Chambers v. Omni Insurance Brokers, 2002 CanLII 44952 (ON CA)

DATE: 20020528
DOCKET: C36904

COURT OF APPEAL FOR ONTARIO

ROSENBERG and FELDMAN JJ.A. and GILLESE J. (ad hoc)

BETWEEN:

JAMES CHAMBERS

Jonathan B. Pitblado, for the Appellant

Plaintiff (Appellant)

• and -

OMNI INSURANCE BROKERS, DOME INSURANCE BROKERS INC. and THOMSON-MCDONALD INSURANCE BROKER LIMITED, carrying on business as a Partnership known as OMNI INSURANCE BROKERS

David A. Broad, for the Respondents

Defendants (Respondents)

Heard: March 01, 2002

On appeal from the judgment of the Divisional Court (Carnwath, Valin and Epstein JJ.), dated April 5, 2001, reported at (2001), 145 O.A.C. 162.

ROSENBERG J.A.:

1[1] This wrongful dismissal action was tried under the Simplified Rules. The evidence before Donohue J. consisted of a large number of affidavits and cross-examination of some of the affiants, including the appellant. The respondent employers defended the case on the basis that there was just cause for dismissal because of the appellant’s incompetence. The trial judge made a number of evidentiary rulings that resulted in some parts of the employers’ case being excluded. The trial judge found that there was no just cause and after making certain deductions awarded the appellant just over $7,500 in damages and $10,000 in costs.

2[2] The respondents appealed to the Divisional Court. The Divisional Court held that the trial judge had misapprehended the evidence and erred in law in his application of the doctrine of condonation. It allowed the appeal and dismissed the plaintiff’s claim with costs fixed at $2,500. This Court granted the appellant leave to appeal. The respondents cross-appeal from the decision on damages and costs, in the event the appeal is allowed.

3[3] In my view, the Divisional Court erred in reversing the trial judge. For the following reasons I would allow the appeal and dismiss the cross-appeal.

THE FACTS

4[4] The appellant is an insurance broker. He owned a small insurance brokerage that was not doing very well. In the spring of 1996, the respondent Omni Insurance Brokers agreed to purchase the appellant’s book of business for approximately $105,000. It appears that most of the proceeds of the sale went to pay off debts of the brokerage. As part of the purchase and sale agreement, Omni agreed to employ the appellant for two years starting September 30, 1996. In the months leading up to the closing, the appellant had office space with Omni but was expected to handle his clients on his own until September 30th.

5[5] The allegation of cause rested principally upon the manner in which the appellant dealt with a client, Ms. Blackley. However, the respondents also relied upon a number of other incidents, only some of which were known when the respondents dismissed the appellant for cause in December 1998.

6[6] The condonation issue arises in this context. The appellant’s two-year employment contract with Omni expired on September 30, 1998. Prior to this, there had been several incidents that the respondents claimed showed lack of attention to detail, if not incompetence. Although the principals of Omni were aware of these incidents, they agreed to continue the appellant’s employment. The conditions of the employment were changed, however, and the appellant’s ability to earn commissions was substantially reduced. He would no longer earn commissions on renewals of insurance contracts of his former clients but only on new business and renewals of that business.

7[7] There was another complicating factor. Whether or not the respondents knew about it, and they claimed they did not, the appellant alleged that he was under stress and perhaps clinically depressed as a result of the death of his father, his recent divorce, the loss of income from his biggest client and his resulting personal bankruptcy.

THE REASONS OF THE DIVISIONAL COURT

8[8] In its reasons, the Divisional Court found two broad bases for interfering with the trial judgment. First, the Court held that the trial judge had misapprehended the evidence and made unreasonable findings of fact. Second, it held that the trial judge erred in his application of the principle of condonation. In order to deal with these issues, a somewhat detailed review of the various allegations of incompetence is required.

