Radikov v. Premier Project Consultants, 2017 ONSC 7192

CITATION: Radikov v. Premier Project Consultants, 2017 ONSC 7192

COURT FILE NO.: DC-1-17

DATE: 2017-12-04

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

BETWEEN:

Martin Radikov

Plaintiff (Respondent)

– and –

Premier Project Consultants Ltd./Kingsley Management Inc.

Defendant (Appellant)

COUNSEL:

Jean-Alexandre De Bousquet and Daria Chyc, Counsel for the Plaintiff (Respondent)

Lydia Bay, Counsel for the Defendant (Appellant)

HEARD: December 1, 2017

BEFORE: The Honourable Justice James W. Sloan

REASONS FOR JUDGMENT

[1] This is an appeal from the decision of Deputy Judge Winny of the Kitchener Small Claims Court, dated December 11, 2016, wherein he upheld the respondent’s claim for wrongful termination of a fixed term consulting contract and awarded damages, including costs totaling $20,469.81.

[2] The parties entered into a six-month fixed term contract for consulting services which was to run from May 6, 2015, to November 6, 2015.

[3] The respondent was to submit biweekly invoices to the appellant and was to be compensated in the amount of $37,500 for the six month term.

[4] In addition to automatically terminating on November 6, 2015, the contract contained the following early termination provision:

7. Termination

Notwithstanding paragraph two (2) above, this agreement and all obligations to provide compensation herein may be terminated as follows:

a) Upon the written mutual consent of the parties; or

b) By either party for cause or material breach of the obligations under the Agreement; or

c) By PPC providing the Consultant with two (2) weeks advance written notice; or

d) By the Consultant providing PPC with two (2) weeks advance written notice.

Final and full compensation if termination of this contract occurs will be for the portion of time up to the date of termination at a rate of $37,500/26 x period worked.

[5] The respondent provided services, pursuant to the contract, until approximately August 14, 2015, or for approximately half the contract term.

[6] Several days after a meeting between the respondent and Mr. Way (President of PPC), the respondent sent an email to Mr. Way with respect to some of his projects and stated, “Also if you have decided that you do not need me anymore (hope this is not the case) I would appreciate the heads up so I can start looking for work”.

[7] Mr. Way responded “… I would not want to stand in your way if another opportunity came up and would wish you all the best in your future endeavors.” The respondent was invited to contact the appellant at the end of his vacation.

[8] On October 2, 2015, the respondent contacted the appellant inquiring as to his status and was told that nothing had changed in regards to work available for him.

[9] The respondent replied to the appellant’s correspondence on October 16, 2015, stating, “Another two weeks went by and I guess it does not look good for the future however I have another three weeks until the end of my contract and I can either come in to do general drafting work or you can terminate the contract.”

[10] The appellant responded the same day indicating that there was no work for the respondent and suggesting that he look for other work.

[11] On November 4, 2015, the respondent sent his last invoices to the appellant for the period from August 15 to November 6, 2015.

[12] In response, the appellant stated for the first time that the agreement had been terminated. This written notice came two days before the end of the fixed term consulting agreement was to end.

[13] The respondent had begun looking for alternate work in September 2016.

The Law regarding Appeals

[14] An appeal lies to the Divisional Court from a final order of the Small Claims Court. Such appeal is to be heard by a single Judge: ss. 31 and 21(2)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[15] Section 2 of the Small Claims Court Jurisdiction and Appeal Limit, O. Reg. 626/00, provides that the Divisional Court has jurisdiction to hear appeals from final orders of the Small Claims Court in excess of $2,500. As the judgment dealt with damages of approximately $15,000, the appeal is properly brought before this Court.

[16] The standard of review in an appeal of an order of a Judge is set out in Housen v. Nikolaisen, 2002 SCC 33. On questions of law, the standard is correctness. On questions of fact, the standard is palpable and overriding error. On questions of mixed fact and law, there is a spectrum. However, with respect to the application of the correct legal principles to the evidence, the standard is palpable and overriding error.

