Executive Summary: Key Legal and Evidentiary Issues

• Whether Lift could elect an “efficient breach” of the long-term Royalty Agreement and confine CSN to damages rather than ongoing performance.
• The adequacy of damages versus specific performance, given CSN’s claimed future lost profits, harm to brand, goodwill, and rights of first refusal over Lift and individual shops.
• The enforceability of negative covenants restricting Lift from operating non-CSN-branded competing collision repair businesses and acquiring shops without CSN’s consent.
• The legal effect and implications of Lift’s anticipatory breach as communicated in its October 2, 2025 letter and proposed transition plan to rebrand to “Lift Collision.”
• How the contractual damage cap and liquidated damages formula interact with CSN’s common-law election to keep the Royalty Agreement alive instead of terminating it.
• The court’s discretion to grant a permanent injunction in a commercial context, balancing equitable considerations against the complexity and uncertainty of long-term damage assessment.

Background and commercial relationship

CSN Collision (Canada) Inc. operates one of Canada’s largest networks of auto collision repair shops, with roughly 265 branded locations across the country. Apart from about a dozen shops owned by its founding shareholders, CSN does not own the network shops; instead, it licenses independent owners to operate under the CSN name, branding, and operating procedures. In exchange, CSN negotiates insurer referral arrangements and volume rebates and receives royalties from licensees. A key structural feature of the network is CSN’s right of first refusal (ROFR) over licensed shops, allowing it to purchase a shop if the owner seeks to sell, thereby preserving network integrity and control. Lift Auto Group Ltd. is in the business of owning collision repair shops. Under a Royalty Agreement and related agreements effective August 1, 2018 (with a term running to 2045), Lift agreed to bring its collision repair shops into the CSN network and to operate them under CSN branding and according to CSN’s procedures. Lift grew from a small footprint to owning 65 CSN shops, acquiring around 40 independent shops since 2020, often benefitting from CSN’s ROFR structure, through which Lift was able to purchase about 20 shops from CSN licensees. In return for the benefits of CSN’s national network and growth potential, Lift agreed to pay higher royalties than independent licensees, and granted CSN a ROFR over Lift’s own business if Lift sought to sell to a competitor. CSN further committed to the relationship by acquiring 5% of Lift’s equity, gaining anti-dilution rights and the ability to nominate a director to Lift’s board.

Contractual framework and key negative covenants

The Royalty Agreement, supplemented by shop-specific license agreements, contains several critical negative covenants governing Lift’s conduct. Article 4.01 provides that Lift will not acquire any collision repair business in any manner without first obtaining CSN’s consent. Article 4.05(a) requires every Lift shop to operate solely under the CSN brand and expressly prohibits any co-branding or local branding in any manner whatsoever. Article 4.10 states that during the term of the agreement and any renewals, Lift shall not own, directly or indirectly, any business that competes in collision repair other than under CSN branding and in strict compliance with the relationship terms. These clauses are central: they ensure that Lift’s shop portfolio remains within the CSN-branded network and that Lift does not develop a parallel competing network or independent brand, preserving CSN’s market presence and leverage with insurers and suppliers. The Royalty Agreement also provides that on a material breach and termination elected by CSN, a liquidated damages formula applies with a contractual damages cap of $40 million. However, CSN has the common-law right, upon a material breach, to elect either to terminate the contract and claim damages under that mechanism, or to keep the agreement alive and sue for damages consistent with that election.

Lift’s strategic shift and anticipatory breach

Over time, Lift’s circumstances and objectives evolved. It took on private equity investment from funds seeking an exit and a monetization event. Those investors viewed CSN’s ROFR over Lift’s business as a serious impediment to achieving a sale, since prospective buyers would be discouraged from investing the time and money to structure a transaction that CSN could effectively appropriate via ROFR. Parallel to this, CSN itself took on an investor and announced that it was now interested in acquiring collision repair shops on its own account. Lift feared that its ability to grow by acquiring departing CSN licensees might be constrained if CSN instead elected to purchase those shops. That concern did not amount to any alleged breach by CSN, and in fact, a 2020 amendment had expressly confirmed CSN’s right to exercise its ROFR over licensees’ shops for its own account, in exchange for other commercial adjustments including changes to Lift’s royalty rate. In this context of diverging strategies, Lift ultimately decided that remaining in the CSN relationship was no longer economically attractive. On October 2, 2025, Lift’s President and CEO sent a letter formally stating that Lift had “no choice but to separate from CSN,” asserting that the business and commercial environment between the parties had “fundamentally changed,” impairing the intended economic benefits, such that it was “no longer economically viable” for Lift to continue in the agreements. Importantly, Lift expressly acknowledged in that letter that it did not currently have the right to terminate the agreements and that its planned transition from the CSN brand “may breach” the agreements. Lift characterized its decision as a difficult but necessary economic choice and proposed to work through any resulting damages with CSN in an “amicable and orderly” fashion. Enclosed with the letter was a detailed transition plan, developed “in the spirit” of a transition provision in the Royalty, Branding and Governance Agreement, intended to minimize disruption and respect CSN’s brand and industry relationships while Lift rebranded.

