1007374 Alberta Ltd. Plaintiff - v. -, 2011 ABQB 804

Court of Queen ’ s Bench of Alberta Citation: 1007374 Alberta Ltd. v. A. Ruggieri Engineering Ltd., 2011 ABQB 804 Date: 20111221 Docket: 0401 14304 Registry: Calgary Between: 1007374 Alberta Ltd. Plaintiff - and - A. Ruggieri Engineering Ltd. Defendant And Between: A. Ruggieri Engineering Ltd. Plaintiff by Counterclaim - and - 1007374 Alberta Ltd., J. Alan Mossman and J.A. Mossman Engineering Ltd. Defendants by Counterclaim _______________________________________________________ Reasons for Judgment of the

Honourable Madam Justice S.M. Bensler _______________________________________________________ I. Introduction [ 1 ] This is a proceeding arising from an alleged breach of a Consulting Agreement (the “Agreement”) between the Plaintiff, 1007374 Alberta Ltd. (“1007374”) and the Defendant, A. Ruggieri Engineering Ltd. (“Ruggieri Engineering”). [ 2 ] Mr. Mossman is the controlling mind of J.A. Mossman Engineering Ltd. (“J.A. Mossman Engineering”) and 1007374. Antonio Ruggieri is the controlling mind of Ruggieri Engineering. The numbered company, 1007374, is the company Mr.

Mossman registered in order to enter into an Agreement with Ruggieri Engineering. [ 3 ] The Plaintiff claims that the Defendant breached the Agreement and claims damages resulting from the breach. The Defendant (Plaintiff by Counterclaim) has counterclaimed for damages as a result of the repudiation of the Agreement by the Plaintiff (Defendant by Counterclaim). 1007374, J.A. Mossman Engineering and Mr. J. Alan Mossman are named as Defendants in the Counterclaim. [ 4 ] Liability, damages and mitigation are all in issue. [ 5 ] For ease of reference, the Plaintiff will be referred to as Mr.

Mossman and the Defendant as Mr. Ruggieri. [ 6 ] The Plaintiff claims the following in his Statement of Claim: a. A declaration that Mr. Ruggieri is obliged to pay the Monthly Fee to the Consultant until the expiry of the five-year term of the Consulting Agreement on March 1, 2008; b. an accounting of all amounts paid and payable to Mr. Ruggieri to the Consultant until the expiry of the five-year term of the Consulting Agreement and, in particular an accounting of the Monthly Fee due to the Consultant; c. damages in the sum of any amount owed and paid or improperly calculated and paid by Mr.

Ruggieri to the Consultant; and d. exemplary damages in the amount of $50,000. [ 7 ] The Plaintiff by Counterclaim claims as against the Defendants by Counterclaim the following relief: a. Damages in the sum of $450,000.00; b. an accounting by the Defendants by Counterclaim of revenue derived other than and through the Consulting Agreement; c. an Order requiring the Defendants by Counterclaim to disgorge revenue earned other than and through the Consulting Agreement; and d. costs on a solicitor and client basis. II.

Facts [ 8 ] Many of the facts are in dispute particularly with respect to certain conversations that occurred between Mr. Mossman and

Mr. Ruggieri. Briefly, the facts that are not in dispute are set out below. [ 9 ] Ruggieri Engineering provides engineering services, including geotechnical and structural engineering services to homebuilders and others in Alberta. [ 10 ] In March 2003, Mr. Mossman and Mr. Ruggieri entered into an Agreement whereby Mr. Mossman agreed to transition his clients over to Mr. Ruggieri in exchange for a consulting fee. [ 11 ] At that time, both Mr. Mossman and Mr. Ruggieri were registered as professional engineers with the Association of Professional Engineers, Geologists and Geophysicists of Alberta (“APEGGA”).

However, in October 2003, Mr. Mossman resigned from APEGGA. Whether he advised Mr. Ruggieri about this development or not, is disputed by the parties. [ 12 ] The purpose of the Agreement was two fold. The Agreement provided for a monthly fee of 25 percent of all amounts invoiced by Ruggieri Engineering to any of the accounts identified in the Agreement or subsequently brought to Mr. Ruggieri by Mr. Mossman. The payment to Mr. Mossman for this portion of the work was capped at $80,000. In addition to the 25 percent, the Agreement provided for payment to Mr.

Mossman of a fee of 60 percent of all amounts invoiced by Ruggieri Engineering in connection with any engineering consulting services provided to it by Mr. Mossman. There was no cap on this payment. [ 13 ] Mr. Mossman began providing the services to Ruggieri Engineering in March 2003. The term of the Consulting Agreement was five years commencing March 1, 2003, subject to termination at the sole option of Mr. Mossman upon three months notice to Mr. Ruggieri. [ 14 ] Mr. Mossman sent his letter of resignation to APEGGA in a letter dated October 29, 2003. [ 15 ] Mr.

Mossman testified that sometime between Christmas and New Years day of 2003 he telephoned Mr. Ruggieri to ask when he would be receiving a key for the new office. He was informed by Mr. Ruggieri that he would not be doing any more engineering work for Ruggieri Engineering. Mr. Mossman did not work after December 2003. [ 16 ] Mr. Mossman received payments from Mr. Ruggieri’s company for the 25 percent fee until June 2004. [ 17 ] On June 30, 2004, Mr. Ruggieri advised Mr.

Mossman, via letter, that the Agreement was at an end and further advised that as of July 1, 2004 no further payment of any kind (including the monthly fee) would be made to Mr. Mossman. [ 18 ] Mr. Mossman provided written notice to Mr. Ruggieri of his intention to terminate the Agreement effective December 15, 2004. This letter was dated September 8, 2004. Consulting Agreement [ 19 ] Because this is a contractual dispute, the starting point of my analysis should be the contract, in this case, the Agreement. The relevant provisions of the Agreement provide as follows: 1.

The Consultant shall, during the Term (as defined herein), provide the following consulting services, on an exclusive basis, to the Company: (

a) geotechnical engineering services

(

b) structural engineering services on (

i) single family dwellings up to and including six plexes and (ii) farm warehousing for United Farmers of Alberta; (

c) services ancillary to the foregoing; and (

d) such other services as may from time to time be agreed to by the Consultant and the Company. 2. [...]The Company shall not terminate this Agreement prior to expiry of the Term. The Consultant shall provide no less than 3 months notice in writing to the Company should the Consultant wish to terminate this Agreement prior to the expiry of this Term, in which event the Consultant shall be entitled to be paid the consulting fee provided in

section 6(

b) in respect of the period of time during which the Consultant provides services and shall continue to be entitled to be paid the Consulting fee provided in

Section 6(

a) until expiry of the full Term as if notice of termination had not been provided. 3. [...]The Consultant shall at all times perform the Services in a competent, professional and skillful manner. [...] 5. The parties acknowledge and agree that the time devoted by the Consultant to the Company in connection with the provisions of the Services hereunder may, at the discretion of the Consultant, be reduced from time to time during the Term, provided that the Consultant shall devote no less than 30 hours per week during the first three (3) years of the Term.

The parties agree that as the time devoted by the Consultant is from time to time reduced as provided above, the Company shall devote proportionately more and more time and resources to servicing the Consultant’s Accounts (as defined below) on a timely basis such that such accounts are serviced in the same prompt, competent, professional and skillful manner as before and such accounts experience no diminishment in the level or quality of engineering services provided. [...] 9. The Consultant represents and warrants to the Company as follows: (

a) Mossman will provide, as an employee of the Consultant and in the course of his employment with the Consultant, 100 percent of the Services which the Consultant has agreed to provide under this Agreement; (

b) the Consultant has the training, experience and ability to perform the Services in a competent, professional and skillful manner and is registered for GST and Workers’ Compensation; and (

c) the Consultant is a valid and subsisting corporation under the laws of the Province of Alberta and has the necessary power, capacity and authority to enter into this Agreement and to perform its obligations hereunder.

