In F & G Delivery Ltd. v. MacKenzie, 2010 BCSC 195, the court considered whether non-solicitation provisions that restricted a former employee from contacting the employer's "potential" clients or customers and "former" employees was reasonable and thus should be enforced by way of an interlocutory injunction.

Background

MacKenzie commenced his second stint of employment with F & G Delivery Ltd. ("F &
G") in 2003. F&G's business was delivering freight and equipment in BC, and a large portion of its work was comprised of crane servicing.

Non-Competition and Confidentiality Agreement

At the time he was re-hired by F&G, MacKenzie signed a Non-Competition and Confidentiality Agreement that included the following provisions:

F & G and the Employee agree that in consideration of F & G providing
employment to the Employee, the Employee shall not,

1) for the period ending two (2) years from the date of termination of the Employee's employment with F & G, regardless of how the termination should occur, directly or indirectly solicit business from any client or customer or potential client or customer of F & G within the geographic area set out in Appendix "A" to this Agreement (the "Restricted Area"). (the "customer solicitation clause")

2) for the period ending one (1) year from date of termination of the Employer's employment with F & G, regardless of how the termination should occur involve or engage himself or herself as an employee, partner, joint venture, principal, consultant, contractor, agent, or shareholder with any person, firm, association, organization, syndicate, company or corporation, engaged in any business activity (specifically including the transportation of equipment or goods) that is similar to the business of F & G and has offices or facilities located within the Restricted Area. (the "non-competition clause").

3) during the Employee's employment with F & G and for a period of three (3) years following the termination of the Employee's employment with F & G regardless of how that termination should occur, the Employee will not hire or take away or cause to be hired or taken away, any employee of the Employer or any former Employee of the Employer who was employed by the Employer during the three (3) years preceding the date of the termination of the Employee's employment with F & G. (the "employee hiring clause").

Resignation/New Employment

MacKenzie resigned from F & G on September 4, 2009. Four days later he was hired by T-Lane.

T-Lane had a crane division that accounted for less than 10% of its total business. MacKenzie was hired as the crane manager with the expectation that he would expand T-Lane's existing crane fleet by locating operators and facilitating the purchase of more equipment to augment the cranes presently operated by T-Lane. 

Mackenzie had been instructed to use T-Lane's existing client data base to expand the crane division and had not been asked or instructed by T-Lane to hire employees or owner/operators of F & G.

Application for Interlocutory Injunction

F & G applied for an interlocutory injunction that would prohibit MacKenzie from:

• soliciting business, either directly or indirectly, from F & G customers within a specified geographical area, and
• directly or indirectly soliciting or inducing, or attempting to solicit or induce, employees of F & G to leave their employment.

Evidence of the Parties

In support of its application, F & G filed four affidavits from individuals who were either employees or crane owner/operators of F & G.  All four referenced conversations they had with MacKenzie in September 2009 at or around the time MacKenzie resigned from F & G.  The inference from the affidavits was that MacKenzie may have suggested to these individuals that they should consider joining him at T-Lane. There was no evidence, however, that any employees had left F & G to work for T-Lane.

There was also no evidence that any F & G customers had transferred their business to T-Lane as a result of anything done by MacKenzie. 

Test for Granting an Injunction

The court set out the three-pronged test for granting an injunction that was adopted by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311:

1. whether the applicant has demonstrated that there is a serious question to be tried (or in certain circumstances a strong prima facie case);
2. whether the applicant will suffer irreparable harm if an injunction is not granted; and
3. whether the balance of convenience favours granting the injunction.

The court then stated that in determining whether there is a serious question to be tried under the first part of the test:

• generally speaking, a court does not undertake an extensive review of the merits of the action. However, when an injunction is sought on the basis of a restrictive covenant, a more detailed consideration of the merits is appropriate.
• the court will consider whether the restrictive covenant is reasonable. There can only be a fair (or serious) question to be tried if the covenant is reasonable.

The court then stated that:

In the case at bar, an injunction will effectively amount to a final determination of the action as it is unlikely this matter would come to trial before some, if not all, of the restrictions in the Agreement will have expired.  In these circumstances,
F & G must show it has a strong prima facie case that the restrictive covenants upon which it relies to seek injunctive relief are enforceable (para. 22).

Test for establishing that a restrictive covenant is reasonable

The court then stated that the test for establishing the reasonableness of a restrictive covenant that imposes post-employment restraint on trade was set out by the court in Aurum Ceramic Dental Laboratories Ltd. v. Hwang, [1998] B.C.J. No. 190 (S.C.):

1) it protects a legitimate proprietary interest of the employer;

2) the restraint is reasonable between the parties in terms of:

-temporal length;

-spatial area covered;

-nature of activities prohibited; and

-overall fairness;

3) the terms of the restraint are clear, certain and not vague; and

4) the restraint is reasonable in terms of the public interest with the onus on the party seeking to strike out the restraint.

A restrictive covenant is enforceable only if it is reasonable between the parties and with reference to the public interest.

Application of Law to Facts

Applying the above law to the facts, the court ruled that the customer solicitation clause and the employee hiring clause were:

• much broader than necessary to protect any legitimate proprietary interest of F & G. The evidence did not disclose that F&G had a proprietary interest in potential customers or former employees;
• that prohibiting MacKenzie from soliciting potential customers or hiring former employees was an unreasonable restraint of trade.
• F & G did not establish that there was a serious question to be tried and accordingly its application for an interlocutory injunction should be dismissed.

The court concluded by stating that even if it had found a serious question to be tried under the first part of the test for an injunction, the balance of convenience did not favour an injunction because: 

• There was no evidence that F & G had suffered any damage, let alone irreparable damage. It is a $17 million a year business and F& G representatives had started that MacKenzie's departure had not hurt its business at all.
• The evidence did not suggest that MacKenzie was a key employee or that his departure from F & G had in any way threatened its ongoing existence.
• There was no evidence that any F & G employee has joined T-Lane, or that any F&G customer has been enticed by MacKenzie to transfer their business.
• An injunction would jeopardize MacKenzie's employment at T-Lane and thus the only party facing irreparable harm was MacKenzie.