Court exercises discretion to refuse to apply estoppel

From May 1995 until February 2001, Tarpline Products Inc. employed David Stewart as vice-president of sales and marketing. Tarpline sold a tarpauline accessory device invented by the owner, David Langtry. The parties entered into an oral agreement which provided Mr. Stewart with a monthly base salary of $2,500 plus five per cent commissions of sales paid annually. In addition to owning Tarpline, Mr. Langtry was part-owner of two other businesses: Raven Plastics and Raven Metals.

Tarpline was co-located with the Raven companies and Mr. Stewart performed managerial services for both Raven companies in addition to his duties at Tarpline.

Although Mr. Stewart’s terms of employment included payment of commissions annually, he did not receive any commissions while employed with Tarpline. At the end of 1995 Mr. Stewart made his first request for commissions. His commission rate was five per cent. Gross sales for 1995 were $56,018 and Mr. Stewart claimed $2,800. Mr. Langtry asked Mr. Stewart to wait until the following year to collect his commissions because of cash flow issues in the company. Mr. Stewart agreed. This pattern continued until 1999.

In 1999 Mr. Stewart wrote to Mr. Langtry to inform him that he was owed unpaid commissions of $58,000. Mr. Langtry never responded directly to this letter. However a meeting was held subsequently where it was determined that, rather than pay Mr. Stewart commissions, his salary would be increased from $30,000 per year to $45,000. This new rate of pay was effective on Jan. 1, 2000.

On Feb. 7, 2001, Mr. Stewart’s employment with Tarpline was terminated. Mr. Stewart was paid six weeks’ severance pay. After he was terminated, Mr. Stewart filed a claim for payment of commissions owed to him with B.C. Ministry of Labour, Employment Standards Branch. He claimed $58,000 in commissions.

The matter was investigated by Mr. Greenman. As part of his investigation, Mr. Greenman contacted Mr. Stewart by telephone and spoke to him for about 10 minutes. He then met with Mr. Langtry on three occasions. Mr. Langtry told Mr. Greenman that the five per cent commission was only payable on profit. Mr. Greenman accepted Mr. Langtry’s interpretation of the commission rate and denied Mr. Stewart’s claim.

Mr. Stewart subsequently brought an action against Tarpline seeking damages for wrongful dismissal and unpaid commissions for 1995 to 1999.

In defending against the wrongful dismissal, Tarpline argued that it had just cause to terminate Mr. Stewart. After his dismissal an employee of Raven Plastics made an allegation of theft against Mr. Stewart. This employee, Darcy Trosko, informed Mr. Langtry that he had purchased some Tarpline samples from Mr. Stewart in the summer of 1999. Mr. Stewart told Mr.Trosko that the price was $28.50 with a receipt or $25 cash without a receipt. He paid by cash but did not see what Mr. Stewart did with the cash. Tarpline argued that Mr. Stewart stole the $25 and did not enter the sale into the ledger book.

Mr. Stewart denied the allegation of theft. He stated that the only time he did not put cash transactions into the general funds of Tarpline was in 2000 when he and the office manager of Raven began to accumulate cash for a Tarpline and Raven staff Christmas party. When he received cash for smaller sales, he put the money into the Christmas party fund.

When Mr. Stewart claimed unpaid commissions as part of his wrongful dismissal claim, Tarpline argued that Mr. Stewart could not pursue the same claim because the matter had already been determined by the Employment Standards Branch.

The Court held that there was no compelling evidence that Mr. Stewart misappropriated any cash. Mr. Langtry argued that if he had learned of Mr. Stewart’s alleged theft while Mr. Stewart was still employed he would have dismissed him immediately. The Court did not accept that Mr. Langtry would have fired his trusted employee over this incident, even if it had occurred. Having found there was no evidence of theft, the Court held that Mr. Stewart was wrongfully dismissed and was entitled to eight months’ notice.

On the issue of commissions, the Court considered Tarpline’s argument that Mr. Stewart was estopped from making a claim as a result of the Employment Standards Branch finding. In order for the principle of issue estoppel to apply, three conditions must be met: the same question has been decided; the judicial decision which is said to create the estoppel is final; and the parties to the judicial decision were the same persons as the parties to the proceeding in which estoppel is raised.

The Court held that all three conditions were met. The Court then considered whether it should exercise its discretion to refuse to apply estoppel. The Court examined the manner of investigation by Mr. Greenman and held that Mr. Stewart was not given a proper opportunity to respond to Tarpline’s position that the commission was to be calculated on profits, not gross sales. Mr. Greenman had already made up his mind to dismiss the claim when he informed Mr. Stewart of Tarpline’s position. For this reason the Court did not apply issue estoppel.

The Court then consider whether Mr. Stewart was entitled to commission. It accepted Mr. Stewart’s evidence over that of Mr. Langtry and held that he was entitled to five per cent commission on gross sales, not on profit.

For more information:

Stewart v. Tarpline Products Inc., 2002 BCSC 59.

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