TSI International Group Inc. v. Formosa, 2015 ONSC 1138

COURT FILE NO.: CV 15-0694-00

DATE: 20150220

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: TSI International Group Inc., Plaintiff

AND:

John Formosa, Steffen Nielsen, iFarm Local Inc., Richard Taylor, Great Life Group Inc and John Masih, carrying on business as MSM Group, Defendants

BEFORE: Ricchetti, J.

COUNSEL: R. Taylor, for the Plaintiff

D. Persaud, for the Defendants

HEARD: February 18, 2015

ENDORSEMENT

THE MOTION

[1] At the conclusion of the hearing, the injunction and Anton Piller orders were issued in a form of an order signed by me. I advised counsel I would issue reasons for my decision. These are those reasons.

[2] The Plaintiff brings this motion seeking an interlocutory injunction restraining the Defendants from continuing to carry on certain business activities and an “Anton Pillar” order permitting the Plaintiff’s representative to search the Defendants’ homes and places of business for confidential information and documentation improperly taken from the Plaintiff.

[3] The Defendants filed responding materials for the return of the motion. The Defendant's counsel did not wish to have an adjournment on terms to cross examine the Plaintiff's affidavit materials. The motion was adjourned to the next day to permit the Plaintiff to file reply materials. The Plaintiff filed reply materials. As a result, there were no cross-examinations on the affidavits filed.

[4] Despite no objection from Defence counsel, I advised counsel that some portions of TSI’s reply affidavit contained hearsay evidence that I would not be relying on for the purpose of this motion.

[5] Counsel agreed and proceeded to make submissions on the interlocutory injunction and Anton Piller motions.

THE PLAINTIFF's EVIDENCE

[6] My role as a motions judge is not to make findings of fact but to consider the credible evidence on the record before me to ascertain the strength of the plaintiff's case and the other factors to make a determination whether it is just and convenient that the relief sought should be issued.

[7] In my view, the following sets out the credible evidence on which I rely for the purpose of this motion.

TSI and its business

[8] The Plaintiff, TSI International Group Inc. (TSI) carries on “land banking”, a land development business in Ontario since 2003. TSI obtains investments for the purchase of the parcels of land and the subsequent development of the land. The lands are then sold for a profit. TSI has approximately $140 million dollars presently invested. To obtain the necessary funding, TSI seeks out investors. TSI has invested funds for approximately 3,400 investors in at least one of its projects. A considerable segment of TSI's investors are from overseas.

The Defendants

[9] The Defendant, John Formosa (Formosa), was the Chief Development Officer and Information Security Manager for TSI until his termination on January 29, 2015. He was also a director of TSI. His relationship with TSI started in 2008. Formosa was subject to a written executed employment agreement dated January 9, 2014. The agreement’s terms include:

• An acknowledgement he has access to confidential information and agrees not to use the confidential information for two years;

• That he will not engage in a similar business for 2 years after termination;

• That he will not engage in any other work while employed by TSI. In other words, he will devote his full time energies to TSI; and

• That he will not engage in activities which would be a conflict of interest to TSI.

[10] The Defendant, Steffen Nielson (Nielson), was the Chief Financial Officer of TSI until he was terminated on January 28, 2015. He was also a director of TSI. His relationship with TSI started in 2008. While there is no executed employment agreement found for Nielson, there is significant evidence that one exists. This is particularly significant, since both Formosa and Nielson initially denied the existence of any employment agreement for a period of time. But TSI later found evidence of an employment agreement for Formosa in an email string which is highly suggestive that a similar one exists or existed for Nielson.

[11] Both Formosa and Nielson were subject to a written undertaking as directors of TSI which provides:

Each of the undersigned confirms that he owes the corporations and other entities for which he serves as director or executive officer, as well the as TSI Group as a whole and its shareholders, a fiduciary duty always to act in their best interests, and herby undertakes to fulfill his fiduciary duty to the best of his ability.

[12] There is really no dispute that Formosa and Nielson owed fiduciary duties to TSI.

[13] iFarm Local Inc. (iF2) is a company established by Formosa and Nielson on June 25, 2014. Formosa is the Chief Development Officer for iF2.

[14] Great Life Group Inc. (GFG) is a company established by the defendant, Richard Taylor (Taylor), a friend of Formosa. He appears to be the sole officer and director of GFG.

