2158124 Ontario Inc. v. Pitton, 2017 ONSC 411
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
2158124 Ontario Inc.
Plaintiff
- and -
Warren John Pitton, Glenny Insurance Brokers Ltd., Brian Douglas Maskell and Scott Gregory Maskell
Defendants
COUNSEL: C. Staples, for the Plaintiff B. Troup, for the Defendants
HEARD: January 6, 2017
BEFORE: A.J. Goodman J.
ENDORSEMENT
1The plaintiff, 2158124 Ontario Inc. operating under the business name StoneRidge Insurance Brokers ("StoneRidge"), moves for an interlocutory injunction restraining the defendants, Warren John Pitton ("Pitton"), Glenny Insurance Brokers Limited (“Glenny”) and Brian Maskell (“Brian”) and Scott Maskell (“Scott”) from committing or assisting in alleged breaches of non-solicitation and confidentiality provisions of an employment agreement between StoneRidge and Pitton.
2At issue in this action is whether Pitton has breached his non-solicitation and confidentiality obligations under an employment agreement. If such a breach is found, does it warrant interlocutory injunctive relief sought by the plaintiff?
3The plaintiffs have provided an undertaking for damages if successful in this motion for interlocutory injunctive relief.
Background:
4StoneRidge carries on business as an insurance brokerage providing clients with access to home, auto, life, commercial, health and wealth insurance products from a range of insurers. While affiliated offices under the StoneRidge name operate in offices throughout Southern Ontario, the plaintiff operates only the Ancaster, Ontario office.
5Glenny carries on business as an insurance brokerage providing clients with insurance products. It is a family-run business whose principals include Brian and Scott. Pitton is a long-time family friend of the principals of Glenny.
6Pitton is 57 years old and resides in the City of Hamilton. Pitton is a licensed insurance broker. Up to April 2011, Pitton was employed as a broker with Canada Brokerlink Limited ("Brokerlink") managing a book of business consisting of commercial and personal clients. In April 2011, Pitton approached StoneRidge's principal, Ted Puccini ("Puccini"), advising that he wished to leave Brokerlink to join StoneRidge. Pitton proposed that StoneRidge approach Brokerlink with an offer to purchase the book of business managed by him so that he could commence his StoneRidge employment with a ready client base. Purchases of books of business in this manner are relatively common in the industry.
7Puccini eventually purchased the book of business from Brokerlink. The book of business was assigned to StoneRidge. Pitton was hired by StoneRidge as a senior account executive managing the Brokerlink book of business.
8On April 25, 2011, Pitton signed an Employment Agreement (“Agreement”) and was employed by StoneRidge until his abrupt resignation on September 16, 2016. Without prior notice, Pitton delivered a letter of resignation and advised Puccini that he had accepted a position as a broker with Glenny at its Fort Erie office, now operating under the name Erion Insurance Group (“Erion”).
9Apparently, discussions of joining Glenny (now Erion) occurred in the summer of 2016. Pitton signed an offer of employment on September 14, 2016 and commenced active employment with Erion on September 19, 2016.
10Puccini expected that if Pitton intended to move to another brokerage, he would have been contacted either by him or by his intended new employer to request that StoneRidge sell the book of business. Puccini was not contacted in that regard.
11During a telephone call on September 17, 2016, Puccini reminded Pitton of his obligations under the Agreement, in particular the non-solicitation clauses. Puccini advised that StoneRidge expected that Pitton would abide by the terms of the Agreement. According to Puccini, Pitton stated that he would do so.
12On September 19, 2016, the Monday after Pitton's Friday resignation, Puccini spoke with Scott. While Puccini had no issue with Pitton's right to seek employment elsewhere, he was concerned about Pitton's and Glenny's intentions with respect to the book of business. Puccini wanted to determine whether Glenny had any intention of making an offer to purchase the book. Scott advised Puccini that Glenny was interested but the price offered was substantially below its value and Puccini did not consider it to be a serious offer.
13Unbeknownst to Puccini or to anyone else at StoneRidge, Pitton began to contact StoneRidge clients to advise that he was leaving. Puccini became aware of the solicitation because StoneRidge was contacted subsequently by several clients requesting clarification of Pitton's situation.
