DIRTT Environmental Solutions Ltd v Falkbuilt Ltd, 2021 ABQB 252

Court of Queen’s Bench of Alberta Citation: DIRTT Environmental Solutions Ltd v Falkbuilt Ltd, 2021 ABQB 252 Date: 20210401 Docket: 1901 06550 Registry: Calgary Between: DIRTT Environmental Solutions Ltd .

Plaintiff - and - Falkbuilt Ltd., Mogens Smed, Barrie Loberg, Saad Fahssi, David Weeks, Nathan McLean, Hamidullah Wafa, 2179086 Alberta Ltd. (operating in its own right or as Echo), Ingrid Schoning and Tara Murray Defendants - and - Falkbuilt Ltd., Mogens Smed and Barrie Loberg Plaintiffs by Counterclaim - and - DIRTT Environmental Solutions Ltd. and Kevin O'Meara Defendants by Counterclaim _______________________________________________________ Reasons for Decision of the Honourable Justice E.J. Sidnell _______________________________________________________

Appeal from the Decision by Master JL Mason Master in Chambers Dated the 6 th day of November, 2020 [ 1 ] The respondent, DIRTT Environmental Solutions Ltd., describes itself as a manufacturing company which uses proprietary software, called ICE Software, to design, configure and pre-fabricate interiors of primarily commercial spaces. DIRTT’s head office is in Calgary, Alberta. [ 2 ] The applicant, Barrie Loberg, was one of the founders of DIRTT, together with one of the other defendants and plaintiffs by counterclaim, Mogens Smed, and another individual who is not party to this litigation. Mr. Loberg seeks partial

summary judgment against DIRTT in the form of two declarations relating to the

interpretation of an Executive Employment Agreement, dated October 21, 2013, between Mr. Loberg and DIRTT (the “Loberg Agreement”). [ 3 ] Mr. Loberg became DIRTT’s Vice President, Software Development, in February 2004. In 2005, Mr. Loberg was one of the developers of the ICE Software. DIRTT commenced sales in May 2005. Steven Parry, the chairman of the board of directors of DIRTT, described Mr.

Loberg’s role with DIRTT, in November 2013, as one of the executive officers and being part of its senior management. [ 4 ] On November 28, 2013, DIRTT issued a prospectus, dated November 21, 2013 (the “Prospectus”) and initiated an initial public offering (“IPO”) to transform DIRTT from a private to a public company listed on the Toronto Stock Exchange. Shortly before the issuance of the Prospectus, Mr. Loberg was involved in negotiating certain terms that were incorporated into the Loberg Agreement and an Executive Employment Agreement that Mr. Smed entered into with DIRTT (the “Smed Agreement”).

The significance of the timing of the negotiation and execution of the Loberg Agreement and Smed Agreement is disputed by Mr. Loberg and DIRTT. [ 5 ] DIRTT alleges that, among other things, Mr. Loberg and Mr. Smed breached their respective obligations to DIRTT by misappropriating DIRTT’s confidential information, copying the ICE Software computer code. DIRTT also alleges that contrary to their fiduciary duties and the restrictive covenants which they agreed to in the Loberg Agreement and the Smed Agreement (the “Restrictive Covenants”), Mr. Loberg and Mr.

Smed founded a new business, operated through the defendant Falkbuilt Ltd., in direct competition to DIRTT and solicited DIRTT’s employees. [ 6 ] Mr. Loberg, Mr. Smed, Falkbuilt, and the other defendants, except Ingrid Schoning (collectively, the “Other Defendants except Schoning”), filed a joint Amended Amended Statement of Defence, even though they are not all represented by the same counsel. In that pleading, those defendants deny all of DIRTT’s allegations and, at para 21, describe the Restrictive Covenants in the Loberg Agreement and Smed Agreement as follows: (

a) Non-Competition . Each of Mr. Smed and Mr. Loberg agreed to not, during their employment and for the 12 or 24 months immediately following the termination of their employment, be engaged in any undertaking, have any financial or other interest in or in respect of the business of any person, or advise, lend money to, or guarantee the debts or obligations of any person in North America which competes with DIRTT's Business, provided that DIRTT is in the Business on the day of the termination of their employment. "Business" is defined in the Smed Agreement and the Loberg Agreement as follows: (

i) with respect to DIRTT, manufacturing and or sale of custom prefabricated modular interior wall partitions including the following which can integrate with the walls solutions: plug ‘n’ play pre-fabricated modular network data cable distribution, plug ‘n’ play pre- fabricated electrical power cable distribution, custom prefabricated modular case goods and prefabricated low profile flooring; (ii) with respect to Ice Edge Business Solutions Ltd., it's (sic) development and sale of 3D computer aided design configuration software to third parties for design, ordering and manufacturing; (

b) Non-Solicitation . Each of Mr. Smed and Mr. Loberg agreed to not, during their employment and for the 12 or 24 months immediately following termination of employment, solicit or attempt to solicit any employee or distribution partner or assist or encourage any DIRTT employee or distribution partner to accept employment or engagement elsewhere or any DIRTT distribution partner to do business elsewhere; [ 7 ] The Loberg Agreement and Smed Agreement also contained clause 9(

f) which made payments under clause 9 conditional: The payments to the Executive pursuant to this

