Jardine Lloyd Thompson Canada Inc v Harke-Hunt, 2013 ABQB 313

Court of Queen ’ s Bench of Alberta Citation: Jardine Lloyd Thompson Canada Inc v Harke-Hunt, 2013 ABQB 313 Date: 20130524 Docket: 1303 03042 Registry: Edmonton Between: Jardine Lloyd Thompson Canada Inc Applicant - and - Laurie Alexis Harke-Hunt, aka Laurie Verna May Harke, and Insight Insurance and Risk Management Ltd Respondents _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Don J.

Manderscheid _______________________________________________________ Introduction [ 1 ] This application for an interlocutory injunction is made by Jardine Lloyd Thompson Canada Inc (“JLT” or “Applicant”) against Laurie Alexis Harke-Hunt, aka Laurie Verna May Harke, (“Ms. Harke” or “Respondent”) and Insight Insurance and Risk Management Ltd (“Insight”). It seeks an Order of this Court enjoining the Respondents, Ms. Harke and Insight, from, inter alia : (

a) soliciting, inducing, encouraging or facilitating JLT employees to leave their employment with JLT until March 4, 2015;

(

b) individually or jointly, directly or indirectly approaching, soliciting or selling insurance or surety to or conducting any insurance business with any person, firm or corporation who or which was, as of January 31, 2013, known to Harke to be a JLT client, or who or which was a potential client of JLT for whom Harke prepared or submitted a proposal, whether written or verbal, in the 12 months prior to March 4, 2013; (

c) permanently, divulging to any person, firm or corporation any name, address or requirement of any client known to Harke to be a JLT client or potential client; (

d) permanently, divulging any confidential information of any nature whatsoever about JLT or its business acquired as a result of Harke’s employment; and (

e) permanently, making copies or using any forms, documents, policy wordings, lists or other information developed by or are the exclusive property of JLT. Facts [ 2 ] The Applicant is a federally incorporated body which is extra-provincially registered in Alberta to carry on a licensed, independent insurance and surety brokerage and risk management business in Alberta, and throughout Canada. The Applicant’s head office is located in Vancouver, BC and it has an operational branch in Edmonton, Alberta, where the Respondent Ms. Harke worked prior to March 4, 2013.

The Applicant is part of a multinational insurance brokerage and risk management business (JLT Group) which has its headquarters in London, England. [ 3 ] The Respondent Insight is incorporated pursuant to the laws of Alberta. Ms. Harke is the sole director and Chief Executive Officer (CEO) of Insight. [ 4 ] Initially, Ms. Harke entered into an employment agreement on June 15, 1989 with a corporation known as Leslie Wright & Rolfe Limited (LW&R), an independent insurance and surety brokerage and risk management business that specialized in the construction industry.

The employment agreement (“Employment Agreement” - partially reproduced in Tab “A” attached to this Decision) between Ms. Harke and LW&R stipulated the terms and conditions, including certain restrictive covenants (“Restrictive Covenants”), regulating the relationship. As an insurance broker with LW&R, Ms. Harke held the title of an Account Executive and had responsibility for establishing and maintenance of client relationships, including dealing with clients on a daily or weekly basis, and performing changes to policy terms. Ms.

Harke also had the role of developing and cultivating a book of insurance brokerage business. [ 5 ] On the basis of certain corporate arrangements and changes, LW&R transformed into the present JLT. This arrangement effectively made JLT the successor corporation to LW&R. [ 6 ] Ms. Harke continued her employment with the successor JLT without a break in service. At JLT, Ms. Harke was promoted to the management cadre as Branch Manager of the Edmonton operational office on January 1, 1999. The precise and practical boundaries of the role which Ms. Harke assumed as the Branch Manager are disputed by the parties.

JLT indicates that she was responsible for the day-to-day operations of the branch, including preparing budgets, approving expense reports, authority to hire, manage and terminate the Edmonton Branch’s employees. However, Ms. Harke represents that, based on the “practice group structure” adopted by JLT, she was only responsible for the employees in her practice area of Sports, Hospitality and Leisure. [ 7 ] Around 2008, Ms. Harke was made Managing Director and promoted to National Practice Leader of JLT’s Sports, Hospitality and Leisure Division, reporting to JLT’s Chief Executive Officer. Ms.

Harke notes that her involvement with the national executive team of the corporation was “largely unproductive” as “most important decisions were made in a top-down fashion by JLT officers or directors in London, England.” In her management position, Ms. Harke established a “Book of Business” on behalf of JLT, which supported operations at the Edmonton Branch. An account

summary of the Book of Business contains a list of all JLT clients serviced by Ms. Harke, including the major ones like, J.V. Driver Projects Inc., LaPrairie Group of Companies, Delnor Construction Ltd.,

Capital Management Ltd., Sureway Construction Group Ltd., and potentially the Katz Group Inc. (in connection with the proposedEdmonton Oilers arena project). [8] In a letter dated March 31, 2011, JLT presented Ms. Harke with an offer of a new employment agreement proposed as a“replacement” of her “last employment agreement [which is] over 21 years old and no longer reflect the terms of [her] employment withJardine Lloyd Thomson Canada Inc”. Ms. Harke rejected the proposed new employment agreement and refused to sign it.Notwithstanding, she continued her work at JLT. [9] On October, 2011, Ms. Harke met with Mr. D.

