People Corporation has been granted a limited injunction against a former employee, prohibiting him from soliciting its clients for one year following a ruling by the Court of King’s Bench of Alberta. The injunction stems from allegations that he breached fiduciary duties by contacting clients he serviced while employed at People Corp.
Justice B.E. Romaine found that People Corp. established a strong prima facie case that the worker — T.P. — may have been a fiduciary and that his solicitation of former clients warranted injunctive relief. “People has provided an undertaking to pay damages if this injunction causes (T.P.) to suffer damages,” Justice Romaine said.
The case revolves around several former employees of People Corp., including J.Q., S.M., and M.A., who left the company to join 2578649 Alberta Ltd., doing business as Quinn Advisory Group (QAG). People Corp. alleged that the defendants breached contractual and common law restrictive covenants, including non-solicitation and confidentiality clauses.
In 2018, People Corp. acquired Lane Quinn Benefit Consultants Ltd. (LQBC) for $20 million. J.Q., the majority shareholder and CEO of LQBC, along with other individual defendants, became employees of People Corp. J.Q. resigned effective Dec. 31, 2023, and subsequently established QAG in January 2024, offering similar services as People Corp.
Employees resigned, brought clients with them
Between February and March 2024, several employees, including T.P., S.M., and M.A., resigned from People Corp. and joined QAG. Shortly thereafter, People Corp. began receiving notices of Agent of Record Change (AORs) from clients transferring their business to QAG.
“Between February 19, 2024, and March 25, 2024, People received 63 AORs respecting clients who had been serviced by the Defendants,” the court document stated.
Definitions in contract broad: Court
People Corp. sought injunctions against the former employees and QAG, alleging breaches of restrictive covenants in the Executive Employment Agreement (EEA) and Restrictive Covenants Agreement (RCA) signed by J.Q. at the time of the acquisition. However, the court found that the restrictive covenants in the EEA were unreasonable and unenforceable due to overbreadth and ambiguity.
Justice Romaine noted that the definitions of “Clients” and “Prospective Clients” in the EEA were overly broad, making it impossible for J.Q. to determine if clients approached by QAG staff would fall within these parameters.
“It is how the restrictive covenant is written that is relevant, and it is not appropriate for the Court to clarify an ambiguous and unreasonable covenant through reading down the language during an injunction application,” the judge wrote.
The court also found no evidence that J.Q. solicited People Corp. employees or clients to join QAG. “People has adduced no evidence but speculation that Mr. Quinn [J.Q.] solicited any client to move its business to QAG,” Justice Romaine stated.
Regarding the other defendants, S.M. and M.A., the court determined that they were not bound by any contractual restrictive covenants and were not fiduciaries of People Corp. “There is no serious issue to be tried with respect to Ms. Metez [S.M.],” the ruling said. Similarly, for M.A., the court found “no strong prima facie case of any breach of any duties, contractual or by common law.”
Potential breach of fiduciary duty
T.P., however, admitted to contacting at least 25 clients he had serviced at People Corp., and these clients subsequently moved their business to QAG. While T.P. was not bound by any contractual restrictive covenants, the court found that his actions might constitute a breach of fiduciary duty.
Applying the criteria from Frame v. Smith, the court assessed whether T.P. was a fiduciary employee. The judge noted that T.P. had strong relationships with clients and that People Corp. was vulnerable to unfair competition due to these relationships. “On the evidence of People’s vulnerability with respect to Mr. Patterson’s [T.P.’s] strong relationship to his clients, People has established such a strong prima facie case,” Justice Romaine wrote.
The injunction against T.P. is limited to prohibiting him from soliciting People Corp.’s clients until Feb. 7, 2025, one year after his resignation. The court emphasized that the injunction would not prevent T.P. from working with clients he had already solicited or from obtaining new clients not associated with People Corp.
In assessing irreparable harm, the court concluded that People Corp.’s losses were quantifiable and did not constitute irreparable damage. “People’s losses are not ‘irreparable’… the number of clients solicited by Mr. Patterson, should he be found to be a fiduciary, and the profits lost during the year… should not be difficult to ascertain,” the ruling stated.
The balance of convenience was also considered in granting the injunction against T.P. The court noted that equity favours enforcing existing duties and that the injunction would not significantly interfere with T.P.’s income-earning capacity. “There is no ‘colour of right’ in being able to continue to breach restrictive covenants for personal gain,” Justice Romaine remarked.
For more information, see People Corporation v 2578649 Alberta Ltd. (Quinn Advisory Group), 2024 ABKB 711 (CanLII).
