Court File and Parties

Court File No.: CV-15-124873 Date: 2016-05-27 Superior Court of Justice – Ontario

Re: MTY TIKI MING ENTERPRISES, Plaintiff And: GREGORY BOUNDRIS, D.B.V. CO. LTD., SUB WORKS INC., and HARALABBI BOUNDRIS, Defendants

Before: Boswell J.

Counsel: Mark A. Klaiman, for the Plaintiff Konstantine-Peter Ketsetzis, for the Defendants

Heard: May 18, 2016

Ruling on Motion for Interlocutory Injunction

[1] For many years, Gregory Boundris operated a Mr. Sub franchise on Concession Street in Hamilton, Ontario. He elected not to renew his franchise agreement when the time came to do so in the summer of 2015. His agreement with Mr. Sub terminated effective August 31, 2015. Subsequently – and by that I mean within the next couple of days – a shop called “Sub Works” began to operate from the Concession Street location. Sub Works is purportedly owned by Mr. Boundris’ son, Haralabbi (a.k.a. “Bobby”).

[2] In his franchise agreement with Mr. Sub, Gregory Boundris agreed that he would not operate, or be involved in any way in the operation of a shop selling submarine sandwiches anywhere within a 3 mile radius of the Concession Street location for a period of two years after the franchise agreement terminated.

[3] The plaintiff is the Mr. Sub franchisor. It claims that Gregory Boundris is the true owner/operator of Sub Works and it seeks an interlocutory injunction restraining him and the other defendants from breaching the restrictive covenant in the franchise agreement. The defendants resist.

A Brief History

[4] Gregory Boundris had been a Mr. Sub franchisee since 1979. In December 1993, he became the franchisee of a Mr. Sub store located at 760 Concession Street, Hamilton.

[5] On August 16, 2005, Mr. Boundris executed a Franchise Renewal Agreement (the “Franchise Agreement”) on behalf of D.B.V. Co. Ltd. as franchisee and himself as principal of the franchisee. The Agreement was to run for ten years.

[6] At the end of the ten year term, Mr. Boundris elected not to renew his franchise license. The Agreement terminated and he ceased to operate a Mr. Sub shop. He removed the Mr. Sub signage from the Concession Street location and ceased to utilize any trade-marked property.

[7] On September 8, 2015, the plaintiff’s business development manager – Wade Hanson – attended at 760 Concession Street and observed that there was a sandwich shop operating under the name “Sub Works”. The menu board appeared similar to that used by Mr. Sub and offered submarine sandwiches and gyros. Mr. Hanson observed that Gregory Boundris was at work behind the counter.

[8] On September 11, 2015, counsel to the plaintiff delivered a letter to Gregory Boundris requesting that he cease and desist carrying on business as Sub Works.

[9] To date, the Sub Works shop continues to operate.

[10] Sub Works Inc. is an active Ontario corporation with a registered head office of 760 Concession Street, Hamilton. Bobby Boundris is the sole registered director and officer of the corporation.

[11] The evidence of Gregory Boundris is that the Sub Works shop is his son’s business. He admits that he has assisted his son by, amongst other things, teaching him how to make sandwiches, assist customers, prepare financial statements and order supplies. He says he comes and goes from the shop as he pleases, and receives no compensation for his assistance and advice.

[12] Bobby Boundris testified, under cross-examination, that he works full-time as a manager at Frank Malfara’s Service Centre. He said he is the sole owner of Sub Works and that he opened it on September 1, 2015. He works in the shop during the evenings and on weekends. He said he does all the ordering of food. He has an accountant who does his financial statements for him. He has one part-time employee. He was asked about any assistance his father provides and he did his best to minimize his father’s contributions. He said his father has been helping him somewhat on a volunteer basis. When asked if his father had assisted him with the tasks associated with running the business he said, “Vaguely, vaguely. I have generated that knowledge myself”.

The Restrictive Covenant

[13] The dispute in this case focuses on a specific provision in the Franchise Agreement that purports to limit the ability of Gregory Boundris to carry on a sandwich business in competition with Mr. Sub following the expiration of the agreement.

