ONTARIO SUPERIOR COURT OF JUSTICE
RE: Parkland Corporation, Applicant
-and-
SRAA Inc., Respondent
BEFORE: F.L. Myers J.
COUNSEL: John C. Wolf and Brendan Jones, for Parkland Corporation Howard Gerson and Jeffrey Frymer, for SRAA Inc. and 1064110 Ontario Ltd. Evelyn Perez Youssoufian, for 1288212 B.C. Ltd. Michael J. Valente, for Global Fuels Inc.
HEARD: April 15, 2021
ENDORSEMENT
The Motions
1Parkland Corporation supplies fuel to gas stations for retail sale to the public. Parkland markets its fuel products under the Ultramar brand.
2Parkland moves for an interlocutory injunction prohibiting SRAA from terminating its lease of a gas station and re-leasing the gas station to a competitor to sell Esso brand fuel products. In addition, Parkland moves to enforce prohibitions in its sublease to the premises that prohibit SRAA from allowing sale of fuel and the display of advertising on the leased property other than in the Ultramar brand.
3The endorsement also applies as well to another motion for the same relief in Parkland Corporation v. 1064110 Ontario Ltd., in Court File No. CV-21-659846. The facts are very similar. The motions were heard together.
Background
4Efforts by the major gasoline suppliers to control gas station sites through long term supply contracts are not new in Ontario. In 1975, the Court of Appeal upheld and enforced long term sales contracts tied to mortgages registered against gas station lands in Stephens v. Gulf Oil Canada Ltd. et al., 1975 711 (ON CA).
5In this case, the legal form of the transactions has evolved from mortgages to leases. The upshot is the same. The supplier’s business model leads it to try to control gas station sites, to control the retail sales process carried on at those gas stations, and to prevent competitors from displacing them.
6Here, Ultramar is trying to protect its turf from incursion by Esso.
7In both cases before the court, the gas station owners, guided by the same lawyer, have signed new deals to sell Esso fuel products at their gas stations. The owners had told Parkland that they felt that their deals were not working out for them. Parkland responded but, apparently, did not meet the owners’ wants or needs. Therefore, the gas station owners purported to unilaterally terminate their leases with Parkland and replace it with Esso operators.
8Parkland seeks to enforce its leases and supply rights.
Outcome
9The issues before me are interlocutory. That is, the motions have been brought on an urgent basis to hold the status quo pending the hearing of the cases on their merits. Mr. Gerson agreed that for present purposes the leases are valid leases and I treat them as such.
10In both cases, the gas station owner unilaterally excluded Parkland from its lease and changed brands in plain violation of the terms of the leases and subleases. SRAA took these steps after Parkland had indicated that it would litigate. As I deal with below, it is significant that 1064110 took its unilateral steps knowing that a motion for an injunction had already been scheduled against SRAA and after Parkland had delivered a motion to seek an injunction against 1064110.
11There is a particular issue in 1064110’s lease that distinguishes its case from that of SRAA. On reflection, it seems to me that it goes more to the nature and strength of the merits of the claim than it does to the question of irreparable harm and the balance of convenience.
12In my view, the lease rights of Parkland require enforcement pending determination of the cases on their merits. Equity is less concerned with proof of irreparable harm when parties deliberately breach their contracts – particularly negative covenants. In any event, I am readily satisfied that Parkland will suffer harm that will not be adequately compensated by an award of damages after trial.
13While the injunction law applicable to leases may differ from the injunction law regarding commercial contracts, the difference, if it is real, is not germane in this case. That commercial leases are also commercial contracts is not in doubt. There is a continuum of transaction formats under which elements of one form or the other may be more significant. The respondents submit that in this case, the leases are in substance fuel supply contracts. They argue that the policy of property law to protect leasehold property interests is less compelling in these cases. They say that the court should consider the arrangements between the parties purely as commercial contracts rather than as leases.
14In my view, whether Parkland’s leasehold interests should be presumptively enforced under property law or whether the injunction test applicable to commercial contracts applies, the result is the same.
15Accordingly, orders will go to enforce the leases and the negative covenants in the subleases as discussed below pending the final determination of each application.
