COURT FILE NO.: CV-18601710 DATE: 2018/12/04 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Loan Away Inc. Plaintiff – and – Western Life Assurance Company Defendant

Elliot Birnboim and Michael Crampton, for the Plaintiff Arthur Hamilton and Laurie Livingstone, for the Defendant Christiaan Jordaan, for IWS Creditor Group Inc.

HEARD: November 14, 2018

H. Sachs J.

Introduction

[1] The Plaintiff, Loan Away Inc. (“Loan Away”), had an agreement with the Defendant, Western Life Assurance Company (“Western”). Pursuant to that agreement Loan Away was permitted to market Western insurance policies to its customers. In return Loan Away was to receive payments from Western. Western stopped making payments to Loan Away and terminated the agreement between them. As a result, Loan Away commenced an action against Western and brought a motion seeking an injunction to require Western to make the payments to them it had not been making and to prevent Western from terminating the insurance policies that Loan Away had sold on its behalf.

[2] In response to the motion for an interlocutory injunction, Western brought a motion seeking to stay the action on the basis of an arbitration clause contained in the agreement at issue. Western acknowledges that its motion for a stay does not affect this court’s ability to grant interim or interlocutory injunctive relief.

[3] Loan Away opposes the motion for a stay, but argues that if any issues are referred to arbitration, this court should order that that arbitration be joined with an ongoing arbitration between IWS Creditor Group Inc. (“IWS”) and Western. To this end, Loan Away has brought a motion seeking leave to amend its Statement of Claim to add IWS as a party.

[4] IWS was a party to the agreement between Loan Away and Western, but that agreement contained no financial terms between Loan Away and IWS. IWS’s role was to act as agent and administrator for Western in connection with the delivery of the Western insurance policies that Loan Away marketed to its customers. The financial terms that IWS is subject to are set out in a separate contract between IWS and Western, a contract that Loan Away is not a party to. IWS and Western are engaged in arbitration concerning the contract that exists between the two of them. It is that arbitration that Loan Away seeks to join if this court orders that any issues in its dispute with Western should be subject to arbitration.

[5] Both Western and IWS oppose Loan Away’s request to join the ongoing arbitration between them. They argue that this court has no jurisdiction to grant such a request. IWS also opposes Loan Away’s request to add it as a party to the action that Loan Away has commenced against Western. The proposed amendments to that claim make it clear that Loan Away is not claiming any relief as against IWS.

[6] For the reasons that follow I would dismiss Loan Away’s request for an interlocutory injunction on the basis that Loan Away did not give an undertaking as to damages and that the evidence it did put forward did not satisfy the requirements for granting the relief it is seeking. I would grant Western’s request that the action as against it be stayed and that the issues in that action be referred to arbitration in accordance with the terms of the dispute resolution clause set out in the agreement between Loan Away and Western. Western and Loan Away have an issue concerning the arbitrator’s jurisdiction to grant Loan Away a permanent (as opposed to an interlocutory) injunction. In my view that issue should be referred to the arbitrator for determination. I would deny Loan Away’s request that its arbitration with Western should be joined to an existing private arbitration between IWS and Western. In the absence of consent this court has no power to grant such relief. If I had not stayed the action I would have denied Loan Away’s request to amend its Statement of Claim to add IWS as a party to that proceeding. IWS is not a necessary party to that proceeding and Loan Away has pleaded no tenable cause of action against IWS. Since Western has not yet delivered a Statement of Defence, Loan Away would have been free to make the other amendments it wishes to make to its Statement of Claim.

Factual Background

[7] Loan Away is in the business of offering small short term loans to consumers throughout Canada. Western is an insurance company with its head office in Winnipeg, Manitoba and operations based in Winnipeg and in High River, Alberta.

[8] In December of 2016, Loan Away and Western entered into an agreement with IWS entitled “Marketing Agreement for Group Creditor Insurance Plan LA001”, dated effective December 1, 2016 (the “Marketing Agreement”). The purpose of the Marketing Agreement was to allow Loan Away to market Western group creditor insurance to Loan Away customers who wished to obtain insurance coverage for their loans. As already noted, IWS’s role under the Marketing Agreement was to serve as agent and administrator for Western in connection with the delivery of its policies. As put by Loan Away in its factum “IWS often acted as the operational ‘interface’ between Western and Loan Away.”