[17] The concept of palpable and overriding error was discussed by the Ontario Court of Appeal in Waxman v. Waxman (2004), 2004 39040 (ON CA), 186 O.A.C. 201, at paras. 296-297:

[296] The “palpable and overriding” standard addresses both the nature of the factual error and its impact on the result. A “palpable” error is one that is obvious, plain to see or clear: Housen at 246. Examples of “palpable” factual errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference.

[297] An “overriding” error is an error that is sufficiently significant to vitiate the challenged finding of fact. Where the challenged finding of fact is based on a constellation of findings, the conclusion that one or more of those findings is founded on a “palpable” error does not automatically mean that the error is also “overriding”. The appellant must demonstrate that the error goes to the root of the challenged finding of fact such that the fact cannot safely stand in the face of that error: Schwartz v. Canada, 1996 217 (SCC), [1996] 1 S.C.R. 254 at 281.

Appellant’s Position

[18] The appellant submits that the trial Judge erred;

A. In fact and law, in misinterpreting the respondent’s contract and in finding that the appellant was bound by a payment obligation even where the respondent provided no services to the appellant.

B. In law, in finding that the appellant could not “avail itself of a notice provision it did not invoke as written”.

C. In law, in finding that “the appropriate measure of damages is the balance of the fixed term contract price.”

D. In law, by failing to take into account the respondent’s mitigation efforts when determining the measure of damages.

E. In fact and law, in awarding costs to the respondent in the amount of $4,500.

Did the Trial Judge Err in Finding That the Appellant Was Obligated to Pay the Respondent, Even When No Services Were Rendered?

[19] The appellant submits that the contract between the parties did not contain a provision that payment would be made regardless of whether the services were provided by the respondent or not. Absent such an agreement or provision to the contrary, an obligation in a consulting arrangement such as this is to provide payment for services rendered.

[20] The appellant in this instance relies on the case of McCready v. De Dwa De Dehs Ney’s Aboriginal Health Centre, 2013 ONSC 2425, where the court states at paragraphs 43 to 45:

[43] I asked Plaintiff’s counsel if he had any authority for the full contract price being the appropriate measure of damages, and he had none. I am not surprised, as I can find none either.

[44] As a hypothetical analogy, I put to Plaintiff’s counsel that the one consulting agreement with which everyone in the courtroom is familiar - the lawyers retainer - does not typically work that way. That is, if a client terminates his or her lawyer, one would expect the lawyer to get paid for work done to date but not for work that was expected to be done, but that had not yet been reached. Counsel contends that the lawyers retainer is a different kind of consulting contract, as it is for an indefinite period of time (until the case or transaction is over), whereas the plaintiffs consulting contract was for a fixed period.

[45] With respect, that strikes me as a distinction without a difference. One could retain a law firm to review one’s business dealings for the next six months, or one could retain a law firm to review one’s business dealings without putting a fixed termination date on the retainer. Either way, the client can generally end the relationship at will; the client’s obligation is to pay for the services rendered, not the services foregone.

Did the Trial Judge Err in Finding That the Appellant Could Not Avail Itself of a Notice Provision It Did Not Invoke as Written?

[21] The appellant submits the damages ought to be limited to two weeks payment, which is the amount agreed upon by the parties in the early termination provisions of the contract.

[22] It submits that where there are several ways in which a contract can be performed the mode that is adopted for the purpose of determining damages is the mode that is the least profitable to the plaintiff and the least burdensome to the defendant.

[23] The appellant relies on the cases of Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, Eady v. The TrekLogic Technologies Inc. 2008 19785 (ON SC), [2008] O.J. No. 1693 and Agribrands Purina Canada Inc. and Kasamekas 2011 ONCA 460, [2011] O.J. No. 2786.

[24] In the Hamilton case at paragraph 11 the court stated:

There is a general principle regarding damages awarded in cases where a defendant who wrongfully repudiated a contract had alternative modes of performing the contract. This general principle traces its roots at least as far back as the case of Cockburn v Alexander (1948), 6 C. B. 791. In that case Maule J. articulated the general principle, at page 814 as follows: generally speaking, where there are several ways in which the contract might be performed, that mode is adopted which is the least profitable to the plaintiff and the least burdensome to the defendant.

