Date: 19980706 Docket: C982834 Registry: Vancouver IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: TLC MULTIMEDIA INC. PLAINTIFF AND: CORE CURRICULUM TECHNOLOGIES INC. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE COHEN Counsel for the Plaintiff: B.L. Fisher J.C. McArthur Counsel for the Defendant: A.P. Seckel Date and Place of Hearing: June 12 & 15, 1998 Vancouver, B.C. [1] The plaintiff, TLC Multi-Media Inc. ("TLC") develops, licenses and publishes educational software. TLC's parent company is the Learning Company Inc. (the "Learning Company"), whose head office is in Cambridge, Massachusetts. [2] The defendant, Core Curriculum Technologies Inc. ("CCT") is a distributor and reseller of educational software in Canada. They are based in Burnaby, B.C. CCT was TLC's distributor of its software in Canada under a Distribution Agreement. The relationship between the parties broke down for a number of reasons. TLC terminated the Distribution Agreement in February 1998. Despite the termination, CCT has continued to hold itself out as an authorized distributor or reseller of TLC's products. CCT owes TLC a substantial amount of money for unpaid invoices. [3] The dispute between the parties is the subject of an arbitration in Boston. TLC issued an Arbitration Demand claiming damages against CCT and a declaration that the Distribution Agreement has been terminated as of March 26, 1998. CCT has not yet filed its defence in the arbitration. [4] TLC seeks in this application, an interlocutory injunction restraining CCT, its employees and agents from: (a) holding itself out as an authorized distributor or reseller of TLC's software products; (b) making false representations that CCT is able to deliver TLC software and that delays in delivery are being caused by TLC, through administrative or organizational problems or otherwise. [5] TLC seeks an interlocutory injunction pending final determination by an Arbitration Tribunal appointed under the rules of the American Arbitration Association, or by consent of the parties. TLC brings this application because, it alleges, CCT's holding itself out as authorized to sell its products is causing harm to TLC. [6] CCT's position is that the termination of the Distribution Agreement was not justified. It is seeking damages resulting from TLC's alleged unfair and deceptive acts and practices in the conduct of trade and commerce in violation of the general laws of Massachusetts. Defence counsel argued that if the court will exercise its jurisdiction, it ought to dismiss the application because inter alia, TLC does not have an existing right that has been breached; damages are an adequate remedy for any breach that TLC might prove in the arbitration; and that the balance of convenience favours CCT. [7] By way of background, TLC has a School Division located in Minneapolis, Minnesota. Until January 1998, TLC products for the Canadian market were sold through Canadian distributors and resellers. In 1996 the Learning Company purchased MECC, another software developer. MECC's exclusive distributor in Canada was CCT. TLC continued to do business with CCT. In January 1997 TLC and CCT signed the Distribution Agreement. [8] In the Distribution Agreement, TLC granted to CCT non- exclusive rights to distribute TLC products and the exclusive right to market and distribute building licenses and district licenses. A building license is a site license version of the product that is sold to individual schools and a district license is a site license version of the product that is sold to school districts. [9] In June 1997 TLC considered other options for its method of marketing its School Division products in Canada. It was not satisfied that an exclusive distributorship was the most effective way of doing business. TLC was concerned that its potential sales in Canada were low, particularly when compared to its sales in the United States. [10] TLC decided that it would operate a Canadian School Division in Mississauga, Ontario. It then considered expanding its marketing to include multiple resellers. These matters were discussed with Mr. Gary Gumley, CCT's President, in June or July 1997. [11] A new director for Canadian School Sales was hired in September 1997. Mr. Robert Martellacci reviewed the current sales activities of CCT and examined availability and potential of Canadian resellers. He concluded that in the previous year there had been lesser exposure to TLC products because of the exclusive arrangement with CCT. Resellers were reluctant to purchase TLC products from CCT because they were competitors. [12] TLC says that there were problems with CCT's performance under the Distribution Agreement, namely, that CCT fell far short of the agreed sales quota; that CCT did not make its best