Court File and Parties

Court File No.: CV-21-00673072-0000 Date: 2024-04-29 Superior Court of Justice - Ontario

Re: LAMIAA MIGAHED, Applicant And: MOHAMMAD HANKIR, CHARM FERTILITY CENTER INC., CHARM ULTRASOUND INC., 10075850 CANADA INC. and CHARM OHIP INC., Respondents

Before: Akazaki J.

Counsel: Paul Fruitman and William C.S. Maidment, for the Applicant Mark Veneziano and Drew Black, for the Respondents

Heard: April 17, 2024

Endorsement

[1] My disposition of this motion for interim relief in the applicant’s corporate oppression claim is guided, in no small part, by the fact that the motion is the opening salvo in a broader matrimonial dispute between the applicant and the individual respondent. Lamiaa Migahed is a physician specializing in fertility medicine. Mohammad Hankir is a businessperson who has managed her fertility clinics. They have equal stakes in the business. How can an equal shareholder be oppressed? Since my role is limited to the interim motion, I have been spared the duty of finally determining that question.

[2] The business is the Centre for Human Assisted Reproductive Medicine, or CHARM, running a number of fertility clinics in Brampton, Oakville, and Etobicoke. The clinics have 20,000 patients and 40 employees. Husband and wife are equal shareholders in the respondent corporations. With the exception of CHARM Ultrasound Inc., Mr. Hankir is their sole director. He says she had wanted it that way. She says she has repeatedly asked to be made a director.

[3] Dr. Migahed contends the business is on the verge of financial collapse because her husband has siphoned funds and resources from the original clinic to branch clinics with mixed success, has engaged in forgery and defalcation, took delivery of a Porsche on the company dime, and has exercised a dictatorial and coercive management style over the clinic’s operations in a way that undermined her role as medical director in charge of patient care.

[4] Mr. Hankir responds to this multi-pronged attack by stating that the clinic is financially sound, he has run the corporate finances in a way that rewarded Dr. Migahed much more than him despite their equal stakes, and it is Dr. Migahed who has no management skill and who is disrupting staff harmony.

[5] The oppression claim is a tough fit, although not fatally so, because the parties have equal equity stakes in the business. Apart from the appointment of a professional receiver-manager, the court has few actual tools to stop an ostensibly successful business from being run into the ground. There is matter of potential of harm to the clinics’ patients if that were to be the result, but I heard little about this element of the business risk. In a case where the applicant is alleging mismanagement and the respondent maintains the business is healthy, the solution appears to be to put them both in charge and hope that their self-interest will be more enlightened than that of the farmers in Aesop’s fable who discovered amidst their geese a layer of golden eggs. If the parties follow that example, they will have created their own and apt justice.

Corporate Organization of the CHARM Group

[6] In 2016, the couple moved to the Greater Toronto Area (GTA) from Ottawa. In October 2017, they bought an existing fertility clinic in Etobicoke. They financed it through a business loan from Royal Bank of Canada, guaranteed by Dr. Migahed. Dr. Migahed disparaged Mr. Hankir by mentioning his lack of credit and his failure as a fast-food franchisee, in an effort to support her theory of his ensuing business profligacy.

[7] Title to the building for the Etobicoke clinic was registered to 10075850 Canada Inc., the shares of which were all issued to Mr. Hankir with him as sole director. According to Dr. Migahed, her husband justified this as a means of insulating her from professional liability suits. He said it was her idea, and that she was the one afraid of such litigation. I struggle to see the relevance of the motive, since Mr. Hankir’s shares in the holding company, and therefore the value of the bricks and mortar, would have been included in his Net Family Property in the matrimonial litigation. That entity is now held 50/50 between Dr. Migahed and Mr. Hankir.

