CITATION: Canadian Hedge Watch Inc. v. Street, 2015 ONSC 454
COURT FILE NO.: CV-14-517184
DATE: 20150122
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
CANADIAN HEDGE WATCH INC.
Plaintiff
- and -
JUDITH STREET, CHRISTOPHER HOLT. TRISTRAM LETT, HUGH INNES and THE ALLIANCE FOR INSTITUTIONAL DIALOGUE.
Defendants
Richard B. Swan and Joseph Blinick
for the Plaintiff
Jon-David Giacomelli and Elena Mamay
for the Defendants
HEARD: January 9, 2015
F.L. Myers J.
REASONS FOR decision
Background
[1] The plaintiff moves for an interlocutory order prohibiting the defendants from, among other things:
a. using the plaintiff’s confidential information;
b. soliciting or accepting business from the current and prospective sponsors, clients, and attendees of the plaintiff’s conference;
c. usurping, taking, or converting any corporate assets or opportunities belonging to the plaintiff;
d. unfairly competing with the plaintiff;
e. interfering with the plaintiff’s contractual relations with third parties;
f. misrepresenting that they are associated with the plaintiff or its conferences; and, most pointedly,
g. from arranging, presenting, promoting, sponsoring, or hosting The Alliance for Institutional Dialogue’s “Annual Symposium” in Niagara-on-the-Lake, or elsewhere, and/or any conference of the same or a similar nature in southern Ontario.
[2] Although the plaintiff’s arguments at times veered into somewhat esoteric spaces like whether an unpaid member of a conference advisory board owes fiduciary duties to the conference provider, and, if so, the scope of any such duties, in my view, the motion can be resolved on a much simpler basis. At a time when the defendant Judith Street was contractually bound to diligently and faithfully serve the plaintiff, she and the other defendants agreed to take the plaintiff’s conference goodwill and opportunity. Rather than competing openly and honestly (assuming competition would have been permissible) there is a strong prima facie case, from the defendants’ own evidence, that the defendants surreptitiously carried out overt acts to implement their agreement to take the plaintiff’s conference. As discussed below, it appears that there is a strong prima facie case they misled the marketplace to believe that the plaintiff would no longer be providing its conference and that they were taking over the plaintiff’s conference. There is a strong prima facie case that they used the plaintiff’s confidential information that Ms. Street unlawfully took with her when she left the plaintiff. The plaintiff is a commercial entity that runs conferences as a revenue-generating business activity. It has established goodwill in its conference. There is a strong prima facie case that under a veil of secrecy the defendants agreed to and have proceeded to unlawfully take the plaintiff’s corporate assets and its corporate opportunities associated with those assets.
[3] While I will deal briefly with some of the myriad of causes of action advanced by the plaintiff below, it is readily apparent that, at minimum, the plaintiff’s action sounds in breach of contract and the torts of unlawful interference with economic interest, passing-off, and conspiracy.
[4] The issues raised by the parties presented some potentially interesting questions concerning remedy. If the issues at stake dealt only with unfair competition under the rubric of post-employment fiduciary duties and breach of confidence, then there may have been timing issues on any remedy and more difficult factual questions assessing the appropriate “springboard” period for interim relief. If what was at stake was leveling the playing field for bona fide, fair competition, similar considerations might arise. But, by their own acts, the defendants chose not to engage in bona fide competition but to take the plaintiff’s asset and to hold themselves out to the public as if they are its owner or operator. On these facts, the balance of convenience favours the granting of an interlocutory injunction to protect the plaintiff from suffering irreparable harm at the hands of the defendants continuing tortious conduct.
The Facts
[5] The plaintiff produces conferences for a profit. In 2010, operating through its Radius Financial Education division, the plaintiff founded the Niagara Institutional Dialogue Conference (the “NID Conference”). It is common ground among the parties that the NID Conference has become the premier conference in Canada for the institutional investor and pension industry.
[6] The plaintiff and the defendants Christopher Holt and Tristram Lett came together to form the NID Conference in 2009. Mr. Holt and Mr. Lett were active players in the industry with deep contacts and networks to industry members and companies that supply the industry who might be interested in sponsoring conferences for industry members. They had developed their own reputations in their own businesses and were active in industry associations such as the Alternative Investment Management Association, other conference providers, and industry publishers.
