COURT FILE NO.: CV-16-556749

DATE: 20190128

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FERNDALE ENTERPRISES INC., Plaintiff

AND:

EXPERTUS TECHNOLOGIES INC. and JACQUES LEBLANC, Defendants

BEFORE: Cavanagh J.

COUNSEL: Robert W. Staley and Jason M. Berall, for the Plaintiff

Eli Mogil, for the Defendants

HEARD: January 24, 2019

ENDORSEMENT

Introduction

[1] The plaintiff Ferndale Enterprises Inc. (“Ferndale”) commenced this action seeking declaratory relief and damages arising from (i) the defendants’ allegedly unlawful termination of two commercial agreements that Ferndale made with the defendant Expertus Technologies Inc. (“Expertus”), and (ii) the defendants’ alleged interference with Ferndale’s business opportunities.

[2] The defendants move for summary judgment dismissing Ferndale’s claims. Alternatively, the defendants submit that if I were to conclude that Expertus was not entitled to terminate the commercial agreements at will or for cause, I should hold Expertus liable for damages, if any, caused by its breaches of these agreements and assess Ferndale’s damages based upon the evidence tendered by the parties on this motion.

[3] Ferndale submits that summary judgment should not be granted dismissing Ferndale’s claims, either fully or partially. Ferndale also submits that if its claims are not summarily dismissed, I should not address issues relating to liability or damages on this summary judgment motion.

[4] For the following reasons, I have concluded that the defendants’ motion for summary judgment should be dismissed.

Background Facts

[5] Ferndale is a company that is wholly-owned by Grant McDaniel who is its president, sole director and sole shareholder.

[6] Expertus is a business which provides payment and cash management solutions to financial services institutions and large enterprises. Jacques Leblanc is Expertus’ president and founder.

[7] In the spring of 2015, Mr. McDaniel and Mr. Leblanc discussed arrangements by which Mr. McDaniel could provide services for Expertus. Mr. McDaniel also offered to introduce Expertus to a company called CGI Group Inc. (“CGI”), an introduction that would be beneficial to Expertus. These discussions resulted in two commercial agreements between Ferndale and Expertus.

[8] An Agreement for Engagement of Independent Contractor (the “Independent Contractor Agreement”) was entered into between Ferndale and Expertus on August 4, 2015. The term of the Independent Contractor Agreement was for two years, to expire August 1, 2017. The parties disagree about the interpretation of the compensation provision in the Independent Contractor Agreement, and the defendants ask me to interpret this provision on this motion, if necessary, as part of an assessment of damages.

[9] Ferndale and Expertus also executed a Confidentiality and Fee Agreement (“CFA”) on August 4, 2015. The CFA provides for a $700,000 finder’s fee upon the successful closing of any transaction with CGI involving a sale of its assets or shares within the next twenty-four months.

[10] In the fall of 2015, following Mr. McDaniel’s introduction of CGI, Expertus and CGI entered into substantive discussions about a transaction by which CGI would acquire Expertus. Due diligence commenced. As part of this process, Expertus provided to CGI the Independent Contractor Agreement on December 17, 2015.

[11] On December 24, 2015, CGI and Expertus entered into a Share Purchase Agreement. The value of the transaction was approximately $10 million.

[12] On December 31, 2015, Mr. Leblanc was advised by CGI that the Independent Contractor Agreement was an issue for CGI. Mr. Leblanc called Mr. McDaniel to so advise him. At a meeting on January 6, 2016, CGI’s key executives reiterated their concern to Mr. Leblanc about the Independent Contractor Agreement. Expertus again reached out to Mr. McDaniel about this concern.

[13] Mr. McDaniel was not willing to give up his rights under the Independent Contractor Agreement.

[14] On January 6, 2016, CGI sent a letter to Mr. Leblanc terminating the transaction.

[15] Mr. McDaniel’s evidence is that following the failure of the CGI transaction, Mr. Leblanc blamed Mr. McDaniel for the termination of this deal and set out to pressure him to drop the Independent Contractor Agreement. Mr. McDaniel’s evidence is that the defendants also interfered with his ability to perform services under the Independent Contractor Agreement.

[16] Ferndale’s claim based upon interference with a business opportunity relates to a company called Ripple Labs Inc. (“Ripple”). Ripple offers a payment system that enables the transfer of money using blockchain technology. In 2015 and 2016, Expertus engaged in discussions with Ripple concerning joint projects for banks. One of the targets was Bank of Montreal. Mr. McDaniel was the Expertus point person because Expertus and Ferndale agreed that Bank of Montreal was a customer in respect of which Ferndale could provide services under the Independent Contractor Agreement. The primary point of contact at Ripple was Nilesh Dusane, its VP of Global Sales.