Burke, the Chief Executive of JLT Group in London, England and proposedto him that she would leave JLT and buy the Book of Business. And again in an e-mail dated December 17, 2012, Ms. Harke re-confirmed her “offer” to purchase the Book of Business for $1,000,000 (one million Canadian dollars). Mr. Burke replied that JLT wouldnot agree to sell any part of its business. [10] Ms. Harke issued a written notice of resignation on January 31, 2013, and ultimately resigned from her employment at JLT onMarch 4, 2013. Sometime around February and March, 2013, Insight was incorporated and Ms.

Harke became its Chief ExecutiveOfficer (CEO). Following this development, JLT brought the within application seeking an interlocutory injunction order against theRespondents. [11] On March 5, 2013, I heard an application in the matter in morning chambers made by JLT, in which it sought an interiminterlocutory injunction order against the Respondents, pending the hearing of the within substantive application. This Court granted theinterim relief order and enjoined the Respondent Ms.

Harke, from March 5, 2013 until April 19, 2013, as further extended by this Courtuntil May 19, 2013 and subsequently, further extended until May 31, 2013, from inter alia: “soliciting, inducing, encouraging or facilitating JLT employees to leave their employment with JLT (and “facilitating” for the purposeof the Order “shall not be deemed to include any offers of employment made by Harke to any employee of JLT where such employeewas the first to initiate contact with Harke and request employment with Harke”); directly or indirectly approaching, soliciting or sellinginsurance or a surety to or conducting any insurance business with (

i) J.V. Driver Projects Inc., (ii) LaPrairie Group of Companies, (iii)Delnor Construction Ltd., (iv) Capital Management Ltd., and (

v) Sureway Construction Group Ltd.; and divulging to any person, firm orcorporation any confidential information relative to her employment with JLT or its business acquired as a result of Harke’semployment.” Issue [12] The issue before this Court is whether or not an interlocutory injunction as sought by the Applicant should be granted.

Law [13] The Supreme Court of Canada clearly articulated the applicable test for the grant of interlocutory injunctions in the case ofRJR-MacDonald Inc v Canada (Attorney General), (SCC), [1994] 1 SCR 311 at para 48, 111 DLR (4th) 385 [RJR]where the court stated that: [Manitoba (Attorney General) v Metropolitan Stores (MTS) Ltd, (SCC), [1987] 1 SCR 110] adopted a three-stage test forcourts to apply when considering an application for either a stay or an interlocutory injunction. First, a preliminary assessment must bemade of the merits of the case to ensure that there is a serious question to be tried.

Secondly, it must be determined whether the applicantwould suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties wouldsuffer greater harm from the granting or refusal of the remedy pending a decision on the merits. It may be helpful to consider each aspectof the test and then apply it to the facts presented in these cases. [14] I now turn to consider each part of the test as they apply to the facts and evidence in this application.

1. Is there a serious question to be tried? [15] I will discuss this aspect under two sub-issues dealing with (

i) the Employment Agreement (and the restrictive covenantscontained therein) and (ii) the relevance of fiduciary obligations in the circumstances of this case. (

i) Employment Agreement/Restrictive Covenants Applicant’s position [16] JLT concedes that in the context of employment, enforcement of restrictive covenants and fiduciary duties, an applicant mustdemonstrate a strong prima facie case at the first stage of the RJR test: Easyhome Ltd v Casey, 2009 ABQB 735 at para 23, 20 Alta LR(5th) 199 [Easyhome]. [17] The Applicant argues that the Employment Agreement which was initially entered into between Ms. Harke and LW&Runderlies the contractual relationship between JLT and Ms. Harke. The agreement expressly provides that it shall enure to the benefit ofand binds Ms.

Harke and LW&R, its successors and assigns (Employment Agreement, Clause 8). Since JLT is the undisputed successorof LW&R, the Employment Agreement flowed from LW&R to JLT and governed Ms. Harke’s entire employment throughout. Although,Ms. Harke’s role and responsibilities in June, 1989 at LW&R evolved and changed from the one that existed in March, 2013 at JLT, theterms of her initial employment agreement provisionally contemplated this development; and as such, the substratum of Ms. Harke’semployment remained intact throughout: Employment Agreement, Clause 7.

Alternatively, JLT submits that under the legal principle ofnovation, Ms. Harke acquiesced and implicitly consented to assigning her employment agreement from LW&R to the successor, JLT:Lyons v Gainers Inc (1987), 17 CCEL 245 at paras 38-39, 1987 CarswellOnt 903; Paul v Etiquette CWL Ltée (cob CWL Labels Ltd),1986 CarswellOnt 2764 at paras 6-10. [18] JLT notes that Ms.

Harke voluntarily quit her position on January 31, 2013 (when she issued a written notice of resignation)and was not constructively dismissed, as she alleges. [19] The Applicant submits that the restrictive covenants (Employment Agreement, Clause 4) in the present case are reasonableand enforceable as they meet the test which requires that: (

i) the employer has a proprietary interest to protect; (ii) the restriction bereasonable as between the parties considering the temporal length, spatial area covered, nature of activities prohibited, and overallfairness; and (iii) the restriction be reasonable in the public interest: Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6 atpara 17, [2009] 1 SCR 157; Evans v Sports Corporation, 2011 ABQB 244 at para 229, 523 AR 22 (QL) [Evans], citing, Elsley v JGCollins Insurance Agencies Limited, (SCC), [1978] 2 SCR 916.

