Martell-Norman v Brown, 2022 NSSC 137

SUPREME COURT OF Nova Scotia Citation: Martell-Norman v Brown , 2022 NSSC 137 Date: 20220517 Docket: ANN, No. 449419 Registry: Annapolis Between: Timothy Martell-Norman and Cheryl Norman-Martell Plaintiffs v. Ronald Elwin Brown Defendant Judge: The Honourable Justice Gregory M. Warner Heard: March 21, 22, 24, 2022, in Kentville, Nova Scotia Counsel: Jonathan G. Cuming, for the Plaintiffs W.

Bruce Gillis, Q.C., for the Defendant By the Court: Overview [ 1 ] In 2011, Timothy Martell-Norman (TMN), having just completed a one-year NSCC plumbing course, agreed to purchase the shares of the defendant’s incorporated plumbing business, Brown & Murphy Services Ltd., (called “Company”).

By law, TMN could not, except under the supervision of a journeyperson (licensed plumber), work as a plumber until he had completed 8000 hours of instruction and work experience, of which about 6000 hours was on the job training. [ 2 ] In July 2011, Brown and TMN signed the standard journeyperson - apprentice agreement with the Nova Scotia Apprenticeship Agency, Brown as journeyperson, TMN as his apprentice.

It was projected that TMN would complete the apprenticeship by December 2015. [ 3 ] On August 31st, 2011, the Martell-Normans signed a Memorandum of Agreement (called “Agreement”) to purchase Brown’s plumbing business. The agreement includes paragraphs 6(2) and 6(3), which read:

(2) The Vendor shall continue as an employee of the Company for a period of four (4) years and retain his qualifications as a journeyman plumber so that the Purchaser may acquire the necessary apprenticeship time required by the Nova Scotia Department of Labour to qualify as a licensed plumber.

(3) The Vendor shall not at any time within the period of five (5) years from the date of execution herein, either individually or in partnership or in conjunction with any person or persons, firm, association, syndicate, company or corporation as principal, agent, director, officer, employee, investor or in any other manner whatsoever, directly or indirectly, carry on, be engaged in, be interested in, or be concerned with, or permit any of their names or any part thereof to be used or employed by any such person or persons, firm, association, syndicate, company or corporation, carrying on, engaged in, interested in or concerned with, a business which is similar to the Purchased Business within thirty (30) miles of Middleton, Nova Scotia. [ 4 ] On January 15th, 2015, TMN and Brown ceased working together.

TMN claims that Brown, in a huff left a job site and refused to supervise TMN any longer. Brown claims that he was terminated by TMN. This is the first trial issue. [ 5 ] The second issue is damages. The plaintiffs state that, because of Brown’s refusal to continue supervision of TMN contrary to section 6(2) of the Agreement, TMN was unable to continue working as an apprentice plumber, thereby losing income and the value of the $56,000.00 the plaintiffs had paid to that date for Brown’s company.

The defendant claims that, by reason of his termination, he lost the $14,000.00 still owing under the Agreement, plus income for work in the first two weeks of January 2015. [ 6 ] On his walk-out or termination, Ron Brown immediately commenced working as a plumber in the Middleton area under the name “R.E. Brown Services”, and the plaintiffs claim that their phone stopped ringing. The plaintiffs claim that this was in breach of the non-competition clause of the Agreement.

They claim damages for this breach. [ 7 ] Oral evidence was heard from Timothy Martell-Norman (TMN), Cheryl Norman-Martell (CNM), Natalie Landry (a training counselor with the Nova Scotia Apprenticeship Agency), and from the defendant, Ronald Brown (Brown). The parties tendered a Joint

Exhibit Book (CEB) with 15 tabs, and agreed that all documents were admitted as evidence, whether referred to in oral evidence or not. The plaintiffs tendered 5 other exhibits, one of which contained excerpts from Ron Brown’s discovery examination. The Evidence [ 8 ] Fact finding requires the Court to assess relevant real (things and documents), direct (orally from witnesses) and circumstantial (inferences from real or direct evidence) evidence. [ 9 ] In the civil context, circumstantial evidence is treated as any other kind of evidence. Its weight depends on the strength of the inference.

See Sopinka, Lederman & Bryant: The Law of Evidence in Canada , 5th ed (Lexis Advance Quicklaw, electronic version,

Chapter 2.) [ 10 ] Direct evidence is assessed for both reliability and credibility. Reliability relates primarily to assessment of a witness’s capacity to observe, recall and communicate accurately. In contrast, credibility relates to the truthfulness or believability of the evidence. As this Court has previously written (for example, Re Novak Estate , 2008 NSSC 283 at pp.36-37, and Bocaneala v Liberatore , 2013 NSSC 372 at pp. 31-34), many tools exist for the assessment of credibility. [ 11 ] I have applied this guidance to find facts.

Timothy Martell-Norman (TMN) [ 12 ] After 23 years as general manager of the 14 Wing Greenwood bowling centre, TMN’s job was made seasonal. He decided to change careers. In September 2011, he enrolled in a one-year NSCC Lawrencetown plumbing course. His spouse, CNM, withdrew from her RSP between $7000 and $8000.00 to pay for the course. TMN graduated with honours on June 10, 2011. [ 13 ] TMN and Brown knew each other. At least twice, while TMN was attending NSCC, they ran across each other and discussed their respective intentions.

They ran across each other at the Post Office; TMN asked how it was going and Brown stated that he was looking to retire. Later TMN hired Brown to install taps; Brown inquired how school was going and they discussed a possible arrangement. [ 14 ] To become a licensed plumber, TMN had to satisfy the Apprenticeship Agency of Nova Scotia that he had put in 8000 hours between study and work experience under the supervision of a licensed “Journeyperson” plumber.

He had earned 1000 hours from the NSCC course; he could earn more hours in periodic courses as he progressed through his apprenticeship, but about 6000 hours had to come from on-the-job work as an apprentice under the direct supervision of a Journeyperson. [ 15 ] The parties came to an informal agreement that the plaintiffs would buy the defendant’s business, and Brown would act as a consultant and the Journeyperson to supervise TMN’s work. [ 16 ] A precondition to an agreement was the plaintiffs’ ability to raise the first half of the requested purchase price.