[8] All services funded by the Ontario Health Insurance Plan (OHIP) were billed through Dr. Migahed’s professional corporation, LMMPC, and revenues from all uninsured services and government fertility funding were collected by CHARM Inc. Neither of these are parties to this application. Dr. Migahed controls the voting shares of CHARM Inc. and is its sole director. The purpose of organizing CHARM Inc. in this manner was to ensure liability assistance from the Canadian Medical Protective Association (CMPA) for the services not funded by OHIP. The CMPA is the professional legal defence fund for doctors. Mr. Hankir later discovered that the advice from CMPA to set up CHARM Inc. and LMMPC this way was incorrect. He deposed that he asked Dr. Migahed to make him an equal voting shareholder in these entities and that she refused.

[9] In 2018, Mr. Hankir negotiated a deal with Humber Valley Imaging to acquire a mobile ultrasound licence. This allowed the clinics to run diagnostic imaging. CHARM Ultrasound Inc. is the operating company for the ultrasound services. It is a respondent to the oppression claim, even though there is complete symmetry between the individuals’ respective interests.

[10] In the fall of 2018, the couple acquired a clinic in Oakville, including the lease on the building, through 2657825 Ontario Inc. Mr. Hankir is the sole shareholder and director. In January 2019, he incorporated CHARM Etobicoke Inc. to operate and collect revenues from uninsured services from both the Etobicoke and the Oakville clinics. 2657825 Ontario Inc. then amalgamated with CHARM Etobicoke Inc. to form Charm Fertility Centre Inc. The couple divided the shareholding in Charm Fertility Centre Inc. equally, with Mr. Hankir as the sole director. Mr. Hankir offered as a justification for his sole control over the pre-amalgamation companies “was because Lamiaa refused to make me an equal shareholder in Charm Inc. and LMMPC.” This appears to be the corporate equivalent of the justification offered to schoolyard monitors that the other one “started it.”

[11] In 2019, Mr. Hankir incorporated Charm OHIP Inc., controlled by the couple in equal shares and by him as the sole director. Dr. Migahed claims that he secretly diverted OHIP billings out of LMMPC to Charm OHIP Inc. by uttering a forged group billing application in which he duplicated Dr. Migahed’s signature and impersonated a doctor. Mr. Hankir responded that this was a planned step between them, and that it was dictated by the business exigencies of the clinics. Mr. Hankir admitted that he should not have signed the form in a location labelled “Physician Signature.”

[12] If there is something to the applicant’s malfeasance claims, the court is left wondering why an oppressing party would resort to such measures. They seem more consistent with a party using underhanded means to resolve a deadlock or indecision – not admirable, but not oppressive either. Oppression is the abuse of legal corporate rights and processes to effect unfair ends. Evidence of un lawful conduct supports the conclusion that the lawful checks and balances operate as they should.

[13] The group structure of the related entities appeared as an appendix to the Applicant’s Factum, which I reproduce below, unedited, for ease of reference:

[14] The respondents are the four companies in the row underneath the “Charm Group” in the above chart. 2657825 Ontario Inc. and Charm Etobicoke Inc. amalgamated into Charm Fertility Centre Inc. The parties exchanged allegations of self-dealing by the other, with the applicant accusing her husband of stealing from the company and the respondent raising the applicant’s handling of OHIP billings as a means of depriving the business of operating funds. On a motion for interim relief, within a suit that will likely be ancillary to the accounting of assets in the divorce proceeding, this evidence appears material only to the question whether the applicant has raised a “serious issue,” in the sense of a non-frivolous oppression complaint. The lease on the Porsche and Mr. Hankir’s contribution to Dr. Migahed’s billing potential will end up the subject of income valuators and other economic experts in the family law trial.

Analysis of the Parties’ Positions Regarding Oppression

[15] The applicant’s position is that Mr. Hankir has been abusing his position as sole director of three of the companies to mismanage the clinics, to exclude Dr. Migahed from decision-making, and to divert revenues to himself and away from CHARM Inc. and LMMPC. The applicant also maintains that Mr. Hankir has been an abusive husband who coerced her into a passive role in their marital life and prevented her from asserting herself in the one corporation in which she is also a director. Mr. Hankir denies these allegations, although he conceded to having made a mistake in signing the group billing application form in a place reserved for physicians. There are competing stories of what happened in a bedroom, resulting in Mr. Hankir’s arrest and Dr. Migahed’s treatment in hospital. The record also included a still from video surveillance of the aftermath of a violent episode attributed to Mr. Hankir.

[16] Against this conflict-laden domestic backdrop, the starting point for the oppression remedy is found in the familiar role for judicial oversight of corporate governance in the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA), appears at s. 248:

248 (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section. 1994, c. 27, s. 71 (33).

Idem

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of. R.S.O. 1990, c. B.16, s. 248 (2).

[17] The oppression remedy in Canadian provincial and federal statutes all operate similarly, to provide a broad equitable remedy based on reasonable expectations of a complainant or applicant, the breach of which amounts to oppression, unfair prejudice, or unfair disregard of a relevant interest: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560, at paras. 58-68. The statutory provisions and the available remedies confer a wide discretion to superior court judges. This stems from the origin of corporations as legal persons created by legislation. There is only one legal personality in a corporation, but potentially divergent interests. Corporations, like their living counterparts, are diverse and are subject to their own nature v. nurture issues.

[18] Ordinarily, the oppression remedy is exercised by minority shareholders: Colautti Landry et al v. Pickard et al, 2021 ONSC 2741, at para. 31. Although not a procedural bar to the application, the inability of a majority or equal shareholder to be oppressed, as a matter of corporate procedure, narrows any inquiry to the source of the frustration of the complainant’s reasonable expectations: Wilson v. Cote, at paras. 50-51.

[19] If the shareholders are equal, it is hard to see how one can affect the company’s fortunes in a way that unfairly affects the other. If, as the applicant claims, her husband is leading the business into failure, his interests fail in lock step with hers. In such instances, the statute’s use of the words “unfairly prejudicial” in addition to “oppressive” allows the courts to provide a remedy: Wilson, para. 52. There is no evidence that Mr. Hankir intends to sabotage the business to lower his Net Family Property calculation in the hope of a higher equalization payment or of a spousal support order. However, as I will discuss in a moment, it is possible that Mr. Hankir can act to the detriment of the corporations, without intending to do so. Such a result could be considered prejudicial to Dr. Migahed’s professional interests in a disproportionate manner, compared to the parties’ economic interests.

[20] Taking the circumstances from a wide perspective, the source of the applicant’s grievance can be categorized as abuse of directorial power under clause 248(2)(c). Essentially, she contends that her husband has been using his power as director to divert the CHARM companies’ financial resources to companies he solely controls. Since anyone can incorporate a company by filing articles of incorporation and paying the requisite fees, what he does with those solely controlled other companies is not really part of the equation. However, since those companies have now been amalgamated into Charm Fertility Centre Inc., whose shares are held equally by Dr. Migahed and Mr. Hankir, Mr. Hankir argues that he has rectified any capacity for self-dealing. He contends that Charm Fertility Centre Inc. rights an imbalance created by Dr. Migahed’s control over CHARM Inc. and LMMPC. There is some merit to that proposition. Corrective behaviours are things the law and the courts encourage, although adversaries in lawsuits usually cite them as admissions of prior wrongdoing.

[21] When companies operated by spouses, or by one spouse for the benefit of both, become the subject of matrimonial litigation, courts can find that a spouse has unfairly excluded the other from participation in a way that invokes the statutory oppression regime: Walshe v Walshe, 2022 MBCA 93, at paras. 23-27. I am prepared to accept, for the sake of argument, that an equal stakeholder can unfairly prejudice or disregard the interests of the other, even if it means affecting the malefactor’s interests in the same way. It is unfair for one occupant of a boat to cause it to sink, if the other one wishes it to stay afloat. The idea of fairness in the incorporation statutes is expansive. If the acts of a sole director are prejudicial, there may be breaches of fiduciary duty. However, not every piece of mismanagement is a breach of fiduciary duty. Some business can simply be badly managed. The evidence of staff mismanagement by both parties to this application are not extraordinary and only show that neither is much good at running a business. Nevertheless, there are no other candidates for directorship of the respondent companies.

