Enerflow Industries Inc. v Surefire Industries Ltd., 2013 ABQB 196

Court of Queen’s Bench of Alberta Citation: Enerflow Industries Inc. v Surefire Industries Ltd., 2013 ABQB 196 Date: 20130402 Docket: 1201 04980 Registry: Calgary Between: Enerflow Industries Inc. Plaintiff - and - Surefire Industries Ltd. and Dean Pryor Defendants Corrected judgment: A corrigendum was issued on April 4, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J. T. McCarthy _______________________________________________________ I.

Introduction [ 1 ] The Defendant, Dean Pryor, commenced employment with the Plaintiff, Enerflow Industries Inc. (“Enerflow”) in or about June 2007. Initially, Mr. Pryor’s was a “ground floor tradesman” and his responsibilities included carrying out service and repairs on equipment. Over time, Mr. Pryor was promoted to running the shop floor and delegating tasks to ground floor tradesmen. It was not clear from the materials provided at what point this occurred. [ 2 ] On July 2, 2008, Enerflow and Mr.

Pryor executed what was styled as an “Employee Non-Disclosure and Non-Compete Agreement” (the “Non-Compete Agreement”).

The provisions of the Non-Compete Agreement are, inter alia , as follows: For good consideration and as an inducement for Enerflow Industries Inc. to employ Dean Pryor, the undersigned Employee hereby agrees not to solicit staff with intentions to employ and not to directly or indirectly compete with the business of the Company and its successors and assigns during the period of employment and for a period of two years following termination of employment and notwithstanding the cause or reason for termination.

The term “not compete” as used herein shall mean that the Employee shall not own, manage, operate, consult or to be employee [sic] in a business substantially similar to or competitive with the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment. ... This agreement as well as employee fiduciary responsibilities is mandatory for employment with Enerflow Industries Inc. [ 3 ] It is not disputed that Mr. Pryor was already employed by Enerflow at the time of the execution of the Non-Compete Agreement.

Neither is it disputed that Mr. Pryor received no monetary payment for executing the Non-Compete Agreement. It is not clear from the materials filed whether the execution of the Non-Compete Agreement occurred before or after Mr. Pryor’s promotion. [ 4 ] In December 2011, Mr. Pryor applied for, was offered and accepted a position with the Defendant, Surefire Industries Ltd. (“Surefire”). In his affidavit sworn September 6, 2012 (the “Pryor Affidavit”), Mr. Pryor avers that he did not advise Surefire of the Non- Compete Agreement. [ 5 ] Enerflow commenced an action against Mr.

Pryor, alleging that he breached both the Non-Compete Agreement and fiduciary duties he owed to Enerflow. Enerflow also brought an action against Surefire, alleging that it induced Mr. Pryor to breach the Non- Compete Agreement. [ 6 ] Surefire and Mr. Pryor brought this application for

summary trial of this matter. Naturally, Enerflow objects, arguing that, for various reasons, the matter is not appropriate for

summary trial. In addition, on February 28, 2013, Enerflow filed an affidavit sworn by its corporate representative, Mr. Mark Williamson (the “Williamson Affidavit”). In the Williamson Affidavit, Mr. Williamson makes various allegations against Mr. Pryor and asserts that this matter is not appropriate for

summary trial. II. Issues and Analysis [ 7 ] Accordingly, there are several issues before me: (

a) Should the Williamson Affidavit be admitted into evidence? (

b) Should the application for

summary trial be dismissed or adjourned pending questioning? (

c) Is this matter appropriate for

summary trial? (

d) If the matter is appropriate for

summary trial, is the Non-Compete Agreement enforceable? (

e) If the matter is appropriate for

summary trial, did Mr. Pryor owe fiduciary duties to Enerflow and, if so, did he breach those duties? (

f) If the matter is appropriate for

summary trial, did Surefire induce Mr. Pryor to breach the Non-Compete Agreement and/or did Surefire otherwise illegally interfere with Enerflow? [ 8 ] It appears to be common ground that, in the event liability is found, damages cannot be determined on this application. A. Admissibility of the Williamson Affidavit [ 9 ] The first issue to be addressed is the admission of the Williamson Affidavit. As noted above, the Williamson Affidavit was sworn and filed on February 28, 2013. The Defendants point out that Rule 7.6 requires the respondent to an application for judgment by way of

summary trial to file any affidavit or other evidence 10 days or more before the date scheduled for the hearing of the application. As this application came before me on March 6, 2013, the Defendants’ position is that the Williamson Affidavit was not filed within the prescribed time limit.

