Vue History p01 court of appeals

In the Court of Appeal of Alberta - Edmonton Special Sittings heard Oct. 20, 1995
IN THE COURT OF APPEAL OF ALBERTA
EDMONTON SPECIAL SITTINGS
HEARD OCTOBER 20, 1995
____________________________________

Chambers Judge
MacCallum J.

Court
FRASER C.J.A.
COTE J.A.
RUSSELL,J.A.

VUE WEEKLY, also
known as VUE
MAGAZINE, RONALD
GEORGE GARTH, 662812
ALBERTA LTD. and
MAUREEN FLEMING

Appellants/Defendants

Counsel
B.J. Willis

- and -

PEAT MARWICK
THORNE INC., the
Receiver and
Manager of SEE
MAGAZINE INC.

Respondents/

Counsel
B.J. Kickham
C.Plante

PlaintiffsAPPEAL # 9503-0692-AC

_____________________________

MEMORANDUM OF JUDGMENT
_____________________________

THE COURT

On October 20, 1995 a special panel of this Court heard an emergency appeal from an interlocutory injunction granted four days earlier. The injunction barred publication of a weekly newspaper. Thanks to hard work and organization by both counsel, in those four days we got bound volumes containing a transcript of the revised and edited reasons of the chambers judge, all the evidence (neatly tabbed and indexed), and written arguments or factums from both sides. It is amazing how much work good counsel can do in a short time. The arguments which we heard were very thoughtful and helpful, even impressive. We are very indebted to counsel.

We must add a caveat before describing the facts. The evidence now before us suggests that the conduct of the defendants here was discreditable in the early stages. Whether there was any partial justification for it will be decided at trial. We do not mean to whitewash the defendants' early conduct, not to prejudice the trial by any of our remarks below. Indeed counsel for the defendants very fairly conceded that his clients' early "self help measures" had been "ill advised", and he did not try to justify them. He said the early steps were taken without legal advice.
We make our decision without going into all of that, for the issue before us is whether the injunction should continue.

At issue here are some Edmonton weekly tabloid newspapers. They feature the entertainment scent, are distributed free off wire racks, and get all their revenue from advertising. Most Canadian cities have one or more of these newspapers. They come and go quickly, and all copy each other's format closely, Garth, one of the defendants, has run a number of the Edmonton ones.
He ran an Edmonton tabloid called SEE, through his one-man company. Two of the employees lent him some money. These papers are prepared on a small computer with over-the-counter software costing under a thousand dollars. Gazette is an unrelated large and solvent company. It did the actual printing, and is the plaintiff in one of the two actions involved here. By agreement, Gazette also did a good deal of SEE's bookkeeping, money handling, and record keeping. SEE fell behind paying its printing bills to Gazette, which had registered P.P.S.A. security over all of SEE's assets, including its goodwill.

There is evidence (not disputed yet) that Gazette formed a plan to use a receiver to take over SEE and eliminate most of the employees and other creditors despite earlier promises to give equity to the lender-employees. But no trial has occurred yet, and there may well be another side to that story. In any event, Gazette and Garth agreed on a brief moratorium, and the debt was not brought into line within that time. Gazette then gave notice that it would sue and seek a receiver. It did so, and Garth did not oppose the appointment. The court appointed a receiver of the property of the company which published SEE. It was a very broad order, giving the receiver the powers which an experienced insolvency lawyer would ask for.

The receiver arrived at SEE's premises to find only bare walls. The birds had flown. Some six or seven days before, Garth had met with the staff at a private residence, and they agreed to start a new competing newspaper under a new company. Indeed, they actually did so, and distributed it on the streets the day before the receivership order was made. The new newspaper was called VUE.

We stress that the steps taken to publish the first issue of VUE cannot be a breach of the receivership order, for the order did not yet exist then. Maybe those steps breached fiduciary duty, but we understand that that has not be been pleaded.

The regular issue of SEE scheduled for that week did not appear. However, within five days of his appointment, the receiver succeeded in publishing the next issue of SEE on time, and has continued to do so weekly ever since. Doubtless the receiver and Gazette worked closely together, using the experience and records of SEE which Gazette held all along.

