An employee (“Baxandall”) of R.J.V. Gas Field Services Ltd., resigned his employment and went into the same business as his former employer, the manufacturer of polyurethane panels. R.J.V. moved for an interlocutory injunction to prevent Baxandall from soliciting or selling to the customers of R.J.V., and the application was granted by the chambers judge. At a later hearing, the chambers judge modified the injunction, deciding to allow Baxandall to sell to the customers of R.J.V. but continuing to block him from canvassing or soliciting those customers, pending the trial of the action. Baxandall and his new company successfully appealed the original Order with the Court of Appeal ordering that the injunction be vacated.

Administrative law – Employment law – Post employment obligations – Restraint of trade – Remedies – Injunctions – Judicial review – Standard of review – Correctness

R.J.V. Gas Field Services Ltd. v. Baxandall, [2003] A.J. No. 731, Alberta Court of Appeal, June 5, 2003, Russell and Wittmann J.J.A. and Smith J. (ad hoc)

In granting the original interim injunction, the chambers judge referred to the tri-partite sequential test in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 and Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1 S.C.R. 110. The components of that test are:

(1)  Whether there is a serious question to be tried;

(2)  Whether the applicant will suffer irreparable harm unless the injunction is granted;

(3)  Whether the balance of convenience favours the granting of the injunction.

The chambers judge found, on the initial application, that there was a serious issue to be tried. On the issue of irreparable harm, the chambers judge adopted the definition referenced in RJR MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at paragraph 59 and found that R.J.V. had established that it would suffer irreparable harm if the injunction were not granted. This conclusion was supported on the basis of Baxandall’s conduct between his decision to leave R.J.V. and engaging in the activities preparing him to set up the manufacturing business.

Considering the third part of the test, the balance of convenience, the chambers judge referenced Metropolitan Stores and concluded at that time that the balance of convenience favoured R.J.V.

The parties returned to argue a stay of the injunction later. The chambers judge changed her ruling on the balance of convenience, indicating that Baxandall personally and his company would lose 99% of their customers if the injunction was maintained. A stay of the selling part of the injunction was granted on the basis that a letter of credit be posted as security for any damages to R.J.V.

On the appeal, the court held that, in terms of whether the chambers judge had applied the correct test, the standard of review was correctness. The court held that the standard of review on irreparable harm and the balance of convenience militated against disturbing the original finding of the chambers judge that, unless the injunction was granted, the applicant would suffer irreparable harm. However, the Court of Appeal then went on to review the additional Reasons of the chambers judge relating to the stay application. The Court of Appeal held that these reasons effectively modified the nature of the injunction.

The Court applied the principles articulated in the Physique Health Club Ltd. case, [1996] A.J. No. 1004, and assumed, without deciding, that Baxandall was in a fiduciary-like relationship with R.J.V. and that he could validly be restrained from targeting or actively soliciting the business of R.J.V.’s customers but only for a “reasonable period of time”.

The court found that the real difficulty was the absence of the chambers judge addressing what a reasonable period of time in the context of the principles laid down in the Physique Health Club Ltd. case might be. In allowing the appeal, the court found, in all of the circumstances, that a reasonable period of time had now passed. It had been more than 18 months since Baxandall’s company started production and, in the absence of some compelling and specific evidence, the reasonable period of time to enjoin him from competing with his former employer had now expired.

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