ONTARIO
SUPERIOR COURT OF JUSTICE
Court File No.: 11-4564-SR
Date: 2014-07-23
B E T W E E N:
Michael Huber and 1623400 Ontario Inc.
James M. Wortzman, Counsel for the Plaintiffs
Plaintiffs
- and -
Alven Way, Jameshill Developments Limited,
1604909 Ontario Inc. and The Shores Limited
Heath P.L. Whiteley, Counsel for the Defendants
Defendants
Heard: November 28, 2013
December 2, 3, 4, 5, 6, 2013
April 15, 17, 2014
THE HONOURABLE MR. JUSTICE P.J. FLYNN
REASONS FOR JUDGMENT
The Dispute
[1] The Plaintiff, Michael Huber (Huber), is the sole shareholder of the corporate Plaintiff. He seeks damages for wrongful dismissal or breach of contract by reason of a failure to provide reasonable notice of termination, commissions owing to him and punitive damages.
[2] And while the Title of Proceedings includes a corporate plaintiff and two corporate defendants, this dispute is between the human players, the Plaintiff, Huber, and the Defendant, Way.
The Players
[3] The Plaintiff Huber manifested himself as intelligent and articulate and gave his evidence in a straightforward fashion without embellishment. I found him to be a completely credible and reliable witness. He was never shaken on cross-examination.
[4] Moreover, he was not cross-examined on some of the evidence which he gave resulting in key gaps to the defence’s position.
[5] The Defendant, Alven Way (Way), is a very experienced real estate developer. He, or corporations owned by him, own the corporate Defendants. Not unusually, he used a myriad of corporations to conduct his business.
[6] Prior to meeting Huber, Way had never developed any condominium projects.
[7] Way was not a credible or reliable witness. While he had used every occasion on oral examinations for discovery to stonewall the Plaintiff, he gave evidence at trial that was often completely contradictory of his discovery evidence and which was often serendipitously filled in gaps for him.
[8] In my view, he fashioned his evidence at trial after sitting through the Plaintiff’s case. One would have thought that his memory at the time of discovery would present itself as a better recollection than when given at trial, but that doesn’t seem to be the case and Mr. Way had some very strange responses. For example, he sometimes indicated that his recollection at the time was truthful, but the accurate memory came to him after he started preparing for trial.
[9] He said that he had an opportunity in trial preparation to go back and reflect and talk to people in his offices and especially his “right hand”, the witness Faye Patterson, and his legal counsel.
[10] He was forced to resile from answers he gave in his discovery evidence and said often that after he made inquiries with certain people, he came to a new version of the evidence.
[11] In my view, the way in which he gave his testimony and the substance of that testimony was a pitiful demonstration of deflection and as the finder of fact I must come away by saying that I can’t determine with any certainty that Mr. Way remembers or knows anything. His evidence seemed quite rehearsed. Moreover, once he refreshed his memory and remembered the proper answers during his trial preparation, he was obliged to advise the Plaintiff and to correct the record. He did not.
[12] So, I have no difficulty in saying that where the evidence of the Plaintiff Huber differs from the evidence of the Defendant Way in any material fashion, I prefer the evidence of the Plaintiff Huber. I find the Plaintiff Huber completely credible and his evidence is corroborated in many ways by several different witnesses, including even witnesses called by the Defendant.
[13] It seems that the only corroboration that the Defendant Way received in evidence came from his “right hand”, Faye Patterson, who has worked for him for a dozen years as his executive assistant and with whom he is in an intimate relationship.
[14] As his cross-examination went on, the Defendant Way’s memory remarkably improved. It is interesting that he first claimed to have a very good memory. By the end of cross-examination, either that assertion was demolished by the cross-examiner or he was unabashedly lying.
[15] Mr. Way’s evidence on cross-examination and his evidence at discovery about similar things cannot both be true and there were many times he stumbled over his own evidence. Either he has a horrible memory which cannot be relied upon by this court or he perjured himself both at discovery and at trial. Either way, he has nothing going for him in terms of reliability or credibility.
