Crowdblink Inc. v Robinson, 2022 ABKB 677

Court of King’s Bench of Alberta Citation: Crowdblink Inc. v Robinson, 2022 ABKB 677 Date: 20221013 Docket: 1903 24485 Registry: Edmonton Between: Crowdblink Inc., 1400523 Alberta Ltd., 1998568 Alberta Ltd., Jeffrey Jessamine and Tyler Ellis Plaintiffs/Defendants by Counterclaim - and - David Robinson Defendant/Plaintiff by Counterclaim - and - Intellitix Technologies Inc. and Crowdblink Technologies Inc. Defendants by Counterclaim _______________________________________________________ Reasons for Decision

of the Honourable Justice Peter Michalyshyn _______________________________________________________ Introduction [ 1 ] This is an application to set aside an ex parte interlocutory order made on November 29, 2019 (the “Order”). The Order was made on the basis that the defendant Robinson engaged in conduct that was unfair, oppressive and unfairly disregarded the interests of the plaintiffs/defendants by counterclaim (hereafter collectively “Crowdblink”). The Order directed Robinson to preserve certain property and to provide Crowdblink access to it.

The Order directed Robinson to provide certain other records to Crowdblink as well. The Order finally prohibited Robinson from engaging in certain communications. [ 2 ] The set-aside application was to have been heard on June 1, 2021. The application was adjourned on May 21, 2021 to enable the parties to complete questioning and undertakings. In due course the set-aside application was heard March 1, 2022, some 2 ½ years after the ex parte Order was made. [ 3 ] For reasons that follow, the application is allowed and the Order is set aside.

Positions of the parties [ 4 ] No one disputes that the hearing to set aside the ex parte Order is de novo , and that the burden remains on Crowdblink on the set-aside application to show it should have been granted: Secure 2013 Group Inc v Tiger Calcium Services Inc , 2017 ABCA 316 , citing Catalyst Canada Services LP v Catalyst Changers Inc , 2013 ABQB 73 at para 32 . [ 5 ] There is an issue whether the Order was mandatory or prohibitive in nature.

The applicant Robinson argues it was mandatory, the respondent Crowdblink argues it was prohibitive. [ 6 ] Robinson argues that the “strong prima facie case” threshold for a mandatory injunction was not met on November 29, 2019. Robinson says it is not met either on the set-aside application. Robinson argues there is now credible evidence, not before the court on November 29, 2019, that stands in the way of a finding of a strong prima facie case.

Even on the lower threshold for a prohibitory order of “a serious issue to be tried”, Robinson argues Crowdblink has failed to show irreparable harm, or – without the Order – that the balance of convenience weighed in Crowdblink’s favour. [ 7 ] Robinson seeks a finding that Crowdblink inappropriately applied for the Order on an ex parte basis. [ 8 ] Finally, and in any event, Robinson seeks to set-aside paragraph three of the Order that finds his conduct was unfair, oppressive and unfairly disregarded the interests of the plaintiffs/defendants. [ 9 ] In defence of the Order, Crowdblink argues that on any standard the credible evidence is clear that oppression existed and that the Order in its entirely was and remains justified.

Nature of the Order – applied for ex parte [ 10 ] On the narrow question of whether Crowdblink should have given notice of its November 29, 2019 application, I dismiss the objection that the Order was applied for inappropriately. The evidence before the court on November 29, 2019, adequately if not amply justified the ex parte nature of the application.

The Order also provided a short three-day ‘come back’ period. [ 11 ] The evidence before the court on November 29, 2019 included Robinson’s communications to Crowdblink of November 15 and 19, 2019 – that because in Robinson’s view Crowdblink had no rights to the software Robinson had developed prior to joining Crowdblink, and given the unfolding deal with ITX, “we need to action this with high priority”; that Robinson acknowledged “my departure from Crowdblink will have a negative impact on operations at least in the short-term”; that without more, as of November 19, 2019 “Crowdblink will be required to shut down its services; and that Robinson “[understood] very well the ramifications this will have for the pending deal between Crowdblink and Intellitix”.

The evidence included also that despite Crowdblink’s November 15, 2019 caution that Robinson not communicate with ITX directly – and despite Robinson’s apparent agreement to refrain from doing so – on November 19, 2019 Robinson in fact did communicate directly with ITX. (It is worth noting that the apparent agreement to refrain, referred to at paragraph 38 of the November 29, 2019 affidavit of Jeffrey Jessamine, is not specifically denied in Robinson’s detailed reply affidavit sworn October 1, 2020.) Finally, the evidence included that Crowdblink/ITX urgently needed “the transfer of all intellectual property forthwith”, as more fully set out at paragraphs 35-46 of the Jessamine affidavit. [ 12 ] While this evidence justified the ex parte nature of the application, of course there is now a significantly different record before the court on the with-notice set-aside application.

