Court File and Parties
COURT FILE NO.: 285/09
Toronto
20091006
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
ZUCKERMAN-HONICKMAN INCORPORATED
Brian N. Radnoff and Louise F. Moher for the Plaintiff/Respondent
Plaintiff/Respondent
- and -
MPI PACKAGING INC. and RONALD O’BRIEN
Kevin Sherkin for the Defendants/Moving Parties
Defendants/Moving Parties
Endorsement
D.L. CORBETT J.
[1] The defendants seek leave to appeal the injunction and related relief granted by Justice Lois Roberts on May 19, 2009.
[2] Despite Mr. Sherkin’s able and persuasive arguments, for the reasons that follow, the motion for leave to appeal is dismissed.[^1]
[3] The defendant corporation manufactured plastic bottles. The plaintiff was one of its customers. The plaintiff, in turn, sold the bottles to beverage manufacturers. The defendant corporation was paid by the plaintiff. The plaintiff, in turn, was paid by the beverage manufacturers. This was a significant and ongoing business relationship, and had been in place for roughly 4.5 years at the time of the events that led to this proceeding.
[4] The relationship between the plaintiff and defendant deteriorated. The plaintiff alleged that bottles delivered by the defendant corporation were contaminated. The plaintiff refused to pay for these bottles. The defendant corporation said that it was owed the price of the bottles. Efforts were made to resolve these disputes, but without success. The defendants took the position that the business relationship with the plaintiff was over. They then approached the plaintiff’s customers, offering to supply bottles to them directly. The plaintiff brought the motion before Roberts J. to enjoin the defendants from this conduct.
[5] In detailed reasons, Justice Roberts found that the plaintiff had established a strong prima facie case that the defendants breached various duties owed to the plaintiff arising out of their ongoing business relationship and wrongfully interfered with the plaintiff’s economic relations with its customers. Justice Roberts went on to find that there would be irreparable harm to the plaintiff’s business if the defendants were permitted to carry on undermining the plaintiff’s business relationships pending trial, and that the balance of convenience weighed in favour of granting the injunction.
[6] It appears that Justice Roberts mis-stated the third branch of the test for an interlocutory injunction, and made findings on the merits that may ultimately not be borne out at trial. However, (1) it is clear that Roberts J. understood and applied the third branch of the injunction test correctly; and (2) it is the decision that is the subject-matter of this motion, not the details of the reasons. The findings of the motions court respecting the underlying merits are for the purposes of the injunction motion, and will not bind the trial judge, who will come to her own conclusions on the facts and the law after a full hearing.
[7] The test for an interlocutory injunction is set out in RJR Macdonald.[^2] It has three parts:
Is there a serious issue to be tried?
Will the moving party suffer irreparable harm if the injunction is not granted?
Does the balance of (in)convenience favour granting the injunction?
[8] The motions court judge correctly stated the first branch of the test and then found that the plaintiff had shown a strong prima facie case for an injunction. In coming to this conclusion, the motions court judge made extensive factual and legal findings. Some of these are challenged by the moving parties on this motion for leave to appeal. For example, the extent of any duties of confidence and fiduciary duties are certainly arguable issues for trial. The learned motions court judge went further than she had to in assessing the evidence for the purpose of the first branch of the test for an injunction. I say nothing about whether there is good reason to doubt the correctness of the motions judge’s conclusion that there is a strong prima facie case here or about any of her specific findings respecting the underlying merits of the case. I need not address those points for the purposes of this decision. Clearly there are serious issues to be tried, and thus there is no reason to doubt that the plaintiff satisfied the first step in the test for an interlocutory injunction.
[9] There is also no reason to doubt the correctness of the motion judge’s finding that the plaintiff established that there would be irreparable harm if the injunction was not granted. The plaintiff was rightly concerned that it would never be able to re-establish relations with its customers if these relationships were supplanted by one of its own suppliers. The business relationship between the plaintiff and its customers is the very essence of its business. This is a clear case of a motions court recognizing the importance of a “book of business” to an ongoing enterprise. This is not a novel or important legal issue: it turns on the very specific factual circumstances of this case.