[16] It is unfortunate when matters of commerce come down to issues of credibility and the reliability of witnesses’ memories. But that is the thing upon which this court is going to rely to make a finding against the Defendants.
[17] A perfect example of Way’s character is when he testified that he did not approve the Plaintiff’s invoices. Confronted by Plaintiff’s counsel, he again denied it, then he offered that he may have approved some, but it would be rare. Finally, he was referred to the 200 invoices, almost all of which were approved by him, as indicated by initials in the box marked “approved by”. He had no explanation whatsoever for his patently untruthful answers.
[18] The same thing applies to his testimony about meetings between Huber and himself. On discovery, he testified that he had no recollection at all of these meetings or who attended them. That included a crucial meeting with Huber and Tim Harris in late July 2007 when the Agreement was entered into and crucial meetings of January 2008 (when the Agreement was amended) and in January 2010 (about transitional work) and the meeting of February 18th (when the Plaintiff’s contractual relationship was summarily terminated).
[19] There are a myriad of examples upon which I could rely in support of the proposition that the Defendant Way is a completely discreditable witness. That situation must have been obvious to all present in the courtroom.
[20] Surprisingly defence counsel did not even question him about some things that were critical to the support of the Plaintiff’s position. For example, regarding the meeting of January 22, 2008, Mr. Huber gave a very clear and credible answer explaining what happened at that meeting (this was the meeting that amended the original July 2007 Agreement) and Mr. Whiteley not only did not attempt to impeach Huber’s credibility on that issue in cross-examination, but didn’t question his own witness with respect to his version of affairs. In the end, but sadly, I must conclude that Mr. Way cannot be believed and none of his evidence should be relied on.
[21] The Plaintiffs called five independent witnesses, four of whom were former employees of Way and one of whom was a former business partner of his. They gave their evidence pursuant to subpoenas. None of them are employed by the Plaintiffs and none of them have any current business dealings with the Plaintiffs. Their evidence corroborated Huber’s with respect to his status as an employee of Way and with respect to the fact that he was to receive commissions on the sale of the condominium units.
[22] These independent witnesses had no stake in the action. Their evidence was credible and was not shaken on cross-examination. They had no personal or business motive to embellish or exaggerate their evidence. None of their evidence was contradicted by any defence witness evidence. Accordingly, I accept the evidence of these witnesses, Schembri, Harris, Palmer, McGuiness and Dupuis, as being truthful and quite contrary to Way’s evidence regarding his contractual relationship with the Plaintiff. Again, quite surprisingly, Defendants’ counsel did not cross-examine any of these witnesses with respect to their evidence that Huber was entitled to commissions. And, Mr. Way and Ms. Patterson gave no evidence to contradict this evidence.
The Events
[23] I find as a fact that because of their dealings in the Spruce Street Lofts, Tim Harris and Huber met with Way in July 2007 and made an oral agreement that they both be employed with respect to the sale of condominium units at Westmount Grand at $65,000 per year, plus 1% of their total sales.
[24] That commission was to be paid at the completion of construction or 1 ½ years after the construction start.
[25] Huber and Harris had been partners or owners of a corporation together and while each was to receive a separate $65,000 salary or income, they were to share in the 1% commission of the sale of the condominiums.
[26] It was originally anticipated that those total sales would amount to some $28,000,000 resulting in commissions of $280,000. At first, there was to be deducted from that $280,000 some marketing costs which the parties had contemplated would be approximately $80,000, thus leaving Harris and Huber each to receive $65,000 per annum and split $200,000 of net commissions.
[27] While Harris left the project and this arrangement after about six weeks, Huber marched on until February of 2010 when he was summarily dismissed without cause or notice. His base pay remained the same, $65,000 per annum billed at $1,250 per week and he was entitled to 1% of the commissions on the sales of the condominiums.
[28] The Agreement got amended in January 2008, after the launch of the condominiums. Both Way and Huber realized that sales were not going very well and they agreed that there be no deduction for direct marketing expenses. So that it was contemplated that if all the units were sold, Huber’s eventual commission would be $280,000. The actual method of payment was by way of Huber remitting invoices from one or the other of his companies, on a weekly basis, because that is the way Way preferred it. Eventually, for some other business purposes discussed between Way and Huber, there was more than one invoice rendered each week and split between various projects, but in total they amounted to $1,250 per week.
