Altam Holdings Ltd. v. Lazette et al., 2009 ABQB 458

• Judge: Lee, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 15, 2009
• Citations: 2009 ABQB 458;(2009), 479 A.R. 89 (QB)

Altam Holdings Ltd. v. Lazette (2009), 479 A.R. 89 (QB)

MLB headnote and full text

Temp. Cite: [2009] A.R. TBEd. AU.036

Altam Holdings Ltd. (plaintiff) v. Leonard Lazette and 1095835 Alberta Ltd. and Barry Bogart and Poplar Creek Consulting Inc. (defendants)

(0903-05305; 2009 ABQB 458)

Indexed As: Altam Holdings Ltd. v. Lazette et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Lee, J.

July 29, 2009.

Summary:

The plaintiff applied for an interlocutory injunction based on a written subcontract agreement between it and the defendant Lazette. The agreement contained, inter alia, non-competition and non-solicitation clauses, which Lazette allegedly breached.

The Alberta Court of Queen's Bench dismissed the application. The plaintiff failed to establish a strong prima facie case. The court determined that, inter alia, Lazette was not providing competing services, the non-competition clause did not apply to the plaintiff's present principal customer (Conoco), there was no evidence of any solicitation of contracts, and no basis for any claim for breach of confidence, breach of fiduciary duty or breach of the duty of fidelity. There were also issues respecting whether there was consideration for the restrictive covenants, whether they were reasonable and whether the plaintiff would be denied equitable relief solely on the basis that it did not come to court with "clean hands" (plaintiff in breach of the contract it sought to enforce).

Contracts - Topic 6732

Illegal contracts - Contrary to public policy - Restraint of trade - Agreements not to compete or solicit - The Alberta Court of Queen's Bench stated that "courts have held that where an adequate non-solicitation clause exists between the parties, a non-competition clause will generally be unnecessary, unreasonable and hence, unenforceable. However, a non-competition clause will be reasonably necessary where an employee obtains personal knowledge and influence over the employer's clients as would enable him, if competition were allowed, to take advantage of the employer's trade connection to undermine the employer's business" - See paragraph 60.

Equity - Topic 3602

Fiduciary or confidential relationships - General principles - Elements of a fiduciary relationship - The Alberta Court of Queen's Bench stated that the prerequisites for finding a fiduciary relationship were: "1) The fiduciary has scope for the exercise of some discretion or power; 2) The fiduciary can unilaterally exercise the power or discretions so as to affect the beneficiaries' legal or practical issues; 3) The beneficiary is peculiarly vulnerable to [and] at the mercy of the fiduciary holding the discretion or power." - See paragraph 108.

Equity - Topic 3606

Fiduciary or confidential relationships - General principles - What constitutes a fiduciary relationship - The Alberta Court of Queen's Bench stated that "while a subcontractor can be recognized as a fiduciary, the circumstances are difficult for this plaintiff to establish where the underlying contract makes clear that the relationship is one of independent contractor and principal. The starting point assumption is that the contractor will pursue its own self interest, not that of the principal. To establish a fiduciary relationship with an independent contractor, the plaintiff must show that there is a mutual understanding that in carrying out his functions the subcontractor gives up personal interest and dedicates himself to the general contractor. This is not unjust as the plaintiff benefits from having a subcontractor relationship and as such must accept the burdens of that relationship too" - See paragraph 230.

Injunctions - Topic 1604.2

Interlocutory or interim injunctions - General principles - Clean hands doctrine - The Alberta Court of Queen's Bench stated that "when a party seeks extraordinary, equitable relief from the court it must come to the court with clean hands. Where it does not, the court may for that reason alone refuse the relief sought. In particular, where the plaintiff seeking to enforce a contract by injunction comes to the court in breach of that contract, it will 'more often than not disentitle them to the relief sought'" - See paragraph 190.

Injunctions - Topic 1606

Interlocutory or interim injunctions - General principles - Balance of convenience - [See Injunctions - Topic 1617 ].

Injunctions - Topic 1607

Interlocutory or interim injunctions - General principles - Requirement of strong prima facie case or appearance of right - The Alberta Court of Queen's Bench stated that "in cases where the injunction sought is intended and does restrict an employee from earning a livelihood or from being employed in a particular field, a higher standard may apply in respect of the first component of the tri-partite test. In those cases, the applicant must establish 'a strong prima facie case.'" - See paragraph 6.

