Court File and Parties
COURT FILE NO.: CV-20-00649-870 DATE: 20200513 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Courtney Campbell, Applicant AND: 1493951 Ontario Inc. and Tri-Echo Restaurants Inc., Respondents
BEFORE: Davies J.
COUNSEL: Russell Bennett, for Mr. Campbell Raj Sharda, for 1493951 Ontario Inc. Ryan Wilson, for Tri-Echo Restaurants Inc.
HEARD: May 12, 2020
Endorsement
[1] Until recently, Courtney Campbell operated 1Tonamara Cannabis Boutique, a retail cannabis store and bakery in Brampton, Ontario. His store opened in January 2019 and he sold cannabis to recreational and medical users.
[2] Mr. Campbell sub-leased the store from Tri-Echo Restaurants Inc. He had an oral agreement with the principal of Tri-Echo, Lawrence Tjan, that gave him possession of the property until April 30, 2021.
[3] 1493951 Ontario Inc. owns the property where Mr. Campbell operated his cannabis store and bakery. Rehan Chaudary is a director and officer of 143951 Ontario Inc.
[4] On March 17, 2020, the Ontario government declared a state of emergency in response to the COVID-19 public health crisis. Several regulations have been passed since then to identify which businesses can remain open during the state of emergency and how they must operate. O. Reg. 82/20 permits any business to operate remotely for the purpose of providing “goods by mail or other forms of delivery or making goods available for pick-up”. O. Reg. 128/20, which came into effect on April 7, 2020, deals specifically with licenced cannabis retailers and also permits authorized retail stores to offer curb-side pick-up and delivery services.
[5] On April 5, 2020, Mr. Campbell closed his in-store operations but continued to provide delivery and curb-side pick up, ostensibly under the authority of O. Reg. 128/20.
[6] On April 21, 2020, the Peel Regional Police executed a search warrant at Mr. Campbell’s business and seized 3.3 kg of marijuana. Four individuals were charged under the Cannabis Control Act for unlawfully selling cannabis. Neither Mr. Campbell nor his business were charged.
[7] After the police completed their investigation, Mr. Chaudary changed the locks on Mr. Campbell’s business and took possession of the premises. Mr. Campbell has brought an application for an Order granting him relief from forfeiture and re-entry into his business. He also seeks an interim Order granting him relief from forfeiture pending the hearing of his application.
[8] On May 11, 2020, Justice Myers ruled that Mr. Campbell’s application is urgent as defined in the Notice to the Profession issued by Chief Justice Morawetz on March 15, 2020. I convened a case management call on May 11, 2020. A hearing was scheduled for May 12, 2020 to allow counsel for 1493915 Ontario Inc. to prepare responding materials and to allow Mr. Tjan to retain counsel on behalf of Tri-Echo Restaurants Inc. On May 12, 2020, I heard argument on Mr. Campbell’s request for interim relief from forfeiture.
[9] The Respondents oppose Mr. Campbell’s request for interim relief from forfeiture. Both take the position that Mr. Campbell is operating an illegal cannabis store. 1493951 Ontario Inc. argues that Mr. Campbell has breached the lease between Tri-Echo Restaurants and 1493951 Ontario Inc., which states that the tenant will “comply with the requirements of all laws, ordinances, rules and regulations of the federal, provincial and municipal authorities”.
[10] Mr. Campbell, on the other hand, takes the position that his business is not illegal. He argues that he meets the three part-test for interim injunctive relief articulated by the Supreme Court of Canada in RJR MacDonald v. Canada (Attorney General), [1994] 1 S.C.R. 311. He argues that there are serious issues to be tried on his application. He also argues that he and his employees and customers will suffer irreparable harm in the form of lost profits and lost wages if he is not permitted to resume operations. He also argues that the balance of convenience favours allowing him to continue to operate his retail store pending the final resolution of this proceeding.
[11] Mr. Campbell is seeking interim relief akin to an interlocutory injunction. Therefore, the test set out by the Supreme Court of Canada in RJR MacDonald applies. However, I am not satisfied that Mr. Campbell has met the test and his application for an interim order is dismissed.
[12] There are several serious issues raised by Mr. Campbell’s application including whether his sub-lease agreement with Tri-Echo Restaurants is valid, whether 1493951 Ontario Inc. consented to the sub-lease agreement, whether Mr. Campbell was given appropriate notice of the forfeiture and whether Mr. Campbell has been or should be given an opportunity to cure any breach of the lease. I, therefore, find that Mr. Campbell has satisfied the first branch of the RJR MacDonald test.
[13] The real issue on this motion for interim relief is whether Mr. Campbell has established that he will suffer irreparable harm if he is not permitted to resume operations and whether the balance of convenience favours granting him the relief sought.
[14] The sale of cannabis for recreational purposes is a highly regulated industry in Ontario. A retail operator licence and a retail store authorization are required to open a retail store and sell cannabis for recreational purposes in Ontario. Each retail cannabis store is also required to have a licensed retail manager. The required licenses and authorizations are issued by the Alcohol and Gaming Commission of Ontario. Mr. Campbell does not have and has never applied for any license or authorization to sell recreational cannabis in Ontario.