[29] The deal included the Westmount Grand, The Shores in Stratford and a condominium at 359 King Street North in Waterloo. Because of the parties’ concerns about the launch of the Westmount Grand not being as successful as they had contemplated, there was a meeting in January 2008 instituted by Huber between Huber and Way, which resulted in an oral agreement amending the original oral agreement. This amendment eliminated the deduction of direct marketing expenses and changed the time of payment for Huber to the time at which Jameshill received financing.
[30] In December of 2009, Way met with Huber to advise him he was going to transition to licensed real estate agents with respect to the rest of the units. By then, there were agreements on 36 of 70 units in the Westmount Grand.
[31] Then, on February 18, 2010, Huber met Way and was advised that his services were no longer needed without cause nor any notice, nor any payment in lieu. At that time, Jameshill hadn’t received any financing and so Huber was not yet entitled to be paid.
[32] In December 2010, Huber noticed that construction was underway at the Westmount Grand, so he e-mailed Way to remind him of their Agreement but Way replied telling Huber that he had rendered his final invoice and that Way had a final release, so that was the end of the matter.
[33] Of course, neither of those allegations was true. There is no invoice that’s marked “final” and the “final release” that Way seemed to be relying on had to do with a dispute between Huber and Way over another project in Cambridge called Spruce Grove, which has nothing to do with this dispute.
[34] So, after this exchange, Huber managed to meet with Way in January 2011 at which time he revealed that he had in his files a bunch of documents, including a pro forma budget prepared by Mr. Way. Not only did Mr. Way refuse to pay Mr. Huber, but he threatened to sue because Huber had those documents.
[35] A couple of days later, there was a strange episode. On January 13, 2011, Mr. Way arrived late in the evening pounding on the door to Huber’s home in such a manner as frightened Huber’s wife. The Hubers did not answer the door. This event was traumatic for Huber’s wife. She began refusing to stay alone in her home, had an alarm system installed and eventually this incident caused them to move houses.
[36] Apparently, Way was attempting to deliver a letter that night. He delivered it by e-mail immediately after this and accused Huber of unlawfully having his documents, including Agreements of Purchase and Sale and the pro forma financial budget. He only made the demand to return the documents after Huber said that he would pursue legal action on account of his unlawful termination.
[37] Way went further than this. He reported to the Police that Huber had stolen documents and wanted Huber arrested. The police called Huber, heard what he had to say and decided not to pursue the matter at all. And that wasn’t all, Way threatened to take Huber’s house and car and to have Huber’s lawyer disbarred.
[38] The $400,000 Counterclaim is all in relation to those documents and Huber’s possession of them. Way admitted on discovery and in cross-examination at the trial that he had absolutely no evidence in support of the allegation in the Counterclaim. For that reason alone, the Counterclaim must be dismissed.
The Plaintiff’s Claims
[39] Huber claims four heads of damage. First, in connection with the sale of condominiums at Westmount Grand, he claims $127,383.30 commission in respect of condominiums worth more than $12.7 million dollars having been sold.
[40] Secondly, he claims 1% of the sales at the Shores condominium project. Those sales were $983,500 and Huber’s claim is for $9,835. I am satisfied of the appropriateness of awarding Huber 1% on the total amount claimed of $983,500 on the Shores condominium and accordingly, the amount is quantified there at $9,835.
[41] Third, Huber claims damages for wrongful termination of the contract or wrongful dismissal in the amount of six months payment in lieu of notice. He was employed for 2 ½ years and as he said in his evidence, he handed the sales to Way on a silver platter. His claim is based on six months payment in lieu of notice, but calculated at $10,000 a month salary, plus commission. In my view, the Plaintiff’s claim here contains an element of double accounting. The $10,000 a month includes the 1% commission, as well as the base salary of $65,000 per annum. Huber could not have been earning that until it was due. So, the calculation on termination pay must be based on the annual salary alone. The 1% commission due is a separate matter.
