CANADIAN CASES on EMPLOYMENT LAW Fourth Series/Quatri`Eme S´Erie Recueil De Jurisprudence Canadienne En Droit Du Travail

CANADIAN CASES ON EMPLOYMENT LAW Fourth Series/Quatri`eme s´erie Recueil de jurisprudence canadienne en droit du travail

VOLUME 10 (Cited 10 C.C.E.L. (4th))

EDITOR-IN-CHIEF/REDACTEUR´ EN CHEF M. Norman Grosman, B.SC., LL.B. Grosman, Grosman & Gale LLP Toronto, Ontario ASSISTANT EDITORS/ADJOINTS A` LA REDACTION´ Robert Bonhomme, D.E.C., B.L.L. Michael J. Weiler, B.A., LL.B. Heenan Blaikie LLP Boughton Law Corporation Montréal, Québec Vancouver, British Columbia Malcolm J. MacKillop, B.A., LL.B. Matthew L.O. Certosimo, B.A.(HONS.), Shields O’Donnell MacKillop LLP LL.B. Toronto, Ontario Borden Ladner Gervais Toronto, Ontario Magali Cournoyer-Proulx, D.E.C., LL.B. Heenan Blaikie LLP Montréal, Québec CARSWELL EDITORIAL STAFF/REDACTION´ DE CARSWELL Cheryl L. McPherson, B.A.(HONS.) Director, Primary Content Operations / Directrice des activités liées au contenu principal Catherine Bennett, B.A., LL.B., LL.M. Product Development Manager Nicole Ross, B.A., LL.B. Andrea Andrulis, B.A., LL.B., LL.M. Supervisor, Legal Writing Acting Supervisor, Legal Writing Mike MacInnes, B.A.(HONS.), LL.B. Jocelyn Cleary, B.A.(HONS.), LL.B. Lead Legal Writer Senior Legal Writer Stephanie Hanna, B.A., M.A., LL.B. Lisa Rao, B.SC., LL.B. Senior Legal Writer Senior Legal Writer Amanda Stewart, B.A.(HONS.), LL.B. Martin-Fran¸cois Parent, LL.B., LL.M., Senior Legal Writer DEA (PARIS II) Bilingual Legal Writer Melissa Dubien Content Editor Torrance v. Canada (Attorney General) 169

[Indexed as: Torrance v. Canada (Attorney General)] Attorney General of Canada Appellant and Rodney Torrance Respondent Federal Court of Appeal Docket: A-514-12 2013 FCA 227 Marc Nadon, J.D. Denis Pelletier, Johanne Gauthier JJ.A. Heard: September 19, 2013 Judgment: September 27, 2013 Tax –––– General principles — Miscellaneous –––– Worker was bike courier who was rendered quadriplegic and did not work thereafter — Worker was denied disability pension as records indicated he had made sufficient CPP contributions in only two years from 1993 to 1998 — Worker had not filed tax returns for 1996, 1997, or 1998 — Department of Human Resources Development Can- ada (HRDC) acknowledged RT’s request to leave his file open and set no time limits for filing tax returns — Worker filed 1996 tax returns, and HRDC requested more information, without time limits — Later, HRDC sent letter setting 45-day deadline for financial information, but letter was not delivered due to error — HRDC denied worker’s application, and correspondence was returned — Worker showed sufficient contributions — Minister’s delegate refused to award pension to which he was otherwise entitled absent administrative errors — Worker’s application for judicial review granted and matter remitted for reconsideration — Trial judge found Minister’s delegate’s decision never specifically dealt with issue of misaddressed communications — Trial judge found worker’s culpability in not sending HRDC notice of his change of address was not determinative — Trial judge found that due to administrative error in transposition of postal code, worker was denied opportunity to seek reconsideration and to remedy filing deficiencies, which resulted in denial of his opportunity for pension — Unreasonable administrative error had occurred — Attorney General appealed — Appeal allowed — Original application for judicial review dismissed and judgment of federal court set aside — Trial judge properly identified reasonableness standard of review but did not properly apply it — Trial judge did not examine Minister’s decision and record, including detailed analysis in appeal book, with view to determining if Minister’s decision fell within range of acceptable outcomes — Trial judge erred in substituting his reasoning for Min- ister’s, and in effect applied correctness standard — Plan officials did not have complete picture of worker’s contributory history when they denied his claim, but no administrative error occurred — Worker did not follow up on his claim for seven years and as result, further delay in making decision to deny benefits 170 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th) would not have changed outcome since worker was not attending to his claim — Plan officials felt sufficient time had elapsed to allow worker to file his income tax returns — When officials received medical information which confirmed that date of disability was outside his minimum qualifying period, they did not require any further medical information to conclude that he was ineligible for benefits. Pensions –––– Federal and provincial pension plans — Federal pension plans — Canada Pension Plan benefits — Disability pension — Miscellane- ous –––– Worker was bike courier who was rendered quadriplegic and did not work thereafter — Worker was denied disability pension as records indicated he had made sufficient CPP contributions in only two years from 1993 to 1998 — Worker had not filed tax returns for 1996, 1997, or 1998 — Department of Human Resources Development Canada (HRDC) acknowledged RT’s request to leave his file open and set no time limits for filing tax returns — Worker filed 1996 tax returns, and HRDC requested more information, without time limits — Later, HRDC sent letter setting 45-day deadline for financial information, but letter was not delivered due to error — HRDC denied worker’s application, and correspondence was returned — Worker showed sufficient contributions — Minister’s delegate refused to award pension to which he was otherwise entitled absent administrative errors — Worker’s application for judicial review granted and matter remitted for reconsideration — Trial judge found Minister’s delegate’s decision never specifically dealt with issue of misaddressed communications — Trial judge found worker’s culpability in not sending HRDC notice of his change of address was not determinative — Trial judge found that due to administrative error in transposition of postal code, worker was denied opportunity to seek reconsideration and to remedy filing deficiencies, which resulted in denial of his opportunity for pension — Unreasonable administrative error had occurred — Attorney General appealed — Appeal allowed — Original application for judicial review dismissed and judgment of federal court set aside — Trial judge properly identified reasonableness standard of review but did not properly apply it — Trial judge did not examine Minister’s decision and record, including detailed analysis in appeal book, with view to determining if Min- ister’s decision fell within range of acceptable outcomes — Trial judge erred in substituting his reasoning for Minister’s, and in effect applied correctness standard — Plan officials did not have complete picture of worker’s contributory history when they denied his claim, but no administrative error occurred — Worker did not follow up on his claim for seven years and as result, further delay in making decision to deny benefits would not have changed outcome since worker was not attending to his claim — Plan officials felt sufficient time had elapsed to allow worker to file his income tax returns — When officials received medical information which confirmed that date of disability was outside his minimum qualifying period, they did not require any further medical information to conclude that he was ineligible for benefits. Torrance v. Canada (Attorney General) 171

Pensions –––– Federal and provincial pension plans — Federal pension plans — Judicial review –––– Worker was bike courier who was rendered quadriplegic and did not work thereafter — Worker was denied disability pension as records indicated he had made sufficient CPP contributions in only two years from 1993 to 1998 — Worker had not filed tax returns for 1996, 1997, or 1998 — Department of Human Resources Development Canada (HRDC) acknowledged RT’s request to leave his file open and set no time limits for filing tax returns — Worker filed 1996 tax returns, and HRDC requested more information, without time limits — Later, HRDC sent letter setting 45-day deadline for financial information, but letter was not delivered due to error — HRDC denied worker’s application, and correspondence was returned — Worker showed sufficient contributions — Minister’s delegate refused to award pension to which he was otherwise entitled absent administrative errors — Worker’s application for judicial review granted and matter remitted for reconsideration — Trial judge found Minister’s delegate’s decision never specifically dealt with issue of misaddressed communications — Trial judge found worker’s culpability in not sending HRDC notice of his change of address was not determinative — Trial judge found that due to administrative error in transposition of postal code, worker was denied opportunity to seek reconsideration and to remedy filing deficiencies, which resulted in denial of his opportunity for pension — Unreasonable administrative error had occurred — Attorney General appealed — Appeal allowed — Original application for judicial review dismissed and judgment of federal court set aside — Trial judge properly identified reasonableness standard of review but did not properly apply it — Trial judge did not examine Minister’s decision and record, including detailed analysis in appeal book, with view to determining if Minister’s decision fell within range of acceptable outcomes — Trial judge erred in substituting his reasoning for Min- ister’s, and in effect applied correctness standard — Plan officials did not have complete picture of worker’s contributory history when they denied his claim, but no administrative error occurred — Worker did not follow up on his claim for seven years and as result, further delay in making decision to deny benefits would not have changed outcome since worker was not attending to his claim — Plan officials felt sufficient time had elapsed to allow worker to file his income tax returns — When officials received medical information which confirmed that date of disability was outside his minimum qualifying period, they did not require any further medical information to conclude that he was ineligible for benefits. Cases considered by J.D. Denis Pelletier J.A.: Bartlett v. Canada (Attorney General) (2012), 2012 FCA 230, 2012 Car- swellNat 3473, 2012 C.E.B. & P.G.R. 8003, 2012 CAF 230, 2012 Car- swellNat 5765, [2012] F.C.J. No. 1181 (F.C.A.) — considered 172 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

King v. R. (2010), 2010 CarswellNat 1331, 2010 FCA 122, 2010 CAF 122, 2010 CarswellNat 5967, (sub nom. Daniel King v. Attorney General of Canada) 2010 C.E.B. & P.G.R. 8391, [2010] F.C.J. No. 634 (F.C.A.) — referred to N.L.N.U. v. Newfoundland & Labrador (Treasury Board) (2011), 2011 Car- swellNfld 414, 2011 CarswellNfld 415, 2011 SCC 62, 38 Admin. L.R. (5th) 255, (sub nom. Nfld. and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board)) 2011 C.L.L.C. 220-008, (sub nom. Newfoundland & Labrador Nurses’ Union v. Newfoundland & Labrador (Treasury Board)) 424 N.R. 220, 340 D.L.R. (4th) 17, D.T.E. 2012T-7, (sub nom. Newfoundland & Labrador Nurses’ Union v. Newfoundland & Labrador (Treasury Board)) [2011] 3 S.C.R. 708, 213 L.A.C. (4th) 95, 97 C.C.E.L. (3d) 199, (sub nom. Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board)) 986 A.P.R. 340, (sub nom. Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board)) 317 Nfld. & P.E.I.R. 340, [2011] S.C.J. No. 62 (S.C.C.) — referred to Q. v. College of Physicians & Surgeons (British Columbia) (2003), 2003 SCC 19, 2003 CarswellBC 713, 2003 CarswellBC 743, 11 B.C.L.R. (4th) 1, 223 D.L.R. (4th) 599, 48 Admin. L.R. (3d) 1, (sub nom. Dr. Q., Re) 302 N.R. 34, [2003] 5 W.W.R. 1, (sub nom. Dr. Q. v. College of Physicians & Surgeons of British Columbia) [2003] 1 S.C.R. 226, (sub nom. Dr. Q., Re) 179 B.C.A.C. 170, (sub nom. Dr. Q., Re) 295 W.A.C. 170, [2003] S.C.J. No. 18, REJB 2003-39403 (S.C.C.) — referred to Scheuneman v. Canada (Human Resources Development) (2005), (sub nom. Scheuneman v. Canada (Minister of Human Resources Development)) 337 N.R. 307, 2005 CarswellNat 2955, 2005 CAF 254, (sub nom. Scheuneman v. R.) 2005 C.E.B. & P.G.R. 8166, 2005 CarswellNat 1879, 2005 FCA 254, [2005] F.C.J. No. 1163 (F.C.A.) — referred to Torrance v. Minister of National Revenue (2008), 2008 D.T.C. 6649 (Eng.), 2008 FC 1083, 2008 CarswellNat 3395, 2008 CarswellNat 4206, 2008 CF 1083, [2009] 1 C.T.C. 292, 335 F.T.R. 164 (Eng.), [2008] F.C.J. No. 1349 (F.C.) — referred to Statutes considered: Canada Pension Plan, R.S.C. 1985, c. C-8 Generally — referred to s. 30(5) — considered s. 44(1)(b) — considered s. 44(1)(b)(i) — considered s. 44(2)(a) — considered s. 44(2)(a)(i) — considered s. 44(2)(b) — considered s. 66(4) — considered Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 173

Privacy Act, R.S.C. 1985, c. P-21 Generally — referred to

APPEAL by Attorney General from judgment reported at Torrance v. Canada (Attorney General) (2012), [2012] F.C.J. No. 1371, 2012 C.E.B. & P.G.R. 8006, 2012 FC 1269, 2012 CarswellNat 4247, 2012 CF 1269, 2012 CarswellNat 4925 (F.C.), allowing application by worker for judicial review of refusal of pension benefits.

Bahaa I. Sunallah, K´etia Calix for Appellant, Attorney General of Canada Jamie L. Thornback for Responednt, Rodney Torrance

J.D. Denis Pelletier J.A.:

1 This case illustrates the adage that hard cases make bad law. 2 This is a hard case. The appellant, Mr. Torrance, a self-employed bi- cycle courier, fell and suffered a spinal injury that left him a quadriplegic. The time and place of his fall are such that it does not appear that he has any recourse in tort or under worker’s compensation legislation to lessen the enormous impact of his loss. He applied for Canada Pension Plan (CPP or the Plan) disability benefits in 1998 but, because of two errors in the address to which the denial letter was mailed, he did not become aware that his application had been denied until 2007. 3 Mr. Torrance applied to the Minister of Human Resources and Skills Development Canada (the Minister) to be placed in the position in which he would have been had certain administrative errors not been made by CPP officials. That request was refused. His application for judicial review of that decision was allowed by the Federal Court in a decision reported as Torrance v. Canada (Attorney General), 2012 FC 1269, [2012] F.C.J. No. 1371 (F.C.) (Reasons). Unfortunately for Mr. Tor- rance, I am of the view that the Federal Court’s decision is not sound in law. As a result, the appeal should be allowed, the decision of the Federal Court set aside, and the Minister’s original decision confirmed.

The Legislation 4 In order to place the facts in their proper context, it is useful to set out a short summary of the Plan’s operation and the text of the relevant legislative provisions. 5 The Plan is a contributory plan which means that both eligibility for benefits and the amount of benefits are determined by a person’s contri- 174 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

butions to the Plan. In the case of employees, Plan contributions are de- ducted at source and remitted by the employer. In the case of those who are self-employed, contributions are remitted together with any tax ow- ing when filing their income tax returns. As a result, the failure to file one’s income tax return, as and when required, has implications for one’s position under the Plan. Subsection 30(5) of the Plan is particularly relevant in this regard: 30. (5) The amount of any contribution required by this Act to be made by a person for a year in respect of their self-employed earnings for the year is deemed to be zero where (a) the return of those earnings required by this section to be filed with the Minister is not filed with the Minister before the day that is four years after the day on or before which the return is required by subsection (1) to be filed; and (b) the Minister does not assess the contribution before the end of those four years. 30. (5) Lorsque aucune déclaration des gains pour une année prove- nant du travail qu’une personne exécute pour son propre compte n’a et´´ e produite auprès du ministre, ainsi que l’exige le présent article, et ce au plus tard quatre ans après la date a` laquelle elle est tenue de produire pour l’année en question la déclaration visée au paragraphe (1), le montant de toute cotisation qui, d’après la présente loi, doit etreˆ versé par elle pour l’année, a` l’égard de semblables gains, est réputé nul sauf si, avant l’expiration de ces quatre ans, le ministre a evalu´´ e la cotisation pour l’année a` l’égard de ces gains. 6 The effect of this provision is that when persons do not file their income tax returns with respect to their self employed earnings within 4 years of the date they are due, their CPP contributions with respect to those earnings are deemed to be zero. This is relevant to the determination of a person’s eligibility for benefits. 7 In order to be eligible to receive disability benefits (after January 1, 1998), a person must have made contributions for the “minimum qualifying period’ which, for our purposes, means four out of the six calendar years ending at the date the person became disabled. 44. (1) Subject to this Part, ... Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 175

(b) a disability pension shall be paid to a contributor who has not reached sixty-five years of age, to whom no retirement pension is payable, who is disabled and who (i) has made contributions for not less than the minimum qualifying period, (2) For the purposes of paragraphs (1)(b) and (e), (a) a contributor shall be considered to have made contributions for not less than the minimum qualifying period only if the contributor has made contributions on earnings that are not less than the basic exemption of that contributor, calculated without regard to subsection 20(2), (i) for at least four of the last six calendar years included either wholly or partly in the contributor’s contributory period or, where there are fewer than six calendar years included either wholly or partly in the contributor’s contributory period, for at least four years, ... (b) the contributory period of a contributor shall be the period (i) commencing January 1, 1966 or when he reaches eighteen years of age, whichever is the later, and (ii) ending with the month in which he is determined to have become disabled for the purpose of paragraph (1)(b), ... (my emphasis) 44. (1) Sous réserve des autres dispositions de la présente partie: ... b) une pension d’invalidité doit etreˆ payée a` un cotisant qui n’a pas atteint l’âge de soixante-cinq ans, a` qui aucune pension de retraite n’est payable, qui est invalide et qui: (i) soit a versé des cotisations pendant au moins la péri- ode minimale d’admissibilité, (2) Pour l’application des alinéas (1)b) et e): a) un cotisant n’est réputé avoir versé des cotisations pendant au moins la période minimale d’admissibilité que s’il a versé des cotisations sur des gains qui sont au moins egaux´ a` son ex- 176 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

emption de base, compte non tenu du paragraphe 20(2), selon le cas: (i) soit, pendant au moins quatre des six dernières années civiles comprises, en tout ou en partie, dans sa période cotisable, soit, lorsqu’il y a moins de six années civiles entièrement ou partiellement comprises dans sa période cotisable, pendant au moins quatre années, ... b) la période cotisable d’un cotisant est la période qui: (i) commence le 1er janvier 1966 ou au moment où il atteint l’âge de dix-huit ans, en choisissant celle de ces deux dates qui est postérieure a` l’autre, (ii) se termine avec le mois au cours duquel il est déclaré invalide dans le cadre de l’alinéa (1)b) ... (je souligne) 8 The Plan includes provision for appeals and reconsiderations with respect to decisions as to eligibility and the amount of Plan benefits. There is also a specific provision that deals with remedying the consequences of administrative error or erroneous advice. Mr. Torrance sought relief from the Minister on the basis of this provision; the denial of his request was the subject of judicial review and, now, of this appeal. 66. (4) Where the Minister is satisfied that, as a result of erroneous advice or administrative error in the administration of this Act, any person has been denied (a) a benefit, or portion thereof, to which that person would have been entitled under this Act, (b) a division of unadjusted pensionable earnings under section 55 or 55.1, or (c) an assignment of a retirement pension under section 65.1, the Minister shall take such remedial action as the Minister considers appropriate to place the person in the position that the person would be in under this Act had the erroneous advice not been given or the administrative error not been made. 66. (4) Dans le cas où le ministre est convaincu qu’un avis erroné ou une erreur administrative survenus dans le cadre de l’application de la présente loi a eu pour résultat que soit refusé a` cette personne, selon le cas: Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 177

a) en tout ou en partie, une prestation a` laquelle elle aurait eu droit en vertu de la présente loi, b) le partage des gains non ajustés ouvrant droit a` pension en application de l’article 55 ou 55.1, c) la cession d’une pension de retraite conformément a` l’article 65.1, le ministre prend les mesures correctives qu’il estime indiquées pour placer la personne en question dans la situation où cette dernière se retrouverait sous l’autorité de la présente loi s’il n’y avait pas eu avis erroné ou erreur administrative. 9 With these legislative provisions in mind, I now turn to the facts giving rise to this litigation.

