



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Shields v. GetSet Communications Inc.,









2011 BCCA 34




Date: 20110125

Docket: CA038366

Between:

Mike Shields and
Cost Plus Computer Solutions Ltd.

Appellants

(Plaintiffs)

And

GetSet Communications
Inc., Sattler, Gail Sattler, Randy Christie

Respondents

(Defendants)




Before:



The Honourable Mr. Justice Low





The Honourable Mr. Justice Chiasson





The Honourable Madam Justice Bennett




On appeal from: Supreme
Court of British Columbia, July 15, 2010
(
Shields v. GetSet Communications Inc.
, Vancouver Docket No. S082140)

Oral Reasons for Judgment




Appellant appearing In Person:



M. Shields





Counsel for the Respondent:



R. Cuddeford





Place and Date of Hearing:



Vancouver, British
  Columbia

January 20, 2010





Place and Date of Judgment:



Vancouver, British
  Columbia

January 25, 2010








[1]

LOW J.A.
: The appellants were plaintiffs in an unsuccessful
action in contract against the four defendants. The appellants brought an
application for summary trial judgment under the former Rule 18A which resulted
in an order made by Mr. Justice Rice dismissing the action.

[2]

The respondent, GetSet Communications Inc. (GetSet), is a company that
designed and hosted websites. The individual defendants owned or worked for
GetSet.

[3]

In 2004, the appellant Mike Shields, on behalf of the appellant company,
approached GetSet to work on developing a website named OnlineOffice. This
resulted in a Memorandum of Understanding dated 19 October 2004. That document
provided that GetSet would be paid half its fees in cash and the other half,
after completion of the website, in the form of shares in the appellant company.

[4]

It appears from the affidavit evidence that some work was done on the
website for which the appellants paid GetSet the sum of $7,181.04. However, the
project was never completed because the business relationship between the
parties broke down around the middle of 2005. Before that occurred, however,
Mr. Shields did work for GetSet on a commission basis. Part of the claim of the
appellants arises out of that second business relationship.

[5]

The statement of claim filed by Mr. Shields is a rambling document with
a predominantly evidentiary flavour. It does not plead facts in the ordinary
manner and does not clearly plead the legal basis on which damages are sought. However,
one can deduce from reading it that the claim is in contract, and on the
evidence presented, the amounts claimed arise out of the breakdown of the
contractual relationship that existed between the parties in the two areas I
have identified.

[6]

There is also a pleading that in February 2005 there was an agreement
among the appellant Mike Shields and the respondents Tim Sattler and Randy
Christie that they would each become one-third shareholders in GetSet. This has
been referred to as a partnership agreement but it might be more accurate to
describe it as a share-purchase agreement.

[7]

In the statement of claim, the appellants claimed the following:

1.

refund of
the $7,081.04 paid to GetSet for work on the website that was not completed;

2.

reimbursement
of $21,795.90 for certain advances made by the appellants to staff members or
contractors employed or retained by GetSet;$750 for purchase of a computer;

3.

$750 for
purchase of a computer;

4.

refund of
$500 for establishing an alternate office location;

5.

payment of
one-third commission of sales made by Mr. Shields on behalf of GetSet from
February to August 2005 in the net amount of $11,322.67;

6.

payment of
a one-third commission for web hosting contract revenue during the same period
and later  calculated at $7,200;

7.

the sum of $20,833 as would be reasonable for Mr. Shields success in
preserving GetSet and/or Victory Communication corporate viability.

[8]

Item 7 apparently was a claim for damages for breach of the
share-purchase agreement.

[9]

In addition, the statement of claim sought punitive damages for
non-performance of the website development contract and for non-performance
of the February 8, 2005 agreement and/or of subsequent agreements, the latter
also referring to the share-purchase agreement.

[10]

The summary trial judge dismissed all claims on the basis that none was
supported by the evidence.

[11]

Notwithstanding the fact that they brought the R. 18A application, the
appellants contended in their factum that, because of credibility issues, this
case was not suitable for disposition under Rule 18A on a summary basis and the
order dismissing the action should be set aside accordingly. Nevertheless, they
also sought judgment in their favour expressed in Part 4 of their factum as
follows:

A judgment in
favor of the Plaintiff be rendered pursuant to Rule 18A with regard to one or
more of his breach of [website development] contract claim for $7,181.04 and/or
his breach of partnership claim in the amount of $1 and/or his breach of
commissions earned claim. With regard to the latter, plaintiff seeks access to
defendant financial records for the period March-August 2005 to calculate gross
sales -- however if all court ordered amounts are paid without delay will
alternatively accept the agreed upon commission rate of 33% times the sales
specifically documented by the email evidence [$18,750 + $2232 +$650 = $21,632
x 33%] less $3677.33 paid = $3461.23.

