Dreco Energy Services Ltd. et al. v. Wenzel et al., 2008 ABQB 574

• Judge: Greckol, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: September 06, 2008
• Citations: 2008 ABQB 574;(2008), 461 A.R. 302 (QB)

Dreco Energy Services Ltd. v. Wenzel (2008), 461 A.R. 302 (QB)

MLB headnote and full text

Temp. Cite: [2008] A.R. TBEd. SE.089

Dreco Energy Services Ltd. and Vector Oil Tool Ltd. (plaintiffs) v. Kenneth Hugo Wenzel, Kenneth H. Wenzel Oilfield Consulting Inc. and KW Downhole Tools Inc. (defendants)

(0203 12910; 2008 ABQB 574)

Indexed As: Dreco Energy Services Ltd. et al. v. Wenzel et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Greckol, J.

September 18, 2008.

Summary:

Wenzel, the inventor of downhole oilfield equipment, and his company owned the shares of Vector. The shares were sold to Dreco. Wenzel remained an employee of Vector. The deal included restrictive covenants and an employment contract between Wenzel and Vector which allegedly bound Wenzel to restrictive covenants, confidentiality agreements and fiduciary duties for five years following termination of Wenzel's employment at Vector's. Dreco and Vector were subsequently sold to National. Wenzel resigned from Vector effective March 15, 2002. He formed a new competing company. Vector and Dreco sued Wenzel and other defendants, asking for injunctive relief and damages for breach of the share purchase agreement and the employment contract. The plaintiffs applied for an interlocutory injunction to prevent the defendants from carrying on business in the downhole tools industry in contravention of the restrictive covenants.

The Alberta Court of Queen's Bench, per Hembroff, J., in a decision reported [2003] A.R. Uned. 83, dismissed the application. The plaintiffs appealed.

The Alberta Court of Appeal, in a decision reported (2004), 346 A.R. 356; 320 W.A.C. 356 allowed the appeal. The court issued an interlocutory injunction and directed that it remain in place until final disposition of the lawsuit, or until a contrary order by a judge of the Court of Queen's Bench. The interlocutory injunction subsequently ceased to have effect and trial was scheduled for October 14, 2008. On July 29, 2008, the plaintiffs brought a motion pursuant to rule 209 of the Rules of Court (Alta.) seeking production of certain bank documents and records of Wenzel Downhole, a third party to which the defendants' operations were allegedly transferred in March 2004.

The Alberta Court of Queen's Bench allowed the motion in part.

Practice - Topic 4604

Discovery - Production of documents by nonparties - When ordered - In 2002, the plaintiffs sued the defendants claiming that Wenzel, a a downhole drill inventor, breached the share purchase agreement through which he sold his highly successful business to them, and that he breached an employment agreement which committed him to restrictive covenants, confidentiality agreements, and fiduciary duties - Trial was scheduled for October 14, 2008 - On July 29, 2008, the plaintiffs brought a motion pursuant to rule 209 of the Rules of Court (Alta.) seeking production of certain bank documents and records of Wenzel Downhole, a third party to which the defendants' operations were allegedly transferred in March 2004 - The Alberta Court of Queen's Bench allowed the motion in part where no prejudice was shown resulting from the motion being brought so close to trial - The following documents were ordered produced, either because the four-part test for rule 209 was met, or because Wenzel Downhole consented: bank statements and cancelled cheques for a relevant period in 2002, a terms of credit sheet for 2002, leverage covenants granted by Wenzel Downhole to the BMO bank between 2000 and 2002, forbearance agreements between Wenzel Downhole and the HSBC bank between 2002 and 2006, leverage covenants granted by Wenzel Downhole to HSBC between 2002 and 2006 - Production was denied in respect of the following: credit monitoring correspondence and materials between Wenzel Downhole and BMO for 2002, forbearance agreements between Wenzel Downhole and BMO between 2000 and 2003, credit monitoring correspondence and materials between Wenzel Downhole and HSBC between 2002 and 2006, internal correspondence and materials between Wenzel, Wenzel Downhole and the BNS bank with respect to a request for a $5 million irrevocable standby letter of credit granted in June 2004 - See paragraphs 1 to 70.

Cases Noticed:

Miller (Ed) Sales and Rentals Ltd. v. Caterpillar Tractor Co. et al. (1988), 94 A.R. 17 (Q.B.), consd. [para. 11].

I.T.L. Industrial Ltd. v. Winterbottom (1980), 106 D.L.R.(3d) 577 (Ont. C.A.), refd to. [para. 17].

Astral Films Ltd. v. Sherman (1978), 19 O.R.(2d) 206 (H.C.), refd to. [para. 17].

498140 Alberta Ltd. et al. v. Canadian Pacific Railway et al. (2006), 402 A.R. 366; 2006 ABQB 433 (Master), refd to. [para. 20].

Miller (Ed) Sales and Rentals Ltd. v. Caterpillar Tractor Co. et al. (1990), 112 A.R. 197 (Q.B.), consd. [para. 26].

Esso Resources Canada Ltd. v. Stearns Catalytic Ltd. et al. (1990), 108 A.R. 161 (C.A.), refd to. [para. 38].

Jahnke v. Wylie (1994), 162 A.R. 131; 83 W.A.C. 131 (C.A.), refd to. [para. 38].

Rhoades v. Occidental Life Insurance Co. of California, [1973] 3 W.W.R. 625 (B.C.C.A.), refd to. [para. 39].

InnerSense International Inc. v. University of Alberta (2007), 414 A.R. 390; 2007 ABQB 157, refd to. [para. 42].

Arnott v. Hayes (1887), 36 Ch. D. 731 (C.A.), refd to. [para. 45].

Parnell v. Wood, [1892] P. 137 (C.A.), refd to. [para. 45].

Minister of National Revenue v. Furnasman Ltd., [1973] F.C. 1327; [1973] C.T.C. 830 (T.D.), consd. [para. 46].

Tournier v. National Provincial and Union Bank of England, [1924] 1 K.B. 461 (C.A.), refd to. [para. 51].

Statutes Noticed:

Rules of Court (Alta.), rule 209 [para. 8].

Authors and Works Noticed:

Stevenson, William A., and Côté, Jean E., Civil Procedure Encyclopedia (2003), vol. 2, pp. 27-74, 27-76 [para. 38].

Counsel:

Gary J. Draper and Kevin Feehan (Fraser Milner Casgrain LLP), for the plaintiffs;

Rob Curtis and Frank Friesacher (McCuaig Desrochers LLP), for the defendants.

This motion was heard on September 6, 2008, by Greckol, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following memorandum of decision on September 18, 2008.