Cite as: Action Business Machines Ltd. v. Adams, 1991 NSSC 1 1990 S.H. No. 75271 IN THE SUPREME COURT OF NOVA SCOTIA TRIAL DIVISION BETWEEN: ACTION BUSINESS MACHINES LIMITED, a body corporate, and 1874000 NOVA SCOTIA LIMITED, a body corporate Plaintiffs - and TIMOTHY R. ADAMS, KIRK McCORMICK, JOHN THOMSON, BRAD LESLIE, BARRY MYATT, SYSTECH RETAIL SYSTEMS INC., a body corporate, EQUILEASE INCORPORATED, a body corporate Defendants HEARD: At Halifax, Nova Scotia, before the Honourable Mr. Justice David W. Gruchy, in Chambers, on December 17 and 20, 1990 DECISION: January 3, 1991 COUNSEL: Peter Bryson, Solicitor for the Plaintiffs David Coles, Solicitor for the Defendants
1990 IN THE SUPREME COURT TRIAL DIVISION
BETWEEN: ACTION BUSINESS MACHINES corporate, and 1874000 NOVA SCOTIA LIMITED, a body corporate - and TIMOTHY R. ADAMS, KIRK McCORMICK, BRAD LESLIE, BARRY MYATT, INC., a body corporate, EQUILEASE INCORPORATED, a body corporate GRUCHY, J. This is an action against the defendants wherein damages, special damages agains.t certain of accounting as between the defendants and the plaintiffs, certain declarations and an injunction from competing wi th Action Business breach of a certain non-competition disclosing confidential or proprietary to the plaintiff ABM, and/or and Systech from soliciting ABM's S.H. No. 75271 OF NOVA SCOTIA
.. LIMITED, a body Plaintiffs JOHN THOMSON, SYSTECH RETAIL SYSTEMS Defendants commenced on November 16, 1990, the plaintiffs ask for general the defendants, an restraining Adams and Systech Machines Limited (ABM) in agreement and/or from information belonging an injunction restraining Adams employees or clients. The
- essence of the plaintiffs' claim against the defendants is found in paragraphs 9, 10, 11, 12 and Other aspects of the statement of claim deal with the defendants John Thomson, Brad Leslie and had not been served with any documents pertaining ta this action at the time of the hearing and for the purposes of the application for interlocutory injunction were 23 and 24 of the statement of claim deal with the claims against the defendants actually involved interlocutory injunction and read as follows: "23. ABM repeats the foregoing against the Defendants, Systech and Adams: A. general damages; B. special damages for McCormick, Thomson and Myatt to breach their contracts with ABM; C. special damages for McCormick and Thomson to breach their fiduciary duties to ABM; D. an accounting; E. a declaration that any activities of McCormick, arising from breaches of should be held on a resulting for ABM; F. an Injunction restraining competing with ABM in breach Agreement or from disclosing confidential or proprietary information belonging to ABM; G. an Injunction restraining soliciting ABM's employees or clients. 2
13 of the statement of claim. Barry Myatt. Those defendants not considered. Paragraphs in the application for paragraphs and claims inducing the Defendants inducing the Defendants monies derived from the Thomson and Equilease or the Non-Competion Agreement or constructive trust Adams and Systech from of the Non-Competition Adams and Systech from
- 24. ABM repeats the foregoing against McCormick and Equilease: A. general damages; B. special damages for Thomson and Myatt to breach ABM; C. special damages from his fiduciary duties to ABM; D. an accounting or declaration constructive trust with respect to all monies obtained from sales to customers misappropriation of confidential information belonging to ABM; E. an Injunction restraining McCormick and Equilease from using or disclosing confidential or proprietary information belonging to ABM; F. an Injunction restraining Equilease and McCormick from soliciting ABM's employees or clients;" The application for commenced on the same date as the main action. The plaintiff has in support of the application for injunction: November 19, 1990, Frank Coady McLeod, supplementary affidavit, Coady, supplementary affidavit dated December 14, 1990, and Brent Smith, supplementary affidavit dated December 14, 1990. The defendants have December 17, 1990, of Timothy R. December 17, 1990, the defendant Brent Smith and Frank Coady on their af f idav i ts. 3 paragraphs and claims inducing the Defendants their contracts with McCormick for breaching of resulting or of ABM or through the or proprietary interlocutory injunction was filed the following affidavits Brent Smith dated dated November 8, 1990, Paul dated November 28, 1990, Frank filed affidavits, both dated Adams and Kirk McCormick. On cross-examined Paul McLeod, The plaintiff
