Synergy Counselling v. Dunvegan Enterprises Date:, 2013 BCPC 101

Citation: Synergy Counselling v. Dunvegan Enterprises Date: 20130506 2013 BCPC 0101 File No: 38563 Registry: Kamloops IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: SYNERGY COUNSELLING ASSOCIATES LTD. CLAIMANT AND: DUNVEGAN ENTERPRISES LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE S.R. HARRISON Appearing for the Claimant: Ms. C. Schell Appearing for the Defendant: Ms. L. Moulton Place of Hearing: Kamloops , B.C. Date of Hearing: July 23, 24, October 31, 2012 and January 17, 2013 Date of Judgment: May 6, 2013 A corrigendum was released by the Court on May 6, 2013. The corrections have been made to the text and the Corrigendum is appended to this document.

1. Introduction [ 1 ] The Claimant, Synergy Counselling Associates Ltd. (“Synergy”), was formerly Celeste Schell Counselling and Consulting Ltd. (“Schell Counselling”). References to Synergy or Schell Consulting are references to the same company. Celeste Schell is the representative of the Claimant in this proceeding and an owner. [ 2 ] The Defendant, Dunvegan Enterprises Ltd. (“Dunvegan”), is owned and represented in this proceeding by Lorraine Moulton. Ms.

Moulton is an experienced clinical counsellor and has been operating the Kamloops Centre for Therapy (“KCT”) as a business for many years through Dunvegan. [ 3 ] This action is between Synergy and Dunvegan. Neither Ms. Moulton nor Ms. Schell are parties to this action in their personal capacities. References to the Claimant and the Defendant in this judgment are references to the corporate parties to this action and not to the individuals representing them. [ 4 ] In a civil action the burden of proving a claim or counterclaim, as the case might be, lies upon the party making it.

The standard of proof required to establish any claim or counterclaim is that of a balance of probabilities. If a party cannot establish the element of its claim on that basis, the claim must fail. 2. Background [ 5 ] For years KCT has provided counselling to clients through counsellors working out of the KCT offices in Kamloops. Ms. Moulton gave evidence that she has had seven counsellors working at KCT at various times.

The services provided by KCT counsellors are paid for by the client directly or by third party payers, generally employers or insurance providers. [ 6 ] By 2007, having completed her studies, Ms. Schell was new to the counselling profession. She became a part-time clinical counsellor with KCT. Ms. Schell was also employed as a social worker with the Ministry of Children and Family Development, a position which she maintained throughout 2008 while working part time with KCT. By March, 2009, Ms. Schell had left her position at the Ministry to work solely with KCT in her personal capacity. [ 7 ] Ms.

Schell gave evidence that Ms. Moulton subsequently encouraged her to form a company. Ms. Moulton said she did not recall doing so. In any event, in January, 2009, Ms. Schell incorporated Schell Counselling. At the end of 2010 the company was renamed Synergy. [ 8 ] Starting in late 2008 and continuing into the spring of 2010, Ms. Moulton and Ms. Schell discussed a buy-in to KCT by Ms. Schell. Ms. Moulton and Ms. Schell were unable to reach an agreement on a buy-in. [ 9 ] By late spring, 2010, Ms. Schell had determined that she would end the connection with KCT to pursue other opportunities. In July 2010, Ms.

Schell advised Ms. Moulton that she was considering terminating the relationship with KCT. In August, 2010, Ms. Schell negotiated a lease of new premises for Synergy. The Claimant took possession of those premises October 1, 2010. [ 10 ] On or about September 15, 2010, Ms. Schell gave notice to Ms. Moulton that the contractual relationship between the parties would be ended in time for the Thanksgiving holiday on October 11, 2010. There is no issue taken as to the sufficiency of the notice. [ 11 ] The Claimant set up a clinical counselling practice at the new location.

There is an issue as to the Claimant conducting business at the new location in the days before the parties’ contractual relationship ended. The Notice of Claim was filed on December 10, 2010. 3. The Pleadings A. Notice of Claim [ 12 ] The Claimant Synergy alleges that it contracted with the Defendant Dunvegan to provide clinical counselling services. These services were provided up to October 10, 2010 by Ms. Schell to clients of KCT, the counselling business owned and operated by the Defendant.

The Claimant says that it was not paid for all the services provided to KCT clients and seeks $12,152.19, plus court fees, less any amounts owing by the Claimant to KCT, including Yellow Pages costs. [ 13 ] A further claim for unpaid HST was abandoned by the Claimant during the trial. B. Reply and Counterclaim [ 14 ] In the Reply, the Dunvegan has pleaded that Synergy’s invoices were only to be paid after Synergy had paid a share of unspecified office expenses, which share had not been paid.

