CITATION: Verge Insurance Brokers Limited et al. v. Richard Sherk et al., 2015 ONSC 4044

ST. CATHARINES COURT FILE NO.: 53982/12

DATE: 2015/06/29

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Verge Insurance Brokers Limited, 1729628 Ontario Inc., Marick Bros. Investments Inc. and Mark Sherk (plaintiffs) v. Richard Sherk, Daniel Sherk, Martin, Merry & Reid Limited, Cal Schultz Insurance Brokers Ltd., Andree Senn, Brenda French and Ruth Pluska (defendants)

BEFORE: The Honourable Mr. Justice J.W. Quinn

COUNSEL: Stephen F. Gleave and Richelle M. Pollard,

for the plaintiffs/responding parties

George Limberis,

for the defendant/moving party, Daniel Sherk

HEARD: December 16, 2014, May 4, 2015 and thereafter by written argument

E N D O R S E M E N T

I. INTRODUCTION

[1] This motion highlights the relative sanctity of a consent order.

[2] The parties are involved in a hornets’ nest of litigation, fueled by a soap opera display of ill will and family betrayal. Motions abound. The one currently before the court seeks a variation of an interlocutory injunction granted on consent.

[3] Pursuant to that injunction, one of the defendants, Daniel Sherk, was prohibited from engaging in certain activities connected with his employment as an insurance salesman. His notice of motion, dated July 4, 2014, asks for an order “varying” the consent interlocutory injunction “by substituting” other provisions. Rules 37.14 and 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 are cited.

[4] The motion evolved to the point where, in his factum of May 19, 2015, the moving party sought to “suspend and amend” the injunction, using, in his words, Rules 59.06(2)(b) and (d) “in tandem.”

[5] Also in that factum, the matter was phrased in the form of this question:

Should the present injunction be suspended and amended pursuant to Rules 59.06(2)(b) or (d)?

[6] Another description of what the moving party is asking for is seen in a letter from his counsel on May 25, 2015: [Underlining added]

We are looking to suspend the parts of the interlocutory injunction order that restrict [the moving party] from soliciting or servicing clients of Verge [Insurance] and are asking the provisions to be substituted that allow the same to occur . . . so as to allow [the moving party] to resume his business and his livelihood . . .

[7] Thus, we went from: “varying . . . by substituting”; to, “suspend and amend” pursuant to Rules 59.06(2)(b) and (d) “in tandem”; to, suspend and amend pursuant to Rules 59.06(2)(b) or (d); to, “suspend the parts. . . [with] provisions to be substituted.”

[8] Whatever language the moving party wishes to use, he argues that:

▪ “the fiduciary duty he allegedly owed has arguably expired, as have the restrictive covenants in his employment agreement”;

▪ “if the injunction ever had a legal justification, that justification has evaporated”;

▪ despite the fact that the order here was made on consent, a distinction should be made between an order disposing of substantive rights on a final basis and one that deals with procedural rights and obligations;

▪ the passage of time since the order was made, the delay by the plaintiffs in bringing this matter to trial and the change in circumstances warrant a variation;

▪ the court has a general or inherent jurisdiction to vary a consent order and should do so where the circumstances surrounding the original order have so changed that it would be unjust to continue to enforce the order in its present form;

▪ the injunction should be suspended and amended pursuant to a combination of Rules 59.06(2)(b) and (d).

[9] The plaintiffs oppose the motion, contending that:

▪ Rules 59.06(2)(b) and (d) cannot be used as proposed by the moving party;

▪ the court lacks inherent jurisdiction under Rule 59.06(2)(b) and (d) to consider the interests of justice;

▪ the power to vary a consent order is restricted to the express provisions of Rule 59.06(2);

▪ a consent order may only be varied where, if it were a contract, it could be rectified.

II. BACKGROUND

1. The plaintiffs

[10] The plaintiff, Verge Insurance Brokers Limited (“Verge”), is a company that carries on business as an insurance broker. The head office of Verge is located in the City of St. Catharines. Verge and its related and subsidiary companies constitute the largest general insurance brokerage in the Niagara Peninsula. Verge is successful. Very successful. I have seen the valuations.

[11] The plaintiff, Mark Sherk (“Mark”), is the president and managing director of Verge. He owns 50% of its shares.

[12] The role of the other two corporate plaintiffs is such that I need not mention them further for the purposes of this decision.

2. The defendants

[13] The defendant, Richard Sherk (“Richard”), is the brother of Mark. He is an officer and director of Verge and he owns the other 50% of the shares.

