IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR  
GENERAL DIVISION  
Citation: 55668 Newfoundland and Labrador Limited v. Sullivan, 2022 NLSC 127  
Date: August 1, 2022  
Docket: 201001G5302  
BETWEEN:  
55668 NEWFOUNDLAND AND  
LABRADOR LIMITED  
FIRST PLAINTIFF  
AND:  
MICHAEL HALL  
SECOND PLAINTIFF  
AND:  
CANADIAN ROOFING SOLUTIONS INC.  
THIRD PLAINTIFF  
AND:  
ROBIN SULLIVAN  
FIRST DEFENDANT  
AND:  
CHRISTOPHER WINSOR  
SECOND DEFENDANT  
(DISCONTINUED 10/03/2014)  
AND:  
61791 NEWFOUNDLAND AND  
LABRADOR LTD.  
THIRD DEFENDANT  
Page 2  
- AND -  
Docket: 201201G0454  
BETWEEN:  
AND:  
55668 NEWFOUNDLAND AND  
LABRADOR LIMITED  
FIRST PLAINTIFF  
MICHAEL HALL  
SECOND PLAINTIFF  
(STRUCK 02/20/2013)  
AND:  
PAUL DAVIS SYSTEMS CANADA,  
LTD.  
DEFENDANT  
AND:  
PAUL DAVIS SYSTEMS CANADA,  
LTD.  
PLAINTIFF BY COUNTERCLAIM  
AND:  
55668 NEWFOUNDLAND AND  
LABRADOR LIMITED  
FIRST DEFENDANT BY COUNTERCLAIM  
AND:  
AND:  
AND:  
MICHAEL HALL  
SECOND DEFENDANT BY COUNTERCLAIM  
ROBIN SULLIVAN  
FIRST THIRD PARTY  
CHRISTOPHER WINSOR  
SECOND THIRD PARTY  
(DISCONTINUED 10/03/2014)  
AND:  
61791 NEWFOUNDLAND AND  
LABRADOR LIMITED  
THIRD THIRD PARTY  
Page 3  
Before: Justice Frances J. Knickle  
Place of Hearing:  
Date of Hearing:  
St. John’s, Newfoundland and Labrador  
March 3-6, 2020; March 9-13, 2020;  
March 17-18, 2020; January 18-22, 2021  
January 25-29, 2021; February 2, 2021;  
April 27-30, 2021; June 30, 2021, July 30,  
2021  
Appearances:  
Paul D. Dicks, Q.C. and  
Megan S. Reynolds  
Appearing on behalf of 55668 Newfoundland and  
Labrador Ltd, Canadian Roofing Solutions Inc.  
and Michael Hall  
Christopher E. Gill  
Appearing on behalf of Robin Sullivan and  
61791 Newfoundland and Labrador Ltd.  
Peter N. Browne, Q.C.  
and Travis D. Payne and  
Shane R. Belbin  
Appearing on behalf of Paul Davis Systems  
Canada, Ltd.  
Authorities Cited:  
CASES CONSIDERED: Allen v. Flood, [1898] A.C. 1, [1898] C.C.S. No.  
35 (U.K.H.L.); Bram Enterprises Ltd. v. A.I. Enterprises Ltd., 2014 SCC 12;  
Alleslev-Krofchak v. Valcom Ltd., 2010 ONCA 557; Seto v. Wendy’s  
Restaurants of Canada Inc., 2016 ABQB 493; Canada Cement LaFarge Ltd.  
v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452;  
American Reserve Energy Corp. v. McDorman, 2002 NFCA 57; 1384334  
Alberta Ltd. v. Buster’s Pizza Donair & Pasta Enterprises Ltd., 2020 ABQB  
369; 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81;  
Page 4  
Bhasin v. Hrynew, 2014 SCC 71; Kerr v. Baranow, 2011 SCC 10; Peel  
(Regional Municipality) v. Canada, [1991] 3 S.C.R. 762; 2671914 Manitoba  
Limited v. Suncorp Pacific Ltd., 2001 MBQB 70; R. c. Gagnon, 2006 SCC  
17; R. v. K.P., 2019 NLCA 37; R. v. Best, 2016 NLCA 10; R. v. S.O., 2019  
NLCA 42; R. v. M. (R.E.), 2008 SCC 51; 55668 Newfoundland and Labrador  
Ltd. v. Sullivan, 2017 NLTD(G) 57; MDG Kingston Inc. v. MDG Computers  
Canada Inc., 2008 ONCA 656  
STATUTES CONSIDERED: Corporations Act, R.S.N.L. 1990, c. C-36;  
Limitations Act, S.N.L. 1995, c. L-16.1, Interpretation Act, R.S.N.L. 1990, c.  
I-19; Judgment Interest Act, R.S.N.L. 1990, c. J-2  
TEXTS CONSIDERED: Peter T. Burns & Joost Blom, Economic Interests  
in Canadian Tort Law (Markham: LexisNexis, 2009); Fridman, G.H.L., Law  
of Agency, 7th ed. (Toronto: Butterworths, 1996)  
REASONS FOR JUDGMENT  
KNICKLE, J.:  
INTRODUCTION  
[1] This trial is the result of the conflict that ensued when the franchisor-  
franchisee business relationship broke down. The Plaintiffs are (1) the incorporation  
known as 55668 Newfoundland and Labrador Limited (55668), (2) Mike Hall, and  
(3) Canadian Roofing Solutions Inc. (Canadian Roofing Solutions). 55668 was  
incorporated to run the franchise known as Paul Davis Systems of St. John’s. Mike  
Hall was a director of both companies. He was also initially a Plaintiff in both  
actions; but after a pre-trial application had been removed as a Plaintiff in the action  
against Paul Davis Systems of Canada.  
[2] The Defendants are: (1) the franchisor Paul Davis Systems of Canada, and (2)  
the owner operator of the franchise that replaced 55668, 61791 Newfoundland and  
Labrador Limited (61791) and its director, Robin Sullivan. Chris Winsor, was also  
initially a named Defendant. He, like Mike Hall, was a former owner of the Plaintiff  
55668. He had partnered with Mike Hall in the operation of the franchise and, as  
Page 5  
well, Canada Roofing Solutions. The action against Chris Winsor has been  
discontinued.  
[3] The Plaintiffs, through two separate actions 201001G5302 (5302) and  
201201G0454 (0454), alleged that the Defendants engaged in several torts:  
conspiracy, conversion of goods, and the tort of economic loss by unlawful means.  
They also claim unjust enrichment and a breach of the duty of good faith against  
Paul Davis Systems of Canada in action 0454. In action 5302 the Defendants, Robin  
Sullivan and 61791, have counterclaimed for alleged costs incurred by 61791 in  
attempting to address outstanding debts of 55668. In action 0454, the Defendant,  
Paul Davis Systems of Canada, have counterclaimed against 55668, for outstanding  
royalties and other fees. Robin Sullivan and 61791 have been named as third parties  
in the action 0454.  
[4] While the two actions have not been joined, the evidence of the trials was  
heard at the same time and is to be applied in both trials.  
[5] The claims of the Plaintiff 55668 are allowed in part in action 5302. I am  
satisfied that the Plaintiff 55668 has established wrongful interference by 61791 and  
Robin Sullivan with the assets of 55668 when their assets were transferred to 61791,  
by way of an invalid written agreement dated April 29, 2010. Any transfer of the  
assets required the consent of Mike Hall, the majority shareholder of 55668. Mike  
Hall did not consent to or sign this transfer of assets agreement, and he did not know  
of the agreement until it was delivered to his counsel a month after it was executed.  
As such, the assignment of the assets identified in this agreement was invalid and  
constitutes wrongful interference with these assets from 55668. I am also satisfied  
that monies belonging to 55668 were deposited into bank accounts of 61791. 55668  
is entitled to damages in the amount equal to the value of the assets.  
[6] I am also satisfied that the counterclaims of 61791 and Robin Sullivan should  
be allowed in part, and the damages owing to 55668 shall be reduced by this set-off  
amount.  
Page 6  
[7] In action 0454, I am not satisfied that the tort of conversion and/or trespass  
against the premises and goods of the Plaintiff 55668 has been established. I am not  
satisfied that 55668 established any damages as a result of this conduct. I am also  
not satisfied that Paul Davis Systems of Canada breached their duty of good faith  
towards 55668. Nor was Paul Davis Systems of Canada unjustly enriched by the  
wrongful interference with 55668’s assets when 61791 took over these assets by way  
of the invalid agreement.  
[8] The counterclaims of Paul Davis Systems of Canada against 55668 are  
allowed. At the date of the termination of the franchise, the Defendant Paul Davis  
Systems of Canada, was owed more than $60,000 in royalties from the Plaintiff  
55668. This debt accrued well before the alleged tortious conduct, and 55668 is  
liable to Paul Davis Systems of Canada for these outstanding royalties.  
[9] In both actions, 5302 and 0454, the claims in conspiracy and unlawful means  
are dismissed. I am not satisfied that there was conduct on the part of any of the  
Defendants that constituted either of these alleged torts. In particular, there was no  
intent on the part of any of the Defendants to injure or cause harm to any of the  
Plaintiffs. Nor have the Plaintiffs established any causal connection between the  
alleged tortious conduct of the Defendants and purported harm suffered by the  
Plaintiffs.  
[10] Any adverse consequences to 55668 (except as I have found in relation to the  
conversion of assets), or Mike Hall, whether economic or by way of mental distress  
as alleged by Mike Hall personally, were, at worst, incidental consequences to the  
legitimate business intentions of the Defendants in their conduct. As stated by Lord  
Davey in Allen v. Flood, [1898] A.C. 1, [1898] C.C.S. No. 35 (U.K.H.L.) at page  
173:  
The right to which a man has to pursue his trade or calling is qualified by the equal  
right of others to do the same and compete with him, though to his damage.  
Page 7  
[11] The claims of the Plaintiff, Canadian Roofing Solutions, in both actions are  
dismissed as there was insufficient evidence to establish that there was any conduct  
that impacted the property or assets of Canadian Roofing Solutions.  
[12] In action 5302, the parties shall bear their own costs.  
[13] In action 0454, the parties shall bear their own costs.  
THE FACTS  
[14] The presentation of evidence entailed several weeks spread over the course of  
18 months; largely due to the advent of the Covid-19 pandemic. Apart from the  
several witnesses who testified on behalf of the parties, hundreds of pages of  
documents were filed which, to the credit of all the parties, were so done mostly by  
consent. The documentary evidence in part comprises three binders with over 190  
separate tabs, two additional books of documents, as well several documents filed  
individually. There was a series of photographs tendered by the Plaintiffs describing  
the alleged assets of 55668. There were also two expert reports filed as part of the  
evidence on the financial health of the company.  
[15] Myriad email communications were admitted. For the most part, there was  
little issue that the communications could be taken for the truth of their contents, and  
represented the intent of the person making the communication.  
[16] I have reviewed this evidence and the viva voce testimony in its entirety. Many  
of the facts are not in dispute. Unless otherwise stated, the background described  
below can be taken as facts that I have accepted. Where there are conflicts in the  
evidence, I have explicitly explained my finding of fact on the particular point.  
Page 8  
[17] Mike Hall, majority shareholder of 55668, testified that he was employed as  
a municipal firefighter and had so been for many years. The nature of his work as a  
firefighter left time to pursue other business ventures. In 2005, he opened a  
renovation business engaging in what he described as small renovationprojects,  
such as kitchen renovations. The company incorporated to run the business was  
known as Eastern Restorations Limited.  
[18] Through a colleague he learned of Paul Davis Systems of Canada. It was  
described as being in the “restoration” business and was becoming national in scope.  
Paul Davis Systems of Canada was run by Ken Robinson and his brother, Stephen.  
Mike Hall understood the business was interested in expanding to the Atlantic  
Canada region where it was yet to be established. Mike Hall stated that he did some  
research, and made a call to Ken Robinson.  
[19] As a result of meeting with the Robinsons, in 2005 the first Paul Davis  
Systems franchise was established, with the corporation, Eastern Restorations  
Limited, being the franchisee. Mike Hall managed the first franchise in partnership  
with his wife and from the couple’s home. Mike Hall testified that in the course of  
running the franchise he became friends with both Stephen and Ken Robinson. He  
visited them at their homes in Ontario and when either of the Robinsons came to  
Newfoundland they were welcomed to Mike Hall’s home. He stated that he looked  
to them for advice and support but he had more contact with Stephen Robinson in  
running the franchise. He described Stephen Robinson as the “technical/money  
guy”, whereas Ken Robinson was “geared towards marketing”.  
[20] Mike Hall testified that the business struggled in the first two to three years.  
During this period, Mike Hall’s marriage deteriorated and he and his first wife  
divorced. In the course of the marriage break-up the first franchise was discontinued  
and Mike Hall declared personal bankruptcy. Notwithstanding the bankruptcy, the  
Robinson brothers supported a further franchise and a second restoration company  
was established.  
[21] In November 2007, the second franchise agreement with Paul Davis Systems  
of Canada was signed. Mike Hall established the corporation 55668 to run the  
Page 9  
franchise. At the time of the establishment of 55668, Mike Hall was not yet  
discharged from personal bankruptcy and so could not be a director. His mother was  
a director until he was discharged from bankruptcy in December 2007. She played  
no further role in the company.  
