Evans v. The Sports Corporation, 2011 ABQB 244

Court of Queen ’ s Bench of Alberta Citation: Evans v. The Sports Corporation, 2011 ABQB 244 Date: 20110408 Docket: 0603 07734 Registry: Edmonton Between: Richard Evans Plaintiff - and - The Sports Corporation Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _______________________________________________________ Introduction [ 1 ] This is a dispute between The Sports Corporation (TSC), an Edmonton-based sports agency headed by Ritch Winter and Steve Kotlowitz, and a former employee, Richard Evans.

There are a number of issues arising out of the failure of the employment relationship. [ 2 ] Mr. Evans claims that he is owed salary which was deferred during the National Hockey League lockout for the 2004 - 2005 season, as well as pay for the last few days of his employment. He also claims that he is owed a bonus payment in the amount of $4,750.00 US relating to the recruitment of Radim Vrbata as a client of TSC.

[ 3 ] Mr. Evans also claims outstanding bonuses for Petr Taticek and Petr Sykora in the total amount of $3,100.00 US. At the beginning of the trial, TSC acknowledged that it owed Mr. Evans the bonus payments for Mr. Taticek and Mr. Sykora. [ 4 ] TSC denies any other obligations to Mr. Evans, and has counter-claimed for damages for alleged breaches of the restrictive covenant or non-solicitation agreement Mr. Evans had in his employment contract with TSC, or alternatively breaches of fiduciary duties owed by Mr. Evans to TSC.

Facts [ 5 ] I do not need to summarize all of the evidence I heard over the course of the trial. The basic facts and chronology are not in dispute. I will deal with conflicts in the evidence only when they are relevant to the issues that require resolution. [ 6 ] The sports agency business is highly competitive. Being a sports agent is perceived by many as an exciting and interesting occupation. TSC, founded by Edmonton lawyer Ritch Winter in the mid 1980's is a well-known sports agency representing a number of NHL hockey players. Mr.

Winter was joined in 1997 by Steve Kotlowitz, a lawyer who had practiced entertainment law in Los Angeles for a number of years. [ 7 ] The sports agency business has several main aspects: recruitment of player/clients (or “assets” as described by Mr. Kotlowitz); nurturing the clients as their careers develop; negotiating contracts for their clients; and servicing the clients needs apart from their contractual relationship with their team (immigration, health, accommodation, money management and other matters) .

It is a highly personal business, as a successful sports agent will generally develop a strong connection, built on trust, between himself and the client. [ 8 ] Sports agents are required to be approved and registered personally with the NHL and the National Hockey League Players’ Association (NHLPA). Before 2000, TSC had three registered sports agents: Mr. Winter, Mr. Kotlowitz and Gerry Johannson. [ 9 ] By the late 1990s, TSC had created a strong network of prospects and clients in the Czech Republic and Slovakia, building on relationships nurtured by Mr.

Winter from his early days in the sports agency business. TSC had contractual arrangements with Jaromir Henys in the Czech Republic. Mr. Henys was a sports agent with strong contacts into junior hockey in the Czech Republic. He was described as the “King of Hockey” in the Czech Republic. TSC paid Mr. Henys a salary and reimbursed his expenses. Through these arrangements with TSC, Mr. Henys provided equipment, training, financial support and guidance to young, promising Czech hockey players. For players hoping to be drafted into the NHL, Mr.

Henys introduced them to TSC with a view to having the player become a TSC client. If the player became a TSC client, and eventually signed an NHL contract through TSC, Mr. Henys received bonuses. [ 10 ] Mr. Winter, Mr. Kotlowitz and Mr. Evans all told similar stories of signing meetings in the Czech Republic with Mr. Henys, young Czech hockey players and their families.

Many Henys prospects would be signed up with TSC over a period of a few days. [ 11 ] Peter Kadlecek, a Slovak national, performed similar functions, under a similar relationship with TSC, in Slovakia. [ 12 ] The Czech/Slovak pipeline provided TSC with a steady source of promising Eastern European hockey players, many of whom have gone on to play in the NHL, providing significant revenues to TSC and since mid-2006, to Mr. Evans. [ 13 ] Mr. Winter originally developed and maintained the relationships with Mr. Henys and Mr. Kadlecek. When Mr. Kotlowitz joined TSC, he took over the Czech - Slovak pipeline from Mr.

Winter and he began to service new players supplied by Mr. Henys and Mr. Kadlecek. This left Mr. Winter and Mr. Johannson to recruit, develop and service their existing clients and prospects from North America and other markets.

[ 14 ] By 2000, TSC had grown and it was looking for another sports agent to help recruit new clients and service those and existing clients. [ 15 ] Mr. Evans had always wanted to be a sports agent. After graduating from law school and articling, he soon took a position with the Professional Hockey Players Association and worked there for some six years as director of legal and business affairs, dealing largely with contract and employment matters. He became acquainted with Mr. Winter and TCS through dealings between TSC and the PHPA, and Mr.

Evans raised the possibility of him working as a sports agent at TSC in June, 1999. [ 16 ] At a meeting in February, 2000 while at the NHL All-Star game, Mr. Evans was invited to join TSC. [ 17 ] An agreement in principle was reached, and while both Mr. Evans and TSC contemplated a formal contract being entered into, Mr. Evans left his job in Toronto and moved to Edmonton to start work at TSC on April 18, 2000. He quickly became registered as a sports agent, and almost immediately left for the Czech Republic to meet Mr. Henys and sign up that year’s batch of Czech recruits. The intention when Mr.

Evans started at TSC was for Mr. Evans to take over Mr. Kotlowitz’s role with Mr. Henys and Mr. Kadlecez, service the existing clients from the Czech Republic and Slovakia, and build up his own network of recruiters and clients. [ 18 ] Because of Mr. Evans’s experience with players and sports through his employment at the PHPA, TSC thought that Mr. Evans would bring with him a number of players, or quickly recruit players for TSC’s benefit. That had been suggested by Mr.

Evans as something he might bring to TSC in the initial discussions about his coming to work at TSC. [ 19 ] An employment contract was eventually negotiated between Mr. Kotlowitz and Mr. Evans. Mr. Kotlowitz relied on TSC’s lawyers, and they produced the first draft of the employment contract. Mr. Evans obtained some legal advice and assistance from a Toronto employment lawyer he knew, Sam Hill. The negotiation and wordsmithing of the contract was done mainly by Mr. Evans and Mr. Kotlowitz, although there may have been some direct dealings between Mr. Kotlowitz and Mr. Hill. Mr. Evans, Mr. Kotlowitz and Mr.

Winter were lawyers themselves. [ 20 ] Ultimately, a contract of employment was signed for a three year term, starting April 18, 2000. Mr. Evans brought no clients with him to TSC, but gave up his job at the PHPA. TSC immediately turned over some existing clients to Mr. Evans, and sent him off to Europe to recruit with Mr. Henys and Mr. Kadlecek. Any new recruits/clients were to be serviced by Mr. Evans. [ 21 ] The employment contract contained a renewal clause as follows: 1(

b) Evans and the Company may renew this agreement on such terms and duration as agreed to between Evans and the Company. Evans and the Company shall provide the other written notice of their intention to renew or conclude the agreement prior to February 17, 2006 [ 22 ] The employment contract also provided the following covenant: 7.

Non-Disclosure, Developments and Unfair Competition Evans acknowledges that he is a key employee of the Company and that in the course of his employment with the Company, he has been and will be entrusted with, has developed and will develop, and has obtained and will obtain confidential information and trade secrets concerning the business of the Company, the disclosure of any of which to the Company’s competitions or the general public would be highly detrimental to the best interests of the Company.

Evans further acknowledges and agrees that the right to maintain confidential all of such confidential information and trade secrets constitutes a proprietary right which the Company is entitled to protect. Accordingly, Evans covenants and agrees with the Company that:

... (

b) he will not, either during the continuance of his employment under this agreement or for a period of 24 months thereafter, obtain or attempt to obtain the withdrawal from the Company of any employees of the Company. (

c) he will not, either during the continuance of his employment or for a period of 24 months thereafter, directly or indirectly through others, call on, solicit, divert or take away or attempts to call on, solicit, divert or take away any client of the Company which has been a client of the Company or any other company to whom Evans provided any services related to the Company’s business. This provision shall not apply to those clients of the Company from whom Evans has received or is owed payments under

section 4 of this agreement. ... (

j) Evans acknowledges and agrees that any revenue generated by Evans’ activities which contravene paragraphs 7(a), (b), (c), (

d) and (

e) of this agreement will unjustly enrich Evans or another third party and will thereby create a trust in favour of the Company in relation to the revenue referenced in this paragraph. [ 23 ] During the first three years of the relationship between Mr. Evans and TSC, a number of players were recruited through the Czech/Slovak pipeline. Some of the existing clients matured into signed NHL players. Mr. Evans proved to be skilled in servicing clients, but had little success in recruitment apart from clients provided through Mr. Henys and Mr. Kadlecek.

