ADT Security Services v. Fluent Home Ltd., 2017 ONSC 4294
CITATION: ADT Security Services v. Fluent Home Ltd., 2017 ONSC 4294
COURT FILE NO.: CV-17-576133
DATE: 20170713
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ADT SECURITY SERVICES CANADA, INC. and ADT CANADA INC. Plaintiffs
- and -
FLUENT HOME LTD. and GRAHAM WOOD Defendant
COUNSEL:
John K. Downing and Brian Whitwham for the Plaintiffs
Barry H. Bresner and Caitlin Sainsbury for the Defendant
Heard at Toronto: July 6, 2017
ENDORSEMENT
D.L. Corbett J.:
[1] The plaintiffs moves to restrain the defendants from soliciting ADT customers and restraining the defendants from making untrue, defamatory statements about the plaintiffs, and false statements damaging to the plaintiffs’ economic interests.
[2] The parties have agreed to adjourn the motion for interlocutory relief on the following schedule:
(i) Any additional evidence relied upon by the plaintiffs in chief shall be served by July 19, 2017.
(ii) Any additional responding material shall be served by the defendants by July 28, 2017.
(iii) Any reply materials shall be served by the plaintiffs by August 4, 2017.
(iv) Cross-examinations shall be completed on a schedule to be agreed between counsel no later than September 8, 2017.
(v) Factums will be delivered on a schedule to be agreed between counsel provided that they are filed no later than September 20, 2017.
(vi) The parties shall file all their materials no later than September 20, 2017.
(vii) The motion for interlocutory relief shall proceed before D.L. Corbett J. on September 28, 2017, commencing at 9:00 am, for an estimated half-day.
(viii) The parties may amend this schedule by agreement between counsel provided that they may not change sub-paragraphs (vi) or (vii) without obtaining an order from D.L. Corbett J.
[3] Two further points require decision:
(1) the defendants’ challenge the jurisdiction of this court; and
(2) the plaintiffs seek interim relief pending return of the motion on September 28, 2017.
Jurisdiction
[4] On July 6th I advised the parties that I had concluded that jurisdiction lies in Ontario for this proceeding. I provided brief oral reasons to which these reasons are supplementary.
[5] A little background is necessary to understand the jurisdiction issue. ADT and Fluent are both in the business of selling and installing security monitoring equipment and providing security monitoring services.
[6] Fluent was a dealer for a company called Protectron, which was a competitor of ADT (specifically, a competitor of the second-named plaintiff). As a dealer, Fluent would try to sell customers security monitoring equipment and to sign them up for Protectron monitoring services. Protectron would then provide the monitoring services. Fluent entered into a Dealership Agreement (the “DA”) with Protectron which contained non-solicitation and related provisions if Fluent ceased being a Protectron dealer. The DA also provided that disputes respecting or arising out of the DA would be subject to the laws of Quebec, and that the courts of Quebec would have exclusive jurisdiction over such disputes.
[7] In the spring/summer of 2014, an ADT company[^1] acquired Protectron and changed its name to ADT Security Services Canada, Inc., the first-named plaintiff. It seems not to be contested that this new ADT company stepped into the shoes of, or was the same company as Protectron, and thus that the rights and obligations under the DA were not changed by ADT’s acquisition of Protectron.
[8] In the autumn of 2015 (roughly 15 months after ADT acquired Protectron), ADT decided to terminate Fluent’s dealership. A termination agreement was executed between ADT Security Services Canada, Inc. (formerly Protectron) and Fluent (the “TA”). Section 6 of the TA provides:
The Parties acknowledge that the covenants and obligations that are stated to survive in the Dealer Agreement after its termination (including, without limiting the generality of this Section 6, those contained in Sections 9.1.4 and 16.4 thereof) shall do so and the existing rights of the Parties shall not be affected by this agreement.
[9] The TA also contained a choice of forum and choice of law provision. The TA states that it is governed by the laws of Ontario. It also states that a court of competent jurisdiction in Toronto shall have exclusive jurisdiction over all conflicts arising out of the TA.
[10] So that is the problem: there are two competing “exclusive jurisdiction” clauses in two different agreements between the same parties. Both sides agree that the court should enforce a contractual bargain for exclusive jurisdiction[^2] (in the overall circumstances of this case), but disagree on which provision should govern.
[11] Counsel for Fluent argued that a literal reading of the two contracts enables this court to give effect to both choices of forum. Here, the argument goes, the TA does nothing more than confirm that surviving rights in the DA do, in fact, survive the termination. Claims arising from that agreement are governed by the DA, including the choice of Quebec as the exclusive forum. Counsel for ADT argued that, on a practical reading of the DA and the TA, the claim before the court arises from the termination, which is the subject matter of the TA. Counsel for ADT also argued that there are claims by the first-named plaintiff that arise at common law, not under the DA, and the exclusive choice of Quebec does not govern those additional claims. Further, counsel argues, the second-named plaintiff is not a party to the DA or the TA, and its claims are not governed by the exclusive forum clause of the DA.
[12] I do not think much of ADT’s “other claims” argument. The exclusive choice of forum in both the DA and the TA is framed in language broader than just claims for breach of contract. Those clauses should be interpreted robustly to give effect to the parties’ intent at the time that they agreed to them. It makes no sense to suggest that the parties would agree upon Quebec, or Toronto, as the place for their litigation arising out of their relationship, but leave it open to divide that litigation between jurisdictions depending on the nature of the causes of action alleged to arise out of the same series of events.