[25] In the Hamilton case there was a 36 months contract which could be terminated on three months’ notice. The defendant initially terminated the contract for cause and later sent a second letter relying on the termination clause of three months.

[26] The Eday case relied on the Hamilton case stating at paragraphs 118 and 119 as follows:

[118] Arbour J. writing for the court, articulated at paragraph 11 the general principle that, where there are several ways in which a contract can be performed, the mode that is adopted for the purpose of determining damages is the mode that is the least profitable to the plaintiff and the least burdensome to the defendant. The assessment of Ms. Hamilton’s damages, therefore, require a determination of the minimum performance the plaintiff was entitled to under the contract. Three months notice was Ms. Hamilton’s minimum guaranteed benefit under the contract and was Open Windows maximum exposure for damages. The court’s conclusion did not depend on the fact that Open Window had delivered a second letter for early termination with notice, a fact that might have distinguished the Hamilton case from the case at hand.

[119] Applying the principles of the Hamilton case to the case at hand, Mr. Eady had a minimum entitlement to a payment of 12 months. That minimum guarantee is TrekLogic Technologies maximum exposure for damages.

[27] The Agribrands case, discusses the Hamilton and Cockburn v. Alexander cases, and after discussion of a tort claim for damages approves of the following at paragraph 45:

However, under the general principle applicable in breach of contracts with alternative performances enunciated above, it is not necessary that the nonbreaching party be restored to the position they would likely, as a matter of fact, have been in but for the repudiation. Rather, the nonbreaching party is entitled to be restored to the position they would have been in had the contract been performed.

In this case the relevant contractual duties have been expressly set out by the parties in the agreement. Hamilton is entitled to OWB’s performance of these voluntarily assumed duties. Hamilton has no compensable interest in the advantages she might have expected under any particular performance of the contract, since the contract itself provided for alternative methods of performance at the election of the defendant. If Hamilton wanted to secure herself the benefits associated with the given particular method of performance, she should have contracted for only that method of performance.

[28] Therefore the appellant submits, that its damages are limited to two weeks of earnings.

Did the Trial Judge Err by Failing to Take into Account the Respondent’s Mitigation Efforts When Determining the Measure of Damages?

[29] The appellant submits that the case of Howard v. Benson Group Inc., 2016 ONCA 256, is not applicable to this case because it involved an employment relationship that was governed by a five-year fixed term contract and the court determined that the without cause early termination provision within the contract was unenforceable. It was for that reason the court determined that the plaintiff was entitled to compensation for the remainder of the fixed term.

[30] The appellant further submits, that at no time did the Trial Judge determine that the early termination provisions in the subject contract were unenforceable.

[31] The appellant relies in part on the case of Greenfix Golf Inc. v. Sportcover International Inc., 2016 ONSC 4189 where the court stated at paragraph 60:

I am not satisfied that the principles espoused in the Bowes and Howard are applicable outside the employment context. It is not clear to me that the fixed term of 10 years in the distribution agreement was an attempt to specify a “penalty” for early termination. There is no implied common law rule governing the termination of commercial contracts as there is in the employment context. The duty to mitigate is based on sound commercial sense – the plaintiff in a breach of contract case ought not to be compensated for a loss it could reasonably have avoided. I would not have relieved Greenfix of its duty to mitigate based on the Court of Appeal’s rulings in Bowes and Howard.

Did the Trial Judge Err in Awarding Costs to the Respondent in the Amount of $4500?

[32] Based on his previous submissions, the appellant submits that it was not unreasonable for it not to accept the settlement offer proposed by the respondent and that his costs should be limited to 15% of the amount claimed.

