Before: The Honourable Mr. Justice Sigurdson
Reasons for Judgment
Counsel for the Plaintiffs: |
J.R. Schmidt
J. Sandrelli
C.N. Matthews
S.A. Dubo |
Counsel for the Defendants: |
P.G. Voith, Q.C.
S.P. Ramsay |
Date and Place of Trial: |
September 11-14, 2006
September 18-22, 2006
October 10-11, 2006 |
|
Vancouver, B.C. |
INTRODUCTION AND ISSUES
[1] This is a claim in contract for compensation in connection with the sale of the defendants’ interest in the Burns Bog property in 2004.
[2] The claim is brought by Lettuce Serview Limited Partnership, as assignee and secured creditor of Edwin (Eddie) Cogan, who is now deceased. The claim is also brought by Trevor Eyton, a member of the Senate of Canada, who asserts he was a partner of Eddie Cogan. Mr. Cogan’s estate, which has never been administered, is not a party.
[3] Eddie Cogan was a well-known broker and negotiator who was retained by the defendant Western Delta Lands Partnership (“Western Delta”) in 1999 as its agent in connection with its interest in the Burns Bog lands. The contract between Western Delta and Eddie Cogan was not in writing, nor were the terms of his engagement precise, but he was generally retained by Western Delta to achieve a successful result for it in connection with the Burns Bog lands. This could be achieved in a number of ways, including: by persuading Western Delta’s existing partner to fulfill its contractual obligations; locating a new partner for Western Delta; negotiating the acquisition of the lands by the Province; or, finding a purchaser for the lands.
[4] The defendants, at material times, held the partnership interests in the ownership of the Burns Bog lands.
[5] The plaintiffs, suing as assignee, secured creditor, and alleged partner of Mr. Cogan, must first establish Mr. Cogan’s entitlement to compensation from the defendants.
[6] The lands were eventually purchased by the Matthews Group. The principal of the Matthews Group was introduced to the defendants by Mr. Cogan, but the transaction with Western Delta completed after Mr. Cogan died, and after the defendants had purported to terminate Mr. Cogan’s agency.
[7] It is not disputed that a contract of agency existed between Western Delta and Mr. Cogan. The question is whether Mr. Cogan did what was agreed would entitle him to a fee or commission. Western Delta says Mr. Cogan was not the effective cause of the ultimate transaction with the Mathews Group, or, put another way, did not do what was agreed would entitle him to a fee. In the alternative, Western Delta says that if Mr. Cogan’s actions did entitle him to a fee under the contract, he is disentitled to compensation by his breach of fiduciary duty as an agent.
[8] If Mr. Cogan was entitled to compensation from Western Delta, the quantum is very much in dispute. No fixed formula was agreed to at the time of his original retention. The plaintiffs point to compensation agreements reached with respect to earlier transactions with the Matthews Group (which did not complete) and other possible transactions as either the contractual basis upon which Mr. Cogan was entitled to be compensated, or evidence of what the parties thought was reasonable remuneration. The plaintiffs seek a fee of $4 million and the defendants say that if they are liable, a fee in the range of something slightly more than $400,000 is appropriate.
[9] Even if Mr. Cogan is entitled to a fee, the defendants say that neither plaintiff is entitled to sue. They say that Lettuce Serview is not an assignee of any claim that Eddie Cogan may have had with respect to the ultimate deal that completed, and even if it is, the defendants say that the assignment, or the security agreement, is limited to the debt underlying the instrument. The plaintiffs say that the assignment is an absolute assignment, not merely security, and even if limited to the amount of Mr. Cogan’s debt to Lettuce Serview, which they dispute, it was not reduced or extinguished by Mr. Cogan’s earlier proposal in bankruptcy.
[10] If the plaintiffs are entitled to compensation based on Mr. Cogan’s contract with Western Delta, the defendants say that payments they made to Mr. Cogan and to others associated with him or the “team that he quarterbacked” must first be deducted.
[11] The defendants say that Mr. Eyton, Mr. Cogan’s long-time friend, was not Mr. Cogan’s partner and could not have been a partner of Mr. Cogan because Mr. Cogan’s agreement with Western Delta was a contract for personal services under which Mr. Cogan was retained for his unique abilities. Furthermore, the defendants say that Mr. Eyton’s conduct disentitles him to compensation, even if he ever was a partner of Mr. Cogan’s.
FACTS
[12] The Burns Bog lands, as I will refer to them, at the relevant time, comprised about 5,500 acres and were the largest tract of undeveloped, non-agricultural land in Greater Vancouver.
[13] In the 1970s, Laurel McLaughlin’s family assembled and owned the Burns Bog lands through different corporate vehicles, including Peel Financial Holdings Ltd. (“Peel Financial”). For a time there was an active peat mining operation. The McLaughlin family holdings, which apparently were substantial, were reorganized in 1993. Ms. McLaughlin, through Western Delta, became the effective owner of the Burns Bog lands, and her family, through Peel Financial, retained a smaller interest.
[14] The principals of Western Delta at the material times were Laurel McLaughlin and her husband, Nicolaas Westeinde.
[15] The lands are unique. The zoning allowed for light industrial activity and agricultural use. Ms. McLaughlin believed that the land had significant development potential.
[16] When Ms. McLaughlin took over the Burns Bog lands in 1993, they had been undeveloped for fifteen years or more. There were financial and environmental obstacles to development. Ms. McLaughlin and Mr. Westeinde were optimistic they could overcome them.
[17] After the family reorganization the lands were essentially Ms. McLaughlin’s sole business asset. She took steps to realize on their commercial potential. She pursued the development of a cranberry operation on 1,640 acres and had ditching and drainage done for that purpose.
[18] A businessman named Barry Ferguson approached Western Delta with a proposal under which the Province would relocate the Pacific National Exhibition (“PNE”) to the Burns Bog lands and create an ecological reserve of 3,000 acres. Ms. McLaughlin attempted to sell 3,500 acres to Mr. Ferguson, but that transaction did not complete. The Province of British Columbia was prepared to loan $25 million for the development of the lands, but apparently was reluctant as long as Mr. Ferguson was involved.
[19] Mr. Ferguson proposed the involvement of Mr. Byron Seaman, a Calgary businessman. In February 1999 the cranberry operation was abandoned. A partnership called Delta Fraser Properties Partnership (“Delta Fraser”) was formed. One partner was Western Delta, made up of two companies, 723896 Ontario Ltd. and 572281 B.C. Ltd., which were controlled by Ms. McLaughlin and Mr. Westeinde. The other partner in Delta Fraser was 3557537 Canada Inc., a company controlled by Mr. Seaman. Each partner acquired a 50% interest in Delta Fraser. The lands were transferred to a numbered company, 569244 B.C. Ltd., and beneficial ownership of the lands was transferred to Delta Fraser. The Province advanced $25 million and was given a mortgage over the lands, and Mr. Seaman was responsible for furnishing working capital. The plan was to develop 2,400 acres and have an ecological reserve or park of 3,000 acres, with 100 acres set aside for the possible PNE site.
[20] However, development prospects dimmed when the possibility of the PNE relocating to the lands ended. Shortly after the formation of the partnership, Mr. Seaman committed the lands to an environmental study with the Province. Western Delta thought that would make the development of the lands more difficult.
[21] By late summer 1999, the property taxes were in arrears by $900,000. The debt against the lands was made up of the mortgage to the Province and a number of smaller mortgages.
[22] A dispute arose between 3557537 Canada Inc., Mr. Seaman’s company, and Western Delta. According to Ms. McLaughlin, this dispute arose because of Mr. Seaman’s non-performance of his obligations to service the Delta Fraser debt, to at least initially fund its operations and to properly manage Delta Fraser’s interest. In July 1999, Western Delta commenced an action against 3557537 Canada Inc. and Mr. Seaman.
[23] In October 1999, Mr. Cogan entered the picture. He telephoned Ms. McLaughlin to say that he could help resolve the Burns Bog situation. Mr. Cogan had tried to assist Mr. Ferguson, and Ms. McLaughlin first spoke to him in that capacity several months earlier.
[24] Ms. McLaughlin and Mr. Westeinde met with Mr. Cogan in late October or early November 1999 at the Pan Pacific Hotel in Vancouver. Ms. McLaughlin understood that Mr. Cogan had been given the background of the Burns Bog situation by Mr. Ferguson, but she explained to him the history of the lands, the parties’ positions, and Western Delta’s objectives.
[25] Mr. Cogan’s reputation, expertise, and background were well known to Ms. McLaughlin. In the past, he had assisted her family in complex and difficult real estate situations.
[26] Historically, Mr. Cogan had profited from the deals he brokered by way of a fee or an equity position.
[27] Mr. Cogan was retained to act for Western Delta. There was no written agreement. Because of the nature of the retainer and perhaps because of the complexity of the situation facing Western Delta regarding the lands, there was no precise oral agreement.
[28] There is no dispute that Mr. Cogan was to be paid when he got a deal, but there was little discussion about compensation beyond that. The basis upon which he would be compensated was not specifically discussed; there was no agreed formula. It is common ground that Mr. Cogan was not to be compensated unless there was success. He was not to be paid simply for effort or hours worked on the project.
[29] Mr. Cogan sought to carry out his mandate. It is undisputed that he invested significant effort over the next four years, until his agency was terminated, in attempting either to convince Mr. Seaman to perform his obligations, or to find a new purchaser or investor for the lands. He was unsuccessful in his efforts with Mr. Seaman, although the litigation between Mr. Seaman and Western Delta was ultimately settled in the summer of 2001.
[30] Mr. Cogan tried to introduce new partners to Western Delta. Through Senator Eyton, whose role in this case I will describe shortly, Mr. Cogan introduced the property to Jim Pattison in January 2000, but no deal was reached. Mr. Cogan was unsuccessful in his dealings with the provincial government.
[31] In 2000, soon after Mr. Cogan was retained, he contacted Jack Matthews. Mr. Matthews was a real estate developer who was from Ontario, but resided in Dallas at the time. Mr. Cogan had known Mr. Matthews for more than 20 years and had done several transactions with him. Mr. Cogan, I find, was the first person to contact Mr. Matthews about acquiring an interest in Burns Bog. Mr. Matthews was not prepared to make an investment in the lands at that time. Mr. Matthews was contacted a significant period of time later by one Karsten von Wersbe through Dr. Jeff Kerbel. Dr. Kerbel is an investor who invests with Mr. Matthews. However, Mr. Matthews did not pursue a possible deal for an interest in Burns Bog at that time either.
[32] In the summer of 2001, the defendants reached a settlement with Mr. Seaman. Essentially, Western Delta took back Mr. Seaman’s interest and converted his equity into a debt obligation.
[33] In August 2001, Peel Financial, the company which held Ms. McLaughlin’s four siblings’ interest in the Burns Bog lands, commenced litigation against Western Delta. Peel sued for $7 million of what was owed to it.
[34] In the meantime, the defendants were negotiating with the Province for the sale of part of the property. This was carried out largely through Senator Gerry St. Germaine, who was part of Mr. Cogan’s team. Senator St. Germaine attempted to negotiate a sale of part of Burns Bog to the provincial government and reached a fee agreement for his company with Western Delta, but there was no discussion at the time between Mr. Cogan and the defendants on how that would fit into Mr. Cogan’s compensation arrangement with Western Delta.
[35] In the fall of 2001 Western Delta paid Mr. Cogan an advance of $100,000 and with Mr. Cogan’s approval paid Pebble Beach Investments, Senator St. Germaine’s company, expenses of $60,000 plus $4,200 for PST and GST.
[36] In the spring of 2002, Mr. Cogan began negotiations with the Matthews Group. This was shortly after Mr. von Wersbe had contacted Mr. Matthews through Dr. Kerbel.
[37] Mr. Matthews was aware that Mr. Cogan acted for the owners of the companies controlled by Ms. McLaughlin. By this time Ms. McLaughlin controlled the Delta Fraser Partnership. I will occasionally for convenience simply refer to the party contracting with Mr. Cogan as Western Delta or the defendants.
[38] In the spring of 2002, Senator Eyton came to British Columbia to meet the Premier to discuss a possible transaction with the provincial government. Mr. Cogan asked that Western Delta pay Senator Eyton’s travel invoice of $3,211.96 for the trip, which it did. The meeting, however, was unsuccessful. The Province made a demand for payment of its loan and in the spring of 2002 commenced foreclosure proceedings.
[39] Mr. Cogan continued to pursue Mr. Matthews on the defendants’ behalf.
[40] On August 28, 2002 in a meeting between Mr. Matthews, Mr. Cogan, Ms. McLaughlin, and Mr. Westeinde, the Matthews Group and the defendants exchanged draft offers and reached a handshake agreement, which was later reduced to writing.
[41] Under the agreement, which I will refer to as the first Matthews deal, the Matthews Group would receive a 50% partnership interest in Delta Fraser, and assume a 50% share of the debt. In addition, the Matthews Group was to pay $10 million on closing plus $31.75 million to Western Delta, which, as a continuing partner, would retain a possible benefit of 50% of any profit realized if the lands were sold or developed.
[42] On August 29, 2002 Ms. McLaughlin and Mr. Cogan settled the terms of his compensation in connection with the first Matthews deal. Mr. Cogan proposed a fee of $2 million to Ms. McLaughlin. It was accepted without negotiation. It was also agreed that Mr. Cogan would be responsible for his costs and expenses associated with companies or persons he retained (including Senator St. Germaine) concerning the deal and the lands.
[43] The first Matthews deal was reduced to writing by an offer dated October 4, 2002, which was accepted on October 7, 2002.
[44] Mr. Cogan, throughout the duration of his dealings with Ms. McLaughlin over Burns Bog and earlier, had financial problems. In 1999 he had made a proposal in bankruptcy.
[45] In October 2002, Mr. Cogan approached the Bitove family, owners of Lettuce Serview, and received a loan for $268,492. He granted Lettuce Serview an assignment and general security agreement in connection with his proposed fee from Western Delta. Ms. McLaughlin for Western Delta agreed to the assignment. The nature and scope of this assignment is in issue and will be discussed later.
[46] The first Matthews deal collapsed later in 2002 and Mr. Cogan received no commission.
[47] By early 2003, the defendants were facing foreclosure proceedings by the Province, as well as litigation by Peel Financial. Ms. McLaughlin was exhausted, particularly from the family litigation. Mr. Westeinde took over the direction of the defendants’ affairs.
[48] Mr. Cogan continued to pursue Mr. Matthews to make another offer in respect of the lands. Mr. Matthews’ financial partner, Dr. Kerbel, however, was interested in a 100% interest in the lands, not a 50% partnership deal.
[49] On April 16, 2003, Mr. Matthews made a second offer and the second Matthews deal was signed the next day by Ms. McLaughlin. Unlike the first offer, the second was for the purchase of a 100% interest in the partnership. The debt at this time was about $65.5 million and Mr. Matthews’ offer was to pay $55 million to the defendants.
[50] Mr. Cogan proposed that his fee be in the amount of $4 million, which was accepted by the defendants, this time by a letter agreement dated May 7, 2003. I will discuss later whether the second deal was less advantageous to Western Delta than the first Matthews deal when discussing the quantum of any compensation to which Mr. Cogan might be entitled.
[51] The defendants say that the fee agreed to with respect to the second Matthews deal, i.e. the letter agreement of May 7, 2003, is not a fair measure of a reasonable fee; Mr. Westeinde, who made the fee agreement with Mr. Cogan, says that Mr. Cogan threatened to prevent the second Matthews deal from completing if he did not agree to the fee.
[52] Mr. Cogan’s financial circumstances continued to be poor. In May, 2003, he sought and obtained a further loan of $50,000 from Lettuce Serview. Mr. Cogan signed an agreement with Lettuce Serview in connection with that advance and confirmed his obligation to pay his past debts to the Bitoves’ companies.