efforts to promote TLC products and develop a market demand in Canada; that CCT did not provide an Annual Sales and Marketing Plan for 1998; that CCT did not provide various quarterly reports that were necessary for providing current information about marketing activities and things like sales, training and servicing problems; that CCT did not carry out its obligations to conduct advertising and promotional activities necessary to promote TLC products. [13] In addition to these problems, TLC claims that CCT was in substantial arrears for past due invoices. TLC is awaiting payment for invoices dating back to July 1997. There is a total amount outstanding of U.S. $176,218.35. CCT has requested proof of delivery for invoices totalling $36,459.40. However, the invoices that are not in dispute total U.S. $139,758.95. With other credits requested by CCT, some of which have been agreed to by TLC, approximately U.S. $105,000 that TLC claims have not been disputed by CCT. [14] In September 1997, the Learning Company started to negotiate with CCT to purchase it because it was interested in expanding its markets in Canada. These negotiations were separate and apart from the activities of CCT and TLC representatives in Canada. [15] In November 1997 TLC decided not to renew the Distribution Agreement in its then current form with CCT. TLC wanted to continue to work with CCT, but not as an exclusive distributor. TLC wanted CCT to continue to sell TLC products as a non- exclusive reseller. It proposed an amendment to the Distribution Agreement that provided that all exclusive rights were to be converted to non-exclusive rights. On November 7, 1997, CCT agreed to the proposed amendment and the Distribution Agreement was renewed for another year on that basis, to January 10, 1999. [16] After the Distribution Agreement was amended, CCT was concerned about how TLC was going to forward sales leads. Until February 1998, all TLC products were advertised in CCT catalogues that listed CCT's 800 telephone number as the contact for TLC products in Canada. Once TLC published its own catalogue, with its own 800 telephone number, CCT wanted assurances as to how TLC would forward sales leads. [17] The parties had discussions about this matter during January 1998. TLC's position was that it could not forward all sales leads to CCT, as it no longer had exclusive rights, and TLC had obligations to all of its resellers in Canada. TLC was prepared to forward sales leads to CCT but it could not provide assurances that CCT would receive all of them, TLC claims that this was not the intent of a new business relationship between TLC and CCT. [18] In February 1998 the relationship between the parties deteriorated further. On February 6, 1998 CCT wrote to TLC threatening to take legal action as a result of its interpretation of the sales lead provision in the Distribution Agreement. It also proposed that the parties mutually agree to terminate the Distribution Agreement and that TLC pay to CCT U.S. $200,000. [19] TLC felt that CCT was making unreasonable demands. On February 11, 1998 TLC gave CCT 180 days written Notice of Termination under section 14.1 of the Amended Distribution Agreement. On February 23 and 25, 1998, TLC gave CCT 30 days written notice of termination for cause under section 14.2(b) of the Distribution Agreement, which permits either party to terminate if the other commits a material breach of any of the terms of the agreement and does not remedy such breach within 30 days after receipt of notice. As well, on February 24, CCT was put on credit hold due to the amount of outstanding invoices. TLC would no longer ship orders to CCT until a satisfactory arrangement was made to settle the amounts. No satisfactory arrangement has been made to date. [20] With respect to the arbitration, the Distribution Agreement contains an arbitration clause that provides, in part, as follows: 15.8 Any dispute, controversy, or claim arising out of, in connection with, or in relation to this Agreement or the breach thereof shall be settled by arbitration in Boston, Massachusetts, pursuant to the rules then obtaining of the American Arbitration Association... [21] TLC commenced arbitration proceedings in Boston on April 22, 1998. TLC's Boston counsel filed an Arbitration Demand with the American Arbitration Association (the "AAA"), claiming, among other relief, damages in the amount of U.S. $176,218 based on the defendant's failure to pay for finished goods shipped by TLC and received by CCT. TLC filed a first Amended Arbitration Demand on May 8, 1998 claiming in addition to the relief claimed in the original demand, a declaration that the Distribution Agreement was terminated. CCT was required to respond to the Demand on June 29, 1998. [22] Under the AAA International