CITATION: Nu Image v. Seager, 2017 ONSC 6101
COURT FILE NO.: 132/17
DATE: 2017 10 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
NU IMAGE LAWNCARE INC. and NU CONCEPT BUSINESS MANAGEMENT INC.
Cherolyn Knapp, for the Plaintiffs
Plaintiffs, moving parties
- and -
MICHAEL SEAGER and SUPERB GROUP INC.
Richard Simmons, for the Defendants
Defendants, responding parties
HEARD: October 3, 2107
REASONS FOR JUDGMENT
Justice Thomas A. Bielby
[1] The Plaintiffs (Nu Image) have before me a motion for an interim injunction.
FACTS AND SUBMISSIONS
[2] The Defendant Michael Seager (Michael) is the nephew of Doug Seager (Doug) the principal of Nu Image. Michael was employed by Nu Image for 17 years until he was terminated from his employment on November 25, 2016. At that dated Michael was Vice President of Operations.
[3] Nu Image alleges Michael was terminated for cause while Michael alleges the dismissal was without cause and has counter claimed for damages for wrongful dismissal.
[4] At the time of his termination Michael was described as Doug’s second in command and took care of the day to day business because Doug was semi-retired.
[5] Nu Image had a list of clientele, for the most part commercial and industrial properties, for whom it supplies landscaping services including lawn cutting and snow removal in the winter. The customer contracts are repeat seasonal or annual contracts.
[6] Nu Image alleges that Michael had intimate knowledge of virtually all aspects of its business operations and client list. He was familiar with the pricing model and how to quote contracts. He had a personal relationship with most of the clients.
[7] Michael was the keeper of Nu Image’s computer passwords and knowledgeable about the security system.
[8] However, prior to his termination, Michael had incorporated Superb Group Inc. (Superb) and registered the business name. Presumably, Superb was to operate business in direct competition with Nu Image. Michael developed an email address for the new company and likely, before his termination, had placed a business add in a publication called the Canadian Condominium Institute Directory.
[9] After his termination Michael, in part using Nu Image’s client list, sent out a mass email soliciting business.
[10] After termination Michael changed Nu Images computer password without, for a time, disclosing the new passwords to Nu Image. He would log into Nu Images computers and could, until February, 2017, see the locations of all of Nu Image’s vehicles.
[11] He would quote new jobs knowing Nu Image’s manner of pricing. It is alleged that Michael would use quote and contract templates similar to those used by Nu Image. After his termination, Michael attended at Nu-Image and downloaded a number of pictures of work completed by Nu Image and used those images to market his own company.
[12] Nu Image submits that it was on track to earn $4,000,000 in the fiscal year ending October 31, 2017, and now expects that number to be $400,000 less.
[13] Nu Image submits that in 2017 it lost $552,000 worth of contracts, a higher number than previous years. In past years new business would make up the difference of business loss, but in 2017 the loss of business exceeded new business by $140,000.
[14] It is alleged that such losses can be attributed to Michael and Superb.
[15] The Plaintiffs submit that Michael has a fiduciary duty to Nu Image, a submissions not disputed by the Defendants. The Plaintiffs submit that Michael has breached his fiduciary duty.
[16] In effect, the Plaintiffs seek to restrain the Defendants from using any and all information obtained from Nu Image and to restrain them from contacting or soliciting business from anyone with whom Nu Image did business from three years prior to the termination to today.
[17] The Plaintiffs also seek an order requiring the Defendants to abandon any contracts they have with past clients of the Plaintiffs.
[18] In response, it is not denied that Michael solicited Nu Image’s clients and had access to the client list. It is submitted however, that there are no grounds for an injunction.
[19] Counsel for the Defendants submits that Nu Image waited almost eleven months to bring this motion, suggesting a lack of urgency. Nu Image has not replaced Michael and as a result the cost of wages has decreased significantly.
[20] Counsel for the Defendants submits that when cross-examined on August 30, 2017, on his affidavit Doug testified that;
(1) Nu Image, was as solid as ever and that it had all worked out;
(2) The loss of profit was in the range of 10%;
(3) The loss of business after one year post Michael’s termination was estimated to be $36,000;
(4) Nu Image has five major competitors in the Kitchener/Guelph area and that Superb was not one of them; and
(5) Within the Kitchener/Guelph area, Nu Image had 30% of the market share.
[21] Based on these admissions the Defendants submit that they are not competitors of Nu Image and an injunction is not warranted.
THE LAW
[22] An injunction may be granted where it appears just or convenient to do so and on such terms as are just. The test for determining when to grant an interim injunction requires the consideration of the following questions;
(a) Is there a serious question to be tried?
(b) Will irreparable harm be suffered if the injunction is not granted?
(c) Does the balance of convenience favour the granting of the injunction?
[23] The long-standing authority for this test is RJR-MacDonald v. Canada (Attorney General) 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311.
SERIOUS QUESTION
[24] The Plaintiffs submit that in regards to the first question, there is a low threshold, only requiring a moving party to establish that the action is not frivolous or vexatious. Where the injunctive relief may interfere with the ability to earn a living or constitute a restraint of trade, a higher standard may apply, requiring the Plaintiffs to establish a strong prima facie case.
[25] In Metratrade Ltd. v. Lai, 2002 CarswellOnt 2612, para. 4, in regards to a fiduciary duty, the court noted that there is an obligation to refrain from soliciting an ex-employer’s customers in order to prevent unfair competition.
