Court File and Parties

COURT FILE NO.: CV-19-00623297 DATE: 20200511 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

GEORGE CARRAS Applicant – and – ALTUS GROUP LIMITED Respondent

Counsel: Hilary Book and Alycia Young for the Applicant Dena N. Varah and Chris Trivisonno for the Respondent

HEARD: February 26, 2020

F.L. Myers J.:

REASONS FOR JUDGMENT

I – OVERVIEW

[1] In 2014, George Carras sold his business, RealNet Canada Inc., to Altus Group Limited. As part of the transaction, Mr. Carras agreed to stay on as President of the business under Altus. The parties also agreed that Mr. Carras would become eligible to receive stock options in Altus as long as he stayed for three years or if Altus terminated his position without cause prior to the end of three years.

[2] Mr. Carras claims that Altus terminated his employment after one year and offered him no new role. This, he submits, amounted to constructive dismissal without cause and entitled him to receive the stock options. Altus takes the position that Mr. Carras worked for Altus for two years, transitioning from an employment position into a consulting position by mutual agreement after the first year. Altus says that Mr. Carras voluntarily left at the end of the second year. Therefore, Altus denies that Mr. Carras ever became entitled to receive stock options.

[3] For the reasons set out below, I find that Mr. Carras was not constructively dismissed from his employment. After one year, by mutual agreement, Mr. Carras became an independent contractor or consultant. This change in status had been contemplated throughout and was not a dismissal by Altus. At the end of the second year, Mr. Carras decided to move on to greener pastures. He left by mutual agreement. Mr. Carras therefore never became entitled to receive the options.

II – THE FACTS

A. The Development and Sale of RealNet

[4] Mr. Carras founded RealNet in in 1995. Over the next two decades, RealNet developed real estate information services for both the commercial and new homes markets. By 2014, RealNet had approximately 40 employees and annual recurring revenues of over $7 million.

[5] In early 2014, RealNet began exploring avenues to sell the company. Altus was a prospective buyer. Altus is a provider of real estate consulting and advisory services, software, and data solutions. Mr. Carras negotiated a deal in principle with Altus’ CEO, Bob Courteau. The transaction closed on July 23, 2014.

B. The Employment Agreement

[6] Initially, Mr. Carras did not intend to continue working for RealNet under Altus. However, Mr. Courteau wanted Mr. Carras to stay with the company for three years to demonstrate stability to the marketplace. Mr. Courteau and Barry Eisen, Altus’ Executive Vice President, Mergers and Acquisitions, negotiated a written employment agreement with Mr. Carras.

[7] Mr. Carras testified that Mr. Courteau told him that the way these deals work at Altus, Mr. Carras would be moved to a consulting arrangement after one year. In other words, the parties contemplated a shift to consulting after the first year of employment. Article 1.4 of the employment agreement reflects this discussion:

During the first year of the Term of employment, your primary responsibilities will be to continue to manage the RealNet Canada Inc. business in accordance with the business plan for RealNet Canada Inc. as may be amended by future determination. In the remaining two (2) years of the Term, the Company is amenable to having discussions with you about redefining your ongoing role and accountabilities with the Company and, if mutual agreement is reached, amending the terms of this Agreement.

[8] The “Term” is defined in Article 1.2 as a period of three years commencing on the closing date of the sales transaction. The “Company” is defined in the preamble as Altus Group Limited. Mr. Johnston testified that part of the purpose of Article 1.4 was to provide Mr. Carras with flexibility to move onto other opportunities and pursue other business ventures for his own account. Read objectively, Article 1.4 demonstrates a meeting of the minds between the parties that Mr. Carras’ role with Altus could change by mutual agreement after his first year of employment.

[9] Altus did not want to pay Mr. Carras his previous salary of over $600,000 per year. Mr. Carras agreed to a lower base salary of $300,000 per year plus a grant of 50,000 stock options in Altus. The stock options would give Mr. Carras the entitlement to purchase shares of Altus at a pre-established price at a future date.