[15] Taylor is a manager of commercial real estate affiliated with Colliers International. As such he has expertise with land related issues.

[16] The Defendant, John Masih (Masih), was an independent IT support provider and until recently, provided IT support for TSI. Given his actions set out below, that relationship has ended.

iFarm Local

[17] In 2012, TSI decided to develop “iFarm Local” so that TSI could utilize the Provincial Nominee Investor Program (PNP) to attract Asian investors to its projects. The PNP is a program which permits foreign individuals who comply with the terms of the PNP program, an opportunity to obtain permanent residency status in Canada. In iFarm Local's case, a foreign investor could invest monies with TSI for an investment into one of TSI's land development deals which has been structured to qualify the foreign investor into the PNP program. This benefits TSI because it adds additional investors into its land development deals. At the same time the foreign investor benefits because it assists the foreign investor to qualify for permanent residency status in Canada. It is hoped this synergy will lead to more investors in TSI’s projects.

[18] TSI decided to use the iFarm Local to grow its land development business.

[19] TSI paid for the development of the iFarm logo. The logo consists of the word “iFarm” with three leaves originating from the “i” and the Local placed sideways.

[20] TSI obtained pro-forma financial statements for foreign investors to ascertain how this investment/PNP program was expected to work financially.

[21] A copy of TSI’s 2013 plan or presentation sets out how this “marriage” between land development and PNP would work. This plan includes pro forma financial information for prospective investors/potential immigrants. The iFarm Local logo is prominent throughout the plan.

[22] There is no evidence that anyone else has “married” the land development business with the PNP. As described by a Toronto immigration lawyer, referring to TSI’s iFarm Local program,: “This category is not open to passive investment and that is why iFarm is a unique opportunity as it joins qualified investors to the program where they will be responsible for operating viable and profitable businesses in Ontario.”

[23] Clearly, there is tremendous potential to a company which can not only obtain investment monies from the foreign investor but the foreign investor gets the added benefit of potentially obtaining permanent resident status in Canada. TSI's foreign investor target group includes investors in Asia.

[24] TSI uses immigration consultants, immigration lawyers and sales persons in Asia to locate potential investors in iFarm Local.

[25] It is clear that TSI has devoted considerable resources to this program for some time. While this business has not yet had significant market exposure, TSI has already pursued some investors and is poised and ready to market these types of investments to a larger market.

[26] TSI's existing land development business and its iFarm Local business has collected a significant amount of confidential and useful information consisting of: lists of its existing and prospective investors with contact information, existing and prospective land banks, its marketing plan, pro forma financials for an iFarm Local investment, existing and prospective agents and so forth. This confidential information was stored electronically on TSI's computers – the hard drives, the server and laptops/computers which the employees used.

[27] All of TSI's computer information was backed up onto hard drives and a server.

[28] Formosa, as Information Security Officer for TSI, had access to TSI’s entire computer system.

[29] Masih, as the independent IT contractor and TSI's “administrator”, had access to all information on TSI’s computer system.

TSI's shareholder dies

[30] In February 2014, Stephen Huggins, the sole shareholder of TSI died.

[31] Formosa and Nielson sought to buy TSI from the estate administrator/trustee, Ms. Maguire, the wife of the late Stephen Huggins. While a memorandum of understanding was arrived at, no agreement was consummated.

[32] Eventually, the estate administrator/trustee sold TSI to another group of stakeholders.

[33] Formosa and Nielson were unhappy. Thus began, Formosa and Nielson’s attempts to take the business away from TSI.

Formosa and Nielson decide to set up their competing business

[34] After the Stephen Huggin’s death in February 2014, TSI's business was having some financial difficulties.

[35] On July 7, 2014, Masih, on the instructions of Formosa, took TSI's hard drives and server. These were used to back up TSI’s computer system. No one else at TSI was told of what Masih had done. There was no billing by Masih for the work in removing the hard drives and server.

[36] Masih says he took the hard drives and server home. This left TSI without any backup for its computer information. Masih does not explain why he left TSI without any computer back up for 6 months.

Formosa and Nielson try to recruit Michael Huggins

[37] In August 2014, Formosa and Nielson approached Michael Huggins, the brother of Stephen Huggins. They invited Mr. Huggins to the Deerhurst Resort for the weekend.

