Court File and Parties

COURT FILE NO.: CV-21-85936 DATE: 2021/03/05 SUPERIOR COURT OF JUSTICE – ONTARIO

In the matter of an intended action

RE: 11123688 Canada Limited o/a Onion Auto Centre, Intended Plaintiff (Moving Party)

AND:

James Springthorpe a.k.a. Jim Springthorpe, Hussein Mattar, 10412732 Canada Inc. a/a Onion Auto Centre, WPG Holdings Inc., and Walter Griessier, Intended Defendants (Responding Parties)

BEFORE: Regional Senior Justice C. MacLeod

COUNSEL: James Bowie, for the Moving Party, Plaintiff James F. Leal, for WPG Holdings Inc. and Griessier J. P. Zubec for Bentley 110 Ottawa Inc. Brett Hodgins for 10412732 Canada Inc, Springthorpe & Mattar

HEARD: March 4, 2021

Endorsement

[1] This is the continuation of a motion that was heard on March 1, 2021. The plaintiff seeks a mandatory order to put it back in possession of the premises at 110 Bentley Avenue in the City of Ottawa.

[2] Those premises are owned by Bentley 110 Ottawa Inc. and are in the possession of Mr. Springthorpe and his corporation, “104”. The location is used as an automobile repair business. Up until the 25th of February 2021 that business was carried on by the plaintiff, “111” and since that date Mr. Springthorpe advises the court that he has started his own business. He also has possession of personal property belonging to the plaintiff or to Raymond Kwan and he is prepared to return it.

[3] This motion is brought in an intended action and there is neither a draft statement of claim nor a notice of action. The precise parameters of the intended litigation cannot be determined. What is clear is that the plaintiff’s business has been closed by the defendant Springthorpe, that the locks have been changed and that Mr. Springthorpe intends to establish his own business in those premises.

[4] It is also clear that Mr. Springthorpe’s company, “104” is the tenant under a lease with the previous owner, “WPG”. The legal and factual question will be whether the plaintiff was in lawful possession of the premises under a sub-lease or by other colour of right and whether the defendant was entitled to dispossess the plaintiff without notice and without legal process?

The Parties and the Evidence

[5] As I observed on Monday when the matter first came to court, the evidentiary record can be charitably regarded as thin. Some allowances must be made for the speed at which materials had to be assembled and the fact that we are in the middle of a pandemic. The affidavits were unsworn but all of the deponents were present at the hearing by videoconference and the affidavits were treated as if they were sworn evidence.

[6] I have two affidavits of David Kwan, which were part of the original materials, a supplementary affidavit of David Kwan and an affidavit of Raymond Kwan. I also have a responding affidavit of James Springthorpe.

[7] At the time the motion was scheduled, it had been suggested by counsel for the plaintiff that I might hear oral evidence to supplement the affidavits. The opposing parties appearing on Monday had objected to this. Although the court can hear oral evidence in support of a motion, I felt it would inappropriate to conduct what would have amounted to a mini-trial without the benefit of pleadings or other documents which would have permitted all parties to have notice of the evidence to be heard. [1]

[8] When the motion came back to court on March 4th, none of the parties had cross examined on the affidavits and no one requested to cross examine or call oral evidence when the motion came before the court yesterday morning. I did allow the individual deponents to provide some background information for clarification, but I did not give that information evidentiary weight unless it was an admission or an acknowledgement.

[9] Let me briefly describe the parties and the evidence. The plaintiff is a numbered company which carried on business as Onion Auto Centre. Mr. Kwan’s original affidavits and his supplementary affidavit (to which is attached a recent corporation search) establish that the sole shareholder and director is Mr. Kwan’s mother, Sau Chun Lee. According to the original affidavit, Ms. Lee is elderly, has recently been hospitalized, has two broken legs and speaks no English. Part of the original motion had been to appoint a litigation guardian but that is not necessary because Ms. Lee is not a party in her personal capacity. She may need a power of attorney or an order appointing an attorney for property but that is not an issue before the court.

