


COURT OF APPEAL FOR ONTARIO

CITATION:
Gentech
    Insurance Ltd. v. Martina, 2012 ONCA 605

DATE: 20120914

DOCKET: C54524

Feldman, Sharpe and Ducharme JJ.A.

BETWEEN

Gentech Insurance Ltd.

Plaintiff

(Respondent)

and

Alan Martina and Peter Diamantouros

Defendants

(Appellants)

Patrick J. Cotter, for the appellants

Allyson Fischer and Stephen F. Gleave, for the
    respondent

Heard: August 20, 2012

On appeal from the judgment of Justice David G. Stinson
    of the Superior Court of Justice, dated October 6, 2011.

ENDORSEMENT

[1]

The appellants are insurance salesmen. The respondent is an insurance
    broker that retains salespeople, referred to as producers, who operate as
    non-employee agents using the brokers licence and facilities. The appellant
    Martina came to the respondent as a producer in 2005. He was shown the
    respondents standard form written agreement. He never signed the written
    agreement, but he commenced and continued as a producer based on an oral
    agreement on the commission split and a 50/50 shared equity interest with
    Gentech in his book of business, that is, his insurance clients.

[2]

The appellant Diamantouros joined Gentech as a producer four months
    after Martina. Diamantouros brought his own book of business. He also did not
    sign the standard form agreement but commenced and continued to work as a
    producer sharing commissions on a 50/50 basis.

[3]

Both men decided to leave Gentech on the same day in January 2009,
    without notice and taking their books of business. Although Gentech tried to
    retain at least a portion of Martinas accounts, most of them chose to transfer
    their accounts to Martina.

[4]

Gentech sued both men on numerous grounds, including breach of contract
    and the tort of civil conspiracy. The key issue in the case was whether there
    was an agreement between each of the appellants and the respondent as to what
    would happen if the appellants left, and if there was an agreement, when was it
    formed and what were its terms.

[5]

The original claim alleged an agreement between Gentech and Martina
    based on the terms of the unsigned contract, and in particular paragraph 18,
    which dealt with termination and provided:

18. If this Agreement is terminated and the Special Conditions
    are satisfied as of the effective date of termination, the Contractor shall
    have the option but not the obligation to acquire the Book of Business from
    Gentech for 50% of the Fair Market Value thereof as determined by mutual
    agreement or binding in accordance with the process and procedures set out in
    Schedule A if they cannot agree. The Contractor must exercise this option by
    notice in writing to Gentech within four weeks before or within two weeks after
    the effective date of termination. The purchase price shall be paid in full on
    closing. Closing shall take place within three weeks after the later of (A)
    final determination of the purchase price, or (B) the effective date of
    termination. On Closing Gentech will provide a list of customers included in
    the Book of Business, copies of such documents as the Contractor may reasonably
    require to service that Book of Business, and a restrictive covenant agreement
    whereby Gentech agrees not to do [sic] sell general insurance products or renew
    general insurance products with the Book of Business without the prior written
    consent of the Contractor which consent may be unreasonably refused prior to
    the earlier of (C) two years after closing, or (D) the death of the Contractor.
    Both parties agree they will execute such further and other assurances as may
    be reasonably required to give effect to this paragraph and the transaction
    herein contemplated.

[6]

Prior to the commencement of the trial, but more than two years after
    the appellants left Gentech, the respondent sought to amend its claim to add a
    claim for, among other things, unjust enrichment. Further, the Amended
    Statement of Claim added paragraph 9, which reads:

When the defendants joined Gentech, both verbally agreed that
    if they left Gentech and took Gentechs customers, they would pay Gentech 50%
    of fair market value for any customers they had sold insurance products or
    renewals to during the twelve months prior to leaving.

[7]

The appellants opposed the amendments on the basis that the Respondent
    was asserting new causes of action that were statute-barred. The trial judge
    allowed the amendments, ruling in respect of paragraph 9 that it was a
    restatement of the claim of an oral agreement. It was essentially in accordance
    with the deal reflected in paragraph 18 of the unsigned contract and did not
    constitute a different cause of action. As a result, it was not statute-barred.

