Reed Stenhouse Ltd. v. Foster et al., (1989) 98 A.R. 49 (QB)

• Judge: Trussler, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 06, 1989
• Citations: (1989), 98 A.R. 49 (QB)

Reed Stenhouse Ltd. v. Foster (1989), 98 A.R. 49 (QB)

MLB headnote and full text

Reed Stenhouse Limited (plaintiff) v. Ralph Owen Foster, Edgar Lorimer Park, Thomas Henry Norman Baskett and Foster Park & Baskett Insurance Ltd. (defendants)

(Action No. 8003-04942)

Indexed As: Reed Stenhouse Ltd. v. Foster et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Trussler, J.

July 6, 1989.

Summary:

Three former employees of an insurance company formed their own insurance company. Several clients switched their business. The employer brought an action against the former employees and their company for breach of a noncompetition agreement and for breach of fiduciary duty owed to their employer.

The Alberta Court of Queen's Bench allowed the employer's claim in part.

Contracts - Topic 6732

Illegal contracts - Contrary to public policy - Restraint of trade - Agreements not to compete - Two middle management employees of an insurance company executed a noncompetition agreement for three years after employment when they borrowed interest free from the company to purchase its shares - The Alberta Court of Queen's Bench held that the requirement for a restrictive covenant was not unreasonable and a three year restraint was supportable - However, the contract was invalid because a geographical limitation could not be inferred - See paragraphs 9 to 16.

Torts - Topic 5246

Interference with economic relations - Interference with business relations - Solicitation of clients of former employer - Three middle management employees of an insurance company formed their own company and enticed away another employee - Several clients switched their business - Two clients were solicited before the employees resigned to set up their own company - The Alberta Court of Queen's Bench held that the employees were entitled to compete against their former employer and were not liable for soliciting clients after resignation - However, they were liable for soliciting while employed and breached their duty of good faith - See paragraphs 17 to 28.

Cases Noticed:

Herbert Morris Ltd. v. Saxelby, [1916] 1 A.C. 688, refd to. [para. 11].

Reed Shaw Osler Ltd. v. Wilson (1981), 35 A.R. 451, refd to. [para. 12].

Cameron v. Canadian Factory Corporation Ltd., [1971] S.C.R. 148, refd to. [para. 12].

Stenhouse Australia Ltd. v. Phillips, [1974] 1 All E.R. 117 (P.C.), refd to. [para. 14].

Elsley v. J.G. Collins Ins. Agencies, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 14].

Canadian Aero Service Ltd. v. O'Malley (1973), 40 D.L.R.(3d) 371 (S.C.C.), refd to. [paras. 17, 20].

W.J. Christie & Co. Ltd. v. Greer (1981), 9 Man.R.(2d) 269; 14 B.L.R. 146 (C.A.), refd to. [para. 19].

Alberts v. Mountjoy (1977), 79 D.L.R. (3d) 108, refd to. [para. 21].

Tomenson Saunders Whitehead Ltd. v. Baird (1980), 7 C.C.E.L. 176, refd to. [para. 23].

R.W. Hamilton v. Aeroquip Corp. (1988), 65 O.R.(2d) 345, refd to. [para. 23].

Faccenda Chicken Ltd. v. Fowler, [1986] 1 All E.R. 617, refd to. [para. 24].

State Vacuum Stores of Canada Ltd. v. Phillips, [1954] 3 D.L.R. 621, refd to. [para. 26].

Hawboldt Industries Ltd. v. Chester Basin Hydraulics & Machine Ltd. (1983), 22 B.L.R. 215, refd to. [para. 26].

Dominion High-Rise Ltd. v. Night Hawk Cleaning & Supply Co. Ltd. (1982), 37 O.R.(2d) 148, refd to. [para. 26].

Counsel:

P.R. Chomicki, Q.C., for the plaintiff;

J.P. Brumlik, Q.C., for the defendant.

This case was heard before Trussler, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on July 6, 1989.