COURT FILE NO.: CV-18-595918

DATE: 20180607

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Delta Power Equipment Ltd., Plaintiff/Moving Party

AND:

Kubota Canada Ltd., Defendant/Responding Party

BEFORE: H. McArthur J.

COUNSEL: Ian Flett, appearing as counsel for the Plaintiff/Moving Party

John Contini, appearing as counsel for the Defendant/Responding Party

HEARD: June 7, 2018

ENDORSEMENT

H. MCARTHUR J.:

Introduction

1Delta Power Equipment Ltd. is a farm equipment dealer with 10 locations in Ontario. Kubota Canada Ltd. is a farm equipment manufacturer. Delta sells Kubota products at three of its dealerships. One of those dealerships is in Sparta, Ontario. Delta and Kubota entered into a dealership agreement with respect to the Sparta location that specified that the agreement would terminate after two-years. The agreement also stipulated that either side could terminate the agreement with 90-days’ notice. Kubota gave notice to Delta pursuant to the agreement that it intends to terminate the Sparta dealership agreement. Delta now brings a motion for injunctive relief to enjoin Kubota from terminating the Sparta dealership agreement.

2For the reasons that follow, I have determined that the motion for an injunction should be dismissed. Given the need for the parties to have an answer quickly, and since argument took place today, I do not intend to outline the facts. Instead, I will refer to the facts as necessary in my analysis, to which I now turn.

Analysis

(i) Preliminary Issue: Can Delta obtain injunctive relief since it has not commenced a proceeding with the Agriculture, Food and Rural Affairs Tribunal?

3As the Supreme Court made clear recently in R. v. Canadian Broadcasting Corp., 2018 SCC 5, at para. 24, an injunction is not a stand-alone remedy. An injunction is generally a remedy ancillary to a cause of action.

4In the present case, while Delta has filed a Statement of Claim in this court, it does not seek injunctive relieve in relation to that action. Rather, it asserts that it is seeking injunctive relief “until a final determination of all disputes” between Delta and Kubota “currently before the Agriculture, Food and Rural Affairs Tribunal (AFRAAT), including all appeals therefrom.”

5Delta intends to argue that the termination is contrary to mandatory provision in the Farm Implements Act, R.S.O. 1990, c. F.4 and accompanying Ontario Regulation 123/06. The Regulations set out the conditions under which a distributor may terminate or refuse to renew a dealership agreement. The Regulations provide that these terms are mandatory and that any provision in a dealership agreement that limits, varies or attempts to waive those terms is void.

6As noted by Delta, the AFRAAT is a specialized tribunal, particularly well-placed to deal with issues relating to the purported termination of a dealership agreement, whether the reasons advanced for termination are reasonable, and the interplay between the Farm Implements Act, the Regulations, and the dealership agreement.

7The difficulty for Delta, is that there are no proceedings between Delta and Kubota currently before the AFRAAT. Nor has Delta taken steps to pursue the issue of the termination of the Sparta Agreement under the Farm Implements Act. Delta has not attended for mediation as provided for by s. 5(3) of the Farm Implements Act. Thus, it has obviously not taken the next step provided for in s. 5(5), which provides that if the parties to a dispute are unable to resolve the issue with the assistance of a mediator any of the parties to the mediation may apply to the Tribunal for a hearing.

8Delta argues that it has not taken those steps yet, because the decision of Chesterman Farm Equipment Inc. v. CNH Canada Ltd., 2016 ONSC 698 - which deals with similar issues- has been under reserve at the Court of Appeal since October, 2017. Delta thus argues that it makes sense to wait for the decision of the court before starting a proceeding at the tribunal.

9I have some difficulty with this submission. The factual matrix is quite different in the present case than in Chesterman. The analysis of the interplay between the dealership agreement and the provisions of the Farm Implements Act and the Regulations may well be approached in a different way, given the distinct facts. I do not see the Chesterman case as a valid reason for Delta to fail to begin the process of having its dispute addressed by the Tribunal, which again, is particularly well-suited to deal with the issues that present in this case.

10But even if Delta reasonably determined that it would be the best use of resources to hold off on starting a proceeding in the Tribunal, I do not think that assists Delta with respect to its efforts to obtain an injunction. Again, as the court made clear in Canadian Broadcasting Corp., at para. 25, “An injunction is not a cause of action, in the sense of containing its own authorizing force. It is, I repeat, a remedy.” Here, the request for injunctive relieve is not linked to a cause of action or proceeding. Delta is asking for a remedy that is not ancillary to any cause of action. In my view, the motion must be dismissed on this ground.

