S.N.S. INDUSTRIAL PRODUCTS LIMITED v. OMRON CANADA INC., 2017 ONSC 4746

COURT FILE NO.: CV-15-239

DATE: 2017/08/08

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: S.N.S. INDUSTRIAL PRODUCTS LIMITED, Plaintiff/Defendant by Counterclaim

AND:

OMRON CANADA INC., Defendant/Plaintiff by Counterclaim

BEFORE: The Honourable Justice D.A. Broad

COUNSEL: John W. McDonald, for the Plaintiff/Defendant by Counterclaim

Robert E. Kwinter and Nicole Henderson, for the Defendant/Plaintiff by Counterclaim

HEARD: April 19 and 20, 2017

ENDORSEMENT

Background

[1] The defendant Omron Canada Inc. (“Omron”) operates in Canada as a manufacturer of industrial automation products. S.N.S. Industrial Products Limited (“SNS”) was a distributor of Omron products between 1996 and 2015.

[2] In the spring of 2015 Omron and SNS were parties to a distribution agreement dated January 8, 2010 (the “Distribution Agreement”) by which Omron appointed SNS as a non-exclusive distributor of Omron products for resale to customers in a territory defined in the Distribution Agreement. The Distribution Agreement, at para. 8(a), provided that it had an initial a term of two years, but would automatically renew for consecutive additional one-year periods unless either party notifies the other party in writing of its intent not to renew at least 60 days before the end of any such period.

[3] Paragraphs 8(b) and 8(c) of the Distribution Agreement provided for termination on alternate grounds.

[4] Paragraph 8(b) provided for a mutual right of termination as follows:

(b) Termination by Notice. Notwithstanding any other provision, either party may terminate this Agreement, at any time, with or without cause, upon sixty (60) days’ prior written notice to the other.

[5] Paragraph 8(c) conferred an additional right only on Omron (referred to as the “Supplier”) to terminate the agreement immediately for certain enumerated causes, on the following terms:

(c) Termination for Cause: Supplier may terminate this Agreement immediately if (without limiting any terms hereof) (i) Distributor breaches any material term hereof; (ii) there is a change in control or majority ownership of Distributor; (iii) Distributor fails for (sic) comply with any applicable Business Plan; (iv) Distributor fails to comply with any applicable Distributor Policies; or (v) all or substantially all of Distributor’s assets are assigned or transferred.

[6] On May 28, 2015 Omron gave written notice to SNS (the “initial termination notice”) of its intention to terminate the Distribution Agreement, effective sixty (60) days thereafter in accordance with paragraph 8(b). In the termination notice Omron pointed SNS to what it termed “post-termination provisions of the Agreement” including the following:

Paragraph 1(e) – discontinuance of SNS’ use of Omron’s Intangible Properties (trade names, logos etc.) on the effective date of termination;

Paragraph 8(e) – provision for SNS to submit a final order of Products to fulfil pending orders. Omron gave notice of its election to require all further purchases of Products by SNS to be on a COD basis;

Paragraph 8(f) – obligation on SNS to deliver a schedule of inventory upon which Omron’s trademark appears and the option of Omron (but not the obligation) to repurchase any such inventory at SNS’ cost;

Paragraph 8(g) – various specified effects of termination, including a bar to either party making any claim for compensation or reimbursement for inability to recoup any investment made in connection with performance under the agreement, loss of prospective profits or anticipated sales or other losses occasioned by termination of the agreement.

[7] Omron stated in the termination notice “we will assume that you will notify on a timely basis any sub-distributors, sales representatives, employees or other third parties for the distribution of Omron products (which you would have hired or appointed in your name and for your own account) of the discontinuation of the relationship with Omron.”

[8] At the time of delivery of the initial termination notice SNS was indebted to Omron for product supplied to that date. Omron claimed that the amount owing to it by SNS was the sum of $430,409.28. SNS communicated to Omron its refusal to pay the outstanding amount and also its refusal to pay for further product on a COD basis.

[9] By letter dated June 11, 2015 (the “immediate termination notice”) Omron gave notice to SNS that it was invoking paragraph 8(c) of the Distributorship Agreement to immediately terminate the Distributorship Agreement for cause. The immediate termination notice cited, as cause, an alleged breach by SNS of its obligations under the Distributorship Agreement to maintain adequate inventory and to provide continuous distribution and support services in the sales territory, as evidenced by the refusal of SNS to fill customers’ orders for Omron product, including product that SNS had in stock, and the dissemination by SNS of a letter to its customers disparaging Omron stating, among other things, that Omron intended to transfer SNS’ customers to other distributors who would provide less competitive pricing and lower service levels.

[10] On July 21, 2015, Omron made written demand for payment from SNS of the outstanding invoices in the sum of $430,409.28. No portion of this amount was paid by SNS and it commenced an action against Omron by Statement of Claim issued July 23, 2015. Omron defended SNS’ action and counterclaimed for payment of the outstanding invoice.

Pleadings

(a) Statement of Claim

[11] In the Statement of Claim SNS claimed against Omron the following:

(a) compensatory damages for breach of the Distribution Agreement in the sum of $10 million;

(b) in addition or in the alternative, compensatory damages for misappropriation of confidential information in the sum of $10 million;

(c) in addition or in the alternative, compensatory damages for solicitation of customers of SNS in the sum of $10 million;

(d) in addition or in the alternative, compensatory damages for breach of the Good-Faith Doctrine in the sum of $10 million;

(e) in addition or in the alternative, punitive damages in the sum of $1 million.

