PTW Canada Ltd v Smith, 2022 ABKB 781

Court of King’s Bench of Alberta Citation: PTW Canada Ltd v Smith 2022 ABKB 781 Date: 20221124 Docket: 2201 05725 Registry: Calgary Between: PTW Canada Ltd Applicant - and - Brett Smith, Vital Controls Inc and Jayson Pancoast Respondents _______________________________________________________ Reasons for Decision of the Honourable Justice C.M. Jones _______________________________________________________ [ 1 ] On October 20 and 21, 2022, I heard an application for review of an ex parte Anton Piller order I issued on May 20, 2022 (the “Order”).

At that hearing, I concluded that the Order properly had been issued at first instance. However, an issue has arisen in respect of the proper test to be applied when considering whether to leave the Order in place going forward. I asked for and received written submissions on that issue. The following is my decision with respect to the prospective status of the Order. [ 2 ] A brief description of the provisions of the Order will be useful. It appoints an Independent Supervising Solicitor (“ISS”) and empowers him to undertake certain search and seizure activities (the “Search Provisions”).

In addition, paragraph 31 of the Order outlines a number of actions the Respondent, Mr. Smith, is prohibited from taking (the “Injunctive Provisions”). [ 3 ] There is no dispute that, pursuant to his mandate under the Order, the ISS entered into various premises, including Mr. Smith’s home, and seized a number of items, including a laptop and cell phones. The ISS then engaged a forensic accountant to examine those items and retrieve various records from them. Those records were analyzed and provided as evidence to this Court. [ 4 ] There was, however, some disagreement as to what remains of the ISS’ mandate. Mr.

Smith argues that the ISS has seized, examined and returned all relevant materials and that, therefore, the Search Provisions are effectively spent. PTW takes the position that “we don’t know what we don’t have” and contends that further materials may yet come to light. At the hearing, however, the ISS expressed his view that, at this point, the Order does not allow for further searches without evidence to suggest that there are more materials. He indicated that there may be another laptop, but that he had not yet questioned Mr.

Smith about it. [ 5 ] This background led to the disagreement as to the appropriate way to assess the prospective necessity of the Order. Briefly stated, PTW asserts that on a review of an Anton Piller order, the four-part test must be applied with reference to the facts known at the time of application. Mr. Smith agrees that the four-part test is to be applied, but argues that it must be applied both at the time of the application and at the time of the review, to the facts known at each of those points.

The parties are in agreement that a review of an Anton Piller order is a de novo hearing. [ 6 ] The four-part test to which the parties refer is that articulated by the Supreme Court of Canada in Celanese Canada Inc v

Murray Demolition Corp, 2006 SCC 36 and set out by the Court of Appeal in Catalyst Partners Inc v Meridian Packaging Ltd, 2007ABCA 201 at para 7: (

i) The plaintiff must demonstrate a strong prima facie case. (ii) The damage to the plaintiff of the defendant’s alleged misconduct must be very serious. (iii) There must be convincing evidence that the defendant has in its possession incriminating documents or things. (iv) It must be shown that there is a real possibility that the defendant may destroy material before the discovery process can do itswork. [7] At the hearing, I questioned whether, once the Search Provisions have been given effect, the Injunctive Provisions should bereviewed with reference to the well-known test for injunctive relief articulated by the Supreme Court of Canada in RJR-MacDonald Incv Canada (Attorney General), (SCC), [1994] 1 SCR 311: (

i) There is a serious issue to be tried. (ii) The applicant will suffer irreparable harm if the injunction is not granted. (iii) The balance of convenience favours the applicant. [8] As noted above, each side provided written submissions at my request. [9] The substance of PTW’s submission was that the Search Provisions and the Injunctive Provisions should be considered as awhole. PTW correctly points out that the raison d’être of an Anton Piller order is the preservation of evidence.

It asserts that theInjunctive Provisions “are essential preservation tools that aid a plaintiff in seizing and preserving evidence that is necessary to prove itscase against a defendant who is likely to, or who has, destroyed such evidence. They mitigate the risk of further destruction of evidencewhile the [ISS] fulfills its obligations under the order and the discovery process is complete.” [10] PTW acknowledges that upon review of an Anton Piller order, the court should take into account any new evidence,including the fruits of the seizure.

It contends, however, that the court’s task is to determine whether, based on the totality of evidence,the Anton Piller test was met at the time the order was issued and there was no material non-disclosure that would alter that result. Itsposition is that the correct question is whether there is new information before me that warrants vacating the Order. [11] I agree that this is part of the inquiry. As I stated during the hearing, I must consider whether the evidence before me at thispoint indicates that the Order should not have been granted at first instance. If so, it should be vacated.

