Dispute did not concern provision of agreement but manner in which affairs of company conducted

PROCEDURE

Dispute did not concern provision of agreement but manner in which affairs of company conducted

Plaintiff minority shareholder alleged defendant, 50% shareholder and operating mind of defendant company, conducting affairs of company in improper manner by, for example, using or diverting funds for personal use. Plaintiff commenced action for various forms of relief, including damages for breach of contract or oppression, and brought motion for interim injunction with respect to affairs and management of company and disclosure of financial information. Motion adjourned on terms restraining defendants from dissipating assets, requiring approval for payments and allowing plaintiff to oversee company’s operations and obtain information and documents. When plaintiffs brought motion to extend terms, appoint principal as co-manager of company and obtain further disclosure, company brought motion for order requiring shareholders to pursue alternate dispute resolution mechanisms provided by shareholders’ agreement. Motion denied. Dispute resolution provision applied to dispute on any matter arising out of provision of agreement and contemplated four distinct steps in process. First, mandatory negotiation either between parties directly or through solicitors. Second, mandatory negotiation with assistance of mediator if parties unable to resolve matters through direct negotiation. Third, arbitration before single arbitrator if parties agreed and fourth, court proceeding. Mediation arose only if parties attempted to resolve matters through direct negotiation and unable to do so. Situation did not arise here where parties used services of solicitors and did not negotiate directly. Dispute did not, in any event, concern provision of agreement but manner in which affairs of company conducted.
829194 Ontario Inc. v. Garibotti (Sep. 18, 2013, Ont. S.C.J., David A. Broad J., File No. 13-40010) 234 A.C.W.S. (3d) 732.