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The Injunction of a Former Employee

March 22, 2022

Ontario

,

Canada

Issue

Absent a non-compete agreement, can an employer obtain an interim order barring a former employee from working in the same industry?

Conclusion

No cases were located where a mere employee was barred from working in the industry pending the resolution of the litigation. The below cases provide some guidance on the relevant legal principles.

A three-stage test is required for determining whether to grant an interlocutory injunction. The moving party must establish:

(i) there is a serious question to be tried;

(ii) irreparable harm will be suffered if the injunction is not granted; and,

(iii) the balance of convenience favours granting the injunction.

Judicial consensus has imposed the requirement of a strong prima facie case in cases involving restrictive covenants and employment contracts, and in injunction actions against former employees. The strong prima facie case test means that the moving party must show that its claim is almost certain to succeed. (1488245 Ontario Ltd. v. Irene Riska et al.)

The case law establishes firmly that former employees are entitled to compete with their employer after employment ends. Enjoining “mere employees” from doing so in the absence of restrictive covenants or evidence of breach of confidence would be an extraordinary remedy, one that as far as I know has never been made. It would represent a significant departure from existing law which I am not prepared to undertake on the facts of this case. (Orpheus Medica v. Deep Biologics Inc.)

The basic policy orientation of the common law is against restrictive covenants and restrictions on an individual’s ability to pursue his or her employment opportunities. An individual’s freedom to earn a livelihood and compete, as well as the need for a sound economy through acceptable commercial competition, will only be curtailed when it would be unfair not to intervene. (1488245 Ontario Ltd. v. Irene Riska et al.)

In the absence of an enforceable restrictive covenant in an employment contract, restrictions on a departing employee may be imposed where he or she is a fiduciary, or is using confidential information in the pursuit of business opportunities for the new employer. The inquiry is fact-driven and requires the court to assess the degree of trust and confidence that the employer placed in the employee. (1488245 Ontario Ltd. v. Irene Riska et al.)

The case law recognizes that in some industries a company’s trade attachment with its customers represents a substantial and vulnerable business asset since it constitutes the earning power of a company. Some employees know the entire details of the existence, nature and extent of the attachment between the company and each of its customers. By contrast, the law imposes fewer obligations on a “mere” employee following his or her departure. T. Edgar Alberts Ltd. v. Mountjoy, supra., remains the classic statement of those obligations. Estey C.J.H.C. identified them, at pages 686-689, as follows:

(i) a departing servant has the right to compete with his former employer by establishing a business in direct or partial competition;

(ii) he may bring to that business the knowledge and skill which he acquired while in the former service, including knowledge and skill directly obtained from the previous master in teaching him his business; and,

(iii) he may obtain the customers’ friendly feelings when he calls upon them if and when he sets up business for himself, provided:

a. there is no valid restrictive clause preventing him from doing so;

b. he does not canvass any customer whose name he has from material obtained or retained in fraud of his employer; and,

c. he does not make “an unfair use” of information acquired in the course of his employment nor make use of confidential information acquired to advance his own business at the expense of that of his former employer.

Fiduciary duties will be imposed on employees who were part of management or were “key personnel” or “key employees” with ability to “unilaterally exercise their authority in a way that could affect their employer’s legal and economic interests”. (1488245 Ontario Ltd. v. Irene Riska et al.)

In DCR Strategies Inc. v. Vector Card Services, LLC, the plaintiff sought an injunction broader in scope than the non-competition and non-solicitation restraints provided under the subject employment contracts. The Court found there was no basis to grant the plaintiff rights greater than those under the contract. Additionally, there was no evidence that after the defendant was terminated that he had engaged in customer solicitation or competitive activity with the plaintiff's customers. The Court held that the defendants owed the plaintiff no more than their legal obligations under the restrictive covenants found in the employment contract.