Engineering, Geological and Geophysical Professions Act [ 20 ] The relevant sections in the Engineering, Geological and Geophysical Professions Act RSA 2000, c E-11(the “ Act ”) provide as follows: 2(1) Except as otherwise provided in this Act, no individual, corporation, partnership or other entity, except a professional engineer, a licensee so authorized in the licensee’s licence, a permit holder so authorized in its permit or a certificate holder so authorized in the certificate holder’s certificate, shall engage in the practice of engineering. [...]

97(1) A person whose registration as a professional engineer, professional geologist, professional geophysicist, licensee, permit holder or certificate holder is cancelled or suspended under this Act shall not, without the consent of the Council, engage in the practice of engineering, geology or geophysics, as the case may be, or directly or indirectly associate the person or itself in the practice of engineering, geology or geophysics with any other professional member, licensee, permit holder or certificate holder.

(2) No professional engineer, professional geologist, professional geophysicist, licensee, permit holder or certificate holder shall, except with the consent of the Council, associate in the practice of engineering, geology or geophysics, as the case may be, directly or indirectly with or employ in connection with that practice a person whose registration has been cancelled or suspended under this Act.

(3) The Council may permit a professional member, licensee, permit holder or certificate holder to employ in connection with the person’s practice a person whose registration has been cancelled or suspended under this Act, but the employment shall be in the capacity and subject to the terms and conditions that are prescribed by the Council. III. Issues [ 21 ] To decide this case I must address the following issues: 1. Was Mr. Mossman prohibited from performing further engineering work under the Agreement, after he resigned from APEGGA? 2. If yes, did this amount to a fundamental breach of the Agreement? 3.

Did the Defendant breach the Agreement? 4. If Mr. Mossman is entitled to damages how should they be quantified? 5. If Mr. Ruggieri is entitled to damages how should they be quantified? IV. Evidence A. Evidence of Mr. Mossman [ 22 ] Mr. Mossman obtained his Bachelor of Science in Civil Engineering in 1963 and has continued to take courses throughout his career. When he first graduated he worked for an insurance company assessing fire risks in industrial complexes. He then worked for a small reinforcing steel company and then a piling contract and foundation engineer.

In approximately 1980, he started working for a company called Cosentino and Partners. He was a signing engineer which meant he could act as the engineer who sealed and checked the plans. After he resigned from that employment, he started doing consulting work on his own for house builders and individual owners of homes. [ 23 ] He joined APEGGA as a student and following two years of professional experience he became a professional engineer with a seal: a stamp from APEGGA. [ 24 ] Mr. Mossman formed J.A. Mossman Engineering in 1984.

The majority of his clients were homeowners who asked him to check the structural components of the homes as required by the City of Calgary. His major business was soil testing. Early on, he formed a relationship with Jayman Homes. According to Mr. Mossman, he formed a relationship with eight out of ten of the top homebuilders as clients. [ 25 ] Mr. Mossman met Mr. Ruggieri in 1999 when Mr. Ruggieri was working as an estimator for Shane homes. Mr. Ruggieri arrived at Mr. Mossman’s home one night to introduce himself. They had discussions about the work Mr. Mossman was doing for Shane Homes.

They maintained contact from that point on. Mr. Ruggieri volunteered to help him with a few personal things.

[ 26 ] At one point, Mr. Ruggieri advised Mr. Mossman that he was going to be doing Shane Homes’ sealing of drawings and letters and plans from that point on. Mr. Mossman mentioned to him that there could be a conflict of interest with the firm. Mr. Mossman did one further job for Shane Homes after that when the company felt that Mr. Ruggieri did not have the experience to deal with an issue. Mr. Mossman did not hear from Shane Homes again and assumed that the reason must have been financial, in other words that Mr. Ruggieri was charging less than Mr. Mossman. [ 27 ] The two developed a relationship and if Mr.

Mossman went on holidays for a week Mr. Mossman would use Mr. Ruggieri as an emergency contact in case his clients required emergency services. [ 28 ] At one point, Mr. Mossman required a supervisor for his practice. There was a problem with a retaining wall that he had built. The design conditions had changed and the builder did not inform him of the changes. Cracks occurred in the wall. He looked after the cost of repairing the wall. APEGGA notified him that there was going to be a hearing.

After the hearing they found that his paperwork was in need of supervision and they requested that he get a supervising engineer for a one-year period in 2001. Mr. Mossman asked Mr. Ruggieri if he would act as his supervisor and Mr. Ruggieri agreed. He was to keep Mr. Ruggieri informed about his work. At the end of each month, they went through the work and Mr. Ruggieri would then write a report to APEGGA. [ 29 ] At the end of the year, APEGGA advised Mr. Mossman that they would like him to be supervised for another year. Mike Strong became his APEGGA supervising engineer and Mr.

Ruggieri continued to be his supervisor. The period of supervision ended in early 2003. [ 30 ] Mr. Mossman testified that at the end of the year, Mr. Ruggieri requested $150,000.00 for the supervising services that he provided to Mr. Mossman. They eventually agreed on $10,000.00. [ 31 ] He wrote Mr. Ruggieri two cheques: the first one was for $4,820.00. The $4,000.00 was payment for the supervising and the $820.00 was payment for some work done by Mr. Ruggieri while Mr. Mossman was on holidays.

The second cheque was for $6,686.55 with $6,000.00 being for supervising and a further $686.55 as payment for some reports issued by Mr. Ruggieri. [ 32 ] One day, Mr. Ruggieri showed up at Mr. Mossman’s door with an Agreement. They had previously discussed the idea of a partnership but Mr. Mossman had initially dismissed the idea as he felt he was able to meet the needs of his clients without a partnership. [ 33 ] Once they had reached an agreement, the basic plan was that Mr. Mossman would transfer his clients to Mr. Ruggieri’s company. The transition was to take place over a period of two months.

The agreement was that any clients that were not yet transferred to Ruggieri Engineering were to be billed by Mr. Mossman. [ 34 ] The intention was for Mr. Mossman to work for his clients in the south and Mr. Ruggieri would work for the clients in the north. Mr. Mossman had a number of his own clients that were north of the river, in Airdrie and other locations. All the engineering sealing was to be done by Mr. Ruggieri as Mr. Mossman was never a shareholder in the company. His understanding was that documents could only be sealed by a shareholder. Once his clients were transferred to Mr.

Ruggieri he was to be paid 60 percent for the work that he did and 25 percent for the work that Mr. Ruggieri’s company did for his former clients. [ 35 ] Mr. Mossman formed a company to do the consulting work for Mr. Ruggieri’s engineering firm, 1007374, as Mr. Ruggieri did not wish to have an association with J.A. Mossman Engineering. [ 36 ] Mr. Mossman provided Mr. Ruggieri with a list of clients which was attached to the contract as

Schedule A. The intention was that the clients in

Schedule A were to be transitioned to Ruggieri Engineering. There were two names that were deleted from the original list, Glenwood Homes and Talisman Homes. Both companies were involved a lawsuit with respect to a subdivision in Cochrane. Mr. Mossman was also being sued at the time. [ 37 ] Jager Homes was also excluded as they did not wish Mr. Mossman to do any further engineering work for them. Mr.

Mossman had recommended a type of concrete which was ultimately refused by the City of Calgary. [ 38 ] UFA was not transitioned as Mr. Ruggieri did not wish to have them as a client. Mr. Mossman continued to do work for UFA under J. A. Mossman until he could find a suitable engineering firm to take over the work. He found a replacement in September 2003. [ 39 ] Mr. Mossman testified that his problems with APEGGA had arisen in discussions between himself and Mr. Ruggieri. According to Mr. Mossman, they spoke about whether his problems would be solved if he dropped his membership. [ 40 ] Mr.

