CITATION: 1350369 Ontario Inc. v. O’Halloran, 2015 ONSC 2770

BARRIE COURT FILE NO.: CV-05-0880

DATE: 20150429

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

1350369 ONTARIO INC. and GRAYDON DAVID CRAGG

Plaintiff

– and –

DARREN O’HALLORAN, TOM JARVIS, SEAN QUINN, WENDY BREDIN, JENNIFER RACHO, TREEFITTY INC. and 2079422 ONTARIO INC.

Defendants

Scott Fairley and Emily Jane Pinckard, for the Plaintiffs

Judith Turner, for the Defendants

HEARD: November 27, 28, December 1, 2, 3, 4 and 5, 2014 and by written submissions

EBERHARD J.

[1] In 1999 Graydon Cragg, a well-established man in the general insurance business, began to explore the development of a financial services business thinking it would serve his clients with their broader financial issues that often arose in the discussion of their insurance needs. He had no experience in this type of work but it was a good idea.

[2] Graydon Cragg invited acquaintance and neighbour, Tom Jarvis, to join him in this good idea by proposing he acquire credentials as a financial adviser and operate the new enterprise which Graydon Cragg would and could fund. Graydon Cragg incorporated 1350369 Ontario Inc. to facilitate the business, provided premises, equipment, acquired through his excellent connections a franchise to sell Ross Dixon financial products, bought the book of another Ross Dixon franchise serviced by Darren O'Halloran, and paid Tom Jarvis and Darren O’Halloran for their work until 2002 when the enterprise had commission revenue and a 20/80 sharing of the revenue was begun.

[3] Dundee bought out Ross Dixon Financial introducing new products and procedures but work continued in the office much the same.

[4] By 2005 the enterprise had grown. It seemed that the good idea had transitioned into a viable business. Tom Jarvis and Darren O’Halloran worked in the office as financial advisors and eventually Sean Quinn too. They had a series of office assistants including Wendy Bredin and Jennifer Racho in 2005. Graydon Cragg left the management to Tom Jarvis and Darren O’Halloran. He never acquired sophistication or qualification in the financial services nature of the enterprise. In 2004 he arranged to move the business to new premises.

[5] Early in 2005 the three financial advisors became dissatisfied and, by summer left the premises Graydon Cragg had provided. They took their copies of client files and the office staff. They intended to continue to service the clients in new premises they had arranged for themselves.

[6] Watching with interest was Dundee, the dealer company whose financial products these financial advisors sold. Dundee had concern for the clients’ interests which required constant tending by the financial advisor but also, less altruistically, recognized that the disruption in relationship between the clients and advisors could result in those clients moving on to different products with those financial advisers or different financial advisors thus causing Dundee financial loss.

[7] Immediately after leaving the office, Tom Jarvis commenced negotiations with Graydon Cragg to buy the enterprise. After Dundee was satisfied that a resolution was pending, Tom Jarvis was approved to continue to sell Dundee products from the new location.

[8] Negotiations between Graydon Cragg and Tom Jarvis fell apart. Graydon Cragg has been paid nothing and lost stock options in Dundee that were conditional on the enterprise continuing to sell Dundee products until 2009. Tom Jarvis, Darren O’Halloran and Sean Quinn operate now as Hollis. They retained the files they took. Graydon Cragg had no means to serve the clients anyway.

Trial Procedure

[9] This trial was limited to issues of liability by agreement of counsel to bifurcate liability from quantum. This procedural choice deprived me of financial information which impacts on several issues that I am asked to decide. For instance, I have no evidence about how much Graydon Cragg contributed to the capitalization of the enterprise. I was not given much to assess what money or money's worth Tom Jarvis or Darren O’Halloran contributed as compared to their remuneration. This lack of concrete financial evidence is significant because both the plaintiff, Graydon Cragg, and the defendants Tom Jarvis and Darren O’Halloran made extravagant declarations in their testimony minimizing the contributions of the opponent and aggrandizing their own. I was deprived of hard information against which to measure the self-serving hyperbole.

[10] I must also observe that the entire trial was a construct of legal principles that had nothing whatever to do with what the parties in this conflict were actually thinking or intending as the relationships and the enterprise grew. This was not big business where companies are guided by teams of lawyers in anticipating and documenting the complications that might arise. Rather, these parties were more typical of practical men of business who regard lawyers as impediments between a good idea and a thriving enterprise. I do not mean to say they were without skill and savvy in their development of the business. They just never thought about, communicated or documented the nature of relationships and understandings which have now led to dispute. They each bristle at the characterization the opponents put forward now. They each display blind spots in their testimony to evidence that does not support their own view.

[11] So, counsel have supplied me with legal precedent to help characterize the relationships. I will address those arguments because they have put their minds to which principles apply and what are the implications of my findings as to the nature of the relationships.

[12] But really my judgment is almost as simple as the basic statement of facts with which I began. Graydon Cragg and Tom Jarvis started a joint enterprise. The started from scratch with Graydon Cragg providing the means to get it going. Tom Jarvis, and Darren O’Halloran who was brought in early, did an excellent job of developing a clientele. The enterprise prospered. External changes occurred such as dealer Dundee buying out dealer Ross Dixon, and such as a change in premises with some unanticipated complications. The book and retention value of the clients grew due to the skills and initiative of Tom Jarvis and Darren O’Halloran. Sean Quinn joined on and the book of clients being served by him and their likely retention grew the value of the business. On the day before Tom Jarvis bolted, the enterprise had a value. It has not been calculated for me but Dundee's David Velanoff described some valuation methods and the original purchase of the second Ross Dixon book of business by Graydon Cragg suggest how it is done.

[13] When he bolted, the immediate and natural inclination of Tom Jarvis was to try to buy Graydon Cragg out. Graydon Cragg could not run the business without Tom Jarvis. Their original discussions had anticipated Tom Jarvis would buy into the business and their conduct on departure was consistent with that intention. No similar opportunity was ever contemplated by anyone that Darren O’Halloran could buy the business and that was consistent with how the parties behaved. Tom Jarvis had that opportunity because he and Graydon Cragg started up the enterprise together.

[14] Then Tom Jarvis, Darren O’Halloran and Sean Quinn simply carried on the business without compensating Graydon Cragg for his interest. That cannot stand. They took its value and they gain from retention of the files.

[15] Dundee wanted them to have the files so clients would not be lost. When resolution by buy-out seemed to be pending Dundee took no further steps in the dispute.

[16] I find the files that formed the book of the enterprise had been developed by effort from Tom Jarvis, Darren O’Halloran and Sean Quinn, but their value on the day before Tom Jarvis pulled the plug, belonged to the enterprise. Tom Jarvis, in cooperation with Darren O'Halloran and Sean Quinn, cannot just have it all without Graydon Cragg being compensated.

[17] I reached this finding beginning with facts that are not in dispute and the meagre documentary record insofar as it pertains to the relationship between the parties. The narrative is then spliced together based on a robust assessment of the credibility of the witnesses to determine which elements of their testimony I could accept. I then, as the lawyers also did before me, determined the legal construct of the relationship between the parties, their intentions and their liability, based on what I find actually occurred.

The Witnesses

The Administrative Assistants

[18] The least helpful witnesses to address disputed facts were the two office assistants named as defendants, Wendy Bredin and Jennifer Racho:

[19] Wendy Bredin began with the enterprise from March 2003 as administrative assistant. She was interviewed by, hired by, negotiated her salary with, took direction from and reported to Tom Jarvis and Darren O'Halloran.

[20] Despite her 2004 T4 issued by G. B. Cragg Insurance Broker Limited she testified she was never an employee of G. B. Cragg Insurance Broker Limited. Nor did she know why her 2004 T4 slip was from 1350369 Ontario Inc. countering only that she relied on her employer to give her the correct T4.

[21] She described that she had no involvement with Graydon Cragg in the office but in the final days Graydon Cragg called her into a meeting room to talk to her about Tom Jarvis leaving. She testified he proceeded to explain that with Tom Jarvis gone there was “no-one to provide me with anyone to do”. She stated he “drew a picture of no work coming down for her, that he didn't fire her but she concluded she concluded she wasn’t going to have a job”. So, she resigned as employee. She directed the resignation letter to 1350369 Ontario Inc. and Graydon Cragg. She insisted “I didn't work for Graydon Cragg, but he left me with impression he was in charge so I directed it to him.” She acknowledged that Graydon Cragg told her she was working for him.

[22] My impression of this witness was that she appeared remarkably forgetful of any detail relating to her knowledge that the three financial advisers intended to depart consistent with her recognition that it was in this, if at all, her potential liability would arise.

[23] Jennifer Racho was even more reticent about revealing anything of importance. By her demeanour she presented as patently aware and concerned about Darren O'Halloran’s reaction to her answers. She frequently denied then acknowledged facts relating to the planned departure. When pressed, she became emotional revealing her concern that her honest answers to questions were not what Darren O'Halloran would want her to say. For example she first tried to suggest that the search for a new office premises was potentially for investment as she and Darren O'Halloran had other investment properties. Finally she had to concede she knew the search was for a premises to carry on the financial service business.

[24] Jennifer Racho testified she is in personal relationship with Darren O'Halloran. They are parents of a 2 year old boy. Parenthetically, the power imbalance in their relationship was proudly and expressly confirmed by Darren O'Halloran when he testified.

[25] Jennifer Racho joined the business enterprise she described as “Dundee” in summer 2004 as administrative and office assistant. When instructed, she recorded the voice message which diverted all business to the financial advisers in their new location “So clients could contact their advisors if they had any financial concerns”.

[26] After first professing she could not recall when or why the financial advisers were looking for a new building but then acknowledged she knew when they resigned they already had the new building. It took repeated cross examination before she abandoned her innocence whether it was all being kept a secret from Graydon Cragg and acknowledged she was aware she knew she was directing Dundee clients to another location and that Graydon Cragg had nothing to do with it. Finally saying she knew at the time, she explained “Graydon Cragg and I didn't get along so I didn't tell him anything. I just informed him when I was leaving”.

[27] I find that Wendy Bredin and Jennifer Racho were employees under the direction of Tom Jarvis and Darren O'Halloran who were managers for the business. Neither had the slightest autonomy or control. They acted on the direction of their managers. Neither had any reason to know of the role of or have involvement with Graydon Cragg but both participated in the deception. They had some sense that he was the boss. Wendy Bredin knew it was necessary to communicate with him about the fact she was leaving. Jennifer Racho was so controlled, in thought and action, by Darren O'Halloran she did not act upon such courtesy.

Dundee Witnesses

[28] Susan Gratto was a Dundee corporate branch manager whose role for Dundee was to supervise and ensure representative compliance with industry regulations. Branch managers have access to official client files which are retained in the branch office though financial advisers keep working files of clients for whom they are agent of record.

[29] She knew that Darren O'Halloran and Tom Jarvis were the registered branch managers in Orillia until spring 2005 when she was told by Dundee to take over the Orillia enterprise as a sub-branch. Asked if she was aware in March 2005, when she took over as branch manager, Tom Jarvis was planning on moving from Monarch she recalled no conversation about it, stating “I assume it was communicated to Dundee”. She knew nothing about the 1350369 Ontario Inc. relationship with Dundee but confirmed that investment advisors could direct commissions to a corporation, which does not have to be registered, and many did that for tax reasons. The regulator has no interest in how the corporation distributes the received funds. From her perspective as branch manager Graydon Cragg was just an owner of neighbouring business, “in my view a silent partner as I did my roll”.

[30] Susan Gratto confirmed regulatory problems with the premises but never did a full audit. She confirmed that there were simple fixes for the various problems, “very simple, yes”.

[31] After the three financial advisers left, she addressed a problem having to do with a client who complained she couldn’t get hold of her financial adviser and it looked like the phone was not being answered by G. B. Cragg Insurance Broker Limited and needed her name as branch manager.

[32] Susan Gratto explained that when a financial adviser leaves a branch as Tom Jarvis did in July 2005, he has to go to another sub-branch and apply for registration with Dundee at another location. She stated it is up to the dealer, Dundee, to ensure the location is registered. That, I find, is consistent with the notion that Dundee could refuse to register. Until the financial adviser gets approval he could still do trades, as he is still a licenced financial adviser. In the time between when Tom Jarvis resigned in July and August when the sub-branch was approved, Tom Jarvis was still supervised by Susan Gratto and since all that is required is a registered location, “he could have used my branch as his location”.

[33] I find Susan Gratto was a reliable witness as to the context in which the financial advisers associated with Dundee operated. It is fair to conclude that the information she conveyed would have been known to Tom Jarvis and Darren O'Halloran in 2005 as they were, until they resigned in March, branch managers for the Dundee branch in which they then worked.

[34] I find Susan Gratto knew nothing of the model of this particular business but she confirmed that a corporation receiving funds is acceptable. She confirmed that the regulatory issues had easy fixes. This evidence helps me find the financial advisers didn't have to bolt to avoid regulatory sanction. She knew nothing of the deceitful plan B but I conclude that as Tom Jarvis and Darren O'Halloran knew what she knows, they would have recognized that plan B would be facilitated by their resignation as branch manager.

[35] Also giving context from the Dundee perspective was David Velanoff. His description of how Dundee branches operate was similar to what Susan Gratto told us. But David Velanoff was with Ross Dixon from start up in 1992 as vice president of franchise development, then compliance, then 9 years as CEO. After that he was vice president of development, compliance and the insurance division for Dundee. He knows the industry and the dealer companies well and he also had considerable personal involvement in both the beginning and the end of the business enterprise of Graydon Cragg and Tom Jarvis.

[36] Although in this bifurcated trial I did not receive evidence to value the disputed business, David Velanoff gave considerable evidence about the recognized methods to determine value. He currently values businesses and advises on how to sell a book of business. I needn’t relate his evidence here except to say he used these skills in the circumstances of this case to facilitate the 1999 purchase of Hewmac by 1350369 Ontario Inc. His evidence also confirms that there are, in fact, recognized methods. This is comforting in the facts of this case because when Graydon Cragg and Tom Jarvis were negotiating the figures for buy-out they inevitably disagreed as neither referred to recognized methods.

[37] Although he didn’t recall every nuanced detail I find David Velanoff is the most reliable witness in this trial as to what occurred. I found him fair minded and very informed on the issues in dispute. Occasionally he spoke of the circumstances in the way he would have heard about them from Graydon Cragg, but alert for that factor, I found his observations on issues in dispute were based on direct involvement and conclusions he reached contemporaneous with the events rather than the re-characterization which the parties tended to do.

[38] Where they differ I accept the evidence of David Velanoff over the evidence of other witnesses but most particularly Tom Jarvis. For instance, when Tom Jarvis testified he scoffed at the notion that Dundee’s continued willingness to include Tom Jarvis among its representatives was in doubt, I prefer the testimony of David Velanoff who said “In our world they are the owners of the relationship …At that time Tom Jarvis was not a sub-branch and he’d…better hurry and get registered. The boss says terminate because Graydon Cragg built the business and Dundee’s top decision makers shared the perception that the way the move occurred was unfair.” David Velanoff specifically stated “I had authority to terminate Tom Jarvis” even knowing that Graydon Cragg was not licenced except maybe as an administrator. “Termination was on the table” but Dundee allowed him to open on the basis it was going to be resolved.

[39] In his Ross Dixon years David Velanoff oversaw operations, compliance, franchises, IT, finance and identified that the most common Ross Dixon Franchise format was a franchise business owned through a corporation. Salaried employees helped build the book of franchisee.

[40] At start-up, Graydon Cragg already successful, was subjected to detailed due diligence and found to be well capitalized for a business plan that was sound, client focussed and it was obvious wouldn’t be profitable for years. The weakness was in the inexperience of the proposed financial representative. Graydon Cragg persuaded David Velanoff that Tom Jarvis would come up to speed and David Velanoff found Tom Jarvis eager and motivated. David Velanoff had to approve the 1350369 Ontario Inc. purchase of Hewmac because “we had to approve the advisors”. So, he met Darren O'Halloran. He identified Graydon Cragg’s role simply to build the financial services business, run G. B. Cragg Insurance Broker Limited and provide money and capital to an asset he owned. He confirmed that there was never a concern for Graydon Cragg’s suitability.

[41] In cross-examination when pressed, David Velanoff added that “I absolutely do know what it takes to build these and a franchise fee is a small component.” He stressed that Graydon Cragg had a plan, a “unique1000 warm client book with his family for years”. He dismissed the suggestion that Graydon Cragg’s failure to report insurance regulation offences would disqualify him stating confidently that” the risk management department is ruthless. If this was important, it would have had red flags all over it”.