The plaintiffs approached Annapolis Ventures, a non-profit CBDC, who agreed to advance a loan on the security of a mortgage on the plaintiffs’ home. [ 17 ] On July 19, 2011, TMN and Brown signed and filed the Apprenticeship Application and Agreement (CEB Tab1 page 11), about which Natalie Landry, the Apprenticeship Counsellor, gave evidence. The Apprenticeship Agency’s file is CEB Tab1. [ 18 ] After the plaintiffs had arranged financing, they hired a lawyer (John Cameron) to prepare a record of their oral agreement. The one-page, undated and unsigned memorandum (called “Memorandum”), CEB Tab15, reads:

Text, letter Description automatically generated [ 19 ] Per that memorandum, Bruce Gillis prepared the formal Agreement (CEB Tab 4). It incorporated most of the oral agreements documented by John Cameron. It was signed by all the parties at his office in his presence on August 31, 2011. The unsigned memorandum (CEB Tab 15), except where expressly modified in the formal Agreement (CEB Tab 4), is relevant as context in respect of the

interpretation of the Agreement. [ 20 ] TMN commented on the ten points itemized in CEB Tab15. Of those the key provision was Brown’s agreement to remain on staff as a plumbing consultant during TMN’s apprenticeship. He stated that he did not receive all the hand tools or inventory owned by the business.

They remained in Brown’s basement as TMN did not have room for them. [ 21 ] TMN testified that the plaintiffs paid the $35,000.00 down-payment from monies borrowed from Annapolis Ventures on the security of a mortgage on their home, and they made the annual $7,000.00 payments in September 2012, 2013, and 2014. [ 22 ] TMN did not understand there to be any difference in the wording of paragraph 6(2) of the Agreement and the 9th point in the Memorandum.

He understood that Brown would agree to remain as a plumbing consultant and TMN’s “Journeyperson” pursuant to the Apprenticeship Agreement they had signed on July 19, 2011. [ 23 ] TMN described his understanding of the requirement that he complete 8000 hours as an apprentice; it involved 4 stages of training and an exam.

It was anticipated to be completed, per the Apprenticeship Application and Agreement and the related documents in CEB Tab 1, by December 31, 2015. [ 24 ] Per CEB Tab 1, page 7, as of June 2013, TMN had credit against the 8000 hours of apprenticeship - 1000 hours from the NSCC course, 180 hours from a six week first stage course at the Ackerly campus of NSCC (April 4-June 7, 2013), and 1966 hours working under the supervision of Brown to March 28, 2013. He testified that he worked a minimum of 35 hours per week, plus some weekends. He needed another 4000 on-the-job hours.

He anticipated that he would complete his apprenticeship by the anticipated December 31, 2015, timeline.

[ 25 ] He seemed to acknowledge that after he returned from the Ackerly course, there were more discussions with Brown on how to plumb. While he denied that there were any issues, he acknowledged that their discussions were “colourful sometimes”. [ 26 ] TMN testified that January 15, 2015, started out like a normal day. He picked up Brown in the van and drove to Nictaux to relocate a pressure tank and drum. Mid-morning, out of the blue, Brown became irritated, said he was done, left the basement and walked to the van. TMN was shocked, but at Brown’s request, drove him home.

TMN thought that maybe Brown was having a bad day. After lunch, TMN went back to Brown’s home to pick him up and return to the job. Brown repeated that he was done. TMN asked for the spare keys to the van and left. The Nictaux job was not complete, but TMN could not go back without Brown. He hoped Brown would cool down over the weekend and come back. On Monday, Natalie Brown called to advise that Brown had advised the Apprenticeship Agency that he would no longer be TMN’s Journeyperson supervisor. TMN panicked, because without a Journeyperson he could not work. He was afraid of losing his home.

Before January 15, his work phone rang for plumbing requests a minimum of 3 or 4 times a day. From January 19th it did not ring at all. He and CNM called the number to see if there was something wrong with the phone connection; there was not. [ 27 ] He contacted other licensed plumbers to act as his Journeyperson supervisor without success. His only income was an early draw on his pension from his prior work. He continued to pay the loan to Annapolis Ventures from these pension draws. [ 28 ] TMN denied that Brown was ever an employee of the business (Brown & Murphy Services Limited).

He was paid a consulting fee of $100.00 per month as TMN’s supervisor, the amount Brown had requested (so that it would not affect his CPP/OAS). TMN deferred to CNM the particulars of how Brown was paid. [ 29 ] On cross-examination, TMN acknowledged that the memorandum (CEB Tab 15) was prepared by Mr. Cameron for the plaintiffs, on the basis that Mr. Gillis would prepare the Agreement which was signed on August 31, 2011. He was not aware of any requests for changes to the Agreement.

He did not ask Cameron to review it because he was satisfied that it contained the bullet points in the Memorandum. [ 30 ] He referred questions as to whether the plaintiffs still had the Company books and shares to CNM.

He acknowledged that he did not make the remaining two payments due under the Agreement after Brown quit. [ 31 ] He repeated that Brown was not on the Company payroll and was paid $100.00 as consulting fees. [ 32 ] When asked about January 15, 2015, TMN stated that he had no idea what led up to Brown cursing and going to sit in the van mid-morning. [ 33 ] He repeated that he did not receive some of the business’s tools that were kept in Brown’s shed. [ 34 ] He was directed to the sentence in the Cameron memorandum that Gillis’s Agreement was to be faxed to John Cameron and asked if that happened.

TMN answered first: as far as he knew, yes, and in redirect, that he was not sure, and that Mr. Cameron was not present when he signed the Agreement. Cheryl Norman-Martell (CNM) [ 35 ] CNM is TMN’s spouse and a shareholder in the Company that owns the business. She does all the Company’s administration, paperwork and banking. She testified that the company had no employees. She was emphatic that Brown knew he was not an employee. He was in receipt of a CPP pension and OAS, and did not want employment income. He was paid as a consultant the $100.00 per month that he requested.

In addition, if a job required a second plumber, Brown was paid as a subcontractor. Brown never provided his SIN number to the company. The company never made any statutory deductions, nor issued an ROE when Brown quit.

