COURT FILE NO.: 15-0064 DATE: 2016 Oct 7 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
DANIEL McGIVERN Plaintiff – and – DLK INSURANCE BROKERS LTD., BRIAN DAVIES, JOANNE SPERO and BRENDA DUFFY Defendants
COUNSEL: M. Hebert, for the Plaintiff C. Edwards and M. Seal, for the Defendants
HEARD: September 19, 20, 21, 22 and 23, 2016 at Brockville
TRANMER j.
reasons for judgment
NATURE OF THE ACTION
[1] The three personal defendants are partners in DLK Insurance Brokers Ltd. (“DLK”), which is an insurance brokerage. Mr. Davies hired the plaintiff as a producer to sell commercial insurance.
[2] After the plaintiff resigned from this employment, having worked for DLK for approximately 10 years, he brought this action claiming that he had been promised an ownership interest in the business and that Mr. Davies agreed to give him ownership in 25% of their combined book of commercial insurance business.
[3] The defendants deny that any such agreement was made and counterclaim for the deficit in the plaintiff's earned commissions against his draw and for damages arising from the plaintiff soliciting his DLK clients to transfer their business from DLK to his new insurance brokerage.
DAN McGIVERN
[4] He was working for Corus in Kingston selling advertising for radio and TV. He left that employment in May of 2004, but was not clear on the circumstances. He indicated that he received a payment because he was mistreated. He said that his last years at CKWS were not his best, blaming the ice storm as negatively impacting his business.
[5] He testified that he had known Brian Davies since about 2001 or 2002. Mr. Davies worked for the defendant DLK selling insurance. They were good friends. He testified that he had been speaking with Brian Davies and went on a couple of Bowman conferences with him at the suggestion of Mr. Davies. These conferences were intended to help insurance salespeople expand their sales.
THE INITIAL CONTRACT
[6] He testified that Mr. Davies mentioned a position to his friend Bill McGall and him. He was told that he would have to build a book of business. He would go into debt initially. He would receive 100% of the commission on new business sold and 30% on the renewal business. He calculated that to break even he would have to sell about $900,000 in premiums on new business after five years.
[7] He said that Mr. Davies told him that they had partners who would be leaving the business and that they needed people to replace them. Mr. McGivern testified that, “I took his offer because within three years the three elder partners were leaving”, Frank Davies, Don Kenny and Steve U’Ren.
[8] Mr. U’Ren confirmed that he was a former partner, who retired in 2006. He confirmed that his interest was bought by the remaining partners and that his business was absorbed by the remaining partners. He testified that the plaintiff was brought in as a producer. He said there was a probable progression to partner as the need arose. He said it would probably be when they retired. This talk was general in nature only. He said there was a lot of talk that the plaintiff was “going to, should, might be made a partner”.
[9] The plaintiff said that Mr. McGall told him that Mr. Davies had made an offer to him.
[10] Mr. McGall testified that he may have brought Mr. Davies and the plaintiff together and that it may have been on the occasion that they first met that he heard Mr. Davies and the plaintiff discussing work. It was casual conversation with no details. He said there was an intent. He believed they were discussing an agreement to bring employment to the plaintiff under Mr. Davies. There was a potential for the opportunity for partnership. There was a lower front end for benefit in the long term. He said it was a very positive opportunity for the plaintiff.
[11] The only person at DLK that the plaintiff spoke to about his work arrangement was Mr. Davies. He testified that it was made clear to him that there would be an opportunity in the future to become a partner. Clients would be turned over to him. He was told that at some point, commissions, on those clients would be his.
[12] He testified that Mr. Davies said to Mr. McGall, and to him that he would have to clear the job with his father and others. Mr. Davies asked him what his starvation salary would be. Mr. McGivern told him $60,000 a year, would just get him by. He knew that the commissions would be paid at 15% of premiums, and that therefore he would have to bring in $400,000 of new business in the first year. He knew that was impossible. He was to be paid 100% of the commission on new business and then 30% of the commission for every year that the policy was renewed.
[13] He began to work at DLK in September 2004. He can't recall whether he signed a contract in 2004 but he believes that he would have. Tab 27 is a blank copy of such a contract. He testified that he must've signed a contract in 2004.
[14] With respect to him sharing in the retiring partners' book of business there was never anything in writing. He testified, however, that that was why he accepted the job. “It was obvious that a person would have to serve the business of the leaving partners and that would be me”.
[15] He testified that he was not sure if he discussed his arrangement with Mr. Kenny or Mr. U’Ren, but “they knew a partnership was part of the plan for me”.
[16] He was asked whether, in the early discussions with Mr. Davies before he started at DLK, there were any specifics as to how that interest was to be given to him. He responded, “he laid out that the entire commissions of first-year would go to the salesperson and on the renewal 30% would go to the salesperson and 70% of the commission to DLK”. He was asked again whether there were any discussions about ownership, “no, no numbers were put in place, for example 10%”. He testified that he did not know the shares division in the company. The evidence is that Ms. Spero paid $415,000 for her 21% share of DLK, Ms. Duffy brought business in and paid $300,000 for her 36% interest and Mr. Davies paid cash and a premium on a life insurance policy on his father's life for his 42% interest.
[17] The plaintiff was asked when that was going to be figured out in his case. He said that that was to be when the partners left. “That would look after me in my retirement”.
[18] He sold commercial insurance. If those clients bought home or auto insurance, he was given 25% of the initial commission, but no renewals. He had no book of business at the outset and he knew that his job required him to make cold calls to prospective clients. These would include clients from his previous advertising sales career.
[19] He testified that Mr. Davies struggled with making the cold calls and asked Mr. McGivern to show him how to do it.
[20] At Tab 21 is his producer contract signed August 1, 2007. It makes reference to a 2004 contract. The 2007 contract references DLK Insurance Brokers Ltd. This is consistent with the corporation formed by the defendant partners at that time. The contract contains a Schedule 1 concerning compensation which is not signed. The plaintiff has never seen a signed copy of that Schedule 1.
[21] He testified that he believes Frank Davies told his son that the draw of $60,000 against commissions was burying him under debt and that that was why this new contract was signed. “Frank said my debt was unfair. I think there was a forgiveness of debt”. This new contract provided for forgiveness of the existing debt, which Ms. Spero and Mr. Davies testified was in the order of $30-$38,000 at the time. The plaintiff testified that, “Brian and I talked. It will work out. I always knew that when the partners retired there’d be a reckoning”.
[22] At Tab 9, is a commission report for him. He testified that he received no other reports that he could recall. He testified that he was made aware of commissions paid and of his debt, “I believe this was a monthly thing.” Bookkeeper Tammy Ferguson testified that he received a statement of his commissions and draw every month. With respect to the report at Tab 9, he testified that he thought it showed his debt. He did not know what the “CR” figures were. With respect to the figure at the bottom of $31,354.30, he testified, “I guess that's my debt”.
[23] He was similarly vague about the report at Tab 10 and Tab 11, “these appear to be my earned commissions”. “I assume my commissions for the year. I don't know.”
[24] He said that he was never given a breakdown as to how the commissions were arrived at or a breakdown on the commissions calculation.
[25] He testified that he was never asked to repay the debt, meaning the overpayment of draw against earned commissions.
[26] He testified that one year because he was paid a bonus, as were the other employees, he was ahead of the debt. This is confirmed by Tammy Ferguson, who said that was the year 2007 when they forgave the debt that existed.
[27] He testified that Mr. Davies did not do new sales and that the company complained about that. Mr. Davies confirmed that his interest was in doing the renewal business including his father's and that it was Mr. McGivern's job to develop new business. Mr. McGivern said that some big accounts were lost.
[28] He testified that he was approached by Ward Strickland at Binks and that he and Mr. Davies met with them. This resulted in Mr. McGivern writing commercial policies using the Binks program for car dealerships.
[29] The three partners retired in 2006 at 2007. He was asked whether there were discussions with Mr. Davies about him getting into the business. “I asked him when do I get my chance” for it to “go the way it is supposed to go”. Mr. Davies kept putting him off. “I said to him, it's not going to happen”. Mr. Davies responded, “no, I can't”. “My partners don't want to divide the book up. It's been taken care of”. This was within a year of the partners retiring.