[42] He identified the agent agreement as something Ross Dixon came up with to regularize relationships as franchises operated on various models. Ross Dixon did not require this but highly recommended it and, if the business was running the employee model, Ross Dixon would need this as the business itself “obviously would have an employment agreement.”

[43] He described that the transition to Dundee changed the name and marketing but not the clients or the operations in the branch offices. He testified the Orillia location developed in the model where every representative was an employee of the franchisee but didn't recall how compensation was done. When it became a Dundee office he didn't think they changed. The retention agreement was a commercial document. The representative agreement was required by securities law regardless of the model. The Ross Dixon Franchisees were adamant that Dundee, the dealer, not interfere with agreements between the owners and financial advisers, which were “all over the map”. In re-examination he confirmed there was no regulation preventing Graydon Cragg carrying on business the way he did and that while technically OSC doesn’t allow corporations, there are many exceptions and the OSC will allow these entities to exist, otherwise there would be havoc in the industry.

[44] In cross-examination David Velanoff acknowledged again that he had no personal knowledge of legal relations between 1350369 Ontario Inc. and Jarvis, O'Halloran and Quinn, such how they were paid or who hired them but countered “I know Graydon Cragg hired Tom Jarvis when he was struggling. I don't know what agreements were made over the evolutionary period of time but he (Tom Jarvis) wanted to purchase the business, therefore he didn't own the business. It’s a logical conclusion.”

[45] Pressed in cross-examination about the Ross Dixon Franchise agent agreements, David Velanoff emphasized that the sales representatives as independents was a broad model but the franchisee owned their own business and though the agreement stating the representative can be an independent contractor, that does not equal ownership of the business.

[46] David Velanoff rejected the notion put in cross-examination that once the Ross Dixon Franchise terminated, the former franchisee could no longer provide the Ross Dixon system stating “Dundee or any dealer provides same type of thing,.. that not all components of the Ross Dixon Franchise were terminated.. but Dundee took on all the company, assumed responsibility for everything the Ross Dixon company did, negotiated about territory but did not terminate the relationships and services”. He said “the Franchisees would not agree and he didn't see any evidence that it stopped,” adding “having been there to run it.” “You can say the shell terminated but all the services and enhanced services continued.”

[47] Specifically he said “Tom Jarvis got the services from Dundee who provided them to the branch… You have to go through the branch, that’s how it works.” He identified the tension between regulations under Securities law and contractual relations. Dundee would honour a direction where to send commissions if that was the practice under the Ross Dixon Franchise and advise that they were “offside the regulator”.

[48] David Velanoff testified about branch organization under Dundee stating that overall the branch is a business entity and a sub-branch is just a location, supervised from outside. The files are the books and records of the dealer, Dundee, and must remain at the branch. The owner of the commercial file would be the owner of the business itself. In his view from inside the industry, was that the former franchise would be the owner of those files.

[49] In cross-examination David Velanoff agreed that the goodwill of the relationship with a client can be purchased but stated the financial adviser is not always the owner of the relationship – it could be the branch. He said whoever is the owner of the relationship often keeps a separate file in case the dealer takes the file and kicks them out.

[50] David Velanoff was at the Monarch Drive location a few times and though it appeared well organized he was aware there was a dispute raising red flags. There was no cease and desist document but there was discussion about it. As Dundee is tough on risk management there would have been a letter. Susan Gratto, as branch manager came to investigate which is a form of an audit, however, “it would have gone further up the line from that if there were serious issues”.

[51] It was also brought to his attention that Scotiabank had rights to not allow financial services in there. David Velanoff spoke to some connections to try to resolve the problem but notes “It went on and on” but they were never told to get out.

[52] When Tom Jarvis left, David Velanoff became aware and was involved under his dealer relations responsibilities. Tom Jarvis’s expressed discomfort in operating there, said he personally just needed to take a break which David Velanoff found unusual for someone to take a break and have no income. Tom Jarvis expressed desire to purchase the business and not go anywhere. Tom Jarvis wanted to see fundamental change in the way things operated.

[53] When he left Monarch Drive it was necessary for Tom Jarvis to be affiliated and supervised by a branch and register as a sub-branch. David Velanoff understood he intended to continue, so they discussed him buying the business, talked about what was a reasonable price and it seemed Tom Jarvis and Graydon Cragg were about to agree. “This is why Dundee didn't take an aggressive position to clean this up fast.”

[54] David Velanoff gave guidance about price based on the multiples he had earlier described in his evidence but “What Tom Jarvis wanted to do was different”.

[55] When Graydon Cragg wrote, optimistic of resolution on July 15, 2005, David Velanoff was happy they were moving in the right direction because Dundee was “operating in an independent world” and wanted them to resolve their issues. Dundee checks regulatory compliance to ensure the clients are not hurt and David Velanoff “was trying to get a breaking up couple to a nice conclusion”.

[56] In cross-examination David Velanoff stated when Graydon Cragg and Tom Jarvis were negotiating Dundee was leaving it to the two parties to resolve it, that he didn't recall the July 17 time limit imposed by Graydon Cragg came from Dundee saying “we might have but I don't recall that”. He acknowledged Dundee approval of a location for a sub-branch is not required. He clarified that Dundee wouldn’t need Graydon Cragg’s permission to licence a sub-branch but stated Dundee can decline at their discretion to open another office.

[57] Tom Jarvis taking the files was a big issue for Dundee. David Velanoff thinks he might have said “you better put the files back”. He described an urgency for Tom Jarvis to get registered. Dundee allowed him to register because “First we were under impression they were coming to a resolution… my boss says terminate… because Graydon Cragg had built the business and it was their perception that it was unfair. I had authority to terminate from Tom Jarvis… Termination was on the table but Dundee allowed him to open on the basis it was going to be resolved”. Dundee approved Tom Jarvis to register because they had to worry about the clients and he termed that “unfortunate but it was a business decision”.

[58] Dundee was satisfied with regulatory issues and client protection. Dundee recognized they had to let the parties argue the commercial side of it. He described that he has seen other departures that were pretty ugly but when Tom Jarvis and Darren O'Halloran left it was, from David Velanoff’s “perspective, the worst I have seen. It was not professional. My boss challenged me – do you want these guys with the firm?”

[59] David Velanoff was a very significant witness because he supplied what a trier of fact so often lacks. He knew and conveyed the context, what I term the lay of the land. He was able to describe industry norms which effectively debunked defence notions such as confirming that documents between Ross Dixon or Dundee and the financial adviser do not address the status of the financial adviser vis-à-vis the business owners; and that the transition from Ross Dixon to Dundee did not change the relationships between owners and financial advisers.

[60] His evidence about Tom Jarvis was persuasive that Tom Jarvis was not an asset to the start-up of the business, that Tom Jarvis didn't own the business and that Tom Jarvis needed to buy the business in accordance with an accepted model for valuation. This evidence demonstrated that Tom Jarvis is not, in the eyes of the informed business world, what he is in his own mind.

Graydon Cragg

[61] I turn now to the witnesses who are principles in the dispute. My analysis is frankly to expose the blind spots each of them cling to in their view of the circumstances. The sequence of my comments will follow the sequence of their testimony, with the Plaintiff obviously first.

[62] The Plaintiff is styled 1350369 ONTARIO INC. and GRAYDON DAVID CRAGG. The insurance company G. B. Cragg Insurance Broker Limited was not named as Plaintiff but was sued in the counterclaims that have been abandoned, and figures in the evidence as the source of some funds and the issuer of T4 slips. GRAYDON DAVID CRAGG, hereafter Graydon Cragg, operates that insurance company that was his father’s and he incorporated 1350369 Ontario Inc. to facilitate the operation of the financial services business (himself as guarantor) that is subject of these proceedings. Graydon Cragg no doubt recognizes the corporate veil for liability exposure but his personal style is to run his businesses as boss, personally and most often orally, reaching into any of his personal or corporate pockets when funds are required, turning his mind to documentation or principles of law rarely. I would call him a business man in the old style. He relies on his connections, his experience and his personality. They have served him well and brought him success. David Velanoff objectively confirmed this success after Ross Dixon due diligence established he was well capitalised.

[63] The Defendants described Graydon Cragg as a cranky bully. Naturally he did not display that in the courtroom. However the Defendants went on to assert that his character was dishonest as he had been found guilty of regulatory offences in his insurance business and then failed to disclose that to Ross Dixon in the franchising process. This attack on character failed. The explanation for the regulatory offences, a collateral issue with no evidence to the contrary, was reasonable; the failure to disclose consistent with Graydon Cragg’s carelessness in documentation; and was overwhelmed by the evidence from David Velanoff of the confidence Ross Dixon and later Dundee had in Graydon Cragg’s dealings.

[64] Moreover, the accusation is entirely irrelevant. The regulatory offences in his insurance business were not known to the Defendants before they abandoned their financial services business involvement with Graydon Cragg. The questioned historical circumstances had no bearing on anything that occurred between the parties. The more time that was spent in this trial on the attempt to blacken Graydon Cragg’s character, the more it served as a negative reflection on the character of the Defendants who were, in the events of this case, highly deceitful. This is especially so because in December after they left, Sean Quinn met Graydon Cragg for coffee and threatened the prospect of this attack to deter Graydon Cragg in bringing this lawsuit.

[65] I found no reason to judge Graydon Cragg incredible in the sense of being a liar. However much of his evidence was unreliable because he was simply uninformed about how the financial services business operated. This accords with his intended role providing start-up capital, hard assets such as premises and equipment for operation, bookkeeping and structure for the collection and distribution of revenues, but leave the management of the business to Tom Jarvis.

[66] This ignorance did not deter Graydon Cragg from making grand statements that he paid for everything. He did not. This is his blind spot. In the beginning, it is true, the revenue stream had not begun so he funded both Tom Jarvis and Darren O'Halloran an agreed amount. In 2002 when Tom Jarvis drew more than that amount, Graydon Cragg demanded repayment and an 80/20 sharing of revenues from commissions began. No documented evidence clarifies which expenses were to come from the 20% retained by 1350369 Ontario Inc. although I heard no dispute that the premises and equipment were thus paid. After 2002 I accept as likely, there were times when revenues were insufficient to pay the expenses Graydon Cragg took responsibility for from the 20% share retained by 1350369 Ontario Inc., so he paid the expense from one of his pockets – his own or G. B. Cragg Insurance Broker Limited, or 1350369 Ontario Inc., he made no distinction.

[67] Graydon Cragg disagreed that any other expenses were paid out of 1350369 Ontario Inc. from the remaining 80 per cent. But for licensing and unusual extras, he testified the 80 per cent was “what the income was that Tom and Darren and, I assume Sean was part of it too, would have gotten”.

[68] He recognized that salaries were included in a list of items that needed to be paid. Mr. O'Halloran would work up the numbers agreeing he would “give it to you and you or somebody else would cut the cheques from the 135 account to pay for those fees?” adding “it was paid out of the numbered company, or if it didn't have enough money to pay the bill, G.B. Cragg, or if it wasn't in a position to pay it I put money in.”

[69] Deprived of financial evidence in this bifurcated trial, it is not possible for me to make a finding as to the extent and for how long Graydon Cragg subsidized the business from his own funds. Exactly which expenses Graydon Cragg considered it his ongoing responsibility to pay from the 20% of revenues retained by 1350369 Ontario Inc., remain unclear as he testifies he paid everything. I do, however, have enough evidence from exhibit 7, Darren O'Halloran’s breakdown of the distribution of funds, to find that the administrative staff was paid from the 80% before Tom Jarvis or Darren O'Halloran, and eventually Sean Quinn, received their share of the remainder.

[70] Graydon Cragg knew that the financial advisers also earned commissions from life insurance sales and mortgages, products other than Dundee mutual funds, “which commissions absolutely should have been part of 135's income”. He reasoned they were employees of 1350369 Ontario Inc. so any income that was generated by them related to that should have come through 1350369 Ontario Inc. Indeed, we later learn from Darren O'Halloran that such commissions were put through 1350369 Ontario Inc., often with Graydon Cragg generously waiting for late payments since the commissions could not be directly received by a corporation so had to be paid in by a cheque from Darren O'Halloran.

[71] He denied that the three financial advisers would make cheques payable to 1350369 Ontario Inc. if the revenue from the sales was not sufficient to cover all of the expenses of that business stating, “I do not recall that ever happening.” That assertion was put forward by Tom Jarvis and Darren O'Halloran in their testimony but no specific occasion or a spec of documentary evidence was introduced to support the assertion as we later see in Darren O'Halloran’s testimony.

[72] I find, on the total evidence that the financial services business was growing as hoped and generating revenues that, when split 80/20 between the financial advisers and 1350369 Ontario Inc., paid for expenses. I have some partial evidence that the financial advisers were enjoying increased personal income as indicated on T4 slips. There was a transition in 2003 from T4 slips being issued by G. B. Cragg Insurance Broker Limited to T4 slips from 1350369 Ontario Inc. Deprived of financial evidence I have no idea whether Graydon Cragg was enjoying any return on his contribution of capital.

[73] Graydon Cragg testified about his discussions with Tom Jarvis that launched the financial services business. He described that with separate licensing requirements, it was acceptable to acquire a Ross Dixon Franchise by setting up limited company and hire licenced representatives. He and Tom Jarvis intended that, when the business got to a certain size, Tom Jarvis would become an owner. The only documentation was Tom Jarvis’s memorandum dated March 23, 1999 of his understanding of the intentions some of which Graydon Cragg agreed, some not. Tom Jarvis writes of investment in the “venture”, “building this enterprise”, in lieu of rebates “come to a mutually agreeable corporate share purchase program in the new RDF franchise operation”, “confident that together we can build a profitable business for both of us”.

[74] In response Graydon Cragg stated the intention that “It is in the new business’ best interest to have you as a shareholder. We will have this as a business objective.” He testified it was “up to me when”.

[75] They did not bother with a formal agreement. Asked in cross examination was there “any written contract between 135 or you and Darren O'Halloran, Tom Jarvis or Sean Quinn” Graydon Cragg stated he “didn't think that was necessary”.

[76] Darren O'Halloran was the only employee of the existing Orillia branch of Ross Dixon Franchise and both Graydon Cragg and Tom Jarvis thought it was a good idea to purchase the client list to add cash flow and clients to their new venture. Graydon Cragg testified the vendor insisted “that if I did not take Darren O'Halloran as an employee he was not going to sell”

[77] Salaries were paid “through 1350369 Ontario Inc. or G. B. Cragg Insurance Broker Limited”, source deductions taken, no invoices rendered or GST to 1350369 Ontario Inc. charged by the financial advisers. Ross Dixon as Franchisor had contracts signed by the financial advisors specifying they were independent contractors of Ross Dixon, but that had nothing to do with their relationship to the franchisee.

[78] The initial salary arrangements changed in 2001 as reflected in an October 17th memorandum signed by Graydon Cragg and Tom Jarvis when Tom Jarvis had been paid $5500 more than revenue of the company and both recognized the need to rectify the problem by Tom Jarvis repaying the overage and go on commission of 80% of all revenue. Graydon Cragg felt if he was going to be investing the arrangement would hold incentive for Tom Jarvis doing more. However the operation of the business continued unchanged, Tom Jarvis managing, Darren O'Halloran assisting and no invoices, withholding taxes paid, T4s issued. How Tom Jarvis and Darren O'Halloran split the 80% was left up to them. Graydon Cragg asserted that Tom Jarvis and Darren O'Halloran paid nothing to third parties but I find that at least by 2003 when there were office assistants, that expense came out of the 80% before Tom Jarvis and Darren O'Halloran got their share.

[79] Tom Jarvis managed the enterprise. Eventually other staff were hired and directed by Tom Jarvis and Darren O'Halloran. Graydon Cragg testified that in some cases, but not all, he was consulted as to his opinion of the individual and their salary. He explained that they asked about it because “my numbered company or G.B. Cragg Insurance or I was paying that, therefore I had a vested interest in it”. His position through the trial was that if the numbered company did not have enough money, which happened quite frequently, funding had to come from someplace. “It would never have come from those individuals,” meaning Tom Jarvis or Darren O'Halloran.

