Fix Auto Canada Inc. v. DeSantis, 2021 ONSC 5439

COURT FILE NO.: CV-20-651709-0000

DATE: 20210817

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

FIX AUTO CANADA INC.

Plaintiff

– and –

TONY DESANTIS

Defendants

Matthew Diskin and Claire Browne, for the Plaintiff

Peter Carey, for the Defendant

HEARD: August 6, 2021

a. ramsay j. (Orally)

A. Overview

1The Plaintiff, Fix Auto Canada Inc. (“Fix Auto”), brings this motion for an interlocutory order restraining the defendant, Tony DeSantis, from engaging in any employment, consulting, or other position with the non-party, Dented Paintless Repairs Inc. or its affiliates, subsidiaries, agents, contractors, or partners (“Dented”) and seeks an order restraining him from using confidential information, pending a trial in this matter. Fix Auto argues that Mr. DeSantis’ current employer is a direct competitor in the auto collision industry.

2Paragraph 39 of Fix Auto’s factum set out the issues on this motion as follows:

i. whether Fix Auto is entitled to an injunction restraining Mr. DeSantis from working at Dented and disseminating proprietary and confidential information belonging to Fix and Fix’s customers to Fix’s competitor;

ii. if necessary, whether Fix Auto is entitled to a sealing order in respect of certain exhibits transmitting confidential information that Mr. DeSantis misappropriated; and

iii. the scheduling of the next procedural steps to the final hearing on the merits.

3On November 16, 2020, Fix Auto obtained an interim injunction order, without notice, from Myers J., restraining Mr. DeSantis from working at Simplicity and requiring him to deliver up all devices that interfaced with USB keys containing confidential information set out in that order. By virtue of Myers J. order, Mr. DeSantis was obliged to deliver up all documents containing Fix Auto’s confidential and proprietary information.

4Counsel submit that documents that were sealed were provided to Justice Myers at the motion and did not form part of the court record before me.

5No motion was brought by Mr. DeSantis to set aside the order of Myers J. as he was terminated from Simplicity shortly after the order was made.

6On the evidence before me, which is not disputed by Fix Auto, Mr. DeSantis has complied with the interim injunctive order of Myers J. and is not in breach of that order.

B. Preliminary Motions

7There were two preliminary issues addressed at the outset of the motion.

i. Relief sought for a Sealing Order

8Fix Auto has conceded on this motion, and in a letter dated May 12, 2021 from Meredith Bacal, in response to Mr. DeSantis’ counsel request for documents, said to be confidential, that those documents were not relevant to the issues in dispute on this motion. Ms. Bacal’s letter indicated, without support, that the court had ordered that Mr. DeSantis not have access to the documents. The documents have not been filed on this motion, sealed, or otherwise.

9Given the concession, there is no need for the court to deal with the relief being sought in the Notice of Motion for a sealing order of confidential information.

ii. Objection to Ms. Hills transcript, pursuant to subrule 39.03 as an abuse of process

10The second preliminary matter addressed was an objection by counsel for Mr. DeSantis to the evidence of one of the witnesses, Ms. Hills, being relied upon by the court under subrule 39.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as it was Mr. DeSantis’ position that it was an abuse of process.

11I dismissed Mr. Carey’s motion.

12Evidence on a motion may be by way of affidavit, transcripts from an examination for discovery, transcript of a witness examined in aid of the motion, or viva voce, in some instances. Subrule 39.03 specifically permits a party, on a motion, to examine a witness in aid of the motion and have that person’s transcript available at the hearing. The rule allows for cross examination and re-examination of the witness. Timing of course is important to ensure that a party who intends to use this as primary evidence does so but takes into account the constraints imposed under the rule for delivering affidavit evidence, after cross examinations, which requires consent or leave of the court. Since no challenge was made to any affidavit intended to be relied upon by Mr. DeSantis on this motion, it appears that the process worked in this instance, as intended.

C. Background

13Mr. DeSantis worked for Fix Auto for eleven years. At the time he resigned on November 2, 2020, he was one of eight vice presidents and had been the Vice President of Sales for the preceding six years. Mr. DeSantis argues though that he had restricted access to financial information. He has admitted to downloading files before his departure. His explanation for doing so is that he intermingled his personal and business life. But he also admitted to downloading documents that he thought he would use as precedents in the future.

