This letter agreement provides the following:

Reference is made to the Principal Agent Agreement dated January 18, 2016 (the “Agreement”) between you and Mandeville Private Client Inc. (“MPC” or “we”), and the Mandeville Advisor Managed Funds which we have established pursuant to a fund management agreement dated April 7, 2020, as may be amended from time to time (the “Fund Management Agreement”) with Majestic Asset Management LLC (“Majestic”), as Investment Fund Manager and Portfolio Manager of such funds, to allow certain of our Registered Representatives who we have designated and are licensed by the Investment Industry Regulatory Organization of Canada (“IIROC”) to provide discretionary portfolio management (each, a “Mandeville RR-PM”) to facilitate the management of assets under a fund structure. Pursuant to a sub-advisory agreement dated November 25, 2020 (the “Sub-Advisory Agreement”) between Majestic and MPC, MPC has been appointed as the investment sub-advisor of the Mandeville Advisor Managed Funds.

This letter (the “Amendment Letter”) shall amend the Agreement [the Principal Agent Agreement between Black and Mandeville] to confirm your appointment, and the key terms of your service, as the Mandeville RR-PM (as defined below) of the Funds (as defined below). Unless otherwise noted in this Amendment Letter, all defined terms used in this Amendment Letter have the meanings given to them in the Agreement. In consideration of the mutual agreements and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you and MPC agree that the Agreement is amended by adding the following text as a new Section 4.1 of the Agreement:

4.1 Mandeville Advisor Managed Funds

(a) Appointment as a Mandeville RR-PM – You acknowledge, agree, and accept that you are hereby appointed by MPC to act as the Mandeville RR-PM under the Sub-Advisory Agreement to provide discretionary portfolio management services to the following funds : Majestic Access Balanced Income Fund, Majestic Access Private Income Fund and Majestic Access Growth Fund (each, a “Fund” and collectively, the “Funds”). Your service as Mandeville RR-PM of the Funds will be subject to the Agreement, as amended by this Amendment Letter. In serving as Mandeville RR-PM to the Funds, you will exercise your powers and discharge your duties in good faith and in the best interests of each Fund , and in connection therewith shall exercise the degree of care, diligence and skill that a reasonably prudent portfolio manager would exercise in the circumstances, and subject to the Investment Policy Statement (IPS) established for each Fund, as well as in compliance with all MPC Procedures for the Funds and/or managed account activities that are established from time to time. You agree that you will be immediately terminated as the Mandeville RR-PM of the Funds if

(i) the Agreement is terminated for any reason ,

You also acknowledge and agree that MPC will be permitted to include and use the word “Access” in the Fund names following the Termination Date.

(e) Fund Set-Up Costs and Expenses – You acknowledge and agree that you are responsible for reimbursing MPC for 100% of the costs and expenses that MPC advances directly to Majestic in connection with the formation and launch of each Fund (for which MPC will not acknowledge and agree that your compensation for serving as the Mandeville RR-PM to the Funds will be limited to payments of your portions of the management fees described in Section 4.1(f) and that such payments shall be subject to Section 5 (excluding Section 5(a) and therefore not subject to further “grid” reduction in accordance with your Personal Payout). (h) Restrictive Covenant and Early Termination Payment

You acknowledge and agree that, if the Agreement is terminated for any reason during the initial two (2) year period following the date of this Amendment Letter (the “Amendment Letter Date”), you will not be permitted to provide investment management or investment advisory services to any investment fund or other pooled investment vehicle for which Majestic, an affiliated entity of Majestic, or any third party, serves as investment fund manager or investment manager prior to making a payment to MPC to reasonably compensate MPC for the time and expense incurred and resources committed by MPC in establishing, and entering into, the arrangements with Majestic to form and launch the Funds (the “Early Termination Payment”). The Early Termination Payment shall be calculated for each Fund as follows:

(i) If the early termination occurs during the initial 12 month period following the Amendment Letter Date, the total of the following amounts: (A) 40 basis points multiplied by the average monthly net asset value (“NAV”) attributable to the Series A units, (B) 0 basis points multiplied by the average monthly NAV attributable to the Series B units, (C) 40 basis points multiplied by the average monthly NAV attributable to the Series F units and (D) 40% of the average monthly management fees paid or payable on the Series I units multiplied by 24.