Arbitration Rules, a party may seek interim relief in connection with its arbitration demand. However, under AAA practice, such relief is not granted prior to the appointment of a tribunal. As of June 3, 1998, the AAA had not yet circulated a list of potential arbitrators. [23] TLC claims that after March 26, 1998, CCT has continued to hold itself out to the public as an authorized TLC distributor or reseller despite the Notices of Termination. TLC also claims that CCT has made representations that delays in delivery of TLC products were being caused by TLC administrative or organizational problems. [24] TLC contends that CCT is holding itself out as an authorized distributor or reseller in circumstances where it cannot deliver certain TLC products at all. Some products, such as building licenses and a product known as "Curriculum Value Pack" are only available directly from TLC. TLC will not fill orders from CCT for two reasons: (1) because CCT has been on credit hold since February 24, 1998, and (2) because of the termination of the Distribution Agreement. [25] TLC also claims that CCT has made false representations about delays for delivery of TLC's product. TLC submits that CCT has told potential customers that delivery would be delayed three to four weeks as TLC was on back-order because of administrative or organizational problems. TLC insists that these representations are false. It claims that there are no delivery delays where a product is sold through authorized resellers. TLC says it is able to deliver its product within one week from the date an order is made with products docked in the Mississauga warehouse. [26] TLC's Boston counsel wrote CCT and its counsel on April 22, 1998 advising that it had become aware that CCT had misrepresented to the Canadian Education market that it has a right to distribute TLC software. Counsel demanded that CCT cease any further efforts to distribute TLC's software and discontinue its use of TLC's trade marks. From April 27 through to May 1, 1998 TLC's counsel received verbal assurances from CCT's counsel that CCT was not making any of the misrepresentations alleged in the April 22, 1998 letter, and that CCT would not make such misrepresentations. [27] On May 14 and May 29, 1998 TLC learned that CCT was still holding itself out as an authorized distributor or reseller of TLC software. As of May 29, 1998 CCT was still taking orders and filling them through a United States distributor. [28] TLC claims that the months of June and July are two of the busiest sales months for educational software. [29] The issues on this application are as follows: (i) the jurisdiction of the court to grant interim relief; (ii) the basis for granting an interim injunction. [30] The relief sought by TLC is for an "interim measure of protection" within the meaning of section 9 of the International Commercial Arbitration Act (the "Act") R.S.B.C. 1996, c. 233. Section 9 provides: It is not incompatible with an arbitration agreement for a party to request from a court, before or during arbitral proceedings, an interim measure of protection and for a court to grant that measure. [31] Counsel for CCT does not dispute this court's jurisdiction to grant interim relief but takes the position that the resolution of the dispute between the parties, and the determination of the relevant merits of the parties' positions, requires an understanding of the facts, the Distribution Agreement and (most significantly) the law of Massachusetts in an area of law where that jurisdiction's law is different than the law of British Columbia. Counsel argued that an arbitrator selected by the parties in Massachusetts will be more familiar with the laws of that jurisdiction. He also said that the arbitrator would be better able to determine the relative merits of the case and the balance of convenience between the parties in light of the applicable law. He claimed it was precisely for reasons such as this that the Distribution Agreement between the parties specified that the applicable law is the law of Massachusetts and that disputes are to be in the exclusive jurisdiction of an arbitrator. He submitted that this court should defer this claim for interim relief to the same tribunal that will decide the case. [32] This court has interpreted section 9 in Trade Fortune Inc. v. Amalgamated Mill Supplies (1994), 113 D.L.R. (4th) 116. In that case, Bouck J. determined that a garnishing order before judgment was an interim measure of protection within the meaning of section 9 of the Act. In his reasons he examined several authorities, including Holtzmann and Neuhaus, A Guide to the UNCITRAL Model Law On International Commercial Arbitration: Legislative History and Commentary (1989). TLC cited the following part of that commentary