16There is a serious issue in the SRAA application as to whether SRAA’s lease has already expired and become a yearly lease that may expire on December 31, 2021. There is no reason why the application against SRAA cannot be determined within this calendar year. If that does not happen, SRAA is at liberty to seek a review of the term of the interlocutory injunction in December once the facts and issues are better developed.
Brief Common Facts
17In both cases before the court, the respondent owns a gas station. It leased the gas station to Parkland. Parkland never intended to actually occupy or operate the gas station as a tenant however. It takes a lease to control the property by subleasing it to an operator. Rather than subleasing to a franchisee or to an independent operator, Parkland’s model is to sublease the premises back to the owner-operator.
18By taking a lease above the operator, Parkland is able to protect itself in case the operator tries to change brands. In that case, Parkland, as head tenant, can terminate the sublease, re-take control of the premises, and grant a new sublease to install another operator to sell under its brand.
19The respondents submit that the use of a lease where the tenant does not intend to occupy the premises deprives the lease of its utility or purpose as a grant of property. I disagree. No law is relied upon for that submission. Renting premises to run a subleasing business is perfectly acceptable. Moreover, the interposition of a non-operating supplier to protect or control the future use of a location by sublease is the regular structure for franchise operations throughout the province.
20In both cases before the court, the respondent is both the landlord and the subtenant with Parkland interposed as the head tenant.
21Under Parkland’s business model, Parkland owns the gasoline sold through Parkland’s own pumps that are installed at gas stations. Unlike an independent third party operator, the respondent owner-operators do not buy the gas that they sell.
22Instead of buying and selling gasoline on their own account, the owner-operators sell Parkland’s gasoline on terms largely driven by Parkland. It is analogous to a form of consignment sale.
23The owner-operators do not make their profit on the sale of Parkland’s gasoline for their own account. Rather, Parkland pays the owner-operators rent under their head leases equal to 1 cent per litre of gasoline sold. There is no set base rent. The rent is all based on the volume of sales made by the owner-operator as subtenant.
24The owner-operators pay only nominal rent to Parkland under the subleases. Parkland’s consideration for the sublease is its opportunity to sell its gasoline at the gas station and the negative covenants by which the owner-operators agree that they will not sell any other brand or display signage for any other brand at the premises.
25Parkland also has renewal rights and rights of first refusal should any offer be made to lease or to supply fuel to the leased premises by a competitor. The ROFR continues for six months after expiry of the leases and all renewals.
26Parkland argues that its business model provides some advantages to the owner-operators. For example, like a consignment, the retailers do not have to incur the upfront investment and financing costs of buying fuel inventory.
27However, the respondents do not find the current terms of their leases and subleases satisfactory.
SRAA Repudiates its Lease and Sublease
28SRAA bought an existing Ultramar gas station and convenience store operation in 2012. It paid $2.175 million and financed the purchase by a mortgage of $1.5 million.
29SRAA signed a new lease and sublease with Parkland on March 5, 2015. Mr. Nazir, one of the principals of SRAA, says the company was “compelled without any ability to negotiate terms and without legal advice”. He does not say that SRAA had any desire to negotiate terms or to retain a lawyer. Neither does he say how Ultramar prevented it from doing either.
30The lease and sublease terms end on the later of January 31, 2020 (five years) or the date by which SRAA sells 22.5 million litres of fuel in the aggregate. SRAA has yet to sell 22.5 million litres. Its current estimate is that it will reach that mark in August or September, 2022.
31Parkland has a renewal right for five years. It expects that term to run into late 2027 after which it will have six months to exercise its ROFR to continue the parties’ relationship and to control the site.
32In response to concerns expressed by SRAA last fall, Parkland offered SRAA the option to revise its relationship whereby SRAA could buy gas from Parkland rather than continuing a consignment model. SRAA signed a ten year lease offer from Parkland in October, 2020 but then changed its mind.
33Mr. Nazir’s evidence is that SRAA is failing. It cannot operate profitably under its current conditions. Over the past two or three years, the shareholders have been required to inject capital loans of almost $300,000 to meet monthly expenses. SRAA’s monthly mortgage and property tax expenses alone amount to almost $10,800.
