IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Natural Trade Ltd. v. MYL Trading Ltd., |
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2018 BCSC 1176 |
Date: 20180713
Docket: S1710413
Registry: Vancouver
Between:
Natural Trade Ltd. and Global Forest, S.A. de C.V.
Plaintiffs
And
MYL
Trading Ltd., Michel Mizrach, Juan Carlos
Quintana, Damian Niron, Eduardo Garcia
Elizondo, Valley Lumber & Packing Trading LLC,
Proterey, S.A. de C.V., Tarimas El Sabino S de RL, and
Maderas Y Pallets EYM, S.A. de C.V.
Defendants
Before: The Honourable Mr. Justice Marchand
Reasons for Judgment
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Counsel for the Plaintiffs: |
H.S. Harris |
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Counsel for the Defendants: |
A.D.
Sekunova |
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Place and Date of Hearing: |
Vancouver, B.C. June 20-22, 2018 |
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Place and Date of Judgment: |
Vancouver, B.C. July 13, 2018 |
[1] The plaintiffs, Natural Trade Ltd. (“Natural Trade”) and Global Forest, S.A. de C.V. (“Global Forest”), are closely held “sister” companies involved in lumber trading. Natural Trade is based in British Columbia and Global Forest is based in Mexico.
[2] Natural Trade exports lumber products from North America, South America and Europe to Mexico where Global Forest sells the products to local customers. Natural Trade and Global Forest consider their business strategy to be unique and successful.
[3] The defendants, Michel Mizrach and Juan Carlos Quintana, are former employees of Natural Trade. The defendant, MYL Trading Ltd. (“MYL Trading”) was a partnership formed by Mr. Mizrach and his spouse while Mr. Mizrach was employed by Natural Trade. It was subsequently incorporated and now competes with Natural Trade and Global Forest. I will refer to Mr. Mizrach, Mr. Quintana and MYL Trading as the “Mizrach defendants”.
[4] The defendant, Damian Niron, is Mr. Mizrach’s cousin and assisted Mr. Mizrach while Mr. Mizrach was employed by Natural Trade and after. The other defendants are competitors and/or former customers of the plaintiffs.
[5] The plaintiffs believe that MYL Trading was formed to directly compete with them and is a corporate vehicle through which Mr. Mizrach and Mr. Quintana misuse confidential information obtained during their employment with Natural Trade.
[6] The plaintiffs seek:
1. an interlocutory injunction to restrain the Mizrach defendants from using confidential information obtained in violation of duties owed to the plaintiffs;
2. an order for recovery by the plaintiffs of its confidential information and other property from the Mizrach defendants; and
3. orders requiring Mr. Mizrach and Mr. Quintana to attest to their eventual return of the plaintiffs’ property and to answer questions about their use of the plaintiffs’ confidential information.
[7] The Mizrach defendants say that there is no evidence that they have ever misused any confidential information and that the plaintiffs have waited too long to pursue an injunction. The Mizrach defendants also say that the plaintiffs’ true purpose is to prevent the Mizrach defendants from competing with them. Specifically, the Mizrach defendants say that the proposed injunction is cast in overly broad terms that would force them out of business.
[8] The Mizrach defendants are prepared to return certain information considered confidential by the plaintiffs and have already returned some of that information. The Mizrach defendants seek direction on the return of other information that they have in electronic format.
[9] The plaintiffs seek no relief at this stage against the other defendants and no other defendants participated in the hearing of the plaintiffs’ present application.
[10] The issues are:
1. If granted, will the interlocutory injunction sought by the plaintiffs effectively amount to a final order?
2. If so, have the plaintiffs established a strong prima facie case?
3. If not, is there a serious question to be tried?
4. Have the plaintiffs demonstrated that they will suffer irreparable harm if an interim injunction is not granted?
5. Does the balance of convenience favour granting an interim injunction?
6. If an interlocutory injunction is granted, what is the appropriate scope of the injunction?
7. Should an order for return of confidential information and other property be made?
8. Should any other orders be made?
[11] During the course of this hearing, the parties referred me to 23 affidavits, over 200 exhibits, extensive written submissions and 40 authorities. I do not consider it necessary or helpful to review these materials in detail in these reasons for judgment. In my view, the issues can be resolved on certain key facts and an application of general legal principles.
[12] I will start my analysis with a brief overview of the relevant background. I will then set out the general legal principles. Finally, I will address each of the issues I have identified.
[13] For the reasons that follow, I will be making a tailored interlocutory injunction and ordering the Mizrach defendants to return certain information to the plaintiffs. I will not make any other orders.
[14] Natural Trade is a closely held, private, Canadian company based in North Vancouver, British Columbia. It was established in 2000. Natural Trade’s sister company, Global Forest, is based in Mexico and was established in 2008. Carlos Villavicencio is a director and the President and CEO of the two companies.