Moreover, they are non-solicitation covenants, whichare interpreted less strictly, rather than non-competition covenants: Spiderplow Canada Ltd v Lyons, 2005 ABQB 207 at para 19, 43Alta LR (4th) 261. And in any event, their proper

interpretation and enforceability are issues for determination at a full trial: AdlerFirestopping Ltd v Rea, 2008 ABQB 95 at para 38, 441 AR 18 [Adler]. [20] Nevertheless, in the context of preliminary assessment, the Applicant argues that first, it has a proprietary interest in its clientrelationships and insurance Book of Business which it seeks to protect as an insurance brokerage business. JLT submits that the evidencebefore this Court is that Ms.

Harke unsuccessfully attempted to purchase the Book of Business on two separate occasions, and theimplication of her action in this regard is that she acknowledges or concedes JLT’s proprietary interest in the Book of Business and thecorresponding client relationships: Frost Insurance Brokers Ltd v McMorrow, [2004] OJ No 5752 at paras 29-30 (Ont Sup Ct J) [FrostInsurance]; Jardine Lloyd Thompson Canada Inc v Fogal, 2007 BCSC 271 at paras 30, 33,[2007] BCJ No 393 [Fogal]. [21] Secondly, JLT argues that: (

a) the temporal length of two years in the restrictive covenant is reasonable and, in any event thereasonableness of this issue is one appropriate for the trial judge’s determination: Frost Insurance at paras 23, 31; MD ManagementLtd v Dhut, 2004 BCSC 513 at para 32, [2004] BCJ No 764; (

b) the restrictive covenant here is “non-solicitation in nature and client-specific in scope” and thus enforceable, as it complies with the general principle of law that non-solicitation covenants, unlike non-competition clauses, need not contain a geographic scope as they are client-specific: Evans at para 229, citing, KOS OilfieldTransportation Ltd v Mitchell, 2010 ABCA 270; and (

c) the activities prohibited in the restrictive covenants here are necessary andreasonable and do not impose a restraint of trade on Ms. Harke, but seek to protect JLT’s vulnerabilities when Ms. Harke departs, in termsof its present business and renewal of insurance policies in limited relation to those persons or entities known to Ms. Harke to be JLT’s

clients or potential clients: Fogal at para 28 . Finally, the restriction in the present case is reasonable in the public interest when the effect of the restrictive covenant in preventing third parties from engaging in insurance business with Ms. Harke is weighed against the public interest which supports the enforcement of covenants which Ms. Harke agreed to; it’s not in the public interest for this Court to condone the actions of Ms. Harke and a few clients in “taking what they could not buy”: Fogal at paras 30, 34 .

Respondents ’ position [ 22 ] The Respondents contend that in 1989, LW&R was a regional, privately held brokerage based in Vancouver, BC and Alberta when Ms. Harke was employed as an Account Executive. They agree that JLT later became the successor to LW&R and Ms. Harke continued in her employment up to its cessation on March 4, 2013 for a total period of 24 years (Respondents’ Brief, para 45). However, the Respondents submit that the nature of Ms. Harke’s employment and her role changed in a significant and fundamental way when she continued with JLT (as the successor to LW&R).

JLT is a national brokerage and a part of a global insurance brokerage (i.e. the JLT Group) with specialty practices areas that are more expansive than LW&R’s. Further, in JLT, Ms. Harke was promoted into different sales and service positions prior to her elevation into management positions, all of which were “fundamentally different” from her commencement position as Account Executive in LW&R (Respondents’ Brief, para 47). [ 23 ] The Respondents argue that these changes were very significant, such that the whole substratum of Ms.

Harke’s employment has changed (or may have disappeared) and her employment contract was no longer enforceable at the time she resigned; or alternatively, it is implied that the employment contract was not intended to apply to the position Ms. Harke occupied at her resignation: Schmidt v AMEC Earth and Environmental Ltd , 2004 BCSC 1012 at para 10 , [2004] BCJ No 1571. They also contend that JLT “understood” this fundamental change in role and approached Ms. Harke with a proposed employment agreement in March 2011, although Ms.

Harke refused to sign the proposed, new agreement. [ 24 ] The Respondents submit that the restrictive covenants in the Employment Agreement are unreasonable and unenforceable. They argue that there is no proprietary ownership right in clients per se and an employer cannot prevent a client from leaving: Evans at para 229 .7.

Notably, Graesser J qualified this basic principle by observing that it “does not mean that the former employee may not be liable to the former employer for damages.” The Respondents state that the purchase of a Book of Business simply amounts to having existing client contracts “assigned,” but not the “purchase of a right” to do future business with a client. Ms.