34In January, 2021, SRAA offered to pay Parkland $23,500 for a release from its lease and sublease commitments. It says it has exhausted its access to capital and it will fail if it is held to its current terms. Mr. Jones questions the reliability of this statement in light of Mr. Nazir having signed on to a renewal in October, 2020 however briefly. Absent cross-examination however, for the purposes of this motion, I accept the evidence that SRAA is on the eve of insolvency and is at or near the point of failing.
35At para. 40 of his affidavit, Mr. Nazir testifies:
In January 2021, I made a decision that for SRAA to survive, it was compelled to terminate the Lease and Sub-Lease, and re-lease the gas station to another fuel supplier who could operate profitably and pay a net rent to SRAA.
36In an email dated January 4, 2021, Mr. Nazir advised Parkland that he was considering a new relationship with someone else. He said he would provide one month notice for Parkland to stop supplying and to pick up its signage.
37Despite its offer of a month’s notice, by letter dated January 22, 2021, corporate counsel for SRAA, Jeffrey Frymer, purported to terminate the lease and sublease as follows:
Please be advised that our client shall be terminating the Agreement, effectively immediately.
Our offices will advise when the signage will be ready for pickup. We expect this to be in the next few weeks, as we co-ordinate its removal.
38There is no term of the lease or the sublease that entitled SRAA to terminate either agreement. SRAA does not allege that Parkland committed a material breach that entitled it to terminate either agreement.
39It is basic contract law (and was common ground at the hearing) that Mr. Frymer’s letter amounted to a repudiation of the lease and sublease agreements.
40Mr. Frymer’s letter was not effective to terminate the lease or the sublease. Rather, it gave formal notice to Parkland that SRAA intended to breach both agreements. Parkland was then entitled to decide if it would accept the breach and terminate the agreements, or if it wished to keep the agreements in place and enforce its rights.
41Parkland responded by rejecting the purported termination and suggested that SRAA should bring legal proceedings if it thought it could terminate its agreements.
42SRAA continued selling Parkland’s fuel after that time. It was paid and accepted its 1 cent per litre rent accordingly.
43Then, on Wednesday, March 31, 2021, Mr. Frymer wrote to tell Parkland that SRAA was removing its signage. SRAA offered to buy from Parkland the 28,694 litres of Parkland gasoline remaining in its tanks.
44Parkland demanded that SRAA cease and desist. There was some contact between counsel the next day, Thursday, April 1, 2021. Friday was Good Friday and the court was closed until Tuesday April 6, 2021.
45Counsel for Parkland arranged an attendance in Civil Practice Court on April 6, 2021. At 11 pm on the night before, SRAA advised that it had entered into a new agreement with 1288212 B.C. Ltd. (selling Esso brand products) and it asserted that it was important to maintain the status quo of the new arrangement.
46In CPC, I scheduled the urgent return of this motion. After that hearing, SRAA disclosed to Parkland its new lease with Esso. The new lease contains a representation by SRAA that its lease with Parkland was terminated and that the site could be rebranded with a fuel supplier of the new tenant’s choice.
47The new lease structure has Esso supplying and operating the gas station. Employees of 1288212 B.C. Ltd. will run the gas station. Mr. Nazir is no longer operating.
48The rent being paid to SRAA under the new lease is $10,000 per month. It is not enough to defray fully SRAA’s mortgage and property tax expenses let alone any other expenses.
49SRAA will continue operating at a loss. But it will suffer a substantially reduced loss each month.
1064410 Repudiates its Lease and Sublease
501064110 signed up with Ultramar in 2012. In 2017, Ultramar assigned the agreements to Parkland.
51Mr. Dhaliwal, the principal of 1064110, swears that he was told that he was signing a fuel supply agreement. He always intended to own and operate his gas station (as he has).
52The initial seven year term expired Dec. 31, 2018.
53The renewal term of the lease provides:
Subject to a written notice given to the Lessor at least ninety (90) days prior to the expiration of the initial term hereof, the Lessee may renew this lease, at its option, for one additional period of five (5) years at conditions acceptable and that the parties undertake to negotiate in good faith. [Emphasis added.]
54This term purports to provide Parkland with a right to renew. But the renewal terms are not set out. The lease contains no arbitration clause or any objective basis to set the terms of renewal. Rather, the terms are to be agreed in future and the parties undertake to negotiate those terms in good faith.
55There is much force in Mr. Gerson’s argument that this clause is an “agreement to agree” and therefore it is not a binding option to renew in favour of Parkland.
