Court File and Parties

Court File No.: CV-22-00680678-00CL
Date: May 30, 2025
Court: Superior Court of Justice – Ontario (Commercial List)

Between:
Jonshal Enterprises Inc., Alexandra Zilbert, Jonathan Schwarz and Shaun Schwarz, Plaintiffs
And:
J.D.H. Holdings Limited, Jonah Turk (in his capacity as Estate Trustee of the Estate of Norman Turk, in his capacity as Estate Trustee of the Estate of Sandra Turk and in his personal capacity), Defendants

Before: Barbara Kimmel

Counsel:
Brian Radnoff and Sahar Cadili, for the Plaintiffs
Archie Rabinowitz, Holly Cunliffe and George Karahotzitis, for the Defendants

Heard: April 16, 2025

Endorsement (Plaintiffs’ Legal Fees/Funding Motion)

The Action

[1] This action involves allegations of oppressive conduct and breaches of fiduciary duty by the defendant, Jonah Turk ("Jonah"), and his deceased father, Norman Turk ("Norman"), in managing the affairs of the defendant, J.D.H. Holdings Inc. ("JDH"), and dealing with the plaintiffs' entitlements as beneficiaries to the estate of their mother (Norman’s daughter and Jonah’s sister, Debra Schwarz “Debra”). The estate is an indirect 1/3 shareholder of JDH through a holding company, Jonshal Enterprises Inc. ("Jonshal").

[2] The individual plaintiffs claim that they were not advised by Norman or Jonah about the existence of Jonshal, Debra's Trust or that Jonshal owned shares in JDH prior to the events that led up to the commencement of this litigation. They say they learned about Jonshal and its 1/3 interest in JDH from their uncle Howard Turk’s (“Howard”) children (their cousins) and follow-up discussions with Howard in 2019. The Plaintiffs assumed control of Jonshal in or about December 2020.

[3] Jonah is a director and officer of JDH. He has been closely involved in managing the day-to-day affairs of JDH since he assumed all decision-making responsibilities for it in or about February 2019.

[4] The plaintiffs frame this action as a claim for oppression and breach of fiduciary duty. Jonah's key obligations and conduct at issue are as a director of JDH and estate trustee of Norman’s estate, Norman’s key obligations and conduct are as a director of JDH and estate trustee of Debra’s estate before his death.

The Motion

[5] This was one of two motions originally scheduled to be heard on April 11, 2025. There was not enough time to hear both so this (the second motion) was adjourned to April 16, 2025. The first motion has been considered and ruled upon in a separate endorsement.

[6] In this motion, the plaintiffs seek:

a. An interim and interlocutory order restraining Jonah from using the funds of JDH to pay the defendants' legal and professional fees and disbursements;
b. An accounting of all funds paid by JDH for legal and professional fees and disbursements in connection with this proceeding and an order requiring Jonah to immediately pay that amount back to JDH [1];
c. In the alternative, an interim and interlocutory order requiring that JDH pay half of the amount set out in (b) above to Jonshal, to reimburse Jonshal for the legal and professional fees and disbursements paid by JDH in connection with this action, on the basis of Jonshal’s one third interest in JDH [2].

The Parties’ Positions on this Motion

The Plaintiffs’ Position

[7] Jonah owns a special class of voting shares in JDH that do not entitle him to any dividends or payments from JDH but allow him to control that company. He has caused JDH to fund the defendants’ professional fees and costs related to this action in furtherance of what the plaintiffs alleged to be his course of oppressive conduct against them.

[8] JDH has already paid hundreds of thousands of dollars towards the defence of this action. The crux of the plaintiffs’ argument on this motion is that there are no guardrails on Jonah’s spending on defence costs while they are being funded by JDH at his direction, since he has no economic interest in JDH.

[9] The plaintiffs maintain that JDH is a necessary, but passive, defendant to this oppression action because it must be bound by the relief sought. The plaintiffs contend that all parties are aware that the objective of this action is for them to be bought out and not for the liquidation and winding-up of JDH, even though that is listed among the heads of relief sought. They object to the defence costs that are being incurred for the benefit of Jonah, not in the ordinary course of business of the corporation, being funded by the corporation, and therefore by the equity shareholders (the plaintiffs and their cousins).

