2005BCSC1809

Before: The Honourable Mr. Justice Cole

Reasons for Judgment

(In Chambers)

Counsel for the Plaintiff:	C.G. White
Counsel for the Defendant:	B. McLean
Date and Place of Trial/Hearing:	December 13, 2005
	Vancouver, B.C.

Introduction:

[1] The plaintiff, Raymond Salons Ltd., applies for an interlocutory injunction to enforce the terms of a restrictive covenant contained in an employment contract. The defendant takes the position that if he has breached the restrictive covenant, the balance of convenience does not favour the granting of an injunction.

Background:

[2] The plaintiff operates approximately eleven hair salons in British Columbia and Alberta. He has two salons in Park Royal employing 30-40 stylists. The defendant signed a contract of employment with the plaintiff containing inter alia, the following terms:

Upon leaving the company you agree to --

3. Except where the Employee is terminated at or before the end of the three month probation period, the Employee further agrees that he/she shall not engage in direct or indirect employment, ownership or partnership in the same or similar business as that carried on by Raymond Salons Ltd. at Park Royal North within two (2) miles of that location for a period of one (1) year from the termination date of the Employee’s employment.

[3] Both parties signed the contract and the defendant commenced employment on or around the 21^st of November 2001. The defendant continued to work full-time until the 7^th of July 2005. On the 23^rd of June 2005, the defendant gave the plaintiff notice of his resignation, effective July 7, 2005.

[4] The defendant says that he resigned from his employment with the plaintiff because of difficulties at work. He was subject to an allegation of harassment and he found out that he had been kept under surveillance, although the accusations of harassment were determined to be groundless. He felt he could not continue in the employment of the plaintiff especially because the manager of the Park Royal North location resigned and a new manager was to take her place. The defendant wanted to continue to work in the business as he is the sole supporter of his wife who is at home with a baby and two older children. He found an existing business carried on by Headquarters Hair Salon (“Headquarters”). Before purchasing that business, he drove all the routes between Park Royal North and the business premises of Headquarters to confirm the premises was more than two miles distance from the plaintiff’s premises. He then proceeded to purchase the business which was completed in July 2005. He had to borrow between $65,000-$70,000 to acquire the business and carry out tenant’s improvements.

[5] Headquarters is located at Edgemont Village in North Vancouver, east of Capilano Road. Edgemont Village is surrounded by a residential community and the business district in the Edgemont Village is distinctive. It really does not compete with businesses at Park Royal North.

[6] Upon the plaintiff learning of the defendant’s new business, they took steps to enforce their restrictive covenant. The defendant’s business is within the two-mile radius of Park Royal North. It is approximately 1.8 miles as the crow flies or 350 metres inside the two miles required by the restrictive covenant.

[7] In October, the solicitor for the plaintiff contacted the defendant’s solicitor and told him that although he had no instructions from his client at that time, his client recognized that the defendant’s business was not really having any financial impact on the plaintiff’s salon at Park Royal North. The plaintiff’s solicitor conveyed his thoughts to the defendant’s solicitor, advising that he would start an action in breach of the restrictive covenant. The defendant would consent to an injunction which he said would not be enforced. The plaintiff was not concerned about the defendant but it was important that it obtain an injunction as the hairdressing community is small and the plaintiff’s client wanted to convey the idea that Raymond Salons would strictly enforce restrictive covenants with its employees and would always obtain injunctions against past employees who breached them. Another hairdresser, more senior than the defendant, had left the plaintiff’s employment about the same time. This other employee was working at Spa Utopia in North Vancouver, which was within two miles of the plaintiff’s Park Royal North Salon and the plaintiff was concerned that this more senior hair dresser would find out if it did not pursue the defendant, which would make it more difficult to deal with her.

[8] According to the plaintiff, since the defendant left the plaintiff’s employment, none of the regular clients that the defendant provided services to have returned. In particular, none of the 80 clients who had seen the defendant at least two times over a three month period have returned to the salon for services.