[26] Counsel for the defendants submits there is no evidence of unfair competition.
[27] In any event, it is my opinion that it is likely that Michael had and may still have a fiduciary duty to the Plaintiffs and, as a result, there is a serious issue to be tried.
[28] A fiduciary must act in a manner that exhibits loyalty and avoidance of the conflict of duty and self-interest. (Canadian Aero Service Ltd. v. O’Malley [1974] SCR 595, para. 32).
[29] After employment ends, a fiduciary is entitled to compete with the former employer, but must do so fairly. They are prohibited from using confidential information (KJA Consultants v. Soberman 2002 CanLII 49613 (ON SC), [2002] O.J. No. 489, para. 2).
[30] The duty includes not competing unfairly by soliciting customers of a former employer (Metatrade, para. 12).
[31] On the material before me, there appears no doubt that the Defendants took advantage of confidential information and property belonging to the Plaintiffs.
[32] There is a serious issue to be tried.
IRREPARABLE HARM
[33] Turning now to irreparable harm, such harm refers to the nature and type of the harm rather than the magnitude of harm. It is a harm of a nature that either cannot be easily quantified in monetary terms or cannot be cured (RJR-MacDonald, para. 64).
[34] The Plaintiffs submit that harm is irreparable and an injunction should be granted. It would be unjust and inadequate to confine the Plaintiffs to a remedy in damages, and allowing the Defendants to succeed in their unlawful manner is contrary to any conception of fairness (Canadian Hedge Watch Inc. v. Street 2015 ONSC 454).
[35] Loss of actual or potential customers leads to not just the loss of revenue but a loss of customer base with whom the ex-employer had developed a relationship (Metatrade, para.14).
[36] Harm can be considered irreparable and call for injunctive relief where it would be unjust and inadequate to confine the Plaintiffs to a remedy in damages (Canadian Hedge, paras 45 & 47).
[37] The Defendants submit that if there is a breach of duty, damages are recoverable and would adequately compensate the Plaintiffs, an injunction should not be granted (Treadway Exports Limited v. Milo O.J. No. 1026, pg. 3; Lukenge v. Yacoob [206] O.J. No. 2723, para. 8).
[38] The Defendants rely on the authority, Counterforce Inc. v. Volpe [2009} O.J. No. 1649, a decision of Pitt J. of the Ontario Superior Court. This case involved a defendant who was allegedly soliciting customers of the plaintiff. The plaintiff sought an interlocutory injunction. The motion was dismissed. There was no way to determined how many customers had left the plaintiff because of the defendant’s actions. However only 4,600 out of 225,000 customers had left the plaintiff which therefore could not demonstrate irreparable harm (para 28).
[39] From paragraph 30, I quote,
In light of the value and size of the customer group, the plaintiff has not shown the presence of irreparable damage, such as the cessation of business or permanent damage to its reputation or market, as described in RJR at p. 341).
[40] Further, it is submitted that the Plaintiffs waited 11 months to seek an injunction suggesting a lack of irreparable harm. If such harm was suffered the Plaintiffs would have moved expeditiously (Dylex Ltd v. Factory Carpet Corp. [1989] O.J. No. 1337).
[41] I find that the Plaintiffs have not established irreparable harm, a necessity for an injunction to issue. While they have quoted significant numbers in relation to lost business they have failed to attribute this loss to the Defendants.
[42] The admissions by Doug under cross-examination suggest a lack of such a loss and thereby a lack of such harm. I find the loss to be much less than claimed.
[43] The delay of 11 months is also a factor, further negating the irreparable harm claim.
BALANCE OF CONVENIENCE
[44] While my findings with respect to harm are sufficient to dismiss the motion for an interim injunction, I will still consider the issue of balance of convenience.
[45] The Plaintiffs submit that a need to restore fairness by returning to the status quo that existed prior to Michael’s termination suggest the balance of convenience favours them (Mi5 Print v. Digital Communications Inc. 2017 ONSC 3112; KJA Consultants Inc. v. Soberman). It is further submitted that an injunction will allow the Plaintiffs time to restore the lost business relationships, the balance of convenience again favouring the Plaintiffs.
[46] Counsel for the Defendants submit that it would be unfair to require his clients to abandon contracts and an injunction would be, in effect, a restraint of trade.
[47] Had I found irreparable harm, I would have ruled the balance of convenience favours the Plaintiffs. Michael had a fiduciary duty to the Plaintiffs and had they suffered harm that could not be adequately compensated by damages an injunction would have been granted.
RULING
[48] The motion for an interim injunction is dismissed.
[49] If the parties cannot agree on costs, I will accept written submissions in that regard. The Defendants’ submissions are to be received within 14 days of the release of this ruling and the Plaintiffs’ response within 10 days thereafter.
[50] The submission should be no longer than three pages in length, double spaced, together with a bill of costs.
Bielby J.
Released: October 12, 2017
CITATION: Nu Image v. Seager, 2017 ONSC 6101
COURT FILE NO.: 132/17
DATE: 2017 10 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
NU IMAGE LAWNCARE INC. AND NU CONCEPT BUSINESS MANAGEMENT INC.
Plaintiffs, moving parties
– and –
MICHAEL SEAGER AND SUPERB GROUP INC.
Defendants, responding parties
REASONS FOR JUDGMENT
Bielby J.
Released: October 12, 2017