0777792 B.C. Ltd. v. Da Costa

2019 BCSC 1839 0777792 B.C. Ltd. v. Da Costa

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: 0777792 B.C. Ltd. v. Da Costa, 2019 BCSC 1839 Date: 20190913 Docket: S199164 Registry: Vancouver Between: 0777792 B.C. Ltd. dba Vancouver Fire and Radius Security Plaintiff And Joe Frank Da Costa and Valor Fire Prevention Inc. Defendants Before: The Honourable Madam Justice Choi Oral Ruling Re Application for an Interim or Interlocutory Injunction In Chambers Counsel for the Plaintiff: R. Savage K. Woo Counsel for the Defendants: D.M. Smart Place and Date of Hearing: Vancouver, B.C. August 30, 2019 September 10 &13, 2019 Place and Date of Ruling: Vancouver, B.C. September 13, 2019 [1] THE COURT: The plaintiff seeks an interim injunction for one year from July 3, 2019, to restrain, enjoin, and prohibit the defendants, Joe Frank da Costa and Valor Fire Prevention Inc., from soliciting any clients of the plaintiff who received services from Mr. da Costa between July 2018 and July 2019. Alternatively, the plaintiff seeks an interim injunction for six months to restrain, enjoin, and prohibit the defendants from controlling, directly or indirectly, a business that competes directly with the plaintiff, and from contacting, soliciting and/or servicing clients of the plaintiff. [2] Additionally, the plaintiff seeks an interlocutory injunction, which is an injunction from the date of any order until a final determination on the merits of

the case, restraining, enjoining, and prohibiting the defendants from using any "Confidential Information" of the plaintiff, as defined in the employment agreement dated December 3, 2008. Article 1 of the employment agreement defines "Confidential Information" as follows: Confidential Information 1. The Employee acknowledges in any position the Employee may hold, in and as a result of the Employee's employment by the Employer, the Employee will, or may, be making use of, acquiring or adding to information about certain matters and things which are confidential to the Employer and which information is the exclusive property of the Employer, including, without limitation: a. 'Confidential Information' means all data and information relating to the business and management of the Employer, including proprietary and trade secret technology and accounting records to which access is obtained by the Employee, including Customer Lists and preferences, Business Operations, Marketing and Development Operations, Computer Software, and Computer Technology. Confidential Information will also include any information which has been disclosed by a third party to the Employer and governed by a non-disclosure agreement entered into between the third party and the Employer. Confidential Information will not include information that: i. is generally known in the industry of the Employer; ii. is now

or subsequently becomes generally available to the public through no wrongful act of the Employee; iii. the Employee rightfully had in its possession prior to the disclosure to the Employee by the Employer; iv. is independently created by the Employee without direct or indirect use of the Confidential Information; or v. the Employee rightfully obtains from a third party who has the right to transfer or disclose it. b. 'Business Operations' means internal personnel and financial information, vendor names and other vendor information (including vendor characteristics, services and agreements), purchasing and internal cost information, internal services and operational manuals, and the manner and methods of conducting the Employer's business; c. 'Computer Software' means all sets of statements, instructions or programs, whether in human readable or machine readable form, that are expressed, fixed, embodied or stored in any manner and that can be used directly or indirectly in a computer ('Computer Programs'); any report format, design or drawing created or produced by such Computer Programs; and all documentation, design specifications and charts, and operating procedures which support the Computer Programs; d. 'Computer Technology' means all scientific and technical information or material pertaining to any machine, appliance or process, including specifications, proposals,

models, designs, formulas, test results and reports, analyses, simulation results, tables of operating conditions, materials, components, industrial skills, operating and testing procedures, shop practices, know-how and show-how; e. 'Marketing and Development Operations' means marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, quoting procedures, marketing techniques and methods of obtaining business, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Employer which have been or are being discussed; and f. 'Customer lists and preferences' means names and customers and their representatives, contracts and their contents and parties, customer services, service due dates, invoices, pricing information, data provided by customers and the type, quantity and specifications of products and services purchased, leased, licensed or received by clients of the Employer. [3] Any findings of fact that I make relate only to this application and not to any other matter raised in this action. Background [4] The plaintiff, Vancouver Fire, provides fire protection, fire safety and commercial security equipment and services in British Columbia from Whistler to Hope. The defendant, Mr. da Costa, was employed at Vancouver Fire from November 1, 1999, until July 3, 2019, as a portable technician. Mr.

