Kwik Kopy Printing Canada Corporation v Pickard, 2016 ABQB 534

Court of Queen’s Bench of Alberta Citation: Kwik Kopy Printing Canada Corporation v Pickard, 2016 ABQB 534 Date: 20160930 Docket: 1603 16430 Registry: Edmonton Between: Kwik Kopy Printing Canada Corporation Plaintiff - and - Frank Pickard, Rose Marie Pickard, P6 Holdings Ltd. and JAG Printing Ltd. Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] In a morning chambers application, Kwik Kopy Printing Canada Corporation applies for an injunction against the Pickard defendants – Frank Pickard, Rose Marie Pickard, and P6 Holdings Ltd. – prohibiting them from engaging in a printing business within a defined area and for a limited time, all in accordance with a non-compete clause in their franchise agreement with Kwik Kopy. Kwik Kopy also asks for a declaration of contractual obligations – including post-termination obligations - and a declaration of breach of statutory obligations of fair dealing under franchise legislation.

Finally, Kwik Kopy asks for a mandatory order requiring the Pickard defendants to comply with post-expiration obligations under the franchise agreement. [ 2 ] The application is granted, in part: the Pickard defendants will, forthwith, complete their obligation to provide to the applicant a list of all their franchise customers - along with the purchases and receivables and artwork and discs for those customers - for the six months immediately preceding August 31, 2016. [ 3 ] The Pickard respondents concede that, in relation to the obligation to provide 6 months' of post-termination information

about their franchise customers to the franchisor, the applicant has a strong prima facie case.

Therefore, having concluded that it is likelythat the plaintiff will be successful at trial on that limited issue, the court issues a mandatory injunction against the Pickard defendants tocomply with that requirement. [4] As to the remaining aspects of Kwik Kopy’s application for injunctive relief, having received only the bare minimum lengthof notice of the application as required by the Rules of Court, and not having had the opportunity of cross-examining the applicant’saffiants nor of providing evidence of their own, the Pickard defendants ask for an adjournment.

In addition, based on their contention thatit is impossible to hear Kwik Kopy’s application in morning chambers; the Pickard defendants also ask that the adjournment be to specialchambers. [5] The court allows the application for an adjournment, in part. Kwik Kopy’s claims for a permanent injunction and fordeclaratory relief are adjourned.

However, the court proceeds as if on a without notice application for what might be described as urgentinterlocutory relief. [6] With respect to the interlocutory relief claimed by the applicant on an urgent basis, there is inadequate evidence before thecourt on this application to grant the relief requested. The respondents concede there are serious issues to be tried. The court accepts thatreputational damage to a franchise operation can be caused by a former franchisee and may be irreparable.

However, there is evidence ofonly two, relatively minor, breaches of the defendants’ post-termination obligations; in the overall circumstances, that limited evidencedoes not constitute irreparable damage. The balance of convenience does not favour the granting of an extraordinary remedy. [7] Kwik Kopy’s application is adjourned to the first available special chambers hearing date. Because of the delay involved inobtaining a special hearing date, Kwik Kopy is given leave to file supplementary evidence on the understanding that it must neverthelessrespect the time limits set for special chambers hearings.

If Kwik Kopy is of the view that its application must be heard prior to 7 monthsfrom now, it must apply to the Associate Chief Justice for a hearing on an expedited basis. Cases and authority cited [8] By Kwik Kopy: Quizno’s Canada Restaurant Corporation v 1450987 Ontario Corp.[2009] O.J. No. 1743. [9] By the Pickard Defendants: Direct Energy Marketing Limited v McIntyre 2007 ABQB 296; Oxford Dictionary . [10] By the court: RJR-MacDonald v Canada (Attorney General) (SCC), [1994] 1 S.C.R. 311; MTY Tiki MingEnterprises v Boundris 2016 ONSC 3290; Paul Sadlon Motors Inc. v.

