Churchill Cellars Ltd. v. Haider, 2022 NSSC 352

SUPREME COURT OF Nova Scotia Citation: Churchill Cellars Ltd. v. Haider , 2022 NSSC 352 Date: 20221205 Docket: Hfx No. 496425 Registry: Halifax Between: Churchill Cellars Ltd. Plaintiff v. Jeff Haider, Devonian Coast Wineries Limited, Jost Vineyards Limited and Carl Sparkes Defendants D E C I S I O N Judge: The Honourable Justice James L. Chipman Heard: November 7, 8 and 9, 2022, in Halifax, Nova Scotia Written Decision: December 5, 2022 Counsel: Michael Simaan, for the Plaintiff Brian K.

Awad, K.C., for the Defendants By the Court: Introduction and Overview [ 1 ] This lawsuit was originally commenced in Ontario in 2016. At the request of the Defendants, the action was stayed in Ontario and transferred and continued in Nova Scotia ( Churchill Cellars Ltd. v. Haider , 2019 ONSC 1143 , affirming 2018 ONSC 2013 ).

The transfer was accepted by the Supreme Court of Nova Scotia by Order dated February 10, 2020. [ 2 ] The Plaintiff Churchill Cellars Ltd. (Churchill), is an Ontario corporation that operates as a wine agency, representing manufacturers of wines, spirits and beer in Ontario and Atlantic Canada. [ 3 ] The Defendants Devonian Coast Wineries Limited and Jost Vineyards Limited (Jost) (collectively, Wineries) operate wineries in Atlantic Canada. [ 4 ] The Defendant Carl Sparkes is the President and Director of Wineries, and was the operating mind of these corporations at all relevant times. [ 5 ] The Defendant Jeff Haider was formerly an employee of Churchill who left and began working with Wineries upon Wineries’ termination of their agency relationship with Churchill in early 2016.

[ 6 ] Churchill had represented Wineries since 2002. In September 2013 Mr. Haider started working for Churchill as brands manager and ultimately became primarily responsible for Churchill’s representation of Wineries in Atlantic Canada. This continued up until he left Churchill and Wineries terminated their relationship with Churchill. [ 7 ] At the commencement of his employment with Churchill in 2013, Mr.

Haider signed a contract that contained the following provision, which I will refer to as the non-solicitation clause: NO SOLICITATION OF CUSTOMERS OR EMPLOYEES You acknowledge and agree as a condition of your employment that for the period of your employment with the Company and a further six (6) months thereafter you will not solicit the business of or perform services for, or become employed by any customer of the Company with whom you had any dealings while employed by the Company or otherwise attempt to influence their contractual relations with the Company.

You acknowledge and agree as a condition of your employment that for the period of your employment with the Company and a further six (6) months thereafter, you will not solicit or attempt to engage or hire any persons on behalf of any other employer who were employed by the Company during your period of employment with the Company. [ 8 ] On January 19, 2016, Mr. Sparkes advised Churchill that Wineries would be terminating Churchill’s representation, effective February 1, 2016. At the same time, Mr. Sparkes advised that Wineries would be hiring Mr.

Haider. [ 9 ] At or about the time he was notified of this, Alexander Patinos advised Mr. Sparkes, on behalf of Churchill, that there was the non-solicitation clause in Mr. Haider’s contract with Churchill. He explained his view to Mr. Sparkes that the provision would prevent Mr. Haider from working for a client of Churchill’s (i.e., Wineries) for a six-month period following the termination of his employment. [ 10 ] Communications ensued between Wineries, Churchill and Mr. Haider regarding the situation. Mr. Haider requested that Churchill permit him to “un-resign”, which Churchill refused. Mr.

Haider then resigned his position with Churchill effective February 15, 2016. [ 11 ] Mr. Haider advised Churchill that he would not be working for Wineries but would instead be leaving the industry altogether. Mr. Sparkes similarly confirmed that Wineries would not be offering Mr. Haider employment, given the non-solicitation clause in Mr. Haider’s contract. [ 12 ] During the six months following his resignation from Churchill, Mr. Haider was formally employed by a non-party company, Devonian Coast Villas Limited (Villas), controlled by Mr. Sparkes. During the six-month period, employees of Wineries consulted Mr.

Haider, seeking his opinions regarding Wineries’ business issues. Positions of the Parties Churchill [ 13 ] Churchill asserts that Mr. Haider breached the non-solicitation clause in his employment contract and that Wineries breached the contract that existed between Churchill and Wineries. In either or both event(s), Churchill says that it is entitled to damages for loss of commissions for a period ranging from six to 14 months. [ 14 ] The parties agree that the total amount of the commission invoices issued by Churchill to the corporate Defendants from February 1, 2015, to January 31, 2016, was $380,468.83.

Accordingly, Churchill says that the breaches entitle them to between $190,234.41 (six months) and $443,880.36 (14 months) from the Defendants, along with prejudgment interest and costs. Defendants [ 15 ] The Defendants challenge the validity of the non-solicitation clause. As for the alleged breach of contract between Churchill and Wineries, they say that Wineries provided Churchill with proper notice.

In the result, the Defendants say that the claims should be dismissed with costs payable to them. [ 16 ] The Defendants maintain that the non-solicitation clause is unenforceable due to its ambiguity and overbreadth. They say the word “dealings” is ambiguous and overbroad. They further say overbreadth arises from the absence of any limitation on the scope of the types of business in which Mr. Haider could engage if employed by, or providing services to, a client of Churchill after resigning. [ 17 ] Alternatively, if there is a finding that the non-solicitation clause is valid, Mr.

Haider acknowledges that he provided services to Wineries contrary to the restrictive covenant when he responded to requests by Wineries’ staff for advice and information during the six months following his resignation from Churchill. [ 18 ] Further, if there is a finding that the non-solicitation clause is enforceable, Wineries acknowledge that they committed the tort of inducing breach of contract when their staff sought and received advice and information from Mr. Haider during the six months following Mr. Haider’s resignation from Churchill. [ 19 ] As for the personal claims against Mr.

Sparkes, he says he was acting in the course of his employment as CEO of Wineries at all times. Accordingly, he argues that these personal claims should be dismissed. Testimony

Deanna Sperry [ 20 ] Deanna Sperry was called by Churchill. She worked as a brand manager for Churchill in 2012 – 2013. Given that Wineries was one of Churchill’s clients, Ms. Sperry worked regularly with Wineries. Sometime in 2013, Mr. Sparkes reached out to her and she agreed to leave Churchill to become director of sales and marketing at Wineries beginning in June 2013. She remained in this role until she was replaced by Mr. Haider in mid-February 2016. [ 21 ] Ms. Sperry described how her role diminished with Mr. Haider’s arrival. At the same time, she recalled that “Mr. Sparkes said Mr.

Haider’s role had to be kept secret.” In particular, Mr. Sparkes did not want Churchill to know that Mr. Haider was assisting Wineries’ employees. [ 22 ] During her testimony, Ms. Sperry reviewed emails from mid-March 2016 which were erroneously sent to Mr. Haider at his former Churchill email address. The emails sought Mr. Haider’s opinion on wine issues and referenced Mr. Haider attending a meeting with other Wineries employees in advance of a meeting with the Nova Scotia Liquor Corporation (NSLC). Ms. Sperry testified that Mr.

