Dykens v. Mullen, 2012 NSSC 347

SUPREME COURT OF NOVA SCOTIA Citation: Dykens v. Mullen , 2012 NSSC 347 Date: 20121003 Docket: Ken. No. 281136 Registry: Kentville Between: Leonard Dykens Plaintiff v. Randy Mullen and Mullen Contracting Limited Defendants Judge: The Honourable Justice Kevin Coady Heard: September 10, 11 & 12, 2012, in Halifax, Nova Scotia Decision: October 3, 2012 Counsel: Derrick J. Kimball, for the Plaintiff G. Bernard Conway, for the Defendants By the Court : Background :

[ 1 ] This application is before the Court as an Application in Court pursuant to Civil Procedure Rule 5.07. This dispute is based in contract. Mr. Dykens and Mr. Mullen were involved in two commercial developments in Windsor, Nova Scotia between 2004 and 2006. Any agreement between the two was never reduced to writing and they now dispute the terms of their oral agreement. This dispute is somewhat complicated because between 2004 and 2006 Mr. Dykens was an employee of the corporate defendant. [ 2 ] The first proposed development was the Wentworth Village Project.

It consisted of approximately 18 acres and was located along the major highway through Windsor. The second proposed development was the Cole Drive Project. It consisted of approximately 22 acres and was located across the highway. Prior to 2004 they were both raw land. The Wentworth land was owned by a local family. The Cole Drive land was owned by a tri-party committee made up of the Town of Windsor, The Municipality of West Hants and the Province of Nova Scotia. This committee was holding it for future development. [ 3 ] The evidence establishes that from 1971 until 2004 Mr.

Dykens was a senior project manager on several large and complex developments throughout Nova Scotia. He was employed by many of the largest players in the industry. When Mr. Dykens joined Mullen Contracting Limited in 2004 he was aware of the development potential of these properties. In fact, as early as 1992 he had discussed development of the Wentworth Road property with the owners and assisted them in obtaining some early municipal approvals. Mr. Dykens did not have an interest in that property prior to joining Mullen Contracting Limited. [ 4 ] Mr.

Dykens was also aware of the Cole Drive property before joining Mullen Contracting Limited in 2004. He knew that the owners had tried to sell and develop that land without success. He was also aware that the Town of Windsor needed a hotel on the property in order to host the Winter Games. Mr. Dykens did not have an interest in that property prior to joining Mullen Contracting Limited. [ 5 ] Mr. Mullen has been active in the construction industry since 1988. He has held supervisory roles on many large projects. In 1996 he incorporated Mullen Contracting Limited.

Randy Mullen was the president, sole director and officer of Mullen Contracting Limited. Prior to 2004 Mr. Mullen had no interest in either the Wentworth Road or the Cole Drive properties. [ 6 ] Mr. Dykens and Mr. Mullen first met in the late 1980's when they worked for associated companies. Over the years they had regular professional contact. They did not interact socially. [ 7 ] There is some dispute over how Mr. Dykens came to Mullen Contracting Limited. Paragraph 10 of Mr. Dykens May 8, 2012 affidavit, and paragraph 12 of Mr.

Mullen ’ s June 29, 2012 affidavit address the development of the employment relationship: 10. I started work with Mullen Contracting Limited in the fall of 2004 after Dineen closed its Atlantic operations. Randy Mullen is the sole officer and director of Mullen Contracting Limited. My remuneration for this position consisted of a salary of $70,000.00, use of a company truck, a gas card and a cell phone. I brought my own truck, a 1999 Chevrolet, and used that as my company vehicle.

Mullen Contracting paid me $5,000.00 for the truck plus allowed me to purchase some materials for my home renovations on the Mullen Contracting account at Swinamer’s Timbermart in exchange for the truck. Appended hereto as Exhibit ‘2' are copies of my T4 slips from Mullen Contracting for the tax years 2004, 2005 and 2006. 12. Shortly after Josh Dykens began working for MCL, Mr. Leonard Dykens approached me about the possibility of his joining MCL. In the fall of 2004, Mr. Leonard Dykens began work for MCL as a project manager.