[30] He testified that Mr. Davies had made promises to him and none of them were coming true.
[31] He testified that Mr. Binks “had offered me jobs a couple of times.” He said that there was an open offer from Mr. Binks to join his firm. This is contrary to the evidence of Mr. Binks who said that Mr. McGivern called him and told him that he had left DLK so Mr. Binks suggested they meet to talk. Mr. Binks testified that this conversation took place in 2010. It is not disputed that the plaintiff was still employed at DLK at that time.
[32] The plaintiff testified that he told Mr. Davies that he was going to Ottawa. Mr. Davies called him while he was driving to Ottawa and told him to come back. He testified that Mr. Davies told him that he had had a fight at the management meeting and that he and Brenda were probably going to buy out JoAnn. He said that Mr. Davies came up with the idea for a partnership in the entire book of business.
[33] They met at the rail way tracks on Lyn Rd. They had a heated discussion. He did not explain why the discussion between them was heated. Mr. Davies told him about the argument at the meeting. Mr. Davies said he had a solution, something to protect him from a sale of the business to McDougall. By this he meant to protect him from his business being sold to McDougall and working for McDougall under terms that he would not know. He told him to come back to the office.
THE SECOND CONTRACT
[34] He said that he met with Mr. Davies the same day or the next day at his office. Mr. Davies presented a plan to him that they would combine their books of commercial business and split it 75%/25%. He testified that his own book of business was 22% of the combined business already so that not many of Mr. Davies’ clients had to be transferred. To him this meant that he would own the 25%. For example, if DLK was sold, to him it meant that he would get his fair share if the business was sold, namely 25% of the combined book of business.
[35] After that, there was no change in his pay, except that he understood he was getting 30% of renewal business for those transferred clients.
[36] He said that after that his pay did not change, but that it was not done for the purposes of him getting a raise, rather it was done to protect his book of business if a sale of DLK occurred.
[37] This was Mr. Davies’ idea. Mr. McGivern agreed to this because he owned his book of business now, although he was not a shareholder. He testified that Mr. Davies and he shook hands and Mr. Davies said, “welcome partner”.
[38] He testified that as far as he knew the two books of business were combined. A few clients were transferred to him.
[39] He testified that he phoned Mr. Binks to say that Mr. Davies had made him a partner on their combined book of business and that he now had ownership of it. He believes he told Mr. Binks the percentage. He said that Mr. Binks said he couldn't offer that to him. Mr. Binks testified that this was in 2010. He said that Mr. McGivern called him to say that he had been able to work things out at DLK. Mr. Binks could not recall what words Mr. McGivern used, “I think he said he was negotiating to be a partner in DLK”.
[40] There was no paperwork on this arrangement. He said the departments were made aware that there was a transfer of responsibilities. He said it was made clear that there was a shift in the way things were going to be done. He managed new clients. He told the guys in the life department that there'd been a resolution.
[41] The plaintiff tied the timing of this event to going to see Mr. Binks and also the partner’s argument that Mr. Davies told him about. Ms. Spero said that argument was in 2012, as did Mr. Davies. The bookkeeper's evidence, supported by the document at Tab 69, confirms the date of 2010 for the new arrangement for calculating the plaintiff's commissions earned on the combined book of business. The shareholder minutes of meetings for 2010 confirm the 2010 date for the new arrangement. (Tabs 22 and 23).
[42] Mr. Shaw testified that in late January 2011, the plaintiff made inquiries of him about becoming a partner with his insurance brokerage. He told Mr. Shaw that he had no ownership at DLK at that point and that is what he wanted.
[43] Mike Carriere testified that he and the plaintiff, contrary to the plaintiff's testimony, were present when DLK announced that the sale to McDougall's was going ahead. He testified that the plaintiff said, “I'm out of here, this place is going nowhere. There is no chance of being a partner.” This was in January of 2014.
[44] The plaintiff said there had been discussions over the years about talks with McDougall. Mr. Davies and he talked about that in 2010. He said the sale to Johnson was dropped on them without notice in December. Johnson presented him with an employment contract. He asked Mr. Davies about his share of his commercial book of business. Mr. Davies responded, “if I owe you money I owe you money”.
[45] He testified that in mid-to late January, it was announced that the Johnson deal had fallen through.
[46] At Tab 6 is his e-mail letter of resignation dated January 16, 2014. The letter makes no mention of a claim for ownership in the book of business. When asked as to why he resigned, he testified that the Johnson deal was in front of him and he had not been paid for his book so he couldn't stay.
[47] He said Finnegan approached him and he decided to work with them. They gave him a partnership.
[48] Ex. 3 is the Statement of Claim issued February 14, 2014, for the lawsuit commenced by DLK against Russell, U’Ren and Finnegan. It was a claim that the two former DLK employee and partner had converted DLK business to Finnegan. The plaintiff was not sued in that action.
[49] Ex. 4 is an affidavit sworn March 14, 2014 by him in that lawsuit. In that affidavit, he swears that he had been promised a partnership in DLK and that that is why he accepted a “significant reduction in salary” to start. He testified that he received no response to that allegation. This lawsuit was settled and resulted in a consent order to dismiss on April 28, 2014.
[50] With respect to damages, Tab 24 identifies that the purchase price on the sale to McDougall was based on three times gross commissions. He testified that the commercial book of business was about 30% of the total business of DLK. 30% of the sale price is $1,602,000. His claim is for 25% of that figure, namely $400,500.
[51] Tab 3 is an exchange of e-mails with Mr. Davies, from February 17, 2012 to March 27, 2012. In one of those e-mails, Mr. McGivern writes, “I would not have accepted a straight commission job without the guarantee that there was business to be handed over to me … to work from the existing book.” There was no response to that e-mail. He does not assert the ownership of 25% of the combined books of business in this e-mail.
[52] He was never asked to repay the final deficiency of about $68,000.
CROSS EXAMINATION
[53] The cross examination challenged his accuracy and credibility as follows:
a. He testified that he expected to buy his partnerships share through the commissions that he earned. It is to be noted that after 10 years he was still in a deficit position on his draw against his commissions.
b. Although he swore in his affidavit that he had agreed to accept a “significant reduction” in his salary to work with DLK, his tax return for 2003, Tab 30, shows that his employment income from commissions at Corus was $54,000. This is $5000 less than what he was paid at DLK. It was put to him that his sworn “significant reduction” was not true. He said he guessed that it was inaccurate. He agreed that he was inaccurate in swearing to that in his affidavit.
c. In fact, he was unemployed, having left Corus, when he accepted employment at DLK. The affidavit is misleading in that regard as well.
d. He acknowledged that the alleged offer of partnership and ownership in a book of business were important to him, but that it was not reduced to writing, not even an e-mail.
e. He testified that there was no performance aspect to the discussions with Mr. Davies about ownership. It was presented to him by Mr. Davies, “when the partners retire will work something out”.
f. Tab 26 is an ad placed by his new employer Waterway. It shows him as selling life insurance. He agreed that he is not licensed to sell life insurance. It was put to him that this misrepresented his line of business experience. He said he did not know about that ad. His partner had placed it.
g. With respect to his concern that with a sale of DLK there would be no way to protect his book of business, he acknowledged that the producer contract of August 1, 2007, Tab 21, contained a “vesting” clause, which did provide protection to him throughout payment should DLK and therefore his book of business be sold.
h. His testimony about his conversation with Mr. Davies in 2004 was definite about the discussion concerning a partnership. He was referred to his examination for discovery of October 7, 2014, questions 95 and 96, where he had testified that that was an “inference”. He responded, my “use of the word inference was a bad choice”.
i. At the discovery, he gave an undertaking to provide a list of the clients that he took with him to Finnegan. Q. 282. Ex. 5 is the list. He had knowledge that there is a discrepancy between the list and his affidavit at paragraph 19, where he identified the list of clients that were transferred to Finnegan.
