Ramona Morrison Hospitality Services Ltd. v. Shelbra International Inc., 2012 ABQB 512

Court of Queen ’ s Bench of Alberta Citation: Ramona Morrison Hospitality Services Ltd. v. Shelbra International Inc., 2012 ABQB 512 Date: 20120830 Docket: 1203 09753 Registry: Edmonton Between: Ramona Morrison Hospitality Services Ltd. Plaintiff/Applicant - and - Shelbra International Inc. and Stonebridge Fort McMurray Inc. Defendants/Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] The operator of a Smitty ’ s restaurant, Ramona Morrison Hospitality Services Ltd., which has a long term lease with the owners of the Stonebridge Hotel in Fort McMurray, Shelbra International Inc., applies for an interlocutory injunction against both the hotel owner and the hotel operator, Stonebridge Fort McMurray Inc., to prevent what it describes as further breaches of its clear, contractual, exclusive food distribution rights for the hotel.

It claims that its business will be irreparably damaged if the injunction is not granted, whereas the granting of the injunction will cause negligible harm to Shelbra. [ 2 ] Shelbra maintains that Smitty ’ s has not demonstrated a clear breach of a clear covenant and has not, therefore, discharged

its burden of establishing a strong prima facie case. It states that the covenant is not clear because it does not explicitly deal with foodservice to the lounge which is located in the hotel building and to the after hours bar which is also located in the building. Shelbra alsocontends that the restrictive covenant here is not clear because it is unreasonable, being in restraint of trade.

Shelbra argues that sincethere is no clear breach of a clear covenant, RMHS must establish both that it would suffer irreparable harm if the injunction were notgranted and that the balance of convenience favours the granting of an injunction and that RMHS has failed to prove both. [3] Shelbra is a proper party to this application.

Although Shelbra recognizes that - pursuant to s. 60 of the Land Titles Act ands. 65 of the Law of Property Act - it was originally bound by the obligations of the RMHS lease, it maintains that its subsequentassignment of the lease to Stonebridge FM created a concurrent lease for a renewable five-year term which granted the reversionaryinterest in the lease from Shelbra to Stonebridge FM.

Shelbra’s position is wrong: as a matter of law, the very purpose of the legislationcited is to prevent the unilateral deflection of responsibility for registered obligations from the registered owner of land to a person whois not on the title. In addition, as a matter of fact, the evidence on this application demonstrates the determinative role which Shelbramaintains, despite the assignment agreement, relative to the Smitty’s lease. [4] RMHS accepts the onus of establishing that it has a strong prima facie case. Having accepted that burden, RMHS has goneon to establish such a case.

On the evidence available on this application, RMHS has demonstrated that it would succeed at trial. In thecontext here, RMHS must demonstrate a clear breach of a clear covenant. In coming to the conclusion that RMHS has met clearcovenant aspect of that burden, the court takes into account the wording of the lease and the experience of the predecessor hotel ownersin interpreting the agreement.

In coming to the conclusion that Shelbra and its agent Stonebridge Fort McMurray have clearly breachedthe clear covenant by replacing Smitty’s as the food distributor for Bailey’s Lounge and by denying Smitty’s exclusivity in relation to thebanqueting facilities, the court relies on the evidence from Shelbra, its employees and agents.

In assessing whether there has been a clearbreach of a clear covenant, for the purposes of this application, the court does not characterize Shelbra’s decision to no longer provideroom service to its guests as a clear breach of a covenant to have Smitty’s provide room service. [5] The advantage to an applicant of adopting the strong prima facie case test is that, if the test is met, the applicant’sobligation to also establish irreparable harm and the balance of convenience is applied with less rigour than in circumstances where anapplicant must only establish that there is a serious issue to be tried: a strong prima facie case answers the balance of convenience testand the breach of a clear contractual obligation is a strong argument in favour of the kind of harm that should not be countenanced in acivil justice system.

Nonetheless, even where an applicant has established a strong prima facie case, the court must still be satisfied that itis just and equitable in all the circumstances to grant the requested injunction. [6] The court is satisfied that it is just and equitable to grant the interlocutory injunction in the circumstances here. Not onlyhas there been a clear breach of a clear obligation, RMHS has established that it would suffer irreparable harm if the injunction were notgranted. On the one hand, RMHS operates on a very low profit margin and continued lounge and banqueting service are critical to itseconomic survival.

