Executive Summary: Key Legal and Evidentiary Issues

• Whether Wayne Hack owed and breached fiduciary duties to Titus Steel Company Limited.

• Determination of breach of employment duties, including good faith, loyalty, and fidelity, in relation to the handling of confidential business records.

• Assessment of whether the tort of conversion and breach of confidence were established.

• Evaluation of the credibility and reliability of the main witnesses, Wayne Hack and Mike Usatis.

• Consideration of whether Titus Steel suffered any damages as a result of the breaches.

• Review of the adequacy of the trial judge’s reasons and whether any reversible error occurred on appeal.

Background and factual context
Titus Steel Company Limited is a family-run business specializing in ballistic steel products. In 2001, Titus hired Wayne Hack as Director of Sales, and in 2004, promoted him to Vice President in the Dynamic Steel Division. Hack became dissatisfied with his job and his relationship with Mike Usatis, Titus’ director, treasurer, and chairman, deteriorated. Between late 2015 and early 2016, Hack’s wife took steps to incorporate a numbered corporation, register the domain name “Progressive Armor,” and retain counsel. Hack resigned from Titus in March 2016 and subsequently began operating Progressive Armor, which sold ballistic steel but ultimately operated at a loss for one year and closed. Shortly after Hack’s resignation, Titus alleged Hack had copied and downloaded confidential and proprietary information before leaving. Hack responded that he had backed up the files as a customary practice and returned the backup USB drives with Titus’ documents.

Titus alleged Hack breached fiduciary obligations or, alternatively, employment duties when he set up a competing business. Titus also claimed damages for alleged willful misconduct or negligence relating to the sale of armour plates to CMC of Georgia and Bemex.

Trial decision
The trial judge expressed serious concerns about the reliability and credibility of both main witnesses, Wayne Hack and Mike Usatis, and accepted their evidence only when supported by other witnesses or documents. The judge found Hack was not a fiduciary, as Titus did not have the necessary degree of vulnerability and salesmen are rarely found to be fiduciaries. Alternatively, even if Hack was a fiduciary, the judge found no breach of fiduciary duty. Hack did not breach his employment duties by competing, but did breach them by misappropriating Titus’ business documents and sharing them with his competitive business, constituting the tort of conversion. However, the judge was not persuaded that Titus suffered any damages as a result. The judge found that Titus failed to show that the use of confidential information caused any losses and did not make out the tort of breach of confidence. The judge also found no willful misconduct or gross negligence regarding the two clients and declined to award punitive damages. Hack was directed to return all business records within seven days. Costs were awarded to the respondents in the sum of $161,264.

Appeal decision and final outcome
Titus Steel appealed, arguing that the trial judge failed to apply her own evidentiary standards and did not provide sufficient reasons for her findings. The Court of Appeal dismissed the appeal, finding that the trial judge’s findings were open to her on the record and that her reasons permitted meaningful appellate review. The respondents were awarded costs for the appeal in the agreed amount of $20,000, all-inclusive.

The successful parties were the respondents, Wayne Robert Hack, 9589864 Canada Incorporated doing business as Progressive Armor, and Progressive Armor Incorporated USA. The total amount ordered in their favor was $181,264 ($161,264 at trial and $20,000 on appeal). No damages or punitive damages were awarded to Titus Steel Company Limited, as no damages were proven. No discussion of policy terms or clauses appears in the decisions.