C. McKINNON J.

[1] This is a motion for summary judgement brought pursuant to Rule 20 of the Ontario Rules of Civil Procedure, which provide that a plaintiff or defendant may, after delivering statements of claim and of defence, move with supporting material or other evidence for summary judgment on all of part of the claim in the statement of claim. A responding party on such a motion must set out specific facts showing that there is a genuine issue requiring a trial. The court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence. In determining whether there is a genuine issue requiring a trial, the motion judge may weigh the evidence, evaluate the credibility of a deponent to an affidavit, and draw any reasonable inference from the evidence unless it is in the interest of justice for such powers to be exercised only at trial.

[2] The defendant Steven Taylor was the founder and President of National Capital Engineering (NCE), a firm which provided engineering and infrastructure services in eastern Ontario. He has a long and recognized history as an expert in the field of transportation planning and design engineering services.

[3] The plaintiff Genivar Inc. acquired the shares of NCE on July 10, 2007. Steven Taylor and his wife were paid $1,350,000.00 for their shares. Genivar wished to acquire the clients of NCE and its contacts in Ontario. In particular they were interested in Steven Taylor’s personal talent and his skilled personnel who agreed to be employed by Genivar.

[4] As a term of the acquisition agreement, Steven Taylor was required to sign a non-competition and non-solicitation agreement in favour of Genivar that included covenants not to compete with or solicit customers, prospective customers or employees of Genivar for a period of four years from July 10, 2007. The specific terms of the non-competition non‑soliciation agreement are very broad in their scope and are here reproduced.

Section 2.2 Non-Competition.

During the Term, Shareholder shall not, directly or indirectly, alone or on his own account or as an employee, consultant, partner, officer or director of any other person, firm, association, syndicate, partnership or company, sponsor, enter into, promote, be engaged or interested in or otherwise in any manner whatsoever take part in the ownership, conduct, or operation of any endeavour, activity or business in all or any part of the Territory which is substantially the same as or is in competition with the Business.

Section 2.3 Non-Solicitation of Customers.

During the Term, Shareholder shall not, on his own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity whatsoever, in connection with any business which is substantially the same as or in competition with the Business:

(a) Canvass or solicit the business of (or procure or assist in the canvassing or soliciting or the business of) any Customer of Prospective Customer;

(b) Accept (or procure or assist the acceptance of) any business from any Customer or Prospective Customer; or

Section 2.4 Non-Solicitation of Employees

During the Term, Shareholder shall not, on his own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity whatsoever:

(a) Employ, offer employment to or solicit the employment or engagement of or otherwise entice away: from the employment of any of the Purchasers, GENIVAR Ontario Inc. or GENIVAR Limited Partnership or any individual who is employed by any of the Purchasers, GENIVAR Ontario Inc. or GENIVAR Limited Partnership whether or not such individual would commit any breach of his contractor terms of employment by leaving the employ of any of the Purchasers, GENIVAR Ontario Inc. or GENIVAR Limited Partnership;

(b) Procure or assist any Person to employ, offer employment or solicit the employment or engagement of or otherwise entice away from the employment of any of the Purchasers, GENIVAR Ontario Inc. or GENIVAR Limited Partnership any such individual;

(d) Procure or assist any Person to employ, offer employment or solicit the employment or engagement of any Employees.

Section 2.5 Non-Interference

Shareholder shall not on his own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity whatsoever including as an employer, employee, principal, agent, joint venturer, partner, shareholder or other equity holder, independent contractor, licensor, licensee, franchiser, franchisee, distributor, consultant, supplier or trustee or by and through any corporation, cooperative partnership, trust, unincorporated association or otherwise, interfere or attempt to interfere with the Business or persuade or attempt to persuade any Customer, Prospective Customer, Employee to discontinue or alter in an adverse manner such Person’s relationship with any of the GENIVAR Ontario Inc., GENIVAR Limited Partnership, the Purchasers or the Corporation.

[5] In addition to the purchase of Steven Taylor’s shares and his agreement not to compete or solicit or interfere with the business of Genivar, he personally was offered and accepted employment with Genivar. As a senior employee of Genivar, he had direct contact with Genivar’s clients and prospective clients and full access to Genivar’s confidential information. He worked closely with Genivar’s major customers in the Ottawa area including the Ministry of Transportation of Ontario, the City of Ottawa, and the National Capital Commission.

