McGinn v. Bleeker et al, 2024 ONSC 6379

Court File and Parties

COURT FILE NO.: CV-24-00097057-0000 DATE: 2024/11/18 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KRISTINE MCGINN Applicant – and – STEPHEN BLEEKER, ASSURANCE HOME CARE, and STEPHEN BLEEKER, IN HIS CAPACITY AS TRUSTEE OF THE JANICE R. MCDONALD FAMILY TRUST Respondents

Counsel: Kevin Caron, Sean Grassie and Emma Williams, Counsel for the Applicant Christopher P. Morris and Mira Nemr, Counsel for the Respondents

HEARD: October 31, 2024

HOLOWKA J.

Reasons for Decision

Overview

1Kristine McGinn and Stephen Bleeker have worked together at Assurance Home Care Inc., a company they have jointly owned and managed, since 2017. Assurance provides a wide variety of home care services to seniors in hospitals, retirement homes and private residences. Assurance has grown and expanded into new markets based on their efforts. Each brought different strengths and expertise to this joint enterprise. Since 2023, tensions between Ms. McGinn and Mr. Bleeker have grown. Ms. McGinn and Mr. Bleeker have very different views on what has been occurring concerning these tensions.

2Mr. Bleeker is the principal and trustee of the Janice R. MacDonald Trust, which holds 60% of Assurance shares. He also serves as the company's Chief Executive Officer, Secretary, and Treasurer. Ms. McGinn holds the remaining 40% of the shares. She is the Chief Operating Officer, director, officer, and employee of Assurance.

3On September 6, 2024, Mr. Bleeker purported to terminate Ms. McGinn as an employee and officer of Assurance without cause. He revoked Ms. McGinn’s access to all company resources, including email. He instructed corporate counsel to issue an order to the Board of Directors that sought to call a shareholder meeting to remove Ms. McGinn from the Board of Directors.

4On September 12, 2024, the parties appeared before Regional Senior Justice MacLeod for an urgent case conference. An interim consent order was granted to pause the attempt to remove Ms. McGinn as a director, pending the outcome of this application. Ms. McGinn presently remains excluded from the day-to-day management of Assurance.

5Ms. McGinn brings this application for the following relief:

a. An order that her claims against the respondents be referred to arbitration in accordance with the Shareholders’ Agreement and the Notice of Arbitration served by the applicant; b. An injunction maintaining the status quo ante between the parties as it existed on September 5, 2024; c. An injunction restraining the respondents from interfering with her ability to access the premises, databases, email accounts, cloud-based services, and all other facilities or property of Assurance, pending arbitration; d. An injunction restraining the respondents from taking any further steps to interfere with her status and rights as a director, officer, and employee of Assurance, pending arbitration; e. An injunction restraining Mr. Bleeker from making any statements to employees or third parties regarding the disputes described herein, and in particular, Ms. McGinn’s personal circumstances with Assurance; and f. Costs from Mr. Bleeker personally, on a substantial indemnity basis.

6The respondents consent to this court making an order that the applicant’s claims against the respondents be referred to arbitration in accordance with the Shareholders’ Agreement and the Notice of Arbitration but oppose the balance of the applicant’s requests for relief. An order for this relief shall be issued.

7In light of the need for me to render a decision quickly, time does not permit a detailed reference to the evidence in these reasons for decision.

8I find that the applicant is entitled to an interim injunction as sought for the following reasons.

Basic Factual Background

The Creation of Assurance

9Stephen Bleeker founded Assurance in July 2015 to provide home care services to clients. By the summer of 2016, Assurance was up and running and had served over thirty clients. Assurance started as an Ottawa-based endeavour.

10In November 2016, Mr. Bleeker sought to fill in knowledge gaps in clinical nursing skills. Ms. McGinn joined Assurance as a 40% shareholder, working for one year for no salary. Mr. Bleeker was appointed Chief Executive Officer, Secretary, and Treasurer of the Board. Ms. McGinn was appointed as Director of Operations and Business Development. Later, Ms. McGinn would be appointed Chief Operations Officer.

11Mr. Bleeker was primarily involved in the financial and business side of Assurance. Ms. McGinn’s role was more operational in nature. Ms. McGinn has a background in nursing and has spent her entire career working in the healthcare industry. Mr. Bleeker and Ms. McGinn were jointly involved in operational decisions and the day-to-day management of Assurance. To a significant degree, Ms. McGinn was the company's public face. Her image appears on the Assurance website. Mr. Bleeker has publicly acknowledged her as his business partner and praised her contributions to Assurance.

12Mr. Bleeker and Ms. McGinn disagree about their respective roles at Assurance. Mr. Bleeker maintains that he, as founder, CEO, and majority shareholder, was the final decision-maker at Assurance. While he would seek Ms. McGinn’s feedback on decisions and collaborate with her, his evidence contradicts Ms. McGinn’s evidence that she understood that she would be involved in all operational decisions and management, including matters related to staffing, strategic direction, and finances.

