Hargraft Schofield v Schofield et al is a November 2007 decision from the Ontario Superior Court of Justice regarding non-competition clauses and an application for an interim injunction giving effect to a non-competition clause. The Plaintiff, Hargraft Schofield (HS) was an insurance company that had purchased the business of John Schofield for a substantial sum of money. The agreement of purchase and sale stipulated a three year non-compete for Mr. Schofield. Mr. Schofield's employment was extended twice by agreement between the parties. There was falling out and Mr. Schofield left HS in November 2006 and joined a competing insurance business owned by his wife (also a former employee of HS).
The Court adopted the reasoning in Singh v 3829537 Canada Inc (2005) which said that in an application to enforce a non-competition clause in an agreement of purchase and sale the court is simply enforcing a contractual term and therefore the moving party need only show a strong prima facie case and not irreparable harm and that the balance of convenience favours an injunction.
(19) The basis of upholding the negative covenants without inquiring as to the question of damages and the balance of convenience is that the court is merely upholding a contract entered into between two parties of equal bargaining power.
The Court then goes on to say that it is interested in whether the covenant is reasonable in the interests of the parties and the public and places the onus on the moving party of establishing this. It also notes that the ambiguity in the clause is construed against the drafter of the clause.
Despite finding that irreparable harm is not a necessary consideration the Court did conclude that the moving party would suffer irreparable harm as a result of the actions of the defendant. This was found even though the Court also concluded there was no risk that HS would go out of business if the injunction was refused.
The essence of the decision is that the injunction was merited because the language of the covenant was plain and obvious, the deal was honoured for a period of time by both sides, the plaintiff was suffering clear harm and the defendants had an alternate field of business they could pursue. In order to bullet proof the decision the Court went further and concluded that the plaintiff would suffer irreparable harm if the injunction was not granted and that the balance of convenience also was in favour of granting the injunction.
While the Court did note that there was a triable issue related to whether the non-compete was extended at the same time as the employment agreement one cannot help but be struck by the clear decision in favour of the injunction. The inescapable conclusion is that the defendant came off very badly in the evidence that was before the Court.