Sparkes “directed” her to send subsequent emails in an attempt to cover-up what was really going on. For example, she sent a further email saying that another Jeff H. with Wineries was the intended recipient. She explained that this other Jeff H. had “absolutely nothing” to do with the matters but that she engaged in this dishonest behaviour “because I was directed to by Carl Sparkes.” [ 23 ] On cross-examination, Ms. Sperry said she felt “one hundred percent” that Mr. Haider took on the director of sales role as soon as he started with Villas.

She elaborated that his “interfacing” with the Maritime provinces liquor boards was “intended to be secret … kept on the downlow for a period of time.” Referring to Mr. Haider, Ms. Sperry stated, “He was taking on all the duties but I was the face because we didn’t want to acknowledge that he was in that role.” [ 24 ] Ms. Sperry “absolutely” agreed that it was wrong to try to cover up Mr. Haider’s involvement, adding (with reference to the emails): “I still feel sick to my stomach about it, I was directed by Carl to send.” She added that it would be incorrect to say that Mr.

Sparkes would not know who the other Jeff H. was, as he also worked for Wineries. Alexander Patinos [ 25 ] Alexander Patinos is the general manager of Churchill. He confirmed that Churchill acts as a representative of alcohol beverage manufacturers. Churchill looks after the sales and marketing of various accounts within liquor stores and restaurants. Mr. Patinos started his own alcohol representative company in 1990 and later joined Churchill. By 2011, he became a minority shareholder as the founder, Chris Churchill, began to plan his retirement. [ 26 ] During the time in issue, Mr. Patinos and Mr.

Churchill would visit Atlantic Canada once or twice annually. By the time he joined Churchill, Wineries was a Churchill client. He noted that Churchill had agreements (written or oral) in place with their various clients in Ontario and Atlantic Canada. He recalled that these agreements outlined the standard duties and obligations between the parties. He said that when Churchill acted as an agent for a winery, it did so on an exclusive basis.

He elaborated that the exclusivity would be based on “category, region or price band.” He added that an appointment letter is provided to the liquor board to confirm that an agency acts for the particular alcohol manufacturer. [ 27 ] Mr. Patinos explained that because Wineries’ products covered a broad spectrum in terms of category and price, Churchill could not represent Wineries’ competitors. Mr. Patinos described Churchill’s relationship with Wineries as a “normal agent-supplier relationship.” He added that Mr. Sparkes was “very demanding, pushing us to advocate for his products.” [ 28 ] Mr.

Patinos testified that when Churchill represents an alcohol manufacturer, “we are an extension of them.” He noted Churchill’s work would involve liaising with liquor boards and implementing marketing programs. He recalled that Churchill’s commission while working with Wineries was based on “eight percent, for most of the period.” He added that the commission was a percentage based on the wholesale price sold to the liquor board. [ 29 ] On cross-examination, Mr.

Patinos acknowledged that the alcohol representation business is “a very competitive industry in terms of clients and employees.” He agreed that employers compete to hire “good people”, and that a unique skill set is involved in understanding liquor boards. [ 30 ] Mr. Patinos said that in his 34 years in the business, he had never seen an alcohol manufacturer sever ties with an agent without providing notice. He added that if this were to happen, it would leave the agent “high and dry.” [ 31 ] Mr.

Patinos agreed that at the material time, Churchill represented Jost in the Maritimes and Ontario, but that Jost represented itself in Newfoundland and Labrador. He agreed that Mr. Sparkes had provided notice for an orderly transition of Jost’s Newfoundland business from Churchill. [ 32 ] After Ms. Sperry left Churchill to join Wineries, Churchill hired Mr. Haider. He signed an employment agreement sent to him by Tim Dauphinee. Mr. Dauphinee was the general manager of Churchill’s Atlantic Canada division, known as Churchill Dauphinee. Jost was one of the brands Churchill Dauphinee worked on and this involved Mr.

Haider planning, forecasting, building displays, delivering product and managing the sales team. Mr. Haider reported directly to Mr. Dauphinee. Mr. Dauphinee oversaw Churchill’s Atlantic Canada operations and reported to Mr. Churchill. [ 33 ] On cross-examination, Mr. Patinos agreed that Churchill moved the Jost account from Mr. Dauphinee to Mr. Haider at some point. He acknowledged that Mr. Dauphinee had health issues but could not address suggestions that Mr. Dauphinee was doing very little work as Mr. Patinos “wasn’t in Halifax often, so I don’t know.” [ 34 ] Mr. Patinos agreed that Ms.

Sperry left Churchill for Jost in July 2013, and that he “saw it as a win for everybody.” He agreed that Churchill did not stand in the way of Ms. Sperry leaving. He said, “…No, you have a major customer …it happens all the time.”

[ 35 ] Mr. Patinos learned that Mr. Haider was leaving Churchill and joining Wineries from Mr. Sparkes on January 19, 2016. At the same time, Mr. Sparkes told Mr. Patinos that he was terminating Wineries’ relationship with Churchill. He said he was not expecting this news and felt “shocked.” He asked Mr. Sparkes what notice he was proposing for terminating Wineries’ relationship with Churchill. Mr. Sparkes responded that the termination would be happening immediately. Mr.

Patinos recalled saying that this was not reasonable and that he “may have said that Churchill should have one month per year.” He added that they would have to have another call. He said he didn’t know at the time if Churchill had a written agreement with Jost. [ 36 ] Mr. Patinos said he subsequently spoke with Mr. Churchill and that “Chris found the agreement.” This document, titled “Contract Agreement”, was entered as an exhibit. Churchill Dauphinee is identified as the “Representative Agent” and Jost as the “Supplier.” Under “Remuneration” the following is stated: 2.

The Supplier will pay to the Representative Agent a commission of eight percent (8%) of the Supplier’s gross sales to the NSLC (Nova Scotia Liquor Corporation). Payment to be issued within fifteen (15) days after receipt of funds from the Nova Scotia Liquor Corporation. Unpaid commissions shall bear interest at a rate of two (2%) percent per month compounded monthly. [ 37 ] The final four clauses of the contract read: 6. This agreement will be in effect as of April 1, 2003 and is valid for a period of five years, renewing itself automatically without further notice from one party to the other. 7.

CANCELLATION : In the event of termination by either party, a registered letter must be addressed to the other party at its respective address, giving six (6) months notice of termination of the other party. 8. This agreement shall be construed in accordance with the laws of the Province of Nova Scotia. Any clause contrary to said laws shall be null and void and shall be treated as severable from the other provisions herein contained. 9.

This agreement and everything herein contained shall enure to the benefit of and be biding upon the parties hereto and their respective successors and assigns. [ 38 ] The agreement is dated April 22, 2003, and is signed by Christopher Churchill on behalf of Churchill Dauphinee. The Jost signatory line is blank; i.e., it is not signed. [ 39 ] Mr. Patinos said that he and Mr. Churchill called Mr. Haider on speaker phone on January 20, 2016. On the call, Mr. Haider confirmed that he was leaving, and Messrs. Patinos and Churchill alerted him to his employment agreement with Churchill Dauphinee. They advised Mr.

