Court File and Parties
COURT FILE NO.: CV-15-540782 DATE: 20170412 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
SOLAR INCOME FUND INC. Plaintiff/Defendant by Counterclaim – and – JENNIFER JACKSON, EMERGING POWER INC. and 2427672 ONTARIO INC. Defendants/Plaintiffs by Counterclaim
COUNSEL: A. Irvin Schein, for the Plaintiff Tina H. Lie, for the Defendant/Plaintiff by Counterclaim, Jennifer Jackson Neil A. Paris, for the Defendants/Plaintiffs by Counterclaim, Emerging Power Inc. and 2427672 Ontario Inc.
HEARD: April 4, 2017
REVISED REASONS FOR DECISION
DIAMOND J.:
Overview
[1] Through a somewhat complex commercial transaction, the personal defendant Jennifer Jackson (“Jackson”) agreed to join the plaintiff Solar Income Fund Inc. (“SIF”) as its President and Chief Operating Officer (“COO”). As part of the overall transaction, the shares of CPE Inc. (“CPE”, a company owned, in part, by Jackson) were sold to SIF. Shares in SIF were in turn sold to the defendant 2427672 Ontario Inc. (“242”).
[2] Jackson became SIF’s President and COO in or around May 2014. Her services were provided through a Commercial Services Agreement (the “Agreement”) between SIF and the defendant Emerging Power Inc.
[3] Approximately nine months later, Jackson reported what she found to be irregularities in SIF’s accounting practices. After seeking and obtaining the advice of SIF’s corporate lawyers, on recommendation from counsel it was decided that SIF retain a forensic accountant and suspend three members of SIF’s accounting team, including Allan Grossman (“Grossman”, SIF’s Vice-President of Finance at the time).
[4] By the end of May 2015, Jackson was no longer SIF’s President and COO. There is a dispute between the parties as to whether Jackson was terminated or resigned from her positions.
[5] SIF argues that there was no legal or factual foundation for Jackson’s concerns or actions, and that she was motivated by a desire to (hopefully) discover financial irregularities so that she could unwind the commercial transaction between the corporate parties, and ultimately re-acquire her shares in CPE.
[6] In mid-November 2015, SIF commenced this proceeding seeking $1,000,000.00 in damages against Jackson, SIF and 242 for misrepresentation, breach of contract and intentional interference with economic relations. Jackson defended and issued her own counterclaim seeking a declaration that SIF indemnify her against all, costs, charges, and expenses in accordance with Section 6.02 of SIF’s By-Law No. 3.
[7] EPI and 242 defended and issued a counterclaim for (a) outstanding invoices, termination pay and expenses due to EPI, and (b) outstanding commissions due to 242.
[8] All the defendants brought motions for summary judgment seeking an order dismissing SIF’s action against them, and granting judgment on their respective counterclaims. Those motions were argued before me on April 4, 2017, and I took my decision under reserve.
[9] These are my Reasons.
Factual Background
[10] SIF is a privately held Ontario company carrying on business in the development and management of solar energy power generation projects and installations. SIF raises capital by sourcing exempt market dealers to locate investors for various projects.
[11] SIF manages and develops solar energy power generation projects for several entities, including two mutual fund trusts known as (a) SIF Solar Energy Income and Growth Fund (“MFT #1”) and SIF2 Solar Income and Growth (“MFT #2”). SIF earns income by providing its management services in exchange for fees pursuant to management agreements between SIF and its clients including the trustees of MFT #1 and MFT #2.
[12] As part of the commercial transaction, SIF purchased CPE shares for $800,000.00, and Jackson, along with her then fiancé (Charles Mazzacato) acquired a 30% interest in SIF for $1,400,000.00.
[13] Under the terms of the Agreement, Jackson was to devote her full time and attention to carrying out her duties and responsibilities as SIF’s president and COO, all the while performing her services faithfully and to the best of her abilities in a manner intended to advance SIF’s interests.
