GarRy Sansome RESPONDENT/PLAINTIFF And: Scott Sheppard APPLICANT/DEFENDANT, 2019 NLSC 237

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Sansome v. Sheppard , 2019 NLSC 237 Date : December 23, 2019 Docket : 201504G0261 Between: GarRy Sansome RESPONDENT/PLAINTIFF And: Scott Sheppard APPLICANT/DEFENDANT Before: Justice Garrett Handrigan Place of Hearing: Corner Brook, Newfoundland and Labrador Dates of Hearing: November 13 and 29, 2019

Summary: Garry Sansome sued Scott Sheppard for damages, alleging Mr. Sheppard breached an oral agreement requiring him to pay Mr. Sansome 30% of commissions he earned servicing some of Mr. Sansome’s former clients in the financial services industry. Mr. Sheppard defended the action by denying any agreement and putting Mr. Sansome to its strict proof. Mr. Sansome applied for

summary judgment in the matter and Mr. Sheppard applied for judgment after

summary trial. The Court heard both applications and reserved its judgment. The Court allowed Mr. Sheppard’s application for judgment after

summary trial and dismissed Mr. Sansome’s claim. It found, in the first instance, that Mr. Sansome was trying to enforce an illegal agreement; and otherwise, that it was Mr. Sansome’s company, Financial Consultants Limited, if anybody, who should have sued Mr. Sheppard, not Mr. Sansome. It dismissed Mr. Sansome’s application for

summary judgment and ordered Mr. Sansome to pay Mr. Sheppard solicitor and client costs to be taxed.

Appearances: Garry Sansome Appearing on his own behalf Robby D. Ash Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317,55 A.C.W.S. (3d) 477 (Nfld. S.C. (T.D.)); Ultramar Canada Inc. v. Atjem Holdings Ltd. (1995), (NL SC), 133 Nfld.& P.E.I.R. 31, 56 A.C.W.S. (3d) 671 (Nfld. S.C. (T.D.)); RoyNat Inc. v. Lester (1993), 105 Nfld. & P.E.I.R. 151, 56 A.C.W.S. (3d) 671(Nfld. S.C. (T.D.)); LeDrew v. Brake (1999), (NL CA), 176 Nfld. & P.E.I.R. 288, 540 A.P.R. 288 (NLCA); Harveyv.

Newfoundland & Labrador, 2005 NLTD 198; Holloway v. Holloway, 2001 NFCA 17 STATUTES CONSIDERED: Insurance Adjusters, Agents and Brokers Act, RSNL 1990, c. I-9 RULES CONSIDERED: Rules of the Supreme Court, 1986, c. 42, Sch. D REASONS FOR JUDGMENT Handrigan, J.: INTRODUCTION [1] On December 1, 2015, Garry Sansome issued a statement of claim in this Court against Scott Sheppard. Mr. Sansome claimedgeneral, special and punitive damages from Mr. Sheppard, as well as costs and interest. Mr. Sansome says that Mr. Sheppard breachedan agreement that he had with Mr. Sheppard. According to Mr. Sansome, Mr.

Sheppard agreed to service former clients of Mr. Sansomein the financial services industry because Mr. Sansome was no longer allowed to do so; from which, says Mr. Sansome, Mr. Sheppardagreed to split any commissions with him that Mr. Sheppard earned from the work. [2] Mr. Sheppard filed his defence to the claim on August 9, 2017. He denied any agreements with Mr. Sansome, as alleged inthe statement of claim or otherwise; and he called on Mr. Sansome to prove them strictly. Mr. Sheppard also said that it would havebeen illegal for Mr. Sansome to receive commissions from Mr. Sansome’s former clients for work Mr.

Sheppard did on their behalf. Heasked that Mr. Sansome’s claim be dismissed with costs. [3] After more than four years since Mr. Sansome began these proceedings, I sense that Mr. Sansome and Mr. Sheppard are bothanxious to have this matter resolved. Towards that end, Mr. Sansome filed an application for

summary judgment on October 25, 2018and Mr. Sheppard filed an application for judgment on

summary trial a year later, on October 22, 2019. [4] Along the way, Mr. Sheppard filed two applications for leave to apply to find Mr. Sansome in contempt of court, one on April27, 2018 and the other on January 17, 2019. If the Court gave Mr. Sheppard leave to apply and it found Mr. Sansome in contempt, Mr.Sheppard wanted Mr. Sansome’s claim dismissed as his remedy, because of the finding. [5] I also note that Mr. Sansome filed two other applications similar to his present application, before he actually filed thisapplication for

summary judgment. He filed the first of the other applications on January 30, 2018, asking for a preliminarydetermination under Rule 38 of the Rules of the Supreme Court, 1986, c. 42, Sch. D (the “Rules”), of whether he had a verbal agreementwith Mr. Sheppard and if Mr. Sheppard was in breach of that agreement. He filed the other application on April 17, 2018 under Rule

14.24 to strike Mr. Sheppard’s defence. [6] In the last two years, the parties have appeared before this Court eight times to address some aspect of the proceedings. I maybe understating the antipathy between the parties to say that a bitter animosity has developed between them since Mr. Sansome startedthe proceedings; and it is still growing. [7] I heard Mr. Sansome’s application for

summary judgment on November 13, 2019 and Mr. Sheppard’s application forsummary trial on November 29, 2019 and reserved my judgment on both until now. the issues [8] The applications raise two issues: 1. Is this matter capable of being disposed of by

summary trial?; or, 2. May it even be disposed of by

summary judgment? the law

Summary Trial Rules of the Supreme Court, 1986 [9] Rule 17A.01(1) provides: A…defendant may, after defence has been filed and at any time prior to the proceeding being placed on a trial list, apply to the Courtwith supporting affidavit material or other evidence for

summary trial seeking judgment on or dismissal of all or part of the claim in thestatement of claim, as the case may be. Case Law [10] Green, J. explained the Rule 17A procedure in detail in Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 55 A.C.W.S. (3d) 477 (Nfld. S.C. (T.D.)), shortly after the Rule was adopted.