[6] Steven Taylor deposes that in June 2010, the Department in which he was employed at Genivar underwent a restructuring as result of which he was unilaterally demoted such that he was assigned a position with very limited managerial responsibilities. This led to him becoming dissatisfied with Genivar, culminating in his decision to provide a notice of a termination on June 30, 2011. He advised his close friends Henry Zygowski and Tim McNaughton in February 2011 of his tentative decision to leave Genivar effective July 2011. The three depose that they were unhappy with their employment at Genivar and became partners of Bytown Engineering in July 2011.

[7] Marc Rivard, the CEO of Genivar in his affidavit states that Steven Taylor was not unilaterally demoted to Vice-President of Special Projects. Rather, Mr. Rivard deposes that Steven Taylor requested that his role be changed in order to allow him to spend more time at home with his family and Genivar accommodated this request by providing him with a modified role at which time his title was changed to Vice-President Special Projects. Marc Rivard states that Steven Taylor himself created the business plan for his new role.

[8] In anticipation of his resignation on the completion of the four year term of the non‑competition agreement, Steven Taylor incorporated a new corporation, Bytown Engineering Inc. in March of 2011. He deposes that he incorporated the new company on his personal time outside of working hours with Genivar. In addition, he took some other preliminary steps by way of preparing to commence business, including registration of his business, making applications for insurance for the business, and exploration of office space and equipment, all of which occurred prior to June 30, 2011. Steven Taylor insists that all this work was done on his personal time and that he was not in breach of the non-competition, non-solicitation agreement.

[9] Steven Taylor gave notice of his resignation to his supervisor at about noon on June 30, 2011 effective July 15, 2011. He deposes that he offered to meet with Marc Rivard to discuss exit options. He deposes that there was a meeting between himself and Marc Rivard on Tuesday July 4, 2011 at which time Steven Taylor discussed with Marc Rivard three options namely: staying with Genivar on varied terms, leaving Genivar immediately, or negotiating a transition plan. Steven Taylor believed that Marc Rivard would be open to a transition plan. He prepared a plan that very night, and was prepared to begin negotiations about it. On his attendance at Genivar the next morning he was escorted from the premises.

[10] In stark contrast, Marc Rivard deposes that without prior notice, Steven Taylor tendered his resignation by e-mail on June 30, 2011, stating that he would be moving to a smaller Ottawa based transportation firm with three employees. On the same day Mr. Zygowski and Mr. McNaughton tendered their resignations. Mr. Zygowski had been an officer, director and shareholder of NCE. Mr. McNaughton was also a key employee occupying a highly specialized and technical role. Mr. Zygowski had been offered and accepted employment with Genivar as a condition of the purchase of NCE and he also signed a non-solicitation agreement lasting three years.

[11] Marc Rivard denies that any discussion took place with Steven Taylor respecting an exit strategy. Upon receiving the e-mail of resignation, the computers of Messrs. Taylor, Zygowski and McNaughton were monitored by an employee by Genivar who found that Mr. McNaughton had e-mailed a fellow employee immediately following his resignation that “this was in the planning for six to eight months and the start day of July 1 was determined long before.” On the day Mr. McNaughton was escorted from Genivar July 5, 2011 he sent an email from a Bytown e‑mail address. No evidence as to the establishment of Bytown e-mail system of addresses has been adduced by the Moving Parties. Both Mr. Zygowski and Mr. McNaughton admitted that Steven Taylor told them of his plans to leave long before their resignations and that both indicated an interest in joining him.

[12] Genivar takes the position that Steven Taylor knew or ought to have known that telling other employees that he intended to leave would amount to solicitation of those employees, particularly in circumstances where they had worked with him in the corporation which had been purchased by Genivar.

[13] Cross-examinations of Messrs. Taylor, Zygowski and McNaughton reveal that Mr. Zygowski had scouted locations and negotiated a lease for Bytown “in June or early July.” No lease or other documents relating to those activities have been produced by the Moving Parties. Mr. McNaughton was tasked with the purchase of office equipment and claims to have purchased two laptops “on a weekend” on his own time. No invoices have been produced to verify the date and time of the purchases.