[14] It is Jackson’s evidence that when she joined SIF in May 2014, SIF had raised significant capital from investors for MFT #1, but was encountering difficulty finding suitable projects into which it could invest those funds. Jackson testified that her initial focus was on managing existing projects and sourcing additional, potential projects. Jackson further testified that, at that time, she did not have access to SIF’s accounting records, relying upon other management personnel to provide her with the accounting information and documentation she needed to carry out her duties and obligations.
Jackson’s Actions
[15] SIF’s accounting team was made up of five individuals including a controller. Grossman was involved in overseeing SIF’s accounting team.
[16] Commencing in or around March 2015, Jackson began to question SIF’s accounting processes and the information being provided by SIF’s accounting team. Jackson testified that her inquiries arose from genuine concerns, including her belief that the draft audited financial statements for MFT #1 appeared inaccurate.
[17] SIF contends that Jackson’s course of conduct was motivated by her desire to unwind the commercial transaction and re-acquire her shares in CPE. In other words, Jackson’s actions must have been carried out with a view to destabilizing SIF’s operations and impairing its cash flow so that SIF would ultimately cease carrying on business.
[18] As an example of Jackson’s concerns, she questioned the basis for SIF charging administration fees of $676,678.00 to MFT #1, as Jackson believed there was no documentary basis for the calculation of those charges. The amount of administration fees in the 2014 draft financial statements was significantly higher than the amount charged in 2013, and in Jackson’s opinion was inconsistent with SIF’s quarterly statements which she received throughout 2014.
[19] Jackson met with SIF’s controller on April 30, 2015. That meeting resulted in Jackson having additional questions rather than answers to her existing concerns.
[20] The day after meeting with SIF’s controller, Jackson and Mazzacato met with three members of SIF’s corporate counsel, Aird & Berlis. Jackson raised her concerns with SIF’s lawyers, who in turn recommended that (a) SIF retain an independent accounting firm to conduct a forensic investigation of SIF’s accounting practices, and (b) SIF suspend members of its accounting team (including Grossman) with pay pending the completion of the forensic investigation.
[21] SIF relies upon the following evidence from Jackson’s cross-examinations in support of its position that Jackson’s actions were motivated by desire to “bring SIF down” and re-acquire her shares in CPE through a potential unwinding of the commercial transaction:
“Q. Just so that we are absolutely clear about what this transaction was, have I described it correctly; that is to say that you and Mr. Mazzacato sold your shares in your company CPE to SIF, and you and Mr. Mazzacato through 2427672 Ontario Inc. purchased shares in SIF? Have I got that right?
A. I think it’s fair to say that I regretted becoming involved in SIF and Mr. Grossman altogether.
Q. Yes. But my question to you is different than that now. So.
A. Then I will say, yes it is fair. I regretted all of it, including the sale.
Q. Yes. But I tried to summarize what the transaction was to you, and I asked you whether or not I’d summarized it accurately?
A. You did summarize it accurately.
Q. Thank you. And in fact in May of 2015, you asked a couple of lawyers at Aird & Berlis – Aird & Berlis were the corporate solicitors for SIF?
A. Yes.
Q. To act for you in an attempt to recover your shares in CPE; am I correct?
A. No, that is incorrect. It was on the way out of a meeting. We had just had our meeting in regards to my concerns around all the accounting irregularities and practices that were going on, and as we left the room, tensions were quite high and I made an off-hand comment to the lawyers at Aird & Berlis and said that I believe that I also needed a lawyer, because our investors were not the only ones who had been defrauded by Mr. Grossman.
Q. And their response – and we are talking about Margaret Nelligan and Anne Miatello, M-I-A-T-E-L-L-O…
A. Yes.
Q. …was that they could not help you because they were conflicted, correct?
A. Yes, but they said they would get me the name of another lawyer. They didn’t do that afterwards, because I realized it was inappropriate, but at the moment they said, yes, we’ll get you a name.”
[22] SIF’s management team agreed to follow Aird & Berlis’ legal advice. On May 1, 2015, the accounting team was suspended, and Jackson took steps to retain Fuller Landau LLP to perform the forensic investigation into SIF’s accounting practices.
