Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to drafting non-compete agreement, questions about their validity and enforceability, or resolving disputes about non-compete clauses, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Ontario independent contractor agreement lawyers registered on the website who can assess your business needs and help you draft, understand, negotiate, and resolve disputes involving non compete agreements and clauses – I should know, I’m one of them! If you want to speak with me directly, you can contact me at michael@dynamiclawyers.com.
As a follow up to my previous blog about non compete agreements, in this blog, I’ll be discussing the starting point in Ontario caselaw for non-compete clauses and agreements – namely, Rogers & Rogers Inc. v. Pinehurst Woodworking Co. Note: this case may not be authoritative as of the date that you are reading them. You should not be relying upon this case in any way whatsoever! You are cautioned again to retain a lawyer to review your particular situation to determine the current status of the caselaw.
In Rogers & Rogers Inc. v. Pinehurst Woodworking Co. [2005] 14 B.L.R. (4th) 142, the plaintiff (a business that supplied and installed store fixtures in high end stores) sued the defendant subcontractor (a business that manufactures store fixtures) for disloyalty. Specifically, the plaintiff alleged that it showed the defendant a business opportunity to supply a client with store fixtures. The contract between two parties stated that any future product inquiries by that client to the defendant were to be directed through the plaintiff. The defendant won the client’s business and the plaintiff sued. Justice Perell of the Ontario Superior Court of Justice reviewed the various allegations and largely dismissed the action against the plaintiff, awarding only nominal ($6,000) damages for a breach of contract claim. What’s important here is Justice Perell’s discussion of the jurisprudence concerning the validity and enforceability of clauses that try to restrict trade. Here’s what he wrote at paras. 95-100:
95 A contract in restraint of trade is one in which a party to a contract agrees to restrict his or her liberty in the future to freely carry on trade with other persons not parties to the contract: Stephens v. Gulf Oil Canada Ltd. (1975), 11 O.R. (2d) 129 (Ont. C.A.) at p. 138-9; Esso Petroleum Co. v. Harper’s Garage (Stourport) Ltd. (1967), [1968] A.C. 269 (U.K. H.L.) at p. 317.
96 All restraints of trade are contrary to public policy and are prima facie void unless they can be justified as being reasonable with respect to the interests of the parties and the public: Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co., [1894] A.C. 535 (U.K. H.L.) at p. 565; J.G. Collins Insurance Agencies v. Elsley, [1978] 2 S.C.R. 916 (S.C.C.); Doerner v. Bliss & Laughlin Industries Inc., [1980] 2 S.C.R. 865 (S.C.C.).
97 The test of reasonableness as between the parties is that the restrictive covenant not go beyond what is adequate to protect the interest of the party seeking to uphold the covenant: Herbert Morris Ltd. v. Saxelby, [1916] 1 A.C. 688 (U.K. H.L.).
98 A four-part inquiry is required to determine if a contract is in restraint of trade: Tank Lining Corp. v. Dunlop Industries Ltd. (1982), 40 O.R. (2d) 219 (Ont. C.A.). The questions are: (1) Is the covenant in restraint of trade? (2) Is the restraint against public policy or is it one of several exceptional cases? (3) Is the restraint justifiable as reasonable between the parties? and (4) Is the restraint justifiable as reasonable with respect to the interests of the public?
99 The onus is on the party seeking to enforce the contract to establish that it is in the interests of the parties and the onus for establishing that it is not reasonable in the public interest is on the party seeking to oppose enforcement; Stephens v. Gulf Oil Canada Ltd., supra; Tank Lining Corp. v. Dunlop Industries Ltd., supra. Reasonableness is determined in the light of circumstances existing at the time the contract is made, which includes the parties expectations of what may possibly happen in the future: Stephens v. Gulf Oil Canada Ltd, supra.; Tank Lining Corp. v. Dunlop Industries Ltd., supra.
100 That the covenant could have been drafted in narrower terms will not save it, because the court will examine only the agreement actually made: Elsley v. J.G. Collins Insurance Ltd., supra at pp. 925-6; Mason v. Provident Clothing & Supply Co., [1913] A.C. 724 (U.K. H.L.) at p. 732; Maguire v. Northland Drug Co. [1935] 3 D.L.R. 521 , [1935] 3 D.L.R. 521 (S.C.C.).
From Justice Perell’s review of the jurisprudence, it becomes clear that courts don’t like clauses that restrain trade. These clauses are contrary to public policy. Therefore, they are void unless they can be justified as being reasonable as between the parties and the public interest. There are tests for determining the latter, onuses that must be discharged by parties trying to rely on this or that, and factors that should be considered and weighed accordingly. This review is done on a case by case basis and you should definitely get a lawyer to review your situation and the applicable caselaw to provide you with a opinion as your legal options. Just make a post on Dynamic Lawyers (100% free and anonymous). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga lawyers who can provide such opinions and even help you resolve disputes about non-compete agreements and clauses that restrict trade.
Remember: Justice Perell’s review of the jurisprudence deals with one way of challenging non-compete clauses. There are other ways of challenging such clauses, which have been previously discussed by me in the previous blog about non compete agreements and which I will get into further detail in future blogs.










