Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344

• Judge: Doherty, Moldaver and Feldman, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: April 13, 2011
• Jurisdiction: Ontario
• Citations: 2011 ONCA 344;(2011), 280 O.A.C. 305 (CA)

Mason v. Chem-Trend (2011), 280 O.A.C. 305 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. AP.042

Tom Mason (appellant/applicant) v. Chem-Trend Limited Partnership (respondent/respondent)

(C52707; M39782; 2011 ONCA 344)

Indexed As: Mason v. Chem-Trend Limited Partnership

Ontario Court of Appeal

Doherty, Moldaver and Feldman, JJ.A.

May 3, 2011.

Summary:

The applicant was terminated, allegedly for cause, after 17 years' employment with the respondent. Wrongful dismissal litigation between the parties was ongoing. In order to try to quickly determine whether and to what extent he was free to compete with the respondent, the applicant brought a separate application asking the court to declare the restrictive covenant in his employment contract unenforceable.

The Ontario Superior Court, in a decision reported at [2010] Uned. 4119, dismissed the application. The applicant appealed.

The Ontario Court of Appeal allowed the appeal.

Contracts - Topic 6732

Illegal contracts - Contrary to public policy - Restraint of trade - Agreements not to compete or solicit - [See Master and Servant - Topic 1323 ].

Equity - Topic 1482

Equitable principles respecting relief - Clean hands doctrine - Application of - [See Master and Servant - Topic 1320 ].

Master and Servant - Topic 1310

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - General - The Ontario Court of Appeal discussed the law respecting the enforceability of restrictive covenants - Three factors determined reasonableness: geographic scope, the activity that was restricted, and the time period of the restriction - Where the covenant was found in an employment contract it would be subjected to stricter scrutiny than where it was part of the consideration for the sale of a business - An ambiguous restrictive covenant was prima facie unreasonable and unenforceable - See paragraphs 8 to 19.

Master and Servant - Topic 1320

Contract of hiring - Covenants in restraint of trade - Restrictive covenants - Onus of proof - The applicant was terminated, allegedly for cause, after 17 years - Wrongful dismissal litigation between the parties was ongoing - In order to try to quickly determine whether and to what extent he was free to compete with the respondent, the applicant brought a separate application asking the court to declare the restrictive covenant in his employment contract unenforceable - The applicant moved for an order striking out portions of the respondent's affidavits - The respondent resisted the order and alleged that the applicant had not come to court with "clean hands" - Gray, J., held that "[t]he fact that the applicant is engaging in activities that are arguably contrary to the restrictive covenant is of no moment. If the restrictive covenant is invalid, the applicant is free to engage in those activities. If it is valid, the respondent has remedies" - The Ontario Court of Appeal stated that the application judge did not appear to make a finding of "unclean hands" on the applicant's part - In any event, the application in this matter was not one for equitable relief but for a declaration regarding the enforceability of the restrictive covenant - See paragraphs 32 and 33.

Master and Servant - Topic 1323

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - General - The applicant was terminated, allegedly for cause, after 17 years - Wrongful dismissal litigation between the parties was ongoing - In order to try to quickly determine whether and to what extent he was free to compete with the respondent, the applicant brought a separate application asking the court to declare the restrictive covenant in his employment contract unenforceable - An application judge held that it was enforceable - The Ontario Court of Appeal disagreed - The covenant was not ambiguous - However, after conducting the balancing process between the rights of the respondent to protect its trade secrets and customer information, and the public interest in free and open competition, in the context of the agreement as a whole and the applicant's role in the company as a salesman, the court concluded that the complete prohibition on competition for one year was overly broad as well as unworkable in practice, making the restrictive covenant unreasonable and unenforceable - See paragraphs 12 to 31.

Cases Noticed:

Collins (J.G.) Insurance Agencies Ltd. v. Elsley's Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 10].

KRG Insurance Brokers (Western) Inc. v. Shafron et al., [2009] 1 S.C.R. 157; 383 N.R. 217; 265 B.C.A.C. 1; 446 W.A.C. 1; 2009 SCC 6, refd to. [para. 13].

Staebler (H.L.) Co. v. Allan et al. (2008), 239 O.A.C. 230; 92 O.R.(3d) 107 (C.A.), refd to. [para. 16].

Counsel:

Chris G. Paliare and Richard Stephenson, for the appellant;

Karen Fields and Susan Crawford, for the respondent.

This appeal was heard on April 13, 2011, by Doherty, Moldaver and Feldman, JJ.A., of the Ontario Court of Appeal. Feldman, J.A., delivered the following judgment for the court on May 3, 2011.