14Among other contact with StoneRidge clients, on September 17, 2016 Pitton sent an email (“the email”) to StoneRidge clients with his contact information stating as follows:
Hello,
I just wanted everyone to know that I have made a decision to join another insurance brokerage. After some time and careful thought, I believe it was time for me to move on. My goal is to provide my clients with the best service at competitive pricing at Erion Insurance Brokers, where I will not only take care of clients but also act as operations manager to have a positive effect on client relations and insurance options. I have enjoyed working with you in the past and hope to continue working with you in the future.
My contact information is: Erion Insurance Brokers
76 Main St., West Grimsby, ON L3M IR6, 1-866-955-2281
Thanks for your past support. Warren
Positions of the Parties:
15The plaintiff submits that a brokerage's book of business and its client base form the core of its business. The personal relationship between a broker and client raises a risk that when a broker leaves, business may follow. Therefore, employment agreements including non-solicitation clauses are common in order to protect a brokerage should a broker leave.
16The plaintiff says that Pitton is subject to terms that includes non-solicitation and confidentiality clauses. StoneRidge alleges that immediately upon his resignation and with the knowledge and support of Glenny and its principals, Pitton commenced soliciting StoneRidge customers in breach of the Agreement. In this regard, Pitton accessed and used client information confidential to StoneRidge.
17The plaintiff submits that the provision in para. 14 of the Agreement requiring payment to StoneRidge of two times annual commissions should a client follow Pitton to a new brokerage is designed to partially compensate StoneRidge for the loss of business purchased by it for value from Brokerlink; or otherwise added to the Book of Business from existing StoneRidge clients. Over the lifetime of an insurance policy, the payment of two times annual commission is below industry standard for a transferred account.
18The plaintiff submits that injunctive relief is necessary to protect its business and client base and that its business will be irreparably harmed if relief is not granted. The balance of convenience favours the granting of interlocutory injunctive relief.
19The defendants' position is that the plaintiff’s motion ought to be dismissed on the grounds that there is not a serious issue to be tried, there is no evidence of irreparable harm suffered by the plaintiff, and the balance of convenience clearly favours dismissing the motion.
20According to the plaintiff, Pitton's book of business at the time of termination consisted of 183 commercial client lines and 92 personal client lines. The defendants say that Pitton sent the email to a small selection of his former clients. The defendants submit that Pitton sent the email out of a sense of professional obligation and courtesy. Most of the clients who received the email had followed Pitton from Brokerlink and included close personal friends and family, the vast majority of whom resulted from relationships that pre-dated his employment with the plaintiff. The defendants say that Pitton restricted the email to 50 individuals and had only spoken to approximately 35 former clients. In some cases, his telephone communication with those clients was the result of them calling him and advising that they had been contacted by Puccini or other StoneRidge employees. The defendants argue that the purpose of the email was not to be a solicitation of the plaintiff’s clients.
21The defendants submit that there was no breach of the Agreement between the parties as Pitton never misused any confidential information. The defendants also argue that the relevant provisions relating to non-solicitation, non-competition, and misuse of confidential information in the Agreement are void and unenforceable. The language in para. 14 of the Agreement is overbroad and unreasonably restrictive in scope. The impugned restrictions apply to all of the plaintiff’s customers, not just those serviced by Pitton. As Pitton is not aware of the identity of all or most of StoneRidge’s client base, these provisions are ambiguous and unfairly restrict Pitton's ability to utilize his skills, experience and knowledge.
22In addition to the 24 month non-solicitation provision, s. 14 of the Agreement contains a non-competition covenant, requiring Pitton to pay damages to the plaintiff for StoneRidge clients who follow him in new employment. The temporal restrictions are excessive. In the alternative, the defendants submit that even though the Agreement provides a quantification for business losses, the plaintiff has not demonstrated that any alleged loss could not be remedied by an award of damages. The defendants also submit that the balance of convenience rests in their favour.
Legal Principles:
23An injunction is an extraordinary remedy that should only be issued to restrain a clear breach of legal obligations. The test to be met for the granting of an interim or interlocutory injunction has been set out by the Supreme Court of Canada in its seminal case of RJR-MacDonald Inc. v. Canada (Attorney General), 1 S.C.R. 311. The moving party must demonstrate:
a. that there is a serious issue to be tried;
b. that the moving party will suffer irreparable harm if the injunction is not granted; and
c. that the balance of convenience favours the granting of the injunction.