There did not seem to be any unhappiness between the parties, although it is clear from the evidence that Mr. Evans did not like Mr. Winter, and Mr. Winter was disappointed with Mr. Evans’s efforts and results with recruitment other than through the Eastern European connections. [ 24 ] There was an unresolved issue between Mr. Evans and TSC relating to a bonus payable arising out of successful contract negotiations for Radim Vrbata. Mr. Evans claimed that he had been responsible for recruiting and signing Mr. Vrbata and that he was entitled to the applicable bonus. Mr.

Henys also claimed that he had been responsible for recruiting and signing Mr. Vrbata as a TSC client. The result of these competing claims was that TSC paid no bonus to anyone, and the issue sat unresolved, and apparently unpushed by anyone. [ 25 ] Ultimately, Mr. Vrbata provided a letter to TSC in May, 2006 stating that Mr. Evans was the reason he had signed with TSC. At trial, TSC produced a letter from Mr. Vrbata to Jiri Crha, his former agent, dated August 2003, explaining to Mr. Crha why he had left Mr. Crha and had signed with TSC. In the letter, Mr.

Vrbata stated that he had signed with TSC because his father had gone to work for Mr. Henys, who had a relationship with TSC, and his signing with TSC would be good for his family. [ 26 ] Mr. Vrbata did not testify at the trial, nor did Mr. Henys (who had died by the time the trial commenced). [ 27 ] When the term of the first employment contract drew close to an end, the parties agreed on a new three year term that provided a higher salary and annual increases for Mr. Evans, and provisions anticipating the contemplated strike/lockout for the 2004- 2005 hockey season.

The collective agreement between the NHL and the NHLPA was set to expire on September 15, 2004, and difficult bargaining was anticipated. It was known that the team owners were looking for significant salary concessions from the players, and the players were reluctant to give up the level of salary and benefits they had achieved through previous negotiations. [ 28 ] The NHLPA feared that failing an agreement, the players might be locked out by the owners for the entire season, if not longer.

As virtually all of TSC’s revenues came from its NHL clients’ salaries, if the players were not receiving their salaries, TSC would receive no revenues. The consequences of a protracted lockout or strike would essentially starve TSC of any revenue, and make payment of salaries difficult if not impossible for TSC. [ 29 ] As a result, the following provisions were negotiated between Mr. Evans and Mr. Kotlowitz in contemplation of the lockout/strike:

3(

c) Evans and the Company recognize and acknowledge that the revenues for the Company are primarily derived from the commissions received from salaries paid to individuals playing hockey in the National Hockey League (“NHL”) and as a result, a labour disruption or work stoppage between the owners of the NHL and the National Hockey League Player Association (“NHLPA”) may significantly impact upon the revenues as well as the short term financial well being of the Company.

Consequently, in the event a labour disruption or work stoppage which necessitates the Company, acting reasonably, to reduce or suspend the payment of base salary to their COO, Evans agrees that his base salary will be reduced or suspended for as long and on the same percentage basis as the base salary of the COO. [ 30 ] As with the initial employment contract, the renewal contract was not signed for some time after the commencement date. Mr. Evans and Mr. Kotlowitz exchanged drafts and comments, and the final form was signed some time in the fall of 2003.

It provided for a further three year term, expiring April 17, 2006. [ 31 ] The 2003 Employment Agreement contained the following entire agreement provision: 11(

a) This agreement constitutes the entire agreement between Evans and the Company related to Evan’s employment with the Company and cancels and supersedes all previous written, verbal or implied agreements, terms, conditions and representations relating to Evan’s employment. There are no understandings, representations or warranties of any kind, express or implied, not expressly set forth herein. [ 32 ] It also contained severability clauses as follows: 7(

i) If any covenant or provision of this paragraph is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other covenant or provisions. ... 11(

b) In the event any part or parts of this agreement shall be held illegal or null and void by and Court or administrative body of competent jurisdiction, such determination shall not affect the remaining parts of this agreement and they shall remain in full force and effect as if such part or parts determined illegal or void had not been included in the agreement. [ 33 ] The fact that there were differences between the first employment contract and the 2003 Employment Agreement in effect at the time of Mr. Evans’ termination is of no relevance to any of the issues to be determined between the parties.

The 2003 Employment Agreement clearly governs their relationship. [ 34 ] Much of the dispute between the parties focuses on the lockout clause and the restrictive or non-competition covenant, and these will be dealt with in detail later in this decision. [ 35 ] As was feared, the NHL and the NHLPA were unable to come to agreement before the expiry of the collective agreement in September, 2004. By the end of June, the 2003-2004 season was over and revenues to TSC from the season had been paid to them.

Their only significant source of revenue for the remainder of the calendar year was players salaries, but there would be no salaries and no revenues unless there was a new collective agreement and a playing season. [ 36 ] So at the end of June, 2004, Mr. Kotlowitz notified Mr. Evans that the lockout clause in the Employment Agreement was activated, and payment of his salary would be suspended effective June 30. That caught Mr. Evans by surprise, as he had expected that the salary suspension would not become effective until the end of August, at worst.

He had not budgeted to be without salary for July and August. [ 37 ] Mr. Evans had diverted a portion of his salary to his wife, who had become an employee of TSC when he started his employment there. Her salary was suspended at the same time as was Mr. Evans’s.

[ 38 ] TSC completed Records of Employment for each of Mr. and Mrs. Evans at the end of June, 2004. In July, 2004, both Mr. and Mrs. Evans applied for and began receiving Employment Insurance benefits, representing to EI that they had been laid off from TSC as at the era of June due to a shortage of work. [ 39 ] To assist Mr. Evans with the sooner-than-expected loss of his salary, he and Mr. Kotlowitz negotiated an arrangement where TSC would “loan” Mr. Evans $12,000.00 being approximately what Mr. Evans netted from his salary over July and August. It was shown as a loan in TSC’s books to “appease” Mr.

Winter, who along with Mr. Kotlowitz and Mr. Johannson, was having his salary suspended. Mr. Winter was concerned that TSC could not pay anything to Mr. Evans because a Record of Employment had already been provided to him. Repayment of the “loan” was never discussed between Mr. Evans and Mr. Kotlowitz. [ 40 ] Arrangements were made for Mr. Evans’s benefits to continue, as well as office parking. Mr. Evans testified that notwithstanding the loss of salary, it was “business as usual” and he went to the office every day, the same as before.

There were still clients to service as the players still had immigration, investment and other personal issues that they relied on TSC and its agents to help them with. Most of the players were playing with non-NHL teams in North America or Europe during the lockout. [ 41 ] Both Mr. Kotlowitz and Mr. Winter testified that Mr. Evans had been encouraged to find work elsewhere, as there was not much to do around TSC. There were no contracts to negotiate, and the players did not need much servicing because they weren’t working in the NHL. They (and TSC) had no expectation that Mr.

Evans would come to work regularly. [ 42 ] Mr. Evans, Mr. Kotlowitz and Mr. Evans all testified as to their joint efforts to find alternate work during the lockout period, described by all as “fishing”. Any replacement work found by any of the agents was to be shared, and any profits to be divided among them. One significant project with Skate Canada was landed through Mr. Winter’s connections there. Mr. Evans did a lot of the work on the Skate Canada project, and the project netted some profits for TSC. Mr. Winter received a larger share than the others, as he had landed the fish. Mr.

Kotlowitz testified that he gave Mr. Evans the share that had been allocated to Mr. Kotlowitz because he and Mr. Evans were friends and he knew Mr. Evans needed the money. [ 43 ] Apart from the “loan” and a total of $18,379.00 paid to Mr. Evans as a result of the Skate Canada project, Mr. Evans received no other salary or payments from TSC over the course of the lockout. [ 44 ] The lockout ended on July 13, 2005. That was in sufficient time for the regular start of the 2005-2006 season.

In anticipation of receiving full revenues for the coming season, TSC resumed salaries for July and August, 2006 but on a rolled-back basis. Mr. Evans received $2,019.23 for July and $8,750.00 for August, instead of his normal salary of $12,500.00. There was no evidence that Mr. Evans was treated differently by way of the roll-back percentage than was Mr. Kotlowitz. [ 45 ] Mr. Evans began to receive his full salary as of September 1, 2005. The other player agents with TSC agreed to take only half salary as revenues for TSC were still affected, but Mr. Evans declined to do so.

