Canada (Attorney General) v. Maritime Harbours Society

Canada (Attorney General) v. Maritime Harbours Society Court Supreme Court Date 2001-10-10 Citation 2001 NSSC 127 Docket SH 173182 Judge/Registrar/Adjudicator MacAdam, A. David (Honourable Justice) Document Type Decision Relations Library Sheet - Canada (Attorney General) v. Maritime Harbours Society - 2001 NSSC 127 - 2001-10-10 - Library Sheet Decision Content 2001 S.H. No. 173182 IN THE SUPREME COURT OF NOVA SCOTIA [Cite as: Canada (Attorney General) v. Maritime Harbours Society, 2001 NSSC 127) Between: ATTORNEY GENERAL OF CANADA, in Right of the Minister of Transport Plaintiff - and - MARITIME HARBOURS SOCIETY, an incorporated society, and MARINESERVE.MG.INC. Defendants D E C I S I O N HEARD: Before the Honourable Justice A. David MacAdam, in Chambers, at Halifax, Nova Scotia, on September 19th and October 9th, 2001 DECISION: October 10, 2001 (Orally) WRITTEN RELEASE OF DECISION: October 16, 2001 COUNSEL: John P. Merrick, Q.C./Sean Foreman, for the Plaintiff George MacDonald, Q.C. /Harvey L. Morrison, the Defendant, Marineserve.Mg.Inc. William L. (Mick) Ryan, Q.C../John MacDonell, for the Defendant, Maritime Harbours Society Date: 20011016 Docket: S.H. No. 173182 MacAdam, J.: [1] By Interlocutory Notice (Application Inter-Partes), dated August 8, 2001, the applicant, Attorney General of Canada, in right of the Minister of Transport (herein “ Transport Canada” or ‘Minister”), sought interlocutory injunctive relief restraining distribution of: ...the remaining portion of the Contribution funds until such time as the Defendants have accounted for the funds, reimbursed those funds previously applied contrary to the provisions of the Agreement and maintained proper accounting records to which Transport Canada has audit access, all in accordance with the Agreement. [2] The defendant, Maritime Harbour Society, (herein “MHS”), says Transport Canada is seeking a mandatory injunction and has not met the requirements for such injunctive relief. The defendant, Marineserve.MG.INC., (herein “Marineserve”), says Transport Canada is seeking a Marevea injunction and the circumstances here present do not justify such a form of injunctive relief. The applicant responds that what it is seeking is neither a mandatory injunction nor a Marevea injunction, but only information consisting of financial documents and records showing details of how money has been spent and a restraint against the further disbursement of funds until production of the documentation and establishment of a process sufficient to enable Transport Canada to complete an audit as to how monies, originally advanced by Transport Canada, were spent and how the remainder of the funds will be spent in the future. [3] As in many cases involving experienced competent counsel, each is correct in their characterization of the nature of the relief sought by Transport Canada on this application. A. BACKGROUND [4] As part of the 1995 National Marine Policy, the Government of Canada announced its intention to have Transport Canada divest itself of regional and local ports. Transport Canada, therefore, developed a Port Divestiture Program designed to transfer regional or local ports to local interests. [5] MHS was formed to explore the possibility of owning and operating the Port of Digby. In July 1999, it presented a feasibility study and business plan to Transport Canada, which was accepted, resulting in agreements in October 1999, whereby Transport Canada transferred the Port of Digby to MHS. As part of the terms for the transfer, Transport Canada agreed to pay MHS the sum of $3,070,000 as a Contribution toward the costs of operating the port (herein “Contribution Funds”). A number of agreements were signed, including a “Contribution Agreement”, which stipulated MHS was to maintain the Contribution Funds in a separate account exclusively dedicated to the “operation of the port”, and at, “...a minimum, maintain separate ledger accounts for all revenues and expenditures”. The records were to be kept in accordance with generally accepted accounting principles and open for audit and inspection by the Minister, during business hours. MHS was also obligated to furnish the Minister with such information as may be required in connection with the audit and inspection. [6] Similar obligations were contained in some of the other documentation executed between the parties. Among these is an Operating Agreement in which Transport Canada is identified as the “Minister” and MHS as the “Port Operator”. Article 12, provides: ARTICLE 12 - ACCOUNTING RECORDS, FINANCIAL REPORTS AND AUDIT Section 12.01 Separate Account 12.01.01 The Port Operator shall maintain a separate account exclusively dedicated for the Operation of the Port and, in that regard shall, at a minimum, maintain separate ledger accounts for all revenues and expenses. Section 12.02 Accounting Records 12.02.01 During the term of this Agreement, the Port Operator shall keep records of operating costs and revenues for the Port in accordance with generally accepted accounting principles and shall keep such records separately from any other accounts and records. Section 1203 Audit and Inspection 12.03.01 The books and accounts and other records, including financial statements, of the Port Operator with respect to the Operation of the Port and anything directly related to this Agreement, shall be open for audit and inspection during business hours by the Minister, and the Minister may take copies and extracts therefrom. 12.03.02 The Port Operator shall furnish to the Minister such information as may be required in connection with the audit and inspection referred to in Subsection 12.03.01 [7] Prior to the agreements with Transport Canada, MHS had entered into a contract with Marineserve, then known as “MG Utilities Inc.”, (herein the “Marineserve Contract”). Marineserve agreed to provide certain services in relation to the Port of Digby in exchange for a series of periodic lump sum payments. Clause 2.2.1 outlines services to be provided by Marineserve; Port Operations and Management Services: 2.2.1 Acting as the Owner’s agent as required in connection with the services as outlined in Annex “A”. [8] The services detailed in Annex “A” include Port Start-up, Overall Management of the Port, developing a Financial Management System, Operations, Infrastructure, Marketing and Communication, Port Development and Administration. [9] Ralston MacDonnell, President of Marineserve, says although he had, through various related companies, been involved in the application by MHS to take over the Port of Digby, he was unaware of the terms and conditions contained in the Contribution and other agreements relating to the distribution of funds advanced to MHS by Transport Canada. He says he was not aware of the provisions limiting use of the Contribution Funds to Eligible Expenditures, being those directly related to the operation of the Port of Digby and which were listed in Schedule “A” to the Contribution Agreement. Nor, presumably was he aware of the expenditures that were identified as not eligible and which were also set out in the Contribution Agreement. [10] MHS notes that as required under the agreement with Transport Canada, in June 2000, Andrew J. Miller, C.A., the auditor of MHS, submitted an audit report to Transport Canada wherein he concluded MHS was in compliance, in all material respects, with the criteria established by the Contribution Agreement. [11] As a consequence of questions raised in the House of Commons, The Minister instructed acceleration of an audit for the purpose of determining whether any of the Contribution Funds had been used for other than Eligible expenses directly related to the operation of the Port. PricewaterhouseCoopers LLP, (herein “PWC”), examined the books and records of MHS, finding only reference to the receipt of the sum of $3,070,000 from Transport Canada and for the period October 21, 1999, to January 31, 2001, records of three payments to Marineserve totalling $1,895,000. [12] In fact, much of the day to day management of the Port has been carried out by a number of the principals of MHS, including William Watkins, chairman of MHS, and his wife. Mr. MacDonnell, acknowledged, on examination, that the salaries of