Benson Kearley & Associates Insurance Brokers Ltd. v. Lewis et al., 2016 ONSC 4290

Case Summary

The plaintiff, an insurance brokerage, sought an interim interlocutory injunction to restrain former employees (defendants) from soliciting clients, inducing staff to leave, and using confidential information. The court applied the "strong prima facie case" test for injunctions concerning restrictive covenants and fiduciary duties. The court found the non-solicitation clauses unenforceable due to being overly broad (unlimited duration for some, prohibiting solicitation of "any" client without knowledge of all clients, effectively a non-competition clause without geographic limit). It also found no strong prima facie case for a common law fiduciary duty, as the defendants were ordinary salespeople, not key employees. Furthermore, there was no evidence of stolen client lists or sufficient evidence of inducing employees to leave. The motion for an interim interlocutory injunction was dismissed. interesting_citations_summary: > This decision highlights the application of the "strong prima facie case" test for interlocutory injunctions seeking to enforce restrictive covenants or imply fiduciary duties against former employees. It reinforces that non-solicitation clauses must be reasonable in temporal and spatial terms, and not overly broad to effectively become non-competition clauses. The case also reiterates that ordinary salespeople typically do not owe a post-employment fiduciary duty precluding client solicitation, and that client names remembered by an ex-employee are not confidential information, unlike stolen client lists. final_judgement: > The motion for an interim interlocutory injunction is dismissed. The plaintiff's motion to consolidate two court files is allowed. Costs are to be agreed upon or submitted in writing. winning_degree_applicant: 5 winning_degree_respondent: 1 judge_bias_applicant: 0 judge_bias_respondent: 0 year: 2016 decision_number: 4290 file_number: - "CV-16-125938-00" - "CV-16-126-769-00" source: "https://www.canlii.org/en/on/onsc/doc/2016/2016onsc4290/2016onsc4290.html" keywords: - Interlocutory injunction - Non-solicitation clause - Restrictive covenant - Fiduciary duty - Confidential information - Employment contract - Insurance brokerage - Strong prima facie case - Irreparable harm - Balance of convenience - Client lists areas_of_law: - Employment Law - Civil Procedure - Contract Law - Equity cited_cases: legislation: [] case_law: - title: "RJR MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311" url: "https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html" - title: "Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (S.C.J.)" url: "https://www.canlii.org/en/on/onsc/doc/2007/2007canlii1694/2007canlii1694.html" - title: "Poppa Corn Corp. v. Collins" url: "https://www.canlii.org/en/on/onsc/doc/2005/2005canlii12900/2005canlii12900.html" - title: "1259695 Ontario Inc. v. Guinchard, [2005] O.J. No. 2049 (S.C.J.)" url: "https://www.canlii.org/en/on/onsc/doc/2005/2005canlii2049/2005canlii2049.html" - title: "Jet Print Inc v. Cohen, [1999] O.J. No. 2864" url: "https://www.canlii.org/en/on/onsc/doc/1999/1999canlii2864/1999canlii2864.html" - title: "Gerrard v. Century 21 Armour Real Estate Inc. (1991), 4 O.R. (3d) 191 (Ont. Ct. Gen. Div.)" url: "https://www.canlii.org/en/on/onsc/doc/1991/1991canlii7104/1991canlii7104.html" - title: "Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.J. No. 5298 (S.C.J.)" url: "https://www.canlii.org/en/on/onsc/doc/2005/2005canlii5298/2005canlii5298.html" - title: "Gunning and Associates Marketing, Inc. v. Kesler, 2005 ONSC 7662" url: "https://www.canlii.org/en/on/onsc/doc/2005/2005onsc7662/2005onsc7662.html" - title: "Lockwood Fire Protection Ltd. v. Caddick, 2015 ONSC 6320" url: "https://www.canlii.org/en/on/onsc/doc/2015/2015onsc6320/2015onsc6320.html" - title: "Polar Wireless Corp. v. Roberts, 2012 ONSC 6482" url: "https://www.canlii.org/en/on/onsc/doc/2012/2012onsc6482/2012onsc6482.html" - title: "Precision Fine Papers Inc. v. Durkin, 2008 ONSC 6871" url: "https://www.canlii.org/en/on/onsc/doc/2008/2008onsc6871/2008onsc6871.html" - title: "Factor Gas Liquids Inc. v. Jean, 2010 ONSC 2454, 264 O.A.C. 46 (Div. Ct.)" url: "https://www.canlii.org/en/on/onscdc/doc/2010/2010onsc2454/2010onsc2454.html" - title: "Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 ONSC 34862" url: "https://www.canlii.org/en/on/onsc/doc/2002/2002canlii34862/2002canlii34862.html" - title: "Accreditation Canada International v. Guerra, 2016 ONSC 3595" url: "https://www.canlii.org/en/on/onsc/doc/2016/2016onsc3595/2016onsc3595.html" - title: "Loeb Inc. v. Cooper (1991), 5 O.R. (3d) 259" url: "https://www.canlii.org/en/on/onsc/doc/1991/1991canlii7219/1991canlii7219.html" - title: "Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344, 106 O.R. (3d) 72" url: "https://www.canlii.org/en/on/onca/doc/2011/2011onca344/2011onca344.html" - title: "H.L. Staebler Co. v. Allan (2008), 92 O.R. (3d) 107 (C.A.)" url: "https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html" - title: "Shafron v. KRG Insurance Brokers (Western) Inc., [2009] 1 S.C.R. 157" url: "https://www.canlii.org/en/ca/scc/doc/2009/2009scc6/2009scc6.html" - title: "Alberts v. Mountjoy (1977), 16 O.R. (2d) 682" url: "https://www.canlii.org/en/on/onsc/doc/1977/1977canlii1026/1977canlii1026.html" - title: "Barton Insurance Brokers Ltd. v. Irwin (1999), 63 B.C.L.R. (3d) 215, 1999 BCCA 73" url: "https://www.canlii.org/en/bc/bcca/doc/1999/1999bcca73/1999bcca73.html" - title: "Guzzo v. Randazzo, 2015 ONSC 6936" url: "https://www.canlii.org/en/on/onsc/doc/2015/2015onsc6936/2015onsc6936.html" - title: "Valley First Financial Services Ltd. v. Trach, [2004] B.C.J. No. 1127, 2004 BCCA 312" url: "https://www.canlii.org/en/bc/bcca/doc/2004/2004bcca312/2004bcca312.html" - title: "Computer Enhancement v. J.C. Options, 2016 ONSC 452" url: "https://www.canlii.org/en/on/onsc/doc/2016/2016onsc452/2016onsc452.html" - title: "Ford v. Keegan, 2014 ONSC 4989" url: "https://www.canlii.org/en/on/onsc/doc/2014/2014onsc4989/2014onsc4989.html" - title: "Professional Court Reporters v. Carter" url: "https://www.canlii.org/en/on/onsc/doc/1993/1993canlii8649/1993canlii8649.html" ``` --- # Court File and Parties **Court File No.:** CV-16-125938-00 **Court File No.:** CV-16-126-769-00 **ONSC:** 4290 **Date:** 2016-06-28 **Ontario Superior Court of Justice** **Between:** Benson Kearley & Associates Insurance Brokers Ltd., Plaintiff – and – Jeffrey Valerio – and – Stephanie Lewis et al, Defendants **Counsel:** Bonnie Roberts Jones, for the Plaintiff Stephen F. Gleave, for the Defendant **Heard:** June 21, 2016 --- # Reasons for Decision **Charney J.:** ## Introduction [1] The plaintiff, Benson, Kearley & Associates Insurance Brokers Ltd. (Benson, Kearley), is an insurance brokerage firm located in Newmarket, Ontario. It brings this motion for an interlocutory injunction to restrain the defendants from soliciting or in any way seeking to obtain business from the plaintiff’s clients or to induce any of the plaintiff’s staff to leave. It also seeks an interlocutory injunction to prevent the defendants from using or disclosing any of the plaintiff’s confidential or proprietary information including client lists and policy renewal dates. [2] The defendants Lewis, Pereira and Valerio, are former employees of another brokerage company, Forrest Power Insurance Brokers Ltd. (Forrest-Power). These defendants all work for the defendant FSB Insurance Ltd. (FSB) and the president of FSB is the defendant Paul Brown. [3] This motion was brought by the plaintiff as an urgent one hour motion. The defendants requested an adjournment, and a long motion (2 hours) has been scheduled for September 15, 2016. The plaintiff asserts that it will suffer irreparable harm if it has to wait until that date, and asks for interim relief until the long motion can be heard. The defendants object to any interlocutory relief being granted. [4] For the reasons given below the motion for an interim interlocutory injunction is dismissed without prejudice to the plaintiff’s right to seek an interlocutory injunction and other relief on September 15, 2016. ## Background [5] Lewis, Pereira and Valerio worked for Forrest-Power for a number of years, writing, selling and maintaining insurance policies on behalf of Forrest-Power. They were referred to as “Sales Producers” or “Producers”. [6] Benson, Kearley acquired the shares of Forrest-Power in September of 2015, and claims to have amalgamated with it. Whether this was a “purchase” or an “amalgamation” may become an important issue when this case goes to trial. As part of the share purchase agreement Forrest-Power provided Benson, Kearley with copies of the agreements it had entered into with its commissioned sales force. There were 9 such “Sales Producers”, including Lewis, Pereira and Valerio. [7] Benson, Kearley undertook to integrate the Forrest-Power staff by offering them new employment agreements that had to be signed by December 1, 2015. Lewis, Pereira and Valerio refused to sign these new agreements because they allege that these agreements sought to significantly change their compensation structure by reducing the rate of commission. As a result Benson, Kearley terminated their employment on December 1, 2015 “in accordance with…your contract with the predecessor Company, Forest-Power Insurance Brokers Ltd.” [8] Accordingly, Lewis, Pereira and Valerio worked for Benson, Kearley from September 1, 2015 to December 1, 2015. [9] Upon termination Lewis, Pereira and Valerio joined Benson, Kearley’s direct competitor, FSB. There is no dispute that upon joining FSB, Lewis, Pereira and Valerio began to solicit their former Forrest-Power clients (now Benson, Kearley’s clients) and that as many as 43 of these clients took their business to FSB. [10] Benson, Kearley