Garland Canada Inc v Shusheski, 2017 ABQB 084

Court of Queen’s Bench of Alberta Citation: Garland Canada Inc v Shusheski, 2017 ABQB 084 Date: 20170208 Docket: 1501 04101 Registry: Calgary Between: Garland Canada Inc. Plaintiff - and - Adam Shusheski, Ironclad Roofing & Construction Inc., Ignite Roofing and Consulting Inc., and Dale McShannock Defendants _______________________________________________________ Reasons for Judgment of J.T.

Prowse , Master in Chambers _______________________________________________________ [ 1 ] The defendant Adam Shusheski (“Shusheski”) was a sales representative for the plaintiff Garland Canada Inc. (“Garland”) from June 3, 2011 until he resigned on October 26, 2014. [ 2 ] Garland is a corporation which, together with its affiliates, manufactures and supplies roofing materials. [ 3 ] Garland has sued Shusheski, Ironclad Roofing & Construction Inc (“Ironclad”), Ignite Roofing and Consulting Inc. (“Ignite”) and Dale McShannock (“McShannock”) alleging that: A. prior to his resignation, Shusheski breached his duty of loyalty to Garland by diverting work from Garland to Ironclad, a corporation owned by his friend McShannock, and B. subsequent to his resignation, Shusheski breached his non-compete covenant by soliciting work from Garland customers in favour of Ignite, a corporation owned by Shusheski and McShannock. [ 4 ] Garland claims that the Ironclad, Ignite and McShannock are liable to it for the tort of inducing breach of contract, knowing assistance in breach of fiduciary duty, and conspiracy.

[ 5 ] Ironclad, Ignite and McShannock apply to have the action against them summarily dismissed. In my view, these three defendants have not met the evidentiary burden which falls upon them in a

summary dismissal application to show that their defence is unassailable, by which I mean highly likely to succeed. Accordingly, for the reasons which follow I dismiss their application and allow the action to proceed against them. Pre-resignation diversion of the Royop job to Ironclad [ 6 ] On April 25, 2014, Shusheski prepared a written “Roof Report Analysis” as an employee of and on the letterhead of Garland. The report was prepared for Gabriela Korman.

She works as a property manager for Royop, who manage a building on Centre Street North, Calgary occupied by a restaurant known as Fiddler’s Green. [ 7 ] In his report Shusheski documented, through words and photographs, problems with the roof and recommended that the roof be replaced at an estimated cost of $44,951. As one would expect, the report points out the advantages of using Garland materials in the roof replacement.

For example, one product which is featured in the report is “Stressply” which is described as follows in the report: The Stressply membrane is a superior Garland product modified with SBS and SIS polymers providing this roof with an unparalleled tensile strength of 550 pounds per square inch. The Stressply system also comes with a 15-year non-prorated warranty issued by Garland. Due to the tensile strength and elasticity of this system it also stands up well to extreme weather and temperature conditions [ 8 ] Next, we have Ironclad paying money to Shusheski in July of 2014 in the amount of $30,000.

The evidence suggests it was either a loan to Shusheski with very generous and ambiguous repayment terms or it was a gift. In either case, one can make a reasonable argument that it was either a kickback or a bribe paid by Ironclad to Shusheski to breach his duty of loyalty to his employer Garland. [ 9 ] We then have an email dated September 10, 2014 from Shusheski to Korman, sent on the Garland email system while Shusheski was employed by Garland: Did you have the P.O. for the Fiddler’s Green. I will likely go review the roof with the roofers on Friday once the snow melts.

Please have it made out to Iron Clad Roofing as Canterbury is to[o] booked up. These guys do a lot of work for me so it will get done exactly to my spec. [ 10 ] This email shows two things. First, Shusheski may be diverting work away from his employer Garland, contrary to his duty of loyalty, and second, he is being deceptive to the customer, because he says the work will be done according to spec, but the spec calls for Garland products and he is diverting the work to someone who is not intending to use Garland products. [ 11 ] On October 26, 2014 Mr. Shusheski resigned from Garland on one day’s notice.

His resignation letter says that he is relocating to B.C. for personal reasons. This appears to be false, as in fact he ended up setting up Ignite in Calgary with McShannock a couple of weeks later, on November 10, 2014. [ 12 ] We then have an Ironclad invoice for the roofing at Fiddler’s Green dated November 20, 2014 for the exact amount of the estimate prepared by Shusheski while he was with Garland i.e. $44,951.00.

This is consistent with the argument that Shusheski was successful in diverting a job, under which Garland was to supply the materials, to another contractor (Ironclad) who was not using Garland materials. [ 13 ] We then have an email from Korman to Garland regarding the Fiddler’s Green roof dated January 29, 2015. She advises that, when Shusheski switched the job from Canterbury to Iron Clad in the fall of 2014 she agreed to the switch assuming that Ironclad was a contractor who used Garland materials. She complains that the roof is not finished yet and she says that the roof is not done as specified.

She enquires whether she will still get a Garland warranty. This email potentially confirms the deceptive way that Shusheski diverted the work away from a contractor who would have used Garland materials to a contractor not using Garland materials. The customer was not made aware that Garland materials would not be used when Ironclad performed the work.

Pre-resignation diversion of the TAS Refrigeration job to Ironclad [ 14 ] McShannock acknowledges that, at about the same time he paid $30,000 to Shusheski in the summer of 2014, Shusheski diverted another prospective roofing job, involving the TAS Refrigeration, to Ironclad. Needless to say, since Ironclad did not use Garland materials. Shusheski was, by diverting the job to Ironclad, missing out in thousands of dollars of commissions that he would have earned from Garland if the job had not been diverted.