[9] The Marketing Agreement refers to a Group Policy. Loan Away is the policy holder under the Group Policy. It enrols its borrowers as certificate holders under the Group Policy. In the event a certificate holder provides a proof of claim under the Group Policy, the benefits of their claim are paid directly to Loan Away.

[10] The Marketing Agreement provides that Loan Away is to collect premiums due under the Western policies as part of the total loan obligation of the borrower. Loan Away is also obligated to remit to Western a portion of the premiums collected that exceeds Western’s share of the premiums. By virtue of this excess, Western accumulated a “reserve” of such payments from Loan Away. Western was obligated to remit a portion of this reserve back to Loan Away on a monthly basis (the “Contingent Compensation”).

Termination Clauses Contained in the Marketing Agreement and Group Policy

[11] The Marketing Agreement contained a number of termination clauses that are relevant to this motion.

[12] The first enabled Western to terminate the Marketing Agreement in the event of a material breach of its obligations under the agreement. Before exercising its right to terminate in this manner Western was obligated to notify Loan Away of the breach and give Loan Away 10 days to cure the breach. This is set out at Article 11.1 (b) of the Marketing Agreement that provides as follows:

Notwithstanding anything in this Agreement to the contrary, and in addition to the other termination provisions set out herein, upon the happening of any one or more of the events set forth in Section 11.1, Western Life will have the right, in addition to any other right or remedy it may have at law or in equity, to immediately terminate this Agreement upon written notice to [Loan Away]:

(b) if [Loan Away] commits a Material Breach of any of its obligations under this Agreement and fails to cure such Material Breach within ten (10) days following receipt of written notice of such Material Breach from Western Life.

[13] The second enabled Western to terminate in the event that Loan Away breached any “Applicable Law”. This right is found at clause (k) of Article 11.1 of the Marketing Agreement, which provides as follows:

(k) If [Loan Away] fails to perform its obligations, including without limitation, any compliance obligations, under this Agreement in accordance with Applicable Law…

[14] “Applicable Law” is a defined term under the Marketing Agreement and includes any orders issued by any regulatory bodies. Unlike the termination clause for material breach, the termination clause for failure to comply with all applicable laws does not contain a notice requirement that would allow Loan Away to rectify the breach.

[15] The Group Policy referenced in the Marketing Agreement is Western Group Master Policy Number LA001, which has an effective date of January 5, 2015. Section 1 of the Group Policy allows both Loan Away and Western to terminate the Group Policy for any reason on 180 days’ notice to the other. It reads as follows:

Termination Provision

For a period of 2 years from the effective date, this Policy may be terminated by either party subject to the terms and conditions listed in Sections 1.1 and 1.2 and thereafter at any time and for any reason by giving the other party at least one hundred and eighty (180) days prior written notice of termination; …

Western Terminates the Marketing Agreement

[16] In September of 2017, the Financial Institutions Commission of British Columbia (“FICOM”) issued an order prohibiting Western group creditor insurance from being marketed or sold in British Columbia by non-financial institutions and non-asset based lenders, including Loan Away (the “FICOM Order”).

[17] Western notified Loan Away in writing of the FICOM Order in September of 2017 and advised it that effective immediately and until further notice, Loan Away could not offer Western group creditor insurance for sale in the province of British Columbia.

[18] In December of 2017, Western discovered that Loan Away had violated the FICOM Order by selling Western group creditor insurance to consumers in British Columbia on four occasions. In a letter dated December 5, 2017, Western confirmed to Loan Away that it had breached the FICOM Order and that it had agreed to take certain steps to address the consequences of those breaches. Western also advised Loan Away that it would be reporting the breaches to FICOM.

[19] In February of 2018 Western discovered that Loan Away had violated the FICOM Order an additional 14 times by continuing to market Western group creditor insurance to customers in British Columbia.

[20] In February of 2018 Western ceased remitting Loan Away’s monthly Contingent Compensation. On March 7, 2018, Western notified Loan Away in writing that it was terminating the Marketing Agreement effective March 31, 2018 because of Loan Away’s repeated breaches of the FICOM Order. According to Western, it was entitled to terminate the Marketing Agreement immediately upon written notice under s. 11.1(k) of that agreement (the section providing for immediate termination if Loan Away fails to comply with any Applicable Law.).