- cross-examined Kirk McCormick affidavits. In the case now before Adams was the principal shareholder of Action Business Machines Limited. He sold his shares in that 1989. The agreement of sale of those shares is not before me. The situation may have been much was, however, on the same date was exhibited in the affidavit of Brent Smith. "prohibi ted area" was def ined as meaning of Canada and "prohibited business" same business as is being currently conducted by (Action Business Machines) as of the date of definition of the word "business" business". The following clauses are in the agreement: "2.02 Adams, as an officer, of Systech, agrees with ABM not to carryon or be engaged in the Prohibited Business within the Prohibited Area during the Prohibited Period. 3.01 Adams, as an officer, of Systech, agrees wi th ABM to continue to deal exclusively with ABM in the Prohibited Area in the wholesale sale and supply by of equipment and products ("Systech's Products") required by ABM to conduct its business in the Prohibited Area. 3.02 In consideration of in Clause 3.01, ABM agrees continue to purchase exclusively products for use by ABM in the Prohibited Area, that Systech continues to provide respect to Systech' s Products competitively priced and of good quality." 4 and Timothy Adams on their me, the defendant Timothy Company on February 16, clearer had it been. There a noncompetition agreement which In that agre~ment, the Atlantic Provinces was def ined as meaning "the the agreement". There is no or of the phrase "same director and shareholder that he will cause Systech director and shareholder that he wi 11 cause Systech Systech to ABM Adams' covenants set forth with Adams that it shall from Systech Systech 's provided quality service wi th and such products remain
- I will refrain from making comment on any shortcomings of these clauses. It is not case. The purview of my examination is as Diplock in American Cyanamid A.C. 396 (A.C.): "It is not part of the court I s of the litigation to try to resolve conflicts of evidence on af fidavi t as to facts on party may utimately depend questions of law which call mature considerations. These wi th at the trial. One introduction of the practice of requiring an undertaking as to damages on the grant of an interlocutory injunction was that it "aided the court in doing that such was its great object, thus abstaining from expressing any opinion upon the merits of the (Wakefield v , Duke of .Buccluch 629" The affidavits and the evidence in this matter contain much allegation and counter-allegation. not attempt to resolve the conflicts among those allegations. Certain points stand out in the situation as it was developed before me: 1. There was in fact a non-competition agreement the plaintiffs and the defendant Timothy Adams. 2. Timothy Adams claims that the plaintiff Action Business Machines Limited has breached Article competition agreement and that by reason thereof he treats the agreement as at an end. 3. Timothy Adams claims to be original agreement for the sale of his shares of Action Business Machines. 5 for me to try the issues of the set forth by Lord Company v. Ethicon Ltd. (1975), function at this stage which the claims of ei ther nor to decide difficult for detailed argument and are matters to be dealt of the reasons for the case until the hearing". (1865), 12 L.T. 628 at I need not and will involving 3.02 of the non-owed money pursuant to the
- 6 4 ~ Timothy Adams claims that Action also breached the non-competition machinery from suppliers other than Systech. 5. Timothy Adams has sold products who mayor may not have been part of ABM's "business". 6. Systech appears to be supplying (or former customers) of through a method of leasing through Equilease. is owned and operated by Kirk McCormick, of Atlantic Business Machines. 7. Timothy Adams, through Systech, "Prohibi ted Area" in or about 1990, or during the period non-competition agreement. The Law: I will set forth my I must apply to the factual situation as me. Section 41(e) of the Judicature Act, c. 240 sets forth that an interim injunction may be granted "where it appears to the court to be The case law has developed four determining whether an interlocutory injuction should be granted. Those considerations are as follows: 1. The strength of the Plaintiff's case. Business Machines has agreement by buying to certain customers products to customers Atlantic Business Machines Equilease a former employee started selling in the October or November of contemplated by the understanding of the law which was developed before R.S.N.S. 1989, just and convenient to do so". criteria to be applied In
2. That unless the inj unction is granted, to the Plaintiff will resul~, which cannot be compensated
by damages.