j. He acknowledged that as a partner in Finnegan, he was aware of the court Order March 6, 2014 restraining Finnegan from soliciting DLK clients. He acknowledged that he breached that court order in soliciting 2 clients of DLK after the order was granted and before the injunction was terminated by order dated April 28, 2014. He said he did not see the list of DLK clients referred to in the March 6, 2014 Order. He said he was not sure when he saw the Order. He testified, “we were made aware that we were not to contact DLK clients. I contacted one client after”. He testified that he did not know that the Binks program clients were not to be contacted. He made a mistake.
k. It was put to him that he said that he left DLK before the McDougall sale was announced. He agreed. It was put to him that Mike Carriere would testify that they heard that announcement together and that he told carrier that he wouldn't go to McDougall, because he would never get to be a partner. He said he could not deny that.
l. He agreed that when he resigned he told Mr. Davies that he was quitting the industry. It was put to him that he lied to Mr. Davies. He said he did not know what his plans were so it wasn't a lie. He agreed that Mr. Davies did not know that he was going to Finnegan.
m. It was put to him that during the examination for discovery he testified that his heading to Ottawa to meet with Mr. Binks and the meeting that resulted in Mr. Davies saying to him “welcome partner”, were not linked in time contrary to his trial testimony. At the examination for discovery, page 62-63, he said he was driving to Ottawa to meet with Binks. Mr. Davies called him. They talked. Mr. Davies told him about the McDougall deal and that “being an owner of this “book of business”, the sale to McDougall would be a great opportunity. In addition, he testified that in 2010, Mr. Davies granted him 25% ownership in their combined books of business. This is contrary to trial testimony, where he said that these events happened on the same day or one day apart. He responded that they were linked. He testified that he was confused about the dates at the examination for discovery. He testified that the events were clear. He said that he has spoken to some people, since the discovery, “then I came up with the date”.
n. He agreed that the transfer of clients discussion with Mr. Davies occurred in 2010. He disagreed that it was later in 2012 when the meeting at Lyn Road and then in the office occurred.
BRIAN DAVIES
[54] This father was one of the senior partners in DLK. He became a partner in about 1986 or 1987. He made a payment of money to become a partner, but he could not recall the amount that he paid.
[55] Ms. Spero paid money for her interest in the business and Ms. Duffy transferred her book of business into DLK.
[56] Each of the three personal defendants paid a significant amount of money to buy out the ownership interests of three retiring partners in 2006. Following that buyout, they became shareholders in DLK proportionately as follows, Mr. Davies 42%, Ms. Duffy 36% and Ms. Spero 22%.
[57] Mr. Davies knew that the plaintiff sold radio and TV advertising. The plaintiff complained about that work. The two of them talked about the plaintiff considering selling insurance. The plaintiff terminated his work at Corus in the spring of 2004 and over the summer obtained his insurance sales license.
[58] Mr. Davies explained to the plaintiff in a broad way the opportunity that was available at DLK. He told the plaintiff that they were looking for someone to sell commercial insurance who would be a self-starter and would not need to be supervised. He said they wanted to grow the business. He invited to plaintiff to attend meetings with the consultant to learn about insurance sales philosophy and to network with other insurance salespeople.
[59] The plaintiff had no insurance sales experience.
[60] Mr. Davies explained the spirit of the DLK producer contract to the plaintiff, the draw, the vesting clause and the single occupation obligation.
[61] Mr. Davies discussed with the plaintiff the possibilities and the culture of DLK that partners were made based on production. He explained that partners bought into the business. He explained that Ms. Spero had been an employee, but that she had been offered a partnership because of her excellent performance. The plaintiff said he'll be able to sell and would earn the consideration to become a partner.
[62] Mr. Davies did not offer the plaintiff an opportunity to buy out the retiring partners. There is a mandatory retirement clause for partners and Mr. Davies knew that the three senior partners would be retiring in 2006 or 2007. He did not talk to Mr. McGivern about an opportunity to buy those partners out. “The timeframe was too tight.” Mr. McGivern was inexperienced in insurance sales and he was not expected to be showing a profit within such a short period of time. An opportunity to buy out these three retiring partners’ interest was “not on the Table” for the plaintiff. The plaintiff had to not only solicit new clients, but he had to learn what coverage they needed.
[63] The plaintiff began his employment in the fall of 2004. His draw was set at $60,000 per year. This was a draw against earned commissions. This was a high starting salary compared to what DLK had traditionally offered starting producers. Producers are typically 23 to 28 years of age and start at a salary of 35,000 or $40,000 a year. The plaintiffs’ draw was set because the plaintiff told Mr. Davies that he was earning $60,000 and that he needed to maintain that level of income.
[64] During the timeframe 2004 to 2006, Mr. Davies’ prime interest in the business was maintaining his father's renewal of business. He was no longer interested in securing new clients for the business. That was the plaintiff’s job.
[65] Throughout his 10 years of employment, the plaintiff's earned commissions were always in a deficit position as against his draw.
[66] In 2006, the three personal defendants bought out the interests in the business of the three retiring senior partners. They each paid in the order of $300,000. In regard to his father's interest, Mr. Davies paid part cash and funded a life insurance policy on his father's life.
[67] There was no discussion between Mr. Davies and the plaintiff about the plaintiff purchasing an interest in the retiring partners’ business. The plaintiff knew that those partners retired.
[68] During this period of time and following, the plaintiff and Mr. Davies’ friendship became stronger.
[69] In 2007, the plaintiff’s deficit was in the order of $30-$38,000. The three personal defendants agreed to forgive that indebtedness. A new producer contract dated August 1, 2007 was offered to and accepted by the plaintiff. In part, it provided for “removing your debt that has accumulated over the last four years”. This was intended to help the plaintiff.
[70] Mr. Davies testified that in 2008 there were challenges to securing new insurance sales business due to the world financial difficulties. He testified that the plaintiff's poor performance was not the fault of the plaintiff.
[71] Mr. Davies testified that the plaintiff's poor performance was a recurring concern of the three shareholders. He defended the plaintiff out of friendship and because he wanted the plaintiff to secure the new business that was desired and that was not something that Mr. Davies was interested in doing.
[72] In connection with the 2010 budget, Ms. Spero and Ms. Duffy told him that they were going to shut off the tap for Mr. McGivern's draw, meaning they were going to pay him only what he earned rather than the fixed draw. His earned commissions were not offsetting his draw. Mr. Davies presented to Ms. Spero and Ms. Duffy, an arrangement whereby he and the plaintiff would combine their books of commercial insurance business. Proportionately, Mr. Davies book was 78% of the total and Mr. McGivern's book was 22% of the total. Mr. McGivern would continue to receive 100% of the first-year commission on new clients. In the past, Mr. McGivern was paid 30% of the year two and thereafter renewals. Going forward, Mr. Davies would be paid 78% of the 30% commissions on the combined books and Mr. McGivern would be paid 22% of the 30% commissions on the combined books. Mr. Davies would give the plaintiff 10 to 12 of his clients in the hopes that this would lead to referrals and new business for the plaintiff. This arrangement was intended to assist the plaintiff.
[73] Mr. Davies agreed with Ms. Spero and Ms. Duffy that Mr. McGivern's debt would be frozen at the current level and that any debt in the future would become Mr. Davies’ responsibility, not theirs.
[74] Ms. Spero and Ms. Duffy agreed to this arrangement.
[75] Mr. McGivern agreed to this new arrangement when it was presented to him in June of 2010.
[76] In his own mind, Mr. Davies thought that in taking this risk on, his share position should be increased.
[77] Mr. Davies testified that Tammy Ferguson, the bookkeeper, was instructed to implement this new arrangement in October of 2010 retroactive to May 2010. She confirmed this evidence. Her calculations resulted in a $4200 payment to Mr. McGivern and corresponding deduction from Mr. Davies account. Tab 69 confirms this evidence. Mr. McGivern's commissions were calculated in this manner from that point on, according to both Mr. Davies and Ferguson.
[78] It was not Mr. Davies’ intention to grant the plaintiff ownership or part ownership in that combined book of business. Furthermore, he did not have the authority to do so without the agreement of Ms. Spero and Ms. Duffy. Ms. Spero testified that she gave no such agreement. Mr. Davies testified that in 2010 he never reached over the Table and said to the plaintiff “welcome partner”.