[53] Mr. Cogan sought advances on his anticipated claim for compensation from Western Delta but was denied.
[54] Ultimately, however, the second Matthews deal collapsed on June 22, 2003.
[55] After the second Matthews deal collapsed, the defendants continued to face financial pressures, including the Province’s foreclosure proceedings and the Peel Financial litigation.
[56] Mr. Matthews recognized that things were looking worse for the defendants. He never lost interest in purchasing the Burns Bog property and simply waited for an opportunity to present itself.
[57] On July 9, 2003 Mr. Westeinde told Mr. Cogan that he was terminated. Mr. Westeinde told Western Delta’s solicitor Mr. Matt Bingham, then of Davis & Company, that he could continue to deal with Mr. Cogan as long as Mr. Bingham did not bill the defendants for it.
[58] In August 2003, Mr. Cogan proposed to Delta Fraser to buy an interest in the land and to seek investors to purchase the land. Delta Fraser accepted the offer. Before Delta Fraser signed the contract, Senator Eyton represented in writing that he would have a lead position with the purchasing group.
[59] On August 29, 2003, with a numbered company as purchaser, and signed by Mr. Cogan, the offer was accepted by the defendants. Mr. Cogan then proceeded with efforts to secure investors who were prepared to fund the purchase.
[60] The conduct of Mr. Cogan and Senator Eyton in connection with this proposed transaction (which I will call the Cogan/Eyton transaction) and the role they were to play is in issue. I will discuss this in more detail later when I discuss the issue of whether Mr. Cogan’s conduct disentitles him to compensation.
[61] Mr. Cogan demanded a commission in respect of this offer. Mr. Westeinde agreed that he would pay Mr. Cogan a fee of at least $2 million and perhaps as much as $4 million. Mr. Westeinde testified that this agreement was also procured by Mr. Cogan by threats. By this time the defendants’ financial circumstances were quite desperate.
[62] On October 16, 2003, Mr. Cogan died suddenly.
[63] The Cogan/Eyton transaction did not complete.
[64] Following Mr. Cogan’s death, two discussions took place between Mr. Westeinde and Nick Cogan, Eddie Cogan’s son, who had worked for a few years with his father. There is a dispute both as to the content and the legal significance of the two conversations. I will discuss that below. The plaintiffs assert that the liability of the defendants to pay a commission in respect of any deal involving the Matthews Group was confirmed. The defendants deny that, and say that evidence of the conversation, in any event, is inadmissible and of no legal effect.
[65] In December 2003, Western Delta’s financial situation continued to be shaky.
[66] In early December 2003, the Matthews Group again approached Western Delta, and after some negotiations agreed to purchase 100% of the lands. That transaction, the final Matthews transaction, was signed in January 2004. There is a dispute as to whether Mr. Cogan was the effective cause of that sale as contemplated by the agency agreement entered into by the parties.
[67] In order to close the final Matthews deal, issues had to be sorted out with Peel Financial, Mr. Ferguson who had continued to claim that he had an interest, and the provincial government. Mr. Cogan had not been involved in settling those issues, and that appears to have been done by the purchaser, the Matthews Group.
[68] Mr. Matthews had purchased Mr. Ferguson’s claim. The defendants say that Mr. Cogan’s failure to disclose to the defendants that Mr. Matthews had purchased Mr. Ferguson’s interest is a breach of fiduciary duty that disentitles him to any claim for compensation to which he might otherwise be entitled.
[69] The final Matthews deal closed in the spring of 2004. The question is whether what Mr. Cogan did in connection with that purchase was an event that the parties agreed would entitle Mr. Cogan to compensation. If so, the question then is how compensation is to be determined.
[70] Under the final Matthews deal, the purchaser acquired a 100% interest in the partnership, which involved an assumption of the existing debt. The Matthews Group paid the defendants a $1 million deposit and $15 million over time; the defendants would realize a possible additional amount of 12.5% of any profits. The Peel Financial litigation was to be resolved by the Matthews Group.
[71] Following the completion of the final Matthews deal, Mr. Nick Cogan called Mr. Westeinde in April 2004. During that conversation, Mr. Westeinde told Nick Cogan that he would not pay a fee in connection with the transaction that completed.
[72] The plaintiff, Lettuce Serview, sues as an assignee and pursuant to a general security agreement. The defendants were notified of the assignment.
[73] Senator Eyton claims to be entitled to recover 50% of the fee as Mr. Cogan’s partner.
DISCUSSION
Eddie Cogan’s Contract as an Agent for Western Delta
[74] The factual matrix under which the contract between Mr. Cogan and Western Delta was made was as follows.
[75] In October 1999, Mr. Cogan called Ms. McLaughlin to offer his services as a business advisor and negotiator. The particular problem facing Western Delta was Mr. Seaman’s failure to perform his obligations as a partner in Delta Fraser, and he and Western Delta were in litigation. Western Delta had lands with significant debt, taxes were in arrears, and there was no active business on the lands generating revenue. The defendants agreed to meet Mr. Cogan.
[76] Mr. Cogan’s background was also known to Ms. McLaughlin. He was unique, charismatic and well-experienced in successfully handling large, complex and difficult real estate situations, including those involving Ms. McLaughlin’s father. Ms. McLaughlin knew him to be an effective and talented person. She felt they trusted each other. Mr. Cogan was known to be very knowledgeable, had extensive high-level contacts in business and politics, and had a knack for cutting through posturing and personalities. His particular talent was his ability to understand and deal with the positions taken by people once he knew his clients’ objectives, and to get people to see their interests. He was not a detail man; he was a deal maker.
[77] Mr. Cogan met with Mr. Westeinde and Ms. McLaughlin at a hotel. They briefed him on the situation facing Western Delta. They reached an agreement for Mr. Cogan to represent Western Delta either at that meeting or after another telephone call or two.
[78] When asked in chief what the agreement was that was reached with Mr. Cogan in November, 1999, Ms. McLaughlin replied:
Basically, that he had a quick discussion with me, I don’t know if it was the first meeting or a subsequent meeting, but he had a quick discussion that really amounted to that I knew that he would be entitled to compensation, that he was looking to improve my position over where I was at that point in time and that he would be bringing value to the deal by putting me in a better financial position than I was at that point in time.
[79] I find that Ms. McLaughlin accurately described her discussions with Mr. Cogan when she testified: “we both understood that (the compensation) would be paid when a deal was done and it would be paid for value that he brought to the transaction”. As Ms. McLaughlin put it, Eddie Cogan was looking to improve her position, bring value and put her in a better position financially than she was.
[80] The evidence at trial regarding their discussions about entitlement to compensation was relatively brief. The amount of compensation was not discussed. Ms. McLaughlin said Mr. Cogan thought that he could get Mr. Seaman to perform his obligations, or if not, he could get a new partner for Western Delta. She said that he would have to be paid when he got a deal and that their discussions really did not go beyond that.
[81] The plaintiffs’ position is this: Mr. Cogan would be paid a fair and reasonable fee in respect of his work should that work lead to a concluded deal, in particular should Mr. Cogan identify a purchaser who would ultimately acquire an interest in the land. The defendants say that a mere introduction was not enough, that the agreement required that Mr. Cogan be the effective cause of the deal in order to earn a fee.
[82] Shortly after the initial meeting, Mr. Cogan was retained to act as the defendant’s agent. Initially, the principal was Western Delta, and later, after Ms. McLaughlin got control, it was the Delta Fraser Properties Partnership as well.
[83] There was never a formal written agreement with respect to Mr. Cogan’s retainer. As Ms. McLaughlin put it, Mr. Cogan did not work that way.
[84] Given the discussions of the parties, and having regard to the factual matrix which included the defendant’s knowledge of how Mr. Cogan worked and Western Delta’s particular circumstances, I find that the essential terms of the agency contract were these: Mr. Cogan would attempt to facilitate a deal to fulfill the defendants’ objectives, which objectives included resolving the financial problems resulting from the situation with Mr. Seaman. Meeting these objectives might be by persuading Mr. Seaman to fulfill his partnership obligations, or, if unsuccessful in dealing with Mr. Seaman, by either locating a new partner to come into Delta Fraser, negotiating a sale of part of the lands to the Province, or finding some other purchaser for the lands.
[85] I conclude that the parties agreed that Eddie Cogan would be compensated if his efforts brought value to Western Delta. That, I find, was the language that the parties used. That was what they agreed was the circumstance that entitled Mr. Cogan to compensation. Although bringing value is a general term, that was the concept that the parties used and agreed on. I find all the evidence is consistent with the agreement as to entitlement to compensation being along those lines.
[86] Mr. Cogan would only be compensated if he delivered a successful result, whether that was by improving Western Delta’s position through a resolution of the Seaman situation or completion of a transaction resulting from his mandate, such as a sale or a new partner, or perhaps in some other manner. He was not to be compensated simply for effort or time spent.
[87] I find that it was agreed that Mr. Cogan’s compensation would be negotiated when the defendant’s partner performed or a successful transaction was on the horizon or had substantially materialized. If the partner performed or the transaction in fact completed, Mr. Cogan would be paid.
[88] I find that it was understood that Mr. Cogan would use a team of people on an as-needed basis and that he was responsible for his costs and expenses, including those of his team members. It was understood that Mr. Cogan would “quarterback” his team (a term that he used) in pursuing his clients’ objectives. Several people, such as Senator St. Germaine, Mr. Stephen Aranoff, and Mr. Gordon Baker, were members of the team. Whether Senator Eyton was a team member or a partner in the arrangement is in issue.
[89] It was a very loose arrangement. The precise events which would entitle Mr. Cogan to a fee were not clearly specified. He was to be paid for success or bringing value to the transaction. Although these are general concepts, the parties were both prepared to work under that agreement. If Mr. Cogan brought in a purchaser or a partner who completed, that would be something entitling him to compensation.
[90] Circumstances facing Western Delta changed, as did the scope of Mr. Cogan’s activities, during his almost four years of work for the defendants, but the basic agreement remained the same: Mr. Cogan would be compensated if he brought value to the defendants.
[91] The question is whether, under the agreement, Eddie Cogan did what the parties agreed would entitle him to compensation from the defendants.
Was Eddie Cogan entitled to a fee for the final Mathews deal?
[92] The threshold legal and factual issue in this case is whether Mr. Cogan, the agent, has performed services for his principal that entitle him to remuneration. This depends on the construction of the agreement between the parties and the facts.
[93] In Alex Duff Realty Ltd. v. Eaglecrest Holdings Ltd. (1983), 26 Alta. L.R. (2d) 133 (C.A.), Kerans J.A. at ¶7 said:
The governing rule was expressed by the House of Lords in Luxor (Eastburn) Ltd. v. Cooper, [1941] A.C. 108. This is that a commission is payable upon, and only upon, the happening of the event provided for in the contract. What is that event? Did it happen? These are the only issues in cases of this sort. Because the answer to the first question turns on the interpretation of a specific contract before the court, it follows, as Locke, J.A., said for the Supreme Court of Canada (in the course of adopting the rule in Luxor) in Taylor v. Silver Giant Mines Ltd., [1954] S.C.R. 280, at 289:
It is impossible ... to state any general rule by which the rights of the agent or the liability of the principal under commission contracts are to be determined.
[emphasis added]
[94] There is no dispute that there was a contract of agency between Mr. Cogan and Western Delta. If Mr. Cogan brought about an event that brought value to the defendants, it was agreed that he would be paid. As Bowstead states, “where the agent is to be remunerated on the happening of an event the question whether the event has occurred depends upon the facts of the case, and the express or implied terms of the agency contract” (F.M.B. Reynolds, Bowstead and Reynolds on Agency, 17th ed. (London: Sweet & Maxwell, 2001) at 233). It is not disputed that Mr. Cogan, if he brought about the agreed event, was entitled to reasonable remuneration.
[95] In Fridman, Law of Agency, 7th ed. (Toronto: Butterworths, 1996) at page 191-192 the author states:
Even if it has been expressly or impliedly agreed by the principal that he will pay remuneration, his duty to pay remuneration only arises where the agent has earned it. This will occur only when the agent has done what was specified in the contract, which is a matter of construction, and the agent has been the direct, effective, or efficient cause of the event upon the occurrence which the principal has agreed to pay the agent remuneration. So the agent must show not only that he has achieved what he was employed to bring about, but also that his acts were not merely incidental to that result, but were essential to its happening. This, like all issues of causation is ultimately a question of fact, though certain legal principles emerge from the cases. On the question of when has the agent been the direct cause of the transaction, it is useful to refer to the words of Erle CJ in Green v. Bartlett:
If the relation of buyer and seller is really brought about by the act of the agent he is entitled to commission although the actual sale has not been effected by him.
[96] The defendants say that Mr. Cogan was not the effective or direct cause of the final Matthews deal (that he did not do what entitled him to remuneration) for several reasons: his efforts did not bring about the sale; there was a significant passage of time between the sale and his participation as an agent; he had subsequently participated as a principal in a different transaction; his agency had been terminated (and he cannot claim a commission after termination of the agency agreement unless he was the effective cause); the negotiations between vendor and purchaser terminated and later resumed without his involvement as agent; and, in any event, because the ultimate sale was negotiated by others and the roadblocks (the Peel Financial litigation, the Ferguson claim, and the provincial government situation) were removed by others.
[97] This was not a contract of agency where the act entitling the agent to compensation was limited or specific. It was understood and agreed by the parties that there were different ways Mr. Cogan might be entitled to compensation.
[98] Unlike a number of the cases referred to by counsel, the so-called retainer agreement here was oral. As I mentioned, the parties did not specifically discuss the precise terms under which Mr. Cogan would be entitled to compensation; the agreement was that he would be entitled to compensation in the event he brought value to Western Delta. Value, I find, was a general and flexible concept and meant different things at different times, as the defendants’ circumstances changed. I find that it was agreed that the defendants would pay Mr. Cogan a fee if he brought about a sale.
[99] The final Mathews deal certainly was something of value to the defendants. The question is whether the final Matthews deal was brought about by Mr. Cogan, such that he was entitled to a fee. In other words, under the terms of the contract between the parties, was he the effective or direct cause of that transaction?
[100] I should say that I do not find the first or second letter fee agreement between Western Delta and Eddie Cogan, where compensation was specified, to be of assistance in determining whether Mr. Cogan was entitled to compensation for the final Matthews deal. Those fee agreements, properly interpreted, only provide for the amount of compensation Mr. Cogan would have received had either of those two transactions completed, although they may provide some assistance in determining reasonable compensation if Mr. Cogan is otherwise entitled.
[101] The arguments that Mr. Cogan was the effective or direct cause of the final Matthews deal include these:
1. Mr. Cogan introduced Mr. Matthews to the property. Mr. Cogan spent an enormous amount of time dealing with Mr. Matthews and secured substantial offers in 2002 and 2003.
2. The Matthews Group ultimately purchased the property.
3. Mr. Matthews remained interested and never stopped pursuing the lands after the second Matthews deal fell through.
4. The defendants retained Mr. Cogan with an imprecise definition of the success entitling Mr. Cogan to compensation.
5. Although Mr. Matthews may have taken steps to remove certain impediments to the sale, it could not be said that any other intermediary was the effective cause of the sale.
[102] First, Mr. Matthews was introduced to the property by Mr. Cogan. However, Mr. Cogan did more than that. He contacted Mr. Matthews regularly. Mr. Cogan had known Mr. Matthews for at least 20 years and in the past had done three or four deals with him. In connection with the Burns Bog lands, Mr. Cogan had helped Mr. Matthews become familiar with the issues surrounding the lands. There were periods when there was little progress in his dealings with Mr. Matthews but Mr. Cogan persisted and obtained from him a substantial written offer to purchase in 2002 and later a second one in April 2003. Although the second deal collapsed in June 2003, the final deal was signed in January 2004, within three months of Mr. Cogan’s death.
