Imperial Oil Ltd. v. Westlake Fuel Ltd. et al., (2001) 156 Man.R.(2d) 296 (CA)

• Judge: Philp, Kroft and Steel, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: June 28, 2001
• Jurisdiction: Manitoba
• Citations: (2001), 156 Man.R.(2d) 296 (CA);2001 MBCA 130

Imperial Oil v. Westlake Fuel (2001), 156 Man.R.(2d) 296 (CA);

    246 W.A.C. 296

MLB headnote and full text

Temp. Cite: [2001] Man.R.(2d) TBEd. AU.002

Imperial Oil Limited and McColl- Frontenac Petroleum Inc., a Partnership, carrying on business under the firm name and style of Imperial Oil (plaintiff/respondent) and Westlake Fuel Ltd., Kevin Jonas Johnson and Kimberley Dawn Johnson carrying on business under the firm name and style of Westshore Fuel and Oil and the said Westlake Fuel Ltd., Kevin Jonas Johnson and Kimberley Dawn Johnson (defendants/appellants)

(AI 01-30-04937; 2001 MBCA 130)

Indexed As: Imperial Oil Ltd. v. Westlake Fuel Ltd. et al.

Manitoba Court of Appeal

Philp, Kroft and Steel, JJ.A.

July 27, 2001.

Summary:

Imperial Oil appointed Westlake Fuel Ltd. as its sole agent for the sale of its products in a defined market area. The Johnsons, who operated Westlake, signed the agency agreement as guarantors. The agreement contained a restrictive covenant prohibiting Westlake from competing with Imperial for 12 months after the termination of the agreement. After concerns arose about Westlake's accounting records, Imperial terminated the agreement. A motions judge granted an interim injunction enforcing the restrictive covenant against Westlake and the Johnsons. They appealed.

The Manitoba Court of Appeal allowed the appeal.

Equity - Topic 3606

Fiduciary or confidential relationships - General principles - What constitutes a fiduciary relationship - Imperial Oil terminated an agency arrangement with Westlake Fuel Inc. and sought to enforce a non-competition covenant in the agency agreement - Johnson, a principal of Westlake, was using Westlake's equipment and premises to compete with Imperial - Imperial argued Johnson owed it a fiduciary duty - The Manitoba Court of Appeal held that while "the law recognizes that a fiduciary obligation may be owed by a director or senior officer of a corporation to the corporation and that the obligation may persist after a formal employment relationship has ended... [this principle] does not support the conclusion that an employee of a corporation (or even an officer, director, or controlling shareholder of the corporation) may owe a fiduciary obligation to a party with whom the corporation has contracted" - See paragraphs 35 to 41.

Injunctions - Topic 1610

Interlocutory or interim injunctions - General principles - Circumstances when injunction will not be granted - Imperial Oil appointed Westlake Fuel Ltd. as its sole selling agent in a defined area - The Johnsons, who operated Westlake, signed the agency agreement as guarantors - Imperial terminated the agreement and sought to enforce a restrictive covenant prohibiting competition with Imperial - A motions judge granted an interim injunction against Westlake and the Johnsons - They appealed - The Manitoba Court of Appeal allowed the appeal - There was no serious issue to be tried as Westlake had ceased conducting business, and its actions in allowing Johnson to use its equipment and service station to conduct business himself did not breach the covenant - There was also no evidence that Imperial would suffer irreparable harm without the injunction, and the balance of convenience weighed against its granting.

Injunctions - Topic 1610

Interlocutory or interim injunctions - General principles - Circumstances when injunction will not be granted - [See Injunctions - Topic 1641 ].

Injunctions - Topic 1616

Interlocutory or interim injunctions - General principles - Arguable issues of law involved or serious question to be tried - [See first Injunctions - Topic 1610 ].

Injunctions - Topic 1617

Interlocutory or interim injunctions - General principles - Breach of negative covenant - [See first Injunctions - Topic 1610 ].

Injunctions - Topic 1641

Interlocutory or interim injunctions - Parties - General - Imperial Oil appointed Westlake Fuel Ltd. as its sole selling agent in a defined area - The Johnsons, who operated Westlake, signed the agency agreement as guarantors - Imperial terminated the agreement - Johnson incorporated another company and used Westlake's trucks, equipment and service station to compete with Imperial - Imperial sought to enforce a restrictive covenant in the agency agreement which prohibited competition after termination - A motions judge granted an interim injunction against Westlake and the Johnsons - They appealed - The Manitoba Court of Appeal allowed the appeal - The court found that "Johnson and his wife have simply not covenanted, in their personal capacities, to be bound by any restrictive covenant. In signing the agency agreement as guarantors they did not agree that they would not, either directly or indirectly, solicit or supply Imperial's customers after the termination of the agreement" - See paragraph 31.

