The test for inerlocutory injunctive relief

There was a time in my career where I worked in civil litigation and a matter came before us to oppose an injunction that was being sought.  Therefore, this recent decision caught my attention.

These applications are serious – and one of the most crucial impact when an interlocutory injunction is being sought is the irreparable harm that may result.  I do recall assisting during the evidentiary gathering process, seeking clear evidence to put forth in our application that irreparable harm would occur if the injunction was granted  – one of the key tests being “there must be an evidentiary basis for the finding”.  Our client was not successful in opposing the injunction.  It was quite an intense matter.

In any event, this is a recent published decision that outlines the principles quite nicely and if you are involved with these applications this is fantastic reading material to review and understand all of the considerations that must be studied when applying for, or opposing an interlocutory injunction.

The decision is MacIsaac v. David, 2019 BCSC 931 (CanLii):

The Test for Interlocutory Injunctive Relief

[44]        The test for an interim order in respect of the oppression remedy is the same generally as that which applies to an interlocutory injunction: see Canada Snow Mountain Investments Co. Ltd. v Miller Springs Ltd., 2015 BCSC 1117 [Canada Snow]; and, Boffo Family Holdings Ltd. v. Mountainview Developments Ltd., 2010 BCSC 560.

 [45]        British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333 (C.A.), aff’d [1991] 1 S.C.R. 62 [Wale], sets out a two-pronged test for an interlocutory injunction: whether there is a fair question to be tried, and whether the balance of convenience between the parties favoured an injunction. Under this test, the question of whether irreparable harm would be suffered by the applicant if the injunction was not granted, is an integral part of assessing the balance of convenience.

 [46]        Subsequently, in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 111 D.L.R. (4th) 385 [RJR-MacDonald] the Supreme Court of Canada restated the test as being three-pronged, with irreparable harm being a discrete element.

 [47]        It has sometimes been said that the two-part and three-part tests are “functionally the same” (see Canada Snow, at para. 79), or have “no practical difference” (see e.g. Progressive Automations Inc. v Jahromi, 2018 BCSC 1015). However, in the BC Court of Appeal’s most recent commentary on the tests, Vancouver Aquarium Marine Science Centre v. Charbonneau, 2017 BCCA 395 [Vancouver Aquarium], Madam Justice Saunders remarked:

 [93] Most often the distinction is likely without practical effect, as I observed in Coburn v. Nagra, 2001 BCCA 607. On reflection, however, I cannot say the distinction is never without practical effect, depending on the meaning attributed to the term “irreparable harm” and the object of the posited harm…

 [48]        Regardless whether a two-part or three-part test is used, it is clear that the first part of the test – “a serious question to be tried” – has a low threshold:

 Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.

RJR-MacDonald, p. 403.

 [49]        With respect to the standard of proof that applies to the factor of irreparable harm, it is clear that there must be an evidentiary basis for the finding, whether or not it is a discrete element (as opposed to being subsumed within the balance of convenience test). In Vancouver Aquarium, Bennett J.A. acknowledged McLachlin J.A.’s (as she then was) caution in Walethat proof of irreparable harm should not be subject to too stringent a standard. However, Bennett J.A. also said:

 [60] … there surely must be a foundation, beyond mere speculation, that irreparable harm will result. Interlocutory injunctive relief pending the trial of the issues is a significant remedy, and should be invoked only when the test in RJR-MacDonald is satisfied on a sound evidentiary foundation.

 [50]        With respect to what role the factor of irreparable harm is to play in the analysis, the decision in Vancouver Aquarium is somewhat unusual in that Bennett J.A. and Saunders J.A. each took a different path, issuing separate reasons for allowing the appeal and setting aside the injunction issued by the Court below, while the third member of the panel, Mr. Justice Donald, agreed with both. Madam Justice Bennett appears to have applied the three-part formulation; she restated it at para. 37 of the reasons, and as she reviewed the law she treated “irreparable harm” and “balance of convenience” as discrete categories. At the same time, Bennett J.A. also cited approvingly the following passage from the decision of the Saskatchewan Court of Appeal in Potash Corp. of Saskatchewan Inc. v. Mosaic Potash Esterhazy Limited Partnership, 2011 SKCA 120 [Potash Corp]:

 [26] For the moment, let me observe that the strength of case, irreparable harm and balance of convenience considerations, although prescribed and necessary parts of the analysis mandated by the Supreme Court, are nonetheless not usefully seen as an inflexible straightjacket. Instead, they should be regarded as the framework in which a court will assess whether an injunction is warranted in any particular case. The ultimate focus of the court must always be on the justice and equity of the situation in issue. As will be seen, there are important and considerable interconnections between the three tests. They are not watertight compartments.