Harke did not concede to JLT’s proprietary interest in the “ownership” of clients by offering to purchase the Book of Business. [ 25 ] Further, the Respondents argue that the temporal length of a two year restriction in the covenant is overly broad, unreasonable and consequently, unenforceable. JLT’s proposed employment agreement offered to Ms. Harke in March 2011 indicated a one year temporal limit, which truly reflected the industry’s typical and reasonable practice: Fogal at paras 29, 33 . The present covenant restricts Ms.

Harke from conducting business with JLT’s clients and is therefore a substantive, non-competition restrictive covenant. The courts have held that a non-competition covenant without a geographical restriction is unenforceable: Senos v Pacesetter Performance Drilling Ltd , 2010 ABQB 533 at para 47 , 497 AR 1. The restrictive covenant here is overbroad as it seeks to restrict Ms.

Harke from dealing with clients outside those she had close relationships with in the specialty areas of construction and sports; given that JLT operates a wide scope of services including: corporate, public, natural resources, professional and financial risks sectors. They submit that there is no justification for JLT to seek protection in respect of clients with whom Ms.

Harke had no working relationship: Phoenix Restorations Ltd v Brownlee , 2010 BCSC 1749 at para 40 , 76 BLR (4th) 282. [ 26 ] With reference to public interest, the Respondents argue that it is an unreasonable and invalid restriction on free competition where third parties that are not solicited are restricted from doing business with whom they choose: Jet Print Inc v Cohen (1999), 43 CPC (4th) 123 at para 14, [1999] OJ No 2864 . They submit that consequently, JLT failed to establish a strong prima facie case for an injunction.

Analysis [ 27 ] Given the nature of this application, where the Applicant seeks an interlocutory injunction in the context of employment and restrictive covenants, the preliminary assessment of the merits of the case at this point would necessarily be more extensive than in a situation where the facts and issues differ. [ 28 ] Based on my review of the evidence presented in this application and the consideration of both parties’ submissions, it

[28] Based on my review of the evidence presented in this application and the consideration of both parties’ submissions, itremains unclear to this Court whether the Employment Agreement and the restrictive covenants therein are valid or not. This conclusionderives from the absence of clear evidence on all the circumstances surrounding the corporate transactions and developments that led tothe transformation of LW&R into JLT or made JLT acquire the status of a successor corporation to LW&R.

Was that businessarrangement between JLT and LW&R a merger, a take-over, an acquisition or a simple assignment of assets and liabilities from onecorporation to the other? [29] Further, given the multinational/global nature of the JLT Group, is it accurate or not to conclude, on the basis of this evidence,that the whole substratum of Ms. Harke’s employment has disappeared and her original employment contract with LW&R (a regional,corporation operating in BC and Alberta) was no longer enforceable at the time she resigned at JLT? Was the initial employment contractbetween Ms.

Harke and LR&W intended to apply to the position Ms. Harke occupied at her resignation at JLT? In my view, thesequestions are legitimate and deserve answers which this Court cannot provide on the basis of the facts and evidence presently before it. [30] Even assuming, without concluding, that there is a valid employment contract in existence between the parties, are therestrictive covenants in the Employment Agreement a non-solicitation covenant, a non-competition covenant or a hybrid?

In my opinion,this Court does not presently have all the relevant evidence and materials that will enable it provide an answer to that question ordetermine all the legal issues that are germane to it. Significantly, the Applicant JLT conceded that in any event, the issues ofinterpretation and enforceability of the restrictive covenants are issues that are for proper determination at a full trial: Applicant’s Brief,para 86; Adler at para 38.

I agree with the Applicant in this regard. [31] Given the limited evidence available before me at this preliminary assessment stage, it is difficult for this Court to come todefinitive conclusions on all the outstanding issues and unanswered questions which I have pointed out in the preceding paragraphs.Consequently, although the analysis does not end here, I am not satisfied that the Applicant has established a strong prima facie case thatthe Employment Agreement and the restrictive covenants contained therein are valid and enforceable.

This takes me to the next sub-issue of fiduciary obligations. (ii) Fiduciary Obligations Applicant’s position [32] The Applicant submits that there is a fiduciary relationship between JLT and Ms. Harke as she had decision-making authorityand power to exercise discretion at the Edmonton Branch of JLT. She had authority to hire and terminate employees, review budgets andoversee their attendances at the office. Ms. Harke was the “face” of JLT and the primary contact for the clients she serviced.

TheApplicant notes that in Canadian Aero Service Ltd v O’Malley (1973), (SCC), [1974] SCR 592 at para 22, 40 DLR (3d)371, it was held that senior officers and members of a corporation’s “top management” were fiduciaries, even if subject to the controllingparent’s company’s supervision. The Applicant argues that Ms.

Harke had the ability to unilaterally exercise her authority and discretionto affect JLT’s legal and economic interests: Anderson, Smyth & Kelly Customs Brokers Ltd v World Wide Customs Brokers Ltd, 1996ABCA 169 at paras 15, 20, 184 AR 81, where a manager and senior officer in charge of the day-to-day operation of a customs brokerageoffice was found to be a fiduciary of the employer as he was in a position to unilaterally exercise his authority to affect the employer’slegal and economic interests. [33] JLT contends that Ms.