the various principals of MHS employed by Marineserve were set by MHS. [13] The only supporting documentation for the payment of the first $1,295,000 was contained in two invoices. As deposed to by J. Patrick O’Neil, partner in the Halifax office of PWC: ...The only description on the invoices was, for the first invoice, “Year I payment - Progress payment number 1 $1,000,000" and, for the second invoice “Payment 2 - Progress payment number 2 $ 295,000". [14] Representatives of PWC’s audit team met with Mr. Watkins, and Mr. Miller, advising the “...the two invoices were not sufficient evidence to enable PWC to complete an audit of the eligibility of the expenditures made under the Contribution Agreement”, and a detailed breakdown of the use of the monies paid to Marineserve, supported by supplier invoices and receipts, would be needed to assess the eligibility of the expenditures under the Contribution Agreement. [15] Discussions ensued between Transport Canada, PWC and MHS in respect to the request for the records of Marineserve. In February 2001, Mr. Miller delivered a further auditor’s report, again concluding compliance by MHS. Eventually the parties agreed to mediation. This resulted in an agreement, whereby the accounting firm, Grant Thornton LLP, (herein “GT”), was to be engaged by PWC to conduct an audit of Marineserve as to its activities on behalf of the Port of Digby. GT completed the audit and in its report dated April 18, 2001, stated that in its opinion Marineserve was in compliance in all material respects with the criteria established under Section 4.01.01 of the Contribution Agreement, wherein it provides: The Contribution shall only be applied in respect of an expenditure directly related to the Operation of the Port and is limited to those items listed in Schedule “A” (“Eligible Expenditures”). [16] In June PWC released its report to Transport Canada in which, among other things, it stated the Marineserve Contract provided for Marineserve to perform services that PWC believed were Ineligible Expenditures as defined in Article 4, Section 4.02 of the Contribution Agreement. [17] In June 2001, Mr. Miller provided a further auditor’s report, in which he concluded MHS was in compliance in all material respects with the criteria established under Articles 3 and 4 of the Contribution Agreement. [18] MHS says under the various agreements it signed with Transport Canada, it is required to make available, including for audit, how it disburses the Contribution Funds to ensure funds are only disbursed for Eligible Expenditures. It says it has complied in all respects with this obligation. MHS, together with Marineserve, say Transport Canada has no business seeking from the latter how it disbursed the payments it received from MHS. MHS also, says the services described in the Marineserve Contract are Eligible Expenditures and therefore no Contribution Funds have been even indirectly used other than as contemplated under the Contribution and other agreements between Transport Canada and MHS. MHS maintains it has complied with its obligation by providing audits, as well as access to each of the payments it has made to Marineserve. [19] Transport Canada, on the other hand, says the real expenditures are made by Marineserve, even though many of the services are in fact performed by the principals of MHS. It is to Marineserve’s books it requires access in order to verify the Contribution Funds are “actually” being used to finance the performance of “Eligible Expenditures” for the Port of Digby. [20] In view of the conclusion by PMC that it was unable to conclude the expenditures of $1,895,000 by MHS of the Contribution Funds were eligible in accordance with Article 4.01.01, Transport Canada commenced this proceeding claiming, among other things, an accounting from MHS and Marineserve for all amounts of the Contribution Funds that had been applied, spent, used or dealt with in any manner and for reimbursement of any monies applied contrary to the provisions of the Contribution Agreement. The relief claimed further sought an interlocutory and permanent Order preventing MHS and Marineserve from applying, spending, using or dealing with in any manner the remaining portion of the Contribution Funds until such time as MHS and Marineserve had provided the accounting. [21] In his pre-hearing brief, counsel for Transport Canada summarized the scope of the injunction sought on this application: It is important to appreciate the limited scope and effect of the injunction sought. Transport Canada does not seek to freeze the money until trial. It recognizes that the Port must continue to be operated for the benefit of those who use it, and accordingly that the Contribution monies should continue to be made available for proper Eligible Expenses. Transport Canada asks merely that no further money be disbursed until there is a proper accounting of monies spent to date and proper records maintained that would permit a proper audit of monies spent in the future. [22] Counsel’s submission, however, continues: Nor does the injunction require the money be frozen until Transport Canada is satisfied all monies are being spent in accordance with the contract obligations. If Transport Canada, based on a proper audit, considers there is a violation of the Contribution Agreement that will have to be dealt with by all the parties in the normal course. The effect of the injunction is to give Transport Canada the ability to properly audit the use of the money as was originally intended by the contracts. With the ability to properly audit Transport Canada can make a determination of the nature and extent of any problem can then take timely action to prevent further loss, including if necessary an application for further interlocutory relief. [23] It appears the next payment under the Marineserve Agreement is due to be paid in October 2001. Transport Canada is seeking to enjoin this payment until it has received a proper accounting of how the monies already paid by MHS to Marineserve have been spent. [24] However, in a further pre-hearing submission, counsel for Transport Canada described the interest sought to be protected on this application as follows: ...The interest that Transport Canada seeks to protect is the right to have access to information showing how the money is being spent while it is being spent in order that if there is a problem timely and more appropriate action can be taken to protect the public funds. To require Transport Canada to await the outcome of what may be a protracted litigation before it can determine where the money has gone is part of the harm, or damage, that Transport Canada seeks to prevent. [25] During counsel’s oral submission, a further draft Order was submitted that included: IT IS HEREBY ORDERED that by no later than the Defendants Maritime Harbours Society and Marineserve.MG Inc. shall serve on the Plaintiff a copy of every document, book, account and record in their respective possession, custody or control relating to the operating costs and revenues for the Port of Digby (including the receipt, management, use and ultimate disposition of any portion of the Contribution payment made to the Defendant Maritime Harbours Society by the Minister of Transport and of any and all monies paid by the Defendant Maritime Harbours Society to the Defendant Marineserve.MG Inc) . . . AND IT IS FURTHER ORDERED that the Defendants Maritime Harbours Society and Marineserve.mg Inc. are restrained from paying, using, disbursing or in any other manner dealing with the remaining portion of the Contribution payment made to the Defendant Maritime Harbours Society by the Minister of Transport until further Order of this Court, save and except such payments or other disbursements are in the normal course, and as are listed on Schedules A and B to this Order. None of the Contribution payment shall be applied to salaries for the Directors of Maritime Harbours Society or for profit or overhead contributions of either Defendant. B. THE FOUNDATION FOR INJUNCTIVE RELIEF [26] Jurisdiction for injunctive relief is provided by Section 43(9) of the Judicature Act, S.N.S. 1972, c.2, which empowers the granting of injunctive relief “in all cases in which it appears to the Court to be just or convenient that such order should be made...”