[15] Natural Trade and Global Forest are in the business of marketing, distributing, brokering, wholesaling, importing, exporting, trading and selling lumber products. Natural Trade and Global Forest’s core business is to work together to export (for Natural Trade) and import (for Global Forest) lumber into the Mexican market. By operating under one umbrella, they are able to conveniently provide customers in Mexico with products from North America, South America and Europe. Natural Trade and Global Forest say that their “unique” strategy makes them a main player in the Mexican market.
[16] Not surprisingly for trading companies, Natural Trade and Global Forest say they rely heavily on their employees, in particular their sales employees, to establish, develop, maintain and expand relationships with suppliers and customers. Natural Trade and Global Forest consider the information collected and used by their employees to be highly confidential and for the benefit of Natural Trade and Global Forest only.
[17] Mr. Mizrach is originally from Argentina and has a degree in Public Accounting. In Argentina, he was involved in accounting, auditing and finance in a variety of industries including textiles, newspaper, finance and lumber. He also had experience with logistics, and importing and exporting products in South America.
[18] Mr. Mizrach was hired by Natural Trade in the spring of 2009. Initially, his responsibilities consisted of accounting and trading lumber. Mr. Mizrach soon became an important trader and was promoted to CFO in 2010. While he was CFO, Mr. Mizrach continued to have an important sales role.
[19] Mr. Quintana is originally from Mexico and has a degree in Business Administration. In Mexico, Mr. Quintana was involved in commercial sales. Mr. Quintana was hired by Natural Trade in late 2008 or early 2009. Throughout his time with Natural Trade, Mr. Quintana worked as a lumber trader.
[20] In 2009, Mr. Mizrach and Mr. Quintana signed written employment agreements with Natural Trade. In 2016, they also signed written confidentiality and non-disclosure agreements. Mr. Mizrach and Mr. Quintana say they signed their employment agreements after they had already been hired and that the employment agreements were not supported by any fresh consideration. Mr. Mizrach and Mr. Quintana say they signed the confidentiality and non-disclosure agreements under duress.
[21] In any event, the employment agreements, and/or confidentiality and non-disclosure agreements include terms relating to non-disclosure of confidential information, return of company property, non-competition and non-solicitation.
[22] During their employment with Natural Trade, Mr. Mizrach and, to a lesser extent, Mr. Quintana had access to, and acquired knowledge of nearly every aspect of Natural Trade’s business and operations. Of particular importance to this litigation, this included access to gross margin reports, which include the customers, suppliers, freight and insurance providers, costs, discounts, profits and profit margins for each sale. Collectively, this information outlined which combinations of customers, suppliers and logistics providers were the most profitable.
[23] In performing their duties for Natural Trade, Mr. Mizrach and Mr. Quintana developed relationships with various customers. Some of Mr. Mizrach’s (and Natural Trade’s) largest customers were owned by the defendant, Eduardo Garcia Elizondo. Mr. Elizondo’s companies include the defendants, Valley Lumber & Packing Trading LLC (“Valley Lumber”), Proterey, S.A. de C.V. (“Protery”), and Tarimas El Sabino S de RL (“Tarimas Sabino”).
[24] The plaintiffs believe that before November 2016, and perhaps as early as the spring of 2015, Mr. Mizrach developed a plan to use their confidential information to take their customers for himself and any partners he may have. In particular, the plaintiffs believe that Mr. Mizrach began working with Mr. Niron, to ensure that Mr. Niron was one of the primary contacts for most of Natural Trade’s suppliers of lumber products in South America so that Mr. Mizrach would have sufficient supplies of lumber to service the plaintiffs’ customers.
[25] To support their beliefs, the plaintiffs have produced documents recovered from Mr. Mizrach’s Natural Trade computer. These documents appear to show that Mr. Mizrach, Mr. Niron and MYL Trading were, for their own benefit, utilizing one of Natural Trade’s suppliers in Brazil to transact business directly with Proterey and Valley Lumber in December 2016. Mr. Mizrach was still employed as Natural Trade’s CFO at the time. The defendants offer no explanation of these records in their affidavits.
[26] At about the same time, the plaintiffs have adduced evidence that Mr. Mizrach made a copy of Natural Trade’s “ERP system”, which lists all of Natural Trade’s suppliers and customers together with contact information for each. Mr. Mizrach says he regularly pulled information from the system for accounting purposes but the plaintiffs’ evidence is that Mr. Mizrach does not appear to have “used” the copy he made for any purpose related to Natural Trade’s business. The implication of the plaintiffs’ evidence is that Mr. Mizrach took a copy of the information for his own benefit to compete with the plaintiffs.
[27] In January 2017, Mr. Mizrach and Proterey incorporated the defendant, Maderas Y Pallets EYM, S.A. de C.V. (“EYM”), with Mr. Mizrach owning 50% of the shares in EYM and Proterey owning the other 50% of the shares.