Haider to get independent legal counsel. [ 40 ] Mr. Patinos was taken to a January 20, 2016 email he received from Mr. Sparkes where he wrote “Shameful!” Mr. Patinos took this to mean that Mr. Sparkes was not happy with the conversation that he and Mr. Churchill had just had with Mr. Haider. [ 41 ] Mr. Patinos was shown a January 25, 2016, email from Mr. Churchill to Mr. Haider, copied to himself and Mr. Dauphinee. The email reads: While you advised us verbally last week of your intention to leave our company effective February 15, 2016, we have not yet received confirmation from you in writing.

Assuming that you will be providing same to us, there are a few matters that we need to discuss as part of your departure. First and foremost, you are aware that on the same day that you announced your departure from our company, we were advised by Carl that he was terminating our representation of his company after over 13 years of service. We were also advised in that call from Carl last Tuesday, January 19 that you had accepted employment with Jost/Devonian Coast Wineries, although that was denied in a subsequent email from him to Tim.

Given the timing of the joint termination by you and Devonian Coast Wineries, we confess that we remain concerned that your intention is to act in an unlawful manner and we would caution you against that. We have enjoyed a good relationship with you to date and would like to go our separate ways on a similar note. It was for that reason that Alex and I strongly suggested to you last week that you get independent legal advice on your actions so that you understand the ramifications of them in the event that you are planning on being employed by our customer.

Finally, there are some outstanding accounting issues that need to be resolved between us. As you know from conversations with Tim at the end of last year, the company has been overpaying you under the terms of your employment with us, and which you had agreed to pay back to us through a withholding of payments due to you throughout this year. As you will now be leaving us imminently, we need to discuss how we will deal with this outstanding balance of $7,000, as well as other matters including your vacation pay entitlement.

We look forward to receiving an official letter of resignation from you right away, as well as hearing from you about the salary overpayment so that we may prepare the necessary record of employment in a timely manner. [ 42 ] Mr. Patinos also addressed the

summary of outstanding invoices emailed to Wineries on February 24, 2016: Here is our commission invoice IN19372 for NSLC orders dated January 26. The following is a

summary of all outstanding invoices: IN18928 December commission $16,408.48

IN19364 January commission $14,844.78 IN19372 January commission $ 9,795.45 1231-2015 marketing expenses Oct-Dec $26,927.35 0224-2016 marketing expenses Jan 1-Feb 22 $23,114.64 TOTAL $91,090.70 [ 43 ] With the aid of further emails, Mr. Patinos noted that the October – December 2015 marketing expenses were paid on March 8, 2016 and the final payment for the remaining amount of $64,163.35 was made on March 30, 2016. He said that Mr. Sparkes refused to pay the invoices until Churchill signed a release; however, Mr.

Patinos said Churchill would not do so as they took the position that Wineries owed Churchill “reasonable notice and costs.” He added that the $91,090.70 was “not paid willingly” and that the lawsuit was required to obtain payment. [ 44 ] On cross-examination, Mr. Patinos agreed that he, Mr. Churchill and Mr. Dauphinee attended a May 2012 meeting in Lunenburg with Mr. Sparkes after Mr. Sparkes became the new owner of Jost. He did not recall Mr. Sparkes raising concerns at the meeting that there had been zero sales growth and that he wanted 15 percent annual growth. As for a September 2012 strategy session, Mr.

Patinos similarly had no recall of details. [ 45 ] Mr. Patinos “vaguely” recalled a May 2013 coffee shop meeting in Halifax with Mr. Sparkes and Mr. Churchill. He acknowledged that Mr. Sparkes expressed concerns “with Mr. Dauphinee’s style …there was a conflict between Carl and Tim.” [ 46 ] Mr. Patinos was asked about another meeting with Mr. Sparkes that took place in October 2013. Questioned as to whether he recalled Mr. Sparkes stating that he and his staff were doing most of the sales work that Churchill should have been doing, Mr. Patinos said he did not recall such a statement having been made. [ 47 ] Mr.

Patinos agreed that there was a meeting at the Ela restaurant in Halifax in April 2015 but could not recall specifics other than “dissatisfaction with sales for lots of reasons.” He stated, “A lot of suppliers want higher sales, it’s the normal conversation …it doesn’t mean they’re leaving us …” Mr. Patinos added that “a lot of Carl’s frustration was with the liquor board.” [ 48 ] Mr. Patinos had no recollection of turning down Mr. Sparkes’ request for a meeting while Messrs. Patinos and Churchill were in Halifax for meetings with Bacardi in September 2015.

He denied being of the view that the relationship between Churchill and Wineries was beyond repair. Carl Sparkes [ 49 ] Carl Sparkes has a Master of Business Administration degree. His background includes work as a CEO in several food processing companies and the oil industry in North America. Mr. Sparkes and his wife, Donna Sparkes, purchased Wineries through a family trust on May 7, 2012. Before purchasing Wineries, he recalled a “rigorous process” that took approximately one year. Given the due diligence, he was emphatic in his assertion that there was no written contract with Churchill.

He acknowledged a history with the agent Churchill Dauphinee. [ 50 ] On cross-examination, he said the due diligence took place over a month or two and “we looked at anything that could trigger a liability.” Mr. Sparkes admitted that he saw the contract between Jost and Churchill Dauphinee. He noted that it was not signed by Jost and stated, “My team, legal and accounting said there was no contract with Churchill.” Mr.

Sparkes was asked about the clause which pertains to Churchill doing the sales work for Wineries and said it was “not correct, we had our own sales force that covered all of the work except with NSLC.” He added that Churchill did not service restaurants and bars on behalf of Wineries.

With regard to the eight percent commission referenced in the contract, he said, “I believe it was up until 2015 when it changed.” As for the clause pertaining to publicity and promotion, he stated, “That was not being adhered to, that wasn’t the deal, we were providing much more, we paid NSLC for promotions.” [ 51 ] As the new purchaser of Wineries, Mr. Sparkes soon felt that Churchill was not providing the kind of service and results that he expected. He determined that Mr. Dauphinee did not have a business focus – “We weren’t speaking the same language.” By the spring of 2013, Mr.

Sparkes made his views known to Mr. Churchill and Mr. Patinos at a Halifax meeting. He told them, “Tim is an impediment to my growth plans, plain and simple.” [ 52 ] Mr. Sparkes noted that Mr. Churchill responded by agreeing to hire a new brand manager and Ms. Sperry was assigned to the Jost account soon after. Mr. Sparkes ultimately hired away the “likeable, enthusiastic” Ms. Sperry and Mr. Haider was hired by Churchill to fill her position. Mr. Sparkes was relieved, as he felt Mr. Dauphinee’s performance “got worse.” He was impressed with Mr. Haider and Churchill soon had him take over the Jost account from Mr.

Dauphinee. [ 53 ] On cross-examination, it was pointed out that Mr. Haider was servicing Wineries’ account at the time when Mr. Sparkes said that he was upset with Churchill’s performance. Mr. Sparkes responded that Mr. Dauphinee “was involved in various ways.” [ 54 ] Mr. Sparks agreed that he hired both Ms. Sperry and Mr. Haider away from Churchill. He also said that he “liked” the Churchill sales team – “The ladies were great.” Nevertheless, Mr. Sparkes said, referring to Churchill, “Nobody was running the company.” [ 55 ] On cross-examination, Mr. Sparkes acknowledged that he was not sure if Ms.