. Essential in any application for an injunction is that the applicant establish, to varying degrees depending on the nature of the injunctive relief being sought, the basis of its claim or claims against the parties sought to be enjoined. The onus on the applicant ranges from ensuring there is “a serious question to be tried”, (R.J.R. MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, at para. 43 to establishing it is “clearly in the right” (Gulf Canada Limited v. Martin (1985), 70 N.S.R. (2d) 322, at pp. 327-328, at para. 41) to raising a “good arguable case”, (Parmar Fisheries Limited v. Parceria Maritimea Esperance L. Da (1982), 53 N.S.R. (2d) 388), to establishing a “strong prima facie case”, (Chitel v. Rothbart (1982), 39 O.R. (2d) 513, at p. 522.) [27] In its pre-hearing reply submission, counsel for Transport Canada, outlined the causes of action it deemed relevant to these applications. In respect to MHS, counsel says it is in breach of the agreements by failing to keep and make available for audit, records as to how the money was spent. Counsel continues that the reality Marineserve has taken over the MHS function of maintaining such records does not relieve MHS from the obligation, adding the fact MHS has not maintained such records and is unable to make them available for audit is itself a breach of the obligation. It is on this cause of action, counsel says, the applicant relies in seeking an injunction restraining further disbursement of the funds, until the information has been made available. [28] In respect to Marineserve, counsel says the elements of the tort of inducing a breach of contract are sufficiently made out to warrant the relief requested as against Marineserve. Counsel says it, or related companies, were involved with MHS in the preliminary feasibility study and it was known at the time that Transport Canada was prepared to make monies available to be applied to certain expenses. He suggests it would have been known to Marineserve that any contribution monies from Transport Canada would have required some form of an accounting as to the use of these monies and therefore Marineserve, when it entered into the contract with MHS, would have known that denial of access to such records would have constituted a breach by MHS of its obligations to Transport Canada. C. INTERLOCUTORY INJUNCTIONS [29] The Supreme Court of Canada in R.J.R. MacDonald Inc. v. Canada (Attorney General), supra, at paras. 78-81, enunciated the test to be applied to applications for Interlocutory Injunctions and, as well, for stays in both private law and Charter cases: At the first stage, an applicant for interlocutory relief in a Charter case must demonstrate a serious question to be tried. Whether the test has been satisfied should be determined by a motions judge on the basis of common sense and an extremely limited review of the case on the merits. The fact that an appellate court has granted leave in the main action is, of course, a relevant and weighty consideration, as is any judgment on the merits which has been rendered, although neither is necessarily conclusive of the matter. A motions court should only go beyond a preliminary investigation of the merits when the result of the interlocutory motion will in effect amount to a final determination of the action, or when the constitutionality of a challenged statute can be determined as a pure question of law. Instances of this sort will be exceedingly rare. Unless the case on the merits is frivolous or vexatious, or the constitutionality of the statute is a pure question of law, a judge on a motion for relief must, as general rule, consider the second and third stages of the Metropolitan Stores test. At the second stage the applicant must convince the court that it will suffer irreparable harm if the relief is not granted. ‘Irreparable’ refers to the nature of the harm rather than its magnitude. In Charter cases, even quantifiable financial loss relied upon by an applicant may be considered irreparable harm so long as it is unclear that such loss could be recovered at the time of a decision on the merits. The third branch of the test, requiring an assessment of the balance of inconvenience, will often determine the result in applications involving Charter rights. In addition to the damage each party alleges it will suffer, the interest of the public must be taken into account. The effect a decision on the application will have upon the public interest may be relied upon by either party. These public interest considerations will carry less weight in exemption cases than in suspension cases. When the nature and declared purpose of legislation is to promote the public interest, a motions court should not be concerned whether the legislation actually has such an effect. It must be assumed to do so. In order to overcome the assumed benefit to the public interest arising from the continued application of the legislation, the applicant who relied on the public interest must demonstrate that the suspension of the legislation would itself provide a public benefit. We would add to this brief summary that, as a general rule, the same principles would apply when a government authority is the applicant in a motion for interlocutory relief. However, the issue of public interest, as an aspect of irreparable harm to the interests of the government, will be considered in the second stage. It will again not be considered in the third stage when harm to the applicant is balanced with harm to the respondent including any harm to the public interest established by the latter. (1) Interlocutory Mandatory Injunctions [30] Counsel for MHS, noting the interlocutory notice filed by Transport Canada, requests an injunction restraining the defendants from applying, spending, using or dealing with in any manner the remaining portion of the Contribution Funds until such time as the defendants have accounted for the funds...and maintained proper account records to which Transport Canada has audit access, is effectively seeking a mandatory injunction rather than a prohibitive injunction and that the threshold test is higher than simply determining there is a “serious question” to be tried. He notes the comment of Justice Gruchy at para. 16 in Gilkerson v. Langille (1995), 147 N.S.R. (2d) 164, where he stated: It is clear as the courts of Nova Scotia recognize that the threshold for a mandatory injunction is even higher than that for ordinary prohibitive injunctions. [31] Counsel continues by referencing the reasons of Grant, J., in Gulf Canada Limited v. Martin (1985) 70 N.S.R. (2d) 322 (S.C.T.D.), where, at para. 41, he cites from Williston & Rolls - The Law of Civil Procedure (1970): A party seeking an interim mandatory injunction must not only satisfy the court that there is a serious question to be tried at the hearing, but also that he is clearly in the right. [32] Counsel also notes two decisions of Justice Hood. In Micronet Information Systems Ltd. v. Packard (Canada) Ltd. (1999) CarswellNS 299, at para. 3, she cites from Justice Proudfoot of the Ontario High Court in the Toronto Brewing & Malting Co. v. Blake (1982), 2 O.R. 175, to the effect that the onus on a party seeking an interim mandatory injunction was not simply a matter of determining whether there is a “serious issue to be tried”, but whether the applicant is “clearly in the right”. In her decision in Hardman v. Alexander, (1998), CarswellNS 506, at para. 8, she stated the threshold test for a mandatory interlocutory injunction required the applicant to establish a strong “prima facie case” and is “clearly in the right”. [33] Regardless of the formulation of the threshold for a mandatory injunction, it is clear it is higher than that for an interlocutory prohibitive injunction. (2) Mareva Injunctions [34] The applicant has also framed its application for interlocutory injunctive relief on the basis the payment about to become due from MHS to Marineserve be enjoined until Transport Canada receives an accounting with respect to the disbursement of funds previously taken from the Contribution Funds. Although the Contribution Agreement provided for the Contribution Funds to be held in trust and therefore were assets of MHS subject to certain contractual