THE ALLEGATIONS

9[9] I will briefly outline the facts relating to each of the allegations, beginning with the incidents known to the employers prior to September 30, 1998. I will also note how the trial judge and the Divisional Court dealt with them.

10[10] The two principals of Omni are Randall McDonald and Gerald Cox. Most of the evidence at trial came from their affidavits and the affidavits of the appellant. All three were cross-examined before the trial judge.

1996 Quinn

11[11] In his affidavit, Mr. McDonald states that in September 1996 he was contacted by one of the appellant’s clients, Jennifer Quinn, who complained about lack of service and requested a refund. He made inquiries and discovered that the Quinns were without automobile coverage for a period of time because of the appellant’s failure to process their application. He approached the appellant about the lack of service concerning this matter and the Gorham matter, discussed below, and the appellant acknowledged the lack of service, which he ascribed to Omni.

12[12] In his affidavit, the appellant explained that there was a problem with the Quinn’s insurer because it did not rate the risk properly. Eventually, the appellant placed the insurance with another company that rated the risk correctly and charged a lower premium. When Ms. Quinn requested that Omni or the appellant refund the difference in the premiums, the appellant explained that he could not give a refund because that was illegal. In respect of insurance of another vehicle, a motorcycle, there was a delay in obtaining the insurance but this was caused by the insurance company. However, temporary slips were forwarded to the Quinns. The appellant stated in his affidavit that he explained the situation to Mr. McDonald, who seemed satisfied with the explanation.

13[13] At trial, counsel for the appellant objected to parts of Mr. McDonald’s affidavit concerning the Quinn matter. The trial judge ruled that “I will not have regard to whoever advised Mr. McDonald of the facts he avers to in his second sentence”. The second sentence refers to Mr. McDonald making inquiries and discovering that for a period of time there was a lapse in coverage.

14[14] The trial judge did not refer to the Quinn matter in his reasons for judgment. The Divisional Court stated:

By December 1, 1998, Omni had learned of two lapses of insurance involving Mr. Chambers’ clients (Mr. and Mrs. Gorham and Ms. Quinn) during the period the plaintiff was running his business from Omni’s office before the closing of the purchase of his business. [Emphasis added.]

15[15] The Divisional Court did not refer to the trial judge’s ruling concerning Mr. McDonald’s allegation of lack of coverage. It also is apparent from Mr. McDonald’s affidavit that he was aware of both the Quinn and Gorham matters in September 1996.

1996 Gorham

16[16] According to the affidavit of Mr. McDonald, in September 1996 he received a fax from Mr. Gorham, a client of the appellant’s. In the fax, Mr. Gorham complained that he had been unable to get information from the appellant concerning coverage. Mr. Gorham did not state that he had no coverage, only that he was unsure whether there was coverage. The fax included copies of correspondence from Mr. Gorham to the appellant. In his affidavit, the appellant explained that he was slow responding to the Gorham inquiries but this was principally because the insurer was not providing the information he needed. Eventually, he was able to obtain a favourable rate for the Gorhams’ daughter. Another problem resulted from the difficulty in integrating his records with those of Omni. Counsel for the respondent did not cross-examine the appellant on this incident.

17[17] The trial judge made no reference to the Gorham incident. I have already referred to the Divisional Court’s reasons respecting this and the Quinn matter.

18[18] Aside from an unsupported and unexplained assertion in Mr. Cox’s affidavit, I can see nothing in the material to indicate that there was any lapse of coverage involving the Gorhams. While the fax from Mr. Gorham indicated that he was unsure whether he had coverage, the respondents produced no evidence of any lapse of coverage.

