Halifax Physiotherapy & Work Hardening Centre Ltd. v. Lewin, 2016 NSSC 186

SUPREME COURT OF Nova Scotia Citation: Halifax Physiotherapy & Work Hardening Centre Ltd. v. Lewin , 2016 NSSC 186 Date: 2016-07-19 Docket: Hfx No. 419976 Registry: Halifax Between: Halifax Physiotherapy & Work Hardening Centre Ltd., a corporation, carrying on business as “CBI Health Centre: Halifax” Plaintiff/Applicant v. Todd Lewin, an individual, Debra Vieth-Morse, an individual, Shaun Sangster, an individual, Sarah Bayne, an individual, and Core Physiotherapy and Rehabilitation Centre Inc., a corporation Defendants/Respondents Library Heading Judge: The Honourable Justice James L.

Chipman Heard: July 14, 2016 in Halifax, Nova Scotia Written Decision: July 19, 2016 Subject: Motion to strike the jury

Summary: [ 1 ] CBI alleges that the Defendants engaged in unfair competition and breached a number of their obligations, both before and after they resigned from its employment. The Defendants deny all of the claims and also argue that CBI failed to mitigate any damages it allegedly suffered. [ 2 ] CBI asserts that the trial will revolve around equitable principles relating to fiduciary duties and the

interpretation of multiple contracts. CBI raises two main arguments to strike the jury. The first is that a claim for equitable relief must be heard by judge alone. The second is that the

interpretation of the contracts involves mixed facts and law so interwoven that the questions of fact cannot be separated out for a jury. The Defendants counter that claims for equitable relief are permissible to be heard by a jury. Regarding the

interpretation of multiple contracts and various legal principles, the Defendants say these issues do not make the proceeding too complex and the questions of fact can be separated out for a jury. Issue: Has the Applicant CBI demonstrated the jury should be struck? Result: Determined that the questions of fact are extricable from the law. Given the factors set out in Cyr v. Anderson , 2014 NSCA 51 , determined the case to be appropriate for a jury. The judicial instruction will be somewhat complicated but not so difficult as to require the striking of the jury.

Found that the Defendants’ prima facie and substantive right to have a trial by jury is made out. While there are issues of equity along with interwoven facts and law, they do not rise to the level requiring that the jury be struck. Accordingly, CBI’s application to strike the jury dismissed and costs awarded to the Defendants in the amount of $1,000 plus disbursements. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET. SUPREME COURT OF Nova Scotia Citation: Halifax Physiotherapy & Work Hardening Centre Ltd. v.

Lewin , 2016 NSSC 186 Date: 2016-07-19 Docket: Hfx No. 419976

Registry: Halifax Between: Halifax Physiotherapy & Work Hardening Centre Ltd., a corporation, carrying on business as “CBI Health Centre: Halifax” Plaintiff/Applicant v. Todd Lewin, an individual, Debra Vieth-Morse, an individual, Shaun Sangster, an individual, Sarah Bayne, an individual, and Core Physiotherapy and Rehabilitation Centre Inc., a corporation Defendants/Respondents Judge: The Honourable Justice James L. Chipman Heard: July 14, 2016, in Halifax, Nova Scotia Counsel: Mark D. Tector and Michelle Black, for the Plaintiff/Applicant Jason Cooke, Ann E. Smith, Q.C. and Keith D.

Lehwald, for the Defendants/Respondents By the Court: Introduction [ 3 ] By Notice of Motion filed February 24, 2016, the Plaintiff/Applicant (“CBI”) moves to strike the jury election of the Defendants/Respondents. The moving party relies on the following: • Civil Procedure Rules 52.02 and 1.01; •

Section 34 of the Judicature Act ; • Common law respecting the striking of civil jury notices in the Province of Nova Scotia; and • Such other grounds as may apply and as this Honourable Court may allow. [ 4 ] For evidence, CBI relies on Cameron McInnes’ affidavits filed June 28 and July 8, 2016. Mr. McInnes is a consultant with CBI and, at the times in issue, was CBI’s Senior Vice-President of Operations – Central and Eastern Canada. [ 5 ] In opposing the motion, the Respondents cite essentially the same references as CBI, placing particular emphasis on the Nova Scotia Court of Appeal’s decision in Cyr v.