In Orpheus Medica v. Deep Biologics Inc., the plaintiff company ("OM") previously employed three individual defendants. OM was developing rapid testing equipment during the COVID-19 pandemic. The defendants left OM and incorporated their own corporation ("DB"). OM that the defendants had misused confidential information and engaged in competition, contrary to the employment agreements. DB was awarded a grant to produce rapid tests, over OM. OM previously obtained an interim injunction against DB and the individual defendants and sought to extend the interim injunction until the trial of the action. OM also sought to enjoin DB from competing against it in the production of COVID-19 testing equipment. OM asserted that it would lose the ability to be the "first mover" to the Canadian market with a fast, mobile, cost-effective COVID-19 testing kit. The plaintiff was also concerned with the optics of former employees competing with it. The Court denied the motion and vacated the injunction. The Court found that there were serious issues to be tried, however, the plaintiff had failed to establish irreparable harm. The plaintiff had recently entered into a funding arrangement with a third party and there was no evidence that OM would be the "first mover" if DB was removed from the equation, as there were many parties involved in that field. Additionally, the Court found that the balance of convenience strongly favoured the defendants. The plaintiff had the continued ability to develop its own rapid COVID-19 diagnostic kit. Additionally, the Court held that the public interest was a factor in favour of setting aside the injunction, given the importance and urgency of both companies' work.

Law

No cases were located where a mere employee was barred from working in the industry pending the resolution of the litigation. The below cases provide some guidance on the relevant legal principles.

In 1488245 Ontario Ltd. v. Irene Riska et al., 2010 ONSC 6780 (CanLII), the Court set out the relevant test and legal principles where an interlocutory injunction is sought with respect to a former employee in the absence of a contractual restrictive covenant:

The Legal Principles

[13] A three-stage test is required for determining whether to grant an interlocutory injunction: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 at p. 334, para. 43. The moving party must establish:

(i) there is a serious question to be tried;

(ii) irreparable harm will be suffered if the injunction is not granted; and,

(iii) the balance of convenience favours granting the injunction.

The court held that where the injunction would effectively result in a final determination of the action, the moving party must show a “strong prima facie case”.

[14] Since that decision, judicial consensus has imposed the requirement of a strong prima facie case in cases involving restrictive covenants and employment contracts, and in injunction actions against former employees: BMO Nesbitt Burns Inc. v. Ord, [2007] O.J. No. 2620 (S.C.J.) per Pattillo J., at paras. 25-26: Gerrard v. Century 21 Armour Real Estate Inc., 1991 CanLII 7104 (ON SC), [1991] 4 O.R. (3d) 191 (Gen. Div.) per Feldman J. at p. 198, leave to appeal to Div. Ct. refused (1991), 4 O.R. (3d) 191n; Jet Print Inc. v. Cohen (1999), 43 C.P.C. (4th) 123, [1999] O.J. No. 2864 (S.C.J.), per Nordheimer J. at para. 11. The strong prima facie case test means that the moving party must show, as Mesbur J. said in Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 CanLII 34862 (ON SC), [2002] O.J. No. 4116 at para. 12, that “its claim is almost certain to succeed.”

The serious question to be tried

[15] The basic policy orientation of the common law is against restrictive covenants and restrictions on an individual’s ability to pursue his or her employment opportunities: IT/NET Inc. v. Doucette (2005), 2005 CanLII 18412 (ON SC), 5 B.L.R. (4th) 71, [2005] O.J. No. 1814 (S.C.J.) at para. 21 per Kealey J., aff’d (2007), 2007 ONCA 52 (CanLII), 25 B.L.R. (4th) 49, [2007] O.J. No. 245 (C.A.):

21 After reviewing closely the many cases referred to me by counsel on this area of the law, it seems clear that an individual’s freedom to earn a livelihood and compete, as well as the need for a sound economy through acceptable commercial competition, will only be curtailed when it would be unfair not to intervene. Thus, all contractual restrictive covenants are prima facie unenforceable. Indeed, a proprietary interest in need of protection, if established, will only be protected if a reasonable restraint is sought to be imposed, considering the particular circumstances of the parties, the industry, the time duration and geographic boundaries suggested, and then only such limit on competition as is necessary. When the nature of the employment gives rise to fiduciary obligations, then such employees must not unfairly solicit customers from their former employer. Here it seems that there must be some particular vulnerability beyond the norm, which the employer is unable to remove or reduce. Lastly, with “mere” employees, the law requires: 1) disclosure of confidential information in confidence; 2) that the employee understood the information was received in confidence; 3) that the employee must have misused the confidential information.

