CITATION: Giacomodonato v. PearTree Securities Inc., 2023 ONSC 3197

COURT FILE NO.: CV-18-594959

DATE: 20230529

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Davide Giacomodonato

Plaintiff

– and –

PearTree Securities Inc. and PearTree Financial Services Ltd.

Defendants

Jonathan G. Bell, Nina Butz, and Marshall Torgov, for the plaintiff

Paul-Erik Veel and Aoife Quinn, for the defendants

AND BETWEEN:

PearTree Securities Inc.

Plaintiff by counterclaim

– and –

Davide Giacomodonato

Defendant to the counterclaim

Paul-Erik Veel and Aoife Quinn, for the plaintiff by counterclaim

Jonathan G. Bell, Nina Butz, and Marshall Torgov, for the defendant to the counterclaim

HEARD: April 24, 25, 26, 27, 28, May 1, 2, 8, 9, and 12, 2023

Robert CentA J.

[1] The plaintiff, David Donato, is an experienced and successful investment banker with experience in the mining sector.[^1] In 2016, he was recruited to join the defendant PearTree, which worked with, among others, mining companies to arrange flow-through donation financing placements.[^2] PearTree hired Mr. Donato to serve as President and co-head of banking with Trent Mell. In January 2018, PearTree terminated Mr. Donato’s employment without cause.

[2] Mr. Donato sued PearTree for wrongful dismissal and amounts he claimed that PearTree owed to him. Depending on the methodology chosen and whether or not certain facts are established, Mr. Donato submits he has been underpaid between $3.194 million and $3.927 million.

[3] PearTree submits that Mr. Donato is owed somewhere between $240,000 and $627,516, depending on the methodology selected and my findings of fact. It also counterclaimed against Mr. Donato for breaching restrictive covenants in his employment agreement when he went to work for a competitor, some nine months after PearTree terminated his employment.

[4] The dispute proceeded to a 10-day trial before me. For the reasons set out below, I find that Mr. Donato has been undercompensated. I dismiss PearTree’s counterclaim.

[5] I find that Mr. Donato and PearTree entered into a binding employment contract on April 11, 2016. I do not accept PearTree’s submission that this first employment contract was merely an agreement to agree or was a non-binding term sheet. The parties, however, subsequently negotiated and agreed to a second employment contract in July 2016. This is the contract that governs Mr. Donato’s entitlements on the termination of his employment. I do not accept Mr. Donato’s submission that there was no consideration for this agreement. He received two weeks additional paid vacation and a $40,000 payment that was referable to the second employment contract. In the alternative, I find that PearTree repudiated the first employment contract and offered Mr. Donato employment on new terms, which Mr. Donato accepted after over a month of substantive negotiations and with the benefit of legal counsel.

[6] Mr. Donato is entitled to compensation for the first year of his employment contract calculated on the basis that he started work on July 11, 2016. That compensation is to be calculated based on transactions where the issuer signed a term sheet with PearTree after July 11, 2016, and where PearTree earned income on the transaction. After December 31, 2016, Mr. Donato’s compensation should be calculated on the basis of a variable payout rate of 1.125% Mr. Mell resigned from PearTree in February 2017 and no suitable replacement was hired.[^3] Mr. Donato is also entitled to a $50,000 bonus for the 2016-2017 compensation year. I find that 100% of the direct costs of sale should be deducted to determine Mr. Donato’s correct compensation. I find that the sponsorship of the Miner’s Lamp dinner, the sales concession to a major donor, and any expenses associated with limited partner subscriptions should not be deducted as they do not fall within the meaning of direct costs of sale.

[7] Mr Donato’s compensation for the 2017-2018 year is to be determined in accordance with the second employment contract. I find that the termination provision in the second employment contract is enforceable. He is not entitled to any variable compensation for that year because PearTree did not reach the $100 million subscription threshold by January 9, 2018. Mr. Donato did not prove that, but for the termination of his employment, PearTree would have participated in more transactions from January to July 2018. I also do not accept that either the historical revenue model or the market share model presented by Mr. Donato’s experts are satisfactory proxies to determine how PearTree would have performed but for the termination of Mr. Donato’s employment. I also find that Mr. Donato did not establish that he would have earned any M&A and advisory fee income between January and July 2018, but for the termination of his employment.

[8] I award Mr. Donato $10,000 in punitive damages for PearTree’s decision to suspend his salary continuation payments, to offset money it owed to him against money it had paid to him, and its attempt to get him to waive a claim to further amounts owing to him by accepting money that PearTree admitted that it owed to him.

[9] I dismiss PearTree’s counterclaim in its entirety. I find that the non-solicitation covenant in the second employment agreement is not enforceable. I find that PearTree did not have a legitimate proprietary interest to protect. Instead, PearTree was simply attempting to limit competition.

[10] I find that Mr. Donato did not breach the non-solicitation covenant. That covenant is also not enforceable. I find that the non-solicitation covenant is not targeted at protecting only PearTree’s legitimate interest in trade secrets or customer data. It is a camouflaged non-competition clause. I find that mining issuers are not exclusive customers PearTree or any of its competitors. In any event, I find that Mr. Donato did not breach the non-solicitation clause, or any fiduciary duties he owed to PearTree in his work as a back-end investment banker working on the issuer-side of transactions at Sprott Private Wealth.

Background facts and trial process

[11] The parties entered into a very helpful agreed statement of facts. I will set out part of it below to frame the contentious issues that I must determine. For consistency, I will replace some of the terms used in the agreed statement of facts with the terms I use in my reasons for decision.

The Parties

1. PearTree Securities and PearTree Financial (together, “PearTree”) are each incorporated in the Province of Ontario with head offices in Toronto, Ontario.

2. PearTree Securities is a wholly owned subsidiary of PearTree Financial.

3. At all times relevant to this claim, PearTree Securities worked with issuers, including Canadian resource exploration companies, to arrange and close structured flow-through donation financing placements. PearTree is a leading provider of flow-through donation financing transactions in Canada.

4. Flow-through share financing transactions are transactions involving the issuance of “flow-through shares” to shareholders. A flow-through share is a type of common share that permit the initial purchaser to claim a tax deduction equivalent to the amount invested. The flow-through share regime allows public companies to transfer to investors certain exploration expenditures conducted on Canadian soil.

5. Flow-through donation financing transactions are a type of flow-through share financing transaction that can permit greater tax advantages in connection with a donation to a charity.

6. Subscribers to flow-through donation share financing engage in the transactions in order to reduce the after-tax cost of making donations. PearTree has received advance income tax rulings from the Canada Revenue Agency and Revenue Quebec with respect to its tax structure.

7. At all times relevant to this claim, PearTree organized all components of a flow-through donation financing, sometimes with the assistance of third parties, and works with all key actors: the subscriber (donor); the charity; the issuer; and the institutional end-buyer.

8. PearTree Securities is registered to carry on business in the Province of Ontario as an Exempt Market Dealer (“EMD”), Restricted Portfolio Manager and Investment Fund Manager. In addition, PearTree Securities is also registered as a Portfolio Manager in the province of Alberta, an Investment Fund Manager in the province of Quebec and as an EMD in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, Prince Edward Island and New Brunswick.

9. Ron Bernbaum is PearTree Financial's Founder and was at all times relevant to this claim CEO of PearTree Financial. Lisa Davis was at all material times relevant to this claim PearTree Securities’ CEO.

10. In 2015, Trent Mell was engaged as a consultant to assist with expanding PearTree Securities’ platform.

11. From June 25, 2015, to July 11, 2016, Mr. Mell was President of PearTree Securities. Upon signing the second employment contract,[^4] Mr. Mell's title became President, Head of Mining.

Davide Giacomodonato

12. During his employment at PearTree Securities, Davide Giacomodonato (“Mr. Donato”) held the title of President and Co-Head of Banking.

13. Prior to his employment at PearTree, Mr. Donato was employed at Mackie Research Capital Corporation (“Mackie”) as Managing Director, Investment Banking.

The First Employment Contract[^5]

14. Ms. Davis sent an initial draft of the first employment contract to Mr. Donato the morning of March 30, 2016.

15. Between March 30, 2016 and March 31, 2016, Mr. Donato, Ms. Davis, Mr. Mell and Mr. Bernbaum discussed changes to the first employment contract.

16. On March 31, 2016, Mr. Donato was provided a final version of the first employment contract.

17. On April 11, 2016, Mr. Donato signed the first employment contract, after changing the outside start date, from May 2, 2016 to June 1, 2016. PearTree accepted that change and countersigned it back to Mr. Donato….

Resignation from Mackie

18. After March 31, 2016, Mr. Donato provided Mr. Bernbaum, Ms. Davis, and Mr. Mell with updates from time to time on his negotiations with Mackie about the financial implications of his departure.

19. Mr. Donato told Mr. Bernbaum and others at PearTree that there would be financial implications if he left Mackie prior to December 1, 2016. PearTree ultimately agreed to pay Mr. Donato an additional $40,000 to assist him with the financial implications related to departing Mackie.

The second employment contract

21. On June 2, 2016, Ms. Davis sent Mr. Mell the first draft of the second employment contract.

22. On June 9, 2016, Ms. Davis sent Mr. Donato the first draft of the second employment contract.

23. Throughout June and early July 2016, Mr. Donato, Mr. Mell, Mr. Bernbaum, and Ms. Davis discussed the terms of the second employment contract.

24. In June 2016, Mr. Mell and Mr. Donato jointly retained counsel at Caravel Law to review the second employment contract. In late June and early July 2016, counsel to Mr. Donato, Mr. Mell, and PearTree also discussed revisions to the second employment contract.

25. On July 7, 2016, Mr. Bernbaum emailed Mr. Donato a final version of the second employment contract.

26. On July 11, 2016, Mr. Donato and Mr. Mell signed the second employment contract emailed to them by Mr. Bernbaum on July 7, 2016….

The Non-Disclosure Agreement

27. On May 30, 2016, Ms. Davis wrote Mr. Donato to provide him with a non-disclosure agreement and asked him to sign it. Mr. Donato did not sign that non-disclosure agreement.

Mr. Donato’s Employment at PearTree

28. Mr. Donato was added to PearTree’s payroll on July 22, 2016.

29. Mr. Donato was provided health and dental benefits effective August 1, 2016.

[12] At trial, Mr. Donato testified on his own behalf and called Mr. Mell, Jason Mayer (the managing partner of Sprott Asset Management), and Prem Lobo (a damages expert) as witnesses. PearTree called Ms. Davis, Mr. Bernbaum, and Peter Weinstein (a damages expert) as witnesses. The experts’ opinions were admitted on consent.

[13] The trial proceeded in person over 10 days. Counsel made effective use of a joint book of documents and provided me very helpful written submissions to underpin their oral submissions. I am grateful to all counsel for the efficient, effective, and collegial presentation of this case.

[14] With the benefit of the background facts listed above, I will turn to the issues in dispute.

Principles of contract interpretation

[15] I think it is helpful to set out the general principles of contract interpretation before turning to the contracts at issue in this proceeding.

[16] The Court of Appeal for Ontario has held that when interpreting a contract, a judge should:

a. determine the intention of the parties in accordance with the language they have used in the written document, based upon the "cardinal presumption" that they intended what they wrote;

b. read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of the agreement’s terms and avoids an interpretation that would render one or more of its terms ineffective;

c. read the contract in the context of the surrounding circumstances known to the parties at the time of its formation. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which it was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and

d. read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.[^6]

[17] As Laskin J.A. noted in City of Thunder Bay, the “overriding principle is that the meaning of an agreement and the intent of the parties in entering into it must be derived from the words the parties used and the context in which they used those words.” For this reason, context (sometimes described as “the surrounding circumstances” or “the factual matrix”) almost always matters because words rarely have meaning apart from their context.[^7]

The first employment contract was enforceable

[18] On March 31, 2016, PearTree sent a letter to Mr. Donato in which it represented that PearTree “would be pleased to engage [Mr. Donato] to provide investment banking and other related services on the following terms.” Mr. Donato made one small change to the start date and on April 11, 2016, Mr. Donato signed the offer back stating that he “accepts and agrees to the terms of this letter.” The parties disagree on whether or not the March 31 letter constituted a binding employment contract.

[19] Mr. Donato testified that Mr. Mell first approached him about the PearTree opportunity in late January 2016. At that time, Mr. Donato worked for Mackie as Managing Director, Investment Banking. He also served on Mackie’s board of directors. He testified that he was not particularly happy with his situation at Mackie and was willing to explore new opportunities. However, because of the terms of his contract with Mackie, he would leave money on the table if he left Mackie before the end of 2016. Mr. Donato testified that in January, with that knowledge, he met with Mr. Mell and then with Mr. Bernbaum to discuss the opportunity at PearTree.

[20] Mr. Donato testified that PearTree next contacted him in March 2016. He then began to discuss the potential terms of his employment with PearTree with Mr. Bernbaum. He testified that he carefully negotiated the terms of his employment over the month of March 2016. He testified that he had two non-negotiable demands from PearTree: an executed and binding agreement setting out the material terms of his employment before he would resign from Mackie; and a fixed two-year term of employment. Mr. Donato testified that he told Mr. Bernbaum that once PearTree provided him with an executed employment agreement, he would begin the process of resigning from Mackie.

[21] PearTree submits that “to give Mr. Donato comfort regarding the terms of his future employment at PearTree, PearTree and Mr. Donato worked out a term sheet setting out the primary terms of his employment relationship at PearTree.” Ms. Davis testified that she did not intend that the March 31 letter would create a binding contract. She stated that she made this clear when she wrote an email to Mr. Donato on March 30, which said “I’ve prepared a short offer letter intended to commit us to the essential business terms of our deal so that you can move forward in your discussions with [Mackie].”

[22] Mr. Bernbaum and Mr. Davis testified that the March 31 letter set out only the basic terms of the employment relationship, but did not contain provisions addressing certain issues, such as termination, and certain aspects of compensation. PearTree points to the evidence of Mr. Mell who testified that he understood that a more detailed employment agreement would be signed in the future and that Mr. Donato shared this understanding.

[23] For the reasons that follow, I find that the March 31 letter was an enforceable contract of employment between PearTree and Mr. Donato.

The parties demonstrated their intention to enter into a contract

[24] For a contract to be formed, there must be a meeting of the minds. I am to apply an objective test and consider the conduct of the parties from the perspective of a reasonable person. The subjective understanding of what one party thought or understood the other party to mean is irrelevant to determining whether or not a reasonable person would conclude, in light of all the material facts, that the parties intended to contract and that the essential terms of that contract can be determined with a reasonable degree of certainty.[^8]

[25] I find that the first employment contract contains all of the essential terms for an employment contract. The first employment contract explicitly stated that:

a. Mr. Donato would be a full-time employee with an annual salary of $240,000 for each of the two-years of the contract term;

b. Mr. Donato would earn a $50,000 annual bonus if PearTree met a specified revenue threshold;

c. Mr. Donato’s start date would be May 2, 2016;

d. Mr. Donato would receive a variable payout equal to a stated percentage of PearTree revenue, calculated in a specified way, less amounts to be deducted from the revenue as direct costs of sale;

e. Revenue and income would be shared with Mr. Donato as PearTree expanded its product offerings and listed the factors that would be considered;

f. Mr. Donato would be covered by “standard confidentiality provisions for employees”; and

g. Mr. Donato was obliged to abide by non-competition and non-solicitation covenants that were spelled out.

[26] PearTree drafted the first employment contract after extensive discussions with Mr. Donate over the month of March and chose language that demonstrates that it intended to be bound by the contract. I do not see any indication that PearTree retained an element of discretion over whether or not to execute a further agreement. The contract is on PearTree letterhead and was written and signed by Lisa Davis, CEO of PearTree Securities Inc. In the introductory paragraph, the CEO of PearTree states that the company “would be pleased to engage you to provide investment banking and other related services on the following terms”. A reasonable person would conclude that the company intended to enter into a binding contract with a prospective employee on the terms set out in the document.[^9]

[27] In the concluding paragraph, the CEO states “this offer is open for acceptance until April 15, 2016.” The letter had a space for Mr. Donato to sign the contract below the words “The undersigned Dave Giacomodonato, accepts and agrees to the terms of this letter.” A reasonable person would conclude that this document contained the necessary elements of offer, acceptance, and consideration and PearTree demonstrated an intention to contract with Mr. Donato.

