Exchange-A-Blade Ltd v Ber-Zel Building Materials Ltd, 2017 ABQB 648

Court of Queen’s Bench of Alberta Citation: Exchange-A-Blade Ltd v Ber-Zel Building Materials Ltd, 2017 ABQB 648 Date: 20171030 Docket: 1701 08171 Registry: Calgary Between: Exchange-A-Blade Ltd. Plaintiff - and - Ber-Zel Building Materials Ltd. doing business as Blades N' Things, Dean Radkie doing business as Blades N' Things, Hazel Radkie doing business as Blades N' Things, Lortex Holdings Ltd., Ray Storteboom, Heather Storteboom, ABC Corp., XYZ Inc., John Doe and Jane Doe Defendants _______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Introduction

[ 1 ] The plaintiff sues for wrongs it believes were committed by the defendants in the nature of conspiracy, breach of noncompetition agreements, and the wrongful solicitation of the plaintiff’s business opportunities.

It sues two different groups. [ 2 ] The defendants Ber-Zel Building Materials Ltd., Dean Radkie, and Hazel Radkie ( the “Radkie defendants”) are from the Wetaskiwin area and were involved in business that distributed the plaintiff’s products in that northern/central Alberta area. [ 3 ] The defendants Lortex Holdings Ltd., Ray Storteboom and Heather Storteboom (the “Storteboom defendants”) were involved in a distributorship of the plaintiff’s products in the southern Alberta area. [ 4 ] The Radkie defendants apply for severance of the claims as between the plaintiff and the Radkie defendants on the one hand and as between the plaintiff and the Storteboom defendants on the other.

They argue that they are distinct claims, barely connected by the statement of claim, and there is no reason why they should be prosecuted together. [ 5 ] The Radkie defendants also ask for a change of judicial centre for the claim against them, if the cases are severed, because their witnesses have no connection with Calgary.

Although they live in Wetaskiwin, they suggest that the judicial centre to be used would be Edmonton, because that is the judicial centre to which their witnesses are closest, overall. [ 6 ] The Storteboom defendants apply for particulars, although they have already delivered their statement of defence in compliance with rule 3.61(4). They say that the claim as pled is too sweeping and nonspecific.

In order to know what the claim is against them, and in particular to know what records to produce, and how to prepare for questioning, they want to know more particulars. [ 7 ] The matter was scheduled for morning chambers but because plaintiff’s counsel became delayed in another application we heard the application in the afternoon. [ 8 ] I have concluded that the applications must be dismissed. I make a costs award against the successful plaintiff arising from the last-minute delivery of its affidavit.

Last-Minute Affidavit from the Plaintiff [ 9 ] The plaintiff asked for an adjournment when the matter was first set to appear before the Court, and was granted an adjournment of three weeks to prepare a response. The afternoon before the matter came before Court the plaintiff served a 111 page affidavit, primarily in relation to the request for particulars, but it also touched to some extent on the application by the Radkie defendants.

Counsel for the defendants say that I should disregard this last-minute affidavit because of the non-compliance with rule 6.3(1), as provided for in rule 6.3(3), or at least the late delivery should have an impact on a costs award. Severance of Claims [ 10 ] Counsel for the Radkie defendants stresses that there is nothing in the affidavit evidence that connects the two groups of defendants. Her clients’ agreement with the plaintiff expired in 2016. What connects them is a “slim” pleading of conspiracy in the statement of claim. She says that is not enough.

She also argues that the claims generally as advanced against the two groups of defendants are significantly different. The same claims are not repeated as against the two defendants. [ 11 ] In support, she relies on a discussion in Egg Lake Farms Ltd v Alberta (Environment) , 2014 ABQB 42 . At paragraph 36 of that case, the Court noted that, “Severance is an exceptional remedy and should only be ordered where it offers a ‘real likelihood’ or ‘good probability’ of saving time and expense”, citing Edmonton Flying Club v Edmonton Regional Airport Authority , 2013 ABCA 91 .

