Court File and Parties

COURT FILE NO.: CV-20-00641310-00CL DATE: 2021-12-13 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: MANNY KAPUR and XTHETICA INC., Plaintiffs

AND:

ZORAN KONEVIC, XTHETICA CANADA INC., TESLA ENERGY CORPORATION and NOTOX TECHNOLOGIES INC., Defendants

AND BETWEEN:

ZORAN KONEVIC, XTHETICA CANADA INC., and NOTOX TECHNOLOGIES INC., Plaintiffs by Counterclaim

AND:

MANNY KAPUR also known as MANVINDER KAPUR, XTHETICA INC., KAREN DIRSTEIN, EKATERINA KOTYLEVA, MIA WELLS, JENNIFER KAPUR also known as JENNIFER RUSCIO, and LASER ADVANTAGE LIMITED trading as LASER ADVANTAGE MEDSPA, MCKESSON SPECIALIZED DISTRIBUTION INC. and CROMA AESTHETICS CANADA LTD., Defendants by Counterclaim

BEFORE: Penny J.

COUNSEL: Howard J. Wolch, for Manny Kapur Sean N. Zeitz, for Zoran Konevic Jeremy Devereux, for McKesson Specialized Distribution Inc. Zohar Levy, for Croma Aesthetics Canada Ltd. Lucas E. Lung and Rebecca Shoom, for Xthetica Canada Inc. and Notox Technologies Inc.

HEARD: November 22, 2021

Endorsement

[1] This is a motion by Manny Kapur to vary the September 24, 2020 interlocutory order of Gilmore J. which granted, until trial, an injunction prohibiting Mr. Kapur from, among other things, competing in any way with Xthetica Canada Inc. (XCI) or soliciting the customers of XCI.

[2] Rule 59.06 permits a motion to vary an order “on the ground of…facts arising or discovered after” the order was made. The moving party must show that the evidence could not have been put forward through reasonable diligence at the time of the original motion and that the evidence, if known, might reasonably have altered the result.

[3] Most of the grounds advanced by Mr. Kapur on this motion were advanced before Gilmore J. Kapur sought leave to appeal that order and was unsuccessful. To the extent issues now raised were raised before Gilmore J. and/or on the motion for leave to appeal, the present motion is nothing more than a thinly veiled attempt to re-argue the merits. That, of course, is prohibited by Rule 59.06. For this reason, I reject most of the arguments advanced by Kapur as being an attempted re-do of the original motion.

[4] There are, however, two related issues that were not before Gilmore J. that gave me great concern and which caused me to take the matter under reserve for detailed and further consideration. The first of these issues is that, although the injunction was granted on September 24, 2020, over 15 months ago, at this point the pleadings are not even closed. There has been no production of documents, examinations have not even been scheduled and there is, for this reason, absolutely no prospect of an imminent trial of the claims advanced against Kapur and his corporate entities in these proceedings. The second issue is that the Professional Services Agreement (PSA) setting out the terms of Kapur’s work with XCI and which lay at the heart of the injunction granted by Gilmore J. in September 2020, specifically provides that Kapur is prohibited from: a) competing with XCI “during the term of this agreement” (which was only one year and expired in July 2020); and, b) soliciting XCI customers for six months following termination of Kapur’s employment, (which also occurred in July 2020).

[5] Having now considered the matter, for the reasons that follow I grant the motion in part.

[6] A party who has obtained an interlocutory injunction is obliged to pursue his or her case with reasonable dispatch. Failure to do so may result in the dissolution of the injunction: Bourganis v. Glarentzos (1978), 1978 CanLII 1651 (ON SC), 19 O.R. (2d) 327 (H.C.J.).

[7] Here, most of the delay has been taken up with the plaintiffs by counterclaim seeking to add parties. Pleadings are not yet closed. It cannot have reasonably been in the contemplation of the Court when the injunction was granted that over fifteen months later, almost nothing would have been done to advance the plaintiffs by counterclaims’ action against Kapur. As Gilmore J. noted, the most stringent standards apply where an injunction will interfere with a person’s ability to earn a livelihood.

[8] There is no doubt that the obligation is on all parties to move matters forward expeditiously in the face of an interlocutory injunction. There is also no doubt that Kapur, while he was seeking leave to appeal, did not file his defence to the counterclaim. Given the issues with the plaintiffs by counterclaim adding parties, however, it is not at all clear that Kapur’s actions contributed to the overall delay. And, even if the plaintiffs by counterclaims’ delay were not sufficient, standing alone, to terminate the injunction, there is a further and even more compelling reason to do so.

[9] The essence of Gilmore J.’s reason for granting the interlocutory injunction preventing Kapur from competing and soliciting customers was Kapur’s “cavalier attitude towards the agreements he signed” with XCI. Specifically, she found that Kapur’s actions were in violation of the non-competition provision in the PSA. This gave rise to her further conclusion that a “breach of a negative covenant” vitiates the need for proof of irreparable harm.

[10] Leaving aside the fact that, by September 2020, the agreement had already come to an end, there was no consideration of how long the contractual non-compete was actually for. It is now over 15 months since the injunction was granted and Kapur has been prohibited from competing for the entire time. Any “springboard-effect” advantage he may have had at the time of the injunction motion is long over, given that the plaintiffs by counterclaim have been given unimpeded access to their market for over 15 months. Similarly, the non-solicitation provision, by its express terms, only lasted 6 months after Kapur’s termination. That period has also long expired.

[11] The plaintiffs by counterclaim argue that their claim is not based on breach of contract but on oppression and alleged breach of fiduciary duty. Accordingly, they argue, the provisions of the PSA are not relevant to Kapur’s obligations not to compete or solicit customers.

[12] There are at least two problems with this argument. First, neither oppression nor fiduciary duty are anywhere mentioned in Gilmore J.’s analysis. Her decision to grant an interlocutory injunction prohibiting Kapur’s competition and customer solicitation was entirely, and explicitly, based on the terms of the PSA. Second, the oppression remedy is, at its core, a remedy designed to uphold the parties’ reasonable expectations. The cases are legion that the most useful and usually determinative guide to the parties’ reasonable expectations is what they themselves agreed to in relevant contracts and other legally binding documents. Far from being irrelevant to Kapur’s obligations, the PSA must be considered to be at the heart of Kapur’s obligations in connection with claims under the oppression remedy.

[13] For these reasons, the motion is granted in part. The non-competition and non-solicitation obligations involving Kapur personally are terminated, with the result that he personally is not prohibited from working in the non-invasive aesthetics and dermatology industry and is not prohibited from contact with persons or entities which may happen to be customers of the plaintiffs by counterclaim as well. Damages, if any, will be an adequate remedy. All other provisions of the injunction remain in force.

[14] The parties agreed on costs of $33,000 (all inclusive) to the successful party. Those costs shall be paid by the plaintiffs by counterclaim to Kapur forthwith.

Penny J.

Date: December 13, 2021