“The “clean hands doctrine” comes from the 18th century maxim that “he who comes to equity must come with clean hands”: see e.g., Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, [2006] 2 S.C.R. 612, at para. 22; Bolianatz Estate v. Simon, 2006 SKCA 16, 264 D.L.R. (4th) 58, at para. 116; Dering v. Earl of Winchelsea (1787), 1 Cox 318, 2 E.R. 1184, at pp. 319-320.
Doug submits that Melissa’s improper withdrawals should therefore have disentitled her to the equitable remedy granted by the trial judge. We disagree that the “clean hands” doctrine applies in the circumstances of this case.
First, the trial judge did not grant equitable relief. As we earlier concluded, the trial judge made no error in finding that there was an agreement between Doug and Melissa to increase Melissa’s common shareholdings to 50%. This was not the granting of equitable relief but the finding by the trial judge of the existence of an agreement between the parties and the granting of the relief that flowed from that agreement.
Moreover, because Melissa’s withdrawals from the company and from Doug’s line of credit are unrelated to the proper division of the shares, Melissa’s conduct would not fall within the application of the “clean hands” doctrine: see e.g., BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 2005 CanLII 30303 (ON CA), 77 O.R. (3d) 161 (C.A.), at para. 27; Toronto (City) v. Polai, 1969 CanLII 339 (ON CA), [1970] 1 O.R. 483 (C.A.), at pp. 493-494, aff’d 1972 CanLII 22 (SCC), [1973] S.C.R. 38.
In any event, the “clean hands” doctrine does not automatically disentitle a party with “unclean hands” from obtaining any relief. Equitable principles are not based on the application of strict rules but are applied at the judge’s discretion and are “crafted in accordance with the specific circumstances of each case”: Pro Swing Inc., at para. 22. As this court observed in Sorrento Developments Ltd. v. Caledon (Town), 2005 CanLII 2549 (Ont. C.A.), at para. 5: “It is a matter of discretion for the trial judge whether to refuse to grant equitable relief on the basis that a litigant has not come to court with clean hands”. Here, the trial judge carefully considered the circumstances surrounding both withdrawals.”