[9] The defendant says that since leaving the plaintiff’s employment, only 40 of his regular clients have gone to Headquarters at least once and these include friends and social acquaintances. With the average service bill for the plaintiff’s salon at $50-$55 per visit and the defendant’s commission at approximately 50 percent of the service bill, this would amount to the plaintiff suffering a loss of approximately $6000 per year.

Analysis:

[10] The defendant says he did not breach the restrictive covenant; furthermore, the plaintiff’s conduct has rendered the covenant unenforceable.

[11] The test for injunctive relief is whether 1) there is a fair question to be tried, and 2) whether the balance of convenience favours it being granted. I am satisfied that there is a fair question to be tried. The next issue is whether or not the balance of convenience favours the plaintiff or the defendant, including whether either party would suffer irreparable harm if the injunction relief is granted or refused.

[12] The plaintiff submits that proof of irreparable harm is not required where an injunction is sought to prevent the violation of a negative covenant. This rule, however, is not rigid.

[13] Macfarlane J.A. in Consumers’ Automart Ltd. v. Hyundai Auto Canada Inc. (1991), 8 B.C.L.R. (3d) 37 (B.C.C.A.) stated at ¶ 8:

Cascade Imperial Mills Ltd. v. Lindsay and English Bay Cedar Products Ltd. (1985), 59 B.C.L.R. 392 stands as authority for the proposition that the rule is not absolute and a judge was right in considering irreparable harm and balance of convenience in the presence of negative covenant. Macdonald, J.A. reviewed the authorities at p.395-396. I do not understand that case to be in conflict with Montreal Trust [Co. v. Montreal Trust Co. of Canada (1988), 24 B.C.L.R. (2d) 238]. They decide a different question. The chambers judge in this case recognized as this Court did in Wale [British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333, [1987] 2 W.W.R. 331] that the question in each case is whether the granting of an injunction is just and equitable in all the circumstances of a case. (See Law and Equity Act)…

[14] I am satisfied that damages can be easily determined based on the records of the plaintiff and the defendant and that the amount of damages would be modest in the area of $6000 for a period of one year. I am also satisfied that the defendant did not intentionally set up his business inside the two mile area, if in fact that is what a court decides. The law has traditionally sided in favour of the plaintiff’s interpretation of the covenant distance, as “the crow flies” (see Raymond Salons Ltd. v. Dawood (25 March 2004), Vancouver S041405 (B.C.S.C.)). The effect of granting an injunction would put the defendant out of business for the balance of the one year period. This, in my view, is disportionate to the amount of the potential damage to the plaintiff. The effect of granting the injunction would be catastrophic to the defendant, in that he is the sole supporter of his wife and three children and borrowed up to $70,000 to start the business and carry out leasehold improvements. Furthermore, the breach is not significant in that it is only 350 metres within the two mile radius and the location of the defendant’s business is in a different catchment area.

[15] The plaintiff, through its solicitor, has acknowledged that the defendant’s business does not really have any financial impact on them at Park Royal North. The primary purpose of the plaintiff’s conduct seems to be to ensure that all their employees know that they will always apply for an injunction to enforce the restrictive covenant.

[16] I am satisfied that in these particular circumstances, damages would be appropriate instead of an injunction. The effect of an injunction would be disportionate to the alleged breach. Furthermore, granting the injunction would not be just and equitable in these circumstances.

[17] With respect to the alternative argument that the plaintiff’s conduct has rendered the covenant unenforceable, I find that in light of the fact it was not contained in the pleadings and the comments made by Cowan L.J.S.C. in Raymond Salons Ltd. v. Boucher (1990), 47 B.L.R. 217, it should not succeed.

[18] The plaintiff’s application is dismissed. The defendant is entitled to his costs.

“F.W. Cole, J.”

The Honourable Mr. Justice F.W. Cole

Citation:	*Raymond Salons Ltd. v. Janmohamed,*
	2005 BCSC 1809