He saw itspotential to be a “...very beneficial means of disposing of a case without the necessity of a full trial in a cost-effective and time-efficientmanner while still respecting the rights of the parties to have a proper determination of the issues in dispute.” (paragraph 13). [11] Not every case is amenable to the procedure and Rule 17A applications should not be made frivolously.

As Green, J. also saidin Marco: “...[C]ounsel have a responsibility to give careful consideration to whether the circumstances are appropriate for bringing anapplication and to ensure that, if brought, the application is carefully prepared and organized so that the matter can be dealt with in asummary fashion consistent with the purpose and intent of the rule” (Marco, paragraph 13). [12] It is clear from Rule 17A that

summary trials can be conducted in one of the following circumstances: • There is no genuine issue for trial between the parties: Rule 17A.03 (1). • There is a genuine issue for trial, but the court can find, from the record, the facts necessary to decide the facts and law pertinent tothat issue. But even then, it must not be "unjust to decide the issues on the application": Rule 17A.03 (2). [13] If the only genuine issue for trial is the amount to which a party is entitled, the court may order a trial of that issue or grantjudgment with a reference to determine the amount: Rule 17A.03(3).

Similarly, if the only genuine issue for trial is a question of law, thecourt may determine that issue and grant judgment: Rule 17A.03(4). A “genuine issue for trial” is one that is “...not spurious and ...relates to a material fact or point of law that is necessary to be decided to resolve the ultimate controversy between the parties”: UltramarCanada Inc. v. Atjem Holdings Ltd. (1995), (NL SC), 133 Nfld. & P.E.I.R. 31, 56 A.C.W.S. (3d) 671 (Nfld. S.C.(T.D.)) at paragraph 1. [14] The party applying for

summary trial must prove there is no genuine issue for trial; or, if there is, the applicant must show howthe court can find from the record the facts necessary to decide the questions of fact and law in respect of that issue, and that it would notbe unjust to decide the issue on the application: See Marco and Ultramar Canada Inc. [15] The party applying must also put forward evidence that supports each element of its claim, counterclaim or defence, as the casemay be.

If it does, the onus shifts to the responding party, if it opposes the application, to show there is a genuine issue for trial and thatit would not be just to decide the issue on the application. Each party must "put its best foot forward" when making or opposing a Rule17A application. [16] When deciding whether it would be unjust to decide the case by

summary trial the court may consider various factors,including, but not limited to: • the absence, for reasons other than the parties' neglect, of material evidence at the time of the application; • the complexity of the matter; • prejudice from delay in going to trial in the usual course; • prejudice to a party's ability to present its case properly in a

summary trial; and,

• costs. (Ultramar Canada Inc., paragraph 13). [17]

Summary trial is an abridged procedure, but it is no less a “trial”. The court judges and decides the issues as on a trial and theburdens and standards of proof apply with the same vigor. There is, however, latitude afforded to the parties in the form andpresentation of evidence. Thus, evidence may be presented by affidavit, it may be drawn from answers to interrogatories or it may bemined from examinations for discovery. Affiants may be cross-examined and re-examined on their affidavits and inferences may bedrawn from a failure to file affidavits or to cross-examine deponents on those affidavits which are filed: see generally Rule 17A.02. [18] The court may dismiss an application for

summary trial if the procedure is not appropriate in the case, but it “shall” grantsummary judgment if there is no genuine issue for trial: Rule 17A.03(1). Rule 17A, as Green, J. stated in Ultramar Canada Inc.,operates on an “issue by issue” basis, so that “...issues...[which] can be disposed of summarily...ought to be, leaving only those issueswhich cannot be disposed of to be dealt with on a more limited and focused trial” (paragraph 15). [19] This is the law I will apply to Mr. Sheppard’s application for judgment after a

summary trial.

Summary Judgment Rules of the Supreme Court, 1986 [20] Rule 17.01(1) provides, as relevant to Mr. Sansome’s application: Where the defendant has filed a defence…the plaintiff may, on the ground that the defendant has no defence to a claim in the originatingdocument…, apply to the Court to enter judgment against the defendant. Case Law [21] Rule 17.01(1) of the Rules offers a measure of expediency to plaintiffs who have claims to which there are no defences.

Itprovides those plaintiffs with ready access to court and ensures that they will not simply languish in the trial queue to find out theinevitable - the defendant has no defence to their claim and has simply bought time by insisting on compliance with the usual pre-trialprocesses stipulated in the Rules. [22] While Rule 17.01(1) may be advantageous for plaintiffs, it can be equally perilous for defendants: the truncated process meansthat defendants do not get a chance to put forward their defences unless they make it clear when they oppose applications under Rule17.01(1) that there is a defence to consider.

