COURT FILE NO.: CV-13-480142

DATE: 20141215

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sobeys Capital Incorporated, Plaintiff

AND:

Sentinel (Sherbourne) Land Corporation, Defendant

BEFORE: Pollak J.

COUNSEL: Krista Chaytor and Faren Bogach, for the Plaintiff

Mark Veneziano and Andrew Parley, for the Defendant

HEARD: December 5, 2014

ENDORSEMENT

[1] The landlord, Sentinel (Sherbourne) Land Corporation (“Sentinel”), moves for an injunction prohibiting its tenant, Sobeys Capital Incorporated (“Sobeys”), from continuing to deny Sentinel access to the property it has leased to Sobeys. The land is municipally known as 197 Front Street East, Toronto.

[2] Sentinel seeks a mandatory order allowing it access so that it can undertake geotechnical and environmental testing of the leased land, including drilling boreholes and installing monitoring wells, which the landlord maintains is a necessary next step in the process of obtaining approval to redevelop the leased land. Sentinel submits that it must finalize its redevelopment plans in order to deal with the Ontario Municipal Board (“OMB”).

[3] Sentinel brings this motion on an urgent basis because of a pre-hearing conference, scheduled for March 17, 2015, which it thinks will be a significant step towards redevelopment. Sentinel’s evidence is that it may be able to negotiate a settlement with the City of Toronto to either shorten the OMB hearing or eliminate the need for the hearing. However, it needs more information about the site before it can finalize its plans and possibly arrive at a settlement with the City.

[4] In addition, Sentinel seeks leave to amend its Statement of Defence and Counterclaim, dated July 5, 2013, to include:

• A declaration that Sobeys is required to cooperate with Sentinel’s redevelopment of the premises;

• A mandatory order permitting agents of Sentinel to enter the premises for the purpose of conducting geotechnical work, including, to drill boreholes and install monitoring wells; and

• Damages in connection with Sobeys’ breach of contract.

[5] Sobeys does not oppose, and I therefore grant, the above-noted amendment. However, the injunction remains contested.

[6] Sentinel’s position is that s. 35 of the lease agreement between Sentinel and Sobeys requires Sobeys to cooperate with, and not hinder, Sentinel’s redevelopment of the property. Section 35 of the lease is a negative covenant wherein Sobeys agrees that, with respect to any redevelopment of the leased land by Sentinel, it “shall not directly or indirectly, take any steps or omit to take any steps which would hinder any aspect of such redevelopment.” Sobeys is breaching the lease by denying Sentinel access to the premises for the requested environmental testing.

[7] Sobeys replies that as a tenant it is entitled to exclusive possession of the leased land and that such exclusive possession should not be interfered with unless clearly provided for in the lease: Naegele v Oke (1916), 31 DLR 501, 37 OLR 61 (Ont CA).

[8] It submits that:

• Section 35 of the lease does not grant access or change Sobeys’ right to exclusive possession of the premises; and

• Sentinel has not proven, on the basis of its evidence on this motion, that Sobeys is hindering the redevelopment.

[9] Both parties refer to the three-part test for interlocutory injunction outlined in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 (“RJR-MacDonald”):

• Is there a serious issue to be tried?

• Would the applicant suffer irreparable harm if the injunction is not granted?

• Is the balance of convenience in favour of the issuance of the injunction?

[10] The Court carved out certain exceptions to the above-noted test at para. 51 in RJR-MacDonald, including:

Two exceptions apply to the general rule that a judge should not engage in an extensive review of the merits. The first arises when the result of the interlocutory motion will in effect amount to a final determination of the action. This will be the case either when the right which the applicant seeks to protect can only be exercised immediately or not at all, or when the result of the application will impose such hardship on one party as to remove any potential benefit from proceeding to trial. Indeed Lord Diplock modified the American Cyanamid principle in such a situation in N.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294, at p. 1307:

Where, however, the grant or refusal of the interlocutory injunction will have the practical effect of putting an end to the action because the harm that will have been already caused to the losing party by its grant or its refusal is complete and of a kind for which money cannot constitute any worthwhile recompense, the degree of likelihood that the plaintiff would have succeeded in establishing his right to an injunction if the action had gone to trial is a factor to be brought into the balance by the judge in weighing the risks that injustice may result from his deciding the application one way rather than the other.