[7] Neither Mr. Lett nor Mr. Holt was an employee of the plaintiff. They agreed to be involved with the plaintiff’s new conference understanding that the plaintiff was assuming the economic risk and reward of the conference. The plaintiff was to take on the legwork, pick a venue, and perform the administration for the conference. Mr. Lett and Mr. Holt agreed to provide their services by sitting on the Advisory Board established by the plaintiff for the conference. They were to be responsible for recommending content and speakers for conferences. But they had access through the administrators to the plaintiff’s information concerning the NID Conference including budgeting information and financial results. They agreed to leverage their existing relationships to help establish and build the conference and, in return, they were given lead roles in the conference and their businesses were provided with free sponsorship recognition and free conference enrollment for which others paid significant prices. Sponsorship opportunities alone were sold by the plaintiff for as much as $40,000 for the NID Conference.
[8] The defendant Judith Street was a Vice President of Sales of the plaintiff since 2009. She became the Chief Operating Officer of the NID Conference upon its creation in 2010. Ms. Street resigned from the plaintiff’s employ in 2013 in order to spend more time with her husband and possibly to help him produce practice management conferences in his business. However, Ms. Street agreed to continue to consult to the plaintiff on a part-time basis under the terms of a written consulting agreement in relation to the NID Conference.
[9] As COO of the NID Conference Ms. Street was also a member of the Advisory Board. She was the representative of the plaintiff with principal responsibility for running the conference. Together with the defendants Lett and Holt, Ms. Street was very successful in developing the NID Conference to its premier place in the industry. Although it suffered a loss in its first year, the NID Conference now accounts for approximately 60% of the plaintiff’s operating profit on an annual basis.
[10] The defendants admit, in writing and orally, that the NID Conference is owned by the plaintiff.
[11] The conference depends for its success on high-level attendees attracting high-level sponsors. Street was responsible for managing relationships with both attendees and sponsors. While Messrs. Holt and Lett brought their professional expertise, reputations, and networks to conference development, counsel for the defendants agreed with Mr. Swan’s characterization that Ms. Street was the face of the NID Conference to attendees and sponsors.
[12] Ms. Street acknowledged to the plaintiff that it was vulnerable to her relationships with attendees and sponsors. When she proposed to become a consultant, she wrote that she understood the need to protect Radius’s interests with contractual covenants. While she was an employee, her written employment agreement contained clauses protecting the plaintiff’s confidential information and preventing solicitation. When Ms. Street left the plaintiff’s employ to continue her role through a consulting agreement, she approached the plaintiff and negotiated a narrowing of the scope of her duties to allow her to work with her husband to create other conferences that would not compete with the NID Conference. As the scope of the non-solicitation clause was proposed by Ms. Street, counsel for the defendants does not challenge its enforceability.
[13] The relevant terms of Ms. Street’s consulting agreement dated July 26, 2013 and signed by her on August 1, 2013 are:
Your position is Vice President Sales. You shall diligently and faithfully serve [the plaintiff] and use your best efforts to promote the interests and goodwill of [the plaintiff]. Your primary services include leading the [NID Conference] and events for fiscal 2014 under the approval of Tony Sanfelice or in his absence Terry Krotkowski.
Either party may terminate this agreement upon giving two weeks notice.
You agree to hold in confidence and keep confidential all information known or used by [the plaintiff] in connection with its business including but not limited to any information, data, program, code, method, technique or process, information relating to any product or service, client information and lists, financial information, marketing information, intellectual property, business opportunities, or research and development.
You also agree to not directly or indirectly use any confidential information except in the course of performing your duties with the knowledge and consent of [the plaintiff] in [the plaintiff’s] interest. In addition, you agree not to directly or indirectly disclose any confidential information to any person or entity, except in the course of performing duties of [the plaintiff] with the knowledge and consent of [the plaintiff].
Upon termination of the Agreement, you shall promptly deliver to [the plaintiff] all client documents and lists, manuals, lists, data, records, and computer programs, codes, materials, products, samples, analyses, reports, equipment, tools and devices relating or pertaining to the company’s business or containing or pertaining to any confidential Information, including any copies or reproductions of the same.
Upon termination for whatever cause you shall promptly deliver to [the plaintiff] all documents, lists, data, records pertaining to [the plaintiff’s] clients.
Upon termination of your relationship with [the plaintiff], (regardless of the reason), you agree that you will not solicit [the plaintiff’s] existing sponsors from [the plaintiff’s] existing conferences: the Niagara Institutional Dialogue, all WAISC conferences, all ETF conferences and the RCC conference (name may change to broader focus) while you are an employee to [the plaintiff] for a period of 12 months. These existing sponsors may be solicited for other purposes that does not directly compete with [the plaintiffs] existing events. An example of an other [sic] purpose is Practice Management, just put on by [Ms. Street’s husband] & yourself.
