9169-3556 Québec Inc. v. Gestion René Simoneau Ltée, J.E. 2009-1674

Initially, the issue before the Court was whether to grant motions seeking interlocutory injunctions against the following defendants: Les Gestions René Simoneau Ltée and René Simoneau; 9178 7654 Québec Inc. and René Simoneau; 142222 Canada Inc. and Richard Ardouin; 9009 2719 Québec Inc. and Jean Guy Désilets; Claude Langlois (Fertilisation Provost) and Claude Langlois; and 9136 8928 Québec Inc. and Maryse Labarre (the defendants). However, on the final day of the hearing, 9169 3556 Québec Inc. (the plaintiff) discontinued its action against 9136 8928 Québec Inc. and Maryse Labarre. Given the similarities shared by all or the these cases, the Court solely considered the facts in the Gestions René Simoneau case for reasons of simplicity.

During the summer season, the defendants’ business was the upkeep of lawns, while the defendant, a franchisor, produced fertilizer. The defendant sought the enforcement of non competition and non solicitation clauses found in agreements entered into between it or its predecessors and the defendants. The agreements also included a clause granting the Court authority to reduce the duration and/or the extent and/or the territory provided for in the foregoing restrictive clauses in the event that the Court found them unreasonable. The franchisee defendants decided to cease their affiliation with the plaintiff in 2007. They contended that the agreements entered into with the plaintiff were contracts of adhesion and that the non competition clauses contained therein were abusive. Moreover, the defendants claimed that they were no longer bound by the agreements due to the unilateral amendments made by the plaintiff.

Decision

In addition to being sui generis contracts, the franchise agreements entered into between the defendants and the plaintiff over several years were contracts of adhesion. As such, the defendants were correct in stating that the non competition clause which restricted the activities of the franchisees for a period of 18 months following the termination of the agreements (and did so within a 20 kilometer radius from the protected territory) was unreasonable and abusive. Such a clause had to be interpreted while taking into consideration the nature of the defendants’ business. Thus, given that the upkeep of lawns was a seasonal business, the enforcement of the non competition undertaking would result in prohibiting the defendants from working for over two years, which would clearly be prejudicial to them. Moreover, the territorial reach of the clause was much greater than the protected territory, which was inexplicable.

The prohibited activities pursuant to the non competition clause were also more extensive than what was necessary for the reasonable protection of the plaintiff. For instance, such a clause would effectively prohibit snow removal activities, which were in no way related to the activities of the plaintiff.

With respect to clauses which permitted limiting the effects of the restrictive provisions in the event that a Court decided that limitation was necessary, the Court confirmed that the said non competition clauses were not enforceable. On this issue, the Court referred to Justice Dugas’ reasoning in the 169914 Canada Inc. case wherein he warned that should such clauses be enforced, the author of the restrictive clause would be permitted to impose unreasonable obligations with respect to the extent, duration and territory covered by the restrictive clause. It had to be kept in mind that the Superior Court would later re-draft the clause in such a way as to make it reasonable.

Non competition clauses which restricted a defendant’s right to make a living have always received a narrow interpretation. In the present case, the enforcement of such a clause would result in depriving dozens of people from working. In addition, such clauses would contravene the stability of contracts principles.

Furthermore, the client list was the property of the franchisees since according to their testimony, the defendants built their clientele over the years by selling their services door-to-door and relying on their strong reputation gained from the quality of their work. This position was substantiated by asking the following question: “If the client list was not the property of the defendants, why would Groupe Action Tandem have purchased it from one of the defendants?”

Finally, due to the unilateral amendments to the terms of the agreements made by the plaintiff, the defendants’ obligations provided therein were not binding, given the binding former agreements. The Court found it unacceptable and abusive for a party to seek the enforcement of non competition clauses while unilaterally amending the binding agreements.