[22] Mike Hall also convinced Chris Winsor, a longtime friend, to take part in the  
venture as one of the shareholders of 55668. Mike Hall testified that both Ken and  
Stephen Robinson had concerns about Mike Hall’s ability to be able to manage the  
business given that he maintained his employment as a firefighter. They wanted to  
know that there was someone managing the franchise on a full-time basis. For this  
reason, Chris Winsor joined as the minority shareholder and also as a director of  
55668.  
[23] Chris Winsor confirmed that he joined the business because the head office of  
Paul Davis Systems of Canada wanted a full-time partner. He testified that he and  
Mike Hall both ran the business. Mike Hall looked after the “financial stuff” while  
he was the “boots on the ground”. He testified that in the beginning “there was a  
good relationship” with the Robinson brothers.  
[24] The former company, Eastern Restorations Limited, was still in existence and  
Mike Hall used this corporation to be paid for work done on behalf of the franchise.  
Monies would be paid to Eastern Restorations Limited by 55668, which would then  
be paid to Mike Hall. Eastern Restorations Limited was also used to provide  
financial assistance for 55668.  
The Franchise Agreement 2007  
[25] The franchise agreement (Exhibit #1, Tab 11) governed the business  
relationship between Paul Davis Systems of Canada, as the franchisor, 55668 as the  
franchisee, and Mike Hall and Chris Winsor as individual “guarantors” and  
shareholders of 55668. It was a standard form agreement for all of the franchises  
operating as Paul Davis Systems. The franchise agreement permitted 55668 to  
operate under the trade name of “Paul Davis Systems of St. John’s” and to use the  
Page 10  
exclusive trademarks and trade secrets of Paul Davis Systems. It also established the  
requirements for royalty payments, which were due monthly. There were several  
other fees that were required either on a monthly or annual basis.  
[26] The franchise agreement prohibited the franchisee from carrying on any other  
business under clauses 6.4 and 6.5., which stated:  
6.4 Services Offered  
During the term of this Agreement, Franchisee agrees to offer to customers within  
the Franchise Territory insurance restoration construction, loss mitigation,  
emergency services and cleaning services. Franchisee may also engage in Optional  
Programs. Franchisee shall not engage in any other business activity, which is  
not directly related to this Agreement.  
6.6 Compliance with Operations Manual  
Franchisee agrees to devote, carry on, conduct and operate the business  
contemplated by this Agreement of a full time basis, in accordance with good  
business practice and in accordance with the standards and policies of PDSC set  
forth in the Operations Manual; to acquire, retain and own, during the term of this  
[A]greement, all assets determined by PDSC to be reasonably necessary for the  
operation of such business and to conduct no business other than the PDSC  
Business from the location for the Franchisee’s operation…  
[Emphasis Added]  
[27] The franchise agreement also gave Paul Davis Systems of Canada the  
authority to terminate the franchise agreement, with or without an “option to cure”  
failures in adhering to the terms of the agreement (clauses 17.1 and 17.2). When  
given a notice to terminate with the option to “cure”, the franchisee was permitted  
15 days to bring the franchise into compliance with the franchise agreement.  
Possible failures where the franchise might be permitted to cure the defect included  
the failure to make timely payments as required (17.1(a)), or to operate the business  
in accordance with the Operations Manual (17.1(b)). There was also a catch-all  
clause, under 17.1(g) which described a failure of “any act” that could constitute a  
breach of the agreement. The clause stated:  
Page 11  
(g) Commission or omission by Franchisee or any other act, not enumerated herein,  
which constitutes a breach of the terms of this Franchise Agreement or any other  
agreement or undertaking entered into between the Franchisor and Franchisee.  
[28] The franchise also contained a dispute resolution clause, by way of mandatory  
arbitration, under clause 24.1:  
Any controversy or claim arising out of or relating to this Agreement or the  
acquisition or operation of the franchise, shall be settled by binding arbitration in  
accordance with arbitration procedures set forth in the Operations Manual. Any  
pending arbitration proceedings involving the Franchisee shall have no effect on  
PDSC’s right to terminate this Agreement and such [sic] to terminate shall not be  
abrogated by the commencement of arbitration proceedings after termination has  
begun or has been concluded.  
[29] The wording of this clause appears to contain a typographical error. The  
phrase “...and such to terminate” probably was intended to state “and such right to  
terminate” as the sentence does not otherwise make grammatical sense. However,  
nothing turns on this in respect of these proceedings. All parties agreed that  
arbitration was a component of the franchise agreement.  
[30] The franchise agreement also required both Chris Winsor and Mike Hall to  
act as guarantors and personally guarantee the monies owed by the franchise to the  
franchisor (Clause 18). Nor could any transfer of the franchise to another entity take  
place without the approval of the franchisor.  
[31] The franchise agreement also contained a non-competition clause in the event  
the franchise agreement is terminated (Clause 23) prohibiting either 55668 or Mike  
Hall and Chris Winsor from engaging in any related business for a period of two  
years after the termination of the franchise agreement.  
Page 12  
The unanimous shareholder’s agreement  
[32] The franchise agreement further required there to be a shareholders’  
agreement between the shareholders of the corporation running the franchise. In  
2009, a unanimous shareholdersagreement was signed by both Mike Hall and Chris  
Winsor (Exhibit #1, Tab 2). The agreement confirmed that Mike Hall was majority  
shareholder at 60 per cent and Chris Winsor held the remaining 40 per cent. The  
agreement provided the mechanisms for the operation of 55668, especially as it  
related to any fundamental changes to the company. In particular, under section  
2.02, certain activities could not be undertaken without unanimous consent by the  
shareholders (both Mike Hall and Chris Winsor). Any “windup, reorganization, or  
dissolution” of 55668 also required unanimous consent by the two shareholders.  
Further, any transfer of shares could not be accomplished without a “first right of  
refusal” of the other shareholders, and with 60 days’ notice to address any possible  
transfer.  
The Farmington leases  
[33] The restoration business required specialized equipment. Much of this  
equipment was leased through a business affiliated with the national Paul Davis  
Systems business, Farmington Equipment Limited (Farmington). Jim Johnson, the  
owner of Farmington and family friend to the Robinsons, testified as to how the  
arrangement worked. Copies of the leases for 55668 were tendered, (Exhibit  
J.Johnson #1, Tabs 3-9). Payments under the leases were monthly and would accrue  
towards the eventual purchase of the particular piece of equipment at the end of the  
lease period. The leases were explicit that the equipment remained the property of  
Farmington until the full purchase price was paid.  
The growth of 55668  
[34] Mike Hall testified that in the first years of business, he struggled to find  
clients. With encouragement from the Robinsons, Mike Hall took a more aggressive  
approach in marketing the franchise. This strategy proved successful and the  
Page 13  
franchise secured a major client, Johnson Insurance, also known as Unifund  
(Unifund). This was a significant gain for not only the franchise locally, but also  
Paul Davis Systems of Canada, because Unifund was national in scope. This meant  
that there was a potential to expand the relationship to other Paul Davis Systems  
franchises across the country.  
[35] Mike Hall stated that having secured Unifund’s business, the franchise’s  
revenues started to improve. A second major client was secured, the Co-operators  
Insurance Company (the Co-operators). These two companies made up the bulk of  
55668’s business and by 2009, 55668 experienced a substantial increase in revenue.  
The financial reports (unaudited), and tendered by consent, showed an increase in  
business from a gross revenue of $613,771 in 2007 to a gross revenue of $1,848,698  
in 2008 and $3,138,411 in 2009.  
The relationship with Robin Sullivan  
[36] It was during this time that Mike Hall also introduced Ken and Stephen  
Robinson to the Defendant, Robin Sullivan. Mike Hall testified he was familiar with  
Robin Sullivan, and recommended him as a potential franchisee. At the time, Robin  
Sullivan operated his own construction company. The introduction was a success  
and Robin Sullivan established his own Paul Davis Systems franchise operating on  
the west coast of the island of Newfoundland; helping to expand the reach of Paul  
Davis Systems of Canada in Newfoundland and Labrador. Mike Hall testified that  
he took Robin Sullivan “under his wing”, taking him to meetings and introducing  
him to contacts in the restoration business in St. John’s. He testified he introduced  
Robin Sullivan to Michelle Stack who was Mike Hall’s friend and contact at  
Unifund. Mike Hall testified that Robin Sullivan had been complaining to him about  
the difficulty in obtaining work, and because of this introduction, Robin Sullivan  
was able to establish his own relationship with Unifund for work on the west coast.  
[37] Robin Sullivan also testified at trial. He explained that he was in the  
construction business and was friends with Mike Hall. He confirmed that he learned  
of Paul Davis Systems through Mike Hall. He also agreed that it was through Mike  
Page 14  
Hall that he was able to establish his own franchise on the west coast of the island  
of Newfoundland, Paul Davis Systems Western”, in 2008.  
[38] There was evidence from an employee of 55668, Dwayne Kearney, that the  
relationship between the two franchises was good and that equipment was often  
shared. He testified that the St. John’s operation was larger and busier than Robin  
Sullivan’s franchise on the west coast. Robin Sullivan agreed that the relationship  
between the two franchises was good.  
[39] Paul Davis Systems of Canada also expanded to other parts of Atlantic  
Canada. Mike Hall stated that he assisted other franchises by providing his  
expertise. He stated because of his efforts, in particular in attracting Robin Sullivan  
as a further franchisee owner, Paul Davis Systems of Canada reduced the amount of  
royalty payments from 55668 by 25 per cent. A condition of this reduction was that  
the franchise remain up-to-date with payments, within a 90 day grace period.  
[40] Despite the positive growth and activity of 55668, expenses also increased.  
In 2009, 55668 took major steps to not only expand 55668’s scope of business but  
also to move to larger and more expensive premises.  
The leased premises at McNamara Drive  
[41] Mike Hall testified that with the growth of the business, the business moved  
on a couple of occasions. In 2009, 55668 secured a large space on McNamara Drive,  
Paradise, NL that also required renovations to render it fit for the needs of the  
business. Many of 55668’s employees handled that renovation work. Chris Winsor  
testified that the renovations took approximately 6 to 8 weeks to complete. There  
was a period of time in 2009 during which 55668 paid rent on two premises while  
the renovations were completed, although it was unclear in the evidence the extent  
to which this overlap in rental payments occurred. Chris Winsor estimated 55668  
may have paid rent for two premises for a period of six months.  
Page 15  
The establishment of Canadian Roofing Solutions  
[42] Both Mike Hall and Chris Winsor testified that in the course of 55668’s  
projects, it was often necessary to subcontract work; especially in the area of roofing.  
However, it was difficult to hire qualified roofers and there were complaints about  
the quality of the work. To meet this demand, the two directors decided to establish  
their own roofing company so that they could have control over this work. Mike Hall  
testified that clients such as Unifund responded positively to the idea.  
[43] Unfortunately, before so doing, neither Mike Hall nor Chris Winsor contacted  
or involved Paul Davis Systems of Canada, to seek either their approval or assistance  
with this venture. Nor did they consider the implications of starting another business  
on the franchise agreement; in particular, the prohibition in the franchise agreement  
from engaging in other businesses. Chris Winsor testified that at the time, he and  
Mike Hall did not consider whether the creation of the new business put them in  
violation of the franchise agreement, but thought because of the apparent need,  
establishing the company would be a good idea.  
[44] Although Mike Hall testified that Canadian Roofing Solutions was not a drain  
or improperly drawing on the franchise’s resources, Chris Winsor testified that there  
was overlap in managing the two businesses. He understood that the revenues were  
kept separate, but there was “cross-over” as the two businesses were operating under  
the “same roof”. The overlap was confirmed by other employees who testified, Larry  
Walton and Glen Cook. For example, Larry Walton, who worked with the franchise  
since 2007, testified that Canadian Roofing Solutions used the same phone system  
as the franchise. Glen Cook also confirmed that assets of Canadian Roofing  
Solutions were kept at the premises of 55668, although he did not know if 55668  
shared assets with Canadian Roofing Solutions.  
[45] I find as a fact that there was an overlap in running the two businesses insofar  
as the use of the same premises, employees and infrastructure such as equipment and  
payroll, to run the businesses.  
Page 16  
[46] Apart from the overlap of the roofing business with the franchise business,  
Canadian Roofing Solutions suffered what Mike Hall described as a major financial  
setback” in 2009, when the one project that was independent of Paul Davis Systems  
failed. Mike Hall testified that the value of the project was between $450,000-  
$500,000. He stated that one third of the way through the project the contractor  
defaulted on payments and he was forced to “call in the bond” in order to ensure  
suppliers were paid.  
[47] Chris Winsor testified that Canadian Roofing Solutions was never profitable.  
The equipment costs were “outrageous” and Paul Davis Systems was the only  
customer. He stated that if he had his time back, he would have never pursued this  
venture.  
Asbestos remediation  
[48] Mike Hall testified that from his experience in the restoration business, many  
buildings required asbestos remediation before renovations could be completed.  
Given this, in 2009 he and Chris Winsor decided to have 55668 branch out into  
asbestos remediation, and took the steps necessary to become certified. He stated  
that the asbestos remediation business was to operate independently from the  
franchise business. Specialized and expensive equipment was needed which meant  
further expenses were incurred by 55668 to get the business established. It was  
unclear in the evidence whether Paul Davis Systems of Canada had approved this  
venture.  
