2004 BCSC 508 Bartholomay v. Sportica Internet Technolgoies Inc. et al

Before: The Honourable Mr. Justice Hood

Reasons for Judgment

Counsel for the Plaintiffs	G. F. Gregory
Agent for the Defendants	M. Tejpar
Date and Place of Trial/Hearing:	October 27 - 31, 2003
	Vancouver, B.C.

[1] The plaintiff brings action against the defendants for wrongful dismissal. He claims damages in the amount of US$285,087 for breach of his written executive employment contract dated January 18, 2001, with the defendant, Sportica Internet Technologies Inc. (Sportica).

[2] The claim against Sportica is based on the plaintiff’s aforesaid contract with that company. The claims against Discovery Software Ltd. (Discovery) and Subsecond Technology Inc. (Subsecond) are based on the common law doctrine of common employers, the assertion being that they were the plaintiff’s employer as well as Sportica. Discovery has gone into bankruptcy, and the action against it has been stayed.

[3] I had some concerns about some of the evidence given by the plaintiff during the trial. Additionally, at times it was inconsistent, vague and of little evidentiary value. I also was uneasy at times with some of the assertions made and positions taken on behalf of the defendant companies. Additionally, they were either unproven or not open to them. The little evidence they called was of little assistance to me. However, the issues before me are very narrow and there is sufficient evidence before me on which to determine them.

[4] By the contract wherein the plaintiff is called the Executive and Sportica is called the Corporation, the plaintiff became the Executive Vice-President, strategic business development, of Sportica. His duties, which are outlined in Schedule A to the contract included the following:

The Executive will work with the founders of the Corporation and the Board and others to develop strategic business, marketing and sales plans, identify and develop strategic partnerships and alliances, assist in raising capital, and assist in the general operations of the Corporation. The Executive will be a key individual in business and sales development, and will act as a Corporation representative in the business and sports communities.

[5] In the preamble to the contract it is stated that the plaintiff has been given access to confidential information with regard to the affairs of Sportica and those who do business with it. It is also stated that Sportica and Subsecond will be irreparably injured and damaged if the plaintiff leaves the employment of Sportica and competes with Sportica or Subsecond prior to the lapse of a reasonable period of time after the termination of the plaintiff’s employment.

[6] Subsecond is also tied in to some of the plaintiff’s contractual obligations. For example, under the confidentiality provision the plaintiff is not to disclose the private affairs of Sportica or Subsecond and so on. And the plaintiff must fully disclose and make available to Sportica any business opportunity relating to Sportica or Subsecond which becomes known to him. There are also non-competition, non-solicitation and non-disparagement provisions relating to Subsecond as well as Sportica. And it is declared that such provisions are necessary and fundamental to the protection of the business of Sportica and Subsecond.

[7] The term of the contract was January 18, 2001 to January 18, 2004, unless termination occurred earlier. After working in his position for about two and a half months Sportica ceased paying the plaintiff and he was told not to perform any further services. I am satisfied and find that the plaintiff was wrongfully dismissed and is entitled to any damages he has proven. The remaining issues are the quantum of damages, whether the plaintiff failed to mitigate his loss or damage, (the onus of which is on the defendants), and whether the common law doctrine of common employers is applicable in this case.

[8] While quantum and the doctrine of common employers were hard fought, the defence of failure to mitigate, the only defence pleaded, was not. I am satisfied on the evidence that the plaintiff took all reasonable steps to mitigate his losses after his contract was breached. In any event, in order to succeed on this defence, the defendants must prove not only that the plaintiff failed to reasonably seek out new employment in a timely fashion after he was discharged, but also that, had he done so, he probably would have obtained employment then. The defendants have not discharged the onus upon them in either respect.

[9] I turn now to the issue of common employers. In my view it is an issue on which the defendants led little admissible evidence to refute the plaintiff’s position and the reasonable inferences that may be drawn from the evidence, pertaining to the close relationship between the defendant companies, the nature of their enterprise, and their common control.

[10] Mr. Gregory referred me to the decision of Wood J., when in this court in Sinclair v. Dover Engineering Services Ltd. (1987), 11 B.C.L.R. (2d) 176, affirmed (1988) 49 D.L.R. (4th) 297 (CA), the decision of the Ontario Court of Appeal in Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 161 (CA) and the decision of Allan J., in Vanderpol v. Aspen Trailer Co., 2002 BCSC 518 with regard to factors to be considered when determining a common employer issue. While each case depends on its own facts, and the cases may be factually distinguishable to some degree, they demonstrate the importance of the degree of the relationship between the defendant companies and the commonality of their purpose and control and, although perhaps to a lesser extent, the plaintiff’s relationship and conduct in relation to them. It is a matter of substance rather than form and the fact that the employee has a written contract with one of the companies is not determinative.

