Court File and Parties

COURT FILE NO.: CV-16-551978 DATE: 20160513 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 720014 Ontario Inc. O/A Eric Transport International, Plaintiff -and- 7669623 Canada Ltd., O/A BM Transfer, Brian Macklin, Mike Stewart and 1643799 Ontario Inc. O/A MJ Express, Defendants

BEFORE: F.L. Myers J.

COUNSEL: Benjamin Salsberg, for the plaintiff Bridget Jokitalo, for the 7669623 Canada Ltd., O/A BM Transfer, and Brian Macklin M. Kathleen Kinch, for the defendants Mike Stewart and 1643799 Ontario Inc. O/A MJ Express

HEARD: May 13, 2016

Endorsement

[1] The plaintiff has established a serious issue to be tried as to whether Mr. Macklin and his company breached the terms of their oral retainer or employment agreement with the plaintiff by taking steps contrary to the plaintiff’s interests while still subject to the agreement and by purporting to terminate the agreement without notice. There is contested evidence on these points. The claims are not frivolous.

[2] The plaintiff has established a serious issue to be tried as to whether the defendant Macklin and his company owed fiduciary duties to the plaintiff. While Mr. Macklin says that his company was an independent contractor to the plaintiff, he concedes that he functioned as the “de facto general manager” of the plaintiff’s business. The interposition of a corporation does not prevent the recognition of fiduciary duties any more than it prevents a claim by the contractor for damages for lack of notice of dismissal. The court will look at the substance of the relationship rather than its form. Belton et al. v. Liberty Insurance Co. of Canada (2004), 2004 ONCA 6668, 72 O.R. (3d) 81 (C.A.) at para. 11. Shannon Rewinds Canada Inc. et al. v. Anderson et al., 2003 ONSC 43526 at para. 28. Keenan et al. v. Canac Kitchens Ltd., 2016 ONCA 79, at paras. 17 to 19.

[3] Whether Mr. Macklin and his company owed fiduciary duties to the plaintiff turns on factors such as: Mr. Macklin’s former duties; the extent or frequency of contact between him and customers and/or suppliers; whether he was the primary contact with customers and/or suppliers; the extent that he had access and made use of knowledge of the plaintiff’s customers, their accounts, pricing practices, and the pricing of product and services; and to what extent the plaintiff’s information was confidential. Canadian Hedge Watch Inc. v. Street, 2015 ONSC 454 at para. 29. There is contested evidence on several of these points. The claim is not frivolous.

[4] If fiduciary duties are owed, there is no serious contest concerning the facts that would amount to a breach of those duties. Mr. Macklin took steps before he left to establish a competing enterprise. He solicited drivers and customers to leave the plaintiff and to go with the defendants. It is not yet clear how much he did before he left and how much was after. However, even if solicitation was done after he left, it was within days of Mr. Macklin leaving. This is admitted as Mr. Macklin believed that he was entitled to compete against the plaintiff in light of his assertion that he was an independent contractor. He and MJ Express apparently did not know that independent contractors (if Mr. Macklin was one) may have fiduciary duties to their principals and that fiduciaries (if he was one) may not compete unfairly.

[5] The plaintiff has also established a serious issue to be tried as to whether Mr. Macklin and his company took with them property, including data, belonging to the plaintiff, that was not theirs to take and which may also amount to a breach of the equitable duty of confidentiality. There is contested evidence on some of this. The claim is not frivolous.

[6] The balance of convenience plainly favours the plaintiff. If an injunction is granted, the defendant will be delayed from starting up a new division of its business in an area in which it has not participated previously. Delay of a new enterprise is not generally seen as significant inconvenience although, here, the defendant MJ has invested some funds in its start-up enterprise. Mr. Macklin says that he will be unable to earn a livelihood if he is enjoined from soliciting flower business for MJ Express until the interlocutory return of the motion in three weeks. I do not agree. He will not be able to work for MJ Express doing the things he was hired to do. But there is a serious issue to be tried as to whether doing those things is in breach of contract, breach of confidence, and breach of fiduciary duties. The manner he chose to terminate his relationship with the plaintiff and start-up his relationship with MJ Express was of his own choosing. If an injunction is granted for three weeks, the defendant MJ Express may have other things for him to do or he may need to consider looking elsewhere to compete against his former employer free of the allegations made against him in this proceeding.

[7] By contrast, if an injunction is not granted, the plaintiff will be at risk of suffering serious negative impact to its business by conduct which might ultimately be proven to have been quite wrongful. If that occurs, is it fair, reasonable, and equitable to hold the plaintiff to its remedy in damages?

[8] The plaintiff’s evidence is that as much as 71% of its revenue is at risk to the defendants. It will be seriously negatively affected if the defendants succeed. But, in the three weeks preceding this motion, there is no evidence that the defendants have succeeded in causing any tangible losses to the plaintiff.