[14] The defendant, Daniel Sherk (“Daniel”), is a former salesman at Verge and the son of Richard. Daniel has brought the variation motion now before the court.

[15] The defendant, Cal Schultz Insurance Brokers Ltd. (“CSI”), is a company that carries on business as an insurance broker in the City of Burlington. It is said that CSI is the competitor who knowingly benefited from the alleged wrongdoing of Richard and Daniel.

[16] The remaining defendants need not be described for an understanding of the motion.

3. The nature of the action and allegations

[17] On April 3, 2012, Richard, having reached the age of 65 years, retired from Verge. On May 3, 2012, Daniel, a 13-year employee of Verge, was fired on the grounds of “inappropriate conduct toward a co-worker as well as insubordination.” I am not aware that the retirement of Richard was controversial (it being age-related), however, Daniel disputes the grounds for his firing.

[18] Verge continued to pay Daniel’s salary until late in August of 2012, at which time it was discontinued upon learning that Daniel allegedly was soliciting clients from Verge.

[19] In October of 2012, a statement of claim was issued and subsequently amended.

[20] According to the amended statement of claim, it is said that Verge earns revenues by commissions on the sale of insurance products to clients, with the commissions being based upon a percentage of the premiums paid by the clients to insurance companies. Verge also is paid monies by insurance companies in accordance with the level of sales by Verge of the products of those companies. Consequently, a loss of clients produces, at least, a double-barreled direct financial loss to Verge.

[21] In their amended statement of claim, the plaintiffs allege, in part, that Richard:

▪ breached his employment contract with Verge;

▪ “breached the non-competition covenant in the Shareholders’ Agreement by entering into competitive activities against Verge and directing and encouraging clients to take their business to another brokerage”;

▪ “breached his duty of confidence at common law and under his employment contract to keep all confidential information belonging to Verge in strict confidence”;

▪ “breached his fiduciary duties owed to Mark and Verge by using confidential information and encouraging and assisting clients to cease doing business with Verge”;

▪ “knowingly and intentionally used unlawful means and interfered in Verge’s contractual relations by using confidential information relating to clients to encourage and assist the clients and insurance companies to take their business to a competitor [CSI]”; and

▪ “conspired with Daniel, CSI, French [a co-owner of CSI], Pluska [the other co-owner of CSI] [and] Senn [a former senior executive of Verge] . . . to misappropriate the clients and confidential information of Verge for the purpose to injure Verge’s business.”

[22] Similar allegations are made in the amended statement of claim against Daniel, with the principal ones being:

▪ that he wrongfully solicited the clients of Verge by using confidential information (including a client list he is said to have stolen from Verge when his employment was terminated) for the purpose of transferring business to CSI;

▪ that, by doing so, he breached restrictive covenants in his contract of employment; and

▪ that he breached fiduciary duties allegedly owing to Verge.

[23] As for CSI, the amended statement of claim contends that it:

▪ “intentionally and knowingly encouraged and assisted” Daniel and Richard to breach their duties to Verge;

▪ “has an ongoing plan to work with Daniel and Richard to use Verge’s confidential information to solicit clients and take their business from Verge and assign the business to CSI”;

▪ “misappropriated and misused Verge’s confidential information relating to its clients”;

▪ “knowingly and intentionally [together with Richard and Daniel] interfered with Verge’s contracts and induced breach of contract”; and

▪ “conspired with Daniel and Richard to wrongfully terminate the contracts and relationships between Verge and its clients.”

4. Counterclaim

[24] Daniel has counterclaimed, alleging wrongful dismissal.

[25] He also seeks a declaration that the restrictive covenant, in section 7 of his employment agreement with Verge, is void. The statement of claim does not plead section 7. Indeed, the reply and defence to counterclaim delivered by the plaintiffs (following the consent interlocutory injunction that is the subject-matter of this motion) states that they are relying upon neither the non-solicitation clause in section 7.01(b) nor the term “know-how” in section 7.01(d).

[26] Section 7 reads, in part:

NON-COMPETITION AND CONFIDENTIALITY

7.01 [Daniel] warrants, covenants and agrees that:

(a) N/A

(b) during the term of this Agreement and for the period(s) of:

(i) six (6) months;

(ii) twelve (12) months;

(iii) eighteen (18) months;

(iv) twenty-four (24) months;

after the termination of the Agreement for any reason . . . [Daniel] shall not . . . contact, solicit, or otherwise attempt to contact for purposes of selling insurance any of the clients, customers or accounts of . . . [Verge] . . . whether or not such clients, customers or accounts . . . were originally solicited by [Daniel] during the term of this Agreement . . .