Anderson , 2014 NSCA 51 . [ 6 ] Documentary production and discoveries have taken place. On January 6, 2016, CBI filed a request for date assignment conference, electing trial by judge. In their memorandum for date assignment judge, filed January 22, 2016, the Defendants elected to have trial by jury. [ 7 ] The date assignment conference took place before Justice Wood on March 11, 2016. The date assignment conference memorandum confirms at item 7 that a motion to set aside the jury notice is “outstanding or contemplated”.

At item 1, the following legal issues to be determined at trial are listed: • breach of contract; • fiduciary duty; • interference with economic interest; • damages – mitigation; and • conspiracy. [ 8 ] Items 5 and 13 of the date assignment conference memorandum confirm each party anticipates calling an expert in the area of damages. As for the types of damages claimed, item 11 confirms: • special damages;

• general damages; • punitive damages; and • aggravated damages. [ 9 ] Further, other remedies are claimed, namely “declaration; injunction; tracing order; accounting”. [ 10 ] With respect to the time needed for trial, item 13 confirms CBI will call six-seven lay witnesses, as well as the one expert, and that the estimate of time needed for their case is 5.5 days. An identical notation is made in respect of the Defendants. Under item 13(

b) the total number of days required for trial is set at 14 days, “(Because it is a jury trial)”. [ 11 ] In its request for date assignment, CBI says that it anticipates relying upon approximately 250 documents at the trial. This is reiterated in Mr. McInnes’ first affidavit at para. 21. In the same affidavit at para. 20, Mr. McInnes identifies what he terms the “key documents” in the litigation and these are appended to his affidavit as exhibits G, H, I, J, K, L and M.

Background [ 12 ] CBI’s amended Notice of Action and Statement of Claim was filed on October 28, 2014, and an Amended Notice of Defence was filed on November 24, 2014. In reviewing the pleadings and materials on file regarding this application, I believe the background to this matter is accurately set out in Mr. McInnes’ first affidavit at paras. 4-12 as follows: 4. CBI is in the business of providing its clients with various therapeutic treatments, including (but not limited to) physiotherapy, occupational therapy and rehabilitation. 5.

CBI has a location in Halifax on North Street, Nova Scotia and is associated with CBI Health Group Inc. which has other affiliated business throughout Canada. 6. The individual defendants in this matter — Todd Lewin (“Mr. Lewin”), Debra Vieth-Morse (“Ms. Vieth-Morse”), Shaun Sangster (“Mr. Sangster”), Sarah Bayne (“Ms. Bayne”) (collectively the “Individual Defendants”) are all former employees of CBI who worked at the Halifax location. 7.

The corporate defendant in this mailer, Core Physiotherapy and Rehabilitation Center Inc. (“Core”), is a business that was conceived of, and created by, the individual Defendants. The Individual Defendants are owners, employees, and officers of Core. 8. As noted above, the Individual Defendants are all former employees of CBI with the following general background: (

a) Mr. Lewin was employed with CBI and its predecessors for approximately 22 years and at the time of his resignation from CBI was co-Manager (with Ms. Vieth-Morse) of CBI’s North Street location; he is a former shareholder (through a holding company) in one of CBI’s predecessor companies; (

b) Ms. Vieth-Morse was employed with CBI and its predecessors for approximately 17 years and at the time of her resignation she was a co-Manager (with Mr. Lewin) of CBI’s North Street location; like Mr. Lewin, she is also a former shareholder (through a holding company) in one of CBI’s predecessor companies; (

c) Mr. Sangster was employed with CBI as a physiotherapist for approximately six (6) years and, while he was employed with it, he was CBI’s top producing physiotherapist at its North Street location; (

d) Ms. Bayne was employed with CBI for approximately ten (10) years as an occupational therapist at its North Street location. 9. On or around June 27, 2013, Mr. Lewin and Ms. Vieth-Morse submitted simultaneous resignations from CBI — effective August 25, 2013. Attached to this affidavit at Exhibit “A” is a true copy of these resignations. 10. On or around July 25, 2013, Mr. Sangster submitted his resignation from CBI —effective August 23, 2013. Attached to this affidavit at Exhibit “B” is a true copy of this resignation. 11. On or around September 17, 2013, Ms. Bayne resigned from CBI. 12.

