ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-1438-SR
DATE: 20140102
BETWEEN:
A BIG MOBILE SIGN COMPANY INC.
Plaintiff
– and –
JANICE MARSHALL a.k.a JANICE STONER and CURBEX LTD.
Defendants
C. Salazar, for the Plaintiff
D. Van Sickle for the Defendant Janice Marshall a.k.a. Janice Stoner
E. Gionet, for the Defendant Curbex Ltd.
HEARD: December 31, 2013
HEALEY J.
Nature of the Motion
[1] The plaintiff seeks injunctive relief against Janice Marshall to prevent her from contacting the plaintiff's customers and/or barring her from operating or otherwise being involved in a mobile sign company within 100 miles of 9 Alexander Street, Brampton, Ontario.
[2] Ms. Marshall was served with this motion on December 23, 2013 and Mr. Van Sickle sought an adjournment in order to be in a position to properly respond. He was able to file a brief responding affidavit and book of authorities on the date of the motion, but sought a two-week adjournment to prepare more fulsome material. The motion for the adjournment was denied, for the reasons that injunctive relief may be granted on an ex parte basis, and the material disclosed that the plaintiff's economic relations with its customers were being affected. I also determined that I would need to hear full argument in order to consider the terms of any adjournment, and accordingly the motion went forward on the basis that this court would consider making a temporary order if warranted, but that any such order could be altered, extended or terminated once the defendant had an opportunity to file a full response and make full argument. Also, counsel for the plaintiff suggested that on the return date he may also seek a determination of the validity of the non-competition covenants under Rule 21.
The Facts
[3] Marshall and the plaintiff entered into a License Agreement ("the Agreement") on October 24, 2008 for a 5 year term (the "Term"), expressly required to expire on October 23, 2013 unless earlier terminated in accordance with the Agreement. The purpose of the Agreement was to permit Marshall to rent mobile signs to customers in the geographic territories of Milton and Georgetown, using the plaintiff's trade name.
[4] Paragraph 4.3 of the Agreement provides that expiration of the Term will result in the following:
(a) Licensee shall cease the use of the Trade Name.
(b) The non competition provisions of this Agreement shall become effective.
(c) On the expiration or earlier termination of the term of this agreement ABMSC shall have the first right to purchase all the Licensee's sign boards, lettering and related equipment.
[5] The terms of the Non-Competition Covenant are set out in Schedule B to the Agreement. The Non-Competition Covenant expressly provides that:
Marshall acknowledges that the terms and conditions of the restrictive covenants are reasonable for the protection of the plaintiff's business, including the protection of confidential information and goodwill;
Marshall acknowledges that the consideration provided for in the Agreement is sufficient to fully compensate her for agreeing to such restrictions; and
in the event of a breach of the restrictive covenants by Marshall, the plaintiff shall be entitled to apply for injunctive relief in addition to other remedies.
[6] The Agreement provides for renewal for a period of three years only had the option of the plaintiff, with royalty fees to be renegotiated at the time of renewal.
[7] Pursuant to the Agreement, Marshall operated her business as A Big Mobile Sign Company (West) (hereafter “West”). This business name is required to be used by her pursuant to paragraph 3.2 of the Agreement, which prescribed this specific use of the plaintiff's trade name.
[8] While a potential extension was being negotiated after October 23, 2013, the plaintiff allowed Marshall to operate under the Agreement until a decision about renewal could be made. Ultimately, negotiations were unsuccessful and on November 28, 2013, Marshall delivered a letter advising that the Agreement would not be renewed. However, she attempted to dictate her own terms for terminating the Agreement.
The Law
[9] The three-part test to be applied in deciding whether to grant an interlocutory injunction is set out in RJR-MacDonald Inc. v. Canada, 1994 117 (SCC), [1994] 1 S.C.R. 311, 1994 CarswellQue, 120 at para. 48 as follows:
(1) whether the applicant has presented a serious issue to be tried or;
(2) whether the applicant would suffer irreparable harm if the application were refused; and
(3) an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.