[10] Altus requested and Mr. Carras agreed that in order to incentivize Mr. Carras to stay with the company for the full three years, Mr. Carras would not become entitled to receive the stock options until the end of the last day of the three-year term. Article 4.2(c) of the agreement provides:

Except as otherwise provided herein, you must be actively employed with the Company on the last day of the Term or you must have entered into and be providing services to the Company under a consulting agreement on the day that would have been the last day of the Term.

[11] Article 4.2(c) contemplates two conditions under which Mr. Carras would become entitled to receive stock options. He could either be actively employed with Altus on the last day of the Term, or he could be providing services under a consulting agreement on that day.

[12] Salary negotiations, including the terms of the options, are captured in emails between Mr. Eisen and Mr. Carras dating between July 17-21, 2014. [1] During the negotiations, Mr. Carras became concerned that if Altus unilaterally ended the employment relationship before its three-year term, he would lose his entitlement to the stock options. Mr. Carras wanted to protect the stock options in the event that Altus unilaterally terminated his position without cause. In an email dated July 17, 2014, Mr. Carras proposed that a portion of the stock options vest each year. Mr. Eisen did not agree to this. In an email dated July 18, 2014, he reiterated that “[t]he options are only there for you if you stay 3 years.”

[13] In a subsequent email, Mr. Carras proposed instead that an amendment be made to Article 8.2 so that he would receive the options if he was terminated without cause prior to the passage of three years. Altus agreed to this change. This change is reflected in Article 8.2(f):

Notwithstanding anything to the contrary contained in this Agreement or the Plan, upon termination of your employment without cause, any unvested Options shall vest and become exercisable in accordance with the Plan.

[14] If Altus terminated Mr. Carras’ employment without cause, the agreement also required it to provide eight months’ notice to Mr. Carras.

[15] I find that the parties agreed that Mr. Carras was entitled to receive stock options if he was still employed or serving as a consultant for Altus on the third anniversary of its purchase of RealNet or if Altus terminated his position without cause before then. Nothing in the agreement provided for Mr. Carras to receive stock options if he resigned, left by mutual agreement, or if Altus terminated his position for cause before the third anniversary of its purchase of RealNet.

C. The Amalgamation of RealNet results in a Consulting Agreement

[16] The sale of RealNet closed in July 2014. Mr. Carras continued working as the president of RealNet after it had become a division of Altus. He reported to Colin Johnston, Altus’ President of Research, Valuation and Advisory in Canada. Other than reporting to Mr. Johnston, many of Mr. Carras’ duties as President of RealNet were the same as they had been before Altus acquired the company.

[17] Between January and April 2015, Altus contemplated merging four of its divisions, including RealNet, to create a new division called Altus Data Solutions (“ADS”). Mr. Carras expressed interest in leading the new, amalgamated division. Mr. Carras recalls that Mr. Courteau told him that the position would not be a good fit for him. Mr. Courteau does not recall this conversation. However, Mr. Johnston, who had direct oversight of the development of the new division, agreed that he had determined that Mr. Carras would not be a good fit for the leadership position. In Altus’ view, in light of Mr. Carras’ strong reputation in the industry, his greatest value was as a public representative of the firm in the external marketplace. Altus wanted Mr. Altus to serve a “market facing” role rather than an internal administrative one.

[18] In an email dated April 6, 2015, Mr. Carras told Mr. Johnston he would like to discuss a “fork in the road.” Mr. Johnston testified that this referred to the decision about what Mr. Carras’ role with Altus would look like if he were no longer going to be President of RealNet, including a potential transition to a consulting role.

[19] In a subsequent email dated April 16, 2015 Mr. Carras wrote to Mr. Johnston “Thanks for the beer and the chat yesterday…it meant a lot to me and I’m actually really excited…” Mr. Johnston testified that Mr. Carras was expressing excitement about transitioning into a consultant role. In his reply affidavit, Mr. Carras points out that the emails do not expressly say anything about a consulting role or a consulting agreement.