[79] In 2011, Mr. Davies came to understand that there was a misunderstanding in 2010 on the part of Ms. Spero and Ms. Duffy about him deserving a greater share proportion for assuming responsibility for the plaintiff deficit. As a result, he thought that all three of them should continue to bear that burden.
[80] This led to a heated argument with Ms. Spero and Ms. Duffy in 2012. Mr. Davies was so angry that he wanted to have Ms. Spero removed as a shareholder.
[81] He needed someone to talk to so he called his friend Mr. McGivern. They talked about this argument and Mr. Davies told Mr. McGivern that there were discussions with McDougall about merging with DLK. McDougall was a larger competing insurance brokerage. This meeting took place at a railway yard in early May of 2012. Mr. Davies told the plaintiff that the merger would help the plaintiff.
[82] Mr. Davies testified that he is positive that this discussion with the plaintiff took place in 2012 because he knows the date of the argument that he had with Ms. Spero and Ms. Duffy and that his dad was dying at the time.
[83] Contrary to the testimony of the plaintiff, Mr. Davies did not know that the plaintiff was on his way to Ottawa to discuss employment with Binks Insurance. The plaintiff did not tell him that he was going to meet with Harry Binks to consider a job offer. If Mr. Davies had been told that, he knew Mr. Binks well enough that he would have telephoned him and complained about Mr. Binks raiding his labour pool.
[84] The plaintiff said that he thought Ms. Spero should leave as well. He said she was disruptive, “a battle axe”. He agreed that having more clout through a merger with McDougall would be good.
[85] There was no discussion with the plaintiff at this time about the plaintiff being given a share in the business.
[86] Through 2012, there were discussions with Johnson Insurance about a sale of DLK to it. Mr. Davies talked to the plaintiff about the Johnson employment contract that was being proposed. The plaintiff did not assert any ownership interest in DLK at the time.
[87] On January 12 or 13 of 2014, Mr. Davies, Ms. Spero and Ms. Duffy realized that the Johnson sale was not going to occur. They decided to go forward with the merger with McDougall. They made that announcement to their staff. Mr. McGivern was still employed at DLK and he attended that meeting. He did not assert any ownership interest in DLK.
[88] By e-mail dated January 16, 2014, Ex. 6, Mr. McGivern tendered his resignation. He did not assert an ownership interest in DLK in that e-mail or verbally. Mr. McGivern told Mr. Davies that he was going to leave the insurance industry.
[89] Mr. Davies asked Mr. McGivern to meet and go over his list of clients and their contacts. The two of them met with Derrick Venema, a DLK employee, to do so.
[90] DLK commenced a lawsuit issued February 14, 2014 against the former employee, a former partner and Finnegan insurance brokers for transferring DLK client business to Finnegan. Mr. Davies, Ms. Spero and Ms. Duffy had learned that the employee had taken a client report that was DLK’s most valuable asset, and that the former partner was transferring a large commercial client to benefit Finnegan.
[91] When Mr. Davies found out that Mr. McGivern was going to work at Finnegan, DLK sent a letter dated February 13, 2014 to Mr. McGivern and to Finnegan to remind Mr. McGivern of his confidentiality and noncompetition obligations under his signed producer contract. At the point of the lawsuit commencing, they did not know the extent of what Mr. McGivern was going to do with respect to his former DLK clients.
[92] The DLK lawsuit was settled through discussions with two principals of Finnegan, Tanner and Yee. They wanted Mr. McGivern included in the settlement. Mr. Davies did not know why, but Ms. Spero thought it had to do with the vesting clause in the producer contract that could result in payment of money by DLK to Mr. McGivern.
[93] In an affidavit sworn March 14, 2014 in that lawsuit, Mr. McGivern first asserted that Mr. Davies had given him a 25% stake in the business of the DLK. Mr. Davies and the other shareholders did not respond to that affidavit as they focused on settling the claim. That lawsuit was dismissed by order dated April 28, 2014.
[94] This present lawsuit was commenced by Mr. McGivern by Statement of Claim, issued March 28, 2014. The Statement of Defence and counterclaims of DLK is dated June 19, 2014.
CROSS-EXAMINATION
[95] Mr. Davies confirmed that there was never a demand that the plaintiff repay his deficit.
[96] To sell shares in DL K to the plaintiff would require the consent of all shareholders. The topic never came up with the plaintiff. Mr. Davies had no authority to transfer a book of business to the plaintiff unless it was with the consent of the shareholders.
[97] He believes that the document at Tab 28, Ex. 1 , is from 2010. It talks about meeting with the plaintiff in March to discuss his future at DLK and that they came up with the following plan. It included client handoff to Dan. It noted that the plaintiff had $84,000 in gross commissions and that the client handoff from Brian Davies book would add $70,000 gross commissions at 30%.
[98] The plaintiff was told about the change in the basis for his commissions in 2010 after the shareholders had approved of it. The producer contract dated August 1, 2007 was not amended to account for this change.
[99] Ex. 1, Tab 76, was prepared in 2010 when this change occurred to base the plaintiff commissions on the combined books of business. The four pages appeared to confirm the date. The plaintiff never received 25% of that book of business. Mr. Davies could not explain why three of the four pages showed a 75/25 split. He said it was not supposed to go to 25%. The books of business worked out to 78/22%.
[100] It was the day that he resigned from DLK that the plaintiff told Mr. Davies that he was leaving the industry. This was before the meeting with the plaintiff and Derrick Venema about the plaintiff's clients.
[101] With respect to the sale to Johnson, in 2012, Mr. Davies told the plaintiff that if he wanted to work for Johnson he would have to sign their contract. The plaintiff did not ask him about ownership of his book of business.
[102] Former partner U’Ren moved a significant block of business, approximately $150,000-$200,000 in premium to Finnegan. They knew that Russell had taken DLK’s most important asset, the expiry report. They did not know how much the other employee Lisa had taken if anything, and she was not sued. There was an adjustment in the purchase price paid by McDougall of $168,000 on account of business moved out of DLK. This reflects about $56,000 in commissions.
[103] Mr. Davies testified that he did not bring up the subject of the plaintiff during the settlement meetings with Mr. Tanner and Mr. Yee. He said they brought it up. He was surprised to hear the plaintiff being mentioned because they had not sued him. Ms. Spero suggested to him that it must be because of the vesting clause in the producer contract that could result in payment of money by DLK to Mr. McGivern.
[104] Mr. Yee testified that he contacted the plaintiff to join their insurance company Waterway in 2013. After DLK sued Finnegan, he and Mr. Tanner, who were principals in that insurance business, met with Mr. Davies and Ms. Spero to try to settle the claim. He was at the first meeting only. He testified that Mr. Davies wanted Mr. McGivern, now a partner in Waterway, to be part of the settlement. Mr. Davies wanted the plaintiff to sign off on not pursuing DLK on any action. Mr. Yee did not understand the motive for the request. He testified that Mr. McGivern had not yet sued DLK at that point. It is to be noted that Mr. McGivern's affidavit in that action was born March 14, 2014.
[105] Mr. Tanner testified that at the second meeting, it was just Mr. Davies and him who attended. Mr. Davies wanted Mr. McGivern to sign a hold harmless agreement in favor of DLJ. Mr. Tanner said he did not know why Mr. Davies wanted this. Mr. McGivern was not involved in that litigation, so Mr. Tanner dismissed the request.
[106] Mr. Davies testified that he did not respond to the Mr. McGivern affidavit asserting the 25% ownership because he did not think that he needed to.
JOANNE SPERO
[107] Ms. Spero purchased Frank Davies’ personal lines business for $115,000 to become a partner.
[108] She pointed out that at Ex. 1 Tab 27 is the producer contract that the plaintiff signed when he joined DLK in 2004.
[109] She watched the plaintiff's sales numbers. They were slow to start. That was expected. He needed to learn the industry and the product. They did not expect him to be profitable in the first year but they expected that he would be out of the hole in five years, that is earning commissions greater than his draw of $60,000.