The Defendant valued these unpaid expenses at $5,000.00 and counterclaimed for that amount. [ 15 ] The Defendant has also alleged that while the Claimant worked for the Defendant, the Claimant conducted a similar business at a different location, contrary to the terms of their agreement. The Defendant claims damages in the amount of $10,000.00 calculated as

40% of the Claimant’s revenue earned off-site while the Claimant was working for the Defendant. [ 16 ] At trial, the Ms. Moulton submitted that Defendant was entitled to 40% of the Claimant’s earnings after the termination of the contractual relationship as it was asserted that the Claimant had “stolen” the Defendant’s practice. This was claim was argued though not expressly pleaded. [ 17 ] The Defendant pleaded that the Claimant had wrongfully removed client files from KCT and the Defendant seeks unspecified damages for that removal. The Defendant said further that Ms.

Schell had wrongly solicited KCT clients to leave KCT for the Claimant. C. Reply to the Counterclaim [ 18 ] In the Claimant’s Reply to the Counterclaim, Synergy denied there was any agreement that it would work for Dunvegan only, or that damages were payable to Dunvegan. Synergy submitted that client files removed from KCT were not taken wrongfully, but were the Claimant’s responsibility to maintain and to ensure confidentiality.

With respect to unpaid office expenses, the Claimant agreed that the Claimant’s share of Yellow Pages expenses to December, 2010 could be set off against monies owed the Claimant by the Defendant. D. Allegations of Fraud and Theft Not Pleaded [ 19 ] During the trial the Defendant alleged that that the Claimant had committed theft and fraud by diverting third party payments from KCT to the use of the Claimant or Ms. Schell personally. These significant claims and others made at trial were not set out in the Defendant’s counterclaim but were only raised by Ms. Moulton during the trial itself.

The Defendant did not at any point apply to amend the Counterclaim to include a claim for fraud or theft. [ 20 ] Actions are defined by their pleadings. Parties should not be called upon to meet one case in the pleadings and an entirely separate case when they come to court. As Low, J.A. stated for our Court of Appeal in Adams Lake Indian Band v. Lieutenant Governor in Council, 2012 BCCA 333 at paragraph 63 : “Pleadings define the issues before the court and the inquiry by the court should be limited thereby.” [ 21 ] This Court is also guided by the principles set out in s. 2 of the Small Claims Act : 2

(1) The purpose of this Act and the rules is to allow people who bring claims to the Provincial Court to have them resolved and to have enforcement proceedings concluded in a just, speedy, inexpensive and simple manner.

(2) Subject to this Act and the rules, in conducting a hearing the Provincial Court may make any order or give any direction it thinks necessary to achieve the purpose of this Act and the rules. [ 22 ] I might have been inclined to dismiss the unpleaded claims but for two features of the case. Firstly, both parties fully addressed these allegations in evidence and in argument. There has been no prejudice to the Claimant. Secondly, these serious allegations seem to be at the heart of the dispute between the parties and the principals.

To the extent that a decision can be given on the merits of the case, justice will be better served. [ 23 ] For those reasons, and bearing in mind s. 2(1) of the Act , I will address the merits of these allegations in this judgment. 4. The Terms of the Contract [ 24 ] The agreement under which Ms. Schell provided counselling services to KCT clients was not initially reduced to writing. However, on October 4, 2007, Ms. Moulton drafted a memorandum which, the parties agree, set out an understanding between Ms. Moulton for KCT and Ms. Schell in her personal capacity. Ms. Moulton and Ms.

Schell are both agreed that the memorandum reflected at least in part their understanding at that time. [ 25 ] The memorandum included expressions to the following effect: 1. Ms. Schell commenced as an associate of Kamloops Centre for Therapy on August 26, 2006. 2. Ms. Moulton was to provide suitable referrals to Ms. Schell as referrals became available. Ms. Moulton would also be available to consult with Ms. Schell where possible. 3. The parties would divide equally the fees collected for the first 15 clients seen by Ms. Schell each month. Ms.

Schell’s percentage would increase to 55% for 16 to 20 clients seen and rise to 60% of fees received for 21 clients or more. 4. Ms. Moulton would be responsible for all overhead, including rent, maintenance, office equipment as well as bookkeeping and

reception staff. 5. Ms. Schell would actively promote her practice and be responsible for her own supplies, advertising and her share of Yellow Pages marketing costs. [ 26 ] Ms. Moulton gave evidence that Ms. Schell started with KCT in August, 2007, rather than 2006 as reflected the memorandum. [ 27 ] While the parties to this action are agreed that there was a contract relating to the clinical counselling work performed by Ms.

