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In a recent Ontario case, a court refused to allow a retailer to remain open pending a full hearing, after it was forced to shut down by the government due to the COVID-19 pandemic.

Retailer Shut Down Due to COVID-19

The applicant is one of Canada’s largest home appliance retailers, which operates 29 showroom/retail stores in six provinces. It also sells its appliance products online.

On November 27, 2020, a Peel bylaw officer ordered the retailer to close its Mississauga showroom under the COVID-19 regulatory regime in place.

On November 28, 2020, a Brampton bylaw officer ordered the retailer to close its Brampton showroom for the same reason.

On December 1, 2020, a Toronto bylaw officer ordered the retailer to close its Etobicoke showroom and advised that its North York showroom was under investigation.

In response, the retailer applied to the court on December 2, 2020 to claim an injunction requiring the governments to allow it to open. It claimed that it operated “hardware stores” that were exempt from mandatory closure under the express terms of the applicable regulation. The retailer argued that under the federal government’s definition of essential services retail workers engaged in the chain of commerce of home appliances were classified as providing essential services.

Additionally, the retailer delivered evidence concerning its efforts to ensure that customers and employees in its showrooms were well protected from the COVID-19 virus. It had installed physical separations, required masks at all times, had hand sanitizer available, and practiced social distancing.

As part of its claim, it explained that December was retail’s high season and it projected over $27 million of revenue in Ontario over the course of the month but for the government measures. 

Because the hearing was scheduled for one week after the original application was filed to allow the government time to formulate its response, the court had to consider whether to grant the retailer interim relief during that time. The retailer had asked the court for an order allowing it to open its stores between the time of the application and the subsequent hearing. It submitted that it would suffer loss of revenue in the order of $500,000 if its stores were not open prior to the hearing.

Court Refuses to Grant Interim Relief

The court set out the three-part test used for interim relief and interlocutory relief as:

  • Is there a serious issue to be tried?
  • Will the retailer suffer “irreparable harm” if it is not allowed to open?
  • What is the “balance of convenience”?

First, the court found that there was a serious issue to be tried, because the issue of interpretation of provincial regulations and municipal bylaws was being raised. The court stated:

“The issue for interpretation is whether a retailer of appliances is a “hardware store” within the meaning of the current regulations. That is not a frivolous issue.”

Second, the court found that, although the retailer’s alleged losses were monetary, in the absence of a mechanism for it to seek compensation, its losses could well amount to irreparable harm, stating:

“The [retailer] notes that if it suffers losses as a result of being wrongly shut down by the government, its losses will not be easily recoverable. No government counsel before me today pointed to a ready mechanism for a business to obtain compensation for being wrongfully shut down under the Covid-19 regime. One may exist in the legislation being relied upon by the government or at common law. But I am not aware of any at this moment.”

Finally, the court assessed the “balance of convenience”, which compares the potential harm to the applicant if no injunction is granted with the potential harm to the respondents if an injunction is granted. In essence, the court had to determine which side would suffer the worse harm and where the equities lay as between the parties. The court observed:

“The [retailer] argues that without an injunction it will suffer very significant and potentially non-compensable losses. However, if it is allowed to open, the risk of Covid-19 transmission to employees and customers who attend its showrooms between now and Tuesday will be minimal. [The retailer] submits that the gulf between the near certainty of significant economic loss and the very low risk of transmission of the virus, tips the balance of convenience in the [its] favour.

However, this case involves the public interest and not just the private concerns of the [retailer] and its customers in its showrooms. The governments are seeking to enforce a regulatory regime to protect public health. The public interest is a proper consideration when a party seeks exemption from existing legislation.” 

Ultimately, the court found that, despite the retailer’s potential losses, the public interest and the risks posed by the COVID virus were paramount. 

As a result, the court declined to grant interim relief to the retailer. 

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Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

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