13Commencing in 2019, Ms. McGinn and Mr. Bleeker drew equal salaries from the company.

The Shareholders’ Agreement

14Mr. Bleeker and Ms. McGinn are signatories to two shareholders’ agreements dated December 1, 2017, and March 2, 2020, respectively, between the Janice R. MacDonald Trust and Ms. McGinn.

15Pursuant to the Shareholders’ Agreement dated March 2, 2020:

a. Mr. Bleeker and Ms. McGinn each have the right to nominate a director so long as they remain an officer or employee of Assurance; b. Mr. Bleeker and Ms. McGinn each nominated themselves as directors; c. Assurance's directors are empowered to manage or supervise the business; d. Mr. Bleeker is an officer with the titles of “Chief Executive Officer” and “Secretary and Treasurer.” e. Ms. McGinn is an officer of Assurance with the title of “Chief Operating Officer.”

16The Shareholders’ Agreement contains a robust dispute resolution mechanism. Section 2.5 states that “any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof, will be resolved in accordance with the dispute resolution procedures” contained in Schedule “B” to the agreement. Of importance to the issues before me, the Schedule states that “in the event of any deadlock, dispute, claim, question or difference arising between the parties, the parties shall use their best endeavours to settle such deadlock, dispute, claim, question or difference. To this effect, they shall consult and negotiate with each other, in good faith and understanding of their mutual interests, to reach a just and equitable solution satisfactory to all of the parties.” The agreement provides that if the negotiations fail, then the parties shall be referred to arbitration.

17Section 3.5 of both Shareholders’ Agreements provide that the agreements shall not confer upon any shareholder any right with respect to the creation/continuation of any employment with Assurance, nor shall it interfere with or effect in any manner any right or power of Assurance to terminate any employment/consulting relationship with or without cause, which right is expressly preserved.

The Expansion of Assurance to Toronto

18Around 2020, Mr. Bleeker and Ms. McGinn expanded Assurance into Toronto without much success. The two decided that Ms. McGinn would move to Toronto to lead the Toronto operations and the desired expansion into this new market for Assurance. Following this new plan being put into place, Assurance had considerable success in Toronto.

19Ms. McGinn’s plan to move to Toronto was her idea. While she only intended to stay in Toronto for several months, she extended her stay on several occasions. Ms. McGinn and Mr. Bleeker agreed that Ms. McGinn would lead the efforts in Toronto, and Mr. Bleeker would continue as CEO in Ottawa.

20According to Mr. Bleeker, Assurance’s expansion in Toronto was attributable to the following factors:

a. Mr. Bleeker’s strategy, supported and executed by Ms. McGinn, to focus on and develop a market of “live-in” care; and b. Assurance’s decision to “go big” on the potential of the Toronto market.

21Ms. McGinn succeeded in closing potential clients in Toronto.

22Given the Toronto expansion, Ms. McGinn's capacities were stretched by her role in Toronto and her ongoing duties in Ottawa, where she continued to run Assurance with Mr. Bleeker.

Offers to Purchase Assurance

23In late 2022 or early 2023, Mr. Bleeker and Ms. McGinn received two unsolicited offers from third parties to purchase Assurance. Both offers stipulated that Ms. McGinn would remain as COO, but Mr. Bleeker would be replaced as CEO. The first of the two purchasers had identified an individual to operate Assurance. In contrast, the second purchaser, a private equity firm, was only interested in acquiring 100% of Assurance to permit a merger with a larger company.

24While Ms. McGinn favoured a sale to the second purchaser, the prospective purchaser described Assurance’s financial statements as “fat”—the operating expenses took up a higher percentage of revenue than was desirable for the purchaser. According to Mr. Bleeker, Ms. McGinn wished to adopt a “skinny budget,” but Mr. Bleeker disagreed. Ultimately, in April 2023, Mr. Bleeker and Ms. McGinn agreed to walk away from both purchasers.

25The evidence of both Mr. Bleeker and Ms. McGinn points to the potential purchasers as contributing to the tensions between them.

The Rise of Tensions

26The evidence of Mr. Bleeker and Ms. McGinn both describe rising tensions between them.

27Mr. Bleeker’s affidavit details his view of incidents of Ms. McGinn not “following protocol” by acting independently in operational matters or hiring decisions. He notes that in July 2023, Ms. McGinn moved ahead with her plan to return to Ottawa, taking unilateral steps to recruit her replacement. She stated that she would consult with him regarding the final selection, but Mr. Bleeker asserts that Ms. McGinn’s plan excluded him from this critical process.

28Ms. McGinn describes the efforts of Mr. Bleeker to exclude her from the business meetings that she usually attended.