Schell at KCT, they are not entirely agreed as to the terms of the contract beyond those set out in the memorandum of October 4, 2007, or indeed who the contracting parties were after January, 2009. [ 28 ] Neither are the parties agreed as to whether the contract restricted the Claimant from competing with the Defendant once the contract ended. [ 29 ] I will deal with these questions in turn. A. Who Were the Parties to the Contract? [ 30 ] Ms. Schell gave evidence that in 2009 Schell Consulting stepped into her place, contractually speaking, at the suggestion of Ms.

Moulton and accordingly with the agreement of the Defendant. The result was, Ms. Schell said, that Schell Consulting assumed her rights and obligations under the contract. [ 31 ] Ms. Moulton gave evidence to the effect that she could not recall suggesting that Ms. Schell should incorporate. She was quite clear that Dunvegan had never contracted services with Schell Counselling at all. Ms. Moulton submitted that Ms. Schell was always an employee of the Defendant during her time at KCT. [ 32 ] There are several problems with this submission.

Firstly it is at odds with the Defendant’s own pleadings, which assert that there was a contract between the Claimant and the Defendant, and that this contract was breached by the Claimant. No claim has been brought by the Defendant against Ms. Schell. [ 33 ] If it is the case, as Ms. Moulton now submits, that there was no contract between the parties to this action, both the claim and counterclaim for damages for breach of contract must fail.

No breach of contract can be found where there is no contract between the parties to the action. [ 34 ] Secondly, there was evidence that KCT accepted and paid invoices from the Claimant in 2010. Early each month, the Defendant’s own bookkeeper would prepare an invoice for the month previous for Ms. Schell’s signature. The invoices, drawn on the letterhead of “Celeste Schell Counselling and Consulting,” were then signed by Ms. Schell and submitted to KCT for payment. The GST number for Schell Counselling appeared on the invoice. [ 35 ] Each invoice set out the value of the sessions conducted by Ms.

Schell in the previous month, as evidenced by attachments, plus GST and less the pro-rated cost of the Yellow Pages advertisement. [ 36 ] The invoice for September 9, 2010 contained the bookkeeper’s annotation that the net amount claimed for August had been paid the same day by cheque, with the cheque number noted. There was no evidence of any deductions made for employment insurance, Canada pension or income tax for either Ms. Schell or Schell Counselling.

It is clear that Schell Counselling was responsible for remitting GST and other taxes and levies. [ 37 ] Although the invoices exhibited omitted the letters “Ltd.” from the letterhead, I’m satisfied that the reference to “Celeste Schell Counselling and Consulting” on the invoice was a reference to the Claimant “Celeste Schell Counselling and Consulting Ltd.” and that this was understood by all concerned. It was not, I’m satisfied, merely an invoice from Ms. Schell in her personal capacity. [ 38 ] I accept the evidence of Ms.

Schell that she incorporated Schell Counselling at the suggestion of and with the approval of Ms. Moulton. [ 39 ] I conclude that Ms. Schell was not an employee of KCT or Dunvegan, neither was she personally contracted to the Defendant after 2009. I accept the evidence of Ms. Schell that the Claimant company had replaced Ms. Schell as a contracting party in 2009 with the knowledge and consent of the Defendant. B. Did the Contract Include Non-Competition Terms? [ 40 ] Ms.

Moulton, for the Defendant, has asserted that the memorandum of October 4, 2007 was not intended by the parties to be a recitation of all the terms existing under the agreement. Ms. Moulton gave evidence that there were other terms, unwritten but expressly agreed by the parties. For example, Ms. Moulton said, she guaranteed Ms. Schell an income of at least $3,000.00 per month when Ms. Schell first began working full time at KCT. This assertion was not challenged by the Claimant. [ 41 ] More significantly, Ms.

Moulton said that although there was nothing set out in writing on the point, it was well understood between herself and Ms. Schell that the Claimant would work only for KCT and would not leave to set up in competition to KCT.

[ 42 ] Ms. Moulton was emphatic that the parties had agreed to a non-competition provision. However, Ms. Moulton was not able to set out the dates, times or circumstances of any conversations with Ms. Schell in which any non-competition terms had been discussed let alone agreed. [ 43 ] The specifics of the alleged non-competition agreement are unknown, even on Ms. Moulton’s evidence. She said nothing of the terms of the alleged non-compete provisions.

There was no evidence given of the duration of the alleged agreement, nothing as to the scope of the practice restrictions, or whether they applied to a particular practice activity or to a defined geography or both. There was no meaningful evidence as to whether the terms included a non-solicitation clause respecting either KCT clients or third party payers. [ 44 ] Ms. Schell denied there had been any agreement on exclusivity or non-compete provisions and said that such restrictions had never been discussed with her. There were no such restrictions reflected in the October 4, 2007 memorandum. Ms.

