Goodwin v. Goodwin: Court Decision Made to Protect Family Business

This case deals with a motion for injunctive relief based on Section 241 of the Canada Business Corporations Act (“CBCA”), also known as the oppression remedy.  The parties to the action – Mr. Goodwin (the Applicant) and Ms. Goodwin (the Respondent) are spouses and business partners, and each of them sought to prevent the other from being present at the premises of their business, Aristocrat Awning Co. (“Aristocrat”).  The marital discord that had plagued them for over a decade had finally begun to poison their work environment, which had a negative impact on the reputation and profitability of the corporation.  Ultimately what had to be decided was which of the two parties, under the circumstances, was better suited to manage the corporation on an interim basis.

Ms. Goodwin held 70% of the shares of Aristocrat, Mr. Goodwin held 20%, and the remaining 10% were held by an independent third party, and these shares do not carry voting rights.  The daughter of the parties, Tracy Goodwin, and her husband Peter Shepherd were also employed by Aristocrat at the time of the litigation.  Aristocrat was pulling in revenues of up to $2.1 million per year.

Section 241 of the CBCA provides that where, “the powers of the directors of the corporation or any of its affiliates are or have been 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,” this court may “make any interim or final order it thinks fit…”

Mr. Goodwin claimed that Ms. Goodwin’s conduct had become increasingly erratic and unpredictable and that her behaviour was becoming detrimental to the business.  As evidence of this, Mr. Goodwin submitted the affidavits of customers, suppliers, and employees.  Even a corporate lawyer (Corinne Rivers) and an accountant (Benjamin Vasagam) retained by Ms. Goodwin submitted affidavits in favour of Mr. Goodwin’s position.

The parties had entered into a consent whereby they were to; appoint an independent business manager to assist with the ongoing problems at Aristocrat; retain the services of a business valuator to facilitate the eventual buy-out and; keep Tracy and her husband on staff.  Ms. Goodwin was also ordered to refrain from writing cryptic notes on the paycheques of Aristocrat’s employees.  Ms. Goodwin did not abide by the consent.  She drove away the mutually appointed business manager – John Currie, who said he could not be of assistance if the Respondent was present at work, and she also frivolously delayed multiple attempts to appoint a business valuator.  Her actions were so destructive that in Paragraph 30 of his decision, Justice McDermot declared that Ms. Goodwin was “ungovernable by court Order.”  As a result, another form of action had to be taken to somehow rectify the situation.

Both counsel of record in this matter acknowledged that the Family Law Rules do not speak to the issue of injunctive relief.  Accordingly, reference was made to Section 101 of the Courts of Justice Act (“CJA”), and Rule 40 of the Rules of Civil Procedure, plus case law decided thereunder.  Under the CJA, a judge can grant an interlocutory injunction where he or she determines that it is “just or convenient” to do so.

Naturally, counsel for Ms. Goodwin objected to the notion that prohibiting her attendance at and involvement in Aristocrat was just or convenient.  The Respondent directed the judge to the three point test for the granting of an interlocutory injunction under Rule 40 and under Section 101, referenced above.  Under the case of RJR MacDonald Inc. v. Canada, the test requires the following:

First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Second, it must be determined whether the Applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.

Justice McDermot decided that Ms. Goodwin was not acting in bad faith, but instead she was suffering from mental health problems that were influencing her behaviour.  This was based on the affidavit evidence and cross-examination of Ms. Rivers and Mr. Vasagam.  However, Justice McDermot went on to say that bad faith is not required to order the injunction, based on the ruling in Brant Investments Ltd. v. KeepRite Inc..

All that has to be proven is that the act complained of produces a result that is “unfairly prejudicial to, or unfairly disregards the interests of one of the protected persons or groups.”  The statute is results oriented; the impugned act has to be unfair in the result without necessarily looking at the motivation.  How have the acts complained of affected Mr. Goodwin?

It is essential that the equalization of the assets of the marriage and the buyout of the corporation are dealt with as soon as possible.  Ms. Goodwin is preventing these things from happening, which in turn affects Mr. Goodwin in two ways: it ruins his plans for the distribution of his estate after his passing (as it is his desire to keep the business in the family), and it is terribly destructive to the business, in which he has a significant interest.  Justice McDermot considers these matters serious, and although the corporation is not a party to the action, the irreparable harm that Ms. Goodwin could bring upon the corporation is still relevant.  Particularly since Ms. Goodwin’s behaviour has prevented the filing of Aristocrat’s 2009 Corporate Income Tax Return, which if not done promptly, may have had dire consequences under both criminal and corporate law.

The final issue was that of balancing the interests of the two parties to the proceeding:  Justice McDermot has to determine which of the parties would have suffered greater harm if the injunction were to be granted.  Ms. Goodwin asked for the same relief as Mr. Goodwin, but Justice McDermot made it clear that the Respondent had not been prejudiced, but rather she was the source of the prejudice to the Applicant and therefore not entitled to any injunction.  Also, because the injunction would be temporary, Ms. Goodwin would have the opportunity to move back into her offices, barring no further Order being made.

Justice McDermot made an Order in favour of Mr. Goodwin, with some stipulations (e.g. while prohibited from taking part in the actual operating of the business, Ms. Goodwin was entitled to bi-weekly disclosure about the corporate affairs and remained entitled to her salary).  The issues facing the court were serious in nature, Mr. Goodwin would have been prejudiced had his application been denied, and on a balance of convenience, granting the injunction against Ms. Goodwin was justified.

I believe this was a well-balanced, well-thought out judgment and ultimately a very good decision was made in order to protect the company.

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