Ted Thomson Management Inc. v. 1331503 Ontario Limited et. al., 2013 ONSC 264

COURT FILE NO.: CV-12-5513

DATE: 20130111

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TED THOMSON MANAGEMENT INC.

Plaintiff /Moving Party

– and –

1331503 ONTARIO LIMITED operating as JENNER GEISLER, IAN JENNER, JAMIE GEISLER, ASSANTE CAPITAL MANAGEMENT LTD., WAYNE MALCOLM and DAVID GRANNARY

Defendants /Responding Parties

Rahul Shastri/Joseph Kennedy, Counsel for the Plaintiff

Allan Sternberg, Counsel for the Defendants 1331503 Ontario Limited, Ian Jenner and Jamie Geisler

W. Michael G. Osborne/Fiona Campbell, Counsel for Assante Capital Management Ltd.

HEARD: December 17, 2012

REASONS FOR DECISION

ELLIES, J.

OVERVIEW

[1] The plaintiff, Ted Thomson Management Inc. (“TTMI”), operates an Assante Wealth Management Branch on McIntyre Street, in North Bay. The defendants, Ian Jenner, Jamie Geisler, Wayne Malcolm and David Grannary are financial advisors who worked at that branch until recently. Jenner and Geisler also operate an Assante branch office in Huntsville, either individually or through their corporate partnership, 1331503 Ontario Limited ("1331503"). Since November 29, 2004, the defendants 1331503, Jenner and Geisler ("the JG Group”) have abided by the terms of an agreement ("the 2004 Agreement”), to which Assante Capital Management Ltd. (“Assante”) was also a party, not to compete with TTMI. However, in October of 2012, with the consent of Assante, the JG Group opened up an Assante branch office about one block away from TTMI’s North Bay branch, on the same street, taking Malcolm and Grannary with them.

[2] In this motion, TTMI seeks to hold the JG Group and Assante to the promises they made in the 2004 Agreement and asks the court to enforce three restrictive clauses against the JG Group and to require Assante to comply with a positive obligation it undertook in that agreement pending the trial of this action.

[3] Although I am sympathetic to the situation in which TTMI finds itself and would not like to be understood as approving of the role that Assante has played in it, in my view, TTMI has failed to demonstrate that the clauses it seeks to enforce against the JG Group are reasonable or that the balance of convenience favours granting the prohibitive injunction, making the mandatory injunction sought against Assante a moot issue.

FACTS

Background

[4] Assante is an investment dealer which controls a network of branch offices across Canada. The investment advisors working at Assante branches are self-employed. Assante provides sales, marketing, compliance, technology and practice management support to those investment advisors, who work to build up their “book of business”, meaning the assets that they manage on behalf of their clients. Each advisor has a code or codes (which may be shared between or among advisors) that is attached to the accounts of the clients for whom the agent performs services. The clients are clients of Assante. However, given the evidence adduced on the motion by the JG Group that advisors within the same office compete with one another and the evidence adduced by Assante that it was better to let the JG Group open another Assante office than to see them join another investment dealer, I infer that the clients are free to choose whichever advisor they like.

[5] Financial advisors are paid on a commission basis. The amount of the commission is determined by the terms of an agreement between the advisor and Assante. From their earnings, advisors pay for the costs of their “practices”, consisting of the usual types of expenses incurred in business. At TTMI, some of those expenses are covered by way of a fixed amount paid by the advisor, including a $14,000 “desk fee” and a fee of $3,600 per year for advertising and promotion.

[6] For regulatory and compliance purposes, each advisor must be associated with a branch manager, who is responsible for administering and supervising the branch. In exchange for providing processing and compliance services to the advisor, the branch in which the branch manager is located is paid a fixed percentage of the commissions earned by the advisors, called an “override”. In addition, the branch may earn “bonus” overrides if commission income reaches a certain level.