[80] Graydon Cragg was questioned about the contention of the Defendants that 1350369 Ontario Inc. never carried on business. He summarized that 1350369 Ontario Inc. had contracts, a lease, financial statements and paid bills. He assumed, after interviews, that Tom Jarvis and Darren O'Halloran shared his vision for the business. They were paid by commission and T4d. Tom Jarvis was the manager to make the business more successful and comply with obligations to 1350369 Ontario Inc., to hire and fire and anything to make business successful while Darren O'Halloran prepared reports for me about sales, invoices. Graydon Cragg stated he “could do the math and see we are progressing along”.

[81] Another significant event occurred in 2002 as a result of Dundee taking over Ross Dixon Financial Services Limited. The Franchise Termination and Ross Dixon Retention Agreement made as of the 24th day of May 2002, by David Velanoff for Dundee, Graydon Cragg for 1350369 Ontario Inc. and as Representative (in effect Guarantor), and in Schedule A, confusingly, by Darren O'Halloran who is not otherwise party to the agreement, as representative.

[82] This event was significant not, I find, because it changed the manner of operating or the way Tom Jarvis and Darren O'Halloran were paid, but because it enhanced and expanded the range of products the financial advisers could offer for sale.

[83] The agreement obligated 1350369 Ontario Inc. and Graydon Cragg as Representative to continue to September 30, 2009, to stay in business, grow the revenues and thus entitle Graydon Cragg to deferred shares in Dundee. Once the financial advisers left in 2005 Graydon Cragg and 1350369 Ontario Inc. had no revenue so he didn't qualify.

[84] Dundee required every financial adviser to sign an agreement obligating them to follow the regulations at the same time specifying that the financial adviser was, vis-à-vis Dundee, strictly an independent contractor.

[85] Tom Jarvis and Darren O'Halloran were paid as before -T4 for commission income; and operated as before; but Graydon Cragg paid costs of the change- letterhead, signage, fees related to change from one of his pockets -1350369 Ontario Inc. or if no funds G. B. Cragg Insurance Broker Limited or himself.

[86] T4s issued to office assistants transitioned to being issued by 1350369 Ontario Inc. in 2003 because, Graydon Cragg reports, the company now had the cash flow to do it.

[87] There is no evidence of any renewed discussion of Tom Jarvis becoming a shareholder despite indications of the venture doing well. Rather, Graydon Cragg started to consider that space was too small for both G. B. Cragg Insurance Broker Limited and 1350369 Ontario Inc. Angelo Orsi, a prominent local developer, was a client offering attractive space and would build to future needs. Graydon Cragg recalls Tom Jarvis and Darren O'Halloran were involved in deciding that current premises were not sufficient, and both were positive about the move. Relationship with Orsi was itself viewed as an opportunity to do property and life insurance and mortgages for him. Graydon Cragg testified the move was a tremendous opportunity for growth and for the employees of 1350369 Ontario Inc.. He felt the lease of ten years was “enough time and I would be 65 and leave a tremendous success with cash flow.”

[88] Graydon Cragg negotiated exclusivity for the financial planning business, at some expense, in the lease but as it turned out the landlord Orsi, through his employee Ben Chong, had already given that exclusivity to the Scotiabank. This would have been extremely limiting for the financial advisors. The exclusivity issue all came to light when they were in the process of moving. Graydon Cragg was paying a penalty for extension at the previous premises. He testified “I told employees this was an issue but I would solve it”.

[89] Graydon Cragg sought and got concessions from the Scotiabank by the direct intervention of Orsi himself who granted the bank first opportunity in relation to the many mortgages that eager buyers in the Orsi subdivisions would need. Tom Jarvis was himself involved with Orsi in working out this solution. However, it took a few months and corporate lawyers were still talking tough in a letter dated July 7, days before July 13, 2005 when Tom Jarvis departed. Graydon Cragg points out there were still lease issues at the time but certainly not related to “me operating the business as it was” and quite reasonably doubts that Tom Jarvis had the slightest knowledge of the letter at the time.

[90] Graydon Cragg testified that all the financial planning business lines of current work were protected and no limitations came about to limit the financial advisors current work. He testified that there had previously been conversation about expansion into securities but as that had not yet commenced that was not mentioned in the concession that was framed as the right to continue lines of work already pursued. Graydon Cragg further testified he remained open to the possibility that if there were real restrictions then the financial services business would have to relocated. He protected that potential by negotiating with the landlord to reduce the space rented if the financial services business had to go elsewhere.

[91] I recognize that until this exclusivity issue was resolved the financial advisors had cause for concern that their work would shrink and available commissions with it. However I find no reason to blame Graydon Cragg for the unexpected duplication in the lease by the Orsi team. Clearly Orsi himself recognized he had to do something about it. Graydon Cragg hired a lawyer and pursued the issue.

[92] Nor do I find that the issue required the financial advisors to act unilaterally to leave the premises. It was one arrow in their quiver of complaints, this uncertainty for a period before the issue was resolved, but it was an issue neither created nor ignored by Graydon Cragg. Rather, he too was impacted by this potential limitation on the commission creating financial services business, and he acted with them and for them to correct the situation.

[93] Another pretext for the financial advisors leaving was that the new premises created some regulatory non-compliance relating to confidentiality and storage. Susan Gratto supported the assertion that there was non-compliance but there was a decided lack of urgency in her response. She never pursued her concern to the level of an audit and, as noted, confirmed that all the non-compliance would give way to an easy fix.

[94] There is actually documentary evidence that the financial advisors were included in the planning of the new premises. Darren O'Halloran contributed comments to the open invitation to provide input through emails to Graydon Cragg’s son. Graydon Cragg testified that the financial advisors saw the planned layout prior to the move. As to compliance, he testified he left compliance issues up to Tom and Darren, and “I assume if I had some issues at the very least the branch manager would come to me and tell me.” He recalled no unsolvable concerns from the financial advisors and he thought it was a fabulous improvement commenting that, like a family, as you eliminate one problem others pop up.

[95] He was therefore surprised after a discussion July 13, 2005 Tom Jarvis was upset and told me he was leaving, saying “I can’t stand the people I am working with”. Graydon Cragg was perplexed, thinking Tom Jarvis was referring to the staff, because Tom hired them and urged “I can’t fire all of them and keep you. Think about this. If you are totally unhappy you’ll have to leave.” He wanted to leave right then.

[96] Graydon Cragg testified he asked Darren O'Halloran as next in the hierarchy “How are you going to divide the files?” and learned the files serviced by Tom Jarvis were all gone.

[97] After that Graydon Cragg testified that David Velanoff arrived and reported, after he had conversation with Tom Jarvis and his wife that Tom Jarvis would buy the files where he was agent of record. Tom Jarvis contacted me to get underway and we agreed he was going to buy the files, that I would sell them and would allow him to carry on business of Dundee. With this positive start Graydon Cragg informed David Velanoff that they had resolved which pleased David Velanoff because Dundee wanted to save Dundee clients.

[98] Thereafter Graydon Cragg testifies Tom Jarvis wanted to move up from a purchase of files to a purchase of shares which Graydon Cragg interpreted as progress to getting a deal done. Then prices and conditions were raised by each. The devil is in the details. Graydon Cragg saw a need, emanating from Dundee, to move quickly and doubted Tom Jarvis’s need for due diligence since he was buying a business he knew and had himself managed. The documentation that passed between them became increasingly positioned and lacking in clarity. I find that both proposed numbers without sufficient basis to avoid provoking the other. Negotiations failed. All the while Graydon Cragg still did not know Tom Jarvis had premises available to commence operations as a sub-branch.

[99] Effectively, that ended the financial planning business in which Graydon Cragg was involved despite a brief effort for his daughter in law to operate as a financial adviser from the premises. The clients, whose files had been developed and were taken by Jarvis, O'Halloran and Quinn, did not remain with a new financial adviser in an empty office whose contact information had all been previously diverted to the new location.

[100] Graydon Cragg’s daughter tried to fill the shoes of the departed financial advisers and Graydon Cragg testified he would have continued but she decided to move on. Graydon Cragg reached agreement with Dundee to shut down before the contractual obligation ended in 2009 as Dundee knew the circumstances. Graydon Cragg lost the deferred share options. He acknowledged that on sale of Ross Dixon to Dundee he had personally received Dundee share options and the deferred share options, not 1350369 Ontario Inc., but there is no evidence before me of share value.

[101] Shown the agreements between Dundee and the individual financial advisers, and confronted with the notion that any financial adviser can make arrangements to continue to sell Dundee products with 1350369 Ontario Inc. having no role, Graydon Cragg responded that 1350369 Ontario Inc. was the base for starting the Dundee office. It had obligations there. The employees of 135 had obligations, that all came from 135. He interpreted the agreement between Ross Dixon and the financial adviser as independent contractor was “because I had a franchise with Ross Dixon. They insisted that all of the employees of Ross Dixon had to sign this. Similarly, “we had an overall agreement with Dundee. The only agreement they had was based on that agreement. They did not have the agreement and then I had it. I had the overall agreement. They had agreements as part of that which also were prepared by Dundee”. He agreed there were no written contracts between 1350369 Ontario Inc. and Jarvis, O'Halloran or Quinn. Pressed, he repeated that though the financial advisers had signed representation agreements directly with Dundee, they “signed them through my overall umbrella with Dundee at Dundee's request because they were employees of 135 at the time the retention agreement was signed between 1350369 Ontario Inc. and Dundee”.

[102] Graydon Cragg therefore concluded that Jarvis, O'Halloran and Quinn could not have been licensed sales representatives for Dundee but for the involvement of 1350369 Ontario Inc. There had to be a location, there had to be an agreement. Any employee would have to sign their separate agreement but they couldn't do it arbitrarily, individually, by themselves. It had to be under this agreement.

[103] Acknowledging that Dundee Wealth Management was perfectly entitled to set up another Dundee office in Orillia he disagreed that there was nothing tying Jarvis, O'Halloran and Quinn to 1350369 Ontario Inc. because 135 was the basis of them having contracts with Dundee. Although agreeing that 135 has no ability to licence or revoke the licences of any of the defendants, he asserted they would “not just be able to arbitrarily go down the street and say I want to start a Dundee unless 135 through myself said that was perfectly acceptable. Employees of 135 could not arbitrarily go wherever they wanted and start a Dundee business unless Dundee and 135 said that was acceptable to them”.

[104] Asked specifically about Sean Quinn’s clients who were brought into the business by him Graydon Cragg asserted “the facility that he was operating under was the numbered company. All of his relationship with Dundee was through the numbered company. If Sean was going to leave he had a process to go through, so he couldn't just walk out one day and say I'm taking these people with him”.

[105] He took the view that the clients were being served in a business with three financial advisers, that if he hired a new employee and fired another or the clients wanted to be transferred to the new employee, they have that right to do it. Taking the view that Sean Quinn was an employee, if he left, “Sean would have to get those clients to agree to where he was going to go, and then if you read his commitment there's a two-year period of time where he couldn't be soliciting clients unless he's just moving to a different Dundee office and he's not obligated to do any of that but also has to have permission to do that which I gave them when we were negotiating the sale of - first the shares - or the clients of Tom and secondly the entire company”. He testified the new Dundee office was possible because “I gave Dundee permission to allow them to have the office.

[106] Although this twice stated notion would sound self-aggrandizing, I return to the evidence of David Velanoff mentioned earlier, culminating in the clear observation that “Dundee allowed him to open on the basis it was going to be resolved.” He did not agree that the business owner had the power of approval but averted to the respect Dundee would give to their views. I find as a fact that Dundee did not have to allow Tom Jarvis and the others to operate from a sub-branch. It was because Graydon Cragg indicated that the dispute was resolved by a sale to Tom Jarvis that he was allowed to register the new location as a sub-branch, though the CEO of Dundee and David Velanoff thought poorly of Tom Jarvis’s conduct.

[107] On the issue then of whether Jarvis, O'Halloran and Quinn were employees, Graydon Cragg agreed they were not employees of G. B. Cragg Insurance Broker Limited despite T4s being issued by G. B. Cragg Insurance Broker Limited. He said he did this on the advice of his accountant and since there was no money in the company and G.B. Cragg Insurance put money into this. In this bifurcated trial he was surprised by the demand for proof that there wasn't enough money and that G.B. Cragg put money in.

[108] I find Graydon Cragg’s character a non-issue except as it bears on his accusers. His use of G. B. Cragg Insurance Broker Limited as “employer” for tax purposes before 1350369 Ontario Inc. had revenue was irrelevant to the relationship dispute in this trial. He was uninformed on details of management and maintained a blind spot regarding expenses paid from the financial advisers’ 80% share of revenue, perhaps because he regarded all revenue as revenue of the business. I accept his evidence that he did pay expenses when the revenue was insufficient but, in this bifurcated trial I have no idea how much, just as I cannot determine whether the financial advisers contributed more to the growth of the business than they were compensated for by their remuneration.

[109] I find that although Tom Jarvis and Darren O'Halloran managed the business they did consult with him. He imposed the move to Monarch Dr. He imposed the physical changes, albeit with some consultation. He worked to eliminate the lease complications and negotiated a clause allowing him to move the financial services business to another location if necessary to carry on business. Neither regulatory non-compliance nor exclusivity actually closed down the business.

[110] But I also find that Graydon Cragg failed to recognize the contingency that the financial advisers who generated the revenue might leave. On the day after Tom Jarvis bolted, he naively asked Darren O'Halloran how the files would be divided. He did not consider they could operate from another approved Dundee sub-branch. What if they just left? Or what if they were hit by a bus, perhaps on the way to one of the conspiratorial lunches?

[111] They could leave, of course. The question in this trial is whether they could take the files, the book, the warm bodies as David Velanoff so eloquently described the clientele.

Tom Jarvis

[112] Tom Jarvis had opportunity in his testimony to demonstrate that his conduct was explained and justified. In this, he utterly failed.

[113] Many variations in the demeanour of witnesses, people being different one from another, do not reliably assist in the assessment of credibility but the manner in which Tom Jarvis gave evidence demands comment:

[114] Even in examination in chief Tom Jarvis was glib, derisive, arrogant and self-righteous. He was dismissive of a relevant document which he had seen “ad nauseam”. Frequently, when maligning Graydon Cragg he would share a chuckle with Darren O'Halloran sitting in the court, an adolescent display of peevishness. No one else found it humorous.

[115] In cross examination Tom Jarvis became increasingly evasive. He responded to many lines of questing with a denial which, when pressed, he was forced, in a sarcastic manner, to retract. He snarled at counsel “let’s move on” in response to a relevant question. He became, often within the space of a few sentences, increasingly inconsistent with himself.

[116] Tom Jarvis proclaimed, twice as if rehearsed, that 1350369 Ontario Inc. was a shell corporation to hold the Ross Dixon Franchise which did not carry on business, that he understood the business model between himself and 1350369 Ontario Inc. as nothing more than a payroll service like ADP.

[117] In cross examination he recognized 1350369 Ontario Inc. as the owner of the Ross Dixon Franchise and Graydon Cragg as guarantor though not sure what he guaranteed as Tom Jarvis himself was within a short time the branch manager responsible to the regulator, the ones, he said, that matter. He acknowledged Graydon Cragg had an obligation to obtain the franchise and if he didn't there would have been no business with the retort: “and we wouldn’t be here”. He dismissed the financial risks to 1350369 Ontario Inc. first as less important than regulatory obligations and secondly that the financial risk on 1350369 Ontario Inc. was only “until we changed in fall 2002.”

[118] Tom Jarvis proclaimed that in 1999 “the business was me, 1350369 Ontario Inc. , was just a shell without me”. Confronted with the assertion that 1350369 Ontario Inc. was the business, he refused to answer with the aforementioned “let’s move on”.

[119] Of his assertion that 1350369 Ontario Inc. compared to ADP which does payroll, he was confronted that APD doesn’t rent space, doesn’t enter franchisee agreements, doesn’t take on liability for remittances or take an interest in the business, he responded by allowing that 1350369 Ontario Inc. had a greater involvement: “Payroll administrator and landlord - as our roles evolved that is exactly how I saw them”.

[120] Yet, at other points in the cross examination he spoke of “the business”. In February 2005 when he and the other financial advisers were developing “plan B” he testified Graydon Cragg was well aware by that point there was a good possibility the “business” had to move, that schedule g of the lease speaks to that so Graydon Cragg was involved in that topic. But when challenged that at the same time Jarvis, O'Halloran and Quinn were looking for a building to move without Graydon Cragg, he first demurred “not specifically without Graydon Cragg but the relationship very strained… He was just a landlord and service provider from my point of view”.