Subsequent to these resignations, CBI discovered that, on or around February 22, 2013, i.e. six (6) months before the resignations of Mr. Lewin, Ms. Vieth-Morse, and Mr. Sangster were to take effect, the individual Defendants had incorporated Core, which was to provide services competitive with CBI. Attached to this affidavit at Exhibit “C” is a true copy of the Nova Scotia Registry of Joint Stocks listing for Core. The listing confirms that each of the Individual Defendants hold a Director level position with Core, along with of titles.

Positions of the Parties [ 13 ] CBI alleges that the Defendants engaged in unfair competition and breach of a number of their obligations, both before and after they resigned from its employment. The Defendants deny all of the claims and also argue that CBI failed to mitigate any damages it allegedly suffered. [ 14 ] CBI asserts that the trial will revolve around equitable principles relating to fiduciary duties (and possible remedies for the breach of such duties), the

interpretation of multiple contracts between CBI and the individual Defendants, and various legal principles. CBI raises two main arguments to strike the jury. The first is that a claim for equitable relief, or at least their claim for equitable relief, must be heard by judge alone. The second is that the

interpretation of the contracts involves mixed facts and law so interwoven that the questions of fact cannot be separated out for a jury.

[ 15 ] The Defendants counter that claims for equitable relief, and certainly this one, are permissible to be heard by a jury. Further, regarding the

interpretation of multiple contracts and various legal principles, the Defendants say these issues do not make the proceeding too complex and the questions of fact can be separated out for a jury. Governing Law [ 16 ] Every party in a civil action in Nova Scotia has a prima facie substantive right to trial by jury. If one party elects trial by jury, the matter must be tried by jury unless another party can satisfy a judge that there are compelling reasons to proceed by judge alone. This right is set out under s. 34 of the Judicature Act , R.S.N.S. 1989, c.

Section 34 is “subject to the rules of Court”. Civil Procedure Rule 52.02 deals with jury election. Pursuant to Rule 52.02(5), if one party elects trial by jury, the matter must be tried by jury unless the other party brings a successful motion to strike the jury notice. The moving party, here CBI, bears the burden of proof on the motion. [ 17 ] Both parties agree that the leading case on the factors to be considered in a motion to strike a jury notice is Cyr . That case arose from a motor vehicle accident. Liability was admitted, leaving causation and damages the remaining issues for determination.

The motions judge held that the matter was too complex to be heard by a jury and struck the notice. On appeal, the Court of Appeal unanimously reversed the Nova Scotia Supreme Court decision and restored the jury. Writing on behalf of the Court, Justice Farrar considered the issues and law and then offered “some guidelines within which judges can operate” (para. 97), setting forth a non- exhaustive list of considerations, as follows at para. 96: What can we take from this discussion? I suggest the following: 1. Parties have a prima facie , substantive right to a jury trial in Nova Scotia. 2.

In determining whether justice requires a jury notice to be struck a court must identify situations and provide cogent reasons for why the issues are too complex to be decided by a jury. 3. Assessment of complexity involves a consideration of the legal, factual and evidentiary issues in each case. 4. Factual complexity, by itself, will rarely be sufficient to strike a jury. For example, cases calling for medical, scientific or other specialized knowledge on the factual issues with conflicting and contradictory opinions from experts should not, save in the rarest of cases, be taken from a jury. 5.

In cases where there are issues of fact and issues of law and the issues of law can be isolated from the issues of fact, it would, again, be rare to strike the jury notice. 6. The fact that judicial instruction on the law may be difficult is not itself a ground for striking a jury. 7. If the issues of fact are difficult to isolate and are clearly interwoven with the issues of law, the motions judge must decide if the issue has risen to a level that it ought to be taken from the jury, always keeping in mind that it is a prima facie and substantive right that a party is entitled to have a trial by jury. 8.