The fact that the revenues from those operations are relatively small is not as important as is the relationship of thatrevenue to the margin.

On the other hand, it would not be possible to quantify the loss which RMHS would suffer if the injunction wererefused because Shelbra is a new owner, which has invested a substantial amount of money to renovations at the hotel, so that the historyof Smitty’s operations in the hotel in the past is not necessarily a useful guide with respect to the value of its operations in the renovatedhotel. [7] Also, RMHS has established that the balance of convenience favours the granting of an interlocutory injunction: in essence,Shelbra would, in essence, lose nothing if the injunction is granted because they do not earn revenue from food service anywhere in thehotel.

However, RMHS is at risk of losing everything if the injunction is not granted since revenue from food service in the lounge andin the banqueting facilities is essential to the survival of RMHS. An injunction will preserve the status quo which existed prior to April1, 2012. [8] Finally, the evidence establishes that, because of the actual activities of each of the respondents, it is fair and equitable forthe interlocutory injunction to apply to both respondents.

Cases and authorities cited [9] By Ramona Morrison Hospitality Services Ltd. (RMHS): 364661 Alberta Ltd. v. 735608 Alberta Ltd. 2010 ABCA 6;Debra’s Hotels Inc. v. Lee (1994), (AB KB), 24 Alta L.R. (3d) 199, 1994 CarswellAlta 244; Stonewater Group ofRestaurants Inc. v. Mikes Restaurant Inc. 2005 ABQB 799; Enerflex Systems Ltd. v Lynn 2005 ABCA 62; M.J.B. Enterprises Ltd. vDefence Construction

(1951) Ltd. [1990] 1 S.C.R. 619..

[10] By the Respondents Shelbra and Stonebridge Fort McMurray Inc.: Foundation Capital Corp. v. Saxon, 2011 ABQB102; KRG Insurance Brokers (Western) Inc. v. Shafron, 2009 SCC 6; McDonald’s Restaurants of Canada Ltd. v. West EdmontonMall Ltd. (1994), (AB KB), 22 Alta. L.R. (3d) 402, 1994 CarswellAlta 205 (QB); West Edmonton Mall Ltd. v.McDonald’s Restaurants of Canada Ltd., 1993 ABCA 218 , [1993] 141 AR 266, 1993 CarswellAlta 632 (CA); ATB SecuritiesInc. v. RBC Dominion Securities Inc., 2008 ABQB 392; Canada Safeway Ltd. v.

Excelsior Life Insurance Co. (1987), 1987 ABCA146 , 55 Alta L.R. (2d) 120. [11] By the court: Quizno’s Canada Restaurant Corp. v 1450987 Ontario Corp. 2009 O.J. No. 1743; Ko v Hillview Homes Ltd.2012 ABCA 245 1. Background [12] The sole business of Ramona Morrison Hospitality Services Ltd., RMHS, is the operation of a Smitty’s franchise restaurant inthe Stonebridge Hotel in Fort McMurray, Alberta. RMHS executed a lease with the predecessor owner of the hotel on October 28, 1996;since its execution, the lease has been registered against the lands by caveat.

When the lease was executed, a lounge - at that time named“Cowboys” - in the hotel premises provided food to its patrons and a late hour night club, also within the hotel premises alsooccasionally provided food to its patrons. When the lease was executed, the hotel had banqueting facilities.

The latest, and contractuallylast, renewal of the lease is for a 5 year term which commenced January 1, 2012. [13] The lease includes the following terms: AND WHEREAS the Tenant is a restaurant operator who is desirous of leasing a portion of the Peter Pond Lands for the purpose ofoperating a Smitty’s restaurant, and further for the purpose of catering banquets utilizing the Landlord’s banquet facility; AND WHEREAS the Landlord and Tenant have agreed that the Tenant shall have the exclusive right to sell, serve and distributeprepared foods (excluding liquor and soft drink beverages and other confectionaries approved by the Tenant within the Peter PondLands); . . .

