COURT FILE NO.: CV-18-00067631
DATE: 2019/12/20
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Frank Tombol
Christopher Perri for the Plaintiff
Plaintiff
- and -
Lawrie Insurance Group Inc.
Ed Canning and Nick Papageorge for the Defendant
Defendant
HEARD at Hamilton, Ontario: December 17, 2019
The Honourable Justice D.L. Edwards
REASONS FOR DECISION ON SUMMARY JUDGMENT MOTION
[1] The plaintiff brings this summary judgment motion.
[2] For the following reasons, I dismiss the plaintiff’s summary judgment motion and dismiss the plaintiff’s claim.
Background
[3] This is an interpretation of an employment contract. There is no material disagreement about the facts. The parties agree that this is the proper subject of a summary judgment motion.
[4] The plaintiff worked as a “Producer” for the defendant insurance brokerage from September 15, 2008 until his retirement on January 1, 2018. He earned commissions on business written for new customers whom he brought to the defendant, as well as policies sold or renewed to existing customers of the defendant. The later customers were called “assigned clients” and the former “developed clients”.
[5] The dispute between the parties is whether both types of clients should be included in the calculation of deferred compensation.
[6] The plaintiff entered into a written employment contract dated September 15, 2008. The agreement was drafted by the defendant and the plaintiff obtained legal advice prior to executing the agreement.
[7] Monthly sales reports were produced that divided the results between, New Business, Renewals and Assigned. Renewals included renewals of policies for both developed and assigned clients who had earlier purchased polices from the plaintiff and who were now renewing that policy. Assigned included renewals by assigned clients of policies that were in place when the client was assigned to the plaintiff. The plaintiff received a different commission based upon the nature of the business, and the designation of the client as between assigned or developed. New policies to either developed or assigned clients earned the plaintiff a commission of 60%. Renewals of those new policies earned the plaintiff a commission of 30%. Where assigned clients renewed policies in existence when the client was assigned to the plaintiff, a commission was earned by him of 20%.
[8] No reports were produced to the plaintiff while he was employed showing a breakdown between assigned clients versus developed clients.
[9] In exchange for an entitlement to deferred compensation, the plaintiff was prohibited for a period of 4 years from soliciting or doing business with any of the clients who formed part of his Deferred Compensation Pool, as well as those for whom the plaintiff had solicited or serviced during the last 24 months of his employment.
[10] The relevant portions of the employment contract regarding compensation state as follows:
- Compensation
The Company shall compensate the Producer in accordance with the terms contained in Schedule A… it is understood and agreed that any renewals which are not written by the Producer for any reason shall not earn commission for the Producer and shall not form part of the Deferred Compensation Pool of the producer.
- Deferred Compensation Pool
The Producer shall sell property and casualty insurance products and insurance policies to new customers of the Company… The new customers shall be allocated to the Producer’s Deferred Compensation Pool and the Company shall maintain an ongoing record of the customers comprising the Producer’s Deferred Compensation Pool. At any particular time, the Deferred Compensation Pool shall consist of only those customers who are customers as of that date.
Schedule B
Optional Termination of Employment Compensation
If the employer exercises this option, it is understood and agreed that the compensation amount calculated is treated as income from employment.
Calculation of Compensation Amount
The Producer will be entitled to compensation based on the Producer’s Deferred Compensation Pool and shall consist of the most recent annual gross commission, billed or received by the Company, less commissions on premiums overdue by more than thirty (30) days, multiplied by one and one quarter (1.25). For clarity, personal lines of insurance, non-recurring bonds, one time event, non-standard business and small commercial insurance as defined in paragraph 9 will not be part of the producers deferred
The Law
[11] There is no issue as to what the test for granting summary judgment is. Hyrniak, the Rules of Civil Procedure and cases after Hyrniak make it very clear.
[12] I must grant summary judgment if I am satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. There is no genuine issue requiring a trial when I am able to reach a fair and just determination of the merits of the motion for summary judgment.
[13] This will be true when the process allows me to make the necessary findings of fact, to apply the law to those facts, and the process is a proportionate more expeditious and less expensive means to achieve a just result.
[14] As noted in Hyrniak, I should first determine if there is a genuine issue requiring a trial based only on the evidence before me, solely on the written record filed and without using the fact-finding powers permitted in Rule 20.04(2.1).
[15] If there appears to be a genuine issue requiring a trial, I should then determine if the need for trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). I may at my discretion use those powers provided that their use is not against the interests of justice.
[16] In determining whether there is a genuine issue requiring a trial, Rule 20.04(2.1) grants me the power to weigh evidence, evaluate the credibility of deponents and draw any reasonable inference from the evidence.
[17] I also have the power to order that oral evidence be presented by one or more parties. (Rule 20.40(2.2))
[18] I would also refer to Rule 1.04 which requires that the rules be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
Parties’ Positions
[19] The plaintiff asserts that this is an employment contract that should be interpreted according to the special principles applicable to such agreements. Absent clear language, the agreement should be interpreted in favour of the employee to provide him with the greatest benefit, and any limitation should be interpreted narrowly. In his view, a reasonable interpretation of the agreement would conclude that both developed and assigned clients should be included in the Deferred Compensation Pool.