During argument of the appeal, by agreement counsel handed to us numerous copies of both publications, and we examined them. We cannot say that the issues of SEE published by the receiver are feeble, unattractive, jejune, or wanting in big paying advertisements. SEE continues to publish regularly, and there is no evidence to suggest that it is unprofitable, or not viable, or that two such newspapers cannot exist in Edmonton. Indeed we notice that some advertisers now advertise in both newspapers. The evidence is that some advertisers went over from SEE to VUE, but that a major national agency did not.

How was the first issue of VUE published the day before the receivership order? By using some physical assets which the old company either owned or leased. That was also true of the next issue of VUE, published about six days after the receivership order. However, later issues of VUE used little or no tangible assets of SEE, which had been virtually all returned to SEE by then. Of course we only recite the evidence before us; other evidence may emerge at trial.

The parties clash on whether VUE used other intangible assets or goodwill belonging to SEE or its receiver to publish any edition of VUE after the receiver was appointed. The trial judge will decide that finally. It seems quite likely that the plaintiffs may recover damages at trial, and nothing in the Memorandum is intended to discourage that. For purposes of this interlocutory injunction, we must decide on the evidence before us now. That alleged use of goodwill is relevant to every test for an interlocutory injunction: arguable case, irreparable harm, and balance of inconvenience. It appears to us on the evidence now before us that VUE did use the plaintiffs' goodwill in the early stages, but has by now clearly ceased doing so. (The trial judge will be free to find otherwise on fuller evidence.)

We so conclude for this reason. It is arguable that the goodwill encompassed all the arrangements and advantages of business which SEE had in place when the receiver was appointed. We pick that day, for it was the receiver which moved for and got the injunction now appealed, not the creditor Gazette. It is arguable that lack of firm contracts with staff, advertisers, readers, or contributors, does not remove them from the scope of goodwill. Only one advertiser had an ongoing contract, and it stayed with SEE and the receiver. Nevertheless, it seems to us that lack of such contracts severely limits the extent, length, and value of the goodwill, when those people are few in number and easily found. It is obvious from the evidence that the defendants could have started up VUE without using any of the underhanded methods which they used. And they could have done so within two weeks, thus "missing" only one issue. There were no non-competition agreements. The advertisers and contributors were well known; any reader could pick up a free copy of SEE and see who they were. The evidence shows there were no secret contacts or lists, and the advertisers were easy to locate. The chambers judge said if clarity were desired, he would bar the defendants from soliciting former advertisers for six months. We see no evidence whatever to justify that. Obviously it was easy to find another printer, to buy or lease a computer, and to buy ordinary publishing software.

The same is true of the employees. Furthermore, the evidence before us makes it very doubtful that the receiver had any interest in keeping most of the staff or contributory of SEE or VUE.
We do not say that acts like the defendants' acts are not theft of goodwill. We say that the extent and duration of that goodwill depends on the precise facts.

At first no one sought to enjoin publication of VUE or any other newspaper. At first, the plaintiffs' only motion was to prevent passing off. A narrow earlier consent injunction dealt successfully with that. All the steps called for in it were accomplished (leaving aside some paperboys' temporary errors in delivery). There is no longer any suggestion of ongoing passing off.
The injunction now under appeal was first sought by notice of motion filed October 2 and returnable October 3. That was 12 days after the first issue of VUE, and five days after the second. It was ultimately heard October 16. The evidence now before us indicates that by October 2, the tangible assets of SEE were no longer used or possessed by the defendants, with possible trivial exceptions. And as noted, by then the defendants would have been able to publish VUE even if they had acted properly and done nothing illegal. That is even more true by October 16 when the injunction was given. and still more so by October 20 when we heard the appeal.

Therefore, it seems to us that by the time that we heard the appeal (and probably earlier), the only evidence before the court must be characterized this way:

1. Any tortious activity (passing off) had ceased, and was not pled, and the consent order prohibiting such activity was never violated (with one possible minor exception since ended.).

2. Any other invasion of property had ceased.

3. Any infringement of the order appointing the receiver had ceased.

4. Any loss or harm still accruing to the creditor or to the receiver was probably now flowing from open legal competition.

5. The advertisers in each newspaper were openly displayed permanently in each issue for all the world to see, so the revenues derived from each could be readily calculated.

6. Both parties keep records, and the creditor and the receiver have and always had all the financial records of SEE (with the possible exception of a few days just before the receiver was appointed).

7. The injunction prohibits the publication of VUE, or a newspaper similar in content, and that would shut down VUE. A significant gap in publication by such a newspaper will kill it, as all the witnesses agree.