3. The balance of convenience between the parties. 4. The preservation of the status quo. Both the Trial and have considered various aspects injunctions in many cases. I survey those cases. It is generally considered American Cyanamid Company v , Ethicon Ltd. considered t o : be new direction or standard in the consideration of the strength of the plaintiff's decision, a court must be satisfied applicant is not frivolous or vexatious or, in other words, there lS a serious question to be tried. have been a deviation from the granting of interlocutory injunctions "strong prima facie case", be established. Mr. Justice Burchell Barristers' Society (1982), 48 N.S.R. of various cases on the matter including American Cyanamid and following: "The foregoing review may be seen to confirm my view that there is no firm or fixed rule. that the cases reflect an 7 irreparable harm
Appeal Divisions of our Court of interim and interlocutory do not consider it necessary to that the decision in (supra) set what is case and, following that that the claim of the That decision appears to previous test applied in the which required that a in McFetridge v. Nova Scotia (2d) 323 set forth a review of interlocutory injunctions concluded that review by the My own impression is evolutionary trend in which
- 8 the courts, responding to the Ii tigation, are moving away from that is more realistic under as well that there has been a underlying tendency to apply the test that is most to produce the best result. in the usual case a remedy is sought before the commencement
of the trial."
In Lintaman, Gillis, Limited and Maritime Drywall (1980) Riddell Inc., and Bank of Montreal (N.S.S.C.T.D.), Hallett, J., stated at pages 331-2: "Lord o i p Lock went on to state at the W.L.R.' s that unless the material available to court at the hear ing of interlocutory injunction fails plaintiff has any real prospect claim, the court should go balance of convenience lies refusing the interlocutory relief. Applying these principles to this the material filed by the plaintiffs disclose that the plaintiffs succeeding. It· is therefore balance of convenience, keeping in mind that the object of the interlocutory injunction plaintiffs against violation they could not be adequately recoverable in the action if· they the corollary of that, that protection be weighed against of the defendants to be protected against injury resulting from their being prevented rights for which they could not be adequately compensated under the plaintiffs' undertaking defendants were successful at the trial." In Kelly's Stereo Mart Enterprises Ltd., Schneider and Schneider 56 (N.S.S.C.T.D.), Burchell, J. stated at pages 60-61: pressures of more complex
a very heavy onus to one
modern conditions. I think
natural and r think correct
likely
It must also be remembered
Park Construction Services Limited v , Goodman, Thorne (1983),54 N.S.R. (2d) 320 p , 323 in Vol. 2 of the the application for an to disclose that the of succeeding in his on to consider whether the in favour of granting or case, in my opinion, does not fail to have any real prospect of necessary to consider the is to protect the of their rights for which compensated in damages succeed at trial and the plaintiffs' need for the corresponding need from exercising their legal in damages if the (Atlantic Lt.d ; ) v , Schneider (1986), 72 N. S. R. (2d)
- "It is, of course the first principle that relief by way of interlocutory injunction should be granted only because it is being sought full and proper adjudication of the rights and obligations of the parties . Resulting judicial reticence concerning the remedies is reflected of the so-called threshold test. it is unnecessary that I question surrounding the appropriateness of the so-called traditional test of a strong seeming more flexible test that are set forth in American Cyanamid ... in the present case my finding is that, having established the existence of an apparent breach on the part of the Defendant company, the Plaintiff has crossed the threshold of eligibility, whether that be judged traditional test or the American Cyanamid formulation. Once an applicant has crossed the threshold of eligibility by establishing a sufficient case, the second main question that is whether by way of injunction will consequenc~s to both parties if the injunction is either granted or refused. It is in the context of this second fundamental question that and dealt with considerations convenience, preservation of the status quo, harm and the difficulty