Salesman awarded $500,000 even though he left before land deal was completed

Employment contract still valid, says Ontario court

The Ontario Superior Court of Justice has awarded $500,000 to an former employee of a property developer who left the company by the time a proposal he had brought yielded a profit.

Michael Dumbrell started working for the Regional Group of Companies Inc. in November 1998. Regional is an umbrella group of seven property and land development companies run by Steven Gordon. Dumbrell’s employment agreement, thoroughly revised by Gordon, called for him to not be paid a salary other than 50 per cent of net profits from ventures he brought to fruition.

Dumbrell worked for Regional for about a year. He spent much of the time trying to put together a deal for a piece of property in downtown Ottawa. In October 1999 Sam Grosz, a friend and business partner of Gordon, visited Ottawa and was shown the Ottawa site. Grosz became interested and entered into a joint venture with another property developer to buy and sell the land. Gordon was invited into the venture for having brought it to Grosz’s attention.

Gordon did not tell Dumbrell about any of these developments. The other property developer negotiated the offer, and in 2002 when Gordon sold his share of the land it yielded a profit of exactly $1 million.

Dumbrell resigned from Regional and filed an action claiming it had deprived him of the profit to which he was entitled as set out in the employment agreement.

The company claimed the Ottawa parcel of land was “old news” and Dumbrell had done no work that led to its eventual sale. The company also claimed Dumbrell had lied about his health and previous work experience in his resumé, which invalidated the employment agreement.

The court ruled in favour of Dumbrell. The misrepresentations in his resumé were exaggerations that had nothing to do with property development and was not the reason he had been hired. Regional had not been enticed into hiring him by the false statements.

It’s true the property was well known in Ottawa’s real estate circles, but it was due to Dumbrell’s efforts that the company gave it the attention it did, said the court. It was through his efforts and exertions that the property’s desirability became known.

It doesn’t matter that it was ultimately another company that concluded the deal. Gordon is able to arrange his affairs, by changing the corporate entity which reaps the rewards, so he can evade obligations. It also doesn’t matter that the deal was done after Dumbrell left Regional. The employment contract still applied, the court said.

The final issue before the court was the definition of “profit” as set out in the employment agreement. Dumbrell did not have an equity share in the property, so he couldn’t be entitled to a share of the profits from its sale, the company claimed. At most he would be entitled to a 50 per cent share in fees earned on the buying and selling of the land, and no fees were earned as Regional was not involved in the fee-earning aspect of the deal.

The court ruled that the basic principle of contract interpretation applies. Words should be given their plain common sense interpretation. In this case the words are plain, clear and unambiguous. The net profit on Gordon’s share of the May 27, 2002 sale of the land was $1 million. Dumbrell was awarded $500,000 plus interest from that date.

For more information see:

Dumbrell v. Regional Group of Cos. Inc., 2005 CarswellOnt 2571 (Ont. S.C.J.)

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