Alberta Permit Pro et al. v. Booth et al., (2007) 442 A.R. 1 (QB)

• Judge: Read, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: September 18, 2007
• Citations: (2007), 442 A.R. 1 (QB);2007 ABQB 562

Alta. Permit Pro v. Booth (2007), 442 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. OC.059

Alberta Permit Pro and 1081959 Alberta Ltd. (plaintiffs) v. Terry Booth, and Jazz Bailey Investments Inc. and Superior Safety Codes Inc., an Amalgamated Corporation (defendants)

Terry Booth, and Jazz Bailey Investments Inc. (plaintiffs by counterclaim) v. Alberta Permit Pro and 1081959 Alberta Ltd. (defendants by counterclaim)

(0403 10830)

Terry Booth (plaintiff) v. Richard Kerscher (defendant)

Richard Kerscher and 1081959 Alberta Ltd. (plaintiffs by counterclaim) v. Terry Booth (defendant by counterclaim)

(0403 08933; 2007 ABQB 562)

Indexed As: Alberta Permit Pro et al. v. Booth et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Read, J.

September 18, 2007.

Summary:

Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement. The transaction also included a restrictive covenant disabling Booth and Jazz Bailey from competing with the purchaser. Booth and Kerscher, the principal of the purchaser, executed an amending agreement which made many changes to the purchase agreement and the consulting agreement. Difficulties arose and Booth's position as a consultant ended. He subsequently incorporated Superior Safety Codes Inc. and went into direct competition with Alberta Permit Pro. Alberta Permit Pro and 1081959 (the plaintiffs) sued, claiming breach of the amending agreement and the restrictive covenant. Booth and Jazz Bailey (the defendants) counterclaimed, alleging breach of the amending agreement and claiming for amounts due under the consulting provisions. Booth also sued on a promissory note signed by Kerscher.

The Alberta Court of Queen's Bench dismissed the plaintiffs' action and allowed the defendants' counterclaim. The court also allowed Booth's action on the promissory note.

Master and Servant - Topic 303

Nature of relationship - What constitutes an employer-employee relationship - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - The Alberta Court of Queen's Bench held that the relationship between Booth/Jazz Bailey and Alberta Permit Pro was that of employer/employee rather than that of an independent contractor - Some of the terminology used in the Consulting Services Agreement and a Third Amending Agreement, such as "consultant" and "services", seemed to imply an independent contractor relationship - However, the court stated that "courts have often placed little weight on the terminology and descriptions of the worker/employer relationship found in the contract, but rather have focussed on how the relationship operated in practice ... Thus, the terminology used is not determinative" - See paragraph 126.

Master and Servant - Topic 303

Nature of relationship - What constitutes an employer-employee relationship - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - The Alberta Court of Queen's Bench held that the relationship between Booth/Jazz Bailey and Alberta Permit Pro was that of employer/employee rather than that of an independent contractor - The court noted that while the services to be provided by the consultant were specified to be those of Booth, the contract was not with Booth, but with Jazz Bailey - The court stated "Conventionally, of course, employees are natural persons. Arguably on this basis as well, the contractual relationship between Jazz Bailey and Alberta Permit Pro could be an independent contractor/employer relationship, with Mr. Booth as an employee of Jazz Bailey. It appears, however, that when the Consulting Services Agreement as amended was in force, Jazz Bailey was essentially a professional corporation that offered the services of Mr. Booth as its primary or sole service ... the fact that the contract was between Jazz Bailey and 1081959 does not preclude Mr. Booth being considered to be an employee of 1081959. Again, therefore, this factor is not determinative" - See paragraphs 127 to 128.

Master and Servant - Topic 303

Nature of relationship - What constitutes an employer-employee relationship - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - The Alberta Court of Queen's Bench held that the relationship between Booth/Jazz Bailey and Alberta Permit Pro was that of employer/employee rather than that of an independent contractor - The court considered that Booth's activities as described in the Consulting Services Agreement as amended appeared central to the operation of Alberta Permit Pro, Booth was to supervise employees, the agreement gave Booth the title of president, control could be exerted over Booth, Booth did not have a chance of profit or risk of loss, the contract was for Booth's services rather than the services of Jazz Bailey in general, Booth worked in an office at Alberta Permit Pro and used office equipment and material provided by Alberta Permit Pro, and, given a non-competition agreement between the parties, an exclusive employment relationship was intended - See paragraphs 121 to 146.

