ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAMES WYMAN
Morris J. Holervich, for the Plaintiff
Plaintiff
- and -
DAVID KADLEC and KADLEC RESORT PROPERTY INC.
Daniel J. Matson, for the Defendants
Defendants
HEARD: April 8 – 11, 14 – 17, 2014
at Thunder Bay, Ontario
RSJ Pierce
Reasons for Judgment
Introduction
1The plaintiff, James Wyman, entered into an agreement with David Kadlec to manage the operation of Kadlec’s resort in Northwestern Ontario. A dispute arose when the defendants terminated Mr. Wyman. The plaintiff initially sued in Small Claims Court. That case has been subsumed in this action. The questions to be determined by the court are:
- What is the agreement between the parties?
- Was the plaintiff a dependent or independent contractor?
- Was there a breach of the agreement and if so, by whom?
- Did the defendants convert any of the plaintiff’s property to their use?
- Were the defendants unjustly enriched as a result of the plaintiff’s efforts on their behalf?
- If the defendants are liable, is David Kadlec personally liable?
- Is the plaintiff liable to the defendants on their counterclaim?
- Are punitive damages warranted?
2The plaintiff has abandoned his claims for an accounting, and for delivery of certain personal property. He claims special damages for unpaid pre-termination commission of $13,000 plus post-termination commission; general damages for unjust dismissal of $77,000; punitive damages of $100,000; and damages for conversion in the amount of $25,000. During submissions, at the conclusion of trial, the plaintiff made an oral motion to amend the claim for conversion to $46,300 to conform with the evidence adduced at trial. The defendants objected and I reserved decision on the amendment. The plaintiff also claimed damages of $100,000 which was pleaded as restitution, but argued as unjust enrichment.
3Much of the defendants’ counterclaim was abandoned at trial. What remained was a claim for damages of $18,000 for the loss of revenues from cabin rental they say was caused by the plaintiff’s conduct and for the recovery of two Nissan boat motors said to be retained by the plaintiff.
Motion to Amend the Plaintiff’s Prayer for Relief
4Rule 26.01 empowers the court to grant leave to amend a pleading at any stage of an action unless there is prejudice that cannot be compensated for by costs or an adjournment. In this case, the plaintiff adduced evidence at trial about the insured value of contents of a modular home he claims were left at the defendants’ resort and converted to their use. The defendants did not allege any prejudice from the proposed amendment and no adjournment was required. I conclude therefore that the amendment should be allowed. The plaintiff is granted leave to amend paragraph 1(f) of his amended statement of claim to claim damages for conversion in the amount of $46,300.
What was the Agreement between the Parties?
5The defendant, David Kadlec, resides in Wisconsin, in the United States. In 2001, the plaintiff, who was then resident in Thunder Bay, met Mr. Kadlec at Raven Lake Resort. The defendant permitted Mr. Wyman to stay at the premises in return for which Wyman helped at the resort. Mr. Kadlec purchased some tourist resorts in the Ignace, Ontario area and recruited personnel to manage them.
6Later in the summer of 2001, the parties made an oral agreement that Mr. Wyman would manage the Raven Lake Resort. Mr. Wyman stated that Mr. Kadlec expected him to run the resort for him as Kadlec would be in the United States and that he required him to be there from the opening in May until the end of hunting season.
7Mr. Wyman stated that he would receive 25% commission based on the gross revenues received for rental of cabins and boats. Tax was not included in the amount upon which commission was calculated, nor were certain expenses such as gas. There was no guarantee as to the amount of the commissions to be paid.
8Mr. Wyman explained that commission was payable when a customer paid in full for the reservation. In other words, commission was only payable on revenues. No commission was payable on bookings or deposits unless there was a cancellation. In those circumstances, Mr. Wyman took commission on the deposit. Usually, Mr. Wyman collected cash from the customer upon arrival and set aside 25% towards his commission. He tracked these transactions on a spread sheet (exhibit 1).
9The defendant’s wife, Gail Kadlec, also took reservations for the resorts. Mr. Wyman received commission on these bookings as well.
10Long-term renters were permitted to pay by cheque. In those circumstances, Mr. Wyman paid himself commission when the cheque was deposited in the bank, unless there was other cash on hand to pay the commission.
11During the summer season, Mr. Wyman stayed at the resort; in the winter, he took bookings from his home in Thunder Bay or later, Red Rock where he subsequently moved. The financial arrangements were apparently satisfactory to the parties for some years.
