



COURT OF APPEAL FOR ONTARIO

CITATION: Hurst v. Hancock, 2019 ONCA 483

DATE: 20190611

DOCKET: C66121/M50368

Feldman, Paciocco and Fairburn JJ.A.

BETWEEN

Craig Hurst

Plaintiff (Respondent/Moving Party)

and

James Hancock, Darwin Productions Inc.
and
    Tradepoint 360 Inc.

Defendants (
Respondents/Responding Parties
)

and

Graham Partners LLP, Graham, Wilson & Green,
    and HGR Graham Partners LLP

Intervenors (Appellants)

Tim Gleason and Rebecca Glass, for the appellants

Katrina Marciniak, for the respondents/responding
    parties

Manjit Singh and Eric Cheng (Sheung Chi), for the
    respondent/moving party

Heard: May 16, 2019

On appeal from the judgment of Justice Peter J. Cavanagh
    of the Superior Court Justice, dated October 5, 2018, with reasons reported at
    2018 ONSC 5919.

REASONS FOR JUDGMENT

[1]

The plaintiff, Craig Hurst, was an employee of the respondent Darwin
    Productions Inc. (Darwin). The respondent, James Hancock, was the principal
    of Darwin. Mr. Hurst consulted a law firm, the intervenors Graham Partners LLP,
    Graham, Wilson & Green and HGR Graham Partners LLP (collectively Graham
    or the appellants) when he was not being paid extra salary he claimed was
    agreed upon together with a percentage interest in the respondent company.

[2]

Mr. Hurst sued the respondents more than two years after Grahams
    initial correspondence with them and after they declined to acknowledge the
    terms of their agreement. When the respondents moved for summary judgment
    claiming that the action was statute-barred, Mr. Hurst commenced an action
    against Graham for negligence. Graham was permitted to intervene on the summary
    judgment motion, because if the claim against the respondents was dismissed as
    statute-barred, the plaintiff would use that finding as the basis to recover
    against Graham.

[3]

The motion judge granted the summary judgment motion, dismissing the
    plaintiffs claim against the respondents as statute-barred. The plaintiff takes
    no position on the appeal from that decision. Only Graham appeals the motion
    judges decision. For the reasons that follow, the appeal will be allowed and
    the summary judgment set aside.

Background facts

[4]

The plaintiff began working for Darwin, the respondent software company,
    in January 2007 on a consulting contract. In or around June 2007, he became an
    employee of Darwin. The plaintiffs position in the action was that his
    agreement with Darwin was that his salary was to be $15,000 per month, $10,000
    of which would be deferred for 24 months and applied toward a 12% share
    ownership interest in the company. The plaintiff also contended that following the
    24-month period he would continue to earn $15,000 per month. The evidence of
    both parties was that due to budget constraints, the plaintiff and other
    employees full wages were deferred to a future date when the respondent
    company had the funds to pay them.

[5]

In November 2009, the plaintiff retained the appellants to assist him in
    confirming that the wages he claimed had been agreed would be paid and that he
    would be receiving the 12% share interest in the company. The appellants wrote
    a letter to the respondents on November 16, 2009. That letter claimed that the
    plaintiff had earned $127,377.30 in unpaid compensation and expenses together
    with a 12% ownership interest in the company. Attached schedules showed the
    unpaid amounts beginning in February 2009. The letter asked for confirmation of
    the amount owing plus a payment plan, provision of the share certificate, and
    confirmation of ownership by Darwin of certain intellectual property.

[6]

Following this letter, Mr. Hurst and Mr. Hancock had meetings as well as
    telephone and email correspondence about the terms on which Mr. Hurst would
    continue his employment with the company, but they did not come to a resolution.
    Nor did they agree on what was earned to date. As a result, the appellants sent
    a further letter dated December 10, 2009, with the same three requests as in
    the November 16 letter, and ending by stating that while a negotiated
    settlement would be preferable, if there was no satisfactory response Mr.
    Hurst will pursue his legal remedies.

