Knight Archer Insurance Ltd. v Dressler, 2019 SKCA 34

Court of Appeal for Saskatchewan Docket: CACV3362 Citation: Knight Archer Insurance Ltd. v Dressler , 2019 SKCA 34 Date: 2019-04-12 Between: Knight Archer Insurance Ltd. Appellant (Plaintiff) And Donna Dressler, Don Shindelka and TIPI General Partner Corporation Respondents (Defendants) Before: Caldwell, Whitmore and Leurer JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Leurer In concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr.

Justice Whitmore On Appeal From: 2019 SKQB 30 , Regina Appeal Heard: March 8, 2019 Counsel: Jonathan Martin for the Appellant Jason Clayards and Roxanne Ouellette for the Respondents Leurer J.A. I. Introduction [ 1 ] Knight Archer Insurance Ltd. [Knight Archer] appeals an order of the Court of Queen’s Bench ( Knight Archer Insurance Ltd. v Dressler , 2019 SKQB 30 ) dismissing its application for an interlocutory injunction.

Knight Archer had sought the injunction to restrain its former employees, Donna Dressler and Don Shindelka, from soliciting business on behalf of their new employer, TIPI General Partner Corporation [TIPI]. [ 2 ] For the reasons that follow, I would dismiss Knight Archer’s appeal. II. Background [ 3 ] Knight Archer is a general insurance broker. TIPI is its direct competitor for business from Saskatchewan’s First Nations’ communities.

The evidence is that this is a niche insurance market, with only four companies underwriting insurance for the governing bodies of these communities as a regular part of their business, and with access by brokers to these underwriters being, at least in some respects, limited. [ 4 ] Further background leading to Knight Archer’s application for an interlocutory injunction is found in the judgment of the Chambers judge: [4] From September of 2015 until October 31, 2018, Ms. Dressler worked for Knight Archer as Vice President of Business Development. Her responsibility was to develop new clientele for Knight Archer.

In this role, she cultivated business relationships with a number of First Nations. Prior to joining Knight Archer, Ms. Dressler had, through previous employment, developed contacts and connections with a number of First Nation communities throughout Saskatchewan. [ 5 ] Mr. Shindelka is a Canadian Accredited Insurance Broker. He worked for Knight Archer as a Commercial Account Executive from January of 2015 until November 30, 2018. During his time at Knight Archer, Mr. Shindelka was Ms. Dressler’s technical assistant, and reported to her. [ 6 ] On October 22, 2018, Ms.

Dressler submitted a letter of resignation to Knight Archer, and her last day of work there was October 31, 2018. Before leaving Knight Archer, she had secured employment with TIPI — IMI Insurance Partners (a business which is part of the defendant TIPI General Partner Corporation) [TIPI]. TIPI is a group of First Nations-owned insurance brokerages. Mr. Shindelka submitted his resignation on November 16, 2018, and ended his employment at Knight Archer on November 30, 2018.

Prior to leaving Knight Archer, he too had secured employment with TIPI. [ 7 ] When they initially began their employment with Knight Archer, both Ms. Dressler and Mr. Shindelka accepted letters of offer which contained a non-solicitation agreement. This non-solicitation agreement provided that upon termination of their employment with Knight Archer, they would not do any of the following things for a period of one year: i.

Either on their own behalf or on behalf of any third party “solicit, contact or in any manner approach” any client of Knight Archer (or any of Knight Archer’s partner companies) for “any purpose competitive with the interests” of Knight Archer; and ii. Take or hire away, or cause or assist to be hired or taken away, any employee of Knight Archer for the purpose of employing or retaining that person in any business competitive with Knight Archer.

[ 8 ] This agreement defined “competitive” as being a business or purpose which offers substantially the same products or services as Knight Archer, in the same jurisdiction where Knight Archer carries on business. It defined “client” as being a client with whom they had contact, or from whom they received confidential information, on behalf of Knight Archer (or any of its partner companies), in the 12 month period prior to cessation of employment. The agreement did not define “confidential information”. [ 9 ] This agreement also contained a liquidated damages clause, in which Ms. Dressler and Mr.

Shindelka agreed — in the event that they violated the agreement in a way which resulted in a loss of business for Knight Archer — to pay Knight Archer 200% of the previous year’s revenue in relation to that lost business. [ 10 ] On March 1, 2017, both Ms. Dressler and Mr. Shindelka signed a “Contract Amendment” which changed the non-solicitation clause slightly. The Contract Amendment provided that upon termination of their employment with Knight Archer, Ms. Dressler and Mr. Shindelka agreed that they would not do any of the following things for a period of two years: i.