His position was somewhat different than that of Mr. Winter and Mr. Kotlowitz, who were shareholders in TSC. Mr. Johannson, the other non-shareholder player agent, did agree to a salary reduction for some period after the lockout ended. Mr. Evans’ refusal to accept a reduced salary caused some further friction between Mr. Evans and Mr. Winter. [ 46 ] The Employment Agreement required each of Mr. Evans and TSC to notify the other by February 17, 2006 as to whether they wanted to terminate the agreement or renew it. Mr. Evans notified TSC before that date that he wished to renew.

TSC gave no notice, although through Mr. Kotlowitz, there were discussions about renewal. Mr. Winter had instructed Mr. Kotlowitz before February 17 that Mr. Kotlowitz was not to make any offer to Mr. Evans. Instead, Mr. Winter wanted Mr. Evans to make an offer to TSC. Mr. Kotlowitz, considering himself to be friends with Mr. Evans, was keener on retaining Mr. Evans as an employee than was Mr. Winter. Mr. Kotlowitz remained optimistic that something would be worked out between them. [ 47 ] Some information was exchanged between Mr. Evans and TSC, in particular a

summary of TSC’s revenues from the Eastern European players being serviced by Mr. Evans and the costs associated with those players, including Mr. Evans’ salary, benefits and expenses, and TSC’s costs related to Mr. Henys and Mr. Kadlecek.

[ 48 ] Mr. Evans was unwilling to make an offer to TSC, as he wanted to have TSC’s position and an offer to consider himself. By the time Mr. Evans had given notice of his intention to renew to TSC, he had begun to consider the possibility of setting out on his own. He had already had discussions with Mr. Kadlecek as to what Mr. Kadlecek might do if Mr. Evans left TSC and was on his own. He had also had similar discussions with Mr. Henys’s son, inquiring through the son as to what Mr. Henys might do if Mr. Evans left TSC and was on his own. [ 49 ] As the expiry date drew closer, neither Mr.

Evans nor TSC budged from their position of wanting the other to make the first offer. Mr. Winter became concerned that TSC was vulnerable to Mr. Evans with respect to the Czeck and Slovak players being serviced by Mr. Evans. He began to email Mr. Evans seeking information about these players, and wanted to meet with Mr. Evans to discuss contact information and the needs of the various players. Mr. Winter was not optimistic that a new contract would be negotiated, and was not particularly keen on having Mr. Evans stay on in any event. [ 50 ] No meeting took place. Ultimately, on April 12, Mr.

Evans announced that he would be leaving when his contract expired a few days later. TSC’s response was to have Mr. Evans leave immediately, rather than wait out the remaining few days of the term. Unknown to TSC, Mr. Evans had already arranged for new phone lines into his home. He was required to clean out his office, and return his keys, other TSC property, and his TSC-supplied cell phone. [ 51 ] Mr. Evans made immediate arrangements to have calls to his TSC cell phone forwarded directly to the new telephone line he had set up in his home. [ 52 ] Upon Mr. Evans leaving the TSC office, it appears that Mr.

Winter and Mr. Kotlowitz became concerned for the TSC clients Mr. Evans had been servicing, and they went to their lawyers for advice. TSC wrote Mr. Evans later that day, reminding him of his obligations under paragraph 7 of the Employment Agreement and warning that they would take action if he breached those obligations. [ 53 ] Also unknown to TSC was that Mr. Evans had made arrangements with Mr. Kadlecek that on Mr. Evans’ departure from TSC, Mr. Kadlecek would terminate his relationship with TSC and enter into an agency or employment arrangement with Mr.

Evans. [ 54 ] There was also evidence that there was an understanding between Mr. Evans and Mr. Henys that Mr. Henys would end his long-standing relationship with TSC on Mr. Evans’ departure from TSC and would then continue the same sort of relationship with Mr. Evans thereafter. The understanding regarding Mr. Henys resulted from discussions between Mr. Evans and Mr. Henys’s son who worked with Mr. Henys in the Czech Republic in Mr. Henys’s European hockey agency business. [ 55 ] It should be noted here that none of TSC’s or Mr. Evans’ hockey-player clients testified at the trial. Neither did Mr.

Kadlecek nor Mr. Henys. Mr. Henys had died by the time of trial. Mr. Henys’s son did not testify. There were a number of records put into evidence at trial that related to Mr. Henys, Mr. Kadlecek, various clients of TSC and Mr. Evans. There was evidence of converations involving Mr. Henys and Mr. Kadlecek.. Most of this evidence was heresay, although little of it was objected to. [ 56 ] Notwithstanding the lack of objections, as both parties appeared to be attempting to rely on some of the hearsay, I do not intend to place much reliance on hearsay evidence.

While relevant to some of the issues, most of this evidence was unhelpful, and of questionable reliability. To the extent that I rely on any of it, I will identify any such hearsay evidence and my reasons for relying on it. [ 57 ] Shortly after Mr. Evans left TSC, TSC began to receive termination notices from many of the clients who had been serviced by Mr. Evans. TSC quickly came to the view that Mr. Evans was breaching the restrictive covenant or non-solicitation provisions in the Employment Agreement and commenced this action. A similar action was also commenced in Colorado. According to Mr. Evans, Mr.

Winter told Mr. Evans at some stage that he would ruin Mr. Evans and take away his house. Mr. Evans complained that TSC badmouthed him with players and clients, although there were no specifics given, and any of those complaints were heresay. [ 58 ] I was advised that the Colorado proceedings had been terminated - essentially dismissed on jurisdictional grounds - before the trial in Edmonton commenced.

[ 59 ] From the time of Mr. Evans’ departure, TSC was concerned about the potential loss of clients to Mr. Evans. Both Mr. Winter and Mr. Kotlowitz testified as to the efforts TSC made in the days immediately following Mr. Evans’ departure to retain his clients. A few telephone calls were made, but no one was assigned the task of contacting all of Mr. Evans’ clients; Mr. Evans’ clients were not transferred to anyone else at TSC to pursue; and there was no plan or strategy put in place to retain the clients. Essentially, TSC’s efforts to mitigate the impact of Mr.

Evans’ departure and decision to compete with TSC were minimal. [ 60 ] Mr. Kotlowitz and Mr. Winter both candidly acknowledged that their efforts to retain Mr. Evans’ clients were minimal and brief. They believed that they were protected by the damages provision in the Employment Agreement; namely that Mr. Evans would have to pay them all of any revenues generated by Mr. Evans from any of these clients for at least the duration of the restriction - two years. [ 61 ] The evidence at trial established that a number of the TSC clients who had been serviced by Mr.

Evans while at TSC terminated their agency relationship with TSC and signed Standard Player-Agent Contracts (SPACS) with Mr. Evans. [ 62 ] The evidence also established that whatever relationship Mr. Evans and Mr. Henys contemplated was never formalized into a written agreement. They were unable to agree to terms and their relationship broke down before it was clearly established. There was communication in August between Mr. Evans and Mr. Henys over documents for various players to sign with Mr. Evans, and a draft “Cooperation Agreement” was sent to Mr. Evans by Mr.

Henys in November, 2006. [ 63 ] However, for some months after Mr. Evans’ departure from TSC, Mr. Henys’s relationship with TSC was impacted and Mr. Henys did nothing to help TSC retain any of the Czech clients who had signed with TSC through the Henys pipeline. The evidence establishes that Mr. Henys was at that time pursuing a relationship with Mr. Evans. [ 64 ] There was little evidence as to anything actually done by Mr. Henys to assist Mr. Evans in having some of his TSC clients terminate their relationship with TSC and sign with Mr. Evans. The draft Cooperation Agreement suggests that Mr.

Henys was instrumental in having some players sign with Mr. Evans, although the draft was authored by Mr. Henys. Having regard to the August emails, Mr. Henys was clearly involved in facilitating documentation for some players effecting the change from TSC to Mr. Evans. Mr. Evans disavows any knowledge of what Mr. Henys was doing or what he did, and denies asking him to do anything on his behalf. [ 65 ] It is clear that Mr. Kadlecek facilitated the documention for a number of Slovak clients terminating TSC’s services and helping them sign with Mr. Evans. He and Mr.

