COURT FILE NO.: CV-18-00605940-0000
DATE: 2022-02-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PUREFACTS FINANCIAL SOLUTIONS INC and K2X0 INC.
R. Campbell, for the Applicants
Applicants
- and -
8088616 CANADA INC, c.o.b. as efektiv, KENNETH CHEUNG and ERIC YU
J. Groia and J. Chan, for the Respondents
Respondents
HEARD: January 11, 2022, Via videoconference at Toronto
Mr. Justice W. D. Newton
Reasons On Motion
Overview
[1] The Plaintiffs (“PureFacts”) seek leave to appeal the arbitral award of the Honourable Colin Campbell dated April 30, 2021 which dismissed PureFacts’ claims against the defendants.
[2] Appeals of arbitration awards, absent agreement to the contrary, are limited to questions of law with leave as set out in section 45 of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”):
Appeal on question of law
45 (1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties. 1991, c. 17, s. 45 (1).[Emphasis added.]
[3] For the reasons that follow, the motion for leave to appeal is dismissed. The issues complained of are not errors of law and would not, if errors of law, significantly affect the rights of the parties.
The Facts
[4] The defendants were employees of PureFacts. Each had signed employment offer letters that contained a non-solicitation provision as follows:
You acknowledge and agree that during your employment and for a twelve (12) month period following the cessation of your employment with the Company for any reason, you shall not without the prior written consent of the Company, individually or in conjunction with any person or entity, directly or indirectly, solicit, induce, interfere with or endeavor to entice away from the Company any customer that you provided service to or with whom you had direct or personal contact on behalf of the Company in the twelve (12) months preceding the cessation of your employment.
[5] After resigning from PureFacts, the individual defendants, through a corporation, were approached by a former client of PureFacts, CPSA, to respond to a Request For Proposal (RFP). PureFacts was also approached. The defendants were shortlisted. PureFacts was not. PureFacts asserts that, by responding to the RFP and using PureFacts’ confidential and proprietary information in their proposal, the defendants breached their employment agreements.
[6] In reaching the conclusion that the “simple act of responding to the RFP”[^1] did not breach the employment agreement, Arbitrator Campbell:
a. Found no evidence of any contact between CPSA and the defendants prior to the invitation to participate in the RFP[^2];
b. Accepted the evidence of the defendants that the defendants had no contact with CPSA prior to the invitation[^3];
c. Found no evidence presented to suggest that PureFacts would have made the shortlist had the defendants not been invited to present further[^4]; and
d. Found the evidence “simply insufficient to support the conclusions that but for the RFP bid” by the defendants, PureFacts would have been successful.[^5]
[7] Arbitrator Campbell also found that by using an hourly rate that they knew to be lower than PureFact’s rate and by incorporating “very limited material from other PureFacts work that they were involved in” the defendants’ actions did not fall into the “breach of confidence category.”[^6]
Issues on Appeal
[8] PureFacts argues that leave to appeal should be granted because the determination of the issues raised by it will have a significant impact on the financial position of the parties and their ability to carry on business. It argues that a different finding on any of the questions of law is likely to change the outcome of the arbitration.
[9] It is the defendants’ position that PureFacts seeks to challenge questions of mixed fact and law which are not appealable under section 45(1) of the Act and that the determination of any legal issues raised by PureFacts will not significantly affect the rights of the parties.
Alleged Errors of Law
Issues Relating to Breach of Confidence
(i) The Arbitrator erred in law by failing to recognize as part of the legal analysis that the information used by the Defendants belonged to PureFacts
[10] PureFacts argues that the Arbitrator, by failing to acknowledge the defendants’ testimony that they used PureFacts’ designs, failed to appreciate the issues and the evidence.
[11] As argued by the defendants, and as referenced above, the Arbitrator clearly stated that the defendants had used “very limited material from other PureFacts work”[^7] thereby acknowledging that the information belonged to PureFacts. The defendants submit that PureFacts is taking issue with the weight the Arbitrator gave to the evidence.
[12] I agree with the defendants. This is not an error of law.
(ii) The Arbitrator erred in law in finding that providing information to a prospective client of assignments the professionals have been involved in, and the incorporation of materials from those assignments, does not breach confidentiality where that information belongs to the professionals’ former employer
[13] The Arbitrator found that “the incorporation of the very limited material from other PureFacts work that they were involved in” did not, “fall into a breach of confidence category.”[^8]
[14] PureFacts argues that the Arbitrator failed to follow authority standing for the proposition that no former employee can use confidential information belonging to their former employer to bid on contracts, thereby committing an error of law.
[15] The defendants argue that PureFacts is challenging the Arbitrator’s application of the breach of confidence analysis to the facts and that this is, therefore, a question of mixed fact and law.
[16] I agree with the defendants. Whether the information was or was not in the “breach of confidence category” involved a determination of the facts before the Arbitrator and is therefore a question of mixed fact and law.
(iii) The Arbitrator erred in law by failing to apply any legal analysis to determine whether or not in assigning an hourly rate which they knew to be lower than the rate used by PureFacts when they were employees, the defendants engaged in a breach of confidence
[17] PureFacts argued that, as the defendants used a lower hourly rate in their proposal than the hourly rate that they knew was formally used by PureFacts, the Arbitrator should have inferred that the defendants intended to underbid PureFacts. Failing to draw the proper inference, PureFacts argues, is a reviewable error of law.
[18] The defendants argue that the failure to draw this inference is not an error of law and submits there was no evidence to support this inference. The evidence was that the list of bidders was confidential and that there was no evidence that the defendants knew that PureFacts had been invited to bid.
