Marcy Taylor McKee

Following the refusal of an interlocutory injunction sought by the landlord applicants to compel a hotel operator to continue operating a hotel under a particular brand, the court determined the issue of costs.

The applicants argued that an indemnity clause in a lease entitled them to full indemnity costs from a former tenant alleged to have breached the lease.

The court held that the indemnity clause did not permit the landlord to recover litigation costs from a prior tenant where the present tenant supported the motion and where the lease’s procedures regarding a change of operating name had not been followed.

Even if the clause applied, the court would decline to exercise its discretion to award costs to the applicants.

Costs were awarded instead to the successful respondent hotel operator.

The applicants sought an interlocutory injunction compelling a hotel operator to continue managing and branding a hotel under a particular brand pending determination of a permanent injunction application.

They argued the lease required continued operation of the hotel using the brand and associated operational infrastructure despite expiry of the hotel management agreement.

The court applied the RJR‑MacDonald test and held that the lease provisions did not clearly impose an obligation requiring the operator to continue providing the full operational benefits of the brand.

The alleged harm, primarily reduced participation rent and potential reputational impacts, was found to be quantifiable and compensable in damages.

The balance of convenience favoured the operator, which would otherwise be compelled to operate a business relationship it no longer wished to maintain.