Court File No. CV-15-5793-0000
SUPERIOR COURT OF JUSTICE
B E T W E E N:
RASHID HAROON Plaintiff
- and -
SUPERMARKET CLEANING MANAGEMENT INC., CREED NATION HOLDINGS INC. JOANNA CREED, JEREMY CREED and JACK CREED Defendants
R E A S O N S F O R J U D G M E N T
BEFORE THE HONOURABLE JUSTICE W. LE MAY on April 12, 2018, at BRAMPTON, Ontario
APPEARANCES:
J. W. Irving Counsel for the Plaintiff
C. Yamashita Counsel for the Defendants
SUPERIOR COURT OF JUSTICE
T A B L E O F C O N T E N T S
REASONS FOR JUDGMENT PAGE 1
Legend [sic] – indicates preceding word has been reproduced verbatim and is not a transcription error. (ph) – indicates preceding word has been spelled phonetically.
Transcript Ordered: April 13, 2018 Transcript Completed: April 26, 2018 Ordering Party Notified: April 26, 2018
THURSDAY, APRIL 12, 2018
R E A S O N S F O R J U D G M E N T
LE MAY J. (Orally):
The plaintiff, Rashid Haroon ran a dry cleaning operation under a sub-agreement with at least some of the defendants. This agreement was terminated by the defendants on December 3, 2015. On December 29, 2015, the plaintiff obtained an ex parte injunction from Emery J. That injunction reads as follows:
"On reading the affidavit of Rashid Haroon, sworn December 22, 2015, and on hearing the submissions of counsel for the plaintiff:
This court orders that the defendants are restrained from selling or disposing of the retail outlet "the dry cleaner" located at 55 Mountainash Road, Brampton, Ontario (the location) pending the outcome of this action.
This court orders that the defendants deposit all funds received from the gross sales at the location since December 3, 2015, into a separate bank account and not to release or disburse any funds from that account pending the outcome of this action.
This court orders that, in the event the defendants have already sold or disposed of the location, the defendants shall deposit all funds received in that regard, together with an amount equal to the gross sales from the location since December 3, 2015 in the account to the Superior Court of Justice pending the outcome of this action.
3(a). This court orders that the plaintiff, Rashid Haroon, shall file a written undertaken as to damages with the court by 4:00 p.m. on Monday, January 4, 2016. Failure to do so shall result in a deemed revocation of paragraphs 1, 2 and 3 of this order ab initio.
This order shall expire on Friday, January 8, 2016, at 4:00 p.m. unless renewed or continued by further order of this court. Accordingly, this motion is adjourned to 10:00 a.m. on Friday, January 8, 2016.
This court orders that the plaintiff's costs of this motion shall be reserved to the presiding justice who hears the motion once all defendants have been served.
It is common ground between the parties that this injunction has continued in force until today. The plaintiff seeks to continue the injunction and seeks further compliance with that injunction. The defendant seeks to have it dissolved.
BACKGROUND FACTS
A. The Plaintiff
The plaintiff is a businessman who operated a dry cleaning location called The Dry Cleaner ("TDC") at 55 Mountainash Road, Brampton. This dry cleaner was located in a grocery store. The plaintiff acquired the location in April of 2008 and operated it until December 3rd of 2015. He had a previous business of a similar nature in a Loblaws store.
B. The Defendants
The personal defendants Joanna, Jeremy and Jack Creed all appear to be involved in the operation of the business in one way or another. They have an agreement through their companies, the corporate defendants Supermarket Cleaning Management Inc. ("SCMI") and Creed Nation Holdings Inc. ("CNHI"), with Loblaws stores to run dry cleaning businesses in the Loblaws store. This gives them the right to run locations and the right to sublet agreements to run particular locations.
C. The Seizure of the Business and the Allegations
On December 3, 2015, SCMI terminated Haroon's sublease and took over the business. No compensation was paid. This decision was made on the defendants' evidence because of alleged irregularities. In particular, the defendants allege that the plaintiff had been breaching the agreement by not reporting all his revenue and by sending some cleaning to another company.
The plaintiff says in turn, however, that he had only been noted in default for this alleged breach once but three noted in default incidents were required to terminate the contract. The plaintiff further argues that the seizure of his asset in terms of the licensing agreement was done improperly and that he was improperly not compensated for it. He also alleges that this was done to benefit the defendants.
