Court File and Parties

COURT FILE NO.: CV-21-667944

DATE: 20210923

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

1162268 Ontario Limited

-and-

Mohammed Shorof Uddin, SIVAPRAGASAM SIVANESWARAN and 12826046 CANADA INC. O/A UNCLE SID'S DELI

BEFORE: S.F. Dunphy J.

COUNSEL:

Timothy M. Duggan and Spencer F. Toole for the plaintiff

Joseph Figliomeni and Darren Frank for the defendants

HEARD at Toronto (Video): September 23, 2021

ENDORSEMENT

[1] The moving party plaintiff brings this motion for an injunction seeking what amounts to a mandatory order to put the defendants entirely out of business or to place such restrictions on their business as would have effectively the same impact. They have not satisfied me that such drastic relief is appropriate and the motion must be dismissed.

[2] Given the nature of relief sought the plaintiff accepts that a strong prima facie case that it will succeed at trial must be made out rather than the lower RJR test. There being no written non-compete covenant, the primary thrust of the plaintiff’s case depends upon establishing that the individual defendants were fiduciaries.

[3] I shall pass over at this juncture the evidence of the individual defendants having undertaken the planning and the opening of this allegedly competing restaurant while still employed by the plaintiff. The evidence on that front is hotly contested. One side says they were deliberately misled, the other side says that there was candour and honesty. For present purposes it is enough that I conclude as I do that the answer to that question does not assist me in considering the question of the existence (as opposed to the breach) of fiduciary duties.

[4] When is an employee a fiduciary? Our courts have long answered this question by considering three questions: (i) what is the scope of the alleged fiduciary to exercise discretion or power; (ii) can that discretion or power be unilaterally exercised in a way that affects the beneficiary’s legal or practical interests; and (iii) is the beneficiary peculiarly vulnerable to or at the mercy of the fiduciary?

[5] The two individual defendants were hired by the plaintiff in 1999 with approximately ten years of experience gained in the deli sector from a rather storied institution – Yitz’s. They brought that expertise with them to the plaintiff’s deli and worked with the plaintiff for the next 21 years.

[6] They were neither officers nor directors of the plaintiff in the 21 subsequent years with the plaintiff. They were senior employees to be sure and had responsibilities such as opening or closing the restaurant. They did not however direct the affairs of the plaintiff beyond its day to day operations while on duty. They neither had nor have access to financial records or bank accounts. They did not determine opening hours, they did not set the menu or other aspects of corporate direction. They neither made nor were vested with the authority to make any strategic decisions.

[7] While it is alleged that they had access to “trade secrets” such as recipes, the evidence does not suggest that this was any different from the sort of information that other lower-level employees involved in food preparation would have. There is scant evidence of how or why such recipes are unique apart from the principal of the plaintiff’s understandable pride in having carried on learned traditions from her father. The evidence that recipes from the plaintiff are in fact being used is rather weak, relying on impressions of other employees of the plaintiff. The menus of both restaurants are in evidence and both look quite generically “deli” in their offerings.

[8] While senior employees, they were paid relatively modest salaries which were drastically cut by the plaintiff during the pandemic. Both individual defendants are shareholders, but minority shareholders only without any executive responsibilities, little to no access to information in that capacity and they only acquired that status relatively recently.

[9] The plaintiff argued that the defendants were “key employees” who should be found in that capacity to be fiduciaries. I was directed to the case GasTOPS Ltd. v. Forsyth, 2009 CanLII 66153 (ON SC) at para 82 where a “key employee” was found to be a fiduciary where the employee’s “position and responsibilities are essential to the employer’s business, making the employer particularly vulnerable to competition upon that employee’s departure”. While the two defendants were doubtless key in the narrow sense of being managers relied upon to do their jobs inside a small business, nothing in the evidence persuades me that they possessed any information or authority by virtue of their employment as to make their employer “particularly vulnerable to competition” upon the employees’ departure. There is no evidence, for example, that any part of the goodwill of the business – such as customer relationships in particular – adhered to them. This case has no elements of “passing off” whatsoever present.

[10] I am also guided by comments in other cases such as Gertz v. Meda Ltd., 2002 CanLII 49608 (ON SC) that I must be wary of being too ready to characterize as a fiduciary employees who are not in that role in fact. The responsibilities of being found to be a fiduciary are significant and material – they are not lightly to be inferred. Occupying a managerial role in and of itself is by no means determinative.

[11] The plaintiff’s claim may clear the hurdle of raising a serious issue to be tried on the existence of a fiduciary duty, it is by no means near the next level of a strong prima facie case of likely success at trial.

[12] The balance of convenience weighs heavily against the granting of the sort of injunction sought here. The plaintiff operates a deli-style restaurant. While doubtless it benefits from goodwill generated from many years operating in that restaurant segment, it has numerous competitors. The evidence that the defendants have appropriated any goodwill associated with the plaintiffs is vanishingly slight. Apart from the menu offerings – which are quite common in the universe of deli restaurants – the two businesses are located in different parts of the city (Yorkville vs. the Junction) and are quite differently positioned (sit-down restaurant with take-out and delivery availability vs take-out and delivery only restaurant focused on its local market with only two stools). If there is overlap in the delivery end of the business, I cannot accept that it is more than minor or incidental and there are plenty of other restaurants and delis between them. Were the defendants to sell their business tomorrow to another deli operator, there is no reason to believe that the plaintiff’s affairs would be affected in the slightest.

[13] There is no evidence that the two warring parties have any material impact on the business of the other. The segment they both compete in is a crowded one and there is no similarity in names and no serious suggestion of passing off. If there is even a single customer of the plaintiff who has availed himself of the services of the defendant, there is no evidence whatsoever that anyone has noted this fact. The defendants’ evidence on this point is uncontradicted. The restaurant take-out and delivery markets are quite time and distance sensitive. The two restaurants are located in geographically separate and distinct areas of the city separated by thickets of traffic and almost five kilometers. The idea that a take-out or delivery sales dollar earned by the defendants can be equated to a lost take-out or delivery sales dollar of the plaintiff is speculative in the extreme. There is little to no tangible link that can be drawn between the two.

[14] Finally, damages are clearly an adequate remedy. What financial data has been produced by the plaintiff suggests only marginal profitability prior to the pandemic at all events. Were the plaintiff to establish the rights it claims on this injunction at trial, there is no reason to imagine that damages would not be an adequate remedy. Profits if earned without right can be accounted for.

[15] The plaintiff’s motion for an injunction must be dismissed.

[16] It is apparent to me that there is a window for the parties to discuss a comprehensive disentanglement of their affairs and to do so in a pragmatic way. While I would normally issue a ruling on costs at this time, I am going to reserve my decision on costs for the time being. I invite the parties to spend the next thirty days having fruitful discussions about how to disentangle their affairs from each other without costs acting as an additional irritant. If a comprehensive settlement emerges from those discussions, costs would obviously be part of that. If no settlement emerges – and I cast no aspersions on any party if that is what occurs – there will be time enough for me to make a decision on costs and to render it. As discussed, I am leaving it to both counsel to arrange a timetable to exchange outlines of costs and their respective short written submissions. A consolidated set of those submissions should be uploaded to Caselines within sixty days if I am to be asked to rule on costs. In that event, kindly notify my assistant when the submissions have all been uploaded to Caselines and I will review them and render a decision as soon as practicable.

[17] I wish to thank both counsel for their thorough and helpful presentations.

S.F. Dunphy J.

Date: September 23, 2021