[14] In early 2014, the Ontario Securities Commission brought proceedings against the CEO of the plaintiff Tony Sanfelice concerning an unrelated investment that pre-dated the creation of the NID Conference. The defendants claim that these proceedings were fatal to the NID Conference that they had so nurtured to great success over the prior five years. The institutional investment and especially the pension industries are highly regulated in the public interest. The whiff of a taint of the NID Conference with mere allegations against Mr. Sanfelice, they say, would lead sponsors and attendees to flee. In early July, 2014, the defendants met and agreed to take over the NID Conference through another entity excluding the plaintiff and its relationship to Mr. Sanfelice.
[15] Ms. Street resigned from the plaintiff on August 13, 2014. She made no mention to the plaintiff or Mr. Sanfelice of her prior agreement with the other defendants. Mr. Lett went to each of the NID Conference’s existing sponsors and specifically told them of the OSC proceedings against Mr. Sanfelice. He also said that the NID Conference might not be held in 2015 as a result. At the time that he did so, the defendants knew that this statement was untrue. Rather it was self-fulfilling. In fact, the defendants knew that the plaintiff had already taken steps to start the reservation process for the conference location for 2015 and the plaintiff had given notice of the dates for the 2015 conference to 2014 attendees. The defendants admit these facts.
[16] The interesting thing about the defendants’ professed concerns is that they do not seem to accord with what actually happened. Although the OSC proceedings were made public and the attendees and sponsors are sophisticated industry players, the 2014 NID Conference was held in June (some four or five months after the public announcement of the OSC proceedings) and was agreed by all to have been the most successful NID Conference to date. No one pulled out as either an attendee or a sponsor. Two sponsors raised the OSC proceedings with Mr. Sanfelice and they stayed involved. Moreover, if Messrs. Lett and Holt had great concerns regarding fiduciary businesses participating in a conference associated with someone who is subject to OSC proceedings, they did not act on that concern prior to the 2014 conference. They did not end their own participation or their firms’ participation in the allegedly tainted NID Conference. In a most telling piece of evidence, Mr. Lett said on cross-examination that he did not tell anyone about the OSC proceedings before the 2014 NID Conference because doing so would have killed the conference.
[17] When cross-examined about why in marketing the defendants’ venture, he felt the need to mention the OSC proceedings to each and every one of the 2014 NID Conference sponsors, Mr. Lett said that he merely wanted to test their the market’s reaction to the news. This is wholly inconsistent with his evidence that he deliberately refrained from telling people about the OSC proceedings before the 2014 conference so as not to “kill” it.
[18] Prior to Ms. Street’s resignation, as early as July 11, 2014, she met with Holt and Lett in order to plot the takeover of the NID Conference. They determined that they would not tell the plaintiff about their efforts until they were a fait accompli. The defendants took some pride in associating the NID Conference with a particular conference facility in Niagara-on-the-Lake. They prominently displayed the facility on the conference brochure. They had the view that the facility was particularly apt to the interactive, casual tone that they hope to create for the conference. They also worked to pick what they believed would be the best date to hold this conference so as to maximize industry participation. The defendants agreed in cross-examination that the venue and dates were important features of the success of the conference.
[19] In July, 2014, prior to Ms. Street terminating her consulting agreement, Mr. Lett went to the hotel and convinced the sales office that he was speaking for the 2015 NID Conference. If he did not say so expressly, he could not have missed that he confused the hotel as its reservation documents were initially given to the defendants bearing the name of the plaintiff. The hotel welcomed the defendants “back” as if they were dealing with the plaintiff or its NID Conference. Mr. Lett did not correct this misapprehension. Moreover, Mr. Lett told the hotel that the employee responsible for dealing with the hotel on behalf of the plaintiff would soon be coming to work with the defendants and therefore the hotel should only deal with Mr. Lett going forward. That is, he took overt steps to keep the hotel from calling its contact at the plaintiff so as to hide from the plaintiff the fact that the defendants were taking the plaintiff’s reservation.
[20] In their affidavits, the defendants state that the plaintiff had the hotel date for 2015 on “hold” but the “hold” had expired before the defendants dealt with the hotel. It is perfectly clear on the evidence that the defendants did not make a reservation after the plaintiff’s efforts to hold the date expired. The defendants took the reservation by misleading the hotel into believing that they were the owner or operator of the plaintiff’s NID Conference.