[10] David Kwan deposes that he is an officer of the plaintiff corporation and has authority to bind the corporation. While he has not produced any documents to support that assertion, it is not strictly necessary for him to do so at this stage. The “indoor management rule” as codified by s. 18 of the Canada Business Corporations Act, does not permit a corporation to disavow actions taken on its behalf due to defects in internal documentation. Mr. Springthorpe in his affidavit states that David Kwan never carried out business at the premises, but Raymond Kwan did. He also acknowledges that Raymond Kwan carried on business through “111”. Raymond Kwan was present at the hearing and swore a supporting affidavit. It is not open to the defendants to dispute the ability of David Kwan to instruct counsel on behalf of the corporation and it is admitted that “111” was the entity operating as Onion Auto Centre. The corporation is a proper party to pursue the litigation.

[11] There is reason to believe that the plaintiff may be able to establish that it had a sublease of the premises. David Kwan deposes that Mr. Springthorpe on behalf of “104” had signed a lease on the premises with WPG (the former owner) in August of 2018. He deposes that in December of 2018 the premises were subleased to “111”. The document produced to support that assertion appears to be an “offer to sublease” signed by “111” in December of 2018 but it is further supported by an acknowledgment of sublease that purports to be signed on February 15, 2019 by Mr. Kwan on behalf of “111”, a signing officer of WPG and what Mr. Kwan deposes is Mr. Springthorpe’s signature on behalf of “Onion Auto Service”.

[12] In his affidavit, Mr. Springthorpe denies that is his signature and he denies that “104” or he have ever carried on business under the name “Onion Auto’. It may be true that 104 never actually carried on business under that name but it certainly appears from the original lease, the tenant was shown as “10412732 Canada Inc. O/A Onion Auto Service.”

[13] Despite denying a sublease, Mr. Springthorpe deposes that Raymond Kwan (David’s brother) had carried on business at the premises since January 2019 “through 11123688 Canada Limited (“111”), under the business name of Onion Auto Centre”. He further states that he, Mr. Springthorpe, had worked in the auto repair business at the premises “as an employee working for Raymond Kwan.” While Mr. Springthorpe states his belief that other people were the registered directors of “111” at the time he swore his affidavit, he acknowledges by this evidence that “111” was using the premises to carry on the business of Onion Auto, that the day to day operation of the business was carried out by Raymond Kwan and that Mr. Springthorpe worked in the business for Mr. Kwan as an employee. That was the situation from January of 2019 until February of this year.

[14] The evidence also establishes that throughout this period, “111” was paying the rent for the premises directly to the landlord. There is no evidence that any payments were paid, demanded or were owing to “104” or to Mr. Springthorpe.

[15] It is Mr. Springthorpe’s evidence that during this entire time, “104” was the tenant, “111” had no right to be there other than Mr. Springthorpe’s verbal authorization on behalf of “104”. He deposes that recently he learned that Raymond Kwan was carrying out activities that Mr. Springthorpe “considered to be potentially criminal in nature”, informed Raymond Kwan that he would no longer permit him to carry on business at 110 Bentley Avenue and changed the locks. There is no evidence concerning the nature of the alleged criminal activity and nothing to support that allegation. The changing of the locks appears to have been unilateral, unexpected and without notice.

[16] I note in passing that there is nothing in the record to explain why Mr. Mattar was named as a party although Mr. Mattar was present at the hearing in the same room as Mr. Springthorpe. It is a reasonable inference that Mr. Springthorpe and Mr. Mattar are working together in the new business.

[17] The new owner of the property is Bentley 110 Ottawa Inc. Mr. Zubec appeared on behalf of the new owner. He advises that if there is a valid sublease and the rent is paid, the new owner will honour it providing there is no criminal activity or other breach of the lease. On the other hand, if “104” is the tenant and has a right to occupy the unit, providing it pays the rent and complies with the terms of the lease, the owner is also content. The owner may be a necessary party to the litigation but has no interest in being dragged into this dispute.

[18] Counsel for WPG, Mr. Leal, also appeared. He had been here on Monday to confirm that his client had been in receipt of the rent cheques and could also verify that the cheques had been paid by the plaintiff. His client has no further interest in the property. Counsel for the plaintiff confirmed that he was not seeking any relief against WPG and Mr. Leal was then given leave to withdraw.

