Shafron v. KRG Insurance Brokers (Western), [2009] (headnotes and paras 14-32)

Facts:

S. was had an employment K with K. which included a restrictive non-competition clause for the “Metropolitan City of Vancouver.” He left K. and began working in Richmond. K. brought action.

Issue:

Is “Metropolitan City of Vancouver” too ambiguous of a term? Was the covenant unreasonable?

JH:

First instance was deemed too ambiguous. On appeal, was upheld.

Reasoning: (SCC Rothstein)

Restrictive covenants are prima facie unenforceable; onus on employer to prove otherwise

A restrictive covenant in the sale of a business will be allowed more often because it often involves a payment to vendor for goodwill

- Employment K’s don’t have this and the employee is often at a bargaining power disadvantage

Reasonable?

- Have to look at geographic coverage

- Time period

- Extent of activity restricted

* For a determination of reasonableness to be made the terms must be unambiguous

Notional Severance:

- Reading down an illegal provision in a K that would be otherwise unenforceable

Blue-Pencil Severance:

- Striking out an illegal provision in a K that would be other wise unenforceable

Rectification:

- Used in K law to restore the original will of the parties

Application:

- Notional Severance: Neither form of severance is appropriate in this case. CA erred in using (should not be used at all to a restrictive covenant)

- Courts should not be bailing employers out of badly drafted K’s

- Blue-Pencil Severance: should also be used sparingly and never on material parts of the K., which the word “Metropolitan” certainly is in this case

- Rectification: cannot be invoked to resolve ambiguity here; used to rectify what the parties agreement actually was, and it is unclear what it was

* Ambiguity makes the covenant neither clear nor reasonable

Holding:

Restrictive covenant cannot be upheld due to ambiguity; can’t be rewritten by the court. Ruled for S. K.’s action dismissed.