[22] Dr. Migahed seeks an order removing Mr. Hankir from all director and officer roles in the respondent corporations and inserting herself in those roles as necessary. Mr. Hankir responds by pointing out that he is the one with the business degree and that Dr. Migahed does not know how to run a business. Given the conflicting affidavits on this motion for interim relief, the best one can say after reviewing them is that the truth is likely found in between.

[23] There appear to have been a rapid expansion of the business into multiple markets in on the perimeter of the GTA, including two failed attempts. Dr. Migahed blames her husband, citing her opposition to such plans and his insistence on proceeding, largely behind her back. This may be evidence of the marital or gender dynamic, or it may be Mr. Hankir being in a business that is over his head. Each of the parties have traded accusations that the other is responsible for the alienation of important members of staff. Dr. Migahed cited an instance when Mr. Hankir asserted his role as CEO in a patient care matter. Mr. Hankir provided examples of Dr. Migahed’s inappropriate online communications with an employee. These complaints seem to be in large part related to operational conflicts which are not really the subject matter of oppression remedies. It is not the court’s statutory role to manage private companies or to stop them from failing. Rather, where the rights of minorities or vulnerable stakeholders could be impacted by significant risk to a business, the court can appoint a receiver or manager.

[24] Mr. Hankir’s response to the application is that he should not be removed, but Dr. Migahed can be added as director of each of the companies in which he is sole director. Dr. Migahed’s surresponse to that proposition is that, deadlocked, the company will be worse off with the two of them as directors. Moreover, her counsel argues, there has been a documented incidence of domestic violence. Allowing the parties to work in the same premises could result in informal coercion and undermining Dr. Migahed’s role as medical director. Mr. Hankir says the police charges were withdrawn and that her injury was accidental. He also pointed out to a statement in Dr. Migahed’s cross-examination transcript where she said she was indifferent about him. Domestic violence allegations are usually hard to prove, but the court must consider its incidence on a scale much more than is reported: Barendregt v. Grebliunas, 2022 SCC 22, at para. 144.

[25] All of this evidence points to a family law dynamic that is playing out awkwardly within the outer perimeter of the OBCA oppression remedy regime, as it relates to these parties.

Test for Interim Relief

[26] Both sides of the dispute agree the interim relief available under s. 248 is a form of injunctive or mandatory order that requires application of the three-part test for interlocutory injunctions stated in RJR-McDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, at 334. First, there is a merits-based analysis, followed by an assessment of the risk of irreparable harm if the order is not granted, and ending with a weighing of the balance of convenience.

[27] They disagree principally on the first part of the test, whether it is a type of injunction that requires the moving party to demonstrate a “serious issue” or a “strong prima facie case.” Where the facts are unsettled, the “serious issue” test of the merits ordinarily prevails: Macreanu v. Godino, 2020 ONSC 535, at para. 70. Given the fluid nature of the parties’ interest in the business, including Mr. Hankir’s lack of a genuine long-term interest once the accounting and division of property in the family law dispute is determined, I agree that with Dr. Migahed’s counsel that the “serious issue” test applies. The authorities also tend to reserve the more onerous “strong prima facie case” for injunctions such as Mareva orders, where the order will seriously disrupt vested property rights.

[28] On the face of the record, I find that the applicant has raised a serious issue in that her claim for an oppression remedy cannot be considered frivolous or devoid of merit. This is a fairly low bar. The fact that her equal capital interest makes the oppression remedy a hard fit, in terms of a formalistic approach to the law. Insofar as she has complained of Mr. Hankir’s unilateral decision-making and movement of funds, she has established the likelihood that Mr. Hankir has been affecting business outcomes that do not accord with her reasonable expectations. The precise nature of those outcomes remains nebulous, however. The respondent’s counsel is likely correct that if the test required a “strong prima facie case,” the motion would fail to meet the threshold element.