[7] Ted Thomson is a financial advisor who has been in the investment industry since 1965. Not surprisingly, he has built up a substantial clientele over the intervening 47 years and is well-known in North Bay. I accept his evidence that he is the face of Assante in that city. There is no evidence that there has ever been more than one Assante branch located there.

[8] TTMI, the company which bears Thomson’s name, owns and operates the Assante branches in North Bay, New Liskard and Sudbury, Ontario. Although there is some dispute in the evidence about the extent of its interest in the Powassan branch, it is common ground that prior to October 15, 2012, TTMI was paid an override as branch manager of that office, as well.

[9] Prior to that date, Jenner, Geisler, Malcolm and Grannary all worked out of the North Bay branch. Geisler had been there since about 1996. Jenner had been then there since 1999. Jenner and Geisler also worked out of the Assante office in Powassan, and an Assante office operated by their company, 1331503, in Huntsville. It is with respect to that branch that events occurred in 2003 which were the genesis of the 2004 Agreement.

The Huntsville Assante Branch

[10] According to the JG Group, prior to 2003, the Huntsville branch was owned and operated by Ambrose Adam, a financial advisor who was also a licensed branch manager. According to the JG Group and to Adam, in August of that year, Jenner and Geisler purchased the branch and agreed to employ Adam as branch manager for a period of one year. According to TTMI, however, the JG Group only purchased Adam’s book of business and not the branch. TTMI’s position as to who owned the Huntsville branch prior to that date is unclear. The sworn evidence of Thomson is only that it “gained control and ownership of the Huntsville branch” after Adam sold his book of business. Appended to the affidavit of Geisler is a copy of an agreement in which it is indicated that TTMI is not responsible for Huntsville branch obligations “that precede its’ (sic) involvement, i.e. prior to October 1, 2003”. However, a letter dated June 17, 2004 written by Thomson, a copy of which is appended to the affidavit of Steven Donald, president of Assante, refers to the Huntsville branch office as “his” and to having exclusive rights to a territory including Huntsville, for a period of time preceding 2003.

[11] According to the JG Group, after it purchased the Huntsville branch, it was forced to align that branch with the North Bay branch because Jenner and Geisler were advised by Assante in December of 2003 that they could not be aligned with more than one branch manager (i.e. Adam in Huntsville and TTMI’s branch manager in North Bay). Therefore, the JG Group entered into the agreement appended to Geisler's affidavit ("the 2003 Agreement"), backdated to October of 2003, which required them to report only to the North Bay branch manager and gave TTMI the right to the overrides from the Huntsville branch. For some reason not explained in the evidence, however, that requirement “disappeared” with the execution of the 2004 Agreement.

[12] What is clear from the evidence is that from at least October of 2003, Huntsville was viewed as a sub-branch of the North Bay branch. The evidence of both TTMI and the JG Group is that TTMI received revenue from the Huntsville branch in the year leading up to the signing of the 2004 Agreement, although they disagree on the amount. Why that revenue stream stopped is another source of disagreement between the parties.

The 2004 Agreement

[13] According to TTMI, the 2004 Agreement had as it genesis certain misconduct on the part of Jenner and Geisler. TTMI alleges that these defendants caused strife within the Assante group by “poaching” advisors and clients from the Assante branch in Bracebridge. How that misconduct resulted in TTMI agreeing to transfer “operational and ownership control” of the Huntsville branch to the JG Group remains unexplained in TTMI`s evidence.

[14] The JG Group`s evidence on the issue is no more helpful. While denying any misconduct on their part, Geisler, with whom Jenner agrees, alleges that they entered into the 2004 Agreement under the threat of a suspension made by the president of Assante at the time. This still does not explain why they were given control of the Huntsville branch.

[15] In my view, the most likely reason that TTMI and the JG Group entered into the 2004 Agreement emerges from the contents of the Thomson letter to Assante of June 17, 2004, referred to above. In the first paragraph, Thomson wrote:

Assante Capital Management Ltd. (“Assante”) has recently advised me that Ian Jenner and Jamie Geisler are seeking to convert my branch office in Huntsville to a stand alone branch owned by Messrs. Jenner and Geisler and subsequently open competing satellite offices in North Bay and Powassan….Assante has asked that I provide my view with respect to this development.

