Cite as: J. W. Bird and Company ltd. v. Levesque, 1988 NSSC 3 S.H. No. 62843
IN THE SUPREME COURT OF NOVA SCOTIA
TRIAL DIVISION
BETWEEN:
J. W. BIRD and COMPANY LIMITED
Plaintiff
- and -UICHEL LEVESQUE, CORNERSTONE CONSTRUCTION
PRODUCTS LIMITED and CORNWSTONE
DEVELOPMENTS
Defendants
HEARD : at Halifax, Nova Scotia, before the Honourable Mr. Justice John M. Davison, in Chambers, on December 30, 1987. DECISION: February 3, 1988
COUNSEL: Colin D. Bryson, Esq., for the Plaintiff
R. J. Ross Stinson, Esq., for the Defendants
James P. Boudreau, Esq., for the Defendants
S.H. No. 62843
IN THE SUPREME COURT OF NOVA SCOTIA
TRIAL DIVISION
BETWEEN: J. W. BIRD and COMPANY LIMITED Plaintiff - and -MICHEL LEVJSQUE, CORNERSTONE CONSTRUCTION
PRODUCTS LIUITED and CORNERSTONE
DEVELOPMENTS
Defendants
DAVIS0N.J.:
This is an application for an interim injunction
restraining the Defendants, and any companies owned or
controlled by the Defendants, from directly soliciting the
customers and suppliers of the Plaintiff and from inducing
the employees of the Plaintiff to work for the Defendants.
The Plaintiff commenced an action by an Originating
Notice and Statement of Claim issued on the 9th day of
December, 1987, claiming, "for a reasonable period of time",
an injunction the terms of which are consistent with that
which was being sought on an interim basis and also for
general damages.
In support of the application for an interim
injunction, the Plaintiff filed the Affidavit of J. W. Bird,
Chairman of the Plaintiff company, and the Defendants filed
the Affidavit of Michel Levesque.
The Plaintiff is said to be in the business of
supplying "specialty construction products" to parties
involved in the construction industry in the Alantic
provinces. It is alleged that these products are not readily
available in building supply stores and that the Plaintiff's
advantage lies in its knowledge of suppliers for these
products which knowledge has been accumulated over a number
of years. The Plaintiff regards its knowledge of suppliers
and customers and its relationship with them as privileged
and confidential trade information which belonged to the
Plaintiff.
The Defendant, Michel Levesque, was employed with
the Plaintiff until November 30th, 1987, and had been employed
with that company for over seven years as a sales
representative. In his Affidavit, Mr. Bird says that Mr.
Levesque was responsible for approximately 50 "key" accounts
and that during his years with the Plaintiff company, Levesque
had the opportunity of developing relationships with suppliers
of the Plaintiff. Mr. Bird's Affidavit goes on to describe
Mr. Levesque as one of four most senior people responsible
for specialty construction products in Nova Scotia who
reported to the Nova Scota Divisional Manager of Specialty
Construction Products who in turn reported to Mr. Bird.
Mr. Levesque was said to be in the top 10% of employees
as far as remuneration was concerned and was earning a base
salary of $35,000 a year plus expenses and commissions.
It is alleged that Mr. Levesque, before he left
the employ of the Plaintiff, approached one of the Plaintiff's
suppliers and advised that he was going into business for
himself and that Mr. Levesque also attempted to induce one
Madelon Parker to leave the employ of the Plaintiff and
join Levesque in his new venture. Madelon Parker was
described as a temporary seasonal employee involved in
revision of cost and price structures. It is also alleged
that Levesque approached customers of the Plaintiff before
his resignation with a view to securing them as his customers.
It is alleged that the Defendant, Cornerstone
Construction Products Limited, was incorporated on November
9th. 1987, and that the name Cornerstone Developments was
registered as a business name under the Partnerships and
Business Names Reqistration Act, R.S.N.S., 1967, c.225 on
May 14th, 1987.
It is alleged by Mr. Bird in his Affidavit that
solicitations by Mr. Levesque to the suppliers and the
customers "may we11 have caused damage" to the Plaintiff
but that "it is too early to know that with any certainty".
It is also alleged that if the Defendants are permitted
to continue to solicit the suppliers and customers of the
Plaintiff, the solicitations will result in irreparable
harm through lost business.
