ONTARIO SUPERIOR COURT OF JUSTICE

OTTAWA COURT FILE NO.: 11-51105

DATE: 2014 AUG 15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GERALD CONSTANTINEAU and FALCON ENTERPRISE CONSTRUCTION INC.

Plaintiffs

– and –

TAMMY SPURRELL and JEFFREY DUPONT

Defendants

Nadia J. Authier, for the Plaintiffs

Defendants appearing in person

HEARD: May 21 and 22, 2014 at Ottawa; written submissions June 30, 2014

TAUSENDFREUND J.

REASONS FOR JUDGMENT

OVERVIEW

[1] At the start of trial, the Plaintiff, Constantineau, confirmed that he was no longer advancing a claim. As well, the action against the Defendant, Dupont, was dismissed.

[2] Gerald Constantineau (“Constantineau”) is the principal and directing mind of the Plaintiff, Falcon Enterprise Construction Inc. (“Falcon”), a small construction company operating in the Ottawa area. The Defendant, Tammy Spurrell (“Spurrell”), was the bookkeeper and office manager for Falcon. She had signing authority on the corporate bank account. She was responsible for the preparation of all cheques to pay suppliers and sub-trades and for payment of Falcon’s day-to-day business expenses.

[3] Falcon states that Spurrell was to be paid on an hourly basis. She was expected to provide invoices for the hours she worked. Although she prepared all cheques, her own pay cheques were to be signed by Constantineau.

[4] Falcon states that during the term of her employment from April 2008 to March 2011, Spurrell wrote corporate cheques to herself and to third parties and used a debit card to withdraw funds from the corporate bank account to make purchases for herself. She also used the corporate Visa card. This, Falcon states, she did entirely for her benefit and to the detriment of Falcon and without its knowledge and consent.

[5] Spurrell does not dispute that she accessed Falcon’s corporate funds, as the Plaintiff claims. However, she states that she did so simply to pay herself the amount she was owed based on a purported verbal agreement she and Constantineau had reached at the time she was hired. She states that she was to be paid $60,000 per year. She agreed to take less initially, on the understanding that eventually she would receive a “payback” once Falcon was generating sufficient income.

FACTS

[6] In 2005, while operating his then general contracting business as Canada Gypsum, Constantineau hired Spurrell as the bookkeeper and office manager for that corporation. She was paid hourly based on invoices she submitted for her time.

[7] In 2008, Constantineau incorporated Falcon as the corporate vehicle which took over and continued his construction business. Constantineau stated that Spurrell agreed to continue to provide bookkeeping and office manager services for Falcon. As she had for Canada Gypsum, Spurrell was paid hourly, based on invoices she submitted for her time. Her hourly rate ranged from $20 to $27, depending on whether she worked in the sales office or attended to bookkeeping/accounting functions. Several such invoices prepared by Spurrell were filed as exhibits.

[8] Spurrell stated that when she was asked to continue to provide services for Falcon at the time of its incorporation, Constantineau and she reached a verbal agreement that she was to be paid $60,000 per year. She described it as a loose, informal verbal agreement. The purported agreement was silent on the number of hours she was expected to work. She stated that as Falcon initially did not have the income to generate her agreed upon salary, she accepted $800 per week on the basis that Falcon would “catch up” on the difference purportedly owing to her once Falcon began to generate more income.

[9] The only purported corroboration of the $60,000 per year verbal agreement is a letter of September 2, 2010 by Falcon to Caisse Populare which states:

To: CAISSE POPULAIRE Attn: CAROLE ST. ONGE

From: FALCON ENTERPRISE Date: SEPT 2, 2010

This letter is to confirm that Tammy Spurrell is employed full time for Falcon Enterprise Construction Inc. in the position of Controller and has been for approximately 6 years.

Her current salary is $60,000.00 per year.

“signed”

Gerald Constantineau

Owner/Operator

FALCON ENTERPRISES CONSTRUCTION INC.