The Court noted that, “consolidation and misjoinder are really two sides of the same coin” and discusses the considerations in consolidating actions outlined in Mikisew Cree First Nation v Canada , 1998 ABQB 675 , 224 AR 157. [ 12 ] Here, the two groups of defendants had two separate sets of contracts with the plaintiff, under which their obligations were different, and since, as she argues, the claims are distinctly different, there would clearly be no advantage in having them tried together. It would essentially require her client to take

part in the separate claim against the Storteboom defendants, substantially increasing the cost of the Radkie defence, and the case is not one where she could allow questioning to be done in respect of the other participants without her taking part. The claim is for in excess of $1 million, and she makes it clear that she would not take the risk of not attending the questioning of the Storteboom defendants. Venue [ 13 ] In relation to the venue, the plaintiff has no real connection with Alberta.

Plaintiff’s counsel acknowledges that the plaintiff only operates in Alberta through its agents which, until the expiry of the relationship with the Radkie defendants, was the Radkie defendants in northern/central Alberta. [ 14 ] The issue of venue only begins to have traction if the cases are to be severed. The remaining defendants have connections in Calgary, and if the claims are to continue as one, then they must be in either Calgary, Edmonton, or Wetaskiwin. Inertia would tend to dictate that they should stay in Calgary.

Particulars [ 15 ] As to the application for particulars, the nature of the claim is, in part, one of conspiracy and breach of confidentiality obligations. The question as to how much information must be specifically set out in the statement of claim addresses the balancing act that is involved in many claims. Counsel for the plaintiff notes that rules 13.6(3) and 13.7 set out various kinds of claims that require specifics, although the list in rule 13.6(3) is inclusive, not exclusive. Conspiracy is not one of them. Neither is breach of confidence.

As a rule, conspiracy claims involve a complaint that the defendants have secretly been working together. It is inherent in the nature of the claim that the plaintiff likely does not know all of the specifics. The plaintiff does not know what conversations or written communications were had, and when. A claim for breach of confidence also usually has the same hobble. With that in mind, the

plaintiff cannot provide too many specifics at the outset. There is some level of “fishing” that is necessary to fully prosecute claims ofthis kind. [16] When it comes to asking questions and demanding the production of records, “fishing” is generally discouraged or notallowed by the courts. And relevance is determined in the first instance by looking at the pleadings. [17] There are many cases involving pescatarial references, the most famous in Alberta being Franco v. Hackett, 2000 ABQB 241by Master Funduk: But the test is relevant and material. That now cuts out the old fishing expeditions.

There is no fishing without first evidence that thereare fish in the pond and a reasonable amount of fish. The Defendant has not satisfied me of that. Conjecture is not sufficient. [18] Essentially, the broad approach described by the Rules of Court as elaborated on by the courts is that if a party has insufficientinformation to demonstrate that it has a claim or defence, then the disclosure requirements in

Part 5 of the Rules of Court, as well as thecourt process generally, are not to be used to fish blindly for evidence to support suspicions. [19] The courts have been clear that litigation is not to be used to ever-expand claims and to take a case through trial where there isnot enough to the claim to warrant it.

For example, a plaintiff or defendant can plead anything that is appropriate at the first instance, butonce the pleadings are closed then without the consent of the other party or parties amendments are not allowed without at least somemodest evidence to justify them (Attila Dogan Construction v AMEC Americas Limited (AMEC E & C Services Limited and AGRAMonenco Inc, 2013 ABQB 525 at para. 21), and a response to a

summary judgment application requires at least some modestevidence or at least a demonstration that the applicant has not met its evidentiary burden (Windsor v Canadian Pacific Railway Ltd,2014 ABCA 108 at para. 21). [20] But if the approach of requiring details early in the process is followed too strictly, few people could properly advance a claimof conspiracy or breach of confidence.

