Docket: 1901 Keith Barton Appellant (Defendant) - v. -, 2011 SKCA 96

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2011 SKCA 96 Date: 20110815 Between: Docket: 1901 Keith Barton Appellant (Defendant) - and - Potash Corporation of Saskatchewan Inc. and Potash Corporation of Saskatchewan Limited Respondents (Plaintiffs) Coram: Vancise, Jackson and Richards JJ.A. Counsel: Gary G.W. Semenchuck, Q.C. for the Appellant (Defendant) Neil B. Fisher for the Respondents (Plaintiffs)

Appeal: From: 2010 SKQB 35 Heard: November 12, 2010 Disposition: Appeal allowed Written Reasons: August 15, 2011 By: The Honourable Mr. Justice Vancise In Concurrence: The Honourable Madam Justice Jackson The Honourable Mr. Justice Richards Vancise J.A. I.

Introduction [ 1 ] The threshold issue on this appeal is whether the Chambers judge erred in failing to find that the voluntary discontinuance of an action in which the plaintiff had obtained an interim injunction and given an undertaking to abide by and pay damages ordered by a court, is an admission that the plaintiff improperly obtained the injunction meriting a determination of whether the defendant suffered damages as a result of the granting of the injunction.

Specifically, the appellant Barton contends that the consent interim injunction which, with some exceptions, restrained him from disclosing information concerning the business affairs of the respondent PCS and the subsequent voluntary discontinuance of the action by PCS is an admission that PCS improperly obtained the injunction which he claims destroyed his reputation, his health and caused him economic loss with the result that he is entitled to damages. [ 2 ] The Chambers judge found that the voluntary discontinuance of the action, some 16 years after it was filed and some six years after the interim injunction had been set aside, did not constitute an admission of improperly obtaining the interim injunction and, after considering all the circumstances surrounding the granting of the injunction, refused to order an assessment of damages and made an order only with respect to Barton’s entitlement for some costs. [ 3 ] In my opinion, the Chambers judge erred in failing to order the assessment of damages for the reasons that follow.

II. Facts [ 4 ] The facts in this case have been set out in great detail by the Chambers judge but a somewhat long resumé will be useful in the understanding of the issues raised on this appeal. [ 5 ] Barton was a Vice-President and General Counsel for PCS (Crown) for some 10 years from 1979 to 1988.

He resigned from his employment in 1988 citing lack of enough work to justify the continuation of the positions of General Counsel and a Senior Executive Officer. [ 6 ] He later contended that the reason he resigned was his concern about the activities of PCS Crown’s President, Charles Childers, in certain dealings with the price of potash which he (Barton) believed violated the Sherman antitrust laws. [ 7 ] After leaving PCS, Barton actively sought employment and consultancy work in large part based on his asserted knowledge of what he contended were Childers’ and other senior executives’ illegal acts of price fixing.

Notwithstanding his resignation, Barton threatened to make it known that concerns about antitrust disclosure were the reason for his constructive dismissal and indeed commenced an action claiming damages for denial of severance pursuant to company policy or constructive dismissal. That action was settled and Barton received $167,500 and executed a release of claims against PCS. [ 8 ] After the settlement of the action for wrongful dismissal, Barton renewed his allegations against PCS and its senior executives.

He wrote to members of the Board of PCS alleging certain wrongdoings by senior management but no action was taken. He contacted private law firms in the United States who were engaged in litigation against certain members of the potash industry, including PCS, and agreed to provide certain information of these alleged antitrust pricing activities.

[9] PCS became concerned about Barton’s activities by reason that, in its opinion, such activities and disclosure related to informationreceived by him in his capacity as General Counsel and Vice-President would be a breach of solicitor-client privilege and/or a breach ofhis fiduciary duties and obligations. [10] In 1993, PCS sued Barton in Canada first in British Columbia and later in Saskatchewan after Barton moved back to the province.

PCS obtained an interlocutory injunction in British Columbia which was later ordered by the Court of Queen’s Bench to be effective inSaskatchewan (see Potash Corp. of Saskatchewan Inc. v. Barton, 2009 SKCA 7, [2009] 3 W.W.R. 1 at paras. 6 and 7). In November2003, a consent interim injunction was granted in Saskatchewan (see Q.B. 3614 of 1993 at para. (a)).

Barton filed a statement of defencein which he denied that all communications made to him during his employment at PCS were made in his capacity as a lawyer and thathe breached solicitor-client privilege. [11] Barton brought an application to set aside the interim injunction in December of 1993. That matter was adjourned and the thenChief Justice of the Court of Queen’s Bench ordered the entire file sealed until a motion was heard. That motion was never heardalthough a renewed motion was brought seven years later to set aside the injunction but was dismissed.

In the interval, the U.S. antitrustclass action proceeded in the U.S. and Kyle J. of the United States District Court made certain findings concerning Barton’s ethical dutiesand responsibilities. In short, he found him to be unethical and disqualified certain counsel who had been dealing with Barton fromcontinuing in the action. [12] A number of other legal skirmishes between Barton and PCS took place in the U.S. between 1994 and 2000. In 2001, this Court setaside the decision refusing the application to unseal the file and returned the matter to the Court of Queen’s Bench.