[103] The evidence shows that after the second Matthews transaction collapsed in June 2003, Mr. Matthews never stopped pursuing the property and wanted the property if the price was right. He waited for another opportunity to present itself after the second transaction fell through. In fact, a few weeks after Mr. Cogan passed away, one of Mr. Matthews’ colleagues contacted Mr. Westeinde of Western Delta.
[104] One of the defendants’ key points on entitlement is that although Mr. Cogan might have been entitled to a commission for the first and second Matthews deals, there was a significant break after the second deal collapsed. Given the termination of his agency, then his death, the fact that negotiations with Mr. Matthews came to an end, and that the purchaser itself had to remove the impediments to the deal from Peel, Ferguson and the Province, they argue that Mr. Cogan cannot be said to be the effective cause of the final deal.
[105] In that respect, the defendants rely mainly on two authorities: Taylor v. Silver Giant Mines Ltd., [1954] S.C.R. 280; and MacDonald Realty (1974) Ltd. v. Saunders, [1997] B.C.J. No. 1182 (S.C.). They assert that there is no basis on which to conclude that Mr. Cogan was the effective cause of the ultimate sale to the Matthews Group, which was negotiated and completed without his involvement months after his death.
[106] Both Taylor and MacDonald Realty concern purchasers who were introduced by the agent, but negotiations terminated before the sale ultimately took place. The agent was held not to be the effective cause of the sale.
[107] In Taylor, the claim was for a commission for the sale of mining properties. By September 1949, Mr. Taylor had negotiated the sale of the Silver Giant property to the Hedley Mascot Company. The defendants agreed to pay a commission to Mr. Taylor, but the deal between Silver Giant Mines and Hedley Mascot broke down by February 6, 1950. However, later negotiations resulted in an agreement in May 1950, and Mr. Taylor sued for a commission. A 3-2 majority of the court interpreted the contract as providing that Mr. Taylor was entitled to a commission “if such a sale should result from the negotiations then being carried on”, and since the negotiations broke down and were terminated, his services were held not to be the effective cause of the sale and he was not entitled to a commission.
[108] In MacDonald Realty, the owners listed their home with the plaintiff realtor, and agreed to pay a commission “if a binding contract of sale of the property is brought into being at any time in respect of which the efforts of you or your agents were an effective cause”. One party, W., made an offer that was not acceptable and the owners and W. thought negotiations were at an end. The property was listed with another agent. During this time, a friend of both parties, K., intervened, and the owners and W. met, and W.’s interest in the property revived. The new listing with the second realtor excluded W. from the commission and W. made an offer that was accepted and completed. Quijano J. held that the plaintiff, MacDonald Realty, was not entitled to a commission. She noted that cases of this sort turn on their facts. She relied on holdings in cases such as Taylor that where there was a clear end to the original negotiations and a subsequent sale, the agent was not entitled to a commission. Quijano J. held that the initial negotiations between W. and the owner were clearly at an end, not merely postponed or dislocated. She found that it was the intervention of K. that brought the owners and W. back together and resulted in the ultimate sale.
[109] Both of these cases turned on their individual facts. Taylor was a case where a majority of the court interpreted the agency contract as one entitling the agent to a commission if a sale resulted from the “negotiations then being carried on”. In MacDonald Realty, the contract required the agent to be the effective cause and the court found that an intervening party was the effective cause.
[110] Under the agency contract in this case, Mr. Cogan was entitled to remuneration if he brought value to the defendants by a transaction that completed. Here I have found that Mr. Matthews was introduced to the property by Mr. Cogan, that he was nurtured over a significant time, and that Mr. Cogan obtained two offers which, if completed, would have resulted in substantial commissions to him. The defendants’ point is that it was Mr. Matthews who really did the final deal because he sorted out the Ferguson and Peel litigation issues and that neither the Province nor Mr. Seaman would deal with Mr. Cogan. However, the plaintiffs’ counsel asks rhetorically, if Eddie Cogan was not the effective cause, who was?
[111] The defendants say that the situation is a little starker than that. They point out that not only did Mr. Cogan not introduce the final deal, but his agency had terminated, he had died, he had not in the past been able to close a deal with Mr. Matthews, and the deal that completed was not an extension of a prior deal but was something much poorer and quite different. In fact, the defendants point out that just before his death, Mr. Cogan was working on his own deal.
[112] However, Mr. Cogan brought Mr. Matthews to the defendants’ table and dealt with him for a number of years. This was not a simple transaction, and the time spent to educate a possible purchaser on the issues surrounding the purchase, and to make the purchaser comfortable and interested, I think, was significant. I expect that any list of possible purchasers was quite short. That is the context in which the efforts of Mr. Cogan and the question of whether he was the effective cause as the parties contemplated in their agreement must be considered. The plaintiffs’ counsel asks: if Mr Cogan were alive, would he be paid a fee for the final Matthews deal? I find that the answer is yes.
[113] I find that Mr. Cogan was the effective cause, or put another way, Mr. Cogan performed the event that the parties had agreed would entitle him to remuneration. He brought value to the defendants. I think that by introducing Mr. Matthews, getting him interested, pursuing him, and generating two offers, when the offer was made by Mr. Matthews (who had never lost interest) shortly after Mr. Cogan’s death, Mr. Cogan would properly be characterized as the effective cause of the final Matthews deal under the contract as entered into by the parties. I recognize that there were things that Mr. Matthews had to deal with for the transaction to complete but in my view the question is whether, as against the owners, Mr. Cogan was the effective cause of the sale being completed. I conclude that he was.
[114] I will discuss later whether Mr. Matthews played a role that should affect the assessment of any value brought by Mr. Cogan.
[115] Before leaving this issue, let me discuss the two telephone conversations that took place between Mr. Nick Cogan, Eddie Cogan’s son, who had worked with his father, and Mr. Westeinde in November 2003 and April 2004.
[116] There is a dispute both as to the content of those discussions and their legal significance. First, I will set out Nick Cogan’s version.
[117] The first call took place a couple of weeks after Eddie Cogan’s death. Nick Cogan called Mr. Westeinde. He said that Mr. Westeinde told him in connection with the deal pending at his father’s death that “Robertson (a reference to the purchaser’s representative) and his people are not real”; “we are going to get foreclosed on”. Mr. Westeinde said there was not a likely purchaser around.
[118] Nick Cogan testified that he asked Mr. Westeinde whether he would pay a fee if someone his father introduced to the deal or brought to the table bought the property, and he testified that Mr. Westeinde said he would pay a fee to the estate and specifically mentioned Mr. Matthews as an example. Nick Cogan reported this conversation to Tom Bitove of Lettuce Serview because he felt Mr. Bitove had a vested interest.
[119] Nick Cogan said that he spoke to Mr. Westeinde on one more occasion. He testified that in April 2004, he learned that Mr. Matthews had bought the property. He wanted to speak to Ms. McLaughlin, but instead he spoke to Mr. Westeinde, who said he was disappointed in the result. Nick Cogan said he asked Mr. Westeinde if he was going to pay a fee as they had discussed the previous November. Mr. Westeinde said no and told Nick Cogan that his father was more of a hindrance than a help.
[120] Mr. Westeinde’s version of these two calls was as follows. He acknowledged having a conversation with Nick Cogan in November 2003 but testified that he had no recollection of the contents of it. He testified that Mr. Matthews was only discussed in April 2004. Mr. Westeinde said that he had a note referring to the Gary Robertson deal (a reference to the Cogan/Eyton deal) which said: ”spoke to Nick Cogan November 17, 03 if deal closes =$ but default had occurred”. That is obviously a reference to the transaction that was possibly pending at Mr. Cogan’s death. Mr. Westeinde thought he made the note on November 17, 2003, and that the Cogan/Eyton deal, the pending deal, had died a couple of times, but by the end of November, it was gone. He said that it is highly improbable that in November 2003 he would have discussed paying a fee if the Matthews deal completed.
[121] Mr. Westeinde acknowledged that there was also a conversation with Nick Cogan in April 2004. He said that Nick Cogan asked whether, if a deal had been done with Mr. Matthews and closed in November 2003, he would have paid a commission. Mr. Westeinde says he responded that he would not have because there was no Matthews transaction in November 2003. He described the conversation as disjointed and said he did not know why Nick Cogan raised the Matthews transaction. He said he had a conversation with Nick Cogan in November 2003 but had only discussed a possible Matthews deal during the April 2004 discussion.
[122] Mr. Voith argues that Mr. Westeinde’s contemporaneous note in November, 2003 is inconsistent with his having discussed in November 2003 a sale of the property to Mr. Matthews.
[123] I prefer Mr. Nick Cogan’s recollection of the November 2003 and April 2004 discussions. I think that it is more logical and is more consistent with the surrounding circumstances. Rather than a discussion in April 2004 about a hypothetical Matthews transaction possibly completing the previous November, which seems unlikely, I think that it is more likely that the parties discussed the possibility of a party introduced by Mr. Cogan at some time buying the land and the defendants paying a commission.
[124] Even if Mr. Westeinde told Mr. Cogan that the defendants would pay a commission if Matthews bought, is that evidence admissible on the issue of the defendants’ liability under the contract with Mr. Cogan?
[125] Mr. Schmidt argues that the conversation is admissible to show the terms that were not written down but were agreed upon in this oral contract of agency.
[126] Mr. Voith says that this subsequent conduct is irrelevant to the interpretation or the determination of the parties’ obligations under the agency agreement because Nick Cogan was not a party to the contract. Mr. Westeinde’s subsequent interpretation of the contract, if that is what the conversation amounted to, Mr. Voith argues, is of no value. He also says that Mr. Westeinde’s subjective impression of whether or not the defendants would be liable has no probative value and is entitled to no weight.
[127] The defendants argue that evidence of post-contractual conduct is inadmissible in the absence of an ambiguity. Counsel relies on Canadian National Railways and Canadian Pacific Ltd. (Re), [1979] 1 W.W.R. 358 (B.C.C.A.), aff’d [1979] 2 S.C.R. 668. There, Lambert J.A. said at 372:
In Canada the rule with respect to subsequent conduct is that if, after considering the agreement itself, including the particular words used in their immediate context and in the context of the agreement as a whole, there remain two reasonable alternative interpretations, then certain additional evidence may be both admitted and taken to have legal relevance if that additional evidence will help to determine which of the two reasonable alternative interpretations is the correct one.
[128] I have concluded that this conversation is not admissible on the interpretation of the agency contract. This is not a question of resolving an ambiguity as there is no ambiguity. The question is did Mr. Eddie Cogan, by his efforts, provide value to the defendants of a nature that the parties agreed would entitle him to compensation? That was the arrangement that they had reached when Mr. Cogan was retained.
[129] However, the plaintiffs’ counsel argues that Mr. Westeinde’s comment that the defendants would pay a commission if a Matthews deal completed is consistent with the theory of the plaintiffs’ case and is admissible as an admission that Mr. Westeinde considered that Mr. Cogan had performed satisfactorily and that he was entitled to be paid. I think that Mr. Westeinde’s comments are admissible on the factual question of whether Mr. Cogan’s efforts were instrumental in bringing the final Matthews deal together.
[130] I have concluded on other evidence that Mr. Cogan performed services entitling him to compensation. Mr. Westeinde’s admission adds support to that conclusion.
Is Eddie Cogan Disentitled to a Fee for Breach of Fiduciary Duty?
[131] The defendants assert that Mr. Eddie Cogan was in breach of fiduciary duty and as such is disentitled to claim a fee or commission.
[132] The defendants’ argument is as follows. Mr. Cogan was an agent and fiduciary; he had a duty of good faith, loyalty, avoidance of conflict of duty and self-interest, and an obligation to make full disclosure of everything he knew representing “the subject matter of the contract and likely to influence the principal’s conduct”. In that respect the defendants rely on the well-known cases of Hodgkinson v. Simms, [1994] 3 S.C.R. 377; Canadian Aero Services Ltd. v. O’Malley, [1974] S.C.R. 592 and Ocean City Realty Ltd. v. A&M Holdings Ltd. (1987), 36 D.L.R. (4th) 94 where Wallace J.A. said at pp. 98-99:
…The duty of disclosure is not confined to those instances where the agent has gained an advantage in the transaction or where the information might affect the value of the property, or where a conflict of interest exists. The agent certainly has a duty of full disclosure in such circumstances; they are commonly occurring circumstances which require full disclosure by the agent. However, they are not exhaustive.
The obligation of the agent to make full disclosure extends beyond these three categories and includes "everything known to him respecting the subject-matter of the contract which would be likely to influence the conduct of his principal" (Canada Permanent Trust Company v. Christie, supra) or, as expressed in 1 Halsbury, 3rd. ed., p. 191, paragraph 443, everything which "... would be likely to operate upon the principal's judgment". In such cases the agent's failure to inform the principal would be material non-disclosure.
…
The test is an objective one to be determined by what a reasonable man in the position of the agent would consider, in the circumstances, would be likely to influence the conduct of his principal.
[133] Mr. Voith argues that Mr. Cogan breached his duty of fidelity and disclosure in a number of ways: if Senator Eyton was Mr. Cogan’s partner in respect of the retainer, Mr. Cogan concealed this from Western Delta, which had no knowledge of the partnership; Mr. Cogan repeatedly misrepresented that Senator Eyton was leading a group which was considering buying the lands when Senator Eyton says this was never the case; and, most importantly, Mr. Cogan knew that Mr. Matthews had purchased Mr. Ferguson’s interest in or claims to the lands and failed to communicate this to Western Delta. In connection with this last point, the defendants say that Mr. Matthews had not merely financed Mr. Ferguson as Mr. Bingham, the defendants’ solicitor, understood, but had purchased Mr. Ferguson’s interest outright. Had Western Delta known this, Mr. Voith says, it would not have been reluctant to insist on Mr. Matthews’ personal involvement in the deal (rather than through shell companies), giving it a possible real remedy on default with respect to the first and second Matthews deals.
[134] Mr. Voith also argues that Mr. Cogan breached his duties of loyalty, good faith, and avoidance of conflict of interest by threatening and extorting an elevated fee from Mr. Westeinde during the negotiation of the second letter agreement. He also argues that Mr. Cogan sought an equity interest from Mr. Matthews in the second Matthews deal, did not inform Western Delta, and misrepresented his discussions with Mr. Matthews by saying that Mr. Matthews had offered him a piece of the deal.
[135] Mr. Voith argues that, collectively, these breaches of duty show that Mr. Cogan had abandoned his duties as agent and was working to advance his self-interest, which he argues is not surprising given the financial pressures he was facing.
[136] Mr. Schmidt argues that allegations of breach of fiduciary duty are not only serious, but require proof commensurate with the seriousness or gravity of the accusation. He submitted that I should be cautious, given that Mr. Cogan is deceased and is not able to answer these allegations. He argues that there is simply no clear disentitling conduct. Mr. Schmidt says these allegations really come down to a suggestion that Mr. Cogan concealed Senator Eyton’s partnership, represented wrongly that there would be a purchase transaction with Senator Eyton, and failed to tell Mr. Bingham that Mr. Matthews had purchased Mr. Ferguson’s alleged interest. Mr. Schmidt says that Ms. McLaughlin knew that Senator Eyton was a partner and that in any event, the nature of his relationship with the other members of his team was not significant. He says there is no evidence that the defendants would have objected if Senator Eyton was Mr. Cogan’s partner.
[137] Mr. Schmidt says that the evidence does not show that there was a real representation that Senator Eyton would step in as a principal purchaser. With respect to Mr. Ferguson, Mr. Schmidt says that there was a conversation between Mr. Cogan and Mr. Bingham to the effect that “Matthews is now Ferguson”; if the solicitor for the defendants knew this, and it was significant, he could have taken whatever steps he considered prudent.
