Kara Turtle v. Dad’s Oil Change, 2021 SKCA 46

Court of Appeal for Saskatchewan Docket: CACV3789 Citation: Turtle v Valvoline Canadian Franchising Corp. , 2021 SKCA 46 Date: 2021-03-25 Between: Kara Turtle and Dad’s Oil Change Limited Applicants/Appellants (Defendants) And Sneer Enterprises Ltd. Applicant/Appellant (Defendant/Plaintiff by Counterclaim) And Valvoline Canadian Franchising Corp. Respondent (Plaintiff/Defendant by Counterclaim) Before: Leurer J.A. (in Chambers) Disposition: Application granted in part Written reasons by: The Honourable Mr.

Justice Leurer On application from: QBG 476 of 2020, Saskatoon Application heard: March 12, 2021 Counsel: Janine Lavoie-Harding and David Ukrainetz for the Appellants Geoffrey Shaw, David Kelman and Conrad Hadubiak, Q.C., for the Respondent Leurer J.A. I.

Introduction [ 1 ] These are my reasons for the grant of a partial conditional stay of the enforcement of an interlocutory injunction pending the hearing of this appeal. [ 2 ] On March 20, 2020, Valvoline Canadian Franchising Corp. [Valvoline] commenced an action in the Court of Queen’s Bench against Kara Turtle, Dad’s Oil Change Limited [Dad’s Oil], Sneer Enterprises Ltd. [Sneer] and Willowgrove Holdings Inc. [Willowgrove].

In its amended statement of claim dated October 8, 2020, Valvoline claims that an oil change business located at 519 Nelson Road, Saskatoon, Saskatchewan [Business] is being operated in breach of certain non-competition obligations owed to it. [ 3 ] After commencing its action, Valvoline moved promptly for interlocutory injunctive relief aimed at shutting down the Business pending the trial of the action.

Owing largely to the COVID-19 crisis, there were delays in the hearing and determination of Valvoline’s application. [ 4 ] By fiat dated March 3, 2021, a Court of Queen’s Bench judge in Chambers granted Valvoline’s injunction request: Valvoline Canadian Franchising Corp. v Turtle (3 March 2021) Saskatoon, QBG 476 of 2020 (Sask QB) [ Chambers Decision ]. The issued order, dated March 8, 2021 [Queen’s Bench Order], states as follows: (

a) Kara Turtle, Sneer Enterprises Ltd., and Dad’s Oil Change Limited are restrained from operating the competing business, Dad’s Oil Change, at 519 Nelson Road in Saskatoon, Saskatchewan until the final disposition of the action or until further order of this Court. (

b) Costs of this application shall be in [ sic ] cause. [ 5 ] Ms. Turtle, Dad’s Oil and Sneer have appealed the Queen’s Bench Order. They have also applied, pursuant to Rule 15 of The Court of Appeal Rules , for a stay of execution pending the hearing of their appeal. [ 6 ] The appellants’ application for a stay first came before me on March 9, 2021. On that day, after consultation with the Registrar, I directed that the hearing of the appeal be scheduled for April 16, 2021. Both parties treated the issue of whether a stay should be granted as an urgent matter. I agreed that it was.

Counsel for the appellants advised that, to comply with the Queen’s Bench Order, the Business had been shuttered pending a decision on their application to stay its operation. [ 7 ] On March 12, 2021, I heard the appellants’ stay application on an expedited basis. At the hearing, I made several additional

procedural orders designed to ensure that the appeal will be ready to be heard on the date set for hearing. On March 15, 2021, I made the following orders pursuant to Rule 15: (

a) There shall be a stay of the operation of the Queen’s Bench Order so far as it restrains Dad’s Oil from operating the Business until the hearing of the appellants’ appeal; (

b) The grant of the stay of the operation of the Queen’s Bench Order, to allow Dad’s Oil to operate the Business pending the hearing of the appellants’ appeal, is subject to the following conditions: (

i) from and after this order, and so long as the Queen’s Bench Order is extant, Ms. Turtle shall not be involved, directly or indirectly, in the direction, management or operation of the Business; (ii) on or before 4:00 p.m. on March 16, 2021, Ms. Turtle shall resign as a director and officer of Dad’s Oil; (iii) the appellants must meet each of the service and filing deadlines imposed on them in relation to their appeal; (

c) Should any of the conditions referred to in subparagraph (

b) not be met, Valvoline may apply, on not less than 48 hours’ notice to the appellants, for an order varying or setting aside the stay order. I shall remain seized to hear any such application that may be brought prior to the hearing of the appeal; and (

d) The costs of this application, and the continuation of the stay after the date set for the hearing of this appeal, are reserved to the panel of the Court who hears this appeal. [ 8 ] The parties were also advised that I would provide further written reasons for these orders in due course. These are those reasons. II. Background A. The dispute [ 9 ] Valvoline is the franchisor of quick-lube Great Canadian Oil Change [GCOC] franchises throughout Canada.

Sneer became the holder of a GCOC franchise, located at 519 Nelson Road, Saskatoon, Saskatchewan, pursuant to an agreement dated October 3, 2007 [Nelson Road Agreement]. Ms. Turtle is the sole shareholder, director and officer of Sneer. Willowgrove is the landlord of the location where the Business is operated. [ 10 ] Among its many terms, the Nelson Road Agreement contains several restrictive covenants.

