INJUNCTIONS. OBA Civil Litigation Fundamentals Sunrise Series January 13, 2014

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1 INJUNCTIONS OBA Civil Litigation Fundamentals Sunrise Series January 13, 2014 Matthew Lerner (Lenczner Slaght Royce Smith Griffin LLP) & Justin Necpal (Torys LLP) Definition An injunction is a remedy by which the Court orders a party to do or refrain from doing a particular act or thing. 1 Origins & Evolution An injunction is a form of equitable remedy that predates the fusion of law and equity Like all equitable relief, injunctions developed to provide a remedy where the operation of law would not do justice. The question of whether the operation of law (as opposed to equity) will suffice is still relevant. As discussed below, by requiring that the plaintiff show irreparable harm, injunctions are not available where the wrong at issue can be remedied by common law remedies, namely damages: The very first principle of injunction law is that you do not obtain injunctions to restrain actionable wrongs for which damages are the proper remedy. 2 However, Justice Sharpe has observed that in spite of the historic basis for injunctions, In deciding whether to grant injunctions, modern courts are less and less willing to be bound by tradition alone, and more and more willing to base their decisions on the relative advantages and disadvantages of damages or an injunction History and the traditional hierarchy are replaced by principle and pragmatism. A context specific determination of the advantages and disadvantages of damages on the one hand and injunctive relief on the other allows the court to select the remedy that best fits the right that is to be protected or vindicated. 3 1 Halsbury's Laws of England, vol 11, 5th ed (London, UK: Butterworths, 1980) at paras [LexisNexis U.K.]. 2 London & Blackwell Ry. Co. v. Cross (1886), 31 Ch.D Robert J. Sharpe, Injunctions and Specific Performance, looseleaf (Toronto: Canada Law Book, 1992) at para

2 - 2 - Availability In Ontario, only the Superior Court of Justice may grant an injunction. The Superior Court s Jurisdiction is based on: o its inherent jurisdiction; and o s. 101 of the Courts of Justice Act: Injunctions and Receivers 101(1) In the Superior Court of Justice, an interlocutory injunction or mandatory order may be granted or a receiver or receiver and manager may be appointed by an interlocutory order, where it appears to a judge of the court to be just or convenient to do so. Terms (2) An order under subsection (1) may include such terms as are considered just. 4 While not a court of inherent jurisdiction, the Federal Court may also grant an interlocutory injunction as a function of its statutory authority to oversee the exercise of power by federal administrative bodies. 5 Purpose Interlocutory injunctions were traditionally conceived of in terms of freezing the status quo until a final determination of a dispute could be made. This raises some conceptual and practical challenges: o How to determine the status quo? o In some circumstances, merely freezing the current state of affairs is not sufficient to ensure that a court can do justice when it renders a final decision. Accordingly, modern justifications focus more on the need to ensure that effective relief can be rendered upon a final determination rather than simply freezing the current state of affairs: The purpose of an injunction is to improve the chances of the court being able to do justice after the determination of the merits at trial. At the interlocutory stage, the court must therefore assess whether granting or withholding an injunction is more likely to produce a just result. 6 4 R.S.O. 1990, c. C Canada (Human Rights Commission) v. Canada Liberty Net, [1998] 1 S.C.R National Commercial Bank Jamaica Ltd. v. Olint Corp. Ltd., [2009] 1 W.L.R (P.C.).

3 - 3 - Types Injunctions can be prohibitive (that is, they forbid a party from doing a particular act or thing), 7 or mandatory (that is, they require a party to do a particular act or thing). 8 In terms of their scope, injunctions can be interlocutory (that is, a pre-trial order put in place until a final determination occurs) or permanent (that is, they take effect indefinitely). Procedure The procedure for seeking an injunction is governed by Rule 40 of the Rules of Civil Procedure. Rule provides that an injunction may be obtained on a motion to a judge: How Obtained An interlocutory injunction or mandatory order under section 101 or 102 of the Courts of Justice Act may be obtained on motion to a judge by a party to a pending or intended proceeding. 9 The ordinary rules for motions therefore apply. Ex parte motions (motions made without notice) o in certain circumstances, it might be appropriate to bring a motion without notice, such as where notice would defeat the purpose of the order sought o moving party must make full and frank disclosure to ensure that the court is not misled on the evidence. Failure to do so can be fatal to the motion. The Guiding Dilemma Ultimately, the court is faced with this dilemma: On the one hand, if an immediate remedy in the form of an injunction is withheld, the plaintiff s rights might be so impaired by the time of a final determination that it would be impossible to fashion a proper remedy. On the other hand, if an injunction is granted, the defendant might end up having been restrained from engaging in conduct that ultimately turns out to be entirely lawful. The Test Pursuant to Rule of the Rules of Civil Procedure, a court may grant an interlocutory injunction on such terms as are considered just. This requires the application of a three-part test first formulated by the House of Lords in American Cynamid Co. v. Ethicon Ltd. ( American Cynamid ) 10 and adopted in Canada by the Canada Inc. v. Royal Trust Co., [1997] N.J. No P.D. v. British Columbia, [2010] B.C.J. No R.R.O. 1990, Reg American Cynamid Co. v. Ethicon Ltd. [1975] A.C. 396 (H.L.).

