Ash Temple Limited v. Croney et al. [Indexed as: Ash Temple Ltd. v. Croney]

46 O.R. (3d) 561

[2000] O.J. No. 38

Docket No. C29515

Court of Appeal for Ontario

Abella, Goudge and MacPherson JJ.A.

January 13, 2000

Civil procedure -- Summary judgment -- Plaintiff bringing action against former employee alleging violation of non- competition agreement and breach of fiduciary duties -- Plaintiff bringing motion for partial summary judgment seeking declaration that defendant had violated non-competition agreement -- Plaintiff not adducing evidence as to nature of its business or character of defendant's former employment -- Motions judge correctly refusing declaration that non- competition agreement enforceable -- Motions judge going too far in declaring non-competition agreement unenforceable -- Issue of enforceability of agreement should have proceeded to trial.

The plaintiff was in the business of supplying dental equipment to dentists. The defendant C was employed by the plaintiff between 1983 and 1990, holding the positions of Toronto branch manager and vice-president. In 1989, the plaintiff and C entered into a shareholders' agreement which contained a non-competition clause. C agreed not to compete with the plaintiff anywhere in Canada for a period of 18 months after his employment with the plaintiff came to an end. Less than a year after leaving the plaintiff's employ, C went to work for the defendant H Ltd., a competitor of the plaintiff's. The plaintiff brought an action against the defendants alleging that C had violated the non-competition clause by accepting employment with H Ltd. and had breached his fiduciary duty to the plaintiff by soliciting the plaintiff's customers and by attempting to lure some of the plaintiff's employees to positions with H Ltd. The defendants brought a motion for partial summary judgment under Rule 20 of the Rules of Civil Pro cedure, R.R.O. 1990, Reg. 194, seeking an order that there was no genuine issue for trial with respect to the non- solicitation components of the statement of claim. The defendants did not seek summary judgment with respect to the non-competition component of the claim. The plaintiff brought a motion for partial summary judgment, seeking a declaration that C had breached his fiduciary duty to the plaintiff by soliciting customers and employees and that C had violated the non-competition clause in the shareholder's agreement. The motions judge held that: the non-competition clause was unenforceable; there was a genuine issue for trial as to whether C was a fiduciary; there was a genuine issue for trial with respect to the solicitation of a single dentist; there was no genuine issue for trial with respect to the solicitation of 20 other dentists; there was a genuine issue for trial with respect to the solicitation of seven employees; and there was no genuine issue for trial with respect to the solicitation of tw o other employees. The defendants were granted their costs of their motion and the action on a party and party basis. The plaintiff appealed from the determinations that the non- competition clause was unenforceable. The plaintiff also appealed the determination that there was no genuine issue for trial with respect to the solicitation of 20 dentists, but only with respect to six of those dentists. Finally, the plaintiff appealed the order as to costs.

Held, the appeal should be allowed in part.

The plaintiff did not place before the motions judge sufficient information about the nature of its business and the character of C's former employment to justify the declaration it sought on a summary judgment basis. Accordingly, the motions judge was correct to refuse a declaration that the non- competition clause was enforceable. However, the motions judge erred in going further and declaring the non-competition clause to be unenforceable. There was no motion before him for summary judgment to that effect, and there were genuine issues for trial with respect to the geographic scope of the non- competition clause and whether a special relationship existed between C and the plaintiff's customers. Just as the record before the motions judge did not support a declaration pursuant to Rule 20 that the clause was unenforceable, so too the record did not support the opposite conclusion. The issue of the enforceability of the non-competition clause should proceed to trial.

There were also genuine issues for trial on the fiduciary obligation/solicitation issue with respect to five of the 21 dentists and seven of the nine employees.

Given the plaintiff's partial success on appeal, the motions judge's costs order, which was almost entirely in the defendants' favour, could not stand. The parties should bear their own costs of the motions for summary judgment. The parties should also bear their own costs of the appeal.

APPEAL from a decision of Festeryga J. on motions for summary judgment.