General Motors of Canada Ltd. 2011 ONSC 4432. 1. Background [11] In 2012, Kwik Kopy Printing Canada Corporation entered into a franchise agreement with Frank and Rose Marie Pickard forthe operation for a term of 10 years of a Kwik Kopy outlet on Roper Road in Edmonton. That agreement was assigned by the Pickards toP6 Holdings Ltd., their wholly owned company. The latter three litigants will, collectively, be referred to as the Pickard defendants. [12]

Section 11.2 of the franchise agreement prohibits the Pickard defendants from competing in any way with Kwik Kopy in theoperation of a printing business for a period of two years, at or from the premises on Roper Road in Edmonton, within Canada Postpostal codes T6E and T6H, and within a three mile radius of any other Kwik Kopy center. The only other Kwik Kopy center operating inthe Edmonton area is located on 170 Street, in the west end of Edmonton. [13]

Section 13.4(

g) of the franchise agreement requires the Pickard defendants to: provide the Franchisor with a list of all the Franchisee’s customers, artwork and discs and their respective purchases and receivables forthe six (6) month period prior to termination or expiration; [14] Although it is not clear exactly when the Pickard defendants terminated their franchise agreement, it is clear that theagreement was terminated as of August 31, 2016. [15] The Pickard defendants have complied with certain of their post-termination obligations: after having, for a time, placed asign on the premises which directed inquiries to them, they have now taken down that sign and made arrangements for telephone callsmade to the Roper Road premises to be forwarded to Kwik Kopy’s west end location. [16] The Pickard defendants have also provided Kwik Kopy with some of the customer lists, artwork, discs, and list of purchasesand receivables, but the information which they have provided is, according to the applicant, not consistent.

The other Kwik KopyEdmonton franchisee swears that the Pickard defendants have continually promised to provide that information but had, as of September 3rd, 2016, not done so. As indicated, the defendants have in fact provided some of that information, perhaps direct to head office;however, Kwik Kopy is certain that some of the required information is missing.

For example, the defendants report purchases forFebruary 2016 in the hundreds of dollars whereas on another report the defendants reported sales in the tens of thousands of dollars. [17] Kwik Kopy has also filed an affidavit from the other franchisee in the Edmonton area who indicates that, on September 7,2016, a Roper Road Kwik Kopy client from the south side of Edmonton, was in touch with the other franchisee’s office. The customer’sbusiness address is in the T6B zone and is further than 3 miles away from the west-end location.

The west end location did not have thatcustomer’s digital file; when the west-end franchisee indicated that he was willing to go and pick up another copy from the customer’slocation, the customer indicated that they would go elsewhere for their printing needs. The west-end franchisee indicated that when hephoned JAG Printing on September 7 after the contact with the now-former customer, the person who answered indicated that FrankPickard was, in fact, present on those premises. [18] Kwik Kopy’s west-end franchisee indicates that many customers order once a year or once every few years.

Therefore, itmaintains that providing only the last 6 months of customer information is totally inadequate.

[ 19 ] Kwik Kopy also asserts that the defendants are in arrears on outstanding fees. [ 20 ] The Pickard defendants were served with Kwik Kopy’s application for an interim, interlocutory and permanent injunction, and for a declaration, and for a mandatory injunction on Friday, September 16, 2016. On Wednesday, September 21, therefore, the defendants had had the required 5 days’ notice of an application. [ 21 ] At the hearing, Kwik Kopy withdrew its claim against JAG Printing Ltd.

At the hearing, JAG Printing took the opportunity of making a formal statement that it has no business relationship with the Pickard defendants. 2. Application for adjournment [ 22 ] Based on its limited opportunity to deal with the evidence presented by Kwik Kopy and to present evidence on its own behalf, the Pickard defendants applied for an adjournment of the application.

Moreover, they asked that the matter be adjourned to a special chambers hearing. [ 23 ] Because morning chambers, which has a time limit of 20 minutes per application, is unsuited to the hearing of applications for interlocutory injunctions, and because the respondents had received the minimum allowable notice of Kwik Kopy’s application, and because of the seriousness and complexity of the application itself, I would have not only allowed, but required, an adjournment of Kwik Kopy’s application to special chambers. [ 24 ] Nonetheless, on the understanding that there may be some issue which is urgent, I refused the application for an outright adjournment and undertook to hear that part of Kwik Kopy’s application dealing with interlocutory relief as if it were brought on a without notice, i.e. ex parte, basis. [ 25 ] Having heard the application for what might be described as emergency interlocutory relief, but not having dealt with all of the Kwik Kopy claims for relief, including, for example, a declaratory order and a final injunction, it was necessary to adjourn the remainder of Kwik Kopy’s application. [ 26 ] However, as of September 21, 2016, the earliest date on which a half day special chambers application could be booked was May 3, 2017.