(ii) If the early termination occurs during the second 12 month period following the Amendment Letter Date, the total of the following amounts: (A) 40 basis points multiplied by the average monthly NAV attributable to the Series A units, (B) 0 basis points multiplied by the average monthly NAV attributable to the Series B units, (C) 40 basis points multiplied by the average monthly NAV attributable to the Series F units and (D) 40% of the average monthly management fees paid or payable on the Series I units multiplied by 24.

(iii) If the early termination occurs after the 24 month period following the Amendment Letter Date: the total of the following amounts: (A) 40 basis points multiplied by the average monthly NAV attributable to the Series A units, (B) 40 basis points multiplied by the average monthly NAV attributable to the Series F units and (C) 40% of the average monthly management fees paid or payable on the Series I units multiplied by 24.

Except as amended in this Amendment Letter, all of the terms and conditions of the Agreement are ratified, confirmed and shall continue in full force and effect. Please confirm your agreement to and acceptance of this Amendment Letter by dating, signing and returning to MPC a copy of this Amendment Letter.

(emphasis added)

[36] As a result, if the Principal Agent Agreement is terminated for any reason, Ms. Black is no longer Mandeville’s RR-PM for the Majestic Funds.

[37] Most important is that there is nothing in this amendment to the Principal Agent Agreement which gives Ms. Black the right to become the Sub-Advisor of the Majestic Funds or to take the Majestic Funds with her if she leaves Mandeville.

[38] In addition, Ms. Black gave Mandeville the right to continue to use the name “Access”, being Ms. Black’s trade name used to provide her financial services to the Majestic Funds. This implicitly suggests that Mandeville would or could continue to operate the Majestic Funds while using the same trade name used by Ms. Black while at Mandeville.

The Majestic Funds Commence Operation

[39] On November 26, 2020, the Majestic Funds were launched. They were composed of the Majestic Access Balanced Income Fund, the Majestic Access Private Income Fund and the Majestic Access Growth Fund.

[40] In accordance with the Amended Principal Agent Agreement, Mandeville appointed Ms. Black to be the first RR-PM of the Majestic Funds.

February 1, 2021 Side Letter between Mandeville and Majestic

[41] On February 1, 2021, Mandeville and Majestic executed an Amendment to the Fund Management Agreement by way of a “Side Letter”.

[42] This “Majestic/Mandeville Side Letter” permitted Majestic , during the Fund Management Agreement and for two years thereafter, “to act as an IFM or PM for the Majestic Access Balanced Income Fund, Majestic Access Private Income Fund and/or the Majestic Access Growth Fund for which Jennifer Black provides investment management or investment advisory services.”

[43] It is important to note that this “Majestic/Mandeville Side Letter”, while it refers to Ms. Black, does not give her any rights as a Sub-Advisor or to act as IFM or PM of the Majestic Funds. Ms. Black is not even a party to this side letter agreement. This side letter agreement only permits “Majestic”, if it so chooses, to become an IFM or PM for the Majestic Funds for which Ms. Black provided investment management or investment advisory services.

Ms. Black’s Dealings with the Funds prior to Resignation

[44] While there were some dealings directly between Ms. Black and Majestic in 2019, it is not clear (and I make no finding) whether Ms. Black was trying to divert the establishment of the Majestic Funds to herself or was dealing with Majestic for Mandeville in setting up the Majestic Funds, although there is some evidence that Ms. Black sought an independent pricing proposal from Majestic for the establishment of the Majestic Funds. In 2019, Ms. Black was still a Mandeville agent assisting in establishing the Majestic Funds.

[45] In May 2020, Ms. Black began to have discussions with Majestic and the Ontario Securities Commission (OSC) to determine whether she could replace Mandeville as the Sub-Advisor to the Majestic Funds. I accept that these discussions, on their face, appear to be inconsistent with Ms. Black’s obligation to devote “full time and attention” to the Mandeville business rather than Ms. Black’s future competitive business and inconsistent with her role as a Mandeville agent.

The Resignation

[46] On October 31, 2022, Ms. Black and Beck gave notice of their resignations from Mandeville effective November 30, 2022.

[47] On November 4, 2022, despite still being employed by Mandeville, Ms. Black purported to exercise her rights “to provide investment management and investment advisory services to the Majestic Access Funds” upon her departure from Mandeville.

