ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-50202

DATE: 20130712

BETWEEN:

PETER LAGEVEEN

Plaintiff

– and –

JOHN DE HAAS and EXPERT HOME EXTERIORS and 1766885 ONTARIO INC.

Defendants

Peter J. Bishop, for the Plaintiff

Jaye E. Hooper, for the Defendants

HEARD: May, 13-17 and 21-24, 2013

REASONS FOR decision

POLOWIN J.

[1] In March 2010, the Plaintiff, Peter Lageveen (“Peter”), left his employment with Kaycan and went to work with John de Haas (“John”) and Expert Home Exteriors (“Expert”). The nature of their business relationship was the focus of this trial. According to Peter, John approached Peter and asked him to leave Kaycan and become a 50% partner in Expert. According to John, Peter approached John repeatedly seeking work as a salesman with Expert. John took him on as an independent contractor working in sales. According to John, Peter was to receive a commission on all new sales generated by him equivalent to 40% of the profit for each contract he secured. In any event, however characterized, the business relationship was short lived, and was terminated by John in October 2010.

[2] Expert is owned and operated by the corporate Defendant 1766885 Ontario Inc., a company duly incorporated in the Province of Ontario. John and his wife Susan de Haas (“Susan”) are the sole shareholders of this company. Expert carries on business as a supplier and installer of residential house siding and other building materials. Expert bids on contracts from residential home builders, seeking work from both tract home builders and individual home builders. Expert utilizes independent contractors for installation. While John pled that Peter was hired as an independent contractor working in sales, at trial it was conceded that Peter may have functioned as a dependent contractor, as that concept is understood in law.

[3] The Plaintiff’s pleadings and his theory of the case evolved through the course of the litigation. Initially it was pled that John and Peter entered into a partnership agreement, whereby Peter would become a 50% partner of John’s. Peter pled that John had made a number of promises and representations to him, on which he relied, in deciding to resign from Kaycan. However, in the Amended Statement of Claim, dated October 6, 2011, the following was stated at paras. 12 and 13:

12. The Plaintiff started working as partner of Expert Home Exteriors on March 1, 2010. The plaintiff now recognizes that although he and de Haas referred to each other as “partners”, his business relationship with de Haas and other defendants was not that of true, legal partnership pursuant to the Partnership Act, R.S.O. 1990, Chapter P.5 and the law of Ontario generally. Rather, based on his express and implied agreements with the defendants, the plaintiff had a contractual business relationship Pursuant to the plaintiff’s unwritten partnership contract with the defendants, pursuant to which the plaintiff was entitled to the following:

a. A 50% share in all profits and retained earnings of the firm for all sales and contracts resulting from business opportunities that arose after March 1, 2010;

b. A weekly draw against earnings in the amount of $1,200.00 per week;

c. Full time use of a firm motor vehicle with all expenses to be paid by Expert Home Exteriors;

d. Prompt reimbursement of all normal business-related expenses incurred by him, including all vehicle expenses, business promotion, business meals, training, and travel, etc.

13. In this pleading, the plaintiff uses the term “partner” in the sense of the non-legal or “layman’s” understanding that the plaintiff and de Haas had of the relationship between them and that, as they assumed and intended, customers, suppliers and contractors of the firm would have of the relationship between them.

[4] In his claim Peter sought:

a. General damages and/or equitable compensation in the amount of $800,000.00;

b. An accounting by the defendants of all sales, sales revenues, net income and/or profits realized by them in the period from March 1, 2010 onwards;

c. An accounting and valuation by the defendants of all business assets, goodwill, supply contracts, business contracts and projected sales of Expert Home Exteriors as of the present date and/or the date of trial;

d. In addition or in the alternative, an order that the plaintiff is entitled to an interest by way of constructive trust in all of the business assets, goodwill, supply contracts, business contracts and projected sales of Expert Home Exteriors in the amount of $800,000.00;

e. In addition or in the alternative, an order that the defendants pay to the plaintiff restitution or equitable compensation equal to the fair and realizable value of the plaintiff’s share of net income or profits generated by Expert Home Exteriors since March 1, 2010 and of the value of Expert Home Exteriors’ assets, goodwill, business contracts and projected sales as of the date of valuation;

f. The sum of $100,000.00 as punitive damages or equitable compensation as a disincentive to deliberate breach of contractual and fiduciary duties, conversion of assets and misappropriation of property;

g. Special damages in an amount to be determined at the trial, particulars of which will be provided prior to the trial;

h. Pre- and post-judgment interest on all amounts found owing pursuant to the Courts of Justice Act, R.S.O 1990, Chapter C.43;

i. Costs of this action on a full indemnity basis; and

j. Such further or other relief as to this Honourable Court may seem just.

[5] It was pled that the Defendants repudiated and substantially breached their contractual fiduciary and equitable obligations to Peter. Further, relying on the doctrine of unjust enrichment, Peter pled that the Defendants have been unjustly enriched by and through the efforts and sacrifices he made, that he suffered a corresponding detriment from that and there was no jurisdictic, contractual or commercial reason for the Defendants to have and retain the benefit of this enrichment in this case.

[6] However, during the second day of John’s cross examination at trial, on May 22, 2013, a new theory of the case was advanced by counsel for Peter. That theory was based on the tort of deceit and fraudulent misrepresentation. It was theorized that John and Susan planned as early as July 2009 to bring Peter on as a salesman for only a short term. Once Peter brought in some big tract house builders to Expert, they intended to terminate their relationship with him. However, as they knew he would never leave Kaycan in such circumstances, they duped him into leaving under false pretences.

