SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: Teledyne Dalsa, Inc., Plaintiff
AND:
BinQiao Li, Defendant
BEFORE: D. M. Brown J.
COUNSEL: M. Schafler and C. Snider, for the Plaintiff
HEARD: January 14, 2014
REASONS FOR DECISION
I. Motion for an Anton Piller order and an injunction restraining disclosure of confidential information and the solicitation of customers and employees
[1] Yesterday I granted the plaintiff, Teledyne Dalsa, Inc., an ex parte Anton Piller order, as well as an interim injunction against the defendant, BinQiao Li, an employee of Teledyne. These are my reasons for so doing.
[2] The motion was supported by a 2-volume motion record containing the affidavit of Brian Doody, the CEO of Teledyne, together with a lengthy factum and key authorities.
[3] Yesterday the plaintiff attended at a 9:30 appointment seeking consideration of its motion. I reviewed the materials over the course of the afternoon and counsel re-attended at 4 p.m. Counsel advised that the plaintiff was seeking similar relief in the Quebec Superior Court against Arthur Pang, another Teledyne employee, and Global Precision Imaging Inc., a CBCA corporation with its registered office in Pierrefonds, Quebec. As of 4 p.m. the Quebec Superior Court was still considering the plaintiff’s motion. I stood the case down. After dealing with another matter, counsel informed me around 5:25 p.m. that the hearing in Montreal had adjourned for the day and would resume today. At that point I granted the orders sought by the plaintiff - the Anton Piller order followed the form of the Model Anton Piller Order used by the Toronto Region Commercial List. Counsel advised that the plaintiff intended to execute the Anton Piller order either today or tomorrow.
II. Anton Piller order
[4] The principles set out by the Supreme Court of Canada in Celanese Canada Inc. v. Murray Demolition Corp. govern.[^1] Let me deal with each element in turn.
A. Strong prima facie case for the substantive relief grounding the request for the order
[5] Teledyne alleges that two of its employees, Li and Pang, have breached their contractual duties of loyalty and their fiduciary duties by carrying on a competing business with Teledyne, targeting existing Teledyne customers.
[6] The Ontario action names only Li as a defendant, but an assessment of the case against him necessarily involves some evaluation of the case against Pang and Global Precision Imaging Inc. (“GPI”).
[7] According to the plaintiff, the discovery of what it alleges as unlawful conduct occurred quite by chance when Pang attempted to send a fax to Quebec Revenue concerning GPI from Teledyne’s Montreal office. A receptionist learned of the failed attempt, which led to a subsequent investigation by the plaintiff. Key to the investigation was the remote electronic search conducted by the plaintiff’s IT personnel of the work computers of Pang and Li. No incriminating evidence was found on either work computer, nor in the archives of the emails sent by either individual through their company accounts. However, at the time the plaintiff’s IT person was conducting a remote review of Pang’s company computer, he discovered that external portable electronic storage devices, or portable hard drives (the “External Drives”), were connected to Pang’s company computer. The IT person was able to download the content of those Hard Drives. The key evidence relied upon by the plaintiff comes from Pang’s External Drives.
[8] Based on my review of the evidence I was satisfied that the plaintiff had demonstrated a strong prima facie case that (i) Pang was a director of GPI (Tab K), (ii) GPI was conducting business with the Beijing Institute of Space Mechanics & Electricity (“BISME”)(Doody, paras. 39 et seq.), (iii) some of that business was conducted through an intermediary corporation, Crown Lead Corporation Limited of Hong Kong, of which Pang is a director (Exs. AA and BB); (iii) GPI was using commercial documentation which very closely resembled that of Teledyne, and (iv) as part of his duties at Teledyne, Pang serviced the BISME account. As part of the terms of his employment with Teledyne, Pang was subject to a Non-Disclosure Agreement (Ex. H) and Code of Ethical Business Conduct (Ex. D). As a senior sales account manager for the Asia Pacific Region, Pang dealt directly with the key contacts at Teledyne’s Chinese customers, including BISME. This evidence led me to conclude that Teledyne had established a strong prima facie case that Pang had breached contractual and common law duties of loyalty and confidentiality owed to Teledyne by reason of the competitive activities of a company in which he was a director, GPI.
