Salesman breached fiduciary duty, but court awards nothing

Company was unable to prove it suffered any damage

An Ontario court has dismissed an insurance salesman's claim of wrongful dismissal, and found he had a fiduciary duty to his former employer that prevented him from soliciting some of their clients at his new job.

Glenn Thomson started working at his father's insurance brokerage in 1990. He was paid a salary until October 1997. After that he was paid commission on accounts he had drummed up himself. Thomson was involved in discussions for a three-way purchase of the company, which Thomson's father ultimately sold to Richard Farmer in 1998. One of the terms of the sale was that Farmer would offer a formal employment contract to Thomson.

This offer, which the father saw and approved of, was made in March 1998. Thomson offered a revised draft which Farmer didn't accept. Tensions between the men increased and Thomson's employment was terminated in August. He immediately found work at another brokerage and began moving clients to his new employer.

The Ontario Superior Court of Justice found the company had been justified in firing Thomson. He had made changes to company records to make it seem that some of his father's accounts were his. The effect of this was to entitle him to a 50 per cent share in the commissions those accounts paid. Thomson had no authority to do this and had done so without the authorization or knowledge of Farmer or his father. This conduct was dishonest and intended to divert firm income improperly to Thomson.

Thomson had also told a client the company was not going to reveal information to the insurer — something that would have resulted in a higher premium. This decision was improper and a breach of the duty the company owed the insurer. The company thus had just cause to terminate Thomson's employment, said the court.

The court dismissed Thomson's claim he was owed back commission. In fact, prior to his dismissal he had been paid income he wasn't entitled to, the court said. And there was no evidence that proved Thomson was still owed money by the company.

The court also ruled in favour of the company in its counterclaim that it had lost clients and money due to Thomson's wrongful conduct after his termination. He owed a fiduciary duty to the firm, which he violated when he solicited its clients for his new company.

The court said Thomson had no fiduciary duty with regard to clients he had found for the firm, but that he did have a duty on accounts he had been given to service. There was a special trust placed in him. When he used the company's confidential information (including client lists) at his new firm it constituted a violation, said the court.

The court added, however, that the company had not been able to prove its damages. Though a wrong was proved, there was no proof of any unrecovered loss.

For more information see:

Thomson v. S.I.A. Insurance Brokers Ltd., 2005 CarswellOnt 3027 (Ont. S.C.J.)

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