take the position that such solicitation is contrary to a non-solicitation clause that Lewis, Pereira and Valerio signed with Forrest-Power. It also takes the position that these former employees have a common law fiduciary duty to not solicit the clients of their former employer. [11] Benson, Kearley believes that Lewis, Pereira and Valerio have access to Benson, Kearley’s client lists and the policy renewal dates and have used this information to target their clients and solicit their business. [12] Lewis, Pereira and Valerio do not dispute that they are soliciting their former clients. They take the position that the non-solicitation clause they signed with Forrest-Power is non-assignable, and they have no such contractual obligation with Benson, Kearley. In the alternative, they argue that the non-solicitation clause is unenforceable as a restraint of trade because they are overly broad with respect to their terms and the territory to which they apply. [13] The defendants claim that their gross commission from clients who have transferred their business from Benson, Kearley to FSB is approximately $10,433.40. [14] Finally, Lewis, Pereira and Valerio deny that they took any confidential information belonging to either Benson, Kearley or Forrest-Power. While they remember the names of the clients they dealt with, they do not have client lists. In addition, the policy renewal dates are not confidential; they simply have to call the clients and ask them when the renewal is coming up. The clients can tell them if they want. ## Test for an Interlocutory Injunction [15] The test for injunctive relief was established by the Supreme Court of Canada in [RJR MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html): 1) Is there a serious issue to be tried? 2) Will the moving party suffer irreparable harm if the injunction is not granted? 3) Does the balance of convenience favour granting the injunction? [16] Given my conclusion on the first part of the test, it is unnecessary for me to consider the second and third parts of the test. ## Serious Issue/Strong Prima Facie Case [17] The Supreme Court has held ([RJR MacDonald Inc. v. Canada (Attorney General)](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html) at paras. 54-55) that the threshold for a serious issue is a low one that requires the judge to make a “preliminary assessment of the merits of the case…a prolonged examination of the merits is generally neither necessary nor desirable.” [18] While the threshold is normally a low one, the plaintiff must establish a stronger prima facie case where it appears that, as a practical matter, the interlocutory injunction will effectively amount to a final determination of the action ([RJR MacDonald Inc. v. Canada (Attorney General)](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html) para. 56). [19] In [Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (S.C.J.)](https://www.canlii.org/en/on/onsc/doc/2007/2007canlii1694/2007canlii1694.html) at para. 39, Brown J. (as he then was) indicated that this higher “strong prima facie case” test has been applied in situations where the plaintiff seeks to enforce a covenant that restrains an employee from competing or soliciting customers: In [RJR-MacDonald Inc.](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html), supra., the Court noted that in cases where an interlocutory injunction would effectively put an end to the action, a court should consider more carefully the likelihood of whether the plaintiff will succeed at trial. In cases involving injunctions seeking to restrain a former employee from competing with, or soliciting customers of, his former employer, this principle operates to require a moving party to establish a strong prima facie case in order to meet the first branch of the [RJR-MacDonald](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html) test: [Poppa Corn Corp. v. Collins](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii12900/2005canlii12900.html); [1259695 Ontario Inc. v. Guinchard, [2005] O.J. No. 2049 (S.C.J.)](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii2049/2005canlii2049.html); [Jet Print Inc v. Cohen, [1999] O.J. No. 2864](https://www.canlii.org/en/on/onsc/doc/1999/1999canlii2864/1999canlii2864.html); [Gerrard v. Century 21 Armour Real Estate Inc. (1991), 4 O.R. (3d) 191 (Ont. Ct. Gen. Div.)](https://www.canlii.org/en/on/onsc/doc/1991/1991canlii7104/1991canlii7104.html); [Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.J. No. 5298 (S.C.J.)](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii5298/2005canlii5298.html), at para 58. As explained by Nordheimer J. in [Jet Print Inc v. Cohen](https://www.canlii.org/en/on/onsc/doc/1999/1999canlii2864/1999canlii2864.html), supra., at para. 11: "... when the injunction sought is intended to place restrictions on a person's ability to engage in their chosen vocation and to earn a livelihood, the higher threshold of a strong prima facie case is the more appropriate test to be applied." [20] See also [Gunning and Associates Marketing, Inc. v. Kesler, 2005 ONSC 7662](https://www.canlii.org/en/on/onsc/doc/2005/2005onsc7662/2005onsc7662.html), at para. 6, [Lockwood Fire Protection Ltd. v. Caddick, 2015 ONSC 6320](https://www.canlii.org/en/on/onsc/doc/2015/2015onsc6320/2015onsc6320.html) at para. 35, [Polar Wireless Corp. v. Roberts, 2012 ONSC 6482](https://www.canlii.org/en/on/onsc/doc/2012/2012onsc6482/2012onsc6482.html) at paras. 