Court File and Parties

Court Files No.: CV-14-111-00 Date: 2017, July 21 Ontario Superior Court of Justice

Between: MD PHYSICIAN SERVICES INC. and MD MANAGEMENT LIMITED Plaintiffs – and – DUANE WISNIEWSKI, JOY SLEETH and RBC DOMINION SECURITIES INC. Defendants

Counsel: W. MICHAEL G. OSBORNE and ANNIE (QURRAT-UL-AIN) TAYYAB, for the Plaintiffs NIGEL CAMPBELL and DOUG MCLEOD, for the Defendants

Heard: in Kingston October 3, 4, 5, 6, 11, 12, 13, 14, 2016. Written Submissions February 27, 2017 Oral Submissions June 5, 2017

Tausendfreund, J.

Reasons for Judgment

Overview

[1] The Plaintiff, MD Management Limited (“MDM”) is a wholly-owned subsidiary of the Plaintiff, MD Physician Services Inc., now known as MD Financial Management Inc. (“MD”). MDM collectively with MD and other companies owned by MD provide products and services primarily to physicians who are members of the Canadian Medical Association and their families.

[2] The Defendants, Duane Wisniewski (“Wisniewski”) and Joy Sleeth (“Sleeth”) both were employees of MDM until they left that employment in 2013 to join a competitor firm, the Defendant RBC Dominion Securities Inc. (“RBC DS”). The Plaintiffs allege that once at RBC DS, both Wisniewski and Sleeth breached the non-solicitation terms of their respective employment contract.

[3] This action is limited to the issue of liability. The parties have agreed to address damages at a future date.

[4] The Defendants state that the Plaintiffs’ allegation is unfounded, as:

a) The non-solicitation agreement is unenforceable, based on ambiguity, vagueness and unreasonableness. They also say that the circumstances under which Wisniewski and Sleeth each were required to sign their respective non-solicitation agreement made these agreements void as against them for lack of consideration and under the doctrine of non est factum.

b) In the alternative, Wisniewski and Sleeth deny that they breached their respective contracts. Their actions in notifying clients of their new employment were reasonable and appropriate and represent a right and benefit of which clients cannot be denied. They urge that it would be contrary to a public policy interest to enforce these non-solicitation agreements which they say are intended to prevent clients from making a free and fully informed decision about the future direction of their investments.

[5] Wisniewski and Sleeth had worked a number of years as investment advisors for MDM until 2013. At the time of joining MDM, each had signed a confidentiality and non-solicitation agreement (“non-solicitation agreement”, “covenant” or “contract”) that purportedly prohibited each for two years after their employment with MDM from soliciting MDM clients they had serviced. As these two contracts are identical in substance, I will refer to them in the singular.

[6] Within days after leaving MDM, Wisniewski and Sleeth joined RBC DS as investment advisors. On the first day at RBC DS, each from memory wrote out names and telephone contacts of many of the MDM clients they had serviced. Each then telephoned those clients. A number of MDM clients then followed them to RBC DS, others did not. As of August 2014, about nine months after he had left MDM, Wisniewski at RBC DS had accumulated a book under his management of about $25 million, of which about $22 million were from clients of MDM whom he had previously serviced. For her part, within 18 months at RBC DS, Sleeth had a book under her management of about $16.8 million.

[7] The Plaintiffs say that these contacts by Wisniewski and Sleeth are breaches of the non-solicitation agreement each signed and that RBC DS is vicariously liable for these breaches.

Facts

[8] MDM is a wholly-owned subsidiary of MD. It provides financial products and services to physicians who are members of the Canadian Medical Association and their families and to other eligible persons who have a connection to the physician member (“Qualified Investors”). About half of Canadian physicians are clients of MDM in some capacity. MDM does not accept members of the general public as clients.

[9] In 2009, CMA Holdings Incorporated, the parent holding company of the various MD group of companies, amalgamated with several other MD corporations. That amalgamated company was called MD Physician Services Inc. In 2013, MD Physician Services Inc. amalgamated with another MD company and on December 15, 2014 changed its corporate name to MD Financial Management Inc. (“MD”). MD which wholly owns MDM has the right to continue this civil proceeding originally commenced by MD Physician Services Inc. and MDM: see Canadian Business Corporations Act, RSC 1985 c C-44, s.186.

[10] MDM offers wealth management products and services, including financial planning and investments. It offers these services to physicians, their families, and other “Qualified Investors” through a network of offices across Canada. It employs “registered representatives”. This is an industry term. The Investment Industry Regulatory Organization of Canada (“IIROC”) provides the following definition of that position:

“An employee or agent of an investment dealer who is approved by IIROC to trade and advise in securities with the public in Canada.”

They are also commonly referred to as “Investments Advisors” or “Financial Consultants”. For the sake of consistency, I will refer to this position as “investment advisor” or “advisor”.

[11] RBC DS is a competitor of MDM. Each is a registered investment dealer and securities retail brokerage firm. RBC DS provides wealth management, financial planning and investment advisory services to the general public. Both RBC DS and MDM have offices throughout Canada, including Kingston, Ontario. They are both subject to IIROC regulations.

[12] MDM’s mandate from the Canadian Medical Association is to “put physicians first.” Its financial advisors are paid a salary plus a bonus based on a number of performance metrics. Typically, a bonus adds 15-25% to the salary earned by an MDM investment advisor. One such performance metric is the “new physician client” target. For example, the new client targets for each of Wisniewski and Sleeth in the years 2012 and 2013 were six and four respectively.

[13] MDM experiences an average annual loss rate of 1.5% to 2% of assets each year, based on clients’ voluntary withdrawal and/or transfer of all or part of their investment accounts.

[14] In 2013, about one half of the 1,322 physicians in the territory covered by MDM’s Kingston office were clients of MDM.

Business Approach

[15] Both MDM and RBC DS offer financial planning, investment and wealth management services. However, MDM distinguishes its service model from other investment advisory firms, such as RBC DS. That difference, MDM states, is its focus on physicians and their families. Pierre LeBel, an MD assistant vice-president, spoke on that issue from the perspective of MD:

“… our core value . . . for our clients is to put physicians first. We don’t ask our advisors to . . . sell a particular product. We expect our advisors . . . to really know physicians very well. . . . We don’t compensate them on product or selling a particular product. They are salaried and that’s to ensure that they’re not motivated to do something that’s contrary to the interests of the physician.”

[16] Mr. LeBel further stated that MDM serves physicians from the very beginning of their careers, even while they are still medical students. There is no “investable assets” threshold that must be met for a physician or medical student to become an MDM client. At RBC DS, anyone can become a client, subject generally to an “investable assets” threshold of $250,000.

[17] RBC DS takes issue with the proposition that the model pursued by MDM is inherently different from the service it delivers to its clients. In any event, RBC DS states, it has little bearing on the issues I must decide. That may well be so, but for the matter of compensation earned by the advisors. At MDM, they are paid an annual salary, plus a bonus of 15 – 25 %. Most of the clients MDM advisors service are assigned to them when they start as advisors at MDM. At RBC DS, advisors build their own business from zero within RBC DS. Their compensation is based on a percentage of fees generated by that business. They do not receive a base salary nor are they provided a list of clients to service. Wiesnewski had been assigned about 200 clients when he first joined MDM. He brought with him two clients from his then previous employment, also as an advisor. Between 2006 and 2013, he generated 16 net new clients at MDM. Sleeth added 14 new clients to her book in 2008 and four in 2012-2013. When she left MDM in 2013, her book consisted of about 200 physician clients, the same number that had been assigned to Wisniewski when he joined MDM in 2005.