[Emphasis added]

[11] The parties’ positions differ with respect to what criteria the Court should consider when assessing Sentinel’s motion.

[12] Sentinel submits that it only needs to show that its motion is neither frivolous nor vexatious. Sobeys disagrees and relies on the “exceptions” referred to above.

[13] Sobeys also submits that the legal rights of the parties under the lease cannot be determined on this motion because there is insufficient evidence; Sentinel has not met the test for a permanent injunction: 1711811 Ontario Ltd. v. Buckley, 2014 ONCA 125, at paras 77-80, citing Cambie Surgeries Corp. v. British Columbia (Medical Services Commission), 2010 BCCA 396. With respect to this submission, the Court noted at the hearing that it lacked sufficient evidence to rule on the merits of Sentinel’s motion. However, Sentinel took the position that the Court required no further evidence on this issue.

[14] The first issue before the Court is to determine whether this is a prohibitive injunction or a mandatory order.

[15] Sentinel argues that what it seeks is a prohibitive injunction, and not a mandatory order. It seeks an order requiring Sobeys to act in accordance with the lease and not hinder Sentinel’s redevelopment efforts.

[16] Sobeys, however, disputes this characterization and submits that Sentinel is not seeking to prevent it from doing something, but instead is requiring Sobeys to give the landlord a right of access to the leased land. It emphasizes paragraph 15(d) of the Amended Statement of Defence and Counterclaim, which requests a “mandatory order” for Sobeys to give Sentinel access to the leased land to drill boreholes in the floors and install monitoring wells.

[17] Sobeys emphasizes the differences between a prohibitory injunction and a mandatory order. A prohibitory injunction prohibits action, whereas a mandatory order forces action to be taken: Canadian Tire Corp. v. Dufrat (1993), 108 DLR (4th) 363, 108 D.L.R. (4th) 363 (Ont Gen Div) at para. 29 (“Dufrat”).

[18] Sobeys argues that in this case, because the request is for a mandatory interlocutory injunction, the onus on Sentinel should be higher. The Court must ask whether Sentinel’s case is “unusually strong and clear.” Sobeys relies on jurisprudence stating that if a mandatory order is sought, the threshold is more strenuous than the threshold for prohibitive injunctions, even if a moving party bases its claim on a negative covenant: Alltricor Financial Management Inc. v. Nu-Port Homes Inc. (2003), 7 RPR (4th) 33, 119 A.C.W.S. (3d) 643 (ONSC) at paras 11-13; Dufrat at para 29; Robert J Sharpe, Injunctions and Specific Performance 4th ed (Toronto, ON: Canada Law Book, 2012) at para 1.580 (“Sharpe”).

[19] I find that the nature of the order Sentinel seeks is mandatory. This Court would be ordering Sobeys to “take action,” i.e. to allow Sentinel access to its premises. I further find that the nature of the order is final. Once access is ordered, the relief sought by Sentinel in the action would already be granted. Given these findings, my assessment of the merits of Sentinel’s claim becomes a very important factor in determining whether Sentinel should be granted the relief it seeks.

[20] Both parties relied on Sharpe at pages 2-29 to 2-31. I find that the following summary with respect to the issue of the Court’s assessment of the merits of Sentinel’s case is very helpful in this case:

It is suggested that the position may be summarized as follows. The weight to be placed upon the preliminary assessment of the relative strength of the plaintiff’s case is a delicate matter which will vary depending upon the context and circumstances. As the likely result at trial is clearly a relevant factor, the judge’s preliminary assessment of the merits should, as a general rule, play an important part in the process. However, the weight to be attached to the preliminary assessment should depend upon the degree of predictability which the factual and legal issues allow. If the judge is of the view that the plaintiff is unlikely to succeed, but cannot say that the claim is frivolous or vexatious, he or she should still go on to consider the other factors, rather than dismiss the application at the threshold. This is a positive and helpful aspect of the Cyanamid case which should not be forgotten. However, the judge’s negative impression of the plaintiff’s chances of ultimate success should be taken into account, along with all other considerations. By the same token, even if the plaintiff’s case looks very strong – a factor which should definitely weigh in his or her favour – the other factors should still be considered. If assessment of the merits is impracticable because of conflicting evidence or questions of credibility, the matter will have to be decided solely on the basis of the balance of convenience and the irreparable harm factors. In certain situations, the issue is not balancing risks but deciding the case in a final way. In those cases, the balance of risk approach should be abandoned as inappropriate. If it is apparent, as a practical matter, that the interlocutory injunction will be the final determination of the dispute, then the judge must make the best of a difficult situation and base the decision solely on an assessment of the merits.

[21] This summary is consistent with the jurisprudence on this issue and confirms once again that the Court’s evaluation of the merits of Sentinel’s claim is important.

Assessment of the Merits of Sentinel’s case

[22] As mentioned above, Sentinel relies on s. 35 of the lease, which provides:

The Tenant acknowledges and agrees that during the Term (and any renewals or extensions thereof), the Landlord or Glenvale intends to redevelop the Premises with or without the additional lands surrounding the Lands for mixed uses, including without limitation, commercial, residential and retail. The Tenant hereby agrees with the Landlord and Glenvale that the Tenant will cooperate with the Landlord and Glenvale in respect of such redevelopment and shall not directly or indirectly, take any steps or omit to take any steps which would hinder any aspect of such redevelopment, including without limitation, opposing or lobbying against any applications made to any relevant governmental authority for zoning, planning and any other use, provided any application includes a food use similar to the Tenant's current use.

[Emphasis added]

[23] Sobeys argues that Sentinel interprets s. 35 of the lease out of context to create a right of access that does not otherwise exist pursuant to the lease. It submits that the effect of including specific examples in s. 35 restricts the general language preceding the examples. Although the section provides that Sobeys should not take steps to oppose or lobby against any applications made by Sentinel with respect to zoning or planning issues, there is no language in s. 35 to support the parties’ intention to limit Sobeys’ right to exclusive possession and to give Sentinel unrestricted access during the “redevelopment” and the term of the lease. It is submitted that such an interpretation of the lease is not commercially reasonable.

[24] I agree with Sobeys’ submission and I find that s. 35 cannot reasonably be interpreted to give Sentinel the right of access that it seeks.

[25] Sentinel relies on Ostry v. Warehouse on Beatty Cabaret Ltd. (1992), 21 R.P.R. (2d) 1, 30 A.C.W.S. (3d) 1203 (S.C.), wherein the Court considered the provisions of a lease in which the landlord was expressly given the right to perform repair work at any time. The Court held that in light of such a clear provision, the landlord had to be given access to perform the repair work. There is no language in this lease to support the granting of such a clear right. I therefore find that Sentinel does not have a good case on the merits. Rather, its case is weak on the merits.

[26] Additionally, as noted above, Sobeys submits as an alternate argument that Sentinel has not adduced evidence proving that Sobeys is “hindering” Sentinel’s redevelopment. I agree and find that there is insufficient evidence for the Court to make a proper assessment on this issue.

[27] Sobeys further submits that Sentinel has no case whatsoever, such that the lowest threshold has not even been met. Although I agree that Sentinel’s claim on the merits is weak, I find it neither frivolous nor vexatious. However, I do find Sentinel’s case weak enough that it is distinguishable from the jurisprudence stating that, when there is a strong case on the merits, the factors of irreparable harm and balance of convenience can be given less weight. Sentinel’s weak case does not meet the high threshold required for a mandatory order and, further, does not meet the threshold required if this interlocutory injunction motion is determinative of the merits of Sentinel’s case.