Harke had and continues to have close, personal and trust relationships with JLT clients whom sheserviced; and the evidence before this Court is that a few of these clients have deposed that they are willing to move their insurancebusinesses to Ms. Harke (and Insight). Also Ms. Harke had influence over a number of the Edmonton Branch employees; and some ofthese employees have either resigned from JLT within weeks of Ms. Harke’s departure or have refused retention incentive bonus offeredto them by JLT.

In support of its position, the Applicant refers to Edgar T Alberts Ltd v Mountjoy (1977), (ON SC),16 OR (2d) 682 at paras 13, 31, 34, 79 DLR (3d) 108 (WL), where a manager, with authority to run the company’s day-to-day operationand had close relationships with clients, was found to be a fiduciary as the employer was thus placed in a vulnerable position,notwithstanding that he did not have the authority to hire and fire or interfere with the capital assets of the insurance business. [34] JLT submits that Ms. Harke was a key employee and a senior executive at JLT.

She has developed a formidable presence andreputation as an insurance broker in central and northern Alberta and has intimate knowledge of the needs of JLT’s clients regardinginsurance and surety products as it relates to the construction industry. The Applicant submits that JLT was and continues to be at themercy of and vulnerable to Ms.

Harke: Sun Drilling Products Corp v Garrett, 1999 ABQB 349 at paras 32-33, 245 AR 370 [Garrett];and Polar Wireless Corp v Roberts, 2012 ONSC 6482 at para 28 [Polar Wireless], citing, GasTOPS Ltd v Forsyth, (ON SC), 2009 CarswellOnt 5773 (Ont Sup Ct J); aff’d 2012 ONCA 134 [GasTOPS Ltd], where it was held that a key employee is afiduciary where his/her position and responsibilities were essential to the employer’s business, making the employer particularly

vulnerable to competition upon that employee’s departure. Respondents’ position [35] The Respondents recognize that fiduciary duties include a limited duty not to actively solicit clients or employees for areasonable period of time after employment ends; a duty not to take a maturing business opportunity from the former employer; and aduty not to disclose or misuse confidential information: Physique Health Club Ltd (cob Physique Fitness Store) v Carlsen, 1996 ABCA358 at para 4,193 AR 196. [36] They submit that Ms.

Harke has neither solicited JLT’s clients nor its employees and there is no evidence before this Courtthat she has taken a maturing business from JLT. Admittedly, a business venture with one of JLT’s client (i.e. J.V. Driver) was a businessproposal made by Porlier Financial to Ms. Harke directly. And clearly there is no evidence before this Court that Ms. Harke removed,disclosed or misused confidential information belonging to JLT. [37] In any event, the Respondents argue that Ms. Harke, in fact, owes no fiduciary obligations to JLT.

They contend that Ms.Harke was a Branch Manager at the Edmonton Branch who was “generally concerned with the day-to-day operations of that office and asmall specialty practice outside the branch.” Ms. Harke was part of the national executive team, but had limited scope for independentdiscretion and unilateral decision making, especially subsequent to November, 2012 (Respondents’ Brief, para 179). Alternatively, Ms.Harke was not a fiduciary when her employment with JLT ceased as she “had been stripped of all her management and clientresponsibilities” at that point.

Analysis [38] In Flag Works Inc v Sign Craft Digital

(1978) Inc, 2007 ABQB 434 at paras 29-31, 427 AR 206 [Flag Works], Martin Jobserved that: 29 The law recognizes that others may be affixed with fiduciary obligations if they hold certain types of positions. In Canadian AeroService Ltd. v. O'Malley (1973), (SCC), [1974] S.C.R. 592, 40 D.L.R. (3d) 371 (S.C.C.), the Supreme Court of Canada,at page 606, distinguished “top management” from “mere employees” on the basis that these “key employees” have larger and moreexacting duties similar to those owed by a director to a corporate employer.

The duties owed by mere employees, unless enlarged bycontract, consist only of respect for trade secrets and confidentiality of customer lists. 30 Three characteristics are associated with the fiduciary relationship. According to Frame v. Smith, (SCC), [1987] 2S.C.R. 99, 42 D.L.R. (4th) 81 (S.C.C.), at 136 they are: 1. The fiduciary has scope for the exercise of discretion or power; 2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests; and 3.

The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. 31 These principles apply to all employers, large or small, but whether an employee owes fiduciary obligations is a fact specificdetermination, assessed on a case by case basis. [39] Thus, the issue of whether Ms. Harke was a “key employee” in JLT and owes fiduciary obligations to the Applicant as such, isa fact specific determination: Flag Works at para 31. [40] Power J in Garrett at para 33, outlined the guiding factors that should be considered in identifying a “key employee” asfollows:

An employee is a key employee if he/she has: - knowledge of names of customers and/or contact persons and/or the needs of clients; - access to the employer’s special or confidential information; - the names of suppliers; - knowledge of pricing and/or the authority to provide special pricing arrangements or other special information to clients; or - other duties and responsibilities which show them to be a key person to the corporation [ 41 ] In reviewing the evidence presented to the Court at this stage of the proceedings, I have no difficulty in concluding that Ms.

Harke belonged to the “top management” cadre in JLT, beginning from January 1, 1999 when she was promoted to the management cadre as Branch Manager of the Edmonton office, including when she was appointed a Managing Director and up to the time she was promoted to the position of National Practice Leader of JLT’s Sports, Hospitality and Leisure Division, reporting to JLT’s Chief Executive Officer. In other words, by virtue of these “top management” positions which she held during her working life in JLT, Ms.

