Docket: 1864 Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr, v. Novo Water Group Inc., 2010 SKCA 151

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2010 SKCA 151 Date: 20101209 Between: Docket: 1864 Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr, and Novo Water Group Inc. Appellants (Defendants) - and - Culligan Canada Ltd. and WaterGroup Companies Inc. Respondents (Plaintiffs) Between: Docket: 1874 Culligan Canada Ltd. and WaterGroup Companies Inc. Appellants (Plaintiffs) - and -

Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr, Novo Water Group Inc. and Canature International Inc. operating as Canature North America Respondents (Defendants) Coram: Lane, Jackson & Ottenbreit JJ.A. Counsel: Conrad Hadubiak and Stephanie Yang for Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr and Novo Watergroup Inc. Colin Feasby and Benjamin Pullen for Culligan Canada Ltd. and WaterGroup Companies Inc.

Appeal: From: 2009 SKQB 401 and 2009 SKQB 473 Heard: May 5, 2010 Disposition: 2009 SKQB 401 – appeal allowed 2009 SKQB 473 – appeal dismissed Written Reasons: December 9, 2010 By: The Honourable Madam Justice Jackson In Concurrence: The Honourable Mr. Justice Lane

The Honourable Mr. Justice Ottenbreit Jackson J.A. I. Introduction [ 1 ] These reasons pertain to two appeals from decisions of the Court of Queen’s Bench. The first is an appeal from a finding of contempt made by Zarzeczny J. in Culligan Canada Ltd. v. Fettes , 2009 SKQB 401 , 340 Sask. R. 187 ( Contempt Judgment No. 1 ) wherein he found that Novo Water Group Inc. (“Novo”) and the nine individual respondents were in contempt of a court order made in favour of WaterGroup Companies Inc. (“WaterGroup”) and Culligan Canada Ltd. (“Culligan”).

The second is an appeal from the decision of Scheibel J. in Culligan Canada Ltd. v. Fettes , 2009 SKQB 473 , 355 Sask.R. 20 ( Contempt Judgment No. 2 ), wherein he did not find that Novo and the nine individual respondents were in contempt. As the parties and factual background of both appeals are the same, these reasons address the appeals from both decisions. [ 2 ] In the result, I have concluded that the appeal from the first contempt judgment should be allowed, and the appeal from the second should be dismissed.

The fundamental basis of my decision is that the Court order, sought to be enforced by the contempt applications, incorporates overly broad and unclear language. Further, external circumstances exacerbated the order’s lack of clarity. II. Background [ 3 ] WaterGroup is a Canadian company that sells water purifying products. Culligan is its parent. Donald Fettes was WaterGroup’s president and chief executive officer until WaterGroup terminated his employment on August 1, 2008 for leading a group of employees in a failed attempt to buy WaterGroup from Culligan. The group of employees included Messrs.

Cyr, Cardiff, Gaiser, Lewgood and Fiorante, who were all senior employees of WaterGroup. Messrs. Hughes and Sandomirsky were also senior employees of WaterGroup, but they left before the failed offer and before WaterGroup terminated Mr. Fettes’s services. [ 4 ] In October 2008, Messrs. Fettes, Hughes and Sandomirsky incorporated Novo, a corporation conducting essentially the same business as WaterGroup. In March 2009, Mr. Heaps, another senior employee of WaterGroup, joined Novo. On May 19, 2009, Messrs. Cyr, Cardiff, Gaiser, Lewgood and Fiorante left WaterGroup of their own volition and joined Mr.

Fettes and Novo. Over the ensuing months, Novo made offers to other key salesmen of WaterGroup, which offers were accepted, resulting in 15 of WaterGroup’s top 17 income earners being employed by Novo. [ 5 ] On May 29, 2009, WaterGroup and Culligan commenced an action against Novo and Messrs.

Fettes, Hughes, Sandomirsky, Cyr, Cardiff, Gaiser, Lewgood, Fiorante and Heaps, alleging, inter alia , breach of contract, breach of confidence, breach of fiduciary duty and interference with contractual relations—all stemming from the allegation that Novo was soliciting WaterGroup’s current customers and enticing away its employees. For ease of reference, Novo, Mr. Fettes and the named employees will be referred to throughout as “Novo” except where it is necessary to differentiate between the company, Mr.

Fettes or the individual named employees. [ 6 ] On June 23, 2009, WaterGroup and Culligan applied for an interim injunction or an indefinite interlocutory injunction restraining Novo from carrying out the activities mentioned in the action, pending a trial of the matter.