obligations in favour of Transport Canada, this injunction would freeze the remaining funds as security for the production of accounting and other records relating to the earlier disbursements of monies from the Contribution Funds. [35] Counsel for Marineserve, in his submission, references Mareva Compania Naviera S.A. v. International Bulkcarriers S.A., [1975] 2 Lloyd’s Rep. 509, which involved the grant of injunctive relief to prevent a defendant from dealing with its assets before trial of the action. Counsel notes that part of the relief requested by the applicant is an injunction preventing MHS from disbursing funds until the defendants “have accounted for the funds”. Since the accounting will only be determined at trial, the effect of Transport Canada’s application is to freeze the money until trial, despite the assertion in the application and in the accompanying submissions that the freeze is only until an accounting has been provided for the monies spent to date. As such, notwithstanding the language in which the relief is couched, the application is for a Mareva injunction in that it seeks to prevent MHS from dealing with its assets before trial. [36] Counsel then notes that the American Cyanamid approach was not applicable citing Polly Peck International Plc v. Nadir, [1992] 2 Lloyd’s Rep. 238, where Lord Donaldson M.R., at p. 249, stated: The approach called for by the decision in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 has as such, no application to the grant or refusal of Mareva injunctions which proceed on principles which are quite difference [sic] from those applicable to other interlocutory injunctions. [37] As observed earlier, counsel references Chitel v. Rothbart, supra, where MacKinnon, A.C.J.O., at p. 522, stated: It is my view, without stating any final opinion on the subject, that the availability of the cross-examination transcript makes more legitimate a preliminary consideration by the motions judge of the merits of the case. Whatever the test may be regarding the granting of interlocutory injunctions generally, in my view, the granting of a Mareva injunction, under special and limited circumstances, requires that the applicant establish a strong prima facie case. [38] Counsel also references, Sharpe, Injunctions and Specific Performance (looseleaf edition), Canada Law Books Inc. , at para. 2.870: While it is difficult to be precise about the strength of case the plaintiff must demonstrate, it is clear that the courts have proceeded cautiously, recognizing the risk of substantial harm and inconvenience which may be caused to the defendant. The Mareva injunction is one which calls for careful scrutiny of the merits of the claim and refusal of injunctive relief unless there is a good prospect of success at trial. The Canadian courts have tended to emphasize the importance of the plaintiff establishing a strong prima facie case. [39] Earlier, at para. 2.750, the authors note that until 1975 it had been firmly established in Canada that interlocutory injunctions would not be granted before trial to restrain a defendant from disposing of their assets, in order to protect the claims of ordinary creditors. The authors then referenced Chitel v. Rothbart, supra, where MacKinnon, A.C.J.O., although noting caution was required, held that injunctions could, in certain circumstances, be granted to restrain disposition of assets pending trial. [40] Counsel for Transport Canada suggests the distinction between a Mareva injunction and what Transport Canada is seeking is illustrated by the reasons of Estey, J., in Aetna Financial Services Ltd. v. Feigelman (1985), 15 D.L.R. 161: ...Mr. Justice Estey noted the generally a court will be hesitant to interfere with a defendant dealing with its assets but that there are three exceptions to that. One of those is a Mareva injunction where an applicant seeks to freeze assets of a defendant pending trial in order to have something against which to recover any judgment. But Justice Estey points out that another exception where courts will grant injunctions is where the fund of money is the subject of the dispute. [41] Counsel for Transport Canada acknowledges the general hesitation to interfere with a defendant dealing with its own assets, noting the Mareva injunction is one of the exceptions to that general principle. Another exception, as suggested by counsel for Transport Canada, is where the fund of money sought to be enjoined is the subject matter of the dispute itself. As noted by Justice Estey, at p. 167 in Aetna Financial Services Ltd. v. Feigelman, supra: However, the abhorrence which the common has felt toward allowing execution before judgment has always been subject to some obvious exceptions: 1. For the preservation of assets, the very subject-matter in dispute, where to allow the adversarial process to proceed unguided would see their destruction before the resolution of the dispute: To a large extent this exception to the Lister rule has been codified in the various provincial and federal procedural rules...That the courts had jurisdiction to make an order for the preservation of property pending litigation was, however, recognised even prior to passage of the rules. [42] As acknowledged by counsel for Transport Canada, this principle of enabling the court to preserve a fund of money that is in dispute has been codified in Civil Procedure Rule 43.02: (1) The court may, on such terms as it thinks just, make an order for the detention, custody or preservation of any property that is the subject matter of a proceeding, or as to which any question may arise therein... [43] However, in the present circumstances, to the extent the application is for the production of records and documents relating to the monies already advanced from the Contribution Funds, the remaining funds are not the assets in dispute. These assets, in the form of the payments already made, have been spent. The assets now sought to be preserved are the remaining monies held by MHS. The essential nature of the application being to preserve this fund pending production of records relating to the earlier advancement of funds is in the nature of an application for a Mareva injunction and the threshold test for such an injunction has not been met in the present circumstance. There will be no Mareva injunction, nor an injunction in the nature of a Mareva injunction whereby the Contribution Funds now held by MHS will be enjoined from distribution until Marineserve has produced records or documents detailing how previous advances have been distributed. 3. Interlocutory Prohibitive Injunctions (a) The First Stage - Serious Issue to be Tried [44] The injunctive relief sought by Transport Canada is, as earlier noted, prohibitive, mandatory and in the nature of a Mareva injunction. In the formulation of its remedy, counsel notes Transport Canada is seeking the right to have access to information showing how the money is spent while it is being spent. Such a formulation is a prohibitive injunction in that it seeks to enjoin the distribution of any further funds until it is shown how these funds will be spent. In respect to this formulation, the applicant is seeking a prohibitive interlocutory injunction and the onus is to establish a “serious issue to be tried”. [45] In Gulf Canada Limited v. Martin, supra, Justice Grant observed he would “not interpret the documentation in detail as that will be done, I presume in the main trial.” This court will not interpret in detail the obligations of MHS under the Contribution Agreement as to whether it meets its obligation by recording the distribution of funds to Marineserve or whether the obligation requires MHS to not only record the payments to Marineserve but to ensure it is in a position, to provide to the applicant, records and documents of the services on behalf of the Port paid from the Contribution Funds provided by Transport Canada. That will no doubt be a matter to be determined at the trial and it is only necessary, on an application for an interim interlocutory prohibitive injunction to determine whether in the circumstances there is a “serious issue to be tried”. As such, I am satisfied the applicant has met the onus. In respect to whether MHS has satisfied its obligation to Transport