Harke had duties and responsibilities which made her “a key person to the corporation” and had access to JLT’s special or confidential information. [ 42 ] The evidence before me also demonstrates that in her management position, Ms. Harke established a “Book of Business” while working at JLT. In my understanding, the Book of Business contains a list of all JLT clients serviced by Ms. Harke, including the major ones like, J.V.

Driver Projects Inc., LaPrairie Group of Companies, Delnor Construction Ltd., Capital Management Ltd., Sureway Construction Group Ltd., and potentially the Katz Group Inc. (in connection with the proposed Edmonton Oilers arena project). On this evidence, I am persuaded that Ms. Harke doubtlessly had and continues to have long-standing personal and trust relationships with some of JLT’s clients, whom she serviced while working at JLT. It also leads me to conclude that Ms. Harke has knowledge of JLT’s clients and their needs.

In the result, I determine that she was a “key employee” of JLT. [ 43 ] I also agree with the Applicant that, based on the evidence before this Court, Ms. Harke had some decision-making authority and power to exercise discretion at JLT’s Edmonton Branch while she was at the office. In my view, she had the ability to unilaterally exercise her authority and discretion to affect JLT’s legal and economic interests. Further, the evidence before me clearly indicates that some of the clients serviced by Ms. Harke at JLT are prepared to transfer their insurance business to the Respondents.

For the purpose of this application, I agree that the probabilities of these business transfers make JLT particularly vulnerable to competition upon Ms. Harke’s departure: Polar Wireless at para 28 ; GasTOPS Ltd at para 82 . [ 44 ] Based on my preliminary assessment of the merits of the Applicant’s case on the issue of fiduciary obligations, I am satisfied that the Applicant has demonstrated a strong prima facie case that the Respondent Ms.

Harke was a “key employee” of JLT, who owes fiduciary obligations to the Applicant, given primarily, the various management and senior executive positions which she had occupied in JLT, prior to her ultimate resignation on March 4, 2013. 2. Would the applicant suffer irreparable harm if the application were refused? [ 45 ] The Applicant argues that generally, monetary damages cannot adequately compensate an employer where the harm involves competition with a departing employee.

It notes that the courts have held that irreparable harm will result where repeat and referral business is key to the employer, and it’s impossible to quantify the loss of such repeat and referral business: Easyhome at paras 41-42 . The loss of a client constitutes irreparable harm to an employer as it is impossible to tangibly and accurately measure it in monetary terms: Hub International (Richmond Auto Mall) Ltd v Mendham , 2011 BCSC 1780 at paras 84-85 , 6 CCLI (5th) 297 [ Hub International ]. [ 46 ] JLT submits that it relies on insurance renewals from each client on an ongoing basis.

It relies on referrals, goodwill and reputation in expanding its Book of Business and revenue; and these intangible factors are key for its profitability in the Edmonton Branch and the tight-knit construction industry. JLT contends that its loss of longstanding and potential client relationships are not quantifiable in monetary damages.

[47] The Respondents argue that there are cases in the investment and insurance businesses where the courts have held that clientlosses are not irreparable and that damages arising from such losses can be easily tracked and quantified in monetary terms, as thoseindustries are highly regulated in nature: Sun Life Financial Distributors (Canada) Inc v Sanche, 2008 MBQB 99 at paras 71-73, 227Man R (2d) 227; BMO Nesbitt Burns Inc v Ord, [2007] OJ No 2620 at para 39 (Sup Ct J); Prodigy Wealth Management Corp vRaymond James Ltd, 2005 BCSC 1863.

I note in this regard, however, that the facts of the cases cited by the Respondents aredistinguishable from the one before me as they are specifically and technically more related to securities, retail and investmentsindustries rather than the insurance business. [48] The Respondents submit that there is no evidence demonstrating that JLT would be unable to collect any damages it mightallegedly suffer; and that if the Respondents “are successful in the market, they will have assets [and if] they are not, there will be nodamages” to JLT: Direct Energy Marketing Ltd v McIntyre, 2007 ABQB 296 at para 6. [49] In my view, there is evidence that both tangible and intangible factors, which make the simple assessment of quantifiabledamages difficult, are involved in the present case: Fogal at para 36.

There is the issue about JLT’s Book of Business, which Ms. Harkereadily offered one million Canadian dollars to purchase but JLT refused to sell, even at that price. This preliminarily indicates to me thatthe Book of Business is considered priceless to JLT. The Applicant also submits that it relies on renewals, referrals, goodwill andreputation in expanding its Book of Business and revenue. These are intangible assets.

In my opinion, based on this evidence, there is areal probability that JLT may lose customer relationships through the renewal process and prospectively beyond that; the Respondentsadmit that JLT will lose at least one major client, J.V. Driver, regardless of how things unfold in this application (Respondents’ Brief,para 214).

Therefore, it seems to me that the intertwined nature of tangible and intangible factors present in this case will make thedamages and harm that JLT would suffer irreparable, if an injunctive relief is not granted at this stage. [50] The Respondents contended in both their submissions and evidence that although some clients are willing to follow Ms.Harke, she has neither solicited JLT’s clients, nor its employees and has not used confidential information.

