Globex Foreign Exchange Corp. v. Kelcher et al., 2011 ABCA 240

• Judge: Hunt, Martin and Slatter, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: April 07, 2011
• Citations: 2011 ABCA 240;(2011), 513 A.R. 101

Globex Foreign Exchange Corp. v. Kelcher (2011), 513 A.R. 101; 530 W.A.C. 101 (CA)

MLB headnote and full text

Temp. Cite: [2011] A.R. TBEd. AU.025

Globex Foreign Exchange Corporation (appellant/plaintiff) v. David Kelcher, Mark MacLean, Luciano Oliverio, Axiom Foreign Exchange International Inc., Axiom Partnership, 1162134 Alberta Corporation, 1162170 Alberta Corporation, 1162174 Alberta Corporation, 1162127 Alberta Corporation, 1162168 Alberta Corporation, 1162816 Alberta Corporation (respondents/defendants)

(1001-0071-AC; 2011 ABCA 240)

Indexed As: Globex Foreign Exchange Corp. v. Kelcher et al.

Alberta Court of Appeal

Hunt, Martin and Slatter, JJ.A.

August 10, 2011.

Summary:

Globex Foreign Exchange Corp. was is in the foreign currency exchange business. The defendants, Kelcher, MacLean and Oliverio, were employees of Globex. The defendants had signed contracts containing non-competition and non-solicitation covenants. The defendants left Globex and joined a competing business. Globex commenced an action against the defendants, alleging that they breached their agreements, thereby causing damage to Globex. In the alternative, Globex argued that the defendants breached their common law duty of fidelity and confidentiality not to compete unfairly with Globex and exploit Globex's information for their own purposes.

The Alberta Court of Queen's Bench, in a decision reported at (2009), 473 A.R. 219, held as follows: there was no consideration given for the non-solicitation and non-competition covenants and they were therefore unenforceable; even if there was consideration, the non-competition covenants were unreasonable and therefore unenforceable as against the defendants; if there was consideration, only Kelcher was bound by the non-solicitation covenant; and there was no breach of any common law duty that the defendants may have owed to Globex. The damages suffered by Globex with respect to the breach by Kelcher of the non-solicitation covenant were provisionally set at $17,927. Globex appealed on the grounds that the trial judge erred in holding that: (1) MacLean's agreement was unenforceable due to the manner of his termination; (2) no consideration was provided to Kelcher and Oliverio in exchange for their agreements; (3) the non-competition covenants in the agreements were unreasonable and therefore unenforceable; (4) only Kelcher was bound by the non-solicitation covenant; (5) the defendants did not breach their common law duties to Globex; and (6) Globex's only entitlement to damages was $17,927. Kelcher cross-appealed as to whether the non-solicitation covenant was enforceable.

The Alberta Court of Appeal, Slatter, J.A., dissenting, dismissed Globex's appeal and allowed Kelcher's cross-appeal.

Master and Servant - Topic 1314

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Consideration - Kelcher and Oliverio signed contracts containing non-competition and non-solicitation covenants some two and one-half years after they began working for Globex Foreign Exchange Corp. - The Alberta Court of Appeal concluded that Kelcher and Oliverio were not bound by the restrictive covenants due to lack of consideration - Neither Kelcher nor Oliverio received anything beyond that to which they were already entitled when, during their employment, they accepted the restrictive covenants - The trial judge had found, based on evidence, that there was no promise made or implied by Globex that their employment would continue as a result of their signing - See paragraphs 73 to 91.

Master and Servant - Topic 1315

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Effect of wrongful termination on enforceability - The Alberta Court of Appeal discussed the law regarding the effect of wrongful termination on the enforceability of restrictive covenants - The court held that the English House of Lords case General Billposting Co. v. Atkinson, which held that wrongful termination rendered restrictive covenants in employment contracts unenforceable, was still good law in Alberta - Nor, did recent Supreme Court of Canada cases, including Tercon Contractors Ltd. v. British Columbia and Guarantee Co. of North America v. Gordon Capital Corp., dictate a different approach - Those cases concerned the doctrine of fundamental breach and whether, as against an innocent party, a wrongdoer could take the benefit of limitation of liability (exclusion) clauses and clauses requiring the commencement of suits within a specific time period - The court stated that "An employer that wrongfully terminates a contract of employment should not be able to capitalize on its failure to give notice or damages in lieu of notice by enforcing prospective obligations against an innocent employee" - See paragraphs 42 to 72.

