Reed Stenhouse Companies Ltd. v. Learning, (1990) 87 Nfld. & P.E.I.R. 271 (NFTD)

• Judge: Puddester, J.
• Court: Supreme Court of Newfoundland and Labrador (Canada)
• Case Date: March 08, 1990
• Jurisdiction: Newfoundland and Labrador
• Citations: (1990), 87 Nfld. & P.E.I.R. 271 (NFTD)

Reed Stenhouse Ltd. (1990), 87 Nfld. & P.E.I.R. 271 (NFTD);

    271 A.P.R. 271

MLB headnote and full text

Reed Stenhouse Companies Limited v. Stephen Ross Learning

(1989 St. J. No. 3753)

Indexed As: Reed Stenhouse Companies Ltd. v. Learning

Newfoundland Supreme Court

Trial Division

Puddester, J.

October 25, 1990.

Summary:

Learning was employed by Reed Stenhouse Companies Ltd. as an insurance broker responsible for substantial commercial accounts in Newfoundland. He belonged to the employer's share purchase plan. In 1987 the employer amended the plan and Learning signed a new one page agreement without reading it. The new agreement contained a covenant in which he promised not to solicit the clients of the employer for one year after leaving his employment. Late in 1989 he moved to a competitor, successfully soliciting one of his clients to follow him before he left. He was almost immediately confronted with the nonsolicitation covenant of which he was unaware, but contacted four major clients anyway, ostensibly to inform them that he was changing employers. The employer brought an action against him to restrain breach of the non-solicitation covenant and applied for an interlocutory injunction.

The Newfoundland Supreme Court, Trial Division, in a judgment reported 83 Nfld. & P.E.I.R. 322; 260 A.P.R. 322, granted the application for an interlocutory injunction.

Subsequently, the Newfoundland Supreme Court, Trial Division, allowed the employer's action and upheld the enforceability of non-solicitation covenant. The court found that Learning breached the covenant, but awarded only $100.00 nominal damages and refused punitive damages. The injunction was continued.

Contracts - Topic 1131

Formation of contract - Form - Standard form contracts - Duty of explanation - The Newfoundland Supreme Court, Trial Division, held that where the wording used, the type and size of print, etc. may hide the term or trick the signatory about its existence, effect or operation, then the plaintiff has a duty to draw that provision to the signatory's attention - Absent this, and where the signatory is given, and reasonably may be expected to use, an appropriate opportunity to examine and read the document before signing, and where the plaintiff has no reason to know that the signatory has not read the document, then the document in full will be binding on the signatory - See paragraph 177.

Contracts - Topic 1131

Formation of contract - Form - Standard form contracts - Duty of explanation - An employee signed without reading a one page agreement to purchase shares in his employer after having the agreement for his perusal for at least several days - The agreement contained a clearly worded covenant in ordinary type by which he promised not to solicit his employer's clients for a year after leaving his employment, a covenant he had not been informed about - He was familiar with and used to reading documents - The Newfoundland Supreme Court, Trial Division, held that the employer was entitled to presume that in signing the document the employee agreed to be bound by all of its terms, including the covenant - See paragraphs 178 to 195.

Contracts - Topic 6732

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

Damages - Topic 1304

Exemplary or punitive damages - Breach of duty by employee - [See Damages - Topic 1305].

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract - The Newfoundland Supreme Court, Trial Division, stated that punitive damages are rarely awarded for breach of contract - The court refused punitive damages to an employer for breach of a non-solicition covenant by an ex-employee - See paragraphs 343 to 367.

Fraud and Misrepresentation - Topic 2506

Misrepresentation - General principles - Innocent misrepresentation - The Newfoundland Supreme Court, Trial Division, stated that actual misrepresentation, even if innocent, renders a contract unenforceable - See paragraphs 115 to 120.

Fraud and Misrepresentation - Topic 2701

Misrepresentation - What constitutes - General - An employer installed a replacement share purchase program for its employees - It included a covenant that the employee would not solicit the employer's clients after leaving his employment - The new plan and materials subsequently circulated never mentioned such a covenant - A memorandum promoting the plan urged employees to consult the employee manual, which did not refer to the covenant either - An employee ignored all of the material and signed the agreement without reading it and did not know of the covenant - The Newfoundland Supreme Court, Trial Division, held that the employer misrepresented the plan contents, but that the employee did not rely on it in entering the plan, so the misrepresentation provided no defence - See paragraphs 121 to 143.