Sleeth and Wisniewski at MDM

[18] Sleeth had worked in the financial industry since 1979, initially for CIBC in Kingston and as of November 3, 2003 for MDM. She had signed a Code of Conduct Employee Confirmation on October 31, 2003 and the non-solicitation agreement, as well as other documents on November 3, 2003. She was neither offered nor did she seek independent legal advice. When asked about the circumstances surrounding her signing these documents, she said: “Of course, I was going to sign anything they put in front of me.” She could not recall reading the non-solicitation agreement before she signed it. She simply thought of it as a confidentiality document.

[19] On November 4, 2013 her employment with MDM was terminated. A week later, she signed a release and acknowledgement specifying which termination package she elected to receive. That day, she accepted the offer of employment from RBC DS. She began her employment there on November 20, 2013. That same day, she wrote out from memory a handwritten list of MDM clients and began to contact them by telephone.

[20] Wisniewski had worked in the financial industry since 1994. He started with MDM on August 15, 2005 when he signed the non-solicitation agreement and a Code of Conduct Employee Confirmation. In the fall of 2013, Wisniewski had a series of discussions with Kevin Brenders, the branch manager of RBC DS. They spoke about the possibility of Wisniewski joining RBC DS. These discussions included topics such as his compensation and the number of clients he might bring with him. On December 5, 2013 Wisniewski accepted a written offer from RBC DS. He started there on December 9, 2013, the day he resigned from MDM. That day, he wrote out from memory a list of his MDM clients and began to contact them by telephone.

Non-Solicitation Agreement

[21] At the beginning of their employment with MDM, Sleeth and Wisniewski each had signed an offer of employment letter and a non-solicitation agreement.

[22] Each signed their respective offer letter before starting their employment with MDM:

a) Sleeth received her offer letter on October 15, 2003 and signed it on October 17, about two weeks before her start date of November 3, 2003.

b) Wisniewski received his offer letter on July 1, 2005 and signed it on July 25, about three weeks before he started to work at MDM on August 15, 2005.

[23] Excerpts of their respective offer letters, which are virtually identical, are these:

“. . . this letter confirms our offer to you of full-time employment subject to the following conditions: . . . Your annual salary will be . . . paid to you on a bi-weekly basis . . . You acknowledge that as a MDM employee, you will acquire information about certain matters, which are confidential. Accordingly, you undertake to treat confidentially all information acquired in connection with or as a result of performance of this agreement relating to the products or the business of MDM . . . . . . You agree to adhere to all MDM policies, rules, systems and procedures. . . As a condition of employment, you are required to sign the enclosed “Confidentiality and Non-Solicitation Agreement” and the “CMA Holdings Group of Companies Code of Conduct”. . . . Please complete and return the enclosed forms along with a signed copy of this letter to . . . Director, Human Resources. Your signature on this letter will confirm your acceptance of this offer of employment.”

[24] Each also signed the non-solicitation agreement on their respective first day of work. As a result of the passage of time, the evidence is unclear whether they were first provided the non-solicitation agreement for their signature before or not until their first day of work. I will return to this issue in my analysis.

[25] The following are certain excerpts of the non-solicitation agreement:

. . . “ “solicit” means: to solicit, or attempt to solicit, the business of any client, or prospective client, of the Employer who was serviced or solicited by the Employee during his/her employment with the Employee . . . Article 4 – Non-Solicitation 4.1: Non-Solicitation. The Employee agrees that the Employee shall not solicit during the Employee’s employment with the Employer and for the period ending two (2) years after the termination of his/her employment, regardless of how that termination should occur, within the geographic area within which s/he provided services to the Employer. . . . 4.2 Geographic and Time Limitations. The Employee acknowledges that the time and geographic limitations in Article 4.1 are reasonable and necessary for the adequate protection of the Employer’s business and property. In the event that the time or geographic limitation is found to be unreasonable by a court, then the Employee agrees to be bound to such reduced time or geographic limitation as said court deems to be reasonable.”

[26] Both Wisniewski and Sleeth worked out of the MDM Kingston office. As such, they both serviced MDM clients in the Kingston area. Additionally, Wisniewski serviced clients east along the 401 corridor to the Brockville area. Most of the clients Sleeth serviced resided and/or worked in the Kingston area. Additionally, she provided service to a few clients within a radius that included the County of Prince Edward, Belleville, Napanee, Perth, Smith Falls and Brockville.

[27] Elizabeth Matz (“Matz”) was and remains the regional manager for the Ottawa region of MDM. In 2013-14 the Ottawa region consisted of offices in Ottawa, Kingston and Sudbury. She defined the area covered by the Kingston office of MDM as Kingston, Belleville, Napanee, Smith Falls, Perth and Brockville.

Post Departure Actions by Wisniewski and Sleeth

[28] Both Wisniewski and Sleeth left MDM having taken nothing but their personal belongings. Wisniewski, who had given his notice, offered to work a two-week notice period. That offer was not accepted by MDM, yet it continued to pay Wisniewski his salary for these two weeks.

[29] A third advisor in the Kingston office of MDM, Art Salvalaggio, left MDM in late December, 2013. At the time, there were four advisors in the MDM Kingston office. The fourth was Jason Trueman. Following Wisniewski’s departure on December 9th, 2013, MDM had sought to execute a “client communications plan” to reassure clients about the stability of the Kingston office of MDM. As part of this plan, Trueman was assigned the responsibility of contacting a certain number of MDM clients to reassure them. For reasons that are unclear, Trueman failed to do so. In fact, Trueman resigned from MDM on December 23, 2013.

[30] The fact that all four advisors in the Kingston office left MDM within six weeks in the November-December 2013 time period created some alarm among MDM clients, based on their concern for the management of their investments. An example is the following letter from a long-time client addressed to MDM management:

“I am writing to register my dismay at yet more changes in my MD Advisors this time from the Kingston office.

. . . I am disappointed in the management in Kingston that is resulting in these changes and I hope you will look below the surface in reviewing these events and perhaps the personalities involved.

At the moment, I have little confidence in my representation and I wonder about the management in Kingston. I have worked with MD services for nearly 40 years and this is the first time I have not felt adequately represented.”

[31] MDM attempted to set up an immediate plan to communicate with its clients. This included notes to all clients informing them that their respective advisors had left, to introduce them to a new advisor and to reassure them that MDM would continue to serve them as they had in the past. It was a form of “damage control”, as described by Matz.

[32] Whatever plan MDM had, it was not carried out as intended. Many clients were not contacted within the 72 hour target MDM had set. Other clients were not contacted for several weeks, and in some cases, months. The fact that this communications plan was not carried out to the degree and with the intended dispatch, was internal to MDM. The delay MDM experienced in contacting clients after the departure of Wisniewski and Sleeth coupled with the December 2013 departure of the remaining two advisors in the Kingston office of MDM, may well have made MDM clients of its Kingston office uncertain and insecure about the future of their investments. For that reason, these MDM clients may have been more pre-disposed to consider a transfer of their investment accounts to an MDM competitor. This is a matter of damages and not one of liability before me on this trial.

Client Notification by Wisniewski and Sleeth

[33] There is no evidence that either Wisniewski or Sleeth took any client or confidential information with them upon leaving MDM.