The Respondent’s Position

[33] The respondent submits that the learned Trial Judge’s:

A. interpretation of the contract and conclusion that the appellant was bound by a payment obligation even where no services were provided was correct,

B. conclusion that the appellant could not avail itself of a notice provision it did not invoke as written and that the appropriate award of damages was the balance of the contract price was correct,

C. conclusion that there was no duty to mitigate in the circumstances was correct,

D. award of costs in the amount of $4,500 was appropriate in the circumstances.

Breach of Contract - Was the Appellant Bound by a Payment Obligation Even Where No Services Were Provided?

[34] The respondent submits that as found by the Trial Judge, there was nothing in the contract which relieved the appellant of its payment obligation if there was insufficient work for the respondent. The contract was silent on this particular point.

[35] The Trial Judge accepted the respondent’s evidence that he was forced to take a vacation and therefore could not provide services to or invoice the appellant after August 15, 2015. The respondent submits that the appellant elected not to call any witnesses to challenge this evidence.

[36] Based on the above factual findings, the Trial Judge inferred that the applicant was liable to pay the respondent for the remainder of the contract term.

[37] The respondent submits there was ample evidence to support the Trial Judge’s conclusion and as such his finding is entitled to deference.

[38] The respondent submits that the McCready case can be distinguished from the current case because in the McCready case the plaintiff was terminated and ceased working for the defendant six days into the contract, while in the current case the respondent was never terminated and he was never unequivocally advised that his services were no longer needed. In fact the respondent was led to believe there was a temporary shortage of work and was invited to touch base at a later date.

[39] The Trial Judge found that although the appellant elected not to use the respondent’s services after August 15, 2015, it never terminated the consulting agreement. On each occasion when the respondent inquired about work, the appellant simply informed him that no work was available at that moment, essentially leaving the respondent in the state of limbo.

[40] The only mention of termination of the respondent’s employment came from the appellant two days before the end of the contract term.

[41] The Trial Judge also found that the contract made no provision for layoffs nor did it contain a provision which relieved the appellant of its payment obligations if there was insufficient work.

What Was the Appropriate Measure of Damages?

[42] Despite the fact that the contract contains an early termination clause, the Trial Judge found that the appellant did not provide a notice of termination and in his judgment stated; “Despite Premier’s weak attempt to construct the facts, it is perfectly obvious that such notice was never given.”

[43] The respondent relies in part on the case of Ariston Realty Corp. v. Elcarim Inc. 2014 ONCA 737. The Ariston case involved a salesperson’s entitlement to a commission on the sale of real property. At paragraph 24 the court stated:

I agree with Justice Howden’s analysis. The provision of written notice was a condition precedent to Ariston’s entitlement to commission on the sale executed after the expiry of the listing agreement. Having failed to fulfil his condition precedent, Ariston has no contractual entitlement to the commission.

[44] The respondent submits that the appellant failed to fulfil the condition precedent which was to provide the respondent with two weeks advance written notice of termination.

[45] With respect to the appellant’s reliance on the Hamilton case, the respondent submits that the principal stated in Hamilton and applied in subsequent decisions also cited by the appellant, is only applicable in cases where there has been clear repudiation. That is simply not the case here.

[46] The respondent relies in part on the text Halsbury Laws of Canada under section HCO–167 - Anticipatory Breach where the text reads:

Anticipatory breach occurs when A, having contractually bound itself to B, communicates its refusal to perform its promise at any time either before it begins or before it must begin to do what it promised. This repudiation has traditionally been ascertained by looking at the intention of the party who is alleged to have committed the anticipatory breach; the intention must be objectively ascertained and must be clear and unequivocal …

[47] Based on the foregoing quote, the respondent submits that it was never clear that the appellant intended not to be bound by the contract.

[48] The respondent submits that, if the appellant is arguing that the contract was over because of anticipatory breach, the respondent never accepted the anticipatory breach as evidenced by his continuing to affirm the contract up until the end of the fixed term, as evidenced by his emails to the appellant.

[49] The respondent submits that since the contract was never repudiated and remained alive in all respects for both parties, the Trial Judge correctly concluded that the respondent was entitled to damages for the remainder of the fixed contract price.