 [51]        Madam Justice Saunders, however, at para. 94, quoted from the two-part formulation described by Mr. Justice Lambert in Canadian Broadcasting Corporation v. CKPG Television Ltd. (1992), 64 B.C.L.R. (2d) 96 (C.A.) [CBC], where he said:

 [23] I would also adopt and follow the approach of Madam Justice McLachlin [in Wale] to the second prong of the test, namely the assessment of balance of convenience. I would summarize that approach in this way: in assessing the balance of convenience a judge should consider those points: ‒ the adequacy of damages as a remedy for the applicant if the injunction is not granted, and for the respondent if an injunction is granted; the likelihood that if damages are finally awarded they will be paid; the preservation of contested property; other factors affecting whether harm from the granting or refusal of the injunction would be irreparable; which of the parties has acted to alter the balance of their relationship and so affect the status quo; the strength of the applicant’s case; any factors affecting the public interest; and any other factors affecting the balance of justice and convenience.

 [24] It should be noted that the strength of the applicant’s case is a separate factor, which should be considered under the second prong of the test, quite apart from the question under the first prong of the test of whether the applicant has established a fair question to be tried. But the assessment of the relative strength of the parties’ cases must recognize the degree to which those cases have not yet been revealed because of the nature of the evidence and the way it has been presented on the injunction application, which may be markedly different from the way it would be presented at trial.

 [52]        Madam Justice Saunders then concluded in Vancouver Aquarium:

 [95] Respectfully, and recognizing that RJR MacDonald did not disapprove Wale, I would adopt the approach of CBC, recognizing that irreparable harm is an important factor to be considered in balancing the interests of justice, but its absence does not preclude an injunction where such is considered appropriate by a judge exercising the inherent jurisdiction assigned by the Law and Equity Act, R.S.B.C. 1996, c. 253.

 [53]        I therefore approach the present applications on the basis that proof of irreparable harm is at the very least an important component of the test for an interlocutory injunction.

 The Oppression Remedy

 [54]        Before I turn to applying the test, something should be said as to the nature of the oppression remedy, as it is foundational to John’s claim in the present action and to his application for interlocutory relief. The court’s power to relieve against the consequences of oppressive conduct is broadly described in s. 227 of the BCA:

 227 (1) For the purposes of this section, “shareholder” has the same meaning as in section 1 (1) and includes a beneficial owner of a share of the company and any other person whom the court considers to be an appropriate person to make an application under this section.

 (2) A shareholder may apply to the court for an order under this section on the ground

    •  that the affairs of the company are being or have been conducted, or that the powers of the directors are being or have been exercised, in a manner oppressive to one or more of the shareholders, including the applicant, or
    • that some act of the company has been done or is threatened, or that some resolution of the shareholders or of the shareholders holding shares of a class or series of shares has been passed or is proposed, that is unfairly prejudicial to one or more of the shareholders, including the applicant.


[55]         The scope, and limitations, of the remedy are described in the following passages from the decision of Madam Justice Newbury, unanimously concurred in, in 1043325 Ontario Ltd. v. CSA Building Sciences Western Ltd., 2016 BCCA 258 [1043325]:

 [48] As observed in Rea [v. Wildeboer, 2015 ONCA 373], the oppression action is clearly a “personal” one, as opposed to a representative or derivative one. The “intersection” or overlap between derivative and oppression actions is a topic much discussed in the cases; but at issue here is the more obscure question of the limits on personal complaints that may be pursued under s. 227. Is any shareholder who has a complaint against a company for any wrong, entitled to invoke s. 227? The answer lies in a consideration of the kinds of rights and expectations protected by, and types of conduct that may be challenged under, the oppression provision.

 [49] First of all, s. 227 contemplates that the conduct complained of relates to the way in which the “affairs of the company” are being or have been conducted or the directors’ powers have been exercised, or to the passage or proposed passage of a resolution. As Markus Koehnen notes in Oppression and Related Remedies (2004), the corporate legislation of many of the provinces (although not of British Columbia) defines “business or affairs of the corporation” for purposes of the oppression provision to mean the relationships among a corporation and its shareholders, directors and officers, etc., but not to include the business carried on by the corporation. (At 110.)

 [50] Although each oppression case is fact-specific, certain types of conduct have commonly been found to constitute oppression. Kevin P. McGuinness in Canadian Business Corporations Law (2nd ed., 2007) offers this overview:

 Conduct that is found to be unfairly prejudicial or oppressive in one case may not necessarily be found in another, even though the factual setting of the two cases is only slightly different. Still, it is worthwhile to summarize some of the decided case law that is indicative of the range of circumstances in which relief may be available. The appropriation of a corporate opportunity can amount to oppression or unfairly prejudicial conduct. It is oppressive for a controlling shareholder to treat the corporation as if it were wholly owned, as, for instance, by causing it to pay repeated and large personal expenses. It is also oppressive for a controlling shareholder or director to orchestrate the business or affairs of a corporation (e.g., by making discretionary or unjustified payments) to frustrate or circumvent his or her obligations under a contract relating to the securities of a corporation. Violations of the Securities Act that do not give rise to a civil cause of action under that Act may also be held to constitute oppression to allow relief to be granted under section 248 [of the Ontario Business Corporations Act]. Defensive tactics employed to defeat a hostile takeover bid may also be oppressive. Nominee directors may be guilty of oppression where they are caused or required by the shareholder who nominates them to make its interest paramount and to disregard or downplay the interests of other shareholders.