Events Following Western’s Termination of the Marketing Agreement

[21] After it delivered its notice of termination in March of 2017 Western hired private investigators to see if Loan Away was violating the Marketing Agreement by requiring customers to purchase insurance in order to obtain a loan. According to Western, those investigations revealed that Loan Away was in fact engaging in this practice, which was prohibited by s. 3.2(d) of the Marketing Agreement that required Loan Away to “ensure that the Group Creditor Insurance Plan is Marketed to prospective insured persons as voluntary and is not a requirement in order to obtain for loan from [Loan Away].”

[22] Loan Away continued to collect premiums from its policy holders and remit them to Western until June of 2018, when it stopped remitting premiums. According to Loan Away it stopped remitting premiums because Western had stopped paying it its Contingent Compensation.

[23] In March of 2018, Loan Away began looking for a replacement insurance company to issue policies for new Loan Away business. To that end, on March 23, 2018, it entered into a contract with Canada Premium Life Insurance Company (“CPL”) and Premium Services Group (“Premium”). On May 7, 2018, Loan Away received a communication from Premium with a list of the various steps it had to complete in order to implement its contract with CPL. Those terms included “confirmation that all Western Life material, except claim forms, has been destroyed or returned to IWS” and a “requirement to stay current with Western Life remittances.” When Loan Away complained about the inclusion of these terms, Premium removed them.

[24] On July 17, 2018, Loan Away commenced this action against Western.

Western Terminates the Group Policy

[25] On August 22, 2018, Western wrote to Loan Away advising it that it was exercising its option to terminate the Group Policy on 180 days’ notice. That letter advised that the termination would be effective as of February 22, 2019 (which is slightly more than 180 days). The letter also specified that it was to serve as notice of termination under s. 3.5 of the Marketing Agreement, which provides as follows:

The Group Policy will at all times be and remain under the sole control and responsibility of Western Life, and Western Life may deal with the Group Policy in any manner that it chooses, including, without limitation, ….cancelling or terminating the Group Policy; provided however, that the Group Policy will not be cancelled or terminated unless and until Western has given [Loan Away] at least one hundred and eighty (180) days’ prior written notice of such cancellation or termination.

Loan Away’s Application for an Injunction Pending Resolution of its Claims

[26] In its Amended Notice of Motion, Loan Away sought the following injunctive relief:

(a) An interim order, pending the return of the interlocutory relief sought in the Statement of Claim, or pending the determination of this matter, restraining the Defendant from terminating the contracts of insurance sold by the Plaintiff to borrowers on behalf of the Defendant;

(b) An interlocutory order, pending determination of this matter;

(i) Restraining the Defendant from terminating the contracts of insurance sold by the Plaintiff to borrowers on behalf of the Defendant; and

(ii) Requiring the Defendant to;

(1) Remit to the Plaintiff the improperly withheld amount due under the parties agreement; or, in the alternative

(2) To pay such amount into Court.

Interim or Interlocutory Injunction

[27] Loan Away’s Amended Notice of Motion requests both an interim order (an order pending completion of cross-examinations) and an interlocutory order (an order pending trial) restraining Western from terminating the insurance contracts. However, at the hearing of this matter Loan Away’s counsel appeared to take the position that he was seeking an interim as opposed to an interlocutory injunction.

[28] Loan Away’s counsel cross-examined Western’s deponent on October 15, 2018. That cross-examination ended abruptly when Loan Away’s counsel walked out of the room, apparently frustrated by what he perceived as being the illegitimate objections and interjections by Western’s counsel.

[29] I have reviewed the transcript of this cross-examination and while it does contain some acrimonious exchanges, it does not in my view disclose conduct by Western’s counsel that would justify terminating the examination. In any event, if that was the view of Loan Away’s counsel, the proper course of action would have been to bring a motion to compel reattendance and to deal with the issues that had arisen in the cross-examination. Instead, Loan Away’s counsel has chosen to say that because he did not get an opportunity to cross-examine in the way he wished I should treat his request for relief as interim as opposed to interlocutory (which, according to him, requires a lower evidentiary threshold).