[50] Although the case of Howard v. Benson Group Inc. (The Benson Group Inc.), 2016 ONCA 256, dealt with an employee, the respondent submits that the appellant’s counsel conceded in his submission that it did not matter whether the respondent was an employee or independent contractor.

[51] In the alternative, the respondent submits that Howard does not apply to the case at bar because this case had an enforceable termination provision unlike Howard.

[52] Notwithstanding that the Howard case involved an employment contract with a fixed term, it was applied to independent contractor contracts in the case of Mohammed v. Information Systems Architects Inc. (“ISA”) where the court at paragraph 56 stated:

Although Howard v Benson Group Inc…. and Bowes vs. Goss Power Products Ltd…. involved employment contracts with fixed terms, in my opinion, the principles also apply to independent contractor contracts that are not of indefinite duration…

[53] With respect to the Greenfix Golf case, the court stated at paragraph 60:

“…There is no implied common-law rule governing the termination of commercial contracts as there is in the employment context. The duty to mitigate is based on sound commercial sense - the plaintiff in a breach of contract case ought not to be compensated for a loss it could reasonably have avoided.”

[54] The respondent submits he made every reasonable effort to mitigate his damages by repeatedly inquiring about his status of employment, but he never received a notice of termination, and this despite the sophistication of the parties.

[55] The respondent also relies in part on the case of Covenoho v. Pendylum Inc. 2015 ONSC 2468 where the court stated at paragraph 38:

Further, had I not come to the conclusion that the plaintiff was terminated in accordance, with the provisions found in article 2.1(a) of the Agreement, then I would have found that she was entitled to damages for the following reasons:

(1) Article 2.1(b) is not an effective basis for the termination of the agreement as the Defendant’s letter of October 11, 2013 purports to terminate the Agreement “with immediate effect” rather than provide at least two weeks’ written notice of the termination of the agreement.

(2) As a result, the Plaintiff would have been entitled to damages equivalent to her salary for the remainder of the unexpired term of the agreement without deduction for mitigation; see Howard, at paragraph 44.

[56] Although the Ontario Court of Appeal eventually disagreed with the Trial Judge’s finding in Covenoho, they agreed with the Trial Judge’s reasoning with respect to damages being due for the balance of the contract term by stating at paragraphs 8 and 9:

[8] The appellant claims damages in the amount of $56,000, representing her salary for the 40 weeks that remained on her fixed term contract at the time of her employment termination. The motion Judge determined that had the appellant’s employment not been validly terminated under the contract, he would have found that she was entitled to damages equivalent to her salary for the remainder of the unexpired term of the contract, without deduction for mitigation.

[9] Having concluded that her employment was not validly terminated, we agree with the motions Judge alternative finding in this regard…

[57] The respondent further submits that the issue of whether the termination provision was enforceable is irrelevant, because the appellant chose not to exercise it and the contract was neither terminated nor repudiated.

Mitigation

[58] Based on his previous submissions, the respondent states that the Trial Judge correctly concluded based on the principles enunciated in the Howard case, that the measure of damages in this case was a balance of the fixed term contract price and that he had no duty to mitigate.

[59] The respondent further relies on the case of Bowes v. Goss Power Products Ltd., 2012 ONCA 425 at paragraphs 34 and 61 where the court stated:

[34] An employment agreement that stipulates a fixed term of notice or payment in lieu should be treated as fixing liquidated damages or a contractual amount. It follows that, in such cases, there is no obligation on the employee to mitigate his or her damages.

[61] Although decisions of Trial courts appear to go both ways on the issue in this appeal, the preponderance of appellate jurisprudence supports the view that, where an employment agreement contains a stipulated entitlement on termination without cause, the amount in question is either liquidated damages or a contractual sum. Either way, mitigation is irrelevant.

Costs

[60] The respondent submits that the award of costs is in the Trial Judge’s discretion and since the award at Trial was higher than his offer to settle, Rule 14.07(1) came into play.