[9] How, then, did the evidence link Li to GPI and Pang? Li and Pang are co-workers at GPI, albeit in different offices and on different sides of the operations – Li on the technical side, and Pang on the sales side. As part of its investigation Teledyne conducted Internet searches against the name “GPI”. Two commercial corporation profile Internet services recorded that Li was a director or administrator of GPI (Ex. J.). However, the official CBCA website did not list Li as a director, but it noted that GPI had not made its annual corporation information filings for 2012 and 2013. Although there was no evidence before me about how the two commercial corporate profile services obtained the information about Li which they posted, most of the information on the two websites simply tracked that found on the official CBCA website, leading me to draw the inference that the websites must have obtained the information from some third party connected with GPI.
[10] Stopping there, that information, in and of itself, would not have been sufficient to grant an Anton Piller. However, one document recovered from Pang’s External Drives was a GPI Inc. Mutual Confidential Nondisclosure Agreement (NDA) with BISME. It listed Pang as the “primary representative” for GPI, and the name of the GPI representative under the signature line was Binqiao Li. His title was “CTO”, which I took to mean Chief Technology Officer. The copy of the NDA on the External Drives was not signed.
[11] By the terms of his May 10, 2011 Employment Agreement Li was to devote his full time and efforts to the business of Teledyne. By a Non-Disclosure, Assignment, Non-Competition and Non-Solicitation Agreement of the same date, Li contracted to various duties of loyalty, confidentiality and non-competition. By virtue of his contract with Teledyne, Li should not be performing any work for any other business. Accordingly, I regarded the presence of Li’s name on the unsigned NDA between GPI and BISME as strong evidence that Li had breached his contractual obligations to Teledyne. Even if that NDA did not culminate in a binding commercial contract, the evidence disclosed that Li was lending his name to a business in competition with Teledyne in breach of his duties to his employer. I was satisfied that the first branch of the Celanese test had been met.
B. Would the damage to Teledyne from Li’s alleged misconduct be very serious?
[12] Doody provided ample evidence to establish that serious damage would result to Teledyne’s relations with its customers from the competitive business undertaken by GPI (Goody affidavit description of the PITON and HARMONY projects, as well as paras. 72, 73, 77 and 78). It is a reasonable inference that Li and Pang, by hiding their involvement in GPI from their employer, Teledyne, are making use of the information they gain through their employment with Teledyne for their personal benefit through the business of GPI. I concluded that the second branch of the Celanese test had been met.
C. Is there convincing evidence that Li has in his possession incriminating documents or things?
[13] As mentioned, Teledyne IT personnel were not able to find any incriminating documents on Li’s company computer or in his corporate email account. When the remote search of his company computer was conducted, no external hard drive was connected to Li’s company computer. However, in paragraphs 76 and 77 of its Factum Teledyne made the following submissions:
Although no relevant evidence was obtained through the connection to Li’s computer, unlike Pang, Li had not connected any external storage devices to his computer, which itself contained no information relating to GPI. Given the information regarding Li’s involvement in this matter retrieved from the Portable Hard Drive, it is likely that Li also possesses documents information relating to GPI. The only conceivable location for these documents and information is his private residence.
The inference that Li must possess relevant information, somewhere, is supportable for the following reasons:
(a) evidence of Li’s role as a director/office of GPI;
(b) evidence of Li’s role (confirmed in at least one document found through Pang), as Chief Technology Officer of GPI in a proposed contract with BISME; and
(c) it is highly likely that Li, a technical expert (rather than Pang), must have had at least some involvement in the preparation of the TPR.
In my view, the evidence supported making such inferences, so I did. I concluded that the third branch of the Celanese test had been met.