Evans were negotiating the terms of an employment arrangement similar to the arrangement Mr. Kadlecek had had with TSC. However, by the fall of 2006, Mr. Kadlecek and Mr. Evans had fallen out, and Mr. Kadlecek returned to his former arrangements with TSC. The same Slovak players who had left TSC in mid-2006 and signed with Mr. Evans apparently terminated their contracts with Mr. Evans when Mr. Kadlecek terminated his arrangements with Mr. Evans, and these same players re-signed with TSC. [ 66 ] Nevertheless, despite the ultimate failure of his relationships with Mr. Henys and Mr. Kadlecek, Mr.

Evans retained many of the clients who had followed him, and has derived (and continues to derive) substantial revenues from some of these players. [ 67 ] Under the terms of the Employment Agreement, Mr. Evans was entitled to compete with TSC immediately on his departure. He was also entitled to take “his” clients with him; namely those clients that he had recruited himself and for whom he had been paid a bonus. This entitlement is spelled out in paragraph 7(

c) of the Employment Agreement. [ 68 ] TSC does not dispute that Mr. Evans was entitled to retain Petr Taticek and Petr Sykora. No claim is asserted by TSC against Mr. Evans in regard to those players. [ 69 ] Mr. Evans asserts that Mr. Vrbata is in the same category. He claims to have recruited and signed Mr. Vrbata. Mr. Evans claims an unpaid bonus with respect to Mr. Vrbata, and denies that TSC is entitled to any part of his revenues from Mr. Vrbata. [ 70 ] TSC’s claim against Mr. Evans relates to the following players:

David Koci; Tomas Kopecky; Filip Kuba; Tomas Mojzis; Filip Novak; Marek Svatos; Radim Vrbata; Mario Bliznak; Tomas Fleischmann; and Vladimir Mihalik [ 71 ] Mr. Evans does not dispute (except with respect to Mr. Vrbata) that all of those players were TSC clients, and they do not fall within paragraph 4, meaning that Mr. Evans was not entitled to solicit them for business. [ 72 ] The quantification of TSC’s claim is also not in dispute (other than with respect to Mr. Vrbata). If Mr. Evans is liable to TSC pursuant to paragraphs 7(

c) and 7(

j) for all revenues from the above players from April 12, 2006 to April 12, 2008, the revenues he is required to pay to TSC total $605,000.00 US and $3,543.75 Can. NHL players’ salaries are paid in US dollars, and TSC is entitled to receive their percentage in US dollars as well. Players playing other than for NHL teams in Canada are paid in Canadian dollars; thus the reason for the claim being in both US and Canadian dollars. [ 73 ] Exhibit 8 lists the payments generated by each of the players for whom damages are claimed. Revenues from Mr.

Vrbata totaled $96,647.60 so it is an easy mathematical calculation to back out any such revenues if Mr. Evans was entitled to solicit Mr. Vrbata and take him away from TSC. [ 74 ] Quantification of Mr. Evans’ claims against TSC is also not in issue. Because his employment terminated a few days before the Employment Agreement expired, and because Mr. Evans was not paid for those days, he has a claim for 5 days pay, or $2,016.13, if he is entitled to such pay. [ 75 ] As well, if Mr. Evans was entitled to receive his full pay from July 1, 2004 to August 31, 2005, he should have been paid $167,083.26.

He was paid $18,379.00 as a result of the “fishing” expeditions, and he had been given $12,000.00 in July, 2005 by TSC after all of the agents’ salaries had been suspended. That amount was characterized as a loan in TSC’s books, but it was clear from the evidence that the payment was intended to be a credit against any future repayment of the missed salary and was never intended to be repaid by Mr. Evans to TSC. [ 76 ] Mr. Kotlowitz testified that the characterization of this payment as a loan had been done to “appease” Mr.

Winter, who apparently felt that there should be no salaries paid out after the end of June and was opposed to helping Mr. Evans out in this fashion. [ 77 ] In any event, while TSC pursued recovery of the “loan” in its pleadings and through discoveries, it did not press the point at trial. [ 78 ] Mr. Evans was also paid $10,769.23 in July and August 2005 after the lockout even settled. [ 79 ] Thus, if Mr. Evans was entitled to receive full pay from July 1, 2004 to August 31, 2005 he is owed $125,287.03 by TSC. TSC’s internal calculations show $122,184.03 but that does not include calculations for August, 2005.

Issues [ 80 ] There are a number of issues relating to Mr. Evans’ claim and TSC’s counterclaim. But for the issues concerning Mr. Vrbata, they are basically discrete claims. Much was made of Mr. Kotlowitz trying to incent Mr. Henys into helping TSC with the litigation against Mr. Evans by offering him a percentage of any recovery from Mr. Evans. Such discussions between Mr. Kotlowitz and Mr. Henys occurred after the relationship between Mr. Evans and Mr. Henys had soured and Mr. Henys had returned to the TSC fold. In the end, nothing turns on that. Mr.

Henys did not testify; any evidence from him by way of documentation (emails in August, 2004 and the draft Cooperation Agreement in November 2004) came from the period when he could be described as being in Mr. Evans’ camp rather than in TSC’s. [ 81 ] Mr. Evans argued that TSC’s conduct throughout should be considered: various threats made to Mr. Evans that TSC would ruin him, the litigation in Colorado, unfavourable comments to players and the suggestion by TSC that its costs in this litigation were being paid by insurance. None of those factors has any relevance to the issues to be determined: the

interpretation of the Employment Agreement and whether either party (or both) has breached its obligations to the other. [ 82 ] The fact that TSC may have misrepresented the effect of the Employment Agreement to some of Mr. Evans’ clients or to others, and the fact that TSC has threatened Mr. Evans with financial ruin, do not change the

interpretation of the Employment Agreement or the actions of the parties. They may not work to TSC’s credit, but those facts are essentially irrelevant to any of the issues to be determined here. Little in this matter turns on the credibility of the witnesses. [ 83 ] Additionally, there was much made of the fact that TSC did not give Mr. Evans the required written notice to renew the Employment Agreement in accordance with paragraph 1(b). Nothing turns on that. TSC was not obliged to give such a notice: it only had to give the notice if it wanted to renew the agreement.

Neither party negotiated in earnest with the other. It appears from the evidence that only Mr. Kotlowitz wanted Mr. Evans to stay. Mr. Evans had little respect for and did not like Mr. Winter. Those feelings were reciprocated by Mr. Winter. Mr. Winter had instructed Mr. Kotlowitz to make no offers to Mr. Evans. He wanted to see what Mr. Evans proposed. Mr. Evans was not interested in making the first offer himself, and did not appear at all concerned about the impending termination date as it drew nearer. The failure to give notice to renew did not relieve Mr.

Evans from any of the obligations he had to TSC on termination, so this is an issue that is essentially irrelevant despite the amount of time it took during the trial. [ 84 ] Additionally, Mr. Evans argued that I should apply an adverse inference against TSC because it did not call Dale Bowes its accountant, any of the hockey players who it claims were solicited by Mr. Evans, Mr. Kadlecek who is now working for TSC again and Mr. Henys junior. [ 85 ] I do not see that Ms.

Bowes’ evidence on any subject would have been of assistance to the court on any of the accountings or salary issues. [ 86 ] I can understand, from a business perspective, why neither party wanted to get any of their clients involved. I do not infer from the absence of direct evidence from any of the players that they were not, or were, solicited. Their evidence may have been helpful to either party, but it was not essential. No inference should be against TSC for not attempting to prove their claim through its clients or former clients. [ 87 ] I can only assume that not calling Mr.

Kadlecek was motivated by not wanting to get him involved or for strategic purposes. By the time of trial, he was again friendly to TSC having falling out with Mr. Evans. Having regard to his switching loyalties, I am not convinced his evidence would have been particularly reliable or helpful. No inference is drawn in relation to him. [ 88 ] As for Mr. Henys junior, I have no information as to whether he would be neutral, friendly to TSC or hostile to TSC. I do not see it as significant that he did not testify for TSC. [ 89 ] The remaining issues to be determined are:

1. Is Mr. Evans entitled to be paid for the stub period - the few days between the day he was told to leave the TSC offices and the date the Employment Agreement expired? 2. Is Mr. Evans entitled to receive his full salary for the lockout period? 3. Is Mr. Evans entitled to receive a bonus in relation to the signing of Mr. Vrbata as a TSC client? 4(A). Did Mr. Evans breach the Employment Agreement by obtaining or attempting to obtain the withdrawal from TSC of any employees of TSC within 24 months from the end of his employment with TSC? 4(B). If so, what damages are TSC entitled to? 5(A). Did Mr.