12Mr. Kadlec’s evidence about the agreement is somewhat different than Mr. Wyman’s. Mr. Kadlec testified that when Wyman managed Raven Lake, they agreed that the commission would be 20% to run the resort and 5% for incidentals in case Mr. Wyman had to do something extra. He said that if either party were dissatisfied, he could back away without recourse to the other person. He called this a “hold harmless” agreement.
13James Thorne was called as a witness for the defence. He is a friend of Mr. Kadlec’s. He testified that he and Kadlec talked about the content of an agreement to be made with Mr. Wyman when the men were first at Raven Lake: that Mr. Wyman would get 20% commission on revenues from bookings and 5% for incidentals. He indicated that the parties entered into a “no fault” agreement by which either man could walk away without claims from the other.
14Mr. Thorne stated that he and Mr. Kadlec put this proposal to Mr. Wyman who agreed. Thorne added that Mr. Kadlec had never run a resort and Mr. Wyman had never managed one. Thus, if one of them had a medical problem or if the defendant decided not to run a resort, the contract would simply terminate. If either party walked away, the commission would be lost. He said that Mr. Wyman asked for the “no fault” term. I do not accept Mr. Thorne’s evidence on this point. Given the informality of the agreement, I doubt this would have occurred to Mr. Wyman. It is hard to understand how such a provision would benefit him.
15Mr. Donald Drebit is an employee of Mr. Kadlec’s. He testified that he and Kadlec made an agreement in the spring of 2005 that Drebit would get 20% commission for cabin cleaning and checking in guests and 5% for extras for the management of Raven Lake Resort. He said that the agreement would terminate at the instance of either and neither could pursue the other. He testified that Mr. Kadlec told him that this was the same agreement that he made with Mr. Wyman.
16If the parties agreed that 5% commission was attributable to incidentals in order to cover extra work performed by Mr. Wyman, it was never charged this way. Rather Mr. Wyman simply paid himself 25% commission as a matter of course and the parties accepted that arrangement.
17Mr. Wyman testified that in June of 2004, Mr. Kadlec told him that there were few bookings for the season at the Bush Lake Resort, and he asked him to assume the management of the resort. Mr. Wyman stated he told Mr. Kadlec that he liked Raven Lake and he didn’t want to go.
18Ultimately, Wyman agreed to manage Bush Lake. He added that he had secured about $40,000 in bookings at Raven Lake and so he was leaving behind $10,000 in commissions. He explained that he left behind the commissions from the bookings because the revenues had not yet been collected. In cross-examination he conceded that he was paid commission on the bookings that others had made for Bush Lake for the 2004 season.
19Mr. Wyman stated that the agreement with Mr. Kadlec was that he would manage Bush Lake and get it running and then retire to Raven Lake where he would be allowed to set up a residence.
20Mr. Kadlec stated that the agreement about commission continued for the management of Bush Lake. He emphasized that he did not promise Mr. Wyman that he could set up residence at Raven Lake and retire there at the conclusion of his services at Bush Lake. He explained that having a modular home sited there permanently would lower the value of the property and be an impediment to resale.
21I accept his evidence in this regard. The nature of the agreement between the two men was very informal; it wasn’t even reduced to writing. It was mirrored by the agreement Mr. Kadlec made with Mr. Drebit when he took over management of Raven Lake Resort. I conclude it was unlikely that either the plaintiff or the defendant was looking to be bound to the other by long-term commitments over a seasonal contract. I find that it was not a condition of an agreement between the parties that Mr. Wyman could permanently occupy space at Raven Lake at retirement.
22I find that the parties agreed that the plaintiff was entitled to 25% commission for services rendered, including incidentals, based on revenues for accommodation and boat rentals. I find that the umbrella payment of 25% rather than 20% plus 5% for incidentals was intended to simplify accounting and was intended to encompass miscellaneous services, such as lawn mowing and minor repairs.
23Commissions were payable upon the receipt of the revenues as Mr. Wyman described, and not upon their deposit into the defendants’ bank account as the defendants allege. The practice of both Mr. Wyman and Mr. Drebit was to the contrary: they paid themselves commission out of the cash they received when customers paid and checked in at the resorts. The cash was later deposited in the bank. This practice continued until Mr. Wyman’s termination, without objection by the defendants.