SECTION VII EXCLUSIVE FOOD RIGHTS 7.01 The Landlord agrees with the Tenant that the Tenant shall have the exclusive right to sell, serve or distribute prepared foodswithin or upon the Peter Pond Lands.

Without limiting the generality of the foregoing, the Landlord shall not engage in the sale, serviceor distribution of prepared food (except liquor, soft drinks and confectionary items which are approved in writing by the Tenant), norshall the Landlord lease to or license any third party to sell, serve or distribute prepared food within the Hotel or upon the Peter PondLands. 7.02 The Landlord covenants to make available to the Tenant the banquet facilities within the Hotel at a rental rate established by theLandlord from time to time.

The Tenant shall have exclusive rights to cater to banquets held within the Hotel . . . 7.05 The Tenant shall offer to the Landlord’s guests room service . . . (a) . . . the Landlord shall cause its employees to make the room delivery . . .

[ 14 ] Evidence from Ramona Morrison and Shelley Morrison establishes that, during the last two years, Smitty ’ s margin of profit is very narrow - 2-3% - and that revenues from the lounge/pub and from the banqueting facilities are crucial to its economic survival. [ 15 ] Shelbra International Inc. became the registered owner of the lands on which the hotel is situate by transfer registered March 15, 2011, and is party to an assignment agreement relating to the Smitty ’ s lease, dated March 1, 2011 made with the previous owner of the hotel.

Prior to Shelbra ’ s purchase of the hotel, at least 4 different hotel owners had dealt with RMHS in relation to the Smitty operations in the hotel. [ 16 ] On March 18, 2011, Shelbra assigned its interests in the operations of the hotel to Stonebridge Fort McMurray Inc. [ 17 ] As indicated above, the Smitty chain restaurant is located in the Stonebridge Hotel. In addition, to Smitty ’ s, within the hotel building there are banquet and meeting facilities, a lounge facility - currently known as “ Bailey ’ s Pub ” , and an after hours night club currently known as “ Club NV ” .

All of those businesses are operated by Stonebridge Fort McMurray Inc. through the agreement with Shelbra. Beverly Ollerhead, who was the assistant general manager of the hotel for the previous owner has become the general manager of the hotel since Shelbra ’ s purchase in 2011. [ 18 ] Since 1996, Smitty ’ s has provided all of the food needs at the hotel, including all the food needs at the lounge/pub and at all the banquets. There never has been a request to provide food services to the after hours club.

Indeed, Shelbra acknowledges that RMHS has been vigilant throughout the years in protecting its exclusivity in that regard, even complaining, for example, if individuals brought food from fast-food operations outside the hotel into the banqueting area. [ 19 ] Over the years, even though the lease gives no authority to the landlord to dictate menus, pricing or mechanisms for billing and collection of revenues, RMHS and the then current owner of the hotel were able to adopt mutually agreeable operational protocols dealing with each of those items. [ 20 ] Shelbra states that, within a few months of its acquisition of the hotel, through its agent Stonebridge FM, it began discussions with RMHS with a view to making some changes to the food service, particularly in the pub.

By letter dated November 6, 2011, Stonebridge FM requested: that

Section 7.01 [of the lease] be amended so that what is now described as Club NV space be exempted from 7.01 in relation to the distribution of prepared food and that the Hotel is exempted from 7.01 when the tenant is not open, and, that

Section 7.01 be waived for a maximum of six special events to be held at the hotel annually. Although the parties met to discuss the proposal, no agreement was reached at the meeting.

In particular, there was no agreement amongst the parties to any food discounts. [ 21 ] In addition to the formal, written, request for changes to the lease, Shelbra states that, almost from the date of its acquisition of the hotel, it began informal negotiations with RMHS concerning various aspects of its lease, including the development of featured foods in the pub on certain days of the week No agreement was ever reached with respect to any of these initiatives. [ 22 ] Shelbra states that it extensively and expensively renovated the pub with a view to reopening the pub in the Spring of 2012.

[ 23 ] Upon the grand reopening of Bailey ’ s Pub at the beginning of March 2012, without consultation with RMHS, Shelbra, through Stonebridge FM had new food menus printed for use in the pub, which showed prices for daily specials at prices lower than the prices Smitty ’ s was charging and that this constituted an error in the programming of point of sale entries for food orders in the pub.