Section 10.1 applies “in term”, that is to say while the agreement is in force: 10.1 No Competition With Us During the Term of This Agreement During the Term, you will not individually, nor in conjunction with or as part of any person, firm, partnership, corporation, syndicate, association, joint venture or other third party or other entity whatsoever, whether as principal, agent, shareholder, director, officer, employee, consultant, landlord, partner, member, joint venturer or guarantor, or in any other manner whatsoever, directly or indirectly, carry on or be engaged in or concerned with or interested in, financially or otherwise, or advise in the establishment or operation of, any business which consists substantially of operating an automotive lubrication service outlet. [ 11 ]

Section 10.2 applies “post term”, that is to say after the expiration or termination of the Nelson Road Agreement: 10.2 No Competition With Us After Expiration or Termination In the event of expiration or termination of this Agreement for any reason whatsoever, or in the event this Agreement is transferred pursuant to

Article 11 of this Agreement, you shall not, without our prior written consent, at any time during the period of two (2) years from the date of such expiration, termination or transfer, either individually or in conjunction with or as part of any person, firm, partnership, corporation, syndicate, association, joint venture or other third party or other entity whatsoever, whether as principal, agent, shareholder, director, officer, partner, employee, consultant, member, joint venturer or guarantor or in any other manner whatsoever, directly or indirectly, carry on, be engaged in or be concerned with or interested in, financially or otherwise, or advise in the establishment or operation of an automotive lubrication service outlet at the Premises, or within a two (2) kilometre radius of the Premises, or within a two (2) kilometre radius [of] the premises of any other Great Canadian Oil Change outlet then in operation. [ 12 ] There are two key matters in dispute between the parties in relation to the Nelson Road Agreement.

First, the parties disagree whether Ms. Turtle is personally bound by its terms. The second key dispute is as to whether the agreement is still in force. The term of the Nelson Road Agreement was, by its express language, to end on October 2, 2017. Valvoline alleges in its amended statement of claim that the Nelson Road Agreement was renewed by Ms. Turtle and Sneer. The appellants disagree. [ 13 ] These two matters of disagreement are important because, in the fall of 2019, Ms. Turtle incorporated the second corporate defendant, Dad’s Oil. She is the sole director and officer of Dad’s Oil.

On November 1, 2019, the assets that are now used to carry on the Business were transferred from Sneer’s to Dad’s Oil. Since that date, the Business has been carried on in the name of Dad’s Oil. Valvoline contends this constitutes a breach of the Nelson Road Agreement [ 14 ] The matter is yet more complicated. In addition to holding a GCOC franchise for the Nelson Road location, pursuant to an agreement dated February 1, 2017 [Warman Agreement], Sneer became a GCOC franchisee for a business located at 910 Centennial Boulevard, Warman, Saskatchewan.

[15] For the most part, the covenants in and the manner of execution of the Warman Agreement are the same as those found in theNelson Road Agreement. Specifically, the Warman Agreement contains the same restrictive covenants as found in the Nelson RoadAgreement, and Ms. Turtle is the designated owner-operator who is stated, by the language of the Warman Agreement, to be bound by itsterms. As with the Nelson Road Agreement, the parties disagree as to whether Ms. Turtle is personally bound by the Warman Agreement. [16] The Warman Agreement states that its term ends on January 31, 2027.

Valvoline’s contention is that the operation of theBusiness at Nelson Road is in breach of the in-term restrictive covenant (i.e., clause 10.2). B. The injunction application [17] Valvoline’s notice of application is dated March 25, 2020. It sought, as against Ms. Turtle, Sneer and Dad’s Oil, an “interim,interlocutory and/or permanent injunction” restraining them from operating the Business and breaching certain specified covenantscontained in the two franchise agreements. Valvoline also sought a mandatory order requiring Willowgrove to assign the lease for thebusiness premises to it.

This latter request was later abandoned by Valvoline and the action against Willowgrove was discontinued. C. The Chambers Decision [18] The Chambers judge made reference to RJR-MacDonald Inc. v Canada (Attorney General), (SCC), [1994] 1SCR 311 [RJR-MacDonald] and noted that the “usual rule” on an interlocutory injunction is that the applicant must establish that:(a) “[t]here is a serious issue to be tried”; (b) “[t]he applicant would suffer irreparable harm if the injunction is not granted”; and (c) “[t]hebalance of convenience favours the applicant” (Chambers Decision at para 23).

However, she determined that, in this case, Valvolinemust show that it had a strong prima facie case, and not simply a serious issue to be tried. She explained this as follows: [32] In my view, there are positive steps that will need to be taken in order to enforce the injunction, which suggests this is a mandatoryinjunction. The practical impacts of the injunction will require the defendants to do something, rather than refrain from doing something -effectively discontinuing Dad’s operation at the location on Nelson Road.

The higher standard of requiring the plaintiff to establish astrong prima facie case is required in these circumstances because it may be the final decision on the issue and due to action beingrequired by the defendants, such as discontinuing employment for employees, dealing with suppliers and managing the financial aspects ofdiscontinuing this operation. [19] The Chambers judge concluded that Valvoline had failed to meet this test in relation to its claim that there had been a breach ofthe Nelson Road Agreement. [20] In relation to the Warman Agreement, the Chambers judge determined the issue to be “whether Ms.

