reasons FOR JUDGMENT

[1] The plaintiff seeks summary judgment in its action against the defendant for two “loans” it made to the defendant in the amount of $950,000 and $581,687, respectively. These loans were made pursuant to an Agency Agreement (Exhibit C to the affidavit of James Miller sworn July 16, 2014) it made with the defendant, signed October 29, 2009 (although dated October 19, 2009). The plaintiff also seeks to recover monies “loaned” in subsequent agreements, that is Associate Agent Agreements made December 11, 2009, between the parties and Bill Gialelis (Exhibit 5 to the affidavit of Nerio D’Ambrosi sworn August 27, 2014) and between the parties and Melinda Burgess dated January 30, 2012 (Exhibit 6 to the affidavit of Nerio D’Ambrosi sworn August 27, 2014). Those agreements loaned $222,000 and $50,000 to Gialelis and Burgess, respectively.

[2] The defendant resists the motion on the basis that there is no obligation to repay the loans, because the repayment terms were not part of the negotiated terms and are not binding. Schedule “D” of the Agency Agreement, which contains the repayment terms, was not provided to the defendant until after the business relationship between the parties had commenced on October 19, 2009. Further, the terms of repayment were imposed on the defendant without consideration and are void in the circumstances pursuant to the provisions of the Employment Standards Act, 2000, S.O. 2000, c. 4441, ss. 5 and 60.

[3] In addition, the defendant argues the business relationship between the parties is an employer-employee relationship rather than the dealer-agent relationship set out in the agreement and alleged by the plaintiff.

[4] The defendant also advances a counterclaim for damages in the amount of $1.5 million dollars along with punitive, exemplary, and aggravated damages in the amount of $250,000 plus interest and costs. Disposition of the counterclaim is not part of this motion.

Facts

[5] The parties are in general agreement that the defendant was looking to move from his existing position as a Branch Manager at Raymond James Ltd. (“RJL”), an independent financial services office in the Yonge and Sheppard area of Toronto. He was approached by the plaintiff, and in particular, George Karakoulis, who was previously the head of RJL’s independent financial services division but, as of the summer of 2009, the Senior Vice President and Head of Independent Wealth Management for Canaccord. The negotiations ensued over the summer of 2009. The court was referred to emails and a Term Sheet which outlined a forgivable loan in the amount of up to $1.95 million dollars to be paid in six equal monthly installments, commencing on the first month following the transfer of the defendant’s dealer licence. The loans would be forgiven at the rate of 20 percent per annum over a five-year period. The Term Sheet made no provision for what would occur in the event of termination within the five-year period.

[6] The second loan was provided on a performance basis, that is, certain gross revenues had to be achieved. The second loan would be payable on a monthly basis and forgiven at the same 20 percent per annum rate over a five-year period.

[7] The purpose of the transition payments is set out in the affidavit of Mr. Karakoulis (who no longer works for the plaintiff), which was filed by the defendant. Mr. Karakoulis indicated the payments were to provide adequate cash flow during the transition period, which usually lasts three to six months, and to compensate the investment advisor for time and effort spent in convincing the clients to transfer their assets, in completing the paperwork necessary, and in changing office branding and marketing materials. It was also intended to recognize the inevitable loss of some assets and to compensate investment advisors for the risk in moving.

[8] The plaintiff admits it provided a draft Agency Agreement by email on August 5 (Exhibit 5 to the affidavit of Nerio D’Ambrosi sworn December 18, 2014) which did not contain Schedule “D”. Schedule “D” is referenced in clause 3.1 Compensation of Agent within the Agency Agreement. However, the complete sentence describing same states, “The Agent may be entitled to receive other financial consideration from the Dealer in accordance with the terms and conditions set out in Schedule “D” which shall form an integral part of this Agreement.” As such, it does not contain any reference to (and it would seem fair to conclude the wording would not arouse any concern about) repayment of the loan in the event of termination. The reference to Schedule “D” indicates that it contains particulars about further potential financial consideration, not potential penalties or repayment.

[9] The plaintiff acknowledges the defendant first received Schedule “D” on October 29, 2009, or ten days after he started and six days after the plaintiff had arranged for the requisite transfer of his dealer licence with the Investment Industry Regulatory Organization of Canada (“IIROC”), which licence is necessary for the defendant to carry on business.