[30] Neither counsel’s materials contain a request for further cross-examinations. Western did not seek to cross-examine Loan Away’s deponent and Loan Away did not pursue the remedies it had to seek further cross-examinations. Thus, I am treating the evidentiary record as complete and I am assessing Loan Away’s request as a request for interlocutory, not interim, relief.

No Undertaking as to Damages

[31] Loan Away did not file an undertaking as to damages. Instead, it asked me to dispense with the need for such an undertaking. The basis for this request is the fact that Western has not paid Loan Away any Contingent Compensation under the Marketing Agreement since February of 2018. According to Loan Away, Western is improperly holding $1.4 million of its money and “it would be perverse to require Loan Away to provide an undertaking for damages.”

[32] Rule 40.03 of the Rules of Civil Procedure states:

40.03 On a motion for an interlocutory injunction or mandatory order, the moving party, shall, unless the court orders otherwise, undertake to abide by any order concerning damages that the court may make if it ultimately appears that the granting of the order has caused damage to the responding party for which the moving party ought to compensate the responding party.

[33] In support of its request to dispense with its undertaking as to damages Loan Away relies on the decision of McEwen J. in Cardinal v. Cleveland Indians Baseball Company Limited Partnership, 2016 ONSC 6929, 134 O.R. (3d) 340. That case concerned an application for interim or interlocutory relief by an Indigenous person seeking to restrain the use of certain logos that used the word “Indian” pending the hearing of his human rights application. In that case the applicant did not file an undertaking as to damages and the respondents sought to have his application dismissed on that basis. The motion judge refused to dismiss the application and stated the following at para. 28:

The parties generally agree that there is no meaningful undertaking that Mr. Cardinal could provide to compensate the respondents with respect to the damages that they would sustain if the injunction was granted. While it is exceptional to grant an injunction without an undertaking, I agree with Mr. Cardinal’s submission that greater flexibility ought to be granted in cases such as this one which have broader public interest significance and which concern human rights as opposed to commercial and pecuniary interests. These types of cases are unlike commercial cases where such an undertaking ought to be filed absent extenuating circumstances. This application is similar to that dealt with by Justice D. Brown (as he then was) in Batty v. City of Toronto, 2011 ONSC 6785, 342 D.L.R. (4th) 121. In Batty, he dispensed with the need to file an undertaking given the Charter-based nature of the relief sought by the applicants. This application invokes quasi-constitutional issues of similarly broad significance.

[34] Unlike Cardinal or Batty, this is not a Charter case or a case which has public interest significance and concerns human rights. This is a dispute between two commercial parties. In such cases, as McEwen J. noted, an undertaking ought to be filed, absent extenuating circumstances. As Glustein J. found in Catalyst Capital Group Inc. v. Moyse, 2015 ONSC 4388, at paras. 10 and 1, in commercial cases, an undertaking as to damages is almost invariably required and in the absence of such an undertaking the court will dismiss the motion for an injunction.

[35] In this case Loan Away asserts that there are extenuating circumstances that justify this court making an order that the undertaking required under the rules should be dispensed with. The circumstance put forward is the fact that Western has not paid Loan Away its Contingent Compensation. I do not agree that this constitutes the type of circumstance that would justify making an exception to the ordinary rule. First, section 12.6 of the Marketing Agreement between the parties contemplates that, upon delivery of a notice of termination, Western ceases to be obligated to pay Contingent Compensation. Eventually, once the existing policies expire, there will be an accounting between the parties and at that point Western may pay Loan Away a share of the Contingent Compensation it is holding. Second, Loan Away has provided no authority to support its contention that this kind of circumstance is the kind of circumstance that would warrant the rare exception of being relieved from the obligation to provide an undertaking as to damages.

[36] In my view, Loan Away’s failure to provide an undertaking is a sufficient basis on which to dismiss its request for interlocutory injunctive relief. However, in the event that I am wrong in reaching this conclusion, I will go on to consider the other factors that must be satisfied before interlocutory injunctive relief can be granted.

Mandatory or Prohibitive Injunction

[37] The first part of the test for granting an interlocutory injunction is different if the injunction being sought is mandatory rather than prohibitive in nature. If the injunction is prohibitive the moving party must demonstrate that there is a serious question to be tried. If it is mandatory, the moving party must demonstrate a strong prima facie case that it will succeed at trial (R. v. Canadian Broadcasting Corp., 2018 SCC 5, 417 D.L.R. (4th) 587).