[48] While still employed by Mandeville, Ms. Black acknowledges having advised Mandeville clients of her departure to establish a new business and of their investment options; one of which was to move their financial accounts from Mandeville to her new business. This activity continued after November 30, 2022.

Transition of the Funds

[49] As a result of the discussions between Majestic and Ms. Black, on November 1, 2022, Majestic contacted Mandeville regarding a transition of the Majestic Funds by providing notice to unitholders (the investors/clients in the Majestic Funds).

[50] On November 4, 2022, Ms. Black advised Mandeville that she was exercising “her option to replace” Mandeville in the role of Sub-Advisor for the Majestic Funds.

[51] Mandeville disagreed with the transfer of the Majestic Funds. Mandeville disagreed with Ms. Black’s alleged “right” to transfer the Majestic Funds to her or her new business.

[52] Mandeville advised Majestic that, under the agreements between Mandeville and Majestic, Majestic could not replace Mandeville as the Sub-Advisor.

[53] There is one key impediment to Ms. Black’s motion. Majestic is not a party to this litigation. Ms. Black’s position relies on an interpretation and enforcement of the agreements between Majestic and Mandeville. Even if Majestic wanted to transfer the Majestic Funds to Ms. Black as Sub Advisor, the issue is whether Majestic has the right to do so – a right that can only be judicially decided with all the necessary parties before the court.

[54] Leading up to this litigation, there were issues and disagreements between Ms. Black and Mandeville regarding how and what Mandeville’s clients could, would or should be told about Ms. Black’s resignation at Mandeville and the establishment of her new business.

Communications by Ms. Black

[55] Ms. Black admits she contacted the clients, in my view Mandeville’s clients, prior to her departure, advising them of her leaving and telling them they had three options: stay with Mandeville, move to her new business or go elsewhere.

[56] From the cross-examination of Ms. Black:

176 Q. I mean, let me be more specific then if it's helpful. How many clients did you talk to between October 31, 2022, and November 30, 2022, about your plans to leave 18 Mandeville?

A. Again, I'm not sure of the exact number but I'll go with a dozen.

177 Q. And it's those dozen that you offered these three options during the period between October 31 and November 30?

A. Correct.

178 Q. And Larry Acton was maybe one of these maybe dozen clients?

A. Possibly.

179 Q. Was David Elliot one of those clients?

A. No. David Elliot would have been after Mandeville sent out their notice.

180 Q. After November 30, 2022?

A. Correct.

MR. FRUITMAN: It might have been November 29.

THE WITNESS: After November, thank you.

181 Q. Did you tell David Elliot that his Mandeville account would be transferred into his new Access account?

A. We provided the options to David Elliot.

These Proceedings

[57] Ms. Black commenced this action on November 17, 2022.

[58] The motion and the cross-motion were delivered shortly thereafter.

The Position of Ms. Black

[59] Ms. Black submits that she has a right to enforce her Amended Principal Agent Agreement to continue to provide investment management and advisory services to the Majestic Funds by transferring the Majestic Funds from Mandeville to her new business.

[60] Unless the Majestic Funds can be transitioned to her new business, Ms. Black submits that she will not have control over “her clients” who wish to transfer their investments to her new business because those clients could or might incur potential costs and tax consequences which would be a disincentive to such a transfer.

The Position of Mandeville

[61] Mandeville’s position is that none of the agreements with Ms. Black expressly or implicitly give Ms. Black the right to transition the Majestic Funds to her new business.

[62] Mandeville points to the fact that none of its agreements with Majestic appear to contemplate or permit Majestic to replace Mandeville as the Sub-Advisor of the Majestic Funds for the purpose of appointing Ms. Black, or someone else, as the Sub-Advisor.

Analysis

Clients Accounts

[63] Separate from clients who have invested through the Majestic Funds, there are other client accounts, who were managed by Ms. Black, while at Mandeville, prior to her resignation on November 30, 2022.

[64] There is no dispute that clients are free, including all Mandeville clients through a trading account or an investment vehicle such as the Majestic Funds, to remove their monies from Mandeville, subject only to any regulatory issue.

[65] I will deal with the impact of the NCNSA, in particular the non-solicitation portion, as Mandeville does not seek to enforce the non-compete clause in the NCNSA.

The Black Motion

Expert Evidence

[66] Ms. Black submits, as expert evidence, the report of David Jarvis. Essentially, Mr. Jarvis provides an opinion regarding the interpretation and enforceability of the very agreements at issue in this proceeding.