24In accordance with their agreement to manage Bush Lake Resort, Mr. Wyman moved a large fifth wheel trailer onto the property in 2004. Most of the cabin rentals at Bush Lake were from Domtar personnel that had made previous rental arrangements with the resort. Mr. Wyman received commission as a result of these bookings.
Was the Plaintiff a Dependent or an Independent Contractor?
25It is conceded that the plaintiff is not an employee. He argues that he was a dependent contractor and as such was entitled to notice of termination of between 6 – 9 months, which should be extended to 12 months given the circumstances of the termination.
26Around 2004, Mr. Wyman set up Northwest Resort Management, a sole proprietorship. He said that it was created so that he could deduct the costs for his truck as a business expense. Mr. Wyman would have been about 55 years old by then based on his age of 65 at the time of trial. The plaintiff managed Bush Lake from June of 2004 until September of 2008 when he was terminated by the defendants. He testified that he could have worked managing other resorts, though he never did.
27The Court of Appeal discussed the distinctions between employees, dependent and independent contractors in McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916. At para 22, the court held that case law has developed an intermediate category of dependent contractor, defined by economic dependency in the work relationship, which requires reasonable notice for termination. The need for notice has been held to arise out of a high level of exclusivity or complete exclusivity in the work: para. 25.
28In Charbonneau v. A.O. Shingler & Co, [2000] O.J. No. 4282 (Sup. Ct.), para. 12, the court held that, in analyzing whether an employer – employee relationship exists, the court must consider
the intentions of the parties, how the parties themselves regarded the relationships, the behaviour of the parties toward each other and the manner of conducting their business with one another…
29For the reasons that follow, I conclude that the plaintiff functioned as an independent contractor, and that the parties regarded their relationship as being characterized by its independence. There was no fixed term of the agreement and no provision for penalty or notice of termination. There was no guarantee of minimum commissions to be paid. Either party could simply terminate the contract without recourse to the other.
30The plaintiff was not in a position of economic vulnerability in relation to the defendants. Mr. Wyman described himself as “semi-retired” in 2000. The evidence indicates that Mr. Wyman was in receipt of a Workers Compensation pension around this time and so had an independent income.
31Before he met Mr. Kadlec, Mr. Wyman and his son operated a small machine shop. Prior to that, Mr. Wyman did small contracting jobs; he also worked for several years as a security manager for a department store. The plaintiff’s wife retired from her work in 2005. She earned some small income from cleaning cabins at Bush Lake.
32During the course of managing Bush Lake, Mr. Wyman determined the manner and time of his work: he solicited his own customers, and was not dependent on the defendants to supply them. He stated that he was given carte blanche to build up the business. He hired others to take his place if he wasn’t there; he went on vacation. After he moved to Red Rock in 2008, he was present at the resort about three days a week for a few hours. During that year, he spent time supervising the building of a garage on his property at Red Rock. He stated that in 2008, he expected to retire shortly.
33Mr. Wyman advised Canada Revenue Agency that he was self-employed. He described himself to Gail Kadlec as an independent contractor (exhibit 55).
34I conclude that the plaintiff was an independent contractor who was not entitled to reasonable notice of termination. In view of my conclusion that the plaintiff was an independent contractor, it is not necessary to deal with the defendants’ argument that Mr. Wyman was terminated for cause.
Was there a Breach of the Agreement and if so, by Whom?
35An explicit term of the parties’ agreement is that monies owed to Mr. Wyman were payable when the revenue was received by the resort. The defendants breached their agreement when they refused to pay commission on rent cheques in Mr. Wyman’s possession at termination.
36Mr Wyman was advised that the defendant corporation decided to terminate the parties’ contract, effective September 10, 2008. He received a copy of the defendants’ letter to this effect attached to an e-mail from the corporate solicitor dated September 12, 2008.
37The defendant corporation’s letter dated September 10, 2008 attributed the decision to “business reasons.” It also advised:
We will arrange for all final payments to be made to you once an accounting of the revenue for Bush Lake Resort is complete. Any outstanding amounts owing will be forwarded to you under separate cover.
We understand that you currently retain property belonging to Kadlec Resort Properties Inc., 1698257 Ontario Inc. and/or Bush Lake Resort at your residence in Nipigon, Ontario. We require you to return all equipment, including but not limited to the John Deere backhoe, lawnmower and fax machine, to Bush Lake Resort, at your own expense.
