NATIONAL HEARING SERVICES INC. dba CONNECT HEARING, Plaintiff - v. -, 2024 NBKB 018

IN THE COURT OF KING'S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF MONCTON File: MC-395-2023 Neutral Citation: 2024 NBKB 018 BETWEEN: NATIONAL HEARING SERVICES INC. dba CONNECT HEARING, Plaintiff - and - J ÉRÉMIE CHIASSON and WAVE AUDIOLOGY INC. and 673638 N.B. INC., Defendants - and - COCHLEAR HOLDINGS INC., 636942 N.B. INC. and DENIS LEBLANC Third Parties DECISION BEFORE: Madam Justice Christa Bourque AT: Moncton, New Brunswick DATE OF HEARING: September 13, 2023 DATE OF WRITTEN DECISION: January 30, 2024

APPEARANCES: Timothy R. Bell, for Plaintiff Joshua J. Santimaw, for the Defendants Jean-François Dupuis, for the Third Parties BOURQUE, J. OVERVIEW [ 1 ] The plaintiff is seeking an interlocutory injunction to prohibit the defendants from operating their business. The plaintiff alleges that, in violation of certain restrictive covenants contained in two previously signed agreements between the parties, the defendants are in direct competition with the plaintiff. [ 2 ] In response, the defendants cite a number of reasons why the plaintiff’s motion should be denied.

These include: 1) the restrictive covenants are invalid because they are ambiguous; 2) the plaintiff has no proprietary interest at stake; 3) there was a power imbalance at the time the agreements were entered into; 4) the defendant Chiasson did not have the benefit of counsel at the time he signed the agreements containing the restrictive covenants; and 5) plaintiff’s claim for injunctive relief with respect to the defendant Chiasson's restrictive covenant is moot. [ 3 ] The third parties took no position relative to the motion.

FACTS [ 4 ] The plaintiff, National Hearing Services Inc. ("National"), which operates under the trade name Connect Hearing, offers audiology services, products, and technology to clients throughout Canada. Established in 1978, National currently has a network of 145 clinics across the country. [ 5 ] The defendant, Jérémie Chiasson (“Chiasson”) works as an audiologist and serves as the director of the two corporate defendants, Wave Audiology (“Wave”) and 673638 N.B. Inc. (“673638”). Wave currently operates a clinic located at 298 Main Street in Shediac, New Brunswick.

Chiasson runs Wave, which offers audiology services. [ 6 ] The third parties, Cochlear Holdings Inc. (“Cochlear”), 636942 N.B. Inc. (“636942”) and Denis LeBlanc have made no submissions and have taken no position with respect to the present motion. The claims against them in the main action relate to representations Chiasson alleges were made to him by Denis LeBlanc regarding specific terms of the Share Purchase Agreement referred to below. [ 7 ] In April 2012, Chiasson became an audiologist at Audiologie Avenir Hearing in Shediac (the “Shediac Clinic”), which was owned and operated by the third parties.

Chiasson was the only audiologist employed at the Shediac Clinic. The third parties also operated 10 other audiology clinics. [ 8 ] In 2013, Chiasson acquired 20 shares in the Shediac Clinic through the incorporation of 673638. He purchased those shares from the third parties. Chiasson did not hold any position as an officer or director of either Cochlear Holdings Inc. or 636942. The sole officers and directors were Denis LeBlanc and Pauline LeBlanc.

The purchase allowed Chiasson to receive dividend income from the Shediac Clinic, although his employment was limited to audiology work. [ 9 ] Sonia LeBlanc served as Chiasson's administrative assistant. They were the only two employees of the Shediac Clinic. [ 10 ] In 2016, 673638 acquired an additional interest in the Shediac Clinic from 636942. As a result of a further share purchase, 673638 became a minority shareholder in the Shediac Clinic, with a 40% interest in the shares. [ 11 ] In 2015, Sonova International, National's parent company, negotiated the acquisition of all 11 clinics from Cochlear.

The parties executed the Amended and Restated Shareholders and Option Agreement (the "Option Agreement"). This provided the framework for the eventual sale of the shares in the Shediac Clinic to National. [ 12 ] On December 22, 2021, Chiasson was provided with a Share Purchase Agreement (the "SPA") pursuant to which National sought to exercise its option to purchase the shares of Shediac Clinic. The closing of the SPA was conditioned upon Chiasson commencing employment as an audiologist with National. The closing was expected to occur prior to the end of 2021.

[ 13 ] At the time the SPA was presented to Chiasson, he communicated to LeBlanc and stated he would not be executing the SPA because his lawyer could not review it before the deadline. He claims he was concerned about the restrictive covenants contained therein. According to Chiasson, LeBlanc advised that the solicitation and non-compete covenants in the SPA remained at one year, similar to the provisions contained in the Option Agreement. [ 14 ] On December 23, 2021, Chiasson signed the SPA on behalf of 673638.

He later discovered that the non-solicitation and non- competition period in the SPA was for three (3) years, in contrast to the one-year period set out in the Option Agreement. [ 15 ] On December 24, 2021, pursuant to the SPA, National purchased all of 673638's shares, along with shares of other companies, to acquire New Brunswick hearing clinics. A total of $1,576,707.80 was received by Chiasson for the sale of his shares. [ 16 ] In accordance with the SPA, 673638 agreed to non-competition and non-solicitation covenants during a Restricted Period extending for 36 months from the date of closing.

The restrictions also barred competition and solicitation within a 35 km radius of National's clinics, situated in Shediac, Dieppe, Moncton, Fredericton, Miramichi, Oromocto, Quispamsis, St. Stephen, Edmundston, and Grand Falls, New Brunswick. [ 17 ] The relevant provisions set out in sections 6.4(

b) and 6.4(

c) of the SPA are as follows: (

b) Non-Competition.

During the Restricted Period, none of the Vendors shall, directly or indirectly, within the Geographic Area, individually or in partnership or in conjunction with any Person, in any capacity whatsoever including, without limitation, as an employer, employee, director, principal, agent, joint venturer, partner, shareholder or other equity holder, independent contractor, licensor, franchisor, franchisee, distributor, consultant, advisor, supplier, partnership or otherwise, carry on or be engaged in or be concerned with or have interest in or advise, lend money to, guarantee the debts or obligations of or permit his/her or its name or any part thereof to be used or employed by any Person which (

i) competes with the products, business or services from time to time being marketed or sold by the Company, or (ii) intends to market or sell products or services which are in competition with the products, business or services from time to time being marketed or sold by the Company; provided that the Vendors shall not be prohibited from conducting the activities of HAR as operated as of the date hereof. (

b) Non-Solicitation. During the Restricted Period, the Vendors shall not: (

i) solicit, or attempt to solicit, or assist any Person in any way to solicit or attempt to solicit any business from any actual or prospective customer, supplier or any Person in the habit of dealing with the Company if such solicitation or attempted solicitation is for the purpose of inducing the Person to cancel, reduce, or replace services obtained through any of the Avenir Group of Companies or otherwise restrict their business or relationship with the Company; or(ii) employ, offer employment to or solicit the employment of, or otherwise entice away from the employment of any of the Company, the Purchaser or their respective Affiliates, any individual who is employed by any of the Company, or who was an employee of the Company within the six month period prior to such employment, offer, solicitation or other enticement, without the prior written consent of the Purchaser in its sole and absolute discretion. [...] (

f) Injunctive Relief. Without limiting the remedies available to the Company and the Purchaser, the Vendors acknowledge that damages at law will be an insufficient remedy to the Company and the Purchaser in view of the irreparable harm which will be suffered by the Company and the Purchaser if any of the Vendors violates the terms of this Agreement, and agrees that the Company or the Purchaser may apply for and have injunctive relief in the Province specified in

Section 9.8 specifically to enforce any such covenants without proving actual damages sustained by the Company or the Purchaser.