Throughout the remainder of that letter, Thomson set out his strong opposition to the plan.

[16] I conclude that the 2004 Agreement granted to the JG Group, either for the first time or for the second time, the operational control of the Huntsville branch, in exchange for which, TTMI secured, or at least believed it had secured, protection against the JG Group opening competing satellite offices in North Bay and Powassan. Clauses 2(g), (h) and (i) of the agreement read:

(g) During the term of this agreement and for a period of one year following the termination of this agreement, for whatever reason, JGA (defined elsewhere in the agreement as 1331503), Jenner and Geisler shall not individually, collectively, directly or in conjunction with any agent, corporation, joint venture, or entity, establish or participate in the establishment of any office, branch, or entity whatsoever within a 200 mile northern, eastern, or western direction, and a 40 mile southern direction, of any office that is currently or may be operated by TTMI. Should this agreement terminate subject to a ruling by the arbitrator(s) referred to in section three, then during the one year period following the ruling JGA, Jenner and Geisler will be permitted by TTMI to operate out of the current Powassan and North Bay locations, at current market rent. For greater clarity, this clause shall not affect or restrict the right of JGA, Jenner and Geisler to operate the Huntsville Branch pursuant to the terms of this agreement.

(h) Provided that TTMI does not terminate this Agreement and or is not in breach of this Agreement, at no time and under no circumstances shall JGA, Jenner or Geisler, or any of their employees, associates or affiliates in any way cause or effect either directly or indirectly any existing account(s) (as of the effective date December 1, 2004) which are included under the representative codes identified as 6670, 7660 and 9670 to be transferred to any other representative codes whatsoever, save and except for those clients who normally reside within the District of Muskoka. Any breach is to be determined and resolved by an arbitrator(s)[^1].

(i) During the term of this agreement and for a period of one year following the termination of this agreement, for whatever reason, JGA, Jenner and Geisler shall not whether directly or indirectly, individually, collectively, or in conjunction with any agent corporation, joint venture, or entity, solicit or retain the services of any employee, agent or financial advisor that is or may be in a working/employee relationship with TTMI, save and except for (certain people not relevant to this matter).

[17] In addition, clauses 2(c) and (e) require the JG Group to continue maintain and to process all gross commissions associated with representative codes 6670, 7670 and 9670 through the North Bay branch.

[18] Clause 5(d) of the 2004 Agreement provides:

The term of this Agreement shall continue indefinitely, and there shall be no amendments to this Agreement unless such amendments are made in writing and agreed to by all parties. This Agreement is the complete Agreement between the parties.

[19] Clause 3 deals with the manner in which the agreement may be terminated. It provides in (a):

Where any party is in breach of any term of this Agreement the non breaching (sic) shall notify the breaching party in writing setting out the details of the breach and detailing the steps they require the breaching party to take to rectify such breach. Where the breaching party does not rectify the breach within ten days the non-breaching party may at its sole option terminate this agreement.

The Defection

[20] The 2004 Agreement did not serve to permanently mend any fences between TTMI and the JG Group. According to Geisler, he and Jenner were “incensed” at Thomson’s conduct leading up to the 2004 Agreement and it is reasonable to infer that they have not been happy with it since. Geisler alleges that TTMI promotes itself and Thomson at the expense of the other financial advisors working at TTMI branches, which TTMI and Thomson vehemently deny.

[21] In or about June of 2011, the Jenner and Geisler were considering whether to join Manulife Financial, a competing financial advisory service. Geisler deposes that Grannary and Malcolm approached him later about the possibility of also leaving TTMI. And so it was that by June of 2012 the four of them had decided to leave TTMI and join Manulife. In August, they entered into a lease for premises located at 222 McIntyre Street West, which Jenner described during cross-examination on his affidavit as being a “good three iron” golf shot away from TTMI’s North Bay office.