[ 7 ] Following a lengthy hearing and cross-examination on numerous affidavits, the learned Chambers judge refused to grant an indefinite interlocutory injunction, but granted, in its stead, two interim injunctions on September 1, 2009 for a period of six months until February 28, 2010 or until further order. [1] One injunction enjoins and restrains Mr. Fettes personally from breaching the terms of Articles 8.01 and 9.01 of his Employment Agreement. The other injunction restrains and enjoins Novo, Mr. Fettes and all of the named employees from: (

a) Soliciting, in any manner, or aiding in soliciting, serving, catering to or assisting, directly or indirectly, the business of previous or current customers of the applicants; (

b) Soliciting or inducing for employment, or aiding in the solicitation for employment, of any person who is, at the time of such solicitation or inducement, employed or contracted by the applicants; (

c) Using or disclosing in any way customer lists, product information, marketing information, business strategy information, financial information, operational margins, details of any needs and demands of particular suppliers and customers, including any special arrangements for discounts or accommodations not widely available, employee information and all of the details of its relationships with its vendors and suppliers including the terms of supply agreements, pricing information, financing arrangements, discounts and special supply arrangements, and other similar information to other persons or entities for their own benefit or for the benefit of those other persons or entities; (

d) Interfering with the plaintiffs' contractual relations with its employees, suppliers and customers; See the reasons of Ball J. in Culligan Canada Ltd. v. Fettes now reported at 2009 SKQB 343 at para. 90 , 340 Sask. R. 162. [ 8 ] On September 2, 2009, before an order embodying the above reasons could be issued, Novo applied to clarify the scope of the terms of the injunction. In a letter to the Local Registrar, which was copied to WaterGroup, Novo’s counsel wrote: In particular we note that Mr. Justice Ball concluded in paragraph 67 of his Reasons that: “The law imposes the following obligations on departing employees who owe fiduciary duties: (

a) a prohibition against directly soliciting former employer’s customers or clients, whether or not there is an agreement restraining soliciting following termination;” While the phrases “soliciting” and “aiding in soliciting” in subparagraph (

a) of paragraph 90 appear to be consistent with Mr. Justice Ball’s conclusions, the use of the words “serving, catering to or assisting” might be interpreted as to broaden his order from non- solicitation of customers to non-competition in respect of previous or current customers of the Applicants. [Letter on Queen’s Bench file: Q.B.G. No. 845 of 2009, J.C. Regina.] [ 9 ] WaterGroup resisted any change being made to the terms of the judgment. Indeed, on September 4, 2009, before the Chambers judge could respond to the application for clarification, WaterGroup wrote a letter to the customers and suppliers in the water treatment industry, offering its

interpretation of the judgment of Ball J.: Dear Valued WaterGroup Customers: We wanted to inform you of a recent court decision in our lawsuit against Novo Water Group, Canature North America and our former employees who represent these companies. . . . On September 1, 2009 the Court granted WaterGroup an injunction which provides that: • Defendants cannot solicit nor serve any previous or current WaterGroup customer ... [Emphasis in original.] [See: Exhibit "A" to Affidavit of Donald Fettes sworn October 2, 2009 on Queen's Bench file: Q.B.G. No. 845 of 2009, J.C.

Regina.] [ 10 ] On September 9, 2009, Ball J. issued a corrigendum to his judgment (the “Corrigendum”). It reads: Paragraph 90, clause (

a) of the interim order restrains and enjoins the defendants from: (

a) Soliciting, in any manner, or aiding in soliciting, serving, catering to or assisting, directly or indirectly, the business of previous or current customers of the applicants; There is an ambiguity in the terms of paragraph 90, clause (

a) that must be clarified so that all parties will understand what has been restrained and enjoined by the court. Paragraph 90, clause (

a) is intended to restrain and enjoin the defendants from soliciting the applicants' previous or current customers. Soliciting encompasses selling, marketing and taking any initiative that might reasonably be construed as intended to establish a business relationship with another person.