[38] Whether an injunction is mandatory or prohibitive is not determined by the language used in the moving party’s motion materials. It is determined by the substance of what is being requested:

Ultimately, the application judge, in characterizing the interlocutory injunction as mandatory or prohibitive, will have to look past the form and the language in which the order sought is framed, in order to identify the substance of what is being sought, and, in light of the particular circumstances of the matter, “what the practical consequences of the…injunction are likely to be.” In short, the application judge should examine whether, in substance, the overall effect of the injunction would be to require the defendant to do something, or to refrain from doing something. (Canadian Broadcasting, at para. 16.)

[39] One aspect of the relief sought by Loan Away is clearly mandatory in nature. It is a request that Western do something, i.e., remit to Loan Away the Contingent Compensation that it has withheld. The other relief sought is framed as prohibitive relief, i.e., a request that Western be restrained from terminating the insurance policies that Loan Away has sold to its borrowers. However, in substance this is a request that Western rescind its notice of termination of the Group Policy and continue to do business with Loan Away. As such, Western is being asked to do something. This makes the request a request for a mandatory order.

[40] This conclusion is consistent with prior cases involving requests for injunctive relief in similar situations. In Delta Power Equipment Ltd. v. Kubota Canada Ltd., 2018 ONSC 3595, Delta Power and Kubota entered into a dealership agreement respecting the sale of farm equipment. Kubota (the farm equipment manufacturer) gave notice to Delta Power that it intended to terminate the agreement, which contained a provision allowing either party to terminate the agreement on 90 days’ notice. Delta Power applied for injunctive relief to enjoin Kubota from terminating the agreement. The court found that the request was a request that Kubota take positive action, such as continuing to supply its products to Delta. Thus, it was, in essence a request for a mandatory injunction.

[41] In Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., [2002] O.J. No. 4116 (S.C.) the plaintiff had an exclusive distributorship agreement with the defendant, which the defendant purported to terminate. The plaintiff applied for an interlocutory injunction to restrain the defendant from terminating the agreement and the court found that “[the] plaintiff’s motion can be characterized as a request for a mandatory injunction requiring the defendant to continue their distributorship agreement until trial” (para. 1).

Has Loan Away Satisfied the First Part of the Test for a Mandatory Injunction?

[42] In Canadian Broadcasting the Supreme Court of Canada ruled that, in order to satisfy the strong prima facie case requirement, the court must be satisfied, after a preliminary review of the case, “that there is 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” (para. 17).

[43] In this case Western terminated the Marketing Agreement because of a breach of the FICOM Order by Loan Away. There is no issue that these breaches occurred. There is also no issue that the Marketing Agreement contains a clause allowing Western to terminate the agreement if Loan Away fails to comply with Applicable Law. Finally, it is not disputed that the definition of “Applicable Law” in the agreement would include the FICOM Order. Thus, on its face, Western was entitled to terminate the Marketing Agreement. Once it did so it was entitled to withhold any Contingent Compensation that Loan Away was owed until a final accounting under the agreement occurred after the existing policies expired. Loan Away was required to continue to remit premium payments to Western until the policies covered by the agreement had expired.

[44] Loan Away argues that Western had no right to terminate the Marketing Agreement because the breaches of the FICOM Order were not serious and Loan Away took immediate steps to remedy those breaches once they were discovered. Loan Away also submits that Western had no right to terminate the agreement on the basis of these breaches because in order to do so they had to give notice to Loan Away of the breaches and give Loan Away an opportunity to remedy those breaches.

[45] Loan Away’s arguments would have merit if Western had terminated the Marketing Agreement under the section that provides for termination in the event of a material breach. That section requires that the breach be material, that notice be given of the breach, and that Loan Away be given an opportunity to remedy the breach (see ss. 11.1(b) of the Marketing Agreement). However, Western did not terminate under ss. 11.1(b); it terminated under ss. 11.1(k). Subsection 11.1(k) contains no materiality requirement and no requirement that Loan Away be given an opportunity to remedy the breach. It does contain a requirement for written notice (which was satisfied). Western is entitled to terminate immediately upon written notice in the event that Loan Away “fails to perform its obligations, including without limitation any compliance obligations, under this Agreement in accordance with Applicable Law…” (emphasis added). Further s. 3.2(g) of the Marketing Agreement requires Loan Away to comply with all Applicable Law. Thus, Western’s actions in terminating the Marketing Agreement were in compliance with the terms of that agreement.