29Mr. Bleeker and Ms. McGinn tried to work through their conflicts: a coach was used, and Mr. Bleeker also proposed using a professional who specialized in helping business partners in conflict. These efforts were not successful. On November 2, 2023, Ms. McGinn wrote to Mr. Bleeker to express her wish to leave Assurance. Ms. McGinn clarified that she wished to continue her role with Assurance until she was bought out or they sold the company.

30Mr. Bleeker’s affidavit details the revived discussions in 2024 with the second potential purchaser from late 2022/early 2023. These discussions again contributed to tensions between Mr. Bleeker and Ms. McGinn.

Ms. McGinn’s Return to Ottawa

31During the summer of 2024, Mr. Bleeker and Ms. McGinn corresponded about her return to Ottawa from Toronto but could not agree on a plan.

32On August 21, 2024, Ms. McGinn emailed Assurance staff advising them that Assurance would be looking to hire an employee in Toronto to replace her so that she could return to her duties at Assurance in the Ottawa head office in the fall.

33Mr. Bleeker viewed Ms. McGinn’s act of sending the email as a direct act of insubordination. His affidavit details earlier concerns that Mr. Bleeker had regarding Ms. McGinn’s performance and his view that it would be in the best interest of Assurance if she were to leave the day-to-day business.

Mr. Bleeker’s Purported Termination of Ms. McGinn

34Mr. Bleeker sought to terminate Ms. McGinn on September 6, 2024. He asked Ms. McGinn to meet him and Assurance’s head of human resources about an undefined human resources matter. Ms. McGinn declined to attend.

35Mr. Bleeker purported to terminate Ms. McGinn as an employee and officer of Assurance “without cause” by sending a letter described as a notice of termination. He also took steps to consolidate his removal of Ms. McGinn from Assurance’s operations and governance by:

a. revoking Ms. McGinn’s access to Assurance’s email account, Slack channels, IT infrastructure, credit card and other resources; b. sending a Slack message to Assurance staff in which he falsely stated that Ms. McGinn would be “stepping back” from Assurance for “much-needed and well earned time for herself and her family”; and c. instructing Assurance’s corporate counsel to issue a notice of an Annual General Meeting of the Shareholders at the law offices of the corporate counsel on September 17, 2024, for the purposes of removing Ms. McGinn as director of Assurance.

36As a result of Ms. McGinn’s purported termination, she was no longer permitted to attend meetings with staff or to deal with clients.

The Response of Ms. McGinn

37Ms. McGinn did not accept that Mr. Bleeker had the authority to terminate her as he purported to do. Through counsel, she disputed Mr. Bleeker’s authority to take the steps he had taken and asked him to restore her access to all company resources. Ms. McGinn invoked the dispute resolution process outlined in the Shareholders’ Agreement and demanded that Mr. Bleeker take no further steps to undermine her rights pending negotiation or arbitration. Mr. Bleeker never responded.

Procedural History

38On September 9, 2024, Ms. McGinn commenced an application for urgent injunctive relief to prevent Mr. Bleeker from completing his plan to remove her as a director, officer, and employee of Assurance.

39An urgent case conference was held before Regional Senior Justice MacLeod on September 12, 2024. On consent, Justice MacLeod issued an order directing that Ms. McGinn remain a director of Assurance and that Mr. Bleeker provide her with certain financial information pending the hearing of the application.

40Ms. McGinn cannot access her company email or other company resources, so she is excluded from the day-to-day operations of Assurance. Mr. Bleeker continues to take the position that Ms. McGinn has been terminated as an employee and officer of Assurance.

41At the conclusion of submissions before me, the parties agreed that the consent order of Justice MacLeod would continue until the release of these reasons for decision.

The Position of the Parties and Issues to Be Decided

42The applicant's position is that the court should grant a prohibitive injunction to protect Ms. McGinn's interests in Assurance, pending arbitration. The applicant submits that the conditions for injunctive relief are present, and should Mr. Bleeker not be enjoined, he will have created an unfair tactical advantage for himself in the pending arbitration. The applicant submits that contrary to the dispute resolution process mandated by the Shareholders’ Agreement, absent injunctive relief, Mr. Bleeker will be able to remove Ms. McGinn from Assurance’s management before the arbitral panel can determine whether he has the authority to do so.

43The respondents’ position is that the applicant does not meet the test required for injunctive relief and that the respondents have not breached the Shareholders’ Agreement. They argue that the applicant has not been subject to any oppressive conduct and that Mr. Bleeker took actions that were, in his judgment, in the best interests of Assurance. They submit that the application should be dismissed.

44Unlike the applicant, the respondents take the position that the injunction sought is both mandatory and prohibitive in nature. To the extent that the injunction is mandatory, a more rigorous test must be applied.

45Finally, the parties agree that I should make an order that the applicant’s claims against the respondents be referred to arbitration in accordance with the Shareholders’ Agreement and the Notice of Arbitration.

