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The Supreme Court's Three-Part Test in RJR-MacDonald Inc

November 22, 2021

British Columbia

,

Canada

Issue

When will the court make a possession order in favour of the owner of a residential property?

Conclusion

The British Columbia Supreme Court has applied the following three-part test articulating in RJR-MacDonald Inc. v. Canada (Attorney General) when considering whether to grant an order for possession over a property:

1. is there a serious question to be tried;

2. will the applicant will suffer irreparable harm if the relief is not granted; and,

3. does the balance of convenience favour granting the application? (Initiate School of the Canadian Rocky Mountains Ltd. v. Wolfenden Ventures Ltd.; Mortensen v Waddell; Watson v. Strong; Jesson v Wilkinson; RJR-MacDonald Inc. v. Canada (Attorney General))

In Initiate School of the Canadian Rocky Mountains Ltd. v. Wolfenden Ventures Ltd., the plaintiff sought to restrain the defendant land owner from ejecting the plaintiff from the property. The defendant sought an order for possession of the property. The plaintiff never had a tenancy agreement with the defendant. Instead of the principles of landlord and tenant law, the plaintiff relied on principles of equity. The plaintiff claimed an interest in the property by way of constructive trust. Rogers J. denied the plaintiff's motion for an interim injunction restraining the landowner from ejecting the plaintiff, finding that the balance of convenience test favoured the defendant's position. Rogers J. noted that the plaintiff was a squatter on the property. By remaining on the property without color of right, it was the plaintiff who altered the status quo. That bodes against giving the plaintiff injunctive relief. Further, Rogers J. found the plaintiffs claim for a proprietary interest was tenuous, as the damages could be assessed in monetary terms. Rogers J. ordered that the defendant was entitled to possession of the land.

In Mortensen v Waddell, the plaintiff alleged that the parties had entered into an oral profit sharing agreement where the plaintiff agreed to renovate a residential property the defendant owned, with the plaintiff providing materials and sale. As part of the agreement, the plaintiff was to reside on the property. The defendant, after a dispute arose, served the plaintiff with notice to end tenancy for cause. The plaintiff sought a proprietary interest in the property through a constructive trust. Meiklem J. held that the plaintiff's refusal to vacate the property was not legitimately based on a proprietary claim to possession, as there was no concern in this case as to the sufficiency of a monetary award. Meiklem J. ordered the plaintiff to vacate the property and also ordered the defendant to pay into the court the sum of $110,000. (Mortensen v Waddell)

In Watson v. Strong, the applications related to the estate of Rosamund Watson. The estate's only asset was a residential property. The estate had significant debts and no means to repay them. The petitioner requested that the estate be sold to satisfy these debts but the respondents were living on the property. The respondent claimed a 25% interest in the estate. The petitioner sought an order for vacant possession so that it could proceed with the sale. The Court granted the petitioner's request as the principal impediment to the sale of the property was the presence of the respondents. The Court found that the respondent could not use a disputed claim to a portion of the Estate to prevent the Estate’s principal asset from being sold and ordered vacant possession of the property. The Court ordered vacant possession of the property. (Watson v. Strong)

In Jesson v Wilkinson, the applications concerned the sale of property located at 4985 Cultus Lake Road in Chilliwack, British Columbia (the “Property”) from the defendant Mr. Wilkinson to the defendant Mr. Marks on November 14, 2013. The Property was purchased by Mr. Wilkinson in 2005, allegedly on the plaintiffs’ behalf. The plaintiffs have had possession of the Property since 2006 and have used it as a second home and vacation property since then. The plaintiffs claimed that the Property was held in trust by Mr. Wilkinson for their benefit. Mr. Marks sought to vacate the ex parte order that granting the plaintiffs interim possession of the Property or vary it to give interim possession to Mr. Marks. Marzari J. considered the three-part test for interim injunction, noting that the plaintiffs would not suffer irreparable home and that they may continue to maintain the CPL on the property pending trial. Marzari J. ordered the plaintiffs to remove themselves and their possessions from the Property within 45 days of the order.

Law

In RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, 1994 CanLII 117 (SCC) the SCC set out the test for granting an interlocutory injunction. The test involves three steps and requires the court to determine whether:

1. there is a serious question to be tried;

2. whether the applicant will suffer irreparable harm if the relief is not granted; and,

3. whether the balance of convenience favour granting the application.

The SCC explained as follows:

[83] 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 a general rule, consider the second and third stages of the Metropolitan Stores test.

[84] 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.

[85] 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 relies on the public interest must demonstrate that the suspension of the legislation would itself provide a public benefit.