[11] In Sinclair, supra, Wood J. at p. 181 said the following, which is often quoted in later cases, including Downtown Eatery, supra:

As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control.

[12] Wood J. had said earlier on the same page in response to the submission that an employee can only contract for employment with a single employer:

I see no reason why such an inflexible notion of contract must necessarily be imposed upon the modern employment relationship. Recognizing the situation for what it was, I see no reason, in fact or in law, why both Dover and Cyril should not be regarded jointly as the plaintiff's employer. The old-fashioned notion that no man can serve two masters fails to recognize the realities of modern-day business, accounting, and tax considerations.

There is nothing sinister or irregular about the apparently complex intercorporate relationship existing between Cyril and Dover. It is, in fact, a perfectly normal arrangement frequently encountered in the business world in one form or another. Similar arrangements may result from corporate take-overs, from tax planning considerations, or from other legitimate business motives too numerous to catalogue.

[13] Mr. Justice Wood had no difficulty in lifting the corporate veil to demonstrate the corporate interrelationship. In the Court of Appeal Wallace J.A., speaking for the court, was of the view that this was not necessary. At p. 299 His Lordship noted that it was a matter of agreement reached between the employee and his respective employers; an agreement I would suggest which is “expressed” by the employers’ control over the employee and his or her activities on behalf of their enterprise.

[14] In Downtown Eatery, supra, the Ontario Court of Appeal cited Wood J.’s decision in Sinclair, supra, as the leading case. The court stressed, referring to earlier authorities, that the true employer must be ascertained on the basis of where effective control over the employee resides, that the employment relationship is not simply a matter of form and technical corporate structure.

[15] The court also noted that the doctrine of common employer “has a well-recognized statutory pedigree in most jurisdictions”, referring to s. 12(1) of the Employment Standards Act, R.S.O. 1990, c. E.14 which “deems associated or related businesses to be “one employer" for the purpose of protecting the benefits to which employees are entitled under the Act.”

[16] On this point, in Vanderpol, supra, Madam Justice Allan referred to s. 95 of the British Columbia equivalent act, Employment Standards Act, R.S.B.C. 1996, c. 113, noting that the development of the common employer doctrine in the common law “tracks the statutory recognition that an employee may have more than one employer in a complex corporate interrelationship.” The key is that the business is carried on under the common control or direction of the entities.

Section 95 provides:

95. If the director considers that businesses, trades or undertakings are carried on by or through more than one corporation, individual, firm, syndicate or association, or any combination of them under common control or direction,

(a) the director may treat the corporations, individuals, firms, syndicates or associations, or any combination of them, as one person for the purposes of this Act, and

(b) if so, they are jointly and separately liable for payment of the amount stated in a determination or in an order of the tribunal, and this Act applies to the recovery of that amount from any or all of them. [Emphasis added]

[17] In the case at bar I am satisfied that the doctrine of common employment should be applied as regards the defendant Subsecond. The three companies are described as related or associated companies. In effect they carry on one enterprise which involves the development and sale of software and marketing technology which began with Discovery, was passed on to Subsecond and is used by Sportica in developing and marketing a new application service provider to the sports market. The business or activities of the companies are closely and inextricably interrelated. In effect, Subsecond “houses” and maintains software and technology geared to the education environment, which was initially developed by Discovery and which is licensed out to Sportica and used in its “product” as an application service provider.

[18] The evidence is that the three companies have common shareholders as well as common directors. As Mr. Gregory points out, there is no way that any of the companies could make a decision that impacted on its dealings with the other companies without there being a hopeless conflict unless the situation is looked at as one business involving decisions made with all three companies in mind. The companies also are located in the same premises in Abbotsford although they may have therein their separate area. There is also some evidence of an exchange of chief executive officers in a holiday situation.

[19] The plaintiff gave evidence with regard to the close relationship between the companies and how they “fit together”, particularly Sportica and Subsecond. He said that he could not “sell” Sportica without Subsecond or without Discovery, and that Subsecond could not exist without the other two companies. He said that when he made business presentations to potential customers and investors on behalf of Sportica, which presentations were reviewed by his superiors, the other two companies were featured prominently in his presentation. Their history, knowledge, experience and availability were in effect held out as being a part of the services to be provided by Sportica.

[20] There are some documents before me which also show the close relationship between the companies. For example, in the Technology and Intellectual Property License Agreement between Subsecond and Sportica, s. 1.1 provides:

In recognition of the common origins of Subsecond and Sportica, and of Sportica’s privileged relationship with Subsecond, Subsecond and Sportica desire to enter into this special Technology and Intellectual Property License Agreement. This Agreement grants extraordinary privileges to Sportica for access to and application of Subsecond’s technology and intellectual property. In no way does this Agreement set any precedent for or provide any foundation for any other license agreement, ...