Section 9 are conditional on the Executive's compliance with the obligations set out in Sections 12 [Non-Competition], 13 [Non-Solicitation] and 14 [Confidentiality] of this Agreement. [ 8 ] Mr. Loberg and Mr. Smed filed a Counterclaim against DIRTT and Kevin O’Meara, DIRTT’s Chief Executive Officer. The Counterclaim, at para 22, describes Mr. Loberg’s issue with clause 9(

f) of the Loberg Agreement:

Section 9(

f) of the Loberg Agreement purports to make the Loberg Termination Entitlements conditional on Mr. Loberg's compliance with non-competition, non-solicitation and confidentiality covenants.

Section 9(

f) is void and unenforceable because it unlawfully contracts out of the minimum requirements of the Code to provide earnings within 3 consecutive days of termination of employment. Accordingly, the Loberg Termination Entitlements cannot be conditional upon Mr. Loberg's continued compliance with any obligations set out under the Loberg Agreement and were due and payable within 3 days of the date of the termination of his employment.

[ 9 ] The Counterclaim makes a number of other allegations, including that “DIRTT engaged in conduct during the course of employment and in the course of terminating its employment relationship with Mr. Smed and Mr. Loberg that was unfair, unfaithful or in bad faith, misleading and unduly insensitive. In addition, the Defendants by Counterclaim engaged in conduct that was malicious, high- handed, callous and reprehensible, entitling Mr. Smed, Mr. Loberg and Falkbuilt to punitive damages.” Mr. Loberg also claims that he has not been paid what he is owed by DIRTT pursuant to the Loberg Agreement. DIRTT refutes the allegations in the Counterclaim. [ 10 ] On this partial

summary judgment application, Mr. Loberg seeks declarations that: (

a) the Restrictive Covenants are unenforceable for: (

i) being unreasonable restrains of trade; (ii) having no legitimate proprietary interest of DIRTT to protect; and (iii) being vague, ambiguous or uncertain because they: (

A) are overly broad; and (

B) unfairly attempt to restrict Mr. Loberg from dealing with individuals or companies he had relationships with before his employment with DIRTT; and (

b) clause 9(

f) of the Loberg Agreement is void and unenforceable because it attempts to contract out of the Employment Standards Code , RSA 2000, c E-9 (the “ Code ”). [ 11 ] DIRTT opposes Mr. Loberg’s applications on the basis that the application is not appropriate for partial

summary judgment. In alternative, DIRTT asserts that Mr. Loberg’s application should be dismissed because the Loberg Agreement must be considered in a commercial context, as opposed to an employment context, and on that basis the Restrictive Covenants are enforceable. Lastly, DIRTT asserts that clause 9(

f) of the Loberg Agreement does not contract out of the Code and is enforceable. [ 12 ] Master Mason found that she was not able to summarily determine the enforceability of the Restrictive Covenants with confidence and that there is a reasonable

interpretation of clause 9(

f) that would not be inconsistent with the Code . As a result, Master Mason dismissed Mr. Loberg’s partial

summary judgment application. Standard of Review [ 13 ] Mr. Loberg now appeals Master Mason’s decision pursuant to Rule 6.14. An appeal from a Master is heard de novo and the standard of review is correctness : DM v Reeves , 2017 ABQB 139 . Issues [ 14 ] The issues that arise in the appeal are as follows: (

a) Is this a proper application for a partial

summary judgment application? (

b) Should the Loberg Agreement be considered in the context of an employment contract or a commercial contract? (

c) Are the Restrictive Covenants unenforceable? (

d) Is clause 9(

f) of the Loberg Agreement void and unenforceable because it attempts to contract out of the Code ? Is this a proper application for a partial

summary judgment application? When can partial

summary judgment be awarded? [ 15 ] This application is brought pursuant to Rule 7.3, the relevant part of which provides for

summary judgment for a part of a claim, as follows: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: . . . (

b) there is no merit to a claim or part of it; . . . [ 16 ] This case raises as a preliminary issue whether the two declarations proposed to be determined on this partial

summary judgment application are appropriate for this type of procedure. Partial

summary judgment applications are distinct from

summary judgment applications because only part of a claim is sought to be resolved, leaving some issues to be determined at trial, whereas

summary judgment typically involves resolution of the entire claim. [ 17 ] The Supreme Court of Canada in Hryniak v Mauldin , 2014 SCC 7 , ushered in a culture shift for

summary judgment and, at para 28 and 34, set the stage for more applications being resolved in a

summary manner: [28] ... The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible - proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure. . . . [34] The

summary judgment motion is an important tool for enhancing access to justice because it can provide a cheaper, faster alternative to a full trial. ... Generally,

summary judgment is available where there is no genuine issue for trial. [ 18 ] The Supreme Court of Canada’s decision in Hryniak came just over three years after significant amendments to the Alberta Rules of Court came into force , which included Rule 1.2: 1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost-effective way.