A 7 month delay to hear an interlocutory injunction may be inappropriate. In Edmonton, parties to litigation who believe that they have an urgent matter must apply to the Associate Chief Justice for an expedited hearing; I have directed these parties to make those inquiries of the ACJ.

I adjourn Kwik Kopy's application, except the portion that is dealt with hereunder, to whatever date the parties can arrange for a special chambers hearing. [ 27 ] In light of the potentially long delay, I give leave to Kwik Kopy to file supplementary affidavits in support of its application, on the understanding that it will nevertheless respect the court’s rules concerning pre-hearing process on special chambers matters. If the parties are unable to agree on deadlines, they are given leave to return for directions. 3.

A mandatory injunction is granted in one area where there is a strong prima facie case [ 28 ] The Pickard defendants acknowledge an obligation to provide the last 6 months of customer information, including artwork and discs, purchases and receivables to the franchisor. They have already provided at least some of that information.

By their admissions, the Pickard defendants concede not only that Kwik Kopy has a strong prima facie case in relation to that part of its claim, but that Kwik Kopy will be successful at trial on that aspect of its claim. [ 29 ] In those circumstances, there is no reason to assess irreparable harm and balance of convenience. Indeed, if anything, all parties are assisted by narrowing the case to its essential disputed facts to minimize delay and expenditure. [ 30 ] The court concludes that it is likely that the plaintiff will be successful at trial on the above-noted issue.

It therefore issues an interlocutory mandatory injunction against the Pickard defendants to complete their compliance with that requirement forthwith. [ 31 ] It must be emphasized that the mandatory relief just granted does not dispose of the applicant’s claim in relation to s. 13.4(

g) of the franchise agreement: there remains a dispute between the parties as to the content of the 6 month limit. An

interpretation of the overall meaning of that

section of the agreement is one of the matters which is adjourned to a special chambers hearing. 4. Kwik Kopy has not established an entitlement to interlocutory relief on this application; its claims are adjourned to a special chambers hearing [ 32 ] Apart from the last 6 months of customer information as described above, for the reasons which follow, the court adjourns Kwik Kopy’s application for various injunctive relief to a special chambers hearing.

a) Serious issue to be tried [ 33 ] The Pickard defendants agree that Kwik Kopy has met the very low threshold of establishing that there is a serious issue to be tried.

b) Irreparable harm [ 34 ] On this application, Kwik Kopy’s main argument concerning irreparable damage focusses on potential reputational harm against Kwik Kopy in the eyes of its existing or prospective franchisees should those franchisees be allowed to believe that Kwik Kopy will not actively protect franchise rights. [ 35 ] As to the definition of irreparable harm, the Oxford Dictionary provides a literal meaning, but, for lawyers, a possibly more useful description is given by the Supreme Court of Canada in RJR-MacDonald :

59 "Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified inmonetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the formerinclude instances where one party will be put out of business by the court's decision (R.L. Crain Inc. v. Hendry (1988), (SK KB), 48 D.L.R. (4th) 228 (Sask.

Q.B.)); where one party will suffer permanent market loss or irrevocable damage to itsbusiness reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challengedactivity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, (BC CA), [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact thatone party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately beable to collect damages, although it may be a relevant consideration (Hubbard v.

Pitt, [1976] Q.B. 142 (C.A.)). [36] Franchise operations can, of course, suffer reputational harm, and reputational harm can, of course, be irreparable: Quizno’sCanada, MTY Tiki Ming: 66 I accept that the restrictive covenant is an important feature in the Franchise Agreement. A failure on the part of the franchisor toenforce it may well be a source of irreparable harm to the franchisor's credibility and, in turn, its ability to manage and control thefranchise system. In the circumstances of this case, and on the evidentiary record before me, I consider this to be a very modest level ofirreparable harm. Not none.

But not much. And to be clear, this is strictly in relation to the claim against the former franchisee, GregoryBoundris. [37] However, reputational harm is not always irreparable: Paul Sadlon Motors. The latter decision is important because it wasissued subsequent to Quizno’s by the same judge, Perrell J. In his 2009 decision, Perrell J. said, in part: . . . in any event, the irreparable harm suffered by the franchisor goes to its goodwill, its reputation, and its responsibility to thefranchisees of the chain to maintain the integrity of the franchise system.