She kept track of any hours that required a second plumber and added that amount monthly to the $100.00 consulting fee that he asked to be paid. [ 36 ] When the defendant’s Counsel objected to the admission of a record communicated to the defendant (not disclosed until the Plaintiff’s settlement conference brief), CNM walked the court through how she recorded, on a monthly basis, the hours charged for a second plumber, and how it was added to Brown’s monthly consultant’s fee at the rate of $10.00 per hour. The list of amounts was given to Brown each year to review before CNM gave it to the plaintiffs’ accountant.

She repeated that Brown did not provide her with his SIN number, no ROE was ever issued, and no statutory deductions were made, on the basis of Brown’s request and agreement. CNM discussed with Brown his request on how he wanted to be compensated, and suggested that he check with his accountant. She understood that Brown did not want to pay tax on the money. (The court notes that none of Brown’s income tax returns for 2011 to 2014 were produced at trial.) [ 37 ] While CNM was on her lunch break at work on January 15th, 2015, TMN called her. He told her that Brown had quit.

She cried because she knew that the business could not function without Brown supervising TMN as journeyperson, and because the business needed a licensed plumber to be insured. [ 38 ] CNM withdrew money from her RSP to pay TMN’s NSCC tuition of between $7000.00 and $8000.00. [ 39 ] CNM testified that Brown approached the plaintiffs to buy his business. He gave them a rough estimate of what he wanted for it. At the time, CNM worked at a bank and approached a colleague about financing. She was told the better option was to approach Annapolis Ventures (“AV”).

AV required information about the business, and a business plan that would show that they could run the business. In addition to TMN’s chat with Brown at the Post Office, Brown came to the Plaintiffs’ home twice in April and/or May 2011 to present his proposal and the information they needed for AV. [ 40 ] The AV loan was in the amount of $37,000.00, with interest at 8%, repayable over 10 years, with monthly payments of $495.06 per month. Six months after January 2015, she asked AV to lower the payments. AV agreed. Recently the plaintiffs remortgaged their home to pay out the AV loan.

[ 41 ] She repeated that everyday before January 15, 2015, they received calls for plumbing. After January 15th, their phone was quiet. They checked with Eastlink and called themselves on the assumption that there was a problem with their phone; that was not so. Their business was a mix of residential and some commercial and rentals. Middleton was “full of very old homes” and one of the basis of their calls was the unique knowledge of Brown of the plumbing in those homes. [ 42 ] She used the accounting/tax services of Robert Bent. He treated the payments to Brown as consulting and contracting fees.

Since the plaintiffs’ involvement, the business had no employees. [ 43 ] She acknowledged signing the Agreement. She identified CEB Tab 15 as a draft that started the process. She was directed to whether the plaintiffs received all the assets listed in the first seven bullets of the Memorandum. She and Brown catalogued the tools and inventory in Brown’s basement after the closing. She testified that some of the inventory did not make it into their possession.

She did not notice the discrepancy between bullet point #9 in the Memorandum and paragraph 6(2) of the Agreement, but she repeated that before the Agreement was signed Brown had stated that he did not want to pay taxes, so she spoke to her accountant, and Brown directed and agreed to the method that she compensated him as a consultant and subcontractor. [ 44 ] The plaintiffs are still paying the original purchase price through the remortgaging of their home. Over three years – 2015- 2017, TMN withdrew all his pension from his former employment - $80,000.00, to pay their bills. [ 45 ] CNM was cross-examined.

When asked if a couple of drafts of the Agreement were exchanged, she replied that she believed so, but did not know if they were exchanged between the lawyers. She raised no objection to the Agreement that she signed in Mr.

Gillis’s office. [ 46 ] When directed to page 2 of the Agreement, she stated that the initials and date of September 29/11 were only those of Brown, and that the transaction actually closed between the first and fourteenth of September. [ 47 ] When asked about the tools kept in Brown’s basement after the closing, she acknowledged that some tools were kept in the van, and the tools in Brown’s basement were there because he had space for them. She testified that the plaintiffs were buying the business “lock, stock and barrel” so that Brown could retire.

She agreed that none of the $70,000.00 was for consulting fees, and that $14,000.00 due after January 2015 was not paid. [ 48 ] She repeated that the plaintiffs tried to find another plumber to replace Brown as TMN’s Journeyperson supervisor. Their efforts included advertising and interviewing plumbers, even going to interview someone in New Brunswick. Natalie Landry [ 49 ] Ms. Landry has been an Industrial Training Counsellor with the Nova Scotia Apprenticeship Agency for twenty years. She was familiar with the Apprenticeship Application and Agreement between TMN and Brown.

She identified and explained the Agency’s file contained in CEB Tab 1, pages 1 to 11. She completed most of CEB Tab1 page 11, signed by the parties on July 29, 2011, and registered with the Agency on August 25, 2011. It was required that TMN work under the supervision of a certified plumber and successfully complete the apprenticeship to be able to work as a plumber in Nova Scotia. TMN was issued an ID card and logbook. Ms. Landry described the process to become an apprentice, and the training benchmarks to becoming a certified plumber.

The legislation at that time required that TMN complete 8000 hours of work and/or education. [ 50 ] TMN was given credit for 1000 hours (level one) for his NSCC course. He needed to complete 2000 to 4000 hours for level two; 4000 to 6000 hours to complete level three; and 6000 to 8000 hours and a test to complete level four. TMN’s hours are recorded in his logbook by his employer; in his case, 1966 hours were entered by his employer for hours worked up to March 28, 2013 – the last update filed with the Agency (CEB Tab1, page2).

The Journeyperson-supervisor was not responsible to report the apprentice’s hours to the Agency. He was required to sign a “skills” document at the level four stage.

She noted that TMN was credited 30 hours for each of the six one-week courses that he passed in 2013. [ 51 ] She stated that the matrix, where the apprentice not the Journeyperson owned the employing company, was an unusual relationship. [ 52 ] Because it is compulsory in Nova Scotia that only a certified plumber could carry on the trade, an apprentice could not act as a plumber without a Journeyperson supervising his work. [ 53 ] On cross-examination, Ms.

Landry was directed to CEB Tab1, page 2, a Client Information Update, filed April 29th, 2013, showing a change in the Employer contact name from Brown to CNM, and logbook hours of 2966. Ms. Landry was directed to the Agency’s running notes (CEB Tab 1, page 10). She could not recall who contacted her on January 19, 2015. Ronald Brown [ 54 ] Brown began his career as a plumber in 1952. He worked for others in Wolfville until he purchased a business in Middleton in 1967 and, with an electrician (Murphy) incorporated Brown & Murphy Services Limited to operate a plumbing heating and electrical business.