(2) In particular, these rules are intended to be used (

a) to identify the real issues in dispute, (

b) to facilitate the quickest means of resolving a claim at the least expense, . . .

(4) The intention of these rules is that the Court, when exercising a discretion to grant a remedy or impose a sanction, will grant or impose a remedy or sanction proportional to the reason for granting or imposing it. [ 19 ] The culture shift in

summary judgment has been firmly adopted in Alberta. In Weir-Jones Technical Services Inc v Purolator , 2019 ABCA 49 , the Alberta Court of Appeal noted, at para 25, that when determining whether a matter is appropriate for

summary disposition, the court must consider the record, the evidence, the facts, and law that must be applied to the facts: The procedures underlying

summary judgment are established by Hryniak ... It comes down to whether

summary disposition is possible, considering the record, the evidence, the facts, and the law that must be applied to them. If the record allows the judge to make the necessary findings of fact and apply the law, then the

summary procedure should be used unless there is a substantive reason to conclude that

summary disposition would not “achieve a just result”. Presuming that

summary disposition will always be “unjust” unless it meets some high standard of irrefutability defeats the whole concept of the “culture shift” mandated by Hryniak ... [ 20 ] However, it is not every case that can be heard in a

summary fashion, or that should be heard as a partial

summary judgment application. In Hryniak , at para 60 , the Supreme Court of Canada noted the tension between those applications where it would not be in the interests of justice to grant a partial

summary judgment and those applications where resolution of a key claim can lead to a more expeditious and just outcome for the parties: The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant

summary judgment against a single defendant. Such partial

summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach. [ 21 ] In Butera v Chown, Cairns LLP , 2017 ONCA 783 , the Ontario Court of Appeal reviewed the appropriateness of granting a partial

summary judgment in a solicitor’s negligence case. The plaintiffs owned and operated an auto dealership which sued the auto manufacturer for damages. The plaintiffs’ claim against the auto manufacturer was dismissed on a

summary judgment application motion on the basis that the limitation period had expired. The ruling dismissing the claim against the auto manufacturer was appealed to the Ontario Court of Appeal and dismissed. Following these dismissals, the plaintiffs commenced a solicitor’s negligence action. The defendant lawyers applied for partial

summary judgment in relation to that portion of the claim founded in misrepresentation, which was granted by the motion judge. On appeal, the Ontario Court of Appeal took the opportunity to comment on the concerns with, and appropriate use of, partial

summary judgment. [ 22 ] The Court noted: that access to justice entails justice that is proportionate, timely and affordable, the applicable Ontario rules, and the encouragement of the Supreme Court of Canada in Hryniak to proceed in a

summary manner. However, the Court also reiterated the caution expressed in Hryniak , at para 60 , that it might not be in the interests of justice to use fact-finding powers to grant

summary judgment against a single defendant if the claims against other defendants will proceed to trial in any event: Butera para 25 . [ 23 ] After reviewing several cases in Butera , the Court identified some of the difficulties that can arise from partial

summary judgment applications, which I paraphrase as follows: (

a) there is a danger of duplicative or inconsistent findings: para 28; (

b) a partial

summary judgment application may result in the main action being delayed and may even be used as a delay tactic:

para 30; (

c) an application for partial

summary judgment may be very expensive: para 31; (

d) judges are required to spend time hearing partial

summary judgment applications and may be required to write comprehensive reasons on an issue that does not dispose of the action: para 32; (

e) the record available at the hearing of a partial

summary judgment application will likely not be as extensive as the record at trial, therefore increasing the danger of inconsistent findings: para 33; (

f) a partial

summary judgment application should be considered to be a rare procedure that is reserved for issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner: para 34; (

g) a

summary judgment application may result in the disposition of the entire action (unless the judgment is dismissed or only successful in part and partial

summary judgment is granted); on the other hand, a partial

summary judgment application does not finally resolve the action and a trial proceeds on the remaining issues: para 35; (

h) it must be asked if: (1) there is any efficiency by granting partial

summary judgment given that the action is proceeding to trial on other matters; and (2) the claims to be determined on the partial

summary judgment application are intertwined with those proceeding to trial: para 36; and (

i) it must be asked if the partial

summary judgment is appropriate in the context of the litigation as whole and will it serve the objectives of proportionality, efficiency and cost effectiveness: para 38. [ 24 ] In Mason v Perras , 2018 ONCA 978 , the Ontario Court of Appeal, at para 22, noted that the motion Judge in that case failed to heed the advice given in Baywood Homes Partnership v Haditaghi , 2014 ONCA 450 , and repeated in Butera , at para 34 : ... A motion for partial

summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. ... [ 25 ] In overturning the partial

summary judgment in Mason , the Ontario Court of Appeal Court found that the appellant’s claim was inextricably linked to the claim against the other defendants: para 23. The Court also noted that a partial

