COURT FILE NO.: CV-15-00523503-0000
DATE: 20150824
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TELIPHONE CORP. and TELIPHONE NAVIGATA-WESTEL COMMUNICATIONS INC.
Plaintiffs
– and –
COMWAVE WHOLESALE INC.
Defendant
Counsel: Lucas E. Lung and Jameel Madhany, for the Plaintiffs John Cotter, for the Defendant
HEARD: July 27, 2015
BEFORE: M. D. FAIETA J.
REASONS FOR DECISION
INTRODUCTION
[1] The Plaintiff Teliphone Navigata-Westel Communications Inc. ("TWN") and the Defendant Comwave Wholesale Inc. are in the business of providing Voice over IP ("VoIP") telecommunications services.
[2] The Plaintiff, Teliphone Corp. ("Teliphone"), and Comwave entered into a Carrier Service Agreement dated June 14, 2013. Under the Agreement Comwave agreed to provide certain network carrier services to Teliphone for consumption by the customers of Teliphone's affiliate, TWN, for three years. Teliphone and TWN are owned by Investel Capital Corp.
[3] Comwave agreed to provide a form of VoIP line to which individual telephone numbers are assigned. In exchange Teliphone agreed to pay Comwave: 1) a monthly fee of 85 cents per telephone line if the volume of telephone lines was 9,000 or greater, or $1.50 per telephone line if the volume was less than 9,000; and 2) a fee of $10 per telephone line ported in or out. In addition, the Plaintiffs agreed to pay a minimum monthly amount of $6,350.00.
[4] In June 2013 TNW bulk ported 8,000 telephone numbers to Comwave's network.
[5] Over about a two-week period commencing in mid-February 2015 TNW directly or indirectly arranged for the bulk port of 6,000 telephone numbers from Comwave to an alternate carrier despite having been advised by Comwave that such action was precluded prior to the expiration of the term of the Agreement. The Plaintiffs allege that they took this action because of concerns regarding the quality of the VoIP service provided by Comwave. However, Comwave denies that any issues regarding the service provided by TWN to its customers were as a result of the VoIP service provided by Comwave. Further, a representative for TWN admitted on cross-examination that 1,600 of the 6,000 telephone numbers were transferred to TWN's own network to save costs and expand its own network footprint.
[6] Given that TWN had bulk ported 6,000 telephone numbers despite having been warned by Comwave that such action was in breach of the Agreement, on March 6, 2015 Comwave cancelled TWN's account and stopped providing services under the Agreement. Comwave offered to arrange to immediately restore services if TNW agreed to meet its payment obligations under the Agreement namely, porting out fees of $10 per telephone number and monthly fees associated for each of the 6,000 telephone numbers to the end of the term. TWN refused to pay the porting out fees for the 6,000 telephone numbers.
[7] Comwave restored services to the remaining 1,600 telephone numbers on its network on March 9, 2015. Later that morning, the Plaintiffs commenced this action and Justice Himel issued an Order that, amongst other things, provided a date for the hearing of this motion and that:
(1) Comwave shall immediately reinstate any services governed by the Agreement that the Comwave has suspended;
(2) Comwave is enjoined from suspending any services provided to the Plaintiffs and governed by the Agreement until further order of this Court; and,
(3) the 1,600 telephone numbers remaining in Comwave's network shall not be migrated or ported until further order of this Court.
[8] The Plaintiffs bring this motion for an Order to enjoin Comwave from suspending any services provided to the plaintiffs under the Agreement. In addition, the Plaintiffs seek an Order to prohibit Comwave from interfering with the migration of the Plaintiff's customers' telephone numbers from the Comwave's network.
[9] The following issues are raised by this motion:
(1) Is the order sought by the Plaintiffs a mandatory or prohibitory injunction?
(2) Have the Plaintiffs satisfied the test for obtaining an interlocutory injunction?
(3) Should the Court decline to exercise its equitable discretion because the Plaintiffs have not come to this court with "clean hands"?
(4) If the injunction is granted, should security and/or payment into court be required in order to fortify the undertaking to damages?
[10] For the reasons that follow, I have denied the injunction.
ANALYSIS
[11] In RJR – MacDonald v. Canada (Attorney General) 1994 SCC 117, [1994] 1 S.C.R. 311, at para. 43, the Supreme Court of Canada described the three-part test for an interlocutory injunction is as follows:
(1) Is there a serious issue to be tried?
(2) Will the moving party suffer irreparable harm if an injunction is refused?