The classic case of oppression arises where the complainant has effectively been denied the very benefit he or she sought to obtain when joining the corporation in the capacity of a director, officer, or shareholder or when investing in it as a security holder. … [At §13.27-8; emphasis added.]

 The author also suggests at §13.92 that:

 … the [oppression] remedy is available where a dispute relates to conduct by the corporation and its officers. It is not available where the dispute is between two shareholders as such, and not the corporation – the dispute must relate to the conduct of the corporation in itself. Nor is relief available merely because of some dispute between two shareholders outside the corporate context – for instance, in the case of the breakdown of a marriage. [Emphasis added.]

 [51] Koehnen, supra, describes some of the outer limits of the remedy:

 To some degree the conduct in question must and should relate to a corporation. Defining the degree to which oppression should require corporate conduct can be tricky. At the easy end of the spectrum are disputes involving a defendant who exercises no corporate role at all. For example, in Thomson v. Quality Mechanical Service Inc., [(2001), 56 O.R. (3d) 234 (S.C.J.)] the plaintiff was one of two 50% shareholders. The corporation’s banking resolution required the signature of both shareholders on cheques. In breach of this resolution, the bank honoured cheques bearing the signature of only one shareholder. The plaintiff’s action against the bank for oppression was dismissed on a preliminary motion. While the bank’s conduct might amount to a breach of its contract with the corporation, the shareholder had no oppression claim because the bank’s conduct did not fall within paragraphs (8)(2)(c) of s. 241(2) [of the Canada Business Corporations Act]. Similarly, the oppression remedy does not include purely personal disputes between shareholders. Thus, in Jarmon v. Brown & Gulfstream Cruises Ltd., the court found no oppression where the two shareholders were spouses in the midst of a marriage break-up and one spouse sought to wind-up the corporation as a means of effecting division of property. Finally, the oppression remedy does not include the conduct of a defendant who happens to play a corporate role but whose conduct does not involve his corporate role. Thus, where a shareholder was also a mortgagee to the corporation, the shareholder’s conduct in foreclosing on a mortgage did not fall within the oppression remedy. The results in these cases, it is submitted, makes sense. The relationships at issue were not properly governed by corporate law but were governed by legal rules applying to banking, divorce or mortgages.

Some courts have used the requirement for corporate activity to draw a distinction between the “personal” and “corporate” conduct of directors. Actions attributable to officers or directors that are not attributable to the corporation do not amount to oppression …

The requirement for corporate conduct has also lead courts to exclude disputes about shareholder agreements from the ambit of the oppression remedy because such agreements are private contracts that fall outside the affairs of the Company. [Citing Johnston v. West Fraser Timber Co. (1982), 37 B.C.L.R 360 (C.A.) lve. to app dismissed (1982) 45 N.R. 538n.] [At 106‑8; emphasis added.]

 [52] The author suggests that requiring “corporate conduct” – i.e., conduct of directors or officers acting in their “corporate capacity” – as a prerequisite to an oppression remedy reflects too narrow a view. He emphasizes that the purpose of the remedy is to “prevent unfairness”, which can come in many forms. He suggests the focus should not be on the conduct but on its effect on the complainant. In the leading Canadian case, BCE Inc. v. 1976 Debentureholders 2008 SCC 69, the Court suggested at para. 65 that the conduct of shareholders may also support a case for oppression.

[54] In summary, while oppression is a “personal” claim, not every personal claim that a shareholder may assert against a corporation will constitute oppressive or unfairly prejudicial conduct. The oppression or unfair prejudice must generally be suffered by the “shareholder” (as defined) qua shareholder: see Dilligenti v. R.W.M.D. Operations Kelowna (1976), 1 B.C.L.R. 36 (S.C.) at 41; Burdeny v. K & D Gourmet Baked Foods & Investments Inc. (1999), 48 B.L.R. (2d) 16 (B.C.S.C.) at para. 20; Safarik v. Ocean Fisheries Ltd. (1995), 12 B.C.L.R (3d) 342 (C.A.) at para. 85; Stone v. Stonehurst Enterprises Ltd. (1987) 80 N.B.R. (2d) 290 (Q.B.) at 305, quoted with approval in Naneff v. Con-Crete Holdings Ltd.(1995), 23 O.R. (3d) 481 (C.A.) at 489. On the other hand, as Naneff illustrates, where the complainant is able to show an entire course of oppressive conduct which includes another cause of action (in Naneff, wrongful dismissal), that cause may also be remedied under the oppression provision.

[Emphasis in original.]

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