56In May, 2018, Parkland purported to exercise its option to renew. There is no written agreement nor much evidence of renewal being discussed between the parties. Mr. Gerson points to correspondence over the next 18 months to suggest that renewal negotiations were tried and failed. There were certainly discussions about pricing and other operating issues. There was a leasing proposal made by Parkland in late 2019 that was not signed by 1064410. But a similar form of proposal was made to SRAA when it remained subject to its lease.
57Parkland argues that it effectively renewed the agreements and things continued after December 31, 2018 as they had before. In the absence of new terms, the law will infer that the old terms continue.
58On February 8, 2021, Mr. Frymer wrote to Parkland:
As you know, with respect to the renewal option in the Lease, pursuant to section 2.02, the parties' have not entered into "conditions acceptable and that the parties undertake to negotiate in good faith."
On that basis, our instructions are to inform you that the Lease is hereby terminated, and this letter shall serve as a sixty (60) day notice period for the collection of any Ultramar signage and other insignia. Accordingly, your items will be available for pickup on April 11, 2021.
59Once again, Mr. Gerson needed to clarify his client’s legal position from what Mr. Frymer had asserted on its behalf. 1064410 had no basis or right to terminate the lease or the sublease on February 8, 2021.
60If the lease was not renewed but expired on December 31, 2018, then Parkland became an overholding tenant at common law and 1064410 became an overholding subtenant. Mr. Gerson accepts that where a long term lease expires and an overholding tenant remains in possession of the premises and rent continues to be accepted without complaint, the common law infers a new year-to-year lease. That new lease would be terminable on six month’s notice.
61In the absence of agreement otherwise, the new, yearly lease will continue on the same terms as the initial lease. But, it may not include the ROFR. See: Budget Car Rentals Toronto Ltd. v. Petro-Canada Inc., 1989 4148 (ON CA).
62Parkland says that the relationship between the parties continued for 25 of 60 months into the renewal term before 1064410 suddenly asserted a problem with the renewal. It says that 1064410 has waived its rights or is estopped from denying the renewal of the lease and sublease. This position requires analysis on the facts. There was sporadic email traffic for several months after Parkland gave notice of the exercise of its renewal option. In addition, Parkland’s first reaction on being told that 1064410 was leaving was not to assert a renewal, but, rather, it said that it understood 1064410‘s decision.
63On the limited evidence before me, I am in no position to make any finding that the lease was or was nor renewed or whether, if not, the ROFR continued to apply in the yearly lease.
64Parkland argues that even if there is a yearly lease, it continues to December 31, 2021.
65In any event, correspondence ensued between the parties. On March 24, 2021, Parkland demanded that 1064410 withdraw its purported termination of the lease by March 26, 2021 failing which it would proceed to court.
66Mr. Frymer responded that day, writing in part
…As you probably expected, my client will not be beholden to your arbitrary deadline of March 26, 2021 for a response.
I expect to receive instructions sometime early next week, with a response to follow, so your client should be prepared to wait until then.
67Mr. Frymer did not respond further so, on April 1, 2021, Parkland served its notice of application and supporting affidavit. It asked counsel to agree to hold the status quo pending a determination on the merits.
68On April 7, after the long weekend activities at SRAA, and after CPC had set the urgent return of Parkland’s motion in the SRAA matter, Mr. Frymer rejected the request to hold the status quo and wrote:
On the foregoing basis, my client is well within its rights to move on from its previous business relationship with your client. Should your client proceed with its injunction application, it will be defended, and we will rely on this letter in support of our cost submissions.
69On April 9, 2021, Parkland served its notice of motion for an interlocutory injunction and sought an urgent hearing April 12,2021.
70On April 12, 2021, 1064410 removed Parkland’s signage before Parkland could get to court to have its motion against 1064410 joined to its motion against SRAA.
Lease Law
71In 1465152 Ontario Limited v. Amexon Development Inc., 2015 ONCA 86, a landlord wanted to redevelop its building. It made agreements with all but one of its tenants to move out. One last tenant (a law firm) would not agree to move. Presumably, as the “last person standing”, it was squeezing the landlord for more than the landlord was willing to pay. The landlord announced that it was terminating the lease. It offered to keep the tenant whole - to pay moving costs and any rent differential caused by the breach. It said it was proposing an “efficient breach” because the tenant would be kept whole and the landlord would be better off. Parties are, after all, allowed to breach contracts in their self-interest provided they pay their damages.