May 1997 Johnson

19[19] In May 1997, the appellant submitted incomplete applications for insurance on behalf of Mr. and Mrs. Johnson. The insurance company repeatedly asked for further information and was only able to get it when Mr. Cox intervened. The insurance company representative provided an affidavit in which he stated that the appellant’s handling of the file showed a serious lack of attention to detail and response. He also stated that he was required to meet with Mr. Cox about the file. The affidavit includes several memos from the appellant and in one of them he apologized for the delays in dealing with the file. Mr. Cox and Mr. McDonald sent a memo to the appellant in July 1997 listing a number of matters. The memo refers to the Johnson matter and asks the appellant to do a number of things in relation to the file. There is no reference in the memo to any specific complaint by the insurance company representative. The appellant replied in a memo acknowledging that there was “no excuse for the poor presentation on this account. This spring, I am afraid my concentration and focus were poor, resulting in this type of error”.

20[20] The appellant was cross-examined at the trial about the Johnson matter. Regrettably, shortly after this part of the cross-examination began, the Court took a break. When the Court reconvened there is the following note in the transcript: “Court monitor did not turn on recording equipment”. As a result, the balance of the appellant’s evidence about the Johnson matter is not reproduced.

21[21] The trial judge did not specifically refer to the Johnson matter. The Divisional Court reviewed the facts of the Johnson matter and concluded with the statement that the insurance company representative “told Mr. Cox that the manner in which Mr. Chambers handled the matter demonstrated a serious lack of attention to detail and response”. I cannot find any reference to such a conversation in the materials although the representative’s affidavit indicates that he spoke to Mr. Cox about the matter. The Divisional Court made no reference to the gap in the transcript.

November 1997 Hardy

22[22] According to the affidavit of Mr. McDonald, Mr. Cox was contacted by Axa Insurance Company because one of the appellant’s clients, Mrs. Hardy, had complained to the Insurance Bureau of Canada. The complaint seemed to revolve around the appellant failing to advise Mrs. Hardy that Axa would no longer insure her and his failing to arrange other insurance for her. The affidavit includes a memo from Mr. McDonald and Mr. Cox to the appellant indicating that these failures represented a serious breach in an insurance broker’s ethical standards and practices. The memo also stated that, should a similar situation occur in the future, they would terminate his employment.

23[23] The appellant testified that he did not recall receiving the memo or receiving notice of any complaint to the Insurance Bureau. He did recall speaking to Mrs. Hardy and he seemed to indicate in cross-examination that he also spoke to the manager at Axa. Counsel for the respondents did not elicit the contents of those conversations.

24[24] In its reasons, the Divisional Court referred to the manner in which the appellant had dealt with Mrs. Hardy and referred to the memo. It characterized these as “lapses involving Mrs. Hardy…”. The trial judge did not refer to this evidence in his reasons. However, in the transcript, the trial judge ruled that because of problems with the respondents’ evidence regarding the Hardy matter he would take into account “what Mr. Gerry Cox or Mr. McDonald did in consequence” of communications from Mrs. Hardy, the Insurance Bureau and the insurance company, but not the communications themselves. The result of that ruling, as I understand it, is that the trial judge only considered the memo to the appellant and there was no admissible evidence about the actual problem with Mrs. Hardy except the appellant’s own account. The Divisional Court did not refer to this ruling in its reasons.

August 1998 meeting

25[25] In August 1998, Mr. Cox told the appellant that he and the other “life licensed producers” must attend an office meeting on August 10th to meet with an insurance company representative and learn about “new product”. On the morning of the 10th, Mr. Cox reminded the appellant of the upcoming meeting. The appellant did not attend the meeting. Mr. Cox spoke with the appellant on August 11th and the appellant admitted that he intentionally missed the meeting. Mr. Cox sent a memo to the appellant stating that “should you take this course again, or should we be aware of any such flagrant activity or conduct unbecoming an insurance broker, you will be immediately released”.

26[26] The appellant put his position about the meeting in his affidavit and he testified about it before the trial judge. He explained that the meeting concerned sale of mutual funds and life insurance sales. He explained that, while he was licensed to sell life insurance, he did not do so through Omni and under the agreement with Omni was not required to do so. He also said that he was not licensed to sell mutual funds and while he was able to sell segregated funds, he was not encouraged to do so.

