Ross and Anglin Ltd. c. Thompson |
2012 QCCS 2529 |
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SUPERIOR COURT |
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CANADA |
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PROVINCE OF QUEBEC |
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DISTRICT OF |
MONTREAL |
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No: |
500-17-033327-068 500-17-037257-071 |
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DATE: |
JUNE 6, 2012 |
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______________________________________________________________________ |
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BY |
THE HONOURABLE |
MR. JUSTICE MARK G. PEACOCK, J.S.C. |
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______________________________________________________________________ |
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N° : 500-17-033327-068
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ROSS AND ANGLIN LTD., -And- ROSS & ANGLIN ONTARIO LTD., |
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Plaintiffs |
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v. |
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DAVID THOMPSON, -And- 4327985 CANADA INC., -And- (…), |
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Defendants |
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-And- |
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3812464 CANADA INC., |
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Mise En Cause |
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-AND-
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N° : 500-17-037257-071
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DAVID THOMPSON, -And- 3812464 CANADA INC., -And- DAVID THOMPSON and CRISTINA MARCON, Ès Qualités, for the DAVID THOMPSON FAMILY TRUST, |
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Plaintiffs |
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v. |
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ROSS AND ANGLIN Limited, -And- ROSS & ANGLIN ONTARIO Limited, -And- 119909 CANADA INC., -And- 3001091 CANADA INC., -And- D.T. CONSTRUCTION LTD., |
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Defendants |
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JUDGMENT |
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[1] The English man of letters Samuel Johnson, said in 1759: "A family is a little kingdom, torn with factions and exposed to revolutions." The present litigation involves the departure of one son from a family construction business, the fallout from which has pitted the 82-year old patriarch of the business, Mr. Ted Thompson ("Mr. Thompson") and three of his sons, Mr. Peter Thompson ("Peter"), Mr. Mark Thompson ("Mark") and Mr. Michael Thompson ("Michael"), (collectively, the "Thompson family") on one side against the departing fourth son, Mr. David Thompson ("David"), on the other.[1] Prior to this litigation, the family’s construction business operated mainly through two companies: Ross and Anglin Ltd. ("Ross Ltd.") and Ross & Anglin Ontario Ltd. ("Ross Ontario") (collectively, the "Ross companies").
[2] David, his own family trust and his personal holding company 3812464 Canada Inc. sued their co-contracting parties - the Ross companies and other related companies[2] - for monies owing under a Share Purchase Agreement (the "SPA") whereby David and his related interests in the family businesses were being bought out and David’s employment was being terminated. In his Re-Amended Introductory Motion, the David lawsuit seeks a total $603,957.00.
[3] In defence to these claims, the Ross companies and their related companies allege that their consent to the SPA was vitiated by fraudulent misrepresentations or omissions by David and that David - surreptitiously during and after the negotiations of the SPA: (1) hired away their former employees, (2) misappropriated maturing business opportunities belonging to the Ross companies and, in general, (3) engaged in unfair business competition through the establishment of his own company, 4327985 Canada Inc. ("Construction Lilja").
[4] In their defence, the Ross companies and their related entities seek, amongst others, to have the Court declare, in accordance with art. 1407, that the share transfer stands, save that as a consequence of David’s alleged fraudulent actions, there is no balance owing or a reduced balance owing. Furthermore and in a separate action[3], the Ross companies constituting themselves as Plaintiffs, claim damages against David and Construction Lilja solidarily, for David’s alleged breaches of his duty of loyalty and honesty both as a director and as a principal/key employee. They allege damages of $566,567.10 (equivalent to the alleged illegal profits earned by Construction Lilja) plus additional damages of $55,000.00 for David’s failure to return Ross Ltd.’s truck and tools.
[5] David et al also filed a Motion under art. 54.1 of the Code of Civil Procedure ("C.C.P.") to have their opponents' proceedings declared abusive and dismissed with extrajudicial fees being paid. He asserted that he was not bound by any non-competition clause, breached no duties of loyalty and that his actions in competing with the Ross companies after he left were transparent and completely legal.
[6] This judgment will be organized under the following headings:
1- Factual and Procedural Overview
2- David’s Lawsuit
A- Share Purchase Agreement ("SPA"): Is it an Enforceable Contract?
1. Legal Effect of Not All Relevant Documents Being Signed
a. Meeting of the Minds
b. Spoliation
B- Has Consent Been Vitiated by Fraudulent Misrepresentations or Omissions by David?
1. Governing Law
2. Analysis
C- Remedies
1. Contents of the SPA
2. Amounts Owing Under the SPA
D- Additional Remedies Requested: Reference to Auditor
E- Need for a Demand Letter (Art. 1594 C.C.Q.)
3- Ross Ltd. Lawsuit
A- Alleged Breaches of Duties of Loyalty, Honesty, Conflict of Interest
1. Governing Law
a. As Director/Mandatary
b. As Principal/Key Employee/Mandatary
c. Length of Time for Which Any Duties Are Owed
B- Illegal Active Solicitation of Employees
1. Governing Law
2. Analysis
a. Tony Caputo
b. Monique Lesieur and Angelo Caputo
c. Pat Cookney
i. Pat Cookney: Key Employee for Refractory Work
ii. Work on OCF Bid
iii. Solicitation to Hire
C- Alleged Misappropriation of Corporate Opportunities
1. Governing Law
a. Nature of Opportunities
2. Whether Ross Ltd. Had Renounced to Opportunities
D- Damages Owed to Ross Ltd.
1. Governing Law
2. Analysis
a. Refractory Tools and Truck
3. Damages Arising from David's Unauthorized Use of Pat Cookney, Active Solicitation to Hire Pat Cookney and Duty to Mitigate
a. Unauthorized Help from Pat on the OCF Candiac Bid
b. After October 30, 2005: Restitution of Profits Earned Due to Pat Cookney
i. Analysis
E- David’s Motion Under Art. 54.1 C.C.P.
1- Factual and Procedural Overview
[7] Ross Ltd. was a well-established Montreal construction company specializing in general contracting for the commercial and industrial sectors. Mr. Thompson, one of the original principals of the business, was effectively retired although still a shareholder when the "factional" rift took place in 2005. The other major shareholders were his four sons. The eldest son, Peter, ran the Ontario operations from Toronto while the other three sons worked in the Montreal office. Mark looked after the accounting and financial aspects of the business while David and Michael each managed different sections of the Quebec operations.
[8] Peter was the sole shareholder of Ross Ontario. David, as well as being a director and officer (Vice-President) of Ross Ltd., was also a shareholder of Ross Ltd. as were his family trust and personal holding company.
[9] Until September 30, 2005, when he resigned his positions as director and officer, David spent most of his entire 27 year career with Ross Ltd. He had not gone to university but had started out as a labourer for Ross Ltd., became a licensed carpenter and ultimately rose through the ranks to become a vice-president of the family firm. The Court understood from the evidence that the career paths for the other brothers were similar with the exception that Peter had left to establish Ross Ontario, which functioned essentially independently from Ross Ltd.
[10] Amongst the four brothers, there was a long simmering issue concerning some of the brothers allowing their offspring to work for the Ross companies. David had always been opposed, unless formative experience had been acquired elsewhere.
[11] Ross Ltd. had a main office in Montreal. It had a core construction workforce and, as required, additional tradespersons were hired on a job by job basis.
[12] In August and September 2003, Ross Ltd. did a subcontracting job for Lilja Corporation ("Lilja US"), a California-based specialized construction company which built and repaired refractory facilities, mainly for the glass manufacturing industry. "Refractory work" involved principally the repair and maintenance or construction of brick ovens where industrial processes were undertaken that required extremely high heat. An integral component was specialized masonry work using bricks that were able to absorb extremely high temperatures. Regular maintenance was required and was also part of the work done by Lilja US.
[13] Lilja US did much of the refractory work (up to 95%) for the various plants throughout North America of Owens-Illinois ("OI"), one of the world's major glass manufacturers. At no time did Lilja US have any formalized written contract with Ross Ltd. The relationship may best be described as a strategic alliance: Lilja US had the confidence of OI from whom they were awarded subcontracts but needed a licensed Canadian contractor to do the refractory and related work in Canada. Not only did the actual work require a licensed contractor, the workmen had also to each have a provincial qualification.
[14] In August 2003, Ross Ltd. was the successful bidder for small non-refractory civil work at the OI plant in Montreal. Ross Ltd. did this work as a sub-contractor to Lilja US.
[15] In February 2004, an important refractory job came up for bid at the OI facility in Montreal. David and Bud Field (president of Lilja US) met to look over the job. Bud Field advised David that he would teach him all the know-how necessary to do the refractory work.
[16] Ultimately, OI determined that the bids were all too high and shelved that project.
[17] Nonetheless, Ross Ltd. later did a small job for OI that it had quoted earlier in the year.
[18] During the course of 2004, Bud Field invited David and his second-in-command, Tony Caputo ("Tony") to come to California for a week's training course in refractory work. Ross Ltd. paid for the travel and the expenses.
[19] During the month of July 2004, David learned that a highly-experienced and licensed refractory mason by the name of Pat Cookney had left his employment at Mowbray, a specialized Canadian firm doing refractory work, located in Ontario.
[20] As a result of very close connections between this Ontario refractory company and the head engineer for OI in Toronto (Mr. Mike Steacy), most of the Canadian OI refractory work went to this Ontario company, instead of Lilja US: much to the annoyance of Lilja’s President, Bud Field.
[21] With the encouragement of Bud Field, David sought to interest his brothers in opening up a refractory division, which could build on the hiring of Pat Cookney, with his expertise both in refractory work and bidding for same.
[22] In addition, a refractory contractor also required from time to time complimentary millwrighting expertise: this expertise Ross Ontario had at its Toronto operation through employee Jim Strong.
[23] Ultimately, in October 2004, Ross Ltd. concluded an employment agreement with Mr. Cookney to come and work for its new refractory division.
[24] To provide this new refractory division with greater credibility and particularly for future bids for OI Canada, Bud Field allowed Ross Ltd. to put, side-by-side, the names of Ross Ltd. and Lilja US on Mr. Cookney's business cards, although the reality was that he was only employed by Ross Ltd. Throughout the remainder of 2004, Mr. Cookney sought to develop the refractory business with David while at the same time continuing to consult on refractory matters for his personal clients who he brought to Ross Ltd.
[25] E-mail correspondence between David and Pat Cookney showed their keen desire to obtain further OI refractory work in Canada through the good offices of Lilja US as the principal contractor.
[26] In April 2005, Lilja US successfully bid on a $9.75 Million refractory contract at the Owen's-Illinois plant in Montreal. Lilja US awarded a $7.66 Million subcontract (the "Furnace B" job) to Ross Ltd. for which Ross Ltd. would essentially be doing all the work and where Lilja US might provide some specialized employees, mainly foremen.
[27] One of the important reasons for Lilja US to need to rely on Ross Ltd. with its local, licensed Quebec work force was that Lilja US had experienced problems with Canadian immigration authorities, who had prevented experienced Lilja US employees, particularly foremen, from coming to work in Canada.
[28] This Furnace B job required that the OI plant be completely shut down to permit the refractory work. As this was very costly for OI, it required that the work be done on a non-stop 24-hour per day basis and be completed within 60 days. For Ross Ltd, who had never done such a refractory job previously, let alone a refractory job of this size, the stress on its personnel was enormous. David and Tony, each took a 12-hour shift so that the job was managed and staffed 24 hours a day, 7 days per week during this two month period. The Ross Ltd. payroll for this job had 125 construction workers. The job had over 500 technical drawings.
[29] In addition to there being a steep learning curve, this job had a low profit margin while stretching Ross Ltd.'s resources to their limit.
[30] In June 2005, Jim Strong who provided the millwrighting capacities for Ross Ontario (and thereby, for Ross Ltd.) left their employ.
[31] The Furnace B job took the months of May and June to complete. In early July 2005 and at Ross Ltd.’s expense, David rented a cottage in the Thousand Islands. He invited Bud Field and Tony to bring their families for some vacation time together.
[32] On or about August 2nd, David and Mark had an argument over the fact that there were some questioned billings for one of the sons’ children working on one of David’s jobs. On this point the stories conflict. The father and the three sons alleged that David used this as a reason to require them to buy him out while David alleged that they used this as a pretext to say they could not work with him anymore. Both versions are equally probable, neither prevails.
[33] The next day, there was a telephone conference with all brothers and the father present and it was agreed that David and the entities he controlled would have their shareholdings in Ross Ltd. and Ross Ontario bought out. This arrangement was supposed to be kept confidential: nonetheless, both sides soon discussed the break-up with third parties.
[34] Throughout the months of August and September 2005, David negotiated mostly with Ross Ltd.'s external accountant, Angelo Pedicelli regarding the terms. Mark and Mr. Thompson were also involved.
[35] In August and up to approximately September 14th (and unbeknownst to Ross Ltd.), David, Tony and one Glenn Kavanagh (the Ross Ltd. employee in charge of their Gatineau office) had various private meetings to discuss the potential of setting-up their own construction business. By mid-September, these talks came to nought.
[36] On September 30, 2005, David resigned as a director and officer of Ross Ltd.
[37] In earlier discussions, when asked by the father what David's future plans were, David was non-committal, suggesting even that he might return to carpentry!
[38] On October 3rd, the arrangements for the buy-out were concluded with David and put down in a detailed term sheet.[4] David was asked to sign a non-competition clause but he flatly refused. Peter complained to the others that he did not trust David. The father maintained that David had to earn a living.
