Cite as: Action Business Machines Ltd. v. Coady, 1988 NSSC 21 S.H. No. 66203
IN THE SUPREUB COURT OF NOVA SCOTIA TRIAL DIVISION BETWEEN: ACTION BUSINESS MACHINES LIMITW Plaintiff - and -FRANK COADY, ROGER LANDRY, OWEN UacNEIL, BRIAN McCOWREY, FAYE COADY and POS ATLANTIC LIMITED Defendants HEARD: at Halifax, Nova Scotia, before the Honourable Mr. Justice John M. Davison, in Chambers, on Thursday, October 27th, 1988 DECISION: November 9, 1988
COUNSEL: James L. Connors, Esq., for the Plaintiff
Sandra B. MacPherson, Esq., for the Plaintiff
M. Lee Cohen, Esq., for the Defendants
Glen Johnson, Esq., for the Defendants
S.H. No. 66203
IN TEE SUPREME COURT OF NOVA SCOTIA
TRIAL DIVISION
BETWEEN: ACTION BUSINESS MACHINES LIHITED
Plaintiff - and -PRANK COADY, ROGER LANDRY, OWEN MacNEIL,
BRIAN WcCOWREY, PAYE COADY and
POS ATLANTIC LIMITED
Defendants
DAVISON, J.:
The Plaintiff is a supplier of point of sale technology
and equipment to retail outlets in the Atlantic provinces. Until
recent times, the Plaintiff also carried on business in Ontario
but by reason of financial stress their office in that province
was closed in 1987.
The individual Defendants are all former employees
of the Plaintiff and are now employees of the Defendant, POS
Altantic Limited, which was incorporated in August of 1988. This
Company was incorporated by several of the individual Defendants
and in the last several weeks, all of the individual Defendants
left the employ of the Plaintiff and became employees of the
Defendant, POS Atlantic Limited.
This application is for an Injunction to: 1) restrain the Defendants from contacting, soliciting or competing with the Plaintiff for customers; 2 ) from soliciting the employees of the Plaintiff; 3 ) from contacting the creditors or suppliers of the Plaintiff; 4) from disclosing or disseminating information concerning pricing
policies, supply policies, product line information, new
product line information, problems with existing product
lines, or other "confidential" information acquired by them
in the course of their employment with the Plaintiff
corporation;
5 ) require the Defendants to deliver to the Plaintiff all "file materials gathered while in the course of employment with the Plaintiff corporation for inspection by the Plaintiff corporation and for preservation by the Plaintiff corporation". All of the evidence advanced on behalf of the Plaintiff
was contained in two Affidavits of Timothy Adams, the President
of the Plaintiff Company. Counsel for the Defendants elected
not to cross-examine Mr. Adams. The Defendants submitted long
Affidavits of Frank Coady, Faye Coady and Owen MacNeil, all of
whom were cross-examined by counsel for the Plaintiff.
The time constraints on the Defendants did not permit
early filing of the Affidavits and other material. I considered
it necessary to reserve my decision to review this material.
The Affidavits are on file and because the nature of the
application dictates an early decision, I will not review the
facts in detail.
In J. W. Bird and Company Limited. v. Levesque et a1 (19881, 82 N.S.R. (2d) 435, I set out in some detail my views on the approach which should be taken in considering an interlocutory injunction. The court must exercise its discretion and grant injunctions when it is just and convenient. In exercising the discretion, it must be remembered that the remedy is considered an 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 Limited V. Levesque et al, (supra), at p. 440, I referred to the judgment of the Supreme Court in Aetna Financial Services Limited v. Feigelman, I19851 1 S.C.R. 2. In that case, Estey, J. referred to the Chesapeake and Ohio Railway Co. v. Ball, 119531 O.R. 843 where McRuer, C.J.H.C. stated at p. 854:
The granting of an interlocutory injunction
is a matter of judicial discretion, but it
is a discretion to be exercised on judicial
principles. I have dealt with this matter
at length because I wish to emphasize how
important it is that parties should not be
restrained by interlocutory injunctions unless
some irreparable injury is likely to accrue
to the plaintiff, and the Court should be
particularly cautious where there is a serious
question as to whether the plaintiff would
ever succeed in the action. I may put it
in a different way: If on one hand a fair
prima facie case is made out and there will
be irreparable damage if the injunction is
not granted, it should be granted, but in
deciding whether an interlocutory in junction
should be granted the defendant's interests
must receive the same consideration as the
plaintiff '6.