Sperry applied but as she kept reaching out, “I gave her a shot.” He agreed that an Annapolis Valley representative, Doug Ross, was hired by Wineries on April 7, 2016. Mr. Sparkes agreed that Mr. Ross was to report to the director of sales who was shown as “TBD” in Mr. Ross’ offer of employment letter. Mr. Sparkes agreed that as of at least March 17, 2016, Ms. Sperry was Wineries’ director of sales. Mr. Sparkes acknowledged that due to a

“restructuring”, Ms. Sperry was demoted to marketing and business development. When it was put to him that Mr. Haider was in fact the new director of sales, Mr. Sparkes maintained that this did not occur until August 2016 (six months after Villas hired Mr. Haider). [ 56 ] Mr. Sparkes was concerned about Churchill Dauphinee’s performance, and he said that during an April 2015 meeting at Ela with Messrs.

Churchill and Patinos, he made it “very clear, I’m not happy, things are not going well, my 15 percent growth target, we’re not getting there.” At the same time, he acknowledged, “We didn’t want the relationship to end, the people in the field were great.” He continued, “We had a crack at this, it could actually work, we had a year to make it work.” Mr. Sparkes added that, given his comments at the meeting, he provided “as much notice as I can imagine giving anybody”, reiterating his position that there was not a contract between the parties. [ 57 ] On cross-examination, Mr.

Sparkes said the 15 percent growth figure was not mentioned at their initial meeting but that this goal was communicated “at some point.” He agreed that there was nothing in writing to Churchill about this. He later added, “I could be wrong on the 15 percent, that was our stretch target.” As for the one year to achieve the growth goal, Mr. Sparkes was asked why the termination occurred about four months later. He responded, “There was no possibility we were going to hit the target …this was known by the end of August, coming into September.” [ 58 ] Mr.

Sparkes said he “absolutely” thought he provided Churchill notice dating to the September 2014 meeting. When pressed as to whether he thought this would be “formal notice”, he replied, “I wouldn’t say formal.” Mr. Sparkes maintained that he put Churchill on notice “two years in advance, they’d be let go if I didn’t get the growth.” Later when his discovery testimony was put to him Mr. Sparkes repeated that he did not provide formal notice but “it was an ongoing understanding that they have to hit these numbers or.…” [ 59 ] Given Churchill’s performance between April and August of 2015, Mr.

Sparkes said, “It was clear there’s not a hope in hell to make the target we agreed to.” Mr. Sparkes asked for a meeting with Messrs. Churchill and Patinos who he knew were in Halifax on other business. His request was denied and Wineries’ planning meeting with the NSLC in September 2015 went ahead without Churchill personnel present. Mr. Sparkes described the situation as “zero representation from Churchill at the meeting with no explanation”; he felt “very angry” and considered the “relationship was over.” [ 60 ] Mr. Sparkes described another sore point late in 2015 at the annual Moncton wine show.

As he and his wife manned the Jost booth and poured wine, Mr. Haider was present representing other Churchill suppliers. During an evening restaurant or bar impromptu meeting with Mr. Haider, Mr. Sparkes gave him the “heads up” that “we’d be ending our relationship with Churchill Dauphinee in the new year.” [ 61 ] Messrs. Sparkes and Haider met for lunch in December and Mr. Haider advised Mr. Sparkes that he was now planning to leave Churchill. According to Mr. Sparkes, part of Mr.

Haider’s rationale for leaving was due to his “being spread too thin”, such that he could not give Wineries “enough attention.” There was no discussion about the non-solicitation clause and Mr. Sparkes denied knowing about it. [ 62 ] Mr. Sparkes travelled to California in early 2016, along with several members of Wineries team for a NAPA Valley symposium. There, the decision was finalized to part ways with Churchill and to hire Mr. Haider. He described a brief conversation with Mr. Patinos and said he did not sense any shock in his reaction.

He described the reaction as “an acceptance and quick jump to the dollars.” Mr. Sparkes said the non-solicitation clause was not raised. [ 63 ] Mr. Sparkes brought up the non-solicitation clause with Mr. Haider the next day, on account of his nephew’s partner raising the issue in conversation. Mr. Haider did not recall signing anything. Upon subsequently learning from Mr. Haider that he had, Mr Sparkes felt he could not hire him. He said that is why he wrote “Shameful!” in his email to Mr. Patinos. Mr. Sparkes felt it was wrong that Mr.

Haider could not work for Wineries “or anyone else.” He added that he had learned from Mr. Haider that Churchill would not hire him back, and asked, rhetorically, “How do you treat somebody like that?” In the circumstances, Mr. Sparkes made the “quick decision” to hire Mr. Haider to work for his Villas company “and figure it out from there.” [ 64 ] This point was revisited on cross-examination and Mr. Sparkes agreed that his nephew’s partner told him that “Americans usually have employment contracts because of their litigious nature.” In any case, Mr.

Sparks said, “dating back to his oil industry days”, he had never seen a non-solicitation clause enforced. [ 65 ] It was pointed out to Mr. Sparkes that the initial offer letter to Mr. Haider from Villas is dated January 17, 2016, before his alleged conversation with his nephew’s partner and prior to Mr. Haider’s conversation with Mr. Patinos. He responded that he was pre- occupied in California and when his human resources person sent out the letter, they did not think to change the date.

At this point it was acknowledged by counsel for the Defendants that any previous drafts of the offer letter (showing Wineries as Mr. Haider’s employer) were not located. [ 66 ] On cross-examination, Mr. Sparkes said that when he found out that Mr. Haider had the non-solicitation clause, he told him that he could not hire him and “suggested he go back and give notice or un-resign.” He said he sent the “Shameful!” email because Churchill was leaving Mr. Haider “high and dry.” When the exact timing of the email was pointed out (11 a.m. on January 20, 2016) Mr.

Sparkes acknowledged that he would not have suggested that Mr. Haider un-resign, but that he was simply reacting to Ms. Patinos having notified Mr. Haider of the non-solicitation clause. Later Mr. Sparkes conceded, “I could have been mistaken, I cannot argue these dates.” [ 67 ] On cross-examination, Mr. Sparkes said, “I may have seen the restrictive covenant, I’m not sure. I’ve seen them but I’ve never seen one enforced, I don’t believe in them.” He added, “I didn’t want Jeff dragged into anything, I felt responsible for Jeff Haider.” Mr.

Sparkes elaborated that he was doing Churchill a “favour by hiring a disgruntled employee.” [ 68 ] Mr. Sparkes acknowledged that he was trying to find a “way around” the non-solicitation clause. After much questioning, he agreed that the “severance” referred to in emails was with regard to “potentially” paying Churchill in order to have Mr. Haider’s services forthwith. He further allowed that he was contemplating “negotiating something to have him transition out. I was prepared to go halfway but I went the entire way and paid him six months.”