[46] Western terminated the Group Policy on 180 days’ notice. Again, the terms of the Group Policy were clear. It could be terminated by either party on at least 180 days’ notice to the other. Further, the Marketing Agreement makes specific reference to the fact that the Group Policy can be cancelled if Western gives 180 days’ notice to Loan Away. Again, on the face of it, Western’s termination of the Group Policy was done in accordance with the contract between the parties.

[47] Loan Away submits that Western terminated both contracts in bad faith, as part of a “money grab” for the Contingent Compensation that it owed Loan Away and in revenge for Loan Away’s actions in commencing this proceeding. Loan Away reinforces its argument in this regard by alleging that Western intentionally interfered with its contractual relations with the new insurance provider that it sought to engage.

[48] With respect to the allegations of bad faith the record does not reveal a strong prima facie case that Western’s actions were somehow improperly motivated. It did not seek to withhold any Contingent Compensation until after it discovered that Loan Away had breached the FICOM Order another 14 times, which resulted in their decision to terminate the Marketing Agreement. Once notice to terminate was delivered, it was entitled to withhold Contingent Compensation. While one might be able to argue that Western should not have withheld the Contingent Compensation in February (since it only delivered notice to terminate in March), this is a far less egregious breach of the Marketing Agreement than Loan Away’s failure to remit any collected premiums or taxes after June of 2018 to the present date. If the Agreement was extant (which Loan Away argues), Loan Away was obligated to remit these payments. If the Agreement was terminated, the Marketing Agreement required Loan Away to continue to collect and remit premiums on all the surviving policies until their terms expired.

[49] In terms of the decision to terminate the Group Policy, Western did not have to give a reason for this termination. Further, it is not surprising that it would want to end its business relationship with Loan Away when it was not complying with its obligations and when it was suing them.

[50] With respect to the allegation that Western somehow committed the tort of intentional interference with contractual relations, the record does not disclose a basis for finding that the tort was committed. Premium withdrew the disputed terms, namely that Loan Away stay current with its remittances to Western Life, and the contract with the new insurance company was entered into. While one might argue that the term should not have been a part of the new contract, the term did not require Loan Away to do anything other than comply with its obligations under its terminated agreement with Western. It is also not clear from the record how the term came to be suggested.

[51] Finally, as the recent decision of the Supreme Court of Canada in Churchill Falls (Labrador) Corp. v. Hydro-Quebec, 2018 SCC 46, the concept of good faith between the parties cannot be used “to undermine the contract’s paradigm.” As put by the court “good faith takes its form from the terms of the contract” (para. 120). In this case Western did no more than act in accordance with the terms of the contract.

[52] For these reasons I find that Loan Away has not satisfied the first part of the test for an interlocutory mandatory injunction.

Has Loan Away Satisfied the Second Part of the Test for A Mandatory Injunction?

[53] The second part of the test requires Loan Away to demonstrate the existence of harm that cannot be compensated for by damages if an injunction is not granted.

[54] Loan Away alleges two kinds of harm in this regard. The first is that if the Group Policy is terminated there will be existing borrowers who will be left without insurance coverage. The second is that, by virtue of this circumstance, there will be damage to Loan Away’s reputation.

[55] With respect to the borrowers or certificate holders, the terms of coverage stipulate that if the Group Policy is terminated the certificate holders are to be notified a minimum of 31 days in advance of coverage terminating. That notice provision is included in the terms of coverage of the Group Policy and is also included in the certificates of insurance that Loan Away provided to all certificate holders. Thus, the harm to the certificate holders that Loan Away claims is irreparable is specifically contemplated in their contracts.

[56] More problematic, however, is that the harm would accrue to the certificate holders, not to Loan Away, who is the one applying for the injunction. If the certificate holders are unable to pay their loans because of a lack of insurance, Loan Away might suffer harm, but it is a harm that is entirely compensable in damages.