After Murphy’s passing in 1972, he worked in plumbing and heating. He sold the heating business twenty-two years ago. He testified that he has continued as a plumber since then. [ 55 ] In 2011, he sold his plumbing business to the plaintiffs. No one initiated the deal. He knew TMN was in community college and they spoke in TMN’s kitchen. Brown set the terms of the deal. As soon as the plaintiffs arranged financing, he got a draft Agreement prepared. There were drafts; CEB Tab 4 was the final version. When directed to various paragraphs in the Agreement, he stated that he did not understand them.

It was clear that he relied on Mr. Gillis for the wording of the Agreement. [ 56 ] When asked to explain what happened on January 15, 2015, he replied that he and TMN were engaged in relocating and modifying a pressure tank and pump in Nictaux. Something was said about more than one way to change the piping. Next thing Brown

knew, “TMN told me that they were all through today”. TMN drove him home and asked for “my set of keys”(for the van), and he did not see him afterwards. In contrast to TMN’s evidence, Brown said that they had finished the job. When asked by his Counsel: what was said about continuing to work for the company, Brown replied that he could not remember any discussion about working for the company. When asked what was the plan to work the next day, he replied that he had no plan to work – he was told he was dismissed.

He then called the Apprenticeship Agency to say that he and TMN were no longer together. [ 57 ] Brown stated that he was owed two weeks salary for 2015, and the balance of the sale price for the business. When asked how he was paid, he replied that he was supposed to get $100.00 per week but was paid $100.00 per month plus a few extra dollars if the job needed a second plumber. He was paid by cheque monthly. No income tax or other deductions were made. He received no “forms” (records of payment) from the company; he said the cheques/deposit slips were self-explanatory.

He did not produce any income tax returns for the years before 2015. He produced tax returns for 2015 and 2016 (Exhibits 2 to 5) shortly before trial. [ 58 ] In relation to Ms. Landry’s evidence, he stated that he called the Agency the same or next day to protect his license and so that TMN would not be permitted to work as a plumber on his own. [ 59 ] He stated that TMN’s evidence that he showed up after lunch to pick Brown up and return to finish the job was not true.

The job was complete when they left, and he did not hear from TMN that afternoon. [ 60 ] His counsel walked Brown through the facts alleged in the plaintiffs’ pretrial brief. He replied that his salary was pre-set at $100 per week and extra work would be added to that. He had no doubt that TMN suffered losses, but it was not caused by him. He was dismissed. [ 61 ] He acknowledged discussing with CNM whether he would be paid by cheque or in cash. He denied any discussions on how his payments would be treated for income tax purposes.

When asked if CNM provided him with T4 slips, he stated that he did not recall seeing any. When asked to comment on CNM’s evidence that he did not want to show the payments because he did not want to pay tax, he replied that he included it in his income “only one year”. As noted, he produced no income tax returns before 2015. I gave no weight to this evidence, absent tax returns for the relevant years.

They were relevant and he had been asked to produce them. [ 62 ] When asked if he had ever received the Memorandum prepared by John Cameron (CEB Tab 15), or reviewed it before the final Agreement, he answered twice that he did not recall. These answers were not credible. [ 63 ] Brown was cross-examined.

With respect to his trial evidence that he was supposed to be paid $100.00 per week, he was directed to his discovery evidence of July 12, 2018, at page 35-36, in which he was adamant that he received $100.00 per month - $1200.00 per year, and his answers to questions put to him by his Counsel on discovery, at page 62, to the effect that he was paid $100.00 per month and “Q. All the other profits and everything of the company went to the Martells? A. Yes, of course.” He added, in his trial evidence, that he was paid for supervision – and extra for work when two plumbers were required, which was “not often”.

When asked to confirm that he actually received about $400.00 per month, he said that he did not recall. [ 64 ] He agreed that the business had hundreds of clients, and that his accountant calculated a range for the sale price based on sales, and that he set the price at the lower end of the range ($70,000.00) as opposed to the higher end ($105,000.00). [ 65 ] Brown was shown and confirmed the contents of his 2015 and 2016 tax returns. His income included OAS, CPP, rental income, and self-employment. The self-employment was plumbing services provided under the name R E Brown Services.

He began operating R E Brown Services on February 1, 2015. He was asked about expenses deducted from yearly gross revenues of between $19,000 and $21,000. [ 66 ] He did not recall whether the Company’s client list was included in the sale to the plaintiffs. When referred to the Memorandum (CEB Tab 15) which listed the client list and customer cards as intended to be transferred, he replied: I don’t remember. He did not remember the client cards as being in the deal or giving them to TMN. When asked how clients would know to contact him after January 15, 2015, he replied: hearsay.

He denied accessing client lists and stated: “no. I have my way of keeping books.” [ 67 ] He understood what he agreed to was to be with TMN and train him the easy and right way to do things. He agreed that there was more than one way to do things. He understood that TMN could not legally work as a plumber without Brown being with him on every job. He agreed that it would have been impossible to run a plumbing business without a plumber.

As a result of Brown ceasing to be TMN’s supervisor, there was a void in plumbing service in the Town of Middleton. [ 68 ] Brown was directed to paragraph 6(3) of the Agreement, wherein he covenanted not to be involved directly or indirectly in a business “similar to the Purchased Business within 30 miles of Middleton for five years from the date of the Agreement.” He replied that when he was dismissed, the contract was broken, and he was free to do what he wanted to do. [ 69 ] At this point, plaintiffs’ counsel noted that Brown was referring to notes which Brown stated were made at the time of the events.

He had reviewed them in preparation for his evidence. The notes had not been produced in any Affidavit disclosing relevant documents, nor in response to counsel’s request at Discovery, nor their existence disclosed at any time. [ 70 ] In answer to plaintiffs Counsel’s

summary of TMN’s version of what happened at Nictaux – Brown left the basement and went to the vehicle, and TMN hoped that you would cool off and he could convince you to return, Brown replied: I never did confirm that I was done. He repeated that TMN asked for the keys before lunch. He called the Apprentice Board after TMN asked for the keys.