[ 69 ] Mr. Sparkes testified that either he or Ms. Sperry would ask Mr. Haider wine-related questions, “but it was very rare.” On cross-examination, he maintained that Mr. Haider “wasn’t really working for Wineries, if I needed help, he was consulted.” He did not believe the non-solicitation clause was breached, noting that Mr. Haider did not contact liquor board personnel. Having listened to Ms. Sperry’s explanations about the emails, Mr. Sparkes said her statements were “false, I doubt that I had any involvement in her sending the emails …I would not have paid attention to these emails at all.” Mr.

Sparkes denied knowing who the other Jeff H. was. He said, “She (Ms. Sperry) was not directed by me to send the emails …this was not a concerted cover-up.” [ 70 ] On cross-examination, Mr. Sparkes said he did not know the other Jeff H. Asked if he was a person who worked for Wineries in bottling, Mr. Sparkes said he “could be.” He added that he did not direct Ms. Sperry to send the emails – “It’s not something I’d do, I wouldn’t get into the weeds to that degree.” When it was put to him that Ms.

Sperry was “covering” for him, he agreed she “could have been, but in terms of importance to me, so insignificant.” [ 71 ] Later in his cross-examination, Mr. Sparkes said he regretted saying that Ms. Sperry was not telling the truth. He then admitted, referring to sending the email, that he may have “done it directly; I did tell people that Jeff Haider is to have no contact with the outside world.” He added, “I don’t doubt that Deanna and others reached out to Jeff on a regular basis.” He maintained that he “very infrequently” reached out to Mr. Haider on Wineries issues. Mr.

Sparkes said that “for the most part” he paid Mr. Haider for the first six months to sit home and do nothing. He admitted that Mr. Haider only “looked at a couple of properties” while he was with Villas. Jeffrey Haider [ 72 ] Jeffrey Haider was hired by Churchill in August 2013. He previously worked as a sales representative for Treasury Wines and E. & J. Gallo Wines. Mr. Haider had very little interaction with Messrs. Churchill and Patinos. During the first year or so with Churchill, Mr. Haider had daily contact with Mr. Dauphinee, his managing director. This changed during Mr.

Haider’s last year with the company when Mr. Dauphinee “became non-existent.” Mr. Haider observed that Mr. Dauphinee was involved in personal calls and the like while at work. He later learned that Mr. Dauphinee “had some health issues.” [ 73 ] Mr. Haider initially said he took over the Wineries account from Mr. Dauphinee in late August or early September 2015. On cross-examination, he agreed that he took on the Wineries account earlier, perhaps a year before he left the company. He knew from speaking with Messrs.

Churchill and Patinos that “Carl was unhappy with Tim and didn’t want to do business with Tim.” [ 74 ] Mr. Haider said Churchill Dauphinee had 20–40 “active suppliers” (including Wineries) in Atlantic Canada as of December 2015. He took issue with Mr. Patinos’ characterization of what exclusivity meant; however, on cross-examination, he acknowledged that he had no examples (other than one Chilean wine, the name of which he could not recall) to refute Mr. Patinos’ evidence. [ 75 ] Mr. Haider recalled seeing Mr. Sparkes at the Moncton wine show in November 2015.

They had a conversation and “Carl mentioned to me in passing that he planned to leave Churchill and would I be interested in working directly.” This news did not surprise Mr. Haider “because of the turmoil in previous years, the numbers weren’t there.” Mr. Haider told Mr. Sparkes that he was open to the proposal. He added that at the time he had “no issues” with Churchill. This changed about a month later when he was told by Churchill’s accountant that the company would be “clawing back” his 15 percent raise from the beginning of 2015 due to a clerical error.

The raise was supposed to have been 1.5 percent. [ 76 ] In late 2015, Mr. Haider met with Mr. Sparkes at the Halifax Baton Rouge restaurant. Mr. Sparkes initiated the lunch meeting, and, at this point, Mr. Haider was “definitely interested” in his job offer. When they met again in January 2015, Mr. Sparkes made the job offer and Mr. Haider “verbally accepted immediately.” The next day, Mr. Haider met with Mr. Dauphinee and notified him. Later the same day, he received a call from Messrs.

Churchill and Patinos advising that he “should see a lawyer” and that “they’d be taking legal action against me because of the clause in my contract.” Mr. Haider said he did not know what to say; he was “not conscious of the clause until they raised it.” [ 77 ] On cross-examination, Mr. Haider clarified that he waited for the “signed piece of paper” from Wineries before notifying Mr. Dauphinee of his resignation. He acknowledged that he never produced his Wineries hiring letter. Mr.

Haider was challenged on his timeline, and he agreed that he approached Chris Churchill and Alex Patinos on January 29, 2016, after he had spoken with a lawyer. [ 78 ] Mr. Haider thought that the non-solicitation clause “was there to stop me from opening my own business and taking customers …not whether I could work for Jost or any other supplier.” He asked for his job back, but Churchill would not take him because “I couldn’t be trusted by Chris or Alex.” [ 79 ] On cross-examination, he agreed the non-solicitation clause prevented him from stealing Churchill’s clients and that Wineries was a client.

It was put to him that he knew it to be “an enforceable agreement”, which he denied. [ 80 ] Following the call, Mr. Haider contacted Mr. Sparkes and let him know about the non-solicitation clause. Mr. Sparkes said legal counsel would have to be sought. Ultimately, it was proposed to Mr. Haider that he work for Villas. Mr. Haider had “no idea” what this would involve, but he considered his options of “no work for six months or go to work (for Wineries) and get sued.” Mr.

Haider felt that he was in “a bind”, adding that he had no experience in the Villas job duties set out in their hiring letter. [ 81 ] On cross-examination, Mr. Haider agreed that it was contemplated that Mr. Sparkes would pay severance to Churchill as part of a release whereby Mr. Haider could work for Wineries. He acknowledged that Mr. Sparkes was negotiating with Churchill “for them to let me go.” [ 82 ] Mr. Haider wrote his suppliers about a week before he was to officially depart Churchill.

On cross-examination, he maintained that when he wrote that he would be accepting a position outside of the wine industry that he was being honest. He elaborated that when he wrote suppliers, he had “no idea” what his work with Villas would involve. [ 83 ] In terms of his job duties while at Villas, Mr. Haider testified, “I did some work writing plans, looked at their budgets, looked at the Jost retail store, I just tried to find something to fill my days.” Asked if he did work for Villas, he said, “I did visit one property in

Malagash, a private home, something they were looking to purchase for their vineyard workers. It was a couple-hour visit.” [84] While with Villas, Mr. Haider acknowledged “some interaction” with Wineries’ new hire Doug Ross – “He’d ask questionsfrom time to time and I’d answer as best I could.” He said he spoke with Ms. Sperry “quite a bit, for sure” regarding the wine business.Mr. Haider maintained that he had no contact with liquor boards during his first six months. [85] On cross-examination, he agreed that after the six months, the only additional work for Wineries involved working with theliquor boards.

When his discovery evidence was reviewed, Mr. Haider acknowledged that he told Ms. Sperry that he did not want anyoneoutside of Wineries to know that he was doing external work. He later admitted – when confronted with his discovery evidence – that heprovided advice “behind the scenes” to Wineries employees prior to their meeting with NSLC representatives. [86] Mr. Haider denied attending a July 2016 meeting with NSLC personnel; however, he later acknowledged that he may havebeen there but did not contribute anything.