Based on this representation, Iam of the view that the Respondents would not be negatively impacted by the issuance of the interlocutory injunction sought by JLT:Hub International at para 84.

In addition, the Respondents indicated that they really have no problem with an interlocutory injunctionlimited to restrictions on solicitation and confidential information, if this Court considers the grant necessary and appropriate (Transcriptof Hearing -April 19, 2013, 40/12-15). [51] In the result, I am satisfied that JLT has established that it will suffer irreparable harm, if an interlocutory injunction is notgranted to ensure that the Respondent Ms. Harke observes the fiduciary obligations she owes to the Applicant, as I have earlier found. 3.

Which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits(Balance of Convenience)? [52] The relevant factors to consider in assessing balance of convenience were set out in Canadian Broadcasting Corporation vCKPG Television Ltd (1992), (BC CA), 64 BCLR (2d) 96 at para. 23, [1992] 3 WWR 279 are: ... the adequacy of damages as a remedy for the applicants if the injunction is not granted, and for the respondent if an injunction isgranted; the likelihood that if damages are finally awarded they will be paid; the preservation of contested property; other factorsaffecting whether harm from the granting or refusal of the injunction would be irreparable; which of the parties has acted to alter thebalance of their relationship and so affect the status quo; the strength of the applicant's case; any factors affecting the public interest; andany other factors affecting the balance of justice and convenience. [53] Based on my conclusion that the Applicant has demonstrated that it will suffer irreparable harm if this injunctive relief is notgranted, the trite inference is that monetary damages will not be an adequate remedy in this circumstance.

Although the Respondentssubmit that Insight is being funded by a large organization which has committed to loan it up to $750,000, it is a critical consideration, inthis regard, that JLT refused to sell its Book of Business to Ms. Harke for a higher amount of one million Canadian dollars. This suggeststo me that if, hypothetically, damages are finally awarded against the Respondents in an amount higher than the loan commitment, thereis a likelihood that they may encounter some difficulty in paying the damages.

On the flip-side, I have no doubt that if the Respondentsare ultimately the successful party, in addition to JLT’s Undertaking as to Damages which has been provided, the Applicant, as part of amultinational corporation, would be able to pay damages to the Respondents.

[54] Further, while the Applicant’s case in regard to the enforcement of the Employment Agreement and the restrictive covenantslacks the requisite strength (as I have already concluded), it has nevertheless demonstrated a strong prima facie case that the RespondentMs.

Harke was a “key employee” who owes the Applicant fiduciary obligations. [55] With regard to the obligations of a fiduciary, I note that in Aquafor Beech Ltd v Whyte, 2010 ONSC 2733 at para 47,102 OR(3d) 139, the Court stated that: The law is clear that while a fiduciary is not precluded from competing with his employer after he leaves, he must not do so unfairly.Soliciting clients is considered unfair as it prevents the employer from solidifying its relationships with those clients or otherwise dealingwith the fiduciary’s departure.

A fiduciary will therefore be restricted from soliciting the employer's clients for a reasonable time afterdeparture. (emphasis added) See also, Garrett at para 32, where Power J said that in Alberta a “key” employee owes a fiduciary obligation to his former employer notto compete with that employer for a reasonable period of time following the termination of his employment. [56] In view of these considerations, I am of the view that JLT would suffer greater harm from the refusal of the interlocutoryinjunctive remedy pending a decision on the merits.

The balance of convenience supports granting an interlocutory injunction in favourof JLT. [57] Even if I were to conclude that, relatively, the interests and ultimate entitlement of the Respondents to free competition withentities that are neither solicited nor parties to this litigation (and the public interest which supports the choice of third parties to choosewho they want to do business with) evenly balances JLT’s interests (following its demonstration of a strong prima facie case against theRespondents as a fiduciary), I am persuaded that it is the Respondents here who have “upset the apple cart” and acted to alter the balanceof the relationship between the parties to affect the status quo. [58] In BC (AG) v Wale (1986), (BC CA), 9 BCLR (2d) 333 at 346, [1987] 2 WWR 331 (BC CA), aff’d (SCC), [1991] 1 SCR 62 [Wale], the majority of the Court of Appeal commented that: ...

One factor which may assist the court in assessing where the balance of convenience lies when the parties’ interests are relativelyevenly balanced is the fact that one side bases his claim on existing rights, while enforcement of the other’s rights would change thestatus quo. To put it another way, where the only effect of an injunction is to postpone the date upon which a person is able to embark ona course of action not previously open to him, it is a counsel of prudence to preserve the status quo. (emphasis added) [59] I agree with the statement of McLachlin, JA (as she then was), for the majority in Wale.

The only effect of an interlocutoryinjunctive relief in the present case will be to postpone the date on which the Respondents would be able to embark on a course of actionthat was not previously open to them; and the counsel of prudence suggests a preservation of the status quo. This conclusion tilts thebalance of convenience in favour of the Applicant. Disposition [60] In conclusion, I am satisfied that JLT has demonstrated a strong prima facie case that the Respondent Ms. Harke was a “keyemployee” of JLT, who owes fiduciary obligations to the Applicant.