(d) [Daniel] recognizes and acknowledges that all information relating to [Verge]’s business . . ., its know-how, trade secrets and the particular way in which [Verge] generally conducts its is business is a valuable, special and unique asset of [Verge]. [Daniel] covenants and agrees that all information obtained during the term of this Agreement shall be held by [Daniel] as a trustee for [Verge] . . . [Daniel] covenants and agrees that he . . . will not, during or after the term of this Agreement, disclose any secret or confidential information . . .

(e) N/A

(f) N/A

[27] Section 7.01(b) is ambiguously worded such that one is unable to determine the applicable timeframe. Nevertheless, even if the longest period is selected (24 months), it has now expired (Daniel was terminated on May 3, 2012).

5. Interim injunction (January 22, 2013)

[28] Verge brought a motion against Daniel, Richard and CSI for an interlocutory injunction. Pending the date when the motion was to be argued, Ramsay J. considered contested terms for an uncontested adjournment, and made an interim injunction in favour of Verge which prohibited Daniel, Richard and CSI from soliciting or servicing the clients of Verge. The interim injunction, dated January 22, 2013, provides: [Underlining and footnote added]

(1) THIS COURT ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI Insurance Brokers Ltd. (‘CSI’), deliver up any of Verge’s confidential documents and information in the defendants’ possession, power or control, including, but not limited to all confidential information.

(2) THIS COURT FURTHER ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI are prohibited from using, reproducing, selling, disseminating or otherwise disclosing documents and confidential information belonging to Verge.

(3) THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications.

(4) THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential information of Verge and dealings with Verge’s clients.

(5) THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI.

(6) THIS COURT FURTHER ORDERS that Richard Sherk is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees. Richard Sherk is allowed to support his son Daniel in the context of a father-son relationship.[^1]

(7) THIS COURT FURTHER ORDERS that for the purposes of this order, the plaintiff, Verge, includes the following companies: Stewart McGuiness Insurance Brokers Ltd.; 1254224 Ontario Inc. (Reimer-Verge); Kannegieter-Zimmerman Ins. Brokers Ltd.; A.B. & J.L White Insurance Brokers Ltd.; 1255653 Ontario Inc. (Milmine Insurance); 1729628 Ontario Inc.; Niagara Insurance Managers Ltd.; Marick Bros. Investments Ltd.; 1760107 Ontario Inc.

6. Minutes of settlement and interlocutory injunction (May 6, 2013)

[29] On April 22, 23, 25, May 1 and 6, 2013, I partially heard several motions brought by the parties.

[30] On May 6, 2013, I granted an interlocutory injunction pursuant to minutes of settlement. The relevant portions of the injunction state:

THIS COURT ORDERS that Mr. Justice Ramsay’s interim order dated January 22, 2013 (‘the January 22^nd interim order’) shall continue as against Richard and Daniel until the trial of this action, except that the following language shall be substituted for paragraph 5 of the January 22^nd interim order:
THIS COURT ORDERS that Richard and Daniel are prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Richard and Daniel are prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario.
THIS COURT ORDERS that the plaintiffs’ . . . [production motion] as against Richard and Daniel is stayed.

[31] Under this consent interlocutory injunction, Daniel is free to obtain employment, and to engage in his chosen career, anywhere in Ontario.

[32] Daniel resigned from his employment with CSI on May 6, 2013. It was a term of the minutes of settlement that he do so. CSI, since then, has settled the action with the plaintiffs.

[33] The motion by Daniel, now before the court, seeks to vary paragraph 5 of the May 6^th interlocutory injunction to allow him to solicit and service clients of Verge, as long as he does not use Verge’s confidential information. Specifically, Daniel wishes to substitute the following for paragraph 5 of the May 6^thinterlocutory injunction:

THIS COURT ORDERS that Richard is prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Richard is prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario.

5a. THIS COURT ORDERS that Daniel can solicit past and current customers of Verge, but is prohibited from using Verge confidential business information to solicit or service the present customers of Verge.

[34] I will set out the three versions of paragraph 5 to permit a side-by-side comparison:

Interim injunction of January 22

Interlocutory injunction of May 6

Variation sought

THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI.
THIS COURT ORDERS that Richard and Daniel are prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Richard and Daniel are prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario.
THIS COURT ORDERS that Richard is prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Richard is prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario.