[7] On May 23, 2013, the last day of trial, the Plaintiff brought a motion for leave to further amend his pleadings. This motion was not opposed by the Defendants, for costs and expediency reasons. The motion was granted. The amendments sought were extensive and reflected the Plaintiff’s new theory of the case. At paras. 8, 9, and 26 the following is pled:

8. In the period of time both before and after January 21, 2010, the defendants made various promises, assurances and representations that the plaintiff relied on in agreeing to resign from his employment with Kaycan and enter into a contract and business relationship with the defendants, including the following:

a. The defendants made the statement, assurances and representations set out in sub-paragraph 7(a) to (e) above.

b. The defendants assured the Plaintiff that as the business, revenues and profits of Expert Home Exteriors increased over the next few years, the amount that the plaintiff would earn from the business would continue to increase.

c. The defendants de Haas said to the plaintiff: “I will teach you the ropes” and “I will teach you everything you need to know to run the business”.

d. The defendants de Haas assured the plaintiff that “we are in this for the long run”. The defendant de Haas informed the plaintiff of his plan for the future – that the Plaintiff would learn everything he needed to know to run the business so that, in a few years, when de Haas was ready to retire, plaintiff would take over and acquire his interest in the business.

9. The defendants were fraudulent in making the promises, assurances, statements and representations referred to in para. 8 above in that:

a. They made these promises and assurances to the plaintiff knowing that they had no intention of honouring them;

b. They made these statements and representations to the plaintiff knowing that they were false and misleading;

c. In making these promises, assurances, statements and representations, the defendants intended to deceive and mislead the plaintiff into deciding to resign from his employment with Kaycan and enter into a business relationship with the defendants; and

d. They knew and intended that this business relationship with the plaintiff would be a relatively short-term relationship that would benefit the Defendants at the expense of the plaintiff.

26. On October 12, 2010, without cause, prior warning or any notice, the defendant de Haas advised the plaintiff that their partnership agreement and any business relationship between them was terminated effective immediately. The plaintiff was shocked by this and asked de Haas why he had suddenly decided to terminate their partnership. De Haas refused to give any reasons for this except to say that the business of Expert Home Exteriors could not sustain both of them. However, the plaintiff pleads that this was untrue and intended by de Haas to conceal the true reason why he decided to terminate their partnership agreement and business relationship. The plaintiff pleads that, at all times since before December 1, 2009, the defendants knew and intended that they would terminate their business relationship with the plaintiff after they had achieved the results described in paras. 20 and 21 above.

[8] The Plaintiff no longer seeks an accounting or valuation. Any claim of a “partnership” or a “partnership agreement” has been removed. References to him being a “partner” have been removed. However, it is still alleged that Peter was led to believe he was a partner of John’s in Expert.

The Evidence

[9] The evidence of the parties is diametrically opposed on almost all issues, fundamental or otherwise. While I have reviewed and considered all of the evidence, I do not intend to detail same in these Reasons. For example, a significant amount of time was spent in the cross-examination of John with respect to how Peter came to attend at John’s home in Smiths Falls on a Saturday in the summer of 2009 for a day on John’s boat, whether John knew in advance that Peter’s son would be attending, whether Peter had been invited in advance to stay for a barbeque, etc. This evidence, while considered, will not be set out in detail. Suffice it to say that the Court is aware that it is Peter’s position that it is from this time that the Defendants’ plot to deceive Peter into leaving Kaycan was conceived. It is Peter’s position that the Defendants were at pains to avoid a conclusion that on that Saturday there was a business purpose for them, because that is when they started to discuss their fraudulent plan.

[10] I turn then to Peter’s evidence. He is 55 years old, a CEJEP graduate, who spent most of his working life in sales positions. He worked as a branch manager with Kaycan from 2005 to the end of February 2010. Kaycan manufactures and sells exterior building products, including siding. As a branch manager he earned approximately $70,000.00, plus bonus and benefits.

[11] Peter described his duties at Kaycan. He was responsible for all branch activities including the sales force and warehouse. He was also to source out new customers for Kaycan, both installers and builders and to encourage builders to spec out Kaycan products. Peter testified that if he got a builder to agree to use a Kaycan product, he would discuss it with an installer favourable to using Kaycan and connect the two. He was a member of the Greater Ottawa-Carleton Home Builders Association so as to establish relationships with builders.

[12] Peter met John in 2006. John had used Kaycan products on occasion. At the time John was mainly working for smaller builders and contractors. He described that they became friends, meeting for coffee and lunch. John became a more frequent customer. Sometime around 2007, Peter met with Karen Milroy, the construction manager at Monarch Homes. She agreed to spec Kaycan products at their Traditions project. He recommended John and Expert for installation. John quoted the project and was awarded the project.

[13] Sometime in 2007-2008, Peter was developing Cardel Homes as a client of Kaycan for their Kings Grant project in Richmond. They agreed to use Kaycan products and were looking for an installer. Peter recommended John and Expert. Further, he recommended John and Expert to the Regional Group for their Kemptville project. Peter also testified that he approached his superiors at Kaycan, on more than one occasion, to increase Expert’s credit limit.

[14] Peter stated that early in 2009 he told John that he was bored at Kaycan, there was no room for advancement and he was looking for new challenges. He had not received an increase in salary for 2008 or 2009. He said that at the end of July or early August 2009 John invited him to his home in Smiths Falls for a barbeque and to go on his boat. Peter thought that this was to thank him for the business he brought to Expert. At a meeting on December 1, 2009, John asked him if he was serious about looking for something different to do. Peter testified that John said that his business was growing leaps and bounds, that he needed someone to work with and he was looking for a partner. Details were not discussed. John said that business slows down in the winter and they would discuss it in the spring. Peter remembered asking John if his wife was on board and that John said not to worry, his wife is not the decision maker in his business.

[15] Peter testified that John showed up in his office at Kaycan during the week of January 10, 2010. John said they “needed to do it sooner rather than later” as business was picking up. Peter told John that his agenda was booked for two weeks and he needed to give five weeks notice, therefore he could not come to Expert until the end of February 2010. Peter did not recall other details with respect to this meeting. However, on a pre-planned trip to Montreal for John to tour the Kaycan plant, on January 21, 2010, they had further discussion. John told him he was looking forward to Peter becoming involved with new customers. John told him that he would teach him the business, how to quote jobs and work with the crews. In addition, John said that at some point he might want to retire (no date was specified) and that Peter could buy him out.

[16] Peter testified that during the car trip to Montreal they discussed his role at Expert. He was to solicit new business for the company, to work with John to manage crews, to ensure that product was available at work sites and to do quotes for jobs. The only discussion with respect to their financial arrangement was that Peter would share in all new business of Expert on a 50%/50% basis with John from the time he joined the company. Peter testified that their agreement was that he was entering into a partnership with John, as an equal partner.

[17] Peter stated that he told John sometime in late January, early February 2010 that he had a car and a cell phone at Kaycan, which he would have to return. John agreed to purchase him a Blackberry, which John brought to him at his office at Kaycan. John told him he had a truck for him to use. Peter picked up the truck in the first week of February.

[18] Peter sent out a flurry of emails in February 2010 to various homebuilders introducing himself and Expert Homes. The e-mail to Muirfield Homes bore fruit. Expert was invited to bid on their Laurentian Highlands project in Petawawa. Peter picked up the tender documents and John prepared the quote. In March they were advised that Expert was awarded the contract.

[19] Peter commenced work at Expert on March 1, 2010 but soon left for a pre-planned golf holiday. Most of the time in March 2010 was spent with him contacting potential new clients, picking up materials and touring the job sites with John to learn what was going on. John prepared the quotes. In fact, Peter testified that he only prepared one quote (the “Boulat” quote) while he was at Expert, with John’s assistance. John showed him how to quote on architectural drawings.

[20] Peter testified that he first spoke to John about money in late March 2010. He told John he needed to receive an income as he was living off of his savings. John said he would pay him $1,200.00 a week and Peter told him that was ok for now. John said “not to worry, it will work out as we go.” Peter stated that anytime he brought up money, John told him not to worry, that they were in it for the long haul and that it would work out. In late May, early June 2010, Peter asked John for additional money so that he could put down first and last month’s rent for a home he wished to rent. Peter gave him a cheque for $2,700.00.

[21] Peter kept notebooks of his work activities while he was at Expert. He gave evidence with respect to those activities. Without going into great detail it appears that John directed Peter as to what he was to do on a daily basis. In June 2010, Peter obtained work from Potvin Construction who was doing work on a Minto Homes site. Peter acted as the supervisor on this job. John did not like Potvin or Minto and did not want to deal with them. Peter testified that up until the end of August 2010, his relationship with John was very good. They met every Friday (payday) and once or twice a week as well. John raised no problems or concerns with respect to his performance.

[22] Peter described his continued efforts to obtain new business for Expert. He knew Carmen Fiego, a co-owner of Holitzner Homes from his activities at the Greater Ottawa-Carleton Home Builders Association, while at Kaycan. He sent an email to Holitzner Homes soliciting work on March 3, 2010. Ms. Fiego told him to contact her husband Barry as it was he who determined who worked on their sites. Peter saw Barry at different job sites. Barry was looking for an installer to replace his main installer, Dave Michaels Enterprises, as Mr. Michaels was retiring. Barry advised that he had been approached by several individuals and he had not decided who he would use. He did state that he would let Expert quote on a Holitzner Homes townhouse project in Kanata North. Peter picked up the drawings on June 24, 2010. Barry told him there were other upcoming projects and that he had not decided which installer he would use in the future. Peter told Barry he wanted him to meet John. John prepared the bid (dated July 5, 2010). John, Peter, and Barry met on August 31, 2010. Expert had been awarded the job shortly before this meeting. Peter testified that he introduced John to Barry as his partner at the meeting.

[23] Peter stated that in September 2010, his conversations with John became more “elusive.” For example, he heard from someone else that Expert was awarded Phase 2 of the Monarch Soho Project. John also bought a $60,000.00 piece of equipment without telling him. They met on Friday, October 8. Peter told John that the truck he was driving needed significant repairs ($1,500 - $1,800), that he did not have the money to pay for them and could John cover it. John reacted with frustration but told him to make an appointment for the repair.

[24] Peter testified that John attended at his home on October 12, 2010. He told Peter that they “could not continue down this path”, they could not continue in business together. Peter was in shock. John said he would pay Peter for the remainder of the month and that he could continue to use the truck for the remainder of the month. He told Peter to sort himself out and move on. Later in his evidence, Peter said that John told him he would receive his weekly money for about a month. Peter received cheques through to November 4, 2010.

[25] Peter testified with respect to his difficulties in obtaining employment since October 2010. In September 2011, he obtained part-time employment with Homesense as a clerk earning $10.69 an hour. He later obtained part-time employment at Amica, a retirement home, as a concierge at $13.75 an hour. In April 2012 he obtained a server job in the dining room at Amica at $15.02 an hour, for 70 hours every two weeks. Peter continues however, to look for branch manager positions or positions in construction.

[26] Peter was referred to his damage claim. Exhibit 25 was a list of all expenses he is claiming from the Defendants, for fuel and vehicle maintenance in the amount of $7,140.77. Exhibit D outlines his claim to “income” from old (before March 2010) and new customers of Expert for new projects. He claimed some $193,627.06 until May 31, 2013 on his income claim. He explained that when a job was quoted, quotes were based on 33% for materials, 33% for labour and 33% for profit. He used a 10% profit figure in Exhibit D as this figure came from John in documents John presented him on October 12, 2010. Where he had invoices (provided in discovery) he utilized same in his calculations and came to a unit price by dividing the number of units into the total invoice price. He stated that he had recently gone out and counted all the units in various projects and estimated how many would have been done in each time period. Peter also testified that when a builder would start a new phase in a development, there would have been a new tendering process.

[27] In cross-examination, Peter agreed that he did not know anything about the structure of Expert when he became a “partner”. He said that he did not see any financial records, accounts receivable, liabilities documentation or cash flow statements. He was not a signing officer of the company, no documentation shows him as a partner, nor did he invest any money in the company. He did not have a company credit card. He signed no personal guarantees on Expert’s liabilities and had no idea in March 2010 what those liabilities were or how they were financed. He had no idea how lines of credit with suppliers were secured. Peter testified that John told him he would retire in 5-7 years, and that Peter would have the chance to buy him out, but they did not value the business or agree on a purchase price.

[28] Peter conceded that while at Kaycan, for some builders, he recommended more than one contractor when recommending Expert. He agreed that Expert would still have to tender even though he had recommended the company. He did not agree that the deal with John was that he would get 40% of the profit on business he himself would bring in. He did agree that he was supposed to run the jobs he brought in, to do quotes for them, coordinate the job with materials and labour, to work with the customers to ensure that the job was done to their satisfaction, but only at some time in the future. With respect to the Statement given to Peter on August 25, 2010, Peter did agree that John expressed frustration at having to pay additional amounts to FRO on his behalf and extra money to him.

[29] I turn to John’s evidence. John is 61 years old, has a grade 11 education and has worked in the siding industry for many years. He started Expert in 2006. To finance the business he arranged for an overdraft at the bank and sold a property in Smiths Falls. He invested the equity in that property, some $150,000.00 into the business. His wife Susan invested $120,000.00 which she received from an inheritance. John described the first years of business as pretty lean. The business was incorporated in 2009 at the urging of their accountant. John owns 51% of the shares, Susan owns 49% of the shares.

[30] John explained that he runs 13 crews who do installation, who are independent contractors, paid on a piece work basis. He stated that builders chose siding companies based on reputation, generally allowing three or four to bid on a job. By 2009, Expert had established a good reputation. Half of its work came from referrals.

[31] John met Peter in 2006 at Kaycan. Since then Expert’s sales with Kaycan probably doubled each year. At times, he and Peter went for coffee or he saw Peter in his office. John stated that they would talk business and Peter would promote Kaycan products. John stated that Peter would tell him he was bored with his job, disgruntled with Kaycan and looking for different business opportunities. Peter would ask John if he heard of business opportunities. John stated that in August 2009 Peter raised again that he was bored etc. John went home that night and discussed it with Susan. He asked Susan what she thought of taking on a salesperson. Susan did not think it was a good idea. They were making a profit and she was content with the situation. While he eventually got her to see it his way, John decided to let it lie.

[32] John explained that he thought Peter was presentable, he worked in the industry and he would have contacts with builders. John thought that Peter’s role would be to get clients, quote jobs and then run the jobs. This was what John did when he worked for his previous employer, Tony Olsen Enterprises. John testified that he decided to take Peter on. He had a meeting with Peter in late November, early December 2009, where Peter had again mentioned he was disgruntled at Kaycan. John told him he could have a position for him but that it would not happen until spring 2010.

[33] John testified that he told Peter that it would be a sales position, and that he would have to do quoting and run the jobs. He told Peter that Peter would be getting 40% of the profit on the jobs Peter brought in. John described that Peter was pleased the job was offered to him but John got the feeling Peter wanted more than a sales job. He told Peter that this definitely was not a partnership, that his wife was his only partner.

[34] The next time they spoke was in mid January 2010. Peter called him asking for a meeting. He said he was very excited about joining Expert and wanted to start right away. John decided to have a heart to heart discussion with Peter. He explained to him that 40% of the profit meant that he would only get 10% of the jobs he brought in. He explained that 40% of a 25% profit margin (John used a 25% profit margin when pricing jobs) is approximately 10%. Using the 10% figure he would have to bring in $1,000,000.00 in business to earn $100,000.00, which is what John thought Peter was earning at Kaycan. Peter told John he would not have a cell phone or a car upon leaving Kaycan and that he could not afford to buy a car. John told Peter he had a truck which was leased. Peter could have it but would be responsible to pay the lease payments and insurance. John also said he would buy Peter a cell phone but Peter would be responsible for its costs. John told Peter he would pay him $1,000.00 per week as an advance towards his commissions. John testified that Peter had no problems with any of this. However, in March 2010, John recognized that Peter would have costs for the car including gas and maintenance, so he bumped the $1,000.00 per week advance up to $1,200.00 per week.

[35] John testified that Peter started as a salesman in March, 2010 and that he introduced him as a salesman to others. He expected that it would take Peter a couple of months to learn how to do quotes and to learn how job sites operate. John observed that Peter knew sales but did not know the first thing about “take-offs”, “drawings” or doing quotes. John explained that Peter became involved in pick up and drop-offs at job sites, when he told John he was at loose ends in the morning and wanted to learn more about the job sites.

[36] John gave Peter a learning session with respect to how to do bids. Peter did the Boulat bid and John corrected his mistakes. Peter completed no other bids while at Expert. John explained that Peter passed drawings on to him and would say it was a rush. John did not think Peter was comfortable doing bids. John spoke with Peter, in early May. Peter had thought the jobs would come in sooner and faster. John testified that he tried to uplift him, telling Peter, it was only the beginning and that he was in it for the long haul. John explained that he observed a change in Peter over the months. Peter was not as excited as he was in the first couple of months and he would not do more than he had to.

[37] John testified that in June and July Peter was doing deliveries. He did no quotes. By July, John was not meeting with Peter frequently. He stated that Peter was getting under his skin by continuously borrowing money from him. Peter asked John for an additional $2,700.00 in June 2010 for first and last month’s rent, which John provided. On Friday July 23, 2010 when John gave Peter his $1,200.00 draw cheque, Peter requested another $5,500.00, saying he was behind on his bills and that the Family Responsibility Office (“FRO”) was after him. John went to the bank machine and gave him $500.00 in cash. On July 27, he gave him a further $2,900.00. John described Peter as panicky, under stress and insistent. He told Peter he would not give him money for FRO as FRO would come to Expert directly, which FRO later did. John paid $1,726.00 to FRO on August 23, 2010 on Peter’s behalf. As of August 6, 2010, John reduced Peter’s weekly advance to $1,000.00, the additional $200.00 per week was to go to FRO.

[38] By August 2010 John was frustrated. From his perspective Peter had portrayed himself as competent and self-motivated, great in sales and management but he was not proving it to John. In late August, John met with Peter and gave him a Statement, dated August 25, 2010. It detailed all of his advances, the monies borrowed, the monies for FRO, his truck and cell phone expenses. The expenses totalled $37,059.28. The Statement also set out the business Peter had brought in for Legacy Homes, Muirfield Homes, Potvin and Cox totalling $40,506.00. At 10% Peter was entitled to $4,050.60. John prepared these Statements in order to have an impact on Peter. John testified that Peter made no comment as to the expenses listed, the builders listed, or why John’s business was not included in the Statement. John testified that Peter never asked John about the business John was bringing in.

[39] John stated that on September 30, 2010 Peter asked him for an additional $2,000.00. He could not remember the excuse Peter gave him but he told Peter that he would give it to him but it would never happen again, no matter what reason. During the week of October 6, 2010, Peter advised him that the truck needed repairs and John told him to go ahead. On the Friday before Thanksgiving they were at Tim Horton’s so that John could give Peter his advance. Peter wrote something on a napkin and passed it to John saying, “this is what I need.” It was a request for an additional $1,800.00. John described Peter as arrogant at this meeting.

[40] John was fuming mad. He went home and discussed the situation with his wife and spent much of the long weekend looking at numbers. He felt they could not go on. He prepared the documents dated October 11, which set out Peter’s sales ($331,308.10), his 10% commission thereon ($33,130.81) and his advances, including expenses for the truck and the cell phone ($47, 192.45). Peter was in a negative position by over $14,000.00. He and Susan decided they could not advance or give him more money. John went to Peter’s home on the Tuesday after Thanksgiving and told him he could no longer work at Expert.

[41] John stated that Peter did not dispute the builders listed on the October 11, documents he prepared, nor did he ask John what builders John had brought in. John told Peter he would give him use of the truck and the cell phone for two weeks and four weeks of advances. Additionally, John later paid FRO $1,400.00 on October 25, 2010. In all John paid Peter, or advanced on his behalf, some $53,487.45.

[42] John was directed to the company’s Financial Statements. He testified that in fact, in 2011 the company did not achieve a 25% profit margin and that 7.58% was Peter’s true profit margin on the 40% deal. John explained that he used the 10% figure in the August 25 and October 11 statements he gave Peter, because that was the maximum Peter could have earned.

[43] In cross-examination, John stated that Peter put Expert forward to Monarch Homes in order to pitch Kaycan products. Expert still had to quote to get the work. John stated that builders consider price, a company’s track record, whether it operates a clean job site, safety issues and service when it decides on contractors, but that price is the most important issue. John believed that he had already done work for Cardel Homes (Richmond Oaks) where he installed Gentek products. This was before he got the Kings Grant project. He did not agree that Peter helped him obtain Cardel as a client. He also did not believe that Peter was responsible for him getting the Regional Group project in Kemptville. He said that a West Hill Homes site foreman went to work for Regional and put John’s name forward.

[44] John testified that when he talked to Susan about Peter coming to work for Expert he said there was no risk because Peter would be a commissioned sales person and would only be paid on results. Taking Peter on would not increase John’s workload as Peter was to be responsible for all of his jobs including doing quotes. Susan went along with the idea. John testified that Peter asked him about being paid the advances weekly during their January 2010 meeting. Peter said he could not survive without the advances and John told him $1,000.00 was the best he could do. John agreed that he told Peter that rewards would not come in for six to eight months or longer.

[45] John agreed that Expert got two new homebuilder clients, Muirfield Homes, and Holitzner Homes, while Peter was there, but not necessarily all by Peter’s efforts. John also agreed that Peter was instrumental in establishing the initial connection with Barry at Holitzner Homes. However, he noted that while Expert was successful on its bid on the Holitzner Homes townhouse project in Kanata North, it was not successful on its bid for Holitzner in Barrhaven. Expert did get more work from Holitzner in 2011.

Determination

[46] As indicated above, the Plaintiff’s pleadings and his theory of the case evolved through the course of this litigation. During the second day of cross-examination of John, counsel for the Plaintiff raised for the first time the issues of fraud and deceit when questioning him. Counsel candidly advised the Court that a new theory of the case had only just come to him. The Plaintiff now alleges that the Defendants took the Plaintiff on under false pretences, with certain promises and assurances of a long-term relationship and other misrepresentations. The Plaintiff alleges that the Defendants had no intention of carrying on a relationship with him beyond the time they needed to achieve their ends. They knew the Plaintiff would not be interested in a sales position, so they had to give him the impression, a false impression, of a partnership or a long term business relationship. When they achieved what they wanted, that is, two residential homebuilders as clients, Holitzner Homes and Muirfield Homes, they cut the Plaintiff loose. According to the Plaintiff, it was a fraudulent and dishonest scheme hatched by John and Susan as early as August 2009. The Plaintiff sought an amendment of his Statement of Claim on the last day of trial.