46The issues that I must decide on this application are:

a. Does this Court have jurisdiction to grant the applicant injunctive relief pending the forthcoming arbitration? b. Is the injunction requested by the applicant prohibitive, mandatory, or a combination of the two? c. Is the applicant entitled to injunctive relief to restore the status quo ante and restrain the respondents from interfering with her rights pending arbitration?

Analysis

Does this Court Have Jurisdiction to Grant Injunctive Relief?

47The applicant raised this issue, but the respondents did not argue it in written or oral submissions. As such, I will only briefly address this issue.

48I am satisfied that I have jurisdiction to grant injunctive relief in aid of arbitrations.

49This relief is derived from at least three sources:

a. This court possesses “inherent jurisdiction” to deal with this application: Courts of Justice Act, R.S.O, 1990, c. C.43, section 101. b. The court has jurisdiction provided by sections 6 and 8 of the Arbitration Act, 1991, to ensure that arbitrations are conducted in accordance with arbitration agreements, including by imposing interim measures. These interim measures are intended to preserve “the ability of the arbitration process to deal with the issues” pending a final determination by the arbitrator and, as such, “protecting the subject matter of the dispute or the evidence”: Alexander M. Gay, Alexandre Kaufman, and James Plotkin, Arbitration Legislation of Ontario: A Commentary (Toronto: Thomson Reuters, 2023) at p. 258. c. Section 247 of the Canada Business Corporations Act, RSC 1985, c. C-44 permits directors and shareholders to apply to the court for an order requiring another director or shareholder “to comply with, or restraining any such person from acting in breach of this Act, the regulations, articles or by-laws, or a unanimous shareholder agreement, and on such application the court may so order and make any further order it thinks fit.”

50In numerous cases, this court has awarded injunctive relief in support of arbitrations: 1338121 Ontario v. FDV Inc., 2011 ONSC 3816, at para. 53, and Bombardier Transportation Canada Inc. v. Metrolinx, at para. 77, Lord v. Clearspring Spectrum Holdings LP, 2017 ONSC 2246, and Ontario Nurses Association v. Eatonville/Henley Place, 2020 ONSC 2467.

The Nature of the Injunction Requested

51The nature of the injunction requested is a critical determination in my analysis. The nature of the injunction determines the test I must apply.

52The applicant submits that the injunction sought in this case is prohibitive in nature in that it does not seek to establish a new right but rather simply requires Mr. Bleeker to comply with the dispute resolution process mandated by the Shareholders’ Agreement. The requested injunction would require Mr. Bleeker to convince the arbitral panel that he is entitled to remove Ms. McGinn as director, officer, and employee before purporting to do so unilaterally.

53In support of this position, Ms. McGinn asserts that there is no principled basis to impose upon her the higher burden required by a mandatory injunction. She argues that the higher burden placed upon those seeking mandatory injunctions is based on the principle that mandatory injunctions can be more burdensome or costly for the party required to comply with the injunction. Ms. McGinn states that this would not be the case here—the injunction merely preserves the status quo before Mr. Bleeker sought to remove her from the management of Assurance. It merely prevents Mr. Bleeker from benefiting from his alleged misconduct pending the outcome of the arbitration.

54The respondents argue that the applicant’s request to return Ms. McGinn to the status quo ante is both mandatory and prohibitive in nature. According to the respondents, the injunction is mandatory as it seeks to reinstitute Ms. McGinn in her position as an employee. It is prohibitive insofar as the application seeks an injunction restraining the respondents from taking steps to remove Ms. McGinn as a director of Assurance.

55The respondents generally rely on Boni v. Leonardo Worldwide Corporation, 2018 ONSC 1875 as an appropriate “roadmap” for me to follow in deciding this application. Concerning the issue of the nature of the injunction, they rely on p. 5 of Boni:

The strength of the case test can vary with the type of injunctive relief being sought. As R.J. Sharpe points out, more rigorous proof of the applicant’s case is required with mandatory interlocutory injunctions. The distinction between a mandatory and a prohibitory injunction is not entirely clear. “A prohibitory injunction is generally to preserve the status quo whereas a mandatory injunction seeks to undo some act and retain the status quo as it was before the act was done”: Shipka v. Trevoy, 2012 ABQB 46, 2012 CarswellAlta 1156, at para. 21 (Alta. Q.B.).

56I find that the injunctive relief in this case is prohibitive in nature.

57The parties agree insofar as the injunction seeks to prevent Ms. McGinn’s removal as an officer and director of Assurance. I agree that the requested injunction to prevent her removal from the Board of Assurance is prohibitive.

58With respect to the injunction requested to establish the status quo ante of Ms. McGill’s employment, I find that the relief sought is prohibitive despite the language cited above in Boni. While this application's injunctive relief seeks to reinstate the status quo ante, it is disputed whether the respondents had the authority to take the impugned steps in light of the Shareholders’ Agreement and the dispute resolution process mandated by it. The legitimacy of the termination of Ms. McGinn is one of the questions to be determined by the arbitral board.