[21] Ms. Street sent an email to Messrs. Holt and Lett on August 8, 2013 describing her efforts to get ready to start selling for the defendants after she left the plaintiff the next week. She admits that despite the express terms of her consulting agreement, she left with computerized customer and sponsor lists and other documents of the plaintiff. While the defendants say that the attendees and sponsors were known to them and the names were not confidential, they ignore the express wording of Ms. Street’s consulting agreement requiring her to take nothing with her and specifically prohibiting her from taking client lists, data etc. The defendants admit the plaintiff’s delegates and sponsor lists and other documents included not just names, but contact information, pricing, negotiated discounts that became the starting point for their own lists. They copied word-for-word the operative wording for their sponsorship contracts directly from the plaintiff’s contract forms. They knew and used the plaintiff’s pricing information as to which sponsors needed which deals in order to sign up. They had the 2014 conference attendees’ comment cards in which attendees were invited to provide criticism of the 2014 NID Conference and to express their desires for next year. The defendants propose no legal basis on which they are entitled to have or to have used that information.
[22] The defendants also determined, expressly, that in order to display compliance with Ms. Street’s non-solicitation clause, she would solicit only new sponsors. They agreed that the other defendants would solicit the plaintiff’s existing sponsors.
[23] In going out to the marketplace, the defendants did not introduce a new conference. Rather, they represented that The Alliance for Institutional Dialogue - the company that they incorporated within the two week notice period following Ms. Street’s resignation - was the result of five years of discussions and deliberations among the founders Lett, Street and Holt. They said that they were building on the strong tradition established by Lett, Street and Holt at the NID Conference. They told participants the conference would be held at the same location and during the same time slot as the NID Conference had been held for the prior five years. They chose a name for their corporation using the same phrase “Institutional Dialogue” that the defendants acknowledge is an important identifier of the NID Conference. It is also telling that after communicating with counsel in order to obtain advice concerning Ms. Street’s non-solicitation obligations, the defendants changed the wording of their letters to sponsors to omit the obvious efforts to associate themselves with the goodwill of the plaintiff in the NID Conference.
[24] The defendants also agree that there is a limited pool of sponsors for a conference of this type in the industry. They recorded their discussion of their intention to solicit the NID Conference sponsors before going to the plaintiff so as to leave the plaintiff starting from zero. They have recruited six of the 2014 NID Conference sponsors based on their efforts to date. The NID Conference has been booked by the plaintiff for a later week, but it is obvious that delegates and sponsors are not going to attend two conferences in the same industry within weeks of each other at the same hotel for the same purpose. As noted at the outset, there is a strong prima facie case that the defendants did not merely seek to compete against the plaintiff, they sought to take the NID Conference.
Analysis
Breach of Contract
[25] Whether or not she is a fiduciary, Ms. Street’s duty of fidelity is expressly stated in her consulting agreement. She agreed and was required to act in the best interests of the plaintiff. Yet she admits to agreeing with the defendants to surreptitiously take the plaintiff’s conference from it while she was still under contract. She knew that Mr. Lett had taken the reservation for the NID Conference at the hotel at a time when the plaintiff had sent notification to the industry to “hold the date”. While still engaged as the senior person responsible for the NID Conference and being the face of the NID Conference, she did not tell plaintiff that she and the other defendants were planning on taking the conference and had taken the hotel reservation as if they were the NID Conference. Ms. Street acknowledged in cross-examination that she was not entitled to work for the plaintiff and the defendants at the same time. Yet that is what she admits doing. See GasTOPS Ltd. v. Forsyth, 2009 66153 (ON SC), 2009 CarswellOnt 5773 at paras. 95, 98 and 109. See also Precision Fine Papers Inc. v. Durkin, 2008 CarswellOnt 944, at para. 12.
[26] Ms. Street also has kept and used the plaintiff’s information that her agreement required her to keep confidential, return, and not use.
[27] Ms. Street did not solicit existing sponsors with one exception where she met with an existing sponsor and “may have” told her that Mr. Lett would be contacting her to solicit her sponsorship. The defendants expressly created a structure to try to get around her non-solicitation obligation.
[28] There is a strong prima facie case that Ms. Street breached her consulting agreement with the plaintiff.