[12]

At the hearing of the appeal, the appellants did
not pursue the argument that the action was not suitable for summary
disposition. They do not seek a new trial.

[13]

In their statement of defence, the respondents pleaded that the
Memorandum of Understanding did not amount to a contract; that there was no
further agreement reached between the parties with respect to the website the
appellants wanted; that Mr. Shields was provided with work space by GetSet in
order to work on the website; that there was an agreement for Mr. Shields to
work in a commission sales position with his remuneration therefrom to retire
the outstanding debt owed by the corporate appellant to GetSet; that Mr.
Shields had no authority to incur expenses on behalf of GetSet; and that
certain named persons were hired by Mr. Shields for the benefit of the
corporate plaintiff and were neither employees of nor contractors with GetSet. It
is at least implicit in this pleading that GetSet received from the appellants
only what it had earned for its work on the website project and that Mr.
Shields was paid all commissions he earned.

[14]

There was no counterclaim.

[15]

At trial, Mr. Shields presented his own affidavits that recite the
dealings between the parties over the period of time in question. Exhibited to
the affidavits are a number of documents, mostly emails that passed between the
parties. Although detailed, the affidavits are not as clear with respect to the
facts asserted as they might have been but some facts are implicit as to what
did and did not occur.

[16]

The respondents filed affidavits sworn by Tim Sattler and Randy Christie.
No documents are attached. The thrust of Mr. Sattlers affidavit is that GetSet
was entitled to retain the monies it was paid for its work on the website and
that there was no more than discussion on the part of Mr. Shields with respect
to the future ownership of GetSet. He acknowledged that Mr. Shields worked for
GetSet on a commission basis but did not recall how much business he brought in.
He provided answers to some of the particular assertions of fact in Mr.
Shields evidence but had no recollection with respect to some matters. He
provided no accounting from GetSets financial records of business generated by
Mr. Shields, commissions earned by him or payments made to him. Gail Sattler,
his wife, was the bookkeeper for GetSet but she did not give evidence.

[17]

Randy Christie swore an affidavit in which he provided answers to some
of the specific assertions of fact made by Mr. Shields, none of which is of any
importance to the issue remaining on appeal. His evidence does not directly
address the matter of him being involved in purchasing the equity of GetSet,
but the thrust of his evidence is that he did not pay much attention to things
said by Mr. Shields and did not want a business relationship with him. Mr.
Christie was not an employee of GetSet but an independent contractor.

[18]

If my addition is correct, the amounts sought in the
statement of claim and at trial total $69,482.61, not including punitive
damages. On appeal, the appellants limit the claim to the following:

(a)      return of
the sum of $7,181.04 paid to GetSet for development work on the website;

(b)      nominal
damages of $1 for breach of the alleged share purchase agreement; and

(c)      $3,461.23 for commissions owing.


Memorandum of Understanding


[19]

Mr. Shields contends that the trial judge erred in not finding that
GetSet had to reimburse the sum of $7,181.04 it received for the partial
development of the OnlineOffice website. This issue involves interpretation of
the Memorandum of Understanding of 19 October 2004.

[20]

With respect to this issue, the trial judge said this:

[14]
Now
Mr. Shields wants what he says is a refund for monies paid to the defendant for
work supposedly performed prior to December 31, 2004. There is no contention
that that money was not paid. On the other hand, there is no contention that
work approximating that value subject to completion of the website, was ever
paid. If it was paid, then the issue is whether there was the failure to
perform for the work needed to complete the website. That is not in evidence
anywhere, and without that evidence I am unable to conclude that any payment
was made in excess of what was owed.

[21]

It seems to me the judge did not directly address the issue because he
did not provide an interpretation of the Memorandum of Understanding. However,
my interpretation of that agreement is that GetSet was entitled to be paid for
the work it performed. There is no evidence that the corporate appellant did
not receive value for that work.