Either on their own behalf or on behalf of any third party “directly or indirectly, solicit, contact or approach in the course of business” any client of Knight Archer or its partner companies with whom they had contact with in the past two years, or “attempt to direct away from” Knight Archer any of its current business; and ii. “Take or hire away, or cause or assist to be hired or taken away” any employee of Knight Archer for the purpose of employing or retaining that person in any business competitive with Knight Archer. [ 11 ] The Contract Amendment defined “competitive” and “client” in the same way those terms were defined in the offer of employment.

Like the non-solicitation clause contained in their original offers of employment, there was no definition of “confidential information”. [ 12 ] The Contract Amendment also replaced the liquidated damages provision contained in the offer of employment by adding the following clauses: You agree that damages would not be a sufficient remedy for any breach, or threatened breach, of this provision by you. In the event of a breach, you agree that KAI may apply for and obtain any relief available to it in a court of law, including injunctive relief.

This relief is in addition to such rights KAI may have to damages arising from any breach, or threatened breach, of this agreement by you. This agreement replaces any prior non-solicit, non-compete or similar provisions in agreements between KAI and you and any other previous agreements or provisions respecting the same are considered null and void. Notwithstanding any termination or cessation of your employment by you or KAI for any reason whatsoever, the provisions of this non- solicitation clause shall continue in full force and effect following such termination.

If any term of this provision is to any extent invalid, illegal, or incapable of being enforced, such term shall be excluded to the extent of such invalidity, illegality or unenforceability and all other terms hereof shall remain in full force and effect. ... I understand that as an employee of KAI, the clients and policies acquired through me for KAI are the property of Knight Archer Insurance Ltd., regardless of where the client originated.

Any violation of this policy for a one year period after my employment has ceased will result in a financial penalty of two times the gross commission payable to Knight Archer Insurance, payable by myself within two (2) months of the violation. [ 13 ] Knight Archer says that, before leaving its employ, Mr. Shindelka solicited and persuaded two of Knight Archer’s First Nation clients to sign brokerage agreements, and take their business to TIPI. Knight Archer also says that its current employees have been told of efforts that Mr.

Shindelka has made to solicit business from other First Nations that are current clients of Knight Archer. It also says that e-mails authored by Ms. Dressler show an intention on her part to: (

i) identify Knight Archer’s First Nations clients to TIPI; (ii) disclose confidential information about those clients; and (iii) solicit those clients and attempt to draw their business away from Knight Archer. (Emphasis added) [5] I will elaborate on the last-quoted paragraph from the Chambers judge’s decision. [6] Shortly after Mr. Shindelka’s last day with Knight Archer, Knight Archer received a number of “brokerage letters” from First Nations clients directing business to TIPI. The letters were partially in Mr. Shindelka’s handwriting, and at least two were dated prior to Mr.

Shindelka’s last day with Knight Archer. [7] Knight Archer also discovered an email from Ms. Dressler, sent while she was still its employee, directed to several persons including a senior officer of TIPI (and copied to Mr. Shindelka). The text of the email states as follows: Hello to both of you, I wanted to provide a list of accounts we have very strong relationships with and will be approaching for a broker letter.

Nathan has discussed this with us and we appreciate during this time of transition other members of our team allowing us to complete this migration over to TIPI without causing confusion for our clients by approaching them. The service and support we provided previously is the reason we will be successful on broker lettering them over to TIPI. Accounts that we currently manage are: [18 account names omitted]

Excited for the time we can say they are all TIPI accounts! Warmest regards, Donna Knight Archer’s evidence is that the names listed on the email comprise the entirety of its First Nations’ clientele. [8] All of this was of grave concern to Knight Archer. On December 11, 2018, it commenced an action against Ms. Dressler, Mr. Shindelka and TIPI. Its statement of claim alleges that Ms. Dressler and Mr. Shindelka had acted, and were intending to continue to act, in breach of the restrictive covenants contained in their employment agreements, as well as in breach of fiduciary duties said to be owed to Knight Archer.