In Initiate School of the Canadian Rocky Mountains Ltd. v. Wolfenden Ventures Ltd., 2010 BCSC 12 (CanLII), the plaintiff sought to restrain the defendant landowner from ejecting the plaintiff from the property. The defendant sought an order for possession of the property. The plaintiff has never had a tenancy agreement with the defendant. Instead of the principles of landlord and tenant law, the plaintiff relied on principles of equity. The plaintiff claimed an interest in the property by way of constructive trust. Rogers J. denied the plaintiff's motion for an interim injunction restraining the landowner from ejecting the plaintiff, finding that the balance of convenience test favoured the defendant's position. Rogers J. noted that the plaintiff was a squatter on the property. By remaining on the property without color of right, it was the plaintiff who altered the status quo. That bodes against giving the plaintiff injunctive relief:

[22] The court’s discussion of the balance of convenience test in RJR is of limited value here. That is because, in RJR, the balance of convenience involved issues arising from the Charter of Rights and Freedoms and the impact of the injunction upon public interest. The present case is a relatively straightforward civil proceeding – no Charter issues arise and the broad public interest will not in any way be affected by the outcome.

[23] In Canadian Broadcasting Corp. (CBC) v. CKPG Television Ltd., 1992 CanLII 560 (BC CA), [1992] B.C.J. No. 247 (B.C.C.A.), the court did discuss the balance of convenience test in the context of civil proceedings. There, Lambert J.A. said:

….in assessing the balance of convenience a judge should consider these points: - the adequacy of damages as a remedy for the applicant if the injunction is not granted, and for the respondent if an injunction is granted; the likelihood that if damages are finally awarded they will be paid; the preservation of contested property; other factors affecting whether harm from the granting or refusal of the injunction would be irreparable; which of the parties has acted to alter the balance of their relationship and so affect the status quo; the strength of the applicant’s case; any factors affecting the public interest; and any other factors affecting the balance of justice and convenience.

[24] It is in the context of this element of the RJR criteria that a discussion of the plaintiff’s estoppel argument belongs. Stripped to its essentials, estoppel is simply an equitable remedy that, when all other remedies fail, will work to restore balance and justice to the parties’ positions.

[25] I have already determined that if the injunction does not go, the plaintiff is at risk of irreparable harm. On the evidence before me, the defendant appears to be solvent and there appears to be no great risk that if the plaintiff succeeds in its claim for damages its judgment will go unpaid.

[26] The property at issue here will not go anywhere if the injunction is or is not granted. The plaintiff has made a claim for an interest in the land; any prudent litigant would protect its claim by filing a certificate of pending litigation against the title to the property. Assuming that the plaintiff as acted accordingly, the plaintiff’s claim for an interest in the land arising out of a constructive trust would not be affected by the success or failure of the injunction application.

[27] As for the status quo, the plaintiff is clearly a squatter on the property. It has been told to vacate several times, but it has simply refused to comply. By remaining on the property without color of right, it is the plaintiff who has altered the status quo. That bodes against giving the plaintiff injunctive relief.

[28] The plaintiff’s case for damages for unjust enrichment may or may not succeed, but it appears to me that the claim for an interest in the land consequent to a constructive trust is extremely tenuous. That is because the default relief in any claim for unjust enrichment and constructive trust is an order for damages. Only when damages cannot be assessed in monetary terms – because, for example, the value of the enrichment the defendant has unjustly received has accrued gradually by way of household services or efficiencies and therefore cannot be monetized – will the court depart from an order for damages and grant the plaintiff an interest in the land: Harraway v. Harraway, 2009 BCCA 561. In the present case, the plaintiff has filed affidavit evidence itemizing the value, in terms of dollars and cents, that it says it has bestowed on the land and by which it says that the defendant has been enriched. Far from describing a case where a monetary award would be inadequate or impossible to asses, the plaintiff has put forward a case that begs for a money award. In my view, the plaintiff’s claim for an interest in the land has no strength at all and is very unlikely to succeed. Therefore, even if my conclusion that there is no fair question to be tried as to possession of the land, this element of the balance of convenience test must be held to fall in the defendant’s favour and weighs heavily against granting the injunction.

[29] As noted earlier, this case does not engage the public interest. The parties fully canvassed the issues surrounding the injunction application, and there do not appear to be any factors that have not already been discussed that would affect the balance of justice and convenience between the parties.

[30] In all, I find that the factors upon which the balance of convenience test turns generally favour the defendant’s position and lie contrary to granting the injunction.