[ 10 ] At the hearing, the Defendants provided me with the decision of our Court of Appeal in Rufnit Ranch Inc. v Griffin , 2007 ABCA 205 . In that case, the Court of Appeal upheld the trial judge’s refusal to admit a late-filed affidavit, saying at para. 8 that “The refusal to admit an affidavit, largely based on hearsay, late in a

summary trial process, is not unreasonable.” [ 11 ] However, my review of the Rules indicates that the Defendants are relying on an incorrect provision. Rule 7.6 provides as follows: 7.6 The respondent to an application for judgment by way of a

summary trial must, 10 days or more before the date scheduled for the hearing of the application, file and serve on the applicant any affidavit or other evidence on which the respondent intends to rely at the hearing of the application. [ 12 ] In my view, however, Rule 7.8 is more appropriate to the present circumstances. That Rule provides as follows: 7.8(1) The respondent to an application for judgment by way of a

summary trial may object to the application at or before the hearing of the application on either or both of the following grounds: (

a) the issue or question raised in the claim, or the claim generally, is not suitable for a

summary trial; (

b) a

summary trial will not facilitate resolution of the claim or any part of it.

(2) Notice of the objection and anything on which the objector intends to rely must be filed and served on the applicant 5 days or more before the objection is scheduled to be heard.

(3) The judge must dismiss the objection if, in the judge’s opinion, (

a) the issue or question raised in the claim, or the claim generally, is suitable for a

summary trial, and (

b) the

summary trial will facilitate resolution of a claim or a part of it. [ 13 ] In Bonsma v Tesco Corp. , 2011 ABQB 620 , Graesser J. of this Court distinguished these two Rules in this manner at para. 25: The respondent can either agree with the process and file materials under R. 7.6, or object under R. 7.8 ... [ 14 ] Enerflow asserts that it did not at any time consent to the

summary trial process; the Defendants do not dispute that assertion. Therefore, I think Enerflow may be taken to have objected to the

summary trial process, with the result that Rule 7.8 is applicable to its response. As Rule 7.8(2) requires a respondent objecting to a

summary trial process to file and serve “anything on which the objector intends to rely” 5 or more days before the hearing, the Williamson Affidavit was filed on time, albeit barely. [ 15 ] Accordingly, I will take the Williamson Affidavit into consideration in determining the remaining issues before me. B. Dismissal or Adjournment Pending Questioning [ 16 ] Enerflow has applied, inter alia , for an Order adjourning the

summary trial until the parties have completed questioning. The Defendants resist an adjournment and point to the decision of Rooke J., as he then was, in Discovery Ridge Development Corporation v

Well International Holdings Corporation , 2003 ABQB 406 , 337 AR 1. In that case, the parties and the Court were in agreement that the Court has jurisdiction to permit a

summary trial prior to discoveries, now called questioning. To determine under what circumstances the Court should do so, Justice Rooke then canvassed extensively the Rules, their underlying policy rationales and the case law from both Alberta and British Columbia. Justice Rooke then summarized his findings as follows at para. 61: In my view, the following guidelines emerge from the Alberta and British Columbia cases: 1. The

summary trial process does not automatically stay or preclude discoveries; 2. In the

summary trial context, the court may choose to dispense with discoveries in circumstances where: a. the party seeking the discoveries has not availed itself in a timely way of the opportunity to conduct them, or b. it is not a real possibility, or likely, that discovery will produce any relevant or probative evidence to assist the party in establishing its case and the court in adjudicating the issues raised in the

summary trial application; and 3. In any case in which discoveries are denied, the court must be satisfied, to the extent possible at the particular stage of the proceedings: a. that the absence of the discoveries will not result in an inability to find the facts necessary to determine the dispute; and b. that it would not otherwise be unjust to proceed to judgment due to the lack of discoveries. [ 17 ] While Discovery Ridge was decided under the old Rules of Court , it is common ground that the case law decided under those Rules is applicable under the current Rules .