[67] This evidence is inadmissible. Mr. Jarvis’ opinion on the interpretation of the subject agreements is neither necessary nor admissible as expert evidence.

[68] Mr. Jarvis goes on to deal with possible regulatory issues that “might” or “would” flow from either party’s interpretation of the agreements. Again, Mr. Jarvis’ opinion as to possible regulatory issues or what the regulatory agencies might or might not do does not assist this court in determining the proper interpretation of these agreements. This position is particularly troublesome in that, at least on the evidence before me, the Mandeville/Majestic Agreements were approved by the regulatory authorities.

[69] If there are regulatory issues, as suggested by Mr. Jarvis, that “would potentially constitute a securities violation or at least be actively challenged by the OSC”, then the proper regulatory authorities will deal with such issues.

[70] Lastly, what Mr. Jarvis suggests is that Mandeville’s “refusal to follow Majestic’s direction conflicts with the constating documents of the Majestic Access Funds, industry practice, and regulatory expectations” (at para. 41 of Ms. Black’s factum dated December 11, 2022). Whether this is true is an issue for the regulatory officials or as between Mandeville and Majestic. It does not confer any “rights” to Ms. Black.

[71] I reject Mr. Jarvis’ evidence.

The real issue is between Mandeville and Majestic

[72] The injunction sought by Ms. Black is framed as an injunction to prohibit Mandeville from “breaching its contractual obligations” to Ms. Black “and from interfering in Jennifer’s relations with a third party, Majestic.” The reality is that Ms. Black is seeking an order of this court with respect to the rights between Mandeville and Majestic – that is whether Majestic can terminate Mandeville as a Sub-Advisor to be replaced by Ms. Black.

[73] But Majestic is not a party to this litigation.

[74] Whether or not this is a mandatory order being sought, this court has no jurisdiction in this proceeding to determine the rights as between Mandeville and Majestic.

[75] However, I also agree that what Ms. Black seeks indirectly is essentially a mandatory injunction, directing Mandeville, despite any rights it might have in its agreements with Majestic, to agree or permit Majestic to appoint Ms. Black’s new business to take over as Sub-Advisor of the Majestic Funds.

[76] As a result, Ms. Black must show a greater likelihood of success than for a prohibitory injunction. See The Tewaaraton Lacrosse League v. Ontario Lacrosse Association, 2022 ONSC 3592, at paras. 52-53:

When a court grants a mandatory injunction, it commands performance of a legal, equitable or statutory obligation owed the plaintiff. For a mandatory interlocutory injunction, the plaintiff must show a greater likelihood of success than must be shown for a prohibitory injunction. To find a strong prima facie case, the motion judge must be satisfied after an extensive review of the evidence of the merits of the case that there is a strong likelihood on the law and the evidence presented that the moving party would ultimately be successful at trial in proving the allegations set out in the notice of motion.

In classifying whether an injunction is mandatory or prohibitory, the analysis goes beyond formalism and requires the court to examine whether, in substance, the overall effect of the injunction would be to require the defendant to do something or to refrain from doing something.

(emphasis added)

Strength of Ms. Black’s Claim

Strong Prima Facie Case

[77] On the evidence before me, I am not persuaded that Ms. Black has demonstrated a strong prima facie case.

[78] I do not find that Ms. Black has even met the low threshold of establishing a serious issue to be tried. Ms. Black does not meet either the strong prima facie test nor the serious issue to be tried test since none of the agreements to which she is a party gives her the “right” to become the Sub-Advisor of the Majestic Funds or the right to transition the Majestic Funds to her or to her new business.

[79] Ms. Black submits that Mandeville agreed that, if Ms. Black left Mandeville, she had the “right” to continue to provide investment management and advisory services for the Funds. Ms. Black relies on two documents: the Amended Principal Agency Agreement and the Black/Mandeville Side Letter.

Amended Principal Agent Agreement (November 25, 2020)

[80] The Amended Principal Agent Agreement does not assist Ms. Black as it expressly provides that Ms. Black would be immediately terminated as the Mandeville RR-PM of the Majestic Funds if the Agreement were terminated for any reason.

