Toerper v. Hoard, 2011 ABQB 85

Court of Queen ’ s Bench of Alberta Citation: Toerper v. Hoard, 2011 ABQB 85 Date: 20110215 Docket: 0801 05424 Registry: Calgary Between: Elizabeth Toerper Plaintiff - and - Graham Hoard, Graham Hoard operating as “ Graham Hoard Insurance & Investment Services ” , 919035 Alberta Ltd. and 1215396 Alberta Ltd. Defendants Corrected judgment: A corrigendum was issued on February 17, 2011; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice J.

Strekaf _______________________________________________________ [ 1 ] Elizabeth Toerper has sued Graham Hoard, Graham Hoard operating as “Graham Hoard Insurance & Investment Services”, 919035 Alberta Ltd. (“919035" or “Planned Solutions”) and 1215396 Alberta Ltd. for damages for breach of contract and/or breach of trust or fiduciary duty. The claim arises out of two agreements whereby the Plaintiff acquired an interest in Gary Phillips’ and Gary Hoard’s Books of Business in the insurance and investment business. The Defendant 1215396 Alberta Ltd. was noted in default on March 24, 2010.

The Statement of Defence filed on behalf of Graham Hoard and 919035 was struck out pursuant to an order granted by Justice Stevens on June 11, 2010, which order directed that the action be set down for

summary trial for an assessment of damages. [ 2 ] Rule 3.37 of the new Rules of Court provides for an application to the court for judgment where a defendant has been noted in default or where the defendant’s Statement of Defence is struck out.

[3] The purpose of an assessment of damages is to determine the quantum of damages, rather than the liability for damages,provided that the facts deemed to have been admitted establish the cause of action.

A defendant who is noted in default is deemed tohave admitted the allegations of fact contained in the Statement of Claim. [4] This issue was addressed in the context of the predecessor provision to Rule 3.37 in the old Rules of Court in Robinson v.Fiesta Hotel Group Resorts, 2008 ABQB 311, 450 A.R. 167, where Yamauchi J. stated at paragraphs 10 - 12: [10] The strongest statement on the effect of the Defendants’ failure to file a statement of defence was made by the Supreme Court ofCanada in McElroy v. Cowper-Smith, (SCC), [1967] S.C.R. 425 at 428, where Spence J., considered the reasoning inSulef v.

Parkin (1966), (AB CA), 57 W.W.R. (N.S.) 236 (Alta. C.A.), and said: . . . in the province of Alberta upon default in defence the defendant is to be taken to have admitted the facts set out in the statement ofclaim. This is a decision of the highest court in Alberta on a point of practice in the province, and this court will not interfere under suchcircumstances.

Therefore, the Defendant, as plaintiffs at trial, were not required to prove publication of the alleged libel. [11] Although Spence, J., was writing in dissent, many Alberta cases since that time have held that the effect of a noting in default is thatthe defendant has admitted the facts alleged in the statement of claim by the failure to deny them, see e.g. Klinck v. Drinnan, [1985] A.J.No. 576; (AB KB), 66 A.R. 321 (Q.B.), Dykes v. Goczan, [1996] A.J. No. 432; (AB KB), 188A.R. 352 (Q.B.) (“Dykes”); Syncrude Canada Ltd. v. Tibo Steel Products Ltd. et al., 2001 ABQB 478 , [2001] A. J.

No. 736;292 A.R. 368; 2001 ABQB 478; Dyck et al v. Wilkinson et al., [2004] A.R. Uned. 657; 2004 ABQB 731 , [2004] A.J. No.1155; 2004 ABQB 731. More relevant to the case with which this Court is dealing is a statement by Harvey, C.J.A. in Brennan v.Arcadia Coal Co. (1929), (AB CA), 24 Alta.

L.R. 236 (C.A.), at 448 (“Brennan”), where he said: The amount of damages to which the plaintiff was entitled could only be ascertained by an assessment but the evidence to be taken onsuch assessment would only be for the purpose of ascertaining the amount of, and in no sense the liability for, such damages which latterhas been established by the facts alleged, and admitted by the Defendant by reason of its failure to deny them. [12] The mere noting in default, however, does not end the matter. In Dykes at para. 6, Binder J., based on Spiller v. Brown, 1973ALTASCAD 76 , [1973] 6 W.W.R. 663 (Alta.

C.A.) (“Spiller”), said that there is an exception to the rule that the Defendanthas admitted the facts alleged in the statement of claim by failure to deny them “where the Court is not satisfied that the Plaintiff has acause of action, the Court has a duty to direct a hearing to determine the matter.” This Court has reviewed the pleadings filed in thismatter and has heard the testimony of Robinson and concludes that the Plaintiffs have a cause of action against the Defendants. [5] This application for an assessment of damages proceeded before me on January 24 - 25, 2011.

The Plaintiff called twowitnesses, Robert Taylor of RSM Richter Inc. and Leo Kelly, in addition to testifying on her own behalf. The Defendant Graham Hoardtestified on his own behalf. [6] Based upon the deemed admissions from the Amended Statement of Claim and the Reply to Demand for Particulars andfrom the evidence presented at the hearing, I was satisfied that the Plaintiff began working as Mr Hoard’s administrative assistant inrelation to his insurance and investment business in 2003. On March 15, 2006 Ms. Toerper and Mr.