As against TIPI, the statement of claim alleges that TIPI induced Ms. Dressler and Mr. Shindelka to breach their agreements with Knight Archer, that TIPI made use of confidential information given to it by Ms. Dressler and Mr. Shindelka, and that TIPI conspired and participated in their alleged breaches. Finally, Knight Archer alleges that all defendants have been unjustly enriched by their wrongful actions. [9] Knight Archer was granted an ex parte interim injunction, restraining Ms. Dressler and Mr.

Shindelka from disclosing or using confidential and proprietary information and from soliciting Knight Archer’s clients. The order also restrained TIPI from receiving confidential information from Ms. Dressler and Mr. Shindelka or making use of confidential information already provided to it. As is normal, the ex parte order was limited in duration, to remain in place only until Knight Archer could seek continuing injunctive relief on notice to the defendants. [10] Knight Archer applied to continue the injunction until trial.

It supported its application with affidavits from several of its senior and line employees. The affidavits provide history relating to Knight Archer’s First Nations business, including its development under the leadership of Ms. Dressler with the assistance of Mr. Shindelka. The affidavits make a compelling case to support the proposition advanced by Knight Archer in its notice of application that Ms. Dressler and Mr. Shindelka were the face of its business with its First Nations clientele and “the rapid loss of these clients would likely spell the end of [Knight Archer’s] First Nations business”. [11] Ms.

Dressler’s affidavit acknowledges that she had secured employment with TIPI prior to resigning from Knight Archer. She explains personal and professional connections that she had with Knight Archer’s First Nations clientele both predating and existing outside of her employment with that firm. She acknowledges that her job with Knight Archer was to develop business with a focus on First Nations communities as well as other client groups. [12] Mr. Shindelka acknowledges in his affidavit that, along with Ms. Dressler, he was a “familiar face to Knight Archer’s First Nations clients”.

He denies having a “special relationship” with these clients and instead he claims he had a “standard insurance broker/client relationship”. [13] Ms. Dressler and Mr. Shindelka do not deny they had solicited business from Knight Archer’s First Nations’ clients and intend to continue to do so into the future. Both Ms. Dressler and Mr. Shindelka also emphasize that they had no involvement in negotiating Knight Archer’s brokerage deals with its underwriters.

They give evidence intended to support their argument that the contract amendment, referenced in paragraph 10 of the Chambers judge’s decision (quoted above), was not supported by fresh consideration and, for that reason, was not operative or enforceable. [ 14 ] TIPI filed the affidavit of its chief executive officer. The affidavit explains that TIPI was formed to provide pension and medical plans, as well as to provide property and casualty insurance to First Nations, Métis and Indigenous organizations nationwide. The affidavit provides background to TIPI’s business development plans in Saskatchewan.

The affiant denies knowledge of the contracts between the individual defendants and Knight Archer, beyond what is contained in the affidavits of others. The affidavit acknowledges receipt of Ms. Dressler’s email quoted above, but states that “such an email was not required to determine Knight Archer’s First Nations clients”.

The affidavit further emphasizes that “First Nations locations and contact details are not private or confidential” and insurance contracts generally are not permanent. [ 15 ] Knight Archer’s application, as well as a responding application by the defendants to strike portions of a reply affidavit filed by Knight Archer, came before a judge of the Court of Queen’s Bench sitting in Chambers. The application to strike parts of Knight Archer’s affidavit record was granted in part on that day. Knight Archer’s application for an interlocutory injunction was dismissed in a later separate judgment. III.

The Queen’s Bench Decision ( 2019 SKQB 30 ) [ 16 ] Knight Archer based its request for injunctive relief on the alleged breaches of contract by Ms. Dressler and Mr. Shindelka, TIPI’s participation in those alleged breaches, and the tort of conspiracy. More specifically, neither the alleged breach of fiduciary duty nor the claim of unjust enrichment was put into play by Knight Archer in support of its application. [ 17 ] The Chambers judge approached Knight Archer’s application on the basis that to be entitled to interlocutory injunctive relief it would need to show that (

i) it had a strong prima facie case, (ii) it would suffer irreparable harm that cannot be compensated through monetary damages if it succeeds at trial and the injunction is not granted, and (iii) the balance of convenience favours the granting of the injunction. [ 18 ] The Chambers judge held that Knight Archer failed to demonstrate a strong prima facie case. The Chambers judge concluded that he was not satisfied that there was a “high likelihood” that any of the agreements containing the restrictive covenants were valid (at para 35).