[57] Loan Away argues that it will suffer harm to its reputation that could not be compensable in damages. However, its material filed on the motion contain no allegation of this nature. As noted in Catalyst Capital, at para. 34, “Evidence of irreparable harm must be clear and not speculative. It is not enough to show that a moving party ‘is likely’ to suffer irreparable harm; one must establish that he or she ‘would suffer’ irreparable harm.” An assertion of irreparable harm in oral argument without a supporting evidentiary record cannot meet this threshold.

[58] For these reasons I find that Loan Away has not met the second part of the test for an interlocutory injunction.

The Third Part of the Test for Injunctive Relief – Balance of Convenience

[59] When a moving party fails to provide sufficient evidence of irreparable harm, it is difficult to establish that the balance of convenience favours granting the injunction (see Catalyst Capital, at para. 39.) Further, courts have expressed a strong preference against forcing parties to continue in business together when trust has been lost between them. As put in Barton-Reid, at para. 10:

I must also keep in mind that courts are generally reluctant to order mandatory interlocutory injunctions when to do so will force parties to continue in business together when there is a complete lack of trust between them. The court must address the practical feasibility of such a judicially imposed arrangement.

[60] It is evident from the tone and content of the materials, particularly Loan Away’s materials, that there is a complete lack of trust between the parties.

Conclusion re Interlocutory Injunction

[61] For these reasons I find that Loan Away has not met the requirements of the test for the granting of interlocutory mandatory injunctive relief.

Western’s Motion to Stay the Action

The Dispute Resolution Clause

[62] The contract between the parties, the Marketing Agreement, contains a mandatory dispute resolution clause that requires disputes concerning any matter governed by the agreement to be dealt with by mediation, followed by arbitration if mediation is not successful. That clause reads as follows:

14.18 Dispute Resolution

If any dispute occurs between the Parties concerning any matter governed by this Agreement, the disputing Party will promptly advise the other Party in writing and the Parties together will use commercially reasonable efforts to resolve the dispute informally. If the Parties are unable to resolve the dispute informally, within ten (10) Business Days of one Party advising the other of the dispute, either Party may send a written request for formal resolution of the dispute to the other Party. Within thirty (30) days after receipt of such written request, the Parties will meet for one day with a mutually agreed upon mediator in Winnipeg, Manitoba and if the Parties are unable to resolve the dispute through such mediation, then the dispute will be settled by arbitration, with no right of appeal, even on questions of law, pursuant to the National Arbitration Rules of the ADR Institute of Canada, Inc.. The arbitration proceedings will take place in Winnipeg, Manitoba, unless otherwise mutually agreed by the Parties. The language of the arbitration will be English. This Section 14.18 will not apply to disputes under Article 13 or Section 14.5 or to any dispute involving an application for a temporary restraining order or other forms of injunctive relief. Under no circumstances, including non-payment of amounts in dispute, may either Party cease to perform its obligations under this Agreement in accordance with the terms and conditions hereof and the Group Policy while any dispute is being resolved.

[63] The exceptions provided for in the Dispute Resolution clause, namely Articles 13 and 14.5, do not apply in this case. Article 13 concerns “Indemnity” and Article 14.5 concerns “Confidentiality”. The exception for an application for temporary injunctive relief does apply and that is why I have dealt with that claim.

[64] The Marketing Agreement also contains a governing law clause that provides that the “Agreement will be governed by and construed in accordance with the laws of Alberta and the laws of Canada applicable thereto.”

Section 7 of the Arbitration Act

[65] Section 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 provides as follows:

If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

[66] The Alberta Arbitration Act contains an identical provision. All of the disputes at issue, except for the request for injunctive relief, are matters that the Marketing Agreement requires be submitted for arbitration. Therefore, section 7(1) would require that the action be stayed.

[67] Loan Away submits that a stay should not be granted for two reasons – the action contains a request for a permanent as well as an interlocutory injunction and it would be unfair for it to have to litigate the same issues in two forums.

[68] As already noted, the Marketing Agreement’s Dispute Resolution clause contains an exception for requests for a temporary restraining order or other forms of injunctive relief. Loan Away argues that its request for a permanent injunction falls under the category of “other forms of injunctive relief”. Western responds by saying that the operative word in the exception is “temporary” and it is meant to apply to requests for temporary as opposed to permanent forms of injunctive relief.

