Noram Engineering and Construction Ltd. v. Cecebe Technologies Inc.

2004 BCSC 1588 Noram Engineering and Construction Ltd. v. Cecebe Technologies Inc. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Noram Engineering and Construction Ltd. v. Cecebe Technologies Inc., 2004 BCSC 1588 Date: 20041124 Docket: S045836 Registry: Vancouver Between: Noram Engineering and Construction Ltd. Plaintiff And: Cecebe Technologies Inc. Defendant Before: The Honourable Mr. Justice Ehrcke Oral Reasons for Judgment In Chambers November 24, 2004 Counsel for Plaintiff G.W. Ghikas, Q.C. R.J.C. Deane Counsel for Defendant J. Hunter, Q.C. M.S. Oulton Place of Hearing: Vancouver, B.C. [1] THE COURT: I have before me three applications arising out of a Statement of Claim filed by the plaintiff, Noram Engineering and Construction Inc. ("Noram"), and a counterclaim filed by the defendant, Cecebe Technologies Inc. ("Cecebe"), on November 12, 2004. [2] The defendant, Cecebe, and the plaintiff, Noram, have each brought applications seeking interim injunctions in connection with a written agreement between them dated October 31, 1996 (the "1996 Agreement"). [3] The plaintiff has also brought an application seeking a stay of the counterclaim of the defendant on the grounds that it raises issues that the parties agreed would be submitted to arbitration under the terms of the 1996 Agreement. [4] Cecebe is in the business of providing consulting, technology and project design services to the sulphuric acid industry. [5] Noram sells engineering, design, building and retrofitting services and equipment to various industries, including the sulphuric acid industry. [6] Effective October 31, 1996, the parties entered into the 1996 Agreement, which provided that Cecebe would provide consulting services and would licence the name "Cecebe" as well as certain patents to Noram in exchange for consulting fees and licence fees, which were to be calculated and paid to Cecebe in accordance with the terms set out in Articles 2 and 3 of the Agreement. [7] Cecebe contends that Noram has not been calculating the consulting fees in accordance with the terms of the 1996 Agreement and that Noram's failure to follow the contractual requirements has resulted in a significant underpayment to Cecebe. Accordingly, Cecebe delivered a notice of termination of the 1996 Agreement to Noram on July 24, 2004. [8] In response, Noram made certain payments to Cecebe, under protest, in order to cure its alleged default. It also filed a statement of claim, which seeks a declaration that the notice of default is invalid. In the alternative, it seeks relief from forfeiture. [9] Cecebe's counterclaim seeks damages for Noram's alleged breach of contract and an accounting of all fees owing under the 1996 Agreement. [10] Both parties now seek interim injunctions pending the trial of these claims. [11] By its notice of motion dated October 22, 2004, Noram seeks an order that Cecebe be restrained and enjoined until trial from exercising any rights or enforcing any obligations which arise in connection with the termination of the 1996 Agreement. [12] By its notice of motion dated November 1, 2004, Cecebe seeks an order that Noram be restrained and enjoined until trial from using, directly or indirectly, the assets as defined in the 1996 Agreement, except as required to complete the projects which Noram committed to prior to November 1, 2004. [13] Simply put, the plaintiff by its application seeks an order that would treat the 1996 Agreement as being a valid and subsisting contract unless and until the contrary is established at trial. [14] The defendant, on the other hand, seeks an order that would treat the notice of termination as valid and the 1996 Agreement as being at an end unless and until the contrary is established at trial. [15] The test for obtaining an interim injunction was discussed by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at page 344: First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. I will deal with each of these three conditions in turn as they relate to each party's application. [16] The first condition for an applicant for an interim injunction to establish is that there is a serious question to be tried. The threshold at this stage is a low one. As was said in RJR-MacDonald at page 337: What then are the indicators of "a serious question to be tried"? There are no specific requirements which must be met in order to satisfy this test. The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case. The court went on to say at page 338 that in most cases, "a prolonged examination of the merits is ... neither necessary nor desirable." [17] In this case, on the materials before me, I am satisfied that both the statement of claim and counterclaim raise serious issues to be tried relating to the effect of the 1996 Agreement and the validity of the notice of termination. [18] The next requirement is that the applicant must show that it would suffer irreparable harm if the injunction were not granted. The nature of this requirement was discussed in RJR‑MacDonald at page 341: At this stage the only issue to be decided is whether a refusal to grant relief could so adversely affect the applicants' own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application. "Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision ...; where one party will suffer permanent market loss or irrevocable damage to its business reputation ...; or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined.... The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration.... [Citations omitted] [19] The potential harm alleged by Noram is described in the affidavit of Kevin Dodds, sworn October 28, 2004. At paragraphs 30-31, he deposed: 30. Apart from the losses that can be calculated, I believe that there will be tremendous damage to Noram's reputation in the sulphuric acid industry. Noram has staked its reputation in the sulphuric acid industry on Cecebe's technology and it would be a crushing blow to lose it. The sulphuric acid industry is a relatively close industry, and the damage to Noram's reputation and competitiveness in that industry would be huge. That risk is exacerbated by the fact that the sulphuric acid business has been declining for the past few years, making it even more important that Noram do everything it can do to maintain its share. 