Evans owe fiduciary duties to TSC? 5(B). If, so, did he breach those obligations, and what damages are TSC entitled to? 6(A). Did Mr. Evans breach the Employment Agreement by directly or indirectly through others, calling on, soliciting, diverting or taking away or attempting to call on, solicit, divert or take away any client of TSC within twenty four months from the end of his employment with TSC? 6(B). If so, what damages are TSC entitled to? 7. Did Mr. Evans owe a duty to not unfairly compete with TSC independent of a fiduciary relationship or a non-solicitation covenant? 8.

If either party is entitled to damages in US dollars from the other, what date should be used for conversion of the currency to Canadian dollars? 1. Stub Period [ 90 ] TSC did not argue that it was entitled to terminate the Employment Agreement for cause. Nor did it argue that it was entitled to terminate Mr. Evans’ employment ahead of the contractually-agreed termination date. It is also not suggested or argued that Mr. Evans quit. Essentially, TSC suggests that the matter is de minimus and that it took a practical approach to the situation. It was then clear that the agreement was not going to be renewed.

There were only a few days left on the contract. TSC didn’t want Mr. Evans around any more having ongoing contact with clients. Mr. Evans had not been cooperative in providing Mr. Winter with information about the clients he was servicing, and there was no personal relationship left between Mr. Winter and Mr. Evans. TSC had no work it wanted Mr. Evans to perform over the remaining term of the contract, and he was not required to do anything. Because he didn’t work, he shouldn’t get paid. [ 91 ] Mr. Evans, on the other had, asserts an entitlement to full payment under the Employment Agreement.

He was not unwilling to work those remaining days, and it was TSC, not he, who brought about his early departure. [ 92 ] I agree with Mr. Evans’ position. When an employment agreement is for a fixed term, both parties are entitled to hold the

other party to the agreement. There was nothing in the agreement giving TSC the right to terminate Mr. Evans at will, or not pay him if they didn’t keep him busy (apart from the lockout clause). TSC could not unilaterally decide that it no longer wanted Mr. Evans around and not pay him. TSC could decide they no longer wanted Mr. Evans around, but apart from termination for cause (which was not alleged) they had to continue to pay him and provide his benefits for the term of the agreement. [ 93 ] Mr. Evans is thus entitled to be paid the remaining five days of his salary, being $2,016.13. 2. Lockout [ 94 ] Mr. Evans’ claim in this regard, and TSC’s defences, raise a number of sub-issues: (

a) what was the nature of the arrangement made; (

b) can such an arrangement stand in light of the Employment Standards Code, RSA 2000 c. E-9; and (

c) what are the effects of TSC completing a Record of Employment and Mr. Evans claiming and receiving Employment Insurance from the Government of Canada during the lockout? (

a) Nature of Agreement [ 95 ] There is no dispute that Mr. Evans made the agreement he did with TSC regarding the pending lockout. He was well aware that the relationship between the NHL owners and the NHLPA was strained and was likely to come to a head at the end of the current collective bargaining agreement. Mr. Winter’s evidence was that there was talk that a strike or lockout might last for two full seasons, and there appeared to be a strong likelihood that at least the full 2004-2005 season was in jeopardy. [ 96 ] The agreement between Mr. Evans and TSC was negotiated between them. Mr.

Evans is a lawyer and is not unfamiliar with bargaining over terms of employment. Mr. Kotlowitz and Mr. Winter are also lawyers with similar experience to that of Mr. Evans. Both had access to legal counsel, although there is no evidence that either Mr. Evans or TSC sought legal advice or representation over the renewal of the Employment Agreement in 2003. [ 97 ] There is no ambiguity in the agreement made, thus there is no scope for any application of the doctrine of contra proferentum .

There was no measurable inequality of bargaining position, and no suggestion that one party took advantage, or tried to take advantage, of the other. [ 98 ] The clause in question is clearly drafted. It allows TSC, in the event of a labour dispute between the owners and the NHLPA, to suspend Mr. Evans’s salary during the duration of the labour dispute. Mr. Evans is to be treated in similar fashion to Mr. Kotlowitz in regard to salary suspension or reduction, and repayment of any deferred or missed salary. [ 99 ] Mr. Evans was aware that TSC was almost totally dependent on revenues from its NHL players.

If a season was shut down or impacted, and players did not receive their salaries from their respective NHL teams, TSC would receive no revenues either. Revenue from players playing in other leagues was not significant, even revenues from NHL players playing for non-NHL teams during the lockout. If TSC received no revenues from players’ salaries, it would have no funds with which to pay salaries and other expenses of TSC during the period of revenue interruption. None of this is surprising. [ 100 ] The Employment Agreement does not contemplate that the employment relationship would end.

From the wording of the agreement, it seems that business and each party’s responsibilities would be as usual, although there would obviously be much less work if there were no players’ contracts to negotiate, and no players issues arising during the hockey season requiring TSC’s assistance. Recruitment of potential clients in Europe and elsewhere, however, would not be affected. As well, there would be some servicing of existing clients despite the fact that the clients were not playing for NHL teams. There were some clients playing in hockey leagues other

than the NHL, so there were still some revenues coming into TSC, and some of its “normal” work. [ 101 ] TSC, through Mr. Winter and Mr. Kotlowitz, realized in June, 2004 that the 2005 season was unlikely to start on schedule, and that there was likely to be a lockout or strike period. Such period might result in the cancellation of the entire season, or might even last more than a season.

In anticipation of the labour difficulties, and facing the reality that there would be no further revenues to TSC because the 2003-2004 season had ended and the players had been fully paid by their teams (and TSC had likewise been fully paid by its clients), TSC suspended salaries entirely effective July 1, 2004. The lockout period did not officially begin, however, until September 16, 2004. [ 102 ] It is also not unreasonable that TSC would take defensive action to protect its financial position once a strike or lockout were a virtual certainty.

Further, it was not unreasonable for TSC to resume salaries on a rolled-back basis once the lockout was officially over in July, 2005 but before it started to receive fees based on the players’ salaries for the season which was about to start. [ 103 ] TSC may have been acting prudently when it suspended salaries in anticipation of the labour difficulties, but in my view, it did not have the right under the Employment Agreement to do so until September 16, 2004. As a result, Mr. Evans should have received his full pay for July and August, 2004 and half of September, 2004.

Of that, he only received $12,000.00 which was characterized as a loan. Mr. Evans is entitled to judgment against TSC in the amount of his salary for July, August and half of September, 2004 ($29,166.65) less the $12,000.00 actually received, in the net amount of $17,166.65. [ 104 ] I also find that under the Employment Agreement, Mr. Evans’ salary should have resumed on July 14, 2005, the day after the lockout officially ended. The labour disruption was over. For July, therefore, he should have received 18/31 of his salary, or $7,258.06. He was paid $2,019.23 for July.

He should have received his full salary for August, or $12,500.00. He was paid $8,750.00. For that roughly six week period, therefore, Mr. Evans is entitled to recover the shortfall, or $11,008.06. [ 105 ] Beyond that, Mr. Evans tied his entitlement to remuneration to Mr. Kotlowitz. In doing so, Mr. Evans may have disadvantaged himself as he did not consider some of the technical possibilities because of Mr. Kotlowitz’s position as a shareholder, director and officer of TSC in addition to his being an employee. Mr. Kotlowitz’s wife was also a shareholder.

It would have been possible for TSC to pay dividends to Mr. or Mrs. Kotlowitz, or directors’ fees to Mr. Kotlowitz, or repay shareholders loans and argue that such payments did not trigger an obligation to treat Mr. Evans in a similar fashion. [ 106 ] But those arguments are hypothetical, as there was no evidence that Mr. Kotlowitz received, directly or indirectly, any payment at all, however characterized, from TSC over the lockout period. Further, there is no evidence that Mr.

Kotlowitz has received anything since the lockout, directly or indirectly, that might be considered to be repayment of or compensation for any lost remuneration during the lockout period. [ 107 ] By the time Mr. Evans left TSC in April, 2006, there had been no such repayments or compensation. In fact, Mr. Kotlowitz, Mr. Winter and Mr. Johannson had taken only half salary for the rest of 2005 once the season started and salaries were restarted in July, 2005. [ 108 ] There remains the potential that Mr. Kotlowitz might be compensated at some future date for the lost earnings.

He testified at trial in 2010 that nothing of that sort had occurred to date. It would of course have been contrary to TSC’s interests to pay anything to Mr. Kotlowitz on account of the lockout period, recognizing that Mr. Evans might have to be treated in a similar fashion. But in my view, the parties’ positions crystallized when the Employment Agreement ended. [ 109 ] The evidence before me satisfies me that for as long as Mr. Evans remained with TSC, he was treated the same as was Mr. Kotlowitz in regard to the deferred or lost salary during the lockout. [ 110 ] Mr.