[12] SNS made reference in the Statement of Claim to a meeting on April 8, 2015 attended by representatives of Omron and SNS in which Omron is alleged to have represented that the Distribution Agreement would not be terminated. SNS pleaded that Omron breached the “Good Faith Doctrine,” which it defined as meaning that the Distribution Agreement must be performed in good faith and Omron cannot, after execution of the Distribution Agreement either eviscerate or defeat the objectives of it by acting out of self-interest but must respect the original expectation of the parties.

[13] In addition, SNS alleged that Omron breached the Distribution Agreement by:

(a) sharing confidential information of SNS with another distributor Aztec Electrical; and

(b) actively soliciting customers of SNS by using unfair “Solicitation Methods” defined as using unfair methods of solicitation of customers of SNS by utilizing its confidential information.

[14] SNS also alleged that Omron, both before and after the termination of the Distribution Agreement, worked with another corporation Proax Technologies to solicit customers of SNS, thereby committing the tort of interference with contractual relations.

(b) Statement of Defence and Counterclaim

[15] Omron defended SNS’ action and counterclaimed against it by Statement of Defence and Counterclaim dated February 10, 2016.

[16] In its Statement of Defence Omron pleaded that it exercised the right to terminate the Distribution Agreement on 60 days’ notice, without cause, on May 28, 2015 pursuant to paragraph 8(b) of the Distribution Agreement. It further pleaded that the refusal by SNS to provide service or Omron products to Omron customers constituted a breach of SNS’ obligations under sections 3(d) and (e) of the Distribution Agreement justifying immediate termination of the Distribution Agreement, for cause, on June 10, 2015 pursuant to section 8(c) of the Agreement.

[17] Omron denied in its Statement of Defence that it breached any undertakings of confidentiality in the Distribution Agreement or otherwise used confidential information as alleged by SNS, and in the alternative, denied that the actions as alleged in the Statement of Claim constituted a breach of the agreement, any duty owed by Omron or interference with contractual relations.

[18] Omron also denied that the Distribution Agreement established any non-solicitation obligations on either party, and in the alternative, stated that if any such obligations were established, there has been no breach of any such obligations.

[19] Omron pleaded that it acted honestly in its contractual performance, did not act in bad faith, nor did it knowingly mislead SNS with respect to any matters directly linked to the performance of the contract. Omron denied that it made any statements or assurances with respect to whether the Distribution Agreement was not going to be terminated, and in the alternative, denied that any statements made by any of its employees amounted to act of dishonesty.

[20] In its Counterclaim Omron claimed payment of the sum of $430,409.28 in respect of outstanding invoices rendered by it to SNS pursuant to the Distribution Agreement, plus pre-judgment interest at the rate of 15% per annum in accordance with the terms of the Agreement.

(c) Reply and Defence to Counterclaim

[21] In its Reply and Defence to Counterclaim SNS pleaded, among other things, as follows:

(a) Section 8(b) of the Distribution Agreement is inconsistent with section 8(a) thereby rendering section 8(b) null and void;

(b) Both the “without cause” and “with cause” terminations of the agreement were contrived by Omron;

(c) Omron could rely on its own “wilful misconduct” and/or “gross negligence” to eviscerate and defeat the Distribution Agreement;

(d) Omron could introduce and rely on an event or occurrence which it self-induced and subsequently claim it as the basis for the termination of the Distribution Agreement, based on the legal doctrines of “self-imposed impossibility” and/or “self-induced frustration”;

(e) with respect to the Counterclaim, since the termination of the Distribution Agreement was contrived by Omron, it cannot now rely on the various provisions of the Distribution Agreement based on the legal doctrines of “good faith”, “self-induced impossibility” and/or “self -induced frustration”;

(f) settlement of the “inventory issue” cannot resolve as between the parties without court intervention; and

(g) various actions of Omron delayed the ability of SNS to deal with the “inventory issue” in any timely manner.

Motion for Summary Judgment

[22] Omron brought a motion for summary judgment seeking dismissal of SNS’ action against it and allowing Omron’s counterclaim against SNS.

[23] Omron states, as grounds for its motion to dismiss SNS’ action, that SNS’ claims against it do not raise any genuine issues of fact or law requiring a trial for their resolution on the basis that:

(a) the Distribution Agreement was validly terminated by Omron in accordance with its terms;

(b) the Distribution Agreement did not impose any non-solicitation obligations on Omron and moreover, SNS was at all material times a non-exclusive distributor of Omron products;

(c) no confidential information belonging to SNS was disclosed by Omron;

(d) Omron complied with the duty of honest contractual performance; and

(e) SNS’ claims for unlawful interference with economic relations and/or inducing breach of contract are meritless, as the Statement of Claim does not identify any allegedly unlawful act committed by Omron against the third-party for the purposes of injuring SNS, or any contract between SNS and a third party whose breach was allegedly induced by Omron.