Injunctions - Topic 1617

Interlocutory or interim injunctions - General principles - Breach of negative covenant - The plaintiff provided rig-moving supervision services to Conoco for its projects in western Canada - It accounted for 90% of the plaintiff's revenue - Those services were subcontracted to other companies, including the defendant Lazette - Lazette, while working in British Columbia on subcontracts with Burlington, signed a subcontractor agreement restraining them from competing with the plaintiff in providing supervision services to Burlington for a specified period - Lazette was also prohibited from soliciting Burlington business and from misusing confidential and proprietary information - While the subcontract remained in effect, Lazette, without notice to the plaintiff, accepted a direct contract from Conoco in Alberta (subcontract work now with Conoco in Alberta) to provide it with similar, but different, services - Burlington and Conoco had amalgamated - The plaintiff alleged breach of the agreement and sought an interlocutory injunction to enforce the restrictive covenant - The Alberta Court of Queen's Bench dismissed the application - The plaintiff failed to establish a strong prima facie case - Lazette was not providing competing services - The non-competition clause did not apply to services provided to Conoco - The agreement was signed years earlier respecting contracts with Burlington in another province - There was no solicitation of contracts - Conoco offered the contract to Lazette - There was no basis for any claim for breach of confidence, breach of fiduciary duty or breach of the duty of fidelity - The services performed were not dependent upon "sensitive" or "confidential" information - Lazette's expertise pre-dated his subcontract with the plaintiff - Further, the plaintiff did not establish irreparable harm (small amount of money involved) and the balance of convenience clearly favoured Lazette - The court opined that there was no consideration for the agreement and the restrictive covenants were unreasonable in their scope - The plaintiff also could be denied equitable relief solely on the basis that it did not come to court with "clean hands", as it appeared to be in breach of the contract it sought to enforce by withholding monies admittedly owed to Lazette.

Injunctions - Topic 1805

Interlocutory or interim injunctions - Requirement of irreparable injury - Covenants not to compete or disclose trade secrets - [See Injunctions - Topic 1617 ].

Injunctions - Topic 5906

Particular matters - General - To restrain breach of confidence - [See Injunctions - Topic 1617 ].

Injunctions - Topic 5971

Particular matters - Restrictive covenants - Covenant not to compete - [See Injunctions - Topic 1617 ].

Master and Servant - Topic 1155

Contract of hiring (employment contract) - Implied terms - Fidelity - The Alberta Court of Queen's Bench stated that "it is an implied term in all employment relationships that the employee has a general obligation of good faith to his or her employer and a duty not to appropriate for his or her own benefit the employer's trade secrets, customer lists or other confidential information received in the course of his or her employment to the detriment of the employer both before and after termination of the employment relationship. ... Outside of the employment context, duties of fidelity can only exist with an express contractual obligation." - No such obligation existed between a contractor and an independent subcontractor where the agreement clearly provided that the contractor was free to offer or not offer subcontract work and the subcontractor was free to accept or reject that work - See paragraphs 125, 236.

Master and Servant - Topic 1314

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Consideration - An employee had been working for the employer under a subcontract for several months when he was presented with an agreement containing non-competition and non-solicitation clauses - The employee was threatened that unless he signed the agreement he would get no more work - The Alberta Court of Queen's Bench stated that "imposing significant non-competition clauses like the one at issue represented a fundamental change in the existing contractual relationship between the parties. However, [the employer] did not provide any consideration for such contractual amendment so arguably these agreements are void for want of consideration." - See paragraph 210.

Master and Servant - Topic 1323

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - General - The Alberta Court of Queen's Bench stated that "reasonable restrictive covenants ... have the following characteristics: 1) Protects a legitimate proprietary interest; 2) Reasonableness in terms of duration, geographical location and overall fairness between the parties; and 3) The covenant does not seek to prevent competition generally but is a reasonable restriction between the parties and is not otherwise void as being against public policy" - See paragraph 47.

Master and Servant - Topic 1324

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - Interest protected - The Alberta Court of Queen's Bench stated that "employers have a proprietary interest in their trade connections and goodwill ... Where an employer's proprietary interest takes the form of trade connections or specified clients over whom the employee has come to exercise special influence, the test is whether the trade contracts made by the employee with the employer's customers are such that personal influence of the employee could be brought to bear to induce them to change their allegiance from the employer. The critical question is 'what degree of influence does the employee have?'. Stated another way, the question is 'whether having regard to the circumstances, the customer is doing business with the employee rather than the employer'" - See paragraphs 48 to 49.