Industrial Cleaning  
[49] A further business commenced around the same period was that of cleaning  
industrial clothing, which meant further financial investment, including a new lease  
from Farmington for a specialized washer and dryer. Again, it was unclear in the  
evidence the extent to which, if any, Paul Davis Systems of Canada authorized this  
venture.  
Page 17  
The deterioration of the relationship with Chris Winsor  
[50] Mike Hall testified that a further complicating factor in running 55668, as well  
as Canadian Roofing Solutions, in 2009 was the deterioration of his relationship with  
Chris Winsor. With the two having been longtime friends, Mike Hall stated the  
deterioration of their friendship was “like a divorce”. From his perspective, the main  
issue was that Chris Winsor became involved in a personal relationship with a  
former Co-operators adjuster, Kim Williams. Mike Hall stated that in 2009 she took  
sick leave from the Co-operators and spent significant time in Chris Winsor’s  
company. Mike Hall was concerned about the time they spent together, especially  
while Chris Winsor was at work, given the potential for the appearance of, if not an  
actual, conflict of interest. He described that often Kim Williams was at the premises  
of 55668, and he was concerned she might have access to other files of 55668. He  
learned that she in fact attended site visits on claims that did not have to do with the  
Co-operators. He stated he spoke to Chris Winsor about the potential for creating a  
conflict of interest with respect to non-clients of the Co-operators, but the problem  
continued.  
[51] To compound the financial and operational pressures on 55668 in 2009 (the  
increased expenses, the addition of the above-described new businesses and  
renovations to the newly leased premises), 55668 lost its two major clients: the Co-  
operators and Unifund.  
The loss of Co-operators Insurance business  
[52] According to the witnesses, the Co-operators Insurance Company made up  
almost 80 per cent of 55668’s business. However, sometime between 2008 and 2009  
problems developed with individual restoration jobs. Not only were there  
complaints regarding the quality of work, there was concern voiced of a potential  
conflict of interest in the personal relationship between Chris Winsor and Kim  
Williams, the adjuster with Co-operator’s. Complaints regarding the potential for  
conflict of interest developed as early as the fall of 2008 (see for example, Exhibits  
ML #3 and ML #5). In the spring of 2009, 55668 was suspended from the Co-  
Page 18  
operatorsroster of restoration companies with whom insurance adjusters were  
entitled to contract. The loss of work meant a significant drop in revenue for 55668.  
[53] The adverse impact from the loss of revenue was evident by mid-summer.  
Royalty payments to Paul Davis Systems of Canada were late. This delay in  
payments precipitated a series of emails from various personnel from the franchisor.  
Around mid-August 2009, after several communications went unanswered or only  
briefly responded to by Mike Hall, Stephen Robinson sent a formal memorandum  
(Exhibit #1, Tab 42) to Mike Hall and Chris Winsor. Stephen Robinson expressed  
not only his concerns with the delay in monies due to Paul Davis Systems of Canada,  
he was concerned that the two directors had commenced a new venture, Canada  
Roofing Solutions, without first getting approval from he and Ken Robinson.  
[54] Mike Hall testified that the reaction of Paul Davis Systems of Canada to  
establishment of Canadian Roofing Solutions was mixed, and that their main  
concern was if or how the business could impact royalty payments. He stated there  
was discussion back and forth about an arrangement that might work for both parties,  
but there was “never a definitive no” to the business. Exhibit #1, Tab 42 suggests  
that the reaction was more than mixed:  
As you know, PDSC has been very patient with you and had given you a break on  
your royalty. They have gone beyond being supportive of your business and now  
have to react because of what has taken place. I have attached the part of your  
Franchise Agreement which states that you cannot conduct a business other than  
your Paul Davis business. (6.4 and 6.5). Based on your financials you have not  
paid your taxes and are therefore in breach of the Operations Manual and MOR.  
Non payment of taxes is a serious breach. It seems that you have been funding your  
roofing company through your Paul Davis Company.  
We believe that you have loaned the roofing business thousand [sic] of dollars,  
while at the same time, not paying PDS Canada. I lack seeing the fairness in your  
decision on this point. Ken and I have done everything from loan you money, to  
teaching you on how to become a successful business owner and can tell you we  
are both highly disappointed in your actions now.  
[55] The memorandum continued:  
Page 19  
The Franchise Agreement is very clear on what is expected of you and what is  
expected of us. We have no choice, but enforce this fully. You should have no  
doubt that we cannot allow certain breaches to continue. …  
[56] Stephen Robinson expressed concern that not only did Canadian Roofing  
Solutions operate from the same premises as the franchise, used the same equipment  
and the same employees, there was concern that the revenue generated by 55668  
from Paul Davis Systems was being used to run the roofing business.  
[57] The memorandum was also concerned with the financial health of the  
franchise generally and referred to it as “again” being “insolvent”. (The reference  
to “again” was to Mike Hall having had previously declared personal bankruptcy.)  
The memorandum stated that as of the summer of 2009, while accounts receivable  
were $157,552.28, accounts payable were $247,246.27. There was concern that  
55668 was having to rent two premises at the same time, and the franchise was  
behind not only in royalties, but statutory remittances.  
[58] The memorandum advised the two shareholders that they had “15 days to  
provide the following remedy”, and then listed a number of specific tasks to be  
performed; including furnishing information about the particulars of Canadian  
Roofing Solutions. The memorandum ended with what might be seen as a warning:  
It is unfortunate we have arrived at this point as all could have been prevented by  
simply heeding our advice and following your franchise agreement. I don’t want to  
be forced to close your franchise, but it seems that that [sic] the franchise is being  
operated as if no agreements have been signed and no rules need be followed.  
[59] Mike Hall testified he did not recall that the memorandum included 15 days  
notice to complete the steps to remedy the situation. He did however immediately  
respond to the memorandum with an email (Exhibit #1, Tab 43) advising Stephen  
Robinson that “we feel confident that we will rebound from our seeming financial  
low we are enduring”. He also took “exception” to the assertion that the other  
business ventures were financed by the franchise, and stated in the email:  
Page 20  
Our other ventures are supporting and fostering the growth of PDS, which will carry  
our parent company to the next level and allow us to repay our outstanding AP.  
[60] The email was signed as “Your friend, Michael”. Mike Hall testified that in  
his view, Canadian Roofing Solutions was an independent business that did not  
adversely affect the business interests of the Paul Davis Systems franchise. Chris  
Winsor stated in his testimony that he also disagreed with the head office that  
royalties should be paid to Paul Davis Systems of Canada from Canadian Roofing  
Solutionsrevenue.  
[61] Mike Hall provided the information regarding Canadian Roofing Solutions as  
requested in the August memorandum. In an email sent September 2, 2009 (Exhibit  
#1, Tab 45), Mike Hall tried to assure the Robinson brothers that the franchise was  
on track, and that they were committed to paying outstanding royalties, which at that  
point were in excess of $48,000. Although the email from Mike Hall maintained a  
friendly and even joking tone, the response from Ken Robinson was less so:  
Hi Mike and Chris  
Thank you for providing the information requested. I will review immediately upon  
receipt and get back to you.  
Steve and I are very concerned about your organization. You have moved forward  
with many initiatives this past year and been bitten by a few of them. We have both  
seen and experienced this type of situation before and the outcome is usually very  
bad. We both hope you will become very successful business people. Let’s hope  
this path does not prove fatal.  
I have often said to my employees in the past, don’t mistake my kindness for  
weakness. Because I will always do what is necessary. Please don’t mistake me.  
That being said, I do consider you both friends and I’m sure we can get you back  
on the path. But you must be willing to listen!  
Best wishes.  
Ken Robinson  
Page 21  
[62] Upon review of the financial information forwarded by Mike Hall, on  
September 10, 2010 Stephen Robinson sent a further memorandum to both Mike  
Hall and Chris Winsor, outlining the concerns of Paul Davis Systems of Canada  
(Exhibit #1, Tab 47). He confirmed the Robinson brothersview that not only were  
55668, Mike Hall and Chris Winsor in breach of the franchise agreement, Stephen  
Robinson reminded Mike Hall and Chris Winsor that there were “outstanding A/R  
issues” and that the failure to address this problem could result in termination of the  
franchise. He wrote:  
It needs to be clearly understood that the St. John’s franchise could be terminated  
for these breaches. It is not our intention to do so at this time, but all issues must be  
resolved.  
[63] Mike Hall responded to Stephen Robinson’s email agreeing with some  
pointsbut reaffirming his view that the roofing company operated independently  
of the franchise. He stated that the company would continue to dispute that Paul  
Davis Systems of Canada was owed royalties from revenue of Canadian Roofing  
Solutions. With respect to being in breach of clauses 6.4 and 6.5 of the franchise  
agreement, he stated:  
We see our dilemma as to the conflict of interest presented in our FA in sections  
6.4 and 6.5 and we are seeking legal opinion as to a remedy.  
[64] In the email, Mike Hall stressed the desire to resolve the conflict and remain  
on good terms with the head office. He expressed that he and Chris Winsor were  
willing to “make the necessary changes to the present structure” of Canadian  
Roofing Solutions so that “both PDSC and PDSJ will be happy with the  
compromise”.  
[65] Stephen Robinson responded to this email in a more conciliatory tone than  
earlier emails. He stated: “we do understand the reasoning behind your decision to  
open a roofing business”. He also supported Mike Hall discussing the issue with a  
lawyer, explaining that “[w]e (PDSC) don’t have many options but to enforce the  
agreement and let the process take its course”. Stephen Robinson also stated that one  
option open to Mike Hall, once they received legal advice, was to pursue arbitration.  
Page 22  
He reminded Mike Hall that Paul Davis Systems of Canada had not received any  
payments from 55668 in “6 to 7 months”.  
[66] Ken Robinson testified that if the royalties from Canadian Roofing Solutions  
had been paid to Paul Davis Systems of Canada, they would have approved of the  
business. This supports Mike Hall’s testimony that a share of royalty payments from  
Canadian Roofing Solutions’ revenue was the Robinsons’ primary concern. On  
cross-examination, Ken Robinson agreed that there were other franchisees who  
operated businesses in addition to their franchises. He agreed that Robin Sullivan  
operated a construction business as well as the west coast franchise. Ken Robinson  
distinguished Robin Sullivan’s situation from that of Mike Hall and Chris Winsor in  
that “Robin was doing everything right” in making the required payments; whereas  
with Mike Hall and Chris Winsor, the concern was that the other businesses were a  
“distraction”.  
[67] In October 2009, an agreement to address the late royalty payments from  
55668 was reached (Exhibit #1, Tab 48). It was signed by Mike Hall, Chris Winsor  
and Stephen Robinson. Apart from the payment regime to address monies owed to  
Paul Davis Systems of Canada, 55668 was not permitted to assume new debt for  
equipment. The agreement also included the following statement in bold type:  
Please note that this is a notice of Non-Compliance as per the Operations Manual,  
Booklet III, MOR, where stated that each Franchise shall pay all sums due to the  
Franchisor as and when due. Failing to do so will result in a monetary ($500.00) or  
network penalty (lose right to vote/awards/termination).  
[68] Although no agreement was reached as to whether royalties were owed by  
Canadian Roofing Solutions, Mike Hall testified that he thought things were  
settling downand a plan was in place.  
Page 23  
The meeting in November, 2009  
[69] Around early November 2009, both Ken and Stephen Robinson came to St.  
John’s when the opening was held for the new premises at McNamara Drive. Both  
Robinsons testified that they did not visit to celebrate the opening of the new  
premises, but to have a frank discussion with Mike Hall and Chris Winsor about the  
state of finances of the St. John’s franchise.  
[70] Chris Winsor testified that at that meeting, the brothers were upset about the  
“outstanding issues”. He testified that Stephen Robinson stated that the franchise  
was insolvent, to which Chris Winsor stated he did not appreciate the comment, and  
did not agree. He thought business was “good”, as at that point work was still  
coming in. However, he also testified that at that time he did not know the full state  
of affairs with the finances of both 55668 and Canadian Roofing Solutions.  
[71] Mike Hall testified that at the meeting, in looking for a way to resolve the  
financial difficulties of 55668, Ken Robinson suggested that one option was for the  
business to be sold. Mike Hall stated he was open to selling the franchise. He stated  
that the brothers indicated to him that they had a buyer. During this meeting, Mike  
Hall stated that he was advised by the brothers that Robin Sullivan was a possible  
buyer for the franchise. Both Ken and Stephen Robinson denied having said this;  
nor did Chris Winsor confirm that Robin Sullivan was mentioned as a potential  
purchaser. He did agree on cross-examination that approximately six months prior  
to the termination of 55668’s franchise, Robin Sullivan told him that he, Robin  
Sullivan, would be the new franchisee.  
[72] Robin Sullivan denied that he had been interested, or even approached by the  
Robinsons, to purchase the franchise in the fall of 2009. He also denied that he told  
Chris Winsor he would be the new franchisee. Robin Sullivan testified that he was  
aware of the trouble faced by 55668, and was concerned how it might affect his  
operations on the west coast. He testified he was not approached by the brothers to  
possibly take over the franchise until after Christmas of 2009, or early January 2010.  
Page 24  
[73] I accept that there was discussion at the meeting in November 2009 that an  
option for the resolution of the franchise’s financial woes was to sell the franchise.  