72The Court of Appeal disagreed. At para. 23 of his decision, Brown JA held:
23As the law in Ontario currently stands, different considerations apply in the latter circumstance, as was explained in Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf (consulted on 30 January 2015), (Toronto: Canada Law Book, 2014), at 4.10 and 4.20:
Where the plaintiff complains of an interference with property rights, injunctive relief is strongly favored. This is especially so in the case of direct infringement in the nature of trespass.
The reason for the primacy of injunctive relief is that an injunction more accurately reflects the substantive definition of property than does a damages award. It is the very essence of the concept of property that the owner should not be deprived without consent. An injunction brings to bear coercive powers to vindicate that right. Compensatory damages for a continuous and wrongful interference with a property interest offers only limited protection in that the plaintiff is, in effect, deprived of property without consent at an objectively determined price. Special justification is required for damages rather than an injunction if the principle of autonomous control over property is to be preserved. A damages award rather than an injunction permits the defendant to carry on interfering with the plaintiff’s property. [Footnotes omitted.]
[Emphasis added.]
73The essence of the lease relationship in the cases at bar is the supplier’s desire to control of the land. The owner-operator obtains the right to sell the supplier’s fuel on agreeing to lock up its site. As noted at the outset, this is not new. It is no different for Esso that has also leased the gas station rather than entering into a simple supply agreement.
74Corporate counsel’s repeated assertions of a right to terminate the leases was a denial of the basic property right granted to Parkland by the owner-operators. Damages for lost sales does not compensate for the loss of control and the respondent’s unilateral grant of a foothold to a major competitor in the location.
75At para. 27 of Amexon, Brown J. cited further from Mr. Sharpe’s leading text:
Especially where the trespass is deliberate and continuing, it is ordinarily difficult to justify the denial of a prohibitive injunction. A damages award in such circumstances amounts to an expropriation without legislative sanction … Such orders may be said to vindicate the plaintiff’s right to exploit the property for whatever it is worth to the defendant and prevent the defendant from circumventing the bargaining process.
76These cases both involve a deliberate and continuing trespass. Both were implemented because the respondents did not accept the positions adopted by Parkland in negotiations. Holding Parkland to an award of damages lets the respondents circumvent the bargaining process and expropriate the property right they granted to Parkland.
77Neither of these cases can be said to involve an “efficient breach”. Neither respondent has offered or taken any steps to keep the applicant whole. Mr. Frymer asserted an entitlement to terminate the leases i.e. to act unilaterally and without compensation.
78In addition, at least SRAA cannot hold the applicant whole. It is teetering on bankruptcy in its own words and has now entered into a new arrangement under which it will keep losing money every month (albeit less than before). It says that it had to do something to avoid failing. But when I asked Mr. Gerson how it can pay damages, Mr. Gerson responded, that it has equity in its gas station that can be sold. If that were true, I doubt it would have entered into another losing lease rather than accessing that equity by selling.
79Regardless, even on Mr. Gerson’s theory, SRAA is dead. It fails under its current lease with Parkland or it is liquidated in a few months or years to pay damages to Parkland. But by the time of liquidation, there will further losses accrued and therefore even less left to satisfy priority claims of the mortgagee, municipal taxes, shareholder loans (if secured), and environmental clean-up super-priorities. There is no assurance of there being sufficient or any value left to keep Parkland whole.
80I have less evidence for 1064410’s financial status. But it too makes no effort to keep Parkland whole. It just says, “sue me”.
81There is no efficient breach here.
82The respondents argue that Parkland cares more about its site control than about their success. That might be true. But that does not give them the right to terminate the leases or to deprive Parkland of the control that it has bargained and paid for these many years.
83When all of this is added to the deliberateness of the breaches, I do not see a basis in property law to justify the denial of injunctive relief in this case.
84Amexon was a final injunction. This case is interlocutory. My findings are necessarily based only on the evidence and arguments that are before me. I am not making any final determination on these issues.