Nothing herein will limit the entitlement of the Company or the Purchaser to actual damages. [ 18 ] As a director of 673638, Chiasson acknowledged in the SPA that the company was advised to obtain independent legal counsel and confirmed, by signing the acknowledgement, that he received legal advice or chose not to do so. [ 19 ] On January 1, 2022, Chiasson was hired by National, and the parties executed an employment agreement (the “Employment Agreement”) which was signed by Chiasson on December 15, 2021.

According to the evidence, Chiasson rejected three draft employment agreements as they were deemed unacceptable. Once satisfied with the contents of the Employment Agreement, he signed it. [ 20 ] The Employment Agreement contained the following acknowledgment: The parties recognize that a breach by the Employee of any of the covenants contained in this Agreement would result in damages to the Employer and that the Employer could not adequately be compensated for damages by a monetary award(s).

Accordingly the Employee agrees that in the event of any such breach, in addition to all other remedies available to the Employer, the Employer shall be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise as may be appropriate to ensure compliance with the provisions of this Agreement.

The parties agree that all restrictions in this Agreement are necessary and fundamental to the protection of the business of the Employer and are reasonable and valid, and all defences to the strict enforcement of this Agreement by the Employer are waived by the Employee. [ 21 ] Chiasson agreed to comply with the restrictive covenants specified in the Employment Agreement, which prohibit competition and solicitation within a 1km radius of the clinics situated in Shediac, Dieppe, and Moncton. The covenants would be in effect for a period of 12 months. The agreement provides: NON-SOLICITATION

14. As long as the Employee is employed by the Employer and for a period of twelve (12) continuous months after termination of the Employee’s employment, whatever the reason for such termination, the Employee will not, directly or indirectly, either for them self, or as a stockholder, partner, investor, director, officer, employee, consultant, independent contractor, agent or in any other capacity: (

a) perform any services for or sell, solicit or attempt to sell any services to, or interfere with Employer’s relationship with any person, company or other entity that was a customer of the Employer or was identified by the Employer as a prospective customer during the period that the Employee was employed by the Employer. “Customer” means all persons, firms or entities that have either (

i) sought or obtained Employer’s services, (ii) contacted the Employer for the purpose of seeking or obtaining the Employer’s services, or (iii) been contacted by the Employer for the purpose of providing its services; (

b) or solicit, hire or employ, or cause any other person, company or entity to solicit, hire or employ any employee or contractor retained or employed by the Employer.

NON-COMPETITION As long as the Employee is employed by the Employer and for a period of twelve (12) continuous months after termination of employment, whatever the reason for such termination, the Employee will not, directly or indirectly, either for themself, or as a stockholder, partner, investor, director, officer, employee, consultant, independent contractor, agent or in any other capacity: engage in any business activity or work in the same or substantially similar capacity as the Employee’s employment with the employer that is in any way competitive with the business of the Employer within a one (1) kilometre radius of any of the office locations the Employee worked at for the Employer during employment with the Employer.

Should the Employee fail to abide by the foregoing agreement not to compete following termination of employment, the twelve (12) month non-competition period shall run from the date of compliance with this provision whether such compliance is obtained by court order or voluntarily. [ 22 ] On August 10, 2022, Chiasson's employment with National was terminated without cause.

He and Sonia LeBlanc were the only two employees working at National’s Shediac location at the time of Chiasson's termination. [ 23 ] On June 7, 2022, while Chiasson was still employed by National, he purchased the property where the defendant Wave, now operates its clinic. Wave's clinic is situated 350 meters away from National's audiology clinic in Shediac. [ 24 ] On August 10, 2022, National Hearing learned Chiasson had contacted Sonova Canada, an affiliate of National. He allegedly sought funding to establish a new clinic.

Chiasson does not deny this in his affidavit. [ 25 ] By letter dated September 21, 2022, National requested that Chiasson confirm his intent to abide by the previously agreed-upon restrictive covenants. However, Chiasson never responded to the correspondence. [ 26 ] On November 25, 2022, Chiasson incorporated Wave Audiology.

The numbered company, 673638 does not own any shares in Wave. [ 27 ] Sonia LeBlanc resigned from National Hearing on December 2, 2022 and by late May 2022, began working for Wave. [ 28 ] According to National, several of its customers have requested that their files be transferred to Wave. [ 29 ] On May 30, 2023, National filed a Notice of Action with Statement of Claim seeking various forms of relief including an interim and/or permanent injunction to prevent Wave and Chiasson from continuing to compete against it.

On the same day, National filed its Notice of Motion. [ 30 ] On July 14, 2023, Chiasson, Wave and 673638 filed a Statement of Defence and Counterclaim, which was amended on August 4, 2023. On July 20, 2023, National filed a Defence to Counterclaim. [ 31 ] On July 24, 2023, Chiasson, Wave and 673638 filed its third party which was amended on July 27, 2023. Since the hearing of this matter, the third parties have filed its defence to the third party claim. [ 32 ] The record before me in this matter contains a number of affidavits filed by both the plaintiff and the defence.

At the outset of the hearing, the Court considered defence counsel's objection to portions of an affidavit filed by National. National conceded the point, and the challenged paragraphs were stricken from the record. ISSUES [ 33 ] Is National's request for an interlocutory injunction against Chiasson moot because the one-year period provided for in the restrictive covenants in the employment agreement has expired? [ 34 ] Should the Court grant National's motion for an injunction requiring the defendants to comply with the restrictive covenants in the SPA and Employment Agreement? LAW AND ANALYSIS

Mootness [35] The defendants contend that the restrictive covenants applicable to Chiasson under the Employment Agreement expired onAugust 10, 2023, one year after the date of his termination. They submit he is no longer bound by them and requiring the court to ruleon the motion for injunctive relief amounts to a waste of judicial resources. The leading case from the Supreme Court of Canada on thetopic of mootness is Borowski v. Canada (Attorney General), (SCC), the Supreme Court declined its discretion to heara moot appeal.

Sopinka, J. writing for the unanimous court outlined the doctrine of mootness as follows at page 2: The doctrine of mootness is part of a general policy that a court may decline to decide a case which raises merely a hypothetical orabstract question. An appeal is moot when a decision will not have the effect of resolving some controversy affecting or potentiallyaffecting the rights of the parties. Such a live controversy must be present not only when the action or proceeding is commenced but alsowhen the court is called upon to reach a decision.

The general policy is enforced in moot cases unless the court exercises its discretionto depart from it. [36] The New Brunswick Court of Appeal recently dealt with the doctrine of mootness in its decision in Her Majesty in Right of theProvince of New Brunswick, as represented by the New Brunswick Liquor Corporation, operating as Alcool NB Liquor v. CanadianUnion of Public Employees, Local 963, et al, 2023 NBCA 55 and adopted the following comments by author Lorne M.

Sossinat paragraph 44 of its decision: [44] In Boundaries of Judicial Review: The Law of Justiciability in Canada, 2nd ed. (Toronto: Carswell, 2012), Lorne M.Sossin, now a Justice of the Ontario Court of Appeal, writes: The doctrine of mootness is unique among the doctrines of justiciability. It is the only doctrine that deals with thecircumstances by which a justiciable matter may become non-justiciable. For a matter to be moot, in other words, it must first have beenan active dispute, properly brought before a court.