[10] The plaintiffs challenge Jonah’s right to rely upon the indemnification provisions in the company’s by-laws regarding his legal defence costs on the grounds that they only provide for the indemnification of officers, not directors. They maintain that while he was both an officer and director, Jonah is only being sued (according to the allegations in the Statement of Claim) for breaches of duty and his conduct as a director, so the corporate indemnity provisions under JDH’s by-laws do not assist him.

JDH Defendants’ Position

[11] Jonah, on behalf of the JDH Defendants, maintains that there is specific relief sought from and in relation to JDH and it is more than a passive defendant named simply so that it will be bound by the result. For example, the Statement of Claim seeks the appointment of an inspector, and the winding-up and liquidation of JDH by a court officer (akin to a receivership) which could, in turn, have implications for JDH’s real estate holdings in co-tenancies. While none of the co-tenants have taken any steps under co-tenancy agreements, as of yet, they could in the future and that is a reason for JDH to defend the action. In other words, JDH “has skin in the game”, unlike the situation in Nanef v. Con-Crete Holdings Ltd. (1993), 11 BLR (2d) 218 (Ont. Gen. Div.), at p. 264.

[12] Jonah argues that, in any event, he is entitled under the JDH by-laws to be indemnified by the company for his legal fees and expenses incurred in the defence of this action and it is appropriate for the company to be funding Jonah’s defence costs as well as its own. He argues that the by-laws expressly allow for the indemnification of officers or “any other person”. As well, he relies on a discovery answer in which it was stated by plaintiffs’ counsel that the plaintiffs are suing him as both a director and an officer, and the plaintiffs cannot resile from that now just because it is convenient for purposes of this motion.

Summary of Outcome

[13] For the reasons that follow, this motion is dismissed, without prejudice to the plaintiffs’ ability to request this relief when their action is heard on its merits.

Issues and Analysis

[14] The following issues are raised on this motion:

a. Can the plaintiffs meet the test in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, at p. 334 for the injunctive relief they seek?
b. Should the interim relief sought by the plaintiffs in connection with their oppression remedy claims under s. 248 of Ontario’s Business Corporations Act, RSO 1990, c B.16 (“OBCA”) be granted as a matter of fairness, applying the principles in Le Maitre Limited v. Segeren, 33 BLR (4th) 224, paras. 29-30?

[15] The plaintiffs have clarified that they are not seeking what is traditionally known as an equitable order for their interim litigation costs to be paid by JDH, which would require them to establish, among other things, impecuniosity or financial circumstances that would preclude the claim from being pursued: see Fontaine v. Canada (Attorney General), 2015 ONSC 7007, at paras. 63, 81; John v. John, 2020 ONSC 5337, at paras. 80-85; Organ v. Barnett, 11 O.R. (3d) 210 (Gen. Div.), at pp. 213-214.

Issue #1: Should Injunctive Relief be Granted Based on the Traditional RJR-MacDonald Test?

[16] The three-part test that must be met for the court to grant injunctive relief, as set out in RJR-MacDonald, at p. 334, is that:

a. there is a serious issue to be tried on the merits of the case;
b. the plaintiffs will suffer irreparable harm if the relief is refused; and
c. the balance of convenience favours granting the relief (in that, pending a decision on the merits, the plaintiffs will suffer greater harm from the court refusing the remedy than the defendants will suffer if the court grants the remedy).

The Merits of the Case

[17] The merits test on an injunction can be elevated from the standard of a “serious issue to be tried” to a requirement to demonstrate a strong prima facie case where the injunctive relief sought is in the nature of a mandatory order, or will amount to a final determination of the action: see R. v. Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 S.C.R. 196, at para. 15; RJR-MacDonald, at p. 338. A strong prima facie case is a case in which the plaintiffs demonstrate that they are clearly right and almost certain to succeed at trial: see Pavao v. Ferreira, 2018 ONSC 1573, at para. 56.