Elsley v. J.C. Collins Insurance Agencies Ltd., 1978 7 (SCC), [1978] 2 S.C.R. 916, 83 D.L.R. (3d) 1, 20 N.R. 1, 3 B.L.R. 183, 36 C.P.R. (2d) 65, consd Other cases referred to Cameron v. Canadian Factors Corp., [1978] S.C.R. 148; Canadian Aero Service Ltd. v. O'Malley, 1973 23 (SCC), [1974] S.C.R. 592, 40 D.L.R. (3d) 371, 11 C.P.R. (2d) 206 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20

Brian D. Mulroney, for appellant. Michael L. Shell and Drazen F. Bulat, for respondents.

The judgment of the court was delivered by

MACPHERSON J.A.: --

INTRODUCTION

[1] Modern companies require excellent senior management in order to prosper in a competitive marketplace. Striving to attract and retain such personnel, companies will offer high salaries, attractive benefits and, sometimes, share purchase options to underline the connection between management's and the company's performance. In return, companies insist on scrupulous loyalty from their senior management.

[2] It is a rare senior manager who will stay with a single company for his or her entire professional career. Companies, recognizing this, worry about a manager taking confidential information when he or she leaves and embarks upon employment with a different company. Companies also worry that the skills which raised the manager to a senior position in their organization (knowledge, experience, energy and even personal charm) might enable the manager to entice some of its current customers and obtain them for the manager's new company.

[3] Companies try to guard against the loss of information and customers in a number of ways. One of the most common methods is through a term in the employment contract known as a non-solicitation clause. This type of provision prohibits a departing employee from soliciting the customers of his or her previous employer.

[4] A more drastic weapon in a company's arsenal is the non- competition clause in an employment contract. It forbids an employee, when he or she leaves the company, from even taking a new position in the same industry. Usually these provisions are limited in terms of geography (kilometres, province, country, occasionally continent) and time (months, years).

[5] The Canadian employment law jurisprudence is replete with cases dealing with the enforceability of non-competition clauses. Because such clauses are, at bottom, restraints on trade, the courts are vigilant in assessing their legality. As expressed by Dickson J. in the leading Canadian case dealing with non-competition clauses, Elsley v. J.G. Collins Insurance Agencies Ltd., 1978 7 (SCC), [1978] 2 S.C.R. 916 at p. 923, 83 D.L.R. (3d) 1:

There is an important public interest in discouraging restraints on trade, and maintaining free and open competition unencumbered by the fetters of restrictive covenants.

[6] I note the word "discouraging" in this passage. The Canadian courts have not enunciated an absolute rule prohibiting non-competition clauses. That is because, in spite of centuries of common law jurisprudence against restraints of trade, the non-competition clause is anchored in another profound principle of the common law -- freedom of contract. As noted by Dickson J. in Elsley, at p. 923, "the courts have been disinclined to restrict the right to contract, particularly when that right has been exercised by knowledgeable persons of equal bargaining power".

[7] This appeal raises both non-solicitation and non- competition issues. It does so in the context of motions for summary judgment brought by both sides in the dispute. Thus the appeal raises both substantive and procedural issues. The substantive issues raise questions in contract law, employment law and the growing field relating to fiduciary obligation. The procedural issue centres on the appropriateness, but also the limits, of a motion for summary judgment.

A. FACTUAL BACKGROUND

1. The Parties and the Key Events

[8] The appellant (and plaintiff) Ash Temple Limited ("Ash Temple") is involved in the business of supplying dental equipment and consumable products to dentists.

[9] The defendant Healthco (Canada) Limited ("Healthco") is involved in the same business as Ash Temple. They are competitors. Both carry on business across Canada through a number of branch offices.

[10] The defendant Kenneth Croney ("Mr. Croney") has worked in the dental supply industry since 1965. From 1967-1974 and 1978-1983 he worked for National Refining Co. He serviced a sales territory in Ontario and rose to the position of Vice- President. On July 1, 1983, National Refining Co. sold certain of its assets to Ash Temple. At that time, Mr. Croney became employed by Ash Temple.

[11] In late 1983, Mr. Croney became Toronto branch manager of Ash Temple. The Toronto branch was Ash Temple's largest and it was situated in the same building as the company's head office. Mr. Croney remained Toronto branch manager until 1990. He also became a Vice-President of Ash Temple.

