COURT FILE NO.: CV-23-00710992-0000 DATE: 20240530 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: LIVINGART KITCHENS INC. Plaintiff - and – ALEXANDER MERENICH, AM ALPHA CONSTRUCTION TRADE INC., BORIS SOKOLOV, ZAFAR SODIKJONOV also known as ZAFARJON SODIKJONOV, IRADA SODIKJONOVA, RADA GROUP INC., ZAFAR SODIKJONOV also known as ZAFARJON SODIKJONOV CARRYING ON BUSUINESS AS GLOBAL DEVELOPMENT Defendants

Irvin Schein for the Plaintiff Joseph Figliomeni and Salma Kebeich for the Defendants Boris Sokolov, Zafar Sodikjonov also known as Zafarjon Sodikjonov, Irada Sodikjonova, Rada Group Inc., and Zafar Sodikjonov also known as Zafarjon Sodikjonov carrying on business as Global Development Margarita Dvorkina for the Defendants Alexander Merenich and AM Alpha Construction Trade Inc. HEARD : April 30, 2024

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] LivingArt Kitchens Inc. sues three former employees or former independent contractors who departed working for LivingArt; namely: Zafar Sodikjonov, Alexander Merenich, and Boris Sokolov. It also sues Irada Sodikjonova, Zafar’s wife, and Rada Group Inc., which is Ms. Sodikjonova’s corporation. It also sues AM Alpha Construction Trade Inc., which is Mr. Merenich’s corporation.

[2] This is LivingArt’s motion for an interim and interlocutory injunction. LivingArt seeks the following relief by way of Orders:

a. prohibiting the Defendants from profiting from and providing services under any contracts awarded to AM Alpha Construction Trade Inc. or Rada Group Inc. or any other corporate entity of which any of the Defendants are shareholders, officers or directors as a direct or indirect result of Alexander Merenich’s, Boris Sokolov’s and Zafar Sodikjonov also known as Zafarjon Sodikjonov’s breaches of their contracts with LivingArt and obligations to LivingArt;

b. restraining Merenich from directly or indirectly, for the twelve (12) month period following the cessation of Merenich’s employment with LivingArt which ended on December 31, 2023, from carrying on, engaging in, being interested in, advising or consulting on any undertaking that produces, markets, sells or otherwise deals in any products or services that are competitive with those supplied or sold by LivingArt anywhere within Canada and Continental United States;

c. restraining Merenich from directly or indirectly soliciting the trade or patronage of any existing customer of LivingArt for the purpose of providing the customer with products sold and/or the services provided by LivingArt, being a period of twelve (12) months from the date that Merenich left his employment with LivingArt, which ended on December 31, 2023;

d. restraining Merenich, Sokolov, and Sodikjonov from acting in any fashion that is in breach of their duties owed to LivingArt, including any contractual and/or fiduciary duties owed to LivingArt;

e. restraining Sodikjonov from being directly or indirectly involved with a business which is in direct competition with the particular business line of LivingArt;

f. restraining Sodikjonov from directly or indirectly soliciting the trade or patronage of any existing customer of LivingArt for the purpose of providing the customer with products sold and/or the services provided by LivingArt until December 31, 2025;

g. restraining the Defendants from unlawfully interfering with the economic relations of and competing against LivingArt in any manner whatsoever, including by making untrue, derogatory or disparaging comments about LivingArt to the clients of LivingArt;

h. restraining the Defendants from using or disclosing LivingArt's confidential and proprietary information for any purpose whatsoever;

i. prohibiting any subsequent transfer, dissipation, depletion and/or liquidation of any of or all of the real and/or personal properties currently owned by the Defendants purchased with or connected to the funds advanced by LivingArt or gleaned from revenues to be disgorged by the Defendants, pending the resolution of this Action;

j. for the preservation of the Defendants' banking records, financial records and/or corporate records and prohibiting the Defendants and/or any other employee, agent, or third party acting on behalf of the Defendants from removing or destroying any financial record, banking record, and/or corporate record;

k. freezing any and all assets of the Defendants, pending resolution of this Action;

l. requiring the Defendants to deliver to LivingArt, all papers, electronic data or information and other materials in their possession, power or control, which contain any of LivingArt's information or belong to LivingArt and subsequently delete and destroy immediately and permanently any of LivingArt's information saved or stored in any manner on any electronic device in their possession, power, or control;

m. requiring the Defendants to keep detailed records of LivingArt's customers transferring their business to the Defendants and/or any of their associated or related companies and all subsequent transactions carried out by the Defendants with respect to such customers, and to maintain an accounting of all revenues made by the Defendants with respect to such customers;

n. requiring the Defendants to keep detailed records of all LivingArt's prospective customers doing business with the Defendants and/or any of their associated or related companies and all subsequent transactions carried out by the Defendants with respect to such customers, and to maintain an accounting of all revenues made by the Defendants with respect to such customers;

o. requiring an accounting and tracing of all funds received from LivingArt and/or disbursed by the Defendants, and a tracing and restitution of any and all sums improperly transferred, stolen, and/or misappropriated by the Defendants;

p. requiring the Defendants to provide an accounting with respect to money received, directly or indirectly, as part of the corporate opportunities appropriated from LivingArt;

q. requiring the Defendants to provide an accounting for any corporate opportunities appropriated by any of them; and

r. requiring the Defendants to deliver up all records of the accounts with respect to corporate opportunities and projects.