27[27] The trial judge did not refer to this incident. The Divisional Court referred to the respondents’ evidence concerning the meeting, including Mr. Cox’s opinion that the appellant had intentionally missed the meeting.

November 1998 Blackley

28[28] As indicated, Omni’s decision to dismiss the appellant was sparked by his handling of the Blackley policy. Ms. Blackley was involved in a minor collision. According to the McDonald affidavit, Ms. Blackley submitted a claim to Economical Mutual Insurance and “our office became aware through Economical that the policy had never been issued”. McDonald stated that he and Mr. Cox investigated the matter and found that the appellant had received an application for insurance from Ms. Blackley in May 1998, that the appellant had provided her with an insurance certificate but had never submitted the application to the insurance company. The computer records disclosed that he printed off another insurance certificate for Ms. Blackley in August 1998.

29[29] On December 1, 1998, Mr. Cox and Mr. McDonald met with the appellant about the Blackley matter. Their concerns were the lack of coverage and that the appellant failed to tell Ms. Blackley, when she called about the collision, that she had no coverage. They were also concerned about the appellant’s failure to report the problem to his employers. The appellant said that he did not know what went wrong. They told him he could resign or he would be fired. He refused to resign and was dismissed by hand-delivered memo two days later. Ms. Blackley’s application and her cheque were later found on the appellant’s desk under some papers.

30[30] The appellant testified about the Blackley matter. He testified that he had difficulty contacting Ms. Blackley to obtain a void cheque because she was in New Zealand for some time. He believed that he had submitted the application. He also testified that he searched for Ms. Blackley’s application on the day of the meeting and could not find it. He could not explain how it was later found on his desk. He also testified that when he checked the computer records while he was talking to her it looked like she was covered.

31[31] The trial judge found as a fact that the appellant did not make sure coverage was in place for Ms. Blackley in the summer of 1998 and that coverage was not, in fact, in place. This “led to the mix up with respect to a claim by Blackley over a minor motor vehicle collision”. He then held as follows:

It is clear that Mr. Chambers misunderstood what was happening in the Blackley file. The matter was his responsibility and he simply failed to make sure that it was taken care of properly. I am not at all sure what really happened or why the matter was not followed up and the insurance properly placed.

32[32] The Divisional Court reviewed the facts of the Blackley matter and concluded that because of the appellant’s failure to follow instructions, Ms. Blackley was left without coverage.

Murphy 1997-98

33[33] The respondents also relied upon the appellant’s handling of two other clients, Michelle Murphy and Xuechun Chen. Mr. McDonald and Mr. Cox discovered possible problems with these files only after December 1, 1998. In his affidavit, Mr. McDonald relied upon information from the Omni office administrator and computer file information about the Murphy matter. The administrator also filed an affidavit. According to these affidavits, in late 1997, Ms. Murphy completed an application for automobile insurance, which was never sent to the insurer. In February 1998, the appellant did arrange insurance with another insurer. There was also a problem with the property insurance in that although the policy was issued, the appellant did not send it to the insured and did not invoice the insured for several months.

34[34] In his affidavits, the appellant stated that there was binder automobile insurance coverage for Ms. Murphy during the relevant period of time.

35[35] The appellant’s counsel objected to the admissibility of some of the information in the affidavits concerning the Murphy matter. The trial judge ruled that he would place no weight upon hearsay comments from Ms. Murphy repeated in the McDonald affidavit and little weight on the recollections of the office administrator because he had serious doubts that she was “monitoring the proceedings in this file on a day to day basis”. In his reasons for judgment, the trial judge stated that he found portions of Mr. McDonald’s affidavit on the Murphy matter “rather an impenetrable jungle of hearsay and so I am not able to find from those paragraphs what really happened”. As to the office administrator’s affidavit, the trial judge found that it was “obvious that she is attempting to recall an historic event from rather stale recollections”. The trial judge referred to the appellant’s evidence that there was binder coverage in place for Murphy.