11In the event that I am wrong on this point, however, I now turn to consider the test to be applied when determining if injunctive relief should be granted.

(ii) The Applicable Test

12The test for granting an interlocutory injunction is well established. In general, the moving party must show that (1) there is a serious question to be tried; (2) the moving party will suffer irreparable harm if the injunction is not granted; and (3) the balance of convenience favours the granting of the injunction: RJR-MacDonald v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at para. 43.

13I say in general, as the Supreme Court recently clarified in Canadian Broadcasting Corp., at paras.16-18, that the first prong of the test is different when a party is seeking a mandatory injunction. In such a case:

The applicant must demonstrate a strong prima facie case that it will succeed at trial. This entails showing a strong likelihood on the law and the evidence presented that, at trial the applicant will be ultimately successful in proving the allegations set out in the originating notice.

14In written submissions, both sides relied on the serious question to be tried test. In oral submissions, Kubota took the position Delta was actually seeking a mandatory injunction. This is because, if successful, Kubota will be required to maintain a business relationship with Delta and provide them with farm equipment. Given that it is a mandatory injunction, Kubota argues that the stricter test applies. Delta counters that it is seeking a restraining injunction, and thus the serious question to be tried test applies.

15I will thus first consider whether the strong prima facie test applies.

1) Is Delta seeking a mandatory injunction, such that Delta must demonstrate a strong prima facie case that it will succeed at trial?

16As noted by the Court in Canadian Broadcasting Corp. at para. 16, “…distinguishing between mandatory and prohibitive injunctions can be difficult, since an interlocutory injunction framed in prohibitive language may “have the effect of forcing the enjoined party to take … positive actions”. That is the case here. While framed as a restraining injunction, the effect of any such injunction being granted means that Kubota will have to take positive action, such as supplying its products to Delta. Thus, I agree that what is being requested is in essence a mandatory injunction, which means that the more stringent test would apply.

17In my view, Delta has failed to establish that it has a strong likelihood of success on the law and evidence. The factual context is important. In August 2016, Kubota advised Delta that if it bought the Sparta location, it would not maintain a dealership agreement with Delta. It set out its reasons for the refusal as required by s. 3(6)(1) of the Regulations. Under s. 3(6)(3) the dealer shall be allowed 15 days from receipt of the notice to address any concerns underlying the refusal. It is unclear if Delta did anything to address the concerns within that 15 day time period.

18Instead, on December 1, 2016, Delta sent a letter to Kubota, proposing that Kubota provide Delta with a limited 24-month contract, which would not be subject to any extensions. The agreement stipulated that either party could terminate the agreement by giving 90-days’ notice. Delta and Kubota signed the agreement on January 20, 2017.

19The argument advanced by Delta is that the parties were not free to opt out of the mandatory provisions set out in the Farm Implements Act and Regulations. To the extent that the agreement provides that Kubota can terminate the agreement, without complying with those provision, the agreement is void. In my view, however, given the context, in which Delta essentially proposed the deal that was agreed to, it may be difficult for it to claim that the contract is void.

20In any event, an argument can be advanced by Kubota that the agreement complied with s. 2(3) of the Regulations. This subsection provides that “the dealership agreement may be terminated with the consent in writing of both the distributor and the dealer”. Thus, while in my view Delta has a case to make, I cannot find that it has a strong likelihood of success.

21In the event that I am wrong that this should be viewed as a mandatory injunction, I now turn to consider whether there is a serious question to be tried, before turning to the other two parts of the test.

2) Is there a serious question to be tried?

22The threshold for establishing if there is a serious question to be tried is a low one that will generally be met if it can be shown that the application is neither vexatious nor frivolous. If satisfied that the application is neither vexatious nor frivolous, then the motions judge should proceed to consider the second and third tests, even if the motions judge is of the opinion that the plaintiff is unlikely to succeed at trial. A lengthy and involved examination of the merits is “generally neither necessary nor desirable”: RJR-MacDonald, at paras. 49-50.

23I am satisfied that the application is neither vexatious nor frivolous. Whether or not the provisions of the Farm Implement Act and the Regulations which deal with contracts supersede the dealership agreement signed by the parties is arguable.

3) Will Delta suffer irreparable harm if the injunction is not granted?