summary judgment needs to achieve some advancement of the action as a whole: para 39. In that case, the Court below noted that granting partial

summary judgment would save little evidence or time at trial: para 39. [ 26 ] In Correa v 368753 Alberta Ltd , 2018 ABQB 938 , Justice Ho upheld a Master’s decision dismissing the defendant’s application for partial

summary judgment. The conflicting evidence in that case and the requirement for further viva voce testimony was found, at paras 55 and 56, not to be in the interests of judicial economy: Even if I were to find evidence establishing Correa’s liability on the narrow issue of property taxes, I still would not find it appropriate to grant partial

summary judgment. As already noted, there is significant conflicting evidence and viva voce testimony will be required to address the conflicting positions put forward by the parties ... Therefore, I do not believe that it would be in the interests of judicial economy to find liability on a narrow issue when there still would need to be a lengthy hearing, including viva voce evidence, to determine the amount owed, if any.

This approach was outlined by the Court of Appeal in Ashraf v SNC Lavalin ATP Inc , 2017 ABCA 95 at para 30 , where the Court saw “very little judicial economy” in making a decision before trial because the trial judge still would be required to consider liability on related issues and there was nothing to be gained by bifurcating the assessment of damages. In my view, this is also consistent with the principle enunciated in Hryniak and Windsor that

summary judgment should be granted where it represents “a proportionate, more expeditious and less expensive means to achieve a just result.” Here, I do not consider that to be the case, particularly where the application for partial

summary judgment is grounded in claims outlined in a Counterclaim. There are numerous other claims and issues to be considered in the context of the Amended Amended Statement of Claim and the Amended Statement of Defence, as well as the remainder of the Counterclaim and Defence to Counterclaim. [ 27 ] A little more than three months after its decision in Weir-Jones , the Alberta Court of Appeal, decided, in Stankovic v 1536679 Alberta Ltd , 2019 ABCA 187 , at para 54 , that a factual and legal link precluded partial

summary judgment. Furthermore, the Court concluded that the findings of the chambers judge could have raised res judicata implications on issues to be determined on the counterclaim. The doctrine of res judicata is a fundamental aspect of our legal system, as noted by the Alberta Court of Appeal in Hill v Hill , 2016 ABCA 49 , para 27 : The doctrine of res judicata has developed to maintain respect for the administration of justice. It is a cornerstone of our legal system.

The system depends on finality, the guiding principle being: “ interest rei publicae ut finis sit litium ”; it is in the interest of the public that litigation come to an end. Public policy dictates that, once the right of appeal has been exhausted, judicial decisions should be conclusive. The law requires that parties to litigation put forward their entire and best case once.

Parties should not be called upon a second time to answer the same claim because legal ingenuity has revealed a new or revised version of the case. [ 28 ] Because the claim and counterclaim were sufficiently interconnected, the Court determined that res judicata could affect determination on the counterclaim and, as a result, partial

summary judgment could not achieve a just result: Stankovic , para 54 . [ 29 ] Concerns about the appropriateness of partial

summary judgment were revisited by the Ontario Court of Appeal in Service Mold + Aerospace Inc v Khalaf , 2019 ONCA 369 , where, at para 14, that Court said:

The principles that guide whether partial

summary judgment is appropriate are, however, more complex than those that apply to

summary judgment motions generally. In Hryniak , at para. 60 , Karakatsanis J. recognized that partial

summary judgment may “run the risk of duplicative proceedings or inconsistent findings of fact” at trial. There is also the risk that partial

summary judgment can frustrate the Hryniak objective of using

summary judgment to achieve proportionate, timely and affordable justice. If used imprudently, partial

summary judgment can cause delay, increase expense, and increase the danger of inconsistent findings at trial made on a more complete record: Butera ... . These risks, which require careful consideration by motion judges, were known before Hryniak and Butera , as illustrated by this court’s decision in Corchis v. KPMG Peat Marwick Thorne ... For this reason, while partial

summary judgment has its place, it “should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner”: Butera ... [ 30 ] In Service Mold , the Court also addressed the dangers of overlapping evidence in a partial

summary judgment application and at trial, and reiterated that partial

summary judgment is only available where the issues can be bifurcated. The Court found that the motion judge should only have granted partial

summary judgment if she was satisfied affirmatively that the issues before her could readily be bifurcated without causing overlap that could lead to inefficient duplication or a material risk of inconsistent findings or outcomes: para 18. [ 31 ] The Court also found that the motion judge gave insufficient weight to the risk of overlap in the evidence relating to the respective limitations defences, thereby creating the risk of inconsistent findings: Service Mold para 20.