Contract Law
85The three-part test for granting an interlocutory injunction is not in doubt. See: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC)
There are Serious Issues to be Tried or Heard
86There are certainly serious issues to be tried on the merits. The respondents offer no lawful basis to terminate the leases as they purported to do. Parkland has a strong prima facie case on the basic allegation that the respondents’ unilateral efforts to remove its signage and exclude it amounts to breaches of the leases and subleases.
87There are serious issues to be tried as to whether the lease with 1064410 terminated or renewed December 31, 2018. Was it continued by the parties’ conduct, waiver, or estoppel or, alternatively does the common law of overholding tenants apply? If Parkland’s lease and sublease were replaced by yearly leases, then there is a serious issue to be tried as to whether the ROFR survived. In addition, there is a serious issue of whether the current leases could be terminated by notice effective before December 31, 2021.
Parkland will Suffer Irreparable Harm unless it is Protected by an Interlocutory Injunction
88I agree with the applicant that the law is less demanding of proof of irreparable harm when an injunction is sought to enforce negative covenants. See: Canpark Services Ltd. v. Imperial Parking Canada Corp, 2001 28004 (ON SC). Similarly, when a party deliberately breaches its contract, equity will intervene more readily.
89The negative covenants in the sub-lease preventing branding by a competitor and sale of fuel supplied by another supplier are readily enforced therefore.
90I am not asked to and do not specifically enforce the subleases per se. Parkland does not seek a mandatory order requiring the respondents to operate or to sell Parkland fuel on their sites. That would raise different issues. I am simply asked to enforce the negative covenants in the subleases.
91The head leases themselves are not negative covenants. They have been deliberately breached as discussed in the lease law section above. Assuming a more exacting proof of irreparable harm is required, I do so find.
92As noted above, there no proof that either respondent has the financial ability to compensate the applicant in damages for lost sales let alone less tangible losses. The loss of control of the sites brings a specie of loss that is not readily susceptible of quantification in damages. It involves assessment of the harm to Parkland of the loss of its ROFR designed to bring it control over the sites for years to come. It involves an assessment of the harm to Parkland more generally in the regions by giving Esso a foothold. Even if the ROFR for 1064410 has expired, Parkland is still being denied its control for the rest of this year and the opportunity to deal with 1064410 on a correct legal footing.
93I do not agree with Mr. Gerson that the harm to Parkland is too speculative to qualify as irreparable. The issue is whether it is just to confine the applicant to its remedy in damages. It is noteworthy that two operators have chosen to act unilaterally to sign up with a competitor and take down Ultramar’s signs. The effect on the intellectual property, the brand, of the applicant if that is seen as an available process will fundamentally undermine its contractual and property rights and its long term business model. Given that the SRAA’s financial position, the lack of evidence of 1064410’s ability to pay damages, and the recognized centrality of the issue of control of the sites that undergirds the structure of the fuel supply business in Ontario, I am satisfied that the injury to Parkland is virtually incalculable and it is not fair, just, or appropriate to limit Parkland to its remedy in damages.
The Balance of Convenience Favours Parkland
94The unilateral steps taken by the respondents in face of opposition and legal proceedings taken by the applicant deprives them of any entitlement to claim the status quo favours them. While the applicant could have come to court between the dates of the purported terminations and the late March implementation by the respondents, no prejudice is claimed by the respondents. They kept selling the applicant’s fuel in the interim despite claiming to have terminated the leases and subleases. Business continued as usual.
95While there was no subsisting injunction preventing the respondents from taking down the applicant’s signs, the aggression and bullheadedness of doing so even after being told that their position was contested (in SRAA’s case) and after being served with a motion (in the case of 1064410) is startling.
96There is no urgency relied upon by the applicants that prevented them from coming to court or waiting a few more days for the scheduled hearing. Mr. Jones speculates that the SRAA acted on the four day long Easter weekend to prevent Parkland from getting to court before there was a fait accompli. The assertion of a new status quo at 11 pm the night before the first CPC hearing for SRAA lends some support for this submission.
97Rushing to take steps in breach of contract before a party can get to court is not likely to be recognized as changing the status quo for the purposes of injunction law. Rather, it is more likely to provide an inference of unreasonable aggression and bad faith. It is not appropriate conduct or, at least, it is not conduct that deposits any weights on the respondents’ side of the scales of equity.
