Restrictive Covenants - Detailed Analysis

Last Updated: October 2022

2. Covenants Connected to the Sale of a Business

Citation, IndustryCovenant(s)Decision
Restauronics Services Ltd. v. Forster, 2001 BCSC 922 (CanLII)

Sale of food service business
Covenant prohibiting vendors from providing food services to similar clients, for five years within BC, Alberta and 100 mile radius of any operations of purchaser.Enforceable. Reasonable, once geographic limitation severed.
Sterling Fence Co. v. Steelguard Fence Ltd., 1992 CanLII 1804 (BCSC)

Chain link fencing business
Covenant prohibiting vendor from engaging in fencing business in BC, Alberta, Saskatchewan, Manitoba and Washington state, for three years.Enforceable, once geographical area severed to include only BC and Washington state.
Dynamex Canada Inc. v. Miller, 1998 CanLII 18094 (NLCA)

Courier business
Covenant preventing vendor from soliciting customers of business for three years.Enforceable. Restrictions reasonable.
Doerner v. Bliss & Laughlin Industries Inc., [1980] 2 SCR 865, 1980 CanLII 50 (SCC)

Manufacturing company

Covenant prohibiting vendors from carrying on or associating with a like business for five years.Enforceable. Unambiguous and reasonable.
Brouwer Claims Canada & Co. Ltd. v. Doge, 2002 BCSC 988 (CanLII)

Contract of employment and purchase of assets including goodwill. Covenant prohibiting carrying on business as insurance adjuster for 12 months within 50 km of head office in Vancouver.Reasonable and enforceable.
Simoni v. Sugarman, 2000 CanLII 20388 (NLSCTD)

Podiatry clinic
Covenant prohibiting interest in business/entity in city of St. John's, which solicits or competes for patients of clinic, for two years. Non-compete prohibiting carrying out podiatric care in St. John's for two years.Covenant on soliciting patients reasonable and enforceable. Covenant prohibiting podiatric care unreasonable, unenforceable.
1598631 Ontario Inc. v Imvescor Restaurant Group Inc., 2015 ONSC 1888 (CanLII)

Franchisor Agreement
Covenant restricting franchisee, for five years, within 10 km of any Baton Rouge Restaurant in Canada, from being engaged or interested in any substantially similar business "selling generally all the products listed in Section 21" (of manual).Enforceable. Limited covenant that applied only if former franchisee operated competing business using recipes contained in Baton Rouge Manual.
Aquifer Distribution Ltd. v. McMurtry, 2008 SKQB 456 (CanLII)

Plumbing and Heating
Non-compete prohibiting employee from engagement in business in direct competition with company, for one year, in Saskatchewan. Non-solicit prohibiting, for one year, soliciting or accepting business from client or potential client of company served by employee within one year preceding termination. Non-solicit prohibiting, for one year, hiring or inducing any other employee to leave employ of Company.Unenforceable. Went beyond protecting company's legitimate client base. Too broad, against public interest.
IRIS The Visual Group Western Canada Inc. v. Park, 2017 BCCA 301 (CanLII)

Optometric services
Non-compete prohibiting involvement in "a business that competes with IRIS" within 5 km of Vernon location, and from soliciting for 3 years. Non-solicitation prohibiting any client in habit of dealing with IRIS.Unenforceable. Overbroad, unreasonable between parties.
Syntax Systems Ltd. v. Mid-Range Computer Group Inc., 2003 CanLII 29363 (ONSC)

Computer Sales
Restrictive covenant prohibiting employee from soliciting or dealing with clients of Syntax, for two years

Unenforceable. Too broad in relation to legitimate interests of Syntax.
MEDIchair LP v. DME Medequip Inc., 2016 ONCA 168 (CanLII)

Medical equipment sales, agreement for purchase of Peterborough franchise
Covenant prohibiting engagement in “similar” business within 30 miles of MEDIchair store, for 18 months from termination of agreement. Term “similar business” not ambiguous for purposes of employer. Temporal or territorial boundaries not unreasonably broad. However, covenant unreasonable as between parties in the circumstances of the particular Peterborough franchise because MEDIchair did not have legitimate/proprietary interest to protect within territorial scope.
1059028 Alberta Ltd v Capio Oilfield Services Ltd, 2016 ABQB 234 (CanLII)

Share purchase agreement, oilfield tubular supply business
Non-compete prohibiting vendor from involvement in “same business” anywhere that company “now operates”, for five years from closing date.

Non-solicit prohibiting soliciting business from “present customer” for five years.
Enforceable. Scope of activities, duration and geographic boundaries ascertainable and reasonable.
853947 B.C. Ltd. v. Source Office Furniture & Systems Ltd., 2016 BCSC 2233 (CanLII)

Office furniture sales

Share purchase agreement
Non-compete prohibiting shareholders from serving or providing advice to any customers of company within 100 mile radius of Kamloops, or any suppliers of company, for two years after ceasing to hold interest in company.Injunction application granted. Clause not ambiguous, reasonable between parties and with regard to public interest. Restraint applied only to customers of company, not business at large.
GDL Solutions Inc. v. Walker et al., 2012 ONSC 4378 (CanLII)

IT services
Non-compete prohibiting direct or indirect involvement with similar or competitive business, within 10 km of Province of Ontario, for 3 years following sale.Reasonable and enforceable, but for 10 km “ring” surrounding Ontario, which was severed from clause, leaving restricted area to Ontario alone.
Wong v. Cook, 1979 CanLII 462 (BCSC) (CanLII)

Pick-up and delivery services
Non-compete prohibiting vendor, for 5 years from date of agreement, from directly or indirectly engaging of being interested in any similar business in BC.Valid and enforceable. Purchaser made a payment for “goodwill” – a proprietary interest he was entitled to protect.
Anderson v. Berry-Heldt, et al, 2005 BCSC 1825 (CanLII)

Travel agency
Non-compete prohibiting shareholder from directly or indirectly being interested in similar or competitive business in BC, Alberta, Saskatchewan, Manitoba or Ontario .

Non-solicit prohibiting accepting or attempting to divert any customer or supplier, or potential customer or supplier, during term of agreement and for one year after shareholder ceases to hold shares.
Enforceable. Reasonable in terms of geographic scope and restricted period.
Kent Building Supplies v. Magasin du Ridge Ltée, 2004 NBQB 152 (CanLII)

Home renovation business
Non-compete prohibiting vendor from directly or indirectly being interested in, for 5 years following the closing date, any competitive undertaking, within 200 km of City of Campbellton, NB.

Non-solicit prohibiting soliciting any suppliers, customers or employees of business, for 5 years following closing date.

Enforceable. Reasonable restraint of trade.