[34] RBC DS, as a matter of course, advises all competitive hires that it is permissible for them to contact and notify their now former clients of their new employment. Kevin Brenders, branch manager of the Kingston office of RBC DS, spoke of the direction and encouragement his firm provides to new hires regarding contact with their former clients:

“A. . . . when they do come to us, we want them to reach out and . . . make appropriate contact, but they can’t bring any information in terms of how to contact those people from their previous employer. So once they leave, they leave with nothing. They come to our office, they sit down, they make lists from memory. . . . we ask them to contact those clients just to say, I’ve made a move. I’ve moved to Dominion Securities and I’m operating as an investment advisor and then I tell them to stop . . . That’s all they are to say . . .

. . . we tell our folks let the client know where you have gone . . . what role you will be doing . . . and then stop so . . . the door has been opened. If the client then chooses to walk through that door by asking for other information . . . the new [investment advisor] is in our view allowed to . . . continue that conversation. . . .

Q. . . . the hope is that the client will walk through the door?

A. Yes, I would hope the client walks through the door . . .

Q. . . . your standard advice to a competitive recruit is to give one day’s notice to the former employer?

A. Correct.

Q. So if I resign today I’m at my new office at DS tomorrow?

A. Yes.

Q. And starting tomorrow, I’m making that list of my clients from my former employer?

A. Yes.

Q. And I start calling them right away, tomorrow?

A. To tell them where they’re now working and what role, yeah. . . .

Q. And you do it as fast as you can?

A. Yes, yes, sometimes there is even greater urgency than others but yes, we try to do it as quickly as possible.

Q. And you know that’s because the advisor who left is calling those clients as fast as he or she can?

A. Yeah, we want to try and retain the business.”

[35] Contact particulars were to be based on the advisor’s own knowledge and recollection. That was so with these two defendants. On the first day of their employment with RBC DS, Wisniewski and Sleeth each wrote down lists, working from their own knowledge and memory of who their clients were and from publicly-available information. Those lists, each 5 pages long, were of names and telephone numbers of their clients while with MDM. Wanda McIsaac, a representative at RBC DS, provided guidance to them on the appropriate steps they could take in notifying their clients of their changed employment. Adhering to these instructions from McIsaac, Sleeth stated:

“. . . she was very clear and very strict as to what I was allowed to say when I contacted clients to let them know that I was no longer at MD Management and that I was now at RBC Dominion Securities, and then I was to take a pause and let the client lead the conversation from that point on.

Q. And so this script that you wrote down, that’s from her?

A. Yes.

Q. And the term “pregnant pause”, that’s from her?

A. Yes.

Q. And then it says, “wait until client requests contact information”?

A. That’s right, so I was not to lead the client in any way just to simply notify them that I had left MD, started at RBC Dominion Securities and then pause and let them take the conversation from there.

Q. So, were there instances where clients did not follow up proactively with you?

A. That’s right.

Q. And in those occasions, what would happen from there?

A. . . . we would just say it was a pleasure knowing you, wish you all the best and that was the end of it.

Q. I’m referring now to your phone calls with clients.

A. Yes, . . . so I called somebody, told them that I left, I was now at RBC, take a pause. They would then either say please send me information or give me your information, or they would say, well thank you very much for letting me know, I appreciate it and it’s been great working together, end of story, . . . end of conversation.

Q. In those later cases, the second example you gave where they say it’s been nice knowing you, end of conversation, . . . what further activities would you engage in with any of those clients?

A. Nothing, unless they had asked for my coordinates, said they wanted to keep in touch. If that was not discussed, then that was the end of the conversation.”

MDM Client Witnesses

Dr. John Earle

[36] He is a retired surgeon residing in Brockville, a client of MDM who has investments also at other firms. Wisniewski was his advisor at MDM. He was happy with the service he provided. In late fall of 2013, Wisniewski told him that he would soon be leaving MDM and move to another financial institution. Dr. Earle wished him luck and told him that he would not leave as he was happy at MDM.

[37] In late January of 2014, Wisniewski had left a telephone message for him that he had moved to RBC DS and would like to meet with him to “discuss things”. Several months later he received one further message from Wisniewski who wanted to know if he was interested in a meeting. Dr. Earle did not respond.

Daniel Dufour

[38] He is a physician at the Brockville General Hospital. He was a client of MDM. Wisniewski was his advisor.

[39] Late in 2013, Wisniewski called him to say that he had left MDM. Two or three months later, Wisniewski called again and asked if they could meet to discuss a possibility of Dr. Dufour moving to RBC DS where Wisniewski was now working as an advisor. Wisniewski made one further call and asked if he could send Dr. Dufour some documents about moving his account to RBC DS. Dr. Dufour did not respond.

Lisa Calder

[40] She is the daughter-in-law of a physician. That is how she became an MDM client in or about 2000. When her children were born, she opened an RESP account for them. Wisniewski was her advisor.

[41] She testified on the strength of a subpoena and brought to court her 2013 calendar.

[42] As had been her custom, she intended to meet with Wisniewski before year end to make RESP contributions for her children. She called Wisniewski during the first week of December 2013 for an appointment. He asked her to wait, as there would be changes at MDM. He booked an appointment for December 12, 2013, about ten days away. On December 9, Wisniewski called her to say that he was no longer with MDM and asked if she would consider moving her funds to RBC DS to remain with him. She told him that she was not interested, as she thought there would be additional fees involved in moving her account.

[43] Wisniewski recalled these discussions differently. He stated that he met with Ms. Calder and her husband at 4:30pm on Friday December the 6th. They were his last clients that day. They wanted to make a contribution to their RESP account. As this was late Friday afternoon, he told them that he would attend to it the following week. He then called Ms. Calder on December 9th, to say that he was now with RBC DS. He asked if she still wanted to meet with him. She told him that she needed to speak to her husband. Wisniewski called again one week later. Ms. Calder told him that they were happy with MDM and were not inclined to move their account.

[44] Ms. Calder stated that she had been upset about missing the deadline for her scheduled RESP contribution. That was an important matter for her. She had brought her 2013 calendar with her to court to confirm the dates of her telephone calls and meeting with Wisniewski. Hers was but one of many accounts that concerned Wisniewski at the time of his intended transfer to RBC DS. The RESP account for her children was important to Ms. Calder. Where their recollections differ, I prefer and accept the recollection of Ms. Calder for those stated reasons. Monday December 9th was the day Wisniewski was to start at RBC DS. I accept and find that he booked an appointment for Ms. Calder for December 12, which he anticipated was a date following his transfer to RBC DS. He had planned and hoped that Ms. Calder would follow him to his new employment.

Dr. Neil McFeely

[45] He is a retired psychiatrist residing in Brockville. Wisniewski was his advisor at MDM.

[46] On February 2nd, 2014 Dr. McFeely received a letter from Wisniewski advising that he had left MDM and that he would like to meet with him at Dr. McFeely’s earliest convenience. Dr. McFeely had already received a letter from MDM that Wisniewski had left and that a new advisor would take over his account. He was satisfied with MDM and did not respond to Wisniewski’s letter.

[47] When asked about this letter, Wisniewski stated that he had missed contacting Dr. McFeely on his call list and simply wanted to let Dr. McFeely know where he could now contact him, were he so inclined.

[48] Wisniewski could have confined his message to simply advise that he had left MDM and that he was now with RBC DS. The fact that he proposed a meeting, leads me to find that Wisniewski sent this letter to afford Dr. McFeely the opportunity to transfer his account or part of it to RBC DS.