which, it submits, is relevant to this case: Article 9 codifies the dual principles that, first, a party does not waive its right to go to arbitration by requesting (and obtaining) interim measures of protection from a national Court, and second, the national Court is not prevented from granting such measures by the existence of an arbitration agreement ... The Working Group agreed that interim measures by a national Court were compatible with arbitration. ... Article 9 is not limited to any particular kind of interim measures. Thus it applies to measures to conserve the subject matter of the dispute; measures to protect trade secrets and proprietary information; measures to preserve evidence ... Article 9 ... it lays down the principle, disputed in some jurisdictions, that resort to a court and subsequent court action with regard to interim measures of protection are compatible with an arbitration agreement. It, thus, makes it clear that the "negative" effect of an arbitration agreement, which is to exclude court jurisdiction, does not operate with regard to such interim measures. The main reason is that the availability of such measures is not contrary to the intentions of parties agreeing to submit a dispute to arbitration and that the measures themselves are conducive to making the arbitration efficient and to securing its expected results. [33] In Channel Tunnel Group v. Balfour Beatty Construction Ltd., [1993] 1 All E.R. 664 it was held that the court had the power to grant an interlocutory injunction under s. 37 of the Supreme Court Act 1981 in support of a cause of action which the parties had agreed should be the subject of a foreign arbitration. It did not matter that the proceedings in England had been stayed under s. 1 of the 1975 Act so that the agreed method of adjudication could take place, as the cause of action remained potentially justiciable before the English Court despite the stay. [34] The decision in Channel Tunnel was applied by the Supreme Court of Canada in BMWE v. Canadian Pacific Ltd. (1996), 21 B.C.L.R. (3d) 201 where it was held that courts have jurisdiction to grant an injunction where there is a justiciable right, regardless of the forum in which the final relief will ultimately be granted. [35] I am satisfied that this court has jurisdiction to grant interim relief notwithstanding that the dispute has been submitted to arbitration in Boston. The issue then becomes whether this court should grant the relief sought by TLC in this application. [36] The Supreme Court of Canada in R.J.R.-MacDonald Inc. v. Attorney General of Canada (1994), 111 D.L.R. (4th) 385 adopted a three-stage test for courts to apply when considering an application for an interlocutory injunction as follows: (a) there is a serious question to be tried, after a preliminary assessment of the merits, (b) the applicant would suffer irreparable harm if the application were refused, and (c) the balance of convenience favours the granting of an interlocutory injunction as the applicant would suffer greater harm from the refusal of the injunction pending a decision on the merits. [37] In my opinion, the evidence establishes that there is a serious and fair question to be tried. However, counsel are on common ground that the main issue before me is whether the balance of convenience favours the granting of an interlocutory injunction. I turn then to a consideration of this prong of the test. In Canadian Broadcasting Corp. v. CKPG Television Ltd. (1992), 64 B.C.L.R. (2d) 96 (C.A.), at p. 102, Lambert J.A. said: I would also adopt and follow the approach of Madam Justice McLachlin to the second prong of the test, namely, the assessment of balance of convenience. I would summarize that approach in this way: 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. It should be noted that the strength of the applicant's case is a separate factor, which should be considered under the second prong of the test, quite apart from the question under the first prong of the test of whether the applicant has established a fair question to be tried. But the assessment of the relative strength of the parties' cases must recognize the degree to which those cases have not yet been revealed because of the nature of the evidence and the way it has been presented on the injunction application, which may be markedly different from the way it would be presented at trial. [38] Counsel for TLC submitted that TLC will suffer irreparable harm if an interlocutory injunction is not granted. She argued that CCT is representing itself as an authorized distributor or reseller of TLC's products in circumstances where it cannot deliver certain TLC products to the customer. She also submitted that the conduct of CCT is causing confusion in the Canadian marketplace