PostScript to the last issue’s Recent Lessons: Fair Competition by Former Employees

The Supreme Court of Canada, in its subsequently released Shafron v. KGR Insurance Brokers (Western) Inc. case, stroked out the blue-pencil severance concept in dealing with a restrictive covenant. This concept is only to be resorted to where the part being removed is clearly severable, trivial and not part of the main purport of the restrictive covenant. Neither did the SCC tolerate notional severance, which involves reading down a contractual provision so as to make it legal and enforceable. Finally, the SCC ruled that rectification could not be involved to resolve an ambiguity as to the geographic restriction as there was no evidence that the parties had agreed on something but mistakenly included another provision in the contract. Again, the SCC emphasized that restrictive covenants generally are restraints of trade and contrary to public policy that can only be overcome if the restriction is reasonable in the circumstances. But an ambiguous restrictive covenant is, by definition, prima facie unreasonable and thereby unenforceable. This decision reinforces the advice not to blindly think that an old "precedent" can be used without tailoring it to meet the circumstances.