ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-08-355403
DATE: 20120420

BETWEEN:

BRIAN LAWRIE
Plaintiff

– and –

OM FINANCIAL INC. AND MGA CANADA INC.
Defendants

Colin Still, for the Plaintiff
Mark Klaiman, for the Defendants

HEARD: December 14, 15, and 16, 2011

McCarthy J.:

[ 1 ] Brian Lawrie (Lawrie) was employed as a broker with the defendant company MGA CANADA INC. (MGA) from November 1, 2005 until March 17, 2008, under an Independent Consultant Agreement (ICA) entered into on November 1, 2005. The ICA contained an engagement term of three years.

[ 2 ] The parties came to disagree on the interpretation of the bonus clause in the ICA. Their respective differing approaches to the calculation of that bonus were the pretext for Lawrie leaving the company seven months prior to the expiration of the term in the ICA.

[ 3 ] The issues to be determined are as follows:

• The amount of commission owing by the defendant to the plaintiff;

• Damages, if any, for breach of contract by the defendant; and

• Damages, if any, for breach of contract and breach of fiduciary duty by the plaintiff.

[ 4 ] The calculation of the commission owing requires the court to interpret the “bonus” sections of the ICA. The relevant sections are found in Part IV and are reproduced below:

4. Bonus

4.1. The Corporation shall pay the Consultant a bonus based on total production of NAFYC, on broker’s business purchased from FERRIER and ASSOCIATES INC. by OM FINANCIAL INC., FTIC and MGA CANADA INC. and new recruits.

4.2. Such bonus payments are paid quarterly.

4.3 The Corporation shall pay the consultant two (2%) bonus on achieving from three hundred thousand up to five hundred thousand ($300,000 - $500,000) NAFYC, three (3%) from five hundred to one million ($500,000 to $1,000,000) NAFYC, and three and one-quarter percent (3.25%) from one million and above ($1,000,000 to above) NAFYC.

[ 5 ] NAFYC stands for Net Annual First Year Commission. The parties agreed that the terms “total production” and NAFYC have the same meaning.

[ 6 ] The plaintiff maintained that the $300,000 of NAFYC was merely a threshold for him to cross in order to qualify for a bonus. Once that bonus threshold was achieved, then he became entitled to 2 per cent on total production of NAFYC. The defendants agreed that the $300,000 was indeed a threshold but argued that the bonus would only be payable upon total production of NAFYC over and above $300,000.

[ 7 ] It was agreed that the NAFYC, for the purposes of the bonus analysis, was $447,169.95 for 2006 and $581,118 for 2007.

REVIEW OF EVIDENCE

BRIAN LAWRIE

[ 8 ] The plaintiff worked for Ferrier and Associates Inc. (Ferrier) as a brokerage manager from 1999 to 2005 until that entity was purchase by MGA by way of an agreement dated October 17, 2005. MGA was owned and operated by Rahul Bhardwaj (RB) and Margaret Nilevsky (MN). MGA made it a condition of the Ferrier transaction that Lawrie and another Ferrier employee execute employment contracts with them. The Lawrie employment contract became the ICA.

[ 9 ] Prior to April 2005, Lawrie’s employment at Ferrier brought him $4,000 as a monthly base salary. According to his evidence, he was also entitled to “override” on individual broker sales. Override is a kind of sales commission collected by an executive or manager in addition to the commission received by a subordinate broker. His employment with Ferrier evolved into a full-time management role by the spring of 2005. He no longer received an expense allowance. His reported income for 2005 was $60,468. This included $9,420.15 received from MGA following its purchase of Ferrier.

[ 10 ] Lawrie first met MN and RB in the summer or fall of 2005 at a time when MGA was involved in negotiations with Ferrier. Lawrie and MGA engaged in discussions about Lawrie’s proposed role as a brokerage manager and consultant. These discussions bore fruit. They led MGA to draft up the ICA for Lawrie’s execution. After making some changes on a draft document, which changes were initialled, Lawrie executed the five-page ICA on November 1, 2005. RB signed on behalf of MGA.

[ 11 ] Lawrie continued in his role as brokerage manager in accordance with the ICA. On August 16, 2007, Lawrie sent the following message via electronic mail (email) to RB:

Subject: Contract & Bonus.

Good morning Rahul,

I have asked you at least four times over the past year to provide me with an official copy of my employment contract and to date rec’d [sic] nothing. This is getting a little annoying to say the least. Could you please provide me with a copy at your earliest convenience.

Secondly, it is now over eight months into the new business year and I have yet to see one penny of bonus for 2006 production of MGA Canada. I thought this was to be paid quarterly but apparently it is not at all. Can I have an explanation as to the system of bonus that you are using?