Breach of Fiduciary Duty
[29] In GasTOPS, supra, Granger J. made reference to and applied the decision in MEP Environmental Products Ltd. v. Hi Performance Coatings Co., 2006 MBQB 119, [2006] MJ No 211 (Man. QB) aff’d 2007 MBCA 71 which contains a helpful discussion of the indicia of whether a former employee was a “key employee” for the purpose of attracting a fiduciary duty. The court will look at a former employee’s job duties; the extent or frequency of contact between the employee and customers and/or suppliers; whether the employee was the primary contact with customers and/or suppliers; to what extent the employee had access and made use of knowledge of the former employees customers, their accounts, pricing practices and the pricing of product and services; and to what extent the former employees information was confidential.
[30] There is at least a serious issue to be tried as to whether Ms. Street was a fiduciary in light of her acknowledged significance as the face of the plaintiff in respect of the NID Conference. She had “encyclopedic knowledge” of the plaintiff’s business, market opportunity, customers, and suppliers. She fits all of the factors identified by Granger J. Messrs. Holt and Lett acknowledge that this is why they wanted her in their business.
[31] If Ms. Street is a fiduciary, then she falls under the Canaero prohibition against unfair post-employment competition. An important factor in deciding whether a fiduciary’s competition is unfair is whether it is infected by improper conduct prior to the time that the fiduciary left her role with the employer. As noted above, the defendants had met, agreed to their plan, took the hotel reservations, and prepared to commence sales as if they were the NID Conference before Ms. Street even left the plaintiff. They incorporated the corporate defendant one week later with Ms. Street as a director. In her affidavit, Ms. Street refers to this appointment as an error that was quickly corrected. Under cross-examination the defendants agreed that Ms. Street’s appointment to the board of the newco was intentionally done but was reversed later purportedly nunc pro tunc at Ms. Street’s request. Her appointment was an “error” only in the sense that Ms. Street realized that she should not have done it. It was not accidental.
[32] The other defendants all knew and participated in Ms. Street’s conduct. They are in a worse position than Mr. Mountjoy’s subordinate Mr. Butt. In Edgar T. Alberts et al. v. Mountjoy et al., 1977 CarswellOnt 48 (OHCJ) Chief Justice Estey, as he then was, held that a subordinate who participates in a fiduciary’s breach of duty is liable with the fiduciary. In this case, arguably, it is the other defendants who are the seniors members of the new entity who wish to create a business and induced a subordinate who had duties to the plaintiff to join them and to breach her duties in doing so.
[33] It is worth noting that Messrs. Holt and Lett never resigned from the plaintiff’s Advisory Board. They say that there was no reason for them to do so as it was an ad hoc, volunteer position in any event. They were not strictly volunteers. They received marketing exposure and personal reputation enhancement in connection with the premier industry think-tank event. Their employers received sponsorship recognition and tickets to the NID Conference with significant value in return for the services of Messrs. Holt and Lett. While there is no doubt that Messrs. Holt and Lett were free to compete with the plaintiff generally, there is at least a serious issue to be tried as to whether in agreeing to sit on the plaintiff’s Advisory Board for consideration there is an implied duty that Messrs. Holt and Lett would act in the best interests of the plaintiff and avoid conflicts of interest vis-à-vis the subject matter of their appointment - the NID Conference - and not try to usurp the conference for themselves.
[34] The defendants Holt and Lett argue that they cannot be fiduciaries because they never undertook to sacrifice their interests to protect those of the plaintiff. Galambos v. Perez, 2009 SCC 48, 2009 SCJ No. 48 at para 66. As set out in the immediately preceding paragraph, the question of whether by agreeing to join the plaintiff’s Advisory Board, the defendants undertook such duties to the plaintiff in relation to the NID Conference is a serious issue to be tried.
[35] The defendants also point to the without profit nature of their new corporation to show their altruism. However they acknowledge that they hope to be paid for their efforts by the corporate defendant once it is able to do so. One does not have to be a shareholder in order to have an economic interest in a corporation. Once they had succeeded in establishing their foothold surreptitiously, in September 2014, the defendants went to the plaintiff and invited it to give the NID Conference to a non-profit entity. Even then they did not disclose what they had already done to the plaintiff unbeknownst to it. They offered to pay the plaintiff instalments of money for a number of years – recognizing yet again that the plaintiff owned the NID Conference and that it had value to the plaintiff. The plaintiff’s response was to assert its ownership of the conference and refuse to give it to the defendants. It only became clear to the plaintiff then, in September 2014, that the relationship between the plaintiff and Messrs. Holt and Lett was severed.