[14] The search of Steven Taylor’s computer found that the insurance application on behalf of Bytown was completed and submitted on March 20, 2011, long before his resignation. Steven Taylor admitted that after the incorporation, he had correspondence with the Professional Engineers of Ontario concerning Bytown but the correspondence has not been produced. Also found on Steven Taylor’s computer was a detailed proposal in the name of Bytown for a bid on a project for the United Counties of Prescott and Russell, Road 174, which had not yet been announced. It contains detailed references to “Bytown” experience and expertise and the “Bytown Team”. It is the evidence of Marc Rivard that Genivar would have intended to bid on this project. Steven Taylor takes the position that it is not the sort of work that Genivar would have bid on, but has not produced the actual bid documents for the contract which in fact he did obtain after his departure from Genivar.

[15] Other e-mails captured included an e-mail from Steven Taylor to Mr. McNaughton and Mr. Zygowski dated July 4, 2011 in which Steven Taylor set out a “transition plan” for projects that Genivar could transfer to Bytown. Included on the list are a number of Ministry of Transportation of Ontario projects as well as other significant Genivar projects. A second e-mail from Steven Taylor to his lawyer on the same day was intercepted wherein he proposed that a number of Genivar’s clients, including the MTO, would go to Bytown after his employment ceased. In addition Steven Taylor attached a draft “memorandum of understanding” in which a plan for Genivar to transition key projects to Bytown is set out. He asks the parties to reply to his “confidential NCE account.” On cross-examination he admitted that he does have such an e-mail account but has not produced any details in respect of it. When Genivar searched Steven Taylor’s computer they noted reference to a second disk drive but no such drive has ever been located or produced.

[16] Genivar has claimed that prior to his resignation Steven Taylor approved the price for a number of Genivar projects that are now running at significant deficits. Genivar contends that these projects were priced below acceptable margins that could not be completed by Genivar because of high overhead but could be completed by Bytown because it is a much smaller operation. Had the projects been transitioned to Bytown there would be profit for Bytown. Steven Taylor denies these allegations.

[17] Since leaving Genivar, other employees of the company have joined Bytown. All current fulltime employees from Bytown are from Genivar. Each worked for Genivar at the time Messrs. Taylor, McNaughton and Zygowski resigned. All these individuals are highly skilled employees with specialized knowledge. It is alleged by Genivar that they were key to its business.

[18] There is a significant dispute with respect to the solicitation by Bytown with respect to contracts with the Ministry of Transportation for Ontario and the City of Ottawa, including work related to the highly lucrative light rail transit project. With respect to the pursuit of these contracts, affidavit evidence and cross-examinations once again demonstrate that the parties are completely at odds with one another. Steven Taylor deposes that he did not pursue any business opportunities while he was at Genivar. Marc Rivard insists that it would not be possible that contracts could be in place immediately upon Bytown becoming operational and necessitates the conclusion that Steven Taylor would have sought these contracts prior to his departure from Genivar.

[19] In a counterclaim, Steven Taylor is also seeking payment of the final instalment of the purchase price for National Capital Engineering. Genivar is holding the money as a potential set‑off against damages to which it claims to be entitled.

[20] After serving its Reply and Defence to the Counterclaim, Genivar proposed a draft discovery plan. The Moving Parties exhibited no interest in agreeing to such a plan. Instead they brought this motion for summary judgement. On August 1, 2012 Genivar sought to have a Case Management Master appointed, which suggestion was also rejected. Examinations for discovery have not been held nor have affidavits of documents exchanged. In particular, Genivar pleads that the Moving Parties have failed or refused to produce the vast majority of relevant evidence which is in its sole power possession or control.

[21] The onus of demonstrating that there are no genuine issues requiring trial rests with the moving party. The moving party must lead evidence that there is no genuine issue requiring a trial, demonstrating that a trial is unnecessary to truly, fairly and justly resolving the issues. It is only after the moving party has met its onus that the burden shifts to the responding party to show that there is a genuine issue requiring trial: see Johnston v. Futerman, 2012 ONSC 4092 at para. 52.

[22] The test for summary judgement under Rule 20 was recently restated by the Court of Appeal for Ontario in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764. The motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment or can this full appreciation only be achieved by way of a trial?

[23] Summary judgement is not appropriate in cases where there is contested evidence that prevents the motion judge from satisfying the full appreciation test; multiple findings of fact that may be required to decide the motion; credibility determinations that are at the heart of the dispute; and, where the evidence conflicts on key issues as well as cases where there is near absence of reliable documentary yardsticks. Where credibility is in issue, a motion judge must bear in mind that the resolution of credibility issues is enhanced by observing witnesses: Combined Air at para. 148.