[39] According to the Ross pleadings, the shareholdings which were agreed to be transferred were the following:
"As reflected in the Share Purchase Agreement (PRA-36), David Thompson held direct and indirect (through his holding company 3812464 Canada Inc. and the David Thompson Family Trust) interest in the capital stock of 119909 Canada Inc., a holding company being the majority shareholder of Ross and Anglin Ltd incorporated under the laws of Canada …
(a) David Thompson was, as of August 2005, the registered and beneficial owner of 64,800 Class D Preferred shares and 700,000 Class F Preferred shares of 119909 Canada Inc.;
(b) David Thompson is also a director, officer and majority shareholder of 3812464 Canada Inc., a corporation incorporated under the laws of Canada,… which was, as of November 2005, the registered and beneficial owner of 106,600 Class E Preference shares of 119909 Canada Inc.;
(c) David Thompson is the settlor of the David Thompson Family Trust, which was, as of August 2005, the registered and beneficial owner of 100 Class A shares of 119909 Canada Inc.;"[5]
[40] The accountant, Mr. Pedicelli arranged with Ross Ontario’s attorney in Toronto to have the final agreement prepared for signature.
[41] On this day or shortly after, David advised Tony and Angelo Caputo (Tony’s cousin who also worked for Ross Ltd.) as well as Pat Cookney and Bud Field that he had left Ross Ltd. for good.
[42] During the early part of October 2005, Pat Cookney and Tony worked for Ross Ltd. on preparing a bid for a potential refractory job at the OI plant in Lavington, B.C.
[43] On October 13, 2005, Lilja US called David to apprise him of a potential new refractory job at an Owens-Corning[6] facility (the "OCF") in Candiac, Quebec. In particular, Bud Field called David to pressure him to "get off his posterior" and get organized to do this job.
[44] The next day on October 14, 2005, David incorporated Construction Lilja in Montreal.
[45] In the middle part of October 2005, David sought the assistance of Pat Cookney, who was still working for Ross Ltd., to help him prepare the successful Construction Lilja bid for the OCF Candiac job.
[46] During the month of October, Pat Cookney was very concerned about whether he had a future with Ross Ltd. and whether his employer still wished to pursue refractory work.
[47] In October 2005, both David and Lilja US (through Bud Field) had conversations with Pat Cookney to encourage him to leave Ross Ltd and he ultimately submitted his resignation to Ross Ltd. on October 31, 2005, advising he was going to work for Lilja U.S. On this basis, he obtained the loan of refractory tools from Peter which were used on the OCF Candiac job. What Peter was not told was that the tools were ultimately used on the Candiac job alright, but by Construction Lilja, David's new company.
[48] On November 2, 2005, Mark sent the SPA to David for comment. The final SPA was sent to Florida for Mr. Thompson’s signature.
[49] On November 17, 2005, Mr. Pedicelli brought David the SPA and documents for his signature. David signed all the documents and the only signature that remained was that of Peter. In partial performance of the SPA, Ross Ltd. provided David with two certified cheques, one in the amount of $106,600.00 and another in the amount of $60,000.00 for redemption of part of the shares being purchased.
[50] On November 21, 2005, Ms. Monique Lesieur, handed-in her resignation to Glen Kavanagh and joined David’s company. This was the event which caused Glen Kavanagh then to disclose for the first time to Mark and the other brothers the earlier discussions in the summer between himself, David and Tony to set up a competing construction business.[7] As a result, Michael later questioned Tony regarding his future plans and Tony confirmed he was staying with Ross Ltd.
[51] However, in the period mid to the end of November 2005, David, Tony and Angelo Caputo meet to discuss their participation in the new construction company incorporated by David.
[52] In or about November 25th, Tony resigned from Ross Ltd. and the next week joined Construction Lilja. Angelo Caputo resigned as well on the same day. The next week and in the wake of these four resignations, Peter testified that he unilaterally shredded the SPA given to him for his signature.
[53] At the end of December, Ross Ltd. sent a new SPA to David for signature which had been unilaterally modified by Ross Ltd. The proposed new terms were much less favourable to David. He refused to sign and instead sent back a lawyer’s letter requiring that he be given the original SPA that he had signed along with the balances as originally-agreed. His request fell on deaf ears.
[54] Construction Lilja throughout the course of the ensuing months continued to receive various refractory jobs as a sub-contractor to Lilja US, mainly for OI work.
[55] At no time after the departure of Pat Cookney and Tony Caputo did Ross Ltd. ever get in contact with Lilja US (and particularly Bud Field) or with OI. Before his resignation Tony advised the brothers, according to their testimony, that he was in contact both with Lilja US and OI on behalf of Ross Ltd.
[56] Ross Ltd. et al themselves commenced a separate action dated October 16, 2006 as plaintiffs in which they claimed damages against David, Lilja US and Lilja Canada for alleged breaches of various duties of loyalty. Ross Ltd. also made substantial claims against Lilja US and Construction Lilja as defendants and co-conspirators:
"51. Lilja Corporation [Ed. note: "Lilja US"] and Lilja Canada [Ed. note: "Construction Lilja"] actively participated in David Thompson’s breach of his duties of good faith, loyalty, confidentiality and to avoid conflict of interest and have thus caused serious damages to Plaintiffs, as more fully explained below:
(a) Lilja Corporation and/or Lilja Canada were made aware and are aware that Ross and Anglin’s employees who gained knowledge of Ross and Anglin’s expertise are also bound by duties of loyalty and good faith;
(b) Lilja Corporation and/or Lilja Canada and David Thompson used confidential and proprietary information belonging to Ross and Anglin to establish quotes for bids and possibly for other purposes;
(c) the sustained and targeted campaign of David Thompson and Lilja Corporation and/or Lilja Canada also aims at depriving Ross and Anglin from its clients, this constituting unfair competition;
(d) Lilja Corporation and/or Lilja Canada have been engaged in an orchestrated solicitation campaign directed at Ross and Anglin’s employees with the intent of injuring a competitor;
(e) Ross and Anglin has strong and objective reasons to fear that Lilja Corporation and Lilja Canada will use former Ross and Anglin employees to appropriate Ross and Anglin’s confidential and proprietary information in order to use such information as a springboard without spending the time, trouble and expense to develop such information on its own;"
[57] By a subsequent amendment dated November 24, 2011[8], Ross Ltd. removed Lilja US as a defendant.
[58] In that same Amended Motion, the main allegations by Ross Ltd. against David Thompson were:
"9. David Thompson (…) has conspired and developed a scheme to:
(a) raid former (…) employees of Ross and Anglin, including:
(i) Antonio Caputo, who joined Ross and Anglin in 1994 and acted up until his resignation on November 25, 2005 as Senior Manager;
(ii) Patrick Cookney, who joined Ross and Anglin in October 2004 and acted up until his resignation on November 4, 2005 as Construction Manager;
(iii) Monique Lesieur, who joined Ross and Anglin in 1999 and acted as Office Manager for the Ottawa-Hull office up until her resignation on November 21, 2005
(iv) Angelo Caputo;
(b) set up (…) Canadian businesses, Construction Lilja and Lilja Canada, directly competing with Ross and Anglin for refractory and civil work in Canada, with a view of obtaining for themselves, secretly and without the approval of Ross and Anglin, business opportunities and servicing clients of Ross and Anglin;
(c) illegally use confidential and proprietary information belonging to Ross and Anglin;
(d) induce Antonio Caputo, Patrick Cookney (…), and Monique Lesieur and Angelo Caputo to violate their obligations of honesty, loyalty and good faith as former key employees of Ross and Anglin and participate in said violations;
(e) engage in unfair competition directed against Ross and Anglin;
these predatory practices being in total breach of David Thompson’s duties as a former key employee, director and officer of Ross and Anglin, the whole as set-out more fully herein below;"
[59] On June 15, 2007, David began the lawsuit on behalf of himself and his related entities claiming the balance owed under the SPA.
[60] Ross Ltd. filed their defence to this action dated October 23, 2007.
[61] The trial began on November 17, 2011, and lasted for 18 days.
2- David’s Lawsuit
A- Share Purchase Agreement ("SPA"): Is it an Enforceable Contract?
1. Legal Effect of Not All Relevant Documents Being Signed
a. Meeting of the Minds
[62] Does the Share Purchase Agreement ("SPA") constitute a binding contract despite the fact that Peter testified that he did not sign the final copy? An unsigned version of that SPA is still available - Exhibit PDT-4 - as is the term sheet forming the basis for this Agreement. Peter testified that he was annoyed at David’s alleged double-dealing and he shredded the SPA with all the other signatures on it. The first question is one of intent: did the parties require that there be a fully-signed SPA for a contract to exist? The second question is one of evidence: irrespective of the answer to the first question, do any judicial consequences follow from Peter’s unilateral destruction of the SPA signed by everyone but himself?
[63] As for the first issue, the relevant articles from the Civil Code of Québec ("C.C.Q.") are:
a) art. 1385: " Le contrat se forme par le seul échange de [the parties’] consentement entre des personnes capables de contracter, à moins que la loi n'exige, en outre, le respect d'une forme particulière comme condition nécessaire à sa formation, ou que les parties n'assujettissent la formation du contrat à une forme solennelle.";
b) art. 1388: "Est une offre de contracter, la proposition qui comporte tous les éléments essentiels …";
c) art. 1423: "La confirmation d'un contrat résulte de la volonté, expresse ou tacite, de renoncer à en invoquer la nullité. La volonté de confirmer doit être certaine et évidente."; and
d) art. 1708: essential elements for a sale contract are four in number: (1) a seller; (2) a buyer, (3) a transfer of ownership of property; and (4) a price.
[64] In the 2007 case of Entreprises Piertrem (1989) inc., the Court of Appeal reiterated the effect of art. 1373 C.C.Q. that a binding promise of sale is constituted where the price is either determined or determinable. [9]
[65] The fact that two cheques were paid (pursuant to paragraphs 2.2a and 2.3 of the SPA) by Ross Ltd. provides additional confirmation that Ross Ltd. et al intended to be bound by the SPA.
[66] As for the requirement for a signed and written contract, the jurisprudence is clear that there is no such requirement - provided there is sufficient intent to contract - as shown in the following two cases:
. "Dans notre droit civil, art. 1385 C.c.Q., la primauté de l'intention, c'est-à-dire le seul échange de consentement est plus importante que l'expression formelle. …"[10]and
. "Le fait qu'il n'y ait pas de contrat écrit n'empêche pas la création d'un lien contractuel dans la mesure où les parties n'en ont pas fait une condition à la réalisation du contrat. Il en est ainsi lorsque le contrat écrit n'est pas l'aboutissement d'un consentement générateur d'obligations pour des parties, mais représente uniquement la manifestation d'un accord de volonté déjà intervenu."[11]
[67] The Supreme Court of Canada has also confirmed that the contract is the agreement between the parties while the contract document is simply evidence of that agreement.[12]
b. Spoliation
[68] The evidence discloses that all parties had signed the SPA, except for Peter. The Court cannot accept that his destruction of the SPA constituted anything other than spoliation of the evidence. His testimony showed him to be a reflective and experienced business person. The SPA had sat on his desk - on his own evidence - for several days. He did not testify to any "incendiary event" which would have caused his emotions to overtake him and lead to his tearing up the SPA as an impulsive gesture. Therefore, he knew or should have known that his vetoing the payment of any monies to David under the SPA would constitute a source of litigation between the parties and that the SPA would be evidence.
[69] While Canadian law does not create a separate substantive cause of action for this spoliation, it does raise an evidential presumption. In the case of Union Canadienne (L'), compagnie d'assurances[13], the Court noted:
"La jurisprudence canadienne en droit de la preuve, en commençant par la Cour suprême du Canada en 1896 et contrairement à une certaine jurisprudence américaine, refuse de reconnaître que la suppression d'une preuve ("spoliation of evidence") puisse conférer un droit d'action indépendant ("substantive remedy"). Tout au plus, peut-elle donner ouverture à une présomption jouant contre la partie qui a détruit ou supprimé la preuve apparemment incriminante et en faveur de la partie qui se voit placée devant la difficulté, voire l'impossibilité, d'apporter une défense pleine et entière. C'est l'application d'une règle de droit romain: omnia praesumuntur contra spoliatorem."
[70] Applying this presumption, the Court determines that the version of the SPA in the form of Exhibit PDT-4 constitutes the signed version that Peter was given. The Court also determines that Peter's signature was a formality only and that Exhibit PDT-4 constituted an enforceable agreement binding the parties whether it was signed by Peter or not. This juridical result is not affected by the spoliation.
B- Has Consent Been Vitiated by Fraudulent Misrepresentations or Omissions by David?
1. Governing Law
[71] Ross Ltd. et al rely on art. 1401 C.C.Q. to allege that error induced by fraud vitiated their consent to the SPA. That article states:
" L'erreur d'une partie, provoquée par le dol de l'autre partie ou à la connaissance de celle-ci, vicie le consentement dans tous les cas où, sans cela, la partie n'aurait pas contracté ou aurait contracté à des conditions différentes.
Le dol peut résulter du silence ou d'une réticence."
[72] In a nutshell, Ross Ltd. et al alleged David's misrepresentations vitiated their consent to the SPA. They alleged as well that they were also "all victims of misrepresentations by David Thompson leading up to the agreement in principle reached on October 3, 2005" as a result of: (a) omissions by David to disclose he was starting up a company to compete with them; (b) various meetings and machinations that he was undertaking to lure away key employees; and (c) David's use of services of certain of these employees while they were still employed by Ross Ltd. They allege also that "they were the victims of a series of misrepresentations leading up until November 17, 2005" at which time David Thompson and his company received the two cheques.
[73] "Fraud" is the fact of voluntarily provoking an error in the mind of a co-contracting party to have that co-contracting party conclude a contract or to conclude it on different conditions.[14]
[74] The actual fraud is the act that provokes the error but the "vice de consentement" is the error itself.[15]
[75] If fraud causing error is alleged, what must be proven is that "but for that error, the party would not have contracted or would have contracted on different terms": it is not necessary that the error relate to the three grounds of art. 1400 C.C.Q.: nature of the contract, object or essential element.[16]
2. Analysis
[76] Since fraud vitiates consent, the relevant time period to consider is between early August and October 3, 2005 when the terms of the SPA were consented to.