The terms "serving, catering to or assisting" derive their meaning from the term "soliciting". To "serve" may be defined as "to be useful to", while the words "catering to or assisting" include initiatives such as offering information, advice or prerequisites to potential customers. All are methods of soliciting business from potential customers and all are restrained and enjoined by the terms of paragraph 90(

a) of the court's order. [ 11 ] On September 15, 2009, WaterGroup took out its order (the “Order”) in the following form: 1. The Respondents, Fettes, Sandomirsky, Hughes, Fiorante, Lewgood, Cardiff, Gaiser, Heaps, Cyr and Novo Water Group Inc. are restrained and enjoined until the close of business on Monday, February 28, 2010 or until further ordered from: (

a) Soliciting, in any manner, or aiding in soliciting, serving, catering to or assisting, directly or indirectly, the business of previous or current customers of the Applicants; (

b) Soliciting or inducing for employment, or aiding in the solicitation for employment, of any person who is, at the time of such solicitation or inducement, employed or contracted by the Applicants; (

c) Using or disclosing in any way customer lists, product information, marketing information, business strategy information, financial information, operational margins, details of any needs and demands of particular suppliers and customers, including any special arrangements for discounts or accommodations not widely available, employee information and all of the details of its relationships with its vendors and suppliers including the terms of supply agreements, pricing information, financing arrangements, discounts and special supply arrangements, and other similar information to other persons or entities for their own benefit or for the benefit of those other persons or entities; and (

d) Interfering with the Applicants’ contractual relations with its employees, suppliers and customers. [Order of Ball J. issued 15 September 2009 in Q.B.G. No. 845 of 2009, J.C. Regina] [ 12 ] On September 17, 2009, Novo appealed the decision of Ball J. to this Court. Novo’s appeal from the decision of Ball J. was heard on November 17, 2009. Written reasons for judgment were released on December 22, 2009 (see: 2009 SKCA 144 ). The Court dismissed the appeal as it related to the injunction against Mr.

Fettes personally, but adjusted the wording of the second injunction against Novo and the named individuals in two ways. First, it struck some words contained in the opening part of the Order, such that it read as of December 22, 2009 (see para. 61): 1 (

a) Soliciting, directly or indirectly, the business of previous or current customers of the applicants; Second, it stated that “previous” means a customer who had been at one time a customer of WaterGroup, but was not a customer as of the creation of Novo (see para. 66). [ 13 ] While the appeal was pending, WaterGroup made three successive applications to the Court of Queen’s Bench for orders finding that Novo was in contempt of the Order. WaterGroup abandoned its second application, and the first and third applications resulted in the judgments that are the subject matter of this appeal. A.

Contempt Judgment No. 1 [ 14 ] WaterGroup filed an application on September 30, 2009 in the Court of Queen’s Bench asking for an order: 1. declaring that Novo and the named individuals were in civil or criminal contempt of Court; 2. sequestering the property of Novo; 3. committing the named individuals to jail; 4. in the alternative to sequestration or committal, levying a fine against Novo and each of the named individuals in an amount deemed to be appropriate; and 5. awarding costs on a full indemnity basis forthwith, and in any event of the cause.

In this application WaterGroup submitted that Novo was in contempt of the Order on the basis of certain specific activities, which are outlined in Appendix A hereto. [ 15 ] The matter was heard on October 6, 2009, and judgment was rendered on October 8, 2009. The learned Chambers judge, Zarzeczny J., found that Novo was in contempt of the Order, but did not impose a fine or penal sanction as he found that Novo had tried to comply with the injunction and, as a result, he did not attribute any bad faith to Novo.

He instructed Novo to remove “any and all promotional materials provided to WaterGroup customers” ( Contempt Judgment No. 1 . at para. 33), as a means of purging its contempt, and he awarded WaterGroup disbursements plus $7,500 for solicitor and client costs, payable within 30 days ( Contempt Judgment No. 1

at para. 34). [16] In arriving at his decision, the Chambers judge was required to interpret the Order. He did by defining the meaning of “soliciting”and “selling”: [25] What is clear from the terms of the order is that the focus of the activity enjoined is on the solicitation of WaterGroup'scustomers and their business by and through the various and alternative manners described. If a prohibition against doing any and allbusiness with WaterGroup's customers had been intended, different language would have been used. [26] To the extent that the original terms of para. (

a) of the order are vague or ambiguous, the corrigendum leaves no doubt about thenature of the activity intended to be prohibited and proffers various alternative commercial expressions of what the term “soliciting” and“directly or indirectly” were intended to mean and encompass. As Ball J. specifically states in the corrigendum; “Paragraph 90, clause (a)is intended to restrain and enjoin the defendants from soliciting the applicants' previous or current customers.

