ACS Public Sector Solutions Inc. et al. v. Courthouse Technologies Ltd. et al.

• Jurisdiction: British Columbia
• Court: Court of Appeal (British Columbia)
• Judge: Southin, Prowse and Donald, JJ.A.
• Citation: (2005), 219 B.C.A.C. 220 (CA),2005 BCCA 605
• Date: 18 October 2005
• Subject Matter: CONTRACTS,EMPLOYMENT LAW

ACS Public Sector v. Courthouse Tech. (2005), 219 B.C.A.C. 220 (CA);

    361 W.A.C. 220

MLB headnote and full text

Temp. Cite: [2005] B.C.A.C. TBEd. DE.032

ACS Public Sector Solutions Inc. and Affiliated Computer Services Inc. (respondents/plaintiffs) v. Paul Arntsen and Senaca Software Inc. (appellants/defendants) and Courthouse Technologies Ltd., Colin Millard, Thomas Gravelle and Scott Kerr (defendants)

(CA033166; 2005 BCCA 605)

Indexed As: ACS Public Sector Solutions Inc. et al. v. Courthouse Technologies Ltd. et al.

British Columbia Court of Appeal

Southin, Prowse and Donald, JJ.A.

December 8, 2005.

Summary:

Artsen and Senaca Software Inc. (the defendants) created source code for software programs for jury management. Omni-Tech Systems Ltd. paid Arntsen for his intellectual property. SCT Technologies (Canada) Inc. bought Omni-Tech. SCT entered into a consulting services agreement with the defendants. The agreement contained a restrictive covenant (non-competition and non-solicitation). The plaintiffs acquired SCT and received an assignment of the defendants' consulting agreement. The consultancy ended. Two employees left the plaintiffs shortly after Artsen's departure and joined a rival company. The plaintiffs sued the defendants arguing that Artsen had to have participated in the new venture and used ACS's intellectual property and confidential information because the new product came onto the market so quickly. The plaintiffs sought an injunction to prevent the use or disclosure of their proprietary and confidential information. The defendants applied for a declaration that the restrictive covenant was unenforceable and sought a ruling pursuant to Supreme Court Rule 18A for dismissal of the action.

The British Columbia Supreme Court, in a decision reported at [2005] B.C.T.C. Uned. 371; 2005 BCSC 909, declared the agreement enforceable after having severed parts of the restrictive covenant. The court refused the plaintiffs' application for an interlocutory injunction. The court denied the defendants' application to try the action by summary trial process under rule 18A. The defendants appealed the court's decisions to sever the restrictive covenant and not to try the action by summary trial.

The British Columbia Court of Appeal dismissed the appeal.

Contracts - Topic 1806

Severable agreements - Circumstances when contract will be severed - The defendants created source code for software programs for jury management - They entered into a consulting agreement with the plaintiffs' predecessor - The agreement contained a restrictive covenant (non-competition and non-solicitation) - The consultancy ended - Two employees left the plaintiffs shortly after and joined a rival company - The plaintiffs sued the defendants arguing they had to have participated in the new venture and used the plaintiffs' intellectual property and confidential information because the new product came onto the market so quickly - The defendants applied for a declaration that the restrictive covenant was unenforceable - The trial judge declared the agreement enforceable after having severed parts of the restrictive covenant - The British Columbia Court of Appeal dismissed the defendants' appeal - The court discussed the issue of severability - Severance was permissible only when the core of the bargain would remain after the unreasonable parts were struck - This was an appropriate case for severance and the trial judge applied the blue-pencil remedy appropriately - See paragraphs 32 to 60.

Master and Servant - Topic 1312

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Severability - [See Contracts - Topic 1806 ].

Cases Noticed:

Collins (J.G.) Insurance Agencies Ltd. v. Elsley Estate, [1978] 2 S.C.R. 916; 20 N.R. 1; 83 D.L.R.(3d) 1, refd to. [para. 23].

Anglo Canadian Shipping Co. v. Pulp, Paper and Woodworkers of Canada, Local 8 (1988), 27 B.C.L.R.(2d) 378 (C.A.), consd. [para. 28].

Canadian American Financial Corp. (Canada) Ltd. v. King (1989), 36 B.C.L.R.(2d) 257 (C.A.), refd to. [para. 32].

Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co., [1894] A.C. 535 (H.L.), refd to. [para. 34].

Maguire v. Northland Drug Co., [1935] S.C.R. 412, refd to. [para. 35].

Hall v. More, [1928] 1 W.W.R. 400 (B.C.C.A.), refd to. [para. 38].

Mason v. Provident Clothing & Supply Co., [1913] A.C. 724 (H.L.), refd to. [para. 39].

Goldsoll v. Goldman, [1915] 1 Ch. 292 (C.A.), refd to. [para. 40].

Ronbar Enterprises Ltd. v. Green, [1954] 2 All E.R. 266 (C.A.), refd to. [para. 43].

Attwood v. Lamont, [1920] 3 K.B. 571 (C.A.), refd to. [para. 46].

Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1 S.C.R. 249; 316 N.R. 84; 183 O.A.C. 342, refd to. [para. 53].

Counsel:

C.R. Forguson, for the appellants;

S.K. Gudmundseth, Q.C., and J.L. Gartner, for the respondents.

This appeal was heard on October 18, 2005, at Vancouver, British Columbia, by Southin, Prowse and Donald, JJ.A., of the British Columbia Court of Appeal. The decision of the Court of Appeal was delivered on December 8, 2005, and included the following opinions:

Donald, J.A. (Prowse, J.A., concurring) - see paragraphs 1 to 63;

Southin, J.A. - see paragraphs 64 to 66.