One of these errors was brought to the attention of Shelbra and Stonebridge FM on March 6, 2012 by Shelley Morrison via email: the daily report for March 5 showed that an item which should have been priced at $9.93 had been rung in at $7.00. Shelley Morrison then left on holiday. No reply to Shelley Morrison ’ s March 6 email was ever provided by Shelbra or Stonebridge FM. On March 14, RMHS learned by chance that Stonebridge FM had printed new menus for Bailey ’ s Pub which showed daily specials with prices discounted below the Smitty ’ s prices.

Ramona Morrison was upset that a unilateral change to pricing in the pub had been made by Stonebridge FM and advised Bev Ollerhead that she would not supply discounted food until the changes were discussed with her and she had received assurance on all of her concerns, including having Shelbra absorb all the cost of discounting Smitty ’ s food items. On March 15, 2012, Stonebridge FM replied in writing to Ramona Morrison questioning whether a “ legal lease ” existed and stating that, in the absence of a lease, “ there is no exclusivity anymore on any level ” .

In addition, Stonebridge FM maintained that because Smitty ’ s had refused to provide Bailey ’ s Pub patrons with one menu item on certain days, and because it refused to provide a 10% discount to all patrons of Bailey ’ s Pub, Smitty ’ s was in violation of the lease and that it no longer had exclusive food rights. After March 14, all communications between the parties were in writing. On March 30, 2012, Ramona Morrison replied in writing, which included the following: “ We have not withheld food service nor do we intend to . . .

As you have expressed frustration, we are also frustrated with your continuing allegations that we do not have a valid lease or that we are in breach of the lease. We intend to live by the word of the lease that was negotiated 15 years ago and which remains in place. We merely ask that you do the same. ” Ramona Morrison received no response to her letter of March 30, 2012. [ 24 ] On April 1, 2012, Shelbra, through Stonebridge FM, ceased placing food order with Smitty ’ s and made an agreement with Cosmo ’ s Restaurant to provide food service to Bailey ’ s Pub.

As of the same date, Stonebridge FM has permitted a total of 10 named food service providers, including Smitty ’ s, to provide catering services to banquets and meetings held in the hotel. As of April 1, 2012, Stonebridge FM discontinued room service to hotel guests. [ 25 ] Shelbra has continued to accept the lease payments from RMHS from March 1 onwards. [ 26 ] During questioning, Ms. Ollerhead, referred to “ my head office ” , and the direct involvement in the discounted menus for Bailey ’ s as being the activities of Shelbra as the “ parent company ” [pp. 17-21]. In a similar vein, Mr.

Korobanik, who described himself as the marketing manager of Shelbra, stated that he was “ responsible ” for Bailey ’ s [p, 21]. 2. Is Shelbra a proper party to these proceedings? [ 27 ] Shelbra maintains that it is not a proper party to these proceedings because it assigned its interests in the operations of the hotel to Stonebridge FM. With respect, Shelbra ’ s position on this issue is wrong.

Its contract with Stonebridge Fort McMurray Inc., while presumably binding as between itself and Stonebridge FM, cannot displace the obligations which Shelbra assumed relative to RMHS and its registered lease when it purchased the hotel. Our system of land-based obligations would become a farce if each registered owner were able to deflect responsibility for a registered restriction on title by contracting out of those responsibilities with a third party.

Indeed, ss. 60 of the Land Titles Act and 65 of the Law of Property Act impose upon Shelbra responsibility for the Smitty ’ s lease. [ 28 ] Moreover, the evidence establishes that, despite its assignment of operational responsibility to Stonebridge FM in March 2011, Shelbra remained directly and crucially involved in all major decisions concerning the Smitty ’ s lease: the questioning of the Stonebridge FM officials establishes that they took direction from Shelbra. e.g. questioning of Mr. Korobanik at pp. 13-14 and 20, letter from Leigh Sylvester as an employee of Shelbra, questioning of Ms.