24As explained in RJR-MacDonald at para. 59, irreparable refers to the nature of the harm suffered rather than its magnitude. It encompasses harm that either cannot be quantified in monetary terms or harm that cannot be cured because of the inability to collect damages from the other side. The moving party is required to adduce clear and non-speculative evidence that irreparable harm will be suffered if the injunction is refused: The Regents of the University of California et al. v. I-Med Pharma Inc., 2016 FC 606, at para. 33.

25Delta argues that if the injunction is not granted, it will suffer irreparable harm in two ways. First, if the dealership agreement is terminated, customers and potential customers will conclude that Delta “… is going broke”, which will have an adverse impact on Delta’s standing and reputation in the small farming communities it serves. Second, irreparable harm will flow from Delta’s lost costs and the lost opportunity of pursuing a partnership with Kubota, a “project which Delta invested 11 million dollars” in by purchasing the Sparta location. I will address each in turn

26First, I am not persuaded by the submission that Delta will suffer irreparable harm to its standing and reputation. Delta makes a bald assertion that its customers will think it is going broke if it loses the right to sell Kubota products at its Sparta location, but does not provide any evidence in support. The assertion is based on speculation. Moreover this claim seems implausible for two reasons. First, Delta does not sell Kubota at seven of its 10 locations. Second, sales of Kubota products only amount to 18% of the total sales at the Sparta location and 1.47% of Delta’s total sales. Given that Delta sells many other brands of farm equipment, it is difficult to accept that its customers would believe it was going bankrupt if it stopped selling Kubota products at the Sparta location.

27Second, I am not satisfied that Delta will suffer irreparable harm from lost costs or lost opportunity with Kubota. With respect to lost costs, Delta failed to provide any specifics of lost investments, apart from an $8,000 sign that had been installed. General claims were made about money invested in preparing the Sparta location with signs, advertising material and custom tools that work only on Kubota machines. Any such costs, however, are easily quantifiable in monetary terms.

28With respect to the claim of lost opportunity, when Delta entered into the dealership agreement with Kubota, it knew that Kubota had already taken the position that it did want a long-term commitment with Delta. The claim about lost opportunity for expanding business with Kubota is inconsistent with the lead-up to the agreement.

29In any event, any lost business opportunity can be adequately addressed with monetary damages. Josie Sisler, the CEO of Delta, testified that in her opinion, the lost future potential flowing from Kubota terminating the agreement would be about $1,833,333 million. Thus, if the injunction is not granted, Delta would not suffer irreparable harm as any damages can be addressed monetarily.

4) Does the balance of convenience favour granting of the injunction?

30When assessing the balance of convenience, the court should consider which of the two parties will suffer the greater harm from the granting or refusal of the injunction, pending a determination on the merits. The factors to consider will vary in each individual case: RSJ-McDonald, at paras. 62-63.

31I have found that Delta will not suffer any irreparable harm if I decline to order the injunction. Any losses it suffers can be compensated monetarily. On the other hand, Kubota will be adversely impacted if I grant the injunction. The injunctions sought by Delta would effectively tie Kubota’s hands in its dealing in and around Delta’s territories.

32Moreover, the injunction would be in effect for an unknown period of time. Delta has yet to start any process at the Tribunal. Delta could not say when it would start the process, saying that it would depend on when the Court of Appeal rules in Chesterman, and what it decides. The uncertainty of timing, which stems from Delta’s failure to take steps towards starting the Tribunal process, militates towards finding that the balance of convenience favours Kubota.

Conclusion

33Delta links its claim to injunctive relief to proceedings at the Agriculture, Food and Rural Affairs Tribunal. Delta, however, has failed to commence proceedings at the Tribunal. In my view, the motion should be dismissed on this basis.

34Alternatively, I find that Delta is seeking a mandatory injunction. As a result, the first test is whether Delta has a strong prima facie case. While I find that Delta has an arguable case, I am not persuaded that it has a strong likelihood of success at trial.

35In the alternative, if the proposed injunction is properly characterized as prohibitive, I accept that Delta has established that there is a serious question to be tried. That said, I find that Delta would not suffer irreparable harm if the injunction is denied. Moreover, I find that the balance of convenience favours Kubota and denying the injunction.

36Balancing all of the factors, I have determined that the motion for an injunction must be dismissed.

Costs

37I encourage the parties to see if they can agree on costs with respect to this motion. If the parties are unable to agree on costs, Kubota shall serve and file with my office written costs submissions within 15 days. Delta shall serve and file with my office any responding costs submissions within 15 days thereafter. The written submission shall not exceed three pages in length, excluding the Costs Outline.