[22] None of the defendants advised TTMI or Assante of their intentions. However, in or about September, Assante learned of the planned defection. Rather than alert its long-time representative in North Bay, rely on the non-competition and non-solicitation clauses contained its own agreements with each of the defectors, or offer assistance to TTMI in competing against them - in other words, to try “to beat them” - Assante decided to “join” them. It agreed to allow the JG Group to open another Assante branch office just down the street from the TTMI North Bay branch office and kept that agreement secret until Thomson discovered it for himself.

[23] On October 15, 2012 that is exactly what happened. Thomson went to the North Bay branch office to find that all four advisors had emptied out their offices and the work stations of their assistants over the weekend. Of course, he was shocked. His shock turned to anger when he learned of the role that Donald had played in the defection, who did little to assuage those feelings by then telling Thomson that Assante had done what it did in TTMI’s best interests.

[24] This action was commenced by way of a Notice of Action issued on November 2, 2012. The present motion was first made returnable on November 16, but was adjourned to permit cross-examinations on the affidavits. In the motion, TTMI requests “interim” injunctions” pending the trial (which, in my view are more property called “interlocutory” injunctions: see RJR-MacDonald Inc. v. Canada (Attorney General), infra, at paragraph 42; Robert J. Sharpe, Injunctions and Specific Performance, looseleaf, (Toronto: Canada Law Book, 2012, at paragraph 2.15), prohibiting the JG Group from breaching the clauses of the 2004 Agreement referred to above. In addition, it requests a similar order against Assante requiring it to adhere to clause 4(a) of the 2004 Agreement, which reads, under the heading, “Assante Responsibilities”:

(a) Assante shall take all steps necessary to implement and to facilitate the completion of the obligations imposed on the parties to this agreement, including completing all of the necessary requirements to allow for the transfer of the Huntsville Branch to JGA, Jenner and Geisler or its written designate.

ISSUES

[25] The defendants argue that the plaintiff must satisfy the three part test laid out in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, modified as a result of the fact that TTMI seeks to enforce restrictive clauses against the JG Group and the relief sought against Assante is a mandatory (v. prohibitive) injunction. Thus, they submit that TTMI must establish:

(a) that it has a strong prima facie case;

(b) that it will suffer irreparable harm if the injunction is not granted; and

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

They argue that TTMI cannot establish any of these three criteria.

[26] In addition, Assante argues that the relief sought against it would result in an order that is too vague in light of the fact that a breach of the order would entail criminal-like sanctions.

ANALYSIS

Strength of the Plaintiff's Case

[27] In RJR-MacDonald, the Supreme Court of Canada held that a party seeking an interlocutory injunction must demonstrate (at paragraphs 77 to 80):

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

(b) that it will suffer irreparable harm if the injunction is not granted; and

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

[28] Ordinarily, it is not necessary to conduct "a prolonged examination of the merits" under the first part of the test. However, there are exceptions to this rule. The JG Group submits that one of them applies to this case, because TTMI seeks to enforce a restrictive covenant. It relies in support of that proposition on a line of cases including Global Knowledge Network (Canada) Inc. v. ESI International Inc., 2009 CarswellOnt 8163 (Ont. S.C.) and Second Cup v. Niranjan, 2007 CarswellOnt 5285 (Ont. S.C.). In these cases, it was held that the plaintiff must show more than simply that there is a serious issue to be tried where it seeks to enforce a restrictive covenant. Instead, the plaintiff must show that it has a strong prima facie case, i.e. that it is "almost certain" that the plaintiff will succeed at trial (: Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 34862 (ON SC), 2002 CarswellOnt 3653 (Ont. S.C.), at paragraph 8).