Again, in 2002,Madam Justice Hunter set aside the order sealing the file and, in 2003, Barton applied for and was granted an order setting aside theinterim injunction which had been granted against him 10 years earlier. [13] Barton moved to dismiss the action for want of prosecution in 2007. That application was dismissed and confirmed by this Court in2009. [14] Finally, PCS discontinued the action in March of 2009 and Barton almost immediately filed this application in July of 2009. Theapplication was dismissed save with respect to certain issues pertaining to costs.

It is from that decision that this appeal is taken. III.

Decision of the Chambers Judge [15] The Chambers judge identified the issue as whether the voluntary discontinuance of the action was an admission by PCS that it hadno right to obtain the injunction with the result that Barton was entitled, pursuant to the undertaking made at the time of the issuance ofthe injunction, to an assessment of damages he suffered as a result of the granting of the interlocutory injunction. [16] The Chambers judge noted that Barton relied on the majority decision of the Appellate Division of the Alberta Supreme Court inBird Construction Co. Ltd. v.

Paterson and Brotherhood of Painters, Decorators, Paper Hangers of America, Glass Workers Local 1725(1960), (AB CA), 23 D.L.R. (2d) 182 and the comments on p. 185 where the majority found that the voluntarydiscontinuance of the action is an admission that the injunction was wrongly asked for. [17] Barton also relied on Vieweger Construction Co. Ltd. v. Rush & Tompkins Construction Ltd., (SCC), [1965] S.C.R.195 and, in particular, the comments of Mr. Justice Spence, speaking for the Court, who, at p. 207, quoted with approval and adopted thestatement by Cotton L.J. in Griffith v. Blake (1884), 27 Ch.

D. 474 at p. 477: … the rule is, that whenever the undertaking is given, and the plaintiff ultimately fails on the merits, an inquiry as to damages will begranted unless there are special circumstances to the contrary. [emphasis in original] [18] The Chambers judge rejected those submissions and chose rather to rely on the dissenting opinion of Porter J.A. in BirdConstruction where he stated, at pp. 188-189: The undertaking does not entitle the defendants to damages unless the Court is satisfied that the injunction ought not to have beengranted. In Re Hailstone, Hopkinson v.

Carter, Farwell L.J. says at p. 880: "The undertaking as to damages which ought to be given onevery interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been

occasioned by an interlocutory injunction, which, on the hearing, is found to have been wrongly asked for, justice requires that suchdamage shall fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so." And Kennedy L.J. at p. 881 says: "It strikes me that it is convenient, as a rule, that when an interlocutory application for aninjunction in such terms as were contained in the present order is granted, the application for damages, because the injunction ought notto have been obtained, should be made at the trial." [Emphasis in original] The defendants are entitled to move in the discontinued action to have it determined: (1) whether the injunction was properly orimproperly granted; and (2) if it is found that it was improperly granted, to have their damages assessed upon proof.

But it is suggested that the plaintiff by filing a discontinuance has made an admission that his injunction was not properly granted. Tosupport this proposition reference is made to a dictum of Murphy J. in B.C. Interior Vegetable Marketing Board v. Kamloops ProduceCo., (BC SC), [1938] 2 D.L.R. 797, 52 B.C.R. 523 at p. 525: "There is no need for a hearing to determine that theinjunction was wrongly asked for. Plaintiffs by discontinuing the action admit this is so." On examination, it is clear that the case wasnever intended to support the proposition for which it is now quoted.

In the judgment of Murphy J. he states that the plaintiff admitted tohim on the hearing that he was not entitled to maintain the action because, if it existed at all, the right was in the Attorney-General andnot in the plaintiff. It will thus be seen that it was not the filing of the discontinuance that formed the admission. It was the admission toMurphy by the plaintiff that the injunction had been wrongly obtained. There was, therefore, no need to make the inquiry of that aspectof the defendant's rights because the error had already been established. Reference is made to 43 Corp. Jur.

Sec. s. 285, p. 1062 in terms as follows: "Ordinarily, however, where plaintiff obtained aninjunction and where thereafter plaintiff discontinues the action without defendant's consent, such discontinuance constitutes anadjudication that plaintiff was not entitled to the injunction." This is a bare statement by an unknown author in another country,unsupported by a precedent or authority and not tested by reason.

It ought not to serve as a guide to this Court in reaching its conclusionsbecause its soundness cannot be weighed. … It is proposed that we should now deprive the plaintiff of his right to resist a claim for damages by denying him the right to assertnow that the injunction was properly obtained because he has done something that he was entitled to do, namely, discontinue in keepingwith the plain words of Rule 265(1).

If that proposal is followed, we will deprive the plaintiff of an answer to the defendants' claim fordamages and give the defendants a substantive right to recover from the plaintiff damages to which they are not entitled if, in fact, theinjunction was properly issued. [19] The Chambers judge found the dissenting opinion of Mr. Justice Porter represents the current judicial practice.