Injustices can occur because of that possibility, and it is imperative for judges dealing withRule 17.01(1) applications to give them the “good hard look” that Barry, J. of this Court referred to in RoyNat Inc. v. Lester (1993), (NL SC), 105 Nfld. & P.E.I.R. 151, 56 A.C.W.S. (3d) 671 (Nfld. S.C. (T.D.)). [23] Rule 17.01(1) involves a two-step process: the plaintiff must show by his affidavit that he has a valid claim, and further averthat the defendant has no defence to the claim. If the plaintiff succeeds in that, the onus shifts to the defendant to “resist the claim forsummary judgment” (LeDrew v.

Brake (1999), (NL CA), 176 Nfld. & P.E.I.R. 288, 540 A.P.R. 288 (NLCA), atparagraph 6). [24] The defendant may do so by affidavit, in which he must “disclose facts which, if proven, would constitute a defence. It is notintended that an application for

summary judgment require the applications judge to assess credibility, weigh evidence or make findingsof fact” (LeDrew, paragraph 6). [25] This is the law I will apply to Mr. Sansome’s application for

summary judgment. [26] I turn now to analyze both applications, starting with the background to them. Analysis Background [27] Garry Sansome was formerly a licensed insurance representative and a financial advisor agent who received commissions fromselling life and group insurance policies. Mr. Sansome operated in Corner Brook and the surrounding area on the west coast ofNewfoundland and Labrador. Mr.

Sansome conducted his financial services business through a corporation, Financial Services Limited,of which he was the sole shareholder. [28] On February 23, 2007, Financial Services Limited entered into a “Producer’s Agreement” with Manulife Financial whereby itbecame a “General Agent Broker” (GAB). Paragraph 2.01 of the agreement stated that its “purpose” was the “…promotion, sale andservice of Manulife products”.

Financial Services operated as “an independent contractor” of Manulife and was “…free to exercise itsown judgment with respect to the conduct of its business within the parameters of generally applicable instructions, rules andrequirements from time to time prescribed by Manulife”. [29] Manulife also required that Financial Services Limited have a “Key Representative”. In paragraph 1, the “definitions” sectionof the agreement, the key representative is “…a person listed in

Schedule A authorized to represent the GAB in all its dealings withManulife”. Financial Services Limited designated “Garry B Sansome” in

Schedule A to the agreement and said of him that he was its“President” and held “100%” of its outstanding shares. [30] The Agreement also has a “Schedule B” attached to it which is “to be completed only if the GAB is incorporated”. Of course,Financial Services Limited, the GAB in this matter, is an incorporated company, so

Schedule B is completed. It identifies “Garry B.Sansome” as the “Representative” for Financial Services Limited and notes the “Sponsoring Company” to be “Manulife”. The Schedulealso contains conditions that apply to the “Representative”. The following are relevant to this matter:

• The Representatives listed below…are all of the Representatives of the GAB as defined by this Agreement. • The GAB will not utilize any other Representatives without the prior written consent of Manulife. • The GAB undertakes to notify Manulife immediately of any change in the employment or licensing status of any of the Representatives of Manulife from time to time, and the effective date of such change. • Upon any Representatives of Manulife ceasing to be licensed for any reason, that Representative will immediately cease to act on behalf of, or in the name of the GAB and Manulife. [ 31 ] Paragraph 7.03 of the agreement deals with breaching the agreement and how it might be terminated as a consequence of the breach.

In particular, it says that “[t]his Agreement may be terminated immediately without notice by either party, and such termination will be effective upon the mailing of the letter to that effect to the other party, by registered mail or by facsimile transmission…”. [ 32 ] Even more relevant to this matter is paragraph 7.04(d), which deals with “Automatic Termination”. It reads, again as pertains to this matter: “This Agreement will terminate automatically upon the happening of any of the following events: (

d) the bankruptcy, insolvency or winding-up of the GAB or of all shareholders”. Paragraph 7.05 says that “…the GAB will continue to be entitled, following termination, to receive compensation with respect to any Manulife products sold as a result of applications submitted prior to the date of termination, subject to the relevant provisions of this Agreement”. [ 33 ] Mike Richards, National Vice President, Financial Accounts, of Manulife Financial wrote to Financial Consultants Limited on July 27, 2010 and directed his “Private and Confidential” letter to Mr. Sansome. He advised Mr.

Sansome “…this letter confirms that the Agreement between Financial Consultants Limited (the “GAB”) and…[Manufacturers Life Insurance Company] automatically terminated in accordance with its terms on September 15, 2009 when you, being the sole shareholder of the GAB, declared your insolvency and thereafter filed a voluntary assignment into bankruptcy based on such insolvency”. [ 34 ] Mr. Richards referred Mr. Sansome to the part of paragraph 7.04 that I quoted earlier in these reasons to support his statement, that “…the Agreement will terminate automatically upon the happening of any of the following events: (

d) the bankruptcy, insolvency, or winding-up of the GAB or all of its shareholders” (underlining mine). He set out the financial consequences attending the terminated Agreement and he advised Mr. Sansome and/or Financial Consultants Limited of their inability to represent Manulife further: “You will not be offered a servicing contract and on termination you must no longer deal with any of the Company’s clients in respect of the Company’s products”. [ 35 ] Scott Shepherd worked as a financial advisor at CIBC in Corner Brook some years ago. There he got to know Garry Sansome who was a CIBC customer.

When he first met Mr. Sansome, Mr. Shepherd was not licensed to sell insurance products since the chartered banks did not require their advisors to have insurance licensing. Eventually, Mr. Shepherd completed the training and acquired his license. [ 36 ] Mr. Sansome approached Mr. Shepherd sometime around the end of 2009 and asked Mr. Sheppard to work with him on some of Financial Consultants Limited’s accounts. He told Mr. Shepherd that he had lost his license to sell insurance products when he made an assignment in bankruptcy. In particular, Mr. Sansome told Mr.