[29] The ratio in these cases is based on the principle that a covenant in restraint of trade is prima facie unenforceable, unless it is demonstrated that the covenant is reasonable between the parties and with reference to the public interest (: see Elsley et. al. v. J.G. Collins Insurance Agencies Ltd., 1978 7 (SCC), [1978] 2 S.C.R. 916, at paragraph 13; Tank Lining Corp. v. Dunlop Industrial Ltd. (1982), 1982 2023 (ON CA), 40 O.R. (2d) 219 (Ont. C.A.)). The party seeking to enforce the covenant has the burden of establishing the former. Once established, the party resisting enforcement has the burden of establishing the latter (: Elsley, supra, at paragraphs 13 and 26).

[30] In order to demonstrate that a restrictive covenant is reasonable, the party seeking to enforce it must demonstrate that it is reasonable in geographic scope, in temporal scope, and in the scope of activity is prohibits (: Elsley, supra, at paragraph 15; GDL Solutions Inc. v. Walker, 2012 ONSC 4378, at paragraph 52).

[31] In my view, TTMI has demonstrated that it has a strong prima facie case with respect to the geographic scope of the clauses in question. The evidence is consistent that investment advisors in Northeastern Ontario draw on a broad catchment basin for clients. TTMI has branch offices as far north as New Liskeard and as far west as Sudbury. The JG Group itself works a territory that extends at least 125 km to the south of North Bay. There is nothing unreasonable in the circumstances about the geographic scope of the clause, in my opinion.

[32] I am not able to say the same, however, with respect to the temporal scope of the clauses. The restrictive clauses at issue here are indefinite. They end one year after the 2004 Agreement is terminated. The agreement provides that it can only be terminated in the event of a beach, and only at the option of a non-breaching party. There is no evidence that the 2004 Agreement has yet been terminated. Thus, unless TTMI breaches the agreement or exercises its right to terminate because of the JG Group’s breach, the restrictive clauses will continue indefinitely. In my view, TTMI has not established a strong prima facie case in this regard.

[33] However, the strong prima facie case test is not the only one that may be applicable. There is another line of cases in Ontario, which hold that a plaintiff seeking to enforce a restrictive covenant need only establish a serious issue to be tried with respect to it. This line of authorities was referred to recently by C.J. Brown, J. in GDL Solutions Inc. v. Walker (supra, at paragraph 34), where he wrote:

In contrast, another line of Ontario cases has not insisted that parties seeking to enforce a restrictive covenant make out the strong prima facie case standard. Rather, they have simply found that where a strong prima facie case can be made out, there is no need to give great regard to the second and third parts of the injunction test. Where only a serious issue to be tried can be established, these courts have found that they must give greater regard to the second and third parts of the injunction. (emphasis added)

[34] I agree with Brown, J. (supra, at paragraph 37) that this line of cases does a good job of reconciling conflicting jurisprudence in Ontario and in striking a balance between the competing principles in cases of this nature. For that reason, I prefer it over the competing authorities.

[35] One of the authorities referred to in GDL Solutions was a decision relied upon by counsel for the JG Group before this court, namely Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., [2008] O.J. No. 190, leave to appeal refused, [2008] O.J. No. 1707 (Div. Crt.), in which Pattillo, J. quoted the following passage from the decision in Canada (Attorney General) v. Saskatchewan Water Corp., 1991 3951 (SK CA), [1991] CarswellSask 235 (Sask. C.A.), at paragraph 36 (paragraph of 35 of Van Wagner):