[23] SIF submits that once the forensic investigation was under way, Jackson began to ignore her day to day responsibilities and focus exclusively upon finding improprieties in SIF’s financial statements. SIF further submits that with its accounting team suspended, Jackson refused to hire any individuals on an interim basis to assist with management and financial operations, and as a result, SIF “began to receive non-payment breach notices from landlords and insurers”.
The Forensic Investigation
[24] Fuller Landau interviewed Grossman in May 2015. In a subsequent meeting with Jackson, Fuller Landau advised that it believed there were a number of “red flags and valid concerns”, but that more investigations were necessary. Unfortunately, SIF did not have sufficient funds to carry out the recommended exhaustive investigation, and as a result, SIF turned to its own accountants MNP LLP (“MNP”) to complete an audit (although not a forensic one).
[25] Fuller Landau never provided any written report as SIF did not have sufficient funds to pay for it. M&P conducted its audit and, ultimately, SIF’s financial statements were finalized with some changes from the initial draft version. The administrative fees charged to MFT #1 had been reduced by nearly $115,000.00, and MFT #1’s equity had been reduced by approximately 10%.
Jackson Position with SIF Ends
[26] Jackson testified that even though she and other members of SIF’s management team worked on addressing her concerns throughout May 2015, by the end of that month the atmosphere at the SIF office had become toxic. Grossman had returned to the office despite his suspension and blamed Jackson for the issues SIF was experiencing.
[27] In late May 2015, without prejudice discussions ensued between Jackson and other members of the SIF management team about Jackson possibly resigning from her position as President and COO. Jackson testified that no resignation occurred, and that she would not formally resign until an agreement had been reached between the parties.
[28] On May 29, 2015, Jackson learned that MNP and Aird & Berlis had been told that she had already resigned. Jackson corrected the record, advising MNP and Aird & Berlis that she had not resigned.
[29] On June 1, 2015, Jackson learned that she had been locked out of SIF’s computer systems. SIF made an internal announcement that Jackson had resigned from her position. Jackson testified that this was not so, and that she was forcibly removed from her positions as SIF’s President and COO.
[30] While there is no dispute that Jackson had discussions about her potential resignation, the parties disagree as to whether Jackson formally communicated her resignation. In any event, on August 17, 2015 (and over Jackson’s objections), SIF shareholders voted to remove her as a director.
Summary Judgment
[31] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the Court shall grant a summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence.” As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[32] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada held that on a motion for summary judgment the Court must first determine whether there is a genuine issue requiring a trial based only upon the record before the Court, without using the fact-finding powers set out in the 2010 amendments. The Court may only grant summary judgment if there is sufficient evidence to justly and fairly adjudicate the dispute, and if summary judgment would be an affordable, timely and proportionate procedure.
[33] The overarching principle is proportionality. Summary judgment ought to be granted unless the added expense and delay of a trial is necessary for a fair and just adjudication of the case.
[34] Nothing in Hryniak or the subsequent jurisprudence displaces the onus upon a party responding to a motion for summary judgment to “lead trump or risk losing”. The Court must assume that the parties have put their best foot forward and placed all relevant evidence in the record. If the Court determines that there is a genuine issue requiring a trial, the inquiry does not end there and the analysis proceeds to whether a Court can determine if the need for a trial may be avoided by use of the aforesaid fact-finding powers.
Issue #1 Does SIF’s action against Jackson raise any genuine issue requiring a trial?
[35] In support of her motion, Jackson relies upon section 134 of the Ontario Business Corporations Act R.S.O. 1990, c. B.16 (“OBCA”) which provides as follows:
“Every director and officer of a corporation in exercising his or her powers and discharging his or her duties to the corporation shall;
(a) act honestly and in good faith with a view to the best interests of the corporation; and
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.”
[36] As held by the Supreme Court of Canada in Blair v. Consolidated Enfield Corp., [1995] 4 S.C.R. 5, an officer and director is not required to prove his/her good faith, as he/she is assumed to act in good faith unless proven otherwise. An officer and director is presumed to act on an informed basis and with the honest belief that the actions he/she took were in the best interests of the Corporation.
[37] Essentially, the common-law duty of care owed by an officer or director has been codified in section 134 of the OBCA. Accordingly, in the absence of evidence to the contrary, Jackson is presumed to have acted honestly, in good faith and in the best interests of SIF.
[38] It is thus incumbent upon the Court to assess the evidence proffered by SIF in response to Jackson’s motion for summary judgment, especially in light of SIF’s legal obligation to “lead trump or risk losing”. In my view, SIF’s evidence falls short of satisfying their evidentiary burden in this regard.
[39] Only Grossman testified in response to Jackson’s motion. In paragraphs 20-21 of his responding affidavit, Grossman stated that he “believed that at the time Jackson determined that she wished to undue the share purchase transaction and re-acquire her shares in CPE”, and that she “embarked upon a course of conduct in order to destabilize SIF and impair its cash flow to the extent that it would experience difficulty meeting its obligation and ultimately cease carrying on business.”
[40] Absent of confirmatory or other documentary evidence, Grossman’s “belief” is really nothing more than conjecture, especially in the face of the provisions of section 134 of the OBCA. While SIF gave some isolated examples of what it claimed to be negligence on the part of Jackson, I do not find that Jackson fell below the applicable standard of care in relation to any of these alleged negligence acts. Jackson’s evidence is supported by back-up documentation, whereas SIF was content to allow Grossman to simply make a series of statements in his affidavit without supporting evidence.
[41] As an example, Grossman alleged that Jackson ignored payments of commissions to SIF’s dealer representatives, but led no evidence of any particulars, including what commissions were ignored, why they were allegedly ignored, and why this resulted from Jackson’s alleged negligence.
[42] It appears that SIF’s position is that the genuine issue for trial is Jackson’s alleged motivation to unwind the commercial transaction and repurchase her shares in CPE. In my view, the time to lead the relevant evidence (and not just conjecture, belief or opinion) in support of that position was now, i.e. in response to Jackson’s motion for summary judgment. A responding party may not ask the Court to utilize any enhanced powers in order to create a genuine issue for that party. Rather, a responding party must adduce sufficient evidence for the Court to include that there may well be a genuine issue required at trial.
[43] As stated above, Jackson followed the advice of SIF’s legal counsel. SIF argues that its lawyers were “infected” with Jackson’s skewed view of SIF’s financial operations. There is no affidavit from Aird & Berlis filed on this motion. Further, even after Jackson’s position with SIF came to an end, Jackson took no steps whatsoever to further her alleged interest in reacquiring her shares in CPE.
[44] The only other “substantive” evidence relied upon by SIF in support of its position that Jackson acted in bad faith is the excerpt from Jackson’s cross-examination as set out in paragraph 21 above. In my view, this evidence also falls short of satisfying SIF’s evidentiary burden. At its highest, Jackson’s evidence is that at the conclusion of the meeting, she made an off-hand comment to Aird & Berlis that she may need a lawyer because she may also have been misled if her concerns about the financial irregularities were ultimately confirmed. While Aird & Berlis was in a position of conflict of interest and offered to provide Jackson with the name of another lawyer, Jackson never took any further steps in this regard. If Jackson was concerned about the existence of financial irregularities as it pertained to her own interest, that does not translate into a finding that she was orchestrating an effort to financially topple SIF from within.
[45] With respect to SIF’s claim in breach of contract, SIF argues that Jackson failed to provide her services in accordance with the Agreement, and that her “witch hunt” is evidence itself of her inability to fulfill her contractual duties of obligations. SIF also points to the fact that Jackson suffers from Attention Deficit Hyper Activity Disorder (“ADHD”), and the record is “replete with evidence of erratic behaviour on her part, creating chaos at SIF and completely disabling SIF’s ability to conduct business.”
[46] There is no medical evidence whatsoever filed on this motion by any party. On the record before me, I find that Jackson never hid her ADHD from anyone at SIF, and SIF was nevertheless content to proceed with the commercial transaction. I do not find that Jackson’s ADHD warrants a genuine issue requiring a trial.
[47] With respect to SIF’s claim for intentional interference with economic relations, as held by the Court of Appeal for Ontario in Frank v. Legate, 2015 ONCA 631, the tort of intentional interference of economic relations is “restricted to three party situations in which the defendant commits an unlawful act against the third party and intentionally causes economic hardship to the plaintiff through that act.” There is no evidence whatsoever in the record before me that any third party was involved in any alleged misconduct on the part of Jackson. No unlawful act was raised by SIF. Tellingly, counsel for SIF did not pursue this line of argument during submissions.
[48] Finally, even assuming that there was a genuine issue requiring a trial with respect to Jackson’s acts and omissions as President and COO, on the record before me I do not find sufficient evidence to raise any genuine issue of damages requiring a trial. As held by the Court of Appeal for Ontario in Mahoney v. Sokoloff, 2015 ONCA 90, a party responding to a summary judgment motion has an obligation to put its best foot forward in respect of all their claims and to lead some evidence of the foundation of any alleged losses. It is difficult to understand how SIF suffered any losses as a result of Jackson’s alleged acts and omissions. At its highest, Grossman’s evidence as to damages was as follows:
- Jackson’s removal of members of SIF’s financial team for a “period of time” caused SIF to incur “significant expenses in connection with the investigation.”
- During the investigation, SIF was unable to function properly in the absence of senior accounting staff, and its ability to conduct business was almost completely disabled.
- As a result of Jackson’s breach of contract and tortious misconduct, SIF suffered “losses and damages” for which Jackson is liable both as a matter of common law and pursuant to the indemnity provisions in the Share Purchase Agreement.
[49] No supporting documentation was tendered. No further particulars have been provided. As previously stated, the draft MFP #1 financial statements were revised and ultimately included different figures in their final version. It is just as possible to conclude on the record before me that the cost of the forensic investigation and MNP’s audit (such costs being unknown) had value as it led to the draft MFP #1 financial statements being revised and thus being more accurate.
[50] For these reasons, I do not find the presence of any genuine issues requiring a trial with respect to SIF’s claim against Jackson. As such, I grant Jackson’s motion for summary judgment and dismiss SIF’s claim against her.
Issue #2 Does Jackson’s counterclaim for indemnification raise any genuine issue requiring a trial?
[51] Pursuant to section 6.02 of SIF’s By-Law No. 3, SIF shall indemnity its directors and officers against all costs, charges and expenses reasonably incurred by the officer or director in respect of any civil, criminal or other proceeding if the officer or director “acted honestly and in good faith with a view to the best interest of the Corporation.”
[52] I have already rejected SIF’s position that Jackson acted in bad faith. The scope of the indemnity provided by SIF is expansive, and no doubt covers the claims advanced in this action. During argument however, SIF submitted that the terms of the indemnification clause “can only apply to claims by non-parties”, and not for claims made by SIF itself.
[53] No real authority was cited by SIF in support of its position. Jackson relies upon the decision of Justice Gunsolus in Chapman v. GPM Investment Management, 2015 ONSC 6591, and specifically the following paragraph:
“I find that the case law regarding indemnification of directors does not exclude actions brought by the Corporation against its directors or officers. In this matter, the defendants have failed to show that Mr. Chapman was not acting in good faith with a view to the best interest of the Corporation and is therefore liable to indemnify him for his cost in defending the counterclaim…
Since the defendants have failed to show that Mr. Chapman was not acting in good faith with a view to the best interest of the Corporation, the indemnifying defendant IAM is labile to indemnify the defendant pursuant to the terms of the Agreement entered into by IAM.”
[54] I agree with the above analysis. There is nothing in section 6.02 which would exclude an obligation to indemnify for costs or expenses incurred as a result of a legal proceeding commenced by SIF. The clause could easily have been drafted in such a way, but instead was drafted to include costs or expenses incurred through legal proceedings commenced by any party.
[55] I am not prepared to interpret clause 6.02 in the manner suggested by SIF, and I thus do not find the presence of a genuine issue requiring a trial with respect to Jackson’s counterclaim. Jackson is therefore entitled to be indemnified against all costs and expenses reasonably incurred in respect of defending this proceeding, including the bringing of her motion for summary judgment.
Issue #3 Does SIF’s claim against EPI and 242 raise any genuine issue requiring a trial?
[56] A review of SIF’s Statement of Claim as against EPI and 242 discloses that SIF’s causes of action in misrepresentation and breach of contract are based upon allegations that (a) EPI and 242 misrepresented to SIF that Jackson would devote her full time and attention to the performance of her duties and obligations under the Agreement and (b) EPI and 242 misrepresented that Jackson was mentally sound when she was not.
[57] In my disposition of Jackson’s motion for summary judgment, I have already made the necessary findings to dispose of SIF’s claims against EPI and 242. On the record before me, Jackson did not breach the terms of the Agreement. There is no medical evidence that Jackson was mentally unsound or unfit.
[58] Based upon these findings, there is no evidentiary foundation to support SIF’s claims in misrepresentation or breach of contract against EPI or 242. I do not find the presence of a genuine issue requiring a trial with respect to SIF’s action against EPI and 242. As such, I grant EPI and 242’s motion for summary judgment and dismiss EPI’s claim against them.
Issue #4 Do EPI and 242’s counterclaims raise any genuine issue requiring a trial?
[59] In their counterclaims, EPI and 242 seek the following damages:
(a) $141,250.00 due to EPI for three month’s outstanding invoices ($50,000.00 per month plus HST) issued by EPI to SIF under the Agreement; (b) $226,000.00 due to EPI for a termination payment of four months’ notice plus HST under the Agreement; (c) $17,349.28 due to EPI for reimbursement of its reasonable expenses under the Agreement: and (d) $464,072.50 for outstanding commissions due to 242 (calculated at 1.25% of the purchase price on various projects) under the Agreement.
Outstanding Invoices
[60] On the face of the Agreement, the outstanding monthly fees are due and owing by SIF to EPI. SIF claims that Jackson (on behalf of EPI) waived entitlement to these monthly fees. This position was set out in Grossman’s affidavit, although on cross-examination the following exchange took place:
“Q. But you agreed that the agreement provides for monthly payments of $50,000.00?
A. Correct.
Q. And you acknowledge that some quantum of fees were not paid?
A. Yes.
Q. But you said Ms. Jackson waived those fees?
A. I don’t see where I say that, quite frankly”.
[61] If Grossman was certain that Jackson waived EPI’s entitlement to the monthly fees (something which Jackson/EPI must have done expressly or impliedly), on cross-examination he could not even remember that he had advanced such a position in this proceeding.
[62] There is no written waiver on the part of Jackson/EPI. SIF relies upon Jackson’s evidence that while she was President and COO, she delayed payment of EPI’s monthly fees due to SIF experiencing cash flow difficulties. As Jackson was “wearing two hats” (EPI as creditor and SIF as debtor), SIF argues that there was a waiver of EPI’s entitlement to those monthly fees during the time when Jackson caused SIF to cease paying them.
[63] I do not agree. A decision to delay payment of fees due to EPI under the Agreement does not amount to a waiver of the right to collect those fees. Once again, the evidence tendered by SIF falls short of its evidentiary burden. I do not find the presence of a genuine issue requiring a trial with respect to EIP’s counterclaim for unpaid invoices.
Termination Pay
[64] SIF’s defence to EPI’s counterclaim for termination pay hinges upon a finding that Jackson resigned from her position as SIF’s President and COO. As held in Betts v. IBM Canada Ltd., 2015 ONSC 529, appeal dismissed 2016 ONSC 2496, an actual resignation must be clear and unequivocal. The Court must determine whether the statements or actions of the individual, viewed objectively by a reasonable person, clearly and unequivocally indicated intention to no longer be bound by the contractual relationship.
[65] Not only is there insufficient evidence to support a finding that Jackson resigned, on cross-examination Grossman took the opposite view stating “I think asking her to leave the company was certainly termination of the Services Agreement for her.”
[66] I therefore do not find the presence of a genuine issue requiring a trial with respect to EPI’s counterclaim for termination pay.
Unpaid Expenses
[67] Jackson provided a summary of her outstanding expenses by way of an itemized spreadsheet along with all original receipts that she could locate. She gave sworn testimony that those expenses were submitted to SIF in the normal course of business. Previous expenses submitted by Jackson were paid in the normal course, however the outstanding expenses were not, presumably due to the friction between the parties commencing in the spring of 2015.
[68] Grossman has no personal knowledge whatsoever of the issue of Jackson’s outstanding expenses. On cross-examination, when asked about the summary prepared by Jackson, Grossman stated “I could only say that I’ve been told that it did … I have not seen the claim nor have I seen copies of the expenses.”
[69] Grossman did not identify the source of his purported belief that the expenses were somehow not due and owing.
[70] I do not find the presence of a genuine issue requiring a trial with respect to EPI’s counterclaim for outstanding expenses.
Outstanding Commissions
[71] 242 claims outstanding commissions owing on six various projects. SIF opposes EPI’s right to recover those outstanding commissions on two grounds:
(a) the additional projects were not formally added to Schedule B to the Agreement, and (b) the commissions are not owing as the project transactions did not close until well after the end of Jackson’s position with SIF.
[72] Dealing with the first argument, SIF’s position is overly technical and relies upon a “form over substance” approach. SIF previously paid 242 commission on a project which was never formally added to Schedule B of the Agreement. It is now seeking to stand on procedural ceremony when, by its previous conduct, it chose not to adhere to the terms of the Agreement. Parties who, by their conduct, vary the terms of a contract cannot subsequently rely upon the contract’s strict provisions to escape liability.
[73] With respect to SIF’s second argument, clause 6(g) of the Agreement provides as follows:
“For any project introduced to the Company pursuant to Section 4(a)(ii) for a period of 12 months after the effective date of termination and upon completion of a definitive purchase agreement, 242 shall be deemed to have earned the commission outlined therein and such commission will be due and payable upon completion of the transaction comprising the definitive agreement between the Project Seller and Buyer.”
[74] In my view, clause 6(g) entitles 242 to a commission upon the securing of a “definitive purchase agreement” (i.e. an unconditional, firm deal). Payment of the outstanding commission is only due and owing once the transaction closes. In other words, 242 is deemed to have earned the commission once the deals go firm but payment is not due unless and until the deals actually close.
[75] There is a 12 month holdover period (much like a standard real estate listing agreement) to ensure that 242 earns its commission on deals which go firm resulting from 242 bringing parties to the table with SIF.
[76] On the record before me, all of the projects in question were not only firm deals, but closed. The commissions are thus due and owing under the Agreement.
[77] I do not find the presence of a genuine issue requiring a trial with respect to 242’s counterclaim for outstanding commissions.
Conclusion
[78] I therefore grant summary judgment:
a) dismissing SIF’s claims against all the defendants, and b) granting the defendants’ counterclaims against SIF.
Costs
[79] At the conclusion of the hearing, all parties submitted their respective Costs Outlines and Bills of Costs. There is no reason that costs should not follow the event, and I am prepared to award the defendants’ their costs of the entire action, inclusive of these motions for summary judgment.
[80] I agree with the defendants that the higher scale of substantial indemnity costs is warranted. SIF based its theories of liability against the defendants upon the allegations that Jackson acted in bad faith, not in the best interests of SIF, and with a view to financially crippling or destroying SIF for her advantage. These are clearly allegations of intentional misconduct which were not proven. Having regard to the inflammatory nature of the allegations made by SIF against the defendants, I conclude that an award of costs on a substantial indemnity basis is appropriate.
[81] With respect to quantum, I have reviewed the defendants’ respective Bills of Costs in detail. Jackson took the proverbial lead on these motions, and as such the amount of costs she is seeking is slightly higher than those sought by EPI and 242.
[82] The defendants were entirely successful on these motions for summary judgment. The proceedings were of moderate factual and legal complexity, although the motions raised important issues for the defendants.
[83] As per the comments of the Court of Appeal for Ontario in Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), I am mandated to consider what is “fair and reasonable” in fixing costs of these motions with a view to balancing compensation of the successful party with the goal of fostering access to justice. In my view, and in all of the circumstances of this case, I order the plaintiff to pay (a) Jackson her costs of this action on a substantial indemnity basis in the all-inclusive amount of $50,000.00, and (b) EPI and 242 their costs of this action on a substantial indemnity basis in the all-inclusive amount of $40,000.00.