[138] Mr. Cogan, the exclusive agent for Western Delta, was, I find, in a fiduciary position. In that capacity, Mr. Cogan owed a duty of loyalty and avoidance of conflict of interest. He had an obligation to disclose anything that would be likely to operate upon his principal’s judgment. The failure to do so would constitute material non-disclosure.
[139] Did Mr. Cogan fail to make full and fair disclosure of all material circumstances to Western Delta, or otherwise breach his fiduciary obligation, disentitling him to a fee in the final Matthews transaction? Mr. Voith says that, taking his assertions as a whole, Mr. Cogan’s conduct disentitles him. I will discuss his points individually and then consider them as a whole.
[140] The allegation of breach of fiduciary duty is a serious one, bordering on an allegation of dishonesty. Mr. Cogan is not alive to defend himself or put the evidence in its proper factual context. While the burden of proof of these allegations is on the balance of probabilities, I think that in the circumstances the evidence has to be scrutinized with greater care: Continental Insurance Co. v. Dalton Cartage Co., [1982] 1 S.C.R. 164.
[141] The first allegation is that Mr. Cogan did not disclose to the defendants that Senator Eyton was his partner in the agency agreement. Senator Eyton was, to the defendants’ knowledge, a member of Mr. Cogan’s team, but the answer to this assertion, quite simply, is that it could not be material non-disclosure because I find that Senator Eyton, for reasons I will discuss below, was never Mr. Cogan’s partner in trying to obtain a sale or a partner for Western Delta.
[142] The second allegation is that Mr. Cogan repeatedly misrepresented that Senator Eyton was leading a group to purchase the lands. The offer to purchase in the so-called Cogan/Eyton transaction was made by a numbered company. Before it was accepted, Senator Eyton signed a letter stating that he was taking a lead position in the group that is “entering into DFPP as Laurel’s partner”. Mr. Westeinde took this to mean that Senator Eyton was a partner, but the letter does not say that. Senator Eyton, whose evidence I found to be equivocal on this point, testified that he was never to be a principal; he said that Ms. McLaughlin and Mr. Bingham wanted some evidence that he would be involved. It is significant that the letter Senator Eyton signed appears to have been acceptable at the time to the defendants. I am unable to conclude that there was a misrepresentation by Mr. Cogan of Senator Eyton’s precise legal status in the transaction that would amount to a breach of fiduciary duty.
[143] The third allegation is that Mr. Matthews had purchased Mr. Ferguson’s interest in the lands, and that Mr. Cogan was aware of this but failed to communicate it to the defendants. I am not satisfied that this is a reasonable conclusion on the evidence as a whole. The notes of the defendants’ solicitor, Mr. Bingham, read: “Know that Matthews is now Ferguson”. I am not satisfied that the defendants’ solicitor was unaware at material times that Mr. Matthews had acquired Mr. Ferguson’s interest or claim or part of it. I found Mr. Bingham’s recollection on this point to be uncertain. It has not been proven that Mr. Cogan did not disclose to the defendants or their agent that Mr. Matthews had acquired Mr. Ferguson’s interest.
[144] Next, the defendants say that Mr. Cogan’s conduct by extorting an elevated fee in connection with the second Matthews deal was a breach of his duty of loyalty and good faith and avoidance of conflict of interest. I note that the plaintiffs are not seeking to enforce the fee that the defendants say was agreed to because of Mr. Cogan’s heavy-handed comments. For example, there is evidence that Mr. Cogan used profanity and threatened to “screw up the deal”. As I will discuss, this affects the weight I should give to a fee arrangement made in such circumstances when determining what is fair and reasonable. But, I have not concluded that the defendants have proven a breach of fiduciary duty entitling them to avoid liability for the fee that Mr. Cogan earned. First, there is no evidence that Mr. Cogan thought that it was an elevated fee. Second, Mr. Cogan’s comments, although unprofessional, in poor taste and rather outlandish, were probably not inconsistent with the unique type of personality that the defendants had retained to help them solve their problems with the Burns Bog. I am not persuaded that Mr. Cogan’s behaviour is conduct that amounts to a breach of fiduciary duty disentitling him to a fee.
[145] Finally, there is evidence that Mr. Cogan sought an equity or management interest in the second Matthews deal, and that he misrepresented his discussion with Mr. Matthews by saying he had been offered a piece but refused. The evidence on this point is so sparse and has such limited context that I am unable to find a misrepresentation amounting to a breach of fiduciary duty which disentitles Mr. Cogan to a commission.
[146] Considering all of the evidence, I have concluded that the defendants have not proven that there has been conduct of the agent, Mr. Cogan, that would disentitle him to a commission.
If Eddie Cogan was entitled to a fee, what is the proper amount?
[147] I have concluded that Mr. Cogan is entitled to remuneration from the defendants. That being so, what is the proper amount of his compensation?
[148] The plaintiffs argue that the contract of agency contained an implied term that the defendant would pay a reasonable fee. That reasonable fee, with respect to any Matthews deal, the plaintiffs say, was set contractually by the first fee agreement made in August 2002. That agreement was for a fee of $2 million for a sale of a 50% interest, and included the possibility of further compensation. The second fee agreement, made in May 2003, fixed a fee of $4 million with respect to a sale of the entire interest. That, the plaintiffs say, was consistent with the first fee agreement establishing a base minimum fee of $2 million.
[149] In the alternative, the plaintiffs say that if the first or second fee agreements, as a matter of contract, do not establish the fee for the final Matthews deal, they provide good evidence of what the parties thought was reasonable compensation and the basis upon which they thought compensation should be set.
[150] The defendants disagree. They say that the first fee agreement in 2002 applied only to the first Matthews deal and did not have any contractual effect beyond that. The defendants say that the second fee agreement applied only to the second Matthews deal. If Mr. Cogan was entitled to compensation, the defendants say that a fair amount of compensation is best determined by adjusting the amount of compensation agreed to for the first Matthews deal after comparing the value that would have been delivered by Mr. Cogan under the first Mathews deal to the value actually delivered under the final Matthews deal.
[151] First, I will discuss the plaintiffs’ argument that the first fee agreement in 2002 provided that there would be a minimum fee of $2 million for any Matthews transaction.
[152] The letter of August 29, 2002 (the “first fee agreement”), which was drafted by the defendants’ lawyer, reads:
Dear Eddie:
Re: Success Fee Concerning the Disposition of Burns Bog Lands
I am writing to set out the terms of our agreement concerning the provision of your services as a business advisor and negotiator to Western Delta Lands Partnership (“WDLP”) in respect of a possible transaction with Jack Matthews and Matthews Southwest Texas LP, LLP (collectively the “Matthews Group”) concerning the land assembly in Delta, British Columbia commonly known as “Burns Bog”. The terms of agreement are as follows:
(i) WDLP acknowledges that you have provided your very considerable skills to WDLP as a business advisor and negotiator to facilitate a possible transaction (the “Matthews Deal”) with the Matthews Group;
(ii) if the Matthews Deal is accepted by WDLP and completes then WDLP will pay you the sum of Two Million Dollars ($2,000,000 Cdn.) (the “Fee”). The Fee shall be deemed earned at the time that the Matthews Deal completes. The Fee shall be inclusive of any and all taxes, costs and/or expenses with respect to the engagement contemplated by this letter agreement or otherwise concerning the subject lands;
(iii) You shall be solely responsible for all of your costs in the provision of your services concerning the Matthews Deal or otherwise concerning the subject lands, including any and all costs and expenses associated with any other persons, companies or entities of whatsoever nature (including Mr. Gerry St. Germain or persons engaged or retained by him) engaged or utilized by you in furtherance of the Matthews Deal and/or regarding the subject lands;
(iv) WDLP confirms that the Fee is not exhaustive consideration for the provision of your services and that it will entertain and consider any further proposals that you may submit concerning your ongoing participation (whether on an equity basis or otherwise) in the development and/or disposition of the subject lands.
(v) this letter agreement sets out the entire proposal concerning the subject matter hereof and there are no other terms, agreements or representations with respect to the same.
On a personal note, let me express my thanks to you for your tireless energy, perseverance and creativity in bringing a potential solution to this matter. I am grateful for your counsel and friendship.
…
(signed by Ms. McLaughlin and Mr. Cogan on August 29, 2002)
[153] The May 7, 2003 letter (the “second fee agreement”), which was drawn up at the time of the second Matthews deal, reads:
Dear Mr. Cogan:
Re: Sale of Lands to Matthews
This letter will set out the new agreement concerning your fees with respect to your engagement to assist in the sale of the Burns Bog lands.
A binding offer (the “Transaction”) from Matthews Southwest Texas LP, LLP was executed by John Matthews for Matthews Investments Southwest, Inc. II (“Matthews”) and the Western Delta Lands Parnership group (“WDLP”) by its owner (“Seller”) on April 22, 2003, to sell the Seller’s interest in the WDLP lands in Delta, B.C. (the “Lands”). The Transaction is schedule to close on or before June 25, 2003.
You have been engaged by the Seller and have been instrumental in facilitating this Transaction.
If the Transaction is successfully completed and the Seller receives the proceeds set out in the Transaction then the Seller will pay you the sum of $2,000,000 Cdn. from the proceeds. Secondly, the terms of the Transaction include a further principal payment of $15,000,000 Cdn. by Matthews to the Seller due on the third anniversary of closing. Upon its receipt of the $15,000,000, the Seller will pay you a second sum of $2,000,000 Cdn. This total of $4,000,000 shall constitute your total fees (the “Fee”).
This Fee shall be inclusive of any and all taxes, costs and/or expenses, including those associated with any other persons, companies or entities of whatsoever nature (including Senator Gerry St. Germain and Senator Trevor Eyton) and/or persons retained by them with respect to your engagement concerning the Lands.
(signed by Mr. Westeinde and Mr. Cogan in May 2003)
[154] Interpreting the letters of August 9, 2002 and May 7, 2003 in the factual matrix in which each was made, and reading them as a whole, I conclude that each was intended to fix the fee only in respect of the particular deal for which it was made, not in respect of possible future deals. That is the plain and ordinary meaning of each of the agreements.
[155] A specific fee agreement, made when a deal was entered into or about to be entered into, is consistent with the agreement of the parties when they entered into the agency agreement in 1999: when Mr. Cogan obtained a deal he and the owners would negotiate his fee.
[156] The plaintiffs point to subparagraph (i) of the first fee agreement to support an interpretation that it applies to any Matthews deal. However, I conclude that the proper meaning of the phrase “a possible transaction” (which is described as the Mathews Deal) is a reference to the deal that had just been negotiated by Mr. Cogan but not yet formalized, rather than a reference to any possible deal for the property or any Matthews deal. The plaintiffs say that I should apply the contra proferentem rule, since the first fee agreement was drafted by the defendants, and conclude that the first fee agreement had application to any Matthews deal, i.e. provided a base fee of at least $2 million. In my view, contra proferentem does not apply because I find that there is no ambiguity in the agreement as to whether it applies beyond the terms of the particular deal for which compensation is set.
[157] Although I have found that there was a contract between the defendants and Mr. Cogan entitling him to compensation for a successful result, I have also concluded that there was no formula agreed upon at the outset, or at the time of the first or second Matthews deal, that determines the amount of compensation for a future deal secured by Mr. Cogan. The first two letter agreements, properly interpreted, related only to the particular transaction and did not establish a base fee of $2 million for any deal, or for any Matthews deal. Moreover, I have concluded there was no general agreement for a fee of $2 million for half of the property and an additional fee of $2 million for the entire property.
[158] What then is fair compensation for the value that Mr. Cogan brought to the defendants by the final Matthews deal and how is it to be determined?
[159] The task of determining a fair amount of compensation is difficult because there was never a formula for Mr. Cogan’s fee, and when it was agreed to for a particular deal, there was no clear evidence of the manner of its calculation.
[160] The question is what role, if any, the fee agreements for deals that did not complete should play in determining what is fair and reasonable compensation for Mr. Cogan for the final Matthews deal.
[161] One approach to the question of reasonable compensation is to attempt to determine objectively what the parties likely would have agreed upon had Mr. Cogan been alive when the final Matthews deal was made. In determining a reasonable fee, I think that what the parties agreed to with respect to deals that did not complete provides some basis for determining what, acting reasonably, they would have agreed was reasonable in connection with the final Matthews deal. Had Mr. Cogan been alive, that is what they would have done.
[162] Counsel for the plaintiffs argued that I should consider, in determining reasonable compensation: the three fee agreements (the first and second Matthews fee agreements, and the fee for the Cogan/Eyton deal); the value of the final Matthews deal inclusive of debt; the fact that under the first Matthews deal the defendants were liable for their share of the debt; the structure and pattern of the fee agreements; and the importance of the final Matthews deal to the defendants, given their increasingly desperate financial position as litigation and debt pressures increased.
[163] The defendants say that the key factor is the value delivered by Mr. Cogan. To determine compensation, they say I should consider the fee to be paid for the first Matthews deal. The defendants argue that I should also take into account the extent to which Mr. Cogan, as opposed to others, was instrumental in making the final Matthews deal a reality.
[164] I heard no expert evidence on the value of the final Matthews deal to the defendants or on what might be usual compensation for a transaction of this type. Given the unique nature of the Burns Bog land, that is hardly surprising.
[165] In determining what is reasonable compensation it is permissible to refer to what the parties considered was reasonable compensation for deals that did not complete: Way v. Latilla, [1937] 3 All E.R. 759, where Lord Atkin said at 764:
Services of this kind are no doubt usually the subject of an express contract as to remuneration, which may take the form of a fee, but may also take the form of a commission share of profits, or share of proceeds calculated at a percentage, or on some other basis. In the present case, there was no question of fee between the parties from beginning to end. On the contrary, the parties had discussed remuneration on the footing of what may loosely be called a “participation” and nothing else. The reference is analogous to the well known distinction between salary and commission. There are many employments the remuneration of which is, by trade usage, invariably fixed on a commission basis. In such cases, if the amount of the commission has not been finally agreed, the quantum meruit would be fixed after taking into account what would be a reasonable commission, in the circumstance, and fixing a sum accordingly. This has been an everyday practice in the courts for years. But, if no trade usage assists the court as to the amount of the commission, it appears to me clear that the court may take into account the bargainings between the parties, not with a view to completing the bargain for them, but as evidence of the value which each of them puts upon the services.
[emphasis added]
[166] I will discuss below the weight and significance that I think should be placed on the first fee agreement, the second fee agreement and the fee arrangement in connection with the Cogan/Eyton deal in determining the value that the parties put on the services and the amount of reasonable compensation for Mr. Cogan.
[167] The parties take quite different views of the guidance I can get from past possible deals.
[168] The plaintiffs’ position is that the fee agreements show that the defendant was prepared to pay at least $2 million to Mr. Cogan for his successful work in connection with the sale of a 50% interest, and that for a sale of a 100% interest they considered that reasonable compensation was $4 million. The plaintiffs also rely on the fees that they say were agreed to be paid in connection with the so-called Cogan/Eyton deal. The plaintiffs argue that these fee agreements provide strong evidence that compensation was not directly tied to the value of the underlying deal but rather that the parties operated under a general understanding, even if it was not of binding contractual force, that there would be a base fee of at least $2 million (subject to an increase) and a fee of $4 million for the sale of the whole partnership interest in the property. The plaintiffs say that the fee agreement under the second Matthews deal showed that they were operating in this fashion.