[14] The restrictive covenant in issue is found at article 11.2, which I set out in full here:

11.2 Non-competition following Termination, Expiration or Transfer

In the event of the expiration or termination of this Agreement for any reason whatsoever, or in the event that this Agreement is transferred pursuant to Section 12.2 of this Agreement, neither the Franchisee, the Principal nor Franchisee’s manager (if any) shall without the prior written consent of the Franchisor, at any time during the period of two (2) years from the date of such expiration or termination or Transfer, either individually or in conjunction with any person, firm, partnership or corporation, or other third party as principal, agent, shareholder, director, officer, employee, consultant, guarantor or in any other manner whatsoever, directly or indirectly carry on, be engaged in nor be concerned with or interested in, financially or otherwise, or advise in the operation of:

(a) At or from the Premises;

(b) Within a three (3) mile radius of the Premises; or,

(c) Within a three (3) mile radius of any other Mr. Sub Restaurant as of the date of such expiration, termination or Transfer of this Agreement;

any business which specializes in the sale of submarine sandwiches or other sandwiches, or the franchising or licensing of such business.

[15] Article 11.2 is quite a mouthful. While it might have been drafted in a more reader-friendly way, it seems clear to me that prior to August 31, 2017, Gregory Boundris is not supposed to be involved in another submarine sandwich shop, in any of the listed capacities, where that shop operates either from 760 Concession Street, or another location within a three mile radius of it.

[16] It is notable how much territory a three mile radius actually covers. It may not, at first blush, sound like much. But the area of a circle can be easily calculated according to the application of a simple mathematical formula: area = r²π. In this case that means 9 miles x 3.14, or 28.26 square miles. Having said this, the defendants do not, at least on this motion, take issue with the enforceability of the restrictive covenant. This is an important factor because in many instances an argument is made that a restrictive covenant is too broad in terms of geography, term, or the types of activities restricted, or that it is otherwise unjustified in terms of the business interests sought to be protected. No such arguments were advanced in this instance.

The Positions of the Parties

[17] The plaintiff asserts that Gregory Boundris is, on his own admission, in breach of the restrictive covenant by, at the very least, assisting his son in the operation of a business specializing in the sale of submarine sandwiches. The plaintiff claims that it has a strong prima facie case for an injunction against Gregory Boundris and that an interlocutory injunction should issue on that basis alone.

[18] The plaintiff goes on to argue that the operation of Sub Works through Bobby Boundris is merely a sham to permit Gregory Boundris to circumvent the provisions of the restrictive covenant. There is sufficient circumstantial evidence, the plaintiff submits, to support the inference that Sub Works is, in reality, being operated by Gregory Boundris. In the circumstances, all of the defendants should be enjoined from operating a sandwich shop in the defined area in contravention of the restrictive covenant.

[19] The defendants take the position that the plaintiff is required to demonstrate, against each of them, that it has a strong prima facie case, that it will suffer irreparable harm if an injunction is not granted and that the balance of convenience favours granting the injunction. The defendants argue that the plaintiff has failed to satisfy any prong of the applicable test in relation to any of the defendants. In the result, they say the motion should be dismissed.

The Issues

[20] The usual threshold test to be met on an application for an interlocutory injunction has been settled for some considerable time: see RJR-MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311 (“RJR-MacDonald”). The moving party must typically satisfy the court of three things:

(i) That there is a serious question to be tried;

(ii) That the moving party will suffer irreparable harm if the injunction is not granted; and

(iii) That the balance of convenience favours the issuance of the injunction. This requires the court to engage in an assessment of who will suffer more: the moving party, should the motion not be granted; or the responding party, should an injunction be issued.

[21] In this case, the application of the RJR-MacDonald test is in issue. The plaintiff says it need only establish that there is clear evidence of a breach of the restrictive covenant. If it does so, it argues, the issues of irreparable harm and balance of convenience become irrelevant.

[22] The defendants argue that the plaintiff must satisfy all three prongs of the test. Moreover, with respect to the first prong, they submit that in the circumstances of this case, the plaintiff must establish a strong prima facie case and not simply a serious issue to be tried.