[35] On behalf of Verge it is argued that Daniel, by this variation motion, seeks to “recapture the benefit” of section 5 of the May 6^th interlocutory injunction that “he gave away to Verge at that time,” thereby robbing the consent injunction of any efficacy.

7. Minutes of settlement were very early in the action

[36] When the minutes of settlement were signed on May 6, 2013, pleadings had not been completed. There were outstanding motions by the plaintiffs (to strike all or part of Daniel’s counterclaim) and by Daniel (pursuant to Rules 20 and 21 of the Rules of Civil Procedure).

[37] It also must be noted that, when the May 6^th minutes of settlement were signed, there was an outstanding production motion by Verge in which e-mails and text messages passing among the defendants (allegedly in furtherance of the conspiracy pleaded in the amended statement of claim) were sought. Paragraph 4 of the minutes of settlement states:

If, at a later stage in this action, the plaintiffs allege that Richard and/or Daniel have not complied with their obligations under Rule 29.1 (Discovery Plan) and/or Rule 30 (Discovery of Documents) then the plaintiffs may move for a remedy at that time.

[38] Consequently, when the interlocutory injunction of May 6, 2013 was granted, a trial was far, far in the distance. The finish line for the action was not even slightly visible.

[39] On May 6, 2013, it would have been obvious that May 3, 2015, the two year anniversary of Daniel’s firing, would come and go without a trial having taken place.

[40] I harbor not the daintiest doubt that, had Daniel proposed a time limit on the interlocutory injunction, Verge would never have signed the minutes of settlement; and, with a time limit, it would not have been an interlocutory injunction.

[41] I have always regarded an interlocutory injunction as one lasting until trial, when the rights of the parties are finally determined, whereas an interim injunction is for a defined period of time irrespective of the trial date. Here, the January 22, 2013 injunction was described as “interim” and the May 6, 2013 injunction was labeled as “interlocutory,” which suggests to me that the parties turned their minds to that distinction. In other words, the intention of the parties was that the interlocutory injunction would remain in place until trial.

8. Undertaking as to damages

[42] Both paragraph 10 of the minutes of settlement and paragraph 5 of the May 6^th interlocutory injunction required the plaintiffs to provide the undertaking as to damages stipulated by Rule 40.03:

40.03 On a motion for an interlocutory injunction . . . the moving party shall . . . undertake to abide by any order concerning damages . . . that the granting of the order has caused . . . to the responding party . . .

[43] The undertaking was provided by the plaintiffs.

9. Production motion

[44] Subsequently, Verge moved for a further and better affidavit of documents from Richard and Daniel and sought a forensic review of their electronic devices for the purposes of identifying and recovering deleted texts and e-mails. Verge alleges that there has been spoliation of evidence. That motion remains outstanding.

III. DISCUSSION

1. Rules relied upon

[45] The notice of motion cites Rules 37.14 and 59.06 of the Rules of Civil Procedure as the grounds relied upon. Rule 59.06 reads:

AMENDING, SETTING ASIDE OR VARYING ORDER

59.06 (1) Amending – An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding.

(2) Setting aside or varying – A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;

(b) suspend the operation of an order;

(d) obtain other relief than that originally awarded,

may make a motion in the proceeding for the relief claimed.

[46] Rule 59.06(1) is not applicable and was not mentioned in argument.

[47] After much initial confusion, it is now expressly acknowledged that the moving party is not relying upon Rule 59.06(2)(a).

[48] Rule 59.06(2)(c) does not apply in this case.

[49] What remains are Rules 59.06(2)(b) and (d), and it is under those Rules that the motion has been argued.

2. Rules 37.14(1) and (2)

[50] Rules 37.14(1) and (2) state, in part:

37.14 (1) Motion to set aside or vary – A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

may move to set aside or vary the order . . .

(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.

[51] In reviewing the cases supplied by the parties, particularly the ones upon which the moving party relies, it is important to distinguish those decided under Rule 59.06(2) and those decided under Rule 37.14. The latter are not of assistance, as Rule 37.14(2) allows the court to set aside or vary an order “on such terms as are just” and similar language is missing in Rule 59.06(2).