Discussion:
24The non-disclosure and confidentiality provisions of the Agreement are very important to StoneRidge. A brokerage collects a significant amount of personal client information and has an obligation to protect same. There is no dispute that a brokerage's primary asset is its customer base, including names, addresses, contact information, occupation, business and insurance requirements, information that would be extremely beneficial to another brokerage.
25Among other terms, the Agreement provides as follows:
12.The Employee shall not, either during the continuance of his employment hereunder or at any time thereafter, disclose the private affairs of STONERIDGE (and/or any of its affiliates) or any secrets or confidential information of STONERIDGE (and/or any of its affiliates) except to auditors, counsel and directors of STONERIDGE and shall not, either during the continuance of his employment hereunder or at any time thereafter, use for his own purposes or for any other purposes other than those of STONERIDGE (and/or any of its affiliates) any secrets or confidential information he may acquire in relation to the business affairs of STONERIDGE (and/or any of its affiliates). For clarity this section shall survive termination of this Agreement.
13.The Employee acknowledges that STONERIDGE (and/or any of its affiliates) will continue to carry on the business of the sale of general insurance policies and life insurance policies (the "Business") and that in the course of carrying out, performing and fulfilling his responsibilities to STONERIDGE (and/or any of its affiliates) in the future under this Agreement he either has had access to and/or was entrusted with or will have access to and/or be entrusted confidential and proprietary information and trade secrets relating to the present and contemplated services, techniques and modes of marketing, procedures, know-how, confidential information and trade secrets concerning the customers of STONERIDGE (and/or any of its affiliates), their names addresses, needs and preferences, their cyclical or other particular business requirements, all of which constitutes part of the goodwill of STONERIDGE (and/or any of its affiliates) and belongs to STONERIDGE (and/or any of its affiliates). The Employee acknowledges and agrees that the right to preserve its goodwill constitutes a proprietary right that STONERIDGE (and/or any of its affiliates) is entitled to protect.
14.Non-Solicitation. In consideration of the Draw and Override and any other incentive of funds and remuneration, the Employee covenants and agrees that they will not at any time during their employment and for a period of twenty-four (24) months immediately following the termination, for whatever reason, of Employee's employment from STONERIDGE, directly or indirectly, either individually or in partnership or in conjunction with any person or persons, firm, association, syndicate, company or corporation, as principal, agent, shareholder, Employee or in any other manner whatsoever, solicit, interfere with or endeavour to entice away from STONERIDGE any of STONERIDGE's clients, including without limitation, any portion of the Book of Business (as defined above). If, for whatever reason (regardless of whether solicited or not) a current or prior client of STONERIDGE should follow the Employee to her new place of business and obtain services similar to those offered by STONERIDGE, then the Employee shall pay STONERIDGE two (2) times the annual commission of said client forthwith upon request from STONERIDGE. For clarity, this section shall survive termination of this Agreement.
Serious Issue to be Tried:
26I agree with the plaintiff that several things flowing from the email clearly indicate a solicitation of business. The email from Pitton was sent two days before Puccini's discussion with Scott regarding a potential purchase of the book of business and his confirmation that the Agreement would be honoured. The email was sent on a Saturday, indicating that Pitton was losing no time in approaching certain of StoneRidge’s clients. Before even apparently commencing his new employment, Pitton had a Glenny email address, office address and telephone number.
27StoneRidge was in touch with most clients serviced by Pitton and was advised by almost all of them that they had been contacted by Pitton either by email, letter or telephone call. I am satisfied that Pitton knew who his StoneRidge clients were, had their contact information on his personal cell phone, was aware of the products they had purchased, the type of insurance coverage they had and general knowledge of when client policy renewals came due. It is somewhat self-serving to justify this conduct by claiming that certain clients would have followed Pitton in any event.
28I find that the email went far beyond simply advising clients that Pitton had left StoneRidge. The email referenced "my clients" and clearly stated that Pitton will provide "the best service at competitive pricing at Erion Insurance Brokers". He opined that his position at Glenny as operations manager will have a "positive effect on client relations and insurance options". Finally, he stated that he hopes "to continue working with you in the future".