Jenny Bright

[49] She is the wife of Dr. Hugh Bright and is a client of MDM. Sleeth was her advisor.

[50] She testified that Sleeth had called her to say “I know you heard that I left MDM”. Sleeth told her about RBC DS where she now worked. Sleeth left her a telephone number and said “I would like to talk to you about your portfolio”. Two months later, Sleeth called and asked her if Ms. Bright and her husband had made a decision. Ms. Bright told her that they were happy with MDM and would stay.

[51] MX 360 is an electronic system used by MDM for storing notes of meetings, telephone calls and emails with clients. MDM mandates that its advisors enter notes into this system and do so in a timely fashion.

[52] A number of MX 360 records contain notes made by MDM advisors concerning discussions they had with MDM clients, concerning telephone calls to them by Wisniewski and Sleeth in the weeks and months following their transfer to RBC DS. As these entries were mandated and made by MDM employees who had a personal knowledge of the information recorded, I find that these electronic notes were made in the usual and ordinary course of MDM business and as such admissible under s. 35(2) of the Evidence Act.

[53] Included in these electronic notes, are these comments by MDM clients:

Dr. Al Little

On January 9th, 2014, Dr. Little indicated to Nancy Roe, an MDM advisor that “Joy is calling him every day asking for business.” On April 29, 2014, Ms. Roe met with Dr. and Mrs. Little who told her that Ms. Sleeth “continues to call them regarding transferring over.”

Dr. Tassos Anastassiades

[54] In a telephone call, Dr. Anastassiades told Robert Rienzo, an MDM advisor, that he had been approached by Wisniewski who was offering lower fees, if he would move his account to RBC DS.

Dr. Peter Jachel

[55] At a meeting on January 16th, 2014, Dr. Jachel told Ms. Roe that “Joy Sleeth has been in touch”, as the question of the RBC portfolio management fees of 0.75% per annum had been raised by Dr. Jachel.

Dr. Jerry Simon

[56] Based on a discussion Ms. Roe had with Dr. Simon, she wrote this electronic note:

“February 26, 2014

Dr. Simon used to deal with Dwayne W. [who] has been soliciting him from RBC Dominion.”

Analysis

[57] The non-solicitation agreements Wisniewski and Sleeth signed were with CMA Holdings Incorporated. As previously noted, CMA Holdings Incorporated, by way of amalgamation, is the same corporate entity as the Plaintiff, MD Physician Services Inc. (“MD”) which wholly owns MDM, the entity which at all times employed Wisniewski and Sleeth. The non-solicitation agreement defines “employer” as CMA Holdings Incorporated and its affiliates. Accordingly, the definition of “employer” in the non-solicitation agreement includes MDM.

[58] The Defendants state that the non-solicitation agreement is unenforceable for these reasons:

a) lack of consideration and the doctrine of non est factum, based on the circumstances under which Wisniewski and Sleeth each were required to sign the agreement;

b) The terms are ambiguous, vague and unreasonable;

c) The Plaintiffs have no proprietary interest in the clients or prospective clients who were serviced or solicited by Wisniewski and Sleeth during their employment at MDM.

[59] I will start with the circumstances surrounding the Defendants’ signing of the non-solicitation agreement.

Sleeth

[60] She received her offer letter from MDM on October 15, 2003, and signed it back on October 17, 2003. On October 31, 2003 she signed a Code of Conduct Employee Confirmation. Her first day of employment at MDM as a “financial consultant” was November 3, 2003. That day she signed the non-solicitation agreement. It included the following terms:

• . . . you undertake to treat confidentially all information acquired in connection with or as a result of performance of this agreement relating to the products or the business of MDM . . . and not to publish, communicate, divulge or disclose to any third party any information, either during your employment, except as may be necessary to perform your duties, or after termination of your employment . . .

• As a condition of employment, you are required to sign the enclosed “Confidentiality and Non-Solicitation Agreement” and the “CMA Holdings Group of Companies Code of Conduct”.

• Your signature on this letter will confirm your acceptance of this offer of employment.

[61] She signed the same non-solicitation agreement on a second and third occasion. The second was in 2006 when she was promoted to senior financial consultant. The third occasion was on November 11, 2013 when she accepted the settlement offered by MDM following the termination of her employment. The termination package included the following term:

6. Acknowledgement

You are reminded that all client information you had access to and/or you received, while you were employed by MDM is the property of MDM, is confidential and may not be used or disclosed by you, . . . You are further reminded of your legal obligations to MDM related to confidentiality and non-solicitation, as set out in your Confidentiality and Non-solicitation agreement. . .

[62] Sleeth signed an acknowledgement accepting the terms and conditions of her termination letter. The release included her acknowledgment that:

The execution of the Release and the receipt of the payments referred to herein constitute additional consideration which binds me to the terms and conditions as set out in my Confidentiality and Non-solicitation Agreement and in the CMA Holdings Group of Companies Code of Conduct.

[63] With respect to the offer of employment letter which she signed and accepted on October 17, 2003, she was asked if she had read the clause referring to the enclosed non-solicitation agreement. She agreed that she had read that paragraph and knew that she would have to sign not only the offer of employment, but also the non-solicitation agreement. She stated, “I knew that I would have to sign something, yes. . . confidentiality is something that I was very familiar with.”

Wisniewski

[64] He received his offer letter on July 11, 2005 and signed it on July 25. The wording is substantially the same as the offer letter signed by Sleeth. He started his employment on August 15, 2005.

[65] As did Sleeth, Wisniewski signed a substantially identical non-solicitation agreement on his first day of work.

[66] Wisniewski agreed that he had read his offer letter and had changed the start date. He also agreed that he had read the term of that letter referring to the non-solicitation agreement and understood that he would have to sign this agreement and that he had a “general understanding” of what non-solicitation clauses were. Both Sleeth and Wisniewski said that they did not see the non-solicitation agreement before they signed it on their first day of work. The evidence indicates that MDM’s practice was to provide new hires, such as Sleeth and Wisniewski, with a copy of this agreement as part of a package that accompanied the offer letter, and referenced that agreement as an enclosure. With the passage of time, MDM was unable to confirm that this practice was followed with Sleeth and Wisniewski. Each had come to MDM from former employment in the financial sector. Several days elapsed before each signed the acceptance of their respective offers. It was not a surprise to either that they were expected to sign such a non-solicitation agreement. If this agreement had not been part of the package of documents that constituted the offer of employment, I expect that it would likely have been raised by both in the days between the presentation of the offers of employment and the date each signed it. Neither did. I conclude as a matter of probability that the non-solicitation agreement was enclosed in the package of documents each received as their respective offer of employment.

[67] With respect to the non est factum issue, I take it the Defendants advance the proposition that neither Wisniewski nor Sleeth knew that they had signed a non-solicitation agreement and for that reason ought not to be bound by it. I reject that submission. I find that the evidence supports the conclusion that their offer of employment letter had included a copy of the proposed covenant, that several days went by before they signed it and that both knew what they were then signing. Additionally, Wisniewski had made changes to his offer letter. In the case of Sleeth, she signed a second such agreement in 2006 when she was promoted and a third time in 2013 as part of her settlement agreement with MDM.

[68] In the alternative and to address the position of the Defendants that there is no consideration for the signing of the non-solicitation agreement by Wisniewski and Sleeth on their respective first day of employment, I rely on and adopt the position enunciated in Scantron Corp. v. Bruce, [1996] O.J. No. 2138 (O.C.J.) at para 17:

. . . continued employment is consideration. The employer could have, through proper means, terminated the employment of employees who are not prepared to agree to terms of employment the employer deems necessary.