[20] On August 6, 2015, Mr. Johnston emailed Mr. Carras to inform him that Altus had hired someone to the lead the ADS division and invited Mr. Carras to talk “next steps.” On August 14, Mr. Carras emailed Mr. Johnston with some discussion points for a meeting introducing the new head of ADS. Mr. Carras also offered two discussion points about his continued involvement with Altus, which included some consulting activities. He asked Mr. Johnston to meet again on Monday to review “the bullet points we discussed,” with a goal of making arrangements for September 1.

[21] On August 17, 2015, Altus announced the hiring of Richard Simon as Managing Director of ADS. On August 18, Mr. Carras emailed Mr. Johnston a set of terms for a role he called “Strategic Advisor.” The terms Mr. Carras put forward included:

• Payment of $20,000 per month [equivalent to $240,000 annually];
• Mr. Carras would attend at the Altus offices two days per week;
• His activities would include market briefings, participating in client meetings, and assisting with business development;
• Altus would provide administrative assistance, meeting space as required, and access to Altus / RealNet information; and
• A one-year term.

[22] Mr. Johnston believed that the duties Mr. Carras described in the August 18 email would allow Mr. Carras to continue with external “market facing” duties in support of Altus while allowing him time to contemplate and move on to the next step in his career. Mr. Carras never expressed to Mr. Johnston a belief that he had been terminated. They never discussed providing a record of employment, pay in lieu of notice, or anything else that would typically accompany a termination.

[23] Mr. Carras asserts that when Altus hired Richard Simon as Managing Director of the new ADS division in August 2015, he was constructively dismissed. As Mr. Simon’s purview included RealNet as part of the new amalgamated division, Mr. Simon took over Mr. Carras’ job duties. Mr. Carras’ cleaned out his office and Mr. Simon took it over.

[24] Mr. Carras’ view is that Altus told him he would not receive the new leadership role and no employment position was ever offered to him.

[25] Mr. Johnston’s view is that once Mr. Carras knew he would not get the new position in the amalgamated division, he turned his mind to transitioning into the part-time consulting role. This was the subject of the April 6, 2015 “fork in the road” email. It would not make sense for Altus to offer a new employment position for Mr. Carras if both parties were interested in a different consulting arrangement.

[26] Mr. Carras proposed the terms of the consulting arrangement in August 2015, including changes to his remuneration and the number of days per week he would attend at the office. He proposed a consulting term of one year during which he would work 40% of the time for 80% of his prior salary. Altus agreed.

[27] After negotiating the principal terms of the consulting agreement, the parties did not finalize a written agreement. The parties disagree about why the agreement was never finalized, but that is not dispositive of any material issue. Mr. Carras and Mr. Johnston exchanged further emails on September 21, 2015, October 2, 2015 and March 09, 2016 attempting to finalize a written contract, but the area of disagreement was never resolved. The fundamental terms of the consulting agreement, being the payment to Mr. Carras of $20,000 per month for market facing services, access to Altus support, and attendance at Altus two days per week, were implemented by the parties and continued for the duration of the one-year consulting term. I find that the parties entered into a consulting relationship by mutual agreement in August 2015 as contemplated by Article 1.4 of the employment agreement.

[28] The parties did not discuss the stock options at any point during their negotiation of the consulting agreement.

D. Mr. Carras’ Departure from Altus

The January 2016 meeting with Mr. Simon

[29] Following a client event in January 2016, Mr. Simon asked Mr. Carras to describe the nature of his consulting work for Altus. In essence, Mr. Simon inquired into what services Mr. Carras was rendering to Altus in exchange for $20,000 per month coming from Mr. Simon’s departmental budget. Mr. Carras says he analogized his consulting arrangement to the receipt of termination pay. Mr. Carras asserts that he told Mr. Simon that he was entitled to notice of termination or pay in lieu of notice of termination. Mr. Carras claimed that the value of the consulting agreement was of similar value to pay in lieu of notice. This version of events aligns with Mr. Carras’ position that he was terminated, or constructively dismissed by Altus in August 2015.