[121] Having said “I had no reason to believe Graydon Cragg would not continue as Dundee and he did” Tom Jarvis discussed imminent departures of the other financial advisers and all the staff stating it was “obvious I was taking over the business. He was very aware that I was the principle so it was rational that everyone else would join me.”

[122] From his own testimony I find that Tom Jarvis was aware that there was a “business” not just a gathering of financial advisers under one roof. I turn now to Tom Jarvis’s evidence as to the development of the business.

[123] On March 23, 1999, Tom Jarvis recorded his understanding of discussions with Graydon Cragg about establishing a financial services business. Though not all these points were accepted by Graydon Cragg, Tom Jarvis summarized “I would do all the leg work and get licencing to set up and I anticipated partnering with him”. He was aware Graydon Cragg instructed incorporation as it was required to go forth with a Ross Dixon Franchise. Tom Jarvis states he was never an officer or shareholder of 1350369 Ontario Inc. Graydon Cragg put in the venture capital to get it off the ground and Tom Jarvis got a draw of $40,000.

[124] In cross examination he stated Graydon Cragg presented himself as a wealthy, experienced guy and Tom Jarvis wanted to get into business with him, adding that he had no evidence to say Graydon Cragg did not have a good reputation until much later. Graydon Cragg wanted to add financial planning to his business so it was for their mutual benefit. There was a discussion whether Tom Jarvis had capital to invest but it was determined “Graydon Cragg would provide the capital – whether I had the money or not was moot. We each had something to contribute: Tom Jarvis – get licenced, and Graydon Cragg the money”. Graydon Cragg said he wanted to benefit his existing insurance clients and although Tom Jarvis says it was no real help, David Velanoff thought his client base an advantage. Tom Jarvis asked rhetorically, and prophetically, “He was going to pay, why should I?”

[125] He stated they anticipated capital and sweat equity and be “joint owners one day, a day that never came”. He understood a corporation was created but he didn't think he necessarily had to pay for any shares as purchase would be totally open for negotiation. He explained his mention in March 1999 of “share purchase” was because at that time he was too inexperienced to know. It was his intention at the time to own this company and he expected, since Graydon Cragg was older, that it “would eventually be mine”. He confirmed that Graydon Cragg was never expected to be involved in the day to day, that Tom Jarvis didn’t pay start-up costs except licencing as that was not the way the business developed and summarized: “I was supposed to be building this cooperatively with him, it was just as much my business as his I was building in 1999.”

[126] Graydon Cragg’s point form response to Tom Jarvis’s March 23 letter set out the compensation arrangement in a broad sense and continued the objective of Tom Jarvis becoming a shareholder.

[127] Tom Jarvis agreed that both knew it would take some time before revenue exceeded cost so the draw was necessary. He agreed to a business model charging a smaller front end commission that would mean a lower cash flow initially and proudly states he and Darren O'Halloran withstood the start-up and that’s the way they operate today. But when confronted with Graydon Cragg’s contribution to that and Ross Dixon’s confidence because Graydon Cragg was well capitalized he proclaimed he was “not a pauper”; that David Velanoff had faith in him as well after the same due diligence. He dismissed the suggestion that David Velanoff was satisfied with Graydon Cragg to grant the franchise, responding David Velanoff was satisfied “that there was a good guy to run this which was me”. Confronted with the assertion that Graydon Cragg’s efforts gave him the opportunity he responded merely “I wasn’t looking to get into it.”

[128] As noted earlier, David Velanoff saw it differently, testifying “The weakness in proposed Ross Dixon Franchise was the inexperience of the proposed financial representative”. Graydon Cragg persuaded David Velanoff “that Tom Jarvis would come up to speed” and David Velanoff found Tom Jarvis eager and motivated.

[129] Tom Jarvis agreed that in 1999 Graydon Cragg’s point form note was the basis of the expectation he would become and shareholder and that his remuneration would be by way of draw and commissions, but emphasized over the passage of time things changed and evaded the question whether this made him an employee in 1999 responding “depends on the definition”. Tom Jarvis acknowledged that the Ross Dixon Franchise documents did not speak to the relationship between himself and 1350369 Ontario Inc. He inserted that “I was green as grass. Graydon Cragg was experienced.”

[130] Tom Jarvis testified that the relationship changed fundamentally by November 2001 when he wrote a new remuneration model in response to Graydon Cragg’s agitation that he didn't want to pay more. At that time Tom Jarvis had drawn more than he was entitled, based on the draw plus commissions arrangement. He described that he “paid back everything in excess of the commissions I had earned that year” and from then on he drew out 80% of the commissions he had generated. “We were on income split from then on - a distinct change from before”. In cross examination he stated “He took 20% and stayed out of my way”. Tom Jarvis drafted the new arrangement “to get past this being thrown in my face” in what he called “the first example where Graydon Cragg was a bully”. I observe this was not the first example of Tom Jarvis being peevish.

[131] Tom Jarvis testified this changed everything. I find it significant that in relating how the change occurred he in no way ties it to the takeover by Dundee. In later testimony he links the two events to the extent of asserting that his relationship with Dundee severed whatever dependence he had on Graydon Cragg or 1350369 Ontario Inc. to carry on business with the dealer.

[132] However he does link the change to remuneration by straight commission to his attitude that 1350369 Ontario Inc. was no more than a shell performing a payroll service at his direction. Feeling bullied hardly seems consistent with this self-proclaimed elevation in status.

[133] The new arrangement was that after the dealer took its royalty, the commission was sent “on my instruction” to 1350369 Ontario Inc., I directed Graydon Cragg to pay signs, staff etc. from 1350369 Ontario Inc.’s 20% and whatever was left came to me and Darren”.

[134] At first there were no other staff but when he a Darren O'Halloran hired staff their wages came out of the 80% first before the two financial advisers split the balance. He had 1350369 Ontario Inc. “write the cheques for me”. He reasoned that “all business risk was to me” except remittances which were small amounts. The expenses were paid “before I got anything” and “when you are self-employed some days chickens, some days feathers”.

[135] Of the 80/20 agreement he said “the profit was mine and I gave him 20%, if he can’t pay rent from that it’s his problem.”

[136] Another significant event at the outset of the business was the purchase of the book of business of another Ross Dixon Franchise coinciding with the commencement of the business Graydon Cragg and Tom Jarvis intended. Ross Dixon had a territorial model so Hewmac, a local office of a Ross Dixon Franchise operating elsewhere in the county could not continue when 1350369 Ontario Inc. acquired the Orillia Ross Dixon Franchise. Darren O'Halloran was the agent of record for Hewmac in Orillia. When the purchase was completed Darren O'Halloran came to the new office and they worked cooperatively to build the business. When the remuneration arrangement changed for Tom Jarvis it changed for Darren O'Halloran too and they split the after expenses balance 60/40. Tom Jarvis considers Darren O'Halloran his partner.

[137] In cross examination more detail emerged. Tom Jarvis proclaimed of the acquisition of Hewmac that “Darren and I getting along was just as important as Graydon Cragg and David Velanoff negotiating it”. He and Graydon Cragg discussed the purchase as an expansion of the client base. But when asked to acknowledge that the business 1350369 Ontario Inc. would acquire a client list he launched into his tirade that “in 1999 was me, the business that could have done something was 1350369 Ontario Inc., just a shell without me”. He was strangely offended when shown documents that 1350369 Ontario Inc. bought the client list, snarling “ apparently 135 wrote the cheque for it”. Asked if there was an agreement that 1350369 Ontario Inc. take on Darren, he allowed “that he would join us”. He expressed his view that Darren continued to service the clients he was agent of record for, adding “A vast majority of those people are still with us.” He acknowledged they discussed building the business with Graydon Cragg saying “we were all working cooperatively at point.”

[138] Tom Jarvis also expressed his view on Darren O'Halloran’s position who still serviced the Hewmac book after the Dundee takeover stating: “I would argue he paid for them in the cancellation of the Ross Dixon Franchise that compensated for whatever was there”. That statement remains unsupported.

[139] I find on this evidence the Tom Jarvis is aware of the concept of buying a book of business and indeed, that a business has a book, and it is something of value.

[140] Tom Jarvis describes business operations stating 1350369 Ontario Inc. had no control where I directed commission to be sent because my agreement is with the dealer. Graydon Cragg merely processed the cheques.

[141] I pause here to recall the evidence of David Velanoff that Dundee, at the insistence of Ross Dixon Franchise owners, continued this practice if it had been in place before the transition.

[142] Tom Jarvis testified that Graydon Cragg’s client base was absolutely not a valuable source of clients, with attrition about 2%, compared to “the clients I built who are with me to this day”.

[143] Pressed in cross-examination why he hadn’t produced a client list he stated no one ever asked him and he hasn’t attempted to identify clients who came from G. B. Cragg Insurance Broker Limited referrals because it took months and years to develop them as clients.

[144] I find it natural that the clients were courted and developed by the financial advisers. No doubt the business has grown and succeeded with the effort and competence of the financial advisers. Obviously there is trust building necessary with a client, even if the referral is from G. B. Cragg Insurance Broker Limited. But I do not find it significant if referrals from G. B. Cragg Insurance Broker Limited were less abundant or successful than initially hoped. The insurance business was a potential source of “warm bodies”. Whether they came or not, whether they were referred or not, does not assist us with the issues in this trial.

[145] Having reviewed Tom Jarvis’s testimony about how he and Darren O'Halloran came to be associated with Graydon Cragg, I turn now to Tom Jarvis’s testimony about whether the financial advisers were employees. Whenever opportunity arose, he testified vehemently he was not.

[146] In a case of remarkably little documentation between the parties who were in some relationship, daily, between 1999 and 2005, Tom Jarvis gives his interpretation of the documentation he was required to sign by Ross Dixon and subsequently Dundee:

[147] Of the Ross Dixon Franchise agent agreement styling him as an “independent contractor” he understood “that I was not capable of anything that would bind 1350369 Ontario Inc.” but went on that 1350369 Ontario Inc. was not an employer because they would have to set hours, pay scale and had no risk - it was all my risk by that time. Again he asserted that the 2001 letter “shows I was not an employee –it shifted all the risk to me”.

[148] When Dundee took over he signed a representative agreement to be their representative and states he functionally operated out of same Memorial Ave location.

[149] Under Dundee Tom Jarvis described that Graydon Cragg had no authority to direct commissions to 1350369 Ontario Inc. stating “it’s my commission so I get to direct it”. He had no discussion with Graydon Cragg why 1350369 Ontario Inc. was continuing. Rather, for ease Tom Jarvis had commissions sent to 1350369 Ontario Inc. and Dundee didn't get involved. All Graydon Cragg had to do by the 2001 agreement was use his 20% to pay rent etc.

[150] Again I refer to David Velanoff’s evidence about maintaining patterns after transition to Dundee.

[151] Tom Jarvis acknowledged he discussed things occasionally with Graydon Cragg. He acknowledged that twice a month the pay sheet was presented to Graydon Cragg so he would see the ups and downs of how they were progressing, he being interested as his 20% was quite large. Tom Jarvis described that they still a reasonably good relationship. He recognized a sheet of projections and a description of business strategies and performance for June of a year that must have been, by its mention of a staff person, 2003 or 2004, prepared by Darren O'Halloran with Graydon Cragg’s handwritten comments on it, but denied it was a reporting to Graydon Cragg. Rather, he insisted that we were keeping him informed as things were reasonably amicable. He absurdly asserted he could have had this conversation with anyone.

[152] The tax set up was another indicator of the status of the relationship that was explored. He complained that he had been shown the T4s “ad nauseam”. In early years the T4s for Tom Jarvis and Darren O'Halloran were issued by G. B. Cragg Insurance Broker Limited and Tom Jarvis rightly stated he was never an employee of that company. He returned to the 2001 letter saying it addresses no deductions in anticipation of revenue sharing. In fact it addresses no withholding taxes after the remaining repayment installment is made and agrees to a negotiation of cost sharing by March 1, 2002. He explains: “It was tax efficient to carry on the way we were. I didn't have to hold back for CRA, someone else took care of remittances.” Here he inserts: it was “a glorified bookkeeping service”. He acknowledges that from the beginning income tax was withheld for him along with CPP and EI, “because that’s how I wanted it done”.

[153] In cross examination he made his insinuations more direct, that having G. B. Cragg Insurance Broker Limited paying these “sounds like a tax dodge – he should have done a shareholder infusion.” He didn't object though, saying “I would not have understood the difference at that time”. As to being characterized in the documentation as an employee he demurred that he wanted 1350369 Ontario Inc. to do the taxes and deductions. So resulted the T4s and T4a’s for mortgages filed for 2003 and 2004, Dundee years, issued by 1350369 Ontario Inc. showing employment income and deductions for CPP and EI, his name and address in the employee identification. But asked if he was telling the government he was an employee Tom Jarvis would say only “I told them I had a T4 from 1350369 Ontario Inc.” and challenged the conclusion that the T4 told the government he was an employee. He summarized “My income came through 1350369 Ontario Inc. at my direction for a practical solution to take proper deductions.” This theory of convenience was never communicated to Graydon Cragg, in other testimony described by Tom Jarvis as a bully, though he was potentially liable for source deductions as Tom Jarvis says “I instructed him to deduct from gross and I was paying him to do it.”

[154] I find this evidence strains credibility. Graydon Cragg’s evidence to the contrary that taxes went through G. B. Cragg Insurance Broker Limited for a few years at the advice of his accountant may be vague, but at least it doesn’t sound patently untrue.

[155] Tom Jarvis further relied on the nature of Dundee operations to demonstrate that he was not an employee of Graydon Cragg or 1350369 Ontario Inc. He described that he and Darren O'Halloran had been co-managers of a Dundee branch and could supervise each other, rather than pay a 3% fee for an outside branch manager and operate as a sub-branch. A branch manager is responsible for regulatory compliance. When they resigned as branch managers in March 2005 Susan Gratto became their outside branch manager. Official records were sent to her and the financial advisers kept their working copies. He proclaimed “they are my files”, “I had a duty to protect them and those people were my responsibility”. This he said was “because Dundee works on a model that anyone can work everywhere”.

[156] Here I pause to recall the evidence of David Velanoff that when Dundee took over Ross Dixon Franchise, “the franchise agreement terminated but the services did not. Dundee becomes the dealer and the relationship through Dundee is with new guy in charge but Dundee was obligated to take on the contracts and the agent agreements”. “Whatever the agreement said, we continued as Dundee”. He described that “Tom Jarvis got the services from Dundee who provided them to the branch. You have to go through the branch, that’s how it works”.

[157] Taken to the Dundee Retention Agreement in cross examination, Tom Jarvis acknowledged that it said Graydon Cragg was defined as the “Representative” and that the Representative agrees to continue the branch as sellers for Dundee, but argued that was “no value to Dundee unless the sales representative went with it, Darren and me”.

[158] In spite of the tone of his remark, I find Tom Jarvis has a point. In this business where Graydon Cragg could not himself operate, he left himself entirely vulnerable to the financial advisers leaving. He would not, and as it turned out could not, continue as a branch without a team of financial advisers to service the clients.

[159] On, May 24, 2002, the same day as the Retention Agreement, Tom Jarvis signed a Sales Representative Agreement required by Dundee, asserting it was a different purpose - one being to transfer the franchise and one to sign as representative to make sure regulations are complied with. He testified “I interpret that sale representative is the one responsible without 1350369 Ontario Inc.”. But his tone changed when challenged that David Velanoff said the Retention Agreement was compensation for giving up the Ross Dixon Franchise territory dismissing David Velanoff’s evidence with the peevish retort “he says lots of things” and that the document does not compensate 1350369 Ontario Inc. for the Hewmac acquisition, he continued the dismissive tone describing the Retention Agreement as an “extensive document that says lots of things”.

[160] Be that as it may, Tom Jarvis described that his concern as branch manager about regulatory non-compliance was a significant reason why he resigned as branch manager and ultimately left the new location leased by 1350369 Ontario Inc.

[161] Tom Jarvis allowed that he didn’t see the move to Monarch Dr. as a negative. Despite having opportunity to comment before the move, which Darren O'Halloran did on behalf of the financial advisers raising no regulatory issue prior, but not having seen the specific layout or furnishings until the move occurred, Tom Jarvis had many complaints about the layout of the premises, privacy of confidential client conversations and being separated in the work area by “a fabric divider from the schmuck selling motor cycle insurance”. Tom Jarvis was insulted by the imposed committee system saying “we are adults, no one can tell me to buy toilet paper”. He thought the carpet was “crappy”. I cite this pettiness in his testimony, just short of a tantrum, because I find the juxtaposition of these remarks colours his complaints about the regulatory concerns with a peevishness that discloses he had by this time developed a general antipathy to anything Graydon Cragg was involved in.