Master and Servant - Topic 1323

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - General - [See first Master and Servant - Topic 1324 ].

Master and Servant - Topic 1324

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenant - Whether reasonable - Interest protected - The defendants left their employment with Globex Foreign Exchange Corp. and joined a competing business - The defendants had signed contracts containing a non-solicitation covenant which provided, inter alia, that for a period of 12 months after termination of employment, the employee would not solicit customers "in any business or activity for any client of Globex with which he/she had dealings on behalf of Globex ..." - The Alberta Court of Appeal held that the covenant did not meet the test of reasonableness - First, the term "dealings" was ambiguous both in meaning and practical application - If it was impossible to predict when you were breaching a restrictive covenant, it was in essence unreasonable - Second, the clause was ambiguous in another way - Read literally, all it prohibited was soliciting customers "for" any client of Globex - There was no suggestion that the defendants' new employer was a client of Globex - It seemed unlikely that was what the clause was meant to prohibit, but the example demonstrated the difficulty in ascertaining the reach of the clause - If the meaning of a restrictive covenant could not be ascertained, a court should not enforce it - Third, the clause was overly broad because it prohibited the former employees from soliciting customers "in any business or activity for any client of Globex" - Globex's business was foreign currency exchange - It was difficult to see what legitimate interest Globex had in preventing its ex-employees from contacting customers as regards other businesses - Yet that was what the non-solicitation clause purported to do - See paragraphs 12 to 23.

Master and Servant - Topic 1324

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenant - Whether reasonable - Interest protected - Oliverio left his employment with Globex Foreign Exchange Corp. - The Alberta Court of Appeal upheld the trial judge's finding that a non-solicitation covenant given by Oliverio was unreasonably wide - Slatter, J.A., stated that "The trial judge found that the second covenant given by Oliverio was unreasonably wide, because it provided he would not 'solicit any customer of Globex' for 18 months. In other words, this covenant was not limited to customers with whom Oliverio had a prior relationship. The trial judge concluded that [Globex] had no legitimate interest in protecting this category of customers from solicitation by Oliverio. Further, this restriction would make entering the business impossible for Oliverio, because he would have no way of knowing whether any potential client had previously been a customer of [Globex]. The conclusions of the trial judge on this question of mixed fact and law are reasonable, and no appellate intervention is warranted" - See paragraphs 3 and 169.

Master and Servant - Topic 4302

Duties of servant - On termination - Confidentiality - [See Master and Servant - Topic 4307 ].

Master and Servant - Topic 4307

Duties of servant - On termination - Competition in business - Solicitation of clients of former employer - The defendants (Kelcher, MacLean and Oliverio) left their employment with Globex Foreign Exchange Corp. and joined a competing business - Globex argued that even if agreements containing non-competition and non-solicitation clauses were not enforceable, the trial judge erred in concluding that the defendants did not breach their common law duties to Globex - The Alberta Court of Appeal held that the defendants did not breach non-contractual obligations - There was no evidence that the defendants took confidential information when they left Globex - Instead, the trial judge found that they wrote down the names of all the clients they could recall (the "Do Not Call List"), with the purpose of ensuring that they complied with the restrictive covenants - There were what the trial judge described as occasional "inadvertent and innocent breaches", but the the trial judge also found that the defendants attempted to abide by the non-solicitation agreement - Those findings were supported by evidence - The trial judge did not commit a palpable and overriding error in concluding that the defendants did not breach their common law obligation not to misuse confidential information - There was no evidence that Oliverio used the Do Not Call List to garner customers - Therefore, he could not have breached any common law obligation - As for Kelcher and MacLean, it was questionable whether the list of customers they made from memory, post-employment, was confidential information - Further, although the court had concluded that the restrictive covenants were not binding, their duration reflected Globex's views about what would be a reasonable period of non-solicitation - It would be artificial to impose a common law obligation more onerous than what Globex obviously considered reasonable - The trial judge also did not err in concluding that Globex's business methods were not sufficiently unique to be proprietary - See paragraphs 24 to 40.

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Counsel:

T.P. Chick, for the appellant;

J.A. D'Andrea, for the respondents.

This appeal and cross-appeal were heard on April 7, 2011, before Hunt, Martin and Slatter, JJ.A., of the Alberta Court of Appeal. The reasons for judgment reserved of the Court of Appeal were delivered on August 10, 2011, including the following opinions:

Hunt, J.A. (Martin, J.A., concurring) - see paragraphs 1 to 93;

Slatter, J.A., dissenting - see paragraphs 94 to 183.