Court File and Parties
DIVISIONAL COURT FILE NO.: 586/16
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: EDGETCH HVAC SERVICES LTD. et Al., Plaintiffs/Respondents
-AND -
jaswinder singh ubhi et al., Defendants/Moving Parties
BEFORE: Swinton J.
COUNSEL: John Philpott, for the corporations and Randy Taylor, Plaintiffs/Respondents
P. Henderson, for the Plaintiff/Respondent Thomas Prakash
Gregory M. Sidlofsky, for the Defendants/Moving Parties
HEARD at Toronto: January 12, 2017
ENDORSEMENT
Background
1The defendants move for a stay of the order of Chiappetta J. dated December 7, 2016 pending the determination of their motion for leave to appeal her order and the appeal, if leave is granted. She gave an order for an interlocutory injunction that restrains the defendants from competing against Edgetch HVAC Services Ltd. Different restrictions apply to Mr. Ubhi, as he was a principal of Edgetch and subject to a restrictive covenant in a unanimous shareholders agreement (“USA”). Other restrictions apply to the former employees to prevent them from assisting Mr. Ubhi in breaching his fiduciary obligations by using Edgetch confidential information or soliciting clients.
2Mr. Prakash supports the order for a stay.
The test for a stay
3The test for a stay requires me to consider three issues:
Is there a serious issue to be tried?
Will the moving party suffer irreparable harm if the stay is not granted?
Where does the balance of convenience lie?
Is there a serious issue to be tried?
4The defendants are seeking leave to appeal the motions judge’s discretionary order. The judge hearing the leave motion will have to apply the test for leave in rule 62.02(4). Accordingly, the question for me, on this stay motion, is whether there is a serious issue to be determined on that motion. In other words, I must consider the likelihood of the defendants’ success on such a motion.
5In my view, the motion is unlikely to succeed under the first branch of the test: that there is a conflicting decision of a judge on the matter in the proposed appeal, and it is desirable that leave to appeal be granted. The defendants argued that there are conflicting decisions on the test to be applied in a motion for an interlocutory injunction to enforce a restrictive covenant – some cases apply a “strong prima facie case” test and some “a serious issue to be tried” test. The motions judge in this case considered the jurisprudence and chose to follow the recent jurisprudence that adopts the strong prima facie case test. The application of that test worked in the favour of the defendants, since it is the more stringent one.
6Accordingly, even if there is some debate in the jurisprudence, there is no basis to find error on the part of the motions judge that would have affected her order. I doubt that leave would be given, when the resolution of the debate about the proper test would have no impact on the order under appeal.
7With respect to rule 62.02(4)(b), there must be some reason to doubt the correctness of the decision, and the proposed appeal must involve a question of general importance, beyond the interests of the immediate parties.
8The defendants argue there is good reason to doubt the correctness of the order because the motions judge made factual findings that were not supported by the evidence. It is not my task here to determine that question. All I will say is that the defendants have not taken issue with the legal principles applied to determine whether there should be an interlocutory injunction. Deference is owed to the findings of fact made by the motions judge and her weighing of the various factors. Her reasons were detailed, and the factual findings based largely on extensive documentary evidence.
9More importantly, the defendants are likely to have difficulty in meeting the second part of the test. As Epstein J. stated in SLSsoft.com Inc. v. Rampart Securities Inc. (Trustee of), [2005] O.J. No. 4847 (Div. Ct.) at para 81, “where the issues are fact-driven, they do not raise issues of general public interest.” Here, the issues raised are largely related to findings of fact.
10Accordingly, the case for leave is not a strong one.
Irreparable harm to the defendants
11The defendants argue that they will suffer irreparable harm if the stay is not granted because Mr. Ubhi is prevented from working in his chosen field, and the other defendants, who were not subject to a restrictive covenant, are prevented from working at Extreme or Gasense, even though they are not subject to a restrictive covenant.
12I have considered the employees’ affidavits filed before the motions judge. I note that a number say they do not work exclusively for Extreme. Moreover, if the new company Synergy is truly a different entity, they should be able to work for that company or any other not subject to the terms of the injunction. Any harm from the injunction should be compensable in damages. Therefore, I do not accept that the employees will suffer irreparable harm.
13With respect to Mr. Ubhi, I accept that he will suffer harm if he is not able to work in his chosen field.
Balance of Convenience
14This part of the test requires me to consider both the harm to the defendants and to the corporate plaintiffs.
15The motions judge clearly explained why she found irreparable harm to the plaintiffs, given the potential loss of customers and goodwill caused by the defendants’ actions. I agree with her analysis.
16I also note that while Mr. Ubhi may suffer harm, he signed the USA, where he agreed that breach of the non-compete clause would cause irreparable harm to Edgetch. On my reading of the evidence, there was ample evidence to show that he was taking actions to move Edgetch’s clients and business to Extreme and now Gasense.
17In weighing the balance of convenience, it is relevant to assess the ongoing impact of the stay on each party. If the defendants really were concerned about the impact of this order, they could have moved in a timely fashion to file their motion materials for the leave motion and asked for an expedited determination of the motion. When offered that route during the hearing of the stay motion, counsel for the defendants explained why he did not wish to accept an expedited process, preferring to pursue a motion to amend the interlocutory injunction order. Accordingly, the stay, if granted, is likely to be in place for a lengthy period, thus exposing the plaintiffs to ongoing irreparable harm.
18In considering the equities, I conclude that the merits of the motion for leave are weak, and that the balance of convenience favours the plaintiffs.
19I understand that circumstances have changed in the positions of the key actors since the order, and Mr. Prakash would support the lifting of the stay. However, he is only one of the plaintiffs. On the basis of the record before me (including the evidence before the motions judge), I am not satisfied that the order should be stayed.
20In reaching my decision, I have not made a determination whether the defendants are in breach of the order. The plaintiffs argue that they are in contempt and therefore should not be granted equitable relief. I am not in a position to determine whether there has been contempt. That requires a motion with evidence that proves the misconduct on the criminal standard “beyond a reasonable doubt.”
21Accordingly, the motion for a stay is dismissed.
22Costs to the plaintiffs other than Mr. Prakash are fixed at $12,000, a sum that is fair and reasonable. I note that the defendants’ counsel submitted a bill of costs for $14,000. I do not agree with the defendants’ submissions that the plaintiffs’ argument was improperly focused on contempt. Their factum and submissions dealt in detail with the elements of the test for a stay. There was evidence on which they reasonably raised a concern about non-compliance with the motions judge’s order. Accordingly, I would not reduce the amount they seek in costs.
Swinton J.
Date: January 16, 2017