[23] In the result, the live issues for determination include the following:

(a) Does the plaintiff need to establish a strong prima facie case in order to obtain the relief sought, or is it enough to demonstrate only that there is a serious issue to be tried?

(b) What is the court’s assessment of the strength of the plaintiff’s case against each defendant?

(c) Is it necessary to consider the issues of irreparable harm and balance of convenience?

(d) If it is necessary for the plaintiff to establish that it will suffer irreparable harm, has it done so? And,

(e) If it is necessary for the plaintiff to establish that the balance of convenience favours the granting of an injunction, has it done so?

Discussion

(a) The “Strong Prima Facie Case” Standard Applies

[24] As I noted above, RJR-MacDonald establishes a three-pronged test to be met by the moving party on a motion for an interlocutory injunction.

[25] The first prong of the test typically requires that the moving party demonstrate only that there is a serious issue to be tried. This is a low threshold and requires little more than that the claim not be frivolous and/or vexatious.

[26] The Supreme Court identified two exceptional circumstances where the “serious issue” threshold will be elevated: RJR-MacDonald, paras. 56-60. One such circumstance arises where a constitutional question is in issue and it is a simple question of law alone. That exception has no application to this case. The other exception is where the interlocutory ruling will effectively amount to a final determination of a claim. In such a case, the court must take a more extensive review of the merits of the plaintiff’s claim, to determine if a strong prima facie case has been made out.

[27] Subsequent to RJR-MacDonald, courts have imposed the higher, strong prima facie case standard in a variety of circumstances. These circumstances tend to broaden the exceptions expressly identified in RJR-MacDonald. They support the conclusion that the test is a guideline and not a strict formula to be applied in rigid or mechanical fashion: see Robert J. Sharpe, J.A., Injunctions and Specific Performance (Canada Law Book: Aurora, 2008, loose leaf edition), at para. 2.280.

[28] A pertinent example is the observation of Nordheimer J. in Jet Print Inc. v. Cohen, [1999] O.J. No. 2864 (S.C.J.), at para. 10, that “in cases involving restrictive covenants in employment contracts, courts have generally adopted the higher threshold that the plaintiff must establish a strong prima facie case before injunctive relief will be granted.”

[29] The defendants rely on the Jet Print decision to support the assertion that the strong prima facie case standard ought to be applied in this case. I do not accept that the Jet Print decision governs in this instance. This is not a case involving a contract of employment. The restrictive covenant in this instance is part of a commercial agreement.

[30] Having said that, I am persuaded that the result of the motion will likely amount to a final decision in this case. Should the injunction be granted, Sub Works will be put out of business, unless of course they elect to re-open outside of the 28 square mile area of exclusivity referenced in the restrictive covenant. That appears to me to be a very unlikely proposition. In my view, should the injunction be granted, Sub Works will be at an end, along with the live issues in the claim.

[31] In the result, I find that the higher threshold of strong prima facie case applies.

(b) The Assessment of the Merits

[32] The strength of the plaintiff’s case must be assessed against each of the defendants individually.

[33] As against Gregory Boundris, I find that the plaintiff has made out a strong prima facie case, based largely on Mr. Boundris’ own admissions.

[34] I should note that establishing a “strong prima facie case” means that the plaintiff has demonstrated that it is almost certain to succeed at trial. This standard is distinguishable from a “prima facie case” which means that the plaintiff has established that, on a balance of probabilities, it will likely succeed at trial. See Quizno’s Canada Restaurant Corp. v. 1450987 Ontario Corp., [2009] O.J. No. 1743 (S.C.J.), at para. 39.

[35] Mr. Hanson testified that he witnessed Gregory Boundris working in the Sub Works shop. Gregory Boundris deposed in his affidavit that he has been assisting his son with a variety of tasks.

[36] Section 11.2 of the Franchise Agreement prohibits Gregory Boundris from, amongst other things, advising in the operation of a business specializing in the sale of submarine sandwiches. He admits he has been doing just that. In the result, he is in clear breach of the Franchise Agreement and a strong prima facie case has been established.

