B.C. Court Finds Non-Solicitation Clause Invalid for Public Policy Reasons

20 June 2018

By Uri Snir

A recent decision from the British Columbia Supreme Court suggests that non-solicitation clauses in employment agreements between financial advisors and their firms may be found invalid for public policy reasons, as the interests of clients must be put ahead of those of the firm.

Background: In National Bank Financial Inc. v. Canaccord Genuity Corp., National Bank Financial (“NBF”) brought an application for, among other things, an interlocutory injunction restraining three former employees and their new employer, Canaccord Genuity Corp. (“Canaccord”), from “disclosing or making use of client information and/or soliciting the plaintiff’s clients.”

The three financial advisors (Dwight Cameron Mann, Jordan James, and Ilia Nizker) were all members of the Mann Group at NBF. The Mann Group was a largely independent team at NBF that grew its client base through its own initiatives. When the Mann Group moved from NBF to Canaccord, it served approximately 2,500 clients with $725 million in assets under management.

While at NBF, the Mann Group purchased its own computer software called “Salesforce”, a third-party customer relationship platform. It allowed the Mann Group to operate a cloud-based database for client information. Only members of the Mann Group had access to the Salesforce database.

Mann gave evidence that NBF was aware that his group was utilizing its own client database, and that it was common practice in the investment advisory industry for advisors to maintain a separate list of clients outside of the list held by the brokerage house.

Neither Mann nor James had a non-solicitation clause in their employment agreements with NBF. However, they both acknowledged that they were bound by a code of conduct, which included confidentiality and non-solicitation provisions. The Nizker’s employment contract did include a non-solicitation clause, and he too agreed to be bound by the code of conduct.

Upon commencing employment at Canaccord, the Mann Group immediately began to solicit clients whose assets they had managed while employed by NBF.

The Court’s Analysis: To be entitled to an interlocutory injunction, the moving party must establish:

  1. That there is a serious issue to be tried;
  2. That the applicant will suffer irreparable harm if the injunction is not granted; and
  3. That the balance of convenience favours the granting of the injunction.


The Court held that in the context of clients being served by investment advisors who move firms, the interests of the clients must be put ahead of those of the firm.

The Court found that the Salesforce database was paid for and maintained by the Mann Group; it was not proprietary to NBF. The Court also considered important public policy factors. It held that brokerage houses do not ‘own’ their clients. Clients should be free to receive information from all competitive sources and to have the ability to decide if they wish to follow their investment advisor to the new brokerage house or stay with the old one.

In addition, the Court found that employee mobility and the ability to compete and earn a livelihood in a chosen field are also considerations that should not be restrained lightly.

Ultimately, NBF failed to demonstrate a serious issue to be tried, and the test for an interlocutory injunction failed at the first stage.

The Court also found that the damages claimed by NBF were not “irreparable”. Irreparable harm refers to the nature of the harm rather than its magnitude. It is harm that cannot be quantified or cured by an award of money damages. The Court noted that prior jurisprudence from the British Columbia Court of Appeal has held that damages flowing from the breach of an investment advisor’s non-solicitation clause are generally calculable.

The Court also held that the balance of convenience clearly favoured the defendants, as the assets under management of NBF exceeded $400 billion. The Court held that “[i]t is likely that the overall financial impact of the loss of the clients managed by the Mann Group will be relatively small.”

The Takeaway: This decision provides a recent confirmation that financial advisors who switch firms can likely take their book of business with them, including soliciting clients away from the advisor’s previous employers, regardless of non-solicitation clauses in employment contracts or codes of conduct. The public policy rationale (namely, a client’s freedom to choose an advisor) is likely applicable to various other industries.

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