Court of Appeal for Ontario
Date: 2019-06-11
Docket: C66121/M50368
Judges: Feldman, Paciocco and Fairburn JJ.A.
Between
Craig Hurst Plaintiff (Respondent/Moving Party)
and
James Hancock, Darwin Productions Inc. and Tradepoint 360 Inc. Defendants (Respondents/Responding Parties)
and
Graham Partners LLP, Graham, Wilson & Green, and HGR Graham Partners LLP Intervenors (Appellants)
Counsel
Tim Gleason and Rebecca Glass, for the appellants
Katrina Marciniak, for the respondents/responding parties
Manjit Singh and Eric Cheng (Sheung Chi), for the respondent/moving party
Heard: May 16, 2019
On Appeal
On appeal from the judgment of Justice Peter J. Cavanagh of the Superior Court of Justice, dated October 5, 2018, with reasons reported at 2018 ONSC 5919.
Reasons for Judgment
Introduction
[1] The plaintiff, Craig Hurst, was an employee of the respondent Darwin Productions Inc. ("Darwin"). The respondent, James Hancock, was the principal of Darwin. Mr. Hurst consulted a law firm, the intervenors Graham Partners LLP, Graham, Wilson & Green and HGR Graham Partners LLP (collectively "Graham" or "the appellants") when he was not being paid extra salary he claimed was agreed upon together with a percentage interest in the respondent company.
[2] Mr. Hurst sued the respondents more than two years after Graham's initial correspondence with them and after they declined to acknowledge the terms of their agreement. When the respondents moved for summary judgment claiming that the action was statute-barred, Mr. Hurst commenced an action against Graham for negligence. Graham was permitted to intervene on the summary judgment motion, because if the claim against the respondents was dismissed as statute-barred, the plaintiff would use that finding as the basis to recover against Graham.
[3] The motion judge granted the summary judgment motion, dismissing the plaintiff's claim against the respondents as statute-barred. The plaintiff takes no position on the appeal from that decision. Only Graham appeals the motion judge's decision. For the reasons that follow, the appeal will be allowed and the summary judgment set aside.
Background Facts
[4] The plaintiff began working for Darwin, the respondent software company, in January 2007 on a consulting contract. In or around June 2007, he became an employee of Darwin. The plaintiff's position in the action was that his agreement with Darwin was that his salary was to be $15,000 per month, $10,000 of which would be deferred for 24 months and applied toward a 12% share ownership interest in the company. The plaintiff also contended that following the 24-month period he would continue to earn $15,000 per month. The evidence of both parties was that due to budget constraints, the plaintiff and other employees' full wages were deferred to a future date when the respondent company had the funds to pay them.
[5] In November 2009, the plaintiff retained the appellants to assist him in confirming that the wages he claimed had been agreed would be paid and that he would be receiving the 12% share interest in the company. The appellants wrote a letter to the respondents on November 16, 2009. That letter claimed that the plaintiff had earned $127,377.30 in unpaid compensation and expenses together with a 12% ownership interest in the company. Attached schedules showed the unpaid amounts beginning in February 2009. The letter asked for confirmation of the amount owing plus a payment plan, provision of the share certificate, and confirmation of ownership by Darwin of certain intellectual property.
[6] Following this letter, Mr. Hurst and Mr. Hancock had meetings as well as telephone and email correspondence about the terms on which Mr. Hurst would continue his employment with the company, but they did not come to a resolution. Nor did they agree on what was earned to date. As a result, the appellants sent a further letter dated December 10, 2009, with the same three requests as in the November 16 letter, and ending by stating that while a negotiated settlement would be preferable, if there was no satisfactory response "Mr. Hurst will pursue his legal remedies."
[7] By letter dated January 11, 2010, lawyers for the respondents, Darwin and Mr. Hancock, responded to each of the claims. With respect to the salary, the respondents denied that there was an agreement to pay more than $5,000 per month, and stated that any other amounts would only be paid when the company was financially able to do so. With respect to the share certificate, there was a dispute about the plaintiff's entitlement because of some actions that he had taken, but willingness to discuss the issue further. It was confirmed that the intellectual property was owned by Mr. Hancock personally and licensed to the company. The letter concluded with a request for further documentation from the plaintiff.
[8] While the plaintiff commenced a Small Claims Court action for some expenses in the fall of 2010, he did not commence the claim for the amounts referred to in the two letters of November and December 2009 until January 10, 2012.
The Decision of the Motion Judge
[9] The plaintiff's position on the motion was that his unpaid salary was a demand obligation. He took that position for the first time in a clarifying affidavit following his cross-examination on his original affidavit. The respondents' position was that any salaries over $5,000 were "theoretical debts on the company that would only be actualized when the company was able to pay them," and they were not a demand obligation or an obligation at all: see Hurst v. Hancock, 2018 ONSC 5919, at para. 24.
[10] The motion judge rejected the plaintiff's position. He found that there was no evidence of an agreement that any unpaid wages were a demand obligation of the company.
[11] The motion judge also rejected the plaintiff's position that he only discovered that the respondents were denying his entitlement to salary or a share in the company from the January 11, 2010 lawyer's letter, and that his cause of action only arose at that time. He concluded that by no later than December 10, 2009, the plaintiff knew that the respondents were disputing his entitlement to the salary and share certificate he claimed. Therefore, the claim was commenced out of time.
The Intervenors' Appeal
[12] The issue that had to be decided in order to determine whether the plaintiff's claim was statute-barred was when the plaintiff's cause of action against the respondents arose and when he discovered it. Because this is a breach of contract claim, the question is did the respondents breach their contract with the plaintiff and, if so, when.