Non-solicitation Agreement

[69] For ease of reference, the relative provisions of the agreement which in substance is a restrictive covenant, are set out again:

“Employer” means CMA Holdings Incorporated and any and all corporations. . . which . . . may be considered affiliated with CMA Holdings Incorporation or any affiliate of CMA Holdings Incorporated. . .

“Solicit” means:

i. To solicit or attempt to solicit the business of any client, or prospective client, of the Employer who was serviced or solicited by the Employee during his/her employment with the Employer,. . .

4.1 Non-solicitation : the Employee agrees that the Employee shall not solicit during the Employee’s employment with the Employer and for the period ending two (2) years after the termination of his/her employment,. . . within the geographic area within s/he provided services to the Employer.

[70] As the above definition of “solicit” is to a degree circular, I turn to the Oxford Dictionary:

Solicit: To ask for or try to obtain (something) from someone or seek or invite (businesses etc.). . .

[71] Before turning to the governing legal principles that apply when determining whether a restrictive covenant in the area of employment law is enforceable, I turn briefly to the nature of this non-solicitation agreement. A restrictive covenant may restrain either competition or solicitation. The former restricts the departing employee from conducting business with former clients and/or customers, while the latter is limited to soliciting their business. The ONCA in Lyons v. Multari, 2000 16851 (ON CA), [2000], 50 O.R. (3d) 526 at paras. 30 and 31 explained the difference between these two types of clauses:

30. It is quite common for employers to insist that their employees sign a contract containing a non-solicitation clause. This type of provision prohibits a departing employee from soliciting the customers of his or her previous employer.

31. The non-competition clause is a more drastic weapon in an employer’s arsenal. Its focus is much broader than an attempt to protect the employer’s client or customer base; it extends to an attempt to keep the former employee out of business. Usually, non-competition clauses are limited in terms of space and time.

[72] Gillese, J.A. in H.L. Staebler Co. v Allan, (2008) ONCA 576 (“Staebler”) summarized this general principle at para 42:

. . . a non-solicitation clause - - suitably restrained in temporal and spatial terms - - is more likely to represent a reasonable balance of the competing interests than is a non-competition clause. An appropriately limited non-solicitation clause offers protection for an employer without unduly compromising a person’s ability to work in his or her chosen field. A non-competition clause, on the other hand is enforceable only in exceptional circumstances.

[73] To state the obvious, the issues before me arise from a non-solicitation and not a non-competition clause. The Plaintiffs here do not assert that Wisniewski and Sleeth, once at RBC DS, could not or should not have competed with MDM, as long as they did not solicit clients or prospective clients whom they had serviced or solicited while at MDM. As stated in Mason v. Chem-Trend Ltd. Partnership, 2011 ONCA 344 at para. 16:

16. The balance is between the public interest in maintaining open competition and discouraging restraints on trade on the one hand, and on the other hand, the right of an employer to the protection of its trade secrets, confidential information and trade connections.

[74] The legal principles that address the enforceability or not of a non-solicitation clause were first detailed by the SCC in Elsley Estate v. J.G. Collins Agencies Ltd., (1978) 2 S.C.R 916, 1978 7 (SCC) (“Elsley”), and more recently applied by the ONCA in Staebler and in Mason, supra at para 16. The principles are these:

a) Do the Plaintiffs have a proprietary interest entitled to protection?

b) Is the covenant reasonable in terms of the public interest?

c) Is the restrictive covenant ambiguous with respect to any of:

i. Temporal length,

ii. Geographical scope, or

iii. Scope of the proscribed activities?

Do the Plaintiff’s Have a Proprietary Interest Entitled to Protection?

[75] As a starting point on this question, I take note of the difference in the system of compensation earned by the advisors at MDM compared to RBC DS. As already noted, MDM provides financial services to physicians and their families. MDM advisors are paid a salary and are assigned a list of clients which may or may not be an existing book of physician investors transferred to the new hire from a departing investment advisor. In addition to their salary, these advisors are paid a bonus in a range of 15 to 25 % of their salary based on a number of factors, including client retention, newly acquired physician investors and the financial result achieved by MDM as a whole. At RBC DS, advisors build their own business from zero and are paid a percentage of the fees generated by that business, with no base salary.

[76] Wisniewski and Sleeth reflect that difference. When Wisniewski started at MDM in 2005, he was assigned a departing advisor’s book of 200 clients. He had brought with him two clients from his previous employment as an investment advisor. Between 2006 and 2013 when he left MDM for RBC DS, he had added 16 net new clients. During her first five years at MDM from 2003 to 2008, Sleeth had been assigned the task of contacting and grooming medical students as possible new investors. She was then promoted to Senior Financial Advisor. When she left MDM five years later and started at RBC DS in November 2013, she had a list of about 200 physician clients. Both Wisniewski and Sleeth arrived at RBC DS in late 2013 without existing clients and started to build their respective books. To assist them financially during that initial phase of attracting financial investors as clients, RBC DS made available to them, as it did to other such new hires, a loan repayable over a period of time. There was no salary. The list of client investors developed by the advisor at RBC DS not only represented his or her compensation based on a share of fees the advisor generated, but the book of business itself became a capital asset for the advisor.

[77] The defendants say that Wisniewski and Sleeth were not the only advisors at MDM who had contact with or serviced their MDM clients. The evidence on that submission is not clear. Yet even if that were so, it would not alter the financial interest MDM had in this list of clients. An employer’s trade connections and customer lists are confidential information which an employer is entitled to protect: See Elsley, supra at p. 924, H.L. Staebler at para 35 and RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., (2007) BCCA 22 at para 130-31 and Towers, Parrin, Forester & Crosby, Inc. v. Cantin, 1999 15100 (ON SC), [1999] O.J. No. 5735 at para 49.

[78] In MD Management Ltd v. Dhut, 2004 BCSC 513, [2004] B.C.J. No. 764 (“Dhut”), the court dealt with the Plaintiff’s application for an interlocutory injunction to prohibit the Defendant from soliciting its clients pending trial. The court in that decision dealt with the same non-solicitation clause and the same employer as is the case here. The court noted:

25. . . . I am of the view that the non-solicitation clause protects legitimate proprietary interests of the employer. Mr. Dhut’s client list, when he worked with the Plaintiff, was provided to him by the employer. It was not the product of cold calling and difficult ground work by Mr. Dhut.

26. The Plaintiff, being a specialized company dealing with physicians, has a genuine interest in ensuring that it is not used simply as an opportunity for financial planners to make contact with physician investors within the relatively protected environment of the firm and then attempt to utilize those contacts to take customers away from it.

[79] Although these comments and observations in Dhut were made in the context of an interlocutory injunction, they apply equally to the facts before me, as does the application of the concept of a proprietary interest in a client list.

[80] I find that MDM had a propriety interest in the respective client lists of Wisniewski and Sleeth.

Is the Covenant reasonable in terms of the public interest?

[81] The reasonableness of a restrictive covenant was addressed in Elsley at para 925. Three factors apply:

a) Did the employer have a propriety interest entitled to protection?

b) Were the temporal or spatial features of the clause too broad?

c) Is the covenant unenforceable as being against competition generally, and not limited to proscribing solicitation of clients of the former employer?