[61] In addition the Trial Judge in his reasons stated the following:

In addition Premier has played hardball with Mr. Radikov: it laid him off without terminating the contract, then claimed at almost the end of the fixed term that it had terminated the contract previously, then denied the termination in its pleading, and at one point proposed to allege in the alternative that it had terminated the contract for cause, then later abandoned that proposal. In my view Premier’s treatment of Mr. Radikov is anything but a model of good faith performance of contractual relations.

Findings

[62] The termination provisions in the contract between the parties are simple and easy to understand. Essentially, either party could terminate the contract at will, by giving two weeks’ written notice.

[63] The Trial Judge found that the appropriate notice under the contract was not given until two days before the end of the contractual term. There was evidence to support this finding and his conclusion on this issue is owed deference.

[64] Pursuant to the reasoning in the Hamilton case, the contract in this case was not wrongfully repudiated nor terminated, at least not until two days before its end. Since either party’s ability to terminate was subject to two weeks’ notice, the contract was never effectively terminated before its end date.

[65] Surely, the method of termination set out in the contract must have some meaning and legal consequence. The respondent, subject to either party invoking the termination clause, was obligated to be at the ready, effectively standing by to assist the appellant, if and when called on to do so.

[66] On the facts as they appear in the record, the respondent was essentially a puppet and the appellant the puppeteer.

[67] The appellant in its submissions, stated that nothing in the contract deals with the issue of whether payment must be made if no services are provided. Such a statement of course is a two-edged sword, since nothing in the agreement states that the respondent would not be paid if he did not provide any services.

[68] Perhaps that is why there was a two-week escape clause, that the appellant could have availed itself of, but did not.

[69] With respect to the McCready case, I find the judge’s analogy to a lawyer’s retainer does not fit the facts of this case. While perhaps not perfect, I believe a better analogy would be that of limousine driver, who would have to arrange his schedule to be on call when required. In any event, unlike the McCready case the respondent was never terminated.

[70] I am unsure what the Trial Judge meant in paragraph 16 of his judgment by the term “effectively a layoff”. It does not appear that either party reacted to what might be termed as a mandatory vacation as a layoff. Certainly there does not appear to be anything in the record that was presented on appeal, to show that either party viewed what happened in August, as a layoff. Also there is no provision in the contract that deals with a layoff, but of course both parties are able to make other arrangements with respect to their relationship if they wish.

[71] I acknowledge that the Ariston case dealt with a condition precedent, but it is persuasive, particularly in the context of this case where the appellant for reasons known only to itself, failed to follow the termination provisions of the contract it drafted.

[72] I disagree with the appellant’s submission that the Trial Judge could not follow the principles set out in the Howard case because he did not first make a finding that the termination clause was unenforceable. In this case nobody wrongfully repudiated the contract and it was not until within two days of the end of the contract that the appellant sent a written termination notice.

[73] It is difficult to see why the Hamilton case would apply to the facts of this case. In the Hamilton case, a letter of termination was set out on May 19, 1998 alleging malfeasance followed by an August 5, 1998 letter relying upon a clause in the agreement which provided for early termination with notice.

[74] In the case at bar, no notice of termination was given until near the end of the contract. I find it disingenuous that a sophisticated party such as the appellant would be able to keep the respondent at its beck and call until the end of the contract, and then try to limit its damages in accordance with a clause in the contract which the appellant itself, saw fit not to use.

[75] I am not persuaded that the Trial Judge made any errors, either factual or legal and I therefore dismiss the appeal with costs.

[76] At the end of trial the parties agreed that the winning party on this appeal should be entitled to their costs fixed at $23,000 inclusive of HST and disbursements.

James W. Sloan

Released: December 4, 2017

CITATION: Radikov v. Premier Project Consultants, 2017 ONSC 7192

COURT FILE NO.: DC-1-17

DATE: 2017-12-04

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Martin Radikov

Plaintiff (Respondent)

– and –

Premier Project Consultants Ltd./Kingsley Management Inc.

Defendant (Appellant)

REASONS FOR JUDGMENT

J.W. Sloan J.

Released: December 4, 2017