[16] In the absence of an enforceable restrictive covenant in an employment contract, restrictions on a departing employee may be imposed where he or she is a fiduciary, or is using confidential information in the pursuit of business opportunities for the new employer: Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (S.C.J.) per D.M. Brown J. At para. 48, he notes that the inquiry is fact-driven and requires the court to assess the degree of trust and confidence that the employer placed in the employee. As Brown J. states:

43 The case law recognizes that in some industries a company’s trade attachment with its customers represents a substantial and vulnerable business asset since it constitutes the earning power of a company. Some employees know the entire details of the existence, nature and extent of the attachment between the company and each of its customers: Edgar T. Alberts Ltd. v. Mountjoy (1977), 1977 CanLII 1026 (ON SC), 16 O.R. (2d) 682 (H.C.J.), at pp. 690-691.

44 By contrast, the law imposes fewer obligations on a “mere” employee following his or her departure. T. Edgar Alberts Ltd. v. Mountjoy, supra., remains the classic statement of those obligations. Estey C.J.H.C. identified them, at pages 686-689, as follows:

(i) a departing servant has the right to compete with his former employer by establishing a business in direct or partial competition;

(ii) he may bring to that business the knowledge and skill which he acquired while in the former service, including knowledge and skill directly obtained from the previous master in teaching him his business; and,

(iii) he may obtain the customers’ friendly feelings when he calls upon them if and when he sets up business for himself, provided:

a. there is no valid restrictive clause preventing him from doing so;

b. he does not canvass any customer whose name he has from material obtained or retained in fraud of his employer; and,

c. he does not make “an unfair use” of information acquired in the course of his employment nor make use of confidential information acquired to advance his own business at the expense of that of his former employer.

[17] Fiduciary duties will be imposed on employees who were part of management or were “key personnel” or “key employees” with ability to “unilaterally exercise their authority in a way that could affect their employer’s legal and economic interests”: Boehmer, supra at paras. 45-46.

[...]

[21] The court will act to restrain the abuse of confidential information: Boehmer, supra at paras. 49-50, 62-63. As Adams J. noted in C.H.S. Air Conditioning Ltd. (c.o.b. Dial One Temp Control) v. Environmental Air Systems Inc. (1996), 1996 CanLII 8137 (ON SC), 20 C.C.E.L. (2d) 123 (Ont. Gen. Div.) at p. 23, “where former employees exploit obviously and highly confidential information in a manner that strikes a court as grossly unfair, it is more likely that a fiduciary obligation will be found to exist or that the information will be treated as the equivalent to a trade secret.”

[22] In Boehmer, supra at paras. 62 and 63, Brown J. stated:

62 In order to establish an action for breach of confidence, a plaintiff must prove that: (i) the information has a quality of confidence about it; (ii) the information was imparted in circumstances importing an obligation of confidence; and, (iii) there was an unauthorized use of that information to the detriment of the party communicating it: Stenada Marketing Ltd. v. Nazareno, [1990] B.C.J. No. 2118 (S.C.).

63 In addition to the trade secrets of an employer, confidential information can include commercial information, such as special knowledge about the employer's customers, knowledge of the employer's policies and procedures that would make it possible to undercut the former employer with a view to inducing the customer to change from its current supplier to the former employee, as well as customer lists: 1259695 Ontario Inc. v. Guinchard, [2005] O.J. No. 2049 (S.C.J.), at para. 59. On the latter point, courts have found a misuse of confidential information not only where an employee departs with copies of customer lists, but where an employee has memorized the list: Quantum Management Service, supra, [(1989), 1989 CanLII 4370 (ON SC), 69 O.R. (2d) 26 (H.C.J.), aff’d (1992), 1992 CanLII 7720 (ON CA), 11 O.R. (3d) 639 (C.A.)] at p. 33-34.

