In a recent Alberta appeal decision, an employee sought to have a trial decision overturned in which he had been found liable for improperly collecting money from a client that was not due to him but rather to his former employer.

Employee sourced business for employer, started own business after relationship broke down

The employer provided moving and delivery services. Some of the employer’s business had been sourced through the employee’s pre-existing business relationships, including the client at issue in the proceedings. In August 2015, the employer issued two invoices to the client, which was located out-of-province.

Around the same time, the business relationship between the employer and employee broke down, and the employee decided to start a moving and storage business on his own account.

Employer attempted to collect payment for invoices, told by client that employee had already received payment

In November 2015, the employer contacted the client seeking to collect on the August 2015 invoices. The client responded, however, that the employee had gone to its office and collected on all outstanding invoices in early October of that year. The client had issued a cheque to the employee in the amount of $12,689 to pay the invoices. The memo on the cheque indicated that it was for “Final Payment” for the employer’s services. The client, therefore, stated that it did not owe the employer any money. The employer attempted to collect the amounts owing from the client once more and was again told the employee had received the payment and no further balance was owing to the employer.

The employee later confirmed that he had collected the money from the client and had deposited the cheque into his personal bank account.

Employer sued the employee for improperly collecting payment owed to employer

The employer sued the employee for $40,000, alleging he had improperly collected and retained payments owed to the employer and was keeping the money in his personal capacity.

In response, the employee claimed that the payment he had collected was for work he had performed for the client directly following the dissolution of his relationship with the employer, although he did not present any documentation to support his claim.

Trial judge ruled in favour of employer, ordered employee to remit one payment to employer

The trial judge ruled in favour of the employer, although he limited the amount that had been improperly collected by the employee to a single payment of $12,689.

The employee appealed the decision on numerous grounds. In part, he alleged that the trial judge had erred in concluding that the $12,689 received by the employee was properly payable to the employer. The employee also appealed on the ground that the trial judge had erred in failing to set-off expenses incurred by him in the sum of $9,580.

Court upholds finding of employee’s improper collection

On appeal, the Alberta Court of Queen’s Bench confirmed the employer clearly provided moving services to the client and sent it two invoices seeking payment for those services. It also found there was no dispute that the company had refused to pay the employer for the two invoices, nor was there any dispute that the employee had been paid by the company in the amount of $12,689 by way of a cheque dated October 6, 2015.

The employee argued the trial judge should have made an adverse inference against the employer for not suing the client for payment of the invoices, instead of suing the employee. The court stated in response:

“The decision to sue a customer or not sue a customer is complicated and is not necessarily indicative that the business does not view the customer as liable. A small enterprise like [the employer] cannot be faulted for deciding not to incur the expense and inconvenience of conducting litigation against a company located in another Province even if it may have a meritorious claim. The Trial Judge acted reasonably in declining to draw an adverse inference against [the employer] for failing to commence a claim against [the company].”

The employee further stated the trial judge erred by not drawing an adverse inference against the employer for its failure to call the client’s employees as witnesses. The court reviewed the legal test for drawing an adverse inference where a party fails to call a witness who appears to have relevant evidence. This test, previously established by the Court of Appeal, sets out the following four factors:

  1. Whether there is a legitimate explanation for the failure to call the witness;
  2. Whether the witness has material evidence to provide;
  3. Whether the witness is the only person or the best person who can provide the evidence; and
  4. Whether the witness is within the exclusive control of the party and is not equally available to both parties.

While the court observed that calling certain witnesses from the client would have been helpful, it found the written evidence had been sufficient for the trial judge to make a determination. The court further stated that bringing witnesses from another province to testify in such a small case was neither practical nor realistic. As such, the court ruled that the trial judge had acted reasonably in not drawing an adverse inference.

The court concluded the trial judge had not erred in concluding on a balance of probabilities that the employee had collected monies from the company that were actually due to the employer. It also dismissed the employee’s claim for expenses incurred in the amount of $9,580, stating that this portion of the claim was conceptually flawed as the expenses were incurred by the employee in pursuing his own business.

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