36[36] The Divisional Court stated that following the December 1, 1998 meeting, “the principals of Omni discovered two other files, Murphy and Chen, where inaction by Mr. Chambers left gaps in their coverage pending the issue of new policies”. The Divisional Court later wrote: “Because of Mr. Chambers’ failure to follow instructions … Mr.[sic] Murphy was arguably without coverage.” The Divisional Court did not mention the trial judge’s evidentiary ruling.

Chen summer 1998

37[37] Mr. McDonald stated in his affidavit that after the December 1st meeting, he and Mr. Cox discovered that there had been a lapse in coverage for Mr. Chen. Mr. Chen had moved from Northern Ontario to London. He wanted to stay with the same insurer but the insurer required a new application. It appeared that the appellant had done nothing about the request. After the appellant’s departure from the firm, they were able to arrange insurance for Mr. Chen.

38[38] In his affidavit, the appellant stated that he recalled being frustrated with the insurance company because it would not simply transfer the policy and that it took considerable time to deal with the insurer on this issue. In cross-examination, the appellant denied that there was any lapse in coverage.

39[39] Counsel for the appellant objected to some of the evidence relating to the Chen matter. The transcript simply states that both counsel made submissions, but does not indicate the nature of those submissions. The trial judge ruled as follows:

I do not think the Chen matter is worthy of any more time. I think it is a regularity squabble and I am not placing any great weight on that on either side.

40[40] In his reasons, the trial judge made brief mention of Chen. He referred to the paragraphs of the various affidavits and his notes of the appellant’s cross-examination and stated:

To summarize that matter, I consider it to have been a trivial matter about the requirement of a new policy, as opposed to the transfer of an old policy and I think it would be fair to characterize it as immaterial.

41[41] The Divisional Court stated that because of the appellant’s inaction there was a gap in the coverage for Chen pending the issue of the new policy.

ANALYSIS

The Condonation Issue

42[42] As indicated, in September 1998, the principals of Omni chose to offer the appellant continued employment, on different terms, although the original two year agreement had expired. Under the original agreement, the appellant’s term of employment was to continue until September 30, 1998. If the company did not provide written notice of non-renewal, it was to give 60 days’ notice prior to that date. On September 1, 1998, Mr. McDonald and Mr. Cox wrote to the appellant stating that they could not renew his contract on the same basis as in the original contract, but offered to continue his employment on a different basis. In the letter they stated that they were providing two months’ salary in lieu of the 60 day notice.

43[43] The trial judge dealt with the question of whether the respondents had condoned the appellant’s previous conduct as follows:

There were some complaints made about the quality of Mr. Chambers’ work in 1997 and early 1998, but I place very little significance on those complaints, or on those problems, considering that Mr. Chambers was offered a continuation of his position by the letter of September 1998. In this respect, I have regard to the legal principle of condonation. I would say that the incidents, or problems, before the fall of 1998, are not to be overlooked entirely, but that in the context of everything that happened, they have very little carry-over impact to what did take place in the fall of 1998. [Emphasis added.]

44[44] The Divisional Court held that the trial judge had erred in his application of the principle of condonation for the following reasons:

Past misconduct, whether sufficient to amount to just cause for discharge or not, can be used or put in the scale with subsequent misconduct to determine if the accumulation amounts to just cause. Any condonation by an employer of past misconduct on the part of an employee is subject to an implied condition of future good conduct and whenever any new misconduct occurs, the old offences may be invoked and may be put in the scale against the employee as cause for dismissal. Nossal v. Better Business Bureau of Metropolitan Toronto Inc. (1985), 12 C.C.E.L. 85 (Ont. C.A.) at p. 90. The trial judge appears to have considered the offer of continued employment to Mr. Chambers as having nullified his prior failures to follow instructions. The trial judge also was of the view that the prior misconduct had “very little carryover impact” to what took place in the fall of 1998. I find the trial judge to have been clearly wrong in his application of the doctrine of condonation.

