Court File and Parties

COURT FILE NO.: CV-24-00723309-0000 DATE: 20240722 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Peninsula Employment Services Ltd., Plaintiff AND: Marc Castillo, Castillo HR Consulting Inc., Borderworx Logistics Inc., Smart Information Technologies Ltd., Creative Minds Children Services Inc., Anita Crawford, Erika Saclayan, Nikki Mathews, Defendants

BEFORE: Brownstone J.

COUNSEL: Kate Findlay / Lawrence Veregin, for the Plaintiff No one appearing, for the Respondent

HEARD: July 22, 2024

Endorsement

[1] This is an ex parte motion for an Anton Piller order against the four personal defendants and Castillo HR Consulting Inc. (“CHR”) (together the “AP defendants”). The motion is based on the AP defendants’ alleged wrongful activities in unlawfully accessing and removing Peninsula’s proprietary information and documentation, infringing its copyright-protected materials and exploiting its trade secrets. In addition to the order to preserve evidence, the plaintiff seeks interim orders to enjoin the continued infringement of copyright and a sealing order pending the return of the motion.

[2] The plaintiff operates an HR outsourcing and consulting business, which includes occupational health and safety consulting. The four personal defendants are former employees of the plaintiff. The personal defendant Castillo was the sales manager for the plaintiff in western Canada, and has founded and owns the defendant CHR, which is an HR outsourcing and consulting business operating out of Vancouver. The three other personal defendants are now employees of CHR and reside in Ontario. They each work from a home office.

[3] The three remaining corporate defendants, BorderWorx Logistics Inc., Smart Information Technologies Ltd. and Creative Minds Children Services Inc. (together, the “Subscribers”) are clients of the plaintiff and subscribe to its HR services. Their subscription contracts entitle them to submit inquiries to and receive tailored advice and/or documentation, as appropriate to each inquiry, from the plaintiff.

[4] The plaintiff owns copyrights in various works including HR employee handbooks and contracts, as well as advisory documents provided to its clients. The personal defendants were all subject to employment agreements when they worked for the plaintiff. The agreements contained confidentiality clauses and confirmed the ownership rights of the plaintiff to the work product. Ownership rights are described broadly:

We maintain exclusive ownership rights, including copyrights, patents, trademarks, trade names, services, marks, industrial designs, trade secrets and other intellectual property rights, in all software, hardware, technology, business plans, documentation, inventions, copyrightable materials, designs, processes, techniques, works of authorship and related know-how and any other material or developments that you may conceive of, invent, design, create, author, write, make or reduce to practice while employed with us, that relate to or are connected with areas of our existing or reasonably foreseeable business interests.

[5] In May 2024, the plaintiff discovered that Mr. Castillo was the authorised contact for one of the Subscribers, BorderLogix, which was said to have 3 employees. The plaintiff found this odd, given Mr. Castillo’s status as one of its former employees. It commenced an internal investigation that revealed that BorderLogix had made over 400 inquiries in the space of 2 years. This exceeded the average number of inquiries for a 3-employee client by more than 25 times and the average number of inquiries for a 22-employee client by close to ten times. The plaintiff discovered that each of the four personally named defendant employees was a contact for at least one of the three Subscribers. The plaintiff had sent the Subscribers hundreds of copyrighted documents in response to their inquiries, prior to discovering the defendants’ role in the Subscribers.

[6] To assist with its investigation, the plaintiff retained a private investigator as well as an audit firm. The private investigator entered into an agreement with CHR on behalf of a fictitious corporation. The audit firm conducted a forensic audit that included a review of the plaintiff’s email system as well as the materials received by the private investigator, including a metadata review.

[7] In order to obtain an Anton Piller order the plaintiff must establish the following four elements:

• A strong prima facie case;
• The damage to the plaintiff arising from the defendant’s alleged misconduct, whether potential or actual, must be very serious;
• There must be convincing evidence that the defendant has incriminating documents or things in their possession; and
• There must be a real possibility that the defendant may destroy such material before the discovery process. See Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] 2 S.C.R. 189 at paras 32 and 36; Promo-Ad v. Keller, 2013 ONSC 1633 at paras. 46-53.

Strong Prima facie case

[8] I find that the plaintiffs have established a strong prima facie case. The results of the investigations it caused to be undertaken provide evidence that the AP defendants together are blatantly infringing the plaintiff’s copyright. The forensic analysis strongly supports the conclusion that the documents provided to the private investigator are the plaintiff’s copyrighted works.

[9] There is a strong prima facie case that the AP defendants:

• Obtained the plaintiff’s copyrighted works unlawfully;
• Have those works in their possession;
• Have improperly copied and reproduced the plaintiff’s copyrighted works;
• Have improperly distributed the copied and reproduced works for their own profit.