Irreparable Harm

[28] Sentinel argues it will suffer irreparable harm without the injunction for the following reasons:

• It cannot finalize the design features including parking and number of residential and commercial units without information on the soil and geotechnical conditions.

• It cannot achieve a final settlement or resolution, or proceed with an application before the OMB on the merits, as the design features may change due to the results of the environmental testing.

• It could be in the untenable and awkward position of settling with the City of Toronto and all interested parties and having to change its design – thus resulting in having to re-start the whole process to obtain approval.

• It cannot obtain final approval for the redevelopment project as MOE approval cannot be provided without the risk assessment which cannot be completed without the environmental testing.

[29] Sobeys submits that Sentinel’s evidence does not support a finding of irreparable harm and submits that irreparable harm refers to the nature, and not the extent, of the harm. Irreparable harm cannot be compensated for with monetary damages and cannot be remedied.

[30] Sobeys argues that Sentinel’s evidence indicates that any damages suffered would be financial. Sentinel’s representative, Mr. MacLeod, gave evidence that the lack of access “could result in Sentinel incurring additional and significant costs due to continued delays in the redevelopment” (emphasis added).

[31] Sentinel’s position is that in cases of an interlocutory injunction to enforce a breach of a negative covenant, the significance of irreparable harm and the balance of convenience depends on the strength of the plaintiff’s case. It relies on GDL Solutions Inc. v. Walker, et al., 2012 ONSC 4378 at para. 36 and Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., 163 A.C.W.S. (3d) 625, [2008] O.J. No. 190 at para. 39 (S.C.J.), leave to appeal refused 165 A.C.W.S. (3d) 1094, [2008] O.J. No. 1707 (Div. Ct.). However, I have already found that Sentinel’s case on the merits is weak.

[32] I agree with Sobeys’ submission that Sentinel has not provided this Court with sufficient evidence to demonstrate irreparable harm. Mr. McLeod’s evidence, which addresses the issue of irreparable harm, does not meet the required burden of proof. Although Sentinel makes many submissions on this issue, they are not supported by the evidence, which indicates only that damages “could” arise and, further, that these damages would be monetary in nature.

[33] This evidence of irreparable harm does not meet the requirements of the jurisprudence, especially in light of how weak Sentinel’s case is on the merits.

Balance of Convenience

[34] Sentinel submits that the balance of convenience clearly favours granting the injunction for the following reasons:

(1) The premises have been vacant since June 2014. This is the opportune time for the environmental testing to be completed.

(2) The environmental testing will not cause any damage to the premises or impede operations.

(3) Sentinel has agreed to do everything possible to minimize the impact of the environmental testing on Sobeys, which will be nil as the premises are vacant.

(4) Sobeys suggests that efforts are being made to sub-lease the store but there is no reason to believe, and no evidence, that the environmental testing would have any impact on those efforts.

[35] Sobeys relies on Echostar Satellite LLC v. Pelletier, 2010 ONSC 2282, wherein the Court held at para. 52 that, when considering the balance of convenience, the following factors are relevant:

• The strength of the moving party’s case.

• Which of the parties has acted to alter the balance of their relationship, thereby altering the status quo.

• The willingness of the parties to provide an undertaking as to damages.

[36] In light of my findings above, it is not necessary for me to consider the balance of convenience criteria. However, if I had to decide on this issue, I would have found in Sobeys’ favour because of the weakness of Sentinel’s case on the merits and because Sentinel wants to disturb the status quo by interfering with Sobeys exclusive right of possession and therefore its right to sublease.

Costs

[37] I have dismissed the Defendant’s motion. The Plaintiff is therefore entitled to a cost award. If the parties are unable to agree on the cost award, they may make brief written submissions as follows:

The Plaintiff’s costs submissions must be delivered by 12:00 p.m. on January 5, 2015; and the Defendant’s costs submissions must be delivered by 12:00 p.m. on January 12, 2015. In accordance with what the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provide, the submissions should not exceed three pages in length.

Pollak J.

Date: December 15, 2014