QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2007 SKQB 397 Date: 2007 11 01 Docket: Q.B.G. 1807/2005 Judicial Centre: Regina BETWEEN: KUSY’S ELECTRIC LTD. and TIM SULLIVAN, SULLIVAN INSTRUMENTATION INC. and POTASH CORPORATION OF SASKATCHEWAN Counsel: Paul J. Harasen for the plaintiff Neil B. Fisher for the defendant, Potash Corporation of Saskatchewan Inc. J. Paul Malone for the defendants, Tim Sullivan and Sullivan Instrumentation Inc. JUDGMENT McLELLAN J. November 1, 2007 [1] The plaintiff claims damages against the defendant Potash Corporation of Saskatchewan Inc. (“PCS”) for breach of contract whereby the plaintiff was to supply electricians to perform work at its potash mine at Rocanville, Saskatchewan. (the “mine”) [2] The plaintiff also claims damages against the defendants Tim Sullivan and Sullivan Instrumentation Inc. (collectively called “Sullivan”) for breach of an employment contract when Sullivan was employed by the plaintiff to perform services for PCS at the mine. [3] PCS entered into contract with the plaintiff on February 16, 2005 for term of two months. The plaintiff was to supply two instrument technicians to perform electrical instrumentation work at the mine. The contract was extended by PCS in mid April and then again in June until the end of September, 2005. [4] The plaintiff alleges that the contract was extended for further three months from September 30 until the end of December 2005. PCS disputes that claim. [5] Sullivan worked for the plaintiff at the Saskferco plant at Belle Plaine from August 2003 until February 2005 at which time he agreed to work for the plaintiff at the PCS mine. He worked there until September 29, 2005. Sullivan met with Darrell Kusniak (“Kusniak”) in the summer of 2005 in Regina and at that time informed Kusniak that he was leaving his company and going into business on his own at the end of September. [6] Kusniak disagrees with that but prefer Sullivan’s account of the meeting. [7] In addition to Sullivan the plaintiff hired Compton Bird (“Bird”), an apprentice instrumentation mechanic to work at the mine site. Bird left his employment with the plaintiff on August 31, 2005 (the plaintiff was not able to find replacement for Bird) which left Sullivan as the sole employee at the mine. [8] Kusniak claims that on September 20, 2005 he received telephone call from Darren Green (“Green”) who was the instrumentation supervisor of PCS at the mine extending the contract for further three months until the end of December 2005. [9] Green’s version of that conversation differs from Kusniak. He claims that during the telephone call with Kusniak he said words to the effect “if need someone from the end of September to the end of December, would you be able to supply someone?” [10] At the time he made the telephone call Green was aware that Bird had left the plaintiff’s employ and had not been replaced. He also knew that Sullivan was leaving employment with the plaintiff. [11] Green pointed out that he advisedly used the word “if” because the usage of outside contractors had gone on for much longer than had been originally anticipated and he did not, nor was he certain he would ever get, authorization to continue to utilize outside contractors. PCS had, on its permanent staff, individuals to do the type of work which was being done by the plaintiff. The decision to hire outside contractors past September 30th would be made by Joseph Fortney (“Fortney”), the General Manager of Operations for PCS at Rocanville. [12] Kusniak went on trip to British Columbia on September 27th and did not return until October 2nd. [13] He knew that PCS might need two outside electricians by October 3rd. Before leaving for British Columbia he had telephoned the union hall and was informed they could not supply any workers. He knew Sullivan was leaving at the end of the month. He claimed he could have moved people from Saskferco to do the job for PCS. He was charging Saskferco the same hourly rates that he was charging PCS. It seems highly unlikely that he would jeopardize that contract which he had for some time to obtain contract for three months without any additional profit. He agreed that he had never spoken to any other employees about going to Rocanville. [14] Kusniak’s credibility was seriously damaged when he suggested that the contract had been extended and yet had made no arrangements to have electricians available to be at Rocanville on October 3rd. Sullivan had faxed his time sheet to the plaintiff on September 22 and added handwritten note asking for his Record of Employment. Even if had accepted Kusniak’s version of the meeting with Sullivan in Regina he would have known at that time that Sullivan was leaving his employ. [15] When consider all the evidence accept Green’s version of the telephone call and as result find that the contract between the plaintiff and PCS was never extended past September 30th. The claim against PCS is therefore dismissed. [16] Sullivan incorporated his company on September 14, 2005 and at that time started to consider other opportunities. He knew the plaintiff’s contract with PCS was expiring at the end of September, 2005 so he made proposal on September 19 on behalf of his company to PCS to do instrumentation work for it. He was advised on September 21 that his proposal was rejected. He revised his