21-25, [Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.J. No. 5298 (S.C.J.)](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii5298/2005canlii5298.html) at para 58, and [Precision Fine Papers Inc. v. Durkin, 2008 ONSC 6871](https://www.canlii.org/en/on/onsc/doc/2008/2008onsc6871/2008onsc6871.html) at para. 17. [21] A strong prima facie case is one in which there is “a substantial likelihood of success in the action that justifies extraordinary relief at the very commencement of the proceeding” (See: [Factor Gas Liquids Inc. v. Jean, 2010 ONSC 2454, 264 O.A.C. 46 (Div. Ct.)](https://www.canlii.org/en/on/onscdc/doc/2010/2010onsc2454/2010onsc2454.html), at para 42). It is not enough to establish that the case will succeed on a balance of probabilities; the plaintiff must establish that he or she is “clearly right and almost certain to be successful at trial” ([Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 ONSC 34862](https://www.canlii.org/en/on/onsc/doc/2002/2002canlii34862/2002canlii34862.html), at para 9, and [Accreditation Canada International v. Guerra, 2016 ONSC 3595](/on/scj/2016/3595) at para. 41). ## Non-Solicitation Clause [22] The first issue in this case focuses on the enforceability of the non-solicitation clauses in the employment agreements between Forrest-Power and the three defendants. Lewis had a somewhat different agreement than the other two defendants. [23] Article 8.1 of the Lewis agreement provides as follows: Upon termination of this agreement, the Producer shall not either directly or indirectly in any form whatsoever, solicit any client of the Broker including any clients who were part of the Book of Business of the Producer that was purchased by the Broker, for a period of five (5) years following the sale. Nor will the Producer at any time, either during the term of this agreement or following its termination, dispose by way of sale or otherwise, information with respect to the Broker’s customer accounts or lists of the same… [24] This paragraph requires some explanation. The “Book of Business” comprises all accounts written by the Producer during the term of the contract. When the contract was first signed, ownership of the Book of Business was divided 50/50 between the Producer (Lewis) and Forrest-Power. It appears from Article 6.1 of the agreement that Forrest-Power retained the right to purchase the “Book of Business” upon termination of the agreement. Accordingly, the 5-year limit on the non-solicitation clause was intended to run from the date of termination. But that is not what happened. [25] The record before me indicates that Forrest-Power purchased the defendant Lewis’ 50% share of her “Book of Business” on January 18, 2012. Accordingly, the 5-year time limit in the non-solicitation clause in the Lewis agreement ran from that date and, the plaintiff has acknowledged, will expire on January 18, 2017. That would be equal to approximately 13 months after termination, which is not in itself unreasonable. [26] The Lewis agreement provides that the liquidated damages for any contravention of Article 8: shall be equal to three (3) times the total of the annual commission income and fees earned on such accounts by the Broker and/or Producer, as the case may be, in the year preceding the contravention of these provisions (or the year of the contravention, whichever is greater). [27] The relevant articles of the Pereira and Valerio agreements are similar but with three important differences. The first difference was that the “Book of Business” produced by the Producer (Pereira and Valerio respectively) “is and shall remain” the property of the Broker. [28] Second, while the Lewis agreement limited non-solicitation for “for a period of five (5) years from the sale” the Pereira and Valerio non-solicitation clauses include no time limit. They provide: Upon termination of this agreement, the Producer shall not either directly or indirectly in any form whatsoever, solicit any clients of the Broker including any clients who were part of the Book of Business of the Producer. [29] The third difference is that liquidated damages in the Pereira and Valerio agreements are calculated as four times the annual commission. [30] The defendants raise two points to argue that the plaintiffs have not raised a strong prima facie case. ### Assignment or Amalgamation? [31] The defendants’ first point is that their agreement was with Forrest-Power, not with Benson, Kearley, and Article 11.3 of the agreement provides that “This agreement may not be assigned without the consent of the parties hereto…” The defendants did not agree to any assignment. [32] The plaintiff responds that Benson, Kearley and Forrest-Power were amalgamated, and an amalgamation does not extinguish the existence of the amalgamating corporations or create any new corporation. Instead the amalgamating corporations are continued as one corporation ([Loeb Inc. v. Cooper (1991), 5 O.R. (3d) 259](https://www.canlii.org/en/on/onsc/doc/1991/1991canlii7219/1991canlii7219.html) at paras. 