[28] As noted above, MYL Trading was a partnership formed by Mr. Mizrach and his spouse. Initially, MYL Trading appears to have been used by Mr. Mizrach to split his commission income from Natural Trade with his spouse. The plaintiffs believe that MYL Trading was subsequently incorporated to directly compete with them and note that Mr. Quintana was appointed as a director of MYL Trading in February 2017.
[29] The plaintiffs have adduced evidence showing that Proterey began importing lumber from suppliers in Brazil, who had previously worked with Natural Trade, to Mexico in February 2017. Given the timing and relationships, the plaintiffs believe this is evidence of the Mizrach defendants competing against Natural Trade while still employed by Natural Trade.
[30] Mr. Mizrach and Mr. Quintana signed letters of resignation from Natural Trade in April 2017. Mr. Mizrach and Mr. Quintana say they did so as a result of unilateral changes to their employment made by Mr. Villavicencio and verbal abuse from him. Though not germane to the issues before me, Mr. Mizrach and Mr. Quintana have filed counterclaims alleging that they were constructively dismissed by Natural Trade. Mr. Mizrach and Mr. Quintana have also counterclaimed for commissions they say they earned but which have not been paid by Natural Trade.
[31] The plaintiffs have adduced evidence that, prior to their departures, Mr. Mizrach and Mr. Quintana either copied or tried to copy their entire work email contents for their personal use. Both Mr. Mizrach and Mr. Quitana acknowledge having or having had several months’ worth of work emails on their cell phones after leaving Natural Trade. Further, Mr. Mizrach acknowledges having copies of certain of Natural Trade’s gross margin reports.
[32] Mr. Mizrach and Mr. Quintana offer explanations as to why they have or had possession of confidential information of the plaintiffs. They explain that they copied or tried to copy the content of their work email accounts to capture personal emails. They explain having several months’ worth of work emails on their cell phones as a mere consequence of their departures. Mr. Mizrach explains his possession of gross margin reports as being to enable him to ensure he was paid for commissions he earned before his departure. Mr. Mizrach also explains that he retained some company information at Mr. Villavicencio’s request to offer assistance to Natural Trade during the transition after his departure.
[33] The plaintiffs have adduced evidence which appears to show that, since the departure of Mr. Mizrach and Mr. Quintana, the plaintiffs have experienced a decline in sales to some of the plaintiffs’ customers which is offset by sales to these same customers by MYL Trading.
[34] The plaintiffs have also adduced evidence suggesting that the Mizrach defendants have set up a distribution yard in Mexico operated by EYM, which the plaintiffs say demonstrates that the Mizrach defendants are copying the plaintiffs’ import/export strategy.
[35] In RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, the Supreme Court of Canada established the well-known test for the granting of an interlocutory injunction:
1. Is there a serious question to be tried?
2. Has the applicant demonstrated that it will suffer irreparable harm if an interim injunction is not granted?
3. Does the balance of convenience favour the granting of an injunction?
[36] In British Columbia, the test for an interlocutory injunction has often been compressed into a two-part test, where irreparable harm is treated as an element of the balance of convenience test. In either case, the fundamental question is whether the granting of an injunction is just and equitable in all the circumstances: British Columbia (Attorney General) v. Wale (1987), 9 B.C.L.R. (2D) 333 (C.A.), aff’d [1991] 1 S.C.R. 62 and Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd., 2007 BCCA 481 at paras. 30-33.
[37] Generally, the court does not embark on a prolonged examination of the merits of the case. However, where the result of an interlocutory injunction would effectively amount to a final determination of the case between the parties, the applicant is required to establish a “strong prima facie case”: RJR at 338-339; JTT Electronics Ltd. v. Farmer, 2014 BCSC 2413 at paras. 21-22.
[38] The test for the return of property, including electronic documents, prior to judgment is essentially the same as the test for the granting of an interlocutory injunction: Laxton v. Coglon, 2006 BCSC 181 aff’d 2006 BCCA 178 and Package Apparel Inc. v. Ellis, 2014 BCSC 884 at para. 40.
[39] The plaintiffs acknowledge that the non-compete clauses in the employment contracts of Mr. Mizrach and Mr. Quintana have expired and the plaintiffs do not seek an order prohibiting the Mizrach defendants from competing against them.
[40] Nevertheless, the Mizrach defendants submit that the injunction sought by the plaintiffs is so vague and overly broad that the Mizrach defendants will not know what they can and cannot do and that they will be driven out of business. At the same time, the Mizrach defendants swear that they have very little information from their time with Natural Trade and that they have not used any confidential information since their departure.
[41] In my respectful view, it is incongruous for the Mizrach defendants to say on the one hand that they are not using any confidential information and to say on the other hand that if they are enjoined from using confidential information they will be driven out of business.
[42] The real concern of the Mizrach defendants appears to be the breadth of the injunction sought by the plaintiffs. That concern can be addressed through a properly tailored order.