Canada by recording the payments made to Marineserve or whether it has the further obligation of ensuring access to the documents and records as to the expenditures by Marineserve, these are matters to be determined following a trial and not on this interlocutory application. It is sufficient, for this part of the onus, that Transport Canada show there is “a serious issue to be tried”. The plaintiff has met this onus. [46] To the extent the relief claimed is for the production of financial documents and records in the hands of Marineserve detailing expenditures that have been made in respect to the operation of the Port of Digby from the funds received from MHS, this is equivalent to seeking a mandatory injunction. This form of injunction would require production of documents and records which may, of course, be producible in the course of this proceeding. The records and documents sought arise from the payment of expenses by Marineserve in the performance of its contract with MHS. In order to sustain Transport Canada’s application it is necessary to interpret the Contribution Agreement as extending an obligation to Marineserve, to ensure the only expenditures paid from the fund received from MHS and taken from the Contribution Funds were Eligible Expenditures under the Contribution Agreement. Such a determination will require an interpretation of clauses in the agreement better suited to be made at trial, rather than on an interlocutory application for injunctive relief. In as much as the onus is to establish a “strong prima facie case” or that Transport Canada is “clearly in the right”, it has not met the onus. [47] The applicant has also not satisfied the onus of establishing a “serious issue to be tried” in respect to its claim against Marineserve founded on the tort of inducing breach of contract. In its submission, the applicant, in addition to noting the involvement of Marineserve, or related companies, in the negotiations by MHS with Transport Canada, references the report of PWC where it stated its belief the Marineserve contract provided for services that were Ineligible Expenditures under the Contribution Agreement, noting the four highest paid of the six employees of Marineserve working at the Port of Digby are officers and/or directors of MHS and that on expenditures of $1,081,399 for salaries, third party costs and consulting fees, an amount of $539,010 for profit reflecting a ratio of profit to direct costs of 50%. [48] Counsel for Marineserve, in his submission, references Klar, Tort Law (2nd ed. 1996), at p. 500: In order to succeed, a plaintiff must prove that the defendant intended to procure a breach of contract. In this respect, intention is proven by showing that the defendant acted with the desire to cause a breach of contract or with the substantial certainty that a breach of contract would result from the defendant’s conduct. This prerequisite is closely related to the requirement that the defendant have knowledge of the contract. In Clerk v. Kindesll on Torts (18th ed. 2000) it is stated at p. 1268: The procurer must act with the requisite knowledge of the existence of the contract and intention to interfere with its performance: a “two-fold requirement”. The plaintiff must show that there was an intentional invasion of his contractual rights and not merely that the breach of contract was the natural consequence of the defendant’s conduct. [49] In his submission, counsel then continues: There are two facts that make unsustainable any argument that Marineserve committed the tort of inducing breach of contract. First, there is no evidence that Marineserve had knowledge of even the general terms of the Contribution Agreement. In fact the only evidence on this point is from Mr. MacDonnell and he states that he had never been provided with the Contribution Agreement until the previous injunction proceedings. Secondly and this, it is submitted, is an even more fatal defect in the Plaintiff’s case, the contract between Marineserve and MHS was in place in September 1999; the agreements between MHS and Transport Canada were dated October 21, 1999. The payments made to Marineserve were made and should, in the future, be made under a contract that preceded the agreements on which the Plaintiff relies. In such circumstances the Plaintiff’s claim simply cannot be maintained. McLachlin, J.A. (as she then was) in Pacific Western Airlines Ltd. v. B.C. Federation of Labour (1986), 26 D.L.R. (4th) 87 (B.C.C.A.) stated at p. 91-92: I deal first with the contention that a case is made out of interference with contractual relations. The answer to this contention is that the legitimate exercise of a contractual right obtained prior to the right allegedly interfered with cannot give support to a claim in tort for interference with contractual relations. The commercial world is founded on the premise that individuals are entitled to exercise their contractual rights for their own benefit, even though the incidental result might be to prevent another person from making or performing some other contract. [50] Mr. MacDonnell denied any knowledge of the terms and conditions attached to the funds provided by Transport Canada. The determination of the essential element of “intention to procure a breach of the contract” will therefore require an assessment of the credibility of the witnesses and the evidence, matters more appropriately left for the trial stage of a proceeding. Justice Pugsley said as much in Oceanus Marine Inc. v. Saunders, [1996] N.S.J. No. 301, where at para. 20, he stated: It was...not the function of the chambers judge, on an application for summary judgement, to determine matters of fact or law which were in dispute. Matters of controversy should be left for resolution of the trial. [51] The admonition against engaging in assessments of matters in controversy, or making findings of credibility, on an interlocutory application, was reiterated by Justice Bateman in Campbell v. Lienaux, 2001 NSCA 122, particularly at para. 82: ...Equally clear is the impossibility, in many cases, of making a reliable assessment of the merits on an interlocutory application, particularly where the action is complex or turns on credibility. To quote Reid, J., once again in John Wink Ltd.: The impossibility of making a proper decision regarding the merits of a claim on insufficient information should be so obvious as not to require illustration.” [Italics is emphasis added in original] . . . From this review of the authorities, I reach the following conclusions. The merit of the plaintiffs case is a relevant consideration to the exercise of discretion to grant or refuse security for costs. The extent to which the merits may properly be considered varies depending on the nature of the case. If the case is complex or turns on credibility, it is generally not appropriate to make an assessment of the merits at the interlocutory stage. The assessment of the merits should be decisive only where (a) the merits may be properly assessed on an interlocutory application; and (b) success or failure appears obvious. (Emphasis added) [52] Although made in the context of applications raising issues that, to some degree, may have been determinative, rather than only valid until a trial is held, I am nonetheless satisfied the statements by Justices Pugsley and Bateman are nevertheless applicable here. Transport Canada provides no direct evidence Marineserve has committed the tort of inducing a breach of contract. Counsel raises the possibility based on Mr. MacDonnell’s, and his group of companies, having been involved in the negotiations with Transport Canada, on behalf of MHS and the employment by Marineserve of the four Directors of MHS. In the face of Mr. MacDonnell’s denial of any knowledge of the relevant terms and conditions of the agreement between MHS and Transport Canada, and the admonition by the Court of Appeal against engaging in matters of credibility on Interlocutory applications, I am not satisfied Transport Canada has even established the relatively low threshold of a “serious issue to be tried.” [53] Although satisfied, in respect to MHS, the applicant has established at least a “serious issue to be tried” as to whether MHS has met its obligation under the Contribution Agreement