[...]

[27] The cases establish that while a fiduciary may compete with his or her former employee, that competition must be “fair”. In Aquafor Beech Ltd. v. Whyte (2010), 2010 ONSC 2733 (CanLII), 102 O.R. (3d) 139, [2010] O.J. No. 2011 (S.C.J.), Conway J. held:

47 This is the crux of Aquafor’s case on breach of fiduciary duty. The law is clear that while a fiduciary is not precluded from competing with his employer after he leaves, he must not do so unfairly. Soliciting clients is considered unfair as it prevents the employer from solidifying its relationships with those clients or otherwise dealing with the fiduciary’s departure. A fiduciary will therefore be restricted from soliciting the employer’s clients for a reasonable time after departure.

[28] He went on to hold:

52 The mere fact that Aquafor clients became clients of Calder, or even that they became clients very quickly, or that the Calder time sheets reflect work for these clients is not sufficient to establish solicitation of those clients. Aquafor led no evidence from any clients that they were solicited by Mr. Whyte or Mr. Dainty.

[29] In IT/NET Inc., supra (S.C.J.), Kealey J. held at para 22:

22 Generally, unfairness will be found where there is active, direct and aggressive solicitation of the former employer’s clientele initiated by a former employee. Such conduct would include specifically targeting major business customers. If such facts are established, then provided the solicitation is the reason for, or the instrumental cause of, the client’s decision to switch allegiance and divert their business, a remedy in law will prevail; but not otherwise.

In DCR Strategies Inc. v. Vector Card Services, LLC, 2011 ONSC 5473 (CanLII), the plaintiff sought an injunction broader in scope than the non-competition and non-solicitation restraints provided under the subject employment contracts. The Court found there was no basis to grant the plaintiff rights greater than those under the contract. Additionally, there was no evidence that after the defendant was terminated that he had engaged in customer solicitation or competitive activity with the plaintiff's customers. The Court held that the defendants owed the plaintiff no more than their legal obligations under the restrictive covenants found in the employment contract:

[46] DCR wants an injunction with a more expansive reach on both non-competition and non-solicitation than the restraint provided under the employment contract. I find there is no basis to grant DCR rights greater than those under the contract. There is no basis to grant an injunction that restrains Storey and Leader from competition beyond Storey’s termination date and no basis to restrain them from soliciting customers beyond one year after his termination date. I find a period of one year to be reasonable.

[47] There is no evidence after Storey was terminated that he has engaged in customer solicitation or competitive activity with DCR customers. DCR asks the court to draw an adverse inference that Storey engaged in that activity after termination from his refusal to agree at his cross-examination to produce his e-mail and telephone records. I am not prepared to extend such extraordinary relief on that basis. I find there must be a substantial evidentiary basis to impose an injunction that exceeds contractual obligations. In any event, Mr. Story was unrepresented at his cross-examination and the information DCR requested is highly private. Storey may have had a well-found reason to refuse production of such personal information quite aside from any intention to hide his activities.

[48] DCR also urges that the court should extend DCR’s rights based on equitable considerations.

[49] DCR cites cases where courts have found departing employees to have had a fiduciary relationship with their former employer where due to the nature of the former employer’s business the former employer is open to financial harm from the solicitation by the former employees of the employer’s clients’ businesses. This has been found more often with former senior employees but has been found to apply to more junior employees who have worked in concert with senior employees. [For example, Alberts et al. v. Mountjoy, 1977 CanLII 1026 (ON SC), [1977] 16 O.R. (2d) 682 (Ont. H.C.J.), at pp. 690-691 and Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (Ont. S.C.J.), at para. 43].