[82] The SCC in KRG Insurance Brokers (Western) Inc. v. Shafron, (2009) SCC 6 (“Shafron”) added a further factor on the question of determining the reasonableness of the covenant. The court stated at para 43:

43. Normally, the reasonableness of a restrictive covenant is determined by considering the extent of the activity sought to be prohibited and the extent of the temporal and spatial scope of the prohibition. . . . a restrictive covenant is prima facie unenforceable unless [the covenant] is shown to be reasonable. However, if the covenant is ambiguous, in the sense that what is prohibited is not clear as to activity, time or geography, it is not possible to demonstrate that it is reasonable. Thus, an ambiguous restrictive covenant is, by definition, prima facie unreasonable and unenforceable. Only if the ambiguity can be resolved is it then possible to determine whether the unambiguous restrictive covenant is reasonable.

[83] When considering the above noted factors, I will be guided by these principles set out by the ONCA in Staebler at paras 38 to 43:

• A restrictive covenant may restrain either competition or solicitation. A non-competition clause restrains the departing employee from conducting business with former clients and customers whereas a non-solicitation clause merely prohibits the departing employee from soliciting their business.

• The non-competition clause is a more drastic weapon in an employer’s arsenal. Its focus is much broader than an attempt to protect the employer’s client or customer base; it extends to an attempt to keep the former employee out of business.

• Elsely makes it clear that a non-solicitation clause is normally sufficient to protect an employer’s proprietary interest and that a non-competition clause is warranted only in exceptional circumstances.

• An appropriately limited non-solicitation clause offers protection for an employer without unduly compromising a person’s ability to work in his or her chosen field.

• . . . the fact that a clause might have been enforceable had it been drafted in narrower terms will not save it. The question is not whether a valid agreement might have been made, but whether the agreement that was made is valid.

[84] The last comment by the ONCA in Staebler was addressed the following year by the SCC in Shafron. The court stated at para. 2:

2. . . . notional severance is not an appropriate mechanism to cure a defective restrictive covenant. . . . severance. . . may only be resorted to in rare cases where the part being removed is trivial, and not part of the main purport of the restrictive covenant.

[85] To suitably address the reasonableness of the covenant, I must also consider its temporal length, geographic scope and the scope of the proscribed activities.

Temporal Length

[86] S. 4.1 of the covenant states that the employee during the term of employment and for a period ending two years after the termination of employment shall not solicit. The term “solicit” is defined as “to solicit, or attempt to solicit, the business of any client or prospective client of the employer who was serviced or solicited by the employee during his or her employment with the employer”. S. 4. 2 provides that the employee acknowledges that the time limitation in s. 4.1 is reasonable and necessary for the adequate protection of the employer’s business and property.

[87] The two year limitation, under the dictionary definition of “solicit”, prevents the former employee from “asking for or attempting to obtain something” from those MDM clients or prospective clients who had been serviced or solicited by the former employee. What it clearly does not address or attempt to prevent is Wisniewski or Sleeth from contacting MDM clients whom they had not serviced or solicited, as well as any other potential clients. The evidence shows that less than 50% of the 1,322 physicians in the area serviced by the Kingston office of MDM were MDM clients.

[88] In determining whether the two year limitation period is reasonable, I have regard to these decisions:

[89] In Dhut, supra the court dealt with an almost identical two year non-solicitation clause as here. The court stated:

27. . . . the spatial area covered, nature of activities prohibited and overall fairness are not seriously brought into issue on this application. The prohibition is merely on solicitation, not on doing business with particular clients. . .

28. In light of the unique nature of the Plaintiff’s operations, I do not see any basis for challenging [the] overall fairness of the non-solicitation clause.

29. While the wording of the clause might be improved upon, I also do not think it could be reasonably said that it is void for uncertainty. The limited nature of the clause does not, in my view, amount to an unreasonable interference with the public interest.

[90] In Syntax Systems Ltd. v. Mid-Range Computer Group Inc., [2003] O.J. No. 3684 (OSCJ) Karakatsanis, J. (as she then was) at para. 29 referred with approval to Quebec jurisprudence that “upheld two-year non-solicitation covenants as being reasonable in their temporal scope where it is clearly defined and is limited to the clientele that the employee dealt with.”

[91] In Smilecorp Inc. v. Pesin, [2012] O.J. No. 5734, the ONCA upheld a finding that a two year non-solicitation clause was reasonable where it only prevented the former dentist from soliciting patients treated by him at the Smilecorp Clinic.

[92] In Stenhouse Australia Ltd v. Phillips, [1974] 1 All ER 117, Privy Council considered the terms of an agreement between an insurance broker and his employer for the termination of his employment. The employee was precluded from soliciting the employer’s clients for a period of five years following his termination. In holding that the non-solicitation agreement was enforceable, the court emphasized that the non-solicitation clause was limited to clients of the employer with whom the employee had dealings or negotiations as a result of the employee’s job function. The court stated at p. 8:

The prohibited activity is soliciting, a narrow prohibition, which leaves open . . . a wide field in which competitive action by the employee is unrestrained, and one which has often, if suitably confined, been accepted by the courts.

[93] I find that the two year limitation period is neither ambiguous nor unreasonable.

Geographical Scope

[94] S. 4. 1 of the non-solicitation agreement provides that the employee shall not solicit “within the geographic area within which s/he provided services to the employer”.

[95] The Defendants state that the “geographic area” in this case was amorphous, vague and without precision. In addition, the Defendants point to the fact that MDM internally used a series of geographic descriptions, such as “zones”, “regions”, and “districts”. The Defendants urge that I should conclude that the term “geographic area” in the non-solicitation agreement is ambiguous and for that reasons not enforceable.

[96] On this issue, I turn initially to Shafron. The SCC at para. 2 spoke of a “blue-pencil” severance which “consists of removing part of a contractual provision . . . [which] may only be resorted to in rare cases where the part being removed is trivial, and not part of the main purport of the restrictive covenant”. The court further stated at para. 36:

36. “However, the general rule must be that a restrictive covenant in an employment contract found to be ambiguous or unreasonable in its terms will be void and unenforceable.”

[97] I also have regard to certain comments of the SCC in its decision of Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 regarding the approach of contractual interpretation. At paras. 46 to 48 the court noted that words alone in a contract do not have an immutable or absolute meaning. Such words derive meaning from context. The court held that interpretation of a contract involves examining the facts of the case and the meaning of the words in light of those facts.

[98] I now turn to the question of whether Wisniewski and Sleeth, having left the employment of MDM, could then determine whom they could or could not solicit. Is the non-solicitation clause sufficiently clear in that regard?

[99] The covenant limits the non-solicitation obligation to members of two groups:

a) Clients who were serviced by these departing employees during their employment with MDM, and

b) Prospective clients who were solicited but not necessarily serviced by them during their employment with MDM.

[100] I note that a “prospective client” is defined as one who was “serviced or solicited by the employee during his or her employment with [MDM]”. I turn again to the Oxford Dictionary definition of “solicit” which is: to ask for or try to obtain something for someone.

[101] Based on that Oxford Dictionary definition of “solicit” and the wording of the non-solicitation agreement, I find that Wisniewski and Sleeth were restricted from contacting, with a view of investing with RBC DS, those physicians and their families for whom they had acted as an investment advisor at MDM or had encouraged them to so invest. If one were to question the clarity of this prohibition, one need only turn to the list of names of former clients Wisniewski and Sleeth recorded from memory on their respective first day at RBC DS. It was a list of former MDM clients whom Wisniewski and Sleeth as advisors each had serviced to invest at MDM. It was a clear and readily ascertainable list whom they contacted once at RBC DS. The reverse also applies. Wisniewski and Sleeth each were free to solicit:

a) clients of MDM whom they had not serviced;

b) anyone else, including physicians, provided that the person was not a client of MDM whom they had serviced as an investment advisor or had encouraged to become an investor with MDM.