Ollerhead. [ 29 ] Because Stonebridge FM acts as Shelbra ’ s agent in the latter ’ s relations with RMHS, not only is Shelbra a proper party to these proceedings, but Stonebridge FM is also a proper party to these proceedings. Indeed, during the course of this decision, although I will often refer only to Shelbra, I should be taken as including Stonebridge FM as Shelbra ’ s agent as the situation requires. [ 30 ] In

summary on this issue, both the law and the evidence establish that Shelbra is a proper party to these proceedings. 3. Has Smitty ’ s demonstrated that it has a strong prima facie case, or, in other words, a very strong probability of success at

trial? [31] The parties agree, and I agree with them, that the general test for the granting of an interlocutory injunction requires theapplicant to demonstrate:

a) there is a serious issue to be tried;

b) it would suffer irreparable harm if the injunction were not granted; andc) the balance of convenience favours the granting of the injunction. [32] The parties also agree that, in the circumstances here, the applicant must establish a strong prima facie case; a strong primafacie case is one where the applicant has demonstrated a very strong probability of success at trial: Foundation Capital Corp. at para.10. In coming to the conclusion that the strong prima facie test applies here, RMHS adopts the reasoning of Ross J. at para. 10 ofStonewater Group of Restaurants.

In argument, RMHS also notes that there is sometimes difficulty in characterizing a covenant asmandatory or restrictive; here, for example, does the covenant require the hotel owner to have Smitty’s provide food in the pub, the afterhours bar and in the banqueting areas - i.e. a mandatory spin - or does it prevent the hotel owner from allowing someone else to providefood in those areas - a restrictive spin.

As the decision in Quizno’s Canada Restaurant Corp. demonstrates, in some circumstances suchas the circumstances here, it does not matter which interpretive spin of the covenant is adopted, the result is the same: RMHS mustestablish a strong prima facie case: 39 The strong prima facie case standard involves a more intensive examination of the merits of the plaintiff's case.

Since a "primafacie case" is established when on the balance of probabilities it is likely that the plaintiff will succeed, I understand a "strong primafacie case" to involve a higher level of assurance at the interlocutory stage that it is likely that the plaintiff will succeed at the trial. In thecontext of claims for mandatory injunctions, a strong prima facie case has been interpreted to mean that the plaintiff must satisfy thecourt that he or she is clearly right and is almost certain to be successful at trial.

Given the very intrusive nature of a mandatoryinjunction, there must be a high assurance that the injunction would be rightly granted. See Barton-Reid Canada Ltd. v. AlfreshBeverages Canada, (ON SC), [2002] O.J. No. 4116 (S.C.J.) at para. 9; Benjamin v. The Toronto-Dominion Bank(2006), (ON SC), 80 O.R. (3d) 424 (S.C.J.) at para. 27. 40 I do not, however, understand the requirement of showing a strong prima facie case to go so far as to require the plaintiff to actuallyprove his or her case.

If this were true, a trial would be superfluous and the interlocutory motion would move from being an examinationof the strength of the case to an actual determination of the merits of the case.

In paragraph 2.130 of the leading Canadian text aboutinjunctions and specific performance, Injunctions and Specific Performance (Canada Law Book: Aurora, 2008, loose leaf), JusticeRobert Sharpe states that the question of whether the plaintiff has shown a strong prima facie case "probably means no more than, if thecourt had to finally decide the matter on its merits, on the basis of the material before it, would the plaintiff succeed?" [33] In the context of this case, RMHS’s burden relative to the first branch of the test for an interlocutory injunction is to prove aclear breach of a clear covenant. (

i) Is the covenant clear? [34] Looking at the covenant first, Shelbra maintains that the covenant here is not clear because the covenant does not explicitlymention food service in the pub and nightclub.

In particular, Shelbra argues that since the banquet facilities are specifically mentioned inthe lease, whereas the pub and after hours night club are not mentioned, the lease cannot be interpreted as giving RMHS exclusive fooddistribution rights in the pub and after hours night club. [35] With respect, this argument is not valid. [36] In coming to the conclusion that the covenant is clear, I first take into account the wording of the contract. The contractclearly gives to RMHS the exclusive right to sell, serve and distribute prepared foods “within or upon the Peter Pond Lands”.

