CITATION: United Rentals of Canada Inc. v. Brooks, 2016 ONSC 6854

COURT FILE NO.: CV-14-227-00

DATE: 2016 Nov 09

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

UNITED RENTALS OF CANADA INC.

Plaintiff (Responding Party)

– and –

DONALD F. BROOKS

Defendant (Moving Party)

S. Regenbogen/G. McGinnis, for the Plaintiff (Responding Party)

T. Lawson/M. Demeo, for the Defendant (Moving Party)

HEARD: October 28, 2016 at Kingston

TRANMER j.

DECISION ON MOTION FOR PARTIAL SUMMARY JUDGMENT

[1] The defendant moves for summary judgment in respect of part of the plaintiff's claim against him. The defendant submits that there is no genuine issue for trial on the issue that a “Confidentiality, Non-Competition and Non-Solicitation Agreement”, (the Agreement), presented to him for signature by his employer during his employment is not enforceable in whole or in part.

[2] If the motion is successful, the action will continue with respect to other claims by the plaintiff against the defendant, including whether the defendant owed common-law duties of loyalty and confidentiality to his employer, the plaintiff, and damages.

THE FACTS

[3] The facts relevant to this motion are not in dispute. They are set out in the affidavit of the defendant and his cross examination thereon, and the affidavit of the plaintiff's representative, Paul DaCosta, and the cross examination thereon.

[4] The defendant has a grade 12 education. He was employed as a delivery driver before he was hired by Darlington Rentals as a delivery driver for them. In about January of 1999, the plaintiff bought Darlington Rentals and hired the defendant as a delivery driver for it. Dave Darlington was kept on by the plaintiff as its manager. The plaintiff sells and rents heavy equipment to construction and industrial companies.

[5] In August of 1999, the plaintiff made the defendant one of its sales representatives, responsible for outside sales for the Kingston and surrounding area. He did not deal with all of the plaintiff's customers. Some of the plaintiff’s customers continued to deal with Dave Darlington and three or four inside sales representatives.

[6] A second outside sales representative was hired in 2002. That sales representative dealt with United Rental customers within the City of Kingston and the surrounding area. The defendant became primarily responsible for the outside sales within the City of Kingston, but not solely responsible for sales within the City of Kingston. He retained some responsibility for some clients outside of the City of Kingston.

[7] On August 26, 2003, Dave Darlington presented the defendant with the Agreement. The defendant swears that he was told by his manager that he was required to sign the agreement if he wanted to continue his employment as a sales representative with the plaintiff. Mr. Darlington did not review the contents of the agreement with him or provide him with any explanation of the contents or why he needed to sign it. The defendant swore that he sincerely believed that his job was in jeopardy if he did not sign the agreement. At the time, he was the primary income earner for his family and he was very concerned about losing his job. The defendant took the Agreement home and talked to his wife about it. He did not consult a lawyer. He said that that's what he'd done for a living, so he just signed it.

[8] Dave Darlington has not provided evidence on this motion.

[9] Paul DaCosta, branch manager for the plaintiff, swore that the defendant was provided with good and valuable consideration to execute the Agreement, specifically that the plaintiff would provide the defendant with written notice of termination or pay in lieu of notice in excess of statutory requirements. He “believed” that if Brooks had refused to sign the Agreement, the plaintiff would not have entrusted him with the important responsibility of continuing to develop and maintain relationships with the plaintiff's customers in the entire City of Kingston. Mr. DaCosta did not speak with Mr. Darlington in advance of swearing his affidavit or his cross examination, and was not present when the defendant was presented with the Agreement by Mr. Darlington.

[10] The Agreement is the entirety of what was given to the defendant to sign on that day or on any occasion regarding the terms of his employment. There were no other written documents as to the terms of his employment setting out for example such important terms as, salary, hours of work, holidays, duties and responsibilities or reporting requirements or whether his pay would be based on salary, or commissions, or a combination.

[11] It is not disputed that prior to this Agreement, there was no restriction on the defendant's common-law rights in the event of termination without cause.

[12] On April 26, 2014, at the age of 53 years, the defendant resigned his position with the plaintiff and took up employment with a competitor of the plaintiff, who had opened an office in Kingston in 2014. The defendant had been 30 years in the business.