[10] Mr. Castillo may have diverted to his own credit card the Subscribers’ payments owing to the plaintiff. There is evidence that all four personal defendants were involved in editing the copyrighted documents that were provided to CHR’s client (the private investigator). Each of the four is listed as a contact for at least one Subscriber.

[11] There is a strong prima facie case that the works are subject to copyright as defined in the Copyright Act, R.S.C. 1985, c. C-42 and the case law, for example Apple Computer, Inc. v. Mackintosh Computers Ltd., [1988] 1 FC 673 (Fed. CA); CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13; P.S. Knight Co. Ltd. v. Canadian Standards Association, 2018 FCA 222.

[12] There is a strong prima facie case that there has been an infringement and secondary infringement of the plaintiff’s copyright. There is a strong prima facie case that the personal defendants engaged in a “deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflect an indifference to the risk of it” and that they are not entitled to be hide behind CHR: Louis Vuitton Malletier S.A. v. Singga Enterprises (Canada) Inc., 2011 FC 776, [2013] 1 FCR 413 at para. 113.

The damage must be very serious

[13] I am satisfied that the damage to the plaintiff is very serious. The AP defendants are undercutting the plaintiff’s pricing with their own customers, and using the plaintiff’s copyrighted work to do so. The production and careful distribution of its copyrighted work is the entire essence of the plaintiff’s business. To lose control over the copyrighted work is to lose control of its business. Serious damage flows from copyright infringement: Canadian Private Copying Collective v. Amico Imaging Services Inc., 2004 FC 469 at para. 18.

There must be convincing evidence that the defendant has incriminating documents or things in their possession

[14] This evidence is clear that the copyrighted documents are in the defendants’ possession. The personal defendants sent copyrighted works to their personal emails while employed by the plaintiff. They are engaged in editing the documents and sending them out by email.

There must be a real possibility that the defendant may destroy such material before the discovery process.

[15] The evidence is electronically held. There is evidence that the evidence can be easily deleted. Likewise it can be concealed. CHR appears to be operating in many jurisdictions. Given the defendants’ deceptive conduct to date I agree there is a real possibility that the evidence would be destroyed if the order is not granted.

[16] The test for an Anton Piller injunction is satisfied. The model order has been appropriately tailored to the circumstances and will issue.

The injunction

[17] The three-part test for an interim injunction is well-known. The plaintiff relies on s. 101 of the Courts of Justice Act, Rule 40.01, and s. 34 and 39.1 of the Copyright Act.

There is a serious issue to be tried

[18] For the reasons set out above in the context of the Anton Piller test, I find the plaintiffs easily satisfy the threshold for the first portion of the test.

[19] A finding of a strong prima facie case may lower the threshold requirements for the other two parts of the test. Nonetheless, I find those two portions of the test are also met, as described below.

Irreparable harm

[20] I find that the plaintiff satisfies this branch of the test. The AP defendants appear to be selling the plaintiff’s own product, and passing it off as their own, at a highly discounted rate. The Subscribers are reaping the benefit of this arrangement. The AP defendants are not removing the metadata from the documents, so that confidential information about the plaintiff’s clients is visible to the third parties with whom the defendants are engaging, resulting in potential reputational harm to the plaintiff. The nature and extent of harm suffered from misuse of confidential information has intangible aspects and is difficult to quantify: Edgetch HVAC Services Ltd. v Ubhi, 2016 ONSC 7564 at paras. 38 and 40.

[21] As stated, I find this branch of the test satisfied.

Balance of convenience

[22] Likewise the balance of convenience favours the plaintiff. The defendants are free to carry on their business – the order sought in no way prohibits them from continuing their HR consulting activities. The injunction is targeted to ensure they do not do so by continuing to infringe the plaintiff’s copyright.

[23] Given the manner in which the defendants are conducting themselves, the plaintiff does not know whether there are other entities, like the Subscribers, with respect to whom the personal defendants and CHR are inserting themselves. The harm to the plaintiff greatly exceeds the harm to the defendants.

Terms of the injunction

[24] Section 39.1 of the Copyright Act permits an injunction to be issued broadly to include works that have not yet been created. The entire nature of the plaintiff’s business is to continually create new copyrighted materials for their clients. I find that the broad injunction is therefore warranted.

[25] The injunction is sought to return 10 days from the date it is served. It will be served along with the Anton Piller order. Service and execution will need to be co-ordinated between Ontario and British Columbia and will take a few days before it happens. In the circumstances, I have amended the order and fix a return date for August 6, 2024, at 9:00 am before me. Should either party seek a different date of return, they may write to my judicial assistant at Linda.Bunoza@ontario.ca

Sealing order

[26] The plaintiff asks that the court file be sealed only for a period of ten days to allow for the service and execution of the order. Failure to grant the sealing order for this brief period risks undermining the remainder of the order. The limited sealing order is therefore granted.

[27] I have signed the order.

Brownstone J. Date: July 22, 2024