[43] On the evidence before me, I am unable to conclude that a properly tailored injunction will drive the defendants out of business and/or effectively amount to a final order. Accordingly, the plaintiffs do not have to establish that they have a strong prima facie case. They need only establish that there is a serious issue to be tried.
[44] The threshold for establishing that there is a serious issue to be tried is a low one. I must satisfy myself that the application is neither vexatious nor frivolous and then move on to consider the rest of the test for granting an interlocutory injunction - even if I am of the view that the plaintiffs are unlikely to succeed. At this stage of the analysis, “[a] prolonged examination of the merits is neither necessary nor desirable”: RJR at 338.
[45] The Mizrach defendants made extensive submissions on the merits of the case. These submissions appear to have been directed at challenging whether the plaintiffs have established a strong prima facie case. Given that the plaintiffs need only establish a serious issue to be tried, I will resist the urge to delve deeply into merits.
[46] There is no serious contest that Mr. Mizrach and Mr. Quintana owe duties of confidence, loyalty, fidelity and/or good faith to at least Natural Trade, as a result of their employment and/or confidentiality and non-disclosure agreements, at common law and/or in equity.
[47] There is also no serious issue that a third party, such as MYL Trading, who is aware that it received confidential information through a breach of confidence may also be held liable for that breach: Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142 at para. 20 and LAC Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at 657.
[48] Further, while the Mizrach defendants maintain that a great deal of information about the international trade of lumber into Mexico is publicly available, there is also no serious issue that the Mizrach defendants have at least some confidential information of the plaintiffs, in particular certain gross margin reports.
[49] There is unexplained evidence that the Mizrach defendants transacted business for their own benefit in competition with the plaintiffs while still employed by Natural Trade. There is also evidence of the Mizrach defendants transacting business with the plaintiffs’ customers, which corresponds with a decline in the plaintiffs’ business with these customers.
[50] It may well be that the employment, and confidentiality and non-disclosure agreements are unenforceable; that there is an explanation for the business apparently transacted by the Mizrach defendants for their own benefit in December 2016; that the Mizrach defendants have used only publicly available information to build their business; and that the Mizrach defendants are simply outcompeting the plaintiffs through their general know-how and perseverance. Nevertheless, the evidence easily satisfies me that there are a number of serious issues to be tried.
[51] In RJR at 341, the Court held as follows regarding irreparable harm:
"Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).
[52] In addition to the examples in RJR, in Edward Jones v. Voldenburg, 2012 BCCA 295 at para. 37, our Court of Appeal held that the general use of confidential information will generally constitute irreparable harm.
[53] On the other hand, the authorities are clear that:
1. Evidence of irreparable harm must be clear and not speculative;
2. Many types of business losses are quantifiable; and
3. Difficulties assessing damages do not make harms irreparable.
(See for example Corporate Images Holdings Partnership v. Satchell, 2008 BCSC 525 at paras. 45-47 and JTT at paras. 26-27.)
[54] On the evidence before me, I am unable to conclude that the plaintiffs are in any real jeopardy of suffering future harms which cannot be quantified or being driven out of business unless an injunction is granted.
[55] In this case, there is evidence of a specific and quantifiable transaction to the personal benefit of the Mizrach defendants while Mr. Mizrach and Mr. Quintana were employed by Natural Trade. There is evidence that the Mizrach defendants have certain confidential information of the plaintiffs. There is also evidence that, since the departure of Mr. Mizrach and Mr. Quintana, MYL Trading has been doing business with customers of the plaintiffs which corresponds with a decline in the plaintiffs’ business with those customers. The plaintiffs have quantified these losses.
[56] The plaintiffs rely on hearsay and inference to conclude that the Mizrach defendants have misused the plaintiffs’ confidential information to undercut the plaintiffs, harm their reputation and take their customers. If that has happened, the harm has already been done and likely cannot be undone by the granting of an injunction. Though it may be difficult, any damage already done to the plaintiffs through the misuse of confidential information by the Mizrach defendants will have to be quantified.
[57] In terms of the present risk to the plaintiffs, the plaintiffs rely on evidence adduced by the Mizrach defendants to establish that the Mizrach defendants have not contacted all of the plaintiffs’ customers. The plaintiffs assert that the injunction is necessary to prevent the Mizrach defendants from pursuing these remaining unsolicited customers through a misuse of confidential information. The plaintiffs offer no direct and specific evidence to establish any ongoing misuse of the plaintiffs’ confidential information.
[58] As a result of the alleged misconduct of the Mizrach defendants, Mr. Villavicencio swears that the plaintiffs’ business is in jeopardy. Incongruously, the plaintiffs rely on their undertaking to pay damages in support of a submission that the Mizrach defendants will not suffer irreparable harm if an injunction is granted but the Mizrach defendants ultimately succeed in the litigation.
[59] Further, there is evidence that, while the plaintiffs have lost the business of some customers, the plaintiffs’ gross sales remain in the same range as prior to the departure of Mr. Mizrach and Mr. Quintana.