98I am concerned by the idea that one or both respondents could quite literally fail. Should that prevent an injunction? As noted above, failure of the defendant actually makes irreparable harm more likely.
99I am not satisfied that the injunction, if granted, causes real prejudice even if the respondents’ businesses fail. There is no evidence of there being a risk of significant job losses. As seen in this case, gas stations can change hands seamlessly. Continued employment for mechanics and cashiers is not necessarily at risk.
100Moreover, efforts to try preserve equity by shareholders when a company is insolvent have limits. It is not appropriate for shareholders to try to preserve equity by creating creditor claims and then deferring recovery in litigation while the business suffers mounting losses. This might be different if Parkland’s leases were so onerous that the Esso deals unlocked significant profit potential and the respondents could prosper to pay any damages. But it is not fair, just, or convenient to try to stay in business at the expense of a creditor who is likely to be left with uncompensated losses.
101Even if the respondents could reverse their fortunes by changing suppliers, the fairer process to try to accomplish that possibility would be through a proposal in bankruptcy rather than by unilateral aggressive actions taken under the guise of wrong legal assertions. When a business is already insolvent, the proposal provisions of the Bankruptcy and Insolvency Act protect the rights of all interested parties and the statute has special environmental protections that would likely be relevant in this environmentally sensitive business.
102Finally, I note that 1288212 B.C. Ltd. and Global Fuels Inc. (i.e. Esso) cannot be treated as bona fide purchasers without notice. Notice of Parkland’s leases are registered on title. I infer that Esso knows when it is taking over a competitor’s gas station. It knew enough to get a rep from SRAA that Parkland’s lease had been terminated and SRAA has the right to lease the premises. Esso can look to SRAA if it is aggrieved.
103On the 1064410 site, I am told that Parkland’s pumps have been removed but new pumps are not yet installed. Esso signage is up. I have not been shown the new agreement with 1064410. So, I do not know if Esso has a remedy or if it will suffer a breach for that matter.
104I am not finding that either Esso entity committed wrongdoing. That is not before me. But I do not have any concern that they may be innocent victims unwittingly caused injury by the court’s order. One of Ultramar or Esso was going to be evicted and potentially able to sue. Many injunction cases recognize that in balancing convenience or inconvenience, there is much less harm to a new entrant being delayed than to an incumbent being evicted.
105In all, I find that the balance of convenience favours granting the relief sought.
Order
106I prohibit the respondents from enforcing their purported terminations of Parkland’s head leases and denying the Applicant the exercise of its rights under their respective leases to the two gas stations. I also prohibit the respondents from violating the negative covenants in the subleases by allowing sales of fuel and advertising of fuel supplied by others.
107While the respondents may not display ads from others, I do not order them to reinstall the applicant’s signage. The applicant has its signage rights under the subleases and leases and it will act on those as it deems fit. I have not looked at the rules for erecting signage and pumps under the respective documents and I will not predetermine whether there may be future breaches.
108As noted above, I am not asked to and do not order the respondents to operate their gas stations as subtenants. If the respondents or either of them is insolvent, or if Ultramar cannot make it worth the respondents’ while to operate, then the chips will fall where they may in the market place.
109Each injunction is separate and lasts until the final disposition of its respective proceeding (whether continued as an application or as a trial of issues). The respondent 1064410 is at liberty to move to change this order in December, 2021 based on the state of the issues and evidence at that time.
Costs
110Costs of an interlocutory injunction are usually reserved to the final outcome of the case. This recognizes that if the respondents succeed after the trial or hearing, then in retrospect, the injunctions should not have been granted.
111Accordingly, costs are in the cause unless I order to the contrary before the end of May, 2021. If either party wishes to claim costs different from the normal approach, they made send no more than three pages of submissions. The applicant’s submissions, if any, are due April 26, 2021. Anyone against whom costs are sought may respond with no more than three pages of submissions by May 3, 2021. Everyone who files submissions shall submit its Costs Outline whether it seeks costs or not. Parties may also file copies of any offers to settle on which they rely.
112All submissions are to be filed through the Civil Submissions Online portal. They shall also be uploaded to Caselines despite the fact that counsel will not have received confirmation of filing as yet.
F.L. Myers J.
Date: April 19, 2021