[77] The burden of proof rests squarely on Ross Ltd. both to prove the misrepresentations and their determinative nature.
[78] Neither the preamble to the SPA[17] nor any of the contents make any reference to non-competition or non-solicitation or to any underlying representations as to what David would or would not do after the shares were sold. On their face, the SPA and the term sheet agreed to on October 3, 2005, speak to a straightforward sale of shares based upon both determined and determinable prices.
[79] All parties were clearly under an obligation of good faith at points leading up to the joint consent on October 3, 2005.
[80] The Court is troubled by David’s flippant response to his father that he might go into carpentry as future employment. In the context of David's then situation, such an answer could not be taken seriously.
[81] On its face, the prime motivating factor for Ross Ltd. et al to agree to the SPA was to fully and finally remove David from the business. The Court determines the actions taken by Ross Ltd. and its principals do not prove on the balance of probabilities that David’s going into competition against them was a determinative factor in relation to their agreement. How could the principals of Ross Ltd. have assumed that David would go to work as a simple carpenter given all the facts they knew about David:
a) he had been in the construction business for 27 years and only in the construction business;
b) he had no university degree but with Ross Ltd., has been accustomed to earning between $150,000.00 and $200,000.00 a year;
c) he and his wife had five children and a new baby on the way;
d) not only, according to Ross Ltd. external accountant Angelo Pedicelli (who spent a lot of time with David during the SPA negotiations) was David non-committal on his future plans, when asked specifically to sign a non-competition clause on October 3, 2005, David flatly refused. Not only did Mr. Pedicelli tell the father and brothers that such a clause was standard in these kinds of share purchase buy-outs but Peter himself complained that he did not trust David. When asked why David should not be required to sign a non-competition clause, Mr. Thompson (the father) volunteered at the time that "David had to make a living". If David’s competing had been a determining factor, Ross Ltd. et al would have negotiated non-competition and non-solicitation clauses into the SPA. Since they did not do so, their real intent must have been something else; and
e) these were all experienced businessmen who had succeeded over a long period of time in what is well-known as a demanding business: construction. Furthermore, this was not the first time that a share buy-out had occurred at Ross Ltd. Mr. Thompson had himself bought out his former partner some years previous and then brought his sons into the business.
[82] In their pleadings, Ross Ltd.’s allegation - that their actions in refusing to pay David the balance under the SPA in late 2005 -corroborates their assertion that their consent was vitiated, is reasoning after the fact and not convincing.
[83] In conclusion, the Court determines that the evidence substantiates that the SPA was agreed-to so as to put an end to David's involvement in the business. Firstly, in paragraph 36 of their action, Ross Ltd. et al allege: "Over the years, considerable tension grew between David …" and the others. Secondly, after Mr. Thompson had testified on the importance to him of having the family in the business, he was asked how he felt about David leaving the business after 27 years. His answer was revealing: if that is what David wanted to do, he could go.
[84] All parties wanted out of a business relationship that was no longer comfortable for any of them.
C- Remedies
1. Contents of the SPA
[85] The vendors in the SPA, the name of the corporation whose shares they held and the shares to be sold are indicated in the following table to the preamble of the SPA:
[86] The SPA had three components: a share purchase transaction, a profit sharing package and a severance package. As for the share purchase, there were different classes of shares: some were payable on closing (September 30, 2005) and others were payable on September 30, 2006. In the profit sharing package, David was to receive certain percentage amounts stated earlier, which were to be shown in three schedules. None of these schedules were completed on the SPA in the Court record: Exhibit PDT-4. The full documents necessary to determine the amounts owing were obtained on discovery and at trial.
[87] As for the severance package, David was to remain an employee of Ross Ltd. until completion of all the transactions. In the interim, he was to receive one year’s salary of $75,000.00 payable bi-weekly.[18] No evidence was lead as to whether any work was expected of David as "employee".
[88] On or before September 30, 2006 David was to also receive a "severance package" of $5,200.00, lump sum.
[89] He was entitled to purchase a car and also a 2000 Tahoe truck was to be purchased for $14,000.00.
[90] At paragraph 6.3 of the SPA, the heading says "Confidentiality clause-Intentionally omitted".
[91] There were no other representations or warranties of interest being made by David et al as vendors. The full names of the Vendors were: David Thompson, 3812464 Canada Inc. (David’s personal holding company) and the David Thompson Family Trust.
[92] Paragraph 2.2 of the SPA confirmed, amongst others, that:
a) $119,999.00 was payable on September 30, 2006 to David’s trust;
b) $30,000.00 was payable to David for certain shares on September 30, 2006; and
c) $75,000.00 was payable to David for certain shares also on September 30, 2006. The balance for shares was paid out to David in November 2005.
2. Amounts Owing Under the SPA
[93] David et al provided an Exhibit PDT-44 showing the amounts they claimed were payable to them "under the Share Purchase Agreement on the basis of information provided by Ross".
[94] Ross Ltd. et al agreed with the figures except for three items in the profit sharing package. Firstly, the difference between them in the 5% gross profit is de minimis and will not be considered. The Court will use the amount claimed by David which is slightly less.
[95] Secondly, as for the 10% gross profit on Molson's jobs, Ross Ltd. claimed this amount was $158,909.43 while David claimed it was $156,584.00. The Court will use the lesser amount claimed by David.
[96] Thirdly, as for paragraph 3.1 of the SPA, Ross Ltd. claimed the amount was $26,363.85 while David claimed it was $41,154.00. The major difference comes in the calculation of the profit share for Glenn Kavanagh which was to be deducted.
[97] The amount used for David's calculations[19] came from figures originally provided by Mark as an undertaking to his examination on discovery. It was only at trial that Ross Ltd. produced new calculations, these done by Mr. Pedicelli.
[98] These latter calculations took David by surprise at trial. There is no reason why these calculations could not have been provided to David earlier. The judicial contract and the parties' Joint Declaration listing the exhibits require that the original undertakings given by Mark be respected. Accordingly, Mark's original figures will be used.
[99] David et al have also asked in their Conclusions for those amounts that remain outstanding under the SPA. The SPA provided that the amounts were to be paid by certain of the Ross Ltd.'s entities to certain of David et al. These amounts have been correlated in the Conclusions to this judgment so that they match the paragraphs in the SPA.
[100] All the amounts that are found owing in the Conclusions are taken from specific paragraphs in the SPA. The evidence supports David's allegations as to the specific amounts.
[101] David has claimed for the balance of salary owed under art. 4.1 of the SPA and under art. 4.3, for nine months of RRSP contributions for the 2005 calendar year. As for the salary, the relevant paragraph of the SPA comes under the heading "ARTICLE 4.00 - SEVERANCE PACKAGE":
"4.1 That David Thompson is an employee of Ross Quebec and that after the completion of the transactions contemplated in this Agreement, David Thompson will cease to be an employee of Ross Quebec. The parties hereto covenant and agree that upon completion of those within transactions, David Thompson shall be entitled to receive one full year salary of $75,000.00 up to and including September 30, 2006 as a bi-weekly salary."
[102] Since "the transactions" contemplated the payment of final monies for certain shares on September 30, 2006, it would appear that David Thompson was to be an "employee" up to that date. However, in the second sentence of art. 4.1, it notes his entitlement to a "bi-weekly salary … upon completion of the within transactions". Read literally, this would mean that the salary "wouldn't be paid until after September 30, 2006". In fact, Ross Ltd. started paying that salary in the Fall of 2005 and only stopped paying at the end of November 2005, following the departure of four employees to join David's new company.
[103] While he was paid this "bi-weekly salary", did David have any obligations of loyalty under art. 2088 C.C.Q. Was the salary being paid for past or for present services? The SPA did not say.
[104] There is no indication what - if any - services David was to perform in exchange for this salary: an amount half or less than half of his former annual salary.
[105] In the absence of the SPA indicating that David was to "do work for remuneration" in the words of art. 2085 C.C.Q., the Court concludes that this was not a "contract for employment" and therefore, no art. 2088 C.C.Q. obligation of loyalty - in reference to the SPA - arose.
[106] Therefore, David's illegal solicitation of Pat Cookney away from Ross Ltd. (discussed later) was no defence to Ross Ltd.'s obligation to pay the "bi-weekly salary".
[107] As a result, the Court also grants this claim for the balance of salary.
[108] Moreover, art. 4.3 of the SPA required the payment of $12,375.00 by way of nine months of RRSP contributions for 2005. The Court is satisfied that such contributions were earned prior to the breach above-mentioned and they will also be ordered paid.
D- Additional Remedies Requested: Reference to Auditor
[109] David et al claim that the Court "APPOINT a chartered accountant practising in the City of Montreal to act as an expert herein and to audit the figures set forth in … Exhibits PTD-28, …, PTD-30, PTD-31 and PTD-33 to PDT-38, and establish the amounts owing to … [David et al] pursuant to Sections 3.1 and 3.2 of the Share Purchase Agreement, …".[20]
[110] Art. 3.1 of the SPA said David was entitled to receive 25% of the net income before taxes pursuant to Ross Ltd. and Ross Ontario financial statements as at September 30, 2005 and art 3.2 of the SPA allowed David 5% of the gross profits of all jobs in process booked as of September 30, 2005.
[111] During trial, David sought to raise certain discrepancies in the financial documents above-mentioned.
[112] He supported his request for an accounting on the basis of art. 413.1 C.C.P. With respect, this article has no application here since no experts’ reports were provided by either party.
[113] Moreover, art. 4.1 C.C.P. requires the Court to see "… to the orderly progress of the proceeding …".
[114] The SPA does not provide David with a contractual right to an accounting and as far as his procedural rights are concerned, the economy of the C.C.P. requires David to have obtained the necessary documents on examination on discovery if necessary, have them examined by his own chartered accountant, and then have an expert’s report filed so that his expert could testify at trial.
[115] If this had been done, the Court would then have been in a position at trial to determine the facts and particularly whether there were any financial discrepancies in the Ross Ltd. et al financial documents.
[116] Furthermore, under art. 4.2 C.C.P., this was the proper and proportionate procedure. After now 18 days of hearing and given the amounts in issue, it is not proportionate to require any such procedure now which would protract this litigation - which originated in 2005 - any further. The animosity evident between these parties speaks to the value of closure. All these litigants have had their days in court.
[117] For the same reasons, the Court will not reserve David’s rights with respect to the profit sharing package described in art. 3.0 of the SPA.
E- Need for a Demand Letter (Art. 1594 C.C.Q.)
[118] The Court cannot agree with the assertion made by David et al. that the clause in the SPA saying that "time is of the essence" obviates the need for a "put[ting] in default" under art. 1594 C.C.Q. A "mise en demeure" ("demand letter") only "operates by way of law" where the Code provides for it per art. 1597 C.C.Q. or where the contract clearly stipulates that the sole passage of time puts the debtor in default. These are the only ways that the requirement of art. 1595 C.C.Q. - to constitute a debtor in default in writing - may be avoided.[21] Neither is applicable here. A "time is of the essence" clause simply means that time periods in a contract are "délais de rigueur".[22]
[119] Therefore, where David et al have asked for interest and indemnity from September 30, 2005, this date has in fact been changed by the Court to January 13, 2006, the date of the demand letter.[23] Where David et al have asked that interest and indemnity run from September 30, 2006, this date will be used since it is later than the date of the demand letter.
3- Ross Ltd. Lawsuit
A- Alleged Breaches of Duties of Loyalty, Honesty, Conflict of Interest
1. Governing Law
a. As Director/Mandatary
[120] Ross Ltd. was incorporated under the Canada Business Corporations Act ("CBCA")[24]. The duties of CBCA directors are regulated under the CBCA as follows:
"122. (1) Les administrateurs et les dirigeants doivent, dans l’exercice de leurs fonctions, agir :
a) avec intégrité et de bonne foi au mieux des intérêts de la société;
b) avec le soin, la diligence et la compétence dont ferait preuve, en pareilles circonstances, une personne prudente.
Observation
(2) Les administrateurs et les dirigeants doivent observer la présente loi, ses règlements d’application, les statuts, les règlements administratifs ainsi que les conventions unanimes des actionnaires.
Absence d’exonération
(3) Sous réserve du paragraphe 146(5), aucune disposition d’un contrat, des statuts, des règlements administratifs ou d’une résolution ne peut libérer les administrateurs ou les dirigeants de l’obligation d’agir conformément à la présente loi et à ses règlements d’application ni des responsabilités découlant de cette obligation."
[121] The applicable C.C.Q. articles are those related to directors' duties combined with those related to mandate:
"321. L'administrateur est considéré comme mandataire de la personne morale. Il doit, dans l'exercice de ses fonctions, respecter les obligations que la loi, l'acte constitutif et les règlements lui imposent et agir dans les limites des pouvoirs qui lui sont conférés.
322. L'administrateur doit agir avec prudence et diligence.
Il doit aussi agir avec honnêteté et loyauté dans l'intérêt de la personne morale.
323, L'administrateur ne peut confondre les biens de la personne morale avec les siens; il ne peut utiliser, à son profit ou au profit d'un tiers, les biens de la personne morale ou l'information qu'il obtient en raison de ses fonctions, à moins qu'il ne soit autorisé à le faire par les membres de la personne morale."
[122] Since directors are also mandataries, the following two relevant articles of the Civil Code of Québec are also applicable:
"2138. Le mandataire est tenu d'accomplir le mandat qu'il a accepté et il doit, dans l'exécution de son mandat, agir avec prudence et diligence.
Il doit également agir avec honnêteté et loyauté dans le meilleur intérêt du mandant et éviter de se placer dans une situation de conflit entre son intérêt personnel et celui de son mandant.
