Gerald Zatylny - v. -, 2016 SKPC 060

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2016 SKPC 060 Date: April 27, 2016 File: 264/15 Location: Regina _____________________________________________________________________________ Between: Gerald Zatylny - and - Kramer Ltd. and Timothy Kramer Self Represented For the Plaintiff Ryan Kitzul For the Defendant JUDGMENT P.

DEMONG, J Introduction [ 1 ] The plaintiff brings this action against the defendants, jointly and severally, seeking the sum of $9,996.58 which he says constitutes a sales commission due and owing to him but for which he was not paid. [ 2 ] The defendants deny that any sales commission is due and owing to the plaintiff and put him to the strict prof thereof. [ 3 ] The defendants also maintain that there is no legal basis upon which Tim Kramer should be named as a party defendant and that any claim that the plaintiff may have should be brought only against his employer, Kramer Ltd. [ 4 ] I agree with the defendants on this point.

The plaintiff advised the court that he was prepared to withdraw the claim against Tim

Kramer in his personal capacity at the management portion of the case management conference. Even had he not done so there was noevidence presented to the court upon which I could conclude that Tim Kramer, as an officer, director or shareholder of the corporatedefendant could be held personally liable for any of the actions taken by the corporate defendant.

There is no basis in fact or in law, inthe instant circumstances, to lift the corporate veil. [5] Finally, the defendants maintain that because the plaintiff filed a complaint with the Saskatchewan Employment StandardsBranch, pursuant to The Saskatchewan Employment Act, and because his complaint was investigated and subsequently dismissed, theplaintiff is now estopped from bringing this lawsuit because his claim has already been denied by a statutory body with authority toaddress his claim. As such, they rely on the legal maxim res judicata. [6] Following trial, the defendants withdrew the estoppel defence.

It was right that they did so. Had they not, I would have concludedthat the investigation undertaken by the investigating officer under that legislation, and the conclusion that was reached following theinvestigation was not proven to be a final decision on the matter under investigation.

Because the finality of a decision of a competentauthority is one of the essential requirements to support a finding of res judicata, (as discussed in Grandview v Doering (1976), (SCC), 2 SCR 621), this defence would not, in any event, have succeeded. [7] Therefore, while the self-represented plaintiff’s statement of claim is less than exacting in defining the nature of the cause ofaction, this is a claim for recovery of a commission which allegedly should have been paid under a contract of employment; a claimwhich is predicated on an allegation that the employer breached the employment contract by failing to act in good faith in quantifyingand allowing a commission for services rendered and for which a stated commission had been promised.

The defence is a simple denialthat the contract was breached, and in the alternative, a demand that the plaintiff prove the nature and extent of his damages. Evidence and Findings of Fact [8] The plaintiff is currently 67 years of age. He has spent about 25 years in the agricultural industry focusing on the sale and serviceof agricultural implements.

In or about December of 2008, he obtained employment with Kramer Ltd., which was, at that time, a ratherlarge corporation which carried on the business of, among other things, selling new and used industrial and agricultural equipmentthroughout Saskatchewan. [9] The plaintiff was hired as an Ag (agriculture) Sales Consultant.

While he had a wage guarantee, it was understood that he wouldearn his income on a commission basis, based on a stated percentage of his employer’s gross profit earned on new and used implementssold by him. [10] The plaintiff was, by all accounts, successful at his job, and in each of the years that he worked at Kramer Ltd. he earnedcommissions far in excess of his minimum guaranteed annual wage. [11] As an Ag Sales Consultant the plaintiff affected sales in three ways. He would sell either brand new equipment or the usedequipment that Kramer Ltd. had on hand.

Alternatively, he would sell new or used equipment in tandem with trade-ins offered byprospective purchasers. The matter that gives rise to the present dispute relates to a sale entered into by the plaintiff in or aboutDecember of 2013, in which he sold new equipment, and took back, in trade, some of the purchaser’s used equipment. [12] In order to appreciate the nature of the dispute, it is necessary to understand the manner in which an Ag Sales Consultant does hisjob, and the manner in which he gets paid.

As an Ag Sales Consultant on commission, the plaintiff would solicit prospective customersin an effort to have them purchase equipment. To be effective at this, the consultant must be familiar with the characteristics not only ofKramer Ltd.’s new and used equipment, but also with a variety of other brands and types of equipment. The sales consultant is alsoexpected to have a relatively good understanding of the value to be ascribed to used equipment, based on its age and general condition.The plaintiff indicated that he had that requisite knowledge, and I have no reason to doubt him on that point.