59In International Steel Services Inc. v. Dynatec Madagascar SA, 2016 ONSC 2810, Justice Newbould considered an interim injunction application to restrain the respondent from interfering with the applicant’s contractual rights under a Sulphuric Acid Plant Operation and Maintenance Agreement, pending the arbitral determination of certain disputes regarding the continuing existence of the agreement. At para. 42, Justice Newbould stated:

ISSI relies on authority that the injunction sought is prohibitive rather than mandatory if it required the parties to act in accordance with an agreement. TDL Group Ltd. v. 1060284 Ontario Ltd., [2001] O.J. No 3614 (Div. Ct.) is authority for the proposition that an order that establishes a new right never agreed to is mandatory while an order requiring the parties to act in accordance with an agreement is prohibitive and not mandatory. The proposition has been applied in a number of cases, including cases such as 674834 Ontario Ltd. (c.o.b. Coffee Delight) v. Culligan, [2007] O.J. No. 979 (per Pattillo J.) and Best Theratronics Ltd. v. Canadian Nuclear Laboratories Ltd., 2015 ONSC 7993 (per Smith J.) in which a franchisor or other contracting party has been required to supply goods to the plaintiff or take other steps under an existing contract that is in dispute.

60I have also read and found persuasive the reasons of D.M. Brown J (as he then was) in 1323257 Ontario Ltd. (c.o.b. Hyundai of Thornhill) v. Hyundai Auto Canada Corp. (2009), 55 B.L.R. (4th) 265 where he adopted TDL Group Ltd. as follows:

30 I propose to follow the directions given by the Divisional Court in TDL Group Ltd. v. 1060284 Ontario Ltd., [2001] O.J. No. 3614 where Lane, J. wrote:

It is clear that the categories of positive and negative covenants and orders are not clear cut. In our view, the essence of the order in its factual matrix is what is to be looked at in making this determination. (para. 4)

He continued, at para. 9, by observing:

An order preventing the denial of a right previously agreed to is very different from an order establishing a new right never agreed to and requiring a party to act accordingly.

TLD has been followed by several recent decisions of this court: Erinwood Ford Sales Ltd. v. Ford Motor Co. of Canada, [2005] O.J. No. 1970 (Ont. S.C.J.); 674834 Ontario Limited v. Culligan of Canada, [2007] O.J. No. 979; Struik v. Dixie Lee Food Systems Ltd., [2006] O.J. No. 3269.

31 In some cases involving the termination of dealerships or franchises, courts have examined whether the injunctive relief sought would be prohibitive or mandatory by inquiring whether the dealership agreement in issue contained renewal rights. Where it did not, some courts have regarded a request for an injunction restraining termination as mandatory in nature, requiring, as it would, the franchisor to continue to supply the franchisee: Parker, supra.; Esmail v. Petro-Canada (1995), 86 O.A.C. 385 (Div. Ct.). Where it did, courts have tended to view requests for interlocutory injunctions restraining termination of the agreement prior to trial as ones for prohibitive relief, with the plaintiff seeking to prevent the denial of a right previously agreed upon: TDL, supra. Although the granting of an injunction in the latter case would require the parties to continue their relationship until trial, as Lane J. pointed out in TDL:

That one effect of this is to require both parties to act in accordance with their contract while the dispute is being tried does not change the essence of the matter. (para. 9)

32 As Spies J. noted in Erinwood Ford at para. 60: "Where a party seeks to prevent early termination of a dealer agreement, the party does not ask the court to create a new right, but rather to preserve the status quo and leave the issue of whether or not the termination is proper for trial."

33 In my view, that describes precisely the circumstances of the present motion. The 1999 Agreement, as continued under the Minutes, provided for its annual automatic renewal absent termination for cause or proper notice of non-renewal. In this action Thornhill puts in issue the validity of its recent termination. Thornhill seeks to set aside the Minutes at trial. If the trial judge grants such relief, the validity of the 2006 Notice of Non-Renewal will be determined at arbitration. If the trial judge does not set aside the Minutes, the court will then consider the validity of the September 2008 Notice of Termination. In either case the essence of the injunctive relief sought is to preserve until trial the status quo of the dealer relationship between Thornhill and HAC.

34 I therefore conclude that the applicable standard for examining the strength of Thornhill's case is whether it gives rise to a serious question to be tried - i.e. whether the claim is neither frivolous or vexatious. A prolonged examination of the merits is neither necessary nor desirable: RJR-McDonald Inc. v. Canada, [1994] 1 S.C.R. 311, at paras. 49-50.

61Here, the applicant seeks an injunction requiring Mr. Bleeker to comply with the dispute resolution process mandated by the Shareholders’ Agreement—a process that the respondents agree is engaged in these circumstances. Both the applicant and the respondents agreed to be bound by this dispute resolution mechanism. The injunction would require the arbitral panel's consideration of whether Mr. Bleeker is entitled, further to the Shareholders’ Agreement, to remove Ms. McGinn as an employee unilaterally before attempting to do so. As such, I am satisfied that the relief sought is prohibitive in nature.