[28] This contract is not obviously deficient in any material respect. PearTree suggests that the document is too brief and skeletal to be a binding contract. I disagree. It is an employment contract, not a complicated commercial contract or a franchise agreement. Moreover, I find that it is very similar in detail and length to the employment contract signed by PearTree and Mr. Mell on June 10, 2015, which governed the terms of his employment as CEO of PearTree Securities and Head of Mining. The fact that the first employment contract did not address every conceivable issue, for example paid vacation beyond the minimums set out in the Employment Standards Act, 2000, or whether or not PearTree would reimburse Mr. Donato for business expenses, does not mean that it was not an enforceable agreement.[^10] The question is whether or not the first employment contract contains all necessary terms, not whether or not it contains all conceivable terms. Similarly, the fact that PearTree described the document as a term sheet does not, on its own, make the agreement any less of a binding contract.

[29] PearTree advances three submissions in support of its position that the first employment contract is not enforceable. I will address the first two together.

[30] First, Ms. Davis and Mr. Bernbaum testified that they did not intend for PearTree to be bound by this agreement and that they always intended to enter in an employment contract on different terms with Mr. Donato after he extricated himself from Mackie. Second, PearTree submits that the closing paragraph of the letter should be interpreted to mean that this document was only an agreement to agree on future terms and, therefore, not enforceable. The paragraph reads as follows:

This offer is open for acceptance until April 15 2016. Should you wish to accept this offer please sign this letter to signify your acceptance of these terms which will form the basis of a employment [sic] contract between us.

[31] I do not accept PearTree’s submissions on this point. The context in which this agreement was made is an important part of interpreting its meaning.[^11] The contemporaneous email communication between Mr. Donato and PearTree makes clear that before he wanted a binding written commitment from PearTree before he would resign from Mackie. He was not prepared to accept oral representations or even an email setting out those terms. PearTree knew that context when it drafted the March 31 letter and stated that it “would be pleased to engage you to provide investment banking and other related services on the following terms”. The subjective beliefs of Ms. Davis and Mr. Bernbaum are irrelevant to the question of whether or not the parties demonstrated an intention to enter into a contract. A reasonable observer would conclude that PearTree intended by this language to form a binding contract.

[32] In addition, I do not accept that the closing words of the March 31 letter undermined the contract’s binding nature. The context of this agreement causes me to interpret the words “please sign this letter to signify your acceptance of these terms which will form the basis of a employment [sic] contract between us” to mean that the terms in the letter would become the employment contract if Mr. Donato signed the letter back.

[33] If PearTree’s language contemplated the execution of a further document, which I do not accept, the most plausible interpretation of that sentence is that PearTree was binding itself to execute, at a future date, a more formal written agreement that contained all of the specific terms set out in the March 31 letter. This does not diminish the enforceability of the contract already reached. As Lang J., as she then was, explained:

The question is whether the parties had intended to, and did in fact, reach an agreement on all the terms essential for the performance of the contract. If they did reach such an agreement, then an agreement to reduce those terms to writing would be no more than a formality. It would not diminish the enforceability of a contract already reached. However, if the parties had only an agreement that they would later agree on those terms, and had not reached agreement on all the essential terms, then their agreement would not be enforceable.[^12]

[34] Here, the first employment contract contains all of the essential terms of an employment contract between PearTree and Mr. Donato. The agreement is sufficiently certain to be valid on its own. There is nothing in its text or the context in which it was prepared that persuades me that the parties’ legal obligations are to be deferred until a formal contract has been approved and executed. The binding nature of the agreement contained in the March 31 letter would not be affected by the subsequent preparation of a more formal agreement.[^13]

[35] Third, PearTree suggests that the first employment contract was subject to two conditions, which meant that the parties did not intend their obligations to be binding from the moment it was entered into. The conditions were as follows:

PearTree Securities Inc Peartree or the Company would be pleased to engage you to provide investment banking and other related services on the following terms and subject to the additional conditions that (i) you are not under any obligation to Mackie Research Capital Corporation or any other person that would prevent you from entering into this engagement and (ii) as co leaders of Peartree’s investment banking group Trent Mell agrees to amend his current arrangement with Peartree such that it is consistent with the terms set out below.

[36] I do not accept PearTree’s submission on this point. I do not interpret those two terms as true conditions precedent to the agreement. If PearTree felt that the conditions were not satisfied, it may have been able to avoid performing its obligations under the contract. PearTree never took that position.

[37] Moreover, PearTree’s submission falters on the facts. Mr. Donato was under no obligation to Mackie that prevented him from entering into the agreement. Mr. Donato might forfeit shares or income from Mackie if he left before the end of his two-year contract, but nothing prevented him from resigning and going to work for PearTree. Mr. Mell testified that he had agreed to adjust the terms of his own employment from those contained in his June 2015 contract to mirror the terms of Mr. Donato’s first employment contract. PearTree could not evade its contractual obligations to Mr. Donato by failing to provide Mr. Mell with a copy of Mr. Donato’s first employment contract to sign. By the time Mr. Donato accepted PearTree’s offer of employment on the terms set out in the first employment contract on April 11, 2016, both terms were fulfilled.

[38] Finally, I do not accept PearTree’s submission that the conduct of the parties after signing the first employment contract demonstrates that the parties did not intend it to be binding. PearTree’s submission overlooks the power dynamic inherent in the employment relationship with Mr. Donato. The fact that PearTree insisted that Mr. Donato compromise on the terms of the first employment contract is no evidence that they had not entered into a binding agreement. It is, rather, evidence that PearTree wanted to improve upon the bargain it made with Mr. Donato. I place very little weight on the evidence of subsequent negotiations in assessing whether or not the parties had reached a binding agreement.

[39] In all of the circumstances of the case, I find that the March 31 letter is an enforceable contract. It manifests offer, acceptance, and consideration. It contains the essential elements of an employment contract. It was a bargain, and it is worthy of enforcement.

The second employment contract was enforceable

[40] Mr. Donato signed a second employment contract with PearTree on July 11, 2016. Mr. Donato takes the position that the contract is unenforceable because it did not provide him with fresh consideration. Mr. Donato submits that the second employment contract constituted a significant change to the terms and conditions provided under the first employment contract. Mr. Donato testified that the second employment contract was materially worse for him because it:

a. was no longer a fixed-term contract, but included a termination clause allowing PearTree to dismiss him, without cause, any time after September 30, 2017, by providing him salary continuance to July 10, 2018, or when Mr. Donato began new employment;

b. significantly expanded the non-competition and non-solicitation clause, and removed the qualifiers Mr. Donato had previously obtained;

c. made numerous changes to Mr. Donato’s compensation structure including that:

i. the banking group was now responsible for paying variable compensation to Mr. Mah;

ii. the variable payout rate of 1.5% would be reduced by 25% if Mr. Mell's employment ended; and

iii. the variable payout would be paid quarterly, and gave PearTree the sole discretion to change the payments for tax advantages.

[41] Mr. Donato testified that he would not have signed the second employment contract if PearTree had presented it to him when he was still at Mackie. He testified that he signed the agreement in July 2018 because he was the sole breadwinner for his family, his wife was seriously ill with cancer, and that he needed the income.

[42] PearTree takes the position that the second employment contract is enforceable because it provided significant additional benefits to Mr. Donato including:

a. additional paid vacation;

b. a $40,000 bonus to offset amounts that Mr. Donato left on the table when he left Mackie;

c. the inclusion of revenue from oil and gas transactions in the calculation of Mr. Donato’s variable compensation;

d. improvements to the timing of the payments of the variable compensation; and

e. clarity in the definition of the banking group.

[43] PearTree submits that there was significant give and take during the negotiation of the second employment contract. Mr. Donato was represented by counsel and the parties negotiated over the terms of the contract from June 2 to July 11, 2016.

The need for consideration

[44] Employment contracts require consideration, which is understood as a benefit to one party or some trouble, prejudice, or inconvenience to the other party. Generally, a pre-existing contract can not be modified unless there is a further benefit to both parties. As a matter of law, employers do not have the right to alter a contract unilaterally by adding new terms or diminishing the existing rights under the contract. Something new and of benefit must flow to the employee in exchange for the new promise.[^14]

[45] Courts recognize the power imbalance that exists between employers and employees. Frequently, bargaining between employers and employees does not resemble paradigmatic free market negotiations. Justice Iacobucci recognized this reality in Machtinger v. HOJ Industries Ltd. when he adopted the words of the Hon. Katherine Swinton, writing extra-judicially:

[T]he terms of the employment contract rarely result from an exercise of free bargaining power in the way that the paradigm commercial exchange between two traders does. Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.[^15]

[46] The Court of Appeal for Ontario has held that the doctrine of consideration helps to protect employees who may have less bargaining power once they have signed an employment contract to resist amendments that may diminish their rights:

The requirement of consideration to support an amended agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers. Some employees may enjoy a measure of bargaining power when negotiating the terms of prospective employment, but once they have been hired and are dependent on the remuneration of the new job, they become more vulnerable. The law recognizes this vulnerability…[^16]

[47] Courts have held that an employer’s promise not to terminate immediately an employee’s employment is not consideration that renders enforceable an amendment to the contract.[^17]

[48] Courts ensure that there is consideration for the contract, but the court is not concerned with the adequacy of the consideration.[^18] As long as there is some consideration for the amendments to the contract, the court leaves it to the parties to form their own judgment over its adequacy and to make their own bargain.[^19] The law does not require that the new benefits be in the form of money, or that the economic value of the new benefits provided to the employee equal or exceed the economic cost of the new terms of the agreement.[^20]

PearTree provided Mr. Donato with fresh consideration

[49] PearTree points to seven terms of the second employment contract as fresh consideration for Mr. Donato. I will consider each in turn.

1. Paid vacation

[50] PearTree submits that the second employment contract provided Mr. Donato with consideration in the form of two additional weeks of paid vacation. I agree.

[51] The first employment contract was silent on the amount of vacation or vacation pay that PearTree was providing to Mr. Donato. In the absence of a superior negotiated term, the Employment Standards Act provided Mr. Donato with two weeks of paid vacation.[^21] The second employment contract provided Mr. Donato with four weeks of paid vacation.

[52] I do not accept Mr. Donato’s submission that I should imply a term into the first employment contract that provided him with four weeks vacation simply based on his level of seniority and experience. Ms. Davis’s evidence is that PearTree never discussed the amount of vacation that Mr. Donato would receive before the parties signed the first employment contract. I would not imply such a term as a matter of custom or usage, as the legal incident of a particular class or kind of contract, or based on the presumed intention of the parties where the term is necessary to give business efficacy to the contract.[^22] There is no basis to do so. The second employment contract provided him with additional vacation.

[53] Even if Mr. Donato did not place a high subjective value on this additional vacation time, it is undoubtedly a benefit that flowed to him under the second employment contract. I do not accept the submission that an additional two weeks of vacation is a de minimus benefit.

2. $40,000 payment to offset amounts Mr. Donato paid to Mackie

[54] PearTree submits that after Mr. Donato accepted the first employment contract, PearTree agreed to pay him a $40,000 bonus once he started at PearTree. Although this payment was not referred to in the second employment contract, PearTree submits that it was consideration for the second employment contract. I agree.

[55] Recall that on March 31, 2016, PearTree sent what would become the first employment contract to Mr. Donato. On April 11, 2016, Mr. Donato made one small change to his start date and signed the offer back. All of the discussions about the $40,000 payment took place after the first employment contract was in place.

[56] Mr. Donato testified that he first spoke to Mr. Bernbaum in late April about PearTree making a payment to him to offset the cost to him of his departure from Mackie. He points to a text message he sent Mr. Mell on April 22, 2023, in which he told Mr. Mell that he had discussed that issue with Mr. Bernbaum. Mr. Donato testified that Mr. Bernbaum offered to pay him an additional $40,000 “in connection with me bringing in accretive business.” Mr. Donato acknowledged in cross-examination that he would not have received this payment if he did not start working at PearTree and that the job he had already accepted required him to bring in new business.

[57] Mr. Bernbaum sent an email to Ms. Davis on May 4, 2016, which confirms that he had discussed with Mr. Donato that PearTree could repay Mr. Donato for the amounts he had to pay Mackie:

Spent half hour on call. We have an approach that works under which [Mr. Donato] pays for his exit and we repay him from two identified sources of accretive revenue in the pipeline due to his activities plus M&A revenue - which is additive to us in any event. Details to be reduced to paper once he has makings of a firm deal hopefully this week.

[58] On May 18, 2016, Mr. Donato reached an agreement with Mackie over the terms of his resignation. One of the terms permitted Mr. Donato to keep the full value of his shares in Mackie and another required him to pay $40,000 to Mackie to settle a deficit balance in his income draw account. Later that day, Mr. Donato advised PearTree that he had “settled on a number” with Mackie. Mr. Donato testified that he paid the $40,000 to Mackie in late June 2016.

[59] On May 27, 2016, Mr. Donato advised PearTree that his departure from Mackie would be finalized shortly and that he would be able to start at PearTree on June 1, 2016, which was the start date in the first employment contract. Ms. Davis responded by advising Mr. Donato that PearTree needed “to make sure that you and [Mr. Mell] signed new employment agreements prior to the actual commencement of employment.”

[60] I find that the $40,000 payment was still being negotiated in late June as part of the negotiations surrounding the second employment contract. On June 20, 2016, Mr. Mell met with Mr. Bernbaum to discuss the terms for the second employment contract. In advance of that meeting, Mr. Mell prepared a document setting out the issues to be settled between the parties. After the meeting, he updated the document by adding text in full caps to reflect his understanding of the agreement which he had reached with Mr. Bernbaum. On June 21, 2016, Mr. Bernbaum annotated the document and added his comments in bold italics. He then attached the document to an email that he sent to Mr. Donato, Mr. Mell, and Ms. Davis. The issue of the $40,000 payment was described as follows:

3. Accretive revenue matter

I recommend that we ‘paper’ the $40k accretive revenue opportunity (via Wesdome, Anaconda and M&A) in a side letter, as this should fall away fairly quickly. THIS AGREEMENT WILL BE HONORED (NOTED THAT THE EARLER TALKS CONTEMPLATED MAKE-WHOLE OPPORTUNITY FOR OUT-OF-POCKET LOSSES ABOVE $40K) Ron: Ok

[61] Mr. Mell testified that it was his understanding that “earlier talks” referenced in the note was the conversation between Mr. Bernbaum and Mr. Donato on April 22, 2016. Mr. Mell also acknowledged that to the best of his knowledge the discussions about that payment went back and forth over a long period of time in April and May.

[62] On June 23, 2016, Mr. Bernbaum sent an email to Mr. Donato and Mr. Mell attaching a draft of the second employment contract. The message indicated that he had not included the $40,000 payment to Mr. Donato in the draft agreement but agreed that PearTree would pay that amount to Mr. Donato. The message read as follows:

Hi - I spent a couple of hours over the past couple of days, had our lawyer incorporate terms and then went back over it. The offer letter is in final form of contract, it's not optically perfect but I think captures the agreement. We are really stuck with and to one another.

I have not taken the time to include the 40K but agree it will be paid. Similarly, Trent has to list the deals already done and dusted.

I'm inclined to start the term on July 1 and have an earlier salary start date. In fact year one would be more than 52 weeks for all purposes.

Please read comment and have reviewed. The form of agreement has not changed since first presented - pulled out some overbearing redundant legalese - weeks ago and the business terms should be as discussed.

Let's assume Dave is here on Monday and let's assume this thing is signed by both and thrown in a drawer not be looked at ever

[63] Although the second employment contract underwent several further revisions, the final version of the agreement did not contain any reference to the $40,000 payment.