Shepherd about a client, Ted Burden, with whom he did a lot of business. But he advised Mr. Shepherd that he could no longer work on Mr. Burden’s account because he had lost his insurance license. [ 37 ] Mr. Sansome made this offer to Mr. Shepherd: Mr. Shepherd would service Mr. Burden’s account and would try to arrange a new insurance policy for Mr. Burden with Manulife. Mr. Sansome would introduce Mr. Shepherd to Mr. Burden. In exchange for Mr. Sansome’s role in facilitating Mr. Shepherd’s contact with Mr. Burden and enabling Mr. Shepherd to secure Mr. Burden’s business, Mr. Shepherd would pay Mr.

Sansome 30% of the commission he earned from the business, “tax-free” to Mr. Sansome. [ 38 ] Mr. Shepherd accepted Mr. Sansome’s offer, but not without uncertainty. He met with Mr. Burden and quickly realized that Mr. Burden did not want to change his insurance arrangements at that point. Mr. Shepherd advised Mr. Sansome accordingly and Mr. Burden made no changes then to his insurance portfolio. Ultimately, in September 2010, Mr. Shepherd took over Mr. Burden’s insurance account, not at Mr.

Sansome’s behest, but on a referral from a Keith Newhook, the owner of a business called Atlantic Marketing Centre (eventually renamed PPI Solutions Atlantic). [ 39 ] For his part, when he retained Mr. Shepherd to manage Mr. Burden’s account, Mr. Newhook acted on instructions from Manulife after they terminated Financial Consultants Limited (and Mr. Sansome) as a General Agent Broker (GAB). Mr. Shepherd refused to pay Mr. Sansome any commissions from his work with Mr. Burden and Mr. Sansome took exception to his refusal. That lies at the basis of Mr. Sansome’s claim in special damages against Mr.

Shepherd, on the Burden account. [ 40 ] Financial Consultants Limited also handled group insurance policies for its clients, such as Consumers Choice Pharmacy Limited and Island Dental Inc. Mr. Sansome proposed a similar arrangement between him and Mr. Shepherd: Mr. Sansome would introduce Mr. Shepherd to these clients, Mr. Shepherd would transact their business and pay 30% of the commission he earned from the business, “tax-free” to Mr. Sansome. [ 41 ] Before Mr. Shepherd transacted any business on the group insurance accounts, Manulife notified Mr.

Sansome by letter on July 27, 2010 that it had terminated its agreement with Financial Consultants Limited so that Mr. Sansome could no longer transact business with these clients, nor could anyone else at Mr. Sansome’s direction. Eventually, Manulife, through the intervention of Keith Newhook, appointed Mr. Shepherd as Agent of Record for those accounts, too. Mr. Shepherd’s status as agent lies at the basis of Mr. Sansome’s claim against him in special damages, on the group policy accounts. [ 42 ] In

summary, Mr. Sansome’s claim against Mr. Shepherd turns on a verbal agreement that Mr. Sansome claims he and Mr. Shepherd had whereby Mr. Shepherd agreed to service Mr. Sansome’s former clients and then share the commissions he earned from that work with Mr. Sansome.

[ 43 ] Mr. Shepherd formally denied the existence of such an agreement when he filed his defence to Mr. Sansome’s claim and put Mr. Sansome to the strict proof of it. Mr. Shepherd also claims that any contract that might have existed between him and Mr. Sansome was illegal because Mr. Sansome was prohibited both by law and by his contract with Manulife from providing any financial services for hire to its customers. [ 44 ] I turn now to discuss the basis for Mr. Shepherd’s claim that Mr. Sansome was acting illegally and that any agreement that might have existed is unenforceable. Discussion Defendant’s Application for Judgment on

Summary Trial - Illegal Contract [ 45 ] I note at the outset that there was an “agreement” of a kind between Mr. Shepherd and Mr. Sansome initially. I agree, as Mr. Sansome has repeatedly pointed out, that Mr. Shepherd denied the existence of the agreement in his defence. However, that “denial” has to be understood in context: It is simply a notice to Mr. Sansome that he will have to offer strict proof of the agreement and its terms should the matter proceed to trial. [ 46 ] Mr. Sansome filed an email that he received from Mr. Shepherd on April 1, 2011 as part of the documentation supporting his interlocutory application for

summary judgment. The email helped me understand Mr. Shepherd’s view of the agreement and its implications for him. Let me offer some of its relevant parts: I’ve had several conversations today with lawyers and authorities. I feel sincerely bad for your situation and I’d like to help with finances but I’m just not able to break the law to do so. Unfortunately, it’s a situation where I’d like to help you and Judy but in doing so I stand a very high probability of losing everything that I have worked very hard to build.

I understand that you won’t see things my way, and if you feel that I’m doing you wrong – I’m very sorry about that. I know your situation is very bad right now and I will continue to service your former business for you as I promissed (sic) you and Keith Newhook I would. To date, I have been very successful in retaining your former Manulife clients and I have spent countless hours doing so. This alone has had a significant value to you in the future. I have even retained several IA [Industrial Alliance] customers so that you may continue to recieve (sic) renewal commissions.