(3) Does the balance of convenience favour granting an injunction?
[12] Comwave submits that the interlocutory injunction sought by the Plaintiffs is in the nature of a mandatory injunction, rather than a prohibitory injunction, and thus there is a higher threshold for an obtaining an interlocutory injunction. In such circumstances, the test is whether there is a strong prima facie case to be tried rather than a serious issue to be tried.[^1]
[13] The three-part test is not to be applied rigidly. In Boehringer Ingelheim (Canada) Ltd. v. Pharmacia Canada Inc., 2001 ONSC 28351, [2001] O.J. No. 1911, Justice Nordheimer stated, at para. 69, that:
…the Cyanamid test should not be considered as a step-by-step formula where each factor is to be considered an obstacle which must be overcome before one can tackle the next obstacle. Rather, the preferable approach is for all three factors to be considered and then the collective impact of those factors determines the ultimate result. I refer to the following observation from Sharpe, Injunctions and Specific Performance, (looseleaf edition) at para. 2.600:
"The terms 'irreparable harm', 'status quo' and 'balance of convenience' do not have a precise meaning. They are more properly seen as guides which take colour and definition in the circumstances of each case. More importantly, they ought not to be seen as separate, water-tight categories. These factors relate to each other, and strength on one part of the test ought to be permitted to compensate for weakness on another."
ISSUE #1: IS THE REQUESTED INTERLOCUTORY INJUNCTION IN THE NATURE OF A MANDATORY INJUNCTION?
[14] In 1711811 Ontario Ltd. v. Buckley Insurance Brokers Ltd. [2014] O.J. No. 697, 2014 ONCA 125, at paras. 57-58, the Ontario Court of Appeal explained:
A mandatory injunction is one that requires the defendant to act positively. It may require the defendant to take certain steps to repair the situation consistent with the plaintiff's rights, or it may require the defendant to carry out an unperformed duty to act in the future…Mandatory injunctions are rarely ordered and must be contrasted with the usual type of injunctive relief, which prohibits certain specified acts.
Because of their very nature, mandatory injunctions are often permanent. …
[15] The Amended Amended Notice of Motion seeks an interlocutory injunction requiring Comwave to permit the migration of all telephone numbers on Comwave's network pursuant to the Agreement to another network to be identified by the Plaintiffs. However, there is no evidence in the material before this Court which shows that a positive act by Comwave is required to permit the bulk port of telephone numbers from the Comwave's network. The affidavit of Yuval Barzakay, sworn April 13, 2015, at paragraphs 6-8, suggests that Comwave would not even be aware of a bulk port of telephone numbers to another network unless it was advised by the Plaintiffs or unless the Plaintiff manually checked the Number Portability Administration Center which, amongst other things, transfers customer telephone numbers between carriers.
[16] However the Amended Amended Notice of Motion seeks an interlocutory order restraining Comwave from suspending any services governed by the Agreement implicitly until the remaining telephone numbers are bulk ported from the Comwave network. In my view, an order that would require Comwave continue to provide services to the Plaintiffs is in the nature of a mandatory injunction as it requires Comwave to take positive steps.
ISSUE #2: HAVE THE PLAINTIFFS SATISFIED THE TEST FOR AN INTERLOCUTORY INJUNCTION?
[17] The application of the three-part test for an interlocutory injunction in these circumstances is described below.
Strong Prima Facie Case
[18] This stage of the analysis requires a preliminary assessment of the strength of the plaintiff's case. A prolonged examination of the merits is generally neither necessary nor desirable. Typically the test is whether the plaintiff's claim raises a serious question to be tried. The threshold is low – the claim must not be frivolous or vexatious.[^2]
[19] Given that the relief sought is in the nature of a mandatory order, the plaintiffs must meet a higher threshold. The plaintiffs must show that they have a strong prima facie case and show that their claim is almost certain to succeed.[^3]
1) Breach of Contract
[20] The Plaintiffs allege that Comwave had no justification for suspending service on March 6, 2015 to the remaining 1,600 telephone numbers that were owned by TNW's customers, and thereby breached the Agreement. Alternatively, the Plaintiffs submit that if the Plaintiffs breached the Agreement by migrating the 6,000 telephone lines without the Comwave's consent, then Comwave breached the Agreement by failing to provide seven days' notice to cure that breach. The Plaintiffs claim damages for loss of business reputation, loss of customers, loss of profits and punitive damages as a result of the suspension of service.
[21] In my view, the Plaintiffs' claim based on breach of contract raises a serious question to be tried but is not certain to succeed for the following reasons.