As I stated, he wasrelatively successful at his job.

[ 13 ] With this knowledge in hand, the sales consultant attempts to make sales. However, before a sale can proceed, the consultant must obtain approval from Kramer Ltd.’s senior management. When a prospective purchaser seeks to purchase new equipment and do so in part by trading in used equipment, the sales consultant is obligated to prepare a conditional sales agreement which identifies the new equipment to be sold and the value of that equipment. The document will then identify the used equipment that is intended to be traded in, and the value of that used equipment.

The value of the used equipment is ascertained by the sales consultant based on his understanding of the prevailing market, his experience in sales, and in discussions with the sales team at Kramer Ltd. Appraisals are prepared on each piece of ‘trade-in’ equipment and these, in addition to the conditional sales agreement are presented to senior management for their consideration. If, upon consideration, senior management feels that there is a likely prospect of netting a gross profit on the combined sale and trade, the sales consultant is given the go ahead to conclude the deal.

The consultant is then paid after a reconciliation of the final costs incurred in the sale. He is paid once the money is in the hands of Kramer Ltd.

He is paid 5% of the gross profit obtained by the company as a result of the deal. [ 14 ] The actual sale and transfer of the equipment may, however, take some time to come to fruition because other conditions are usually required to be met, such as the expected date of receipt of the new equipment from the manufacturer, the date upon which the purchaser wants delivery, financing arrangements and the like. [ 15 ] While the process sounds simple at first, (and I mean that in relative terms) ascertaining the precise amount of commission earned on any given deal is a little more difficult - and that is the crux of this dispute. [ 16 ] In early December of 2013 the plaintiff managed to arrange what he and Kramer Ltd. thought was a significant deal.

A purchaser sought to buy nine pieces of new equipment with a stated value totalling $2,436,000.00. The purchaser wanted to trade in six pieces of used equipment. The used equipment was appraised by the plaintiff with a stated value of $1,796,000.00. After set off of these two amounts, the remaining amount that the purchaser would have to pay equated to (taxes in) $643,882.50. [ 17 ] The plaintiff says that he, together with an employee of Kramer Ltd. named Tony Hadland, presented the sales order to Tim Kramer, who, at the time, was in charge of authorizing sales. The plaintiff says that it was presented to Mr.

Kramer, and Mr. Kramer asked them if they felt that ‘these were good’, which I understand to mean an inquiry into the reasonableness of the value of the ‘trade-in’ equipment and the prospect of a net gross profit being realized on the combined sale and trade. He was assured that they were, and the plaintiff says that Mr. Kramer okayed the sale, and that he in fact signed a ‘New Equip Sales - With Trade’ sheet. This document will be explained shortly, but the assertion by the plaintiff is that the sheet identified the total commission to be paid to him to be $9,996.58, and that Mr.

Kramer’s endorsement on that sheet was confirmation that he would receive that commission when the sale went through. [ 18 ] The defendant denies that Mr. Kramer would have signed off on a ‘New Equip Sales - With Trade’ sheet at this early date and provides several explanations for this. Unfortunately for the plaintiff, he cannot provide either the original or a copy of that document.

He says that it was provided to him but when he was in the process of resigning from his job with Kramer Ltd. he attempted to locate it and is of the view that it was taken from his office at some point in time. [ 19 ] There was a significant delay between the presentation of the conditional sales agreement and assorted documents to Kramer Ltd. management and the actual sale and transfer of the equipment in question.

I did not hear any specific evidence on why this was so, but the sales contract appears to have been signed by the purchaser on July 31 st of 2014, and the transfer of equipment and payment of the cash balance would have taken place sometime later. A minimum of eight months would have passed between the date of the original appraisals, and the date that Kramer Ltd. having pocketed the proceeds of the sale. [ 20 ] Sometime after the sale went through, the plaintiff was notified that the deal in question actually resulted in a calculation of a net loss to Kramer Ltd. in the sum of -$90,427.77.

As a result, the potential commission was -$4,521.39. That stated, Kramer Ltd. concluded that the plaintiff had worked hard on the deal was therefore prepared to pay the plaintiff a finder’s fee of $2,500.00 in relation to the sale of the new equipment under the deal. This was, according to Mr. Kramer, a fee that would be paid to any employee of Kramer Ltd., salesman or not, if they could bring in a buyer of new equipment.

