Former Employee Liable for Payments Improperly Collected and Retained on Behalf of Ex-Employer feature image

Former Employee Liable for Payments Improperly Collected and Retained on Behalf of Ex-Employer

The breakdown of a business relationship can create conflict between parties and result in financial complications for businesses. In a decision recently issued by the Court of Queen’s Bench of Alberta, an ex-employee of a company was held liable for a payment he collected on behalf of the company and improperly kept for himself after unsuccessfully arguing the payment was for services he rendered personally.

Defendant ex-employee argued payment from plaintiff’s client were for services rendered by the defendant

The plaintiff company is involved in the moving and storage business. It was incorporated in late 2014 and is owned by a sole individual. Some of the company’s business was sourced by the defendant, who was then an employee of the company, through his pre-existing relationships. One such client was Across Canada.

The company provided services to Across Canada and provided invoices in August 2015. During that same month, the relationship between the company and the defendant deteriorated and the defendant went into business for himself. 

On November 2, 2015, the company sent a letter to Across Canada inquiring about payment for their outstanding invoices. The company was advised the defendant had attended Across Canada’s office in October and had collected the payment. Across Canada, therefore, advised the plaintiff company that it didn’t consider itself to have any outstanding amounts owing to the plaintiff.

The defendant told the court that he did indeed collect a cheque from Across Canada in the amount of $12,689, and that the cheque was deposited into his personal bank account. The memo on the cheque indicated it was a final payment for moving services by the plaintiff company.

The company tried once more to collect payment from Across Canada, which maintained the invoices had already been paid. Across Canada provided a receipt they received from the defendant stating there was no balance owing by them to the plaintiff company.

The defendant’s position was that the payment he collected was for work performed by him following the dissolution of his relationship with the plaintiff company. This argument was rejected at trial as the trial judge found there was no evidence to support this position.

 

Defendant appealed on grounds that trial judge improperly relied on hearsay evidence

The ex-employee defendant’s primary argument on appeal was that the trial judge improperly relied on the plaintiff company’s statement that the payments provided were owed to the company. The defendant maintained the payment received from Across Canada was owed to him for work he performed after he cut ties with the company.

The Court of Queen’s Bench noted that the defendant had admitted on cross-examination that the payment from Across Canada was in respect to services provided by the plaintiff company. The court therefore found no issues of hearsay as the defendant’s admissions supported the plaintiff company and Across Canada’s version of events.

The defendant’s also argued the trial judge did not sufficiently examine the conduct of the plaintiff company and Across Canada. He stated the company should have sued Across Canada for the completed work or at least should have called Across Canada’s employees as witnesses. The defendant argued that the trial judge should have drawn an adverse inference from the plaintiff’s failure to do this.

The court responded to this argument by stating that the decision to sue a customer or not sue a customer is complicated and not indicative of the customer’s liability. In this case, the plaintiff company runs a rather small operation and could not be blamed for wanting to avoid the expense and inconvenience associated with litigation involving another company in another province, even if the claim had merit.

Lastly, the defendant argued the trial judge did not properly take the defendant’s expenses into account in awarding damages to the plaintiff company. The defendant calculated these expenses at $9,580. The Court of Queen’s Bench noted no claim for these expenses was made at the outset of the proceedings and it was too late to seek compensation for them. The court also held it was not worth permitting the defendant to amend his claim as there was no merit to the argument he was owed expenses. The defendant was found to have incurred those expenses pursuing business for his own account, not for the plaintiff company. As the plaintiff company was entitled to the payment by Across Canada for work the company performed, the defendant had no claim to set-off his own expenses incurred for his own business.

As the defendant was unsuccessful on all grounds of his appeal, he was ordered to repay the plaintiff company the amount he received from Across Canada as well as an additional $2,733 in costs.

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The experienced advocacy team at HMC Lawyers has over 130 years of combined experience in civil litigation matters, enforcement proceedings, and alternative dispute resolution. We provide strategic legal solutions and advocate for clients involved in a wide variety of business and corporate disputes. To find out how we can help you or your business, reach out online or call us at 403-269-7220 for a consultation.

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