See, for example, Bonsma at para. 27 . [ 18 ] The Defendants filed an affidavit (the “Morgan Affidavit”) attaching correspondence that details the extensive history of this

summary trial application. The application itself was filed on September 12, 2012. The correspondence attached to the Morgan Affidavit establishes that, over the course of the ensuing months, counsel for the Defendants made repeated and persistent efforts to move this matter along. It was not until February 15, 2013 that counsel for the Plaintiff indicated that they would seek to dismiss the application for

summary trial or to delay it pending questioning. At that point, the Defendants offered to make themselves available for questioning prior to this application, even as late as March 5, 2013. Enerflow did not take the Defendants up on their offer. [ 19 ] In oral argument, counsel for the Defendants was careful to state that the delay appears to lie at the feet of Enerflow and not its counsel. Indeed, the correspondence attached to the Morgan Affidavit indicates that counsel for Enerflow was having considerable difficulty obtaining instructions from his client.

Enerflow’s position was that its intervening acquisition by a U.S. corporation created the difficulty. However, as the Defendants point out, that acquisition took place in mid-2012. [ 20 ] In my view, it is clear that Enerflow has failed to avail itself in a timely manner of the opportunity for questioning. While I can appreciate that its acquisition could lead to some delay, this was excessive, particularly in light of the persistence of counsel for the Defendants. While delay is only one of the factors identified by Justice Rooke in Discovery Ridge , it is one that weighs heavily against Enerflow in this case.

Parties who initiate litigation must not be permitted to pursue it in a dilatory manner. [ 21 ] The Defendants also assert that questioning will not produce any probative evidence for Enerflow and that the issues in this matter can be addressed by way of

summary trial without questioning. The Defendants enumerate the issues to be determined as the enforceability of the Non-Compete Agreement, Mr. Pryor’s fiduciary obligations, if any and whether Surefire induced Mr. Pryor to breach the Non-Compete Agreement. The Defendants point out that Mr. Pryor was Enerflow’s employee and that, therefore, Enerflow does not require questioning to “discover” the nature of the employment relationship and what, if any, fiduciary obligations Mr. Pryor had.

[ 22 ] Enerflow argued at the hearing that there is conflict between the Williamson Affidavit and the affidavit sworn by Mr. Pryor on September 6, 2012. Plaintiff’s counsel asserted that questioning is needed to “flesh out” the facts in those affidavits. [ 23 ] In this respect, I take guidance from the comments of Justice Rooke at para. 56 of Discovery Ridge : In a similar vein is D. Fogell Associates Ltd. v. Esprit d Corp.

(1980) Ltd. , [1996] B.C.J. No. 1715 (S.C.) . the Defendant in that case argued that there was not enough evidence before the Court to adjudicate under the

summary trial rule, but that it could obtain some evidence to assist the Court on discovery. Baker J. held that it was “ improbable ” (para. 54, emphasis added) that the Defendant would extract the admissions it sought from the Plaintiff’s officer, and more importantly, no effort was made to

schedule discoveries of the Plaintiff’s officer prior to

summary trial, nor did the Defendant seek an adjournment of the

summary trial to permit examinations for discovery to take place. I agree with the statements of Baker J. at paras. 55-56: It must be remembered that a

summary trial is a trial. A party who deliberately chooses not to present evidence cannot then assert that as a result there are not enough facts before the court to decide the issues contested, or that it would be unjust to decide the issues because evidence, which is available, has not been put before the court. To permit a party to conduct itself in such a way would defeat the purpose of the

summary trial procedure. [ 24 ] In my view, as I will discuss further herein, at least some of the issues in this matter may be addressed without questioning. In particular, questioning will not add relevant evidence to the determination of the enforceability of the Non-Compete Agreement. [ 25 ] In consequence, Enerflow’s application to adjourn the

summary trial procedure pending questioning is dismissed. C. Appropriateness of

Summary Trial Procedure [ 26 ] The next question is whether this matter is appropriate for

summary trial at all.