[17] In March 2016, Mr. McDaniel had discussions with Mr. Dusane about an opportunity for a position at Ripple. Mr. McDaniel was offered a full-time position as Canadian Sales Director for Ripple. Mr. McDaniel did not accept this offer.

[18] There was an industry conference scheduled for April 18, 2016 in Arizona (the “Payments Conference”). On February 12, 2016, Mr. McDaniel emailed Mr. Leblanc and expressed interest in attending the Payments Conference. Mr. Leblanc advised Mr. McDaniel that he was not selected to attend the Payments Conference. Mr. McDaniel decided to attend the Payments Conference at his own expense.

[19] Mr. McDaniel attended the Payments Conference from April 17 to 19, 2016. The evidence in relation to the interactions between Mr. McDaniel and Mr. Leblanc at this conference is conflicting. Some of this evidence relates to Mr. McDaniel’s status with Ripple.

[20] Following the Payments Conference, there was email correspondence involving Mr. McDaniel, Mr. Leblanc and Mr. Dusane in relation to the opportunity at Ripple. Following this correspondence, by email dated May 5, 2016, Ripple ended the discussions concerning this opportunity. Ultimately, Mr. McDaniel did not become employed by or otherwise perform services for Ripple, either directly or through Ferndale.

[21] By letter dated May 9, 2016, Expertus terminated the Independent Contractor Agreement and the CFA for cause. In this letter, Expertus advised that it had completely lost confidence in Mr. McDaniel. The letter includes statements describing the reasons for the terminations of the two agreements.

[22] Ferndale then commenced this action.

Analysis

[23] Rule 20.01(3) of the Rules of Civil Procedure provides that a defendant may, after delivering a statement of defence, move for summary judgment dismissing all or part of the claim in the statement of claim.

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

[25] In Hryniak v. Maudlin, 2014 SCC 7 the Supreme Court of Canada held:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when 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.

[26] The following issues arise on this motion:

a. Should Ferndale’s claims in the statement of claim be dismissed on the ground that there is no genuine issue requiring a trial with respect to them?

b. If all of Ferndale’s claims are not dismissed, should I decide on this motion that the defendants are liable for one or more of these claims, assess Ferndale’s damages in respect of the claim or claims on the evidence before me on this motion, and grant summary judgment accordingly?

[27] I first address whether the defendants have shown that there is no genuine issue requiring a trial in relation to whether Ferndale’s claim for damages for breach of the Independent Contractor Agreement should be dismissed.

[28] The defendants submit that by May 2016 the relationship between Mr. Leblanc and Mr. McDaniel had deteriorated to the point that trust was lost. The defendants rely on evidence that Mr. McDaniel refused to meet with CGI to discuss a renegotiation of his Independent Contractor Agreement; that he was secretly working with a competitor, Ripple, on a pitch to a client to which he knew Expertus was also pitching; that he attended at the Payments Conference representing Ripple; and that he shared confidential information. The defendants submit that by seeking another position at Ripple (and telling Ripple that his work with Expertus is coming to an end), Ferndale repudiated the Independent Contractor Agreement.

[29] The defendants submit that Expertus was entitled to terminate the Independent Contractor Agreement at will or, alternatively, with cause, before the end of the two-year term, and that there is no genuine issue requiring a trial in relation to whether it did so. On this basis, the defendants ask for summary judgment dismissing Ferndale’s claim with respect to the Independent Contractor Agreement.

[30] Alternatively, the defendants submit that on the evidentiary record before me, I am able to decide whether Expertus’ termination of the Independent Contractor Agreement was proper and, if I conclude that Expertus was not entitled to terminate the Independent Contractor Agreement at will or with cause before the end of its term, then Expertus should be held liable for breach of the Independent Contractor Agreement and Ferndale’s damages, if any, should be assessed on the evidence before me. Expertus relies on evidence in the record with respect to damages, and submits that Ferndale was required to put its best foot forward in response to this motion for summary judgment and introduce all of the evidence upon which it relies as proof of damages.

[31] Ferndale submits that the evidence does not permit a finding that Expertus lawfully terminated the Independent Contractor Agreement at will, or for cause, and, consequently, the defendants’ motion for summary judgment dismissing Ferndale’s claim with respect to the Independent Contractor Agreement must be dismissed. Ferndale submits that the defendants are not permitted to move for summary judgment holding Expertus liable and assessing Ferndale’s damages. Ferndale submits that it is entitled to proceed to discovery and to provide expert evidence on damages after examinations for discovery have been completed.