This has been a cost of time and money to me – but I did it because both you and your former clients needed help and there was nobody else to turn to. I know we had an agreement and I don’t for one second pretend that we didn’t. My main reason for not seeing my part of the bargain through is because I honestly did not fully understand the ramifications of your proposed deal at the time of making it. I never had a good feeling about it from the start but I did agree to go ahead with it because a friend needed help. I wish now you never asked me to do that – and I wish even more that I never agreed to it.

I will continue to help you and Judy however I can and I still consider you a friend – I hope you will see fit to understand where I am coming from. You have always known me to be ethical and above-board. It’s for those same characteristics that I’m making my decision today. [ 47 ] So, there was an agreement, of sorts, between Mr. Sansome and Mr. Shepherd. But that agreement as Mr. Shepherd soon learned was to do something illegal and he could not support it. Now Mr. Sansome wants to enforce that agreement against Mr. Shepherd and receive damages because of it. Mr.

Sansome’s claim is unsupportable at law and it is patently obvious that Mr. Sansome cannot succeed by it, as I will now demonstrate. I will begin with the legislation that regulates the adjusters, agents and brokers who work in the insurance industry in the Province. [ 48 ] The Insurance Adjusters, Agents and Brokers Act , RSNL 1990, c. I-9 (“the Act ”) applies. It sets the terms for issuing licences to those operating in the industry.

A “licence” only retains the status of licence so long as it has not “…been suspended, revoked or cancelled by the superintendent [of Insurance]”. [ 49 ] Each licensee under the Act must be “sponsored”.

Section 7(3) of the Act provides, in relevant part, that “[w]here…[a] representative ceases to be sponsored by the sponsor whose name is specified in his or her licence, the licence of the adjuster or representative is considered to be suspended for the purposes of this Act , and the sponsor, adjuster or representative shall immediately return the licence to the superintendent, who may cancel that licence” (underlining mine). [ 50 ] Section 12(1) of the Act says that “[a] licence remains in effect…until it is suspended, revoked or cancelled under this Act ”. Section 28(1) (

a) provides as follows: “An insurer or its officers, agents, brokers, representatives or employees shall not pay or allow compensation or anything of value for an application of insurance to (

a) a person who without a licence and in respect of insurance in the province acts as an agent, broker or representative or may influence the insured or prospect for insurance”. Section 45(13) of the Act says that “[a] person who violates subsection 28(1) is guilty of an offence” and is liable to a range of penalties under

section 46. [ 51 ] I noted earlier that Mike Richards, National Vice President, Financial Accounts, of Manulife Financial wrote to Mr. Sansome on July 27, 2010 and advised him that the Agreement between Financial Consultants Limited had been automatically terminated when Mr.

Sansome declared he was insolvent on September 15, 2009 and made an assignment in bankruptcy. Mr. Richards’ letter also ended Manulife’s sponsorship of Financial Consultants Limited and Mr. Sansome’s status as a key representative of Manulife as his sponsoring company. [ 52 ] I will discuss whether Manulife’s termination of its Agreement with Financial Consultants Limited and Garry Sansome took effect on July 27, 2010 or September 15, 2009 shortly.

For now, I simply note that on July 27, 2010 (at the very latest), Financial Consultants Limited and Garry Sansome were neither a licensee nor a key representative of Manulife under the Act . Thus, it would have been illegal for Scott Shepherd to pay any amounts to Mr. Sansome, or for Mr. Sansome to demand any payments from Mr. Shepherd for any services that Mr. Shepherd provided to Mr. Sansome’s former clients; as section 28(1) (

a) of the Act provides. [ 53 ] But, of course, it was not only the Act that affected Financial Consultants Limited and Mr. Sansome’s status as licensee and key representative. Earlier in these reasons, I quoted portions of the Producer’s Agreement that Financial Consultants and Garry Sansome signed February 23, 2007 to become the General Agent Broker for Manulife and its key representative respectively. I noted paragraph 7.04(

d) of the Agreement in particular, which provided that the agreement terminated automatically if either Financial Consultants Limited or all of its shareholders became bankrupt or insolvent. [ 54 ] I also noted Schedules A and B of the Agreement which listed Mr. Sansome as the only key representative of Financial Consultants Limited and stated conditions that applied to his designation, including: Financial Consultants could not have any other key representative than Mr.

Sansome unless it had written approval from Manulife; Financial Consultants Limited was obliged to notify Manulife immediately of any change in Mr. Sansome’s employment or licensing status; and if Mr.

Sansome ceased to be licensed he had to stop immediately from holding himself out to represent Manulife, whether personally or through Financial Consultants Limited. [ 55 ] Let me summarize the implications that these portions of the Act and the Producer’s Agreement have for this matter: • Both Garry Sansome and Financial Consultants Limited were automatically terminated in their respective roles as agent and key representative of Manulife when Mr.

Sansome made the assignment in bankruptcy on September 15, 2009; • Financial Consultants Limited could no longer act on behalf of Manulife after September 15, 2009; • Garry Sansome could no longer represent Financial Consultants Limited in its dealings with Manulife and he could not act on behalf of Manulife himself after September 15, 2009; • Without Manulife’s written approval, Scott Shepherd could not represent Financial Consultants Limited in its dealings with Manulife and Mr.