[38] Formosa and Nielson told Mr. Huggins that:

a) they planned to leave TSI and start another business “by replicating the TSI land banking/iFarm model” ;

b) they “had the TSI client list and computer hard drives that stored everything TSI had ever created”;

c) “they had every contract and every document TSI produced over the years”;

d) they had already sourced lands and had found new office space; and

e) they would use Ms. Zhang, a former TSI agent in China.

[39] Formosa denied he met with Mr. Huggins in August at the Deerhurst Resort. However, Mr. Huggins was not cross-examined on this crucial evidence and the remaining evidence on this motion is entirely consistent with what Mr. Huggins sets out he was told by Formosa and Nielson in August 2014.

The Investigation

[40] Upon the appointment of a new TSI president in August 2014, Daniel Lane (Lane), he began having concerns regarding the activities of Formosa and Nielson.

[41] Lane retained a private investigation firm, Integra Investigations (Integra).

[42] Integra learned:

a) that Formosa and Nielson had incorporated a company, “iFarm Local Inc.” on June 25, 201 (iFarm 2);

b) iFarm 2 had opened a bank account; and

c) iFarm 2 had retained accountants.

[43] Integra decided to conduct surveillance on Formosa and Nielson between January 25-28, 2015. This is during the period of time Formosa and Nielson were still employees and directors of TSI. Integra observed:

a) Formosa and Nielson had meetings with Diana Zhang, TSI’s former sales agent, an Asian investor and an Ontario land owner.

b) at one of the meetings, Formosa and Nielson used marketing materials.

c) Photos of the marketing materials were taken by Integra. These photos show that GLG was using marketing materials for a land development deal and the materials included pages from TSI's iFarm Local's marketing materials.

[44] Ms. Zhang was a former TSI agent in China whose responsibility was to bring to TSI foreign investors. Ms. Zhang was subject to a written agreement which had expired but contained a non-competition agreement not to “market, sell, distribute, support, or maintain, whether directly or indirectly, any similar investment without first obtaining the written consent of TSI”. As directors and key personnel at TSI, this would have been known to Formosa and Nielson.

[45] Integra discovered that GLG has office rental space at 3250 Bloor Street West, Toronto.

[46] Clearly, Formosa, Nielson, iFarm2, GLG and Taylor had established a business: to compete with TSI's iFarm Local's business, had commenced to carry on business in competition with TSI, using TSI's iFarm Local's marketing materials, and to access foreign investors through a former TSI agent contrary to her non-compete provisions.

[47] There is essentially no challenge to the facts discovered by Integra.

Removal of the Hard Drives and Server from TSI

[48] In December 2014, Lane was advised by a TSI employee that two of TSI’s backup hard drives had been removed on or about June 27, 2014.

[49] Masih had been working on TSI’s computer system during that time period.

[50] Lane confronted Masih about the missing hard drives. Masih denied he had removed the hard drives.

[51] Masih was confronted at his home by Integra’s investigators. Masih continued to deny he had any computer equipment belonging to TSI.

[52] Shortly thereafter, Masih called Lane and advised Lane that Formosa had called him and spoke to him about the hard drives.

[53] Formosa then admitted to Lane that he told Masih to remove the hard drives and a server.

[54] Formosa then spoke to Masih. Masih returned the hard drives and a server to TSI. Masih provided TSI no explanation as to what or why he had taken the hard drives or server. He left the equipment with TSI and left.

[55] Martin Musters, a computer forensics’ investigator, sets out in his affidavit that all TSI’s electronic information and documentation could be downloaded from TSI’s hard drives and server which Masih had taken.

Attempts to Delete Information

[56] On January 28, 2015 Formosa instructed a TSI employee to delete all iFarm Local materials from her computer and to deliver her computer to Masih to ensure it was done properly.

[57] Clearly, this instruction was subsequent to the hard drives being returned to TSI. This shows a deliberate attempt to delete other electronic information and Masih's involvement in the deletion and/or taking of TSI's electronic information.

Computer Equipment Still Missing

[58] There still remains missing TSI equipment set out in Exhibit K to Daniel Lane’s affidavit of February 11, 2015.

Terminations

[59] On January 28, 2015 Nielson was approached and asked about iFarm2. He denied he had met with Ms. Zhang for many months. Based on the surveillance by Integra, Lane knew this to be a lie. Nielson was terminated.