An inordinately long trial involving voluminous documentation and complex legal issues, for practical reasons, may simply make a jury trial unworkable and the jury notice should be struck. 9. The length of the trial is not, itself, a reason to strike the jury notice. 10. The time for rendering a decision is not a determining factor in striking a jury notice. [ 18 ] Cyr is recognized as the leading authority in Nova Scotia on motions to strike a jury notice (see Pettipas v. Bell Aliant Regional Communications Inc. , 2015 NSSC 58 at para. 7 and AtlanticSpark Professional Services Inc. v.

Hryshyna , 2016 NSSC 114 at paras. 23- 25 ). [ 19 ] In Cyr , Justice Farrar cited “an excellent and thorough history of the evolution of jury trials in Nova Scotia”, referring to an earlier Nova Scotia Supreme Court decision, as follows: [29] The right to a jury trial has a long history in Nova Scotia. Warner J. in Geophysical Services Inc. v. Sable Mary Seismic Inc. , 2008 NSSC 79 , aff’d 2008 NSCA 83 , leave to appeal to Supreme Court of Canada ref’d [2012] 3 S.C.R. xiii, gave an excellent and thorough history of the evolution of jury trials in Nova Scotia (paras.41-57).

I will not repeat his review here. [ 20 ] Justice Farrar also referred to Geophysical in Cyr at paras. 53 and 61 . [ 21 ] I make mention of this because CBI emphasizes Geophysical and in particular, Justice Warner’s finding at para. 107: [107] With respect to the remedies claimed by Geophysical (A.2), Geophysical seeks a determination of the extent to which they claim they were over-billed by and over-paid Kimball pursuant to a contract. On its face, this is a matter that is appropriate for a jury.

However, Geophysical claims several equitable remedies in order to enforce its claims against the Defendant including restitution, a finding of a constructive trust, and an equitable tracing to third parties. All these remedies are of an equitable nature and require the exercise of judicial discretion not appropriately exercised by a jury. The exercise of such judicial discretion by juries has never existed in the English court system and is not in accord with my reading of the past and present versions of the Judicature Act .

The very basis of the court of equity in England, as reflected in the analytical approach of Chief Justice Cowan in Fraser - the exercise of judicial discretion, is the reason why it is not appropriate for a jury to determine the equitable remedies requested. The remedies in this case are not inconsequential. They are as, if not more, significant than the determination of the contents of the contract. [ 22 ] Geophysical was affirmed by the Nova Scotia Court of Appeal ( 2008 NSCA 83 ), albeit the Court of Appeal specifically

declined to comment on Justice Warner’s conclusion regarding equitable issues (para. 10). [23] In addition to citing the Geophysical decisions, CBI relies on Big X Holdings Inc. v. Royal Bank of Canada, 2014 NSSC 368. In his decision, Justice Moir determined that “fact finding on an equitable claim is not for a jury” (para. 54). In allowing the motion tostrike the jury, Justice Moir concluded as follows at paras. 51 and 52: [51] The question of whether the bank was fiduciary to the plaintiffs may involve straightforward fact-finding if the plaintiffs relysimply on the ad hoc banker/customer relationship.

In that case, there would likely be no factual dispute. If the plaintiffs proposesomething beyond the ad hoc fiduciary relationship, the court would have to decide whether there was a special or per se relationship: Galambos v. Perez, 2009 SCC 48. [52] Like an arguable case for or against an implied term, a serious argument for a per se fiduciary relationship involves a nuancedand highly circumstantial inquiry. Law is not easily severed from fact. [24] CBI relies on the above authority and emphasizes s. 34(

c) of the Judicature Act, which reads: Subject to rules of Court, the trials and procedure in all cases, whether of a legal or equitable nature, shall be as nearly as possible thesame and the following provisions shall apply: … (

c) if in any proceeding both legal and equitable issues are raised, they shall be heard and determined at the same time, unless theSupreme Court or a judge, or the judge at the trial, otherwise directs or unless under the foregoing provisions of this

Section either of theparties requires that the legal issues of fact be tried with a jury; [25] CBI argues that this is precisely the kind of case that requires judge alone. For example, they note the matter involves fourDefendants who, CBI says, owed (and breached) different fiduciary duties to CBI. [26] In response to the argument that equitable matters are wholly outside the purview of jury trials, the Defendants refer to theCourt of Appeal decision in Geophysical, noting that Justice Warner’s comments on equity did not enter their analysis.