Master and Servant - Topic 303

Nature of relationship - What constitutes an employer-employee relationship - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - The Alberta Court of Queen's Bench held that the relationship between Booth/Jazz Bailey and Alberta Permit Pro was that of employer/employee rather than that of an independent contractor - With respect to the factor of the "chance of profit or risk of loss", the court considered that Booth's compensation was based on a commission scheme where the quantum of compensation was dependent on corporate income - The court stated that "The range of compensation that could have been received by Mr. Booth under the terms of this agreement were highly variable, and at the extremes could result in Mr. Booth either working without pay, or in his receiving extremely generous compensation. However, this compensation scheme cannot be termed a chance of profit or a risk of loss as the courts have interpreted these terms. 'Profit' is a term considered in light of investments made by a worker, or costs paid by a worker" - Booth did not have a chance of profit or risk of loss as those terms had been applied in the case law - Analysis of this factor favoured a conclusion that he was an employee rather than an independent contractor - See paragraphs 138 to 140.

Master and Servant - Topic 1330

Contract of hiring (employment contract) - Covenants in restraint of trade - Restrictive covenants - Breach of - What constitutes - [See Master and Servant - Topic 4305 ].

Master and Servant - Topic 4305

Duties of servant - On termination - Competition in business - General - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - The transaction also included a restrictive covenant disabling Booth and Jazz Bailey from competing with the purchaser - Booth and the principal of the purchaser, executed an amending agreement which made many changes to the purchase agreement and the consulting agreement - Difficulties arose and Booth's position as a consultant ended - He subsequently incorporated Superior Safety Codes Inc. and went into direct competition with Alberta Permit Pro - Alberta Permit Pro and 1081959 sued, claiming breach of the amending agreement and the restrictive covenant - The Alberta Court of Queen's Bench dismissed the action - The court held that Alberta Permit Pro and 1081959 had constructively dismissed Jazz Bailey and Booth without complying with the requirement of the amending agreement that they pay a "termination amount" as defined in the agreement - The court further held that as a consequence of s. 6.1 of the amending agreement, because the consulting services provision was breached by the purchasers, the non-competition agreement was terminated - As of the date of the purchasers' breach, Booth and Jazz Bailey were free to compete with Alberta Permit Pro - See paragraphs 226 to 231.

Master and Servant - Topic 7502

Dismissal or discipline of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - Difficulties arose - When Booth went to work on a Monday morning, he found his office door locked, his name plate had been taken off the door, and the locks had been changed - When he went home, he found an email from a partner of Alberta Permit Pro, which stated that it would be in Alberta Permit Pro's "best interest if you worked out of your home office" - It also requested that Booth amend his title from that of President to that of Consultant - The Alberta Court of Queen's Bench held that Alberta Permit Pro and 1081959 had constructively dismissed Jazz Bailey and Booth - The court considered, inter alia, that there was more than one contract in play - The court stated that "Potentially, the greatest harm to Mr. Booth may not have been within the employment relationship, but rather to the collateral contract of purchase and sale. Mr. Booth was particularly vulnerable because of the other contractual obligations between the parties ... In my view, a constructive dismissal may result where an employer deliberately changes or threatens to change an employment contract so as to affect a different relationship (contract, or otherwise) in a manner that solely benefits the employer and at a cost to the employee, particularly when the employer exploits an imbalance of power between the parties" - See paragraph 175.

Master and Servant - Topic 7502

Dismissal or discipline of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Through his corporation, Jazz Bailey Investments Inc., Booth agreed to act as a consultant to the new owner under a consulting agreement - Difficulties arose - When Booth went to work on a Monday morning, he found his office door locked, his name plate had been taken off the door, and the locks had been changed - When he went home, he found an email from a partner of Alberta Permit Pro - The email, which was marked "without prejudice", stated that it would be in Alberta Permit Pro's "best interest if you worked out of your home office" - It also requested that Booth amend his title from that of President to that of Consultant - The Alberta Court of Queen's Bench held that Alberta Permit Pro and 1081959 had constructively dismissed Jazz Bailey and Booth - Being locked out of his office was just the final event in a long series of events that caused Booth to conclude that what had occurred was a constructive termination - The court also looked at the purchasers' track record for living up to the terms of the agreements they had entered into - The court stated that the purchasers' conduct could be characterized as bad faith dealings and that it saw no logical reason why bad faith on the part of an employer could not contribute to a constructive dismissal - See paragraphs 147 to 191.

