Executive Summary: Key Legal and Evidentiary Issues

• Sergio Salina worked as an investment consultant for Investors Group Financial Services Inc. for 27 years before being terminated with cause on May 23, 2018, leading to a wrongful dismissal claim and a counterclaim by Investors Group.
   
• A threshold issue was whether Mr. Salina's working relationship with Investors Group was that of an employee, independent contractor, or dependent contractor — the court found he was a dependent contractor, entitling him to reasonable notice in the absence of just cause.
   
• The termination clause in the Consultant's Agreement, which purported to allow termination with or without cause and with or without notice, was found unenforceable because it did not clearly specify any alternative notice period as required by the common-law presumption.
   
• Investors Group did not establish just cause as of May 23, 2018, based on its stated reasons — the Florence Day bequest, the commission-generating trades, and non-compliance with the action plans — but the court found that after-acquired cause was established through Mr. Salina's possession of 24 pre-signed forms from 13 clients while under close supervision, combined with a false attestation of compliance.
   
• Investors Group's counterclaim alleged breaches of the non-solicitation and confidentiality clauses of the Consultant's Agreement; while the court found Mr. Salina breached both clauses, causation was not established on a balance of probabilities.
   
• Both the plaintiff's wrongful dismissal claim and the defendant's counterclaim were dismissed.
   

Facts of the case

On the morning of May 23, 2018, Sergio Salina arrived at the Fairmont Empress Hotel in Victoria, British Columbia, for what he expected to be a congratulatory breakfast meeting with Darryl Gossen, the vice president of Western Canada for Investors Group Financial Services Inc. Instead, Mr. Salina received a termination letter, ending his 27-year career with the company. Mr. Salina began working for Investors Syndicate Limited — a predecessor to Investors Group — on February 11, 1991, under a Sales Representative Agreement dated February 8, 1991. On August 6, 2002, he and Investors Group entered into a Consultant's Agreement, which governed the relationship at the time of termination. Over the course of his career, Mr. Salina built a book of business with approximately 500 clients across about 290 households, managing approximately $92.5 million in client assets; his average client relationship was 22 years.

The events leading to his termination began on January 25, 2016, with the death of Ms. Florence Day, a long-time client. Mr. Salina had been named a beneficiary in Ms. Day's will and failed to promptly disclose this to Investors Group, contrary to company policy. Investors Group's compliance department opened an investigation and reported the matter to the Mutual Fund Dealers Association, which conducted its own investigation. Mr. Salina was ultimately directed on April 25, 2017, to decline the bequest by May 3, 2017, or face termination with cause; he formally declined it on May 1, 2017. During the investigation, Investors Group also flagged a July 14, 2014 trade in Ms. Day's account in which Mr. Salina — with Ms. Day's consent — moved $498,511.57 from a no-load series of a mutual fund to a deferred sales charge ("DSC") series of the same fund. Investors Group characterized this as a commission-generating trade. A broader review found that from January 2, 2014 to February 1, 2017, Mr. Salina completed 53 no-load to DSC trades for 16 clients aged mid-to-late 50s or older.

On April 5, 2017, the British Columbia Securities Commission imposed terms and conditions requiring Investors Group to place Mr. Salina under close supervision. As part of that supervision, Investors Group completed a review of his book and found that most clients at or near retirement age had high-risk, aggressive portfolios. Investors Group implemented three action plans requiring Mr. Salina to meet with identified clients and repeat the "Know Your Client" process to verify the suitability of their investments. Investors Group was dissatisfied with Mr. Salina's approach to the second and third action plans and concluded he was "unsupervisable." After his termination, Investors Group discovered that he had obtained and possessed 24 pre-signed forms from 13 clients, a practice prohibited under Investors Group policy and Mutual Fund Dealers Association guidelines. On July 12, 2022, Mr. Salina entered into a settlement agreement with the Mutual Fund Dealers Association, admitting to a number of violations and agreeing to pay a $30,000.00 fine and $5,000.00 in costs.

