A former rep must pay back more than $400,000 to his former firm, representing the balance on a $1.6-million recruitment bonus that was structured as an interest-free loan, an Ontario court ruled.
The Ontario Superior Court of Justice granted summary judgment to Brant Securities Ltd. against a former rep with the firm, Donald Goss, finding that he still owed the firm more than $460,000.
According to the decision, Goss joined Aston Hill Securities in 2013 as a vice-president and investment advisor. At the time, he signed an employment agreement that included a $1.6-million recruitment bonus that was structured as an interest-free loan for him to buy shares in the firm’s parent company, Aston Hill Financial Inc., through a private placement.
The agreement also stipulated that Goss would receive a $160,000 annual bonus provided he met certain revenue benchmarks, with that bonus applied against the loan. If he met those goals each year, the loan would be repaid in 10 years. However, Goss didn’t stay with the firm for 10 years.
In 2016 Aston Hill merged with Brant Securities. In 2020 the firm was acquired by Worldsource Securities, which didn’t offer employment to Goss, who was then facing enforcement allegations from the Ontario Securities Commission (OSC).
In November 2021, Brant demanded repayment of the $461,000 that remained outstanding from the original bonus arrangement, and in early 2022 it sued Goss to collect.
In May of that year, Ontario’s Capital Markets Tribunal found that Goss had engaged in insider trading. In January 2023, it imposed a 15-year market ban, a $1-million fine and ordered over $1.2 million in disgorgement. That decision remains under appeal, the court noted.
Now, however, the court has concluded that Goss owes his old firm the remainder of his bonus under a promissory note he signed.
According to the court, Goss argued that the original promissory note was never enforceable “because of a failure of consideration.”
The court disagreed. It ruled that there was consideration, and that it’s not up to the court to determine whether the consideration included in a particular deal was adequate or not.
In this case, that consideration included “commission-based compensation, sales support, transfer costs, licence costs, and the recruitment bonus contained in the employment agreement,” the court said. “That was the ‘value received’ referred to in the promissory note, which Mr. Goss signed as a condition of his employment agreement.”
As a result, the court found that the promissory note was valid and enforceable against Goss, and ruled that he owed the firm over $460,000.
The court also found that the firm owed Goss $33,600 in unpaid benefits, which it offset against the judgment against him, leaving $427,000 for him to repay.
While the court also ruled that Goss wasn’t given adequate notice that he wouldn’t have a job with Worldsource after it acquired Brant, it concluded that he didn’t suffer any damages, as he quickly signed on with Hampton Securities, where he received an upfront signing bonus of $250,000 that outweighed any potential damages from the insufficient notice from his previous employer.
“In short, Mr. Goss improved his financial position by resigning from Brant and moving to Hampton. He has no damages from the termination of his employment,” the court said.
Ultimately, the court concluded that Goss owes his former firm $427,383.40, and it ordered him to pay that amount to Brant as damages.