Further, there was a defence that was pleaded in relation to both claims and, as the motion judge only dealt with one of the claims to which that defence was raised, the risk of a different result went without consideration: Service Mold para 21. [ 32 ] The Ontario Court of Appeal returned to consider the appropriateness of partial

summary judgment in Malik v Attia , 2020 ONCA 787 . In that case, the court below had granted partial

summary judgment declaring that the buyers of two residential properties were in breach of two purchase agreements. The motion judge ordered that the matter proceed to trial on the issues of damages and forfeiture of the deposit. The Ontario Court of Appeal found that there was little risk of inconsistent findings of fact on the issues of liability, on the one hand, and forfeiture and damages on the other: at para 60. However, the Court said that before hearing a motion for partial

summary judgment the motion judge must be determine whether partial

summary judgment will achieve the objectives of proportionate, timely and affordable justice or, instead, cause delay and increase expense: at para 61. [ 33 ] To determine whether a partial

summary judgment application will achieve the objectives of being proportionate, timely and affordable justice, Brown JA suggested, at para 62, that the judge ask the following questions of the parties: (1) demonstrate that dividing the determination of the file into several parts will prove cheaper for the parties; (2) show how partial

summary judgment will get the parties case in and out of the court system more quickly; and (3) establish how partial

summary judgment will not result in inconsistent findings by the multiple judges who will touch divided case. [ 34 ] While the Ontario Court of Appeal in Malik upheld the partial

summary judgment granted by the court below, it clearly did not agree with the litigation strategy pursued in that case, as Brown JA said, at para 67: As a matter of process, I strongly disagree with the Seller’s decision to move for partial

summary judgment and refrain from filing any evidence of damages and with the motion judge’s acquiescence in hearing the motion so framed. That said, it is not a ground for appellate intervention. To set aside the judgment solely on the basis that the process added cost and delay would, in its own turn, only add more cost and delay. [ 35 ] Distilling the comments and concerns from the cases referred to above, in my view, I must answer the three main questions, set out below, in the affirmative to find that partial

summary judgment is an appropriate application to pursue in this case: (

a) Can the issue to be determined on a partial

summary judgment application be bifurcated from the remainder of the issues that will proceed to trial? The determination of whether the issue can be bifurcated should be considered with the answers to the following four exploratory questions in mind: (

i) Is the issue to be determined on the partial

summary judgment application intertwined with those proceeding to trial? (ii) Where there is more than one defendant, is the issue to be determined on the partial

summary judgment application inextricably linked to the claim against the other defendant(s)? (iii) Is the record available on the issue to be determined at the partial

summary judgment application as extensive as it would be at trial? (iv) Is there a danger of duplicative or inconsistent findings of fact or any res judicata on issues to be determined at trial? (

b) Will the partial

summary judgment application advance the action as a whole? To access whether there will be any advancement, the following two exploratory questions can be asked: (

i) Will the partial

summary judgment application achieve efficiencies in the litigation given that other issues will be proceeding to trial? (ii) Will the partial

summary judgment application deal with the issue expeditiously and not cause unreasonable delay to the main action? (

c) Will partial

summary judgment significantly advance access to justice, and be the most proportionate, timely and cost-

effective approach? [ 36 ] If the partial

summary judgment application is appropriate based on affirmative answers to these three questions, then I can proceed as set out in Weir-Jones , if the record permits the necessary findings of fact and application of the law to determine the matter summarily. Can the issue to be determined on a partial

summary judgment application be bifurcated from the remainder of the issues that will proceed to trial? [ 37 ] The four exploratory questions are examined below and it is clear from the answers that the issue of the enforceability of the Restrictive Covenants, and the issue of whether clause 9(

f) is void and unenforceable, cannot be bifurcated from the remainder of the issues that will proceed to trial. Is the issue to be determined on the partial

summary judgment application intertwined with those proceeding to trial? [ 38 ] I first address the question about the issues to be determined because framing the issues is an essential step to answering all of the four questions related to bifurcation. However, as will be seen, the answers to one of the four questions may be applicable to more than one question. [ 39 ] By way of partial

summary judgment, Mr. Loberg seeks a declaration relating to the enforceability two aspects of the Loberg Agreement: the Restrictive Covenants and clause 9(f). [ 40 ] DIRTT has alleged, among other things, that Mr. Loberg and Mr. Smed breached their fiduciary duties, misappropriated DIRTT’s confidential information, copied the ICE Software computer code, commenced a new business in direct competition to DIRTT, and solicited DIRTT’s employees. The Restrictive Covenants relate directly to the issue of use of competing against DIRTT and solicitation of DIRTT’s employees.

As a result, the issue of the enforceability of the Restrictive Covenants is directly related to issues proceeding to trial. [ 41 ] The Counterclaim raises a number of allegations that could be intertwined with the issues raised in this application for partial

summary judgment because those allegations are broadly set out. For instance, there is an allegation of DIRTT engaging in improper conduct during the course of Mr. Loberg’s employment, and in the course of terminating its employment relationship with Mr. Loberg. The Counterclaim also contains allegations that DIRTT has failed to pay what is owed to Mr. Loberg under the Loberg Agreement. As a result, the negotiation,

interpretation, severability and enforcement of the Loberg Agreement, will likely lead to intertwining of the facts and allegations asserted in this partial

summary judgment application and at the trial. Where there is more than one defendant, is the issue to be determined on the partial

summary judgment application inextricably linked to the claim against the other defendant(s)? [ 42 ] Mr. Loberg asserts that the claims against Mr. Smed are different because of their different executive roles and the fact that Mr. Smed was terminated several months before Mr. Loberg. [ 43 ] As noted, a common Amended Amended Statement of Defence was filed on behalf of the Other Defendants except Schoning, which includes a common defence asserted by both Mr. Loberg and Mr.