The proposed transition and conflict with contractual terms

The transition plan contemplated a wholesale rebranding of Lift’s network. It stated that all Lift-owned locations would be rebranded under a single convention name, “Lift Collision,” with unique identifiers for individual locations. The plan also emphasized that Lift would not disparage CSN and sought to structure the separation cooperatively. Yet, by design, the plan envisaged Lift operating collision repair shops under its own brand, in direct competition with CSN’s network. That rebranding was plainly inconsistent with Article 4.05(a), which mandates that every Lift shop be operated solely under the CSN brand and prohibits any local or alternative branding, and with Article 4.10, which forbids Lift from owning competing collision repair businesses outside the CSN-branded system. The October 2, 2025 letter and transition plan therefore constituted an anticipatory breach of the Royalty Agreement and related licenses, as Lift signalled an intention not to perform core negative covenants over the remaining 19 years of the term.

Lift’s “efficient breach” rationale and damages position

Lift approached the dispute as a form of “efficient breach,” a concept recognized in commercial law whereby a party may rationally choose to breach a contract, pay full compensatory damages, and thereby pursue a more profitable course. Lift proposed to unilaterally exit the CSN relationship, pay whatever damages were ultimately determined to be owing under the contract, and then sell or operate its business free of CSN’s constraints. CSN, however, exercised its common-law election not to terminate the Royalty Agreement, instead insisting that it remain on foot and that Lift continue to perform. Because CSN refused to terminate, the contractual liquidated damages formula and $40 million damages cap did not apply by the agreement’s own terms. CSN instead claimed that its damages—lost profits over the remaining 19 years, plus harm to its brand, goodwill, insurer and supplier relationships, and the value of its ROFRs—could exceed $130 million and would be difficult, if not impossible, to quantify precisely. Lift disputed both the scale and method of CSN’s damages claims. It argued that the parties’ prior agreement on a formula and cap evidenced that money damages were conceptually adequate. It also pointed to CSN’s recent valuation in a third-party investment transaction (approximately $135 million enterprise value), Lift’s relative contribution to CSN’s revenue (about 9%), and the fact that CSN would still have a large Canadian network even if Lift’s 65 shops departed, as indications that the loss was comparatively modest and quantifiable. Crucially, however, despite arguing for a damages-only remedy, Lift did not present a principled methodology that would comprehensively address CSN’s foreseeable losses, particularly long-term and intangible harms and the ROFR-related expectations that could crystallize in future transactions.

CSN’s application for a permanent injunction

CSN brought an application in the Ontario Superior Court of Justice for final relief, not an interlocutory injunction pending trial. It sought specific performance of the parties’ agreements by way of a permanent injunction restraining Lift from violating the identified negative covenants, including rebranding and operating competing non-CSN shops. Lift admitted that its October 2, 2025 letter amounted to an anticipatory breach, so the case centered on remedy: whether the Court should confine CSN to damages or grant a permanent injunction. The Court reviewed authorities on final injunctive relief and enforcement of restrictive covenants, including the principle that while damages are the default remedy, equitable relief is appropriate where damages are inadequate or unjust, and particularly where the covenant is negative in form and designed to be enforced by injunction. The judge acknowledged that enforcing negative covenants often amounts to the Court giving effect to the parties’ bargain—“saying by way of injunction that which the parties have already said by way of covenant.” At the same time, the Court recognized that an injunction that effectively forces businesses to remain in a relationship can resemble a mandatory order, against which courts are cautious, especially if ongoing judicial supervision would be required. Here, the evidence showed that the parties had operated effectively together for years, and that if Lift was restrained from breaching, business would “go on as usual” in the shops. The Court did not anticipate supervisory difficulties or operational friction warranting denial of equitable relief.

