Executive summary: Key legal and evidentiary issues

• Conflicting terms between the Asset Purchase Agreement and Employment Contract created ambiguity over whether Mr. Bouchard's employment was a three-year fixed-term arrangement or terminable at will.

• Application of Ontario law pursuant to the parties' choice-of-law clause determined that no mitigation deduction applied to damages for early termination of a fixed-term contract, following Howard v. Benson Group Inc.

• Enforceability of the non-compete covenant was assessed as a covenant within a commercial contract for the sale of a business, rather than in the context of an employment contract simpliciter, such that concerns about power imbalance did not arise.

• FCAPX's withholding of the final $5,000 asset purchase installment over a document transfer dispute was found unjustified, triggering contractual interest at 6.5%.

• Quantification of lost-profit damages for breach of the non-compete covenant required judicial estimation using a 30% expense margin due to the absence of direct evidence of FCAPX's profit margin.

• Mr. Bouchard's failure to plead or argue FCAPX's alleged failure to mitigate on the counterclaim at trial precluded him from raising that issue on appeal.

Background of the parties and the transaction

Mr. Bouchard is a registered professional engineer and the principal of 0935079 BC Ltd., formerly Ally Engineering Ltd. ("Ally"), based in Chilliwack, British Columbia. Through Ally, he provided engineering services to clients in the Fraser Valley and Lower Mainland. Facility Condition Assessment Portfolio Experts Ontario Ltd. ("FCAPX"), a federally incorporated, Ontario-based company that provides engineering and consulting services, is led by its president, Mr. Roth. In 2018, FCAPX secured a large contract to provide engineering services to the City of Vancouver and sought to assemble a local team to carry out the work. Mr. Roth, who had worked with Mr. Bouchard in the past, entered into negotiations in mid-2018 for FCAPX to purchase Ally and to hire Mr. Bouchard as an employee.

The contractual framework

The negotiations produced three interrelated written contracts, all drafted by FCAPX's counsel and reviewed by Mr. Bouchard's counsel, executed on dates between 17 August and 4 September 2018. The Asset Purchase Agreement provided that FCAPX would purchase Ally's intellectual property, goodwill and the right to operate the business, outstanding contracts, future potential business, and existing inventory and equipment, while expressly excluding Ally's business loan with an estimated outstanding balance of $150,000. The purchase price was $120,000, consisting of a $5,000 deposit payable at closing, followed by 23 monthly installments of $5,000. The Asset Purchase Agreement also included a three-year consulting agreement clause and a three-year restrictive covenant barring Mr. Bouchard from competing with FCAPX or carrying on a comparable business within a 100-kilometer radius of the location where FCAPX carries on business. The Non-Solicitation and Confidentiality Agreement provided that Mr. Bouchard would not directly or indirectly solicit, interfere with, or endeavour to entice away any of FCAPX's current or prospective customers or clients within a 100-kilometer radius of Chilliwack. The Employment Contract confirmed Mr. Bouchard's employment as a Project Engineer, on a permanent, full-time basis, at a salary of $91,000 per year, commencing on 4 September 2018. Its termination provisions stated that FCAPX could terminate without cause with notice, or pay in lieu of such notice, and any severance pay required by the Employment Standards Act. Schedule A provided that any conditions in the Asset Purchase Agreement were to supersede any related or relevant clause within the Employment Contract. The parties agreed that these contracts were governed by Ontario law.

The breakdown of the working relationship

By September 2019, the working relationship had begun to sour. FCAPX was unhappy with Mr. Bouchard's work, at least in part because he was not prioritizing the City of Vancouver contract, was late in filing reports, and several projects were over budget. Mr. Bouchard was equally unhappy with the direction and content of the work, in part because he did not like spending so much of his time on reporting and other administrative duties. FCAPX documented its concerns in a performance letter dated 18 September 2019. The strain came to a head in July 2020, when Mr. Bouchard proposed a change in his working conditions. On 13 July 2020, Mr. Roth replied with a letter entitled "Offer for Release of Asset Purchase Agreement Clause," proposing various terms for a mutually agreeable split. Mr. Bouchard did not accept the offer, responding with several emails dated 14 July 2020 stating that he wanted to continue working with FCAPX with changes to some of his conditions of employment. Later in the day on 14 July 2020, FCAPX notified Mr. Bouchard by email that his employment was terminated, without cause. FCAPX paid Mr. Bouchard two weeks' salary — the minimum required under the Employment Standards Act, 2000, S.O. 2000, c. 41 — and withheld payment of the final $5,000 installment on the asset purchase price, taking the position that it would not be released until Mr. Bouchard transferred certain documents FCAPX claimed to have acquired as part of its purchase of Ally's business. After his termination, Mr. Bouchard continued to do work for some former FCAPX clients despite his contractual non-compete commitment.