[52] Consequently, the following cases referenced by counsel for the moving party are not helpful in my task:

▪ Beetown Honey Products Inc. (Re) (2003), 2003 32918 (ON SC), 67 O.R. (3d) 511 (S.C.J.); [2004] O.J. No. 4329 (C.A.) (Although Rule 37.14 is not mentioned, the order in issue there was made by the registrar and, therefore, falls under Rule 37.14(c));

▪ Stoughton Trailers Canada Corp. v. James Expedite Transport Inc., 2008 CarswellOnt 7344 (S.C.J.); [2008] O.J. No. 4864 (C.A.) (Although the Court of Appeal did not cite a Rule, the Rule relied upon in the lower court was Rule 37.14(1)).

[53] The crux of this motion lies in the fact that the May 6, 2013 interlocutory injunction is a consent order.

[54] “A consent judgment is final and binding and can only be amended when it does not express the real intention of the parties or where there is fraud. In other words, a consent judgment can only be rectified on the same grounds on which a contract can be rectified”: see Monarch Construction Ltd. v. Buildevco Ltd. (1988), 26 C.P.C. (2d) 164 (Ont. C.A.) at pp. 165-166.

[55] “[A] consent judgment may be set aside on the same grounds as the agreement giving rise to the judgment. These grounds go to the formation of the agreement . . .”: see McGowan v. McGowan (1995), 1995 1085 (ON CA), 14 R.F.L. (4^th) 325 (Ont. C.A.) at para. 19. This statement was approved by the Supreme Court Canada in Rick v. Brandsema, 2009 SCC 10, [2009] 1 SCR 295 at para. 64. The Supreme Court went on to quote the late James G. McLeod in an annotation (one of countless informative annotations that were the trademark of Professor McLeod in the Reports of Family Law) to Thomsett v. Thomsett, 2001 BCSC 546, 16 R.F.L. (5th) 427 at pp. 428-29:

. . . a consent judgment is not a judicial determination on the merits of a case but only an agreement elevated to an order on consent. The basis for the order is the parties’ agreement, not a judge’s determination of what is fair and reasonable in the circumstances.

[56] A recent reaffirmation of the consent-order-is-a-contract principle is found in Ruffudeen-Coutts v. Coutts, [2012] O.J. No. 400 (C.A.) at para. 63, where the Court says, “. . . consent orders have their foundation in contract . . .” and refers to Rick v. Brandsema, supra and Monarch Construction Ltd. v. Buildevco Ltd., supra.

[57] In McGowan v. McGowan, supra,, at para. 21, it was expressly recognized that the minutes of settlement in that case were “the underlying agreement” or “the agreement giving rise to the consent judgment.”

4. Inherent jurisdiction

[58] The moving party submits that, irrespective of the Rules, there is an inherent jurisdiction in the court to grant the relief requested. The submission is phrased in these words:

. . . to deal with this specific issue – the consent form of the order – [the moving party] relies on the concept of inherent jurisdiction . . . the consent form of an order does not deprive this court of the jurisdiction it would otherwise enjoy to vary or set aside that order.

(a) inherent jurisdiction defined

[59] “Inherent jurisdiction is a power derived from the very nature of the court as a superior court of law, permitting the court to maintain its authority and to prevent its process being obstructed and abused”: see Stelco Inc. (Re), 2005 8671 (ON CA) at para. 34, citing with approval I. H. Jacob, “The Inherent Jurisdiction of the Court” (1970), 23 Current Legal Problems at pp. 27-28.

[60] “[T]he inherent jurisdiction of the court is . . . a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so”: see Halsbury’s Laws of England, 4^th ed. (London: LexisNexis UK, 1973), vol. 37, at para. 14.

(b) inherent jurisdiction is not to conflict with Rule

[61] “[T]he inherent jurisdiction of the Court of Queen’s Bench is not such as to empower a judge of that Court to make an order negating the unambiguous expression of the legislative will”: see Baxter Student Housing Ltd. et al. v. College Housing Co-operative Ltd. et al., 1975 164 (SCC), [1976] 2 S.C.R. 475 at p. 480.

[62] “Inherent jurisdiction cannot, of course, be exercised so as to conflict with a statute or Rule”: see Montreal Trust Company et al. v. Churchill Forest Industries (Manitoba) Limited, 1971 960 (MB CA), [1971] 4 W.W.R. 542 at p. 547, cited with approval in Baxter Student Housing Ltd. et al. v. College Housing Co-operative Ltd. et al., ibid.

[63] “In spite of the expansive nature of this power, inherent jurisdiction does not operate where Parliament or the legislature has acted”: see Stelco Inc. (Re), supra, at para. 35.