Soliciting encompassesselling, marketing and taking any initiative that might reasonably be construed as intended to establish a business relationship withanother person.”. He goes on to say: “The terms ‘serving, catering to or assisting’ derive their meaning from the term ‘soliciting’.” [27] While there may be many connotations or alternate senses to the use of the word “selling”, selling is not intended to reflect anabsolute prohibition against any sale and purchase howsoever initiated, but rather used in the sense or connotation of “selling thecustomer on using the company or its products”.

At the risk of belabouring the point, it is this connotation of “selling” as a function ofsoliciting that is clearly prohibited. The order does not prohibit any and all sales to former customers of WaterGroup irrespective ofwhether or not the contact was initiated by the customer or Novo. Only the latter is clearly prohibited by the terms of the interiminjunction. [Bolding in original, underlining mine.] B. Contempt Judgment No. 2 [17] On November 10, 2009, WaterGroup applied again for an order finding Novo in contempt. The evidentiary basis of thisapplication is outlined in Appendix B hereto.

The matter was heard on November 26, 2010 and the Court rendered its judgment onDecember 7, 2009. This time the learned Chambers judge, Scheibel J., did not find Novo to be in contempt. He adopted theinterpretation placed on the Order by Zarzeczny J., and found that the Order was clear. Nonetheless, he found that WaterGroup hadfailed to prove contempt beyond a reasonable doubt (Contempt Judgment No. 2 at para. 53). III.

Analysis [18] WaterGroup alleges that acts of contempt had occurred between September 1, 2009, the date the reasons for the Order were issued,and November 26, 2009, the date the second application was returnable. The defining issue in this appeal is whether the Order enjoiningthe activity of Novo was sufficiently clear, during this period, to support a finding of contempt. This is a question of law, reviewable ona standard of correctness (see: Housen v.

Nikolaisen, 2002 SCC 33 at para. 8, [2002] 2 S.C.R. 235). [19] It is self-evident that an enjoined party cannot insist on absolute precision in an injunction (see: Robert J. Sharpe, Injunctions and Specific Performance, looseleaf, 2nd ed. (Aurora, Ont.: Canada Law Book, 2009) at §6.180). The injunction must, however, give theenjoined party sufficient guidance by making it clear what activities are prohibited (see: New Roots Herbal Inc. et al. v. W-7 Clay Inc. etal. (1999), (SK KB), 176 Sask. R. 144 (Q.B.); affirmed (1999), (SK CA), 180 Sask.

R. 140(C.A.); and Baumung v. 8 & 10 Cattle Co-operative Ltd., 2005 SKCA 108, 259 D.L.R. (4th) 292). [20] In Baumung, the Court referred to numerous authorities to illustrate the statement that “in order to ground a contempt finding, acourt order must be clear or, to put the point in another way, that an ambiguity in an order should be resolved to the benefit of the allegedcontemnor” (at para. 27). Similarly, in Sonoco Ltd. v.

Local 433, Vancouver Converters of the International Brotherhood of Pulp,Sulphite and Paper Mill Workers (1970), (BC CA), 13 D.L.R. (3d) 617 at p. 621, the British Columbia Court ofAppeal wrote: “persons enjoined ought to be able to tell from the order what they may not do without having to decide whether they areacting lawfully or not.” Further, the very clarity of the court order must be proven beyond a reasonable doubt before a finding ofcontempt will be sustained (see: Bhatnager v.

Canada (Minister of Employment and Immigration), (SCC), [1990] 2S.C.R. 217 at p. 224). [21] A review of the jurisprudence reveals that courts tend to find an order unclear on one of three possible bases: (

i) the order is missing an essential detail about where, when or to whom the order will apply (see: Skybound Dev. Ltd. v. HughesProperties Ltd. (BC CA), [1988] 5 W.W.R. 355 (B.C.C.A.); and 1196303 Ontario Ltd. v. Glen Grove Suites Inc., (Ont. S.C.J.), [2009] O.J. No. 3270 (QL)); (ii) the order incorporates overly broad or unclear language (see: Re Distillery, Brewery, Winery, Soft Drink & Allied Worker's Union

604 and British Columbia Distillery Co. Ltd., (1975), (BC SC), 57 D.L.R. (3d) 752 (B.C.S.C.) at pp. 752-53; ButtconEnergy Inc. v. Ontario Lottery & Gaming Corp., 2010 ONSC 3056 at para. 39; and New Roots, supra at para. 16); and, (iii) external circumstances have obscured the meaning of the order (see: Bell ExpressVu Limited Partnership v. Torroni, 2009 ONCA85 at para. 25, 304 D.L.R. (4th) 431; Baumung, supra; and Québec (Commission des valeurs mobilières) c. Lassonde, [1994] J.Q. No.1073 (QL) (Que. C.A.) at para. 31).