Assessment of damages versus equitable relief

The judge devoted substantial analysis to the supposed “efficient breach” and the adequacy of damages. Efficient breach is most suitable where damages are discrete and readily calculable, such as the sale of fungible goods or where a contract contains a fully operative liquidated damages clause. In contrast, the CSN–Lift relationship is a multi-decade, network-based arrangement with intertwined economic, branding, and relational interests. The Court emphasized that CSN’s ability to maintain a national network is critical to its insurer relationships and bargaining power. If Lift’s 65 shops exited, CSN would lose significant presence, particularly in Western Canada, thereby potentially weakening its position in negotiating insurer referral programs and supplier volume arrangements, and diminishing its brand visibility and goodwill. These categories of harm are inherently difficult to quantify prospectively. The ROFR structure presented another layer of complexity: CSN claimed it would be severely prejudiced if Lift left the network and then sold its business outside the ROFR regime. The Court acknowledged that quantifying the lost future profits that CSN might have earned by exercising its ROFR over Lift’s business—or over individual shops—would be highly speculative and fact-intensive, involving hypothetical future sales, deal structures, and operational outcomes over as long as 19 years. While Lift argued that so long as the agreements remained in force CSN’s ROFRs would persist, that submission sidestepped the reality that Lift’s proposed conduct would immediately breach the branding and competition covenants and could trigger further ROFR-related disputes down the line. The Court concluded that a damages-only approach would entail protracted, multi-layered litigation over many years, repeated assessments of evolving losses, and reliance on the standard Hadley v. Baxendale framework for foreseeability. That process would be inefficient, uncertain, and unable to provide a clean, timely resolution. The Court found that Lift’s characterization of its exit as “efficient” was unsustainable in light of the impossibility of confidently quantifying the full spectrum of CSN’s losses at the time of breach. Without a clear, precise, and comprehensive damages methodology, the notion of an efficient breach collapsed into a simple breach, with all the attendant litigation risk and cost.

Equitable balancing and precedent considerations

In assessing whether an injunction was the appropriate remedy, the Court drew parallels to prior decisions enforcing negative covenants where damages were seen as inadequate or unworkable. It referenced cases emphasizing that if parties, for value and with open eyes, promise that something will not be done, equity commonly enforces that negative promise by injunction rather than turning the covenant into a mere license fee for breach. Lift argued that an injunction would unfairly constrain it and that CSN’s fears about lost market share, insurer relationships, and goodwill were speculative. But the Court observed that in cases of anticipatory breach, all discussions of future loss inevitably contain elements of prediction and that the lack of realized loss to date does not mean the risk is insubstantial. CSN’s evidence, including testimony from its CEO about dealings with insurers and the importance of a national footprint, was found to be grounded and reasonable. The Court was persuaded that if Lift were allowed to proceed with its rebranding and competitive operations, CSN would be exposed to complex and incalculable harms over a long horizon, to be resolved only through extensive litigation. In line with authorities where courts declined to send parties down a long, uncertain path of damage quantification for future, contingent harms, the judge considered it “undesirable” to consign CSN to a trial (or multiple trials) on damages for losses that had yet to crystallize and could extend over many years.

Final orders, successful party, and monetary outcome

Ultimately, the Court held that it was neither just nor appropriate to confine CSN to a damages remedy. Lift’s proposed course amounted to a deliberate breach of contracts whose negative covenants were crafted to be enforceable by injunction, and Lift was not, in reality, presenting CSN with two economically equivalent outcomes. Specific performance of the parties’ bargains, in the form of a permanent injunction, was therefore granted. The Court ordered that Lift be prohibited from acting on the transition plan enclosed with its October 2, 2025 letter and from violating the negative covenants in Articles 4.05(a) and 4.10 of the Royalty Agreement and analogous restrictions in the shop-specific license agreements. CSN was clearly the successful party: it obtained the core equitable relief it sought and preserved the ongoing performance of the long-term Royalty Agreement on its terms. On costs, the Court awarded CSN partial indemnity costs fixed at $185,000, disallowing only the disbursement related to its expert witness. There was no award of contractual damages at this stage; the only monetary order was this costs award. As a result, CSN emerged as the successful party, with the Court both enforcing its contractual protections by permanent injunction and ordering Lift to pay a total monetary award of $185,000 in costs in CSN’s favour.