[3] For the reasons that follow, LivingArt’s motion is dismissed.

B. Overview

[4] LivingArt brought an action against departing employees and an incoherent, overreaching, interlocutory motion for an injunction to restrain the defendants Sodikjonov, Merenich, and Sokolov from making a living. LivingArt’s injunction motion was riddled with factual and legal holes and inadmissible evidence.

[5] The Rada Group Defendants (Mr. Sodikjonov, Ms. Sodikjonova, and Rada Group Inc.) responded to the motion with an evasive, unforthcoming, uncandid, and disjointed defence and counterclaim for interference with business relations.

[6] Mr. Merenich and his corporation AM Alpha Construction Trade Inc. (“AM Alpha”) responded with querulous denials, a counterclaim for wrongful dismissal and an improperly proffered affidavit of a forensic document examiner alleging that LivingArt had forged an employment contract.

[7] Mr. Sokolov responded with querulous denials and his own counterclaim for wrongful dismissal.

[8] Much of the evidence from both sides was irrelevant, uncorroborated, unreliable, or unbelievable. Evidence about matters critical to whether the court should exercise its discretion to grant or to refuse to grant an interlocutory injunction was not proffered. The stories of the parties are largely not reconcilable.

[9] It may be the case that the defendants Sodikjonov, Merenich, and Sokolov breached employment contracts or the common law or equitable duties of departing employees, in which case, they will be accountable after a trial; however, to varying degrees, depending upon which defendant was the target for the injunction, LivingArt failed miserably to satisfy the three-branched test for an interlocutory injunction.

[10] LivingArt’s motion should be and is dismissed.

C. Facts

[11] For this interlocutory motion, there were fourteen affiant witnesses. The witnesses provided affidavits and transcript evidence. The evidentiary record of affidavits, transcripts, exhibits and answers to undertakings was about 10,000 pages. The parties provided piles of hearsay and self-serving spin evidence about the involvement of the main actors and about others who had roles to play or who witnessed the events. There were some relevant actors who did not testify, and some actors who had hearsay surrogates to describe the events. LivingArt and some of the defendant parties proffered inadmissible reports from experts. The reports were attached to other witnesses’ affidavits, which makes the expert’s evidence some exponential degree of hearsay.

[12] A trial judge is in a far better position to resolve the too numerous-to-mention conflicts in the evidence, the too numerous-to-mention credibility and reliability issues, and the too numerous-to-mention requests for adverse findings of fact about questions that a witness refused to answer on his or her cross-examination.

[13] What follows are my findings of fact solely for the purposes of LivingArt’s interlocutory motion. A trial judge might arrive at different conclusions.

1. Dramatis Personae

[14] The parties, witnesses, and actors in this action are:

• The Plaintiff, LivingArt Kitchens Inc., carries on business as a supplier and builder of kitchen cabinetry for high rise residential construction projects. It is owned by Oksana Rudenko (75%) and Vladik Gladilen (25%). LivingArt hires employees and independent contractors as its workers. LivingArt says that its operating and engineering methods about constructing and installing kitchen cabinetry are unique, proprietary, and confidential know-how. LivingArt safeguards its information by issuing individual work devices that are password protected. Permissions for LivingArt’s workers to access information varies on a worker-by-worker basis. Access to LivingArt’s premises is secured with access cards and fingerprint recognition systems. LivingArt has a workforce numbering in the hundreds. To date LivingArt has been a quite successful and growing business. It speculates, however, that it will be decimated by the unfair competition of the Rada Group Defendants who are being assisted by the Defendants Merenich and Sokolov. LivingArt alleges that that the Rada Group Defendants are unfairly competing by using LivingArt’s know-how, drawings, and clientele to win contracts.

• Oksana Rudenko is Vladik Gladilen’s common law spouse. She is the majority shareholder of LivingArt. She is the mother of Iliya Nazerenko, who works for LivingArt in a senior position.

• Vladik Gladilen is Oksana Rudenko’s common law spouse. Mr. Gladilen is a professional engineer. He is a minority shareholder of LivingArt. He is the father of Joseph Gladilen, who works for LivingArt in a senior position.

• The Defendant Zafar Sodikjonov began working for LivingArt in 2012 as a project engineer. He subsequently was hired by LivingArt as a sole proprietor. Mr. Sodikjonov does not have a non-compensation agreement or a confidentiality agreement with LivingArt. As an independent contractor, Mr. Sodikjonov used the business name Global Development. Mr. Sodikjonov is alleged to have represented to LivingArt’s clients that he had been made a partner, which may or may not be true. Corporations have shareholders, not partners, and Mr. Sodikjonov was not an owner of LivingArt, but colloquially speaking, a partner shares the profits of the enterprise and how Mr. Sodikjonov was paid was not disclosed. He deposed that he received bonuses in kind of the products produced by LivingArt. As will be described below, Mr. Sodikjonov worked for LivingArt, and was an important but not a key employee. He departed, and then began working for his spouse’s corporation, which competes with LivingArt.

• The Defendant Irada Sodikjonova is Zafar’s spouse. She worked at LivingArt from May 2014 to February 2015 and from March 2018 to March 2019 as a bookkeeper. She had a business in the furnishing trade that did not compete with LivingArt. On February 21, 2022, she incorporated Rada Group Inc. Ms. Sodikjonova is the sole director of Rada Group. Rada Group employs Mr. Sodikjonov, whom LivingArt alleges is the chief operating officer of the enterprise. Rada Group does cabinetry work but does not confine its work to kitchens. Rada Group is a competitor of LivingArt insofar as kitchen cabinetry is concerned. Mr. Sodikjonov denies that Rada Group is his corporation.

