Indexed as:

Katzman v. Zalev Metals Inc.

Between

Sydney F. Katzman, applicant, and

Zalev Metals Inc., respondent

And between

Zalev Metals Inc., plaintiff, and

Sydney F. Katzman, defendant

[1999] O.J. No. 2047

Court File Nos. 97-GD-42389 and 98-CV-144948

 Ontario Superior Court of Justice

 Windsor, Ontario

Cusinato J.

May 31, 1999.

(13 pp.)

Practice -- Judgments and orders -- Summary judgments -- Bar to application, existence of issue to be tried -- Master and servant -- Duties of servant -- On termination -- Competition in business.

Motion by the plaintiff, Katzman, for summary judgment. The defendant, Zalev Metals, terminated Katzman's employment. The parties were subject to an employment agreement, which contained a non-competition provision that was to commence upon the expiry of the agreement. Katzman argued that his right to past, present and future salary, as well as his right to immediate payment of the non-competition remuneration, was provided for within the terms of the agreement. However, Zalev claimed that Katzman's employment was terminated for just cause. Zalev had also started its own action against the plaintiff.

HELD: Motion dismissed. There were genuine issues to be tried. Termination of Katzman's employment, with or without cause, could have affected the commencement date for the non-competition payment. This alone sufficed as a consideration to deny summary judgment. Further, if there was a justification for termination, the salary would no longer be payable. Both proceedings were ordered to proceed to trial.

Statutes, Regulations and Rules Cited:

Ontario Rules of Civil Procedure, Rules 14, 37.03(2).

Counsel:

Leon Paroian and Raymond Colautti (Paroian, Raphael, Courey, Houston), for the applicant and the moving party in action 98-CV-144948.

Jeffrey B. Simpson (Lang, Michener), for the respondent in each instance.

CUSINATO J.:--

HISTORICAL BACKGROUND:

1     Zalev Metals Inc. (Zalev) as a corporate entity has through the years from its founding undergone many organizational changes. For our purpose, if not for simplicity, while a number of separate subsidiaries have been referred to under the Zalev name, we shall refer to all of the corporate entities collectively as Zalev.

2     This corporation together with its subsidiaries from the year 1914 has been, and is presently, principally involved in the purchase, sale, recycling and processing of ferrous and nonferrous metals.

3     Beginning in the early 1950's the applicant Sydney F. Katzman (Katzman) became active in the operation of Zalev to the point where he eventually became the principal director in its management. This situation continued until the sale of the applicant's shares to the C.A.I. Group under agreement dated June 7, 1996.

4     As part of this sale and transfer, the applicant entered into an employment agreement on the 8th of July, 1996, which is now the subject of our consideration. The essentials of the agreement that are important to our review, provided for a term of employment extending over a period of 3 years. Specific provisions were incorporated as to compensation, including annual salary, when it was payable, medical plan payments, convention and entertainment expenses, and so on. Added to the employment agreement, was a non-competition provision, which commenced upon the expiry of the employment agreement or 3 years after the termination of the period of any salary continuation payment made to the executive called the restricted period.

THE ACTIONS:

5     As set out separate actions have been commenced by each of the above parties outlining the relief they claim. Action 97-GD-423989 commenced in the County of Essex is an application by Sydney F. Katzman (Katzman). It seeks as against the named respondent the declaratory relief outlined therein as well as specific performance as to payment of various sums and benefits under the terms of an employment agreement between the parties.

6     This application has been commenced under Rule 14. This Rule authorizes a proceeding by application for the determination of rights that depend on the interpretation of a contract where there is unlikely any material facts in dispute.

7     It is the applicant's position that his continued right to salary past, present, and future as well his request for immediate payment of the non-competition remuneration is provided within the terms of the agreement. This forms the essence of Katzman's motion for summary judgment wherein he seeks dismissal of Zalev's action, suggesting there is no merit to their action, and no genuine issue for trial. Katzman's outline for judgment within the terms of the agreement is incorporated in the application as well as in his defence and counter-claim on the motion for summary judgment. The claims then in the application are essentially repeated in the statement of defence and counter-claim filed by him in Action 98-CV-144948.

8     Katzman in his motion for summary judgment complimented by his application contends that the terms of his agreement have crystallized, and Zalev's action is frivolous and for the purpose of delay.

9     It is Katzman's submission that because the terms of the agreement are clear they are now operative. Upon this basis it is the applicant's conviction, that there can be no dispute as to payment. That neither oral evidence or a trial is required as it relates to the written document. It is on this determination he suggests this matter should proceed summarily to judgment because there can be no genuine issue for trial.

10     Zalev in partial answer to this contention has as I have referred to earlier commenced its own separate action by Statement of Claim in the County of York. This action is identified by Court File 98-CV-144948 in which Katzman is the named defendant.

11     The plaintiff in this action claims that with the discovery of post fact evidence the defendant's employment with the plaintiff justifies termination for just cause. That with this contention, the defendant was erroneously overpaid the sum of $261,286 for loss of salary, for which the plaintiff Zalev, claims return of the said monies, in that the defendant has been unjustly enriched.

12     In response to the application, the first action instituted, Zalev has filed a counter-application. In its response, it denies entitlement to the claims as set out and on this motion has identified its position as to the proper interpretation of the terms of the agreement, the subject of the litigation.

13     Procedurally, it was on the return date of Katzman's application, that his counsel combined the notice of motion seeking dismissal of Zalev's Action 98-CV-144948, with consideration of his application for summary judgment. The effect then of the above procedure was that on the return date of the application, the materials filed in each action were used to supplement the other.

