Appellate Court Finds Restrictive Covenant Not Enforceable Where Party Had No Legitimate/Proprietary Interest to Protect in Territory

The Ontario Court of Appeal recently found that a restrictive covenant was unreasonable because the respondent, who sought to enforce the covenant, did not have a legitimate or proprietary interest to protect within the territorial scope of the covenant. In MEDIchair LP v. DME Medequip Inc., the Court was asked to decide whether the application judge had erred in finding that the restrictive covenant (provided in the course of a sale of business) was reasonable in scope, having regard to the legitimate or proprietary interest of the respondent.