Negotiable Instruments - Topic 8406

Promissory notes - Liability of parties - General - Makers - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Booth agreed to act as a consultant to the new owner under a consulting agreement - Booth subsequently deposited $300,000 in an Alberta Permit Pro bank account and Kerscher, the principal of the purchaser, signed a promissory note for $300,000 - Difficulties arose and litigation ensued - Kerscher was sued on the promissory note - Kerscher argued that the loan of $300,000 was made to Alberta Permit Pro and not to him personally and that he obtained no personal benefit from the funds - The Alberta Court of Queen's Bench found that Kerscher was the debtor under the promissory note - The promissory note was clear on its face - Kerscher was the named debtor and not Alberta Permit Pro - He did not sign in his representative capacity for the corporation - Whether the loan was made to him personally or to the corporation was immaterial - See paragraphs 233 to 234.

Negotiable Instruments - Topic 7441

Promissory notes - Consideration - Sufficiency - General - Booth sold his business, Alberta Permit Pro, to 1081959 Alberta Ltd. - Booth agreed to act as a consultant to the new owner under a consulting agreement - Booth subsequently deposited $300,000 in an Alberta Permit Pro bank account and Kerscher, the principal of the purchaser, signed a promissory note for $300,000 - Difficulties arose and litigation ensued - Kerscher was sued on the promissory note - Kerscher argued that he received no consideration for the funds advanced and the promissory note was therefore unenforceable - The Alberta Court of Queen's Bench rejected the argument - The money was deposited as a loan into the bank account of Alberta Permit Pro - The funds were used to pay bills of Alberta Permit Pro at a time when the business had cash flow problems - Kerscher therefore received consideration for the promissory note - He received Booth's promise to inject funds into a business controlled by Kerscher in circumstances where if the business had not received the influx of funds, Kerscher might otherwise have had to pay it personally - See paragraphs 235 to 236.

Cases Noticed:

Farber v. Compagnie Trust Royal, [1997] 1 S.C.R. 846; 210 N.R. 161; 145 D.L.R.(4th) 1, refd to. [para. 122].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1; 57 D.L.R.(4th) 321, refd to. [para. 123].

Rousell v. Prairie Implement Manufacturers Association (1992), 106 Sask.R. 99; 44 C.C.E.L. 243 (Q.B.), refd to. [para. 126].

Walden v. Danger Bay Productions Ltd. et al., [1994] 6 W.W.R. 138; 42 B.C.A.C. 196; 67 W.A.C. 196; 114 D.L.R.(4th) 85, refd to. [para. 126].

Wiebe Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553; 70 N.R. 214; 46 Alta. L.R.(2d) 83 (F.C.A.), refd to. [para. 126].

Bird v. Warnock Hersey Professional Services Ltd. (1980), 25 B.C.L.R. 95 (S.C.), refd to. [para. 128].

Therrien et al. v. True North Properties Ltd. et al. (2007), 418 A.R. 26; 15 A.C.W.S.(3d) 76; 2007 ABQB 312, refd to. [para. 128].

Marbry et al. v. Avrecan International Inc. (1999), 119 B.C.A.C. 266; 194 W.A.C. 266; 171 D.L.R.(4th) 436; 1999 BCCA 172, refd to. [para. 128].

Alberta Care-A-Child Ltd. v. Payne et al. (2005), 383 A.R. 43; 2005 ABQB 561, refd to. [para. 128].

671122 Ontario Ltd. v. Sagaz Industries Canada Inc. et al., [2001] 2 S.C.R. 983; 274 N.R. 366; 150 O.A.C. 12; 2001 SCC 59, refd to. [para. 129].

Oil & Rubber Specialties Inc. v. Minister of National Revenue, [1999] T.C.J. No. 480, refd to. [para. 133].

Canada (Procureur général) v. Groupe Desmarais Pinsonneault & Avard Inc. (2002), 291 N.R. 389; 2002 FCA 144, refd to. [para. 136].

Shaw Communications Inc. v. Minister of National Revenue, [2002] T.C.J. No. 314; 2003 D.T.C. 1459, affd. [2003] N.R. Uned. 78; 2003 D.T.C. 5707; 2003 FCA 171, refd to. [para. 138].

Polimark Ltd. v. Minister of National Revenue, [2000] T.C.J. No. 52 (T.C.C.), refd to. [para. 139].

