There appears to be a very marked change in the law with respect to the courts’ authority and willingness to, in effect, rewrite restrictive covenants that might be found to be otherwise unenforceable because they were not reasonable with respect to scope, geography or time. It may be recalled that the judge in Prostar rewrote a noncompetition clause in an employment contract by substituting a two-year prohibition for a five-year prohibition.
The British Columbia Court of Appeal recently issued a decision where it applied this type of reasoning and the concept of “notional severance” to save a non-competition clause. Although the decision is not a complete parallel to Prostar, it does follow the line of reasoning and expands somewhat on the application of the doctrine of “notional severance.”
In KRG Insurance Brokers (Western) Inc v. Shafron, the restrictive covenant in question precluded the employee/vendor from competing for a period of three years following his termination with the business of insurance brokerage “carried on within the Metropolitan City of Vancouver.” He had operated and sold his insurance agency located in South Granville and stayed on as an employee. He signed successive employment contracts incorporating the non-competition clause.
The problem, of course, with the use of “Metropolitan” in reference to Vancouver is that there is no “fixed, recognized meaning” to the phrase and, in fact, the suggested meanings simply reinforced the ambiguity in the language. The court noted the clause was drafted by Toronto lawyers for whom the expression “metropolitan” does have clear meaning.
The court then had to consider whether it could interpret the language as it is to give effect to the parties’ intentions or to “proceed by way of notional severance.” The court applied notional severance to save the bargain and construed “Metropolitan City of Vancouver” to mean the City of Vancouver and municipalities directly contiguous to it.