He did not answer counsel’s rhetorical question: You say the person who paid you $56,000 for the business, just walked (from it). [ 71 ] On redirect, Brown agreed with CNM’s evidence that he gave her a Rolodex that contained client file cards. [ 72 ] He repeated that they had finished the Nictaux job before they went home, and that TMN told him that they were through before the job was finished.

First Issue: On January 15, 2015, did Brown quit or was he dismissed? [ 73 ] TMN and Brown gave opposing evidence. I find that TMN’s evidence fits into the picture revealed by the whole of the evidence, one of the tools for assessing credibility. TMN gave his evidence in a straight-forward manner and did not avoid answering any questions. I find that Brown quit and was not dismissed. [ 74 ] Brown could not recall evidence that was not helpful to his case, including for example awareness of the memorandum (CEB, Tab 15) enumerating the oral agreement prepared for and used by Mr.

Gillis as the basis for the formal Agreement. In addition, Brown’s trial evidence was inconsistent with his discovery evidence on a few material facts.

His evidence about the employment arrangement – that he was paid as an employee and reported his “income” for income tax purposes was not believed for two reasons: despite requests, he did not produce his tax returns for 2011-2014; and more important CNM gave fulsome, unhesitating, and articulate evidence as to the arrangement, especially about Brown’s desire not to have reportable income that would interfere with his receipt of OAS, which evidence was far more credible than Brown’s contrary evidence. [ 75 ] Supporting the plaintiffs’ credibility was the fact that TMN was out of business, as of January 15, 2015, without Brown as his supervisor.

The plaintiffs had already paid $56,000.00 of the $70,000.00 purchase price, and TMN had worked fulltime as an apprentice plumber under Brown for three and a half years. Of the 8000 hours of required apprentice time as of March 28, 2013, he had reported 1966 actual log book hours (CEB page 2), plus 1180 hours obtained by study, and had uncredited work hours from May 31, 2013 to January 2015 to add.

He was still repaying the mortgage taken out to pay the initial $35,000.00 purchase price. [ 76 ] Circumstances that suggest Brown quit include the following. [ 77 ] To supervise TMN he was required to be present whenever TMN was on a job – basically full-time. For this he agreed to receive $100.00 per month as consultant fees; in fact, he was receiving about $400.00 per month.

This was not much for a person who had, by his description, operated a very successful business for many years. [ 78 ] It is not disputed that Brown immediately notified the Apprenticeship Agency that TMN no longer had a journeyman supervisor, and immediately went into competition with his former business. I accept the plaintiffs’ evidence that when Brown quit, their phone stopped ringing. It makes sense that, if Brown wanted to re-enter the plumbing business, it would be easier without competition. [ 79 ] As Ms.

Landry testified, and as intended in the Apprenticeship Agreement (CEB page 11), it was anticipated and likely that TMN would have completed his apprenticeship in December 2015. The Cameron memorandum documenting the oral agreement provided that Brown would remain as a consultant “for the duration of [TMN]’s apprenticeship”.

It was changed in the formal signed Agreement to read that Brown “shall continue as an employee of the Company for a period of four years and retain his qualifications as a journeyman plumber so that the Purchaser may acquire the necessary apprenticeship time required by the Nova Scotia Department of Labour to qualify as a licensed plumber.” Brown quit before the four year period ended, and before TMN could obtain the work hours to qualify as a licensed plumber, and compete with Brown. [ 80 ] Brown’s evidence that he was an employee of the company is not credible.

The plaintiffs’ evidence that he asked to be paid other than as an employee as it would affect his Old Age security, and that they accepted this request after consulting with their accountant on an alternative, is consistent with his failure to produce the requested tax returns for 2011-2014. I infer those tax returns would not likely show what he received from the Company. [ 81 ] Applying the Faryna v Chorny plausibility analysis, (

a) It is improbable that TMN would dismiss Brown, knowing that he would not be able to work, make a living, and pay the debt he owed for the purchase of the business. Despite the plaintiffs’ efforts, they could find no replacement for Brown, and their work phone ‘went dead’ immediately after Brown quit. (

b) The arrangement whereby Brown was required to be present when TMN had work, while only received $100.00 per month as a consultant, plus a little more occasionally, was much less remunerative than he would have received when he operated the business, or when he immediately recommenced working for himself after quitting. It is more likely that he quit working long hours for little remuneration than what he had earned as owner of a “very successful business”, and what he would reasonably expect to earn if TMN was unable to plumb and compete with him in Middleton for his old clients after he stopped acting as TMN’s Journeyperson supervisor. In

summary, the plaintiffs had everything to lose; the defendant had nothing to lose and everything to gain. Issue Two: Damages claimed by the Defendant. [ 82 ] Mr. Brown claimed the installments on the purchase price due September 2015 and September 2016 ($7000.00 x 2) and for his work up to January 15, 2015. [ 83 ] Since I find that he (

a) was not an employee of the company, (

b) withdrew from the apprentice agreement in breach of the Agreement, and (

c) immediately re-entered the plumbing business in Middleton in breach of his non-competition agreement, he is not entitled to damages. The reason why is tied to, and analyzed in, the Plaintiffs’ claim for damages. Damages claimed by the Plaintiffs. [ 84 ] The plaintiffs submit that Brown’s withdrawal from the apprenticeship arrangement contrary to paragraph 6(2) of the Agreement, and immediate re-entry into competition as a plumber contrary to paragraph 6(3) of the Agreement constituted fundamental breaches of the Agreement. They resulted in the loss of the business and their whole investment in it.

Without Brown as TMN’s journeyperson supervisor, the business could not operate and had no value. They seek return of the investment of $56,000.00 (plus pre-

judgement interest). [ 85 ] Effectively, the plaintiffs seek consequential damages related to TMN’s loss of TMN’s ability to continue the apprenticeship, not on the basis of the special character of an apprenticeship agreement outlined in the seminal English decision – Dunk v George Waller and Son [1970] AER 630 (CA), but on the principle in Hadley v Baxendale applied in Marchen v Dams Ford Lincoln Sales Ltd , 2010 BCCA 29 at paragraph 64 .