In summary, we find that to apply the appropriate test where an interlocutory injunction is sought on the basis of breach of a negative covenant the judge should use the following approach. To satisfy the first test he must undertake a preliminary and tentative analysis of the strength of the case put forward by the plaintiff. Is it overwhelming? Is it a strong prima facie case? Is it a prima facie case? Is it less than a prima facie case? Similarly he must make a tentative and preliminary assessment of the possible defences which may be offered, all with a view to estimating the extent to which those defences reduce the strength of the case initially shown by the plaintiff. At the end of that process the judge must answer the question: Is the plaintiff left with at least a prima facie case? If the answer is yes, the first test has been satisfied. As for the second and third tests, the strength of the case that the plaintiff is left with will determine bow heavily the balance of convenience and irreparable harm must be weighed in the context of negative covenants. If the plaintiff is left with a strong prima facie case approaching a plain and uncontested breach of a clear covenant then an injunction ought to be granted without much regard to the balance of convenience and irreparable harm. If the plaintiff is left with only a prima facie case then more regard needs to be had to the balance of convenience and irreparable harm. (emphasis added)

[36] Initially, it appears that there is a discrepancy between the ratio in Saskatchewan Water Corp. and the authorities referred to in GDL Solutions. The court in Saskatchewan Water Corp. referred to the requirement that the plaintiff demonstrate at least "a prima facie case", whereas Brown, J. and the line of cases upon which he relied in GDL Solutions make reference to the requirement of "a serious issue to be tried". In my opinion, the two are equivalent. In RJR-MacDonald, the court held that the serious issue to be tried test meant only that the plaintiff's case was neither frivolous nor vexatious (RJR-MacDonald, at paragraph 50). The phrase "prima facie case" has been held to mean simply that the plaintiff has adduced evidence which, if accepted, may (not will) result in success (: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3rd ed. (Markham, Ont.: LexisNexis Canada, 2009) at paragraphs 3.35 to 3.43). Where a plaintiff demonstrates that it has a prima facie case, it cannot be said that the case is either frivolous or vexatious. That is the situation with respect to the temporal scope of the restrictive clauses at issue in this case, in my view.

[37] An indefinite restriction on trade is not, per se, unreasonable. The jurisprudence makes a distinction between clauses arising in an employment situation and those that arise in the sale of a business. Inequality of bargaining power and the absence of a payment for goodwill, in the first instance, and the need to make a business saleable, in the second, mean that a more rigorous test is applied in the former situation than in the latter when determining the reasonableness of a restrictive covenant (: Elsley, supra, at paragraphs 15 to 17; KRG Insurance Brokers (Western), Inc. v. Shafron, 2009 SCC 6, [2009] 1 S.C.R. 157, paragraphs 18 to 23).

[38] As counsel for the JG Group pointed out in his submissions, this case does not fit neatly into either category. Obviously, this is not an employment contract. Equally clearly, it is the opposite of the usual sale situation, in which the vendors, not the “purchasers” (I use that term loosely) are the ones agreeing not to compete. However, the uniqueness of this situation is why, in my view, there is a serious issue to be tried. It would not be unreasonable for a court to conclude at trial that TTMI transferred the right to earn income indefinitely from the Huntsville branch in exchange for an indefinite promise not to compete and that, therefore, the clause is reasonable in time. This was the result, at the interlocutory stage, in St. Clair Group Investments Inc. v. Seater, [1996] O.J. No. 4393 (Ont. Ct. (Gen. Div.)), in which a permanent agreement not to compete was held to be reasonable in the context of the sale of a business and, therefore, an injunction was issued pending trial. In the case at bar, Thomson has deposed that the JG Group has likely earned in excess of $1m since it took over the Huntsville branch. That may very well make the indefinite nature of the clauses in this case reasonable. I would not, therefore, deny the plaintiff of the relief requested on that basis.

[39] I turn now to the final aspect of reasonableness, namely, the scope of the activity that is restricted. In my opinion, TTMI has failed to demonstrate that clauses 2(g) and (h) are reasonable in this regard, no matter what the test. These clauses prohibit the JG Group from engaging in any "office, branch, or entity whatsoever" within the restricted territory, from using codes that would prevent TTMI from earning income with respect to clients of the JG Group from the North Bay and Powassan branches (except for clients who normally reside within the District of Muskoka, where the Huntsville branch is located), and from retaining the services of virtually anyone who may be working for TTMI (again, with a limited exception).