[169] The defendants take a different view. They argue that the most reliable measure of fair and reasonable compensation in all the circumstances is the first Matthews deal. They say it was the only one that was freely negotiated and the only one that is of any probative value on the key issue of compensation. The defendants argue that the final Matthews deal was a much poorer deal from Western Delta’s perspective than the first Matthews deal. Although both provided for a share of profits, the defendants say that the final Matthews deal essentially generated payment to the defendants of roughly 40% of the payment they would have received under the first Matthews deal, and the defendants still retained a 50% interest in the partnership. If the first fee agreement is of any guidance (and the defendants say it is the best guidance), the defendants say that on a linear basis, the plaintiff would only be entitled to about one-half of 40% of a fee of $2 million, or $400,000 (taking into consideration that under the first Matthews deal the defendants were to retain a one-half interest). The defendants say that the second Matthews deal and the Cogan/Eyton deal, in which the defendants agreed to pay a substantial fee to Mr. Cogan, are of little guidance in determining what the parties considered fair and reasonable, because there was no free and voluntary meeting of the minds on the issue of compensation. Mr. Cogan, the defendants argue, pressured the defendants to pay the fee by threatening to disrupt the underlying deal.
[170] Let me review the deals in more detail.
[171] The first Matthews agreement in October 2002 was an offer by the Matthews Group to purchase a 50% interest in the partnership for $10 million down and $31.75 million in payments to the defendants. Western Delta, an equal partner, retained the possible further benefit of 50% of any profit if the lands were sold or developed. The debt associated with the land at that time was about $62 million. In connection with this deal, Mr. Cogan negotiated a $2 million fee payable upon completion, inclusive of taxes, costs and expenses, and a general statement in the fee agreement that the defendants would entertain further proposals Mr. Cogan might submit concerning his ongoing participation, whether on an equity basis or otherwise, in the development and/or disposition of the lands.
[172] The second Matthews deal, about six months later in April 2003, was an offer by the purchaser for a 100% interest in the partnership holding the lands. The debt, according to the offer at the time, was about $65.5 million. The defendants were to receive $55 million, $40 million of which was payable at closing. Mr. Cogan requested a fee of $4 million, $2 million on closing and $2 million deferred, and that fee agreement was reduced to writing. Mr. Cogan apparently stated that he wanted $4 million for this transaction because he was entitled to $2 million for half of the property. Mr. Westeinde testified that Mr. Cogan said he would take steps to prevent the second Matthews deal from closing if the defendants did not agree to the commission. Mr. Bingham also testified that Mr. Cogan used abusive language and essentially said that he would disrupt the transaction if the fee was not agreed to. Mr. Westeinde agreed to the proposal.
[173] The so-called Cogan/Eyton deal, which also did not close, was signed in August 2003, about five months later. Under this deal there was to be a $2 million deposit forming part of $10 million payable on closing and a $35 million priority payment to the defendants with the option of the purchaser acquiring the remaining 50% interest in the partnership. The agreement contained a provision for the financial implications of a settlement with Peel Financial.
[174] Mr. Westeinde was presented with a request by Mr. Cogan for commission payable on closing of $4 million, but said that he thought Mr. Cogan was joking, as Mr. Cogan was a principal in the purchase. Once again, Mr. Westeinde testified that there was a highly emotional discussion, with threats and strong language from Mr. Cogan. Mr. Westeinde’s evidence was that the amount of commission discussed was $4 million, but it was understood that it would be $2 million plus $2 million, and the terms of the second $2 million were never clarified.
[175] This deal collapsed after Mr. Cogan’s death.
[176] The final Matthews deal, the one for which I have concluded Mr. Cogan is entitled to compensation, was made pursuant to an offer dated December 19, 2003, which was signed on January 5, 2004. The debt against the property at the time exceeded $60 million. The offer was to purchase 100% of the partnership interest in Western Delta and Delta Fraser. The Matthews Group paid a $1 million deposit on closing and an additional $15 million pursuant to a note payable over time. The defendants retained a 12.5% interest in the profits from the remaining lands after the deduction of development costs and working capital.
[177] Although the plaintiffs argue that value was not to be the overriding factor in determining Mr. Cogan’s compensation, I disagree. I think that the provision of value by Mr. Cogan was at the heart of the retainer agreement. If Mr. Cogan was entitled to a fee, he was entitled to it if he brought value and on the basis of the value that he brought to the defendants.
[178] The various fee agreements reached by the parties indicate that if a successful transaction was achieved, the fee would not be insubstantial.
[179] Because there is no agreed formula or evidence of industry standard, the best evidence of a reasonable fee is the evidence of what the parties agreed to, discussed or negotiated in the past.
[180] I agree with the defendants’ submission that the first fee agreement for the first Mathews deal is the best indicator of what the parties thought was reasonable, or objectively what was reasonable. That fee agreement was one in which both parties appeared to reach agreement quickly and without controversy. I place less weight on the apparent agreement with respect to the fee on the second Matthews deal, and even less weight on the fee agreement with respect to the proposed Cogan/Eyton transaction. Although the defendants do not argue that the second fee agreement was not binding, they say that the circumstances indicate that they were pressured to agree to it, which I find the evidence to some degree shows, and for that reason I give it less weight as evidence of what, from the parties’ perspectives, is reasonable compensation. The same observations apply, but more so, with respect to the commission discussions in connection with the so-called Cogan/Eyton deal, where Mr. Cogan was acting in the capacity of a principal and was not simply the agent for the defendants. The fee discussions in that case, I find, were also rather tentative, and for that reason as well I place less weight on that fee agreement.
[181] What do I draw from the first fee agreement as to what is a fair fee here? The plaintiffs say that it shows that $2 million is payable for a 50% interest, and, when taken with the second fee agreement, indicates that $4 million is an appropriate fee for selling the whole interest under the final Matthews deal. While some weight must be given to the fact that for a successful transaction the parties apparently contemplated a substantial fee, I think that the value that was provided by Mr. Cogan in the first Matthews deal differed significantly from the value he provided in the final one, and I think that compensation for the final Matthews deal should differ accordingly. I disagree with the plaintiffs that value was not the most important consideration in determining the fee that was payable to Mr. Cogan.
[182] The most important factor to the defendants was their net cash recovery and the potential for future gain. Under the first Matthews deal, the purchaser would pay $41.75 million with Western Delta retaining a right as a continuing owner in the partnership to 50% of the profits. The second Matthews deal, although poorer than the first, was substantially better than the final deal. On the other hand, under the final Matthews deal, the defendants’ cash recovery was $16 million and they had what, I find on Mr. Westeinde’s evidence, which I accept, was a significantly poorer and more remote prospect of recovering a share of profits.
[183] I agree with Mr. Voith that the final Matthews deal generated a significantly poorer return to the defendants than the first Mathews deal. Leaving aside the profit sharing provisions of the two deals, the first Matthews deal was $41.75 million for half the partnership interest in the lands, whereas the final Matthews deal was $16 million for the entire interest. As I understood Mr. Voith’s argument, the benefit to the defendants from the final deal was only about one-half of 40% of the face value of the first transaction, justifying a fee on a linear basis that is substantially less than the $2 million agreed to with respect to the first deal. The defendants retained a half interest under the first Matthews deal. Mr. Voith’s argument, which is a reasonable one, is that a $2 million dollar fee for generating a sale of a half interest for $41.75 million equates to about a $400,000 plus fee for the benefit generated by the sale of the entire interest under the final Matthews deal for about $16 million plus a small interest in profits. I must keep in mind that under the first Matthews deal, Western Delta had a continuing obligation to pay its share of the debt. I also recognize that the final Matthews deal involved the purchaser resolving the Peel litigation.
[184] Although the other fee agreements are entitled to less weight, it is not appropriate to ignore them. For example, I should give some weight to the fact that under the second Matthews deal the defendants were prepared to pay $4 million for a poorer deal than the first Matthews deal. It is also important to keep in mind the possibility for additional compensation to Mr. Cogan under the first fee agreement. It must also be recognized that comparisons among the various deals are very inexact for many reasons, including the fact that the transactions were structured differently and were complex transactions.
[185] Comparing the second Mathews deal (for which the defendants agreed to pay a fee to Mr. Cogan of $4 million) to the final one, the value that the defendants would receive appears generally to be about three times greater in the second. Even though I must consider the evidence carefully, given that Mr. Cogan is not available to testify, I have concluded that the fee with respect to neither the second Matthews deal nor the Cogan/Eyton deal can be said to properly and fully reflect the parties’ mutual understanding of what a fair compensation would be for the value Mr. Cogan brought, and I place less weight accordingly.
[186] There is some merit to the plaintiffs’ submission that those fee agreements must be considered, and I have taken them into consideration; however, I find that the value of the first Matthews deal to the defendants was far greater than the value of the final one, and objectively entitled Mr. Cogan to a far greater fee than in connection with the final Matthews transaction.
[187] The plaintiffs say that the approach of comparing the value of the first Matthews deal to the final Matthews deal misconceives the real pattern for the parties’ agreement, which is that the fee was seen by the parties as being in a range of a base rate of $2 million up to $4 million depending on the size of the interest that was sold. The plaintiffs say that such a fee arrangement reflects the real value that was provided by Mr. Cogan, because although the sale price dropped, Western Delta’s financial circumstances became more dire and a sale became more important or valuable to the defendants over time.
[188] I am not persuaded that there was an understanding that there would be a fee of between $2 million and $4 million depending on whether half or all of the partner’s interest was sold. Mr. Cogan may have seen that as a benchmark but I am not persuaded that the defendants ever thought that was a fair basis for compensation. To suggest a fee of $4 million based on a sale of the whole interest that is in no way tied to the value of the transaction to the defendants does not to my mind accord with the proper understanding of the arrangement, and that is that Mr. Cogan would be compensated for the value he brought to the defendants. The value that he brought through the final Matthews deal was quantitatively significantly less than the first Matthews deal.
[189] The parties took different views of whether I should compare the various deals on a net of debt or gross basis. Both approaches, I think, have some merit, but the real value to the defendants, the concept that was underlying the fee arrangement, was the net return to the defendants. On that basis, the net recovery on the first deal, even considering that Western Delta was still obliged to pay its share of the debt, was substantially greater than on the final Matthews deal.
[190] Although Mr. Cogan did an enormous amount of work for several years, a factor the plaintiffs asked me to consider, the amount of work he did, per se, is not relevant. The question is the value he brought to the defendants.
[191] By 2003, the defendants’ circumstances appeared quite poor. They had no money, could not pay counsel and appeared to have no cash reserves. They were involved in litigation with Peel Financial. Mr. Westeinde described their circumstances at the time, I think accurately, as desperate. The plaintiffs argue that the final Matthews deal actually brought great value to the defendants, given that their circumstances had deteriorated in terms of threatened foreclosure proceedings and other litigation. It might be argued that they took a rock bottom price, but there was no suggestion that the final Matthews deal was not fair market value for their interest. Their desperate financial circumstances by and large led them to accept the deal. I think the particular value of the final Matthews deal to the defendants, given their circumstances, is a relevant factor to consider.
[192] Nevertheless, objectively, although a poorer deal became more attractive as the defendants’ circumstances changed, that factor is neutralized, at least to some extent, by the fact that it was for an amount that earlier would have been unacceptable to the defendants.
[193] Although I find that Mr. Cogan did what he was required to do under the contract to earn a fee, a factor that I should consider on the question of quantum is whether it is significant that others did things that contributed to the final deal being reached and the transaction completing. In other words, having concluded that the threshold question entitling Mr. Cogan to remuneration has been satisfied, should I take into account that the purchaser Matthews resolved matters with Peel and Ferguson in order to make the final Matthews deal a reality? I think that those factors largely go to whether Mr. Cogan was the effective cause or not, but, having found that he was, some relatively modest weight should be given to them in measuring the value of Mr. Cogan’s contribution. Whether Cogan was the effective cause of the sale and the value of his contribution are separate questions, but I think that I am entitled to take into account the contributions of others in bringing the sale to fruition when measuring the value contributed by Mr. Cogan and his team.
[194] From the amount of any fee, Mr. Cogan, I find, was obligated to pay the members of his team, as well as any advances. Therefore, I find the following deductions should take place from any fee to which Mr. Cogan was otherwise entitled:
(a) $100,000 paid to Mr. Eddie Cogan on July 17, 2001 as an advance;
(b) $60,000 to Senator St. Germaine on October 12, 2001 plus $4,200 paid to account for GST and PST on November 13, 2001;
(c) $3,211.96 to Senator Eyton to cover expenses in connection with his meeting with the Premier in April 2002;
(d) $45,000 paid to Senator St. Germaine to settle his claim for work in relation to Burns Bog.
[195] I find that the evidence shows that the possible range for a fair and reasonable fee for the value that Mr. Cogan brought to the defendants is in the neighbourhood of $400,000 or $500,000 on the low side to about $1.3 million or so on the high side. Taking into account all of the considerations that I have set out and giving the fee arrangements the weight that I described, I have concluded that fair and reasonable compensation for Mr. Cogan is the sum of $800,000. From that amount will be deducted the payments already made by the defendants that are set out in the previous paragraph.
[196] Having found that the defendants are responsible to pay Mr. Cogan remuneration for the final Matthews transaction, I now turn to the question of the standing of the plaintiffs, Lettuce Serview and Senator Trevor Eyton, to sue.
Lettuce Serview’s Entitlement to Sue for the Debt to Eddie Cogan and any Restrictions on its Ability to Sue
[197] Lettuce Serview says that it has the right to enforce payment of Mr. Cogan’s fee (to the full extent of Mr. Cogan’s interest in that fee) because it has an absolute assignment of the fee or because of its rights under the general security agreement of October 31, 2002.
[198] The issues raised in this part of the judgment include: the scope of the assignment and security agreement, whether they apply to monies payable to Mr. Cogan in connection with the final Matthews deal, and whether Lettuce Serview’s claim is limited to the amount of Mr. Cogan’s debt that was not the subject of his bankruptcy proposal.
[199] Let me set out the facts concerning the assignment and security agreement in favour of Lettuce Serview.
[200] In October 2002, Mr. Cogan approached the Bitove’s company, Lettuce Serview, for a loan. The head of the Bitove family, John Bitove Sr., had a long relationship with Mr. Cogan. The Bitoves, through other companies, had loaned Mr. Cogan $500,000 (two loans of $250,000 each). In October 2002 Lettuce Serview loaned Mr. Cogan a further $268,492.67. On October 31, 2002, Mr. Cogan signed a promissory note agreeing to pay on or prior to January 3, 2003 the sum of $518,492.67.
[201] Mr. Cogan entered into an Assignment of Agreement (the “Assignment”) and a General Security Agreement (the “General Security Agreement”) with Lettuce Serview on October 31, 2002.
[202] In May 2003, Lettuce Serview made an additional loan of $50,000 to Mr. Cogan. On May 12, 2003, by a letter agreement signed by Lettuce Serview and Mr. Cogan, the parties confirmed the additional $50,000 loan and confirmed the earlier advances of principal of $250,000 on October 14, 1997, $250,000 on November 12, 1997, and $268,492.67 on October 31, 2002, for a total indebtedness including interest to April 30, 2003 of $1,009,892.89 (the “Indebtedness”). In that letter agreement, the parties referred back to the Assignment and General Security Agreement and confirmed that:
The Indebtedness is and shall be secured by the following (the “Security”):
a. a general security agreement granted by you to us dated October 31, 2002 whereby you granted to [Lettuce Serview] a first charge security interest in all of your present and after acquired property, assets and undertaking;
b. an Assignment of Agreement made as of October 31, 2002 whereby you assigned all of your right, title and interest in and to the Fee and all other benefits you are entitled to receive in connection with the [Delta Fraser] Transaction; and
c. an irrevocable direction to [Delta Fraser], [Western Delta] and 628032 British Columbia Ltd. dated October 31, 2002 whereby you irrevocably directed payment of the Fee to Gowling Lafleur Henderson LLP or as it may further direct.