Mootness arises where, because of factual developments (e.g. a litigant dies) or legaldevelopments (e.g. the impugned law is repealed or amended), the dispute no longer has a concrete effect on the parties by the time it issubmitted for resolution before the Court. In such circumstances, Canadian courts have held they possess a discretion as to whether toadjudicate the matter. [p. 107] [37] In Borowski, supra, the Supreme Court of Canada held that when a case is moot, the general practice of the Court is to decline todecide the case.

The rationale for this legal principle is rooted in the adversarial system and the desire to conserve judicial resources.The Supreme Court in Borowski established a two-step analysis for determining whether a court should decline to hear a case because ithas become moot.

First, the court must determine whether there continues to be a live controversy to be decided by the court and itsdecision will have impact on the rights of the parties. [38] As part of the second step, the court may, however, exercise its discretion to hear a matter that has become moot when collateralconsequences warrant a decision on the merits, or when the particular circumstances of the case make it worthwhile to use judicialresources to resolve it.

These situations include cases where the decision will have a practical effect on the rights of the parties, or casesare of a recurring but short-lived nature, so that the dispute will always have disappeared before it is resolved. In addition, some casesraise an issue of public importance that must be resolved because of their national significance and the social cost of not resolving them.Finally, the principle of the mootness doctrine is based on the court's awareness of its jurisdictional function in our political structure.

Rendering judgments in the absence of litigation can be seen as an intrusion into the legislative process. [39] In the case at bar, I must determine whether, despite the passage of the 12 months since Chiasson’s termination, there is still areal controversy between the parties and whether a court decision on the issues raised in the motion will have a practical effect on theirrights.

If so, the case is not moot and there is no need to proceed to the second step. [40] In response to the defence’s argument, counsel for National relies on the restrictive provisions of the Employment Agreementwith Chiasson wherein it provides the following: Should the Employee fail to abide by the foregoing agreement not to compete following termination of employment, the twelve (12)month non-competition period shall run from the date of compliance with this provision whether such compliance is obtained by courtorder or voluntarily. [Emphasis mine] [41] Chiasson submits the restrictive covenants in the employment contract are not enforceable because they are ambiguous and lackcertainty.

He argues that requiring the 12-month restriction to run from the date of compliance (voluntarily or by order) could have theeffect of lasting into perpetuity depending on when the plaintiff decided to bring the matter to court and obtain an order. [42] It is argued by the plaintiff that the 12-month period provided for in the restrictive covenant are conditional upon compliance. Inother words, the time starts to run from the time Chiasson begins to comply.

Plaintiff's counsel explained that since litigation can take asignificant amount of time to reach the courts, a party could potentially violate the restrictions and avoid being ordered to ceaseoperations altogether because it quite often takes more than 12 months to get to trial.

[ 43 ] National points to evidence that Chiasson had every opportunity to review and amend the employment agreement, which he did on three separate occasions by returning the agreement to National for revision because it was not acceptable. [ 44 ] Under these circumstances, I do not accept Chiasson’s argument that he was not given an opportunity to participate in the drafting of this agreement.

If he did not agree to be bound by the terms of the restrictive covenants as drafted, he should have requested that they be amended. [ 45 ] It is my opinion that the parties' use of the time language in the restrictive covenant was intended to avoid this very situation. I am satisfied, therefore, that the parties intended for the restriction to begin to run on the date of voluntary or court-ordered compliance. [ 46 ] The injunctive relief sought against Chiasson has not become moot due to the passage of time as it relates to the non-compete clause.

The 12-month period will only be triggered by Chiasson's compliance or by a court order. Currently, there is no evidence indicating that Chiasson has complied, and there is no court order in place. Therefore, a real controversy between the parties remains, and a court decision on the issue will have a practical effect on the parties. [ 47 ] Having decided that the motion related to the non-compete clause is not moot, it is not necessary to proceed to the second part of the test.

That is, to analyze whether I should exercise my discretion to hear the matter. [ 48 ] Unlike the non-competition provisions, which are triggered by Chiasson's compliance or a court order, the non-solicitation clause is only valid for 12 months from the date of termination. This clause expired on August 22, 2023, making it moot. In regards to the criteria outlined in the second step of the Barrowski analysis, this is not a case in which it is appropriate to exercise my discretion to consider the non-solicitation clause despite it being moot.

Restrictive Covenants Generally [ 49 ] The Court now turns to the merits of National's motion for an interlocutory injunction requiring defendants to comply with the restrictive covenants contained in the Share Purchase Agreement and the Employment Agreement. Before doing so, it is helpful to review the law relating to restrictive covenants, both in the employment context and those contained in commercial agreements. [ 50 ] In the case of KRG Insurance v. Shafron , 2009 SCC 6 , the Supreme Court reviewed the considerations applicable to restrictive covenants.

The Court’s comments at paragraphs 15 to17 are of assistance: [15] A restrictive covenant in a contract is what the common law refers to as a restraint of trade. Restrictive covenants are frequently found in agreements for the purchase and sale of a business and in employment contracts.

A restrictive covenant precludes the vendor in the sale of a business from competing with the purchaser and, in an employment contract, the restrictive covenant precludes the employee, upon leaving employment, from competing with the former employer. [16] Restrictive covenants give rise to a tension in the common law between the concept of freedom to contract and public policy considerations against restraint of trade. In the seminal decision of the House of Lords in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. , [1894] A.C. 535 , this tension was explained.

At common law, restraints of trade are contrary to public policy because they interfere with individual liberty of action and because the exercise of trade should be encouraged and should be free. Lord Macnaghten stated, at p. 565: The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void.

That is the general rule. [17] However, recognition of the freedom of the parties to contract requires that there be exceptions to the general rule against restraints of trade. The exception is where the restraint of trade is found to be reasonable. At p. 565, Lord Macnaghten continued: But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case.

It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable — reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.

That, I think, is the fair result of all the authorities. [Emphasis added.] Therefore, despite the presumption that restrictive covenants are prima facie unenforceable, a reasonable restrictive covenant will be upheld. [ 51 ] Restrictive covenants in employment agreements and those in agreements for the sale of a business share the common goal of restricting certain actions of the parties. However, they differ in their focus and purpose.

Restrictive covenants within contracts for the sale of a business serve to safeguard the purchaser's genuine interest in preventing the vendor from engaging in competitive activities within the same market. The purpose of those contained in employment agreements are to protect the employer’s interests, such as trade

secrets, confidential information, and client relationships. This distinction was addressed by the Supreme Court in Payette v.

Guay Inc,2013 SCC 45 , [2013] 3 S.C.R. 95 at paragraph 36 through 39: [36] The application of different rules in the context of a contract of employment is a response to the imbalance of power that generallycharacterizes the employer-employee relationship when an individual contract of employment is negotiated, and its purpose is to protectthe employee. [37] These rules have no equivalent in the commercial context, since an imbalance of power is not presumed to exist in avendor-purchaser relationship.

The inclusion of non-competition and non-solicitation clauses in a contract for the sale of a business isusually intended to protect the purchaser’s investment.

In limiting the vendor’s right to compete with the purchaser and preventing thevendor from working for a competitor of the purchaser for a certain time after the transaction, such clauses enable the purchaser toprotect its investment by building strong ties with its new customers [translation] “without fearing, for a given period, competition fromthe vendor” (C.A. reasons, at para. 62), which had previously established a relationship with its customers, suppliers and employees. [38] In this Court’s decision in Shafron, my colleague Rothstein J. referred to what is now a cardinal rule, that partiesnegotiating the sale of assets have greater freedom of contract than parties negotiating a contract of employment.

