Ontario Court of Appeal notes contract signed, timesheets submitted, salary given
The Ontario Court of Appeal has confirmed an employment relationship between an animation corporation and a gaming studio head, given that the latter had signed an employment agreement, received a salary and benefits, and had income tax deducted at source.
The case was Clark v. Walker, 2026 ONCA 634. With gaming engine technology, the appellant D. Clark developed a unique process to make two-dimensional images seem three-dimensional for possible commercial use.
Mr. Clark’s studio, the appellant Moonray Studios Inc., did not satisfy the eligibility criteria for a government research grant.
Thus, Mr. Clark turned to the respondent Yowza Animation Corp., which complied with the government funding requirements. The respondent H. Walker served as Yowza’s chief executive officer.
Mr. Clark and Moonray’s employees signed employment contracts with Yowza, though working at Moonray’s studio in Hamilton. Pursuant to the parties’ agreement:
Ultimately, the parties’ efforts resulted in a contract with Cake Entertainment to use Toonlight in developing a Netflix animated television series based on the Angry Birds game. The parties shared profits arising from the Angry Birds contract.
Mr. Clark’s and Yowza’s relationship started to deteriorate. The parties parted ways after Mr. Clark resigned from Yowza. Thus, Yowza produced the series without Mr. Clark or Moonray’s Hamilton team and retained all production revenue.
In their action, the appellants sought damages and/or disgorgement for breaches of confidence, fiduciary duty, a joint venture agreement, and the duties of good faith and fair dealing.
In a counterclaim, the respondents asked for damages for negligent misrepresentation in tort and contract.
On June 27, 2025, Justice M. Dale Parayeski of the Ontario Superior Court of Justice dismissed the appellants’ claims and allowed the respondents’ counterclaim.
The trial judge awarded the respondents nominal damages of $1 for breach of the employment contract and ordered the parties to bear their own costs.
On appeal, the appellants asserted that the judge erred in allowing the counterclaim, specifically by finding that Mr. Clark had breached the employment contract when he kept or took the work product achieved while he and the Hamilton staff were Yowza employees.
The appellants also alleged that the respondents owed fiduciary duties and a duty of confidence based on a contemplated or operationalized joint venture, even if no actual joint venture existed.
The Ontario Court of Appeal partly allowed the appellants’ appeal by setting aside the trial judge’s order granting the counterclaim.
First, the appeal court ruled that the judge imposed liability based on a cause of action that the respondents did not plead. The appeal court noted that the respondents did not claim that Mr. Clark had taken anything from Yowza.
Second, even if the respondents pleaded that cause of action, the appeal court would have discerned no error in the judge’s conclusion that Mr. Clark had taken something of value.
Without evidence of what Mr. Clark had taken, the appeal court saw no reason to determine that Mr. Clark had taken anything from Yowza, let alone something of value.
Otherwise, the Ontario Court of Appeal dismissed the rest of the appellants’ appeal.
The appeal court considered the trial judge’s reasons adequate because they dealt with the material issues, explained how he reached his conclusions, and allowed for meaningful appellate review.
The Ontario Court of Appeal found no evidence that the parties had agreed to the terms needed to create a joint venture agreement.
Given the undisputed facts, the appeal court saw no error in the trial judge’s finding that Mr. Clark was a Yowza employee. The appeal court noted that an employment relationship did not necessarily preclude a joint venture.
Based on the evidence, the Ontario Court of Appeal found no reason to interfere with the trial judge’s factual findings supporting his conclusion that no fiduciary relationship existed between the parties, who had an employment relationship.
The Ontario Court of Appeal held that the trial judge identified the relevant test for breach of confidence, properly applied it to the evidence, and reasonably saw no misuse of confidential information by the respondents.
The Ontario Court of Appeal found no basis to disturb the trial judge’s findings on damages. The appeal court also refused to interfere with the judge’s determination that Mr. Clark had failed to mitigate his alleged damages.
The Ontario Court of Appeal granted the respondents leave to appeal against the costs order and allowed them to admit the fresh evidence. However, the appeal court dismissed the respondents’ costs appeal upon discerning no error in the trial judge’s refusal to order costs.
Lastly, despite the divided success on appeal, the appeal court found the appellants, as the more successful parties, entitled to a portion of their requested appeal costs of $47,000.
Thus, the appeal court ordered the respondents to pay the appellants all-inclusive appeal costs of $23,500.
Here are some other recent labour and employment law decisions by the Court of Appeal for Ontario.
In two wrongful dismissal actions, the appeal court issued an Aug. 6 decision in the employers’ favour upon determining that the employment contracts’ termination provisions complied with the minimum entitlements required under the province’s Employment Standards Act, 2000.
Last Apr. 16, the appeal court partly allowed an employer’s appeal to the limited extent of reducing the award of damages to a wrongfully dismissed employee upon determining that a judge failed to deduct money earned in mitigation.
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