The Facts 10 Mr. Torrance fell and became a quadriplegic on August 29, 1998. In November 1998, while resident in the G.F. Strong Rehabilitation Center, Mr. Torrance made an application for disability benefits. At that time, Mr. Torrance had not filed his 1996, 1997 and 1998 income tax returns. 11 On December 14, 1998, Mr. Torrance was advised that his application for benefits was refused because he had only made contributions to the Plan in two of the six years between 1993 and 1998: see Appeal Book (A.B.), p. 70. Mr. Torrance responded on February 27, 1999, asking that his claim be kept open until he could file his income tax returns for 1996, 1997, and 1998: see A.B. p. 71. Shortly thereafter, he filed his tax return for 1996 but he did not file his tax returns for 1997 and 1998. On March 18, 1999, Plan officials acknowledged receipt of Mr. Tor- rance’s letter and treated it as a request for reconsideration: see A.B. p.72. 12 In May 1999, Plan officials contacted Mr. Torrance again to advise that they had received earnings information up to the year 1997 and to indicate that they required his notice of assessment for his 1998 taxation year “as soon as possible”. Mr. Torrance had some employment earnings and some self-employed earnings in 1997. While he had not yet filed his income tax return for that year, Plan officials were aware of employer remittances with respect to his employment earnings, thus the reference to 1997 earnings. In any event, the same letter advised Mr. Torrance that the status of his application was being changed from “a reconsideration level application to an initial application”: see A.B. at p. 76. This was the 178 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

last communication from CPP officials that reached Mr. Torrance until he renewed contact with them in May 2007. 13 In late June 1999, Plan officials wrote to Mr. Torrance again, advising that further information was required to process his claim and enclos- ing an Authorization to Disclose Information/Consent for Medical Evalu- ation form, as well as a Request Sheet for Additional Information questionnaire. The letter indicated that Mr. Torrance’s application could not be processed without this information and asked him to return the forms within 45 days. This letter was returned undelivered because Mr. Torrance had left the rehabilitation center and had moved to his own apartment. 14 In light of this, CPP officials made various attempts to obtain Mr. Torrance’s current address by contacting the rehabilitation center as well as Mr. Torrance’s family physician. They were given the correct street address by the rehabilitation center but that address referred to the wrong apartment number. 15 On July 30, 1997, CPP officials wrote to Mr. Torrance once again, advising him that his claim for benefits was denied because he was not disabled at the last date on which he met the contribution requirement. The letter went on to say that Mr. Torrance could ask for reconsideration of this decision within 90 days of the receipt of the letter. If Mr. Torrance chose to ask for reconsideration, he was asked to provide his notice of assessment for his 1998 taxation year. 16 This letter did not reach Mr. Torrance. The letter was addressed to the right street address but to the wrong apartment. To compound matters, the postal code was wrong. The correct postal code, as supplied by the rehabilitation center, was V5V 3N1. The postal code on the letter sent to Mr. Torrance was incorrectly written as V5N 3N1. As a result of one or the other or both of these errors, Mr. Torrance did not receive the letter advising him that his claim for benefits was denied. 17 In 2006, Mr. Torrance, with the help of a care aid, filed his 1997 and 1998 income tax returns. When Mr. Torrance’s self-employed earnings were added to his employment earnings for that year, he had sufficient contributory earnings in 1997 and in 1998 to qualify for a disability pension. However, the Minister of National Revenue, who is responsible for collecting and accounting for contributions, applied subsection 30(5), deemed Mr. Torrance’s contributions for those two years to be zero. Mr. Torrance attempted unsuccessfully to challenge this determination in the Federal Court. The Court found that the Minister of National Revenue Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 179

had no discretion as to the application of subsection 30(5) of the Plan: see Torrance v. Minister of National Revenue, 2008 FC 1083, [2008] F.C.J. No. 1349 (F.C.), at paragraph 21. 18 Mr. Torrance then turned his attention to his application for disability benefits. He made a request under the Privacy Act, R.S.C. 1985 c. P-21 and obtained a copy of his CPP file. In reviewing that file, he learned for the first time of the July 1999 letter denying his claim. In May 2007, he wrote to the Minister asking for reconsideration of the July 1999 denial of his claim. He justified the delay in the making of his request on the fact that he had not received the refusal letter until March 2007. 19 Up to this point, CPP officials had no reason to believe that Mr. Tor- rance had not received their July 1999 letter since, unlike the June letter, it was not returned undelivered. 20 I am unable to find the Minister’s response to the May 2007 letter in the record but, given subsequent events, I assume that it was denied. 21 In October 2010, Mr. Torrance, through counsel, requested that the Minister exercise her discretion under subsection 66(4) so as to “award Mr. Torrance the disability pension that he would have received had it not been for the erroneous advice given and the administrative errors made in the handling of his file”: A.B. p. 34. Mr. Torrance identified the erroneous advice and the administrative errors as follows: 1- Insufficient and inaccurate information was provided in the May 1999 letter. 2- CPP officials failed to ensure that the letters of June and July 1999 were delivered to Mr. Torrance in a timely fashion. 3- CPP officials made decisions with respect to Mr. Torrance’s application and request for reconsideration on the basis of insufficient information. 22 On November 8, 2011, Mr. Torrance’s request for relief under subsection 66(4) was denied on the basis that the Minister had determined that “Mr. Torrance was not denied a benefit as a result of erroneous advice/administrative error” for reasons which can be summarized as follows: 1- It was Mr. Torrance’s responsibility to file his income tax returns in a timely fashion. CPP officials were not responsible for informing Mr. Torrance of the consequences of the failure to file his income tax. 2- CPP officials did not make an administrative error when they denied Mr. Torrance’s claim within the 45 days provided for supplying 180 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

additional medical information in the June 1999 letter. The information received from the rehabilitation center confirmed that Mr. Tor- rance was not disabled until after his minimum qualifying period as established from the information on hand as of July 1999. This decision was made approximately five months after Mr. Torrance asked for an extension of time to file his income tax returns. A.B. p. 96 23 Counsel for Mr. Torrance was critical of this letter, saying that it did not deal with the administrative errors that had been identified but focussed instead on Mr. Torrance’s failings. Counsel points out, correctly, that subsection 66(4) requires an examination of the officials’ behaviour not that of Mr. Torrance. That said, subsection 66(4) also requires that any administrative error have deprived a claimant of benefits to which he would otherwise have been entitled. It is therefore not inappropriate for officials to identify the reason the claimant was not entitled to benefits in order to show that any administrative error which may have occurred was not the cause of the claimant’s ineligibility for benefits.

The Decision Under Review 24 Mr. Torrance brought an application for judicial review of the Min- ister’s refusal to exercise her discretion under subsection 66(4). 25 After setting out the facts, the application judge identified the issue as whether the Minister’s delegate (the author of the November 8, 2011 letter) erred in determining that there was no erroneous advice or administrative error which would have permitted the Minister to exercise her remedial jurisdiction. He also noted the respondent Attorney General of Canada’s contention that the Minister’s remedial powers did not extend to setting aside the deemed failure to contribute mandated by subsection 30(5) of the Plan. 26 The application judge identified reasonableness as the standard of review of the decision as to whether there has been administrative error, based on the prior jurisprudence of the Federal Court. On the question of the extent of the Minister’s remedial power with respect to subsection 30(5), the application judge ruled that the standard of review was correctness, based on this Court’s decision in Bartlett v. Canada (Attorney Gen- eral), 2012 FCA 230, [2012] F.C.J. No. 1181 (F.C.A.) (Bartlett). 27 After reviewing this Court’s decision in Bartlett and Scheuneman v. Canada (Human Resources Development), 2005 FCA 254, [2005] F.C.J. No. 1163 (F.C.A.), the application judge found that it was unreasonable Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 181

for the Minister not to acknowledge that the failure to give Mr. Torrance notice of denial of his benefits, an opportunity for reconsideration and to file his 1998 tax return as described in the July 27, 1999 letter was due to an administrative error. In the application judge’s view, Mr. Torrance’s failure to provide CPP officials with his current address was not determinative of the issue. 28 The application judge found that the use of the wrong postal code was the administrative error which denied Mr. Torrance his opportunity for a pension. In the application judge’s view, “it is unreasonable speculation as advanced by the Respondent [Attorney General] that, faced with the July 27, 1999 letter, Mr. Torrance would not have complied with the pension filing requirements. [...] but for the administrative error, Mr. Torrance would have filed his 1998 tax return and s. 30(5) would never have come into play”: see Reasons at paragraphs 41-42. 29 The application judge then considered the effect of subsection 30(5) of the Plan. He referred to this Court’s decision in Bartlett as authority for the proposition that subsection 66(4) gives the Minister broad and unfettered authority to take remedial action to ensure that the claimant is made whole as though the administrative error had not occurred. Accord- ing to the application judge, this broad remedial power would be de- feated if it were circumscribed by subsection 30(5). 30 The application judge concluded his decision by addressing Mr. Tor- rance’s request that the Court order the Minister to provide him a pension in light of the statement in the Attorney General’s memorandum that Mr. Torrance lacked sufficient contributions to qualify for a disability pension. The Court declined to do so on the basis that it was to be presumed that the Minister would act in accordance with the Court’s finding with respect to the primacy of subsection 66(4) in relation to subsection 30(5).

Analysis 31 The first issue to be considered is the standard of review. 32 The role of an appellate court on appeal from a decision of a trial court sitting in judicial review of an administrative decision is to determine whether the trial court identified the correct standard of review and, if so, whether it applied it properly: see Q. v. College of Physicians & Surgeons (British Columbia), 2003 SCC 19, [2003] 1 S.C.R. 226 (S.C.C.), at paragraph 43. 33 In this case, the application judge identified reasonableness as the standard of review of the Minister’s determination as to whether there 182 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

had been an administrative error: see Reasons, at paragraph 28. The application judge further identified correctness as the standard of review of the legal question as to whether the Minister’s remedial authority under subsection 66(4) was limited by subsection 30(5) of the Plan: see Rea- sons, at paragraph 29. 34 I agree that the question as to whether or not there was an administrative error is reviewable on a standard of reasonableness because it is a question of fact. I would also say that the question as to whether the administrative error resulted in a deprivation of benefits which would otherwise have been payable is also a question of fact, reviewable on the standard of reasonableness. The application judge did not frame the latter question as I have but it is clear from his Reasons that he was aware that the central question before him was one of causation. 35 The difficulty is that, having correctly identified the standard of review, the application judge did not apply it correctly. He did not examine the Minister’s decision and the record, including the detailed analysis found at pages 263-267 of the Appeal Book, with a view to determining whether, in light of those documents, the Minister’s decision fell within the range of acceptable outcomes: see N.L.N.U. v. Newfoundland & Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708 (S.C.C.), at paragraphs 12-13. 36 The application judge’s conclusion as to the unreasonableness of the Minister’s decision was based on the fact that the latter did not recognize that the “failure to give Mr. Torrance notice of the denial of his benefits, an opportunity to file for reconsideration, and to file his 1998 tax return” was due to an administrative error: see Reasons, at paragraph 37. The application judge then laid out his view of the chain of causation by noting that had Mr. Torrance received notice of the denial of his claim, he would have filed his 1998 income tax return, subsection 30(5) would never have come into play and Mr. Torrance would have received his disability pension. 37 In my view, the application judge erred in substituting his reasoning for the Minister’s. In effect, he applied the correctness standard. In these circumstances, it falls to this Court to apply the reasonableness standard to the Minister’s decision. 38 This Court has held that in order for subsection 66(4) of the Plan to give rise to a remedy, there must be a causal link between the administrative error or erroneous advice and the loss of benefits: see King v. R., 2010 FCA 122, [2010] F.C.J. No. 634 (F.C.A.), at paragraph 11. Thus, Torrance v. Canada (Attorney General) J.D. Denis Pelletier J.A. 183

the proper inquiry is not whether there was an administrative error but whether there was an administrative error causing a loss of benefits. 39 In this case, the Minister took the position that any error which may have occurred did not result in a denial of benefits to which Mr. Torrance would otherwise have been entitled: see A.B. p. 96. 40 In the Minister’s view, it was Mr. Torrance’s responsibility to file his income tax returns, a responsibility that Mr. Torrance acknowledged in his letter in his letter of February 1999. The Minister went on to say that it was not the responsibility of Plan officials to inform clients of the repercussions of not filing their income tax returns. These points go to Mr. Torrance’s allegation that incomplete and inaccurate information was provided to Mr. Torrance in the May 1999 letter advising that earnings information for the 1997 tax year had been received and asking Mr. Torrance to submit his notice of assessment for the 1998 tax year as soon as possible. 41 The Minister’s response rests on two points. The first is that Mr. Tor- rance knew, independently of the requirements of the Plan, that he was required to file his income tax annually. The second is that, after the first refusal of his claim for benefits in December 1998, Mr. Torrance knew that he had to file his 1996 to 1998 income tax returns in order to qualify for disability benefits. The only piece of information which Mr. Torrance did not have was that if he did not file his income tax returns within four years of the time at which they were due, he would be precluded from making contributions for those years. Nothing was communicated to Mr. Torrance which would have led a reasonable person to conclude that he had an indefinite period of time to file his income tax returns. 42 The second point in the Minister’s letter went to Mr. Torrance’s allegation that the Plan officials’ decision with respect to his entitlement was made on the basis of inadequate and incomplete information because it was made on the basis of partial information as to Mr. Torrance’s 1997 earnings and without knowledge of his 1998 earnings. According to Mr. Torrance, this occurred because the decision was made before the expiry of the 45 days given to Mr. Torrance to provide further information in the June 1999 letter: see A.B. at p. 40. 43 The June 1999 letter did not request further financial information from Mr. Torrance nor did it provide a window of 45 days in order to 184 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

provide that information. The relevant parts of the June 30, 1999 letter are as follows: Could you please: • sign and date the enclosed Authorization to Disclose Infor- mation/Consent for Medical Evaluation form. As you will note from the first paragraph of the form, this gives us permission to ask for information from your doctor and other authorities. • fill out all the blank areas on the enclosed Request Sheet for Additional Information questionnaire and sign it and date it. If you need more space, please attach an additional sheet of paper. We cannot process your application until we receive this information. Please send it back to us in the enclosed envelope within 45 days. A.B. p. 78 44 The June 1999 letter dealt with medical information. It did not request financial information. 45 The Minister’s decision indicates that information had been received from the G.F. Strong Rehabilitation Center within the 45 day period which confirmed that Mr. Torrance’s last day worked, August 29, 1998, was outside his minimum qualifying period, which was determined at that time to be December 30, 1997. As a result, waiting for the expiration of the 45 day period in order to determine eligibility was unnecessary. The Minister noted that this decision was made 5 months after Mr. Tor- rance asked for an extension of time to allow him to file his 1996, 1997 and 1998 income tax returns. 46 It is true, as subsequent events have shown, that Plan officials did not have a complete picture of Mr. Torrance’s contributory history as of July 27, 1999 when they denied his claim. The question is whether this lack of information was due to an administrative error. Plan officials knew from a questionnaire which had been completed by Mr. Torrance that he had self-employed earnings in 1997 and 1998. On February 27, 1999, Mr. Torrance asked for an extension of time to file his income tax returns. On May 17, 1999, he was asked to provide his notice of assessment for 1998 as soon as possible. 47 The question this raises is whether the Plan officials’ decision to deny Mr. Torrance’s claim as of July 1999 was an administrative error. No doubt every case will turn on its particular facts. In this case, Mr. Tor- rance did not follow up on his claim for seven years. As a result, if Plan Torrance v. Canada (Attorney General) Marc Nadon J.A. 185

officials had postponed making their decision until the end of the 45 days, or indeed, for a further 6 months, it would have made no difference since Mr. Torrance did not turn his attention to his claim until 2006. A further delay in making the decision to deny benefits would not have changed the outcome since Mr. Torrance was not attending to his claim. Plan officials were obviously of the view that sufficient time had elapsed to allow Mr. Torrance to file his income tax returns. As a result, when they received medical information which confirmed that his date of disability was outside his minimum qualifying period, they did not require any further medical information to conclude that he was ineligible for benefits. In my view, that decision did not constitute an administrative error and, as a result, did not give rise to a remedy under subsection 66(4) of the Plan. 48 In my view, the Minister’s conclusion that the failure of the July 1999 letter to reach its destination was not the cause of Mr. Torrance’s failure to file his income tax returns in a timely fashion is reasonable. It was Mr. Torrance’s failure to file his 1997 and 1998 income tax returns within four years of their due date which triggered the operation of subsection 30(5), which in turn led to Mr. Torrance’s ineligibility for benefits. The application judge’s conclusion that Mr. Torrance would have filed his income tax returns had he received the July 30, 1999 letter cannot be sustained in light of Mr. Torrance’s failure to do so after the first denial of his claim in December 1998 on the basis of insufficient contributions. 49 In light of this conclusion, I do not have to deal with the question of whether the Minister’s remedial authority under subsection 66(4) is con- strained by subsection 30(5) of the Plan. That said, I should not be taken as approving of the application judge’s conclusions on this point.

Conclusion 50 In the end result, an examination of the Minister’s decision shows that it falls with the range of acceptable outcomes, having regard to the reasons given for it and the record before the Minister. As a result, the appeal should be allowed, the decision of the Federal Court should be set aside and Mr. Torrance’s application for judicial review should be dismissed. As costs were not sought, there will be no order as to costs.

Marc Nadon J.A.:

I agree. 186 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Johanne Gauthier J.A.:

I agree. Appeal allowed. Miller v. Convergys CMG Canada Limited Partnership 187

[Indexed as: Miller v. Convergys CMG Canada Limited Partnership] Gerry Miller Plaintiff and Convergys CMG Canada Limited Partnership, Convergys Corporation, Convergys Information Management Group Inc., Convergys New Brunswick Inc. and Convergys Customer Management Group Inc. Defendants British Columbia Supreme Court Docket: Vancouver S116335 2013 BCSC 1589 L.A. Fenlon J. Heard: June 3-6, 2013 Judgment: August 30, 2013 Labour and employment law –––– Employment law — Termination and dismissal — Notice — Effect of contractual terms regarding notice –––– Em- ployee was hired as telephone agent in September 2003 and signed employment contract — Employee was promoted to Team Lead in March 2006 and again in November 2006 to Client Services Manager; each time he signed new contract — In 2010, employee was promoted to Senior Manager Client Services; he did not sign new contract — Employee’s travel increased in fall 2009 and he began to work for new client who wanted him to work on site in United States to reduce expenses — Employer encourage employee to relocate to United States, but employee demurred because his same-sex spouse would not have been able to obtain visa in United States — Employer attempted to help employee find new position within company in Canada — On July 13, 2011, employee was formally terminated with seven weeks’ pay in lieu of notice as was stipulated in November 2006 contract — Employee brought action for 12 months’ notice — Action dismissed — Employment contract from November 2006 still applied to employee because change in employment responsibilities he experienced were natural progression within role of Client Services Manager — Promotion he received in July 2010 recognized increasing importance of work he had begun doing in fall 2009 — Furthermore, employment contract expressly provided that it would continue to apply even if employee’s role changed. Labour and employment law –––– Employment law — Interpretation of employment contract — Essential terms –––– Employee was hired as telephone agent in September 2003 and signed employment contract — Employee was promoted to Team Lead in March 2006 and again in November 2006 to Client Services Manager; each time he signed new contract — In 2010, employee was promoted to Senior Manager Client Services; he did not sign new contract — 188 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Employee’s travel increased in fall 2009 and he began to work for new client who wanted him to work on site in United States to reduce expenses — Em- ployer encourage employee to relocate to United States, but employee demurred because his same-sex spouse would not have been able to obtain visa in United States — Employer attempted to help employee find new position within company in Canada — On July 13, 2011, employee was formally terminated with seven weeks’ pay in lieu of notice as was stipulated in November 2006 contract — Employer offered to pay 14 weeks’ salary if employee signed release not to bring action for wrongful dismissal — Employee brought action for 12 months’ notice — Action dismissed — Provision in employment contract regarding notice was unambiguous: employee was entitled to minimum notice provided by Employment Standards Act — Further, ex gratis offer to sweeten severance package if employee agreed to forgo wrongful dismissal claim was akin to settlement offer; it was neither evidence that employer did not intent to rely on contract nor evidence that employer was contractually bound to pay increased sum. Labour and employment law –––– Employment law — Interpretation of employment contract — Duress –––– Employee was hired as telephone agent in September 2003 and signed employment contract — Employee was promoted to Team Lead in March 2006 and again in November 2006 to Client Services Man- ager; each time he signed new contract within 24 hours of receiving it, without legal advice — In 2010, employee was promoted to Senior Manager Client Ser- vices; he did not sign new contract — Employee’s travel increased in fall 2009 and he began to work for new client who wanted him to work on site in United States to reduce expenses — Employer encourage employee to relocate to United States, but employee demurred because his same-sex spouse would not have been able to obtain visa in United States — Employer attempted to help employee find new position within company in Canada — On July 13, 2011, employee was formally terminated with seven weeks’ pay in lieu of notice as was stipulated in November 2006 contract — Employee brought action for 12 months’ notice — Action dismissed — Employer was not required to point out strengths and weaknesses of employment contract — It was sufficient that prospective employee was given time to review proposed employment contract on his own, in absence of any influence by prospective employer — Contract was written in plain language and employee had signed almost two identical contracts in relation to earlier positions with employer — There was no evidence employer pushed employee to sign immediately or put undue pressure on him. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Aggravated, punitive or exemplary damages –––– Employee was hired as telephone agent in September 2003 and signed employment contract — Employee was promoted to Team Lead in March 2006 and again in November 2006 to Client Services Manager; each time Miller v. Convergys CMG Canada Limited Partnership 189

he signed new contract within 24 hours of receiving it, without legal advice — In 2010, employee was promoted to Senior Manager Client Services; he did not sign new contract — Employee’s travel increased in fall 2009 and he began to work for new client who wanted him to work on site in United States to reduce expenses — Employer encourage employee to relocate to United States, but employee demurred because his same-sex spouse would not have been able to obtain visa in United States — Employer attempted to help employee find new position within company in Canada — On July 13, 2011, employee was formally terminated with seven weeks’ pay in lieu of notice as was stipulated in Novem- ber 2006 contract — Employer’s representative told coworkers about employee’s termination — Employee brought action for punitive damages — Ac- tion dismissed — Evidentiary record of email exchanges between employer representatives and employee reflected level of courtesy, respect and appreciation for employee and his contribution to company — Employer took interest in helping employee find new position with company — Employer’s representatives told other employee’s about termination in order to spare employee fury of calls and explanations; she also did not want anyone to be left with impression employee was terminated for cause. Cases considered by L.A. Fenlon J.: Finlan v. Ritchie Bros. Auctioneers (Canada) Ltd. (2006), 2006 C.L.L.C. 210- 011, 2006 BCSC 291, 2006 CarswellBC 442, [2006] B.C.J. No. 408 (B.C. S.C.) — referred to Krieser v. Active Chemicals Ltd. (2005), 2005 CarswellBC 2241, 2005 BCSC 1370, [2005] B.C.J. No. 2056 (B.C. S.C.) — distinguished Machtinger v. HOJ Industries Ltd. (1992), 40 C.C.E.L. 1, (sub nom. Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.) 53 O.A.C. 200, 91 D.L.R. (4th) 491, 7 O.R. (3d) 480n, (sub nom. Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.) 136 N.R. 40, 92 C.L.L.C. 14,022, [1992] 1 S.C.R. 986, 1992 CarswellOnt 892, 1992 CarswellOnt 989, [1992] S.C.J. No. 41 (S.C.C.) — considered Schmidt v. AMEC Earth & Environmental Ltd. (2004), 2004 CarswellBC 1739, 2004 BCSC 1012, [2004] B.C.J. No. 1571 (B.C. S.C.) — considered Shore v. Ladner Downs (1998), 1998 CarswellBC 973, 52 B.C.L.R. (3d) 336, 160 D.L.R. (4th) 76, 107 B.C.A.C. 142, 174 W.A.C. 142, [1998] B.C.J. No. 1045 (B.C. C.A.) — considered University of British Columbia v. Assn. of Administrative & Professional Staff (2006), 53 C.C.E.L. (3d) 241, 2006 C.L.L.C. 210-048, 59 B.C.L.R. (4th) 203, 2006 CarswellBC 2676, 2006 BCCA 491, 385 W.A.C. 108, 232 B.C.A.C. 108, [2006] B.C.J. No. 2846 (B.C. C.A.) — considered Wallace v. United Grain Growers Ltd. (1997), 123 Man. R. (2d) 1, 159 W.A.C. 1, 152 D.L.R. (4th) 1, 1997 CarswellMan 455, 1997 CarswellMan 456, 219 N.R. 161, [1997] 3 S.C.R. 701, [1999] 4 W.W.R. 86, 36 C.C.E.L. (2d) 1, 3 190 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