[40] I do not accept the argument made on behalf of the JG Group that clause 2(g) is too ambiguous to enforce. It is clear from the agreement as a whole and the context within which it was created that these terms refer only to investment advisory offices and not to any other business. The clause makes specific reference to the North Bay, Powassan and Huntsville branches, which engage only in the business of investment advising. Moreover, there is no evidence of any issue having arisen between the parties concerning the meaning or scope of any of these clauses from the date of the 2004 Agreement until this motion was brought, nearly eight years later.

[41] Nonetheless, TTMI has not demonstrated that such a broad prohibition is reasonable between the parties. Clauses 2(g) and (h) preclude any member of the JG Group from working even with Manulife, or for any client whose transactions were made under the identified codes (subject to the geographical and other terms), even if that client went to Manulife long before anyone from the JG Group ever got there, as long as the 2004 Agreement was in effect and for one year thereafter. Clause 2(i) precludes the JG Group from retaining the services of anyone who works for TTMI, even a receptionist, and even if they were never solicited by the JG Group to do so. There is no evidence as to why such broad restrictions were a necessary component of the transaction. The only evidence before this court is that the JG Group gained the right to receive income from the Huntsville branch in exchange for agreeing to these terms. Therefore, in my view, TTMI has failed to demonstrate even a serious issue to be tried with respect to these clauses and the injunction ought not to be issued with respect to them.

[42] As a result of my ruling with respect to the relief requested against the JG Group, I do not believe that the order sought against Assante should be made. It would not be appropriate to require Assante to "take all steps necessary to implement and facilitate" the obligations of the JG Group under the terms of an agreement that is not being adhered to by the JG Group.

Irreparable Harm

[43] Failure to satisfy the first part of the RJR-MacDonald test is fatal to the plaintiff's motion. For that reason, I need not address the other two parts of the test. However, considerable time and attention was devoted by the parties to these issues. Therefore, and in the event that I have committed any error that would allow a reviewing court to interfere with my discretion, I will address the issues of harm and the balance of convenience.

[44] Most of the cases that have applied the strong prima facie case test have also held that, once that test is satisfied, considerations of irreparable harm and balance of convenience are largely unnecessary (: see, for example, Montreal Trust Co. v. Montreal Trust Co. of Canada, 1988 3020 (BC CA), [1988] B.C.J. No. 410 (B.C.C.A.); Bank of Montreal v. James Main Holding Ltd., [1982] O.J. No. 1245 (Div. Ct.); Key Pos Business Systems Inc. v. Singh, [2008] O.J. No. 1791 (Ont. S.C.J.) As noted by Brown, J. in GDL Solutions, those cases which have applied the lower threshold have also given greater consideration to the other two RJR-MacDonald factors (: see Edward Jones v. Voldeng, 2012 BCCA 195; Van Wagner, supra).

[45] As to the meaning of "irreparable harm", the court wrote in RJR-MacDonald (at paragraph 59):

“Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where the party will be put out of business by the court’s decision (R.L. Crain Inc. v. Hendry (1998), 1988 5042 (SK QB), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation … (emphasis added)

[46] The defendants argue that TTMI made a completely useless bargain for itself with respect to clauses 2(g), (h) and (i) of the 2004 Agreement. They argue that TTMI has no clients, no “goodwill”, and no “brand” to protect. They submit that TTMI is just a management company with only money, not goodwill, to lose by the actions of the defendants. In my view, this argument misses the mark. In making it, the defendants are confusing the concepts of irreparable harm, a damages issue, with the concept of a cause of action. TTMI does not have to demonstrate that it can sue for loss of goodwill, only that it can sue on a covenant, the breach of which will cause it harm. It is irrelevant to whom the goodwill or the clients of the branch actually belong. TTMI benefits from the goodwill generated by the agents who work there. If the actions of the JG Group impair the ability of the agents at TTMI to attract or to hold on to clients, TTMI will suffer damages arising from the loss of goodwill. As the court held in RJR-MacDonald, harm is irreparable where a party will suffer a permanent market loss or irrevocable damage to its business reputation.