29Based on the evidence before me, I conclude that Pitton solicited former clients of StoneRidge immediately after his resignation from the plaintiff’s business.
30The plaintiff submits that if an interlocutory injunction is granted, the issues in this action will not be effectively determined. Pitton will not be prevented from continuing his employment with Glenny and will suffer no loss. The plaintiff submits that the lower test of a serious issue to be tried ought to be applied. The defendants argue that the Agreement provides for restrictive covenants and the strong prima facie case standard is applicable.
31With respect to the interpretation of the clauses found in this Agreement and restrictive covenants in employment agreements generally, the case law in Ontario is divided as to whether the standard to be applied ought to be the lower "serious question to be tried" or the higher "strong prima facie case" test. The majority of reported cases that applied the higher standard of a strong prima facie case dealt with restrictive non-competition clauses, as opposed to mere non-solicitation clauses.
32One line of cases in Ontario has found that the higher standard of a strong prima facie case should be met where parties are seeking to enforce restrictive covenants. In these cases, if the higher standard is met, less emphasis is placed on the second and third parts of the injunction test. Still, other jurisprudence provides that a court need not choose between a higher or a lower threshold but, depending on the strength of a plaintiff’s case, irreparable harm and the balance of convenience will be given either more or less weight; less if a strong prima facie case, more if it is simply a serious issue to be tried.
33Whether the "serious question to be tried" test or the higher standard of a "strong prima facie case" is to be applied in this case must be met in relation to certain aspects of the plaintiff's claim. The authorities suggest that where the interlocutory injunction will interfere with the defendant's ability to make a living, the threshold should be the higher one of “strong prima facie” case.
34In Van Wagner Communications Co., Canada v. Penex Metropolis Ltd., [2008] CarswellOnt 218, [2008] O.J. No. 190, at para 39, Pattillo J. addressed the vexing question of the appropriate test to be applied:
…Each of those respected judges are saying, in my view, that in the case of an interlocutory injunction to restrain a breach of a negative covenant, irreparable harm and the balance of convenience need to be still considered. The extent of the consideration, however, will be directly influenced by the strength of a plaintiff's case. Even where there is a clear breach of a negative covenant which is reasonable on its face, the issues of irreparable harm and balance of convenience cannot be ignored. They may, however, become less of a factor in reaching the final determination of the issue depending on the strength of the plaintiff's case.
35I agree with Pattillo J.’s application of the general test and weight to be placed on the various factors for injunctive relief. See also Rogers Communications Inc. v. Shaw Communities Inc., [2009] O.J. No. 3842 (S.C.).
36A restrictive covenant in an employment contract akin to a restraint of trade is voidable and will not be enforced unless justified as reasonable between the parties or in the public interest. The onus is on the employer trying to enforce the restrictive covenant to justify it as being no more than is reasonably required to protect its valid proprietary interests between the parties. If it is a non-solicitation clause, it is more likely to be enforced. The difference between a non-solicitation clause and a non-competition clause has been described by the Court of Appeal in H.J. Staebler Co. v. Allan, 2008 ONCA 576, 2008 CarswellOnt 4650 at para. 38 as follows:
…A restrictive covenant may restrain either competition or solicitation. A noncompetition 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.
37Various courts have been reluctant to uphold non-competition clauses where a non-solicitation clause would adequately protect an employer's interest. A valid non-solicitation clause must clearly advise the former employee which customers are off limits to her or him. In cases where the specific customers that are not to be solicited have not been clearly identified, restrictive covenants have been found to be ambiguous in their practical implementation and therefore, unenforceable and void: ThyssenKrupp Elevator (Canada) Ltd. v. Amos, [2014] O.J. No. 3155 at paras. 31 and 32; Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344 at para. 30.
38Paragraph 14 of the Agreement employs the words "solicit, interfere with or endeavour to entice away". In my view, this is very clearly language of solicitation. Nowhere do the provisions curtail Pitton's right or ability to carry on a livelihood or business as an insurance broker.
39I accept the plaintiff’s interpretation of the relevant clauses of the Agreement. The combination of paragraphs (a) and (b) of the Glenny agreement constitutes a greater restriction on Pitton than anything in the Agreement. In cross-examination, Pitton stated that he did not consider the Glenny provisions to be unreasonable or problematic. Likewise, the injunctive relief provision in the Glenny employment agreement tends to be more restrictive.