[10] The uncontradicted evidence of Constantineau which I accept regarding this letter is that Spurrell had applied for a mortgage and had asked him to help her in that regard by submitting a letter stating that her income was $60,000 and that she had been employed by him for six years. Both of these representations were untrue.

[11] I find on a balance of probabilities that there was no agreement to pay Spurrell $60,000 per year, but that she was to be paid hourly, as noted above. In that regard, I rely on the following:

a. The invoices for her time submitted by Spurrell;

b. Spurrell’s pay cheques signed by Constantineau, all of which were in varying amounts from week to week;

c. Spurrell did not provide a single cancelled cheque or document confirming a payment to her of $800.00 per week;

d. Spurrell’s acknowledgement that there was no discussion by her with Constantineau as to whether Falcon had reached the level of income to justify a payment of income to her at the $60,000 per year level;

e. Spurrell made no request to Falcon nor took any action to seek payment at the $60,000 level to which she states she was entitled.

[12] When Falcon was incorporated, Constantineau was named as the owner and incorporator of that company. He arranged to have Spurrell named as a Director as he expected her to address all day-to-day concerns of the company. In addition to Constantineau, Spurrell was also noted as a signing officer for banking purposes. Although she was expected to prepare and sign cheques for Falcon’s suppliers and creditors, she was not to sign her own pay cheques.

Debit Card

[13] On April 24, 2008, Spurrell attended at Falcon’s bank, Caisse Populaire. She applied for and obtained a debit card in her name for Falcon’s corporate account. She stated that Constantineau and she each obtained a debit card that day for the Falcon corporate account, yet the only document filed to obtain a debit card is the application of Spurrell. Constantineau stated that he did not know until March 2011 of this application or that Spurrell had obtained such a debit card for the corporate account of Falcon. In the absence of any corroboration by Spurrell of her position, I accept the Plaintiff’s evidence that Constantineau did not know that Spurrell had applied for and obtained this debit card. Constantineau first learned that she had arranged for the issue to her of a debit card for the Falcon corporate account when he discovered that numerous cash withdrawals had been made with the debit card from the Falcon corporate account. He immediately cancelled it.

[14] Regardless of whether Spurrell had obtained the debit card with or without Constantineau’s knowledge or consent, Spurrell’s use of that card was limited to transactions for the benefit only of Falcon. There was no authorization given to Spurrell to use this card as though it were her own bank account. After all, it was a business account and a paper trail would be needed for income tax purposes. A debit card generally is a very poor instrument to generate such a “paper trail”. None of the withdrawals made by Spurrell with this debit card were payment to Falcon’s suppliers or sub-trades, nor were these funds used by Spurrell for the benefit of Falcon in general. Most certainly, Spurrell was not authorized by Falcon to make either cash withdrawals or fuel and other personal purchases on the strength of this debit card.

[15] Between September 9, 2008 and March 13, 2011, there were 44 withdrawals from the Falcon account in the total amount of $56,999.00. Between September 15, 2008 and March 14, 2011, Spurrell made fuel purchases for her automobile in the total amount of $5,604.10. In addition, she made personal purchases using this debit card between September 24, 2008 and November 27, 2010 in the amount of $10,561.98.

Cheques

[16] In March 2011, Constantineau discovered that, without his knowledge and consent, funds had been withdrawn from the Falcon corporate account. Spurrell admitted that from September 2008 to September 2010, she had written to herself and signed 50 cheques in the combined amount of $79,630.43. Included among these cheques were two in the amounts of $2,000 and $5,000 respectively. These were payable to Spurrell’s common law spouse, Jeffrey Dupont. He neither worked for nor was owed money by Falcon.

Visa Card

[17] In February 2011, Spurrell used the Falcon corporate Visa Card to purchase a trip for herself in the amount of $1,613.62. Constantineau neither knew about this purchase nor did he authorize it. Spurrell agreed that she was not authorized to make this purchase for herself and that it was a mistake for her to have done so.

ANALYSIS

[18] Spurrell agreed that she wrote cheques to herself and made personal purchases with a debit card drawn on the Falcon corporate account. She stated that as a director and officer of Falcon, she had the authority of Falcon and was entitled to have proceeded in that fashion. I disagree.