proposal and submitted new proposal on September 26, 2005. [17] Fortney made the decision to hire outside electricians past September 30th on September 26th. He knew, at that time, that Sullivan was leaving the employ of the plaintiff. He realized that it would be more cost effective and quicker to have Sullivan complete the work. Sullivan had already had all safety orientations, was familiar with the site and the PCS employees and would have no learning curve to negatively offset productivity. IV [18] The only remaining sole issue is whether Sullivan breached his employment contract by submitting a proposal to PCS when he was still employed by the plaintiff. [19] The law is well settled that an employee is under an implied obligation not to compete with an employer during the term of his or her employment. Although Sullivan had given notice that he would no longer work for the plaintiff after September 30th he was still employed at the time he made his proposal. [20] find nothing wrong with Sullivan setting up his corporation with view to starting competitive business after his employment with the plaintiff ended. An employee must be free to plan his future after his employment with his employer ends. He did not prepare the proposals during working hours. He prepared them with the assistance of his wife, when he was off work in Regina. [21] However the B.C. Court of Appeal in the case of Restauronics Services Ltd. v. Forster 2004 BCCA 130 (CanLII); [2004] 5 W.W.R. 233; 239 D.L.R. (4th) 98 held that an employee who submitted a bid for a food services contract in competition to her employer during a period of working notice was in breach of her employment contract. [22] The facts in that case are summarized in the headnote as follows: The plaintiff was engaged in the business of providing institutional cafeteria services. It had employed the defendant as regional director. On July 26, 1995, the plaintiff gave the defendant two months’ working notice. In the course of her duties, the defendant had compiled information used by the plaintiff in bid to provide cafeteria services to the Burnaby Correctional Centre for Women (“BCCW”). In August 1995, in the course of renegotiating the prices for the BCCW contract, the defendant had attended meeting between the plaintiff and BCCW and advised that the plaintiff should maintain its prices. The plaintiff refused and so the BCCW issued request for proposal. The defendant, through company she incorporated, submitted bid for the BCCW contract on September 25, 1995. The defendant’s company was the successful bidder. The plaintiff then commenced an action for breach of contract and breach of fiduciary duty. The trial judge had concluded that the defendant had been wrongfully dismissed when she was given only two months’ notice and found that she was entitled to four months’ notice. He also found that although the giving of unreasonable notice constituted fundamental breach of the employment contract, the defendant had not elected to treat the contract as being at an end when given notice of her dismissal. Accordingly, the employment contract had not terminated until the end of the notice period, October 7, 1995. Finally, the trial judge found that the defendant was not “key employee” and, therefore, she did not owe fiduciary duty to the plaintiff. He also found that as the defendant had only planned to carry out competing business while still employed, she had not breached her duty of good faith. [23] The Court of Appeal held that the trial judge erred in finding that the defendant’s actions had amounted to mere preparation. [24] Ryan J.A. writing for the court held that the defendant breached her duty of fidelity. [25] He stated that: [45] The relationship of employer and employee continued after Ms. Nicolas was given working notice on August 3, 1995. Her duties and obligations to her employer did not change during that time. As Madam Justice Southin summarized in Kalaman v. Singer Valve Co. (1977), 1997 CanLII 4035 (BC CA), 38 B.C.L.R. (3d) 331 (B.C.C.A.), at para. (4) During the period of working notice, the relationship of employer and employee continues. Thus, the employer continues to owe the same obligations to the employee in matters of his remuneration, provision of proper work and so forth, as he would have owed to the employee before the notice was given. For his part, the employee continues to owe to the employer the same obligations as he owed under happier circumstances (see, if any authority is needed for such trite proposition, Schilling v. Kidd Garrett Ltd., [1977] N.Z.L.R. 243 (New Zealand C.A.) If therefore, in the period of working notice, the employee does act inconsistent with the continuance of the contract of employment, he may be summarily dismissed. [46] Madam Justice Southin continued her comments at para. 101 with discussion of the duties owed by an employee to an employer: (5) The duties of an employee to an employer in the absence of an express contract are those implied by law. They have been variously put. ... The obligation is sometimes described as one of “good faith and fidelity”. In the words of Richmond P. in the Schilling case at pp. 247-248: ... It seems to be impossible to lay down any fixed test applicable to all circumstances. Some helpful passages from various judgments will be found