In his Affidavit, Mr. Michel Levesque stipulates
that his employment with the Plaintiff was not the subject
of a written agreement and that during his tenure with the
company he had no involvement "at the managerial level"
and performed no managerial functions. Mr. Levesque states
that the business carried on by the Plaintiff was not unique
or special to the Plaintiff company and that many other
companies carry on a business of a similar nature. The Affidavit also stated that the knowledge and access to producers and suppliers were generally known throughout the construction industry. It is said that the identity
of any customers or suppliers were readily attainable through
references to the membership list of the Nova Scotia
Construction Association or by visiting job sites and
examining business directories.
Mr. Levesque went on to attest to the fact that
when he resigned from the Plaintiff company by letter dated
November 16th, 1987, he returned all written documentation
and customer lists and has not retained any copies of this
documentation. He states that the contact that he has had
with the customers and suppliers was initiated and based
upon his knowledge and skill acquired during his time in
the industry generally and was not based upon any written
confidential information or customer lists. Mr. Levesque
denies attempting to solicit business from the one customer
referred to in the Affidavit of Mr. Bird and denies inducing
any employees to breach their contract with the Plaintiff
corporation. His Affidavit goes on to state that Madelon
Parker had advised him that she had already tendered her
resignation to the Plaintiff before entering into employment
negotiations with the Defendant company. Mr. Levesque also
denies making representations to any of the Plaintiff
company's customers before leaving the employ of the Plaintiff
company. He denies revealing confidential information or
trade secrets about his former employer and states that
any information of which he made use was based on his own
personal skill and knowledge.
The court's jurisdiction to grant interlocutory
injunctions is found in s. 39(9) of the Judicature Act S.N.S.
1972, c.2. It may be granted when it appears to the court
that it would be just and convenient to do so. The discretion
in the court is wide.
The interlocutory injunction has been used as
a procedure for maintaining the status quo prior to the.
trial of an issue. As the rights of parties are affected
prior' to a full trial the remedy has been considered, and
in my view, should still be considered an extraordinary
remedy.
The traditional factors required of an applicant for attaining an injunction, which seemed to have been crystallized by the House of Lords in J.T. Stratford 6 Son Ltd. v. Lindley. [I9651 A.C. 269, were to prove by way of a prima facie case that there has been an infringement of his rights and that irreparable harm will ensue which could not be compensated by damages. The Applicant usually must show that the inconvenience he will suffer, if the remedy is refused, is greater than the inconvenience to the Defendant if the injunction is granted. Ten years after the Stratford case, the House
of Lords handed down the decision in American Cyanamid
Co. v. Ethicon Ltd., [1975] 2 W.L.R. 316. In that case,
Lord Diplock rejected the suggestion that the Plaintiff was required to prove a prima facie case and went to say a t page 323: The court no doubt must be satisfied
that the claim is not frivolous or
vexatious; in other words, that there
is a serious question to be tried.
... So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought. This apparent conflict between two judgments of the House of Lords left the Bar in England and the Court of Appeal, when deciding Fellowes 6 Son v. Fisher, [1975] 3 W.L.R. 184, in a quandary. Lord Denning, M.R. pointed out that the House did not refer to the Stratford case in its judgment in the American Cyamamid case and goes on to reconcile the two cases by finding that the Fellowes case fell within the exceptional cases referred to by the House as involving "special factors to be taken into consideration in the particular circumstances of individual cases". Denning, M.R. added that these individual cases are important and numerous. Browne, L.J. rationalized the difference in the two cases by pointing out that the House in the Stratford case adopted a principle which was common ground between counsel whereas in the American Cyanamid there was direct decision on the point. There is no doubt the Court of Appeal had difficulty with the reasoning of the House of Lords including the imposition of "rigid rules" for a discretionary remedy.
The American Cyanamid test has received a mixed
reaction in Canada. In Ontario, the courts, initially,
appeared reluctant to follow the rules laid down by Lord
Diplock and Holland, J. in Cradle Pictures (Canada) Ltd.
v. Penner (1976). 63 D.L.R. (3d) 440 stated at p.443:
In my view, for me to make an order enjoining Anne Penner and Penner Studio Ltd. from carrying on the activities above described I must first be satisfied that the plaintiff has made out a strong prima facie case that Mrs. Penner and this company are in fact carrying on this business under the direction, supervision and control of Mr. Penner. In American Cyanamid Co. v. Ethicon Ltd., [I9751 2 W.L.R. 316, the House of Lords appeared to indicate that this is no longer the test; the test being only whether there was a serious question to be tried. In Pellowes 6 Son v. Fisher, in which judgment was delivered by the Court of Appeal in England on May 2, 1975, members of the Court expressed the view that the decision of the House of Lords in the American Cyanamid Co. case on the principles to be applied when Courts were asked to grant an interlocutory injunction, not only was at variance with the approach of the House until that time but also represented a complete departure f r t he practice in England up to that time. Whatever may be the law of England at the present time it certainly appears to me that the test I have outlined above . is the law of Ontario at the present time Other cases in Ontario cast a different complexion
and I refer to Bernard v. Valentini (19781, 18 O.R. (2d)
656 and Labelle v. Ottawa Real Estate Board (1977), 16 O.R.