Critical to this conclusion was the absence of any definition of the terms “partner companies” and “confidential information” found in both the original agreements and in the amending agreements. He held that “proper definition of these two terms was essential to clearly identifying which persons or entities comprise the ‘clients’ that Ms. Dressler and Mr. Shindelka would be prohibited from soliciting or contacting for business purposes” (at para 38).

[19] The Chambers judge also concluded that Knight Archer had not demonstrated it would suffer irreparable harm that could not becompensated through monetary damages if the injunction was not granted and it succeeded at trial. [20] Because of his conclusion that Knight Archer’s application failed at both the first and second stage of the test for injunctiverelief, the Chambers judge found it unnecessary to consider the balance of convenience. IV. Parties’ positions [21] Knight Archer argues that the Chambers judge erred: (

i) in ruling it had “failed to establish a strong prima facie case that thenon-solicitation clauses were valid and enforceable”; and (ii) “in determining whether there was irreparable harm or committed palpableand overriding errors in interpreting the evidence in this regard”. To support this latter argument, Knight Archer asserts that the Chambersjudge erred in striking parts of its affidavit record.

Knight Archer also argues the balance of convenience supports the grant of injunctiverelief. [22] The respondents emphasize that a decision to grant or refuse injunctive relief is inherently “discretionary, fact specific andcontextual”. They argue that appellate courts have a limited role in reviewing the grant or refusal of interlocutory injunctions. They defendthe decision of the Chambers judge to deny Knight Archer’s request for an injunction as a reasonable exercise of his discretion.

Therespondents say that the Chambers judge committed no reviewable error when he concluded that Knight Archer does not have a strongprima facie case and Knight Archer has not demonstrated that it would suffer irreparable harm that could not be compensated throughmonetary damages if it succeeded at trial and the injunction was not granted. V. Issues [23] The issue in this appeal is whether the Chambers judge erred in refusing Knight Archer’s request for interlocutory injunctiverelief. This issue is properly determined by considering the following questions: (

a) What standard, or standards, of review are applicable? (

b) Did the Chambers judge err by concluding that Knight Archer had failed to establish a strong prima facie case that the non-solicitation provisions of its contracts with Ms. Dressler and Mr. Shindelka were enforceable? (

c) Did the Chambers judge err by concluding that Knight Archer had not demonstrated that it will suffer irreparable harm if aninjunction is not granted? VI. Analysis A.

What standard, or standards, of review are applicable? [24] The ultimate issue in this appeal is whether the Chambers judge erred in refusing Knight Archer’s request for injunctive relief.While this issue raises subsidiary questions which may attract different standards of review, both parties referenced the decision of thisCourt in Fettes v Culligan Canada Ltd., 2009 SKCA 144, [2010] 6 WWR 420 [Culligan], as expressing the standard of review applicableto the ultimate issue.

In Culligan, Jackson J.A. stated as follows: [13] As a preliminary matter, it is important to underscore the standard of review to be applied. It has been often said that appellatecourts have a limited role in reviewing the granting of an interim or interlocutory injunction. In that regard, the Supreme Court of Canadahas adopted the deferential approach established by Diplock J. in Hadmor Productions Ltd. v. Hamilton, [1982] 1 All E.R. 1042 andManitoba (Attorney General) v. Metropolitan Stores Ltd., (SCC), [1987] 1 S.C.R. 110.

The reviewing court must notinterfere with a Chambers judge’s exercise of discretion merely on the ground that the members of the court would have exercised theirdiscretion differently (Hadmor, at p. 1046; Metropolitan Stores, pp. 154-56). As the Supreme Court of Canada said recently in Harper v.Canada (Attorney General), 2000 SCC 57, [2000] 2 S.C.R. 764 at p. 777: “[t]o interfere, there must be a clear mistake on the law or theevidence, or some other glaring error.” From this Court see also: Canada (Attorney General) v. Saskatchewan Water Corp., (SK CA), [1992] 4 W.W.R. 712 and Govan Local School Board v.

Last Mountain School Division No. 29 (1991), (SK CA), 83 D.L.R. (4th) 685 at p. 690. [14] As Ball J. made clear, his task was not to pass conclusively on the evidence (Culligan, No. 1, para. 15); nor is it our task to do so.Rather, our task is to decide whether these interim conclusions of the Chambers judge reflect error in principle or are otherwise sounreasonable as to demand intervention. This Court might take issue with discrete aspects of his

interpretation of the EmploymentAgreement or his general findings, but the fact remains that this is an interim order, made with a view to maintaining the status quopending a trial, and is of short duration. The decision under review must be viewed in that light. [15] Counsel for the Appellants accepts this standard of review, but, nonetheless submits that this Court is in as good a position as theChambers judge to assess and weigh the evidence.