[24] As grounds for summary judgment in respect of its Counterclaim, Omron states that SNS’ defences to the Counterclaim to not raise any genuine issues of fact or law requiring a trial on the basis that:

(a) SNS does not deny that it is indebted to Omron in respect of the unpaid invoices;

(b) the damages sought by Omron in the counterclaim amount to a credit to which SNS claims it is entitled;

(c) Omron is not required to repurchase any inventory from SNS, and moreover, SNS failed to comply with the provisions of the distribution agreement concerning the return of inventory.

Omron’s Evidence

[25] In support of its motion for summary judgment, Omron filed the affidavit of Michael Joy, its Regional Sales Manager for the Central Region, sworn November 21, 2016 (the “Joy Affidavit”), in which he deposed, inter alia, to the following:

(a) under the Distribution Agreement, SNS was authorized as a non-exclusive distributor of Omron products in Ontario;

(b) the Distribution Agreement provided that both Omron and SNS had the right to terminate the Agreement, with or without cause, on 60 days’ notice (section 8(b)) and in addition, Omron had the right to terminate the Distribution Agreement for cause in certain circumstances (section 8(c));

(c) by April, 2015 Omron had made a business decision to consolidate its distribution network, consisting of about half a dozen distributors, including SNS. It was considering terminating at least two of its Ontario distributors, but had not come to any decision as to which distributors should be terminated;

(d) on April 8, 2015 he attended a meeting between representatives of Omron and SNS. Mr. Joy and Brett Lupton (Omron’s National Sales Manager) attended on behalf of Omron and Don Sanfilippo (President of SNS), Mike Daly and Colin Cartwright attended on behalf of SNS;

(e) he did not know at the time that Mr. Sanfilippo was secretly recording the meeting, as he did not advise Mr. Joy nor Mr. Lupton that he intended to record the meeting nor did he request their permission to do so;

(f) in addition to Mr. Sanfilippo airing a number of complaints about the relationship between SNS and Omron, SNS seem to be seeking assurances that Omron was satisfied with its performance. Messrs. Joy and Lupton did note some of the positive things that SNS was doing as a distributor and at one point Mr. Joy stated that Omron did not have a letter of termination addressed to SNS, which was true as Omron had not made any decisions as of the time of the meeting regarding terminating any distributors. However, both Mr. Joy and Mr. Lupton were candid with SNS that the situation at Omron was “fluid” and that they could not speak to what might happen in the future;

(g) neither Mr. Lupton nor Mr. Joy made any statements that Omron would not be terminating SNS as a distributor in the future;

(h) following the April 8, 2015 meeting, Omron decided to terminate its relationship with SNS and elected to use its contractual right to terminate the distribution agreement without cause on notice. On May 28, 2015, Mr. Lupton and Mr. Joy attended at SNS’ offices to deliver a letter to Mr. Sanfilippo advising that Omron was exercising its right to terminate the distribution agreement, without cause, on 60 days’ notice. The letter went on to summarize SNS’ obligations during the notice period and following the termination taking effect and, among other things, advised SNS that Omron was exercising its right under section 8(3) of the Distribution Agreement to require that all further purchases of Omron products by SNS be on a cash on delivery (COD) basis;

(i) Mr. Joy spoke to Mr. Sanfilippo by telephone on June 2, 2015 at which time Mr. Sanfilippo told Mr. Joy that SNS would not pay any of the outstanding invoices issued by Omron and reiterated that it intended to sue SNS for terminating the Distributorship Agreement. Mr. Sanfillipo also advised that SNS would not pay for future orders of Omron products on a COD basis;

(j) Mr. Lupton wrote to Mr. Sanfilippo on June 4, 2015 requesting that he confirm that SNS would pay for future orders on a COD basis. On June 8, 2015 Omron received an undated letter from Mr. Sanfilippo to Mr. Lupton advising that he “could not pay” the amount owing to Omron by SNS. The letter did not provide the requested confirmation that SNS would pay for future orders on a COD basis;

(k) Omron received a copy of an undated letter that SNS was “ apparently” distributing to its Omron customers stating, amongst other things, that Omron had decided to “dissolve the relationship” with SNS, and that “Omron will forward you to another authorized distributor. You will find your pricing will go up and your service levels will decrease.” It further offered that SNS provide other products to satisfy its customers’ applications at “competitive pricing”;

(l) Omron also learned from “some of its customers” that SNS was refusing to accept orders or provide quotes for Omron products, “despite the fact that it continued to be authorized as a distributor under the distribution agreement during the notice period.” It is noted that the source of this hearsay evidence is not disclosed in the Joy affidavit;

(m) Omron decided to exercise its right to terminate the Distribution Agreement immediately, with cause, “in light of these ongoing breaches of SNS’ obligations under the Distribution Agreement” and on June 11, 2015 Mr. Lupton wrote to Mr.Sanfolippo providing SNS with notice of immediate termination of the Distribution Agreement pursuant to section 8(c) thereof;

(n) after Omron “learned that SNS was refusing to take orders for Omron products, we [Omron] left it up to each of our customers to decide which distributor they wished to deal with going forward”;

(o) Omron did not make use of any confidential information belonging to SNS that was supplied under the Distribution Agreement to transition customers to other Omron distributors following the termination of SNS;

(p) on July 21, 2015 the General Manager of Omron wrote to Mr. Sanfilippo demanding payment of the amounts owing by SNS in respect of unpaid invoices in the sum of $430,409.28, plus interest.