to only apply Contribution Funds towards the payment of Eligible expenses, I am not, satisfied, for the reasons noted, it has met the onus in respect to the allegation Marineserve has committed the tort of inducing a breach of contract. (i) Additional Issues Raised by MHS [54] Having determined Transport Canada has established a “serious issue to be tried” as between itself and MHS as to whether the latter has met its obligations under the Contribution Agreement to ensure funds spent from the Contribution Funds have only been applied towards Eligible Expenditures, it is also necessary to consider two preliminary issues raised by counsel for MHS as to whether it is just and convenient that an interlocutory prohibitive injunction be issued in respect to the remainder of the Contribution Funds now held by MHS. [55] Raised by counsel for MHS are issues as to whether the application for injunctive relief should be denied on the basis of delay by Transport Canada in bringing the application and whether an adverse inference should be drawn against Transport Canada in respect to issues regarding the parties’ understanding and alleged implied terms of the various agreements. (a) DELAY [56] Counsel observes Transport Canada has been aware of the Marineserve Contract since September 2000. In view of the knowledge MHS was continuing to spend money pursuant to the terms of the Marineserve Contract, the application for injunctive relief at this stage should be denied, he says, on the basis of delay in making the application. Counsel notes the decision of Barclay, J., in University of Regina Faculty Assn. V. University of Regina 1999 CarswellSask 395, where on the issue of delay: A plaintiff, once entitled to an injunction may lose that right on account of delay in asserting the claim. Consideration of delay is an aspect of the more general principle which takes into account the injustice of awarding relief against a party who will be prejudiced on account of a change of position related to acts or omissions of the party seeking relief . . . ...Interlocutory relief is granted on the basis of urgency and a plaintiff who delays demonstrates a lack of urgency and makes its position much less convincing. [57] It is clear from the history of this matter that there have been ongoing discussions between Transport Canada and MHS, and to a lesser extent with Marineserve, in respect to how the Contribution Funds were being disbursed. These discussions included whether Transport Canada had the right, under the Contribution and other agreements to go behind the payments made by MHS to Marineserve from the Contributions Funds to determine how Marineserve had applied these funds in payment of expenses and whether they necessarily had to be disbursed only on Eligible Expenditures as defined under the Contribution Agreement. The position of Transport Canada has been known to both MHS and Marineserve from the time of the request by PWC to access to the records of Marineserve in respect to the Port of Digby. There is nothing in the circumstances outlined in the various affidavits filed on this application from which to impute any delay by Transport Canada in bringing this application as would disentitle it to injunctive relief, if otherwise entitled. [58] In conjunction with its submission on delay, counsel for MHS anticipated an argument by Transport Canada that any delay in bringing this application was necessitated by the requirement, under the contractual documents, for the parties to engage in mediation in an attempt to resolve the dispute. As part of this argument, counsel says, Transport Canada cannot use the mediation process as an excuse for extreme delay and at the same time commence the instant proceeding in the face of the dispute resolution provisions contained in the Contribution Agreement, whereby, pursuant to Article 13.01.01, the parties agree to a procedure involving meetings, to be followed by mediation, to be followed by arbitration before pursuing any other legal remedy. Counsel for Transport Canada notes that the provision for arbitration contained in Article 13.02 is in reference to the Federal Commercial Arbitration Act, R.S.C. 1985, c. 17 (2nd Supp.), as amended, which contains a provision permitting interlocutory applications without necessarily proceeding to arbitration under the Act. Since the next payments from the Contribution Funds are to be made to Marineserve in the latter part of October, to await the conclusion of the dispute resolution procedures provided for in Article 13 would make the application for injunctive relief mute and meaningless despite what would otherwise might be valid grounds for such interlocutory relief. This in no way will preclude, in the eventuality of trial, a court determining the relief sought in this proceeding must first await the dispute resolution provisions and procedures set out in Article 13. It is only in respect to the interlocutory nature of this application that I am not prepared to preclude the applicant’s claim for interlocutory relief having in mind the limited scope of review and examination possible at this stage. (b) Adverse Inference [59] Counsel for MHS notes the deponent to the affidavits filed by the applicant was not the person involved in the negotiations between MHS and Transport Canada and which resulted in the Contribution and other agreements relating to the divestiture of the Port to MHS and the terms and conditions under which the Contribution Funds were paid to MHS. Counsel suggests the failure of Transport Canada to put forward such a witness calls for an adverse inference as to what his testimony would be, particularly with respect to Transport Canada’s understanding of the various agreements which he negotiated, proposed and signed on behalf of Transport Canada. In this respect, counsel refers to the reasons of Justice Pigeon in Levesque v. Comeau (1970), 16 D.L.R. (3d) 425(S.C.C.) and Justice Saunders in Scotia Fuels Ltd. v. Lewis (1991), 102 N.S.R. (2d) 12 (S.C.T.D.), where in each case the court drew an adverse inference from the failure of one of the parties to call a particular witness. To similar effect is the statement of MacIntosh, J., in da Silva v. Tobin Investments Ltd. (1978), 34 N.S.R. (2d) 659, that ”... failure to call a witness or party whose evidence might clarify the facts of a particular case may justify the court in drawing an inference adverse to that party. “ [60] In the present circumstance, in respect to whether the applicant has established a “serious issue to be tried”, I am satisfied, notwithstanding any inference to be drawn from the failure to file affidavits of the person’s involved in negotiations on the part of Transport Canada, although issues that may or may not be considered by the trial judge, do not preclude a finding the applicant has met the first stage of the test as described in R.J.R. MacDonald Inc. v. Canada (Attorney General), supra. (B) Irreparable Harm [61] K. Morriss, Director General, Port Programs and Divestiture for Transport Canada, in his affidavit deposed to on the 3rd of August 2001, after noting that as of January 31, 2001, the sum of $1,895,000 had been advanced by MHS to Marineserve, leaving the remaining sum of $1,175,000, then at paragraph (15), after stating his belief there is a significant risk Transport Canada would be unable to make recovery of any monies due in respect to payment of Non-Eligible expenses, deposes: ii) That MHS was incorporated as a non-profit society as of October 1, 1998. Its only activity appears to be in relation to the acquisition of the Port of Digby and in that regard it has only been in operation since October 1999. Other than a moderate income from the operation of the Port, I know of no other source of income for MHS. Nor am I aware of any assets other than the wharf and related property. I believe that the remaining portion of the Contribution is the only means by which MHS could repay the Contribution and if the balance of the Contribution monies are disbursed, MHS will have no ability to repay all or any portion of the Contribution to Transport Canada. [62] Counsel, in his submission, suggests that pending full document production and discovery, Transport Canada has no way to know with certainty whether there has in fact