I also accept that Robin Sullivan’s name may have come up in the meeting. I also  
accept Chris Winsor’s testimony that Robin Sullivan advised him that he was going  
to be the new franchisee, but have difficulty accepting that this occurred six months  
prior to the termination of 55668’s franchise agreement. I agree with Robin Sullivan  
that it is more likely that he was approached by the brothers around Christmas 2009,  
or early January 2010, when 55668 lost its second major client, Unifund.  
The loss of Unifund  
[74] Despite coming to an agreement in October 2009 as to how to return the  
business to more solid financial footing, towards the end of November 2009, 55668  
suffered another major financial setback. Unifund suspended 55668 as a potential  
contractor for restoration work. Mike Hall testified that there was no formal notice,  
but he learned of the suspension while on a snowmobiling trip in the Rocky  
Mountains with Robin Sullivan. Mike Hall stated that he received a phone call from  
Michelle Stack, the close friend and business associate from Unifund, who advised  
she had been fired from the company.  
[75] Mike Hall pursued the matter further with the regional manager at Unifund,  
Gerard Corcoran. A series of emails were tendered showing correspondence  
between the two (Exhibit #1, Tabs 49-50). In a lengthy email on December 1, 2009,  
Mike Hall requested to meet with Gerard Corcoran to try and resolve the suspension.  
In the email, he described the franchise as a “loyal service provider” and took  
“enormous pride” in the position the franchise had held with Unifund. The email  
response from Gerard Corcoran was telling:  
[You have] no clue of the present state of affairs we (Unifund) finds itself in thanks  
to the lack of attention and control of several restoration jobs currently ongoing  
with your company. Over the past several weeks (and actually months) PDS has  
done anything but “make Unifund look good”.  
We have adjusters scrambling to get control of several files that have gone clearly  
off the rails because of the incompetence [shown] by your staff by not “doing the  
Page 25  
right thing” and not “keeping control of the situation” when it comes to major  
restoration --- needed in a timely manner.  
[76] Gerard Corcoran stated in the email that until matters were under control, he  
would not discuss the situation with Mike Hall.  
[77] Whether the work done by 55668 for Unifund was of less than satisfactory  
quality was not pursued in detail at trial. However, Gerard Corcoran testified that  
from his recollection, there were problems with particular restoration projects. He  
agreed on cross-examination that there could also be unreasonable clients. He  
testified that one concern was not so much about the quality of the work, but that  
55668 had obtained a larger share of restoration work than was typical. That  
imbalance had to be rectified and was part of the reason for the suspension. While  
he agreed that the suspension of the franchise was not necessarily permanent, he  
stated that as long as Mike Hall was associated with Paul Davis Systems, Unifund  
would not use the franchise for restoration work. I accept as a fact that by the end  
of November, 2009, Unifund no longer wished to utilize Mike Hall or 55668 for  
restoration work.  
[78] The loss of both Unifund and Co-operators for 55668 meant that by the end  
of December 2009, 55668 had lost its major sources of revenue.  
[79] Mike Hall stated that in late December or early January 2010, he had  
discussions with Robin Sullivan. According to Mike Hall, Robin Sullivan expressed  
an interest in purchasing the business and was willing to discuss coming to an  
agreement. Mike Hall stated that in the meantime he also considered other potential  
buyers and even raised another specific potential buyer, Henry Power, with Chris  
Winsor. Robin Sullivan did not confirm the conversation. I find as a fact there was  
a conversation between Robin Sullivan and Mike Hall about selling the franchise, in  
late December 2009 or early January 2010.  
Page 26  
The events of January 2010  
[80] Matters came to a head in January of 2010.  
[81] Mike Hall testified that in his view, the deterioration of his relationship with  
Chris Winsor contributed negatively to business. He decided Chris Winsor should  
be removed from managing the business. Rather than approaching him directly, or  
taking any of the steps as established in the unanimous shareholder agreement, on  
January 3, 2010 Mike Hall sent an email advising several employees that Chris  
Winsor and he would be “parting ways” (Exhibit #1, Tab 55). He forwarded a  
similar email to Ken and Stephen Robinson approximately an hour later. He did not  
send the email to Chris Winsor. Chris Winsor stated that he found out about the  
email from one of the recipients, Dwayne Kearney.  
[82] Chris Winsor stated upon learning of the email, his first concern was that he  
was losing his job. He telephoned Ken Robinson and was advised by him that Mike  
Hall could not do thisas it would be in breach of the franchise agreement. Chris  
Winsor then wrote Mike Hall an email and advised him accordingly. At the direction  
of the Robinsons, the four individuals spoke in a conference phone call the next  
morning.  
[83] Mike Hall stated that in that phone call he was told by the brothers to send out  
a retraction regarding Chris Winsor or there would be no “further dialogue”  
regarding helping out the franchise. Mike Hall stated that he was told that he had no  
authority to “break” his relationship with Chris Winsor, but had to obtain  
authorization from the head office. Mike Hall described the direction to him to either  
“back down” or it would be the end of the relationship with Paul Davis Systems of  
Canada. Mike Hall stated that, for that reason, he sent an email to the Robinsons  
confirming that he would not pursue removing Chris Winsor as a director or  
shareholder of 55668 (Exhibit 1, Tab # 58).  
[84] Chris Winsor testified that when he learned from Dwayne Kearney of Mike  
Hall’s intention to remove him from the franchise, while he was worried about losing  
Page 27  
his job, he also wanted to quit. However, he testified that Ken Robinson convinced  
him to stay with the franchise. After the phone conference in which the Robinsons  
directed Mike Hall to retract the email purporting to remove Chris Winsor as a  
director of 55668, Chris Winsor emailed the brothers advising that he would  
continue to work for and “support” the franchise “until I am directed from PDSC.”  
He advised he would update the brothers over the next month, and thanked them for  
their support.  
January 22, 2010  
[85] Mike Hall testified that after the phone call on January 4, 2010, his  
relationship with both of the Robinsons and Chris Winsor became tense. There was  
little communication thereafter.  
[86] Chris Winsor testified that after the phone call with the Robinson brothers,  
and during the month of January 2010, Mike Hall’s behavior was “unpredictable”.  
In particular, on the afternoon of Friday, January 22, 2010 during business hours, he  
noticed Mike Hall removing equipment and items from the workshop area of the  
premises. He could not recall exactly what was taken, except tools and a snow-  
blower, but he became concerned because he did not know what Mike Hall was  
removing or why. There were items that belonged to homeowners or other clients of  
the insurance companies stored at the premises while restoration work was done.  
Chris Winsor knew that the franchise was responsible for the safekeeping of this  
property while at its premises.  
[87] He also became aware that on the same date, that Mike Hall had directed  
55668’s bank to remove overdraft protection on its account. Mike Hall then  
transferred approximately $15,000 from 55668’s bank account to the bank account  
of Eastern Restorations Limited. Mike Hall testified that he transferred the money  
because Eastern Restorations Limited had loaned this money to ensure that 55668  
would have the necessary overdraft protection on its account.  
Page 28  
[88] Chris Winsor stated that he telephoned Ken Robinson the same day “looking  
for direction” as to what he should do. He stated that Ken Robinson told him to  
“change the locks”. On cross-examination by counsel for Paul Davis Systems of  
Canada, Chris Winsor qualified what Ken Robinson said to “he told me I could  
change the locks”. Under further cross-examination by counsel for the Plaintiffs,  
Chris Winsor confirmed that it was Ken Robinson’s idea to change the locks. He  
stated he did not know of any authority under the franchise agreement to take such  
action but assumed there was authority given it was what Ken Robinson told him to  
do. He followed this direction and had the locks changed by an employee. He then  
sent an email both to Ken Robinson and Robin Sullivan (Exhibit #1, Tab 64)  
advising of having changed the locks. He testified that his concern was to ensure  
that the property of third parties, and the contents of the building generally, were  
safe.  
[89] Ken Robinson testified that while he had a conversation with Chris Winsor he  
did not direct him to change the locks at the premises. He may have suggested it as  
an option. He testified his main concern was to ensure that any property belonging  
to customers stored at the premises was protected from harm.  
[90] Mike Hall stated that on January 22, 2010 he received a call from one of the  
managers, Larry Walton, that the locks to the premises of McNamara Drive had been  
changed. Mike Hall testified he tried the locks himself the next day, which was a  
Saturday when the offices would normally be closed, and was unable to access the  
premises.  
[91] Larry Walton testified that he was the person who actually changed the locks.  
He was instructed to so do by Chris Winsor, and then was told that he and other  
employees were not to allow Mike Hall into the premises except during business  
hours, and through the front door. He testified that at the time he had no concerns  
that Mike Hall was removing assets of 55668 or insurance clients from the premises.  
[92] Dwayne Kearney similarly testified that he was also instructed to not allow  
Mike Hall on the premises. He testified that because of what happened, the “drama”  
as he described it, employees were concerned whether or not they would have a job.  
Page 29  
He also testified that before January 22 he did not see Mike Hall remove any property  
from the premises. He did not know if Mike Hall removed any of his personal  
property, but testified “I’m sure he did”. Dwayne Kearney testified that he was told  
by Chris Winsor to report if Mike Hall came to the premises.  
[93] Glen Cook, another employee of 55668, confirmed that Chris Winsor advised  
that the locks were changed. He understood from Chris Winsor that the direction to  
do so “specifically” came from Ken Robinson. He testified he remembered this  
because he remembered stating “that’s going to have implications down the road”.  
The termination of the franchise agreement  
[94] On January 26, four days after the locks were changed at 55668’s premises, a  
letter (CW #3, Tab 12) was sent from Paul Davis Systems of Canada to both Chris  
Winsor and Mike Hall advising that the franchise agreement was being terminated  
under article 17 of the franchise agreement. The termination was for “failure to  
maintain business practices in accordance with the Paul Davis Systems Operations  
Manual”. The failure was as per article 17.1(A) of the franchise agreement by failing  
to pay “sums” as required. As a termination under article 17.1, the termination  
should have included the 15 day notice period for 55668 to curethe failures.  
However, the notice provided no option to remedy the failures, in particular the late  
royalty payments. The termination notice also cited article 6.2b for:  
“failing to conduct business as per the Franchise Agreement: Franchisee agrees to  
carry on, conduct and operate the business contemplated by this franchisee  
agreement on a full time basis, …etc.”  
[95] The citation of the relevant article number as 6.2b appears to have been in  
error. The text of the article cited as 6.2b is in fact the text of articles 6.4 and 6.5 of  
the franchise agreement referred to earlier in this judgment. Article 6.2b of the  
franchise agreement refers to unrelated subject matter. Nothing turns on this  
apparent error in the letter, as it was clear from the evidence, and the parties agreed,  
that the basis for the termination of the franchise was because of the failure to pay  
Page 30  
the required royalties, and that 55668, by operating a separate business, Canadian  
Roofing Solutions, violated articles 6.4 and 6.5.  
The new franchise agreement with 61791 and Robin Sullivan  
[96] On February 6, 2010, less than two weeks after the termination of the  
franchise agreement with 55668, Paul Davis Systems of Canada signed a franchise  
agreement with Robin Sullivan and 61791, his newly incorporated company (RS #2,  
Tab 10). The new name of the franchise was Paul Davis Systems Eastern.  
[97] Neither Robin Sullivan nor the Robinson brothers could recall with precision  
when Robin Sullivan was approached or agreed to run a franchise for Paul Davis  
Systems in eastern Newfoundland and Labrador. Chris Winsor also initially testified  
that he was unsure at what point he knew that Robin Sullivan was going to take over  
the franchise, notwithstanding that he also testified that Robin Sullivan had told him  
he would be the new franchisee six months earlier. However, on cross-examination,  
Chris Winsor agreed he must have known at least by January 22, because he would  
not otherwise have advised Robin Sullivan that the locks had been changed. Chris  
Winsor also agreed that after the locks were changed he took direction from Robin  
Sullivan. He stated that there was a two-week period before the locks were changed  
where he was given no direction by anyone.  
[98] Gerard Corcoran from Unifund confirmed email communication with Robin  
Sullivan as early as January 18, 2010 (Exhibit 1, Tab 63) in which Robin Sullivan  
advised he was taking over the Paul Davis Systems franchise in St. John’s. The  
email from Robin Sullivan to Gerard Corcoran states:  
Hi Gerard, I think that we haven’t officially met but I am told that Jason Hicks and  
Todd Blake have spoken to you in the past with regards to our work here on the  
west coast of the province. I have been in conversation with Ken Robinson of PDS  
Canada and the PDS staff out in St. John’s with regards to the current issues in that  
location. I have been engaged to take over the business out there in an effort to right  
some of the wrongs that have been done.  
Page 31  
I am coming to St. John’s to begin this task and would like to ask for the  
opportunity to meet with you to discuss the issues so that I can or we can resolve  
them with the hopes of doing work in the future for your organization. Please let  
me know a time that I might come and speak with you in the next day or so. Just 5  
minutes would do.  
[99] Although Robin Sullivan could not recall the email, he did not dispute that he  
would have met with Gerard Corcoran in the course of doing his “due diligence” to  
determine whether or not he would take over the franchise. He did not agree that he  
had made a final decision to assume the franchise at that point, but was still doing  
his “due diligence”. Robin Sullivan stated that not only Unifund, but other suppliers  
or contractors used by Paul Davis Systems in St. John’s did not want to hire, or be  
hired, if Mike Hall was associated with the franchise. Many suppliers had not been  
paid, and their relationships with the Paul Davis Systems franchise in St. John’s were  
strained. Robin Sullivan testified he had to meet with suppliers and clients to see if  
they would accept further business from the franchise with him at the helm, and it  
was for this reason he met with Gerard Corcoran.  