Turtle personally boundherself to the covenants” found in that agreement (at para 58). She was convinced that there was a strong prima facie case that Ms. Turtlewas bound by that agreement and therefore had breached the in-term restrictive covenant found in it. The Chambers Decision states inpart on this issue as follows: [60] The wording of the Warman franchise agreement clearly incorporates

Schedule “A” at several points and in numerous clauses.Even if Ms. Turtle is not a “guarantor” or the “franchisee”, through her role as the sole director and officer for Sneer, she agreed to be“bound by the covenants contained” in the Warman franchise agreement. On behalf of Sneer, she made a material representation that she,personally, was an “owner-operator” as identified in

Schedule “A”. This

schedule specifically provides that Ms. Turtle agreed to bepersonally bound by the covenants in the Warman franchise agreement. [21] The Chambers judge also concluded that Valvoline would suffer irreparable harm should the injunction not be granted: [77] As Valvoline has presented a strong prima facie case, I am inclined toward granting the injunction as this reflects the enforcementof the contractual obligations between the parties.

However, in reviewing the evidence, I would be satisfied that this threshold has beenmet without such an inclination. [78] The franchise agreement itself confirms in clause 1.5 that the automotive lubrication service industry is “highly competitive”. [79] Valvoline has presented evidence of Dad’s interference with their operations and diversion of customers, such as accepting GCOCcoupons and continuing to use GCOC trademarks and signage after the conversion to this competing business.

Valvoline has alsopresented evidence of customer confusion such as the customer complaint and request for refund made directly through GCOC toValvoline as a result of service received at Dad’s. Additionally, as an ongoing GCOC franchisee, Ms.

Turtle, the sole director and officerof both Sneer and Dad’s, is privy to internal and confidential market information provided by Valvoline to their franchisees, such as thatset out in the affidavit of Lisa Culp, Director of International Operations for Valvoline, deposed July 3, 2020 at paragraphs 4 to 14. [80] Further, Valvoline provides evidence that their acquisition of the GCOC franchise system served as a “springboard” for theirexpansion into Canada. The evidence of Lisa Culp, in her affidavit deposed March 24, 2020, provides the following: 59.

Based on my 22 years of experience in the franchising and quicklube industry, I believe that the failure to grant the requestedinjunctive relief and the inability to enforce the non-competition covenants would send at least three damaging messages to current andprospective Valvoline franchisees: (

a) Valvoline is not able to control its System and is unable to protect its franchisees from rogue franchisees, like Turtle, who overtlybreach their non-competition covenants; (

b) a franchisee can reap all of the benefits of their franchise system and value of the Trademarks, learn all of the confidential information,abandon the System, incorporate a new company and then continue to use all of that goodwill and information in direct competition withValvoline and its franchisees, without consequence; and

(

c) there is little to no incentive for the other franchisees in Saskatoon, and across Canada, to abide by their franchise agreements and tochoose to renew their franchise agreements. This will have a detrimental effect throughout the System, ultimately affecting every singlefranchisee committed to the System. Valvoline and the System depend on renewals and the enforcement of its non-competition covenantto maintain its vitality.

In my experience, new prospective franchisees are hesitant to join the System and current franchisees are hesitantto renew their franchise agreements if a current franchisee is simultaneously operating in direct competition. [81] In my view, it would be difficult, if not impossible, to prove and quantify the value of Valvoline’s losses if the injunction is notgranted. [22] Finally, the Chambers judge concluded that the balance of convenience favoured the grant of injunctive relief: [83] As set out by the Saskatchewan Court of Appeal in [Mosaic Potash Esterhazy Limited Partnership v Potash Corporation ofSaskatchewan Inc., 2011 SKCA 120, 377 Sask R 78], testing the balance of convenience requires me to weigh the risk of the irreparableharm Valvoline is likely to suffer before trial if the injunction is not granted and they succeed at trial, against the risk of the irreparableharm the defendants are likely to suffer if the injunction is granted and they prevail at trial.

Relevant considerations include the relativestrength of the plaintiff’s case, the relative likelihood of irreparable harm, and the likely amount and nature of such harm. [84] Valvoline suggests that any harm suffered by the defendants is monetary and compensable by damages, which they haveundertaken to pay. They do not seek discontinued operation of the GCOC location in Warman, rather the discontinued operation of thecompeting business, Dad’s. As such, they suggest Ms.

Turtle’s source of income will not be entirely impaired as this franchise agreementremains in effect until 2027. [85] The defendants point to the inequities between the parties, with Valvoline being an international, multi-billion dollar enterpriseand the defendants being a local entrepreneur. [86] I acknowledge that the defendants will suffer harm if the injunctive relief is granted. In my view, the harm suffered by thedefendants is the result of the position that the corporations’ director and officer chose to place her corporations in. Further, I do not viewharm to the defendants as “irreparable”.

Were the defendants to succeed at trial and damages awarded in their favour, there is littlequestion that Valvoline could and will compensate the defendants for damages. [87] As I have noted, a strong prima facie case exists that the defendants chose to establish a new business which directly competeswith their ongoing franchise and the business interests of the franchisor. The result of this is a serious potential to exploit the benefitsavailable to Sneer and Ms.

Turtle (as Sneer’s director and officer) solely because of the Warman franchise agreement. [88] Again, as set out in [101280222 Saskatchewan Ltd. v Silver Star Salvage

(1998) Ltd., 2019 SKCA 59, [2019] 11 WWR 516], Iacknowledge the balance of convenience plays a less prominent role when enforcing a bargain made between the parties through arestrictive covenant.

As I have determined that Valvoline has established a strong prima facie case, equity and justice support aninclination in favour of granting the injunction when considering the balance of convenience. [89] When I weigh this with the strength of the case set out by Valvoline, including my determination that they have met the thresholdfor irreparable harm and the evidence discussed in support of that conclusion, I am satisfied that the balance of convenience favoursValvoline. III.

Analysis [23] The only issue is whether a stay of the Queen’s Bench Order should be granted pursuant to Rule 15(1) of The Court of AppealRules.