been any breach of the various agreements by MHS. Counsel then continues: ...If in the interim MHS is able to continue to disburse the remaining Contribution money to Marineserve in circumstances whereby Transport Canada is unable to audit or determine the actual application of those monies then by the time a default by MHS can be established the Contribution monies will have been dissipated. Transport Canada will be unable to make any recovery and it will suffer irreparable harm. [63] In paragraph (103) of his affidavit, Mr. Watkins, on behalf of MHS, responds to Mr. Morriss: THAT in paragraph 15 of Mr. Morriss’ affidavit he speculates as to MHS’s ability to repay any monies which may have been improperly applied. I repeat my assertion that no funds have been spent in a manner contrary to the agreements between Transport Canada and MHS. In the unlikely event that some portion of the contribution funds is found to have been spent on Ineligible Expenditures (which is completely and totally denied), MHS would have the financial ability to make repayment. a. With the consent of the Minister of Transport pursuant to Section 4.02.01 of the Operating Agreement, MHS could mortgage the Port lands, which have been valued by Transport Canada’s own appraisers at $480,500 in accordance with the Amended Operating Agreement annexed as Exhibit “A” to Mr. Morriss’ August 23, 2001 affidavit; b. As noted by Mr. Morriss in subparagraph (15)(ii) of his affidavit, MHS has revenues in addition to the contribution funds. MHS’ revenues total approximately $180,000 per year. [64] Counsel refers to the decision of Justice Legg in Harrison v. University of British Columbia (1986) 13 CCEL98 at para. 18. The burden on the plaintiff who seeks an interlocutory injunction is well known. He must make out not only that he has a serious question to be tried (I refer to American Cyanamid Co. v. Ethicon, [1975] A.C. 396, [1975] All E.R. 504 (H.L.) and the position of this Court in Stoffman v. Vancouver Gen. Hospital which is cited in the material before me (1985), 23 D.L.R. (4th) 146 at 147 (B.C.S.C.) [affirmed (1985), 68 B.C.L.R. 230, 23 D.L.R. (4th) 146 (B.C.C.A.)], but he must also prove that he will probably suffer irreparable harm if the injunction is not granted. [65] Counsel continues by citing Sharpe, Injunctions and Specific Performance, supra, at para. 2.390 on the meaning of irreparable harm: ...In the context of the preliminary injunctive relief, the phrase is given a more specific meaning, namely, that the plaintiff, before the trial, must risk some injury which cannot be compensated or remedied other than through the granting of an interlocutory injunction. The rationale for requiring the plaintiff to show irreparable harm is readily understood. If damages will provide adequate compensation, and the defendant is in a position to pay them, then ordinarily there will be no justification in running the risk of an injunction pending the trial. [66] Counsel for MHS comments that under the terms of the agreements between Transport Canada and MHS, any final settlement in respect to contribution monies spent on Ineligible Expenditures is to be made no later than six months after the date of termination of the agreement and therefore, Transport Canada is not entitled to be repaid, nor as counsel suggests, has any cause of action, until April 12, 2010. [67] Counsel for Transport Canada suggests the applicant has suffered irreparable harm by virtue of critical articles, speculations and discussions in the media to the effect it is unable to ensure that public funds, represented by the Contribution Funds, are being spent for the announced public purpose of assisting in the operation of the Port of Digby. In respect to these assertions by counsel for Transport Canada, I am not satisfied these would represent irreparable harm . They are matters that will be finally determined when there has been a full trial of all issues, including the scope and nature of the obligations assumed by MHS under the terms of these agreements. Whether, in the final analysis there is validity to any of the media speculation as to Transport Canada’s role in ensuring public funds are spent for public purposes will have to be considered in the light of findings made following full trial. The fact there is media speculation as to whether Transport Canada has been effective in ensuring the use of the funds made available to MHS for the operation of the Port is not a question of irreparable harm but the right of a free media in a free society to comment on government action or inaction. As a public body, Transport Canada may be subjected to media and public criticism. The existence of such criticism is not irreparable harm. The validity, if at all, of these criticisms will be a matter for consideration only after a full trial, when all sides will have had an opportunity to present their positions and to challenge that of the other parties. [68] The issue of irreparable harm is whether, as noted in Sharpe, Injunctions and Specific Performance, supra, damages will provide adequate compensation and “the defendant is in a position to pay them”. Clearly, since the issues here involve the alleged expenditure of monies for purposes other than they were originally intended, damages would provide adequate compensation if they were available at the time the loss, if any, is determined. The only real issue is whether the defendant, MHS, is in a position to pay such damages. [69] Having in mind the remainder of the Contribution Funds to be advanced, in excess of $1,000,000, and in view of the affidavit of Mr. Watkins, as to the limited resources available to MHS, I am satisfied on a balance of probabilities, the defendant may not be in a position to pay any damages arising out of the payment of Ineligible Expenditures, depending, of course, on the quantum of such Ineligible Expenditures. [70] In R.J.R. MacDonald Inc. v. Canada (Attorney General), supra, at para. 79, the court noted irreparable harm exists where there is quantifiable financial loss, so long as it is unclear that such loss could be recovered at the time of the decision on the merits. Here the applicant has met the second of the three steps required for prohibitive injunctive relief. (C) Balance of Convenience [71] It is in respect to the third step or stage, balance of convenience, that counsel for Transport Canada suggests there is in this instance a compelling public interest, similar to that previously noted in R.J.R. MacDonald Inc. v. Canada (Attorney General), supra, at paras. 80 - 81. [72] The court there commented that the effect a decision on the application would have upon the public interest may be relied on by either party. However, in the present instance, the public interest as raised by counsel, relates to the merits to be determined at the trial itself, namely, whether by virtue of the agreements entered into between Transport Canada and MHS there were insufficient provisions precluding MHS from spending monies other than as originally intended. This will depend on whether, in fact, MHS has expended monies on Ineligible Expenditures or permitted, by virtue of its contract with Marineserve, some part of the Contribution Funds to be spent on Ineligible Expenditures. These are matters not capable of determination at this interlocutory stage and, as noted, are matters to be determined at trial. [73] The issue of balance of convenience to the parties must be considered in the context of the position of Transport Canada seeking a freeze against spending any further of the Contribution Funds at this time. Mr. Watkins, at para. 122 of his affidavit, suggests MHS will suffer irreparable harm, noting 29 ramifications or repercussions to the Port if the next payment due under the Marineserve contract is not made. [74] In addition, Mr. MacDonnell, at paragraph (26) of his affidavit, in stating, “any restriction on Marineserve’s ability to receive its contract payments may impair the operation of the port.”, suggests seven consequences clearly adverse to the interests of the Port, would ensue. [75] At the conclusion of his examination, Mr. Morriss was asked whether any of the ramifications noted by Mr. Watkins in his affidavit and by Mr. MacDonnell, in his affidavit, would constitute