Smed in relation to the Restrictive Covenants: In specific response to ... any allegations ... related to the Restrictive Covenants, it is denied that the Restrictive Covenants are enforceable for various reasons including, but not limited to, the following: (

a) They are unreasonable restraints of trade and prima facie unenforceable at common law; (

b) There is no DIRTT legitimate proprietary interest to protect; (

c) They are vague, ambiguous and/or uncertain for the following reasons in particular: (

i) The Restrictive Covenants are overly broad, because of, inter alia, the following: A. The scope of the restrictions are vague and excessive, going further than necessary to protect any legitimate proprietary interest; B. The duration of the restrictions, being 12 or 24 months, is excessive and overbroad, going further than necessary to protect any legitimate proprietary interest; C. The geographic area covered by the non-competition covenant is unreasonably wide; and D.

The geographic areas covered by the non-competition covenants are not clear and certain. (ii) The Restrictive Covenants unfairly attempt to restrict Mr. Smed and Mr. Loberg from dealing with individuals or companies they had relationships with prior to their employment with DIRTT. [ 44 ] Mr. Loberg’s position on why clause 9(

f) of the Loberg Agreement is void and unenforceable is set out in paragraph 22 of the Counterclaim (quoted above at paragraph [8]). A nearly identical complaint about clause 9(

f) being void and enforceable, but relating to Mr. Smed, is set out in paragraph 11 of the Counterclaim.

[ 45 ] Mr. Loberg’s and Mr. Smed’s joint pleading shows that the issues proposed to be determined on Mr. Loberg’s partial

summary judgment application are inextricably linked to the claim against, defence of, and counterclaim asserted by, the other defendant, Mr. Smed. Is the record available on the issue to be determined at the partial

summary judgment application as extensive as it would be at trial? [ 46 ] Mr. Loberg asserts that the evidence in relation to the Restrictive Covenants will not change before trial. However, this position does not acknowledge the respective positions of the parties on the

interpretation of the Restrictive Covenants. Relying on KRG Insurance Brokers (Western) Inc v Shafron , 2009 SCC 6 , and IRIS The Visual Group Western Canada Inc v Park , 2017 BCCA 301 , Mr.

Loberg submits that restrictive covenants in an employment contract are prima facie unenforceable and it is the employer’s onus to show that they are reasonable in the circumstances: Shafron , para 17 . [ 47 ] DIRTT replies by relying on Guay inc c Payette , 2013 SCC 45 , and asserting that the Loberg Agreement and the Smed Agreement were negotiated in preparation of the IPO, and that the Prospectus shows that they were created in the context of a commercial arrangement.

In Shafron , the Supreme Court of Canada noted that there is a difference between restrictive covenants in employment contracts and those in contracts for the sale of a business. There is greater freedom to contract between a buyer and seller than there is between an employer and an employee: Shafron paras 18 and 19 . [ 48 ] Considerable time at the hearing of this matter was taken up with examining the facts surrounding the issue of whether the Loberg Agreement and the Smed Agreement were the products of an employer-employee arrangement or a commercial transaction in the context of the IPO.

I find that the record would be more extensive on this point at trial. Indeed, I find that, without further evidence, it cannot be determined what type of context the Loberg Agreement and Smed Agreement were negotiated in. This leaves the issue, of who bears the onus in showing that the Restrictive Covenants were reasonable or unreasonable, unresolved. [ 49 ] Mr. Loberg relied heavily on Ceridian Dayforce Corporation v Daniel Wright , 2017 ONSC 6763 , for the proposition that determination of enforceability of a restrictive covenant is an appropriate issue for a partial

summary judgment application. The Ceridian case is distinguishable from the case at hand. While the facts, and application of the law to them, were straightforward in Ceridian , that is not the case here. In Ceridian , there was no issue raised as to whether the restrictive covenants should be considered in the employment or commercial context. Here, a determination as to whether the Loberg Agreement was made in the employment or commercial context must be made before turning to the

interpretation of the Restrictive Covenants. [ 50 ] Mr. Loberg maintains that the Restrictive Covenants are unenforceable for being unreasonable restrains of trade, having no legitimate proprietary interest of DIRTT to protect; and for being vague, ambiguous or uncertain because they are overly broad and unfairly attempt to restrict Mr. Loberg from dealing with individuals or companies he had relationships with before his employment with DIRTT. There are findings to be made in relation to the allegation of unreasonableness of the Restrictive Covenants. I find the record will be more comprehensive at trial.