He took somecomfort from the fact that, in Vieweger Construction, the Supreme Court of Canada accepted the proposition that, in somecircumstances, no damages will be awarded unless there are special circumstances to the contrary. [20] The Chambers judge then relied on the decision of Peter Kiewit Sons Co. Ltd. v. North Pacific Roadbuilders Ltd., 2005 BCSC1586, 56 B.C.L.R. (4th) 114 in which Mr. Justice Silverman found, relying on comments by I.C.F.

Spry in The Principles of EquitableRemedies, 4th ed. (Agincourt, Ont.: Carswell, 1990) at p. 640 and David Bean and Isabel Parry in Injunctions, 8th ed. (London: ThomsonSweet & Maxwell, 2004) at s. 6.07, that the filing of a discontinuance in proceedings before they reach a final hearing is sometimesappropriate and will not lead automatically to a hearing on damages suffered or a result of the obtainment of the injunction. JusticeSilverman found that the order of such a hearing is discretionary. In so finding, he also referred to Cheltenham & Gloucester BuildingSociety (Formerly Portsmouth Building Society) v.

Ricketts and Others, [1993] 1 W.L.R. 1545, [1993] 4 All E.R. 276 (C.A.) at pp. 1556and 1559. [21] The Chambers judge concluded, following the logic in Peter Kiewit, that the filing of a notice of discontinuance does not in everycase constitute an admission or an irrebuttable presumption that the interlocutory injunction was improperly granted and decided that hewas entitled to take into account all of the circumstances including the conduct of the parties, the history of the litigation, terms of theinjunction and why it was granted in order to determine whether Barton was entitled to a reference to assess damages.

He said twoquestions must be asked:

(1) To what extent did the injunction impose restrictions on Barton; and,

(2) Were those restrictions reasonablynecessary. [22] With that, he embarked upon a consideration of the circumstances including the long and tangled relationship and legal proceedingsthat existed between PCS, in its previous identity known as PCS (Crown) and PCS in its current corporate identity, and Barton. In theresult, he found: (

a) that the interlocutory injunction was properly granted; (

b) that it did not extend beyond what was reasonablynecessary to restrain unlawful conduct; and, (

c) that Barton was not entitled to a hearing to determine the damages, if any, that he(Barton) suffered as a result of the granting of the interlocutory injunctions and simply awarded him some of the costs incurred in theseproceedings. IV. Analysis

[ 23 ] It is common ground that the Court will not look with favour on any attempt by a plaintiff to resile from the undertaking that the plaintiff has given to abide by any order the Court may make as to damages sustained by the defendant as a result of the granting of the interlocutory injunction. It is also uncontestable that the undertaking to pay those damages is given to the Court granting the interlocutory injunction and not to the defendant.

Barton argues the Chambers judge erred in not finding that the discontinuance of the action constituted an admission that PCS had wrongfully sought the interim injunctions and that Barton was not entitled to an order for a reference to determine what damages he suffered as a result of the granting of the interlocutory injunction.

In particular, Barton contends the Chambers judge erred in basing his decision on the dissenting reasons of Porter J.A. in Bird Construction and relying on Peter Kiewit . [ 24 ] In deciding the issue of the obligation of a plaintiff to pay damages pursuant to an undertaking to pay damages, it is useful to set out the development of the law applicable to requiring a plaintiff to file an undertaking to pay damages suffered by a defendant as a result of the granting of the interlocutory injunction.

It is also useful to examine the issue of the effect of the filing of a discontinuance or the dismissal of a claim on the merits where an interlocutory injunction has been granted – does it automatically result in the conclusion or admission that the plaintiff was not entitled to the injunction and, as a result, the defendant is entitled to a reference to determine the damages he or she suffered or is the decision to hold a reference discretionary? [ 25 ] The origin and practice of requiring an undertaking as to damages from a plaintiff seeking an interlocutory injunction originated in the mid-nineteenth century.

Initially, it only applied in the case of ex-parte injunctions but it was later extended to all interlocutory injunctions. For example, see Smith v. Day (1882), 21 Ch. D. 421 (C.A.) at p. 424, per Jessel M.R. The English practice was followed in Canada late in the last century. The earliest recorded instance of an undertaking being exacted of a plaintiff was in Chappell v. Davison (1856), 8 De. G.M. & G. 1, 44 E.R. 289 (H.L.) . [ 26 ] The nature of the undertaking was described by Diplock L.J. in F. Hoffmann-La Roche & Co. AG and others v.

Secretary of State for Trade and Industry , [1974] 2 All E.R. 1128 (H.L.) at p. 1150 as: The court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damages. All it can do is to refuse the application if he declines to do so. The undertaking is not given to the defendant but to the court itself. Non-performance of it is contempt of court, not breach of contract, and attracts the remedies available for contempts; but the court exacts the undertaking for the defendant’s benefit.

It retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so; but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an enquiry into damages at which principles to be applied are fixed and clear.

The assessment is made on the same basis as damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant, that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction. See Smith v. Day [ (1882), 21 Ch.

D. 421 ], per Brett L.J., [at p. 427]. [Emphasis in original] [ 27 ] The Supreme Court of Canada considered the issue in Vieweger Construction, supra where Spence J., on behalf of the Court, stated, at pp. 207-208: It would appear that the proper test was laid down by the Court of Appeal in Griffith v. Blake [ (1884), 27 Ch. D. 474 .]. There, the Court of Appeal was concerned with a dictum of the late Master of the Rolls in Smith v. Day [ (1882), 21 Ch.

