Court File and Parties

Citation: 1576347 Ontario Ltd. v. 1142827 Ontario Ltd., 2011 ONSC 3823 Divisional Court File No.: CV-11-421420 Date: 2011-06-23 Superior Court of Justice – Ontario

Re: 1576347 Ontario Ltd. operating as Centennial Park Mini Indy, Plaintiff And: 1142827 Ontario Limited, Centennial Park Mini-Indy Inc., 898139 Ontario Limited and Ross McMullen, Defendants

Before: Aston J.

Counsel: John P. Koch / Allison A. Thornton, for the Plaintiff Roger A. Gosbee, for the Defendants

Heard: June 3, 2011

Endorsement

[1] This is a motion by the plaintiff for an interlocutory injunction, extending the interim injunction granted by Perell J. on March 14, 2011. The injunction sought would restrain the defendants from interfering with the plaintiff’s operation of the business known as Centennial Park Mini Indy pending trial. The business is a go-kart rental and racing facility on property subleased to the defendants by the City of Toronto. The parties entered into a contract February 25, 2010 called a “Management Agreement”. That agreement gives the plaintiff control of the business and the premises on which the business is located for a period of ten years and nine months in exchange for the payment of certain money to the defendants.

[2] Both the plaintiff and the defendants have alleged breaches of the Management Agreement by the other side and each of them have delivered written complaints to the other of those alleged breaches. After a series of increasingly heated exchanges, the defendants changed the locks on the business on February 24, 2011, purporting to terminate the Management Agreement based on the plaintiff’s various defaults thereunder. The interim injunction of March 14^th followed, ordering the defendants to provide the plaintiff with keys to the premises and not to interfere with the business pending further order of the court on the return of this motion. The interim injunction was contingent on the plaintiff paying in full various disputed amounts listed in the defendants’ Notice of Default, on a without prejudice basis. That condition was met. The plaintiff takes the position that it is now complying with all terms of the Management Agreement and will do so pending trial. The plaintiff also disputes that it has defaulted under the agreement in any significant way and says, alternatively, that it should be granted relief from forfeiture as a form of equitable relief, or that the defendants have no right to terminate the Management Agreement even if the defendants are entitled to damages or compensation.

[3] To obtain an interlocutory injunction, the plaintiff must meet the three-part test set out by the Supreme Court of Canada in RGR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311:

(a) there is a serious issue to be tried;

(b) the plaintiff would suffer irreparable harm of a nature that cannot be compensated in damages if an injunction is not granted; and

(c) the balance of convenience favours the granting of an injunction.

[4] The parties disagree on the first element of this test. The plaintiff claims it need only demonstrate that its claim is neither frivolous nor vexatious. The defendants assert that because the injunction is essentially a form of mandatory relief (in that it required the defendants to give the plaintiff a key and surrender property the defendants had lawfully taken into their possession) a higher threshold must be met by the plaintiff. I accept the position of the plaintiff on this point. The defendants have not clearly established the right to have taken possession of the premises and the plaintiff is seeking to restrain them from doing so. The plaintiff has established that there is a serious issue to be tried on whether the Management Agreement continues as a valid, subsisting contract.

[5] Though the defendants dispute any default under the Management Agreement prior to purporting to terminate that contract and changing the locks, the plaintiff has presented sufficient evidence to prove there is a genuine issue for trial on whether the defendants were within their rights in doing so. I reach that conclusion mindful of the fact that the plaintiff’s evidence on whether it actually sent a Notice of Default November 1, 2010, as it alleges, must be viewed with skepticism.

[6] The evidence also seems to substantiate that the plaintiff has taken a failing venture and turned it into one that has the potential to thrive because of the substantial time and money the plaintiff has invested. That investment was made in the expectation the plaintiff would operate the business for a decade or more. It is fair to assume that the refusal to grant the interlocutory injunction will effectively put the plaintiff out of business, an outcome which meets the irreparable harm aspect of the RGR-MacDonald test. The only prejudice to the defendants would be to require the defendants to continue to accept the payments due to them under the Management Agreement, which is no prejudice at all if they are not entitled to terminate that contract. The balance of convenience certainly favours the plaintiff.

[7] I am satisfied the plaintiff has met the test for an interlocutory injunction pending trial or further order of the court, but only on conditions. Order to go as follows:

(a) The defendants shall refrain from interfering in any way with the operation by the Plaintiff of the business of Centennial Park Mini Indy pursuant to the Management Agreement dated February 25, 2010 (“Agreement”) for the term of the Agreement or until further order of the court or the final determination of this action at trial, which ever shall come first.

(b) The plaintiff will make all payments due to the defendants under the Management Agreement in timely fashion.

(c) Without prejudice to the determination of the issue, the plaintiff will continue to pay HST on the management fees payable to the defendants.

(d) Without prejudice to any claim for damages in relation to the signage, the plaintiff will pay $8,900 to 1142827 Ontario Limited as provided in paragraph 8.1 of the Management Agreement, within 15 days.

(e) The plaintiff is to pay 1142827 Ontario Limited $7,000 on account of the steel which the plaintiff sold. Payment is to be made within 15 days of the defendants’ undertaking in writing to indemnify the plaintiff from any claim by the City of Toronto in relation to the steel sold by the plaintiff.

(f) The plaintiff shall not permit Robert Clark to be on the premises or participate in the management and operation of the facilities in any manner.

[8] This last condition does not constitute any finding as to whether naming him as a licensed go-kart mechanic to obtain a TSSA permit constituted a breach of the amending agreement to the Management Agreement, dated March 3, 2010. There is insufficient evidence to decide that issue one way or the other at this stage of the proceeding.

[9] The plaintiff’s undertaking dated March 3, 2011, filed for this Notice of Motion first returnable March 3, 2011, remains in effect.

[10] If counsel are unable to agree on costs, the plaintiff may serve and file brief written submissions within the next 20 days and the defendants within 10 days thereafter.

Aston J.

Date: June 23, 2011