Mossman never applied his engineering seal to any documents he submitted under the Agreement. If it required a seal it was sealed by Mr. Ruggieri. [ 41 ] During the first three months of the Agreement, Mr. Mossman worked more than 30 hours per week. However, Mr. Ruggieri hired a soil technologist who then went on to do quite a bit of the work that had been done by Mr. Mossman and as a result his hours were reduced. [ 42 ] In August, September and October of 2003, Mr. Mossman worked approximately 20 hours or less per week. He mentioned to Mr. Ruggieri that he was unhappy with this arrangement.

He wanted to work more hours. [ 43 ] Mr. Mossman’s plan was that in the second year of the Agreement he would insist on doing all the work in the south. It was to be part of his retirement and pension plan. He anticipated that it would require 50 hours per week and he was willing to do that amount of hours. [ 44 ] Mr. Mossman did not receive any copies of the bills that Mr. Ruggieri’s company sent to accounts within ten days of those being rendered as per the Agreement. [ 45 ] Mr. Mossman testified that the major clients were transitioned in the first two months.

It was difficult to transition all the clients as Mr. Ruggieri was unavailable to meet them because of his workload. Mr. Ruggieri agreed to extend the transition period by one month. The last client that was transitioned was in August 2003. [ 46 ] Mr. Mossman received no money under the Agreement from Mr. Ruggieri’s company for the months of March, April and May 2003 because they had agreed that this was the transition period. As the transition period was taking longer than they anticipated and it was difficult to set up meetings with all the parties, they eventually agreed that Mr.

Ruggieri would write a letter under his letterhead and that would officially act as the transition of those clients. [ 47 ] With respect to some of the specific clients, Mr. Mossman testified that he did not receive any money for work done for Homes by Avi. Mr. Ruggieri advised Mr. Mossman that the reason was because he was advised by the construction manager and the “accountant girl” that they did not want Mr. Mossman performing engineering work for Avi. Mr. Mossman disagreed with this

interpretation and said that Avi Amar, the owner, phoned him personally and asked him to do engineering work. [ 48 ] With respect to Stepper Homes, there were months when Mr. Mossman did not receive any payments and Stepper was one of the city’s largest home builders. Mr. Ruggieri advised him that Stepper had concerns about the speed in which they received some reports. Mr. Mossman testified that these were reports from the northeast so it was not work he would have done. He never agreed to have Stepper removed as a client under the Agreement. [ 49 ] Mr.

Mossman had no complaints about the information he received for the month of June. It was a report generated by Mr. Ruggieri’s computer. However, after July 27, 2004 he received no further information or payments from Ruggieri Engineering. Mr. Ruggieri’s explanation was that his computer was broken. His understanding was that Mr. Ruggieri would have his computer repaired.

Mr. Mossman later received some handwritten receivables. Resignation with APEGGA [ 50 ] Mr. Mossman understood he was subject to an investigation with APEGGA. The investigation concerned a beam support system in a property of Cedarglen Homes. Mr. Mossman was advised in 2001 of the investigation. [ 51 ] According to Mr. Mossman, after the first hearing it was proven that the support system was adequate. The outcome was that he was asked to attend another hearing in 2003. At the second hearing, he was questioned on the nails that he had used in the design.

At the end of the hearing, he was advised that there would be a third hearing. According to Mr. Mossman at this point, he said within earshot of Mr. Ruggieri that he was going to resign from APEGGA. [ 52 ] Mr. Mossman testified that once his lawyer had prepared his resignation letter, Mr. Mossman advised Mr. Ruggieri that he had resigned from APEGGA. When he received the letter back from APEGGA, he spoke with Mr. Ruggieri again. [ 53 ] After his resignation, Mr. Mossman sent his stamp and permits back to APEGGA. [ 54 ] Mr. Mossman received a letter from APEGGA on November 24, 2003.

The letter confirmed receiving his request to resign his membership in APEGGA and that it had amended their records to show that he had resigned as a “Member in Good Standing” The letter stated: We wish to advise you that while your membership is resigned you must cease and desist in the Province of Alberta from: • engaging in the practice of “engineering” “geology” or “geophysics” • continuing to use the titles or abbreviations P. Eng., P. Geol., or P.

Geoph. • using the words “engineer” “geologist” or “geophysicist” in combination with any other name, title description, letter, symbol, or abbreviation that represents expressly or by implication that you are a professional “engineer” “geologist” or “geophysicist”. [ 55 ] Mr. Ruggieri advised Mr. Mossman that he would not be doing any more engineering work for Ruggieri Engineering as Mr. Mossman was no longer a member of APEGGA. The date that this occurred is in dispute. [ 56 ] Mr. Mossman did not work after 2003.

He stated that it was his understanding that if he did so he would have been in breach of the Agreement. [ 57 ] Mr. Mossman received the 25 percent monthly fee until July 2004 at which point it stopped entirely. In total, he received approximately $82,000.00 from Ruggieri Engineering. [ 58 ] When questioned on cross-examination as to whether he thought he could continue to work as an engineer, Mr. Mossman testified that he believed that he could not represent himself as a professional engineer and did not represent himself as a professional engineer once he had resigned.

However, in his view, he could still provide services under the Agreement. [ 59 ] Mr. Mossman advised Mr. Ruggieri that he had received the letters from APEGGA but agreed that he did not provide Mr.

Ruggieri with copies. [ 60 ] The reports that Mr. Mossman prepared were ultimately to be utilized by homebuilders in order to advance construction on the relevant properties. [ 61 ] Mr. Mossman continued to service his clients through the transition period. There was no documentation on this verbal agreement. He testified that he and Mr. Ruggieri had agreed to it verbally. He agreed that he invoiced clients from March 2003 up until October 2003. Much of this work was for work completed before the Agreement and for clients that were not yet transitioned.

Further, on some of the invoices, he did not collect the money as it went directly to Ruggieri Engineering. B. Evidence of Mr. Ruggieri [ 62 ] Mr. Ruggieri obtained his Bachelor of Engineering in 1994. He also has a real estate certificate that was completed in 1994 and a trade degree in carpentry. He is a registered member of APEGGA and a director and officer of Ruggieri Engineering. [ 63 ] When he was working with Shane Homes as an estimator and purchaser, he discovered that Mr. Mossman was doing work as an engineer with Shane Homes so he presented himself at Mr.

Mossman’s residence in order to meet him. [ 64 ] When Mr. Mossman was dealing with some issues with APEGGA, he asked Mr. Ruggieri to be his supervisor. [ 65 ] With respect to the decision to form a business relationship with Mr. Mossman, Mr. Ruggieri testified at trial as follows: (p. 112, lines 27-29): Q And when did the discussions first occur with respect to forming a business relationship? How did that unfold? A Well, Mr. Mossman did mention that he was interested in retiring one day and, you know, he also mentioned that he was under some heat from APEGGA.

So, um, that started things rolling for sure. [ 66 ] Mr. Ruggieri testified that prior to entering into the Agreement, his business was growing rapidly. His turnaround time was anywhere from one to three days which was unheard of in the industry. [ 67 ] At the time he signed the Agreement, his understanding of Mr. Mossman’s status as a professional engineer was that he was still an active member of APEGGA. This certification was extremely important. In order to be an engineer, you have to be certified. [ 68 ] Mr.

Mossman’s responsibilities included providing engineering services on an exclusive basis and those included geotechnical engineering, structural, services ancillary to the foregoing and any services that Ruggieri Engineering would have required of him. This included going to a site to inspect soils, assessing the soils, coming up with a bearing capacity, specifying the size of the footings and specifications of the rebar; retaining wall design, design components in the house that would support load; and communicating that information to Mr. Ruggieri in the form of drawings and specifications.

In order to perform these tasks, a certain level of mathematics, physics and chemistry was required. [ 69 ] With respect to the transition of clients Mr. Ruggieri testified at trial as follows (p. l16, lines 26-37): Q How about the transition of clients, what can you tell me about Mr. Mossman’s responsibilities as you understood them to be in that regard?

