Executive Summary: Key Legal and Evidentiary Issues

• Dispute centers on whether the sale of Bravo Pizza’s business, goodwill, name and recipes gave rise to an implied covenant not to compete, or only to an implied non-solicitation duty tied to goodwill and former customers.
• Evidence regarding use of identical or very similar recipes, menus, and promotional photos from inside Bravo Pizza by Pizza Mike’s goes to whether the defendants are undermining the goodwill and recipes sold to the plaintiffs.
• Affidavit evidence and procedural conduct (late affidavits, requests to strike paragraphs, and adjournment applications) shape what factual material could be considered on the interlocutory injunction motion.
• The plaintiffs’ financial evidence and anecdotal customer confusion were scrutinized to determine whether any harm from Pizza Mike’s operation was “irreparable” or instead compensable in damages.
• Competing case law on implied obligations in the sale of a business guided the court’s conclusion that no implied non-competition covenant arose, but that a strong prima facie case existed for breach of an implied covenant not to undermine goodwill and recipes.
• The scope of the injunctive relief pled (a non-competition injunction within 100 km) and the prohibition on courts effectively “drafting” unbargained-for restrictive covenants were decisive in refusing the interlocutory injunction.

Background and sale of the pizza business

Bravo Pizza Restaurant Ltd. was an established pizza restaurant in Riverview, New Brunswick, founded in 1988 and operated for many years by defendants Elieni Zafeiriadou and Avraam (Mike) Stefanidis. In late 2023, they decided to sell the restaurant to plaintiff Puneet Vinayak and his company, 752335 N.B. Inc., for $115,000. The transaction closed in January 2024 and involved the restaurant premises at 567 Coverdale Road, as well as a range of business assets. These assets included all equipment used in the business, all outstanding and confirmed sales orders, contractual interests, books and records, title to registered and unregistered trademarks and trade names, the goodwill of Bravo Pizza including the business name, and all recipes required and currently used by Bravo Pizza. A further condition required the former owners to stay on for up to 30 days to train the new owners in processes, operations, and recipes. Crucially, the agreement of purchase and sale did not contain an express non-competition or restrictive covenant, despite the sellers representing during negotiations that they were retiring from the food industry due to health and age-related reasons. The contract was documented using a standard real-property style form, which the court later criticized as inadequate for a business sale because it omitted provisions commonly expected in such transactions, including carefully drafted covenants dealing with competition and solicitation.

Opening of Pizza Mike’s and emerging conflict

By January 2025, the defendants reported feeling better physically and began considering a return to the restaurant business on a more limited basis. After confirming that the Bravo Pizza sale contract contained no non-compete clause or restrictive covenant, they opened a new restaurant, Pizza Mike’s, in May 2025. Pizza Mike’s was located approximately 700 metres away, at 708 Coverdale Road in Riverview. The plaintiffs alleged that Pizza Mike’s used the same or substantially similar recipes and menus as Bravo Pizza and relied heavily on the identity and reputation of the former owners. Social-media evidence included Facebook posts announcing Pizza Mike’s with language such as “we look forward to serving you again” and promotional photographs taken in the kitchen of Bravo Pizza before the sale, featuring Stefanidis and Zafeiriadou. Customers reportedly recognized both the former owners and the characteristic taste of the products at the new location, which the plaintiffs said showed that the defendants were trading on and eroding the goodwill the plaintiffs had purchased.

The plaintiffs’ claims in the underlying action

In January 2026, the plaintiffs commenced an action (later amended) advancing three main theories. First, they claimed that by opening and promoting Pizza Mike’s the defendants had breached an implied covenant not to compete that arose as a matter of law from the sale of Bravo Pizza and its goodwill. Second, they argued there was at least an implied covenant not to undermine the transferred goodwill and recipes, which they said had been breached by using identical recipes, menus and promotional photos to divert customers and confuse the market. Third, they alleged fraudulent or negligent misrepresentation, asserting they were induced to purchase Bravo Pizza by statements that the defendants were retiring from the food industry for health reasons. The relief sought in the action included an order requiring the defendants to cease operating Pizza Mike’s and to stop competing with Bravo Pizza, together with damages for loss of goodwill and profits, as well as general, special and punitive damages. At the time of the injunction motion, the defendants had not yet filed a statement of defence, but their position was that they were legally entitled to compete because the plaintiffs had not insisted on a non-competition clause when the business was sold.

