IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           Baseline Processing Inc. (“BLP”) has sued Chun Min Chen in relation to an alleged breach of an Account Consultant Agreement (the “Agreement”), wherein Ms. Chen agreed not to solicit any customers of BLP for a period of 12 months after the termination of the Agreement.

[2]           Ms. Chen counterclaims for compensation because most of her former clients remained at BLP after her departure.

[3]           BLP hired Ms. Chen as an independent contractor in the position of an account consultant pursuant to the terms of an Account Consultant Agreement dated July 2, 2013.

[4]           Ms. Chen’s role was essentially that of a salesperson who arranged for merchants or clients to contract with a financial services company called Elavon Canada Company (“Elavon”).  More simply, the purpose was to facilitate merchants using credit or debit card payment terminals supplied by Elavon.  Each sales transaction that involved the use of the terminals generated income for Elavon.  That income is referred to as a “residual”.  The residual payment is then divided between Elavon and BLP.  The account consultant receives a portion of the residual paid to BLP.

[5]           Clause 6.2 of the Agreement allows BLP to terminate the Agreement for any reason upon giving one month’s notice to the account consultant or paying an amount representing one month of referral fees.

[6]           Clause 6.3 allows BLP to terminate the Agreement without notice or compensation “if the account consultant fails to materially comply with the provisions of this Agreement”.  The Agreement goes on to set out a non-exclusive list of such failures.

[7]           Clause 9.0 is a non-solicitation clause.  The relevant portion of the clause states as follows:

[8]           Sometime after the Account Consultant Agreement was entered into, issues arose in the relationship between BLP and Ms. Chen as indicated by letters sent by BLP to Ms. Chen.

[9]           In a letter dated May 27, 2014, BLP advised Ms. Chen that “threats against people or property at Baseline Processing will not be tolerated in any way.  This will be your warning with regards to this.  Failure to comply will result in immediate termination of your independent contractor agreement with Baseline Processing.”

[10]        Later, in a letter dated March 29, 2016, BLP told Ms. Chen:

[11]        Then in a letter dated April 19, 2016, BLP advised Ms. Chen:

[12]        Ms. Chen’s position as an account consultant with BLP came to an end as of April 19, 2016.  Two months later Ms. Chen started her own company to compete with BLP.  Ms. Chen now promoted the payment system of a company called Global Payments.

[13]        Paul Schulz is the president of BLP.  He testified that since the contract between Ms. Chen and BLP ended, a number of merchants obtained by Ms. Chen left BLP.  Specifically Mr. Schulz identified four merchants:

[14]        BLP contends that Ms. Chen solicited these merchants away from BLP contrary to the non-solicitation clause of the Agreement. 

[15]        BLP tendered into evidence a copy of the New Merchant Application agreement for three of these merchants: Fortune City Seafood Restaurant, J & A Health Food International Ltd. and Prince Seafood Restaurant.  These agreements are the contracts the merchants entered into with Elavon, and all were arranged by Ms. Chen on behalf of BLP.

[16]        A copy of a New Merchant Application agreement for Jin Jiang Shanghai was not put into evidence.

[17]        Mr. Schulz testified that these four merchants cancelled their New Merchant Application agreements shortly after Ms. Chen left BLP, although I was not given specific dates of when this occurred.

[18]        Mr. Schulz also testified that Prince Seafood Restaurant entered into another New Merchant Application agreement in September 2017.  However Mr. Schulz testified that no sales are being generated through the Elavon payment terminal, which meant that the terminals are not being used at all.  Ms. Schulz assumes that Prince Seafood Restaurant was using another payment terminal system but lacks any evidence of this.

[19]        Mr. Schulz referred to a record of the residuals received from these four merchants in June 2014, which was as follows:

[20]        Mr. Schulz gave evidence that in this industry it is common for accounts to be purchased.  In this case, he calculated his claim for damages by multiplying the monthly residual amount by 24 months, which he felt to be a fair assessment of BLP’s loss.  By my calculation, this amounts to $16,666.08.

[21]        The amount of residuals earned each month varies. Additional records provided by BLP for the months of January, February, March and April of 2014 all showed differing amounts for the monthly residuals from each merchant.