[13] In June of 2014, the plaintiff issued the Statement of Claim in this action seeking, in part, to enforce the agreement.

THE ISSUES

[14] The defendant submits that there is no genuine issue for trial in that the Agreement is not enforceable because the defendant received no valuable consideration in exchange for signing it, and he signed it under the threat of dismissal and therefore, under duress. In the alternative, the defendant submits that there is no genuine issue for trial in that the Non-Competition and Non-Solicitation clause is not enforceable because it is an unreasonable restraint of trade and it is ambiguous.

POSITIONS OF THE PARTIES

[15] The defendant submits that it is irrelevant to the motion as to whether the defendant breached the Agreement through his conduct and that the question of damages is irrelevant to the motion.

[16] The defendant submits that his credibility is not in issue because there is no dispute as to the relevant facts and his evidence has not been contradicted or cast into question.

[17] The defendant submits that the test on summary judgment is as set out in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87.

[18] He submits that the obligation is on the plaintiff to put its best evidence forward in response to the motion and to not submit that further and better evidence is available for trial. ThyssenKrupp v. Amos, [2014] O.J. No. 3155.

[19] He submits that therefore the evidence of Paul DaCosta amounts to nothing more than bald, unsupported allegations, and that the accounting evidence put forth by the plaintiff, which in no way other than timing, links the defendant to a drop in sales business is irrelevant.

THE AGREEMENT

No Consideration

[20] The defendant submits that there was no consideration for signing the Agreement and that therefore, it is unenforceable.

[21] The defendant submits that prior to the Agreement, he was entitled to common law rights on termination of employment without cause. The Agreement restricts these rights in capping the maximum notice at 12 months after 15 years of employment or beyond. His employment did not change otherwise as a result of his signing the Agreement. The Agreement also refers to payment in lieu of notice being calculated on “base salary”. Mr. DaCosta gave evidence which indicated that the defendant’s income was based to some extent on commissions.

[22] In its response to an undertaking, the plaintiff indicated that the consideration was that the plaintiff would provide the defendant with written notice of termination or pay in lieu of notice in excess of statutory requirements.

[23] The defendant submits that the continued employment of the defendant by the plaintiff is not consideration.

[24] The defendant also points out that the Agreement is incorrect in the first recital where it states that the plaintiff has made and continues to make a substantial economic investment in the… “Education and training of the employee”. The defendant denies that he was educated or trained by the plaintiff. The defendant also points out that the sentence in paragraph 3 at the bottom of page 4 of the Agreement, which states, “the employee acknowledges and agrees that the notice or pay in lieu of notice provisions in this section 3(b) are fair and reasonable and are the result of negotiations between the parties.” The defendant submits that there is no evidence of such negotiations on the undisputed evidence that he has put forward.

[25] It is the position of the plaintiff that there was valid consideration for the Agreement. It emphasizes that the employer relied on the defendant's promise to comply with the terms of the Agreement and in particular, the noncompetition provisions. It says that the Agreement provided the defendant with certainty, in the event of termination, that benefits would be paid and that it did not require the defendant to mitigate or to deduct in the event he secured work during the notice period.

[26] The plaintiff submits that forbearance from being terminated for a reasonable length of time is consideration. On this point, the defendant points out that there is no such evidence that the plaintiff undertook such forbearance, and further that the answer to the undertaking did not identify such consideration.

[27] The plaintiff points to the evidence of Mr. DaCosta that, “I believe that if Brooks had refused to sign the (Agreement)… United Rentals would not have entrusted him with the important responsibility of continuing to develop and maintain relationships with United Rentals customers in the entire City of Kingston.” Mr. DaCosta indicates that he was the operations manager in early 2003, but that at the time, the branch manager of the Kingston office was Dave Darlington. Mr. DaCosta’s evidence is based on his “understanding”, and his “belief”, but apparently not his firsthand knowledge and he did not speak with Mr. Darlington about these events.

DURESS

[28] The defendant submits that his evidence establishes that he signed the Agreement under the reasonable belief that if he did not, he would lose his job. He was the sole wage earner for his family at the time and this was the business that he was experienced in. His evidence has not been cast into doubt.