The agreement also provides that Subsecond is to supply training at Sportica’s request and at Sportica’s facility, to personnel of Sportica to enable such personnel to fully operate, maintain, modify and/or extend all of the functions of the Subsecond software without any assistance from Subsecond.

[21] There is also a Voting Trust Agreement dated January 17, 2001, made the day before the plaintiff was hired, between the shareholders, who are referred to as the founders, and Sportica. The following provision is contained in the preamble:

(G) The parties to this Agreement deem it to be in the best interests of Discovery and Sportica and of all the direct and indirect shareholders of Discovery and Sportica that this agreement be entered into as an interim measure, to remain in effect until such time as the Sportica Shareholders’ Agreement (as defined below) is executed or until this Agreement is otherwise terminated pursuant to Section 6.1, in order to ensure that each of Discovery and Sportica is controlled by the same person (as “person” is defined in the British Columbia Securities Act) and to ensure that there is continuity of control and stability in the policies and management of Discovery and Sportica and in corporations or business entities effectively controlled by Discovery or Sportica or both.

(A) Damages

[22] The Plaintiff claimed damages in the amount of US$277,094.54, particulars of which are as follows:

1	Original contract amount: (including bonus)	$432,000.00
2	Unpaid Sportica expenses:
(a)	Business related:	+$4,100.00
(b)	Medical expenses:	+$2,400.00
(c)	Dental expenses:	+$520.00
	Less payments made:	$24,200.00
	Balance due before mitigation:	$414,820.00

3	Mitigation
	2002	-$80,115.46
	2003 through year end	-$85,000.00
(a)	Associated mitigation costs:	+$25,571.00
(b)	Job related search:	+$1,819.00

	Total (US)	$277,094.54

[23] The claim for damages is based on clause 7.2 of the agreement which provides as follows:

7.2 Termination by Corporation at any Time

The Corporation may, in its sole discretion and at any time terminate the employment of the Executive upon payment to the Executive of an amount equal to accrued but unpaid salary, any declared but unpaid bonus, expenses incurred in accordance with Section 4.7 prior to the date of termination, the premium costs of benefits incurred in accordance with Section 4.6 prior to the date of termination and amounts owing as Commission prior to the date of termination, together with an amount equal to the Executive’s salary for the period commencing the date of termination and ending on January 18, 2004. [Emphasis added]

[24] The bonus provisions contained in the contract provide:

4.5 Bonuses

Subject to meeting certain pre-established criteria which the Corporation will, in consultation with the Executive, use good faith efforts to formulate within 30 days of execution of this agreement, the Executive will be entitled to receive a bonus by way of additional salary equal to no less than 20% of the base salary of the Executive for the year in which such bonus is given, payable in two equal semi-annual payments. The Board will review the bonus structure, criteria and amount annually. [Emphasis added]

His base salary was US$120,000 per annum.

[25] The first item claimed that is, the $432,000 consists of three year’s salary of $360,000 and three year’s bonus of $72,000, calculated at 20% of the salary for each of the three years.

[26] It is common ground that during the two and a half months the plaintiff worked for the companies the bonus criteria was never fixed nor was a bonus declared or given. In any event, I am satisfied that the parties simply did not get together to establish the criteria. At first the plaintiff testified that he had not been with the company long enough to enable them to formulate a bonus criteria. He later said that he could not recall whether or not he communicated with the company in that regard. Still later he said that he had done so and that for some reason the company had not responded. However, no bonus is claimed for the actual period of employment and I need not deal with this evidence further.

[27] Mr. Gregory says that the plaintiff is entitled to a 20% bonus for each of the three years commencing the date of termination and ending on January 18, 2004, when the term of the agreement ended and pursuant to clause 7.2. I am unable to agree with the submissions which entail the words “Executive salary” used in the latter part of clause 7.2 being interpreted as including a bonus. In my view clause 7.2 does not contemplate a bonus being declared or payable for the termination period. Hence the claim for $432,000 is reduced by $72,000 to $360,000.

[28] Turning to the balance of the claims, items 2(a) Business Related $4,100 and (c) Dental expenses $520 are not recoverable as being either unproven or abandoned. And the same fate applies to items 3(a) Associated mitigation costs $25,571 and (b) Job related search $1,819. Total damages are therefore fixed at US$173,085.

[29] The plaintiff then will recover the aforesaid damages against both defendants Sportica and Subsecond who are jointly and severally liable to him. The damages will be paid pursuant to the provisions of the Foreign Money Claims Act, R.S.B.C. 1996, c. 155.

[30] The plaintiff will also have his costs.

“S.W. Hood, J.”
The Honourable Mr. Justice S.W. Hood

Citation:	*Bartholomay v. Sportica Internet Technologies Inc. et al.,*
	2004 BCSC 508