[18] To ascertain whether the relief sought is mandatory: “the application judge should 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." Canadian Broadcasting Corp., at para. 16. The Supreme Court of Canada in CBC explained (at para. 15) that a mandatory injunction “directs the defendant to undertake a positive course of action, such as taking steps to restore the status quo, or otherwise ‘put the situation back to what it should be’”.

[19] The JDH Defendants contend that the plaintiffs must, and cannot, meet the higher merits test of strong prima facie case because they are seeking an order requiring them to do something: repay legal and professional fees and disbursements already paid (a mandatory order). The plaintiffs maintain that they are not really seeking a mandatory order, but rather they are seeking an order prohibiting payment by JDH of legal defence costs, and only a mandatory ancillary order for the repayment of amounts previously paid in connection with the defence of this action, that the plaintiffs say should not have been paid in the first place.

[20] During oral argument the plaintiffs brought to the court’s attention the case of Reichmann v. Reichmann et al, 2015 ONSC 5040, which was an oppression remedy case where a motion for interim relief under the oppression provisions of s. 248 of the OBCA was successful. In that case, the court found (at para. 38) that there was a very strong case that the defendant was directing the payment of cash advances to himself and to persons of his choosing, without declaring dividends, which was oppressive and unfairly disregarded the interests of the plaintiff’s reasonable expectation as a shareholder to equal treatment in terms of corporate distributions because it circumvented the process for declaring dividends that would have equally benefitted all shareholders. The analogy that the plaintiffs seek to draw to the Reichmann case supports the position of the JDH Defendants that this too is a situation in which the plaintiffs would need to meet the higher merits test of a strong prima facie case to establish entitlement to an injunction.

[21] As the JDH Defendants noted in their written submissions, the other authorities the plaintiffs rely upon for the relief they seek (see, for example, Zanardo v. Di Battista Gambin Developments Limited, 2019 ONSC 1632; Nanef; Renpenning v. Renpenning, 2023 BCSC 789) are all cases in which a final finding of oppression has already been made, except the Reichmann case which found a “very strong case” on the merits when the interim order was granted.

[22] Further, I agree that at least part of the relief the plaintiffs seek is a mandatory order for the repayment of funds that in substance has the overall effect of requiring the JDH Defendants to do something, even if it flows from or is ancillary to the prohibition on payment of legal fees they seek.

[23] To be granted the injunctive relief sought by the plaintiffs on this motion, they would have to establish a strong prima facie case on the merits of their claims. However, I am reluctant to make a preliminary determination about whether the plaintiffs have made out a strong prima facie case on the merits here, where I have concerns about their ability to establish irreparable harm (discussed in the next section of this endorsement). A summary trial has been scheduled for April 2026 and the case is progressing. In addition to the factual complexities of proof of an oppression claim, there are a number of issues associated with the limitations arguments and a (new) standing defence that the court would have to determine, all on the higher merits standard to conclude that the plaintiffs are clearly right and almost certain to succeed in order to grant the injunctive relief that the plaintiffs seek.

[24] For this motion, the parties have canvassed in detail the merits of the claims and defences, which go to the heart of the alleged oppression in this case. The allegations span a lengthy period of time both pre-dating and post-dating the commencement of this action, and will require consideration of the course of conduct of JDH’s business over many years. In such circumstances, I see no advantage to the parties in the court making the findings on the merits that would be necessary for a traditional RJR-MacDonald injunction based on the written record before me, which will fundamentally impact the action going forward, when I am not satisfied that the plaintiffs have met the other requirements for the injunctive relief they seek. I have thus decided that I will not undertake the merits analysis at this time.

Irreparable Harm

[25] Irreparable harm must be something that cannot be compensated by monetary damages alone, or otherwise remedied, if the case is ultimately decided in favour of the defendants: RJR-MacDonald, at p. 341.

