Court File and Parties

COURT FILE NO.: CV-20-00653442 MOTION HEARD: 20210916, 20220121 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FirstService Residential Ontario, Plaintiff AND: Julian McNabb, Matt Newton, Yianni Eracles and Melbourne Property Management Inc., Defendants

BEFORE: Associate Justice B. McAfee

COUNSEL: Mitchell Smith and Alyssa Jagt, Counsel, for the Moving Party, the Plaintiff Leo Klug, Counsel, for the Responding Parties, the Defendants

HEARD: September 16, 2021, and January 21, 2022

Reasons for Decision

[1] The plaintiff FirstService Residential Ontario (FirstService) moves for an order directing the parties to comply with the proposed discovery plan attached as schedule “A” to the notice of motion.

[2] The motion has now been resolved with respect to certain provisions of the proposed discovery plan. Certain provisions regarding the discovery of documents of the defendants remain in dispute.

[3] On December 18, 2020, this action was commenced against the defendants Julian McNabb (McNabb), Matt Newton (Newton) and Yianni Eracles (Eracles) (collectively the individual defendants) and Melbourne Property Management Inc. (MPM). FirstService seeks, inter alia, damages in the amount of $10,000,000.00 for breach of fiduciary duty, breach of contract, breach of the duty to act honestly in performing contractual obligations, breach of confidence, conspiracy, inducing breach of contract and/or interference with contractual relations, inducing breach of confidence and inducing breach of duty to act honestly in the performance of their contracts with FirstService, loss of revenue and resulting profit, loss of business opportunity and loss of goodwill. Punitive, exemplary, and aggravated damages in the further amount of $750,000.00 are sought as a result of the breaches of duties and wilful and deliberate misuse of FirstService’s confidential information, and MPM’s participation in and encouragement of same.

[4] FirstService alleges that the individual defendants, who made up the entire development team within FirstService’s business in Ontario, resigned from FirstService to join MPM, a direct competitor. FirstService alleges that the defendants began to solicit FirstService’s clients, including through the use of FirstService’s confidential information. The defendants deny liability. McNabb has counterclaimed for $88,917.06 for commissions owing.

[5] Rule 29.1.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 requires the parties to agree to a discovery plan where a party intends to obtain evidence under Rules 30 to 33 and 35. Failing agreement, in accordance with Rule 29.1.05(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court may impose a discovery plan.

[6] The parties now consent to the following amendments to the proposed discovery plan and I so order:

• Affidavits of Documents: the delivery deadline shall be April 15, 2022;
• Documentary Productions of FirstService
  • vii: FirstService will provide a list;
  • vii.a. and vii.b. shall be replaced as follows:
    • a. A list of all property management contracts that were entered into or renewed dating back 36 months prior to the defendant’s resignation. The list should include the name of the party or parties to the contract, the term of the agreement (dates), any termination conditions of the contract, and if the contract was a new contract or a renewal. The value of the contract is still under dispute and the defendants reserve their rights to question on this issue at discovery;
  • vii.c. shall be replaced as follows:
    • c. particulars of all contracts that have been held for 10 years or more and the particulars of the contracts that have been held for 20 years or more, for the 36-month period prior to the individual defendants’ resignations;
  • vii.e. shall be replaced as follows:
    • e. The retention reports for 2017, 2018 and 2019. These reports should be final reports with statistics that are provided to the corporate office;
  • xvii. shall be replaced as follows:
    • xvii. The plaintiff is to provide the average eNPS scores (Associate Engagement Scores) for each of the years 2017, 2018 and 2019. The defendants reserve their rights to examine on the documentation produced;
  • xviii. shall be replaced as follows:
    • xviii. The plaintiff is to provide the average NPS scores (Net Promoter Scores) for each of the years 2017, 2018 and 2019. The defendants reserve their rights to examine on the documentation produced;
  • xix: the wording as set out in the proposed discovery plain is now agreed to;
• Documentary Productions of McNabb, Newton, and Eracles
  • vi.c. shall be deleted;
• Documentary Productions of All Defendants
  • iv. shall be deleted;
  • vii. shall be included with the addition of the word “relevant” after the word “All”;
• Oral Discovery: the dates shall be no later than May 31, 2022;
• A new section shall be included stating as follows:
  • 8. The parties reserve their rights to ask questions on documents produced and to move for further production of documents after the initial examinations for discovery.