[32] Although Ferndale submits on this motion that Expertus breached the Independent Contractor Agreement by terminating it without cause before the end of the two-year term, Ferndale does not ask me to grant summary judgment on this issue.

[33] Expertus relies upon the following conduct by Mr. McDaniel as causing loss of trust and justifying termination of the two agreements for cause:

a. Mr. McDaniel’s interpretation of his commission entitlement under the Independent Contractor Agreement.

b. Mr. McDaniel/Ferndale sabotaged the CGI transaction or, at a minimum, breached their obligations to assist thereunder, including the obligation of good faith.

c. Mr. McDaniel attempted to take a full-time position with Ripple, a competitor of Expertus.

d. Mr. McDaniel engaged in misconduct at the Payments Conference by representing a competitor (Ripple).

e. Mr. McDaniel/Ferndale improperly shared confidential information about Expertus and its business dealings with third parties, including to CGI and Ripple, without authorization from Expertus and contrary to Ferndale’s obligations.

[34] Ferndale submits that Expertus was only entitled to terminate the Independent Contractor Agreement if Ferndale’s conduct resulted in a substantial failure of performance amounting to fundamental breach. Ferndale submits that none of the conduct upon which Expertus relies justified termination of the Independent Contractor Agreement before the end of its term.

[35] I am not able to conclude on the evidentiary record before me that there is no genuine issue requiring a trial in relation to whether Expertus was justified in terminating the Independent Contractor Agreement at will or for cause. Because I have decided that this action must proceed to trial on all issues, I do not consider it to be necessary or proper for me to analyze in my reasons the evidence that bears on this issue. This analysis should be left to the trial judge.

[36] As a result, the defendants’ motion for summary judgment dismissing Ferndale’s claim for damages for breach of the Independent Contractor Agreement is dismissed.

[37] I do not accept the defendants’ alternative submission that I should decide on this motion whether Expertus breached the Independent Contractor Agreement and, if I conclude that it did, that I should hold Expertus liable, assess Ferndale’s damages on basis of the evidence tendered by the parties on this motion, and grant summary judgment accordingly.

[38] Such an approach is not contemplated by Rule 20.01(1)(3) which provides that a defendant may move for summary judgment “dismissing all or part of the claim in the statement of claim”. This rule does not provide that a defendant may move for summary judgment holding the defendant liable and assessing the plaintiff’s damages based upon evidence tendered by the defendant.

[39] It is open to a motion judge who dismisses a motion for summary judgment to determine an issue and grant summary judgment in favour of a responding party if warranted by the evidentiary record and where it would be in the interests of justice to do so. See, for example, Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922 at para. 52. However, no authority was provided to me in which a motion judge followed the approach proposed by the defendants in this case, where a defendant moves, in the alternative, for summary judgment in favour of the plaintiff and asks the motion judge to assess the plaintiff’s damages on the evidentiary record on the motion (one which the plaintiff maintains is incomplete) and grant judgment accordingly.

[40] I do not agree with the defendants’ submission that the “culture shift” that is described in Hryniak at paras. 23-33 (that supports a more expansive application of the summary judgment procedure) justifies the approach to summary judgment that they propose in this case. In my view, it would not be in the interest of justice to require Ferndale, before it has conducted examinations for discovery, to put its best foot forward with evidence of its damages in response to Expertus’ motion. Ferndale is entitled to conduct examinations for discovery and to tender evidence to prove damages as it sees fit.

[41] The authorities are clear that a motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner: Butera v. Chown, Cairns LLP 2017 ONCA 783 at para. 34; Mason v. Perras Mongenais, 2018 ONCA 978 at paras. 22 and 41.

[42] The issues in relation to Ferndale’s claims for breach of the CFA and based upon the alleged interference with a business opportunity at Ripple cannot be readily bifurcated from those in relation to Ferndale’s claim for damages for breach of the Independent Contractor Agreement. For this reason, it is neither necessary nor appropriate for me to decide whether the defendants have shown these claims should be dismissed because there is no genuine issue requiring a trial with respect to them.

[43] This action should proceed to trial on all issues.

Disposition

[44] For these reasons, the defendants’ motion for summary judgment is dismissed.

[45] If the parties are unable to agree on costs, Ferndale may make written submissions within 14 days. The defendants may make written responding submissions within 14 days thereafter. Ferndale may make brief written reply submissions, if so advised, within five days thereafter.

Cavanagh J.

Date: January 28, 2019