In Mark Fairbanks Professional Corporation v. T.G. Michelson Professional Corporation, 2023 ABKB 53, Justice R.A. Neufeld denied an application for an injunction based on allegations of breaches of a non-solicitation agreement and the tort of passing off. This case provides critical commentary on the “balance of convenience” portion of the RJR Macdonald Test, holding that courts should be very reluctant to order an injunction unless there is evidence of a continued breach.
It is important to note that the context of this dispute centers around restrictive covenants in the commercial context rather than the employment context. While this changes some aspects of the analysis (i.e., the presumption against enforceability in employment law), the Court’s comments on irreparable harm and balance of convenience are very relevant to employment law.
Heading
The following are the pertinent facts summarized by Justice R.A. Neufeld:
- Michelson signed a settlement agreement with Dimension Dentistry (the “Agreement”). Dimension agreed to purchase Dr. Michelson’s ownership interest. In exchange, Dr. Michelson signed a non-solicitation agreement, preventing him from soliciting Dimension’s patients for two years and soliciting Dimensions employees unless they had been away from Dimension’s employment for six months.
- Shortly after the parties finalized the Agreement, Dr. Michelson began working with Passion Dental. Dr. Michelson’s wife posted the following on his Facebook Page:
I have left Dimension Dentistry and will be relocating my dental practice to another clinic in South Calgary where I will continue to offer the same services as before. Details will follow in another announcement in the near future.”
(the “Facebook Post”).
- Around the same time (approximately 10 days following Dr. Michelson’s departure), one of Dimension’s employees left Dimension and began employment with Passion Dental.
- Two months later, Passion Dental started a google advertising campaign. Searching “Dimension Dentistry” populated a two-line ad on the first page with the headline “Dr. Troy Michelson & Dimension Dentistry.” When Dr. Michelson was notified of the ad, he immediately requested that Passion Dental take it down, which it did.
- The Plaintiffs (Dimension) alleged that Dr. Michelson breached the Agreement by soliciting patients via the Facebook Post and by encouraging and directly arranging for the hiring of Dimension’s former employee. They also alleged that Dr. Michelson caused Passion Dental to undertake the google advertising campaign and, in doing so, committed the tort of passing off.
Analysis / Conclusion
The Plaintiffs sought an interlocutory injunction to compel the removal of the Facebook Post (7 months old at the time of the application), prohibit the use of “Dimension Dentistry” in any advertising by or of Dr. Michelson, and compel Dr. Michelson to cease practicing dentistry for six months.
Applications for interlocutory injunctions are analyzed through the three part test set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, which is (1) whether there is a serious issue to be tried; (2) whether irreparable harm would result to the Applicants if the injunction is not granted, and (3) whether a balance of convenience between the parties favors granting the injunction.
Considering the first step, Justice Neufeld found that the Facebook Post did not raise a serious issue to be tried as it could not be properly characterized as having been done for the purpose of solicitation. The post did not attempt to “alter” or “modify” the relationship between Dimension and its patients – it only informed readers that Dr. Michelson intended to continue practicing at a different location. The Agreement did not require that Dr. Michelson maintain “radio silence,” and he was entitled to respond to inquiries of his whereabouts so long as he did not “induce, encourage or facilitate” anyone from moving business to him for 24 months.
Justice Neufeld found that hiring the Dimension employee and the google ad raised serious “issues to be tried”. The Court found that these two issues also passed the next step of the analysis, “irreparable harm”. While there may not have been evidence quantifying the damage Dimension had suffered, Justice Neufeld highlighted that Courts must focus on the nature, not the magnitude of the harm. As noted in RJR Macdonald, irreparable harm is harm that can either not be quantified in monetary terms or cannot be cured. In this case, the nature of the harm was “loss of competitive position and goodwill,” and the Agreement specifically stated that irreparable harm would result from its breach. Justice Neufeld found that both considerations were sufficient to satisfy this step of the test.
However, the two issues failed on the ‘Balance of convenience” step. At this stage, Courts weigh the relative consequences of the injunction and consider how the order will affect both sides. Justice Neufeld found that the balance of convenience strongly favored Dr. Michelson, noting the following:
… Interlocutory injunctions are an exceptional remedy. They are granted before the Court has heard the evidence and arguments required to fully and fairly adjudicate a dispute, and are intended to preserve the status quo until that time. Where no evidence is provided of a continued breach, or a likelihood of repetition of one committed previously, the Court should be very reluctant to enjoin or restrain how people such as the Defendants go about their business and personal affairs. To do so without a demonstrated need is a severe inconvenience in its own right. It is no answer to say that the restrictions would be easy to comply with. [underline added]
At the time of hearing the application, the six-month restricted period for hiring previous Dimension employees had expired. As such, even if the employee’s hiring was a breach, that issue was one to be determined at trial – and an order extending the hiring restriction or restricting Dr. Michelson from working could not be granted. Further, Passion Dental had taken the google ad down, and with no evidence suggesting that further ads would be created, no purpose would be served to order Dr. Michelson not to do so.
My Take
In the employment law context, where a former employer is seeking an injunction to restrain a previous employee from competing or soliciting, Courts usually impose the standard of a strong prima facie case rather than a “serious issue to be tried.” In this case, the Court imposed the lower standard of “serious issue to be tried” – while Justice Neufeld didn’t provide an explanation, it is likely that lower standard was imposed because the dispute arose out of an asset sale instead of the employment context.
The finding that the Facebook Post did not amount to a breach of the Agreement is also notable, as it demonstrates the requirement that solicitation be “active.” As noted by the Court, a public announcement that someone has changed employment is not the same as inducing, encouraging, or facilitating past clients to change where they are providing business.
The considerations under the balance of convenience test are important, as they highlight the purpose of interlocutory injunctions. As noted by Justice Neufeld, injunctions are an exceptional remedy granted to “preserve the status quo” or stop a continuous activity that may constitute a breach after a Court can hear evidence and arguments required to fully and fairly adjudicate a dispute. In this case, concluding that the injunction was unjustified was based on a lack of demonstrated need. Without evidence of a continuing breach, the imposition of restrictions that would significantly restrain Dr. Michelson’s business and personal affairs amounted to a severe inconvenience in its own right. Further, simply because it would be “easy” to comply with such an order is insufficient to justify its imposition.
Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
Michael Hernandez is an employment lawyer at Bow River Law. He is a knowledgeable and skilled lawyer, handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.