[64] Mr. Donato submits that the $40,000 was not consideration for the second employment contract. He submits that he reached a separate agreement with PearTree over the $40,000 payment before PearTree presented the second employment contract to him. On Mr. Donato’s theory, he reached three separate agreements with PearTree: the first employment contract; the agreement for the $40,000 payment; and the second employment contract. I do not accept his submission.

[65] First, I find as a fact that the parties were still discussing the contours of the “accretive revenue matter” while they were negotiating over the terms of the second employment contract. The best evidence of the status of the negotiations is found in the exchange of emails around the lunch meeting between Mr. Mell and Mr. Bernbaum on June 20, 2016. Mr. Mell proposed that the $40,000 accretive revenue opportunity be “papered” in side-letter, as opposed to included in the second employment contract, because it would “fall away fairly quickly” when PearTree paid it. In Mr. Mell’s post-meeting note, he records that the earlier conversations “contemplated make-whole opportunity for out-of-pocket losses above $40k” (emphasis added). That appears to be a different proposal than the final agreement to pay $40,000 (and no more).

[66] Second, it would be artificial to conclude that the $40,000 payment formed a free-standing enforceable contract entirely disconnected from the second employment contract. Such an interpretation ignores the context of the negotiations between the parties. The $40,000 payment only came up after the parties signed the first employment contract. It provided an additional benefit to Mr. Donato that depended on him starting work at PearTree, which he did under the terms of the second employment contract. In my view, this $40,000 payment was capable of providing any consideration necessary to support the enforceability of the second employment contract. The fact that the second contract was signed later did not render that contract unenforceable or vitiate the consideration provided.[^23]

[67] Third, the parties agree that PearTree paid the $40,000 to Mr. Donato on July 26, 2016, only days after he started work at PearTree. I disagree with Mr. Donato’s submission that the payment was related exclusively to accretive revenue and not the second employment contract. It is highly unlikely that Mr. Donato generated sufficient accretive revenue between July 11, 2016, and July 26, 2016, to warrant a $40,000 bonus. The payment is much better understood as being connected to him starting work at PearTree under the second employment contract than an accurate assessment of the value of the accretive work he produced in his first 15 days of work.

3. Inclusion of the Oil and Gas revenue

[68] PearTree submits that it provided fresh consideration to Mr. Donato in the second employment contract by including the value of all oil and gas deals up to $100 million in the calculation of the variable compensation. I disagree.

[69] PearTree’s submission turns on the interpretation of three different provisions of the first employment contract: the bonus provision, the variable compensation provision, and the revenue sharing policy. They provide as follows:

Bonus: $50,000 if Peartree financings for the year exceed $100M from current product offerings based on the subscription for flow-through shares (“Base Revenue”).

Variable Payout to Banking Group: 25% of Peartree Base Revenue (at fixed rate of 6% of subscription amount) after deducting all direct costs of sale including, without limitation, any referral fees, commissions, selling concessions. Direct costs of sale do not include donor related costs and legal fees/costs associated with a flow-through financing.

Revenue Sharing Policy the intention of the Company and [Mr. Donato] is to recognize and compensate for contribution to the Company's revenue and income. [Mr. Donato] and the Company recognize that as the Company expands its product offerings that we will work in good faith to follow this policy. Along these lines:

1. Oil and Gas - We agree that the Banking Group will be compensated for its contribution to the Company's activities in the O&G sector including working with Danny Mah and others from time to time – such compensation to be determined. All O&G flow-through offerings will be included for the purpose of determining whether $100M bonus threshold has been reached.

[70] PearTree submits that the phrase “PearTree Base Revenue” in the variable compensation provision excludes revenue from oil and gas deals. PearTree submits that such a carve out should be inferred because of the language in the revenue sharing policy that says compensation for oil and gas is to be determined. PearTree says that the reference to oil and gas revenues being included in the bonus threshold means that this is the only compensation provision that includes oil and gas revenue. I disagree.

[71] PearTree’s interpretation of the agreement does significant violence to the text of the agreement and is commercially unreasonable. PearTree Base Revenue is a defined term in the agreement. I see no support in the text of the agreement that would justify excluding one type of “current product offering”, in this case oil and gas transactions, from the calculation of the variable payout.

[72] What remains “to be determined” is the future revenue sharing policy, which may provide additional compensation to the banking group for its contributions to the Mr. Mah and the PearTree’s work in the oil and gas sector. I do not accept PearTree’s submissions that the future discussions around the revenue sharing policy mean that oil and gas revenue should be excluded from PearTree Base Revenue as defined in the first employment contract.

[73] The first employment contract clarifies that oil and gas flow-through revenue will be included in the calculation of whether or not the bonus threshold was reached but that does not mean that the revenue is excluded from the calculation of the variable payout. Much clearer language would be required to deprive Mr. Donato of that benefit.

[74] I find that the inclusion of oil and gas revenue in the calculation of the variable payout under the second employment contract provided no additional consideration to Mr. Donato.

4. The amendment to the termination provision

[75] PearTree submits that it provided fresh consideration to Mr. Donato in the second employment contract by including a provision that would allow Mr. Donato to resign before the end of the two year term. PearTree submits that this was a benefit to Mr. Donato because if he resigned before the end of the two-year term, he would be liable for “wrongful resignation.” I disagree.

[76] PearTree’s submission rests on the proposition that it would have been able to sue Mr. Donato, a banker, for resigning from his position before the end of the contract term and could also have proved damages flowing from that breach. PearTree led no evidence to demonstrate that there is anything about Mr. Donato’s position that would justify a long notice period. Similarly, PearTree led no evidence to demonstrate that would have incurred costs, expenses or damages had Mr. Donato resigned early. The fact that PearTree terminated Mr. Donato’s employment without notice and never replaced him amply demonstrates the flaw in PearTree’s position.

[77] In addition, Mr. Mell’s employment contract was identical to Mr. Donato’s second employment contract. By the letter of the contract, Mr. Mell could not resign prior to September 30, 2017, and, thereafter, could only resign on four weeks notice. In fact, Mr. Mell resigned and started his new job in March 2017, seemingly without any protest by PearTree. This is further evidence that the benefit of the “right to resign” is more imaginary than real.

[78] I do not accept PearTree’s submission that permitting Mr. Donato to resign before the end of the contract amounts to fresh consideration.

5. The timing of the payment of variable compensation

[79] PearTree submits that the second employment contract specified the timing when it would pay the variable compensation to Mr. Donato whereas the first agreement was silent on this point. PearTree submits that this amounts to fresh consideration for the second employment contract. I disagree.

[80] I do not infer that the payment schedule in the second employment contract was more favourable to Mr. Donato than it would have been under the first employment contract. Indeed, PearTree did not comply with the payment schedule under the second employment contract. I see no meaningful benefit flowing to Mr. Donato under the second employment contract with respect to the timing of the payments made to him.

6. The reimbursement of Mr. Donato’s business expenses

[81] PearTree submits that the second employment contract explicitly provided that PearTree would reimburse Mr. Donato for business expenses, whereas the first employment contract did not. PearTree submits that this amounts to fresh consideration for the second employment contract. I disagree.

[82] Mr. Donato was hired to be the Co-Head of Banking with Mr. Mell. He became the President and Head of Banking when Mr. Mell departed. It is difficult to believe that PearTree would not reimburse Mr. Donato for business expenses he incurred. Indeed, the first employment contract that Mr. Mell had with PearTree stated that PearTree would reimburse him for “work-related expenses.”

[83] I would readily imply a term into Mr. Donato’s first employment contract that would require PearTree to reimburse its co-head of banking for work-related expenses. I have no doubt that such a term would have been the joint intention of the parties.

[84] PearTree submits that these expenses, approximately $10,000 per year, were “substantial.” Given the hundreds of millions of dollars of deals in which the banking group was involved, I disagree. I also do not accept PearTree’s submission that generic business development expenses would otherwise comprise “direct costs of sale” to be deducted from the amount of variable compensation pursuant to he second employment contract.

[85] I do not accept that PearTree reimbursing Mr. Donato for work-related expenses amounts to fresh consideration for the second employment contract.

7. The definition of the banking group

[86] PearTree submits that the second employment contract “provided clarity” in its definition of members of the banking group and that this definition provided a benefit to Mr. Donato. I disagree.

[87] The second employment contract states that “Any compensation payable to members of the banking group other than base salary shall be payable out of the Variable Payout.” The contract goes on to name Mr. Mah as a member of the banking group and provides specific terms for his compensation. It also references Marianne Jankevice and describes her bonus arrangement.

[88] The second employment contract does not, however, exhaustively define the members of the banking group. If PearTree wished to argue that Ms. Davis or Mr. Bernbaum were “members of the banking group” and that they were entitled to compensation out of the variable payout pool, it is not clear that the second employment contract would preclude that argument.

[89] I do not accept PearTree’s submission that the definition of the banking group provided any benefit or fresh consideration to Mr. Donato for the second employment contract.

8. Conclusion

[90] I find that PearTree provided Mr. Donato with additional paid vacation in the second employment contract, which amounted to fresh consideration. In addition, I find that the $40,000 bonus was consideration for the second employment contract, even though it was not referred to in the text of that contract.

[91] It is not role of the court to assess the adequacy of the consideration provided by PearTree or to assess whether or not the economic benefits obtained by Mr. Donato outweigh what he gave up. I observe, however, that neither two additional weeks of paid vacation nor $40,000 can be fairly described as a mere peppercorn. I find that the second employment contract is enforceable.

Mr. Donato accepted the new contract

[92] PearTree also submits that, in the alternative, even if it did not provide fresh consideration for the second employment contract, it is nevertheless enforceable on Wronko principles because the employer repudiated the first employment contract and Mr. Donato agreed to be bound by the second employment contract.[^24] For the reasons that follow, I agree with this alternative position.

[93] In Wronko, the Court of Appeal for Ontario affirmed that an employee may not unilaterally vary an employee’s contract. An employee is entitled to insist that her employer follow the terms of the contract. An employee will not be held to have accepted a unilateral variation of her contract simply because she continued to work. Citing the earlier decision of the Court of Appeal for Ontario in Hill v. Peter Gorman Ltd., 1957 CanLII 393, 9 D.L.R. (2d) 124 (Ont. C.A.), Winkler C.J.O. described the three options available to an employee when an employer attempts a unilateral amendment to a fundamental term of a contract of employment:

First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.

Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term. This course of action would now be termed a "constructive dismissal", as discussed in [Farber c. Royal Trust Co., 1997 CanLII 387 (SCC), [1997] 1 S.C.R. 846], although this term was not in use when Hill was decided.

Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms. If the employer does not take this course and permits the employee to continue to fulfill his or her job requirements, then the employee is entitled to insist on adherence to the terms of the original contract. In other words, if the employer permits the employee to discharge his obligations under the original employment contract, then — unless proper notice of termination is given — the employer is regarded as acquiescing to the employee's position. As Mackay J.A. [in Hill] so aptly put it: "I cannot agree that an employer has any unilateral right to change a contract or that by attempting to make such a change he can force an employee to either accept it or quit."

[94] The analysis of this issue in this case is somewhat complicated by the fact that Mr. Donato believed (correctly) that the first employment contract was binding but PearTree believed (incorrectly) that it was not. Nevertheless, I accept that by no later than July 7, 2016, PearTree had demonstrated an intention that it would not longer be bound by the first employment contract. PearTree intended to change significantly the compensation that it would pay to Mr. Donato. That breach is sufficiently serious to amount to the constructive dismissal of Mr. Donato. Moreover, by seeking to replace the entirety of the first employment contract with the second, and by refusing to permit Mr. Donato to start work until he signed the second employment contract in an acceptable form, PearTree more generally demonstrated that it did not intend to be bound by the terms of the first employment contract.[^25]

[95] It is important to consider the context that led up to PearTree’s final offer to Mr. Donato and Mr. Mell. PearTree indicated to Mr. Donato as early as May 27, 2016, that it intended to present him with a new employment agreement. Ms. Davis sent Mr. Mell the first draft of that agreement on June 2, 2016. The parties met on June 6, 2019, to discuss the terms of the second employment contract. That meeting became so heated that Mr. Bernbaum stepped out of the meeting to calm down and then came back to apologize. The parties then exchanged further drafts of the agreement starting on June 16, 2016. Mr. Donato and Mr. Mell retained counsel to represent them in the negotiations over the second employment contract. They proposed many revisions to the terms of the second employment contract. PearTree accepted some of the proposals and rejected others.

[96] Against that backdrop, on July 7, 2016, Mr. Bernbaum sent its final offer to Mr. Donato, Mr. Mell, and their counsel. I have no doubt that this message demonstrates unequivocally that PearTree was not willing to be bound by the terms of the first employment contract and that it would terminate Mr. Donato’s employment if he did not accept this final offer. Given the centrality of Mr. Bernbaum’s message, I will set it out some of the important passages and add underlining to identify the key parts of the message:

Dear Dave and Trent - as discussed with Trent last night, we have gone through so many iterations that we have lost sight of what was traded along the way. The offer on the table is our last ditch effort. If the terms are not all acceptable in totality then we don't have a deal. Dave has avoided signing a NDA and as a result we have not been able to share the information needed to begin to formulate thinking around a business plan and as such has provided no value to PearTree to this date. That combined with his delays in extricating himself from Mackie in preserving his equity has not been helpful. As a result, if there is a deal then it begins on July 11 as per the agreement. Base salary begins on July 11. Variable compensation begins to run on that date. Financings documented before July 11 but not closed until after July 11 including [name of mining company] for 25M$ closing on July 27 are not included in variable compensation. I need to be clear on all these issues and there must be clear consensus.

This is hardly a typical enterprise and the deal we may be entering into is hardly between the upper hand employer and the unwashed employee whose subsidence wage is augmented by allusive promises of commission. Characterization of unfairness and fundamental wrongfulness windfall is offensive unhelpful and demonstrative of lack of appreciation of the needs of all parties. PearTree has concerns that must be addressed along-side those of Dave and Trent. We have agreed to many of your concerns / terms even when we have found them unfounded. Yesterday Dan asked Bernadine if her draft fairly represented her clients instructions to which he received affirmation. If Dave and Trent truly agree with the comments about fairness wrongfulness and windfalls then we have no basis for a relationship and you need read no further and there will be no deal. At this point the market has come back, Dave can find employment at or better terms but PearTree has been significantly prejudiced by delays and protracted negotiation. Not a typical employer employee discussion.

There a likely a number of other matters that could be discussed but for the hour, Gentlemen - as Trent knows after 14 months working with us, we are always keen to appreciate the needs and agenda on the other side of the table. At [this] point the decision for you is binary. I would appreciate responses to the queries contained in the email and either signed agreement or confirmation that there is no deal by end of day tomorrow.

[97] Mr. Donato correctly interpreted this message to mean that PearTree was terminating his employment unless he agreed to the terms of the second employment contract. He testified that it was “take it or leave it and leave it means you are unemployed….” Mr. Donato testified that he ultimately chose to sign the agreement because he did not want to be unemployed.

[98] I find that PearTree repudiated the first employment contract and offered Mr. Donato employment under the terms of the second employment contract. Mr. Donato then had the three options described in Wronko: accept the terms of the second employment contract; reject the second employment contract and sue for PearTree for damages under the first employment contract; or make it clear that he was rejecting the terms in the second employment contract and put PearTree to its election on how to proceed.

[99] Mr. Donato chose to sign the second employment contract and to work under its terms. He did not indicate that he was working under protest. I accept that there was a power imbalance between PearTree and Mr. Donato. This arose not only from the structural inequity between PearTree and an individual employee, but also from his personal situation, including his wife’s serious illness. Nevertheless, there were some features of the negotiations that mitigate the power imbalance:

a. Mr. Donato, through his cooperation with Mr. Mell, had access to a good deal of relevant information about how PearTree worked and the likely implications of the economic terms of the second employment contract;

b. Mr. Donato was represented by counsel during the negotiations;

c. The negotiations over the second employment contract took over one month, which provided a reasonable amount of time for Mr. Donato to consider the proposed terms and his options on how to proceed;

d. There was a meaningful back and forth negotiation with PearTree over the terms of the second employment contract, even if Mr. Donato certainly did not get all of the changes he wanted;

e. Mr. Donato was a sophisticated employee who was quite comfortable negotiating and, as demonstrated in his exit negotiations with Mackie, re-negotiating contracts to his financial benefit; and

f. Mr. Donato had the benefit of negotiating the terms of the second employment contract against the backdrop of the binding first employment contract. While this was not a perfect option, he could have commenced an action for damages arising from the first employment contract, which was arguably a fixed-term two year contract with no duty to mitigate.