Evans tried to make something of the fact that Mr. Kotlowitz had sold some of his shares in TSC during the relevant period. The fact that Mr. Kotlowitz realized on some of his capital investment in TSC is in my view not germane to the issue. There may have been a compelling argument in Mr. Evans’ favour had TSC elected to declare dividends over the relevant period to its shareholders, rather than compensate its employees for their losses over the lockout period. But essentially, Mr. Kotlowitz reduced his interest in TSC and reduced his further entitlements from TSC.

His shares were apparently sold to arms’ length purchasers, so there is no relevance to those proceeds in regard to how Mr. Kotlowitz was treated by TSC in regard to the lockout period.

[111] Subject to the remaining arguments as to the enforceability of the lockout agreement, Mr. Evans was entitled to be paid forJuly and August and to receive full pay after July 13, 2005, but he has not established any entitlement to payment for the balance of thelockout period as Mr. Kotlowitz received nothing for that period. [112] Mr. Evans may have made an agreement that placed himself at risk in the event of some jiggery-pokery by TSC, but theevidence satisfies me that TSC and Mr. Kotlowitz acted honestly and in a manner consistent with a fair

interpretation of the EmploymentAgreement. TSC cannot be faulted for the manner in which Mr. Evans was treated during the lockout and in the period thereafter untilthe end of the term of his contract, and Mr. Evans has no valid complaint that he was taken advantage of in any way by TSC. [113] As a result, I conclude that TSC had no contractual obligation to Mr. Evans during the locklout period, other than to pay himproportionately what Mr. Kotlowitz was paid. He received more than Mr. Kotlowitz did, so there is no residual contractual complaint. (

b) Employment Standards Code [114] Mr. Evans argues that non-payment of his regular wages during the lockout constituted a breach of s. 4 of the EmploymentStandards Code and claims that he is entitled to be paid his full salary over the lockout period. Essentially, he argues that the lockoutprovisions in the Employment Agreement should be severed as being illegal. [115] TSC argues that the Employment Standards Code has no application to this situation, or that if it does, Mr. Evans was paidmore than he was required to be paid under the Code in any event.

TSC also argues that by the terms of the lockout clause, Mr. Evanswas tied to Mr. Kotlowitz, and that his only entitlement was to be treated the same as TSC treated Mr. Kotlowitz by way of salarysuspension or reduction and eventual repayment. TSC notes that Mr. Kotlowitz received nothing during the lockout, and has to datemade no recovery of the suspended salary entitlements. [116] Further, TSC argues that the Code has no application at all because Mr.

Evans left his employment over the lockout periodand cannot claim to be an employee of TSC while he was representing to the Government (and receiving unemployment benefits) that hewas unemployed. The latter argument will be dealt with separately. [117] The relevant provisions of the Code are as follows: 4. An agreement that this Act or a provision of it does not apply, or that the remedies provided by it are not to be available for anemployee, is against public policy and void. [118] Mr. Evans also points to the minimum wage provisions under the Employment Standards Regulations, being sections 7, 9 and10.

At the relevant time, the applicable minimum wage was $8.80 per hour. [119] The breach argued by Mr. Evans is that TSC could not contract with him to receive no salary as such an agreement wouldviolate the minimum wage provisions under the Code and the Regulations, and is thereby void under s. 4 of the Code. The EmploymentAgreement as drafted could have the result of Mr. Evans being paid less than the minimum wage (i.e. nothing) for an extended period. [120] Mr. Evans relies on Machtinger v. HOJ Industries Ltd., (SCC), [1992] 1 S.C.R. 986, and Beaulne v.Kaverit Steel and Crane ULC, 2002 ABQB 787.

Machtinger dealt with reasonable notice, and holds that the Ontario EmploymentStandards Act does not oust common law obligations with respect to notice of termination. Beaulne was a wrongful dismissal claiminvolving a claim for unpaid overtime. In that case, Greckol J. held that the employer could not avoid payment for overtime merelybecause the employee had not complied with a loose company policy of getting pre-approval.

[ 121 ] I am mindful of the approach taken to illegal interest rates in Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC 7 . I recognize that the Court was dealing with common law illegality, and not statutory illegality as is the case here, where the Code expressly states that an agreement ousting its provisions is “against public policy and void”.

However, in Transport North American Express , the Court had a number of choices available to it, from removing all interest payment obligations to allowing the maximum rate permitted by law. [ 122 ] The Court applied principles of severance to attempt to interpret the contract in a manner that cured the illegality while remaining as close as possible to the intent of the parties.

Iacobucci J., speaking for the majority, stated: 32 If the case is an appropriate one for the court to sever only those provisions of the loan agreement that put the effective interest rate over 60 percent, and if it is conceded, as it must be, that such a rewording alters the agreement of the parties, the question becomes only a choice of the appropriate technique of severance.

The preferred severance technique is the one that, in light of the particular contractual context involved, would most appropriately cure the illegality while remaining otherwise as close as possible to the intentions of the parties expressed in the agreement. The blue-pencil technique may not necessarily achieve that result. ... 38 This demonstrates that, at least in the case of contracts in violation of s. 347 of the Code , the results associated with the application of the blue-pencil approach are overly dependent upon the form of the contract, rather than its substance.

In these three similar contracts, the borrower must pay 30.8 percent interest, 60.0 percent interest, or no interest, depending on otherwise insignificant differences in drafting. Results this erratic and sensitive to the form of contractual expression are undesirable, and can be avoided through the use of notional severance in cases where considerations flowing from the broad contractual context favour the lender. 39 There is little danger that abuses of this remedial flexibility would surreptitiously creep past trial judges.

On the contrary, judges are apt to be quite suspicious, and rightly so, of credit arrangements which provide for effective annual rates of interest in excess of 60 percent per annum. Using notional severance to read down interest provisions to be just within the legal limit would not find application in traditional loan-sharking transactions.

It would be available as a remedy where a court recognizes the commercial sophistication and professional advice received by both parties, concludes that the violation of s. 347 by the parties was unintentional, and considers it equitable to give effect to the highest legal interest obligation available. In such cases, there is no reason, in my view, to prefer the blue- pencil approach as more likely to deter criminal interest rates. I will return to this point below. 40 Thus, the appropriate approach is to vest the greatest possible amount of remedial discretion in judges in courts of first instance.

The spectrum of available remedies runs from a court holding contracts in violation of s. 347 void ab initio , in the most egregious and abusive cases, according to the criteria identified in Thomson , supra , to notional severance. In the determination of where along the spectrum a particular contract lies, the considerations identified in Thomson by Blair J.A. should be referred to and analysed carefully.

Although Blair J.A. was considering the desirability of severing illegal interest from principal, the same factors are helpful in determining whether to reduce illegal interest to a legal level. [ 123 ] Here, Mr. Evans did receive salary from TSC over the relevant period. He received $12,000.00 in July, 2004 and then payments from the Skate Canada work in February, May and July, 2005 totaling $18,379.00. He began to receive regular (although reduced) salary in July, 2005, receiving $2,019.23 in July and $8,750.00 in August. [ 124 ] As to the $12,000.00 paid in July 2004, Mr.

Evans cannot have that payment characterized as something other than a loan (for the purposes of avoiding potential repayment of it) but not salary or wages for the purposes of the Code . By any calculation, Mr. Evans received more than the minimum wage over the period salaries were suspended at TSC. [ 125 ] If one treats the $12,000.00 payment in July as wholly attributable to salary or entitlements for July and August, 2004, that leaves a 10 1/2 month period during which Mr. Evans received only $18,379.00 from TSC relating to the fishing endeavours.

That payment by itself would be more than the minimum wage applicable to the period. [ 126 ] That only partly answers the question, however. S. 4 says that the parties cannot contract out of the Employment Standards

Code . Mr. Evans argues that regardless of what he got paid, TSC was not entitled to suspend his salary at all, and he is entitled to not just minimum wage for the applicable period, but full pay. [ 127 ] Machtinger may be interpreted as holding that if an employer breaches a provision of Employment Standards legislation, the employee’s remedies are not limited to the minimum provisions set forward in the legislation.

There, the contract of employment contained a provision that the employer could terminate the employee’s employment without cause and without notice in the case of one employee and on two weeks’ notice for the other. Those provisions contravened the Ontario legislation.

Iacobucci J. for the majority in the Supreme Court held that the employees were not limited to notice specified in the legislation, as the legislation provided a minimum standard and was not intended to oust common law entitlements. [ 128 ] I do not read Machtinger as holding that if a provision in an employment contract calling for a reduction in wages in certain contingent circumstances offends employment standards legislation that the affected employee is entitled to receive his full wages in the event the contingency materializes.