That Rule provides as follows: Stay 15(1) Unless otherwise ordered by the judge appealed from or by a judge, the service and filing of a notice of appeal does not stay theexecution of a judgment or an order awarding mandamus, an injunction, alimony, or maintenance for a spouse, child or dependant adult.Unless otherwise ordered by a judge, the service and filing of a notice of appeal stays the execution of any other judgment or orderpending the disposition of the appeal. … [24] The overall purpose of Rule 15 is “to prevent such prejudice, pending the determination of the appeal, as may arise between thedate the appeal is launched and the date it is determined” (The Honourable Stuart J.

Cameron, Civil Appeals in Saskatchewan: The Courtof Appeal Act & Rules Annotated, 1st ed (Regina: Law Society of Saskatchewan Library, 2015) at 126, citing Bank of Nova Scotia v OmniConstruction Ltd. (1981), (SK CA), 14 Sask R 81 (CA)). In Ochapowace First Nation v A.(V.) (1994), (SK CA), 123 Sask R 311 (CA), Lane J.A. similarly described the underlying principle behind the rule to be to “prevent injusticeand to ensure that the result is fair and equitable to all sides”.

He went on to state that the Rule’s “purpose is to minimize prejudicepending the appeal and to balance the competing interests of the respondent who has been successful against those of an appellant whoought not to be prejudiced simply by appealing” (at para 11). [25] Rule 15(1) operates differently depending on the character of the judgment under appeal. If the appeal is from an award of amoney judgment, the stay is automatic. On the other hand, where (as here) the appeal is from the grant of an injunction, a stay must berequested.

However, the jurisprudence from this Court has tended to approach the issue of whether a stay should exist pending an appealby asking the same general questions regardless of whether the stay is automatic or being requested. In this regard, in Saskatchewan vRacette, 2018 SKCA 17, 423 DLR (4th) 532, Caldwell J.A. introduced his

summary of the applicable principles by stating as follows: [19] The principles upon which a judge of this Court determines whether it is appropriate to lift or leave in place a stay of executionunder Rule 15(1) pending an appeal are well-settled ….

[ 26 ] In Lawson v Rees , 2016 SKCA 37 at para 8 , 396 DLR (4th) 472, Ryan-Froslie J.A. referred to the “well-settled” principles for when to lift a stay and then added that “ the same objectives apply when imposing a stay , namely, to prevent injustice, to ensure the result is as fair and equitable as possible for all sides, to minimize prejudice and to balance the competing interests” (emphasis in original).

This was also the approach taken in Abrametz v The Law Society of Saskatchewan , 2019 SKCA 21 at para 12 [ Abrametz ] and Goodman v Saskatchewan (Community Operations) , 2020 SKCA 51 at paras 41–44 [ Goodman ] . [ 27 ] This Court has generally considered the issue of whether a stay should exist pending an appeal within the framework created by the three-part test set out in RJR-MacDonald .

Justice Richards (as he then was) succinctly summarized that test in the context of an application for an interlocutory injunction in Mosaic Potash Esterhazy Limited Partnership v Potash Corporation of Saskatchewan Inc . , 2011 SKCA 120 , 377 Sask R 78 : [113] In the interest of clarity, it may be useful to recapitulate the basic points which have been developed in the course of these reasons and to summarize the approach a judge should typically take when deciding whether to grant interlocutory injunctive relief. This can be done as follows: (

a) The judge should normally begin with a preliminary consideration of the strength of the plaintiff’s case. The general rule in this regard is that the plaintiff must demonstrate a serious issue to be tried, i.e. the plaintiff must have a claim which is not frivolous or vexatious. If the plaintiff raises a serious issue to be tried, it is necessary for the judge to turn to the matters of irreparable harm and balance of convenience. (

b) Irreparable harm is best seen as an aspect of the balance of convenience. The general rule here is that the plaintiff must establish at least a meaningful doubt as to whether the loss he or she might suffer before trial if an injunction is not granted can be compensated for, or adequately compensated for, in damages. Put another way, the plaintiff must demonstrate a meaningful risk of irreparable harm. If this is done, the analysis turns to the balance of convenience proper. (

c) The assessment of the balance of convenience is usually the core of the analysis. In this regard, the relative strength of the plaintiff’s case, the relative likelihood of irreparable harm, and the likely amount and nature of such harm will typically all be relevant considerations. Depending on the particulars of the case, strength in relation to one of these matters might compensate for weakness in another.

Centrally, the judge must weigh the risk of the irreparable harm the plaintiff is likely to suffer before trial if the injunction is not granted, and he or she succeeds at trial, against the risk of the irreparable harm the defendant is likely to suffer if the injunction is granted and he or she prevails at trial. That said, the balance of convenience analysis is compendious. It can accommodate a range of equitable and other considerations. (

d) The judge’s ultimate focus in considering whether to grant interlocutory injunctive relief must be on the overall equities and justice of the situation at hand. [ 28 ] In this case, both parties presented argument based on this being the applicable test. Therefore, bringing all of this into the specific context of this case, I approach the appellants’ request for a stay of proceedings by considering three questions: (

a) Have the appellants raised a serious question to be determined in their appeal that may result in the Queen’s Bench Order being overturned? (

b) Will the appellants suffer irreparable harm if a stay is not granted? (

c) Does the balance of convenience weigh in favour of granting the stay? [ 29 ] Valvoline contended that the appellants do not get past the first part of the test. It says that the Chambers judge put it to the burden of establishing that it had a strong prima facie case. It says that because the Chambers judge agreed it had cleared this hurdle, I should conclude that the appellants’ appeal is destined to fail and I should not even consider the questions of irreparable harm and balance of convenience. [ 30 ] I cannot agree. The merits bar is not high.