In keeping with this submission, counsel asks the Court to look at discrete findings offact made by the Chambers judge and, if error is found with respect to one or more of these findings of fact, submits that the Court canintervene and exercise its own discretion afresh. In my view, the standard of review with respect to interlocutory injunctions does notoperate in this fashion. Leaving aside errors of law, the standard of review with respect to an interlocutory order requires the reviewingcourt to view the granting of the injunction more globally than this.

It would be a rare finding of fact that would vitiate the exercise ofdiscretion in refusing or granting an injunction. (Emphasis added)

B. Did the Chambers judge err by concluding that Knight Archer had failed toestablish a strong prima facie case that the non-solicitation provisions of its contractswith Ms. Dressler and Mr. Shindelka were enforceable? [25] In Mosaic Potash Esterhazy Limited Partnership v Potash Corporation of Saskatchewan Inc., 2011 SKCA 120 at para 113, 341DLR (4th) 407 [Mosaic], this Court summarized the approach a judge should “typically take when deciding whether to grant interlocutoryinjunctive relief”.

Justice Richards (as he then was), writing for the Court, indicated that the judge should normally begin with apreliminary consideration of the strength of the plaintiff’s case. He further stated that the “general rule in this regard is that the plaintiffmust demonstrate a serious issue to be tried, i.e. the plaintiff must have a claim which is not frivolous or vexatious”.

Yet, like the SupremeCourt of Canada in RJR-MacDonald Inc. v Canada (Attorney General), (SCC), [1994] 1 SCR 311, Mosaic recognizessome limited exceptions to this rule. [26] In the Court of Queen’s Bench, Knight Archer proceeded on the basis that, because it was seeking to enforce the restrictivecovenants found in contracts of employment, it needed to establish a strong prima facie case as a threshold to entering into a considerationof the other criteria relevant to the grant or refusal of an injunction.

In proceeding in this way, Knight Archer appears to have beeninfluenced by Culligan, at paragraph 19, as well as other authority. Knight Archer filed a last-minute application to amend its notice ofappeal to put this issue in play before us. Knight Archer then abandoned this argument in light of the fact it had not been made in the Courtof Queen’s Bench. [27] I therefore proceed on the basis that the question of whether the Chambers judge erred in determining that Knight Archer hadnot established a strong prima facie case that its restrictive covenants were enforceable is a threshold question.

Unless Knight Archer cancross that threshold, the issues of irreparable harm and balance of convenience do not come into play. [28] Knight Archer takes no issue with the Chambers judge’s characterization of the standard of proof applicable to the strong primafacie case requirement. In this regard, the Chambers judge stated that this means that it was up to Knight Archer to persuade him that“there is a high likelihood that the restrictive covenant is valid” (at para 32).

I proceed on this basis, which is in keeping with the directiongiven in R v Canadian Broadcasting Corp., 2018 SCC 5 at paras 17–18, [2018] 1 SCR 196. Finally, Knight Archer also accepts, for thepurposes of the appeal only, that it could not establish a strong prima facie case that the 2017 contract amendments were enforceable. [29] As a result of all of this, Knight Archer’s request for injunctive relief depends on it establishing a high likelihood that therestrictive covenants contained in the 2015 contracts of employment are enforceable.

These agreements read in material part as follows: Non-Solicitation In accepting this offer of employment, you agree that, regardless of the circumstances of the termination of your employment (includingwithout cause), you shall not, for a period of twelve (12) months following the termination of your employment with [Knight Archer]: i.

Either on your own behalf or on behalf of any third party, solicit, contact or in any manner approach for any purpose competitive withthe interests of [Knight Archer] any client of [Knight Archer] (or any of [Knight Archer’s] partner companies)... ... ... “competitive” with [Knight Archer] means a business or purpose which offers substantially the same products or services of [KnightArcher] in the same jurisdiction(

s) where [Knight Archer] carries on business; and a “client” is a client with whom you had contact onbehalf of [Knight Archer] (or any of [Knight Archer’s] partner companies) and/or from or about whom you received confidentialinformation...” [30] The Chambers judge concluded the following with respect to these covenants: [38] Neither of the restrictive covenants contain any definition of two key terms: (

i) partner companies; and (ii) confidentialinformation. In my view, proper definition of these two terms is essential to clearly identifying which persons or entities comprise the“clients” that Ms. Dressler and Mr. Shindelka would be prohibited from soliciting or contacting for business purposes. While persons inthe position of Ms. Dressler and Mr.

