



COURT OF APPEAL FOR ONTARIO

CITATION: Hampton Securities Limited v. Tassone, 2017 ONCA 69

DATE: 20170125

DOCKET: C62346

Simmons, Brown and Roberts JJ.A.

BETWEEN

Hampton Securities Limited on its own behalf and
    on behalf of all Creditors of Joseph Tassone

Plaintiff/Responding Party (Appellant)

and

Joseph Tassone and Anne Tassone

Defendants/Moving Parties (Respondents)

Colby Linthwaite, for the appellant

Jordan Kirkness, for the respondents

Heard: January 19, 2017

On appeal from the order of Justice David G. Stinson of
    the Superior Court of Justice, dated March 10, 2016, with reasons reported at 2016
    ONSC 1743.

ENDORSEMENT

Overview

[1]

Following the oral hearing we dismissed this
    appeal for reasons to follow. These are our reasons.

[2]

The appellant, Hampton Securities Limited,
    employed the respondent, Joseph Tassone, to trade in securities using the
    companys own capital. During Tassones employment, Hampton maintained a
    trading inventory account (the Inventory Account) that recorded the gains and
    losses resulting from Tassones trades with its capital.
In
    the months when Tassones trades achieved no profits, he would earn no
    remuneration; only once his trades again generated profits that were sufficient
    to overcome his accumulated losses, would he earn anything.
When
    Tassones employment ended in September, 2011, his Inventory Account stood in a
    loss position  approximately $700,000.

[3]

Hampton took the position Tassone was
    personally responsible for the loss and demanded he make good on it. Hampton
    applied the approximately $100,000 of Tassones personal funds kept in a
    personal reserve account against the loss. The company also liquidated
    Tassones shares in Hampton and applied the proceeds to the loss. Hampton then
    sued Tassone for the remaining net loss, about $600,000. Hampton also attacked
    Tassones transfer of title in the matrimonial home to his wife, the respondent
    Anne Tassone, as a fraudulent conveyance.

[4]

Tassone denied any personal liability for the
    loss. He counterclaimed for wrongful dismissal and damages for Hamptons
    wrongful application of his personal funds against the loss.

[5]

Tassone moved for partial summary judgment on
    the issue of whether he was personally responsible for the losses in his
    Inventory Account. The parties agreed the motion would finally decide the issue
    of liability on Hamptons main claim.

[6]

The motion judge granted Tassone partial
    summary judgment. He held Tassone was not personally responsible for the accumulated
    losses, save to the extent of the amount in his personal reserve account. The
    motion judge dismissed Hamptons claim for payment of the accumulated losses in
    excess of Tassones retained personal reserve.

Analysis of the grounds of appeal

[7]

Hampton advances several grounds of appeal.

[8]

First, it submits the motion judge
    misdirected himself about the proper question to be decided. In its factum,
    Hampton contends the proper question was whether it was an express or implied
    term of Tassones employment contract that the end of employment would relieve
    Tassone of his established liability to indemnify Hampton for already-incurred
    losses.

[9]

We see no merit in this argument. The motion
    judge clearly recognized that the issue of Tassones liability for losses in
    his Inventory Account when his employment ended turned on the terms of his
    contract of employment, including what, if any, obligation Tassone had to
    compensate or indemnify Hampton for losses in the Inventory Account. As the
    motion judge stated, at para. 14, this was largely a question of fact.

[10]

Second, Hampton contends the reasons of the
    motion judge should be read as containing a finding Tassone was required to
    indemnify Hampton for losses suffered due to his trading. We do not see how the
    motion judges reasons could be read in that fashion. His findings about the
    terms of the employment contract were to the contrary.

[11]

After conducting a thorough review of the
    documents constituting Tassones employment contract, the motion judge made the
    following findings: (i) it was a term of the employment contract that the funds
    in the personal reserve account were the property of Tassone, but were
    available to reduce or extinguish any accumulated trading losses in the
    Inventory Account; (ii) no document required Tassone to indemnify Hampton for
    all accumulated losses in the event he ceased to be an employee. Those findings
    led the motion judge to conclude, at para. 37:

Based on the foregoing, I am not prepared to find as a fact
    that it was an express term of the employment contract between Hampton and
    Tassone that, in the event Tassones accumulated losses exceeded his personal
    reserve at the time the employment relationship ended, Tassone would be liable
    to make good 100% of the remaining losses. Based on the evidence I accept, the
    parties' agreement did not include such a term.

[12]

The motion judge then considered whether the
    employment contract should be construed as containing an implied term imposing
    personal liability for trading losses on Tassone. He concluded it should not,
    as it was not necessary and obvious such a term should be implied: para. 41.

[13]

The motion judges finding about the terms
    constituting the employment contract between the parties and their
    interpretation is entitled to deference, absent palpable and overriding error.
    We see none.

[14]

Third, Hampton submits the motion judge erred
    in interpreting the employment contract because he failed to follow the
    decision of this court in
Refco Futures (Canada) Ltd. v. Keuroghlian
,
    2008 ONCA 592,
240 O.A.C. 300
.
    That case is distinguishable on its facts. In it, the finding of liability of a
    foreign exchange trader for losses resulting from trades on behalf of certain
    clients was based on the express terms of the traders employment agreement:
    [2006] O.J. No. 3725 (S.C.J.), at paras. 96-97 and 321; affd 2008 ONCA 592,
240
    O.A.C. 300,
at para. 50. Also, in
Refco
,
    the trader had fraudulently concealed losses and obtained large commissions
    while doing so: at paras. 14-18. That fraud prevented the employer from deducting
    losses from amounts the payable to the trader during the course of employment as
    it was entitled to do under the contract. In that context the employer could clearly
    pursue the trader after the end of the employment relationship.

[15]

Fourth, Hampton submits the motion judge
    erred in failing to rely on the evidence of its President, Mr. Peter Deeb, that
    it was an established practice in the industry that departing employees were
    responsible for accumulated trading losses. We do not accept this submission.
    Contrary to Hamptons submission, Tassone did not admit to such a practice in
    his pleading: see Fresh as Amended, Amended, Amended Fresh Statement of Defence
    and Counterclaim, para. 3. Of more significance, Hampton did not adduce
    independent expert evidence of any such industry practice. The motion judge
    held he was not prepared to make a finding of industry practice in the absence
    of such evidence. He committed no error in so deciding.

[16]

Finally, Hampton submits the motion judge
    erred in failing to decide whether Tassone failed to give adequate notice of
    his cessation of employment and to consider whether trading gains he might have
    generated during a proper notice period would reduce the losses in the
    Inventory Account. Tassone submits this issue was not raised before the motion
    judge and, in any event, was not pleaded by Hampton as a basis for its claim.

[17]

We accept Tassones submission on this point.
    Neither Hamptons statement of claim or fresh as amended reply and defence to
    counterclaim pleads that Tassones failure to give proper notice contributed,
    in any manner, to the accumulated losses in the Inventory Account.

[18]

We dismissed the appeal for the foregoing
    reasons and awarded costs of the appeal to the responding parties, on a partial
    indemnity scale, fixed in the amount of $15,000, inclusive of disbursements and
    HST.

"Janet
    Simmons J.A."

"David
    Brown J.A."

"L.B.
    Roberts J.A."