We also require you to immediately return all keys, credit cards and any materials, records, documents or property belonging to Kadlec Resort Properties Inc., 1698257 Ontario Inc. and/or Bush Lake Resort, including but not limited to all Form 33’s, resort booking ledgers, records or information, customer information and documents, supplier or service contracts and/or agreements, all legal files, all corporate records, and all financial records in your possession, whether written or electronic form, to the attention of our counsel, Shelley Trewin at Weiler, Maloney, Nelson, 1001 William Street, Suite 201, Thunder Bay, Ontario P7B 6M1, and make suitable arrangements with Ms. Trewin for the removal of any of your personal belongings which may be located at Bush Lake Resort.
This letter also serves as formal written notice given to you pursuant to the Trespass Property Act, R.S.O. 1990, c. T.21. You are not allowed or entitled on the premises of Bush Lake Resort, Jellicoe Ontario, or any properties owned by Kadlec Resort Properties Inc. without the specific permission from and in the presence of Dave or Gayle Kadlec or their designated company representative.
38The foregoing correspondence was drafted by the corporate solicitor. It is not clear from this letter how Mr. Wyman could conveniently return certain chattels and retrieve his belongings given the constraints of the trespass notice.
39Added to this communication was Ms. Trewin’s letter dated September 12, 2008, referencing the above correspondence. Despite the fact that Mr. Wyman was sent the defendants’ correspondence after 5 p.m. on September 12, 2008, Ms. Trewin states:
We are the solicitors for Kadlec Resort Properties Inc., 1698257 Ontario Inc. and Bush Lake Resort (collectively referred to hereafter as the Corporation). We understand that your services, and that of Northwest Resort Management were terminated effective September 10, 2008. A copy of the Corporation’s letter is attached, and refers also to a number of items belonging to the Corporation which as of the date of this letter, have not been returned.
In addition to the Corporation’s property, we have since learned that you are also illegally withholding revenue belonging to the Corporation.
The letter terminating your services confirmed that the Corporation will arrange for all final payments to be made to you once an accounting of the revenue for Bush Lake Resort is complete, and that any outstanding amounts owing will be forwarded to you under separate cover.
This letter will further confirm that the Corporation will pay any outstanding monies owing to you once it has had the opportunity to satisfy itself, and using the services of Mr. Rick Trochimchuk at Fitzpatrick and Partners, of the accuracy and completeness of the invoicing and deposits to date, and calculate your commission entitlements relating to the various categories , on the express condition that you return, completely and accurately, all information belonging to the Corporation as itemized in the letter attached by 1:00 pm on Monday, September 15, 2008. Failing which, the Corporation will pursue any and all alternatives to retrieve its property.
We further understand that you have a ‘4X4 Quad’ on the Resort remises [sic]. We suggest you make arrangements for a third party, and further suggest best the gentleman, Jim, who assisting [sic] in building your garage, to attend and retrieve your equipment on Saturday between the hours of 11:00am and 12:00pm. This third party should also be returning the Corporation’s lawn mover [sic] that was located at your residence, to the Resort, at the same time as he attends to pick up your 4X4 Quad. Further arrangements for any other personal property you have remaining at the resort premises can be made through my office.
40Notwithstanding the very short notice, Mr. Wyman advised Ms. Trewin that he would deposit the three cheques which he had in his possession on September 15th and deliver the invoices, bank books and other accounting documents to the accountant. This he did. He stated that he trusted the accountant to pay the commission and to be fair. Mr. Wyman also delivered the business records to Ms. Trewin’s office the same day.
41The parties agree that if commission is due to Mr. Wyman for the six invoices he submitted which were unpaid, they are worth $6,237.50 for July – August, 2008 and $4,940 for August – September, 2008 (exhibit 60).
42Despite the fact that Mr. Wyman was terminated, I am of the view he is entitled to commission on these cheques which were in his possession when he was terminated, and deposited subsequently. He is therefore entitled to commission totalling $11,177.50. He is also entitled to interest on this sum pursuant to the Courts of Justice Act commencing September 15, 2008.
43The defendants’ and Ms. Trewin’s commitment to pay commission due once it was calculated was completely ignored. Exhibit 12 shows that the calculation was forwarded to the defendants and counsel on October 14, 2008. Mr. Kadlec confirmed that this was the last statement from the corporate accountant about commissions owed to the plaintiff.