In this case, the Order is not missing an essential element, but in my respectful view it is unclear and ambiguous because it incorporatesoverly broad and unclear language, and external circumstances have exacerbated that lack of clarity, such that a finding of contempt, inrelation to it, cannot be sustained. [22] An analysis of the clarity of the Order requires a consideration of which order governed the activities of Novo between September1, 2009 and November 26, 2009: (

i) the Order of Ball J., or (ii) the order of this Court. On this point, I agree with WaterGroup’ssubmission, at para. 41 of its Factum (C.A. File No. 1864), that “[t]he Defendants were required to obey the Injunction as it was issuedup until the date that it was amended by the Court of Appeal.” See: Canadian Transport (U.K.) v. Alsbury et al.; Tony Poje and 14Others and Attorney-General of British Columbia, (BC CA), [1953] 1 D.L.R. 385 (B.C.C.A.), affirmed (SCC), [1953] 1 S.C.R. 516; and Canada (Human Rights Commission) v. Canadian Liberty Net, (SCC), [1998] 1S.C.R. 626 at para. 51.

This Court’s modification of the Order could not on its own affect the result of this appeal. The application ofthis principle, however, only takes the Court so far. [23] From September 1 to September 9, 2009, the activities of Novo were governed by the reasons for judgment of Ball J. but, as heacknowledged, those reasons were ambiguous, and therefore could not support a finding of contempt. From September 9 to 15, 2009,Novo’s activities were governed by the reasons of Ball J. as modified by the Corrigendum.

From September 15, 2009 until November26, 2009, Novo’s activities were governed by the Order, which makes no reference to the Corrigendum. Even if I assume that WaterGroup’s failure to take into account the Corrigendum in the September 15th Order is not fatal to its position, I am still of the viewthat the Order is sufficiently ambiguous to preclude a finding of contempt, for three principal reasons. [24] First, every judge who has written in relation to this Order has recognized the need to provide clarifying comments with respect toit.

As I have indicated, Ball J. issued his own Corrigendum, narrowing the reach of the Order. In his judgment on the first contemptapplication, Zarzeczny J. found it necessary to interpret the Order before finding Novo to be in contempt (see: Contempt Judgment No. 1at paras. 25-27). Scheibel J. adopted the meaning given to the Order by Zarzeczny J. It was the order, as clarified by Zarzeczny J., thatScheibel J. found to be clear. Finally, this Court amended the terms of the Order to clarify what it perceived to be an ambiguity.

Whileit is not this Court’s order that governs, our modification of the language is an aspect of the record that speaks to the clarity andsufficiency of the original Order. [25] Second, in the case before us, the actions of the parties establish a history of confusion and contention regarding the meaning of theOrder—a fact this Court remarked upon when it modified the Order (2009 SKCA 144 at para. 41). In September 2009, both WaterGroupand Novo issued communications regarding what each believed to be the scope of the injunction.

Their views as to the meaning andscope of the injunction differed significantly and each believed the other’s communication was misleading. (See: Kirk Affidavit swornSeptember 29, 2009 at para. 8 and Fettes Affidavit sworn October 2, 2009 at para. 12.) There is evidence that Novo requestedclarification of the scope of the injunction on multiple occasions: (

i) on September 2, 2009, they requested that Ball J. clarify his reasons;(ii) on October 27, 2009, they requested clarification from Zarzeczny J. after he had issued his judgment [Letter on Queen’s Bench file:Q.B.G. No. 845 of 2009, J.C.

Regina]; (iii) in their submissions to Scheibel J., they maintained the position that the terms of the Orderwere unclear and ambiguous, and submitted that they “have attempted to deal with the uncertainty caused by the decision and are tryingto keep their business afloat while still being in compliance with the order” (Contempt Judgment No. 2 at para. 36); and (iv) in theirappeal of the injunction, they asked this Court to clarify the scope of the Order. [26] In Bell ExpressVu, supra at para. 28, the Ontario Court of Appeal cited with approval the following passage from JaskhsEnterprises Inc. v.

Indus Corporation, (Ont. S.C.J.), at para. 40: [40] ... [A] failure to comply with an order of the court will not be contempt if there are genuine, unresolved issues between the partieswith respect to the manner in which it is to be carried into operation. A finding of contempt will not be made for breach of an orderunless its meaning and requirements in the particular circumstances are clear and unambiguous...