.
.
.
2146. Le mandataire ne peut utiliser à son profit l'information qu'il obtient ou le bien qu'il est chargé de recevoir ou d'administrer dans l'exécution de son mandat, à moins que le mandant n'y ait consenti ou que l'utilisation ne résulte de la loi ou du mandat.
Outre la compensation à laquelle il peut être tenu pour le préjudice subi, le mandataire doit, s'il utilise le bien ou l'information sans y être autorisé, indemniser le mandant en payant, s'il s'agit d'une information, une somme équivalant à l'enrichissement qu'il obtient ou, s'il s'agit d'un bien, un loyer approprié ou l'intérêt sur les sommes utilisées." (This Court's emphasis)
[123] The Court of Appeal in Gravino v. Enerchem Transport inc.[25] has clarified the law in Quebec on the duties of directors, particularly under the CBCA.[26]
[124] The original principles of directors’ duties arose in the birth-place of corporate law, English law. Common law jurisprudence in Canada has developed these principles further, under the rubric of "fiduciary duty".
[125] In the past, a question arose whether this common law jurisprudence had any binding effect in Quebec. The answer came from the Supreme Court of Canada in 2004 In re: Peoples Department Stores Inc. v. Wise.[27] The Supreme Court of Canada determined that since the CBCA did not provide any direct remedies for taking action against directors who had breached their obligation of loyalty, that in these circumstances in the Province of Quebec, resort must be had to the Quebec Civil Code where the principles of art. 122(1) and following of the CBCA needed to be harmonized with the principles of the C.C.Q.
[126] The Supreme Court of Canada confirmed the supplementary role of the C.C.Q.[28] and recognized that this complementarity was created by the combined application of art. 300 C.C.Q. and art. 8.1 of the Federal Interpretation Act[29]. Art. 300 states:
"Les personnes morales de droit public sont d'abord régies par les lois particulières qui les constituent et par celles qui leur sont applicables; les personnes morales de droit privé sont d'abord régies par les lois applicables à leur espèce.
Les unes et les autres sont aussi régies par le présent code lorsqu'il y a lieu de compléter les dispositions de ces lois, notamment quant à leur statut de personne morale, leurs biens ou leurs rapports avec les autres personnes."
[127] A review of the articles both in the C.B.C.A. and the Civil Code of Québec on directors’ duties notes their similitude. However, one important difference concerns the source of the law which prohibits a director or former director from appropriating maturing business opportunities from his company.
[128] Professor Lord Wedderburn, editor of Gower on Company Law[30] referred to the term "appropriating corporate cakes and ale" as an original metaphor used in the earlier English jurisprudence. Modern parlance now speaks of "appropriating maturing business opportunities".
[129] Canadian common law, particularly in the leading case of CanAero v. O’Malley[31] developed the concept of "fiduciary duty" for directors, as a source of their obligation to not appropriate maturing business opportunities. The Court of Appeal has made clear in Gravino[32] that the source for this prohibition under Quebec law is not fiduciary duty but rather art. 322 and 323 C.C.Q.[33]
[130] To the extent that the proper Civil Code of Quebec source is used (and not the common law fiduciary duty), Quebec courts have no difficulty in using the terms "appropriating a maturing business opportunity".[34]
[131] That said, there is a wealth of common law jurisprudence that has built up to establish what an improper "appropriation of a maturing business opportunity" is. Without in any way binding Quebec courts, this common law jurisprudence may nonetheless provide useful illustrations where the circumstances in Quebec cases are sufficiently similar.[35]
[132] Finally, the Court of Appeal in Gravino[36] has established two other broad criteria:
a) the intensity of the director’s duty of loyalty varies in relation to the director’s responsibility: the greater are these responsibilities, the greater are the duties of loyalty; and
b) the duration of the duty in time is a function of the specific circumstances.[37]
b. As Principal/Key Employee/Mandatary
[133] For the reasons that follow, the Court determines that since there is no non-competition clause binding the parties, the reasonable duration for David’s obligation of loyalty as a key employee of Ross Ltd. is 7 months from September 30, 2005, the date of David's departure.
[134] The starting point for this analysis begins with two main articles from the Civil Code of Québec:
"2088. Le salarié, outre qu'il est tenu d'exécuter son travail avec prudence et diligence, doit agir avec loyauté et ne pas faire usage de l'information à caractère confidentiel qu'il obtient dans l'exécution ou à l'occasion de son travail.
Ces obligations survivent pendant un délai raisonnable après cessation du contrat, et survivent en tout temps lorsque l'information réfère à la réputation et à la vie privée d'autrui.
2089. Les parties peuvent, par écrit et en termes exprès, stipuler que, même après la fin du contrat, le salarié ne pourra faire concurrence à l'employeur ni participer à quelque titre que ce soit à une entreprise qui lui ferait concurrence.
Toutefois, cette stipulation doit être limitée, quant au temps, au lieu et au genre de travail, à ce qui est nécessaire pour protéger les intérêts légitimes de l'employeur.
Il incombe à l'employeur de prouver que cette stipulation est valide."
c. Length of Time for Which Any Duties Are Owed
[135] Recent jurisprudence from the Court of Appeal established that, as a general rule, this duty should be in force for several months only, unless there are exceptional circumstances.[38]
[136] In the 2008 case of Ménard v. Parts-Expert inc.[39], the Court of Appeal imposed a period of 6 months. The defendants were a husband and wife team. The new company they set-up profited from the personal knowledge of the husband and business opportunities obtained from the original employer. They were able to "jump-start" their new business using information acquired from the original employer not the least of which was a confidential client list of between 1500 and 2000 clients. This 6-month duration was applied even though the Court of Appeal found that the husband was not a key employee.[40]
[137] One of the longest delays accorded was in the 2001 Court of Appeal decision of Armanious v. Datex Bar Code Systems Inc.[41] Injunctive relief of 12 months was ordered and upheld in appeal which started to run 15 months after the two defendants resigned. That case involved two employees who were found to be disloyal. They had been planning their departure for over a year with the sole goal being to obtain an unfair advantage in competing with their former employer. They gave false reasons to the employer for their departure and they took with them confidential client lists as well as relevant information that assisted them in "jump starting" their business.[42] In addition, they paralysed the activities of the former employer by destroying certain data bases. In this case, one of the employees was the vice-president responsible for technical support and the other was a sales manager.
[138] Both for the duty of loyalty of a director[43] as well as for a senior employee[44], the amount of time for the duty of loyalty to be in force following departure depends on the specific facts of each case.
[139] In the pre-Civil Code of Québec case of Johnson & Higgins Willis Faber Ltée v. Picard[45], that case involved former employees and officers setting-up a competitive insurance brokerage business to their former employer. The Court of Appeal confirmed that in the absence of a non-competition clause, the general rule is freedom of commerce exercised reasonably.[46] With a logic still applicable even after the Civil Code of Québec was introduced, the Court of Appeal noted that since "reasonable limits" were used as criteria to restrict non-competition clauses, "…, à plus forte raison, la durée de l’obligation rigide de loyauté se doit d’être limitée, particulièrement en matière d’injonction".
[140] In the Johnson & Higgins case, like here, there was no non-competition clause. There, the Court of Appeal upheld the 12 month injunction ordered at first instance without further comment.
[141] The Court of Appeal’s rationale has been further bolstered by the introduction of art. 2088 C.C.Q.: if the parties in a consensual agreement cannot restrict commerce for more than 12 months, then the Legislator could not have intended a statutorily imposed limit be any greater.
[142] In a 2007 judgment, the Court of Appeal has provided additional guidance concerning the obligational content of art. 2088 C.C.Q.:
"Le second alinéa de l'article 2088 C.c.Q. et le devoir de loyauté qu'il énonce doivent être interprétés de façon restrictive, la survie d'une obligation contractuelle au-delà de la terminaison du contrat qui y a donné naissance étant exorbitante du droit commun. Cette interprétation restrictive se justifie également par le fait que, dans l'organisation de notre société, la concurrence, en affaires, est la règle.
- Le devoir de loyauté postcontractuel est un devoir atténué, qui n'a ni l'ampleur ni la rigueur de l'obligation telle qu'elle existe pendant la durée du contrat. Ce devoir de loyauté postcontractuel ne saurait par ailleurs imposer au salarié des restrictions équivalentes à celles d'une clause de non-concurrence.
- En l'absence d'une clause de non-concurrence, l'ex-salarié peut en principe concurrencer son ex-employeur (soit en trouvant un nouvel emploi chez un concurrent, soit en fondant sa propre entreprise concurrente, soit en investissant dans une entreprise concurrente, etc.). Il peut même se livrer à une concurrence vigoureuse, à condition toutefois que cette concurrence demeure loyale et respecte le principe de bonne foi.
- Le contenu obligationnel précis du devoir de loyauté postcontractuel variera selon les circonstances (par exemple : nature du contrat et de l'entreprise, nature, conditions et niveau hiérarchique du poste occupé par l'ex-salarié, motifs de la terminaison du contrat de travail, état de la concurrence dans le secteur d'activités de l'employeur, etc.).
- En elle-même, la sollicitation de clientèle n'est pas interdite, en principe, puisqu'il s'agit d'un acte de concurrence ordinaire, la recherche de la clientèle étant l'élément définitionnel de la concurrence.
- La jurisprudence tend à interdire des comportements tels : utiliser, aux fins de sollicitation de clientèle, des documents ou renseignements confidentiels de l'ex-employeur ou utiliser de tactiques de dénigrement ou se livrer à des tromperies ou à de fausses représentations; profiter indûment de certaines relations privilégiées avec la clientèle; solliciter de façon insistante et systématique ses ex-collègues de travail et tenter de les convaincre de quitter l'employeur; conserver des biens ou des documents de l'ex-employeur[8], etc.
- Enfin, le devoir de loyauté postcontractuel ne dure qu'un temps, celui d'un « délai raisonnable », comme le dit l'article 2088 C.c.Q. Là encore, la jurisprudence est assez réservée : la durée de l'obligation de loyauté postcontractuelle dépend des circonstances de chaque espèce[9], mais elle dépasse rarement quelques mois. Il peut y avoir des cas exceptionnels, mais ils sont, justement, exceptionnels et doivent le rester si l'on ne veut pas indûment limiter le principe de concurrence qui régit notre société et avantager les employeurs au détriment des salariés. Après l'expiration de ce délai raisonnable, l'ex-salarié n'est plus assujetti qu'aux règles ordinaires applicables à la concurrence (en vertu de l'article 1457 C.c.Q.)." [10] (This Court's emphasis)[47]
[8] "Le refus de remettre ces biens, d'ailleurs, constitue dans certains cas un vol pur et simple, sans égard à la notion de loyauté."
[9] "Les facteurs mentionnés plus haut seront à nouveau considérés (par exemple: nature du contrat et de l'entreprise, nature, conditions et niveau hiérarchique du poste occupé par l'ex-salarié, durée du service de l'ex-salarié au sein de l'entreprise de l'employeur, motifs de la terminaison du contrat de travail, état de la concurrence dans le secteur d'activités de l'employeur, etc.). On s'intéressera en outre aux motifs et aux circonstances de la rupture du contrat de travail, de même qu'à la durée du service antérieur de l'ex-salarié. Ainsi, le caractère injustifié d'un congédiement peut avoir un effet à la baisse sur la durée du délai raisonnable. La bonne ou la mauvaise foi de l'ex-salarié peut être un élément à considérer dans l'évaluation de la durée de ce délai raisonnable."
[10] Sur le tout, voir par exemple : Excelsior (L'), compagnie d'assurance-vie c. Mutuelle du Canada (La), compagnie d'assurance-vie, 1992 CanLII 3559 (QC CA), [1992] R.J.Q. 2666 (C.A.); Dufresne c. Groupe Christie Ltée, [1992] R.D.J. 546 (C.A.); Positron c. Desroches, reflex, [1988] R.J.Q. 1636 (règlement hors cour, C.A., 1991-09-16, 500-09-000620-880); Improthèque inc. c. St-Gelais, reflex, [1995] R.J.Q. 2469 (C.S.); Groupe Financier Assbec c. Dion, [1995] R.D.J. 172 (C.A.); Frank White Enterprises Inc. c. 130541 Canada inc., J.E. 95-1233 (C.A.); Armanious c. Datex Bar Code Systems Inc./Systèmes de code à barres Datex inc., précité, note 6; Étiquette nationale inc. c. Sarrazin, J.E. 2002-508 ; Industries Flexart ltée c. Baril, 2003 CanLII 47919 (QC CA), [2003] R.J.Q. 665 , [2003] R.J.D.T. 39 (C.A.); Gestion Marie-Lou (St-Marc) inc. c. Lapierre, J.E. 2003-1698 (C.A.); Corporation scientifique Claisse inc. c. Instruments Katanax inc., 2006 QCCA 1425 (CanLII), 2006 QCCA 1425 , J.E. 2006-2266 .
[143] In another very recent case involving directors, Gravino.[48], the Court of Appeal reiterated that the statutory obligation of loyalty of a director is not a substitute for a non-competition clause. In that case, the delay of 12 months was deemed sufficiently long such that a business opportunity in the spring of 1996 was differentiated from one in 1997 on the grounds "… trop de temps s’était écoulé entre les deux événements pour que l’on puisse conclure que la même occasion d’affaires demeure en jeu."[49]
[144] Based on this jurisprudence, the Court determines that the general range - before considering the specific facts of this case - is between the several months of Bélisle to the twelve months of Gravino and Johnson & Higgins.
[145] Moreover, in their Introductory Motion dated October 13, 2006, Ross Ltd. et al alleged Lilja US was a co-conspirator along with David.[50] After making such allegations, Ross Ltd. et al could not reasonably expect to get any further work from Lilja US. Therefore, the reasonable delay period for duties of loyalty ends - at the latest - on October 13, 2006.