• The Defendant Boris Sokolov immigrated to Toronto from Russia in April of 2018. He is married and is the sole provider for his wife and their infant child. He worked as a project engineer. He had no role in management or management-level decision-making. About two years into his employment, he was presented with a written employment agreement. The employment agreement contains non-competition and confidentiality provisions. He signed the employment agreement without any legal advice. He says he signed it under duress. Mr. Sokolov was a minor employee at LivingArt and had no authority with respect to the business affairs of the corporation. Mr. Sokolov left his employment at LivingArt in May 2022.

• The Defendant Alexander Merenich immigrated to Canada with his wife and six-year-old son in December 2021 having accepted an employment offer from LivingArt. Mr. Merenich’s mother is a Florida acquaintance of Ms. Rudenko and on his mother’s recommendation, Mr. Merenich was hired by LivingArt. He signed a two-page employment agreement. The agreement does not contain any non-competition or non-solicitation provisions. He commenced work in January 2022. He was a minor employee at LivingArt. He had no negotiating authority, and his work was overseen by Ms. Rudenko, Mr. Gladilen, and Vladimir Demyanenko, LivingArt’s Operations Manager.

• Iliya Nazerenko, who studied civil engineering at McMaster University, joined LivingArt in 2005 and he is now the Vice President, Operations. Mr. Nazerenko is Ms. Rudenko’s son.

• Joseph Gladilen is Vladik Gladilen’s son. He was employed at LivingArt in a senior management position.

• Vladimir Demyanenko is an employee of LivingArt. He is the Operations Manager.

• Olga Guci is an employee of LivingArt. She is the Office Manager.

• Martin Jirgenson is an employee of LivingArt. He is a supervisor. In the summer of 2022, Mr. Jirgenson worked for Rada Group.

• Lyubuv Cheypesh is an employee of LivingArt.

• Olena Orlov is an employee of LivingArt.

• Dmitry Yakunin is an employee of LivingArt.

• Dmytro Vonsiak is a former employee of LivingArt and of Rada Group. Mr. Vonsiak worked at LivingArt from April 2019 to July 2020. He worked for Rada Group for nine months.

• Serghey Striiuc is self-employed. He operates a computer numerical control machine and is a software trainer. He has been retained by Mr. Sodikjonov and Mr. Sokolov. Mr. Striiuc was retained by Rada Group to deliver training services relating to CNC machines, a machine used to make furniture and cabinetry.

• Kevin Lo is a forensic computer analyst of MT>3, a forensic examination firm that was retained by LivingArt to assist with its investigation of the defendants. MT>3 was asked to examine LivingArt’s electronic records and electronically stored information to determine whether it was accessed and hacked by the departed employees. Mr. Lo concluded that Mr. Sodikjonov and Mr. Merenich had copied thousands of computer files onto their own storage devices before they departed from LivingArt. Mr. Sodikjonov and Mr. Merenich deny any improper copying or deleting of files.

• Greg Bembridge of TEELtechnologies Canada was retained to conduct a forensic analysis of Mr. Merenich’s access to confidential information on December 30, 2022. Mr. Bembridge’s report was included as an exhibit to Vladik Gladilen’s affidavit. He came to the same conclusions as Mr. Lo that Mr. Sodikjonov and Mr. Merenich copied LivingArt’s computer files before departing from the business.

• Cameron Bakker is the Senior Vice President of Axiom Builders Inc. He was involved with a project in Burnaby, British Columbia known as the Central Park House Project. In March 2021, Axiom entered into a letter of agreement with LivingArt with respect to this project. Ultimately this agreement was cancelled, and a similar agreement was entered into by Axiom with the Rada Group. LivingArt alleges that Mr. Sodikjonov misappropriated this business opportunity that belonged to LivingArt.

• Sarba Sohail of Docufraud Canada, Forensic Document Experts is a forensic document examiner. He was retained by Mr. Merenich to determine the authenticity of the employment agreement with LivingArt that he was alleged to have signed. Mr. Sohail’s opinion was that the document was a forgery. Mr. Sohail’s report was included as an exhibit to Mr. Merenich’s affidavit.

2. Chronology

[15] Mr. Sodikjonov began work with LivingArt around 2012 as an employee doing general labour. At some point in time, he began working as an independent contractor. He was a sole practitioner using the business style Global Development. How Mr. Sodikjonov was remunerated for his work at LivingArt was not disclosed.

[16] In 2020, during the COVID-19 pandemic, for extended periods of time, Ms. Rudenko and Mr. Gladilen, the owners of LivingArt, were living in Florida. During the pandemic, they say they placed Mr. Sodikjonov in charge of LivingArt’s marketing, contracting, sales and contract administration. They say Mr. Sodikjonov had the authority to negotiate and administer contracts on behalf of LivingArt. He, however, did not have the authority to sign the contracts for LivingArt. Mr. Sodikjonov denies ever having a senior management position at LivingArt.

[17] I find as a fact that while Mr. Sodikjonov was a valued employee, he was not senior management. Throughout his career working as an employee or independent contractor, he had the normal legal responsibilities of an employee to his or her employer. It was not established that Mr. Sodikjonov had a fiduciary relationship to LivingArt or any fiduciary obligations to LivingArt.