[22]

The memorandum is between the corporate appellant and the corporate
respondent. The document states as its purpose the development of the
OnlineOffice.com website as set out in certain identified specifications. Hourly
billing rates are specified to be in accordance with an attached schedule. Payment
is to be half in cash and half in shares in OnlineOffice.com Inc., the shares
to be priced at 25 cents per share and to be deemed earned and payable
only
upon the launch of a functioning OnlineOffice.com website. It is of importance
that the contract provides for weekly billing by GetSet to be due and payable
within five days to a maximum of $1,500 per week. Any excess shall be deferred
to the end of the development period and thereafter billed on a weekly basis on
the same terms until extinguished.

[23]

There is no explicit provision in the contract that development costs
paid to GetSet must be refunded if the project is not completed. Nor is such a
contractual term implicit. Therefore there is no legal requirement arising from
the contract itself that GetSet must refund that which it earned simply because
the development of the website was not completed.

[24]

The evidence does not address why the project did not complete. The
relationship between the parties changed with the discussion of the future of
GetSet and Mr. Shields becoming a commission salesman for GetSet. There is
evidence that Mr. Shields did not have the money to finance the development of
the website on an ongoing basis. He does not plead or otherwise suggest that
GetSet breached the contract by failing to complete the website. As I have
said, there is no evidence that the appellant company did not get value for the
development work done by GetSet. Mr. Shields acknowledged that he received the
work product.

[25]

In these circumstances, there is no basis in law for ordering return of
the monies paid to GetSet under the contract.

Share purchase agreement

[26]

Mr. Sattler was the only shareholder in GetSet. Mr. Shields claims that
at a meeting on 7 February 2005, he, Mr. Sattler and Mr. Christie agreed that
GetSet would be restructured so that each of them would own one-third of the
shares in GetSet. His notes of this meeting are exhibited to one of his
affidavits. He says that GetSet is no longer an operating company and a money
judgment for damages for breach of contract would be pointless so he asks for
nominal damages.

[27]

On this issue, the trial judge said:

[12]      ...
upon
reviewing the evidence and listening to the submissions of Mr. Shields, that I
am unable on his evidence to find any even probability that there was a
partnership agreement as such. No document has been produced that outlines a
partnership agreement. There are no terms in detail that are recalled and
presented before me. There is no evidence of payment according to a partnership
understanding. There is no certainty as to who were the parties. There is no
reason on a commonsense analysis that this would have been the way that these
parties continued in business after having at that point, that is the first
couple of months of 2005, opted for this arrangement, having had a very
difficult time with each other. It was at a time when Mr. Christie, one of the
defendants was in the process of leaving GetSet, where he had worked before as
a programmer.

[28]

There is nothing in writing between the parties that would serve to
prove the agreement alleged. Mr. Shields notes are not sufficient and on his
evidence put in its best light the most that can be said is that there was some
discussion about a restructuring of the ownership of GetSet that never got
beyond discussion. There is nothing in the evidence to support any conclusions
as to the essential terms of the agreement alleged, particularly the cost of
acquisition of the shares in GetSet. On this basis, the agreement alleged would
fail for being vague and uncertain.

[29]

In addition, emails between the parties subsequent to the meeting date
make it clear that nothing had been agreed to with respect to the future equity
ownership of GetSet. It is not necessary to look beyond an email from Mr.
Shields to Gail Sattler dated 26 April 2005 in which Mr. Shields wrote: In conclusion
my suggestion is for you and Tim [Sattler] to decide once and for all whether
you want Randy [Christie] and I as partners or as subcontractors or employees
and then to make an offer we can all agree to in writing.

[30]

This is not the language of a party who asserts that prior to the date
of the email there was an enforceable agreement. The trial judge did not err in
finding the agreement alleged to be unproven.

Commissions

[31]

As to the commissions claim, the trial judge said this:

[21]
I have spoken about the one-third
commission. In his statement of claim he talks about an estimated $45,000 of
which $15,000 should be commission less $3,677 that he acknowledges he has
received.

[22]      I

have
to say again, as I said before for lack of evidence as to an agreement between
the parties on the payment of that amount of a commission, I am unable to make
a finding that there is any such commission that has not been paid and is
outstanding.

[32]

The trial judge failed to note, as I have stated above, that the
respondents pleaded that there was a commission sales arrangement with Mr.
Shields, with the remuneration he earned to be offset against the debt owed by
the corporate appellant to GetSet. The first part of this admission supports
the assertion of Mr. Shields that there was a commission agreement. Counsel has
not directed us to any evidence that there was to be an offset.