40The question is whether the covenants in the Agreement are unenforceable as being against competition generally and not limited to former clients: J.G. Collins Insurance Agency v. Elsley, 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916 at p. 926. Where a non-solicitation provision is limited to customers or clients of the employer, a geographic limit is irrelevant and not required. I am persuaded in this case that the Agreement is limited to customers of the Ancaster office alone. Nothing in the Agreement prohibits solicitation or competition for clients of any other StoneRidge affiliated office. The two-year limitation clause appears to be reasonable and in-line with industry norms.
41In discussing para. 14 of the Agreement, the defendants submit that the provision refers to all of the plaintiff's clients and not just those served by Pitton. Clearly, Pitton does not have knowledge of all of StoneRidge's clients. Pitton has estimated that StoneRidge has thousands of clients, however, the non-solicitation provision is not specific to those clients that Pitton dealt with or had direct dealings with. More importantly, the defendants submit that the language above does not just reference non-solicitation of the plaintiff's employees, it is also essentially a restrictive non-competition provision. With respect, I disagree.
42Taking into account all the evidence presented, the language in the Agreement is clearly in the realm of a non-solicitation prohibition and does not constrain Pitton’s ability to work in the insurance field or in the manner suggested by defendants’ counsel. Nonetheless, I am satisfied that the plaintiff meets the higher burden, if indeed that burden applies to all or any part of this segment of the claim.
43In respect of confidential information, it does not make a difference if a departing employee has information that allows him to correspond with and solicit former clients, to the extent that he is doing so from memory. Committing to memory the names of clients, their contacts, the clients' needs or preferences, and the rates that the clients were willing to pay, is confidential information and exploiting such information to solicit former clients "is tantamount to the physical asportation of a client list" and its use is prohibited: Quantum Management Services Ltd. v. Hann, 1989 CarswellOnt 124 (S.C.J.) at paras. 43-44; aff’d. 1992 CarswellOnt 1707 (C.A.) at para. 3, Sheehan & Rosie Ltd. v. Northwood, 2000 CarswellOnt 670 (S.C.J.) at paras. 52-53.
44Again, I agree with the plaintiffs that the non-solicitation provision in the Agreement is reasonable and not vague when applying the evidence of the industry standard. Furthermore, the language of the e-mail from Pitton to StoneRidge clients clearly and objectively shows an intention to solicit business. The use of confidential StoneRidge information to facilitate solicitation is a breach in and of itself.
45StoneRidge has met its onus and established breaches of paras. 13 and 14 by the defendants. Therefore, the plaintiff has not only shown a serious issue to be tried but that it has a strong prima facie case.
Irreparable Harm:
46In RJR-MacDonald, the Supreme Court of Canada had defined “irreparable harm” as the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples include instances where one party will suffer permanent market loss; or irrevocable damage to its business reputation.
47It is settled law that in order to succeed on an application for an interlocutory injunction, the moving party must establish that it would suffer irreparable harm unless the injunction is granted. The moving party must show whether a refusal to grant the relief sought could so adversely affect its own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the results of the motion. RJR-MacDonald, at para. 63.
48An assertion that a plaintiff is likely to suffer irreparable harm is insufficient to warrant the granting of an interlocutory injunction. It is necessary for the evidence to support a finding that the defendant would suffer irreparable harm. The onus is on the party seeking an injunction to place sufficient financial and other evidence before the court on which such a finding can be made. It is important to note that in order to establish irreparable harm, the moving party’s evidence must be clear and not speculative. Absent clear evidence that irreparable harm will result, an interlocutory injunction should not issue. Ciba-Geigy Canada Ltd. v. Novopharm Ltd., 1994 CarswellOnt 700 (F.C.T.D.) at para. 118.
49Irreparable harm is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. It is well established that irreparable harm is not made out simply because damages may be difficult to quantify. The plaintiffs must prove that the alleged harm cannot be quantified in monetary terms. As Epstein J. noted in 754223 Ontario Ltd v. R-M Trust Co, [1997] O.J. No. 282 (Gen. Div.) at para. 40: “Irreparable harm cannot be founded upon mere speculation. This evidence must be sufficient to support a finding that the moving party would suffer such harm not that it is merely likely.”