Schell pointed out she had been engaged with and continued with other employment when she started work with KCT, without objection from the Defendant. [ 45 ] Ms. Schell also submitted that there would have been no reason for her to agree to such a fundamental restriction on her ability to work professionally and earn a living after the initial terms with Dunvegan had been settled. Had such an important restriction been agreed at any time, she said, it would surely have been documented. [ 46 ] I accept the evidence of Ms. Schell in this regard.

There is no persuasive evidence that the parties agreed to terms that the Claimant would work exclusively for the Defendant or that the Claimant would not compete with the Defendant after the contract ended. The issue of exclusivity is addressed in more detail below. 5. The Claimant’s Claim for Unpaid Services and the Defendant’s Allegations of Theft and Fraud [ 47 ] The Claimant has pleaded that the Defendant failed to pay for services rendered by the Claimant to KCT from January through October 2010 and claims damages. [ 48 ] Ms.

Schell gave in evidence that the Claimant had not been paid for 212 client sessions conducted by Ms. Schell during 2010, 99 of them in September, 2010. These sessions represent a total value of $22,485 in work done. The Defendant arrived at this figure after providing in evidence a list of clients seen by Ms. Schell, the dates she saw them, the hourly rates charged and, where a third party was to be billed for the session, the name of that party. [ 49 ] The Claimant claims 60% of the funds received by the Defendant as being due to the Claimant under the terms of their agreement.

Assuming the above-mentioned funds were received by KTC, the 60% share due to the Claimant would be $13,491. The Claimant asserts that the Defendant should be able to provide a proper accounting to show what monies were received by the Defendant and what, if any, were not. [ 50 ] The Claimant also claimed HST for July, August and September 2010. The amount said to be owed was $2,584. In the course of the trial, Ms.

Schell accepted that HST was not outstanding and abandoned this portion of the claim. [ 51 ] The Claimant also agreed the claim should be offset by $1,334, representing the Claimant’s share of the Yellow Pages advertising for the period September through December, 2010. [ 52 ] At times, the Defendant did not take much issue with the evidence as to clients seen by Ms. Schell, the value of the work done, or the third party payers responsible for those session payments. The Defendant agreed that the proportionate amounts owed to the Claimant were payable when the payments had been received by KCT.

The Defendant’s case was that these third party accounts, worked on by Ms. Schell, still showed as unpaid by the third party payers and were outstanding on KCT books. In the course of the trial the Defendant alleged that the third party payers had paid these accounts, but the Claimant, by theft or fraud, had taken the money. [ 53 ] In trial the Defendant attempted to demonstrate that the $22,485 worth of work performed by Ms. Schell in 2010 had not been collected by KCT and represented a loss to KCT of $9,360.

At the October 31, 2012 trial continuation the Defendant recalculated these outstanding accounts to be worth $15,581. This would have resulted in earnings of $6,219 to the Defendant, Ms. Moulton said, had they not been appropriated by the Claimant. Ms. Moulton’s evidence on these points was at times difficult to follow. She reminded the court that she is not a bookkeeper or accountant. [ 54 ] The Defendant said that the existence of such large outstanding accounts were unprecedented at KCT.

The Defendant submitted that the only reasonable conclusion to be drawn from the evidence was that these third party payments had been made by the payers, but that the Claimant and Ms. Schell had dishonestly diverted the payments to their own use rather than remitting them to KCT. The Defendant alleged this had occurred over a broad period from January 7, 2010 until October, 2010. [ 55 ] Fraud and theft are serious allegations and are to be proven by the Defendant on a balance of probabilities. It will suffice to say that fraud is

an act of deceit, falsehood or dishonesty which results in the taking or risking of another’s property, money or valuable security. Theft occurs where a person takes or converts anything to his or her own use, fraudulently and without colour of right, with intent to deprive the owner of the thing of it, or to deprive a person who has an interest in the thing of that interest. Neither will arise where a person takes a thing honestly and in good faith believes that they have a lawful claim to the thing taken. [ 56 ] It will be necessary to examine the evidence. A.

Changed Billing Instructions by the Claimant [ 57 ] The Defendant alleged that the Claimant took money due to the Defendant in part when Ms. Schell changed account payment instructions for some third party payers and redirected payments from the Defendant’s account to the Claimant’s. These changes occurred in the weeks prior to the end of the business relationship between the parties and not at the start of 2010.

[ 58 ] Ms. Schell’s evidence was that some of the third party payers required that invoices be submitted in the name of the clinician doing the work rather than the business name and that where that was required she had done so. She denied that she had appropriated any funds to her own use or that she had attempted to conceal payments from Ms. Moulton.