The Legal Test for Prohibitive Injunctive Relief

62Given that the injunctive relief sought is prohibitive in nature, the well-known three-part test set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, applies.

63In considering the RJR-MacDonald test, I have considered the comments of Schabas J. in Pioneering Technology Corp v. Comber et al., 2019 ONSC 3278, where he described, at para. 12, the manner the test is to be applied: “It is accepted that not all parts of the RJR test must always be met by the moving party, and that the three parts must be assessed as a whole, that strength on one branch may compensate for weakness on another branch. In some circumstances, a showing of a strong prima facie case is required, rather than just a serious issue to be tried, such as when a restrictive covenant is sought to be enforced or restrictions are placed on the ability to earn a livelihood: Jet Print Inc. v. Cohen, 1999 CarswellOnt 2357 (Ont. S.C.J.) at para. 11.”

Serious Issue to be Tried

64The applicant argues that the serious issue is whether Mr. Bleeker’s conduct in unilaterally locking Ms. McGinn out of Assurance was permitted by the Shareholders’ Agreement and the dispute resolution process outlined in it. The applicant submits that the dispute resolution process requires the parties to attempt to negotiate any dispute, deadlock, difference or claim between them for 60 days. If those negotiations fail, they are required to submit their dispute to arbitration.

65The applicant argues, first, that the impugned conduct of Mr. Bleeker is a prima facie breach of the dispute resolution mechanism contained within the Shareholders’ Agreement. Second, in acting unilaterally and without engaging in the dispute resolution process, the applicant argues that Mr. Bleeker has deprived the arbitral panel of the opportunity to decide whether an obviously arguable dispute falls within the terms of the dispute process.

66The respondents submit that as the injunction sought is mandatory in nature, the standard to be applied by me in deciding whether an injunction should be issued is an elevated one of a “strong prima facie case” as articulated by the Supreme Court in R. v. Canadian Broadcasting Corporation, 2018 SCC 5.

67The respondents submit that the applicant does not have a strong prima facie case because:

a. Mr. Bleeker was the Chief Executive Officer and, as such, had the legal authority to terminate an employee. This authority as CEO is delegated to him as CEO pursuant to the Shareholders’ Agreement and the Bylaws. The “business judgment rule” permits him to do so, provided the decision falls within a reasonable range of alternatives. b. The applicant’s “reasonable expectations” have not been infringed by her termination, which, therefore, is not an oppressive act that may trigger the application of an oppression remedy under the CBCA. c. Mr. Bleeker exercised his business judgment in terminating the applicant without cause. The business judgment rule prevents courts from intervening in the affairs of a business when decisions are made prudently, in good faith and on reasonable grounds. d. The Trust had the authority to remove the applicant as director by ordinary resolution. To do so, a meeting of the shareholders must be called, and the shareholders and directors must be provided notice.

68As noted above, I have concluded that the injunction sought is prohibitive in nature. As such, only a serious issue must be shown. I am satisfied that this standard has been met. While I need not decide the merits of the anticipated arbitration, I am satisfied that whether Mr. Bleeker had the unilateral authority to dismiss Ms. McGinn as an employee, director and officer of Assurance constitutes a serious issue to be argued. The dispute resolution mechanism is broadly worded, and the Shareholders’ Agreement does not allocate specific authority to the CEO to act as Mr. Bleeker purported to do. I come to this conclusion despite section 3.5 of the Shareholders’ Agreement entitled “No Right to Continued Employment.” I am not persuaded that it forecloses the applicant’s argument or the existence of a serious issue to be decided.

69I have considered the application of the business judgment rule. I accept the proposition of the respondents that the courts must be cautious before becoming enmeshed in business decisions. I also accept the submission that an interventionist and expansive reading of the dispute resolution mechanism contained in the Shareholders’ Agreement could send every disagreement between the parties to arbitration and bring the business to a grinding halt. Still, I do not find that the applicant proposes an extreme interpretation. In my view, the dispute referred to arbitration is, at the very least, a serious issue to be argued.

Irreparable Harm

70Irreparable harm is harm that cannot be quantified in monetary terms or that cannot be cured, usually because one party cannot collect damages from the other.