which will clearly harm the reputation and goodwill of TLC and will likely cause TLC to lose current and potential customers. She claimed that CCT's misrepresentations have made it more difficult for TLC's authorized sellers to market TLC's products and penetrate the school market in Canada. She also submitted that loss of customers and sales to TLC will be impossible to calculate and compensate in damages. [39] On the point of inability to calculate damages, TLC argued that it is unlikely that it will ever be possible to fully determine the extent of any loss directly attributable to the wrongful conduct of CCT holding itself out as an authorized distributor or reseller of TLC's products. She said that it would not be difficult to determine any losses suffered by CCT if it eventually succeeds in the arbitration. She also claimed that CCT's longstanding and substantial indebtedness to TLC calls into question CCT's ability to pay any damages for any losses suffered by TLC as a result of the conduct of CCT in issue in this application. [40] In his affidavit sworn June 3, 1998, Mr. Robert Martellacci deposed, as follows: 22. Subsequent to March 26, 1998 CCT has continued to hold itself out to the public as an authorized TLC distributor or reseller despite the notices of termination. CCT has also made representations that delays in delivery of TLC products were being caused by TLC administrative or organizational problems. In particular: (a) On April 8, 1998 Dave Parkes, of Educational Resources, telephoned me. Educational Resources is a current TLC reseller in Ontario. He asked me to call a particular customer to advise them that CCT was no longer authorized and could not provide them with a TLC Curriculum Value Pack. TLC resellers were having difficulty approaching customers because CCT was continuing to hold itself out as an authorized distributor or reseller, able to supply TLC products. TLC Curriculum Value Packs are only available directly from TLC. CCT cannot supply this product to a customer, as TLC would not fill any CCT orders after CCT was put on credit hold on February 24, 1998 and also after the Distribution Agreement was terminated as of March 26, 1998. (b) On April 27, 1998 Wayne Clark of Image Media, a current TLC reseller in British Columbia, informed me that CCT represented itself as an authorized TLC distributor or reseller at an Education Conference in Vancouver on April 24, 1998. CCT was promoting TLC building site licenses in its advertising material, copies of which are attached as Exhibit "A" to the Affidavit of Wayne Clark. TLC building site licenses are only available directly from TLC. CCT cannot supply these products to customers for the same reasons stated in subparagraph (a) above. (c) On April 27, I asked Valerie Rusnov, a teacher in Ontario, to call CCT's Oakville office and make inquiries about pricing and the availability of TLC products. Ms. Rusnov did so and informed me that CCT gave her the following information: i) building site licenses were available on a 2 for 1 promotion, and ii) delivery would be delayed 3 - 4 weeks because TLC is on back order because of administrative or organizational problems. (d) I attended the ECOO'98 Conference in Toronto from April 30 to May 2, 1998. During the conference I had a conversation with Blake Cowan, CCT's Vice-President of Marketing. I was very concerned about the information I had been given that CCT was representing that delays in delivering TLC product were being caused by TLC administrative or organizational problems. I raised the matter with Mr. Cowan. He acknowledged to me that CCT was circulating these statements and he knew that the statements were false. (e) CCT was holding itself out as a TLC distributor at the ECOO'98 Conference. Its representatives were providing to potential customers TLC's list of French school products. CCT is not able to obtain these products and thus cannot supply them to customers. Attached as Exhibit "D" to this Affidavit is a copy of the first page of a list that has been printed from a computer disk I obtained from CCT at the Conference. (f) On May 14, 1998 I was informed by Gary Temoin of CES Canadian Educational Supplies Inc., another of TLC's current resellers in British Columbia, that Gary Gumley was still telling purchasers that CCT is authorized to sell TLC products. (g) On May 29, 1998 I received a telephone call from Avi Oaknine, Ontario Sales Manager for CCT. He asked me if TLC was advising school boards that CCT was "de- authorized". I advised him that TLC was simply advising purchasers who the authorized resellers were. He admitted to me that CCT was still taking orders and filling them through a United States distributor. 