2020 QCCA 1363, 2020 QCCA 1363

FLS Transportation Services Limited c. Fuze Logistics Services Inc. 2020 QCCA 1363 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-029120-201 ( 500-17-112963-205 ) MINUTES OF HEARING DATE: October 23, 2020 THE HONOURABLE ROBERT M. MAINVILLE, J.A. APPLICANT COUNSEL fls transportation services limited Mtre Charles Wagner Mtre raphaël buruiana ( Fasken Martineau Dumoulin ) By videoconference RESPONDENTS COUNSEL fuze logistics services inc.

M tre Francis p. donovan M tre SAmuel lalancette ( Ravinsky, Ryan, Lemoine ) By videoconference pierre selim chris tan claudio damato corey newman ross geary hadi diallo juan guzman tania caucci douglas eaonou julie hess melissa prezuiso mikael alon Mtre NORMAND LAURENDAU ( Robinson Sheppard Shapiro ) By videoconference

DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of the proceeding on August 20, 2020 by Mr. Justice Mark Philllips of the Superior Court , District of Montreal (Arts. 31 and 357 C.C.P. ) . Appellant’s application for the issuance of a sealing order regarding certain schedules (Art. 378 C.C.P. ) . Clerk at the hearing : Mélanie Camiré Courtroom: RC-18 HEARING 9:28 Commencement of the hearing.

Identification of counsel. 9:31 Submissions by Mtre Wagner. 10:01 Submissions by Mtre Laurendeau. 10:16 Submissions by Mtre Donovan. 10:26 Reply by Mtre Wagner. 10:31 Recess of the hearing. 16:03 Resumption of the hearing. BY THE JUDGE: Judgment – see page 4. 16:09 Conclusion of the hearing. Mélanie Camiré, Clerk at the hearing JUDGMENT [ 1 ] The Applicant is seeking leave to appeal the judgment of August 20, 2020, rendered by the Honourable Mr.

Justice Mark Phillips of the Superior Court, District of Montreal ( 2020 QCCS 2604 ), dismissing its application for provisional injunction orders. [ 2 ] The Applicant is a company operating in the fields of customs brokerage, international freight forwarding and ground transportation. At the beginning of July 2020, twelve of its employees in its Montreal branch resigned and were shortly thereafter hired by one of its competitors, Fuze Logistics Services inc. (“Fuze”), a company founded, owned and operated by its past CEO.

Another employee would follow the same path shortly thereafter. [ 3 ] On July 21, 2020, the Applicant initiated legal proceedings in the Superior Court against Fuze and its former employees seeking to enforce non-competition, non-solicitation and non-use of confidential information covenants as well as raising the general duty of post-employment loyalty provided in

article 2088 of the Civil Code of Quebec . [ 4 ] The next day, July 22, 2020, St-Pierre, J.S.C. issued a 10-day provisional injunction order consistent with the Applicant’s requests, but without the benefit of submissions from Fuze and the former employees, who had been served the day before but had not been in a position to respond. Given difficulties in securing a hearing date, on August 5, 2020, Justice Gouin J.S.C. extended the provisional injunction. [ 5 ] Prior to the August 5th extension, Fuze and the former employees had filed numerous affidavits setting out the circumstances of the resignations.

These were said to result from a toxic work climate at the Applicant’s Montreal office and from constant fear of being dismissed. Almost all the affidavits noted an excessive staff turnover within the Applicant’s operations since its acquisition by American interests in 2016.

In this regard, sworn affidavit testimony sets out that some 254 employees of the Applicant had been terminated or had quit their employment during the post-acquisition period of February 2016 to July 6, 2020, out of just over 300 employees at the time of the 2016 acquisition. [ 6 ] In light of this evidence, at the August 5, 2020, hearing, Justice Gouin gave specific instructions to the Applicant to file appropriate affidavits to explain why 254 out of 300 employees had been terminated or had quit in the past four years.

Affidavits on the Applicant’s behalf were subsequently filed and a hearing was held before Phillips, J.S.C., who rendered his judgment on August 20, 2020.