[100] Having accepted the second employment contract in these circumstances, however, Mr. Donato is bound by its terms.

Compensation owing to Mr. Donato

[101] Mr. Donato is entitled to be paid correctly for Year 1 at PearTree, which I find ran from July 11, 2016, to July 10, 2017, and for damages flowing from the termination of his employment on January 8, 2018.

Year 1 Compensation – July 11, 2016, to July 10, 2017

[102] I must resolve a number of issues to permit an accurate calculation of the money owed to Mr. Donato for Year 1 of his employment with PearTree. With the benefit of these determinations, the parties and their experts should be able to agree on the amounts, if any, owing to Mr. Donato for Year 1. The parties may come back before me if there are any additional items to be resolved.

1. What transactions should be included in the calculation of Mr. Donato’s compensation?

[103] The parties disagree on which transactions should be included for the purposes of calculating Mr. Donato’s first year compensation. Two things flow from my conclusion that the second employment contract is binding on the parties.

[104] First, for the purposes of calculating his compensation, Mr. Donato’s start date is July 11, 2016, which is the date specified in the second employment contract. I see no basis to select another date given the clear language.

[105] Second, Mr. Donato is only entitled to compensation under the second employment contract, which he signed with the benefit of legal advice. That second contract released all of his claims against PearTree under the first employment contract:

This Agreement constitutes the entire agreement between the parties hereto with respect to your employment. Any and all previous agreements, written or oral, express or implied between the parties hereto or on their behalf relating to your engagement with and/or your employment by Peartree are hereby terminated and cancelled and each of the parties hereto hereby releases and forever discharges the other of and from all manner of actions, causes of action, claims and demands whatsoever under or in respect of any such agreement.

[106] To determine which transactions are to be included in Mr. Donato’s compensation for Year 1, I must interpret the following provision of the second employment contract:

You agree that in order for an amount to be considered for the purpose of the Variable Payout for a specific 12 month period, a firm written commitment from the other parties to the transaction relating to the revenue must be received in such period, and the transaction must be completed within 2 weeks of the end of the 12 month period. Revenue from any deals for which commitments have been secured prior to the commencement of your employment which close after the commencement of your employment shall be excluded from the Variable Payout.

[107] I find that Mr. Donato is only entitled to have a transaction included in his Year 1 income if the issuer signed a firm written commitment on or after July 11, 2016. For that reason, the following transactions should be excluded from the calculation of his Year 1 compensation:

a. All transactions with a closing date before July 11, 2016, including the Kelt Transaction;

b. The Crown William Mining transaction, because PearTree earned no income on that transaction;

c. Kirkland Lake Gold Inc., because PearTree sent a draft term sheet to KLGI on May 30, 2016, KLGI indicated it was revising the term sheet on June 16, 2016, KLGI and PearTree were exchanging term sheets on June 16, 2016, requested a copy of the executed term sheet on June 21, 2016, and issued a press release announcing this transaction that same day. All of this activity took place before July 11, 2016, and the transaction is, therefore, excluded from Mr. Donato’s compensation;

d. Osisko Mining (two transactions), because the company signed the term sheet with PearTree on June 27, 2016, which was before July 11, 2016.

2. The variable payout rate

[108] The parties disagree on the variable payout rate to be used to calculate Mr. Donato’s compensation. PearTree submits that the payout rate of 1.5% of subscription amounts should be reduced by 25% because Mr. Mell resigned from PearTree. Mr. Donato submits that the appropriate rate is 1.5% because the collective efforts of the banking group constituted a suitable replacement for Mr. Mell.

[109] Mr. Mell resigned from PearTree in February 2017, which triggered the clause that describes the compensation rate. That clause reads as follows:

It is the intention of the parties that the Variable Payout Plan is designed to compensate the entire Banking Group led by two co-heads. In the event that during the term of this agreement Trent Mell ceases to be employed by Peartree, it is understood and agreed that the amount of the Variable Payout that accrues to the Banking Group in which Trent Mell is no longer entitled to participate, shall be reduced by 25% until such time as a suitable replacement is hired.

[110] Mr. Donato submits that the collective efforts of the banking group, consisting of Mr. Donato, Mr. Baschuk, and Mr. Chan, constituted a suitable replacement for Mr. Mell. He notes that during the eight months that Mr. Mell and Mr. Donato worked together as co-heads of the banking group (July 2016 to February 2017), average monthly transactions were $20,069,000; during the eight months after Mr. Mell left PearTree (March 2017 to October 2017), average monthly transactions were $19,158,000.293. Moreover, backing out certain transactions that formed part of PearTree’s base business, deal flow increased after Mr. Mell’s departure.

[111] I do not accept Mr. Donato’s submissions as it is not consistent with the language of the second employment contract. The clause is triggered if and when Mr. Mell “ceases to be employed by PearTree.” Upon that event, the payout rate is reduced to 1.125% . The payout shall be at that reduced rate “until such time as a suitable replacement is hired.”

[112] The evidence is clear that PearTree did not hire any replacement for Mr. Mell, the co-head of banking, before Mr. Donato’s termination. The only person hired after Mr. Mell departed was Ricky Chan. Mr. Chan’s employment contract is dated March 23, 2017. Mr. Chan is given the title of Vice-President reporting to Mr. Donato (Mr. Mell was President and co-head of banking with Mr. Donato), a salary of significantly less than Mr. Mell’s base salary of $240,000, an annual discretionary bonus (Mr. Mell was entitled to the variable compensation program as Mr. Donato).[^26]

[113] Mr. Donato testified that Mr. Chan was hired as a “direct response” to Mr. Mell leaving PearTree described Mr. Chan’s initial role as a “plug and play, stay-at-home defenceman,” which I understood to mean someone who would be in the office to assist with transactions as opposed to someone who would be in the streets attempting to drum up new business. Mr. Chan subsequently attended mining conferences and working to help with deal generation. Mr. Donato testified that he considered Mr. Chan (along with Mr. Baschuk) to be a suitable replacement for Mr. Mell.

[114] I do not accept Mr. Donato’s evidence that Mr. Chan was hired as a direct response to Mr. Mell’s departure or that Mr. Chan was a suitable replacement for Mr. Mell. Mr. Mell testified that the hiring process for Mr. Chan had started before his departure and that he interviewed Mr. Chan before he left PearTree. Mr. Chan had never before worked as a lead investment banker when he joined PearTree. He was not hired to replace Mr. Mell, did not assume Mr. Mell’s title or receive compensation commensurate with the role previously filled by Mr. Mell. It does not appear that, even after Mr. Donato’s departure, Mr. Chan ever assumed a leadership role. None of this is meant as a criticism of Mr. Chan. Not one witness said a bad thing about Mr. Chan or his work. It is simply to explain my conclusion that the hiring of Mr. Chan was not the hiring of a “suitable replacement” for Mr. Mell within the meaning of the second employment contract.

[115] Mr. Donato submits that it is commercially absurd to interpret the second employment contract in a manner that reduces his compensation as a result of failing to replace Mr. Mell for whom no replacement was required while PearTree maintained or improved its performance. I disagree. Interpreting the clause in the context of the entirety of the contract and the circumstances known to the parties, I find that the clause does not tie the variable payout rate to the deal flow or the economic performance of PearTree after Mr. Mell’s departure. The clause ties the rate to hiring of a suitable replacement for Mr. Mell. There is no evidence that Mr. Donato tried to hire a suitable replacement for Mr. Mell or that such efforts were thwarted by PearTree.

[116] Mr. Donato makes an alternative argument that he is entitled to variable compensation for all transactions at a rate of 1.5% for all transactions leading up to Mr. Mell’s departure and 1.125% thereafter. In my view, the complete answer to this submission is found in the text of the second employment contract, which spells out exactly when and how the variable payout is to be completed:

Any Variable Payout to which the Banking Group is entitled shall be calculated and paid as follows:

1. The first calculation is at the end of the second quarter being December 31, 2016. The Variable Compensation as calculated above (if any) shall be paid 120 days post the end of the two quarters, being on or by April 30, 2017 in the year following.

2. The second calculation is at the end of the third quarter being March 31, 2017. The Variable Compensation as calculated above (if any) shall be paid 90 days post the end of the quarter, being on or by June 30, 2017;

3. The third calculation is at the end of the fourth quarter being June 30, 2017. The Variable Compensation as calculated above (if any), shall be paid 90 days post the end of the quarter, being on or by September 30, 2017; and

4. The subsequent calculations shall be at the end of each subsequent quarter. The Variable Compensation as calculated above (if any), shall be paid 90 days post the end of the quarter.

[117] The variable payout rate is one element of the calculation to be performed in accordance with the second employment contract. If Mr. Mell was an employee of PearTree on the date specified for the calculation of the entitlement to variable compensation (not the date when the compensation is to be paid), the calculation should be at the rate of 1.5%. In concrete terms, if and only if PearTree employed Mr. Mell on March 31, 2017, the second calculation should be done at 1.5%. Otherwise, the calculation should be at 1.125%

[118] If the parties are not able to agree on whether or not PearTree employed Mr. Mell on March 31, 2017, they may arrange for a further attendance before me to resolve that issue.

3. Bonus amount

[119] While this amount was originally in dispute, the parties agree that Mr. Donato was entitled to a $50,000 bonus if the PearTree generated $100 million in subscription sales.

[120] I find that Mr. Donato is entitled to be paid a $50,000 bonus for year 1 pursuant to the second employment contract.

4. Calculating the direct costs to be deducted

[121] The parties disagree about two aspects of the direct costs that must be deducted in order to determine Mr. Donato’s correct compensation. First, they dispute whether 25% or 100% of the value of the expense should be deducted. Second, they dispute whether certain expenses of PearTree should be deducted at all. Resolving this issue requires the interpretation of the clause in the second employment contract that describes the calculation of the variable payout, including the deduction of direct costs of sale:

In consideration of fulfilling your duties, for each of the two 12 month periods of your employment with Peartree, the Banking Group will have the ability to earn a “Variable Payout” as follows.

For current flow-through product offerings other than CEE / CDE / CRCE offerings by Alberta headquartered oil and gas issuers, midstream issuers, pipeline issuers, and power issuers - 1.5% of subscription amounts, above Base Revenue, less all direct costs of sale including, without limitation, any referral fees, commissions, and selling concessions. Direct costs of sale do not include donor related costs and legal fees/costs associated with a flow-through financing unless otherwise agreed.

[122] To understand the parties’ submissions, I think it is helpful to set out how this calculation operates.[^27] First, assume a world where there are no direct costs of sale and where Peartree sold $300 million worth of charitable flow-through shares in the year. From that amount, subtract $100 million (the fixed Base Revenue number) to calculate the subscription amount above Base Revenue. In this case, that amount is $200 million. The $200 million is then multiplied by 1.5% (which is the product of 6% (being the deemed PearTree profit margin) and 25% (being the amount of the profit allocated to the banking group)). This calculation can be described as (Total Subscriptions – Base Revenue) *0.015. In this scenario, the variable payout pool for the banking group (not Mr. Donato alone) would be $3 million.

[123] The parties disagree how to recognize the direct costs of sale in this formula. The difference between the parties’ positions can be described this way:

a. Mr. Donato: Variable Payout = (Total subscriptions – Base Revenue – Direct costs of sale) * 0.015

b. PearTree: Variable Payout = ((Total subscriptions – Base Revenue) * 0.015) – Direct costs of sale

[124] In my view, PearTree’s approach is more consistent with the text and structure of the second employment contract. The clause appears to contemplate a two-step process. First, the amount of the variable payout is calculated by calculating 1.5% of the subscription amounts above $100 million (which is the defined value of Base Revenue) and then deducting direct costs. In my view, deducing the direct costs before multiplying by 1.5% is not consistent with the language used in the agreement.

[125] I accept Mr. Donato’s submission that adopting PearTree’s approach could result in a few cases where the direct costs of the financing would exceed the amount of income the banking group would receive. Mr. Donato submits that this is a commercially absurd result because the transaction would still produce an economic return for PearTree, but the banking group would have no incentive to pursue that work.

[126] I do not think that the situation described by Mr. Donato makes my interpretation of the clause commercially absurd. First, the banking group would still have an incentive to pursue the transaction so that the proceeds would count towards meeting the $100 million threshold for the bonus and variable compensation payments. Second, my interpretation incentivizes the banking group to minimize the direct costs of sale. There is nothing absurd about the contract allocating the burden of finding such efficiencies squarely on the banking group. Third, the banking group owes duties of loyalty to PearTree to pursue beneficial transactions, even if those transactions would not earn them additional dollars.

[127] I find that 100% of the direct costs of sale should be deducted from the amounts paid to the banking group under the second employment contract.

5. Expenses to be deducted as a direct cost of sale

[128] The parties disagree on whether or not certain expenses should be deducted from the variable payout to the banking group. Three types of expenses remain in dispute: an event sponsorship, selling concessions, and limited partnership expenses.[^28]

(a) Miner’s Lamp Dinner sponsorship

[129] PearTree paid $175,000 to sponsor an event on behalf of IAMGOLD at the University of Toronto. PearTree submits that this was a “cost associated with doing transactions” for IAMGOLD. I disagree.

[130] PearTree is only entitled to deduct the “direct costs of sale” from the amounts to be paid to the banking group. In my view, an event sponsorship is not a direct cost of sale. There is no evidence that IAMGOLD demanded this donation as a quid pro quo for a particular transaction. Indeed, it would be extremely surprising if a publicly traded company imposed such a quid pro quo. There is no evidence that this donation was a direct cost associated with any particular transaction.

[131] This donation is much better described as a general expense of PearTree than a direct cost of sale. The parties agree that Mr. Bernbaum and Ms. Davis, not Mr. Donato, made the decision to donate this amount. Ms. Davis explained the rationale for the donation as follows:

Q. … So then I will skip down to University of Toronto Miner's Lamp payments. What does that relate to, Ms. Davis?

A. That was a fundraising event that was being steered by the, primarily the CFO of IAMGOLD and as part of building and preserving that relationship we had agreed to be a sponsor of that event.

[132] I do not accept that this expense is properly described as a “direct cost of sale” within the meaning of the second employment contract. This expense should not be deducted.

(b) Sales concessions

[133] PearTree submits that it should be entitled to deduct $113,400 as a “sales concession” within the meaning of the second employment contract. This was an amount that PearTree agreed to remit to a large donor in connection with that donor’s involvement in a particular transaction. PearTree agreed to reduce the amount the donor paid to PearTree because of the size of the transaction and amount of fees the donor would otherwise pay to PearTree.

[134] Mr. Donato submits that this is not an appropriate deduction because the economic result of PearTree’s decision is simply to reduce PearTree’s overall income from the transaction and that the parties have already accounted for the variable profitability of each transaction by setting the compensation rate for the banking group at a fixed number, 6%. Moreover, Mr. Donato submits that “selling concession” is a term of art that covers the situation where the PearTree had to hire an underwriter for a transaction and PearTree had to pay to place the deal through the underwriter.

[135] I find that PearTree is not entitled to deduct this amount from Mr. Donato’s compensation. The relevant clause provides as follows:

less all direct costs of sale including, without limitation, any referral fees, commissions, and selling concessions. Direct costs of sale do not include donor related costs and legal fees/costs associated with a flow-through financing unless otherwise agreed.