In Duff v Oshust , 2005 ABQB 117 , 381 AR 386 at para. 24 , this Court enumerated the following list of factors to be used in making this assessment: 1. the amount involved; 2. the complexity of the matter; 3. its urgency; 4. any prejudice likely to arise by reason of delay; 5. the cost of taking the case forward to a conventional trial in relation to the amount involved; 6. the course of proceedings; 7. whether all witnesses or only some were (will be) cross-examined in court; 8. whether there is a real possibility that the defendant can bolster its evidence by discovery of the plaintiff’s documents and witnesses; and 9. whether the resolution will depend on findings of credibility. [ 27 ] The Court in that case also made these comments at para. 29: I must then consider the other factors as outlined above.

I note that the Rules provide that a judge may grant judgment by way of

summary trial irrespective of the amounts involved, the complexity of the issues, and the existence of conflicting evidence; however, as noted in Compton at para. 18 “there will be cases where these factors separately or in combination may operate so as to prevent a court from finding the necessary facts or render it unfair to do so.” [ 28 ] The Defendants’ position is that most of the issues in this matter are suitable for a

summary trial process. At the hearing, counsel

for the Defendants conceded that the question of whether there was consideration for the Non-Compete Agreement may not beappropriate for

summary trial given the lack of evidence as to whether Mr. Pryor received a promotion in return for executing the Non-Compete Agreement. [29] For its part, Enerflow takes the position that the entire matter is unsuitable for

summary trial. Enerflow’s counsel argued at thehearing that there is no urgency to the matter and that it will be prejudiced if it proceeds to judgment at this stage. Enerflow also arguesthat there is conflicting affidavit evidence before the Court in respect of the action against Mr. Pryor, particularly on the issues ofconsideration for executing the Non-Compete Agreement and fiduciary obligations. Enerflow argues that there is insufficient evidencebefore this Court to allow it to render judgment in the action against Surefire. While Surefire has provided evidence that Mr.

Pryor didnot inform it of the existence of the Non-Compete Agreement, Enerflow says there is still a question of whether Surefire took reasonablesteps to inquire as to the existence of such an agreement. [30] I find that this matter is suitable for

summary trial and I dismiss Enerflow’s objection thereto. In arriving at this conclusion, I ammindful that Rule 7.8(3) provides that I must dismiss the objection if I am of the view that the issue or question is suitable for

summarytrial and that the

summary trial will facilitate resolution of the claim or a part of it. As noted above, I find that, at a minimum, theenforceability of the Non-Compete Agreement can be determined in a

summary trial process. While the issue of consideration for theNon-Compete Agreement may or may not be capable of resolution in a

summary trial, the enforceability of the provisions of the Non-Compete Agreement may be determined by examining the face of that document, making that issue suitable for

summary trial. [31] Accordingly, I will now proceed to consider the merits of the issues before me. D. Enforceability of the Non-Compete Agreement [32] First, of course, comes the Non-Compete Agreement. The Defendants take the position that it is not enforceable because it isoverly broad and because there was no consideration for it.

In respect of the breadth of the Non-Compete Agreement, the Defendants citeCommunity Credit Union Ltd v Ast, 2007 ABQB 46, 413 AR 248 and Globex Foreign Exchange Corp v Kelcher, 2011 ABCA 240, 513AR 101. [33] There is a considerable body of cases concerning non-competition agreements. Many of those cases were decided in the contextof an injunction application, but the principles articulated are also applicable to this case. The principles were set out as follows byGraesser J. of this Court at para. 34 of Senos v.

Pacesetter Performance Drilling Ltd., 2010 ABQB 533, 497 AR 1: There are a number of basic principles at play in this application. These principles are not contentious in this application; it is theapplication of these principles to the facts that drives the parties’ dispute. Cases interpreting and enforcing (or refusing to enforce)restrictive covenants and non-competition agreements are legion, and the references below are to the cases cited by counsel, and are notintended to be comprehensive or necessarily reflect the leading cases on the subject. These principles are: 1.

Restrictive covenants and non-competition agreements are prima facie unenforceable as being in restraint of trade and are thuscontrary to public policy: Doerner v. Bliss & Laughlin Industries Inc., (SCC), [1980] 2 S.C.R. 865; 2. The onus is on the party seeking to enforce such agreements to prove, on a balance of probabilities, that the agreement isreasonable between the parties and not contrary to the public interest: Ensign Drilling Inc. v. Lundle, 2007 ABQB 357, at para. 65; 3.