His remuneration was essentially as set out in paragraph 10 of his affidavit of May 8, 2012, with the exception that he was paid a salary of $72,000.00 and MCL bought a new truck exclusively for his use in 2005. I do not find that any of the differences in the above paragraphs are relevant to deciding the issue in this case. The employment relationship does not figure largely in this dispute as it is common ground that the two development projects were pursued outside of the employment relationship. [ 8 ] Paragraph 17 of Mr. Mullen ’ s June 29, 2012 affidavit, and paragraph 14 of Mr.

Dykens ’ May 8, 2012 affidavit, address the genesis of these projects.

17. I agree that in late 2004, Mr. Leonard Dykens approached me about the possibility of developing lands referred to in his affidavit of May 8, 2012, as the “Wentworth Village Project” and “Cole Drive Project”. I did not know of Mr. Leonard Dykens' historical attempts at developing the ‘Wentworth Village Project” and “Cole Drive Project” until I was advised by him in late 2004. 14. This work was outside the scope of my employment contract as a project manager with Mullen Contracting Limited. However, it represented a significant profitable opportunity for Randy Mullen, Mullen Contracting and as well for me.

In late 2004, I discussed this proposal with Randy Mullen and together we developed the idea to form a company and embarked upon the development as a distinct and separate business arrangement.

My responsibilities in this enterprise were to negotiate a purchase price and arrange the acquisition of the land; coordinate and manage the development of the property throughout the various stages under the planning laws and regulations of the Municipality; to coordinate and manage the [instillation] of all infrastructure and services to the land including roads, water and sewer; ready the land for sale which included bringing the lots to appropriate grade and survey. Mr.

Mullen ’ s evidence was that this “ was the type of project he was expected and required to develop for MCL ” (Mullen affidavit, June 29, 2012, paragraph 18). While this may be so, the evidence indicates that these projects were pursued outside of the employment relationship. [ 9 ] The proposed projects required not only development expertise but also financial support. Neither Mr. Dykens nor Mr. Mullen had the resources needed to launch these projects. In 2005 Lloyd Parker and Mariana Cowan were recruited to provide this support. Ms. Cowan was a silent partner while Mr. Parker was a hands on partner. Messrs.

Dykens, Mullen and Parker developed an approach that promised profits in the millions. [ 10 ] The initial plan was that the four individuals would be equal partners in a yet to be formed company. It was anticipated that the two projects would be developed by that company (3102673 Nova Scotia Limited). Upon his agreement to finance the projects, Mr. Parker arranged for his lawyer to prepare a shareholders agreement. Prior to the incorporation of the numbered company, and the signing of the shareholders agreement, Mr. Dykens withdrew from these corporate arrangements.

Paragraph 18 of his May 8, 2012 affidavit provides his reasons for that decision: 18 I was not agreeable to this arrangement and decided I did not want to hold any shares in the Company. I did not know Lloyd Parker or Marianna Cowan. I was also concerned about Bruce Brett’s prior warning about me getting involved with Lloyd Parker. In addition, my wife had recently recovered from a battle with cancer. Mr. Mullen and I had discussions about my views on being a shareholder and on how to proceed. I did not want to wait for there to be a profit in the Company.

We discussed how my wife had recently battled an illness which was an eye opener for me. We discussed how my wife and I wanted to live a stress reduced lifestyle the next few years. Because of the stress at the time, I did not think it was worth it to hold any shares in the Company and that was when Mr. Mullen asked to buy out my share of the Project. [ 11 ] Mr. Mullen ’ s June 29, 2012 affidavit addresses that decision at paragraph 25: 25 Unfortunately, as the time to close the purchase of the lands forming the basis of the Development approached, Mr.