C.B.R. (4th) 1, [1997] L.V.I. 2889-1, 97 C.L.L.C. 210-029, [1997] S.C.J. No. 94 (S.C.C.) — referred to Statutes considered: Employment Standards Act, R.S.B.C. 1996, c. 113 Generally — referred to Rules considered: Supreme Court Civil Rules, B.C. Reg. 168/2009 App. B, s. 2(2)(b) — referred to

ACTIONS by employee for 12 months’ notice based on reasonable notice at common law and for punitive damages for manner in which employer effected termination.

R.B. Johnson for Plaintiff T. Erskine for Defendants

L.A. Fenlon J.: Introduction 1 The plaintiff was employed by the defendant for seven-and-a-half years. He was dismissed without cause. The defendant gave the plaintiff seven weeks’ pay in lieu of notice as required by an employment contract signed five years earlier. 2 The plaintiff claims the notice period in the employment contract is unenforceable because the contract does not apply to his new position; the notice provision is ambiguous; and the contract is unconscionable. 3 Based on reasonable notice at common law the plaintiff seeks 12 months’ notice. In addition he claims punitive damages for the manner in which the defendant effected the termination.

Decision 4 The plaintiff’s claims are dismissed. I conclude that the notice provision in the contract is enforceable and that there is no basis for an award of punitive damages.

Background 5 There is little disagreement between the parties on the facts of this case. They agree on the following. Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 191

6 Although four defendants are named, only Convergys CMG Canada Limited Partnership (“Convergys”) employed the plaintiff and the other defendants are not properly parties to the action. 7 Convergys is in the business of providing customer care and billing services for other companies. The plaintiff, Mr. Gerry Miller, commenced employment with the defendant in September 2003 as a telephone agent in Kamloops, B.C. During his employment he signed three contracts of employment: the first when he was initially hired as a telephone agent; the second in March 2006 when he became a Team Lead (a more senior telephone agent with a supervisory role); and the third in November 2006 when he was promoted to the position of Client Services Manager. Only the third contract is relevant to this dispute. 8 In 2010 Mr. Miller was promoted to “Senior Manager Client Ser- vices”. He did not sign a new contract of employment when he assumed that role. 9 Mr. Miller was very good at his job. He was well liked by the company’s clients, management and fellow employees. There is no allegation of cause in this case. The defendant described Mr. Miller at trial as a “stellar employee”. 10 Initially Mr. Miller worked as a Client Manager for FedEx. When Convergys closed its offices in Kamloops, he took on a role with a large client, Resort Condominium International (“RCI”), for whom Convergys provided services at sites in Pueblo, Colorado and Salt Lake City, Utah. Mr. Miller worked from home and travelled about 50% of the time. 11 For various reasons the call centre in Pueblo was not doing well, something that was not Mr. Miller’s fault. The client RCI took the unusual step of having a representative on site, and the client was more comfortable when Mr. Miller was on site as well. 12 Convergys was concerned about the cost of bringing someone in from Canada on a regular basis. The cross-border flights were expensive and the team was regularly exceeding its travel budget due to Mr. Miller’s expenses. 13 Convergys thought Mr. Miller was the right man for the job. They encouraged him to relocate to the United States. Because Mr. Miller was in a same-sex common-law relationship, moving to Colorado or Utah was not a straightforward decision. The United States did not recognize his partner as a spouse, which meant his partner could not get a work 192 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

visa. The visa problem resulted from United States immigration laws and was outside of the defendant’s control. 14 Discussions about Mr. Miller moving to the United States went on over many months. By December 2010 it was apparent that Mr. Miller would not move to the United States. At that point the defendant tried to help Mr. Miller find a position with the company in Canada. 15 Only two witnesses were called at trial: the plaintiff, Gerry Miller, and his manager, Linda Toucey. It was evident that the two both respected and liked each other. Mr. Miller described his working relationship with Ms. Toucey as “great” and said that he “loved Linda”. For her part, when asked to describe her working relationship with Mr. Miller, Ms. Toucey said: “Awesome. He respected me and I respected him. He was like a brother and I would have done anything for him.” 16 With respect to the facts and in particular the dates on which the parties disagree, I make the following findings. 17 By January 2011 Convergys had determined that the client services manager for RCI needed to be on site in either Colorado or Utah. Mr. Miller acknowledged that he and Ms. Toucey talked about that problem “all the time”. He knew by the end of the first quarter of 2011 that since he could not move to the United States, Convergys was going to have to terminate his employment in that position. Ms. Toucey delayed that event as long as she could. 18 On June 8, 2011, a senior administrator sent an email to Ms. Toucey saying that the company had to move to replace Mr. Miller. On June 16, 2011, Ms. Toucey talked to Mr. Miller and told him that his position was being posted and he would be “RIF’D”, a term used to describe a “reduc- tion in force” when a position was terminated without cause. 19 On June 30, 2011, Mr. Miller had an interview with the defendant’s hiring manager, Gina Massa, for a senior analyst position with the defendant in Canada. He was notified on July 12 that the defendant’s recruiter, Kim Brown-Ice, urgently wanted to schedule a second interview for the senior analyst position. On July 13, 2011, the defendant formally terminated Mr. Miller’s position as Senior Client Manager for RCI. Because he had commenced medical leave for a problem with his elbow on July 4, the company made the termination effective immediately and gave him seven weeks’ pay in lieu of notice, confirming that his health and dental benefits would continue for seven weeks. Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 193

20 At the time of his dismissal, Mr. Miller’s compensation package included an annual salary of $67,870, plus a comprehensive benefits package including life insurance, accidental death and dismemberment, long term disability, extended medical benefits, MSP and dental benefits. He received four weeks of paid holidays a year and was enrolled in a pension-matching plan. Annual merit increases were also available.

Analysis 1. Was the November 2006 employment contract in force at the time of the plaintiff’s termination? 21 The plaintiff submits that the employment agreement he signed on November 22, 2006, does not apply to the final position he held as Se- nior Manager Client Services. If that is so, the defendant cannot rely on the seven weeks’ notice provided for in that contract and Mr. Miller would be entitled to reasonable notice at common law. The defendant concedes that notice at common law would be significantly greater, about seven-and-a-half months. The plaintiff submits that it would be in the range of ten to twelve months. 22 It is well established that substantial changes in employment can render an employment contract unenforceable by the time an employee is dismissed: Schmidt v. AMEC Earth & Environmental Ltd., 2004 BCSC 1012 (B.C. S.C.): [10] Significant changes in employment can render an employment contract unenforceable by the time of termination of employment. The substratum of the employment contract entered into at the time of hiring may have disappeared by the time of termination, or it may be implied that the contract could not have been intended to apply to the position ultimately occupied by the time of termination: Sawko v. Foseco Canada Ltd. (1987), 15 C.C.E.L. 309 (Ont. Dist. Ct.); Irrcher v. MI Developments Inc. January 7, 2002, Court File No. 00-CV- 198182 (Ont. Sup. Ct.), affirmed [2003] O.J. No. 4087 (Ont. C.A.); Dolden v. Clarke Simpkins Ltd. (1983), 3 C.C.E.L. 153 (B.C.S.C.); Sharpe v. Computer Innovations Distribution Inc. (1993), 1 C.C.E.L. (2d) 28 (N.B.Q.B.), affirmed (1994), 2 C.C.E.L. (2d) 157 (N.B.C.A.). [Emphasis added.] 23 Did Mr. Miller’s employment change significantly after he signed the employment contract as a Client Services Manager in November 2006? Mr. Miller described the differences in his employment following promotion to Senior Manager Client Services as “drastic”. He said that he 194 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

had a change in budgetary responsibility, going from a portfolio of about $12 million to $25 million between two sites. Further, unlike the earlier position as a Senior Manager, he could hire employees, was responsible for being on call outside of regular work hours, and had nine individuals reporting to him, which he described as a significant increase. Finally, Mr. Miller said that his travel increased from about 10% of the time as a Client Services Manager to 50% of his time as a Senior Manager. 24 In terms of pay, the parties agree Mr. Miller received an increase to reflect movement from a “B3 Band” to a “C Band job”. When he started as a Client Services Manager, he earned $43,200 per year; as a Senior Client Services Manager he was paid $67,800. 25 The defendant says that the two roles were not markedly different. Ms. Toucey testified that the work done by Mr. Miller as a Client Ser- vices Manager was the same as the work he did as a Senior Manager, except that the volume of the work had increased. At the time, Con- vergys had 73 client services managers, 45 of whom held the title “Se- nior Client Services Manager”. She said the designation of Senior Man- ager reflects the dollar value of an account and the number of offices or sites involved. 26 As to the reclassification of Mr. Miller’s job to the “C” band, Ms. Toucey explained that there are three levels of Client Services Manager. The bands are compensation categories. The Client Service Manager position begins in the “B” band for compensation and moves to a “C” band when an employee becomes a Senior Client Manager. She explained “A” band was for employees with an hourly rate, such as telephone agents. “B” bands and higher represented salaried positions at various levels. 27 While Ms. Toucey agrees that a Senior Client Manager can be responsible for up to $25 million per year in client work, she said the RCI work at the two sites amounted to $15 million per year. She noted that the FedEx account Mr. Miller had been responsible for as a Client Ser- vices Manager was $13 million and that the volume of work he was responsible for with RCI was approximately the same. 28 When pressed in cross-examination as to why the defendant did not have Mr. Miller sign a contract when he was appointed Senior Client Services Manager, Ms. Toucey replied that Mr. Miller was still a Client Services Manager and had signed a contract for that position in Novem- ber 2006. 29 I accept Ms. Toucey’s evidence that Mr. Miller’s appointment as Se- nior Client Services Manager occurred in late spring or early summer of Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 195

2010. I also accept her evidence that the plaintiff’s travel increased in the fall of 2009 when he was still a Client Services Manager. 30 When RCI came on as a new Convergys client in 2009, Convergys wanted Mr. Miller to work with that client. He was seen as a team builder who would be able to deal with “ramping up” RCI services. Over a period of six weeks Mr. Miller was transitioned from FedEx work into RCI’s work. In the fourth quarter of 2009 Convergys hired 100 people to provide telephone services for RCI. Employees began taking calls in Oc- tober and were up to a complement of 100 by January 2010 at Con- vergys’ Pueblo, Colorado site. It proved to be a tough site, with an entirely new group of telephone agents. The site leader in Pueblo was older and could not keep up with the additional work coming into the site from RCI. As a result, Mr. Miller and Ms. Toucey spent a lot of time on site solving the problems. RCI also had some of their managers on site and Convergys did not want to appear less interested than the client in solving problems. The Salt Lake City site for RCI opened in 2010, and Mr. Miller also spent time at that site. 31 I conclude that Ms. Toucey’s evidence about the plaintiff’s employment responsibilities is to be preferred to Mr. Miller’s. Ms. Toucey was an impressive and careful witness, providing detailed evidence in a forthright and consistent manner. In contrast, Mr. Miller’s evidence tended to lack particularity. He could not recall dates readily. His evidence was at times evasive and contradictory. For example, when asked about an email he sent to human resources asking about benefits following a termination without cause, Mr. Miller initially refused to admit that he was asking in relation to himself. He insisted that his question “was about anyone”. When asked why he did not respond to a request made on July 12 to immediately contact Convergys to arrange a follow-up interview for a new position he had applied for, Mr. Miller said he did not have his phone with him because he was at a doctor’s appointment. He was initially quite certain about that evidence. When confronted with medical records that showed no appointment on that date, Mr. Miller said he must have been at the hospital for tests that day, but added “I can’t be sure of the date”. 32 Mr. Miller said at one point he had no recollection of signing any of the offers of employment or of the circumstances surrounding the signing. But on re-direct he said he had a clear recollection that no one had drawn the termination provisions in the contracts to his attention. 196 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

33 I find that the changes Mr. Miller described to his employment occurred when he moved from managing FedEx to managing RCI in the fall of 2009. The promotion he received to Senior Client Manager in July 2010 recognized his increasing importance to RCI and the growth in RCI’s business with Convergys. I find that change in employment responsibilities to be a natural progression within the role of a Client Ser- vices Manager. 34 In that regard, the case before me is distinguishable from Schmidt and Krieser v. Active Chemicals Ltd., 2005 BCSC 1370 (B.C. S.C.). In those cases and in the cases cited in Schmidt, the plaintiffs’ positions were found to have changed dramatically so that in effect the position held at the time of termination was simply not the same job. As Gerow J. recognized in Schmidt at para. 29: Incremental changes in the terms of employment are unexceptional and unsurprising and the substratum of the employment contract can not be removed by anything short of fundamental change. 35 Further, the employment contract expressly provides that it will continue to apply even if Mr. Miller’s role changed. Under the heading “Ef- fective date” the contract provides: Effective December 3, 2006 Convergys agrees to employ you in the position of Client Services Manager on a regular full time basis. Dur- ing your tenure with Convergys, your position with the company may change; however, the terms of this employment contract and all related schedules will continue to apply unless mutually agreed otherwise. [Emphasis added.] Under the heading “Termination” the contract states: This agreement and the attached schedules constitute the entire agreement between you and Convergys with respect to your employment. Any and all previous agreements, written or oral, express or implied between you and Convergys are terminated. Furthermore, all of the documents contained or referred to herein form your contract of employment with Convergys. Changes in position, responsibilities, salary or benefits will not invalidate any provision in this contract unless changes to any provision in this contract are expressly agreed to by the parties. [Emphasis added.]] 36 In summary on this issue, I find that the employment contract signed by Mr. Miller on November 22, 2006, when he became a Client Services Manager continued to apply to the position of Senior Manager Client Services. Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 197

2. Is the notice provision in the employment contract enforceable? 37 The plaintiff submits this term is unenforceable because: a) it is ambiguous; b) it breaches the Employment Standards Act, R.S.B.C. 1996, c. 113 [Act]; and c) the contract is unconscionable. 38 I will address each argument in turn.

a) Is the clause ambiguous? 39 There is a presumption at common law that a contract of employment for an indefinite term is terminable only on reasonable notice of termination. That presumption is rebuttable if the contract of employment clearly specifies some other period of notice either expressly or impliedly: Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 (S.C.C.), at 998- 999, (1992), 91 D.L.R. (4th) 491 (S.C.C.). Machtinger confirms that if a notice period in a written contract of employment meets the minimum requirements of the applicable employment standards legislation, it will be binding. 40 The relevant passage from the employment contract in the case before me is as follows: b. Convergys may terminate your employment for cause, or by providing you with notice, or pay in lieu of notice in accordance with the Employment Standards Act of British Columbia. 41 The plaintiff submits the notice provision is ambiguous for two reasons. First, because the clause does not say that Mr. Miller is only entitled to the minimum notice provided for in the Act, implying that he could be entitled to more. A similar argument was raised in University of British Columbia v. Assn. of Administrative & Professional Staff, 2006 BCCA 491, 59 B.C.L.R. (4th) 203 (B.C. C.A.) [Wong]. The employment contract in that case provided (at para. 7): During this period, either you or the University may terminate the employment relationship with notice in accordance with the Employ- ment Standards Act. 42 In rejecting the employee’s submission that the clause was ambiguous, Mr. Justice Chiasson cited the following passages from Machtinger in which Mr. Justice Iacobucci stated at 1004-1005: Absent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incor- 198 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

porate the minimum notice periods set out in the Act. Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice. Mr. Justice Chiasson went on to state at para. 34: I agree with the conclusion of the chambers judge that a plain reading of Article 9.3.1 is that the provisions of the ESA providing for notice or pay in lieu of notice are incorporated into the contract in issue. The effect is that the language of the ESA concerning notice or pay in lieu of notice is part of the contract. It is as if the draftsman included the words either in the text of or as a schedule to the contract. 43 While the second comma in the notice provision in issue in the case at bar is unfortunately placed, on a plain reading the meaning is clear: the employee is entitled to the minimum notice provided in the Act. As in Wong, I do not find the termination clause to be ambiguous. 44 I will address at this point the plaintiff’s submission that an offer by the defendant to pay 14 weeks’ salary if the plaintiff signed a release amounts to “evidence the defendant did not intend to rely on the contract”. 45 An ex gratia offer to “sweeten” a severance package if the employee agrees to forgo a wrongful dismissal claim is akin to a settlement offer and is neither evidence that the employer does not intend to rely on the contract nor evidence that the employer is contractually bound to pay the increased sum.

b) Does the contract breach the Employment Standards Act? 46 The plaintiff submits that the contract breaches the Act because a clause in the contract dealing with probation provides for no notice during the first three months of employment. The probation clause is as follows: Probationary Period Your position is subject to a Ninety (90) day probationary period. Your performance and suitability for employment with the company will be evaluated during the probationary period. The standard of performance during the probationary period will be in the sole discretion of the company. It is understood that the probationary period is designated to determine your suitability for continued employment. Consequently, your employment can be terminated at any time during the probationary period if you are deemed unsuitable, without the Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 199

requirement to provide notice or pay in lieu of such notice. [Empha- sis added.] 47 When Mr. Miller signed the employment contract he had been with Convergys for over three years. Under the Act he was entitled to three weeks’ notice or pay in lieu, but the probationary clause provided for no notice for 90 days after signing the contract. 48 Relying on Shore v. Ladner Downs (1998), 160 D.L.R. (4th) 76, 52 B.C.L.R. (3d) 336 (B.C. C.A.), the plaintiff argues that in order to be enforceable against an employee a severance clause must not limit the employee’s potential notice period in any circumstances to less than the employee’s actual or potential minimum notice under the Act. 49 Madam Justice Neilson (as she then was) addressed this argument in Krieser. In that case the plaintiff had worked for the defendant for over sixteen years before being dismissed. The employment contract provided no severance pay for employees dismissed during the first six months of their employment, whereas the Act required one weeks’ pay for employees dismissed between three and six months of employment. Relying on Shore, the plaintiff argued that the entire termination provision was unenforceable due to non-compliance with the Act. Madam Justice Neilson rejected the submission, saying at para. 10: Further, in each of the cases relied on by the plaintiff, the discrep- ancy between the legislated notice period and the contractual notice period created an actual or potential disadvantage for the plaintiff/employee if he or she was dismissed. That is not the case here. At the time of the legislative changes in 1995, the plaintiff had worked for the defendant for over seven years. Thus, neither s. 63(1) nor paragraph 6(A)(1) had any application to him. At that time, and until his dismissal, he fell under paragraph 6(A)(7) of the Contract, which provides for six months’ notice, a period significantly more generous than the eight weeks required by s. 63(2)(b) of the Act. [Emphasis added.] 50 In the case at bar Mr. Miller had been an employee for three years at the time he signed the contract. The probationary clause did not apply to him either then or at the time of his termination. Even if it could be construed as imposing a “without notice” probationary period on him in 2006 in relation to the new position of Client Services Manager (an inter- 200 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

pretation that seems unlikely), that clause could be severed from the contract as unenforceable under the following provision: Severability Each paragraph of this agreement and the attached Schedules are separate and distinct covenants, severable one from the other and if such covenant is determined to be invalid or unenforceable, such invalidity or unenforceability shall attach only to the covenant to the extent of such invalidity or unenforceability, and all other covenants shall continue in full force and effect. In Krieser at para. 13 Neilson J. also relied on a severance clause to dis- tinguish the case before her from the facts in Shore. 51 In conclusion on this issue, I find that in Mr. Miller’s circumstances the employment contract did not breach the Act.

c) Is the contract unconscionable and therefore unenforceable? 52 The plaintiff makes four submissions in support of his position that the contract is unconscionable: (i) he had only 24 hours to consider the contract before signing; (ii) he did not receive legal advice before signing; (iii) the defendant did not draw to his attention the severance, non-competition and non-solicitation clauses or the other terms of the agreement in general; and (iv) the defendant did not provide him with a copy of the signed agreement. 53 There is no merit to Mr. Miller’s assertion that he did not receive a copy of the contract. He acknowledged in cross-examination that he had kept an unsigned copy of the contract pinned to his bulletin board for four-and-a-half years. 54 Nor do I accept the plaintiff’s other submissions. An employer is not required to point out the strengths and weaknesses of an employment contract. It is sufficient that a prospective employee is given time to review a proposed employment contract on his own, in the absence of any influence by the prospective employer, and is given the opportunity to seek out any advice he may wish to obtain about the proposed contract: Finlan v. Ritchie Bros. Auctioneers (Canada) Ltd., 2006 BCSC 291 (B.C. S.C.) at para. 36. Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 201

55 The contract expressly gave Mr. Miller 24 hours to consider its terms. It provides for an opportunity to obtain advice stating at the top of page 3: Please read the terms and conditions set out in the letter, and the attached Schedules, carefully. If you have any questions concerning the terms of your employment with Convergys, please do not hesitate to discuss them with us. In addition, please feel free to seek independent legal advice concerning the contract. 56 The contract is written in plain language. Mr. Miller had signed almost two identical contracts in relation to earlier positions with Con- vergys. He chose not to obtain independent legal advice and chose not to take advantage of the 24-hour period to read over and consider the terms of the contract. There is no evidence that the defendant pushed Mr. Miller to sign immediately or put undue pressure on him in any way. 57 The plaintiff also suggested that the non-competition and non-solicitation clauses were unfair. I do not find that to be so, since they were restricted to companies directly in competition with the defendant.