[100] Even earlier there was correspondence from Jim Johnson to Ken Robinson (J.  
Johnson #3) dated January 13, 2010 before the termination of the franchise  
agreement that stated:  
I spoke to Chris Winsor; who is very optimistic that the business will survive.  
He indicated that he is waiting for a decision from you (head office) on the future  
plans for St. John’s.  
[101] Larry Walton, who kept a diary to keep track of work for the franchise (LW  
#1), had noted on January 25, 2010, before the new franchise agreement but after  
the locks were changed, to provide Robin Sullivan with a list of “courses and  
contacts”.  
[102] Similarly, Dwayne Kearney testified that on January 29, 2010 he went to the  
west coast of the island to help out with that franchise, while Robin Sullivan came  
to St. John’s to conduct business in relation to the St John’s operation. Robin  
Sullivan also agreed these events occurred. January 29, 2010 would have been after  
Page 32  
the termination of the franchise agreement with 55668, but prior to Robin Sullivan  
signing the new franchise agreement with Paul Davis Systems of Canada in  
February.  
The transition from 55668 (Paul Davis Systems St. John’s) to 61791 (Paul  
Davis Systems Eastern)  
[103] Although the new franchise agreement for 61791 was in place by early  
February 2010, it took several weeks for the operations that related to Paul Davis  
Systems to be transferred from 55668 to 61791. Chris Winsor testified that he  
understood that Mike Hall was going to continue with the roofing business. While  
55668 would clue up any outstanding work for Paul Davis Systems, 61791 would  
take over new work that appeared.  
[104] During this period, the same employees were working for 55668 and 61791.  
Both Robin Sullivan and Chris Winsor testified there was an effort to have  
employees paid by 55668 or 61791, depending on for whom work was being done,  
but the delineation was not clear. There was overlap as to which company paid  
which employee and when. For example, a check stub was filed for Larry Walton  
showing that for the weeks February 22, 2010 to March 3, 2010, after the franchise  
agreement was terminated with 55668, he was paid by 55668; although he was also  
assisting Robin Sullivan in organizing the new franchise. By April 2010, it appears  
the employees were all transferred to 61791’s payroll.  
[105] There is ample correspondence during February and March 2010 that suggests  
that, for the most part, there was an amicable tone to the negotiations to the transfer  
of operations from 55668 to 61791. In particular, the email correspondence from  
March, 2010 described in Exhibit #1, Tabs 81, 82, 85, 87, shows that the parties not  
only came to an agreement on the assignment of the lease held by 55668 for  
McNamara Drive, but they were working towards an agreement on the assignment  
of 55668’s equipment and infrastructure.  
Page 33  
The transfer of the lease of premises at McNamara Drive  
[106] The assignment of the lease was finalized on March 29, 2010 (Exhibit #1, Tab  
13), and signed by Mike Hall and Robin Sullivan. Robin Sullivan testified that he  
did not want to lease McNamara Drive because in his view the premises were larger  
than what was needed to run the franchise. However, he testified that work started  
coming in almost immediately for the new franchise. He needed not only space  
immediately within which to run the franchise; he also wanted to assure clients like  
Unifund that the new franchise was in control of the premises and business. For this  
reason, he testified he was willing to assume the lease. I accept his testimony that  
this was why he assumed the lease.  
[107] The lease, as had been arranged between 55668 and the owner of the building,  
included an option to purchase the building at the end of the lease period. The  
purchase price was just under one million dollars, less the rent that was paid during  
the term of the lease. Included in the assignment to 61791, was a further clause that  
61791 agreed to pay $50,000 to 55668 if, at the end of term of the lease, Robin  
Sullivan and 61791 decided to purchase the premises rather than continue to rent.  
[108] There was a conflict in the evidence as to the purpose of this clause. Robin  
Sullivan testified that this clause was to accommodate Mike Hall’s concern that  
55668 be reimbursed for the improvements made by the company to the premises  
when it had renovated the building. Under cross-examination, it was put to Robin  
Sullivan that the $50,000 represented reimbursement for monies 55668 had already  
paid under the lease. Robin Sullivan disagreed.  
[109] Part of the email correspondence on the terms of the lease assignment and  
transfer of operations included exchanges about compensation for the leasehold  
improvements. In an email dated March 23, 2010 (Exhibit #1, Tab 85), Mike Hall  
stated:  
In discussions with my lawyer, it is clear that unless you are willing to  
compensate Chris and I for our leasehold improvements, I’m not willing to sign the  
assignment …  
Page 34  
[110] Robin Sullivan responded:  
Fair enough. As for the leasehold improvements, I guess it would be easy enough  
then to put a clause in the assignment of the lease that if I decide to stay in the  
building and ultimately buy it out, which is not happening because it is too big for  
us, then at that time I would reimburse you for some of the costs of the  
infrastructure. Does that solve the assignment issue with you? All we have to do is  
come to terms on a more reasonable value of the infrastructure and that is put to  
bed.  
As for the assets, Chris has to put all the information together and then I can finalize  
my list for the agreement.  
Sound good?  
[111] Mike Hall responded back “Sounds good old friend!!”  
[112] Mike Hall denied in his testimony that the purpose of the $50,000 payment  
clause was to accommodate his concern that the improvements to the premises be  
accounted for in the transfer of assets. He stated that the clause was “earmarked for  
the opportunity Robin Sullivan was given to take over the lease agreement”. Mike  
Hall testified that he signed the lease under duress and compulsion and if he had  
known that he would be treated dishonestly he would never have signed.  
The transfer of assets and equipment  
[113] There was both leased equipment as well as equipment owned by 55668 that  
was transferred from 55668 to 61791.  
[114] With respect to equipment owned by 55668, by March 18, 2010, Chris Winsor  
prepared a list with estimated values in dollars beside each item (Exhibit #1, Tab  
82). The total value of the assets in this list was estimated to be $157,000. This  
amount included a value of $75,000 for “building infrastructure” to account for the  
improvements that had been made by the renovations to the leased premises. This  
Page 35  
list was forwarded by email to Mike Hall on the same day. He responded by email  
(Exhibit #1, Tab 81): “Looks good to me”. Although the list was not attached to  
this email exhibit, given the timing of the emails I am satisfied this response was  
made regarding the list.  
[115] At trial, Mike Hall disputed that he agreed that this was a “complete” list of  
the assets of 55668. Nor did he agree with the valuations. He testified that the item  
“GMC van capson the list valued at $4500 was inaccurate, as there were three such  
caps, which he would have valued at $7500 each. He testified that when he sent the  
email saying “Looks good to me”, he did not think this list was final, but was a  
starting point.  
[116] There was difficulty in coming to agreement, not solely regarding the value  
of the equipment; but how compensation for the acquisitions was to be effected.  
Rather than pay 55668 directly, Robin Sullivan wanted to pay debts outstanding to  
creditors who were continuing suppliers or contractors used by the Paul Davis  
Systems franchise. However, Mike Hall testified that he did not agree that this was  
how the money should be used, if the money was not going to come directly to  
55668. He was more concerned with paying creditors such as Revenue Canada or  
Workplace Safety NL (see for example Exhibit #1, Tab 100), in which Mike Hall  
emailed Chris Winsor that he would only allow the sale of one of the vehicles if “the  
full proceeds go toward the Revenue Canada Remittance balance”).  
[117] On April 16, Chris Winsor emailed Mike Hall to tell him Robin Sullivan “has  
agreed to buy all the assets from 55668 for the prices that we had listed”. Chris  
Winsor testified he was referring to the list with values that had been prepared on  
March 18, 2010 (Exhibit #1, Tab 103). Before Mike Hall responded to this email,  
Chris Winsor also emailed Mike Hall regarding payments on two vehicles owned by  
55668, and other equipment (Exhibit #1, Tab 102). Mike Hall responded to this  
second email first, stating: When is Robin making the payment for the equipment?”  
[118] Mike Hall then responded to the first email about Robin Sullivan having  
agreed to purchase the assets, and stated:  
Page 36  
I will agree to the sale of these assets when the cheque has been delivered to our lawyers.  
...  
[119] Chris Winsor testified that he took these responses as agreement from Mike  
Hall with the list and values as the proposal for Robin Sullivan. Mike Hall testified  
that when he wrote this email, he was “wondering what was going on with the  
assets”.  
[120] An agreement was signed and dated April 30, 2010 (Consent #1, Tab 14). The  
assignment agreement contained the original list prepared by Chris Winsor without  
the item “building infrastructure”, as that had been accommodated in the lease  
assignment signed in March 2010. The value of the assets to be assigned to 61791  
was also as per the original list except as reduced to account for the removal of the  
building infrastructure value of $75,000. The amount of money to be paid for the  
remaining assets was $70,000.  
[121] There was a Schedule Aattached to the agreement which was a list of  
inventory different than the list prepared by Chris Winsor on March 18, 2010.  
However, the March 18 list was included (less the item “building infrastructure”) as  
Schedule “C”, and Schedule “A” referred to Schedule “C” list of items where  
necessary. As well, the $70,000 did not initially include the harmonized sales tax  
(HST). Chris Winsor initialed and wrote in handwriting on the agreement that HST  
was to be added to the $70,000. Chris Winsor and Larry Walton also initialed all  
the pages of the agreement.  
[122] In terms of payments to creditors of 55668, the agreement stipulated:  
Whereas the assets as noted in Schedule “A” of the assignor will be sold as is where  
is to the assignee for noted compensation of $70,000.00 CDN HST inclusive, which  
will be paid out solely to the creditors listed in Schedule “B” for compensation of  
debt owed to them by the Assignor noted above. The above noted compensation  
will attempt to pay off debts owed by the assignor to the credits to the extent that  
the above notes compensation will allow. The Assignee extends no guarantee that  
the creditors will be paid in full and in no way is the Assignee responsible for these  
debts or any others owed by the Assignor.  
Page 37  
[123] Chris Winsor testified that he believed the $70,000 was used to pay the  
creditors listed in Schedule Bof the agreement. He testified that both he and  
Robin Sullivan decided which creditors to pay and chose to pay those creditors with  
whom the franchise needed to maintain a business relationship. The creditors listed  
in Schedule “B” did not include creditors that Mike Hall testified he wanted paid,  
such as Canada Revenue Agency. At trial, Robin Sullivan and 61791 tendered a  
summary of payments totaling $89,418.05, made by 61791 to creditors of 55668 (RS  
#3). Many of the vendors paid were the same vendors listed in Schedule B, and I  
accept that RS#3 is an accurate account of creditors of 55668 that were paid by  
61791.  
[124] RS #3 also listed payments by 61791 for vehicles and miscellaneous items,  
for $19,605 and $5,650 respectively. It appears this money went directly to 55668,  
as evidenced by deposits from 61791 to 55668’s bank accounts. I also accept that  
this money was paid by 61791 for the vehicles of 55668.  
[125] Although the list prepared by Chris Winsor on March 18, and as attached as  
Schedule Cto the assignment agreement contained the item “GMC Van”, it  
appears that most of the vehicles were handled separately from the April 30, 2010  
agreement. An email from Larry Walton to Robin Sullivan on March 25, 2010  
(Exhibit #1, Tab 94) listed a number of vehicle purchases by 61791 from 55668,  
including three vans (1 Ford, and 2 Dodge) and a “Ford Cube Van”. There was also  
a steam cleaner and a “drain vac” listed. The individual amounts paid for the items  
were also listed beside each item and totaled $23,500.  
[126] Mike Hall did not sign the agreement to assign the assets and asserted at trial  
that he never agreed to the terms of this agreement. Mike Hall testified he did not  
know it had been executed until it was forwarded to him and his lawyer in early June  
2010 (Consent #2, Tab 115). Upon receipt of a copy of the assignment of assets  
agreement, then counsel for Mike Hall and 55668, wrote a letter to Robin Sullivan  
(Consent #2, Tab 115) challenging its legitimacy. Mike Hall testified that when he  
became privy to the agreement, he told Robin Sullivan that he “would see him in  
court”.  
Page 38  
[127] Mike Hall further testified that the manner in which the creditors of 55668  
were paid by Chris Winsor and Robin Sullivan meant that the unpaid creditors of  
55668 started approaching him for monies owed. Often they were directed to him  
by Chris Winsor; particularly if it was a creditor for whom Mike Hall had provided  
a personal guarantee. Both Robin Sullivan and Chris Winsor testified that their  
concern was to ensure creditors with whom Paul Davis Systems needed to maintain  
a relationship were paid.  
[128] Mike Hall made arrangements with some creditors, such as Bell Mobility,  
Honda, and Workplace Health and Safety NL to pay debts. The money owed to  
Workplace Health and Safety NL was $44,365.21. Debts totaling $28,302.26 to  
several other creditors were not paid. A further $10,000 was paid by Mike Hall on  
behalf of Canadian Roofing Solutions to a creditor (J.N. Baird & Company), as part  
of a settlement (Exhibit M.H. #7).  