Leonard Dykens would not commit to executing the shareholders agreement. He also was reluctant to have shares issued in his name and to invest monies in the company. On June 24, 2005, 3102673 Nova Scotia Limited was incorporated. Twenty-five common shares were issued to both Mr. Parker and Ms. Cowan. Fifty shares were issued to Mr. Mullen ’ s family trust. [ 12 ] On July 21, 2005 the Wentworth Village property was purchased by 3102673 Nova Scotia Limited for $250,000.00.

On October 15, 2005 that same company purchased the Cole Drive property for $1.00 with the stipulation that a lot be set aside and designated for a hotel. There was much evidence at this hearing about the failure of these projects. I need not review these details to decide the issue in this case. However, it is clear that these projects experienced many complications and set backs. [ 13 ] While the projects did reach some level of completion, they did not achieve the potential originally anticipated. Parcels of land

[ 13 ] While the projects did reach some level of completion, they did not achieve the potential originally anticipated. Parcels of land had to be sold to fund continued development. Liens were filed and deficiencies experienced. I accept Mr. Mullen ’ s evidence that the shareholders of 3102673 Nova Scotia Limited have not received any profits from these projects. Mullen Contracting Limited was the general contractor on both projects. While payments were made to that company for work completed, I am satisfied that Mullen Contracting Limited did not profit from that relationship.

I am satisfied that both defendants suffered financially because of their involvement in these projects. I can state that I came to these conclusions having considered the evidence of Jim Melvin, Mr. Dykens ’ accountant. I can also state that these conclusions have no impact on the ultimate decision. [ 14 ] The position of the parties on the critical issue is best set forth in their affidavits. Mr. Dykens states as follows in paragraph 19 of his May 8, 2012 affidavit: 19. I agreed to take a lesser amount of the projected profits in lieu of taking any shares.

The time frames could have extended up to ten years to realize the final profits in the Project so I agreed to take a lesser amount in exchange for not having to wait until the profits were realized. Ultimately, in or about June 2005, before the Company was incorporated, Mr. Mullen and I agreed that he would pay me $200,000.00 in lieu of my taking any shares. He would take up my proposed shareholdings in the Company. This was in addition to my annual salary of $70,000.00 and other remuneration which I was receiving from Mullen Contracting.

I was to receive my payment of $200,000.00 when the Projects were complete and the approvals were obtained from the municipal and other regulatory bodies. Mr. Mullen states as follows in paragraph 28 of his June 29, 2012 affidavit: 28 My family trust received the 50 common shares in 3102673, including the 25 common shares of Mr. Leonard Dykens would have received if he completed his investment in the Project. Although he and I had discussed his reluctance to invest in the Project on more than one occasion, it was during an informal meeting on Cole Drive, Windsor, Hants County, Nova Scotia with Messrs.

Lloyd Parker and Leonard Dykens that it became apparent that Mr. Dykens would not invest in the Project or sign personal guarantees. In an effort to move the process along, I stated to Mr. Dykens that I would take his shares and at some point down the road if the Project ever made money (i.e., profit) I would see that he was looked after. Mr. Leonard Dykens agreed to this arrangement. At no time did I ever agree to provide a guaranteed profit to Mr. Leonard Dykens, nor was a time frame for profit or payment discussed or agreed to by the parties.

This difference represents the sole issue to be decided in this application. The Law of Contract : [ 15 ] The first question to be decided is whether Mr. Dykens has established that a contract with Mr. Mullen existed. The second question to be decided is whether Mr. Dykens has established the terms respecting consideration. There is no evidence that Mullen Contracting Limited was a party to any contract respecting the development of the two projects. [ 16 ] Cromwell, J.A., in United Gulf Developments v. Iskandar , 2008 NSCA 71 , discussed the requirements for a legally enforceable contract.

He stated at paragraph 14: [14] To have an enforceable contract, there must be agreement between the parties as to all essential terms. To use the language of a leading case, a contract “... settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties”: May and Butcher, Ltd. v. The King , [1934] 2 K.B. 17 (H.L.) at p.21 . Determining what terms are “essential” in a particular case is, however, more difficult than stating the principle.