[203] The Assignment and General Security Agreement referred to in the May 12, 2003 letter agreement provided in part as follows. First, the Assignment:
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged by the parties to this Assignment, Cogan agrees with LSLP [Lettuce Serview] as follows:
1. Assignment of Agreement: As continuing collateral security for the existing and future liabilities and obligations of Cogan to LSLP, howsoever and wheresoever incurred and any ultimate unpaid balance thereof and whether direct, indirect or contingent (the “Indebtedness”), Cogan assigns to and in favour of LSLP, its successors and assigns, all of his right, title and interest in and to any and all fees and/or benefits received or to be received by Cogan in connection with the disposition of Burns Bog Lands as described in a letter from Western Delta Lands Partnership to Cogan dated August 29, 2002 (the “Letter Agreement”), a copy of which is attached hereto as Schedule “A” (the “Collateral”). For greater certainty, the Collateral includes and shall extend to any and all benefits, payment or other amounts which may be payable to Cogan in connection with the Burns Bog Lands whether in connection with the Matthews Deal (as that term is defined in the Letter Agreement) or otherwise.
…
6. Defeasance: Upon the payment of the Indebtedness, LSLP shall, at Cogan’s request and reasonable expense, cancel and discharge this Assignment.
…
8. Rights and Remedies Cumulative: The rights and remedies given to LSLP in this Assignment shall be in addition to and not in substitution for any rights or remedies which LSLP may be entitled under any security agreement between LSLP and Cogan or any other document creating a security interest in favour of Cogan, or any other agreement between LSLP and Cogan or any other person, or at law, and may be exercised, whether or not LSLP has pursued or is then pursuing any other such rights and remedies.
…
[204] The General Security Agreement provided, in part, as follows:
1. Grant of Security Interest
As a general and continuing security for the payment of all obligations, indebtedness and liabilities of the Debtor to the Lender whether incurred prior to, at the time of or subsequent to the execution hereof, including extensions or renewals, and all other liabilities of the Debtor to the Lender, direct or indirect, wheresoever and howsoever incurred and any ultimate unpaid balance thereof, including, without restricting the generality of the foregoing, advances to the Debtor under fixed or revolving credits established from time to time, and the obligations and liabilities of the Debtor under any contract of guarantee now or hereafter in existence whereby the Debtor guarantees payment of the debts, liabilities and obligations of a third party to the Lender, the Debtor hereby grants to the Lender a continuing security interest in all of the Debtor’s property, assets and undertaking of any kind or nature, now owned or after acquired including, without limitation, the following described property (hereinafter collectively called the “Collateral”):
(a) Accounts:
all debts, accounts, claims, monies and choses in action which now are or which may at any time hereafter be due or owing to or owned by the Debtor, and also all securities, bills, notes and other documents now held or owned or which may be hereafter taken, held or owned by the Debtor or anyone on behalf of the Debtor in respect of such debts, claims, monies and choses in action or any part thereof, and also all books and papers recording, evidencing or relating to such debts, accounts, claims, monies and choses in action or any part therefore (all of the foregoing being hereinafter called the “accounts”);
…
(f) Intangibles:
all intangible property now owned or hereafter acquired or reacquired by the Debtor and not included in subparagraph (a) above including, without limiting the generality of the foregoing, all contractual rights, goodwill, patents, trade marks, copyrights and other industrial property (all of which are hereinafter called the “intangibles”);
…
(l) Undertaking:
all present and future personal property, business and undertaking of the Debtor not being accounts, inventory, equipment, chattel paper, instruments, intangibles, leases, money, documents of title, records and securities (all of which is hereinafter called the “undertaking”);
…
For greater certainty, the security interest created hereby shall be operative as a present, attached, fixed and specific assignment, mortgage and charge of and security interest in any and all of the Collateral now owned by the Debtor and, with respect to any and all of the Collateral acquired by the Debtor after the date hereof, shall be operative as a present, specific assignment, mortgage and charge of and security interest in such Collateral which shall attach as a fixed and specific mortgage and charge of and security interest in such Collateral as of the moment the Debtor acquires any rights or interests therein. The security interest created hereby shall not be interpreted or constituted as a floating charge and the Debtor’s rights to deal with the Collateral without the consent of the Lender are restricted to those rights specifically granted by paragraph 4(a) (which paragraph is intended solely as an incorporation and elaboration of Subsection 28(1) of the PPSA) and paragraph 4(b) hereof.
…
9. Governing Law
This Agreement shall be interpreted in accordance with the laws of the Province of Ontario. Reference to the governing statute shall be, where the context permits, to the Personal Property Security Act of Ontario as amended from time to time. To the extent that they are not inconsistent herewith, the definitions contained in the PPSA, Section 1, shall govern the interpretation of this Agreement.
[205] Let me outline the positions of the parties as to whether Lettuce Serview can, and the extent to which it can, maintain its claim in this action either by way of the Assignment or the Security Agreement.
[206] Lettuce Serview says the Assignment is a statutory assignment that complies with s. 36 of the Law and Equity Act, R.S.B.C. 1996, c. 253, as it is in writing and there has been written notice to the debtor. Lettuce Serview says that the Assignment from Mr. Cogan applies to any transaction involving the Burns Bog lands, and is not restricted to his fee for the first Matthews deal. Lettuce Serview also contends that the entire amount of Mr. Cogan’s claim against the defendants is covered by the Assignment. In this respect, it says that the Assignment is an absolute assignment and not simply security. The plaintiffs say that the Assignment is absolute even if it provides for redemption and reassignment to the debtor on repayment of the loan. Alternatively, Lettuce Serview says it is entitled to enforce its claim under the General Security Agreement if the Assignment is not effective.
[207] Mr. Voith argues that the Assignment is not an absolute assignment, but rather a charge by way of security only. Moreover, the defendants say that if a right of redemption is reserved to the assignor, the agreement can only be a charge. Mr. Voith argues that neither the Assignment nor the General Security Agreement give Lettuce Serview the right to claim compensation due to Mr. Cogan for the final Matthews deal. The defendants say that the Assignment, properly interpreted, in any event, only provides Lettuce Serview with a right to advance a claim under the first letter agreement in connection with the first Matthews deal. His argument, as I understood it, was that to the extent that the Assignment applied to the fee for the final Matthews deal, it was limited by the amount of any underlying debt by Mr. Cogan to Lettuce Serview.
[208] The defendants also say that the language of the Assignment is insufficient to meet the test for certainty of an assignment.
[209] As to the General Security Agreement, the defendants say it does not give Lettuce Serview a right of action against the defendants, but, if it does, the entitlement to sue, like the Assignment, is limited to the amount secured under it, which excludes any debt to Lettuce Serview that was discharged in Mr. Cogan’s bankruptcy proceedings.
[210] Is the Assignment of October 31, 2002 an absolute assignment or simply a security interest? The plaintiffs say it is not merely a charge, but is an assignment as well; the defendants say it cannot be both. This is a question of the interpretation of the instrument. The significance of this issue usually is the ability of the assignee to sue in its own name for a debt owed to another. The defendants did not argue that Lettuce Serview could not maintain this action in its own name, only that the amount of its claim was limited by the amount of Mr. Cogan’s debt to Lettuce Serview because the assignment was not absolute but operated by way of security.
[211] Section 36(1) of the Law and Equity Act states:
36(1) An absolute assignment, in writing signed by the assignor, not purporting to be by way of charge only, of a debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, is and is deemed to have been effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this Act had not been enacted, to pass and transfer the legal right to the debt or chose in action from the date of the notice, and all legal and other remedies for the debt or chose in action, and the power to give a good discharge for the debt or chose in action, without the concurrence of the assignor.
[212] The wording of the Assignment indicates that it operated by way of security. In the Assignment the words “absolute assignment” do not appear; the document states in the first paragraph that it is “continuing collateral security for the existing and future liabilities and obligations of Cogan to LSLP [Lettuce Serview]…”. Paragraph 3 of the Assignment indicates that Lettuce Serview’s rights shall not be exercised until an event of default has occurred. The Assignment provides that upon payment of the debt Lettuce Serview shall cancel and discharge the assignment. The irrevocable direction signed by Mr. Cogan and acknowledged by Delta Fraser Properties Partnership on October 31, 2002 indicates that Mr. Cogan assigned his right and interest in the letter agreement and the fee as further and continuing collateral security.
[213] Mr. Schmidt argues that where an assignment of a chose in action satisfies the requirements of s. 36 of the Law and Equity Act, namely that it is in writing with notice to the debtor, it transfers title to the chose in action by virtue of that legislation. He says that even where the assignment is in the nature of a mortgage and includes a provision for redemption and reassignment on repayment of the loan, it is nevertheless an absolute assignment. For this proposition, Mr. Schmidt relies on Hughes v. Pump House Hotel Co., [1902] 2 K.B. 190 (C.A.). Mr. Voith argues that is not the law in Canada.
[214] In Hughes, a building contractor, as security for his overdraft and for future loans from his bank, assigned to his bank all monies that were due or became due under his building contracts. Notice of the assignment was given to the building owners. The question was whether the assignor could sue. The instrument at issue was found to be an absolute assignment because all the rights of the assignor in respect of monies payable under the building contract were intended to pass to the assignee. It did not purport to be by way of charge only. It was held that where there was an absolute assignment, subject to an equity of redemption, that it could still be an absolute assignment within the meaning of the Judicature Act, 1873, now section 36 of the Law and Equity Act. It was held that the assignor could not bring an action for monies and that it was clear from the terms of the instrument that the intention was to pass to the assignee complete control of all monies payable under the building contract. Cozens-Hardy L.J. said at p. 197:
If, on the construction of the document, it appears to be an absolute assignment, though subject to an equity of redemption, express or implied, it cannot in my opinion be material to consider what was the consideration for the assignment, or whether the security was for a fixed and definite sum, or for a current account. In either case the debtor can safely pay the assignee, and he is not concerned to inquire into the state of accounts between the assignor and the assignee…. The real question, and, in my opinion, the only question, is this: Does the instrument purport to be by way of charge only?
[215] The defendants rely on a decision from the Supreme of Canada in Alberta (Treasury Branches) v. Canada (Minister of National Revenue - M.N.R.), [1996] 1 S.C.R. 963. The issue there was whether lending institutions holding a general assignment of book debts were secured creditors pursuant to the Income Tax Act and the Excise Tax Act. If they were and the government’s submission was correct, the government would have priority and recover monies that ought to have been paid by way of employee income tax or GST remittance. Cory J. for the majority of the court held that the general assignment of book debts was a security interest and the government was entitled to priority. He said at ¶35:
… In summary, an assignment cannot be both absolute and yet leave an equity of redemption in the form of the right to redeem with the assignor. The retention of an equity of redemption is consistent with a security interest and not with an absolute assignment. A GABD [general assignment of book debts] simply cannot constitute an absolute transfer of property.
[216] Earlier, Cory J. said this at ¶22:
… An absolute assignment is irrevocable. To say that the same instrument can operate both as an absolute assignment and as a security interest is to simultaneously put forward two incompatible positions. The two conflicting concepts cannot live together in the same document.
[217] The Assignment in the case at bar purports to assign all of Mr. Cogan’s rights, title and interest. However, I think that reading the instrument as a whole it is clear that the Assignment was not irrevocable, had a limited effect and was intended to provide security for Mr. Cogan’s debt to Lettuce Serview.
[218] The issue is firstly whether the Assignment is a statutory assignment under the Law and Equity Act. I think that it is. The assignment is in writing and notice has been given to the defendants. Following Hughes I think that even though Mr. Cogan had a right or redemption, Lettuce Serview was entitled to sue in this proceeding in its own name to recover the debt owed to Mr. Cogan.
[219] The issue in Alberta (Treasury Branches) v. Canada (Minister of National Revenue - M.N.R.) was not, as in Hughes, whether the assignment was a statutory assignment for the purposes of the Law and Equity Act but whether it was an absolute assignment or a security interest for the purposes of a priority question involving the tax legislation there in issue. I conclude that Lettuce Serview is entitled to sue in its own name even though the Assignment was in the nature of a mortgage or a security interest.
[220] The dispute between the parties was not whether Lettuce Serview could maintain this action in its own name but whether Lettuce Serview is entitled to recover the full amount of the defendants’ obligation to Mr. Cogan or is limited by the extent of Mr. Cogan’s liability to his secured creditor Lettuce Serview. Neither party provided me with clear authority on this question. However, given my conclusion that the amount of the fee that Mr. Cogan was entitled to from the defendants is less than his debt (as I will discuss) to Lettuce Serview, this issue is academic. The issue of whether an assignment that complies with the Law and Equity Act which is also security allows the assignee to recover the whole of the assigned debt or simply the amount required to discharge the security, does not arise on the facts of this case.
[221] Accordingly, I now turn to the next issue, and that is whether the claim to a fee from the defendants arising from the final Matthews deal is within the scope of the Assignment or the General Security Agreement.
[222] Different considerations apply to the scope of these two documents. I will deal with the Assignment first.
[223] The Assignment provides:
… Cogan agrees with LSLP [Lettuce Serview] as follows:
…
As continuing collateral security for the existing and future liabilities and obligations of Cogan to LSLP … Cogan assigns to and in favour of LSLP … all of his right, title and interest in and to any and all fees and/or benefits received or to be received by Cogan in connection with the disposition of Burns Bog Lands as described in a letter from Western Delta Lands Partnership to Cogan dated August 29, 2002 (the “Letter Agreement”), a copy of which is attached hereto as Schedule “A” (the “Collateral”). For greater certainty, the Collateral includes and shall extend to any and all benefits, payment or other amounts which may be payable to Cogan in connection with the Burns Bog Lands whether in connection with the Matthews Deal (as that term is defined in the Letter Agreement) or otherwise.
[224] Lettuce Serview argues that the Assignment, on its plain reading, applies to any transaction involving the lands (whether in connection with the Matthews deal or otherwise), and not simply to the first Matthews deal, or for that matter any Matthews deal.
[225] The defendants’ position is that the Assignment does not grant any rights beyond those arising in relation to the first fee agreement of August 29, 2002 and does not extend to the final Matthews deal. The defendants say that the Assignment assigns as security what it describes as the Collateral. The Assignment describes the Collateral in a two step basis. First, it confers certain rights to Lettuce Serview in connection with the first fee agreement. Second, in the following sentence, it clarifies the extent of the rights assigned under that fee agreement. The purpose of the two-step description, the defendants say, is to clarify that the rights assigned to the plaintiff are not confined to simply the right to the fee or the right to the benefit under the first fee agreement, but also include the right to bring a claim for damages in relation to the fee or the benefit. The defendants say that, properly interpreted, Lettuce Serview’s rights under the Assignment are limited to payment of the fee due under the first letter agreement, the right to other benefits agreed under the first letter agreement and a cause of action in damages in relation to the fee.
[226] The defendants also submit that the plaintiffs’ argument for a broader interpretation of the Assignment rests heavily on the word “otherwise” and fails to meet the rigorous standard for certainty of subject matter for an assignment. Finally, the defendants say that a broad interpretation of “otherwise” is not reasonable in the context of the factual matrix, given that it would allow Lettuce Serview to pursue the defendants in relation to any amount sought by Mr. Cogan in relation to any other potential purchaser.
[227] What is the scope of the Assignment? Is it limited to the fee under the letter agreement for the first Matthews deal and related claims, or does it extend to the claim for the fee in connection with the final Matthews deal?
[228] I think that the proper interpretation of the Assignment is that it is an assignment of all amounts that may be payable to Mr. Cogan with respect to the Burns Bog lands. I disagree with Mr. Voith that the sentence following the defined term “Collateral” was intended to limit the assignee’s rights. Viewed objectively, it was intended to make it clear that Mr. Cogan had assigned any and all fees from the Burns Bog lands, whether connected with the first Matthews deal or otherwise. That is the sense in which “or otherwise” is used.