[7]

By letter dated January 11, 2010, lawyers for the respondents, Darwin
    and Mr. Hancock, responded to each of the claims. With respect to the salary,
    the respondents denied that there was an agreement to pay more than $5,000 per
    month, and stated that any other amounts would only be paid when the company
    was financially able to do so. With respect to the share certificate, there was
    a dispute about the plaintiffs entitlement because of some actions that he had
    taken, but willingness to discuss the issue further. It was confirmed that the
    intellectual property was owned by Mr. Hancock personally and licensed to the
    company. The letter concluded with a request for further documentation from the
    plaintiff.

[8]

While the plaintiff commenced a Small Claims Court action for some
    expenses in the fall of 2010, he did not commence the claim for the amounts
    referred to in the two letters of November and December 2009 until January 10,
    2012.

The decision of the motion judge

[9]

The plaintiffs position on the motion was that his unpaid salary was a
    demand obligation. He took that position for the first time in a clarifying
    affidavit following his cross-examination on his original affidavit. The respondents
    position was that any salaries over $5,000 were theoretical debts on the
    company that would only be actualized when the company was able to pay them,
    and they were not a demand obligation or an obligation at all: see
Hurst v.
    Hancock
, 2018 ONSC 5919, at para. 24.

[10]

The
    motion judge rejected the plaintiffs position. He found that there was no
    evidence of an agreement that any unpaid wages were a demand obligation of the
    company.

[11]

The
    motion judge also rejected the plaintiffs position that he only discovered
    that the respondents were denying his entitlement to salary or a share in the
    company from the January 11, 2010 lawyers letter, and that his cause of action
    only arose at that time. He concluded that by no later than December 10, 2009,
    the plaintiff knew that the respondents were disputing his entitlement to the
    salary and share certificate he claimed. Therefore, the claim was commenced out
    of time.

The intervenors appeal

[12]

The
    issue that had to be decided in order to determine whether the plaintiffs
    claim was statute-barred was when the plaintiffs cause of action against the
    respondents arose and when he discovered it. Because this is a breach of
    contract claim, the question is did the respondents breach their contract with
    the plaintiff and, if so, when.

[13]

The
    appellants position is that the motion judge erred in law by failing to
    address and properly analyze the issue of anticipatory breach of contract. They
    say that the respondents position in December 2009 could be characterized as notice
    that they intended to breach the agreement to pay the unpaid salary in the
    future when the company could afford to do so. In law, the plaintiff could
    accept that anticipatory breach (or repudiation) and sue, or choose to wait
    until performance was due: see
Ali v. O-Two Medical Technologies Inc.
,
    2013 ONCA 733, 118 O.R. (3d) 321, at para. 24.

[14]

In
    this case, the appellants contend that the plaintiff chose to wait until he
    sued in January 2012. That suit constituted acceptance of the repudiation. The
    appellants argue that the motion judge therefore erred in law by finding that
    the claim was statute-barred, or in the alternative, the question of when the
    claim was discovered constituted a genuine issue for trial.

[15]

In
    rejecting the submission that the unpaid salary was a demand obligation, the
    motion judge concluded that the salary became due and owing when it was earned,
    but that there was a practical agreement to defer payment. He stated, at para.
    32:

The obligation by Darwin to
pay unpaid salary that was earned by the plaintiff was owed
    each month that the salary was earned and unpaid. The plaintiffs evidence is
    that he knew that he had a claim for unpaid salary each month from June 2007 to
    December 2009, even though the plaintiff and Hancock may have agreed that, as a
    practical matter, unpaid wages would not be paid until Darwin was financially
    able to do so. When I consider the plaintiffs evidence and Hancocks evidence
    in relation to the plaintiffs contract of employment and the nature of
    Darwins obligation to pay any wages owed to the plaintiff, I conclude that
    this was not a demand obligation, and no demand was required before it could be
    enforced.

[16]

While the motion judge was entitled to reject the plaintiffs
    late-blooming position that the extra salary was a demand obligation, there was
    no basis on the evidence to make the finding that the extra salary became due
    and owing as it was earned. Both parties agreed that any extra salary was
    deferred to a future time when the company was financially able to pay it.
    There was no evidence by either party that the salary earned became due and
    owing each month when it was earned.