[146] Given the specific circumstances of David’s position, the Court determines that the greater intensity for the obligation of loyalty arises from his position as key employee and principal: therefore under art. 2088 and 2138 C.C.Q., rather than under that as a director i.e. art. 320 -322 C.C.Q.
[147] The following factors militate in favour of a greater intensity and hence longer duration:
a) the key man position of David as one of the four principals in the company and the close family connection;
b) the ascendancy that David's position in the hierarchy gave him over Pat Cookney;
c) the development and investment by Ross Ltd. in the technical and managerial expertise to undertake refractory and related civil work for the available refractory jobs (essentially those for OI);
d) the fact that Ross Ltd. supported David directly in the inception and development of this specialized business unit:
(i) through the millwright Jim Strong in the Ross Ontario operation who had contacts with Mike Steacy, the OI engineer for Canada; and
(ii) the hiring of Pat Cookney who had worked for many years with the Mowbray firm on jobs allocated by Mike Steacy for OI Canada. At the same time, Ross Ltd. provided David and Tony with the opportunity for building their business and personal relationship with Bud Field: by paying for them to attend for the one week hands-on training course in California in 2004; by allowing them to attend at the Lilja US booth at a glass trade show in the United States and by paying for David’s rental cottage in the Thousand Islands following the Furnace B job in July 2005, to which David was able to invite Bud Field and Tony; and
e) Ross Ltd. - by paying the salary for Pat Cookney since October 2004 made the investment which permitted Ross Ltd. to "get its foot in the door" in the refractory business, not the least of which allowed David to:
(i) successfully obtain the Furnace B job in Montreal;
(ii) bid on other refractory jobs such as that in Lavington, B.C. in the Fall of 2005; and
(iii) by virtue of Ross Ltd. allowing to David to develop the strategic alliance with Lilja US, he became privy to the Lilja US proprietary bid manual which explained how to calculate winning bids on refractory jobs. According to Mr. Walter Bowe, then vice-president and now president of Lilja US, this manual contained highly confidential and highly useful information which David could not have gleaned elsewhere for bidding on refractory jobs.
[148] Furthermore, the Ross Ltd. commitment to the Furnace B job cannot be underestimated. In addition to monopolizing the management skills - for 60 days non-stop - for David and Tony as well as a similar involvement at a lower level for Pat Cookney, Ross Ltd. was required to employ 125 persons to complete this mandate. The uncontradicted evidence was that this placed a huge strain on the existing resources for Ross Ltd. and its personnel.
[149] From when does this 7-month delay run? It runs for the 7 months from September 30, 2005 to April 30, 2006.
[150] The Court is mindful of the admonition of the Court of Appeal that encouraging free trade must be the rule but it determines that these circumstances are exceptional. Hence the question to ask is: what is a reasonable period - absent any non-competition clause and any non-solicitation clause - to which Ross Ltd. et al should be reasonably protected? The Court determines that seven months from the date of David’s departure -September 30, 2005 - is appropriate. Although David has never signed any non-competition nor non-solicitation clause, he still remained responsible for these statutory duties of loyalty.[51]
[151] Both sides could have negotiated mutually satisfactory contractual arrangements regarding: (a) who was and (b) how service was, to be rendered to Lilja US after David left. The Court is perplexed at how this "elephant in the room" could have existed all through the negotiations of August and September without seemingly ever having been discussed. That said, absent any negotiation by David to reduce or eliminate his obligations under the second paragraph of art. 2088 C.C.Q., these obligations provided, amongst others, certain protection for Ross Ltd.’s privileged relationship with its employees.
B- Illegal Active Solicitation of Employees
1. Governing Law
[152] The Plaintiffs alleged that David breached his duty of loyalty by inducing four employees to leave Ross Ltd. and join Construction Lilja: Tony Caputo, Monique Lesieur, Angelo Caputo and Pat Cookney. There was no evidence that any of the four employees were bound by non-competition or non-solicitation clauses.
[153] David was the immediate superior of Tony Caputo. Pat Cookney reported to Tony but also had a very close working relationship with David and was therefore a subordinate of David’s as well. Monique Lesieur worked under the supervision of Glen Kavanagh in Gatineau and had no direct reporting responsibility to David. Angelo Caputo, Tony's cousin, was a manager working mainly for Michael.
[154] There is the general principle that the greater the responsibility of the employee in a company, the greater is their intensity of loyalty owed. This duty is particularly important where a senior employee may be leaving the employer to set-up his own competing business and where his position in the hierarchy may provide him with undue influence in relation to his subordinates in causing them to leave.
[155] Absent any contractual restriction, any employee is entitled to leave their employment upon providing the employer with reasonable notice.
[156] However, the Court of Appeal has confirmed that a senior employee cannot in an "insistent and systematic" way solicit other employees at the employer to convince them to leave.[52] Such solicitation is not allowed: (a) while the senior employee is employed; and (b) for a reasonable period after they have left their employment.
[157] This legal protection recognizes the investment that the employer has placed in training their employees. In our "knowledge-based economy", highly skilled employees may be as equally valuable to the employer as any proprietary information. Loyalty requires that a senior employee who is leaving does not unduly take advantage to "jump start" their new business through such employee raiding.
[158] As to what constitutes soliciting an employee to quit, "solicitation" has been defined in jurisprudence as "une demande instante, une demande pressante … en vue d’obtenir quelque chose".[53]
2. Analysis
a. Tony Caputo
[159] Ross Ltd. et al have not met their burden to prove that David bears legal responsibility for Tony Caputo’s leaving their employ. The key element of concerted effort by the senior employee to induce the other - usually subordinate - employees to leave, is simply not present in the case of Tony nor for that matter, for Ms. Lesieur or Angelo Caputo.
[160] The evidence is clear that within the Ross Ltd. management structure, Tony was David’s "right-hand man". From the beginning, Tony showed himself wanting to be part of David’s future plans. Tony took his vacation time with David and his family, Tony worked shoulder to shoulder with David throughout the 60 days of the furnace B project, and after David left, the brothers’ attempt to retain Tony’s services seems to be half-hearted at best: Tony’s credible testimony was that he was offered a vague 10% participation in the business without any real specifics of what it would cost him to buy in. After two meetings, the discussions were dropped.
[161] Tony had worked the majority of his adult life for Ross Ltd., as had his father before him. Through his own efforts, he had worked himself into a position of responsibility in the tier of management just below the brothers. When he decided to leave at the end of November, he gave Ross Ltd. two weeks’ notice but was asked to leave forthwith.
b. Monique Lesieur and Angelo Caputo
[162] There is no evidence of any discussions between David and Ms. Lesieur, who was the administrative assistant to Glen Kavanagh in the Gatineau office of Ross Ltd. Since Glen Kavanagh himself had been directly involved in early discussions with David and Tony regarding setting-up a competing construction business to Ross Ltd., it is equally conceivable that information concerning this potential employment opportunity could have come to Ms. Lesieur in discussions with Mr. Kavanagh.
[163] Again, Ross Ltd. has not met its burden to prove any illegal inducement by David of this former employee.
[164] As for Angelo Caputo, the Court accepts his testimony that he followed his cousin Tony to Construction Lilja because of his particular affinity with Tony (whom he considered to be like a brother) and not because of any active solicitation by David.
c. Pat Cookney
i. Pat Cookney: Key Employee for Refractory Work
[165] The evidence is clear that the expertise of Pat Cookney was a sine qua non to Ross Ltd. and Construction Lilja getting refractory work in Canada. This conclusion arises from the following examples drawn from the evidence:
a) on October 8, 2004, David emailed the brothers saying that Pat Cookney was "hired to head-up the refractory division";
b) At the time of Pat's hiring, Tony Caputo said to David in an email: "Pat has what we need for refractory but Ross and Anglin has the money and resources to make it happen";
c) in an email from Bud to OI head office in Ohio[54], October 21, 2004 he confirmed that Pat Cookney was the key person that Mike Stacey turned to, to give OI refractory work in Canada when Pat was at his previous employer;
d) in another email to a senior engineer at OI in the US, Bud Field said on October 21, 2004 regarding Pat Cookney: "We have since hired the most respected refractory superintendent in Canada …";[55]
e) in a critical email from David (after he had left) to Pat Cookney on October 20, 2005, David said: "…I spoke to Bud just prior to calling you and his words were "you have to get Pat on board, we need his expertise to build the refractory business within Canada""; and
f) in an e-mail from David to Pat Cookney on October 20, 2005 under the heading "The Future", David said: "A year ago, I had every intention of a long refractory road with both you and R&A. However, things have changed. My going out and my intentions of starting up fresh has caused some anxiety for me knowing that to do so, I needed some key people to follow. You are one of the keys. I can go into a meeting with you and a client and I automatically have the comfort of knowing they can't throw anything at us that you can't answer on the technical side and that when you speak of the refractory (sic) they get a feeling that they have landed an expert in this field." (Court's emphasis)
[166] The old adage in service-oriented businesses was that three types of employees are required: "those who find the work", "those who mind the work", i.e. make sure that the work is managed properly and "those who grind the work" i.e. do the work.
[167] For Ross Ltd.’s refractory division David was clearly the "finder" with his relationship with Bud Field. Tony was the "minder" and the key "grinder" was Pat Cookney. Given the tight interwoven structure of the refractory group, Ross Ltd. knew or should have known that they had no one "in-house" to easily replace David, Tony or Pat. As the Superior Court has said in other cases, when a company accepts to operate in a situation where it leaves all the expertise in one particular area in the hands of one person, the company cannot complain and must be taken to know the foreseeable difficulties, when that person leaves of their own initiative.[56]
[168] The central questions are - whether and if so, who - induced Pat Cookney to leave Ross Ltd. and did Pat work for David (as a competitor) while still being employed by Ross Ltd.?
[169] The duty of loyalty of a director or officer of an employer does not allow them to actively solicit present employees of the employer during the period when that duty is owed.[57] In the 2007 case of Choix du fromager, the Superior Court found that the direct solicitation of employees by an intermediary was but a smoke screen to camouflage the real solicitation by the party owing the duty.[58]
[170] In the present case, this Court determines that communications between Bud Field and Pat constituted just such a camouflage. The real intent was that Pat was to be hired by David and his new company, Construction Lilja and all Bud Field was doing was providing comfort that, in a worst case scenario, Lilja US would temporarily defray Pat’s salary. Bud Field's intervention does not change the fact that there was a direct and illegal hiring away by David and Construction Lilja, of Pat Cookney, contrary to David’s obligations of loyalty to Ross Ltd.
[171] Had Pat Cookney left the employment of Ross Ltd. of his own independent will upon giving reasonable notice, no legal liability for active solicitation to hire (as an element of breach of loyalty by David) would have occurred.
[172] However, as will now be shown by reference to the evidence, the direct cause for Pat Cookney tendering his resignation was the active and illegal solicitation to hire by David. David's actions gave rise to his legal liability (and that of Construction Lilja) for the resulting damages.
ii. Work on OCF Bid
[173] The evidence demonstrates that David had a long-term plan to be in the refractory business. It was consistent with this long-term plan that David sought Pat's help to bid on the OCF job in Candiac - even though Pat was still employed by Ross Ltd.
[174] The chronology of events establishes this conclusion.
[175] On June 4, 2005, David Thompson in an e-mail to Pat Cookney said: "When you we're hired, it was for a long-term business plan, to develop a service-oriented refractory division that could provide or enable us to provide a total service. Personally, I am very satisfied with the progress we have made as a team and can only see things getting better. …"[59]
[176] In June 5, 2005, in an e-mail to Pat Cookney, David Thompson flatters Pat Cookney by saying "the glass industry is yours to have because of your history and the contacts you've made". David then goes on to describe the accomplishments of their refractory division and concludes by saying "I believe that within the next two years, we're going to do things that we never imagined we would and I hope we have all our key guys with us". (Court's emphasis)[60] This last statement was prophetic.
[177] On August 11, 2005, David instructed Pat on labourers' rates for budgetary purposes so as to give to OI for next year.[61] On September 9, 2005, David e-mailed Bud to tell him he had at lunch with Mike Stacey and had learned about the Christmas work for 2005-2006 for OI.[62] This work was at OI plants in Brampton, Toronto, Lavington, B.C. and Scoudouc, N.B.
[178] On October 6, 2005, Bud emailed Pat Cookney to talk to him about the upcoming Lavington job.[63] On October 6, 2005, Tony was also in communication with Bud and Pat re: this job.[64]
[179] Starting on October 19, 2005, there were e-mail exchanges between Pat Cookney from his personal e-mail address to David Thompson: they concerned the upcoming OCF job in Candiac but also made reference to upcoming jobs in Scoudouc and Lavington.[65]
[180] In an October 20, 2005 e-mail from David Thompson to Pat Cookney, David said "your price is the price I'm using for Lavington". He placed Pat Cookney in a flagrant conflict of interest since Ross Ltd. was also bidding on the Lavington job.[66]
iii. Solicitation to Hire
[181] In addition to David enticing Pat to work on the OCF bid for Construction Lilja when Pat was still employed by Ross Ltd, a telling communication of October 20, 2005 from David to Pat was a direct solicitation for hire. In that email David said to Pat that Bud will pick-up the cost of Pat’s salary "until you get all your paperwork in order". David also said that he hoped that Pat will follow him - a clear and direct solicitation for Pat to come to the new company and "lastly I won’t make you any false promises but I know you will receive more compensation in the long run from Lilja Canada than R&A".
[182] The solicitation could not have been more active nor more direct. It ran contrary to David’s on-going duty of loyalty and put him in a conflict of interest by placing his own interests ahead of Ross Ltd.