I am persuaded that JLT has established that it will sufferirreparable harm, if an interlocutory injunction is not granted, as the intertwined nature of tangible and intangible factors present in thiscase will make assessment of quantifiable damages extremely difficult. Finally, the balance of convenience favours the granting of aninterlocutory injunctive relief, but not to the extent requested by the Applicant. In this respect, such interlocutory injunctive relief should

not have the effect of penalizing or preventing any parties who are not parties to this litigation, from conducting the purchase and sale of insurance or sureties with the Respondents, where such parties initialize on their own volition, the purchase and sale of insurance or sureties with the Respondents. [ 61 ] In the result, there will be an interlocutory injunction to the effect that, until the final disposition of this matter, or the 31st day of May, 2014, whichever is earlier, the Respondents, Laurie Alexis Harke-Hunt, aka Laurie Verna May Harke, and Insight Insurance and Risk Management Ltd, are enjoined individually or jointly, directly or indirectly from: 1.

Soliciting, inducing, encouraging or facilitating any persons who were employees of JLT on March 4, 2013, being the date that the Respondent Harke ceased employment with JLT, to leave their employment with JLT and take employment with either of the Respondents.

That for the purpose of this Order, the terms “soliciting, inducing, encouraging or facilitating” shall not be deemed to include any offers of employment made by either of the Respondents to any such employee of JLT where such employee was the first party to initiate contact with either of the Respondents and request employment with either of the Respondents; 2. Soliciting, inducing, encouraging or facilitating the selling of insurance or a surety with any parties who were customers of JLT on March 4, 2013, being the date that the Respondent Harke ceased employment with JLT.

That for the purpose of this Order, the terms “soliciting, inducing, encouraging or facilitating” shall not be deemed to include any selling of insurance or a surety made by either of the Respondents to any parties who were customers of JLT on March 4, 2013 and being the date that the Respondent Harke ceased employment with JLT, where such parties were the first to initiate contact with either of the Respondents and request the sale of insurance or a surety; 3.

From divulging to any person, firm or corporation any confidential information relative to Harke’s employment with JLT concerning JLT or its business acquired as a result of Harke’s employment with JLT; 4. That costs of this application shall be in the cause. [ 62 ] This interlocutory injunction Order is in effect as at May 24, 2013, being the date of filing of this Decision, and supersedes the Court Order issued on May 17, 2013, which ceases to apply upon the filing of this Decision and the within Order. Heard on the 19 th day of April, 2013. Dated at the City of Edmonton, Alberta this 24 th day of May, 2013.

Don J. Manderscheid J.C.Q.B.A. Appearances: Richard F. Steele Tina K. Lee

Burnet, Duckworth & Palmer LLP for the Applicant Thomas W.R. Ross Maurice C. Dransfeld McLennan Ross LLP for the Respondents Tab “A” Employment Agreement 1. LW&R hereby employs the Employee from the date hereof; as an Account Executive, it being understood and agreed that LW&R may from time to time during the Employee’s employment change the position or capacity in which the Employee is employed, and in each such position or capacity the Employee shall perform the functions and have the responsibilities which are designated from time to time by the President or his designated representative. 2.

The Employee shall devote the whole of his/her working time, attention and energies to the performance of his/her duties, as such from time to time defined by LW&R, and shall do all in his/her power to advance the interests of LW&R while in its employment, and shall not either directly or indirectly, alone or in partnership, engage in or be connected with any other business, undertaking or employment without the written approval of the President or his designated representative. 3.

The Employee shall not, while an Employee of LW&R, or at any time after the termination of the said employment, directly or indirectly: (

a) divulge to any person, firm or corporation any name, address or requirement of any client of LW&R known to the Employee to be a client of LW&R or any person, firm or corporation known to the Employee to be likely to become a client of LW&R; (

b) divulge to any person, firm or corporation any confidential information of any nature whatsoever about LW&R or its business acquired as a result of his/her employment; (

c) make copies of, or use in any manner any forms, documents, policy wordings, lists or other information of or with reference to clients or procedural or operations manuals or parts thereof which are developed by or are the property of LW&R, and which are exclusive to LW&R unless authorized by LW&R. 4. The Employee shall not, while an employee of LW&R or at any time within two years after the termination of the said employment, directly or indirectly: (

a) attempt to obtain the withdrawal from LW&R of any of LW&R’s employees; (

b) individually or jointly with, or as agent for, or as employee of, or through any other person, firm or corporation directly or indirectly approach, solicit or sell insurance or surety to or conduct any insurance business with any person, firm or corporation who or which was, at the date of termination of the Employee’s employment with LW&R, known to the Employee to be a customer or client of LW&R, or who was within one year prior thereto a potential customer or client of LW&R for whom the Employee had prepared or submitted a

proposal, whether written or verbal. 5. The Employee agrees to give LW&R at least one month’s written notice of intention to leave his/her employment. .... 7. It is understood and agreed that the term of this Agreement shall be coincidental with the term of employment of the Employee by LW&R, and that effluxion of time shall not affect any of its terms and conditions. 8. This Agreement shall enure for the benefit of and binds the Employee and LW&R, its successors and assigns.