[17]

The motion judge made no other finding regarding the terms of the
    agreement between the parties. Nor did he find when that agreement was
    breached.

[18]

The appellants submit that the motion judge erred by failing to address
    the anticipatory breach argument in his reasons for decision. We were told that
    this argument may not have been raised directly in oral submissions by the
    appellants because of time constraints at the hearing of the motion, but that
    it was raised in the appellants factum before the motion judge, which was
    referred to in oral submissions. That factum was provided to this court during
    oral argument.

[19]

We agree with the appellants that the motion judge erred in law by
    failing to address this legal argument and by failing to find whether any
    repudiation or anticipatory breach by the respondents, either in December 2009
    or in January 2010 by the lawyers letter, was accepted by the plaintiff before
    he commenced this action. If there was anticipatory breach or repudiation, then
    until the appellant accepted that breach, no cause of action accrued: see
Ali
,
    at para. 26.

[20]

With respect to the 12% share interest claim, the plaintiff sought a
    declaration that he was entitled to that interest. He argued that no limitation
    period applies to a claim for a declaration without a claim for consequential
    relief, relying on s. 16(1)(a) of the
Limitations Act, 2002
, S.O.
    2002, c. 24, Sched. B. The motion judge rejected that submission because the
    plaintiff also sought as consequential relief a mandatory order for the respondent
    company to issue the 12% share certificate. Since the agreement alleged was
    that the plaintiff became entitled to the share interest 24 months after June
    2007, if the respondents denied the plaintiffs right to the share interest,
    the cause of action for breach of the agreement to grant it would have arisen.

[21]

The appellants submit that the respondents position as to the
    plaintiffs share interest was equivocal even in the lawyers letter of January
    2010. That leads to the issue of whether the record was sufficient for the
    motion judge to decide this factual issue, among others relating to the terms
    of the plaintiffs employment.

[22]

The motion judge determined that the evidentiary record was sufficient
    to allow him to make the necessary findings of fact and to apply the law to
    reach a just result and that there was no genuine issue that required a trial.
    We disagree. The primary issue between the parties was the terms of the
    agreement. The motion judge did not make a finding on that critical issue, or
    whether and if so when the respondents breached that agreement. There is a
    basic disagreement on what was agreed and no written contract. In our view,
    there was a genuine issue requiring a trial. The limitation issue will turn on
    that finding.

[23]

The appeal is therefore allowed, meaning the summary judgment in favour
    of the respondents, including the costs awarded, is set aside, with costs of
    the appeal to the appellants, fixed at $9000 inclusive of disbursements and
    HST.

The plaintiffs motion respecting costs

[24]

The plaintiff, who took no position on the appeal, brought a motion
    before the panel asking the court to effectively declare that r. 63.01(1) of
    the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 stays the costs
    order made against the plaintiff on the summary judgment motion, by virtue of
    this appeal by the appellants. The plaintiff filed a factum. The respondents filed
    no responding material. The affidavit filed by the plaintiff indicates that following
    the summary judgment there were ongoing proceedings in the Superior Court
    between the plaintiff and the respondents and that this costs enforcement issue
    was raised in a motion in the Superior Court where the respondents took the position
    that there is no automatic stay in favour of the plaintiff. The status of that
    motion is not revealed in the material.

[25]

In oral submissions, counsel for the plaintiff advised that on the
    morning of the appeal counsel for the respondents said that they would not
    enforce the costs order pending the outcome of the appeal. The plaintiff sought
    his costs of bringing this issue before the court.

[26]

We are not prepared to order any costs of the plaintiffs motion. The
    plaintiff chose not to appeal and took no position on the intervenors appeal.
    The issue of the enforceability of the costs award pending the appellants appeal
    was raised before the Superior Court before this motion was brought. There is
    no suggestion that the respondents have taken steps to collect the awarded costs
    from the plaintiff. There is therefore no live issue before this court. The
    plaintiffs motion in this court, essentially asking the court to interpret a
    rule for the assistance of the parties, is ill-conceived, and at this stage, it
    is moot.

K.
    Feldman J.A.

David
    M. Paciocco J.A.

Fairburn
    J.A.