[129] The Farmington leases were handled independently of the agreement to  
transfer the assets. The leased equipment was transferred generally without issue;  
although Robin Sullivan testified that in his view, the leases he entered into with  
Farmington were new leases, as he renegotiated the dates of commencement and  
termination. The email (Exhibit #1, Tab 94) regarding the purchase of vehicles also  
referred to leases that were to be sent to Robin Sullivan. It contained the line “two  
trailers, drying equipment, soda and ice blasters”.  
[130] However, the transfer or renegotiation of the lease for the specialized washer  
and dryer was delayed. There was correspondence from Jim Johnson in March 2010  
which suggested, at least initially, that 61791 would not assume this lease (J. Johnson  
#2, Tab 75). However, it appears that at some point 61791 did take over the lease,  
as a copy of that lease was filed with the court (Exhibit #1, Tab 6). The  
commencement date was July 1, 2010.  
Page 39  
The disposition of Canadian Roofing Solutions assets  
[131] At the time the franchise agreement between Paul Davis Systems of Canada  
and 55668 was terminated, like 55668, the financial picture for Canadian Roofing  
Solutions was not strong. There were outstanding debts, and apart from the one  
major project, there was little revenue being generated.  
[132] Soon after the locks were changed, Mike Hall sent an email to Kent Building  
Supplies (Exhibit #1, Tabs 65-66) advising that he would be continuing on with the  
roofing business without Chris Winsor. However, there was also evidence that Mike  
Hall intended to and did sell the assets of the business to help realize some of the  
outstanding debt. Fred Stack, a retired firefighter who was acquainted with the  
Plaintiff, Mike Hall, testified that he purchased the equipment. He testified he had a  
conversation with Mike Hall about buying the equipment in 2010, and purchased it  
around August of 2010. He stated he thought it was a “good deal” as the equipment  
was in good condition. He testified he paid $7000. Copies of two cheques tendered  
from the banking records of August 2011 showed that Fred Stack paid a total of  
$8000. Mike Hall testified that he used the money paid by Fred Stack to pay debts  
of Canadian Roofing Solutions. The business was discontinued.  
The personal items of Mike Hall  
[133] There was evidence that several items that belonged personally to Mike Hall  
were at the premises of McNamara Drive when the locks were changed. Although  
there was continuous correspondence back and forth between Mike Hall, Chris  
Winsor and Robin Sullivan regarding Mike Hall’s retrieval of these items, this did  
not occur for some time. Mike Hall did eventually retrieve at least some of the items.  
It was not clear in the evidence what was missing, if anything, when Mike Hall was  
finally able to retrieve the items.  
Page 40  
The financial evidence  
[134] Financial reports for both 55668 and Canadian Roofing Solutions were filed  
by consent (Consent MP #5, Supplementary Book of Documents, Tab 9). Similar  
financial statements were filed for 61791 (Consents 7-24, Tabs 18-35). Although the  
financial statements were not established as having been audited or externally  
verified, the parties were in agreement that the statements were generally  
representative of the financial health of all three companies.  
[135] As well, bank statements of 55668 between February 2010 and July 2010  
(Consents #37-43, Tabs 173-179) showed that deposits to 55668’s account totaled  
$550,863.08. There was further evidence that between January 22-28, 2010, 55668  
received $51,289.61 in deposits. This revenue was explained as payment for projects  
that had either just finished, or were finished during 2010.  
THE EXPERT TESTIMONY  
[136] Michael Power, a chartered accountant, testified on behalf of the Plaintiff  
55668, and Errol Soriano testified on behalf of the Defence. Both were qualified as  
experts in business valuation.  
The evidence of Michael Power  
[137] The admissibility of Michael Power’s testimony as an expert was challenged  
both on the basis of his qualifications and alleged impartiality. After a voir dire, I  
was satisfied that Mr. Power was both qualified to give expert opinion and was an  
impartial witness.  
[138] The evidence on the voir dire was that Mr. Power has been a chartered  
accountant, managing his own firm since 1979. With over forty yearsexperience as  
Page 41  
a chartered accountant, he had previously testified in the Supreme Court of  
Newfoundland and Labrador on matters relating to taxation and accounting. He did  
not specify the number of times he has been qualified as an expert in accounting or  
whether he had been previously qualified to give expert opinion on business  
evaluation. He testified, however, that in the course of his work as a chartered  
accountant he developed a niche, advising clients on the financial implications in  
acquiring businesses. This required him to assess the value of a particular company  
including an assessment of the business’ current worth, and expected future  
profitability. He explained this work also included advising clients on the value of  
the goodwill of a company that was a prospective purchase. On cross-examination,  
Mr. Power conceded that he did not have the formal designation of a “chartered  
business evaluator”, and agreed there is a national standard in doing such work.  
However, he testified that he had calculated the goodwill of a company on behalf of  
clients regularly, in the area of 100-200 times per year.  
[139] Mr. Power was also challenged on his impartiality in these proceedings as he  
provided information to Canada Revenue Agency after 2009 on behalf of Mike Hall  
and 55668 respecting taxes owed by both Mike Hall and 55668. Mr. Power  
disagreed that when he provided information, he was acting as an advocate for Mike  
Hall. Mr. Power testified that he understood the need to be impartial. He also agreed  
that his opinions were only as reliable as the information upon which they were  
based.  
[140] Upon hearing his testimony, I was satisfied that he was not acting as an  
advocate for Mike Hall, but did no more than explain facts as he understood them to  
be at the time. I was satisfied both that he would be an impartial witness and was  
qualified to opine on the value of a business. All other criteria for the admissibility  
of expert opinion having been met, I permitted him to testify in the area of business  
valuation.  
[141] Michael Power prepared two reports which were entered by consent. The  
first, (MP #3, Tab 170) was described as a draft report in the form of a five-page  
letter to Mike Hall’s former counsel. There were several attachments including  
copies of emails, unaudited financial statements for 55668 for the years 2007, 2008,  
2009 and 2010, and for 61791 for the years 2011, 2012, and 2013. Michael Power  
Page 42  
also explained that he reviewed the deposit books for 55668 between January 2010  
and May 2010. He also reviewed the inventory list of equipment in 55668’s  
possession as identified by Chris Winsor. The second report (MP #4, Tab 171) was  
a response to Eric Soriano’s “critique” report. This second report was also in the  
form of a letter (five pages), with further attachments.  
[142] According to MP#3, Schedule 1, 55668’s revenue and net income for the years  
2007-2009 was as follows:  
Year  
Revenue  
Net Income (Loss)  
2007  
2008  
2009  
$ 613,771  
1,848,698  
3,138,412  
10,012  
(10,608)  
45,430  
[143] For 61791, in the ensuing years the revenue and net income was determined  
to be:  
Year  
Revenue  
Net Income (Loss)  
2010  
2011  
2012  
2013  
$1,979,150  
3,829,623  
3,243,851  
3,540,374  
(92,818)  
101,209  
(2,582)  
99,117  
[144] Mr. Power testified that at the time the locks were changed (January 22, 2010),  
there were statutory remittances, due by both 55668 and Canadian Roofing Solutions  
to both Canada Revenue Agency and Workplace Health and Safety (WHCC) in the  
following amounts:  
55668  
Canada Revenue Agency Payroll  
WHSCC  
50,487.32  
16,617.23  
________________________________________  
Total 67,104.55  
Page 43  
Canadian Roofing Solutions  
Canada Revenue Agency Payroll  
WHSCC  
66,203.27  
34,339.25  
_______________________________________  
Total 100,542.52  
[145] Mr. Power stated in his report that there was a further amount of money owing  
from both 55668 and Canadian Roofing Solutions to Kent’s Limited in the amounts  
of $56,529.33 and $27,302.20; both debts of which Mike Hall had provided a  
personal guarantee.  
The assets  
[146] According to MP#3, at page 4, the assets and corresponding values of 55668  
as of January 22, 2010 were:  
Deposits (Jan/10)  
Deposits (Feb-May/10)  
Leasehold Improvements  
Equipment  
$
51,289.61  
550,863.08  
350,000  
157,000  
____________________________________  
Total Value 1,147,253.58  
$
[147] Mr. Power described the above as the “hard” assets of 55668.  
The equipment  
[148] The “equipment” value was obtained from the list prepared by Chris Winsor.  
Mr. Power stated that the 2009 financial statements recorded assets in the amount of  
$798,615.32. He explained the difference between his value and the value in the  
Page 44  
2009 statement, in that the 2009 statement did not appear to include account  
receivables for that year or the value of assets later removed from Mike Hall’s  
control.  
[149] In the second report (MP #4, Tab 171, Schedule A), the list of equipment was  
more extensive and was valued at an amount exceeding the previous $157,000, at  
almost $1,000,000. Upon cross-examination, it became evident that this increase in  
value was because included in the itemization of the equipment, were the items  
leased from Farmington. Further, the list included a value of $100,000 for “pick  
ups” and “cargo vans”.  
The leasehold improvements  
[150] Mr. Power explained that the value of the leasehold improvements he assigned  
in his report was given to him by Mike Hall. He was not provided with  
documentation to verify this amount. In the second report, there was a more detailed  
breakdown of the work done as part of the leasehold improvements. There was no  
supporting documentation, but the cost, like the first report, was listed as $350,000.  
Mr. Power also estimated the value of the upgrades to be between $250,000 to  
$600,000. He explained this estimate range was reasonable, as he had noted that the  
salaries for employees of 55668 had increased dramatically for the year 2009 when  
the renovation work was completed. He understood that it had been the employees  
of 55668 that had conducted the renovation work. He testified that the amount of the  
increase in salaries was proportional to the estimated costs in leasehold  
improvements. Given this, he was satisfied that the estimated figure of $350,000 was  
consistent with this comparison of the total cost, less the increase in salaries.  
The calculation of goodwill of 55668  
[151] Mr. Power testified that at the time the locks were changed, there would have  
been a goodwill value attached to 55668. He calculated the value of the goodwill to  
be somewhere between $693,273 and $1,039,914.  
Page 45  
[152] In determining this value, Mr. Power explained that he relied on not only the  
financial statements of 55668, but the financial statements of 61791 in 2011 to  
calculate the goodwill value (MP #3, p. 5). When he examined 61791’s financial  
statements, he observed that the level of revenue was similar to that of 55668’s  
revenue in 2009. In his view this similar level of revenue supported that had 55668  
been able to continue in 2011 with operations, 55668 could have expected a similar  
level of revenue as 61791.  
[153] Upon review of the information he was provided, Mr. Power concluded that  
at the time the franchise agreement was terminated, the total value of 55668 was  
estimated to be between $1,840,529 and $2,187,167. Although his first report  
referred to these figures as representing the “actual loss to Michael Hall”, Michael  
Power stated that the figures should have been described as representing the value  
of the assets of 55668 “out of the control” of Michael Hall.  
[154] On cross-examination, Mr. Power was challenged on his explanation as to  
how or when a business possessed goodwill. While Mr. Power did not concede that  
there was no goodwill in a business that was not being sold, he agreed that the value  
of goodwill is a value that only becomes relevant when a business is being sold.  
[155] Mr. Power was also challenged as to whether or not his draft report was a  
valuation of losses to Mike Hall personally, or a valuation of 55668 at the time of  
lockout. It was pointed out to him that the opening sentence in the report referred to  
providing “comments” on the “financial impact of the lockout of Mike Hall”. The  
concluding paragraph in the draft report refers to the “actual loss to Mr. Michael  
Hall”, and the reference line states “Mike Hall”.  
[156] Mr. Power acknowledged the references, but stated that the valuation he was  
determining was not to establish Mike Hall’s personal losses but the loss of the value  
of 55668.  
[157] Mr. Power was also challenged on his inclusion of Canadian Roofing  
Solutions in his valuation of 55668, given that it was a separate company. Mr. Power  
Page 46  
stated that there was little information regarding Canadian Roofing Services, except  
for the March deposit, and the monies owed.  
[158] Mr. Power agreed it was not possible to come to a definitive conclusion about  
the overall value of 55668 as he had insufficient information and was clear that his  
assessment was an estimate only. Mr. Power explained his report assumed Michael  
Hall did not have control of the named assets of 55668, but it did not account for  
whether Chris Winsor, the other shareholder and director, had control of the assets.  
He also conceded that if Michael Hall continued to exercise control over assets of  
55668, such as the bank accounts, this would affect his valuation. He agreed that if  
money went into 55668’s bank accounts, this would be money that was in 55668’s  
control. This would affect his inclusion of the bank deposits as assets that were “out  
of 55668’s control”.  
[159] Mr. Power stated he did not have access to, and so did not take into account  
the assignment of the lease agreement for McNamara Drive (Consent #1, Tab 14).  
The evidence of Errol Soriano  
[160] The admissibility of Errol Soriano’s opinions, the expert who testified on  
behalf of the Defendants, were not challenged and he was qualified to testify as an  
expert in the area of business valuation. It was clear from his background he had  
considerable training and experience in business valuation.  
[161] He prepared one report (ES#2) for the Defendants entitled a “Limited Critique  
Report”. His report described its purpose as “to comment on the analysis and  
findings” of Michael Power’s first report. The report reviewed most of the same  
documentation reviewed by Michael Power, however, the report stated that further  
material was reviewed: the franchise agreement, the agreement to assign the assets  
from 55668 to 61791, the formal notice of termination delivered to 55668, a  
summary of monies paid by 61791 on “behalf of 55668”, emails from Stacey  
Penney, the former bookkeeper for 55668, with attachments, and the pleadings filed  
in the litigation.  