To the contrary, she said, KCT records showed the session times recorded, the invoices billed, the name under which the accounts had been submitted, and the bookkeeper’s notations showing payments made and disbursement of the funds received. [ 59 ] I will examine events with two third party payers said by the Defendant to demonstrate fraud or theft on the part of the Claimant.

i) Solareh [ 60 ] Solareh, also known as Poseaction, was a third party payer whose clients were contracted to be seen only by Ms. Schell at KCT. Ms. Schell stated that at the beginning of October, 2010, with the parties’ contract about to end, she changed payment instructions to Solareh so that payments were no longer to go to KCT. Ms. Schell pointed out that her instructions to Solareh were only accepted because the Solareh contract was solely in her name, not that of Ms. Moulton or KCT. [ 61 ] Ms.

Schell agreed that the affected payments included some Solareh clients seen by her at KCT to which the Defendant would have been entitled to the agreed 40% share of fees. However, changing the payment directions was a necessary and inevitable step as the parties were ending their business relationship. [ 62 ] According to Ms. Schell, whose evidence I accept in this regard, it was well understood that an accounting would have to be done between the parties in accordance with the terms of their agreement.

The KCT records, including the appointment diaries, client session times, hourly rates and account invoices were all maintained in the Defendant’s offices and at all times available to the Defendant. [ 63 ] The directions by Ms. Schell changing the Solareh payment instructions do not in these circumstances amount to evidence of an intention to steal from or defraud the Defendant. No dishonesty or subterfuge has been proven in respect of the Claimant’s Solareh accounts. ii) Worksafe BC [ 64 ] While the Claimant was associated with KCT, the Claimant also provided mental health treatment services to injured workers.

This work was performed through the Defendant’s contract with Worksafe BC, the Workers’ Compensation Board. [ 65 ] However, on August 20, 2010 the Claimant entered into a new contract with Worksafe BC to provide those same services. That contract was to take effect September 15, 2010. [ 66 ] On that date, Ms. Schell provided Ms. Moulton with a copy of the contract. This was the same day Ms. Schell gave notice that the Claimant would be terminating the connection with KCT and the Defendant. [ 67 ] Ms.

Moulton asserts that this evidence demonstrates deceitful conduct by the Claimant and an intention to steal monies from the Defendant. She puts this on the basis that the Worksafe BC contract was entered into and was to take effect while the Claimant was still providing services to the Defendant. [ 68 ] Ms. Moulton pointed in particular to an entry for September 27, 2010 in Ms. Schell’s appointment book regarding a client session: “Celeste to bill Worksafe BC directly and pay to KCT 40%.” Ms.

Schell agreed that this was in effect an advice to the KCT bookkeeper not to bill Worksafe BC, a course which had not been previously agreed with Ms. Moulton. [ 69 ] Ms. Moulton’s characterisation of this direction as

an act of dishonesty by the Claimant, or Ms. Schell personally, are not a warranted or reasonable

interpretation of this evidence. The fact that Ms. Schell provided Ms. Moulton with a copy of the new Worksafe BC contract was

an act of disclosure, not evidence of deceit. [ 70 ] Similarly, the open direction to the bookkeeper on how the September 27 file would be billed may not have accorded with Ms. Moulton’s wishes, but it related to funds over which both parties had an interest. [ 71 ] There was no persuasive evidence of an attempt at concealment by the Claimant or an attempt to deprive the Defendant of money, other than that owed to the Claimant under the terms of their agreement.

No doubt the timing of the initiation of the new Worksafe contract complicated the accounting, but the allegation of theft or fraud by the Claimant or Ms. Schell is not made out. B. Other Evidence of Dishonesty [ 72 ] The Defendant asserted that the Claimant had diverted funds from third party payers from January through October, 2010. Ms. Moulton was at a loss to explain how these funds had been diverted to the extent and over the time alleged. She pointed to what she characterised as the secrecy and subterfuge employed by Ms.

Schell in making arrangements in preparation for the Claimant’s departure from KCT in the months before the business relationship ended. These undisclosed arrangements included the involvement of a new business plan with a new partner and the lease of new premises, none of which were discussed with Ms. Moulton. Ms. Moulton drew a connection between these behaviours, and the monies believed to be missing, and concluded that Ms. Schell must have taken them. [ 73 ] The evidence presented by Ms.

Moulton as to which third party accounts were unpaid and to what extent was frequently confusing and at times in plain and admitted error. Ms. Moulton asserted, by way of one example, that Solareh made no payments at all

to KCT from June 2010 onwards. Ms. Schell produced details of a bank transfer from Solareh to KCT on August 3, 2010 in the amount of $2,312.00 representing fees for clients seen by Ms. Schell in June and July, 2010. Ms. Moulton then admitted that these funds had indeed been received by KCT. [ 74 ] Evidence adduced by the Defendant was not always helpful to the Defendant’s case. Eleven KCT invoices worth $1,375.00 were presented for work done and billed to the Autism Society. These invoices were said by Ms. Moulton to demonstrate that someone, she presumed Ms.

