EnWave Corporation v. Dehydration Research LLC, 2022 BCSC 637[BC1]
Written by Ty Schmidt, supervised by Professor Bruce Curran
Will potential breaches of confidence, contract and fiduciary duty constitute a serious question to be tried in an application for the continuation of an interlocutory injunction? Yes, says the Supreme Court of British Columbia in the recent decision of EnWave Corporation v. Dehydration Research, LLC, 2022 BCSC 637.
EnWave Corporation (“EnWave”) is a corporation that designs, manufactures, and sells products that use vacuum microwave drying technology, and it has spent 24 million dollars in a period over 15 years to develop and refine these specialized products. In 2018, two members of EnWave, who were the corporation’s former chief executive officer and former senior vice president, resigned from EnWave and subsequently (within half a year of resignation) formed their own group of companies for the purpose of designing and selling similar technologies. Further, both of these individuals had each retained confidential documents and information (such as information on clientele and specifications for particular EnWave products) and may have used them for the benefit of their new enterprise, Dehydration Research (“DR”).
After discovering this potential breach of confidence, EnWave applied for injunctive relief prohibiting DR from selling, supplying, delivering, or installing vacuum microwave dryers until after the trial of this matter. Basran J. found that the conduct of the DR defendants potentially amounted to a breach of fiduciary duty as well as possible breaches of contract and confidence. As former directors of EnWave, the defendants were under a duty not to compete with their employer post-employment for a reasonable period of time. Additionally, the defendants were under a contractual duty to deliver to EnWave any documents within their possession pertaining to that business, which they appeared to have flagrantly violated. Given these findings, the judge ruled that there was a serious issue to be tried, the first step in the three-part test for granting an injunction. After finding the other two steps of the test were satisfied (irreparable harm and balance of convenience), the judge ruled in favour of EnWave.
This case further solidifies the concept that directors owe a fiduciary duty to the corporation even after their positions are terminated and that taking company secrets for the purpose of competing with that company will undoubtedly lead to trouble.
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