[26] The plaintiffs contend that the damages arising from the past and continuing payment by JDH of the defendant’s legal and professional fees and disbursements in connection with the defence of this action are not only monetary in nature. They say that the lack of any guardrails or inherent controls on the spending of defence costs impacts the litigation dynamic. While the plaintiffs concede that this is not a situation where they are unable to fund this action through their own resources and do not claim to have been hindered in their pursuit of the action by excess defence cost funding that is putting them at any disadvantage, they maintain that because Jonah has no economic interest in JDH he does not feel the impact of his decisions about spending on defence costs in the way that an ordinary litigant would. Further, the plaintiffs are concerned that Jonah is too far removed from the cost consequences of pursuing unfounded defences if the first resort for payment of the plaintiffs’ costs (if successful) will be from JDH, a company that they are shareholders of.

[27] The JDH Defendants argue that what the plaintiffs seek is just monetary damages. The JDH Defendants maintain that the plaintiffs seek (and can seek at the trial) repayment of any amounts that Jonah has caused JDH to pay on account of the defendants’ legal costs, namely legal and professional fees and disbursements in connection with the defence of this action, and that these may be claimed as damages separate and apart from any costs award that may be sought at trial. The JDH Defendants argue that these are compensable damages for the oppression claim if granted, and that is how they were characterized in the cases that the plaintiffs rely upon in their factum for this motion: see Zanardo; Nanef; Renpenning.

[28] The JDH Defendants have also conceded that the legal costs incurred by JDH in the defence of this action come within the heads of compensable damages for which the individual defendants can be held responsible after accounting for them, if the plaintiffs’ action succeeds. The defendants say that the threat or overhang of this potential relief at trial serves as a sufficient disincentive to them overspending on their defence costs. No one has suggested that the individual defendants will not be able to afford to pay any damages that they be ordered to pay at trial.

[29] No authority was cited for the plaintiffs’ assertion that defence cost funding from another source (even a source that indirectly is the plaintiff) gives rise to irreparable harm of the nature the plaintiffs allege. There are other circumstances in which defendants have their defence costs paid by other sources with the threat of having to pay them back if they are found to have acted improperly. The obvious example that comes to mind is the funding by an external insurance company of insurance defence costs. Another example is where a defendant has an indemnity from the corporation for their defence costs, as the defendants in this case claim to have (and the plaintiffs challenge). I am not persuaded that having a source of funding of defence costs itself gives rise to irreparable harm.

[30] If this was a situation in which the plaintiffs’ ability to mount their claim against a deeper pocketed defendant that was not self-funding the defence costs at first instance but rather using funds that should have been distributed to the plaintiffs to pay the defence costs, that might be cause to reflect differently on this question of irreparable harm, but that is not this case so I do not need to go there.

[31] Even the disputed question of whether Jonah is entitled to any corporate indemnity under JDH’s by-laws, if ultimately decided against Jonah and found to be a further example of his oppressive conduct (using the plaintiffs’ equity to fund his defence of their claims against him), still only gives rise to a claim for damages. The same would be true if it is later determined that and the disputed point about whether JDH is a passive defendant simply a necessary party to be bound by the result of this litigation and not an active defendant in need of its own funding for defence costs.

[32] The plaintiffs have not established that they will suffer irreparable harm if the order they seek regarding the past and continuing payment of the JDH Defendants’ legal fees and disbursements by JDH is not granted.

The Balance of Convenience

[33] The final stage of the injunction test is a determination of which of the parties will suffer greater harm from the granting or refusing of the proposed interlocutory injunction. See RJR-MacDonald, at pp. 342-343.

[34] In the absence of irreparable harm being established, there is no need to move to the final stage of assessing the balance of convenience (or inconvenience) as between the plaintiffs and the defendants. Ultimately, because the plaintiffs are not claiming impecuniosity or an inability to properly pursue their claims, and have not identified any impediment to them recovering the defence costs of the JDH Defendants from Jonah at trial if they succeed, there is no funding imbalance that is disproportionately affecting the ability of the two sides to effectively mount their respective claims and defences. The plaintiffs have also acknowledged that they do not need incrementally more dividends that the funded defence costs of the JDH Defendants are depriving them of in order to pursue their claims.

