Beware The Ambiguous Covenant!

In the case of , the Ontario Court of Appeal recently confirmed that the severance of ambiguous terms in a non-competition or non-solicitation restrictive covenant will only be permitted on rare occasions. In the 2009 Supreme Court of Canada decision in KRG Insurance Brokers (Western) Inc. v. Shafron, the court stated that severance of ambiguous restrictive covenants takes two forms: (i) notional – the reading down of a contract term to make it legal and enforceable; and (ii) blue pencil – the removal of part of a contract term. The court confirmed that blue pencil severance of an ambiguous restrictive covenant will only be permitted where the portion being removed is trivial.

In the Veolia v. Brule decision, the court determined that the parties to the non-competition covenant would not have agreed to remove the words which were ambiguous, without varying other terms of the covenant. Justice Hoy, writing for the court, found that the ambiguous words were not