Injunctions - Topic 6309

Particular matters - Injury to trade - Competition from former employee - The Newfoundland Supreme Court, Trial Division, found that an employee breached a nonsolicitation covenant and enjoined him from soliciting his former employer's clients for one year in accordance with the covenant - See paragraphs 331 to 333.

Master and Servant - Topic 1323

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - General - Burden of proof - The Newfoundland Supreme Court, Trial Division, held that a party seeking to uphold a covenant must establish that it is reasonable by showing that: "(a) the plaintiff has a proprietary interest requiring protection and that the covenant is incidental to and in support of that interest; (b) the covenant does not go beyond what is necessary to reasonably protect the plaintiff's proprietary interest; (c) the covenant is reasonable as to the geographical area and the time frame in which it is to operate; and (d) the covenant is reasonable with respect to the defendant's interests, as well as the plaintiff's." - See paragraph 205.

Master and Servant - Topic 1323

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - General - Non-solicitation clauses - An insurance broker signed an optional share purchase agreement with his employer, which included a covenant not to solicit the employer's clients for one year upon leaving his employment - The Newfoundland Supreme Court, Trial Division, held that the employer could enforce the non-solicitation covenant, because protection of the employer's trade connections was a sufficient priority interest, the one year period was reasonable, the covenant was reasonable with respect to both the employer's and employee's interests and was not contrary to the public interest - See paragraphs 196 to 299.

Master and Servant - Topic 1325

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Whether reasonable - Term - One year - The Newfoundland Supreme Court, Trial Division, upheld the reasonableness of a covenant that an insurance broker not solicit the clients of his former employer for one year after leaving his employment - See paragraphs 196 to 299.

Cases Noticed:

City Motors (Nfld.) Limited v. Alton (1988), 69 Nfld. & P.E.I.R. 161; 211 A.P.R. 161 (Nfld. C.A.), consd. [para. 112].

Tilden Rent-A-Car Company v. Clendenning (1978), 18 O.R.(2d) 601; 83 D.L.R.(3d) 400 (Ont. C.A.), appld. [paras. 112, 120, 152].

L'Estrange v. F. Graucob Limited, [1934] 2 K.B. 394, consd. [paras. 117, 151].

Canadian Indemnity Co. v. Okanagan Mainline Real Estate Board et al. (1970), 16 D.L.R.(3d) 715 (S.C.C.), appld. [para. 118].

Atwood v. Lamont, [1920] 3 K.B. 571 (C.A.), consd. [para. 146].

Craven et al. v. Strand Holidays (Canada) Ltd. et al. (1982), 142 D.L.R.(3d) 31 (Ont. C.A.), consd. [para. 156].

Leading Investments Limited v. Liebig (H.W.) & Co. Ltd., [1986] 1 S.C.R. 70; 65 N.R. 209; 14 O.A.C. 159, consd. [para. 159].

Crocker v. Sundance Northwest Resorts Ltd., [1988] 1 S.C.R. 1186; 86 N.R. 241; 29 O.A.C. 1, dist. [para. 161].

City Motors (Nfld.) Ltd. v. Alton (1987), 64 Nfld. & P.E.I.R. 52; 197 A.P.R. 52 (Nfld. S.C.T.D.), refd to. [para. 166].

Royal Garage Limited v. East Coast Holdings Limited and Lewis (1983), 41 Nfld. & P.E.I.R. 297; 119 A.P.R. 297 (Nfld. D.C.), dist. [para. 167].

Benedek et al. v. Dorian Homes et al. (1986), 43 R.P.R. 16 (Ont. H.C.), dist. [para. 169].

Atomic Interprovincial Transport (Eastern) Ltd. v. Geiger (Paul) Trucking Ltd. et al. (1987), 49 Man.R.(2d) 296 (C.A.), dist. [para. 170].

Alliance Truck Rental & Transport Ltd. v. M.P.H.A. Topographics Ltd. et al. (1984), 8 C.C.L.I. 70 (Ont. C.C.), dist. [para. 173].

J.G. Collins Insurance Agencies Ltd. v. Elsley et al., [1978] 2 S.C.R. 916; 20 N.R. 1; 83 D.L.R.(3d) 1, appld. [paras. 197, 204, 257, 296].