[110] She testified that she expected that he would sell approximately $250,000 in premiums annually after his first year. Mr. Davies confirmed that this was a fair expectation in the industry. The plaintiff would be paid commission of 30% each year for his renewals. She testified that a 90% retention of business is customary. She testified that his income could go up if he performed in this way. She testified that after five years, it was expected that he would no longer be in the hole, that is overdrawing as compared to his commissions.
[111] The fact is that after 10 years he was still not earning enough commissions to match his draw. She called his performance lackluster. She liked him as a person but she was not impressed with his performance in sales. In the last two years he brought in only 12 new clients.
[112] She explained that in 2006 three senior partners retired. She and Ms. Duffy and Mr. Davies incorporated. Ms. Duffy had brought in her own book of business. At Ex. 1, Tab 49 is an example of a share purchase agreement from one of the retiring partners. She testified that the business had incorporated, the three retiring partners were given shares and she, Mr. Davies and Ms. Duffy purchased those shares upon the retirements.
[113] She and Mr. Davies and Ms. Duffy paid $900,000 over six years to the retiring partners. Her money to do this came from her earned commissions.
[114] When the three partners retired in 2006, she and Mr. Davies and Ms. Duffy talked about whether they thought the plaintiff was fit to be a partner. She did not think he was fit to be a partner yet because she had not seen what she wanted to see in a partner in him. At that point in time, she did not think that he would ever become a partner.
[115] From 2006 until 2014, the plaintiff's performance was lackluster. There was no sign that he would hit his goals. As indicated, in the last two years, his performance was dismal bringing in only 12 new customers.
[116] She testified that the plaintiff never got out of a deficit position. He was paid the same draw throughout until his resignation.
[117] In 2007, they, the three shareholders, agreed to forgive his debt and came up with a five-year plan to assist him. Ex. 1 Tab 21 is a new producer contract signed August 1, 2007. It sets out that the debt at that point was forgiven and indicates how over the next four years they would reduce his draw and indicated how he would earn the balance of his $60,000 through sales and renewal. The intention was to give him a fresh start. They needed a commercial producer. His performance never did increase to meet these expectations.
[118] In 2010, when she presented the spring budget for the company, the three shareholders decided that they were not going to let the plaintiff go further into debt. He was at about $38,000 at that point. She and Ms. Duffy wanted a new producer. Mr. Davies came up with the plan to freeze the plaintiff’s debt. Mr. Davies would work with the plaintiff. They would share renewals. The plaintiff would keep his 100% of new business commission, which they hoped would come from referrals from Mr. Davies customers.
[119] At that time, Mr. Davies was responsible to renew all of the business that had been brought in by the retiring three partners. She noted that the business made more money on renewals than on new sales because on the latter in the first year, the producer kept the entire commission.
[120] She approved of the arrangement whereby Mr. Davies would receive 78% of renewal commissions and the plaintiff would receive 22% of the renewal commissions on their combined books of business.
[121] She testified that the plaintiff was not given ownership in that book of business. The plaintiff had no ownership interests in the business. There were no discussions in 2010 that the plaintiff could purchase shares or otherwise acquire an ownership interest in the business. The plaintiff never asserted an ownership interest to her.
[122] Ex. 1, Tab 22 are Minutes of shareholder meeting, May 12, 2010. It states that the number got frozen May 1, 2011 (obviously a typing mistake, should reference 2010). This meant that from that point on, she and Ms. Duffy were no longer responsible for the plaintiff’s deficit.
[123] Tab 23 are Minutes from the November 5, 2010 meeting, indicating that business had been moved from Mr. Davies to the plaintiff. This is consistent with her testimony and that of Mr. Davies as to timing.
[124] At about that timing of the 2012 budget, she pointed out to Mr. Davies that the plaintiff was further in debt. Mr. Davies indicated that his 2010 agreement to accept responsibility for that debt from his other two shareholders had not been put in place. He said that the debt had not been frozen and that all three of the shareholders were still sharing in the plaintiff's debt. This gave rise to a heated argument between the shareholders. There was talk of putting her out as a shareholder.
[125] She confirmed that the business had been close to sale to Johnson. She testified that on January 13, 2014, she and her two shareholders decided that that sale would not go ahead and that they would pursue a sale with McDougall with whom they had previously been in discussions. This was announced to the staff on January 13, 2014.
[126] She confirmed that the share purchase agreement with McDougall is found at Tab 24 of Exhibit 1. The purchase price paid was three times the gross commissions earned by DLK. The three shareholders signed a five-year non-competition clause with McDougall.
[127] She was informed that the plaintiff had resigned a day or two after the announcement of the sale to McDougall. She learned that he was leaving the industry.
[128] Up to this point in time, the plaintiff had not asserted any ownership interest in the business or any form of shareholding in the business of DL K.
[129] She confirmed that the plaintiff did take clients with him as they would receive broker of record change notices concerning their clients. She became aware that he was working for the competition.
[130] She testified that they lost commissions in the amount of $52,299.35 including the Mr. Binks business.
[131] They sued Russell, U’Ren and Finnegan, because they knew that they had raided DLK customers. At that point they were not concerned about the plaintiff. That litigation was settled by a payment to DLK.
CROSS EXAMINATION
[132] She paid a total of $415,000 for her ownership of shares in DLK. This was a combination of the original $115,000 plus a further $300,000 when the three senior partners retired. Payout to her of her 22% share from the McDougall sale was $876, 130.
[133] She confirmed that there was no demand made to the plaintiff for repayment of the deficit. “We kept forgiving”.
[134] In 2012, Mr. Davies resiled from his agreement with Ms. Duffy and her to accept responsibility for the plaintiff’s debt. He said it was not fair to him. It was not going to work.
[135] She confirmed that Tab 76 is from 2010.
[136] She confirmed that the deal made with the plaintiff in 2010 was that the books of business of Mr. Davies and the plaintiff would be combined. Mr. Davies would be paid 78% of the 30% commission on all renewals. The plaintiff would be paid 22% of the 30% commissions on all renewals, not just 30% on his own clients’ renewals.
[137] She testified that there was no change in his “compensation” after this new deal was put in place because he did not bring in new business from the referrals as was intended. It is important to note in view of the submissions of plaintiff's counsel, that the question that was put to Tammy Ferguson the bookkeeper was framed differently. She was asked, “was the way his commissions were calculated ever changed?. She responded that in October of 2010 she was told to combine the books of business of Mr. Davies and Mr. McGivern. She was to takeout the new business because the plaintiff was to receive 100% of those commissions. Mr. Davies was to receive 78% of the combined renewal commissions and the plaintiff was to receive 22% of the combined renewal commissions. These two answers are consistent in my opinion. The compensation about which Ms. Spero was questioned is the draw, the amount which the plaintiff received as pay, which remained at $60,000 per year until he resigned.
[138] She confirmed that over the 10 years that he was employed, DLK received 70% of the renewal commission brought in by the plaintiff, and also by Mr. Davies.
[139] She confirmed that she expected the plaintiff to bring in $250,000 in premium per year in new business and in every year thereafter, “or more”. She confirmed that after five years this would equate with $1,250,000 in premiums for new business. It was pointed out to her that for the entire company beginning since 1950 as of the year 2013 its book of business was $12 million, which included the book of business that Ms. Duffy brought in.
[140] The fact that DLK did not sue Mr. McGivern for taking clients does not mean that DLK recognized that Mr. McGivern owned those clients. This is because that lawsuit settled quickly, within 2 ½ months. They thought he was leaving the industry. They did not know initially that he was recruiting DLK clients. They knew that Russell and U’Ren were doing so. The present action was commenced March 28, 2014 and they defended it and counterclaimed in it. They did not respond to the Mr. McGivern affidavit of March 14, 2014, because that action settled. They responded to it in their statement of defence and counterclaim in this action.
TAMMY FERGUSON
[141] As indicated, she was the bookkeeper.
[142] Contrary to the evidence of the plaintiff, she confirmed that the plaintiff would receive a statement every month showing his commissions and his draw and the status of his net account.
