Imperial Oil v. H.H.L. Fuels Ltd. et al., (2004) 283 N.B.R.(2d) 1 (TD)

• Judge: Rideout, J.
• Court: Court of Queen's Bench of New Brunswick (Canada)
• Case Date: October 18, 2004
• Jurisdiction: New Brunswick
• Citations: (2004), 283 N.B.R.(2d) 1 (TD);2004 NBQB 370

Imperial Oil v. HHL Fuels Ltd. (2004), 283 N.B.R.(2d) 1 (TD);

    283 R.N.-B.(2e) 1; 740 A.P.R. 1

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2004] N.B.R.(2d) TBEd. OC.024

Imperial Oil, a partnership of Imperial Oil Limited and McColl-Frontenac Petroleum Inc. (plaintiff) v. H.H.L. Fuels Ltd., a body corporate, Pétrole P. Levesque Fuels Inc., Herman Levesque and Paul Levesque (defendants)

(M/C/0325/01; 2004 NBQB 370)

Indexed As: Imperial Oil v. H.H.L. Fuels Ltd. et al.

New Brunswick Court of Queen's Bench

Trial Division

Judicial District of Moncton

Rideout, J.

October 18, 2004.

Summary:

Levesque owned HHL, the exclusive dis­tributor of Imperial products in Edmundston for 30 years under the Agency Agreement. Levesque, wishing to retire, was not inter­ested in Imperial's plan to have HHL be­come one of 4-5 super agencies in N.B., consolidating the existing 14 agencies. A dispute arose as to HHL's liability for fuel shortages. Levesque's son, who had worked for his father for several years, incorporated his own company (PPL) to distribute Shell products. HHL, although continuing to operate, sold assets to PPL and some of HHL's drivers became drivers for PPL. Levesque notified HHL customers that he was retiring. HHL lost customers to PPL. Imperial terminated the Agency Agreement for fundamental breach of contract (non­competition clause) and sued for damages for breach of contract, breach of fiduciary duty, breach of confidence and conversion. HHL counterclaimed for damages for monies allegedly owing under an incentive program upon termination of an agency. HHL sought punitive damages and solicitor and client costs.

The New Brunswick Court of Queen's Bench, Trial Division, dismissed Imperial's action, with the exception of judgment for monies owing for fuel shortages. The court allowed the counterclaim. The claims for punitive damages and solicitor and client costs were dismissed. There was no breach of the noncompetition clause, no fiduciary relationship existed, there was no breach of confidence and no conversion.

Agency - Topic 6025

Duration and termination of agency - Termination - Noncompetition covenants - Levesque's company (HHL) was party to an Agency Agreement with Imperial giving HHL exclusive rights to sell Imperial products - After 30 years, Levesque wished to retire, had no interest in becoming a super agency under Imperial's plan to consolidate 14 N.B. agencies into 4-5 super agencies, and was involved in a dispute as to HHL's liability to Imperial for fuel shortages - The Agency Agree­ment contained a 12 month non-compe­tition clause - Although HHL continued to operate, it sold some assets to PPL (com­pany incorporated by Levesque's son to operate a Shell agency) - Some of HHL's drivers became employed by PPL and Levesque advised customers that he was retiring and that they could be serviced by PPL - Imperial terminated the Agency Agreement and sued for damages for, inter alia, breach of the noncompetition clause - The New Brunswick Court of Queen's Bench, Trial Division, dismissed the claim - PPL and the son were not parties to the noncompetition clause and were not bound by it - HHL and Levesque did not breach the clause - HHL was winding down and sold some assets to PPL, but did not "di­rectly or indirectly" solicit orders or supply customers - There was no evidence of any customer being approached to become PPL customers - See paragraphs 31 to 42.

Contracts - Topic 6732

Illegal contracts - Contrary to public policy - Restraint of trade - Agreements not to compete - [See Agency - Topic 6025 ].

Equity - Topic 3602

Fiduciary or confidential relationships - General principles - Elements of a fidu­ciary relationship - The relationship be­tween an oil company (Imperial) and an independent distributor (HHL) was gov­erned by an Agency Agreement, an agree­ment Imperial had with all of its indepen­dent distributors across Canada - Imperial sued HHL for damages for breach of fid­uciary duty - The New Brunswick Court of Queen's Bench, Trial Division, dismissed the claim - Generally, a manufacturer-distributor relationship did not give rise to a fiduciary duty unless there existed excep­tional circumstances - Imperial's sub­mission that its vulnerability due to the distributor's direct contact with customers constituted an exceptional circumstance was rejected - There was no vulnerability, a required element of a fiduciary relation­ship - Alternatively, if there was vulnera­bility, Imperial was vulnerable in every agency agreement and it could accordingly not be said to be exceptional - There was also no breach of any duty of fidelity by HHL or Levesque, as Levesque held no position in PPL, no customer lists or confi­dential documents were used, no customers were solicited - Given the lack of any relationship between Imperial and PPL or Levesque's son, there could be no duty of fidelity owed to Imperial - For the same reasons, the court rejected a claim for breach of confidence - See paragraphs 43 to 59.

Equity - Topic 3716.2

Fiduciary or confidential relationships - Commercial relationships - Distributorship or franchise agreements - [See Equity - Topic 3602 ].

Equity - Topic 3902

Fiduciary or confidential relationships - Breach of confidence - What constitutes - [See Equity - Topic 3602 ].

Master and Servant - Topic 1155

Contract of hiring (employment contract) - Implied terms - Fidelity - [See Equity - Topic 3602 ].

Cases Noticed:

Collins (J.G.) Insurance Agencies Ltd. v. Elsley Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 31].

Winnipeg Livestock Sales Ltd. v. Plewman et al. (2000), 150 Man.R.(2d) 82; 230 W.A.C. 82; 192 D.L.R.(4th) 525 (C.A.), refd to. [para. 34].

Imperial Oil Ltd. v. Westlake Fuel Ltd. et al. (2001), 156 Man.R.(2d) 296; 246 W.A.C. 296 (C.A.), refd to. [para. 36].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 43].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 44].

Valley Equipment Ltd. et al. v. Deere (John) Ltd. (2000), 223 N.B.R.(2d) 264; 572 A.P.R. 264 (T.D.), refd to. [para. 49].

G.M.G. Fish Services Ltd. v. McGrattan et al. (2001), 231 N.B.R.(2d) 330; 597 A.P.R. 330 (T.D.), affd. (2001), 240 N.B.R.(2d) 146; 622 A.P.R. 146 (C.A.), refd to. [para. 50].

Barton Insurance Brokers Ltd. v. Irwin et al. (1999), 119 B.C.A.C. 109; 194 W.A.C. 109 (C.A.), refd to. [para. 53].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201, refd to. [para. 72].

Hill v. Church of Scientology of Toronto and Manning, [1995] 2 S.C.R. 1130; 184 N.R. 1; 84 O.A.C. 1, refd to. [para. 73].

Authors and Works Noticed:

Ellis, Mark Vincent, Fiduciary Duties in Canada, s. 14A-9 [para. 43].

Counsel:

Richard Costello, Q.C., M. Shane Dugas and Michelle C. Awad, for the plaintiff;

Jacqueline L. King and Erin Tully, for the defendants.

This action and counterclaim were heard on September 16, 17, 20-23, 2004, before Rideout, J., of the New Brunswick Court of Queen's Bench, Trial Division, Judicial District of Moncton, who delivered the following judgment on October 18, 2004.