The sort of terms that are considered essential varies with the nature of the transaction and the context in which the agreement is made: Mitsui & Co. v. Jones Power Co. , 2000 NSCA 95 , 189 N.S.R. (2d) 1 (C.A.) at para. 64 . [ 17 ] In LeSoleil Hotel and Suites Ltd. v. LeSoleil Management Inc. , 2009 BCSC 1303 , Dickson, J. stated: Courts strive to uphold contractual obligations solemnly and freely undertaken. They do not, however, impose them upon parties who have not reached agreement on all essential terms.

For parties to be bound in a contractual relationship there must be a manifest meeting of the minds. They must express themselves outwardly in a manner that indicates both an intention to be bound and reasonably certain mutually agreed terms. These fundamental principles of contract law enable commercial life to operate in a fair, predictable and efficient manner. They apply whether the purported contract in question is concluded in writing, orally, by conduct, or by a combination thereof. The key question in all cases is whether an agreement has been reached on all essential terms, regardless of its form. In respect of oral contracts, Dickson, J. further stated: The

interpretation of oral contracts turns on the same essential principles. If the alleged agreement has not been reduced to writing, the Court must consider what the parties said and did and assess objectively whether, in context, their words and actions establish an intention to be bound. The genesis and aim of the transaction is an aspect of the relevant context for consideration. The credibility of witnesses will be particularly important and differing versions of events will increase the difficulty of establishing that an enforceable bargain was made.

When the Court considers the parties’ manifest intentions, it may be required to determine whether they intended to create a binding contract or simply reached a basis for future agreement. This question often arises where ... the alleged agreement contemplates the execution of a further formal contract. It is not necessary for every conceivable matter to be resolved between the parties before an enforceable contract is created. The law does not, however, recognize an “agreement to agree”.

The question for determination is whether the parties have reached agreement on all matters that are vital or fundamental to the arrangement or whether they intended to defer legal obligation until a final agreement has been reached. [ 18 ] In Fridman, The Law of Contract in Canada , 6 th ed., 2011, the author states: Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract.

The law is concerned not with the parties’ intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms. As Fraser C.J.A. said in Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co. [(2003), 17 Alta.

L.R. (4 th ) 243 at 249]: the parties will be found to have reached a meeting of the minds, in other words be ad idem , where it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty. The above is the analysis that I must bring to determine whether a contract was struck and, if so, the terms of that contract. Analysis : [ 19 ] I find as a fact that there was a contract between Mr. Dykens and Mr. Mullen.

I also find as a fact that the terms respecting compensation are those advanced by Mr. Dykens. I am satisfied that initially Mr. Dykens ’ intention was to be a partner in 3102673 Nova Scotia Limited. I am satisfied that Mr. Dykens decided against partnership for the reasons set forth in his affidavit. I find as a fact that Mr. Dykens offered to sell his proposed 25% for $200,000.00, payable when the projects were complete. I find as a fact that Mr. Mullen accepted this proposal as he still believed that these projects were going to generate significant profits. Consideration flowed both ways. Mr.

Dykens was to get $200,000.00 and Mr. Mullen was getting a further 25% equity position in 3102673 Nova Scotia Limited. All of these agreements occurred while the future looked promising.

[ 20 ] I am satisfied that presently, and for some time, Mr. Mullen is not in a financial position to honour the terms of his agreement. Mullen Contracting Limited has also suffered from the failure of these projects and is not in a position to fund Mr. Mullen ’ s half of the bargain. Mr. Mullen may now feel that the deal he made was dependant on the profitability of the projects. However, that is not the picture to be observed by the “ reasonably objective bystander. ” [ 21 ] The above findings are not based solely on the credibility of Messrs. Dykens and Mullen.

In fact, but for supporting evidence, it would have been difficult to make findings of fact. [ 22 ] The draft shareholders agreement supports the foundation of the position advanced by Mr. Dykens. It confirms that initially Mr. Dykens was to be a shareholder in the proposed numbered company. It is not disputed that Mr. Dykens ’ share was transferred to Mr. Mullen. It is clear that it was Mr. Dykens who decided against the partnership. It is a reasonable conclusion that Mr. Mullen had to pay for that interest.