SNS’ Evidence

[26] In response to the motion SNS. filed affidavits of Michael Daly, Vice President of SNS sworn December 2, 2016, the (the “Daly affidavit) and Donald Sanfillipo, the President of SNS, sworn December 9, 2016 (the “ Sanfillipo affidavit”).

(a) Affidavit of Michael Daly

[27] The Daly affidavit described, among other things, conversations between Mr. Daley and Mr. Joy and other individuals within the two companies in November and December 2012, and in February, 2013.

[28] Mr. Daly, in his affidavit, advanced various allegations that Omron gave preference to another distributor, Aztec, and stated that he came to understand that “Aztec ran Omron.” No source for this information was identified in the affidavit.

[29] The Daly affidavit recounted events relating to an “inventory program” requiring SNS to purchase bulk inventory from Omron.

[30] The Daly affidavit referenced a “OS3” distributor event held in November, 2013 in which SNS was questioned by Omron about its plans to grow sales of Omron products.

[31] The Daly affidavit recited a situation involving a customer named Linamar Corporation for whose business Aztec and SNS were competing. The affidavit asserted that Mr. Joy gave assurances that Aztec would be reprimanded for undercutting SNS’ pricing but the reprimand never happened.

[32] The Daly affidavit also recited an incident in December 2014 in which Mr. Lupton reprimanded Mr. Daley for quoting on business with Toyota Corporation which Mr. Lupton claimed caused him “major problems”. He quoted Mr. Lupton as saying in the conversation “it’s time for changes, we clearly have too many distributors and this won’t help you.” Mr. Daley called Mr. Joy who responded “there’s no reason for concern at all since SNS is doing all the right things and is a top distributor for Omron.”

[33] The Daly affidavit also recited that at an unspecified time SNS implemented certain changes to serve the Barrie, Ontario market at Omron’s request.

[34] The Daly affidavit made an allegation, consisting of triple hearsay, that Colin Cartwright told Mr. Daley that Steven Cassano, an Aztec employee, stated to him that he [that is Cassano] had heard from an unnamed party that “SNS was losing a big product line.”

[35] Mr. Daley deposed that he asked Messrs Lupton and Joy to meet with Mr. Sanfilippo and himself “to ensure that there was no truth to the Cartwright rumour.” The meeting was held on April 8, 2015 and “was recorded for future reference.”

(b) Affidavit of Don Sanfilippo

[36] Mr. Sanfilippo, in his affidavit, deposed that the “primary purpose of the April 8, 2015 meeting was for SNS to be certain that there was to be no termination of the Distribution Agreement.” Messrs. Sanfilippo and Daly surreptitiously recorded the meeting on a recording device without any disclosure to Messrs. Lupton and Joy.

[37] Mr. Sanfilippo asserted in his affidavit that Omron “misled and/or lied to SNS” in reference to the termination issues. In particular Mr. Joy was reported to have said “do we have a letter of termination addressed at S.N.S. Automation? Absolutely not.” Mr. Lupton referred to SNS as a “very strong player in this market” and that “you got the right people in place, you will see-I would expect to see a difference” and “you guys are in a good position right”.

[38] The Sanfilippo affidavit asserted that the “with or without cause” termination on May 28, 2015 was “contrived”. The affidavit confirmed that Mr. Daly, on behalf of SNS, distributed the undated “Dear Omron customer” letter in June, 2015, and prior to the “with cause” termination letter of Omron dated June 11, 2015. Mr. Sanfilippo asserted that the “with cause” termination was “contrived”.

[39] The Sanfilippo affidavit presented a lists of documents which he said are required to prove that the “thorough review” was contrived and the termination was self-induced by Omron, to prove misappropriation of confidential information by Omron.

[40] Mr. Sanfilippo deposed that Omron executives worked to destroy the relationship between Omron and SNS and delivered SNS customers to competitors Aztec and Proax.

[41] The final 20 pages of the Sanfilippo affidavit consist primarily of legal argument upon which Mr. Sanfilippo relies “in part” on SNS’ counsel Mr. McDonald.

[42] The Sanfilippo affidavit appended as an exhibit an affidavit of Colin Cartwright sworn June 26, 2015 in which Mr. Cartwright deposed “during a get together with a friend called Steve Cassano on Friday, March 28, he [that is Cassano] mentioned that he’d (sic) been informed a few days earlier that S.N.S. Industrial were (sic) about to lose a major vendor. Although Steve would not reveal who told him this, I did manage to determine from the conversation that it was Omron who would be cutting off SNS.” As can be seen this affidavit consists of double hearsay.

(c) Transcripts

[43] SNS included in its Motion Record what is stated to be a transcript of a “Recorded Conversation” at a meeting held on April 8, 2015 attended by Messrs. Sanfilippo, Daly and Cartwright on behalf of SNS and Messrs. Joy and Lupton on behalf of Omron. Messrs. Sanfilippo, Daly and Joy were cross-examined on their respective affidavits and transcripts of their cross examinations were included in the motion materials.

Principles Governing Motions for Summary Judgment

[44] The principles governing motions for summary judgment are well-known and the parties do not have any fundamental disagreement with regard to them. The essentials may be summarized as follows.

