SPARTEK SYSTEMS INC v BROWN, 2014 ABQB 526
3.65: Permission of Court to amendment before or after close of pleadings
3.73: Incorrect parties not fatal to actions
The Defendant, Robert Brown (“Brown”), was the President, a director, and one of two largest shareholders of the Plaintiff, Spartek Systems Inc. (“Spartek”) In 2004, Brown agreed to sell his interest in Spartek and executed a Share Sale Agreement on his own behalf and on behalf of his wholly owned company, the Defendant 1133098 Alberta Ltd (“113”). Spartek alleged that Brown, in a conspiracy with other Defendants, breached his contractual and other obligations to Spartek, including non-competition, non-solicitation of employees or clients, and protection of confidential information. 113 commenced a separate Action against Spartek claiming for monies allegedly owing under a promissory note issued pursuant to the Share Sale Agreement. The two Actions were consolidated.
Brown argued that the Share Sale Agreement should not be enforced as not all parties to the Agreement were parties to the Action. Justice Ross found no substance to the objection. Ross J. cited Rule 3.73(1)(b) which provides that “no claim or action fails because two or more parties do not join an action that they could or should have joined”. In accordance with Rule 3.73(2), where a judgment is entered in respect of the claims between the parties to the action, that judgment “is without prejudice to the rights of persons who are not parties to the action”.
Spartek entered into a Settlement Agreement with the Defendants, Chris Holt (“Holt) and Carlos Claveria (“Claveria”). Spartek later continued the Action against Holt alleging that Holt breached his obligations under the Settlement Agreement. Justice Ross found no fundamental breach of the Settlement Agreement and concluded that Holt was protected from liability. Ross J. held that Holt and Claveria were co-conspirators who would have been liable but for the Settlement Agreement. Holt did not Counterclaim against Spartek seeking enforcement of the Settlement Agreement, but it was agreed by Spartek and confirmed by Justice Ross during Trial that the appropriate amendment to the pleadings was permitted without the filing of an Order, pursuant to Rule 3.65(4).
Justice Ross concluded that the Share Sale Agreement was valid and that Brown violated the non-solicitation and non-competition covenants. All of the required elements were proven regarding the conspiracy claims against Brown, Holt, Claveria, and the Defendant Terrence Matthews. Spartek proved damages for lost profits and replacement costs for employees who departed from Spartek as a result of the Defendants’ unlawful actions and common design. Justice Ross also pierced the corporate veil between 113 and Brown. 113 received Judgment against Spartek pursuant to the promissory note. Because the corporate veil was pierced, Spartek was permitted to set off its Judgment against Brown from its liability to 113.View CanLII Details