[7] What follows are my rulings with respect to the impugned provisions of the proposed discovery plan.

[8] To the extent that the defendants oppose the inclusion of certain provisions arguing in part that portions of the employment agreements between the individual defendants and FirstService are unenforceable, the enforceability of a contract is not an issue appropriately determined on a motion for a discovery plan.

[9] FirstService seeks the inclusion of the following provision with respect to the documentary productions of McNabb, Newton and Eracles, which the defendants oppose:

• iii. Employment agreements/contracts between MPM and the defendants McNabb, Newton and Eracles.

[10] I am satisfied that the documents at iii. are relevant having regard to the pleadings. At paragraph 1(c) of the statement of claim FirstService seeks a declaration that MPM encouraged and assisted the individual defendants in breaching their contractual and common law duties owed to FirstService. The nature and terms of the employment agreements/contracts are relevant to the allegations of breach of duty, solicitation, and conspiracy. The provision shall be included in the discovery plan.

[11] FirstService seeks the inclusion of the following provisions with respect to the documentary productions of MPM, which the defendants oppose:

• i. Employment agreements/contracts between MPM and the defendants McNabb, Newton and Eracles;
• ii. All relevant communications between MPM and any prospective clients or clients of First Service pertaining to MPM’s provision of services to those clients;
• iii. All relevant communications between MPM and any current or former clients regarding the Individual Defendants joining MPM.

[12] The documents at i. are relevant for the reasons given at paragraph [10] above. The provision shall be included in the discovery plan.

[13] I am satisfied that the documents at ii. and iii. are relevant based on the pleadings and the allegations of solicitation. At the time the statement of claim was issued, FirstService was aware of four former clients who were allegedly solicited by the defendants as pleaded at paragraphs 39 to 44 of the statement of claim. Since serving the statement of claim, FirstService learned of other clients allegedly solicited by the defendants (Affidavit of M. Hopkins, paragraph 15). At paragraph 45 of the statement of claim, FirstService pleads that the full extent of the defendants’ further unlawful solicitation is within the knowledge of the defendants. In these circumstances, the productions should not be limited to the specific clients referred to at paragraphs 39 to 44 of the statement of claim. These provisions shall be included in the discovery plan.

[14] FirstService seeks the inclusion of the following provisions with respect to the documentary productions of all defendants, which the defendants oppose:

• ii. All relevant communications regarding employee solicitation between any and all of the defendants regarding FirstService’s employees;
• iii. All relevant communications between any and all of the defendants regarding FirstService and its prospective, current and former clients;
• vi. All financial statements/accounts showing profits/revenues for clients regarding work performed by the Defendants for current and former clients of FirstService;

[15] I am satisfied that the documents at ii. are relevant based on the pleadings. The documents are relevant to the allegations of solicitation of FirstService employees. At paragraph 1(n) of the statement of claim relief is sought in this regard. The applicable non-solicitation clause (11.2) is pleaded at paragraph 21 of the statement of claim and at paragraph 6 of the statement of defence. However, the defendants shall not be required to produce documents regarding employee applications to MPM in instances where those employees had no relevant prior communication with the defendants, referred to on the motion as “cold applications”. This provision, together with the preceding sentence, shall be included in the discovery plan.

[16] I am satisfied that the documents at iii. are relevant for the reasons given at paragraph [13] above. This provision shall be included in the discovery plan.

[17] I am satisfied that the documents at vi. are relevant based on the pleadings and in particular the claim for an accounting and disgorgement of all revenues and profits as set out at paragraph 1(e) of the statement of claim. This provision shall be included in the discovery plan.

[18] With respect to the issue of costs of the motion, the parties agree that the all-inclusive amount of $5,000.00 shall be payable to the successful party. FirstService was successful on the contested issues argued and is entitled to costs of the motion in the all-inclusive amount of $5,000.00 payable by the defendants within 30 days.

Associate Justice B. McAfee Date: March 23, 2022