Master and Servant - Topic 1330

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Breach of - What constitutes - The plaintiff applied for an interlocutory injunction based on a written subcontract agreement between it and the defendant Lazette - The agreement contained, inter alia, non-competition and non-solicitation clauses - At that time, the subcontract pertained to work with Burlington in British Columbia - The present subcontract Lazette was working under was in Alberta with Conoco, a connected but distinct legal entity from Burlington - The Alberta Court of Queen's Bench held that Lazette's acceptance of a direct contract with Conoco could not breach the agreement - The court stated that "the non-competition clause refers to one company only: Burlington ... It does not refer to 'affiliates', 'subsidiaries', 'successors', 'assigns' or anything of the sort. While there has been some business combination between Conoco and Burlington, [the plaintiff] has admitted that they are distinct legal entities. Again ambiguity in a clause such as this is read against [the plaintiff], not Mr. Lazette. Had [the plaintiff] intended the clause to apply to other companies for example related ones, it ought to have said so in its contract. ... It is difficult for [the plaintiff] to now suggest that as the result of an unanticipated business combination taking place some years later, that a term of an agreement dealing specifically and narrowly with one company doing one type of work in one area ought now apply to a different company doing a different kind of work in a different area" - See paragraphs 199 to 200.

Cases Noticed:

Ominayak et al. v. Norcen Energy Resources Ltd. et al. (1985), 58 A.R. 161 (C.A.), refd to. [para. 5].

Lubicon Lake Indian Band v. Norcen Energy Resources Ltd. - see Ominayak et al. v. Norcen Energy Resources Ltd. et al.

RJR-MacDonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général) (1994), 164 N.R. 1; 60 Q.A.C. 241; 111 D.L.R.(4th) 385; 1994 CarswellQue 120 (S.C.C.), refd to. [para. 5].

R.J.V. Gas Field Services Ltd. v. Baxandall et al. (2003), 330 A.R. 115; 299 W.A.C. 115; 2003 ABCA 170, refd to. [para. 6].

Globex Foreign Exchange Corp. v. Kelcher et al. (2005), 376 A.R. 133; 360 W.A.C. 133; 2005 ABCA 419, refd to. [para. 6].

KRG Insurance Brokers (Western) Inc. v. Shafron et al. (2009), 383 N.R. 217; 265 B.C.A.C. 1; 446 W.A.C. 1; 2009 SCC 6, refd to. [para. 38].

Collins (J.G.) Insurance Agencies Ltd. v. Elsley Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 39].

Herff Jones Canada Inc. v. Todd et al. (1996), 181 A.R. 236; 116 W.A.C. 236; 1996 CarswellAlta 260 (C.A.), refd to. [para. 47].

Winnipeg Livestock Sales Ltd. v. Plewman et al. (2000), 150 Man.R.(2d) 82; 230 W.A.C. 82; 2000 MBCA 60, refd to. [para. 47].

Gunning and Associates Marketing Inc. v. Kesler et al., [2005] O.T.C. 204; 2005 CanLII 766 (Sup. Ct.), refd to. [para. 73].

Hume v. OSA Marine Services Canada Ltd. (1987), 10 F.T.R. 300 (T.D.), refd to. [para. 85].

Bank of Nova Scotia v. Horgan (1985), 9 C.C.E.L. 288 (B.C.C.A.), refd to. [para. 86].

Maguire v. Northland Drug Co., [1935] S.C.R. 412, refd to. [para. 91].

Hodgkinson v. Simms et al. (1994), 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; 1994 CanLII 70 (S.C.C.), refd to. [para. 105].

Smith v. Undercover Wear Ltd., 1993 CanLII 5587 (Ont. Gen. Div.), refd to. [para. 106].

Physique Health Club Ltd. v. Carlsen et al. (1996), 193 A.R. 196; 135 W.A.C. 196; 1996 CarswellAlta 958 (C.A.), red to. [para. 108].

Frame v. Smith and Smith (1987), 78 N.R. 40; 23 O.A.C. 84 (S.C.C.), refd to. [para. 108].