[60] Finally, there is evidence that the plaintiffs have a very substantial business in comparison to the fledgling business of the Mizrach defendants.
[61] While I am unable to conclude that the plaintiffs are in any real jeopardy of being driven out of business unless an injunction is granted, on the Mizrach defendants’ own evidence, there is a real risk that if the plaintiffs succeed in this litigation they will be unable to collect from the Mizrach defendants. It is that risk that raises the spectre of irreparable harm in the context of this case.
[62] In the recent case of National Bank Financial Inc. v. Canaccord Genuity Corp., 2018 BCSC 857 at para. 94, G.C. Weatherill J. summarized the factors the court may consider in assessing the balance of convenience to include:
a) the adequacy of damages as a remedy if an injunction is or is not granted;
b) the likelihood that damages will be paid;
c) the need to preserve contested property;
d) which of the parties has acted to alter the status quo;
e) the strength of the plaintiff’s case; and
f) harm to third parties.
[63] Of course, this list is not exhaustive and the court may consider other relevant factors. I will focus on the factors which I consider to be the critical factors in the circumstances of this case.
[64] In this case, the Mizrach defendants have or have had confidential information of the plaintiffs, including at least gross margin reports and months’ worth of work emails. This information includes key contact information for the plaintiffs’ customers and suppliers, costs and discounts along the supply chain, and profit margins for a wide variety of means of satisfying the needs of particular customers. There may be additional information in the possession of the Mizrach defendants relating to, for example, the credit-worthiness of certain customers.
[65] Some of this information is publicly available. For example, there are subscription services that detail lumber imports into Mexico, which identify suppliers and customers. However, this publicly available information does not include any information regarding the discounts offered by the plaintiffs, who the plaintiffs’ key contacts are, which customers are the most credit-worthy and what combination of suppliers, and logistics and insurance providers are the most profitable. The publicly available information also does not contain information regarding the final destination of many of the plaintiffs’ lumber shipments into Mexico – because the publicly available information only shows the imports by Global Forest and not Global Forest’s ultimate sales to its customers.
[66] At this stage, only the Mizrach defendants know for sure whether they have misused the confidential information of the plaintiffs to unfairly compete with them. Nevertheless, the plaintiffs have adduced some reasonably compelling evidence that that has occurred. That evidence includes:
1. The unexplained evidence that the Mizrach defendants transacted business for their personal benefit while still employed by Natural Trade;
2. Mr. Mizrach’s incorporation of EYL prior to his departure from Natural Trade;
3. The downloading or attempted downloading by Mr. Mizrach and Mr. Quintana of all of the content of their work email accounts before their departures from Natrural Trade;
4. The possession of the plaintiffs’ property by the Mizrach defendants, including important information which is not publicly available;
5. The speed with which the Mizrach defendants began competing with the plaintiffs; and
6. Sales by the Mizrach defendants to the plaintiffs’ customers that correspond to a decline in sales to those customers by the plaintiffs.
[67] At this stage, it is hard to know whether any misuse of confidential information by the Mizrach defendants has harmed the plaintiffs’ reputation or caused the plaintiffs to suffer a permanent loss of market share. It also appears that the plaintiffs have been able to quantify substantial losses that they attribute to misconduct by the Mizrach defendants. There is, however, a real risk that, if ultimately successful, the plaintiffs will be unable to recover their damages from the Mizrach defendants.
[68] In addition, if an injunction is granted, it is not apparent how that would irreparably harm the Mizrach defendants. The Mizrach defendants say that they are not using any of the plaintiffs’ confidential information. The plaintiffs are not seeking an order prohibiting the Mizrach defendants from competing against them. If the Mizrach defendants are ultimately successful, the plaintiffs will be in a position to pay any damage award that may be made as a result of the granting of an injunction.
[69] While these factors weigh in favour of an injunction, the main factor weighing in the other direction is the passage of time.
[70] Commodities trading is a dynamic and not static business. Markets go up and down. Customer needs change. Key contacts change. New players may enter the field, while existing players may consolidate or exit. New governments come into power. Regulatory requirements and/or tariffs change. The list goes on.
[71] More than 14 months have passed since Mr. Mizrach and Mr. Quintana left the employ of Natural Trade. If the Mizrach defendants have misused the confidential information of the plaintiffs, it seems self-evident that most of the damage must already be done. Presumably, the Mizrach defendants have already targeted the best prospects and established new relationships with their customers. Any damage done to date likely cannot be undone by the granting of an injunction. Borrowing the phrase used by Groberman J., as he then was, in MD Management Ltd. v. Dhut, 2004 BCSC 513 at para. 42, it is likely too late now to “unscramble the egg”.
