Executive Summary: Key Legal and Evidentiary Issues

• Fiduciary and contractual duties of a former owner-turned-consultant were found to be broad and ongoing, including duties of loyalty, disclosure, and non-disparagement toward the purchaser and the company.

• The court held that Michael Beck’s behind-the-scenes role in fomenting employee dissatisfaction and encouraging complaints to Enbridge breached the Non-Competition Agreement and the share purchase agreement.

• Through corporate attribution, Beck’s conduct as directing mind of Megory Holdings Inc. was imputed to Megory, making the selling company liable for post-closing misconduct affecting Banner’s business.

• The court found that these contractual breaches were the effective cause of Enbridge’s termination of its contract with Banner Installations Ltd., resulting in a significant loss of profit.

• ABZ Falling Inc. obtained a substantial damages award for lost profit, while still owing the final instalments under the promissory note to Megory.

• Although serious allegations were made to Enbridge about Bradley Loring, the court held that the complaint communications were protected by qualified privilege and dismissed Loring’s defamation claim.

Facts and outcome of the case

Background to the sale and Enbridge contract
Michael Beck had owned and operated Banner Installations Ltd. for many years through his holding company, Megory Holdings Inc. Banner’s business was inspecting and maintaining aerial pipelines in British Columbia, with the great majority of its work and revenue coming from pipelines owned by Enbridge through Westcoast Energy Inc. Around 2017, these pipelines were owned by Enbridge through Westcoast, doing business as Spectra Energy Transmission, and since then Banner had been the only vendor on those pipelines. On April 3, 2020, Mr. Beck negotiated a new contract with Enbridge for a three-year term to April 3, 2025, with an option for Enbridge to renew for another two years. The contract was non-exclusive and could be terminated by either party on 30 days’ notice, but there was no evidence that Enbridge had contemplated engaging a different company or terminating the contract before receiving the October 6, 2021 email. On May 31, 2020, Megory sold all the shares of Banner to ABZ Falling Inc., the holding company of long-time employee Bradley Curtis Loring, under a share purchase agreement for $3,000,000. ABZ paid the price by a promissory note in four yearly instalments of $750,000, and Mr. Loring guaranteed ABZ’s obligations. Megory also lent ABZ $206,000 for initial expenses, which was to be repaid by August 31, 2020 and was not in issue. At closing, Mr. Beck signed a “Non-Solicitation, Non-Competition and Confidentiality Agreement” with ABZ. In that agreement, he acknowledged that he had a duty of loyalty, confidence and a fiduciary duty to ABZ and Banner, agreed not to direct customers away or reduce business, agreed not to disclose confidential information except for the benefit of ABZ or Banner as requested by ABZ, and covenanted not to make statements that disparaged or defamed ABZ or Banner. The share purchase agreement also required Megory to assist in the transition of employees, foster good relations between employees and ABZ, and not disparage ABZ or its affiliates, acknowledging that doing so could cause irreparable harm to Banner and ABZ.

Workplace events and the October 6, 2021 email
After the sale, Mr. Loring took control of Banner’s operations, while Mr. Beck continued as a consultant and Banner employee, attending worksites, advising on safety and operations, and interacting with crew members. There were no identified transitional problems or safety concerns in the 2020 season. In 2021, some employees became unhappy with Mr. Loring and Banner’s workplace culture. The evidence included an incident at Fort St. John involving “wet pipe”, differing views on whether and how it was safe to traverse or work in such conditions, and concerns among some crew members. Mr. Beck received information from employees such as Mr. Madsen and Mr. Babakaiff about “issues” and safety concerns, but he did not raise these matters privately and constructively with Mr. Loring. Instead, he called Enbridge’s handler, Ed McClarty, before and after a September 15, 2021 meeting, without telling Mr. Loring, to say that employees were leaving and that there were safety issues, and he did not disclose those calls to Mr. Loring. On September 15, 2021, a meeting was held at Mr. Beck’s property in Hope, attended by Mr. Loring and several Banner employees. The court found that Mr. Beck ran the meeting, did most of the talking, and was very critical of Mr. Loring’s management in front of the crew, including raising the wet pipe issue and treatment of employees, without prior private discussion. Some employees quit or decided to quit around this time, and Mr. Beck later met with at least two employees and said he could make calls to help them find other jobs. Mr. Beck then ceased working for Banner after this point. On October 6, 2021, Megan Beck sent an email to Enbridge’s “myhr” address stating that she was writing on behalf of “several employees of Banner” and alleging that under Mr. Loring, Banner had not adopted the previous owner’s strict safety measures, had become a company that valued production over safety, and listing about 20 “examples” under headings of safety concerns, employee abuse, billing and vehicles. The email was copied to Mr. Beck, Mr. Madsen and former employee Adam Giorgio, and it listed contact information for Messrs. Beck, Madsen, Giorgio, Babakaiff and Yadernuck as employees included in the complaint. The court found that Mr. Beck more likely than not helped draft the email, or at least reviewed and approved its contents, knew he was being presented as one of the employees on whose behalf the complaint was made, and actively encouraged and supported Megan and Mr. Madsen in sending the email and in pursuing further complaints.