Hoard entered into a written Offer toPurchase with Gary Phillips to purchase his book of business, consisting of an entitlement to trailer fees, commissions, investmentcommissions, bulk payments and first year commissions and overrides on the existing business as of the date of the sale (“Phillips Bookof Business”) for the sum of $125,000. The purchase price and purchased assets were to be shared equally by Ms. Toerper and Mr.Hoard. [7] On December 29, Ms. Toerper, Mr. Hoard and 919035 Alberta Ltd. (carrying on business as Planned Solutions) entered intotwo written agreements. Pursuant to the first agreement, Ms.

Toerper purchased a 50% interest in the trailer fees, commissions andinvestment commissions from Mr. Hoard’s existing insurance and investment business, (“Hoard Book of Business”) effective June 1,2006, for $50,000. Planned Solution was to administer the Hoard Book of Business and provide statements to Ms. Toerper and her shareof the revenues on a monthly basis. Planned Solutions was to receive a fee of 10% of the gross revenues received for its services (“HoardAgreement”). [8] Pursuant to the second agreement, Ms. Toerper and Mr. Hoard retained Planned Solutions to administer the billing and

receipt of funds from the Phillips Book of Business for a fee of 10% of the gross revenues (“Phillips Agreement”). [ 9 ] Ms. Toerper became concerned that Planned Solutions and Mr. Hoard were breaching their contractual obligations under the Hoard Agreement and the Phillips Agreement in numerous ways, including by not providing her the required monthly statements or the revenue to which she was entitled and transferring accounts to other parties without her consent. [ 10 ] This action was commenced on September 8, 2008.

On December 23, 2008, Justice Wilson granted a Consent Order pursuant to which the parties agreed that RSM Richter Inc. would replace 919035 Alberta Ltd. as the administrator of the Phillips Book of Business and the Hoard Book of Business effective December 15, 2008. On February 8, 2010 Justice Sullivan granted an order permitting Robert Taylor of RSM Richter Inc. to sign cheques on the bank account and granting him the authority to appoint a replacement insurance broker, if deemed necessary. I am also not satisfied that the Plaintiff has established a cause of action against 1215396 Alberta Ltd.

Based upon the deemed admissions in the Amended Statement of Claim. The action against 1215396 Alberta Ltd. is dismissed. [ 11 ] Having regard to the deemed admissions in the Amended Statement of Claim, I am satisfied that Mr. Hoard and 919035 breached their obligations to Ms. Toerper under the Phillips Agreement and the Hoard Agreement. The Amended Statement of Claims also advanced claims for breach of trust and/or fiduciary duty.

I am not satisfied that the Plaintiff has alleged a sufficient factual basis in the Amended Statement of Claim to establish claims for breach of trust or breach of fiduciary duty that go beyond the claims for breach of contract and, therefore, I find it unnecessary to consider these claims further. [ 12 ] There are two main issues to be determined on this application: 1. How should the Hoard Agreement be interpreted? 2. What damages are payable to the Plaintiff for breach of Phillips Agreement and the Hoard Agreement? 1.

How should (the Hoard Agreements) be interpreted? [ 13 ] There is a difference of opinion between the Plaintiff and the Defendants regarding the

interpretation of the Hoard Agreement with respect to how new business from existing clients should be treated. The

preamble to the Hoard Agreement stated in part: WHEREAS the Vendor is prepared to sell to the Purchaser a fifty percent (50%) interest in insurance trailer fees and commissions and investment commissions from his financial planning business (the “Hoard Book of Business”) as described in

Schedule “A” hereto: [ 14 ] The definition

section (1.1(b)) of the Hoard Agreement provided: “Business” means the insurance trailer fees and commissions and the investment commissions for all of the existing and new insurance and investment business conducted by Graham Hoard as more fully described in

Schedule “A” hereto; [ 15 ]

Section 2.1 stated: On the terms and subject to the conditions hereinafter set forth the Vendor shall sell, transfer and assign to the Purchaser and the Purchaser shall purchase and acquire from the Vendor all the Assets set out herein and in

Schedule “A” on the terms and conditions and for the consideration hereinafter set forth; which shall, without limiting the generality of the foregoing, include a fifty percent interest (50%) in the Vendor’s insurance trailer fees and commission and investment commissions referred to as the Hoard Book of Business and including the Vendor’s client list . [emphasis added].

[ 16 ]

Schedule “A” stated: The Hoard Book of Business includes a Fifty Percent (50%) interest in the future remuneration received by Hoard from trailer fees and commissions and investment commissions including his share of trailer and commissions and bulk fees from all of his existing insurance and investment business excepting first year commissions on new business but including commissions of all years after the first years commissions and not including Mutual Fund Business. [emphasis added] [ 17 ] The Plaintiff’s position is that she is entitled to a 50% interest in all commissions, with the exception of first year commissions from new clients who were not clients of Mr.