[ 21 ] The plaintiff was taken aback and sought an explanation. The explanation was that the original valuations that had been provided by the plaintiff for the used equipment were much to high; that senior management, as they had done for many years, conducted their own appraisal and concluded that the value was significantly lower. The plaintiff was presented with a copy of the ‘New Equip Sales - With Trade’ worksheet which showed a true value to the company for the used equipment at a much lower number than what the plaintiff had appraised.

In essence, by the time the deal was finalized, Kramer Ltd. had come to the conclusion that the amount that Kramer could realize for the used equipment on re-sale was significantly lower than that projected by the plaintiff many months earlier. Since Kramer Ltd. would likely not be able to re-sell them for what the plaintiff had factored, the anticipated ‘gross profit for the company’ on the entirety of the deal was a negative number.

Because the commission agreement was predicated on the plaintiff receiving 5% on the net gross profit, the commission payable was a negative number. [ 22 ] The plaintiff’s argument proceeds as follows: 1. He is very good at his job and prior to this sale he had always brought profitable deals to the company. This was uncontradicted at trial. If Kramer Ltd. didn’t compel him to sell at a stated price, his sales were always profitable. 2. His original appraisals identifying a greater value for Kramer on re-sale of the used equipment was accurate, or at least more accurate than Kramer Ltd. management.

In fact, he was never made aware that there was a second appraisal that was undertaken by management on any given deal nor had he ever been alerted to that. In addition, but for a deal falling through for reasons unassociated with his efforts, he could have sold one piece of the ‘trade-in’ equipment for at or about what he had appraised it at, and therefore, by extension, his valuation on all of the used equipment was the more accurate. 3.

Further, not only has he provided evidence to the court to show that another equipment dealership would have supported and accepted his valuations, and paid his commission, Kramer Ltd. has attempted to sell the equipment in question at the very valuation that he ascribed to that equipment. 4.

Presumably therefore, and because Kramer Ltd. was moving out of the agriculture equipment sales business, senior management purposefully reduced the true re-sale value of the equipment so that they could, at some later date, sell this equipment later on at a greater profit and avoid paying the plaintiff a significant commission. 5.

As such, this purposeful reduction adversely impacted on the amount of the commission that he should have received and therefore, Kramer Ltd. has not acted in good faith in its performance of the employment contract, and a breach of its obligation to act in good faith operates to allow the plaintiff to recover the commission ostensibly agreed to. [ 23 ] Tim Kramer and Ralph Schaeffer tendered evidence on behalf of Kramer Ltd. Mr. Kramer is an officer of the company, and Mr. Schaeffer was the manager in charge of the equipment sales for Kramer Ltd.

It was his job to assess the value to be attributed to trade- ins and used equipment and to set prices to determine the worth of the equipment. He did this in concert with two other management staff. [ 24 ] The defendant’s evidence confirms that, in its view, Mr. Zatylny was a good salesman. That stated, the defendant, through Mr. Schaeffer, pointed out that there is often a significant delay between a salesman structuring a deal and the actual sale. In the interim, and in this specific case, Mr. Schaeffer indicated that the market for used equipment had decreased quite rapidly.

In the intervening time between December of 2013 and the fall of 2014, when the deal was finalized, the company’s valuations were significantly lower based on the market conditions. [ 25 ] The defendant also pointed out that the 5% sales commission is not automatically based on the valuations set by the sales consultant. The consultant’s valuations operate as a guide for Kramer Ltd. to determine whether or not there is, at first instance, an opportunity to make a gross profit on the combined sale and trade, and Kramer Ltd. seeks to make a notional gross profit to the company of 12% on any given deal.

The commission is, as all consultants are aware, based on the gross profit that is generated by the deal in question. [ 26 ] Respectfully, I can come to no other conclusion but that the plaintiff is well aware of this arrangement. Mr. Zatylny indicated that

[ 26 ] Respectfully, I can come to no other conclusion but that the plaintiff is well aware of this arrangement. Mr. Zatylny indicated that he had, while in the employ of Kramer Ltd. participated in approximately 500 to 600 sales. Of those, he concedes that in only 10% of the time does he obtain a full commission. In the remaining 90%, he obtains less. The reason for this was made apparent at trial. In this particular business, there are no guarantees. In assessing the profit that may be made in any given deal, the sales price for new equipment is set for the purchaser.

Against that purchase price is the cost to Kramer Ltd. in obtaining the equipment from the manufacturer. The cost valuation may vary based on increased changes in the manufacturer’s price, the cost of delivering the equipment to Kramer, the differential and fluctuating value of the Canadian dollar and other reasons. As a result, the gross profit margin invariably goes down. The same can be said for the depreciating value of used equipment that had been traded in. Therefore, Mr. Zatylny knows, or certainly ought to have known that he would not be guaranteed a full 5% commission on this deal.