When confronted with emails, he agreed he must have attended a preparatory meeting;however, he said, “I can’t even recall it.” He agreed that Ms. Sperry had sent “cover emails”, as the Jeff H. was really supposed to behim and not a Wineries bottling plant employee. Credibility [87] In assessing credibility, I am guided by the statement of Justice McLachlin (as she then was) in R. v.

Marquard, (SCC), [1993] 4 S.C.R. 223, at p. 248: "Credibility must always be the product of the judge or jury's view of the diverse ingredients ithas perceived at trial, combined with experience, logic and an intuitive sense of the matter." In R. v. White, (SCC), [1947]S.C.R. 268, at p. 272, the Supreme Court explained factors that are pertinent to weighing a witness's credibility: "The general integrityand intelligence of the witness, his powers to observe, his capacity to remember and his accuracy in statement are important.

It is alsoimportant to determine whether he is honestly endeavouring to tell the truth, whether he is sincere and frank or whether he is biased,reticent and evasive." [88] I have assessed the credibility and reliability of the witnesses by referring to facts proven by others independently, and byconsidering whether their evidence is contradicted or corroborated by the evidence of other credible witnesses.

I have considered howthe witnesses' evidence fits into the entirety of the evidence presented at the trial. [89] I have also assessed the interests and motives of the parties, whether questions were answered in a forthright and frank manner,whether their testimony was impeached in cross-examination, and whether it is consistent with their examination for discovery evidence. [90] Given my overall findings, I need not parse the evidence and comment on every aspect of credibility for each witness. Havingregard to all the evidence, I found Ms. Sperry to be most credible.

She impressed me as a sincere individual who, to this day, feels badlyabout the deception she was involved with in an attempt to shield Mr. Haider’s involvement in Wineries-related work for the initial sixmonths of his tenure. [91] I found Mr. Patinos generally credible; however, he had little recall of several key areas put to him in cross-examination. Ratherthan evasiveness, I put his lack of recall down to a generally minimal level of involvement in Churchill’s Atlantic operation. [92] As for Mr. Sparkes, where his evidence conflicted with Ms. Sperry’s, I preferred her testimony. Mr.

Sparkes impressed me aspassionate about his business; however, I formed the distinct impression that his emotions clouded some of his recall in key areas. [93] With respect to Mr. Haider, he also had some credibility issues. Nevertheless, I found that many of the cross-examinationquestions that caused him to be less credible ultimately had little bearing on my key findings in the case.

Analysis and Disposition Is notice required and, if so, what is reasonable notice? [94] Having regard to all the evidence it is clear to me that Churchill was entitled to reasonable notice given the longstandingrelationship between the parties. Whereas Mr. Sparkes attempted to deny the existence of a written contract, I find that on his ownevidence, he saw the contract and was aware of its provisions. From May 2012 (when his family trust purchased Wineries) untilFebruary 1, 2016 (when Mr.

Sparkes terminated the contract), the parties were in a commercial relationship whereby Churchill wasWineries’ representative agent. On the evidence, I find that their relationship was a constant, essentially under the same terms thatpreceded both Mr. Patinos’ and Mr. Sparkes beginnings with their respective companies. Indeed, all the evidence points to therepresentative agency relationship having been commenced in 2002. [95] Although Mr. Sparkes tried to distance Wineries from the written contract, and his counsel argued that Wineries did not haveany obligation to provide notice, I specifically reject this.

From the evidence, it is clear to me that the main provisions of the written“contract agreement” were adhered to by the parties, continuously and including for the approximate three and one-half years from whenMr. Sparkes purchased Wineries until he terminated the agreement. In this regard, my review of the written contract and the evidence ofthe commercial relationship reveals that the two are consistent. For example, all the oral and documentary evidence points to the fact thatChurchill was the representative agent of Wineries, the supplier.

As such, Churchill acted solely as the distributor of Jost products inNova Scotia. With regard to remuneration, just as set forth in the written document, Wineries paid Churchill, for the most part, acommission of eight percent of Wineries’ gross sales to the NSLC. [96] The written contract speaks to the representative agent’s obligation to provide publicity and promotion from a five percentpromotional budget (given by Wineries). Although Mr.

Sparkes took issue with the notion that Churchill provided publicity andpromotion, there are no documents backing up his claim that Churchill was derelict in their duties. [97] Given all the evidence, I accept that Mr. Sparkes became frustrated with Churchill’s performance. In particular, he was notpleased with Mr. Dauphinee’s performance, and undoubtedly aspired for 15 percent annual sales increases. Although I was not provided

with any documentation to back up Mr. Sparkes’ assertion that the targets were not met between 2013 and 2015, I generally accept histestimony in this area. Having said this, there are no meeting minutes, emails or the like to support the notion that Mr. Sparkes backed uphis “stretch goal”in such a way that he put Churchill on notice that he would be terminating their supplier / representative agent relationship if theaspirational targets were not met. Indeed, whereas Mr.

Sparkes traced a history of milestone meetings dating back to 2013 and into thefollowing two years, where he essentially put the relationship on the line – “I provided as much notice as I can imagine giving anybody”– there is no corroborative evidence in this vital area. Not only is there an absence of emails, letters, minutes, etc., but no other witnesscorroborated that these ultimatums were ever provided. [98] Turning to Churchill’s position on termination, they initially argued that “the industry standard” is one month for every yearthat the contract was ongoing.

During oral argument, Churchill’s counsel resiled from the position that 14 months’ notice was owed andsuggested that six to nine months would be appropriate notice. [99] When I review the circumstances, I am drawn to the appropriateness of the written contract’s cancellation clause whichspecifies six months notice. Although the clause (number 7) also provides “…a registered letter must be addressed to the other party …”,I do not think anything turns on this formality. Indeed, the parties agree that Mr. Sparkes’ email on January 19, 2016 was the firstwritten notice to Churchill.

In my view, this email accords with sufficient written notice. [100] Although Wineries did not sign the written contract, by his own evidence, Mr. Sparkes became aware of its existence. Whereas hetraced notice back to as early as 2013, and was adamant that he repeated his concerns at subsequent meetings up until the penultimateApril 2015 meeting at Ela, I find that he did not provide formal notice to Churchill until he sent his January 19, 2016 email. Once again,I note that Mr. Sparkes’ alleged ultimatums are not backed up by any written or oral evidence.

There is simply no corroborative evidenceto support his version that Churchill was effectively put on notice dating back to April 2015 or earlier. [101] To my mind the written contract is representative of the parties ongoing relationship, inclusive of the years post-dating Mr.Sparkes’ purchase of Wineries. In any case, I categorically reject the Defendants’ position that Churchill was not entitled to any noticeor, in the alternative, that Mr. Sparkes provided sufficient notice. At the same time, I cannot accept Churchill’s position that they shouldbe entitled to notice beyond six months.

In this regard, the written contract they encouraged the Court to accept clearly stipulates sixmonths. In any event – and given the varying authorities provided on appropriate notice – I find that six months is reasonable andappropriate in the context of the within commercial relationship and market. [102] I would add that I find six months’ notice reasonable having regard to the factors as set out by Justice Hinds in Yamaha CanadaMusic Ltd./Yamaha Canada Musique Ltee v.

