Howard and Associates Inc. v Tomasek Agencies Inc., 2017 ONSC 4291

Court File and Parties

Ottawa Court File No.: 16-67754 Date: 2017/07/12 Ontario Superior Court of Justice

Between: Howard and Associates Inc. Plaintiff/Moving Party – and – Tomasek Agencies Inc. Defendant/Respondent on Motion

Counsel: Thomas W. Curran, for the Plaintiff/Moving Party Jamie MacDonald, for the Defendant/Respondent

Heard: April 28, 2017 at Ottawa

Reasons for Decision on Motion

JAMES J.

1This is a motion for partial summary judgment brought by the Plaintiff (the “moving party”). At the outset of the hearing of the motion, counsel for the moving party indicated that he was seeking the following relief:

a) a declaration that the defendant (“the respondent”) was not a “dependent contractor” of the moving party;

b) that the respondent deliver a further and better affidavit of documents showing all sales made by it since 2012 of all products, and financial records sufficient to determine its profits from each separate product line.

2Counsel for the moving party amended this latter request by stating that what he was actually seeking was a sworn affidavit of documents in the first instance, rather than a supplementary or “better” affidavit of documents.

[3]

Background

By way of background, the moving party is the Canadian distributor of the Wigwam brand of socks. The respondent was a regional sales agent in Alberta. The parties did not have a written agreement but had done business together for many years. The moving party says one of the terms of their agreement was mutual exclusivity which the moving party explained as a commitment by the moving party not to sell Wigwam socks to anyone else in the respondent’s territory and a commitment by the respondent not to sell socks that were competitive with the Wigwam line of products.

4The respondent does not agree that it was restricted to selling only the Wigwam brand of socks.

5In 2015 the moving party terminated the agreement to supply Wigwam socks to the respondent without notice on the grounds that the respondent continued to sell competitive products despite a prior warning to discontinue this practice.

6In response to the termination of the sales agent agreement, Timothy Mitchell, a lawyer with the Calgary office of Norton Rose Fulbright Canada LLP, wrote to the moving party on behalf of the respondent on February 18, 2016 indicating that:

Although Tomasek was not an employee, a Court will find it was a dependent contractor, as Tomasek’s relationship with Howard more closely resembled an employment relationship than an independent contractor relationship…The case law is clear that relationships falling into this intermediate category of dependent contractors may only be terminated upon reasonable notice.

7The moving party responded by commencing this action in Ontario under the simplified procedure in March, 2016 for relief that included a declaration that the respondent was not a dependent contractor.

8In April, 2016 Jamie Macdonald of the Ottawa office of Norton Rose Fulbright assumed carriage of the matter for the respondent and had a discussion with counsel for the moving party, Mr. Curran. Following their discussion, Mr. Curran wrote to Mr. Macdonald requesting that he confirm that the respondent was no longer asserting that the respondent was a dependent contractor, “failing which my client will proceed on its motion for partial summary judgment on that issue”. He also requested delivery of a statement of defence.

9A week later the respondent delivered its statement of defence and counterclaim. In its counterclaim, the respondent pleaded that the agreement between the parties could only be terminated on reasonable notice and that given the length of the relationship and the respondent’s “economic dependence” on the moving party, the respondent was entitled to a reasonable notice period of twenty months (see para. 20). Counsel for the respondent did not confirm in writing, as requested by counsel for the moving party, that the respondent was not a “dependent contractor”.

10The stance taken by the respondent in its statement of defence amounted to a transition from a position based on employment law considerations to a position grounded in the commercial law of contract, notwithstanding the reference to “economic dependency”. This may be due to variations in the law between Alberta and Ontario or it may be that the contractual argument was seen as the preferred approach. The respondent suggests that the moving party commenced its action in Ontario to “forestall the possibility of having to defend an action in Alberta on that issue”.

[11]

Analysis

At the hearing of the motion, counsel for the moving party made it clear he was looking for two things: a declaration that the respondent was not a “dependent contractor” and an order requiring the delivery of an affidavit of documents by the respondent. The request in paragraph two of the notice of motion, for a declaration that the moving party was entitled to damages for breach of contract and for an order directing a reference hearing before a referee to determine the damages, was not argued.

12In response, counsel for the respondent acknowledged that the respondent’s position was based on implied contractual rights and that there was no difficulty in delivering a sworn affidavit of documents, a draft affidavit having been already provided. The respondent’s factum says that its position is not based on any employment law concepts. The respondent’s position on the motion is that the moving party’s request for a declaration ought to be dismissed because there is no genuine issue on this point and it is simply irrelevant to the dispute. Essentially, according to the respondent, the moving party is asking the court to foreclose a legal argument that the respondent has not advanced through any judicial proceeding. While this may be true, I note that the respondent did not challenge the request for declaratory relief on this basis in its statement of defence.

13I am not aware of any prejudice that would be suffered by the respondent if the request for a declaration was granted, given the current position of the respondent that the parties were in a commercial relationship. I agree with the respondent that the granting of declaratory relief is discretionary and generally ought not to be permitted if the dispute is theoretical or involves future as opposed to present rights. It seems to me, however, that the issue is not completely theoretical because it was specifically raised by counsel for the respondent initially and arose in the context of the existing relationship between the parties. The respondent’s statement of defence refers to the respondent’s “economic dependence” on the moving party. In addition, the moving party has been very clear since the outset of the dispute that in the absence of a retraction, it intended to move for an order.

14Although the issues appear to have resolved into fairly simple propositions by the time the motion was argued, the documentary and evidentiary record compiled by the parties for use on the motion was quite extensive and largely irrelevant to the specific relief sought when the matter proceeded in court.

15The issue for the court to decide is whether it is clear that the respondent was not a dependent contractor. A related question, whether there is any utility in making a determination one way or the other, ought to be resolved in favour of the moving party for the reasons set out in paragraph 12 above. The respondent has said that it does not contend that it is a dependent contractor yet at the same time says it was economically dependent. Economic dependence is a fundamental aspect of the notion of dependent contractor, but economic dependence can arise in different circumstances and is not limited to relationships that are, at their core, dealings between an employer and his or her employee. On the evidentiary record before me on this motion, economic dependence as it is understood in the context of employment law is not a genuine issue requiring a trial.

[16]

Disposition

In the result, the requested declaration will issue. In addition, the respondent shall deliver a sworn affidavit of documents in compliance with the rules of court, if it has not already done so, within 30 days, if the litigation is going to go forward.

[17]

Costs

On the issue of costs, I have costs outlines from both parties. If either side wishes to provide more information respecting its position on costs, they may do so within 20 days, after which time a costs endorsement will issue.