Shindelka may have become aware of who some of Knight Archer’s partner companies were in thecourse of their employment, I cannot conclude from the evidence before me that they were so completely aware of the entire scope ofKnight Archer’s business that they would know who all the partner companies were.

In addition, without a precise definition of the term“confidential information”, it would not be possible for them to know, with a reasonable degree of certainty, whether or not they hadreceived such information as would make someone a “client” within the meaning of the restrictive covenant. [39] As a result, I find that both of the restrictive covenants in question are ambiguous as to the prohibited activity, and prima facieunenforceable.

This means that Knight Archer has failed to demonstrate that it has a strong prima facie case… [31] Knight Archer argues that the Chambers judge erred by placing the restrictive covenants “under microscopic scrutiny”. KnightArcher relies on the following passage from the judgment of Dickson J. (as he then was) in Elseley v J.G.

Collins Insurance AgenciesLimited, (SCC), [1978] 2 SCR 916 at 923–924: It is important, I think, to resist the inclination to lift a restrictive covenant out of an employment agreement and examine it in adisembodied manner, as if it were some strange scientific specimen under microscopic scrutiny.

The validity, or otherwise, of a restrictivecovenant can be determined only upon an overall assessment, of the clause, the agreement within which it is found, and all of thesurrounding circumstances. [32] Knight Archer says the restrictive covenants are sufficiently certain to be enforceable even without a definition of “confidentialinformation” and “partner companies”.

[ 33 ] I am sympathetic to Knight Archer’s arguments that the Chambers judge erred in finding that the absence of a definition of “confidential information” resulted in it failing to show a strong prima facie case.

The Chambers judge’s analysis as to why the absence of a definition of the term “confidential information” rendered the restrictive covenants unclear is limited to the statement that absent a “precise definition” of the term “it would not be possible for [the respondents] to know, with a reasonable degree of certainty, whether or not they had received such information as would make someone a ‘client’ within the meaning of the restrictive covenant” (at para 38). [ 34 ] Knight Archer observes that the phrase “confidential information” is often found in restrictive covenants.

It asserts that “the failure to define it on its own has never been found to be an ambiguity warranting non-enforcement of the covenant” (emphasis added). I am not confident that a review of the case authorities could ever be sufficiently exhaustive to allow me to agree with the rather bold statement that the failure to define “confidential information” has never been found to be an ambiguity warranting non-enforcement of a restrictive covenant.

Nonetheless, the respondents point to no case law where a failure to define “confidential information” has been found, on its own, to be fatal to the enforceability of a non-solicitation clause. [ 35 ] More to the point, every contract must be interpreted in its own factual context, which the Chambers judge did not attempt to analyze. In my respectful view, the failure to do this begins to rise to an error reviewable by this Court: P.S.S. Professional Salon Services Inc. v Saskatchewan (Human Rights Commission) , 2007 SKCA 149 at para 68 , [2008] 5 WWR 440. However, I do not need to decide this issue.

I am satisfied that the Chambers judge did not err when he concluded, on the evidence he had before him, that because of the uncertainties created by the absence of a definition of “partner companies” Knight Archer had not demonstrated that “there is a high likelihood that the restrictive covenant is valid”. [ 36 ] Restrictive covenants are prima facie unenforceable unless shown to be reasonable. In most cases, the reasonableness of a restrictive covenant is challenged on the basis of its scope (geographic, temporal, or proscribed activity). However, reasonableness may be tested in other ways.

In Shafron v KRG Insurance Brokers (Western) Inc. , 2009 SCC 6 , [2009] 1 SCR 157 [ Shafron ], at issue was the clarity of the covenant itself, leading Rothstein J. to observe: [43] … if the covenant is ambiguous, in the sense that what is prohibited is not clear as to activity, time, or geography, it is not possible to demonstrate that it is reasonable. Thus, an ambiguous restrictive covenant is, by definition, prima facie unreasonable and unenforceable.

