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Ontario Court Case dealing with Non-Solicitation

By October 28, 2013April 28th, 2021Employment Law

Now, you’ve probably read my previous blogs about non-solicitation:

Are Non-Solicitation Clauses legal?  It Depends

Non-Solicitation Clauses – BC Court Update

And, while doing some research, I came across an important Ontario case that I wanted to share.

In Dr. Alain Nourkeyhani Dentistry Professional Corp. v. Pakroo [2008] O.J. No. 2249, the Ontario Superior Court of Justice (Divisional Court) had to determine whether Dr. Jaffar Pakroo dentist should be prevented from practicing dentistry in contravention of a purchase and sale agreement, as well as being prevented from advertising his new practice in the Iranian media.   In August 2007, Dr. Pakroo sold his practice to Dr. Alain Nourkeyhani DPC.  The agreement of purchase and sale contained various restrictive covenants, including a non-compete and a non-solicitation clause.  Specifically, the agreement said that Dr. Pakroo would not practice as a dentist within a 10-mile radius of the then current office; the agreement also said that Dr. Pakroo would not “directly or indirectly, contact, solicit, interfere with or endeavour to entice away from the Purchaser in any manner whatsoever, any patient”.  Less than 1 year later, Dr. Pakroo opened an office within the 10-mile radius of his other office.  Dr. Alain Nourkeyhani DPC sued.

On a motion (i.e. a mini-trial that is brought before the trial to deal with the issue of whether Dr. Pakroo should be allowed to operate his new practice), the Divisional Court held that it was clear that Dr. Pakroo had violated the purchase and sale agreement and ordered him not to engage in the practice of dentistry at his new office.  He was also ordered to “cease and desist from advertising his services as a dentist in the Iranian media in the Greater Toronto area”.

Dr. Pakroo appealed the decision. The Divisional Court sided with the previous judgment and saw no reason to interfere.  The motion judge had identified the legal test and applies it to the facts to make a decision.  So the Divisional Court dismissed the appeal with respect to the part of Dr. Pakroo not engage in the practice of dentistry at his new office until the trial was decided.

That said, the Divisional Court did not agree with the motion judge’s order concerning preventing Dr. Pakroo from advertising in the Iranian media. Indeed, the Divisional Court held that, based on the jurisprudence of appeals, the motions udge got it wrong and granted an appeal to Dr. Pakroo.  Here’s how the Court got there:

18 It is generally recognized that a non-solicitation clause in an agreement does not prevent a person from doing general advertising in the media: Groupe Financier Assbec Ltée v. Dion, (1994), 61 C.P.R. (3d) 289 (Que. C.A.); Hawboldt Industries Ltd. v. Chester Basin Hydraulics & Machine Ltd. [1983] N.S.J. No. 87, 57 N.S.R. (2d) 413 (N.S.S.C.) at paras. 55 and 62; Sanford Evans List Brokerage v. Trauzzi, [2000] O.J. No. 1394, 50 C.C.E.L. (2d) 105 (S.C.J.) at para. 49, and cases referred to therein. In addition, it is generally not considered to be solicitation of customers if advertisements are placed in trade journals or the like, provided that confidential information is not used: Hawboldt Industries Ltd. If advertising of a general nature is carried out, it is irrelevant that information with respect to the defendant’s new location may come to the attention of his former customers and irrelevant that they might therefore seek him out. That does not constitute solicitation. It is only where a defendant makes use of confidential information or targets specific members of the former client base that advertising efforts have traditionally been found to be objectionable.

19 In Dr. P. Andreaou Inc. v. McCaig, [2007] B.C.J. No. 537 the British Columbia Court of Appeal held that a dentist who sold his practice in Surrey and then placed an advertisement in the local Surrey newspaper announcing the new location of his practice (which was outside the Surrey area) did not breach the terms of the sale agreement prohibiting him from soliciting former patients. The wording of the non-solicitation clause in that case is strikingly similar to the one at issue in this case. Further, the fact that the ads were placed by Dr. McCaig in the Surrey newspaper where the former practice was located, rather than in the new community in which he was practicing, is significant. The ads were placed in the community where those patients were located.

20 In my view, the decision of the motion judge on this issue is in conflict with the cases I have cited, and in particular with the British Columbia Court of Appeal decision referred to in the preceding paragraph. This is not simply a matter of exercising discretion in a different way. It appears to me that there is an actual conflict in principle.

21 Alternatively, based on these authorities and on the wording of the agreement in this case, I have reasons to doubt the correctness of the motion judge’s decision in this regard. The plaintiff knew about the advertising Dr. Pakroo had done in the past. It would have been a simple matter to insert a provision with respect to advertising if it was the intention of the parties that there should be a limit on advertising. It also appears that the motion judge took into account that the defendant had breached the geographic restriction in the non-competition clause when issuing the order prohibiting future advertising. In my view, it is debatable that the defendant’s bad conduct in where he chose to relocate his practice can be used to restrain his right to advertise his practice, which otherwise is an untrammelled right. The fact that advertising generally is not restrained, but merely advertising in the Iranian media, does not alter the fact that there is nothing in the agreement prohibiting advertising at all, whether in the Iranian media or elsewhere. Just because a large proportion of Dr. Pakroo’s former patients are Iranian does not mean that placing advertisements in the Iranian media is a “solicitation” of those people. Clearly, Dr. Pakroo sought to reach individuals likely to be particularly interested in his services, and clearly, many of his former patients would be likely to see or hear the ads he placed, but so would many other potential clients. It is strongly arguable that more than this is required before a person can be restrained from communicating his place of business to the public.

22 In my opinion, this is an issue that goes beyond the interest of the two parties involved. Toronto has a rich and diverse population. There are many separate cultural communities within the Greater Toronto area and many media sources serving the particular needs of those communities, often in their own language. Many individuals in those communities have a less than perfect grasp of the English language and prefer to deal with professionals, such as doctors, who can communicate with them in their native languages. Prohibiting a professional from advertising in his own cultural community whenever he or she is restrained from soliciting former clients or patients has implications both for those professionals and for the community they serve.

Moral of the story: if you want to prevent a dentist from soliciting and you want to include prohibitions on advertising, then make sure your agreement says so!  Legal battles can hopefully be avoided if the parties enter into clear, complete, and certain agreements.   As the Divisional Court said above: “It would have been a simple matter to insert a provision with respect to advertising if it was the intention of the parties that there should be a limit on advertising”.

Finally worth mentioning is that this Ontario case follows and cites Dr. P. Andreaou Inc. v. McCaig, which I discussed in my previous blog.