[30] Mr. Simon recalls the conversation differently. He does not agree with Mr. Carras’ version of events. Mr. Simon recalls Mr. Carras characterizing his services as allowing Altus to “leverage his relationships” and that Altus could “bounce ideas off of him.” Mr. Simon testified that Mr. Carras did not say that he had been terminated, did not analogize the consulting agreement to termination pay, and that Mr. Simon never acknowledged Mr. Carras’ entitlement to termination pay.

[31] I do not need to resolve this conflict in the evidence. Even if Mr. Carras analogized to severance pay, he was plainly speaking as a metaphor and was not asserting that he had actually been dismissed. Under the terms of the employment agreement, Mr. Carras was entitled to eight months’ notice of termination. Mr. Carras confirmed in cross-examination that he treated the $20,000 monthly payments as consulting fees and not as a retiring allowance. Moreover, payment in lieu of notice would not have been calculated at 80% of Mr. Carras’ employment income. It would be 100%. It would not have been payable for a year – only eight months. Furthermore, no work would be required by an employee who was terminated and entitled to payment in lieu. If Mr. Carras made the analogy, I interpret the comment as an indication that Mr. Carras believed that he was not required to do much other than to show his face to the marketplace in association with the RealNet business being carried on by Altus. He quite fairly viewed his consulting role as a soft exit strategy during the transition of his former business to Altus.

The End of the Consulting Agreement in August 2016

[32] While consulting with Altus, Mr. Carras started multiple projects on his own account. He founded RealStrategies in August 2015, to provide consulting to Altus and the Toronto Star. He founded OneClose in either February or August 2016, a company designed to solve interim occupancy issues with new condominiums.

[33] Mr. Johnston testified that at the end of the one-year consulting term, he and Mr. Carras went for a social beer on August 8, 2016 to mark the end of Mr. Carras’ tenure with Altus. Mr. Johnston testified that “It was understood that Mr. Carras’ consultant relationship with Altus was at an end.” This evidence was not challenged in cross-examination.

[34] On August 8, 2016, Mr. Carras emailed Mr. Johnston, and wrote “[t]hanks for the beer, the honesty and the friendship!”

[35] Johnston responded, “[y]ou are most welcome for beers, I wish only the best for you my friend.”

[36] Mr. Carras thanked him and suggested an opportunity for possible future collaboration, to which Mr. Johnston never responded. Mr. Carras then went on vacation. When he returned from his vacation, his Altus email and telephone had been disabled. Mr. Carras stopped coming into Altus’ offices and was no longer paid by Altus.

[37] After leaving Altus, Mr. Carras continued his entrepreneurial career. He started new projects and founded new companies. He founded R-Hauz Solutions in November 2017, a company designed to provide prebuilt infill housing for laneways and avenues. He founded R-LABS Canada Inc. in February 2018 and R-LABS Canada Limited Partnership in August 2018.

[38] The nature of the parties’ relationship and the correspondence informs the factual analysis. In 2015, it was Mr. Carras who suggested a one-year term for consulting. That term ended in August 2016. The nature and tone of Mr. Carras and Mr. Johnston’s emails suggest a mutual parting of ways, which is consistent with the consulting agreement’s one-year term coming to a close.

[39] There is no evidence of any subsequent conversation about the nature of Mr. Carras’ relationship with Altus, or any inquiries from either party.

The Exercise of Stock options in August 2017

[40] On August 4, 2017, Mr. Carras contacted Altus concerning the exercise of his stock options. Altus’ in-house counsel informed Mr. Carras that he was not entitled to any stock options because he had not been employed by Altus or providing services under a consulting agreement for the required three-year period.

III – THE LAW OF CONSTRUCTIVE DISMISSAL

[41] Mr. Carras submits that Altus constructively dismissed him in 2015. He was constructively dismissed, he argues, when Mr. Simon was hired to replace him as president of the new amalgamated division and his employment position was converted to a consulting position.