[143] She confirmed that as of the date of his resignation, his account was overdrawn in the amount of $69,189.19, which would be owing to DLK according to his employment contract. That amount has not been paid. It has not been disputed by the plaintiff.
[144] She testified that there was a yearly bonus paid to the employees. His bonus was used to pay down his debt, except for the year 2007 when his deficit balance was wiped clean. For that year, he would have received the bonus.
PLAINTIFF’S POSITION
[145] The plaintiff claims damages for breach of contract, unjust enrichment and conversion. The plaintiff did not advance oral argument with respect to his claim for conversion.
[146] Plaintiff submits that the background to this case is that Brian Davies needed to get a producer to grow the firm. He wanted a self-starter who did not need supervision.
[147] He submits that the initial meeting between Mr. Davies, Mr. McGall and the plaintiff was general discussion about an interest in the business down the road. The plaintiff says the intent was that down the road he be given a partnership in the business. He was told that partners would be leaving and he would have an opportunity to get in.
[148] The plaintiff does not argue that the contract he seeks to enforce was made at this meeting.
[149] The plaintiff submits that the contract that he seeks to enforce was made in 2010 either with Brian Davies or with Brian Davies as a partner or shareholder in the Corporation.
[150] The plaintiff submits that he told Mr. Davies that he was going to join the Binks company. Mr. Binks confirms that in 2010 he received a call from the plaintiff to talk about a job. The meeting did not happen. Mr. Binks said the plaintiff called to say that some arrangement concerning partnership had been made with DLK.
[151] The plaintiff submits that there are two versions of the 2010 deal. The evidence is that the arrangement was made solely between the plaintiff and Mr. Davies. The plaintiff admits that he was confused about the dates when testifying at the examination for discovery. The plaintiff submits that he was given a 25% share in their combined book of business and that Mr. Davies shook his hand and said “welcome partner”. The plaintiff submits that there was no paperwork because they were good friends. The plaintiff submits that the document at Ex. 1, Tab 76 confirms this arrangement as it makes reference on three of the four pages to a 75/25 split between them. The plaintiff submits that Mr. Davies made this deal because the plaintiff threatened to go to Mr. Binks. Mr. Davies needed him as a producer to increase the business of DLK. Mr. Davies fought with his fellow shareholders to keep the plaintiff at DLK. Mr. Davies testified that he would have challenged Mr. Binks for recruiting the plaintiff.
[152] The plaintiff submits that the second version of this deal comes from the evidence of Mr. Davies. He said they decided to combine their books of business and he would transfer 10 to 12 clients to the plaintiff to give the plaintiff more leads.
[153] The plaintiff submits that the evidence of Mr. Davies and Ms. Spero is that arrangements for the plaintiff's compensation did not change. I point out here, as I have in reviewing the testimony of Ms. Spero, that the use of the word compensation by defense counsel in this context, as understood by the witnesses referred to the $60,000 draw. As Ms. Spero said, the draw did not increase because the plaintiff did not produce. For reasons that I explain below, I accept the testimony of Mr. Davies as supported by the bookkeeper and Tab 69 that the method of calculating the plaintiff's commissions did change in 2010.
[154] The plaintiff points out that in defending the counterclaim for lost business, the defendants cannot rely on the 2007 producers contract because this change in the calculation of the plaintiff's commissions was contrary to its terms and that contract was not amended.
[155] The plaintiff submits that the only reason the plaintiff would have given up not going to work with Mr. Binks is because of this offer of a 25% ownership stake.
[156] With respect to this submission by the plaintiff, it is to be noted that Mr. Binks testified that there was no job offer made by him to the plaintiff and furthermore it is to be noted that the change to sharing commissions on the joint combined books of business was intended by DLK to help the plaintiff produce more business and therefore earn more commissions. Mr. Binks’ testimony is contrary to that of the plaintiff, who testified that there was an open job offer from Mr. Binks to him.
[157] The plaintiff relies on the fact that DLK did not include him as part of the lawsuit for lost business and further that it did not respond to his affidavit in which he claimed the ownership interest as proving that it recognized that he had been given a 25% ownership interest in the joint book of business. The plaintiff submits that if Mr. Davies had not agreed to give the plaintiff a 25% ownership interest in the combined book there would be no reason for him during the settlement discussions with Mr. Tanner and Mr. Yee to ask for a release.
[158] With respect to damages, the plaintiff refers to Tab 28 showing $154,000 of gross commissions being credited to him, namely $84,000 of his earned commissions plus $70,000 of commissions handed over from Mr. Davies to him. The plaintiff submits that there are three ways to calculate his damages. The plaintiff submits that firstly from his $84,000 in commissions, one deducts the $52,000 of commissions that he took to Finnegans. Then applying the three times factor used in the purchase by McDougalls, the sum of $96,000 is owed to him. A second way to calculate his damages would be to use the total of $154,000 combined commissions and subtract the $52,000 of commissions which he took to Finnegans. Applying the three times factor, results in $306,000 owed to him. The final way he says that his damages can be calculated is to simply take the combined commissions of $154,000, apply the three times factor, which results in a total of $462,000 owed to him.
[159] With respect to the counterclaim for the deficit, the plaintiff submits that that claim, having never been demanded until the counterclaim was delivered, is statute barred.
[160] With respect to the counterclaim for damages for the lost book of business, the plaintiff submits that there is no evidence as to the quantum of the business that was lost due to the plaintiff's actions alone. He submits that the plaintiff has not proved what business the plaintiff alone transferred to Finnegans, bearing in mind that U’Ren, Russell and Tyo also left and went to Finnegans. There is no breakdown of what the plaintiff alone transferred.
[161] Furthermore, with respect to this counterclaim, the plaintiff submits that because of the manner in which the defendants conducted themselves after 2010 in calculating the commissions earned by the plaintiff, which is contrary to the producers contract, and even though that was intended to benefit the plaintiff and in 2010 benefited him to the extent of $4200, the defendants cannot rely on the non-competition clause in the contract.
DEFENDANTS’ POSITION
[162] The defendants submit that this is a case of credibility and that the plaintiff is to be found to be a witness who is not credible and not reliable. The defendants cite Faryna v. Chorny , [1951] BCJ No. 152 for the test to be applied by the court in assessing credibility.
[163] The defendants challenged the two bases upon which the plaintiff asserts that the defendants would give him an ownership interest while paying no money to buy in, and with no restriction on client solicitation and without such an important agreement having been committed to writing.
[164] Firstly, the defendants say that the plaintiff is not to be believed that he was lured to accept the employment because of the promise of ownership. The plaintiff asserted that he took a significant reduction in pay to accept work at DLK. His tax returns demonstrate, however, that he was paid $5000 more than when he was at Corus. Furthermore, he was unemployed at the time he began discussions with Mr. Davies about employment. The defendants say that the plaintiff has misrepresented his position to the court in these regards.
[165] The defendants say that the evidence of Mr. McGall does not support a contract for ownership stake in the future.
[166] The defendants say that the evidence of the plaintiff that there was no performance aspect to an opportunity to gain ownership in the future defies credibility and common sense. He had no knowledge about the insurance business or the products available or needed by clients. The undisputed evidence is that it was going to take him between three and five years to break even. The other three shareholders had each contributed money or money's worth to gain an ownership stake in the business. U’Ren’s evidence does not support the plaintiff's assertion that a contract for ownership in the future was established at the time he joined the firm.
[167] Secondly, with respect to the plaintiff's assertion that Mr. Davies offered him the 25% ownership stake to keep him from joining Mr. Binks, the defendants point out that the evidence of Mr. Binks contradicts that of the plaintiff as to date, that the plaintiff told him that he was no longer at DLK, and that the plaintiff told him he was negotiating to be a partner and further that there was no outstanding or open job offer from Mr. Binks to the plaintiff.
[168] The defendants point out that the evidence of the plaintiff ties the timing of this contract to the day that he was traveling to see Mr. Binks to the same day that Mr. Davies called him and talk to him about the heated exchange in the management meeting. Mr. Binks says that telephone call was in 2010. Both Ms. Spero and Mr. Davies say the heated argument was in 2012. The plaintiff gave conflicting testimony between his trial evidence and his discovery evidence. Counsel for the plaintiff submitted that the deal was made in 2010.