[136] In my view, reducing the amount a donor pays to PearTree is better described as a “donor related cost,” which is not to be deducted, than a “selling commission.” I accept that the benefit conferred on the donor by PearTree is not an out of pocked expense to PearTree, but the economic effect is the same. I do not think that this type of benefit falls comfortably within the meaning of “selling concession” as that clause is typically used. I find that this amount is better characterized as a “donor related cost,” which the parties expressly agreed would not be deducted. The expense related to this $113,400 amount should not be deducted.

(c) Limited partner subscriptions

[137] The parties disagree on how to treat limited partnership subscriptions for the purposes of calculating Mr. Donato’s variable compensation. LP subscriptions refers to charitable flow-through transactions where there is insufficient donor demand to take up all of the shares the issuer wishes to sell. In such a situation, PearTree may purchase the shares in a limited partnership. PearTree will then attempt to sell units in the limited partnership so that participants can obtain a tax advantage.

[138] Mr. Donato submits that there is no basis in the second employment contract to treat the limited partnership subscriptions any differently than any other subscription. Mr. Donato submits that the parties agreed on a blended average profit margin of 6% for all transactions and that this number already prices in any deals, such as limited partner subscriptions, that may produce a profit margin of less than 6%. Just as there is no mechanism in the second employment contract for Mr. Donato to benefit from transactions that have a higher profit margin than 6%, there is no basis for limited partnership subscriptions to be treated differently if their profit margin is less than 6%.

[139] PearTree submits that limited partnership expenses fall within the definition of direct costs and that all expenses incurred in order to sell limited partnership units should be included within the definition of “direct costs” and deducted from the compensation paid to Mr. Donato. To reflect these expenses, PearTree submits that all subscription revenue from the limited partnership subscription should be deducted and then the actual income earned by PearTree should be added back in. PearTree also points to the portion of the second employment contract that indicates that “variable remuneration to compensate you for investment banking services in respect of other types of transactions will be separately determined by PearTree with a view to maintaining substantially similar corporate profitability in respect of such transactions.” Consistent with this principle, PearTree paid out 25% of net amounts from the LP transaction to try to maintain a similar profitability level. I do not accept PearTree’s submission on this point.

[140] In my view, there is no basis to treat the revenue from the limited partnership subscriptions differently from any other charitable flow-through transaction. Transactions conducted through the limited partnerships were one of the “current flow-through product offerings” described in the second employment contract. The contract awarded 1.5% of all subscription amounts, including limited partnership transactions to the banking group for calculating the variable payout. It would take much clearer language in the second employment contract to persuade me to adopt PearTree’s interpretation of that clause.

[141] I accept Mr. Donato’s submission that the parties fixed 6% as the deemed profit that PearTree earned on transactions. When they negotiated over that number, both parties knew that PearTree’s profit on each individual transaction varied. To simplify calculations, the parties agreed to set a fixed percentage that would be the deemed profit on all transactions. The parties initially discussed using 7% and PearTree negotiated that number down to 6.5% and then to 6%. It was well known to both parties that some of the “current flow-through product offerings,” including the limited partnership subscriptions, would be more or less profitable than others. I see nothing in the text of the second employment contract, or the context in which it was negotiated, that suggests that revenue from limited partnership subscriptions should receive different treatment or somehow be excluded from the calculation.

[142] PearTree has not satisfied me that the lower level of profitability associated with limited partnership transactions fits comfortably within the meaning of “direct costs of sale.” I find that limited partnership subscriptions should be treated the same as all other subscription amounts from the current flow-through product offerings.

(d) Compensation to other members of the banking group

[143] The parties disagreed about how to calculate the compensation to be paid to other members of the banking group.

[144] As set out above, I have determined that Mr. Donato’s compensation is to be determined in accordance with the second employment contract and that Mr. Donato’s start date was July 11, 2016. Given those determinations, I understand that the parties have agreed on the appropriate adjustments:

a. $36,386.33 should be deducted in respect of compensation paid to Mr. Mah;

b. $11,666.67 should be deducted in respect of Mr. Baschuk’s salary in excess of $100,000;

c. $8,333.33 should be deducted in respect of Mr. Chan’s salary in excess of $100,000; and

d. the bonuses paid to Mr. Baschuk and Mr. Chan should be prorated between the two variable compensation years based on a July 11 start date.

Year 2 compensation

[145] Mr. Donato is entitled to damages for wrongful dismissal in accordance with the terms of the second employment contract. The applicable parts of the termination provision provide as follows:

This employment relationship is not terminable by either party on or before September 30, 2017 except:

(a) by Peartree immediately at any time for just cause by written notice to you.

(b) by you upon providing a minimum of four (4) weeks notice in advance, in writing, which notice Peartree can in its discretion partially or fully waive;

(c) by Peartree on a without cause basis by providing you with salary continuance, at your regular base salary, along with medical/dental benefit continuance (if such benefits are being provided at the time of termination), until the earlier of July 10, 2018, or when you commence new employment (including self employment);

(d) it is also agreed that if your employment with Peartree is terminated on a without cause basis subsequent to September 30, 2017, that you will remain eligible to receive Variable Compensation relating to any deals which you had proposed in writing in Term Sheet form, presented to issuers prior to the termination of your employment and for which firm written commitments were secured and financings closed by Peartree subsequent to the date of the termination of your employment but prior to July 10, 2018.

The termination provision is enforceable

[146] In closing argument, Mr. Donato suggested that the termination provision contained in the second employment contract was not enforceable. Mr. Donato did not plead this point in his fresh as amended statement of claim dated December 6, 2018. Mr. Donato did not call evidence on this point. It was not the focus of his submissions. Mr. Donato filed a 67-page written closing argument. Only three of the 180 paragraphs addressed this submission that the termination clause was not enforceable because it violated the Employment Standards Act. The written submissions do not cite or engage with any of the significant body of caselaw that considers whether or not a termination clause in an employment agreement is enforceable. Counsel for Mr. Donato did not press this issue during closing oral submissions. It is fair to say that this submission was not a focus of the trial.

[147] Mr. Donato’s written submissions stated as follows:

97. Even if the July Agreement is found to govern Mr. Donato's employment relationship with PearTree (which it does not), the termination clause is unenforceable. The without cause provision in the termination clause deprives Mr. Donato of his statutory entitlements. The termination clause purports to allow PearTree to dismiss Mr. Donato without cause by providing him with salary continuance, at his "regular base salary", until the earlier of July 10, 2018 or when he commences new employment. However, pursuant to section 38 of the ESA, when an employee's employment ends, for any reason, the employee is entitled to any accrued vacation pay that is outstanding at the time their employment ended. Mr. Donato had accrued vacation pay at the time of his termination. The termination clause does not mention vacation pay, and is thus offside the ESA.

98. Fixed-term contracts are subject to the ESA minimum standards relating to termination of employment. While Regulation 288/01 carves out certain exemptions in which the ESA's minimum requirements regarding termination entitlements will not apply in fixed-term scenarios, none of these exemptions apply to Mr. Donato. Specifically, section 2(2) of Regulation 288/01 establishes that fixed-term employees will be entitled to notice of termination or termination pay in situations where: (a) their employment terminates before the fixed-term expires; and (b) their term expires more than 12 months after the employment started. Mr. Donato satisfies both. Therefore, the without cause termination.

99. A severability clause cannot have any effect on clauses of a contract that have been made void by statute. Without the termination clause, the July Agreement contains the same two-year fixed-term as the March Agreement. The Ontario Court of Appeal has held that where employers draft an ambiguous or vague clause that is later found to be unenforceable, they cannot complain when it is held to the remaining terms of the contract.

[148] I do not accept these submissions for four reasons.

[149] First, I have found that the second employment contract is enforceable.

[150] Second, whether or not the termination clause in the second employment contract is enforceable, the term of the first employment contract is entirely irrelevant to Mr. Donato’s rights upon his termination in January 2018. Even if I were to find that the termination provision in the second employment contract was not enforceable, Mr. Donato could not claim under the first employment contract. He would only be entitled to reasonable notice of the termination of the second employment contract.

[151] Third, I do not think the second employment contract is a true fixed-term contract as its terms expressly provide for without-cause termination in advance of the end of the contract’s two-year term.

[152] Fourth, I do not accept that the deprives Mr. Donato of his statutory entitlement to vacation pay. I accept that an employer may not contract out of any employment standards unless it substitutes a greater benefit. Failing to provide a greater benefit would render the termination clause void and unenforceable.[^29] In my view, the termination provision is merely silent on the question of whether or not Mr. Donato’s unused vacation pay is to be paid to him. This is not a contract that purports to exclude PearTree’s obligation to pay out the accrued and outstanding vacation pay.[^30] The contract is silent on the question of accrued but unpaid vacation pay. It is also silent on the requirement to pay out wages for days already worked. The second employment contract does not say that Mr. Donato is not entitled to anything further beyond the salary continuation, benefit continuation, and limited entitlement to variable compensation that is described in the contract. I do not interpret this silence as an attempt by PearTree to deprive Mr. Donato of his statutory entitlements.[^31]

[153] I find that the termination provision in the second employment contract is valid and enforceable. Peartree, therefore, was contractually obligated to provide Mr. Donato with salary continuance at his regular base salary, and medical/dental benefit continuance until the earlier of July 10, 2018, or when he commenced new employment (including self employment). PearTree was also obliged to pay out any other statutory amounts owing to Mr. Donato as at the date of termination.

What amounts are payable in respect of Year 2 compensation?

[154] Pursuant to the second employment contract, Mr. Donato was also entitled to receive variable compensation in certain circumstances. The relevant clause provided:

it is also agreed that if your employment with Peartree is terminated on a without cause basis subsequent to September 30, 2017, that you will remain eligible to receive Variable Compensation relating to any deals which you had proposed in writing in Term Sheet form, presented to issuers prior to the termination of your employment and for which firm written commitments were secured and financings closed by Peartree subsequent to the date of the termination of your employment but prior to July 10, 2018.

[155] PearTree did not pay Mr. Donato any variable compensation for Year 2 because PearTree had not surpassed the $100 million subscription threshold by January 9, 2018, which was the date PearTree terminated Mr. Donato.

[156] In his written submissions, Mr. Donato agreed that if the second employment contract governs the termination of his employment, and if the termination provision is enforceable, then he “does not dispute the application of KSV [PearTree’s damages expert’s] Scenarios 1 and 2 as they apply to Year 2.”

[157] As I have found that the second employment contract, including its termination provision is enforceable, and that the appropriate start date is July 11, 2016, I agree that the appropriate damages calculation for Year 2 is set out in KSV Scenario 1 and 2. Mr. Donato is entitled to total compensation for Year 2 of $240,000.[^32]

[158] In the event that I am wrong, and the termination provision in the second employment is not valid, I will now consider the evidence led by Mr. Donato on the question of whether or not, but for his termination, PearTree would have participated in more transactions between January 8, 2018, and July 11, 2018.

[159] Mr. Donato submitted that, but for the termination of his employment, PearTree would have generated significantly more deals between January 11, 2018, and July 11, 2018. The evidence in support of this proposition came in three forms:

a. Mr. Donato’s evidence that he has identified five transactions between January and July 2018 that he believes PearTree would have landed but for terminating his employment and that he believes he would have landed more work;

b. expert evidence from Mr. Lobo about the results of using:

i. a historical revenue model to project how PearTree would have performed but for the termination of Mr. Donato’s employment; and

ii. a market share model to project how PearTree would have performed but for the termination of Mr. Donato’s employment.

1. Mr. Donato’s evidence

[160] Mr. Donato testified that he remained a keen observer of the charitable flow-through market after PearTree terminated his employment. He identified five transactions that he believed PearTree would have participated in, but for the termination of his employment: Seabridge, Bonterra, Probe, Nighthawk, and Victoria Gold.

[161] On May 4, 2018, Seabridge Gold announced a $19.7 million private placement of flow-through shares. The proceeds of the financing were to be used to fund a 2018 exploration program at one of the company’s projects in British Columbia. PearTree was not involved in this financing.

[162] Mr. Donato testified that he believed that this transaction involved charitable flow-through shares. Mr. Donato testified that if PearTree had not terminated his employment in January 2018, Seabridge would have been a company that he “would have targeted.” On April 13, 2018, a month before the press release, Mr. Donato sent a message to the CEO of Seabridge to congratulate him on the financing and to tell him that Mr. Donato was looking for new opportunities. The CEO thanked him for his email and stated “Pear tree could have used your leadership on our financing!” The comments from the CEO are admissible for the fact that he made them, but they are clearly hearsay and inadmissible for the truth of their contents.

[163] Ms. Davis testified that PearTree had done deals with Seabridge before and after Mr. Donato’s time at PearTree. She explained that PearTree had a good relationship with the firm that often took the whole placement when Seabridge does a charitable flow-through placement.[^33] She also explained that several people at PearTree were involved in building that relationship over time. Ms. Davis testified that PearTree bid on that transaction but was unsuccessful because Oberon (a competitor of PearTree) priced the deal more aggressively.

[164] On February 26, 2018, Bonterra Resources announced the closing of a $21.5 million private placement. PearTree did not play any role in the transaction. Mr. Donato testified that approximately $10 million of that placement involved charitable flow-through shares and the remainder was traditional flow-through shares. Mr. Donato testified that he “would have definitely targeted” Bonterra for transactions as he had worked with them in the past.

[165] Mr. Donato testified that the investment bank on this transaction was Sprott Capital Partners and that company regularly reached out to him for financings while he was at PearTree. Mr. Donato expected that Sprott would have contacted him on this transaction.

[166] Ms. Davis testified that, by this time, it would have been unlikely for Sprott Capital Partners to have asked PearTree to get involved in this transaction because Sprott had decided to start charging a fee to participating entities like PearTree. Ms. Davis said that PearTree had made a policy decision not to pay these fees and, as a result, PearTree would have been Sprott Capital Partners’ call of last resort. Since Sprott Capital Partners was able to place the shares through a non-PearTree entity, Ms. Davis testified that it would have been extremely unlikely that Sprott would have called PearTree.

[167] On June 19, 2018, Probe Metals issued a press release announcing the completion of a $24.7 million financing, which included over $14 million in flow-through shares. PearTree was not involved in this financing.

[168] Mr. Donato testified that he would have targeted Probe Metals for transactions in 2018, and that he believes he would have closed this transaction for PearTree, but for his termination. He stated that he had a longstanding relationship with the CEO of Probe and had first assisted them with a transaction back in 2011. Mr. Donato testified that Sprott Capital Partners also led this financing and, for the reasons set out above with respect to the Bonterra transaction, he believed that he would have been able to secure this business.

[169] Ms. Davis testified that PearTree attempted unsuccessfully to land this transaction. Although Ms. Davis did not testify on this point with respect to the Probe transaction specifically, I accept that her prior evidence about PearTree’s unwillingness to pay the Sprott Capital Partners transaction fee would also apply to this transaction.

[170] On July 11, 2018, Nighthawk Gold Corp. announced a $2.5 million private placement of flow-through shares. PearTree did not participate in this transaction.

[171] Mr. Donato testified that he would have targeted Nighthawk if he was still at PearTree in 2018. Mr. Donato testified that he believed this transaction involved charitable flow-through shares (although this is not clear from the press release). He indicated that he believed that he would have completed this transaction for Nighthawk because PearTree did a lot of good work for Nighthawk and the company was very happy with PearTree.

[172] Ms. Davis testified that she did not have any knowledge about that particular transaction.

[173] Mr. Donato testified that he had discussed a financing with Victoria Gold in the fall of 2017 that did not proceed due to pricing issues. Mr. Donato pointed to an email message about Victoria Gold and its proposed $15 million development flow-through financing that he sent to Mr. Bernbaum on October 11, 2018. It read “I spoke to them again today. They’d like to move forward. Let’s chat tonight.” Mr. Donato testified that Victoria Gold intended to move forward with PearTree on that transaction, but it did not proceed because the back-end investor was not willing to pay the price Victoria Gold wanted. That would have been PearTree’s first transaction with Victoria Gold.