Nature of the Order – mandatory or prohibitory

[13] I agree with Crowdblink that the Order was, and remains, an essentially prohibitory injunction. [14] Yes, the Order required Robinson to do certain things. They are set out at subparagraphs 4(a-d). They were essentiallydisclosure requirements. And since the November 29, 2019 Order, there is some evidence that the disclosure was either already inCrowdblink’s possession or power, or has been provided by Robinson. [15] To the extent of that disclosure, all that remains of the Order is subparagraph 4(e).

It is clearly prohibitory in that it prohibitsRobinson from: …publishing or disseminating information of comment in any way relating to Crowdblink to the public or any party, an [sic] in particularto any person associated with Intellitix Technologies Inc, without the express written permission of Jessamine. [16] On the whole of the record before me, I conclude that the essence of the Order was the prohibition at subparagraph 4(e).

Thatappears to be particularly the case given the passage of time since November 29, 2019 and, again, evidence before me that Crowdblinkwas already or had come into possession of the information referred to elsewhere in paragraph 4. [17] On this issue, Crowdblink argues persuasively at paragraph 114 of counsel’s Brief filed May 18, 2021 that by his ownevidence, Robinson had arranged for the transfer of all code underlying the technology to ITX, such that they and Crowdblink had allthey needed to continue operations, except for Robinson’s consent to use the intellectual property.

If this is so, the mandatory disclosureaspects of the Order were all the more secondary to the prohibitory aspect, noted above. [18] In conclusion on this point, as the Order was, and certainly appears now to be essentially prohibitory, Crowdblink’s burden onthis set-aside application is to satisfy the test of a “serious issue to be tried”.

Oppression finding [19] I agree with Robinson that on the basis of record before the court on November 29, 2019 the stated finding at paragraph three– that “Robinson engaged in conduct that is unfair, oppressive and unfairly disregards the interests of [the Plaintiffs]” – should be setaside. [20] It is worth noting Robinson’s evidence, in his affidavit sworn October 1, 2020 and as emphasized in his counsel’s May 11,2021 Brief, that soon after the Order was made counsel for Crowdblink stated in December 19, 2019 correspondence, that: …the oppression remedy was more of a foundation for getting the Order, which is injunctive in nature, without an undertakings [sic] asto damages.

The Oppression remedy did not ground the injunction itself. [21] Likewise in their counsel’s Brief of May 18, 2021, at paragraphs 12-14, Crowdblink further concedes the paragraph threefinding of oppression “would not be relied on for any further determination in the action and that the parties should proceed to deal withthe merits of the matter”. [22] Yet notwithstanding these statements, in Crowdblink’s same Brief, at paragraph three, the Order’s finding of oppression isstrenuously defended: In the Respondents’ submissions, the evidence is clear that Robinson engaged in conduct that was oppressive, prejudicial and unfairlydisregarded the interests of Crowdblink.

The Respondents submit that the Order was well supported by evidence, was properly granted,and should not be set aside. [23] Crowdblink again relies on the Order’s finding of oppression at paragraphs 76-78 and 83 of its Brief. [24] Granted, there is a serious issue to be tried whether oppression is made out in the circumstances of this case.

It is a non-issuehowever that the stated finding of oppression in the Order should be set aside, as occurred in Logithasan v Chawla, 2012 ABQB 368.My use of the phrase “stated finding” conveys that though not styled as any kind of an interim without prejudice order, the Order ofNovember 29, 2019 was made ex parte and with a three-day ‘come-back’ provision.

That provision, and the very ex parte, nature of theOrder – as in Logithasan having been made without any true adjudication – signalled that Robinson could apply to vary the entirety ofthe Order, without limitation, and at the convenience of the parties and the court. [25] For the reasons given on this point, the stated finding at paragraph three of the Order is set aside. Was the Order properly granted? [26] I will deal first and briefly with s 242 of the Business Corporations Act RSA 2000, c B-9.

