Court of Appeal Upholds Injunction against Competing Contractor

In Karras v. Wizedemy Inc., 2024 BCCA 301, the B.C. Court of Appeal upheld an interlocutory injunction that enforce a non-competition clause against an independent contractor. The clause, and the injunction, prevent a tutor from providing certain educational services for 12 months.

Supreme Court Decision

The appellants, Karras and his company (EasyGrades LLC) (collectively, “Karras”), provide tutoring and educational services to university students. The respondents, Wizedemy Inc. and Wizedemy Corp. (collectively “Wize”), provide online education products and tutoring services. In 2019, Karras and Wize entered into an independent contractor agreement under which Karras agreed to provide exam preparation products to student clients of Wize. The agreement included a restrictive covenant, non-competition clause, stating in material part:

10.1  Non-Competition. … Prof therefore agrees that, during the term of this Agreement and for a period of twelve (12) months from the date of termination of this Agreement, however caused, Prof will not, for any reason, directly or indirectly, either as an individual or as a partner or as part of a joint venture, or as an employee, contractor, consultant or in any other capacity, be engaged or employed in any education services business that offers any products or services that are directly competitive with, and available to students at the same institutions as any Wize products or services that Prof worked on while with Wize, unless prior written permission to such activity is given by Wize.

In March 2024, Wize terminated its agreement with Karras and commenced an action against Karras. Wize alleged that Karras had sold products in direct competition with Wize products, used its confidential information, directed clients to his own online community server, and advertised services unaffiliated with Wize. Among other relief, Wize applied for an interlocutory injunction enforcing the non-competition clause. In response, Karras argued that the non-competition clause was ambiguous, overbroad, and that Wize had failed to establish a strong prima facie case that the non-competition clause was enforceable.

The application judge found the non-competition clause was not overbroad or ambiguous in terms of its geographical reach, duration, and prohibited activities. The judge noted that while the clause was difficult to interpret, it was still capable of interpretation. The judge held the clause was restricted to products and services that directly competed with Wize’s products or services and available to students at the same institutions. The judge was also satisfied Wize demonstrated irreparable harm if the injunction was denied. The judge found the balance of convenience weighted in favored of granting the injunction.

The judge granted an interlocutory injunction that, “the defendants are enjoined and restrained, for a period of 12 months ending March 3, 2025, from engaging in any education services business at Concordia and UBC.”

Court of Appeal Decision

Karras appealed the interlocutory injunction order to the BC Court of Appeal.

Karras took issue with how the application judge applied each element of the test for an injunction. The Court of Appeal rejected these arguments. 

Karras also argued the judge erred in granting an order that differs substantively from the order sought by Wize and from the wording of the non-competition clause. The Court of Appeal accepted this argument. The Court of Appeal varied the wording of the injunction order to state the following:

“The defendants are enjoined and restrained for a period of 12 months ending March 3, 2025 from engaging in any education services business that offers any products or services that are directly competitive with, and available to, students at Concordia University and the University of British Columbia, unless prior written permission to such activity is given by the plaintiffs.”

In summary, the Court of Appeal upheld the interlocutory injunction order but allowed the appeal only to the limited extent of varying the wording of the order.

Key Takeaways

This case is an example of how restrictive covenants, and non-competition clauses specifically, can be enforceable in some circumstances and can support an application for an interim or interlocutory injunction. This case is also an example of a non-competition clause in the context of an independent contractor agreement, rather than an employment agreement. The wording of a non-competition clause should be carefully constructed with the assistance of legal counsel if an employer wants to maximize their chances of enforcing the clause later.