[18] In 2021, LivingArt began to transition its employees and consultants to written agreements containing confidentiality and restrictive covenants. In early 2022, Mr. Sokolov signed an employment contract that contained restrictive covenants. He testified that within months of his signing the agreement, he was targeted for dismissal and was bullied and harassed at work.

[19] On March 22, 2021, LivingArt entered into a letter of agreement with Axiom Builders Inc. with respect to a high-rise condominium project in Burnaby, British Columbia, known as the Central Park House Project. Mr. Sodikjonov was authorized to sign the letter of agreement, and he administered the contract with the developer.

[20] In October 2021, Mr. Sodikjonov identified himself as “VP” of LivingArt to Woodworking Network, an industry magazine. This was a false identifier. He was not a vice-president. This false identifier does not establish that Mr. Sodikjonov had a fiduciary relationship with LivingArt. He was an important manager of the work product of LivingArt, but he was not a manager of the business making financial and governance decisions for the corporation.

[21] On February 8, 2022, Mr. Merenich was hired as LivingArt’s corporate sales manager. Mr. Merenich had the normal legal responsibilities of an employee to his or her employer. He was not a senior manager. He had no fiduciary obligations. LivingArt says that Mr. Merenich signed an employment agreement dated February 8, 2022. The original of this agreement is missing and LivingArt alleges that it was mysteriously removed by one or other of the defendants. Mr. Merenich denies signing the contract, and he alleges that the copy is a forgery. He says that he saw the alleged employment agreement for the first time after LivingArt’s litigation had commenced.

[22] For the interlocutory motion, as noted above, Mr. Merenich proffered an expert report from Mr. Sohail. It was Mr. Sohail’s opinion that the copy of the employment agreement was digitally manipulated. It was Mr. Sohail’s opinion that Mr. Merenich’s signature and initials had been cut and pasted into the document from other documents. Mr. Sohail opined that Ms. Rudenko’s signature contains discrepancies that suggested digital alterations.

[23] On February 21, 2022, while Mr. Sodikjonov was still working for LivingArt, Ms. Sodikjonova incorporated Rada Group Inc. Ms. Sodikjonova is the sole director of Rada Group. Although Rada Group does not confine its work to kitchen cabinetry, it is a competitor of LivingArt insofar as kitchen cabinetry in residential land development projects is concerned. Although he said that Rada Group was his wife’s business, for the purposes of the injunction motion, I find that Mr. Sodikjonov came to be or was from the outset the chief operating officer of Rada Group.

[24] It was Mr. Lo’s opinion evidence that on March 30, 2022, before he ended his work relationship with LivingArt, Mr. Sodikjonov copied and downloaded 2,900 LivingArt computer files onto an external storage device. Mr. Sodikjonov provided this information to Rada Group. Mr. Sodikjonov had copied LivingArt’s files long before his relationship with it ended. He denies any improper copying of files.

[25] It was Mr. Lo’s opinion evidence that again on April 26, 2022, before he ended his work relationship with LivingArt, Mr. Sodikjonov downloaded 4,300 LivingArt computer files onto an external storage device. Mr. Sodikjonov provided this information to Rada Group.

[26] It was Mr. Lo’s opinion evidence that on April 27, 2022, before he ended his work relationship Mr. Sodikjonov deleted over 2,300 LivingArt computer files from its computer system.

[27] In May 2022, Mr. Sokolov quit his employment at LivingArt. Of the personal defendants, Mr. Sokolov was the first to depart. Mr. Sokolov currently works in the furniture industry unrelated to kitchen cabinetry. He does some occasional freelance work for Rada Group.

[28] It was Mr. Lo’s opinion evidence that on July 19, 2022, before Mr. Sodikjonov departed, he deleted over 30,000 LivingArt computer files from its computer system.

[29] In August 2022, LivingArt says that Mr. Sodikjonov demanded to be made a partner of LivingArt and he threatened to cause problems if his demand was not met. His demands were not met and LivingArt terminated its business relationship with Mr. Sodikjonov. Mr. Sodikjonov was thus the second of the personal defendants to depart LivingArt. Mr. Sodikjonov immediately began to work full-time for Rada Group. Mr. Sodikjonov’s version of his severing relations with LivingArt amounts to not much more than deciding to support his wife in her new business because he had become uncomfortable working with Mr. Gladilen.

[30] Around August 2022, Mr. Merenich replaced Mr. Sodikjonov and became responsible for the Central Park House Project in British Columbia.

[31] Meanwhile at Rada Group, Mr. Sodikjonov gave Mr. Jirgenson, who was working for Rada Group, a memory stick. The memory stick contained LivingArt drawings. The memory stick also contained Rada Group’s shop drawings for a project known as the ROWE Townhomes Project. Mr. Sodikjonov had copied LivingArt’s engineering details and construction methods to prepare the ROWE Townhomes Project drawings.

[32] At Rada Group, Mr. Sodikjonov also gave Mr. Vonsiak drawings bearing the LivingArt name.

[33] In late October 2022, six months after he had departed from LivingArt, Mr. Sokolov began working part-time at Rada Group. He made files for cutting cabinetry by CNC machines.

