Executive Summary: Key Legal and Evidentiary Issues

• Restrictive covenants in the shareholder agreement were unenforceable as the defendants had not received the agreement, were unaware of its terms, and lacked consideration.

• No basis was found to extend fiduciary duties beyond 13 months post-employment; no material client loss or misconduct warranted longer restraint.

• The Court held GNE waived confidentiality over key documents by filing them in court without a sealing order, undermining its claim of confidential misuse.

• Allegations of conspiracy and knowing assistance by Paloma entities lacked evidentiary support and were dismissed.

• Respondents’ request for enhanced or solicitor-client costs was denied due to lack of detailed cost records and absence of “reprehensible” litigation conduct.

• Rule 6.8 non-party witnesses were not entitled to additional cost recovery; undertakings were found too onerous and unsupported under the rule.

Background facts

Bradley Penney, Neil MacDonald, and Dustin Monilaws left Great North Equipment Inc. (GNE) in June 2023. They began working for Paloma Pressure Control LLC or related entities, competing in the oilfield equipment market. GNE obtained a ten-month interim injunction against them in August 2023 (via consent before Yamauchi J.), which prohibited solicitation, competition, and misuse of confidential information. The injunction was extended twice—to July 20, 2024 (Sidnell J.) and to August 31, 2024 (Mah J.)—pending further proceedings.

GNE later sought to expand the injunction for one year and extend its reach to Paloma entities, citing alleged contractual breaches, fiduciary violations, misuse of confidential information, and conspiracy.

Shareholder agreement and restrictive covenants

GNE argued that Penney and MacDonald were bound by non-compete and non-solicit covenants in a shareholder agreement (SA) via signed Joinder Agreements. However, the Court found:

• MacDonald never exercised his option to purchase shares and was therefore never a shareholder.

• Neither Penney nor MacDonald were given a copy of the SA or informed of its covenants.

• There was no consideration provided for undertaking the obligations.

The Court concluded the covenants were unenforceable and that no “serious issue to be tried” existed regarding their applicability.

Fiduciary duties and duration

Assuming fiduciary status for the individuals, the Court found no grounds to extend fiduciary obligations beyond the 13-month injunction period. It noted:

• There was no persuasive evidence of actual harm to GNE’s client relationships caused by the respondents.

• The duration of fiduciary roles was relatively short: Penney and MacDonald held their relevant titles for just over two years, and Monilaws worked in his role for about nine months.

• GNE did not demonstrate that any further period was necessary to “retain the loyalty” of its clients as defined in Anderson, Smyth & Kelly Customs Brokers Ltd v World Wide Customs Brokers Ltd, 1996 ABCA 169.

Confidential information and sealing order

GNE claimed the defendants had and misused confidential information. However:

• The information in question had been filed publicly in affidavits without a sealing order.

• The Court held this amounted to a waiver of confidentiality, citing Lac d'Amiante du Québec Ltée v 2858-0702 Québec Inc, 2001 SCC 51.

• The sealing order application was denied due to lack of evidence that the disclosure was inadvertent.

Conspiracy and knowing assistance allegations

GNE alleged Paloma knowingly assisted in breaches or conspired with the individuals. The Court rejected these arguments:

• No evidence supported these claims, especially in light of measures Paloma took to avoid exposure to GNE information.

Final outcome on injunction and sealing

The application to extend the injunction and sealing order was dismissed in full. The original injunction was terminated.

Costs decision

In Great North Equipment Inc v Penney, 2025 ABKB 42, Justice Lema ruled on costs:

• Respondents sought 70% of legal fees ($498,769.13) and 100% for others ($94,764.75), totaling $593,533.88.

• Alternatively, they sought Schedule C Column 5 costs with a 5x multiplier ($486,625.00).

• The Court declined enhanced costs, finding no “reprehensible, scandalous or outrageous conduct” by GNE.

• No solicitor-client costs were awarded as the respondents provided no supporting evidence (bills, time records) to justify the amounts.

• Applying Schedule C Column 5 with a 1.5x multiplier, the Court awarded $82,012.50, then deducted $12,012.50 for GNE’s success on interlocutory matters, yielding $70,000.

• GNE was granted $5,000 for success in the cost hearing itself, resulting in a net award of $65,000 payable by GNE.

Rule 6.8 witness costs

The Court declined to grant any additional costs for three Rule 6.8 witnesses:

• The undertakings requested from them were “too intrusive and onerous” and the rules did not support requiring such undertakings.

• Their legal costs were grouped with another respondent’s claim, and no breakdown or records were submitted.

• Any compensation beyond paid conduct money was rejected.

Conclusion

The case reflects a complete dismissal of GNE’s attempt to extend and broaden injunctive relief, primarily due to failure to prove enforceable obligations, ongoing harm, or wrongful conduct. Costs were awarded moderately in favour of the respondents, and GNE’s conduct did not justify any exceptional cost sanctions. The evidentiary standard for injunctive relief and litigation cost claims was not met.