Unlawful Interference with Economic Interests
[36] The defendants other than Street were aware of her non-solicitation obligation. It is not open to the defendants to act with her in a joint enterprise whereby all of them will receive the fruits of solicitation carried out by the others in association with her and, as noted above, usurping the plaintiff’s goodwill. See Precision, supra, at para 23. See also GDL Solutions Inc. v. Walker, 2012 ONSC 4378 at para. 88 (c).
[37] In response to the court’s question as to whether a volunteer on a conference advisory board is free to kill the conference, the defendants’ counsel submitted that while such conduct may be an unlawful interference with the plaintiff’s economic interests, it is not a breach of fiduciary duty. Counsel then submitted that an interlocutory injunction does not lie to restrain the tort of unlawful interference with economic interests. He provided no law to support that submission and I reject it.
[38] As discussed above, Mr. Lett deliberately told each of the sponsors about the OSC proceedings involving Mr. Sanfelice expecting that doing so would likely “kill” the NID Conference. This was truthful information but delivered so as to injure the plaintiff. Ms. Street testified that she did not tell people about the OSC proceedings in soliciting them because she did not feel it was right to do so. Moreover, at the same time, Mr. Lett told all of the plaintiff’s sponsors falsely that the NID Conference for 2015 may not be held by the plaintiff when he knew the contrary to be true. Doing so removes the need to consider whether conveying truthful information intending harm may be actionable. False statements made with intent to injure a plaintiff form the basis for the tort of unlawful interference. The defendants have caused the plaintiff to lose at least six sponsorships and given their intention to tie up the available sponsors to leave the plaintiff starting from zero, by their unlawful acts, the defendants may well have achieved their goal of killing the NID Conference absent interim relief. The defendants have interfered with the plaintiff’s relationships with the hotel and attendees too. There is a strong prima facie case of this tort having been made out as well. Bram Enterprises Ltd. A.I. Enterprises Ltd., 2014 SCC 12. See also UL Canada Inc. v. Procter & Gamble Inc., 1996 CarswellOnt 615.
Passing Off
[39] In addition to the defendants’ efforts to associate themselves with the NID Conference in their solicitation of sponsors referred to above, they bought several internet sites to direct to the defendants’ conference website members of the public who might try to reach the plaintiff. For example, the defendants registered the URL nid.institute. By smoking gun email dated September 26, 2014, Mr. Lett told Ms. Street:
Chris [Holt] tied up www.Instititionaldialogue.org and .net so if anybody puts the wrong address in they will be directed to our website. Sneaky.
[40] He is quite correct. There is no innocent explanation for that act.
[41] There is a serious issue to be tried as to whether the defendants have succeeded in causing confusion in the minds of sponsors and the market place as to whether they are the plaintiff and the owners of the NID Conference. They used a similar name, the same hotel, the same date, some of the plaintiff’s business documentation, referred to their history and traditions which in realty were the plaintiff’s history and traditions with its NID Conference and they convinced the hotel that they were the NID Conference.
Conspiracy
[42] This case is a poster child for the tort of civil conspiracy by unlawful means. There is discrete and express evidence showing a strong prima facie case of all of the classic elements of the tort. There is clear evidence of agreement; overt acts to carry out the agreement; unlawful means used; the acts were directed at the plaintiff; they were done knowing that as a result the plaintiff would likely be injured; and it was indeed injured by those acts. See Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate, [1983] 1 S.C.R. 453
Irreparable Harm and Balance of Convenience
[43] In light of the strength of the plaintiff’s case, the other two factors governing the granting of an interlocutory injunction may be somewhat less important on this motion. This is especially the case for the negative prohibitions sought restraining breach of Ms. Street’s non-solicitation clause and the ongoing commission of various torts. Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., [2008] O.J. No. 190.
[44] Nevertheless, it seems clear that the plaintiff is at risk of suffering irreparable harm in a number of ways. The defendants concede that they cannot afford to pay damages at the level claimed to be the value of the NID Conference by the plaintiff. It may be early to try to evaluate the plaintiff’s damages however. This case involves marketing though conferences. Much of the perceived value of such events is intangible. Proof of a specific value to one’s reputation of being associated with a conference or a “premier” conference is inherently uncertain. Moreover Street has kept and used the plaintiff’s confidential information. Valuing that claim is also uncertain. Permanent loss of market share and irrevocable damage to reputation can amount to irreparable harm says the Supreme Court of Canada. RJR-MacDonald v. Canada, 1994 117 (SCC), 1994 Carswell Que 120 at para 64. Loss of goodwill is often seen as irreparable and is at the core of the plaintiff’s loss in this case.