da Costa was terminated because he started a competing business, the defendant Valor Fire, in breach of his employment agreement. I will refer to the plaintiff as "Vancouver Fire" as well as the "employer." [5] Mr. da Costa's duties as a portable technician were to sell fire protection equipment and services to customers. He also performed repairs and maintenance on customers' fire protection equipment, such as extinguishers, hoses, and emergency lights. There was no employment agreement between Mr. da Costa and Vancouver Fire between November 1999 and December 2008. On December 3, 2008, Vancouver Fire asked Mr. da Costa, along with the company's other portable technicians, to sign an employment agreement. As set out in the notice of application at para. 7, the agreement contained, inter alia: (a) a provision prohibiting Mr. da Costa's use of VFRS' "Confidential Information", as defined in the Employment Agreement, "for any purpose which might be directly or indirectly detrimental to the Employer or any of its affiliates or subsidiaries"; (b) a provision requiring Mr. da Costa to protect the confidentiality of VFRS' Confidential Information after termination of his employment; (c) a provision prohibiting conflicts of interest; (d) a limited non‑competition clause; (e) a provision acknowledging Mr. da Costa's agreement that VFRS would be entitled to an injunction if he committed

or engaged in any act restricted by the Employment Agreement in relation to VFRS' Confidential Information; and (f) a provision requiring Mr. da Costa to return all Confidential Information to VFRS upon termination of employment. [6] Mr. da Costa deposes that he was not provided an opportunity to read the employment agreement or obtain any legal advice. During the December 3 meeting, he says he was asked to sign it immediately and Ms. Joslyn Alderson, vice‑president of the plaintiff, advised that if the portable technicians did not sign the agreement, their employment would end. Ms. Alderson disputes this account. She deposes that she advised the technicians that "if they wanted to have an assistant technician in order to take advantage of the improved commission structure, they would need to sign the employment contract." She denies pressuring the technicians to sign the agreement immediately or advising the technicians that they would be fired if they refused to sign the agreement. [7] The parties also dispute whether Mr. da Costa earned more money in consideration for signing the employment agreement. The plaintiff provides evidence that Mr. da Costa had an improved compensation structure as a result of the agreement; Mr. da Costa swears that his compensation remained the same for some time afterwards. Mr. Brandon Higgs, a Sales/Technician Manager who supervised Mr. da Costa at Vancouver Fire, deposes for the plaintiff at paras. 11-12: 11. In exchange for the obligations in the Employment Agreement, VFRS provided an improved compensation structure to Mr. da Costa under which he earned commission on his and his assistant's sales, less shop and material charges.

12. Mr. da Costa earned more income under this new compensation structure. When Mr. da Costa was first hired, he was paid a commission on only sales that he made. Following the execution of the Employment Agreement, Mr. da Costa earned commissions on both his sales and his assistant's sales. [8] Mr. da Costa's replies to this evidence in his affidavit at paras. 27-30: 27. In paragraph 11 of the Higgs Affidavit, it is stated that I was provided with an improved compensation structure in exchange for signing the Employment Contract. I deny this. There were no changes to my job or to my compensation following the signing of the Employment Contract. I did not receive any benefit, or any increased benefit, from signing the Employment Contract.

28. In paragraph 8 of the Higgs Affidavit, Mr. Higgs describes the creation of the Lead Portable Technician position. At VFRS, a "Lead Portable Technician" is simply a Portable Technician who has an assistant working under them. The first Lead Portable Technician was Anthony Sawada. He was assigned an assistant in 2007.

29. I did not become a Lead Portable Technician until 2012 or 2013. While the Employment Contract references a "TA" (technical assistant), no TAs were introduced into my territory to assist me until 2012 or 2013, when James Lowry was hired to be my assistant. At that point, I became a Lead Portable Technician, but only on a part time basis, with an assistant roughly 20% of the time only.