[34] In the fall of 2022, there was a falling out between Mr. Merenich and LivingArt. Mr. Merenich’s version of the deterioration of his relationship with LivingArt was that he had discovered and had reported errors in a tender chart prepared by a more senior employee. He says that his whistleblowing led to retaliatory treatment. He says he was disinvited to client meetings, and he was advised that the owners were unhappy with how he was conducting himself.

[35] In November 2022, Ms. Rudenko told Mr. Merenich’s mother that he should look for another job.

[36] It was Mr. Lo’s opinion evidence that on December 30, 2022, while still employed at LivingArt, Mr. Merenich downloaded 20,000 computer files onto an external storage device and also deleted 200 files. Amongst the copied fields was a folder that contained all of LivingArt’s potential projects for the period 2023-2026. Mr. Merenich denies that he deleted or copied any computer files or misappropriated any confidential or proprietary information.

[37] In early January 2023, Mr. Merenich was asked to sign a resignation later and date it, January 1, 2023, Mr. Merenich resigned from LivingArt. There is a dispute between the parties as to whether he was fired.

[38] After his termination, Mr. Merenich worked as a food delivery driver for several months to support his family. Then in the spring of 2023, as a sole proprietor he began work as a trader and supplier of raw materials and goods in the cabinetry and furniture business.

[39] On May 8, 2023, Mr. Merenich incorporated AM Alpha. It is a trading company that provides delivery of goods. It does not manufacture, design, engineer or install kitchens or prepare drawings for kitchen cabinets. It imported kitchen cabinetry supplies. Some of this cabinetry was supplied to Rada Group.

[40] Mr. Sodikjonov gave Mr. Merenich drawings, which were originally LivingArt’s drawings and asked him to use these drawings to obtain cabinetry supplies for Rada Group.

[41] In May 2023, LivingArt’s European supply partner, ZOV-LenEUROMEBEL (“Zov”) notified LivingArt that it had received an inquiry from Mr. Merenich of AM Alpha about the Central Park House Project. Mr. Merenich had supplied Zov with LivingArt’s drawings and technical details. Zov was not prepared to deal with Mr. Merenich without LivingArt’s consent.

[42] In July 2023, LivingArt learned that Mr. Merenich had sent LivingArt’s drawings and technical details to other suppliers for the Central Park House Project. There was a meeting between Mr. Merenich and Ms. Rudenko. Mr. Merenich testified that he told Ms. Rudenko that Zov had told him that LivingArt would allow him to deal with Zov in consideration of a 10% fee.

[43] Unbeknownst to Mr. Merenich, Ms. Rudenko audio recorded the meeting.

[44] At the meeting, Ms. Rudenko denied any agreement about a fee. She advised Mr. Merenich that he did not have the right to pass on engineering designs that had been prepared by LivingArt to anyone.

[45] In August 2023, LivingArt commenced an action against Mr. Merenich and his company. An urgent ex-parte motion was scheduled. The motion, however, did not proceed. The defendants did not become aware of this previous action until April of 2024.

[46] On September 24, 2023, Axiom, the developer of the Central Park House Project, issued a notice of termination of its contract to LivingArt.

[47] Axiom then awarded essentially the same contract to Rada Group at a higher price. The contract incorporated LivingArt’s designs and drawings, which Mr. Bakker on behalf of the developer believed it had already purchased from LivingArt.

[48] Mr. Bakker testified that Axiom terminated its contract with LivingArt because Mr. Sodikjonov had repeatedly made requests for changes to the letter of agreement contract and these changes were never finalized. LivingArt submits that before he departed LivingArt, Mr. Sodikjonov had intentionally undermined LivingArt’s contracting with Axiom in order to secure a corporate opportunity for Rada Group. These allegations are denied by Mr. Sodikjonov. He blames LivingArt for not responding to his requests that the agreement with Axiom be finalized.

[49] In addition to the contract between Axiom and the Rada Group, there was evidence that Mr. Sodikjonov had secured for the Rada Group the contracts for two high-rise condominium projects being constructed in Toronto by the Madison Group. The Madison Group had been a regular customer of LivingArt. The projects were known as the Capital Project and the Alias Project.

[50] There was evidence that Mr. Merenich delivered cabinetry drawings for the Capital and Alias Projects. The drawings were identical to LivingArt’s drawings.

[51] There was evidence that Mr. Sodikjonov had secured for Rada Group a project in British Columbia known as the ROWE Townhomes Project. The evidence suggested that the Rada Group was offering engineering services identical to those offered by LivingArt.

[52] There was no evidence that Mr. Merenich or his company had or has any contracts with any of LivingArt’s clients. Mr. Merenich was providing services as a supplier to the Rada Group and others.

[53] The evidence for the interlocutory injunction motion was that after the personal Defendants departed, LivingArt’s revenues increased.

[54] LivingArt’s explanation for its continuing to grow business was that the revenue was earned from contracts entered into before the personal Defendants departed. It submitted that the detrimental irreparable harm on LivingArt’s business will be felt within two to four years. LivingArt submitted that there has been a significant decline in projects secured in 2023 for which it blames the Rada Group. LivingArt submitted that the risk of harm was very high because the Defendants had information about the entirety of LivingArt’s client base in the files that had been unlawfully copied and removed from its computers.

[55] LivingArt did not proffer any financial statements that would show its current or past income. It did not provide any accounting analysis to support its claims of loss of income. It refused to disclose how much the owners and their children earned at LivingArt.