[64] Inherent jurisdiction is “not limitless; if the legislative body has not left a functional gap or vacuum, then inherent jurisdiction should not be brought into play”: see Royal Oak Mines Inc. (Re), 1999 14843 (ON SC), [1999] O.J. No. 864 (Gen. Div.), cited with approval in Stelco Inc. (Re), ibid.

[65] “[W]here the usefulness of the powers under the Rule ends, the usefulness of the powers of inherent jurisdiction begins . . . they are wider and more extensive powers . . . filling any gaps left by the Rules . . .’: see I. H. Jacob, “The Inherent Jurisdiction of the Court” (1970), 23 Current Legal Problems at pp. 50-51.

[66] Furthermore, s. 146 of the Courts of Justice Act, R.S.O. 1990, c. C.43 restricts the scope of inherent jurisdiction to situations where there is an “absence of express provision for procedures . . .”:

Where procedures not provided – Jurisdiction conferred on a court, a judge or a justice of the peace shall, in the absence of express provision for procedures for its exercise in any Act, regulation or rule, be exercised in any manner consistent with the due administration of justice.

(d) no inherent jurisdiction under Rule 59.06(2)(a)

[67] “The respondent cannot avoid the effect of [Rule 59.06(2)(a)] by invoking the inherent jurisdiction of the court”: see Trainor v. Canada (Customs and Revenue Agency), 2012 ONSC 3450, [2012] O.J. 2665 (Div. Ct.) at para. 7; affirmed, 2011 ONCA 794.

[68] In a motion brought pursuant to Rule 59.06(2)(a), it is not open to the court to invoke its inherent jurisdiction. Inherent jurisdiction is limited to cases in which there is “jurisdiction conferred on a court and an absence of express provision for procedure for its exercise in any Act, regulation or rule”: see the Divisional Court decision in Estate of Goldentuler v. Crosbie, 2014 ON SC at para. 34, relying upon earlier authorities.

[69] If there is no inherent jurisdiction under Rule 59.06(2)(a), why should there be one under Rules 59.06(2)(b) and (d)?

(e) no inherent jurisdiction to vary a consent order

[70] “Although the limits of a Superior Court’s power in the exercise of its inherent jurisdiction are not fully defined, there are nevertheless limits that have been established in certain areas and the power of a Court to vary a consent order is one of them”: see Bank of Nova Scotia v. Golden Forest Holdings Ltd. 1990 2489 (NSCA) at pp. 4-5 after citing, with approval, Monarch Construction Ltd. v. Buildevco Ltd., ibid.

[71] “A consent order . . . is an integrated whole unless specifically provided otherwise”: see Shackleton v. Shackleton (1999) BCCA 704 at para. 14.

[72] A consent order represents an agreement reached by the parties. A court rarely, very rarely, should pick and choose what part or parts of that agreement may be reworded or otherwise excused from enforcement.

6. Rule 59.06(2) – no distinction between final and interlocutory orders

[73] Rule 59.06(2) does not distinguish between final and interlocutory orders.

7. Rule 59.06(2)(b)

[74] Rule 59.06(2)(b) deals with suspending the operation of an order. This Rule only applies to a total suspension of an order. Motions that seek to suspend a portion or parts of an order are not within the contemplation of Rule 59.06(2)(b): see L.M. Rosen Realty Ltd. v. D’Amore, [1988] O.J. No. 1113 (H.C.J.) at p. 3 (QL).

[75] The moving party at bar is asking for parts of the consent injunction to be suspended. This is apparent in the earlier quote from the letter of May 25, 2015, which I will repeat: [Underlining added]

[76] Suspending only part of an order is the equivalent of a variation.

8. Rule 59.06(2)(d)

[77] Rule 59.06(2)(d) allows a party to move to “obtain other relief than that originally awarded” and is available only to a party who was granted relief on the original motion: see Eastwalsh Homes Ltd. v. Anatal Development Corp., [1990] O.J. No. 2207 (Gen. Div.) at p. 4 (QL).

[78] That is not what happened here. Relief was not granted to the moving party; and, the consent nature of the order does not negate the fact that relief was granted to the plaintiffs on the original motion.

9. May Rules 59.06(2)(b) and (d) be used in tandem to amend an order?

[79] The moving party cites Wason v. Farmers’ Mutual Insurance Co. (Lindsay), [1996] O.J. No. 3848 (Gen. Div.) as authority for the proposition that Rule 59.06(2)(b) may be used to suspend an order and Rule 59.06(2)(d) may be used to substitute a new order and that “the two provisions may be used, in tandem, to amend an existing order.”

