Canadian Transit Co. v. Girdhar et al.

[Indexed as: Canadian Transit Co. v. Girdhar]

Court File No. 421/01 Ontario Superior Court of Justice, Divisional Court Then J.

Heard: October 24, 2001 Judgment rendered: October 29, 2001

Counsel

John Contini, for applicant. Leonard Ricchetti, for respondents.

Judgment

The judgment of the court was endorsed on the record:

[1] THEN J.:—The Applicant, Canadian Transit Company (C.T.C.), seeks leave to appeal to the Divisional Court from the refusal of Day J. [reported 14 C.P.R. (4th) 34] to grant an interlocutory injunction enjoining the Respondent Earth Tech (Canada) Inc. (E.T.C.), a professional engineering consulting firm, from acting as a consultant of C.T.C. on the Peace Bridge Project on the Buffalo/Fort Erie geographical area.

[2] E.T.C. has conducted three studies for C.T.C. in connection with the operations of the Ambassador Bridge located in the Windsor/Detroit area in the general area of forecasting cross-border traffic volumes and analyzing roadway capacity for the connecting roads. These studies, in general terms, are similar to the work that E.T.C. proposes to do for C.T.C.'s competition albeit in a different geographical area.

[3] Day J. found in his application of the criteria set out in RJR-Macdonald Inc. v Canada (Attorney General) (1994), 54 C.P.R. (3d) 114 (S.C.C.), that there was a serious issue to be tried. As to that issue he stated the following at para. [11]:

[11] It is reasonable to expect that Earth Tech is custodian of confidential information from CTC. As regards that information it would appear that there is likelihood of a fiduciary relationship having been generated. Whether or not such relationship has been breached is a question of fact to be resolved at trial. The plethora of information provided by both sides in the motion materials cannot be taken at this level as determinative. Clearly there is a serious question to be tried for purposes of the RJR-MacDonald test which I will next address.

[4] On the issue of irreparable harm, Day J. seemed to resile somewhat from his assessment of fiduciary duty where at para. [18] he stated:

[18] In this case, I would say that there is some doubt on the merits of whether Earth Tech owes a fiduciary duty or has breached its confidentiality agreement with CTC. Thus, clear evidence of irreparable harm must be shown.

[5] Nevertheless, he found that there was no irreparable harm to C.T.C. which could not be compensated by damages.

[6] Day J. also found for the Respondent on the issue of balance of convenience and accordingly refused to issue the injunction. There is no issue taken with the manner in which the test in Macdonald was applied.

[7] The Applicant relies on both branches of rule 62.02(4) in furtherance of his application for leave to appeal to the Divisional Court.

[8] The Applicant submits that there are conflicting decisions on the issue of whether the Ontario Code of Ethics regulating engineers raises fiduciary duties [R.R.O. 1990, Reg. 941, s. 77]. I agree that the Ontario case of Trilea Centres Inc. a Cumming Cockburn Ltd. (1991), 5 O.R. (3d) 598 (Gen. Div.), appears to conflict with the Alberta Court of Appeal decision in Terra Energy Ltd. v Kilborn Engineering (1999), 170 D.L.R. (4th) 405, which came to a different conclusion on identical language. This conflict however is of no moment because Day J. found a fiduciary relationship as outlined in his reasons at para. [11] without the need to consider the impact of the Code of Ethics. In my view, it is not desirable to grant leave on this point alone.

[9] There is also a conflict in the authorities of this court as to the effect, if any, of a contractual acknowledgement by a party of an entitlement to an injunction should have on the granting of an injunction by the court. See (Pro: We Care Health Services Inc. v Barter, [2001] O.J. No. 2029 (QL); Universal Concert Canada v Labatt Brewing Co., [2000] O.J. No. 339 (QL) [summarized 94 A.C.W.S. (3d) 743]; Contra: Jet Print Inc. v Cohen, [1999] O.J. No. 2864 (QL) [reported 43 C.P.C. (4th) 123], FCC Canada Inc. v. St. Lawrence Corp., [2000] O.J. No. 4387 (QL) [summarized 101 A.C.W.S. (3d) 399]). The granting of the injunction in this case did not turn on this point and the Applicant quite properly did not emphasize it in argument. In my view, it is not desirable to grant leave to appeal on this point alone.

[10] Finally, the Applicant submits that there is reason to doubt the correctness of Day J.'s refusal to grant an injunction because of his failure to consider and apply the decision of this court in Drabinsky a KPMG, [1999] O.J. No. 1416 (QL) [reported 10 C.B.R. (4th) 130]). The Applicant submits that the Drabinsky case, which deals with accountants, stands for the proposition that professional advisers are fiduciaries and that the fiduciary is barred from dividing loyalties between competing interests, including self-interest. The disqualification of a fiduciary from acting both for and against the same party is based on the inescapable conflict of interest that is inherent in the situation. The Court need not find irreparable harm or balance of convenience in favour of the client to issue an injunction if there is a breach of these implied covenants. The Applicant submits that the approach that fiduciaries avoid conflicts of interest as outlined by Drabinsky, which applies to professional advisers such as accountants, equally applies to professional advisers such as engineers. The Applicant submits that the decision appealed from did not consider the issue of conflict of interest at all. The Applicant submits that the failure of the court below to consider and apply the approach in Drabinsky should cause this court to have good reason to doubt the correctness of the decision.

[11] In my view, the criteria in rule 62.02(4)(b) does not require this court to find that Day J. was wrong but can be met if the correctness of the decision is open to serious debate. In my view, the applicability of the Drabinsky approach to professional advisers such as engineers who are in a fiduciary relationship with past clients is open to serious debate. Moreover, the resolution of this issue has importance beyond the specific facts of this case but raise matters of general public importance.

[12] The application for leave to appeal to the Divisional Court is granted. Costs of this motion are left to the discretion of the panel hearing the appeal.

Application granted.