[22] First, TNW was not a party to the Agreement and thus is unlikely to have standing to assert a breach of contract claim against Comwave.
[23] Second, it appears that Comwave may have been justified in suspending the Plaintiffs' service. There is a reasonable argument that bulk porting of telephone numbers was prohibited during the term of the Agreement by section 5.7 of the Agreement and section 13 of Schedule "A" of the Agreement. If so, then the Plaintiffs were in breach of the Agreement when they bulk ported 6,000 telephone numbers to another carrier in February and March 2015.
[24] Third, I think it is far from certain that Comwave was required to provide seven days' notice to Teliphone of its intention to suspend service. Although section 5.2 of the Agreement requires that seven days' notice be given, section 4 of Schedule "A" to the Agreement provides that if the customer is in default of this Agreement, Comwave may, at its option, terminate this Agreement without any liability" and implicitly, without notice. It is arguable that section 4 of Schedule "A" governs given that section 14.15 of the Agreement states that "…[i]f there should be any conflict between the terms and conditions above and those in Schedule A, the terms and conditions in Schedule A shall control."
2) Intentional Interference with Economic Relations
[25] The test for tort of intentional interference with economic relations, which is now known simply as the tort of unlawful means, was clarified and narrowed by the Supreme Court of Canada in A.I. Enterprises v. Bram Enterprises 2014 SCC 12, [2014] 1 S.C.R. 177. At para. 5 the Court stated that the tort is "…available in three-party situations in which the defendant commits an unlawful act against a third party and that act intentionally causes economic harm to the plaintiff."
[26] The tort of unlawful means requires that there must be an intention to cause economic harm to the claimant: (1) as an end in itself; or (2) because it is a necessary means of achieving an end that serves some ulterior motive. It is not sufficient that the harm to the plaintiff is an incidental or inevitable consequence of Comwave's conduct.[^4]
[27] The Statement of Claim alleges that the suspension of service was intended to cause economic harm to TWN however it does not indicate whether such intention was an end itself or a means that served some ulterior motive.
[28] The evidence from the cross-examination of Yuval Barzakay suggests that the services were terminated because Comwave wanted Teliphone to either return the 6,000 numbers that it had bulk ported to another carrier or to pay the port migration fee. Had Teliphone agreed to either arrangement, then the service would have been restored.
[29] Even if the questionable merits of the breach of contract claim are not taken into account, it is my view that the allegation of the tort of unlawful means does not raise a strong prima facie case or a serious issue to be tried given Mr. Barzakay's evidence.
Irreparable Harm
[30] In RJR MacDonald Inc. v. Canada (Attorney General) the Supreme Court of Canada explained "irreparable harm" as follows:
"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 one party will be put out of business by the court's decision…where one party will suffer permanent market loss or irrevocable damages to its business reputation…or where a permanent loss of natural resources will be the result if a challenged activity is not enjoined.[^5] [Emphasis added]
[31] In Paul Sadlon Motors Inc. v. General Motors of Canada Ltd., 2011 ONSC 4432, Justice Perell, at para. 78, stated: "A loss of market share, a loss of goodwill, or damage to reputation can be irreparable harm; however, it is not necessarily irreparable harm, and the attendant damages are not necessarily unquantifiable…"
[32] The plaintiffs submit that TWN received 16 complaints from its 1,600 customers as a result of the service outage between March 6, 2015 and March 9, 2015. The evidence provided by the Plaintiffs speculates that the safety of some people "may have" been put at risk by the suspension of services.
[33] The plaintiffs state that a prolonged service outage would cause TWN to lose customers and "…cause significant harm to TNW's reputation as a high-quality service provider". In my view, any loss of reputation or market share suffered by the TWN resulting from the suspension of service is not irreparable harm as the loss of customers (associated with the 1,600 telephone numbers) can be quantified.
[34] Further, Teliphone does not have any customers and has provided no evidence of the irreparable harm that it would suffer if this injunction is not granted.
Balance of Convenience
[35] The assessment of the balance of convenience requires the "…determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory decision, pending a decision on the merits."[^6]
[36] The Plaintiffs submit:
…the plaintiffs suffered immense irreparable harm the first time Comwave suspended service without notice, and Comwave has promised to do it again. As noted, the current state of affairs, where TNW's customers are being held hostage, is causing irreparable harm to some of TNW's business relationships.