[174] Mr. Donato testified that he learned in his discussions with Victoria Gold that it intended to do raise development capital in spring 2018. He stated that he would have followed up on that opportunity because he had extensive discussions with them. Mr. Donato testified that in the end, Victoria Gold did proceed with a financing in the first half of 2018 with $125 million raised through “common shares.” The evidence is unclear on whether or not Victoria Gold ultimately used charitable flow-through shares for this transaction.

[175] Mr. Donato testified that he believed there were other transactions that he might have closed:

Q. Mr. Donato, are there any other transactions we haven't discussed that you believe you could have closed with PearTree had you not been terminated that ultimately closed with other service providers?

A. So the answer is yes, there's a fair number of -- there were other companies that issued flow-through shares, that closed transactions with other service providers that I have relationships with that I would have tried to win the business. So I am not saying that I would have closed them all, I would have had an opportunity to pursue those transactions.

[176] Ms. Davis, in contrast, testified that she did not believe there were any transactions that PearTree would have closed, but for the termination of Mr. Donato’s employment. She felt that PearTree’s reputation in the mining community and its deep book of donors drove its success more than calls to any one individual.

[177] I find that Mr. Donato has not proven on a balance of probabilities that PearTree would have closed any additional deals but for his termination. I accept his evidence that he would have continued to work and attempted to close additional deals, but I am not satisfied that his efforts alone would have produced any additional deals for PearTree.

[178] He identified only five individual transactions that he believed he would have closed for PearTree. He was not able to point to any evidence that he had worked on those specific transactions with any of the issuers or that he was close to winning any of them. His evidence was much less precise than that. He indicated that he would have targeted the companies and pointed to his relationships with some of the people at those companies.

[179] He did not, for example, call a witness from any of the issuers to testify that they would have placed the business with PearTree but for the departure of Mr. Donato.

[180] With respect to Victoria Gold, I am not satisfied on a balance of probabilities that its financing in Spring 2018 even used charitable flow-through shares, much less that Mr. Donato would have successfully landed that deal for PearTree. Indeed, the one deal where Mr. Donato testified that Victoria Gold stated that they were prepared to move forward with PearTree as a service provider did not proceed due to pricing issues beyond PearTree’s control. That demonstrates how precarious these deals are and how many of their features lie beyond the control of Mr. Donato or PearTree.

[181] Balanced against his evidence is the evidence of Ms. Davis that PearTree lost out on one transaction because of pricing (which was not a matter within Mr. Donato’s control) and two transactions because they were led by Sprott Capital Partners and PearTree would not have paid the commission fees required to participate in those financings.

[182] I am not satisfied on a balance of probabilities that Mr. Donato would have landed any additional deals or for PearTree between January 8 and July 11, 2018. I do not accept that the banking group would have enjoyed more success if Mr. Donato remained employed. If the termination provision of the second employment contract is not valid, I would calculate Mr. Donato’s reasonable notice based on the value of the deals that PearTree actually closed in 2018.

2. Historical revenue model and market share model

[183] Based on my earlier findings, I do not reach the questions of using the historical revenue or market share approach as a proxy to determine how PearTree would have performed but for Mr. Donato’s termination. However, in the event I am found to have erred, I will explain why I would not adopt this methodology. In my view, the revenue projections produced by these models are significantly flawed and fail to address the significant volatility in the market during a narrow window of time.

[184] The historical revenue approach projects PearTree’s revenues assuming that PearTree’s revenues from January 8, 2018, to July 11, 2018, are equal to its average revenue per month from approximately June 2016 to January 2018. Mr. Donato explains the historical revenue approach as follows:

167. The Historical Revenue Approach calculates the value of transactions during the period of time Mr. Donato was employed at PearTree and extrapolates the average value of those transactions for the period of time following Mr. Donato's termination until the end of Year 2. Using the Historical Revenue Approach, Mr. Lobo estimates PearTree sales between $103,065,000 and $110,685,000 from January 10, 2018 until the end of Year 2, depending on the applicable start date.

168. The purpose of utilizing the Historical Revenue Approach is to reflect PearTree's actual demonstrated deal generation during Mr. Donato's employment by utilizing the entirety of Mr. Donato's employment at PearTree as the base from which to extrapolate the second-half of Year 2.

169. The Historical Revenue approach is premised on the notion that PearTree's deals are generated by the relationships members of the Banking Group have with issuers. The evidence is clear that had Mr. Donato not been terminated from PearTree, he would have solicited additional transactions over and above what PearTree completed in the first-half of 2018 (i.e. Seabridge Gold) and converted equitable securities financings that otherwise should have proceeded as charitable flow-through (i.e. Victoria Gold Corp.). Moreover, the defendants did not offer any evidence to suggest that Mr. Donato would not have generated these additional transactions had he not been terminated from PearTree.

[185] The market share approach projects PearTree’s revenues assuming that PearTree maintained the same share of the flow-through share finance market in 2018 as it held in 2016 and 2017. Mr. Donato explained the market share approach as follows:

170. The Market Share Approach is another methodology frequently employed in damages quantification analysis. It estimates the total dollar value of transactions that the Banking Group could have generated during 2018 "but for" Mr. Donato's termination from PearTree by projecting the percentage of the actual charitable flow-through market PearTree would have captured during the second-half of Year 2 had Mr. Donato remained employed. Mr. Lobo determined that the total publicly disclosed Canadian flow-through transactions in the Canadian market in 2018 was $338,469,453.344

171. If this Court finds that the Market Share Approach is the appropriate methodology to be employed, it must then determine what percentage of the market PearTree would likely have captured but for Mr. Donato's termination from PearTree. Mr. Lobo found that PearTree would likely have captured 64% of the 2018 market based on a weighted average of PearTree's control of the market during Mr. Donato's employment at PearTree in 2016 and 2017. Using the Market Share Approach, Mr. Lobo estimates PearTree sales between $92,040,000 and $107,579,000 from January 10, 2018 until the end of Year 2.

172. It is appropriate to use a weighted average to determine PearTree's 2018 market share had Mr. Donato remained employed because the total value of transactions in a given year may fluctuate based on the closing of a particular transaction.347 The weighted average allows for a larger data set, which accounts for monthly fluctuations that may occur due to timing of transactions

[186] Both of the models produce projections much higher than the deal revenue that PearTree actually secured from January 8, 2018, to July 11, 2018. During that period, PearTree had total subscription revenue of $25.83 million dollars. However, the market share theory projects that PearTree would have earned subscriptions of over $92 million during that period. The historical trend approach projects that PearTree would have deals worth over $103 million. The models, therefore, did not predict PearTree’s actual performance. Indeed, they both significantly overestimated PearTree performance.

[187] Is such a gap reasonably explained by the absence of Mr. Donato? No.

[188] I found that Mr. Donato has not proven that PearTree would have successfully closed any additional transactions but for the termination of his employment. I do not accept that either theory is useful to assess Mr. Donato’s damages. The models fail to take into account that the volume of deal financings in any six month period are affected by many issues other than Mr. Donato’s employment at PearTree. These factors include the size of the market, market conditions, the price of gold, issuer capital requirements, and intended issuer expenditures that qualify for the flow-through deduction. In my view, these factors are far more important determinants of PearTree deal volume than Mr. Donato’s presence or absence. The total deal volume in the 2018 market was much lower than in 2017. Within 2018, deal volume in the first half of the year was particularly low. I am not persuaded that Mr. Donato’s presence at PearTree would have had any observable impact on these trends.

[189] The models also fail to take into account that a significant portion of PearTree revenue in prior years arose from IAMGOLD transactions that Mr. Donato did not generate. There were no IAMGOLD transactions in the first half of 2018. Even if Mr. Donato continued to work at PearTree during this period, PearTree would not have obtained IAMGOLD deals because that issuer was not seeking to place deals.

[190] The models, and in particular the market share approach, do not take into account the growth in competition that PearTree faced from Sprott, Oberon, and others. As the competitors began to increase their market share, PearTree’s market share would drop.

[191] I accept that it is extremely difficult to model the market behaviour in this sector. The total deal flow fluctuates wildly year over year and quarter over quarter. Deal share of companies like PearTree can, in any given quarter or year, wax and wane depending on the price of gold, whether their best customers need to raise significant capital fast, the demand of their donor pool, their bidding luck, or may other reasons. I find that the models presented by Mr. Donato do not provide a reasonable or useful basis for assessing his damages.

Year 2 M&A and advisory fee income

[192] Mr. Donato submits that he is entitled to damages in respect of M&A and advisory fee income that he would have earned in Year 2, but for his termination.

[193] The second employment contract provided that 55% of all revenue generated by Mr. Donato’s M&A and advisory work would be payable to the banking group. In Year 1 of his employment, Mr. Donato earned $170,030 in M&A income. Mr. Donato submits that he would have generated approximately the same amount of income in Year 2. I disagree.

[194] First, the evidence is undisputed that Mr. Donato did not do any fee-generating M&A work in the first six months of Year 2. Mr. Donato, therefore, had only six months left to achieve his prior year’s total M&A income, which would have required him to significantly increase the pace of that work, compared to the prior year.

[195] Second, at the time of his termination in January 2018, Mr. Donato had no signed engagements to do any fee-generating M&A work. Signed engagements would be strong evidence that Mr. Donato was more likely than not to earn M&A income in the remaining six months of Year 2.

[196] Third, Mr. Donato did not provide any evidence that he performed any M&A services on his own account after PearTree terminated his employment.

[197] Fourth, Mr. Donato’s evidence about his likely M&A work was vague and did not persuade me that it was more likely than not that he would have obtained M&A work at PearTree but for the termination of his employment. He testified as follows:

Q. If your employment had not been terminated do you believe you would have generated M&A income in the second half of year two?

A. Yes I think there's good likelihood. I was working on something with, with Agnico looking to combine assets with Treasury Metals and First Mining and we had multiple discussions, we met with Agnico they were looking to send people to site, I don't know what came out of it.

Ultimately those assets years later were put together because they belonged together and that's why Agnico was excited about it but I didn't have the opportunity to keep pursuing that.

And then obviously given the opportunity I would have pursued other opportunities as well.

Q. So if your employment had not been terminated do you think it reasonable that your M&A income in year two would have been comparable to what you generated in year one?

A. Yes, I do.

[198] I find that Mr. Donato’s evidence is too speculative to establish on a balance of probabilities that he would have earned any M&A income (much less $170,000) between January 8, 2018, and July 11, 2018, but for his termination.

[199] I do not award him any damages in respect of lost M&A income as a result of the termination of his employment.

Punitive Damages

[200] Mr. Donato seeks an award of punitive damages against PearTree.

[201] Punitive damages are only awarded in exceptional cases for malicious, oppressive, and high-handed conduct that offends the court’s sense of decency and is deserving of punishment. There must be an independent actionable wrong in order for a court to make an award of punitive damages.[^34] An employer’s breach of the implied duty of good faith and fair dealing or failing to comply with the provisions of the Employment Standards Act have been held to constitute independently actionable wrongs.[^35]

[202] Awards of punitive damages should only be made to punish misconduct that represents a marked departure from ordinary standards of reasonable behaviour or can be described as harsh, vindictive, reprehensible and malicious.[^36]

[203] I do not accept Mr. Donato’s submission that PearTree breached the duties of honest performance and good faith and fair dealing. I do not accept that PearTree misled Mr. Donato about the terms of his employment. For the reasons set out above, I found that the first and second employment contracts were enforceable. I accept that PearTree sought to improve its bargain with Mr. Donato in the second employment contract, but I do not accept that it “forced” him to sign it or that it was devoid of consideration flowing to him. Mr. Donato had a binding employment contract and could have accepted PearTree’s repudiation of the first employment contract and sued for breach. I accept that Mr. Donato faced a difficult decision in trying personal circumstances. However, he had the benefit of legal advice and could have sued on his two-year fixed term contract. I do not accept the negotiations leading to the second employment contract justify an award of punitive damages.

[204] I also do not accept that PearTree’s counterclaim justifies an award of punitive damages. For the reasons set out below, I dismiss the counterclaim in its entirety. However, by accepting employment at Sprott, Mr. Donato violated the letter of non-competition clause of the second employment contract. PearTree’s counterclaim had no merit, but was rooted in the language of the restrictive covenants. The counterclaim is not obviously “a strategic and abusive tactic to induce Mr. Donato to drop his claim.” PearTree’s punitive damages claim was manifestly devoid of merit and PearTree should have abandoned it long before trial. In my view, the flaws in the counterclaim, including the punitive damages claim, are better considered when I address costs of the action.

[205] One aspect of PearTree’s conduct, however, warrants an award of punitive damages: its failure to pay out the amounts owing to Mr. Donato after it terminated his employment.

[206] PearTree terminated Mr. Donato’s employment without notice on January 9, 2018. At that time, it knew that it still owed Mr. Donato a significant amount of money from his variable compensation from July 11, 2016, to July 10, 2017. It was also required to pay him in accordance with the second employment contract. In the termination letter delivered on January 9, 2018, PearTree stated as follows:

1. Financial Assistance

In accordance with the termination provision set out in your Offer of Employment, the Company will provide you with financial assistance by way of salary continuance at your regular base salary, along with medical/dental benefit continuance, until the earlier of July 10, 2018, or when you commence new employment (including self-employment). The salary continuance is inclusive of any minimum entitlements to termination pay and severance pay to which you may be entitled pursuant to the Ontario Employment Standards Act, 2000.

2. Outstanding Compensation and Vacation Pay

All outstanding vacation pay and salary accrued to today, January 9, 2018, less applicable statutory deductions, will be paid to you. We will also ensure the payment to the banking group of the balance of the Variable Compensation in respect of the period ended June 30, 2017 that we had not been able to calculate until profitability on the sale of partnership units through to the end of the 2017 calendar year could be determined. As agreed, this will be 25% of net partnership income to the Company. We are completing the be in a position to issue payment by January 31, 2018.

[207] In February 2018, PearTree demanded that Mr. Donato sign a certificate of compliance stating that he was complying with the restrictive covenants under his contract. PearTree had no right to do so. There was nothing in the second employment contract that obliged him to provide such a certificate. Moreover, PearTree had no reason to believe that Mr. Donato (who remained unemployed until September 2018) had breached his covenants. Mr. Donato, quite reasonably, refused to give in to PearTree’s demand. Ms. Davis stated that she “couldn’t understand, you know, from a non-legal standpoint if this was truthful why wouldn’t he sign it.” The complete answer, of course, is that he was under no obligation to sign this certificate, which was not contemplated in the second employment contract, which PearTree drafted.

[208] Instead of accepting Mr. Donato’s decision not to sign the certificate, Ms. Davis drew the illogical conclusion that his decision was proof that he had breached his covenants. I emphasize that there was absolutely no evidence that Mr. Donato was not in compliance with his obligations, only that he would not submit to his former employer’s demands.

[209] On June 21, 2018, Ms. Davis wrote to Mr. Donato and advise him that PearTree was cutting off the salary continuation payments that they were obliged to pay to Mr. Donato under the second employment contract. She also purported to set off money that PearTree admittedly owed to Mr. Donato against the salary continuance already paid. Finally, she enclosed a cheque but attached a unilateral term that if he cashed the cheque, he would give up all rights to claim that he was owed any further amounts. The letter read, in part, as follows:

In our discussions and correspondence we have expressed our concerns about your compliance with the above listed conditions, and have requested a simple form of certificate to confirm that you have been entitled to the salary payments that have continued to be made since the termination of our contract. Since February when I requested a signed certificate from you, we have been attempting to finalize matters between us. We even agreed to pay your legal expenses for the review of the certificate, but it is clear from our last conversation that you are not prepared to entertain this. As I have said in our last couple discussions, your unwillingness to give any consideration to signing this certificate that only confirms conditions and covenants you have acknowledged you are bound by seems to lead to no other logical conclusion but that you are not in compliance. Therefore, we have suspended further salary continuance payments.

We are enclosing a cheque in the amount of $114,191.64. This is in respect of the amount of the balance of the Variable Compensation for 2017 that we had not been able to calculate until year end ($290,803.67). We have set off against this amount the gross salary ($103,913.04) paid to you since January 10, 2018 leaving a balance of $186,890.63 from which we have deducted applicable withholding tax ($71,080.11) and premiums for health insurance benefits ($1,618.88). Any balance in respect of salary and benefits will be payable upon receipt of confirmation that the conditions to the salary and benefits continuance referred to above have been satisfied.