Procedural history and evidentiary rulings on the motion

Before turning to the substance of the injunction, the court dealt extensively with procedural and evidentiary issues. On the first scheduled hearing date, the plaintiffs objected to the inclusion of the defendants’ affidavits, which had been filed outside the standard timelines under the Rules of Court, and then sought an adjournment. The judge allowed the late affidavits to form part of the motion record in the interests of having a complete evidentiary foundation, then granted an adjournment to allow the plaintiffs to respond. The plaintiffs later filed a supplemental affidavit from Mr. Vinayak. The defendants expressed concern about additional plaintiff evidence, but the court, relying on the general principles of liberal construction of the Rules and the power to dispense with strict compliance, admitted the supplemental affidavit as serving the interests of justice and procedural fairness. The defendants also moved to strike a number of paragraphs of Mr. Vinayak’s original affidavit for non-compliance with affidavit rules, arguing that some statements were speculative, argumentative, or lacked proper sourcing. The court struck two paragraphs that contained bare, unparticularized conclusions about financial and reputational harm and compromised profitability, finding they offered no useful factual context. Other challenged paragraphs were allowed to stand, including the plaintiffs’ account of their understanding that the defendants would not compete, their assertions about declining revenue and difficulties selling the restaurant, and statements about stress and anxiety. The judge held that those issues fell within the affiant’s personal knowledge or were sufficiently supported elsewhere in the record to be admissible at the interlocutory stage. A second adjournment request by the plaintiffs—this time to obtain more financial records from their accountant—was refused. The court stressed that as moving parties, particularly on an expedited schedule they themselves had requested, they bore responsibility for coming prepared with the evidence needed to support injunctive relief. The deficiencies in their financial proof had already been flagged by the defendants before the first hearing date, and another delay would not have been consistent with the efficient resolution of the motion.

The interlocutory injunction framework

The motion before the court was for an interlocutory injunction prohibiting the operation of Pizza Mike’s within a 100-kilometre radius of Bravo Pizza. Drawing on section 33 of the Judicature Act and Rule 40.05, the court noted its general power to grant injunctive relief where just and convenient. It then applied the well-known three-stage test from RJR-MacDonald Inc. v Canada (Attorney General), as refined in R. v Canadian Broadcasting Corp.: (1) the merits (serious issue to be tried or strong prima facie case, depending on the nature of the injunction), (2) irreparable harm, and (3) balance of convenience. A key point was the characterization of the relief sought. Although framed as a prohibition on operating within 100 kilometres, the order would, in substance, compel Pizza Mike’s to close, and potentially relocate, in order to comply. The court therefore treated it as a mandatory injunction rather than a purely prohibitive one. That higher characterization meant the plaintiffs had to demonstrate a strong prima facie case, not merely a serious question to be tried.

Implied covenants and the scope of the contractual obligations

On the merits, the central legal issue was whether the sale of Bravo Pizza’s business, including goodwill and recipes, carried with it an implied non-competition covenant, or only an implied duty not to solicit former customers and not to undermine the transferred goodwill. The court approached this question through modern principles of contractual interpretation, particularly Sattva Capital Corp. v Creston Moly Corp., which allows consideration of surrounding circumstances to interpret the written terms but forbids using external evidence to contradict or add to the contractual language. The plaintiffs argued that at common law, the sale of goodwill inherently carries an implied non-competition covenant. They relied principally on Trego v Hunt, a historic House of Lords decision, and urged a broad reading of that case to support a prohibition on opening a competing business nearby, particularly when recipes and brand identity had been transferred. The court, however, found that later jurisprudence, including Read v Wright and Mid Island Truck & Crane Ltd. v Simian Cartage Inc., interpreted Trego as establishing an implied non-solicitation covenant tied to goodwill, not a full non-competition restriction. While the purchaser of goodwill is entitled to be protected from the seller actively soliciting former customers, that does not automatically bar the seller from re-entering the same line of business or even from passively accepting custom from former patrons. Because the parties were represented by counsel and did not include any non-competition clause in their written agreement, and given the conceptual and practical difficulties of implying a geographically and temporally precise restraint, the court refused to imply a non-competition covenant into the contract. It did, however, accept that an implied non-solicitation covenant could arise in the specific circumstances of this sale, particularly given that the contract expressly transferred the recipes and goodwill and that the defendants had represented they were retiring from the food industry.

Goodwill, recipes, and the implied duty not to undermine the sale

The court placed significant emphasis on the contractual inclusion of “all recipes required and currently used” in the business and the transfer of goodwill and business name. Coupled with the Defendants’ “we are retiring” narrative at the time of sale, these terms and surrounding circumstances supported an implied covenant not to use those recipes and goodwill to solicit the former customer base of Bravo Pizza. The evidentiary record showed that Pizza Mike’s marketing campaign intentionally invoked continuity with the old Bravo Pizza operators, including using photographs taken inside Bravo Pizza and messaging that invited customers back with “we look forward to serving you again.” Customer comments and social-media activity suggested that at least some patrons recognized the same products and perceived Pizza Mike’s as a continuation of the former operation. From these facts, the court drew a strong inference that the defendants were using the transferred recipes and the goodwill associated with their past ownership to attract Bravo Pizza’s old customers. On that basis, the judge concluded that there was a strong prima facie case of breach of an implied covenant not to undermine the transferred goodwill and recipes by using them as a vehicle to solicit former customers. This satisfied the “merits” stage of the injunction test with respect to that narrower contractual claim, even though the broader implied non-competition theory did not succeed.

