An Ontario court has upheld an earlier ruling granting an injunction against a brokerage firm, BMO Nesbitt Burns Inc., preventing it from soliciting the clients of rival firm, Sprott Private Wealth LP, after certain employees defected from Sprott to BMO.
According to the decision, Sprott Private Wealth LP v. BMO Nesbitt Burns Inc., BMO sought leave to appeal from a court order issued in June that granted an interlocutory injunction against the brokerage firm and unnamed individual defendants that restrained them from soliciting the clients of Sprott, and restrained them from using confidential information including client lists.
The decision, handed down by the Superior Court of Justice, Divisional Court, says that BMO argued that the motion judge erred in granting the injunction for a number of reasons, including, that the judge failed to properly consider the “balance of convenience” in granting the injunction, and in concluding that Sprott had demonstrated that it would suffer irreparable harm if the injunction was not granted.
However, the Divisional Court upheld the initial decision. “It is not apparent to me that the motion judge failed to apply the proper test in deciding whether or not to grant the injunctive relief sought by the plaintiff,” Judge Ian Nordheimer wrote in the Divisional Court’s decision.
“When one reviews the reasons of the motion judge, against the factual record, I am satisfied both that the motion judge applied the strong prima facie case test and correctly found that it had been met,” Nordheimer wrote.
The Divisional Court also found that the motion judge properly considered the issue of irreparable harm. “What was important on this issue… is the finding of the motion judge that the actions of the defendants could, in essence, threaten the very viability of the plaintiff and its continued business,” Nordheimer wrote.
“The destruction of the plaintiff’s business is of a measure that is demonstrably different than a simple dispute over the profit to be derived from a given client … I cannot conclude that the motion judge made any error in finding that the damages that might result from the defendants’ actions, if unrestrained, would constitute irreparable harm,” Nordeimer wrote.
Finally, on the issue of the balance of convenience, the Divisional Court said that the motion judge was right in concluding that it favoured the plaintiff.
“The motion judge was faced with a factual scenario where the defendants had carefully plotted their actions. They had engaged in a scheme to allow the individual defendants to jettison their existing employer and join the corporate defendant with the singular objective of bringing with them most, if not all, of the plaintiff’s clients for whom they had been responsible,” Norheimer wrote.
“The defendants did so with the full knowledge of the non-solicitation arrangements to which the individual defendants were bound. There was also clear evidence that the individual defendants had used confidential information belonging to the plaintiff to effect this result. It would be difficult to see how, in those circumstances, the motion judge could have concluded other than the balance of convenience favoured the plaintiff,” Nordheimer added.
The court also rejected the argument that the order adversely affects innocent clients. “That effort does not withstand any degree of scrutiny,” the Nordheimer wrote said.
“All of the clients are free to take their business wherever they wish including to the defendants if they do so of their own free volition. All that the order of the motion judge does is to preclude the defendants from enticing any of those clients to join them. Any effect on clients from the existence of the injunction is indirect and relatively minor. When it is compared to the defendants’ actions in orchestrating this whole endeavour, it visits very little prejudice on the clients involved,” Nordheimer wrote.
The Divisional Court dismissed the appeal, and ordered $12,000 in costs against the defendants.