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IMPLIED DUTIES OF EMPLOYEE - Confidential information and privacy

Wednesday, February 10, 2021 @ 6:16 AM  

Lexis Advance® Quicklaw®
Appeal by the defendants from a trial judgment finding them liable for breach of confidence. The respondent GEA Refrigeration Canada Inc. (GEA) was in the business of marketing and production of hygienic freezers. The individual appellants were former employees of GEA. They formed a competing company, FPS. All appellants had written agreements requiring them to maintain confidentiality over information belonging to GEA, including GEA’s engineering drawings. They also had agreements preventing them from entering into competition with GEA for a period of time after their employment terminated. The judge found that the individual appellants improperly used GEA’s engineering drawings and other confidential information to design products for sale by FPS in competition with GEA. The judge also found that the individual appellants breached express or implied obligations of confidence in their contracts of employment with GEA and awarded damages against them. The judge’s primary reason for inferring that FPS used the GEA engineering drawings to design and produce its own hygienic freezers was her view that such use was a practical necessity. She awarded damages of $7,131,087 against FPS, calculated based on disgorgement of profits for a period of approximately four years. She found the five individual appellants to be jointly and severally liable with the corporation for $3,630,000, assessed based on profits lost by GEA because of their tortious breaches of confidence and their breaches of express and implied confidentiality provisions of their employment contracts. The appellants argued the evidence was incapable of supporting the judge’s finding that the appellants possessed GEA engineering drawings and used them to design FPS freezers. The appellants also disputed the judge’s assessment of damages, arguing that the judge made legal errors in her assessment of damages, requiring FPS to disgorge profits for an excessive period.

HELD: Appeal dismissed. The appellant Chen’s lengthy employment by GEA and his explanation as to how GEA documents remained on his computers after he was terminated by the company and the judge’s inference that he retained hundreds of drawings was an entirely reasonable one. The fact that there was no direct evidence that Chen possessed engineering drawings after his employment with GEA was terminated was not surprising, considering the judge’s finding that the appellants’ disclosure of documents was woefully inadequate. The judge’s inference that information on Chen’s computers would have disclosed the use of GEA engineering drawings in designing FPS freezers was not an unreasonable one. The trial judge did not conflate design concepts with design details or make a palpable and overriding error in inferring that GEA engineering drawings were used as the basis for designing FPS freezers. Her finding that FPS used GEA engineering drawings in designing its hygienic freezers was a reasonable inference to draw. The use of the springboard doctrine in assessing damages was appropriate as was the judge’s determination of the duration of the springboard period at four years. The judge did not err in finding that GEA would have obtained certain contracts if FPS had not used its confidential information to obtain them for itself. The judge made no error in finding that Chang violated the non-solicitation agreement. Her finding that Lai’s activities went beyond mere planning and constituted actual participation in a competing company during the currency of his employment with GEA was entitled to deference.

GEA Refrigeration Canada Inc. v. Chang, [2020] B.C.J. No. 2043, British Columbia Court of Appeal, H. Groberman, G.J. Fitch and J.J.L. Hunter JJ.A., December 14, 2020. Digest No. TLD-February82021005