[10] I accept the argument of Mr. Van Sickle that an injunction to enforce a restrictive covenant requires the plaintiff to meet the strong prima facie test standard: Quizno’s Canada Restaurant Corp. v. 145-0987 Ontario Corp., 2009 20708 (ON SC), 2009 CarswellOnt 2280 (S.C.J.) at para. 41, referring also to Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (Ont. S.C.J.); Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.J. No. 5298 (Ont. S.C.J.); 1259695 Ontario Inc. v. Guinchard, [2005] O.J. No. 2049 (Ont. S.C.J.); Kohler Canada Co. v. Porter, [2002] O.J. No. 2418 (Ont. S.C.J.). The granting of an injunction would effectively terminate Marshall's involvement in the mobile sign industry, pending any further decision that may be made on the enforceability of the restrictive covenants. In Quizno’s Canada, Perell J. explains his adoption of a "strong prima facie the case" to mean "a showing of a strong case with a high although not absolutely assured likelihood of success based on the material presently before the court": para. 42.
[11] On the evidence before me on the record, the plaintiff has demonstrated a strong prima facie case. Marshall has acknowledged the reasonableness of the terms of the restrictive covenants; although she stated that the Agreement was entered into without the benefit of legal advice, she does not give evidence that raises any grounds to set aside the Agreement. She has acknowledged receiving adequate consideration in exchange for her non-competition.
[12] The plaintiff presents evidence (Exhibit F to the affidavit of Wendy Bigalke) that Marshall has, after the failed negotiations, attempted to solicit a customer of the plaintiff for the purpose of future contracts, but with the a company that she planned to operate under the name Curbex. Curbex Ltd. is a competitor of the plaintiff. In e-mail correspondence sent by West to another potential customer on December 11, 2013 (Exhibit G to the affidavit of Wendy Bigalke), it was stated:
Effective 01 January we will no longer be trading under the name of A Big Mobile Sign.
Effective 01 January we will become Curbex. This permits us to provide a far superior product at the same price. It also allows us to offer a far wider range of products, ranging from signs to window & car motifs to business cards.
While these are the two examples that are in the evidence before this court, Marshall has provided evidence that she currently has 50 ongoing mobile sign rental contracts. Common sense suggests that she would likely have targeted more than these two individuals or entities while still operating under the plaintiff's trade name, with the intention to garner business for her own purposes. Further, a letter from the City of Burlington sets out a list of ten mobile sign permits for signs that were issued after October 23, 2013 to Marshall, those licenses having now been revoked at the request of the plaintiff because of Marshall's lack of authority to obtain them.
[13] Wendy Bigalke is a director and president of the plaintiff. Her affidavit also provides evidence that she has received information from a number of municipal offices that Marshall continues to secure or attempt to secure mobile sign permits in areas that are prohibited areas under the Agreement, and in other municipalities.
[14] In her affidavit, Marshall deposes that it was her understanding that under the terms of the Agreement, she would be permitted to retain clients that had been obtained by West directly during the Term. No explanation was given for the basis for that belief. Given the wording of the restrictive covenants, it is difficult to understand how she could have arrived at such an interpretation.
[15] There is clear evidence that she is attempting, at a minimum, to lure "West's" customers to continue to use her services after she is done operating under the plaintiff's trade name. But in fact, there are no "West's" customers. There is nothing in the Agreement that gives rise to any right on the part of Marshall to consider client lists her as her own property, or to retain customers after the termination of the Term. A straightforward reading of the Non-Competition Covenant makes clear that she is not to solicit or entice any of the plaintiff's customers for the provision of services which are the same as, or similar to, or competitive with the plaintiff within 100 miles of a certain point. Finally, the injunctive relief requested is no more intrusive than that required under the terms of the Agreement upon expiration of the Term. While her counsel argues that the terms of the Agreement and/or Non-Competition Covenant are ambiguous, rendering one or both unreasonable, I am unable to agree that ambiguity exists.