Schell by way of direction to the KCT bookkeeper, had caused the Autism Society to issue cheques to Ms. Schell personally rather than KCT. Ms. Moulton was quite clear that KCT had not received any of these funds. [ 75 ] In cross examination however, Ms. Schell drew to Ms. Moulton’s attention writing on some of the invoices. Ms. Moulton identified this writing as belonging to the KCT bookkeeper. These pencilled annotations suggested that the invoices had indeed been entered and credited in the KCT bookkeeping system.

For example, one of the invoices showed the bookkeeper’s notes going down the page: “Paid and posted”, “Pay to Celeste” with action dates noted. [ 76 ] Ms. Moulton had no explanation for the existence of these annotations other than commenting that it was suspicious that Ms. Schell knew so much about the KCT bookkeeping system. The bookkeeper’s entries on these KCT business records strongly suggested that the invoiced amounts were received by KCT, posted to the appropriate ledger and the agreed share paid out to Ms. Schell by KCT. [ 77 ] Remarkably, the Defendant did not call the KCT bookkeeper to give evidence.

The bookkeeper might have been expected to explain KCT billing and bookkeeping, which accounts had been paid, which if any were outstanding, and whether any money was actually missing or unaccounted. [ 78 ] Ms. Moulton explained the absence of the bookkeeper’s evidence by saying she had been dismissed for incompetence after Ms. Schell had left KCT offices. When the accounts said to be outstanding were shown to have been marked “paid” and “posted” by the bookkeeper, Ms. Moulton responded, “She was not able to handle this and was dismissed.” When asked whether this might account for any money missing, Ms.

Moulton responded “Perhaps.” [ 79 ] Ms. Schell later asked Ms. Moulton how, in light of her belief that monies were missing and the bookkeeper was dismissed for incompetence, she could accuse Ms. Schell of being a fraud and a thief. Ms. Moulton answered, “I don’t know where the money is.” [ 80 ] This entire passage of evidence did nothing to encourage confidence in the accuracy or reliability of KCT bookkeeping. Ms. Moulton attempted to lead evidence as to what she was told by her accountant and third party payers.

These hearsay statements were not admissible in evidence. [ 81 ] Neither was the Defendant’s accountant called to give evidence, though this individual might have been expected to cast light on the state of KCT accounts in a way Ms. Moulton was not capable of explaining. [ 82 ] The Defendant called no witnesses from any of the third party payers. These witnesses could have spoken to the issue of whether the pertinent accounts were outstanding or paid, and if paid, when and to whom. [ 83 ] In assessing the evidence heard, I must also acknowledge that Ms. Moulton’s evidence was not always straightforward.

In relation to a document prepared by her with respect to work performed by Ms. Schell in 2009, Ms. Moulton had noted and stood by her comment “All referrals from me at KCT.” She was clearly asserting that all the work Ms. Schell had performed that year had been referred by Ms. Moulton and that no client referrals had been generated by Ms. Schell. [ 84 ] In cross examination, however, Ms. Moulton agreed that another document produced by the Defendant listed all the clients seen by Ms. Schell in 2009, by name and hours billed. This document attributed 40% of that work to referrals originating from Ms.

Schell, not from Ms. Moulton or KCT at all. Ms. Moulton had no satisfactory explanation for this clear contradiction, other than to say “The figures are not accurate.” [ 85 ] I found Ms. Schell’s evidence to be generally more reliable. Several times Ms. Schell demonstrated a better grasp of KCT’s books than Ms. Moulton did. I have mentioned that Ms. Moulton found that suspicious. When shown errors or contradictions in her

interpretation of what the KCT books purported to show, Ms. Moulton could only reiterate, “I’m not a bookkeeper or an accountant.” The absence of the bookkeeper or the accountant was telling. [ 86 ] The evidence presented by the Defendant regarding KCT accounts, what was paid and what was not, and whether monies were missing was changeable, confusing and unreliable. The Defendant has not come close to establishing that the Claimant or Ms. Schell stole from or defrauded the Defendant in any regard. 6. Other Aspects of the Defendant’s Counterclaim A.

Damages for Work Performed by the Claimant Outside the Terms of the Contract [ 87 ] The Defendant has counterclaimed for 40% of the revenue earned by the Claimant at the Claimant’s new business location while the Claimant was still contracted to the Defendant. The Defendant has asserted that it was an express or implied term of the contract that the Claimant would provide professional services exclusively through the offices of KCT during the period of the contract. [ 88 ] Ms. Schell gave evidence that after she gave notice to Ms.