It is sufficient that the claim, or in this case the appeal, “is not frivolous or vexatious” ( RJR-MacDonald at 335, adopting American Cyanamid Co. v Ethicon Ltd. , [1975] AC 396 ). Reference to one or two key arguments offered by the parties to support their competing contentions will illustrate the source of the divide between the parties on this point. It will also assist in explaining why I have concluded that the merits threshold is crossed. [ 31 ] Valvoline points to the fact that Ms. Turtle is described in the Nelson Road Agreement as the “owner-operator” of the franchised business.

Schedule “A” states that, as the owner-operator, she is “bound by the covenants contained in this Agreement”. For their part, the appellants observe that Sneer is the only named party to the agreement and that the agreement is stated to be “Signed for and on behalf of” Sneer “By its Authorized Signatory”, Ms. Turtle. Moreover, the appellants point out that the two franchise agreements contemplate that there are three potential parties to the agreement, being the franchisor, the franchisee and the guarantor. Valvoline is the franchisor and Sneer is the franchisee. Ms.

Turtle, the appellants point out, is neither, nor is she a guarantor. [ 32 ] Of course, the appellants’ arguments were considered and rejected by the Chambers judge. However, it cannot be said that their arguments are frivolous or vexatious or otherwise devoid of merit. This is particularly so in a context where there may be room for argument that the standard of review applicable to the

interpretation of these two contracts is correctness. [ 33 ] I would emphasize that both sides to this disagreement have many other points to make to support their respective positions; I simply highlight these examples to explain why I see there to be fodder for legitimate disagreement on the question as to whether Ms. Turtle is personally bound by the terms of the two agreements. [ 34 ] I turn then to the issue of irreparable harm. The appellants assert that if Dad’s Oil is forced to cease the operations of the Business, it will have no revenue source from which to pay its expenses.

This, in turn it is said, will require Dad’s Oil to lay off its employees, causing harm to those employees, and put Dad’s Oil in the position of being unable to pay its rent, exposing it to termination of its lease and being unable to pay its insurer, banker, utility providers and other suppliers and service providers. They also say that Dad’s

Oil “may not have the resources to continue with the within appeal, denying it access to justice”. Finally, the appellants maintain thatDad’s Oil will lose its “built up base of loyal customers”. [35] Valvoline submits that none of these consequences are made out on the record, nor would they amount to irreparable harm, asthat term is understood in the jurisprudence. It points out that records filed with Canada Revenue Agency support its contention that Dad’sOil has a strong balance sheet. It describes the idea that Dad’s Oil risks losing its lease as speculative.

It says that I should take no accountof any harm that Dad’s Oil’s employees may suffer. It also says that Valvoline’s experience is that oil change franchises can close andreopen without any loss of their customer base. [36] I am unconvinced that there is a meaningful risk Dad’s Oil will suffer the catastrophic business failure the appellants allege if itis shuttered while its appeal is prosecuted. It was open to the appellants to call evidence to support their contention that its financial affairswere different than what was disclosed on the records relied on by Valvoline.

The appellants explained their failure to do so based on theurgency of getting their application for a stay before me. I understand that this may result in an imperfect record. However, the documentsrelied on by Valvoline came in first instance from the evidence before the Chambers judge. I am not able to accept that the appellantswere caught unawares by this evidence when it was brought into play in the context of this application. [37] I agree with Valvoline when it contends that there is inherent reliability in those records. They show that when Ms.

Turtleincorporated Dad’s Oil on November 1, 2019, she transferred into it assets worth $1 million. Much of this was represented by goodwill,but it also included net operating capital of $180,200, including cash of $131,900. While the appellants took issue with Valvoline’sinterpretation of the financial records and their applicability in the present context, their rebuttal amounted to representations, notevidence. It is true that the records relied on by Valvoline show the state of finances of Dad’s Oil as of November 1, 2019. It is nowMarch 2021.

However, the same financial records projected the Business to be financially successful. When assessed against its balancesheet, the expenses identified by the appellants in their evidence also do not support their argument that the Business will flounder ifshuttered for the period it takes to prosecute this appeal – particularly given that it will be heard on an expedited basis.

Moreover, thepossibility that Dad’s Oil will lose its lease and have nowhere to operate if the appellants succeed in their appeal seems to me to be remoteand speculative, particularly given that their appeal has been expedited. [38] For these reasons, I am unpersuaded that the appellants face a realistic risk of losing the Business if the injunction is left inplace during the time their appeal takes.

However, I am convinced that Dad’s Oil will suffer a meaningful risk of irreparable harm in atleast two ways if the injunction is enforced pending the hearing of this appeal. [39] Dad’s Oil will undoubtedly suffer a loss of business revenue during a shutdown. The loss of business revenue may not beirreparable but, here, I see a meaningful risk of the loss of market share if it is forced to close. In Fettes v Culligan Canada Ltd.,2009 SKCA 144 at para 35, [2010] 6 WWR 420, Jackson J.A. observed that courts “have found potential loss of market share canconstitute irreparable harm”, referring to Scantron Corp. v.

