An investment dealer is entitled to a refund of fees that it paid to another firm over non-compete arrangements, an Ontario court has found, upholding a lower court’s decision.
According to a decision from the Court of Appeal for Ontario, investment dealer Optimize Inc. agreed to acquire a portfolio of clients from fund dealer and exempt market dealer, International Capital Management Inc., in 2018. As part of the deal, the firms entered an agreement that required Optimize to pay monthly non-compete fees to ICM — unless more than 15% of the clients that were sold to Optimize transferred to firms related to ICM, or its owners.
By August 2018, Optimize concluded that more than 15% of the clients that it had acquired had moved to another dealer, T.I.P. Wealth Manager Inc., that was associated with ICM’s owners. As a result, it claimed that it was entitled to a refund on the non-compete fees.
The court said that ICM then launched a legal action, seeking a declaration that the non-compete agreement and a referral agreement were valid and binding, and seeking damages for alleged breaches of those agreements. Optimize counter-sued, seeking a refund on the referral fees.
On a motion for summary judgment, in 2024, the motion judge dismissed the original claim and granted the counterclaim — accepting Optimize’s evidence that more than 15% of the clients had transferred to TIP, and concluding that there was no need for a trial.
On appeal, ICM argued that the motion judge erred in finding there was no genuine issue requiring a trial on the question of whether the 15% threshold was breached.
However, the appeal court found no error with the lower court’s decision.
“We see no error in principle or any misapprehension of the evidence in the motion judge’s reasons,” it said.
ICM also argued that the motion judge misinterpreted the terms of the non-compete agreement.
However, again, the appeal court said that there was “no error in the motion judge’s analysis…”