Given my finding with regard toevidence of oppression and the need for that serious issue to be tried, still at this point in time the interlocutory Order cannot be justifiedunder s 242 of the Act. [27] It remains to address the Order through the lens of the tripartite test set out in RJR-MacDonald Inc v Canada (AttorneyGeneral), (SCC), [1994] 1 SCR 311 at 334, 347-349:

a) Is there a serious question to be heard on the merits (meaning not frivolous or vexatious)?

b) Will the applicant suffer irreparable harm if the Order is not granted?

c) Does the balance of convenience between the parties favour granting the Order? [ 28 ] The standard of proof is the balance of probabilities and the onus rests with the applicant to establish that the test is met. Serious issue to be tried [ 29 ] At paras 54-55, the court in RJR stated: What then are the indicators of “a serious question to be tried”? There are no specific requirements which must be met in order to satisfy this test. The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case. ...

Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable. [ 30 ] In its evidence and argument Robinson focuses on why the strong prima facie case test is not met, less so if at all on whether on the whole of the record there are serious issues to be tried. [ 31 ] Of course I make no comment whether Crowdblink will succeed at trial.

But the serious issues to be tried arising from the pleadings, evidence (including questioning transcripts) and arguments of counsel include the following: • The March 10, 2017 Letter of Intent, its terms, and whether it was a binding agreement or no more than an agreement to agree, and if the latter, what interest Crowdblink ever gained in Robinson’s intellectual property, either the IP Robinson brought to Crowdblink on the commencement of his employment on or about May 24, 2017, and/or during his employment which, for practical purposes, ended in mid-November, 2019.

Crowdlink cites Tremblay v Orio Canada Inc , 2013 FC 109 as an example of an employer retaining intellectual property rights to the property developed during the employee’s term with the company; Robinson cites authority and argues that Robinson retained his IP rights throughout; • The May 24, 2017 Employment Agreement, whether it was bona fide or to the contrary, was Robinson a contractor; and in any event whether it gave rise to fiduciary obligations, and if so, of what nature, on Robinson’s part to Crowdblink; • Robinson’s November, 2019 correspondence in emails and text messages (eg, at exhibits I, J, K and L of Jessamine’s November 29, 2019 affidavit) and whether they were evidence of his intent to “axe” a deal between Crowdblink and ITX, or to assert his own interests as part of any deal then going forward, or indeed if Robinson’s position in that regard is a distinction without a difference; • When it was that Robinson left Crowdblink’s employment in favour of Bambora North America, on December 2, 2019, and in that regard, again the

interpretation of Robinson’s November, 2019 communications leading up to his departure from Crowdblink, well ahead of December 31, 2019 – the date noted by Crowdblink as the “the date Robinson’s resignation…became effective”. [ 32 ] On the basis of this inexhaustive list of serious issues to be tried, I find that Crowdblink has satisfied the first part of the RJR tripartite test.

Will Crowdblink suffer irreparable harm if the injunction is varied? [ 33 ] On this second stage of the test the court in RJR at paras 63-64 said: At this stage the only issue to be decided is whether a refusal to grant relief could so adversely affect the applicants’ own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application. “Irreparable” refers to the nature of the harm suffered rather than its magnitude.

It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other.

Examples of the former include instances where one party will be put out of business by the court’s decision; where one party will suffer permanent market loss or irrevocable damage to its business reputation; or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined; The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration. [citations omitted]. [ 34 ] As noted in Catalyst Canada Services LP v Catalyst Changers Inc , 2013 ABQB 73 at para 73 , the standard of proof for this test is high, such that “there must be a high degree of probability that harm will in fact occur”.

But whether or not harm is compensable in money damages is not the only consideration: Ominayak v Norcen Energy Resources Ltd , 1985 ABCA 12 , and Law Society of Alberta v Black & Company , 1983 ABCA 261 .

Still, as noted in RJR itself, the remedy of money damages remains a factor that may weigh in the question of irreparable harm. [ 35 ] As with the first branch of the RJR test, whether this high degree of probability exists can be assessed only on a preliminary basis. [ 36 ] Evidence relevant to this assessment includes Robinson’s – to some extent disputed by Crowdblink – that on his departure in mid-November, 2019 Crowdblink and/or ITX had all the necessary intellectual property, but lacked only Robinson’s consent to its use.

Relevant too is Robinson’s evidence that after the Order, he offered to assist the plaintiffs at a nominal hourly rate, and his further evidence (at paragraph 29 of his affidavit sworn October 1, 2020) that:

I note that [Crowdblink] only ever requested approximately 30 minutes of my time, indicating that they indeed had what they required despite their demands for my ongoing assistance. [ 37 ] As to other evidence of irreparable harm, Crowdblink points to the Jessamine affidavit, and evidence that the order applied for on November 29, 2019 critically anchored the deal with ITX that would see products released to market in January, 2020.