Page 47  
[162] Errol Soriano’s report criticized the analysis undertaken by Michael Power.  
He objected to the valuation of the assets of 55668 as it did not take into account the  
liabilities of 55668. He was also concerned that there were either unjustifiable  
assumptions of facts relied upon, or a failure to consider other relevant factors. In  
particular, Errol Soriano objected to the assumption made by Michael Power when  
he calculated the goodwill of 55668, that 55668 would have had the same earning  
potential as 61791 in 2010-2011, if it had been able to pursue restoration ventures.  
At page 6 of his report Mr. Soriano stated:  
b. second, PB states that “… the loss to Mr. Michael Hall would also include  
goodwill or earnings ability of the business…It is a reasonable assumption that the  
value of goodwill is significant”. Whether or not a particular business has  
commercial (saleable) goodwill is a matter determined based on the particular  
attributes of the business. The valuator’s analysis should focus on the ability of the  
business to earn an above market rate of return on invested capital into the  
foreseeable future. PB has not undertaken any such analysis. …  
[163] Although retained solely to configure the report of Mr. Power, when asked,  
Errol Soriano testified that given the situation with 55668 at the time, it would be  
difficult to attach any goodwill value to the company.  
The calculation of goodwill  
[164] I agree with Errol Soriano that the calculation of any goodwill attaching to  
55668 had to reasonably account for 55668’s earning potential at the time. On cross-  
examination, Mr. Power agreed that if 80 per cent of 55668’s clients were gone, this  
would affect his calculation of goodwill for the company.  
[165] For this reason, I do not accept Mr. Power’s calculation of the goodwill of  
55668. It was not reasonable to assume that 55668 would have earned similar  
revenue to 61791 in 2011, because this assumption fails to consider whether 55668  
actually had a prospect of earning any revenue. At the time the franchise was  
Page 48  
terminated, 55668 was generating no new work, no longer had new clients, or any  
prospective potential earnings. There is no dispute that $804,619.53 was deposited  
into the account, but $817,987.60 was also debited; most of which was used to pay  
55668’s financial obligations such as salaries and paying creditors.  
[166] It was only after Robin Sullivan, through 61791, took over the franchise that  
the former major clients, such as the Co-operators and Unifund, returned to using  
Paul Davis Systems franchise to do restoration work. The evidence from Gerard  
Corcoran of Unifund was that as long as Mike Hall, through 55668, was managing  
Paul Davis Systems, they did not intend to use Paul Davis Systems to do restoration  
work. As well, there were emails from Robin Sullivan to Ken and Stephen Robinson  
as late as August 2011 describing difficulties in establishing and maintaining  
relationships with suppliers of the former franchise because of monies owed and left  
unpaid.  
[167] Further, while 55668 may have been able to continue in unrelated businesses  
such as the cleaning of industrial equipment, 55668 would not have been able to  
carry on in the restoration business given the two-year prohibition on competition in  
the franchise agreement. There was no evidence presented that 55668 had pending  
clients in any of the unrelated businesses.  
[168] With these realities facing 55668, and in contrast to the prospects for 61791,  
who had re-established relationships with both the Co-operators and Unifund, it is  
speculative to suggest that the revenue stream for 55668 in 2011 would have been  
similar to the revenues for 61791. Unfortunately, there was no evidence as to how  
these differences would affect the value of any goodwill of 55668.  
[169] Given the above I attach no goodwill value to 55668.  
[170] In October 2010, Mike Hall and 55668 filed a Statement of Claim against  
Robin Sullivan and 61791. The Statement of Claim against Paul Davis Systems of  
Canada was filed in February 2012. Both Statements of Claim and corresponding  
Statements of Defence, and Statements of Third Parties have been amended.  
Page 49  
THE POSITION OF THE PARTIES  
The position of the Plaintiffs 55668 and Canadian Roofing Solutions  
[171] The Plaintiffs, 55668 and Canadian Roofing Solutions, submit the Defendants  
unlawfully conspired to “exclude Mike Hall” from the premises of 55668 so that a  
seamless takeoverof the franchise could be facilitated; in particular by the act of  
changing the locks at the premises of McNamara Drive on January 22, 2010. The  
Plaintiffs submit this was done without legal authority and that the explanation that  
there was concern that Mike Hall was improperly removing the assets was no more  
than a “pretext” to exclude Mike Hall from the operation of the business of 55668.  
The Plaintiffs submit the real reason behind changing the locks was because Mike  
Hall had earlier that day withdrawn approximately $15,000 from the account of  
55668 and placed it in the account of his business, Eastern Restorations Limited.  
[172] The Plaintiffs submit that by excluding Mike Hall from the premises and  
limiting his operation of the bank accounts, the Defendants were able to avoid all  
the delay, expense, headaches and uncertainties of starting from scratch. The  
Plaintiffs submit this conduct “deprived 55668 and Mike Hall access to 55668’s  
assets, and that the Defendants basically stole the assets of 55668. The Plaintiffs  
assert the purported assignment of the assets of 55668 is invalid and as such, 55668  
has never been properly reimbursed for these assets. It was signed without Mike  
Hall’s consent, and thus not in compliance with the unanimous shareholder’s  
agreement or the Corporations Act, R.S.N.L. 1990, c. C-36. They further assert that  
61791 and Robin Sullivan used the assets of 55668 to pay creditors that only  
benefitted the Defendants. This was also a trespass and conversion of 55668’s  
assets.  
[173] While Mike Hall concedes that he signed the agreement to assign the lease of  
McNamara Drive on behalf of 55668, he submits he so did under duress and threats  
from the Defendants as well as pressure from creditors. He submits that he also  
signed as an “act of good faith” as he believed at that time 55668 would receive fair  
compensation for the equipment of 55668.  
Page 50  
[174] The Plaintiffs further assert that the Farmington leases were assigned to 61791  
without any compensation due to 55668.  
[175] The Plaintiffs also assert that a significant number of assets of Canadian  
Roofing Solutions were at the premises when the locks were changed.  
[176] The Plaintiffs submit that the manner in which the Defendants, in particular  
Paul Davis Systems of Canada, took control of the assets of 55668 and Canadian  
Roofing Solutions, constituted a breach of their duty of honest performance and  
good faith owed to the Plaintiffs. Paul Davis Systems of Canada breached their duty  
of good faith towards the Plaintiffs by misrepresenting their intentions to the  
Plaintiffs in the January 4, 2010 conference call. In that call, Ken and Stephen  
Robinson advised Mike Hall to “back down” with respect to his desire to remove  
Chris Winsor from the company or there would be no further cooperation or dialogue  
between them and Mike Hall regarding the franchise. The Plaintiffs submit this was  
a statement made in bad faith, because at that point Paul Davis Systems of Canada  
had already determined that it would end the franchise agreement and had no  
intentions of continuing the relationship with 55668. They submit the Robinsons  
were in discussions with Robin Sullivan well before the date the locks were changed.  
All of this conduct, submit the Plaintiffs, supports evidence of a conspiracy to take  
over the assets of 55668.  
[177] They further submit that all of the above conduct of the Defendants  
established the Defendants committed the tort of unlawful means against the  
Plaintiffs.  
[178] For the above wrongs, the Plaintiffs claim damages for the value of 55668’s  
assets for which no compensation was paid; including $804,619.53 deposited in the  
account of 55668, the value of leasehold improvements, and the value of the  
equipment as provided by Mike Hall to the expert, Mike Power, at $1,106,000. The  
Plaintiffs submit there was also goodwill in 55668, the value for which it alleges no  
compensation was paid. Mr. Power estimated the goodwill value was between  
$173,319 and $1,039,914, and the Plaintiffs claim this amount.  
Page 51  
[179] The Plaintiffs claim that damages for Mike Hall personally should consist of  
“two elements”: the payments Mike Hall was required to make to creditors of 55668  
and general damages for lost wages and benefits he would have received from  
55668. He also claims aggravated damages for the “severe and unnecessary personal  
anguish, embarrassment, hurt and reputational damage to Hall”.  
[180] In response to the counterclaims of Paul Davis Systems of Canada, the  
Plaintiffs do not dispute that there were royalties outstanding; nor do they dispute  
that Paul Davis Systems of Canada was entitled to terminate the franchise  
agreement. However, they submit that Paul Davis Systems of Canada “actively  
interfered” with 55668’s ability to carry on business, and thus 55668 was never  
permitted the chance to pay these monies. The Plaintiffs submit the Defendants  
should not be able to benefit from its own wrongful conduct in “participating in the  
seizures of 55668’s assets”. Further, Paul Davis Systems of Canada benefited from  
the “seamless” transition of the franchise from 55668 to 61791, pointing to the fees  
paid by 61791 to Paul Davis Systems of Canada. They submit the monies paid is a  
result of the wrongful conduct by Paul Davis Systems of Canada.  
[181] The Plaintiffs claim for a disgorgement of the profits earned by Paul Davis  
Systems of Canada, as well as exemplary or punitive damages for the conduct in bad  
faith by all the Defendants.  
[182] The Plaintiffs make a similar submission respecting the counterclaims of  
Robin Sullivan and 61791. The Plaintiffs submit 61791 and Robin Sullivan  
converted the assets of 55668, in particular in taking control of the equipment  
through an invalid agreement. Further, any payments made by 61791 on behalf of  
55668 were not at the request of 55668. These were previous decisions made by  
Robin Sullivan to benefit 61791. This should not fall at the feet of 55668.  
[183] The position for Canadian Roofing Solutions is that there is no need to  
quantify damages as they would be the same as 55668.  
Page 52  
The position of 61791 and Robin Sullivan  
[184] The position of 61791 and Robin Sullivan as Defendants in action 5302, and  
as third parties in action 0454, is that both actions should be dismissed. They deny  
being involved in a conspiracy or any wrongdoing towards 55668 or Canadian  
Roofing Solutions. The Defendants assert that Robin Sullivan had no knowledge or  
involvement in the decision to change the locks of the premises at McNamara Drive.  
They acknowledge that Robin Sullivan was uncertain as to the date he decided to  
take over the franchise, however, the evidence supports that the decision was likely  
around January 25, 2010, after the locks had been changed.  
[185] They further submit Mike Hall continued to exercise control and they point to  
several areas in the evidence, at paragraph 43 of their brief, which illustrates this  
control after the locks were changed on January 22, 2010. They further submit that  
as majority shareholder, if Mike Hall objected to the changing of the locks, it was  
not only within Mike Hall’s authority to take steps to assert control over 55668, it  
was his duty. The unanimous shareholder agreement would have supported action  
by him as majority shareholder.  
[186] Robin Sullivan and 61791 further assert there was no wrongful conversion of  
either company’s assets. The assignment of the lease of the premises was fairly  
negotiated and Mike Hall signed it in the presence of his own legal counsel. They  
assert the agreement to assign the assets as identified to 61791 is also valid. Mike  
Hall agreed to the transfer of the assets and was actively involved in the negotiations  
as to the appropriate compensation. While the Defendants acknowledge that Mike  
Hall did not sign this agreement, they assert that they are entitled to rely on Chris  
Winsor’s signature under the principle known as the “indoor management” rule.  
[187] As far as the Farmington leases were concerned, the Defendants submit the  
Plaintiffs had no property interest in these leases, as the leases themselves confirm  
that the subject matter of these leases remained the property of Farmington until the  
lease was fully paid for by the lessee. Given this, there can be no monies owed to  
the Plaintiffs for their transfer to 61791.  
Page 53  
[188] They further assert that the choice of creditors to be paid was with no intention  
to harm 55668 or Mike Hall, although Robin Sullivan conceded his main concern  
was to preserve the Paul Davis Systems brand. Robin Sullivan asserted that he left  
the decisions mostly to Chris Winsor and Stacey Penney, and whatever involvement  
he had as to which creditors were paid, his choices were a fair business decision.  
[189] Robin Sullivan further asserts that the mismanagement of 55668 by Mike Hall  
was the cause of its downfall, not the conduct on the part of the Defendants,  
including which creditors to pay. He submits that the large debt owed by 55668 took  
several years to accrue, in particular the amounts owing to government entities such  
as Workplace Health and Safety NL. Further, given the loss of the two major clients  
there was very little if any goodwill attached to 55668, as the goodwill only existed  
if there was a “book of business”. The Defendants point to the fact that there was no  
evidence that there were any interested buyers in 55668 and any suggestion by the  
Plaintiffs otherwise is nothing more than speculation.  
[190] The Defendants submit that they are not liable to the Plaintiffs as alleged. Still,  
if liability is found, the Plaintiffs have failed to establish any damages and the claims  
should be dismissed in their entirety. If damages are to be determined they should  
be offset by expenditures made by 61791 on behalf of 55668.  
The position of Paul Davis Systems of Canada  
[191] The position of Paul Davis Systems of Canada on action 0454 is that not only  
should the actions be dismissed, the counterclaim for the monies owing should be  
allowed. Paul Davis Systems of Canada submits that the claims for conspiracy and  
unlawful means should be dismissed as they are barred under the Limitations Act,  
S.N.L. 1995, c. L-16.1.  
[192] Paul Davis Systems of Canada submits that while there is overlap in the  
evidence between the two actions, it is a Defendant in the second action only. The  
sole Plaintiff is 55668. Any complaint about the conduct of Robin Sullivan and  
Page 54  
61791 in the transfer of assets from 55668 to 61791 does not involve Paul Davis  
Systems of Canada.  
