Ontario Civil

Business Associations

Powers, rights and liabilities

Contracts by corporations

Company co-founder obtaining order to enforce rights under governance agreement

Parties were involved in commercial dispute concerning operations of company co-founded by LL. Parties signed governance agreement which gave LL certain rights concerning replacement of members of board of directors of company. LL’s application to enforce those rights was granted. Application judge found that other shareholding entities were in breach of governance agreement, that there was no conflict with shareholders’ agreement, that governance agreement was stand-alone document independent of shareholders’ agreement, and that arbitration clause did not apply. Application judge determined, in alternative, that LL’s oppression remedies would apply, and that had he sent matter to arbitration he would have issued interim injunction. Other shareholding entities appealed, contending that application judge erred in interpreting contract, should have stayed application in accordance with arbitration clause in shareholders’ agreement, and erred in his alternative findings regarding oppression remedy and interim injunction. Appeal dismissed. Application judge did not err in his interpretation of governance agreement. Application judge made clear, thorough and extensive findings of fact which he correctly applied to law. Application judge did not err with respect to alternate remedies. Application judge concluded that injunction was appropriate because damages would be impossible to calculate and proof of damages would be nearly impossible. As to oppression remedy, LL had reasonable expectation that commitments made by other shareholding entities would be honoured and failure to do so would prejudice her.

Lord v. Clearspring Spectrum Holdings L.P. (2017), 2017 CarswellOnt 20420, 2017 ONCA 1016, Doherty J.A., M.L. Benotto J.A., and B.W. Miller J.A. (Ont. C.A.); affirmed (2017), 2017 CarswellOnt 5287, 2017 ONSC 2246, F.L. Myers J. (Ont. S.C.J. [Commercial List]).

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