[29] It is the position of the plaintiff that this issue requires a trial to permit the court to assess the credibility of the defendant.

[30] The plaintiff further submits that the evidence of the defendant does not establish that the will of the defendant was overcome by the situation, and therefore, he does not meet the criteria for duress at law. He chose to speak only to his spouse about the Agreement and had the opportunity to consult a lawyer, but chose not to. He was given time to consider the Agreement.

DEFENDANT CONDONED THE CHANGE IN THE TERMS OF HIS EMPLOYMENT

[31] It is the position of the plaintiff that the defendant condoned the change in the terms of his employment, and acquiesced in them. He continued to work for a further 11 years and the employer relied on his promises made in the Agreement. Accordingly, he lost the right to challenge those changes.

[32] The defendant submits that this is not the case and that there is good law to the effect that, despite the passage of time of employment following the signing of such an agreement, the defendant is entitled to challenge the enforceability of such an agreement.

NON-COMPETITION CLAUSE (2.)

[33] The defendant submits that even if the Agreement is enforceable, there is no genuine issue for trial that this clause is not enforceable.

[34] The defendant submits that in assessing the reasonableness of the clause, the court must consider the test set out in Elsley v. J.G. Collins, 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916 (para. 19).

[35] Firstly, has the plaintiff a proprietary interest that is entitled to protection? The defendant submits that there is no best evidence put forward by the plaintiff on this, but only the bald, unsupported allegations of Mr. DaCosta. The evidence is that the pricing agreement was the only record of the plaintiff that the defendant had, and that Mr. DaCosta, knowing this, did not ask that it be returned.

[36] The plaintiff points to the affidavit of Mr. DaCosta, where he states that based on his experience in his employment with the plaintiff, he believes that the restrictive covenants are reasonable and necessary to protect the plaintiff's “confidential information, its client base and its trade connections… Given the extremely competitive nature of the equipment sales and rentals business… Developing personal relationships with customers is the most effective way to sell and rent our equipment to those customers… Brooks was the only United Rentals Sales Representative responsible for developing and maintaining relationships with customers of United Rentals in the City of Kingston.” In that same paragraph, however, Mr. DaCosta states that the plaintiff has “developed its client relationships over many years and is entitled to profit from the history of fostering those relationships.” It had purchased the Darlington business and had kept Darlington on as its branch manager. On the undisputed facts, the defendant was not its sole employee responsible for outside sales in the City of Kingston.

[37] The plaintiff points out that that the defendant knew what the plaintiff's rates were for its rental equipment, who the existing customers were, who the contact person was, information related to suppliers and manufacturers, and some technical information about the product and the use of the product. In his evidence on the latter point, the defendant points out that he acquired this knowledge while working with Suntrack Rentals in the 1980s for 11 years and then with Darlington Rentals.

[38] Secondly, the defendant submits that the temporal and spatial features of the clause were too broad. He submits that there is no evidence to justify or support the 12 month restriction. He further submits that the 100 km radius is unreasonable and too broad because the defendant was primarily responsible for the City of Kingston. Furthermore, the noncompetition restriction applies not only to the customers of the plaintiff, but to customers of its affiliates, even if these customers are unknown to the defendant. In contrast, the restriction on prospective customers is on those which the defendant knows about. There is no evidence put forward by the plaintiff for example, such as the custom in the industry for such restrictions, or the time necessary to get a new sales person up to speed.

[39] The plaintiff submits that this clause is not ambiguous and not overly broad. It stresses that the defendant was a 15 year employee. It points out that in clause 2(e), the defendant agrees, that he “understands that the provisions of this Agreement have been carefully designed to restrict his or her activities to the minimum extent that is consistent with law and the company's business requirements. Employee has carefully considered these restrictions and Employee confirms that they will not unduly restrict Employee's ability to obtain a livelihood. Before signing this Agreement, Employee has had the opportunity to discuss this Agreement and all of its terms with his or her lawyer.”

