SUPERIOR COURT OF JUSTICE - ONTARIO
RE: EF Institute for Cultural Exchange Limited v. Worldstrides Inc. and David Conklin
COURT FILE NO.: CV-15-539959
MOTION HEARD: 2018 05 09
BEFORE: MASTER R.A. MUIR
COUNSEL: Bryan Fromstein for the plaintiff David Badham and Skye Sepp for the defendants
ENDORSEMENT
[1] The plaintiff brings this motion seeking production of the unredacted financial statements of the defendant Worldstrides Inc. (“Worldstrides”) for the years 2015 to 2017.
[2] The defendant David Conklin (“Conklin”) was the former president and a director of the plaintiff. His employment was terminated in 2014. As part of his termination agreement Conklin was paid $225,000.00. In return for this payment, Conklin agreed, among other things, to a one year non-compete clause.
[3] Worldstrides is a competitor of the plaintiff. The plaintiff alleges that Conklin breached the terms of the non-compete clause by interviewing with Worldstrides, providing advice to Worldstrides and by disclosing confidential information about the plaintiff to Worldstrides, all within the one year period following his termination by the plaintiff. The plaintiff seeks damages and the return of the $225,000.00. The plaintiff also seeks disgorgement of any other benefits that may have accrued to the defendants as a result of Conklin’s alleged breach of the non-compete clause.
[4] The parties appeared on a refusals motion before Master Wiebe on August 28, 2017. Master Wiebe ordered Worldstrides to produce its financial statements for 2015 to 2017. He appears to have determined that the financials may contain information relevant to the disgorgement remedy. However, Master Wiebe ordered that Worldstrides could redact any non-relevant information found in the financial statements.
[5] Worldstrides then produced redacted versions of its financial statements. Almost all of the information in the financial statements is redacted. The only information provided is Worldstrides’ bottom line profit/loss position for each year. All other information concerning Worldstrides’ financial operations was redacted from the copies of the financial statements produced to the plaintiff. Worldstrides takes the position that these redactions are consistent with Master Wiebe’s endorsement. It submits that only non-relevant information has been redacted.
[6] The plaintiff argued that more is required. The plaintiff seeks detailed information about the operation of Worldstrides during the relevant years in order to identify and quantify any benefits Worldstrides may have received as a result of Conklin’s alleged breach of the non-compete clause. Consequently, the plaintiff now moves for production of the financial statements in an unredacted form.
[7] In my view, much of the argument on the motion before me was an attempt by the parties to re-litigate matters that had been or could have been decided on the motion before Master Wiebe. Master Wiebe made a finding that the 2015 to 2017 financial statements contained some information relevant to the plaintiff’s claim for disgorgement. The relevant portion of his decision reads as follows:
The claim of the plaintiff is limited to disgorgement as against both defendants;
As a result, Worldstrides must disclose its financial statements for 2015, 2016 and 2017 but with information not relevant to this case redacted.
[8] In my view, it is clear from this endorsement that Master Wiebe determined that the 2015 to 2017 financial statements were relevant, at least in part, to the remedy of disgorgement. It is also clear that he declined to order Worldstrides to produce the statements in their entirety but rather production was limited to the relevant portions only. In short, Master Wiebe ordered that the financial statements must be produced but only the portions that may be relevant to disgorgement. That issue has been decided.
[9] Master Wiebe’s order was without prejudice to the plaintiff bringing a further motion, such as this one, for further disclosure from the financials after the redacted versions were produced. He ordered that on any such motion Worldstrides must file copies of the unredacted versions of the financial statements for the presiding master to review. It is important to note that Master Wiebe did not have the benefit of reviewing the unredacted versions of the financial statements when he made his August 28, 2017 order. They were, however, placed before me on this motion for my inspection pursuant to Rule 30.06(d), which allows the court to inspect a document for the purpose of determining its relevance.
[10] Given Master Wiebe’s endorsement, it is my view that the only issue for the court on this motion is whether the redactions were proper. Do the unredacted financial statements contain any information relevant to the plaintiff’s claim for disgorgement? If they do, the information must be produced.
[11] I have carefully reviewed the unredacted financial statements produced for my inspection pursuant to Master Wiebe’s endorsement. In my view, none of the redacted information is relevant to the plaintiff’s specific allegations of misconduct that would support the remedy of disgorgement. The financial statements present a very general high level overview of the financial operation of Worldstrides. They set out assets, liabilities, shareholders’ equity, revenue and expenses. No specifics or details of any of these items are provided, just general generic descriptions setting out gross numbers. The plaintiff’s expert states that he requires details of revenue and expenses. The financial statements contain no such details. He also seeks information with respect to Canadian operations. Nothing in the statements appears to segregate Canadian and non-Canadian operations. The listed expenses do not appear to include intangibles. They show no detail regarding allocations between related corporations. The financial statements do not provide any information about corporate structure. In summary, there is nothing in the unredacted 2015 to 2017 financial statements that is relevant to disgorgement or that would assist the court in identifying and quantifying any benefits Worldstrides may have received from the alleged breach of the non-compete clause. I have therefore concluded that the remaining information in the unredacted financial statements is not relevant to matters in issue in this action and need not be produced.
[12] For these reasons, the relief with respect to the production of the Worldstrides unredacted financial statements is dismissed. The unredacted financial statements of Worldstrides filed for this motion on May 3, 2018 shall be sealed, treated as confidential and not form part of the public record.
[13] If the parties are unable to resolve the issues of re-attendance and the costs of this motion, they shall provide the court with brief submissions in writing by July 4, 2018. These submissions may be sent directly to me by email.
Master R.A. Muir
DATE: 2018 06 01