D. Procedural and Evidentiary Background

[56] On December 7, 2023, LivingArt commenced this action by Statement of Claim.

[57] On February 21, 2024, LivingArt attended Civil Practice Court. Justice Chalmers made the following endorsement:

The Plaintiff seeks a date for an injunction on an urgent basis. The Plaintiff states that 3 senior employees have left the company and are now competing contract to the confidentiality agreements. The Defendants deny the allegations. I am prepared to schedule the motion on an urgent basis. The motion is scheduled for April 30, 2024 for a full day. The timetable set out below is ordered. […]

[58] On February 28, 2024, LivingArt brought this motion for interlocutory injunctive relief. Its Motion Record (2,257 pages) contained its Notice of Motion, its Statement of Claim and the affidavits of Mr. Nazarenko. Mr. Nazarenko’s affidavit contained Mr. Lo’s reports as an exhibit.

[59] On March 25, 2024, Mr. Sodikjonov, Ms. Sodikjonova, and the Rada Group Inc., delivered a Statement of Defence and Counterclaim. The Counterclaim claims damages of $2.0 million for intentional interference with economic relations and unlawful means.

[60] On April 1, 2024, Mr. Merenich and AM Alpha delivered a Statement of Defence and Counterclaim. In the Counterclaim, Mr. Merenich, among other things, claimed: a declaration that the employment agreement was unenforceable; damages for wrongful dismissal; and damages for breach of the Employment Standards Act, 2000. [1]

[61] The same day, Mr. Sokolov delivered a Statement of Defence and Counterclaim. In the Counterclaim, he claimed, among other things, a declaration that the employment agreement was unenforceable; damages for wrongful dismissal; and damages for breach of the Employment Standards Act, 2000. On the same day, Mr. Sokolov delivered his Responding Motion Record (35 pages). It contained his affidavit.

[62] On April 2, 2024, Mr. Sokolov was cross-examined.

[63] On April 8, 2024, Mr. Merenich and AM Alpha delivered a Responding Motion Record (235 pages). It contained his affidavit. On the same day, Mr. Sodikjonov, Ms. Sodikjonova, and Rada Group delivered their Responding Motion Record (193 pages). It contained Mr. Sodikjonov’s affidavit and the affidavit of Cam Bakker.

[64] On April 10, 2024, LivingArt delivered the Reply Record. The Reply Record is 4,593 pages long and it contained eleven affidavits. (Vladik Gladilen, Nazarenko, Rudenko, Guci, Jirgenson, Vonsiak, Demyanenko, Striiuc, Yakunin, Orlov and Cheypesh). Also on April 10, 2024, Messrs. Gladilen, Nazarenko, and Striiuc and Ms. Orlov were cross-examined.

[65] On April 11, 2024, Mr. Merenich and AM Alpha delivered a Supplementary Responding Motion Record (76 pages). It contained Mr. Merenich’s affidavit which attached the Forensic Report of Sarba Sohail. Also on April 11, 2024, Messrs. Merenich and Sodikjonov were cross-examined.

[66] On April 16, 2024, Messrs. Demyanenko and Vonsiak and Mesdames Cheypesh and Orlov were cross-examined.

[67] On April 17, 2024, Messrs. Bakker, Nazarenko, and Yakunin were cross-examined.

[68] On April 18, 2024, Ms. Rudenko was cross-examined.

[69] On April 23, 2024, LivingArt delivered a supplementary affidavit (27 pages) of Ms. Rudenko containing a translation of her meeting with Mr. Merenich.

[70] LivingArt supported its motion for an injunction with the following evidentiary record:

a. Affidavit dated April 10, 2024 of Mr. Demyanenko.

b. Affidavit dated April 10, 2024 of Mr. Gladilen.

c. Affidavit dated April 10, 2024 of Ms. Guci.

d. Affidavit dated April 10, 2024 of Mr. Jirgenson.

e. Affidavits dated February 7, 2024 and April 10, 2024 of Mr. Nazarenko.

f. Affidavits dated April 10, 2024 and April 23, 2024 of Ms. Rudenko.

g. Affidavit dated April 10, 2024 of Mr. Striiuc.

h. Affidavit dated April 10, 2024 of Mr. Yakunin.

[71] The Defendants resisted LivingArt’s motion and relied on the following evidentiary record:

a. Affidavit dated April 8, 2024 from Mr. Bakker.

b. Affidavits dated April 8, 2024 and April 11, 2024 from Mr. Merenich.

c. Affidavit dated April 8, 2024 from Mr. Sodikjonov.

d. Affidavit dated April 5, 2024 from Mr. Sokolov.

[72] It may be observed that there were numerous procedural regularities that were ignored or waived. The proper procedure is to complete the exchange of affidavits before cross-examinations. The proper procedure is that a moving party should not split its case by delivering reply material that is not proper reply to the responding party’s material.

[73] It may be observed that the parties also ignored the proper procedure for the admission of expert witness reports.

E. Legal Background

[74] Section 101 of the Courts of Justice Act [2] provides the court with the jurisdiction to grant interlocutory injunctions. Section 101 states:

Injunctions and receivers

101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory Order may be granted or a receiver or receiver and manager may be appointed by an interlocutory Order, where it appears to a judge of the court to be just or convenient to do so.

Terms

(2) An Order under subsection (1) may include such terms as are considered just.