Bailey’sand the after hours nightclub are both clearly located on “the Peter Pond Lands” as that term is defined in the lease. Therefore, RMHSclearly has the exclusive right of food distribution to Bailey’s and the after hours nightclub. [37] The fact that the banqueting service is mentioned separately in no way invalidates the clear reference to food distribution on

the Peter Pond Lands. On the contrary, since the banquet facilities could have been interpreted as being within the hotel rather than merely on the Peter Pond Lands, it was presumably thought useful to make a specific reference to banqueting facilities so as to avoid any potential problem of

interpretation in relation to banqueting. [ 38 ] Second, I take into account the fact that the several previous owners of the hotel during the 15 year period of the lease prior to the date on which Shelbra bought the hotel reportedly had no difficulty in concluding that the contract gave to RMHS the exclusive food distribution rights which it now claims, including the exclusive right to distribute food to the pub and to the after-hours nightclub. In that sense, the previous owners of the hotel are, at the very least, “ reasonable bystanders ” of the type mentioned by our Court of Appeal in Ko , e.g. para. 76 .

Indeed, not only were previous hotel owners reasonable bystanders, but they could even be classified as interested bystanders because their interest, being similar Shelbra ’ s interest, would be to minimize any potential overbreadth of

interpretation of the lease agreement. [ 39 ] It is true that no detail is provided in the lease agreement about the procedure to be adopted for arranging payments for food service at the pub, at the after hours nightclub and in the banqueting hall. However, this is not an uncertainty relating to price: given the fact that Smitty ’ s is a well-established food chain, with well-established prices, a method for computing the cost of the services which it provided were a mere matter of business efficacy which the parties should have been able to work out: see para. 87 of Ko . See also para. 29 of M.J.B.

Enterprises Ltd. [ 40 ] There is no doubt that the mere fact that previous hotel owners interpreted the contract in the same way as RMHS interprets it on this application cannot bind the current hotel owner. However, the wording of the agreement and the

interpretation of previous hotel owners are factors which the court is entitled to consider together in determining whether RMHS has established a strong prima facie case. [ 41 ] Shelbra also maintains that a clear covenant must also be a reasonable one and that the covenant here is not reasonable because it is in restraint of trade. [ 42 ] With respect, this argument is not valid. [ 43 ] The parties to a contract are the ones who decide what is reasonable for them; in a manner of speaking, they create a law for themselves.

Here, although Shelbra clearly finds the terms of the contract overly restrictive, there can be no question of the fact that, when it was negotiated, the parties were mutually of the opinion that the contract was reasonable. [ 44 ] Nor is this one of the rare situations in which a court must interfere in an agreement that parties with capacity freely negotiated with one another because of public policy concerns relating to restraint of trade: this agreement was confined temporally to a specified number of years and geographically to one building.

In the result, therefore, the contract is not only clear, but valid. [ 45 ] Finally, Shelbra argues that RMHS broke its contractual obligations first, having declined to provide the daily specials advertised on Bailey ’ s menu, thereby relieving Shelbra from complying with its covenants. [ 46 ] With respect, this argument is not valid. [ 47 ] Even if it were accepted that the failure by RMHS to provide a daily special to patrons of Bailey ’ s Pub were a breach by RMHS of its obligations under the lease and the first breach of the lease by either party (as opposed, for example, to Shelbra ’ s unilateral changing of prices for Smitty ’ s food when it was supplied as a “ special ” to patrons of Bailey ’ s), that breach would only entitle Shelbra to claim damages (or possibly an injunction requiring RMHS to provide food) since there had been substantial performance by RMHS of its obligations under the lease.

Indeed, it is obvious by Shelbra ’ s ongoing acceptance of RMHS ’ s lease payments that Shelbra was not terminating its contract with RMHS through repudiation. In

summary on this point, even if RMHS did breach the lease, that did not give to Shelbra the right to purport to set aside the exclusive food distribution provisions of the lease. (ii) Is the breach clear?