While this document does not establish the quantum or timing of a payment, it does satisfy me that there was an offer and an acceptance. I am satisfied that at the time of the drafting of the shareholders agreement both Mr. Dykens and Mr. Mullen were equally invested in the projects. [ 23 ] I also found support for my conclusions in a one page document created in November 2006. This document was prepared by Mr. Mullen and presented to Mr. Dykens when his employment with Mullen Contracting Limited ended in late 2006. It should be remembered that at this hearing it was Mr.

Mullen ’ s position that there was no discussion of $200,000.00 or an agreed time frame for any payment. Mr. Mullen ’ s testimony was that “ I stated to Mr. Dykens that I would take his shares and at some point down the road if the project made any money (i.e., profit) I would see that he was looked after. ” That document states as follows: 1) Pay wages to November 4, 2006 effective immediately.

Items 2 through 6 are conditional upon and subject to: - Subway contract being finalized and paid for in a timely (December 15, 2006) and favourable manner including all extras and the inclusion of roof trusses (and crane time) which were missed in the cost

summary. Monies owing to Reid Shanks to be adjusted as may be required based on materials supplied by Mullen Contracting, monies owed to Mullen ($5,000.00 deposit) and the fact that the original quote provided by Reid has quantities that seem to be grossly inflated. - Preparation of invoice and collection of same from Heritage Fireplace. - Preparation of invoice and collection of same from Gene Vaughan. - Providing assistance in the completion and turnover of Cole Drive as may be required. 2) Pay wages to Dec. 1, 2006. 3) Transfer title to 2005 Chevy Colorado on an as is basis (value $35,000.00).

Will have to pick a value for tax purposes which will be added to 2006 T4 slip. HST on transfer of title to be paid by Leonard. 40 Pay for roof trusses, concrete and electrical for new home (approximate value $24,500.00 to $25,000.00).

5) Pay $15,000.00 in Dividends to Nicole for each of 2005, 2006 and 2007 - Total $45,000.00. Cost to Mullen Contracting is $54,000.00 after taxes. Previously paid $8,500.00 towards this in 2005. An additional $6,500.00 to be paid by year end 2006 and balance paid out as Windsor commercial property sells and monies are available upon payment of expenses. 6) Balance of $200,000.00 agreement ($86,000.00) to be paid out as Windsor commercial property sells and monies are available upon payment of expenses.

Note: Cell phone to be turned in on or before December 15, 2006. [ 24 ] The above document represents an effort by Mr. Mullen to financially settle with Mr. Dykens when the employment relationship ended. Mr. Dykens comments on this document at paragraph 32 of his May 8, 2012 affidavit: 32. At that time Mr. Mullen approached me with an offer by Mullen Contracting Limited / Randy Mullen to pay the $200,000.00 debt. Appended hereto as Exhibit “5" is a copy of the offer. The offer was not satisfactory to me. Mr. Mullen wanted me to try to clean up a number of problems for him.

He required that I continue working for him for another month and most of the payment for the $200,000.00 was promised to be paid in the future. Mr. Mullen stated in his affidavit and viva voce evidence that this document represented an effort to clean up obligations that Mr. Dykens owed to Mr. Mullen and Mullen Contracting Limited. That may be so and I need not settle those disputes in order to decide this case. This document is significant in that it establishes the $200,000.00 obligation. It also provides some support for Mr. Dykens ’ position on when it was to be paid.

It does not tie the obligation to a payment “ at some point down the road ” and dependant on “ if the project made any money. ” I do not accept Mr. Mullen ’ s evidence that the $200,000.00 figure first emerged when this settlement proposal was prepared. The next document I will reference establishes that the $200,000.00 figure predated the settlement proposal. [ 25 ] On August 4, 2006 Mr. Mullen provided Mr. Dykens with the following letter: August 4, 2006 To Whom It May Concern: Please be advised that Mr.