MacDonald and Oryall Ltd. (1990), (BC CA), 46 B.C.L.R. (2d) 363(C.A.), beginning at para. 12: 12 In Western Equipment the following factors were considered relevant to the determination of the length of notice in thecircumstances of that case: 1) The length and type of relationship between the parties. 2) The extent of the sales force employed by the party whose distributorship was terminated. 3) The importance of the exclusive distributorship to the party terminated. 4) The acquisition of inventory. 5) Time needed by the terminated party to acquire a replacement line of products and to re-establish a viable business. [103] In this case, the relationship lasted for approximately 14 years between a representative agent and supplier.

No precise evidencewas led concerning the extent of Churchill’s sales force. The exclusive agency was undoubtedly important to Churchill; however, theydid have 20 – 40 other brands. There was no inventory kept by Churchill. No evidence was led concerning the time needed to acquire,for example, another Atlantic winery in the region.

Once again, considering the evidence in the context of the factors and overallcircumstances, I find that six months is reasonable. [104] Given my findings above, it is perhaps practically unnecessary to delve into the enforceability of the non-solicitation clause.Nevertheless, there was considerable evidence and argument in this area, and I feel compelled to thoroughly address the issue. Is the non-solicitation clause valid? [105] In Atlantic Business Interiors Ltd. v.

Hipson, 2005 NSCA 16, our Court of Appeal considered the validity of a restrictive covenantin the case of a sales representative who had left an office furniture company for a competitor. Justice Freeman framed the issue asfollows: 26 The second issue considered by the trial judge, in part B of his decision, involves the validity of restrictive covenants undercommon law tests. He referred to Elsley v. J.G. Collins Insurance Agencies Ltd., (SCC), [1978] 2 S.C.R. 916 as theleading Canadian case on non-competition clauses in an employment context and cited the "concise

summary" of the case found in thejudgment of MacPherson J.A. of the Ontario Court of Appeal in Lyons v. Multari (2000), (ON CA), 50 O.R. (3rd)526 beginning at page 531. [21] ... In Elsley, Dickson J. began his analysis by recognizing that such clauses presented a collision between two long-standingcommon law principles - discouraging restraints on trade and respecting freedom of contract. Dickson J. explained, at p. 923: The principles to be applied in considering restrictive covenants of employment are well-established. ... A covenant in restraint of trade isenforceable only if it is reasonable between the parties and with reference to the public interest. As in many of the cases which come

before the courts, competing demands must be weighed. There is an important public interest in discouraging restraint on trade, and maintaining free and open competition unencumbered by the fetters of restrictive covenants. On the other hand, the courts have been disinclined to restrict the right to contract, particularly when that right has been exercised by knowledgeable persons of equal bargaining power. 27 The reconciliation of these conflicting principles was anchored in reasonableness requiring an overall assessment of the clause, the agreement containing it, and all surrounding circumstances.

This resulted in a three part test proposed by Dickson J. and restated by MacPherson J.A. as follows: [23] Importantly, Dickson J. then set out the factors that require special attention when considering a restrictive covenant in an employment contract.

In his view, there are three such factors: first, whether the employer has a proprietary interest entitled to protection; second, whether the temporal or spatial features of the clause are too broad; and third, whether the covenant is unenforceable as being against competition generally, and not limited to proscribing solicitation of clients of the former employee (at p. 925). 28 "Generally speaking," MacPherson J.A. said, "the courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer's interests." 29 "'... [I]n exceptional cases,'" he said, quoting Dickson J., "'the nature of the employment may justify a covenant prohibiting an employee not only from soliciting customers, but also from establishing his own business or working for others so as to be likely to appropriate the employer's trade connection through his acquaintance with the employer's customers.

This may indeed be the only effective covenant to protect the proprietary interest of the employer. A simple non-solicitation clause would not suffice.'" 30 Having reviewed the law establishing that a restrictive covenant containing a non-competition clause is enforceable only when a non-solicitation clause would not suffice, and that it must be no wider than reasonably required to afford adequate protection to the employer, Justice Wright noted: [33] ...

In the present case, the restrictive covenant contains both a non-competition clause and a non-solicitation clause within the temporal and spatial limits specified.

It is to be remembered, however, that courts decide on the validity of restrictive covenants as they are written by the parties and cannot "write down" a restrictive covenant into narrower terms which the court considers to be more reasonable in scope in the employment context at hand. … 38 Having posed what I consider to be the right question in his para. 44, and considered the evidence, Justice Wright reached a factual conclusion in para. 51: [51] All things considered, I conclude that this is not an exceptional case where the more drastic weapon of a non-competition clause was reasonably necessary to protect the interest of ABI in its trade connections.

As earlier noted, courts will not write down excessively broad restrictive covenants to narrower terms more reasonable in their scope (which here would have been a simple non-solicitation clause as described in the preceding paragraph). I therefore find that the restrictive covenant inserted in Mr.

Hipson's employment agreement as clause L is unenforceable, in failing to meet the common law tests for validity above described. [ 106 ] Justice Freeman concluded that Justice Wright correctly applied the Elsley principles in finding restrictive covenant to be unenforceable, and that he was correct in refusing to sever it or write it down. [ 107 ] I note that Churchill concedes that the non-solicitation clause would effectively prevent Mr.

Haider from working in his field of expertise anywhere in the world for a six-month period. [ 108 ] The non-solicitation clause’s broad terms are clearly contrary to the concept of free movement of employees within a free market. In order to be determined to be reasonable, Churchill would have to satisfy the Court that a no less restrictive provision would protect its proprietary interest. As stated by the Supreme Court of Canada in Shafron v.

KRG Insurance Brokers (Western) Inc. , 2009 SCC 6 , at para. 27 , generally failure to define the applicable geographic location of the restriction is fatal to its validity. [ 109 ] Given the evidence and authorities, Churchill has not satisfied me on a balance of probabilities that they have a significant proprietary interest in a loyal client base that requires the non-solicitation clause.

Indeed, even if they had established a proprietary interest requiring protection, they would also have to establish (and they have not) that the non-solicitation clause is the least restrictive means necessary to protect that interest. [ 110 ] With respect to the temporal and spatial features of the non-solicitation clause, it is for a six-month period and covers an unrestricted area. I have been provided with no evidence as to what period of time would be reasonably required to secure Churchill’s customers, or replace Mr.

Haider, or what is the industry standard. [ 111 ] To sum up on this issue, Churchill has failed to satisfy me that the very broad non-solicitation clause is reasonable and therefore valid. The purported non-competition provisions go far beyond an attempt to limit damage to Churchill’s proprietary business relationships. The non-solicitation clause is so broad as to attempt to limit competition generally and accordingly, I find that it is therefore void. Damages Owing [ 112 ] With respect to damages, Churchill asks the Court to simply award damages based upon the agreed total amount of commission invoices.