[45] Each of the foregoing is a factor. There are cases in which judges have said that although difficult, damages may be calculated for each of the foregoing heads of loss. Rather than simply trying to fit the facts into immutable pigeon-holes with no reference to principle, it seems to me that an approach to assessing irreparable harm is to look at whether it is fundamentally just to confine the plaintiff to its remedy in damages on the particular facts and circumstances of the case. In the seminal case of American Cyanamid v. Ethicon Limited, 1975 2598 (FC), [1975] AC 396 (HL), Lord Diplock explained:
If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.
[46] What then is an adequate remedy? Realistically, virtually any claim can be valued. Appellate courts have made it clear that, at trial, judges are to value damages as best they can. The valuation may not be scientific or precise, but a fair and just assessment of money damages is likely possible for almost any cause of action. Why then do some cases say that there should be an interlocutory injunction because loss of goodwill is irreparable harm but other cases say that damage to goodwill is readily calculable? Why do some cases say that loss of market share is irreparable harm and others say that loss of profit consequent upon a loss of market share is readily calculable? The answer, it seems to me, is in the equitable nature of the relief being sought. There are three factors in the RJR and American Cyanamid tests for interlocutory injunctions not just one. The court looks at the strength of the case, the risk of irreparable harm, and the balance of convenience to determine if it is just and equitable to confine the plaintiff to a remedy in damages in the circumstances of each case. In most cases, it may well be adequate for the plaintiff to be compensated in damages for monetary loss especially in a business context. But each case is decided on its own facts and circumstances.
[47] In this case, to confine the plaintiff to a remedy in damages would be most unjust and inadequate. The defendants cannot pay. The calculation is ephemeral and uncertain being bound up in the value of reputation and goodwill that is at the very core of why conferences exist as a marketing tool. The potential spillover effect from the loss of clients and sponsors from the premier NID Conference into other aspects of the plaintiff’s business will be very difficult and expensive to prove. Moreover, allowing the defendants to succeed in their unlawful design is contrary to any conception of fairness. It is not clear that the NID Conference can recover from the harm inflicted upon it already. However, saying to the plaintiff “Too bad; so sad; see you at trial” is unacceptable. Doing so would vindicate the defendants’ surreptitious breaches of duty and intentional torts.
[48] Lord Diplock said that the question of irreparable harm should also be considered from the perspective of the defendants. This is essentially weighing the balance of who would be most harmed or inconvenienced by an injunction. Here, the plaintiff has given an undertaking to pay damages to the defendants if an injunction is ultimately found to be have been improperly granted (i.e. if the plaintiff loses at trial). Delaying a new business is a minimal and readily compensable harm. This is especially the case where the new business has brought the relief upon itself by intentional misconduct.
[49] This case has many similarities to the decision of Molloy J. in KJA Consultants Inc. v. Soberman, 2002 49613 (ON SC), 2002 CarswellOnt 467. In that case, a key employee who, like Ms. Street, reported to the CEO of the plaintiff and was the face of the business with customers, left and wrongfully solicited the plaintiff’s customers. At paragraph 9 of her decision, Molloy J. assessed the harm suffered by the plaintiff as follows:
- In my view, the type of harm the plaintiff will sustain by the defendant’s breach of fiduciary obligation is irreparable and cannot be compensated for by damages. It is not simply a matter of disgorging the profit received from projects that are now ongoing between Mr. Soberman and clients of KJA. As a result, at least in part, of his breach Mr. Soberman will now have the opportunity to nurture a relationship with those clients and, if he impresses them with his work, KJA, may lose the client forever. It is not possible now to determine if that would have happened in any event. The loss of goodwill and potential loss of market share are the kinds of harm that have long been recognized as appropriately protected by injunctive relief because damages alone would not be an adequate remedy: RJR-MacDonald Inc.; EJ Personnel Services Inc. v. Quality Personnel Inc. (1985), 1985 6386 (ON SC), 6 C.P.R. (3d) 173 (Ont. H.C.); Planvest Financial Corp. v. Cramer (1990), 1990 406 (BC SC), 30 C.P.R. (3d) 399 (B.C. S.C.). Accordingly, I find that the second branch of the RJR-MacDonald Inc. test is met.