Shepherd could not act on his own on behalf of Manulife after September 15, 2009; and • Any dealings Scott Shepherd had at Garry Sansome’s behest with any of Manulife’s customers after September 15, 2009 were contrary to the Producer’s Agreement with Manulife and

section 45 of the Act . [ 56 ] The result is that Garry Sansome’s claim against Scott Shepherd is based on an illegal contract and is unenforceable. [ 57 ] In Harvey v. Newfoundland & Labrador , 2005 NLTD 198 , Halley, J. of this Court dismissed a claim Josiah Harvey brought against the Her Majesty in Right of Newfoundland and Labrador. Mr. Harvey said that he was a party to an oral agreement whereby the Province agreed to hire him as Director of the House of Assembly Television. Mr. Harvey claimed that he promised to vote for Roger Grimes for leader of the provincial Liberal Party and in return, Mr.

Grimes promised Mr. Harvey that if he was elected Leader and became Premier of the Province, he would appoint him to the position of Director of House television. Mr. Grimes testified at trial and denied he made any representation of the kind to Mr. Harvey. [ 58 ] Halley, J. dismissed Mr. Harvey’s claim; and explained his decision this way: “In this case, Harvey has alleged that he offered an official (Grimes) a benefit (a vote) for his ‘cooperation’ in arranging for his appointment as Director of the House of Assembly television.

An agreement such as that is illegal because it involves the criminal activity known as ‘ influence peddling ’. As a matter of public policy, this Court will not assist Harvey to enforce the alleged agreement: Harvey , paragraph 16 (emphasis in original). [ 59 ] Earlier in these reasons, I noted there was some concern about the effective date of Financial Consultants Limited’s termination as Manulife’s General Agent Broker. Was it September 9, 2009 when Mr.

Sansome made his assignment in bankruptcy, or July 27, 2010 when Manulife wrote to Financial Consultants Limited to notify the company the Producer’s Agreement was terminated? [ 60 ] Nothing turns on that date, because Mr. Shepherd earned no benefits from working with Mr. Sansome’s former clients until after July 27, 2010; and, by the time Mr. Shepherd began to draw benefits from the work, Manulife, with Keith Hancock’s help, had retained Mr. Shepherd directly for that work. However, it is clear that the effective date was September 9, 2009, if, for no other reason, that is when Mr.

Sansome should have informed Manulife of the material change in his status. He did not notify Manulife, of course, and continued to operate contrary to the Agreement and the Act as though nothing had changed, until Manulife found out and told him so. [ 61 ] When I heard Mr. Sansome’s application for a

summary judgment, he asked permission to cross-examine Mr. Shepherd before he made any submissions about why I should grant him

summary judgment. With some reluctance, I allowed the cross-examination. I note from Mr. Sansome’s cross-examination, this exchange with Mr. Shepherd, in particular: Q: When (sic) the major parts of your defence and the claim in your defence is that the Plaintiff [Garry Sansome] was unlicenced and uninsured at the time of the I call it the burden agreement. Is that a fact? Did you ever at any time what did you do to verify that the Plaintiff was neither licenced nor unlicenced? What steps did you take? A: Well the first step I took, Mr.

Sansome, was ask you directly if you were licenced and you told me no you had lost your licence and then you squarely pointed the finger at Dion Hancock for causing you to lose your licence because he had terminated your licence with his MGA. Furthermore, I then asked the MGA, Mr. Hancock, if Mr. Sansome had licencing and have been told by me that no he was not a licenced agent. I met with you at a Chinese restaurant I believe on West Street - I’m not sure if it’s still open or not – sometime

around Christmas of 2009 and asked you if you had a licence and you had said no, you had declared bankruptcy but nobody knew about it and that you were going to lose your licence. So three occasions with you, once with Mr. Hancock, and I also contacted Manulife and they had told me that you never had a licence because they had ended your sponsorship. [ 62 ] To defend against Mr. Shepherd’s claim that Mr. Sansome relies on an illegal and unenforceable contract, Mr.

Sansome refers to a letter dated April 4, 2011 that he says he received from a compliance officer with Financial Services Regulations Division, Department of Government Services of the Government of Newfoundland and Labrador. The letter purports to advise Mr. Sansome, that “[w]e have received a Notice of Termination of Sponsorship of your LIFE (INCLUDING ACCIDENT AND SICKNESS) INSURANCE REPRESENTATIVE: LEVEL III Licence No. #05-81-GS003-2 from THE MANUFACTURERS LIFE INSURANCE COMPANY with effect from April 4, 2011”. [ 63 ] Based on the letter, Mr.

Sansome claims that he continued to be licensed for approximately 19 months after he made his assignment in bankruptcy on September 9, 2009, so everything he transacted with Mr. Shepherd in those months, was legal and is enforceable. Mr. Sansome’s claim is unsustainable. It ignores the obvious points I noted above about the relationships between Manulife and Financial Consultants Limited and between Manulife and Mr. Sansome.

Additionally, it ignores the dictates of the Act and how licences are automatically revoked when a person ceases to be sponsored by the person named in the licence; Manulife, in this case. [ 64 ] In the result, I find that the agreement that Mr. Sansome relies on with Mr. Shepherd, to the limited extent that Mr. Shepherd acted on it all, was an illegal contract and is unenforceable. Defendant’s Application for Judgment on

Summary Trial - Wrong Plaintiff [ 65 ] Mr. Shepherd also claims that Garry Sansome is the wrong plaintiff. Of course, Mr. Sheppard denies that anyone has a claim against him for any of what transacted between him and Mr. Sansome in the fall of 2009; but if anyone has a claim, Mr. Shepherd contends that it would be Financial Consultants Limited and not Mr. Sansome. [ 66 ] When I set out the background to Mr. Sansome’s claim I attended carefully to the documentation that Mr. Sansome relies on to frame his cause of action against Mr. Shepherd. The Producer’s Agreement is critical to Mr.