D. The Proceedings To Date
A statement of claim has been served and a defence has been filed. On December 29, 2015, an order was obtained from Justice Emery restraining the defendants from selling and disposing of the dry cleaning business. I have described that order above. However, the business had previously been sold by the defendants in December 2015 to another third party [indiscernible]. As a result, paragraph 3 of Justice Emery's order was applicable. I have set it out above.
However, it also appears that the proceeds of the sale of the licence were used by the defendants to pay various debts owing to Loblaws. Certainly, there was a very clear receipt of funds and the payment of the funds the next day. I make no final findings of fact on exactly what happened with this money or why it was dealt with.
The defendants continue to have the agreement with this business to operate the store but do not receive the money directly except for the licensing fees. The defendants have also paid certain monies into court. The total amount that has been paid into court is $84,164.42. The litigation has not progressed beyond the pleading stage, although at the end of these reasons I will outline a timetable that will result in the action being tried 10 months from now.
ISSUES
There are two issues to be determined in this case:
whether the injunction should be continued; and,
what is meant by paragraph 3 of the order in light of the sale of business.
In my view, the second issue only arises if the plaintiff is successful on the first issue.
ARGUMENTS
The plaintiff argues that the test in RJR-MacDonald applies and that this test allows for an injunction to be granted in this case. Plaintiff's counsel also argues that he has a strong prima facie case; that he would suffer irreparable harm if an injunction would not be granted because of the fact that his life savings were taken by the defendants and taken wrongfully by the defendants; and, that the balance of convenience also favours granting the injunction. He also argues, in essence, that he meets the Mareva Injunction test as well.
The defendants' argue that this is a Mareva Injunction, and in the alternative, a mandatory injunction. The defendants argue that the plaintiff cannot meet the strong prima facie case required by the Mareva Injunction test and also argue that other elements of the Mareva Injunction test cannot be met. In the alternative, the defendants argue that the plaintiff cannot meet the RJR-MacDonald test for a prohibitive injunction.
ANALYSIS AND CONCLUSIONS
A. The Difference Between the Types of Injunctions
The test for a standard prohibitive injunction is set out in RJR-MacDonald v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311. There are three parts to this test.
The applicant must show that there's a serious issue to be tried;
The applicant must show that they will suffer irreparable harm if the injunction's not granted; and
The applicant must show that the balance of convenience favours granting the injunction.
The test for Mareva Injunction, however, is more stringent. One formulation of that test is set out in Brigham v. Oralife Group Incorporated, 1999 Carswell Ontario 868 Ontario Court of Justice (General Division). At paragraphs 34 and 35 of that case the court states:
34 The issue on this motion is whether the plaintiffs have met the requirements for a Mareva injunction. It is a drastic and extraordinary remedy and runs counter to the principle that there can be no execution before judgment and no judgment before trial. There is a profound unfairness in tying up assets, interfering with a persons right to deal with his assets indefinitely pending trial of an action which may not succeed or which may result in an award for an amount less than the frozen assets. The court should avoid such orders if they might permit a plaintiff to force, by blackmail or litigation, settlements on defendants who cannot afford to await ultimate vindication at trial.
35 A restraint against disposition of assets may be obtained under s. 101 of the Courts of Justice Act and Rule 40 if:
The plaintiff makes full and frank disclosure of all material matters in its knowledge.
The plaintiff gives particulars of its claim while fairly stating the defendant's case.
The plaintiff establishes that it has a strong prima facie case on the merits, after considering the points made by the defendant.
There are grounds for believing the defendant has assets in the jurisdiction.
There is a real and genuine risk that the defendant's assets will disappear or will be removed from Canada, to avoid judgment or frustrate tracing or execution.
The plaintiff will suffer irreparable harm if the order is not granted.
(a) The plaintiff has undertaken to abide by an order to compensate the defendant for any damages suffered by the defendant if it ultimately appears that the restraining order ought not to have been granted; and
(b) the plaintiff has sufficient assets to fulfil such an undertaking.
- The court should be sensitive to inconveniencing third parties and their freedom of action generally.
This is clearly a higher test than the test required for an injunction under the RJR-MacDonald principles.
Third, in terms of positive injunction there is a argument that a strong prima facie case is required. This requirement is described by the Court of Appeal in Cytrynbaum v. Look Communications Inc., 2013 ONCA 455. In that decision, at paragraph 54, the Court of Appeal states:
It is widely accepted that this type of preliminary merits-based assessment is distinct from a final determination of the dispute. When preliminary or interlocutory orders require some assessment of the merits (including, for example, motions for interlocutory injunctions, motions for leave to proceed after the expiry of procedural time periods or motions for a stay pending appeal), the court is cautioned against attempting to make anything approaching a final determination of the issue. The court typically looks to see if the case is "arguable", "raises a serious issue to be tried" or is "not frivolous and vexatious". If a preliminary or interlocutory order will have drastic consequences (including, for example, an interlocutory mandatory injunction or a Mareva or Anton Piller order), the bar is raised to the level of "strong prima facie case".