[193] Paul Davis Systems of Canada submits that it was within its legitimate right  
to terminate the franchise agreement. 55668 was in breach of the franchise  
agreement because it was behind in royalty fees and was also running an independent  
business, Canadian Roofing Solutions. There was nothing conspiratorial or unlawful  
in the conduct that surrounded the termination of the franchise agreement. This was  
a legitimate business decision.  
THE ISSUES  
[194] Although there are two separate actions, there is overlap between the issues  
as they relate to each Defendant. Given this, the issues are identified not according  
to the action, but as they relate to the evidence as a whole. Having said that, Paul  
Davis Systems of Canada is a Defendant solely in action 0454, so liability, if any,  
for any of the allegations will attach to that action.  
[195] The issues can be framed as follows:  
1.  
2.  
Are the Plaintiffs statute barred in bringing the within actions against  
Paul Davis Systems of Canada by reason of the Limitations Act?  
If the Plaintiffs are not barred from bringing any of the within actions,  
does the evidence establish that the Defendants committed the torts as  
alleged?  
3.  
If any of the torts alleged are established, what is the proper assessment  
of damages in these circumstances?  
Page 55  
[196] Before addressing the issues, it is helpful to review the applicable legal  
principles in this matter.  
THE APPLICABLE LAW  
[197] The Plaintiffs allege mainly three torts against all Defendants, the tort of  
causing economic harm by unlawful means, the tort of conspiracy to cause harm,  
and conversion of the property of 55668 and Canadian Roofing Solutions. The  
Plaintiffs further allege that Paul Davis Systems of Canada breached its duty of good  
faith in its handling of the termination of the agreement, and has been unjustly  
enriched by their conduct.  
The tort of causing economic harm by unlawful means  
[198] The tort of causing economic harm by unlawful means was explained in Bram  
Enterprises Ltd. v. A.I. Enterprises Ltd., 2014 SCC 12.  
[199] In Bram, Cromwell, J. explained that the tort is a “parasitic” tort in that it  
creates liability in a “three party” situation (Bram, para. 23); allowing the plaintiff  
to “sue the defendant for economic loss resulting from the defendant’s unlawful act  
against a third party. Given this tort relates to wrongs arising generally in the  
commercial context, the elements are narrowly construed. Cromwell, J. explained  
the rational for the narrow constraints of the tort at paragraph 29:  
The scope of the unlawful means tort should be understood in the context of the  
broad outlines of tort law’s approach to regulating economic and competitive  
activity. Several aspects of that approach support adopting a narrow scope for the  
unlawful means tort: the common law accords less protection to purely economic  
interests; it is reluctant to develop rules to enforce fair competition; it is concerned  
not to undermine certainty in commercial affairs; and the history of the common  
law shows that tort liability, if unduly expanded, may undermine fundamental  
rights.  
Page 56  
[200] At paragraph 44, Cromwell, J. stated that the narrow scope of the tort is “to  
maintain tort law’s reticence to intrude too far into the realm of competitive market  
activity”. From Bram, there are three elements to the tort:  
1) the defendant engages in an unlawful conduct against a 3rd party  
2) with the intention to cause economic harm to the plaintiff.  
3) and the unlawful conduct against the 3rd party causes economic harm to the  
plaintiff.  
The meaning of unlawfulconduct  
[201] The narrow scope of the tort limits the alleged “unlawful conductto only  
those acts of the defendant against a third party that would give rise to civil liability  
to the third party or would be actionable by the third party if the third party suffered  
harm”, (Bram at paras. 74-76, and 86). As Cromwell, J. stated at paragraph 45:  
… the tort does not seek to create new actionable wrongs but simply to expand the  
range of persons who may sue for harm intentionally caused by existing actionable  
wrongs to a third party.  
The meaning of “intention”  
[202] The intention is “to cause economic harm” to the plaintiff, either as an end in  
itself, or “as a necessary means that serves an ulterior motive”, (Bram, at para. 95).  
Cromwell, J. stated:  
95.  
It is the intentional targeting of the plaintiff by the defendant that justifies  
stretching the defendant’s liability so as to afford the plaintiff a cause of  
action. It is not sufficient that the harm to the plaintiff be an incidental  
consequence of the defendant’s conduct, even where the defendant realizes  
that it is extremely likely that harm to the plaintiff may result. Such  
incidental economic harm is an accepted part of market competition.  
Page 57  
[203] At paragraph 96, Cromwell, J. cited Goudge, J. in Alleslev-Krofchak v.  
Valcom Ltd., 2010 ONCA 557, at paragraph 50, where it was explained that it is  
insufficient to show that the consequences of the conduct were “merely foreseeable”.  
Vigorous” but “lawful competitive behavior” will not be captured by the tort, as  
stated in Bram at paragraph 97.  
[204] For the Plaintiffs to succeed with this allegation they must establish that one  
or more of the Defendants engaged in unlawful conduct, as understood in Bram,  
against a third party, with the intention to cause economic harm to the Plaintiff(s)  
and economic harm was suffered as a result of this conduct (see also Seto v. Wendy’s  
Restaurants of Canada Inc., 2016 ABQB 493, at paras. 51-53).  
The elements of tort of conspiracy  
[205] In the text Peter T. Burns & Joost Blom, Economic Interests in Canadian Tort  
Law (Markham: LexisNexis, 2009) at pages 11-12 conspiracy was described as  
consisting of two kinds, conspiracy to injure (sometimes referred to as lawful means  
conspiracy or predominant purpose conspiracy), and unlawful means conspiracy.  
Lawful means conspiracy was described as where two or more persons agree to a  
course of conduct that while lawful, has the predominant purpose of injuring the  
economic interest of the plaintiff and does injure the plaintiff.  
[206] The elements of the tort of conspiracy were also explained in Canada Cement  
LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452.  
At paragraph 33 of LaFarge the two means by which the tort may be committed  
were described:  
1) Whether the means used by the defendants are lawful or unlawful, the  
predominant purpose of the conduct is to cause injury to the plaintiff; or  
2) Where the conducts of the defendants is unlawful, the conduct is directed toward  
the plaintiff (alone or together with others), and the defendants should know in the  
circumstances that injury to the plaintiff is likely to and does cause injury.  
Page 58  
[207] The Plaintiffs allege that it is the second form of the tort that is at issue in  
these circumstances. In order for the Plaintiffs to succeed, they must establish that  
there was an agreement between two or more of the Defendants to engage in  
unlawful conduct, directed at the Plaintiffs, knowing or having ought to have known  
that the conduct was likely to cause harm to the Plaintiffs, and that conduct does  
cause harm to the Plaintiffs. It is important to note that unlawful conduct in this  
context is not necessarily the same kind of unlawful conduct to establish the tort of  
unlawful means. Finally, there must be a causal connection between the alleged  
conspiratorial conduct and the harm suffered (see American Reserve Energy Corp.  
v. McDorman, 2002 NFCA 57, at paras. 38-39).  
The elements of the tort of conversion  
[208] The tort of conversion was aptly described in 1384334 Alberta Ltd. v. Buster’s  
Pizza Donair & Pasta Enterprises Ltd., 2020 ABQB 369, at paragraphs 91-92:  
91  
For the tort of conversion, there are four essential features: (1) a wrongful  
act; (2) involving a chattel; (3) consisting of handling, disposing, or  
destruction of the chattel; (4) with the intention or effect of denying or  
negating the title of another person to such chattel: Clow v. Gershman  
Transport International Ltd., 2000 ABQB 360 (Alta. Q.B.) at para 13  
(Chow).  
92  
A wrongful seizure of chattels is trespass. Trespass involves a simple  
interference with the plaintiff's possession whereas conversion requires the  
defendant to exercise rights of ownership over the goods: Chow at para 19.  
[209] In order to establish this tort, the Plaintiffs must establish that the Defendants  
wrongfully interfered with their property. (See also 373409 Alberta Ltd. (Receiver  
of) v. Bank of Montreal, 2002 SCC 81, at paras 8 and 9).  
Page 59  
Duty of good faith  
[210] The Plaintiffs allege Paul Davis Systems of Canada breached its duty of good  
faith towards the Plaintiffs by facilitating the transfer of the franchise.  
[211] The duty of good faith of parties to perform the contract obligations honestly  
was explained in Bhasin v. Hrynew, 2014 SCC 71. The principle arose in the context  
of a dispute regarding a franchise agreement. At paragraph 33, Cromwell, J. stated  
that the duty of good faith is an ‘organizing principle’ of the common law of  
contracts to act honestly, fairly and reasonably. A ‘manifestation’ of that organizing  
principle is the common law duty to act honestly in the performance of contractual  
duties. The scope of this duty is that the parties must not knowingly lie or mislead  
the other party about matters directly linked to the performance of the contract  
(Bhasin, at para. 73).  
[212] It is not an implied term of a contract (Bhasin, at para. 86), but defines the  
minimum standard of conduct expected of the parties in the performance of the  
contract (Bhasin, at para. 74). In order to establish this, the Plaintiffs must establish  
that the Defendants, Paul Davis Systems of Canada, behaved dishonestly or misled  
the Plaintiffs in the performance of their contractual duties.  
The principles regarding unjust enrichment  
[213] The Plaintiffs alleged that the Defendants, particularly Paul Davis Systems of  
Canada, were unjustly enriched by their conduct, including the conversion of the  
assets of 55668. They were unjustly enriched because they were able to receive  
royalties form 61791 which occurred at the expense of 55668 losing control of its  
assets and business.  
[214] The principles of unjust enrichment are well established: Kerr v. Baranow,  
2011 SCC 10; Peel (Regional Municipality) v. Canada, [1991] 3 S.C.R. 762:  
Page 60  
1) The defendant has been enriched by the receipt of a benefit;  
2) the plaintiff has suffered a corresponding deprivation; or at the expense of the  
plaintiff; and  
3) there is no juristic reason for the enrichment of the defendant.  
[215] At paragraphs, 31-32 in Kerr, Cromwell, J. explained the principles this way:  
31  
At the heart of the doctrine of unjust enrichment lies the notion of restoring  
a benefit which justice does not permit one to retain: Peel (Regional  
Municipality) v. Canada, [1992] 3 S.C.R. 762 (S.C.C.), at p. 788. For  
recovery, something must have been given by the plaintiff and received and  
retained by the defendant without juristic reason. A series of categories  
developed in which retention of a conferred benefit was considered unjust.  
These included, for example: benefits conferred under mistakes of fact or  
law; under compulsion; out of necessity; as a result of ineffective  
transactions; or at the defendant’s request: see Peel, at p. 789; see generally,  
G. H. L. Fridman, Restitution (2nd ed. 1992), c. 3-5, 7, 8 and 10; and Lord  
Goff of Chieveley and G. Jones, The Law of Restitution (7th ed., 2007), c.  
4-11, 17 and 19-26).  
32  
Canadian law, however, does not limit unjust enrichment claims to these  
categories. It permits recovery whenever the plaintiff can establish three  
elements: an enrichment of or benefit to the defendant, a corresponding  
deprivation of the plaintiff, and the absence of a juristic reason for the  
enrichment: Pettkus; Peel, at p. 784. By retaining the existing categories,  
while recognizing other claims that fall within the principles underlying  
unjust enrichment, the law is able “to develop in a flexible way as required  
to meet changing perceptions of justice”: Peel, at p. 788.  
[216] At paragraph 40 of Kerr, Cromwell explained that “juristic reason” means no  
more than:  
…there is no reason in law or justice for the defendant’s retention of the benefit  
conferred by the plaintiff, making its retention “unjust” in the circumstances of the  
case.  
Page 61  
[217] For the Plaintiffs to succeed with their claims of unjust enrichment they must  
establish that the Defendants received a benefit, at the expense of the Plaintiffs, and  
there is no juristic reason for the benefit making it unjust for the Defendants to retain  
the benefit.  
The indoor management rule  
[218] The Defendants 61791 and Robin Sullivan assert that the agreement to assign  
the assets from 55668 to 61791 is valid. They rely on the principle known as the  
indoor management rule to support their argument that they were entitled to rely on  
Chris Winsor’s signature to execute the agreement.  
[219] The indoor management rule is a principle at common law that has also been  
codified in many Corporations Acts, including the Corporations Act in this  
jurisdiction. The decision of 2671914 Manitoba Limited v. Suncorp Pacific Ltd.,  
2001 MBQB 70 explained the rule at common law. At paragraph 46, referring to  
Fridman, G.H.L., Law of Agency, 7th ed. (Toronto: Butterworths, 1996) at page 357,  
the court explained that the indoor management rule permits a party outside the  
corporation who is contracting with the company, to rely upon a purported agent of  
the company’s authority to act.  
[220] Section 31 of the Corporations Act of Newfoundland and Labrador, has  
codified the rule. The relevant sections for the purposes here of Section 31 states:  
Assertions of corporate incapacity  
31. A corporation, or a guarantor of an obligation of a corporation, may not assert  
against a person dealing with the corporation or with a person who has acquired  
rights from the corporation  
(d) that a person held out by a corporation as a director, an officer or an agent of  
the corporation has not been properly appointed or has no authority to exercise the  
Page 62  
powers and perform the duties that are customary in the business of the corporation  
or usual for that director, officer or agent;  
(e) that a document issued by a director, officer or agent of a corporation with  
actual or usual authority to issue the document is not valid or not genuine; or