[162] Nevertheless I accept that the regulatory non-compliance was real. The filing cabinets, privacy barriers, shared computer servers and signage were issues. Graydon Cragg was resistant though a few issues were addressed, inadequately, and “like pulling teeth” to get him to spend anything on good solutions. Tom Jarvis testified he worked hard to solve the issues and “separate the entities again but it was obvious there was no negotiation that would get Graydon Cragg to spend a nickel to change the layout he decided on”.

[163] So, Tom Jarvis testified he resigned as branch manager in the January to March 2005 frame “because I was liable to ensure everything was compliant”, well, one of the reasons, adding that he wanted to move into securities, opportunistically citing David Velanoff saying in his testimony he had to get experience as an investment advisor.

[164] Tom Jarvis testified the regulatory noncompliance was important because the regulator was “the only one who could stop me working”. He discussed his dilemma with other branch managers but when asked why there was no email to Graydon Cragg from himself or Darren O'Halloran that the new premises did not comply with regulations, he explained that the relationship was strained about the location and amalgamation, a lot of animosity and anxiety. Further, and astonishing in light of his frequent criticism that Graydon Cragg didn't use a computer so there were no emails between them, he proclaimed “my method is face to face discussion”.

[165] He said from March to July when Susan Gratto was branch manager there were no changes but on-going discussions about reconstructing the unit into something else. He stated that there was no cease and desist order because “she satisfied herself I was working diligently to solve” the non-compliance.

[166] Here I pause to recall the evidence of Susan Gratto who confirmed regulatory problems with the premises but never did a full audit. She confirmed that there were simple fixes for the various problems, “very simple, yes”.

[167] No regulator action was ever initiated.

[168] More uncertain, as a result of the move to premises at Monarch Drive was the news, after they had already moved in, that Scotiabank had an exclusivity clause in their lease that to Tom Jarvis appeared to “effectively stop my business.” This truly was a surprise, as Graydon Cragg had also negotiated an exclusivity clause though Tom Jarvis learned later of a lawyer’s letter warning against taking possession until this was resolved.

[169] Tom Jarvis described that he and Graydon Cragg had “a number of discussions and when he was on holidays I did the negotiation”. He said “We discussed having to take my work elsewhere if I couldn’t do it there.” The landlord Orsi intervened personally by offering Scotiabank right of first refusal on mortgages for Orsi purchases to drop the exclusivity which Tom Jarvis said meant “100% change in my business development” due to a loss of Orsi work in Barrie and Orillia so two staff doing only mortgages left in the January to March period.

[170] Tom Jarvis doubted the wording of the Scotiabank concession of exclusivity and the agreement between Orsi and Graydon Cragg that Orsi would release the space so the investment business could move elsewhere if necessary. He was aware that in July 2005 when he left there were continuing negotiations. However he acknowledged a contemporaneous email that they were “over the hump” did not mention the loss of the mortgage business. He was prepared to “go with” the assertion that the Scotiabank exclusivity was only about the investment business and not mortgages. In fact, at Monarch Drive the Dundee products didn't change and Scotiabank never said stop.

[171] Tom Jarvis acknowledged that in the many discussions with Graydon Cragg about whether the business could be operated in that location because of the exclusivity issue, he never mentioned that he was exploring “plan B”, the option of leaving to carry on the investment business without Graydon Cragg explaining that their “toxic” relationship would get worse - “gas on the fire”.

[172] But at the trial Tom Jarvis freely acknowledged that by January 2005 as a “back up plan” Jarvis, O'Halloran and Quinn were searching out new premises and taking pains not to let Graydon Cragg know it. He rationalized that Graydon Cragg was aware the business might have to move, that schedule G to the lease was negotiated so 1350369 Ontario Inc. could give up the space. Pressed on this deceit, he returned to his theme that Graydon Cragg was just a landlord and service provider “from my point of view”.

[173] Also Tom Jarvis resigned as branch manager in March 2005. He acknowledged that would make it easier to move and absolved him “from being offside the regulator”. He explained that “if I had left as branch manager I would have to take all files to another branch – if I was branch manager I was still responsible”. The fact of this resignation was also kept from Graydon Cragg.

[174] So too, without mentioning it to Graydon Cragg, Tom Jarvis incorporated Treefitty Inc., another named Defendant, to hold property in May 2005 with Jarvis, O'Halloran and Quinn as directors. I found it interesting that there were so many parallels to the structure of 1350369 Ontario Inc. and the business he was leaving, a business he viewed as nothing more than a “landlord and service provider” put into place to operate the new business. It made his resignation note particularly ironic in stating he was leaving to pursue “a different business opportunity”. Even he agree that the note was misleading, but justified that with the excuse that it was in the heat of the moment 15 minutes after his meeting with Graydon Cragg and the name calling.

[175] After Tom Jarvis left the business on July 13, 2005, Darren O'Halloran, Sean Quinn and the staff remained. He knew that the phone message was changed to direct clients to the new business he had, by the time of their departure in August, set up to be a sub-branch of the Barrie Dundee office and Susan Gratto was branch manager. He complained that Graydon Cragg’s staff did not refer clients trying to contact them to the new office stressing the importance of timely service and remarking that Susan Gratto had to take it up with Graydon Cragg.

[176] In cross examination he acknowledged that he had offered a job to staff, Wendy Bredin, before she resigned as Graydon Cragg had told her there would be no work. He said Jennifer Racho knew all about it as she and Darren O'Halloran were “effectively spouses” and it was “obvious I was taking over the business”.

[177] During this time while Darren O'Halloran and Sean Quinn were still going to work at Monarch, Tom, Darrell and Sean met at restaurants. He acknowledged that he knew Darren O'Halloran, Sean Quinn and the staff were going to resign before Graydon Cragg knew. He said Graydon Cragg was very aware that I was the principle so it was “rational that everyone else would join me”. He felt no duty to tell him. However, he pointed out, “that I wrote a cheque back to 1350369 Ontario Inc. to make sure staff was paid as he felt it was his “moral and ethical obligation”.

[178] The rest all resigned in August when “despite my efforts to act like a gentleman the negotiations were not going well”.

[179] I find he was no gentleman. I prefer the evidence of David Velanoff that his conduct was unfair and unprofessional but I do not intend to cast blame on either party for the failure of the negotiations which were doomed by the absence of any objective valuation. Both threw out numbers that were insulting to the worldview of the other. Rather than correct misunderstanding in the communications they simply dug in their heels. Still, as I said earlier, the fact that Tom Jarvis’s inclination was to buy out Graydon Cragg’s interest puts to lie his current position that there was nothing to buy.

[180] Tom Jarvis describes “I agreed to the concept of taking over 1350369 Ontario Inc. but nothing else”. By that, he meant buying the shares. He testifies that when Graydon Cragg told David Velanoff they had an agreement, they certainly did not but he was committed to a negotiation process.

[181] He did so to avoid being sued, to get staff paid and to try to have resolution regarding 1350369 Ontario Inc. In requiring information, which Graydon Cragg reasoned he had knowledge of already, Tom Jarvis stated he was “attempting to inject some rational thought into negotiations rather than be bullied and berated from the other side” and the time frame seemed too fast for a sober second look.

[182] He emphasized he had “no intention to screw him out of Ross Dixon options” as he was aware there were shares out there not yet received by Graydon Cragg or 1350369 Ontario Inc.

[183] I find it is an undisputed fact that the options were dependent on Graydon Cragg through 1350369 Ontario Inc. continuing as a Dundee branch until 2009. The screwing was inevitable. Graydon Cragg was vulnerable and as Tom Jarvis many times said, “I was the business”. Of course Graydon Cragg would be screwed out of the options.

[184] A final offer, this time from Tom Jarvis and Darren O'Halloran, was sent August 11 and everyone left on August 12.

[185] In a letter to Graydon Cragg’s lawyer in the midst of negotiations, Tom Jarvis named as a condition that there be no litigation “related to this contemplated transaction or the employment of Tom Jarvis by 1350369 Ontario Inc.……” “forever indemnify any claim…during the period of November 1999 until July 13, 2005inclusive”. Tom Jarvis explained the letter was “my attempt to introduce some civility”. He testified “I don’t agree I was an employee but I agree I put that word there”.

[186] Tom Jarvis saw no opposition from Dundee because, from a client protection perspective they had the same financial adviser and “all we did was change addresses”. Seeing the July 15, 2005 letter from Graydon Cragg to David Velanoff, thanking him for coming and, as they had reached agreement, no further Dundee action by was required, after which the new location was allowed, Tom Jarvis mused “I don’t think that was the reason he would approve another office. - Dundee was convinced I would go to another dealer. - It was in their interest to approve the new office- in nobody’s interest to let this drag on – It was laughable he would suggest he considered terminating me”.

[187] I find Tom Jarvis knew there was a business involving Graydon Cragg and 1350369 Ontario Inc. It is not credible that he thought he would get shares for free and he never did, but on all the evidence I find they did intend to build the business together. I find he knows a book of a business has value.

[188] I find his interpretations of dealer documentation and practices in error and prefer the evidence of David Velanoff as to the purpose and practices.

[189] My adverse findings concerning Tom Jarvis create something of a dilemma in reaching judgment because I accept that the business, founded on Graydon Cragg’s capital, was built and attained value through his efforts and those of his cohort, Darren O'Halloran. I accept that clients were targeted and served through their efforts whether they happened to have been referred, as Graydon Cragg and they initially anticipated, through G. B. Cragg Insurance Broker Limited, or not. I accept that client loyalty would be to their financial adviser whether Tom Jarvis grabbed the files and surreptitiously ran with them, or not. But that is what he did.

[190] As I have written this rather detailed review of Tom Jarvis’s testimony, including his own words, in effect if not always verbatim, I remain unimpressed with his view of the circumstances. I found him deceitful in the conduct he himself described and is either self-deluding in his justifications or merely unapologetic for his prevarication. Either way, much of his evidence is unreliable and falls far short of supporting his assertions. In his mind “exactly how I saw it” equates with reality. To the contrary much of what he testified was delusional and, I am afraid, a “folie a deux.”

Darren O'Halloran

[191] Darren O'Halloran and Tom Jarvis each expressed their loyalty to one another, styling themselves as business partners and friends. Darren O'Halloran testified having listened to Tom Jarvis for years I suppose, but specifically as he preceded him in this trial. It is not surprising therefore that their assertions match. I need only review the nuanced differences in Darren O'Halloran’s views.

[192] It was notable in his evidence that in examination in chief Darren O'Halloran made his proud proclamations of independence stressing his experience in the financial services industry when he first encountered the novice Graydon Cragg and Tom Jarvis when 1350369 Ontario Inc. purchased Hewmac. He found much fault with the tax and corporate documentation produced by the Plaintiff and suggested that Graydon Cragg’s lack of computer skill accounted for the absence of documentary evidence of their discussions and understandings.

[193] By contrast, when challenged on his assertions in cross-examination, he excused documents contrary to his position as the result of his naivety because he was 26 years old when the relationship was discussed and Graydon Cragg a wily businessman. He explained the absence of tax returns which would demonstrate his assertion that did not file as an employee, which he several times brought up unbidden, as not produced because he didn't think they were relevant. Further, he blamed his not having proof of email communications between himself and Tom Jarvis documenting the concerns and understandings they shared over their involvement with Graydon Cragg and 1350369 Ontario Inc., as the result of a computer failure in 2008, well after this litigation was in progress. Credibility suffered.

[194] I begin at the beginning. Describing himself as a licensed, self-employed financial adviser in Orillia servicing the Anderson book and other work under his representative code, splitting commission and office overhead at Hewmac. When the Orillia Ross Dixon Franchise was acquired, he saw it as two small start-up offices owned by the same company so it made sense to work together. He then met Tom Jarvis and Graydon Cragg and described the opportunities Graydon Cragg believed available were “ludicrous” and didn't entice him at all as Darren O'Halloran had a better understanding of how the industry worked. However he was interested in Tom Jarvis’s connections in Orillia so he eventually joined.

[195] Again, with a flurry of self-aggrandizement, he described he was needed to assist Tom Jarvis with his knowledge of trading software and to service “my clients”. For that he agreed to start at $25,000 a year and they discussed a split of “assets I was managing.”

[196] He stated he “put all my assets - all my commissions to 1350369 Ontario Inc.” explaining it was “my way of buying in and paying my share over time”. There is no evidence he communicated this notion.

[197] Having agreed to $25,000 a year for administration, plus commission, he asserts “In the end I didn't take any commissions until the change”. Never did he offer a shred of evidence what such commissions amounted to as a demonstration that he gave something up.

[198] He proclaimed “I was independent. I didn't want to stay as a salaried employee. I didn't want to work for anybody” “I was a partner to Tom Jarvis. I had my own business.”

[199] None of this survived challenge. In cross examination Darren O'Halloran acknowledged that Hewmac had an office in Orillia where he was the representative of record and Rob Anderson owned the Hewmac territory. Anderson “paid lease and overhead and I paid him a certain amount” explaining “from day one in industry it is my business but I didn't want hassle of ownership and lease”. He serviced the “book of business” which he “continued to service when I moved to Memorial”.

[200] He stated “Anderson wanted to be sure I was comfortable working from that office” Darren O'Halloran talked to Tom Jarvis and “we had complimentary skill sets”. Anderson and Graydon Cragg negotiated. Darren O'Halloran provided them with a client list and office contents. In cross-examination Darren O'Halloran acknowledged that Hewmac sold its client list to 1350369 Ontario Inc. He recognized a method of valuation by multiple and trailer, stating 1.5-2 was the norm back then. Despite this sophistication he was “not sure” whether the purchase price was a multiple of his book agreeing it “could have been part of it”.

[201] Darren O'Halloran was aware client retention was part of the negotiated price and that Anderson was selling a list of what Darren O'Halloran describes as his clients, that had some value and, he continued to service and that it continued to have value. He then gratuitously offered that a third went back to Anderson because they didn't like G. B. Cragg Insurance Broker Limited but offers no evidence of that view saying he thought it was bad taste to bring clients to testify.

[202] Darren O'Halloran stated he “knew how it worked better than Tom Jarvis or Graydon Cragg” so they were aligned on how long it would take. He considered Graydon Cragg an older, successful casualty insurer who wanted a financial planning office for mutual referral back and forth, for clients who wanted to talk about financial planning and not send them to a competitor. He denied Graydon Cragg wanted to own a financial planning business stating Graydon Cragg “owned the physical assets, not my clients…. I think he owned a territory and we agreed on a method on what I made and what I took that more than compensated him.” “I believe I have purchased the right to have those clients” acknowledging there is no purchase documentation.

[203] Examining the written expectations that Darren O'Halloran authored to Graydon Cragg at the beginning of their relationship, he dismisses his use of the words “what I would expect job with you would entail” and “salary” as commonplace expressions incorrectly used, and states he would have “demanded $50,000- 60,000” to just be an employee and service Tom Jarvis’s clients boasting “I have 3 licences. I was extremely overqualified to be an assistant”. So he says now but the tone of his document is much more that of a job applicant than an independent contractor prepared to sell his enhanced services. He says it was merely a “15 year old document by a 26 year old”.

[204] Darren O'Halloran states Tom Jarvis indicated he was looking to become an owner. Darren O'Halloran sized up the situation that “Graydon Cragg is 50, I am 26 and Tom Jarvis 30. Tom Jarvis was thinking when Graydon Cragg wanted out, he wanted it…. He wanted to own it, not to BUY it.” Darren O'Halloran saw himself as joining Tom Jarvis, not Graydon Cragg, despite his five page memo to Graydon Cragg about his expectations. Asked if he was joining a business Graydon Cragg was starting, Darren O'Halloran first qualified he was joining a Ross Dixon Franchise but ultimately did say it was a business.

[205] In cross-examination he stated he understood Graydon Cragg and Tom Jarvis talked of an interest in becoming a shareholder. Darren O'Halloran declared he had “no interest or intent myself to become a shareholder”.

[206] Asserting again that “I agreed to put all back into the business and only take $25,000 back” including non Ross Dixon Franchise product commissions he couldn’t put through 1350369 Ontario Inc., and believing “I had paid for everything he paid for” “I had paid for his assets and he had no interest in my clients” and that he took less than he earned, that he had bought the client list back “by putting all my commissions back in”. Asked if there was any agreement, he stated, as if agreement didn't matter, that “No. The clients were in my name, why would I buy people in my name?”