[24] In Cole v. Hamilton (City) (1999), 45 O.R. 3(rd) 235, Cumming J. stated at para. 8:

The Plaintiffs, as with any other person, have the right to be able to put their best foot forward in defending a motion for summary judgment by ascertaining all relevant evidence in support of their position. To be able to do this, they properly require an affidavit of documents from the defendants prior to the return of the summary judgment motion.

[25] In 90 George St. v. Reliance Construction Canada Inc., 2012 ONSC 1171, Master C. MacLeod commented at para. 34:

In Combined Air the Court of Appeal suggests that premature summary judgment should be refused if it is unfair to expect the necessary evidence to be developed through affidavit and cross examination. In fact the court suggests that such a motion could be stayed to permit more efficient complete and orderly production and development of evidence through the ordinary discovery process. It would be manifestly unjust to grant summary judgment against a plaintiff because the plaintiff lacks evidence of facts if that evidence is in the exclusive control of the defendant. Even more so of course if the plaintiff has been denied access to that evidence by failure of the defendant to make production, answer undertakings or by improper refusals. Thus before making a Rule 20.02 inference and granting summary judgment against a party who has failed to put its best foot forward, the court must consider the status of production and discovery.

[26] A review of the record before me demonstrates that the defendants have disclosed only that information which might assist in their defence and have failed or refused to produce clearly relevant information to the plaintiff, including documents relating to the formation of Bytown, its Articles or Bylaws; the shareholders agreement of Bytown; communications between Messrs. Taylor, Zygowski and McNaughton regarding the setup and business of Bytown; communications from Mr. Taylor’s personal e-mail address; documents regarding the lease signed for Bytown or the equipment purchased for it; communication with other Genivar employees; records of Bytown prior to the expiry of the non-competition agreement; projects or proposals of Bytown entered into subsequent to its incorporation; communications with the Professional Engineers of Ontario, including Bytown’s license; evidence as to Bytown’s claim that it refused work that was follow-up work from Genivar projects; evidence of e-mail communications with Genivar clients; evidence as to Bytown’s e-mail system and evidence as to the work Genivar knows Bytown has done for its clients including the City of Ottawa and United Counties of Prescott and Russel.

[27] I am satisfied that such information is essential prior to the disposition of a motion for summary judgment. Perhaps more problematic are the issues of credibility between Mr. Taylor and Mr. Rivard that have been referred to during the course of these Reasons, which on their face appear irresolvable, absent hearing and seeing the witnesses viva voce.

[28] The motion brought by the defendants is clearly premature and cannot be disposed of in the absence of the information properly being sought by the plaintiff. Even then, given the credibility issues which have already surfaced in the affidavit evidence produced before me, it is unlikely that the issues between the parties can be determined without a trial. Having stated that, I am not prepared to foreclose a further motion for summary judgement following full discovery and the exchange of affidavits for documents. The motion is stayed pending these steps being completed.

[29] In view of my finding with respect to the motion for summary judgment based upon the non-competition and non-solicitation clauses of the agreement between Steven Taylor and Genivar, it us unnecessary to address the arguments submitted by Genivar that Steven Taylor owed a common-law duty to Genivar by virtue of a fiduciary relationship with his employer to refrain from solicitation or competition with Genivar for a reasonable period of time in accordance with the law set out in Canadian Aero Service Ltd. v. O’Malley, 1973 CanLII 23 (SCC), [1974] S.C.R. 592 and GasTOPS LTD. v. Forsyth, 2009 CanLII 66153 (ON SC), [2009] O.J. No. 3969. The issue would appear to be one of pure law, and is arguably amenable to a motion for summary judgment.

[30] Finally, it would be premature to award summary judgment on the counterclaim for the balance of the purchase money of National Capital Engineering, allegedly owing to Steven Taylor, as the monies might purposely be subject to set off, depending on how the litigation develops.

[31] In the event costs cannot be agreed upon, I shall entertain brief submissions as to costs within 45 days on a schedule agreed to by counsel.

The Hon. Mr. Justice Colin McKinnon

Released: November 20, 2012

COURT FILE NO.: 11-53240

DATE: 20121120

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GENIVAR INC.

Plaintiff/Responding Party

– and –

STEVEN TAYLOR and BYTOWN ENGINEERING INC.

Defendants/Moving Parties

REASONS FOR DECision

McKinnon J.

Released: November 20, 2012

Genivar Inc. v. Steven Taylor and Bytown Engineering Inc., 2012 ONSC 6285

Case Summary

C. McKINNON J.

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 1

Legal Tests 1

Legislation 1