Were the deal not to be realized, Crowdblink said it would sustain “substantial damages” in the millions of dollars, and “was at risk of suffering significant reputational damage by not being able to get products to market by January, 2020”. [ 38 ] While recognizing the caution in RJR that “irreparable” refers to the nature of the harm suffered rather than its magnitude”, still the evidence relied on by Crowdblink initially even as to the nature of the apprehended harm is vague and uncertain.

What’s more, the nature of the evidence supporting a finding of irreparable harm does not appear to have improved with the passage of 2 ½ years since the Order was given, on November 29, 2019. [ 39 ] It is interesting too that in its November 29, 2019 affidavit, Crowdblink quotes ITX as saying, at paragraph 45, that “…the ITX deal can still move forward, and that the damage Robinson has caused can be somewhat mitigated if by December 23, 2019 the following occurs…” What then follows in the affidavit is a list of requirements only some of which Crowdblink sought in the Order that flowed from the November 29, 2019 application.

Conspicuously missing is the paragraph 45 ITX prerequisite to save the deal that: Robinson provides training to the CB and ITX designated staff on the software platform to the extent that a complete transition can occur in an orderly fashion. [ 40 ] At no point has Crowdblink brought to my attention evidence that this ITX prerequisite, not sought as part of the Order, was ever fulfilled in any other fashion.

Indeed, no evidence was brought to my attention on this set-aside application whether the deal between Crowdblink and ITX ever went ahead – whether with the benefit of the Order or otherwise, were the plaintiffs able to “release products to market in January, 2020, and/or whether with the benefit of the Order or otherwise, were the plaintiffs able to avoid or mitigate the claimed “substantial cumulative damages” noted at paragraph 46 of the November 29, 2019 affidavit? [ 41 ] It is curious too that Crowdblink’s January 20, 2021 affidavit at paragraph 2 confirms that the intellectual property in dispute had not been commercially used by the plaintiffs since the Order. [ 42 ] Crowdblink says Robinson has failed to bring forward evidence of an ability to pay damages.

Crowdblink stated, at paragraph 52 of the November 29, 2019 affidavit, that to its knowledge Robinson “does not have the financial means to pay the damages that will be incurred” should the Order not be granted.

There is some uncertainty as to those damages: Crowdblink notes that pleadings have issued seeking judgment against Robinson of “$1,000,000 plus costs and interest” – not the “millions in damages” predicted at paragraph 47 of its November 29, 2019 affidavit. [ 43 ] On this record now before the court and on a preliminary basis, I find that Crowdblink falls short of showing the required high degree of probability that irreparable harm will in fact occur if the Order now is set aside. [ 44 ] I also find no credible evidence of likely harm to Crowdblink in the nature of a loss of strategic advantage, market share, or customer relations – evidence that the court could weigh alongside the evidence, and Crowdblink’s argument, that money damages for alleged irreparable harm would be inadequate.

Likewise, I find as speculative Crowdblink’s evidence that Robinson would be unable to satisfy a judgment. I agree that it is not for Robinson on an application such as this to prove he could pay an award of damages. As was noted in argument, it appears no questions were put to Robinson in this regard when he was examined on affidavit prior to the application now before the court.

The balance of convenience [ 45 ] This third stage of the RJR tripartite test requires the court to assess which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits: RJR at para 48. [ 46 ] Again as noted in Catalyst , the court will be informed in part by the factors considered at the first and second stages of the RJR test. [ 47 ] I am also informed by the circumstances of this set-aside application, including the significant passage of time from the November 29, 2019 Order, and whether the balance of convenience that may have existed at that time, now 2 ½ years later still exists.

So that while the balance of convenience may have weighed in Crowdblink’s favour as of November 29, 2019, that same cannot now be said with any confidence on this set-aside application. Conclusion [47] For the reasons given, the Order of November 29, 2019 is set aside. If the parties are unable to agree on costs, they may be further spoken to. Heard on the 11 th day of March, 2022. Dated at the City of Edmonton, Alberta this 13 th day of October, 2022.

Peter Michalyshyn J.C.Q.B.A. Appearances: Jose Delgado Bishop & McKenzie LLP for the Plaintiffs/Defendants by Counterclaim Crowdblink Inc., 1400523 Alberta Ltd., Jeffrey Jessamine and Tyler Ellis Chris Zelyas Dentons Canada LLP for the Defendant/Plaintiff by Counterclaim David Robinson