Culligan Can. Ltd. v. Fettes,

• Jurisdiction: Saskatchewan
• Judge: Lane, Jackson and Ottenbreit, JJ.A.
• Neutral Citation: 2010 SKCA 151
• Court: Court of Appeal (Saskatchewan)
• Date: 05 May 2010
• Citation: 2010 SKCA 151,(2010), 366 Sask.R. 24 (CA),326 DLR (4th) 463,366 Sask R 24,366 Sask.R. 24,(2010), 366 SaskR 24 (CA),366 SaskR 24,326 D.L.R. (4th) 463

Culligan Can. Ltd. v. Fettes (2010), 366 Sask.R. 24 (CA);

    506 W.A.C. 24

MLB headnote and full text

Temp. Cite: [2010] Sask.R. TBEd. DE.028

Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr, and Novo Water Group Inc. (appellants/defendants) v. Culligan Canada Ltd. and WaterGroup Companies Inc. (respondents/plaintiffs)

(No. 1864)

Culligan Canada Ltd. and WaterGroup Companies Inc. (appellants/plaintiffs) v. Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr, Novo Water Group Inc. and Canature International Inc. operating as Canature North America (respondents/defendants)

(No. 1874; 2010 SKCA 151)

Indexed As: Culligan Canada Ltd. et al. v. Fettes et al.

Saskatchewan Court of Appeal

Lane, Jackson and Ottenbreit, JJ.A.

December 9, 2010.

Summary:

The plaintiffs, Culligan and its wholly owned subsidiary WaterGroup, applied for interim and/or interlocutory injunctive relief against the individual defendants and their newly formed company, the defendant Novo Water Group (Novo). Like the plaintiffs, Novo sold and distributed water treatment and filtration products and services. Until recently all of the individual defendants were employed with WaterGroup. They filled substantially the same roles with Novo as they previously had with WaterGroup (executive or senior management positions). The plaintiffs also applied for mandatory orders relating to the production of electronically stored data relevant to the dispute. In addition, the plaintiffs said that the defendant Fettes, formerly the most senior employee of WaterGroup in Canada and now President of Novo, had breached contractual covenants not to compete with WaterGroup or to disclose its confidential information. The plaintiffs sought to enjoin Fettes from a continuing breach of 1997 contractual non-compete and non-disclosure covenants until further court order.

The Saskatchewan Court of Queen's Bench, in a decision reported at (2009), 340 Sask.R. 162, granted the plaintiffs a six-month interim order restraining and enjoining the individual defendants and Novo from: (a) soliciting, in any manner, or aiding in soliciting, serving, catering to or assisting, directly or indirectly, the business of the plaintiffs' previous or current customers; (b) soliciting or inducing for employment, or aiding in the solicitation for employment, of any person who was, at the time of such solicitation or inducement, employed or contracted by the plaintiffs; (c) using or disclosing in any way customer lists, product information, marketing information, business strategy information, financial information, operational margins, details of any needs and demands of particular suppliers and customers; or (d) interfering with the plaintiffs' contractual relations with its employees, suppliers and customers. The court granted a further six-month interim order restraining and enjoining the defendant Fettes from breaching his 1997 employment agreement. The request for mandatory orders requiring the preservation, disclosure and production of electronic data and information by the defendants was dismissed, without prejudice to the plaintiffs' right to renew the application following a post pleadings conference as contemplated by Queen's Bench Rule 191(11A). The plaintiffs applied for an order finding the defendants in contempt of the interim restraining and injunctive order.

The Saskatchewan Court of Queen's Bench, in a decision reported at (2009), 340 Sask.R. 187, found the defendants in contempt. The court ordered the defendants to purge their contempt by immediately recalling and removing any and all promotional materials provided to WaterGroup customers. The court also awarded the plaintiffs solicitor and client costs of $7,500, plus disbursements actually incurred (first contempt judgment). The plaintiffs brought a second application to declare the defendants in civil or criminal contempt for failing to comply with the terms of the interim injunction.

The Saskatchewan Court of Queen's Bench, in a decision reported at (2009), 355 Sask.R. 20, dismissed the application (second contempt judgment).

The Saskatchewan Court of Appeal, in a decision reported at (2009), 346 Sask.R. 100; 477 W.A.C. 100, allowed in part an appeal by the defendants from the granting of the interim injunctions. The wording of the injunction granted against all of the defendants was adjusted so as to narrow its scope.

The Saskatchewan Court of Appeal allowed an appeal from the first contempt judgment and dismissed an appeal from the second contempt judgment. The order sought to be enforced by the contempt applications incorporated overly broad and unclear language. Further, external circumstances exacerbated the order's lack of clarity.