Moulton in mid-September, 2010 to wind up the Claimant’s involvement with the Defendant by Thanksgiving, Monday, October 11, 2010. She said she worked in September seeing clients, closing files and ending her involvement with KCT clients.

[ 89 ] The Claimant took possession of the new business premises on October 1, 2010. Leasehold improvements were completed and the space became available to the Claimant on Wednesday, October 6, 2010. Ms. Schell said she started seeing clients in the new space that day, October 6, and on the two days immediately following. Ms. Schell agreed that these three days preceded the end of the Claimant’s contractual relationship with the Defendant. [ 90 ] Ms. Schell’s said that she believed there was nothing in the contract between the parties which would have prevented her from working elsewhere during this period.

Indeed there is no evidence that such a term was expressly discussed or agreed. Nothing on the point was evidenced in writing. Ms. Schell, as mentioned above, had been providing professional services to the Ministry at the time she was first contracted to the Defendant. [ 91 ] Following on from the findings above regarding the terms of the contract, the Claimant was contracted to the Defendant to provide counselling services to the clients of KCT. The Defendant has not established that there was an agreed term that this would be an exclusive arrangement.

This was not an employer-employee relationship where an exclusive relationship might be more easily implied. The Defendant has not met the burden of proving that the contract between the parties was exclusive or that it must have prohibited the Claimant from providing professional services except through KCT. [ 92 ] Accordingly the Defendant’s claim for 40% of the Defendant’s earnings at the new location prior to October 11, 2010 is not established and is dismissed. B.

Wrongful Removal of Client Files [ 93 ] The Defendant has counterclaimed for damages for what is alleged to be the wrongful removal of KCT client files by the Claimant. Ms. Schell agreed that on leaving, she removed the files upon which she had worked at KCT. She said she did so in order to maintain the confidentiality of the files and in particular the session notes she placed on the files. [ 94 ] It is clear that the parties did not discuss or agree terms as to what would become of the files when they ended their working relationship.

Both parties have asked for direction from the court as to who should hold and control the files concerned. [ 95 ] The Defendant is of the view that the files were part of the KCT business and were therefore owned by the Defendant. They were not the Claimant’s to remove. [ 96 ] It may be helpful to review what information the files contained. Each file held a file-opening form headed “Kamloops Centre for Therapy.” This heading was printed above Ms. Moulton’s name and formal qualifications. The opening form recorded the client’s personal and contact information.

Additional space was available for a brief description of the client’s presenting problem, the counsellor’s brief assessment and the client’s credit card information, where provided. Some of this information was copied into accounting records to allow for billing. [ 97 ] In the file opening documents, clients were asked to acknowledge in writing the therapist’s obligations regarding confidentiality and the limits of confidentiality, the manner of payment and the policy on appointment cancellations. [ 98 ] The

section relating to confidentiality commenced: As your therapist, I agree to hold in confidence the information shared within each session. [ 99 ] The document was then countersigned by the therapist concerned. Ms. Schell considered this declaration to be an assumption of personal responsibility for the records by the therapist and not merely an acknowledgement as an agent on behalf of KCT. [ 100 ] Ms. Schell gave evidence that beyond the file opening documents, these files contained for the most

part clinical notes she took of her sessions with clients. The files were held at the KCT office in a locked filing cabinet to which Ms. Schell alone held the key. [ 101 ] Ms. Schell took the view that she and the Claimant had a greater responsibility to maintain the confidentiality of the files than did KCT, the Defendant or Ms. Moulton. Ms. Schell said she tried to inform herself of the issues involved, including a discussion had with the solicitor to the BC Association of Clinical Counsellors. [ 102 ] I was provided by the Claimant with a helpful commentary authored by George K.

Bryce, legal counsel to the BCACC: Restrictive Covenants in Shared Office Contracts, published by the BCACC July 8, 2011 . [ 103 ] Ms. Schell said that she did not invite input from KCT clients on file storage as she did not want to appear to be soliciting those clients. On departing KCT, Ms. Schell removed the files to the new offices of the Claimant.

She said that any requests by former KCT clients that their files be returned to KCT have been honoured. [ 104 ] The Defendant expressed the view that the Claimant took the files for an improper purpose and that it was part of the Claimant’s attempt to “steal” a counselling practice from the Defendant. [ 105 ] Both parties asserted a primary responsibility for the protection of personal information contained in the files under the provisions of the Personal Information Protection Act , [ SBC 2003] Ch. 63 .

Both parties referred to provisions in the Act. [ 106 ] The purpose of the Act is found in s. 2: 2 The purpose of this Act is to govern the collection, use and disclosure of personal information by organizations in a manner that recognizes both the right of individuals to protect their personal information and the need of organizations to collect, use or disclose personal information for purposes that a reasonable person would consider appropriate in the circumstances.