[12] On June 23, 1989, Ash Temple and Mr. Croney entered into an agreement referred to as an Employee "A" Shareholders' Agreement. It provided Mr. Croney with certain share purchase options. On October 31, 1989, he purchased 3,263 Class "A" shares for $52,500. On June 20, 1990, Mr. Croney received an additional 698 Class "A" shares as a managing shareholders' bonus.

[13] One of the clauses of the shareholders' agreement was a non-competition clause. Section 3 of the agreement provided:

The Shareholder agrees with the Corporation that, in consideration of his employment and continued employment with the Corporation and the mutual covenants and benefits set forth in this Agreement, during the period of the employment of the Shareholder by the Corporation and for the period of eighteen (18) months thereafter, the Shareholder will not, directly or indirectly, without the prior written consent of the Corporation, either individually or in partnership or in conjunction with any one or more individuals, entities, persons, firms or corporations, as principal, agent or shareholder, or in any other manner whatsoever, carry on or be engaged in or concerned or interested in or advise, manage, lend money to or guarantee the debts or obligations of or permit his name to be used or employed in carrying on within Canada a business similar to or competitive with the business of the Corporation (as such business shall then consist).

[14] In April 1990, Mr. Croney resigned as a Vice-President of Ash Temple and as Toronto branch manager and agreed to become a sales agent. In May 1990, he resigned from the employ of Ash Temple effective June 30, 1990.

[15] Mr. Croney was very highly regarded in the dental supply business. He was quickly able to obtain alternative employment that did not violate the non-competition clause which he had accepted. In September and October 1990, he worked as a manufacturer's representative with Dental-Ez. In November 1990, he obtained employment with Siemens.

[16] In addition, on September 20, 1990, Mr. Croney entered into an employment contract with Healthco, a major competitor of Ash Temple. The term of Mr. Croney's employment was to begin "January 1, 1992 or such earlier date as the company and you may agree." If Mr. Croney started to work for Healthco on January 1, 1992, as contemplated by the agreement, he would not have violated the 18-month non-competition clause he had signed with Ash Temple.

[17] Interestingly, the employment contract between Mr. Croney and Healthco contained a non-competition clause quite similar to clause 3 of the Ash Temple-Croney agreement. Mr. Croney agreed that if he left Healthco he would not engage in a competitive business anywhere in Canada for a period of one year. He also agreed to a non-solicitation clause. He would not solicit Healthco's customers or its employees for a year after leaving Healthco.

[18] On November 15, 1990, Mr. Croney sold 1,450 of his Class "A" shares in Ash Temple. The company then redeemed his remaining 2,546 Class "A" shares. In total, Mr. Croney received $162,839 for his shares. Since he had purchased 3,263 shares for $52,500 just over a year before, it can be seen that Mr. Croney made a quick and healthy profit pursuant to the Employee "A" Shareholders' Agreement he had signed in June 1989.

[19] On May 2, 1991, Mr. Croney appeared at the annual Ontario Dental Association Convention in his new capacity as Vice-President and regional manager of Healthco. This was a clear violation of clause 3 of his agreement with Ash Temple which prohibited him from accepting employment anywhere in Canada for 18 months after leaving Ash Temple.

2. The Litigation

[20] On May 23, 1991, Ash Temple commenced this action. Ash Temple alleged that Mr. Croney had violated the non-competition clause of the shareholders' agreement by accepting employment with Healthco and that he had breached his fiduciary duty to Ash Temple by soliciting Ash Temple's customers (i.e., dentists) and by attempting to lure some of Ash Temple's employees to positions at Healthco. Healthco was joined as a defendant. Ash Temple wants it to disgorge any profits it may have received through Mr. Croney's unlawful acts.

[21] For some reason, the lawsuit meandered for about six years. Then in the autumn of 1997, the defendants brought a motion for partial summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They sought an order that there was no genuine issue for trial with respect to the non-solicitation components (both customers and employees) of Ash Temple's statement of claim. The defendants did not seek summary judgment with respect to the non-competition component of the claim.

[22] Ash Temple responded with its own motion for partial summary judgment. It sought a declaration that Mr. Croney had breached his fiduciary duty to Ash Temple by soliciting its customers and employees. In addition, Ash Temple sought a declaration that Mr. Croney had violated the non-competition clause in the shareholders' agreement he had signed. Finally, Ash Temple sought an order for a trial of the issue of damages for Mr. Croney's violation of his fiduciary duty and the shareholders' agreement.