Specifically, on the potential issue of remoteness, the plaintiffs claim that the consequential loss of the continuation of the apprenticeship and the opportunity to eventually earn a living as a plumber, was not too remote and was within the reasonable contemplation of the parties at the time the Agreement was entered into. The special circumstances under which the Agreement was made, described by Ms.

Landry as a rare (“not often”) and unusual relationship, in which Brown was fulfilling the journeyperson-supervisor role for the apprentice who was purchasing his business, highlighted the importance of Brown upholding his agreement to comply with paragraph 6(2).

The loss of the use of the business was in addition to the loss of the asset purchased. [ 86 ] The plaintiffs claim, as consequential loss, the tuition for the 2010-2011 plumbing course ($7-8000.00) and for the six-week Dartmouth course in 2013, rounded down to $10,000.00. [ 87 ] The plaintiffs claim damages for Brown’s breach of the non-competition paragraph, which obligated him not to compete in the Middleton area for 5 years from August 31, 2011 – that is until August 31, 2016.

They estimate the gross twenty month loss at $36,512. [ 88 ] The Defendant’s submissions were largely related to his submission that he was terminated and owed money. In reply to the plaintiff’s claim for return of the purchase price paid, his position is that the plaintiffs received, through the share-purchase Agreement all the assets that they bargained for.

He submitted that the burden of proof remained with the plaintiffs to prove both their version of what happened on January 15, 2015, and the quantum of any loss or damages claimed. [ 89 ] In a short reply, the plaintiffs refer to their evidence that they did not have room for the inventory included in the sale, which remained in Brown’s basement, and was valued at $21,000.00 on August 31, 2011. The inventory in his basement on January 15, 2015, was not returned to the Company. Analysis of Damage Claims The Law [ 90 ] The court relies on two texts for the fundamental principles for analyzing damage claims:

(1) S.M. Waddams, The Law of Damages (Toronto: Canada Law Book, Looseleaf 2012) chapters one – loss of property, five – damage to economic interests, thirteen – certainty, fourteen – remoteness, and fifteen – mitigation; and

(2) Harvin D Pitch and Ronald M Synder, Damages for Breach of Contract, 2 nd edition (Toronto: Reuters Thomson Proview eBook, March 16, 2022) chapters one, two, especially four (Loss of Chance), nine, ten and eleven. [ 91 ] Waddams writes that compensation for loss of property has two elements: a substitute for loss of the value of the property and a substitute for the loss of the opportunity to use it, § 1.20. When damage assessment is in issue, it is too late to protect the plaintiff’s actual interest in the specific property § 1.200.

The plaintiff’s individual circumstances are to be considered in assessing the value to the plaintiff § 1.270 (citing Liesbosch v Edison [1933]AC449(HL) ).

An award of damages should put the party complaining so far as money can do it in the same situation as if the contract had been performed § 1.970. [ 92 ] In respect of compensation for loss of use, Waddams writes: the capital value of property itself reflects the value of future anticipated use, so if complete compensation can be given for the full value of the property there would be no room for an additional claim for loss of use, so as to avoid double compensation, but for convenience, courts commonly divide a claim for loss of property from a claim for loss of use § 1.830. [ 93 ] In c.5, respecting loss of contractual benefits, he writes that a person who makes a good bargain is treated as one who has a present right, the value of which is measured by the value of the promised performance.

The contract breaker is bound to make good the loss caused by the breach § 5.10. If the contract is a profitable one, the plaintiff gets full compensation and cannot add a claim for expenses incurred in reliance of the contract; if the contract is not profitable, the plaintiff may claim expenses incurred in reliance on the contract § 5.200. The most common claim is loss of the profits that the plaintiff would have made but for the defendant’s wrong.

Waddams cites caselaw for the statement that the assessment “must always be more or less a matter of estimate, because it is impossible to ascertain, with mathematical precision, what in the ordinary course of business would have been the amount of sales and profits” § 5.890. Probable loss of future business profits, though difficult to estimate, have been awarded in a wide variety of circumstances § 5.930.

Compensation for loss of the opportunity to earn money by supplying services has been applied frequently in cases of breach of contract by employers and wrongful interference with providing services by other means (I include as an example, breach of a non- competition contract) § 5.1060. [ 94 ] In c. 13, he writes that there are two kinds of uncertainty affecting proving loss: unknown facts that could theoretically be known, and the uncertainty of attempting to estimate the position the plaintiff would have occupied in hypothetical circumstances – if the wrong had not been done § 13.10.

If the plaintiff proves that a loss probably occurred, difficulty of determining the amount will not excuse or benefit the wrongdoer § 13.30. [ 95 ] In c. 4 – Loss of Chance, of Pitch and Snyder’s text, the authors expand on the last principle - determining the loss where the party who breaches a contract is liable to an innocent party for any deprivation of promised benefits, and any consequential losses flowing from the breach or that were or ought reasonably to have been within the contemplation of the defendant at the time of contracting (per Hadley v Baxendale ) § 4:1. [ 96 ] Where a party is deprived of an opportunity to obtain a benefit which was uncertain but potential at the time of the contracting, that party has suffered a loss of chance or loss of opportunity.

In these cases it is impossible to prove an actual loss of a benefit; therefore, if the plaintiff can prove on a balance of probabilities that a chance was lost, he/she may be entitled to damages, even where the court estimates that the plaintiff would have had a less than 50% (but more than trivial) chance of capitalizing on the opportunity and securing

the benefit. Causation and quantification of loss are separate issues. [97] The plaintiff must prove that the defendant’s breach deprived the plaintiff of a chance to secure a significant benefit and thatthe loss of chance was not too remote from the parties’ bargain (that is, it was within the contemplation of the parties at the time of thecontract). The existence of the opportunity and fact that the defendant’s breach deprived the plaintiff of the opportunity must be provenon a balance of probabilities.

The plaintiff is then entitled to damages equal to the estimated percentage likelihood that the plaintiffwould have secured the benefit. “It will be a rare case where the probability that the plaintiff would have secured the benefit but for thedefendant’s breach can be determined with precision. . . loss of chance cases will frequently require the court to place a definite value onan uncertain and indefinite hypothetical occurrence.” [98] Pitch and Synder trace the principles from Chaplin v Hicks [1911] 2KB786 (EngCA) to Justice Doherty’s description of thefour requirements for a successful loss of chance claim in a contracts case in Folland v Reardon, (ON CA), [2005] OJNo216 (ONCA) at paragraphs 73 and 74, more recently reaffirmed in Trillium Motors World Ltd v Cassels Brock and Blackwell LLP,2017 ONCA 544.