[229] I find that the defendants’ suggested interpretation is a strained one. Reading the document as a whole, I think that the purpose of the additional language was to clarify that the assignment was in connection with the fee for any transaction involving the Burns Bog lands rather than clarifying that the right to claim damages was assigned in addition to the fee.
[230] Although the use of the defined term “Collateral” creates a possible ambiguity, I find that the proper interpretation is that the Assignment, to the extent of any valid debt owing by Mr. Cogan to Lettuce Serview, applies to the claim arising out of the final Matthews deal.
[231] I have also concluded that the Assignment of the chose in action which is effectively “any and all benefits, payment or other amounts which may be payable to Cogan in connection with Burns Bog Lands” is sufficiently certain to be enforceable. In that respect, I refer to Cowichan Native Heritage Society (Trustee of) v. Toronto Dominion Bank (1993), 84 B.C.L.R. (2d) 165 (C.A.) at ¶25 and Hythe Inn Ltd. (Receiver of) v. Canadian Imperial Bank of Commerce (1986), 2 B.C.L.R. (2d) 119 (C.A.) at 126.
[232] I now turn to the General Security Agreement. This is an alternative basis under which Lettuce Serview says that it is entitled to enforce Mr. Cogan’s claim in this action.
[233] The issue again comes down to whether the General Security Agreement is broad enough in scope to cover the claim in connection with the final Matthews deal. Unlike the Assignment, the General Security Agreement does not contain language that arguably limits the security interest to the fee agreement under the first Matthews transaction. The General Security Agreement uses very general language. The Security Agreement purports to grant Lettuce Serview “a continuing security interest in all of the Debtor’s property, assets and undertaking of any kind or nature, now owned or after acquired including, without limitation, the following described property … : accounts, inventory, equipment, chattel paper, instruments, intangibles, leases, money, documents of title, books and records etc., securities, undertaking, and proceeds.” Each of those categories is further defined in the General Security Agreement. I have set out the definition of “accounts”, “intangibles”, and “undertaking” above because they, arguably, encompass Mr. Cogan’s claim to a fee from the defendants.
[234] The defendants argue that Mr. Cogan’s claim does not come within the description of Accounts, Intangibles, or Undertaking as those defined terms are used in the General Security Agreement.
[235] “Accounts” is defined under the General Security Agreement as follows:
(a) Accounts:
all debts, accounts, claims, monies and choses in action which now are or which may at any time hereafter be due or owing to or owned by the Debtor, and also all securities, bills, notes and other documents now held or owned or which may be hereafter taken, held or owned by the Debtor or anyone on behalf of the Debtor in respect of such debts, claims, monies and choses in action or any part thereof, and also all books and papers recording, evidencing or relating to such debts, accounts, claims, monies and choses in action or any part therefore (all of the foregoing being hereinafter called the “accounts”);
[236] To constitute an “Account”, the defendants submit that the amount must be due and owing. The defendants further say that this category could be used if entitlement to the amount owing was made out, but say that that has not yet happened. As to the meaning of “Account”, the defendant relies on Agent's Equity Inc. v. Hope (Trustees of) (1996), 30 O.R. (3d) 557 (Gen. Div.); Stone v. Stone (1999), 46 O.R. (3d) 31 (Sup. Ct. J.) at ¶45-46; and TCE Capital Corp. v. Kolenc (Trustee of) (1999), 44 O.R. (3d) 148 (Gen. Div.).
[237] In Agent’s Equity, “account” was given a specific meaning in the instrument and meant “any monetary obligation not evidenced by chattel paper, an instrument or a security, whether or not it has been earned by performance”. In Stone, the court referred to the definition of “account” in Black’s Law Dictionary and The Dictionary of Canadian Law (Carswell). In TCE Capital Corp., it was held that a commission was an account within the Personal Property Security Act, R.S.O. 1990, c. P.10 (“the Ontario PPSA”), and had to be registered, failing which the assignee was unsuccessful against the trustee of the assignor realtor.
[238] I do not find these cases of particular assistance to the interpretation of the word “Account” as it appears in the General Security Agreement. I think that the claim here falls within the meaning of “Accounts” as that is used in the General Security Agreement. The word “Account” is given the broad definition I have mentioned and captures a claim for monies which now or which may at any time hereafter be due or owing to Mr. Cogan. The fact that the claim was not proven until this trial does not take it outside the definition of “Account”.
[239] The plaintiffs also rely on “Intangibles” and “Undertaking”, as those terms are used in the General Security Agreement. I will only refer to the term “Undertaking”, which reads
(l) Undertaking:
all present and future personal property, business and undertaking of the Debtor not being accounts, inventory, equipment, chattel paper, instruments, intangibles, leases, money, documents of title, records and securities (all of which is hereinafter called the “undertaking”);
[240] If my conclusion that Mr. Cogan’s claim against the defendants falls within “Accounts” is wrong, I would conclude that it falls within the term “Undertaking”.
[241] The defendants say that by reason of s. 11 of the Ontario PPSA, the security interest attaches when the security agreement contains a description of the collateral sufficient to enable it to be identified. I think that the description is sufficient to comply with that standard.
[242] The plaintiff says that its rights as a secured party are established both by the General Security Agreement and the British Columbia Personal Property Security Act, R.S.B.C. 1996, c. 359 (“the B.C. PPSA”). It says that the General Security Agreement has broad remedies in the event of default, which are in addition to the rights and remedies under the B.C. PPSA. The plaintiff relies on paragraph 3(c) of the General Security Agreement which says that the lender may “collect, realize … or otherwise deal with the Collateral”.
[243] To summarize, I am satisfied that Lettuce Serview is entitled to sue the defendants for the amount owing to Mr. Cogan under the Assignment and the General Security Agreement. If Lettuce Serview is entitled to sue under the Assignment or Security Agreement, as I have concluded it is, the next question is whether there are limits to the recovery. Because of the conclusion I reach, I need only consider the amount of Mr. Cogan’s debt to Lettuce Serview.
[244] On the evidence, Mr. Cogan was indebted to Lettuce Serview as of August 31, 2006 in the amount of $1,308,134.79, inclusive of interest. That amount is made up of these advances: (1) October 14, 1997 - $250,00 advanced by the Bitove Corporation; (2) November 12, 1997 - $250,000 advanced by Lettuce Serview Inc. which subsequently amalgamated to become Quinta Capital Inc.; (3) October 31, 2002 - $268,492.67 advanced by Lettuce Serview; (4) May 12, 2003 - $50,000 advanced by Lettuce Serview.
[245] However the defendants say that the underlying indebtedness is substantially less, and was reduced by Mr. Cogan’s bankruptcy.
[246] To establish that the indebtedness was in part extinguished by a proposal under the Bankruptcy and Insolvency Act, the defendants rely on the following admissions made by the plaintiffs concerning Mr. Cogan’s bankruptcy:
On or about July 9, 1999, Edwin Cogan submitted a Proposal under the Bankruptcy and Insolvency Act
In his Statement of Affairs, Cogan listed Quinta Capital Limited, c/o The Bitove Group of Companies, as an unsecured creditor with a claim in the amount of $564,000.00.
…
On June 11, 2003, the Office of the Superintendent of Bankruptcy Canada certified that the administration of Cogan’s estate “appears to be satisfactorily completed and generally in accordance with the terms and conditions of the proposal, the provisions of the Bankruptcy and Insolvency Act, General Rules and the Directives of the Superintendent”.
On October 30, 2003, a Letter to the Creditors was mailed by registered mail to Quinta Capital Limited, which enclosed Share Certificates representing its final dividend.
[247] The defendants say that once a proposal is accepted, approved and is binding, the debtor receives the same relief as he would from a discharge of bankruptcy, which is a release of all debts to unsecured creditors under the terms of s. 178 of the Bankruptcy and Insolvency Act. The defendants say that in June 2003, when the Office of the Superintendent certified that the estate “appears to be satisfactorily completed and generally in accordance with the terms and conditions of the proposal”, the proposal was binding on all unsecured creditors and Mr. Cogan received the same relief he would from a discharge in bankruptcy.
[248] The defendants say that Lettuce Serview cannot enforce a claim to Mr. Cogan’s debts that have been discharged. The defendants therefore submit that the debt with respect to the two 1997 loans has been repaid by way of distribution of shares under the proposal and was extinguished by the operation of the Bankruptcy and Insolvency Act. The defendants argue that Lettuce Serview’s recovery is limited to at most $318,492.67 (plus interest), made up of the October 31, 2002 loan of $268,492.67 and the May 12, 2003 loan of $50,000.
[249] In Chamandy Bros. Ltd. v. Albert (1928), 62 O.L.R. 105, the Ontario Court of Appeal held that where a debtor, having made an arrangement with his creditors, in that case called the composition, promises to pay a debt which has been released by the arrangement and for which there is new and valuable consideration, that promise is valid and enforceable even when all creditors have been paid the full amount of the “composition” at the time of the institution of the action. Orde J.A. said at p. 112:
The agreement, being subsequent to the compromise, had not been a factor in the acceptance or approval of it, and there was no moral turpitude in the defendants' making a subsequent promise to pay a particular creditor in full. In many cases conduct of that kind is regarded with approval, and in the present case the credit given for the large supply of goods may have been the very thing necessary to enable the defendants to complete the composition payments and so avoid bankruptcy. The bargain has been talked of as a preferential agreement. It has not been attacked by any creditors, either those who compounded or later ones.
[250] On the strength of Chamandy, a promise to pay a debt that was the subject of a proposal in bankruptcy is valid and enforceable, in the absence of fraud and even before the proposal is finally performed, when there is fresh consideration for that promise.
[251] Here, by the letter agreement of May 12, 2003, Mr. Cogan confirmed the initial three advances I described above, requested an additional loan of $50,000 from Lettuce Serview and confirmed the entire indebtedness.
[252] I find that when Mr. Cogan, in consideration of a fresh advance of $50,000, agreed that he would repay the outstanding indebtedness, including indebtedness that would otherwise be discharged pursuant to his proposal under the Bankruptcy and Insolvency Act, he was able to and did obligate himself as a matter of law to pay that indebtedness. Lettuce Serview gave consideration for the promise. A bare promise to pay a debt that was compromised in the bankruptcy proceeding would not be effective. Here, however, there was new and valuable consideration for the promise and it is effective.
Was Trevor Eyton Eddie Cogan’s partner?
[253] The plaintiffs submit that Senator Eyton is the sole surviving partner of Mr. Cogan and as such is entitled to sue to recover the partnership’s claim for compensation in full.
[254] They say that even if the partnership was unknown to the defendants, which the plaintiffs dispute, a partner may sue on a contract whether or not the partnership’s existence was disclosed to the other contracting party. Although a partnership is automatically dissolved upon death, absent any agreement to the contrary, the surviving partner, the plaintiffs argue, is entitled to enforce the causes of action belonging to the partnership. They say that if any monies are recovered to the credit of the partnership, the surviving partner must account to the estate of the deceased partner or the assignee of the other partner.
[255] The defendants make four main points in opposition to Senator Eyton’s claim as a partner: first, by Senator Eyton’s own admission, he was not Mr. Cogan’s partner at the time Mr. Cogan was retained and made the agreement with the defendants; second, factually, Senator Eyton was never Mr. Cogan’s partner; third, Senator Eyton cannot enforce the agreement as an undisclosed partner because it was a contract for the personal services of Mr. Cogan; and finally, a component of the partnership was illegal or improper and should not be enforced.
[256] Mr. Schmidt argues that even if it was a contract for personal services, Mr. Cogan contributed his entitlement to the fee arising from the retainer to the partnership and as a matter of partnership law it became partnership property. Upon Mr. Cogan’s death Mr. Eyton had the authority to enforce any cause of action belonging to the partnership, such as the recovery of debt or damages for breach of contract. Mr. Schmidt argues strenuously that there is no foundation for the argument that the partnership had an illegal component and argues that the matters to which the defendants refer were minor and had nothing to do with the final Matthews deal for which the commission is claimed.
[257] Whether there is a partnership is essentially a factual question: a partnership exists any time persons carry on a business in common with a view to profit.
[258] What is the evidence in support of the partnership?
[259] The plaintiffs rely on Senator Eyton’s evidence that he entered a partnership. They add that the existence of a partnership was corroborated by Eddie Cogan’s communications with Tom Bitove and Nick Cogan, and they argue that Ms. McLaughlin’s note of a conversation in June 2000 indicates that she was aware of the partnership. Mr. Schmidt submits that there was evidence of the partnership in written communications in June 2003 and October 2003.
[260] In this case, the question of whether Senator Eyton and Mr. Cogan were partners is essentially an issue of credibility.
[261] The oft-cited comments in Faryna v. Chorny (1951), [1952] 2 D.L.R. 354 (B.C.C.A.), are particularly apt here. I refer to ¶10 of that judgment:
The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions. Only thus can a court satisfactorily appraise the testimony of quick-minded, experienced and confident witnesses, and of those shrewd persons adept in the half-lie and of long and successful experience in combining skilful exaggeration with partial suppression of the truth. Again a witness may testify what he sincerely believes to be true, but he may be quite honestly mistaken. For a trial judge to say "I believe him because I judge him to be telling the truth," is to come to a conclusion on consideration of only half the problem. In truth it may easily be self-direction of a dangerous kind.
[262] The main credibility issues surround the evidence of Senator Eyton, Mr. Bitove, and Mr. Nick Cogan. Although there was some challenge to the evidence of Ms. McLaughlin and Mr. Westeinde, there is very little evidence to suggest the defendants were aware of any partnership between Mr. Cogan and Senator Eyton in connection with the retainer agreement.
[263] Mr. Cogan is not alive to testify whether Senator Eyton became his partner. Senator Eyton’s evidence is that he made an oral agreement with Mr. Cogan to be his partner. The documentary evidence that the plaintiffs rely on to corroborate the existence of the partnership are three documents that they say provide evidence of the partnership: a letter from Senator Eyton to Mr. Matthews dated June 27, 2003 that was copied to Mr. Bingham and Mr. Eddie Cogan; a letter from Senator Eyton to Mr. Bingham dated October 28, 2003 that was copied to Mr. Aranoff; and a handwritten note made by Ms. McLaughlin on June 1, 2000.
[264] First let me look at the objective surrounding circumstances.
[265] The evidence discloses a close, personal relationship between Mr. Cogan and Senator Eyton over a period of many years. They had been business associates in past projects. But were they partners in connection with the earning of a fee for the project in which Mr. Cogan was retained by the defendants? Or, on the other hand, was Senator Eyton a “team player”, as a number of people assisting Mr. Cogan were on his various projects, including the Burns Bog project?
[266] There is no written partnership agreement. There is no reasonably contemporaneous correspondence between Eddie Cogan and Senator Eyton establishing or confirming the existence of a partnership. There are no contemporaneous documents or notes made by either Mr. Cogan or Senator Eyton that were presented at trial that evidence a partnership between them.
[267] There were no accounts or entries that were presented from the records of either Senator Eyton or Mr. Cogan that suggest the existence of a partnership.
[268] The evidence shows that Mr. Eddie Cogan typically would be involved in large projects and would “quarterback” a team that he would put together to deal with the necessary tasks – legal, government liaison, financial, etc. – that might be needed for a particular project. Documents that came into Mr. Eddie Cogan’s office were copied and passed on to various team members. Significantly, the evidence shows that at the outset, Senator Eyton was not copied on documents relating to the Burns Bog lands at a time when he says that he and Mr. Cogan had agreed to be partners in the retainer by the defendants. Some of these documents were dated in March 2000 and June 2000. If Senator Eyton was a partner sharing what was possibly a significant fee, one would expect, at the least that he would be kept up to date by his partner.