The Court in Bell ExpressVu, supra ultimately concluded: “[t]here was too much scope for confusion regarding the actual terms of theNovember 16 Orders—as evidenced by the communications between the parties—to find the appellant in contempt” (at para. 28). [27] There is a difference between wilful and true misunderstanding, but given that each judge, who has considered the Order, modifiedits original terms, Novo’s persistence is indicative of the latter. While Zarzeczny J. found that Novo was in contempt, he did not imposea fine, in part, because he found that: (

i) Novo’s actions were “not taken in defiance of the court order”; and (ii) Novo’s “request of BallJ. for a clarification of his original order is some evidence of the good faith intentions of the defendants to identify the scope of the orderand comply with it” (Contempt Judgment No. 1 at para. 32).

[ 28 ] Third, the ultimate test of the clarity of a court order is a reviewing court’s capacity to apply the order to the facts. In this case, the ambiguity of the order makes its application to the facts problematic. [ 29 ] The first application to cite for contempt addressed the period from September 1, 2009 until October 6, 2009—the return date of the motion. The position of each of the parties in relation to the allegedly offensive activity is set out in Appendix A hereto. The activity falls into two categories: (

i) Novo contacting a customer before September 1, 2009 and then reacting to a call made from the customer, as a result of Novo’s prior initiative, on or after September 1, 2009; and (ii) a customer of WaterGroup, on its own initiative, contacting Novo on or after September 1, 2009. [ 30 ] In my respectful view, the inconsistency between the reasons of Ball J. and the Corrigendum, and the lack of clarity in the Corrigendum, make the certain and consistent application of the Order to these facts problematic.

The reasons contemplate some legitimate competition on the part of Novo and the named employees (apart from Mr. Fettes). The Corrigendum defines “serve” as being “useful to”, which appears to collide with allowing legitimate competition, but then speaks of prohibiting only “initiatives,” which appears to permit contact between Novo and customers as long as the customers were not solicited by Novo, and to narrow the scope of the Order. This Court’s capacity to apply the Order to these facts, therefore, is undermined by the Order’s failure to clarify the content of the prohibition against “serving”.

The definition of “serve” in its broadest sense would mean that any contact between Novo and WaterGroup customers would be enjoined, but if the term “serve” only enjoins contact initiated by Novo, none of the impugned activities in the first contempt application could support a finding of contempt. [ 31 ] The second contempt application addresses the period from October 6, 2009 until November 26, 2009—the return date of the notice of motion. This time the activity sought to be enjoined is Novo’s use of mass mailing devices to advertise its presence in the market.

Scheibel J. found that the conflicting affidavits prevented him from being satisfied beyond a reasonable doubt that clear proof existed that the terms of the injunction had been broken ( Contempt Judgment No. 2 at paras. 50-51). Scheibel J. also found that “internet email is the common form of communication and marketing in this industry” and that “[a]ny ban on all emails would put the defendants in the position of being unable to advertise effectively and would prevent them from competing in the industry” ( Contempt Judgment No. 2 at para. 17).

WaterGroup argued that Scheibel J. erred in law in making this statement, and further that, since there was no conflict on the fact of the use of these marketing devices in this case, any lack of clarity in the Order should not insulate this aspect of Scheibel J.’s decision from review. [ 32 ] In considering the clarity of a court order, it may be possible to sever certain aspects of the order found to be ambiguous from other parts found to be clear.

The difficulty in the second contempt application is that there is no distinct legal issue, regarding the use of mass mailing devices, which can be decided without considering what it means to “serve.” Thus, as with the first contempt application, the lack of clarity in the Order on this point is fatal to the second application to cite for contempt. [ 33 ] In short, lack of clarity in the Order and surrounding circumstances mean the contempt finding cannot be supported. Thus, the appeal from the decision of Zarzeczny J. is allowed.

While Scheibel J. found Novo not to be in contempt for reasons unrelated to the clarity of the Order, an appeal is from the result, not the reasons. IV. Conclusion [ 34 ] The appeal from Contempt Judgment No. 1 is allowed, and the appeal from Contempt Judgment No. 2 is dismissed, both with costs in the usual way on Column 2. DATED at the City of Regina, in the Province of Saskatchewan, this 9th day of December, A.D. 2010. ___ “ Jackson J.A.” ___________________ Jackson J.A.