[19] I agree with the defendants. This is not an error of law.
Issues Relating to Non-solicitation
(iv) the Arbitrator erred in law in finding that there is no solicitation relying on a dictionary definition of solicitation, in failing to recognize that the law defined solicitation to include submitting a tender or quoting on a contract, and that there is no obligation to respond to an invitation to tender or quote for solicitation to take place
[20] PureFacts argues that by using a dictionary definition of solicitation the Arbitrator used a definition which was “underinclusive and not aligned with the legal concept of solicitation.” PureFacts relies upon a 1994 decision, Atlas Janitorial Services Co. v. Germanis[^9] for the proposition that submitting a tender or quote can amount to solicitation even if those actions follow from an invitation to bid.
[21] The defendants argue that the words in contracts are to be interpreted in their plain and ordinary sense[^10] and that more recent authority establishes that responding to a tender is not solicitation.[^11]
[22] I agree with the defendants. In 2016, in Computer Enhancement, Charney J. considered authorities including Atlas Janitorial and Veolia and concluded:
[87] I have found one case in which submitting a bid at the request of a potential customer was considered to be “soliciting”. In Atlas Janitorial Services Co. v. Germanis, 1994 CanLII 7522 (ON SC), the plaintiff sought damages for loss of business suffered as a result of the defendant’s breaches of a non-solicitation clause in their employment contract. The court states at para. 70:
There is nothing intrinsically difficult in defining soliciting. It simply means to ask for or invite business. Although it was argued, I was not referred to any authority for the proposition that it is not soliciting to submit a tender or to quote on a contract so long as one is doing it at the invitation of the customer. There is no obligation to respond to an invitation to tender or quote. Although the first generates the second, the second does not follow inevitably.
[88] While this does support the plaintiff in this case, the Ontario Court of Appeal’s later decision in Veolia ES Industrial Services, supra, now provides the missing authority for the proposition that submitting a tender or bid at the invitation of a customer is not soliciting. I conclude that Veolia ES Industrial Services represents the applicable legal principle, and the submission of bids in response to tenders or RFPs does not qualify as direct or indirect soliciting. [Emphasis added.]
[23] There is no error of law as the correct legal principles were applied.
(v) The Arbitrator erred in law in failing to apply the legal test for assessing the reasonableness of a restrictive covenant
[24] PureFacts argues that the Arbitrator failed to apply the correct legal test as set out in Elsley v. J.G. Collins Ins. Agencies[^12] for assessing the reasonableness of a restrictive covenant and failed to provide any reasons for his finding that the non-solicitation clause was overly broad and therefore unenforceable.
[25] The defendants argue that the Arbitrator did set out the factors and applied the proper test.
[26] It is clear from the Arbitrator’s decision that he did apply the test as set out in Elsley. At paragraph 32 of the Award the Arbitrator refers to the Elsley factors as set out by the Ontario Court of Appeal in H.L. Staebler Company Limited v. Allan.[^13] In any event, having found that the defendants did not “solicit” CPSA by responding to the RFP, the Arbitrator concluded that there was no violation of the noncompetition clause whether enforceable or not.[^14]
[27] There is no error in law or one which would significantly affect the rights of the parties.
Other Errors
(vi) the Arbitrator erred in law in failing to appreciate the evidence that forces outside of CPSA conducted work with respect to the build phase of the project
[28] PureFacts argues that by misapprehending this evidence the Arbitrator committed an error of law.
[29] The defendants submit that this is a question of fact, not law. Further, the defendants state that this evidence would have no impact upon the final determination in the case as the evidence on the hearing was that PureFacts was not included in the “short list” because the price was not under the predetermined ceiling for the scope of work and that PureFacts was not suitable for the build phase.[^15]
[30] While this may have been an error in the appreciation of the evidence it is not an error which would significantly affect the rights of the parties.
Conclusion
[31] For the foregoing reasons, the application for leave to appeal is dismissed.
[32] The defendants are entitled to their costs of this motion payable by the applicants fixed in the amount of $18,000 inclusive of disbursements and HST as agreed.
“Original signed by”
The Hon. Mr. Justice W.D. Newton
Released: February 10, 2022
COURT FILE NO.: CV-18-00605940-0000
DATE: 2022-02-10
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
PUREFACTS FINANCIAL SOLUTIONS INC and K2X0 INC.
Applicants
- and -
8088616 CANADA INC, c.o.b. as efektiv, KENNETH CHEUNG and ERIC YU
Respondents
REASONS ON MOTION
Newton J.
Released: February 10, 2022
[^1]: Arbitral Award at para. 16. [^2]: Arbitral Award at para. 12. [^3]: Arbitral Award at para. 14. [^4]: Arbitral Award at para. 15. [^5]: Arbitral Award at para. 19. [^6]: Arbitral Award at para. 23 – 25. [^7]: Arbitral Award at para. 25. [^8]: Arbitral Award at para. 25. [^9]: 1994 CanLII 7522. [^10]: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at paras. 47-48. [^11]: Veolia ES Industrail Services Inc. v. Brule, 2012 ONCA 173 at para. 44 and Computer Enhancement v. J>C. Options. et al., 2016 ONSC 452 at para. 83-90. [^12]: 1978 CanLII 7 (SCC), [1978] 2 SCR 916 [^13]: 2008 ONCA 576 at para. 36. [^14]: Arbitral Award at para. 35. [^15]: See Affidavit of Sarath Pillai, sworn March 3, 2021 at paras. 7 and 12.