[75] A purpose of an interlocutory injunction is to preserve the status quo until the legal right asserted by the plaintiff can be dealt with by the trial court. [3]

[76] In RJR-MacDonald Inc. v. Canada (Attorney General) [4], the Supreme Court of Canada set out the test used for granting or refusing to grant an interlocutory injunction. Under the RJR-MacDonald test for an interlocutory injunction, the court considers three factors: (1) whether the plaintiff has presented a serious issue to be tried or, in a narrow band of cases, a strong prima facie case; (2) whether the plaintiff would suffer irreparable harm if the remedy for the defendant's misconduct were left to be granted at trial; and (3) where does the balance of convenience or inconvenience lie in the granting or the refusing to grant an interlocutory injunction.

[77] The higher threshold of showing a strong prima facie case is required where the outcome of the interlocutory injunction, practically speaking, will make proceeding to trial pointless for one party or when the plaintiff’s right can be exercised only immediately or not at all. [5] The strong prima facie test standard is the measure used for determining whether it is appropriate to enforce a restrictive covenant by an injunction that would restrain an individual’s ability to make a living and to use his or her knowledge and skills obtained during employment. [6] The strong prima facie case test applies to allegations of common law fiduciary duties of an employee. [7]

[78] To find a strong prima facie case, the motion judge must be satisfied after an extensive review of the evidence of the merits of the case that there is a strong likelihood on the law and the evidence presented that the moving party would ultimately be successful at trial in proving the allegations set out in the notice of motion. [8]

[79] Under the RJR-MacDonald test, the court considers whether the plaintiff or applicant has shown that there is a serious issue to be tried in the sense that the plaintiff or applicant has a viable claim. For most cases, this factor sets a low threshold, and this approach negates the need of any intensive review of the merits at the preliminary phase of the proceedings. However, if its consideration of the other elements of the test is inconclusive, the court may revisit the question of the strength or merits of the plaintiff's case as an aspect of the balance of convenience factor. [9]

[80] The irreparable harm analysis means the court will consider whether damages awarded after a trial will provide the plaintiff or applicant with an adequate remedy without the need for an interlocutory remedy. [10] The onus is on the party seeking an injunction to place sufficient financial and other evidence before the court showing that irreparable harm will result. [11] The onus is on the plaintiff or applicant to show that if made to wait for a hearing where damages are awarded, then he or she will suffer irreparable harm. If damages or some other trial remedy would come too late or be inadequate to repair the harm or be insufficient to do justice, then the harm may be said to be irreparable. Evidence of irreparable harm must be clear and not speculative. [12]

[81] Examples of irreparable harm noted in the RJR-MacDonald judgment included: the plaintiff being put out of business; the plaintiff suffering a permanent injury to its business reputation; [13] the plaintiff suffering a permanent loss of market share; [14] and the plaintiff’s property being permanently depleted. Injury to the goodwill of a business may constitute irreparable harm. [15] Passing off and using another’s trade name may constitute irreparable harm. [16]

[82] A loss of market share, a loss of goodwill, or damage to reputation can, in a given case, constitute irreparable harm; [17] however, these losses are not necessarily or categorically irreparable harm, and the attendant damages from a loss of market share, a loss of goodwill or damage to reputation are not necessarily unquantifiable. [18] In Curran Farm Equipment Ltd. v. John Deere Ltd. [19], the Divisional Court stated that: “if the nature of the damages can be calculated in money, then no matter how difficult it may be to quantify the damages, the court should decline to grant an injunction”.

[83] The balance of convenience analysis considers what is the effect on the parties and sometimes on third parties of the court granting or not granting the interlocutory injunction. [20] This analysis involves a determination of which of the two parties will suffer the greater harm from the granting or the refusal to grant an interlocutory injunction pending a decision on the merits. In this context, the court will need to compare and contrast the harm that the plaintiff may suffer if the interlocutory injunction is refused with the harm that the defendant would suffer that would not be reparable by the plaintiff's undertaking as to damages if the interlocutory injunction is granted. The factors that the court may consider in assessing the balance of convenience and the weight to be given to them are indeterminate and will vary from case to case. [21]

[84] If the plaintiff's case seems weak, then the undoubted convenience of an injunction may not balance the inconvenience of the defendant suffering the interference with his or her rights based on a doubtful claim. Conversely, if the merits of the plaintiff's case seem quite strong then the plaintiff's inconvenience of being denied an interlocutory remedy may seem to outbalance the inconvenience of the defendant having to suffer a restraint on his or her rights. [22]

[85] It remains to be determined whether LivingArt has been harmed by the competition from Rada Group. It was not established on the evidence presented on the motion that the harm to LivingArt’s business is irreparable either in the sense that it cannot sustain its place in the marketplace or in the sense that the remedies of damages and disgorgement would come too late at trial to do justice.

F. Discussion and Analysis

[86] In the immediate case, LivingArt’s motion for injunctive relief was of the type that requires establishing a strong prima facie case; it failed to show a strong prima facie case.

[87] In the immediate case, LivingArt’s motion for an interlocutory injunction required it to prove irreparable harm; it failed to do so.

[88] In the immediate case, LivingArt’s motion for an interlocutory injunction required it to show that the balance of convenience favoured granting the injunction; it failed to do so.

[89] LivingArt’s case against the Defendants is built upon the misappropriation of confidential information by a fiduciary or by employees bound by common law or equitable duties to the employer. For the purposes of this motion, I am prepared to assume that Messrs. Sodikjonov and Merenich departed from their relationship with LivingArt with confidential or proprietary information, but this is just a generous assumption for the purposes of the motion.