45[45] In his factum, the appellant invites this Court to reconsider the doctrine of condonation as set out in Nossal should we find that the trial judge erred. I do not find it necessary to do so in this case because I am not satisfied that the trial judge erred. The present doctrine is set out in the reasons of the Divisional Court. As the Court states, condonation is subject to an implied condition of future good conduct, and whenever any new misconduct occurs the “old offences” may be invoked and may be put in the scale against the employee as cause for dismissal.

46[46] I do not agree with the Divisional Court that the trial judge erred in his application of the doctrine. Application of the legal test for condonation involves a question of mixed fact and law. As recently explained by the majority in Housen v. Nikolaisen, 2002 SCC 33 at paras. 27 to 37, the standard of review of such questions varies depending upon the nature of the alleged errors. Where for example the legal doctrine requires the trial judge to consider four matters and he or she considers only three, this amounts to a pure error of law and the standard of correctness applies. However, where the error does not amount to an error of law, the appellate court must apply a more stringent standard of review. In Housen at para. 28, the majority adopted a passage from Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 37 that included the following statement: “In short, as the level of generality of the challenged proposition approaches utter particularity, the matter approaches pure application, and hence draws nigh to being an unqualified question of mixed law and fact”. The application of the doctrine of condonation falls within this category. The test itself speaks not in terms of absolutes but in terms of putting matters into the scale. In my view, unless the trial judge has completely ignored the previous conduct, the appellate court must accord deference to the trial judge’s decision about the weight to be given to it. See Southam Inc., supra at para. 43.

47[47] The trial judge in this case did not ignore the previous conduct. He expressly said that it ought not to be overlooked entirely. Contrary to the Divisional Court, I do not read his reasons as holding that the offer of employment in September 1998 “nullified [the appellant’s] prior failures”. There are good reasons for according deference to the trial judge’s decision in this respect. He made findings of fact about some of these incidents. He had the advantage of seeing the appellant and the other witnesses testify. The Divisional Court made its own findings about those and other incidents not mentioned by the trial judge. It was wrong to do so: those factual findings were for the trial judge, not the appellate court. Further, the weight to be given to some of the earlier incidents was also impacted by the evidentiary rulings made by the trial judge in the course of the trial. The trial judge had the advantage of submissions concerning this evidence. Those submissions were not reproduced in the transcript for use on the appeal. The Divisional Court made no reference to those evidentiary rulings.

48[48] I will briefly set out some of my concerns with the approach taken by the Divisional Court. The Court characterized the Gorham and Quinn matters as lapses of insurance coverage. With respect to Quinn, it appears that the trial judge ruled that the part of Mr. McDonald’s affidavit stating that there was a lapse in coverage was inadmissible. As to Gorham, as I have said, it is not apparent that there was any evidence of a lapse in coverage beyond Mr. Cox’s bald assertion that such a lapse had occured. The trial judge also had the evidence from the appellant that he had explained the problems with these files to Mr. McDonald, who appeared satisfied with the explanations.

49[49] As to the Johnson matter, the Divisional Court found that a representative of the insurance company told Mr. Cox that the manner in which the appellant handled the matter demonstrated a serious lack of attention to detail and response. As I have indicated, I could not find any reference to such a conversation in the materials. Further, it would be difficult for the appellate court to make findings of fact given that a portion of the appellant’s testimony relating to that client was not transcribed.

50[50] The Divisional Court also found that there was a lapse in coverage regarding Mrs. Hardy. However, as indicated, the trial judge ruled inadmissible most of the respondents’ evidence concerning the Hardy matter. In the result, none of the respondents’ evidence as to the nature of the problem concerning Mrs. Hardy was admissible. In addition, of course, the trial judge had the appellant’s explanation of the Hardy file.

51[51] In my view, it was for the trial judge to decide what weight to give to these other incidents in all the circumstances, especially since there were real disputes about whether any of them amounted to “misconduct”.