For example,they refer to para. 10 of the decision of the Court of Appeal: [10] In reaching these specific conclusions, which were based on the evidence before him, the judge has not applied any wrongprinciples of law and no injustice will result from his decision.

However, in dismissing the appeal we want to be clear that we aremaking no comment on the judge’s reasoning and conclusions to the effect that equitable issues of law, fact and remedy are not mattersproperly or historically for determination by juries (para. 116 (c) ) or on his reasoning that Civil Procedure Rule 1.03, providing for thejust, speedy and inexpensive determination of every proceeding, militates generally against jury trials (paras. 80-82, 106, 117). [Emphasis added] [27] Given the above comments, the Defendants argue the Court of Appeal expressly chose not to endorse Justice Warner’sreasoning with respect to removing equitable issues from a jury. [28] Further, the Defendants note that in Cyr, Justice Farrar did not comment on Justice Warner’s analysis regarding determinationof equitable issues by a jury.

Additionally, the Defendants cite an earlier decision of the Nova Scotia Court of Appeal, Behune v.Melenchuk, 1994 CarswellNS 173 (NSCA), where Chief Justice Clarke stated as follows at para. 12: Equitable issues such as those that arise in the application of the doctrine of undue influence are permitted to be placed before a jury inNova Scotia (see Judicature Act, R.S.N.S. 1989, c. 240, s. 34). This jury was entitled to make findings of fact upon which JusticeEdwards was in turn entitled to apply the law.

Where there is evidence in support, the reasons and conclusion reached by a jury are to begiven every reasonable breadth of

interpretation and application. See Vavaroutsos v. Jackson et al (1988), (NS CA),82 N.S.R. 30; Cameron v. Excelsior Life Insurance Company (1981), 44 N.S.R. (20) 91; Wawanesa Mutual Insurance Company (1984),60 N.S.R. (20) 124. [Emphasis added] [29] Both parties rely on the decision of Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, in asserting that contractualinterpretation is a question of mixed fact and law. At para. 50, Justice Rothstein, on behalf of an unanimous Court, stated as follows: With respect for the contrary view, I am of the opinion that the historical approach should be abandoned. Contractual

interpretationinvolves issues of mixed fact and law as it is an exercise in which the principles of contractual

interpretation are applied to the words ofthe written contract, considered in light of the factual matrix. [30] With this authority in mind, the question here is whether the mixed fact and law can be separated by a judge for a jury. Analysis and Disposition Equitable Claims [31] Having reviewed Justice Warner’s decision in Geophysical, it is not surprising that Justice Farrar was of the view that heprovided an excellent and thorough history of the evolution of jury trials in Nova Scotia.

When I read Cyr it is also clear to me that theCourt of Appeal did not articulate a general rule against allowing a jury to hear equitable issues. This is perhaps not surprising givenwhat the Court of Appeal said in Geophysical. Furthermore, there is the matter of Chief Justice Clarke’s definitive finding in para. 12 ofBehune, i.e. “equitable issues such as those that arise in the application of the doctrine of undue influence are permitted to beplaced before a jury in Nova Scotia…”.

[ 32 ] Having regard to the totality of the authority from our Court of Appeal, I am of the view that equitable issues may be placed before a jury in Nova Scotia. The question remains as to whether the principles of equity and equitable relief in this case must be heard by judge alone. I will answer this question in my analysis to follow. Complexity/Questions of Law and Mixed Fact and Law [ 33 ] I do not regard a two week-long trial with in the order of 250 documents to be unwieldy for a jury. As for the “key documents”, I have paid particular attention to materials appended as exhibits G, H, I,J,K,L and M of Mr.

McInnes’ first affidavit. When I scrutinize the material, the documents may be boiled down to sets of agreements: namely, shareholders, share purchase and employment agreements. Having reviewed these agreements, I do not find them to be overly voluminous or complex. While undoubtedly drafted by lawyers, they are written in plain language and are not obtuse. Turning to Justice Farrar’s ten non-exhaustive guidelines, it is my determination that there is far from the complexity required to sufficiently strike this jury notice.