24-25). As such there is no assignment. [33] This is an issue that will have to wait for a full hearing, but I am satisfied that the plaintiff has met the higher “strong prima facie case” burden with respect to this first issue. ### Is the Non-Solicitation Clause Unenforceable? [34] The defendants’ second point is that the terms of the non-solicitation clause are too broad to be enforceable. [35] In [Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344, 106 O.R. (3d) 72](https://www.canlii.org/en/on/onca/doc/2011/2011onca344/2011onca344.html), the Ontario Court of Appeal discussed the governing principles that are applicable when considering whether a restrictive covenant in a contract of employment is unreasonable and therefore unenforceable. Referencing its earlier decision in [H.L. Staebler Co. v. Allan (2008), 92 O.R. (3d) 107 (C.A.)](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html) (Staebler) the court summarized the principles as follows (at para. 16, citations omitted): ▪ To be enforceable, the covenant must be "reasonable between the parties and with reference to the public interest"; ▪ The balance is between the public interest in maintaining open competition and discouraging restraints on trade on the one hand, and on the other hand, the right of an employer to the protection of its trade secrets, confidential information and trade connections; ▪ The validity, or otherwise, of a restrictive covenant can be determined only upon an overall assessment of the clause, the agreement within which it is found and all of the surrounding circumstances; ▪ In that context, the three factors to be considered are (1) did the employer have a proprietary interest entitled to protection; (2) are the temporal or spatial limits too broad; and (3) is the covenant overly broad in the activity it proscribes because it prohibits competition generally and not just solicitation of the employer's customers? [36] The Court of Appeal also referenced (at para. 13) the Supreme Court of Canada’s decision in [Shafron v. KRG Insurance Brokers (Western) Inc., [2009] 1 S.C.R. 157](https://www.canlii.org/en/ca/scc/doc/2009/2009scc6/2009scc6.html), which held that where the covenant is found in an employment contract, it will be subjected to stricter scrutiny than where it is part of the consideration for the sale of a business. The contracts in issue in this case appear to be employment contracts rather than contracts in relation to the sale of a business. [37] The plaintiff has argued this motion on the basis that these agreements are all “commercial” as opposed to “employment” contracts, and therefore subject to lesser scrutiny. I reject that position. Based on the record before me on this motion, the facts of this case appear much closer to the facts in the [Staebler](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html) case in which the Ontario Court of Appeal declared that the restrictive covenant was an unenforceable part of an employment contract. [38] A summary of the relevant facts taken from the Court of Appeal’s decision in [Staebler](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html) are as follows: a) Staebler was a large insurance broker that sells commercial, personal and group benefits insurance. b) The defendants’ were two of ten insurance sales people working for Staebler. Their role was no different than that of any other salesperson selling insurance at Staebler. They sold insurance according to Staebler procedures and earned income based on gross commissions received by Staebler on the annual renewal of policies. They were not managers, directors or key employees. c) Salespeople in the insurance brokerage industry develop close relationships with their clients. That is the industry norm. d) The terms of employment at issue in that case provided that in the event of termination of employment with the Company, the employee undertook not to conduct business with any clients or customers of H.L. Staebler Company Limited that were handled or serviced by the employee at the date of termination for a period of 2 consecutive years following termination. The damages for any breach of this undertaking were 1 1/2 times the commission income of the former employee. e) The case was concerned with “trade connections” rather than trade secrets or confidential information. [39] The Court of Appeal in [Staebler](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html) stated two general principles applicable to restrictive covenants (paras. 