44The commission calculated by the defendants’ accountant was not paid as of trial. Had the defendants made timely payment, it is probable that this litigation and the attendant costs could have been avoided.
45The plaintiff also claims commission on rentals for bookings worth $17,255 he made with hunters in the amount of $4,313.75 although he stated that he did not regard the hunters as his customers.
46At the time of the plaintiff’s termination, hunting season had not commenced. There is no evidence that the defendants had received revenues for these bookings, or that they represented cancellations, for which commission would be paid on deposits. Mr. Wyman testified that, by the terms of the parties’ agreement, commission was payable when the booking was paid in full. Thus, the plaintiff is not entitled to commission on the fees paid by hunters for the fall season.
47As the defendants’ resort business developed, a number of cabins were rented on a long-term basis to various mining contractors. Mr. Wyman was paid monthly commission on the rentals when received from these customers. However, the parties made no agreement for payment of commissions in the event that their contractual arrangements ceased. I find that the plaintiff’s claim for commission for rents received after Mr. Wyman’s termination is not in keeping with the parties’ contractual arrangements.
48The plaintiff claims the sum of $179.20 for the cost of delivery of files to the corporate solicitor. In view of the defendants’ demand that all files be delivered immediately, this claim is reasonable and will be allowed.
Conversion
49If the parties are at liberty to walk away from their agreement, it is implicit that they walk away restored to their original positions, including possession of personal property.
50In 2005, the plaintiff sold his residence in Thunder Bay and moved his furnishings to a vacant three-bedroom modular home owned by Bush Lake Resort. It is not disputed that he equipped the residence with appliances, drapes, dishes and other furnishings. Mr. Wyman stated that other furnishings from his former home were also placed in rental cabins.
51The plaintiff identified various photographs of furniture he said remained in the modular home or in cabins at his termination. These include miscellaneous hand tools, a washer and drier, kitchen table and chairs, a fridge and stove, corner table and chairs, Lazy Boy chairs, pots, pans and dishes, microwave, television and stand, desk, coffee table and end tables, lamps, satellite system and receiver, unspecified equipment, a helmet and suits for the 4-wheeler.
52The plaintiff claims damages in the amount of $46,300 for the value of furniture left in the modular home or cabins at Bush Lake Resort. He submits this value is established by the contents insurance policy (exhibit 33). Mr. Wyman takes the position that the only furniture he removed from the modular was a bedroom suite that he valued at $2,000 plus a leather couch and chair. He stated that Mr. Kadlec and his daughters occupied the residence after he left and then it was rented to a mining contractor.
53Mr. Kadlec testified that the plaintiff took all of the contents of the modular home when he moved into his new residence at Red Rock except a few things which he didn’t specify. Mr. Kadlec denied seeing wrenches, (exhibit 23) couches, (exhibit 25), table and chairs (exhibit 29) or chair, television and stand (exhibit 30) at Bush Lake Resort. Mr. Kadlec stated that he assisted Mr. Wyman in moving to the Red Rock residence and the plaintiff told him that he had all of his property out of the resort. Mr. Wyman denies this.
54In cross-examination, Mr. Kadlec stated that to the extent there was any furniture in the modular home, it was moved to the plaintiff’s Red Rock residence in a trailer and then he went to a furniture store in Thunder Bay to purchase new furnishings for the modular home. He did not specify what items were purchased and no invoice was produced. However, Mr. Kadlec agreed that during examination for discovery he said he didn’t know whose furnishings were in the modular home.
55Terry King testified that he never saw the couch (exhibit 25), table and chairs (exhibit 29), chairs, television and stand (exhibit 30) at the Bush Lake Resort.
56I conclude that the modular home was not left vacant when Mr. Wyman moved certain items to his Red Rock residence.
57The evidence concerning what, if any, furniture remained at Bush Lake is less than satisfactory. I conclude that the value of used furnishings left in the modular was modest and does not approach the value for which the contents were insured. I assess the value of the furnishings that the plaintiff left in the modular residence at $4,000. The plaintiff shall have judgment in that amount.
58Mr. Wyman’s 4-wheeler remained at Bush Lake Resort at the time of his termination. Initially, the man he sent to recover it was not given access. The defendants refused to release it to his designate until Mr. Wyman returned their backhoe that was being used at his residence with Mr. Kadlec’s permission. Eventually Mr. Wyman recovered his 4-wheeler after a couple of attempts. I allow the plaintiff the sum of $165 as expenses to retrieve his 4-wheeler.