[40] The third question to be considered under the Elsley analysis is whether the covenant is unenforceable as being against competition generally and not limited to prescribing solicitation of clients of the former employer. The defendant submits that it is an overreach for the clause to apply to all of the plaintiff's customers and its affiliate customers known or unknown to the defendant. This is the only work that the plaintiff has known.

[41] The plaintiff denies this assertion.

NON-COMPETITION CLAUSE IS AMBIGUOUS

[42] The defendant asserts that the clause is ambiguous. The plaintiff disputes that assertion.

Analysis

[43] Rule 20.01(3) permits the defendant to move for summary judgment dismissing all or part of the claim in the statement of claim.

[44] Hryniak states that there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. (Para. 49). The question is whether summary judgment will provide a fair and just adjudication.

[45] This case is one which is readily suitable for adjudication on the issues raised by way of summary judgment.

[46] I am able to make the necessary findings of fact because they are not in dispute, and because the defendant’s evidence is not challenged as to credibility. I am able to apply the applicable law to the facts. This motion for summary judgment is clearly a proportionate, more expeditious and less expensive means to achieve a fair and just adjudication on the issues raised.

[47] The evidence of the plaintiff advanced through Mr. DaCosta does not meet the requirements referred to in ThyssenKrupp to put its best foot forward or to lead trump. This is particularly so with respect to paragraph 27 and 28 of his affidavit, which are merely bald and unsupported allegations and which, in any event, are, in my view, irrelevant to the issues before the court. Mr. DaCosta’s evidence at paragraph 19 and 20 of his affidavit fail to account for Dave Darlington's and Darlington Rentals’ contributions to the build up of the business of United Rentals, and the contributions of the other outside sales representative who was working the City of Kingston area. As I have pointed out, Mr. Darlington provided no evidence as to the reasonableness of the Agreement or his discussions with the defendant at the time that the Agreement was presented to the defendant to be signed. The evidence as to those circumstances is that of the defendant alone.

NO CONSIDERATION FOR THE AGREEMENT

[48] A contract is an exchange of promises, acts or acts and promises as a result of which each party to the contract receives something from the other. For a contract to be binding, consideration must flow between the parties. Absent consideration, there is no contract. Braiden v. La-Z-Boy 2008 ONCA 464, [2008] O.J. No. 2314 (C.A.), para. 46.

[49] I find that there was no consideration for the Agreement and that therefore, it is not enforceable against the defendant. My reasons are as follows.

[50] The Agreement significantly changed the terms of the defendant's employment. It placed limitations on his ability to leave the employment of the plaintiff and work with another company in the same business and it placed restrictions on his common-law rights to notice or payment in lieu of termination. These limitations and restrictions did not exist prior to the Agreement.

[51] The plaintiff provided to him no benefit, for example, increased salary or a promotion, or more holidays or shorter hours of work in exchange for or as an incentive for signing the Agreement.

[52] There is no evidence that the plaintiff agreed that it would continue the defendant's employment beyond the day that he signed the Agreement in exchange for his signature on it. Related to this point, is the evidence of the defendant, who said that he thought he would lose his job if he did not sign. He said that Mr. Darlington was a man of few words, who said to him, “you have to sign this to be employed by United Rentals as a salesman”.

[53] In the absence of evidence from Mr. Darlington, the evidence of the defendant must be preferred to the evidence of Mr. DaCosta at paragraph 11 of his affidavit as to his belief as to what would happen if Mr. Brooks had refused to sign the Agreement.

[54] “A new notice provision in a contract is “a tremendously significant modification of the implied term of reasonable notice”, one that requires consideration flowing from the employer to support it.” “The requirement of consideration to support a change to the terms of an agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers… Once they (employees) have been hired and are dependent on the remuneration of the job they become more vulnerable.” Braiden, para. 48 and 49.

[55] Continuation of employment is not consideration in law. As in the case before me, Braiden testified that he signed the agreement because he understood that he might otherwise lose his employment.

[56] To some extent, the plaintiff argues that it provided forbearance from firing as consideration.

[57] Braiden held, at para. 57, “a change in the notice period is a significant modification of the employment agreement, additional consideration is required to support such modification and continued employment does not constitute something of value flowing to the employee.”