I cannot comment on why Mr. Zatylny was unaware of the fact that management might, from time to time, second guess a valuation undertaken months prior to the actual sale. [ 27 ] While Mr Zatylny may have been unaware that senior management often does second guess valuations made by sales consultants, Kramer Ltd. has indicated that there is nothing at all untoward about this practice. It is simply due diligence, and done to ensure that a consultant does not purposefully or by inexperience unreasonably inflate the value of used equipment in order to magnify his or her potential commission.

The court heard no evidence tending to suggest that this was anything other than an accepted and sensible business practice. There was simply no evidence put before the court to suggest that this was not a typical and accepted means by which to fairly evaluate the gross profit of the company - which is, as has been noted, the amount from which all commissions are calculated. [ 28 ] In addition, while it may well have been that Mr.

Zatylny could have sold one of the pieces of used equipment for at or about his own appraisal, the deal fell through, and in any event, one piece is not indicative of the entirety of the equipment in issue. Nor, in my view, does it matter that Kramer is attempting to sell the used equipment that it received under the sale for the amount appraised by Mr. Zatylny. I would fully expect them to try to do so to recoup their losses. It is telling however, that there is no evidence before the court to show if any of the pieces of equipment have been sold at all in the intervening 18 months.

If they had been sold, and if they had been sold for the amount appraised by Mr. Zatylny, this would be some evidence of a lack of good faith on the part of Kramer. The fact that there is no evidence of this lends support to Kramer Ltd.’s conclusion that the true value appraisal was too high. In short, the plaintiff has failed to show that the actions taken by Kramer Ltd. to reduce the value was undertaken in bad faith. [ 29 ] As I listened to the evidence I found all of the defendants to be credible. None of them were shaken to any great extent on cross- examination. The problem is that Mr.

Zatylny suggests that he had a promise in writing to pay the full commission while Tim Kramer denies this. Unfortunately for Mr. Zatylny, the denial is based on a business protocol which is invariably followed, while the plaintiff’s assertions are absolutely contrary to that established business practice. [ 30 ] Let me explain. The plaintiff acknowledges that his commission is based on the gross profit to the company. It is not predicated on his valuation of any given deal, although that plays a material role in assisting the company to determine whether a gross profit can be made. Mr.

Zatylny concedes that in the vast majority of cases (90%) he will receive less than his full commission based on a reconciliation of the final numbers by management in any given sale. In fact, he conceded that he would likely have received less than full commission on this actual sale once all of the numbers were finalized (but for Kramer Ltd.’s alleged promise and reconciliation of true value). He concedes that this is a statistical likelihood, and he further concedes that in that event, he would have no way of knowing, except in very general terms, what his commission might have been. [ 31 ] In addition, Mr.

Zatylny has acknowledged that, as the defendant says, he does not receive a commission if a sale falls apart. He further acknowledges, as the company has testified, that commissions are never paid until, as Tim Kramer puts it, Kramer Ltd. ‘has the cash in hand’ from the sale. Kramer Ltd. will not pay a commission if the deal falls through, or if there is no gross profit obtained, and in any event, not until Kramer Ltd. has its money. [ 32 ] In

summary, there is not, regardless of the reason why, written proof of a promise to pay the amount which Mr. Zatylny suggests. In addition, the circumstances under which the alleged promise was made - that is to say, well prior to the conclusion of the deal, and done without regard to whether the company would make a gross profit, and before any reconciliation of the cost of the deal could be completed, and well before Kramer Ltd. had the cash in hand, all operate to undermine Mr. Zatylny’s claim. [ 33 ] At the commencement of this trial I advised Mr.

Zatylny that he carried the burden of proof in this matter - that he must convince the court more likely than not that the evidence in support to his claim would shift the scales of justice in his favour. It may be that what Mr. Zatylny says is true and it may not be, but I am limited in my function to consider and base my decision on only that evidence which has been presented in court. With due respect, I am not satisfied that there is sufficient evidence that Kramer Ltd. conducted itself in bad faith in re-evaluating the true value of the used equipment.

In addition, I am not satisfied that there is sufficient evidence for me to find that, contrary to all of the established practices of Kramer Ltd. it committed to a guaranteed promise of payment of a certain amount of commission to Mr. Zatylny.

[ 34 ] The plaintiff’s claim is dismissed. I make no order as to costs in the instant circumstances. P. Demong, J