[20] The defendant agrees that it is an employment contract but asserts that there is no ambiguity in the agreement, and that only developed clients should be included in the Deferred Compensation Pool.
The Law
[21] The appropriate approach to contractual interpretation requires that the agreement must be read as a whole and in the context of the circumstances as they existed when the agreement was created. Dumbrell v. The Regional Group of Companies Inc. et al., 2007 ONCA 53, 2007 ONCA, at para 53, BOA
[22] It is not the subjective understanding of the parties, but rather the meaning of the contract viewed objectively in the context of the situation and what a reasonable person in the circumstances at the time of the execution of the agreement would have understood the words set out in the written agreement. Dumbrell, supra at paras 26 and 27
[23] Courts have recognized that there is an unequal bargaining power in employment contract situations and that employees are a vulnerable group in need of protection of the law. Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC) at paras 90 top 93
[24] Because of this the courts have said:
It is a basic principle of contractual interpretation that a provision that is ambiguous or capable of more than one reasonable interpretation shall be interpreted against its drafter. Given the context of unequal bargaining power between employees and employers, the policy reasons under scoring this principle are magnified. For this reason, courts have interpreted reservation of rights clauses restrictively against employers, finding that they must be explicit about affecting the benefits of retired employees (cannot simply refer to the benefits of current employees) and that they must also be explicit in conveying a right to introduce changes after the point of retirement. O’Neill v. General Motors of Canada, 2013 ONSC, 4654, at para. 71
Analysis
[25] First, I agree that this is an appropriate case for a summary judgment.
[26] Second, there is no real dispute that this is an employment contract.
[27] Third, I find that when the agreement is viewed as a whole, there is no ambiguity. Clearly, only developed clients form part of the Deferred Compensation Pool (“Pool”).
[28] There is only one definition of the Pool. That definition is contained in article 9 under the heading of Deferred Compensation Pool. That contains the only language of inclusion found in the entire agreement. It states that “new customers shall be allocated to the Producer’s Deferred Compensation Pool”. Nowhere else in the agreement is there language of inclusion for the Pool. Nowhere else is there any language suggesting that assigned clients form part of the Pool.
[29] In article 1 there is an overriding provision that clearly excludes from the Pool any renewals for which a commission is not paid. As I have already noted, renewals can be for both assigned and developed clients. However, one cannot take this exclusory language and then infer that it somehow also acts to include assigned clients into the Pool.
[30] The plaintiff asserts that article 9 is ambiguous because following the statement that new customers are allocated to the Pool, it states that: “and the Company shall maintain an ongoing record of the customers comprising the Producer’s Deferred Compensation Pool.” He notes that this phrase follows the phrase: “(t)he new customers shall be allocated to the Producer’s Deferred Compensation Pool” and is connected to that phrase by the word “and”.
[31] I agree that these two phrases should be read together. Clearly the agreement is defining which customers should be allocated to the Pool, namely new customers, and directs the Company to maintain an ongoing record of those customers. The fact that the agreement does not state “keep a record of those new customers” is unnecessary as the two phrases are connected grammatically.
[32] Schedule B describes how the deferred compensation will be paid. There is a clarification of certain types of business, the premiums of which will not be counted, but there are no further statements about the type of customers who will comprise the Pool.
[33] The plaintiff notes that article 11 (c) of the agreement is a non-interference with business clause which prohibits the employee from soliciting “any customers which formed part of the Producer’s Deferred Compensation Pool or whom the Producer solicited or serviced during the last 24 months of his/her employment”. He submitted that it would not make commercial sense for the employee being prohibited from soliciting assigned customers for whom he was not compensated via the Pool.
[34] However, that provision, in my view, is further evidence that assigned clients do not form part of the Pool; otherwise why add the provision regarding customers who the employee serviced in the last 24 months of employment. If both assigned and developed clients were included in the Pool, what is the purpose of this inclusion? If all clients, both assigned and developed from part of the Pool, then that provision would not be necessary.
[35] Further, Article 8 of the agreement provides that the Company has ownership of all clients, information etc. A restriction on soliciting assigned clients is consistent with the Company’s ownership.
[36] In light of my conclusion that there is no ambiguity, I need not deal with the issue as to whether a grant to an employee of additional rights should be interpreted differently than where an employee’s rights are restricted, by the contract, and indeed, whether this deferred compensation was granting the employee additional rights.
Summary
[37] For the foregoing reasons, I find that only developed clients form part of the Pool.
[38] I dismiss the plaintiff’s summary judgment motion and dismiss the plaintiff’s claim.
[39] If the parties cannot agree upon costs, the defendant shall serve and file his cost submissions within seven days; the plaintiff shall serve and file its cost submissions within five days thereafter and a reply, if any, within three days. Cost submissions shall be limited to three pages.
D.L. EDWARDS, J.
Released: December 20, 2019
COURT FILE NO.: CV-18-00067631
DATE: 2019/12/20
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Frank Tombol
Plaintiff
- and –
Lawrie Insurance Group Inc.
Defendant
REASONS FOR DECISION ON
SUMMARY JUDGMENT MOTION
D.L. Edwards J.
Released: December 20, 2019