Restrictive covenants and non-competition agreements in contracts of employment are less likely to be found reasonable than aresimilar provisions in commercial arrangements such as shareholders’ agreements or business or share purchase and sale agreements: Dale& Co. v. Land, (1987) 1987 ABCA 197 , 56 Alta. L.R. (2d) 107 (C.A.), Ensign, supra, and Shafron v. KRG Insurance Brokers(Western) Inc., 2009 SCC 6; 4. Reasonableness is generally determined by looking at a combination of: (

a) the scope of activities being restricted or prohibited;

(

b) the duration of the restrictions or prohibitions; and (

c) the geographic scope of the restrictions or prohibitions: J.G. Collins Insurance Agencies v. Elsley Estate, (SCC), [1978] 2 S.C.R. 916 and Globex Foreign Exchange Corp. v.Kelcher, 2005 ABCA 419. 5. Freedom of contract and equality of bargaining power are also important considerations. Relative bargaining power is aconsideration as to whether contra proferentum might apply to

interpretation disputes: Esso Petroleum Co. v. Harper’s Garage(Stourport) Ltd., [1968] A.C. 269 (H.L.), Eli Lilly & Co. v. Novopharm Ltd., (SCC), 1998 CarswellNat 1061 (S.C.C.),J.G. Collins, supra, and Globex, supra. 6.

Interpretation of such contractual provisions follows normal principles of

interpretation: Venture Capital USA Inc. v. YorktonSecurities Inc., (2005), (ON CA), 75 O.R. (3d) 325 (C.A.). That case accepted the issue as stated by Geoff R. Hall in Canadian Contractual

Interpretation Law, 3rd Ed., Markham, Ontario: LexisNexis Canada Inc. 2007 at p. 276, as being: a matter of discerning the parties’ objectively manifested intentions at the time of contracting by reference to the words they have usedand the context in which they have used them; 7. Ambiguities may be resolved by looking at prior drafts and negotiations showing pertinent circumstances “other than the parties’subjective intentions: Indian Molybdenum Ltd. v. The King, (SCC), [1951] 3 D.L.R. 497 (S.C.C.) and Gainers Inc. v.Pocklington Inc., 2000 ABCA 151; and 8.

The enforceability of such clauses rests on the wording contained in such clauses. The courts will not “read down” such clauses,or essentially redraft the clauses for the parties, unless the power to do so is contained in the underlying contract between the parties:Shafron, supra. Any “blue-pencilling” must therefore be done in accordance with the contract. [34] The fourth principle articulated above by Graesser J. was also discussed by Molloy J. of the Ontario Superior Court of Justice inKohler Canada Co. v.

Porter (2002), (ON SC), 26 BLR (3d) 24 at para. 41: The leading case on the enforceability of non-competition clauses in employment contracts is Elsley v. J.G. Collins Insurance AgenciesLtd., supra. The starting point is that such non-competition clauses, as a matter of general principle, are void: Lyons v. Multari, supra, atpara. 19.

An employer may, however, justify a non-competition clause if it can be shown that it is reasonable and not contrary to thepublic interest having regard to three factors: (1) whether the employer has a proprietary interest entitled to protection; (2) whether thetemporal or spatial features of the clause are too broad; and (3) whether the covenant is against competition generally rather than limitedto non-solicitation of the employer’s customers: Elsley v. Collins, supra, at p. 7; Lyons v.

Multari, supra, at para. 23. [35] With respect to the third factor set out above, the courts have made clear that restrictions that act in restraint of competitiongenerally will not be enforced. In Thienes v Godenir, 2011 SKQB 271, 380 Sask R 145 at para. 41, the Court stated that “If therestrictive covenant cannot be seen as protecting a valid proprietary interest it is not enforceable. If the sole purpose of the restrictivecovenant is to prevent competition, it will be held to be contrary to the public interest.” [36] With these principles in mind, I now turn to the Non-Compete Agreement.

