Former employee entitled to commission on property he found during his employment

Employee did the groundwork for real estate deal employer consummated after he left

A former employee of a real estate developer is entitled to his share of the profit from a property he found during his employment, the Ontario Court of Appeal has ruled.

Michael Dumbrell worked for the Regional Group of Companies, Inc., an Ottawa real estate business, for one year beginning in November 1998. His job was to find commercial real estate projects, bring them to Regional and be involved in their purchase and development. According to his contract, Dumbrell was paid a commission which was a percentage of the profits from property sales.

In early 1999, Dumbrell found a property which he felt presented a good opportunity for profitable development. He informed Regional and prepared an offer on its behalf. The offer was refused and Regional’s CEO, Steven Gordon, told him he was no longer interested in the property.

More than a year later, the working relationship between Dumbrell and Gordon deteriorated and Dumbrell resigned on Nov. 22, 1999. After Dumbrell had resigned but shortly before he stopped working for Regional, the company made another offer on the property. It was accepted and a trust that was 25 per cent owned by Gordon and his family purchased the property on Jan. 24, 2000.

Dumbrell learned of the purchase and asked Gordon if Regional was involved, which Gordon denied. Dumbrell found out the truth and launched a lawsuit for his share of the profits.

In May 2002, Gordon’s trust sold its share of the property for a profit of one million dollars. Dumbrell amended his lawsuit to demand 50 per cent of the profit, as per his contract with Regional. In the original trial, the Ontario Superior Court of Justice found Dumbrell’s efforts during his employment with Regional were directly responsible for the sale and he was entitled to 50 per cent commission on the profit from the sale of property. It also found Gordon was personally liable for breach of contract for not giving Dumbrell his share.

The Ontario Court of Appeal agreed Dumbrell was entitled to a commission on Regional’s share of the profit. However, it found he was entitled only to Regional’s share and not that of third party investors, meaning he was entitled to half of 73 per cent of the profits.

Though the court affirmed the trial court’s decision on Dumbrell’s commission, it disagreed with the ruling that Gordon was personally liable. It found Regional was a legitimate and active real estate company and Dumbrell had been an employee. Gordon was the CEO and an agent of the company, but his actions were in the course of operating the company and his responsibilities to the company were separate from his corporate duties. Gordon could not be liable for the company’s breach of the contract. See Dumbrell v. Regional Group of Cos., 2007 CarswellOnt 407 (Ont. C.A.).

Latest stories