COURT FILE AND PARTIES

COURT FILE NO.: 5419/12
DATE: 2012-10-10
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DANG VARIETY STORE AND GAS BAR AND LUCKY RESTAURANT INC., Plaintiff

AND:

PIONEER ENERGY LLP and PIONEER ENERGY MANAGEMENT INC., Defendants

BEFORE: HOURIGAN J.

COUNSEL:
Harold S. Albrecht, Counsel for the Plaintiff

Cameron Neil, Counsel for the Defendants

HEARD: October 10, 2012

ENDORSEMENT

Introduction

[ 1 ] This is a motion by the plaintiff for an interim interlocutory injunction to preserve the plaintiff’s rights under the Motor Fuel Supply Agreement – Esso Branded Motor Fuels, dated January 12, 2011 and effective October 1, 2010 (the “Agreement”).

[ 2 ] The plaintiff is an Ontario corporation operating a gas bar, convenience store and restaurant at 406 King Street East, Cambridge, Ontario. The defendant Pioneer Energy LLP is the managing partner of Pioneer Energy Management Inc., an Ontario corporation.

[ 3 ] Pursuant to the Agreement, the defendants were obligated to provide fuel under certain terms and conditions to the plaintiff. The Agreement was for a term of 10 years, ending on October 31, 2020. The plaintiff operated as an Esso fuel station.

[ 4 ] It appears to be common ground that the plaintiff had difficulty complying with the terms of the Agreement. In particular, during the course of the business relationship, the plaintiff has made 31 NSF payments totalling over a million dollars. Moreover, there were also incidents of late payments and a failure to meet minimum volume of fuel purchases, among other issues. The plaintiff received warnings of termination of the Agreement on May 26, 2011, August 26, 2011 and December 7, 2011.

[ 5 ] By July of 2012, the business relationship between the parties had significantly deteriorated.

[ 6 ] In a letter dated July 20, 2012, counsel for the plaintiff wrote to Pioneer Energy LLP and stated as follows:

Please accept this as my confirmation that I have sat down with Thanh Dang, reviewed and explained his responsibilities and obligations to you, and that he has informed me that the following measures will be taken to ensure that he fulfills his responsibilities and obligations completely:

-To keep his ESSO location running professionally as per your requirements;

-To keep all machines and equipment functioning and working properly at all times, and in the event that any machine or equipment breaks down, to repair the same immediately;

-To ensure that the proper infrastructure is in place to accept all credit cards and forms of payment required by you;

-To keep fuel in constant supply and avoid any further shortages; and

-To provide you with all required invoices and reports in a timely manner.

Mr. Dang has informed me that he understands if he fails to fulfill the measures above, as per the conditions of your existing agreement with him, you have the right to terminate his contract with no further notice, with all costs and losses being his responsibility. ...

[ 7 ] Ultimately, on August 16, 2012, the defendants placed the plaintiff on probation. A specific term of that probation was that if a payment was returned from the bank for any reason, including NSF, Pioneer Energy LLP would terminate the Agreement without further notice.

[ 8 ] On September 18, 2012, Pioneer Energy Management Inc. wrote to the plaintiff indicating that two cheques issued to Pioneer were returned NSF in the period August 17, 2012 to September 12, 2012. The letter went on to indicate that pursuant to s. 27(b)(xi) of the Agreement, Pioneer was electing to exercise its right of termination immediately. Pursuant to that provision of the Agreement, if the plaintiff fails to pay any amount payable to the defendants they may terminate the agreement without notice or an opportunity to cure.

Analysis

(i) Mandatory Order

[ 9 ] There appears to be a conflict in the case law regarding whether an injunction of this type is in fact a mandatory order. The decisions in Parker v. Canadian Tire Corp ., [1998] O.J. No. 1720 (C.J.G.D.) and Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp. , 2002 34862 (ON SC) , [2002] O.J. No. 4116 (S.C.J.) suggest that it is a mandatory order and consequently a higher standard of proof is required. The decisions in Erinwood Ford Sales Ltd. v. Ford Motor Company of Canada Ltd. ; 2005 CarswellOnt. 1954 (S.C.) and TDL Group Ltd. v. 1060284 Ontario Ltd., 2001 CarswellOnt. 3304 (Div. Ct.) suggest that what is sought is not a mandatory order.

[ 10 ] For the purposes of this motion, it is unnecessary to analyze if there is in fact a conflict in the case law and how it should be resolved.