[22]        Henry Tai was hired as an account consultant to replace Ms. Chen.  Mr. Tai obtained three letters from merchants suggesting that Ms. Chen persuaded the clients to leave BLP.  Those merchants were Prince Seafood Restaurant, Ginseng World Health Food Inc. and J & A Health Food International Ltd.

[23]        BLP is not advancing a claim for damages in relation to Ginseng Word Health Food Inc. and so I need not concern myself with the letter from this company.  Henry Tai also advised that Ginseng World never left as a client of BLP.

[24]        A note from Jian Zi Zheng on behalf of Prince Seafood Restaurant states:

[25]        A note from Andy Zhou on behalf of J & A Health Food International Ltd. states:

[26]        The notes do not state if or when the merchants left BLP.

[27]        Mr. Tai testified that J and A Health Food had two accounts with BLP.  He said that one account left BLP but returned in September 2017.

[28]        Mr. Tai testified that Prince Seafood Restaurant also returned as a client with BLP in September 2017.

[29]        Becky Zhang was called as a witness by Ms. Chen and testified through a Mandarin interpreter.

[30]        Ms. Zhang is the owner of Fortune City Seafood Restaurant.  When directly asked by Ms. Chen whether Fortune City was solicited by Ms. Chen to leave BLP, Ms. Zhang said no.  Despite this clear statement, I have concerns about Ms. Zhang’s evidence.  She seemed quite confused when giving her evidence.  She testified that Fortune City entered into an agreement with BLP in June 2015 when the actual New Merchant Application form for Fortune City is dated November 16, 2013.  She testified about an internet connection problem involving a payment terminal but seemed confused over whether this terminal came from Elavon or Global Payments.

[31]        Ms. Zhang was clear that she relied on Ms. Chen as her primary contact for dealing with the payment terminal.  Ms. Chen was able to communicate with Ms. Zhang in Mandarin.

[32]        The defendant Chun Min Chen initially gave her evidence though a Mandarin interpreter but as the hearing proceeded, she elected to give her testimony in English.

[33]        Ms. Chen acknowledged that she was fired by BLP.  She did not dispute that BLP had grounds for her termination.  She took the position that she had obtained some 60 clients for BLP.  She testified that these were her clients and that BLP should be compensating her for them.  Ms. Chen filed a counterclaim in relation to 55 clients she says remained with BLP. 

[34]        I have reviewed the Account Consultant Agreement.  The Agreement gives no indication that the clients obtained by Ms. Chen in her role as an account consultant are her clients.  The agreement in fact refers to the clients as being clients of BLP.  For example, clause 2.1 reads in part:

[35]        Further, the non-solicitation clause found at section 9.1 of the Agreement also makes clear that the clients do not belong to the account consultant.

[36]        Ms. Chen said that when she left BPL, she contacted all her customers to say that she had left BPL.  In Ms. Chen’s words, she told her customers that she was treated “so rudely” and “so racist”.  Ms. Chen said that her customers could then make up their own choice about whether to remain with BLP.

[37]        Ms. Chen also stressed that all her clients want a sales representative who speaks Chinese and that her clients had developed a relationship with her.  I add that during her testimony, Ms. Chen referred to speaking both Mandarin and Chinese with her clients and it was apparent that she was using these two descriptions interchangeably.

[38]        Ms. Chen also testified that the clients who left BLP signed a contract directly with Global Payments.  Ms. Chen said that she receives no residual payments as a result of these clients being with Global Payments.

[39]        With respect to the counterclaim, Ms. Chen said this was based on the 55 clients that remained with BLP.  She said that the amount of the counterclaim, that being $20,188.00, was based on the amount of residuals that she had lost.  Ms. Chen did not provide any information on how this sum was calculated.  Ms. Chen went on to say that at a minimum, BLP should have given her one month notice of termination as provided for under the Agreement. She reiterated though that she was suing for her lost revenues and that BLP cannot take her clients away for free.  In referring to BLP, Ms. Chen said that “they have to pay”.

[40]        As I have discussed above, BLP tendered three documents signed by persons on behalf of Prince Seafood Restaurant, Ginseng World Health Food Inc. and J & A Health Food International Ltd.  Each document states that Ms. Chen approached them to do business with Ms. Chen’s company.

