The recent decision of Planet Paper Box Group Inc., v. McEwan, highlights some of the risks of utilizing an ex parte motion to enforce restrictive covenants against a departing employee. The decision re-affirms that the court will take a strict approach when assessing whether an ex parte motion was reasonable. This case is an example of the consequences when a party fails to meet those strict standards.
The facts, as always, are important. The plaintiff was a manufacturer of corrugated paper boxes. The defendant was a former sales representative. She resigned in June, 2018 after working for the plaintiff for 6 years. Her contract of employment contained several restrictive covenants, including a non-compete clause that prevented her from working for a competitor within 250km of the plaintiff’s head office. In July 2018, the plaintiff’s lawyer wrote to the defendant advising that they had evidence she was violating this agreement. On October 29, 2018 they commenced a claim against her. On November 1, 2018, an ex parte motion was brought by the plaintiff for an injunction. The court initially granted the ex parte motion on November 1, 2018, and an injunction was granted for 15 days. It restrained the defendant, Ms. McEwan from contacting the plaintiff’s customers and from using the plaintiff’s confidential information.
The plaintiff returned on November 19, 2108, to extend the injunction. The original motion was ex parte, meaning the defendant had no notice and the only material before the judge was the plaintiff’s evidence. With both parties providing submissions on the resumption, Charney J., found that the plaintiff had omitted important information in its original ex parte materials and that an ex parte motion had not been necessary. Because of this, the motion was dismissed, and the interim injunction set aside.
In dismissing the injunction, Charney J., re-iterated that an ex parte motion was an extraordinary process and should only occur where there was good reason to believe the defendant, if given notice, would act to frustrate the process of justice by hiding, removing, or disposing of assets or evidence. Similarly, there was no evidence that urgency required the motion to be provided without notice. Charney J. held that the motion to extend an injunction should be dismissed on that basis alone.
Additionally, Charney J., found that the plaintiff failed to provide full and fair disclosure of all material facts. Given the extraordinary nature of an ex parte motion, the moving party is required to provide all material evidence to the judge, regardless of whether it helps or harms their case. A failure to do so is sufficient grounds to set aside any ex parte order, regardless of whether the additional information would have changed the outcome.
Ultimately, the most significant issue was the fact that the plaintiff’s affidavit failed to identify the source of the information it was relying upon as required by the Rules of Civil Procedure. Crucially, the plaintiff alleged the employee was working for a competitor but failed to cite the source of this information. Upon hearing the defendant’s evidence it was determined that this statement was simply untrue, and the plaintiff had never worked for the named competitor. Ultimately, it was the judge’s view that the plaintiff’s failure to provide the specific source of its information and belief, as required by Rule 39.01(4), was also a failure to make “full and fair disclosure of all material facts” as required by 39.01(6). The source of the information and belief was a material fact necessary for the court hearing the motion to have a balanced view of those facts that might reasonably affect the outcome of the motion.
Consequently, the original injunction was set aside and the defendant was entitled to costs to be determined.
Employers may feel they need to act quickly to prevent a former employee from “poaching” clients or improperly competing with the business. For this reason, ex parte motions and injunctions may appear attractive.
Although this decision hinged largely on technical non-compliance with a procedural rule of the court, it is a strong warning to employers that ex parte motions are a risky way to enforce restrictive covenants contained within a contract of employment. Courts do not like to grant ex parte motions and given their inherently unbalanced nature, judges will not hesitate to set them aside if it turns out parties did not provide full and frank disclosure. It is important to note that full and fair disclosure goes beyond providing both sides of the story but also includes providing the source of that information. Ultimately, an injunction may be necessary in some proceedings. The decision to bring a motion for an injunction should only be done after the underlying evidence has been verified. A failure to do so can be costly both in terms of legal spend but also reputational damage from reported decisions.
The decision, Planet Paper Box Group Inc., v. McEwan, 2018 ONSC 6991 can be found here.
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