(2d) 502.
The Manitoba Court of Appeal in Lambair Ltd. v.
Aero Trades (Western) Limited (1978). 87 D.L.R. (3d) 500
rejected the American Cyanamid approach whereas a single
judge in British Columbia adopted it in Bowman Products
(Canada) Ltd. v. Fach (1976). 24 C.P.R. (2d) 282.
In Nova Scotia, Mr. Justice Burchell conducted an incisive review of the relevant principles in McFetridge v. Nova Scotia Barristers Society (19811, 48 N.S.R. (2d) 323 and applied the test in the American Cyanamid case.
An appeal was allowed but on the grounds other than the
issue raised by the American Cyanamid case.
On the other hand, it is clear from Mercator Enterprises Ltd. v. Harris 6 Mainland Investments Ltd. (1978). 29 N.S.R. (2d) 691 and United Rubber, Cork, Linoleum and Plastic Workers of America v. Michelin Tires (Canada) Ltd. (1979). 35 N.S.R. (2d) 104, both of which were decided
subsequent to the American Cyanamid case, that the law in
Nova Scotia requires the Plaintiff to "ordinarily" show
a strong prima facie case.
Hallett, J., of our Court, in Lintaman v. Goodman
(1982). 54 N.S.R. (2d) 320 expressed the view that the
decisions of the Appeal Division in Mercator and in Aspotogan
v. Lawrence (1976). 14 N.S.R. (2d) 501 don't limit the
approach t h e c o u r t s h o u l d t a k e and t h e i m p o r t a n t q u e s t i o n , i s c o n v e n i e n t " t o do so . I a g r e e t h a t t h e r e w i l l be j u s t t o g r a n t an i n j u n c t i o n proof of a p r ima f a c i e c a s e . U l t i m a t e l y , t h e i s s u e i s w h e t h e r it would be " j u s t and c o n v e n i e n t " and t h e j u d i c i a l d i s c r e t i o n r e q u i r e d s h o u l d n ' t b e f e t t e r e d N e v e r t h e l e s s , a n i n j u n c t i o n e x t r a o r d i n a r y remedy a n d , i n c o u r t s h o u l d r e q u i r e a h i g h e r e x i s t e n c e of " a s e r i o u s q u e s t i o n t o be t r i e d " o r p r o o f t h e c l a i m s a r e n o t " f r i v o l o u s d i f f i c u l t t o meet t h e s e t e s t s when by way of A f f i d a v i t o r by way would s u g g e s t , w i t h r e s p e c t , where a p a r t y s e e k s i n t e r v e n t i o n which res t r ic ts t h e r i g h t s of a n o t h e r b e f o r e a f u l l t r i a l on t h a t p a r t y s h o u l d be t o advance a p r ima f a c i e c a s e . Be fo re l e a v i n g t h i s t h e r e c e n t judgment o f t h e Supreme Cour t o f F i n a n c i a l S e r v i c e s L i m i t e d v. 2 which d e a l t w i t h a Mareva i n g r a n t i n g an i n j u n c t i o n whether it i s " j u s t and w i l l be s i t u a t i o n s where it d e s p i t e t h e l a c k of w i t h t o o many r u l e s . s h o u l d be c o n s i d e r e d a n my o p i n i o n , i n -most c a s e s a s t a n d a r d t h a n p roof o f t h e t h a t o r v e x a t i o u s " . I t i s n o t you a r e a d v a n c i n g p roof of compet ing- A f f i d a v i t s . I " o r d i n a r i l y " o r i n most c a s e s on t h e i s s u e , t h e bu rden e v i d e n c e t o i n d i c a t e s u b j e c t , I would r e f e r t o Canada i n Aetna Feige lman 119851 1 S.C.R. i n j u n c t i o n . E a r l y i n h i s
judgement, Estey, J. spoke of interlocutory injunctions
generally and referred to The Chesapeake and Ohio Railway
-Co. v. Ball, [1953] O.R. 843 where McRuer, C.J.H.C. stated 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 wlll 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's.
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.,
[I9751 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.
Although recognizing the doubts cast on the "prima
facie" rule, Mr. Justice Estey refrained from endorsing
those doubts. On the other hand, he clearly indicated the
need for good and valid reasons before the remedy is granted.