42 and 43): [A] non-solicitation clause -- suitably restrained in temporal and spatial terms -- is more likely to represent a reasonable balance of the competing interests than is a non-competition clause. An appropriately limited non-solicitation clause offers protection for an employer without unduly compromising a person's ability to work in his or her chosen field. A non-competition clause, on the other hand, is enforceable only in exceptional circumstances. [T]he fact that a clause might have been enforceable had it been drafted in narrower terms will not save it. The question is not whether a valid agreement might have been made but whether the agreement that was made is valid. [40] The clause in the [Staebler](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html) case was a non-competition clause. The Court of Appeal concluded that while Staebler had a proprietary interest in its book of business and that it was entitled to protect that asset, the non-competition clause at issue had no geographic limit and was unreasonable and unenforceable. [41] While Article 8.1 of the Forrest-Power agreements appears to be a non-solicitation clause rather than a non-competition clause, the absence of a temporal limit in the Pereira and Valerio agreements render them prima facie unreasonable. While Benson-Kearley has a proprietary interest in its “Book of Business” that it is entitled to protect, I was directed to no cases that permit non-solicitation clauses of unlimited duration. No explanation or justification for an unlimited duration was provided by the plaintiff. On this basis alone I find that the plaintiff has not met the higher “strong prima facie case” burden with respect to the Pereira and Valerio agreements. Indeed, given the dearth of case law to support a non-solicitation clause with unlimited duration, I doubt that they even meet the lower “serious issue to be tried” test. [42] A second difficulty with Article 8.1 in all three agreements is that it prohibits solicitation of “any” of Benson-Kearley’s clients, not just those clients that were part of Lewis, Pereira and Valerio’s Book of Business. The difficulty with this provision is that there is no evidence before me that the defendants know or have access to a list of all of Benson-Kearley’s clients. This is confirmed by the three defendants who gave evidence on this motion that they do not know who all of Forrest-Power’s clients were and are not aware of the clients of Benson, Kearley. Therefore the defendants have no way of knowing whether any particular potential client they may wish to solicit is a current client of Benson-Kearley’s. [43] Such broad non-solicitation clauses have been held to be unreasonable and unenforceable because they amount to a non-competition clause. In [Mason v. Chem-Trend Limited Partnership](https://www.canlii.org/en/on/onca/doc/2011/2011onca344/2011onca344.html), the Ontario Court of Appeal stated the following with respect to a similar non-solicitation clause (at para. 30): Effectively, because the appellant cannot know which potential customers are off-limits to him, he is prohibited for one year from dealing with any business that may have been a customer of the company. The restriction is therefore not only ambiguous in its practical implementation, but effectively prohibits the appellant from competing with the respondent for one year. [44] Accordingly, while the employer has a proprietary interest that it is entitled to protect, the restrictive covenant is, on its face, too broad. The Pereira and Valerio agreements have no durational limit, and all three agreements amount to a non-competition clause without geographic limit. In my view, the plaintiff has not met the higher “strong prima facie case” requirement with respect to the enforceability of the restrictive covenants under the first step of the three part test in [RJR MacDonald Inc. v. Canada (Attorney General)](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html). ## Fiduciary Duty [45] The plaintiff also relies on the defendants’ common law fiduciary duty as an alternative to the non-solicitation clauses. [46] In [Lockwood Fire Protection Ltd. v. Caddick, 2015 ONSC 6320](https://www.canlii.org/en/on/onsc/doc/2015/2015onsc6320/2015onsc6320.html), at para. 36, Dunphy J. held that the strong prima facie case test also applied to allegations of common law fiduciary duties: If the strong prima facie case test applies to express restrictive covenants, it ought in my view to apply as well to a restrictive covenant which the plaintiff effectively seeks to imply by alleging the existence of fiduciary duties and a breach of them. [47] I agree with this conclusion. [48] All employees have certain basic duties to their employers