[45] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that, on motion by a plaintiff or a defendant, the court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[46] The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.) stated at para. 49 that there will be no genuine issue requiring a trial when a judge hearing a summary judgment motion is able to reach a fair and just determination on the merits, and that this will be the case where the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[47] The Supreme Court of Canada went on to provide a roadmap or approach to be followed by judges hearing motions for summary judgment at paras. 66-68. The judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers in sub rules 20.04(2.1) and (2.2). There will be no genuine issue requiring a trial if the summary judgment process provides the motions judge with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure. If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under sub rules 20.04(2.1) and (2.2). While summary judgment must be granted if there is no genuine issue requiring a trial, the decision to use either the expanded fact-finding powers or to call oral evidence is discretionary.

Issues

[48] The court is called upon to determine if there are genuine issues requiring a trial respecting the following:

(a) The claim by SNS that Omron unlawfully terminated the Distribution Agreement

(b) The claim by SNS that Omron misappropriated confidential information belonging to SNS prior to or following the termination

(c) The claim by SNS that Omron committed the tort of wrongful interference with contractual relations of SNS

(d) The claim by SNS that Omron solicited its customers

(e) SNS’ defence to Omron’s counterclaim in respect of the outstanding invoices for product shipped.

Termination of the Distribution Agreement

(a) Position of Omron

[49] Omron states that it lawfully terminated the distribution agreement on May 28, 2015 by giving 60 days’ notice to SNS pursuant to paragraph 8(b) of the Distribution Agreement.

[50] Omron states that following delivery of the May 28, 2015 notice of termination SNS remained bound by all of the terms of the Distribution Agreement until the effective date of termination, being the end of the 60 day notice period. It says that SNS breached its obligations under the Distribution Agreement during the notice period in three respects:

(a) it refused to pay for shipments of Omron product on a COD basis leading to its refusal or inability to fill customer orders for Omron product, in breach of its obligations to maintain adequate inventory and to provide continuous distribution and support services in its sales territory;

(b) it advised Omron that it would not pay its outstanding invoices; and

(c) it disseminated a letter to customers disparaging Omron, stating that SNS was unable to fill orders for Omron products but would provide customers with other products, in breach of its obligations to provide continuous distribution and support services to customers.

[51] Omron states that it lawfully terminated the Distribution Agreement for cause on June 11, 2015 pursuant to paragraph 8(c).

(b) Position of SNS

[52] SNS argues that paragraph 8(b) of the Distribution Agreement is inconsistent with paragraph 8(a) and is therefore null and void. Paragraph 8(a) provides as follows:

(a) Term. Subject to the terms hereof, this agreement shall have a term of two years; provided that it shall automatically renew for consecutive additional one-year periods unless either party notifies the other party in writing of its intent not to renew by 60 days before the end of any such period.

[53] SNS says that paragraph 8(a) provides for a 60 day notice at the end of each contract year thereby permitting a substantial investment to be made by it in the Omron distribution arrangement on an annual basis without fear of being subject to a “without cause” termination for an additional 12 months each year.

[54] SNS also submits that, in exercising the right to terminate the Distribution Agreement pursuant to paragraph 8(b), Omron breached its obligation of good faith as laid down by the Supreme Court of Canada in Bhasin v. Hrynew 2014 SCC 71 (S.C.C.). In support of this submission, S.N.S. points to the following factors:

(a) according to his affidavit, Colin Cartwright was informed by an Aztec employee that SNS was about to lose the Omron account;

(b) at the April 8, 2015 meeting Messrs. Lupton and Joy made certain statements on behalf of Omron which were supportive and complimentary to SNS and which led SNS to feel secure in relation to the continuation of its relationship with Omron. The statements included (i) that Omron did not have a letter of termination addressed to SNS; (ii) the presentation of a new sales program called “Evolution”; (iii) smaller distributors may be terminated; (v) SNS was ranked as one of Omron’s larger distributors; (vi) SNS were doing “all the right things”; (vii) that Omron approved SNS hiring a new sales representative for Barrie; (viii) a review of parts of the new program; and (ix) SNS would be considered as distributor of the year;

(c) the representations by Messrs. Lupton and Joy at the April 8, 2015 meeting were inconsistent with the explanation set forth in the notice of termination letter dated May 28, 2015 that the decision was the result of a thorough review of distribution agreements in Canada in order to better align Omron’s business objectives and resources; and

(d) Omron cannot introduce and rely on an event or occurrence which Omron self-induced and subsequently claim it as the basis for the termination of the Distribution Agreement based on the legal doctrine of “self-induced frustration”.

[55] SNS argues that Omron’s reasons for termination for cause set forth in its letter of June 11, 2015 were contrived and invalid. It submits that, following termination of the Distribution Agreement on May 28, 2015, paragraphs 3(d) and 3(e) of the Agreement, which required it to maintain a stock of products sufficient to enable it to service customers in the territory and to continuously provide support activities in the territory in order to ensure service quality and sales volumes, had no further application since section 3 “is not a termination provision”.

(c) Analysis

[56] I do not agree that paragraph 8(b) of the Distribution Agreement is inconsistent with paragraph 8(a). Paragraph 8(a) speaks to the term of the Agreement, providing for an initial term of two years and for automatic renewal for successive terms of one year each unless either party notifies the other party in writing of its intent not to renew 60 days before the end of any such period. Contrary to paragraph 8(a), paragraph 8(b) provides each party with the right to terminate at any time during the initial term or a renewal term, with or without cause, by giving 60 days’ notice to the other party. There is nothing which prevents paragraph (a) and paragraph (b) from coexisting and there is no conflict between them. Even if it could be argued that the two provisions do conflict, paragraph 8(b) is explicitly stated to “apply notwithstanding any other provision”.