Plaintiffs can often show little more than the consequences of what appears to have been a wrongcommitted in secret by the defendants, just as a victim of a motor vehicle/pedestrian accident can initially show little more than the factof the accident. Details of the driver’s inattention and negligence are not known to that plaintiff. [21] The purposes of requiring particulars were listed in Welco Expediting Ltd v Harris, (AB KB), 1712 A.R.341, 31 Alta. L.R. (3d) 173 (1995) at para. 30, 31 by Moshansky, J., and cited in 1021018 Alberta Ltd v Bazinet, 2015 ABQB 151: (

a) limiting the generalities of pleadings; (

b) limiting and defining the issues; (

c) to inform the defendant of the defence that must be met; (

d) to prevent the defendant from being taken by surprise at discoveries; and at trial; (

e) to enable the defendant to know what evidence the defendant should be prepared to present and prepare for discoveries and trial; and (

f) to prevent the plaintiff from dealing with matters not referred to in the pleadings. [22] Accordingly, it must be remembered that the pleadings are intended to define the issues and particulars may be required tomeet that end – to allow the defendants to know what case they have to meet and to put brackets around the limits of the lawsuit. [23] And it is helpful to remember that what the defendants are entitled to is particulars in the form of the pleading - not theevidence. [24] If a plaintiff is expected to know and be ready to prove every aspect of a claim at the time the statement of claim is filed, therewould be little point in the disclosure requirements of

part 5 of the Alberta Rules of Court. And the Rules require that pleadings besuccinct, and be restricted to facts, and not set out the evidence: rule 13.6(1) and (2). As mentioned, the level of specific informationrequired is higher for certain kinds of claims listed in rules 13.6(3) and 13.7. [25] The main topics in question here are the connection between the two groups of defendants and the details of what it is thatthey are said to have done to violate their obligations to the plaintiff. [26] The Radkie defendants promise an application for

summary dismissal in the near future, but chose not to combine theapplications for severance and change of judicial centre with that one. Analysis Statement of Claim [27] The first 19 paragraphs of the statement of claim plead what appear to be separate claims against the two groups ofdefendants, but paragraphs 20, 21, and 23 plead common activities. [28] Paragraph 20 pleads that both defendant groups passed on confidential information to a specific competitor and that DeanRadkie became primarily responsible for the competitor’s client contact in northern and central Alberta, and Mr. and Mrs.

Radkiebecame the contact in southern Alberta, and each commenced harming the plaintiff. [29] Paragraph 21 pleads that they have breached their respective agreements with the plaintiff and wrongly solicited customers ofthe plaintiff. Paragraph 21 includes the sentence, “The full particulars of that breach are known only to the Defendants but will berevealed at the trial of this action.”

[ 30 ] Paragraph 23 alleges that both groups provided confidential information, have been involved in activities contrary to their obligations, solicited the plaintiff’s customers with the intention of selling the competitor’s product or services, taken actions on behalf of the competitor which may impair the plaintiff’s relations with its customers, and directed others to conduct competitive acts, with some particularity. [ 31 ] Paragraphs 24 and 25 go on to provide some general descriptions about contacting specific customers of the plaintiff, redirecting the plaintiff’s customers to the competitor.

Both Dean Radkie and Ray Storteboom are said to have seized corporate opportunities belonging to the plaintiff. [ 32 ] It is clear that the claim relates specifically to a particular competitor of the plaintiff, specific agreements that the defendants are said to be bound by, and customer accounts claimed to have been taken – when the defendants were the plaintiff’s representatives in Alberta until their agreements ended. [ 33 ] It seems clear that according to the pleading, the claims are properly joined, assuming there is some factual basis for the allegations.

Statements of Defence [ 34 ] The Radkie statement of defence asserts that the individuals are not liable because there was no valid personal guarantee of the corporate obligations. It asserts that the Radkie defendants are not in breach of their obligations, and acknowledges providing storage facilities to the competitor, but no other service. They deny any conspiracy. They plead that the non-competition obligation does not survive the expiry of their distribution agreement, as opposed to its “termination for any reason”. They plead that the non-solicitation clause did not survive the termination or expiry.