4 - 4 - Supreme Court of Canada ( SCC ) in RJR-MacDonald Inc. v. Canada (AG) ( RJR- MacDonald ). 11 The plaintiff bears the burden of proof at each stage. 1. Strength of the Plaintiff s Case o The plaintiff must show a serious question [of fact or law] to be tried. Previously, plaintiffs had been required to show a strong prima facie case. The serious question to be tried standard is generally a low threshold. In RJR- MacDonald, the SCC held that: The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is neither necessary nor desirable. o However, in certain contexts the plaintiff will be required to meet a higher threshold more akin to the strong prima facie case requirement. 12 These include cases dealing with: Picketing Defamation Restrictive (negative) covenants Fiduciary duties and misuse of confidential information 13 Take-over bids 2. Whether the Plaintiff Will Suffer Irreparable Harm Without an Injunction o An injunction is an extraordinary remedy because it restricts a person from acting or requires them to do a particular act before there has been a final determination as to whether the restriction or requirement is warranted. o Accordingly, to justify such extraordinary relief, the plaintiff must show that, absent an injunction, he or she would not be able to remedy the wrong through normal legal proceedings, typically an action for damages: The notion of irreparable harm both incorporates and substitutes for the traditional discretionary barrier to equitable remedies; namely, proof that common law equities are inadequate RJR-MacDonald Inc. v. Canada (AG) [1994] 1 S.C.R GDL Solutions Inc. v. Walker et al., 2012 ONSC Polar Wireless Corporation v. Roberts, 2012 ONSC Jeffrey Berryman, The Law of Equitable Remedies, 2d ed (Toronto: Irwin Law Inc., 2013) at 30.

5 - 5 - o In RJR-MacDonald, the SCC held that, Irreparable refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or cannot be cured, usually because one party cannot collect damages from the other. [Emphasis added] o Examples of irreparable harm include: Harm to one s reputation or career 15 Harm to the viability of a business, including goodwill 16 Non-compliance with a restrictive covenant 17 Infringements of natural resources or the quiet enjoyment of land 18 Intellectual property infringements 19 o Generally, irreparable harm will not be inferred and requires evidence that is clear and not speculative. 20 o Likewise, a plaintiff may be refused an interlocutory injunction if there are reasonable steps he or should could take to avoid the harm or ensure that any harm suffered is not irreparable. 21 Plaintiff s Undertaking o The plaintiff will normally be required to post an undertaking in damages to provide for the event in which he or she ultimately abandons the claim or is unsuccessful at trial. The undertaking aims to offset the risk to the defendant in granting a remedy before the legality of the conduct complained of is ultimately determined. Courts have required that the undertaking be meaningful. However, the court may dispense with the undertaking altogether where the plaintiff has a compelling case or does not have the financial means to make such an undertaking. 22 o In Ontario, Rule of the Rules of Civil Procedure stipulates that: Undertaking 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 15 T.(S) v. Stubbs, [1998] O.J. No Molson Canada 2005 v. Miller Brewing Co., 2013 ONSC Micropublishing Services Canada Ltd. v. Lee (1998), 31 CPC 4th 270 (Gen. Div.). 18 Western Canada Wilderness Committee v. Keenah, [2001] B.C.J. No (B.C.S.C). 19 Eveready Canada v. Duracell Canada Inc. (1995), 64 C.P.R. (3d) 348 (Ont. Gen. Div.). 20 Syntex Inc. v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129 (F.C.A); leave to appeal to the SCC refused. 21.Independent Fish Harvesters Inc. v. Newfoundland and Labrador (Minister of Fisheries), [2005] N.J. No Benjamin v. Toronto Dominion Bank (2006), 80 O.R. (3d) 424; see also Delta (Corporation of) v. Nationwide Auctions Inc. (1979), 100 D.L.R. (3d) 272 (B.C.S.C).