A It was Mr. Mossman’s responsibility to transition clients. It was his responsibility to call his leads in the different clients, and to arrange to meet with them, and transition the clients to A. Ruggieri Engineering. Q Now, why – why was that his responsibility? A Well, many of Mr. Mossman’s clients, I didn’t know. I didn’t know who the estimators were, purchasers, the people making the decisions. So obviously, for me to just to call a builder and say, “Hey, I’m Tony from A. Ruggieri Engineering, like you gave me your business, I would obviously be – I wouldn’t be very effective.

So, obviously, it made sense that, since he knew the people, that he would do that. [ 70 ] Mr. Ruggieri sealed the documents. He disagreed with Mr. Mossman’s opinion that it had to be a shareholder who sealed the documents. Mr. Ruggieri is not a shareholder and he seals documents. [ 71 ] With respect to the discussions surrounding Mr. Mossman’s resignation with APEGGA, Mr. Ruggieri testified as follows (p. 120, lines 8-30): Q Can you tell me about any discussions that occurred between anyone at A.

Ruggieri Engineering Ltd. and James Mossman concerning his maintaining his professional standing, his standing and licence to practice as a professional engineer, any discussions? A Well, there were numerous discussions between Mr. Mossman and myself with regards to maintaining his membership. Q And when did those occur? A They occurred both before and after the signing of this agreement. Q Tell me about those discussions? A It was important for me that there be two professional engineers involved with A. Ruggieri Engineering, and I expressed that to Mr. Mossman.

I also expressed the – expressed the fact, you know, God forbid if something were to happen to me, that there would be somebody there to look after things. At the time, um, before that agreement I was making plans and making commitments, and realized that, if something were to go sideways, it – it would significantly, not only affect the company, but it would also affect my personal life. So, in essence, it was a security for me to know that I could count on someone else. This security I didn’t have before because I was the only one.

So, with time, I got to hire a very well-known engineer in the City of Calgary and I was proud of that. I also understood that membership was critical in the advancement of A. Ruggieri Engineering. So, these ideas were communicated to Mr. Mossman, but I never expected the outcome, so. [ 72 ] Mr. Ruggieri was upset with the amount of invoicing that Mr. Mossman had done in these months. He was very angry and testified that he did not find out until examinations for discoveries that Mr. Mossman had issued so many invoices. In the worst case scenario Mr. Mossman would have been entitled to 25 percent. In Mr.

Ruggieri’s view, a lot of the invoices were for clients that had been transitioned over to Ruggieri Engineering. [ 73 ] Mr. Ruggieri saw the supervision of Mr. Mossman in 2001 as an obligation towards APEGGA and it was done out of goodwill. He did not expect to be paid and was not paid. Mr. Ruggieri denied that he ever requested $150,000 or that he ever received $10,000. He testified that the two cheques were for services rendered to J.A. Mossman Engineering when Mr. Mossman was away on holidays. [ 74 ] Mr. Ruggieri was aware of the original complaints and sanctions against Mr.

Mossman, but according to his testimony, more complaints arose after they entered into the Agreement. [ 75 ] In 2003, he joined the investigative committee at APEGGA. According to Mr. Ruggieri it was through this committee that he found out that Mr. Mossman had resigned.

[ 76 ] When Mr. Ruggieri was asked if he had had any discussions with Mr. Mossman prior to learning of his resignation through the investigative committee he did not directly respond but only said that he did not tell him to resign. It made no sense to Mr. Ruggieri that he would put himself or his company in jeopardy. After he found out that Mr. Mossman had resigned from APEGGA, he contacted Mr. Mossman and said that he could not use his services anymore. [ 77 ] According to Mr.

Ruggieri he was not provided with the letter from APEGGA and it was not until the examinations for discoveries that he became aware of it. When he finally received it, he understood it to mean that Mr. Mossman could not practice engineering any longer. He had to return his stamp and seal. He wrote Mr. Mossman to terminate the Agreement. [ 78 ] In the fall of 2004 he received a letter from Mr. Mossman terminating the Agreement. [ 79 ] On cross-examination, Mr. Ruggieri agreed that he knew there would be some invoices before a client was transitioned. It was the volume of invoices that concerned him. [ 80 ] Mr.

Ruggieri was cross-examined on invoices from specific companies. With respect to the following clients he agreed as follows: • The first time Ruggieri Engineering paid the consultant for Impact Stone was for the month of June. The cheque was dated July 15, 2003. The last invoice was July 8, 2003. • The first time that Ruggieri Engineering paid the consultant for Janssen Homes was for the month of August 2003. • The first time Ruggieri Engineering paid the consultant for Jayman Homes was for the month of June 2003. That cheque was dated July 15, 2003. The last invoice is one dated August 4, 2003.

There are no more invoices to Jayman Homes after August 4, 2003. • Ruggieri Engineering paid Mr. Mossman for Lifestyle Homes in the month of January 2004. The last invoice addressed to Lifestyle Homes is dated October 16, 2003. • The first time Ruggieri Engineering paid Mr. Mossman for Ecostone was the month of January. The last invoice addressed to Eco Stone is dated July 7, 2003. • The first time Ruggieri paid Mossman for Park Haven was for the month of December 2003 and the last invoice is dated July 8, 2003. [ 81 ] Mr.

Ruggieri agreed that Ruggieri Engineering did not provide the consultant with a copy of any bills or invoices within ten business days of rendering them. Mr. Ruggieri’s explanation was that he intended to provide additional information but was too busy to do so. [ 82 ] At some point during the time that his company was paying Mr. Mossman, Mr. Mossman raised concerns about the lack of documentation. On or about May 11, 2004, Mr. Ruggieri received a written request from a lawyer requesting records of Ruggieri Engineering available for inspection. Mr. Ruggieri agreed that he did not reply to the request. [ 83 ] Mr.

Ruggieri agreed that his stamp is the stamp of acceptance and that he was the responsible engineer required by the Agreement.

[ 84 ] Mr. Ruggieri agreed that the amount that Ruggieri Engineering invoiced increased from 2003 through 2007. From March 1, 2005 through February 28, 2006, Ruggieri Engineering invoiced over $1 million. From March 1, 2006 through February 28, 2007 his company invoiced $1.5 million. From March 1, 2003 to March 1, 2008 - over $4. 5 million. [ 85 ] Mr. Ruggieri also agreed that the phrase “APEGGA” did not appear anywhere in the Agreement. Despite knowing that Mr. Mossman had difficulties with APEGGA he did not specifically write into the Agreement that Mr.

Mossman or the consultant had to maintain a membership with APEGGA. [ 86 ] Mr. Ruggieri agreed that he was not familiar with Mr. Mossman’s method of invoicing. [ 87 ] Mr. Ruggieri agreed that he felt that he was not compensated for the supervision. However, there appeared to be some discrepancy between his answer at trial and his answer during discoveries. On the one hand he appeared to say that he had never requested any compensation, however during discovery he seemed to say that he and Mr. Mossman had agreed to some type of compensation.

When questioned on the discrepancy, he testified as follows (p. 169, lines 20-41, p. 170, line l): Q You testified that you didn’t get a dime for that. A Those weren’t my exact words, but . . . Q You didn’t say “didn’t get a dime for that”? You don’t recall that yesterday? A A dime? If that’s on the record, that’s what was said. Q You weren’t compensated in any way whatsover? A What’s the definition of “compensation”? Q Do you have an understanding – A If we went out for coffee and he paid for it, is that compensation? [ 88 ] Mr. Ruggieri then went on to confirm that he did not receive any monetary compensation.

When asked if he received any compensation he evaded the question by trying to get Plaintiff’s counsel to specify what type of compensation when in fact he then confirmed that he did not receive any compensation monetary or otherwise which is why I have difficulty understanding why he evaded this question to the degree that he did. He stated: Q And if you could just read from line 22 to the end of your answer. A Not quite. We did supervision. We supervised Mr. Mossman during his practice, a requirement from APEGGA. At that time, it was agreed that, yeah, well, we’ll compensate it in an agreement later on.