White Oaks Welding Supplies v. Tapp (1983), 149 D.L.R.(3d) 159 (Ont. H.C.), refd to. [para. 114].

Canadian Aero Service Ltd. v. O'Malley et al. (1973), 40 D.L.R.(3d) 371 (S.C.C.), refd to. [para. 116].

Atlas Janitorial Services Co. v. Germanis (1994), 53 C.P.R.(3d) 1 (Ont. Gen. Div.), refd to. [para. 127].

Guyer Oil Co. v. Fulton et al., [1976] 5 W.W.R. 356 (Sask. C.A.), affd. [1977] 4 W.W.R. 112; 16 N.R. 465 (S.C.C.), refd to. [para. 128].

McCormick Delisle & Thompson Inc. v. Ballantyne et al. (2001), 145 O.A.C. 379 (C.A.), refd to. [para. 129].

Monarch Messenger Services Ltd. v. Houlding (1984), 56 A.R. 147 (Q.B.), refd to. [para. 133].

Avva Light Corp. et al. v. Komonoski and Henley (1997), 204 A.R. 344 (Q.B.), refd to. [para. 139].

Hampstead & Suburban Properties Ltd. v. Diomiedous, [1968] 3 All E.R. 545 (Ch. D.), refd to. [para. 147].

Debra's Hotels Inc. v. Lee et al. (1994), 159 A.R. 268 (Q.B.), refd to. [para. 148].

Exxonmobil Canada Energy v. Novagas Canada Ltd. et al. (2002), 318 A.R. 99; 2002 CarswellAlta 739 (Q.B.), refd to. [para. 148].

CIBC Development Corp. v. 724133 Alberta Ltd., 1999 ABQB 749, refd to. [para. 190].

Stone Sapphire Ltd. v. Transglobal Communications Group Inc. et al. (2007), 416 A.R. 289; 2007 ABQB 236, refd to. [para. 194].

Belterra Corp. v. Yaganiski (2004), 258 Sask.R. 272; 2004 SKQB 448, refd to. [para. 197].

Wilson Trophy Co. (B.C.) Ltd. v. Chorney et al., [1991] B.C.T.C. Uned. 144; 35 C.P.R.(3d) 161 (S.C.), refd to. [para. 205].

Techform Products Ltd. v. Wolda (2001), 150 O.A.C. 163 (C.A.), refd to. [para. 213].

Hobbs v. TDI Canada Ltd. (2004), 192 O.A.C. 141 (C.A.), refd to. [para. 213].

Hub Financial Inc. v. Molinaro et al., [2002] O.T.C. 526; 26 B.L.R.(3d) 295 (Sup. Ct.), refd to. [para. 230].

Oberle v. Asset Capital Mortgage Corp., [2006] A.R. Uned. 173; 2006 ABQB 250, refd to. [para. 230].

Geeks Unlimited Technical Services Inc. v. R.B.L. Consulting Ltd. et al. (2009), 342 N.B.R.(2d) 302; 878 A.P.R. 302; 2009 NBQB 80 (T.D.), refd to. [para. 236].

McKinders v. Proprietary Energy Industries Inc. et al. (1998), 218 A.R. 389; 1998 ABQB 11, refd to. [para. 237].

West Edmonton Mall Ltd. v. McDonald's Restaurants of Canada Ltd. (1993), 141 A.R. 266; 46 W.A.C. 266 (C.A.), refd to. [para. 238].

American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.), refd to. [para. 240].

Authors and Works Noticed:

Ball, Stacey Reginald, Canadian Employment Law, pp. 13-33, para. 13.40.4 [para. 122]; 15-1 [para. 126]; 15-2 [para. 127]; 15-4 [para. 130].

England, Geoffrey, Wood, Roderick, and Christie, Innis, Employment Law in Canada, pp. 11-22, para. 11.38 [para. 49]; 11-162, para. 11.142 [para. 125]; paras. 11.31 [para. 47]; 11.155 [para. 129]; 11.156 [para. 133].

Counsel:

S.A. Sabine (Duncan & Craig LLP), for the plaintiff/applicant;

M.D. Mysak (Bennett Jones LLP), for the defendants/respondents, Leonard Lazette and 1095835 Alberta Ltd.

This application was heard on July 15, 2009, before Lee, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on July 29, 2009.