I concur ___ “Lane J.A.” ______________________ Lane J.A. I concur __ ”Ottenbreit J.A.” __________________ Ottenbreit J.A. Appendix A Events giving rise to WaterGroup’s first application to cite Novo for contempt 1. Novo sponsored a Barbeque for a WaterGroup Customer WaterGroup alleged that on September 16, 2009 Novo sponsored a barbeque at Noble Trade premises (a WaterGroup customer) in Guelph, Ontario. A promotional flyer for the event, which identifies Novo as the host, was mailed to Noble Trade’s customers.

In response to WaterGroup’s allegations, Novo deposed that Noble Trade requested its sponsorship prior to the Order and they assented to the request on August 26, 2009. On the day of the Order, Novo contacted Noble Trade seeking to cancel the event, explaining that Novo could not attend because of the Order. Noble Trade did not cancel the event, which was held on September 16, but no representatives of Novo attended nor were any of its products displayed, and Novo did not contribute money to the event. 2. Novo’s interaction with Reeves Water Treatment WaterGroup alleged that (

i) between September 1 and 3, 2009, Dan Cyr, one of the named employees, visited Reeves Water Treatment (a WaterGroup customer) in Prince Edward Island; and (ii) Novo arranged to send Novo products to Reeves. In response, Novo deposed that Eustace Reeves, the principal behind Reeves Water Treatment, contacted it on August 26, 2009, and asked that a representative visit his facility, which Mr. Cyr did on September 1, 2009. On September 2, 2009, Mr. Reeves called Mr. Cyr and asked him to ship some equipment. On September 17, 2009, Mr. Reeves called Mr.

Cyr to say that he and his son would be visiting Cambridge, Ontario and wanted to see the Novo facility there, which they toured on September 21. 3. Attendance at Classic Water WaterGroup deposed that one of its employees, Mr. Mills, attended Classic Water (a WaterGroup customer) on September 22, 2009 in St. Eustache, Québec and was advised that Mr. Cyr had visited several Classic Water locations, for the purpose of making sales calls, and had delivered promotional product to Classic Water’s head office within the previous two weeks. In response, Novo deposed that Mr.

Cyr spoke with Classic Water on or about August 20, 2009 and a representative asked Mr. Cyr to visit him in Pickering, Ontario, which visit took place on August 26, 2009. Classic Water requested pricing information, which Mr. Cyr provided on or about September 11, 2009. 4. Email contact with Water Universe WaterGroup deposed that on September 10, 2009, it received an email with an attachment from Water Universe (a WaterGroup customer) meant for Novo. The attachment is an information form, filled out by Water Universe and providing Water Universe’s contact information.

The attachment reads “Thank you for considering IWT [Independent Water Tech, a division of Canature] as your supplier!” and offers to send a product catalogue, price list, free t-shirt and details of a promotional contest (winning a trip to Shanghai). Novo deposed that this form was provided to Water Universe on August 18, 2009. A representative of Water Universe called Novo on September 10, 2009 and asked for a price list and catalogue which Novo provided. There was no further contact with Water Universe. 5.

Novo hosted WaterGroup customers at their offices WaterGroup deposed that certain WaterGroup customers were attending Novo’s offices or plant in Cambridge. WaterGroup hired Mr. Green, the president of G&S Investigations, to observe the premises of Novo in Kitchener, Ontario and provide it with proof of these overtures. Mr. Green swore an affidavit with attachments detailing activities that took place on September 21, 2009. He identified a vehicle, with the wording “Jackson Water Conditioning”, arriving at the Novo premises and a male and female, believed to be Lorne and Connie Jackson, entering the building.

He also identified two males, believed to be Eustace and Eusty Reeves, entering the premises. In response, Novo stated that Lorne Jackson of Jackson Water Treatment called Novo’s representative, Mr. MacMillan on or about

September 10, 2009, and asked that the call be returned. When Mr. MacMillan returned the call, Mr. Jackson asked to see Novo’s offices. Mr. Jackson attended Novo’s premises on September 21, 2009, but there has been no further contact since. Novo also volunteered that Mr. Reeves called Mr. Cyr on September 17, 2009 and advised that he and his son wanted to see Novo’s facility, which they toured on September 21, 2009. 6. September 23, 2009 Fax WaterGroup attested that Novo sent a facsimile to the water conditioning industry, including WaterGroup customers.