[8]

There were two meetings between the appellant Martina and the main
    principal of Gentech, Mr. Muir. The first was before Martina started, where
    Muir presented a spreadsheet that showed examples of the commission calculation
    as well as how the fair market value of the book of business would be
    calculated at termination, based on a factor of two. Martina subsequently held
    Gentech to the commission calculation, which provided for a higher commission
    in the first years, based on the first meeting and the spreadsheet. At the
    second meeting, shortly after Martina started working at Gentech, Muir
    presented Martina with standard form documents outlining the agreement,
    including a services contract and a non-competition/non-solicitation agreement.
    Those documents were never signed.

[9]

The trial judge found that Gentech and Martina had agreed to be bound by
    the terms reflected in the spreadsheet examples from the first meeting,
    including the commission structure and the 50/50 equity split with a
    termination buyout at two times commission representing fair market value.

[10]

The
    appellant submits that the effect of this finding was to turn an option to
    purchase the book of business on termination, contained in Gentechs written
    contract at paragraph 18, into a mandatory obligation on the producers to buy
    their books of business on termination. His position was that if he left
    Gentech with his book of business, his option was to purchase Gentechs 50%
    interest or not purchase it, and face a lawsuit for breaching a non-solicitation
    covenant, which lawsuit he believed would not be successful.

[11]

We
    do not agree. The trial judge found that Martina and Muir made an oral
    agreement based on the spreadsheet and not on the terms of the Gentech form of
    agreement that was not signed. The oral agreement included the commission split
    as well as the 50/50 equity interest in Marinas book of business. If Martina
    chose to leave Gentech with his book of business, he was required to purchase
    Gentechs 50% interest at fair market value which the spread sheet showed as
    two times annual commission. On the other hand, if Martina wished to leave
    without his book of business, for example, if he wished to retire, then Gentech
    would purchase his 50% interest at the same formula price.

[12]

It
    is implicit in this arrangement that whoever sold the book of business would
    not solicit those customers for two years, reflecting the two times annual
    commission price formula.

[13]

We
    note that even had the terms of paragraph 18 of the written agreement applied,
    Marina would not have had an option to leave Gentech with his book of business
    without paying for it. The option was to not take the book of business.

[14]

Muir
    testified that this was how he always operated with his producers and was not
    cross-examined on this evidence. He further testified that when a producer
    would retire, Gentech would buy out that producers 50% equity interest.

[15]

We
    see no error in the trial judges conclusion that Martina breached the oral
    agreement.

[16]

Diamantouros
    was found liable only for the tort of unlawful conduct conspiracy. In our view,
    that finding cannot be sustained.

[17]

The
    trial judge was not referred to this courts decision in
Agribrands Purina
    Canada Inc. v. Kasamekas
, 2011 ONCA 460, 106 O.R. (3d) 427, which was
    released shortly before his decision in this case. In
Agribrands
, this
    court clarified the requirements for the cause of action for unlawful conduct
    conspiracy,
including that each conspirator must be
    engaged either in unlawful conduct or conduct intended to harm the complaining
    party. For an action in unlawful conduct conspiracy, the conduct must be
    actionable. It must be wrong in the law. (para. 33). In this case, Diamantouros
    owned his book of business and was entitled to leave without notice. The trial
    judge made no finding of unlawful conduct by Diamantouros or that his purpose
    in leaving was to harm Gentech. The appeal must therefore be allowed in respect
    of the claim for unlawful conduct conspiracy against the appellant Diamantouros.

[18]

In
    the result, the appeal is dismissed in respect of the appellant Martina and
    allowed in respect of the appellant Diamantouros. Costs of the appeal to the
    respondent in the amount of $20,000 inclusive of disbursements and HST, which
    counsel agreed includes a reduction of $5000 to reflect the partial success in
    respect of the appellant Diamantouros.

K. Feldman J.A.

Robert J. Sharpe J.A.

E. Ducharme J.A.