[23] The duelling motions for summary judgment were heard by Festeryga J. on October 7 and 10, 1997. He rendered his decision on March 11, 1998. He held:

(1) The non-competition clause was unenforceable.

(2) There was a genuine issue for trial as to whether Mr. Croney was a fiduciary.

(3) There was a genuine issue for trial with respect to the solicitation of a single dentist.

(4) There was no genuine issue for trial with respect to the solicitation of 20 other dentists.

(5) There was a genuine issue for trial with respect to the solicitation of seven employees.

(6) There was no genuine issue for trial with respect to the solicitation of two other employees.

(7) The action should proceed to trial on the issue of damages.

(8) The defendants should have their costs of their motion and the action to date on a party and party basis. Each side should bear its own costs of the plaintiff's motion.

[24] The plaintiff, Ash Temple, appeals from the motions judge's conclusions in (1) concerning the non-enforceability of the non-competition clause, in (4) with respect to six dentists, and in (8) on the issue of costs. Neither the plaintiff nor the defendants appeal any of the other components of the motions judge's decision.

B. ISSUES

[25] The issues on this appeal are:

(1) Did the motions judge err in declaring that the non- competition clause in the shareholders' agreement was unenforceable?

(2) Did the motions judge err in deciding that there was no genuine issue for trial with respect to the solicitation of three different groups of Ash Temple's dentist customers:

(a) Drs. Maggisano, M. Papini and E. Papini (Allied Health),

(b) Dr. McCutcheon (Meadowvale Dental), and

(c) Drs. Watt and McGrath (King Dental)?

(3) Did the motions judge err in his disposition of costs of the motions and of the action to date?

C. ANALYSIS

1. The Non-Competition Clause Issue

[26] It will be recalled that clause 3 of the shareholders' agreement signed by Mr. Croney forbade him from taking a position with a competing company anywhere in Canada for a period of 18 months following the cessation of his employment with Ash Temple. Mr. Croney left Ash Temple on June 30, 1990. He commenced employment with Healthco, a competitor, in Ontario no later than May 2, 1991. This was a clear and open violation of the non-competition clause.

[27] The motions judge held that the non-competition covenant was invalid. The essence of his reasons is contained in this passage:

The principles to be applied in considering restrictive covenants of employment are well established, discussed and reviewed in Elsley v. J.G. Collins Insurance Agencies Ltd. (1978), 1978 7 (SCC), 83 D.L.R. (3d) 1 (S.C.C.). I have come to the conclusion that the clause is not enforceable since it is not reasonable and that it is against public interest.

I am satisfied that the covenant is too broad in that it prevented Croney from competing anywhere in Canada. The facts are quite clear that his entire working career was restricted to Ontario and mostly in Toronto. To prevent Croney from competing outside of Ontario is an unreasonable restraint of trade. I am also of the view that the covenant is unenforceable as being against competition generally and not limited to proscribing solicitation of clients of the former employer, Ash.

[28] The leading Canadian case dealing with non-competition clauses is, as the motions judge recognized, Elsley v. J.G. Collins Insurance Agencies Ltd., supra. In that case, Dickson J. identified the competing factors that come into play in the interpretation of such clauses. In favour of the clauses is the principle of freedom of contract; opposing the clauses is the public interest in discouraging restraints on trade.

[29] How is the balance between these factors to be struck in a particular case? Dickson J. addressed this question in this fashion, at pp. 923-24 and 926:

In assessing the opposing interests the word one finds repeated throughout the cases is the word "reasonable". The test of reasonableness can be applied, however, only in the peculiar circumstances of the particular case. . . .

. . . The validity, or otherwise, of a restrictive covenant can be determined only upon an overall assessment, of the clause, the agreement within which it is found, and all of the surrounding circumstances.

. . . Whether a restriction is reasonably required for the protection of the covenantee can only be decided by considering the nature of the covenantee's business and the nature and character of the employment.