Bruce (1996), (ON SC), 136 DLR (4th) 64 (Ont Ct J (GenDiv)) at para 29, and Eversoft Fibre & Foam Ltd. v James, [2001] OJ No 3741 at para 11 (QL) (Ont Sup Ct). See also: Knight ArcherInsurance Ltd. v Dressler, 2019 SKCA 34 at paras 47–50, [2019] 8 WWR 245. [40] In an effort to refute the idea that Dad’s Oil faces the risk of market loss, Valvoline offered evidence of the recent experience ofone of its franchisees. According to the affidavit of Logan Smith, a Valvoline franchise holder in Yorkton suffered an abrupt stoppage ofoperation between March 21, 2020 and April 28, 2020.

When the franchise reopened, “its daily sales volume and revenue actuallyincreased when compared to the period prior to stoppage” (emphasis in original). However, I cannot help but note that this shutdowncoincided with the first days of the COVID-19 crisis, when it can be expected that many of that franchise’s competitors would also havebeen closed. Further, Yorkton may present a different marketplace than Saskatoon.

For these reasons, I am not prepared to accept theexperience of this single franchisee as sufficient to rebut the more obvious and common sense conclusion that a shutdown will give rise todefinite, but difficult to quantify, losses by Dad’s Oil. [41] I am also convinced of a second aspect of the appellants’ claimed irreparable harm. They say that if Dad’s Oil is forced toshutter, it will be required to lay off all of its employees. They further say that these employees will likely look for work elsewhere andbecome unavailable to the Business should it become entitled to reopen.

Its evidence is also that “Dad’s Oil has spent significant resourcesin providing training and support to its employees”.

While the wage loss those employees would experience is appropriately considered, ifat all, under the balance of convenience part of the test (see Goodman at para 63), I am prepared to accept that the fact that these workersmay not be available to Dad’s Oil when it reopens, should it win its appeal, gives rise to a material risk of irreparable harm to Dad’s Oil. [42] Valvoline offers, as a global response to the appellants’ claim that they face irreparable harm, the fact that it has filed anundertaking as to damages.

As I understand it, the proposition is that Valvoline will therefore make good any loss the appellants maysuffer if it turns out that the injunction should not have been granted. However, this argument confuses what irreparable harm is. While anundertaking as to damages is intended to provide financial protection to a defendant who becomes subject to an injunction, it is of littlecomfort to a defendant who suffers irreparable loss. [43] The idea of irreparable harm “refers to the nature of the harm suffered rather than its magnitude” (RJR-MacDonald at 341).

Inthis case, I am satisfied that this part of the test has been passed, at least for one appellant – Dad’s Oil. [44] I turn, therefore, to consider the balance of convenience. It is at this stage of the test that I must weigh the harm the appellantswill face if a stay is not granted against the harm the respondent Valvoline will experience if the Queen’s Bench Order is not enforcedpending the appeal (see RJR-MacDonald at 341). [45] As previously noted, the Chambers judge identified four types of irreparable harm Valvoline would suffer if not grantedinjunctive relief, which I summarize as follows: (

a) Dad’s Oil’s “interference with their operations and diversion of customers, such as accepting GCOC coupons and continuingto use GCOC trademarks and signage after the conversion to this competing business” (at para 79); (b) “[C]ustomer confusion such as the customer complaint and request for refund made directly through GCOC to Valvoline” (at

para 79); (

c) The likelihood that Dad’s Oil would benefit from the use of confidential market information provided by Valvoline to itsfranchisees (at para 79); and (

d) The “three damaging messages” that would be sent to Valvoline’s current and prospective franchisees if Valvoline is not ableto enforce the non-competition covenants in its franchise agreements (at para 80). [46] Valvoline maintains that it will suffer all of these types of irreparable harm if the injunction is stayed pending the appeal. Italso supplemented the record that had been before the Chambers judge when she made these determinations. Mr.

Logan states that Dad’sOil continues to be operated in a “manner that it is likely to confuse customers into believing that it is still affiliated with the GreatCanadian Oil Change”. He states that Dad’s Oil continues to market its business on Google as “Great Canadian Oil Change”.

He gives asan example of continuing customer confusion a February 2021 customer review relating to an experience at a different GCOC location,but “submitted under the Google account of the GCOC” at 519 Nelson Road. [47] I would offer three introductory comments before entering consideration of the competing irreparable harms and the balance ofconvenience. [48] First, I agree with Valvoline when it argues that it is not my role in this application to sit in appeal on the merits of theChambers judge’s determinations. That is for the panel that hears this appeal.

However, I must still judge this application by applying theapplicable principles in light of the record before me. This leads to my next point. [49] Second, it is important to identify the focal point for the analysis in this application. My focus is exclusively on thecomparative impact that either the continuation, or stay, of the injunction will have on the competing parties during the time it takes forthis appeal to be decided.

While the Chambers judge necessarily considered irreparable harm and balance of convenience whendetermining to grant Valvoline an injunction, her focus was for a different purpose and involved consideration of a much longer periodthan that with which I am concerned. [50] This difference in focus can result in a different weighing of interests. I would offer, as an example, the irreparable harm thatthe Chambers judge identified Valvoline will suffer if the “message” is not sent to its prospective and existing franchisees that its non-competition covenants are not enforceable.

This idea is readily understood if it turns out that Valvoline is not able to secure interlocutoryinjunctive relief at all. However, I see little risk that any negative message will be sent to Valvoline’s franchisees if the grant of itsinterlocutory injunction against Dad’s Oil is delayed by a few months while this appeal is heard. [51] The different focus that I have, when compared to that of the Chambers judge, also obliges me to consider several other aspectsof the evidence somewhat differently.