In addition, I find that the evidence relating to the Loberg Agreement will overlap with the evidence relating to the Smed Agreement on this point, and perhaps other aspects of their

interpretation. [ 51 ] Relying on DM v Reeves , Mr. Loberg submits that a party is deemed to have put their best foot forward and, if DIRTT has not done so, then it should not be Mr. Loberg who suffers for the paucity of evidence before this Court. At para 24 of DM v Reeves , Justice Jeffrey addressed the obligation on a responding plaintiff when faced with a

summary judgment dismissal application: Further, proceedings like this are the opportunity for plaintiffs to, as has been said in not dissimilar

summary dismissal processes, “put their best foot forward” and not hide the basis of their claims or their supporting evidence until trial. “A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses” ... Now was the opportunity for [the plaintiffs] to demonstrate their claims have a reasonable prospect of success. If there are no such details, the sued party has a right to not be drawn through an expensive litigation process needlessly, where their success is obvious from the start. [ 52 ] The respondent is to put its best foot forward is to show that there is a genuine issue for trial in

summary judgment cases. In partial

summary judgment cases, the respondent must show why partial

summary judgment is not appropriate. This does not equate to putting before the court all of the evidence on an issue. Four considerations for

summary dispositions were described by Slatter JA in Weir-Jones , at para 47, and the obligation on the respondent to put its best foot forward to demonstrate a genuine issue for trial is set out in

c) in the quote below:

a) Having regard to the state of the record and the issues, is it possible to fairly resolve the dispute on a

summary basis, or do uncertainties in the facts, the record or the law reveal a genuine issue requiring a trial?

b) Has the moving party met the burden on it to show that there is either “no merit” or “no defence” and that there is no genuine issue requiring a trial? At a threshold level the facts of the case must be proven on a balance of probabilities or the application will fail, but mere establishment of the facts to that standard is not a proxy for

summary adjudication.

c) If the moving party has met its burden, the resisting party must put its best foot forward and demonstrate from the record that there is a genuine issue requiring a trial. This can occur by challenging the moving party’s case, by identifying a positive defence, by showing that a fair and just

summary disposition is not realistic, or by otherwise demonstrating that there is a genuine issue requiring a trial. If there is a genuine issue requiring a trial,

summary disposition is not available.

d) In any event, the presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute. [ 53 ] Here, Mr. Loberg submits that on a partial

summary judgment application the respondent, DIRTT, should put into evidence everything that would be before the trial judge on the issues. In this case, oral and documentary discovery is still taking place, so it is not even possible to put forward all of the evidence. In any event, the obligation on the respondent is not to put its best foot forward to

produce all of its evidence, but rather the obligation is to demonstrate that: partial

summary judgment is not appropriate, a fair and just

summary disposition is not realistic or there is a genuine issue requiring a trial. Where the issue cannot be bifurcated from those proceeding to trial, production of all of the evidence on the issue necessarily leads to the unacceptable situation of overlapping evidence on the application and at the trial. [ 54 ] Mr. Loberg submits that one only has to look at the words of the Restrictive Covenants to see that they are unreasonable restraints of trade, do not protect legitimate proprietary interests and are vague, ambiguous or uncertain because they are overly broad and unfairly attempt to restrict Mr. Loberg.

However, this position overlooks: (1) the requirement to first determine the context in which the Restrictive Covenants were negotiated; (2) the incomplete record on the issue of the negotiation context and the reasonableness of the Restrictive Covenants; and (3) the need to re-litigate the same issues at trial in relation the Smed Agreement which contains the same Restrictive Covenants.

Is there a danger of duplicative or inconsistent findings of fact or any res judicata on issues to be determined at trial? [ 55 ] As discussed above, there is a danger of duplicative or inconsistent findings of fact, and a danger of res judicata on the issues related to: (1) the allegation of fiduciary duties; (2) the same claims against, defences relied on, and counterclaims pursued, by both Mr. Loberg and Mr. Smed; and (3) whether the Loberg Agreement was negotiated in the employment or commercial context. [ 56 ] The evidence before me on this application is that Mr.

Loberg was involved with negotiating certain terms that were inserted into both the Loberg Agreement and the Smed Agreement. DIRTT says that Mr. Loberg will be a witness regarding the formation of the Loberg Agreement and the Smed Agreement. One can reasonably expect that there would be findings of fact arising from Mr. Loberg’s evidence on this point. This another example of the possible danger in this case of duplicative or inconsistent findings of fact. Will the partial

summary judgment application advance the action as a whole? [ 57 ] The two exploratory questions are considered below and, based on the answers, it is clear to me that the issues proposed to be determined on this partial

summary judgment application will not advance the action as a whole. Will the partial

summary judgment application achieve efficiencies in the litigation, given that other issues will be proceeding to trial? [ 58 ] DIRTT submits that Mr. Loberg has breached his fiduciary duties and that there is an overlap between the evidence that will be adduced regarding the fiduciary duties claim and the claims relating to the Loberg Agreement. Mr. Loberg counters that an allegation of a breach of fiduciary duties relates to an obligation of shorter duration than the duration of the Restrictive Covenants. Mr.