14Fix Auto is involved in the automobile collision repair business. Their factum indicates that this includes the collision repair and body repair and both “subsume Paintless dent Repair”. They are also involved in frame reconstruction. Fix Auto’s clients are insurance companies.

15After discovering that Mr. DeSantis had downloaded files prior to his departure, and before he could start his new job at Simplicity, a competitor, Fix Auto brought a motion for injunctive relief to restrain Mr. DeSantis from starting employment and asking that he deliver up all documents which were downloaded by him pending the return of the motion for the injunction. That motion was heard by Justice Myers in November 2020, who granted the order.

16As a result of Justice Myers’ order, Mr. DeSantis lost his job at Simplicity. The documents which were downloaded were returned to Fix Auto in accordance with the order of Justice Myers. Fix Auto does not dispute that Mr. DeSantis is not in breach of Justice Myers’ order. Mr. DeSantis did delete emails in November 2020 after the interim injunctive order was granted. He claimed the emails related to negotiations with Simplicity and other personal information. An expert retained by Fix Auto has determined that the emails, having been deleted for more than seven days, are now permanently deleted. Fix Auto submits that an adverse inference ought to be drawn by the deletion of the emails, which it argues is tantamount to spoliation.

17At the time of Myers J. order, Mr. DeSantis was to start at Simplicity, an employer whose business was perhaps much more similar to Fix Auto’s. On this motion, counsel for Fix Auto acknowledges that Mr. DeSantis current employer, Dented “is a slightly different business”.

D. Analysis

18The test for granting an injunctive relief is set out at paragraph 40 of Fix Auto’s factum, as articulated by the Supreme Court of Canada in R.J.R.-MacDonald Inc. v Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 SCR 311 [RJR-MacDonald]. The court stated that an injunction will be granted where:

i) the moving party has demonstrated a serious question to be tried;

ii) the moving party would suffer irreparable harm if the motion was refused;

iii) and the balance of convenience favours the granting of the injunction: R.J.R.-MacDonald Inc. at paras. 83-85.

19But, there is a higher threshold imposed on a moving party where the case is regarding restrictive covenants in employment contracts, for the plaintiff to establish a strong prima facie case before injunctive relief will be granted: Jet Print Inc. v. Cohen, [1999] O.J. No. 2864, Nordheimer J. as he then was, at para. 10, citing, Gerrard v. Century 21 Armour Real Estate Inc. (1991), 1991 CanLII 7104 (ON SC), 4 O.R. (3d) 191 (Ont. Gen. Div.), at at p. 198:

Is there a serious issue to be tried?

Breach of confidence

20With respect to the allegation of a breach of confidence, I repeat what is set out at para. 43 of Fix Auto’s factum as follows:

“In order to make out a claim for breach of confidence, the moving party must establish that (i) the material information conveyed is confidential; (ii) the information was communicated in confidence; and (iii) that the confidential information was misused by the party to whom it was communicated to the detriment of the confider: Lysko v. Braley (2006), 2006 CanLII 11846 (ON CA), 79 OR (3d) 721 (ON CA) at para. 17 citing Lac Minerals Ltd. v. International Corona Resources Ltd.,1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, at pp 635-39.”

21Fix Auto’s initial concern that Mr. DeSantis had downloaded confidential and proprietary information, which is disputed by Mr. DeSantis, is understandable. Since the order of Myers J., however, he was fired from Simplicity, a company that may have been more of a competitor. Since the order of Myers J. Mr. DeSantis has also returned the documents downloaded on the USB keys, provided up all the USB keys in his possession, his daughter’s laptop, the password to his personal email account and the password to his LinkedIn account by the end of November 2020. Mr. DeSantis’ factum indicates that all downloaded material of any kind was returned to Fix Auto, which is not disputed.

22Fix Auto’s motion materials includes documents that are “redacted” and or were filed, under seal by order of Justice Myers. None of the documents have been disclosed to Mr. DeSantis’ counsel, despite an undertaking not to disclose them outside of the litigation, nor have they been disclosed to this court. On this motion there is, however, a live debate as to what documents, if any, which were downloaded, are publicly available. Fix Auto argues that an adverse inference may be drawn by virtue of the fact that emails were deleted after Justice Myers’ order. However, even if the emails contained confidential information, they cannot be recovered. Fix Auto’s own expert concluded that they have been permanently deleted.