[10] The defendant alleges that at this point he was not in a position to further bargain (or refuse to sign), given the commitments he had already made. It is noteworthy that the defendant was not just moving himself but also in the process of attempting to have as many of the 12 to 15 associate agents managing about $250 million dollars of investments at his previous position move as well. He was also reaching out to individual investors to transfer their business, which was generating $2 to $3 million dollars of revenue in fees and commissions on an annual basis.

[11] The Agency Agreement which the defendant signed contains in Schedule “D”, a list of the eight Associate Agents the defendant persuaded to move with him and detailed that unless five years had passed and there had been full forgiveness of the loans, those loans would “become immediately due and payable” as set out in clause 7 of Schedule “D”. Termination of the Agency Agreement could be made for “any reason” on 90 days’ notice.

[12] The Agency Agreement also raises in clause 3.1 the agent’s acceptance of the amount set out in the compensation schedule, also found in Schedule “D”, as full compensation. Article 5.2 sets out the 90-day termination notice and clause 6.1 is an “entire agreement” clause which specifies that “no amendment to, or waiver of, this Agreement will be effective or binding unless set forth in writing and signed by the party to be bound thereby.”

[13] As indicated, the plaintiff proceeded with advancing the initial $950,000 in six monthly installments between November 3, 2009, and March 31, 2010. The defendant succeeded in reaching the requisite targets and received the second transition loan of $581,687 on May 25, 2011.

[14] In the fall of 2009 the plaintiff, through Mr. Karakoulis, approached the defendant requesting that his nephew, Bill Gialelis, become an Associate Agent with the defendant. The defendant agreed and an Associate Agent Agreement was executed dated December 11, 2009, with similar if not identical terms, providing for a loan of $222,000 with the same forgiveness and repayment terms and conditions. However, the defendant was required to sign the Associate Agent Agreement, which held him responsible for repayment in the event of termination or default of Mr. Gialelis.

[15] Similarly, in or about January 2012, the plaintiff, through Mr. Karakoulis, requested that the defendant take on Melinda Burgess as part of the plaintiff opening a Barrie office. An Associate Agent Agreement advancing her $50,000.00 was executed January 30, 2012. Again, the defendant was responsible for repayment of this loan upon Ms. Burgess’ termination or default.

[16] By February 2012, the defendant was managing 12 agents with $190 million dollars of assets invested. The plaintiff was attempting to build an Independent Wealth Management (“IWM”) Division, which was part of how the plaintiff enticed the defendant to join them. In fact, as part of the negotiations, the defendant travelled to Vancouver to meet with Canaccord executives, including the CEO, Peter Brown, and two Executive Vice Presidents. He wanted to be persuaded that Canaccord was making a “long term commitment.”

[17] On April 30, 2012, or only two and one half years after hiring the defendant, the plaintiff delivered to the defendant a letter purporting to be the defendant’s “decision by you to resign your agency relationship” effective July 29, 2012. Near the end of the letter the plaintiff states, “So there is no misunderstanding, your agency employment with Canaccord will terminate in any event as of the resignation date.” In fact, this is a termination letter (Exhibit 7 of the affidavit of Nerio D’Ambrosio sworn August 27, 2014).

[18] Bill Gialelis and Melinda Burgess were also subsequently terminated, triggering the repayment of their loans by the defendant. However, both were subsequently re-hired by the plaintiff. New Agency Agreements were executed that did not provide for loans or include a Schedule “D”.

Analysis – Genuine Issue Requiring a Trial

[19] Counsel for the plaintiff relies on the reasons of Justice Karakatsanis in Hryniak v. Mauldin, [2014] S.C.R. 87 at paragraph 66, where Justice Karakatsanis holds that the judge should first determine if there is a genuine issue requiring trial based on the evidence before him or her. The plaintiff submits there is no such genuine issue. Counsel for the plaintiff points to two other decisions.

[20] In Canaccord Genuity v. Sammy, 2014 ONSC 3691, Justice Perell granted summary judgment and ordered repayment of loans advanced and not forgiven with respect to the same format Agency Agreement. In that case there was also an Associate Agent Agreement with a third individual, Mr. Minghella. However, the request for Mr. Sammy to resign appeared to be predicated on investment decisions that were considered by Canaccord to be a “serious regulatory violation” (paragraph 28). Mr. Sammy also advanced a counterclaim which was not part of the summary judgment motion.

