The Catalyst Capital Group Inc v Moyse, 2014 ONSC 6442
The Catalyst Capital Group Inc. (“Catalyst”) obtained an interlocutory injunction to prevent a former employee, Brandon Moyse, from working at and divulging confidential information to the competing investment firm West Face. [83] The injunction was awarded out of concern that Moyse would divulge confidential information, especially considering Moyse’s apparent misunderstanding of what constitutes confidential information and his transfer of confidential memos to West Face as a writing sample. [78] Central to the Court’s analysis was that Moyse and West Face could not ask that the injunction not be awarded in equity since Moyse and West Face themselves had not done equity. [2, 24]
Factual Background
Moyse’s employment contract with Catalyst contained a confidentiality clause, a non-solicitation clause, and a non-competition clause. [3] Nevertheless, while still at Catalyst, Moyse expressed to West Face an interest in joining the competing firm. [3] Moreover, as part of the recruitment process, Moyse sent West Face a number of investment memos from his work at Catalyst as writing samples. These memos were marked “Confidential” and “For Internal Discussion Purposes Only”. [13] Upon receiving the confidential memos, West Face impressed upon Moyse that he is not to divulge any confidential information he obtained from Catalyst, but the memos were circulated among the West Face management anyway. [13]
Catalyst wrote to West Face expressing its concerns about Moyse joining West Face, particularly with respect to the potential for Moyse to divulge information that it considered confidential. [3] However, West Face and Moyse did not respond to the concerns of Catalyst in a meaningful way until the evolution of this motion required them to do so. [22]
Catalyst sought this injunction, while West Face took the view that the information in the memos was not particularly sensitive or damaging to Catalyst. [17]
Opposing an Injunction Requires Equity
The primary guiding factor in the Court’s analysis was what it saw as a corollary to “He who seeks equity must do equity”. The Court stated that “[t]his is not just true of those who ask for an injunction, but also to those who oppose it.” [2] Focusing on the seemingly inequitable acts of Moyse and West Face, the Court thought that the case would ultimately be decided on “whether, in the end, the approach adopted by Brandon Moyse and West Face will meet the test that allows a party to obtain equity.” [24] This principle worked against Moyse and West Face as the Court considered the three pronged test for interlocutory injunctions: (i) serious issue, (ii) irreparable harm, and (iii) balance of convenience. [45-46]
There was a Serious Issue to be Tried
The Court found there to be a strong prima facie case that the confidentiality clause, which the parties agreed applies, [50] had been breached. [71] The Court was especially concerned with how West Face circulated Catalyst’s confidential memos even when it understood Catalyst would consider them to be confidential. [71] One point that is disturbing is that Moyse admitted in cross-examination that he was not sure what made a memo confidential, [14] and adamantly denied that the investment work he did at Catalyst could be considered confidential. [16] Moyse even held on to a number of documents from Catalyst after leaving their employ, and denied they could be considered confidential, alleging that Catalyst’s concerns were mere speculation. [43] Moyse had accessed these files during the period of his departure to West Face (for example, two days after meeting with a partner from West Face, and two has after he resigned from Catalyst). [44] The Court emphasized that these actions worked against Moyse and West Face in equity, and hindered their ability to ask that the injunction be denied. [71]
The Court also though it to be a serious issue whether the noncompetition clause in Moyse’s contract would be invoked to ensure that the promised confidentiality be maintained. [51, 68]
Irreparable Harm
Under the irreparable harm analysis, the Court considered the potential harm to Catalyst. [76] The Court thought that the potential for unfair competition could lead to irreparable harm to Catalyst. [76] Specific reference was made to a particular telecom deal that Moyse was working on at Catalyst that West Face was also interested in. [76-77] If confidential information on this deal were to be divulged, which the Court thought to be a risk considering the defendants’ apparent mistreatment of the confidential memos, the harm to Catalyst would not be possible to quantify. [78] On this point as well, the Court thought that Moyse’s apparent misunderstanding and mishandling of confidential information worked against Moyse and West Face in equity. [78]
Balance of Convenience
Under the balance of convenience analysis, the Court considered the possible impact on Moyse (without directly considering the balance for Catalyst). [79] The noncompetition clause in Moyse’s contract had a term of only 6 months. [52] Holding him to it would not constitute irreparable harm. [81] Nor would it have any short term effect if Catalyst is required to pay Moyse’s salary during the interim. [81] Thus, the Court found the balance of convenience to favour Catalyst. [82]
Conclusion
Ultimately, the balance of equity did not favour Moyse and West Face. [83]
The Court granted the interlocutory injunction preventing Moyse from using any confidential information of Catalyst, and from working at West Face until the non-competition period comes to an end on December 22, 2014, and ordered that Catalyst pay his West Face salary until December 21 2014. [83]
Commentary
The focus in this case was on what the Court clearly thought to be a flagrant disregard for confidential information on the part of Moyse and West Face. This disregard was deemed inequitable and worked considerably against Moyse, and seemed to be the primary reason why the Court ultimately decided to hold him not only to his confidentiality clause, but also to his noncompetition clause.