[50] Determinations on whether a fiduciary relationship exists are very much fact-driven.

[51] In one case DCR cites the senior employee had worked 22 years with the former employer as a general manager and sat as a director on the board of directors of the former employer. There is considerable evidence of the departing employee’s competitive activities and of the financial losses incurred by the former employer post-termination and considerable evidence of the junior employees working in concert with the senior employee before and after termination. In those circumstances, the court found the senior employee and the junior employees who joined him in the competitive activity owed a fiduciary duty to the former employee. [Alberts et al v. Mountjoy, supra, p.p. 11-12]. Those facts can be distinguished from the facts before me.

[52] In another case, the court found that employees that could not unilaterally affect the economic interests of the former employer, in the sense they were not the sole face of the employer to the customers, were not under a fiduciary obligation to the former employer. This court held:

Factors, in my view, that have led courts to find the existence of this above-average level of trust in a non-management employee include the employee’s exclusive relationship with customers of the employer and the ability of the employee to act unilaterally to bind the employer’s interest by setting prices or concluding contracts. Supervisory responsibilities over other employees, shy of being part of the formal management structure, also has operated as a factor pointing to a potential fiduciary relationship. Obviously these factors are not exhaustive, but they reflect circumstances where an employer has placed a higher degree of trust and confidence in a person than in most employees, with the resulting ability of that person to affect the economic interests of the employer.

[Boehmer Box L.P. v. Ellis Packaging, supra, para. 52].

[53] DCR submits Storey, who from the evidence seemed to work essentially as a pre-paid debit card service salesman, acted in concert with a more senior employee, Nham, the former director of card services, to solicit DCR’s customers and perspective customers in the interest of establishing an enterprise competitive with DCR’s pre-paid card business. DCR asks the court to find Storey had fiduciary obligations to DCR.

[54] Aston, J. did not find reason to conclude that Nham had the trust of a fiduciary in his role at DCR. I too find there is no basis to find DCR impressed Storey with the special trust of a fiduciary. I find there is no evidence that Storey was the exclusive face of the company to the customers. There is no evidence that persuades me he was in a position to unilaterally affect the financial well-being of the company.

[55] Therefore, I find that Storey and Leader owe DCR no more than their legal obligations under the employment contract to refrain from soliciting any of DRC’s customers or prospective customers with whom they had contact while employed with DCR.

[56] For the same reasons, I find no reason to order a restraint on competition beyond Storey’s termination date, May 5, 2011.

In Orpheus Medica v. Deep Biologics Inc., 2020 ONSC 4974 (CanLII), the Court recently summarized the test for an interlocutory injunction concerning a former employee's ability to compete with the former employer:

(a) What is the test for injunctive relief in this case?

[12] Pursuant to the Supreme Court of Canada decision in RJR MacDonald v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at p. 334, the usual test for an interlocutory injunction is as follows:

(a) Is there a serious issue to be tried?

(b) Will the party requesting the injunction suffer irreparable harm if the injunction is not granted? and

(c) Does the balance of convenience weigh in favour of granting an injunction or denying it?

[13] In RJR MacDonald, the Court indicated that, although rare, there are exceptions where the moving party must establish a more stringent “strong prima facie case”: at p. 339.

[14] Courts have applied the more stringent “strong prima facie case” test in the following circumstances:

(a) Where the injunction will as a practical matter amount to a final determination of the action: RJR MacDonald, at p. 338.

(b) Where the plaintiff is seeking to enforce restrictive covenants restraining former employees from competing or soliciting customers. In Boehmer Box L.P. v. Ellis Packaging Ltd., 2007 CanLII 14619 (Ont. S.C.), Brown J. (as he then was) explained the policy behind requiring the higher standard in such cases, as follows, at para. 39:

…when the injunction sought is intended to place restrictions on a person’s ability to engage in their chosen vocation and to earn a livelihood, the higher threshold of a strong prima facie case is the more appropriate test to be applied.