He was entitled to pay for that and we weren’t invoicing. And at that time when we got into the negotiation, we said, well, what about, you know, those fees that we – incur, and we both agreed that, okay, you know what, the first three months of the agreement that’ll – that should be sufficient to compensate you. I have a - - personally have a problem with that because it was – it was only two months that was accounted and extended. Sir, that’s not what the agreement says. My question to you is where was that then agreement – side agreement or understanding documented.

My answer was, They were verbal discussions and verbal agreements. If you actually look at the terms of reference, it clearly says that I’m entitled to those expenses. Q No, I’m just going to stop you there. When you said “the terms of reference”, you’re talking about the terms of reference. -- A For –

Q –for your supervision of Mr. Mossman’s practice, correct? A That’s correct. [ 89 ] When asked to reconcile the above testimony from the examination for discovery, Mr. Ruggieri testified that he was entitled to compensation but in his view he did not get any. He then further evaded the question by testifying that the three months referenced in the above testimony referred to the transitioning of clients. In fact, Plaintiff’s counsel failed to obtain an adequate answer from Mr. Ruggieri. [ 90 ] Mr. Ruggieri was also vague with respect to his answer with respect to a meeting he had with Mr.

Mossman in November 2003. He agreed that after November 2003 he did not envision Mr. Mossman providing any further services to clients aside from a period of time when he would “transition any incidents” that took place. When asked whether this meeting occurred before he learned that Mr. Mossman had resigned his resignation with APEGGA he testified that he was uncertain. However, in examinations for discovery, he testified that the meeting did take place prior to his learning of Mr. Mossman’s resignation. C. Evidence of Mr. Anast Demitt [ 91 ] Mr. Anast Demitt testified for the Defendant.

He was qualified as an expert in the field of engineering. He obtained his Bachelor of Science in Civil Engineering in 1978. He is currently a member of APEGGA and a principal in a senior consulting capacity. He is involved as a structural consultant specializing in the evaluation and repair of damages and deteriorated structural systems and exterior wall assemblies. [ 92 ] Mr. Demitt opined on the ability of Mr. Mossman to continue to provide services to Ruggieri Engineering given that Mr. Mossman had resigned from APEGGA. In Mr. Demitt’s view, the services expected of Mr.

Mossman were clearly the practice of engineering. He stated at p. 3 of his expert report: For example, the practice of geotechnical engineering requires the evaluation of soils for the purposes of supporting structural loads from foundations. Structural engineering involves the analysis of structural elements or complete buildings for the purposes of specifying member sizes or procedures required during construction. These activities are the practice of engineering as defined by the Act . [ 93 ] Mr.

Demitt went on to state that an individual providing these services must be registered as a professional engineer in order to comply with the laws of Alberta. [ 94 ] Mr. Demitt reviewed the Agreement and in his view it was evident that Mr. Mossman would be providing engineering services to Ruggieri Engineering. He then looked at the legislation which defined the practice of engineering whether it be geotechnical engineering.

He went through the Act and the Regulations and it was clear to him that a professional engineer is required to be registered with APEGGA. [ 95 ] Based on his review of the Agreement it was evident that it was the expectation that Mr. Mossman would be evaluating, for example, soil conditions and determining their adequacy for supporting of foundation loads. Individuals who are providing these services must be licensed by APEGGA as professional engineer and furthermore, the corporate entity they are associated with would require a permit to practice which is issued by APEGGA. [ 96 ] Based on Mr.

Demitt’s review of s. 97 of the Act , Mr. Mossman would not be able to fulfill his practice of engineering under this Agreement if he is not registered with APEGGA. In his view, it could possibly be unprofessional conduct if Mr. Ruggieri were to associate with an individual who was not registered with APEGGA. [ 97 ] When asked if Mr. Hughes’ report altered his opinion, he replied that it did not change his opinion. In his view, Mr. Hughes

[ 97 ] When asked if Mr. Hughes’ report altered his opinion, he replied that it did not change his opinion. In his view, Mr. Hughes was practising under an organization where someone else was taking professional responsibility for his work. In Mr. Mossman’s case, there was only one employee within his numbered company which meant that the employee would have also had to have been the professional member responsible for the practice and therefore Mr. Mossman would have to have a permit to practice and a professional engineering licence. D. Evidence of Mr. Michael Hughes [ 98 ] Mr.

Hughes testified on behalf of the Plaintiff. He was qualified to provide an opinion in two areas: first, the ability of a formally trained engineer who is not registered with APEGGA to work in the engineering industry; and second, to give an opinion on whether Mr. Mossman as a formally trained engineer would have been able to do the work in accordance with the Agreement while not registered with APEGGA. [ 99 ] Mr. Hughes was born in England and immigrated to Canada in 1974. He obtained his engineering degree in Britain and was a fully qualified engineer when he emigrated from Britain. Mr.

Hughes testified that he is not a member of APEGGA as it would have required retraining. He is currently registered with the Instrument Society of America (the international equivalent of APEGGA for his profession); the Institute of Electrical Engineers and the Institute of Measurement and Control. His particular area of expertise is instrumentation. [ 100 ] Although Mr.

Hughes has an impressive curriculum vitae, he acknowledged that he is not a civil or a structural engineer. [ 101 ] In his long career, his inability to provide a stamp on a particular document has never hampered him in any way from performing his function as an engineer. He works with individuals who are trained as engineers but not APEGGA members. In his opinion, Mr. Mossman could have provided the services under the Agreement while not being registered with APEGGA. [ 102 ] Mr.

Hughes testified that it is common practice throughout engineering for an engineering team to work on a project with the ultimate responsibility being taken by the member of APEGGA. [ 103 ] On cross-examination, Mr. Hughes agreed that he is not familiar with the Act and was reluctant to express a legal opinion. V. Analysis A. The Plaintiff ’s Position [ 104 ] The Plaintiff argues that the Defendant’s breaches were threefold: 1. During the first year of the Agreement, when the payments were being made, the Defendant failed to provide proper back up documentation and underpaid the Plaintiff on monthly amounts. 2.

The Defendant failed to pay the 25 percent monthly payments for the five year term of the Agreement. 3. The Defendant failed to pay the 60 percent consulting monthly payments. [ 105 ] Mr. Mossman submitted that the Agreement required a certain level of disclosure of information and that was not provided. Page 5, para. 7 of the Agreement states that the Defendant is going to render bills in connection with the services on a regular and timely basis and shall provide a copy of such bills to the consultant within 10 business days of rendering them. Mr. Ruggieri admitted that he did not provide the information.

The Plaintiff further submits that the Defendant underpaid the Plaintiff on those monthly amounts. Mr. Mossman was able to ascertain that Homes by Avi was not being included. The evidence supports the fact that Homes by Avi was originally included in the Agreement.

[ 106 ] The Plaintiff submits that there are two reasons why his alleged inability to provide consulting services do not amount to a fundamental breach. First, it could not have frustrated the Agreement because the termination of the consulting services was specifically contemplated within the Agreement.

Second, when one considers the surrounding circumstances, and the gravity of the consequences of the breach, if there was a breach, it cannot be a fundamental breach. [ 107 ] The Agreement provided for 25 percent payable over the full five-year term regardless of whether consulting services were being provided or not. The Plaintiff had no obligation to provide consulting services for the full five years.

The Plaintiff could have terminated the Agreement and continued to receive his 25 percent of up to $80,000. [ 108 ] Second, when one considers the circumstances and the gravity of the breach being alleged, it cannot amount to a fundamental breach. The Plaintiff’s chief argument is that Mr. Ruggieri terminated the Agreement prior to learning that Mr. Mossman had resigned from APEGGA, therefore his resignation could not have been the cause of the termination. B. Defendant ’s Position [ 109 ] The Defendant argues that Mr.