Only if the ambiguity can be resolved is it then possible to determine whether the unambiguous restrictive covenant is reasonable. [ 37 ] Knight Archer did not suggest the term “partner companies” is to be understood in its strict legal sense, that is as referring to corporations with whom it was in a relationship pursuant to The Partnership Act , RSS 1978, c P-3 . Instead, it suggested in oral argument that the phrase should be understood to mean any company that was “aligned in interest” to Knight Archer.

Knight Archer’s evidence fails to assist in giving meaning to this inherently ambiguous and undefined notion. Moreover, the ambiguities surrounding this idea strike to the core of the reasonableness of the restrictive covenants themselves. [ 38 ] The evidence reveals, as common sense might suggest, that as a general insurance brokerage Knight Archer operates in conjunction with other entities and has numerous business relationships.

A concrete illustration of this is Knight Archer’s relationship with Saskatchewan Government Insurance [SGI]. [ 39 ] In its statement of claim, Knight Archer alleges breach of a document under the joint logo of Knight Archer and SGI, titled “Confidentiality – Non-Disclosure”. The text of the document is a commitment to maintain confidentiality over information considered confidential by SGI or Knight Archer. In this Court, Knight Archer did not rely on this document to support its claim to injunctive relief. This may be because, although the “Confidentiality – Non-Disclosure” document was signed by both Ms.

Dressler and Mr. Shindelka, it simply states that by signing the document each has read and understood its content. The important point for present purposes is that the document evidences that SGI could likely be described as a company “aligned in interest” with Knight Archer. Yet, if SGI is understood to be a “partner company” of Knight Archer for the purposes of the restrictive covenants, the scope of the restrictive covenants quickly expands past the point that Knight Archer can claim a strong prima facie case to advance. I say this because the restrictive covenants purport to restrict Ms. Dressler and Mr.

Shindelka from soliciting business from every SGI customer with whom they had any contact while in the employ of Knight Archer.

Knight Archer may ultimately reconsider its position, and conclude that “partner companies” means something less than companies “aligned in interest” with it, but the point illustrates the ramifications of not being able to come to a conclusion, on the evidence to date at least, as to a narrower definition of “partner companies” for the purposes of the restrictive covenants. [ 40 ] The problems created by the absence of a definition of “partner companies” expand because the evidence discloses the existence of other companies that may have a closer business or ownership alignment with Knight Archer. [ 41 ] Mr.

Shindelka’s employment contract refers to Knight Archer’s partner companies as including “specifically Archer Risk Solutions Inc.” No evidence was lead as to the ownership of this company or its relationship with Knight Archer. Moreover, the language of the contract suggests that there are other “partner companies”, but these are not identified in Mr. Shindelka’s contract. No “partner companies” at all are identified in Ms. Dressler’s employment contract. Therefore that contract provides no reference point whatsoever to assist in identifying Knight Archer’s partner companies for the purposes of Ms.

Dressler’s contract. [ 42 ] The difficulties caused by the paucity of evidence were central to the Chambers judge’s determination of this issue. The Chambers judge’s conclusion was that “[w]hile persons in the position of Ms. Dressler and Mr.

Shindelka may have become aware of who some of Knight Archer’s partner companies were in the course of their employment, I cannot conclude from the evidence before me that they were so completely aware of the entire scope of Knight Archer’s business that they would know who all the partner companies were” (emphasis added, at para 38). [ 43 ] Knight Archer referred to Culligan and Jardine Lloyd Thompson Canada Inc. v Fogal , 2007 BCSC 271 , as examples of cases in which courts have granted injunctions to enforce contract language that it says have similar ambiguities.

The terms of the contracts, the factual matrix for interpreting those agreements, and the evidence surrounding the corporate organizations in those cases were different than those here. For example, in Culligan , this Court upheld a restrictive covenant that extended to an employer and “affiliates”. It is not obvious that the point Knight Archer seeks to draw from Culligan was even argued in that case. Moreover, “affiliates” has a defined legal meaning, and the corporations that fall within that expression will be determinable in the context of the particular corporate organization at

issue in any case. This stands in contrast to the situation here, where both the identity and ownership of some corporations that are potentially “partner companies” is not determinable in the evidence or otherwise. For this reason, these cases provide no assistance to Knight Archer, at least as matters now stand. [ 44 ] Ultimately, it is necessary to go back to this Court’s role in this appeal. Our role is not to offer a fresh

interpretation of the restrictive covenants. Instead, we sit as a Court of review of the decision of the Chambers judge, whose own responsibility was to make a preliminary assessment of the strength of the argument that the restrictive covenants were enforceable.