[102] The agreement includes the term that the non-solicitation provision was to be limited to the geographic area within which the MDM advisor had provided services, or had solicited. In my view, that geographical description neither adds to nor detracts from the non-solicitation provision. The Defendants urge that the entire agreement should not apply, based in part on the non-specific and therefore ambiguous geographic definition. However, it is to be distinguished, for example, from the ambiguous term “Metropolitan City of Vancouver” with which the court dealt in Shafron. There is, of course, no such defined term. For that reason, the entire contract was found to be ambiguous, as the term could not be severed “without varying other terms of the contract or otherwise changing the bargain”: see Shafron, para. 50. The facts before me are different. The driving factor in this case is whether MDM clients were solicited as prospective investors with RBC DS. Wisniewski and Sleeth had worked for MDM in its Kingston office. At issue, however, is not a geographic location or area where these clients were serviced or solicited, but whether these clients had been serviced or solicited by Wisniewski or Sleeth. In today’s world of instant electronic communication, financial advice can and is provided over both long and short distances. Gone is the day when the investment business was largely carried out on a face to face basis. As the geographic term of the non-solicitation agreement adds nothing meaningful to the question of who may or may not have been serviced or solicited, I find that this term is “trivial and not part of the main purport of the restrictive covenant”, per Shafron at para 36. Also of note I find to be the quote of the B.C.C.A. in American Financial Corp. (Canada) v. B. King (1989), 60 D.L.R. 4th (293), referred to with approval in Shafron at para. 49:

49. . . . the courts will only [apply blue pencil severance to] sever the covenant and expunge a part of it if the obligation that remains can fairly be said to be a sensible and reasonable obligation in itself and such that the parties would unquestionably have agreed to it without varying any other terms of the contract or otherwise changing the bargain. . . . It is in that context that reference is made in the cases severing and expunging merely trivial or technical parts of an invalid covenant, which are not part of the main purport of the clause, in order to make it valid.

[103] The term in s. 4.1 of the covenant, namely “within the geographic area within which s/he provided services to the Employer” is severed and will not form part of my assessment of whether the non-solicitation agreement is enforceable.

Scope of the Proscribed Activities.

[104] A restrictive covenant, such as this non-solicitation clause, must be reasonable between the parties. Both sides must clearly be able to identify and particularly the departing employees, Wisniewski and Sleeth, whom they can and cannot, solicit: see Towers, Parrin et al v. Cantin, supra at para. 54.

[105] As I already found, this covenant limited the non-solicitation obligation to two identifiable groups:

a) Clients who had been serviced by Wisniewski or Sleeth during their MDM employment, and

b) Prospective clients who had been solicited by them during their MDM employment.

[106] The Defendants rely on John A. Ford & Associates Inc. v. Keegan, 2014 ONSC 4989 and Mason, supra, two decisions in which the covenants were not upheld as against the departing employees. The court in each of these two decisions held that the respective covenant was ambiguous in the sense that the departing employee could not identify which customers of the former employer were off limits. In both cases, the covenant did not limit the category of customers to the agents’ own customers, but included all customers of the employer. I agree with the Defendants’ position that a valid non-solicitation clause must clearly advise the former employee which customers are off-limits to him/her. However, I factually distinguish these two cases from the issues before me.

[107] I find that Wisniewski and Sleeth knew or should have known that contacts by them of their former MDM clients in the manner detailed here was an action likely proscribed by the non-solicitation clause each signed.

Did Wisniewski and Sleeth Breach the Non-Solicitation Agreement?

[108] As already noted above, on their first day at RBC DS Wisniewski and Sleeth wrote from memory a list of their former MDM clients whom they then contacted by telephone, ostensibly to only advise them that they had left MDM and were now at RBC DS. This contact and the manner and wording of it was undertaken with the approval and direction of RBC DS. On the face of it, it was a contact for the benefit of their former clients. The Defendants urge that this was indeed so, as clients had a right to know that their advisor was now working for a competitor. They point to RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc. 2007 BCCA 22, where in obiter Southin, J. A. for the majority stated:

81. In my opinion, a client is entitled to know immediately upon his advisor leaving one firm for another where that advisor has gone, so that he or she can decide whether to change to the new firm or remain with the old.

I note that not only was there not a non-solicitation covenant in play in the facts of that case, but also that the decision was overturned by SCC: 2008 SCC 54, [2008] 3 S.C.R. 79. McLachlin, C.J., speaking for the majority stated:

18. . . . the current law. . . restricts post-employment duties to the duty not to misuse confidential information, as well as duties arising out of a fiduciary duty or restrictive covenant . . .

19. For the purposes of this case, the law may be accepted as summarized by the preceding paragraph. The contract of employment ends when either the employer or the employee terminates the employment relationship, although residual duties may remain. An employee terminating his or her employment may be liable. . . for breach of specific residual duties. . .

[109] The Defendants also rely on the trial decision of Edward Jones v. Voldeng, 2012 BCSC 497 and the appeal decision of that case at 2012 BCCA 295. An investment adviser who was employed by Edward Jones resigned his position to join RBC DS. Edward Jones alleged that the employee had breached a term of his employment contract which prevented him from soliciting “any customer” of Edward Jones. The Court of Appeal, also apparently in obiter, referring to solicitation by the now departed adviser stated at para. 45 that “in certain relationships some such conduct is not only proper, but is desirable”. Unfortunately, it is not clear what the court meant by the term “in certain relationships”. In any event, as the proscribed activity involved “any customer” of Edward Jones, I factually distinguish these two decisions from the case before me.

[110] In deciding whether the telephone calls by Wisniewski and Sleeth to their former MDM clients were simply to inform them of their departure, or whether it was a form of solicitation, I have regard to the following:

• It occurred on the first day at RBC DS. They were to do it as quickly as they could, as based on instructions to them by RBC DS.

• It was to be a direct telephone contact. Leaving a telephone message or sending an email would not do.

• After advising the client that he/she had moved to RBC DS, there was a pause, as Kevin Brenders, the branch manager of the Kingston office of RBC DS, explained:

“. . . the door has been opened. If the client then chooses to walk through that door by asking for further information. . . the new [adviser] is in our view allowed to continue that conversation. . . I would hope the client walks through the door. . . we want to try and retain the business.”

[111] I conclude that the telephone contacts made by Wisniewski and Sleeth during their early days at RBC DS, although made in the guise of simply informing their clients of their new place of employment, was meant to be, and became in substance, solicitation. Applicable to this apparent charade is this observation by Corbett, J. in BMO Nesbitt Burns Inc. v. TD Waterhouse Investor Services [2006] O.J. No. 2074 (OSCJ) at para. 14, referring to contacts by an adviser with his former clients under similar circumstances as here:

14. . . . This is sophistry, and will just lead to ridiculous litigation, demarcating the precise words that may and may not be used by advisers when they approach clients to secure their business.