Conclusion

[31] The plaintiff’s case does not satisfy the criteria for an interim injunction. The plaintiff’s application for an injunction is therefore dismissed.

Rogers J. ordered that the defendant was entitled to possession of the land:

Order for Possession

[35] Given the plaintiff’s refusal to vacate the property in the face of clear demands that it leave, it is clear that the defendant both deserves and requires the court’s assistance. There will be an order that the defendant is entitled to possession of the land in issue in this suit. That order will be effective immediately.

In Mortensen v Waddell, 2017 BCSC 1235 (CanLII), the plaintiff alleged that the parties had entered into an oral profit sharing agreement where the plaintiff agreed to renovate a residential property the defendant owned, with the plaintiff providing materials and sale. As part of the agreement, the plaintiff was to reside on the property. The defendant, after a dispute arose, served the plaintiff with notice to end tenancy for cause. The plaintiff sought a proprietary interest in the property through a constructive trust. Meiklem J. held that the plaintiff's refusal to vacate the property was not legitimately based on a proprietary claim to possession, as there was no concern in this case as to the sufficiency of a monetary award:

[22] The defendants recognize that the plaintiff has a monetary claim. Although it disputes that it is as high as the plaintiff claims, DWH has offered to pay $110,000 into court as security for the plaintiff’s claim and to address the balance of convenience in order to obtain the injunctive relief sought and effect a sale of the Property.

[23] The plaintiff’s Notice of Civil Claim primarily pleads monetary relief. Constructive trust is generally only available as a remedy for unjust enrichment if a monetary award is insufficient: Peter v. Beblow 1993 CanLII 126 (SCC), [1993] 1 S.C.R.980 and Initiate School of the Canadian Rocky Mountains Ltd. v. Wolfenden Ventures Ltd., 2010 BCSC 12. There is very little, if any, prospect that Mr. Mortensen will succeed with obtaining a constructive trust remedy on the facts of this case. There is no concern in this case as to the sufficiency of a monetary award. Mr. Mortensen has, from the very outset of his dealings with DWH, had the option of purchasing the Property, but has simply never been financially able to do so.

[24] Mr. Mortensen’s refusal to vacate the Property is not legitimately based on a proprietary claim to possession. It is clear from his pleadings in the Notice of Civil Claim that Mr. Mortensen considered that the defendants had repudiated and breached the agreement and he pleaded (Part 3, paragraph 4): “the Plaintiff is removed from any obligation to complete the Agreements”. He has made a liquidated quantum meruit claim and a claim for general exemplary and punitive damages. His right to occupy the Property was for a business purpose which has come to an end with the termination of the agreement.

Meiklem J. ordered the plaintiff to vacate the property and also ordered the defendant to pay into the court the sum of $110,000:

[36] In my view, the required elements for the injunctive relief sought are established and I find that such relief is necessary to bring this case to a conclusion, something that is clearly in the best interests of both parties. There is no concern about the defendants’ ability to pay any damages awarded to the plaintiff and DWH’s preparedness to lodge $110,000 with the court will ensure that any award in favour Mr. Mortensen up to that amount will be paid promptly. Mr. Mortensen would be well advised to have the matter prepared and set for trial at the earliest opportunity.

[37] The defendant, DWH, is granted the injunctive relief sought, and is ordered to pay into court the sum of $110,000. Once I have received confirmation of payment into court, I will sign an Order that Mr. Mortensen will vacate the Property on the last day of the month following the month in which the payment into court was made. In other words, if the payment is made in July 2017, the possession order will specify August 31, 2017. Effective immediately, Mr. Mortensen will cease any construction or renovation work on the Property, unless the defendants’ express prior written consent has been provided, and he will cease the collection of any rental revenue from the Property.

In Watson v. Strong, 2014 BCSC 754 (CanLII), the applications related to the estate of Rosamund Watson. The estate's only asset was a residential property. The estate had significant debts and no means to repay them. The petitioner requested that the estate be sold to satisfy these debts but the respondents were living on the property. The respondent claimed a 25% interest in the estate. The petitioner sought an order for vacant possession so that it could proceed with the sale. The Court granted the petitioner's request as the principal impediment to the sale of the property was the presence of the respondents. The Court found that the respondent could not use a disputed claim to a portion of the Estate to prevent the Estate’s principal asset from being sold and ordered vacant possession of the property:

[37] The inherent difficulty with Gordon Watson’s position is that it presumes an entitlement to an interest in the Estate by way of a constructive trust, the trustee being his son, Aaron Watson.