[207] Darren O'Halloran said Tom Jarvis paid money in and went to 80/20. He said it was the “same with me when I went 80/20”. When asked whether he rendered any invoices for services rendered to 1350369 Ontario Inc. he said not in 1999/2000 but he later got receipts, signed by Graydon Cragg as his share of expenses, for cheques he wrote personally from income to 1350369 Ontario Inc. He did not produce any receipts, stating he hadn’t brought them.

[208] These “beliefs” were further explored in cross-examination. Darren O'Halloran acknowledged Graydon Cragg bought the Anderson list, that there was no agreement to buy back, “in writing”, and no agreement to credit to a purchase “in writing”, but qualified it “was my perception”. He qualified every admission of lease and equipment and franchise paid for by Graydon Cragg or 1350369 Ontario Inc. with a statement of something he bought or a complaint about what was provided.

[209] In chief Darren O'Halloran said that “Even during these years I didn't get a T4” in cross he was shown a 2000 T4 but he dismissed it because it was issued by G. B. Cragg Insurance Broker Limited which was never his employer “as Graydon Cragg agrees” adding “it seems improper to me”. He then insisted subsequent 1350369 Ontario Inc. T4s mean no more. He was taken through the annual tax returns and the use of T4s inferring a declaration to the government that he was an employee.

[210] Darren O'Halloran repeatedly responded that the T4 income was only part of what his tax return included. He stated “In each year I filed as self-employed and declared all income received, including T4 employment income” and made no complaint to Graydon Cragg as “we got the money we were supposed to get” and “1999-2003 didn't ask him to change”

[211] The strength of this evidence diminishes when challenged he hadn’t brought the tax returns to demonstrate his assertions by his response “I have them in box over there. I wouldn’t have thought this was relevant.” This leaves only an adverse inference.

[212] He said that running taxes through 1350369 Ontario Inc. was an accounting advantage but not a tax advantage. It was convenient to use a numbered company as a payroll and bookkeeping service rather than each financial adviser having to separately pay and remit each employee and expense. Jarvis, O'Halloran and Quinn did this through their own numbered company, 2079422 Ontario Inc., after they left.

[213] In cross-examination Darren O'Halloran acknowledged he never received a T4a, only T4s, and deflected the assertion that in doing so he declared to the government he was an employee with the statement “I was naïve about taxes. The dollar amounts a right. I just put it on my tax return, I filed as self-employed”

[214] By comparison, the assistant Wendy Bredin who was paid from the 80% was not declared as an employee of Tom Jarvis and Darren O'Halloran, but Darren O'Halloran counters “We signed other documents as her employer”. He acknowledged, all employers are required to deduct remittances, that “we tell 1350369 Ontario Inc. how much she earned, they withheld remittances and wrote a cheque to Wendy Bredin less the deductions”.

[215] Further, he acknowledged his own 2004 tax documents in which Employment Insurance and CPP were deducted as if an employee.

[216] Like Tom Jarvis, Darren O'Halloran testified that the relationship changed in 2001. He testifies that in October 2001 Graydon Cragg and Tom Jarvis decided the arrangement was not working and made changes and Darren O'Halloran went from salary to that same format around the end of the year. As usual nothing was reduced to writing. There was no change in the day to day. From 2001 Darren O'Halloran gave Graydon Cragg a breakdown of pay sheets and 1350369 Ontario Inc. wrote the cheque. “Tom Jarvis and I got the revenue. Graydon Cragg said if we wanted to hire someone up to us we were responsible, it had to come out of our pay. Expenses such as Yellow Pages ads were paid by 1350369 Ontario Inc. but taken off the 80%.”

[217] Darren O'Halloran testified that an adjustment was made for his self-employed income which he was not able to direct trough the corporation. He asserted that where there was a negative from the last pay he would write a cheque to 1350369 Ontario Inc. to cover expenses and the 20%. In a unique moment, he stated Graydon Cragg not unreasonable and would wait for significant amounts.

[218] He stated they did this because it was easier to direct all revenue through 1350369 Ontario Inc. He said this revenue “went to my bank first and I had to write it back to 1350369 Ontario Inc. to ensure I was covering my share of expenses”. Darren O'Halloran testifies he directed payment of all staff, and expenses from their 80% and then he and Tom Jarvis could direct it as they wished and split the remainder. He agreed that after 2001 what they had was a revenue sharing agreement with Graydon Cragg.

[219] Darren O'Halloran said he and Tom Jarvis chose to direct their share to grow the entire business including Graydon Cragg’s 20% “of a much larger pie”. They decided they could grow it better by having staff.

[220] Darren O'Halloran produced an example of the breakdown he provided to Graydon Cragg showing what Tom Jarvis and Darren O'Halloran were paid in commissions from all sources after the dealer cut for Dundee products, the 20% to 1350369 Ontario Inc., expenses, semi-monthly pay sheets, all provided in anticipation of a cheque being paid to them. It was from the 80% that overhead including staff salaries was paid.

[221] When this was explored in cross-examination he repeated that Graydon Cragg was not obligated to pay staff, stating “if there was no money we have to pay them and hope that commissions would come in and pay money back into 1350369 Ontario Inc. The financial advisers “had to insure there was money in there”. However, he admitted he did not recall any instance when money paid in was other than revenue generated from the Dundee location, no cheque other than revenue was produced and finally Darren O'Halloran had to retreat to a position that “I don’t think there was ever a time we were that low but we would have had to if we were”

[222] An undated financial projection was produced, prepared by Darren O'Halloran for Graydon Cragg and showing Graydon Cragg’s contemporaneous hand written comments, during a period when Peggy and Wendy Bredin were with the business. This, and an incomplete series of Commission/Pay Templates submitted to Graydon Cragg by Darren O'Halloran, belie the assertion made by Tom Jarvis that the financial advisers had no reporting requirements to Graydon Cragg and that any sharing of information was no more than would be casual conversation with an uninterested stranger.

[223] In cross-examination Darren O'Halloran commented on his projection document which he put together and gave to Graydon Cragg to inform him of the manner the business was being built. He agreed Graydon Cragg showed more interest than simply a payroll company but would agree it was to recoup start-up money only to the extent that it covered the rent and overhead, not profit, and as a good referral source back to G. B. Cragg Insurance Broker Limited.

[224] On the limited roll he asserted for Graydon Cragg, when pressed, Darren O'Halloran acknowledged that the financial advisers were not liable on the lease, not to 3rd parties except for their own education.

[225] The transition from Ross Dixon Franchise to Dundee did not really figure into Darren O'Halloran’s evidence in chief except to point out that thereafter he took part in management decisions including hiring, but the transition was explored in cross-examination. He agreed that it was Graydon Cragg’s connection with Ross Dixon that led to becoming Dundee. He acknowledged Dundee wanted all the Ross Dixon Franchise representatives to sign on, not specific to Darren O'Halloran and Tom Jarvis and that he was not involved in the negotiations. He understood at the time that Dundee wanted to retain the Ross Dixon business for a period. He agreed that his agreement with Dundee had nothing to do with his relationship with 1350369 Ontario Inc., which remained a separate agreement with Graydon Cragg splitting 80/20 for location and accounting. He stated they chose to operate from the same location, still direct commissions to 1350369 Ontario Inc., with no change in day to day following the transition. Tom Jarvis, Darren O'Halloran and Graydon Cragg sometimes discussed “how we were doing” because “the more we grew the business, the larger his 20%.”

[226] More significant to Darren O'Halloran was the move from Memorial Dr. to Monarch Dr. He testified it occurred without the Jarvis, O'Halloran and Quinn seeing the proposed layout and after they saw it and assessed regulatory compliance there was “no opportunity to change it without vigorous feedback.” In cross-examination this was corrected to say they didn't see the layout until just before they moved in. He acknowledged there were no complaints in writing after seeing it. He says there were probably emails between himself and Tom Jarvis but nothing he could produce, and did not include in the Affidavit of Documents, because of a 2008 computer problem that wiped out all his email and storage, as noted, well after the lawsuit commenced.

[227] Darren O'Halloran repeated the same complaints as Tom Jarvis, describing Graydon Cragg’s refusal to let them bring their compliant filing cabinets as “ridiculous”. Although Darren O'Halloran liked “to get my opinion on the record but Graydon Cragg preferred to meet with Tom Jarvis, so funneled through Tom Jarvis”, in writing and verbally.

[228] In cross-examination Darren O'Halloran acknowledge being involved in the dialogue prior to the move, but did not see the proposed layout though he asked. He identified the evolving summary of input on the planned move but said an earlier proposal to change locations in their Memorial Ave building was more thoroughly reviewed than the move to Monarch Dr. Darren O'Halloran acknowledged committees from both the insurance and financial services side but remembered them as being after the move. He recalls an amendment to plans regarding a bathroom based on the input but complains that the regulator’s requirements for separated space could have been accommodated from the start as this was a new build.

[229] Darren O'Halloran provided more specifics as to the regulator’s requirements stating that the problem with the front meeting rooms was a matter of signage labelling the rooms in a particular way, not a matter of layout. Privacy and locked cabinets in the back work area were serious concerns to Darren O'Halloran as a branch manager. “that is why gave it up. In two months Graydon Cragg didn't allow us to buy cabinets or photocopier. I can’t force him to change when I have told him it is required by the regulator. It is my right to do it for myself and my clients.”

[230] Pressed on his assertion that he left the location because of serious regulatory non-compliance without any evidence of written expression of concern he countered “I don’t see why it is relevant” that lost emails were not included in his affidavit of documents. He ranted then “I gave Graydon Cragg clear indication of non-compliance, didn't allow us to take cabinets, didn't allow me to buy a better fax and scanner, didn't allow red files, it was all irrational. Everything was verbal.”

[231] As to the exclusivity issues at the new location, Darren O'Halloran’s evidence matched that of Tom Jarvis because Darren O'Halloran wasn’t kept informed directly. He got all his information from Tom Jarvis whom he says was involved in trying to resolve the issue. He accepted as true Tom Jarvis’s concern that the ambiguity of the wording of the Scotiabank release meant “I could not do anything but life insurance” and that “We weren’t allowed to advertise, it was horrible”.

[232] In cross-examination he allowed that he knew Graydon Cragg quickly got lawyers involved and engaged in negotiations with the landlord and Scotiabank to protect the investment side of the business. The G. B. Cragg Insurance Broker Limited insurance business was not affected.

[233] Darren O'Halloran regretted the negotiated solution Tom Jarvis told him about, as Orsi had given Scotiabank first contact on 22,000 mortgages as a carrot. Orsi left a voice message with Tom Jarvis they were “over the hump” and Darren O'Halloran testified “We didn't object, it was one of the things we tried to do to make it work”

[234] Darren O'Halloran acknowledged that their sign went up, they were operating, with the same products as before the move and Scotiabank did nothing to stop their business but qualified that they didn't advertise and that Scotiabank did nothing “while we were there” but negotiations , he now knows, were still in flux.

[235] Darren O'Halloran described he and Tom Jarvis resigned as branch managers by March 2005 as “ I didn't want to be on the hook for the location that I felt was completely non-compliant” “Whether Dundee or the regulator came in or not in my opinion it was not compliant” “If we had stayed there Susan Gratto would have had to address it…but since we left she didn't”.

[236] He was personally involved in looking for alternative space, here again listing “a barrage of daily annoyances” such as the scanner, and another of the “ridiculous stupid things” like the red files, juxtaposed with concern for an audit that Graydon Cragg had no intention of satisfying. The planning was kept secret from Graydon Cragg because “I didn't find him a reasonable sort to deal with” and worried “if we tell him and are not prepared with an action plan there could be repercussions to us and clients - He could have locked us out”.

[237] Nevertheless, he asserted their preferred plan A was to make Monarch work, with plan B to go somewhere else.

[238] Darren O'Halloran regarded his changing the yellow pages to a generic number with no location as a “moot point” consistent with head office requirements to link emails to a representative. His personal involvement in the change considered that there were “so many issues, we were not sure we would stay there, not allowed to advertise, even a sign, if we flaunted to Scotiabank it would affect negotiations”, so he thought a generic number with no location best.

[239] In cross-examination that all emails in evidence are about moving the Dundee business to another location without Graydon Cragg, that is, about putting plan B in place. Darren O'Halloran reasoned there were no emails about plan A because “it was in place – we were already there”.

[240] The first step after the move and the issues arose at Monarch was to contact a real estate agent and review listings. Even after Tom Jarvis left and wrote he needed time to prepare his new location the possibility was concealed from Graydon Cragg as plan B was not fully in place. He recalls a conversation with Graydon Cragg that he would prefer Tom Jarvis to come back to work but if he can’t, it “didn't make sense for me to stay there without my business partner”, contradicting Graydon Cragg’s evidence that he didn't know Darren O'Halloran would leave. But Darren O'Halloran acknowledged Graydon Cragg didn't know they had a building and a company. Although Tom Jarvis had his files with the obvious intention to carry on business those preparations were intentionally concealed from him.

[241] Darren O'Halloran testified they tried to keep the staff out of it, minimizing his spouse’s knowledge and role due to their emphasized lack of shared life. Like the other staff she would come with her employer.

[242] The “moot point” of the yellow page ad, was explored in cross-examination, revealing the number is now in use at the Defendant’s new location, that Graydon Cragg was not told “as they never told him anything about advertising” that the change allowed flexibility “if we had to leave” and ignored the fact that if they left Graydon Cragg could have chosen to continue Dundee business, now without contact numbers in the yellow pages. Darren O'Halloran demurred that they paid for the ad.

[243] Darren O'Halloran made no attempt to deny that Jarvis, O'Halloran and Quinn in March 2005 intended to “move quickly to keep it quiet” and “wanted to have plan B in place before going to Graydon Cragg”. Asked if this was “to increase your leverage” he first responded “to protect my business” then challenged that it was for leverage while still working at Monarch he allowed “sure”.

[244] The timing, he said, was “forced upon us when Tom Jarvis left the building”. Darren O'Halloran described “When Tom Jarvis left everything change, to then I was wanting a plan to move my clients if forced to do that.” The Coldwater Rd. location had been purchased but was fully tenanted”. “After July 13 and the whirlwind started we planned to put together plan B so we could go to Graydon Cragg with list of what we needed to stay and if he didn't agree we could say we are leaving to this location we own, to give power for negotiations”.

[245] Between July 13 and August when Darren O'Halloran left, he states he had many discussions with Graydon Cragg who was saying Tom Jarvis had left, he earned all mortgage revenue and large portion of investment revenue through his code, which was a vast majority of our business. Graydon Cragg knew “I didn't have enough to pay the girls”.

[246] Darren O'Halloran states he told Graydon Cragg “my main goal was to get Tom Jarvis back and work out a structure to make it work. I indicated if my partner can’t come back I have to go work with my partner.” He testifies that “before we left Tom Jarvis put a proposal to Graydon Cragg offering $60,000 flat - $5000 for rent and overhead and we would take over all control of our business”.

[247] He reasoned, “If [plan B] fully in place and available I could go back to Graydon Cragg and say this is what we need to stay here”. If plan A could work out they could rent out the new location. But Tom Jarvis leaving “massively” accelerated things. For a few days he hoped Tom Jarvis would come back and discussions were held but, characteristically laying the blame elsewhere, he asserted “Unfortunately it quickly showed Graydon Cragg was not going to make it viable for us”.

[248] Negotiations described by Graydon Cragg and Tom Jarvis had begun while Darren O'Halloran was still at the Monarch Dr. location. Darren O'Halloran and the remaining staff left August 12 and the new location was approved by Dundee by August 15 when Darren O'Halloran went to Coldwater Rd. He took his client files “I am under a duty to control”. He asserts he was involved in discussing almost all the “back and forth” with Tom Jarvis because “he is my business partner and he was thrust into negotiations to possibly buy 1350369 Ontario Inc. and not come back to Monarch.” He asserts Graydon Cragg knew he and Tom Jarvis were meeting and talking every evening though Darren O'Halloran continued to work and he didn't sign any offer until August 11, the day before he left while Graydon Cragg was out of the office, and though the offer remained open for acceptance.