D. 421 .], to the effect that the undertaking as to damages only applies where the plaintiff has acted improperly in obtaining the injunction, and all the members of the Court expressed dissent with that view. Baggallay L.J. said, at p. 476: If the Defendants turn out to be right, it appears to me that they can, under the undertaking, obtain compensation for all injury sustained by them from the granting of the injunction.

And Cotton, L.J., said at p. 477: But I am of opinion that his dictum is not well founded, and that the rule is, that whenever the undertaking is given, and the plaintiff ultimately fails on the merits, an inquiry as to damages will be granted unless there are special circumstances to the contrary. (The italicizing is my own.) Counsel for the respondent company before this Court agreed to such statement of the principle, but submitted that in this case there were special circumstances as it had not been shown that the respondent company obtained the injunction by any perjury or misrepresentation and that since two judges in the Trial Division and three judges in the Court of Appeal were of the opinion that the respondent company was entitled to its injunction, if this Court were of the other view it would be an example of judicial error and not any misrepresentation by the respondent company which caused the injunction to issue.

I am of the opinion that these circumstances do not constitute such "special circumstances" as were in the mind of Cotton L.J. There are examples of plaintiffs who are public bodies and who acted in the public interest to hold the situation in status quo until the rights were determined. There are other cases where the defendant, although he succeeded upon technical grounds, certainly had been guilty of conduct which did not move the Court to exercise its discretion in his favour. In these cases, the Court has found the "special circumstances" which entitled it to refuse a reference as to damages.

Here, the respondent company throughout has insisted that very considerable items of heavy construction machinery be held so the defendant could not use them and therefore make any profit from them, and that situation continued for months until the respondent company's use for the equipment ended. I am of the opinion that it is

an ordinary case of an injunction granted upon a plaintiff's application and upon the plaintiff's undertaking, and that the plaintiff shouldbe required to make good its undertaking. I would, therefore, direct that there be a reference in the ordinary course of procedure in theProvince of Alberta to determine such damages and that the appellant company be granted judgment for such damages and the costs ofthe reference. [Emphasis added] [28] Vieweger Construction has been followed in Canada Coal Co. v. BP Resources Canada Ltd., (BC SC), [1991]B.C.J. No. 329 (QL), 54 B.C.L.R. (2d) 12 (B.C.

S.C.) and Delrina Corp. (c.o.b. Carolian Systems) v. Triolet Systems Inc., [1998] O.J.No. 2967 (Ont. C.J.) (QL). [29] The issue of whether a plaintiff who has voluntarily discontinued an action while the injunction was still in place is considered tohave no right to an injunction and has been considered by a number of courts and academics in Canada. [30] Robert J. Sharpe (now Mr.

Justice Sharpe of the Ontario Court of Appeal) in Injunctions and Specific Performance, looseleaf(Aurora, Ont.: Canada Law Book, 2010) states, at para. 2.513: … It has been held that a plaintiff who discontinues the action prior to trial is taken to admit to having no right to an injunction and anassessment of damages will be ordered. … [31] A.A.S.

Zuckerman in The Undertaking in Damages – Substantive and Procedural Dimensions (1994), 53 Cambridge L.J. 546states, at pp. 567-68: … We may therefore say that a plaintiff who obtains an interim injunction commits himself to establishing its necessity by proving hisclaim. If applicants were not held to this commitment, a plaintiff would be able to obtain the benefit of an interim injunction and avoidany risk of compensation by simply discontinuing his action or causing it to be dismissed other than on the merits.

We may conclude,therefore, that if the plaintiff fails to proceed to trial, by abandoning his action or by allowing it to be dismissed for want of prosecutionor for whatever cause within his control, he will thereby ordinarily have forfeited any claim to the legitimacy and propriety of theinterference with the defendant’s substantive rights and may be held liable in damages. [32] The first judicial consideration of the effect of filing a discontinuance by the plaintiff while an injunction was still in force isNewcomen v. Coulson (1878), 7 Ch. D. 764.

In that case, it appears the Court proceeded on the basis that the injunction had beenterminated because it directed a reference to assess damages on the plaintiff’s undertaking. Malins V.C. stated in relevant part, at pp.765-766: I cannot accede to Mr. Higgin's argument, that a Plaintiff can deprive a Defendant of his right to damages under the Plaintiff'sundertaking by discontinuing his action.

If this suit had come to a hearing I should have considered that the proper time for theDefendants to claim damages under the Plaintiff's undertaking, and if they had not done so, I should have considered their right waived....

Here the Plaintiff has deprived the Defendants of their proper opportunity to ask for damages, but it would be a most dangerousdoctrine to hold that he can thus evade his liability. … There must be a reference as to damages in the ordinary way. [33] The issue of whether a defendant is entitled to a reference for an assessment of damages after a voluntary filing of a notice ofdiscontinuance by the plaintiff was, as noted above, dealt with directly in Bird Construction. There, the majority stated, at pp. 185-186: The defendants have asked for an order that the action be dismissed.