[58] As in Braiden, there is no evidence that the plaintiff explicitly or implicitly promised the defendant that it would forbear from exercising its right to terminate the employee for a reasonable period, thus enhancing the employee security of employment.

[59] Similiarly, as in Hobbs v. TDI Canada Ltd. 2004 CanLII 44783 (ON CA), [2004] O.J. No. 4876 (OCA), there is no evidence that the plaintiff promised to forbear from terminating the defendant if he signed the Agreement. There is no evidence that the plaintiff wanted, or intended, to end the defendant’s employment prior to him signing the Agreement.

[60] The Ontario Court of Appeal decision in Holland v. Hostopia [2015] ONCA 762 is further support for this principle.

[61] In any event, the plaintiff’s written position, set out in its answer to an undertaking given, is that the consideration for signing the Agreement was the term that the defendant would be provided with notice or payment in lieu of termination in excess of the statutory requirements. This is not consideration in my view because the agreement restricted the defendant's common-law rights on termination and put a maximum on the notice or payment in lieu that could prove to be far less than his common-law entitlement.

[62] The plaintiff’s written position, set out in its answer to an undertaking given, is that the consideration for signing the Agreement was the term that the defendant would be provided with notice or payment in lieu of termination in excess of the statutory requirements. This is not consideration in my view because the Agreement restricted the defendant's common-law rights on termination and put a maximum on the notice or payment in lieu that could prove to be far less than his common-law entitlement.

[63] In oral argument, the plaintiff argued that the Agreement provided for consideration in the form of benefits would be paid during any notice, and that the Agreement did not require the defendant to mitigate or deduct should he find employment during the notice period. The defendant was entitled to benefits during any notice period at common law and further, it cannot be said that the cap of 12 months after 15 years of employment without mitigation or deduction would be of benefit to the defendant should he be terminated without cause following a significantly long term of employment.

[64] It is also to be noted that the Agreement tied payment in lieu of notice to base salary, whereas Mr. DaCosta gave evidence that at least some aspect of the defendant’s pay was based on commissions.

[65] I am further concerned that the Agreement is false in certain significant matters on its face. The defendant's evidence is that, contrary to the first recital, he did not receive the benefit of a substantial economic investment in his education or training for the job. Also, importantly, the last sentence on page 4, cl. 3, on the evidentiary record before me, “that the notice or pay in lieu of notice provisions in this section 3(b) are… the result of negotiations between the parties”, is completely false.

[66] I find on the facts that there was clearly an imbalance in bargaining positions as between the parties at the time the Agreement was put to the defendant, which favoured the plaintiff.

[67] With respect to the plaintiff's argument that it relied on the defendant's promise, the only evidence offered by the plaintiff in this regard is by Mr. DaCosta who said that he “believed” that if Brooks had refused to sign the Agreement, the company would not have entrusted him with the important responsibility of continuing to develop and maintain relationships with customers in the entire city of Kingston. Mr. DaCosta appears to have been the operations manager at the relevant time and the branch manager was Dave Darlington. This evidence is put forward as Mr. DaCosta’s belief. I find that it is not probative evidence of any reliance by the plaintiff on a promise by the defendant. The defendant’s evidence was that Mr. Darlington who was the branch manager told him to sign the Agreement if he wanted to work as a salesman. There is no evidence that the plaintiff desired or intended to dismiss the defendant. He was one of two outside sales representatives for the city area. The plaintiff may have believed that the Agreement was enforceable. But it took no action to its detriment on the basis of that belief.

[68] I find as a fact that the Agreement brought no benefit whatsoever to the defendant.

[69] This issue is appropriately adjudicated in the context of this summary judgment motion. The Hryniak test has been met by the defendant. I find that the Agreement is not enforceable as there was no consideration flowing to the defendant for signing it. Accordingly, there is no genuine issue for trial on this point.

DURESS

[70] In view of the decision in favour of the defendant on the no consideration argument, it is unnecessary for me to adjudicate on this second issue raised by the defendant against the enforceability of the Agreement.