[38] There is no evidence before me on these applications from Aaron Watson. There was only the submission by Gordon Watson to the effect that his son needs to “grow up”.

[39] In any event, as I indicated to the parties during submissions, it is simply not possible for me, on the evidentiary record which exists on these applications, to make a finding as to whether Gordon Watson is or is not a beneficiary of the Estate. In fact, in one of his submissions, Gordon Watson acknowledged that he may ultimately not receive any funds at all.

[40] That being the case, he cannot, in my view, continue to occupy the Property, since in doing so he is preventing the petitioner from performing his duties and obligations as executor of the Estate. Even if Gordon Watson were entirely successful in his claim to a 25% interest in the Estate, he would ultimately receive, at most, approximately $250,000, less his share of the Estate’s outstanding debts and expenses.

[41] However, for that to happen, the Property has to be sold. Gordon Watson cannot use a disputed claim to a portion of the Estate to prevent the Estate’s principal asset from being sold.

[42] Vacant possession of the Property is to be provided on or before Thursday, May 22, 2014, that is three weeks from now.

In Jesson v Wilkinson, 2018 BCSC 1921 (CanLII), the applications concerned the sale of sale of property located at 4985 Cultus Lake Road in Chilliwack, British Columbia (the “Property”) from the defendant Mr. Wilkinson to the defendant Mr. Marks on November 14, 2013. The Property was purchased by Mr. Wilkinson in 2005, allegedly on the plaintiffs’ behalf. The plaintiffs have had possession of the Property since 2006 and have used it as a second home and vacation property since then. The plaintiffs claimed that the Property was held in trust by Mr. Wilkinson for their benefit. Mr. Marks sought to vacate the ex parte order that granting the plaintiffs interim possession of the Property or vary it to give interim possession to Mr. Marks. Marzari J. considered the three-part test for interim injunction, noting that the plaintiffs would not suffer irreparable home and that they may continue to maintain the CPL on the property pending trial. Marzari J. ordered the plaintiffs to remove themselves and their possessions from the Property within 45 days of the order:

[60] The test for an interlocutory injunction is well established. In RJR-MacDonald. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, the Supreme Court of Canada provided that before an interlocutory injunction can be made, the applicant must demonstrate three things:

a) that there is a serious question to be tried in the main proceeding;

b) that the applicant will suffer irreparable harm if the interim injunction is not granted; and

c) the balance of inconvenience to the parties favours the applicant over the respondent.

[61] For the reasons stated above, I find that the plaintiffs have established a serious question to be tried with respect to the merits of their claim.

[62] However, there is no compelling evidence that the plaintiffs will suffer irreparable harm if an interlocutory injunction granting them possession is not ordered. There is no real risk that Mr. Marks would allow the Property, which he owns, to suffer waste or damage. Rather, the evidence is that Mr. Marks has kept the insurance on the Property current and would live in the Property rather than leave it vacant.

[63] Furthermore, the Property is not the plaintiffs’ principal residence but only their holiday home. Their evidence is that they enjoy being there with their family and grandchildren for parts of the summer and often at Christmases. However, not being able to use this holiday home for a few seasons pending trial does not constitute irreparable harm. I accept that there will be a sense of loss in not being able to use the Property for a time pending the outcome of the trial, but this is not so severe on the evidence as to constitute irreparable harm. Nor is the fact that special possessions and furniture items may have to be put into storage.

[64] Furthermore, the plaintiffs have registered and may continue to maintain the CPL on the Property securing their alleged interest in the home pending trial.

[65] Finally, the balance of convenience favours allowing Mr. Marks to take possession of the Property. The evidence establishes that Mr. Marks sold his principal residence in order to purchase the Property with the intention of living in it as his principal residence in 2013. Over the last almost five years since his purchase and the plaintiffs’ continued possession of the Property, Mr. Marks has had to arrange various rental accommodations for himself and his family.

[66] I would therefore order that the Court’s order of December 13, 2013, be varied to remove paragraphs 39 through 42. The plaintiffs shall not have an order for possession of the Property going forward from this date.

[67] The plaintiffs have asked that if the order for possession was removed, that they be given a reasonable opportunity to remove their possessions and ready the home on the Property for a new occupant. They requested 45 days to do this. Mr. Marks suggested that 30 days should be sufficient. I consider 45 days to be reasonable in all the circumstances.

[68] Therefore, the December 13, 2013 order shall be varied to require the plaintiffs to remove themselves and their possessions from the Property within 45 days of this order, and to give possession of the Property over to Mr. Marks at that time.

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