[19] Spurrell worked for Falcon. It matters little whether she was an employee or an independent contractor. It was her duty to act in the best interests of Falcon. She failed in that regard. The cheques she wrote to herself and to Dupont, the withdrawals and purchases she made with Falcon’s debit card and the purchase of the trip with Falcon’s credit card were all entirely for her benefit and at the expense and to the detriment of Falcon. None of it was for payment she had earned. In short, she stole these funds from Falcon. The summary of the amounts for which Falcon shall have judgment against Spurrell is as follows:

Total cheques and cash withdrawals from 2008 to 2011

$136,629.43

Total debit purchases using the Falcon debit card

10,561.98

Fuel purchases using the Falcon debit card

5,604.10

Purchase of the trip using the Falcon Visa card

1,613.62

Total amount owing:

$154,409.13

PUNITIVE DAMAGES

[20] Falcon seeks punitive damages. Spurrell has taken no position.

[21] I accept and am guided by the principles on the application of punitive damages as enunciated by the SCC in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 and as outlined by Lemmon J. in Jefflin Investments Ltd. v. Charendoff, [2009] O.J. No. 5348 at para. 21:

21 In Whiten, the Court provided the following guidance on how to assess punitive damages:

(1) "Punitive damages are very much the exception rather than the rule".

(2) They are "imposed only if there has been high-handed, malicious, arbitrary, or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour."

(3) "Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff, and any advantage or profit gained by the defendant".

(4) Regard should be had "to any other fines or penalties suffered by the defendant for the misconduct in question."

(5) "Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation."

(6) "Their purpose is not to compensate the plaintiff".

(7) Their purpose is "to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community's collective condemnation (denunciation) of what has happened."

(8) "Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives".

(9) "[T]hey are given in an amount that is no greater than necessary to rationally accomplish their purpose."

(10) "While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a "windfall" in addition to compensatory damages."

(11) "Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient."

[22] I also note these comments by the SCC in Whiten, supra, at para.71.

71 … In directing itself to the punitive damages, the court should relate the facts of the particular case to the underlying purposes of punitive damages and ask itself how, in particular, an award would further one or other of the objectives of the law, and what is the lowest award that would serve the purpose, i.e., because any higher award would be irrational.

[23] In applying these principles to the instant facts, I note in particular that:

a. Spurrell was in a position of trust which she breached regularly and consistently over 2.5 years;

b. The conduct of Spurrell was planned and deliberate;

c. The reasons advanced for having accessed Falcon’s bank account as though it were Spurrell’s own, were self-serving, without foundation and substance. I reject Spurrell’s position in its entirety.

d. Spurrell’s admission that her purchase of a trip for herself made with Falcon’s corporate Visa card was a mistake, in my view, compromised and coloured her entire evidence of her justification in accessing and using Falcon’s funds.

e. In view of the overwhelming evidence against Spurrell, it is disturbing that she failed to acknowledge her responsibility in this misappropriation of funds to her benefit, but for the purchase of the trip with Falcon’s Visa card;

f. Falcon’s financial position was seriously compromised as a result of Spurrell’s actions; and

g. There was no evidence that Spurrell was otherwise punished for these actions.

[24] To achieve the objectives of retribution, deterrence and denunciation, I find that Spurrell shall pay an amount of $10,000.00 as punitive damages.

[25] As these damages are due to Falcon based on Spurrell’s fraud and misappropriation of Falcon’s funds for her own benefit and use and if she has made or were to make an assignment in bankruptcy, I find that this judgment shall survive any possible subsequent Order of Discharge of Spurrell from bankruptcy under section 178(1)(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3:

Debts not released by order of discharge

(1) An order of discharge does not release the bankrupt from

(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;

[26] If required, I may be spoken to as to costs within 30 days. In the alternative, the matter of costs shall then be deemed to be resolved.

Honourable Mr. Justice W. U. Tausendfreund

Released: August 15, 2014