71The applicant argues that she will suffer irreparable harm if I do not grant this injunction in two ways:

a. First, Mr. Bleeker will succeed in subverting the dispute resolution process. In her notice of arbitration, the applicant asks the arbitral panel to impose a shotgun/buy-sell arrangement. Absent the injunctive relief, the situation created by Mr. Bleeker by unilaterally terminating Ms. McGinn will diminish or extinguish the prospect of this relief being granted. This arises because many months will have passed before a decision is made by an arbitral panel, and given her exclusion from Assurance, the arbitral panel will be less inclined to return Ms. McGinn to the leadership of Assurance—it would arguably cause confusion, disruption, and chaos. b. Second, Mr. Bleeker will be able to manage Assurance to the exclusion of Ms. McGinn. The applicant will have no way of knowing what Mr. Bleeker is doing or how his decisions may impact her interests. The applicant argues that with months pending a decision of the arbitral board, it will be impossible to quantify the impact on the business of her exclusion. The applicant points to Seferovic v. Seferovic, 2019 ONSC 5023 at para. 53-55 as an example of this reasoning. As an adjunct to this argument, the applicant points to conduct by Mr. Bleeker that she describes as increasingly erratic and argues that while she is excluded from the management of Assurance, she nevertheless remains its public face and, as such, faces a serious risk of irreparable harm to her reputation.

72The respondents submit that there is no evidence that Ms. McGinn will suffer irreparable harm—harm that is not compensable by an award of damages. They argue that if the arbitral panel determines that a buyout is warranted, then any damages or terms of a buyout can be calculated based on the current value of the shares of Assurance.

73With respect to the applicant’s argument that she will suffer reputational harm, I do not find that Mr. Bleeker’s conduct can be fairly described as increasingly erratic. While his clear misstatement of the circumstances of Ms. McGinn’s departure in a Slack message to Assurance’s employees is troubling, the balance of the conduct of the respondents described by the applicant does not amount to erratic behaviour. I do not find a clear inference that Ms. McGinn and Assurance will suffer irreparable reputational harm if the injunction is not granted, and Mr. Bleeker continues to manage Assurance to the exclusion of Ms. McGinn. Mr. Bleeker and Ms. McGinn have worked together since 2017, and their joint efforts have led to a successful and growing enterprise despite the present conflict. Mr. Bleeker is dedicated to the success of Assurance—the reputation of Assurance and Ms. McGinn are intertwined, and, as such, I conclude that the likelihood of Ms. McGinn suffering reputational harm is remote.

74I am satisfied, however, that failing to grant the injunction will significantly diminish or extinguish the availability of the requested remedy of a shotgun/buy-sell order. A shotgun/buy-sell order resolves deadlocks in a two-shareholder corporation. It provides for one party, shareholder #1, to make an offer to either buy the interest of the other shareholder, shareholder #2, or sell shareholder #1’s own interest at the same stipulated price per share and further allows the receiving party, shareholder #2, to decide whether to be the buyer or the seller. Excluding the applicant from the day-to-day management and leadership of Assurance while the arbitration process unfolds diminishes the likelihood of an arbitral panel making an order to implement this remedy —the panel would not find it feasible to order a remedy that could have the effect of destabilizing Assurance with the reinstallation of Ms. McGinn after months of exclusion. As such, the applicant will suffer irreparable harm should I not grant the injunctive relief.

75In obiter, Justice F.L. Myers came to a similar conclusion when commenting on injunctive relief in Lord v. Clearspring Spectrum Holdings L.P., 2017 ONSC 2246, at para. 60, when he stated:

“While a change in the board of directors of a corporation need not always amount to irreparable harm, in this case, the applicant would be stripped of the rights that she negotiated that let her veto Clearspring's power to cause its funds to nominate the majority of the members of the two relevant boards of directors. The respondents seek to act so as to undermine Ms. Lord's rights under the Governance Agreement. This, coupled with the inherent difficulty of ‘unscrambling the egg’ or undoing steps to be taken by boards constituted without heed to Ms. Lord's rights under the Governance Agreement, amply satisfy the definition of irreparable harm — or harm that is not readily compensated in damages.”

76See also Best v. Darling 2020 NBQB 104 at para. 45 and 46.

77In conclusion, the applicant has met the irreparable harm requirement in this case.

Balance of Convenience

78The third part of the test requires “a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits”: RJR-MacDonald, at para. 62.

79The applicant submits that the relevant considerations in determining the balance of convenience include the parties’ obligations under the Shareholders’ Agreement, the integrity of the arbitration process, and the best interests of Assurance. She submits that these factors all militate in her favour.

80In relation to these factors, she argues:

a. That there is no suggestion that she breached the Shareholders’ Agreement. She is entitled and obliged to manage the day-to-day operations of Assurance which she has done since 2017. All parties agree that Assurance has performed well under her management. b. If the order is granted Ms. McGinn will resume her management activities. Mr. Bleeker will “merely” be required to comply with the Shareholders’ Agreement to which he is bound. The respondents will have an opportunity to present their position on the merits to an arbitral panel. If Mr. Bleeker succeeds, he will presumably obtain an order permitting him to buy the applicant’s stake in the company. Ms. McGinn’s request for a shotgun/buy-sell order will be foreclosed. c. If the injunction is not granted, Mr. Bleeker will succeed in removing Ms. McGinn from the management of Assurance—a company that they have built together—prior to the orderly adjudication of their disputes. Ms. McGinn will have zero effective control or oversight of the company and will suffer irreparable harm to her reputation and to her interest in assurance.