[47] Counsel for the Defendants submitted that civil fraud has a higher standard of proof than the balance of probabilities standard. This issue has been canvassed by the Supreme Court of Canada in Continental Insurance Co. v. Dalton Cartage Co., 1982 13 (SCC), [1982] 1 S.C.R. 164. The following was stated at p. 169:

Where there is an allegation of conduct that is morally blameworthy or that could have a criminal or penal aspect and the allegation is made in civil litigation, the relevant burden of proof remains proof on a balance of probabilities. So this Court decided in Hanes v. Wawanesa Mutual Insurance Co., 1963 1 (SCC), [1963] S.C.R. 154. There Ritchie J. canvassed the then existing authorities, including especially the judgment of Lord Denning in Bater v. Bater, [1950] 2 All E.R. 458, at p. 459, and the judgment of Cartwright J., as he then was, in Smith v. Smith and Smedman, 1952 3 (SCC), [1952] 2 S.C.R. 312, at p. 331, and he concluded as follows (at p. 164):

Having regard to the above authorities, I am of opinion that the learned trial judge applied the wrong standard of proof in the present case and that the question of whether or not the appellant was in a state of intoxication at the time of the accident is a question which ought to have been determined according to the "balance of probabilities".

It is true that apart from his reference to Bater v. Bater and to the Smith and Smedman case, Ritchie J. did not himself enlarge on what was involved in proof on a balance of probabilities where conduct such as that included in the two policies herein is concerned. In my opinion, Keith J. in dealing with the burden of proof could properly consider the cogency of the evidence offered to support proof on a balance of probabilities and this is what he did when he referred to proof commensurate with the gravity of the allegations or of the accusation of theft by the temporary driver. There is necessarily a matter of judgment involved in weighing evidence that goes to the burden of proof, and a trial judge is justified in scrutinizing evidence with greater care if there are serious allegations to be established by the proof that is offered. I put the matter in the words used by Lord Denning in Bater v. Bater, supra, at p. 459, as follows:

It is true that by our law there is a higher standard of proof in criminal cases than in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. Many great judges have said that, in proportion as the crime is enormous, so ought the proof to be clear. So also in civil cases. The case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject-matter. A civil court, when considering a charge of fraud, will naturally require a higher degree of probability than that which it would require if considering whether negligence were established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature, but still it does require a degree of probability which is commensurate with the occasion.

[48] Thus in cases where fraud or fraudulent misrepresentation is being alleged, courts have recognized the seriousness of such an allegation and the standard of probability is higher. The plaintiff bears the onus to prove that the elements of the action have been met.

[49] As set out by the Supreme Court of Canada in Parna v. G. & S. Properties Ltd., 1970 25 (SCC), [1971] S.C.R. 306, to establish a claim for fraudulent misrepresentation, a plaintiff must prove the following elements:

1. The defendant made a false representation of fact to the plaintiff.

2. The defendant made the false representation knowingly, or without believing it to be true, or recklessly without care to its truth or falsity.

3. The defendant made the false representation with the intent that the plaintiff would rely and act upon the false representation.

4. The plaintiff relied on the false representation to his or her detriment.

[50] A theory must be grounded in the evidence. In my view, the evidence in this case simply does not support the Plaintiff’s theory. The allegations of fraud, dishonesty and deception are unfounded, made with little, if not nothing, in support.

[51] According to Peter, both John and Susan were at pains to avoid the conclusion that the Saturday visit in Smiths Falls in the summer of 2009 had a business purpose for them. According to Peter, that is when they started to discuss their fraudulent plan. However, simply because the parties have a different recollection of that visit and how it came to be, does not make a fraudulent purpose. The Plaintiff also points to the discrepancies between the evidence of Peter and Susan as to what John says he discussed with her and when, from August 2009. From the Court’s point of view the discrepancies in their evidence support that their evidence was not scripted together. Further, from review of Susan’s evidence it appears that she views herself as the homemaker. She is not really involved or interested in the business. She was candid when she told the Court that she did not have much of a recollection of the timing or conversations stating “it did not mean anything to me” or “I didn’t give it much thought.” She trusted her husband to run the business.

[52] Peter also points to the fact that the business relationship was terminated within a month after Expert was awarded the Holitzner contract for Kanata North. However, the termination has to be viewed in the context of the evidence. John had already brought to Peter’s attention in late August 2010, by way of the August 25, 2010 Statement, the deepening financial hole he was in. Peter had already asked John for additional monies on several occasions. In September he asked for more. The documentary evidence before the Court fully supports the extra requests for money. It is reasonable for this Court to conclude that the final request for additional momies made by Peter on October 8, 2010 was the catalyst for John’s decision to terminate the relationship.

[53] In the last amendment to the Statement of Claim, any claims of a “partnership” or “partnership agreement” were removed. Many references to Peter having been a “partner” have been removed. However, in his evidence, Peter stated that John told him he was looking for a partner and that he was offered a partnership in the business. He was adamant that he was to share in all new business that came to Expert on a 50%/50% basis from the time he joined the company, even for builders who had already been clients of Expert, including Cardel Homes and Monarch Homes. Peter testified that their agreement was that he was entering into a partnership with John, as an equal partner.

[54] On the totality of the evidence before the Court, I cannot find that Peter was offered any form of partnership. It makes absolutely no commercial sense that a businessperson who had invested his wife’s inheritance and all the equity in property he sold for that purpose (together some $250,000.00), and assumed a line of credit and other liabilities, would simply hand over 50% of all new business to Peter for absolutely nothing. John had gone through lean years in business and it was finally showing profit. In addition to the financial contribution John and Susan made and the liabilities they shouldered, John invested sweat equity, working 10-12 hour days.