[35] Finally, the balance of convenience is often weighed in light of an undertaking as to damages given by the plaintiffs on an interlocutory injunction motion, to protect the defendants in the event the plaintiffs do not succeed at trial. Here, the plaintiffs have suggested that they should not have to give that undertaking as to damages since it would be JDH (the company in which they are shareholders) paying the defence costs but for the injunction, and that company would be the one Jonah would have to repay Jonah for any defence costs he is ordered to pay out of pocket. That argument strikes me as somewhat inconsistent with the plaintiffs’ rationale for granting the injunction in the first place, but ultimately another point I need not decide given my determination that there is no irreparable harm.

[36] The lack of a demonstration of irreparable harm (not compensable by money damages) is what is ultimately fatal to the plaintiffs’ request for a traditional RJR-MacDonald interlocutory injunction.

Issue #2: Should Interim Relief be Granted on Grounds of Fairness Under s. 248 of the OBCA?

[37] There is consensus in the case law that it is ordinarily expected that an interlocutory injunction sought in the context of a s. 248 OBCA oppression remedy claim will be subject to the RJR-MacDonald injunction test. However, this court has recognized, dating back to Le Maitre Ltd., at para. 30, that:

…[T]here may be some circumstances where interim relief pursuant to section 248(3) is merited absent all of the traditional considerations associated with an interlocutory injunction. The dictates of fairness may be so overwhelming that it may be appropriate to forego compliance with any one or all of the balance of convenience, irreparable harm or an undertaking as to damages. In my view, such an approach is consistent with the broad nature of the oppression remedy, the language of section 248(3), and with cases such as Deluce Holdings Inc. v. Air Canada, M. v. H., UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc., Ellins v. Coventree Inc. and RV & S Ltd. v. Aiolos Inc.

[38] As was emphasized in Lakhani et al. v. Gilla Enterprises Inc. et al., 2019 ONSC 1727, 145 O.R. (3d) 704, at para. 37: “except in rare circumstances and, generally speaking, the principles for granting interlocutory relief should be applicable when injunctive relief is sought in the context of an oppression remedy”.

[39] The plaintiffs argue that fairness dictates that JDH, and indirectly themselves and the other JDH shareholders, should not be funding the legal fees of a director alleged to have oppressed its equity shareholders. They liken their situation to be most closely aligned with the plaintiffs in the Reichmann case, in which overall fairness was the basis on which an order was made restricting the manner and timing of distributions to persons who were equity holders, to level the playing field. They contend that is what they seek here: to level the playing field so that either JDH is funding everyone’s legal costs, or all parties are funding their own legal costs and by extension they and the other equity shareholders of JDH are not indirectly funding Jonah’s legal costs to defend the very conduct that they claim is oppressive.

[40] The JDH Defendants assert in their factum that:

[T]here is no unfairness to the plaintiffs at all: if the plaintiffs are successful at trial, then the court can order the costs be paid by any one or more of the defendants, as applicable, and that the legal costs incurred by JDH be a compensable damage for which the individual defendants are responsible. In other words, Jonah still faces a risk of damages and a negative cost award if he is unsuccessful in his defence.

[41] The court in Reichmann recognized that, when considering the fairness principle within the exercise of the court’s broad discretion to grant “an interim order it thinks fit” under s. 248(3) of the OBCA, “it is only a shareholder's interest as a shareholder that can be protected and not a shareholder's other personal interests”: see para. 29. A shareholder’s right to receive dividends is a shareholder’s interest, qua shareholder that can be protected under s. 248. That was the immediate issue in Reichmann.

[42] In this case, the right that the plaintiffs seek to protect, qua shareholders of JDH, flows from the reasonable expectations that are said not to have been met through the allegedly oppressive and unfairly prejudicial conduct of Jonah (and his father Norman, before he died), which remains to be determined in this action. Here, it is not suggested that the funds being used to pay the defence costs of the JDH Defendants are being distributed in a manner that is contrary to an inherent statutory right of the plaintiffs as shareholders (to receive dividends; to the contrary, the plaintiffs and other shareholders have been receiving dividends from JDH).

[43] The dictates of fairness are not so overwhelming in a situation such as this where the JDH Defendants’ right to indemnity for their legal costs is a complex matter involving legal and factual determinations that will have to be finally determined on a complete record at trial. The plaintiffs’ claims regarding Jonah’s allegedly oppressive conduct, and the defences raised against those claims, are also complex matters involving legal and factual determinations that will have to be made at trial. The payment of the defence costs at issue on this motion are not creating an impediment to either the plaintiffs’ ability to prosecute this action, nor is there any demonstrated impediment to those costs being recovered as part of the damages at trial, if the court so orders.