[13] The appellants' position is that the motion judge erred in law by failing to address and properly analyze the issue of anticipatory breach of contract. They say that the respondents' position in December 2009 could be characterized as notice that they intended to breach the agreement to pay the unpaid salary in the future when the company could afford to do so. In law, the plaintiff could accept that anticipatory breach (or repudiation) and sue, or choose to wait until performance was due: see Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, 118 O.R. (3d) 321, at para. 24.
[14] In this case, the appellants contend that the plaintiff chose to wait until he sued in January 2012. That suit constituted acceptance of the repudiation. The appellants argue that the motion judge therefore erred in law by finding that the claim was statute-barred, or in the alternative, the question of when the claim was discovered constituted a genuine issue for trial.
[15] In rejecting the submission that the unpaid salary was a demand obligation, the motion judge concluded that the salary became due and owing when it was earned, but that there was a practical agreement to defer payment. He stated, at para. 32:
The obligation by Darwin to pay unpaid salary that was earned by the plaintiff was owed each month that the salary was earned and unpaid. The plaintiff's evidence is that he knew that he had a claim for unpaid salary each month from June 2007 to December 2009, even though the plaintiff and Hancock may have agreed that, as a practical matter, unpaid wages would not be paid until Darwin was financially able to do so. When I consider the plaintiff's evidence and Hancock's evidence in relation to the plaintiff's contract of employment and the nature of Darwin's obligation to pay any wages owed to the plaintiff, I conclude that this was not a demand obligation, and no demand was required before it could be enforced.
[16] While the motion judge was entitled to reject the plaintiff's late-blooming position that the extra salary was a demand obligation, there was no basis on the evidence to make the finding that the extra salary became due and owing as it was earned. Both parties agreed that any extra salary was deferred to a future time when the company was financially able to pay it. There was no evidence by either party that the salary earned became due and owing each month when it was earned.
[17] The motion judge made no other finding regarding the terms of the agreement between the parties. Nor did he find when that agreement was breached.
[18] The appellants submit that the motion judge erred by failing to address the anticipatory breach argument in his reasons for decision. We were told that this argument may not have been raised directly in oral submissions by the appellants because of time constraints at the hearing of the motion, but that it was raised in the appellants' factum before the motion judge, which was referred to in oral submissions. That factum was provided to this court during oral argument.
[19] We agree with the appellants that the motion judge erred in law by failing to address this legal argument and by failing to find whether any repudiation or anticipatory breach by the respondents, either in December 2009 or in January 2010 by the lawyer's letter, was accepted by the plaintiff before he commenced this action. If there was anticipatory breach or repudiation, then until the appellant accepted that breach, no cause of action accrued: see Ali, at para. 26.
[20] With respect to the 12% share interest claim, the plaintiff sought a declaration that he was entitled to that interest. He argued that no limitation period applies to a claim for a declaration without a claim for consequential relief, relying on s. 16(1)(a) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. The motion judge rejected that submission because the plaintiff also sought as consequential relief a mandatory order for the respondent company to issue the 12% share certificate. Since the agreement alleged was that the plaintiff became entitled to the share interest 24 months after June 2007, if the respondents denied the plaintiff's right to the share interest, the cause of action for breach of the agreement to grant it would have arisen.
[21] The appellants submit that the respondents' position as to the plaintiff's share interest was equivocal even in the lawyer's letter of January 2010. That leads to the issue of whether the record was sufficient for the motion judge to decide this factual issue, among others relating to the terms of the plaintiff's employment.
[22] The motion judge determined that the evidentiary record was sufficient to allow him to make the necessary findings of fact and to apply the law to reach a just result and that there was no genuine issue that required a trial. We disagree. The primary issue between the parties was the terms of the agreement. The motion judge did not make a finding on that critical issue, or whether and if so when the respondents breached that agreement. There is a basic disagreement on what was agreed and no written contract. In our view, there was a genuine issue requiring a trial. The limitation issue will turn on that finding.
[23] The appeal is therefore allowed, meaning the summary judgment in favour of the respondents, including the costs awarded, is set aside, with costs of the appeal to the appellants, fixed at $9000 inclusive of disbursements and HST.
The Plaintiff's Motion Respecting Costs
[24] The plaintiff, who took no position on the appeal, brought a motion before the panel asking the court to effectively declare that r. 63.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 stays the costs order made against the plaintiff on the summary judgment motion, by virtue of this appeal by the appellants. The plaintiff filed a factum. The respondents filed no responding material. The affidavit filed by the plaintiff indicates that following the summary judgment there were ongoing proceedings in the Superior Court between the plaintiff and the respondents and that this costs enforcement issue was raised in a motion in the Superior Court where the respondents took the position that there is no automatic stay in favour of the plaintiff. The status of that motion is not revealed in the material.
[25] In oral submissions, counsel for the plaintiff advised that on the morning of the appeal counsel for the respondents said that they would not enforce the costs order pending the outcome of the appeal. The plaintiff sought his costs of bringing this issue before the court.
[26] We are not prepared to order any costs of the plaintiff's motion. The plaintiff chose not to appeal and took no position on the intervenors' appeal. The issue of the enforceability of the costs award pending the appellants' appeal was raised before the Superior Court before this motion was brought. There is no suggestion that the respondents have taken steps to collect the awarded costs from the plaintiff. There is therefore no live issue before this court. The plaintiff's motion in this court, essentially asking the court to interpret a rule for the assistance of the parties, is ill-conceived, and at this stage, it is moot.
K. Feldman J.A.
David M. Paciocco J.A.
Fairburn J.A.