[112] In addition to these telephone contacts made by Wisniewski and Sleeth, the evidence shows that both engaged in further and other solicitation of clients, particulars of which include:

a) Wisniewski

i. suggested to both Dr. Earle and Ms. Calder that changes were coming at MDM;

ii. contacted Dr. Earle repeatedly and sent him unsolicited mail on two occasions;

iii. sent an unsolicited letter to Dr. McFeely, inviting him to contact him, in the hope of obtaining his business;

iv. contacted Dr. Dufour to ask if they could meet to discuss the possibility of Dr. Dufour moving to RBC DS, and on another occasion, if he could send Dr. Dufour some documents about moving his account to RBC DS;

v. Dr. Anastassiades told an MDM adviser that he had been approached by Wisniewski to ask if he would move his account to RBC DS and that he was offering lower fees;

vi. Dr. Simon told an MDM adviser that “Dwayne” had been soliciting him from RBC Dominion.

b) Sleeth

i. called Mrs. Bright twice to suggest that she and her husband should move their portfolio to RBC DS;

ii. Dr. Little indicated that “Joy is calling him every day asking for business”.

[113] The Defendants state that these telephone contacts by Wisniewski and Sleeth were intended only as information for MDM clients who might be concerned about their investments. Was that so, or was it but a charade or “sophistry” to circumvent the non-solicitation obligation, in the attempt by Wisniewski and Sleeth to solicit their former MDM clients? To assist me in that decision, I additionally note the following:

a) Lisa Calder: She had been Wisniewski’s client. It had been her custom to meet with him in December each year to arrange for an annual RESP contribution for her children. Wisniewski asked her to wait and booked an appointment for December 12th, 2013, about 10 days away. On December 9th, Wisniewski called her to say that he was no longer with MDM and asked if she would consider moving her funds to RBC DS to remain with him. Wisniewski recalled these discussions differently: Ms. Calder met with him at 4:30 p.m. on Friday, December 6. As it was late in the work week, he advised her that he would attend to the task in the following week. Wisniewski then called Ms. Calder on December 9th to say that he was now with RBC DS and asked if she still wanted to meet with him.

For reasons I already particularized, where the evidence of Wisniewski differed from that given by Ms. Calder about their discussions, I prefer and accept the evidence of Ms. Calder. As I already stated, I find that Wisniewski had booked an appointment for Ms. Calder for December 12th, which he anticipated was a date following his transfer to RBC DS. I find that Wisniewski had planned and hoped that Ms. Calder would then follow him to his new employment.

b) Dr. Neil McFeely: Regarding the letter of February 2, 2014, which Wisniewski had sent to Dr. McFeely, Wisniewski explained that he had missed contacting Dr. McFeely on his call list and simply wanted to let him know where Dr. McFeely could now contact him, were he so inclined. I do not accept that explanation. Wisniewski could have confined his message to simply advise that he had left MDM and that he was now with RBC DS. This letter was but an opportunity to importune Dr. McFeely to transfer his account, or part of it, to RBC DS.

c) Wisniewski and Sleeth were salaried employees of MDM. They had no legal obligation to contact their clients to advise them that they were no longer so employed. If in fact that was the motivation for them to have made these calls, they could have sent announcements, e-mails or have left telephone messages. They attended to none of these options. Alternatively, they could have advised MDM that on a voluntary basis they would be prepared to contact their former clients to advise them that they had left and where they could now be contacted, if their clients were so inclined. That would be particularly so for Wisniewski who had voluntarily left MDM and had offered a two week working notice for which he was actually paid. Perhaps not surprisingly, neither Wisniewski nor Sleeth had approached MDM with such a proposition.

[114] The evidence leads me to conclude that the actions by Wisniewski and Sleeth in contacting their former MDM clients had nothing to do with any perceived obligation to advise these clients that they had left their employment at MDM and to reassure their clients regarding their investments at MDM. Quite to the contrary. It had everything to do with the attempt by Wisniewski and Sleeth to retain the business of servicing these accounts.

[115] I find that both Wisniewski and Sleeth breached their non-solicitation agreement by soliciting or attempting to solicit the business of MDM clients who had been serviced by them during their employment with MDM.

Confidentiality

[116] The non-solicitation agreement signed by Wisniewski and Sleeth contained the following terms governing confidentiality:

“Confidential information” means information that is confidential and proprietary to [CMA Holdings Incorporated] and that is not known to the public or to the competitors and which is the exclusive property of [CMA Holdings Incorporated] and includes, but is not limited to, the following, whether in electronic copy or otherwise:

d) All information regarding existing and potential clients, including client lists, contracts, prices, invoices, computer printouts, mailing lists, and prospect cards,

i. Information relating to financial and other personal information of clients and employees. . .

2.1 “Confidentiality” during the employee’s employment with the employer, the employee undertakes not to disclose confidential information to any third party unless s/he has the prior written approval of an authorized officer of the employer to do so. The employee agrees not to use, in any way, the confidential information for his/her own benefit, whether directly or indirectly, or for the benefit of any other person or entity . . .

[117] The Plaintiffs further state that MDM has obligations under the Personal Information Protection and Electronic Documents Act (“PIPEDA”) to maintain the confidentiality of personal information of its clients. “Personal information” is defined in the act as “information about an identifiable individual”. The act establishes that personal information shall not be used or disclosed for purposes other than those for which it was collected, except with the consent of the individual or as required by law.

[118] There is no evidence that either Wisniewski or Sleeth removed any confidential information from MDM in either paper or electronic form. However, the Plaintiffs state that Wisniewski and Sleeth breached their confidentiality obligations to MDM and to their former clients by writing out a list of former clients and then calling them with the goal of obtaining their business. While they generally obtained telephone numbers from public sources, at least one former client, Jenny Bright testified that she was contacted by Ms. Sleeth by telephone at an unlisted number.

[119] Although the contact by Wisniewski and Sleeth of their former clients at MDM constitutes a technical breach of their confidentiality obligation and, in the case of unlisted telephone numbers, a breach of PIPEDA, it was in substance no more than a telephone call. If that former client then chose to move the account to RBC DS, that was entirely the client’s choice. If the client responded by thanking Wisniewski and Sleeth for the call without further action to move their account, that was the end of the matter. In my view, such a breach does not rise above the maxim of de minimus non curat lex. For that reason, such breaches on these facts, do not attract any damages.

Is RBC DS Vicariously Liable for These Breaches?

[120] Wisniewski and Sleeth committed these breaches in the performance of their duties as employees of RBC DS. Despite the fact that they were not salaried employees, but financial advisers who earned their income entirely from commissions, they were not acting on their own but on instructions of RBC DS. Their efforts in contacting their former MDM clients were attempts to having these clients follow them to RBC DS. If a client chose to transfer his or her account, RBC DS would benefit. I also note that the offer letters given to Wisniewski and Sleeth by RBC DS refer to “employment”.

[121] It was RBC DS who instructed both Wisniewski and Sleeth to contact their former MDM clients. In fact, it coached them in the manner of the contact which it facilitated.

[122] I find that RBC DS is vicariously liable for the breaches of a non-solicitation and confidentiality obligation Wisniewski and Sleeth had to MDM.

Summary

[123] This trial was limited to the issue of liability.

[124] I will leave it to counsel to proceed with the damages part of this trial, on a schedule and in a manner upon which counsel may agree and/or this court should direct.

[125] I may be spoken to on the issue of costs within 30 days of the release of these reasons, if counsel are of the view that it is not premature to now address costs of this phase of the trial only.

Honourable Mr. Justice Wolf Tausendfreund

Released: July 21, 2017