Your comments would be appreciated.

Thanks, Brian

[ 12 ] On December 14, 2007, Lawrie provided his bonus entitlement calculation for 2006 in a letter addressed to RB and copied to MN. Applying the 2 per cent to the entire NAFYC for that year ($447,169.95), he arrived at the amount of $8,943.40.

[ 13 ] On March 3, 2008, MGA Canada provided its own bonus calculations to Lawrie in a one page letter. MGA used NAFYC numbers of $400,485.18 for 2006 and $406,856.51 for 2007. It applied the 2 per cent figure to the portion of NAFYC which exceeded the $300,000 threshold in the respective years ($100,485.18 for 2006 and $106,856.51 for 2007). This resulted in a total bonus for the two years of $4,267.42. The letter setting out the calculations was sent to Lawrie with an attached cheque for that amount.

[ 14 ] On March 10, 2008, in a handwritten note to MN on MGA stationary, Lawrie advised as follows:

Good Morning Margaret: I am returning this offer as ‘unacceptable’ and will be leaving the agency in the near future.

Sincerely, Brian Lawrie

[ 15 ] Shortly thereafter, Lawrie provided MGA a formal letter of resignation dated March 17, 2008, which read as follows:

Subject: Letter of Resignation

This letter is formal notification that I will be leaving my position as Marketing Director of MGA Canada Inc., effective the end of the month, March 31, 2008. I trust that this is satisfactory and wish both of you success in the future.

Sincerely,

Brian Lawrie

[ 16 ] Lawrie did not remain on at the brokerage until March 31, 2008. On March 17, he was provided with a letter from MGA which read as follows:

To: Brian Lawrie

This letter is to confirm exceptance [sic] of your resignation from your independent consultant contract with MGA Canada Inc. as of March 31, 2008. Please find enclosed cheque for $2,500.00 as final payment for the period from March 17, 2008 to March 31, 2008.

We wish you the very best in your retirement.

Sincerely, Margaret Nilevsky
Managing Director

Rahul Bhardwaj
Managing Director

[ 17 ] Following his resignation from MGA, Lawrie accepted a position at the Club at Bond Head. He chose not to seek employment in his previous field of work. He has not returned to the insurance brokerage business since leaving MGA.

[ 18 ] In cross-examination, Lawrie conceded that he did not report the expense stipend from Ferrier on his tax returns. He recalled reviewing the draft ICA but could recall no discussions with MGA about the bonus itself. Lawrie admitted to reviewing the draft ICA and making the initialled changes on the document prior to executing same. He conceded that the ICA called for increased total production each year. He understood that his intended role with MGA was to manage the brokers who had come over with the Ferrier book of business. He recognized that his bonus would be based on new total production. Lawrie recalled a meeting with RB following the email of August 16, 2007, at which he was provided with a copy of the ICA together with RB’s own interpretation of the bonus provision. Although he was unhappy with RB’s version of how the bonus was to be calculated, Lawrie did not harbour any desire to leave MGA at that time. According to Lawrie, RB invited him to provide his own bonus calculations.

[ 19 ] Lawrie advised that “QFS” was a competitor with MGA Canada. Lawrie had been approached by QFS to join them as sales manager on several occasions between 1998 and 2007. Lawrie denied having any dialogue with QFS in January 2008. He denied encouraging any of the former Ferrier brokers (Doyle, Jenkins or Cook) to leave MGA for QFS after his own dispute with MGA arose. Lawrie denied threatening to ruin MGA’s business. After leaving MGA, he did not seek out further employment in the insurance business.

[ 20 ] Lawrie impressed me as a very credible witness with a good handle on the nature of the insurance business and brokerage management. He admitted that he did not declare the $2,000 per month expense stipend from Ferrier to Revenue Canada. I am not persuaded that this should impact on his credibility as it pertains to the issues in this case. I heard no evidence that Lawrie was a non-performing party to the contract or that he was in any way dishonest or incompetent in the discharge of his duties. I accept his evidence that he believed that “growth in business” meant new business or NAFYC in a given year.

(continued verbatim in the same structure…)

[ 70 ] The plaintiff is entitled to judgment against the defendants in the amount of $20,565.76 plus interest as set out in paragraph 58 above.

[ 71 ] If the parties are unable to agree on the issue of costs, then the plaintiff shall have until April 30, 2012, to make written submissions on costs, limited to five pages. The defendants shall have until May 11, 2012, to make responding submissions, limited to three pages. The plaintiff shall have until May 18, 2012, to make reply submissions, if any, limited to two pages.

McCARTHY J.

Released: April 20, 2012