Leonard Dykens is presently employed by Mullen Contracting Limited as a Project Manager/Site Superintendent for our commercial construction activities with an annual salary of $72,000.00. My Dykens will also be paid a portion of the profits from two of our developments presently underway in Windsor, Nova Scotia. The amount to be paid to Mr. Dykens totals $200,000.00 and will be paid out over the next two years as the properties are developed and sold. Please advise if you have any questions or require further information pertaining to Mr. Dykens employment with Mullen Contracting Limited.

Sincerely, Mullen Contracting Limited Randy Mullen President

[ 26 ] Mr. Dykens discusses this document at paragraph 30 of his May 8, 2012 affidavit: 30. In August 2006, I asked Randy Mullen to provide me with a letter certifying my income with Mullen Contracting and the expected payment of $200,000 pursuant to our agreement so that I could arrange bridge financing for my home construction. Appended hereto as Exhibit “4" is a copy of the letter dated August 4, 2006 addressed “To whom it may concern.” In this letter Mr.

Mullen, on behalf of Mullen Contracting Limited, advised that I was to be paid the sum of $200,000.00 over a period of two years “as the properties are developed and sold.” I did not agree to the payment over two years as the properties were developed and sold. The reason why I agreed to the sum of $200,000.00 for not taking shares was so that I would not have to wait for the Company to realize a profit. There was no stipulation that I would have to wait for the Company to realize a profit as it was a strict sale of my 25% interest in the enterprise. [ 27 ] Mr.

Mullen replied at paragraph 32 of his June 29, 2012 affidavit: 32 On August 4, 2006, I wrote a letter to Mr. Leonard Dykens’ bank at his request, a copy of which is attached hereto as Exhibit “D”. This was done as a favour to Mr. Dykens to assist him in obtaining bridge financing to construct his new home. I felt there would be no harm in doing so as Mr. Dykens assured me he had a sale for his existing home, that it would be closing in a matter of months and that his bank would be paid out. At this time I still felt Mr. Dykens to be trustworthy and I took him at his word.

Also, we were all optimistic the commercial land would in fact sell in a timely manner and the proceeds/profits from these sales would be available to all involved. This is reflected in the attached letter in the concluding sentence of the penultimate paragraph. The letter was not intended to constitute an agreement on my behalf to pay Mr. Dykens a set amount within a fixed time frame. The significance of this letter is that shows that the $200,000.00 figure was in play before the “ fall of 2006." [ 28 ] These documents, as well as the testimony of Mr.

Dykens, satisfy me that there was a contract between the parties. I find that the terms of that contract were that Mr. Mullen purchased Mr. Dykens ’ share in 3102673 Nova Scotia Limited for $200,000.00 payable when the projects were complete. I reject Mr. Mullen ’ s evidence that this payment was due at some ill-defined time “ down the road, ” or when there were sufficient profits to meet that obligation. Credits to Defendants : [ 29 ] Mr. Dykens and Mr. Mullen entered into a number of side deals during the term of their employment relationship. It is agreed that Mr.

Dykens purchased roof trusses and other materials on Mullen Contracting Limited ’ s account in the amount of $28,816.13 and that this amount is still outstanding. It is also agreed that Mr. Mullen is owed $8,500.00 arising out of the sale of a motorcycle. The parties agree that these amounts be deducted from the $200,000.00 and that the balance owing is $162,683.87. Liability of Mullen Contracting Limited : [ 30 ] I find that the obligation owed to Mr. Dykens is the obligation of Mr. Mullen and not the obligation of Mullen Contracting Limited.

The corporate defendant was employed by 3102673 Nova Scotia Limited during the development of the two projects. It was never part of the contract between Mr. Dykens and Mr. Mullen. Conclusion : [ 31 ] Judgment is granted in favour of Mr. Dykens in the amount of $162,683.87. I will accept written submissions on costs should the parties be unable to agree.

Coady, J.