(c) Where the plaintiff seeks an interlocutory injunction alleging breach of post-employment fiduciary obligations: Benson Kearley & Associates Insurance Brokers Ltd., v. Jeffrey Valerio, 2016 ONSC 4290, at para. 46. In Lockwood Fire Protection Ltd. v. Jason Caddick et al., 2015 ONSC 6320, at para. 36, Dunphy J., explained:

If the strong prima facie case test applies to express restrictive covenants, it ought in my view to apply as well to a restrictive covenant which the plaintiff effectively seeks to imply by alleging the existence of fiduciary duties and a breach of them.

[...]

[142] In RJR MacDonald, at p. 341, the Court described irreparable harm as follows:

“Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court’s decision. (R.L. Crain Inc. v. Hendry (1988), 1988 CanLII 5042 (SK QB), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, 1985 CanLII 154 (BC CA), [1985] 3 W.W. R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).

[143] The plaintiff’s evidence as to irreparable harm must be clear and not speculative. Absent clear evidence that irreparable harm will result, an interlocutory injunction should not be granted: Stress-Crete Limited v. Harriman, 2019 ONSC 2773, at para. 58 It is well established that irreparable harm is not made out simply because damages may be difficult to quantify. The plaintiff must prove that the alleged harm cannot be quantified in monetary terms: Stress-Crete, at para. 59.

In that case, the plaintiff company ("OM") previously employed three individual defendants. OM was developing rapid testing equipment during the COVID-19 pandemic. The defendants left OM and incorporated their own corporation ("DB"). OM that the defendants had misused confidential information and engaged in competition, contrary to the employment agreements. DB was awarded a grant to produce rapid tests, over OM. OM previously obtained an interim injunction against DB and the individual defendants and sought to extend the interim injunction until the trial of the action. OM also sought to enjoin DB from competing against it in the production of COVID-19 testing equipment. OM asserted that it would lose the ability to be the "first mover" to the Canadian market with a fast, mobile, cost-effective COVID-19 testing kit. The plaintiff was also concerned with the optics of former employees competing with it.

The Court denied the motion and vacated the injunction. The Court found that there were serious issues to be tried, however, the plaintiff had failed to establish irreparable harm. The plaintiff had recently entered into a funding arrangement with a third party and there was no evidence that OM would be the "first mover" if DB was removed from the equation, as there were many parties involved in that field. Additionally, the Court found that the balance of convenience strongly favoured the defendants. The plaintiff had the continued ability to develop its own rapid COVID-19 diagnostic kit. Additionally, the Court held that the public interest was a factor in favour of setting aside the injunction, given the importance and urgency of both companies' work:

[145] Orpheus asserts that it will lose the ability to be the “first mover” to the Canadian market with a fast, mobile, cost effective COVID-19 testing kit and that it will suffer irreparable harm as prospective investors and strategic partners will be hesitant to invest in it while Deep Biologics leverages a similar device.

[146] Further, Dr. Babaei says Orpheus’ reputation and future investor opportunities have been damaged because of the optics of former members of his team competing with him. He states:

If Deep Biologics is permitted to operate, on account of the individual’s breach of their Employment Agreements and NDA as well as their duty of loyalty and fiduciary duties, by using confidential materials and manuals appropriated from Orpheus, it will tarnish how investors and strategic partners look at me, personally, and at Orpheus - in other words, investor and strategic partners’ confidence will be seriously undermined and future investment and partnership opportunities with Orpheus will be considered too “risky” as the same thing may happen on another project or company I am involved with.

[147] In my view the plaintiff has failed to establish irreparable harm for the following reasons:

(a) Dr. Babaei’s chief concern to Orpheus’ reputation set out above is that the defendants are operating in breach of Purported Orpheus Employment Agreements, their fiduciary duties, and Implied Employment duties by using confidential materials which have been misappropriated. As set out earlier in these reasons, Orpheus has not presented any strong prima facie case, or even substantial issue to be tried, that that is what the defendants are doing. It is very well established in the case law that mere employees may compete with an employer after their employment ends. If that hurts the employer’s reputation it is not compensable.

