Shafron was employed by KRG in Vancouver as an insurance salesman. He left KRG in 2001 to work for a competitor in Richmond, a neighbouring city. KRG commenced an action to enforce the restrictive covenant signed by Shafron which stated he would "not for a period of three (3) years thereafter, directly or indirectly, carry on, be employed in, or be interested in or permit his name to be used in connection with the business of insurance brokerage which is carried on within the Metropolitan City of Vancouver". The trial judge found that the restrictive covenant was neither clear, certain nor reasonable because it used the term "Metropolitan City of Vancouver". The Court of Appeal held that the restrictive covenant was enforceable, even though the term "Metropolitan City of Vancouver" was ambiguous.
- When can the doctrine of severance be used to resolve an ambiguous term in a restrictive covenant?
Appeal allowed with costs.
Rothstein, writing for a unanimous court, held that the restrictive covenant was uncertain and ambiguous. There was no evidence that the parties unquestioningly would have agreed to remove the word "Metropolitan" without varying any other terms of the contract or otherwise changing the bargain. Further, there was no indication that the parties agreed on something and then mistakenly included something else in the written contract and rectification could not be invoked to resolve the ambiguity in this case. The Court of Appeal erred when it rewrote the restrictive covenant in this case to substitute the term "City of Vancouver, the University of British Columbia Endowment Lands, Richmond and Burnaby" for the term "Metropolitan City of Vancouver". It was inappropriate for the Court of Appeal to rewrite the geographic scope in the restrictive covenant to what it thought was reasonable.
- A restrictive covenant is prima facie unenforceable unless it is shown to be reasonable with respect to the parties and reasonable with respect to the interests of the public (Nordenfelt test).
- An ambiguous restrictive covenant can only be enforced if the ambiguity can be resolved.