81The respondents submit that Ms. McGinn’s return would lead to a decline in morale, an increase in staff turnover and a loss of key talent—undermining the stability and operational efficiency of Assurance. The respondents argue that Ms. McGinn’s reinstatement would exacerbate tension and lead to a misalignment in leadership.

82I do not accept the respondents’ assertion that Ms. McGinn’s return would lead to lost revenue, a decline in morale and a loss of key talent. The evidentiary basis for this submission is based on inadmissible hearsay. Mr. Bleeker’s affidavit on this point relies on statements made by unidentified employees of Assurance. The assertions relied upon by Mr. Bleeker are contested in the affidavit evidence of the applicant.

83I acknowledge that the relationship between Ms. McGinn and Mr. Bleeker is tense. The conduct of Mr. Bleeker has doubtlessly increased that tension. That said, despite their past differences, they have been able to work together in the interest of advancing their joint enterprise. I am satisfied that this would continue in the future pending the outcome of the arbitration.

84I have considered the respondents’ submission based on Boni that “[given the] significant evidence of hostility over a lengthy period of time, it is unreasonable to think that it would be in the interests of either party to continue this hostile relationship that will require ongoing court supervision, particularly when termination of the relationship may be inevitable”: Boni, at para 66.

85While the conclusion cited above is compelling, such a conclusion turns on the particular facts of the case. I find that the facts before me are very different from those in Boni. The circumstances in Boni were that:

a. The applicant was terminated as CEO as part of a broader corporate restructuring following his deficient decision-making and poor performance; b. There had been a deterioration in the relationship between the applicant and other employees; c. A majority of the board of directors had terminated the applicant; d. There was no arbitration clause in play—the applicant was not seeking to preserve his ability to buy others out of the company; e. The applicant did not move promptly for injunctive relief; and f. The applicant was one of several people running the company.

86The circumstances before me reflect that Ms. McGinn is a successful partner in her joint enterprise with Mr. Bleeker—one of two principals. A deterioration between the applicant and employees of Assurance has not been established. The respondents purportedly terminated her unilaterally without resorting to the dispute resolution mechanism, and arbitration is forthcoming. In summary, the circumstances between this case and Boni are dissimilar.

87In FDV, the parties had agreed to arbitrate in circumstances where there was little chance of their business relationship continuing. At para. 40, Justice D. M. Brown noted that although “their relationship had broken down…arbitration is an appropriate forum in which to determine, in effect, who will end up buying out whom and at what price.” I accept that FDV confirms that interim injunctive relief requiring parties to continue working together pending arbitration may be appropriate where they have agreed to adjudicate the merits of their dispute through arbitration. In agreeing with this submission, I do acknowledge that in FDV, neither party adduced evidence suggesting the wait for arbitration would prejudice the ongoing operations of the company. That said, I have found that Mr. Bleeker’s evidence on this point is inadmissible and contested by the applicant.

88I find that in light of the unilateral conduct of Mr. Bleeker in terminating Ms. McGinn, despite a dispute resolution mechanism in the Shareholders’ Agreement, the equities of the situation favour the applicant: see Indal Ltd. v. Halko (1976), 1976 CarswellON 273, at para. 24. If the injunction is not granted, the applicant will very likely be deprived of part of the remedy sought by her—the integrity of the arbitration process will be compromised. The balance of convenience would weigh in favour of preserving the status quo prior to the alleged breach pending the outcome of any arbitration.

89I conclude that the balance of convenience weighs in favour of preserving the status quo prior to the alleged breach, pending the outcome of arbitration.

Disposition and Order

90The applicant is entitled to injunctive relief preserving the status quo ante as of September 5, 2024.

91Specifically, the following shall be issued:

a. An order that the applicant's claims against the respondents be referred to arbitration in accordance with the Shareholders’ Agreement and the Notice of Arbitration; b. An injunction maintaining the status quo ante between the parties as it existed on September 5, 2024, pending arbitration; c. An injunction restraining the respondents from interfering with her ability to access the premises, databases, email accounts, cloud-based services, and all other facilities or property of Assurance, pending arbitration; d. An injunction restraining the respondents from taking any further steps to interfere with her status and rights as a director, officer, and employee of Assurance, pending arbitration; and e. An injunction restraining Mr. Stephen Bleeker from making any statement to employees or third parties regarding the disputes described herein and, in particular, the applicant’s personal circumstances or status with Assurance.

Costs

92I encourage the parties to settle the costs of the motion. If they cannot, the applicant may serve and file written cost submissions, together will a Bill of Costs, by December 17, 2024. The respondents may serve and file responding written cost submissions by January 17, 2025. The cost submissions shall not exceed three pages in length, excluding the Bill of Costs.

Holowka J.