Sansome’s claim because it establishes the relationship with Manulife. However, as I noted when I first referred to the Agreement and have maintained throughout these reasons, the contracting parties in the Agreement are Financial Consultants Limited and Manulife Financial and not Mr. Sansome and Manulife Financial. [ 67 ] Again, as I have already noted, Mr. Sansome has no direct contractual relationship with Manulife but is simply the “Key Representative” who interacts with Manulife on Financial Consultants Limited’s behalf to transact the business between the two contractual entities.

Financial Consultants Limited can use no other representative without Manulife’s prior written approval and Financial Consultants Limited was obliged to notify Manulife immediately of any changes in its representative’s status; which it failed to do when Mr. Sansome made his assignment in bankruptcy. [ 68 ] Mr. Sansome clearly confuses his status as Financial Consultants Limited’s sole shareholder and the company’s separate status as a legal person. Several times in my dealings with Mr. Sansome he claimed that there is no distinction between him and Financial Consultants Limited, or as Mr.

Sansome puts it: Financial Consultants Limited was “…his private property which he has 100% legal rights to”. [ 69 ] Mr. Sansome is wrong in law about Financial Consultants Limited’s legal status. The company is the legal person who contracted with Manulife and to the extent that Mr. Sansome negotiated with Scott Shepherd for Mr. Shepherd to transact any business for Manulife under the Producer’s Agreement it could only be on behalf of Financial Consultants Limited and not Mr. Sansome personally. [ 70 ] Thus, only Financial Consultants Limited might claim a remedy against him if Mr.

Shepherd breached any agreements and not Mr. Sansome in his own right, as he is attempting to do. Of course, this is all academic in this matter because of my ruling that Financial Consultants Limited will not be able to enforce illegal contracts anymore than Mr. Sansome could enforce them. Plaintiff’s Application for

Summary Judgment [ 71 ] Mr. Sansome applied for

summary judgment against Mr. Sheppard. To succeed on his application, Mr. Sansome must show that he has a valid claim as demonstrated by the materials he filed in support of his application; and, if he does, the onus then shifts to Mr. Sheppard to show he may have a defence to his claim. [ 72 ] It is clear from my discussion of Mr. Sheppard’s application for judgment on a

summary trial that Mr. Sansome does not have a valid claim and that Mr. Sheppard has two valid defenses to Mr. Sansome’s. Accordingly, I dismiss Mr. Sansome’s application for

summary judgment. Costs [ 73 ] The Judicature Act , R.S.N.L. 1990, c. J-4 and the Rules of the Supreme Court, 1986 provide for awards of costs and generally leave them in the discretion of the Court: see,

section 53 of the Judicature Act ; and Rules 55.02 to 55.14 of the Rules of the Supreme Court, 1986 . Costs usually follow the cause: Rule 55.03(1); and costs are generally awarded on a party and party basis: Rule 55.04(1). [ 74 ] The discretion to order costs is broad, but it is not unfettered. At a minimum the discretion must be exercised judicially and according to law. Wells, C.J.N. (as he then was) contemplated limitations on the exercise of the discretion in Holloway v.

Holloway , 2001 NFCA 17 : The breadth of the discretion which the Court has with respect to ordering costs would allow the Court to grant the respondent's request. However, its decision cannot be based on a whim. Neither can it be a knee jerk reaction to the abuse of process by the appellant in taking

the application he did or to the unsound position taken by the appellant on this appeal. The Court must exercise its discretion through the application of proper principles. [ 75 ] There are three kinds of costs: party and party; solicitor and client; and, solicitor and own client: see, Holloway . Solicitor and client costs represent all disbursements, charges and fees, taxable by the solicitor against his client as necessary for the proper presentation of the proceeding for which the costs are awarded, but they are limited to the four corners of that proceeding.

In effect, solicitor and client costs will amount to full indemnification of the party bringing proceedings in all but exceptional cases. For those exceptional cases, solicitor and own client costs are reserved. But it is clear, particularly from Wells, C.J.N.'s reasons in the Holloway case, that solicitor and own client costs should be reserved for the clearest of cases. [ 76 ] Let me examine the procedural background to this matter as I consider whether costs should be awarded against Mr. Sansome; and, if so, what kind of costs. [ 77 ] Mr.

Sansome began these proceedings on December 1, 2015 by filing a statement of claim in this Court. The matter languished for about a year and a half until April 17, 2017 when Mr. Sansome filed an interlocutory asking the Court to make a preliminary determination of an issue under Rule 38.01. He withdrew that application on April 27, 2017 and filed another interlocutory application on April 17, 2018, asking the Court to strike the defence that Mr. Sheppard filed on August 9, 2017, pursuant to Rule 14.24. [ 78 ] In the meantime, Mr. Sheppard began to get concerned about some of Mr.

Sansome’s actions outside the court proceedings. For example, Mr. Sansome sent an email to Mr. Sheppard’s counsel on January 23, 2018 in which he threatened to file a false police report after the matter went to Court alleging that Mr. Sheppard committed perjury when he testified at the trial. [ 79 ] Mr. Sansome made that threat in advance of the trial to try and compel Mr. Sheppard to accept a settlement proposal that Mr. Sansome forwarded to Mr. Sheppard’s counsel whereby Mr. Sheppard would pay him $112,500. Mr.