[29] The second part of the test requires delving into the texture of the business relationships in issue. Will there be irreparable harm if Mr. Hankir remains the sole director of the subject companies? Each party has an interest in the survival of the business. I do foresee, however, argument that leaving Mr. Hankir solely in charge could have a serious impact on Dr. Migahed’s ability to carry out her professional duties. The nature of the business requires the applicant as the medical director to have significant operational say in the daily and medium-term operations. I am therefore satisfied that the status quo with Mr. Hankir at the helm and Dr. Migahed as a reluctant medical licensee runs a serious risk of harm to the business, including its long-term goodwill. The clinical care of patients could also suffer, if Dr. Migahed is not accorded full authority as a director of each of the companies.

[30] Finally, the double-barreled fact that the clinic represents Dr. Migahed’s professional future and Mr. Hankir will have to find a new business venture is the easiest element of the test. The balance of convenience clearly favours Dr. Migahed for ordering some change from the status quo.

[31] The applicant having met the test for an interim oppression remedy, the inquiry turns to the appropriate remedy. The moving party can overcome the three hurdles, but the remedy must remain shaped by the necessity to recognize that the application might ultimately be dismissed, that the correction of the oppression must not compound corporate disruptions, and that Mr. Hankir has rights, too. Are there grounds to remove him from all involvement in the major decisions of the corporations? For the reasons that follow, I think not.

Remedy and the Connection to the Family Law Issues

[32] There is an obvious chicken-and-egg question for which the answer does not leap from the page. Did the corporate crisis emerge from the failure of the marriage, or did the marriage fail because the couple were incompatible as business partners? The applicant’s narrative that her husband is a failed fast-food restauranteur imports a modicum of professional condescension, and Mr. Hankir’s assumption that his wife never wanted to be a director because she has no head for business appears based partly on experience and partly on sexism. Family law only magnifies the reality that many business disputes outside that context derive their fuel from the same vice of hubris that threatens the ability of everyone involved to get along.

[33] There is no long-term future corporate coexistence for the parties in the CHARM Group. The value of the shares of constituent parts will be valued and become the main part of the division of property between them under Part I of the Family Law Act, R.S.O. 1990, c. F.3. Dr. Migahed’s professional and economic future is tied to the clinics. Mr. Hankir’s stake will likely have to be bought out. There exists a conflict of interest for the applicant between keeping the business healthy and reducing its share value. Mr. Hankir’s interest is simpler in that he benefits from any increase in the business’ value. One very likely result is that Dr. Migahed will lack the capital to buy out Mr. Hankir’s shares immediately, and he will have a passive role for some years. Based on this balancing tied to the future of the company, one solution might be to grant the motion outright and substitute Dr. Migahed for Mr. Hankir in all roles of corporate authority because she has the enduring stake and could be a better steward of the businesses’ fortunes.

[34] The problem with this approach is that it creates a scapegoat by ousting Mr. Hankir in the hope that all the negativity of the situation will follow him out the door. The reality is that his ear will be figuratively pressed against that door and will stand ready to bring a new motion at Dr. Migahed’s first misstep as the new manager. Moreover, the court’s role is not to pick a loser, but rather to correct the unfairness to the complainant. In other words, the court should prefer to reorganize the boardroom but not itself become a tiebreaker in a deadlock. Both Dr. Migahed and Mr. Hankir expressed their mutual expectation that their interests be allocated equally. The court, in that instance, should prefer to let the parties resolve their dispute in accordance with that expectation: Walshe, at para. 27.

[35] I appreciate the submission on behalf of Dr. Migahed that her husband’s ability to coerce her should craft a court order that grants her control and strips it from the alleged abuser. The family division of this court possesses a process much better suited to correcting such behaviour, if in fact it there is evidence to warrant correction. That court can restrain Mr. Hankir from being within 100 metres of Dr. Migahed. That would, indirectly, resolve the issue of Mr. Hankir’s presence at the clinics.