[30] In the present case, it is important to recall that Ash Temple seeks a declaration that its non-competition clause is enforceable in the context of a motion for summary judgment. Did Ash Temple place before the motions judge sufficient information about the nature of its business and the character of Mr. Croney's employment to justify the declaration it sought on a summary judgment basis?

[31] In my view, the answer to this question must be "No". In support of its motion for summary judgment, Ash Temple filed three affidavits from company personnel -- John Adamski, a sales representative who was appointed Toronto branch manager approximately four months after Mr. Croney's departure, and Edward Adamski and Tom Platt, two sales representatives. All three of the affidavits of the Ash Temple representatives are directed to the alleged solicitation activities (of both former employees and former customers) of Mr. Croney after he left Ash Temple. In none of the affidavits is there more than a fleeting reference to the nature of Ash Temple's business or the character of Mr. Croney's employment that would be relevant to the non-competition clause. For example, there is not a word about Ash Temple's Canada-wide dental supply business which might underpin the geographic scope ("within Canada") of the non-competition clause.

[32] Ash Temple admits in its factum that non-competition clauses will be upheld "in exceptional cases". Yet the main argument it advances about the geographic scope of its non- competition clause in this case is one based on analogy -- when Mr. Croney signed on with Healthco he again accepted a Canada-wide non-competition clause. Ash Temple submits that this establishes the reasonableness of its non-competition clause.

[33] I disagree. I do not question that Mr. Croney's non- competition clause with Healthco is a relevant factor in assessing the reasonableness of Ash Temple's clause. The Healthco clause speaks, potentially, to industry practice and even to Mr. Croney's understanding of what is appropriate in the industry. However, the argument by analogy is not conclusive. It is necessary to consider the factors set out by Dickson J. in Elsley, supra, namely the nature of the employer's business and the character of the employee's position. In the record before the motions judge, there was very little that would have assisted him in making his inquiry into these factors. Accordingly, the motions judge was correct to refuse a declaration that the non-competition clause was enforceable.

[34] However, the motions judge went farther. He declared that the non-competition clause was unenforceable. He was of the view that the clause was an unlawful restraint of competition generally, and that the Canada-wide scope of the restraint on Mr. Croney's future employment in the industry was too broad in light of the fact that Mr. Croney had never worked outside Ontario.

[35] It is important to note the context within which the motions judge made this declaration. Ash Temple brought a motion for summary judgment on the non-competition issue. The defendants responded to this motion. In addition, they brought their own motion for summary judgment, but only on the fiduciary obligation (non-solicitation of employees and customers) issue. They did not bring a motion for summary judgment on the non-competition clause issue. Accordingly, if Ash Temple had not brought its motion for summary judgment with respect to the non-competition clause, this issue would have proceeded to trial.

[36] In light of this context, was the motions judge correct to declare that the non-competition clause was unenforceable? With respect, I think that he was not correct.

[37] The normal result when a judge does not grant a plaintiff's motion for summary judgment is that the motion is dismissed and the matter proceeds to trial. In some cases, it is possible for a judge to determine the entire action against the plaintiff who loses on its motion for summary judgment. Such a result is possible -- I would think on a very occasional basis -- because of rule 20.04(4) of the Rules of Civil Procedure, which provides in part:

20.04(4) Where the court is satisfied that the only genuine issue is a question of law, the court may determine the question and grant judgment accordingly . . . .

[38] The present case is not one in which the motions judge could decide the entire issue against the plaintiff which lost its motion for summary judgment. Since the defendants brought no motion for summary judgment on the non-competition clause, the motions judge erred in not referring the issue for trial. Based on Elsley, there were at least two elements of the Ash Temple-Croney relationship that required the issue of the enforceability of the non-competition clause to proceed to trial.

[39] First, in Elsley, Dickson J. discussed employment situations in which there is a special relationship between a senior employee and the customers of the company. He said, at p. 926:

In the present case, when the clause was drafted it was known that Elsley had, or would acquire, a special and intimate knowledge of the customers of his prospective employer and the means of influence over them.

