Court File and Parties

COURT FILE NO.: CV-19-00616108-0000

DATE: 20190827

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JING ZHANG a.k.a. JEFF ZHANG, Applicant

AND:

SHENGLIN FINANCIAL GROUP INC., Respondent

BEFORE: Justice S. Nakatsuru

COUNSEL: Rebecca Huang and Zina Rita, for the Applicant

Douglas Smith and Cindy Zhang, for the Respondent

HEARD: July 5, 2019

ENDORSEMENT

[1] The Applicant, Jeff Zhang, is one of 18 independent financial advisors selling insurance products by London Life Insurance through the Respondent company, Shenglin Financial Group Inc. (“SFG”). Mr. Zhang receives payments from SFG: First year commissions, bonus for new sales, and service commissions (“SC”) for servicing existing customers during the policy terms. For years, Mr. Zhang received his SC on London Life Insurance policies from SFG. In June of 2017, SFG gave notice to their advisors that payment of SC would depend upon their performance on new sales. In January of 2018, SFG implemented this policy. Mr. Zhang and SFG disagree on whether SFG has the right to do so under the Financial Security Advisor Contract (“Contract”) signed by SFG and Mr. Zhang. Mr. Zhang applies to this court to obtain his earned SC that has been held back by SFG.

[2] For the following reasons, this application is dismissed.

[3] A number of preliminary objections were made to the evidentiary record. The Applicant objected to any reliance on the affidavit material of SFG given the refusals and the interference with cross-examination. The Respondent takes the view that the testimony of other financial advisors summoned to give evidence is irrelevant. I find that it is not necessary to resolve these issues. They are of no moment to the core issue on this application as I see it. That issue is contractual interpretation.

[4] There is only one relevant agreement in the evidence presented. This is the Contract between Mr. Zhang and SFG. None other is alleged. None other has been proven.

[5] Somewhat oddly, in this case, both parties take the position that the SC are not dealt with in the Contract. The Applicant argues that nothing in the Contract permits the Respondent from withholding SC on the basis of the imposition of minimum standards of performance. The Applicant argues that the Contract does not deal with it at all. He argues that he is entitled to such payments since the Contract does not permit SFG to withhold it based on its new policy of minimum standards.

[6] The Respondent also argues that the Contract does not deal with SC. However, as a result, it submits that Mr. Zhang has not established any legal obligation to pay the SC to him. Thus, it is contended that the SC are a discretionary payment not subject to legal enforcement. SFG submits that since Mr. Zhang has not proven any legal obligation to pay him the SC, his position really puts the cart before the horse. There can be no breach because there is no right.

[7] Alternatively, the Respondent submits that the Contract permits the imposition of performance standards on the payment of SC.

[8] Before I analyze these arguments, I will note that there is no evidence of any contractual relationship between London Life Insurance and Mr. Zhang. The reference in the policy document of London Life Insurance adduced by the Applicant that “Service/asset commission is paid to the commissionable representative” is ambiguous and of little probative value.

[9] I find that the only basis that Mr. Zhang could be entitled to SC is the Contract. I fully appreciate that the President of SFG, Mr. Xian, testified that, in his view, the Contract does not apply to SC. I also take full account of the position of the parties. However, I find that in the circumstances of this case, it is not necessary to resort to the extrinsic evidence regarding the intentions of the parties. I find that the Contract properly interpreted contemplates SC as a form of compensation or payment to Mr. Zhang.

[10] It is not disputed that SC are not specifically referenced in the Contract and in the Compensation Schedule as expressed compensation to be paid to Mr. Zhang. However, when the whole of the Contract is considered in the factual matrix that existed at the time of its negotiation, I find that SC were intended to be a part of the Contract.

[11] First of all, the whole of the Contract contemplates that Mr. Zhang’s duties would include servicing of customer contracts. These are set out in such clauses as 1(a), 1(d)3, and 1(d)4. While SC are not specifically referred to under the “Commission and other payments portion” of clause 4 of the Contract or the Compensation Schedule, it is clear that SFG had reserved to itself the right to vary or modify the types of payments to be provided to Mr. Zhang. In other words, the first year commissions and bonus explicitly referred to are not exhaustive under the Contract of the types of payments Mr. Zhang was to receive from SFG. In this regard, it is worthy of note that the Contract does in fact refer to “service commissions.” Specifically, clause 4(e) in particular dealing with what happens on termination, refers to “service commission” that was earned before termination. There would be no reason to include SC in the clause, if it was not anticipated it would form a part of the compensation payable. See also clause 9(d) which upon termination, payments are said to be not only restricted to Commission.

[12] Secondly, when the factual matrix is considered, it is clear to me that SC were to be a part of this. It is undisputed that SC were a significant part of the compensation being provided by SFG to Mr. Zhang and the other financial advisors. The Contract was a standard contract that SFG signed with its advisors given the point in time. It was also a part of industry wide standards that such advisors receive SC. Objectively, the parties must have intended to include SC as a part of the compensation package that Mr. Zhang was to receive.

[13] Given this, I find it clear and unambiguous that SFG is entitled to put the minimum performance standard it did when it came to payment of SC. Reading the whole of the Contract, two things are clear with respect to the objective intent of the parties: (1) that minimum performance standards were an important part of the Contract; (2) SFG had reserved the right to change the terms of compensation and payment from time to time with notice.

[14] With respect to point (1), there are clauses 1(d), 1(d)1, 1(f), and clause 7 of the Compensation Schedule.

[15] With respect to point (2), there are clauses 4(a) and a note on p. 9 stating “this agreement is subject to change at the discretion of SFG based on industry trends”.

[16] Directly applicable to the facts of this case, the Contract provides for performance standards to be tied to compensation. Clause 4(c) states:

c). Failure to meet minimum performance standards

Any established pay arrangement may be modified or withdrawn upon notice, for failure to meet minimum performance standards and activity levels, as may be set by Shenglin Financial Inc. from time to time.

[17] In my view, the plain and unambiguous wording of this provision allows SFG to place minimum performance standards on the receipt of SC. The wording could not be any clearer. Clause 4(c) does not restrict itself to the type of compensation and payment as it applies to “any established pay arrangement”. SC would fall within that definition. It plainly states something like the SC may be “modified or withdrawn” based upon failure to meet minimum performance standards and activity levels. This is not restricted at all with any reference to Compensation Schedule but is broader. And it denotes that SFG would set them “from time to time”. Clearly, this allows SFG to put minimum performance standards on the receipt of SC. This is clearly the intention of the parties. To hold otherwise, would be to rewrite the Contract.

[18] While notice had to be given, I find that sufficient notice was given to Mr. Zhang. There were a series of email notices and meetings from June of 2017 to January of 2018 when this change was brought in.

[19] In conclusion, based upon the Contract, SFG was entitled to put into place the performance standards that are in dispute, even when the financial advisors were not in agreement with it.

[20] As a result of this finding, it is not necessary for me to deal with SFG’s alternative argument of estoppel.

[21] Accordingly, the application is dismissed.

[22] I would encourage the issues of costs be resolved between the parties. If it cannot, I will entertain written submissions, each one limited to two pages excluding any attachments (any Bill of Costs, Costs Outline, and authorities). SFG shall file within ten days of the release of these reasons. Mr. Zhang shall file within seven days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru

Released: August 27, 2019