Employer’s Aggressive Fight for Clients Backfires, Court Awards Damages for Defamation of Departed Employee
Alberta Computers.com v. Thibert, 2019 ABQB 964
The Alberta Court of Queen’s Bench awards $60,000 in damages against an employer that defamed its former employee while attempting to dissuade the local business community from doing business with him.
One of the first byproducts of a key employee’s departure often is the fight for client loyalty. The contest may feature aggressive threats of legal action by the former employer to curb or outright prevent competition, solicitation or use of allegedly confidential information. Where there is a real prospect of loss of business, the former employer understandably will reach out to retain and reassure clients before obtaining legal counsel.
Alberta Computers.com v. Thibert, 2019 ABQB 964, brings home the wisdom of caution in respect of disparaging the departed employee with clients. In particular, the uttering of false statements about a former employee’s breach of obligations, e.g. breach of confidence or fiduciary duty, may be defamatory and can attract significant liability.
In this case, the spurned employer, a computer and IT sales and service company in Grande Prairie, not only sued its former employee, but upped the ante by sending a letter to several businesses in the community. The letter accused the employee of breaching his fiduciary duty and duty of confidence and asserted that the law required him to cease soliciting or providing services to these companies. This tactic surely was one the employer came to regret, as the Alberta Court of Queen’s Bench found the comments to be defamatory and awarded $60,000 in general damages pursuant to the employee’s counterclaim.
Troy Thibert worked for Alberta Computers for a mere six months. His employment ended when he did not return to work following a tense and hostile meeting with the company’s principal. Mr. Thibert was originally hired to sell managed services to IT clients. By the time of the meeting, it had become apparent that Alberta Computers, despite its representation to Mr. Thibert, did not have a proper managed services product to sell to clients. In addition, it had failed to provide a written employment agreement or develop a commission structure, as promised.
Following the breakdown of the employment relationship and Mr. Thibert’s departure, he continued to provide IT services through his company, Snap Technologies Inc. Alberta Computers subsequently commenced proceedings against him and Snap for breach of confidence, breach of fiduciary duty and inducing breach of contract between Alberta Computers and its customers.
Mr. Thibert counterclaimed for defamation, based on letters sent by Alberta Computers following his departure to Snap’s customers and the wider Grande Prairie business community. Specifically, the letter stated:
As of September 2, 2009 Troy Thibert is no longer employed with Alberta Computers. We regret Troy Thibert’s decision to leave, but wish him well in any future endeavors. It has, however, come to our attention that he has approached many of our clientele, which is a breach of fiduciary trust and as such our lawyers are issuing him a cease and desist letter. We are sending you this letter to inform you that Troy is legally obligated under common law to cease all services and solicitation with you as a client. …
Mr. Thibert also counterclaimed for constructive dismissal.
The Court first dismissed Alberta Computers’ claims, finding Mr. Thibert and his company had not committed a breach of confidence or induced breach of contract. Nor was Mr. Thibert a fiduciary of Alberta Computers.
The Court further found that Alberta Computers had constructively dismissed Mr. Thibert and awarded him nine months’ severance, based on inducement from his prior employment.
The Court then turned to Mr. Thibert’s and Snap’s claim for defamation, repeating the test for defamation as set out by the Supreme Court of Canada in Grant v. Torstar Corp, 2009 SCC 61, at para. 28:
(1) that the impugned words were defamatory, in the sense that they would tend to lower [the Plaintiffs’ by Counterclaim] reputation in the eyes of a reasonable person;
(2) that the words in fact referred to [the Plaintiffs’ by Counterclaim]; and
(3) that the words were published, meaning that they were communicated to at least one person other than [the Plaintiffs’ by Counterclaim].
If these elements were proven, the onus would then shift to Alberta Computers to advance a defence to escape liability.
Addressing the September letter, the Court found that its contents would tend to lower Mr. Thibert’s reputation:
In reviewing the September Letter, statements that Mr. Thibert “has approached many of our clientele, which is a breach of fiduciary trust”, that Alberta Computers’ “lawyers are issuing him a cease and desist letter”, and that Mr. Thibert “is legally obligated under common law to cease all services and solicitation with you” suggests he was acting improperly and contrary to the law. I agree with Mr. Thibert’s submission that the “sting” of these statements in the September Letter is that Mr. Thibert is untrustworthy and unethical in his business dealings.
(at para. 244)
Alberta Computers relied on the defences of justification and qualified privilege. The Court rejected both pleas.
False Statements of Legal Breach Not Protected as Opinion
Concerning the defence of justification, Alberta Computers argued that all of the statements in the letter were true, other than two statements which it characterized as legal conclusions and, as such, statements of opinion:
(a) “…which is a breach of fiduciary trust…”
(b) “We are sending you this letter to inform you that Troy is legally obligated under common law to cease all services and solicitation with you as a client.”
The Court disagreed, finding that neither of these statements were presented as opinion, but were put forward as factual statements. Even if the statements were opinion, in order to be protected, they had to be correct. In this case, they were not, as Thibert was not a fiduciary and the law did not prohibit him from competing or soliciting. The Court further found that Thibert had not even approached the clients, but was approached by them.
No Qualified Privilege Where Defendant Should Have Known Statements Were Not True
The Court also rejected the defence of qualified privilege, which may be available where the statements are made by a person discharging some public or private duty or to protect some private interest to a person with a corresponding interest in receiving it.
While the truth of the statements is not in issue when qualified privilege is pleaded, the speaker must have an honest belief in their truth. As noted in Kanak v. Riggin, 2017 ONSC 2837, para. 32, a defamation case arising from a job reference:
It is settled law that the protection of qualified privilege is lost if the plaintiff proves that the dominant motive for publishing the defamatory expression is actual or express malice. Actual or express malice includes:
a) Spite or ill will;
b) Any indirect motive or ulterior purpose which conflicts with the occasion;
c) Speaking dishonestly, or in knowing or reckless disregard for the truth.
(Roger D. McConchie & David Potts, Canadian Libel and Slander Actions, supra, pp. 405-406)
The Court held that Alberta Computers “was not entitled to suggest Mr. Thibert had acted improperly when, as I have found, he had not breached any duties.” While the Court did not address the point directly, presumably it was of the view that Alberta Computers had spoken dishonestly or with a reckless disregard for the truth.
The Court also found there was no “special relationship” between Alberta Computers, its principals and the recipients of the September letter, noting that the letter was sent to an audience that was wider than Alberta Computers’ clients.
Having dismissed Alberta Computers’ defences, the Court awarded $60,000 in general damages for defamation:
Based on the evidence before me, I conclude that the September Letter was sent out in an effort to prevent Mr. Thibert from obtaining clients in the Grande Prairie area and to ensure he could not compete with Alberta Computers. In implying that Mr. Thibert was untrustworthy and unethical, and in stating that he had acted contrary to his obligations and the law, Mr. Pope and Alberta Computers’ conduct in sending the September Letter was egregious.
(at para. 276)
There are lessons in this decision for the spurned employer when fighting for the loyalty of clients. Keep to the provable facts and avoid allegations of a legal breach, lest they not be able to be proven. Communications should be directed to the clients only and should not extend to parties who the employer may wish to attract in the future.