30. Having an assistant assigned to me did not initially give me increased remuneration, as a portion of my sales were then credited to my assistant instead of to me. At first, with an assistant, as the volume of my sales in my designated territory did not increase quickly enough, my remuneration decreased. The addition of an assistant only increased remuneration for me later, when I was able to increase sales sufficiently. [9] I now turn to the circumstances of Mr. da Costa's termination as set out in Mr. Higgs' affidavit. On July 3, 2019, Mr. da Costa's assistant attended a customer site and noticed a service tag belonging to the defendant Valor Fire. The employer conducted corporate searches and learned that Mr. da Costa, while employed by the plaintiff, registered Valor Fire on January 2, 2019, as a sole proprietorship. Later on July 3, Mr. Higgs and others from Vancouver Fire went to Mr. da Costa's home to deliver the termination letter and to pick up Vancouver Fire's truck, electronics, and other equipment. They saw a Valor Fire truck parked outside his home. Mr. Higgs deposes at paras. 27-29: 27. Using the GPS system installed in Mr. da Costa's VFRS‑owned truck, we saw that Mr. da Costa had driven home. David Baxter, Ms. Alderson, and I intercepted Mr. da Costa at his home. He had picked up a friend and I believe he was asking his friend to take the Valor Fire truck away from his home, presumably to hide it.

28. When Mr. da Costa recognized us at his home, he dropped off his friend who jumped into a Valor Fire truck parked at Mr. da Costa's home and Mr. da Costa drove off in the VFRS‑owned truck. We followed Mr. da Costa's truck, and we called Mr. da Costa's cell phone and asked him to pull over. Mr. da Costa said that he needed an hour alone in the car, and that we could follow him all night "until someone runs out of gas". Mr. da Costa then hung up his cell phone and began driving erratically. We lost Mr. da Costa on the road and called the police.

29. The police were able to stop Mr. da Costa in a strip mall. The police asked us if we wanted to press charges against Mr. da Costa. We said that we just wanted our company vehicle back. We took back our VFRS‑owned truck and the police let Mr. da Costa go. [10] Mr. Higgs discovered that about $2,000 worth of equipment was missing from the Vancouver Fire truck driven by Mr. da Costa. He also discovered that between January 2019 and July 2019, Mr. da Costa was using Vancouver Fire's equipment to service 159 fire extinguishers, presumably for Valor Fire, because the work was not billed to any Vancouver Fire customers. Vancouver Fire contacted their customers to advise of Mr. da Costa's termination and to inquire whether they had been serviced by Mr. da Costa outside of his employment with Vancouver Fire. Many customers responded. [11] Much of the evidence in Mr. Higgs' affidavit regarding Mr. da Costa's solicitation of customers is hearsay or double hearsay. In the context of an extraordinary remedy such as an injunction, I place little weight on this evidence. However, there is other evidence that has a stronger evidentiary foundation. Mr. Higg's affidavit includes an invoice dated June 25, 2019, on Valor Fire's letterhead to Regency Toyota, a customer that Mr. da Costa previously serviced while employed at Vancouver Fire. The invoice totals $144.90 and lists an annual fire

inspection, servicing extinguishers and emergency lights, and six-year maintenance. [12] I now turn to Mr. da Costa's evidence respecting the termination. Mr. da Costa admitted to starting a new business in June 2019 but seems to disagree that he did so in January 2019. Mr. da Costa disputes using Vancouver Fire equipment or tools to further Valor. In his affidavit, Mr. da Costa admitted that: a) he registered Valor Fire as a sole proprietor on January 2, 2019; b) he purchased a van for Valor Fire in the spring of 2019; c) he launched the website for his business on June 18, 2019; and, d) he incorporated Valor Fire on June 27, 2019. [13] Mr. da Costa also deposes that he intended to leave his employment on June 1, 2019, when Valor Fire was ready to operate. On June 11, 2019, he hired Mr. Matthew Wakelin, a former assistant that he worked with at Vancouver Fire, to work for Valor Fire. Between June 11 and July 3, 2019, he solicited Vancouver Fire's clients who were behind in their servicing schedule. He does not indicate how many clients were solicited, but deposes that 10 to 15 customers opted to be serviced early by Mr. Wakelin. He did not service Vancouver Fire customers himself through Valor Fire while employed at Vancouver Fire. Mr. Wakelin serviced the customers through Valor Fire. [14] After he was terminated, Mr. da Costa retained some paperwork that he titled "Vancouver