[37] On the other hand, there is no evidence at all in the record regarding any breach by the corporate defendant, D.B.V. Co. Ltd. At this stage I am not able to find that even a serious issue has been raised against them.

[38] The claim against Bobby Boundris and Sub Works Inc. is the trickiest aspect of the case to assess. Neither of these parties was a signatory to the Franchise Agreement, nor bound by its terms. The claim against these two parties is based on the assertion that they are knowingly assisting Gregory Boundris to circumvent the terms of the Franchise Agreement. In other words, the assertion is that the purported ownership of Sub Works by Bobby Boundris is a sham; that Gregory Boundris is the real owner/operator; and that Bobby Boundris is complicit in his father’s breach of the restrictive covenant.

[39] It can be difficult, of course, to assess the merits of a case of this nature at a preliminary stage like this. The present vantage point is pretty limited. The record consists of brief affidavits and limited cross-examination. Much will ultimately turn on the credibility of the evidence of Gregory and Bobby Boundris.

[40] The evidence to support the plaintiff’s position is all circumstantial. It consists, at least at this preliminary point in time, of the following:

(a) Timing. The Sub Works shop appears to have opened the day after the Franchise Agreement terminated;

(b) Location. The Sub Works shop is operating from the same location as the Mr. Sub franchise;

(c) Menu. The sandwiches offered at Sub Works are similar to those offered by Mr. Sub, though Sub Works does offer gyros as well. The menu board is similar in appearance and content;

(d) Experience. Gregory Boundris has over 30 years of experience in the submarine sandwich business. Bobby Boundris has almost none, save for what he picked up helping his father in the Mr. Sub shop over the years. Bobby Boundris has never before operated his own business;

(e) Availability. Gregory Boundris has no other gainful employment. He claims to be more or less retired. Bobby Boundris has another full-time job managing an auto service centre. Gregory Boundris has been observed working behind the counter in the shop; and,

(f) Staffing. Bobby Boundaris testified on cross-examination that he works at the shop in the evenings and on weekends. He said he has one other staff member who works part-time hours. He denied that his father is providing much assistance to him. It is hard to understand who is staffing the shop during the day on the evidence of Bobby Boundris.

[41] There is other circumstantial evidence, however, that points away from the finding urged upon the court by the plaintiff. In particular:

(a) Sub Works Inc. is a distinct corporate entity. Bobby Boundris is its sole director and officer;

(b) The evidence placing Gregory Boundris in the shop is very limited and consists of two random visits by Mr. Hanson. No other surveillance has been conducted (apparently);

(c) Bobby Boundris testified that he does all the ordering for the restaurant, manages the staff of one, and has an accountant to assist him with the books;

(d) Bobby Boundris also testified that the sales of Sub Works are low at present and are not sufficient to permit him to “quit his day job” as the saying goes. He said he is hopeful that one day he will be able to do so;

(e) The restaurant has a new menu with additional items, new menu boards, new signage, and a new colour scheme; and,

(f) It would appear that the staffing has changed from the time the Mr. Sub was operated, though admittedly the evidence is not particularly clear on how the Mr. Sub was staffed. There is evidence, however, that Bobby Boundris is now working in the shop on evenings and weekends.

[42] There is also direct evidence in the record from each of Gregory and Bobby Boundris to the effect that Bobby Boundris is the legitimate and genuine owner/operator of Sub Works.

[43] There is good reason to be suspicious about the true nature of the ownership of the Sub Works shop. There is good reason to suspect that its existence constitutes an end run around the Franchise Agreement by Gregory Boundris, aided by his son. Sub Works replicates, by and large, the Mr. Sub business. It operates from the same location as the Mr. Sub franchise did and offers similar products. Gregory Boundris is clearly involved in the operation to some extent, though it is apparent that Bobby Boundris did his best to downplay his father’s role.

