B.C. insurance company, Mardon & Campbell Insurance Brokers, has won an injunction against insurance broker Richard Creed, Reliance Insurance Agencies Ltd. and Pacific Marine Underwriting Managers Ltd., restraining them from competing with Mardon.

Mardon brought the motion seeking the injunction as preliminary step of its lawsuit against the defendants for breach of a non-competition clause in a share-purchase agreement between Mardon and Creed.

For several years, Mardon was owned 50% by the defendant Creed. Then, on Feb. 1, 2000, Creed and the other 50% owner sold their shares. The total purchase price was $2,150,000, 50% of which was paid to Creed. The primary value of the shares represented Mardon’s “good will” within the insurance industry.

At the same time that the Share Purchase Agreement was executed, Creed also entered into a contract of employment with Mardon as a selling agent. But, subsequently, Mardon bought him out. The Buyout Agreement re-confirmed the non-competition clause set out in the share purchase agreement.

Creed’s evidence was that in early December (prior to executing the agreements with Mardon), he was contacted by one of Mardon’s competitors, Jim Ball, the sole owner of Reliance.

Mardon expected Creed to be retiring. Instead, he re-entered the insurance business through Reliance. One of the clauses in the Letter of Understanding setting him up at Reliance stated: “Any broker business which may follow me from prior employment will be brokered through Reliance for a split on commission to be determined later.”

Ball and Creed testified that this was not the final agreement related to Creed’s employment. “Nevertheless,” wrote the B.C. trial division judge in his decision, “there is no other agreement … to suggest that many of the terms of the employment were not as described in the Letter of Understanding … Eventually with the creation of Pacific Marine Underwriting Managers Ltd., Creed was a salaried employee of that company rather than a shareholder. Nevertheless, there is no other agreement … to suggest that many of the terms of the employment were not as described in the Letter of Understanding.”

Ball denied knowledge of Creed’s non-competition agreement with Mardon, but the judge was not convinced. “I find Ball’s initial denial he was unaware of the existence of the … covenants given by Creed to Mardon … to not be true … I find further Ball would be familiar with such covenants … It is clear from the evidence that Ball and Reliance initiated and induced Creed’s breach of the non-competition and non-soliciting covenants with full knowledge of the existence of such covenants.”

Because an injunction is not a final remedy and is, instead, a temporary measure put in place as a case proceeds to trial, a court must examine the impact of an injunction on both parties.

“It is apparent that if the injunctive relief applied for is granted, Creed will be restricted from employment in the insurance business in British Columbia,” wrote the judge. “He was paid over $1 million to agree to not compete with Mardon. When he subsequently signed the Buyout Agreement at the time of the termination of his employment with Mardon, he expressed the view that he intended to retire.

Furthermore, the judge ruled that if the injunction was not granted Creed will continue to compete with Mardon. “The damage to Mardon now and until trial, is capable of some calculation, but there are aspects of its loss which are not capable of such calculation. Finally, in this particular type of business, good will is by far the value of the business which here was purchased for a significant sum.”

With files from James Langton