[21] The plaintiff also relied on Canaccord Genuity Corp. v. Beck, 2013 ONSC 7964, a trial decision involving similar circumstances, including an Agency Agreement with a Schedule “D”, transition loans, and termination within the timeframe before such loans were completely forgiven. In this instance, the trial judge noted (at paragraph 13) that problems quickly arose, in that Beck was unable to be registered with IIROC as a result of alleged improprieties. In that trial Beck alleged that Schedule “D” was not attached and the first time he saw it was when the statement of claim was issued. This evidence was evaluated by the trial judge as “simply not credible” (at paragraph 24).

[22] Counsel for the defendant takes the position that these authorities are distinguishable, in that the circumstances are different, particularly with regard to the possibility, as alleged in the counterclaim, that the relationship was that of employer-employee and that the failure to provide Schedule “D” prior to the commencement of the relationship or provide consideration for the additional terms imposed may render Schedule “D” void and release the defendant from the obligation to repay the loans. I was referred to the Court’s inherent jurisdiction to determine the nature of the relationship. Overall, there appears to be good reason to have concern that a finding in favour of the plaintiff could be inconsistent with the counterclaim to be determined. As a result, the plaintiff’s motion fails on this first level.

[23] Hryniak then requires the evidence be reviewed using the new fact finding powers to determine if the need for a trial can be avoided and whether a fair and just result can be achieved. In this regard, I have similar concerns, particularly with regard to the repayment of loans extended to Gialelis and Burgess and their continued employment with the plaintiff, which does not require or involve their repayment of the outstanding loans.

[24] In my view, the key fact (which distinguishes the situation from the other cases described above) is the plaintiff acknowledging that the defendant did not receive the terms contained in Schedule “D” until 10 days after he commenced his business relationship with the plaintiff, which was at a point where it would be impractical to resile from the agreement or further negotiate.

[25] In my view, there is clearly significant evidence which may require the evaluation of credibility of certain witnesses. In particular, this case is distinct now that Mr. Karakoulis is not employed by the plaintiff and agreed to depose an affidavit at the request of the defendant. To that end, it would appear appropriate to take heed of the comment made by Justice Lauwers in Bayview Homes Partnership v. Haditajhi, 2014 ONCA 450 (at paragraph 44) that “great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.”

Disposition

[26] As a result, the plaintiff’s motion is dismissed. In the circumstances, the Supreme Court of Canada in Hryniak at paragraph 78 directs I consider whether there are any compelling reasons that I not remain seized of the matter. I conclude that the purpose behind the Supreme Court’s direction would not be well-served in the circumstances. I have not made any findings on the evidence presented beyond my finding that there is a genuine issue for trial and my noted concern that a finding in favour of the plaintiff may be inconsistent with a possible result in the counterclaim. Similarly, there do not appear to be additional findings or limitations of issues that would be appropriate. Therefore, I decline to remain seized of the matter or make any other findings.

Costs

[27] At the conclusion of submissions counsel for the parties provided to me a costs outline in accordance with the Rules. The cost outline of the plaintiff was $44,351.29 on a partial indemnity basis. The defendant’s cost outline was in the amount of $17,891.29 on a partial indemnity basis. There were brief submissions about the significant difference without my being able to ascertain the basis for same. Given the result, the defendant is entitled to recover its costs in the amount of $17,891.29 inclusive of disbursements and HST, payable forthwith.

[28] I wish to thank counsel for their able and concise submissions.

Mr. Justice G. Dow

Released: April 24, 2015

CITATION: Canaccord Genuity Corp. v. D’Ambrosi, 2015 ONSC 1344

COURT FILE NO.: CV-13-00478326

DATE: 20150424

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CANACCORD GENUITY CORP.

Applicant

– and –

NERIO D’AMBROSI

Respondent

REASONS FOR JUDGMENT

Mr. Justice G. Dow

Released: April 24, 2015

Canaccord Genuity Corp. v. D’Ambrosi, 2015 ONSC 1344

Case Summary

reasons FOR JUDGMENT

Facts

Analysis – Genuine Issue Requiring a Trial

Disposition

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 2

Legal Tests 1

Legislation 1