[72] While the plaintiffs concede that the value of confidential information may lose its relevance over time, Mr. Villavicencio has sworn that product costs of South American lumber have been stable for over a year and that the confidential information of the plaintiffs still has value. Further, the evidence of the Mizrach defendants establishes that they have not contacted some of the plaintiffs’ existing customers. Though diminished in value, in my view, an injunction will still serve a purpose.
[73] The other legitimate consideration weighing against the granting of an injunction is the breadth of the injunction sought by the plaintiffs. In JTT at paras. 39-43, Voith J. explained the rationale for a plaintiff seeking an injunction relating to confidential information to identify that information with a reasonable degree of specificity as follows:
[39] The need to identify with some reasonable degree of specificity what a plaintiff asserts is confidential or proprietary serves three important and related functions. First, it enables a defendant to respond to an application and the relief sought in the application, and to bring into question whether the purported confidential information is in fact confidential or whether it is information that is in the public domain. Certainly that is a relevant issue in this case. Mr. Potter deposes that much of JTT’s information or processes are broadly used in the battery industry. That assertion is not really questioned by JTT.
[40] Second, if a plaintiff can establish that specific information in its possession is confidential, and the remaining elements of an injunction are made out, the defendant is put on notice, in the form of an order, of what it is that he or she can or cannot do.
[41] Third, in the event that there is an allegation that a defendant has not complied with the terms of an order restraining the use of specific confidential information, the court is in a position to address the alleged breach. Absent some reasonable level of precision or definition, the issue of enforcement is rendered either more difficult or impossible.
[42] In Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf, (Toronto: Canada Law Book, 2013) at para. 1.390, under the heading “Problems of definition”, the author states:
Quite clearly, in formulating injunction orders, the courts should avoid vague or ambiguous language which fails to give the defendant proper guidance or which in effect postpones determination of what actually constitutes a violation of the plaintiff’s rights. As the Supreme Court of Canada stated:
The terms of the order must be clear and specific. The party needs to know exactly what has to be done to comply with the order. Also, the courts do not usually watch over or supervise performance. While the specificity requirement is linked to the claimant’s ability to follow up non-performance with contempt of court proceedings, supervision by the courts often means relitigation and the expenditure of judicial resources.
It is unfair to the defendant to do nothing more than give a warning not to do anything wrong and resolve the important questions of detail on a contempt application and the terms of the injunction should be no wider than is required to protect the plaintiff’s right. When an issue is “ripe for decision between the parties” the courts should decide then and there.
[Footnotes omitted in original.]
[43] The requirement that the terms of an injunction be “clear and specific” often arises when an injunction is being enforced, but it is clear that the requirement also constitutes a prerequisite to granting an injunction. In Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, the Court refused to enforce a US contempt order due to, inter alia, its vagueness. Deschamps J., for the majority, said:
23 ... equitable orders are crafted in accordance with the specific circumstances of each case. The most relevant equitable remedies for the purposes of the present case are specific performance, that is, an order by the court to a party to perform its contractual obligations, and the injunction, that is, an order to a party to do or refrain from doing a particular act.
24 Despite their flexibility and specificity, Canadian relief orders are fashioned following general guidelines. The terms of the order must be clear and specific. The party needs to know exactly what has to be done to comply with the order. Also, the courts do not usually watch over or supervise performance. While the specificity requirement is linked to the claimant’s ability to follow up non-performance with contempt of court proceedings, supervision by the courts often means relitigation and the expenditure of judicial resources.
[74] As I indicated at the outset, in my view, any concerns about ambiguity or over-breadth can be addressed by tailoring an injunction to meet the circumstances of the case.
[75] It remains to be seen whether the Mizrach defendants have misused or are presently misusing the confidential information of the plaintiffs. There can be no question, however, that the possession of it by the Mizrach defendants puts the Mizrach defendants “in a position to seriously injure” the plaintiffs by giving the Mizrach defendants a “springboard for activities detrimental to [the plaintiffs]”: Clayburn Industries Ltd. v. Piper (1998), 62 B.C.L.R. (3d) (S.C.) at para. 30, citing from A.R. Thomson Ltd. v. Stock, [1990] B.C.J. No. 2164.
[76] As I see it, there is no reason why the Mizrach defendants should not be enjoined from using clearly identified confidential information of the plaintiffs. The Mizrach defendants should not have this information. The Mizrach defendants say they have not been using this information. Misuse of this information has the potential to seriously harm the plaintiffs. The Mizrach defendants do not appear to have the capacity to pay a damage award resulting from any misuse of the information. On the other hand, the plaintiffs do appear to have the capacity to pay a damage award in the event the Mizrach defendants are ultimately successful in the litigation. Time has gone by but an injunction will still serve an important purpose.
[77] In my view, in all the circumstances of this case, it is just and equitable to grant a tailored interlocutory injunction to enjoin the Mizrach defendants from using specified confidential information of the plaintiffs.