[44] That said, in light of the evidence on the whole, as limited as it may presently be, this is not an obvious case by any means. There is certainly a serious issue to be tried. But without an opportunity to hear the witnesses and assess their credibility, I am not able to say that the plaintiff has a strong prima facie case against Bobby Boundris or Sub Works Inc. Indeed, I am not even prepared to find that a prima facie case has been demonstrated in relation to these two defendants. The circumstantial evidence is somewhat equivocal at this stage and not strong enough to overcome the direct evidence given by each of Gregory and Bobby Boundris about the ownership and operation of the sandwich shop.

[45] In my view, on the present record, I would assess the merits of the case against Bobby Boundris and Sub Works Inc. as more or less balanced. In other words, it is possible that the Sub Works ownership structure is a sham and that it is a contrivance to circumvent the Franchise Agreement. It is equally possible that it is not a sham; that the business is genuinely owned and operated by Bobby Boundris.

(c) Irreparable Harm and the Balance of Convenience Must be Considered

[46] The plaintiff asserts that where a party seeks to restrain a clear breach of a restrictive covenant, it is unnecessary to consider either irreparable harm or the balance of convenience.

[47] The plaintiff relies on the decision of Rivard J. in Ontario Duct Cleaning Ltd. and Wiles, [2001] O.J. No. 5150 (S.C.J.), where the court was faced with a similar request for an injunction restraining parties from breaching a restrictive covenant in a franchise agreement. Rivard J. held, at para. 3:

…Where there is a clear breach of a negative covenant, the elements of irreparable harm and balance of convenience are not required because unless special circumstances exist, the court will compel a contracting party to comply with non-competition obligations and will not give him a “holiday” from a clear promise (see Button v. Jones, [2001] O.J. No. 1976 (Ont. S.C.J.) ).

[48] The plaintiff’s counsel also cited Pet Valu Canada Inc. v. 1381114 Ontario Ltd, 2013 ONSC 5361, where Backhouse J. expressed a similar sentiment, saying, at para. 10,

Where there is a clear breach of a non-competition provision which is a negative covenant, the elements of irreparable harm and balance of convenience are not required.

[49] With the greatest of respect to the two learned justices just cited, I view their observations as an over-simplification of the law.

[50] First, it is important to recognize that the Supreme Court, in RJR-MacDonald, did not expressly provide for exceptions to the threshold test where the second and third prongs do not apply. To suggest that where a clear breach of a restrictive covenant is established the second and third prongs are irrelevant is, in my view, not in keeping with the Supreme Court’s ruling.

[51] Neither Ontario Duct Cleaning nor Pet Valu contain any analysis or explanation for why the second and third prongs of the RJR-MacDonald test do not apply in cases of a clear breach of a negative covenant. This view can apparently be traced back to a decision of the Saskatchewan Court of Appeal in Canada (Attorney General) v. Saskatchewan Water Corp., [1991] S.J. No. 403. There, Bayda C.J.S, as he then was, held, for a unanimous court:

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 how 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.

[52] The Saskatchewan Water Corp. decision has been favourably cited in Ontario: see for instance, Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., [2008] O.J. No. 1707 (S.C.J.) and C.B.J. International Inc. v. Lubinski, [2003] O.J. No. 2699 (Div. Ct.).

[53] It is notable that nowhere in the ruling in Saskatchewan Water Corp. is there an indication that the irreparable harm and balance of convenience tests can be ignored if a clear breach has been made out. The Saskatchewan Court of Appeal said only that less regard can be paid to those issues in the face of a clear breach of a negative covenant.

[54] The Saskatchewan Water Corp. decision reflects what I believe to be the correct approach to the application of the three prongs of the RJR-MacDonald test. In particular, the three elements of the test must be applied contextually. The Supreme Court has not directed that they be given equal weight in each case. The weight to be accorded to any one particular factor will vary from case to case. Justices Sopinka and Cory, writing for a unanimous court in RJR-MacDonald, at para. 59, said as much:

The circumstances in which this exception will apply are rare. When it does, a more extensive review of the merits of the case must be undertaken. Then when the second and third stages of the test are considered and applied the anticipated result on the merits should be borne in mind.