59Mr. Wyman also claims the return of two electric Nissan boat motors that the defendants arranged to have police seize from his possession. These consisted of an 18 hp. motor purchased for $6,598 and a 3.5 hp. motor purchased for $1,149 plus tax at 13% in the spring of 2006. The defendants counterclaim for recovery of these motors.
60Mr. Wyman testified that these motors were ordered through the resort account for his use and he reimbursed the resort for them. In his statement to the police (exhibit 20), Mr. Wyman implied that he provided the resort with furniture and appliances for the defendants’ unfurnished modular home and rental units in return for the motors.
61Exhibit 21 corroborates that an acquaintance purchased a personal motor at the same time, for which the resort was paid.
62Mr. Wyman testified that the motors were only used on his personal boats, first at the resort and subsequently at Red Rock. He also stated that the resort had no use for electric motors as there was no means by which they could be recharged. However, he stated that the resort was trying them to see if they might be suitable for hunters.
63Mr. Wyman said that he took possession of the motors upon delivery in the spring of 2006 and no issue was made regarding his use of them on his boat until after his termination. The plaintiff added that prior to the purchase of the electric motors, he had used pull-start motors; however, since his heart bypass surgery in 2005, he wasn’t up to the task.
64The motors have been in the possession of the Ontario Provincial Police since they were seized in 2009 at the insistence of the defendants’, pending the outcome of this trial. In the meantime, the defendants have not attempted to recover the motors. Mr. Wyman says it is because there are no boats at the resort to fit them.
65Mr. Kadlec testified that the resort buys a few motors each year which the plaintiff chose. He denied seeing them at the resort on the plaintiff’s boats. He said the only discussion they had about the motors involved them being used at the resort. If this were so, it is peculiar that the third motor, purchased for Mr. Cherubini, would have been purchased at the same time (exhibit 22). He did not respond to the plaintiff’s evidence that the resort could not use electric motors. He denied making any arrangement to swap the motors for other furniture and equipment provided by the plaintiff.
66There is no documentary evidence to prove that the parties intended to offset the value of the motors by the furniture supplied to cabins at Bush Lake Resort. The motors were purchased in 2006, some two years before the plaintiff left furnishings behind in the modular home, so the value of those contents could not be considered as payment in return for the motors.
67It may be that the defendants agreed to make a trial of electric motors at the resort, especially in view of Mr. Wyman’s heart surgery the year before. Indeed, the motors were used on the plaintiff’s boat at the resort from 2006 to the spring of 2008. However, there is no evidence that the resort intended to gift the motors to Mr. Wyman, and no evidence that he reimbursed the resort for them or that the motors were bartered for furniture brought to the resort. The plaintiff’s claim for return of the motors is dismissed. The defendants are granted judgment on the counterclaim for possession of the two motors.
Unjust Enrichment
68Unjust enrichment occurs when:
a. The defendant is enriched by the plaintiff’s efforts;
b. The plaintiff suffers a corresponding deprivation; and
c. There is an absence of a juristic reason for the enrichment.
See: Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575, para. 14.
69The defendants concede that the plaintiff did things for the corporation that enriched them. They argue that the plaintiff’s services were covered by contract, or alternatively, Mr. Wyman intended to donate his time.
70Mr. Wyman testified that he performed significant services for the defendants beyond those contemplated by the parties’ agreement, such that the defendants were unjustly enriched by his efforts. He said that from time to time, Mr. Kadlec would ask him for a favour. For example, pursuant to the defendants’ instructions, he was the nominal purchaser for resort properties the defendant acquired, beginning in 2003. He located other resort properties that he thought might be of interest to Mr. Kadlec, some of which the defendant purchased. He was not paid commission for his role in locating these properties.
71The plaintiff recommended to Mr. Wyman that he incorporate and he did. Mr. Wyman became a director of the corporate defendant when it was incorporated in about 2003 and an officer in 2004.
