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An advisor managed to invalidate a non-competition clause that had no territorial limit


Charles Mathieu

30 July 2019 09:30

Photo : Freepik

A non-competition clause between a life insurer and a financial advisor can be deemed invalid if it does not contain territorial limits.

The Quebec superior Court has had to consider such a case in the spring, revealed Maurice Charbonneau, president and attorney in Charbonneau, counsel. It was reported in a newsletter to its customers and which the of the insurance Journal has obtained a copy.

Jonathan Side, a financial security advisor and mutual fund representative, was seeking to suspend a non-competition clause that bound to the iA Insurance and financial Services. The said non-compete clause meant that the applicant could not, for a period of two years after the end of the contract between the two parties, acting as a representative of the insurer. In addition, he could not sell any of the products offered by it.

In this case, Mr. smith was required to prove ” that there [was] prima facie case or a serious question to be tried “. But also that he was ” exposed to a serious or irreparable injury, or that it will be created a state of fact or law of nature to render the final judgment ineffectual “. Mr. Hand had to prove that the concept of the “balance of harms” weighs in his favor.

Signature and rupture

In 2005, the applicant signed a “representative contract” with the insurer so that the latter authorized ” the applicant to seek and obtain proposals and applications for the various contracts and the financial services that it offers directly or through other companies “.

In exchange, Mr. Côté had ” pass priority to any proposal of insurance and pension obtained by him, as well as any proposal and request for other types of contract and financial services offered directly by ai “, one can read in the judgment.

In the summer of 2017, the applicant has begun to exercise its functions in Planning, heritage, J. C. The just allowed him to have access to several products from several insurers and offer it to its customers.

“This way of proceeding does not, however, ai that sees this as a significant breach of the applicant in his / her obligation to transmit, as a priority, any proposal or request for insurance and annuity. Do neither one nor two, it ends march 9, 2018 the contract, without giving notice of the termination of the seven days as prescribed, ” said judge Sylvain Provencher in his judgment. Note that in the winter of 2017, Mr. Côté was approximately 1 300 people.

Thus, since the breaking of the contract between the two parties, the applicant has complied with the non-competition clause and is not in a position to represent the clients he represented in ai.

Territorial limit

According to the applicant, the non-competition clause is invalid because it does not include any territorial limits. “It was because […] such A clause is valid or not. It is not for the Court to fill in the gaps and rewrite it, ” said judge Provencher in his judgment.

In order to justify the any, the judge made reference to the judgment in Gagnon c. Mario St-Pierre, because previously heard by the Quebec Court of appeal. “The non-competition undertaking, therefore, must include a territorial limit to be reasonable, must not exceed what is necessary to protect the interests of the party benefiting from it, this means in practice is that it must generally be limited to the territory where the latter carries out its activities “, noted the judge Provencher.

Prejudice to the plaintiff and balance of convenience

After the judge Provencher, all done in a way that the applicant “suffers” from the economic point of view, because the latter does not receive commission for the customers he had prior to the breach of contract. The claimant “must start at zero” and recruiting new customers, one can read in the judgment.

Everything requires time and investment, and a decrease in income in the short and medium term. “This notion of prejudice is not only a question of commission in the short term. The continued strength of the commitment – which requires the applicant to refuse to act as a representative for the 1,300 people – is to threaten the privileged relationship of trust that exists between the applicant and the customers, prevents it from maintaining and developing the business relationship by selling new products to the persons in question or a third party recommended by them “, says the Court.

After the judge Provencher, the balance of inconvenience if the injunction request is accepted or denied favours the applicant because of the disability of the non-competition clause.


The Tribunal has thus decided to suspend ” the application of the non-competition clause provided for by the contract representative, and this, until a judgment was rendered on the request for a permanent injunction and damages “.

Nevertheless, the judge took the decision to exempt the applicant to provide a bond.

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