Case Report – Fiduciaries may prepare to depart

There is a line of case law in which Canadian courts have held that “ordinary employees” can take steps in preparing to compete post-departure without violating their duty of loyality and fidelity. In this August 17th Saskatchewan Court of Appeal cause case, the court held that fiduciaries may also take such preparatory steps provided they do not usurp a corporate opportunity or otherwise breach the trust upon which their fiduciary status is based. In other words, evidence of preparation alone is not enough to prove a breach. The court said:

Applying the case law to these activities, the trial judge did not err in saying that Mr. Fleming did not breach the fiduciary duty owed to his employer. The steps taken were of an exploratory nature only and fall easily into the category of contemplation and casual discussions with others. I reach this conclusion even though these were activities that would have resulted in a business capable of competing directly with Ryly’s, if they had come to fruition. To use Professor Flannigan’s analysis, however, Mr. Fleming did not reach the point of opportunistically diverting his employer’s resources to his or her own self interest rather than for the limited purpose authorized by the employer. No resource belonging to the employer was used in Mr. Fleming’s activities.

Calyniuk Restaurants Inc. v. Fleming, 2007 SKCA 85 (CanLII).

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