8. Denying the injunction will not kill SEE. Indeed, SEE keeps running a large ad saying it is here to stay, whatever happens.

9. All the tangible property taken from SEE has been returned to its receiver.

It is elementary law that an injunction is not intended to punish. A perpetual injunction after trial may be designed to undo harm. This is not such an injunction, and there is here no present harm to undo, save for paying money. An injunction cannot be used to do what money will properly do. An injunction, whether interlocutory or perpetual after trial, may be used to prevent future harm from illegal acts. But no future harm from illegal acts is here threatened.

It seems to us that the only motive for getting this injunction, the only good that it would do anyone, is to kill off the defendants' business and so remove competition. It was expressed to us as "leveling the playing field", but that appears to us to mean having the court do a new wrong now in return for an old wrong done by the defendants. Two wrongs do not make a right. No authority was cited for such novel use of injunctions, and we know of none. An injunction is to be used to prevent irreparable harm, not to create it. Ending a going business is always presumed to work irreparable harm.

Therefore, we answer the three usual tests for interlocutory injunctions as follows:

(a) There may be arguable causes of action, but they are no longer germane to what is going on now.

(b) No irreparable harm is now being caused or threatened by any illegal act.

(c) The injunction would kill the defendant but not help the receiver or the creditor (save by ending legitimate competition). Therefore, the balance of inconvenience is completely one-sided, against any injunction.

In addition, the injunction finally given was incapable of logical expression of its limits. If limited to the wrongs done, it had no scope, or was impossible to understand and comply with. If not so limited, it plainly would go beyond what the law allows. The continuing inability to define it on October 16 and later is symptomatic.

Therefore, we do not need to consider arguments about freedom of the press, freedom to earn a livelihood, or the public interest.

We wish to add one comment about the undertaking as to damages. Only the receiver sought the injunction, not the creditor Gazette. The receiver induced the chambers judge to limit its undertaking to the assets under administration, on the grounds that the receiver was the court's officer. Yet the evidence showed that (apart from the cause of action sued on), the assets were of dubious value. Even more curious is that the whole litigation is for the benefit of a large solvent creditor, who uses the same lawyers as does the receiver. The receiver was appointed because of Gazette's P.P.S.A. security, not because of any dispute over title or possession, and not for a number of creditors. A meaningful undertaking as to damages is a vital part of the balance of inconvenience; without it, an interlocutory injunction may well work irreparable harm, not prevent it. If the receiver could not be expected to give a meaningful undertaking, then the creditor or someone else should have volunteered one. If no one is willing to do so, then it is doubtful that an interlocutory injunction should have been given. A lot of urgent litigation boils down to the unwillingness of either side to take any risk or be answerable for what it proposes, this suit has elements of that.

At the end of oral argument we considered the matter. Then we allowed the appeal and dissolved the interlocutory injunction at once, with reasons to follow. Those reasons are found above.

Along with the motion for an interlocutory injunction, the chambers judge heard one for contempt, and found it proved, but gave no other relief (beyond the injunction). It seems to us that the evidence of contempt is conflicting and uncertain. We repeat that much of the underhanded work of the defendants seems to have been done before the court made any orders at all. It may well be that there were some breaches of the receivership order, but how many, when, to what extend, and precisely by whom, are most unclear. The chambers judge thought that publishing VUE on October 5 and 12 was contempt, but did not really say why. We think that proposition is unclear, even doubtful. Nor do we understand contravening "the spirit of the" receivership order. As it seems to us highly unlikely that there is now any large ongoing contempt, there is no urgency in deciding that. And we lack the material to do so. One cannot weigh conflicting affidavits, and whether one can rely on hearsay is doubtful. Counsel suggested that clarification of the original receivership order would be helpful, but we cannot produce a declaratory judgment in four days, still less on this record. Therefore, from the bench we also upset the finding of contempt, and directed that it be tried before the trial judge. It may well be best to do so on the basis of all the trial evidence, but the trial judge can set the procedure which seems to him most just and convenient.

After more argument, we gave the appellant defendants one set of costs of this appeal in any event on column 5, plus disbursements. They had almost total success on the issues appealed, and the trial cannot affect the main one, the interlocutory injunction. The appellants' counsel suggested that costs in chambers should remain in the cause, and the respondents' counsel did not object.

JUDGMENT DATED at EDMONTON, ALBERTA
this 1st day of November, A.D. 1995

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