Misrepresentation claims and the retirement representations

The plaintiffs also advanced tort claims for fraudulent and negligent misrepresentation, premised on the defendants’ statements that they were retiring from the food industry for health and age-related reasons. They argued that these statements induced the purchase by assuring them they would not face competition from the former owners. Applying the elements of negligent misrepresentation from Queen v Cognos Inc. and the stringent standard for fraudulent misrepresentation, the court found the record wanting. The defendants had, in fact, ceased operating Bravo Pizza and retired at the time of the sale. Coverage of the sale and other surrounding facts were consistent with a genuine intent to retire, at least initially. The later decision to re-enter the business, after health improved, was characterized as a change of mind rather than proof that the original statements were false or made with reckless disregard for the truth. As a result, there was no strong prima facie case that the retirement statements were “untrue, inaccurate or misleading” when made, nor any evidence of the deliberate or willful distortion of the truth required for fraud. The misrepresentation claims therefore did not support interlocutory relief.

Irreparable harm and the adequacy of damages

On the second stage of the test, the plaintiffs had to show that they would suffer irreparable harm if the injunction was refused—that is, harm not quantifiable in money or not realistically compensable by a damages award. They argued that Bravo Pizza had experienced a continuous decline in revenue since Pizza Mike’s opened, that it was in a precarious financial position, and that its goodwill and reputation were being actively destroyed through customer confusion and the defendants’ use of identical recipes and imagery. The defendants countered that the plaintiffs’ delay—waiting approximately eight months after Pizza Mike’s opened to sue—was inconsistent with a claim of urgent, irreparable harm. They also pointed to the plaintiffs’ expansion into a second Bravo Pizza location in Moncton in September 2025 as inconsistent with imminent collapse. Perhaps most importantly, they attacked the sufficiency and time span of the plaintiffs’ financial evidence, observing that only a narrow 19-day snapshot of financial data had been provided. The court accepted that the plaintiffs might be suffering some harm, and acknowledged evidence suggesting erosion of goodwill as customers shifted to Pizza Mike’s. However, it was not satisfied that Bravo Pizza was likely to be forced out of business if the injunction was denied, nor that Pizza Mike’s operations were shown to be the decisive cause of any financial stress in a broader market environment. Crucially, the court emphasized that any proven damage to goodwill and business reputation arising from breach of contract would be compensable in money at trial. Because the nature of the alleged harm remained amenable to a damages remedy, and the evidence did not demonstrate that the plaintiffs’ business would be irretrievably lost, the irreparable harm requirement was not met.

Balance of convenience and limits on judicially created restraints

Although failure to prove irreparable harm should have ended the injunction analysis, the judge proceeded to address the balance of convenience out of caution, in case the irreparable harm assessment was later found to be in error. Weighing the harms, the plaintiffs argued that their business was at substantial risk if the injunction was not granted and that their goodwill and customer base would continue to be diverted. They emphasized that the defendants had already been paid for Bravo Pizza, suggesting they had been compensated for stepping aside and allowing the plaintiffs to carry on its legacy. The defendants responded that ordering the closure of Pizza Mike’s within a 100-kilometre radius would precipitate an immediate operational collapse of their new venture, jeopardizing staff employment, outstanding financial obligations, and relationships with customers and suppliers. The court observed that, on a pure balancing of harms, the scale might appear to favour some form of relief for the plaintiffs, particularly given the strong prima facie case on undermining goodwill. But it found that the actual form of relief requested—a broad non-competition injunction—posed a separate legal problem: it would, in substance, write into the contract a restrictive covenant that the parties had never agreed upon. The judge relied on recent appellate authority cautioning against granting remedies that have not been pled or that effectively re-draft the parties’ bargain. Here, although a more tailored non-solicitation injunction might conceivably fit the implied covenant the court recognized, the plaintiffs had not sought that form of relief. They had asked solely for a wide non-competition restraint in a 100-kilometre radius. Given pleading and fairness concerns, the court held that it could not substitute an unrequested non-solicitation order or impose a non-competition regime that contradicted the structure of the parties’ written agreement.

Outcome and costs

Ultimately, the court concluded that the plaintiffs had made out a strong prima facie case that the defendants breached an implied covenant not to undermine the goodwill and recipes that were sold with Bravo Pizza. However, they failed on the broader implied non-competition and misrepresentation theories, and critically did not establish irreparable harm. The sweeping non-competition injunction they sought was also found to be legally inappropriate, as it would amount to inserting a non-competition clause the parties had not negotiated into their contract. The motion for interlocutory injunctive relief was therefore denied. On costs, the court departed from the usual rule that the unsuccessful party pays, noting that while the plaintiffs did not meet the threshold for an injunction, the defendants’ conduct in leveraging the transferred goodwill and recipes was “reproachable” and there remained a serious contractual dispute to be tried. In these circumstances, each side was ordered to bear its own costs of the motion. As a result, in this decision the successful party is the defendants, who resisted the interlocutory injunction. No damages, costs, or other monetary amounts were awarded or ordered in their favour at this stage, and the total monetary recovery ordered for any party in this decision is therefore zero, with any future quantification of damages left to be determined at trial if liability is ultimately established.