Diversion of funds justifies termination

|Canadian Employment Law Today

In November 1997 Niels Christensen went to work for DCMW Research International which was owned by husband and wife, Donald J. McDougall and Carol McCloskey. Mr. Christensen was hired as president of the corporation. As part of his employment contract, Mr. Christensen was to be made a director of the corporation. However this never occurred.

Because of the financial woes at DCMW, in December 1997, Mr. Christensen had to sign a guarantee in favour of the National Bank of Canada for an overdraft owing. The guarantee was in the amount of $50,000 and was secured by a mortgage on Mr. Christensen’s home.

In consideration for signing the guarantee, Mr. McDougall, Ms. McCloskey and the corporation signed an indemnity. The indemnity provided undertakings that the National Bank loan would be paid off within one year, that Mr. Christensen would be indemnified for any loss under the guarantee and that 15 per cent of the issue shares of DCMW would be issued to Mr. Christensen.