[249] He shared Tom Jarvis’s view that Graydon Cragg’s offer was “Laughable – a price from the air without logic; time frame two days after forced out of the office; massive amount of shares for the company without telling its assets or liabilities, huge up front cost and on top of that buy the furniture and equipment that Graydon Cragg based on retail value; cost for sign, all costs to purchaser and $12,000 rent for a month and which made no sense as buying 1350369 Ontario Inc. holds the lease”.

[250] Asked whether in negotiating there was an intention to pay for a book of business Darren O'Halloran asserted they made many reasonable offers. Parroting that they, unlike Graydon Cragg, tried to provide justification for their numbers, which was to avoid being sued but it may have, likely did, include a multiple and perceived goodwill. He asserted he “didn't think Graydon Cragg had anything to sell except hard assets and the goodwill in the phone line. He rejected a parallel of Graydon Cragg’s purchase of Hewmac’s book saying, now, “I don’t know what he bought”.

[251] I pause here to observe again that neither side presented offers based on any objective valuation even of their own position.

[252] I pause here also to observe again that all understood it was Tom Jarvis who was the one who would buy out the business. Darren O'Halloran had no thought that he had the right to do so. Buy-out was the immediate inclination of all concerned. It is only subsequently that the notion has emerged that Graydon Cragg had nothing to sell.

Sean Quinn

[253] Neither did Sean Quinn display inclination to buy into 1350369 Ontario Inc. or Graydon Cragg’s interest in the business though he did go in on the purchase of property and the incorporation of a company to facilitate the business the three financial advisers intended. He has since sold his interest in Coldwater Rd., as the third location is described. He describes himself as a financial adviser for Hollis, Dundee with a name change.

[254] Sean Quinn was a witness careful to stay on message with his frequent assertion of merely renting space and a desk. He was, however, much less prone to hyperbole, if rather self-righteous in tone.

[255] In 2003 Sean Quinn, after years of interest and helping friends, wanted to get into the financial services industry for a small client base of family and friends. He took the course then knew he “needed to be connected to a large institution to build clients”. He met Tom Jarvis and Darren O'Halloran, liked their business and philosophy and office. Only then, sometime in 2004, was he taken by Tom Jarvis to meet Graydon Cragg “about renting space”. He needed only a desk and a phone as he went out to meet his clients. Eventually he needed an assistant and it made sense, when he came into the office on Mondays only, to make use of the staff Tom Jarvis and Darren O'Halloran had already. He, unlike Tom Jarvis and Darren O'Halloran, did not share clients.

[256] He testified when he met with Tom Jarvis and Graydon Cragg it was to confirm how he would pay for the space, desk and phone. After discussion of his “rent” he agreed to pay Graydon Cragg 20% of his revenue. This was accomplished by Sean Quinn instructing Dundee to send his net commissions to 1350369 Ontario Inc., then Graydon Cragg take 20% and I pay my administrative assistant from my 80% at a share negotiated at an earlier meeting with Tom Jarvis and Darren O'Halloran

[257] He said he agreed to 80/20 because his previous experience helping his family and friends and knowing their assets, he calculated that was a fair number for renting space in Orillia. He emphasized he was not an employee of Graydon Cragg nor of Tom Jarvis and Darren O'Halloran. He signed a representative agreement with Dundee as required by the dealer but had no signed agreement with Graydon Cragg or 1350369 Ontario Inc.

[258] He testified he had his licence and his list of 6 family members and 5 closest friends to meet with when he was licensed. After a year and a half on Memorial Dr. and on Monarch Dr. he had the same 11 clients. He arrived with his own lap top.

[259] In cross-examination he stated his reason to meet with Graydon Cragg was “my understanding he was the landlord for the Dundee location.” He remained unaware of Graydon Cragg’s agreement with Dundee. But learned of the 80/20 arrangement and thought it fair after running the math.

[260] In cross-examination Sean Quinn acknowledged that it made a difference that the desk was in a Dundee office. His agreement with Dundee identified the Memorial Dr. location and Tom Jarvis as branch manager.

[261] In cross-examination he rebuffed questions about the start-up of the business objecting “What does that have to do with me?” He understood Graydon Cragg put some money in and Tom Jarvis and Darren O'Halloran had a reduced revenue stream, Darren O'Halloran saying he took a smaller income in first years than he could have made elsewhere. Sean Quinn testified he didn't know about the Ross Dixon Franchise history, saying only that Tom Jarvis and Darren O'Halloran were licensed representatives of Dundee, “Oh and Graydon Cragg was a licensed assistant.”

[262] Sean Quinn doggedly clung to the notion that his relationship to the office was merely to rent a desk for use one day a week. He knows that an investment advisor needs to be affiliated with a registered office but will not budge from the idea that it is the desk and not the affiliation that matters. Asked if the approval by Dundee of the Coldwater Rd office in August 2005 gave him comfort he once again emphasized that it was approval of an office for “Dundee financial advisers to work from” apparently blind to the reality that due to conduct Dundee may have, and almost did, reject the three as financial advisers.

[263] In cross-examination, in contrast to other Defendants, no T4s issued by 1350369 Ontario Inc. for Sean Quinn were put to him. There was no confrontation based on statements made to Revenue Canada that he was an employee.

[264] Sean Quinn’s views on the rest of the narrative add little. The move to Monarch Dr., since he stated all he wanted was a desk, was of no benefit to him. And he was being asked to move to Monarch after being in industry only a year. He agreed with Darren O'Halloran’s layout and privacy concerns before the move and let him articulate them. Specific to himself he noted he was once in a discussion with Graydon Cragg. Sean Quinn wanted to” keep my desk” but Graydon Cragg wanted to buy the new one. He commented it was such a small thing but it happened. After the move he made no comment to Graydon Cragg “because Tom Jarvis and Darren O'Halloran were well aware, and more appropriate to have one person to communicate with Graydon Cragg as all three of us had the same concern. He agreed there was nothing in writing.

[265] Sean Quinn went over the same narrative about his involvement in the search for an alternate office space, explaining with potential shut down by Scotiabank and also knowing that in a hoped for transition to Dundee Public that new compliance and regulations would get tougher, they felt “our concerns were obviously clearly expressed, nothing done, so what’s our back up?” Sean Quinn opined that looking for new space was a natural thing to do as they would need “an office to work from if they were shut down on Monarch". He stated he had no interest in purchase of property and now rents the Coldwater Rd space from Tom Jarvis and Darren O'Halloran. But they needed a cash flow positive back up. They didn't tell Graydon Cragg because they were trying to resolve Monarch first and foremost and if they did, then there was no need to move. He distanced himself from the comments of Tom Jarvis and Darren O'Halloran, about leverage stating “I’ll speak for myself. My clear priority is to my clients and Dundee regulators and it was not in the interest of my clients not to have a location to serve them.”

[266] Sean Quinn had little knowledge of attempts to resolve the Scotiabank exclusivity problem. He credits Tom Jarvis using his relationship with “a Scotiabank guy” to resolve the problem. He knew nothing of Graydon Cragg’s lawyers or negotiations, nothing of Orsi’s intervention stating, tellingly, “at the time I knew it was not resolved because Tom Jarvis kept me up to date”. Despite no business of his ever being stopped, he believed there was a serious threat to his business.

[267] Sean Quinn said Graydon Cragg was not informed the financial advisers were looking for a new location “because I didn't know his response, wanted to protect my clients, and wondered if Graydon Cragg knew he thought about owning a building … was going to kick me out?”

[268] In cross-examination he acknowledged his email encouraging secrecy, repeating the same mantra as an excuse. He wanted to get information from Graydon Cragg to forecast costs in the new location but Darren O'Halloran answered to keep quiet. He continued at Monarch after Tom Jarvis’s abrupt departure because Tom Jarvis had to get Coldwater Rd set up.

[269] Still, he described his leave taking from Graydon Cragg on August 11 as a calm, non-confrontational meeting with him at which time he told Graydon Cragg “that I no longer needed to rent space with him, going with my administrative assistant who was going with Darren O'Halloran and Tom Jarvis. I gave him a final payment of 40% instead of 20% unasked as a gesture”. It was clear to him I was taking my advisor files” and all this without any protest from Graydon Cragg about taking his files. Sean Quinn then adopted a tone of outraged indignation that Graydon Cragg initiated regulator and police investigations and a lawsuit.

[270] Sean Quinn said he left because “I only needed a desk and phone but we shared an administrative assistant… so when Tom Jarvis left, with Tom Jarvis and Darren O'Halloran sharing clients, and Darren O'Halloran would go with Tom Jarvis then administrative assistant would go with him. That was mainly why I went to Coldwater Rd as I had no administrative assistant and I paid 1/3 of her income”. He added that she only spends 5% of her time on his work.

[271] As to the negotiations Tom Jarvis was all the while conducting with Graydon Cragg to purchase the business he had no direct involvement with Graydon Cragg but the three financial advisers discussed responses to Graydon Cragg’s offers.

[272] He requested a meeting with in December 2005 wanting “a non-confrontational conversation with Graydon Cragg to see if we could get through this process”. He righteously proclaimed he wanted to see what Graydon Cragg’s concerns were. By that time, however, the Defendants had information of Graydon Cragg RIBO breaches predating the commencement of this business and Sean Quinn used this meeting to warn him, that if he pursued the law suit this character evidence would be brought out against him.

[273] It was apparent from all the evidence and Sean Quinn’s testimony in particular that he was uninformed of the history and oral agreements between and among Graydon Cragg and Tom Jarvis and Darren O'Halloran. By the time he came along Tom Jarvis and Darren O'Halloran viewed themselves as partners of each other in a business of their creation with Graydon Cragg and 1350369 Ontario Inc. being their landlord and payroll service. Sean Quinn was not in the office daily so continued to get information indirectly through them and had little relationship with Graydon Cragg which might have informed him of his more significant involvement. He complains of being dragged into this “mess” ascribing blame only to Graydon Cragg. His outrage is misplaced. He accepted what Tom Jarvis and Darren O'Halloran told him rather than inquire into the true nature of the business set up. He accepted their communicated self-importance and self-deluding view of the business. He only heard story through Tom Jarvis and Darren O'Halloran so, unfortunately, he had good reason to take up their delusion as truth since they were the branch managers.

[274] I find no evidence he was triggered to recognize reality by receiving T4s from 1350369 Ontario Inc. from the 2004 tax year when he was working in the business.

[275] The other finding I make about Sean Quinn is also rather more favourable to him. He is in a different position than Tom Jarvis who built his book of clients based on a business venture funded by Graydon Cragg. He is in a different position than Darren O'Halloran who is outside of the business venture agreement between Graydon Cragg and Tom Jarvis and whose book of clients was purchased by Graydon Cragg for the business and, with new clients, built within the business. By contrast, Sean Quinn came with his own book of clients. The business did not purchase it and the book did not expand within the business except, likely, in value, as the investments of and the commission income from these clients increased. I say “likely” because in this bifurcated trial I have no evidence of values.

The Employment issue

[276] Though the pleadings raise various questions of law in this action, legal argument after trial focussed on whether the Defendant financial advisers were employees or self-employed.

[277] During the trial, before it became apparent that liability would turn on that finding, it was clear that the sensibilities of the financial adviser Defendants were insulted by the suggestion. All fiercely proclaimed their autonomy. Much of the evidence they put before the court was intended to show how they were in charge of the management, the client development, the relations with the dealer and regulator, and the stewards of the client relationship. Meanwhile Graydon Cragg, true to form, simply regards everyone in his businesses as his employees unless, as an incentive and once proven, they are offered an ownership role.

[278] I have already found that Wendy Bredin and Jennifer Racho were employees. Whether paid from the 20% of 1350369 Ontario Inc. or the 80% of the financial advisers, they were paid and T4ed by the business, directed by the managers of the business and, I find, did nothing relevant to this case outside of the directions given by those managers.

[279] They did, to be sure, participate in facilitating the deceit and Jennifer Racho in redirecting business but all that was at the direction of their managers. It is too high an expectation that they would somehow sort out the relationship questions disputed in the trial and be under some duty to tell all to Graydon Cragg.

[280] I find there is no basis for Wendy Bredin or Jennifer Racho to be found liable to Graydon Cragg or 1350369 Ontario Inc. Accordingly, to avoid confusion as I go on to discuss the financial adviser Defendants, I now dismiss all claims against Wendy Bredin and Jennifer Racho.

[281] I turn to the law that guides the determination of whether the financial advisers were employees. Submissions from the parties approached the underlying test differently: the Plaintiff by citing case law directly[^1] and the Defendant offering the insights from an authoritative text.[^2] There is a great deal of overlap.

[282] The tests are exhaustively set out in the submissions so I will avert to them here with a short descriptor only.

[283] King summarizes Sagaz: a) control; b) equipment; c) hiring helpers; d) financial risk; e) investment and management; f) opportunity for profit.

[284] Echlin et al suggest four staged approaches: a) control: over hiring, means of payment, type manner and timing of work, discipline; b) fourfold test: control of type, manner and timing of work, tools and equipment, chance of profit, risk of loss; c) organization test: degree of integration and economic dependence on the one establishment; and d) permanency test: tenure and durable relationship.

[285] The Defendants submit “135 is not a company with a product to sell…. Jarvis, O'Halloran and Quinn were not commissioned salespersons of 135. This is absolutely undisputable. These gentlemen were commissioned representatives of the dealer Dundee.” Based on those assertions, expanded in argument, they submit “that the entire discussion with respect to the application of the Belton and King cases has no reference to the facts of this case.

[286] Belton[^3] is distinguished by the Defendants here because the employer in those cases was the dealer, companies with a product to sell, more in the position of Dundee in our case. But these cases do set out principle specific to the status of commissioned agents. The Ontario Court of Appeal cites the B.C. Court of Appeal (appeal to (S.C.C.) denied)[^4] nuancing the employee tests to the circumstance of commissioned agents: 1) exclusivity of service, 2) control as to product sold and when where and how, 3) tools; 4) risk and expectation of profit, and 5) whose business is it?

[287] I do not intend to ignore the appeal courts’ insights into the circumstances of commissioned agents.

[288] My findings of fact predict the application of these principles.

[289] I have found there was a business between 1999 and 2005 arising from the agreement of Tom Jarvis and Graydon Cragg to develop it through Graydon Cragg’s capital and Tom Jarvis’s sweat. Although intended, Tom Jarvis has never been named an owner nor acquired shares of 1350369 Ontario Inc. which is the corporate manifestation of the business. The business at all times had the umbrella relationship with the dealer, first Ross Dixon then Dundee, which gave access to the financial advisers to the status of representatives of the dealer to sell the dealer’s products, and to the tools of the dealer. While there are other methods for financial advisers to access Dundee’s products and tools, from 1999 to July 2005 it was through the relationship Graydon Cragg had built and placed in 1350369 Ontario Inc., with the dealer.

[290] Darren O'Halloran sold products besides Dundee products but directed those revenues through 1350369 Ontario Inc. Graydon Cragg expected him to as he regarded all business done from that office as his business. Darren O'Halloran and Tom Jarvis both took advantage of accounting that characterized them as employees of 1350369 Ontario Inc. for tax, CPP and EI purposes. They continued to direct the revenues from Dundee sales through 1350369 Ontario Inc. consistent with David Velanoff’s evidence that the commercial practices of the Ross Dixon Franchises were not affected by the transition to Dundee. Neither Tom Jarvis nor Darren O'Halloran linked the transition to Dundee with the alteration of the method of remuneration to straight commission in 2001. I find there was no fundamental change in relationship, unspoken and undocumented even in the Defendant’s evidence, which transformed Tom Jarvis and Darren O'Halloran from employees receiving a draw and the possibility of commission income if revenues exceeded an agreed level, to independent contractors. All of the evidence, except the shared delusion of Tom Jarvis and Darren O'Halloran, confirmed that the representative agreement with Dundee did not alter the commercial relationship with the business that now was a business bound by a separate Retention Agreement, to sell Dundee products until 2009. Specifically, it did not narrow their status to being only independent contractors of Dundee.

[291] The 2001 alteration in method of remuneration did somewhat alter both the risk of the financial advisers and the expectation of profit. Graydon Cragg and 1350369 Ontario Inc. retained all risk to 3rd parties no matter what the revenues of the business were. But Tom Jarvis and Darren O'Halloran, as managers, took on the risk of expenses outside what the business was paying. They could make the decisions, with a view to their own profit, what expenses they wished to take on. The evidence indicates that they decided they could grow the business better, thereby increasing the revenues in which they had a share, by hiring assistants.