[57] It is evident that the parties deliberately bargained for an Agreement with relatively minimal security of tenure on both sides. Under the Agreement each party bore the risk of the other party terminating the agreement on 60 days’ notice. The argument that paragraph 8(a) exists to permit SNS to make “substantial investment” in the arrangement with Omron is inconsistent with the minimal security of tenure that the parties bargained for and agreed to in paragraph 8(b).

[58] I would not give effect to SNS’ submission that Omron, by invoking paragraph 8(b) to terminate the Distribution Agreement on 60 days’ notice in the circumstances, breached its obligation of good faith.

[59] Cromwell, J. in Bhasin, outlined the parameters of the “organizing principle of good faith performance of contracts” at paragraph 73, as follows:

I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one's contractual performance.

[60] Earlier in his review, Justice Cromwell observed, at para. 70:

The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another — even intentionally — in the legitimate pursuit of economic self-interest: Bram Enterprises Ltd. v. A.I. Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177 (S.C.C.), at para. 31. Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601 (S.C.C.), at para. 31. The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or "palm tree" justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.

[61] Assuming that Messrs. Lupton and Joy made the statements attributed to them in the meeting of April 8, 2015, there is no admissible evidence that, insofar as they were statements of fact, they were untrue at the time that they were made. Insofar as the comments were expressions of opinion, there is no evidence that the opinions were not genuinely held.

[62] The affidavit of Colin Cartwright contains inadmissible double hearsay. Rule 39.01(4) of the Rules of Civil Procedure provides that an affidavit for use on a motion may contain statements of the deponent’s information and belief if the source of the information and the fact of the belief are specified in the affidavit. The allegation by Mr. Cartwright that he had heard on March 28, 2015 from a “friend called Steve Cassano” that he (that is Steve Cassano) had been informed a few days earlier by an unnamed person that “SNS was about to lose a major vendor” represents nothing more than an unsubstantiated rumour.

[63] There is similarly no evidence that Omron had formulated a decision to give notice of termination of the Distributorship Agreement to SNS by the time of the April 8, 2015 meeting.

[64] SNS is required on a motion of this nature to put its “best foot forward” and the court is entitled to assume that the evidence led on the motion will be the evidence at trial.

[65] The reality is that, pursuant to the terms of the Distributorship Agreement, each party retained for itself the right to terminate the Agreement, without cause, on sixty days’ notice to the other. I find no basis, on the record before the court, to suggest that Omron, in giving notice to terminate in accordance with the express terms of the Agreement, sought to undermine the legitimate contractual interests of SNS in bad faith (see Bhasin at para. 65).

[66] I find that Omron was entitled to terminate the Distribution Agreement on May 28, 2015, without cause, by giving 60 days’ notice to S.N.S. The effective date of termination was 60 days following delivery of the notice, being on July 27, 2015.

[67] There are no issues of credibility which would require a trial to resolve in order to determine that Omron was entitled to terminate the Distribution Agreement upon 60 days’ notice.

[68] There is nothing in the Distribution Agreement which provides that SNS was relieved of any of its obligations under the Distribution Agreement during the notice period following the giving of notice of termination under paragraph 8(b). Indeed Paragraph 8(e) specifically confirms that SNS must be in compliance with all of the terms of the Agreement should it wish to submit to Omron a final order for Products as needed to fulfil all orders which SNS had pending and which were scheduled to be shipped within 30 days of the effective date of S.N.S.’ termination.

[69] Accordingly the terms for payment for product supplied by Omron, being “net 30 days” in paragraph 2(c) continued to apply, as did the obligations on SNS in paragraphs 3(d) to “(i) maintain a stock of products sufficient to enable it to service customers in the territory, or (ii) participate in Supplier’s vendor-managed inventory program” and in paragraph 3(e) “to continuously provide support activities in the territory in order to ensure service quality and sales volumes”.

[70] I find that Mr. Sanfilippo did advise representatives of Omron on June 1 and 2, 2015 that SNS would not pay any of its then outstanding accounts payable to Omron, but intended to claim those amounts back from Omron in the Court proceedings that it intended to bring in relation to the termination of the Distribution Agreement. Mr. Sanfilippo did not, in his affidavit, deny that he made these statements to representatives of Omron. I find that the statement by SNS that it would not pay the outstanding accounts payable to Omron represented an anticipatory breach of contract, thereby entitling Omron to exercise the right to terminate the Distribution Agreement for cause pursuant to paragraph 8(c) on June 11, 2015.

[71] Although it is not necessary to make a specific finding with respect to whether SNS committed other breaches of the Distribution Agreement justifying Omron’s exercise of its right to terminate with cause, I find that the dissemination of the letter to customers entitled “Dear Omron Customer” did represent a breach of the obligation of SNS in paragraph 3(e) of the Distribution Agreement “to continuously provide support activities in the territory in order to ensure service quality and sales volumes”, during the 60 day period following delivery by Omron of the initial notice of termination. The structure of the Agreement provided that, insofar as customers were concerned, it would be business as usual until the effective date of termination following the exercise by either party of the right to terminate upon notice pursuant to paragraph 8(b).