72In conjunction with the defendant’s corporate solicitor, Mr. Wyman arranged a resolution to some charges laid against Mr. Kadlec by the Ministry of Natural Resources in 2006 and attended at court on behalf of the corporation, pleaded guilty and paid the fine. The plaintiff also dealt with the Ministry of Tourism over tourism licences for the corporate defendant’s holdings in 2006. He accompanied the corporate solicitor when he toured sites owned by the corporate defendant and attended negotiations regarding the Emerald Field litigation. He instructed the corporate accountant in 2007 and the corporate solicitor in 2008. Mr. Wyman remitted provincial sales tax for the corporation as well as calculating the GST rebate. Significantly, however, Mr. Wyman never had signing authority. Rather he was provided with pre-signed cheques. Ms. Kadlec handled all the banking from Wisconsin.
73Mr. Wyman did not record the hours spent on these activities. There is no indication that he sought reimbursement for his out-of-pocket expenses or that he tried to renegotiate his agreement with the defendants. He testified that he did not expect to get paid for the extra work because Mr. Kadlec insinuated he could enjoy his retirement at Raven Lake.
74I find that the defendants were unjustly enriched by Mr. Wyman’s activities as the defendants’ de facto Canadian agent. Mr. Kadlec resided in Wisconsin and his business affairs often kept him there. He developed enough trust in Mr. Wyman over the years to call on him to locate investment properties and act as the nominal purchaser, solve regulatory problems, preserve the corporation’s interests, and deal with the corporate accountant and solicitor.
75I find that the plaintiff suffered a deprivation related both to his time and his out-of-pocket expenses, such as gas for his truck, in undertaking these activities.
76Was there a juristic reason for the deprivation? The defendants argue that these services are covered by contract. I do not agree. These activities fall outside the scope of incidentals for which 5% commission was provided in the commission structure. There was no evidence that another manager, Mr. Drebit, was similarly engaged although he also received a 25% global commission. Thus, the contract between the parties does not account for the unjust enrichment.
77Alternatively, the defendants argue that the plaintiff intended to donate his time to the defendants, thereby providing a juristic reason for the unjust enrichment: Pacific National Investments Ltd., para. 23. In my view, Mr. Wyman offered his time to accommodate Mr. Kadlec and to cultivate goodwill for their ongoing business relationship, but under the misapprehension that he would be able to retire to Raven Lake. Had he realized that Mr. Kadlec would not provide a retirement location for his modular home, he would not have been a willing agent. Thus, I find that Mr. Wyman had no true donative intent.
78Mr. Kadlec took advantage of Mr. Wyman’s goodwill. If he had been required to travel to Canada himself to attend to these matters, or employ an agent to do so, he would have incurred significant additional expense. I find that the defendants were unjustly enriched by the plaintiff’s activities. In the circumstances, the defendants shall pay to the plaintiff damages fixed at $10,000.
Counterclaim
79The defendants abandoned much of their counterclaim. Apart from their claim for possession of the motors, the defendants counterclaim for damages of $18,000 for the loss of revenues after Northstar left on August 22, 2008.
80Northstar is a mining contractor that rented cabins at Bush Lake Resort on a monthly basis. The plaintiff invoiced Northstar monthly for its rentals which were paid by cheque.
81Mr. Wyman became concerned that the drillers who were in the Northstar cabins were causing damage as shown in exhibit 50. In addition, Northstar fell into arrears of rent. Mr. Wyman had difficulty contacting the administrator for Northstar to discuss the damage and arrears. On August 13, 2008, he faxed a letter to their administrator indicating he had been trying to contact her for over a month to discuss his concerns (exhibit 51). He indicated that if the issues were not resolved by August 15, 2008, the corporate defendant would begin eviction proceedings.
82Northstar responded with a letter dated August 15, 2008 indicating they intended to vacate the property by August 22nd. Mr. Wyman sent an undated letter advising that in view of the arrears of rent of $16,830, Kadlec Resort was claiming a lien on Northstar’s property pending payment of its account. The account was duly paid.
83In cross-examination, Mr. Kadlec agreed he saw photographs of resort property that Mr. Wyman considered to be damaged. He agreed that damage to cabins would be a concern that he would want Mr. Wyman to address “in a workman-like way.” Mr. Kadlec arranged to meet with the Northstar administrator because he didn’t want to lose a customer, but he wasn’t then aware there were substantial arrears.
