The recent Superior Court decision in Canaccord Genuity
Corporation v. Sammy is a useful reminder of the law relating
what may happen when an employee obtains a loan from his employer,
and then the employee is fired.
In this case, the plaintiff Canaccord, an investment dealer,
entered into an agency agreement with the defendant Sammy, an
investment advisor, in 2011.
The agreement also provided that Canaccord would make a sizeable
loan to Sammy. The loan was forgivable under certain circumstances
but the agreement provided that if the agency relationship was
terminated by either party and for any reason, the loan would be
repayable immediately with interest.
After the agreement was executed, Sammy became an investment
advisor for Canaccord and brought over his book of business.
Within about a year, Canaccord made the decision to
terminate the relationship and did so on 90 days' notice.
Canaccord had concerns about certain aspects of Sammy's
conduct. For his part, not surprisingly, Sammy denied any
With the termination, the plaintiff demanded repayment of its
Sammy refused to pay, taking the position that the agency
agreement had been terminated in bad faith. Sammy insisted that the
allegations against him were unproven fabrications, designed as an
excuse to end the relationship and appropriate his book of
business. He insisted that because of the abrupt termination,
he was unable to transfer his book of business to any other dealer
and as a result he lost substantial income. He took the
position that Canaccord had acted wrongfully and accordingly, he
was discharged from any obligation to repay the loan. In the
alternative, he insisted that the damages which he had sustained as
a result of Canaccord's conduct could be set off against the
amount otherwise owing under the loan.
Canaccord moved for summary judgment.
The essence of Sammy's defence to the summary judgment
motion, and the basis of his counterclaim, was that the manner of
his termination was a breach of an implied duty of good faith.
The Court disagreed and granted summary judgment. The Court
pointed out that in this case, the loan was repayable even if
Canaccord did breach any duty of good faith, simply as a matter of
contract interpretation. The issue of whether or not
Canaccord's good faith or bad faith was not relevant to the
issue of whether or not the loan was repayable.
The Court observed that under the current law, Canadian courts
have not recognized a stand alone duty of good faith independent
from the terms expressed in a contract. To the extent that there is
a duty of good faith, it has not gone so far as to create new
rights and obligations for which the parties have not bargained,
nor will it change the express terms of a contract. Rather,
the duty of good faith exists to ensure that parties do not act in
a way that defeats the objectives of their agreement.
Accordingly, while Sammy might be able to allege bad faith with
respect to the termination of the agency agreement, that is not a
factor in Sammy's obligation to repay the loan.
In cases of this nature, it is always within the discretion of
the Court to grant judgment but then stay execution of the judgment
pending the resolution of a counterclaim. In other words, the
judgment will go into the books, as it were, but the successful
plaintiff will not be able to actually collect on the judgment
until the defendant's counterclaim has been disposed of.
In this case, the motions judge declined to exercise his
discretion that way. He ruled that the money was payable
immediately. Presumably, this was a reflection of the
Court's skepticism as to the defendant's counterclaim.
This case is a useful reminder of the difficulty that will be
faced by anyone attempting to avoid his or her obligations,
expressed in a contract clearly and plainly, by putting forward
arguments that are not directly related to the obligation. If Sammy
had truly been concerned about what would happen to his book of
business upon termination, and the fact that such a termination
would cause him a significant amount of difficulty repaying the
loan that had been made to him, he should have protected himself in
the wording of the contract.
Originally published at irvinschein.com.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
A former teacher at Bodwell High School has learned a valuable lesson from the B.C. Human Rights Tribunal— it is not discriminatory for an employer to offer child-related benefits to only employees with children.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).