The plaintiff must show: (1) on a balance of probabilities that but for the defendant’s breach, the plaintiff had a chanceto obtain a benefit or avoid a loss; (2) the lost chance was sufficiently real and significant to rise above mere speculation; (3) the outcomedepended on someone or something other than the plaintiff; and (4) the lost chance had some practical value. Doherty JA writes atparagraph 74: [74] The first criterion is simply an application of the traditional burden of proof.

The plaintiff has the burden of demonstrating the "butfor" connection between the lost opportunity and the defendant's misconduct. The second criterion is admittedly somewhat nebulous.There is no bright line between a real chance and a speculative chance. An empirical review of the case law suggests that chancesassessed at less than 15 per cent are seldom viewed as real chances.

The third requirement recognizes that where a plaintiff is faced withthe difficulty of establishing what would have happened, a past hypothetical fact, had the defendant not engaged in the wrongful conduct,it is too much to expect the plaintiff to establish that hypothetical fact on the balance of probabilities where what would have happenedturns on the actions of a third party. The fourth requirement reflects the inherent nature of a damages award.

If the chance lost has no realvalue, neither the compensatory nor restitutionary rationale for damages would justify an award of more than nominal damages. [99] Pitch and Synder note caselaw from the Supreme Court of Canada in which the plaintiff is not excused for failing to callavailable evidence, and that it is up to the court to estimate damages even if the computation of damages amounted to mere guesswork.Courts are not to hold the plaintiff to an overly burdensome evidentiary burden. §§ 4.3-4.9.

Courts appear to sometimes apply amechanical or cumulative analysis of the contingencies, but on more occasions reject that approach for the holistic approach, as inTrillium. §§ 4.10-4.17. [100] Two sections of the Lexis Advance Quicklaw version of Halsbury’s Laws of Canada -Damages (2021 Reissue) by LawrenceDavid and Bruce Feldthusen: HDA-40 (Breach of Contract-General Principle – Special issues in the Assessment of Damages for Breachof Contracts – Difficulty in Assessing Plaintiff’s Claim) and HDA-95 (Limiting Principles – Causation and Uncertainty) adopt the sameprinciples in concise language and with multiple case citations.

Application to this case [101] The plaintiffs seek these compensatory damages: (

a) Return of the purchase price for the Company paid before the defendant’s breach ($56,000.) and relief from the defendant’scounterclaim for the remaining amount ($14,000.00); (

b) consequential damages on the basis that the plaintiffs lost the use of the business as a going concern; (

c) the tuition paid to attend the Lawrencetown NSCC plumbing course in 2010-2011 ($7,000.00) and the six-week course inDartmouth between April 29 and June 7, 2013 ($2,000.00); (

d) Damages for breach to the agreement not to compete until after August 31, 2016 – estimated at $36,512.00 for twenty months; and (

e) An unstated amount for the Company tools and inventory retained by Brown after January 15, 2015. [102] The court agrees that it was reasonably foreseeable by Brown, when the Agreement was entered into, that Brown’s agreements toact as TMN’s journeyperson-supervisor for four years and not to compete with the plaintiffs in the plumbing business in the Middletonarea for five years were significant benefits to the plaintiffs, given in exchange for their agreement to purchase Brown’s business. [103] Brown gave evidence that he set the sale price for the Company, in consultation with his accountant, on the basis of the verysuccessful business he was operating.

Said differently, the price was set on the business’s ability to earn profits as a going concern. Theplaintiffs agreed to Brown’s purchase price for the Company’s tangible and intangible assets. The sale price was $70,000.00, but theCompany’s August 31, 2011, financial statements (CEB 5 and 9) show tangible assets of $21942.00, of which $21,000.00 was inventory.I find that the remainder of the purchase price ($48,058.00) was intangible – the ability to earn profits as a going concern in theplumbing business.

It is evident from the totality of the evidence, including Brown’s evidence, that the arrangement – which requiredBrown to supervise all TMN’s work for nominal consideration other than the purchase price, and not compete with the business, weresignificant benefits the plaintiffs acquired through their purchase of Brown’s Company.

This had to have been obvious to all the partiesat the time the Agreement was entered. [104] The August 31, 2011, Company statements show that in the 8 months to August 31, 2011, the Company made net profit of$14,085 on sales of $53,245.00 (CEB 5) and that Brown was able to withdraw actual dividends of $81,274.95 (CEB 6). The August 30,2012, Company statements (CEB 9) show that in the first year of operation by the plaintiffs, the Company had sales of $98,118.56, andnet profit of $11,262.78 after payment of subcontracts (according to CNM’s explanation, payments to Brown) of $12,105.55 and a

management fee of $7000.00.

GST filings in CEB 11 indicate that the Company’s quarterly sales continued to average about $25,000 after September 2012. [ 105 ] Because the bulk of the purchase price was not for tangible assets, but rather the agreements of Brown to act as TMN’s journeyperson-supervisor for nominal consideration for 4 years and not to compete with the Company in the Middleton area for 5 years, thereby giving TMN the opportunity to become a licensed plumber and the plaintiffs the opportunity to operate a profitable business, the appropriate approach to determining a compensatory basis is to estimate the loss of use of the purchased business by Brown’s breaches.

More specifically, the loss of opportunity of TMN to become a licensed plumber, and the Company to become profitable. [ 106 ] Because it is uncertain that TMN would have completed his apprenticeship within the four years that Brown committed himself to in the Agreement, the analysis of loss involves two aspects: first, the certain loss to TMN of the right to continue his apprenticeship under Brown until August 31, 2015 and the Company not to have Brown compete for plumbing work in the Middleton area; and second, the loss of a chance to continue as a profitable plumbing business thereafter.

The analysis applies the four criteria attributed to Folland v Reardon . [ 107 ] I will quantify these two compensatory claims separately. [ 108 ] First, the available Company statements show that under Brown’s ownership and the first year of the plaintiffs’ ownership the Company reported gross sales of about $100,000.00 per year and net profit (before management fees) of about $20,000.00 per year. Brown’s net profit for 8 months ending August 31, 2011, was $14,084, or at rate of $21,127.50 per year, and the plaintiffs’ net profit (with $7,000.00 management fee) was $18,262.78 for year ending August 30, 2012.

