In Parkland Corporation v. Caledon Fuels Inc., 2024 ONSC 2361, the Ontario Superior Court of Justice granted an injunction which prevented a party to a long-term lease and supply agreement from breaching certain negative covenants contained in that contract.
The Applicant and Respondent were both parties to an agreement under which the Applicant was made the exclusive supplier of petroleum products to a gas station which it subleased to the Respondent. In January of 2024, the Respondent notified the Applicant that it intended to enter into arrangements with another supplier, in contravention of the agreement. The Applicant brought an urgent application seeking a permanent injunction, to prevent the Respondent from doing so.
In its decision, the Court’s analysis on the injunctive relief sought by the Applicant followed the Ontario Court of Appeal’s decision in 711811 Ontario Ltd. (AdLine) v. Buckley Insurance Brokers Ltd., 2014 ONCA 125, where that Court cited the test for a permanent (or final) injunction as follows:
“In order to obtain final injunctive relief, a party is required to establish its legal rights. The court must then determine whether an injunction is an appropriate remedy. Irreparable harm and balance of convenience are not, per se, relevant to the granting of a final injunction, though some of the evidence that a court would use to evaluate those issues on an interlocutory injunction application might also be considered in evaluating whether the court ought to exercise its discretion to grant final injunctive relief.”
In reliance on the above test, the Court in Parkland accounted for irreparable harm and the balance of convenience between the parties in its analysis.
When considering the irreparable harm issue, the Court specifically referenced a provision in the agreement wherein the parties acknowledged that the Applicant would suffer irreparable harm if certain terms governing the Applicant’s supply of petroleum products to the Respondent were breached. The Court further noted that this provision entitled the Applicant to seek an injunction which restrained such a breach.
When considering the balance of convenience in this case, the Court held that the Respondent’s breach of the agreement would significantly impact the Applicant’s reputation and ability to enforce similar long-term supply agreements with other parties. These agreements, it found, were an “integral” part of the Applicant’s business model. Conversely, the Court held that the only harm to the Respondent if an injunction was granted would be that it “will have to comply with agreements to which it is already bound.”
On these and other findings, the Court held that the irreparable harm and balance of convenience considerations strongly favoured the Applicant. The Court ultimately ordered a permanent injunction which prevented the Respondent from using, storing, selling, or advertising fuels other than those supplied by the Applicant at the gas station during the term of their agreement.
Parties who have received notice of an anticipatory breach of their contractual agreements may want to seek legal advice on whether certain remedies, such as injunctive relief, could be sought to prevent or compensate for any harm they may suffer from the breach.
The lawyers at Gilbertson Davis LLP have experience with Contract Litigation, Commercial Leasing Disputes and Injunctions and Urgent Remedies. Please contact us for an initial consultation.
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