[72] The letter distributed to Omron customers by SNS represented that it was “no longer authorized” to provide “local support for our customer base” and that “Omron decided not to release our orders when promised as they were planning on the termination.” These representations to customers breached the obligation of SNS to “continuously provide support activities in the territory in order to ensure service quality and sales volumes”.

[73] No issues of credibility requiring a trial are engaged in order to make the finding that SNS breached the Distribution Agreement following the delivery of the Notice of Termination by Omron on May 28, 2015, thereby entitling Omron to terminate the Agreement, with cause, on June 11, 2015.

[74] The argument of SNS based upon the doctrine of “self-induced frustration” can be readily addressed. It is clear from the authorities cited by counsel for SNS that “self-induced frustration” is a plea that is available in a breach of contract action to answer to a defence of frustration (see for example Kendall v. Ivanhoe Insurance Managers Ltd. [1985] O.J. No. 1725 (Master) at para. 12, citing Maritime National Fish Ltd. v. Ocean Trawlers Ltd., 1935 CanLII 323 (UK JCPC), [1935] A.C. 524 (P.C.)). Omron did not plead frustration in defence of SNS’ action alleging wrongful termination of the Distribution Agreement. Rather it defended the action on the basis that it lawfully terminated the Distribution Agreement in accordance with its terms. The doctrine of “self -induced frustration” has no application to this case.

[75] In the event that I am wrong in finding that Omron validly exercised its right to immediately terminate the Distribution Agreement for cause on June 11, 2015, I find that the taking of that step by Omron did not have the effect of negating its exercise of the right to terminate the Agreement on sixty days’ notice on May 28, 2017. The Agreement therefore would have terminated pursuant to the initial notice of termination effective on July 27, 2015. SNS’ damages, in that event, would be limited to those, if any, that it sustained in the period between June 11 and July 27, 2015.

Claim for Misappropriation of Confidential Information

[76] SNS has pleaded that Omron misappropriated confidential information belonging to it. S.N.S. must establish four elements to make out its claim for breach of confidence, namely, 1) it must of conveyed confidential information to Omron, 2) the information must have been conveyed in confidence, 3) the information must have been misused by Omron, and 4) Omron must have been enriched or SNS must have suffered damages as a result (see Lac Minerals Ltd. v. International Corona Resources Ltd. 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574 at para. 10 and Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (S.C.J.) at para. 57).

[77] It appears from the Sanfilippo Affidavit that the confidential information that SNS says was conveyed to Omron consisted of the names of its customers and, in addition, its knowledge of the “technical, complex and automated nature of Omron products” which was such that “trained technical employees” were required to sell and service such products.

[78] It is difficult to see how the “technical, complex and automated nature” of Omron’s own products could constitute confidential information of SNS Moreover. SNS has not established a basis by which the identity of customers who purchased Omron products was confidential to it. Paragraph 8(g) of the Distribution Agreement specifically provided that Omron shall be permitted to utilize information supplied by SNS under paragraphs 3(b) and 3(c), namely point-of-sale information and selling prices to SNS’ customers and other reports relating to marketing and product development as Omron may reasonably request, to the extent necessary, in Omron’s reasonable business judgment, to ensure that the needs of customers in the territory are met.

[79] The Sanfilippo affidavit alleges, in a hearsay statement, that a former Omron employee told him that Omron executives communicated “confidential information” related to SNS to executives of a competitor Aztec during a meeting. Neither the nature of the “confidential information” nor when the meeting took place was specified in the Sanfilippo affidavit, although it may be inferred from the Daly affidavit that it took place in November, 2013, one and one-half years prior to termination of the Distribution Agreement.

[80] In my view, there are no or insufficient particulars or evidence as to what confidential information Omron received, how it used or misused that information, how it benefited from so doing, and how SNS was damaged as a result. SNS claim for misappropriation of confidential information consists of sweeping generalizations (see Sweda Farms at para. 59). As indicated previously, SNS is required to put its “best foot forward” in response to the motion for summary judgment and the court is entitled to assume that the evidence led by SNS on the motion on this issue will be its evidence at trial. There is no triable issue with respect to SNS’ claim for misappropriation of confidential information. There are no issues of credibility requiring a trial in relation to this claim.

Claims for Interference with Contractual Relations and Solicitation

[81] SNS has pleaded that Omron interfered with its contractual relationships. It has also claimed damages for “solicitation” of its customers. The Statement of Claim does not allege that the solicitation was wrongful or was in breach of any agreement between the parties.

[82] The claims of interference with contractual relations and solicitation appear to be linked in the Statement of Claim. The only particulars of the claims in the body of the Statement of Claim appear at paragraph 45 where it is alleged that Omron “both before and after the termination of the Distribution Agreement, worked with Aztec Electrical to solicit the customers of SNS related to Omron Canada products in order that the customers of SNS became the customers of Aztec Electrical and thereby committed Wrongful Interference.”

[83] In order to make out a claim based on the tort of interference with contractual relations, S.N.S. must show that 1) Omron had knowledge of the contract between SNS and a third party; 2) Omron’s conduct was intended to cause the third party to breach the contract; 3) Omron’s conduct caused the third party to breach the contract; and 4) SNS suffered damage as a result of the breach (see Correia v. Canac Kitchens 2008 ONCA 506, at para. 99; see also Drouillard v. Cogeco Cable Inc.2007 ONCA 322, at para. 26).