3. Is the plaintiff entitled to punitive damages? 58 When dismissing employees, an employer’s duty of good faith and fair dealing requires it to be candid, reasonable, honest and forthright, and to refrain from conduct that is unfair or in bad faith such as being untruthful, misleading or unduly insensitive: Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 (S.C.C.) at paras. 98, (1997), 152 D.L.R. (4th) 1 (S.C.C.). In the case at bar Mr. Miller seeks punitive damages of $10,000 to $15,000 based on what he alleges to be insensitive and bad faith conduct in the manner of his dismissal. 59 I pause to note that the plaintiff has chosen to concurrently pursue a human rights action against his employer for discrimination. Mr. Miller in that proceeding asserts that he was terminated due to his sexual orientation and medical condition. Although the facts upon which Mr. Miller intends to rely in the human rights action were alluded to during the trial before me, and although he suggested that he was terminated after disclosing his medical condition to his employer, Mr. Miller does not rely on those facts in support of his claim for punitive damages in this Court. Accordingly, I make no findings in relation to those allegations, which will be addressed by the B.C. Human Rights Tribunal. However, in fairness to the defendant, I note that Convergys unequivocally denies the 202 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

suggestion that Mr. Miller’s sexual orientation and medical condition played a role in his dismissal. 60 In this proceeding, Mr. Miller relies only on the following conduct in support of his claim for punitive damages: a) the defendant forced the plaintiff to engage in a job search in order to remain employed with the company; b) the defendant announced the posting of the plaintiff’s position to at least 13 coworkers and clients in a conference call about three weeks before the official notice of termination; c) the defendant terminated the plaintiff’s employment the day after advising him that they wished to interview him a second time for another position; d) the defendant terminated MSP coverage for the plaintiff after two weeks, rather than after seven weeks as promised; and e) the defendant offered the plaintiff 14 weeks’ severance upon termination if he would sign a waiver but resiled from that offer when he asserted that he was entitled to a higher amount. 61 I have earlier addressed item (e), the withdrawal of the offer to pay increased severance. As for the remainder of the allegations, I have no hesitation in finding them to be entirely without merit. 62 As noted previously, Ms. Toucey and Mr. Miller had an exceptionally close and respectful relationship. The evidentiary record of email exchanges between Mr. Miller, Ms. Toucey and other Convergys managers reflects a similar level of courtesy, respect and appreciation for Mr. Miller and his contribution to the company. Mr. Miller knew in 2010 that travel costs were exceeding budget and that the company needed a full- time on-site Client Services Manager for RCI in the United States. Con- vergys continued to employ Mr. Miller nonetheless, putting off his termination so that he could explore options for either moving his partner to the United States or finding other positions within Convergys that would permit him to continue to reside in Canada. 63 The defendant also took an interest in helping Mr. Miller find such a position. Managers communicated behind the scenes to nominate him for other roles. As Mr. Miller noted, he was even offered an interview for a position he had not applied for. He was interviewed in June 2012 for a senior analyst position. That led to an urgent request on July 12 for Mr. Miller v. Convergys CMG Canada Limited Partnership L.A. Fenlon J. 203

Miller to contact the recruiter to set up a second interview, a request Mr. Miller did not respond to before he was officially terminated from his Senior Client Services Manager position. 64 I do not find any insensitivity on the part of the defendant in Ms. Toucey arranging a telephone call with Mr. Miller’s coworkers on June 20, 2011, to inform them of the company’s decision to post Mr. Miller’s position. Ms. Toucey explained to Mr. Miller in advance of the call that she did not want anyone to be left with the impression that he was being terminated for cause or had done anything other than an outstanding job for RCI. At trial, Ms. Toucey said that she also wanted to spare Mr. Miller a flurry of calls and explanations as all his coworkers would want to know what was happening. She said that would inevitably occur without this sharing of information because “everyone loved him”. Ms. Toucey told Mr. Miller of the plan and the reasons for the call in advance. It is common ground that he did not object to the idea. Given how close the two were, it is inconceivable that Mr. Miller would not have told Ms. Toucey if he found the idea upsetting. 65 While the Medical Services Plan benefit was cut off at the end of July rather than at the end of August as it should have been with seven weeks’ notice, I find that this was inadvertent and not an intentional act of mal- ice on the part of the defendant. 66 In summary on the issue of punitive damages, I find the plaintiff has not proved that the defendant breached its duty of good faith and fair dealing.

4. Mitigation 67 In light of the findings I have made upholding the contract’s seven weeks’ notice of termination, it is unnecessary to address the issue of whether Mr. Miller failed to mitigate his damages. I will do so nonetheless in the event I am found to be in error on the question of enforceability of the contract. 68 Mr. Miller went on medical leave on July 5, 2011, about one week before his formal notice of termination. He commenced short-term disability leave on July 12. He remained on short-term disability leave throughout the notice period. 69 The defendant has the burden of proving that Mr. Miller failed to mitigate his damages. Convergys argues that Mr. Miller did not take reasonable steps to obtain offers of employment for two reasons. First, because he failed to follow up on the second interview for the senior analyst posi- 204 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

tion as he was requested to do by the company on July 12, 2011; and second, because he took no steps to find another job before September 19, 2011. 70 I conclude that Mr. Miller did not fail to mitigate his damages. Al- though he did not pursue the second interview, he was at the time starting a medical leave and it is not surprising that he was focused on his health rather than on pursuing that opportunity. 71 The defendant’s second submission arises because documentary evidence of Mr. Miller’s efforts to find alternate employment begins on September 19, 2011. Mr. Miller explained the gap of about two months as due to his lack of awareness of the need to keep records of his job searches. I accept his evidence that he did take reasonable steps in the weeks following his dismissal to obtain other work. He obtained a position with Rocky Mountaineer from March 19, 2012, until October 19, 2012, at an annual salary of $47,000 per year. It was a temporary position as he was covering a maternity leave. 72 In conclusion on this issue, I find that Mr. Miller did not fail to mitigate his losses.

Costs 73 As the defendant has been entirely successful, Convergys is entitled to its costs at Scale B. Actions dismissed. Infinium Capital Corp. v. AB2000 Software Corp. 205

[Indexed as: Infinium Capital Corp. v. AB2000 Software Corp.] Infinium Capital Corporation Plaintiff (Defendant by Counterclaim) and AB2000 Software Corporation, Alexandre Bevziouk Defendants (Plaintiffs by Counterclaim) Ontario Superior Court of Justice Docket: 06-CV-321998 PD3 2013 ONSC 5022 A.J. O’Marra J. Heard: June 10-14, 17-18, 2013 Judgment: July 29, 2013 Labour and employment law –––– Employment law — Nature of employment relationship — Miscellaneous –––– Employer was securities trading company while employee was software developer — Employer retained employee in 2003 to help develop electronic trading platform on part-time basis; employee started working for employer on full-time basis in 2004 through his own company — Employer deployed proprietary algorithmic trading platform in summer 2005; program was fully operational and producing considerable profits for employer by late fall 2005 — Employee engaged in re-negotiation of his compensation package — Employer discovered problems with program and learned employee had tampered with it; employer terminated employee — Employee brought action against employer for damages for wrongful dismissal or breach of contract — Action dismissed — Employee had not been either independent or dependent contractor — Employee had been given title of Chief Technology Of- ficer and put in charge of software developers; employee had therefore been part of management structure — Employee had been subject to employee performance review, and he and his dependants had been permitted to participate in employer’s employee benefits package — Employer’s principals had used term “employee”in letters and e-mails — Payment of employee through his own company for tax purposes did not change nature of relationship. Labour and employment law –––– Employment standards legislation — Termination of employment — Termination of employment by employer — What constituting dismissal — Breach of contract –––– Employer was securities trading company while employee was software developer — Employer retained employee in 2003 to help develop electronic trading platform on part- time basis; employee started working for employer on full-time basis in 2004 through his own company — Employer deployed proprietary algorithmic trading platform in summer 2005; program was fully operational and producing con- 206 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

siderable profits for employer by late fall 2005 — Employee engaged in re-negotiation of his compensation package — Employer discovered problems with program and learned employee had tampered with it; employer terminated employee — Employee brought action against employer for damages for wrongful dismissal or breach of contract — Action dismissed — Employee had not been either independent or dependent contractor — Employee had been given title of Chief Technology Officer and put in charge of software developers; employee had therefore been part of management structure — Employee had been subject to employee performance review, and he and his dependants had been permitted to participate in employer’s employee benefits package — Employer’s principals had used term “employee”in letters and e-mails — Payment of employee through his own company for tax purposes did not change nature of relationship. Cases considered by A.J. O’Marra J.: Cariboo Press (1969) Ltd. v. O’Connor (1996), 1996 CarswellBC 280, [1996] B.C.J. No. 275 (B.C. C.A.) — considered Connolly v. General Motors of Canada Ltd. (1993), 1993 CarswellOnt 963, 50 C.C.E.L. 247, [1993] O.J. No. 2811 (Ont. Gen. Div.) — considered Fanous v. Total Credit Recovery Ltd. (2006), 2006 CarswellOnt 4527, [2006] O.J. No. 3036 (Ont. S.C.J.) — referred to McKee v. Reid’s Heritage Homes Ltd. (2009), 256 O.A.C. 376, 69 B.L.R. (4th) 14, 315 D.L.R. (4th) 129, 2009 ONCA 916, 2009 CarswellOnt 8053, 78 C.C.E.L. (3d) 191, 2010 C.L.L.C. 210-011, [2009] O.J. No. 5489 (Ont. C.A.) — referred to 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. (2001), 2001 SCC 59, 204 D.L.R. (4th) 542, 274 N.R. 366, 55 O.R. (3d) 782 (headnote only), [2001] 4 C.T.C. 139, 17 B.L.R. (3d) 1, 2001 CarswellOnt 3357, 2001 CarswellOnt 3358, 11 C.C.E.L. (3d) 1, 12 C.P.C. (5th) 1, 150 O.A.C. 12, 8 C.C.L.T. (3d) 60, [2001] 2 S.C.R. 983, (sub nom. Sagaz Industries Canada Inc. v. 671122 Ontario Ltd.) 2002 C.L.L.C. 210-013, [2001] S.C.J. No. 61, REJB 2001- 25875 (S.C.C.) — considered Statutes considered: Securities Act, R.S.O. 1990, c. S.5 Generally — referred to

ACTION by employee against employer for damages for wrongful dismissal or breach of contract.

Catherine Powell, Daniel Stern for Plaintiff / Defendant by Counterclaim J. Gardner Hodder, Stefan A. De Smit for Defendants / Plaintiffs by Counterclaim Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 207

A.J. O’Marra J.:

1 Alexandre Bevziouk, and his company AB2000 Software Corpora- tion brought an action by counterclaim against Infinium Capital Corpora- tion (Infinium) seeking damages for breach of contract and wrongful dismissal after Alexandre Bevziouk’s relationship as a software developer with Infinium was terminated October 2, 2006. 2 Originally, after Bevziouk’s termination Infinium commenced an action against Bevziouk and AB2000 Software, and others for misuse of its confidential information, copyright infringement and breach of contract. In November 2007 Infinium sought and obtained an injunction on consent that required Bevziouk to return to Infinium all of Infinium’s software in his possession and to remove certain content from a website he maintained in which Infinium had a proprietary interest. In April 2013 Infinium discontinued its action against Bevziouk and AB2000. Alexan- dre Bevziouk has continued his action for breach of contract and wrongful dismissal.

Background 3 Infinium Capital Corporation, (Infinium) a securities trading company, was started by Alan Grujic and Sergei Tchetvertnykh in 2002. In- finium was engaged in proprietary capital trading, that is, its traders traded the capital of the firm. In addition to traders using standard trading strategies and techniques, Infinium began to develop electronic trading strategies, or algorithmic trading capacity for inter-listed arbitrage. 4 Alan Grujic and Sergei Tchetvertnykh both had Engineering and Masters of Business Degrees as well as many years’ experience in financial securities industry internationally. Grujic worked with Toronto Do- minion Bank with its trading group as a trader and trading floor manager in Canada, Toronto, London and Tokyo. Tchetvertnykh worked with Credit Suisse First Boston on Wall Street and in Ukraine heading up its investment banking division in Kiev. In Toronto and London he worked with Merrill-Lynch specializing in international mergers and acquisi- tions. Later, after working as the director of Private Equity for an Invest- ment Fund he returned to Merrill-Lynch to establish a technology group. 5 Mr. Bevziouk’s education was in robotic engineering and computer sciences. He obtained a Master’s Degree from Kiev University and worked as a software developer in Ukraine for 6-7 years. He immigrated 208 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

to Canada in 1995 and continued to work in the field of software development. 6 In 2003 Infinium retained the services of Alexandre Bevziouk as a software developer to help Infinium develop its electronic trading platform. Mr. Tchetvertnykh and Mr. Bevziuok had known each other during university in Kiev. Mr. Tchetvertnykh approached Mr. Bevziouk to help them build an electronic trading platform. Mr. Bevziouk was highly regarded as a software developer. He continued to provide software solutions on a part-time basis to Infinium while working as a software developer and chief technical officer (CTO) for CDP Communications. In 2004 Mr. Bevziouk left CDP Communications to work full-time at Infinium. 7 On March 30, 2004, Mr. Bevziouk through his company, AB2000, entered into a Service Agreement (SA#1) to “develop, implement and test various trading systems, strategies and analytics that are expected to earn profits from daily trading in equity securities using the company’s capital and execution platforms”. The agreement between AB2000 Software (the Contractor), described as an “equity trading strategist”, which it was not, and Infinium, was signed personally by Mr. Bevziouk. Sergei Tchetvertnykh testified that they had created a template contract for the trading staff they had been retaining and the same form was used to retain Mr. Bevziouk to head up its technology section. Mr Bevziouk testified he always regarded the agreement as being between him and Infinium. 8 The agreement provided the following compensation for Bevziouk’s services: a) the greater of 50% of AB2000’s net monthly trading profit or $12,700. payable monthly; b) discretionary bonus, paid, if any, at the end of the calendar year; and, c) a stock option of the right to purchase up to 5% of voting shares, following a 3 year vesting period and during the next 2 years for consideration equal to the book value as of the date of purchase. Mr. Bevziuok was given the title of Chief Technology Officer (CTO) and the position entailed the implement of trading strategies and ideas through software programme development, as well as the hiring, training and supervision of the technical support employees of Infinium. 9 In the summer of 2005, Infinium deployed its proprietary algorithmic trading platform using an application called the MD server (market data server). It was the basis of Infinium becoming a high frequency trader. The trading platform allowed it to make thousands of trades a day based on the trading strategies programmed to respond instantly to the market Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 209

data, such as inter-listed arbitrage, by taking advantage instantly of price anomalies in different markets. High frequency traders can gather and interpret market data and buy and sell in response instantly. By late fall 2005 the programme was fully operational and producing considerable profits for Infinium from its inter-listed arbitrage trading. 10 In October 2005 Mr. Bevziouk sought to revise his compensation package. He negotiated it with Mr. Tchetvertnykh. He declined to purchase 1% of the shares available to him for $40,000. and instead agreed to sell his 5% interest for $50,000. payable to him personally. It was done so he could offset a capital loss because of a voided share value he had incurred when he left CDP. 11 On December 1, 2005, Mr. Bevziouk executed a Rights Purchase Agreement with respect to the 5% of shares for $50,000 and a Mutual Release as between Alexandre Bevziouk and Infinium. Further, he executed another Mutual Release with respect to the 2004 Service Agree- ment (SA#1) between AB2000 Software, which he signed Alexandre Bevziouk, President and Infinium. 12 Another Service Agreement (SA#2) with a revised compensation package was presented in December 2005 but not executed until March 10, 2006. When it was signed it was backdated to December 1, 2005. Mr. Bevziouk had requested a delay in its execution in order for him to review it with a lawyer. On December 11, 2005 he sent the following email to Alan Grujic: Can we postpone making a final decision regarding my compensation for several weeks? I am just not quite comfortable with my current choice and would like to seek legal advice regarding two options we have been considering. 13 All of the e-mail traffic between Bevziouk, Tchetvertnykh and Grujic about re-negotiating the Service Agreement submitted in evidence dealt only with the issues of base compensation and bonuses. There is no men- tion of compensation being sought for commissions from net trading profits. The lack of such recorded inquiries is of some significance in the discussion later about Bevziouk’s claim for trading profits. The first time the issue was raised was in his counterclaim against Infinium. 14 Notwithstanding having executed SA#2 March 10, 2006, which increased his base monthly salary by 15% and a stipulation of discretionary bonuses “paid, if any, quarterly”, Mr. Bevziouk immediately sought to 210 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

further revise the terms of his compensation. In an email the next day he wrote to Alan Grujic: Alan, as you know I signed a contract yesterday knowing that in its current form it is bias and it is not balanced in terms of reflecting both sides interests equally. Actually my lawyer in oral conversation suggested not to sign it at all. But Sergei was “heavily” on my back pushing me to sign it and he was not willing to take any com- promises. You know that I cannot defend my interests that well, so I just gave up and signed the paper without being agreed with the document. However after our yesterday’s phone chat I thought thoroughly about the situation I am in now and would like to share my opinion with you. Alan, you mentioned that with new compensation in place I doubled my earnings in a year and this is quite unusual in standard situation. Well, I am here almost for two years (one year and eleven months to be precise) so it is two year progress. Also at my previous place I started with 60K and in two years I was making 120 (with bonuses) and it was related to my contribution to CDP’s success. During one of our previous conversations we were talking about changes in my compensation schema and you told that it would be close too (sic) 300K guaranteed and Sergei kind of agreed with that (well, in the contract he twisted the situation his way). So “almost 300K” (would come from 175K base plus 25K quarterly. But actually I ended up with the agreement of 175K plus undefined discretionary bonus with two years vesting period on unknown portion of it plus a bunch of limitations. I believe that this is not right and I am going to ask Sergei and you to consider amendment the contract to reflect my interests in a different way than it is stated now. 15 On a number of occasions during 2006 the MD server, the principal trading platform for the algorithmic trading would not open at the start of a trading day or indicate a system error. However, Mr. Bevziouk was able to correct it within minutes without revealing to the other technical support staff how he had accomplished it. 16 In September, 2006 Mr. Bevziouk went on vacation. Mr. Tchetvertnykh, with Mr. Grujic’s agreement, directed another senior programmer, Alexey Zubko to check the source code of the MD server application. Mr. Tchetvertnykh had become suspicious of Mr. Bevziouk. He claimed to have overheard an earlier conversation between Mr. Bevziouk and an unknown person on a commuter train in which Mr. Bevziouk said he had stolen all of the software worth $25 million. In combination with the number of instances when the system would not Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 211

start without Mr. Bevziouk’s involvement and his many absences or late arrival to work they wanted the system investigated. (Exhibit No. 45) 17 Mr. Zubko, on looking for the source code for the MD server application, Infinium’s main trading platform for algorithmic trading, found it missing. It was not in the SourceSafe, a repository for tracking time changes in the code. It had been replaced by a compressed zip file that had been password protected by Mr. Bevziouk. Another Infinium programmer was given the task of cracking the zip file password, which took several hours. It was found that unless there was a date change at the end of the month, which was unknown to anyone at Infinium, the application would not start, again without showing any system error. In the absence of Mr. Bevziouk, it could not have been started without the expenditure of considerable time by a programmer to crack the zip file. At a minimum, it would have caused significant trading delay and loss to Infinium. 18 On October 2, 2006 Infinium terminated the Service Agreement #2 of 2005 citing Alexandre Bevziouk’s theft of Infinium’s proprietary software relating to its principal trading platform the MD server and by him having inserted what was characterized as a malicious code into the MD server.

Position of the Parties 19 Alexandre Bevziouk claims that he was an employee of Infinium and not a contractor, terminated without cause and thereby entitled to receive unpaid commissions as provided for in the Service Agreements, calculated on the basis of net algorithmic trading profits realized by Infinium during the term of both agreements, as well as further damages. 20 Infinium’s position is as follows: 1) Mr. Bevziouk was either an independent contractor or, in the alternative, a dependant contractor, not an employee. 2) Mr. Bevziouk has no cause of action under the Service Agreement dated March 30th, 2004 (SA#1) which was subject to the Mutual Release signed by him and superseded by the Service Agreement dated December 1, 2005 (SA#2). 3) Mr. Bevziouk’s relationship with Infinium under the terms of the 2005 Service Agreement (SA#2) was terminated with just cause as a result of his misconduct. 212 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

4) In the alternative, if the 2005 Service Agreement (SA#2) was terminated without cause and Bevziouk was entitled to notice, his damages are limited to reasonable notice as recognized under common law. 5) Mr. Bevziouk is not entitled to receive commissions calculated on the basis of trading profits earned through the use of software for algorithmic trading.

Issues 21 In considering whether there was a breach of contract and/or the wrongful dismissal of Alexandre Bevziouk as claimed, I consider the following questions: 1) Was Alexandre Bevziouk an employee of Infinium or a contractor providing service pursuant to Service Agreements? 2) Is Alexandre Bevziouk/AB2000 Software Corporation entitled to make any claim pursuant to the Service Agreement (SA#1) executed March 30, 2004? 3) Is Alexandre Bevziouk/AB2000 entitled to “commissions” pursuant to the terms of the Service Agreements? 4) Was Alexandre Bevziouk’s relationship with Infinium under the 2005 Service Agreement terminated with or without just cause?

Issues Analysis 1. Employee v. independent/dependent contractor 22 Alexandre Bevziouk and AB2000 Software have the onus to demonstrate that Alexandre Bevziouk was an employee and not an independent or dependent contractor. 23 In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (S.C.C.) the Supreme Court on reviewing a number of tests used to determine whether a person is an employee or contractor observed that there is no single conclusive test which can be universally applied. What must always occur is a search for the total relationship of the parties. The central question is “whether the person who has been engaged to perform the services is performing them as a person in business on his own account.” The court cited a non-exhaustive list of factors which could be taken into consideration in the determination: Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 213

• The level of control the employer has over the worker’s activities • Whether the worker provides his or her own equipment • Whether the worker hires his or her own helpers • The degree of financial risk taken by the worker • The degree of responsibility for investment and management held by the worker, and • The worker’s opportunity for profit and the performance of his or her tasks 24 The court concluded that there is no set formula as to the application of such factors and the relative weight of each factor will depend on the particular facts and circumstances of the case. 25 The Service Agreements which set out the relationship of Bevziouk to Infinium Capital Corporation were both addressed to AB2000 Software Corporation, care of Alex Bevziouk, President and signed by Alex Bevziouk. The March 30, 2004 Service Agreement (SA#1) opens with the following recital: This service agreement (“CONTRACT”) confirms our mutual under- standing and agreement regarding the scope and terms of the reten- tion of AB2000 Software Corporation (“the contractor”) as an equity trading strategist for Infinium Capital Corporation (“Infinium” or the “Company”). 26 Similarly, the opening paragraph to the Service Agreement dated De- cember 1, 2005 (SA#2) states: We are very pleased to enter into a services agreement with AB2000 Software Corporation (“the Contractor”) as an equity trading strategist (“the Contract”) for Infinium Capital Corporation...your signature in the space provided indicates your acceptance of our offer on these terms and conditions. 27 Although the agreements indicate that AB2000 is being contracted as an equity trading strategist both Mr. Bevziouk and the principals of In- finium, Alan Grujic and Sergei Tchetvertnykh agree that the purpose of the contract was to retain the services of Mr. Bevziouk to create software solutions to implement trading strategies, specifically for algorithmic trading. To that end Mr. Bevziouk was given the title of Chief Technol- ogy Officer and put in charge of the software developers. 28 In addition to working as the head of technology and part of the management structure counsel for Mr. Bevziouk points to the additional indicia that would suggest Mr. Bevziouk was an employee and should be 214 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

considered as such. Both “Service Agreements” conclude with the following statement above Mr. Bevziouk’s signature: I have been given a copy of this employment agreement. I have read, understand and hereby accept its terms and conditions. I acknowledge that this constitutes my entire agreement with the company. (Emphasis added) 29 The statement would appear to describe an acceptance of an employer/employee relationship. 30 Although Mr. Bevziouk initially denied having had a performance review during the term of his relationship with Infinium, an Employee Re- view document, dated July 28, 2006 for Mr. Bevziouk was tendered in evidence. Further indicia of the relationship, Mr. Bevziuok and his de- pendents were permitted to participate in Infinium’s employee benefits package. 31 In a letter written by Alan Grujic on behalf of Mr. Bevziouk to assist him with sponsoring his in-laws immigration to Canada (Exhibit No. 33) he said the following: This letter is to confirm that Mr. Alex Bevziouk has been employed with Infinium Capital Corporation in the capacity as the Chief Tech- nology Officer since April 2004. (Emphasis added) 32 During the course of re-negotiating the second agreement (SA#2) e- mails were frequently exchanged between Mr. Bevziuok and the principals, Grujic and Tchetvertynkh. In an e-mail dated July 28, 2005 from Sergei Tchetvertnykh to Alex Bevziouk, he described Mr. Bevziouk as a “valuable employee”. (Exhibit No. 49). 33 In the organizational chart for Infinium Capital Corporation (ICC) Mr. Bevziouk is described as the Head of Technology and as one of its executives. (Exhibit Nos. 90 and 91) 34 On the other hand, Mr. Bevziouk requested that the agreement be between AB2000 and Infinium so his compensation for services could be paid to the corporation in order to benefit from certain tax advantages. 35 On balance however, I am satisfied that Mr. Bevziouk, as part of the management structure, being subject to an employee performance review and stated relationship as referenced by Infinium’s principals in letters and e-mails he was an employee and entitled to reasonable notice upon termination, unless termination was for just cause. Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 215

36 In finding him to have been an employee there is no basis to consider whether by the same indicia of “minimum economic dependency” he was a dependant contractor, a category, which arises only as a “carve out” from the non-employment contractor category. (See McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916 (Ont. C.A.).)

2. Is Alexandre Bevziouk/AB2000 Software Corporation entitled to make any claim pursuant to the service agreement executed March 30, 2004? 37 On December 1, 2005 Mr. Bevziouk executed a Mutual Release with respect to the March 30th, 2004 Service Agreement (SA#1) in which it states: ...Alex Bevziouk hereby remises, releases and forever discharges the corporation and its affiliates, shareholders, officers, directors, successors and assigns (“the Corporation or Releasees”) and the corporation hereby remises, releases and forever discharges Alex Bevziuok and his respective heirs, successors and assigns (“the Alex Bevziuok Releasees”), of and from any and all actions, causes of action, suits, debts, duties, accounts, bonds, covenants, contracts, claims and demands whatsoever with which the respective release in party now has or hereafter can, shall or may have against the respective party being released for or by reason of or in any way arising out of any cause, matter, fact or circumstance related or referable to or connected to the agreement or the transactions contemplated thereby. 38 In addition to signing the Mutual Release with respect to the Service Agreement (SA#1) Mr. Bevziouk also executed the Rights Purchase Agreement to sell the 5% shares interest in the March 30th, 2004 Service Agreement (SA#1) for $50,000. He executed a similar Mutual Release with respect to the Rights Purchase Agreement dated December 1, 2005. 39 Mr. Bevziouk testified that the documents were not explained to him by Mr. Tchetvertnykh who provided them to him and he did not understand them. He testified that he felt bullied and intimidated into signing the documents by Mr. Tchetvertnykh. 40 I do not accept Mr. Bevziouk’s evidence in either regard. He had signed a Mutual Release with respect to his former employer, CDP Com- munications when he left its employ to work at Infinium. Further, there was evidence he had the opportunity to consult with a lawyer before he executed the documents. 41 He acknowledged that the Mutual Release with respect to the Rights Purchase Agreement would result in him receiving $50,000 and that the 216 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Mutual Release with respect to the Service Agreement meant that his relationship with Infinium would be governed by the second agreement which he continued to negotiate. He requested that the payment be made to him personally in order that he may benefit by the offset to his voided share value at CDP Communication. He requested a deferral of the execution of the Service Agreement (SA#2). He asked to have it delayed to obtain legal advice. His evidence that he did not like the advice of the lawyer not only rang hollow but contradicted his e-mail to Mr. Grujic the day after signing the agreement in which he stated he did so against his lawyer’s advice all of which contradicts his assertion that he was bullied into executing the documentation by Sergei Tchetvertnykh. 42 Even though the relationship between Alexandre Bevziouk and Sergei Tchetvertnykh had become strained because of his many requests for greater compensation, Mr. Bevziouk was not hesitant in putting his views and/or concerns in email communications to Alan Grujic, the other principal of Infinium. 43 He understood that the Mutual Release would terminate the terms of the March 30th, 2004 Service Agreement (SA#1). He initiated the re-negotiation. He had the benefit of reviewing the documents with a solicitor. Mr. Bevziouk is bound by the prohibition of making any claims or taking any proceedings under the Agreement, (SA#1).

3. Is Alexandre Bevziouk entitled to “commission” pursuant to the 2005 service agreement? 44 The Service Agreement (SA#2) stipulated the following with respect to services and compensation: Services Notwithstanding other responsibilities you may be asked to perform during the term of the contract, you undertake to develop, implement and test various trading systems, strategies and analytics that are expected to earn profits from daily trading in equity securities using the company’s capital and execution platforms. You will apply your own discretion with respect to the ultimate trading strategies developed fully or in part by your trading systems. You are required to comply with order entry, capital limit monitoring and all other trading and financial control policies and procedures established by the company. The company will provide to you such training as may be necessary for you to properly provide the services under this service agreement. Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 217

Compensation Compensation for your services would consist of the following: a) Payout: in determination of your monthly payout, the company will assess its monthly trading profit earned from trading utilizing strategies developed and personally supervised by you, less deductions applicable to your trading, including execution, clearing and capital costs, if any. Your individual compensation target is set to 10% (ten per cent) of the monthly net trading profit attributable to your trading or $14,583.33, whichever is greater. Payment will be made in the month immediately following the applicable trading month. b) Discretionary bonus, paid, if any, quarterly. Restricted component of the discretionary bonus, if any, shall be vested in two years from the date granted. c) Right to participate in the employee equity benefits program when it will be established with a purpose to provide select employees with an option to purchase equity linked securities issued by the company prior to its public offering. You (sic) individual limit of participation will be equal to the sum of all discretionary bonuses, cash and restricted, granted during the term of your full time engagement with the company prior to the offering. d) Reimbursement of reasonable out of pocket expenses incurred in connection with this agreement, on approved basis. 45 Mr. Bevziouk asserts that he should be entitled to 10% commission of all the net trading profits for algorithmic trading because he developed the program which permitted the strategies to be implemented. He maintains that in addition to making requests for bonuses, as set out in various emails tendered in evidence he verbally requested a number of times of Mr. Tchetvertnykh for payment of commissions, but was rebuffed by him. I do not accept Mr. Bevziouk’s evidence that he made verbal requests for commission compensation. All of Mr. Bevziouk’s communications, by way of e-mails tendered in evidence concerned annual compensation and bonuses. None of the communications reflect requests for compensation by way of commissions. 46 He was not entitled to trading profits even by the terms of the Service Agreement. The Agreement stated that in determining his monthly payout the company would assess its “monthly trading profit earned from trading utilizing strategies developed and personally supervised by you, 218 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

less deductions applicable to your trading, including executions, clearing and capital costs, if any”. Moreover, it stated his individual compensation target was set to 10% of the monthly net trading profit attributable “to your trading” or $14,583.33, whichever is greater. 47 Mr. Tchetvertnykh testified that the compensation by way of net trading profits was part of the template agreement for the benefit of the traders. Each trader was responsible for trading losses and as a result the traders had to provide a deposit to cover any losses, which Mr. Bevziouk did not provide. Mr. Bevziouk confirmed in evidence that his principal responsibility for Infinium was developing trading software. He supervised the team of software developers and worked with them on various projects. It was the traders and strategists who provided him with the strategies for which he was to design software to execute the trading ideas. The traders and strategists came to him to resolve any technical difficulties they had with the programs. 48 Mr. Bevziouk did not testify to any instance in which he designed or devised a trading strategy. I accept the evidence of Mr. Tchetvertnykh and Mr. Grujic that it was they and other traders who provided ideas and strategies to Mr. Bevziouk to implement the necessary computer code in order to execute their ideas. Mr. Bevziouk provided support to strategists and traders working at Infinium. There is no evidence to suggest otherwise. 49 I accept the evidence of Mr. Tchetvertnykh that Mr. Bevziouk was persistent in seeking an enhanced compensation package, but that he never raised compensation through commissions for net trading profits. He was not a trader. He did not supervise traders. He did not create the strategies or come up with the ideas that were programmed by him or the other software developers on staff. He knew he was not entitled to commissions from net trading profits. 50 It is clear that Infinium used a template agreement for both traders and Mr. Bevziouk’s services. Mr. Bevziouk was retained to provide software development. He was not a trader. He was not registered or qualified to be a trader. In this regard, I accept the evidence of Mr. Law- rence Boyce, an expert in the administration and application of security laws of Ontario from his experience as a past Director of Investigative Services and Compliance for the Toronto Stock Exchange (TSX), Direc- tor of Sales Compliance and Registrar for the Investment Dealers Associ- ation of Canada (IDA), and Vice-president of Business Conduct Compli- ance with the Investment Industry Regulatory Organization of Canada Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 219

(IIROC). In reviewing Mr. Bevziouk’s activities involving the program- ming of algorithmic trading, he concluded that he did not have any qualifications to trade on Infinium’s behalf under the rules of the TSX, the IDA/IIROC and the Universal Market Integrity Rules (UMRI). 51 Mr. Bevziouk did not develop trading strategies, he did not supervise trading, he did not do any trading and he was not a registered qualified trader. Had he done so, not only he, but Infinium as well, would have been in violation of the Securities Act, its Regulations, and the various securities regulators. 52 There was no reference to any interest in commission payments during the negotiation of the 2005 Service Agreement and in the exchange of e-mails in which he sought clarification of his bonuses and vesting interests. I conclude that Mr. Bevziuok did not seek to claim commission payments during the currency of either of the 2004 or 2005 Service Agreements and his testimony suggesting otherwise was an attempt to mislead the court. 53 The Service Agreement with respect to compensation by way of either 10% of net trading profits or stipulated monthly compensation is not ambiguous in term of the criteria that would have been necessary for him to meet in order to receive commission compensation. Those criteria were neither met nor could they be by Mr. Bevziouk as a software developer. 54 I agree with the submission made by counsel for Infinium that Mr. Bevziouk cannot be awarded something to which he was not entitled to, for which he did not expect, or ask for during his tenure at Infinium.

4. Was Alexandre Bevziouk’s tenure at Infinium terminated with or without just cause? 55 The 2005 Service Agreement (SA#2) contained the following termination clause: This agreement may be terminated: a) by the company, without cause, at any time upon providing you with the total unpaid compensation to which you are entitled, including the accrued share of the current month’s compensation, in lieu of notice. It is agreed that such payment will be in complete satisfaction of all common-law and statutory obligations; b) by you, upon giving the company not less than four (4) weeks notice in writing; 220 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

c) by either party at any time, by mutual written consent of the parties; or d) by either party at any time for cause, without notice. 56 In this instance, the burden is with Infinium to establish that it had cause to terminate the agreement and their relationship without notice to Bevziouk. An employer may dismiss an employee at any time without warning and without notice or compensation in lieu of notice, provided the employer proves there was just cause to do so. (See Fanous v. Total Credit Recovery Ltd., [2006] O.J. No. 3036 (Ont. S.C.J.)) 57 During late 2005 and into 2006, a period during which Mr. Bevziouk was negotiating his compensation package with Infinium, from time to time at the start of business the MD server (market data server), In- finium’s principal trading platform, would not start or display a system error. Only Mr. Bevziuok could correct the difficulty and he could do so within a brief period of time. He would not disclose to the other software developers the steps he had taken to rectify the difficulty. 58 As noted above, in September 2006, when Mr. Bevziuok was on vacation it was discovered that he had removed the MD server source code which prevented the other software developers at Infinium from acces- sing the program. Mr. Alexey Zubko was asked to examine the system because of the unexplained MD server fail to start occurrences and the disappearance of the MD server source file. It was discovered that the administrator, Alex Bevziuok deleted the MD server source files in Janu- ary 2006 and inserted a compressed zip file password locked version with the name MD server in May 2006. The zip file was locked, which prevented the other developers access to examine its contents. A second password was required which was unknown to any of the software developers. Any failure to start the main trading platform, thereby delaying Infinium from trading, put Infinium at financial risk, as well as created the potential of destabilizing the securities market because of the high volume of trades involved. Further, it put Infinium at risk with respect to the securities markets regulators. 59 Christopher Stoute, retired Professor Emeritus with Ryerson Univer- sity, Faculty of Electrical and Computer Engineering, an expert with respect to computer hardware and software design testified as to his review of Infinium’s operating systems and electronic data files for the material time leading to Bevziouk’s dismissal. He concluded that Mr. Bevziouk was responsible for inserting an unneeded code into the MD server which provided no useful purpose to Infinium. Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 221

