Creative argument rescues claim for causing loss by unlawful means
Fundraising Initiatives v. Globalfaces Direct, 2015 ONSC 1334, is a fine example of how creative argument can rescue pleadings from being struck.
Fundraising Initiatives and Globalfaces Direct are companies involved in the business of providing charity fundraising services. A third company, Samsara, contracted with Fundraising Initiatives to provide field agents to go door-to-door on its behalf. Within a month of the termination of Samsara’s contract with Fundraising Initiatives, Globalfaces began conducting business as a rival in the same market in British Columbia in which Fundraising Initiatives had been active.
Fundraising Initiatives alleged that Samsara breached their agreement by working with Globalfaces and providing services that were substantially the same as those provided to Fundraising Initiatives. It alleged that Samsara disclosed confidential information to Globalfaces, who in turn intentionally exploited that information to interfere with Fundraising Initiatives’ economic interests.
Globalfaces moved to strike the following claims:
Intentional Interference with Economic Interests
40. Globalfaces intentionally exploited Fundraising Initiatives’ confidential information so as to divert profits from Fundraising Initiatives to Globalfaces or to weaken Fundraising Initiatives’ market position.
41. Globalfaces’ use of Fundraising Initiatives confidential information has unlawfully interfered with Fundraising Initiatives’ business.
42. As a result of the the Defendant’s conduct, Fundraising Initiatives lost BC Cancer as a client suffered a reduction in general goodwill, and faces a decline in relative market share due to the disclosure of its trade secrets.
The issue was whether Fundraising Initiatives alleged an actionable wrong committed against a third party causing loss to Fundraising Initiatives as required by A.I. Enterprises v. Bram, 2014 SCC 12.
Paragraphs 40-42 in themselves did not disclose an actionable wrong against a third party. However, Fundraising Initiatives pointed to paragraphs 24 and 25 of the Statement of Claim which provided:
24. Davison, Nott and Francis, either personally or on behalf of Samsara, provided the application that they copied from Fundraising Initiatives’ confidential information to Globalfaces and provided Globalfaces with information about Fundraising Initiatives’ business processes and clients including BC Cancer.
25. Globalfaces is using this application and other confidential information belonging to Fundraising Initiatives to conduct business in British Columbia and Ontario (and perhaps in other provinces unbeknownst to Fundraising Initiatives) and to solicit clients.
Fundraising Initiatives argued that the pleadings, read as a whole, disclosed the unauthorized taking of information belonging not only to Fundraising Initiatives, but to its clients as well. Those clients are third parties who would have a cause of action against Globalfaces for the tort of intrusion upon seclusion.
The key features of intrusion upon seclusion were set out in Jones v. Tsige, 2012 ONCA 32:
…first, that the defendant's conduct must be intentional, within which I would include reckless; second, that the defendant must have invaded, without lawful justification, the plaintiff's private affairs or concerns; and third, that a reasonable person would regard the invasion as highly offensive causing distress, humiliation or anguish.
The judge agreed that, on a generous reading of the Statement of Claim, it was clear that Fundraising Initiatives plead that Globalfaces acquired, without authorization, confidential information belonging to both Fundraising Initiatives and its clients to develop a competing business with the intention of diverting funds away from Fundraising Initiatives (at para. 18). He also agreed that Globalfaces' acquisition and use of this information could ground a claim by the clients for the tort of intrusion upon seclusion (at para. 21) . Therefore, Fundraising Initiatives had adequately pled an actionable wrong against a third party to sustain a claim for causing loss by unlawful means.
The judge noted that it remains open to Globalfaces to demand further particulars if needed to understand and defend the claim being made by Fundraising Initiatives (at para. 22).
At the risk of revealing myself as a torts geek, I have to say that it was a treat to discover this layering of two interesting torts to sustain the claim against the third party to the breach of confidence.