On January 23, 2009, the Supreme Court of Canada handed down a
decision regarding the Court's role in interpreting and
enforcing restrictive covenants. More specifically, the Supreme
Court held that it is not for a Court to interpret or
"fix" ambiguous restrictive covenants in an effort to
uphold their validity.
Facts and Judicial History
In the case of Shafron v. KRG Insurance Brokers (Western)
Inc.1, Mr. Shafron's employment contract with
KRG Insurance Brokers (Western) ("KRG") contained a
restrictive covenant that prohibited him from competing with KRG
for a three-year period after the termination of his employment in
the "Metropolitan City of Vancouver". In 2001, Mr.
Shafron left the employ of KRG and began working as an insurance
salesman for Shaw Insurance Agency in Richmond, British Columbia.
KRG sought to have the restrictive covenant contained in Mr.
Shafron's employment contract enforced. Mr. Shafron challenged
the enforceability of the restrictive covenant on the basis that
there was no recognized meaning for the phrase "Metropolitan
City of Vancouver."
The trial court dismissed KRG's claim. However the Court of
Appeal overturned the lower court's decision and, by relying on
the doctrine of notional severance (the process of reading down a
contractual provision so as to make it legal and enforceable),
clarified the meaning of "Metropolitan City of Vancouver"
as to denote "the University of British Columbia endowment
lands, Richmond and Burnaby." By doing so, the Court of Appeal
upheld the restrictive covenant and ruled that Mr. Shafron was in
breach of same.
The Supreme Court
The Supreme Court of Canada reversed the ruling of the Court of
Appeal. It found that the expression "Metropolitan City of
Vancouver" was neither clear nor certain, and as such the
restrictive covenant could not be validly upheld and enforced. The
Court further articulated that it is not for the Court to step in
and impose a meaning on an ambiguous clause that the parties
themselves did not intend. Ruling otherwise would "invite the
employer to impose an unreasonable restrictive covenant on the
employee" given that the employer could rely on the Court to
read down the language and enforce such a restrictive
In Quebec, non-compete covenants are expressly governed by
Article 2089 of the Civil Code of Quebec, which provides
that a non-competition clause must be limited to time, place and
type of employment and whatever is necessary for the protection of
the legitimate interests of the employer, failing which it will not
be enforceable. The Supreme Court decision further buttresses this
This decision indubitably illustrates that courts will not step
in to "save" or enforce language in an employment
contract that is vague or uncertain. Employers cannot circumvent
the absolute necessity of drafting clear, reasonable and
unambiguous restrictive covenants, otherwise, they risk losing the
faculty to protect their interests when faced with departing
1 2009 SCC 6. 2 Paragraph 40 of the judgment.
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