Accordingly, Churchill says the math is simple and amounts to $31,705.73 per month. Given my determination of six months owing, it follows that the appropriate figure is $190,234.41. such that given my determination of six months owing that the appropriate figure is $190,234.41. On the other hand, the Defendants argue that the Court must take into account the concept of net profits. They argue that it would be unfair for Churchill to receive pure commissions for a period when they did not have to expend any money to

service the account. [113] In assessing these competing arguments, I find assistance from our Court of Appeal in Sklar-Peppler Furniture Corp. v. GeorgeC. Sweet Agencies Ltd., 1995 NSCA 125, wherein Justice Hallett provided the following guidance: 5 The guiding principle of law in assessing damages was correctly stated by the learned trial judge. However, he committed aserious error when he specifically instructed the jury that they could calculate the award on gross commissions without deductions forexpenses.

This instruction flies in the face of the guiding principle because the respondent did incur significant expenses to earncommissions; to calculate the award using gross commissions is to put the respondent in a much better position than he would have beenhad the wrongful termination not occurred. The learned trial judge erred when he concluded that there was good authority for thecalculation of an award based on gross commissions. The respondent's counsel at trial was able to persuade the learned trial judge thatthis was a proper approach to the award of damages.

The trial judge rejected the arguments put forward by the appellant's counsel at trialthat this was an improper basis upon which to award the damages. The trial judge ended up leaving it to the jury to determine whichmethod they would apply if they determined there was a wrongful termination of the sales agency relationship. … 8 On the other hand there is strong authority to support the position taken by the appellant at the trial and on this appeal.

First, thegeneral principle that damages for a breach of contract are to be calculated so as to put the wronged party in the position he would havebeen had the breach not occurred. In The Law of Damages, Waddams, 1983, in dealing with damages to economic interest the author hasa

section entitled "Loss of Earnings" which starts with the following introductory sentence at paragraph 640: "This

section is concerned with compensation for loss by the plaintiff of the opportunity to earn money by his services. " 9 At paragraph 647 Waddams states: "The basic principle of compensation is that the plaintiff is entitled to be put, so far as money can do it, in the position he would haveoccupied if the wrong had not been done. This principle in a case where the plaintiff is deprived of opportunities to render services andearn a reward, suggests as a starting point the amount of the reward (wages, commission or price), that would have been earned.

Fromthis, however, must be deducted, as Anglin, J., said in a building case: "the time, labour and expense which the plaintiffs have been savedthrough being relieved of their obligation to carry out the contract under which they would have earned it. Thus, out-of-pocket expensesthat have been saved, such as the cost to a builder of materials, must be deducted. This is merely to say that the plaintiff is entitled to hisexpected net profit, not to gross revenues." 10 Secondly, the decision of the Ontario Court of Appeal in Jaremko v. A.E.

LePage Real Estate Services Limited (1989), (ON CA), 60 D.L.R. (4th) 762 addresses this issue directly. The court stated at p. 765: "Counsel for the defendant submitted that the plaintiff's damages should have been calculated not on the basis of his gross commissionsbut rather on the basis of his net commissions after deduction of his expenses.

We agree in principle with this submission." 11 The principle that expenses incurred to earn commissions must be deducted in calculating a loss following a wrongfultermination of the sales relationship in circumstances where the sales agent pays all expenses was applied in Bell v. Trail-Mate Productsof Canada Ltd. (1986), 15 CCEL 39. In that case the plaintiff was an employee paid by commissions.

The trial judge made reference tothe fact that the plaintiff was to pay for all gas and oil and other expenses and stated: "Where the plaintiff pays her own expenses, it is only on the net income that damages are calculated and not the gross, so that theexpenses of the plaintiff will also have to be deducted." 12 Likewise in Smith v. Undercover Wear Ltd. (1993), (ON SC), 51 C.P.R. (3d) 409, the plaintiff, acommissioned sales agent, in that case had put forth her damage claim on the basis of gross commissions and not commissions afterpayment of business expenses.

Justice Granger, who tried the case, disagreed and cited the decision of the Ontario Court of Appeal inJaremko. He stated at p. 429: "In my opinion, it would be wrong to award the plaintiff damages based upon her gross commission. If she was awarded damages on thisbasis, she would be unjustly enriched as she would be in a better financial position than she would have been if she had continued hercontractual arrangement with Undercover Wear. . ." 13 In

summary, the general principles for damage assessment and the case law supports the position taken by the appellant beforethe learned trial judge that the proper basis for calculating a damage award would be gross commissions less expenses. The learned trialjudge left it to the jury to choose which method they would apply. The jury obviously chose to fix the damage award the grosscommissions without any deductions for expenses. [114] The total amount of the commission invoices issued by Churchill to the corporate Defendants from February 1, 2015 to January 1,2016 was $380,468.83.

Accordingly, the commission invoices issued by Churchill to Wineries represent the total revenue Churchillreceived from the corporate Defendants as payment for one year of Churchill’s services. [115] The gross profit (also known as gross income) is determined by deducting the variable costs associated with providing theservices, including labour costs and travel expenses directly related to the work for Wineries. Gross profit does not include fixed costs(costs that must be paid regardless of the level of output by the business).

Fixed costs include rent, advertising, insurance, salaries foremployees not directly involved in the work for the corporate Defendants and office supplies. Net profit (also known as net income) isdetermined by subtracting fixed costs from gross profit. [116] The goal of the damages assessment is to put Churchill in the position it would have been in had the corporate Defendantsprovided six months’ notice. In the result, were I to simply divide $380,468.83 by two and award damages of $190,234.41, Churchill will

be overcompensated to the extent of the variable costs which they did not have to incur to bring in that revenue from Wineries. Theywould not be overcompensated, however, with respect to fixed costs, because those expenses would be incurred in any event, regardlessof whether Churchill was providing services to Wineries. [117] No evidence was provided as to Churchill’s variable costs in relation to its work for Wineries. Accordingly, I must do the bestthat I can based on fairness and using my discretion in the circumstances of the case.

In this regard, I am mindful of our Court’s recentdecision in Reddick Brothers Masonry Limited v. Hage Investments Limited, 2022 NSSC 89, where Justice Coughlan drew on SupremeCourt of Canada authority as follows: 47 The difficulty in fixing the amount of damages was addressed in Penvidic Contracting Co. Ltd. v. International Nickel Companyof Canada Ltd., (SCC), [1976] 1 S.C.R. 267 where Spence J. in giving the Court's judgment stated at page 279: When Wood v.

Grand Valley Railway Company, supra, reached the Supreme Court of Canada, judgment was given by Davies J. and wasreported in (SCC), 51 S.C.R. 283, where the learned justice said at p. 289: It was clearly impossible under the facts of that case to estimate with anything approaching to mathematical accuracy the damagessustained by the plaintiffs, but it seems to me to be clearly laid down there by the learned judges that such an impossibility cannot"relieve the wrongdoer of the necessity of paying damages for his breach of contract" and that on the other hand the tribunal to estimatethem whether jury or judge must under such circumstances do "the best it can" and its conclusion will not be set aside even if the amountof the verdict is a matter of guess work. [118] With the above in mind, I have applied an overall reduction of twenty percent to the six-month figure.

This yields a net amount ofseverance owing by the corporate Defendants to the Plaintiff of $152,187.53. If the parties are unable to agree on costs and/orprejudgment interest, I would ask for written submissions within 30 days of this decision. Chipman, J.