6 - 6 - 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. 23 o If the plaintiff is ultimately unsuccessful at trial, the defendant will be able to claim damages for the harm suffered as a result of the improperly obtained injunction. 24 o The defendant may also be required to keep proper records so that the plaintiff can quantify the amount owed as a result of an improper injunction The Balance of Convenience o If the plaintiff has shown that there is a serious issue to be tried and that, absent an injunction, he or she would suffer irreparable harm, the court will consider the relative impact of granting or denying an injunction on the parties o This can involve any number of considerations. Common considerations include: Timing A plaintiff once entitled to an injunction might lose that right on account of delay in asserting the claim. 26 Delay alone may not be fatal if the defendant has not been prejudiced by the delay. 27 However, if the plaintiff has delayed in bringing the injunction, the court will be disinclined to find that the harm complained of is truly irreparable. 28 Undertaking (discussed above) Third parties - i.e. the relative prejudice to third parties may also be considered. 29 The Merits of the Case: A Fourth Prerequisite? By requiring a plaintiff only to meet the relatively low serious question to be tried standard, the American Cynamid/RJR-Macdonald approach seemingly precludes any substantive review of the merits of a case. This makes sense given that the court does not have the benefits afforded by a full trial on a motion for an injunction. However, in American Cynamid the House of Lords recognized a limited exception to this prohibition at the end of the balance of convenience step if an assessment of irreparable harm and balance of convenience has not yielded a clear answer. This approach has been adopted in Canada as well. As Justice Sharpe explains, 23 R.R.O. 1990, Reg Ontario Ltd. v. Fleischer [2001] O.J. No (C.A.). 25 Kraus Group Inc. v. McCarroll, [1995] M.J. No. 368 (Q.B.). 26 Van v. Qureshi, 2013 ONSC Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R Robert J. Sharpe, Injunctions and Specific Performance, looseleaf (Toronto: Canada Law Book, 1992) at para Cargill Ltd. v. Makarenko, 2009 SKQB 235.

7 - 7 - The core test to be applied is irreparable harm and the balance of convenience. It is only where the irreparable harm and the balance of convenience fail to yield a clear answer that the relative strength of the parties cases may be taken into account, and even then, only where one side of the case is clearly stronger It seems incontrovertible that the plaintiff s chance of ultimate success is directly relevant to an assessment of the relative risks of harm. The likelihood of the plaintiff s success or failure relates both to the extent of the risk that there will be any legal harm which calls for a remedy in favour of the plaintiff, and to the extent of the risk that an injunction may prevent the defendant from pursuing a rightful course of conduct. 30 The Court s Flexible Approach A strict application of the RJR-MacDonald test does not always produce results that reflect the overall balance of risk: [A] box-ticking approach does not do justice to the complexity of a decision as to whether or not to grant an interlocutory injunction. 31 Accordingly, Canadian courts have opted for a flexible approach wherein the various steps of the RJR-MacDonald test are viewed as guidelines rather than strict preconditions: the strength of the case, irreparable harm and balance of convenience considerations, although prescribed and necessary parts of the analysis mandated by the Supreme Court, are nonetheless not usefully seen as an inflexible straightjacket. Instead, they should be regarded as the framework in which a court will assess whether an injunction is warranted in any particular case. The ultimate focus of the court must always be on the justice and equity of the situation in issue there are important and considerable interconnections between the three tests. They are not watertight compartments Robert J. Sharpe, Injunctions and Specific Performance, looseleaf (Toronto: Canada Law Book, 1992) at paras National Commercial Bank Jamaica Ltd. v. Olint Corp. Ltd., [2009] 1 W.L.R (P.C.). 32 Potash Corp. of Saskatchewan Inc. v. Mosaic Potash Esterhazy Limited Partnership, [2011] S.J. No. 627 (C.A.).

8 - 8 - Practical Considerations Plaintiff: Drafting affidavits with the test and the defendant s likely arguments in mind: o Does the type of action fall into the limited exceptions for which the Court may require satisfying a higher threshold akin to a strong prima facie case? o Why is the harm irreparable? i.e. why will damages not suffice? o Has the plaintiff moved quickly to bring the motion? Has the defendant been prejudiced by the time between the conduct that is said to justify an injunction and the bringing of legal proceedings? o Is there anything that the plaintiff can reasonably do to mitigate the harm complained of? o Would it be harder on the plaintiff not to grant the injunction than the hardship faced by the defendant if the injunction were granted? o Is the plaintiff s case likely to succeed at trial? Undertaking as to damages: o Can the plaintiff provide a meaningful undertaking in case he or she abandons the action or is ultimately unsuccessful? If not, what is the basis for having the Court employ its discretion to forego the undertaking? Have to be able to move quickly o To get in court quickly Motions Scheduling Court to demonstrate the urgency, or a 9:30 appointment on the Commercial List if the subject matter is commercial Effectively running an application with witnesses Costs injunctions can be expensive Is the injunction absolutely necessary, or can the harm be dealt with at trial? The plaintiff bears the burden of proof at each stage of the RJR-MacDonald analysis and judges are generally disinclined to order such an extraordinary remedy Defendant: Challenge of having to drop everything to respond quickly o If you cannot drop everything to respond, or the client cannot afford for you to respond, how to get an agreement that preserves the status quo? o Getting an adjournment and on what terms? Whether to file responding materials or just cross-examine the plaintiff s affiants? o If you begin cross-examining the plaintiff s affiant without having filed a responding affidavit, will not be able to file a responding affidavit without leave of the court o Responding affidavit would try to show: monetary nature of alleged harm (such that damages would suffice and injunction is unwarranted) harm to defendant if injunction is granted ability of plaintiff to mitigate the harm delay