[269] It must be noted that the surrounding documents do not corroborate or support the existence of a partnership between Mr. Cogan and Senator Eyton. Senator Eyton and Mr. Cogan might have operated together on an informal basis. But if there were a partnership, where they had agreed to share a potentially large fee, one would expect to see some contemporaneous notes or correspondence, accounts or communications that might corroborate the existence of the partnership. Nothing of that nature was presented in evidence. I will discuss in a moment the documents that the plaintiffs do rely on.
[270] Although Mr. Cogan was retained by the defendants in October 1999 or thereabouts, Senator Eyton did not see the documents concerning the Burns Bog situation until later, and according to Senator Eyton’s evidence, he did not get back to Mr. Cogan about his interest in going into partnership until January or February 2000.
[271] First let me summarize Senator Eyton’s evidence on his partnership agreement with Mr. Cogan.
[272] Senator Eyton was called to the bar in 1962 and practiced commercial law in Toronto. He then served as president of Brascan until 1990 when he was appointed to the Canadian Senate. He had been Mr. Cogan’s good friend for many years. He said he would meet him two or three times each week. They worked together unsuccessfully to secure an American League baseball franchise. He said that there was one deal that was not in writing in the past where Mr. Cogan had a minority interest and Senator Eyton said that he was a “ten percent partner”. He said that there were no other relations as partner but that he was prepared to help him out.
[273] Senator Eyton said that Mr. Cogan was retained by Ms. McLaughlin to exploit the property and that he said that Mr. Cogan wanted him to make a real commitment to participate in the mandate. He said he considered for a while whether to be his partner and then said that he would help Mr. Cogan out. Mr. Cogan offered him an equal partnership and an equal share of the profits after expenses. He testified that after considering it for a few months he accepted this offer. He said that his commitment was to provide whatever talent or experience that he had and that his role was as advisor, counsellor, draftsman and expediter. He said that he spent three to four hours per week but that Mr. Cogan was continuously involved in this project. He said that he wrote and spoke to dozens of investors including Coca Cola, Squire Beverages and Messrs. Saxton and Pattison.
[274] Overall, I did not find Senator Eyton’s evidence that he was Mr. Cogan’s partner compelling or persuasive. It was given cautiously. There were occasional inconsistencies between his evidence at discovery and at trial. On cross-examination he did not dispute the suggestion that there was no evidence between 1999 and 2003 that supports the existence of the partnership.
[275] Senator Eyton wrote a letter on June 6, 2001 on the letterhead of the Senate of Canada to the Minister of the Environment (copied to the Minister of Finance and the Minister of Canada Customs and Revenue) in connection with a certification of ecological sensitivity of the lands from the Ministry of the Environment and a possible ruling from Canada Customs and Revenue. In the letter Senator Eyton describes himself as a “volunteer”, but said in his evidence that he should have been more fulsome in the description of his role. He said on cross- examination that he misstated his status. He said that using Senate letterhead was not in accordance with his usual practice but he felt that there was no conflict of interest as the transaction was supported by all of the relevant parties.
[276] Senator Eyton wrote another letter in 2003 on Senate letterhead to a Member of Parliament to obtain a visa for someone apparently involved in the possible purchase of the Burns Bog lands. He said that it escaped his ordinary practice and should not have been written on Senate letterhead if he had a personal interest. On cross-examination he said he only had a financial interest in the commission, not as a principal in the transaction completing. Senator Eyton gave somewhat conflicting answers on cross-examination and on his discovery as to whether he had checked into the credentials of the applicant for a visa.
[277] Senator Eyton testified that he had no specific recollection of a discussion in connection with the first fee agreement on the first Matthews deal but said that he and Mr. Cogan understood their relationship. Senator Eyton said that he did not tell Mr. Westeinde or Ms. McLaughlin that he was Mr. Cogan’s partner but says that he was confident that Mr. Bingham was aware and the nature of his relationship with Mr. Cogan would be apparent to Mr. Bingham. However, Mr. Bingham denied ever being told that Mr. Eyton was Mr. Cogan’s partner, and I accept Mr. Bingham’s evidence in that respect.
[278] Why, if Senator Eyton was Mr. Cogan’s partner, did he not disclose it to Ms. McLaughlin? One possible explanation is that the McLaughlin family (particularly Ms. McLaughlin’s father) had a falling out with Senator Eyton when, in the 1970s, he supported the opposite side in a business transaction. Nevertheless, Ms. McLaughlin did not object to Senator Eyton’s participation in Burns Bog to the extent that she understood he was involved, so it seems somewhat unlikely he would not have told her that he was Mr. Cogan’s partner in the fee retainer agreement, if he was.
[279] Were the defendants aware of a partnership? The evidence indicates that Senator Eyton did not tell Ms. McLaughlin or Mr. Westeinde about it, but presumably if there was a partnership between Mr. Cogan and Senator Eyton they could have heard of it from Mr. Cogan. I accept the evidence of Ms. McLaughlin and Mr. Westeinde that they were not told by Eddie Cogan that Senator Eyton was a partner in the retainer agreement. I found them to be credible witnesses on this point.
[280] Senator Eyton said at trial that the Bitoves were generally aware of his role in the partnership, but his evidence on discovery was that when he first spoke to the Bitoves after Mr. Cogan’s death, they were unaware of his half interest at that time.
[281] In June 2000, in correspondence from Mr. Cogan’s wife, Vera Ignatowitsch, to the managing director of the Jim Pattison Group, there is reference to Senator Eyton as a member of the team, described in the same light as Mr. Baker and Senator St. Germaine. (Mr. Baker and Senator St. Germaine were not Mr. Cogan’s partners but members of his team that he retained to perform services for the defendants). The letter was copied to Mr. Cogan and if Ms. Ignatowitsch was aware of the relationship of Senator Eyton and Mr. Cogan, as I expect she would be, she did not refer to him as a partner in the venture to exploit the Burns Bog lands. The correspondence from Ms. Ignatowitsch does not distinguish between team players, such as Mr. Baker, and Senator Eyton. In fact, Mr. Cogan, in his dealings with others, referred to Senator Eyton as being on his team.
[282] Mr. Eyton got a cheque from Western Delta in May 2002 for $3211.96 in connection with his travel expenses for the trip to visit the Premier, but he says that he was surprised to get it and not aware that Mr. Cogan had asked Western Delta to provide it. Mr. Eyton said he had no recollection of telling the Premier that he had a personal interest in the transaction.
[283] However, Mr. Schmidt relies on letters dated June 27 and October 28, 2003. In Senator Eyton’s letter dated June 27, 2003, he wrote on the second page to Mr. Matthews:
I acknowledge in writing this letter I have a modest conflict because I am Eddie Cogan’s financial partner in this venture. But the prime reason for this letter is to see this exceptional opportunity unfold along the lines I foresaw and “tasted” forty years ago!
[284] If this letter is admissible, it is probably admissible to rebut the contention by the defendants that the suggestion of a partnership between Mr. Cogan and Senator Eyton is one of recent concoction. However, this letter predates, by only a short time, the proposed purchase in which Mr. Cogan and Senator Eyton had involvement as purchasers. It is uncertain whether the reference was to a partnership in which Senator Eyton and Mr. Cogan were to be purchasers, something that the evidence is ambiguous on, or whether it was to a partnership in connection with the retainer agreement. During cross-examination, Senator Eyton said he was not a principal in the purchase and that was never his intention, but he had indicated on discovery that he was going to be a partner in the transaction. I do not attach great weight to this correspondence as it is unclear whether Senator Eyton, in the letter, is referring to the purchase or to the retainer agreement.
[285] The next document relied on by the plaintiffs is the October 28, 2003 letter sent to Mr. Bingham, which says that:
My understanding of the Bog arrangements is as follows:
Eddie and I are partners in the Bog and will share the commission payable in respect to the first 50% equally – after all related expenses.
[286] This letter was sent to Mr. Bingham after he had left Davis and Company, although it was addressed to Mr. Bingham’s fax number there. Mr. Westeinde did not see the document until the litigation had commenced. Mr. Bingham testified he did not know of a partnership that Senator Eyton alleges in connection with the retainer agreement. It was a letter written about twelve days after Mr. Cogan died. In the circumstances, the weight to attach to this document, given that it (and the previous document) are not contemporaneous with the alleged partnership in the retainer must be very modest.
[287] The third document that the plaintiffs point to is a note made by Ms. McLaughlin that the plaintiffs say is evidence that the individual defendants were aware of the partnership between Senator Eyton and Mr. Cogan to sell Burns Bog. On cross-examination, the plaintiffs’ counsel questioned Ms. McLaughlin on her handwritten note made June 1, 2000. It read: “Burn said Cogan provoked litigation. T.E. said everything goes back to Cogan because he is running the deal. T.E. is Cogan’s partner” [emphasis added]. I accept Ms. McLaughlin’s evidence that this note represents and is a reference to the partnership in which Mr. Cogan and Senator Eyton were possible partners in the acquisition of the property, not partners in the commission retainer agreement. Ms. McLaughlin said this was in connection with Senator Eyton wanting to take an option of Mr. Seaman’s interest and Mr. Pattison did not want to be up front. She referred to a memo of 08/02/00 that indicated that Mr. Pattison had met with Mr. Cogan and Senator Eyton and the consensus was “that Trevor Eyton and Cogan would try to obtain a 60 day option to buy out Seaman”.
[288] In summary, I find that the objective evidence does not support Senator Eyton’s evidence that he had entered a partnership agreement with Mr. Cogan in early 2000. I find that his evidence is imprecise and I do not think his recollection is reliable.
[289] The plaintiffs also rely on the evidence of statements made by Eddie Cogan to Tom Bitove and to Mr. Cogan’s son, Nick Cogan. The evidence of statements made by Mr. Cogan to Mr. Bitove and to his son Nick were conceded to be admissible under the principled exception to the hearsay rule, necessity clearly having been shown. However, the defendants, who say that there was no partnership, submit that the evidence in support of it, including statements allegedly made by Eddie Cogan to third parties, is not ultimately reliable.
[290] What of the evidence of Mr. Tom Bitove, the representative of Lettuce Serview? He testified that Mr. Cogan said he had a partnership with Senator Eyton and that he was entitled to half. Mr. Bitove says that he knew that Senator Eyton was partners with Mr. Cogan and others, but he did not know who they were.
[291] Mr. Bitove agreed that until recently Lettuce Serview had asserted a claim to the whole of the $2 million fee. By letter agreement dated October 29, 2002 between Lettuce Serview and Eddie Cogan, Mr. Cogan gave Lettuce Serview an assignment of the fee of $2 million (contemplated under the first Matthews deal). In the letter, Mr. Cogan agreed that he would deliver an acknowledgement that the fee was owing by the defendant to Mr. Cogan in full, subject only to completion of the transaction. The agreement between Eddie Cogan and Lettuce Serview of May 12, 2003 suggests that Mr. Cogan would receive a fee of not less than $2 million, which suggests that he was representing to Lettuce Serview that the fee was his, and not partly the property of someone else.
[292] The circumstances surrounding the assignment to Lettuce Serview appear inconsistent with the suggestion that Mr. Cogan or Senator Eyton told Mr. Bitove and the lawyer preparing the documentation about any interest of Senator Eyton’s in a partnership.
[293] Nick Cogan said that his father told him that he had a partnership with Trevor Eyton and that Senator Eyton was entitled to half of the fee. Nick Cogan said that his father mentioned it many times, that his father told his wife, Vera, and his lawyer in Toronto. Nick Cogan said his father was clear that Senator Eyton was a partner and the money would be paid out first for Senator Eyton’s and his father’s expenses, and some fees to himself and another, and that he was offering his 50% interest as security.
[294] Mr. Nick Cogan has an interest in the outcome of this issue. He agreed that he would stand to share on Senator Eyton’s side if Senator Eyton was successful in this litigation.
[295] It was suggested to Nick Cogan that Eddie Cogan had called Ms. McLaughlin in January 2000 and said Senator Eyton was doing a few things as a favour, but Nick Cogan said he had no idea of this. Nick Cogan was shown a letter dated June 29, 2000 written by Mrs. Cogan (Vera Ignatowitsch) to Mr. Pattison. She noted the roster of team members included Senator Trevor Eyton, Gordon Baker, and Senator Gerry St. Germaine, but her correspondence did not distinguish Senator Eyton from any other team member. Nick Cogan said that he was not sure if he saw that document at the time or not. Nick Cogan thought his mother would have been kept apprised of Senator Eyton’s involvement. He accepted that in dealings with Western Delta, Mr. Cogan referred to Senator Eyton as “being on [his] team”.
[296] Is the evidence of Senator Eyton, Tom Bitove, and Nick Cogan reliable on the issue of whether Mr. Cogan and Senator Eyton were partners? I do not think so. A partnership need not be in writing, but there is no documentary evidence to support it. There is a suggestion that Ms. McLaughlin noted a partnership in her notes but her explanation, which I accept, was that the note pertained to the partnership in which Senator Eyton may have been participating as a purchaser, rather than as a partner for the fee from the defendants. The evidence seems clear that this partnership in the retainer agreement was never mentioned to the defendants. Senator Eyton says that Mr. Bingham, the lawyer for the defendants, would have known, but he denies knowledge that Senator Eyton was Mr. Cogan’s partner, and I accept that evidence.
[297] Senator Eyton’s evidence appears inconsistent and unclear at best. Senator Eyton did not claim or track his business expenses or claim them on his income tax returns, even though he was entitled to be reimbursed for them from partnership income if he was a partner. The fact that Senator Eyton did not disclose on his required filings as a Senator his interest in the alleged partnership is some evidence that his current characterization may not be not accurate. If Senator Eyton was a partner from early on, his involvement in the first and second Matthews deals appears oddly limited.
[298] The surrounding circumstances really provide no support for the assertion of a partnership. The documents do not indicate a partnership interest. The Assignment and General Security Agreement with Lettuce Serview do not suggest an interest of a person other than Eddie Cogan in the fee. Senator Eyton’s involvement and record keeping does not support the assertion that he was a partner. The failure of Senator Eyton to mention a partnership to the defendants also does not support his assertion.
[299] Considering all the evidence, I find that Senator Eyton was not a partner of Eddie Cogan’s at any material time and does not have status to sue as a partner.
[300] The defendants argue that if Senator Eyton was Mr. Cogan’s partner, he is not entitled to enforce the agreement because it was a contract of personal services. I think that this clearly was a contract under which it was the specific attributes of Mr. Cogan that were retained: his unique expertise, knowledge and skill. This argument would have merit if the plaintiffs were seeking to enforce a contract that had not yet been fully performed: see Robson and Sharpe v. Drummond (1831), 2 B. & Ad. 303, cited with approval by the Supreme Court of Canada in Canada v. Smith (1883), 10 S.C.R. 1.
[301] But here, the alleged partner is only seeking to receive the fee owing to the partnership, and no further performance on Mr. Cogan’s part is required. Fredrickson v. Insurance Corp. of B.C. (1986), 28 D.L.R. (4th) 414 (B.C.C.A.) at 427-428, aff’d (1988), 49 D.L.R. (4th) 160, supports the proposition that if there was a partnership, the enforcement of a cause of action by a partner for damages arising out of an already executed contract is not affected by the fact that the contract was originally one of personal service by another.
[302] As I have concluded that Senator Eyton does not have standing to sue as a partner, his action must be dismissed. It is not necessary for me to decide the issue raised by the defendants as to whether his conduct as a partner disentitles him to a fee.
SUMMARY
[303] The plaintiff Lettuce Serview is entitled to judgment in the amount of $800,000 less the amounts that the defendants have previously paid to Mr. Cogan and the members of his team. That amounts to a judgment in the sum of $588,789.04.
[304] The parties may speak to the issue of costs.
“J.S. Sigurdson, J.”
The Honourable Mr. Justice J.S. Sigurdson