[55] The British Columbia Court of Appeal provided the following guidance in Belron Canada Inc. v. TCG International Inc., 2009 BCCA 577, at para. 22:

It is probably correct to say that in most commercial cases involving sophisticated and solvent litigants in which a strong prima facie case is made out that there has been or will be breach of a negative covenant, an interim injunction will be granted. But this area of law would not be well served by formulating a rule, as suggested by Belron, that the injunction should always be granted absent exceptional circumstances. The questions of irreparable harm and balance of convenience should be addressed. Each motion for an interim injunction should be determined on a discretionary basis under the three-part test. On the present state of the law, there is no basis for holding that the test is not of general application.

[56] In my view, it is not correct to suggest that where a clear case of breach has been made out, irreparable harm and balance of convenience need not be demonstrated. Instead, I intend to follow the guidance of the British Columbia Court of Appeal, which I believe to be correct. In other words, I intend to consider the three prongs contextually, adjusting the weight to be accorded to any particular factor based on the particular circumstances of the case.

(d) Irreparable Harm

[57] Little time was spent by plaintiff’s counsel on the issue of irreparable harm. This is perhaps explained by the concession that the plaintiff is a large corporation with 27 brands, including 291 Mr. Sub franchises across Canada. In 2015 their gross earnings were approximately $145,000,000. They are not being financially impacted in any material way by the operation of Sub Works.

[58] There are no other Mr. Sub shops within the exclusive area described in the Franchise Agreement and no evidence that any are planned.

[59] The location at 760 Concession Street is no longer available as a Mr. Sub location given the landlord’s decision to convert the property to medical office space. The landlord has deposed that he is unwilling to commit to a long term lease with Mr. Sub. Sub Works currently operates on a month-to-month basis at that location.

[60] The plaintiff’s counsel asserted that the court should conclude that the operation of Sub Works has caused and will continue to cause irreparable damage to the franchise system of the plaintiff. Counsel relied on the decision of Perell J. in Quizno’s Canada Restaurant Corp. v. 1450987 Ontario Corp., as above, to support his assertion.

[61] In Quizno’s, the franchisor sought to enjoin the operations of three franchisees for alleged breaches of their franchise agreements. The franchisor alleged that the franchisees had essentially gone rogue and were selling under-portioned sandwiches to customers, failing to participate in promotions, and failing to provide the delivery service as directed by the franchisor.

[62] Perell J. considered each prong of the RJR-MacDonald decision. He applied the strong prima facie case standard, having concluded that granting the injunction sought by the franchisor would essentially put the franchisees out of business and render proceeding to trial pointless for them. When it came to the issue of irreparable harm, he held as follows, at para. 93:

In my opinion, the franchisor will suffer irreparable harm if an interlocutory injunction is not granted and for the reasons discussed further below the balance of convenience favours granting an interlocutory injunction. It would appear that the franchisees would not be able to satisfy a damages award against them and, in any event, the irreparable harm suffered by the franchisor goes to its goodwill, its reputation, and its responsibility to the franchisees of the chain to maintain the integrity of the franchise system. Damages would not adequately address these harms.

[63] Here, the plaintiff’s counsel submitted that, like in Quizno’s, its goodwill, reputation and the integrity of its franchise system will be irreparably harmed without the injunction sought.

[64] There is a difference between the case at bar and the Quizno’s decision in my view. The difference relates to the sufficiency of the evidentiary record. In Quizno’s there was evidence that three franchisees were not following franchise rules, promotions and standards. They were compromising the brand, which has an impact on the franchise system as a whole.

[65] In the case at bar, I have no such evidentiary foundation to conclude that the franchise system will be irreparably harmed without injunctive relief. Nor do I have an evidentiary basis on which to conclude that the defendants, or any of them, will be unable to pay damages.

[66] I accept that the restrictive covenant is an important feature in the Franchise Agreement. A failure on the part of the franchisor to enforce it may well be a source of irreparable harm to the franchisor’s credibility and, in turn, its ability to manage and control the franchise system. In the circumstances of this case, and on the evidentiary record before me, I consider this to be a very modest level of irreparable harm. Not none. But not much. And to be clear, this is strictly in relation to the claim against the former franchisee, Gregory Boundris.