Works/Leads" and sets of copies of old monthly invoices. He returned those through counsel on August 9, 2019. He deposes that he has not retained any other "Vancouver Works/Leads sheets, customer information, customer lists, old invoices or other VFRS documents." [15] Mr. da Costa also deposes that he has no other realistic career in a different field. He is 58 years old, having spent 20 years in fire safety and obtained no other work experience or educational qualifications. Due to various conflicts with Vancouver Fire in the spring of 2018, he feared his employment would be terminated and felt he needed to make plans as a result. Legal Framework [16] I adopt my reasons from Praxair Canada Inc. v. Hirakida, 2019 BCSC 1261 at paras. 17-19, setting out the legal framework for injunctions, which is as follows: [17] Historically, an injunction was an order "of an equitable nature, restraining the person to whom it is directed from performing a specified act, or, in certain exceptional cases requiring him to perform a specified act": Maxwell's Plumbing and Heating Ltd. v. British Columbia, 2017 BCCA 285 at para. 28, citing I.C.F. Spry, The Principles of Equitable Remedies (London: Sweet & Maxwell, 2014) at 332. [18] In RJR‑MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 [RJR‑MacDonald], the Supreme Court of Canada held that the test from an

English case, American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396, applies to interlocutory injunction applications. The applicant must establish three elements in order for the court to grant the injunction: a) there is a serious issue to be tried; b) the applicant will suffer irreparable harm absent the injunction; and c) the balance of convenience favours granting the injunction. [19] While there are other cases, including B.C. (A.G.) v. Wale (1986), 1986 CanLII 171 (BC CA), 9 B.C.L.R. (2d) 333 (C.A.), aff'd 1991 CanLII 109 (SCC), [1991] 1 S.C.R. 62, which may formulate the test slightly differently, the applicant must establish some variation of the RJR‑MacDonald test. The injunctive relief must be just and equitable in light of the circumstances of the case: Edward Jones v. Voldeng, 2012 BCCA 295. Analysis [17] The court must engage in a preliminary review of the merits to determine whether there is a serious issue to be tried. This is a low threshold and does not involve an extensive examination: RJR-Macdonald at 337. Exception to this rule arise when the injunction will amount to a final determination of the action or when it imposes such hardship on one party that there is no benefit in proceeding to trial: RJR-Macdonald at 337-338. [18] The defendants argue that the injunction sought would limit Mr. da Costa's ability to earn a living and may end up being a final

determination on the merits, except for damages. Because of this, they argue one of the exceptions applies, and the higher "strong prima facie case" standard is appropriate: Corporate Images Holdings Partnership v. Satchell, 2008 BCSC 525. To establish a strong prima facie case, the plaintiff must establish a substantial likelihood of success: Telus Communications Inc. v. Golberg, 2018 BCSC 1825 at para. 27 [Telus]. [19] The plaintiff does not necessarily disagree that this standard ought to apply. They disagree, however, that Mr. da Costa's livelihood is at stake, since he still could work as an employee for a business competing with Vancouver Fire under the injunction's terms. The plaintiff further submits there is a fair question to be tried and a strong prima facie case that arises from the circumstances respecting the breach of contract. The defendants argue that the agreement is unenforceable because it is overly broad, vague, and inconsistent. [20] The general rule is that the court will presume a restrictive covenant to be void as a restraint of trade unless the following characteristics are shown: 1) it protects the legitimate proprietary interest of the employer; 2) the restraint is reasonable between the parties in terms of temporal length, spatial area covered, the nature of activities prohibited, and overall fairness; 3) the terms of the restraint are clear,

certain, and not vague; 4) the restraint is reasonable in terms of the public interest with the onus on the party seeking to strike out the restraint. (See Elsley v. J.G. Collins Ins. Agencies, [1978] 2 S.C.R. 916 and National Bank Financial Inc. v. Canaccord Genuity Corp., 2018 BCSC 857 at para. 59.) [21] Vancouver Fire must show a strong prima facie case, or a substantial likelihood, that it will succeed at trial. In reviewing the authorities, I accept that the starting point for the analysis is that the restrictive covenant is prima facie unenforceable, but will be enforced if it was reasonable between the parties in the circumstances: Telus at para. 30. [22] I find that Article 8, which is the restrictive covenant, is not enforceable for the purposes of this injunction for the following reasons: a) Article 8 is overly broad. Sub. 8(i) does not only restrain Mr. da Costa from operating a competing business that provides fire services to his former customers at Vancouver Fire, but also prohibits him from offering security products and services. While Vancouver Fire provided security products and services, there is no evidence that Mr. da Costa provided them while employed at Vancouver fire. b) Article 8 lacks any geographic restriction. It simply prohibits Mr. da Costa from operating a business that competes with Vancouver Fire, directly or indirectly. Vancouver Fire argues