[40] The same can, potentially, be said about Mr. Croney. The record before the motions judge is replete with testimony from many dentists about their relationship with Mr. Croney. Mr. Croney helped set up the practices of some dentists, he provided excellent service for long years to many of the dentists, and he became personal friends with several of them. In her affidavit, Dr. Peggy Watt spoke of "a sense of loyalty to Ash Temple because of the help we received from Croney". That statement is typical of the views expressed by a large number of dentists who came to know, trust and rely on Mr. Croney and Ash Temple.

[41] The consequence of statements like Dr. Watt's is that Mr. Croney may have had, in Dickson J.'s words in Elsley, "a special and intimate knowledge" of Ash Temple's customers and "a means of influence over them". If he did, this would have the potential to be an important factor telling in favour of the enforceability of the non-competition clause. There is, therefore, a genuine issue for trial on this point.

[42] Second, the issue of the geographic scope of the non- competition clause also presents a genuine issue for trial. The motions judge did mention this issue. He said that Mr. Croney's "entire working career was restricted to Ontario and mostly in Toronto". In my view, that was not sufficient to justify the conclusion that Ash Temple's non-competition clause was unenforceable in the face of the competing inference available from Mr. Croney's non-competition clause with Healthco.

[43] An instructive case on this point is Cameron v. Canadian Factors Corp., 1970 163 (SCC), [1971] S.C.R. 148. In that case, the Supreme Court of Canada declared that a Canada-wide non-competition clause for a comptroller employed by a factoring company was unenforceable. In reaching his conclusion, Laskin J. said, at pp. 163-64:

The evidence in this case does not support a finding of protectible business operations of the respondent beyond the Province of Quebec.

Paragraph 3 presents even less difficulty for the conclusion that it is offensive to the principle of public order. I am satisfied to deal with it as exceeding, in its Canada-wide ambit, any reasonable requirement of the respondent for the protection of its business interests which, on the record, are centred in the Province of Quebec.

(Emphasis added)

[44] In the present case, there is simply not enough evidence "on the record" to support the motions judge's conclusion that the non-competition clause is unenforceable. In their statement of defence, the defendants admit that both Ash Temple and Healthco carry on business across Canada. Moreover, Mr. Croney signed a Canada-wide non-competition clause when he joined Healthco which is, at a minimum, some evidence in favour of industry practice. In the face of these factors, the motions judge went too far when he declared that the non-competition clause was unenforceable. Just as the record before him did not support a declaration pursuant to Rule 20 that the clause was enforceable, so too the record did not support the opposite conclusion.

[45] In conclusion, the issue of the enforceability of the non-competition clause requires a trial. The motions judge was correct to dismiss Ash Temple's motion for summary judgment on this issue. However, he should have made the order that normally flows from such a decision, namely that there was a genuine issue for trial. He erred when he took the second step and declared, without a sufficient supporting record, that the non-competition clause was entirely unenforceable.

2. The Solicitation Issue

[46] On this issue there are what I would call duelling motions for summary judgment. The plaintiff brought a motion for summary judgment seeking declarations that the defendants breached their fiduciary duties by soliciting Ash Temple's customers and employees. The defendants brought a motion for summary judgment seeking the opposite, namely declarations that they engaged in no such conduct.

[47] Both sides prepared many affidavits in support of their motions. There were extensive cross-examinations on most of the affidavits. The duelling motions were heard together by Festeryga J. who decided:

(1) There was a genuine issue for trial with respect to the solicitation of a single customer (dentist).

(2) There was no genuine issue for trial with respect to the solicitation of 20 other dentists.

(3) There was a genuine issue for trial concerning the solicitation of seven of Ash Temple's employees.

(4) There was no genuine issue for trial concerning the solicitation of two other employees.

[48] The defendants do not appeal (1) and (3). The plaintiff does not appeal (4). Nor does the plaintiff appeal (2) as it relates to 14 of the 20 dentists. All that is in issue on this appeal is Ash Temple's appeal relating to six of the dentists in category (2). Ash Temple contends that the motions judge erred in deciding that there was no genuine issue for trial with respect to these six dentists.

[49] The six dentists should be considered in three groupings: (a) Drs. Maggisano, M. Papini and E. Papini (Allied Health); (b) Dr. McCutcheon (Meadowvale Dental); and (c) Drs. Watt and McGrath (King Dental). However, before turning to a specific consideration of these groups of dentists, I want to make two observations, one about general principles, the other about the record before the motions judge on this issue.