Mossman’s actions breached the “very core of the consulting agreement” and fundamentally breached the Agreement. After his resignation from APEGGA and the cancellation of his permit to practice, the engineering services contemplated and which were to be performed by Mr. Mossman under the consulting agreement constituted an express violation of the Act. As a consequence of Mr.

Mossman’s resignation, both personally and corporately as a professional engineer, he ceased to be able to perform engineering services for and on behalf of the Plaintiff and at that point the Plaintiff was in breach of its representations and obligations owed to the Defendant. Further, Mr. Mossman has taken no steps to reinstate his APEGGA accreditation since his resignation in 2003 and therefore has failed to mitigate his losses. C. Analysis 1. Was Mr. Mossman prohibited from performing further engineering work under the Agreement after he resigned from APEGGA? [ 110 ] The Defendant claims that Mr.

Mossman’s resignation from APEGGA amounted to a fundamental breach of the Agreement. I will address this issue first. At the time of entering into the Agreement, there is no dispute that Mr. Mossman was registered with APEGGA. There is also no dispute that Mr. Ruggieri was aware that Mr. Mossman was “under some heat” with APEGGA prior to the signing of the Agreement. What is in dispute is whether or not Mr. Ruggieri was aware of Mr. Mossman’s final decision to resign from APEGGA. In my view, this is unclear, however, I am not sure that at the end of the day a finding on this point is critical.

I am puzzled by the fact that Mr. Mossman would resign without discussing it with Mr. Ruggieri. It is hard to believe that Mr. Ruggieri was not aware of the decision. However, in my view, once the resignation was in place, Mr. Mossman was no longer able to practice professionally as an engineer, nor was he able to perform his consulting obligations pursuant to the Agreement. [ 111 ] Mr. Mossman was hired by Mr. Ruggieri to provide geotechnical and structural services pertaining to single and multi-unit residential dwellings. Once he resigned from APEGGA he was no longer able to provide these services.

Further, he made no attempt to reinstate himself with APEGGA. [ 112 ] I accept the evidence of Mr. Demitt that if Ruggieri Engineering continued to employ or associate itself with Mr. Mossman it would be subject to the scrutiny of APEGGA. Mr. Demitt’s experience includes extensive experience on the investigative and disciplinary committees of APEGGA. Further, he practices a similar type of engineering work as Mr. Ruggieri and Mr. Mossman. While, Mr. Hughes curriculum vitae is impressive, his expertise lies in instrumentation which appears to be very different from structural engineering.

I prefer the evidence of Mr. Demitt. [ 113 ] The Defendant referred to APEGGA v Broere Electric Ltd. , 2007 ABQB 6 . In this case, APEGGA applied under s. 3 of the Act to enforce the right to the term “engineer” and to prevent misrepresentation of the practice of engineering by the respondents, none of whom were professional engineers or staffed by professional engineers. The respondent was a master electrician who referred to himself as “B. Eng.” in correspondence and in a drawing. Signage on his company premises and vehicles used the term “engineers” as well as

“engineered electrical systems.” [114] The Court determined that the term “B. Eng,” was used in conjunction with his name on drawings and conveyed the impressionthat he was a professional engineer. It follows that such use is a representation by implication, if not expressly, that he is entitled toengage in the practice of engineering. While there was no evidence of harm to the public through the activity in question and, to thecontrary, the product of the respondents appeared to meet very high standards, there was no need for proof of harm. The Court concludedthat the Act forbade the conduct and the offence was punishable as a

summary conviction. [115] I do not find this case particularly helpful. Mr. Mossman has not been accused of holding himself out as a registered engineer.His argument is that he is able to carry out his duties as long as he is under the responsibility of a supervising engineer. [116] However, regardless of the case law, in my view after reading the Act and the Agreement, and hearing the testimony of Mr.Demitt, once Mr. Mossman resigned from APEGGA he was no longer able to perform the duties outlined under the Agreement.

Further,the letter he received from APEGGA on November 24, 2003 makes it clear that he is to cease and desist from engaging in the practice ofengineering. The work that he was required to do pursuant to the Agreement clearly falls within the purview of the practice ofengineering notwithstanding he was not sealing the documents. The next question is what effect this had for the parties under theAgreement. [117] Further, I do not accept the Plaintiff’s argument that Mr. Mossman’s resignation was not the cause of the termination. In myview, Mr. Ruggieri ended the Agreement once he learned Mr.

Mossman had resigned from APEGGA. 2. Did Mr. Mossman’s resignation amount to a fundamental breach of the Agreement? [118] The Defendants submit that Mr. Mossman’s resignation from APEGGA is a fundamental breach of the Agreement andtherefore entitled Mr. Ruggieri to rescind the entire Agreement. Mr. Mossman argues that first and foremost there was no breach andsecond, even if there was it was not a fundamental term of the Agreement.

In my view, there was a breach but it was not a fundamentalbreach. [119] In Bank of British Columbia v Turbo Resources Ltd. 1983 ABCA 160 , [1983], 46 AR 22 (CA) the Court of Appealheld that all the circumstances of the contract must be considered in determining whether a breach went to the root of the contract.

Thiswas confirmed in First City Trust Co. v Triple Five Corp 1989 ABCA 28 , [1989], 94 AR 106 (CA) where the Court of Appealconsidered the issue as to whether or not one parties’ breach of the covenant to maintain mortgage payments relieved Triple Five of itsobligations or merely gave rise to an action for damages.

The Court of Appeal considered at 562 whether the default by the Defendants inhis covenant as vendor under the Agreement constituted a fundamental breach effectively releasing Triple Five from its obligations underthe Agreement: One of the problems that has arisen in this area of the law is the wide variety of expressions which have been used to define the nature ofa term which, if breached by one party, entitles the party not in default to repudiate. Waddams comments as follows: "A variety of expressions has been used to define the sort of term that, if broken by one party, will excuse the other.

"Dependentcovenant", "covenant which goes to the whole of the consideration", "condition", "condition precedent", "breach going to the root of thecontract", "concurrent condition", breach that "terminates" or "frustrates the object" of the contract, "non-severable breach","repudiation", "renunciation", "breach of an entire contract", are among the expressions used.

Behind them all, it is suggested, lies asingle notion -- that of substantial failure of performance." (Law of Contracts, (2d) at page 440.) [120] The Court of Appeal then considered the varied responses to the decision of the English Court of Apeal in Hong Kong FirShipping Col. Ltd. v Kawasaki Kisen Kaisha Ltd. (1961), [1962] 1 All ER 474 and concluded that the test set out in the Hong Kong Fircase did not replace the earlier and traditional rules as to when an innocent party is excused from a breach by the other party.

However, itdid introduce a new test, namely one based on a consideration of the gravity of the consequences of the breach. The Court stated at 566:

The traditional test, in my view, can be readily reconciled with the so called "third category" approach put forward in Hong Kong Fir.The approach which I believe to have been accepted by the authorities can be briefly summarized as follows: (1) the test enunciated by Bowen L.J. remains the starting point; (2) the surrounding circumstances referred to in that test must include the commercial setting; and (3) if it cannot be determined by those considerations whether the Parties intended the obligation in question to be a warranty soundingonly in damages or a condition, the breach of which would release the innocent party, then the basis for seeking out that intent should be,as put forward by Hong Kong Fir, namely an assessment of the gravity of the event to which the breach gave rise. [121] Both parties relied on LMK Marketing Inc. v 1133181, 2010 ABCA 301 which considered fundamental breach in the context ofan aborted sale of 12 condominium units.

The Court of Appeal stated at para. 20: As to the second ground of appeal, the trial judge did not err in failing to grant recision of the contract on the basis of a breach of theobligation to hold the funds in trust. Breaches that entitle rescission have been described in various ways, but fundamentally, rescission ispermitted where the repudiating party can show a breach going to the root of the contract, a breach tantamount to the frustration of thecontract, or a substantial failure of performance.