(b) Despite his assertion that the actions of the Individual Defendants have hurt its reputation and harmed its future prospects, on July 6, 2020, Orpheus entered into a Letter of Intent with Therma Bright Inc. to partner in the development of a handheld COVID-19 rapid test. The July 7, 2020 Press Release reads:

…The design and development of the fundamental components of the proposed test has already begun, which will allow Therma and Orpheus to deliver a solution quickly to the Canadian and a global market….

…Dr. Saeid Babaei, chairman and CEO of Orpheus Medica commented, “We are pleased and encouraged to enter into this partnership with Therma and our academic collaborators to fast track our unique saliva rapid test…”

(c) At the hearing of the interlocutory motion on August 14, 2020, the defendants sought to introduce new evidence after cross-examination of a subsequent Press Release from Orpheus and Therma Bright dated August 13, 2020. Orpheus opposed this evidence on the basis that the defendants should have requested as undertakings the production of any future press releases and did not do so. Orpheus also sought to introduce a further affidavit from Dr. Babaei addressing this further press release. I reserved on this matter and advised that I would address it in the reasons. On the basis of Nexim Healthcare Consultants Inc. v. Yacoob, 2018 ONSC 91, at para. 9, I am admitting both of these affidavits in the interests of justice and having a complete evidentiary record. I conclude that the evidence is relevant, responds to matters raised on cross examination, and would not result in any non-compensable prejudice. Clearly, since the press release did not exist before cross-examination, the defendants have a good explanation for why it was not included at the outset.

(d) The August 13, 2020 press release confirms that the funding arrangement with Therma Bright is ongoing. It states:

Therma will provide funding for the project in phases (“Phase” or “Phases”) contingent upon achieving certain corporate and scientific milestones. Therma will provide medical device expertise to help accelerate the development of CoviSafe screening test to address the ongoing pandemic.

Initial Phase 1 milestones have now been met and Therma has issued 1,000,000 warrants exercisable at $0.05 per share with a 5-year expiry.

…The design and development plan of CoviSafe is underway and Therma and Orpheus expect to deliver a solution quickly to the Canadian and global market.

…Dr. Saeid Babaei, Chairman & CEO of Orpheus Medica, commented: “We are pleased to have Therma’s support to complete the entire developmental and commercialization plan of CoviSafe, allowing us to expedite the prototype development, clinical validation and regulatory submission plans in the coming months.”

Mr. Rob Fia, CEO of Therma, commented, “We are excited to have completed Phase 1 of the development program and to enter into Phase 2 of this joint development arrangement with Orpheus Medica. Therma and Orpheus expect to move forward quickly to identify QEM manufacturers to assist with validation and manufacturing CoviSafe with the completion of our recent financing.”

Dr. Babaei asserted in his original affidavit material sworn July 6, 2020, his cross-examination and in his supplementary affidavit dated August 13, 2020, that Orpheus’ business relationship with Therma Bright is not firm, and that milestones will have to be reached at various stages. In my view, the press releases demonstrate a substantial commitment by Therma Bright to working with Orpheus. Indeed, Dr. Babaei states that the reason why Therma Bright issued the press release is because of its disclosure obligations as a public company. Given that this press release is required by securities laws, I draw the inference that Therma Bright has included all material information in it. There is nothing in the Press Release that demonstrates that the arrangement is in jeopardy. There is no evidence in this proceeding from Therma Bright indicating that it will not continue to work with Orpheus if the interim injunction is not continued or if the Individual Defendants are not enjoined from developing their test.

(e) There is no persuasive case presented, that Orpheus would be the “first mover” if Deep Biologics is removed from the equation. There are currently many companies developing a COVID-19 rapid handheld diagnostic saliva test – 4 of which obtained t

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