The clause at issue provided that Brulé, the founder of Veolia ES Industrial Services, would not compete with the business for ‘two (2) years commencing on January 1, 2007 following termination’. Brulé left the company in 2004, taking with him a binder of information about tenders Veolia had been involved in and a list of Veolia’s employees. He incorporated a company called Clean Water Works, which in 2005 submitted a bid on a project, beating out Veolia. Veolia then sued for breach of the non-competition clause.
The trial judge concluded that the clause was badly drafted and could be made enforceable only by severing the words ‘commencing on January 1, 2007’, resulting in a non-compete period which ran from the date he left Veolia. This was reasonable, and had been breached. The Court of Appeal disagreed: the trial judge had been too ready to wield the proverbial blue pencil, which is to be used rarely and only where it crosses out trivial words not affecting the main purport of the covenant. Not so here, where the parties clearly did intend the language to have effect. Leaving the wording as it was, the clause was clearly unreasonable, in that it prevented competition for a period starting 2 years after the employee had left his old job. The trial judge was also wrong to say that Brulé had breached his fiduciary duty: it wasn’t a breach of duty to take the binder of information because Brulé didn’t actually use the information in putting his competing bid together, and it wasn’t confidential anyway. There is no duty on the part of a departed fiduciary who is free to compete to inform his former employer of an intention to do just that.
Veolia ES Industrial Services Inc v Brulé, 2012 ONCA 173
[Link available here].