[42] With respect to damages for wrongful dismissal or wrongful termination of contract, given his 30 month stint for the Defendant and his companies and the important and tireless role he played, I am satisfied that reasonable notice ought to have been given amounting to five months’ salary based on $65,000 per annum. That amounts to $27,083.30.
[43] The fourth claim of the Plaintiff involves punitive, aggravated and exemplary damages in the amount of $45,000, based upon Way’s behaviour and the manner in which he treated Huber. Instead of providing Huber with notice of termination, he asked Huber to transition all of his knowledge and information to an outside agent. Huber did that. Then, once that had been done, instead of providing him notice, Way requested that Huber provide all of his computer log-in password information and contact information, which Huber also did. Then, Way terminated Huber’s employment without notice or payment in lieu thereof, with neither cause nor any complaint.
[44] When Huber made requests for payment, Way professed to rely upon documents that did not exist to deny his request. When Huber provided documentation substantiating his claim, Way threatened to take away his house and car and disbar Huber’s lawyer. Disturbingly, when Huber indicated he would pursue litigation, Way showed up at his home at night and traumatized Huber’s wife. He made groundless allegations of theft against Huber. He maliciously reported that Huber had stolen documents and attempted to have him arrested. He then started a $400,000 Counterclaim alleging that Huber had committed criminal acts.
[45] Way admitted that when he asserted his Counterclaim, he had no evidence to support it and he admitted at trial that he still had no evidence to support it, yet he never withdrew those allegations.
[46] Way’s conduct is deserving of censure. This court cannot condone conduct intended to threaten and intimidate the wronged Plaintiff from seeking recourse through the courts.
[47] What is outrageous here is that Way claims it was Huber’s inappropriate behaviour with respect to the documents when in fact, one of the documents that Huber relies on, the June 23, 2009 pro forma budget, was prepared by Way and shows inside agents’ commissions of $245,000, where the only inside agent at the time was Huber.
[48] That document was only produced by Huber. It wasn’t in Way’s Affidavit of Documents or even in his Supplementary Affidavit, which was given to the Plaintiff’s counsel on the eve of trial. I agree with Huber that the Way buried that document and thereby breached the rules.
[49] The Defendant’s conduct must certainly be censured here. While it was an attempt to intimidate this Plaintiff, it is fair to say that this Plaintiff was not going to be moved off his game plan.
[50] Way made serious allegations in the Counterclaim that included wrongful removal of documents, hacking into Way’s computer, giving documents to Way’s competitors, conversion, the involvement of police, sharing information with Gordon Schembri and it is remarkable that Way’s counsel never questioned him in respect of any of those allegations or regarding any loss or damage he suffered as alleged in his Counterclaim. That was because it was a fiction. And these egregious allegations were made without a shred of evidence to support them.
[51] The claim for punitive damages doesn’t deal exactly with the manner of termination, but it does deal with immediately post-termination conduct and the egregious attempts by Way to intimidate the Plaintiff into withdrawing his claim.
[52] Way pressed the Counterclaim right to the very end, without any evidence to support it.
[53] There is no correct number involving this head of damage but I would assess it at $25,000.
[54] Finally, the Plaintiff’s claim for the sale of condominiums at Westmount Grand amounts to some $127,383.30, based on 36 units said to have sold. However, while I have my misgivings because of Way’s failure to make full and frank disclosure, on the evidence at trial. Way is right to raise the issue that only 19 of the 36 Agreements of Purchase and Sale closed. Surely, it is not a reasonable commercial expectation to contemplate a bonus or commission on incompleted transactions.
[55] I conclude that those completed sales worth $7,307,610 amount to commission entitlement of $73,076.10, as shown on Schedule “A”.
Discussion
[56] Having established entitlement to damages by the Plaintiff and quantum, let me now address the issue of the proper Defendant. Huber takes the position that he was employed by Way.