I note, first, that the Non-Compete Agreementcontains no geographic restriction. On its face, it purports to prevent Mr. Pryor from competing with Enerflow anywhere in the world.This is clearly unreasonable as such an onerous restriction on Mr. Pryor cannot be necessary to protect Enerflow’s interests. Therefore,the Non-Compete Agreement is overly broad in this respect. [37] Further, I cannot interpret the Non-Compete Agreement as applying only to a more restricted geographic area.

As set out above,the case law is clear that the courts are not to “read down” non-competition agreements that are overly broad in scope. Rather, suchagreements must be treated as unenforceable.

[38] In my view, the Non-Compete Agreement also goes too far in respect of the activities it aims to restrict. It states that Mr. Pryorshall not “own, manage, operate, consult or to be employee [sic] in a business substantially similar to or competitive with” Enerflow.Thus, it purports to prevent Mr. Pryor even from being employed by a business similar to Enerflow’s. [39] In this regard, I take guidance from the decision in Kohler.

In that case, the Court refused to enforce the non-competition clause inan employee’s contract, holding at para. 64 that “[i]f the non-competition clause in enforced, he would be prevented from workinganywhere in North America in the only field in which he has experience and expertise. He would be extremely unlikely to attract anequivalent salary outside his line of work, if he could obtain a job at all.” The Court in Kohler also made these comments at para. 17: I am also mindful of the devastating impact on an employee if the ability to work and earn a living is restrained.

As was noted byDickson J. in Reference re Public Service Employee Relations Act (Alberta), (SCC), [1987] 1 S.C.R. 313 at 368: Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support, and, asimportantly, a contributory role in society.

A person’s employment is an essential component of his or her sense of identity, self-worthand emotional well-being. [40] While Kohler concerned an application for an injunction, these comments on the importance of an individual’s work indicate tome that a person’s ability to obtain employment must not be lightly restricted. In consequence, I find that the Non-Compete Agreement isunenforceable as it prohibits too broad a range of activities. [41] In their brief, the Defendants raised arguments that the Non-Compete Agreement fails for want of consideration.

At the hearing,however, they conceded that that issue might not be appropriate for

summary trial as it is not clear on the materials presently before thisCourt whether Mr. Pryor might have received a promotion in exchange for executing the Non-Compete Agreement. In light of myfindings above, I need not address this issue. E. Fiduciary Obligations [42] Enerflow argues that Mr. Pryor owed fiduciary obligations to Enerflow and that he breached those obligations. Its position is thatthis issue must be canvassed in a full trial and is not suitable for the

summary trial process. The Defendants argue that Mr. Pryor owedno such obligations and that this question can be determined in a

summary trial. [43] The question of fiduciary status in an employee has been canvassed by the courts in a great many cases. In Firemaster OilfieldServices Ltd. v. Safety Boss (Canada)

(1993) Ltd., 2000 ABQB 929, 87 Alta LR (3d) 366, Sulyma J. of this Court set out the following asthe starting point for an analysis of fiduciary status: The Supreme Court of Canada has articulated a test for determining fiduciary status in Frame v. Smith (1987), (SCC), 42 D.L.R. (4th) 81 (S.C.C.) and LAC Minerals Ltd. v. International Corona Resources Ltd. (1989) (SCC), 61 D.L.R. (4th)14 at 60-64 (S.C.C.). In Frame v. Smith (supra) Madam Justice Wilson held that fiduciary status should only be found in cases in which: (

a) the fiduciary has scope for the exercise of some discretion or power; (

b) the fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; (

c) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. [44] Sulyma J. then went on at para. 29 of that decision to distinguish between employees who are and are not fiduciaries by quotingfrom Sure Grip Fasteners Ltd. v. All Grade Bolt and Chain Inc. et al. (1993) 45 C.C.E.L. 276 at 284 (Ont. Gen. Div.): It is clear that the generic relationship between employer and employee does not per se give rise to fiduciary responsibilities. Moreover,the employee’s title is far from determinative of the issue. Accordingly, the function and level of responsibility held by the employeerather than the name, must be examined. [Citation omitted.]