84Mr. Kadlec negotiated a contract with the plaintiff with a “hold harmless” term by which each party could simply walk away. There was no provision for damages as a result of management decisions made by Mr. Wyman who was authorized to exercise independent judgment. Mr. Kadlec typically only visited the resort in the spring and in the fall. Having sought the freedom to walk away from contractual relations with the plaintiff, he cannot now claim damages when he believes that Mr. Wyman mismanaged a situation. The resort recovered the arrears of rent as a result of the plaintiff’s actions.
85Except for judgment for possession of the motors, the counterclaim for damages is dismissed.
Is David Kadlec Personally Liable for Damages?
86The plaintiff claims damages against Mr. Kadlec personally. The defendants submit that the termination of Mr. Wyman was done in the ordinary course of the corporate defendant’s business such that any liability lies with the corporation and not with Mr. Kadlec personally. I do not agree.
87The agreement upon which the parties operated was made between Mr. Wyman and Mr. Kadlec personally. It predated the incorporation of Kadlec Resort Property Inc. There is no evidence that the terms of the agreement changed either implicitly or explicitly. I conclude that to the extent there is liability, Mr. Kadlec is not exempt from it.
88However, with respect to the plaintiff’s claim for unjust enrichment, the actions of the plaintiff advanced the interests of both Mr. Kadlec personally and the corporate defendant. In those circumstances, joint liability will obtain.
Punitive Damages
89The plaintiff claims punitive damages in the amount of $100,000 to punish the defendants for:
- locking Mr. Wyman out of Bush Lake Resort;
- withholding the plaintiff’s personal property;
- withholding the plaintiff’s commission, once calculated;
- alleging that the plaintiff took the defendants’ property; and
- accusing the plaintiff of theft.
90Punitive damages are damages intended to punish or deter the defendant: Rock v. Canadian Red Cross Society, 1994 CarswellOnt 981 (Ont. Gen. Div.), para. 160. In this case, there was a certain “tit for tat” quality to the defendants’ withholding of commission in the face of a counterclaim for damages for lost revenues, and with respect to the withholding of the other party’s personal property. I do not find that these actions, as unwise as they may have been, call for an award of punitive damages.
91Nor can I find that locking Mr. Wyman out of the resort is justification for punitive damages. However, in light of the relationship between the parties over a period of years and the responsibility the defendants had given Mr. Wyman, it can hardly have been necessary.
92The defendants’ conduct in pressing the police to charge Mr. Wyman with possession of stolen property in connection with the motors was foolish, especially when the police advised that possession of the motors was a civil dispute. Not satisfied with this answer, the defendants complained to the Member of the Provincial Parliament, hoping to pressure the police to lay a charge. Unfortunately, the police did. This strategy was an effort to leverage Mr. Kadlec’s position in this case. In fact, it exacerbated the case, removing any possibility that the parties might resolve their differences short of trial.
93Ultimately, the Crown Attorney withdrew the charge against Mr. Wyman on the basis that there was no reasonable prospect of conviction.
94In view of my finding that Mr. Wyman has not proven ownership of the motors, no punitive damages will lie. That claim is dismissed.
Summary
The plaintiff is granted leave to amend para. 1(f) of his amended statement of claim to claim damages for conversion in the amount of $46,300.
The plaintiff shall have judgment against David Kadlec for unpaid commissions and for the cost to deliver files in the amount of $11,356.70 together with interest pursuant to the Courts of Justice Act commencing September 15, 2008;
The plaintiff shall have judgment against David Kadlec for conversion and for retrieval of his 4-wheeler in the amount of $4,165.
The plaintiff shall have judgment against the defendants for unjust enrichment in the amount of $10,000.
The defendants shall have judgment on the counterclaim for possession of the 18 hp. and 3.5 hp. Nissan marine motors currently being held by the Ontario Provincial Police.
The plaintiff’s claim and the defendants’ counterclaim are otherwise dismissed.
With exception of provision for interest in para. 1 prejudgment interest is payable pursuant to the Courts of Justice Act.
95If the parties cannot agree on costs, either party may apply to the trial coordinator within thirty days to obtain an appointment to argue same, failing which costs will be deemed settled.
Regional Senior Justice H.M. Pierce
Released: August 14, 2014
COURT FILE NO.: CV-09-0069-00
DATE: 2014-08-14
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAMES WYMAN
Plaintiff
- and –
DAVID KADLEC and KADLEC RESORT PROPERTY INC.
Defendant
REASONS ON JUDGMENT
Pierce, RSJ
Released: August 14, 2014
/nf