When a selling dentist violates a non-compete clause in Ontario by opening a new practice nearby, the buyer can sue for breach of contract. Buyers generally seek an interlocutory injunction at the Superior Court of Justice to immediately shut down the competing practice, which usually costs $15,000 to $30,000+ CAD in upfront legal fees.
Enforcing Non-Competes in Dental Practice Sales
Purchasing a dental practice in Ontario is a massive financial commitment, often running into the millions of dollars. When you buy a practice, you are not just buying dental chairs and x-ray machines; you are primarily buying the “goodwill”āthe loyalty of the existing patient roster. To protect this investment, the Share Purchase Agreement (SPA) or Asset Purchase Agreement will contain strict restrictive covenants, including non-compete and non-solicitation clauses. 📍
A major commercial dispute arises when the selling dentist takes your money, only to turn around and open a brand new clinic just down the street. While Ontario recently banned non-compete clauses for standard employees, the law makes a specific exception for the commercial sale of a business. In commercial M&A transactions, non-competes are fully enforceable if they are reasonable, and buyers must act aggressively to stop the seller from poaching their new patients. 📝
Step-by-Step Process for Commercial Injunctions
Stopping a rogue dentist requires swift and decisive litigation. Whether the disputed clinics are in London, Hamilton, or Vaughan, you must apply to the provincial courts to halt their business operations immediately. 💼
Step 1: Analyze the Share Purchase Agreement (SPA)
Before launching a lawsuit, your commercial litigation lawyer must carefully review the restrictive covenants in your SPA. They will check the geographic radius (e.g., 5 kilometres) and the time limit (e.g., 3 years) of the non-compete. If the clause is drafted too broadly (e.g., banning them from practicing anywhere in Ontario), a judge may deem it unreasonable and throw it out entirely. 📋
Step 2: Gather Evidence of the Breach
You need concrete proof that the seller is violating the agreement. You must document that they have opened a clinic within the restricted zone or that they are actively soliciting your patients. Keep records of patients requesting their charts be transferred to the seller’s new clinic, or take screenshots of social media ads targeting your neighbourhood. 📸
Step 3: Send a Cease and Desist Notice
Your lawyer will formally serve the selling dentist with a Cease and Desist letter. This letter demands that they immediately close their competing practice and stop contacting patients, warning them that failure to comply will result in an immediate court injunction and a lawsuit for massive financial damages. ✉
Step 4: Apply for an Interlocutory Injunction
If the seller ignores the letter, you cannot wait for a normal trialāyour business would bleed out patients in the meantime. Your lawyer will file an urgent motion for an interlocutory injunction at the Superior Court of Justice. You must prove to a judge that there is a serious issue to be tried, that you will suffer “irreparable harm” if the seller is not stopped, and that the balance of convenience favours protecting your purchase. ⚔
Step 5: Proceed to Trial for Damages
If the injunction is granted, the seller is legally ordered to shut down their competing clinic until a final trial happens. The litigation then proceeds to the discovery phase and eventually a full trial, where you will seek financial compensation for any lost profits or diminished goodwill caused by the seller’s initial breach. 💰
How Much Does it Cost in Ontario?
Seeking an injunction is one of the most intense and expensive procedures in commercial litigation. You are essentially fighting a mini-trial within weeks of discovering the breach. 💵
| Expense Type | Description | Estimated Cost (CAD) |
|---|---|---|
| Initial Legal Strategy | Reviewing the SPA, drafting cease and desist letters. | $2,000 – $5,000 |
| Injunction Motion | Drafting affidavits, court filings, and arguing the urgent motion. | $15,000 – $35,000+ |
| Court Filing Fees | Issuing the Statement of Claim and Notice of Motion. | $400 – $600 |
| Full Trial for Damages | Taking the breach of contract case to a final judgment. | $50,000 – $100,000+ |
Keep in mind that if you lose the injunction motion, the judge will usually order you to pay a portion of the selling dentist’s legal costs, adding significant financial risk to the process.
How Long Does the Process Take?
Speed is critical when protecting the goodwill of a purchased business. Gathering evidence and drafting the motion for an interlocutory injunction usually takes 2 to 4 weeks. ⏱
Getting a hearing date before a judge for the injunction takes another 2 to 6 weeks, depending on the urgency and court backlog in your specific Ontario region. However, resolving the entire lawsuit and getting a final ruling on financial damages takes much longer, typically 2 to 3 years.
Frequently Asked Questions (FAQ)
I thought non-competes were illegal in Ontario now?
In 2021, Ontario passed legislation banning non-compete clauses for standard employees. However, there is a strict carve-out exception for the sale of a business. If you buy a dental practice, you can legally enforce a non-compete against the seller to protect the goodwill you purchased.
What is the difference between non-compete and non-solicitation?
A non-compete prevents the seller from opening any dental clinic within a certain geographic area. A non-solicitation clause only prevents them from actively contacting your patients or poaching your staff, but allows them to practice right next door if they want.
How do courts measure the distance for a non-compete radius?
Unless the Share Purchase Agreement specifies “driving distance,” Ontario courts typically interpret geographic radiuses “as the crow flies” (a straight line on a map from the sold clinic to the new clinic).
What happens if the seller’s spouse opens the clinic instead?
Well-drafted commercial agreements usually include clauses preventing the seller from competing indirectly through family members, corporations, or acting as a silent partner. If they attempt this loophole, you can still sue them for breach of contract and seek an injunction.
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