'SIDNEY & NANCY' Sidney Greenwood and Nancy Fitzgerald had worked for National Business Systems, an international computer repair service, for ten years. It therefore came as a surprise when they both received lay-off notices on a Friday afternoon late in December 2005. Both were given severance packages that matched their seniority so they decided that this might be the catalyst to launch their own business repairing computers and related equipment for businesses in their community. Both were single, so no one else would be affected if the business failed. Sidney had graduated from a community college with a diploma in computer technology while Nancy had left high school after grade twelve, having taken several business courses prior to graduating. They decided to establish a partnership and to call their rm Compact Business Systems, closely mimicking a large successful rm in another city called Compaq Business Systems. Since they had no plans to expand their business beyond their own community, they did not believe that the similarity in names would pose a problem. In fact, Sidney and Nancy so re-\"M" \"m ,...1,...... "M" i" .1... Compaq Business Systems' logo that they used similar gradient tones of T9" tne-what 3'03 ant _t0 do ertisements. Sidney and Nancy named their premium same day service: \"m Service\" (a name already trademarked by Compaq Business Systems; and this became their most popular stande of service outselling their three day \"invest service\" by a margin of two to One. Sidney and Nancy gave no thought to the non-competition clause they had signed with National when they were hired. All employees of National were required to sign a non-competition covenant stipulating that they would not work for a competitor or start up a competitive business within three years after leaving National Business Systems. There was no geographic restriction contained in the non-competition clause, as National Business Systems had customers all over the world. In considering their m costs, the pair determined that they would need a small shop to conduct their business from, some testing and repair-equipment, a modest inventory of electronic components and a delivery van to pick-up and return equipment they would repair. They would also need to do some advertising in the local newspaper to get their name in front of the public. Pooling their resomces they found they had a shortfall in start-up capital of some $50,000. Because neither Sidney nor Nancy owned a home or had any appreciable assets, the bank would not lend them the money without a guarantor. Nancy's uncle Fred was fairlygyell established and agreed to sign a continuing guarantee for the necessary funds, insisting that \"this was as much as he was prepared to 'be on the hook for', so they better make do.\" This limitation however, was not written into the agreement with the bank, nor was the bank made aware of it. Compact Business Systems opened for business on March 1, 2006. In the rst couple of months after start- up the business was going extremely well. On April 15, 2006, one of Compact's customers - Lucky Accounting delivered one of its (Lucky's) desktop HQ computers to Compact. Compact was asked to upgrade the computer and install a new operating system known as Vulnerable. When Lucky's employee returned to Compact on April 21St to pick up the HQ computer, Compact informed the Lucky employee that he was out of luck because the HQ computer had been stolen in a break-in the night before. Neither Compact nor Lucky had any insurance coverage on the HQ computer. Compact's desk clerk calmly l explained to the Lucky employee that the loss was not Compact's fault. The Lucky employee became very angry but she was not able to obtain any satisfaction from Compact. When Compact upgraded computers, this often involved not only changing the hardware but also adding additional software. Shawna, a mature looking17 year old high school student, brought her computer into Compact's. Shawna's computer had not being working well lately and she had absolutely no idea why that was the case. Compact's desk clerk advised Shawn that the only way to improve the computer would be for her to purchase Compact's Deluxe Upgrade Package for $750.00. Shawna, under the urging of the desk clerk, agreed and signed the work order. Shawna picked up her computer a few days later. Once she had her computer at home it worked perfectly. Unfortunately she got to use it more than usual because her parents grounded her for foolishly spending far, far more, than was needed to fix her computer. Later that day a long term customer, known to his friends as "Shady," brought his computer to Compact. Shady had heard that Compact would install software (named FreeFromITunes) which would allow Shady to download music and movies from itunes.com without payment. Compact installed this software and Shady paid the $400.00 fee. When Shady got his computer home he realized that FreeFromITunes did not work at all and, in fact, resulted in Shady being charged double for each download. Sidney and Nancy called on several of National Business Systems customers and persuaded several to switch their business with offers of reduced service charges and faster turn-around. Sidney and Nancy were particularly proud that they were able to persuade the regional office of International Tire Inc. to bring all their computer repair work to Compact. International Tire Inc., who was National Business Systems largest customer, was in the 3"d year of a 5 year service contract with National Business. Nancy was also quick to point out to those she called on that she had long suspected National Business Systems of overcharging its bigger customers and using off-shore components of inferior quality in their repairs. Needless to say, many of National's customers were eager to switch their business in favour of the lower prices offered by Compact. On June 1, 2006, Compact Business Systems signed a three year agreement with