of latter consideration has been as an aspect of irreparable show that the stress to be placed on those considerations depends upon the particular and they will be emphasized variously in order to produce a just and convenient result... forgotten that Secfion 39(91 of the Judicature Act, S.N.S. 1972, c. 2 which authorizes provides that it may be granted convenient so to do." In J.W. Bird and Company Limited v. Cornerstone Construction Products Developments (19881,82 N.S.R. J. stated at page 439: 9 is a drastic remedy that in exceptional circumstances before there has. been any in the several formulations In the present case review again the oft-debated prima facie case or the a restrictive covenant and according to the so-called the focus shifts to an intervention be just having regard to the the courts have recognized such as the balance of irreparable calculating damages, which put forward in some cases harm. The decided cases circumstances of the case It should not be the remedy of injunction, where it is just or Michel Levesque, Limited and Cornerstone (2d) 435 (N.S.S.C.T.D.), Davison,
- 10 "I agree that there will be situations where it will be just to grant an injunction despite of a prima facie case. Ultimately, it would be 'just and convenient' discretion required shouldn't be fettered with too rules. Nevertheless, an injunction should be considered an extraordinary remedy and, a court should require a higher the existence of 'the serious question to proof that the claims are not It is not difficult to meet advancing proof by way of affidavit or by way of competing affidavits. I would suggest, or in most cases where a party seeks intervention which restricts the rights of another before the issue, the burden on that party would be to advance evidence to indicate a prima facie case." Mr. Justice Davison also later set forth the approach which he considered should be the unr epor t ed decision of Action Frank Coady, Roger Landry, Owen Coady and POS Atlantic Limited, S.H. "In J.W. Bird and Company Limited v. Levesque et al (1988), 82 N.S.R. (2d) 435, I set out in on the approach which should an interlocutory' injunction. its discretion and grant injunctions and convenient. In exercising be remembered that the extraordinary one in that the court is dealing with the rights of the parties short of a full trial on the issues. In J.W. Bird and Company (supra), at p.440, 'I referred Supreme Court in Aetna Financial Feigelman, [1985] 1 S.C.R.,2. referred to the Chesapeake and Ohio Railway Co. [1953] O.R. 843 where McRuer, C.J.H.C. stated at p.854: ,'The granting of an interlocutory matter of judicial discretion, but it is a discretion to be exercised on judicial principles. the lack of proof the issue is whether and the judicial many my opinion, in mos t cases standard than proof of be tried' or I frivolous or vexatious'. these tests when you are with respect, 'ordinarily' a full trial on taken in cases such as this in Business Machines Limited v MacNeil, Brian McCoubrey, Faye No. 66203. He said: some detail my views be taken in considering The court must exercise when it is just the discretion, it must remedy is considered an Limited v. Levesque et al to the judgment of the Services Limited v. In that case, Estey, J. v. Ball, injunction is a I have dealt
- with this matter at length because I wish to emphasize how important it is that restrained by interlocutory irreparable injury is plaintiff, and the Court cautious where there is whether the plaintiff action. I may put in hand a fair pr ima facie case is will be irreparable damage if the injunction is not granted, it should be granted, but in deciding whether an interlocutory injunction defendant's interests consideration as the plaintiff's.' Following the reference to this passage, Estey, J. stated: 'Reconsideration of the requirement that the plaintiff must show a "strong prima the wake of the decision of American Cyanamid v , Ethicon Ltd., However, the other principles C.J.H.C. remain unimpaired. it can be fairly stated li tiga tion in this country orders other than purely procedural ones are difficult Court prior to trial. I It is incumbent on the Applicant to advance a case and show that irreparable would not be compensated weigh the balance of convenience and consider the effect of the injunction on the Plaintiff.'" PRIMA FACIE CASE The material available to application' did not fail to disclose any real prospect of succeeding in their claim. that the plaintiffs have shown against the defendants Adams reservations about the strength 11 parties should not be injunctions unless some likely to accrue to the should be particularly a serious question as to would ever succeed in the a different way: If on one made out and there should be granted the must receive the same facie case" has corne in the House of Lords in [1975] A.C. 396. enunciated by McRuer As a general proposition, that in the scheme of to obtain from the prima facie harm will ensue which in damages. The court must Defendants as well as the me at the hearing of this that the plaintiffs have Indeed, I find a strong prima facie case as and Systech. I have some real of their case as against the
