An Ontario court has ruled that an independent insurance broker did, in fact, join a brokerage network, although he never actually signed an agreement formalizing the deal.
In its decision released Tuesday, the Ontario Superior Court of Justice found in favour of Prolink Broker Network Inc., which sued insurance broker Rakesh Jaitley and his firm, My Insurance Broker Corp. (MIB), arguing that Jaitley had effectively joined the Prolink Network and then violated the contract between them.
The Jaitley and MIB argued that they never agreed to the essential terms of a contract, therefore, there was no breach.
However, the court found in favour of Prolink, ruling that an agreement was formed. “Although the defendants did not actually sign an agreement, their actions were consistent with a meeting of the minds and an intention to be bound,” the court said. It ruled that Prolink is entitled to judgment for breach of contract and damages.
According to the decision, Jaitley was an Allstate Insurance agent who attended a meeting in September 2007 put on by Prolink in order to recruit disgruntled Allstate agents into the Prolink system. Prolink is a network of small brokerages that provides back office systems, marketing assistance, training, and HR support to brokers in exchange for taking 25% ownership of each firm and 7.5% of commissions.
The court found that in November 2007, Jaitley signed a letter of intent and a non-disclosure agreement, indicating that they were in the process of negotiating an agreement to forge a business relationship. Those discussions continued through the spring of 2008, although Jaitley ultimately never signed Prolink’s standard partnership and shareholder agreements.
However, the court found that they effectively acted as if there was a deal. “For reasons that are unclear to me, Mr. Jaitley changed his mind about the terms under which he wished to be associated with Prolink. This change of mind came about after coming to an agreement with Prolink,” the court said.
“I do not impugn Mr. Jaitley’s motives. He struck me as an honest and decent man,” said Judge R.F. Goldstein, however, “Mr. Jaitley appears to have convinced himself that he did not come to an agreement in August 2008 and that negotiations were ongoing, notwithstanding a lapse of several months while MIB acted as if it were bound. The email record reflects otherwise. Mr. Jaitley’s subsequent behaviour confirms his intention to be bound.”
“In my respectful view, when Mr. Jaitley waited for over six months to deal with issues with the agreement it did not constitute further negotiations over an agreement that was not consummated. Rather, it constituted an attempted to revise an existing agreement,” Goldstein said.
As a result, the court ruled that Prolink is entitled to damages for breach of contract, which it calculated at 25% of two times the brokerage’s earnings during the period when the agreement was in effect, along with 7.5% of commissions. It’s also entitled to costs, the court said, which it left up to the two sides to agree on.