Following the reference to this passage, Estey, J.
stated:
Reconsideration of the requirement that
the plaintiff must show a 'strong prima facie
case' has come in the wake of the decision
of the House of Lords in American Cyanamid
v. Ethicon Ltd., [1975] A.C. 396. However,
the other principles enunciated by McRuer
C.J.H.C. remain unimpaired. As a general
proposition, it can be fairly stated that
in the scheme of litigation in this country
orders other than purely procedural ones
are difficult to obtain from the Court prior
to trial.
It is encumbant on the Applicant to advance a prima
facie case and show that irreparable harm will ensue which would
not be compensated in damages. The court must weigh the balance
of convenience and consider the effect o f the injunction on the
Defendants as well as the Plaintiff.
STRONG PRIMA FACIE CASE
In J. W. Bird and Company Limited v. Levesque et al,
(supra), I stated at p. 439:
I agree that there will be situations where
it will be just to grant an injunction despite
the lack of proof of a prima facie case. Ultimately, the issue is whether it would be .just and convenient. and the judicial discretion required shouldn't be fettered with too many rules. Nevertheless, an in junction should be considered an extr in aordinary remedy and, in my opinion, most cases a court should require a higher standard than proof of the existence of 'a serious question to be tried' or proof that the claims are not frivolous or vexatious'. It is not difficult to meet these tests when you are advancing proof by way of affidavit or by way of competing affidavits. I would suggest, with respect, 'ordinarily' or in most cases where a party seeks intervention vhich restricts the rights of another before a full trial on the issue, the burden on that party should be to advance evidence to indicate a prima facie case. It is the Plaintiff's submission that the individual
Defendants, with the exception of Faye Coady, had positions with
the Plaintiff company of such seniority as to give rise to a
fidicuary duty as discussed by the Supreme Court of Canada in
Canadian Aero Service Ltd. v. OmHalley (1973). 40 D.L.R. (3d)
371 at 381-2. In that case, the court distinguished between
"top management" and "mere employees". The duty of the latter,
in the absence of contrary contractual terms, was limited to
respect for trade secrets and confidentiality of customer lists.
Laskin, J. (as he then was) stated at p. 382:
... the fiduciary relationship goes at least this far: a director or a senior officer like O'Malley or Zarzycki is precluded from obtaining for himself, either secretly or vithout the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for vhich it has been
negotiating; and expecially is this so where
the director or officer is a participant
in the negotiations on behalf of the company.
In his Affidavit, Timothy Adams described Frank Coady
as a Marketing Manager and a Director of the Plaintiff who managed
the Sobey's account. Adams described Roger Landry as head of
the New Brunswick and Prince Edward Island operations and Owen
MacReid as Service Manager for the Plaintiff who arranged the
servicing and supplies of all service contracts.
The Defendants minimized their positions of
responsibility. In the cross-examination of Coady, it was
established that he was a Director and had signed resolutions
and other documents as a Director but he did not participate
as a Director at any meetings and did not conduct any
responsibilities as a director.
I find that the Plaintiff has established, by the
Affidavits of Timothy Adams, a prima facie case. I hasten to
say that I found Frank Coady's evidence credible when he gave
testimony which would suggest he was a nominal director only
but I did not have the opportunity of observing Mr. Adams on
the stand. It would be unfair to foreclose the Plaintiff from
a remedy on the basis of conflicting Affidavits. In this
situation, the strength of the Plaintiff's case should be
determined by the trial judge. For the purposes of this
application, I find the Plaintiff has advanced sufficient evidence
- 7 -
to establish a prima facie case.
