Decision examines whether relationship among parties was 'confidential'
Ontario's Superior Court of Justice recently dealt with a case involving allegations of breach of contract, violation of fiduciary duty, and misuse of confidential information between an employer and former employees.
The decision sheds light on the nature of fiduciary relationships, the use of confidential information, and the consequences of constructive dismissal.
Northwest Protection Service, a company providing security services for various events and properties, claimed that its former part-time employees, Renville Wellington and Robert Dee, breached their fiduciary duties and improperly competed against the company.
Northwest alleged that they used its confidential information, worked for its competitors, and wrongfully recruited staff.
Confidential jobs?
Wellington and Dee juggled multiple jobs while dedicating part of their time to Northwest Protection Services. They began their journey at Northwest as supervisors and climbed the ranks to become senior supervisors.
According to records, Wellington even took on the responsibility of providing close personal protection, known as "black ops," for Northwest's VIP clients, showcasing his specialized skills in the security industry.
However, their employment with Northwest came to an abrupt end in March 2020, just as the COVID-19 pandemic began. Northwest leveled serious accusations against Wellington and Dee, claiming that they had breached their fiduciary duties and engaged in improper competition against the company.
Northwest alleged that they had exploited the company's confidential information, including sensitive details about bidding processes, pricing strategies, and requests for proposals, to gain an unfair advantage.
The company further asserted that Wellington and Dee had not only used this information for their own benefit but had also shared it with Northwest's direct competitors, thereby causing significant harm to the company's business interests. Northwest even implicated Wellington's corporation, Protocol7even ("P7"), in these alleged wrongdoings.
Northwest filed a comprehensive claim against Wellington, Dee, and P7, seeking damages for breach of contract, breach of duty of care, breach of fiduciary duty, and breach of confidence.
Involuntary layoff?
On the other hand, Wellington and P7 fired back with their own counterclaim, alleging that Northwest had wrongfully placed Wellington on an involuntary layoff, which he had never accepted, effectively resulting in constructive dismissal. They further accused Northwest of improperly interfering with their economic relations with Fan Expo, a third party, in the fall of 2021.
According to Wellington, Northwest had threatened to withdraw from its own contract to provide security at Fan Expo if Wellington or P7 were involved in providing any services for the event, despite the fact that Wellington and P7 had already been contracted to do so.
As a result of this alleged interference, Wellington and P7 claimed damages amounting from their loss of the Fan Expo contract and funds they had already invested in supplies for the event.
Access to confidential information
The court found that Wellington and Dee were not in a fiduciary relationship with Northwest, as they were part-time employees with limited operational scope and no managerial functions.
The court also determined that they did not have access to confidential information, such as pricing formulas or client lists, and that there was no evidence of them disclosing or using such information for their own benefit.
Furthermore, the court found that Wellington and Dee did not wrongfully work for Northwest's competitors, as there was no prohibition on them doing so. The court also concluded that they did not wrongfully recruit staff for Northwest's competitors, as there was insufficient evidence to support this claim.
Was there constructive dismissal?
Regarding Wellington's counterclaim, the court found that even if Northwest constructively dismissed him, he had not provided evidence of any damages suffered, as he began working for another company within a week of his layoff.
The court also dismissed Wellington's claim that Northwest wrongfully interfered with his economic relations with Fan Expo due to a lack of evidence on the nature of the arrangement between Northwest and Fan Expo.
Consequently, the court dismissed both Northwest's claim and the defendants' counterclaim.