[19] In summary, the evidence and the admissions, lean as they are, permit the following findings of fact for purposes of this motion:

a. The plaintiff is a proper party to bring the motion and was the entity carrying on business in the premises until February 25, 2021. b. Those premises were originally leased to “104” under a lease that permits them to be used “for the purpose of an automotive repair, body shop and carwash … and related business offices … and for no other purpose.” c. The lease to “104” expires on January 31, 2028 with the possibility of renewal for 5 years. d. The plaintiff had been carrying on the business of automobile repair in the premises since January of 2019. e. Whatever the tenancy relationship between 104 controlled by Mr. Springthorpe and 111 through which Raymond Kwan was operating the business, 111 was authorized by 104 to use the premises and Mr. Springthorpe was working as an employee. f. Based on vague allegations of criminal behaviour, Mr. Springthorpe unilaterally and without notice took control of the premises, changed the locks and seized property belonging to the plaintiff or to Raymond Kwan. g. The effect of this action has been to halt the plaintiff’s business and to interfere or prevent the plaintiff from honouring any contracts for automobile repair. h. Mr. Springthorpe intends to carry on the business of automobile repair in the same premises.

[20] The question is whether these findings are sufficient to justify granting injunctive or mandatory relief? The plaintiff seeks an interlocutory order in advance of commencing the action putting the plaintiff back in possession of the property and restraining the defendant from interfering with the operation of the business.

The test for injunctive relief & analysis of the evidence

[21] An interlocutory order pursuant to s. 101 of the Courts of Justice Act is not a conclusive determination of right. For that reason, the party obtaining such an order must give an undertaking to be liable in damages if it ultimately turns out that the injunctive relief is unjustified. In addition, where a party brings a motion in advance of a proceeding, the moving party must undertake to commence the proceeding forthwith pursuant to Rule 37.17 of the Rules of Civil Procedure. This is not a step to be taken lightly as quite apart from the usual exposure to costs, both of these are serious undertakings which must be formally given and must then be honoured.

[22] As this matter was before the court on Monday and again today, I would have anticipated at least a draft of a statement of claim. And I would have expected written undertakings in accordance with the above requirements. Ordinarily the affidavit in support of an injunction should contain an acknowledgement of these requirements, the undertakings in question and evidence that the moving party understands their significance. This is not fatal. I could in an appropriate case issue an order conditional upon receipt of the undertaking but the absence of an undertaking in damages and the absence of any steps towards compliance with Rule 37.17 are noteworthy.

[23] It is possible to make a temporary or interim order pending a return before the court to argue the case for an interlocutory order on a more complete record. This device is frequently employed when the need for immediate relief can be demonstrated, the responding parties require time to provide a complete evidentiary record and to cross examine but the situation is such that an order preserving the status quo or restoring the status quo is necessary to prevent irreparable harm. Even a temporary order based on an unproven case is an exceptional and extraordinary remedy however and it can only be granted on the same settled principles. [2] In the event, none of the parties asked for an adjournment.

[24] I am not sure the plaintiff truly appreciates the extraordinary nature of a mandatory order. Here, in advance of litigation, without a draft pleading, based on the barest of facts, I am asked to order that the defendant deliver the keys to the premises and put the plaintiff back into possession. I cannot assess all of the implications of granting or withholding such an order on the evidence before me. While this is no longer brought ex parte, the evidentiary record I am presented with falls well short of “full and frank disclosure”.

[25] The modern Canadian test for injunctions or other mandatory orders is the American Cyanimid test adopted by the Supreme Court of Canada in Manitoba (A.G.) v. Metropolitan Stores, [1987] 1 SCR 110 and RJR-MacDonald v. Canada (Attorney General), [1994] 1 SCR 311. That test asks firstly whether there is a serious issue to be tried. It must be assessed on the basis of “common sense and an extremely limited review of the merits.” This is readily met. As described above, even without a pleading, it is easy to conclude that the unilateral expulsion of the plaintiff from the location in which it did business in circumstances where the plaintiff claims a right to occupation of the premises is a serious issue. There is sufficient evidence to demonstrate that the assertion of right by the plaintiff is not frivolous or vexatious.