Ineligible Expenditures. After consideration, he noted only two as possibly representing Ineligible Expenditures. In respect to one of the expenditures, he indicated he was not prepared to state it was an Ineligible Expenditure, only that he would have to consider whether, in his opinion, it would constitute an Eligible Expenditure. In respect to the other repercussion, that MHS would not be able to honour its contractual obligations to Marineserve and therefore would be in breach of its contract and subject to legal action, he said he could not comment, since this involved the contractual obligations between MHS and Marineserve. [76] Having regard to the position testified by Mr. Morriss, that the ramifications outlined by Mr. Watkins as the effect of a prohibitive injunction would not constitute ineligible expenditures, with the two possible exceptions noted, and, as well, the consequences noted by Mr. MacDonnell as to the position of Marineserve in the event of non-payment by MHS of the contract payment due, it would appear the critical issue on this application is the determination of the balance of convenience in the circumstances here present. On the one had, the applicant faces the prospect of having funds it advanced for limited and specific purposes, that is to be applied to certain Eligible Expenditures relating to the operation of the Port of Digby, used for other purposes. On the other hand, a freeze on further disbursements of the remainder of the Contribution Funds is very likely to result in a shut down of the Port of Digby, a consequence apparently neither sought nor intended by the applicant. [77] Under its agreements with Transport Canada, MHS undertook to keep and make available for audit, records as to how the Contribution monies were spent. It says it has done so and that one part of the record is the invoices from Marineserve. Transport Canada suggests otherwise, on the basis the funds are being disbursed to Marineserve under an agreement whereby it is required to supply many of the services required in the operation of the Port of Digby and the invoices from Marineserve neither are themselves Eligible expenses, nor provide the required detail to enable a determination to be made as to whether any or all of the invoices are for Eligible Expenditures. Recognizing the Marineserve Contract has no provision requiring Marineserve to account for how it expends the monies it receives from MHS, whether from Contribution Funds or other monies, the weighing of the balance of convenience is in regard to the possible rights and obligations of Transport Canada and MHS under their agreements. [78] If MHS subcontracted to Marineserve services in respect to the Port of Digby, without ensuring its ability to provide to Transport Canada the necessary records and substantiation that Contribution Funds were only being used for Eligible Expenditures, this is a problem MHS has created for itself. MHS could have required Marineserve to make available the required accounting records. However, since the Marineserve Contract preceded in time the agreements with Transport Canada, if it was not then in a position to provide these records, it should not have made the undertaking to provide them in the agreements signed with Transport Canada. Transport Canada notes that absent an injunction, the payment due to Marineserve will be made, and in the event of a finding some or all of the expenditures are not Eligible Expenditures, these monies will be expended without regard to the public objective intended by the Contribution Funds. [79] I am satisfied, in all the circumstances, the balance of convenience favours some form of injunctive relief. 4. The Injunction Claimed [80] Subject to its nature and scope, in the context of the basis for relief advanced on this application, Transport Canada is entitled to injunctive relief, as against MHS. [81] The present formulation of its requested injunctive relief would permit funds to be disbursed for the purposes described in para. 122 of Mr. Watkins’ affidavit and para. 26 of Mr. MacDonnell, excluding, however, the disbursement of any funds for wages and salaries of persons who are Directors of MHS or towards the profit or overhead contributions of either defendant. There is no basis, on the evidence, including the documents filed on this application, for any such distinction or exclusion. Submissions as to any lack of “reasonableness” of these expenditures are not now relevant since “reasonableness” has not been advanced as a basis for the injunctive relief. In any event, whether the contract is to be interpreted with an implied term that the expenditures must be “reasonable” is a matter of interpretation to be considered at the trial, when all sides will have an opportunity to present their evidence and arguments. [82] Counsel for Marineserve, in commenting on the form of injunction relief suggested by Transport Canada during oral submissions, stated the provisions entitling payment for some expenditures, while precluding others, would leave his client in an untenable position. Marineserve would have to interpret each activity with a view to ascertaining if it had a “profit or overhead” component so as not to violate the proposed injunction. [83] Similarly, courts have been reluctant, perhaps even extremely reluctant, to issue orders that require ongoing supervision, such as would be required in the circumstances of such an order. Although in the context of an application for a mandatory injunction by a landlord of a shopping centre to have the defendant food store continue to operate, on the basis it was an anchor tenant, the comments of White, J., in Bramalea Ltd. v. Canada Safeway Ltd. (1985), CarswellOnt. 517, at paras. 16 and 18, are equally applicable here: It would not be practical for this court to assume responsibility for seeing that a large supermarket continue to function. . . . It is completely impossible for any order of this court to be supervised by the court in any way that would make any sense. [84] In a similar vein, Armstrong, J., of the Saskatchewan Court of Queens Bench, in Swift Current Mall (Receivership) v. Rinney Canada Inc. (1988), 69 Sask. R. 135, at p. 137, in dismissing an application for a mandatory injunction to force the respondent to re-open and operate, stated it: . . . would in my mind involve the kind of supervisory role which courts have declined to accept in other similar situations. [85] The proposed order would require the court to supervise the disbursement of the Contribution Funds and to assess whether, in respect to at least the named defendants, any payment involved a “profit or overhead” component. If necessary, these are matters to be determined at trial, following presentation of evidence and submissions by all parties, and are not matters the court will be in a position to consider and decide on the basis of the limited evidence that would be available on any future Interlocutory application. [86] For each of the reasons noted, I decline to grant an injunction in the form outlined in the draft order presented by counsel for Transport Canada during oral submissions. (D) CONCLUSION [87] The breach, advanced by Transport Canada, is that MHS “failed to keep and make available for audit, records as to how the money was spent”. As such, the formulation of any injunction must have relationship to the alleged breach for which it is being awarded. Providing Transport Canada makes an appropriate undertaking as to damages, it is entitled to injunctive relief, limited, however, in scope to the nature of the suggested breach. [88] Plaintiff, subject to providing an undertaking as to damages, is granted an injunction restricting payment of any of the Contribution Funds unless MHS will be able to provide records of the services and products to be paid from these funds, and has such records open for inspection and audit by the plaintiff. [89] If MHS is either unable or unwilling to provide such a commitment, then the injunction may be discharged if it is able to provide a bond, with a good and sufficient surety, as security in the event it is determined that some or all of the payment now due to Marineserve has been used other than for “Eligible Expenditures”, as defined in its agreements with the plaintiff. J.