Your deposit of the cheque shall be taken as satisfaction of the payment of all compensation due under the contract for the period through to its termination other than the disputed amount of salary continuance for the period from January 10, 2018 through July 10, 2018.

[210] I do not see any lawful authority for PearTree to take any of these steps. Mr. Donato was entitled to receive the amounts owing to him. PearTree had no right to withhold or set those amounts off against other amounts owed to Mr. Donato. PearTree abused its power in taking this step.

[211] In the circumstances, I award $10,000 in punitive damages to Mr. Donato.

PearTree’s counterclaim

[212] On September 18, 2018, nine months after PearTree terminated his employment, Mr. Donato signed an employment contract with Sprott Private Wealth LP. He assumed the position of Managing Director, Charitable Flow-Through Services.

[213] Notably, PearTree did not seek any injunctive relief against Mr. Donato when it learned of his employment. Indeed, it did nothing until Mr. Donato sued PearTree for the compensation that PearTree owed to him. Only then, did PearTree counterclaim against Mr. Donato for breach of:

a. the non-competition, non-solicitation, and confidentiality provisions in the second employment contract;

b. breach of fiduciary duty; and

c. unjust enrichment.

[214] At trial, PearTree filed an expert report claiming that it suffered damages of $1.599 million. In the alternative, PearTree sought disgorgement of all the employment income that Mr. Donato earned from September 2018 to January 2020.

[215] PearTree also sought punitive damages of $1 million and maintained that claim until midway through the trial.

[216] For the reasons that follow, I dismiss the counterclaim in its entirety. The non-competition and non-solicitation clauses are unenforceable. They are contrary to public policy and are overly broad. There is no evidence Mr. Donato ever misused confidential information or competed unfairly. Even if Mr. Donato was a fiduciary, there is no evidence that he breached the duties that survived PearTree’s decision to terminate his employment.

The restrictive covenants are not enforceable

1. Legal principles

[217] The general rule in Ontario is that, on public policy grounds, a provision in a contract that restrains an employee from competing with her former employer, is prima facie unenforceable.[^37] Such a provision will only be upheld if it is reasonable considered against the interests of the parties and the public, judged in light of the circumstances at the time the covenant is made.[^38]

[218] PearTree bears the onus of demonstrating the provision is protecting a legitimate or proprietary interest and is reasonable as between the parties. Mr. Donato has the onus of showing the provision is unreasonable with respect to the public interest.[^39]

[219] In order to determine whether a restrictive covenant is reasonable, the extent of the activity sought to be prohibited, the geographic coverage of the restriction, and its duration are all relevant.[^40] In order to survive, a covenant must be clear as to activity, time, and geography. A covenant that is ambiguous on any of these matters is prima facie unenforceable. This is because it is not possible to show, in the face of unresolved ambiguity, that the covenant is reasonable.[^41] Even if the covenant is clear or its ambiguities can be resolved, it will only be upheld if it is reasonable.

[220] A non-competition covenant in an employment agreement that restricts the post-termination activities of an employee is subject to more rigorous scrutiny than a non-competition covenant in a sales agreement that restricts the post-sale activities of the vendor.[^42]

[221] Where, properly interpreted, the covenant is not shown to be reasonable, the court may not effectively rewrite it to reflect terms the parties may have reasonably agreed to. The court is not permitted “to rewrite a restrictive covenant in an employment contract in order to reflect its own view of what the parties’ consensus ad idem might have been or what the court thinks is reasonable in the circumstances.”[^43]

2. The non-competition clause is not reasonable

[222] PearTree has pleaded in its counterclaim that Mr. Donato breached the non-competition clause in his second employment contract, which is prima facie unenforceable. I find that the covenant is not reasonable when considered against the interests of the parties and the public, judged in light of the circumstances at the time the parties signed the contract. It is a restriction designed to prohibit competition and to prevent Mr. Donato from having meaningful access to employment in his chosen profession.

[223] The clause reads as follows:

You hereby covenant and agree that during the term of your employment and for a period of 24 months after the cessation of your employment for any reason, you shall not indirectly or directly accept employment from, provide services to or engage in a business in Canada primarily engaged in the business of structured charity flow-through financing or other proprietary products developed by Peartree before or during your employment with Peartree.

You understand and agree that the Confidential Information, Inventions, Non-Solicitation and Non-Competition provisions above are reasonable, enforceable and independent of one another should any provision be found unenforceable by a court of law. Further, you understand that a breach of any of these provisions during the term of your employment constitutes just cause for termination of employment and that whether during or after the term of employment, such breach causes irreparable harm which may be remedied by injunction and damages.

You specifically acknowledge that Peartree operates a niche business which represents a very small subset of investment banking services in Canada, and that the appropriation of Peartree's know-how and trade secrets could be irreversibly detrimental to Peartree. Conversely, you acknowledge that your skills and experience would permit you to be employed in, or otherwise engage in general investment banking activities across Canada without engaging in a business competitive with Peartree. For greater clarity, it is understood and agreed that neither the non- solicitation nor non-competition covenants above are intended to prevent you from resuming general investment banking activities following your engagement with Peartree provided that you will not solicit or initiate transactions with any firm that is a provider of structured flow-through donation or similar services or otherwise engage with such a firm other than in circumstances in which such engagement is as a syndicate group member or other ancillary role.

[224] PearTree has not demonstrated that this clause is reasonable as between the parties.

[225] First, I do not accept that PearTree has a proprietary interest in the issuer side of charitable flow-through donations. I do not accept the evidence of either Mr. Bernbaum or Ms. Davis on this point. Their evidence lacked in specificity and failed to adequately explain how PearTree could have a proprietary interest in dealing with mining issuers in a transparent market in 2016 to 2018. I preferred the evidence of Mr. Mayer on this point. He was as close to a disinterested witness as possible in this case. He testified that there was nothing proprietary about this structure of charitable flow-through financing arrangements:

Q. And would you describe the structure of a flow-through transaction to be proprietary to any one service provider?

A. It's not proprietary at all, no.

Q. Is the tax structuring of a flow-through transaction proprietary to any one service provider?

A. No, it is not.

Q. What about the pricing structure?

A. No. So, so the pricing is always well known it's widely disseminated. Companies press release the price at which they are issuing the shares at.

In the case of a charitable flow-through offering the company issues the press release that's publicly states the price that they are issuing the shares at.

Typically the company or the agent representing the company, like I said in the charitable flow-through offering you have an individual subscribing they are paying a price, they are then immediately shell selling that share at a lower price.

The agent or the company then will widely disseminate what that lower price is going to be so that it's widely known price paid for the flow-through share and the price that it was resold at.

Q. Would the pricing that a service provider is offering be public before a press release would be issued for the purpose of --

A. From a practical standpoint the majority of transactions are conducted are done by way of private placement in which case you're allowed to have open communication about what the prices are going to be paid so many cases yes it's known it's part of the negotiation prior to the transaction being publicly announced.

[226] I accept Mr. Mayer’s evidence. Based on the evidence before me in this trial, I find that PearTree was not seeking to protect a legitimate proprietary interest through the non-competition covenant.

[227] Second, the non-competition covenant is not reasonable with respect to the activity it seeks to prohibit. The clause states that Mr. Donato “shall not… accept employment from, provide services to or engage in a business in Canada primarily engaged in the business of structured charity flow-through financing.” This covenant would prohibit Mr. Donato from accepting a job as the social media coordinator for Sprott Private Wealth. It is not narrowly tailored to protect any proprietary interest PearTree alleges that it possesses. The covenant is not saved by the “for greater clarity” provision as that only deals with certain investment banking activities, not employment in a non-investment banking role. This covenant is over-broad and unreasonable.

[228] This clause extends far beyond the scope of PearTree’s legitimate interests. During the negotiations over the first employment contract, Mr. Donato pressed PearTree on the scope of any post-employment covenants because he did not want to be prohibited from practising his profession if things at PearTree did not work out. Mr. Donate testified that he ad worked on traditional flow-through financings since 2000 and charitable flow-through financings since 2011. Mr. Bernbaum clearly identified that PearTree’s only legitimate concern was that Mr. Donato not compete with the donor side of the business after his employment. On March 30, 2016, Mr. Donato wrote to Mr. Bernbaum to express his concern about signing a non-competition agreement and, in particular, not wanting to be able to act as an investment banker in charitable flow-through financings. Mr. Bernbaum assured him that PearTree’s only interest was in ensuring that Mr. Donato did not act as a promoter on the donation side:

[Mr. Donato] Non-compete: I have no problem with a non-compete. My concern as an investment banker is I presently pitch companies to undertake "charitable" FT financings whereby I cooperate with groups like PearTree.

[Mr. Bernbaum]: non-compete would be limited to acting as a "Promoter' of a donation flow-through tax shelter. Acting as a banker would be outside of the restriction.

[229] Mr. Bernbaum testified that, before Mr. Donato came to PearTree, he was a high-performing investment banker who had done flow-through transactions but “not as a promoter of the donation transaction.” When Mr. Bernbaum uses the word “promoter” he is referring not to the investment banking side of the business, but to identifying, soliciting, and engaging with donor clients who are prepared to buy and then donate the shares.

[230] I find that PearTree’s legitimate interest was limited to restricting Mr. Donato from competing with PearTree as a promoter. Instead of attempting to tailor a narrow covenant to protect this legitimate interest, PearTree instead crafted a covenant the dramatically overshot its legitimate purpose. The covenant as drafted is not reasonable.

[231] In addition, the reasonableness of a covenant is to be judged in light of the circumstances at the time the covenant is made.[^44] Here, the covenant was contained in the second employment contract. While I found that the second employment contract, as a whole, was enforceable, I would not enforce the restrictive covenant in light of the circumstances at the time the covenant was made. Courts will always look carefully at covenants in employment contracts. In my view, they should scrutinize the clauses particularly carefully where, as here, the scope of the covenant is expanded dramatically after the employee has already signed a binding employment contract. In the circumstances of this case, I have no hesitation concluding that the restrictive covenant is unreasonable.

[232] In addition, I find that the 24-month term of the restrictive covenant is unreasonably long. PearTree provided no evidence to demonstrate that the length of the clause was necessary to protect any interest and they have not met their burden to prove that the length of the restriction is reasonable. I note that the restrictive covenants in Mr. Donato’s contract with Sprott last for three months after his termination. The restrictive covenants in Mr. Donato’s contract with Mackie lasted between zero months and six months depending on his length of service with Mackie. Mr. Donato’s employment agreement with Jennings Capital and Haywood Securities Inc. did not have restrictive covenants at all. For these reasons, I find that the length of the non-competition clause is unreasonable.

[233] For all of these reasons, I find that the non-competition clause is not enforceable. Therefore, I dismiss PearTree’s counterclaim that Mr. Donato breached the non-competition clause.

3. The non-solicitation clause is not enforceable and Mr. Donato did not breach it

[234] PearTree has pleaded in its counterclaim that Mr. Donato breached the non-solicitation clause in his second employment contract. The non-solicitation is not reasonable when considered against the interests of the parties and the public, judged in light of the circumstances at the time the parties signed the contract.

[235] I find that the non-solicitation agreement is not targeted at protecting only PearTree’s legitimate interest in trade secrets or customer data. It is a camouflaged non-competition clause designed to eliminate competition. The clause reads as follows:

You hereby covenant and agree that during the term of your employment and for a period of 24 months after the cessation of your employment for any reason, you shall not individually or in partnership or jointly or in conjunction with any person, firm, association, syndicate, company, corporation, joint venture, partnership or entity, as principal, agent, employee, shareholder, director, officer, owner, investor, partner, or any other manner whatsoever, directly or indirectly, solicit or induce or attempt to solicit or induce any customers or suppliers (which includes issuers, brokers and other intermediaries) of Peartree to secure engagements to underwrite securities offerings or otherwise obtain allocations of securities under those offerings for the purpose of gifting arrangements or other tax structured products, or solicit or induce or attempt to solicit or induce, any employees of Peartree or Peartree Financial Services Ltd. to leave their employment.

[236] There is no dispute that PearTree can protect its interest in its own employees. That portion of the clause, while unobjectionable, is not the basis of PearTree’s counterclaim.

[237] In general, a non-solicitation clause, suitably restrained in temporal and spatial terms, is more likely to represent a reasonable balance of the competing interests than is a non-competition clause. An appropriately limited non-solicitation clause offers protection for an employer without unduly compromising a person’s ability to work in their chosen field.[^45] PearTree’s clause, however, goes far beyond a typical non-solicitation clause.

[238] The portion of the non-solicitation clause that is at issue reads as follows.

You…agree that during the term of your employment and for a period of 24 months after the cessation of your employment for any reason, you shall not… directly or indirectly, solicit… any customers or suppliers (which includes issuers, brokers and other intermediaries) of Peartree to secure engagements to underwrite securities offerings or otherwise obtain allocations of securities under those offerings for the purpose of gifting arrangements or other tax structured products

[239] Under this clause, PearTree purports to prevent Mr. Donato from soliciting issuers to underwrite securities offerings for any tax structured products if that issuer had ever worked with PearTree. This would prohibit Mr. Donato from contacting an issuer to try and place traditional flow-through products, not just charitable flow-through products. Ms. Davis testified that PearTree does not facilitate traditional flow-through offerings. In many ways, the non-solicitation clause is even more restrictive than the non-competition clause. This clause goes much further than necessary to protect any legitimate interest of PearTree. It is effectively a non-competition clause in the guise of a non-solicitation agreement. PearTree may not do indirectly what it may not do directly.

[240] Moreover, the meaning of “customers or suppliers…of Peartree” is very ambiguous. Its ambiguity is deepened, not resolved, by the inclusion of “issuers, brokers and other intermediaries” within the meaning of the clause. The evidence before me regarding the role of mining issuers does not suggest that they fit comfortably within the meaning of “customers or suppliers.” If the meaning of those words is stretched to include mining issuers, they do not provide meaningful guidance to Mr. Donato regarding what is purportedly prohibited.

[241] I also do not accept the characterization of mining issuers as “customers or suppliers” of PearTree. The evidence is that PearTree worked with mining issuers on a particular transaction. At the end of that transaction, neither party had any ongoing obligation to the other. Mr. Mayer testified compellingly that mining issuers are not exclusive customers of any single entity like PearTree. Although relationships may play a small part in the transaction, the mining issuers go where they can raise capital for the lowest price. I accept his evidence on this point.

[242] Even Mr. Bernbaum testified that “It is very unusual to have a mining issuer that is, that remains loyal throughout you know five years through every single financing that they have done for flow-through shares.” While this might be true of a small number of issuers for PearTree (for example, Osisko, or IAMGOLD), the evidence before me demonstrates that issuers shop these transactions when necessary and are influenced about where to place them by many factors, including price. In contrast, PearTree appears to have very deep relationships with its donor clients. That is an interest that may be worthy of protection but is not at issue in the counterclaim.

[243] In addition, there is no temporal limitation on the issuers that Mr. Donato cannot solicit. This clause would prevent him from contacting a mining issuer that did a small single transaction with PearTree before Mr. Donato went to work at PearTree and no other business. Even if Mr. Donato had no contact with that mining issuer while at PearTree, the non-solicitation clause would prevent Mr. Donato from seeking their business. Such a broad restriction appears aimed at preventing competition, not protecting legitimate interests of PearTree.

[244] It is also important to consider the context in which this non-solicitation clause was negotiated. Recall Mr. Donato’s written concern about the non-competition clause on March 30: “My concern as an investment banker is I presently pitch companies to undertake "charitable" FT financings whereby I cooperate with groups like PearTree.” Mr. Bernbaum reassured him that he was not interested in preventing Mr. Donato from continuing with that activity, he only wanted to prevent Mr. Donato from acting as a promoter to donors. The non-solicitation agreement purports to do the very thing that Mr. Bernbaum stated he had no interest in preventing. This is very strong evidence that the non-solicitation clause is much broader than necessary to protect PearTree’s legitimate interests.

