Court of Appeal for Ontario

Date: 2018-03-28 Docket: C64150

Judges: Feldman, Pardu and Benotto JJ.A.

Between

Louie Cosolo Plaintiff (Respondent)

and

Geo. A. Kelson Company Limited Defendant (Appellant)

Counsel

For the Appellant: Geoff Hall and Patrick Pengelly

For the Respondent: Patrick Monaghan and Michelle Fan

Heard: March 1, 2018

On Appeal

On appeal from the order of Justice Paul Perell of the Superior Court of Justice, dated July 5, 2017, with reasons reported at 2017 ONSC 4150.

Reasons for Decision

[1] Cosolo is an engineer who was employed by the appellant engineering firm between 2005 and October 30, 2015, becoming a vice-president in July, 2011. During his employment, Cosolo acquired 43,000 Class E common shares of Kelson, which he sold to the company in August 2015 for $891,820. This amount was to be paid in ten installment payments of $89,182 each plus interest on the outstanding balance.

[2] He received the first installment before resigning in October 2015, but in 2016, after he had become the CEO of a rival engineering firm, Kelson refused to make further payments. It alleged that Cosolo had breached his fiduciary duties by soliciting Kelson employees to join him at the rival engineering firm and by using Kelson's confidential information to compete against Kelson.

[3] Cosolo sued Kelson for $802,638 plus interest for breach of contract. Kelson defended and asserted a right of setoff for damages for breach of fiduciary duty. When Cosolo moved for summary judgment, Kelson resisted, submitting that there were genuine issues for trial and that a proper adjudication of the case would require full discovery and a full trial. Although Kelson cross-examined on the affidavits filed in support of the summary judgment motion, it did not pursue additional documentary discovery before the summary judgment motion was heard.

[4] The motion judge granted summary judgment to Cosolo for $750,000, after applying a discount rate of 7% to the outstanding debt. Both sides presented expert evidence on the discount rate, but neither was given the financial information that was requested from Kelson that would affect the rate.

[5] The motion judge found that as vice-president of Kelson, Cosolo had access to sensitive, confidential and proprietary information about Kelson, and that Cosolo had a fiduciary relationship with Kelson. However, the motion judge found that Cosolo did not cause any harm to Kelson by any breach of fiduciary duty. He found that Cosolo did not use any confidential or proprietary information from Kelson, that the employees who left Kelson to work with Cosolo's new employer did so on their own initiative, and that the two employees approached by Cosolo did not leave Kelson.

[6] The appellant argues that the motion judge made palpable and overriding errors in finding that: (i) Cosolo did not breach his fiduciary duty by communicating with two current Kelson employees and that even if he did, the communications were meaningless breaches; (ii) Cosolo did not use any confidential or proprietary information from Kelson; and (iii) a discount rate between 6% and 8% was the best estimate of the present value of Cosolo's claim.

[7] The appellant claims that given the conflicting evidence on these points, these findings were not available on the summary judgment motion and can only be properly determined at a trial. His position on the appeal is that the motion judge erred by granting summary judgment on the record before him, and not ordering a trial of the issues of breach of fiduciary duty by the respondent and the proper discount rate to be applied to the respondent's claim.

[8] The appellant submits, in effect, that a breach of fiduciary duty case such as this is in a special category that is not suitable for summary judgment, and therefore the motion judge should have declined to act on the evidence put before the court on the summary judgment motion. Instead he should have ordered a trial (or possibly one or more mini-trials) with full documentary discovery.

[9] We do not agree with this submission. The motion judge's conclusion that the respondent breached no fiduciary duty owed to his employer causing damage was amply supported by the evidence. There was nothing raised in the cross-examinations on the affidavits to suggest the need for any further exploration of either documentary or testimonial evidence to resolve any of the issues that the motion judge was asked to decide.

[10] In other words, there was no genuine issue for trial raised on the record. Nor is breach of fiduciary duty a special category that is not amenable to summary judgment where no genuine issue for trial is raised.

[11] Further, there is therefore nothing in this record to suggest that there may be other relevant evidence that would have affected either the decision of the motion judge whether to grant summary judgment, or his decision on the merits. In any event, there was nothing that prevented the appellant from seeking further documentary production for the purpose of the motion.

[12] The appeal is therefore dismissed, with costs in the agreed amount of $25,000, inclusive of disbursements and HST.

K. Feldman J.A.

G. Pardu J.A.

M.L. Benotto J.A.