[50] First, with reference to general principles, the leading Canadian case dealing with the fiduciary obligations of senior employees is Canadian Aero Service Ltd. v. O'Malley, 1973 23 (SCC), [1974] S.C.R. 592, 40 D.L.R. (3d) 371. In that case, Laskin J. spoke of the "general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a . . . senior officer must conform" (at p. 620). He referred to "the pervasiveness of a strict ethic in this area of the law" (at p. 607), and stated that in certain circumstances the fiduciary duties of the senior officer stayed with him "even after his resignation" (at p. 607).

[51] Second, the record before the motions judge was an interesting, perhaps unusual, one. In support of its motion for summary judgment, the defendants placed before the court affidavits from nine dentists saying that Mr. Croney had not solicited their business after he left Ash Temple. In support of its motion for summary judgment, Ash Temple provided no affidavits in which any of the 21 dentists it alleged were the subject of improper solicitation by the defendants stated that to be the case. In light of this dichotomy in the direct evidence on the solicitation issue, it is not surprising that the motions judge granted the defendants' motion (and dismissed the plaintiff's motion) with respect to 20 of the 21 dentists. Nor is it surprising, perhaps, that Ash Temple has decided not to appeal the judge's decision with respect to 14 of the 20 judges.

[52] Against the backdrop of these two observations, I turn to the three groups of dentists in issue on this appeal.

(a) Allied Health

[53] Mr. Croney left his employment with Ash Temple on June 30, 1990. In May 1990, he had sold dental equipment on behalf of Ash Temple to a number of dentists at the 1990 Ontario Dental Association Conference. With the agreement of Ash Temple, Mr. Croney supervised the installation of the equipment and received commissions on the sales. This responsibility, and corresponding benefit, continued until November 1990.

[54] In spite of this continuing relationship between Ash Temple and Mr. Croney, it is clear from the record that Mr. Croney engaged in conduct that encouraged the Allied Health group of dentists to change their business from Ash Temple to Healthco.

[55] In his affidavit in support of the defendants' motion for summary judgment, Dr. Gerry Maggisano said:

11. In or about the early fall, 1990, I contacted Croney to determine his status and whether or not he would be working for another dental supplier or distributor. Croney advised me that there was little he could do for me in the circumstances having regard to an agreement he had with Ash Temple. I insisted that Croney provide me with a recommendation as to where I ought to direct the business of our practices. He suggested that I call Dave Deeley at Healthco.

In his examination for discovery, Mr. Croney essentially confirmed Dr. Maggisano's account.

[56] It needs to be recalled that Mr. Croney signed an employment contract with Healthco on September 20, 1990, albeit with a prospective commencement date of January 1, 1992. It appears that, with respect to the Allied Health dentists, Mr. Croney may have jumped the gun and solicited them for Healthco, even if indirectly in response to questions from the dentists, while he still had a relationship (until November) with Ash Temple.

[57] The motions judge did not provide separate reasons for including the Allied Health dentists in the category of 20 dentists for which he concluded there was no genuine issue for trial. In my view, on the record before him, and in light of the "strict ethic" in this area, a trial is required to determine whether, when Dr. Maggisano contacted Mr. Croney and expressed dissatisfaction with Ash Temple's service, Mr. Croney had a duty to bring this to Ash Temple's attention and even to assist in trying to remedy the problem rather than simply recommend that Dr. Maggisano contact Healthco, Mr. Croney's imminent employer. The factual determination of the nature of the contact between Dr. Maggisano and Mr. Croney and the nature of the latter's ongoing relationship with Ash Temple would be crucial to this issue. Accordingly, there is a genuine issue for trial with respect to the solicitation of the Allied Health dentists.

(b) Meadowvale Dental

[58] Although both parties in their facta seem to equate Meadowvale Dental with only a single dentist, Dr. Elaine McCutcheon, in fact it was a partnership consisting of four dentists -- Dr. McCutcheon and the three dentists from Allied Health, Drs. Maggisano, M. Papini and E. Papini. Dr. McCutcheon was the partner responsible for the administration and operation of the practice.