- 12 other defendants but in view of concern myself about that aspect of this matter. IRREPARABLE In view of my affirmative question, I must go on to consider whether, unless the injunction is granted, irreparable harm to the plaintiff will result, which cannot be compensated by damages. The affidavit of Brent major customers, being Sobey IS, Co-Op Atlantic and Lawton IS, account for eighty percent or of ABM I S revenues. He says that McCormick, President of Equilease, has attempted technology to several of ABM's attempted to market Systech's merchandise. in his affidavit as follows: "14. THAT ABM is e spec i a Ll.y vulnerable to competi tion at this time owing to the departure of Myatt and Leslie at significant loss and damage access to the confidential knowledge could result in ABM's loss significant amount of work Defendants' use of Myatt's . particular time could cripple difficult or impossible to quantify in damages likely be irreparable. 15. THAT Thomson now McCormick/Equilease/Systech offices. Thomson, Adams and McCormick would all be aware of what ABM client contracts are Thomson and McCormick would maturing business opportunities with various ABM clients. my finding below, I need not DAMAGE finding to the first Smith establishes that its Boland's, Atlantic Wholesalers, more in hi's capacity as to supply equipment and customers, and previously has He further concludes imminence of the GST. The t.h i s time will cause to ABM. The Defendants' and skill of Myatt of major clients and/or a from those clients.' The knowledge and skill at this ABM. The harm would be and would works with or for from Equilease's Dartmouth coming up for renewal. both be aware of ABM's
--13 16. THAT ABM has spent hundreds and thousands of specific software packages clients and in developing the imminence of the GST this is an extremely important period of time for ABM. particular equipment and technology package, it is likely to retain that package for if the Defendants make use belonging to ABM at this time, they could make significant inroads into ABM's client harm to ABM not quantifiable damages. In particular, maintenance and service contracts form a large percentage of loses the equipment and technology likely to lose the maintenance Accordingly, ABM faces the following losses: a) serious decrease in revenues; b) loss of market share that will be extremely difficult to regain; c) loss of clients owing to maintenance, support and service arising out of the loss of Myatt to Systech/Equilease; d) loss of reputation with suppliers and clients; e) damage to corporate morale." The affidavit and McLeod do not address the matter of supplementary affidavits of Frank Coady and Brent Smith. The evidence concerning viva voce, appears to me to be more speculative than real. I find that the evidence falls me that in the absence of an injunction, the plaintiffs will result, which damages. a great deal of time and dollars developing customer and programs for its major a GST program. Because of Once a client chooses a some years. Accordingly, of confidential information base and cause irreparable or compensable by way of the profits of ABM. If ABM package it is also and service contracts. ABM' s inabili ty to provide supplementary affidavit of Paul damage at all. Nor do the damage, both affidavit and short of persuading irreparable damage to cannot be compensated by
- 14 CONCLUSION Having concluded that to persuade me as to the irreparabi li ty of not consider any further requirements injunction. This application is, have not considered the full case on its merits following a trial, I refrain from ordering costs to either party, but, rather, order "hat costs shall be in the cause. Halifax, N.S. January 3, 1991 the plaintiffs have failed any damages, I need for an interlocutory therefore, dismissed. As I
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.