[ 11 ] Instead, I am determining this motion on the principles in RJR MacDonald Inc. v. Canada (A.G.) , (1994) 1994 117 (SCC) , 1 S.C.R. 311. Pursuant to that decision in order to succeed on its motion for an injunction the plaintiff must establish that there is: (i) a serious issue to be tried; (ii) it would suffer irreparable harm if the injunction were not granted; and (iii) the balance of convenience favours issuing the injunction.

(ii) Serious Issue to be Tried

[ 12 ] Turning now to the issue of a serious issue to be tried, the threshold is very low because usually the court is not in a position on an injunction motion to determine the merits of a case. Notwithstanding the foregoing, I find that in the circumstances of this case the plaintiff has not met its onus in this regard.

[ 13 ] On the uncontroverted evidence before me there is no issue that the plaintiff was repeatedly in breach of its obligations under the Agreement.

[ 14 ] The defendants appear to have shown great patience with the plaintiff in providing it with opportunities to operate in a manner in keeping with its contractual obligations. This culminated in the defendants putting the plaintiff on probation. There is no issue, given the letter from its counsel, that the plaintiff understood the consequence of a further breach. Despite this warning the plaintiff proceeded to make two NSF payments.

[ 15 ] In these circumstances, the defendants were within their contractual rights to terminate. Indeed, the plaintiff cannot point to any provision in the Agreement which would permit it to insist on the continuation of the contract. Nor can it point to any provision of the Agreement which they say is being breached by the defendants.

[ 16 ] It is no answer, as was suggested by the plaintiff, to point to the fact that after the NSF payments it eventually paid what it owed. The defendants have the right to insist on payment pursuant to the terms of the Agreement.

[ 17 ] I also find that the defendants are under no contractual obligation to wait for the plaintiff to retain a third party to ensure prompt payments under the Agreement in the future.

(iii) Irreparable Harm

[ 18 ] The next issue is irreparable harm. Again I find that the plaintiff has not met its onus in this regard.

[ 19 ] It is true, as was submitted by the plaintiff, that where the failure to issue an injunction will result in the moving party being forced out of business that may be considered to be irreparable harm ( see for example Struik v. Dixie Lee Food Systems Ltd . 2006 CarswellOnt 4932 (S.C.) ).

[ 20 ] Despite the foregoing, it is not sufficient, as was done in this case, for the plaintiff to simply make bald allegations of irreparable harm (see Milligan v. Byrne 2011 ONSC 5562 (S.C.)).

[ 21 ] In the case at bar, I note that the plaintiff operates a convenience store and a restaurant from the same location. It has not been explained why those parts of its business cannot be relied upon to keep the business operating.

[ 22 ] Counsel for the plaintiff also did not dispute that his client could obtain an alternative supplier of fuel. However, he submits that his client would lose the value of a leading supplier like Esso and that his client has no chance of obtaining another major supplier. Therefore, he states that his client would be driven out of business.

[ 23 ] The difficulty with this argument is twofold. First, other than a bald statement in his client’s affidavit that a new major supplier cannot be obtained there is no other evidence in support of this proposition. Second, there is also no reliable evidence that there would be a significant loss in revenue if his client was supplied by a “no name” supplier or a lesser know supplier. Given that the plaintiff operated the gas bar previously as a “no name” station, one would assume that this evidence would be readily available. In fact, the evidence filed by the defendants suggests that there was no major difference in volume between the sales as a “no name” station and an Esso station.

(iv) Balance of Convenience

[ 24 ] Finally turning to the issue of balance of convenience, I find that the plaintiff has not met its onus.

[ 25 ] Again the plaintiff argues on this branch of the test that if that if the injunction is not granted it will be put out of business. For the reasons set forth above, I am not satisfied on the evidence that the plaintiff would in fact be put out of business if an injunction is not granted.

[ 26 ] The defendants argue that the granting of an injunction in this case would set a very concerning precedent for them in their dealings with other companies whom they supply fuel to under similar contractual arrangements. I accept that if a station could continually and repeatedly breach its contractual obligations but then resist termination on the basis that they will improve their performance in the future that could cause some measure of inconvenience for the defendants in their dealings with other fuel stations.

[ 27 ] I conclude, therefore, that the balance of convenience does not favour the granting of the injunction.

Disposition

[ 28 ] For all the foregoing reasons, the motion is dismissed.

[ 29 ] The plaintiff shall pay costs to the defendants in the amount of $7,000 within 60 days.

Hourigan J.

Date: October 10, 2012