[16] The second element of the test is irreparable harm. This is addressed in part in paragraph 33 of the Bigalke affidavit, wherein she states:
The mobile sign business requires prompt and meticulous attention to client needs or they will go elsewhere to rent mobile signs. Every day that Marshall and/or Curbex continues to govern themselves as outlined above, in breach of the Agreement, causes irreparable harm to the plaintiff's reputation and business. Marshall and/or Curbex need to be stopped so that the plaintiff can attempt to restore its relationship with its customers.
[17] In addition, however, it is obvious that soliciting customers to divert business to an existing or potential competitor could have irreversible consequences for the plaintiff's business, and is exactly the type of harm that the restrictive covenants were intended to protect against. The plaintiff's goodwill, trade name and customers are only business assets and Marshall is using or attempting to use all of these assets to direct business to herself. The evidence shows that this element of the test has been satisfied.
[18] Considering the balance of convenience, the evidence presented by Marshall does not weigh in her favour. The financial repercussions to her from granting an injunction are not significant. Her evidence is that her total net profits in 2012 were $25,000, and she expects that her net profits for 2013 will be lower. She does not give evidence of how much she will earn if the 50 outstanding contracts are permitted to run their course in the next month or so, but based on the annual profit, the financial loss could not be significant. However, allowing her to continue to have ongoing contact with the plaintiff's customers enhances her opportunities to continue to solicit business.
[19] Marshall's evidence is that before November 28, 2013, West had already entered into numerous rental contracts with customers for December 2013 and January 2014, but has not done so since November 28, 2013. She wishes to continue to service the existing customers to the conclusion of the contracts. The Agreement does not provide for what is to occur to West's pre-existing rental contracts after the expiration of the Term. It is in part on ground that Marshall argues that there is ambiguity in the Agreement. Yet it is clear that this is something with which she concerns herself because she believes that some of those clients are hers, and/or are customers or potential customers open to solicitation from a new entity anticipated to be operated by her. She also raises the spectre of West being liable for breach of contract if she terminates rental agreements prematurely. There is no evidence that West is a legal entity capable of being sued. West is the name that the plaintiff permitted Marshall to use while carrying out business activities governed by the Agreement. Rental contracts entered into prior to November 28, 2013 were arguably entered into on behalf of the plaintiff under the terms of the Agreement, but any contracts entered into after that would have been entered into at Marshall's peril. Her evidence is that none were made after November 28, 2013, so her exposure to liability is low.
[20] The balance of convenience favours the injunction to ensure that Marshall does not continue to interfere with the plaintiff's customers, or to use the plaintiff's trade name to do so, and to help to ensure that she does not use the plaintiff's trade name to make derogatory comparisons to competitors as she is now doing.
Order
[21] For the foregoing reasons, this court orders:
Leave is granted for short service of the plaintiff's notice of motion and motion record;
An interim injunction shall issue prohibiting Janice Marshall from:
(i) operating or otherwise being involved in any way with a mobile sign company within 100 miles of 9 Alexander Street, Brampton Ontario (the "Prohibited Area");
(ii) operating in any way under the plaintiff's trade name "A Big Mobile Sign Company (West)" including obtaining mobile sign permits under the plaintiff's trade name; and
(iii) distributing advertising materials containing pictures of the plaintiff's mobile signs including name and contact information.
Janice Marshall shall forthwith remove all mobile signs rented and/or placed after November 28, 2013 within the Prohibited Area;
Janice Marshall shall forthwith provide to the plaintiff the list of all of their mobile sign customers located within the Prohibited Area, including all customer histories and contact information, as well as a list of all mobile sign customers currently operating under permits issued under the plaintiff's trade name;
This motion is adjourned to January 14, 2014 at 9:30 a.m. for a review of the injunction on further and better material;
The costs of this motion are reserved to the next appearance.
HEALEY J.
Released: January 2, 2014