60 In his report Professor Stoute stated the following: In the author’s opinion the malicious code plays no beneficial role in the operation of the MD server...the malicious code was only effective when the MD server application was being loaded into the server’s memory to enable it to run and play its essential role of In- finium’s trading system. The malicious code imbedded within the MD server code would conduct its specific validation and verification procedures. During these procedures the malicious code checks to ensure the existence of the file labeled “send.exe” as well as the current calendar month. When the month was beyond a number set within the malicious code rou- tine, or if the send.exe file was absent in the operational system resources, the MD server loading procedure stopped after a short delay with no error message displayed: no guidance offered to the server’s operators regarding the malfunction. At this point the MD server application would be effectively useless to Infinium. The securities trading system was not operational. 61 Professor Stoute noted that the malicious code would have no effect on the MD server application when it was in operation, however, the code could and did abort the MD server application from launching successfully during startup loading operations on multiple occasions. The failure to launch the MD server application as a result was under Mr. Bevziouk’s secret control. 62 Counsel for Mr. Bevziouk suggested that he had inserted the code as a security feature to prevent theft of Infinium’s operating software at the request of the principals of Infinium. It is important to note that Mr. Grujic and Mr. Tchetvertnykh had no knowledge of the code or procedure instituted by Mr. Bevziouk. Indeed, no one at Infinium, other than Mr. Bevziuok was aware that the inserted password protected zip file and code existed or the effect it would have. Professor Stoute was of the view that any suggested theft deterrence was nil. Moreover, Mr. Bevziouk, having compressed the source code in a locked zip file, made it more easily stolen because the MD server was then in one file, rather than being spread out amongst tens of files in an uncompressed source code version. As he stated in his report: “Stealing of a complete MD server application stored in one zip file, in the author’s opinion clearly facili- tates theft”. 63 I accept Professor Stoute’s evidence that the code inserted by Mr. Bevziouk severely and secretly compromised Infinium’s MD server application. It enabled Mr. Bevziouk to stop the MD server application 222 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

from loading and running. It was inserted for one purpose, to provide Alex Bevziuok complete control over the loading of the system. It was a malicious code of no benefit to Infinium, but with great potential of causing serious disruption to the securities trading operations of Infinium. 64 Professor Stoute’s view, from his review of the electronic data, was that Mr. Bevziouk inserted the malicious code into the MD server application sometime in late 2005 or early 2006. I bear in mind that Mr. Bevziuok inserted the malicious code during the period of time he was actively renegotiating his compensation with Infinium. Even after signing the Service Agreement (SA#2) in March 2006 he expressed repeatedly his discontentment with his level of compensation in light of his own perceived importance to Infinium’s trading successes. Inserting a malicious code to either prove his continued importance to Infinium or to sabotage Infinium’s trading platform, irremediably undermined the relationship and trust necessary in the employment relationship thereby providing just cause for termination. 65 Once Infinium discovered the malicious code further investigation revealed that Mr. Bevziouk had engaged in a number of activities in contravention of his agreements with Infinium that as well were sufficient to warrant a loss of trust and confidence by the employer. He had actively sought to form a proprietary trading partnership with other companies that would have been in competition with Infinium, using the software programs developed for Infinium. Ominously, in February 2006 he wrote an e-mail to Mr. Tchetvertnykh that Infinium would be at a disadvantage if someone were to deploy a trading platform such as the one Infinium was using — “Sergey, it is not on (sic) your interest to have a similar solution used somewhere else — your money making machine will suffer a significant setback.” In the context of his outside activities and his quest for greater compensation it appears to have been a taunting threat. (Exhibit No. 56) 66 In Cariboo Press (1969) Ltd. v. O’Connor, [1996] B.C.J. No. 275 (B.C. C.A.) at para. 19 McEachern C.J.B.C. for the BC Court of Appeal citing Gurry’s Breach of Confidence, Oxford: Clarendon Press, 1984 at 179 observed that an employee must not compete with his employer during the subsistence of the employment relationship”, an absolute, or almost absolute prohibition. To do so would constitute a breach of the duty of loyalty and fidelity expected of an employee. In Connolly v. General Motors of Canada Ltd., [1993] O.J. No. 2811 (Ont. Gen. Div.) at para. 20 Ferguson J. in a wrongful dismissal case observed that a single incident Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 223

of an employee’s disloyalty and infidelity can be sufficient to warrant a loss of trust and confidence by the employer justifying dismissal for cause. 67 In April 2006 Mr. Bevziouk registered the website www.feedhandler.net for the purpose of marketing what he said was AB2000 software, designed to enable would-be competitors of Infinium to engage in algorithmic trading. 68 In June 2006 Mr. Bevziouk attended a conference in New York City for the purpose of attracting investors and potential customers of AB2000 through Feedhandler. (Exhibit Nos. 57, 58, 59) 69 In September 2006 Mr. Bevziouk entered into negotiations with ORC Software for the purposes of ascertaining whether he could launch an algorithmic trading platform that would eventually be in competition with Infinium. (Exhibit No. 60) 70 Indeed, many of his meetings and conversations with representatives of these other companies took place during his working hours at In- finium, and during the time he was trying to increase his compensation from Infinium. (Exhibit Nos. 54 and 55) 71 Mr. Bevziouk was also in contravention of the nondisclosure of confidential information conditions of the 2005 Service Agreement (SA#2). Mr. Bevziouk had never constructed a trading platform before working at Infinium. After Infinium had successfully deployed its algorithmic trading strategies Mr. Bevziouk sought to compete against Infinium in seeking to establish a proprietary trading partnership with others using information developed at Infinium. Mr. Bevziouk was under a duty to protect Infinium’s confidential information. His work product belonged to Infinium. 72 Mr. Bevziouk also violated a number of the “Acceptable Use Policy Document” required of all Infinium staff to follow. It set out a number of prohibited uses of information resources, such as: a) stealing or copying of electronic files without permission... e) performing activities intending to circumvent security or access controls of any organization, including the possession or use of hardware or software tools intended to defeat copy protection, discover passwords, identify security vul- nerabilities, decrypt encrypted files, or compromise information security by any other means. 224 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

f) writing, copying, executing, or attempting to introduce any computer code design to self replicate, damage, or otherwise hinder the performance of or access to any corporate computer, network, or information... i) promotion or maintaining a personal or private business, or using corporate information resources for personal gain... m) disclosing any corporate information that is not otherwise public. 73 Mr. Bevziouk breached a number of these policies by his conduct. Within a few days of his termination on October 2, 2006, in a recorded conversation with Mr. Grujic he acknowledged his malfeasance: Alan (AG): ...I have tried to give you the benefit of the doubt but the evidence is overwhelming. I know you put malicious code in our software, I know you set up a website to try to sell our code, I know you told someone you were stealing and Sergei overheard you. And now we are investigating you because we think you are trying to sell our code to Questrade. Alex (AB): Alan I swear on my child’s life I never tried to use your trading software. Only my data parcel. AG: What about the other stuff? AB: OK it is true, but the code changes made the software impos- sible to steal. This is what you wanted isn’t it. AG: No Alex, I didn’t want you to make the code so it would blow up on us if we didn’t do what you wanted. And what gives you a right to sell our software on your website. AB: You know I was never comfortable with not owning the code I wrote. I believe it is the reason for your success and my creativity so I felt I had rights to it. AG: Alex, we were always clear we would not hire someone to produce a code we did not own. You know this and furthermore it is common business practice. Alex, you cannot steal my ideas - the design was not even your idea. Even if it had been, can you imagine if you hired an architect or a contractor to design you a house and then even though you paid them they decided that because they liked what they made they would keep it. Or an even better example is a painter you hire to paint you a painting. AB: You are right, I am a bastard. I made a mistake and overesti- mated how good my code was but no one was interested in buying it.... Infinium Capital Corp. v. AB2000 Software Corp. A.J. O’Marra J. 225

74 His self-interested actions were premised on his misguided view that it was his code and that he was the reason for the success of the company. In effect, if he was not going to get the compensation he believed due to him he would find it elsewhere at the expense of Infinium. 75 I am satisfied that Mr. Bevziouk, by removing the source code, inserting a malicious code in the MD server to have control over the main trading platform of Infinium, by secretly attempting to compete against Infinium, by attempting to use confidential information to his advantage and by breaching a variety of Infinium’s policies, any one of which provided sufficient just cause for Infinium to lose trust and confidence in him and to terminate its relationship with him without notice. 76 In the result, Alexandre Bevziouk’s/AB2000 Software Corporation action against Infinium Capital Corporation (now Galiam Securities Can- ada Corp.) for breach of contract and wrongful dismissal is dismissed with costs to Infinium. 77 If the parties are unable to agree as between themselves as to costs they may make written submissions no more than four pages in length within 15 days of the release of this judgment. Action dismissed. 226 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: Hawkes v. Levelton Holdings Ltd.] Darryl Hawkes, Respondent (Plaintiff) and Levelton Holdings Ltd. and Levelton Consultants Ltd., Appellants (Defendants) British Columbia Court of Appeal Docket: Vancouver CA040236 2013 BCCA 306 Frankel, Neilson, Hinkson JJ.A. Heard: May 17, 2013 Judgment: June 28, 2013 Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Bonuses –––– Plaintiff was terminated by defendant employer, and plaintiff brought action for wrongful dismissal — At time of termination, plaintiff was shareholder in defendant, which shares paid no dividends — Rather than dividend payments, shareholder employees such as plaintiff with membership in “share pool” and “bonus pool” were, from time to time, paid further shares and cash bonuses as mixed form of profit-sharing and incentivization — Action was allowed, trial judge holding inter alia that plaintiff’s membership in “share pool” and “bonus pool” constituted implied term of contract of employment — Defendant appealed — Appeal dismissed — Trial judge erred in finding that “pool” memberships constituted implied but essential term of plaintiff’s employment — However, record showed that in fact “pool” memberships were treated throughout and intended to be treated as part and parcel of plaintiff’s benefit plan — Given finding of wrongful dismissal, plaintiff was entitled to value of benefits payable in course of reasonable notice period — Accordingly appropriate result was same notwithstanding error and appeal was properly dismissed. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Stock options and shares –––– Valua- tion — Timing issues — Plaintiff was terminated by defendant employer, and plaintiff brought action for wrongful dismissal — At time of termination, plaintiff was shareholder in defendant, subject to agreement requiring plaintiff to divest self of share holdings at time of termination or over five-year term commencing upon plaintiff’s 61st birthday — Defendant exercised termination “shotgun” clause and purchased plaintiff’s shares at share value on termination date — Value of shares in defendant continued to climb up to time of trial — Action was allowed, and trial judge held that plaintiff was entitled to 18-month reasonable notice period — Trial judge held that shares were properly valued at their value as at end of notice period — Plaintiff appealed from share valua- Hawkes v. Levelton Holdings Ltd. 227

tion — Appeal dismissed — Plaintiff’s assertion that but for defendant’s act of wrongful dismissal plaintiff would never have been terminated was irrelevant — Defendant was entitled to terminate plaintiff without cause at any time, subject to reasonable notice given — As any termination would trigger “shotgun” clause on plain reading of employment agreement, trial judge properly valued plaintiff’s shares at their end of notice period value and appeal was accordingly properly dismissed. Cases considered by Hinkson J.A.: Gillies v. Goldman Sachs Canada Inc. (2001), 2001 CarswellBC 2716, 2001 BCCA 683, 14 C.C.E.L. (3d) 1, 95 B.C.L.R. (3d) 260, 160 B.C.A.C. 149, 261 W.A.C. 149, [2001] B.C.J. No. 2542 (B.C. C.A.) — considered Iacobucci v. WIC Radio Ltd. (1999), 1999 BCCA 753, 1999 CarswellBC 2822, 131 B.C.A.C. 252, 214 W.A.C. 252, 23 C.C.P.B. 28, 47 C.C.E.L. (2d) 163, 2 B.L.R. (3d) 51, 72 B.C.L.R. (3d) 234, [1999] B.C.J. No. 2890 (B.C. C.A.) — considered Insurance Corp. of British Columbia v. Patko (2008), 290 D.L.R. (4th) 687, 77 B.C.L.R. (4th) 254, 420 W.A.C. 259, 251 B.C.A.C. 259, 57 M.V.R. (5th) 70, 2008 BCCA 65, 2008 CarswellBC 253, 51 C.P.C. (6th) 53, [2008] B.C.J. No. 240 (B.C. C.A.) — considered Longman v. Federal Business Development Bank (1982), 36 B.C.L.R. 115, 131 D.L.R. (3d) 533, 1982 CarswellBC 80, [1982] B.C.J. No. 1521 (B.C. S.C.) — considered Machtinger v. HOJ Industries Ltd. (1992), 40 C.C.E.L. 1, (sub nom. Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.) 53 O.A.C. 200, 91 D.L.R. (4th) 491, 7 O.R. (3d) 480n, (sub nom. Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.) 136 N.R. 40, 92 C.L.L.C. 14,022, [1992] 1 S.C.R. 986, 1992 CarswellOnt 892, 1992 CarswellOnt 989, [1992] S.C.J. No. 41 (S.C.C.) — referred to Nygard International Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103, 1990 Car- swellBC 112, [1990] B.C.J. No. 1155 (B.C. C.A.) — considered Saalfeld v. Absolute Software Corp. (2009), 88 B.C.L.R. (4th) 244, 71 C.C.E.L. (3d) 29, 265 B.C.A.C. 116, 446 W.A.C. 116, 2009 BCCA 18, 2009 Car- swellBC 64, 81 C.C.P.B. 169, [2009] B.C.J. No. 56 (B.C. C.A.) — considered Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board (1973), [1973] 2 All E.R. 260, [1973] 1 W.L.R. 601 (U.K. H.L.) — considered Statutes considered: Business Corporations Act, S.B.C. 2002, c. 57 Generally — referred to s. 227 — referred to 228 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

s. 227(2) — referred to

APPEAL by defendants from judgment reported at Hawkes v. Levelton Holdings Ltd. (2012), [2012] B.C.J. No. 1708, 2012 BCSC 1219, 2012 CarswellBC 2493, 2 C.C.E.L. (4th) 1 (B.C. S.C.), allowing plaintiff’s action for damage for wrongful dismissal; APPEAL by defendants; CROSS-APPEAL by plaintiff from portions of above-noted judgment and from judgment reported at Hawkes v. Levelton Holdings Ltd. (2012), 2012 CarswellBC 4033, 2012 BCSC 1968 (B.C. S.C.), in respect of assessment of plaintiff’s damages.

S. Brearley, for Appellant D.S. Boyle, for Respondent

Hinkson J.A.:

1 The appellant Levelton Consultants Ltd. (“Consultants”) is wholly owned by the appellant Levelton Holdings Ltd. (“Holdings”). The respondent was employed as a professional engineer by Consultants or its predecessors for a period of 18 years. He also became a shareholder in Holdings during the period of his employment, and remained so until his employment was terminated without notice on November 22, 2010. 2 After a ten day trial, the trial judge found that the respondent had been wrongfully dismissed and awarded him damages, including the value of his shares in Holdings at the end of what she found was a reasonable period of notice for his termination without cause. Her reasons for judgment are dated August 15, 2012, and are indexed at 2012 BCSC 1219 (B.C. S.C.). Supplemental reasons for judgment were issued on De- cember 12, 2012, and are indexed at 2012 BCSC 1968 (B.C. S.C.). 3 The appellants appeal the award of damages relating to the respondent’s benefits as a shareholder of Holdings. The respondent cross appeals the value assigned by the trial judge to his shares in Holdings.

Background 4 The respondent joined a predecessor of Consultants in 1992, thereafter working for it, and then for Consultants, until his termination in 2010. I will refer to Consultants and its predecessors collectively as Consul- tants for ease of reference. Throughout his employment with Consul- tants, the respondent had no written contract. Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 229

5 During his career with Consultants, the respondent progressed to manager of his working group in 1997, director of the board from 1999 to 2004, and manager of his division in 2005 and 2006. 6 Following a change in the presidency of Holdings in 2005, the respondent was informed that he would be removed as manager of Consul- tants’ geotechnical division. He agreed to continue thereafter as an employee of Consultants as a senior project manager in a different company office than the one where he had been working, moving in June 2007. From 2007 to 2009 the respondent’s performance reviews indicated that he was meeting or exceeding Consultants’ expectations. 7 Consultants’ professional employees were entitled to purchase shares in Holdings and the respondent did so. He began purchasing shares in Holdings in 1995 and continued to accumulate shares until 2004. 8 The benefit to Consultants’ employees of also being shareholders of Holdings was described by the trial judge as participation in the profits in Consultants not as dividends, but rather as bonuses based on a profit distribution formula set by Holdings’ Board. 9 At paras. 258 - 259 of her reasons, the trial judge found that: [258] Employees of Consultants who were also shareholders of Holdings received an annual bonus. The bonus was added to the employee’s salary at Consultants. [259] The bonus was a way of distributing profits and rewarding performance. Holdings did not issue dividends. 10 The bonus pool available to distribute to those who were both shareholders and employees was determined annually by the management of Holdings. Once the bonus pool was calculated, it would be distributed on a per person basis in accordance with the following formula: a) 35% of a bonus pool was to be distributed on the basis of the number of shares held by a shareholder; b) 15% of the bonus pool was distributed on an equal basis; and c) 50% would be distributed to shareholders based on management’s assessment of that person’s performance as an employee that year. 11 The respondent’s share of the bonus pool was $167,220.00 in 2007; $132,815.00 in 2008; and $86,877.00 in 2009. 12 Pursuant to Holdings’ “Shareholders Buy/Sell Agreement” (the “BSA”), the respondent’s ability to maintain his status as a shareholder was subject to his continued employment with Consultants; sections 10.1 and 10.2 of the BSA provide that Holdings’ right to buy back the share- 230 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

holder’s shares will be “triggered” in the event that he or she ceases to be an employee of, inter alia, Consultants. 13 The respondent’s employment with Consultants was terminated on November 22, 2010. The respondent asked that the decision to terminate him be reconsidered by Consultants, but its management refused to do so. The respondent then wrote to the board of Holdings to ask that it reconsider his termination, but was advised that Holdings would not interfere with the decision. 14 Pursuant to s. 15.9 of the BSA, any party that refuses to fulfill any of its obligations under the BSA is deemed to irrevocably appoint a representative of Holdings to act on that party’s behalf. 15 On December 3, 2010, the respondent sent a notice to the appellants, purporting to revoke their authority to act on his behalf pursuant to that section. Holdings replied by letter dated December 7, 2010, stating its view that the revocation was not effective. 16 On December 15, 2010, Holdings sent the respondent a letter which referred to “the issue of [him] continuing to be a shareholder of [Hold- ings]” and stated that he was a defaulting shareholder under the BSA. Holdings further stated that it was therefore initiating the process mandated by the BSA which required the respondent to sell all of his shares. 17 On December 16, 2010, Holdings advised the respondent that the closing date for the purchase and sale of his shares would be December 22, 2010. 18 The respondent filed a notice of civil claim on December 16, 2010. 19 On December 20, 2010, a notice of triggering event pursuant to the BSA was sent to the respondent by Holdings. The respondent took the position that Holdings had repudiated the terms of the BSA, and thus could not rely upon its provisions. 20 On December 21, 2010, and June 29, 2011, the respondent obtained injunctions from the Supreme Court, precluding the appellants from dealing with his shares.

The Findings of the Trial Judge 21 The trial judge set out the issues she intended to resolve at para. 8 of her reasons for judgment: 1. Was the plaintiff dismissed from his employment without just cause? Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 231

2. If the plaintiff was wrongfully dismissed without notice, did he fail to mitigate his damages? 3. If the plaintiff was wrongfully dismissed without notice, what is the measure of his damages? 4. Was the termination of the plaintiff’s employment oppressive or unfairly prejudicial to him as a shareholder within the meaning of the [Business Corporations Act, S.B.C. 2002, c. 57] BCA, and if so, what remedy is appropriate? 5. Did the defendants by counterclaim, Mr. Robert Bourne and Elite Sports Management, act together with the plaintiff to deliberately deceive Consultants for the sole purpose of obtaining a financial benefit to the detriment of Consultants, in respect of the submission of receipts for the 2008 and 2010 hockey camps, and if so, is Consultants entitled to damages in respect of the $7,035 it paid to the plaintiff to reimburse him in respect of those hockey camps? 22 At paras. 28 and 216 of her reasons, the trial judge found: [28] Here it is common ground that there was no written contract of employment. In such circumstances, the law ordinarily implies certain terms of employment: first, that the employer is entitled to dismiss an employee, even without cause; second, if the dismissal is without cause, the employee is entitled to reasonable notice: Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 (S.C.C.) at p. 997-998. It is well-accepted that the employer has the burden of proving just cause for an employee’s dismissal when the dismissal is without notice: Horvath v. SAAN Stores Ltd., 2003 BCSC 1845 (B.C. S.C.), at para. 2, Nowlan v. Midland Transport Ltd. (1996), 174 N.B.R. (2d) 81 (C.A.) at para. 17. ... [216] Normally the law implies in an indefinite and unwritten employment contract an implied term that the employment can be terminated on reasonable notice to the employee: Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.) at p. 143. I will approach the damages issue on that basis. 23 The trial judge found that the appellants had not established cause for the respondent’s termination. No appeal is taken from this finding. 24 Having considered the respondent’s circumstances, including his age, professional qualifications, salary, equity ownership and seniority, the trial judge determined at para. 237 that a reasonable period of notice of dismissal was 18 months. No appeal is taken from this finding. 232 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