Doerner et al. v. Bliss & Laughlin Industries Inc. et al., [1980] 2 S.C.R. 865; 34 N.R. 168; 117 D.L.R.(3d) 547, appld. [para. 197].

Tank Lining Corp. v. Dunlop Industrial Ltd. (1982), 40 O.R.(2d) 219 (C.A.), consd. [para. 199].

Dale and Company Ltd. v. Land et al. (1987), 84 A.R. 52; 56 Alta. L.R.(2d) 107 (C.A.), consd. [paras. 199, 257].

Arvak Management Inc. v. McKee (1983), 40 Nfld. & P.E.I.R. 116; 115 A.P.R. 116 (Nfld. S.C.T.D.), appld. [para. 205].

Stenhouse Australia Ltd. v. Phillips, [1974] 1 All E.R. 117 (P.C.), consd. [para. 208].

Alberts et al. v. Mountjoy et al. (1977), 79 D.L.R.(3d) 108 (Ont. H.C.), consd. [paras. 208, 259].

Herbert Morris Limited v. Saxelby, [1916] A.C. 68 (H.L.), consd. [para. 234].

R.C. Young Insurance Ltd. v. Bricknell, [1955] 5 D.L.R. 487; 23 C.P.R. 73 (Ont. C.A.), consd. [para. 238].

Robert W. McGuire v. Northland Drug, [1935] S.C.R. 412, consd. [para. 239].

W.R. Grace & Co. of Canada Ltd. v. Sare et al. (1980), 28 O.R.(2d) 612 (Ont. H.C.), consd. [para. 241].

Cameron v. Canadian Factors Corporation Ltd. (1970), 18 D.L.R.(3d) 574 (S.C.C.), consd. [para. 254].

Metropolitan Life Insurance Co. v. Qually (1985), 36 Man.R.(2d) 59 (Q.B.), consd. [paras. 257, 296].

Sanders v. Parry, [1967] 2 All E.R. 803 (H.C.), consd. [paras. 267, 338].

Robb v. Green, [1895] 2 Q.B. 315; 64 L.J. (Q.B.) 593 (C.A.), appld. [para. 272].

Tri-Associates Insurance Agency Ltd. v. Douglas et al. (1985), 15 C.C.L.I. 61 (Ont. H.C.), appld. [para. 274].

State Vacuum Stores of Canada Limited v. Phillips et al. (1954), 12 W.W.R.(N.S.) 489 (B.C.C.A.), appld. [para. 341].

McGee v. Clarke, [1927] 1 W.W.R. 593 (B.C.C.A.), consd. [para. 342].

Vorvis v. Insurance Corporation of British Columbia (1989), 94 N.R. 321; 58 D.L.R.(4th) 193 (S.C.C.), appld. [para. 344].

Warner v. Arsenault (1982), 53 N.S.R.(2d) 146; 109 A.P.R. 146 (C.A.), consd. [para. 345].

Meyer v. Gordon (1981), 17 C.C.L.T. 1 (B.C.S.C.), consd. [para. 345].

Nantel v. Parisien (1981), 18 C.C.L.T. 79 (Ont. H.C.), consd. [para. 346].

DeMarco Agencies Limited v. Merlo (1987), 62 Nfld. & P.E.I.R. 248; 190 A.P.R. 248 (Nfld. C.A.), folld. [para. 361].

Attorney-General for Newfoundland v. Newfoundland Association of Public Employees (1976), 74 D.L.R.(3d) 195 (Nfld. S.C.), dist. [para. 363].

Authors and Works Noticed:

Corpus Juris Secundum, vol. 17, s. 241(2) [paras. 216, 221].

Halsbury's Laws of England (4th Ed.), vol. 16, paras. 548 [para. 266]; 549 [para. 270].

Spencer, J.R., Signature, Consent and the Rule in L'Estrange v. Graucob, [1973] Can. L.J., [para. 158].

Counsel:

Edward M. Roberts, Q.C., for the plaintiff;

John Glube, for the defendant.

This case was heard on February 8, 9, 12-16 and March 8, 1990, before Puddester, J., of the Newfoundland Supreme Court, Trial Division, who delivered the following judgment on October 25, 1990: