SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 06-CV-324305PD1
DATE: 20130131

RE: Sam Lochran, Plaintiff

– AND –

Duro-Test Canada Co., Defendant

BEFORE: Justice E.M. Morgan

COUNSEL: Barry J. Goldman, for the Plaintiff

No one appearing for the Defendant

HEARD: January 28, 2013

ENDORSEMENT

[1] The Plaintiff is a former employee of the Defendant, and claims for loss of income during the period of April to December 2005. He alleges that the negligence of his employer’s management caused his losses during that year.

[2] The Defendant did not appear at trial. This was not a default judgment, as the Defendant has filed a Statement of Defense and attended, with counsel, at all discoveries and at the pre-trial a month ago. However, Defendant’s counsel indicated to Plaintiff’s counsel that they would be going off record, and no one attended at trial on behalf of the Defendant.

[3] Accordingly, the half-day trial focused on the Plaintiff proving his damages. In addition, a legal issue with respect to the question of liability is evident from the pleadings – i.e. does the Defendant owe a duty to the Plaintiff to ensure that the Defendant remains profitable so that the Plaintiff can continue to earn a high level of income as a salesman?

[4] I asked counsel for the Plaintiff about the duty of care question at the outset of his trial. Counsel for the Plaintiff produced no written argument or brief of authorities for this trial, and could point me to no case law establishing such a duty.

[5] To put the matter briefly, the Defendant is a wholesaler and distributer of light bulbs and lighting fixtures. The Plaintiff is a sales representative whose income is on a commission basis depending on his annual sales.

[6] The Plaintiff’s largest customer for lighting equipment was Canadian Forces Base Borden (“Borden”). In order to supply equipment to Borden, the Defendant had to have a National Standing Offer (NSO), which was obtained by answering a tender from the federal Department of Public Works. The NSO was historically renewed on an annual basis, and more recently on an every-two-years basis.

[7] According to the Plaintiff, the Defendant had successfully renewed the NSO for lighting equipment for roughly 30 years. The Plaintiff himself serviced the Borden account since 1994.

[8] In early 2005, the Defendant failed to renew the NSO for lighting equipment. The Plaintiff contends that this was due to the negligence of the Defendant’s management. It does appear that the NSO that year slipped through the cracks and that this occurred through no fault of the Plaintiff’s. The Plaintiff was responsible for sales to Borden and other customers, but renewing the NSO, which was a condition precedent for selling to a federal institution such as Borden, was the responsibility of management.

[9] In an effort to repair the situation, the Defendant negotiated a Regional Standing Offer (“RSO”) later that year as a temporary solution. This allowed sales to Borden to re-start pending the next round of NSO renewals. The RSO became effective in mid-December 2005. The Defendant, and the Plaintiff, therefore missed the sales that they expected to make to Borden for the second, third, and fourth quarters of 2005.

[10] At the very end of 2005 and beginning of 2006, the sales to Borden resumed. The fact is that the 2006 sales were lower than expected, but the Plaintiff explains that this reduction was due to other factors. Specifically, the Defendant had supply and delivery challenges, and the personnel at Borden responsible for purchasing lighting equipment started looking to other suppliers to fill in the gaps.

[11] The Plaintiff therefore limits his claim to the reduction in sales during last three quarters of 2005. It is this reduction that he alleges was caused by the Defendant’s negligence in missing the renewal of the NSO.

[12] In answer to my question about the Defendant’s duty of care, counsel for the Plaintiff points to the employment contract between the parties. That contract, dated January 20, 1994, establishes customer accounts such as the Borden account as a “Protected Account” for the Plaintiff. The contract assures the Plaintiff that he will not face competition from other sales representatives for this type of account.

[13] The employment contract does not, however, guarantee any specific level of sales to Borden or to any other customer, whether that customer is a “Protected Account” or not. Indeed, the Defendant could not possibly have guaranteed any particular level of sales to any given customer. If sales were guaranteed, the Defendant would not need to hire a commission-earning sales force.

[14] The Plaintiff concedes that it was up to him to work with the customer and to generate the sales. He submits that what the Defendant had to do is provide the products and, for Borden, the NSO.

[15] The failure to renew the NSO in 2005 was not a breach of contract by the Defendant. The employment contract makes no mention of the NSO, Borden, the federal government, or any other related entity or process. It simply says, in its relevant part, that if the Plaintiff has a Protected Account then no other sales representative will compete for sales to that account. It does not actually identify or guarantee any Protected Account, which could vary from time to time.

[16] If the Plaintiff has a claim for lost income, it would have to be a claim in tort. As indicated, however, Plaintiff’s counsel has pointed me to no cases establishing a duty of care of this nature for employers.

[17] In a letter to the Plaintiff dated December 20, 2005, the president of the Defendant stated:

As you are aware, two parties earn money from every DTC order, the salesperson and the company. Every lost order or missed opportunity impacts both. I can assure you that I am as upset as you are anytime business is lost or opportunities are missed, for whatever reason.

[18] The Defendant’s president then ended his correspondence with the conclusion that, “it doesn’t make sense to hold the company and/or its employees financially responsible for errors or oversights as they attempt to do their jobs.”

[19] The evidence is clear that the NSO was not missed for any sinister reason by the Defendant. The Defendant did not thereby profit at the Plaintiff’s expense; likewise, the Defendant did not injure the employee by trying to save money or otherwise cut corners, and so this is not analogous to a case where an employer has failed to meet a health or safety standard and thereby jeopardized its employee.

[20] Furthermore, this is not a case of an employer who fails to adequately perform a specifically employment-related duty like keeping track of employee overtime hours, Fulawka v. Bank of Nova Scotia (2011), 337 DLR (4th) 319 (Div Ct), var’d on other grounds, (2012), 2012 ONCA 443, 111 O.R. (3d) 346 (CA), or making the employee aware of a life insurance policy available to him, Perlett Estate v. Riverside Health Care Facilities Inc. (2003), 46 CCPB 92 (Ont SC), rev’d 2005 18184 (ON CA), 254 DLR (4th) 338 (CA). The employer’s failure did not grow out of the employer-employee relationship.

[21] In the instant case, both parties – Defendant and Plaintiff – lost the Borden sales for roughly nine months. The failure of management was not directed toward the employee, but toward the company itself. Under these circumstances, where the loss in question is to the profitability of the employer, it would take some argument to convince me to extend the employer’s duty of care to an employee.

[22] Even if the threshold duty of care question were successfully crossed, I do not think that the Plaintiff has adequately proven his losses. The Plaintiff has produced a chart showing his sales to Borden in 2004, his sales to Borden for the first three months of 2005 when the NSO was still in force, his drop-off in Borden sales for the balance of 2005, and his sales to Borden in 2006 when the RSO kicked in and the NSO eventually resumed. Taking account of commissions, bonuses, and other heads of earnings that might have accrued had the Borden sales continue as projected, the Plaintiff would have lost somewhere over $50,000 in Borden-related income.

[23] What the Plaintiff has not done is to produce evidence of his actual income for the relevant period. No tax returns or T4 or T4A slips have been put in evidence to show how much the Plaintiff actually earned in the years 2004-2006. The Plaintiff says that Borden amounted to somewhere in the neighbourhood of 50% of his sales most years, but he has done nothing to actually demonstrate that. He has produced no sales records for his other customers.

[24] In answer to my own question, he conceded that sales to other customers did increase during the months in 2005 that he was not selling to Borden. As indicated, however, he had no sales information or figures to back that up. He guessed that he earned about $25,000 less in 2005 than he had earned in 2004, but he testified that he is sure that he would have earned even more if the Borden sales could have proceeded as projected that year.

[25] In my view, the Plaintiff’s losses simply have not been proved. I cannot assume that he lost money during the relevant period without actually seeing how much he really earned.

[26] For two reasons, therefore, judgment cannot be granted in the Plaintiff’s favour. I am not certain that there is a cause of action based on the questionable duty of care that the claim raises; and, moreover, even if there is a valid cause of action, damages have not been proved as the Plaintiff’s loss of income during the relevant period has not been established in the evidentiary record before me.

[27] The action is dismissed. As the Defendant did not appear at trial, there will be no costs for or against either party.

Morgan J.

Date: January 31, 2013