[169] The defendants point out that the plaintiff claims an ownership in the combined books of business, even though he transferred DLK clients to Finnegans. Such ownership was covered by a non-competition clause with respect to the other shareholders and also bears fiduciary duties owed by the plaintiff to DLK.
[170] The defendants also point out that the plaintiff says that he wanted ownership to protect himself against the sale. However, the producers contract contained a vesting clause, which would have paid him in the event of the sale of DLK. The defendants point out that the plaintiff was protected by that clause, but bound by the noncompetition conditions as well.
[171] The defendants submit that the consideration for the new producers contract signed August 1, 2007 was the forgiveness of the plaintiff's debt to the business at that point in time.
[172] The defendants submit that the evidence of Mr. Davies accords with common sense. His fellow shareholders were angry, his good friend, the plaintiff, was underperforming. He was fair in his testimony in saying that market conditions were hurting the plaintiff’s ability to produce. Mr. Davies wanted to placate his 2 shareholders and also to protect his friend. His intention was to give the plaintiff access to more clients to help increases production.
[173] The defendants submit that Mr. Davies could not give ownership in the book of business. That was a corporate asset, and required the consent of all shareholders for a transfer. Ms. Spero said that topic never came up and she certainly did not consent.
[174] The defendants point out that at no time until the affidavit of March 14, 2014 did the plaintiff asserts an ownership interest. He did that in the context of the DLK lawsuit against his new partners. He made no mention of the issue in his 2012 e-mails or in his e-mail of resignation. He participated in a meeting transfer his clients to Mr. Venema. The evidence of Shaw and Mr. Carriere respectively is that the plaintiff acknowledged he had no ownership interest in January of 2011 and in January of 2014.
[175] The defendants submit that the plaintiff has demonstrated that he is not a reliable historian. Contrary to his testimony, both Mr. Carriere and Mr. Davies say he was present at the meeting when the McDougall sale was announced. His affidavit concerning taking a significant reduction in salary was false. He acknowledged that he breached a court order by soliciting clients.
[176] The defendants submit that there is no proven contract for the 25% ownership in the combined books of business. The defendants submit that there can be no unjust enrichment claim on the facts of this case. There was no benefit to the defendants as the plaintiff continued to overdraw against his commissions despite the change intended to benefit the plaintiff.
[177] With respect to their counterclaim, the defendants submit that the Limitations Act does not bar their claim for the deficit.
[178] With respect to their damages for the solicitation of clients to Finnegans, the defendants point to Exhibit 5 in which the plaintiff admits that he took $52,000 in commissions from the defendants. In addition, another $4587.50 of commissions was transferred in three other clients. The total claim therefore is $56,399.68 of lost commissions. Applying the three times factor, results in a loss in this regard to the defendants of $169,199.04. The defendants also point to the producers contract, which provides for a two times gross commissions payment to them in the alternative.
CREDIBILITY AND RELIABILITY OF THE WITNESSES
1. Daniel McGivern
[179] The plaintiff was vague about important matters that he should have been more certain of.
[180] The plaintiff was internally inconsistent on important matters.
[181] The plaintiff was contradicted by other evidence which I accept.
[182] The plaintiff demonstrated dishonesty.
Vague
[183] Examples of the plaintiff being vague on important matters include the following.
[184] The defendant testified that before he accepted employment, it was made clear to him that there would be an opportunity in the future to become a partner. He also testified that he accepted the job because “it was obvious that a person would have to serve the business of the leading partners and that would be me”. Those are two different concepts, being a partner compared to serving the business of retiring partners.
[185] He asserts that Mr. Davies made promises to him, yet he testified that in 2007, “Brian and I talked. It will work out. I always knew that when the partners retired, there would be a reckoning”. He did not know the share division for Mr. Davies, Ms. Spero, and Ms. Duffy or what proportion he would receive.
[186] He was vague about the commission reports at Tabs 9, 10 and 11. He said, “I believe this was the monthly thing.” Tammy Ferguson testified that he received the statement of his commissions and draw every month. He testified that he “thought” the report at Tab 9 showed his debt. He did not know what the “CR” figures were. With respect to the figure at the bottom of Tab 9, $31,354.30, he testified, “I guess that's my debt”. He was similarly vague about the contents of Tabs 10 and 11. One would expect him to be more definite about his earned commissions and his accumulating debt.
[187] He was vague as to how the vesting clause in the producers contract, which he signed in 2004 and 2007, did not protect him in the event of a sale of DLK.
Internally Inconsistent
[188] Examples of the plaintiff's testimony being internally inconsistent are as follows.
[189] He claims that Mr. Davies gave him an ownership interest yet in his March 27, 2012 email, Tab 3, he writes, “I would not have accepted the straight commission job without the guarantee that there was business to be handed over to me to work from the existing book.” The latter is entirely different in nature from the former.
[190] His testimony about his conversation with Mr. Davies in 2004 was definite about the discussion concerning a partnership. Yet at his examination for discovery he testified that that was an “inference”. His explanation was that his use of the word inference was a bad choice.
[191] In his answer to undertakings and in his affidavit sworn March 14, 2014, he omitted to identify Casual Living as a DLK client that moved to Finnegans.
[192] At trial, he testified that he was given an ownership interest in the combined books of business by Mr. Davies on the same day or the day after that he had been driving to Ottawa to meet with Mr. Binks. At examination for discovery. He said that it was in 2010, that Mr. Davies gave him a 25% ownership stake in their combined books of business. At discovery he said that the conversation that occurred on the day when he was driving to Ottawa to meet with Mr. Binks was to the effect that Mr. Davies told him concerning the McDougall deal, “being an owner of this book of business… The sale to McDougalls would be a great opportunity”. His explanation of this discrepancy was that since the discovery he had spoken to some people and had come up with the date.
Externally Inconsistent
[193] Examples of the plaintiff's testimony being externally inconsistent are as follows.
[194] The plaintiffs sworn affidavit evidence that his draw represented a significant reduction from his previous salary is inconsistent with his 2003 tax return. That affidavit evidence is also misleading because at the time he accepted employment at DLK he was not employed.
[195] He was contradicted by the evidence of Mr. Binks, who said the time of their telephone call was 2010, and that the plaintiff told him he had left DLK. The plaintiff was still employed at DLK in 2010. Mr. Binks evidence is inconsistent with that of the plaintiff, who said that Mr. Binks had offered him jobs a couple of times and that there was an open job offer there for him.
[196] The plaintiff's testimony is inconsistent with the testimony of Mr. Shaw, who testified that in January of 2011 the plaintiff was looking for an ownership opportunity with his business. The plaintiff told him that he had no ownership at DLK at that time and that is what he wanted.
[197] The plaintiff's testimony is inconsistent with that of Mr. Carriere who said that in January of 2014, the plaintiff and he were together present at the announcement of the sale to McDougalls. Mr. Carrier testified that the plaintiff said “I'm out of here. This place is going nowhere. There is no chance of being a partner here. I have to be proactive not reactive”. The plaintiff testified that he could not deny what Mr. Carriere said.
[198] The plaintiff's testimony is inconsistent with that of Mr. Venema who testified that in a meeting with Mr. Davies after he had resigned, the plaintiff cooperated in identifying the contacts for his clients and how they wished to be contacted with a view to transferring those clients to be serviced by Mr. Venema.
[199] The plaintiff's testimony is inconsistent with that of Mr. Binks, who testified that their telephone call was in 2010, and the testimony of Ms. Spero and Mr. Davies, who said that the shareholder argument and blowup was in 2012. This is not consistent with the trial testimony of the plaintiff that it was on the same day that he was driving to Ottawa to meet with Mr. Binks, that Mr. Davies told him about the argument with his shareholders and welcomed him as a partner.
[200] The plaintiff's claim that he was given an ownership interest is inconsistent with his e-mail of March 27, 2012, and his resignation e-mail at January 16, 2014 in which there is no mention of an ownership interest or claim.