23. CCT's representations about delivery delays are false. TLC is able to deliver its product within one week from the date an order is made by an authorized reseller with product stocked in the Mississauga warehouse. 24. These incidents cause TLC great concern, because there is clearly confusion in the Canadian marketplace as a result of CCT's continual misrepresentations that it is authorized to sell TLC products. CCT cannot deliver certain TLC products at all. For CCT to hold itself out as a TLC authorized distributor or reseller when it cannot deliver the TLC product to the customer will clearly harm TLC's reputation and goodwill in Canada. It is likely that TLC will lose current and potential customers. 25. Further, CCT's false representations that delivery delays are caused by TLC has harmed and will continue to harm TLC's reputation and goodwill and it is likely that TLC will lose current and potential customers who are not interested in waiting for delivery of product and who may also turn to other products due to a mistrust of TLC administration. 26. The months of June and July are busy months for sales of school products, as schools purchase software with moneys from both previous and next year's budgets. Our resellers collect a substantial number of orders during these months. I believe that if CCT is not restrained from holding itself out as an authorized distributor or reseller of TLC products and from continuing to make false representations about delivery delays, pending a determination by arbitration, TLC will suffer irreparable harm. Loss of customers and sales during this time of the year will be impossible to calculate and to compensate in damages. [41] Mr. Domenic Sicilia, Vice-President of Softkey Software Products Inc., a wholly owned subsidiary of the Learning Company, and an affiliate of TLC, deposed in his affidavit, sworn June 3, 1998, as follows: 28. I am very concerned that TLC will suffer irreparable harm if CCT is permitted to continue to hold itself out as an authorized distributor or reseller of TLC products, especially since CCT was formerly an exclusive distributor. This makes TLC particularly vulnerable to CCT's misrepresentations about its status. If CCT continues to hold itself out as an authorized TLC distributor or reseller when it is not in a position to deliver TLC products either at all or within a reasonable period of time, TLC's reputation and goodwill will be harmed. False representations as to the cause for delays in delivery may very likely cause customers and potential customers to purchase other software products. 29. June and July are potentially busy months for School Division Sales and if CCT is not restrained from holding itself out as an authorized distributor or reseller and from making false and misleading representations as to delays in delivery, it is very likely that TLC will lose substantial sales during the month and following. CCT's false representations make it more difficult for TLC's current authorized resellers to penetrate the Canadian market. [42] On the allegation of confusion in the Canadian marketplace, TLC relied on two of its authorized distributors in British Columbia who have deposed that competition from CCT has caused confusion in the marketplace during some of the busiest sales months in British Columbia, and is likely to cause a loss of customers for TLC's products. [43] In his affidavit sworn June 2, 1998, Mr. Wayne Clark, an employee of Image Media, an authorized distributor of software published by TLC, deposed as follows: 3. As a newer reseller of TLC products, it has been difficult for Image Media to penetrate the school market because CCT has been known as TLC's sole distributor in Canada. Image Media's ability to market TLC's products is harmed if CCT continues to hold itself out as an authorized distributor. 4. I have been involved in the educational software market in British Columbia for 3 years and as such I am familiar with the market place for educational software. It is my opinion that the reputation of TLC and its affiliates has been and will continue to be irreparably harmed so long as CCT continues to represent to purchasers and potential purchasers that they are authorized to sell product which they cannot deliver and that any delay in delivery is being caused by TLC or its affiliates. 