As the action has been effectively terminated by the filing of adiscontinuance, such an order is unnecessary. It is, I think, clear that the plaintiff by discontinuing the action has admitted that it had noright to the relief claimed. In B.C. Interior Vegetable Marketing Bd. et al. v. Kamloops Produce Co., (BC SC), [1938]2 D.L.R. 797, 52 B.C.R. 523, Murphy J. at p. 525 says: "There is no need for a hearing to determine that the injunction was wronglyasked for. Plaintiffs by discontinuing the action admit this is so." And in 43 Corp. Jur.

Sec., p. 285, it is stated that ordinarily "where plaintiff obtained an injunction and where thereafter plaintiffdiscontinues the action without defendant's consent, such discontinuance constitutes an adjudication that plaintiff was not entitled to theinjunction". There will be cases where the wrong or threatened wrong which has been enjoined will disappear and make the continuationof the injunction unnecessary.

In such cases, the proper procedure is to apply to have the injunction dissolved and the Court will have theopportunity to determine if the plaintiff's right to the injunction is either conceded or established, in which cases the plaintiff would beentitled to be relieved of his undertaking. If that right has not been made out, the defendant would then or thereafter be entitled to havehis damages assessed. I think it is a salutary rule to insist that a discontinuance is an admission that the injunction was wrongly asked forwhere an action is discontinued while an injunction is undischarged.

In this way the Court is assured that its processes are not abused. [34] The majority also referred to Wm. Halliday Contracting Co. Ltd. v. Nicols, (ON SC), [1952] 4 D.L.R. 75 (Ont.H.C.) where, in a case somewhat similar to the facts in Bird Construction, Mr. Justice Gale stated, at pp. 77-78:

It is said that here there is no evidence to suggest that the defendants are going to be able to show any actual loss by reason of thegranting of the injunction. I do not pass upon that contention except to say that Mr. Dubin does mention matters which may support anaward of compensation, and he also adds that if a reference does take place, he will argue that what has occurred amounts to an abuse ofthe process of the Court and qualifies his client to recover punitive or exemplary damages.

Again, I do not intend to express myself onthat point except to say that plaintiffs ought to be made to understand that ex parte interim injunctions are not to be sought lightly or forimproper purposes, and that if they obtain that remedy, they do so at their peril so far as damage is concerned in the event that it isshown that it was not the product of good faith. [35] The filing of a notice of discontinuance in and of itself does not in every case constitute either an admission or an irrebuttablepresumption in law that the additional interlocutory injunction was wrongfully obtained or the undertaking is enforceable and the onlystep is to order damages. [36] The issue therefore is whether there is a discretion to grant or to refuse an application for a reference to assess damages pursuant tothe undertaking given to the Court on behalf of the plaintiff and, if so, whether it was properly exercised. [37] Thus, in the ordinary course of things, an unsuccessful plaintiff and a plaintiff that discontinues an action will generally be requiredto pay damages in accordance with the undertaking unless there are “special circumstances” and, as noted above, the Courts generallywill not be sympathetic towards plaintiffs who resile from the obligation and undertaking.

To resolve this issue, it is necessary toexamine the evidence before the Chambers judge to determine whether any “special circumstances” existed which would disentitleBarton to a hearing to assess damages he suffered as a result of the granting of the interlocutory injunction. [38] The question, simply put, is whether this is a case where it is appropriate to depart from the strong presumption that a party whogives an undertaking to obtain an interlocutory injunction should be held to it.

The Chambers judge, in my opinion, erred in concludingthat the Court was to consider whether or not the injunction was properly granted “having regard to all of the circumstances including theconduct of the parties, the history of the litigation between them, the terms of the interim injunction, why it was granted and why it wasdiscontinued.” The issue is not whether it was properly “granted.” The issue is whether there are “special circumstances,” ascontemplated in Vieweger Construction, disentitling the defendant to a reference to determine the damages, if any, he or she suffered as aresult of the granting of the interlocutory injunction. [39] The Ontario Court of Appeal recently dealt with this issue in United States of America v.

Yemec, 2010 ONCA 414, 320 D.L.R. (4th)96. The Court referred to Vieweger Construction and noted that the Court had elaborated on what constitutes special circumstances inGu v. Tai Foong International Ltd. (2003), (ON CA), 168 O.A.C. 47 (Ont. C.A.) where it stated that the discretionto relieve a party from its undertaking as to damages is a narrow one and that there is a strong presumption in favour of an inquiry (para.70); and, affirmed the statement in Nelson Burns & Co. v. Gratham Industries Ltd. (1987), 25 O.A.C. 89 (Ont.

C.A.), at paras. 10-11 ofNelson: [10] Since the decision of the Supreme Court of Canada in Vieweger an important change has taken place in the law with respect tointerlocutory injunctions. As a result of a decision of the House of Lords in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396,the balance of convenience test has largely displaced an earlier view that an applicant could obtain an interlocutory injunction only if hecould show a strong prima facie case.

