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Digest: Shafron v. KRG Insurance Brokers (Western) Inc.

[2009] S.C.J. No. 6
2009 SCC 6

Court File No. 31981

Supreme Court of Canada

January 23, 2009
On appeal from the British Columbia Court of Appeal, [2007] B.C.J. No. 261.

Employment law — Contract of employment — Express terms — Restrictive covenants — Reasonability — Appeal by a former employee from Court of Appeal judgment, which set aside a decision whereby the trial judge refused to enforce a restrictive covenant — Appeal allowed — Appellant left respondent employer to work for a competitor in Richmond — The term "Metropolitan City of Vancouver" in the restrictive covenant was uncertain and ambiguous — An ambiguous restrictive covenant was prima facie unenforceable because the party seeking enforcement was unable to demonstrate reasonableness in the face of an ambiguity — The Court of Appeal erred in rewriting the geographic scope in the restrictive covenant to what it thought was reasonable.

Appeal by Shafron from a decision of the Court of Appeal of British Columbia, which overturned a decision whereby the trial judge refused to enforce a restrictive covenant. Shafron was employed by KRG Insurance Brokers (Western) Inc. as an insurance salesman. He left KRG in 2001 to work for a competitor in Richmond. KRG commenced an action to enforce the restrictive covenant signed by Shafron and further claimed that he had breached fiduciary and equitable obligations. The trial judge found that the restrictive covenant was neither clear, certain nor reasonable because it used the term "Metropolitan City of Vancouver". The Court of Appeal held that the restrictive covenant was enforceable, even though the term "Metropolitan City of Vancouver" was ambiguous. The Court of Appeal applied the doctrine of notional severance to construe it as applying to the City of Vancouver, the University of British Columbia Endowment Lands, Richmond and Burnaby.

HELD: Appeal allowed. The term "Metropolitan City of Vancouver" was uncertain and ambiguous. The findings of the trial judge with respect to fiduciary obligations and the improper use of confidential information were based on evidence at trial. These were not pure questions of law and the Court of Appeal correctly did not interfere with the trial judge's conclusions on these issues. For a determination of reasonableness to be made, the terms of the restrictive covenant had to be unambiguous. An ambiguous restrictive covenant was be prima facie unenforceable because the party seeking enforcement was unable to demonstrate reasonableness in the face of an ambiguity. Notional severance, which involved reading down a contractual provision so as to make it legal and enforceable, had no place in the construction of restrictive covenants in employment contracts. There was no evidence that the parties unquestioningly would have agreed to remove the word "Metropolitan" without varying any other terms of the contract or otherwise changing the bargain. Further, there was no indication that the parties agreed on something and then mistakenly included something else in the written contract and rectification could not be invoked to resolve the ambiguity in this case. The Court of Appeal erred when it rewrote the restrictive covenant in this case to substitute the term "City of Vancouver, the University of British Columbia Endowment Lands, Richmond and Burnaby" for the term "Metropolitan City of Vancouver". It was inappropriate for the Court of Appeal to rewrite the geographic scope in the restrictive covenant to what it thought was reasonable.

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