[60] On January 28, 2015 Formosa resigned. He was terminated the next day by TSI.

Deloitte and Touche’s Proposed Method of Search of Computer Documentation

[61] Corey Fotheringham sets out Deloitte’s proposed investigation of the computer equipment in the possession of the Defendants.

Impact of the Use of TSI's electronic information

[62] The evidence is that the timing for investments by investors, foreign or domestic, is unpredictable. An investor might invest now but not invest again, or not for many years with TSI.

[63] Approximately 3,400 investors have previously invested in at least one TSI project. This list is highly confidential as it would provide a list of potential investors who had an interest in investing in land development in Ontario.

[64] No other company is presently marketing the land development/PNP program as a method to find investors for land development. TSI would be the first to broadly market this concept to foreign investors.

[65] Investors are cautious, particularly foreign investors, who had no lasting direct contact with the investment company or any ties to Ontario. If there is any possibility of confusion or impropriety, an investor might avoid investing with that investment company to avoid a risk that the investment is not a bona fide investment.

Summary

[66] The above evidence establishes, for the purpose of this motion:

a) a flagrant breach of the contractual and fiduciary duties of Formosa and Nielson, the theft of confidential TSI information, while they were key employees and directors of TSI;

b) the usurping of a corporate opportunity by GFG, iFarm2, and Taylor to compete in a unique investment strategy developed by TSI and actually using TSI's marketing materials to conduct potential business, with a former TSI agent who was in breach of her non-compete provisions in her contract; and

c) Masih, breached his obligations to the company as its IT services provider and was clearly involved in the removal and retention of the hard drives and server.

The Defendant’s Response

[67] The Defendant’s affidavits purport to provide explanations, many of which are not credible, but more importantly, confirm TSI’s essential evidence on the following points:

a) Formosa, Neilson and Taylor established iF2 to directly compete with TSI’s iFarm Local and did so while Formosa and Taylor were employed by TSI and directors of TSI;

b) The name chosen by Formosa, Neilson and Taylor was a copy of TSI’s iFarm Local;

c) iFarm2 was actually incorporated, banking arrangements, offices were rented, marketing documentation prepared while Formosa and Taylor were employed by TSI and directors of TSI;

d) GLG, and hence, Taylor, knew that the marketing materials contained TSI's iFarm Local materials. There is no doubt that GLG and Taylor would have known they were proceeding to go into business with TSI's documentation and competing with TSI while Formosa and Nielson continued to be employed by TSI;

e) iFarm2 actually started to carry on its business in direct competition to TSI's iFarm Local's business. It did so through meeting with Ms. Zhang, her investor and an Ontario land owner while Formosa and Taylor were still by GFG employed by TSI and directors of TSI. This was done with Taylor’s company and the use of TSI marketing materials;

f) Formosa arranged for the removal of TSI’s hard drives and server from TSI’s premises for approximately 6 months;

g) Even after termination, Formosa continued to have computer equipment belonging to TSI;

h) All of the above was done without advising TSI or to the knowledge of other persons at TSI including Lane or any other key personnel at TSI.

What is Formosa’s responding evidence?

[68] Formosa’s evidence is more damning than it is helpful to the Defendants. It is an admission that Formosa breached his fiduciary duty to TSI while still employed by TSI.

[69] Formosa sets out in his affidavit that TSI had financial difficulties after the shareholder died in February 2014. He says that TSI didn't want to proceed with iFarm Local. He was concerned about the possibility of the landlord locking them out of the premises. He wanted to implement a “continuity plan” so he instructed Masih, an independent contractor, to remove the hard drives and store them in his home. Formosa denies any information on the hard drives was ever accessed.

[70] On the issue of the hard drives and server, what Formosa doesn’t explain is: why he would trust an independent contractor to hold TSI's vital and confidential information “in his home”; why no one else was told of this “continuity plan”; why Masih would deny having the hard drives to Lane, the president of TSI when confronted; why Masih would only return the hard drives after being instructed to do so by Formosa; why, when the financial position of TSI improved, he didn’t have the hard drives and servers returned.

[71] On the issue of starting a business which competes with TSI while being employed by TSI, Formosa doesn't provide any excuse known to law that would permit him to do what he did in breach of his fiduciary duty. He did not obtain the consent or advise TSI that he was starting a business to compete with iFarm Local. The inference is irresistible.

[72] Formosa attempts to suggest that iFarm was his idea while working at TSI and that he pursued this on his own time and expense. He then goes on to suggest that TSI didn’t want to pursue the iFarm project. But Formosa doesn't deny iFarm2 would be pursuing the same investors as iFarm Local and that he was doing so when he met with Ms. Zhang, the investor and the land owner in January 2015. He also doesn't explain why he wouldn't have told Lane or anyone else he was incorporating and pursuing iFarm2 business while continuing to collect a substantial salary from TSI.

[73] Formosa’s evidence also suggests that iFarm2 was only an idea that had not yet been put into place. This is inconsistent with the evidence of the meetings with Ms. Zhang and her investor/land owner and inconsistent with GLG marketing materials Formosa used at the meetings. Formosa admits that the iFarm logo was used “on some high level marketing materials shown to a potential investor”.

[74] I agree with Formosa’s evidence that land banking is not unique. What is unique is the “marrying” of land banking and the PNP program to Asian investors. That is the business that iFarm2 was pursuing as well.

[75] There simply is no basis to suggest that Formosa did not breach his contractual obligations and fiduciary duty prior to his termination.

What is Nielsen’s response?

[76] Nielson admits he breached his fiduciary duty to TSI by working on a plan “on his own time” while still employed by TSI.

What is Richard Taylor’s response?

[77] Not very much. He established GLG and has been communicating with Formosa. His affidavit adds nothing to the analysis. What Taylor doesn't deal with is that GLG's marketing materials includes TSI's marketing materials and how that came to be. In light of the communications with Formosa (a TSI employee) and the use of TSI's materials in GLG's marketing materials to Ms. Zhang and the others, one can easily infer that Taylor knew full well what Formosa and Nielson were doing.

What is Masih’s response?

[78] He says that Formosa told him to establish a continuity plan. He admits that he took the hard drives on July 7, 2014 and took them home, not to his office. He does not report in writing to anyone anything about his “continuity plan” to anyone, including to Formosa. He doesn’t tell anyone else at TSI. He admits when asked by Lane about the hard drives – he told Lane, the then president of TSI, he “did not know what he was talking about”. After meeting with the private investigators, where he denied any knowledge, he went home and spoke to Formosa. He then got the hard drives and server from his home and returned them to Lane.

[79] Surprisingly, Masih never billed TSI for removing or storing the hard drives and server. He never reported this work in any way to anyone.

[80] Masih’s evidence makes little sense. It confirms that TSI's computer information in its hard drive and server were taken by Masih on Formosa’s instrustions and held for about 6 months.

THE ANALYSIS

The Injunction

[81] The applicable test when considering a motion for an interlocutory injunction is set out by the Supreme Court of Canada in RJR MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, 111 D.L.R.(4th) 385, as follows:

i. Is there a serious question to be tried?;

ii. Will the moving party suffer irreparable harm if the injunction is not granted?; and

iii. Does the balance of convenience favour the granting of an injunction?

[82] There are two arguments that the applicable test, in the first prong of the RJR analysis, is a strong prima facie case.

[83] First, as stated by Brown J. in para. 27 of GDL Solutions Inc. v. Walker et al., 2012 ONSC 4378:

"...Where the injunction will amount to a final determination of the action, where a constitutional issue presents as a question of law alone, or where, in a private law context, the factual record is largely settled, the plaintiff must show a strong prima facie case rather than a serious issue to be tried at the first step of the test”.

[84] Second, some courts in Ontario have held that the higher standard of a strong prima facie case should apply where parties are seeking to enforce restrictive covenants, both in the context of an employment agreement and the sale of a business. However, if the higher standard is met, less emphasis is placed on the second and third parts of the injunction test. See: Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (S.C.J.) and Quizno’s Canada Restaurant Corp. v. 1450987 Ontario Corp., 2009 CanLII 20708 (ON SC), [2009] O.J. No. 1743 (S.C.J.) and 1003126 Ontario Ltd. v. DiCarlo, 2013 ONSC 278, 10 C.C.E.L. (4th) 1 at para. 21

[85] Justice Pattillo in Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., [2008] O.J. No. 190 (S.C.J.) stated the following:

[38] Penex further submits that notwithstanding the principle of Doherty v. Allman, in considering an interlocutory injunction in respect of a negative covenant, the court must still consider irreparable harm and balance a convenient. It points to the recent decision of Mr. Justice Pitt of this Court in Carecor Health Services Ltd. v. Health Trans Services Inc., 2006 Carswell Ont. 3781 (S.C..J.) at paragraph 18 where the learned judge states as follows:

Carecore submits that neither proof of irreparable harm, nor consideration of the balance of convenience is required in granting an injunction where the court is being asked to give effect to negative covenants such as these. This is referred to as the Doherty v. Allman [(1878), (1877-78) L.R. 3 App. Cas. 709 (U.K.H.L.)] principle (see: Montreal Trust Co. v. Montreal Trust Co. of Canada (1988), 1988 CanLII 3020 (BC CA), 24 B.C.L.R. (2d) 238 (B.C.C.A.). The rule submitted above is not absolute and should not be inflexibly applied upon an interrogatory motion, except in compelling cases. The presence of a negative covenant does not divest the court of its discretion in injunctive matters. The fundamental question of the court is whether granting an injunction is just and equitable in all circumstances of the case (see: Jet Print Inc. v. Cohen (1999), 43 C.P.C. (4th) 123 (Ont. S.C.J.). Justice Sharpe, when writing about the restrictive covenant principle, stated

Neither does the Doherty v. Allman principle apply with the same force to interrogatory injunctions. There the court does not have the advantage of a full review of the facts and law, and the validity or enforceability of the covenant may not be upheld at trial. The ordinary criteria determining the availability of interlocutory injunctions apply and a plaintiff who sues upon an express negative covenant will not be awarded interlocutory injunctive relief automatically (see: Robert Sharpe, Injunctions and Specific Performance, supra, 2.410, 9.40).

In light of the above, I will still consider irreparable harm and the balance of convenience.

[39] In my view, the comments by both Sharpe JA in his text on Injunctions as quoted above and by Mr. Justice Pitt in Carecor, supra, are not inconsistent with the test enunciated in Saskatchewan Water, supra,. Each of those respected judges are saying, in my view, that in the case of an interlocutory injunction to restrain a breach of a negative covenant, irreparable harm and the balance of convenience need to be still considered. The extent of the consideration, however, will be directly influenced by the strength of a plaintiff’s case. Even where there is a clear breach of a negative covenant which is reasonable on its face, the issues of irreparable harm and balance of convenience cannot be ignored. They may, however, become less of a factor in reaching the final determination of the issue depending on the strength of the plaintiff’s case.

[86] In this case, I am satisfied that the interlocutory injunction is essentially a final determination in the action with respect to most of the Defendants. As such, it is appropriate to use the strong prima facie test for the first branch of the analysis.

Strong Prima Facie Case

[87] I am satisfied that the evidence in this case establishes a strong prima facie case that Formosa and Nielson breached their employment agreements and/or fiduciary duties by engaging in a business while employed by TSI and which business directly competed and competes with TSI. They had employment agreements which made it clear they were fiduciaries. They were directors of TSI and clearly understood they owed fiduciary duties to TSI. They were key employees with access to all TSI’s confidential information and documentation.

[88] There is uncontradicted evidence that the Defendants actually proceeded to compete directly with TSI. Formosa, Nielson, Taylor, GLG, and iFarm2 used TSI’s confidential information and business plan with Ms. Zhang's investor and a land owner.

[89] The evidence establishes that Masih was clearly involved in the removal and retention of TSI’s confidential information and documentation by taking and keeping the hard drives and servers and then attempting to deceive Lane regarding the whereabouts of the hard drives and server.

[90] It is true that there is no direct evidence that computer information on the hard drives, server or other computers was taken or copied. However, that is not the test. If direct definitive evidence of use was necessary, a defendant could admit taking the confidential information but deny its use. The evidence of use is solely within the defendant's knowledge - not the plaintiff's knowledge. Proof with this standard would be impossible. Instead, this court may draw inferences from the uncontradicted evidence. In this case, that inference is easily drawn from the evidence of the surreptitious manner in which the hard drives and server were taken, Michael Huggins’s evidence and the actual use of TSI’s marketing materials after the hard drives were taken.

[91] At this point, based on the evidence before me, it is difficult to ascertain what, if any, defence could possibly succeed.

[92] TSI has established a strong prima facie case.

Irreparable Harm

[93] The Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at para. 58, described the second stage of the test for an interlocutory injunction – whether irreparable harm will occur to the applicant if the injunction is refused – as follows: “[a]t this stage the only issue to be decided is whether a refusal to grant relief could so adversely affect the applicants' own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application.” As for the meaning of “irreparable”, the Court stated:

“Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision (R.L. Crain Inc. v. Hendry (1988), 1988 CanLII 5042 (SK QB), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, 1985 CanLII 154 (BC CA), [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).

[94] There are many cases that have found that once a strong prima facie case is shown the considerations of irreparable harm and balance of convenience are largely unnecessary. See Montreal Trust Co. v. Montreal Trust Co. of Canada, 1988 CanLII 3020 (BC CA), [1988] B.C.J. No. 410 (B.C.C.A.); Bank of Montreal v. James Main Holding Ltd., [1982] O.J. No. 1245 (Div. Ct.); Key Pos Business Systems Inc. v. Singh, [2008] O.J. No. 1791 (Ont. S.C.J.)

[95] Nevertheless, I will consider whether the Plaintiff has demonstrated it will suffer irreparable harm if the injunction is not granted. The Defendants submit that TSI will not suffer irreparable harm. I disagree. This “marriage” of land development and PNP is a unique marketing tool and business opportunity. No one else is presently engaged in this business. To allow the Defendants to use TSI’s confidential information and documentation, marketing materials, agents and investor list will permit the Defendants to get into this market very quickly to the detriment of TSI’s present and future endeavours.

[96] The further difficulty is that once the Defendants enter the market, the impact on TSI’s business will never be ascertainable to any degree of certainty. For example, how, when and the frequency of investments by foreign investors could never be adequately determined at a later date into this new and untapped market.

[97] In Omega Digital Data Inc. v. Airos Technology Inc. (1996), 1996 CanLII 11785 (ON SC), 32 OR (3d) 21; [1996] OJ No.5382, Justice Sharpe was confronted with a similar situation where he had to deal with former employees going out to compete in a new business. He had the following to say at page 24:

I am satisfied that the loss of the right of the plaintiff to exploit that market opportunity with the advantages of being the first and only entrant into the market without competition from the defendants' very similar product would result in irreparable harm to the plaintiff. It would be, in my view, extremely difficult to quantify the damage the plaintiff would suffer if an injunction were not granted. It is clear that in cases of this precise kind the type of harm complained of by the plaintiff has repeatedly been recognized as constituting irreparable harm within the meaning of the test for an interlocutory injunction. I refer here in particular to the judgment of Justice Blair in M.D. Prescriptions Inc. v. Gandey (1991), 1991 CanLII 14302 (ON SC), 37 C.P.R. (3d) 472 (Ont. Gen. Div.) at p. 477, where Justice Blair adopted a decision of the English Court of Appeal in Evans Marshall & Co. v. Bertola S.A., [1973] 1 W.L.R. 349 at p. 369, [1973] 1 All E.R. 992, where Lord Justice Sachs stated at p. 349:

Applying this test it seems just to say to the defendants, you cannot breach your fiduciary duties and then expect the plaintiff to prove the damages suffered by loss of revenue, loss of share of the market, when these are difficult to accurately determine.

Justice Blair went on to say:

I do not see how it can be said that the plaintiffs can be adequately compensated in damages for this kind of a situation when no one can know, or in fact prove, what actual impact the conduct of Mr. Gandey, assuming he is a fiduciary, may have had.

Balance of Convenience

[98] The third stage of the test for an interlocutory injunction involves "a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits". See RJR-MacDonald, 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311. The factors which must be considered in assessing the “balance of convenience” are numerous and will vary in each individual case. See RJR-MacDonald at para 63.

[99] The balance of convenience has been held to weigh in favour of the party with a long-established business and customer base “developed and nurtured over the years”, and who has committed substantial financial resources to the business, over the party who has just set up a business and has substantially less financial investment in it: EII Ltd. v. Dutko (1997), 1997 CanLII 22818 (MB QB), 119 Man.R. (2d) 178, (Q.B.); C.B. Constantini Ltd. v. Slozka, , 2006 BCSC 1210, [2006] B.C.J. No. 1798 (QL) (S.C.).