C- Alleged Misappropriation of Corporate Opportunities
1. Governing Law
[183] Ross Ltd. took the position that David’s establishing a business alliance between Construction Lilja and Lilja US was in breach of his duty of loyalty.
[184] The law in Quebec does not support this assertion. Free and vigorous competition is the cornerstone of our economic system. Obligations of loyalty and good faith, important as they are, are residual requirements to this fundamental principle. An individual who leaves a company is entitled to put his aptitudes and know-how to use for a competitor without this competition constituting a violation of the duty of loyalty.
[185] The leading case on this subject is Excelsior (L'), compagnie d'assurance-vie, a 1992 case of the Court of Appeal[67], where the Court of Appeal stated:
"En principe, aucune clause de non-concurrence et, en règle générale, aucun devoir implicite découlant d'un contrat d'emploi ne sauraient empêcher un individu de gagner sa vie en utilisant ses connaissances et ses aptitudes professionnelles chez un concurrent. Ces dernières se rattachent à sa personne et à son patrimoine :
[…]
Que l'obligation de loyauté provienne d'un mandat, comme cela paraît être le cas ici, ou du contrat d'emploi, on ne saurait encore une fois lui donner une interprétation et un contenu plus inconciliables avec les fondements de l'ordre public économique que les clauses de non concurrence elles-mêmes. Elle ne permet pas de consolider un droit de propriété de la clientèle, qui demeure l'objet de la lutte pour le marché, lutte à laquelle l'ancien employé ou mandataire a droit de participer, pourvu qu'il le fasse correctement. …
Dans notre système économique, la clientèle demeure libre de ses choix. Elle décide où elle se portera. Toute entreprise assume les risques de ses mouvements. Demeurent toujours pertinents ces commentaires du juge en chef Lafontaine dans l'affaire La Moderne, compagnie d'assurance c. Vanchestein, (1925) 39 B.R. 294, selon qui la clientèle appartient, en définitive, à elle-même.
«Le client n'appartient qu'à lui-même. Il est susceptible de compétition de la part de qui que ce soit.» (p. 302)." (Court's underlining)
[186] A recent example of the application of this principle before the Superior Court is the 2011 case of Imprimerie World Color inc. v. Lehoux:[68]
"Toutefois, l'obligation de loyauté n'exige pas l'ex-employé à refuser la clientèle qui décide de le suivre."
[187] The twin principles - that free competition is the rule and that art. 2088 re: solicitation of clients may be given a restrictive interpretation - were effectively restated by the Court of Appeal in the Concentrés scientifiques Bélisle inc. case.[69]
"… Bien que dommageable, la concurrence, en elle-même, ne saurait être fautive et source de responsabilité civile. Même lourdement préjudiciable pour une entreprise d'assurance, la seule conquête d'une part de marché par un nouveau concurrent ne lui donne pas droit à une indemnité. La concurrence fait partie de ces activités reconnues comme licites, bien que dommageables. On a le droit de conduire le restaurateur ou l'épicier voisin à la faillite, pourvu que, ce faisant, on emploie des moyens licites et corrects. […]"
[188] Similarly at paragraph 45 of the Gravino case before the Court of Appeal, the principles from the Excelsior case were quoted with approval.[70] Moreover, Gravino provides an important example at paragraph 85 which has applicability here. In that case, the Court of Appeal had found that the business opportunity had not reached a sufficient level of maturation. However, a similar opportunity with the same potential co-contractor had been discussed when the two ex-employees were employed by the plaintiff. The Court of Appeal said that if the plaintiff wished to prevent the ex-employees from approaching this co-contractor to try and finally consummate a similar deal, it needed to have protected itself contractually (which it had not done).
[189] Finally and to conclude this section, the Court of Appeal has confirmed that the following principles established by Mr. Justice Journet in Gravino at trial are valid statements of law in Quebec provided one does not attribute "fiduciary duty" as their source:
"1. …
2. …
3. …
4. l’occasion d’affaires doit être en voie de réalisation;
5. la compagnie ne sera protégée que si elle poursuit activement [l’occasion] d’affaires;
6. l’interdiction de s’approprier l’occasion d’affaires survit après le départ pendant une période variable, selon les circonstances;
7. la survie de l’interdiction découlera soit d’un départ provoqué par le désir d’obtenir l’occasion d’affaires, soit du fait que [l’occasion] ne provient pas d’une initiative fraîche de l’administrateur ou du haut fonctionnaire, mais plutôt de sa position au sein de la compagnie;
8. la restitution des profits est un remède approprié;
9. il n’est pas nécessaire pour la compagnie de prouver qu’elle aurait réussi à réaliser l’occasion d’affaires;
10. il n’est pas nécessaire pour la compagnie de prouver qu’il y a eu utilisation d’informations confidentielles;
11. les offres présentées par l’administrateur ou le haut dirigeant pour obtenir l’occasion d’affaires n’ont pas à être substantiellement similaires dans la mesure où les objets généraux sont les mêmes."
a. Nature of Opportunities
[190] What exactly was the maturing business opportunity alleged?
[191] That opportunity was the strategic alliance with Lilja US whereby Lilja US would use its Canadian sub-contractor for Canadian refractory work for OI. At the time of David’s departure, the Court determines that this was a maturing business opportunity which David’s duty of loyalty prevented him from actively soliciting on behalf of himself and Construction Lilja.
[192] The elements that made this a maturing business opportunity ("occasion d’affaires en voie de réalisation") are:
a) in an email from Bud Field to Jim Strong on October 15, 2004 to advise him on an upcoming meeting with Mike Stacey of OI Canada, Bud Field instructed: "… sell us as Lilja/ R&A, a joint venture for all types of glass related projects, big and small, for all their plants in Canada". Bud says to Mr. Strong to tell Mr. Stacey that: "this approach has been blessed by Toledo" (i.e. the head office for OI in the US).
b) the fact that the refractory division was marketed to clients as "Ross and Anglin - Lilja US" as per the business cards;
c) Ross Ltd had developed good credibility in refractory work as sub-contractor to Lilja U.S. as a result of the success of the Furnace B job;
c) Ross Ltd had become a preferred supplier for OI;
d) on January 12, 2005, David wrote to Pat Cookney:[71] "Bud is very keen on us getting 100% of the OI Canada work …"; and
e) at some indefinite date in early 2006, OI went to a "sole source" system whereby bidding was eliminated in favour of all refractory work in North America being contracted to Lilja US whose responsibility was then to engage any required sub-contractors.
[193] The viability and potential for the strategic alliance that had existed between Ross Ltd and Lilja US had two fundamental components:
a) the expertise of Pat Cookney in the bidding for and the undertaking of, refractory work. While the former skill may have become redundant when "sole sourcing" was implemented, it remained essential for non-OI clients; and
b) the close professional relationship between Bud Field and David.
[194] Having determined that this strategic alliance constituted a maturing business opportunity, the question is whether any of David’s actions constitute illegal, active solicitation.
[195] The Court answers that question in the negative. The Court concludes that illegal solicitation has not occurred for two reasons:
a) Bud Field preferred to deal with David and so orchestrated matters so that Construction Lilja could be established to service the needs of Lilja US;[72] and
b) the business opportunity was not solicited by David and Construction Lilja so much as it was bestowed upon them by Bud Field.
[196] The evidence discloses that in 2005, including the period from August to October, David spoke regularly - in his own evidence at least once a week - with Bud Field. They had developed a close professional relationship based in part on the similarity of their personalities as hard-driving, results-oriented businessmen who put the clients’ interests ahead of their own personal comforts. In the context of such a strong intuitu personae relationship, Quebec law has permitted direct and individualized contact between a former employee and their clientele.[73]
[197] The Court of Appeal has underscored that this ongoing obligation of loyalty creates a tension between freedom to work and freedom to compete. However, the Court of Appeal has confirmed that it is the client that is free to make their own choices with whom they wish to deal and that every business must assume the risk of such movements of clientele.[74]
[198] Ross Ltd. has not proven on the balance of probabilities that it was David who actively solicited this business opportunity. The evidence shows rather that it was Bud Field, who:
a) pushed David to incorporate;
b) helped David push Pat Cookney to leave Ross Ltd.; and
c) ultimately, pushed the OI work to Construction Lilja. Such a conclusion is supported by the examination of Bud Field filed into evidence, the testimony given by Mr. Walter Bowe, President of Lilja US as well as an internet announcement for Lilja US showing Construction Lilja as their Canadian operation and David as their Canadian operations manager.[75]
[199] This is not to say that David was not willing to be pushed: it is to say that he was not proven to be the active instigator, as the law requires, to prove the misappropriation of a maturing business opportunity.
2. Whether Ross Ltd. Had Renounced to Opportunities
[200] Through the testimony of Pat Cookney, David raised the defence that Ross Ltd. had renounced to these opportunities.
[201] Although not binding on this Court, there is, by analogy, some interesting common law jurisprudence. The leading case is Peso Silver Mines Ltd. v. Cropper[76] where the Supreme Court of Canada noted that the plaintiff company had turned down the opportunity for "sound business reasons" and therefore the directors were allowed to pursue that opportunity.
[202] What of the alleged renunciation in the present case? Pat Cookney testified that he was on a telephone conference call sometime between October 5th and October 21st with he and Peter in Toronto and the other brothers and Tony in Montreal. In answer to Pat's question whether Ross would still be subcontracting for OI, Pat Cookney testified that Tony confirmed that Ross and Anglin would not pursue refractory jobs anymore.
[203] The Court does not accept this testimony because other evidence by Pat Cookney put the impartiality of his testimony in doubt, his own contemporaneous e-mail is inconsistent with this testimony and surprisingly, this important event was not discussed by Tony in his testimony.
[204] Firstly, regarding his credibility. Pat Cookney testified initially that he first learned of the OCF job on November 7, 2005. This would have been after he had given his resignation.
[205] However, he was then shown an exchange of e-mails (Exhibit PRA-30). In his own e-mail of October 20, 2005, he took exception to Bud Field wanting to send someone from Lilja US, instead of allowing David to send Pat, to the meeting with OCF regarding the upcoming bids.
[206] Secondly, how could Tony on behalf of Ross Ltd., have said that Ross Ltd. was not prepared to do anymore refractory jobs in this alleged telephone conference somewhere between October 5th and October 21st when Pat Cookney himself, in his e-mail to David of October 20, 2005, makes reference to the fact that Tony and Peter are trying to get a place on the bidders' list for the Lavington refractory job? Also, in an e-mail of October 19, 2005, Pat Cookney, as construction manager of Ross Ltd., wrote to Mike Steacy and said "We are working up three separate proposals for your review" and the subject line says "refractory installations".
[207] On this evidence, the Court was not satisfied there has been any renunciation by Ross Ltd. to undertake refractory work from September 30, 2005 going forward.
D- Damages Owed to Ross Ltd.
1. Governing Law
[208] The two principles of Quebec law that apply are: (a) net profits should be used to calculate damages; and (b) the nets profits are those of Construction Lilja, David's accomplice, who profited directly from his disloyal acts. Art. 1611 C.C.Q. states: "Les dommages-intérêts dus au créancier compensent la perte qu'il subit et le gain dont il est privé. …" The general rule established by the Court of Appeal is that the profit in question is net profit and not gross profit.[77] The Concise Oxford Dictionary[78] defines net profit "as the actual gain after working expenses have been taken".
[209] The jurisprudence does leave open the possibility that gross profits may be claimed in those circumstances where the Plaintiff, who has the burden of proof, can show "… par une preuve suffisamment convaincante qu’elle aurait réalisé un tel profit sur les ventes qu’elle a perdues."[79] Such evidence is easier to make when an isolated contract is involved.[80]
[210] The Court determines that any claim for gross profit has not been made out here.
[211] When net profit is used, the courts have looked at the recent financial statements and have taken a contemporaneous average of recent net profits "… de l’ensemble des activités de l’entreprise …".[81]
[212] Whether acting as a director or as a vice-president, David was always a mandatary for Ross Ltd. and was thereby bound by art. 2146 C.C.Q.:
"Le mandataire ne peut utiliser à son profit l'information qu'il obtient ou le bien qu'il est chargé de recevoir ou d'administrer dans l'exécution de son mandat, à moins que le mandant n'y ait consenti ou que l'utilisation ne résulte de la loi ou du mandat.
Outre la compensation à laquelle il peut être tenu pour le préjudice subi, le mandataire doit, s'il utilise le bien ou l'information sans y être autorisé, indemniser le mandant en payant, s'il s'agit d'une information, une somme équivalant à l'enrichissement qu'il obtient ou, s'il s'agit d'un bien, un loyer approprié ou l'intérêt sur les sommes utilisées."
2. Analysis
[213] The Court of Appeal in Gravino has confirmed that art. 2146 C.C.Q. allows for the restitution of profits where there has been a breach of art. 322 C.C.Q.[82] This principle applies equally to a breach of duty under art. 2088 C.C.Q. since an employee is also a mandatary.
a. Refractory Tools and Truck
[214] These moveables belonged to Ross Ltd. and Ross Ontario. The tools were loaned effectively by David and Construction Lilja: they became misappropriations when never returned. As for the truck, it was supposed to have been purchased by David but never was. If he did not want to buy it, he should have returned it at once. Instead, he used it without authorization for two years … before unilaterally returning it. He owes damages for this two-year period of misappropriation.
[215] In December 2005, Mark and Peter made a list of the tools they allege were taken in October 2005, along with their replacement price. This Exhibit PRA-69 was objected to on the grounds that neither Mark nor Peter knew whether the tools were new or used at the time they were provided nor had an inventory of the actual tools taken by Pat when he made the request to Peter in late October 2005.
[216] The evidence discloses the following. Construction Lilja needed these refractory tools to begin the Candiac job and it had no tools. Pat Cookney requested to borrow these refractory tools from Peter on the grounds that they were going to be used by Lilja US. In fact, as everyone now knows, they were used by Construction Lilja.
