Weston Gardens Retirement Inc. v. 2540250 Ontario Ltd., 2019 ONSC 2663

Court File and Parties

COURT FILE NO.: CV-19-617708 DATE: 201904 30 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Weston Gardens Retirement Inc. AND: 2540250 Ontario Limited

BEFORE: Nishikawa J.

COUNSEL: Stephen Schwartz, for the Applicant Jeffrey Levine and Guneev Bhinder, for the Respondent

HEARD: April 24, 2019

Endorsement

Overview

1The Applicant, Weston Gardens Retirement Home Inc. (“Weston Gardens”), brings this Application for an injunction to enforce a restrictive covenant to preclude the Respondent, 2540250 Ontario Limited (“254”), from operating a retirement home.

2The Application proceeded on a short timeline, resulting in some ambiguity as to whether the Applicant was seeking an interlocutory or permanent injunction. The relief sought in the Notice of Application includes an “interim, interlocutory and permanent injunction” as well as damages. No separate motion for interlocutory relief was brought. At the hearing, Applicant’s counsel advised that, the Applicant seeks interlocutory or permanent injunctive relief, but that the issue of damages would be deferred to a later date. Respondent’s counsel had proceeded on the understanding that the Applicant was seeking interlocutory relief.

3I adopt the reasoning of Templeton J. in Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc., 2018 ONSC 7589 at paras. 106-107, where he noted that the test for a permanent injunction is different from the test for interlocutory injunctive relief, and that permanent relief can only be granted after a final adjudication. In order to obtain a permanent injunction, the Applicant must establish its legal rights. This cannot be adjudicated on the record before me, as there are highly contested factual issues, as further detailed below.

4The Applicant has failed to meet the test for an interlocutory injunction. As the Application raises further issues that cannot be determined at this stage, the balance of the Application is adjourned.

Factual Background

5The Applicant, Weston Gardens Retirement Inc. (“Weston Gardens”), carries on business as a retirement home at the property municipally known as 303 Queens Drive, Toronto. Weston Gardens purchased the existing building and business in November 2013 for a price of $9.3 million and made substantial improvements to the property.

6Weston Gardens is licensed as a retirement home by the Retirement Homes Regulatory Authority (the “RHRA”) and provides services and amenities to its residents, as well as short-term accommodations for individuals recovering from surgery. These individuals are often referred to the home by nearby hospitals or rehabilitation facilities. Weston Gardens views its location as key to its success, because many residents are from the neighbourhood or have family in the area.

7A nearby property at 265 Queens Drive, Toronto (the “Property”) is subject to a restrictive covenant which prohibits the use of the Property as a seniors and/or long-term care housing, including a retirement home. The restrictive covenant was registered on September 13, 2011, for a period of ten years, for the benefit of the owner of 303 Queens Drive.

8In August 2017, the Respondent, 2540250 Ontario Limited (“254”) acquired the Property. 254 was aware of the restrictive covenant when it acquired the Property. 254 is the general partner of QD Realty Holdings LP (“QD Realty”). In February 2019, QD Realty obtained a licence from the RHRA and opened a retirement home known as Queens Estate at the Property. Queens Estate operates under the brand “Metta Lifestyles” which has other retirement homes. For ease of reference, the retirement home will be referred to as “Queens Estate” and the company will be referred to as 254. 254 describes Queens Estate as a “complex care facility” offering services such as a dementia care program and assistance with feeding.

9254 submits that QD Realty’s Chief Executive Officer, Astrum Nanji, contacted Weston Gardens’ President, Samuel Posner, in October 2017 and obtained Weston Gardens’ consent to operate a retirement home at the Property.

10Weston Gardens denies this. It maintains that during a meeting between Mr. Nanji and a representative of Weston Gardens, Allan Silber, on October 19, 2018, Mr. Nanji stated that 254 had not yet decided what business it would operate at the Property and would contact Mr. Silber when it decided. 254 alleges that this statement was intended to mislead Mr. Silber in order to prevent Weston Gardens from moving to obtain an injunction before Queens Estate was operational.

Analysis

Has the Applicant Met the Test for an Interlocutory Injunction?

11In order to obtain an interlocutory injunction, a moving party must satisfy the well-known test from RJR-MacDonald v. Canada (Attorney General), [1994] 1 S.C.R. 311 at para. 48, which requires that:

(i) There is a serious question to be tried; (ii) The moving party will suffer irreparable harm if the relief is not granted; and (iii) The balance of convenience favours granting the injunction.