[13] I conclude that the parties have agreed upon Ontario for their disputes. The surviving rights under the DA are “unaffected” by the TA, but those rights can and will be adjudicated in Ontario. The TA is the more recent agreement, and although it does not expressly vary the exclusive forum clause of the DA, it does so by reasonable implication. Unquestionably this litigation arises out of Fluent’s termination as a dealer. That was the subject-matter of the TA. All claims arising between the parties to the TA arising out of the termination and events following the termination ought to be decided in one proceeding.
[14] I am satisfied that the parties intended that exclusive jurisdiction be in Ontario. Protectron was federally incorporated, centred in Quebec. It appears that Fluent has no material operations in Quebec. It appears that ADT has operations across Canada, but that its “head office” functions are primarily in Ontario. There would be no reason for the parties to preserve exclusive jurisdiction in Quebec for the DA when they entered into the TA, particularly when they selected Ontario in the TA.
[15] If I had concluded otherwise and found that the jurisdictional provisions of the DA continued in the face of the terms of the TA, then I would have concluded that the jurisdictional terms of both agreements apply and that in the result, the litigation could be brought in either Quebec or Ontario.
[16] I note that the defendants did not pursue an argument based on forum non conveniens.
Interim Injunctive Terms
[17] ADT seeks an interim injunction pending decision on the motion for an interlocutory injunction. For the reasons that follow, I decline to grant an interim injunction.
[18] The three-part test for an interlocutory injunction is:
(a) Is there a serious issue to be tried?
(b) Will the plaintiff suffer irreparable harm if the injunction is not granted?
(c) Does the balance of convenience favour granting the injunction?[^3]
[19] Delay is a basis to deny injunctive relief. Here, the claim came to ADT’s attention about a year ago. ADT has spent the past year investigating and documenting the claim. There is evidence of 140 customers of the first-named defendant who “switched” to Fluent, and affidavits from about 18 of those customers stating what they say happened to cause them to change their service provider. I accept that it would take substantial time and effort to develop this kind of record.
[20] Plaintiffs’ counsel argues that a moving party faces a dilemna in these cases. If the party rushes to court with a slender record, the basis for the injunction may not be proved. On the other hand, if the party takes the time necessary to prepare a thorough record, it risks an argument that the matters must not be all that urgent and irreparable if it was prepared to defer seeking court assistance for so long. This characterization of the dilemma is fair.
[21] Some of the older cases characterize delay as “sitting on one’s rights” - a sort of affront to the court’s equitable jurisdiction. Current thinking does not usually rely upon this rationale. Rather, delay is evidence from which the court may infer that the moving party does not consider accruing harm to be irreparable.[^4] The inference is permissive, not mandatory, and will depend on the circumstances of the case. This case is a good example: the plaintiffs cannot argue seriously that loss of a customer here or there will cause irreparable harm. However, long-term erosion of market share through a systematic campaign in violation of the DA could be a basis for finding irreparable harm.
[22] Delay may also be a basis on which the court finds that it would be unfair to put the defendants under the yoke of an injunction pending return of the motion for interlocutory relief. That is the basis on which I rest my decision here.
[23] Irreparable harm will be a live issue on return of the motion for interlocutory relief.[^5] The plaintiffs have taken months to prepare the injunction materials. It is only fair that the defendants have a reasonable period of time to respond. The parties agreed on the schedule set out in paragraph 2, above, and I do not draw an inference against the plaintiffs on the basis of that agreed schedule – which accommodates the vacation schedules of counsel (given that this matter first came to court at the very end of June). However, if the plaintiffs had felt that incremental damage of each passing day or week was causing irreparable harm, the court could have accommodated a much tighter schedule to return the motion to court in a matter of days or weeks rather than three months.
[24] I conclude that it is not established that the plaintiffs will suffer irreparable harm over the next three months, and thus that an interim injunction ought not be granted. This finding is without prejudice to the position of the parties on the issue of irreparable harm on the return of the motion, and is based on the materials and arguments before me in July 6th.
[25] It is not necessary to address other injunction issues at this stage, and I Leave those for the motion for interlocutory relief.
Disposition and Costs
[26] Order to go that the parties follow the schedule and terms set out in paragraph 2 of this endorsement. Request for interim injunction pending return of the motion for interlocutory relief is dismissed, without prejudice to the position of the parties on the motion for interlocutory relief, or at trial.
D.L. Corbett J.
Released: July 13, 2017
CITATION: ADT Security Services v. Fluent Home Ltd., 2017 ONSC 4294
COURT FILE NO.: CV-17-576133
DATE: 20170713
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ADT SECURITY SERVICES, INC. and ADT CANADA LTD. Plaintiffs
- and -
FLUENT HOME LTD. and GRAHAM WOOD Defendants
ENDORSEMENT
D.L. Corbett J.
Released: July 13, 2017
[^1]: I am not clear on ADT’s corporate structure; for the purposes of this endorsement I proceed on the basis that the two plaintiffs are affiliates and are affiliates of ADT companies in the USA. [^2]: I agree with this position: Expedition Helicopters Inc. v. Honeywell Inc. (2010), 2010 ONCA 351, 100 OR (3d) 241, para. 24 (C.A.). [^3]: RJR MacDonald Inc. v. A.G. Canada, 1994 CanLII 117 (SCC), [1994] 1 SCR 311. [^4]: Sharpe, Injunctions and Specific Performance, para. 1.990. [^5]: Just as an injunction may be refused on an interlocutory basis but may still be ordered as a final remedy: Sharpe, Injunctions and Specific Performance, para. 1.990.