This Court has referred to a breach of this kind as "fundamental breach" and a "breachgoing to the root of the contract", or a "repudiatory breach": First City Trust Co. v. Triple Five Corp, (1989) 1989 ABCA 28 ,65 Alta. L.R. (2d) 193 at para. 36 (Alta. C.A.). [122] The Court of Appeal reiterated the test set out in First City Trust Co. at para. 22: In First City Trust Co v. Triple Five Corp., supra, at para. 56, this Court set out the test for "repudiatory breach": (

i) One must look at the contract in the light of the surrounding circumstances, and then make up one's mind whether the intention of theparties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty or condition; (ii) The surrounding circumstances must include the commercial setting; and (iii) If it cannot be determined by those considerations whether the parties intended the obligation to be a condition, one must undertakea consideration of the gravity of the consequences of a breach. [123] In Tercon Contractors Ltd. v British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 SCR 69, the SupremeCourt laid the doctrine of fundamental breach to rest in respect of exclusion of liability clauses.

A review of Tercon and subsequent casesclarifies that the Court in Tercon did not alter the doctrine's application to repudiation. For example, see BP Global Specials Products(America) Inc. v Conros Corporation, 2010 ONSC 1094; Pioneer Hi-Bred International, Inc. v Richardson International Limited, 2010MBQB 161. [124] Justice Topolniski describes fundamental breach as follows in Angeltvedt v Flint Field Services Ltd., 2010 ABQB 749, 43 Alta LR (5th) 427 at para. 42: 2. Fundamental breach of a contract giving rise to repudiation has been described in many ways: (

a) A breach which goes to the root of the contract (First City Trust Co. v. Triple Five Corp. (1989), 1989 ABCA 28 , 65 Alta.L.R. (2d) 193 at para. 36); (

b) A breach which frustrates the object of the contract (First City Trust Co. at para. 36); (

c) A substantial failure of performance. (First City Trust Co. at para. 36); (

d) A breach that deprives a party of substantially the whole benefit which it was the parties' intention that he should obtain from thecontract. The foundation of the contract must be undermined or the very thing bargained for not be provided (Hunter Engineering Co. v.

Syncrude Canada Ltd., (SCC), [1989] 1 S.C.R. 426 at para. 137); and (

e) In the context of employment law it is described as a unilaterally imposed fundamental or substantial change to an employee'scontract of employment that results in its termination and entitles the employee to consider that he is constructively dismissed (Farber atpara. 33). 3. The conduct and circumstances of the parties must be considered as a whole to ascertain whether repudiation is established (DelcorPainting & Flooring Ltd. v. 20/20 Properties Inc., 2009 ABQB 670 at para. 24).

Where there is no express and absolute refusal by oneparty to perform his obligations under the contract, the test is whether the defaulting party's actions could lead a reasonable person toconclude that he no longer intends to be bound by the provisions of the contract (Delcor Painting & Flooring Ltd. at para. 24, citing WCIWaste Conversion Inc. v. ADI International Inc., 2008 PESCTD 40 at paras. 330-334, 283 Nfld. & P.E.I.R. 254). 4. An innocent party faced with a repudiation can either affirm the contract or accept the repudiation, making it plain that he considersthe contract to be at an end (H.G.

Beale, ed., Chitty on Contracts, vol. 2 (Toronto: Carswell, 2004) at p. 729). 5. There is no distinction between the considerations in assessing if there has been repudiation of an employment contract or acommercial contract (Farber at para. 33); Alberta Permit Pro, 2009 ABCA 146 at para. 44). [125] In my view, the purposes of this Agreement were twofold: first, the transition of clients from Mr. Mossman to Mr. Ruggieri andsubsequent remuneration for this transition and second, a consulting contract for the performance of work by Mr. Mossman. Byresigning from APEGGA, Mr.

Mossman breached the Agreement and was unable to fulfill his employment duties by working withclients. However, by resigning from APEGGA he did not breach the transition of the clients term. In fact, in my view, the evidenceillustrates that he did transition the clients. There was a two month transition period that was then extended due to difficulties arrangingmeetings with Mr. Ruggieri. The fact that he resigned from APEGGA and was no longer able to perform the consulting work does notnegate the fact that he provided valuable clients to Mr. Ruggieri and Mr.

Ruggieri benefited from the business provided by these clients.Mr. Mossman was still entitled to receive the 25 percent from the Agreement for the full term of the Agreement. [126] Based on my review of the case law of fundamental breach, this was not a fundamental breach. This breach did not deprive Mr.Ruggieri of the whole benefit of the contract. As the objectives of this Agreement were two-fold the breach did not frustrate the mainpurpose of the Agreement which was the transition of major clients to Mr. Ruggieri. [127] In fact, the evidence at trial illustrated that Mr.

Ruggieri’s business underwent a major growth which started in 2003. Surely theinference can be drawn that he benefited from the addition of those major clients transitioned from Mr. Mossman. This was the long termgoal for him and in my view, the consulting services provided by Mr. Mossman were secondary. [128] Further, my support for this conclusion arises from the Agreement itself. The Agreement specifically contemplated a situationwhereby the consulting portion of the Agreement could be terminated and the 25 percent fee would still be payable to the Consultant forthe full term of the Agreement.

The clause in the Agreement states that the Consultant shall provide no less than three months’ notice inwriting to the Company should the Consultant wish to terminate the Agreement prior to the expiry of the term. Therefore, the fact thatMr. Mossman himself later terminated the Agreement has no bearing on his entitlement to receive compensation for the transition of theclients to Mr. Ruggieri. Further, in his letter dated September 8, 2004, Mr. Mossman only stated that he considered Mr. Ruggieri’s verbaladvice and refusal to give Mr.

Mossman access to the new office space as relieving him of his “consulting services”. He makes noreference to the 25 percent payment for the transition of clients. [129] Therefore, although I find that there was a breach of the term to provide the consulting services I find that there was no breachwith respect to the transition of clients and Mr. Mossman is entitled to receive damages for this loss in that regard. 3. Did the Defendant Breach the Agreement? [130] The Plaintiff submits that the breaches were threefold. I have determined that Mr.

Mossman’s resignation from APEGGA,although not a fundamental breach was a breach of the Agreement, therefore the Defendant did not breach the Agreement by failing topay the 60 percent consulting monthly fee. [131] The Plaintiff submits that the Defendant breached the Agreement by failing to provide proper back up documents and underpaidthe Plaintiff on monthly amounts. The Agreement itself states that the Defendant would render bills in connection with the services on aregular and timely basis and shall provide the Consultant with a copy of such bills within ten business days of rendering them.

Theevidence supports this assertion. Even Mr. Ruggieri himself admitted that he did not provide adequate documentation to Mr. Mossman.

Therefore, during the first year of the Agreement when the payments were being made, the Defendant failed to provide proper back up documentation and underpaid the Plaintiff on monthly amounts. [ 132 ] Further, for the reasons previously outlined Mr. Ruggieri breached the consulting Agreement by failing to continue to pay Mr. Mossman his portion of the 25 percent fee for the transition of the clients. 4. Damages - Mr.

Ruggieri [ 133 ] The Plaintiff by Counterclaim states that it incurred numerous expenses because of the breach by the Defendant including the necessity of engaging alternate engineering services and the loss of clientele as a result of the resignation of Mr. Mossman. [ 134 ] In my view, there was no evidence adduced at trial in support of this claim. Mr. Ruggieri does not appear to have suffered any financial loss from the breach of the contract and in fact, in my view, the evidence illustrated that his company ultimately benefited as he retained the clients that were transitioned from Mr. Mossman.

There was no evidence before me to support the claim that Ruggieri Engineering suffered a loss of reputation. [ 135 ] Further, there was also an issue with some of the invoices that Mr. Mossman issued after the Agreement was signed. After hearing the evidence and reviewing the invoices, in my view, there was no evidence that showed they were improper. There was a transition period until the end of August and the timing of the invoices were in keeping with a practice of invoicing 30 to 45 days within which the work was done. I accept Mr.