Whatever the differences may be between the two standards it is now plain that in Ontariointerlocutory injunctions are now easier to obtain than was the case prior to the American Cyanamid case. [11] Because of this change and because of the number of such injunctions that are sought it is appropriate to emphasize the seriousnature of the undertaking to pay damages which is a condition of the issuance of the interlocutory injunction.

In the ordinary course theunsuccessful plaintiff must understand that he is obliged to pay damages in accordance with his undertaking without quibble and courtsgenerally will be unsympathetic towards those who seek to resile from such an obligation. [40] Peter Kiewit is clearly distinguishable on the facts. There, the parties filed an agreed statement of facts stating that the plaintiffdiscontinued the action for the purpose of facilitating settlement negotiations and at no time admitted liability.

That situation does notexist here. [41] In this case, the action was discontinued some six years after the interlocutory injunction was set aside and long after the reason forthe commencement of the actions, preventing Barton from testifying in the antitrust action brought against PCS and others, has ceased toexist.

Thus, the reason for the discontinuance had nothing to do with the impecuniosity of Barton and everything to do with the fact thatthe threat posed by Barton testifying in or providing evidence about price fixing in the Sherman antitrust actions no longer posed any riskto PCS and it was pointless to proceed to trial. [42] It is clear from the pleadings that damages were never the primary reason for the obtainment of the injunctions. The primarypurpose was to prevent Barton from divulging information about certain alleged price fixing in the antitrust actions.

The fact that thethreat of the antitrust action has passed should not disentitle Barton to relief. The issue is not whether PCS continued to need the

injunction but rather whether there are “special circumstances” disentitling Barton to an inquiry with respect to damages. [ 43 ] None of the allegations in the statement of claim were proven by reason that the respondent PCS never proceeded to trial. [ 44 ] The Chambers judge relied principally on the following reasons for refusing to assess damages and to permit PCS to resile from its undertaking: (

a) that the injunction was granted to prevent Barton from disclosing certain matters pertaining to PCS’s affairs that were subject to solicitor-client privilege in litigation brought against PCS and other potash producers for breaches of US antitrust laws; (

b) that the reason for obtaining the interlocutory injunction was to prevent Barton entering into a contract with counsel acting against PCS, his former employer, and other potash producers to act as a consultant; (

c) that PCS presented a strong prima facie case when it obtained the injunction in British Columbia and later in Saskatchewan; (

d) the injunction was not limited to providing information to US lawyers under what was known as the Millstein Cohen Contract but against all other efforts by Barton to benefit financially from the sale of information about the business affairs of PCS to any person and restrained Barton from any contract or employment with the US litigants in any way related to potash industry action that would have placed him in a conflict of interest against his client and former employer, PCS; (

e) the injunction enjoined Barton from doing only what his professional and fiduciary obligations required him to refrain from doing in any event, that is disclosing information concerning the business of PCS. [ 45 ] The Chambers judge concluded that such disclosure would breach solicitor-client privilege, place Barton in a conflict of interest or breach his fiduciary obligations and that, in his opinion, the interim injunction was properly obtained and did not extend beyond what was reasonably necessary to restrain unlawful conduct that had occurred and was likely to continue. [ 46 ] Finally, he found that the reason PCS discontinued the action against Barton was that any relief it could have obtained as a result of proceeding against Barton had “been rendered meaningless” because of his impecuniosity and the “rational thing to do was to discontinue the actions.” He also noted that Barton himself, some nine years ago, noted that the potential fallout at that stage had no great value.

That, however, is not the issue. The issue, simply put, is are there “special circumstances” as described by the Supreme Court of Canada which would entitle PCS to resile from its undertaking or is this just an ordinary action with the consequences that flow from obtaining an interlocutory injunction. Those special circumstances are narrow and have never been defined. [ 47 ] In an annotation to Nelson Burns, supra , Mr.

Paul Bates, of the Law Society of Upper Canada, argues that a reasonable test of special circumstances can be derived from the fact that the power to grant the injunction is based on the Court’s equitable jurisdiction and, in his opinion, a determination of whether “special circumstances” exist should be based on equitable principles and whether the plaintiff can make out a defence in equity to the damages claimed by the defendant pursuant to the undertaking. [ 48 ] Following this line of reasoning, the only special circumstances PCS could rely on are defences in equity, such as fraud, misrepresentation, estoppel, waiver, or laches (in this case, laches would apply to PCS and not Barton).

Barton moved expeditiously to bring the request for a reference to assess damages after PCS filed the notice of discontinuance. PCS took no action to obtain the relief it claimed in the action including, among other things, a permanent injunction. While this argument is interesting and somewhat attractive, it is not entirely persuasive and “special circumstances,” although narrow in scope, could encompass considerations not limited to formal equitable relief. [ 49 ] Barton argues there are no special circumstances which would excuse the enforcement of PCS’s undertaking.

None of the equitable defences apply, there is no estoppel, laches, waiver, fraud, or misrepresentation. But, it is worth noting as well that PCS filed no evidence on this application with respect to the reason for discontinuing the action, except Barton’s impecuniosity and the fact that it was pointless to pressure him because the Queen’s Bench file was unsealed and the information generally available and that the US actions were long resolved. These circumstances, in my opinion, do not constitute special circumstances as contemplated by Vieweger Construction .