Policy terms and contractual clauses at issue

The Consultant's Agreement contained several clauses central to this dispute. Clause 10 — the Termination Provision — stated that the agreement could be terminated at any time by either party, with or without cause and with or without notice or any compensation in lieu of notice. Clause 9 — the Non-Solicitation Clause — prohibited Mr. Salina, for one year following termination, from soliciting investment business from any Investors Group client in his territory, and for two years following termination, from soliciting any client with whom he had dealt during the term of the agreement. The Consultant's Agreement also contained a Confidentiality Clause prohibiting Mr. Salina from using or preserving confidential information — defined to include client lists, investment information, personal financial reviews, and client transaction summaries — without written permission, and requiring him to return all such information within three days of termination.

Reasoning and analysis

Justice Morishita first addressed whether Mr. Salina was in an employment-like relationship with Investors Group, applying the multi-factor test set out in Lightstream Telecommunications Inc. v. Telecon Inc., 2018 BCSC 1940. The court found that while several factors weighed in favour of independent contractor status — including ownership of equipment and tools, profit/loss opportunity, and the parties' mutual treatment of the relationship for tax purposes — the substantial degree of control Investors Group exercised over Mr. Salina's activities and the significant integration of those activities into Investors Group's business were determinative. The court concluded that Mr. Salina's role was best characterized as that of a dependent contractor, entitling him to reasonable notice in the absence of just cause.

On the enforceability of the Termination Provision, the court held that the common-law presumption of entitlement to reasonable notice applies to dependent contractors and can only be rebutted by a contract that clearly specifies some other period of notice. The Termination Provision, which purported to allow termination with or without notice, did not specify any alternative period; the court found that "no notice" or "zero notice" is incompatible with "some other period of notice," and accordingly the Termination Provision was unenforceable.

Turning to just cause, the court found that the three grounds cited by Investors Group at the time of termination — the Florence Day bequest disclosure failure and false attestation, the commission-generating trades, and the approach to the action plans — did not collectively or individually establish just cause as of May 23, 2018. The court accepted that the bequest matter and the commission-generating trade raised ethical concerns and constituted misconduct of moderate severity, but found that this alone would not justify termination without notice given Mr. Salina's 27 years of loyal service. The no-load to DSC trades involving other clients were not shown to be unsuitable. Mr. Salina's conduct in relation to the three action plans was found to reflect cooperation, notwithstanding some criticism of his approach.

However, the court proceeded to consider after-acquired cause. It found that after Mr. Salina's termination, Investors Group discovered 24 pre-signed forms from 13 clients in his files. The court found that Mr. Salina had possessed these forms while under close supervision, had collected some of them during the supervision period, and had made at least one false certification in a monthly close supervision attestation confirming compliance with the rules regarding pre-signed forms. Justice Morishita concluded that this conduct — collecting and possessing prohibited pre-signed forms while under close supervision and making a false attestation — demonstrated a level of deceit and dishonesty incompatible with the trust and integrity required of an investment advisor, and was irreconcilable with the continuation of the dependent contractor relationship.

On the counterclaim, the court found that Mr. Salina breached both the Non-Solicitation Clause and the Confidentiality Clause. Following his termination, Mr. Salina maintained contact with several former clients, initiated meetings with many of them, and a number of those clients subsequently transferred their portfolios to Echelon Wealth, his new firm. He also retained 840 documents comprising client databases, portfolio return summaries, family trees, and detailed account statements, which he did not return to Investors Group despite a contractual obligation to do so. However, Investors Group failed to establish causation on a balance of probabilities — specifically, that the clients who left would have stayed with Investors Group absent Mr. Salina's breaches. The court found there was no admissible evidence from the departing clients as to why they moved their portfolios, and that it was equally plausible they left because they were dissatisfied with the new consultant assigned to them or intended to follow Mr. Salina regardless of his actions.

Ruling and overall outcome

Justice Morishita dismissed both the plaintiff's wrongful dismissal claim and the defendant's counterclaim. Although the court found that the Termination Provision was unenforceable and that Investors Group did not have just cause at the time it terminated Mr. Salina, the after-acquired cause arising from Mr. Salina's possession of prohibited pre-signed forms while under close supervision — and his false attestation of compliance — established just cause for termination. Accordingly, Mr. Salina was not entitled to damages for wrongful dismissal. On the counterclaim, while Mr. Salina was found to have breached both the Non-Solicitation and Confidentiality Clauses of the Consultant's Agreement, Investors Group could not establish on a balance of probabilities that those breaches caused the client losses it claimed, and the counterclaim was therefore dismissed. No monetary award was made to either party; costs were not resolved in the judgment and remained subject to further submissions if the parties could not agree.