[36] The fact that Dr. Migahed is pregnant with the couple’s fifth child, and the circumstances in which this occurred, has also fueled the issue of Mr. Hankir’s control over Dr. Migahed. Based on what I have read, I am not going to provide details in a widely available public document because the issue is out of place in a s. 248 analysis. For the sake of that readership, I will state my awareness of sexual violence and fertility as instruments of gendered coercion. I do not, for a moment, disregard the issue as a live one in the dynamic between the two corporate stakeholders. However, the corporate statute governs what companies and individuals do, perhaps to each other, through the machinery of share ownership, voting, and management.

[37] In a closely held corporation, the personal relationship between the claimant and other corporate actors can be a factor in oppression: BCE, para. 75. However, those considerations return to corporate topics such as the issuance of securities and dividends: Re Ferguson and Imax Systems Corp. (1983), 150 D.L.R. (3d) 718 (Ont. C.A.). Neither the evidence nor the applicant’s theory of the motion lead to the conclusion that replacing Mr. Hankir as corporate director would stop him from coercing Dr. Migahed any more than if she had the veto of an equal directorship. A controlling influence extraneous to the corporate relationship cannot really be addressed in this motion. If the court were to attempt to do so, there would also be a serious risk of unfairly stripping Mr. Hankir of rights based on factors outside corporate governance.

[38] An order under cl. 248(3)(e) of the OBCA, appointing Dr. Migahed a director of all the respondent corporations with Mr. Hankir, would put the parties in the position of possessing a veto over the other. Since the matrimonial turmoil creates a need to preserve the business from incurring any significant obligations outside the course of ordinary business, a deadlock at the management level is not necessarily prejudicial to the interests of the parties. This measure has the effect of preventing the types of conduct of which the applicant has complained, such as the unilateral acquisition of new clinics and the movement of operating capital. By this, I do not make a finding that such unilateral conduct has occurred. Deadlocked parties do find a way to inch forward, especially when their self-interest is tied to that of the adversary. The parties are each represented by senior members of two of the city’s best family law firms. If something significant needs to be done that requires them to confer, either those lawyers or counsel in this corporate matter can broker the directors’ resolutions in a manner that shields Dr. Migahed from Mr. Hankir’s personal presence. All remaining operations can be completed by staff or, in the case of clinical decisions, by Dr. Migahed as the only one of the two who is licenced to make them.

[39] An ancillary interim order that should relieve Dr. Migahed from her husband’s interference in clinical operations would be an order under cl. 248(3)(a) restraining Mr. Hankir from inclusion in any decisions regarding patient care or the organization of medical processes and equipment at the clinics.

[40] Counsel for the applicant shall draft a formal order incorporating the result in paragraphs 38 and 39 above, in a form that best suits the corporate realities of the parties. After approval by counsel for the respondent, the draft order can be taken out by filing same and directing it to my attention.

Costs

[41] On the issue of costs, I refer to the summary of applicable principles in Barry’s Bootcamp Canada Inc. v. 100 Bloor Street West Corporation, 2022 ONSC 4331, at paras. 11-13. Vermette J. recognized the flexibility in the traditional rule that motions for interim relief, if granted, should attract costs in the cause. If the outcome of the motion is likely to resolve the dispute, an immediate costs order is more appropriate than in a case where the final injunction hearing is more foreseeable. Since I predict that the corporate dispute will rather quickly enter the jurisdiction of the court under the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), I will entertain submissions regarding costs of the motion if the parties cannot settle them. I do express my inclination to hold that both sides’ legal expenses should be paid by the corporate respondents, for no reason other than the favorable tax advantage to the parties. This could also be the last opportunity to tap into that advantage, since the deadlock in the directorship will render the corporate respondents no longer entitled to instruct their current counsel.

[42] If the costs cannot be settled, I direct the parties first to exchange costs outlines and attempt to settle the costs to be awarded depending on the award. Counsel are to deliver costs submissions within 14 days hereof, with mutual responses within 10 days thereafter. In all cases, costs submissions shall be limited to 3 pages in length, double-spaced.

[43] The approved draft order and costs documents to be directed to my attention may be sent to my judicial assistant at Melissa.Issa@ontario.ca.

Akazaki J. Date: April 29, 2024