Injunctions - Topic 1805

Interlocutory or interim injunctions - Requirement of irreparable injury - Covenants not to compete - [See first Injunctions - Topic 1610 ].

Injunctions - Topic 5953

Particular matters - Contracts - Negative covenants - [See first Injunctions - Topic 1610 ].

Injunctions - Topic 5971

Particular matters - Restrictive covenants - Covenants not to compete - [See first Injunctions - Topic 1610 ].

Master and Servant - Topic 4207

Duties of servant - Fiduciary duty - [See Equity - Topic 3606 ].

Cases Noticed:

Imperial Oil Ltd. v. Scott (Frank R.) Ltd. (1993), 51 C.P.R.(3d) 488 (Ont. Gen. Div.), dist. [para. 12].

Manitoba (Attorney General) v. Metropolitan Stores Ltd. - see Metropolitan Stores (MTS) Ltd. v. Manitoba Food and Commercial Workers, Local 832 and Labour Board (Man.).

Metropolitan Stores (MTS) Ltd. v. Manitoba Food and Commercial Workers, Local 832 and Labour Board (Man.), [1987] 1 S.C.R. 110; 73 N.R. 341; 46 Man.R.(2d) 241; 38 D.L.R.(4th) 321; 18 C.P.C.(2d) 273; 25 Admin. L.R. 20, refd to. [para. 14].

R.J.R. MacDonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général), [1994] 1 S.C.R. 311; 164 N.R. 1; 60 Q.A.C. 241; 58 A.R. 161; 111 D.L.R.(4th) 385; 54 C.P.R.(3d) 114, refd to. [para. 14].

Collins (J.G.) Insurance Agencies Ltd. v. Elsley's Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 15].

Winnipeg Livestock Sales Ltd. v. Plewman et al. (2000), 150 Man.R.(2d) 82; 230 W.A.C. 82 (C.A.), refd to. [para. 16].

Routh v. Jones, [1947] 1 All E.R. 179 (Ch. D.), affd. [1947] 1 All E.R. 758 (C.A.), refd to. [para. 18].

Morris (Herbert) Ltd. v. Saxelby, [1916] 1 A.C. 688 (H.L.), refd to. [para. 19, footnote 1].

Big Iron Drilling Ltd. v. Standard Holdings Ltd., [1981] 1 W.W.R. 599 (Sask. Q.B.), refd to. [para. 29].

Saskatchewan Economic Development Corp. v. Patterson-Boyd Manufacturing Corp., P-B Fabricators Ltd. and Western Metal and Supply Co., [1981] 2 W.W.R. 40; 6 Sask.R. 325 (C.A.), refd to. [para. 30].

Colonial & Home Fuel Distributors Ltd. v. Skinners Ltd. (1963), 39 D.L.R.(2d) 579 (Man. Q.B.), affd. (1963), 46 D.L.R.(2d) 695 (C.A.), affd. [1964] S.C.R. v., refd to. [para. 30].

Gerrard v. Century 21 Armour Real Estate Inc. (1991), 4 O.R.(3d) 191 (Gen. Div.), refd to. [para. 36].

Canadian Aero Services Ltd. v. O'Malley, [1974] S.C.R. 592, refd to. [para. 37].

Alberts et al. v. Mountjoy et al. (1977), 16 O.R.(2d) 682 (H.C.), refd to. [para. 37].

Barton Insurance Brokers Ltd. v. Irwin et al. (1999), 119 B.C.A.C. 109; 194 W.A.C. 109; 40 C.C.E.L.(2d) 159 (C.A.), refd to. [para. 37].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R. (4th) 14; 35 E.T.R. 1; 44 B.L.R. 1, refd to. [para. 39].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; [1994] 9 W.W.R. 609, refd to. [para. 39].

Trophy Foods Inc. v. Scott et al. (1995), 140 N.S.R.(2d) 92; 399 A.P.R. 92; 123 D.L.R.(4th) 509 (C.A.), refd to. [para. 39].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 40].

Authors and Works Noticed:

Zaid, Frank, Canadian Franchise Guide (1993) (Looseleaf), generally [para. 29].

Counsel:

W.S. Gange and J.L. King, for the appellants;

J.G. Edmond and S. Mattheos, for the respondent.

This appeal was heard on June 28, 2001, by Philp, Kroft and Steel, JJ.A., of the Manitoba Court of Appeal. Philp, J.A., delivered the following decision for the court on July 27, 2001.