that there is a geographic limitation because the company only operates its business in certain municipalities between Vancouver and Whistler. They cite Dynamex Canada Inc. v. Miller, 1998 CanLII 18094 (N.L.C.A.). I agree with the defendants; however, that Article 8 should have specifically included this limitation. Without it, and assuming the injunctions sought were granted, Vancouver Fire could expand its area of business, placing the defendants in breach unwittingly. c) Mr. da Costa was not a fiduciary at Vancouver Fire. He was one of a number of portable technicians. d) A less restrictive non‑solicitation clause would have adequately protected Vancouver Fire's legitimate business interests in this situation. When a non-solicitation clause could have substituted for a non-competition clause in an employment agreement, the non-competition clause will generally be unenforceable: Valley First Financial Services Ltd. v. Trach, 2004 BCCA 312 at para. 49. [23] I am, therefore, not satisfied that Vancouver Fire has met the first branch of the RJR‑MacDonald test. The injunctions sought under para. 1 of the notice of application filed August 19, 2019, are therefore dismissed. [24] I now turn to the injunction respecting confidential information sought in para. 2 of the notice of application. The plaintiffs argue that if Mr. da Costa has returned all the documentation and information

that he allegedly took, he should have no trouble agreeing to this order. The defendants agree, in theory, to an injunction respecting confidential information. They argue, however, that the order sought is unenforceable, since it is overly broad, ambiguous, and undefined. They submit that Mr. da Costa has returned all information that could properly be considered confidential. They note that the names and addresses of former customers are not confidential; this information is in Mr. da Costa's memory and can be found in the modern equivalent of the phone book. Moreover, as Mr. da Costa deposes, the renewal date for a former customer's annual fire safety inspection is visible on their fire extinguishers, which are usually near the store front. [25] Counsel agree that the most significant information for Vancouver Fire is the renewal date for a customer's annual fire safety inspections. This explains why the plaintiff seeks a one-year injunction from the date of Mr. da Costa's termination, prohibiting the defendants from soliciting Vancouver Fire customers. They are concerned he will service those clients whose renewal dates he knows and then retain their business. This is what occurred with Quest, a former customer of Vancouver Fire, who advised Ms. Alderson on August 20, 2019, that they would be switching to Valor Fire. Counsel could not articulate any particular test for an

injunction restraining the defendants from using confidential information, beyond the general principles of preventing unfair competition and restoring fairness. [26] The plaintiff relies on two cases, Mi5 Print & Digital Communications Inc. v. Larmer, 2017 ONSC 3112; and Cambridge Mercantile Corp. v. Cook, 2016 BCSC 11 [Cambridge], a case of Mr. Justice McEwan of this Court. I agree with the defendants that these two cases are of limited utility for the broad injunction sought in this case because the facts are so distinguishable. [27] In Mi5 Print, Mr. Larmer was a fiduciary. He was the vice‑president of business development. He was found to have taken his laptop with all of Mi5 Print's customer contact information, quotations, project information, advertising layouts, and specifications relating to certain clients. No one has pled that Mr. da Costa was a fiduciary. While Mr. da Costa retained 637 pages of information, returned via his counsel in August 2019, I do not find this information is comparable to the information that Mr. Larmer took in Mi5 Print. [28] In Cambridge, the parties were governed by an employment agreement, which contained a non‑solicitation clause. There is no such non‑solicitation clause between the parties in this case. While the plaintiff argues that I can infer that Article 8 is actually a non‑solicitation clause, I disagree with that submission. It

is not up to the court to rewrite the contract. [29] I also find that the definition of "confidential information" as defined in the employment agreement to be dense, broad, and difficult to understand. If an injunction were granted using the definition in the agreement, it would be questionable whether the injunction is enforceable. I do not think it would be obvious to Mr. da Costa, or others, what constitutes confidential information. [30] For these reasons, I find that the plaintiff's application for an injunction respecting confidential information cannot meet the first branch of the RJR‑MacDonald test, which is a strong prima facie case. I, therefore, dismiss the application for this injunction as well. [31] The parties have agreed to an order requiring Mr. da Costa to preserve information on his smartphone tracking all his sales, so that the plaintiff may cross‑reference its list of customers serviced by Mr. da Costa with the defendants' sales records. I make this order by consent. [32] Costs will be in the cause. "Choi J."