They further plead that the non-solicitation and non-competition clauses are unenforceable.

Under the heading, “Conspiracy Insufficiently Plead [sic]”, they give a general denial of the conspiracy, essentially repeating earlier paragraphs. [ 35 ] The August 24, 2017 affidavit of Dean Radkie asserts many of the various defences of the Radkie defendants in support of the application to separate the claims. [ 36 ] The Storteboom statement of defence is much shorter than the Radkie defence, but it also sets out a variety of defences and specifically says in paragraph 17 that the allegations of conspiracy are denied and it asks for “solicitor-client costs with respect to this unfounded allegation.” Evidence Tendered on the Applications [ 37 ] The affidavit of Ray Storteboom does not address the merits of the defence.

It focuses on the service of a demand for particulars (which is attached to the affidavit) and the lack of a response from plaintiff’s counsel. [ 38 ] The affidavit of Dean Radkie denies various aspects of the facts asserted in the claim. The affidavit focuses on the arguments that there is no connection by the Radkies to the Calgary Judicial Centre. [ 39 ] An unfiled copy of the plaintiff’s lately-provided reply to the Storteboom defendants’ demand for particulars was provided to me. Some particulars were set out.

However, the plaintiff takes the position that details of the following topics were adequately provided: (

a) information provided by the Stortebooms to the competitor and the dates it was provided (no particulars of the information or the dates were set out in the statement of claim); (

b) information about activities similar to the competitor that the Stortebooms have been involved in (none is set out in the statement of claim); (

c) information as to what “actions” the Stortebooms are said to have taken on behalf of the competitor (none is given); and (

d) information as to what conduct or direction of others is referenced (none is given). [ 40 ] In addition, although the plaintiff asserts that the particulars of the names of customers and dates have been sufficiently pled, it nonetheless gives two instances of names, dates, and the nature of communications. [ 41 ] The plaintiff provided the late-breaking affidavit of Robert Forbes. It does not respond in detail to Mr. Radkie’s affidavit, but this is not a

summary dismissal claim so the plaintiff is not called upon to “put its best foot forward” at this stage. It sets out that the plaintiff has been “subjected to a coordinated attack” from the competitor and further details that 14 accounts in southern Alberta are now using the competitor and 18 accounts in northern Alberta have now moved to the competitor. He blames this loss of business on the defendants, based on some information as to a fairly specific meeting between Mr. Radkie and representatives of the competitor, the presence on the Radkie lands of the competitor’s warehouse, and that Mr.

Radkie had arranged to buy back the plaintiff’s stock at various independent dealers and replace it with the competitor’s product and distributing it. No specific details are given of this last assertion. [ 42 ] In my view there is some evidence that there may be some wrong-doing being undertaken by the defendants. At the very least, it is acknowledged that the Radkies, as landlords, now have a financial interest in the success of the competitor’s business.

The lost business to competitors from northern Alberta and southern Alberta appears similar. [ 43 ] There may be strong defences to the claim, and I do not mean to suggest otherwise. [ 44 ] It is clear that the plaintiff is not aware of many details. However, it is aware of the loss of business throughout the province

to a specific competitor, and the apparent communications between at least the Radkies and the competitor, and it knows that they have a business relationship as to the warehouse operations. There is more than mere suspicion at this stage. [ 45 ] With this background there is enough to support the allegations as a viable claim, and there is enough for the defendants to know what the claim brought against them is about.

They know the identity of whom they are said to be supporting (the competitor) they know who they are said to have conspired with (each group with the other) and they know the general nature of the loss claimed (the business of the plaintiff’s accounts with 32 customers in Alberta). [ 46 ] As to knowing what records to produce, I expect that there may be few, because their defences are to the effect that there is no conspiracy, there has been no violation of confidentiality obligations, and so on. [ 47 ] As mentioned, the nature of the claim involves dealing with the possibility of some secrecy in which the defendants are engaged.