[217] There was a shipping container full of these tools sent to the Candiac job site. In view of Pat Cookney’s expertise, the Court draws the inference that there was a complete set of refractory tools since Mr. Cookney would know exactly what was required.
[218] In the demand letter, Exhibit PDT-8, David’s attorney refers to these refractory tools (masonry saws, pneumatic drill and miscellaneous tools) for which David offers to pay $12,000.00 at the time. The uncontradicted evidence of Peter is that such a drill and masonry saws are worth $14,000.00 new.
[219] The Court will allow the production into evidence of Exhibit PRA-69 (the list made up by Peter and Mark) although it has the limitations above-mentioned. The Court notes that the offer by David of $12,000.00 was made conditional upon the outstanding matters in the SPA being completed. It is a reasonable assumption that the value offered was under the actual value. What is clear is that David and Construction Lilja would not have been able to do the Candiac job without these tools, that Peter provided them willingly and without hesitation and that they were never returned.
[220] The Court arbitrates the value of $18,000.00 as reasonable in all these circumstances.
[221] As for the truck, it was a 2000 Tahoe. The purchase price in September, 2005 was agreed to in the SPA as $14,000.00.
[222] The Court was not provided with any evidence regarding what a reasonable mileage charge would be nor what it would cost to rent an equivalent vehicle.
[223] The primary driver for the vehicle was David. When he took possession of the vehicle, it had 210,000 kilometres and when he returned it had 250,000 kilometres. He testified that he returned it because he did not want to invest any upkeep on the vehicle but that he had done repairs on an "as needed basis" during the time the vehicle was in his possession.
[224] The Court understood from the evidence that for the two years that David had use of the truck, Ross Ltd. paid for the insurance.
[225] In the circumstances, the Court arbitrates again that damages of $3,500.00 per year would be reasonable.
[226] Accordingly, the Court awards damages in the amount of $7,000.00 for the misappropriated use of the truck.
3. Damages Arising from David's Unauthorized Use of Pat Cookney, Active Solicitation to Hire Pat Cookney and Duty to Mitigate
[227] The basis for the obligation to mitigate (or minimize damages) arises from art. 1479 C.C.Q. David, as debtor, has the burden to prove that Ross Ltd. did not take reasonable steps to minimize its damages.[83]
[228] The principle applicable under Quebec civil law for mitigation of damages has been stated by the Court of Appeal:
"[101] La règle applicable à la question de la minimisation des dommages par le créancier (art. 1479 C.c.Q.) est succinctement exprimée par la Cour suprême dans l’arrêt Laflamme c. Prudential-Bache Commodities Canada Ltd:
Le droit civil impose au créancier l’obligation de minimiser les dommages. Cette obligation, maintenant codifiée à l’art. 1479 C.c.Q., exige du créancier qu’il évite l’aggravation du risque « en prenant les mesures qu’aurait prises, dans les mêmes circonstances, une personne raisonnablement prudente et diligente » (Baudouin et Deslauriers, op. cit., n° 1256). Il y a donc lieu de tenir compte des circonstances propres à chaque situation dans l’évaluation de ce qui constitue le comportement attendu du créancier."[84]
a. Unauthorized Help from Pat on the OCF Candiac Bid
[229] Ross Ltd. did not bid on the Owens-Corning job in Candiac but Construction Lilja did and won the bid. Pat Cookney - then working for Ross Ltd. - was illegally solicited by David to work on the winning bid. Absent this unauthorized work by Pat, there would not have been a bid, let alone a successful one, by Construction Lilja. This work product from Pat on the bid constituted "information belonging to Ross" per art. 2146 C.C.Q. Accordingly, the Court determines that the Construction Lilja profit belonged to Ross Ltd. and for which David and Construction Lilja are solidarily responsible to Ross Ltd. This liability arises because of David's breached duty of loyalty as former key employee/mandatary.[85]
[230] The speed with which this all happened justifies that there was no real opportunity for Ross Ltd. to mitigate.
b. After October 30, 2005: Restitution of Profits Earned Due to Pat Cookney
[231] Subsequent to the OC bid, Ross Ltd. did nothing to replace Tony or Pat and hence, was in no position to do any refractory work. However, in keeping with the Laflamme case, Ross Ltd. cannot be expected to mitigate up to April 30, 2006 because the entire refractory division was no more, leaving no one in Ross Ltd. with any understanding of how to re-establish it within this short 7 month timeframe. Therefore, David and Construction Lilja are solidarily liable to restore to Construction Lilja the net profits from refractory jobs they were paid for up to April 30, 2006. The evidence is clear that without the specialized expertise of Pat Cookney, Construction Lilja would not have been able to undertake these refractory jobs.
i. Analysis
[232] Ross Ltd. et al claim "jointly and severally" (the Court interprets these terms to mean "solidarily" in Quebec civil law)[86] against David and Construction Lilja by way of damages in the amount of $566,567.10, with interest and indemnity, as well as damages against David personally for $55,000.00: alleged to be the value of the 2000 Chevrolet Tahoe truck ($14,000) and refractory tools (masonry saws, pneumatic drill and miscellaneous tools) which they allege David kept, without colour of right.
[233] As noted, the determination of damages means that the mandatary and his accomplice cannot be left with those net profits which should be returned to the mandator (Ross Ltd.).
[234] Ross Ltd. through the evidence of Mark alleged that their average profit margin was in the order of 15%: he did not indicate whether this was gross or net profit.
[235] The Court reviewed the 2005 financial statement for Ross Ltd.[87], Exhibit PDT-29 (which also showed the figures for 2004). For 2005 and 2004, the respective figures were: total billings of $20,607,360.00 and $10,144,986.00 while net income (profit) was $193,826.00 (.94% of total billings) and $75,078 (.74 % of total billings).
[236] In the case of the Furnace B refractory job done in May - June 2005 by Ross Ltd., the total billings were $11,432,644.32[88] for which the proposed share that Ross Ltd. would make on net profit was $481,763.01 (or 4.21% of the total billings).
[237] Even if the Court wished to use Ross Ltd.’s own net profit margin figures, there was no substantiation for the 15% put forward in Mark's testimony as net profit.[89]
[238] If one now turns to the unaudited accounting opinion of the financial affairs of Construction Lilja for 2006 (Exhibit PRA-84), gross sales are shown to be $3,847,008.00 while net profit is $151,439.00 (or 3.9% of total sales).
[239] In the seven month period between September 30, 2005 and April 30, 2006, Construction Lilja undertook the refractory work for the contracts shown in the following table. Since David had no restriction on the solicitation of general non-refractory work, that work is not relevant for the purposes of calculating damages.
[240] The Court determines that for the refractory work in the relevant 7-month period shown in the attached table the total billings were $612,489.34. Except for Candiac, the remaining jobs are sub-contracts to Lilja US for OI:
Contract # |
Client |
Period of Invoices |
Total Billed Before Taxes |
R-05-500 |
Candiac (Owens-Corning) |
9 Feb., 2006 - 27 March, 2006 |
$ 200,931.00 |
R-05-501 |
Brampton Burner Block |
22 Dec., 2005 - 29 March, 2006 |
$ 39,314.98 |
R-05-502 |
Lavington, B.C. |
22 Dec., 2005 - 3 March, 2006 |
$ 321,263.09 |
R-05-503 |
Kipling |
22 Dec., 2005 - 29 March, 2006 |
$ 39,462.25 |
R-06-504 |
Kipling |
17 Feb., 2006 |
$ 688.68 |
R-06-505 |
Montreal |
27 April, 2006 |
$ 7,625.20 |
R-06-506 |
Scoudouc, N.B. |
3 April, 2006 |
$ 3,204.14 |
|
|
GRAND TOTAL: |
$ 612,489.34 |
[241] If the Court were simply to take 4% of this total billing figure as an estimated net profit, the amount is $24,499.57.
[242] However, as the table demonstrates the evidence produced (Exhibit PRA-86) shows refractory work essentially undertaken and billed beginning on December 22, 2005 and going to April 3, 2006: there were no other refractory billings from April 3 to April 30, 2006.
[243] David’s duty of loyalty has been determined by the Court to run for seven months from September 2005 to April 30, 2006. Accordingly, the four months in 2006 (January 1st to April 30th) represent one third of that year. If one takes one third of the annual net profits for 2006 of $151,439.00, that amount is $49,974.87.
[244] The financial statement for 2006 for Construction Lilja was not an audit opinion. In note 2, it said: "Revenue from construction contract is recognized on the percentage of completion basis whereby revenue is measured by proportion of construction costs incurred to date as a percentage of estimated total construction costs". Since neither side called any expert evidence to explain any of the financial documents, the Court understands from this note that the monetary values used are "time-driven". This is another reason to use the time-based calculation i.e. one third of the year, to determine the net profit that must be returned: $49,974.87.
[245] Since the hiring away was undertaken by David and was for the benefit of Construction Lilja, they are both responsible solidarily for this amount.
E- David’s Motion Under Art. 54.1 C.C.P.
[246] By Motion dated November 15, 2011, David et al made a Motion to Dismiss, amongst others, under art. 54.1 and 165 (4) C.C.P. The conclusions to that Motion sought the dismissal of both the Ross lawsuit as well as the Ross Ltd. Plea to the David lawsuit, the disjunction of both actions and costs including extrajudicial fees incurred by David et al.
[247] This Court dismisses the disjoinder aspect of this application which no longer has any purpose since the trial was part-way completed when the Motion was presented. That said, the Court is required to deal with the Motion under 165 (4) C.C.P. before dealing with it under art. 54.1 C.C.P. The reasons given by the Court in regard to the actions on the merits answer the art. 165(4) aspect. What of the art. 54.1 allegations?
[248] The Motion to Dismiss is divided under two headings, one attacking the Ross Ltd. lawsuit and the second attacking the Ross Ltd. Plea to David's lawsuit. The allegations concerning the Ross Ltd. lawsuit are summarized in paragraph 13 of David's Motion:
"13. This being so, the R & A lawsuit is clearly unfounded and frivolous since its entire foundation including the foundation with the claim of $500,000.00 "sauf à parfaire", was always exclusively founded on the accounting that was being requested from the Defendants until the trial - however this claim and the resulting conclusion have now been struck from the R & A lawsuit." [Court's comment: The conclusion requesting an accounting was removed as a result of Ross Ltd.'s request to amend which occurred late in the trial]
[249] As for the Plea, there is no specific allegation that it is abusive. The sole-allegation is at paragraph 25 which is: "This Defence is unfounded …"
[250] The outstanding relief requested by this Motion that is not yet resolved is the request for extrajudicial fees. For this Court to award such extrajudicial fees, it must find that "an action or other pleading" is "improper" under art. 54.1 C.C.P.
[251] The following legal principles are applicable:
a) the simple fact that an action or procedure is unfounded does not make it abusive under art. 54.1 C.C.P.: blameworthy conduct must be proven;[90] and
b) even though a procedure or action may be rejected because it is "manifestly unfounded" does not necessarily mean that that procedure is abusive.[91]
[252] Until the Court makes a final finding that a procedure is abusive, the impugned party is always presumed to be in good faith per art. 2805 C.C.Q.[92]
[253] The Court is not satisfied that abuse has been shown in this "family feud". The fact that a litigant's arguments are found to be unmeritorious does not make them abusive either.
[254] As for that part of the purchase price under the SPA, being $119,999.00 which was owed to the David Thompson Family Trust, it is clear that the allegations of fraud made against David could not be raised against the Family Trust. However, the Trust itself did not at any point in the past seek to disjoin this issue and have it ruled upon earlier. There is a valid argument that all these matters had to be tried at the same time.
[255] The parties have the right to have all their outstanding disputes in this litigation decided at one time, which is the choice they made. In these circumstances, the Court determines that the failure to pay the David Thompson Family Trust earlier does not constitute an abuse under art. 54.1 C.C.P.
[256] In view of how the Court has disposed of this case on the merits, it is not appropriate to award costs on this Motion as a separate matter and so it will be dismissed, without costs.
[257] Ross Ltd. et al have asked the Court to reserve their rights. Their counsel signed the Joint Declaration stating that their case was ready for trial. The Court will not reserve any rights since it runs contrary of the purpose of litigation which is to provide finality to all disputes placed by the parties before the Court. To reserve rights would be in breach of this judicial contract entered into knowingly and willingly by Ross Ltd. et al that their litigation was fully ready to proceed. It was on the strength of this Joint Declaration that all parties benefited from 18 days of trial.