[37] Conversely, Comwave submits that it will not be paid if the Plaintiffs are permitted to bulk port the remaining 1,600 telephone numbers and/or Comwave is precluded from suspending services.
[38] Comwave also submits that to grant an injunction would appear to endorse the plaintiffs' position that Comwave's services were deficient and that these deficiencies justified the plaintiffs' actions. This perception would stigmatize Comwave's services and have a significant impact on its ability to grow its business.
[39] Further, Comwave submits that allowing the remaining 1,600 telephone numbers to be ported would effectively give the relief sought by the Plaintiffs (porting out the telephone numbers at no cost) before this action is determined on its merits.
[40] In my view, the balance of convenience favours Comwave.
ISSUE #3: SHOULD THE COURT DECLINE TO ISSUE AN INTERLOCUTORY ON THE GROUNDS THAT THE PLAINTIFFS DO NOT HAVE "CLEAN HANDS"?
[41] Comwave submits that the Plaintiffs have not come to court with clean hands for two reasons.
[42] First, the Plaintiffs have asked this Court to compel Comwave to continue to provide services, however it has not paid Comwave for the services provided pursuant to Justice Himel's Order dated March 9, 2015. The Plaintiffs could offer no explanation for their failure to pay anything towards these services and suggested that Justice Himel's Order be amended to expressly provide that the Plaintiffs had to pay for the services provided pursuant to the Order of this Court. Such language should have been easily inferred. Could the Plaintiffs have reasonably believed otherwise? Monthly invoices from Comwave issued to Teliphone from April 1, 2015 to July 1, 2015 total over $95,000.00 and remains unpaid. I find the Plaintiffs' failure to pay anything on account of these services to reflect poorly upon them, especially as the Plaintiffs are re-selling these same services to their customers.
[43] Second, on this motion the Plaintiffs submit that Comwave should not be permitted to insist that any outstanding balances for services provided to a telephone number be paid prior to it being ported out to another network. Comwave complains that the Plaintiffs' position is hypocritical given that it has asked Comwave on two occasions in the past to not allow a customer to port out their telephone number from Comwave's network until the Plaintiffs' account was settled by their customer.
CONCLUSIONS
[44] In my view, I am not satisfied that an interlocutory injunction should be granted to require Comwave to: 1) continue to provide services to the Plaintiffs until the Plaintiffs bulk port out the remaining 1,600 telephone number from Comwave's network; and 2) permit TWN to port out 1,600 telephone number from the Comwave network without payment of a port out fee. The Plaintiffs have not satisfied the three-part test for an interlocutory injunction nor have they come to court with "clean hands".
[45] However, this Order shall not be effective until 3 p.m. Eastern Standard Time on September 25, 2015 in order to provide the Plaintiffs with an opportunity to make arrangements with Comwave for the port out the remaining 1,600 telephone numbers or to allow the Plaintiffs to notify their customers that their service will be suspended effective September 25, 2015 so that they can make their own port out arrangements directly with Comwave.
[46] At the hearing of this motion the parties advised that the main issue separating the parties is whether a $10 per telephone number port out fee is required to be paid by the Plaintiffs to Comwave. This amounts to a dispute of about $60,000.00. However, the parties each claim in excess of $30,000 in legal costs on this motion. The expense of the legal steps taken in this proceeding appears disproportionate to the interests at stake. The continued prosecution of this action makes no financial sense. Pursuant to Rule 50.13 of the Rules of Civil Procedure I direct that a Case Conference be held on Monday, September 14, 2015 at 2:00 p.m. in my office to address the settlement of this action. The principals of the parties shall either attend in person or be available by telephone.
Mr. Justice M. D. Faieta
Released: August 24, 2015
COURT FILE NO.: CV-15-00523503-0000
DATE: 20150824
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TELIPHONE CORP. and TELIPHONE NAVIGATA-WESTEL COMMUNICATIONS INC.
Plaintiffs
– and –
COMWAVE WHOLESALE INC.
Defendant
REASONS FOR DECISION
Mr. Justice M. D. Faieta
Released: August 24, 2015
[^1]: Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 ONSC 34862, [2002] O.J. No. 4116, at para. 9.
[^2]: RJR MacDonald Inc. v. Canada (Attorney General), at para. 49-50.
[^3]: Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 ONSC 34862, [2002] O.J. No. 4116, at para. 12.
[^4]: A.I. Enterprises v. Bram Enterprises, at para. 95.
[^5]: RJR MacDonald Inc. v. Canada (Attorney General), at para. 59.
[^6]: RJR, at para 62, 63.