The Chambers judge found Valvoline to face irreparable harm flowing from the fact that Dad’s Oilwas accepting CGOC coupons and using Valvoline’s trademarks. In argument before me, Valvoline’s counsel accepted that theacceptance of its coupons was not a breach of Valvoline’s trademarks. Its counsel also agreed that, subject to the question of how theBusiness was being associated with GCOC on Google, Valvoline could not point to any current usage by Dad’s Oil of its trademarks.Somewhat ironically, Valvoline complained about the absence of signage at the Business premises.

I was also not pointed to any specificevidence of the continued misuse of confidential information. Based on all of this, I see little or no risk to Valvoline’s trademarks orgoodwill if the Business is allowed to operate while this appeal is underway. [52] There is evidence of market confusion that may impact the very short period I am concerned with. However, the source of thisconfusion is equivocal. Valvoline contends that Dad’s Oil is marketing its business on Google as Great Canadian Oil Change. Mr. Loganattaches printouts of a Google map and recent Google review information.

The appellants deny they are responsible for whateverassociation Google makes between the Business and GCOC. Neither party has provided evidence as to how advertising appears in thisforum. Not only do I have no evidence as to how or by whom the advertising was placed, I have no evidence as to its duration once placedor how, once placed, it can be removed.

Therefore, I can make no assessment of whether, by refusing the stay, I will be helping to remedythe irreparable harm Valvoline claims to be suffering as a consequence of what may be appearing on Google. [53] The third point I would make is that the grant or refusal of a stay is not an all or nothing proposition. It has long been acceptedthat a judge called to consider a request to lift a stay of proceedings may impose conditions.

In Tekarra Properties Ltd. v Saskatoon Drugand Stationery Co. (1985), (SK CA), 37 Sask R 286 (CA), an appeal was taken from the imposition of conditions in anorder lifting a stay of proceedings pursuant to this Rule. The argument was that the Rule did not expressly allow for the imposition ofconditions. This submission was tersely rejected by a five-member panel of this Court, writing per curiam: [5] … The Rule provides that apart from the execution of any one of the four kinds of judgment specifically enumerated, a stay isautomatic unless otherwise ordered by a judge of the Court of Appeal.

The power to remove the stay is derived from these underlinedwords. Is it “otherwise ordered” if a judge directs the stay shall be removed but only if the appellant performs a certain act or agrees to acertain thing? I think it is. The power to remove the stay is one of discretion. To exercise a discretion is to choose responsibly. The powerof responsible choice can have meaning only if the available choices are capable of producing a responsible result.

To give a person onlytwo choices (e.g. to do something or not to do it), neither of which is capable of producing a responsible result, and to decline to give him athird, a fourth and other choices which have that capability, is not to give him the power of responsible choice. The third, fourth and otherchoices amount to the power to impose conditions. It follows that the power of discretion -- the power of responsible choice -- necessarilyincludes the power to impose conditions. [6] To view the Rule from a different but similar perspective, this picture presents itself.

In many situations a stay is clearly unjust toone side, but to remove the stay is clearly unjust to the opposite side. What is just is something in between. If that something is outside thereach of the Rule, then the Rule becomes an instrument of injustice -- a purpose one can confidently say was not intended by thepromulgators of the Rule.

Unless the language of the Rule inexorably forces such a construction, the Rule should not be read that way.There is nothing, in my view, in the language of the Rule that forces such an undesirable and unintended result. [7] I turn now to the next question: the limits upon the power to impose conditions. The power, as noted, is one of discretion, an

unfettered discretion. The only limits are those of appropriateness and justice. (Emphasis in original) [ 54 ] I see no reason not to interpret Rule 15(1) as providing similar authority to attach conditions to the grant of a stay. A similar issue arose in Abrametz . One of the issues in that case was whether it was permissible to attach conditions to the grant of a stay pursuant to s. 56(4) of The Legal Profession Act, 1990 , SS 1990-91, c L-10.1 . That provision allows a lawyer found guilty of professional misconduct to apply for a stay pending the disposition of the appeal.

It was held to be “more in keeping with the purpose of s. 56(4) to interpret it as allowing the court to calibrate competing interests through the imposition of conditions in conjunction with the grant of a stay” (at para 18). [ 55 ] As in Abrametz , I would be cutting with too dull a knife if I were to assess the circumstances as requiring me to simply choose to leave the injunction in place or to stay its operation pending the disposition of the appeal.

Instead, the overall equities and justice of the situation are best balanced if a more surgical approach is taken – by ordering a partial , and conditional , stay of enforcement of the Queen’s Bench Order. [ 56 ] First, when I consider all of this, I see no reason why the injunction should not continue as against Ms. Turtle and Sneer. The Business is not being operated, at least directly, by either of them. Ms. Turtle is certainly involved in it, of course. She incorporated Dad’s Oil. She remains its only director and officer.

However, there is no evidence that the Business cannot be conducted without her involvement. To the contrary, she offered, as condition of the stay, that she would stand down from any involvement in Dad’s Oil by resigning as a director and officer and place her shares in a blind trust. [ 57 ] Valvoline argued that Ms. Turtle’s offer was illusory and, moreover, the transfer of the shares may place them beyond its reach should it eventually need to enforce a monetary judgment. I am aware that Valvoline’s underlying complaint is that Dad’s Oil was established as an artifice for Ms.

Turtle to avoid her non-competition covenants. It may well prevail in its position in this appeal. However, an order requiring Ms. Turtle to resign as a director and officer has practical, and legal, consequences, given the obligations resting on her in those capacities pursuant to The Business Corporations Act , RSS 1978, c B-10 .