I now turn to the substantive issues raised by
the Plaintiff in the action and in submissions made before
me. I need not review the law in great detail but must
give consideration to whether the Plaintiff has convinced
me it has a prima facie case.
It is the position of the Applicant that:
(a) the information that the Defendant took when he left the employ of the Plaintiff constituted "trade secrets"; (b) Alternatively, the relationship the Defendant
had with the Plaintiff was fiduciary in
character and the Defendant has breached
that trust;
(cl If the relationship was not fiduciary, the
Defendant made improper use of confidential
information belonging to the Plaintiff and
should be restrained. In this respect, the
Plaintiff relies on the judgment of O'Leary,
J. in Monarch Messenger Services Ltd. v.
Bouldinq (1984), 2 C.P.R. (3d) 235.
~t the outset, this case must be distinguished
from those where employees have entered contracts with
employers restricting activities following departure from
employment. We are not concerned with the very basic struggle
between freedom to contract and the right to be free from
restraints on trade.
The Defendant denies taking any confidential
documents. There is no suggestion that he left the employ
of the Plaintiff with any thing other than the additional
knowledge and skill with respect to the products sold by
the Plaintiff and knowledge of the customers and suppliers
which, in my view, cannot be considered "trade secrets"
in the sense that processes or procedures peculiar to the
Plaintiff would be considered "trade secrets". Most sales
organizations have customers and suppliers and the identity
of these customers and suppliers are not peculiar to the
individual sales organization. In the absence of a contract
prohibiting solicitation or in the absence of a fiduciary
relationship, there should be no restriction on persons
who wish to engage in trade with customers or suppliers.
When an employee reaches a senior level of
employment, a fiduciary relationship develops with his
employer prohibiting the employee, upon leaving the
employment, from breaching the trust by soliciting business
from customers of the former employer. It arises because
of the obvious conflict of interest situation in which the
former employee finds himself. There is no duty upon other
employees to refrain from competing with a former employer.
For a better understanding, I refer to Alberts v. Hountjoy
(1977), 16 O.R. (2d) 682; Hudson's Bay Company v. McClocklin,
[I9861 5 W.W.R. 29; Canadian Aero Service Ltd. v. O'Malley
(1973). 40 D.L.R. (3d) 371 (S.C.C.)
I am not convinced by the Affidavit evidence before
me that the Defendant had such a position with the Plaintiff
or that he assumed the responsibility of the strict ethic
imposed on senior employees or directors as that ethic is
described by Laskin, J. (as he then was) in the Canadian
Aero Services Ltd. case (supra).
In my view, the Plaintiff has not established
a prima facie case. If one applied the American Cyanamid
test, I would have greater difficulity saying that the
competing Affidavits did not raise a serious question to
be tried but that test, in my view, could be satisfied in
all but the most frivolous of applications.
I agree with the submission of counsel for the
Plaintiff that damages of the Plaintiff would be difficult
to calculate. For that matter, the same could be said of
the damages of the Defendant should the injunction be granted.
The fact that damages are difficult to calculate does not
eliminate the responsibility of the court to assess them
but it may render damages an inappropriate remedy.
In any event, it is my view that one of the most
important factors in determining whether an injunction is
"just and convenient" is the weighing of the balance of
convenience. When I consider the evidence of Mr. Bird that
the alleged action of the Defendant "may well have caused
damage" to the Plaintiff in contrast to that of Mr. Levesque
wherein he attests that an injunction would "effectively
shut down" his business resulting in irreparable damage,
I have no difficulty in finding that the balance of
convenience strongly favors refusal of the injunction.
There remains for consideration the allegation
of the Plaintiff that the Defendant, Levesque, has induced
an employee to leave her employment with the Plaintiff and
that an injunction should be granted to prevent similar
acts in the future. The Defendant denies inducing any
employees to breach their contract of employment and states
that the specific employee referred to by Mr. Bird, who
was a temporary seasonal employee, had tendered her
resignation to the Plaintiff company before entering
negotiations with the Defendant company.
The Plaintiff has not adduced evidence to indicate
the Defendant has started a campaign to lure employees from
the Plaintiff or that there is danger the Defendant would
take similar steps with other employees.
Even if it could be said the Plaintiff has advanced
sufficient facts to warrant the remedy sought and even if
it could be said the application was not premature, and
I have doubts with respect to both counts, I have not been
convinced that irreparable harm would result and that damages
would be inappropriate.
The application is dismissed with costs to the Defendants in any event of the cause. < Halifax, Nova Scotia
February 3, 1988
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