The plaintiff is likely to be working to some extent in the dark at the outset. That is probably why the Alberta Rules of Court do not specifically require particulars of a claim for conspiracy or breach of confidence. [ 48 ] As long as the plaintiff has some objective basis for the general nature of the claims, it is normal pleading practice to assert the sorts of related allegations that commonly accompany claims of breach of confidentiality and non-competition agreements, so as to avoid objections in questioning if a particular detail is not alleged.

Those have been sufficiently particularized for the defendants to know what the claim against them is, and to place brackets on their obligations and extent of disclosure.

Conclusion [ 49 ] Accordingly, I do not require the plaintiff to provide any more particulars at this stage, and given the plea of conspiracy there is not a proper basis for separating the claims. [ 50 ] Without severance, the application to change the judicial centre becomes moot. [ 51 ] I am conscious of the fact that there is little evidence even suggesting coordinated acts between the two groups of defendants other than the overall loss of business to the competitor, and I am conscious of the fact that the concern about the competitor’s warehouse is focussed only on the Radkie defendants, who are the ones asking for the move to Edmonton Judicial District. [ 52 ] In my view if the defendants are clear that there is no conspiracy, and there is no other wrong-doing, then the proper step to address these allegations is by way of a

summary judgment application. That would require the defendants to put their defence under oath and would force the plaintiff to put its best foot forward. However, that may involve extensive cross-examination of the defendants’ deponents, which might bear a strong resemblance to questioning for discovery purposes. [ 53 ] Accordingly, the applications are dismissed. Costs [ 54 ] Costs would normally follow the cause, and in the absence of some reason why

Schedule C costs for a contested application would not be payable, my direction would be that each of the defendant groups pay half of the plaintiff’s costs. However, the plaintiff here sought a three-week adjournment to file an affidavit and then sent a lengthy affidavit late in the afternoon the day before the day for hearing.

Since this was the plaintiff’s lawsuit, it is difficult to understand why it would have taken a long time to assemble information to justify its lawsuit. [ 55 ] It is of special a concern because counsel for the Radkies had to travel from Edmonton to argue the application so she essentially received it on the way out the door. [ 56 ] Sometimes when reply affidavits are given with sufficient notice there is the opportunity to cross-examine, and there is also time to reflect on the dispute and seek instructions.

Late delivery of an affidavit essentially eliminates that. [ 57 ] One of the applications was for a reply to the demand for particulars. The reply, given late, did provide some particulars. [ 58 ] Had the reply to demand for particulars been provided in time, and had the affidavit been provided several days before the hearing, the defendants might have found their own way to the conclusions that I have now reached, and no hearing would have been necessary. [ 59 ] Accordingly, my direction is that although they were unsuccessful the defendants shall each have half of the costs for a contested application under

Schedule “C”, plus $50 each for their filing fees, plus 100 per cent of reasonable travel costs for counsel for the Radkies from downtown Edmonton to downtown Calgary and return, including hotel costs and three meals (breakfast, lunch and supper since the appearance in court extended into the afternoon from morning chambers) if those costs were incurred. If counsel drove, I would award travel costs at $0.505 per kilometre. Otherwise, the expense of the bus or airplane and taxis are recoverable. Other disbursements associated with this application shall be in the cause. Heard on the 6 th day of October, 2017. Dated at the City of Calgary, Alberta this 30 th day of October, 2017.

A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances: Kathleen Elhatton-Lake Witten LLP for the Applicants (Defendants) Ber-Zel Building Materials Ltd., Dean Radkie, and Hazel Radkie Kyle Harder Gowling WLG (Canada) LLP for the Applicants (Defendants) Lortex Holdings Ltd., Ray Storteboom, and Heather Storteboom Norman D. Anderson Shea Nerland LLP for the Respondent (Plaintiff)