[80] If that is the ratio decidendi in Wason v. Farmers’ Mutual Insurance Co. (Lindsay), I think that it is bad law. Orders are amended under Rule 59.06(1) which stipulates certain precise criteria. One should not be able to skirt Rule 59.06(1) by resorting to a brew of Rules 59.06(2)(b) and (d).

[81] As well, it does not make sense that a litigant may avoid the onerous requirements of Rule 59.06(2)(a) by concocting a two-step fiction involving Rule 59.06(2)(b) and (d).

10. Passage of time and delay

[82] As I indicated at the outset, the moving party argues that “the fiduciary duty he allegedly owed has arguably expired, as have the restrictive covenants in his employment agreement . . . [and], if the injunction ever had a legal justification, that justification has evaporated.” This is a matter for trial. Credibility is a cancerous issue for every party in the various ongoing pieces of the Verge Insurance litigation.

[83] Although the moving party submits that “the plaintiffs have utterly failed in their obligation to bring the present matter to trial,” I am not satisfied that this submission is factually sound.

11. Change of circumstances

[84] The moving party further argues that the court has an inherent jurisdiction to vary a consent order and should do so where the circumstances surrounding the original order have so changed that it would be unjust to continue to enforce the order in its present form.

[85] “. . . Rule 59.06(2) . . . does not come into play where . . . the plaintiff has a change in position or change in circumstances”: see Hall v. Powers, (2005) 2005 23121 (ON SC), 80 O.R. (3d) 462 (S.C.J.) at para. 13.

[86] Even if an inherent jurisdiction exists, it should not be used here to upset the fairly-negotiated bargain of the parties.

11. Some cases upon which moving party relies

[87] The moving party relies upon certain cases that I think are distinguishable from the matter before me and, therefore, are unhelpful for the reasons parenthetically indicated:

▪ Bourganis v. Glarentzos et al., [1978] O.J. No. 3311 (H.C.J.) (This case did not involve a consent order or Rule 59.06(2).)

▪ Chitel v. Rothbart (1984), 42 C.P.C. 217 (Ont. Master); affirmed (1985) 2 C.P.C. (2d) xiix (Div. Ct.) (No Rule was cited in this case.)

▪ CIBA-Geigy Ltd. v. Navopharm Ltd., 1997 Carswell Nat 2400 (F.C.-T.D.) (This case did not involve a consent order or Rule 59.06(2).)

▪ Wilkinson v. Yat Ming Industrial Factory Ltd., [2003] O.J. No. 1385 (S.C.J.) (The consent order was set aside in circumstances where it was found that, in agreeing to the order, counsel for one of the parties was not acting on the instructions of his client. Therefore, that decision is merely consistent with the principle that a court can vary or set aside an order where the order does not express the real intention of the parties.)

▪ Levert Personnel Resources Inc. v. LeClair, [2007] O.J. No. 5013 (S.C.J.) (The order being considered there was not a consent order.)

▪ Malata Group (HK) Ltd. v. Jung, [2009] O.J. No. 3620 (S.C.J.) (Although this was a motion to vary a consent order, it was decided with neither the moving party nor the court mentioning any rule under the Rules of Civil Procedure.)

▪ 1516089 Ontario Inc. v. Jacobs, 2011 CarswellOnt 2212 (S.C.J.) (This case did not involve a consent order or Rule 59.06(2).)

▪ Mould Clean Laboratories Ltd. v. Fort Albany First Nation 2013 ONSC 66 (While the motion was brought pursuant to Rule 59.06(2), the court relied upon Beetown Honey Products Inc. (Re), supra, and Stoughton Trailers Canada Corp. v. James Expedite Transport Inc., supra, which were decided under Rule 37.14.)

▪ Cookish v. Paul Lee Associates Professional Corp. 2013 CarswellOnt 5070 (C.A.) (This decision centres around an interpretation of the Solicitors Act. Rule 59.06 is not mentioned. The Court references Beetown Honey Products Inc. (Re), supra, and Stoughton Trailers Canada Corp. v. James Expedite Transport Inc., supra, which, as I have said, arose under Rule 37.14. And the Court does not mention Monarch Construction Ltd. v. Buildevco Ltd., supra, Rick v. Brandsema, supra, and McGowan v. McGowan, supra.)