The Parties’ Positions

12Weston Gardens argues that 254 breached the restrictive covenant by opening a retirement home at the Property. The Applicant denies that it consented. Weston Gardens alleges that it will suffer irreparable harm if an injunction is not granted because Queens Estate is a competing retirement home with a new, renovated facility less than 180 metres away from Weston Gardens. Weston Gardens alleges that it will suffer a loss of goodwill and market share, and that its reputation will be damaged.

13254 maintains that Weston Gardens consented to it opening a retirement home at the Property. 254’s further argues that Weston Gardens cannot demonstrate irreparable harm because Queens Estate is not a competing retirement home, since it caters to a different clientele and offers services that Weston Gardens is not licensed to provide. 254 submits that any potential harm to Weston Gardens is not irreparable, and can be compensated by damages.

Serious Question

14At the first stage, the question is whether the claim is frivolous or without merit, and the court does not engage in a prolonged examination of the merits: RJR-MacDonald at para. 55. The Respondent acknowledges that for the purposes of interlocutory injunctive relief, Weston Gardens has met this low threshold.

Irreparable Harm

15Irreparable harm is harm that “cannot be quantified in monetary terms or which cannot be cured.” RJR McDonald at para. 59.

16The case law makes clear that proof of irreparable harm must be clear and not speculative: Curran Farm Equipment Ltd. v. John Deere Ltd., 2011 ONSC 3791 (Div. Ct.) at para. 16. The obligation is on the plaintiff to put forward sufficient evidence to establish irreparable harm: Paradigm Shift Technologies Inc. v. Oudovikine, 2012 ONSC 148 at paras. 54-55.

17Weston Gardens argues that in cases involving a clear breach of a negative covenant, there is a presumption of irreparable harm or the irreparable harm standard may be relaxed. See Canpages Inc. v. Quebecor Media Inc.; Pet Valu Canada Inc. v. 138114 Ontario Ltd., 2013 ONSC 5361 at para. 10.

18However, in Stop’N Cash 1000 Inc. v. 1553785 Ontario Ltd at para. 9, the Divisional Court stated: “[u]ntil the Supreme Court has spoken again, we must follow the RJR criteria faithfully. See also, MD Management Ltd. v. Campbell, 2010 ONSC 6373 (Div. Ct.) at para. 5. Weston Gardens must provide clear evidence of irreparable harm. Moreover, based on the contradictory evidence regarding Weston Gardens’ consent, it cannot be said that this case involves a clear breach of a negative covenant.

19Weston Gardens alleges that the harm caused by 254’s breach of the restrictive covenant is irreparable because:

• Unfair competition and loss of market share cannot easily be quantified because of the fluidity in the resident base and the multiple factors that determine an individual’s choice of retirement home;
• Weston Gardens will suffer a loss of reputation and goodwill in the form of decreased referrals from hospitals and other facilities when they discharge patients to retirement homes;
• Queens Estate will cause a decrease in available parking in the area, which will make families less likely to choose Weston Gardens; and
• Weston Gardens’ staff may choose to seek employment with Queens Estate, leading to a loss of staff.

20Numerous cases have found that lost sales or market share can be compensated in damages. While such damages may be difficult to calculate, they nonetheless can be quantified in monetary terms: Curran Farm Equipment at paras. 16-17; Paradigm Shift at para. 54. In MD Management Ltd. v. Campbell, 2010 ONSC 2315 at para. 33, Grace J. found that calculating a loss of clients in the highly regulated investment industry would not be insurmountable. In Wonderland Power, which involved the enforcement of a restrictive covenant on a neighbouring property, Templeton J. refused the injunction because he was not convinced that the alleged harm to the plaintiff could not be cured of quantified in monetary terms (at para. 98).

21Weston Gardens states that it suffered a seven percent drop in occupancy in March 2019, after Queens Estate opened. Based on the numbers provided, the drop in occupancy is closer to 5.5 percent. This decrease is not directly attributable to Queens Estate, however, because none of the residents of Queens Estate came from Weston Gardens. The numbers show that Weston Gardens’ occupancy rates fluctuate a few percentage points from month to month, but have consistently remained above 93 percent.

22As a regulated entity, Weston Gardens keeps detailed records of residents’ arrivals and departures, as well as the referring institutions. While it may be difficult to calculate a loss of residents to Queens Estate, it is nonetheless harm that would be quantifiable. See MD Management, 2010 ONSC 2315 at para. 26.