At that rate, it is likely that in the almost 7.5 months between January 15, 2015, and August 31, 2015, the plaintiffs lost $13,000.00. [ 109 ] Second, it was anticipated by the parties when they signed the Apprenticeship Application and Agreement on July 19, 2011, and by Ms. Landry in her evidence in March, 2022, that TMN would complete certification as a licensed plumber by December 31, 2015. TMN had accrued, by study as of June 7, 2013 1180 hours of the then required 8000 hours. As of March 28, 2013,TMN had recorded with the Apprenticeship Board 1966 hours by work (about 18 months at 110 hours per month).

TMN testified that he worked fulltime plus some Saturdays. At that rate (110 hours per month), it is reasonable to infer as a probability that, in the 21 months from early June 2013 to early January 2015, he accrued another approximate 2310 worked hours. TMN’s total hours as of the breach was about 5456 hours. At the same rate, he likely would have accrued another 880 worked hours by August 31, 2015, for a total of about 6336 hours.

Between additional study and work, there was a chance that TMN would have completed certification by about the end of 2015, and certainly before September 1 st , 2016, when Brown’s agreement not to compete with the Company ended. [ 110 ] In addition, Ms. Landry testified that the 8000 hours apprenticeship requirement had been relaxed since 2011 and TMN may have required fewer worked hours. [ 111 ] Another significant factor is that the plaintiffs’ attempts to find another journeyperson-supervisor were unsuccessful.

I conclude that the fact that Brown, in breach of his agreement, immediately went back into business in the rural community of Middleton (serving the clientele he had served for 44 years until 3 years before) likely precluded any reasonable prospect of the plaintiffs being able to hire someone to replace Brown, and profitably compete with Brown. [ 112 ] As to the first Folland factor, it is clear that, but for the defendant’s breaches of the Agreement, the plaintiffs had a chance to succeed in the sense of TMN’s obtaining certification as a licensed plumber, the Company continuing to operate as a going concern at a profit. [ 113 ] As to the second Folland factor, the chance lost was sufficiently real and significant to rise above mere speculation. [ 114 ] As to the third factor, I accept the plaintiffs’ evidence as to their unsuccessful efforts to find a replacement for Brown, that is, to mitigate.

Their failure was not through lack of effort. The matrix in this case was, as Ms. Landry described it and I find, rare and unusual. The usual apprenticeship arrangement involves an apprentice being hired by a business with one or more licensed plumbers (journeypersons) and working as an employee. In this case, the arrangement enabled Brown to immediately sell his “very successful” business to his apprentice, in return for providing the required supervision of all his work for nominal consideration, and not competing with him. TMN could not work, and the Company could not continue, without a licensed plumber.

The company had no value without Brown. The loss of the value of the business is not attributable to the plaintiffs, but to the fact that Brown breached the Agreement in two fundamental aspects: supervising TMN until August 31, 2015, and not competing with the Company until September 1, 2016. [ 115 ] As for the fourth factor, the lost chance involved the loss of the benefits the plaintiffs were to receive by the Agreement.

That loss, in turn, resulted in the loss of the value of the Company. [ 116 ] The analysis of contingencies that go into the estimate of damages for loss of a chance is not a mechanistic or cumulative analysis where the contingencies are interdependent (Pitch & Synder § 4.14). [ 117 ] As of January, 2015, TMN was about 68% of the way to becoming a licenced plumber, and the Company to being able to operate as a going concern in the plumbing business.

But for Brown withdrawing as TMN’s supervisor and going into business against him, I estimate that TMN had more than a 50% chance of successfully completing his apprenticeship. He was incentivized by the debt he owed to Annapolis Ventures to do so. [ 118 ] I further find that, if TMN had obtained his certification, the Company would have continued to earn annual profit at the rate of $20,000.00, at least until Brown’s non-compete obligation ended on August 31, 2016.

Said differently, the Company would have likely earned at least $20,000.00 between August 31, 2015, and August 31, 2016. [ 119 ] After August 31, 2016, TMN and the Company may have faced competition from Brown. If so, it is likely that event could

reduce the plaintiffs’ income. Brown’s age was not in evidence, but he testified that he began in the trade in September 1952. I infer that in September 2016 he was at least 80 years old. TMN was about 52 in September 2016. I estimate that TMN would likely have worked as a plumber until age 60 or longer. I assess the risk to the plaintiffs’ hypothetical income or profit for 8 years from 2016 (including competition from Brown) to be about 50%. [ 120 ] I summarize the plaintiffs’ losses as: (

a) January 15, 2015 to August 31, 2015 - $13,000.00. (

b) August 31, 2015 to August 31, 2016 - $20,000.00 times 50% or $10,000.00. (

c) August 31, 2016 to August 31, 2025 - $10,000.00 times 50% times 8 years or $40,000.00. (

d) Prejudgment interest at the rate 0f 2.5% per annum on those amounts from the date they would have been received to the date of this decision, less a reduction at the rate of 2.5% per annum for those amounts in Paragraph 119(

c) lost over the three years after this decision (as the present value of those hypothetical future losses). [ 121 ] The plaintiffs’ claim related to recovery of the cost of the 2010-2011 tuition, claimed as a foreseeable consequence of Brown’s breaches, is denied. TMN entered that program before he discussed or entered the Agreement with Brown. That loss was not caused by Brown. The claim for the cost of the 2013 courses is already calculated in the loss of profit damages. [ 122 ] The plaintiffs’ claim for tools or inventory retained by Brown is denied.

The plaintiffs failed to present any evidence as to the potential value of any tools or inventory in Brown’s basement on January 15, 2015, nor any efforts by them to recover them. Conclusion [ 123 ] The defendant breached the Agreement as described in this decision. His counterclaim is denied. [ 124 ] The plaintiffs did not breach the Agreement.

The defendant is ordered to pay the plaintiffs compensatory damages in the amount of $63,000.00, plus prejudgment interest and costs. [ 125 ] If the parties are unable to agree on costs within 20 days, the plaintiffs shall file a brief within 7 days and the defendant within 7 days thereafter. J.