[69] In Dancap Productions Inc. v. Key Brand Entertainment Inc., 2009 ONCA 135, [2009] O.J. No. 572, at para. 32 the Ontario Court of Appeal confirms that where it is “arguable” that a dispute falls within the terms of an arbitration agreement, the court should grant a stay and refer the issue of jurisdiction to the arbitral tribunal. In this case, it is arguable whether a request for a permanent injunction falls within the terms of the arbitration agreement and therefore the matter should be referred to the arbitrator for determination.

[70] With respect to the issue of fairness, since all of the remaining issues will be referred for arbitration there is no danger that Loan Away will have to litigate in two separate forums. Further, the possibility of having to litigate in two separate forums is expressly contemplated by both the Ontario and Alberta Arbitration Acts. Both contain a clause allowing for the court to stay the proceeding with respect to the matters dealt with in the arbitration agreement and allowing it to proceed with respect to other matters if the matters can reasonably be separated.

[71] Loan Away relies on the decision of the Alberta Court of Appeal in New Era Nutrition Inc. v. Balance Bar Company, 2004 ABCA 280, 245 D.L.R. (4th) 107, in support of its position that its claim should proceed and any arbitration stayed. In that case the Court of Appeal stayed the arbitration rather than the litigation. It did so because of two factors that are not present in this case. The litigation included claims for relief against parties who were not a party to the arbitration and numerous steps had been taken under the litigation (including examinations for discovery), which had been in place for two years. Here there are no requests for relief against any parties other than Western. While Loan Away seeks to add IWS as a party, its claim makes no claim for relief against IWS. Further the litigation is at its early stages; pleadings have not even been completed.

[72] Thus, I would stay the action in this case.

The Request that any Arbitration Be Consolidated With the Existing Arbitration Between IWS and Western

[73] As already indicated, IWS and Western were parties to a contract that Loan Away was not a party to. Disputes arose between them and an arbitration concerning those disputes is being conducted in Ontario. Loan Away seeks to have the arbitration between it and Western consolidated with that arbitration. In doing so it argues that the factual issues in both arbitrations will overlap.

[74] Section 8(4) of the Arbitration Act contains a clause allowing a court to make orders consolidating two arbitrations. The Alberta legislation contains an identical provision. However, the wording of the section is clear. The order can only be made “on the application of all the parties to more than one arbitration.” In this case the only party who is seeking consolidation is Loan Away. Both IWS and Western object to the order. Thus, I have no jurisdiction to make the order requested.

Loan Away’s Request to Amend its Statement of Claim to Add IWS as a Party

[75] As already noted, Loan Away requested an order granting it leave to amend its Statement of Claim to add IWS as a defendant. IWS opposed the order. While it is not necessary for me to deal with the request (given that I have stayed the action) I will do so for the sake of completeness only.

[76] Rule 5.03(4) provides that a court “may order that any person who ought to have been joined as a party or whose presence as a party is necessary to enable the court to adjudicate effectively and completely on the issues in the proceeding shall be added as a party.”

[77] Rule 5.04(2) provides that “[a]t any stage of a proceeding the court may by order add…a party…on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.”

[78] In order to add a party under either of these rules a tenable cause of action must be pleaded against the party sought to be added (with respect to Rule 5.03(4) see Vaughn v. Ontario (Minister of Health), [1996] O.J. No. 1647 and with respect to Rule 5.04(2) see Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74 (S.C.)).

[79] The materials filed by Loan Away in support of its motion do not identify IWS rights that could be affected by the litigation between Loan Away and Western. They make no allegations of wrongdoing on the party of IWS and they do not state a cause of action against IWS. The proposed Amended Statement of Claim states only that “IWS is an interested party” in the litigation because it was “affected” by the conduct of Western. It identifies no reason why IWS is a necessary party to the litigation.

[80] Loan Away has not satisfied the requirements for an order seeking to amend a claim by adding a party.

Conclusion

[81] For these reasons I am dismissing Loan Away’s motion for interlocutory injunctive relief. I am also making an order staying Loan Away’s action against Western and denying Loan Away’s request to consolidate the arbitration between it and Western with the arbitration that is ongoing between IWS and Western. Failing agreement, the parties may make submissions in writing on the question of costs. Western and IWS shall file their submissions within 10 days of the release of these reasons and Loan Away shall have 10 days thereafter to respond.