The parties are ad idem in thisrespect. [12] However, PTW takes the further position that no ongoing assessment is required. PTW states this in its written submission: By virtue of the Anton Piller test being met at the time it was granted (and if no material non-disclosure or new evidence alters thatoriginal determination), there is necessarily an ongoing risk of destruction of evidence that continues until the end of the discoveryprocess. [13] In my view, this proposition is more tenuous and unduly circumscribes the review process.

It effectively presumes that thereis further evidence that is at risk of destruction. The four-part test, however, requires convincing evidence that the defendant has in itspossession incriminating evidence or things. Consequently, I find it difficult to accept that consideration of the Anton Piller test is amatter of “one and done”. Rather, it seems to me that there must be meaningful review of the necessity of such an order, particularlygiven its draconian nature. [14] For his part, Mr.

Smith cites Welcome Ford Sales Limited v Hellec, 2011 ABQB 753 at para 17 for the principles applicableto de novo review of an ex parte order, including that “an attachment order shall not be maintained unless the current circumstancesjustify its continued existence”. Mr. Smith takes the position that this principle applies equally to an Anton Piller order. He goes on tosay that, on a de novo review, the court should consider the “fruits of the search”.

He asserts that the ISS’ searches have unearthednothing that justifies continuation of the Order and argues as follows in his written submission: [Continuation of the Order] will inevitably put Mr. Smith in an indefinite limbo giving in the hands of PTW a draconian tool to go on acontinuous fishing expedition regardless of the fact that there is no evidence, despite the best discovery, to prove that Mr. Smith hasmisappropriated any confidential data of PTW. [15] While Mr.

Smith’s earlier conduct was of sufficient concern to warrant the initial issuance of the Order, I agree that in theabsence of convincing evidence that he possesses and is likely to destroy further relevant evidence, it is not reasonable to keep the SearchProvisions like a sword of Damocles over his head. [16] Mr. Smith agrees with PTW that the four-part test applies on review of an Anton Piller order, though he asserts that itsapplication at this point should be prospective rather than retrospective.

In his written submission, he cites Gulf Islands NavigationLimited v Seafarers’ International Union of North America (Canadian District) (1959), (BC SC), 18 DLR (2d) 216(BCCA) for the distinction between “discharging” and “dissolving” an ex parte injunction order: The court went on to comment that Discharge is usually based on irregularity which may be shown by merely pointing to defects in theoriginal material, whereas dissolution is based on new affidavits showing that the injunction was based on incomplete knowledge offacts. [17] Essentially, Mr.

Smith would have me apply the four-part test to the evidence as it presently stands to determine whether the

Order should be “dissolved” or should continue. [ 18 ] The difficulty I have with this is that, in the absence of convincing evidence that Mr. Smith possesses and is likely to destroy further material, the Order is destined to fail the four-part test at this point with the result that both the Search Provisions and the Injunctive Provisions will cease to operate. [ 19 ] While there was some suggestion that Mr. Smith may have further items, I do not have convincing evidence of that and the ISS candidly stated at the hearing that he had not yet questioned Mr. Smith in that regard.

In my view, the Search Provisions are “spent” and should be considered of no further effect. If the ISS determines that further searches are necessary, the parties may reattend before the Court with the requisite evidence. [ 20 ] That being the case, the better approach is to apply the three-part test for injunctive relief to the Injunctive Provisions. I am satisfied that the test is met. [ 21 ] There is clearly a serious issue to be tried. While Mr. Smith maintains that there is no evidence that he took any of PTW’s confidential data, there is clear evidence that he took certain materials.

Whether those materials were or were not confidential information belonging to PTW is a matter for trial. [ 22 ] I am satisfied that PTW will suffer irreparable harm if Mr. Smith is not enjoined from using any such confidential material. It is clear that PTW and Vital are engaged in a highly competitive industry. Improper use of materials such as customer lists is likely to cause PTW considerable damage. [ 23 ] Finally, the balance of convenience favours PTW. The Injunctive Provisions simply prohibit Mr. Smith from misusing certain information.

As that information allegedly belongs to PTW, this constitutes a minimal intrusion on Mr. Smith. [ 24 ] Accordingly, the Injunctive Provisions of the Order are confirmed and continue in force. Heard on the 20 th and 21 st days of October 2022. Dated at the City of Calgary, Alberta this 24 th day of November, 2022. C.M. Jones J.C.K.B.A.

Appearances: Richard N Billington, KC Billington Barristers for the Applicant Lori Brienza and Allison Wight (Student-at-Law) Mathews, Dinsdale & Clark LLP for the Applicant Charles Osuji and Tanaaz Padania Osuji & Smith Lawyers for the Respondents , Brett Smith and Jayson Pancoast Todd M. Lee Miles Davison LLP

for the Respondent, Vital Controls Inc. Oliver Ho Jensen Shawa Solomon Duguid Hawkes LLP as independent Supervising Solicitor