collected by Havers J. in Sanders v. Parry [1967] WLR 753, 766; [1967] All ER 803, 808-809. One of those references is to the judgment of Lord Greene in Hivac Ltd. v. Park Royal Scientific Instruments Ltd. [1946] Ch 169; [1946] All ER 350, where Lord Greene said: It has been said on many occasions that an employee owes duty of fidelity to his employer. As general proposition that is indisputable. The practical difficulty in any given case is to find exactly how far that rather vague duty of fidelity extends (ibid, 174; 353). [47] In State Vacuum Stores of Canada Ltd. v. Phillips, 1954 CanLII 240 (BC CA), [1954] D.L.R. 621 (B.C.C.A.), Sidney Smith J.A. said this, at p. 625: The principle that an unfaithful employee may be answerable in damages is well established in the decided cases although, as Lord Greene M.R. points out in Hivac Ltd. v. Park Royal Scientific Instruments Ltd., [1946] All E.R. 330, this breach of the law may not yet have been fully explored in its remoter aspects. Bowen L.J. refers to the principle in this language in Lamb v. Evans, [1893] Ch. 218 at p. 229: “The common law, it is true, treats the matter from the point of view of an implied contract, and assumes that there is promise to do that which is part of the bargain, or which can be fairly implied as part of the good faith which is necessary to make the bargain effectual. What is an implied contract or an implied promise in law? It is that promise which the law implies and authorizes us to infer in order to give the transaction that effect which the parties must have intended it to have, and without which it would be futile.” And it is discussed in Robb v. Green, [1895] Q.B. 315, where A. L. Smith L.J. said at p. 320: “It is my opinion that this judgment should be upheld, and upon the ground that there has been breach by the defendant of his contract of service with the plaintiff. think that it is necessary implication which must be engrafted on such contract that the servant undertakes to serve his master with good faith and fidelity”. [48] The jurisprudence in this court establishes that competition with an employer will in almost all cases constitute breach of the duty of loyalty. In Cariboo Press (1969) Ltd. v. O’Connor, 1996 CanLII 1553 (BC CA), [1996] B.C.J. No. 275 (QL) (B.C.C.A.) [summarized 61 A.C.W.S. (3d) 290], Chief Justice McEachern said at paras. 19-20: The remaining question then, is whether O’Connor breached his employment duty by having secret interest in competitor from March 1, 1991, to July of the same year. Such would normally constitute conflict of interest and would be regarded as breach of the duty of loyalty and fidelity that is expected of an employee. In this respect, see Gurry’s Breach of Confidence, (Oxford: Clarendon Press, 1984) at 179, where the author says that “[t]he employee must not compete with his employer during the subsistence of the employment relationship.” think the foregoing must be an absolute, or almost absolute, prohibition. During the period in question, O’Connor was deriving benefit from both his employer and from competitor. In my view, this constitutes breach of his contract of employment. [49] In the case at bar the trial judge seemed to rest his decision in part on finding that Ms. Nicolas’s conduct in bidding on the BCCW contract while employed with Restauronics amounted only to planning carried out to establish competing business and that as such it may not have constituted breach of the duty of good faith. He then listed other factors, such as the fact that the bid was made two weeks before the contract ended, which persuaded him that her conduct in bidding against her employer was not breach of fidelity. [50] The authors of Employment Law in Canada, [3rd. ed., Vol. (Markham, Ont: Butterworths, 1998) (looseleaf)] note at §11.131: Difficulties have arisen in determining the exact point at which planning and preparation by an employee who is still employed to set up himself or herself in competition with the employer will violate his or her implied duty of fidelity ... After all, if it is lawful for an employee to engage in post-termination competition with an employer, it hardly makes sense to hold it unlawful to plan the form that such competition will take. In more recent decisions on point, the courts have held that merely planning to establish competing business does not ipso facto violate the duty, unless it is clear that the employee has already determined to abuse the employer’s confidential information or trade secrets in his or her future business or has already begun to canvass the employer’s customers or entice fellow employees of the employer to join him or her in the new business. [Corporate Classic Caterers v. Dynapro Systems Inc. (1998), 1997 CanLII 4408 (BC SC), 33 C.C.E.L. (2d) 58 (B.C.S.C.); Leith v. Rosen Fuels Ltd. (1984), C.C.E.L. 184 (Ont. H.C.J.), esp. at 195.] [Emphasis added.] [51] In my view the trial judge erred in fact in characterizing Ms. Nicolas’s actions as mere preparation. Ms. Nicolas competed with her employer for business which had been the employer’s; her placing of the bid went beyond preparation. [52] Her conduct was similar in this regard to that of the defendants in Woodrow Log Scaling Ltd. v. Halls, [1997] B.C.J. No. 140 (QL) (B.C.S.C.) [summarized 68 A.C.W.S. (3d) 454]. In that case employees submitted