23Weston Gardens claims that it will suffer a loss of reputation and goodwill, however, the evidence supporting this claim is speculative. Weston Gardens has not explained how its reputation, which has been established a reputation over a period of years, would be negatively affected by Queens Estate’s presence. While a risk of being put out of business could constitute irreparable harm, Weston Gardens has not alleged or provided evidence that Queens Estate threatens its continued existence: 2256598 Ontario Inc. v. World Bowl Entertainment Centre Inc., 2013 ONSC 3097 at para. 24.

24In respect of a potential loss of staff, to date, two Weston Gardens’ employees applied to work at Queens Estate. They were not hired by Queens Estate because 254 has undertaken not to hire any Weston Gardens staff and has implemented a policy to this effect. In relation to parking, Queens Estate has 38 spaces of its own parking on the Property and visitors to Queens Estate do not need to park on the street. Weston Gardens has not provided evidence of visitors being unable to find parking.

25Based on the foregoing, Weston Gardens has failed to demonstrate that it will suffer irreparable harm if the injunction is not granted.

Balance of Convenience

26Weston Gardens argues that the balance of convenience weighs in favour or granting an injunction because Queens Estate has only been open for two months, and has filled 40 of the 120 spots available. Weston Gardens further submits that because 254 opened Queens Estate with full knowledge of the restrictive covenant, it took a calculated risk and should not be entitled to benefit from that choice. EasyFinancial Services Inc. v. EZMoney Tario Inc., 2016 ONSC 17177 at para. 55-57, aff’d 2018 ONSC 1542 (Div. Ct.).

27The evidence shows that the forty residents of Queens Estate all require either dementia care services or assistance with feeding. Weston Gardens recognizes that if an injunction is granted, the residents cannot simply be forced to move elsewhere, and that some process may have to be put in place. The Applicant has not suggested that the residents could be moved to Weston Gardens, likely because it is not currently licensed to provide the required services. As a facility that provides dementia care, Queens Estate has secured exits to prevent patients wandering off the Property. Weston Gardens is not a secured facility.

28I agree with Weston Gardens’ submission that 254 has been able to establish a “foothold” in the same community, which the restrictive covenant was intended to protect against. Moreover, the evidence of Weston Gardens’ consent is equivocal. Nonetheless, now that there are forty residents requiring significant levels of care that Weston Gardens would not be able to provide, an injunction enforcing the restrictive covenant would be unduly harmful to vulnerable third parties who have no involvement in this litigation. Moreover, in the event that Weston Gardens is ultimately unsuccessful on the Application, the residents will have been moved out of Queens Estate needlessly.

29While this litigation is between two private parties, the public interest in protecting the residents of Queens Estate is a relevant factor when weighing the balance of convenience. See Bell Canada v. Cogeco Cable Canada, 2016 ONSC 6044 at para. 40. I find that the balance of convenience weighs against granting an injunction because the harm to the Respondent in granting the injunction exceeds the harm to the Applicant in not granting the injunction.

30In the context of this litigation, Mr. Nanji has stated that “if this court deemed it necessary, 254 would undertake to refrain from accepting residents that Weston Gardens could accommodate through to the end of September, 2021 when the restrictive covenant expires to guarantee for Weston Gardens that the Queens Estate is not competing with it for that period.” Weston Gardens’ position is that such an undertaking would be impossible to enforce due to patient confidentiality and privacy. An undertaking of this nature, at least until the final adjudication of the Application, would appear to address some of the concerns raised by Weston Gardens.

Conclusion

31Based on the foregoing, the Application for an interlocutory injunction is dismissed, and the balance of the Application is adjourned.

32Counsel submitted their costs outlines at the hearing. The Respondent’s costs on a partial indemnity basis total $39,231.20, including disbursements of approximately $2,686.00 and HST. The Applicant’s costs were $30,970.00, including disbursements of approximately $2,022.79 and HST.

33Pursuant to the Courts of Justice Act, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the Court when determining the issue of costs.

34I have considered these factors, as well as the principle of proportionality in R. 1.01(1.1) of the Rules of Civil Procedure, while keeping in mind that the Court should seek to balance the indemnity principle with the fundamental objective of access to justice. The Respondent was successful in defending against the Application. Neither party has taken steps to unduly lengthen the proceeding, which appears to have been conducted in an efficient and cooperative manner. I fix costs on a partial indemnity basis at $35,000.00, inclusive of disbursements and HST, payable by the Applicant to the Respondent within thirty days.

Nishikawa J.