[50] Molloy J. then turned to consider how the nature of the harm inflicted upon the plaintiff ought to affect the remedy. At para. 12 she wrote:
- The plaintiff seeks an injunction restraining Mr. Soberman from soliciting customers (paragraph 1 of the notice of motion) and from using confidential information (paragraph 4 of the notice of motion). Both are appropriate. But for the breach of trust by Mr. Soberman, I would have said that the appropriate length of time for such an injunction would have been 12 to 15 months. I agree with the submissions of the solicitor for the plaintiff that it is appropriate to increase that time period because of the breach of trust that has already occurred. If the defendant had acted properly, he would have been free to solicit customers directly by September 14, 2002. The plaintiff very fairly and clearly set out its expectations in that regard in its letter to Mr. Soberman. He chose to ignore it and to act in blatant breach of trust. The plaintiff has been harmed thereby and will require a longer period of time to overcome the resulting disadvantage. It is not fair to the plaintiff to grant an injunction in the same terms as would have applied absent any breach by the defendant. The plaintiff is in a more vulnerable position as a result of the defendant’s breach and requires more protection. Accordingly, an injunction shall issue in the terms set out in paragraphs 1 and 4 of the notice of motion until March 14, 2003 (a period of 18 months after employment ceased), or until further order of this court.
[51] Here, as noted above, it seems to me that the predominant issues are not breach of fiduciary duty and the time required to re-balance the playing field. What the defendants appear prima facie to have done is to set out to unlawfully take that which is not theirs through a conspiracy that included breaching Ms. Street’s contract, passing themselves off as the plaintiff, bad mouthing the plaintiff, interfering in its relations with third parties, using its confidential information, and hurting it so that only the defendants’ conference can proceed. Like Molloy J., it seems to me that the plaintiff is entitled to try to overcome the resulting disadvantage. Moreover, the defendants should be enjoined from using the fruits of their efforts.
[52] I do not know if this motion is going to resolve the full case. I raised with the parties at the hearing that given the substantial amount of material filed (including facta of 70 and 40 pages respectively, and, of course, a 12 page reply factum) and the fact that all of the key players have been cross-examined on the motion, a motion for summary judgment may be ripe. In light of Hryniak v. Mauldin, 2014 SCC 7, the parties and the court ought to be able to determine relatively quickly whether further production of documents is required and what, if any, issues require a trial. Although the findings herein are made on the basis of “serious issues to be tried” and a “strong prima facie case”, it is not clear that the court would be in any significantly different position had this motion been styled as a motion for summary judgment. In light of the focus of the civil justice system on efficiency, affordability, and proportionality, the parties should be incentivized to get to a final decision as soon as possible. It may be that this case can be done relatively quickly. On that basis, in my view, it is appropriate that the injunctions sought by the plaintiff be granted pending the outcome of the case by trial or otherwise. In light of the harm that it has suffered, in my view, the plaintiff will likely be incentivized to get out into the marketplace quickly and, like the defendants, it will want to get to a final result so as to provide certainty to NID Conference sponsors and attendees. The relief sought in paragraphs 184(a) through (f) and (h) through (n) of the plaintiff’s factum is granted until trial or other final outcome of this action or until varied if the defendants establish that the plaintiff is stalling the final outcome inappropriately. The relief sought in paragraph 184(g) was stated too broadly and did not add anything to the relief otherwise granted.
[53] The parties are urged to settle costs. If necessary, the plaintiff may deliver no more than five pages of written submissions plus a costs outline by February 7, 2015. The defendants may respond with no more than five pages of submissions plus their own costs outline by February 21, 2015.
[54] All costs submissions are to be made by searchable pdf attachment to an email to my Assistant. Case law, if any, shall not be provided but may be referenced by hyperlinks to or another reporting service in the submissions.
[55] I further direct under sub-rule 50.13(1) that counsel arrange a case conference with me at 9:00 a.m. or 4:00 p.m. on a date to which the parties agree and then book with my office to be held before February 14, 2015. The matters to be dealt with at the case conference are the matters listed in sub-rule 50.13(5)
F.L. Myers, J. DATE: January 22, 2015
CITATION: Canadian Hedge Watch Inc. v. Street, 2015 ONSC 454
COURT FILE NO.: CV-14-517184
DATE: 20150122
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
CANADIAN HEDGE WATCH INC.
Plaintiff
- and -
JUDITH STREET, CHRISTOPHER HOLT. TRISTRAM LETT, HUGH INNES and THE ALLIANCE FOR INSTITUTIONAL DIALOGUE.
Defendants
REASONS FOR DECISION
F.L. MYERS J.
Released: January 22, 2015