International Tire Inc. Terms of the contract included the requirement that Compact would repair all of International Tire's computers in a timely manner and that International would send all of its computer repairs to Compact during the 3 year period. The contract was signed by the President of International Tire (on behalf of International Tire Inc.) and by Sidney Greenwood. Another term of the contract required Compact to pick up, repair and return the computers within an average time of approximately 4 business days. Sid and Nancy were fortunate to get a large contract from another tire manufacture - American Tire Corporation - based in Nova Scotia. This contract was fixed price contract. Sid and Nancy negotiate a deal that would pay $100,000 per year for 4 years for keeping ATC's computers working in tip top shape. The contract contained Sid and Nancy's cost exposure because ATC's ability to utilize their services was limited to having Sid and Nancy repair or upgrade a maximum of 1300 computers a year. A contract covering this work was executed by both parties. A few days after the contract was signed, Nancy notice that the contract stated that the annual payment would be $10,000 per year. Around Thanksgiving 2006, things started to go wrong. Nancy, who had agreed to take care of the administrative end of the business, had fallen behind in paying the firm's bills and several suppliers were becoming impatient. At the same time, payments were not coming in from their customers and Nancy was too busy to spend time chasing the delinquent accounts. Mainly as a result of this, cash flow was tight.By this time, Sidney and Nancy's business had paid $15,000 of the initial loan. The pair approached the an additional $5,000 to get them through their 'tight spot'. The bank manager agreed and provided the needed funds with all of Compact's business assets to be secured against the additional funds. One night a couple of weeks later, Sidney was delivering a computer to a customer on his way home from work and had an accident. A young woman in the other car, Freda Schmidt, was seriously injured, suffering serious neck and back injuries. It was determined that Sidney had made an improper lane change and he was subsequently charged with dangerous operation of a motor vehicle. As it turned out, Freda was a highly paid administrative assistant and when her boss learned she could be off work for at least three months, was going to sue for the loss of her services and the cost of replacing her on a temporary basis. By early November, the average time Compact took to repair a computer had slipped from 4 business days to T or 8 business days. After several complaints from International to Compact, International advised Compact that it was cancelling the contract because Compact had breached a condition of the contract. International Tire Inc. stopped sending its computers to Compact for repair. In addition, during the last two months of their rst year, the economy went from bad to worse. Orders dropped off, suppliers were screaming for payment in full on their overdue accounts, and the bank was threatening to seize the collateral posted as security for their loan. Sidney and Nancy decided that they had had enough and decided to declare bankruptcy. Believing that m Fred was in the clear, it seemed like they had nothing to lose. The bank could 'go pound salt'. In the week before the pair were to visit their lawyer to discuss the bankruptcy process, Sid and Nancy wrote cheques to three of their suppliers whom they felt had treated them well and who they did not want to leave holding the bag. They also arranged to sell off some unused inventory to a discount warehouse for 30% of its original value. They pocketed the cash they received from the sale, believing that they were entitled to it as compensation for a_.l_l_of their hard work. In early January 2007, they met with their lawyer to start bankruptcy proceedings. They disclosed their nancial situation, including the most recent loan arrangement they had with the bank. Although the lawyer only gave the initial loan agreement with the bank a cursory look, he assured them the inventory was the only security the bank was entitled to. The delivery van, which was leased, could be returned to the leasing company without any additional costs and they would simply abandon the lease for the building they were using as a workshop. Meanwhile, the leasing company, having heard about Compact's troubles, decided to 113; and recover their van, fearing that bankruptcy proceedings cauld see it tied up for weeks once the trustee in bankruptcy put a lock on the rm's premises. They ordered their agents to break into Sidney & Nancy's shop late one night to recover the van. In doing so, the agents broke the padlock on the door and, while moving through the dimly lit premises, one of the agents tripped over an electric heater which ignited a puddle of solvent Nancy had spilled and failed to clean up. The solvent ignited immediately causing a re that quickly spread through the shop. Serious damage was done to the shop and One of the agents sustained serious burns while putting the re out. He was out of work for three months recovering from the injuries. Questions: Describe how defamation is an issue in this case. What specic form of defamation occurred? Who is the plaintiff and who is the defendant? Which defenses, if any, would be available to Sidney and Nancy? What would be the most probable outcome (remedy) and why. Assuming that there is a valid contract was the contract breached? Which party breached the contract? What did that party do that amounted to a breach of contract? At what point in time could one of the parties start a legal action? Explain how trespass is an issue in this case from Compact's perspective? Who is the trespasser? If an action for trespass is commenced, who would be the plaintiff and who would be the defendant? What would be the most probable outcome (remedy) and why