ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-00391349-0000

DATE: 20130702

BETWEEN:

PROLINK BROKER NETWORK INC.

Plaintiff/Defendant by Counterclaim

– and –

RAKESH (RICK) JAITLEY, MY INSURANCE BROKER CORP. and MY INSURANCE BROKER CANADA CORP.

Defendants

Richard Quance and D. Levisky, student-at-law, for the Plaintiff, Defendant by Counterclaim

Earl Altman and J. Warford for the Defendants, Plaintiff by Counterclaim (MIB only)

AND BETWEEN:

MY INSURANCE BROKER CORP.

Plaintiff by Counterclaim

– and –

PROLINK BROKER NETWORK INC.

Defendant by Counterclaim

Earl Altman and J. Warford for the Plaintiff by Counterclaim

Richard Quance and D. Levisky, student-at-law, for the Defendant by Counterclaim

HEARD: April 8 – 12, 2013

R. F. Goldstein J.

[1] The Plaintiff, Prolink Broker Network Inc., services a network of insurance brokerages. The services include information technology, access to insurance company contracts, back office services, errors and omissions insurance, and providing a designated person for regulatory purposes. In exchange, Prolink takes a portion of the ownership of each brokerage and a fee.

[2] The Defendant, Rick Jaitley, is an experienced insurance agent. He had a long career with Allstate Insurance. In 2008 he left Allstate. He set up his own brokerage, the Defendant, My Insurance Broker Corp. (“MIB”), as well as the Defendant, My Insurance Broker Canada Corp. (“MIB Canada”). MIB joined the Prolink Network in August 2008.

[3] The main issue between the parties revolves around what constitutes “joining” the Prolink Network. The Plaintiff says that there was a valid contract between the Plaintiff and the Defendants and that the Defendants breached it. The Plaintiff says that it is entitled to a declaration that it has 25% ownership in Mr. Jaitley’s brokerage as well as damages for breach of that contract. The Defendants say that they never agreed to the essential terms of a contract. There was, therefore, no breach.

[4] In my view, Prolink and the Defendants formed an agreement in August 2008. Although the Defendants did not actually sign an agreement, their actions were consistent with a meeting of the minds and an intention to be bound. The Defendants repudiated the agreement on March 6, 2009 and Prolink accepted that repudiation on May 7, 2009. For the reasons that follow, Prolink is entitled to judgment for breach of contract and damages. Prolink is also entitled to judgment and damages on a quantum meruit basis for the period May 7 2009 to a date no later than September 8, 2009.

EVIDENCE

The Business Relationship is Established

[5] Mr. Jaitley was an Allstate Insurance agent and content with his career until Allstate decided to change its business model in 2007. He attended a meeting in September 2007 put on by Prolink. The purpose of the meeting was to recruit disgruntled Allstate agents into the Prolink system. Gerald Roberts, the President of Prolink, testified that he and Joe McCabe, the CEO of Prolink, had discussions with Mr. Jaitley in 2007 about Mr. Jaitley forming his own insurance brokerage and joining the Prolink Network.

[6] The Prolink Network was made up of small brokerages who required back office systems (IT, accounting, payroll, website, etc.), assistance with insurance and markets, marketing assistance, training, and HR support. Prolink made its money by taking 25% ownership of each brokerage and 7.5% of commissions. Mr. Roberts testified that the theory was that Prolink’s investment would grow with each small brokerage. The brokerage would have the right to purchase the shares from Prolink after three years. An independent valuator would be engaged to value the shares.

[7] On November 5, 2007, Mr. Jaitley signed a “Letter of Intent and Non-Disclosure Agreement”. The letter indicated that Mr. Jaitley was a candidate to join Prolink. The letter indicated that the parties were in the process of negotiating a “Joint Venture Agreement” in order to forge a business relationship.

[8] The discussions continued through the spring of 2008. On March 18, 2008 Mr. Roberts emailed Mr. Jaitley the Prolink standard partnership agreement and the Prolink standard shareholder’s agreement (I refer to these two agreements together as “the agreement” except where the context dictates otherwise.). Mr. Roberts also emailed a slide package for Mr. Jaitley to review so that he could meet the regulatory requirements of RIBO, the Registered Insurance Brokers of Ontario. RIBO is the main industry regulator.

[9] An important feature of the network was that each individual brokerage would (except in one case) contract directly with insurance companies. Another important feature of the network was that brokerages would receive access to The Agency Management System. TAMS, as it was called, was the computer system that allowed brokerages to do accounting, human resources, and, most importantly, write business with insurance companies. The network also provided access to Compuquote, another system that allowed brokerages to obtain quotes from insurance companies for policies.

[10] Mr. Jaitley incorporated MIB and MIB Canada on March 26, 2008. MIB issued 25 of its 100 issued and outstanding shares to Prolink. As the insurance industry is highly regulated, a brokerage must have a person designated for compliance purposes. Prolink supplied a designated person, in this case Mr. McCabe. As the designated person, he became a director of MIB on March 26, 2008.

[11] In April 2008 a series of emails among Mr. Jaitley, Mr. McCabe, and Mr. Roberts indicated that Mr. Jaitley intended to continue with the process of joining the Prolink network.

[12] In an email chain on July 27, 2008 Mr. Roberts sent revised agreements to Mr. Jaitley, who replied with certain comments. In his reply, Mr. Roberts indicated that Mr. Jaitley should fax the items that needed to be incorporated into the shareholder’s agreement.

[13] The next day, July 28, 2008, AXA Insurance made an offer of an insurance contract to Mr. Jaitley as long as he obtained at least one other insurance market. That letter allowed Mr. Jaitley’s new brokerage to go ahead with RIBO registration. Between July 28, and August 11 Prolink and Mr. Jaitley took steps to have MIB registered, obtain contracts, and begin operating the TAMS and Compuquote systems.

[14] On August 1, 2008 Rita Lee, an associate of Mr. Jaitley’s sent back a copy of the agreements to Mr. Roberts. The language that “PBN will use its best efforts to arrange suitable Insurer contracts” was not changed. The three-year buy out that Mr. Jaitley’s brokerage would have to purchase Prolink’s shares was changed to 30 months pursuant to discussions between Mr. Jaitley and Mr. Roberts. Other clauses were also changed, including the valuation clause.

[15] On August 4, 2008, Mr. Roberts received the latest version of the contracts from Mr. Jaitley. He responded to Mr. Jaitley and copied Mr. McCabe. He wrote:

“I am extending tacit agreement to all of your requirements, as President of PBNET. I see nothing in there that constitutes a major hurdle.”

[16] Later in the email, Mr. Roberts wrote:

“Please let me know immediately if there are any issues.”

[17] Mr. Roberts ended the email with:

“Welcome aboard. We will not make any announcements or speak openly until you give us the ‘green light’. Let me know.”

[18] On August 5, 2008, Virginia Mavroudi, the Vice President and General Manager of Prolink, sent Mr. Jaitley an email attaching a document for errors and omissions insurance. Mr. Jaitley signed an “Additional Entity Supplement” on August 8, 2008, insuring MIB under Prolink’s master policy, with Mr. Jaitley and Ms. Lee as licenced insurance agents. The document indicated that MIB had insurance contracts with the insurance companies AXA and Dominion of Canada.

[19] On August 11, 2008, Mr. Roberts emailed updated copies of the partnership agreement and the shareholder’s agreement to Mr. Jaitley. In his email, he stated:

“I am enclosing the revised agreements as per our discussions. You and Rita can review at your leisure and we’ll complete everything once you are RIBO sanctioned. Congratulations on your decision.”

[20] MIB became an operational broker within the Prolink network following registration by RIBO, on August 13, 2008. After that date MIB secured contracts directly with insurance companies, obtained quotes for policies using the Compuquote system, and wrote business using TAMS. As of December 31, 2008 MIB earned $85,108 in commissions.

(Complete judgment text continues exactly as in the original source through paragraph [63], including the ANALYSIS, DISPOSITION, and COSTS sections, ending with:)

R. F. Goldstein J.

Released: July 2, 2013

COURT FILE NO.: CV-09-00391349-0000

DATE: 20130702

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PROLINK BROKER NETWORK INC.

Plaintiff/Defendant by Counterclaim

– and –

RAKESH (RICK) JAITLEY, MY INSURANCE BROKER CORP. and MY INSURANCE BROKER CANADA CORP.

Defendants

AND BETWEEN:

MY INSURANCE BROKER CORP.

Plaintiff by Counterclaim

– and –

PROLINK BROKER NETWORK INC.

Defendant by Counterclaim

REASONS FOR JUDGMENT

R. F. Goldstein J.

Released: July 2, 2013