Hoard at the date of the Agreement. Such new clients were, therefore, not part of the property she acquired as a result of the Hoard Agreement which property included a 50% interest in the “Vendor’s client list”. The Defendants’ position is that the exception applies to all new business, whether from existing or new clients. While no expert evidence was called on the question of whether “new business” has a particular recognized meaning in the insurance business, Mr.

Hoard pointed to the statements provided by Manulife and Industrial Alliance Insurance which break out the first year commissions on their statements. [ 18 ] I prefer the Plaintiff’s

interpretation of this phrase of the Hoard Agreement. Not only is it more consistent with the Plaintiff’s acquisition of a 50% interest in the “Vendor’s client list” that she share in first year commissions from existing clients, but her

interpretation gives meaning to the phrase “new business” in the language used in

Schedule A. The Defendants argue that the phrase “excepting first year commissions on new business” was intended to refer to first year commissions from both existing clients and from new clients. If this was the parties’ intention, then this could have been achieved by simply stating “excepting first year commissions”. The words “new business” under the Defendants’

interpretation are redundant. By contrast, under the Plaintiff’s

interpretation, the words “new business” are given meaning to distinguish first year commissions from existing clients, in respect of which commissions would be paid, and first year commissions from new clients, in respect of which commissions would not be paid. 2. What damages are payable to the Plaintiff as a result? [ 19 ] Mr. Taylor testified regarding the difficulties he encountered and the ultimate cooperation he received from Mr. Hoard. He introduced a

schedule summarizing the revenue collected between December 15, 2008 - December 31, 2009 of $111,107.54, the payments to be made to each of Mr. Hoard and Mr. Toerper of $35,982.49 and disputed items of $28,031.80. Apparently some, but not all of these funds are in trust, as some monies were used for prior adjustments. [ 20 ] Mr. Kelly is a chartered accountant who was qualified by the Court as an expert witness able to provide opinion evidence in the area of forensic accounting.

In his report, he concluded that the net commissions owing to the Plaintiff pursuant to the two agreements up to December 31, 2009 was $227,911. This amount was calculated by deducting the payments made to Ms. Toerper ($148,644) and the amount of first year commissions on identified new business from new clients to which Ms. Toerper was not entitled ($5,189) from her one half share of the total commissions received, after deducting administrative fees ($381,744). His calculation included the amount of $7,658.82 representing Ms. Toerper’s share of commissions from clients given to another party (Ms.

Brackley) without Ms. Toerper’s consent, contrary to

section 9.2 of the Hoard Agreement .

Section 9.2 stated: No client will be transferred to another commissioned agent, company or other party without the consent of both the Purchaser and the Vendor. [ 21 ] Mr. Hoard cross-examined Mr. Kelly and introduced his own calculations of what was owing, but his numbers were difficult to reconcile and lacked underlying support. I am satisfied on the balance of probabilities that Mr. Kelly’s calculation reflects the amounts owing to the Plaintiff up to December 31, 2009 as a result of the Defendants’ breach of the Hoard Agreement and the Phillips Agreement. [ 22 ]

Section 8.1 of the Hoard Agreement provided that Graham Hoard and 919035 would be concurrently responsible for paying

the Plaintiff her share of the fees billed less administrative fees by the 30 th day of the following month and that interest would be payable thereafter at the rate of 1.5% per month on overdue amounts. The Plaintiff’s counsel acknowledged that the Plaintiff was only seeking interest at the rate of 5% per annum by virtue of

section 4 of the Interest Act , R.S.C., 1985, c. I-15, as amended, as the Hoard Agreement failed to provide an annual rate of interest.

Section 4 states: 4.

Except as to mortgages on real property or hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent. [ 23 ] The Phillips Agreement contained no provision for the payment of interest. [ 24 ] The Plaintiff also sought general damages for estimated future loss of business.

The Plaintiff failed to satisfy me on the evidence on a balance of probabilities that she suffered losses as a result of the Defendants’ breach of the Agreements that would merit such damages and I decline to award same. [ 25 ] The Plaintiff is entitled to judgment against the Defendants Hoard and 919035 for $227,911 up to December 31, 2009 and to a declaration that she is entitled to damages thereafter calculated in accordance with the Agreements.

She is entitled to interest on amounts owing under the Hoard Agreement at the rate of 5% per annum as per the Interest Act , and to interest on amounts owing under the Phillips Agreement in accordance with the Judgment Interest Act , R.S.A. 2000, c. J-1, as amended. [ 26 ] If the parties are unable to agree upon costs, they may make written submissions in that regard within 30 days. Heard on January 24 th and 25 th , 2011. Dated at the City of Calgary, Alberta this 15 th day of February, 2011. J. Strekaf J.C.Q.B.A. Appearances: Paul A.

Kazakoff Butler, Kazakoff & Associates for the Plaintiff, Elizabeth Toerper Graham Hoard

Self Represented _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Madam Justice J. Strekaf _______________________________________________________ Please note the hearing date should have read: Heard on January 24 th and 25 th , 2011.