It is clear that a strong prima facie case requires a higher likelihood of success than a serious issue to be tried. When these two tests are considered, however, there are some common similarities and elements.
B. Which Test Applies?
I do not intend to answer the question of which test applies for two reasons. First, I can dispose of this case on the irreparable harm and the balance of convenience elements. Irreparable harm is clearly common to both tests. Balance of convenience is also something the court will have to wrestle with in one way or another regardless of which test applies. As will be seen later in the reasons, neither element is met in this case.
Second, and more importantly, assessing which test applies could require me to opine in some significant way on the merits of this case. In particular, counsel for the defendants vigorously argued that the plaintiff does not meet the strong prima facie case. However, counsel for the defendants also rightly conceded that there was a serious issue to be tried in this case.
The merits are a matter that are going to have to be resolved at trial. I do not want to comment on them except to note that it is clear that there is a serious issue to be tried in this case. It is also unclear to me whether the plaintiff can meet the standard of a strong prima facie case as described Justice R. Smith in Best Theratronics Ltd. V. Canadian Nuclear Laboratories Ltd., 2015 ONSC 7993. In that case, Justice Smith described, at paragraph 42, the test of a strong prima facie case. He stated,
"The test for obtaining a mandatory injunction was set out by the Ontario Court of Appeal in Cytrynbaum v. Look Communications, 2013 ONCA 455 at paragraph 54 which held that the test to obtain a mandatory injunction was more onerous than for other injunctive relief, namely the moving party must show a strong prima facie case rather than just a serious issue to be tried. This means that the moving party must show that it is 'almost certain to succeed on the merits' in order to obtain a mandatory injunction."
As I have said, it is not clear to me whether or not it is almost certain that the plaintiff will succeed on the merits, but it is also not clear to me that they will not almost certainly succeed on the merits. That is a question for trial.
C. Irreparable Harm
A claim for repossession of the lease is not sought in this case. It is a case claim for damages. As Mesbur J. noted in Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., an unreported decision dated September 25, 2002. At paragraph 18 she stated,
"Although perhaps difficult, the damages can be calculated. If the nature of the damage can be calculated in money, then no matter how hard it may be to quantify the damages, the court should decline to grant an injunction."
In this particular case, Mr. Irving argues that his client's life savings have been taken improperly by the defendants and that this represents an irreparable harm if he does not get them back. There are two responses to this argument. First, as I have noted, the merits in this case are not completely clear to me; and second, savings are a matter that can be compensated in damages. In addition, touching on the Mareva test for a moment, I do not see on the evidence in this case a real and genuine risk of assets being dissipated in this case and I reach that conclusion because the defendants have 60 plus outlets that they are managing, they are resident in Canada, it appears to be a viable business, and there does not appear to be any evidence before me to establish that they are likely to depart the jurisdiction.
D. The Balance of Convenience
As I have noted, there will have to be a trial in this issue. The balance of convenience therefore, in my view, favours leaving the money in the hands of the defendants until the plaintiff establishes his claim for damages.
CONCLUSION
For these reasons, the injunction is dissolved. However, a timetable, as I noted, is required.
To that end I am ordering the following:
a) a defence to the counterclaim is to be filed within 30 days of my decision;
b) affidavits of documents are due 30 days after the close of pleadings;
c) any other pleadings are to be filed in accordance with the time limits under the Rule;
d) discoveries are to be completed 90 days after the affidavits of documents are due;
e) a trial date is to be set for four days for the week of February 25, 2019.
That brings me to the subject of costs and to the end of the formal reasons.
...END OF EXCERPT
FORM 2
Certificate of Transcript (Subsection 5(2))
Evidence Act
I, Janet M. Gautier, certify that this document is a true and accurate transcript, to the best of my skill and ability of the recording of the proceedings in Haroon v. Supermarket Cleaning Management Inc., et al, in the Superior Court of Justice held at 7755 Hurontario Street, Brampton, Ontario, taken from Recording No. 3199_212_20180412_093010__30_LEMAYW.dcr, which has been certified in Form 1.
(Date) (Signature of Authorized Person)
Janet M. Gautier
ACT ID: 2283791662
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