Executive Summary: Key Legal and Evidentiary Issues

• The dispute centers on allegations that a former managing director secretly negotiated a competing services agreement with AFX's primary competitor while still bound by fiduciary duties.
   
• Courts were asked to determine whether a temporary injunction restraining competition with AFX's clients should extend until trial.
   
• Evidence disclosed a pattern of concealment, including late production of a competing agreement and redacted financial records.
   
• An application to add the competitor, Mixtec North America Inc., as a defendant was dismissed on the basis that the proposed pleadings were inappropriately vague.
   
• Appellate review confirmed that the lower court's threshold requirements for adding a party were not clearly wrong.
   
• Both courts left open the possibility of adding Mixtec as a defendant once the pleadings are properly particularized.
   

Facts of the case

AFX Mixing & Pumping Technologies Inc. is a British Columbia company that provides industrial mixing and pumping equipment, agitators, and peristaltic pumps, along with related repair and sourcing services. It is majority-owned by AFX Holdings Proprietary Limited, a South African company. Shaune McKinon served as AFX's managing director and only Canada-based director from 2014 until his employment ended on March 8, 2025; he was removed as a director on April 8, 2025. His wife, Vanessa McKinon, worked as AFX's administration manager, and their adult children, Kirsty [also referred to as "Kristy" in one decision] and Kent McKinon, were also former AFX employees. Shaune and Kirsty incorporated Macworx Inc. in 2019, each holding a 50% share; one decision describes both as directors of Macworx, while another instead names Kirsty and Kent (rather than Shaune) as its directors [the underlying decisions are inconsistent on this point].

AFX alleged that Macworx operated out of AFX's premises, competed with AFX for its own clients, and partnered with Mixtec, described as AFX's largest global competitor and a Utah-based manufacturer with no Canadian facilities, employees, or assets. Evidence produced during the litigation showed that Macworx and Mixtec entered into an agreement effective March 18, 2025, under which Macworx would provide Mixtec the same services, for the same products, in the same territory as Shaune's former role with AFX, in exchange for a monthly retainer of USD $6,000 plus commissions. Documents obtained from Mixtec revealed that negotiations between Shaune and Mixtec began as early as December 2024, that Shaune signed the Mixtec agreement on March 20, 2025 while still an AFX director (not in May 2025 as he had initially deposed), and that he sent AFX technical plans for a client to Mixtec on March 23, 2025 while ordering a replacement part through Mixtec rather than AFX. The Mixtec-sourced records also showed Vanessa and Kent being introduced into the Macworx sales and administration team in April 2025.

AFX filed its notice of civil claim on May 30, 2025, and obtained a temporary injunction on August 28, 2025, restraining the defendants from using or possessing specified categories of AFX confidential information. A subsequent document production order issued October 14, 2025 led to the disclosure of the Macworx-Mixtec agreement on November 10, 2025, and further Mixtec-sourced emails on December 3, 2025, both after prior deadlines for production had passed. AFX then sought a second, broader injunction preventing the defendants from doing any business with AFX clients pending trial (scheduled for April 2027), and separately applied to add Mixtec as a defendant and to amend its pleadings to allege knowing assistance in breach of fiduciary duty and breach of trust against Mixtec. Associate Judge Bilawich dismissed the application to add Mixtec, and AFX appealed that decision to Justice Marzari.

Policy and legislative provisions at issue

The application to add Mixtec as a defendant was governed by Rule 6-2(7)(c) of the Supreme Court Civil Rules, which permits a party to be added where there may exist a question or issue between that person and an existing party connected to the relief claimed or subject matter of the proceeding, and where it would be just and convenient for the court to determine that issue. The test, as summarized in Madadi v. Nichols and Meade v. Armstrong (City), sets a low threshold at the first stage, requiring only a real and non-frivolous issue or possible cause of action, before turning to a discretionary just-and-convenient analysis informed by factors such as delay, prejudice, and the connection between existing and proposed claims.