Enbridge’s investigations and termination of the Banner contract
Enbridge did not initially see the October 6, 2021 email because it went into a spam folder, and it was only discovered in early January 2022. Dean Freeman, Enbridge’s director of pipelines in British Columbia, initiated two investigations. One, led or co-led by Jason Rowley, focused on safety processes, including the safe work permit process and Banner’s practices; the other, by Ethics and Compliance (including Ms. Dhaliwal and Mr. Neuberger), examined both safety and billing allegations. Mr. Rowley’s team interviewed Mr. Loring on May 4, 2022, and prepared a report. Mr. Rowley testified that Mr. Loring did not unequivocally deny the allegations and had said that he was managing the company as he had been trained and mentored to do. The Ethics and Compliance team concluded in its written report that the allegations, including those relating to safety, were not established on a balance of probabilities, though it recommended additional oversight, reinforcing reporting processes, and initiating an expression of interest for the aerial work. Mr. Freeman testified that he decided to terminate the contract based on information from the safety investigation, particularly unsafe work content such as working on wet pipe, free climbing, and unreported incidents, and on the understanding that Mr. Loring did not deny the allegations but explained them as normal practice. On June 8, 2022, Enbridge informed Mr. Loring that it was terminating its contract with Banner. Banner performed no Enbridge work in 2022, did only limited work for Fortis in 2022 and 2023, and then went dormant when Mr. Loring could not replace the lost Enbridge work.

Contractual findings and damages between Megory, ABZ and Banner
After Enbridge terminated the contract, ABZ did not pay the final two $750,000 instalments under the promissory note. Megory sued ABZ and Mr. Loring for the outstanding $1,500,000 plus contractual interest, and ABZ and Mr. Loring counterclaimed, alleging breaches of the Non-Competition Agreement and the share purchase agreement by Megory and Mr. Beck, and seeking damages. Banner also sued Megory, Mr. Beck, Megan and Mr. Madsen on similar theories. The court interpreted Article 3 of the Non-Competition Agreement as imposing on Mr. Beck a fiduciary duty to ABZ and Banner that included duties of loyalty, disclosure and confidence. It held that Mr. Beck breached this duty and other provisions of the Non-Competition Agreement, and also that his conduct, if attributed to Megory, would put Megory in breach of Article 5.3(c) of the share purchase agreement, which required assisting in transition, fostering good relations, and not disparaging ABZ or its affiliates. The court found that Mr. Beck’s conduct—failing to raise concerns constructively with Mr. Loring, disparaging Mr. Loring to employees at the September 15 meeting, contacting Enbridge without informing Mr. Loring, participating in and encouraging the October 6 email and later complaints, and disclosing confidential information not for ABZ or Banner’s benefit—breached these contracts. Applying the doctrine of corporate attribution, the court held that Mr. Beck was the sole directing mind of Megory, that his post-closing role as Banner’s consultant fell within the sector of corporate operations assigned to him, and that his conduct should be attributed to Megory for purposes of the share purchase agreement and the Non-Competition Agreement. The court concluded that these breaches were the effective or dominant cause of Enbridge’s termination of the Banner contract and the loss of profit, and that such loss was within the contemplation of the parties. On quantum, the court accepted the evidence of expert Daniel Sturgess, who estimated Banner’s loss of profit to April 3, 2025 at $3,310,000 and, assuming renewal to April 3, 2027, at $5,510,000. The court found it unlikely that Enbridge would have terminated or reduced Banner’s work before April 3, 2025, and therefore awarded the full $3,310,000 for that period. For the two-year renewal period, it held that ABZ was deprived of a chance that warranted damages at 80% of the estimated $2,200,000 profit, or $1,760,000. ABZ’s total loss of profit was therefore $5,070,000, from which the unpaid $1,500,000 purchase price (plus contractual interest) was to be subtracted, and ABZ was also entitled to interest under the Court Order Interest Act. The court held that ABZ and Mr. Loring owe Megory $1,500,000 plus contractual interest under the promissory note and guarantee, and that Megory and Mr. Beck are jointly and severally liable to ABZ for $5,070,000 plus interest. Banner’s separate action did not result in a separate damages award because ABZ’s contractual recovery addressed the loss.

Defamation and overall outcome
In a counterclaim, Mr. Loring alleged that the October 6, 2021 email and certain text messages from or through Megan and Mr. Madsen defamed him by making false statements that harmed his reputation. The court found that some of the impugned words were defamatory in that they referred to Mr. Loring, would tend to lower his reputation, and were published to Enbridge. However, it held that the publications occurred on an occasion of qualified privilege, because the defendants had at least a moral or personal interest or duty in raising safety, employee treatment and billing concerns with Enbridge, and Enbridge had a corresponding interest or duty to receive the information. The court concluded that Mr. Loring had not proven malice. It found no evidence that the defendants knew the key statements were false or were recklessly indifferent as to their truth, and accepted that their dominant purpose was to raise concerns about safety and workplace issues rather than to injure Mr. Loring for an improper purpose. As a result, the defence of qualified privilege succeeded and Mr. Loring’s defamation claim was dismissed. In summary, ABZ Falling Inc. and Mr. Loring remain liable to Megory for $1,500,000 plus contractual interest under the promissory note, while Megory and Mr. Beck are liable to ABZ for $5,070,000 plus interest for breach of the share purchase agreement and the Non-Competition Agreement, and the defamation claim by Mr. Loring against Mr. Beck, Megan Beck and Michael Madsen was dismissed. The court encouraged the parties to agree on costs and left costs to be determined later if necessary.