[50] Barton contends the Chambers judge erred in his consideration of the circumstances surrounding the obtainment of the interiminjunction. Barton argues that PCS did not prove any of the allegations in the statement of claim which would have supported thegranting of the injunction. In particular, he argues that the Chambers judge erred in stating that he, Barton, was only enjoined fromdoing that from which he was prevented from doing because of solicitor-client privilege.

There is, however, no uncontested evidence onwhich to base that statement because the matter never was determined at trial. [51] Barton was, on his own evidence, employed in three capacities by PCS (Crown). He was General Counsel, Vice-President andSecretary of the Board of PCS (Crown) at various times. There is no uncontradicted evidence from PCS or PCS (Crown) about thenature of the capacity in which Barton obtained information that PCS and PCS (Crown) so desperately wanted to prevent him fromtestifying to or any evidence dealing with the capacity he was acting in when he received such evidence.

That is, did he receive theevidence from Mr.

Childers, the President of PCS (Crown) and later PCS, about alleged price fixing in his capacity as General Counsel,at which time Childers would have sought his legal advice, or in some other non-legal capacity? [52] The evidence, according to Barton, is that at no time did Childers seek his advice with respect to these matters and, in fact, thereason for Barton tendering his resignation is that his legal advice was not being sought. [53] There is no uncontested evidence that Childers was seeking Barton’s legal advice on matters subject to the antitrust litigation asGeneral Counsel.

Barton attests that the impugned information was received by him in his capacity as Vice-President or Secretary ofPCS (Crown) and that, arguably, solicitor-client privilege would not apply and that, if it did, it (

a) did not enure to the benefit of PCS; (b)was waived; or (

c) was “criminal activity” exempt. None of this has been resolved. It may well be that as a director, for the period oftime that he was a director of PCS (Crown) or one of its subsidiaries, he had a fiduciary responsibility with respect to certain informationwhich he received but, again, there is no satisfactory evidence with respect to that. [54] The Supreme Court of Canada considered the concept of solicitor-client privilege in Solosky v. Canada, (SCC),[1980] 1 S.C.R. 821. Mr.

Justice Dickson discussed the concept of privileged communications between a solicitor and his client in theseterms, at p. 835: There are exceptions to the privilege. The privilege does not apply to communications in which legal advice is neither sought noroffered, that is to say, where the lawyer is not contacted in his professional capacity. … [55] Solicitor-client privilege by corporate in-house counsel who act in a legal capacity was considered by Lord Denning in AlfredCrompton Amusement Machines Ltd. v.

Commissioners of Customs and Excise (No. 2), [1972] 2 All E.R. 353 (C.A.), at p. 376-377: … It does sometimes happen that such a legal adviser does work for his employer in another capacity, perhaps of an executive nature. Their communication in that capacity would not be the subject of legal professional privilege. So the legal adviser must be scrupulous tomake the distinction. Being a servant or agent too, he may be under more pressure from his client. So he must be careful to resist it.

Hemust be as independent in the doing of right as any other legal adviser. [56] The Crompton decision of Lord Denning has been cited with approval and followed by the Supreme Court of Canada in R. v.Campbell, (SCC), [1999] 1 S.C.R. 565 in which the Court stated, at para. 50: It is, of course, not everything done by a government (or other) lawyer that attracts solicitor-client privilege.

While some of whatgovernment lawyers do is indistinguishable from the work of private practitioners, they may and frequently do have multipleresponsibilities including, for example, participation in various operating committees of their respective departments. Governmentlawyers who have spent years with a particular client department may be called upon to offer policy advice that has nothing to do withtheir legal training or expertise, but draws on departmental know-how. Advice given by lawyers on matters outside the solicitor-clientrelationship is not protected.

A comparable range of functions is exhibited by salaried corporate counsel employed by businessorganizations.

Solicitor-client communications by corporate employees with in-house counsel enjoy the privilege, … [57] The Chambers judge referred to and relied on a decision of Judge Kyle of the United States District Court, District of Minnesota,Third Division, in Re: Potash Antitrust Litigation, 1993 WL 543013 in which Judge Kyle found Barton to be in breach of his ethicalduties as a solicitor and having breached the rules relating to confidential information and then stated: “[u]nfortunately, this judicialconfirmation that Mr.

Barton’s claims of ‘illegal and criminal price fixing schemes’ against PCS and other potash producers wereunfounded did not put an end to the litigation.”[1] Those findings were made in a foreign jurisdiction in a proceeding in which Bartonwas not a party and did not testify. The reliance by the Chambers judge on the U.S. decision was an error. That decision was based onlegal opinions provided by two eminent Saskatchewan lawyers but those opinions were based solely on facts prepared by PCS, whichBarton argues were false and misleading.

Those opinions assumed Barton had obtained the information in his capacity as a solicitor, afact which Barton denies.

[ 58 ] It is interesting to note that Madam Justice Hunter, in the context of this action, when ordering that the file that had been sealed by Chief Justice McPherson be unsealed stated: [40] In my view, it is extremely rare that a circumstance would exist which requires that an entire court file be sealed. In the instant case the whole issue of what information Barton possessed may or may not be subject to solicitor-client privilege is to some extent the essence of the action. However, on the face of the pleadings it is clear that Barton had many roles while he was employed by PCS.