5. The months of June and July are particularly busy sales months in the educational software industry. As the school year comes to a close, school districts in British Columbia spend considerable current year budget funds purchasing educational software and they also look to the next fiscal year for additional products. Historically, there are more site licences sold in June than in any other month. Any confusion in the market place as to the authorized distributors of TLC products is likely to cause TLC to lose sales during this critical time. [44] Mr. Gary Temoin, President of CES Canadian Educational Supplies Inc, an authorized distributor of software published by TLC, deposed, in his affidavit sworn June 2, 1998, as follows: 3. Because CCT was formerly TLC's exclusive distributor for site licenses, schools and school boards in British Columbia have been accustomed to dealing with CCT and many are not aware that CES and other resellers are currently authorized to sell these TLC products. When CCT continues to represent itself as an authorized distributor, these customers are reluctant to deal with anyone else. This makes it very difficult for TLC to penetrate the school market through its currently authorized resellers. 4. I have been involved in the educational software market in British Columbia for 16 years and as such I am familiar with the market place for educational software. It is my opinion that the reputation of TLC and its affiliates has been and will continue to be irreparably harmed so long as CCT continues to represent to purchasers and potential purchasers that CCT is authorized to sell TLC products when in fact it is not. 5. The months of June and July are particularly busy sales months. As the school year comes to a close, it is often the case that school districts in British Columbia spend a considerable amount of funds on educational software as they try to spend the remainder of their 1997/98 budgets and order new product for the coming year from 1998/99 budgets. It is my experience that about 50% of educational software sales are made from May through to the end of July in each year. [45] In response to the allegations of TLC, Mr. Gumley in his affidavit sworn June 9, 1998, deposed, as follows: 37. In the months of April and May of 1998 TLC failed to assist CCT in providing service to customers who had placed orders at times clearly before any purported termination of the relationship between TLC and CCT could have taken place. Specifically, TLC refused to honour back orders that were in place on behalf of customers, even if the back orders were paid by Visa or C.O.D. or any other cash method of payment. These steps taken by TLC were clearly injurious to CCT and its customers. On May 21, 1998, I wrote to Mr. Sicilia on this issue. A copy of my letter is now produced and shown to me and attached as Exhibit "6" to this my affidavit. TLC has not responded to this letter. ... 46. In response to paragraph 29 of Mr. Sicilia's affidavit, while it is true that June and July are perhaps the busiest months for the placement of orders with TLC for their product to be delivered to schools, the fact is that these sales are the result of marketing efforts that had been made throughout the school year. Indeed, teachers are normally not even available during the month of July to make orders. Accordingly, the window of opportunity for continued marketing efforts is only from now until the end of June. However, the impact of this dispute on TLC is negligible, in my view. Educators would not be deterred from acquiring software they want by the fact of a dispute between TLC and CCT. Educators buy software based on the content of the software, something they will have decided on after long processes of review. That is why our relationships are so important to CCT. It is through a long term relationship that we can convince educators on the content of software. For TLC, on the other hand, the product that they manufacture will be sold through one distributor/reseller or another, despite this dispute. This is to be contrasted with the impact of an injunction on CCT. While CCT may only lose two or three weeks of potential direct contact with customers, the effect of an injunction on CCT's customer relations may be uncalcuable. ... 53. In answers to paragraphs 20 and 21 of Mr. Martellacci's affidavit, notwithstanding his claim that CCT has not cured any of the failures or breaches that he describes, CCT did attempt to resolve the question of accounts payable to TLC in several ways. One was to offer to pay the amount that CCT acknowledged was owing into an escrow account and that cash would be paid for future deliveries. This offer was refused. 54. In answer to paragraph 22 of Mr. Martellacci's affidavit, it is CCT's position that it has not been validly terminated under the Distribution Agreement, as amended, and continues to have the right to represent itself as an authorized distributor or reseller of TLC products. It is for that reason that prior to June 5, 1998 when asked if we were authorized to sell TLC products we have represented that CCT is an authorized distributor or reseller. To do otherwise would severely damage our reputation. In the meantime, TLC is advising customers that CCT is not authorized and has gone so far as to attempt to damage CCT's reputation by falsely advising customers that CCT is unable to pay its bills. ... 