[100] With respect to balance of convenience, TSI has been developing its iFarm Local business since 2012 or 2013. TSI is using its prior business dealings in land development and its investor contacts and foreign agents to begin to publicly market iFarm Local business. On the other hand, the Defendants, have just started their business. The balance of convenience clearly favours granting the injunction.

[101] The injunction shall issue.

The Anton Pillar Order

[102] The Supreme Court of Canada in Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36 2 SCR 189, set out the essential requirements for the issuance of an Anton Piller order:

There are four essential conditions for the making of an Anton Piller order.

First, the plaintiff must demonstrate a strong prima facie case.

Second, the damage to the plaintiff of the defendant’s alleged misconduct, potential or actual, must be very serious.

Third, there must be convincing evidence that the defendant has in its possession incriminating documents or things, and

fourthly it must be shown that there is a real possibility that the defendant may destroy such material before the discovery process can do its work:.

Nintendo of America, Inc. v. Coinex Video Games Inc., 1982 CanLII 5251 (FCA), [1983] 2 F.C. 189 (C.A.), at pp. 197-99; Indian Manufacturing Ltd. v. Lo (1997), 1997 CanLII 5346 (FCA), 75 C.P.R. (3d) 338 (F.C.A.), at pp. 341-42; Netsmart Inc. v. Poelzer, 2002 ABQB 800, [2003] 1 W.W.R. 698, at para. 16; Anton Piller KG, at pp. 58-61; Ridgewood Electric, at para. 27; Grenzservice, at para. 39; Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 1996 CanLII 7295 (MB CA), 67 C.P.R. (3d) 202 (Man. C.A.), at p. 208; Ontario Realty Corp. v. P. Gabriele & Sons Ltd. (2000), 2000 CanLII 22697 (ON SC), 50 O.R. (3d) 539 (S.C.J.), at para. 9; Proctor & Gamble Inc. v. John Doe (c.o.b. Clarion Trading International), [2000] F.C.J. No. 61 (QL) (T.D.), at para. 45; Netbored, at para. 39; Adobe Systems Inc. v. KLJ Computer Solutions Inc., 1999 CanLII 7905 (FC), [1999] 3 F.C. 621 (T.D.), at para. 35.

Strong Prima Facie Case

[103] For the reasons set out above, TSI has established it has a strong prima facie case.

Very Serious Damage to TSI

[104] Lane provided ample evidence to establish that serious damage would result to TSI's iFarm Local business from the business undertaken by the Defendants in direct competition using TSI's confidential information and documentation. In fact, at least one potential investor and land owner have been subjected to the unfair competition by iFarm2 potentially losing an investor and land owner to TSI.

Possession of the Documents

[105] There is no doubt that the Defendants had in their possession TSI's computer information which included all TSI's confidential information and documentation.

[106] Formosa still has some TSI computers which contain TSI information and documentation.

[107] Clearly, the Defendants have documents which utilize the TSI information and documentation as can be seen from the GLG marketing documents.

[108] I am satisfied there is convincing evidence that the Defendants have possession of documentation and information that is incriminating.

Real Possibility of Destruction

[109] There is evidence that after the Defendant's activities came to light, there was an attempt to have the employee remove computer information from the computer to avoid detection.

[110] There is evidence of an attempt to hide the whereabouts of the hard drives and server.

[111] There was a denial of meetings with Ms. Zhang, the investor and the landowner who used the TSI materials.

[112] This evidence establishes the lack of trustworthiness of the Defendants from the impropriety of their actions which warrants this court drawing a reasonable inference that the destruction of the documents remaining in the Defendant's possession would be a real possibility. See Teledyne Dalsa Inc. v. Li 2014 ONSC 323.

[113] There is substantial credible evidence that without an order, there is a real possibility that the information and documentation which the Defendants possess, most of which is electronic information which can be easily erased, will be destroyed.

[114] The Anton Piller order shall issue.

Conclusion

[115] An injunction and Anton Piller order shall issue in the form signed by me.

COSTS

[116] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 3 pages, with attached Costs Outline and any authorities.

[117] Any responding party shall have one week thereafter to serve and file responding submissions. Written submissions shall be limited to 3 pages with any authorities relied on attached.

[118] There shall be no reply submissions without leave.

Ricchetti, J.

Date: February 20, 2015