What is the standard for establishing there is a serious question to be tried in an application for enforcement of a restrictive covenant in a shareholder agreement?

British Columbia, Canada


The following excerpt is from Teco Natural Resource Group Limited v. Bernier, 2010 BCSC 1140 (CanLII):

Is the standard to be applied in the present case that of a “strong prima facie case”, or the American Cyanamid formulation, “a serious question to be tried”? This application is for enforcement of a restrictive covenant which is in restraint of trade and is therefore prima facie considered void as against public policy. There is a distinction made in law between such restrictive covenants in employment contracts, and in commercial agreements such as shareholder agreements and contracts for the purchase and sale of a business. The latter are scrutinized much less rigorously: see Anderson v. Berry-Heldt, 2005 BCSC 1825, aff’d 2007 BCCA 100. In this case, the plaintiff says since the defendants, in agreeing to be bound by the terms of the shareholders' agreement, took on for themselves the benefits of owning shares in the company, the court ought not to hesitate in imposing on the defendant the burden of complying with the terms of the shareholders' agreement, as onerous as those clauses may be. The plaintiff says that it thereby meets its obligation of establishing there is a serious question to be tried.

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