57. In answer to paragraph 24 of Mr. Martellacci's affidavit, any confusion in the Canadian marketplace is the result of TLC's decision to terminate CCT's distribution rights. Further, in my view, it is CCT that bears the brunt of any confusion. In my experience in selling educational software over the past 15 years in Canada, the decision to purchase a particular software title is not made on a purely price and availability basis. The major factor in deciding on educational software is based on the content of the programme. Once a particular programme is decided upon by an educator, it is unlikely that they would decide to choose an alternate programme on the basis of difficulties or issues that are raised in these proceedings. As a result, in my opinion, TLC still gets the sale, though we may not. Accordingly, it is CCT's reputation and goodwill that is being damaged by TLC's actions. [46] I do not agree that the balance of convenience favours TLC. Firstly, I agree with the defence counsel that there is no real evidence of irreparable harm given by TLC. The most that TLC can argue from the evidence on confusion is that competitors of CCT may be confused (Mr. Clark is a former CCT employee and a current competitor of CCT). As defence counsel correctly pointed out, there is no evidence submitted by TLC of any customer confusion. [47] Secondly, as defence counsel submitted, this is a case involving the sale of software, primarily to educators, and Mr. Gumley has deposed to the decision process for the purchase of such software. Hence, as counsel said, the real issue is whether schools will fill their requirements by seeking to place orders directly from TLC, or through CCT. As he noted, in either case, TLC will, as manufacturer, sell its product. However, the issue for CCT will be what sales did it lose. On this point, I agree with defence counsel that evidence of CCT obtaining orders that TLC will not fill will become important evidence in the calculation of its damages should it succeed in the arbitration. Obviously, CCT has an interest in keeping close track of customers who want to order product, but who cannot have their orders filled. Accordingly, I do not think that TLC should be permitted, by way of injunctive relief, to remove CCT's ability to calculate its damages. And, as defence counsel argued, "The sales will be made. Who would take the primary order is at issue, but these sorts of damages issues are decided by the courts, and by arbitrators, on a routine basis. Accordingly, as damages are an adequate remedy, no injunction should be issued." [48] Thirdly, regarding TLC's allegation that CCT has made false representations about delays for delivery of TLC's product; and that it has told potential customers that delivery would be delayed three to four weeks as TLC was on back order because of administrative or organizational problems, Mr. Gumley deposed that he was not aware of representatives of CCT making representations to customers and potential customers that delays and deliveries of TLC products were being caused by administrative or organizational problems within TLC. He did, however, depose that those customers that were waiting for back ordered products were told that their back orders were not being filled because of TLC's administrative decisions. [49] Mr. Gumley also deposed that while Mr. Cowan had a conversation with Mr. Martellacci, he did not tell him that CCT was representing that delays in delivering TLC product were being caused by TLC administrative or organizational problems. And, as the statement was not made to Mr. Martellacci, that Mr. Cowan denies that he said that he knew the statements were false. [50] TLC's complaint is that it has terminated the Distribution Agreement but that CCT refuses to discontinue holding itself out as an authorized distributor or reseller of the plaintiff's software products. CCT insists that the termination is invalid and that it is entitled to continue holding itself out as an authorized distributor or reseller of TLC's product. As I have already found, TLC has not in my view tendered concrete evidence that it will suffer irreparable harm. On the other hand, CCT claims that if it is enjoined from continuing, it will lose customer relationships and its ability to calculate damages will be impaired. In the circumstances, I agree with defence counsel that the balance of convenience favours CCT; that it will be hurt more by the grant of an injunction than TLC will be hurt by the status quo. Accordingly, I do not think that the status quo should be upset. [51] In the result, the injunction application is denied, with costs to CCT. "Cohen, J."