He made the followingcomment: The absence of payment for goodwill as well as the generally accepted imbalance in power between employee andemployer justifies more rigorous scrutiny of restrictive covenants in employment contracts compared to those in contracts for the sale ofa business. [para. 23] [39] Thus, the common law rules for restrictive covenants relating to employment do not apply with the same rigour or intensity wherethe obligations are assumed in the context of a commercial contract.

This is especially true where the evidence shows that the partiesnegotiated on equal terms and were advised by competent professionals, and that the contract does not create an imbalance betweenthem. [52] It is against the background of the foregoing that I now turn to the law as it relates to the injunctions being sought. Injunctive Relief [53] The test for injunctive relief generally is well settled. Courts must apply the three-part test set out in RJR-MacDonald Inc. v.Canada (Attorney General), (SCC), [1994] S.C.J. No. 17: 1.

A preliminary assessment of the case must be made on the merits of the case to ensure that there is a serious issue to be tried; 2. It must be determined that the applicant will suffer irreparable harm if the application were refused; and 3. An assessment must be made as to which of the parties would suffer greater harm from the granting or refusal to grant the injunctionpending a decision on the merits. [54] The first part of the three-part test is the determination of whether a case raises a serious issue to be tried. Richard, J.A. (as hethen was) states at paragraph 32 in Leby Fixtures & Interiors Ltd. v.

The Bank of Nova Scotia, 2006 NBCA 93 (“LebyFixtures”) as follows: […] It is not the function of the Court at this stage to determine whether Leby Fixtures might succeed in its action. The threshold hasbeen described as a low one (see Sunny Corner Enterprises Inc. v. St. Anne Industries Ltd. (2005), 286 N.B.R. (2d) 19, [2005] N.B.J. No.203 (QL), 2005 NBCA 54, at para. 14 and the cases cited therein).

In Canada East Manufacturing this Court described the first stage ofthe test in the following words (at para. 9): There is no requirement that a reasonable prospect of succeeding be established … In RJR-MacDonald Inc., the Supreme Court ofCanada stated at 337-38: What then are the indicators of “a serious question to be tried”? There are no specific requirements which must be met in order to satisfythis test. The threshold is a low one.

The judge on the application must make a preliminary assessment of the merits of the case… Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and thirdtests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neithernecessary nor desirable. [Emphasis mine]

[55] However, the first step of the RJR-MacDonald test does not always require the court to determine whether there is a serious issueto be tried. In certain exceptional circumstances, the standard to apply as the first step in the inquiry is whether the plaintiff hasestablished a strong prima facie case. One such exception exists when a party seeks to enforce a restrictive covenant. In that situation,the higher standard of "strong prima facie case" should be applied (RJR-Macdonald at p 340). In the matter of Imperial Sheet Metal Ltd.et al. v.

Landry and Gray Metal Products Inc., 2007 NBCA 51 at paragraphs 23 and 24, our Court of Appeal identified thoseinstances where the heightened standard is invoked, clarifying that it should not be regarded as a threshold test: 23 I readily accept that in cases involving a question of law, such as the

interpretation of a contractual provision, it is open to the motionjudge to adopt the elevated standard of prima facie case. This is so because it is much easier to predict the ultimate outcome of the case.For example, the jurisprudence surrounding the

interpretation and enforcement of restrictive covenants is settled: see J.G. CollinsInsurance Agencies v. Elsley, (SCC), [1978] 2 S.C.R. 916, [1978] S.C.J. No. 47 (S.C.C.) and Imperial Oil Ltd. v. H.H.L.Fuels Ltd. (2006), 294 N.B.R. (2d) 371, [2006] N.B.J. No. 2, 2006 NBCA 1 (N.B. C.A.), per Turnbull J.A. at para. 20. Accordingly,such cases may validly be classified as an exception to the general rule against conducting an extensive review of the merits of the case.This understanding is consistent with RJR-MacDonald.

I also accept that the elevated standard should be applied in those cases wherethe matter of injunctive relief will become moot by the time the case can reasonably be expected to go to trial. Finally, I accept that itwould be unwise to treat the elevated standard as a threshold test. In my opinion, Justice Sharpe's approach is the preferred one. Thus, forexample, in employment cases involving the

interpretation of a restrictive covenant, the motion judge would approach the question ofinjunctive relief by looking at: (1) the relative strength of the plaintiff's case; (2) the matter of irreparable harm to the plaintiff; (3) thematter of irreparable harm to the defendant; and (4) any other relevant factors. 24 In

summary, as a general rule, the standard of serious issue continues to apply to employment law cases, save in three instances: (1)those cases involving a question of law, such as the

interpretation of a contractual provision; (2) cases in which there has been oral cross-examination; and (3) cases where it is reasonable to predict that the request for injunctive relief will become moot by the time the mattergoes to trial. If any one of these exceptions is applicable, the elevated standard of prima facie case may be applied.

That standardtranslates into an inquiry as to the relative strength of the plaintiff's case and is not to be treated as a threshold test. [56] In Imperial Sheet Metal Ltd, supra, the Court of Appeal refrained from employing the elevated test; however, it is important tohighlight that the employment contract under consideration in that case did not include any restrictive covenants. [57] Since we are dealing with both types of contracts in this matter (commercial and employment) I will first address the injunctionsought with respect to the restrictive covenants contained in the Employment Agreement, and then consider whether it is appropriate togrant an injunction with respect to the restrictive covenants contained in the Share Purchase Agreement.

A) Serious Issue to be tried or strong prima facie case

a) Employment Agreement [58] Canadian jurisprudence has consistently held that a strong prima facie case is essential when seeking injunctive relief withrespect to a restrictive covenant in an employment contract. This is logical because a court ought not to restrain an individual fromengaging in lucrative work aligned with their skills unless a fundamental principle necessitates such restraint. The legal system should beconsiderate of the individual's interests, especially when an injunction impedes their capacity to earn a living. (See: BrettYoung SeedsLimited Partnership v. Dyck [2013] A.J.

No. 567) [59] The Manitoba Court of Appeal recently discussed the reasoning behind the application of the "strong prima facie case" criteria torestrictive covenants contained in employment contracts. In paragraphs 27 to 31 of People Corp. v. Mansbridge, [2022] M.J. No. 95, theCourt said: 27 The recognition of the power imbalance between an employer and employee resulting in the need for more rigorous scrutiny ofrestrictive covenants was reaffirmed in Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6.

While that case did not deal withan injunction, the Supreme Court took the opportunity to summarize the law on restrictive covenants and noted that a power imbalancebetween employer and employee justifies more rigorous scrutiny. As noted by Rothstein J (at paras 22-23): . . . It is also accepted that there is generally an imbalance in power between employee and employer.

For example, an employee may beat an economic disadvantage when litigating the reasonableness of a restrictive covenant because the employer may have access togreater resources (see, for example, Elsley [Elsley v J G Collins Ins Agencies, (SCC), [1978] 2 SCR 916], at p. 924,and Mason v. Provident Clothing and Supply Co., [1913] A.C. 724 (H.L.), per Lord Moulton, at p. 745, quoted below at para. 33).

The absence of payment for goodwill as well as the generally accepted imbalance in power between employee and employer justifiesmore rigorous scrutiny of restrictive covenants in employment contracts compared to those in contracts for the sale of a business. [emphasis added] 28 Rothstein J indicated that restrictive covenants are prima facie unenforceable unless they are reasonable.

This prima facieunenforceability has been noted as a factor in the application of a more stringent standard in assessing the first branch of the RJR test inan employment context (see Knight Archer Insurance Ltd v Dressler, 2019 SKCA 24, where a test of a strong prima facie case wasadopted for the purposes of an injunction in a restrictive covenant case). 29 In Enerflex Systems Ltd v Lynn, 2005 ABCA 62, Picard JA stated (at para 8):

The chambers judge made no error of law in choosing and applying the strong prima facie case test instead of the serious issue to be triedtest. For the first branch of the tripartite test, there is a great deal of authority for the former test in a case such as this when a restrictivecovenant affecting employment is the central issue. See RJR p. 335; Robert J.