[41]        Small Claims Court Rule 10(1) allows a judge in a Small Claims trial to receive evidence in any way the judge thinks is appropriate.

[42]        Small Claims Act section 16 states that a Provincial Court may accept evidence that the court considers credible, trustworthy and relevant.

[43]        A Small Claims Court hearing is not bound by the same formal rules of evidence applicable to other types of proceedings.  This is in keeping with section 2(1) of the Act which mandates that proceedings conclude “in a just, speedy, inexpensive and simple manner.”

[44]        Ms. Chen confirmed that she did contact her former clients and BLP argues that this bolsters the reliability of the written statements.  I note though that Ms. Chen did not admit that she asked any clients to leave BLP.

[45]        No information was given to me to explain why representatives of Prince Seafood Restaurant and J & A Health Food International Ltd. could not attend court to testify.  No information was given to me to explain why the written statements were necessary.

[46]        The statements provided were not in the form of an affidavit but were simply one line statements.

[47]        There is no indication who the signatories of the notes were or whether they were authorized to make a statement on behalf of the merchant.

[48]        These brief statements offer me nothing to satisfy my concerns over their reliability.

[49]        Furthermore, Ms. Chen’s right to cross-examination these witnesses would have been crucial.  To allow the introduction of these statements as evidence without any opportunity to cross-examine the statement-maker would have been unfairly prejudicial to Ms. Chen.

[50]        Given my concerns as set out above, I am not prepared to accept these statements as evidence for the truth of its contents.  In other words, I will not accept the written statements as evidence that Ms. Chen asked the clients to leave BLP and join Global Payments.

[51]        Ms. Chen also sought to introduce into evidence statements from witnesses who were not present at court.  Copies of these statements were not been provided to the claimant, contrary to an earlier order from The Honourable Judge Low requiring an exchange of documents 60 days prior to the hearing.  Ms. Chen said that she did not obtain the statements until closer to the date of trial.  She did not explain why though.  Furthermore, Ms. Chen never provided a copy of the statements to the claimant even after the start of the trial.  Ms. Chen said this was based on the advice of her lawyer.

[52]        During the course of the trial, I held that Ms. Chen could not tender the statements as evidence.  Ms. Chen did not give me any valid reasons why the statement writers could not attend court to testify.  Ms. Chen did not satisfactorily explain why copies of the statements were not supplied to the claimant as ordered by this court or even why the statements were not disclosed at the first opportunity after they became available.  To permit this evidence would have been unfair to the claimant.  A Small Claims Court trial is not a trial by ambush.

[53]        Clause 9.0 provides that Ms. Chen shall not, for a period of 12 months after the termination of the Account Consultation Agreement, “directly or indirectly solicit any Merchants, Referred Merchants, customers, clients, vendors or suppliers of BLP (or any person or entities who have been approached or specifically targeted to become a Merchant, Referred Merchant, customer, client, vendor or supplier of BLP) to transfer any business from BLP or its affiliates to any other person or entity or encourage any such Merchant, Referred Merchant, customer, client, vendor or supplier to cease doing business with BLP or alter in any manner the method of doing business with BLP.”

[54]        The Agreement was terminated April 19, 2016 and so the non-solicitation clause applies up to April 19, 2017.

[55]        Paul Schulz testified that Fortune City Seafood Restaurant, J & A Health Food International Ltd., Prince Seafood Restaurant and Jin Jiang Shanghai all left as clients shortly after the termination of the Agreement.

[56]        Ms. Chen admits that when she left BPL, she told all her customers that she had been treated “so rudely” and “so racist” by BPL.  Ms. Chen said that her customers could then make up their own choice about whether to remain with BLP.  She testified that she never solicited any of the clients.

[57]        A solicitation can be made directly or indirectly.  It can occur when words are used that a recipient can reasonably construe as an appeal or a request for something: see Edward Jones v. Voldeng, 2012 BCSC 497 at paragraph 30 (appealed allowed for other reasons 2012 BCCA 295).

[58]        The claimant has no direct evidence of any solicitation.

[59]        For reasons set out above, I am placing no weight on the brief written statements from Prince Seafood Restaurant and J and A Health.