Loberg submits that resolving the enforceability of the Restrictive Covenants would lessen the burden of document discovery and oral examination because only the shorter duration of the fiduciary duties would be in play. However, not only does the evidence underpinning these two claims overlap, the duration of the fiduciary duty period is unknown until the decision in the trial is rendered, meaning the period of overlap and the possible benefit to Mr. Loberg is unknown. I find that Mr. Loberg has not shown that there would be any efficiencies from a partial

summary judgment relating to the Restrictive Covenants. [ 59 ] No efficiencies regarding the application to declare clause 9(

f) of the Loberg Agreement void and unenforceable were brought to my attention. Based on my finding that the enforceability of clause 9(

f) in the Smed Agreement is nearly identical to the issue raised in relation to the Loberg Agreement, and will be proceeding to trial, I find that dealing with clause 9(

f) of the Loberg Agreement will not make the trial more efficient. Will the partial

summary judgment application deal with the issue expeditiously and not cause unreasonable delay to the main action? [ 60 ] Mr. Loberg filed his application for partial

summary judgment on September 6, 2019. The application was not heard by Master Mason until October 23, 2020. I have no information to suggest that the delay, between filing the application and the hearing before the Master, was caused by anything other than the pandemic. Master Mason promptly issued her reasons, by endorsement, on November 6, 2020. However, since I have found that the issues raised in the partial

summary judgment application cannot be bifurcated from the issues which will proceed to trial, the partial

summary judgment application cannot deal with the issues expeditiously. [ 61 ] Both parties agree that the main action has proceeded in parallel to Mr. Loberg’s partial

summary judgment application, although they have a different view on the affects of the application on the pursuit of the main action. I do not have any evidence before me that this partial

summary judgment application has delayed the main action. Will partial

summary judgment significantly advance access to justice, and be the most proportionate, timely and cost-effective approach? [ 62 ] Mr. Loberg strongly asserts that partial

summary judgment on the Restrictive Covenants, if resolved in his favour, would greatly reduce the stress and pressure on an ex-employee who is facing an overwhelming claim from a well-financed employer. It is further asserted that this imbalance of litigation power should weigh heavily in favour of dealing with Mr. Loberg’s partial

summary judgment application concurrently with the pursuit of the main action. [ 63 ] While Mr. Loberg emphasizes the imbalance of power in this action, and that partial

summary judgment is his best path to access to justice, his position does not address the negative outcomes, or potential negative outcomes, from a partial

summary judgment, including: duplicative or inconsistent findings of facts and potential res judicata issues.

[ 64 ] In his Brief filed for the application before Master Mason, Mr. Loberg submits that

summary disposition is appropriate and proportional in cases where the law is relatively clear: Disputes involving the

interpretation of documents is “ideally suited” to

summary disposition, particularly in cases where the law is relatively clear.

Summary disposition is proportionate, faster, and a less expensive way to answer contractual

interpretation cases and achieve a just result. [ 65 ] In this case, the facts are not straightforward and the law is not relatively clear, at least not until the threshold issue of the context of negotiation of the Restrictive Covenants is determined. Further, the intertwining of the issues raised on the partial

summary judgment application and those proceeding to trial makes the

interpretation of the Loberg Agreement problematic because of the potential for duplicative or inconsistent findings and res judicata . [ 66 ] Mr. Loberg submits that he will benefit from cost savings if partial

summary judgment is granted and that I should not consider whether any cost savings accrue to DIRTT. It is my view that costs savings should be examined from both the applicant’s and respondent’s position. However, given my finding that there are no efficiencies to be gained by proceeding with the partial

summary judgment application, I do not see how there could be any material cost savings to either party in this case if the partial

summary judgment application was permitted to proceed. [ 67 ] I have found that: (

a) issue of the enforceability of the Restrictive Covenants, and the issue of whether clause 9(

f) is void and unenforceable, cannot be bifurcated from the remainder of the issues that will proceed to trial; and (

b) the partial

summary judgment application will not advance the action as a whole. [ 68 ] The result of the analysis I have undertaken is that proceeding with a partial

summary judgment application would cause problems for the trial and would not be beneficial to the parties. These outcomes would negatively affect Mr. Loberg’s access to justice. [ 69 ] For all of the above reasons, I find that the proposed partial

summary judgment is not the most proportionate, timely and cost- effective manner in which to address the issues. As a result, the appeal from Master Mason is dismissed. Remaining Issues [ 70 ] Given that I have found that this application is not appropriate for a partial

summary judgment procedure, I will not address the remaining issues raised in this application. Costs [ 71 ] If the parties are unable to agree as to costs, they may contact me within 30 days of the date of these reasons. Heard on the 11 th day of March, 2021. Dated at the City of Calgary, Alberta this 1 st day of April, 2021. E.J. Sidnell J.C.Q.B.A. Appearances: Melanie Teetaert, Gary T. Clarke, Sheena Owens, and David M. Price for the applicant: Barry Loberg Richard F. Steele, James D. Murphy, and Janna Young for the respondent: DIRTT Environmental Solutions Ltd.