[ 48 ] Shelbra acknowledges that, since at least April 1, 2012, it has allowed persons other than Smitty ’ s to provide food services in the pub, at the nightclub and in the banqueting facilities. In this context, it is important to note that even Shelbra does not contend that RMHS is in breach of any covenant in relation to the banqueting facilities and that Shelbra therefore has some justification of its breach of the lease in relation to banqueting facilities; the breach by Shelbra of RMHS ’ s exclusive food distribution rights in relation to the banqueting facilities is not only clear, it is egregious. [ 49 ] In

summary, the breach of the lease covenants by each of Shelbra and Stonebridge FM is clear. [ 50 ] However, there is one aspect of RMHS ’ s position which the court does not accept. In my view, RMHS has not established that Shelbra is in clear default of any covenant to provide room service to guests.

Article 7.05 of the lease may merely require, or allow, Smitty ’ s to provide guest room food services if the hotel decides to provide room service to its guests; that

article may not require the hotel to choose to provide such services. Therefore, in concluding that Shelbra, and Stonebridge Fort McMurray as its agent, have clearly breached the terms of the lease, the only clear breaches I have taken into account are the breaches pursuant to which Shelbra and its agent have arranged for a food supplier other than RMHS to provide food services at Bailey’s and also where Shelbra and its agent have arranged for nine additional food suppliers to be allowed to provide food in Shelbra’s banqueting facilities. 4.

Has Smitty ’ s demonstrated that it will suffer irreparable damages if an injunction is not granted? [ 51 ] Because RMHS has met the test of establishing a clear breach of a clear covenant, the court turns to consider, with less rigour than it would in another type of application for an interlocutory injunction, whether RMHS has established irreparable harm. [ 52 ] By any standard, RMHS has met the burden of establishing that it will suffer irreparable harm if an interlocutory injunction is not granted. [ 53 ] In coming to that conclusion, the court takes two factors into account.

The first is that the financial evidence provided by RMHS establishes that although the revenues generated by food service to Bailey ’ s and to the banqueting facilities are not objectively great, their contribution to the narrow profit margin of RMHS relative to its operations in this facility are crucial. [ 54 ] The second is that Shelbra has emphasized the quality and extent of the recent renovations which it undertook in its facilities, including Bailey ’ s Pub. Presumably these renovations were undertaken with a view to increasing the use of the facilities, including Bailey ’ s Pub.

Therefore, the historical information about the amount of revenue generated through food service to Bailey ’ s Pub will not necessarily be a fair predictor of potential revenues given the important renovations. [ 55 ] Moreover, in determining what is fair and equitable in the circumstances here, the court observes that there is value, in the commercial context where predictability is a necessity, in requiring parties to a contract to comply with the terms of the contract at least until a court can formally and finally rule on the contractual dispute. [ 56 ] In

summary, RMHS has met the test of establishing that it would suffer irreparable damage if the injunction were not granted. 5.

Has Smitty ’ s established that the balance of convenience favours the granting of an injunction? [ 57 ] Because RMHS has met the test of establishing a clear breach of a clear covenant, the court turns last to consider, with less rigour than it would in another type of application for an interlocutory injunction, whether RMHS has established that the balance of convenience favours the granting of an interlocutory injunction. [ 58 ] By any standard, RMHS has met the burden of establishing that the balance of convenience favours the granting of an injunction.

In coming to that conclusion, the main factor which the court takes into account is the evidence to the effect that Shelbra

suffers no financial disadvantage if the injunction is granted because it does not earn revenue from food service anywhere in the hotel. However, RMHS is at risk of becoming unprofitable and therefore losing its only business if it loses revenues from food service to the pub and to the banqueting facility. [ 59 ] Moreover, in determining what is fair and equitable in the circumstances here, the court observes that he granting of an injunction will preserve the status quo which existed prior to the development of this relatively minor dispute between the parties until a court can resolve that dispute. 6.

Conclusion - RMHS is entitled to an interlocutory injunction against both respondents [ 60 ] For the reasons set out above, the court has concluded that it is just and equitable to grant the application by RMHS for an interlocutory injunction against Shelbra and Stonebridge FM. 7. Costs [ 61 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 2 nd day of August, 2012. Dated at the City of Edmonton, Alberta this 30 th day of August, 2012. J.B. Veit J.C.Q.B.A. Appearances: Daniel W. Hagg, Q.C. for Ramona Morrison Hospitality Services Ltd.

Amanda M. Lindberg, MacPherson Leslie & Tyerman LLP for Shelbra and Stonebridge Fort McMurray Inc.