The fax indicates that, while Novo is not able to take any initiative with the objective of soliciting the business of WaterGroup customers, the “order does not prevent anyone from choosing to do business with Canature North America Inc.” Mr. Fettes deposed that Novo sent the fax in response to WaterGroup’s communication with the water treatment industry [emphasis in original]. WaterGroup’s communication is attached to his affidavit and states “Defendants cannot solicit nor serve any previous or current WaterGroup customer ” [emphasis in original].

Novo deposed that it did not choose the parties to whom the fax was sent, but rather paid All Points Marketing to fax the notice to its mailing list. 7. Novo materials at Crane Supply Mr. Jackson deposed that in the week prior to September 24, 2009, he attended the business premises of Crane Supply (a WaterGroup customer) in both Regina and Saskatoon, where he saw Novo promotional materials at the check-out counters.

The promotional material was a coupon, featuring the Novo logo, offering $25 in savings on the purchase of any NovoSoft Water Softener or NovoClear Whole-House Filter, and providing space for companies to fill in their contact information. Novo replied that Don Matt of Novo was in contact with Crane Supply prior to September 1, 2009 and any contact since that date has been initiated by Crane Supply. The coupon was justified on the basis that it was given to plumbers who are customers of Crane and not of WaterGroup or Novo.

Appendix B Events giving rise to WaterGroup’s second application to cite Novo for contempt 1. October 13, 2009 email to water conditioning industry WaterGroup attested that Novo emailed the water conditioning industry (including WaterGroup and WaterGroup customers) encouraging customers to try Novo products via a limited time free freight offer. In substance, the email: (

i) contained pictures and contact information of several Novo employees; and (ii) referred to the experience of the Novo team and the quality of the Novo products. It stated “We are so confident that once you try our products you will see why they are the best on the market. To encourage you to try our products, take advantage of our limited time Free Freight offer”.

In reply, Novo stated that the email was sent on October 13, 2009, before Novo was aware of the contempt judgment of Zarzeczny J. and, in any event, it did not believe marketing emails were a violation of the injunction as they are generated by a third party from an opt-in list current in the industry. 2. October 29, 2009 email to WWMCA (Waterloo-Wellington Mechanical Contractors Association) mailing list WaterGroup deposed that Novo emailed the WWMCA mailing list inviting plumbing and mechanical contractors to attend Novo’s new product showcase in November.

WaterGroup created a customer loyalty program called the “Key Dealer Partnership Program”. There is an overlap between companies registered as Key Dealers and companies registered with the WWMCA. The following companies are members of both: Boyes Pumps & Water Treatment, Conestogo Mechanical Contractors Ltd., Dave Kenny Plumbing Ltd., Emke Schaab Climate Care Inc., Fast Plumbing & Heating Ltd., J.C. Waterworks Plumbing, Len’s Plumbing & Heating Ltd., Lodder Brothers Ltd., Nichols Plumbing 1993 Inc., Ron Beer Plumbing & Heating Ltd., and TMTP Consulting Inc.

The Key Dealers, who are members of the WWMCA and listed in Mr. Kirk’s affidavit sworn November 10, 2009, are “direct customers” of WaterGroup. The impugned email included pictures of Novo employees and invited all “Plumbing & Mechanical Contractors” to attend Novo’s New Product Showcase. The email stated that attendees would qualify for a special promo discount. In an affidavit sworn November 25, 2009, WaterGroup attested that Novo directly mailed Noble Trade, a WaterGroup customer, with an invitation to the Novo New Product Showcase in the same format as Novo caused to be sent to the WWMCA mailing list.

In response to Mr. Kirk’s affidavit of November 10, Novo made these statements: (

i) prior to the mailing, Novo removed all wholesalers who were customers of WaterGroup to ensure compliance with the order; (ii) the mailing is directed towards plumbers, who are not customers of WaterGroup because plumbers do not purchase directly from WaterGroup; (iii) the plumbers and contractors who received the email are not direct customers of WaterGroup but rather buy from wholesalers; (iv) the email was sent by a third party and the mailing list is not controlled by Novo; (

v) the Key Dealers were never direct customers of WaterGroup but were Petwa customers; (vi) although Conestogo Mechanical Contractors Ltd., Dave Kenny Plumbing Ltd. and Ron Beer Plumbing & Heating Ltd. had accounts at WaterGroup, these accounts were to buy replacement parts, not to “directly buy product”.

3. Novo new product showcase on November 19, 2009 Mr. Green, the President of G&S Investigations, attested that he observed representatives of W.C. Weinhardt Plumbing & Repair, a customer of Petwa and WaterGroup, attend this event at the premises of Novo in Kitchener, Ontario on November 19, 2009.