Sharpe, Injunctions and Specific Performance (2nd ed.1992), at pp. 2-13 - 2-20. . . . (See also Globex Foreign Exchange Corporation v Kelcher, 2005 ABCA 419 at para 10, McFadyen JA; and Dreco Energy Services Ltdv Wenzel, 2008 ABCA 290.) 30 While People has referred to two Manitoba trial decisions (Carson International Inc v Biggar et al, 2010 MBQB 198; and NatcoManufacturers and Distributors Ltd v Topolnitsky et al, 2011 MBQB 197) where Steinbach has been followed, neither of those decisionsinvolves a written agreement containing restrictive covenants.

Similarly, in Accel Towing v Roberts et al, 2011 MBQB 126, the trialjudge quickly concluded that the test was not met as there was no binding covenant -- even on a cursory examination of the facts. 31 Steinbach has not been reviewed by this Court although the law has evolved since then.

We are satisfied that, taking intoconsideration the policy reasons and pronouncements of the Supreme Court, such as Shafron, with respect to the requirement thatrestrictive covenants, in the context of an employer/employee relationship and contract, be strictly reviewed, a strong prima facie test onthe first branch of the RJR test is to be preferred and should be used.

The motion judge did not err in law in choosing to do so in thiscase. [60] In the present case, I am satisfied that it is appropriate to apply the heightened standard of a strong prima facie case, given thenature of the matter involving an employment contract.

Moreover, the presence of restrictive covenants prohibiting competition furtherjustifies the application of this elevated standard. [61] As explained in R v Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 SCR 196, a strong prima facie case is one where thereis a strong likelihood on the law and the evidence that the plaintiff will make out the allegations in its statement of claim: [17] This brings me to just what is entailed by showing a “strong prima facie case”.

Courts have employed various formulations,requiring the applicant to establish a “strong and clear chance of success”; a “strong and clear” or “unusually strong and clear” case; thathe or she is “clearly right” or “clearly in the right”; that he or she enjoys a “high probability” or “great likelihood of success”; a “highdegree of assurance” of success; a “significant prospect” of success; or “almost certain” success. Common to all these formulations is aburden on the applicant to show a case of such merit that it is very likely to succeed at trial.

Meaning, that upon a preliminary review ofthe case, the application judge must be satisfied that there is a strong likelihood on the law and the evidence presented that, at trial, theapplicant will be ultimately successful in proving the allegations set out in the originating notice. [62] In order to determine whether the plaintiff has established a strong prima facie case against Chiasson, it must convince me thatthe Employment Agreement is binding and enforceable, that the restrictive covenants are valid and enforceable (a 3-part sub-testapplies) and, there is a strong likelihood, Chiasson breached them.

i) Binding and enforceable agreement [63] I am satisfied by the evidence that the Employment Agreement entered into by National and Chiasson is indeed binding andenforceable. Chiasson was provided a full opportunity to negotiated the terms of the agreement and in fact, rejected various iterations ofit on three occasions. He only signed it once he was satisfied with its terms.

Chiasson had the benefit of legal counsel and there is noevidence contained in the record that he did not know or understand what he was signing or that he was induced into signing it. [64] Chiasson's counsel contends that the wrongful termination of their client renders the Employment Agreement null and void.Consequently, they argue that the restrictive covenants within the agreement lack force and effect. [65] Termination itself does not necessarily render an entire employment contract void.

The termination of employment ends theemployment relationship, but the terms and conditions of the employment contract may continue to have legal significance, especiallythose related to post-employment obligations and restrictive covenants. These are designed to protect the employer's legitimate businessinterests after the employment relationship has ended. [66] However, if the court determines that the termination was wrongful or in breach of the employment contract, it could impact theoverall validity of the contract.

In such cases, any restrictive covenants which form part an employment contract could be held to beunenforceable due to the wrongful termination. However, as counsel for National correctly stated, not all terminations are wrongful. Thecircumstances surrounding each termination must be considered to determine whether the employer acted reasonably, in good faith, andin compliance with employment contract and applicable employment statutes. [67] In the present matter, while Chiasson was indeed terminated, there is nothing in the evidence which suggests the termination waswrongful.

In fact, Chiasson received everything to which he was entitled under the Employment Contract upon his termination includingpay in lieu of notice. Chiasson and his lawyer have failed to present any evidence or persuasive arguments justifying the allegedwrongful termination by National. Consequently, I am convinced that the restrictive covenant must endure despite the termination. Nevertheless, I must consider the enforceability of the restrictive covenant/non-competition clause. (ii) Enforceability of the restrictive covenant (non-competition clause) [68] In the case of J.G. Collins Insurance Agencies Ltd. v.

Elsley Estate, (SCC), [1978] 2 S.C.R. 916, the SupremeCourt of Canada dealt with the enforceability of restrictive covenants in employment contracts. In this case, Mr. Elsley, an insurancesalesman, had entered into an employment contract with a restrictive covenant preventing him from competing with his former employer

within a specified geographic area for a certain period after the termination of his employment. The Supreme Court emphasized the needfor a balance between protecting an employer's legitimate business interests and an employee's freedom to pursue their livelihood. Thecourt ruled that restrictive covenants are prima facie unenforceable as they are in restraint of trade, and it is the employer's burden todemonstrate that such clauses are reasonable and necessary to protect legitimate business interests.

The court held that the determinationof whether a restrictive covenant is reasonable rests largely on three factors: 1) whether the employer has a proprietary interest worthy of protection; 2) whether the temporal and spatial restrictions are too broad; and 3) whether the covenant restricts competition generally, or merely bars solicitation of the former employer’s clients. [69] Applying these factors to the particular covenant in this case, I find it to be reasonable. (iii) Proprietary interest [70] In the case of Doerner v.

Bliss & Laughlin Industries Inc., (SCC), [1980] 2 S.C.R. 865, the Supreme Courtobserved at page 873 that a restrictive covenant in the context of an employment relationship might be acceptable where: …the purpose of the covenant is not to prohibit the employee from exploiting the skills he has acquired in his past employment, but toprotect the former employer against competition where the scope and nature of the employee’s work and his contract with clients andcustomers of his former employer is such that he could readily harm his employer. [71] I am satisfied that National does indeed have a proprietary interest which it is entitled to protect which is made up of customersbased in New Brunswick to whom it provides hearing services.

Chiasson worked in this industry for 12 years before he becameemployed with National and was the face of National’s clinic in Shediac where he was the only audiologist employed by it. It isreasonable to infer that all of National’s clients receiving services in its clinic would inevitably have had contact and thus a relationshipwith Chiasson. Those client relationships are a proprietary interest which National is entitled to protect (See: Innersolutions Ltd.

V.Hooper, 2015 ABQB 258 ). [72] Counsel for the defence argues that National cannot have a proprietary interest in their patients and relies on the case of Mirarchiv. Lussier, 2007 QCCA 284 where the court examined the effect of restrictive covenants in the health services industry (dentistry) andstated the latter should not restrict a patient’s right to continuity of care. Mirarchi addressed the specific wording of the restrictivecovenant, which prohibited departing dentists from treating or referring existing patients of Mirarchi to another dentist.

The court foundthat this covenant was against public policy because it restricted the patient's right to choose their own healthcare provider.