[47] Evidence of irreparable harm must be clear and not speculative (: Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 34862 (ON SC), [2002] O.J. No. 4116 (Ont. S.C.J.), at paragraph 18). The defendants argue that the only evidence before this court that any goodwill will be lost is the bald assertion of Mr. Thompson to that effect in his affidavit. In my view, it requires no speculation to conclude that the present clients of TTMI's North Bay branch will be confused by the fact that a competing Assante branch has opened up a block away. Nor does it require any speculation to conclude that they will wonder about the viability of the present branch or its relationship with Assante. This is common sense. Regrettably, common sense appears in this case to have taken a back seat to the desire to retain a certain share of the market.

[48] The JG Group also argued that little or no goodwill will be lost by TTMI as a result of the fact that it has a much larger presence in the North Bay marketplace, including the size of its premises and the extent to which it advertises. This, too, misses the mark. It fails to recognize that the more the TTMI branch, or any of its agents, do to promote the Assante brand, the more they help their competitors down the street. The harm done to TTMI is not avoidable by the size of its presence or reparable by efforts to increase that presence.

[49] For these reasons, it is my view that TTMI will suffer irreparable harm as the result of the actions of the defendants.

Balance of Convenience

[50] This part of the RJR-MacDonald test involves a consideration of which of the two sides will suffer the greater harm from the granting or refusal of the interlocutory injunction. As the court noted in RJR-MacDonald, “many interlocutory proceedings will be determined at this stage” (: RJR-MacDonald, supra, at paragraph 62). This is true in the present case.

[51] As the court also noted in RJR-MacDonald, the factors which must be considered in assessing the balance of convenience are many and will vary from case-to-case (at paragraph 63). These factors include the effect of granting the injunction on the clients of both sides of the dispute (: Edward Jones v. Voldeng, supra, at paragraph 46). The existence of a negative covenant may also be considered under this branch of the test (: Edward Jones v. Voldeng, supra, at paragraph 42).

[52] The JG Group argues that it will suffer greater harm than will TTMI if the injunction is granted. The JG Group would undoubtedly suffer some harm if the injunction was granted. I need not determine how much, in my view, in light of my conclusion that the granting of the injunction will do little or nothing to stop the harm that will be suffered by TTMI. This is because the injunction will not prevent the competing Assante branch from opening. Malcolm and Grannary are not bound by the 2004 Agreement and, from the evidence that a lease has been signed and renovations undertaken, it is reasonable to infer that they will be working there even if Jenner and Geisler are not. This fact tips the scales against granting the relief sought under this part of the test, in my opinion.

conclusion

[53] For the foregoing reasons, TTMI’s motion is dismissed.

COSTS

[54] If the parties are unable to reach agreement with respect to the issue of costs, they may make written submissions of no more than five pages in length, excluding authorities and attachments, as follows:

(a) The defendants shall have 20 days from the date of the release of these reasons to serve and file their submissions;

(b) The plaintiff shall have 10 days following receipt of the last of the aforementioned submissions within which to do likewise; and

(c) The defendants shall have 10 days thereafter in which to file any brief reply that may be necessary.

Ellies, J.

Released: 20130111

Ted Thomson Management Inc. v. 1331503 Ontario Limited et. al., 2013 ONSC 264

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TED THOMSON MANAGEMENT INC.

- and -

1331503 ONTARIO LIMITED operating as JENNER GEISLER, IAN JENNER, JAMIE GEISLER, ASSANTE CAPITAL MANAGEMENT LTD., WAYNE MALCOLM and DAVID GRANNARY

REASONS FOR decision

Ellies, J.

Released: 20130111

[^1]: Clause 3 requires that disputes be settled by arbitration, but only where the alleged breaching party makes that request. No such request has been made and none of the parties to this motion raised the issue of jurisdiction.