[81] The Amended Principal Agent Agreement allows Mandeville to continue to use the word “Access” with respect to the Majestic Funds following the termination (“Access” being the trade name which Ms. Black, Ms. Baccarani and Mr. Beck had used from the time the Majestic Funds had operated). Clearly, this wording implicitly contemplates that Mandeville would or could continue the Majestic Funds and use Ms. Black’s trade name after the termination of Ms. Black’s agency.

[82] In conclusion, there is no provision in the Amended Principal Agent Agreement which implicitly or expressly grants Ms. Black the “right” to transfer the Majestic Funds to her new financial business if her agreements with Mandeville ended.

[83] Ms. Black points to the Restrictive Covenant and Early Termination Payment provision at paragraph (h) of the agreement. However, this provision still does not give Ms. Black the “right” she claims to a transfer of the Majestic Funds to her new business. What the provision provides is that if the Amended Principal Agent Agreement is terminated within two years of the amendment, Ms. Black could not provide investment management or investment advisory services to any investment fund or other pooled investment with Majestic or any third party unless she made the “Early Termination Payment”. As such, if Ms. Black made the Early Termination Payment, she could provide investment management or investment advisory services to any investment fund or other pooled investment with Majestic or any other third party. In other words, notwithstanding the NCNSA, she could compete with Mandeville by providing financial advisory services to pooled investment funds with Majestic. But it does not say she has a “right” to provide financial advisory services or become the Sub-Advisor of the Majestic Funds.

[84] Mandeville acknowledges that Ms. Black is free to provide RR and PM services to other funds. Ms. Black may have the ability to provide investment management or investment advisory services to a Majestic fund (under the Amendment between Ms. Black and Mandeville) – but that doesn’t mean that she has a right to insist Majestic so engage Ms. Black for their funds.

[85] The Amended Principal Agent Agreement doesn’t go as far as Ms. Black asserts it does – granting her the right to take the Majestic Funds.

[86] Ms. Black submits that it makes no sense that Ms. Black would have to repay Mandeville the “set up costs and expenses” of the Majestic Funds. Whatever the purpose, the Early Termination Payment gave Ms. Black the exemption from the non-compete to provide her investment and financial services to any Majestic funds or to any other pooled investment funds.

[87] The interpretation that Ms. Black advances is simply not clear and unambiguous in the Amendment to the Principal Agent Agreement.

The November 25, 2020 Side Letter Mandeville/Majestic

[88] Ms. Black further identifies the November 25, 2020 Side Letter between Majestic and Mandeville as giving her this alleged “right” to take the Majestic Funds if she left Mandeville. The most significant problem Ms. Black faces is that this Side Letter is between Mandeville and Majestic. Ms. Black is not a party under or signatory to this Side Letter.

[89] The Side Letter permits Majestic, during the Fund Management Agreement and up to two years thereafter, to act as the IFM or PM for the Majestic Funds for which Ms. Black provides (emphasizing the use of the current tense) investment management and investment advisory services. This language appears to give Majestic certain rights relating to the Majestic Funds – not Ms. Black.

[90] So, based on the apparent wording of this agreement, if Majestic wanted to, it could appoint itself as IFM (Investment Fund Manager) or PM (Portfolio Manager) for the Majestic Funds. Majestic may have this right (subject to regulatory issues and its willingness to do so).

[91] However, Ms. Black was not given and does not apparently have the right to demand Majestic appoint her or her new business as IFM or PM.

[92] Nor does Ms. Black have the right to do so indirectly by obtaining a court order directing Mandeville to permit this. And even if such an order was granted, it would not go so far as to order Majestic to appoint Ms. Black to any role in any fund.

[93] I use the words “apparent” and “may” because, as I stated above, this court is not and cannot make binding interpretations of agreements between Majestic and Mandeville. If there is a dispute as to whether Majestic can or cannot appoint Ms. Black in any role in any fund, that is an issue for Mandeville and Majestic to resolve. The same is true whether Mandeville can appoint a new Fund Manager upon termination of the agreements between Mandeville and Majestic.

[94] To conclude, even if Ms. Black’s allegation is true – that she was told the agreements provide that she “could assume the role of sub-advisor and provide investment management and investment advisory services for the Majestic Funds if and when she left” Mandeville – such a right is not set out in any agreement or the side letter whether as between Mandeville, Ms. Black, or Majestic.