Mayer v. Lavigne (J. Conrad) Ltd. (1979), 27 O.R.(2d) 129; 105 D.L.R.(3d) 734 (Ont. C.A.), refd to. [para. 140].

Truong v. British Columbia et al. (1999), 128 B.C.A.C. 240; 208 W.A.C. 240; 47 C.C.E.L.(2d) 307; 1999 BCCA 513, refd to. [para. 141].

Te'mexw Treaty Association v. Minister of National Revenue, [2000] T.C.J. No. 447 (T.C.C.), refd to. [para. 142].

Bennett v. Cunningham (2006), 55 C.C.E.L.(3d) 304 (Ont. Sup. Ct.), refd to. [para. 144].

Doiron v. Manufacturers Life Insurance Co. et al. (2002), 319 A.R. 387; 2002 ABQB 664, affd. (2003), 339 A.R. 371; 312 W.A.C. 371; 232 D.L.R.(4th) 732; 2003 ABCA 336, refd to. [para. 144].

Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; 77 N.R. 161; 21 O.A.C. 321; 1987 CanLII 55, refd to. [para. 145].

Tanton v. Crane Canada Inc., [2001] 4 W.W.R. 655; 278 A.R. 137; 2000 ABQB 837, refd to. [para. 148].

Wells v. Toka Ltd. (1991), 94 Nfld. & P.E.I.R. 257; 298 A.P.R. 257 (Nfld. T.D.), refd to. [para. 149].

Pathak v. Jannock Steel Fabricating Co. et al. (1999), 228 A.R. 312; 188 W.A.C. 312; 1999 ABCA 8, refd to. [para. 149].

Lesiuk v. British Columbia Forest Products Ltd. (1986), 33 D.L.R.(4th) 1 (B.C.C.A.), refd to. [para. 149].

Bergmann v. CPT Canada Power Technology Ltd., [1998] 1 W.W.R. 581; 207 A.R. 212 (Q.B.), refd to. [para. 149].

Vanderleest v. Regina (City) (1992), 102 Sask.R. 24; 91 D.L.R.(4th) 538 (Q.B.), refd to. [para. 150].

Niwranski v. H.N. Helicopter Parts International Corp. (1992), 45 C.C.E.L. 303 (B.C.S.C.), refd to. [para. 157].

Genyk v. H & R Block (Canada) Ltd. and Irving (1980), 5 Man.R.(2d) 123 (Co. Ct.), refd to. [para. 157].

Miller v. ICO Canada Inc., [2005] A.R. Uned. 477; 2005 ABQB 226, refd to. [para. 157].

Colasurdo v. CTG Inc, [1988] O.J. No. 2715, refd to. [para. 157].

Tilbe v. Richmond Realty Ltd. (1995), 11 C.C.E.L.(2d) 11 (B.C.S.C.), refd to. [para. 157].

Bowen Estate v. Ritchie Bros. Auctioneers Ltd. (1999), 126 O.A.C. 139; 47 C.C.E.L.(2d) 232 (C.A.), refd to. [para. 163].

Alguire v. Cash Canada Group Ltd. (2005), 380 A.R. 227; 363 W.A.C. 227; 144 A.C.W.S.(3d) 486; 2005 ABCA 387, refd to. [para. 164].

Reber v. Lloyds Bank International Canada (1985), 61 B.C.L.R. 361; 7 C.C.E.L. 98; 18 D.L.R.(4th) 122 (C.A.), refd to. [para. 165].

Janzen and Govereau v. Pharos Restaurant and Grammas et al., [1989] 1 S.C.R. 1252; 95 N.R. 81; 58 Man.R.(2d) 1; 59 D.L.R.(4th) 352, refd to. [para. 176].

Shah v. Xerox Canada Ltd. (1998), 77 O.T.C. 171; 49 C.C.E.L.(2d) 30 (Gen. Div.), refd to. [para. 179].

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1; 152 D.L.R.(4th) 1, refd to. [para. 187].

Authors and Works Noticed:

England, Geoffrey, Wood, Roderick, and Christie, Innis, Employment Law in Canada (4th Ed. 2005) (2007 Looseleaf Update), p. 2-15 [para. 128].

Counsel:

Dennis G. Groh, Q.C., for the plaintiffs;

K.D. Wakefield, Q.C., and Shauna N. Finlay (Fraser Milner Casgrain LLP), for the defendants.

These actions were heard on June 4-22, 2007, before Read, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following reasons for judgment on September 18, 2007.