In general, the relationship becomes elevated to the fiduciary level when the employer reposes trust and confidence in the employee on a continual basis, relying upon the employee in reaching business decisions. It is the trust and reliance transferred by the employer which gives the employee the power, and in some cases, the discretion, to make business decisions on the employer’s behalf. Conversely, the law imposes a duty on the employee to act honestly and in good faith.

The circumstances in which a fiduciary relationship may be found, appear to cover the whole spectrum from total reliance to total independence. [ 45 ] The Defendants assert in their brief that Mr. Pryor was “simply a millwright involved in the repair and refurbishment of equipment”. Enerflow’s position, as set out in the Williamson Affidavit, is that Mr. Pryor was a “Team Leader” in Enerflow’s service department, which it characterizes as a “senior employment position”. The Williamson Affidavit also indicates that Mr.

Pryor “was trusted with access to confidential and proprietary information belonging to Enerflow, including designs and specifications associated with certain equipment produced and manufactured by Enerflow”. [ 46 ] This, in my view, is insufficient to ground a claim that Mr. Pryor owed fiduciary duties to Enerflow. While he may have had some leadership role within his department, the above quote from Sure Grip shows that merely calling him a “Team Leader” does not give rise to the elevated obligations of a fiduciary.

This was reiterated by the Supreme Court of Canada in the more recent case of RBC Dominion Securities Inc. v Merrill Lynch Canada Inc. , 2008 SCC 54 , 3 SCR 79. In that case, Abella J., dissenting on other grounds, made these instructive comments at paras. 50 - 52: Fiduciary duties do not arise from an employee’s title, such as branch manager, but from his or her actual authority or control over the employer’s operation. ...

Injecting such an enhanced content into the implied duty of good faith of a non-fiduciary employee has the effect of creating a new legal category of “quasi-fiduciary” employee, a subset the law has yet to recognize. Nor, it seems to me, should it do so now. Expanding the scope of the duty of good faith in this manner represents an novel and potentially enormous liability on employees.

This development, in my view, is not only unwelcome in its uncertainty and punitive in its impact, it also risks widening what this Court has long recognized to be the imbalance of power in employment relationships, by further entrenching the inherent vulnerability of employees... [ 47 ] However Enerflow may choose to style Mr. Pryor’s role in the organization, it is apparent that he did not have the level of authority or control over Enerflow’s operation that would justify the imposition of fiduciary obligations. No doubt, his role in the company was important, but that is not the test.

In KOS Oilfield Transportation Ltd. v Mitchell , 2010 ABCA 270 , 490 AR 108, our Court of Appeal at para. 35 quoted as follows from Flag Works Inc. v Sign Craft Digital

(1978) Inc. , 2007 ABQB 434 , 427 AR 206: There is a difference between an employee who is important to the smooth and profitable functioning of the enterprise and the type of employee the law will affix with fiduciary duties. Fiduciary duties are among the most onerous obligations recognized by law and not every employee owes fiduciary obligations. ... When examining the nature of the relationship and determining whether fiduciary obligations are owed, it is important to return to foundational principles and to apply them according to the purpose underlying such obligations. Too wide a reading of Frame v.

Smith would have purchasing clerks as fiduciaries because they may spend substantial sums, affect the employer’s legal status and make the employer vulnerable to the clerk’s imprudent decisions. The law will intervene and impose fiduciary duties in limited circumstances where necessary and the defendants argue that the imposition of such obligations should be guarded because it creates significant restrictions.

The underlying notion behind a breach of the fiduciary obligation seems to be the misappropriation to the fiduciary of an opportunity that rightfully belongs to the employer. [ 48 ] Two recent cases will serve as a useful contrast. In ADM Measurements Ltd. v Bullet Electric Ltd. , 2012 ABQB 150 , 534 AR 333, the defendant was a journeyman electrician hired to work for the plaintiff corporation. Based on his personal relationship with the plaintiff’s owner, it was anticipated that the defendant eventually would buy the business when the owner retired.

At some point, however, the relationship soured and the defendant left to start his own business. Germain J. of this Court found that the defendant did not owe fiduciary duties and made these comments at paras. 79, 80 and 84: Simply put, Mr. Young was an electrician. His role at ADM evolved over time. He was the electrician that supervised the men, he assisted with bidding and from time to time was the one who gave Mr. McCullough some advice, particularly in his own area of technical expertise, and on one proposed business expansion. However, Mr. Young never had the complete reins of the company.