[67] In my view, no irreparable harm has been demonstrated in relation to the claims against Sub Works Inc. and/or Bobby Boundris.

(e) The Balance of Convenience

[68] The third prong of the RJR-MacDonald test requires the court to assess the measure of anticipated suffering in two scenarios: one in which the injunction is granted; the other in which it is not.

[69] Again, the test must be applied in respect of each of the parties individually.

[70] I am not persuaded that the plaintiff will suffer significantly if the injunction is not granted. There is no evidence that the operation of Sub Works is causing them any financial loss, or loss of market share, or damage to their reputation or image. The particular location, 760 Concession Street is no longer available to the franchisor as a Mr. Sub location regardless of the operation of Sub Works. There is no evidence that the franchisor is anxious to establish another franchise location within the exclusive area referenced in the Franchise Agreement.

[71] Similarly, I find that Gregory Boundris, on the record before me, would suffer virtually no prejudice should the injunction be granted. He essentially would be compelled to comply with a contractual provision, the validity of which he does not question. He says he is not the owner of Sub Works, is not being paid to work there, is providing minimal assistance to his son, and is essentially retired.

[72] Sub Works and Bobby Boundris, on the other hand, would be significantly impacted in a negative way should the injunction be granted. Sub Works would be put out of business. Whatever investment Bobby Boundris has made in the business – and frankly that is unclear – would be lost.

Conclusions

[73] Applying the three-pronged RJR-MacDonald test, I reach the following conclusions.

[74] The plaintiff’s claim against Gregory Boundris is, in my view, highly likely to succeed at trial. If it had to be decided on a final basis, today, on the materials before me, the plaintiff would certainly succeed. The balance of convenience is a relatively neutral factor given that I do not believe either party will suffer significantly whether or not the injunction is granted. I have found very modest irreparable harm in the circumstances, but given the strong prima facie case established by the plaintiff, the injunction sought is warranted and shall issue against Gregory Boundris.

[75] Gregory Boundris, in the result, shall be restrained until trial, or September 1, 2017, whichever comes first, from directly or indirectly carrying on, engaging in, or advising in the operation of any business which specializes in the sale of submarine sandwiches or other sandwiches, at or from 760 Concession Street, Hamilton Ontario, within a 3 mile radius of 760 Concession Street, Hamilton Ontario, or within a 3 mile radius of any Mr. Sub restaurant. Without limiting the generality of the foregoing, he shall not directly or indirectly carry on, engage in, or advise in the operation of the Sub Works shop presently operating from 760 Concession Street, Hamilton Ontario.

[76] The plaintiff’s claim against Bobby Boundris and Sub Works Inc. is not, at least at this stage and on this record, as strong as the case against Gregory Boundris. The plaintiff may succeed against these defendants, or it may not. I am not able to find that the plaintiff has established a strong prima facie case, or even a prima facie case, against Bobby Boundris and/or Sub Works Inc. They have established only that there is a serious issue to be tried and that there is good reason to be suspicious about the plaintiff’s assertion that the operation of Sub Works is a sham to circumvent the Franchise Agreement.

[77] My finding on the strength of the case is fatal to the plaintiff’s application for an interlocutory injunction against these two defendants. But beyond that, I find that the plaintiff has not made out that it will suffer irreparable harm if Bobby Boundris and Sub Works are not restrained as requested. Moreover, the balance of convenience favours rejecting the request for an injunction at this stage as against these defendants.

[78] In the result, the motion against Bobby Boundris and Sub Works Inc. is dismissed, as is the motion against D.B.V. Co. Ltd.

Costs

[79] Counsel were surveyed about their costs associated with preparing for and arguing the motion. They were very close in terms of their assessments. Each valued partial indemnity costs at between $10,000 and $15,000. In view of the mixed success on the motion, costs are, in my view, a wash and none are ordered.

Boswell J. Released: May 27, 2016