[78] The plaintiffs seek an order restraining and enjoining the Mizrach defendants in the following terms:
1. The defendants Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd., their agents and employees, or any of them, are restrained and enjoined from directly or indirectly using, reproducing, copying, disclosing or conveying to others, in any way or format, whether electronic, printed or verbal, any information not made available to the public which Michel Mizrach and/or Juan Carlos Quintana learned of, or acquired during, their employment with the plaintiff Natural Trade Ltd. (“Natural Trade”), including but not limited to:
a) technical information including but not limited to product design and manufacturing information;
b) names and addresses, contacts, buying habits, statistics and preferences of customers and prospective customers, suppliers and competitors of the plaintiffs;
c) names and addresses of the plaintiffs’ contacts;
d) any and all agreements or contracts involving the plaintiffs;
e) logistics information, strategies, methods of shipment and related know-how of the plaintiffs;
f) pricing and sales policies, strategies, techniques and concepts of the plaintiffs;
g) trade secrets, copyrights, logos, or trademarks of the plaintiffs;
h) business strategies of the plaintiffs;
i) financial statements, accounting records, financial reports, including financial information from customers of the plaintiffs;
j) organizational charts, human resource documents, policies and/or processes of the plaintiffs;
k) credit applications from the plaintiffs’ customers;
l) purchase orders, invoices and any other forms developed and used by the plaintiffs;
m) purchase orders, invoices or other documents related to purchase or sale transactions involving the plaintiffs, or either of them;
n) marketing and business plans and strategies of the plaintiffs;
o) sales forecasts and projections of the plaintiffs;
p) new market developments, as well as existing or new market research developed and used by the plaintiffs;
q) digital or printed internal publications, pictures and designs, certifications, affiliations to different associations developed and used by the plaintiffs;
r) all forms of Gross Margin (GM) calculations, reports, summaries created for or by any of the plaintiffs or their employees or agents, and any and all information in the GM forms, reports and summaries of the plaintiffs in intangible or tangible form;
s) sales information of the plaintiffs, including top selling designs and those that produce the greatest profit margins;
t) trade show participation of the plaintiffs, lists of attendees including suppliers and customers of the plaintiffs; and/or
any other private and confidential information pertaining to the plaintiffs, their business, their customers, employees, suppliers, and logistics providers (the “Confidential Information”).
2. Without limiting the generality of the above paragraph, the defendants Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd. their agents and employees, or any of them, are restrained and enjoined, until further order of this court, from including but not limited to those referred to in paragraphs 178, 182 and 192 of Michel Mizrach’s Affidavit #2 sworn in this action on June 8, 2018.
[79] In considering these terms, I am mindful that the Court of Appeal upheld a broadly worded injunction regarding confidential information in Edward Jones at paras. 7 and 54. At the same time, I am mindful that an injunction should go no further than necessary to protect the interest at risk: Future Shop Ltd. v. Northwest-Atlantic (B.C.) Broker Inc., 2000 BCSC 1797 at para. 56. Finally, I am mindful that it is not the court’s function to try to construct a sensible order from overly broad language proposed by the party seeking relief: JTT at para. 37.
[80] With these cautions in mind, I note the following:
1. The plaintiffs are traders. There is no evidence that they are involved in product design or manufacturing;
2. Mr. Mizrach and Mr. Quintana have accumulated their “know-how” over many years and not exclusively from the plaintiffs. Any prohibition against the Mizrach defendants using the know-how they acquired during their employment with Natural Trade would be too vague to enable them to know what they can and cannot do, difficult to enforce and effectively put them out of business;
3. There is no evidence of the plaintiffs having or the defendants misusing any “trade secrets, copyrights, logos, or trademarks”. In particular, while the plaintiffs consider their import/export strategy to be unique, I am unable to agree. In my experience, it is not uncommon for related entities to trade in commodities with each other and, in any event, the defendants have adduced evidence of other businesses that employ a similar strategy to that being used by the plaintiffs;
4. Likewise, there is no other business strategy that has been clearly articulated by the plaintiffs as being truly unique to them. Any prohibition against the Mizrach defendants using business strategies employed by the plaintiffs would be too vague to enable them to know what they can and cannot do, difficult to enforce and effectively put them out of business;
5. Time has passed and any damage done through the misuse of confidential information likely cannot now be undone by the granting of an injunction. Going forward, the real object of an injunction must be to prevent the misuse of the type of confidential information that can truly give the Mizrach defendants an unfair competitive advantage over the plaintiffs. The most critical information is that found in the gross margin reports;
6. Going forward, the evidence is sparse at best regarding how prohibiting the Mizrach defendants from using other information considered confidential by the plaintiffs will serve any meaningful purpose. For example, if the Mizrach defendants have already used confidential information relating to human resources or the creation of forms, it is not at all clear to me how that damage can be addressed by an injunction at this stage;
7. Given that the plaintiffs acknowledge the Mizrach defendants are free to compete with them and that there is plenty of publicly available information regarding suppliers and consumers of lumber products, there is no basis to make an order prohibiting the defendants from contacting the customers or suppliers of the plaintiffs that the Mizrach defendants have not sold any products to, or purchased any products from, as of June 8, 2018; and
8. Rather than craft an order completely from scratch, I consider myself able to simply narrow down the order proposed by the plaintiffs to go only as far as necessary in all the circumstances of the case.