[292] I agree with the Plaintiff’s submissions acknowledging, though Graydon Cragg did not in his evidence, “While the gross commissions earned were used to pay business expenses, the obligation to pay those expenses remained with 135”. I recall Tom Jarvis’s evidence that after he left “I wrote a cheque back to 1350369 Ontario Inc. to make sure staff was paid” as he felt it was his “moral and ethical obligation”. I further agree with the Plaintiff’s submission that “The agreement between 135 and that the Defendants provided for a division of commissions with an allocation of certain expenses against those commissions. This provided the Defendants with an opportunity to earn more if they were able to generate increased revenues without increasing those agreed-upon expenses. However, the Plaintiffs submit that this does not equate to financial or business risk. The Defendants were entitled to potential financial reward based on their own productivity, as is typical of a commissioned employee. However, if revenues were weak, they would earn less but not be obligated to pay any third-party suppliers.”

[293] I find that the risk and prospect of profit criteria favour a characterization of Tom Jarvis and Darren O'Halloran as employees.

[294] As to the organization and permanency criteria contained in the multifaceted approach cited by the Defendants, I turn to an examination of the “degree to which the worker is integrated into the company’s activities”. Firstly, Tom Jarvis kept saying “I am the business”. Quite so. He and Darren O'Halloran worked diligently to manage and grow the business. Their duties and efforts were “a vital part of the business” as set out in their own submission. This was the intention at the outset and remained so until 2005. Even in 2005 when they were discontent, each claims that they preferred “plan A” which was to stay in the business with organizational change. Instead, they pursued “plan B” in which they effectively took the business as their own. They continue it now. They have a durable connection to the business, merely denying that Graydon Cragg was also connected.

[295] This brings me to the criteria that is the basis of the traditional test set out in Sagaz and King and continues in each and every nuanced test since: control.

[296] The Defendants focus on the aspect of control about the when, where and how of day to day operations. I agree that Graydon Cragg was isolated and largely unaware of those aspects of the business. It was intended from the beginning that Tom Jarvis, and then also Darren O'Halloran, would manage those matters. It takes no imagination at all to think of the many businesses in which the leadership has no idea of the nitty gritty of the daily work.

[297] The proof in this case of the degree of control over the financial advisers is the measure of their frustration and chafing under that control that caused the Defendants to leave. Graydon Cragg imposed the billing model and the advertising strategy. Graydon Cragg imposed the location. Graydon Cragg would not permit drawing beyond the agreed limit such that a straight commission model was imposed. Graydon Cragg required reporting of progress in growing the business. Graydon Cragg imposed limits on the equipment. Graydon Cragg imposed trivial office jobs. Graydon Cragg retained the choice when to negotiate a share transfer to Tom Jarvis.

[298] At some point Tom Jarvis figured out that the Dundee model would tolerate a sub-branch that did not require the umbrella relationship under which this business had grown.

[299] Tom Jarvis, was no longer impressed with Graydon Cragg’s success and no longer willing to be in a business under his control. So he left and tried to buy it.

[300] That control, so resented, proves what the Defendants Tom Jarvis and Darren O'Halloran pridefully deny: they were employees of this business.

[301] Sean Quinn, being told only what Tom Jarvis and Darren O'Halloran thought rather than reality, hooked into this business. What he understandably thought of as rent was, in fact, coming in under an umbrella that gave him access to tools, subject to the control as to location, equipment, billing model, remuneration model, office jobs and, regrettably, management by employees of the business who refused to recognize there was a business.

[302] I do not fail to recall my finding that Sean Quinn’s book was never acquired by the business. That gives him a degree of autonomy. Nor do I fail to recognize his limited use of the business: the umbrella, the location for his desk which he did not use to meet or solicit clients, the shared office assistant. I do not fail to recall that no T4s were presented in evidence in relation to Sean Quinn.

[303] There is no evidence to the contrary when Sean Quinn asserts he was taken to meet Graydon Cragg when he came in under the umbrella and they spoke of renting space. Graydon Cragg testified about hiring and firing employees when discussing Sean Quinn’s status in the business but links it to a discussion of client choice to remain with a particular agent. There is no evidence that Sean Quinn shared clients or participated in servicing the clients of other financial advisers in the business.

[304] I find, though some aspects of an employment relationship are present, that Sean Quinn was correct when he blurted out about Tom Jarvis and Darren O'Halloran “they don’t speak for me”. He was not at one with the financial advisers who I have found were employees of the business. I find that Sean Quinn had connection to the business that may not allow him to walk away with the files without any consequence, but I find it has not been proven on a balance of probabilities that Sean Quinn was an employee.

Fiduciaries

[305] The Plaintiff alleges Tom Jarvis and Darren O'Halloran were fiduciaries in accordance with the principles in Frame v Smith[^5]:

1. The fiduciary has scope for the exercise of some discretion or power;

2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and

3. The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

[306] It would seem obvious that Tom Jarvis and Darren O'Halloran who had total management of the day to day business and did all of the client development of the business would meet those criteria, but the Defendants rely on a case in which the issue came up between investment advisers (IA) who took the client files from their employment with one dealer and moved them to a different dealer.[^6] The Supreme Court of Canada did not disturb the finding of the Trial Judge that the IAs were not fiduciaries. The Trial Judge stated that there was an “implicit acknowledgement that a departing IA will carry a large portion of that book with him or her to the firm’s serious detriment” such that a fiduciary’s obligation to “place the beneficiary’s interest before his or her own” would “run counter to the party’s expectations and intentions” citing “what they themselves acknowledge as both their shared and competing interest in the clients”.

[307] That court also rejected one employee’s role as manager elevating him to fiduciary status as he was in that small office of a large dealer, principally an IA, referring again to “the acknowledged inevitability of active competition for clients at the relationship’s end.”

[308] There is no evidentiary base in the present case to suggest a shared expectation of the inevitability of competition for clients in the small Orillia office of a business formed to service clients first with Ross Dixon products and later Dundee products. To the contrary, the business was formed, and managed, to expand the client base of the business. There was no suggestion that Graydon Cragg capitalized a business so that the financial adviser employees could grow their individual books.

[309] It was a business in which full trust was placed in Tom Jarvis and Darren O'Halloran as managers. Client development and retention was entirely promoted by methods within the discretion of the managers. Graydon Cragg was entirely vulnerable, as history shows, to conduct by his the business managers that would divert clients away from the business. Graydon Cragg had no means to service the clients without these employees.

[310] I find Tom Jarvis and Darren O'Halloran were fiduciaries.

Breach of Employment Contract, Notice Period, Breach of Fiduciary Duty

[311] Under the broad categories of breach of contract and duty and of leaving without notice, it is perhaps useful that I express my finding that the excuses given by Tom Jarvis and Darren O'Halloran are unpersuasive.

[312] Throughout my discussion of the evidence I have stated that nothing in Graydon Cragg’s character justified the conduct of the Defendants. Character complaints emerged after the departure and had no bearing on it. Accusations that he was a bully and unresponsive to complaints and responsible for failure to communicate because he did not use a computer were either unproven or more than balanced by the demonstrated peevishness of Tom Jarvis and Darren O'Halloran, or their own failure to provide evidence of effective communication much less written.

[313] Of the necessity to leave because of regulatory non-compliance, I find on the evidence it was a pretext, not a cause. Easy fixes were available. No disruption of business ever occurred. I will accept that Graydon Cragg was difficult to persuade if he didn't see things the way the managers did but he demonstrated, in his action to address the exclusivity issue, that he would act decisively to facilitate the financial services business if it became necessary. The financial advisers did not have to leave to continue their work for the clients.

[314] Of the necessity to leave because of the exclusivity issue, I find on the evidence, it was a serious issue that Graydon Cragg as owner and Tom Jarvis as manager each worked diligently to solve. The issue did not arise through any fault of Graydon Cragg’s lease negotiations. I doubt the landlord Orsi would have been so active in finessing a solution had he not recognized that his forces made promises which could not co-exist to two tenants. No doubt employees on full commission were concerned. I did not have concrete evidence of detriment but I accept there could have been. Nevertheless the financial advisers did not have to leave to continue their work. If they had been prevented from doing so, Graydon Cragg had negotiated a clause in the lease so he could move the financial services business. Yes, that might have been inconvenient, but didn't plan B do just that, only surreptitiously and without Graydon Cragg.

[315] The parties argued these legal constructs of breach and notice, but it is really just gilding the lily. I made findings that the book of business belonged to 1350369 Ontario Inc. except the book serviced by Sean Quinn which the business never purchased. My judgment on the approach to be taken to damages goes back to my early remarks that Graydon Cragg had a business operating as 1350369 Ontario Inc. to July 2005. By August 2005 the three financial advisers had that same business without Graydon Cragg and without compensating him. This cannot stand.

[316] Having regard to my findings as to the different position of Sean Quinn it is necessary that I address the issue of notice. He did in fact recognize some obligation to contribute to expenses when he departed by giving Graydon Cragg more than the 20% requirement.

[317] The notice argument put forward by the Plaintiff relates to the departure of an employee. I have found the Sean Quinn was not an employee. However, his association to the business did make the business more valuable inasmuch as it created a revenue stream which benefitted the business. A business evaluator will have methods to calculate how much that increased the value of the business in July 2005, bearing in mind the contingency that Sean Quinn could take his book and go.

[318] There is no evidence that Sean Quinn would have left the business but for the others departing. He testified, despite participating in the deceit, that he preferred plan A staying where he was and only left because the others took his office assistant. Further, although he mentioned that he is not currently an owner of the Defendants new enterprise, he is still with them, a factor that a business evaluator may find relevant to an assessment of the contingency relating to the durability of the income stream.

[319] It is that difference in the value of the business, not notice per se, that I find to be Sean Quinn’s liability.

Unjust Enrichment

[320] This construct was not extensively explored by either party in written submissions. However it was claimed by the Plaintiff and perhaps best matches the approach I have taken.

[321] The Defendants Tom Jarvis and Darren O'Halloran in August 2005 converted unto themselves a book of business which they have since used as a basis for their own profit. In August 2005 Graydon Cragg and 1350369 Ontario Inc. were deprived of that same book of business and 20% of all revenues generated by Jarvis, O'Halloran and Quinn. The Defendant financial advisers have supplied no evidence of a juristic reason why they should be thus enriched.

180 A claim for enrichment requires three tests to be satisfied before an unjust enrichment can be said to exist: There must be an enrichment, a corresponding deprivation and an absence of any juristic reason for the enrichment. Becker v. Pettkus, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834 (S.C.C). In Nicholson v. St. Denis (1975), 1975 CanLII 393 (ON CA), 8 O.R. (2d) 315 (Ont. C.A.), at 317, MacKinnon J.A. of the Ontario Court of Appeal stated as follows:

The law of unjust enrichment, which could more accurately be termed the doctrine of restitution, has developed to give a remedy where it would be unjust, under the circumstances, to allow a defendant to retain a benefit conferred on him by the plaintiff at the plaintiffs expense.[^7].

Civil Conspiracy, Duty of Honesty in Contractual Performance

[322] I do not go on to consider these constructs simply on the basis of how many different ways to found liability are necessary?

Punitive Damages

[323] David Velanoff, who has seen much, thought this departure was the worst he has seen. He described the conduct as unfair and unprofessional. I agree. The commercial context of the conduct however, means that the wrong suffered was an economic one. Graydon Cragg was deprived of an asset he had and must be compensated. The nature of the loss does not shock the community in the sense that cases such as Whiten[^8] do. I decline to order punitive damages.

Direction for the Business Evaluator

[324] As I said at the outset of these reasons for judgment, the bifurcation of this trial left me without evidence or tools to craft the judgment I am mandated to provide. I have ruled on the heads of damages but am unable to put meat on those bones.

[325] It would be wasteful of litigation expense to leave it at that. There obviously needs to be a valuation of the business but the evaluator should be given direction.

[326] This is a challenge. I have David Velanoff’s evidence and an example of how a book is valued from the 1350369 Ontario Inc. purchase of Hewmac. I recognize that the principles of evaluation are nuanced and complicated. I have no tools to go there.

[327] Further, I have no mandate to write a contract for the parties. My directions must be with a view to quantifying damages.

[328] That having been said, I find that damages equate with the value of the business Graydon Cragg was deprived of by the conduct of the financial advisers. This determination has two distinct stages:

(a) The first is to evaluate the business on July 13, 2005 immediately before Tom Jarvis left. That establishes a figure for what loss of the business cost Graydon Cragg and 1350369 Ontario Inc. in total.

(b) The second is to determine a reduction from damages to restore that loss of the totality, an amount that never belonged to Graydon Cragg alone because of the nature of the joint venture agreed upon in 1999 between Tom Jarvis and Graydon Cragg.

[329] For further guidance, another way to view this reduction is mentioned at at paragraph 110. Tom Jarvis and Darren O'Halloran could have left the business without taking files or clients. Graydon Cragg would have a business he could not operate. Even immediate substitution of other financial advisors would result in attrition that the business evaluator must consider. This contingency would impact the value of the business first calculated under subparagraph 327a) unless it is taken into account in subparagraph 327 b) as I have directed.

[330] I recognize that Tom Jarvis never actually did buy into the business. I recognize that Tom Jarvis did not advance any sort of trust claim. However, I cannot find that Graydon Cragg should be awarded damages for the full value of the business when he and Tom Jarvis had agreed from the outset that they were building a business together.

[331] Darren O'Halloran has no such interest. Sean Quinn has no such claim.

[332] The final figure to compensate Graydon Cragg for his loss is derived from an analysis of what Tom Jarvis should have paid if, instead of storming out on July 13, 2005, he had sat down and said ‘I want to buy out the business, let’s have it valued’. Of course, after these years of expensive litigation it will be complicated to get back to that figure but that is what Graydon Cragg should receive after all is said and done.

[333] Once that value is determined I find Darren O'Halloran and Tom Jarvis joint and severally liable. They proclaim themselves partners. In liability they are, though Tom Jarvis’ position vis-à-vis Graydon Cragg may reduce the totality of those damages.

[334] Sean Quinn is liable to contribute to the damages owed to Graydon Cragg only to the extent that the business valuator finds the revenue stream created by his book increases the value of the business. Without knowing the nuanced principles to apply, I expect there is some significant retention value in this because Sean Quinn preferred Plan A. He would have stayed indefinitely if the business had continued in a Graydon Cragg premises. He has stayed with the other Defendants. It appears to be a very stable income stream.

[335] One item of loss that will remain unreduced by Tom Jarvis’s agreement with Graydon Cragg is the loss of the deferred share option. Tom Jarvis emphasized he never intended to “screw” Graydon Cragg out of that. From that statement I find that the expected benefit was not considered to be a benefit to the business but personal to Graydon Cragg.

Procedure

[336] This truly is a bifurcated trial. I am seized of the determination I have directed though I take some comfort in the confident prediction of counsel that they could work out damages once liability is determined. However, I can foresee the difficulty in determining the extent of reduction to the total loss that Graydon Cragg and 1350369 Ontario Inc. should receive as damages, in the remarks of Tom Jarvis, that he didn't necessarily think he had to pay anything to acquire the business, and Darren O'Halloran that he felt he had reimbursed Graydon Cragg already for the Hewmac book.

[337] I have noted that I am seized because I have already found that these are delusions.

[338] Counsel will schedule the remainder of the trial, should it be necessary, by arranging an attendance in Trial Scheduling Court through the Trial Coordinator.

EBERHARD J.

Released: April 29, 2015

[^1]: 671122 Ontario Led. V. Sagaz Industries Canada Inc. [2001] (S.C.C.) para 46-48; King v. Merrill Lynch Canada Inc. 2005 CanLII 43679 (ON SC), [2005] O.J. No. 5028 para 34

[^2]: For Better or For Worse: a practical guide to Canadian employment law 3rd edition Justice Randall Echlin and Christine Tomlinson 2011

[^3]: Belton v. Liberty Insurance Co. of Canada (2004) 2004 CanLII 6668 (ON CA), 72 O.R. (3d) 81 (Ont. C.A.)

[^4]: Doyle v. London Life Insurance Co. (1985), 1985 CanLII 301 (BC CA), 23 D.L.R. (4th) 443 (BCCA)

[^5]: Frame v Smith 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99 ((S.C.C.))

[^6]: RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2003 BCSJ No 1773

[^7]: King V. Merrill Lynch Canada Inc. 2005 CanLII 43679 (ON SC), [2005] O.J. No. 5028 (Ont. S.C.J.), at para 180

[^8]: Whiten v Pilot Insurance Co[2002] SCC 18 (S.C.C.)