Sansome also indicated in the email he sent to counsel that he would file the police report, regardless of the outcome of the trial. Mr. Sheppard responded to the threat by filing an interlocutory application on April 30, 2018 asking leave of the Court to apply to find Mr. Sansome in contempt of court. [ 80 ] On January 17, 2019, Mr. Sheppard filed a second application for leave to apply to find Mr. Sansome in contempt of court. In this application, Mr. Sheppard repeated the threat that Mr. Sansome made to report him to the police in his January 23, 2018 email to counsel and referred to another email Mr.

Sansome sent to his counsel on June 12, 2018 in which he raised the matter of perjury again and repeated his proposal that Mr. Sheppard pay him $112,500 to settle the matter. Mr. Sansome described the sum in his June 12, 2018 email as “a chance [for Mr. Sheppard] to get a (sic) out of jail card”. Otherwise, Mr. Sansome filed his application for

summary judgment on October 25, 2018 and Mr. Sheppard filed his application for judgment by

summary trial on October 22, 2019. [ 81 ] Throughout this matter, Mr. Sansome has acted in a high-handed and cavalier manner towards Mr. Sheppard. For example, this is what Mr. Sansome said about Mr. Sheppard in paragraph 55 of the interlocutory application for

summary judgment that he filed on October 25, 2018: “The Plaintiff [Mr. Sansome] repeats all of the above and state (sic) it’s clearly seen that the Defendant [Mr. Sheppard] repeatedly lies again and again. He tries to cover up one lie with another” (italics in original). [ 82 ] In the reply Mr. Sansome filed on January 15, 2019 to a response that Mr. Sheppard filed to Mr. Sansome’s application for

summary judgment, Mr. Sansome said this at paragraph 1: “Upon receiving the Defendant’s [Mr. Sheppard’s] affidavit in response, I could not believe what I was reading. That they could be so brave or stupid to believe that your honor would fall for this. It is an insult to your honor (sic) intelligence, when you have in your position (sic) the complete proven facts. Facts that the defendant was supposed to prove wrong with proof, not just with hearsay as was done.

The facts prove that the defendant indeed in the past committed Perjury and indeed with this affidavit commits Perjury again” (underlining and bold in original). Mr. Sansome repeated similar allegations in paragraphs 3, 4 and 7 of his reply. [ 83 ] It appears that Mr. Sansome has been on a campaign to discredit and ridicule Mr. Sheppard from the outset, with the mocking and contemptuous words and conduct that he directs towards him. For example, on page 23 of the transcript from Mr. Sansome’s cross- examination of Mr. Sheppard on November 13, 2019 before me, Mr.

Sansome made this comment: “…I’m trying to find something your honour that will discredit the full statement you [Mr. Sheppard] just gave”. Elsewhere, on the same page, Mr. Sansome directed this comment about Mr. Sheppard to me: “Your Honour, I asked the question and Mr. Sheppard told you a story that was an absolute lie”. [ 84 ] In paragraph 11 of the interlocutory application Mr. Sheppard filed on January 17, 2019, when he applied for leave to apply to find Mr. Sansome in contempt of court, Mr. Sheppard summarized his concern about Mr. Sansome’s conduct this way: “The Respondent [Mr.

Sansome] has abused the process of the administration of justice and committed a criminal offence in threatening the Applicant [Mr. Sheppard] with being the subject of a groundless criminal complaint and investigation if the Applicant continues to seek to have the within action adjudicated by this Honourable Court. Such conduct is designed to inhibit or dissuade the Applicant from accessing the court to have the parties’ legal rights and obligations ascertained and enforced.

Such conduct is also an attempt to affect the due administration of justice and therefore impacts the public interest and is an abuse of this Honourable Court’s process”. [ 85 ] I share concerns similar to those that Mr. Sheppard expressed in this quotation. While I know that Mr. Sansome represents himself in this matter, that does not account for, nor does it excuse his handling of this matter. Overall, Mr. Sansome has been on a singular mission to discredit, deter and discourage Mr. Sheppard from defending the claim Mr. Sansome brought against him. In those circumstances, I award Mr.

Sheppard costs on a solicitor and client basis, the middle ground as described in the quotation from Wells, C.J.N. in Holloway , above.

Summary and Disposition [ 86 ] Garry Sansome sued Scott Sheppard for damages, alleging Mr. Sheppard breached an oral agreement requiring him to pay Mr. Sansome 30% of commissions he earned servicing some of Mr. Sansome’s former clients in the financial services industry. Mr. Sheppard defended the action by denying any agreement and putting Mr. Sansome to its strict proof. Mr. Sansome applied for

summary judgment in the matter and Mr. Sheppard applied for judgment after

summary trial. The Court heard both applications and reserved its judgment.

[ 87 ] The Court allowed Mr. Sheppard’s application for judgment after

summary trial and dismissed Mr. Sansome’s claim. It found, in the first instance, that Mr. Sansome was trying to enforce an illegal agreement; and otherwise, that it was Mr. Sansome’s company, Financial Consultants Limited, if anybody, who should have sued Mr. Sheppard, not Mr. Sansome. It dismissed Mr. Sansome’s application for

summary judgment and ordered Mr. Sansome to pay Mr. Sheppard solicitor and client costs to be taxed. Order [ 88 ] In the result, I order that: 1. Scott Sheppard’s application for judgment for

summary trial is allowed and Garry Sansome’s claim is dismissed. 2. Garry Sansome’s application for

summary judgment is dismissed. 3. Garry Sansome pay Scott Sheppard’s costs to be taxed on a solicitor and client basis. _____________________________ Garrett Handrigan Justice