An order that prohibits her from continuing any direct or indirect involvement in the operations of the Business also provides some measure of assurance that there will not be other conduct on her part that would affect Valvoline’s legitimate interests. [ 58 ] Given Valvoline’s objections to the blind trust offered by Ms. Turtle, I have not considered it. However, I am also not convinced it is necessary, given the intended scope of the condition requiring Ms.

Turtle to disengage from any role in Dad’s Oil. [ 59 ] I understand that it is Valvoline’s position that the very operation of the Business is contrary to the covenants contained in the franchise agreements and the harm, as found by the Chambers judge, would continue to flow from this. However, five factors attenuate the weight I ascribe to this: (

a) As explained, I am unpersuaded that the “message” to Valvoline’s current and prospective franchisees will be materially weakened if the implementation of the injunction is delayed pending the outcome of the appeal; (

b) There is no present signage associating the Business with GCOC; (

c) There is no evidence of a continuing use of trademarks beyond the ambiguously attributable Google references; (

d) Valvoline will not be completely deprived of the fruit of its victory by the grant of this partial and conditional stay, even if it ultimately succeeds in showing that one or both of the agreements are in force and restrict the activities in question. The injunction, if upheld, is until disposition of the action. In the action, Valvoline claims the benefit of a restriction found in the Warman Agreement that, on its face, will run until 2027. To borrow a sports phrase, this appeal does not involve a situation where the appellants can “run out the clock” by their appeal; and (

e) If Valvoline succeeds in its appeal and the result is that the Queen’s Bench Order is upheld thereby compelling the Business to be shut down, Valvoline will also still have its claim for damages suffered before the injunction is put in place. It already has this claim for the period from the initial breach until the Business shut down in response to the grant of the Queen’s Bench Order, should it succeed at trial.

It will now also have that claim for the additional period between March 15, 2021, when I ordered the stay to be lifted, until when the Business shuts down again, assuming that this is the end result of the appeal. [ 60 ] I have also weighed, when making the decision to allow Dad’s Oil to continue to operate the Business pending the hearing of the appeal, the fact that the appeal will be heard in a matter of weeks. This short period makes more severe the negative consequences to Dad’s Oil if the stay is not granted.

It appears disproportionate that it could face the loss of its workforce for this delay and, potentially, the additional delay if the panel that hears the appeal reserves its decision. [ 61 ] I would, finally, mention three arguments that I did not put into the balance. First, the appellants submitted that I should reject all of Valvoline’s arguments because it was dilatory in the prosecution of its injunction request. They point particularly to two instances where adjournments were required in the Queen’s Bench proceedings because of Valvoline’s actions.

In my view, this was an argument to be considered, if at all, by the Chambers judge. She apparently agreed with Valvoline’s submission that it had moved with sufficient promptitude, stating that “Valvoline treated this case with urgency, and it was only as a result of the current pandemic that there was a delay in the application being heard ” ( Chambers Decision at para 97, emphasis added). There has been no delay by either party since the Queen’s Bench Order was granted.

I therefore set aside delay as an issue bearing on the stay issue. [ 62 ] Second, I did not assign weight to the interests of the employees of the Business. As already noted, the appellants asked me to consider the fact that shuttering the Business would harm its employees. The appellants referred to Goodman as authority for the general proposition that third party interests could be considered as part of the balance of convenience analysis. However, the interest potentially at stake in Goodman was one which was more general and related to the community.

The appellants did not refer me to any previous case where the interests of an employee of a business operating in breach of a restrictive covenant was considered as a reason not to enforce that covenant. To the extent that Dad’s Oil does not consider that the rights its employees have against it to be a sufficient remedy for any harm

that they may suffer, the evidence suggests that it has the ability to provide financial protection to those employees on an ex gratia basis.Absent any further support for this interest being taken into account, as a matter of first impression only, it seems to me that I should setthe interests of the employees to one side and I do so. [63] Third, Valvoline argued that the appellants’ request for a stay should be denied because they lacked clean hands. It points tovarious alleged breaches of the Warman Agreement by Ms.

Turtle and Sneer, relating to payments of royalties and a failure to install apoint of sale system at the Warman franchise location. However, Turtle and Sneer maintain that there were no breaches of this kind. In anyevent, all of this is unrelated to the issues in the injunction. Moreover, I have determined that the injunction must continue as againstMs. Turtle and Sneer.

I therefore give no weight to Valvoline’s clean hands argument. [64] In conclusion, the overall equities and justice of the situation call for me to allow the Business to continue to operate pendingthe hearing of the appeal, but without any involvement by Ms. Turtle in its affairs. IV. Conclusion [65] For all these reasons, I have concluded that it is appropriate that a partial, conditional, stay of the Queen’s Bench Order beordered. The result will be that the injunction shall continue as against both Sneer and Ms. Turtle. The stay that I have granted shall allowDad’s Oil to operate the Business.

The conditions I have attached to the granting of this partial stay are designed to ensure that Ms. Turtleis not involved in the Business pending the hearing of the appeal and that the appeal will be prosecuted promptly. [66] In Trail-Rite Flatdecks Ltd. v Larcon Investments Ltd. (1987), (SK CA), 61 Sask R 163 at para 17 (CA),Cameron J.A. stayed the operation of an interlocutory injunction “pending the hearing and determination of the appeal” (emphasis added).In this case, I have determined that the stay should last only until the hearing of the appeal.

Circumstances have required that I decide thisapplication on an urgent basis. It may be that the panel that hears the appeal has a different view of the situation. Therefore, the questionof the continuation of the stay hereby ordered, after the date set for the hearing of this appeal, is reserved to the panel of the Court whohears this appeal, as are the costs of this application. “Leurer J.A.” Leurer J.A.