23And, as Mr. DeSantis dealings with his current employer, Dented, was initiated in mid-February 2021, he was offered a job on March 12, 2021, and commenced employment with Dented on March 22, 2021. There is not a scintilla of evidence before the court to indicate that Mr. DeSantis has disclosed or provided confidential information to Dented. And, given the date of the deletions and the return of the documents, it cannot be said that he disclosed the deleted information to Dented nor the documents returned to Fix Auto under Myers’ J. order. Counsel for Fix Auto submits that it is not known whether Mr. DeSantis had another email account or sent documents to another email account. This is mere speculation. I do not accept, on the evidence before me, that there is a “cloud of suspicion” concerning Mr. DeSantis departure. At its highest, on the evidence before me, he exercised poor judgment in mingling his personal and business accounts.

24While Mr. DeSantis was at Fix Auto, there were two insurers for whom Fix Auto did paintless dent repair work, Desjardins Insurance and Economical Insurance. The contract with Desjardins expired before Mr. DeSantis left Fix Auto, and Desjardins took its business elsewhere, directing it to Simplicity, because Fix Auto could not keep up with the work in a province hit by a hailstorm.

25As for Economical, Fix Auto’s contract with this insurer was not exclusive, but, in any event, there is no evidence that Mr. DeSantis approached Economical or provided confidential information to his current employer, Dented, regarding Economical. Fix Auto subcontracts out this work to paintless dent repair suppliers. Fix Auto submits that in responding to this motion Mr. DeSantis has disclosed confidential information about Economical. While there is some dispute between the parties as to whether some of the information in the evidence before the court is publicly available, I am satisfied that the information disclosed by Mr. DeSantis was to respond to this motion, and Fix Auto cannot complain when it has brought Dented, a non-party, into the picture by examining a representative of Dented in aid of the motion.

26Mr. DeSantis did approach Intact Insurance. The evidence before the court is that Intact never had a contract with Fix to do paintless dent repair work.

27Fix Auto argues though that by virtue of his position with the company, Mr. DeSantis had access to confidential information, which he admitted is in his head, which would justify the relief sought. In its factum, Fix Auto took the position that Dented is a direct competitor and submitted that “(b)oth it and Fix offer the same services – Paintless dent repairs – to their customers.” However, during submissions, Fix Auto concedes that Dented is a slightly different business, and that concession was reasonable given the evidence before the court.

28Dented does not do any traditional autobody repairs. Dented’s line of work is wholly dedicated to Paintless dent repair whereas less than 0.5% of Fix Auto’s revenue is generated from Paintless dent repair, based on calculations made by counsel for Mr. DeSantis, which I accept as a reasonable guess estimate, which is not challenged or denied by Fix Auto. Fix Auto declined to provide to provide more accurate numbers on this motion. And, in fact, Fix Auto subcontracts most of its Paintless dent repair work to two other companies, Dent Wizard and Nimbus. It also has a limited, 10

29On the evidence, Fix Auto has not shown an unauthorized use of any confidential information to its detriment, which is necessary to prove a breach of confidence.

30Fix Auto bears the onus of establishing that the information is confidential or constituted as a trade secret, and mere speculation of misuse of confidential information is not sufficient. There must be real, not speculative, evidence of irreparable harm Camino Modular Systems Inc. v Kranidis, supra at para 57-61.

31There is no evidence before the court that Mr. DeSantis has conveyed confidential or proprietary information to Dented. There is no evidence before the court that Dented has misused confidential information, conveyed to it, by Mr. DeSantis to the detriment of Fix Auto.

Spoliation and Conversion

32While Mr. DeSantis has admitted that he downloaded documents belonging to Fix without permission on the USBs, he maintains that he had intermingled both his personal and business records. This is a triable issue which will be based on credibility.

Breach of Contract

33Fix Auto submits that Mr. DeSantis is in breach of a confidential agreement and a non-competition agreement. It is an open question as to whether these documents were backdated, and if so, they would not be enforceable. Mr. DeSantis’ position that they were back dated is supported by Mr. Kaplaniak, who signed the documents on the same day as Mr. DeSantis. As Fix Auto has conceded that his was backdated, an inference may be drawn that Mr. DeSantis’s was as well.