The trial court's findings

Mr. Bouchard commenced an action in the Supreme Court of British Columbia seeking damages for wrongful termination, breach of contract for FCAPX's failure to make the final installment payment, and interest on the unpaid amount. FCAPX counterclaimed for breach of the non-compete covenants and conversion in relation to the disputed documents. Following a three-day trial, during which the trial judge heard evidence from two witnesses — Mr. Bouchard and Mr. Roth — she gave reasons for judgment partially allowing both the claim and the counterclaim. On the employment claim, the trial judge acknowledged the apparent conflict between the Asset Purchase Agreement, which provided that Mr. Bouchard's employment contract "shall be for no less than 3 years on terms agreeable to both the parties," and the Employment Contract, which provided for termination without cause with notice or pay in lieu under the Employment Standards Act. Reading the two contracts together, and relying on Schedule A's stipulation that the Asset Purchase Agreement's provisions would supersede related terms in the Employment Contract, the judge found that the parties had agreed to a minimum three-year fixed-term employment contract. The judge found this interpretation consistent with the factual matrix: FCAPX was seeking to build a team to service its City of Vancouver contract, and Mr. Bouchard was seeking stability through a guarantee of employment for a fixed term that would allow him to pay off the remainder of his business loan. The judge reasoned that it would not have been in Mr. Bouchard's interests to commit to a three-year restrictive covenant without a contractual guarantee of fixed-term employment for that same duration. The judge further concluded that the contract did not provide for without cause early termination of the three-year fixed term. Applying Ontario law and citing Howard v. Benson Group Inc., 2016 ONCA 256, the judge concluded that the appropriate damages for breach of a fixed-term contract were a payout of the remainder of the fixed term, with no obligation on the employee to mitigate. Mr. Bouchard was awarded damages equal to his pay for the remainder of the three-year employment contract, less the two weeks' pay FCAPX provided at the time of termination. The judge also found that FCAPX's failure to make timely payment of the final $5,000 installment was a breach of the Asset Purchase Agreement, holding that the dispute about return of documents was "easily resolvable" and afforded no basis for withholding payment. FCAPX was ordered to pay $5,000 plus contractual interest of 6.5% from the date of default.

The non-compete covenant and counterclaim damages

On the counterclaim, the trial judge found that the non-compete term in the Asset Purchase Agreement was properly assessed as a covenant within a commercial contract for the sale of a business, such that it did not involve the same concerns about power imbalance that may arise in the context of an employment contract simpliciter. In the context of a commercial agreement for the sale of assets, the judge noted, the restriction or agreement to not compete is itself part of what is being sold. The judge assessed the time period, geographic area, and scope of activity covered by the covenant and concluded that three concurrent years of non-competition within a radius of 100 kilometers from where Mr. Bouchard performed his work was reasonable under all the circumstances. The judge found that Mr. Bouchard was in breach of the covenant to the extent that his post-employment work deprived FCAPX of revenues from three specific clients — referred to as Strata Corporations LMS 2816, KAS 748, and NW2142 — but also found that some aspects of his work, such as carpet cleaning and other services that were not in competition with FCAPX, did not contravene the covenant. The judge determined that Mr. Bouchard received revenues totalling $29,560.25 from those three clients. In the absence of evidence with respect to FCAPX's profit margin, and to achieve a timely and expedient resolution, the judge applied a deduction for expenses of 30% as a reasonable estimate, concluding that FCAPX was entitled to damages of $20,692.18. The judge invited further written submissions within 30 days if either party took the position that a different expense ratio should be applied.

The appeals and the Court of Appeal's ruling

Both parties appealed to the British Columbia Court of Appeal. FCAPX raised three grounds: that the trial judge erred in finding a three-year fixed-term contract, in declining to deduct Mr. Bouchard's post-termination earnings as mitigation, and in ordering contractual interest on the withheld installment. Mr. Bouchard raised three grounds: that the judge erred in finding he breached the non-compete covenant, in finding FCAPX had proven its damages, and in awarding damages despite FCAPX's alleged failure to mitigate. In a unanimous decision delivered on 5 March 2026, authored by Justice Riley and concurred in by Justices Groberman and MacNaughton, the Court of Appeal dismissed both appeals. On the fixed-term contract issue, the Court found no palpable and overriding error in the trial judge's interpretation of the interrelated contracts, noting that the judge's reasoning reflected that she took the $120,000 payment into account in her analysis of the factual matrix. On mitigation, the Court held that the contracts were governed by Ontario law and the trial judge was effectively bound by Howard, which provides that where a fixed-term contract does not include an enforceable early termination provision, the employee is entitled to payment for the balance of the term with no obligation to mitigate. The Court further noted that the state of the law in British Columbia as reflected in Neilson v. Vancouver Hockey Club Ltd. is "at odds with" the state of the law in Ontario as reflected in Howard, but that principles of horizontal stare decisis compelled deference to the Ontario Court of Appeal's considered decision regarding Ontario employment law. The Court also observed that even under the British Columbia approach, the outcome would not necessarily differ, as it would be incongruous for FCAPX to argue for mitigation deductions while simultaneously maintaining that Mr. Bouchard was prohibited from using his professional skills to earn income under the non-compete covenant. On the contractual interest issue, the Court found no error, holding that the dispute over documents did not relieve FCAPX of its obligation to make the final payment on its due date. On Mr. Bouchard's appeal, the Court found that evidence adduced at trial, including Mr. Bouchard's own testimony and his invoices, supported the judge's finding that he breached the non-compete covenant by performing engineering work for three former FCAPX clients. The Court also upheld the damages assessment, finding that the judge did the best she could with the available evidence and that the assessment was grounded in evidence, even though it involved some estimation. Mr. Bouchard's failure-to-mitigate argument was dismissed because he did not plead failure to mitigate in his response to counterclaim, did not argue the point before the trial judge, and did not seek leave to raise a new issue on appeal. In the result, both appeals were dismissed, preserving the trial judgment in which Mr. Bouchard was awarded his salary for the balance of the fixed term plus $5,000 with contractual interest at 6.5%, while FCAPX was awarded $20,692.18 for breach of the non-compete covenant. The exact net amount owing between the parties after set-off was not specified in the decisions.