[57] While Way maintains that Huber was an independent contractor and rendered invoices to various projects, it is clear to me that he was not in any way an independent contractor. A rose is a rose is a rose. It looks a lot like an employment situation here and even if it is not purely an employment relationship, it must be that of a very dependent contractor. Mr. Huber, in either case was entitled to reasonable notice of termination of the Agreement or payment in lieu thereof.
[58] Moreover, I find support in the case of McKee v. Reid’s Heritage Homes Ltd. 2009 ONCA 916, where the trial judge found:
The Plaintiff’s activity in the present case is part of the business of the Defendant. Selling homes is the most integral part of the Defendant’s business. It is the Defendant’s business in which the Plaintiff is engaged.
[59] And as with that court, I would find that indeed Mr. Huber was an employee, not an independent contractor, nor even a dependent contractor.
[60] Now of course, the result is the same as for an employee or a dependent contractor, in my view. As the independent witnesses testified, the relationship between Huber and Way had many indicia of an employee/employer relationship, or at the very least, a relationship that exhibited economic dependency. Here are some of the reasons:
(a) Huber was provided an office by Way at Way’s premises at no cost;
(b) Huber utilized Way’s support staff;
(c) Huber utilized Way’s supplies;
(d) Huber was provided a business card by Way that identified him as a sales and marketing representative of an entity of Kingley which was a trade name utilized by Way for his various corporations;
(e) Huber worked full time for Way;
(f) Huber took vacation and was paid by Way when he did so;
(g) Huber worked weekends and evenings without receiving any additional compensation, sometimes as many as 80 hours a week and on average, about 60 hours;
(h) Huber was required to follow Way’s direction;
(i) Huber was required to follow Faye Patterson’s direction;
(j) Huber was not required to keep track of his time;
(k) Huber signed 31 of the 36 Agreements of Purchase and Sale on behalf of Jameshill as its authorized representative with authority to bind the corporation;
(l) Huber signed these Agreements because Way authorized him to do so and Way knew that he signed these Agreements;
(m) Huber also signed three of the six Agreements of Purchase and Sale with respect to the Shores;
(n) Huber was required to work out of Way’s offices, the sales centers and out of his own home. This is why he had documentation with him so he could perform his duties and responsibilities. Purchasers would often call him at night and on the weekend. He had to have the documents he needed in order to deal with these matters. Way knew that he had these documents with him. There is absolutely nothing improper about Huber having these documents with him.
[61] What is important here is the essence of the relationship. It looks, walks and talks like an employee/employer relationship and it is. Regardless of the fact that the Defendants, Jameshill and 1604909 Ontario had no employees and regardless of the fact that Huber did not report any employee income from any of the corporate Defendants to the Canada Revenue Agency, the method of the payment came as a result of the Agreement. An employee can agree with his employer that the payments be made through the employee’s sole purpose corporation and here it was that the employer, Mr. Way, insisted on those invoices.
[62] Huber gave evidence that after the Agreement was entered into, Way requested that Huber receive his salary by rendering invoices to corporations owned by Way. Huber agreed as it mattered not to him.
[63] Thereafter, approximately 200 invoices were issued by Huber, generally on a weekly basis, to various corporations owned by Way. Huber gave evidence that the invoices were in the amount of $1,250 per week and explained that this is how he was paid his $65,000 salary. This was not a coincidence. It was the bargain between the parties.
[64] Although at trial Way first denied approving the invoices, on cross it became clear that there was no question that he approved the vast majority of them. At discovery, Way swore that he had no idea why or what Huber was invoicing for or the amounts. At trial, faced with the fact that the invoices amounted to $1,250 a week, Way changed his story.
[65] So I find that the Plaintiff Huber was employed by the Defendant Way, who is the alter ego of the corporate Defendants. Just as Mr. Way ignored the legal niceties of his individual corporations, so shall we. The amounts that I find appropriately reasonable as damages are to be paid by Way. Another way of putting it is that I find the Defendant Way to be liable entirely for the damages of the Plaintiff Huber.
What about the commission?
[66] For the first time in argument, the Defendant raised the Real Estate and Business Brokers Act S.O. 2002 to thwart the Plaintiff’s claim to the commission.