AFX's proposed claims against Mixtec relied on the equitable doctrines of knowing assistance in breach of trust and knowing receipt of trust property, with the required elements drawn from Gold v. Rosenberg and Citadel General Assurance Co. v. Lloyds Bank Canada. These doctrines distinguish between the higher actual-knowledge threshold required for knowing assistance and the lower constructive-knowledge threshold sufficient for knowing receipt. AFX also invoked the tort of civil conspiracy, which requires precisely pleaded facts under Can-Dive Services Ltd. v. Pacific Coast Energy Corp. and Pan v. Kelly. Separately, the second injunction application turned on the equitable framework governing post-departure fiduciary duties, including the statutory director duties set out in sections 142 and 153 of the Business Corporations Act, and the principle from TCT Logistics Inc. v. Nordeen that non-competition restraints on a departed fiduciary should generally not extend beyond approximately twelve months absent extraordinary circumstances.

Reasoning and analysis

In dismissing AFX's second injunction application, Justice Coval found that AFX had established a strong initial case that Shaune breached his fiduciary duty by secretly negotiating with Mixtec, transmitting AFX's confidential technical output, and concealing these actions through incomplete affidavits and redacted document production. However, he concluded that AFX could not show a strong case that Shaune's post-departure non-competition duty would extend all the way to the April 2027 trial, given that nine months had already elapsed since his departure and courts are reluctant to extend such duties much beyond twelve months. He also found insufficient evidence of ongoing misuse of confidential information, noting that AFX already benefited from an earlier injunction addressing that risk and that affidavits from two AFX customers indicated no improper solicitation. Balancing the harm to the McKinons' ability to earn a living against AFX's protected interests, he declined to grant the broader injunction, though he ordered production of certain categories of correspondence.

On the application to add Mixtec, Associate Judge Bilawich accepted that the threshold to add a party is low and can be met on pleadings alone, and he considered the elements of knowing assistance, knowing receipt, and civil conspiracy. He found that AFX's proposed pleadings failed to particularize what confidential information Mixtec was alleged to have received, failed to distinguish AFX pricing information from Macworx's own, and improperly lumped Mixtec into a general conspiracy allegation directed at "all defendants." He concluded the claims were inappropriately vague and dismissed the application, but granted AFX liberty to reapply with a modified pleading.

On appeal, Justice Marzari held that the applicable standard of review was whether Bilawich A.J. was clearly wrong, since his order was not final and expressly contemplated a further application. She found no error in his statement or application of the legal test, agreeing that the pleadings conflated knowing assistance with knowing receipt, and that the conspiracy allegation against Mixtec appeared to have been included by accident rather than by deliberate pleading. She noted, however, that AFX's oral submissions on appeal went considerably further than its written pleadings in specifying what Mixtec was alleged to have known and done, and that such clarifications, if incorporated into a revised pleading, would likely satisfy the threshold for a claim in knowing assistance of breach of fiduciary duty and breach of trust. Turning to the just-and-convenient branch of the test, she rejected Mixtec's argument that the application was a tactical device to obtain third-party discovery, finding instead that AFX was pursuing a genuine claim for damages, disgorgement, and injunctive relief against a party facing meaningful costs exposure if unsuccessful.

Ruling and overall outcome

Justice Coval dismissed AFX's application for a second injunction restraining the defendants from doing business with AFX's clients, while ordering limited document production; costs of that application were left in the cause. Associate Judge Bilawich dismissed AFX's application to add Mixtec as a defendant, awarding Mixtec costs as a non-party but suspending assessment of those costs for what he described as "an appropriate period, say 60 or 90 days," to allow AFX to reapply with a properly particularized pleading. On appeal, Justice Marzari dismissed AFX's appeal, finding that Bilawich A.J.'s decision was not clearly wrong, and likewise awarded Mixtec its costs of the appeal while suspending assessment for 90 days to permit AFX to bring a revised application; she indicated that any future opposition by Mixtec to a compliant amended pleading could result in a costs order against Mixtec that could be set off against the costs AFX otherwise owes. No monetary damages or disgorgement were awarded to either AFX or Mixtec at this stage, as the underlying claims remain to be litigated or repleaded; the only amounts fixed relate to costs, which remain to be assessed rather than quantified in the reasons.