[42] The Supreme Court of Canada reviewed the law of constructive dismissal in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10. The concept is broadly outlined at para. 30:

When an employer’s conduct evinces an intention no longer to be bound by the employment contract, the employee has the choice of either accepting that conduct or changes made by the employer, or treating the conduct or changes as a repudiation of the contract by the employer and suing for wrongful dismissal.

[43] An employment contract is not automatically terminated by an employer’s unilateral act in breach of the contract. The breach must be of sufficient materiality or otherwise evince the employer’s intention to no longer be bound by the contract of employment.

[44] In addition, when confronted by a breach by the employer, the employee has the option to agree to the new terms or accept the repudiation of the agreement by the employer and bring the employment to an end. Only then, once the contract is over, can an employee sue for wrongful dismissal (Persaud (ONSC), at para. 40). The employee must be given some time to respond (Persaud (ONCA), at para. 14). The employee has “a positive obligation to signal his or her rejection of the new terms in a timely fashion, or else risk being viewed as condoning the changes [emphasis added]” (Persaud (ONSC), at para. 40).

[45] When a situation is unclear, the employer may have a duty to clarify or to inquire (Johal v Simmons da Silva LLP, 2016 ONSC 7835, at paras. 107-108) to determine if the employee will accept the new terms, or if he believes that the employer dismissed him, or if he is resigning.

[46] Acquiescence can be a defence to constructive dismissal. If an employee consents or acquiesces to a change of an essential term, that change is no longer considered a unilateral act by the employer. It will not constitute a breach and it will not amount to constructive dismissal (Persaud v. Telus Corporation, 2016 ONSC 1577, at para. 40, aff’d 2017 ONCA 479, at para. 14; Potter, at para. 37).

IV – ANALYSIS

A. Was Mr. Carras constructively dismissed at the end of the first year of employment?

[47] Mr. Carras submits that he was “all but fired” when the defendant refused to give him the new leadership role. He received no particular role and was offered no alternatives. He argues that Altus took his job away. This, he submits, amounted to a constructive dismissal without cause that entitled him to his stock options immediately.

[48] I reject this characterization of Mr. Carras’ situation. No one thought Mr. Carras was fired. Altus did not go through any formal steps to separate him as it does with other employees when they are leaving. Neither did Altus take steps that were inconsistent with the ongoing contractual terms. The employment contract anticipated that the parties could agree to alter the form of their relationship from employment to a consultancy. This is what they did. It is not inconsistent with the contract. It is in fact carrying out the contractual intent.

[49] Counsel for Mr. Carras noted that the later consulting agreement made no reference to the original employment agreement. It did not release Altus from its obligations in that agreement.

[50] I note as well that Mr. Carras did not ask to have his options conveyed to him in August 2015. If he thought that he had become entitled to them at that time, he did not say so. If Mr. Carras had, at any time point during the consulting year, asked about the status of his options, Altus would have been contractually required to confirm they were still available under Article 4.2(c) of their agreement. The agreement specifically contemplated Altus maintaining its obligation to provide stock options while Mr. Carras was consulting.

[51] When the company said it had no role for him like his previous role, Mr. Carras responded that he wanted to consult and took initiative to create a new role for himself that Altus accepted. That does not demonstrate that he was “all but fired.” He also did not demonstrate an intention to resign. There was no constructive dismissal because the employer did not act as if the agreement was at an end or as if it was no longer bound by it.

Employer’s duty to clarify

[52] Absent a resignation by Mr. Carras or any ambiguity as to the parties’ intentions in August 2015, I do not view it as necessary to consider whether Altus might have had a duty to clarify the status of affairs.

[53] This case is distinguishable from Johal. At para. 105 of Johal, Justice Sloan provided a list of 19 factors he had considered, including the fact that the plaintiff had worked for the employer for 27 years, had maintained a particular role for 4 years, was called into a meeting without any particular notice, received oral information about a change of role, and that her sudden departure was out of character. This led Justice Sloan to find at para. 107, “on the facts of this case, [the employer] was required to do more to determine the Plaintiff’s true and unequivocal intention.”