In the context of the present issue, in light of the evidence available to him, it is impossible to see reviewable error on the part of the Chambers judge in his conclusion that Knight Archer had failed to demonstrate that there was a “high likelihood” that the restrictive covenants were enforceable because of the ambiguities surrounding the phrase “partner companies”. [ 45 ] I conclude by emphasizing that my determination of this issue is made for the purposes of a review of the Chambers judge’s decision and on the basis of the evidence presently before the Court.

It remains open to Knight Archer to convince a judge at trial that its restrictive covenants are enforceable. C. Did the Chambers judge err by concluding that Knight Archer had not demonstrated that it will suffer irreparable harm if an injunction is not granted? [ 46 ] Because of my conclusion in relation to the strong prima facie case criteria, it is not necessary to determine whether the Chambers judge erred in relation to either the question of irreparable harm or in striking parts of Knight Archer’s reply evidence (which evidence was directed to the question of the existence of irreparable harm).

However, I will comment briefly on the question of irreparable harm. [ 47 ] The Chambers judge concluded that Knight Archer had failed to establish it will suffer irreparable harm if it is not granted an injunction but succeeded at trial. He reasoned as follows: [41] ... Based on the evidence before me, it would appear that Knight Archer can readily determine which, if any, former clients it has lost to TIPI. It can readily determine the value of the business those clients represented.

Calculations of a reflective damage award may be made, using that information. [42] Moreover, the insurance business involves some transience among clients. It is clear that clients can, and often do, take their business from one broker to another when their contracts of insurance expire. Knight Archer has failed to demonstrate that clients temporarily lost are clients forever lost.

In addition, the evidence also does not establish that the business Knight Archer has lost, or stands to lose, as a result of what it alleges against the defendants is so significant that it will put Knight Archer out of business, or even meaningfully impact on its operations. [ 48 ] One reason why parties seek injunctive relief in the face of threatened breaches of restrictive covenants is the practical impossibility of establishing a linkage between loss of market share and the activities of defendants in breach of the covenant.

This difficulty exists even in cases where there is some natural attrition of clientele, since absent client cooperation (which may be difficult, if not practically impossible, to secure) it can be indiscernible whether the loss of business is attributable to natural client movement or the breach of the restrictive covenant.

Even where the client base is small, easily identified and, as a result, the book of business readily quantifiable, the ability to prove causal connection between the movement of a client and the actions of a defendant in breach of a restrictive covenant may render the loss indeterminable and form the foundation to assert irreparable harm if injunctive relief is not granted.

As stated by Jackson J.A. in Culligan , “courts have recognized the difficulty a plaintiff faces when quantifying losses caused by a defendant former employee possessing and using confidential information in a competing business” (at para 35). [ 49 ] I recognize the existence of case law suggesting that loss of clients or market share can be calculated, albeit sometimes not easily, and therefore will not constitute irreparable harm, at least unless the loss of clientele is permanent.

Culligan would support the view that the practical real world inability to establish a linkage between loss of market share and the activities of defendants in breach of the covenant may support a finding of irreparable harm.

Stegg Ltd. v Moffatt , 2006 SKQB 7 at para 38 , and Sharp Mechanical Ltd. v Downing , 2012 SKQB 36 at para 32 , 391 Sask R 124, provide other examples where irreparable harm has been found, at least in part, on this basis. [ 50 ] Not only is this not overtly considered by the Chambers judge, but his reasons may, at least implicitly, be taken to reject this as a consideration when determining the existence of irreparable harm. I say all of this to make clear that, by dismissing this appeal, I am not endorsing the Chambers judge’s reasons surrounding the issue of irreparable harm.

Instead, I would prefer to leave this issue for a case where its determination will affect the outcome of the appeal. VII. Conclusion [ 51 ] The Chambers judge did not commit a reviewable error when he concluded Knight Archer did not demonstrate, on the evidence it brought forward, that it has a strong prima facie case that its restrictive covenants are enforceable.

For this reason, I would dismiss the appeal. [ 52 ] The respondents are entitled to their costs in the usual way, both with respect to this appeal and the application heard and disposed of by Barrington-Foote J.A. in Chambers ( 2019 SKCA 24 ) in advance of the hearing of this appeal. “Leurer J.A.” Leurer J.A. I concur. “Caldwell J.A.”

Caldwell J.A. I concur. “Whitmore J.A.” Whitmore J.A.