An Ontario court has awarded a financial company nearly $430,000 from a former investment advisor who was given a recruitment bonus of $1.6 million in a case the judge called “a bit of a mess.”
Brant Securities Limited emerged partially victorious in the legal battle against former employee DG over the enforcement of a promissory note. The Ontario Superior Court granted summary judgment in favour of Brant, ordering DG to pay $461,000, while also ruling in DG’s favour for $33,616.60 in unpaid Employment Standards Act benefits.
The dispute centered around a promissory note signed by DG, connected to the “recruitment bonus” he received upon joining Aston Hill Securities, which later amalgamated with Brant.
Recruitment bonus was a loan
This bonus was actually loaned to DG at the start of his employment for the sole purpose of him acquiring common shares of Aston Hill Financial (AHF) Inc. through a private placement. AHF was the publicly traded parent company of AHS. DG received 1,304,844 shares with a total market value of $1,748,490.96.
If DG met certain revenue benchmarks, AHS agreed to award him an annual bonus of $160,000, which would be applied to forgive the debt arising from the recruitment bonus. If DG met his annual benchmarks each year, the interest-free loan would be repaid over 10 years. If he defaulted on repayment of the loan, the entire principal amount outstanding would become due and payable, the court said.
In 2016, AHS amalgamated with Brant Securities. In anticipation of this merger, DG, AHS, and AHF entered into an amended and restated promissory note dated March 30, 2016, which was effective as of Sept. 16, 2013.
Selling of shares
In October and November 2016, DG sold 1,268,000 of the 1,304,844 AHF shares that he had purchased with the proceeds of the $1.6 million recruitment bonus. This represented more than 97% of the shares he received. He sold the shares on the open market for a total of $143,466.
From 2017 to 2020, DG signed an annual confirmation of the amount he continued to owe under the amended note. On Oct. 8, 2020, he signed the final such acknowledgement, confirming that he owed $960,000 under the amended note.
Another merger and regulatory investigation
In February 2020, Brant began discussions with Worldsource Securities about the the possible merger of the business.
Shortly after that, DG was the subject of a regulatory investigation and prosecution under the Ontario Securities Act. A 36-day hearing took place before the Capital Markets Tribunal between October 2020 and February 2021.
When Worldsource agreed to buy the business, it did not agree to offer employment to DG. On Nov. 9, 2021, Brant requested repayment of the amounts still owing — which came to $461,000 after it deducted money it owed him for compensation and referral fees. DG refused to pay that amount.
On May 26, 2022, the Capital Markets Tribunal concluded DG had breached the Securities Act by repeatedly engaging in “insider trading on a large scale,” according to the court. He was hit with a 15-year ban, a penalty of $1 million, was was required to disgorge more than $1.2 million. That ruling is currently under appeal.
A ‘bit of a mess’
The court validated both the original and amended promissory notes, dismissing DG’s claims that they were not enforceable. The court said there was “no genuine issue” requiring a trial about whether or not the promissory note was valid and awarded the amount via summary judgment.
The court addressed the complexities of the case, noting, “The entire situation was a bit of a mess.”
“The parties agree that (DG) met his performance targets in 2014 and 2015 and was entitled to a bonus in each of those years,” the court said.
“It is conceded that AHS did not pay those bonuses in those years, which breached the employment agreement. In consequence, (DG) did not make his annual instalments in either 2014 or 2015, which was a payment default under the promissory note. It is conceded that AHS did not notify (DG) in writing of the payment default as required by the promissory note. All of this came to light at the time when AHF was on the cusp of selling its business to Brant.”
Despite the turmoil, the court found sufficient grounds to enforce the repayment of the promissory notes. However, the judgment wasn’t a total loss for DG, who was awarded damages for unpaid Employment Standards Act benefits, set off against the amount he owed under the note.
Common law damages rebuffed
DG also sought common law damages for wrongful dismissal. But the court said there were no damages because he was actually better off financially after he found new employment, citing a $250,000 up-front signing bonus from his new employer.
The court noted that DG refused to provide a copy of his employment agreement — stating: “This was not an appropriate refusal for a litigant advancing a claim for common law damages for wrongful dismissal.”
For more information, see Brant Securities Limited v. Goss, 2024 ONSC 915 (CanLII).