Mossman’s evidence on this point. [ 136 ] The Defendant’s (Plaintiff by Counterclaim) claim for damages is denied. 5. Damages - Mr. Mossman [ 137 ] The Plaintiff argues that he should be entitled to restitutionary damages. Restitutionary damages are a discretionary remedy which are measured by the defendant’s gain and may be awarded where the plaintiff has suffered no loss or where the plaintiff’s loss is less than the defendant’s gain: Cassano v Toronto-Dominion Bank, 2007 ONCA 781 , 87 OR (3d) 401.

In view of my findings that the Plaintiff’s actions in resigning from APEGGA resulted in a breach to the Agreement, I find that this is not an appropriate case to award restitutionary damages. [ 138 ] The evidence before this court with respect to the invoices was compiled by a paralegal on behalf of the Plaintiff. The paralegal compiled the information from the CDs that were provided to her by the Defendants. The paralegal who recreated the documents has a Bachelor of Science degree, a paralegal certificate and has also been a bookkeeper in the past.

In my view, she was more than qualified to compile this information. The information was summarized using the date, amount, the author and the recipient. The invoices that were compiled were dated between March 1, 2003 and March 1, 2008. Any invoices that were not related to customers of Mr. Mossman’s were deemed irrelevant and were not included in the

summary. There was no further evidence presented at trial. I accept this evidence as being an accurate

summary of the invoices between March 1, 2003 and March 1, 2008. I do not believe that it is necessary to obtain the opinion of an accountant or economist in this case. Had I found in favour of the Plaintiff for the 60 percent consulting fee, the damages would have been more difficult to calculate. However, in this case the evidence illustrates that Mr. Mossman was entitled to collect the maximum portion of the fee which, in this case, is $80,000. [ 139 ] The Defendant argues that there is no way of knowing if these invoices were collected upon and therefore the damages have been incorrectly calculated.

The Agreement itself refers to total amount “collected” versus only the invoices. Clause 7 of the Agreement provides as follows: The Consultant shall keep records of all hours spent and billed by the Consultant in the performance of Services hereunder and shall provide a copy of such records to the Company on or before the last day of every month in respect of all Services performed during that month. The Company shall render bills in connection with Services provided by the Consultant hereunder and services provided by the

Company in respect of the Consultant’s Accounts on a regular and timely basis and shall provide a copy of such bills to the Consultant within 10 business days of rendering them. The Company shall use all reasonable efforts to promptly collect all such bills. No such bills shall be written off, set-off or settled for less than their face value without prior written consent of the Consultant.

The Consultant shall have the right to review the books and records of the Company relating to bills rendered to and amount collected from the Consultant’s Accounts. [ 140 ] There was no evidence before me that consent was given to write off or settle for less than the face value of the invoices. Therefore, in my view, the invoices are deemed to be collected upon. [ 141 ] The Plaintiff is entitled to damages for the 25 percent fee for the transition of his clients. The invoices reviewed by the paralegal and submitted by Mr.

Mossman indicate that he was eligible to receive the maximum amount for five years which was $80,000. In total he received $40,297 for the first year and a further $22,573. He should have received $400,000. Therefore his total damages are $337,130. [ 142 ] Mr. Mossman argues that he should receive exemplary damages due to the conduct of Mr. Ruggieri. The Plaintiff argues that the Defendant had a duty to act in good faith; it breached this duty by encouraging Mr.

Mossman to resign from APEGGA. [ 143 ] The Plaintiff submitted the case of Indutech Canada Ltd. v Gibbs Pipe Distributors, 2011 ABQB 38 where Justice Romaine listed factors to take into account when considering punitive damages. The Plaintiff argued that when the Defendant has taken advantage of a vulnerable Plaintiff to create a profit for itself, punitive damages can be awarded. Justice Romaine (at para. 563) cited Justice Binnie in Whiten v Pilot Insurance Co. , 2002 SCC 18 , [2002] 1 SCR 595 where he summarized the general principles with respect to punitive damages:

a) While punitive damages are largely restricted to intentional torts or breach of fiduciary duty, they are available in exceptional cases of breach of contract.

b) The general objectives of punitive damages are punishment (in the sense of retribution), deterrence of the wrongdoer and others, and denunciation ("the means by which the jury or judge expresses its outrage at the egregious conduct").

c) Since the primary vehicle of punishment is criminal law, punitive damages should be awarded with restraint, and only in exceptional cases.

d) The incantation of the time-honoured pejoratives ("high-handed," "oppressive", vindictive", etc.) provides insufficient guidance (or discipline) to the judge or jury setting the amount... A more principled and less exhortatory approach is desirable.

e) Punitive damages should promote rationality (for example, how, in particular, an award would further one or other of the objectives of the law, and what is the lowest award that would serve the purpose).

f) It is rational to use punitive damages to relieve a wrongdoer of its profit where compensatory damages would amount to nothing more than a licence fee to earn greater profits through outrageous disregard of the legal or equitable rights of others.

g) The proper focus is not on the plaintiff's loss but on the defendant's misconduct. A mechanical or formulaic approach does not allow sufficiently for the many variables that ought to be taken into account in arriving at a just award.

h) The governing rule for quantum is proportionality. The overall award, that is to say compensatory damages plus punitive damages plus any other punishment related to the same misconduct, should be rationally related to the objectives for which the punitive damages are awarded (retribution, deterrence and denunciation). [ 144 ] Mr. Ruggieri had been his supervisor for two years and appeared to be well aware of most, if not all, of the professional allegations against Mr. Mossman. Yet, he entered into an Agreement, benefited from the transition of all Mr.

Mossman’s clients and then was able to terminate the Agreement. Although, I question Mr. Ruggieri’s desire to enter into an Agreement with Mr. Mossman when he knew that Mr. Mossman was in “under some heat” with APEGGA there is no evidence to illustrate that his actions were deliberately high handed. Further, there is no evidence before me that he actively encouraged and supported Mr. Mossman’s decision to resign from APEGGA. Therefore, I decline to make an award for exemplary damages. The damage award compensates Mr. Mossman for his loss of clients. [ 145 ] Had I found that Mr.

Mossman had not breached the Agreement by resigning from APEGGA then mitigation may have been in issue. Mr. Mossman has not attempted to reinstate himself with APEGGA and has not worked since 2004. However, I find that there was no way to mitigate the loss of all his clients once they were transitioned over to Mr. Ruggieri.

VI. Conclusion [ 146 ] In conclusion, I find that Mr. Mossman’s resignation from APEGGA resulted in him being unable to perform the consulting portion of the Agreement. However, this breach did not result in a fundamental breach of the Agreement. By terminating the Agreement and failing to pay Mr. Mossman the 25% for the transition of clients, Mr. Ruggieri breached the Agreement. [ 147 ] The evidence adduced at trial did not support a claim for damages on behalf of the Defendant (Plaintiff by Counterclaim). The Defendant’s (Plaintiff by Counterclaim) claim for damages is denied. [ 148 ] Mr.

Mossman suffered a loss when Mr. Ruggieri terminated the Agreement and stopped the 25 percent payments. He is entitled to damages for the loss of the 25 percent fee for the transition of the clients to Ruggieri Engineering. The Plaintiff (Defendants by Counterclaim) is entitled to $337,130 in damages. VII. Costs [ 149 ] If counsel are unable to agree on costs, they may appear before me within 60 days. Heard on the 9 th day of May, 2011 to the 12 th day of May, 2011 and the 16 th day of May, 2011. Dated at the City of Calgary, Alberta this 21 st day of December, 2011. S.M. Bensler J.C.Q.B.A.

Appearances: Tiffany Franklin, Bennett Jones LLP for the Plaintiff/Defendants by Counterclaim Spencer Bates, Beaumont Church LLP for the Defendant/Plaintiff by Counterclaim