The circumstances surrounding a fierce battle in Vancouver’s parking industry have led a B.C. Supreme Court judge to order the former CEO of Impark to give the company back more than $1.2 million in severance pay.
Justice Emily Burke found Herbert Anderson breached his fiduciary duty to Impark by changing and then concealing an agreement which paved the way for him to set up a rival company with former consultant Michael Menzies.
Picked to be pallbearer
Anderson left Impark in 2010; he and Menzies went on to form GoPark, a company which Impark claims has been approaching its employees and competing for contracts since its inception in 2012.
As part of her ruling, Burke also ordered GoPark to give up its profits from 2012 to March 2014.
“This matter involves competition in the corporate world and the fiduciary duties of an officer of a large company,” Burke wrote in the introduction to her lengthy decision.
As well as being veterans of the parking industry, Anderson and Menzies are close friends; according to the decision Anderson lists Menzies as a “pallbearer at his funeral in the event of his own death.”
In 2006, Impark paid $5.2 million to buy two of Menzies’ parking companies in Winnipeg and Vancouver. As part of the deal, he also signed a consulting agreement with Impark, which operates 1,600 parking lots across Canada.
The consulting agreement was supposed to expire in August 2012, with Menzies agreeing not to compete with Impark for an extra two years until 2014.
‘Incredulous’ they were now competing
It was that deal that ended up at the heart of the lawsuit.
According to the decision, Anderson signed an agreement in June 2010 canceling the final year of the agreement and eliminating the two-year non-competition clause. Two months later, Anderson left Impark with $1.2 million in severance.
The matter came to light in 2011, when new Impark CEO Allan Copping met Menzies for lunch for a “catch up meeting.”
Menzies told him about the amended agreement, but Copping claimed that when he returned to the office, only the old deal was on file.
In 2012, Copping got reports about a new company, GoPark, calling employees and approaching Impark clients in Toronto and Vancouver. A corporate search turned up Anderson and Menzies’ names among GoPark’s three directors.
“Mr. Copping was ‘incredulous’ that Mr. Menzies was involved with GoPark,” Burke’s decision reads.
“Impark was immediately concerned about the competitive threat of Mr. Menzies. Mr. Copping noted Mr. Menzies had ‘a lot of relationships locally, business relationships, and had had a good track record of competing with Impark.”
Trying to save the company money?
At trial, Impark accused Anderson of breaching his fiduciary duty when he was CEO by signing the letter which released Menzies from his obligation not to compete.
“By all appearances, the only interests served by the letter agreement were your own personal interests in being able to combine and compete against Impark much sooner that you could have otherwise,” Copping wrote in a letter to Anderson and Menzies which was entered into evidence.
Anderson argued that he was trying to save the company money in a tough economic climate by eliminating a $180,000-a-year consultant’s contract. And he argued that Impark “reconstructed, exaggerated, and distorted” Menzies’ actual value.
But the judge found he was a competitive threat who had intimate knowledge of the Canadian parking market.
Burke found that Anderson was in a conflict of interest when he reached the agreement with Menzies and that the two concealed the letter from Impark, which never located a copy in their files.
The judge ordered Anderson to pay back his severance.
But she also found that he and Menzies couldn’t have operated GoPark prior to March 2014 without the breach of fiduciary duty.
As a result, Burke ordered both men and their company to turn all GoPark profits earned up to that point over to Impark.