Regional managers in the management hierarchy, such as Mr. Beaver, who notionally reported to Mr. Young, still had the direct ear of Mr. McCullough. Mr. McCullough maintained an office at the company and in fact had placed his daughter in the key role of office manager. I find Mr. McCullough never took his hand off the throttle of the company.

Mr. Young had no financial duties to the company that related to banking. He was not a cheque signatory and while he would be sought for advice from time to time he was not a primary decision-maker nor involved in the company’s strategic planning. He was an electrician with increased scheduling duties and who received a share of the profit. Putting the case bluntly, and certainly not intending disrespect, Mr. Young was not much more to ADM than a glorified electrician workhorse, and the “top hand”. ... Mr. Young cannot be a fiduciary because he falls outside ADM’s core administration.

At most, he was a high-level tradesman who reported to the corporation’s directing mind. He was not an irreplaceable member of the management team, or a necessary decision maker. ... [ 49 ] By contrast, the Court of Appeal in Evans v Sports Corp. , 2013 ABCA 14 upheld the trial judge’s finding that the appellant was a fiduciary, saying as follows at para. 34: In this case, while the Eastern European market was merely a segment of the overall business operations of TSC, Evans was entrusted with primary responsibility for its successful operation.

TSC paid Henys and Kadlecek to find and recruit players who were then turned over to Evans. Evans could then use the power and influence arising from the personal relationship developed with these players, either for the benefit of TSC, or for himself. The great majority of the revenues flowing to Evans and his company, after he left TSC, were from the players originally entrusted to his care by TSC. [ 50 ] I find that Mr. Pryor’s role with Enerflow was much more akin to that of the plaintiff in ADM than to that of the appellant in Evans . Accordingly, I find that Mr.

Pryor owed no fiduciary obligations to Enerflow and Enerflow’s claim in this regard is dismissed. F. Claims Against Surefire [ 51 ] Enerflow claims, first, that Surefire induced Mr. Pryor to breach the Non-Compete Agreement. Mr. Pryor swears in his affidavit that he did not advise Surefire of the existence of the Non-Compete Agreement and Surefire asserts that it first learned of the Non- Compete Agreement when it received a copy from Enerflow itself after having hired Mr. Pryor. Enerflow, however, argues that this issue cannot be determined in a

summary trial as it requires further evidence of what, if any, efforts Surefire made to inquire of the possibility of such an agreement. [ 52 ] Given my conclusion that the Non-Compete Agreement is unenforceable, Enerflow’s claim that Surefire induced Mr. Pryor to breach that agreement is untenable, regardless of what knowledge, if any, Surefire had or ought to have had of its existence. Therefore, Enerflow’s claim against Surefire on this ground is dismissed. [ 53 ] Similarly, I cannot see any basis for Enerflow’s claim against Surefire for interference with Enerflow’s economic interests.

As I have found that Mr. Pryor owed no fiduciary duties to Enerflow, there can be no possibility of Surefire having induced Mr. Pryor to breach any such obligations. Enerflow alleges that Mr. Pryor solicited several employees of Enerflow to take up employment with Surefire instead and that two of them, Mr. Brett Ammerman and Mr. Scott Doucette, did so. However, Enerflow has provided no evidence to indicate that these employees were subject to non-competition agreements and it appears to have abandoned its initial demand that Surefire terminate Mr. Ammerman’s employment.

Enerflow’s claim against Surefire on this ground is also dismissed. III. Conclusion [ 54 ] In the result, the Plaintiff’s claims are dismissed and judgment is granted in favour of the Defendants. If the parties are unable to agree on costs, they may make an appointment to have costs spoken to. Heard on the 6 th day of March, 2013. Dated at the City of Calgary, Alberta this 2 nd day of April, 2013.

J. McCarthy J.C.Q.B.A. Appearances: Grant W.D. Cameron/Michael Whiting for the Plaintiff Gulu Punia/David Both for the Defendants _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr. Justice J. T. McCarthy _______________________________________________________ Page 15: Add in Appearance for Plaintiff: Michael Whiting Add in Appearance for Defendants: David Both