50Cases of unfair competition have often been recognized as ones in which damages may not adequately compensate the plaintiff for the loss suffered due to the defendant's conduct. Indeed, goodwill, market share and damage to relationships with customers can be inherently difficult to assess. In a competitive industry, such as found here, where there can be considerable fluidity of customer allegiances, it may be difficult, but not impossible for the moving party to establish an accurate measure of damages: Precision Fine Papers Inc. v. Durkin, 2008 CarswellOnt 944 at para. 25.
51While each case will turn on its own facts, solicitation of customers, loss of customers, loss of market share, or damage to business reputation or goodwill have all been characterized as irreparable harm: Ontario Graphite Ltd. v. Janik, supra, at paras. 62-63, Messa Computing Inc. v. Phipps, 1997 CarswellOnt 5596 (Gen. Div.) at para. 32.
52In this line of business, I accept that commissions are typically charged on an annual basis. It is difficult at this juncture to determine how much business losses might be subject to the solicitation issue, given that insurance policy renewals occur throughout the year. To date, the plaintiff estimates that approximately $35,000-$50,000 in business has left StoneRidge and gone to Glenny. The plaintiff asserts that the amount of business loss is likely to increase throughout the year.
53However, StoneRidge’s evidence in support of irreparable harm in relation to the measure of damages regarding the solicitation of clients is less than compelling. As mentioned, if damages would be an adequate remedy and the defendants would be in a financial position to pay them, no interlocutory injunction should normally be granted, no matter how strong a plaintiff’s claim appears to be. Even where a plaintiff demonstrates that damages might be difficult to ascertain, the moving party will not have discharged their onus of proving irreparable loss and that damages would not be an adequate remedy: MacDonald Ohm Insurance Brokers Ltd. v. Gillmore, [2000] O.J. No. 2745 (Sup. Ct.) at para. 16.
54While the assessment of the measure of damages cannot be readily ascertained at this stage that does not mean to say that it cannot be so quantified at trial. In this case, we are dealing with a finite number of clients and the value of the business lost, if any, is quantifiable. Even if there is a loss of a customer base or business, I am persuaded that such damages can be ascertained and compensated with an award of monetary damages. The Statement of Claim makes it clear that the plaintiff believes it can be compensated by money, in this case an amount of $2 million.
55I note that the Agreement provides that if a client chooses to freely seek out Pitton and obtain his services, the provision requires a fee of two times annual commissions to be paid to StoneRidge. If Pitton is found to have breached enforceable provisions of his Agreement with the plaintiff, their entitlement to damages will likely be determined by applying a multiple of the annual commission for each client solicited or serviced.
56I am persuaded that damages are not only ascertainable, but are presumed and, to a degree, quantified by virtue of the language found in para. 14 of the Agreement, the nature of the commissions along with the renewal processes of client business. On this specific component of non-solicitation, the plaintiff fails in its onus to satisfy the irreparable harm factor.
57Turning now to the issue of the alleged misuse of confidential business and personal information, I accept that the preponderance of the jurisprudence provides that irreparable harm is presumed: Carecor Health Services v. Health Trans Services Inc., 2006 CarswellOnt 3781 (S.C.) at para. 20.
58The Agreement between Pitton and the plaintiff does not define "confidential information". There is some reference in para. 13 of the Agreement to customers' names and addresses. I disagree with the defendants’ assertions that the scope or description of this information as framed in the Agreement is not proprietary, or not highly sensitive and would otherwise be available to Pitton.
59Paragraph 13 of the Agreement also refers to the plaintiff’s customers "needs and preferences, their cycles or other particular business requirements" as constituting part of the goodwill of the plaintiff. While there is no direct evidence that Pitton has misused any information about customer needs, preferences, cycles or other business requirements, I am able to draw a reasonable inference that such information is available and has been or may be employed: Lyons v. Multari, 2000 CanLII 16851 (ON CA), [2000] O.J. No. 3462.
60I agree with the defendants that damages in relation to the use of confidential information to entice or solicit former clients are ascertainable in the event that liability is established at trial. As mentioned, records of clients who followed Pitton from StoneRidge and the value of commissions paid on each client's policies is information that is available and will form the evidence for a trial of these issues.