[95] Ms. Black submits that the principled exception to the privity doctrine applies in this case. See Brown v. Belleville (City), 2013 ONCA 148, at paras. 100-111. While I have reservations about whether the exception to the privity doctrine applies in the circumstances of this case, the agreements in question do not give Ms. Black the rights she alleges. The agreements do not expressly or implicitly refer, let alone give, Ms. Black nor Majestic the right to change the Sub-Advisor or to transition the Majestic Funds to her new business. At best, it gives Majestic the right to appoint an IFM or PM for the Majestic Funds but does not direct Majestic to appoint Ms. Black or Ms. Black’s new business as an IFM or PM for the Majestic Funds. This is perhaps what is the central and fatal impediment to Ms. Black’s alleged “right”.

[96] Ms. Black also points to the Offering Memorandum. I fail to see how the Offering Memorandum gives Ms. Black the right to become the Sub-Advisor because the Offering Memorandum refers to Ms. Black as having been appointed by Mandeville at the time as a “discretionary manager”. Ms. Black fails to refer to the wording under the section relating to the Sub-Advisor which states:

…Mandeville will, in its sole discretion, appoint one or more of its registered representatives who have been designated and approved by IIROC to provide discretionary portfolio management (“Mandeville RR-PMs”, and each a “Mandeville RR-PM”) in connection with the provision of the investment advisory services of Mandeville to each Fund….

…Mandeville will appoint one or more registered representatives to provide discretionary investment management services to each Fund. Each such individual must adhere to Mandeville’s internal policies and procedures providing for a supervisory and risk management framework. Mandeville’s internal policies and procedures have been reviewed by IIROC and meet best practices identified by Mandeville for discretionary investment management services.

[97] I reject the submission that there is some “right” created that Ms. Black would remain associated with the Majestic Funds or that Ms. Black must remain in any specific position or control over the Majestic Funds.

[98] Accordingly, Ms. Black has failed to meet this part of the injunction test.

Irreparable Harm

[99] Ms. Black points to the harm that will be caused to the Mandeville clients who wish to have Ms. Black’s new business manage their monies in the Majestic Funds. They will have to transfer their monies potentially incurring tax liabilities, costs and expenses.

[100] The result, of course, is that some of these clients may not transfer their investments to Ms. Black’s new business because of the financial consequences of the transfer. Ms. Black says her losses “are impossible to quantify at this time.”

[101] On the other hand, Ms. Black alleges that Mandeville’s damages could be easily quantified “using the penalty payment formula in Jennifer’s agent agreement.”

[102] The potential damages either party will claim will be dependent entirely on the discretion of the clients. It is, in my view, futile to try to reasonably and accurately assess the financial implications and other reasons why a great many clients may or may not choose to move their investments from the Majestic Funds.

[103] There is no suggestion that Mandeville has “refused” clients who voluntarily wish to transfer their monies to Ms. Black’s new business – nor that Mandeville will or even can do so. The clients can do so. The regulatory authorities would be able to deal with such issues.

[104] I am not satisfied this factor favours either party.

Balance of Convenience

[105] Ms. Black submits that the interests of “her clients” and the “public interest” favour granting the injunction.

[106] It is Ms. Black’s interests that are best served by permitting Ms. Black to be the Sub-Advisor of the Majestic Funds – her financial interests.

[107] I repeat, this is a case where Ms. Black refers repeatedly to “her clients.” The problem is that they are Mandeville clients – Ms. Black having sold her business to Mandeville ; Ms. Black having assisted in setting up the Majestic Funds while an agent for Mandeville ; Ms. Black having put Mandeville clients into the Majestic Funds . And now Ms. Black wants to take “her clients” by taking control of the Majestic Funds.

[108] Given that clients have the right to transfer their investments if they choose to do so, I am not persuaded that the balance of convenience favours Ms. Black.

Weighing the Factors and Other Relevant Considerations

[109] I am troubled Ms. Black’s discussions with Majestic and the OSC and her efforts to arrange the transfer of the Majestic Funds to Ms. Black’s new business, while she was still a Mandeville agent with contractual obligations to Mandeville.

[110] Considering the above, I am not persuaded that Ms. Black has met her onus on this motion.

Conclusion on Ms. Black’s Motion

[111] In my view, considering the factors and circumstances of this case, I am not prepared to grant an injunction requested by Ms. Black.

[112] Consequently, all other relief sought by Ms. Black in her motion is also dismissed.

The Mandeville Cross-Motion

[113] Ms. Black submits that Mandeville has not provided any proof of solicitation by Ms. Black.