▪ Nicholas C. Tibollo Professional Corp. v. Wasserman Associates Inc. 2013 ONSC 2685 (Div. Ct.) (This case does not involve a true consent order. Also, the initial order was that of the local registrar and, therefore, comes under Rule 37.14(2). Finally, this case relied upon Cookish v. Paul Lee Associates Professional Corp., supra, which I already have addressed.)

12. Conclusion

[88] The jurisdiction to vary a consent order by means of a motion brought pursuant to Rules 59.06(2)(b) and (d) of the Rules of Civil Procedure is confined to the express language of those Rules. This is particularly fair and sensible in the case of a consent interlocutory injunction wherein the enjoined party has the benefit of the damages undertaking in Rule 40.03:

40.03 On a motion for an interlocutory injunction or mandatory order, the moving party shall, unless the court orders otherwise, undertake to abide by any order concerning damages that the court may make if it ultimately appears that the granting of the order has caused damage to the responding party for which the moving party ought to compensate the responding party.

[89] In my opinion, this court should not upset the bargain struck by the parties, as evidenced by their consent (freely and voluntarily given).

[90] In response to this variation motion the plaintiffs are not required to defend or to justify the substantive merits of the consent interlocutory injunction.

[91] If there is an injustice to the moving party by means of a continuation of the interlocutory injunction (and it is too early to conclude one way or another), his remedy is the damages undertaking.

IV. RESULT

[92] The motion is dismissed. Counsel should await further instructions as to costs submissions.

The Honourable Mr. Justice J.W. Quinn

DATE: June 29, 2015

CITATION: Verge Insurance Brokers Limited et al. v. Richard Sherk et al., 2015 ONSC 4044

COURT FILE NO.: 53982/12

DATE: 2015/06/29

SUPERIOR COURT OF JUSTICE - ONTARIO

BEFORE: The Honourable Mr. Justice J.W. Quinn

COUNSEL: Stephen F. Gleave and Richelle M. Pollard, for the plaintiffs/responding parties

George Limberis, for the defendant/moving party, Daniel Sherk

ENDORSEMENT

J.W. Quinn J.

DATE: June 29, 2015

[^1]: On February 4, 2013, Ramsay J. added the underlined sentence to paragraph 6.

Verge Insurance Brokers Limited et al. v. Richard Sherk et al., 2015 ONSC 4044

Case Summary

SUPERIOR COURT OF JUSTICE - ONTARIO

E N D O R S E M E N T

I. INTRODUCTION

II. BACKGROUND

1. The plaintiffs

2. The defendants

3. The nature of the action and allegations

4. Counterclaim

5. Interim injunction (January 22, 2013)

6. Minutes of settlement and interlocutory injunction (May 6, 2013)

7. Minutes of settlement were very early in the action

8. Undertaking as to damages

9. Production motion

III. DISCUSSION

1. Rules relied upon

2. Rules 37.14(1) and (2)

4. Inherent jurisdiction

6. Rule 59.06(2) – no distinction between final and interlocutory orders

7. Rule 59.06(2)(b)

8. Rule 59.06(2)(d)

9. May Rules 59.06(2)(b) and (d) be used in tandem to amend an order?

10. Passage of time and delay

11. Change of circumstances

11. Some cases upon which moving party relies

12. Conclusion

IV. RESULT

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 3

Legal Tests 1

Legislation 2

SUPERIOR COURT OF JUSTICE - ONTARIO

E N D O R S E M E N T

I. INTRODUCTION

II. BACKGROUND

1. The plaintiffs

2. The defendants

3. The nature of the action and allegations

4. Counterclaim

5. Interim injunction (January 22, 2013)

6. Minutes of settlement and interlocutory injunction (May 6, 2013)

7. Minutes of settlement were very early in the action

8. Undertaking as to damages

9. Production motion

III. DISCUSSION

1. Rules relied upon

2. Rules 37.14(1) and (2)

3. Varying a consent order is like rectifying a contract

4. Inherent jurisdiction

5. Consent order “is an integrated whole”

6. Rule 59.06(2) – no distinction between final and interlocutory orders

7. Rule 59.06(2)(b)

8. Rule 59.06(2)(d)

9. May Rules 59.06(2)(b) and (d) be used in tandem to amend an order?

10. Passage of time and delay

11. Change of circumstances

11. Some cases upon which moving party relies

12. Conclusion

IV. RESULT

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 3

Legal Tests 1

Legislation 2