[84] The evidence led by SNS did not identify any contract between it and a third party that was breached as a result of Omron’s conduct. Insofar as the claim may be based on the fact that customers who had previously purchased Omron products from SNS were transitioned over by Omron to other distributors following the termination of the Distribution Agreement, Messrs. Sanfilippo and Daly each acknowledged on cross-examination that SNS did not have any contracts with customers requiring them to purchase their Omron products from SNS. Mr. Daly acknowledged that the customers were free to determine which Omron distributor they wished to deal with.

[85] As with the claim for misappropriation of confidential information, SNS’ claims for interference with contractual relations and solicitation consist of unsubstantiated generalizations, and no issues requiring a trial exist with respect to these claims. There are no issues of credibility requiring a trial in respect of SNS’ claims for interference with contractual relations and solicitation.

Omron Counterclaim for Payment of Outstanding Invoices

[86] As indicated above, Omron counterclaimed for payment by SNS of $430,409.28 owing in respect of unpaid invoices rendered by Omron to SNS for products supplied, together with interest thereon at the rate of 15% per year pursuant to the Distribution Agreement.

[87] SNS, in its Defence to Counterclaim, did not deny liability for the outstanding invoices. In particular, it did not deny that it received the goods referred to in the invoices nor that the amounts charged in the invoices reflected the agreed prices for the goods. It did not assert that it paid any of the outstanding invoices, nor that any of the goods referred to in the invoices were defective. The Defence to Counterclaim simply referred to correspondence from counsel for SNS to previous counsel of Omron which stated that “the settlement of the inventory issue would not resolve as between the parties without court intervention.” It also alleged that “various actions of Omron delayed the ability of SNS to deal with the inventory issue in any timely manner.” These pleadings do not set forth any arguable defence to the counterclaim.

[88] S.N.S.’ lengthy Factum does not deal with the counterclaim at all. The only reference to the counterclaim in SNS’ affidavit material in response to the motion was the statement by Mr. Sanfilippo, at paragraph 91 of his affidavit that “the various actions of the defendant delayed the ability of the plaintiff to deal with the inventory issue in any timely manner as evidenced by the correspondence summarized below.” The correspondence referred to consists of letters from counsel for SNS to previous counsel of Omron dated August 21, 2015, September 9, 2015 and December 5, 2015. The first two letters requested delivery of “an accounting calculation” and the last letter asserted “it is now clear that the inventory situation is not going to be resolved as between SNS. and Omron for the following reasons and this issue is best left for the trial of this action.”

[89] The evidence of Mr. Sanfilippo does not raise or suggest a triable issue with respect to Omron’s counterclaim.

[90] Paragraph 8(f) of the Distribution Agreement required SNS to deliver to Omron, within 15 days of termination, a complete and accurate schedule of its inventory bearing Omron’s trademark, and SNS’ cost for each item. Omron then had the option, within 15 days of receipt of the schedule, to notify SNS of its intent to purchase any such inventory at S.N.S.’ cost.

[91] SNS did not deliver a schedule of its inventory, as required by paragraph 8(f) of the Agreement. Insofar as SNS may be asserting a credit for the cost of inventory that it had on hand as of the date of termination of the Distribution Agreement, which is not clear from the Defence to Counterclaim or the Sanfilippo affidavit, there is no basis for such an assertion in the face of the failure of SNS to comply with paragraph 8(f) of the Agreement.

[92] There are no issues requiring a trial with respect to the defence of SNS to Omron’s counterclaim. There are no credibility issues which will require a trial for resolution in respect of Omron’s counterclaim for payment of the outstanding invoices.

Summary

[93] I am of the view that Omron’s summary judgment motion achieves a fair and just adjudication as it has provided a process which has allowed me, as the motion judge, to make the necessary findings of fact and apply the law to those facts. The motion for summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result in respect of SNS’ action and Omron’s counterclaim than going to trial. A trial is therefore not required (see Hryniak, at paras. 4 and 49.)

[94] I have determined that there is no genuine issue requiring trial in respect of the action and the counterclaim based only on the evidence before me, without using the new fact-finding the powers in rule 20.04 (2.1) and (2.2).

Disposition

[95] On the basis of the foregoing, judgment is granted:

(a) dismissing the action of the plaintiff SNS;

(b) ordering the plaintiff SNS to pay to the defendant Omron, in respect of the counterclaim, the sum of $430,409.28, plus interest thereon at the rate of 15% per annum, pursuant to the terms of the Distribution Agreement, calculated from July 21, 2015.

[96] The judgment against SNS in respect of the counterclaim shall bear post-judgment interest at the rate of 15% per annum until paid, in accordance with the terms of the Distribution Agreement.

Costs

[97] If the parties cannot agree on costs, the defendant Omron may make written submissions as to costs within 21 days of the release of this Endorsement. The plaintiff SNS has14 days after receipt of the defendant’s submissions to respond. Such written submissions shall not exceed five (5) double-spaced pages, exclusive of Costs Outlines, Bills of Costs, Offers to Settle and authorities and are to be forwarded to me at my chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad, J.

Date: August 8, 2017