As noted above by Barclay J. in Potash Corp. of Saskatchewan Mining Ltd., supra , for a communication to be subject to solicitor-client privilege it must be either an opinion on law, legal services or assistance in legal proceedings. [41] The injunction application prayed for and granted by consent goes far beyond any issue of solicitor-client privilege because Barton could not disclose any information disclosing the business or affairs of PCS. Further, Barton was restrained from having any contract or employment with any of the “U.S. Litigants” which in any way related to potash.

Therefore, the essence of the conduct of Barton complained of and being restrained by PCS is beyond any claims for solicitor-client privilege. … [44] Pleadings are allegations – not evidence. Any interlocutory motions and affidavits filed in support are generally open and available for inspection on a court file.

While affidavits will contain evidence of certain matters, unless the affidavits filed in opposition to the same application admit the facts as true, then the statement of fact alleged in the affidavit are not generally tested until either a cross-examination on the affidavit occurs or during the course of trial, the statements made in the affidavit are tested under cross- examination.

Only then, depending on the materiality of the facts and the findings of the court on the issues of credibility does one know what are the proven facts. [2] [ 59 ] In September of 2003, Madam Justice Hunter, again in dealing with the issue of whether or not the injunction should be vacated, stated: Applying the criteria in the above cases, I find that the right to relief is not clear, nor is it clear that the plaintiff would suffer irreparable harm. More compelling is the effluxion of time between the granting of the injunctive relief in 1993 and this application to set it aside.

This dictates that the order should end. … Given the lack of activity in pursuing this action to trial, the length of time this order has been in effect and the very broad terms of restraint in the order, the balance of convenience has now shifted in favour of dissolution of the injunction. [3] [ 60 ] Interestingly, PCS did not pursue the action for a permanent injunction after the Court set aside the interim injunction.

It was apparently satisfied that it had achieved what it set out to achieve by obtaining the interlocutory injunction, here and elsewhere, without the necessity of going to trial to seek the relief claimed in the statement of claim. [ 61 ] The Chambers judge made the following comments with respect to the reasons for PCS discontinuing the action: [74] Finally, on March 27, 2009 PCS served and filed notices of discontinuance of its actions against Mr. Barton. PCS says that the actions were discontinued because, first, on his own evidence Mr.

Barton is essentially judgment proof; second, six years had elapsed after the injunctions were set aside without any effort by Mr.

Barton to seek an assessment of damages; and, third, with the unsealing of the court file and the setting aside of the injunctions the whole purpose of the actions – which were to prevent a lawyer and fiduciary from disclosing to the public information that was privileged and confidential – was pointless. [ 62 ] The issue is not whether Barton should have requested a hearing to assess damages he suffered after the setting aside of the injunctions, but rather whether PCS should have got on with the trial.

While there was some evidence of the reason for the delay by PCS, the only reasons given by counsel for PCS were Barton’s impecunosity, the fact that the file had been unsealed and the information was available to the general public, and that the U.S. actions were resolved which I have found do not constitute special circumstances. [ 63 ] Again, it is worth noting that the Chambers judge in paras. 79-81 of his judgment erred by concluding, as found in para. 80, that Barton was enjoined from doing only what his professional or fiduciary obligation precluded him from doing in any event.

There was no clear evidence on which he could have so concluded. At best, there was conflicting evidence on this point.

Indeed, as noted by Madam Justice Hunter, and as pointed out by Barton in his affidavit, he, Barton, was employed in a number of capacities by PCS (Crown), many of which did not engage his legal services and there was no uncontradicted evidence what information he received, if any, was subject to fiduciary obligations. [ 64 ] To reiterate the fundamental question — are there special circumstances which would disentitle Barton to a reference to determine what damages, if any, he suffered as a result of the interlocutory injunctions being maintained over a period of some 16 years?

As noted above, in my opinion, there are not. This is an ordinary action, although one that has lasted for an inordinately long period of time, and the consequences which flow from an ordinary action which failed or which has been discontinued without resolution of the allegations made out ought to fall on PCS and it ought not to be allowed to resile from the undertaking that it granted to the Court in the

circumstances of this case. [ 65 ] There will therefore be an order that the matter be returned to the Court of Queen’s Bench for the holding of a reference to determine whether or not Barton suffered any damage as a result of the obtainment of the interlocutory injunction and, if so, fixing the amount of damages that he did suffer. Included in that reference would be the determination of whether Barton is, as he claims, entitled to punitive damages and whether he is entitled to his costs on a solicitor-client basis. [ 66 ] Barton is entitled to his costs in this Court on the appropriate column.

It is up to the Court of Queen’s Bench to determine whether or not he is entitled to his costs on a solicitor-client basis in the Court below. DATED at the City of Regina, in the Province of Saskatchewan, this 15 th day of August, A.D. 2011. “Vancise J.A.” Vancise J.A. I concur “Vancise J.A.” per Jackson J.A. I concur “Richards J.A.” Richards J.A.