25 The trial judge found that at the time of his termination, the respondent was earning an annual salary of $116,500.00. She also found that he began employment at a higher salary with another engineering firm on December 5, 2011, and after deducting other income he had received, quantified his damages for lost salary at $107,900.00, together with $3,600.00 for lost vehicle allowance. 26 The trial judge also found that the respondent had not failed to mitigate his damages. No appeal is taken from this finding. 27 The trial judge then addressed the respondent’s claim for lost benefits as a shareholder of Holdings. At paras. 247 and 248 of her reasons, she observed: [247] The most contentious aspects of Mr. Hawkes’ claim for damages for wrongful dismissal, outside of the calculation of the notice period, are his claim for a portion of the annual bonus paid to shareholder-employees and his claim for the loss of the value of his shares in Holdings. He claims damages for the loss of these benefits through the 18-month period of reasonable notice of dismissal. [248] Both of these categories of damages, loss of bonus and loss of increased share value, are conceptually similar. They raise issues as to whether certain benefits Mr. Hawkes enjoyed as a shareholder would have continued during the period of reasonable notice of termination of his employment contract. 28 The trial judge concluded at paras. 255-256 of her reasons that: [255] I have come to the conclusion that it was an implied term of Mr. Hawkes’ employment contract that he would be entitled to share in the benefits accruing to shareholders, both bonuses and any increases in share value, during a period of reasonable notice of termination of employment. [256] I have reached this conclusion based on an examination of first, the intertwined nature of the employment and shareholder relationship, and second, an analysis of the written shareholders agreement itself. 29 In discussing the intertwined employee-shareholder relationship, the trial judge found at paras. 263-269 of her reasons: [263] The whole bonus payment structure was based on the employment and shareholder positions being intertwined: the bonus was not a dividend but was paid by way of salary, and involved components related to the employee’s shareholdings as well as related to on-the- job performance. The bonus components related to the employee’s shareholdings were objectively measured in the sense that they sim- Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 233

ply involved a calculation based on the shares held; the component related to performance was more subjectively measured. But both bonuses were non-discretionary bonuses given to Mr. Hawkes because he was both an employee and a shareholder, just as other shareholder-employees received the same benefits. [264] Also illustrative of the intertwined nature of the employment and shareholder relationship is the fact that a person could not simply purchase shares in Holdings. Rather, the person had to be an eligible employee of Consultants. The determination of eligibility to purchase shares was very much tied into the person’s status and performance as employee. The Board of Holdings repeatedly set out that in making such decisions the Board considered such criteria as the person’s demonstrated business acumen, management skills, ability to bring in work, and technical expertise. These are qualities that were only apparent as employee qualities, not shareholder qualities. [265] Once an employee was approved to purchase shares in Hold- ings, he could not transfer those shares to another employee unless it was approved by the Board. [266] The share price was not determined by market value or other market forces, but by management of the firm. [267] The employee-share ownership program was also seen as a good management tool in the interests of the long-term health of the operating business, Consultants: it encouraged older employees to pass on the legacy of their engineering practices and it encouraged younger employees to stay with the firm. [268] Thus, the right to own shares in Holdings, and thereby receive the related bonus benefits, was clearly earned by being a good employee of Consultants. The opportunity to purchase shares was a re- ward for employment performance. It follows that it was an implied term of the employment contract between Levelton and its employee- shareholders that the employee would enjoy all benefits normally accruing to him as shareholder based on the shares he held, during the full term of the employment relationship. [269] I find that the only reasonable interpretation of the combined shareholder-employee relationship is that it was an implied term of the employment contract that if the employee received notice of termination of employment, he would continue to receive all the benefits of employment and of his shareholdings during the period of reasonable notice. 30 Having concluded that the respondent was entitled to these benefits during the reasonable notice period, the trial judge next considered 234 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

whether there was any express term in the BSA overriding the implied term of the employment contract she had found. 31 Clause 10.1(g) of the BSA sets out the circumstances which constitute a “triggering event” as follows: 10.1 Causes of Triggering Event Any of the following shall constitute a Triggering Event: ... (g) if a Shareholder ceases to be an employee of the Company or any Subsidiary for any reason other than for cause. 32 Clause 10.2 of the BSA provides: On the occurrence of a Triggering Event by a Shareholder, the Board shall notify that Shareholder (the “Triggering Shareholder”) or in the case of 10.1(a), the Triggering Shareholder’s personal representative, or such other person as the Board determines of such Triggering Event, and such notice will set out the Company’s intent to purchase the shares of the Triggering Shareholder in accordance with Section 12.0 (Buy-Sell Procedure). 33 When Mr. Hawkes was dismissed, Consultants took the position that he was dismissed for cause, and so did not give a clause 10.2 notice of triggering event to him. 34 Section 12.2(a) and (c) of the BSA state: 12.2 Triggering Event (a) On the occurrence of a Triggering Event and service of notice pursuant to Paragraph 10.2, the Company shall cause the Shares (the “Triggered Shares”) owned by the Triggering Shareholder to be offered for sale ...... (c) If any Triggered shares are not purchased by existing or new Shareholders within thirty (30) days of the Triggering Event, the Company shall purchase the remaining Triggered Shares; 35 Section 12.2(e) of the BSA provides in part that “all transactions of Triggered Shares between the Triggering Shareholder and other Share- holders shall be completed within sixty (60) days of the Triggering Event as determined by the Board”. 36 The trial judge concluded at paras. 289-291: [289] The language of clause 10.1(g) of the BSA on its own does not support the position that the parties intended such language to mean that if the shareholder-employee was terminated without cause and Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 235

without reasonable notice, he would be precluded from claiming as his damages the loss of the benefits he would have earned as shareholder-employee during the reasonable notice period. [290] The BSA made it clear that a shareholder had to be an employee. I have already found that the two roles were intertwined. Clearly the BSA did not address every term of employment and so there was an implied employment contract that co-existed with the shareholders agreement. Of necessity, the defendants are relying on the implied term of employment that an employer can terminate an employee without cause. [291] As mentioned earlier, another standard implied term of employment is that an employer must give reasonable notice before terminating an employee’s contract of employment without cause. The terms of the BSA did nothing to address or override this implied term of employment. To the contrary: the defendants expressly incorporated into the BSA terms of an earlier agreement which on its face clearly did not provide for termination without notice and without cause. They did so by virtue of a memorandum dated May 25, 2009. 37 At paras. 307-309 of her reasons, the trial judge found: [307] Clause 10.1(g) of the BSA does not expressly state that if a shareholder is dismissed from his employment without cause and without reasonable notice, he is, for purposes of any damages claim in relation to breach of his employment contract, considered to have ceased to be an employee as of the date of his dismissal as opposed to as of the date of the expiry of reasonable notice. If that was the meaning, it would provide an incentive to Levelton to treat its employee-shareholders unfairly. For example, in event of an economic downturn and consequential need to reduce staff by dismissing employees without cause, Levelton would have the incentive to fire employee-shareholders unlawfully, in breach of contract, without notice, so that it could avoid having to pay out the bonuses already earned by those employees as shareholders but not yet distributed, or which could have been earned over the contractual notice period. That would be manifestly unfair and not in accord with the intentions and expectations of the Levelton employee-shareholder group. Conclusion on Interpretation of the BSA [308] I find that had the defendants not breached Mr. Hawkes’ contract of employment, Mr. Hawkes would have continued in his employment for 18 months after receiving reasonable notice of his dismissal. Given that his employment would not have ceased during this time, clause 10.1(g) of the BSA would not have applied and there 236 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

would have been no triggering event to cause the sale of his shares until after his employment did actually cease 18 months later. [309] As damages flowing from the breach of the employment contract, Mr. Hawkes is therefore entitled to compensation for the loss of the opportunity to share in whatever pecuniary benefits flowed from being a shareholder during that 18 month notice period. This conclusion is in keeping with the analysis of the Court of Appeal in Saalfeld [v. Absolute Software Corp., 2009 BCCA 18] at paras. 33 and 42. 38 Based upon her analysis, the trial judge found that the respondent was entitled to damages related to the loss of his right to participate in the share pool and equal pool portions of the bonus pool to the end of the 18 month notice period. She assessed this entitlement for the relevant part of 2010 as a distribution of $53,984.00 in relation to the share pool and $11,270.00 in relation to the equal pool, for a total of $65,254.00; for 2011 a total of $65,254.00; and for the relevant part of 2012 a total of $27,189.00. The total damages in relation to the respondent’s lost share of the share pool and equal pool were assessed at $157,697.00. 39 Insofar as the performance pool part of the bonus pool, the trial judge found that but for his wrongful termination, the respondent would have continued to perform well, and therefore would have earned a performance bonus during the notice period in the amount of $64,733.00. 40 As the bonus pool payments were calculated and paid in the year following that in which they were earned, for tax reasons, some of the bonus pool amounts were distributed as salary in the year calculated and some were paid to a related company and treated as a shareholder loan to that company by the employee shareholder. There was then a process in subsequent years when the shareholder loan would be “repaid” to the employee-shareholder together with interest at the rate of 1% over the average Bank of Montreal prime rate. Holdings conceded that they owed this amount to the respondent. 41 The respondent’s shareholder loan account stood at $58,581.67 as of December 31, 2011. The trial judge ordered that Holdings should pay this amount, together with interest to the respondent. 42 At the time of the respondent’s dismissal, shares in Holdings were valued at $228.05. By May 2011, the shares were valued at $404.70. Holdings management had an intention for 2012 to have the share price reach the price which had been proposed in 2010 i.e., $431.13. Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 237

43 At paras. 352-353 the trial judge reasoned that: [352] Had Mr. Hawkes been given reasonable notice of the termination of his employment, he would have continued as an employee- shareholder until roughly the end of May 2012, and only then would his employment and all related benefits end, including the benefit of owning shares. Thus only then would he have been required to sell his shares. [353] Therefore, if the employer’s breach of the employment contract would have caused him to sell his shares (as Levelton claims it did), it would have caused Mr. Hawkes to suffer damages equal to the difference in share price as between his actual dismissal and what would have happened had he had to sell his shares at the end of the period of reasonable notice. 44 In the result, the trial judge valued the respondent’s shares for the calculation of his damages for their forced sale at $431.13, subject to her findings with respect to the respondent’s claim for an oppression remedy. 45 The trial judge concluded that the appellants’ attempt to deny the respondent the benefits he would have received as shareholder during a period of reasonable notice of termination of employment (his bonuses and the increase in share value) might constitute oppressive or unfairly prejudicial conduct, contrary to s. 227(2) of the Business Corporations Act, S.B.C. 2002, c. 57 (the “BCA”), but as she had already provided remedies for those wrongs in the wrongful dismissal aspect of his claim, declined to award further remedies for oppression. 46 At paras. 396-397 the trial judge concluded: [396] Thus I find that the manner in dealing with Mr. Hawkes’ dismissal and the corresponding attempt to deny him the benefits he would have been entitled to as a shareholder during a period of reasonable notice, was unfairly prejudicial to him as a shareholder, within the meaning of s. 227(2)(b) of the BCA. [397] Were this relief not duplicative of the relief I have ordered in respect of the wrongful dismissal damages, I would conclude that it would be appropriate to fashion a remedy pursuant to s. 227(3) of the BCA, directing Holdings to cause the payment of the bonuses to Mr. Hawkes that I have already assessed as due to him during the period of reasonable notice, and directing Holdings to purchase his shares at a price of $431.13 per share. 47 The appellants advanced a counterclaim at trial. They argued that the defendants by counterclaim, Mr. Robert Bourne and Elite Sports Man- agement, acted together with the respondent to deliberately deceive Con- 238 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

sultants for the sole purpose of obtaining a financial benefit to the detriment of Consultants, in respect of the submission of receipts for $7,035.00 for the respondent’s attendance at hockey camps in 2008 and 2010. The trial judge accepted the evidence of the defendants by counterclaim that they did not intend to deceive Consultants and dismissed the counterclaim. No appeal is taken from this finding. 48 Following the release of the reasons for judgment, and prior to entry of a final order, the respondent applied for reconsideration or re-opening of the judgment on two bases; first, to clarify two asserted ambiguities in the remedies portion of the trial reasons and second, to advance new submissions as to her order respecting the repurchase of the respondent’s shares. 49 The trial judge accepted that there were ambiguities in her reasons in the way she described the respondent’s remedies and that she did not clearly delineate which party was subject to which remedy. On Decem- ber 12, 2012, she issued her supplemental reasons for judgment. 50 In her supplemental reasons the trial judge corrected the arithmetic error in her first reasons relating to the difference between the share prices in January of 2011 and May of 2012, and clarified that the respondent was required to sell his shares to Holdings and Holdings was required to purchase his shares. 51 The trial judge also corrected her earlier reasons by stating that the respondent’s shares were to be purchased by Holdings at a price of $228.05 per share, and that Consultants were liable to the respondent in damages for the lost bonuses and benefits and loss of increase in share value that he suffered during the period when he ought to have been given reasonable notice of dismissal. 52 The trial judge further clarified that repayment of the respondent’s shareholder loan was not damages for wrongful dismissal. It was simply repayment of a debt owed by Holdings to the respondent pursuant to s. 227 of the BCA. 53 Finally, the respondent sought to file additional submissions arguing that there are different tax consequences to him, depending on the way the purchase of his shares is fashioned, and seeking to have the court make the most favourable orders from a tax standpoint. The trial judge rejected the application on the basis that such submissions could have been made during the trial and that they were not supported by the evidence at trial or the theory of his case as argued at trial. She concluded that the new issue was not a proper matter for her reconsideration. Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 239

Issues on the Appeal and the Cross Appeal 54 The appeal in this matter is restricted to the respondent’s damage awards for his shareholder’s benefits during the reasonable notice period of 18 months. The appellants contend that the trial judge erred: a) in awarding the respondent the difference in share value between the date of his dismissal ($228.05) and the end of the notice period ($431.13); and b) in awarding the respondent the portions of the bonus pool based on shareholding (the lost share pool and equal pool bonuses of $157,697.00). 55 On his cross appeal, the respondent contends that the trial judge erred in refusing to value his shares at fair market value ($533.86), rather than at the price intended by Holdings for 2012 ($431.13).

Discussion a) The Appeal i) The Bonus Pools and the Valuation of the Respondent’s Shares 56 The appellants complain that the respondent did not include any plea relying on an implied term in his employment contract. When this issue was raised before the trial judge following her initial reasons for judgment, the following exchange took place with Mr. Brearley, trial counsel for the appellants: THE COURT: Well there was no written contract, so isn’t every term implied? I’m sorry, I am completely missing the point. If there’s no written employment contract, isn’t every term of it implied? That’s the point. MR. BREARLEY: Well certainly there wasn’t an employment contract, that’s true. But there was an implied term that the benefits of shareholdings [indiscernible] the employment contract. THE COURT: Well they never - - they never talked about the terms of the contract so it has to be implied; right? And that’s what the whole trial was about was whether it should be or shouldn’t be. I mean no one ever argued that it was expressly promised. It was always argued that it’s implicit in their relationship that he would be entitled to all the benefits. I don’t- MR. BREARLEY: With respect, My Lady, it wasn’t actually. The benefits of shareholdings were argued to rise and fall with the shareholders agreement, not with the employment contract. 240 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

THE COURT: Well then why did the plaintiff rely on all those cases that say it’s part of the employment contract? I mean that’s — that’s what the argument was. Those cases all say that that’s an implied term of contract. It’s not expressed because there’s no written contract. Anyhow, I’m not going to get into whatever arguments you both want to advance on appeal. I’m not going to re-open. You can say as a record that he offered, and he can make whatever he wants to do of that. But I’m not going to parse the terms of the reasons for judgment to improve anyone’s position on appeal. That’s not ... MR. BREARLEY: That’s my position. 57 The appellants also contend that the respondent did not advance any claim in his pleadings for the value of his shares as damages for breach of his employment contract or with respect to any bonus entitlement. 58 The appellants refer to the decision of this Court in Insurance Corp. of British Columbia v. Patko, 2008 BCCA 65 (B.C. C.A.), for the proposition that it is improper for a judge to decide a case on issues that were not argued. It is my opinion that the reasoning in Patko does not assist the appellants. In his opening statement, counsel for the respondent identified two of the issues to be determined at trial as: One, wrongful dismissal. Was the Plaintiff dismissed for cause? Two, if so, what is the measure of damages, and in particular, do those damages include the increase in the formulated sale price [Of the shares in Holdings] during the notice period, and does it include the bonuses that he would have received during the notice period? 59 Although he chose not to make an opening statement, counsel for the appellants recognized in his closing submissions that: Mr. Hawkes claim has two components. He sues qua employee and he sues qua shareholder. 60 Later in his closing submissions, counsel for the appellants argued: A significant portion of Mr. Hawkes’ bonus was based on his status as a shareholder. That status, we say, came to an end at the time of his dismissal on November 22nd. Any award for lost bonus has to back out an amount attributable to his status as shareholder. ... We say that there is no basis to conclude that the loss of profit through his shares in Holdings should be considered damages owed by Consultants for termination without cause. Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 241

61 The issues that the appellants contend were not pleaded were all clearly seen by them as live issues at trial, and were stated by the trial judge to have been the subject of argument. The appellants thus suffered no prejudice from a lack of more specific pleadings. 62 While I have found that it was open to the trial judge to consider these issues, in my opinion, she erred in finding that the contract between the parties included an implied term that the respondent would be entitled to share in the benefits accruing to shareholders, including bonuses and any increases in share value, during a period of reasonable notice of termination of employment. I am not persuaded that her error affected the correct disposition of the case. 63 In Longman v. Federal Business Development Bank (1982), 36 B.C.L.R. 115 (B.C. S.C.), Wallace J., as he then was, cited with approval the reasoning of the House of Lords in Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board, [1973] 1 W.L.R. 601 (U.K. H.L.), at 609 as follows: Faced with the conflict of judicial opinion in this case, I prefer the views of Donaldson J. and Cairns L.J. as being more orthodox and in conformity with the basic principle that the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court’s function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business effi- cacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves. [Emphasis added.] 64 Given the position that the parties took before the trial judge, it is difficult to conclude with any certainty that they anticipated the problem. Had they done so, presumably the positions that they took before the trial judge would have been the positions they took amongst themselves. 242 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

65 The appellants contend that according to the terms of the BSA, the respondent’s shares had to be sold to other shareholders or back to Hold- ings within 60 days of his termination and he had no right to participate in any of the benefits of a shareholder after that date. It is my opinion that the appellants are correct in this contention. However, this does not affect the respondent’s entitlement to the benefits he would have received had he continued as an employee during the 18 month notice period. 66 The trial judge correctly pointed out at para. 6 of her supplemental reasons: The plaintiff also claimed general damages for his wrongful dismissal. As he stated in his written opening submission at para. 35 (a theme repeated elsewhere, including at paras. 34(b) and 46): First and foremost, this is a wrongful dismissal claim, and the plaintiff says that he was dismissed without cause and without reasonable notice, and is entitled to be put into the position that he would have been in, if his employer, Levelton Consultants Ltd., had given him reasonable notice of termination, including: a. Lost wages until he found alternate employment (December 5, 2011); b. The cost to replace lost benefits until he found alternate employment; c. The bonuses that he would have earned during the period of reasonable notice; d. The difference between the formulated price [for his shares] at the time of his dismissal and the higher formulated price [at the end of the reasonable notice period]. 67 The trial judge referred to the decision of Madam Justice Huddart in Saalfeld v. Absolute Software Corp., 2009 BCCA 18 (B.C. C.A.). In that case, Huddart J.A. observed at para. 20: It is not disputed that the measure of damages for breach of an employment contract is what the employee would have received if the contract had been performed according to its terms: Nygard Interna- tional Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103 (C.A.); and Iacobucci v. WIC Radio Ltd., 1999 BCCA 753, 72 B.C.L.R. (3d) 234 ... Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 243

68 In Saalfeld, as here, a share option plan was integral to the employment contract, and thus entitled the terminated employee to damages for the loss of its value. 69 This was the approach preferred by Madam Justice Southin in this Court in Nygard International Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103 (B.C. C.A.), at 106-107, where she wrote: ... When a contract is repudiated and the innocent party accepts the repudiation, which in my opinion is what happened here, the contract remains alive for the purpose of assessing the compensation to be paid. That compensation, that is to say, damages for the breach are what the innocent party would have received or earned depending on the nature of the contract had it been performed according to its terms. Here had it been performed according to its terms it would have been terminated within 30 days and thus, in my opinion, the defendant, the respondent in this Court, was entitled to whatever amount he would have earned in that 30 days according to the evidence... 70 This approach was also applied in Iacobucci v. WIC Radio Ltd., 1999 BCCA 753 (B.C. C.A.) at para. 24, where Chief Justice McEachern wrote: Applying the foregoing to the facts of this case, it is my view that the plaintiff was entitled to recover damages equivalent to the benefits he would have received if he had remained as an employee until the expiration of a period of reasonable notice. It makes no difference, in my view, that he cannot require WIC Western to accept his attempted exercise of future options. The value of such a right is a part of the measure of the damages he is entitled to recover from WIC Radio. In this respect, I note that the decision of the Committee was that it would not be necessary for the optionees to raise funds to exercise their options and arrangements were made with a broker to pay the optionees out. In other words, the plaintiff’s entitlement became a cash payment during the period of reasonable notice. 71 See also Gillies v. Goldman Sachs Canada Inc., 2001 BCCA 683 (B.C. C.A.), where Madam Justice Saunders wrote at para. 20: On the basis of these authorities and the clear principle that Mr. Gil- lies is entitled to be treated, for remedial purposes, as if he were an employee throughout the notice period, the issue here is whether Mr. Gillies would have been entitled to participate in the IPO had it been issued during the period of reasonable notice... 244 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