[67] That Act prohibits trade in real estate unless registered under the Act and prohibits an action for commissions by a non-registered, non-exempt person. While s.5(1)(f) exempts a full time employee of a party to a trade who is acting on behalf of his employer in respect of Ontario real estate, s.5(2) says an independent contractor is not an employee for the purpose of clause 1(f).
[68] Well, two things must be said about this. One, the Defendants never asked for a stay of the action as set out in the Real Estate and Business Brokers Act and second of all, this defence was never pleaded, as required by Rule 25.07(4).
[69] In my view, whether or not it is a commission and I would find as the Plaintiff has argued, that it’s not really a true commission because it’s not just for the sale of the real estate, it’s for all of the tasks that Huber was employed to do in respect of the condominium sales. It’s simply a way of quantifying his income.
[70] It was not conditional on getting an Offer and didn’t require him even to be involved in a particular sale. All of the real estate agreements in this case are silent with respect to the commission and so this is not really a lawsuit in respect of those commissions, but as I’ve indicated earlier, I find that Huber was an employee of Way and in any event the Real Estate and Business Brokers Act doesn’t apply to prohibit him from claiming for this part of his income. Huber was considered by everyone else to be Way’s full time employee.
[71] As the cases say, the mischief that the Real Estate and Business Brokers Act is designed to protect is the inexperienced public from unscrupulous sales agents. Mr. Huber had the status of full time employee and Way certainly didn’t need protection from him, so just as the case of the release in respect of the Shores, the Real Estate and Business Brokers Act issue is a red herring.
Disposition
[72] The Plaintiff, Huber, must succeed here. I am satisfied that he had made out his claims and is entitled to damages as follows:
First, for “commissions”
a) On Westmount Grand $73,076.10
b) On The Shore $9835.00
Secondly, for wrongful termination $27,083.30
And thirdly, for aggravated and exemplary damages $25,000.00
For a total of $134,994.40
[73] And so I would grant judgment for the Plaintiff’s on that amount, together with pre and post judgment interest.
[74] The Counterclaim is hereby dismissed.
Costs
[75] It would seem to me that in the ordinary course, the Plaintiff, having succeeded in his claims and in defeating the Counterclaim, should be entitled to costs. But I will make that determination and fix those costs, if any, after receiving the parties submissions as follows:
[76] The Plaintiff on or before August 22, 2014 shall serve and deliver to me at my Kitchener Chambers his cost submissions, consisting of the following:
a) His Costs Outline, not augmented by more than three double-spaced pages;
b) His Bill of Costs, and
c) Any relevant Offer(s) to Settle
[77] And the Defendant, on or before September 12, 2014 shall serve and deliver to me at my Kitchener Chambers, his costs submissions consisting of the following:
a) His Costs Outline, not augmented by more than three double-spaced pages; and
b) Any relevant Offer(s) to Settle.
P.J. Flynn J.
Released: July, 23, 2014
SCHEDULE “A”
Michael Huber and 1623400 Ontario Inc.
v.
Alven Way, Jameshill Developments Limited,
1604909 Ontario Inc. and The Shores Limited
THE DEALS THAT CLOSED
Tab 1
$285,900
Tab 3
$454,900
Tab 4
$576,800
Tab 6
$354,000
Tab 7
$590,900
Tab 8
$424, 900
Tab 9
$1,133,900
Tab 11
$273,900
Tab 13
$282,900
Tab 15
$273,900
Tab 16
$269,900
Tab 18
$256,410
Tab 22
$283,900
Tab 27
$279,900
Tab 28
$279,900
Tab 33
$279,900
Tab 34
$259,900
Tab 35
$455,900
Tab 36
$289,900
$7,307,610
COURT FILE NO.: 11-4564-SR
DATE: 2014-07-23
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Michael Huber and 1623400 Ontario Inc.
Plaintiffs
– and –
Alven Way, Jameshill Developments Limited,
1604909 Ontario Inc. and The Shores Limited
Defendants
REASONS FOR judgment
P.J. Flynn J.
Released: July 23, 2014
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