Misapprehension of Evidence

52[52] The Divisional Court found that the trial judge failed to appreciate relevant evidence and drew unreasonable inferences.

53[53] The Divisional Court held that the trial judge failed to appreciate relevant evidence concerning the lapses in coverage of clients of the brokerage. It is unclear from the reasons whether the Court intended to include the Gorham, Quinn, Johnson and Hardy incidents, all of which were known to the respondents by September 1998. In any event, I have already dealt with those matters in considering the condonation issue. In sum, it is not at all clear that there was a lapse of coverage with respect to any of those clients.

54[54] The Divisional Court specifically referred to the Blackley, Chen and Murphy matters as instances where the trial judge failed to appreciate relevant evidence. The Court held that it takes “little imagination to identify the potential irreparable harm to an insurance brokerage that fails to cover a client, although instructed to do so”. The Court also held that the trial judge drew an unreasonable inference from his analysis of the premiums paid by these clients as a measure of the seriousness of the appellant’s failure to follow instructions. In the Divisional Court’s view, the seriousness must be measured by the potential risk to the brokerage.

55[55] Before considering these alleged errors by the trial judge, it is important to properly characterize the facts. The Divisional Court found that Mr. Chen was left without coverage and Ms. Murphy was arguably without coverage. The trial judge dealt with both of these matters in his evidentiary rulings. In the Murphy matter, he ruled that important portions of the respondents’ evidence could not be relied upon. With respect to Chen, after hearing submissions, which have not been reproduced, the trial judge concluded that he would not place any great weight on it. In his reasons, the trial judge reviewed the evidence concerning these clients. I have set out some of his findings above. He concluded that with respect to Murphy there was “tardiness at most” and “other than one dissatisfied customer, because of the tardiness, … there was little to the problem”. It is implicit that he accepted the appellant’s evidence that there was binder coverage.

56[56] As to Chen, again the trial judge referred to the evidence and held that, like Murphy, it was a simple shortfall in customer service. He characterized this issue as a “regularity squabble” and a trivial matter about requiring a new policy as opposed to the transfer of an old policy. In other words, the trial judge did not find that there was a lapse in coverage. I have already reviewed the evidence above. In my view, those findings were open to the trial judge to make. The trial judge’s findings cannot properly be characterized as displaying palpable and overriding error. On this record, it was not open to the Divisional Court to reverse those findings. It follows that any alleged error by the trial judge in relying on the amount of premiums to determine the seriousness of these matters was of no consequence.

57[57] Blackley is different, but the trial judge also recognized that Blackley was a more serious matter. He did find as a fact that there had been a lapse of coverage, that the appellant did not understand what was happening with that file, that it was his responsibility and that he failed to make sure it was taken care of properly. However, the trial judge also stated that he was not sure “what really happened or why the matter was not followed up and the insurance properly placed”. Later, in reference to all three matters - Blackley, Murphy and Chen - the trial judge stated:

Having reviewed the nature of these three named incidents, it is important to note that we have no direct evidence from the customers in question, or from the insurance companies in question. We have only other persons from the agency attempting to reconstruct what went on from the documents, as well as Mr. Chambers’ own attempts at reconstructing what happened. The result is a rather unclear understanding of just how big these problems really were.

58[58] Then, with respect to Blackley, the trial judge found that the Blackley error was significant but had to be put in perspective with the size of the firm’s business. He remarked that the revenue from all three clients would be miniscule. The trial judge also stated that he was also making allowance for the personal stress the appellant was under at the time and the possibility that any professional might make a mistake from time to time.

59[59] The burden of proving cause for summary dismissal was upon the respondents. To the extent that the trial judge was unable to make findings as to exactly what happened in the Blackley matter, the respondents may have been unable to meet the burden of proof. I agree that it was probably not an accurate measure of the seriousness of the mistake to look only at the amount of premiums paid or the percentage of the business this client represented. On the other hand, I think it inappropriate for the Divisional Court to speculate, in the absence of evidence, that a lapse in coverage would cause “irreparable harm” of a “catastrophic kind”. At the end of the day, there was no evidence as to the potential seriousness of this particular error.