[81] I will outline the specific terms that I consider appropriate and necessary in my order below.
[82] While the plaintiffs have their doubts that the Mizrach defendants have been honest regarding the extent of the plaintiffs’ information in their possession, there is really no issue regarding the return of the plaintiffs’ information and other property. The defendants are willing to do so and only require direction on how to handle the return of, in particular, information that is in electronic format. I will set out the terms in my order below.
[83] The order will be in the form requested by the plaintiffs. The order will not be restricted to confidential information and will cover all of the property of the plaintiffs that is in the possession of the Mizrach defendants. There is no reason for the Mizrach defendants to have any of the plaintiffs’ property.
[84] The Mizrach defendants will be ordered to retain a copy of any of the plaintiffs’ property that they have in electronic format in its current format. Such an order is necessary to enable the plaintiffs to have an opportunity, if ordered or agreed, to forensically examine the data to determine, for example, whether it has been manipulated or misused.
[85] In addition to the relief sought in their Notice of Application, the plaintiffs’ proposed form of order contains additional terms. One of these terms would require Mr. Mizrach and Mr. Quintana to swear affidavits attesting to their no longer being in possession of the plaintiffs’ confidential information. The other of these terms would require the Mizrach defendants to answer questions regarding what they have done with the plaintiffs’ confidential information.
[86] I will not be making the additional orders sought by the plaintiffs. They were not included in the Notice of Application and, in any event, in my view are unnecessary or inappropriate. In particular, the terms seeking the Mizrach defendants to answer questions regarding what they have done with the plaintiffs’ confidential information are better suited to interrogatories or examinations for discovery.
[87] For the reasons expressed, I make the following order:
1. The defendants Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd., their agents and employees, or any of them, are restrained and enjoined from directly or indirectly using, reproducing, copying, disclosing or conveying to others, in any way or format, whether electronic, printed or verbal, the following information not made available to the public which Michel Mizrach and/or Juan Carlos Quintana learned of, or acquired during, their employment with the plaintiff Natural Trade Ltd. (“Natural Trade”):
a. statistics concerning the customers and prospective customers, suppliers and competitors of the plaintiffs;
b. names and addresses of the plaintiffs’ contacts;
c. any and all agreements or contracts involving the plaintiffs;
d. pricing and sales policies of the plaintiffs;
e. financial statements, accounting records and financial reports, including financial information from customers of the plaintiffs;
f. credit applications from the plaintiffs’ customers;
g. purchase orders, invoices or other documents related to purchase or sale transactions involving the plaintiffs, or either of them;
h. sales forecasts and projections of the plaintiffs;
i. new market developments, as well as existing or new market research developed and used by the plaintiffs;
j. digital or printed internal publications;
k. all forms of Gross Margin (“GM”) calculations, reports and summaries created for or by any of the plaintiffs or their employees or agents, and any and all information in the GM forms, reports and summaries of the plaintiffs in intangible or tangible form; and
l. sales information of the plaintiffs, including top selling designs and those that produce the greatest profit margins.
(collectively, the “Confidential Information”).
2. The defendants Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd., shall immediately return to the plaintiffs any and all Confidential Information that is in their possession or control in hard copy and/or digital/electronic format, and all other property of the plaintiffs that is in the possession and/or control of Michael Mizrach, Juan Carlos Quintana and MYL Trading Ltd., or any of them and their agents/employees, including but not limited to, all e-mails that contain any Confidential Information and other records or information that contain any Confidential Information or property of the plaintiffs that were downloaded, uploaded, archived, copied or forwarded by Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd. at any time during the employment of Michel Mizrach and Juan Carlos Quintana with Natural Trade and after their employment ended.
3. The defendants Michel Mizrach, Juan Carlos Quintana and MYL Trading Ltd., shall retain, in its current format, any Confidential Information or other property referred to in paragraph 2 that is in electronic format until the parties agree or the court orders otherwise.
[88] In circumstances such as these where the relief granted is narrower than sought, the ultimate outcome is unknown, and I can discern no misconduct in relation to the litigation and hearing of the application, I would ordinarily order that costs be in the cause. The parties have, however, requested leave to address costs.
[89] My mind is certainly open in relation to costs. If, after a consideration of my reasons, order and comments, the parties still wish to address costs, they have leave to schedule a further hearing before me, which may be conducted by telephone. The parties must take steps to schedule any hearing in relation to costs within four weeks of the release of my reasons for judgment. If they do not, costs will be in the cause.
[90] I thank counsel for their thorough and thoughtful submissions.
“L.S. Marchand J.”
MARCHAND J.