[55] It makes no sense that Peter would leave Kaycan without knowing the draw he would receive from Expert on a weekly basis, as Peter claimed. He would have this Court believe that John only told him later in March 2010 that he would pay him a weekly amount of $1,200.00. Peter was leaving a job that paid him $70,000.00 plus benefits. As the evidence revealed Peter was not in a secure financial situation. He needed John to advance him first and last month’s rent when he sought to rent his home in June 2010. He owed money to FRO and would not qualify for financing for a car. Peter would have needed money to live on a daily basis. Further, both Peter and John testified that a vehicle and a cell phone were discussed prior to his leaving Kaycan. In fact, Peter had the cell phone by at least February 3, 2010, according to an email that he sent. It is not believable that a cell phone and a vehicle were discussed in January 2010, but an advance or draw for Peter was not. I am satisfied that John told Peter prior to his giving notice to Kaycan that he would pay him an advance each week of $1,000, which would be reconciled against the commissions that he would earn on the business Peter brought in. I accept John’s explanation that he later decided later to raise this amount to $1,200.00 per week based on the fact that Peter would be responsible for gas and maintenance of the truck.

[56] There is no documentary evidence that supports in any way Peter’s assertion that he was to get 50% of all new business that came to Expert as he claimed. The documentary evidence supports John’s version of evidence. The Statements of August 25, and October 11, 2010, clearly set out that Peter only was to get 10% of the work he brought to Expert. It is interesting to note that there were no emails or correspondence to John from Peter after he received these Statements questioning in any way why the business John brought in to Expert was not included in the Statements. Nowhere in Peter’s evidence did he indicate that he ever challenged John on this issue or that he ever even asked for any information about the business John brought in. Further, I am left to wonder why if Peter was entitled to 50% of all business brought into Expert, he had to go to John, on several occasions, hat in hand, for additional monies, which would likely have been humiliating.

[57] This same documentary evidence also supports John’s assertion that Peter was to be responsible for all expenses related to the truck and the cell phone. Again, Peter raised no issue with respect to the way the expenses were shown on these Statements. In fact, the only issue Peter raised, in the email dated October 27, 2010, after his termination, was in relation to his allegation that John promised to cover him for one month with respect to the advances and the truck. In addition, Peter’s own Income Tax Return indicates that the expenses were taken into income and then deducted, rendering further support for John’s position that Peter was to be responsible for all expenses related to the car and the cell phone.

[58] I am mindful of the evidence of Linda Cousineau and Larry Tarasoff, Peter’s landlords from July 1, 2010. The Application to Rent supports John’s version of the issues. Mr. Tarasoff was advised by John that Peter would earn $60,000.00 plus bonus. The $60,000.00 roughly corresponds to Peter’s advances for one year. Mr. Tarasoff testified that Peter introduced John as his partner and John said it was a five year plan for Peter to learn the business and eventually buy John out. Ms. Cousineau testified that John introduced himself as Peter’s partner. However, on the totality of the evidence, for the reasons set out above, I do not find that Peter was offered a partnership in Expert, or that he was told that he would be a 50%/50% equal partner with John, entitled to 50% of all new business that came to the company. I accept that Peter was offered 40% of the profit on all new business jobs that he brought in and that he would be responsible for all of his vehicle and cell phone expenses.

[59] The Plaintiff has relied on the doctrine of unjust enrichment. The Supreme court of Canada has reviewed the law with respect to unjust enrichment in the case of Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269. Cromwell J. wrote on behalf of the Court. He stated that at the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain. He noted that a series of categories had been developed in which retention of a conferred benefit was considered unjust. However he stated that Canadian law does not limit unjust enrichment to these categories. It permits recovery when a plaintiff can establish three elements; an enrichment of or benefit to the defendant, a corresponding deprivation of the plaintiff, and the absence of a juristic reason for the enrichment. The following was stated at paras. 38–41:

[38] For the first requirement - enrichment - the plaintiff must show that he or she gave something to the defendant which the defendant received and retained. The benefit need not be retained permanently, but there must be a benefit which has enriched the defendant and which can be restored to the plaintiff in specie or by money. Moreover, the benefit must be tangible. It may be positive or negative, the latter in the sense that the benefit conferred on the defendant spares him or her an expense he or she would have had to undertake (Peel, at pp. 788 and 790; Garland, at paras. 31 and 37).

[39] Turning to the second element - a corresponding deprivation - the plaintiff's loss is material only if the defendant has gained a benefit or been enriched (Peel, at pp. 789-90). That is why the second requirement obligates the Plaintiff to establish not simply that the defendant has been enriched, but also that the enrichment corresponds to a deprivation which the plaintiff has suffered (Pettkus, at p. 852; Rathwell, at p. 455).

(2) Absence of Juristic Reason

[40] The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. To put it simply, this means that there is no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff, making its retention "unjust" in the circumstances of the case: see Pettkus, at p. 848; Rathwell, at p. 456; Sorochan, at p. 44; Peter, at p. 987; Peel, at pp. 784 and 788; Garland, at para. 30.

[41] Juristic reasons to deny recovery may be the intention to make a gift (referred to as a "donative intent"), a contract, or a disposition of law (Peter, at pp. 990-91; Garland, at para. 44; Rathwell, at p. 455). The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff's expense is required by law, such as where a valid statute denies recovery (P. D. Maddaugh and J. D. McCamus, The Law of Restitution (1990), at p. 46; Reference re Goods and Services Tax, 1992 69 (SCC), [1992] 2 S.C.R. 445; Mack v. Canada (Attorney General) (2002), 60 O.R. (3d) 737 (C.A.)). However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as "the legitimate expectation of the parties, the right of parties to order their affairs by contract" (Peel, at p. 803).