[90] It is a generous assumption because the expert evidence upon which LivingArt depended to show that Messrs. Sodikjonov and Merenich (but not Mr. Sokolov) misappropriated computer documents was not admissible evidence because of the procedural irregularities. However, even with this generous assumption, LivingArt did not demonstrate a strong prima facie case. I have doubt about whether the information taken from LivingArt was genuinely confidential information. It may be that the information was capable of being reconstituted without the assistance of copied computer files. LivingArt has no copyrights, patents, or trademarks. I have doubt whether there is something special or unique about LivingArt’s know-how or about its operational or business processes. The evidence suggested that the drawings of the cabinetry desired by the clientele came from the clientele. Mr. Merenich testified he was never told that LivingArt had some unique technology. The other defendants disputed that there was anything unique about LivingArt’s processes. At least some of the information alleged to be confidential would be information available from prior education, general knowledge and experience gained from employment.

[91] Whether there is genuine confidential and proprietary information are matters that will have to be determined at trial. For present purposes, I conclude that LivingArt has not demonstrated a strong prima facie case of the misappropriation or the conversion of confidential or proprietary information.

[92] There is, in any event, no evidence that Mr. Sokolov did anything other than quit working for LivingArt to work in carpentry work of a more general type than the specialized work of LivingArt that focused on kitchen cabinetry. His work for Rada Group was occasional part-time work. Based on just the evidence submitted on this interlocutory motion, it was a gross overreach to seek to enjoin Mr. Sokolov.

[93] In the absence of a valid restrictive covenant, ordinary employees are free to compete with their former employers provided that they do not misappropriate proprietary or confidential information such as customer lists or trade secrets, but employees who may be characterized as "top management", "senior management" or a "key employee" may have a post-employment fiduciary duty that precludes them soliciting a former employer's clients or customers. [23] Mr. Sokolov and Mr. Merenich were ordinary employees. In all events, there is no strong prima facie case that Messrs. Sodikjonov, Merenich, and Sokolov had a fiduciary relationship with LivingArt and the cases against Merenich and Sokolov are the far opposite of strong.

[94] In the departing worker or employee context, a fiduciary relationship exists when: (a) the departing worker had the scope for the exercise or discretion of power; (b) he or she could use such discretion or power unilaterally to affect the employer’s legal or practical interests; and (c) the employer is vulnerable to the worker’s discretionary power. There must be “evidence of a mutual understanding that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party.” [24]

[95] There is some small traction that Mr. Sodikjonov might arguably be a fiduciary, but it is not a strong prima facie case. He was not an owner, officer, or director of LivingArt. He did not have discretion or unilateral authority to bind LivingArt contractually. The contracts required the approval of more senior managers. He was not involved in the business’s financing, human relations, or corporate governance.

[96] Messrs. Merenich and Sokolov were not directors or officers of LivingArt. They did not and could not bind LivingArt to any contracts. They had no access to LivingArt’s financial, banking, income tax or accounting information. They were not responsible for strategic or management-level decision-making. They were not involved in the business’s financing, human relations, or corporate governance.

[97] Mr. Sodikjonov is not the signatory to a worker contract with non-competition, non-solicitation, or confidentiality provisions. Mr. Merenich denies signing any employment agreement with restrictive covenants and alleges that the agreement that he is alleged to have signed is a forgery. He also asserts that the non-competition clause in the agreement is unenforceable as contrary to the Employment Standards Act, 2000. While Mr. Sokolov did sign an employment contract with a non-competition clause, a confidential information clause, and a non-solicitation clause, it is contestable that he breached these provisions, and there is a reasonable strong argument that the restrictive covenants are illegal as contrary to the Employment Standards Act, 2000.

[98] LivingArt has not demonstrated irreparable harm. It did not provide sufficient financial or other evidence to show irreparable harm. Its evidence of irreparable harm was largely if not entirely speculative.

[99] The balance of convenience overwhelmingly favoured not granting the injunction. LivingArt’s eighteen-paragraph multifaceted claim for injunctive relief was grossly overreaching and not necessary to preserve the status quo. Damages are an adequate remedy if it is established that any of the Defendants misappropriated confidential or proprietary information or breached employment contracts.

[100] LivingArt’s motion is an attempt to kill competition from Rada Group and to deprive Messrs. Sokolov and Merenich of a livelihood and the ability to use their own knowledge and expertise.

[101] LivingArt will be able to carry on successfully its business were the court to grant or refuse to grant an injunction, but the proposed injunction is grossly overreaching and unnecessary given that damages are an adequate remedy. That said, in any event, the balance of convenience favours not granting any injunction because the defendants would effectively be put out of their livelihoods and their business should an injunction be granted. Provided it competes fairly, the Rada Group is entitled to compete with LivingArt and generally speaking the law does not support restraint of trade. Whether the Rada Group is competing unfairly remains to be determined and the balance of convenience favours not granting an injunction and rather leaving LivingArt with its remedy of damages.

G. Conclusion

[102] For the above reasons, LivingArt’s motion is dismissed.

[103] If the parties cannot agree about costs, they may make submissions in writing beginning with the Defendants’ submissions within ten days of the release of these Reasons for Decision followed by LivingArt’s submissions within a further ten days.

Perell, J. Released: May 30, 2024