Indeed, when I review Justice Farrar’s ten considerations, the only one which causes me pause here (in the context of potentially striking the jury) is no. 7: 7.

If the issues of fact are difficult to isolate and are clearly interwoven with the issues of law, the motions judge must decide if the issue has risen to a level that it ought to be taken from the jury, always keeping in mind that it is a prima facie and substantive right that a party is entitled to have a trial by jury. [ 34 ] In their reply brief and oral argument, CBI submits that most, if not all, of the issues at stake in this action are complex questions of law or mixed fact and law.

They go on to suggest that CBI has provided many cogent reasons as to why the issues in this case involve questions of law or mixed questions of fact and law that rise to a level that they should be decided by a judge, not a jury. [ 35 ] CBI emphasizes Justice Rothstein’s decision, noting correctly that it stands for the proposition that contractual

interpretation is a matter of mixed fact and law. They assert that issues of fact and issues of law in this case are inextricable, i.e. they cannot be readily isolated thus making the case inappropriate for a jury. [ 36 ] With respect, I altogether reject this argument. In this regard, I have already passed judgment on my view of the key documents.

To this, I would add that the only expert evidence expected (one for each side) will be in the area of damages. [ 37 ] When I scrutinize the pleadings, it is clear to me that the facts center around what I would characterize as relatively routine business dealings between individuals.

Indeed, I am drawn to the Defendants’ counsel’s arguments that much of the trial will be concerned with determining questions of fact, as follows: 1. whether any of the Defendants appropriated, misused, or disclosed CBI’s confidential information; 2. whether any of the Defendants induced clients and employees away from CBI; 3. to what extent the actions of the Defendants caused damage to CBI, if at all; 4. whether Mr. Lewin and Ms. Vieth-Morse were in positions of trust or key roles at CBI before or after 2011; 5. whether Mr. Sangster or Ms. Bayne were in positions of trust or key employees at all; 6. whether Mr.

Sangster or Ms. Bayne ever gained access to CBI’s clients or methods of doing business; and 7. whether the individual defendants’ resignations were pre-planned or coordinated. [ 38 ] Turning to Sattva Capital Corp. , Justice Rothstein discusses how in many cases questions of law will not be readily extricable from questions of fact. Nevertheless, as he states at para. 53, it is not impossible: Nonetheless, it may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law ( Housen , at paras. 31 and 34-35).

Legal errors made in the course of contractual

interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor” ( King , at para. 21).

Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on. [ 39 ] When I consider the pleadings and evidence here, I am of the view that it will be possible for the trial judge to identify and extract the questions of law and fact.

For example, the judge would want to be clear in allowing the jury to decide the answers to the questions posed above in para. 35, but keep within his or her purview the legal determination of concepts such as novation. Further, I am satisfied that this is a case where the equitable issues such as identified by Chief Justice Clarke may be placed before the jury selected for this case. [ 40 ] Turning to the Cyr guidelines, recall in no. 5, Justice Farrar noted that when issues of law can be isolated from issues of fact, it would be rare to strike the jury notice.

He then adds at item no. 6, “the fact that judicial instruction on the law may be difficult is not itself a ground for striking a jury.” [ 41 ] Having reviewed the affidavits, pleadings and briefs, it is clear to me that the questions of fact here are extricable from the law. Indeed, it occurs to me that the trial will be focused on weighing credibility between various witnesses and the examination of the key documents as well as other even less complicated materials, such as emails and letters. To my mind, having regard to the Cyr factors, these determinations are entirely appropriate for a jury.

In my view, the judicial instruction will be somewhat complicated but not so difficult as to require the striking of the jury. Indeed, I am of the view that the Defendants’ prima facie and substantive right to have a trial by jury is made out. While there are issues of equity along with facts and law clearly interwoven, they have not nearly risen to the level requiring that the jury be struck. Accordingly, I hereby dismiss CBI’s application to strike the jury and award costs to the

Defendants in the amount of $1,000 plus disbursements. Chipman, J.