34A larger question though is whether, even if the agreement stands, whether the restrictive covenants were reasonable. Mr. DeSantis is a Canadian Citizen. His work background has been in the automotive industry right after he got out of school. The scope of the non-compete clause would prevent him from being employed anywhere in Canada for one year from his departure, that is November 2, 2021, with virtually any automotive repair businesses no matter how transient the associations. And, if the clauses are not enforceable, at common law, a departing fiduciary can compete, but cannot solicitor customers within a reasonable period of time.

Will Fix Auto Suffer Irreparable Harm if the Injunction were not granted?

35After the issuance of the Order, Mr. DeSantis delivered up some of the devices the Court ordered to Fix’s forensic expert.

36There is no actual evidence of irreparable harm or damage. Fix Auto merely speculates that there will be irreparable harm down to road, as it puts it, if the agreements or their terms are disclosed to Dented, Dented will obtain an unfair advantage in the marketplace and undermine Fix’s relationship with its insurer clients. On this motion, counsel for Fix Auto submitted that the agreements were generally between three to five years. Fix Auto can point to no agreement with its insurer clients that have been impacted by any action taken by Mr. DeSantis in initially downloading documents some nine (9) months ago or to any loss of insurer agreement or client as a result of that conduct.

37There is not a scintilla of evidence before the court that Mr. Desantis has disclosed confidential information to his current employer.

38The onus is on the person seeking the injunction to establish irreparable harm. This must be based on evidence before the court. As stated by Epstein J. in 754223 Ontario Ltd. v. R-M Trust Co. (January 20, 1997), Doc. 96-CU-114787, RE 7166/96 (Ont. Gen. Div.), "Irreparable harm cannot be founded upon mere speculation."

39Irreparable harm must be clear and not speculative: Jet Print Inc. v. Cohen, 1999 CarswellOnt 2357O, at para 21; Curran Farm Equipment Ltd. v. John Deere Ltd., 2011 ONSC 3791 (Div. Ct.), at para. 16.

40Fix Auto must put forward sufficient evidence to establish irreparable harm: Paradigm Shift Technologies Inc. v. Oudovikine, 2012 ONSC 148 at paras. 54-55; Jet Print Inc. v. Cohen, supra.

41While there may have been a closer connection between the nature of the work that Simplicity was engaged in, the employer is that Mr. DeSantis parachuted at the time when Justice Myers granted his order, there is little evidence that Dented and Fix Auto are in the same market and are competing against each other. Fix Auto has the onus of establishing this link, it has not done so.

Does the balance of convenience favour the granting of the injunction?

42Fix Auto contrasts Mr. DeSantis’ ease in obtaining a new position, and his available financial means, and submits that “he does not ‘need’ a job working at a competitor while he still retains Fix’s confidential information” in contrast to what Fix Auto argues is the substantial harm caused to Fix Auto “from of a former member of its senior management using its confidential information at a competing employer that pays no heed to confidentiality.”

43There is no concrete evidence put forward by Fix Auto to show that the balance of convenience favours Fix Auto, aside from mere speculation.

44Whereas, even if the one year non-compete clause were enforceable, Mr. DeSantis resigned on November 2, 2020 and the 1 year restriction on his ability to work would expire on November 2, 2021, a little less than 3 months from the date of the hearing of the motion. If the clause were not enforceable, at common law, even if he were a fiduciary, he would be able to work at his current employer, which he started at in March 2021, provided that he did not misuse confidential information. Given the nature of the two companies, the need for Mr. Desantis to earn a living, the lack of any vidence is before the court to show that any confidential information has been conveyed by Mr. DeSantis to his new employer, the balance of convenience favours Mr. DeSantis in this case.

General Comments

45Counsel for Fix Auto has indicated that the plaintiff is prepared to proceed with expeditiously with a trial, and there is no reason why that should not happen as the parties appear to be motivated to have a speedy resolution of this litigation.

D. Costs

46After hearing submissions on costs, and for the oral reasons given, the plaintiff Fix Auto shall pay to the defendant, Mr. DeSantis, his costs of the motion fixed in the amount of $65,000, plus disbursements, forthwith, in accordance with subrule 57.03 of the Rules of Civil Procedure.

A. Ramsay J.