[10] Finally, on the balance of convenience, the learned motions court judge weighed the proper factors and found that the balance weighed in favour of granting the injunction. It was in her discretion to apply terms, and she declined to do so, other than the usual undertaking as to damages from the plaintiff. In so concluding, the trial judge weighed the limited extent of the order she was making, the manifest impropriety of some of the defendants’ conduct, and the importance of preserving the plaintiff’s business relationships. She found that the totality of the circumstances weighed in favour of granting the injunction. This was a fact-specific determination. It cannot be said that there are conflicting decisions in respect to the fact-specific determination of the balance of convenience, nor can it be said that there is good reason to doubt the correctness of the motion judge’s findings.
[11] Obviously the motion was important for both parties. The defendants argue that the motions judge misapprehended the evidence concerning the harm they would suffer if the order was granted. The motions judge was unconvinced by the defendants’ evidence on this point – she called it “unreliable” – and this finding was based on a full consideration of the evidence. I cannot now consider the subsequent insolvency of the corporate defendant to second-guess the motions judge: that was not before her.[^3]
[12] As I indicated above, the motions judge went further than was required in assessing the merits for the purpose of the first branch of the test for an injunction. However, she was entitled to consider the relative strength of the case under the balance of convenience. The motions judge was satisfied that the plaintiff had established a strong prima facie case, and it seems clear that this finding was part of Her Honour’s weighing of the balance of convenience.
[13] The role of the merits on injunctions motions remains controversial. RJR Macdonald adopted the test laid out in American Cyanamid,[^4] lowering the threshold test on the merits from “strong prima facie case” to “serious issue to be tried”. One would think that the role of the merits would be reduced as a result, with corresponding savings in time and money for the parties. That is not always the case. This is an issue that might well be of sufficient general importance to merit granting leave to appeal to the Divisional Court, in an appropriate case. This is not the right case to do that. On the motions judge’s view, her assessment of the merits of the case weighed in favour of granting the injunction. But even without this factor, this still was a proper case to grant an injunction. Since the role of the merits does not play a critical role in this particular case, it is not appropriate to grant leave to appeal to consider that issue.
[14] Finally, the defendants take the position that there was no proper basis to direct the order at Mr. O’Brien, who was acting solely in his capacity as an employee of the corporate defendant. I disagree. The wrongful interference with economic relations, as found by the motions judge, was as a result of the individual conduct of the individual defendant.
[15] Motion dismissed, with costs to the plaintiff/responding party fixed at $6,500 plus GST.
_______________________ D.L. Corbett J.
Released: October 6, 2009
COURT FILE NO.: 285/09
Toronto
DATE: 20091006
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
ZUCKERMAN-HONICKMAN INCORPORATED
Plaintiff/Respondent
- and –
MPI PACKAGING and O’BRIEN
Defendant/Moving Parties
Endorsement
D.L. CORBETT J.
[^1]: The test for leave to appeal is set out in Rule 62.02(a) and (b) of the Rules of Civil Procedure. See also Way v. Deslauriers, [2005] O.J. No. 3245 (Ont. S.C.J.), Comtrade Petroleum v. 490300 Ont. Ltd., 1992 7405 (ON SC), [1992] O.J. No. 652 (Ont. Div. Ct.), SLMSoft.com Inc. v. Rampart Securities, 2005 41549 (ON SCDC), [2005] O.J. No. 4847 (Ont. Div. Ct.), Gold Reserve Inc. v. Rusoro Mining, 2009 16291 (ON SC), [2009] O.J. No. 1442 (Ont. S.C.J.).
[^2]: 1994 117 (SCC), [1994] 1 S.C.R. 311.
[^3]: The plaintiff argued that the insolvency renders the proposed appeal moot. I disagree. If it was decided that the injunction was wrongly granted then the defendants would be entitled to seek to enforce the plaintiff’s undertaking as to damages.
[^4]: 1975 2598 (FC), [1975] A.C. 396 (H.L.).