[44] Unlike in Le Maitre, the court in Lakhani found (at para. 38) that the plaintiffs had not otherwise met the test for an injunction and concluded that “it cannot be said in the immediate case that the dictates of fairness are so overwhelming that it may be appropriate to forgo compliance with the traditional considerations associated with an interlocutory injunction”. The same is true here. The plaintiffs have not otherwise met the test for an interlocutory injunction (for the reasons outlined in the previous section of this endorsement) and the dictates of fairness are not so overwhelming here that the court should forgo compliance with those traditional considerations.

Determination of Motion

[45] The plaintiffs’ motion for interim relief regarding the funding of the JDH Defendants’ legal and professional fees and disbursements in connection with their defence of this action is dismissed, without prejudice to the plaintiffs’ right to seek damages and an order for Jonah (in any or all of his various capacities) to repay some or all such amounts paid by JDH at trial. To the extent that pleading amendments are required for this, those should be attended to sooner than later.

[46] The court has not, by this endorsement, made any determination about the corporate rights and remedies that the equity shareholders may have available to them regarding the JDH funding of the defence costs.

Costs

[47] The plaintiffs’ costs outline for this motion certifies their total all-inclusive partial indemnity costs to be $43,979.04, substantial indemnity costs to be $65,091.64, and full indemnity costs to be $102,902.89.

[48] The JDH Defendants’ costs outline for this motion certifies their total all-inclusive partial indemnity costs to be $45,093.45, substantial indemnity costs to be $67,640.16, and full indemnity costs to be $75,155.74.

[49] The claimed certified amounts of costs only differ materially on the full indemnity scale which would not apply to any award of costs for this motion.

[50] The parties advised at the conclusion of the hearing that there were no relevant offers to settle that would need to be considered when the court comes to deal with the matter of the costs of this motion.

[51] The court was under the impression that the parties contemplated that costs would be decided when the motion was decided based on their Costs Outlines and any submissions made in those outlines. However, the plaintiffs have recently indicated a desire to make written cost submissions. That was not contemplated and I do not consider it to be necessary.

[52] The JDH Defendants were successful in defeating the plaintiffs’ interim motion regarding the funding of defence costs; however, I consider this to be a unique situation in which I should exercise my discretion not to make an award of costs at this time. It is acknowledged that the issues raised on this motion can be considered and determined at the trial of this oppression claim on its merits. All parties have recognized that the relief sought (including the possibility of an order requiring Jonah paying back to JDH defence costs paid during the course of this proceeding, or some equivalent in damages to the plaintiffs) remains open for the court to order. The time and effort that went into briefing the evidence and legal arguments in support of this motion can and should be re-purposed for the trial and should not have to be duplicated. Any incremental costs for the motion and appearance are minimal and are overshadowed and complicated by the fact that JDH is funding the costs at first instance.

[53] In the exercise of my discretion under s. 131 of the Courts of Justice Act, RSO 1990, c C.43, and notwithstanding the usual approach under Rule 57.03(1) of the Rules of Civil Procedure, RRO 1990, Reg 194 for fixing the costs of a motion and ordering them to be payable forthwith, I am satisfied that a different order should be made in this case. As such, I am ordering the costs of this motion to be payable in the cause, subject to any further order or direction of this court regarding the funding of the defence costs by JDH at first instance and any further relief flowing from that.

Barbara Kimmel
Date: May 30, 2025

[1] The request for repayment by Jonah to JDH of legal and professional fees and disbursements paid in the defence of this action by JDH was not expressly sought in the Notice of Motion but was added to the relief sought in the plaintiffs’ factum as part of the further and other relief claimed in the Notice of Motion.

[2] This alternative relief was amended in the plaintiffs’ factum, from what was originally sought on the motion which was for an order for payment by JDH of some or all of the plaintiffs’ legal fees in connection with this proceeding.