[59] In 1990, Dr. McCutcheon decided to switch Meadowvale Dental's business from Ash Temple to Pro-Mart. She also signed an agreement with Healthco to service Meadowvale Dental's equipment and she purchased some supplies from Healthco if they were unavailable from Pro-Mart. In her affidavit Dr. McCutcheon said:

11. My decision to minimize and/or cease purchasing from Ash Temple . . . had nothing whatsoever to do with Croney leaving the employ of Ash Temple or due to any efforts he made to solicit my business.

Dr. McCutcheon also stated in her affidavit:

9. . . . Upon returning from the Canadian Dental Association convention, I discussed the matter with Dr. Maggisano. Dr. Maggisano advised me that he had no preference as to the supplier from which I bought sundries or dental products for the Meadowvale Dental practice.

[60] This is strong evidence in support of the defendants' position. However, in his affidavit Dr. Massimo Papini, a partner of both Dr. McCutcheon and Dr. Maggisano, stated:

3. My brother Egidio and I always had our own practice and were also part of the Allied Health Group with Dr. Gerry Maggisano and partners in Meadowvale Dental. Dr. Maggisano handled the purchasing of sundries, dental products and equipment for the group, which included Meadowvale Dental in which Dr. Elaine McCutcheon was also a partner. Dr. McCutcheon was responsible for the administration and operation of Meadowvale Dental.

Moreover, in the cross-examination on his affidavit, Dr. Maggisano stated: "Generally, Dr. McCutcheon would do what we decided the Papinis and I."

[61] The motions judge did not give separate reasons for including the Meadowvale Dental dentists in the category of 20 dentists for which he concluded there was no genuine issue for trial. In my view, in spite of the strong and direct evidence of Dr. McCutcheon on the solicitation issue, there is some conflicting evidence in the record which requires that the issue concerning this group of dentists proceed to trial.

(c) King Dental

[62] In her affidavit, Dr. Peggy Watt of King Dental stated:

9. At no time prior to leaving the employ of Ash Temple did Croney contact me or Dr. Paul McGrath to solicit our business for Healthco. Croney did not contact either me or Dr. McGrath between June, 1990 and the spring of 1997 to solicit our business for Healthco.

[63] There is nothing in the record before the motions judge to contradict this statement. Accordingly, he was correct to include the King Dental dentists in the category of 20 dentists for which he concluded there was no genuine issue for trial.

3. Costs of the Summary Judgment Motions

[64] The motions judge awarded the defendants their costs of their summary judgment motion and the action to date on a party and party basis because "[m]ost of the defendants' motion was successful whereas the plaintiff was successful on a significantly lesser scale". He made no order as to costs of the plaintiff's motion for summary judgment.

[65] Although success on the motions for summary judgment was divided, I would be disinclined to interfere with the motions judge's disposition of costs if this appeal had been dismissed. I say that because I think the motions judge's comparison of the success of the parties on the two motions was an accurate one.

[66] However, the plaintiff-appellant has achieved partial success on this appeal. The lay of the land at this stage of the action is this: the non-competition issue must proceed to trial; so too must the solicitation issue with respect to 5 of 21 dentists and 7 of 9 employees. It follows that the motions judge's costs order, which was almost entirely in the defendants' favour, cannot stand. In these circumstances, the parties should bear their own costs of the motions for summary judgment.

DISPOSITION

[67] The appeal is allowed in part. There is a genuine issue for trial with respect to the enforceability of the non- competition clause. There is also a genuine issue for trial on the fiduciary obligation/solicitation issue with respect to the Allied Health and Meadowvale groups of dentists. There is no genuine issue for trial with respect to the King Dental group of dentists. The costs order of the motions judge is varied to provide that all parties should bear their own costs of the motions for summary judgment.

[68] Success on the appeal is divided. On the non-competition issue, the appellant did not obtain the principal relief it sought, namely a declaration that the restrictive covenant was enforceable. However, contrary to the conclusion of the motions judge, the non-competition issue must proceed to trial. On the fiduciary obligation/solicitation issue, the appellant was successful with respect to two groups of dentists and unsuccessful with respect to one group. In my view, there is a sufficiently close division of success to justify an order that all parties bear their own costs of the appeal.

Appeal allowed in part.