[54] There was no such ambiguity at the end of Mr. Carras’ first year with Altus. Mr. Carras was a sophisticated individual with extensive business experience. The agreement he signed with Altus anticipated his duties changing from year to year. Mr. Carras put forward a new proposal for the 2015-2016 year. He then worked as a consultant for that year and was paid according to the terms he proposed.

Mr. Carras acquiesced to any changes in the employment relationship

[55] Mr. Carras asserts that by replacing him with Mr. Simon as the president of ADS, Altus’ acts were inconsistent with his ongoing employment under the parties’ agreement. If he believed that this was a breach of the agreement, he had two options. He could consent to Altus’ actions or treat them as amounting to a repudiation of the contract. If Mr. Carras chose to treat the actions as repudiation, he had to tell Altus at some point. He could then sue for wrongful dismissal and for his stock options, on the basis that he had been constructively dismissed (Persaud (ONSC), at para. 40).

[56] Mr. Carras did not treat Altus’ actions as repudiation of the contract or as termination of his agreement. Accepting that Mr. Carras must be given some time to make his decision, he asserted none of his rights on termination under the agreement. The agreement had an 8-month severance provision. Mr. Carras did not ask for severance pay. Nor did Mr. Carras claim that he had become entitled to receive his stock options because he had been terminated. Crucially, Mr. Carras initiated the negotiations for his consulting agreement and then worked for a year under terms that he had proposed.

[57] This is not a circular holding that because Mr. Carras had not yet asked for his stock options, he cannot now ask for his stock options. Chronology imbues the analysis. If Mr. Carras believed that Altus breached an essential term of the agreement, or that he had been “all but fired” in August 2015, he had an obligation at law – if he wished to pursue a claim for breach of contract – to accept Altus’ repudiation and treat the contract as being repudiated. He did not do so.

[58] I have already found that the change in Mr. Carras’ status in August 2015 was a mutual agreement as contemplated by Article 1.4 of the agreement. However, were it not, Mr. Carras acquiesced in the change. He worked under the new terms for a year and was paid in the agreed upon amount. He never communicated to Altus that he believed that it had repudiated the employment agreement and acted accordingly.

B. The events of August 2016

[59] At the end of his year as a consultant, Mr. Carras had completed two years with Altus. Mr. Carras did not inquire as to how his role would change for the last of his three years. Mr. Johnston’s evidence is that Mr. Carras was excited to move on from Altus. The emails between Mr. Carras and Mr. Johnson evidence a mutual farewell.

[60] When Mr. Carras returned from vacation and his phone and email were disconnected, he did not inquire into the circumstances. He did not protest. He did not question what had happened to his job. He simply moved on without any further question. He was involved in new businesses he had founded during the consulting year, and subsequently founded several others. I find that this departure in August 2016 was voluntary and arose by mutual agreement.

[61] It is important to note that Mr. Carras makes no argument otherwise. He bases his claim to entitlement of stock options on the events in August 2015 and not 2016.

[62] However, it is the voluntary ending of the relationship by both parties in August 2016, and not any of the parties’ actions in August 2015, that prevents Mr. Carras from qualifying for the stock options.

V – CONCLUSION

[63] Mr. Carras’ employment was not terminated without cause by Altus. As Mr. Carras did not work for three years and his employment was not terminated without cause prior to the three-year period expiring, he does not qualify for stock options under his agreement with Altus.

[64] The application is therefore dismissed.

[65] The parties agreed that costs of this application totaling $50,000 inclusive of taxes and disbursements are to go to the successful party. So ordered.

Released: May 11, 2020

COURT FILE NO.: CV-19-00623297 DATE: 20200511 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: GEORGE CARRAS Applicant – and – ALTUS GROUP LIMITED Respondent

REASONS FOR JUDGMENT F.L. Myers J. Released: May 11, 2020

[1] I note that the contemporaneous emails are considered as part of the surrounding circumstances.