Court File and Parties

COURT FILE NO.: CV-15-1989-00 DATE: 2017 04 19 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: EZMONEY TARIO, INC. : Plaintiff (Respondent on Motion) AND: 7724934 CANADA INC. and EASYFINANCIAL SERVICES INCORPORATED , Defendants (Moving Party)

BEFORE: Trimble J.

COUNSEL: J.Chen, J. Woycheshyn, W. Bortolin, Lawyers for the defendant Easyfinancial Services Incorporated

HEARD at Brampton: In writing

ENDORSEMENT

Introduction

[1] Easyfinancial Services Incorporated (Easyfinancial) seeks leave to appeal from the order of Andre, J., dated November 25, 2016, granting an injunction that the Defendant, 7724934 Canada Inc. comply with a restrictive covenant in its lease with EZMoney Tario Inc., by not permitting Easyfinancial to continue to operate its business from the Kingspoint Plaza in Brampton.

[2] Neither EZMoney nor 772 filed responding material to the Motion for Leave although served.

[3] EZMoney and 772 entered into a 4 year lease on June 11, 2011 which permitted EZMoney to operate its payday loan business from 772’s plaza.

[4] The lease between EZmoney and 772 provides:

7.4 Restrictive Covenants

The Landlord shall not lease space to any other tenants in the Shopping Centre, or any expansion therefore, whose primary use is any one or more of the uses permitted to be offered by the Tenant pursuant to Section 7.1 hereof. It is agreed that the foregoing restriction: (a) shall not prohibit the provision of such services by other tenants in the Shopping Centre on an ancillary or incidental basis; (b) shall not apply to any leases or offers to lease in respect of, or tenants in possession of, premises in the Shopping Centre as of July 30, 2010; (c) shall not apply to any tenants in the Shopping Centre occupying premises of 10,000 square feet or more; and (d) shall not apply to any banks, trust companies or financing institutions such as CitiFinancial or HSBC Financial.

7.1 Use of Leased Premises

The Lease Premises shall be used continuously, actively and diligently for the sole purpose of the primary use of the brokering, marketing, servicing and making of payday loans and advances, instalment advances, cheque cashing, precious metal and stone purchasing. The Tenant agrees not to offer (i.e. brokering, marketing, servicing and making) secured personal loans, mortgages, home equity loans and home refinancing and for no other purpose.

Unless otherwise specifically set out in this Lease to the contrary, nothing contained in this Lease shall: (i) confer upon the Tenant the exclusive right to sell or provide in the Shopping Centre any of the products or services permitted to be sold or provided from the Leased Premises pursuant to this Section 7.1; nor (ii) prevent the Landlord from leasing any other premises in the Shopping Centre to any other tenant(s) carrying on a business which is similar in whole or in part to the business permitted to be carried on from the Leased Premises pursuant to this Section 7.1 .

[5] On September 14, 2014, 772 entered into its lease with Easyfinancial, a company involved in the installment loans business. Easyfinancial opened its doors to the public on October 31, 2014. At the time it negotiated the lease, 772 warned Easyfinancial of the restrictive covenant in the lease with EZMoney and the indemnity agreement.

[6] On November 3, 2014, EZMoney notified 772 of the breach of the restrictive covenant in the lease. The letter was given to Easyfinancial, who responded denying the breach.

[7] On December 12, 2014, EZMoney renewed its lease to 2020 with an option to extend it to 2025. EZMoney issued its Statement of Claim on April 27, 2015 and brought its motion for an injunction on May 25, 2015, which Andre, J. granted.

THE DECISION APPEALED FROM

[8] The Learned Motions Judge held:

a. The test to be applied was that in RJR Macdonald Inc. v. Canada (A.G.) , [1994] 1 S.C.R. 311;

b. Easyfinancial’s business activity violated the restrictive covenant in EZFMoney’s lease. Easyfinancial’s activities were those prohibited by the restrictive covenant and were not saved by the exception to the restrictive covenant;

c. The injunction should be granted. EZMoney made out a strong prima facie case, there is a likelihood of irreparable harm in loss of market share, and the balance of convenience favoured granting the injunction.