Again, whether the payment of $30,000 is a loan with loose terms of repayment, or an outright gift, in either case it appears on its face to arguably be a kickback or bribe to compensate Shusheski for his loss of commission that he would have earned if the TAS Refrigeration job had gone to a contractor who would have used Garland products. [ 15 ] It is open for a trial judge to conclude that, as Shusheski’s friend, McShannock knew that Shesheski’s job was to get contracts for reroofing to contractors who would use Garland products, and that this diversion to Ironclad was a breach of Shusheski’s duties as an employee of Garland.

Liability of Ironclad and McShannock for the pre-resignation diversion of Garland work to Ironclad [ 16 ] Given the evidence discussed above, it is arguable that Ironclad and McShannock participated in inducing Shusheski to breach his contract with Garland, including his duty of loyalty to Garland. [ 17 ] With respect to McShannock’s personal liability, as opposed to Ironclad’s liability, there is an arguable case that McShannock cannot be sheltered from personal liability by the fact that the alleged bribe was paid by his corporation Ironclad rather than by himself personally. [ 18 ] Bribery, if established, would not in my view be considered as bona fide so as to exculpate McShannock from personal liability, as discussed in paragraphs 54 and 59 of Micro-Watt Control Devices Ltd. v Krohne Inc. , 2012 ABQB 503 :

54. It is well established law that knowingly inducing another party to breach a contractual obligation with a third-party constitutes a legally recognized cause of action in tort: Quinn v Leathem , [1901] A.C. 495 (U.K. H.L.) , applied in Pocklington at para 39. Knowingly inducing a breach, which is a separate cause of action from breaching the contract itself, may therefore ground a claim that a director or officer of a corporation is personally liable for the actions of the corporation: Craik at para 19. 59.

I also acknowledge the Applicants' position that the director of a company acting bona fide within their scope of the authority and in the best interests of a company generally will not be held personally liable in tort for inducing breach unless something more is proven.

However, this is a question to be decided at trial (emphasis added) Post-resignation competition for Garland clients [ 19 ] Shusheski was bound by a non-compete clause after he resigned from Garland, by paragraph 9 of his employment contract, which stated: In recognition of the vulnerability of the Corporation to injury by the Employee after the termination of his employment, the Employee agrees that in the event of such termination, for any reason or for no reason, the Employee will not for a period of twelve (12) months thereafter either through his own activities, through an agent, through any entity or otherwise, directly or indirectly:

a) engage in the sale of, or contracting for, products or services which are the same as, or similar to, those offered or marketed by the Corporation, within the sales territory to which the Employee was assigned by the Corporation as of the Date of Termination and any sales territory to which the Employee was assigned at any time during the five year period immediately preceding such date. [ 20 ] The primary argument raised on behalf of Ignite (the new corporation created by Shusheski and McShannock) as to why there could not be a breach of this covenant, was that Garland and Ignite were in two different businesses, namely: • Garland was in the business of manufacturing and selling roofing products not to the end users, but rather to roofing contractors, who would in turn sell these products as well as installation services to end users. • Ignite was a roofing contractor, selling roofing products and installation services to end users. [ 21 ] In other words, the assertion is that Garland and Ignite were in two different businesses, and therefore Ignite was not engaging in the sale of products or services similar to those offered by Garland. [ 22 ] In my view, it is not clear that the defendants will succeed with this argument. [ 23 ] While it is true that Garland is a wholesaler, who does not sell directly to end users, and Ignite sells only to the end users, the Court needs to consider the business methodology used by Garland.

Garland dealt directly with the end user, as seen in its dealings with the end user Royop, in order to persuade the end user to enter into a contract with a roof installer who will use Garland products. Garland would offer a warranty on its product and on installation directly to the end user. [ 24 ] In the circumstances I think that Garland has an arguable position that, to the extent Ignite dealt with end users who had been directly in contact with Garland prior to Shusheski’s resignation, Ignite was inducing Shusheski to breach his non-compete covenant with Garland.

Conclusion [ 25 ] For the reasons I have enunciated, it is my conclusion that Garland has arguable claims against Ironclad, Ignite and McShannock. Or, to put it another way, those three defendants have not met the onus on them to establish that their defences are unassailable. [ 26 ] I have not dealt in these reasons with every alleged claim of Garland against these defendants nor every defence asserted to those claims. Suffice it to say that Garland has arguable claims, as discussed above, against each of these defendants. [ 27 ] It would not be appropriate to consider giving partial

summary judgment declaring certain claims to be dismissed and others not dismissed. The various causes of action asserted are to varying degrees intertwined, and it should be up to the trial judge to decide which have merit and which do not. It would not be appropriate in this case to make a ruling leaving certain causes of action to be considered by the trial judge but not others. [ 28 ] Consequently, I dismiss the

summary dismissal applications. Costs [ 29 ] If the parties cannot agree on costs they may seek a ruling from me in that regard. Heard on the 30 th day of January and 7 th day of February, 2017. Dated at the City of Calgary, Alberta this 8 th day of February , 2017.

J.T. Prowse M.C.Q.B.A. Appearances: Duncan J. Marsden Lorelle Binnion Borden Ladner Gervais LLP for the Plaintiff Caroline J. Smith Blake, Cassels & Graydon LLP for the Defendants