Conclusions
A- For David Thompson's Action
Montreal Superior Court of Québec, District of Montréal
Case # 500-17-037257-071
[258] GRANTS in part the "Re-Amended Introductory Motion to Institute Proceedings";
[259] ORDERS that within 20 days of the present judgment, the following take place so as to complete the closing of the Share Purchase Agreement:
a) Ross Ltd. et al's attorneys will provide all funds ordered in this section to David et al's attorneys to be held "in escrow". Ross Ltd.'s attorneys may undertake compensation for those amounts ordered in the Ross Ltd. action against the appropriate parties, except for any compensation of costs which will have to be determined following taxation (or agreement between the parties);
b) Ross Ltd. et al's attorneys will provide David et al's attorneys with all of the documents to be signed so as to fully complete the closing required by the Share Purchase Agreement (Exhibit PDT-4) including, without limitation, a new originally signed Share Purchase Agreement in the form of Exhibit PDT-4 and Share Purchase Transfers and other necessary documents to complete the transaction for David and his related entities to sign;
c) David and his related entities will sign the documents received and return them to Ross Ltd.'s attorneys by messenger;
d) upon written confirmation by the messenger service of delivery, the funds held "in escrow" may be disbursed by David's attorneys; and
e) the modalities in paragraphs (a) - (d) above may be modified upon the parties' written agreement;
[260] DECLARES that Defendants 119909 Canada Inc., 3001091 Canada Inc. and D.T. Construction Ltd. owe Plaintiff, David Thompson and ORDERS them to pay the sum of $64,800.00, representing the purchase price for his 64 800 Class "D" Preferred Shares of 119909 Canada Inc., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[261] DECLARES that Defendants 119909 Canada Inc., 3001091 Canada Inc. and D.T. Construction Ltd. owe Plaintiff David Thompson and ORDERS them to pay the sum of $1.00, representing the purchase price for his 700 000 Class "F" Preferred Shares of 119909 Canada Inc., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[262] ORDERS that Defendants 119909 Canada Inc., 3001091 Canada Inc. and D.T. Construction Ltd. pay to Plaintiff The David Thompson Family Trust the sum of $119,999.00, representing the purchase price for its 100 Class "A" Shares of 119909 Canada Inc., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from September 30, 2006;
[263] DECLARES that Defendants 119909 Canada Inc., 3001091 Canada Inc. and D.T. Construction Ltd. owe Plaintiff David Thompson and ORDERS them to pay the sum of $30,000.00, representing the purchase price for his 400 Common Shares of D.T. Construction Ltd., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from September 30, 2006;
[264] DECLARES that Defendants 119909 Canada Inc., 3001091 Canada Inc. and D.T. Construction Ltd. owe Plaintiff David Thompson and ORDERS them to pay the sum of $75,000.00, representing the purchase price for his 185 Class "A" Shares of said 3001091 Canada Inc., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from September 30, 2006;
[265] DECLARES that Defendant Ross and Anglin Limited owes Plaintiff David Thompson and ORDERS them to pay the sum of $63,461.54, representing the balance of one years’ salary of $75,000.00, with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[266] DECLARES that Defendant Ross and Anglin Limited owes Plaintiff David Thompson and ORDERS them to pay the sum of $12,375.00, representing the RRSP contribution to be paid by Ross and Anglin Ltd., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[267] DECLARES that Defendant Ross and Anglin Ltd. owes Plaintiff David Thompson and ORDERS them to pay the sum of $4,400.00, representing the balance of the severance payment in the total amount of $5,200.00 owing by Ross and Anglin Ltd., with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from September 30, 2006;
[268] ORDERS that Defendants solidarily pay to Plaintiff David Thompson the sum of $41,154.00, representing 25% of the net income before taxes as at September 30, 2005 for Ross And Anglin Ltd. and Ross & Anglin Ontario Ltd., pursuant to s. 3.1 of the Agreement, with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[269] ORDERS the Defendants solidarily to pay to Plaintiff David Thompson the sum of $36,183.00, representing 5% of the gross profit of all jobs in process or booked as at September 30, 2005 pursuant to s. 3.2 of the Agreement, with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[270] ORDERS the Defendants solidarily to pay to Plaintiff David Thompson the sum of $156,584.00, representing 10% of the gross profit of the Molson's jobs booked in Ross & Anglin Ontario Ltd. as at September 30, 2005 pursuant to s. 3.2 of the Agreement, with interest thereon at the legal rate and the additional indemnity provided by law calculated as of and from January 13, 2006;
[271] THE WHOLE with costs;
B- For Ross Ltd.'s Action
Montreal Superior Court of Québec, District of Montréal
Case # 500-17-033327-068
[272] GRANTS the Amended Introductory Motion in part;
[273] ORDERS Defendants David Thompson and 4327985 Canada Inc. solidarily to pay damages to Ross and Anglin Ltd in the amount of $49,974.87, together with interest at the legal rate and additional indemnity provided by law since the date of service of the Introductory Motion dated October 13, 2006;
[274] ORDERS David Thompson to pay to Ross and Anglin Ltd the amount of $7,000.00 as damages for the 2000 Tahoe truck used by him for two years with interest at the legal rate and additional indemnity provided by law since the date of service of the Introductory Motion dated October 13, 2006 as well as $18,000.00 for the refractory and other tools he retained, with interest at the legal rate and additional indemnity provided by law since the date of service of the Introductory Motion dated October 13, 2006;
[275] The whole with costs.
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(S) MARK G. PEACOCK, J.S.C. __________________________________
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Me. Claude Marseille Me. Liviu Kaufman |
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BLAKE CASSELS & GRAYDON LLP |
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Attorneys for Plaintiffs in Court Action No. 500-17-037267-071, and Attorneys for Defendants and Mise En Cause in Court Action No. 500-17-033327-068 |
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Me. Sylvain Rigaud Me. Maya Angenot |
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NORTON ROSE OR |
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Attorneys for Defendants in Court Action No. 500-17-037267-071, and Attorneys for Plaintiffs in Court Action No. 500-17-033327-068 |
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Dates of hearing: |
November 7, 8, 9, 10, 11, 14, 15, 16, 17, 18, 21, 22, 23, 24, 25, 28 and 29, 2011 and December 1, 2011 |
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[1] The Court’s use of the parties’ first names is for clarity and simplicity. No disrespect is intended.
[2] Hereinafter, the “David lawsuit”.
[3] Hereinafter, the “Ross Ltd. lawsuit”. On March 14, 2008, the Superior Court ordered both actions joined.
[4] Exhibit PDT-51A.
[5] Ross Ltd.'s Amended Motion to Institute Proceedings dated November 24, 2011 at para. 37.
[6] This is an independent company from OI.
[7] Mr. Kavanagh's credibility as a witness was diminished because in his testimony, he appeared to put his own interests ahead of those of his employer and work colleagues.
[8] The heading to this Motion was: “Amended Motion to Institute Proceedings (as per Decision of the Court delivered on November 28, 2011)".
[9] Entreprises Piertrem (1989) inc. v. Pomerleau Les Bateaux inc., 2007 QCCA 759 at para. 22.
[10] 9096-9031 Québec inc. v. Champagne, REJB 2004 53210 (S.C.) at para. 83.
[11] Jet Films inc. v. Les Productions Sky High Entertainment R.S.C.S. Inc., REJB 2003 40641 (S.C.) at para. 49.
[12] Guardian Insurance Co. of Canada v. Victoria Tire Sales Ltd., [1979] 2 SCR 849 at 869, 870.
[13] Union Canadienne (L'), compagnie d'assurances v. Crane Canada Co., 2006 QCCS 141 at para. 30.
[14] Pierre-Gabriel JOBIN and Nathalie VÉZINA, Baudouin et Jobin, Les Obligations, 6e édition, Cowansville, Éditions Yvon Blais, 2005 at p. 293.
[15] Pierre-Gabriel JOBIN and Nathalie VÉZINA, Ibid.
[16] Art. 1401 C.C.Q.; Pierre-Gabriel JOBIN and Nathalie VÉZINA, Ibid.
[17] Exhibit PDT-4.
[18] This is obviously a negotiated amount since his actual salary was somewhere between $150,000.00- $200,000.00 per year according to the evidence.
[19] Exhibit PDT-44.
[20] See Conclusions in David Thompson's Re-Amended Motion dated November 28, 2011.
[21] Expertises didactiques Lyons inc. v. Learned Enterprises internationales (Canada) inc., J.E. 99-907 (S.C.), AZ-99021449 at pp. 33, 34.
[22] Placements Favo v. 9012-5642 Québec inc. (Qualipak), 2002 CanLII 11037 (QC CA) at p. 5 and Pierre-Gabriel JOBIN and Nathalie VÉZINA, supra, note 14.
[23] Exhibit PDT-8.
[24] Canada Business Corporations Act, R.S.C., 1985, c. C-44.
[25] 2008 QCCA 1820 .
[26] Ibid.
[27] [2004] 3 SCR 461 at para. 29 and 32.
[28] Ibid. at para. 54.
[29] Interpretation Act, R.S.C., 1985, c. I-21.
[30] In lectures given by him in the Masters of Law Program at the London School of Economics and Political Science.
[31] [1974] SCR 592.
[32] Gravino, supra, note 25.
[33] Gravino, Ibid. at para. 39 and Financière Banque Nationale inc. v. Dussault, 2009 QCCA 1594 at para. 71.
[34] Toges Grand Maître inc v. Côté, 2009 QCCS at 1560 and Gravino, supra, note 25 at para. 69.
[35] See Paul MARTEL, La société par actions au Québec, volume I: les aspects juridiques, Montréal, Wilson & Lafleur, Martel ltée, 2011 at para. 23-332.
[36] Gravino, supra, note 25.
[37] Gravino, Ibid.
[38] Concentrés scientifiques Bélisle inc. v. Lyrco Nutrition inc., 2007 QCCA 676 at para. 42, confirmed in Tremblay v. Simple Concept inc., 2010 QCCA 802 .
[39] 2008 QCCA 1827 .
[40] Ibid. at para. 8-10.
[41] [2001] R.J.Q. 2820 (C.A.).
[42] The term "jump start" is equivalent to the French term "tremplin". Both refer to an unfair advantage being taken by a start-up company.
[43] Gravino, supra, note 25 at para. 39.
[44] Concentrés scientifiques Bélisle inc., supra, note 38 at para. 42.
[45] [1989] R.J.Q. 24 (C.A.).
[46] Ibid. at p.6 of 9.
[47] Concentrés scientifiques Bélisle inc., supra, note 38 at para. 42.
[48] Gravino, supra, note 25.
[49] Ibid. at para. 52 and 84.
[50] See paragraphs 26, 50(a), 51 and 53 of Introductory Motion.
[51] See a carefully reasoned analysis by: Robert BONHOMME, Obligation de loyauté post-emploi: plusieurs visages, gare à l'imposteur, in Développements récents sur la non-concurrence, volume 289, Service de formation continue, Barreau du Québec, 2008, particularly at pp. 179-181.
[52] Concentrés scientifiques Bélisle inc. supra, note 38 at para. 42.
[53] Industries Metafab inc. v. équipements environmental Terra inc., 2010 QCCS 6271 at para. 67 and 68.
[54] Exhibit PRA-13.
[55] Ibid.
[56] Metafab, supra, note 53 at para. 103.
[57] Choix du fromager (CDF) inc. v. Allard, J.E. 2007-402 (S.C.) at para. 75, citing Marque d'Or inc. v. Clayman, [1988] R.J.Q. 706 (S.C.).
[58] Choix du fromager, supra, note 57 at para.80.
[59] Exhibit PRA-65.
[60] Exhibit PRA-65.
[61] Exhibit PRA-50.
[62] Exhibit PRA-56.
[63] Exhibit PRA-60.
[64] Exhibit PRA-61.
[65] Exhibits PRA-24 and 25.
[66] However in Exhibit PRA-30, an e-mail of October 20, 2005 from Pat Cookney to David in which Pat confirmed and said, amongst others, "Tony and Peter are still trying to get a place on the bidders' list (Ed. note: for the Lavington job)".
[67] Excelsior (L'), compagnie d'assurance-vie v. Mutuelle du Canada (La), compagnie d'assurance-vie, [1992] R.J.Q. 2666 (C.A.).
[68] 2011 QCCS 1800 at para. 21.
[69] Concentrés scientifiques Bélisle inc., supra, note 38 at para. 151 and 42.
[70] Gravino, supra, note 25 at para. 45.
[71] Exhibit PRA-18.
[72] Bud Field (deceased by the time of trial) had testified on discovery: "Once David determined to go on his own, then I would not deal with Ross and Anglin. But prior to that, that would have been a possibility. Yes."
[73] Georges AUDET, Robert BONHOMME, Clément GASCON, Le congédiement en droit québécois en matière de contrat individuel de travail, 3e édition, Cowansville, Éditions Yvon Blais, 2011 at para. 11.5.39.
[74] Gilles Michel inc. v. Michel, 2007 QCCA 1523 at para. 12, citing with approval the Excelsior (L'), compagnie d'assurance-vie v. Mutuelle du Canada (La), compagnie d'assurance-vie, EYB 1992-56314 (C.A.).
[75] Exhibits PDT-46 and PDT-46A and Exhibit PRA-81.
[76] [1966] 58 D.L.R. (2d) (S.C.C.) at p. 8.
[77] Yaskawa Motoman Canada Ltd. v. Bercar Electronics Ltd., J.E. 2007-13 (C.A.) and Acier Mutual Inc. v. Fertek inc., J.E. 96-602 (C.A.).
[78] 9th Edition, Oxford University Press: Oxford, 1995.
[79] Luxwood Auto trim Inc. v. Sealrez inc, 2007 QCCS 4877 at para.117.
[80] Ibid. at para.119.
[81] Acier Mutual Inc., supra, note 77 at p. 15.
[82] Gravino, supra, note 25 at para. 39 and Bank of Montreal v. Ng, [1989] 2. S.C.R. 429.
[83] Rosenberg v. Industries Ultratainter inc., AZ-50082355 (2001 C.A.) at para. 18.
[84] BMO Nesbitt Burns ltée v. Dolmen (1994) inc, 2008 QCCA 851 at para. 101.
[85] Bank of Montreal, supra, note 82.
[86] The use of this term "joint and several" is considered "an inappropriate borrowing by the codifiers of the Civil Code of Lower Canada of this term from the common law", (R. P. Kouri et al, Private Law Dictionary and Bilingual Lexicons, 2nd ed., Cowansville, Éditions Yvon Blais, 1991 at p. 217).
[87] Exhibit PDT-29.
[88] Exhibit PDT-30 at p.4.
[89] Who in fairness might have been referring to gross profits: but this was not clear to the Court.
[90] Acadia Subaru v. Michaud, 2011 QCCA 1037 at para. 42.
[91] Ibid. at para. 58.
[92] Ibid. at para. 68.
AVIS :
Le lecteur doit s'assurer que les décisions consultées sont finales et sans appel; la consultation du plumitif s'avère une précaution utile.