14     In support of the issues raised by the applicant, voluminous materials have been filed by the Moving Party. Zalev the respondent on the other hand, has not filed any significant materials, but takes the position that in support of its assertions, it relies on the Moving Party's materials. Counsel for Zalev submits that even with a cursory review of those documents filed by the Moving Party, they establish in themselves, that there is a genuine issue for trial, and for this reason no purpose is served that the documents be duplicated.

15     On a question of procedure, it arose in my own mind as to the Toronto action of how it was returned in this jurisdiction for summary judgment, the respondent counsel being located in Toronto, and the motion brought without leave. Rule 37.03(2) provides that the motion is to be returned in the location of the responding solicitor. On this consideration, no issue was raised during the proceedings by respondent counsel as to this court's jurisdiction to deal with those issues in this County. The issue not being raised by the respondent, perhaps because their action requests the trial within this venue, I make no further comment.

16     I now address the relief claimed in the motion for summary judgment together with the application. These issues may appear to be slightly different, particularly as to the facts raised in the action commenced by Statement of Claim and those pleaded on the application, but the cross pleadings make the issues in both actions very similar if not the same. In each instance when the facts are reviewed as arise in the pleadings, each refer to the employment agreement for disposition of the specific issues raised.

17     One major issue raised by Zalev unique to its own position is its claim for rectification of the agreement, and this is set out in its counter-application. The legal principles are pleaded to address what it submits to be an error within the agreement. The pleading sets out common mistake in the transformation of numbers from a draft to the original document for execution. This Zalev states was discovered after execution and is not reflective of the agreement known to both parties.

18     It is Zalev's submission that to interpret the correct intent of the parties and the agreement, evidence must be considered to determine if there is a common mistake not reflective of their mutual understanding of what was to be in the written document. It is on this basis Zalev prefers to rely on the materials which have been filed by the applicant to illustrate that the relief sought by the Moving Party cannot be dealt with summarily. Those materials, Zalev submits, clearly establish mistakes from the preliminary drafts filed to the typed final agreement, without any evidence to establish why the numbers for non-competition are increased four-fold in the final document.

18a     In this regard, we also have the admissions of Katzman to consider on his cross-examination, if the fees payable for non-competition are properly reflective of the parties agreement. [The Court did not number this paragraph. QL has assigned the number 18a.]

DISPOSITION:

19     I have determined after review of all the materials and with consideration of the submissions made that at this stage it is inappropriate without evidence to provide any specific conclusions. It is evident from the materials filed, that there is a body of evidence that suggests an error in the transformation of numbers within the agreement for the quantum to be paid as a non-competition fee.

20     To counter this position, the Moving Party presses this court to accept that the agreement speaks for itself. That, on its face there is no identifiable error within the document. As to the non-competition fee, which provides payment of $100,000 quarterly, rather than the $25,000 suggested by the respondent, it should be enforced as written.

21     In my examination of the materials for disposition, while the action commenced by Statement of Claim through Zalev, sets out its position, it is not procedurally before me in proper form to deal with its claims for declaratory relief and mistake. I am aware of its pleading of justification for rescission and termination of the applicant's employment for cause because this claim is presented on the motion for dismissal. Added to this relief by Zalev, is its claim that the salary paid to date for termination without cause should be returned.

22     From a consideration of the materials available for my review, I conclude, that termination of the applicant's employment whether it is with or without cause, may affect the commencement date for the non-competition payment and this is aside from the dispute as to the correct quarterly payment. These issues alone suffice as a consideration to deny summary judgment.

23     In this court's review of the agreement upon which the motion for summary judgment depends, much may fall then on the above determinations. That is whether there is a required payment of the non-competition fee concurrent with or without salary upon rescission of the employment term, or if payment commences only upon cessation of any salary continuation.

24     It is trite to say, that if there is justification for termination, then the salary is no longer payable. Disposition of this issue alone may have a bearing on whether the compensation for non-competition, whatever its quantum becomes payable immediately or at some future date.

25     For these reasons, I conclude there are genuine issues to be tried. Having arrived at this conclusion, with my familiarity now of both actions, I find it prudent that both of these actions proceed before the court at the same time and in the order directed by the trial judge. It is my view, the actions should be heard by a trial judge in the County of Essex. In dealing with the question of venue, I note that although the Moving Party sought a change of venue for the action commenced by Statement of Claim, that action names the place for trial as the County of Essex.

26     With the above determination, little purpose is served for a review of the case law as to when summary judgment may issue. It is sufficient to say that where there are major differences on the enforceability of the agreement which require consideration not only on issues of credibility but the law of mistake, these are not matters that can be dealt with summarily.

27     For these reasons, the motion is dismissed with direction the application proceed as a trial and be treated as an action together with the action commenced by Statement of Claim. I conclude, that oral evidence is appropriate both on the application as well as the action commenced by Statement of Claim. For the purpose of a trial, the parties may wish to utilize the cross-examinations of each of the parties conducted to date to be used as examinations-for-discovery, with leave of the court or on consent. I also suggest with approval of the court, the parties be permitted to utilize the affidavit materials filed on the application, to supplement the oral evidence which may shorten the trial. I make these suggestions because these actions should now be expedited and tried together.

28     As a final comment, I note, that added to the motion disposed of, there is a further motion filed by the respondent, but not reached. It addresses the issue of refusal to answer specific questions relating to a witness produced on the application by the applicant Katzman. On this question, I have in open court and in chambers suggested to the parties they reconsider their positions to resolve those issues. Nonetheless, if these matters cannot be resolved, this motion should be returned for specific direction by the court as to what questions are appropriate for answer.

29     On the issue of costs, I may be spoken to if the parties are unable to reach accord.

CUSINATO J.

cp/s/rsm