DEFENDANT CONDONED THE CHANGE IN THE TERMS OF HIS EMPLOYMENT

[71] The plaintiff concedes that the Agreement was a unilateral amendment to a fundamental term of the defendant's employment. Nevertheless, he continued to work for the plaintiff for another 11 years. The Farquar v. Butler, 1998 CanLII 5828 (BC SC), [1998] BCJ No.191 (BCCA) decision relied upon by the plaintiff is distinguishable. In the present case, the defendant did not elect to treat the employment contract as being at an end. The case of Antsey v. Fednav, [1990] F.C.J. No. 477, is also distinguishable. The employer had reduced the employee’s remuneration, vacation pay and pension plan contributions. The court viewed the employee’s action brought two years later, as one for breach of contract, in effect, damages for constructive dismissal. The court held that by staying on beyond what would have been outside the reasonable notice period the plaintiff had in fact condoned the actions of the employer. In fact, the plaintiff, by staying on beyond what would have been found to be a reasonable notice of termination, even if constructively dismissed, had not suffered any damages. The other case relied upon by the plaintiff Blair v. ICI, [2010] OJ No. 1746, is also distinguishable as dealing with a case of constructive dismissal where the plaintiff continued to work beyond what would have been found to have been a reasonable period of notice.

[72] As the defendant points out, Braiden challenged the agreement forced upon him some seven years after it was signed, and in Holland, the agreement had been signed six years previously.

[73] I find that there is no factual basis for the suggestion that the defendant condoned or acquiesced in the terms of the Agreement, and that, at law, he is not barred from challenging the enforceability of that Agreement.

NON-COMPETITION CLAUSE

[74] In view of the decision that I have reached in favour of the defendant that the Agreement as a whole is not enforceable against the defendant, it is unnecessary for me to deal with the defendant's challenge to the enforceability of the non-competition clause.

[75] However, I would find should this matter go further, that this issue is properly adjudicated within the context of the Hryniak principles, and that there is no genuine issue for trial. I can fairly and justly determine that this clause is not enforceable on the facts and the law that apply to this motion.

[76] Mr. DaCosta identifies proprietary interests of the plaintiff in paragraph 13 however in paragraph 19, he states: “based on my experience, I believe that developing personal relationships with customers is the most effective way to sell and rent our equipment to those customers.” The fact is that the defendant was known to everyone in construction as he had worked in the business for Suntrack, then Darlington and then the plaintiff. His personal relationships cannot be viewed as a proprietary interest of the plaintiff.

[77] I have no hesitation in finding that on the evidentiary record before me the breadth of the temporal and spatial features of the clause are not supported. There is no evidence to support the 12 month restriction. There is no evidence to support the 100 km radius, especially in view of the fact that the defendant’s work was primarily in the City of Kingston.

[78] I also find that the clause is unenforceable as being against competition generally. The clause restricted the defendant with respect to all of the company’s and its affiliates, clients, whether known or not known to the defendant. That breadth is in contrast to the restriction with respect to prospective customers which restricted the defendant only from those he knew of.

[79] For these reasons, I find that there is no genuine issue for trial insofar as the non-competition clause is, in fact and in law, unenforceable.

NON-COMPETITION CLAUSE IS AMBIGUOUS

[80] In view of the decisions I ever reached as set out above, it is not necessary for me to adjudicate upon this issue.

DECISION

[81] For these reasons, the motion for summary judgment is granted. The claim of the plaintiff that the defendant breached the terms of the Agreement resulting in damages to the plaintiff is dismissed on the basis that the Agreement is not enforceable.

COSTS

[82] If the parties cannot agree on costs, after bona fide efforts to resolve same, the defendant may make written submissions restricted to 3 pages plus the costs outline within 10 days hereof, and the plaintiff may respond similarly, within 7 days.

Honourable Mr. Justice Gary W. Tranmer

Released: November 9, 2016

CITATION: United Rentals of Canada Inc. v. Brooks, 2016 ONSC 6854

COURT FILE NO.: CV-14-227-00

DATE: 2016 Nov 09

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

UNITED RENTALS OF CANADA INC.

Plaintiff (Responding Party)

– and –

DONALD F. BROOKS

Defendant (Moving Party)

DECISION ON MOTION FOR PARTIAL SUMMARY JUDGMENT

Tranmer J.

Released: November 9, 2016