Quantum meruit comes to mind, with the minimum wage as a minimum standard. [ 129 ] In my view, this is not a dissimilar situation from the Transport North American Express case. There, the parties contracted for a criminal interest rate. They were sophisticated, commercial entities. They had legal advice. There, the Courts elected to read down the interest rate to the highest allowable rate, rather than to eliminate interest altogether. [ 130 ] The Employment Standards Code was enacted to legislate minimum employment conditions, mainly relating to wages, holidays and hours of work.

The basic principle was to prevent vulnerable employees from being unfairly taken advantage of by their employers. It applies to all employees, regardless of their rate of pay or position with the employer. I reject the argument on behalf of TSC that the Code has no application to an employee like Mr. Evans because of his relative sophistication. He, like all employees, are entitled to the full protection of the Code . [ 131 ] Here, there is no suggestion that TSC took unfair advantage of Mr. Evans. He was a lawyer.

One of the main functions of his job was to negotiate employment contracts with large, sophisticated employers for his clients. He was negotiating his own employment contract with his colleague, another lawyer. Both parties had access to legal advice. [ 132 ] In the Employment Agreement, relating to the contingency of a players’ strike or lockout, he was treated the same as other similar employees. True, two of the employees were shareholders as well, but the evidence was that the other non-shareholder employee, Mr. Johannson, was treated the same as was Mr.

Evans (but for the $12,000.00 July payment and receiving Mr. Kotlowitz’s share of the “fishing” money). TSC was not a large company, with less than 10 employees. [ 133 ] Mr. Evans was well aware that TSC would be significantly impacted by the lockout and that it would essentially have no revenues for the same period as their player-clients were not playing in the NHL and being paid by their NHL teams. [ 134 ] Had Mr. Evans been paid nothing over the relevant period, he might well have an argument that he should at least receive the minimum wage. But he received more than that.

I conclude that a salary reduction agreement or salary deferral agreement such as the one in question here should be interpreted in such a fashion as to give effect to its clear intent, subject to the proviso that the parties cannot contract out of entitlement to receipt of at least the minimum wage and the minimum benefits and working conditions legislated by the Code . [ 135 ] The parties expressly contemplated circumstances that might otherwise amount to frustration of the Employment Agreement. Collective agreements routinely contemplate layoffs in the event of bona fide shortages of work.

There should be nothing in a non- unionized environment limiting the parties from making similar arrangements. Here, there was a bona fide shortage of work, not caused by any act or neglect or default of TSC. The parties agreed on the consequences to each of them of such an occurrence. What happened to Mr.

Evans was not unlike a layoff for shortage of work, although he continued to receive his benefits. [ 136 ] I do not see that the Code contemplates or should be interpreted as dealing with situations where parties of relatively equal bargaining power agree on the consequences to each of them in the event of a defined contingency, so long as the results do not offend the protections provided by the Code .

[ 137 ] Here, there was no certainty that Mr. Evans would be paid less than the minimum wage. He was to be paid in similar fashion to Mr. Kotlowitz. The salary was described as being “reduced or suspended”. TSC implemented the labour disruption provision and reduced or suspended the salaries of Mr. Evans and others to nothing. However, I do not interpret the agreement as meaning that TSC could reduce salaries to nothing.

That would offend the Employment Standards Code and Regulations . [ 138 ] It is more appropriate to take a “wait and see” approach to what actually happened, rather than declare the provision void because it could have resulted in no pay at all. [ 139 ] As a result, and having specific regard to the payments made by TSC to Mr. Evans during the labour disruption period, I find that the Employment Agreement does not offend the Code , and paragraph 3(

c) of the Employment Agreement is not contrary to the Code . It must, however, be interpreted as not permitting TSC to reduce salaries below minimum wage for any relevant period. [ 140 ] Even if the labour disruption provision were found to be void, that does not automatically mean that Mr. Evans would be entitled to full salary for a labour disruption period. The Force Majeure provisions of the Employment Agreement might have been brought into play. There could have been a quantum meruit assessment of the value of services provided by Mr. Evans over the labour disruption period.

There was insufficient evidence before me to conclude that on a quantum meruit basis, Mr. Evans should be paid any more than he was paid, together with what I have found him to be entitled to for the period before the lockout started and the period after the lockout officially ended. [ 141 ] I accept that Mr. Kotlowitz said to Mr. Evans that he didn’t expect Mr. Evans to work for free during the lockout period. I also accept Mr. Kotlowitz’s evidence that TSC freed Mr. Evans to seek other work, and indeed encouraged Mr. Evans to try to find work outside TSC over the lockout period.

The Employment Agreement contains a typical “entire agreement” clause, so these discussions are irrelevant to the

interpretation of the lockout clause. The discussions are consistent with the “fishing” endeavours and my conclusion that the Employment Agreement has to be interpreted so as to require payment of at least the minimum wage. There was no discussion of what “not work for free” meant. It should also be noted that Mr. Evans continued to receive his normal employment benefits from TSC over the lockout period. [ 142 ] In the end, Mr. Evans got more than he bargained for, having regard to Mr. Kotlowitz giving him his share of the fishing monies from Skate Canada.

The Employment Agreement provisions were neither unfair nor unreasonable having regard to the nature of TSC’s business. He received significantly more than the minimum wage over the 14 month period TSC was directly affected by the labour disruption. (

c) Record of Employment - Termination [ 143 ] Mr. Kotlowitz and Mr. Winter testified that they told Mr. Evans that he was free to find something else to do over the lockout period and that he did not have to keep regular hours or even come in to the TSC premises. TSC nonetheless continued Mr. Evans’ benefits. Mr. Evans disputed that he was not expected to come in to TSC’s offices and testified that as far as he was concerned, it was “business as usual”. Mr.

Evans made some minimal efforts to find other work, but was not successful in doing so and my impression from his evidence was that he wasn’t really interested in doing anything else. He was committed to the sports agency business and had clients to serve. [ 144 ] He was clearly ready, willing and able to do anything TSC asked of him over that period, and played a major role in doing the work for Skate Canada that resulted from the fishing endeavours. [ 145 ] I accept Mr. Kotlowitz’s and Mr. Winter’s evidence that Mr.

Evans was free to do other work and was encouraged to do so, but I do so with the caveat that it may well have been a career-limiting move if Mr. Evans had abandoned TSC at that time, and worked elsewhere rather than coming into the office, doing whatever was required to be done, and doing whatever was necessary to service the TSC clients entrusted to him. And TSC’s position ignores the fact that most of Mr. Evans’ clients (and theirs) were playing hockey in other leagues and still required some servicing. Mr.

Evans was undoubtedly expected at a minimum to keep contact with his clients and service their ongoing needs.

[ 146 ] In the end, nothing turns on this. From a legal perspective, Mr. Evans resigned his employment with TSC when he had TSC complete the Record of Employment and applied for unemployment benefits. [ 147 ] For the court to come to any other conclusion would require the court to turn a blind eye to, or countenance, a possible fraud perpetrated on the Government of Canada. Employment Insurance benefits are to be paid to the unemployed. Employed people are not entitled to benefits.

An employed person cannot represent to the government that he is unemployed and thus entitled benefits, when he is in fact employed. [ 148 ] Mr. Evans argues that TSC cannot rely on his application for EI and his receipt of EI benefits because it provided the ROE. He claims that TSC checked with its accountant to make sure he could be given an ROE. Mr. Kotlowitz testified that it was Mr. Evans who came to him seeking an ROE and all TSC did was oblige Mr. Evans. [ 149 ] In my analysis, TSC’s involvement does not assist Mr. Evans.

I do not accept his evidence that TSC came up with this deal for him to seek EI benefits. He approached TSC to facilitate his getting EI payments. They did so. They may be criticized for complying with his request. They may have been badly advised by their accountant, or their accountant may not have been given the full story. But it was Mr. Evans who applied for the benefits and Mr. Evans who received them. He was an employment lawyer and an experienced player agent negotiating employment contracts. He was not directed to apply for EI by TSC.

He did so of his own choosing, and must live with the consequences. [ 150 ] It is certainly arguable from the facts that Mr. Evans continued to be employed by and work for TSC from July 1, 2004 to July 13, 2005. He continued to do work, and received benefits. After receiving the $12,000.00 payment in July, 2004, he did not receive any salary for the balance of 2004.