Dishonest
[201] The plaintiff’s sworn affidavit evidence of March 14, 2014 in which he claimed that his draw at “significant reduction from his previous salary” could be viewed as a falsehood made under oath on an important matter.
[202] The plaintiff acknowledged that he knowingly breached a restraining order made by the court.
[203] The plaintiff acknowledged that an advertisement for Waterway indicating that he sold life insurance was false. He blamed Mr. Yee for placing that ad.
[204] He told Mr. Davies that he was leaving the insurance industry at the time of his resignation in January of 2014, but Mr. Yee testified that he contacted the plaintiff in December of 2013 about joining his business. The plaintiff joined Mr. Yee's business as a partner and former DLK clients brought their business to the new business.
[205] For these reasons, I have serious concerns about accepting the plaintiff as a credible and reliable witness.
2. Brian Davies
[206] His testimony was direct and specific. He was responsive and not evasive. There was no evidence of prior inconsistent statements or testimony.
[207] His testimony was internally consistent. I acknowledge that he was vague in his explanation about the documents at Tab 76 but I find this to have little impact on his overall credibility and reliability of the witness.
[208] His testimony was externally consistent with Ms. Spero, Tammy Ferguson, Tab 69 and the shareholder minutes at Tabs 27 and 28. His testimony was also consistent with that of Mr. Venema concerning the meeting with the plaintiff to identify the plaintiff's client’s contacts.
[209] I accept the explanation given by Mr. Davies for not responding to the plaintiff's affidavit claiming an ownership interest. That was in the context of the lawsuit commenced by DLK, which was settled within a couple of months, during which time the plaintiff commenced the present action, which Mr. Davies and his shareholders defended and counterclaimed. The explanation given by Mr. Davies for not suing the plaintiff in the DLK lawsuit is reasonable and I accept it.
[210] I cannot resolve whether it was Mr. Tanner or Mr. Yee or Mr. Davies, who brought up Mr. McGivern during the settlement discussions. But it is reasonable to conclude that Mr. Davies had before him the Mr. McGivern affidavit during those discussions and would want to deal with that claim.
[211] I accept the testimony of Mr. Davies as credible and reliable.
3. Joanne Spero
[212] Her testimony was straightforward, direct and detailed. She was responsive. There were no pauses to search for an answer. She was not invasive. The testimony was matter of fact.
[213] There was no evidence of prior inconsistent statements or testimony.
[214] Her testimony was internally consistent and externally consistent.
[215] Her testimony was not seriously challenged or disputed in cross-examination.
[216] There is no reason not to accept her as a credible and reliable witness and I do so accept her evidence.
4. The other witnesses
[217] There is no reason not to accept the testimony of the other witnesses as credible and reliable and I do so.
[218] As I indicated, I cannot resolve whether it was Mr. Tanner or Mr. Yee, or Mr. Davies, who brought up the plaintiff during settlement discussions, but that is a minor matter that does not impact the credibility of those witnesses in my opinion.
Summary
[219] For these reasons, where the evidence of the plaintiff differs from the evidence of Mr. Davies and Ms. Spero and the other witnesses, I accept the evidence of Mr. Davies, Ms. Spero and the other witnesses.
ANALYSIS
No Contract in 2004
[220] On the evidence, I agree with the submission of the plaintiff's counsel and I find that there was no contract for ownership made before or at the time that the plaintiff first entered employment with DLK in 2004.
No Contract for an Ownership Interest of 25%
[221] For the reasons that I have indicated, I accept the testimony of Mr. Davies that he made no such contract with the plaintiff.
[222] In addition, it is to be noted that each of the three shareholders paid money or brought value to DLK in acquiring their respective ownership interests. The plaintiff’s earned commissions did not exceed his draw and therefore he was not in a position to purchase an ownership interest from his income. For the reasons that I have already given, I cannot find that there was an outstanding job opportunity for the plaintiff with Mr. Binks that Mr. Davies enticed him to forgo in consideration of an ownership interest.
[223] Given the plaintiff's testimony as to the timing of the alleged contract for ownership, the testimony of Mr. Shaw and Mr. Carriere and Mr. Venema contradict the plaintiff's claim that Mr. Davies gave him an ownership interest.
[224] The plaintiff’s e-mails of March 27, 2012 and January 16, 2014 contradict his claim in that there is no mention whatsoever of such an important matter.
[225] The testimony of Mr. Davies is reasonable and logical in that he wished to help his friend and as well to grow the business and he did so by combining the books of business and giving the plaintiff access to some of his clients in the hopes that it would generate referrals and therefore new business for the plaintiff. The evidence of Mr. Davies is supported by the testimony of Ms. Spero, Tammy Ferguson and the document at Tab 69.
[226] I have already even reasons for finding that the credibility and reliability of the plaintiff cannot be accepted over contrary evidence.
[227] The fact that there is no clear explanation as to why three of the four documents at Tab 76 show a 75/25 split does not prove the plaintiff's claim.
[228] I have already given reasons as to why I find that the plaintiff’s submission that the failure of DLK to respond to the plaintiff's affidavit of March 14, 2014 supports the plaintiff's claim does not do so. In fact, it could be said that the defendants’ defence and counterclaim in this action is the response.
[229] The fact that I cannot resolve the question as to who brought up the plaintiff's name during settlement discussions as between Mr. Davies, Ms. Spero, Mr. Tanner and Mr. Yee does not support the plaintiff's claim.
[230] For all of these reasons, I find that there was no contract for 25% ownership interest in DLK made with the plaintiff at any time.
No Unjust Enrichment
[231] I find that there was no benefit derived by the defendants to support such a claim. The plaintiff was paid a draw against his earned commissions. His production never met the expectations of the shareholders of DLK. He remained in a deficit position. The shareholders forgave that debt. Some of the defendants’ clients left DLK after the plaintiff resigned and did business with him working for a competitor.
[232] I find that there was no deprivation suffered by the plaintiff. On the evidence, he was fairly paid for the work he did. His employment was continued despite his deficit position and the defendants helped him by forgiving debt and giving him access to their clients. It was the plaintiff who chose to resign from his employment.
[233] I find that there is no evidence to support the plaintiff's claim for unjust enrichment.
Conversion
[234] The plaintiff did not advance this claim in oral argument, and I find that there is no basis in the evidence support such a claim.
Damages
[235] Had I found in favour of the plaintiff, which I do not, I would have assessed his damages as follows. Tab 28 shows combined commissions of $154,000. The evidence is that commissions of $56,399.68 of former DLK clients are being serviced by the plaintiff at his new employment. Subtracting these two numbers and applying the three times factor results in damages of $292,800.96.
Defendants’ Counterclaim
[236] With respect to the defendants’ counterclaim for the plaintiff's deficit, I find that the defendants were prepared to forgive that debt for 10 years of employment. There was no demand made even after the plaintiff's resignation until this lawsuit was commenced. The defendants took the risk in hiring the plaintiff and they made 70% on his renewal business. By all appearances, they were prepared to let the deficit continue even if the plaintiff had not resigned. Mr. Davies and the plaintiff were good friends throughout the relevant timeframe.
[237] For these reasons, the counterclaim for debt is dismissed.
[238] With respect to the counterclaim for lost business, I find that there is no clear evidence as to whether or to what extent the plaintiff solicited DLK clients. One reasonable and logical explanation for him now servicing former DL K clients is that they followed him for relationship reasons or loyalty. Another reasonable and logical explanation is that those clients did not want to deal with the new DLK McDougall business.
[239] For these reasons, the counterclaim for lost business is dismissed.
[240] In the event that I am wrong in dismissing the counterclaim, the damages would be $69,186.19 for the debt, and 3 times $56,399.68, namely $169,199.04, for the lost business claim.
COSTS
[241] Both the claim and the counterclaims were unsuccessful. It may well be therefore that this is a case where no costs should be awarded. However, if the parties wish to make submissions on costs, they may do so in writing limited to no more than three pages plus the costs outlined. The plaintiff shall deliver his submissions within 10 days and the defendants within seven days after receipt of the plaintiff's submissions.
Honourable Mr. Justice Gary W. Tranmer