60[60] There were other circumstances that the trial judge had to take into account in deciding whether there was just cause for summary dismissal. The appellant provided an explanation. He was cross-examined on that explanation. It is apparent that the trial judge did not entirely accept the respondents’ version of events. It was for the respondents to establish that there was such incompetence as to justify dismissal.

61[61] The Divisional Court was also critical of the trial judge for relying on the absence of evidence from the “347 other customers of Mr. Chambers”. The Divisional Court held that this created the impression that the trial judge felt it was incumbent on Omni to provide evidence from other clients in order to satisfy its burden of proving just cause. The Divisional Court considered this to be an unreasonable inference. It seems to me that the Divisional Court may have taken this comment out of context. What the trial judge said was this:

I am mindful of the benefits to the defendants of having Mr. Chambers on their premises at very little cost to themselves. In return for getting a percentage of premiums, the defendants enjoyed the benefit of retaining all of his clients. I balance this benefit against the infinitesimally small detriment to the goodwill of the firm that may have been caused by the Blackley incident.

To look at it strictly from the point of view of numbers, I have not heard that the 347 other customers of Mr. Chambers were disgusted with his service. [Emphasis added.]

62[62] In my view, the trial judge was saying no more than that the Blackley incident was a single incident that had only a very minor impact on the firm. I would not characterize this as an unreasonable inference in the context.

63[63] The Divisional Court also held that the trial judge misapprehended the evidence “when he stressed the benefits to Omni of having Mr. Chambers on its premises ‘at very little cost’”. As the Court pointed out, Omni had paid over $105,000 for the appellant’s book of business.

64[64] I do not agree that this amounts to a misapprehension of the evidence. Earlier in his reasons, the trial judge found that Omni obtained considerable benefits from the appellant’s presence on the premises because as a result his clients remained with the firm, whereas they might have gone elsewhere. The trial judge did not overlook the fact that Omni purchased the appellant’s business or the amount paid. There was extensive evidence and argument before the trial judge about the terms of the sale, including the purchase price of $105,000. However, in this part of his reasons, the trial judge was referring not to the cost of purchasing the business but rather to the cost of having the appellant on the premises as an employee. The trial judge had before him a great deal of evidence about the operation of the firm, the conditions under which the appellant worked and the commissions that he was earning. On the appellant’s evidence, he suffered a substantial decline in income after Omni purchased his business. It was open to the trial judge to find that the respondents received the benefits of having the appellant on the premises at little cost to themselves.

65[65] I would allow the appeal, set aside the judgment of the Divisional Court and restore the judgment of the trial judge.

THE CROSS-APPEAL

66[66] The respondents cross-appeal on the length of the notice period. The trial judge fixed the notice period at six months. The respondents submit that the appellant failed to mitigate his damages and they suggest a notice period of one month. The trial judge considered the evidence on this issue, including the impact of the non-solicitation agreement. I have not been persuaded that his decision is unreasonable.

67[67] The respondents also seek leave to appeal the costs order. They submit that the amount was excessive given the modest recovery by the appellant. I have not been persuaded that the trial judge made any error in principle.

DISPOSITION

68[68] Accordingly, I would allow the appeal, set aside the judgment of the Divisional Court and restore the judgment of the trial judge. I would dismiss the cross-appeal. The appellant is entitled to his costs in the Divisional Court, on the motion for leave to this Court and the costs of the appeal on a partial indemnity scale.

69[69] In the Divisional Court, costs were fixed at $2,500. I would fix the costs to the appellant for the Divisional Court at the same amount. I would fix the costs of the motion for leave to appeal to this Court at $1,400 including disbursements. I would fix the costs of the appeal at $5,000 plus disbursements and GST.