It should benoted that the other terms included in the restrictive covenants, such as the defendant's commitment to not compete within a specificgeographic area of the plaintiff's clinic for a certain period of time, were not at issue. [73] The restrictive covenant agreed to by Chiasson in the Employment Agreement do not make reference to him having to refuse totreat or continue to treat National’s patients and, in that regard, the Miarchi case is distinguishable. [74] In consideration of the law and the facts of this case, I am of the view that National does indeed possess a proprietary interestwhich it is entitled to protect with a restrictive covenant. (iv) Temporal and spatial restrictions [75] In assessing geographic and temporal restrictions contained in restrictive covenants, courts must assess their reasonableness byensuring a balance is struck between protecting the legitimate interests of employers and allowing employees some degree of freedom topursue their careers.

A clause that is overly broad in terms of geography or duration may be deemed unenforceable if it is found torestrict the employee in his ability to earn a living. [76] In the present case, Chiasson agreed to comply with the restrictive covenants prohibiting competition and solicitation within a1km radius of the clinic located in Shediac and that he would comply with that restriction for a period of 12 months from the date ofcompliance or a court order. [77] In my view neither the spatial or temporal restrictions imposed on Chiasson are not overly broad and do not in my view, overlyrestrict him from earning a living as an audiologist. (

v) Extent of the activity sought to be prohibited [78] Counsel for Chiasson strongly argued that the restrictions on Chiasson’s activities are ambiguous and overly broad. I reject thisargument. The relevant portion of the non-competition covenant states “the Employee will not… engage in any business activity or workin the same or substantially similar capacity as the Employee’s employment with the employer that is in any way competitive with thebusiness of the Employer”. [79] Chiasson has worked as an audiologist for many years. During this time, he was the only audiologist in the clinic where heworked.

In my view he should be fully aware of his role in providing audiology services and the type of business operated by National. The restrictions are clear, Chiasson must not work for a competitor who operates within a 1 km radius of National’s clinics for a periodof 12 months. It is important to remember that Chiasson bargained for these terms, with the benefit of counsel and returned theemployment contract three times before agreeing to its terms.

[ 80 ] The defence argues that a non-solicitation clause would have been sufficient to protect National ( See: Elsley at p.958). I disagree. Chiasson was in frequent and direct contact with National’s clients while he worked there. He was the only audiologist in the clinic and it could be expected that clients would follow him even without him having solicited them. [ 81 ] Although I have previously determined the non-solicitation covenant to be moot, my view is also that it is not reasonable.

In general terms, the non-solicitation covenant prohibits Chiasson from performing or selling any services to National’s customers or prospective customers for a period of 12 months. The non-solicitation clause is, in my opinion, too broad and could cover too many possibilities, which would amount to an unjustified restraint of trade. [ 82 ] Regarding the non-solicitation of employees, the covenant provides that Chiasson may not, during the same 12 month period, solicit, hire or employ National’s employees. I find this reasonable and not overly broad.

However, once again, because the 12 months expired in August 2023, the matter is now moot. [ 83 ] After considering all three factors outlined in Elsley , supra, I have concluded that National has successfully established that the non-competition clause is valid and enforceable. (vi) Breach of the restrictive covenants [ 84 ] The final element to consider regarding whether National has established a strong prima facie case against Chiasson for the breach of the restrictive covenant is whether he indeed breached it. [ 85 ] The evidence establishes that within a few months of Chiasson’s termination by National, he purchased the property which currently houses Wave’s clinic where he works as an audiologist.

The property is located only 350 meters from National’s clinic in Shediac. [ 86 ] One of the matters which I dealt with earlier is whether the temporal restrictions set out in the non-compete clause have expired. I determined they have not as the 12 months begins to run as of the date of compliance or order of the court.

It is clear to me, on the evidence, that Chiasson has breached the non-compete clause by failing to wait 12 months before beginning his employment with Wave Audiology who, I find, is in direct competition with National. [ 87 ] The evidence further establishes that Chiasson hired National’s employee Sonia LeBlanc withing the 12 month period provided for in the non-solicitation clause entered into with National. [ 88 ] In light of all of the above, I am satisfied that National has established a strong prima facie case as regards to Chiasson’s breach of the non-competition convenant contained in the Employment Agreement. [ 89 ] I turn now to an examination of the restrictive covenants set forth in the SPA and consider the first branch of the RJR- MacDonald test in connection with those restrictive covenants. (

b) Share Purchase Agreement [ 90 ] When considering the applicability of the first branch of the RJR-MacDonald test to the Share Purchase Agreement—whether a serious issue or a strong prima facie case exists—I refer to our Court of Appeal's decision in Imperial Sheet Metal , supra.

The court established that the threshold for a strong prima facie case is to be applied where: 1) the central issue is based on a question of law; 2) oral cross-examination has been conducted; or 3) the decision whether to grant an injunction will cause the issue to become moot. [ 91 ] The exceptions outlined in Imperial Sheet Metal stem from the underlying principle that, during the injunction stage, if the nature of the dispute allows for a more predictable trial outcome, the burden falls on the applicant to establish a strong prima facie case.

Claims grounded in restrictive covenants often face challenges at trial. Their enforceability hinges on being reasonable between the involved parties and not contrary to public interest. In my view, the restrictive covenants outlined in the SPA also align with the exceptions delineated in Imperial Sheet Metal , given that I am tasked with interpreting the contractual provisions and drawing a conclusion regarding the underlying merits of the claim.

i) Reasonableness and Enforceability [ 92 ] To establish a strong prima facie case regarding the restrictive covenants in the SPA, it must be shown that they are reasonable.

The jurisprudence clearly states that restrictive covenants contained in commercial agreements are assumed to be lawful unless the defendants can establish, they are unreasonable. ( See: Payette , supra at paragraph 58 ) In the present matter, the defendants have presented several arguments which aim to cast doubt on their reasonableness. [ 93 ] First, the defendants argue that the restrictive covenants contained in the SPA are ambiguous and do not apply to Chiasson, who signed the agreement as a director of 673638 and a minority shareholder of 636492.

He did not sign the SPA in his personal capacity and therefore it does not apply to him. [ 94 ] The defendants add that 673638, the only of the defendants who is a party to the SPA, is not competing. And finally, Wave Audiology, the entity that currently operates the alleged competing clinic, is not a party to the SPA. Taking all these elements into account, the only party to whom the SPA applies is 673638, who the evidence establishes, is not competing. [ 95 ] National presents two arguments in response to these submissions.

Firstly, it urges the court to draw an inference from the language employed in the SPA, asserting that the obligations outlined within it should extend to Chiasson. The contention is rooted in the substantial payment of 1.5 million dollars made to Chiasson, facilitated through his corporate entity, for his stake in the Shediac clinic. The plaintiff contends that such a significant transaction implies an intention for Chiasson to be personally bound by the SPA.

The alternative scenario, where Chiasson could establish a new company and compete against National without consequence, would render the restrictive covenants within the SPA futile. National submits the parties could not have intended that result.

[96] National first relies on the wording of the SPA's restrictive covenants that "None of the Vendors shall, directly or indirectly"compete against National's clients, compete against National, or disclose National's confidential information.

In my respectful view,those terms cannot be stretched to the point of applying to Chiasson personally. [97] Upon closer scrutiny of the SPA, it becomes evident that Chiasson is conspicuously absent as a named party to the agreement.The initial page of the SPA expressly indicates the contracting parties as National Hearing Services Inc., the purchaser, and the specifiedvendors, namely Cochlear Holdings Inc., Denis LeBlanc Family Trust (2013), 636942 N.B. Inc., 673638 N.B. Inc., and 646214 N.B.