IRREPARABLE DAHAGE It is the position of the Plaintiff that the continued solicitation of customers, employees, creditors and suppliers will cause the Plaintiff irreparable harm. In particular, the Plaintiff refers to the decrease in revenue if it loses major accounts such as Sobey's Ltd. and Atlantic Wholesalers Limited. Mr. Adams says the loss of these accounts would place the Plaintiff "in a serious financial loss position, which given last year's loss, I do not believe the corporation would be able to sustain." Dealing with the request to prohibit solicitation of customers and suppliers, I would note that situation is different from that which faced me in J. W. Bird v. Levesque, (supra). Here, the Plaintiff's concern is the loss of a few major customers. Any damages which may arise from that event in the form of lost revenue would be calculable in damages. It is true that the courts have granted injunctions
where it has been shown the Act complained of would put the
Applicant out of busines. The evidence before me falls short
of convincing me that the Plaintiff will be forced to close its
business but even if I was convinced that the solicitation of
customers and suppliers would have such a serious effect on the
plaintiff, I would have difficulty precluding the Defendants
from carrying on their trade.
On the other hand, it is clear from the evidence that
the Plaintiff has certain key people in its employ with specific
knowledge of the industry. In my view, the Defendants should
be restrained from approaching these key people and from attempting
to seduce them into the employ of the corporate Defendant. The
loss of these employees could cause damage which could not be
calculated in money terms.
There is a direct conflict in the evidence submitted by Affidavit concerning the use of documents of a confidential nature. Adams states that files in connection with the Plaintiff's business with major customers, service information on a product of Telxon, quotations to customers, information on pricing policies and product information were missing following the departure of the Defendants. The Defendants Coady and MacNeil deny taking any documents . There is an allegation in the Affidavit of Mr. Adams
to the effect that Brian McCoubrey is in possession of confidential
information concerning software programmes and system configurations for customers. I did not receive an Affidavit of Mr. McCoubrey.
I cannot make a determination on the accuracy of the
allegations of the Plaintiff with respect to confidential documents
based on the conflicting Affidavits. I will assume some documents
are in the hands of the Defendants and make an Order accordingly.
If such documents are not in the possession of the Defendants,
the direction in the Order will be meaningless but no harm will
have been done.
BALANCE OF CONVENIENCB
The court should be slow to grant injunctions which
restrain trade in the absense of contractual terms to that effect
or other good reason.
The Defendants are commencing a new enterprise in a business in which they are knowledgable as a result of many years of labour. A restraining order would probably terminate this business. I am not convinced, on the evidence before me, that the Defendants' efforts in the industry would have a similar effect on the Plaintiff. In my view, the balance of convenience, with respect
to the application to restrain the Defendants from approaching
customers and suppliers, favours the Defendants.
CONCLUSION
I will sign an Order which:
(1) restrains the Defendants from approaching the present
employees of the Plaintiff with a view to enticing those
persons to leave their present employment. Naturally, the
Order would not restrain the employees of the Plaintiff
from leaving their present employment and taking a job with
the corporate Defendant if the move is done through the
initiative of the employee.
( 2 ) disclosing or disseminating information concerning pricing policies, supply policies or other information of a confidential nature as it relates particularly to the business of the Plaintiff and which is the property of the Plaintiff. This would not restrict the Defendants from making use of general knowledge of the industry and products of the industry acquired during the employment experience. ( 3 ) return to the Plaintiff any file material or documents owned by the Plaintiff. I recognize the danger that my directions may cause
confusion and further difficulties and, in the interest of better
certainty, I state that I am requiring the Defendants to return
documents and to refrain from disclosing information which could
be termed "confidential information" of the Plaintiff's. The
enjoiner does not relate to information generally known in the
industry or documents acquired by the Defendants which are personal
t o them. A s t h e r e has been d iv ided succes s , there w i l l be no c o s t s of t h e a p p l i c a t i o n . Hal i fax . Nova S c o t i a November 9 . 1988
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