[15] The sale of cannabis for medical use is regulated by Health Canada. A license is also required to sell medical cannabis. Mr. Campbell does not have a license to sell cannabis for medical purposes either.
[16] Mr. Campbell believes that the current regulatory regime in Ontario is discriminatory. He also objects to requirement under s. 18 of the Cannabis Licence Act that licensed cannabis retailers only sell cannabis that was purchased from the Ontario Cannabis Retail Corporation. Mr. Campbell feels that he can offer better quality cannabis products to his customers by buying them directly from the producers rather than through the provincially regulated wholesaler. In other words, Mr. Campbell does not like the regulatory regime that has been set up in Ontario for the sale of cannabis and has chosen to not apply for the necessary licenses or authorizations.
[17] In the affidavit filed in support of his request for interim relief, Mr. Campbell states that he has “claimed an exemption to the Cannabis Control Act, 2017”. What Mr. Campbell has actually done is advise the Peel Regional Police and the City of Brampton that he is operating a retail cannabis store and that he feels he should be exempt from the requirements of the Cannabis Licence Act and the Cannabis Control Act. Mr. Campbell has not sought an exemption from the government or the Court. Nor has he brought a legal challenge to the regulatory regime.
[18] Mr. Campbell now takes the position that because he has asserted that he should be exempt from the licensing regime and because his company has never been charged with violating any act, his business is operating legally. I disagree.
[19] There are very clear regulatory requirements for operating a legal retail cannabis store in Ontario. Mr. Campbell has chosen not to comply with those requirements. He has been running a retail cannabis store without the required licenses and authorizations since January 2019. The fact that the business has not been charged or convicted under either the Cannabis Control Act or the Cannabis Licence Act does not change the fact that he does not have the required authorizations or an exemption from the regulatory requirements. Simply asserting an exemption does not create a lawful exemption. On the record before me, I am not satisfied that Mr. Campbell was operating a legal cannabis store before 1493951 Ontario Inc. changed the locks on April 21, 2020.
[20] I accept that Mr. Campbell’s business employed a large number of people. His employees have all been out of work since 1493951 Ontario Inc. changed the locks on April 21, 2020. Undoubtedly, the abrupt closure of the store has had a devastating impact on them and their families. It will be very difficult for his employees to find other work in the midst of the COVID‑19 pandemic. I am sympathetic to those who worked for Mr. Campbell and the position in which they now find themselves.
[21] I also accept that Mr. Campbell was making significant profit before his store was closed. So long as he cannot resume operations, he will be unable to make money and his brand will likely suffer. However, lost profits from a business that is not complying with a mandatory regulatory regime is not the sort of harm the Court should consider when deciding if an applicant will suffer irreparable harm under the RJR MacDonald test.
[22] To determine where the balance of convenience lies, I must weigh the benefit to Mr. Campbell and the risk to the Respondents of granting the interim relief sought. Again, I accept that Mr. Campbell is currently prevented from making the sort of profits he was making before April 21, 2020. However, because Mr. Campbell has not satisfied me that his business was operating lawfully, he has also not satisfied me that he will lose a benefit to which he is legally entitled if I do not make an interim order.
[23] Mr. Campbell takes the position that allowing him to resume operations would not cause any harm to the Respondents. I disagree. If Mr. Campbell is permitted to re-open his business, which is not in compliance with provincial regulations, there is a real risk that 1493951 Ontario Inc. would be charged under s. 22 of the Cannabis Control Act for knowingly permitting its property to be used as an unauthorized cannabis retailer.
[24] I find that the balance of convenience favours not granting relief from forfeiture on an interim basis. Relief from forfeiture is an equitable remedy that, above all else, considers the overall justice of the case. The Court cannot permit a cannabis business to operate, even on an interim basis, if it is not complying with the detailed regulatory scheme designed to ensure the safety of the public. The Court is also not prepared to create a risk that the landlord will be charged if the business resumes operations. The application of relief from forfeiture on an interim basis is therefore dismissed.
[25] Counsel for 1493951 Ontario Inc. asked me to summarily dismiss Mr. Campbell’s application against his client. He argues that Mr. Campbell has no claim against 1493951 Ontario Inc. because there is no written sub-lease agreement and his client did not consent to the sub-lease. Section 21 of the Commercial Tenancies Act allows a sub-tenant to seek relief from forfeiture in relation to the main lease. The validity of the sub-lease, the applicability of any estoppel, and whether Mr. Campbell has a claim in relation to the lease between Tri-Echo Restaurants and 1493951 Ontario Inc. are issues that will need to be determined on a full evidentiary record at the hearing of Mr. Campbell’s application.
[26] A further case management call will be held on Friday May 15, 2020 at 11:15 a.m. to fix a date for Mr. Campbell’s application. Counsel for Mr. Campbell is to serve any supplementary affidavits on the Respondents by 9:00 a.m. on Friday May 15, 2020. A timetable for Responding affidavits and cross-examinations, if required, will be set during the case management call.