Ltd.Notably, there is no mention of Chiasson in his personal capacity. [98] Furthermore, there is no indication throughout my review of the SPA that it is intended to be binding on Chiasson in his personalcapacity. The sole reference to his identity occurs in the signature block at the conclusion of the agreement, where he is identified as thePresident of 673638 N.B. Inc.

This isolated reference is the only instance within the entire agreement where Chiasson's name is invoked,providing no substantive basis to assert his personal obligations under the SPA. [99] It is my opinion that if the intention behind the SPA encompassed Chiasson, such a crucial aspect should have been explicitlyand unequivocally expressed within the contract. Upholding National's argument, which suggests inferring the application of the SPA toChiasson, disregards the fundamental principle of separate corporate personality.

The significance of this principle is demonstrated in therecent decision from the Saskatchewan Court of Appeal in Turtle et al. v. Valvoline Canadian Franchise Corp., 2021 SKCA 76. The court in Turtle cited with approval our Court of Appeal’s decision in Imperial Oil v. H.H.L. Fuels Ltd. and HermanLevesque, 2006 NBCA 1 in which the court upheld the trials judge’s finding that Mr.

Levesque, who signed an agreement as president ofthe corporation involved, was not personally bound by its terms. ii) Piercing the corporate veil [100] In the alternative, National is seeking the extraordinary remedy of piercing the corporate veil with respect to both 673638 andWave and asks the court to impose the obligations outlined in the Share Purchase Agreement (SPA) on Chiasson. [101] It is important to recognize that courts generally do not disregard the concept of a corporation's separate legal identity unless thereare strong reasons to do so (See: Estate of Michael Burke and 102256 Ontario Inc. v.

Royal & Sun Alliance Insurance Company ofCanada, 2011 NBCA 98 paragraph 60). This usually happens in cases involving fraud, illegal activities, or other improperpurposes carried out through the corporate structure.

National argues that Chiasson, who identified as the alter-ego of 673638, mustcomply with the restrictive covenants specified in the SPA. [102] Piercing the corporate veil and establishing Chiasson as the alter-ego of the corporation necessitates a detailed examination of thecircumstances to ascertain whether Chiasson and the corporation are so intricately interconnected that they should be treated as asingular entity. While this evidence may emerge during the trial, I find no evidence in the record before me to support the argument thatit is appropriate to pierce the corporate veil in these circumstances.

I have not seen any evidence that 673638 or Wave are being used forany improper purpose. In addition, I am unable to find, given the evidence, that Chiasson should be considered, at law, the alter ego ofeither 673638 or Wave. iii) Acknowledgment in Employment Agreement [103] The next argument advanced by National in asserting that the SPA applies to Chiasson draws support from the wording in theAcknowledgment signed by Chiasson upon commencing his employment with National. The relevant portion of the Acknowledgmentsstates the following: WHEREAS: A.

The undersigned are parties to a Share Purchase Agreement dated December 24, 2021 in respect of the sale, directly orindirectly, of certain shares by the undersigned individual (the “SPA”); B. pursuant to the SPS, the undersigned individual agreed to non-competition and non-solicitation covenants during the RestrictedPeriod (as defined in the SPA) as set out in

section 6.4(

b) and 6.4(

c) of the SPA; C. the undersigned are parties to an Employment Agreement dated January 1, 2022 (the “Employment Agreement”); and D. pursuant to the Employment Agreement, the undersigned individual agreed to non-competition and non-solicitation covenants asset out in

section 10 and 11 of the Employment Agreement (the “Employment Agreement Restrictive covenants”); NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the mutual covenants hereincontained (the receipt of which is hereby acknowledged), the parties hereto agree as follows: 1. Acknowledgement and Agreement: The undersigned hereby acknowledge and agree that the Employment Agreement RestrictiveCovenants shall not be applicable until after the expiry of the Restricted Period.

For greater certainty, nothing in thisacknowledgement and Agreement shall be read to extend the period of the Employment Agreement Restrictive Covenants fromthe termination date and in no event shall the Employment Agreement Restrictive Covenants have any effects beyond twelvemonths after the date of termination of the undersigned’s employment. 2. Governing Law.

This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws ofthe Province of New Brunswick, and the laws of Canada in force in such Province (excluding any rule or principle of the conflict of lawswhich might refer such construction of

interpretation to the laws of another jurisdiction). Each Party irrevocably submits and attorns tothe exclusive jurisdiction of the courts of the Province of New Brunswick with respect to any matter arising under this Agreement orrelated to this Agreement.

DATED January 1, 2022. [104] In my view, there is nothing in the wording of the Acknowledgment which lends support to National’s argument that Chiasson ispersonally bound by the terms of the SPA. If National wanted that to be the case, they should have included it in the SPA. Therefore, Iconclude that the restrictive covenants of the SPA are not enforceable as against Chiasson.

Furthermore, while the SPA does apply to673638, there is no evidence before me to support that it has ever breached its agreement not to compete. [105] As for Wave, it is not a party to the SPA, making its enforcement unlikely unless, as National contends, this Court is inclined topierce the corporate veil to reach Chiasson, who serves as a director of Wave.

In light of my finding that the SPA does not apply toChiasson, piercing the corporate veil becomes moot. [106] In light of my conclusions that the SPA is unenforceable against any of the Defendants, National has failed to establish a strongprima facie case with respect to the restrictive covenants contained in the SPA.

B) Irreparable Harm [107] The second branch of the RJR-MacDonald test requires National to establish that it will suffer irreparable harm if the injunctiverelief is not granted. According to the Supreme Court of Canada, irreparable harm is characterized by the nature of the harm rather thanits magnitude. It pertains to harm that is either incapable of being quantified in monetary terms or unable to be remedied, typically due toone party's inability to recover damages from the other. The evidence of irreparable harm must not be inferred, and evidence cannot bespeculative.

The onus squarely rests on National to convince the court. [108] In Imperial Sheet Metal, supra, the Court of Appeal discussed the concept and application of "irreparable harm" as follows: [28] A finding of irreparable harm to the plaintiff is not a condition precedent to the granting of injunctive relief. In other words, it is nota threshold test and, therefore, it is unnecessary to identify the appropriate standard of proof. In some cases, the evidence of harm may beoverwhelming or unanswerable. In others, there may be a nagging doubt.

In both circumstances, it is both wise and necessary to completethe tri-partite analysis. Paragraph 78 of RJR-MacDonald supports this approach: "Unless the case on the merits is frivolous or vexatious,or the constitutionality of the statute is a pure question of law, a judge on a motion for relief must, as a general rule, consider the secondand third stages of the Metropolitan Stores test." This passage suggests that once you get past the first stage in the analysis you shouldaddress both the second and third steps.

The jurisprudence of this Court is consistent with this understanding: see Canada EastManufacturing Inc. v. Harvey and Maritime Wire Co. (1996), (NB CA), 183 N.B.R. (2d) 293 (C.A.), [1996] N.B.J.No. 552 (QL), and Melanson v. New Brunswick (Attorney General), [2006] N.B.J. No. 555 (C.A.)(QL); see also Justice Sharpe's text atpage 2-35 and cases cited at notes 100 and 100a. [29] I am not suggesting that an applicant who fails to establish irreparable harm (for example, on a balance of probabilities) retains arealistic chance of obtaining injunctive relief. Far from it.

What you are more apt to find is conflicting evidence with respect to thefinancial impact on a party if the injunction is or is not granted. In some cases, motion judges have no difficulty in concluding that theplaintiff will not suffer irreparable harm if the injunction application were dismissed. In other cases, the conflicting affidavit evidencemay raise a serious but nagging doubt over whether irreparable harm to the plaintiff/applicant will result. For example, in DominionRefuse Collectors v. Thompson, [2003] N.B.R. (2d) (Supp.) No. 48 (Q.B.), [2003] N.B.J.