[ 7 ] Phillips J.S.C., after reviewing the affidavit evidence, concluded that the Applicant had failed to respond to the instructions given by Gouin, J.S.C., namely an explanation for the extraordinary turnover in personnel. Taking into account

article 2095 of the Civil Code of Quebec – which provides that an employer cannot avail himself of a stipulation of non-competition if he has himself given the employee a serious reason for terminating his employment contract – as well as the lack of explanation as to the employee turnover situation, Phillips, J.S.C. concluded that the Applicant had forfeited any further extension of the provisional injunction. [ 8 ] The pertinent paragraphs of Phillips, J.S.C.’s judgment read as follows: [22] Justice Gouin’s order effectively put Plaintiff on notice that absent cogent, detailed and compelling explanations for the high level of attrition, enforcement of the restrictive covenants would be on very shaky ground.

In that context, the Court can accept nothing less than precise explanations of the utmost candour. It cannot content itself with a few dismissive words. In the view of the Court, the affidavits provided by Plaintiff made light of Justice Gouin’s order. (…) [25] In responding to Justice Gouin’s order as it has done, Plaintiff has failed to do that. In so doing, it has forfeited its right to obtain a further extension of the orders previously issued.

The application for a safeguard order will therefore be dismissed. (…) [27] All that said, the Court’s dismissal of the application for a safeguard order should not be taken as an endorsement of the Defendants’ conduct.

If Plaintiff acts on its stated intention to pursue indemnification in the form of damages, it may perhaps turn out that, following a trial on the merits, certain of the restrictive clauses could prove to be enforceable and be shown to have been infringed, the whole resulting in rights to disgorgement of ill-gotten gains and other remedies. [28] The Defendants will of course also have an opportunity at trial to flesh out their position on the toxic work environment, argue that it absolved them from compliance with the restrictive clauses found in their contracts, and that those clauses are in any event unenforceable on other grounds, notably due to excessive temporal and geographic scope, as well as the lack of a legitimate interest to protect, within the meaning of

article 2089 of the Civil Code of Québec , particularly in the case of clerical staff whose ability to earn their livelihood should not be tampered with lightly. [29] The present judgment is of course in no way dispositive of any of those issues. (…) [31] Finally, the Court notes that the twelve employees initially named as Defendants have, in their sworn statements, all formally undertaken to abide by their residual duty of loyalty to Plaintiff, which the Court understands to be a reference to their obligation under

article 2088 of the Civil Code of Québec . [ 9 ] It is trite law that a judgment dismissing a request for a provisional injunction may rarely be appealed in light of the discretionary nature of the decision. An appeal can be contemplated only if exceptional and compelling circumstances can be conclusively demonstrated, such as a clear and decisive error of law: PCM Sales Canada Inc. c. Botero-Rojas , 2017 QCCA 1874 , paras. 9-10 ; Kukura c. Pivitol Payments Corporation , 2016 QCCA 1391 , para. 8 ; Éditions Genex inc. c.

RNC Media inc. , 2014 QCCA 1628 , para. 5 . [ 10 ] By its very nature, a provisional injunction is a temporary measure that rarely finally determines the issues opposing the parties and rarely affects their respective claims.

As Phillips, J.S.C. notes in this case, the Applicant may pursue its claims for damages and, if the restrictive covenants signed by its former employees prove to be enforceable and are shown to have been infringed, may seek disgorgement of the gains resulting from their breach. [ 11 ] In this case, the detailed affidavits submitted by the former employees and on behalf of Fuze provide a firm basis for applying

article 2095 of the Civil Code of Quebec . This is moreover the case in light of the Applicant’s failure to cogently address the issue of the extraordinary employee turnover, as ordered by Gouin, J.S.C. As a result, the Applicant’s prima facie appearance of right with respect to the enforcement of the former employees’ restrictive covenants is somewhat undermined, though it is not inexistent, as Philipps.

J.S.C. himself noted in para. [27] of his judgment, reproduced above. [ 12 ] The question raised by the Applicant in this case is whether that alone was sufficient to dismiss the application for a provisional injunction. [ 13 ] It is well accepted that the usual criteria to obtain a provisional injunction are an appearance of right, a serious or irreparable injury, an analysis of the balance of convenience and the urgency of the situation: articles 510-511 C.C.P. ; 176283 Canada inc. c. St- Germain , 2011 QCCA 608 , paras. 7-8 ; Gestion Marigec inc. c.