[114] Ms. Black admits that prior to the effective date of her resignation, she sent a standard letter to her clients advising them that she was leaving Mandeville and giving them options of staying at Mandeville, moving to her new business or going elsewhere.

[115] Ms. Black does not dispute the enforceability of the non-solicitation agreement.

[116] Ms. Black denies that she has engaged in any solicitation of former clients. Ms. Black does not consider that, while still an agent at Mandeville, her advice to Mandeville clients that she was leaving Mandeville and giving them the options regarding their investments, one of which is to transfer their accounts to her new business, constituted solicitation.

[117] I disagree.

[118] First, Ms. Black’s obligation under the Principal Agency Agreement was to provide her full time and attention to Mandeville’s business. This letter to “clients” was sent while Ms. Black was still an agent of Mandeville.

[119] Second, the only possible interpretation of her letter to “her” clients is effectively a form of solicitation. The fact that she advised clients that they had the three options does not change the fact it was a form of solicitation. And she did so while still acting as an agent for Mandeville.

[120] Ms. Black submits that Mandeville has not met the test for an injunction.

[121] The non-solicitation provision in the NCNSA is that Ms. Black would not “induce any person who is… [a customer] of MHI as of the date on which the Advisor stops providing services for MHI, to terminate such relationship, to leave, to stop selling to, or stop buying from, or otherwise to cease or reduce its dealing with MHI or any of MHl's affiliates.” Term was defined in the NCNSA to mean “the period beginning the date hereof and ending two-years immediately after (i) the last day on which the Advisor provides services for MHI, regardless of the reason for the cessation of services, or (ii) a Liquidation Event of MHI.”

[122] I have no hesitation concluding that the non-solicitation provisions in the NCNSA are enforceable.

[123] First, a similar conclusion was reached in Mandeville Holdings Inc. v. Santucci, 2021 ONSC 4321 at paras. 12(e) and 54.

[124] Second, such non-solicitation provisions are much more readily enforced against a party who sold the business (in this case the business was the clients and client accounts) rather than a non-solicitation provision in an employment contract. Ms. Black sold her business, including her clients and client accounts, to Mandeville in 2016.

[125] In my view, Mandeville Holdings Inc. has made out a serious issue to be tried with respect to the non-solicitation of “MHI’s clients”.

[126] I recognize that the non-solicitation applies to MHI’s clients leaving MHI and any MHI affiliate which would include both Mandeville companies in this proceeding.

[127] However, the relief sought by Mandeville includes Mandeville Private Client Inc.’s clients. Yet the NSNCA only applies to “Mandeville Holdings Inc.’s clients” and there appears to be no provision that makes the non-solicitation applicable to Mandeville Private Client Inc.’s clients. Neither party addressed this issue of whether the non-solicitation provision applies to clients of Mandeville Private Client Inc. Accordingly, if the parties cannot resolve this issue before the Order is settled, the parties can either appear before me, or make submissions on this issue in writing. Otherwise, the injunction should track the exact wording of the non-solicitation provision.

[128] This was a sale of a business, an unambiguous non-solicitation term making this a very strong case.

[129] As for the irreparable harm, it is always difficult to assess the impact on the parties given that damages attributable to either party are indeterminate, short of going to each “client” and asking them under oath why they did or did not transfer their monies.

[130] As for the balance of convenience, this favours granting the injunction to prohibit Ms. Black from soliciting former MHI clients from leaving Mandeville companies. This includes advising such MHI clients of an option to transfer their investments to her new business.

Conclusion on the Mandeville Cross-Motion

[131] Considering the above, I am satisfied that an interlocutory injunction should issue preventing Ms. Black from soliciting former clients or customers of Mandeville Holdings Inc. to directly or indirectly suggest or offer them an option that they can transfer their investments from any Mandeville affiliated company.

Costs

[132] Either party seeking costs may deliver written submissions, within 3 weeks of the release of these reasons, limited to 7 pages, plus additional documents consisting of offers, authorities and bills of costs.

[133] Any party against whom costs are sought may deliver, within 3 weeks thereafter, written responding submissions limited to 7 pages, plus additional documents consisting of offers, authorities and bills of costs.

[134] There will be no reply submissions.

[135] All cost submissions must be filed and uploaded to CaseLines.

Released: January 17, 2023 Ricchetti J.