Damages would not adequately address these harms. [38] In his 2011 decision, Perrell J. said, in part: 78 A loss of market share, a loss of goodwill, or damage to reputation can be irreparable harm; however, it is not necessarilyirreparable harm, and the attendant damages are not necessarily unquantifiable: Bell Canada v. Rogers Communications Inc., (ON SC), [2009] O.J. No. 3161 (S.C.J.); MD Management Ltd. v. Campbell, 2010 ONSC 2315 at para. 32, aff'd 2010ONSC 6373; Cana International Distributing Inc. (c.o.b. Sexy Living v. Standard Innovation Corp., 2010 ONSC 6273 , [2010]O.J.

No. 4919 (S.C.J.) at paras. 18-19. [39] In the result, it is clear that Quizno’s is authority only for the proposition that reputational harm to a franchise operation maybe of a kind or a size that cannot be compensated in damages. [40] I don’t understand McMahon J., in Direct Energy, to challenge the Quizno’s conclusion that reputational harm can beirreparable.

Indeed, in his decision, McMahon J. was not even dealing with reputational harm as being irreparable but rather withimpecuniosity as being irreparable; in the result, he was not prepared, in the circumstances of that case, to find that that an inability topay money damages constitutes, ipso facto, irreparable harm.

McMahon J.’s conclusion appears to be another way of saying what theSupreme Court said in RJR-MacDonald about impecuniosity, albeit in different language. [41] As the case law also makes clear, a mere allegation that a franchisee is not complying with a franchise agreement may not besufficient justification for an interlocutory injunction based on reputational harm. [42] Here, one of Kwik Kopy’s other franchisees knows of one breach: the relatively short-term posting of a sign directinginquiries to the Pickard defendants rather than to Kwik Kopy’s other Edmonton franchisee.

That breach is not ongoing. [43] The same franchisee alleges one other breach – the failure, upon the termination of the franchise, to turn over to the franchisora customer’s artwork. As noted above, the issue of the

interpretation of the

section of the franchise agreement dealing with the obligationto turn over artwork if the art work had not been filed within the 6 months preceding August 31, 2016 has yet to be made.

Therefore,whether the failure to provide the artwork in question is or is not a breach of the franchise agreement may depend on the date when thatcustomer provided the artwork. [44] Because of the address of the franchise customer referred to by the west-end Edmonton franchisee, any post-terminationapproach by the Pickard defendants to that customer presumably does not constitute a breach of the franchise non-compete clause. [45] The remaining Edmonton franchisee also knows that Kwik Kopy has moved swiftly to require the Pickard defendants tocomply with their post-termination obligations. [46] In addition to reputational harm, there is some evidence of harm suffered by Kwik Kopy as a result of the Pickard defendants’failure to provide franchise customers’ digital art work to the franchisor.

Although one might have thought that digital information canbe replaced almost literally at the drop of a finger, Kwik Kopy asserts that customers would rather not send that information twice andmight change printers to avoid that extra step. This might all be true, but there is, on this application, no evidence of actual loss arisingfrom that specific concern. [47] In

summary, in all of the circumstances known at this stage of proceedings, there is insufficient evidence of reputational harmto the applicant to justify an interlocutory injunction.

c) Balance of convenience [48] The notion of balance of convenience is sufficiently fluid to be able to mold itself to different circumstances. Here, nosufficient reason has been advanced by the applicant to establish that it would be better to grant it an extraordinary remedy prior to trialthan to await the court’s eventual decision. The balance of convenience therefore favours the respondents.

[ 49 ] As set out above, Kwik Kopy’s claim for injunctive and declaratory relief is adjourned to a special chambers hearing. 5. Costs [ 50 ] If the parties are not agreed on costs, I can be spoken to within 30 days of the release of this decision. Heard on the 21 st day of September, 2016. Dated at the City of Edmonton, Alberta this 30 th day of September, 2016. J.B. Veit J.C.Q.B.A. Appearances: Keltie L. Lambert, Witten LLP for the Plaintiff John K. Campbell for the Pickard Defendants Imran Qureshi, Ogilvie LLP for Defendant, JAG Printing Ltd.