[60] I have great difficulty in understanding how the doctrine of unjust enrichment applies to the facts in this case. Firstly, bringing new jobs to Expert was precisely what Peter was brought on to do. (I hesitate here to use the word employ, but for reasons which will be set out more fully below, I would not have characterized him as an independent contractor. I would characterize him, at the very least as a dependent contractor.) Peter was brought on as a salesperson and it was expected that he would run the jobs he brought in. On the evidence before me, he only ran the Potvin job. He was paid for the jobs he brought in. Finding new jobs for Expert was precisely what he was paid to do.

[61] However, Peter wishes this Court to go further. He would like to be paid 10% of every job that Expert obtained after he left the company from at least Muirfield Homes and Holitzner Homes, to date. There is no doubt that Peter sent an email to Muirfield Homes which led to Expert being permitted to bid on the Petawawa project. There is no doubt that Peter pursued Barry at Holitzner which also led to Expert being permitted to bid on the Kanata North project. But making such contacts, getting Expert’s foot in the door so as to being allowed to bid, plays only a small part in obtaining new work. It was John who performed the time intensive work of preparing the bids, and it is on those bids that work is awarded. It was John who ran the Muirfield and Holitzner jobs after Peter left the company.

[62] Furthermore, simply because a builder gives a contractor one job, or one phase of a development, does not guarantee future work from that builder. Expert was awarded the Kanata North project from Holitzner Homes but it was not successful on its bid for Holitzner work in Barrhaven. It was the uncontradicted evidence of John that a number of factors influence whether a contractor will continue to receive work from a builder. While the most important factor is price, builders also consider a company’s track record, whether it operates a clean job site, safety issues and service issues.

[63] Peter was paid to bring in new work. In fact, according to the evidence, he received in the end approximately $16,000.00 more than he was entitled to from Expert. It seems unconscionable to me that he would be entitled to 10% of all Muirfield Homes work for example, for work awarded after he left simply because he sent an email to them and picked up drawings for John. In hindsight it is apparent that Peter’s decision to leave Kaycan was a poor one and was detrimental to him. Since he left Kaycan he has never achieved the compensation package he enjoyed there. But that is not the type of detriment to which the doctrine of unjust enrichment refers. On the evidence before me Peter was bored at Kaycan and wanted to leave. He was not lured to Expert by the Defendants, he jumped.

[64] If Expert has maintained the Holitzner Homes and Muirfield Homes work since Peter’s departure it is because it has done good work for these builders. If one looks at the legitimate expectations of the parties, as directed by the Supreme Court of Canada in Kerr v. Baranow, how could it have been a legitimate expectation of the parties that Peter would be entitled to 10% of all of the revenue generated on the Muirfield and Holitzner work, obtained by Expert after he left, in the circumstances of this case.

[65] For completeness I turn briefly to the issue of damages. As did the theory of the case evolve during the course of the trial so did the damage claim. For example, in submissions counsel for the Plaintiff indicated that he was no longer seeking 10% of the revenue from old clients (such as Monarch Homes and Cardel Homes) with respect to new work received from those clients after March 1, 2010. Counsel stated the Defendants had those clients prior to Peter coming to Expert. These clients do not fit in with his theory of unjust enrichment.

[66] In any event I would not have been inclined to order damages as claimed by Peter. Firstly, some of the evidence proffered with respect to damages was based on estimates and guestimates. For example, Peter went out and looked at housing developments soon before trial and counted the number of units and guessed at when they were built. Where he had invoices, he divided the number of units into the invoice price and came up with a price per unit. He then used this price per unit to come up with a revenue figure for later phases of development, for which he did not have invoices. Finally, and most concerning, his damage claim simply uses a 10% figure. Ten percent was the most Peter could have been expected to receive. He does not adjust for the true profit of the company. It was the uncontradicted evidence of John that Expert did not achieve a 25% profit margin at the end of its fiscal year.

[67] Also for completeness, I turn briefly to the issue of whether Peter was an independent contractor. While not necessary for these reasons, I do not so find. The common law recognizes three categories of workers; employees, dependent contractors and independent contractors. An employee is characterized by the traditional employer – employee relationship, while an independent contractor is someone who typically owns and operates his or her own business. A dependent contractor falls into an intermediate category wherein the person operates his or her own business, but is in relationship of some permanency and dependency with another business, such that the relationship has some of the hallmarks of an employment relationship.

[68] A number of tests have been developed by the courts to determine if someone is an employee, a dependent contractor or an independent contractor. Those tests will not be reviewed herein. Suffice it to say that the evidence does not support that Peter operated his own business. Much of his work was controlled by John. He did not own his own tools or equipment. He took on no financial risk. The work was integral to Expert. The relationship was expected to be an indeterminate one. He did not provide his services to others. The fundamental question to be answered is whether Peter was performing services as a person in business on his own account. On the facts of this case, Peter was not doing so.

[69] As a dependent contractor or an employee of Expert, Peter would have been entitled to reasonable notice of the termination of his employment or relationship with the company unless there had been just cause for the termination. This issue however, need not be addressed by this Court. Counsel for Peter put on the record that it was Peter’s position that he was not a dependent contractor and that he was not seeking damages for failure to provide reasonable notice.

[70] In summary, for the reasons set out above, the Plaintiff’s claim is dismissed. The parties are to make brief written submission including any settlement offers made with respect to costs. The Defendants submissions are to be provided to the Court by August 6, 2013. The Plaintiff is to respond by August 27, 2013.

Polowin J.

Released: July 12, 2013

COURT FILE NO.: 10-50202

DATE: 20130712

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PETER LAGEVEEN

Plaintiff

– and –

JOHN DE HAAS and EXPERT HOME EXTERIORS and 1766885 ONTARIO INC.

Defendants

REASONS FOR Decision

Polowin J.

Released: July 12, 2013