of loyalty and confidence during the course of their employment. In the absence of a valid restrictive covenant, however, ordinary or “mere” employees are free to compete with their former employers once their employment is terminated subject to the caveat that he or she may not make use of the employer’s confidential information, such as customer lists or trade secrets. A higher duty applies to a former employee who may be characterized as “top management”, “senior management” or a “key employee” on the basis of the functions and duties performed. Such a “key employee” may have a post-employment fiduciary duty that precludes him or her from soliciting a former employer’s clients or customers. See: [Alberts v. Mountjoy (1977), 16 O.R. (2d) 682](https://www.canlii.org/en/on/onsc/doc/1977/1977canlii1026/1977canlii1026.html); [Barton Insurance Brokers Ltd. v. Irwin (1999), 63 B.C.L.R. (3d) 215, 1999 BCCA 73](https://www.canlii.org/en/bc/bcca/doc/1999/1999bcca73/1999bcca73.html); [Guzzo v. Randazzo, 2015 ONSC 6936](https://www.canlii.org/en/on/onsc/doc/2015/2015onsc6936/2015onsc6936.html), at para. 167; [Valley First Financial Services Ltd. v. Trach, [2004] B.C.J. No. 1127, 2004 BCCA 312](https://www.canlii.org/en/bc/bcca/doc/2004/2004bcca312/2004bcca312.html); [Computer Enhancement v. J.C. Options, 2016 ONSC 452](https://www.canlii.org/en/on/onsc/doc/2016/2016onsc452/2016onsc452.html) at paras. 65-75. [49] In [Staebler](https://www.canlii.org/en/on/onca/doc/2008/2008onca576/2008onca576.html), the Ontario Court of Appeal concluded that the insurance sales people did not owe a fiduciary duty to their employer that prevented them from soliciting clients after they were terminated (at paras. 55-56): The Employees were two of ten commercial insurance salespeople that worked for Staebler. They did not play an exceptional role in the Staebler business -- they were ordinary salespeople. They were not managers, directors or key employees. They did not stand in a fiduciary relationship with Staebler. Although the Employees had close personal relationships with their clients, that is the industry norm. [50] Accordingly, an ordinary insurance sales person is generally not considered a senior manager, director or key employee. The record before me is not sufficient to raise a strong prima facie case to the contrary. The three defendants represented one-third of the producers at Forrest-Power, but I do not have any information regarding their proportion of customers at Forrest-Power or at Benson, Kearley. As Price J. stated in [Ford v. Keegan, 2014 ONSC 4989](https://www.canlii.org/en/on/onsc/doc/2014/2014onsc4989/2014onsc4989.html) at para. 205: There are circumstances …where the proportion of customers that the employer has assigned exclusively to its agent is so small, in relation to the scale of the business and of the employer’s presence within the industry, that the power reposed in the agent creates minimal vulnerability in the employer. That situation is very different than the one …where the employee had dealt with a substantial proportion of the firm’s customers for 17 years, virtually to the exclusion of his employer. [51] I am not prepared to assume on the basis of the record before me that any of the defendants are “key employees”. Accordingly, the plaintiff has not met the higher “strong prima facie case” burden with respect to the fiduciary duty argument under the first step of the three part test in [RJR MacDonald Inc. v. Canada (Attorney General)](https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html). ## Confidential or Proprietary Information [52] The plaintiff also seeks an interlocutory injunction with respect to the use or disclosure of any of the plaintiff’s confidential or proprietary information including client lists and policy renewal dates. [53] This issue is covered by Article 7.1 of the agreement, which provides: The Producer shall not either during the term of this agreement, or at any time thereafter, except in the proper course of his/her duties…divulge to any person any trade secret or information concerning the business or clientele of the Broker which may come to his attention in the course of his/her duties. [54] The defendants do not dispute the validity or enforceability of this provision of the agreement. They take the position that they have no confidential or trade secret information. Nor do they have client lists. They do, of course, remember the names of their clients they dealt with, and acknowledge that they have solicited them and asked the clients for their renewal dates. They argue that the renewal dates are not confidential to Benson, Kearley and former clients are free to tell competing brokers when their renewal dates will be. [55] The cases relating to confidential and proprietary information do appear to draw a distinction between client lists (which are confidential) and client names based upon the memory of the ex-employee (which are not confidential). For example, in [Professional Court Reporters v. Carter](https://www.canlii.org/en/on/onsc/doc/1993/1993canlii8649/1993canlii8649.html), Ferguson J. relies on the leading case of [Alberts v. Mountjoy (1977), 16 O.R. (2d) 682](https://www.canlii.org/en/on/onsc/doc/1977/1977canlii1026/1977canlii1026.html), where Estey C.J.H.C. (as he then was) stated: It is now beyond argument that a departing servant has the right to compete with his former employer. He may do so by establishing a business in direct or partial competition and he may bring to that business the knowledge and skill which he acquired while in the former service, including knowledge and skill directly obtained from the previous master in teaching him his business… It appears from the law as enunciated in these authorities that whether or not an ex-employee may solicit customers of his employer turns upon the narrow question as to whether or not the solicitation is from a list of customers or clients removed from the ex-employer's premises, as against solicitation based upon the memory of the ex-employee [56] Ferguson J. adopted this distinction at para. 22: As discussed by Chief Justice Estey, this distinction is really just a practical rule developed by the courts in an effort to “draw the line” between what is fair and unfair. I am satisfied that even though it is not completely satisfactory, it is well established in Ontario law and has been consistently applied… [57] In the result Ferguson J. rejected the plaintiff’s claim for damages for breach of fiduciary duty on the ground that there was no evidence that the defendant took a client list (at paras. 35, 37): The only confidential information referred to were the names of the plaintiff’s clients. In my view, this could not be considered confidential in the sense required by this area of the law…Finally, if a mere employee can solicit a former employer’s clients without reliance on a written client list there is no reason why an independent contractor cannot do so. [58] At this stage of the proceedings I do not have evidence that the defendants have a client list. The plaintiff has expressed its suspicion in this regard, but there is no evidence. A total of 43 clients have transferred their insurance to FSB since December 1, 2015. This number is not, on its face, inconsistent with the memory capacity of an average employee. I am not prepared to infer a stolen client list on the basis of the evidence before me on this motion. ## Inducing Employees To Leave [59] Article 8.3 of the Agreement of all three defendants provides that: The Producer agrees that he/she will not …for a period of five years following the termination of this agreement, directly or indirectly, induce any employees of the Broker…to leave their employ… [60] The plaintiff seeks an injunction to prevent the defendants from “in any way seeking to induce representatives of Benson Kearley’s staff, its contractors or employees to leave Benson Kearley. [61] The only evidence provided that the defendants have violated this term of their agreement is the affidavit of an account manager at Benson, Kearley who states that she was called by the defendant Lewis on May 3, 2016, to discuss the fact that the defendants were competing with Benson, Kearley. Her affidavit states: Lewis also asked me how I “was making out” at Benson Kearley and whether I “was happy”. I responded that it was a good brokerage to work for and that I was happy with my current position. I believe that Lewis was attempting to determine whether I would be interested in leaving Benson Kearley and joining her at FSB. [62] In the limited time available for the motion before me I did not hear much argument on this point. Assuming such a provision to be enforceable, the account manager’s suspicion is not sufficient evidence to ground an interlocutory injunction. She was not offered a job by Lewis, and there is no evidence that any of Benson, Kearley’s other employees have been offered jobs or have left their employ. I will not, on the basis of this record, issue a declaration prohibiting the defendants from asking people if they are happy. ## Conclusion [63] Based on the foregoing the motion for an interim interlocutory injunction is dismissed, without prejudice to the plaintiff’s right to seek an interlocutory injunction and other relief set out in its Notice of Motion on September 15, 2016. [64] The plaintiff’s motion to consolidate Court File No. CV-16-126769-00 and Court File No. CV-16-125938-00 is allowed. [65] The defendants are presumptively entitled to costs. If the parties cannot agree on costs, the defendants may file written submission of no longer than 3 pages plus cost outline and any offer to settle within 30 days of the release of this decision, and the plaintiff may reply on the same terms within 15 days of receiving the defendants’ submission. --- Justice R.E. Charney Released: June 28, 2016