Contempt - Topic 42

General - Elements of contempt - Mens rea - Ball, J., granted the plaintiffs, Culligan and its wholly owned subsidiary WaterGroup, interim injunctive relief against the individual defendants and their newly formed company, the defendant Novo Water Group (Novo) - Like the plaintiffs, Novo sold and distributed water treatment and filtration products and services - Until recently all of the individual defendants, including Fettes, were employed with WaterGroup - They filled substantially the same roles with Novo as they previously had with WaterGroup (executive or senior management positions) - The injunction prohibited, inter alia, solicitation of the plaintiffs' customers and interference with their contractual relations - The plaintiffs brought two applications for contempt against the defendants - The first was allowed and the second denied - The Saskatchewan Court of Appeal allowed the defendants' appeal from the first contempt application and dismissed the plaintiffs' appeal from the second - The order sought to be enforced by the contempt applications incorporated overly broad and unclear language - Further, external circumstances exacerbated the order's lack of clarity - First, every judge who had written in relation to the order had recognized the need to provide clarifying comments respecting it - Ball, J., issued his own corrigendum, narrowing its reach - On the first contempt application, Zarzeczny, J., found it necessary to interpret the order before finding Novo in contempt - On the second, Scheibel, J., adopted the meaning given to the order by Zarzeczny, J., finding it to be clear - The Court of Appeal amended the terms of the order to clarify what it perceived to be an ambiguity - Second, the parties' actions established a history of confusion and contention regarding its meaning - There was a difference between wilful and true misunderstanding - Given that each judge who had considered the order modified its original terms, Novo's persistence was indicative of the latter - Third, the ultimate test of a court order's clarity was a reviewing court's capacity to apply it to the facts - In this case, the order's ambiguity made its application to the facts problematic.

Contempt - Topic 2647

Defences - Particular defences - Invalidity of order disobeyed - [See Contempt - Topic 42 ].

Injunctions - Topic 6309

Particular matters - Injury to trade - Competition from former employee, shareholder, franchisee, etc. - [See Contempt - Topic 42 ].

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 18].

New Roots Herbal Inc. et al. v. W-7 Clay Inc. et al. (1999), 176 Sask.R. 144 (Q.B.), affd. (1999), 180 Sask.R. 140; 205 W.A.C. 140 (C.A.), refd to. [para. 19].

Baumung v. 8 & 10 Cattle Co-operative Ltd. et al. (2005), 269 Sask.R. 190; 357 W.A.C. 190; 259 D.L.R.(4th) 292; 2005 SKCA 108, refd to. [para. 19].

Sonoco Ltd. v. International Brotherhood of Pulp, Sulphite and Paper Mill Workers, Local 433 (1970), 13 D.L.R.(3d) 617 (B.C.C.A.), refd to. [para. 20].

Bhatnager v. Minister of Employment and Immigration, [1990] 2 S.C.R. 217; 111 N.R. 185, refd to. [para. 20].

Skybound Development Ltd. v. Hughes Properties Ltd., [1988] 5 W.W.R. 355 (B.C.C.A.), refd to. [para. 21].

1196303 Ontario Inc. v. Glen Grove Suites Inc. et al., [2009] O.T.C. Uned. I87; 2009 CanLII 40564 (Sup. Ct.), refd to. [para. 21].

Distillery, Brewery, Winery, Soft Drink, and Allied Workers Union 604 and British Columbia Distillery Co., Re (1975), 57 D.L.R.(3d) 752 (B.C.S.C.), refd to. [para. 21].

Buttcon Energy Inc. et al. v. Ontario Lottery & Gaming Corp., [2010] O.T.C. Uned. 3056; 2010 ONSC 3056, refd to. [para. 21].

Bell ExpressVu Limited Partnership v. Torroni et al. (2009), 246 O.A.C. 212; 304 D.L.R.(4th) 431; 2009 ONCA 85, refd to. [para. 21].

Québec (Commission des valeurs mobilières) v. Lassonde, [1994] J.Q. No. 1073 (C.A.), refd to. [para. 21].

Canadian Transport (U.K.) Ltd. v. Alsbury et al., [1953] 1 D.L.R. 385 (B.C.C.A.), affd. [1953] 1 S.C.R. 516, refd to. [para. 22].

Canadian Human Rights Commission v. Canadian Liberty Net et al., [1998] 1 S.C.R. 626; 224 N.R. 241, refd to. [para. 22].

Jaskhs Enterprises Inc. et al. v. Indus Corp. et al., [2004] O.T.C. 859; 2004 CanLII 32262 (Sup. Ct.), refd to. [para. 26].

Authors and Works Noticed:

Sharpe, Robert J., Injunctions and Specific Performance (2nd Ed. 2009) (Looseleaf), § 6.180 [para. 19].

Counsel:

Conrad Hadubiak and Stephanie Yang, for Donald Fettes, Jon Sandomirsky, Toby Hughes, Michael Fiorante, Dale Lewgood, John Cardiff, Denton Gaiser, James Heaps, Daniel Cyr and Novo Watergroup Inc.;

Colin Feasby and Benjamin Pullen, for Culligan Canada Ltd. and WaterGroup Companies Inc.

This appeal was heard on May 5, 2010, by Lane, Jackson and Ottenbreit, JJ.A., of the Saskatchewan Court of Appeal. Jackson, J.A., delivered the following reasons for the court on December 9, 2010.