[26] The second branch of the test requires the plaintiff to demonstrate irreparable harm that will result if the relief is not granted. This is more difficult. It may not be sufficient that the business will be closed or disrupted. The question is whether the failure to grant an order now will render any prospect of recovering damages illusory. Put succinctly, the question is whether damages will provide the plaintiff with an adequate remedy? Irreparable harm cuts both ways. The court must also consider if irreparable harm will be done to the defendant in granting the order and a significant consideration is whether or not the plaintiff’s undertaking in damages referred to above would provide adequate compensation for the defendant if it turns out that the defendant is the successful party at trial. [5] The evidentiary record must address the question of harm in as much detail as possible.

[27] The third branch of the test weighs the balance of convenience. Which side will suffer more harm or convenience if the order is granted or is not granted? Again, this is not an exercise in speculative or abstract thinking. The moving party must bring evidence directed to the balancing exercise.

[28] The moving party argues that the effect of the actions taken by the defendant will put the plaintiff out of business, destroy the livelihood of the owners and make it impossible to pursue the litigation because the plaintiff will be without income. By contrast the defendant would be in the same position as before if the plaintiff operates the business out of the premises, pays the rent and employs Mr. Springthorpe.

[29] Obvious and self evident as all of that may appear on first blush, I cannot reach those conclusions in the absence of evidence. As examples, the plaintiff does not give any evidence as to whether the business was profitable or not. I have no financial statements or business records. There is no evidence to determine what the damages might be or what would be involved in mitigating those losses. What kind of equipment and tools are necessary to carry on the business? Is there another location that might be available? How difficult would it be to move the equipment? How many employees are there? Do the family members have other sources of income? How many customers do they have? What are the qualifications of those employees particularly Raymond Kwan? What was the genesis of the dispute with Mr. Springthorpe? Would it be possible for Mr. Springthorpe to continue to operate as an employee of Mr. Kwan? Could the business operate without Mr. Springthorpe? What level of customer loyalty, good will or brand recognition attaches to Mr. Kwan, to Onion Automobile or to the location?

[30] While there are sufficient facts to demonstrate that there is a basis to advance a claim, the skeletal affidavit evidence does not permit me to make any assessment of the strength of that case. It is not enough to assert that damages are an inadequate remedy or to assert that harm will be irreparable, there must be evidence that is as robust as possible in relation to these issues. A critical consideration is whether the granting or withholding of the requested order will, in fact, determine the rights of the parties because in that case the strength of the case becomes a predominant concern. [6] The evidence must address the consequences of granting the requested orders and the alternatives if the order is not granted.

[31] I am not assisted by the evidence of the defendant which is similarly sparse, consists of vague unsubstantiated allegations (in the case of the allegation of criminal activity) or denials (in the case of his purported signature on documents) yet fails to provide details that are clearly within his knowledge. In fact, the defendant knows the Kwan brothers well. He deposes that he worked for Raymond. He deposes that he was told by David that he works for the federal government. He is David’s landlord in a residential tenancy. Mr. Springthorpe even purports to know details of the ownership structure of “111” which is an entity he knew was the entity that the business was operated through. Still, the onus is on the moving party to justify the granting of a mandatory order and the plaintiff must bring evidence before the court dealing with every component of the test.

[32] I am not prepared to order the defendant to put the plaintiff back into occupation of the premises in advance of the commencement of litigation and with such a meagre evidentiary record.

Conclusion and Disposition

[33] I am dismissing the motion for an interlocutory mandatory order at this point in time.

[34] The defendant undertook to the court to preserve the property of the plaintiff or of Raymond Kwan and to release it to Raymond Kwan upon demand. An undertaking to the court may be enforced by order and that would be appropriate. I will make an order for the preservation and return of the personal property, including tools, equipment, computers and business records.

[35] I will add that dismissal of the motion at this point in time, does not preclude a further motion for interlocutory or summary relief on proper evidence once the action has been properly constituted. If the only question is the validity of the sub-lease and a potential calculation of damages, various other methods of streamlined litigation should be explored.

Costs

[36] I have not heard submissions on costs. I am prepared to deal with costs if the parties cannot resolve the issue amongst themselves.

Mr. Justice C. MacLeod Date: March 5, 2021

Footnotes:

[1] See Rule 39.01 of the Rules of Civil Procedure [2] See Sharpe, Hon. Robert, Injunctions and Specific Performance, 2nd Edition, p. 2-11 -2-12 and cases cited therein. [5] See Sharpe, supra at pp 2-18 and 2-19. [6] Sharpe, supra, at p. 2-23