competing bid against their employer and did not terminate their employment until after they had secured the contract for their own benefit. The court found this to be breach of the employees’ duty of good faith and awarded damages to the employer. (D.L.R. pp. 111-113) [26] could find no case law on point in this province and am unable to distinguish Sullivan’s actions from those of the defendant in Restauronics Services Ltd. v. Forster, supra. I therefore find that Sullivan breached his duty of fidelity to the plaintiff. [27] However I am not satisfied that the plaintiff proved it would have been in a position to perform further work for PCS if Sullivan had not submitted a proposal. [28] Kusniak had telephoned the union hall and was told there were no members available for him to hire. [29] As noted above he did not return to Saskatchewan until the day before PCS required two technicians and had no employees ready to go to Rocanville. It would appear that he had abandoned any thought of continuing the contract until the end of December. Further if he had pulled employees from Saskferco he would have suffered no damage. [30] Ryan J.A. pointed out at p. 117: [73] The case law seems to indicate that where there has been misuse of confidential information or trade secrets, the employer may recover damages against the employee for profits it has lost as consequence of the breach or, instead of damages, elect to take judgment for an account of the profits the employee has obtained through the wrongful exploitation of the material in question. The employer is free to choose whichever method will result in greater compensation. (E.g., 57134 Manitoba Ltd. v. Palmer (1985), 1985 CanLII 572 (BC SC), 65 B.C.L.R. 355 at 371, C.P.R. (3d) 477 (B.C.S.C.), affirmed (1989), 1989 CanLII 2743 (BC CA), 37 B.C.L.R. (2d) 50, 26 C.P.R. (3d) 8(B.C.C.A.)). [74] In the case at bar, the appellant proved that the respondent breached her duty of loyalty by competing with it for the BCCW contract while she was in its employ. It did not prove, however, that Ms. Nicolas used any confidential information or trade secrets in doing so. [31] Sullivan was not in a managerial position with the plaintiff. He did not possess any confidential information or trade secrets. He knew nothing as to profit margins, etc. of the plaintiff. He did have the experience suggested by Fortney but I do not consider that to be confidential information or a trade secret. If there had been electricians available through the union hall they could have undertaken the work being performed by Sullivan. [32] As pointed out by Ryan J.A. the position of Sullivan when he submitted his proposal is almost identical to that of Ms. Nicolas: [76] ...Ms. Nicolas prepared her bid for the contract based on information she had obtained over the years simply by virtue of being in the business. Restauronics failed to prove that Ms. Nicholas used any confidential information or trade secrets in preparing her bid. [77] Aside from the effrontery of Ms. Nicolas’s bid, there is nothing that Restauronics can complain of in this case. [33] Ryan J.A. then held that Restauronics was not entitled to anything more than nominal damages and awarded it $500.00. I likewise hold that the plaintiff in this case is entitled to no more than nominal damages. I also award it $500.00. [34] In the result PCS is entitled to costs against the plaintiff and the plaintiff is entitled to costs against Sullivan. J. I.D. McLellan
The plaintiff claims damages against the defendants Tim Sullivan and Sullivan Instrumentation (collectively 'Sullivan') for breach of an employment contract when Sullivan was employed by the plaintiff to perform services for PCS at the mine. The issue is whether Sullivan breached his employment contract by submitting a proposal to PCS when he was still employed by the plaintiff. HELD: 1) There is nothing wrong with Sullivan setting up his corporation with a view to starting a competitive business after his employment with the plaintiff ended. An employee must be free to plan his future after his employment with his employer ends. He did not prepare the proposals during working hours. He prepared them with the assistance of his wife, when he was off work in Regina. However, it has been held that an employee who submitted a bid in competition to his or her employer during a period of working notice was in breach of the employment contract. Therefore, Sullivan breached his duty of fidelity to the plaintiff. 2) However, the Court was not satisfied that the plaintiff proved it would have been in a position to perform further work for PCS if Sullivan had not submitted a proposal. There were no union members available for it to hire. It had no employees ready to perform the contract. It would appear the plaintiff had abandoned any thought of continuing the contract until the end of December. If he had pulled employees from another contract, he would have suffered no damage. 3) Sullivan was not in a managerial position with the plaintiff. He did not possess any confidential information or trade secrets. He knew nothing as to the profit margins of the plaintiff. He did have business experience but not confidential information or a trade secret. 4) The plaintiff in this case is entitled to no more than nominal damages in the amount of $500 plus costs.