He apparently did not receive EI benefits at some time in 2005 when he was out of Canada and in Europe recruiting players for TSC, but appears to have generally received EI benefits until July, 2005 when the lockout ended. [ 151 ] But for the period July 1, 2004 to July 13, 2005, Mr. Evans cannot now credibly claim that he was employed by TSC and is entitled to his full salary over that whole period.

He chose to seek unemployment benefits and cannot now resile from that position because he has now decided to claim that he is entitled to full payment from TSC for that period on the basis that his employment was never really terminated. [ 152 ] The fact that Mr. Evans is a lawyer makes his claim somewhat odious. Even if Mr.

Evans intends to reimburse EI to the extent of any benefits received during periods when he should not have recovered EI because of recovery from TSC, his situation is completely different from one where an employee is fired, claims and receives EI, and is then successful in recovering damages for wrongful dismissal. The employee in the latter circumstance has clearly been fired and has no job. [ 153 ] I find that he is disentitled to recover any further salary from TSC for the period September, 2004 to July 13, 2005. He was entitled to be paid for July and August, 2004 whether he worked or not.

He clearly began to work for TSC again after July 13, 2005. [ 154 ] To find otherwise would countenance what I consider to be the improper collection of benefits from Employment Insurance. [ 155 ] Regardless of how Mr. Evans’ relationship with TSC is characterized, he is entitled to receive his full salary for the period July 1, 2004 to September 15, 2004 and again from July 23, 2005 to August 31, 2005. The $12,000.00 paid to him in July 2004 should in fact be treated as salary paid to him during July, 2004, for July and August. [ 156 ] The fact that Mr.

Evans’ employment was terminated through the provision of the ROE by TSC does not disentitle Mr. Evans to recover the salary he was entitled to receive by the operation of the lockout provision in the Employment Agreement. He had a contractual entitlement to those payments from TSC. He may well have an obligation to repay some or perhaps all of the EI benefits he received over the lockout period. But that obligation does not relieve TSC from its contractual obligations to Mr. Evans. [ 157 ] In any event, from September 16, 2004 until the lockout ended, Mr.

Evans received exactly what TSC was obliged to pay him: what Mr. Kotlowitz received over the same period. To the extent that the Employment Standards Code applied, what he received for the fishing endeavours exceeded the minimum wage, so there is no remaining claim.

[158] Mr. Evans argues that the receipt of Employment Insurance benefits is irrelevant, as he may be required to repay benefitsreceived under the provisions of the Employment Insurance Act, S.C. 1996, c. 23, and in particular sections 45 and 46. [159] However, those sections refer to a claimant receiving benefits for a period and a person subsequently becoming liable to payearnings for the same period.

The situation contemplated there is one of a dismissal where the dismissed employee subsequentlyrecovers damages or compensation for the wages he or she should have received by way of notice or damages for wrongful dismissal.Those sections do not contemplate a situation where someone represents that his employment has been terminated and subsequentlyargues that his employment was in fact not terminated and EI documents were only completed to get EI payments, and did not reallyreflect his true employment circumstances. [160] Chapell v. Canadian Pacific Railway Company, 2010 ABQB 441, and Desforge v.

E-D Roofing Limited., (2008), (ON SC), 69 C.C.E.L. 115 (Ont. S.C.J.), are cases reinforcing the obligation of an employee to repay EI benefits receivedfor periods the employee subsequently receives compensation for from the employer. They do not support an argument justifying thewrongful application for EI benefits in the first place. [161] From a legal perspective, Mr. Evans was either employed by TSC during the lockout period or he wasn’t. In my view, theeffect of the ROE and his applying for and receiving EI benefits over that period is that he was not an employee of TSC during thatperiod.

He continued to have a contractual relationship. The Employment Agreement did not expressly contemplate that his employmentwould terminate in the event of a lockout and the implementation of paragraph 3(

c) of the Employment Agreement. But the ROE had theeffect of terminating his employment as at the end of June, 2004. [162] It may be that he was re-employed by TSC in February when the Skate Canada work materialized; it may be that the fishingendeavours were more of a joint venture or independent contractor relationship. I need not determine that for the purposes of thisdecision. At a minimum, he was not an employee for the purposes of the Employment Standards Code for at least the period July 1, 2004to January 31, 2005.

From February 1, 2005 until July 22, 2005, if he was an employee as opposed to an independent contractor, hereceived more than the minimum wage payable over that period. [163] Mr. Evans argues that he must have continued to be employed by TSC throughout the lockout period because if hisemployment had been terminated, all of the SPACs with players he had signed to TSC would have terminated on their terms (Mr. Evansapparently being the “guarantor” of TSC’s obligations under the SPAC).

Since TSC did not treat these SPACs as having terminated andreplacing them with new ones, TSC cannot now, he argues, take the position that Mr. Evans was not employed by TSC throughout. [164] That is an interesting argument, but one that is between TSC and some of its clients. Mr. Evans cannot take advantage of thatin answer to his having accepted the ROE and collected unemployment benefits during the lockout period. 3. Vrbata Bonus [165] There is no doubt that Mr. Vrbata became a TSC client during Mr. Evans’ employment with TSC. Mr. Evans testified that hewas the effective cause of Mr. Vrbata signing with TSC.

Mr. Vrbata provided a letter to TSC to that effect. However, the letter is purehearsay, and Mr. Vrbata did not testify. His evidence was not unavailable and I do not see that his letter is of any evidentiary value orsatisfies any of the requirements for hearsay to be admitted in evidence under the new principled approach to hearsay. [166] Nevertheless, Mr. Evans gave evidence that it was he and his contact with Mr. Vrbata that caused Mr. Vrbata to sign withTSC. [167] TSC presented as evidence to the contrary a letter or fax from Mr. Vrbata to Mr. Crha dated August 27, 2003, explaining whyhe was terminating Mr.

Crha’s agency and signing with TSC. There, he references his father’s relationship with Mr. Henys and that

connection with TSC. Mr. Evans is not mentioned. [ 168 ] That communication is also pure hearsay, and suffers the same fate as the letter proferred by Mr. Evans. [ 169 ] TSC notes that Mr. Vrbata’s brother David was a TSC client, who had been referred to TSC by Mr. Henys. That does not explain why Radim Vrbata signed with Mr. Crha in the first place. [ 170 ] What I am left with is Mr. Evans’ evidence that he was the effective cause of the signing, and TSC’s evidence through both Mr. Kotlowitz and Mr. Winter that Mr.

Henys had claimed to be the effective cause of the signing and also claimed entitlement to a bonus or compensation as a result. David Vrbata’s relationship with Mr. Henys and TSC is of no assistance in resolving the issue. [ 171 ] This claim is, in my view, answered by what TSC did, not by what it claims. It paid no one. It did not pick between Mr. Evans and Mr. Henys; instead it appears to have stonewalled both. Presumably, at the time, neither Mr. Evans nor Mr. Henys wanted to jeopardize their relationship with TSC over the relatively small bonus payable in regard to Mr. Vrbata’s signing.

There is no evidence that Mr. Henys did anything other than make a request for payment of the bonus. [ 172 ] Mr. Evans made the claim, and specifically referenced it during the negotiations for the renewal of the first employment contract. The issue was never resolved during his employment. [ 173 ] Mr. Henys is now dead. There is no evidence before me that he has ever advanced any formal claim against TSC in regard to Mr. Vrbata. The matter is undoubtedly statute-barred as regards any claim by Mr. Henys. Mr. Evans, on the other hand, has pursued his claim.

No limitation defence has been raised. [ 174 ] TSC cannot expect to receive a windfall of not having to pay anyone with respect to Mr. Vrbata. Mr. Evans has a claim; he testified that it was valid. TSC disputes the claim only on the basis of hearsay. Essentially, there is no evidence to dispute Mr. Evans’ claim. I have no reason to disbelieve Mr. Evans on this subject. [ 175 ] As a result, I find that Mr. Evans is entitled to receive the bonus with respect to the signing of Mr. Vrbata, which has been quantified as $4,750.00. Conclusion on Mr Evans’ Claims [ 176 ] Mr.

Evans is entitled to receive payment for the stub period in the amount of $2,016.13. He is entitled to be fully paid for July, August and half of September, 2004 in the amount of $29,166.65 less the $12,000.00 he actually received attributable to that period, namely $17,166.65. He is entitled to be fully paid for the period July 23, 2004 to August 31, 2004 in the amount of $16,129.03, less the $10,769.23 actually received, namely $5,359.80. Mr. Evans is also entitled to receive his bonus in regard to the signing of Mr. Vrbata in the amount of $4,750.00 together with bonuses for Mr. Taticek and Mr.

Sykora of $3,100.00

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