[107] Sections 4 and 34 provide as follows: 4

(1) In meeting its responsibilities under this Act, an organization must consider what a reasonable person would considerappropriate in the circumstances.

(2) An organization is responsible for personal information under its control, including personal information that is not in the custody ofthe organization. …. 34 An organization must protect personal information in its custody or under its control by making reasonable security arrangementsto prevent unauthorized access, collection, use, disclosure, copying, modification or disposal or similar risks. [108] The Act requires that organizations exercise reasonable care in fulfilling their obligations with respect to the protection ofpersonal information under their control.

The Act, however, does not assist in determining who, in these circumstances, should exercisethat control. [109] In McInerney v. MacDonald (SCC), [1992] 2 S.C.R. 138 the Supreme Court of Canada affirmed the commonlaw position that although a medical file itself may be owned by a physician, the patient has a continuing equitable interest in themedical information contained within it. A patient, as a general rule, is entitled to access the medical information in her records and toinspect and copy that information.

This broad principle will have application to other clinical records, such as the counselling recordsconcerned here. [110] It seems clear that clients who attended the KCT offices to obtain counselling services, signed KCT file opening documents,paid accounts rendered to them by KCT and received KCT receipts, no doubt understood themselves to be clients of KCT rather than ofthe particular counsellor they saw.

These clients would reasonably have expected that their files would remain within the KCT offices orotherwise under KCT control unless other arrangements had been agreed. [111] I’m satisfied that these client files properly belonged to KCT and not to the individual therapist, notwithstanding the therapist’sobligation to hold information in confidence.

That personal undertaking did not by itself confer ownership or a right to permanentpossession of the file by the therapist concerned. [112] As for the requirements of the Personal Information Protection Act, there is no suggestion that the Defendant was not meetingits obligations under the Act. On the assumption that the Claimant and Ms.

Schell also had obligations under the Act, those obligationswould have been reasonably discharged by leaving the KCT files in the custody and control of their owner, the Defendant. [113] In the absence of any agreement between the parties or their clients regarding file storage, there will be an order that all filesremoved from KCT offices by the Claimant shall be returned to KCT, provided that the Claimant may retain the files of those KCTclients who have since become clients of Synergy or who have otherwise requested in writing that Synergy maintain their records. [114] The Defendant has claimed unspecified damages under this head.

However as no loss to the Defendant has been proven, therewill be no order for damages. C. Improper Transfer of Clients [115] In further unpleaded allegations, the Defendant accused the Claimant of “stealing” 50 active clients. This followed upon Ms.Schell’s evidence that about 50 clients seen by her at KCT followed her to the Claimant’s new offices. It will hardly be surprising thatmany clients, having developed a rapport with a counsellor, will prefer to follow that counsellor to a new office. Indeed Ms.

Moultonagreed that the Defendant would have no claim in this regard if former clients of KCT had decided of their own volition to follow Ms.Schell to her new place of work. [116] Ms. Schell denied that she had solicited KCT clients to move with her to the new Synergy premises. There was no evidence tothe contrary. [117] No evidence was called to establish that any of former KCT clients had been solicited, seen by Ms.

Schell without their consent,seen as a result of improper pressure, or seen in violation any agreement between the parties. [118] The Defendant’s unpleaded claim for damages, said by the Defendant to be worth 40% of the value of the Claimant’s work afterleaving KCT, up to the jurisdictional limits of this court, is unsupportable and is dismissed. 7. Conclusion [119] The Claimants claim for services provided but not paid by the Defendant is allowed.

In the absence of any convincing evidencebefore me that the amounts billed for work done by the Claimant at KCT were not paid to the Defendant, the Claimant’s is entitled to it’scontractual share of those billings, being $13,491, less $1,334 for Yellow Pages fees, for a net amount $12,157. [120] The Claimant is also entitled to filing, service and search fees in the amount of$167.68 and pre-judgment interest at theappropriate rates from December 10, 2010 until the date of judgment.

[ 121 ] There will also be an order that all files removed from KCT offices by the Claimant shall be returned to KCT, provided that the Claimant may retain the files of those KCT clients who have since become clients of the Claimant or who have requested in writing that the Claimant maintain their records. [ 122 ] The Defendant’s counterclaim is otherwise dismissed. [ 123 ] There will be an order that the exhibits entered herein are to be sealed until further order of this court or another court of competent jurisdiction.

This is necessary in order to protect the confidentiality of client information. [ 124 ] Absent any application for a payment schedule, this judgment will be payable forthwith. _________________________ S.R. Harrison Provincial Court Judge CORRIGENDUM: RELEASED MAY 6, 2013 [1] Please note the corrected change to Page 28 of the original Reasons for Judgment issued May 6, 2013 as per the following: C. Improper Transfer of Clients