31. Further, even if Cecebe succeeds in terminating the 1996 Agreement and depriving Noram of its right to purchase the intellectual property and technology for a nominal sum, there will be nothing to stop Cecebe from turning around and selling it to another purchaser, most likely one of our competitors. That competitor will have the benefit of the technology in which Noram has invested significant resources and, without that technology, Noram will never be able to regain the lost market share. Even if the court ultimately finds in Noram's favour, there would be very little that could be done to restore Noram to the position it is in now. [20] I am satisfied that Noram has established that it would in the relevant sense suffer irreparable harm which could not adequately be cured by monetary damages. [21] Cecebe's alleged harm is described in the affidavit of Gordon Cameron, sworn November 18, 2004. He deposes that Noram has demonstrated an inability to develop an effective presence in the sulphuric acid industry and is unwilling to heed the advice of Cecebe. He says that Noram is damaging the longstanding reputation of Cecebe and has also alienated a key supplier of components of Cecebe products. He says that to allow Noram to continue using Cecebe's name and technology pending trial would further damage Cecebe's reputation and would erode the market share or products using the Cecebe technology. [22] I am satisfied that Cecebe, too, has established that it would suffer irreparable harm. [23] I must then turn to the third component of the test, namely, the balance of convenience. This has been described by the Supreme Court of Canada as, "a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits." [24] On the basis of the material before me, I have come to the conclusion that the balance of convenience favours granting the injunction sought by Noram and refusing the injunction sought by Cecebe. [25] The parties have been operating under the 1996 Agreement for some eight years now. Noram's presence in the market is well established. To permit Noram to continue to use Cecebe's name and technology pending trial will, in my view, cause less harm to Cecebe's interests than would be caused to Noram if Cecebe were granted the injunction it seeks. I do not accept Cecebe's argument that it will effectively be put out of business. It will continue to operate as it has for the last eight years. [26] The final issue to be determined is whether Noram's application for an order staying proceedings in respect of Cecebe's counterclaim should be granted. [27] Noram relies on s. 15 of the Commercial Arbitration Act, R.S.B.C. 1996, c. 55, which provides: 15(1) If a party to an arbitration agreement commences legal proceedings in a court against another party to the agreement in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may apply, before or after entering an appearance and before delivery of any pleadings or taking any other step in the proceedings, to that court to stay the legal proceedings. (2) In an application under subsection (1), the court must make an order staying the legal proceedings unless it determines that the arbitration agreement is void, inoperative or incapable of being performed. [28] "Arbitration agreement" is defined in s. 1 of the Commercial Arbitration Act in this way: "Arbitration agreement" means a written or oral term of an agreement between 2 or more persons to submit present or future disputes between them to arbitration, whether or not an arbitrator is named, but does not include an agreement to which the International Commercial Arbitration Act applies. [29] In Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 66 B.C.L.R. (2d) 113 (C.A.), our Court of Appeal said at pages 119-121: ... it is not for the court on an application for a stay of proceedings to reach any final determination as to the scope of the arbitration agreement or whether a particular party to the legal proceedings is a party to the arbitration agreement because those are matters within the jurisdiction of the arbitral tribunal. Only where it is clear that the dispute is outside the terms of the arbitration agreement or that a party is not a party to the arbitration agreement or that the application is out of time should the court reach any final determination in respect of such matters on an application for a stay of proceedings. Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal. [30] Noram contends that ss. 2.10, 3.07 and 8.02 of the 1996 Agreement constitute an arbitration agreement within the meaning of the Commercial Arbitration Act, and that the issues raised by Cecebe in its counterclaim must be settled by arbitration rather than by the courts. [31] Cecebe, on the other hand, maintains that arbitration is not mandatory under the 1996 Agreement, but rather is an option that the parties may resort to if either one of them so elects in writing. Cecebe says that neither party has so elected. [32] Section 2.10(4) of the 1996 Agreement provides: 2.10(4) If the parties are unable to resolve all matters in dispute within such period, either party shall be entitled to require by written notice to the other party that all unresolved matters shall be submitted to arbitration for resolution pursuant to the provisions of this agreement. The consulting fees statement shall be modified to the extent required to give effect to the arbitrator's determination and shall be deemed to have been approved as of the date of such determination. [33] Noram submits that it has given written notice that it has elected arbitration and refers to a letter from its counsel to counsel for Cecebe, dated August 20, 2004, which states: If Cecebe wishes to receive payment for consulting fees and licence fees, Cecebe must either approve the statements presented to it or refer any disagreements to arbitration. [34] Noram also relies on a letter from their counsel to Cecebe, dated October 22, 2004, stating: Only after the account as been deemed to have been approved at the conclusion of the process contemplated by the agreement, including arbitration if necessary, is the account due and payable. [35] Those two statements being conditional in nature do not, in my view, constitute written notice that the unresolved issues shall be submitted to arbitration. [36] I note, as well, that in its statement of claim filed October 22, 2004, Noram pleaded at paragraph 16 that: Neither party has required by written notice that the 2003 consulting fees statement be submitted to arbitration in accordance with the 1996 Agreement. [37] Accordingly, I find that s. 15 of the Commercial Arbitration Act has not been triggered by the filing of Cecebe's counterclaim, and Noram's application for a stay is therefore dismissed. [38] To summarize, the plaintiff's application for an interlocutory injunction as set out in its notice of motion, dated October 22, 2004, is granted. The other two applications are dismissed. [39] Do the parties have submissions on costs? (DISCUSSION BETWEEN THE COURT AND COUNSEL RE COSTS) [40] THE COURT: Costs will be in the cause with respect to each of the three applications. "W.F. Ehrcke, J." The Honourable Mr. Justice W.F. Ehrcke