D. Is there a real possibility that Li might destroy such material before the discovery process?
[14] As to the fourth branch of the Celanese test, I accepted as accurate statements of the law the following portions of Teledyne’s factum:
In determining whether documents are at risk, the court may take into account the trustworthiness of a defendant. The court may infer a risk of destruction when it is shown that the defendant has been acting improperly, for example, where it has been shown that the defendant has knowingly violated the plaintiff’s rights…
The copying of proprietary and confidential information, which constitutes a prima facie breach of confidentiality and non-disclosure obligations, can support the inference that there is a risk of destruction.
Finally, relief in the nature of an Anton Piller has previously been granted in cases such as this, where allegations are made by a company against its existing or former employees for breaching obligations owed under employment, non-compete and non-disclosure agreements.
[15] Based on the evidence filed, Teledyne asked that I make the following inferences of fact:
In this case, there is a prima facie case that Li breached his contractual, common law and fiduciary duties owing to Teledyne DALSA through misappropriation of the company’s confidential proprietary information and through competing with the company in such an effective fashion to have obtained two contracts with Teledyne DALSA’s client, BISME, since 2012. Li has concealed these activities from Teledyne DALSA, even though he was well aware of his obligations owed toward the company, and acknowledged his awareness of such obligations in May 2013 by signing the acknowledgement that he had read, understood and would abide by the Code. Li has, in short, proven to be an untrustworthy individual.
It may reasonably be inferred, therefore, that if no order were granted to preserve the evidence in Li’s possession, there is a real likelihood that relevant evidence in his possession will be destroyed for the purpose of further concealing Li and Pang’s scheme, if he receives prior notice of this proceeding.
In addition, where the documents to be preserved are electronic, this is an additional factor in determining whether there is a real risk of destruction of evidence, given the ease with which electronic evidence may be moved, copied or destroyed. In this case, it is expected that many of the relevant documents in Li’s possession will be electronic documents, given that all of the documents located to date are electronic documents.
Based on my assessment of the evidence, those were reasonable inferences to make, and I made them. I concluded that Teledyne had satisfied the fourth branch of the Celanese test.
[16] Accordingly, I granted the requested Anton Piller order against Li, but I reduced its duration from the standard 10 days found in the Model Order, stipulating that it expired on Monday, January 20, 2014, unless continued by this Court. I appointed the Fogler, Rubinoff LLP firm as the Independent Supervising Solicitors.
III. Interim Injunction
[17] As to the interim injunction restraining Li from disclosing Teledyne confidential information or soliciting Teledyne customers or employees, after applying the test in RJR-MacDonald Inc. v. Canada (Attorney General)[^2] to the evidence described above, I concluded that it was just and convenient for the injunction to issue. I also limited the duration of the injunction to January 20, 2014.
[18] Teledyne gave an undertaking as to damages.
[19] Teledyne requested an order sealing the pleading and the materials filed in support of the motion. Given the confidential nature of much of the information and the fact that the Anton Piller order had not yet been executed, I was satisfied that the conditions for a sealing order set out in Sierra Club of Canada v. Canada (Minister of Finance)[^3] had been met and I granted the order. The need for a continuing sealing order can be dealt with on a subsequent attendance.
[20] I seized myself of this case.
[21] I would note that both the plaintiff and the defendant reside in Waterloo, Ontario, in the Central South Region of this Court. In light of Rule 13.1.01 of the Rules of Civil Procedure I was prepared to grant leave to commence the proceeding on the Toronto Region Commercial List and to hear the urgent motion. At some point of times, if requested by a party, it might be appropriate to transfer this proceeding to the Central South Region as long as any time-sensitive characteristics of his litigation can be accommodated.
[22] Teledyne shall serve the defendant with a copy of these Reasons upon the execution of the Anton Piller order.
D. M. Brown J.
Date: January 15, 2014
[^1]: 2006 SCC 36, [2006] 2 S.C.R. 189.
[^2]: 1994 117 (SCC), [1994] 1 S.C.R. 311.
[^3]: 2002 SCC 41, [2002] 2 S.C.R. 522.