Immeubles Rimanesa inc. , 2017 QCCA 1870 , para. 13 . [ 14 ] Moreover, it is also generally accepted that if the appearance of right is doubtful but still exists, the criteria of serious or irreparable injury, balance of convenience and urgency may still be considered and may nevertheless lead to the issuance of the injunctive relief sought: see, among others, 9045-6740 Québec inc. c. 9049-6902 Québec inc. , J.E. 2003-2153 (Thibault, J.A.) . [ 15 ] Nevertheless, this Court has stated that these criteria may be adapted to the various circumstances that may arise.

As a general rule, however, the criteria should be followed. Thus, in Sawyer c. S. Teller ltée , 2011 QCCA 2389 , the Court stated the following: [2] On ne peut peut-être pas affirmer que les critères propres à l'injonction interlocutoire seront en tout temps, et quelle que soit la situation, applicables intégralement et sans nuance aux ordonnances intérimaires prononcées en vertu de ces dispositions.

Cependant, vu la nature de telles ordonnances, qui reposent sur une preuve forcément incomplète et engendrent des apparences pouvant en conséquent être trompeuses, le tribunal, afin de baliser l'exercice du pouvoir discrétionnaire que lui confèrent les dispositions en question, s'en

remettra en principe à des critères analogues à ceux de l'injonction interlocutoire (critères qui relèvent du simple bon sens) et usera du même cadre d'analyse. Le fait que les ordonnances intérimaires visent ordinairement la préservation des droits et ne doivent pas servir à court-circuiter le jugement final sur le fond de l'action en justice est un argument supplémentaire en ce sens. C'est ce que notre Cour a décidé récemment dans 176283 Canada inc. c. St-Germain , en rapport avec les articles 241 et s. de la

Loi canadienne sur les sociétés par actions , et les propos qu'elle tient dans cette affaire sont transposables à la

Loi sur les sociétés par actions , avec les adaptations qui s'imposent. [ 16 ] The issue raised by the Applicant in this case is if the failure to consider the applicable criteria is justified. That question is of interest to the larger legal community: Knafo c. Kanfo , 2018 QCCA 1168 , para. 6 . [ 17 ] As a result, the Applicant has convinced me that this is one of those cases for which leave to appeal a provisional injunction should be granted. [ 18 ] The Applicant also seeks a sealing order as was granted by Gouin, J.S.C. on August 5, 2020.

FOR THESE REASONS, THE UNDERSIGNED: [ 19 ] GRANTS the application for leave to appeal and AUTHORIZES the appeal of the judgment of August 20, 2020, rendered by the Honourable Mr.

Justice Mark Phillips of the Superior Court, District of Montreal ( 2020 QCCS 2604 ); [ 20 ] ORDERS that the appeal proceed by way of memoranda; [ 21 ] ORDERS the appellant to prepare its memorandum containing an argument not exceeding 15 pages (excluding the conclusions), to notify a copy of this memorandum to the other parties and to file five copies of the memorandum with the Court on or before November 6th, 2020; [ 22 ] ORDERS the respondents to prepare a single joint memorandum containing a joint argument not exceeding 15 pages (excluding the conclusions), and to notify a copy of this memorandum to the appellant and to file five copies of the memorandum with the Court on or before November 20, 2020 ; [ 23 ] SETS the date of the appeal at November 27, 2020, in the Lamer Courtroom at 100 Notre-Dame East, Montreal, at 9:30 am or as soon thereafter as the Court may determine, for a hearing not exceeding 120 minutes (60 minutes for the appellant and 60 minutes for the respondents); [ 24 ] GRANTS the application for a sealing order; [ 25 ] ORDERS the filing of Schedules 2 and 4 under seal in the appeal procedures of the decision rendered in the proceeding bearing number 500-17-112963-205 before the Superior Court; [ 26 ] COSTS on the applications to follow the result of the appeal.

ROBERT M. MAINVILLE, J.A.