[9] Counsel for Mr. Macklin says that the business is driven by pricing. The business is homogeneous and competitive. Clients often go to brokers who shop the business to the lowest priced competitor. As such, he argues that this is not a case where reputation and goodwill are uniquely at risk. However, the defendant also argued, powerfully, that he has long term relationships with the customers that, in many case, pre-date his retainer by the plaintiff. He says that many customers call him at home. He views many of the customers as being “his” customers and prides himself on the quality of service he provides to them. The business involves transporting flowers. Temperature and other shipping variables are involved to protect and deliver customers’ plants and greenery in proper condition. This evidence actually undermines Mr. Macklin’s argument that the business is fungible and is all based on price competition. The more he focuses on his close connection with the customers and his unique level of service, the more he pushes himself towards occupying a fiduciary role and the more he shows the vulnerability of the plaintiff to unfair competition.

[10] Mr. Salsberg argues that the type of harm that the plaintiff may suffer is irreparable in that it is very difficult to quantify and the existence of the business is at stake. Moreover, orders are taken for trucking shipments in future. It may be that the plaintiff has just not felt the impact of the defendants’ competition as yet. How ironic it would be, he argues, if the defendants are left free to compete and manage to strike a deadly blow before the return of the motion on June 3, 2016.

[11] MJ Express argues that it has done nothing wrong. It inquired of Mr. Macklin and was rightly assured that he did not have a non-competition covenant that bound him to the plaintiff. He was not a part-owner of the plaintiff’s business. Unfortunately, MJ Express apparently did not know to inquire into fiduciary duties. I agree with counsel for MJ Express that it has not been shown to have done anything wrong deliberately. It has not hired any of the drivers whom the plaintiff solicited. It has not received any confidential information or data belong to the plaintiff (if Mr. Macklin took any). On the evidence to date, MJ Express has acted in good faith and that favours its side of the equitable balance. Ignorance of the law is no excuse however. There is a serious issue to be tried as to whether MJ Express is a beneficiary of breaches of fiduciary duties and as such, it is properly within the focus of the plaintiff’s claims.

[12] MJ Express also argues that had Mr. Macklin left the plaintiff in the ordinary course, the plaintiff might well have lost some, much, or even all of its business. Mr. Macklin is, after all, the senior manager and the face of the business. The business may have had serious issues surviving without him. The plaintiff may be susceptible to harm then, not due to any wrongdoing, but just due to its own poor succession planning in that it has left itself vulnerable to the loss of its key manager. It is this issue that tips the scales in my view. There is no way to tell whether any losses which may be suffered by the plaintiff are the result of Mr. Macklin leaving or Mr. Macklin and his company breaching their contracts and fiduciary duties if any. MJ Express’s counsel is right, that had Mr. Macklin left in the ordinary course, losses might have been incurred by the plaintiff in any event. But he did not do that. He did not do the forthright, upright thing. He did not work with the plaintiff, his principal for 15 years, on an above-board plan to extricate himself from the business so as to allow him to compete fairly. Instead, he implemented a design which, if he is found to have been a fiduciary, raises a serious issue to be tried as to whether he is competing unfairly. Had Mr. Macklin left in the ordinary course, MJ Express would not yet be in business in its new line having solicited the plaintiff’s drivers and customers. It would not be susceptible to an argument that it has benefited from an illicit springboard into the market place months or years ahead of its ability to do so without benefiting from alleged breaches of contract and fiduciary duty.

[13] I do not think that it lies well in a defendant’s mouth to say, “I may be hurting you illegally, too bad; so sad; I’ll see you in court in a few years to discuss damages.” Not, at least, when its own actions prevent any meaningful assessment and calculation of damages. How will the plaintiff ever prove that the damages it lost were due to Mr. Macklin’s unfair competition (if any) as compared to losses that were inevitable if he had left “properly?” Moreover, in light of the sums involved and the fact that the defendants’ attack is on the core of the plaintiff’s business, I accept, for the time being at least, that the risk of the plaintiff going out of business is real and would be irreparable.

[14] It is also significant that this matter is already scheduled to be heard on an interlocutory basis on June 3, 2016. I am seized of that motion. On consent, I signed an order at the hearing today establishing a schedule for the steps leading to that hearing. In the interim, until the disposition of the motion returnable June 3, 2016, the defendants, including 1643799 Ontario Inc. (which was added as a defendant today on consent), their officers, directors, employees, successors and assigns, anyone acting on the instructions of any of the foregoing, and anyone with knowledge of this order, are prohibited from accepting business from any of the entities listed in Schedule “A” to the plaintiff’s Notice of Motion dated May 11, 2016. Despite the foregoing, the defendants may continue to accept business from brokers, overflow business from competitor truckers, and the four entitles listed in para. 5 of the Affidavit of Brian Macklin sworn May 13, 2016 as long as the business does not involve transporting flowers, plants, or greenery products of any kind.

[15] I decline at this time to order the plaintiff to secure its undertaking on damages without prejudice to the rights of the defendants to raise this issue again on June 3, 2016.

[16] This order is effective at 12:01 a.m., E.D.T., Saturday, May 14, 2016.

[17] The costs of this appearance are reserved to the June 3, 2016 motion.

F.L. Myers J. Date: May 13, 2016