61However, I arrive at a different conclusion with respect to the assessment of damages from the availability or use of any confidential or private information for competitive advantage and pricing, loss of market share, impairment to goodwill or to solicit new clients. I recognize that the nature of these damages goes beyond lost sales commissions and may not be readily quantifiable at trial. Premised on these elements, the probability of irreparable harm from the improper use of confidential or private information is established.
Balance of Convenience:
62There are numerous factors that must be considered in addressing this prong of the RJR-MacDonald test. The question of balance of convenience and irreparable harm are closely aligned, but the former also relates to matter difficult to quantify in monetary terms.
63In determining where the balance of convenience lies, the court will weigh the benefit to the plaintiff of granting the injunction as against the burden on the defendants. Courts have sided with the employer where confidential information is at stake or where the departing employee has solicited existing customers of his employer with whom he had direct dealings during his former employment.
64It is true that the non-solicitation clause does not prohibit Pitton from carrying on business. Pitton's employment with Glenny and his salary will not be affected if the injunction is granted. However, the same can be said for StoneRidge. Pitton was not a fiduciary and only has a limited number of clients from his former employ with StoneRidge. I am not persuaded on the evidence that StoneRidge will be impacted to the extent argued by the plaintiff if solicitation is allowed to continue.
65Indeed, on the evidence, the plaintiff will be in a significantly better position to sustain any loss than the defendants and specifically Pitton, whose skills, expertise and ability to earn a living would be compromised if the injunction were granted. Without opining on the issue, the identification of the group of clients solicited from the book of business or otherwise from StoneRidge is a live issue for trial. While I accept that the plaintiff has suffered some harm, I tend to agree with the defendants that practically speaking, an injunction barring Pitton from contacting or communicating with long-standing friends, family members and former clients, some of whom may predate his relationship with StoneRidge is unduly restrictive in these circumstances. In this regard, I find that the balance of convenience favours the defendants.
66However, there is cogent evidence to establish that the defendants took confidential or private information from the plaintiff. In my opinion, in considering where the balance of convenience lies, it would be inequitable to permit a wrongdoer who had voluntarily signed and allegedly benefitted from a breach of a confidentiality covenant to claim that he would be more hurt by the granting of an interlocutory injunction. I am satisfied that the balance of convenience lies with the plaintiff to restrain the defendants’ activities with respect to paras. 12 and 13 of the Agreement.
Conclusion:
67In my consideration of the RJR-MacDonald factors for injunctive relief, StoneRidge has met its burden to demonstrate that there is a serious issue to be tried.
68However, StoneRidge has failed to establish that they will suffer and will continue to suffer greater harm if an injunction is not granted in respect of the non-solicitation clause arising from clause 14 of the Agreement. In my opinion, any detrimental consequences or damages flowing from the defendants’ actions can be remedied by an appropriate award of damages at trial. On balance, I find that StoneRidge cannot meet its onus to obtain the extraordinary remedy of an interlocutory injunction as it pertains to the non-solicitation of the plaintiff’s clients.
69That said, I accept that StoneRidge has demonstrated irreparable harm from the use of confidential information in Pitton’s possession arising from his former employment. In my opinion, the loss arising from such use cannot be compensated for by damages or, an award of damages would be inadequate compensation for the loss of the plaintiff’s position in this highly competitive market. I am satisfied that the balance of convenience lies with the plaintiff as it pertains to the defendants’ use of confidential or personal information in any form or manner.
70Therefore, the plaintiff’s motion for an interlocutory injunction is granted, in part. The personal and corporate defendants shall not use, employ or disclose any confidential or proprietary information or trade secrets of StoneRidge or any other private secrets or information as specified in paras. 1(c) and 1(d) of the Motion Record. The defendants shall return to the plaintiff any book of business or other confidential or private records or documents in whatever format, forthwith.
Costs:
71Generally, Rule 57.01 of the Rules of Civil Procedure provide that the successful party on a motion is presumed and entitled to costs. It is trite law that costs of a motion or trial is entirely within the discretion of the motions judge. As success was divided, in the exercise of my discretion under the Rules, each party shall bear their own costs for this motion.
A.J. Goodman J.
Date: January 27, 2017