[245] I find that the non-solicitation clause is in fact a non-competition clause. It is over-broad and unreasonable on any standard. I would not enforce the clause.

[246] Even if the non-solicitation clause was enforceable, I would find that Mr. Donato did not breach that clause.

[247] I accept that the evidence that Mr. Donato worked at Sprott Private Wealth as a back-end investment banker working on issuer-side of the transactions. All of the evidence demonstrates that Mr. Donato has no role on the donor side of Sprott Private Wealth’s business. Sprott’s donor promoter is Manny Bhutor, who focused exclusively on those functions after Mr. Donate arrived at Sprott. Mr. Mayer described Mr. Donato’s work at Sprott Private Wealth as involving coordinating due diligence with the issuers, liaising with counsel and tax counsel, administrative leg work, and ensuring there was a process in place so that the transaction would close smoothly.

[248] Mr. Donato candidly admitted that some of the financings he worked on at Sprott involved issuers that had done business with PearTree. The issuers were BonTerra Resources, Nighthawk Gold Corp., Dolly Varden Silver Corporation, Seabridge Gold Inc., and Probe Metals Inc.

[249] I accept the uncontradicted evidence of Jason Mayer that he, not Mr. Donato, brought these transactions to Sprott. I also accept Mr. Mayer’s evidence that Mr. Donato did not solicit any of PearTree’s clients on behalf of Sprott. Mr. Mayer gave unchallenged evidence that he had longstanding or pre-existing relationships with each of the issuers of concern to PearTree. This evidence is corroborated with extrinsic evidence. For example, Sprott Capital Partners was the lead investment banker for Bonterra and Probe Metals and directed that work to its related company, Sprott Private Wealth.

[250] PearTree points to a series of emails between Mr. Mayer and Mr. Donato or between Mr. Donato and representatives of the various mining issuers that it says demonstrates that Mr. Donato was soliciting its clients. I do not accept that any of these messages, considered separately or together, demonstrate that Mr. Donato was soliciting PearTree’s clients.

[251] First, on November 9, 2018, following a press release for a Seabridge private placement of common shares, Mr. Mayer wrote to Mr. Donato and said “Hey man. Might want to check in with [Rudi Fronk, the CEO of Seabridge] to see if he will consider FT this year especially if [redacted] does not go.” Mr. Donato responded, “Will do.” He then sent a message to Mr. Fronk that said, in part, “When you are interested in BC or national flow-through please reach out. We presently have over $20 million of BC demand and plenty of national flow-through as well. I suspect you will wait until the new year.” There were then a series of messages between November and February trying to arrange telephone calls, personal meetings at various conferences, or a dinner with Sprott at a conference in late February.

[252] In April 2019, when Mr. Fronk advised Mr. Donato that “for the time being” he had “no interest in flow-throughs.” Mr. Donato then sent another email to the CEO in May to invite him to a dinner in Vancouver in July. He accepted the dinner invitation.

[253] In August 2019, Mr. Fronk wrote to Mr. Mayer and Mr. Donato and thanked them for agreeing to work with Seabridge on a charitable flow-through share offering.

[254] Mr. Mayer testified that Mr. Donato played no role in soliciting the Seabridge transaction. Mr. Mayer explained that he had been meeting with Mr. Fronk since 2013 to discuss flow-through transactions. In addition, Mr. Mayer indicted that he received significant assistance from Whitney George, the CEO of Sprott, who was a significant shareholder in Seabridge and had a longstanding relationship with Mr. Fronk. Mr. Mayer testified that Mr. George was “pretty instrumental” in getting the work and that Sprott’s opportunities to work with Seabridge were “predominantly” due to Mr. Whitney’s relationship with Mr. Fronk.

[255] I accept Mr. Mayer’s evidence. I find that Mr. Donato played no role in Sprott landing that Seabridge deal. Mr. Donato’s emails, which amount to little more than attempts to arrange meetings and dinners between representatives of Sprott and Seabridge, would not violate a proper non-solicitation agreement. They do not even amount to an attempt to solicit.

[256] I reach the same conclusion about Mr. Donato’s peripheral involvement in contact with Nighthawk. Regardless of Mr. Donato’s mundane emails with people at Nighthawk, the uncontradicted evidence of Mr. Mayer was that the Nighthawk transaction came to Sprott through a broker dealer acting on the transaction that had both charitable flow-through and traditional flow-through components. Sprott completed the charitable side and invested in the traditional component. Mr. Mayer testified that Mr. Donato played no role in soliciting that transaction.

[257] In conclusion, PearTree has not proven on a balance of probabilities that Mr. Donato breached the non-solicitation clause of the second employment contract, even if it was enforceable.

Mr. Donato did not breach any fiduciary duties owed to PearTree.

[258] PearTree submits that Mr. Donato breached fiduciary duties that he owed to the company. Assuming that Mr. Donato was a fiduciary, I find that he did not breach any such duties.[^46]

[259] Mr. Donato’s fiduciary duties survived the termination of his employment.[^47] However, absent a valid non-competition agreement or similar restriction, the fiduciary may use his or her own skills and experience and compete with the corporation post-departure provided that this is not done unfairly.[^48] I have found that neither the non-competition clause nor the non-solicitation clauses of the second employment contract are enforceable.

[260] The burden is on PearTree to prove on a balance of probabilities that Mr. Donato competed unfairly after it terminated his employment without notice to him.

[261] PearTree submits that Mr. Donato competed unfairly because he “had knowledge with respect to PearTree’s confidential business strategies.” The problem with this submission is that there is absolutely no evidence that Mr. Donato used any PearTree confidential information during his employment at Sprott. For the reasons set out above, I also reject PearTree’s submissions that Mr. Donato solicited any issuers that had previously worked with PearTree.

[262] PearTree submits that is should find that Mr. Donato was not permitted to compete unfairly with PearTree for 24 months after it terminated his employment without notice because that was the length of the restrictive covenant in the second employment contract, even if that covenant is found to be unenforceable. I find that a two-year prohibition would be manifestly unreasonable. I would impose a term of no more than six months. I observe that Mr. Donato was unemployed for more than six months after PearTree terminated his employment.

Damages

[263] Mid-way through trial, PearTree abandoned its claim for damages arising from Mr. Donato’s alleged breaches of the non-competition and non-solicitation clauses, and for his breach of fiduciary duty.

[264] Instead, PearTree submits that Mr. Donato should be required to disgorge to PearTree all of the employment income he earned at Sprott for the two years after PearTree terminated his employment without notice. I reject this remarkable submission. Even if I were to find that Mr. Donato had breached any of those duties, PearTree did not prove that they suffered one penny of loss after it terminated Mr. Donato’s employment. The evidence is that PearTree is much more profitable today than it was in 2018. If I accept the evidence of Mr. Bernbaum and Ms. Davis, Mr. Donato contributed very little to the profitability of PearTree during his time at the company.

[265] If Mr. Donato breached the non-competition and non-solicitation clauses, or his fiduciary duty, I would award PearTree $1.00 in damages.

Conclusion

[266] The compensation owed to Mr. Donato is to be determined and adjusted in accordance with the findings set out above. The parties and their experts should work together over the next 30 days to see if they can agree on the amounts owing in light of my findings. If they are not able to reach a consensus in that time, the parties should contact my judicial assistant and arrange for a further attendance with me to settle the issues.

[267] The counterclaim is dismissed.

[268] If the parties are not able to resolve costs of this proceeding, I will set a timetable for costs submissions once the amounts owing to Mr. Donato have been determined.

Robert Centa J.

Released: May 29, 2023

CITATION: Giacomodonato v. PearTree Securities Inc., 2023 ONSC 3197

COURT FILE NO.: CV-18-594959

DATE: 20230529

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Davide Giacomodonato

Plaintiff

– and –

PearTree Securities Inc. and PearTree Financial Services Ltd.

Defendants

AND BETWEEN:

PearTree Securities Inc.

Plaintiff by counterclaim

– and –

Davide Giacomodonato

Defendant to the counterclaim

REASONS FOR JUDGMENT

Robert Centa J.

Released: May 29, 2023

[^1]: Mr. Donato’s legal name is Davide Giacomodonato. I will follow the convention that he and his lawyers used at trial and refer to him as David Donato.

[^2]: The defendant PearTree Securities Inc. is a wholly owned subsidiary of the defendant PearTree Financial Services Ltd. I will refer to them collectively as PearTree unless it is necessary to refer to one or the other.

[^3]: After releasing this decision to the parties, they alerted me to a typographical error in this sentence, which I have now corrected.

[^4]: The parties agreed to use the phrase “July employment agreement” in the agreed statement of facts for convenience and without prejudice to their position as to which document is valid and enforceable. I refer to this document as the second employment contract in the reasons for decision.

[^5]: The parties agreed to use the phrase “the March Term Sheet” in the agreed statement of facts for convenience and without prejudice to their position as to which document is valid and enforceable. I refer to this document as the first employment contract in the reasons for decision.

[^6]: Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 13 C.E.L.R. (4th) 28, at para. 65, rev’d on other grounds; Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, [2019] 4 S.C.R. 394; Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, 424 D.L.R. (4th) 588, at paras. 30, 46; Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847, 159 O.R. (3d) 255 at para. 52; Dumbrell v. Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, at para. 53.

[^7]: City of Thunder Bay, at para. 30.

[^8]: Neu Solutions v. eSolutions MN, 2023 ONSC 311, at para. 32; Brousseau c. La Cité Collégiale et al., 2021 ONSC 2676, at para. 8; Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003 ABCA 221, 35 B.L.R. (3d) 30, at para. 9.

[^9]: Ruparell v. J.H. Cochrane Investments Inc. et al., 2020 ONSC 7466, at para. 23; Romexim Canada Inc. et al. v. James Morrison et al., 2022 ONSC 2889, at para. 24.

[^10]: S.O. 2000, c. 41.

[^11]: Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, at para. 54.

[^12]: 3664902 Canada Inc. v. Hudson’s Bay Co., 2002 CarswellOnt 22, at para. 42.

[^13]: Bawitko Investments Ltd. v. Kernals Popcorn Ltd., 1991 CanLII 2734, 79 D.L.R. (4^th) 97 (Ont. C.A.) at pp. 103-104.

[^14]: Techform Products Ltd. v. Wolda (2001), 2001 CanLII 8604 (ON CA), 56 O.R. (3d) 1 (C.A.) at para. 24, leave to appeal refused [2002] 3 S.C.R. xii; Holland v. Hostopia.com Inc., 2015 ONCA 762 at paras. 51-55; Francis v. Canadian Imperial Bank of Commerce (1994), 1994 CanLII 1578 (ON CA), 21 O.R. (3d) 75 (C.A.).

[^15]: 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at para. 31, citing Swinton, Katherine. "Contract Law and the Employment Relationship: The Proper Forum for Reform" in Barry J. Reiter and John Swan, eds., Studies in Contract Law. Toronto: Butterworths, 1980, 357 at 363.

[^16]: Hobbs v. TDI Canada Ltd., 2004 CanLII 44783, 246 D.L.R. (4th) 43 (Ont. C.A.), at para. 42.

[^17]: Goberdhan v. Knights of Columbus, 2023 ONCA 327, at para. 21; Hobbs at para. 32; Braiden v. La-Z-Boy Canada Ltd., 2008 ONCA 464, 294 D.L.R. (4th) 172, at para. 60.

[^18]: Richardson v. Tiffin, 1940 CanLII 11 (SCC), [1940] S.C.R. 635 at 656.

[^19]: Loranger v. Haines, 1921 CanLII 520 (ON CA), [1921] 64 D.L.R. 364 (Ont. C.A.).

[^20]: Lancia v. Park Dentistry, 2018 ONSC 751, at para. 54; Riskie v. Sony of Canada Ltd., 2015 ONSC 5859 at paras. 31 to 36; Techform at paras. 26, 28; Clarke v. Insight Components (Canada) Inc., 2008 ONCA 837, 70 C.C.E.L. (3d) 13, at paras. 7 to 11; United Rentals of Canada Inc. v. Brooks, 2016 ONSC 6854, at para. 51;

[^21]: Employment Standards Act, 2000, S.O. 2000, c. 41, s. 31.

[^22]: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, 1999 CanLII 677, at para. 27; Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 CanLII 9923 (ON CA), 68 O.R. (3d) 457 (C.A.), at para. 99 (per Laskin J.A. dissenting but not on this point).

[^23]: Clarke v. Insight Components (Canada) Inc., 2008 ONCA 837, at para. 11

[^24]: Wronko v. Western Inventory Service Ltd., 2008 ONCA 327, 90 O.R. (3d) 547.

[^25]: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500, at paras. 30 to 40.

[^26]: After releasing this decision to the parties, at their request, I reworded this sentence to protect confidential information.

[^27]: For simplicity, I will use the 1.5% payout rate regardless of the fact that the correct rate for certain quarters will be 1.125% because of Mr. Mell’s departure.

[^28]: The parties have agreed that the cost of deal toys for the Integra financing are not deductible.

[^29]: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at para. 21.

[^30]: Wood, at para. 38.

[^31]: Roden v. Toronto Humane Society (2005), 2005 CanLII 33578, 259 DLR (4th) 89 (Ont. C.A.), at paras. 59 to 63; Lamontagne v. J.L Richards & Associates Limited, 2021 ONSC 2133, at paras. 47 to 49.

[^32]: After releasing this decision to the parties, they alerted me to an error in this sentence, which I have now corrected.

[^33]: After releasing this decision to the parties, at their request, I revised this sentence to protect confidential information..

[^34]: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at paras. 111 to 116.

[^35]: Halupa v. Sagemedica Inc., 2019 ONSC 7411; Galea v. Wal-Mart Canada Corp., 2017 ONSC 245; Pohl v. Hudson’s Bay Company, 2022 ONSC 5230, at paras. 118 to 120.

[^36]: Whiten, at para. 36.

[^37]: M & P Drug Mart Inc. v. Norton, 2022 ONCA 398, 79 C.C.E.L. (4th) 171, at para. 32.

[^38]: M & P, at para. 32; Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157, at paras. 15-17; Martin v. ConCreate USL Limited Partnership, 2013 ONCA 72, 359 D.L.R. (4th) 123, at paras. 49, 54.

[^39]: Martin, at para. 50; Tank Lining Corp. v. Dunlop Industrial Ltd. (1982), 1982 CanLII 2023 (ON CA), 40 O.R. (2d) 219 at p. 224 (C.A.).

[^40]: Shafron, at para. 26.

[^41]: M &P at para. 36; Shafron, at paras. 27, 43; Martin, at para. 51.

[^42]: M & P, at para. 35; Shafron, at para. 23.

[^43]: Shafron, at para. 47.

[^44]: M & P, at para. 32; Shafron, at paras. 15-17; Martin, at paras. 49, 54.

[^45]: H.L. Staebler Co. v. Allan, 2008 ONCA 576, 92 O.R. (3d) 107, at para. 42; Lyons v. Multari (2000), 2000 CanLII 16851 (ON CA), 50 O.R. (3d) 526 (C.A.); Elsley Estate v. J.G. Collins Insurance Agencies Ltd., 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916.

[^46]: I have serious doubts about whether or not Mr. Donato was a fiduciary. He did not have authority to approve or to price deals. He did not have authority to hire his own staff. He did not have authority to set his own travel or expense budgets. He and Mr. Mell were, to use Mr. Donato’s phrase, micro-managed by Mr. Bernbaum and Ms. Davis.

[^47]: Canadian Aero Services Ltd. v. O’Malley, 1973 CanLII 23 (SCC), [1974] S.C.R. 592 at 620.

[^48]: Palumbo v. Quercia, 2018 ONSC 5034, at para. 61; Middleton v. Direct Broadcast Satellite Communications Corp., 2022 ONSC 7345, at para. 81; Aquafor Beech Ltd. v. Whyte, Dainty and Calder, 2010 ONSC 2733, at para. 47.