Dec 11, 2019

Real Property: Rights of First Refusal; Injunctions

Androsoff v Waycon Investments Inc., 2019 SKCA 131 (CanLII)

Keywords: interlocutory injunctions; farm land; “right of first refusal”

Synopsis:

The Appellants own five quarter sections of farm land in the Blaine Lake area of Saskatchewan. The Respondent leases and farms the land. When the Appellants enter an agreement to sell the land to a third party, the Respondent asserts a “right of first refusal” and commences an action. The Respondent also obtains an interlocutory injunction permitting it to continue farming pending the outcome of trial. The Court of Appeal finds the Chambers Judge made reversible errors in assessing the strength of the Respondent’s case and the issue of irreparable harm. The Appellant’s appeal is allowed and the injunction is set aside.

Importance:

The three-part test for a mandatory interlocutory injunction is, more recently, set out by the Supreme Court of Canada in R v Canadian Broadcasting Corporation, 2018 SCC 5 (CanLII) at para 18. The party seeking an injunction must demonstrate the following:

  1. a strong prima facie case that the Applicant will succeed at trial;
  2. irreparable harm if the injunction is not granted; and
  3. that the balance of convenience favours the applicant.

Citing Cruickshank Construction Limited v Durrett Companies Limited, 2013 ONSC 3209 (CanLII), the Chambers Judge found that, pursuant to the lease in place at the time, the Respondent enjoyed a right to renew its lease and a right of first refusal with respect to the sale of the Appellant’s land which entitled it to continue farming the land until the trial. As such, the Chambers Judge determined there was a strong prima facie case. (See para. 16). With respect to irreparable harm, the Chambers Judge relied on exhibit evidence and affidavits supporting the proposition that farming the land in question allowed for “convenient access” to other lands owned by the Respondent and accommodated their “long term drainage plans”. As these benefits were “extremely difficult to quantify”, the Chambers Judge determined that damages would be inadequate. (See para. 17).

What went wrong with the Chambers Judge’s reasons and on what basis can a Court of Appeal intervene in these circumstances? Citing Harper v Canada (Attorney General), 2000 SCC 57 (CanLII) at para. 26, the Court of Appeal noted it would be permitted to interfere only where the Chambers Judge made a “clear mistake on the law or the evidence, or some other glaring error”. (See para. 20). More specifically, the Court of Appeal referred to parallel authority from the Court of Appeal for Saskatchewan in 101280222 Saskatchewan Ltd. v Silver Star Salvage (1998) Ltd., 2019 SKCA 59 (CanLII) at para. 14. There it was suggested that the Court should only interfere where the decision “involves an error of principle, the disregard or misapprehension of a material fact, a failure to act judicially or a result that is so plainly wrong as to amount to an injustice”. (See para. 20).

With respect to the Chambers Judge’s assessment of the Respondent’s prima facie case, the Court of Appeal found she had “failed to appreciate” the implications of the evidence about the lease agreement – that the “legal and evidentiary waters of this case are, at a minimum, considerably murkier than the Chambers judge recognized”. (See paras. 25-30). For the Court of Appeal “[i]t cannot be said” that the Respondent has a strong case against the Appellants, “[g]iven that murkiness”. (See paras. 30-31).

With respect to irreparable harm, the Court of Appeal identified a “clear mistake in relation to the evidence”:

More specifically, I see nothing in the affidavits filed that would have allowed the Chambers judge to conclude as she did. (See para. 38).

For the Court, even accepting that the Appellant’s sale of the land would make it “harder to farm” the Respondent’s other land in the area, “…there is no prospect of an irreparable harm to [the Respondent].” (See para. 39). To the contrary, the kind of harm described was, for the Court of Appeal, “readily ascertainable and hence not something in the nature of irreparable harm”. (See para. 41).

Counsel for the Appellants: Randall Klein (MacDermid Lamarsh, Saskatoon)

Counsel for the Respondent: Curtis Onishenko (McKercher LLP, Saskatoon)