Case information

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Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Contracts - Breach - Termination - Torts - Employer and employee - Vicarious liability - Damages - Punitive - Fiduciary Duty - Whether employees owe their employers a duty not to compete unfairly upon departure - Whether departing employees can take with them and use confidential information in the form of client lists, to the detriment of their former employer - How the principles in Hadley v. Baxendale (1854) 9 Exch. 341, 156 E.R. 145 apply to the assessment of damages for breach of an employee’s duties - How the duties of a non-fiduciary employee are to be determined - Whether an appellate court can decide that a cause of action should fail on the basis of inadequate pleadings notwithstanding the absence of any prejudice resulting from such supposed inadequacy - Whether an appellate court can reverse findings of facts and law made by a trial judge in a judgment from which no appeal has been taken or determine issues not in dispute in the original litigation.

The Respondent branch manager, investment advisors and their assistants in two branches of the Appellant (“RBC”) left their employment to accept positions offered to them at Merrill Lynch Canada Inc. (“Merrill Lynch”). Their mass departure, without notice, caused the near-collapse of the branch. They took with them confidential client records, which were later returned to RBC. Their contracts of service with RBC did not contain non-competition covenants. RBC brought an action in damages against Merrill Lynch, its regional manager Michaud, and RBC’s former branch manager and other employees, alleging the tort of conspiracy and an action in tort for conversion for the removal of documents. RBC claimed breaches of fiduciary and contractual duties by its former employees and alleged direct liability for inducing those breaches by Merrill Lynch and Michaud, and vicarious liability by Merrill Lynch.

The Supreme Court of British Columbia allowed RBC’s action. While Holmes J. found that there was no conspiracy and no fiduciary duties owed, she held that the former employees breached the implied terms of their employment contracts to provide reasonable notice of termination of their employment and not to compete unfairly with RBC by: failing to provide reasonable notice of termination; engaging in concerted and vigorous efforts to move clients to Merrill Lynch before RBC could protect its relationships; and removing all RBC’s confidential client records several weeks before terminating. She found branch manager Delamont in breach of his contractual duty to faithfully perform his role, by promoting and coordinating the departure. She found all the former employees liable for tortious conversion of the confidential client records and Merrill Lynch and Michaud liable for that as well. Finally, Merrill Lynch and Michaud were found to have tortiously induced the breach of contractual duty not to compete unfairly with RBC. In a separate trial the Court determined the compensatory and punitive damages payable by each defendant.

The Court of Appeal for British Columbia allowed the appeal in part, denying compensatory damages for loss of profits to RBC beyond the reasonable notice period. The Court also dismissed RBC’s cross-appeal for greater damages. Rowles J.A. dissented in part.