No. 289 (QL), 2003 NBQB 305, the motionjudge admitted that it was difficult to assess the former employer's claim of irreparable harm. The motion judge concluded that there wasa "possibility" of such and went on to consider the balance of convenience. Knowing that courts in New Brunswick are going to bepresented with conflicting affidavit evidence, carefully crafted having regard to the legal principles set out in the jurisprudence, it is bothwise and necessary to proceed to the third stage in the analysis. [30] In

summary, so long as motion judges are not imposing a threshold test with respect to the question of whether the plaintiff willsuffer irreparable harm and so long as they are prepared to proceed to the third stage of the tri-partite analysis, and assess the potentialharm to the defendant, no one can complain that the principles in RJR-MacDonald have not been respected.

Whether the case forirreparable harm to the plaintiff is weak or strong, it is still necessary to turn to the third step in the analysis. [109] In his leading text Injunctions and Specific Performance, Justice Sharp discusses the notion of irreparable harm to the plaintiffat pages 2-62 to 2-64 (Canada Law Book, Looseleaf Edition, 2021). He writes: It is exceptionally difficult to define irreparable harm precisely. Courts regularly and routinely assess monetary awards for non-pecuniaryinjuries where it is necessary to do so.

On the other hand, the courts have sometimes been prepared to view what otherwise seem readilycalculable losses "irreparable" for the purposes of interlocutory relief. In the context of preliminary relief, the test is a relative and flexible one which, it is submitted, necessarily involves an evaluation of theother factors. Indeed, it has been held that an interlocutory injunction may be granted where "irreparable harm" has not beendemonstrated. Similarly, attempts to make irreparable harm a condition precedent, and hence a threshold test, have been rejected.

Thesecases suggest that the "irreparable harm" requirement can only be defined in the context of the risk balancing exercise. If the plaintiff'scase looks very strong, harm may appear to be more "irreparable" where the plaintiff has only an even chance of success. While judgesseldom explicitly acknowledge that there is an "overflow" effect, produced by strength or weakness of other factors, it cannot be doubtedthat, as a practical matter, it exists. The important point is that irreparable harm has not been given a definition of universal application:its meaning takes shape in the context of each particular case.

However it is defined, failure to establish irreparable harm is commonly

cited as the primary reason for refusing injunctive relief. [ 110 ] First, National relies on the contract wording wherein both the Employment Agreement and the SPA state that the parties agree and recognize that a breach of the covenants contained therein would cause irreparable harm to National.

However, counsel for the defendants correctly pointed out that the parties may not contractually limit the court's inherent discretion in determining whether extraordinary equitable relief in the form of a preliminary injunction is appropriate. [ 111 ] National further argues that if the Court denies its request for a preliminary injunction, it will suffer irreparable harm in the form of permanent loss of market share and goodwill, which is difficult, if not impossible, to quantify precisely. National contends that any monetary damages awarded would be insufficient to compensate for these losses. [ 112 ] I agree.

The circumstances suggest that the risk of irreparable harm is increased due to Chiasson's prominent role as the former representative of National's clinic. Additionally, Chiasson served as the sole audiologist in the Shediac Clinic for many years, making him the face of that clinic. [ 113 ] In response, the defendants argue that damages can be easily calculated with the help of valuators or accountants. However, it is difficult if not impossible to quantify the number of individuals who chose Wave's services over National solely because of Chiasson's involvement.

The loss of market share and goodwill presents challenges in calculating damages and obtaining fair compensation for National. [ 114 ] Therefore, I find National has met the second part of the RJR-McDonald test.

C) Balance of Convenience [ 115 ] The third part of the test which this court is required to address in considering injunctive relief is referred to as the “balance of convenience.” At this third stage of the three-part test, this court must weigh the potential harm caused to National if the injunction is not granted against any potential harm caused to the defendants if an interlocutory injunction is imposed. [ 116 ] In Leby Fixtures , supra, Richard J.A. discusses how to approach the third part of the test as delineated in RJR-MacDonald at paragraph 43: [43] In RJR-MacDonald , the Supreme Court said this about the third stage of the three-stage test (at paras. 62-63): The third test to be applied in an application for interlocutory relief was described by Beetz J. in Metropolitan Stores at p. 129 as: "a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits".

In light of the relatively low threshold of the first test and the difficulties in applying the test of irreparable harm in Charter cases, many interlocutory proceedings will be determined at this stage. The factors which must be considered in assessing the "balance of inconvenience" are numerous and will vary in each individual case. In American Cyanamid , Lord Diplock cautioned, at p. 408, that: It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them.

These will vary from case to case. He added, at p. 409, that "there may be many other special factors to be taken into consideration in the particular circumstances of individual cases." [ 117 ] In assessing the potential harm arising from the granting or denial of the interlocutory injunction, the scales tip in favor of National concerning the non-compete clause within the Employment Agreement. [ 118 ] National has devoted substantial resources to establish its presence in Shediac, a venture that featured Chiasson as the face of its clinic.

Chiasson's decision to establish a competing entity merely 350 meters away poses a significant threat to National's business. [ 119 ] Conversely, Chiasson contends that the imposition of the injunction would have severe repercussions on his livelihood and family life, especially if compliance requires adherence to the restrictive covenants outlined in the SPA. [ 120 ] It is critical to note that if the injunction is granted, the non-compete clause in the Employment Agreement does not prevent Chiasson from operating beyond the one-kilometer radius of National's Shediac clinic.

In this regard, I am not persuaded that Chiasson would suffer greater harm than the plaintiff if the injunction is granted. [ 121 ] Turning to the covenants outlined in the SPA, a different story unfolds. In the event these covenants applied to Chiasson, their enforcement would, in my view, have a profound impact on Chiasson's ability to earn a living. The condition requiring him to remain at least 35 km outside the larger centers where National operates restricts Chiasson to doing business only in the more rural areas of the

province. [ 122 ] This restriction significantly limits Chiasson's professional opportunities. After careful consideration, it is apparent that, on balance, the harm to Chiasson if the injunction is granted outweighs the harm to National if I deny the application as regards to the SPA. CONCLUSION [ 123 ] I am satisfied that National has successfully met the criteria of the three-part test for preliminary injunctive relief with respect to the non-competition provisions contained in the Employment Agreement.

Conversely, it has not met the test as it relates to the covenants contained in the SPA. [ 124 ] Accordingly, an interlocutory injunction will be issued against Chiasson in accordance with the wording of clause 14 of the Employment Agreement. DISPOSITION [ 125 ] This court orders the following:

A) The defendant, Jérémie Chiasson, for the period of 12 months from the date of the within Order, shall be enjoined from directly or indirectly, either for himself, or as a stockholder, partner, investor, director, officer, employee, consultant, independent, contractor, agent, or in any other capacity: engage in any business activity or work in the same, or substantially similar capacity as his employment with National that is in any way, competitive, with National’s business, within a one (1) kilometer radius of any of the office locations in which Jérémie Chiasson worked at for National during his employment with the latter.

B) This injunction will be effective one week from the date of this decision to allow Chiasson to comply with this order.

C) As to National's motion to compel defendants to comply with the restrictive covenants in the SPA, that motion is hereby denied, and the reasons for that decision are set forth above.

D) Costs in the amount of $2,000 plus HST shall be paid to National by Chiasson forthwith. DATED at Moncton, New Brunswick, this 30 th day of January, 2024. ________________________________________ Christa Bourque Justice of the Court of King’s Bench New Brunswick, Trial Division