[33]

The evidence with respect to the commissions claim is a bit sketchy but
I am convinced that it was sufficient to support part of the claim. The trial
judge did not refer to any specifics in the evidence. I expect that we have
been given more assistance by Mr. Shields than he gave to the trial judge in
isolating the evidence that supports the conclusion that Mr. Shields worked for
GetSet on a commission basis and managed client accounts so as to be entitled
to payment for his work.

[34]

At least one email written by Gail Sattler acknowledges that Mr.
Shields, as he claimed in his evidence, was to be paid 33% for his work for
GetSet. Mr. Sattler did not deny this in his affidavit. Rather, he swore: The
sales job that GetSet hired Shields to perform was a commission sales job. He
went on to express some disappointment in the work Mr. Shields generated for
GetSet but did not deny the commission rate or the particulars in the evidence
given by Mr. Shields. He also swore that he did not recall exactly how much
business Shields brought in. Gail Sattler who, as bookkeeper for the company,
would be in a position to know about these matters did not give evidence. It is
common ground that Mr. Shields did some work for GetSet and that he received
remuneration for this work in the amount of $3,677.33.

[35]

I conclude, therefore, that the trial judge erred in failing to find
that there was a commission agreement at 33%. At the hearing of the appeal,
counsel for GetSet did not attempt to persuade us that the judge was correct in
his conclusion.

[36]

GetSet has not provided an accounting of the sales attributable to
Mr. Shields, the commissions earned thereon, and the payments made to him.
At trial, Mr. Shields claimed sales of $45,000 and $15,000 in commissions, less
the payment received. On appeal, he limits his claim to commissions on gross
sales of $21,632, less the amount received, leaving a net balance owing of
$3,461.23.

[37]

There are documents in evidence supporting gross sales in at least the
amount now asserted. Counsel for GetSet contends that Mr. Shields did not swear
in his affidavit that he was not paid the balance of the commissions earned. I
think this fact can be inferred. A spread sheet prepared by Mr. Shields and
emailed to Gail Sattler shows the commissions claimed and the amount paid by
GetSet. She has provided no evidence that GetSet paid Mr. Shields any more than
the sum of $3,677.33 as stated in the spread sheet. There is also an email from
Mr. Shields to her complaining that a cheque he received was only about half of
what he expected. To avoid the inference that this was all that Mr. Shields
received for his services, GetSet could have produced evidence of a later
payment or payments.

[38]

I would allow the appeal to the extent of giving Mr. Shields judgment
against GetSet in the amount of $3,461.23.

Costs

[39]

The trial judge ordered that the appellants pay costs to the respondents.
That part of the order has to be reconsidered in light of partial success on
the appeal.

[40]

The respondents argue that in the result this action comes within the
jurisdiction of the Provincial Court under the
Small Claims Act
so that
the appellants should be deprived of costs in both this court and the trial
court. They cite R. 57(10) under the old rules that would apply to this case.

[41]

This action arose from a fairly complex business relationship between
the parties, the amount initially claimed was in excess of the jurisdiction of
the court under the
Small Claims Act
and, in my opinion, there was
sufficient reason to bring the action in the Supreme Court as contemplated by
the rule.

[42]

Mr. Shields should have had some success at trial and should have
recovered some of his costs in the trial court. I would vary the trial costs
order to provide that the respondents recover 75% of their trial costs and that
the appellants recover 25% of their trial costs.

[43]

Success in this court being divided, I would order that the parties bear
their own costs of the appeal.

Disposition

[44]

I would made the following order:

(a)      that the appeal be
dismissed as against Tim Sattler, Gail Sattler and Randie Christie;

(b)      that the order
dismissing the action as against GetSet be set aside and that the appellants
recover judgment against GetSet in the amount of $3,461.23;

(c)      that the provision
for costs in the trial court order be set aside and be replaced with an order
that the appellants pay the respondents 75% of their costs of trial and that
GetSet pay the appellants 25% of their costs of trial;

(d)      that
the parties bear their own costs of the appeal.

[45]

CHIASSON J.A.
:I agree.

[46]

BENNETT J.A.
: I agree.

[47]

LOW J.A.
: There will be an order accordingly.

The Honourable Mr. Justice Low