[60]        Becky Zhang of Fortune City Restaurant testified that the restaurant did not leave BLP due to a solicitation from Ms. Chen.  I found that her evidence had some credibility problems although it was clear that she was reliant on Ms. Chen as her sales contact because Ms. Chen was able to speak Mandarin.

[61]        Even if I reject Ms. Zhang’s evidence that she was not solicited by Ms. Chen, it does not mean the opposite is true since the burden of proof for BLP’s claim remains with the claimant.

[62]        Ms. Chen said that she had brought some 60 clients to BLP and five had left. BLP is only suing in relation to four of those clients.  Ms. Chen’s comments about being treated rudely and in a racist manner appear to not have had any influence on the 55 clients still with BLP.

[63]        Ms. Chen also stressed that all her clients want a sales representative who speaks Chinese and that her clients only had a relationship with her.

[64]        Ultimately I am left with the following:

[65]        There is a basis to be suspicious that Ms. Chen, at a minimum, indirectly solicited the four clients to leave BLP by complaining of their allegedly unfair treatment of her.  However, that is all I am left with. I cannot discount the possibility that the few clients who left did so for other reasons, such as preferring to have Ms. Chen as their contact for any payment terminal issues.

[66]        BLP has the burden of proving its case on the balance of probabilities and not by merely raising a suspicion.  Given the state of the evidence, I am not persuaded that this burden has been met, and so the claim of BLP that Ms. Chen breached the non-solicitation clause in the Agreement is dismissed.

[67]        The claimant also advanced an alternative argument that Ms. Chen is liable for the tort of interference with contractual relations or for inducing a breach of contract.  I reject this argument for the following reasons.

[68]        The contract for the use of the payment terminal was between the client and Elavon Canada Company, and not between the client and BLP.  If Ms. Chen interfered with the contractual relations or induced a breach of contract between the client and Elavon Canada Company, then that is a claim that only Elavon Canada Company can bring.

[69]        Furthermore, there was no mention of such claims in the Notice of Claim.  I am not prepared to allow new causes of action to be advanced in submissions following the trial as to do so would be unfair to Ms. Chen.

[70]        In light of my finding that a breach of the non-solicitation clause has not been proven, I need not assess the damages payable.  Nevertheless I will offer these comments.

[71]        The calculation of the lost residuals was based only on the amount of residuals received in June 2014.  It was clear however that the monthly amount of the residuals fluctuates.  Given this, the amount to be used for the monthly residuals should not be based only on the June 2014 amounts.  A court would need a more complete record of the monthly residuals earned.

[72]        The claim for damages was also based on the amount of residuals that would have been received over a 24 month period.  No independent expert evidence was given to allow me to conclude that using a 24 month period was appropriate.  Mr. Schulz also testified that BLP had a 97% client retention rate but I saw no supporting documentary evidence of this.

[73]        Given the lack of evidence, I cannot set out an amount of damages that would have been payable had I found Ms. Chen liable.

[74]        BLP advanced some evidence to support the contention that the Ms. Chen’s Account Consultant Agreement was terminated for cause pursuant to clause 6.3 of the Agreement.  Clause 6.3 lists various grounds for termination but the list is not exclusive.

[75]        BLP tendered copies of warning letters sent to Ms. Chen, which letters suggest that Ms. Chen has made threats to other employees.  The letters themselves are not proof that threats were made.  However, they do show the state of mind of BLP and describe BLP’s reason for the termination of the Agreement.

[76]        Ms. Chen did not argue that that the termination was not warranted.  Her position was that she should be compensated for the 55 clients who remained with BLP after her termination.  However, clause 6.3 permits BLP to terminate the Agreement without paying any compensation to Ms. Chen.  Further, the Agreement makes clear that the merchants are not clients of Ms. Chen but clients of BLP.

[77]        Ms. Chen had no basis to claim payment from BLP upon the termination of the Account Consultant Agreement pursuant to clause 6.3.  Accordingly the counterclaim is dismissed.

[78]        The claim of Baseline Processing Inc. and the counterclaim of Chun Min Chen are dismissed.  In light of the results, there will be no award of costs or expenses payable by either party.