Test for Leave to Appeal

[9] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be granted easily. The test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.

[10] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992) , 7 O.R. (3d) 542 (Div. Ct.).

[11] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co . , [2003] O.J. No. 3442 (S.C.J.); Ash v. Lloyd’s Corp . (1992) , 8 O.R. (3d) 282 (Gen. Div.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd . (1986) , 57 O.R. (2d) 569 (H.C.J.); Greslik v. Ontario Legal Aid Plan (1988) , 65 O.R. (2d) 110 (Div. Ct.).

Analysis

[12] Easyfinancial says that the learned motions Judged made several critical and reversible errors. These are:

a. He erred in concluding that Easyfinancial engaged in one of the business activities prohibited by the restrictive covenant. Easyfinancial says that there are fundamental differences between its and EZMoney’s business activities. Unlike EZMoney, Easyfinancial did not provide payday loans or advances, cash cheques or purchase precious metals and stones. The only question was whether Easyfinancial provided “instalment advances” as its primary business. It does not. In any event, Easyfinancial falls within the exception to the restrictive covenant as it is a financing institution.

b. There was no evidence of irreparable harm. Rather, the learned motions judge found that a mere possibility that EZMoney might suffer irreparable harm was sufficient regardless of the fact that no irreparable harm had happened in the two years that Easyfinancial operated in the same plaza as EZMoney.

c. The learned motions Judge erred in applying the assumption of risk instead of the balance of convenience. He held that when Easyfinancial entered its lease it knew of the covenant, and “took a calculated risk in proceeding with its business”.

d. The learned motions Judge failed to consider the effect of EZMoney’s delay in bringing its motion as a factor.

[13] On the first test, I am not satisfied that there are any conflicting decision as required under Rule 62.02(4)(a).

[14] On the second test, Rule 62.02(4)(b), I have reason to doubt the correctness of the order for the reasons set out below. It is important to remember that the test does not require that I find that the order from which leave is sought is in error: it merely requires me to be satisfied that there is good reason to doubt its correctness.

[15] The reasons I have to doubt the correctness of the learned motions judge’s order are:

a. EZMoney conceded that Easyfinancial did not broker, market, service, or make payday loans or advances. Further, EZMoney never alleged that Easyfinancial cashed cheques or purchased precious metals or stones. Therefore, in order for the restrictive covenant to apply and the injunction to issue EZMoney must make the strong prima facie case that the term in the restrictive covenant, “instalment advance” is the same as an “instalment loan”, which describes Easyfinancial’s activities, but which is not used in the covenant. Easyfinancial led much evidence comparing the business that EZMoney and Easyfinancial conducted. Based on the evidence, I have reason to doubt the correctness of the learned motions judge’s interpretation of the restrictive covenant.

b. The covenant contained an exception for “financing institutions such as CitiFinancial or HSBC Financial”. Easyfinancial led evidence of its similarities to those institutions; EZMoney led no evidence. Based on the evidence, I have reason to doubt the correctness of the learned motions judge’s interpretation of the exception to the covenant.

c. In holding that “the potential loss of market share may well be significant” satisfies the irreparable harm arm of the RJR Macdonald test, the learned motions judge may have fundamentally altered this arm of the RJR Macdonald test.

d. Further, the learned motions judge did not consider under the third arm of the RJR Macdonald test the effect or impact on EZMoney’s delay in bringing its application. I have reason to doubt the correctness of the learned motions judge’s decision in this respect.

[16] I am also satisfied that the issues involved in this leave to appeal motion are matters of sufficient importance that leave to appeal ought to be granted. Restrictive covenants such as the one at issue in this motion are common, if not standard, in commercial leases. Appellate review of this case will affect more than the interests of the parties.

Costs:

[17] I leave the matter of costs to the Divisional Court. I will fix them, after receiving written submissions from the applicant, not exceeding three double spaced pages, excluding cases and bill of cost. The submissions are due three weeks after the release of these reasons.

J. K. Trimble, J. Date: April 19, 2017