72 The trial judge found that the respondent’s salary, entitlement to shareholdings and bonuses were the benefits of his employment. At para. 219 of her reasons she stated that: ... damages in a wrongful dismissal case are measured by what the employee would have earned had his employment continued to the end of the reasonable notice period. 73 In my opinion, she was correct in reaching this conclusion. Having reached that conclusion, her error in implying a term in the employment agreement that the respondent would be entitled to share in the benefits accruing to shareholders, both bonuses and any increases in share value, during a period of reasonable notice of termination of employment was of no material consequence. 74 Implying the term was also wrong in law because it conflated a general legal principle regarding remedies for wrongful dismissal with the content of a specific contract. It was unnecessary to imply the term into the contract in order to enable the respondent to recover the benefits he would have enjoyed during the notice period. Even without such a term, having been wrongfully terminated by Consultants, he was entitled to recover the benefits and bonuses and increases to which he, as an employee would have been entitled as a part of his compensation package with the Consultants. 75 Other than its effect upon the respondent’s ability to continue to hold shares in Holdings, once his employment with Consultants was terminated, I am unable to accept that the BSA was a relevant consideration in the assessment of the respondent’s damages for his wrongful dismissal. 76 Had the respondent been given the reasonable notice of his termination determined by the trial judge, he would have received his salary, and retained his shares for 18 months, and received bonuses as a shareholder of Holdings during that period. He would also have been able to retain his shares in Holdings until the end of the 18 month period, at which time he would have been obliged to sell them in accordance with the BSA for the then effective price of $431.13 per share. 77 In the result, it is my opinion that the trial judge was correct in valu- ing the respondent’s shares at $431.13 per share, and in awarding him damages to include his salary, his lost bonuses and the value of his shares, calculated at $431.13 per share as his compensation for his dismissal without cause. Hawkes v. Levelton Holdings Ltd. Hinkson J.A. 245

ii) Is there a Remedy Available to the Respondent Pursuant to s. 227 of the BCA? 78 The trial judge found that Consultants’ dismissal of the respondent was oppressive, entitling him to damages pursuant to s. 227 of the BCA. Despite that finding, she declined to award damages for that oppression, concluding at para. 377 of her reasons: However, based on the findings I have already made, Levelton’s attempt to deny Mr. Hawkes the benefits he would have received as shareholder during a period of reasonable notice of termination of employment (his bonuses and the increase in share value) may be such as to constitute oppressive or unfairly prejudicial conduct, contrary to s. 227(2) of the BCA. I have already provided remedies for these wrongs in the wrongful dismissal aspect of Mr. Hawkes’ claim: Mr. Hawkes’ shares should be purchased at a price of $431.03 per share; and, Mr. Hawkes has been awarded damages for the lost bonuses. I see no need for additional remedies. 79 The trial judge determined that the respondent’s entitlement pursuant to s. 227 of the BCA was duplicative to his entitlement pursuant to a wrongful dismissal analysis. While the trial judge awarded the respondent repayment of his shareholder’s loan under s. 227 of the BCA, no additional damages were awarded for the asserted oppression. 80 As I would uphold her order based upon the appropriate remedy for the respondent’s wrongful dismissal, I do not consider that it is necessary to resolve whether the trial judge’s analysis of the respondent’s entitlement to a remedy pursuant to s. 227 is correct.

b) The Cross Appeal 81 The respondent contends that the trial judge erred by not awarding him the fair market value of his shares in Holdings. As I understand him, his position is premised on the hypothesis that had his employment with Consultants not been terminated as it was, he would not have been terminated at all, and he would thus have enjoyed his shareholder’s status until he reached the age of sixty-one, and then have been obliged pursuant to the BSA to divest himself of twenty per cent of his shares in each of the five years that followed his sixty-first birthday. 82 His contention is that he would then enjoy the eight years of increase in the value of his shareholding, and that that increase would have tracked the increase in value of his shareholding that had been exper- 246 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

ienced up until the expiration of what the trial judge determined was the reasonable period of notice to which he was entitled. 83 I see no merit in this contention. The respondent was terminated. While his termination was found to have been wrongful by the trial judge, that entitled him damages as if he had remained as an employee until the expiration of a period of reasonable notice. The disposition of his shares was not premature, but required once he ceased to be an employee of Consultants, and that ought to have occurred 18 months after he was terminated. 84 The trial judge’s award for the value of the respondent’s shares was based upon the share value at the end of the period of reasonable notice, and there is, in my opinion, no basis upon which the valuation should be extended beyond that period. 85 I would not accede to the respondent’s contention and would dismiss his cross appeal.

c) Costs 86 I would order that the respondent should recover his costs of the appeal, and that the appellants should recover their costs of the cross appeal.

Frankel J.A.:

I agree.

Neilson J.A.:

I agree. Appeal dismissed; cross-appeal dismissed. Pluri Vox Media Corp. v. R. 247

[Indexed as: Pluri Vox Media Corp. v. R.] Pluri Vox Media Corp. Appellant and Her Majesty the Queen Respondent Pluri Vox Media Corp. Appellant and Minister of National Revenue Respondent Federal Court of Appeal Docket: A-219-11, A-331-11 2012 FCA 295 Marc No¨el, Johanne Trudel, Wyman W. Webb JJ.A Heard: November 5, 2012 Judgment: November 16, 2012 Tax –––– Income tax — Employment income — Employee or independent contractor –––– Shareholder was sole shareholder and directing mind of business — Business was media company which monitored news stories and trans- lated them — Shareholder ran business and supervised management — Minister of National Revenue assessed business under Income Tax Act and Canada Pen- sion Plan on basis that shareholder performed work for company as employee rather than independent contractor — Shareholder’s appeal was dismissed — Trial judge found shareholder was employee and not independent contractor — Trial judge found shareholder not engaged to perform services on his own account, and did not act as lawyer for business although he was lawyer — Trial judge found shareholder’s actual work for business had little to do with being shareholder — Trial judge found financial risk was as shareholder, not employee — Trial judge found shareholder directed operation of company, and company could not function without his labour — Trial judge found fact that income was based on profits of business rather than fixed remuneration did not make shareholder contract worker, and was similar to working on commission — Trial judge found money paid to shareholder was ascertainable in practice, as he received income of business — Business appealed — Appeal dismissed — Failure to pay GST was not in concert with stated intent of independent contractor arrangement — Trial judge made no error in finding of facts — Worker may be director of company and independent contractor for that company — Trial judge improperly pierced corporate veil in finding that shareholder could not be controlled by business, however, relationship between worker and business and other independent contractors indicated employment relationship. 248 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Public law –––– Social programs — Employment insurance — Entitlement to benefits — Insurable employment — Employment contracts — Contract of service –––– Shareholder was sole shareholder and directing mind of business — Business was media company which monitored news stories and trans- lated them — Shareholder ran business and supervised management — Minister of National Revenue assessed business under Income Tax Act and Canada Pen- sion Plan on basis that shareholder performed work for company as employee rather than independent contractor — Shareholder’s appeal was dismissed — Trial judge found shareholder was employee and not independent contractor — Trial judge found shareholder not engaged to perform services on his own account, and did not act as lawyer for business although he was lawyer — Trial judge found shareholder’s actual work for business had little to do with being shareholder — Trial judge found financial risk was as shareholder, not employee — Trial judge found shareholder directed operation of company, and company could not function without his labour — Trial judge found fact that income was based on profits of business rather than fixed remuneration did not make shareholder contract worker, and was similar to working on commission — Trial judge found money paid to shareholder was ascertainable in practice, as he received income of business — Business appealed — Appeal dismissed — Failure to pay GST was not in concert with stated intent of independent contractor arrangement — Trial judge made no error in finding of facts — Worker may be director of company and independent contractor for that company — Trial judge improperly pierced corporate veil in finding that shareholder could not be controlled by business, however, relationship between worker and business and other independent contractors indicated employment relationship. Cases considered by Wyman W. Webb J.A.: Groupe Desmarais Pinsonneault & Avard Inc. c. Ministre du Revenu national (2002), 2002 CarswellNat 1267, 2002 FCA 144, (sub nom. Canada (Procureur g´en´eral) v. Groupe Desmarais Pinsonneault & Avard Inc.) 291 N.R. 389, 2002 CAF 144, 2002 CarswellNat 938, [2002] F.C.J. No. 572 (Fed. C.A.) — considered Lee v. Lee’s Air Farming Ltd. (1960), [1961] A.C. 12, [1960] 3 All E.R. 420, [1960] 3 W.L.R. 758 (New Zealand P.C.) — followed Meredith v. R. (2002), 2002 FCA 258, 2002 CarswellNat 1514, (sub nom. Meredith v. Canada (Attorney General)) 291 N.R. 352, [2002] 3 C.T.C. 519, 2002 D.T.C. 7190, 2002 CAF 258, 2002 CarswellNat 2147, [2002] F.C.J. No. 1007 (Fed. C.A.) — considered Zupet v. Minister of National Revenue (2005), 2005 TCC 89, 2005 CarswellNat 7352, 2005 CCI 89, 2005 CarswellNat 382, 2005 C.E.B. & P.G.R. 8138 (T.C.C. [Employment Insurance]) — followed 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. (2001), 2001 SCC 59, 204 D.L.R. (4th) 542, 274 N.R. 366, 55 O.R. (3d) 782 (headnote only), [2001] 4 Pluri Vox Media Corp. v. R. Wyman W. Webb J.A. 249

C.T.C. 139, 17 B.L.R. (3d) 1, 2001 CarswellOnt 3357, 2001 CarswellOnt 3358, 11 C.C.E.L. (3d) 1, 12 C.P.C. (5th) 1, 150 O.A.C. 12, 8 C.C.L.T. (3d) 60, [2001] 2 S.C.R. 983, (sub nom. Sagaz Industries Canada Inc. v. 671122 Ontario Ltd.) 2002 C.L.L.C. 210-013, [2001] S.C.J. No. 61, REJB 2001- 25875 (S.C.C.) — followed Statutes considered: Canada Pension Plan, R.S.C. 1985, c. C-8 Generally — referred to Excise Tax Act, R.S.C. 1985, c. E-15 Pt. IX [en. 1990, c. 45, s. 12(1)] — referred to Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) Generally — referred to

APPEAL by business from judgment reported at Pluri Vox Media Corp. v. R. (2011), 2011 CCI 237, 2011 CarswellNat 2044, 2011 TCC 237, 2011 Car- swellNat 1344, 2011 D.T.C. 1175 (T.C.C. [Informal Procedure]), dismissing appeal by shareholder from determination of Minister of National Revenue that shareholder worked as employee rather than independent contractor.

Martin Reesink for Appellant Tamara Watters, Rosemary Fincham for Respondent

Wyman W. Webb J.A.:

1 These are appeals from two decisions of the Tax Court of Canada (2011 TCC 237 (T.C.C. [Informal Procedure])) rendered by Rip C.J. (the Tax Court judge) based on a common set of reasons. 2 The appeals were consolidated by order of this Court dated October 7, 2012, the appeal in Court file A-219-11 being designated as the lead appeal. In conformity with that order the reasons which follow will be filed in Court file A-219-11 and a copy thereof will be filed as reasons for judgment in Court file A-331-11. 3 The issue in theses appeals is whether the Tax Court judge made a reviewable error in holding that Martin Reesink was an employee and not an independent contractor in 2008 in relation to the services that he was providing to Pluri Vox Media Corp. (the “Appellant”) and for which he was paid approximately $3,000 to $8,000 per month. Martin Reesink was the sole shareholder of the Appellant. The Tax Court judge held that Martin Reesink was an employee in providing these services and the Ap- pellant has appealed that decision. Martin Reesink is a lawyer and he 250 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

represented the Appellant during the hearing before the Tax Court and before us. 4 One of the issues raised in the Notice of Appeal is whether the Tax Court judge could amend his reasons for judgment. In his reasons the Tax Court judge stated that Martin Reesink was a de jure director but his reasons were subsequently amended to state that he was a de facto director. At the hearing of the appeal, Martin Reesink indicated that he was no longer pursuing this issue. 5 The main position of the Appellant during the hearing before us was simply that Martin Reesink was an independent contractor because this was the intention of the Appellant and Martin Reesink. This is different from the main argument that was presented by the Appellant before the Tax Court as identified by the Tax Court judge in paragraph 24 of his reasons: 24 To put the situation in blunt terms, Mr. Reesink’s main argument that he is not an employee is that nobody at Pluri Vox directs his functions in the company... 6 The Tax Court judge does not address the issue of the stated intention of the Appellant and Martin Reesink that his services would be provided as an independent contractor. However the Tax Court judge did note in his reasons that Martin Reesink was registered for the purposes of the Excise Tax Act. It is also clear from the Tax Court hearing (and not disputed by the Appellant) that Martin Reesink did not report any GST in relation to the amounts that he was paid by the Appellant for the services that he rendered. Had he been an independent contractor then GST would have been payable by the Appellant in relation to these amounts. In contrast, if his services were provided as an employee, no GST would have been payable by the Appellant. Given that the GST treatment is inconsistent with the alleged common intent that Martin Reesink’s services were to be provided as an independent contractor, I would give no weight to this argument. 7 While the Appellant also submitted that there were various findings of fact made by the Tax Court judge that were palpably wrong, the Ap- pellant has failed to demonstrate any such error. 8 There are, however, some issues that arise from the hearing that should be addressed. Although the Tax Court judge does not say so explicitly in his reasons, his remarks during the hearing suggest that in his view Martin Reesink could not be both a director of the Appellant and an independent contractor providing other services to the Appellant. Pluri Vox Media Corp. v. R. Wyman W. Webb J.A. 251

9 In Zupet v. Minister of National Revenue, 2005 TCC 89 (T.C.C. [Em- ployment Insurance]), Bowman A.C.J. (as he then was) found that a person, who was the sole director of her company, also provided services to her company as an independent contractor. Bowman A.C.J., after quoting extensively from Lord Borth-Y-Gest in Lee v. Lee’s Air Farming Ltd. (1960), [1961] A.C. 12 (New Zealand P.C.), made the following comments: 16 If the courts are to use a willing suspension of disbelief to hold that an individual can enter into a contract of service with that individual’s own company, there is no reason why the same willing suspension of disbelief cannot allow the court to find that the same individual can enter into a contract for services with his or her company. Indeed the portion of Lord Borth-Y-Gest’s speech in Lee that I have italicized recognizes that very possibility. 10 I agree with these comments. It would also seem to me that, while this would be unusual, an individual could enter into more than one contract with his or her own company and therefore could provide services in different capacities. It follows that the simple fact that an individual is a director or an officer of a company does not, in and of itself, exclude the possibility that other services may be provided by that individual as an independent contractor. When that occurs, it will be necessary, for the purposes of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended, and the Canada Pension Plan, R.S.C. 1985, c. C-8, to appor- tion the amounts paid between the services performed in one capacity and the other. 11 Another matter that can be usefully commented on is how the control factor is to be applied when, as is the case here, the issue is whether an individual is an employee or an independent contractor of his or her own company. As noted by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (S.C.C.) (“Sagaz”), in paragraph 47, control is one of the factors to be considered in making this determination. In assessing this factor in circumstances where the individual concerned is providing services to his or her own corporation, it must be remembered that the corporation is a separate person and the corporate veil is not to be pierced, except in limited situations. The Re- spondent submitted in her written argument that the Tax Court judge had properly applied the decisions of this court in Meredith v. R., 2002 FCA 258, 2002 D.T.C. 7190 (Fed. C.A.) and Groupe Desmarais Pinsonneault & Avard Inc. c. Ministre du Revenu national, 2002 FCA 144 (Fed. C.A.). 252 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

12 In Meredith v. R., above, Malone J.A. stated at paragraphs 11, 12 and 15: 11. In my analysis, the Judge committed several errors in the disposition of this case. First of all, the Judge “pierced the corporate veil” insofar as he looked beyond the corporate entity itself to assess the applicant’s actions. Examples are sprinkled [sic] thought the reasons for judgment. For instance, he held that, notwithstanding the contractual relationship between the third parties and Stem, that it was “ob- vious that Roeslein and Ball were hiring [Meredith’s] expertise and not retaining the Company as such in that it had no other workers.” He also stated that “it is apparent that [Meredith] controls the Com- pany and uses it for his own benefit from time to time when it is convenient. The Company does not use him.” Further, he also made reference to the methods by which Meredith was paid by Stem, as well as arrangements Stem had with its bank, including personal guarantees provided by Meredith. 12. Lifting the corporate veil is contrary to long-established principles of corporate law. Absent an allegation that the corporation constitutes a “sham” or a vehicle for wrongdoing on the part of putative shareholders, or statutory authorisation to do so, a court must respect the legal relationships created by a taxpayer (see Salomon v. Salomon & Co., [1897] A.C. 22; Kosmopoulos v. Constitution Insurance Co. of Canada, [1987] 1 S.C.R. 2). A court cannot recharacterize the bona fide relationships on the basis of what it deems to be the economic realities underlying those relationships (see Continental Bank Leasing Corp. v. The Queen, [1998] 2 S.C.R. 298; Shell Canada Ltd. v. The Queen, [1999] 3 S.C.R. 622; Ludco Enterprises Limited v. The Queen, 2001 SCC 62at para. 51). It follows, therefore, that the Judge erred in law by inquiring into the economic realities of the relationship as between Stem and Meredith, when he was not authorised by statute or common law to do so. ... 15. The recent decision of this Court in Groupe Desmarais Pinsonneault & Avard Inc. v. Canada (MNR), 2002 FCA 144is in- structive on the issue of control. There, No¨el J.A. writing for the Court indicated that the question is not whether the corporation did or did not exercise control, but whether it was in a position to do so. The importance lies in the corporation’s legal power to control the employees, not whether the employees feel subject to that control. That is the case here, where Stem has contracted with arms-length third parties. It is Stem, not the applicant, with whom the third parties contracted for Meredith’s expertise, and it is within Stem’s legal Pluri Vox Media Corp. v. R. Wyman W. Webb J.A. 253

power, as a corporation, to control Meredith. Therefore, given the corporate structure in place, it is irrelevant that Meredith is the sole shareholder and director. Based on the above authority, the Judge erred in finding that control lay in the hands of the applicant in his personal capacity. 13 In relation to the issue of control in this case, the Tax Court judge, in paragraph 22 of his reasons, stated that: 22 Mr. Reesink was not engaged by Pluri Vox to perform services as a person in business on his account. He was not engaged as Pluri Vox’s lawyer. The question of who controlled whom has no answer: could the corporation control Mr. Reesink since he was its sole shareholder? Obviously not, qua shareholder. But Mr. Reesink’s work at Pluri Vox had nothing to do with being a shareholder. Except where there is a unanimous shareholders agreement, shareholders do not meddle in the management of the business and affairs of a corporation. It is Mr. Reesink’s functions other than as a shareholder that are relevant in my view. 14 It seems to me that in reaching the conclusions that the Appellant could not control Martin Reesink since he was the sole shareholder of the Appellant and that “[t]he question of who controlled whom has no answer”, the Tax Court judge in effect pierced the corporate veil. He was also only considering whether the Appellant actually controlled Martin Reesink not whether the Appellant, as a separate legal entity, was in a position to control Martin Reesink. As noted in Groupe Desmarais Pinsonneault & Avard Inc. above, “[t]he importance lies in the corporation’s legal power to control the employees, not whether the employees feel subject to that control”. However, in my opinion, these conclusions of the Tax Court judge would not affect the outcome in this case. 15 As noted by the Supreme Court of Canada in Sagaz in paragraph 47: 47 ...The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. 16 In the present case, the evidence shows that the Appellant retained the services of an individual by the name of Andrew Baldwin as an independent contractor. Andrew Baldwin’s status as an independent contractor is not in dispute. The Tax Court judge found that Martin Reesink was supervising Andrew Baldwin and the Appellant did not challenge this finding by the Tax Court judge. It follows that if one accepts the Appellant’s contention that Martin Reesink was acting as an independent contractor, the result is that one independent contractor (Andrew Baldwin) was be- 254 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

ing supervised by another (Martin Reesink) in circumstances where no contractual relationship existed between the two. The better view is that Martin Reesink was an employee (and not carrying on his own business) while supervising Andrew Baldwin. 17 As a result I would dismiss the appeals, with one set of costs in the lead appeal.

Marc No¨el J.A.:

I agree

Johanne Trudel J.A.:

I agree Appeal dismissed. Rel Foods Ltd. v. Smart 255

[Indexed as: Rel Foods Ltd. v. Smart] Rel Foods Ltd. c.o.b. Dairy Queen Brazier Applicant v. Theresa J. Smart and Director of Employment Standards Responding Parties Ontario Labour Relations Board Docket: 4326-10-ES Matthew R. Wilson V-Chair Judgment: December 20, 2012 Labour and employment law –––– Employment standards legislation — Termination of employment — Termination pay — Entitlement –––– Em- ployment standards officer (“ESO”) issued order to pay amount of $553.20 against employer, DQ — Order represented termination pay which ESO found to be payable to employee following termination without notice — Employer made application for review — Application granted — Order to Pay issued against employer was revoked — Based on uncontradicted evidence presented at hearing, board concluded that employee stole two ice cream blizzards and lied to manager when confronted — There was little doubt that deliberate theft constitutes wilful misconduct for purpose of Employment Standards Act (“Act”) — Employee’s conduct was theft — By engaging in such misconduct employee forfeited right to termination pay. Labour and employment law –––– Employment standards legislation — Termination of employment — Exemptions to entitlement to statutory termination or severance pay — Misconduct –––– Employment standards officer (“ESO”) issued order to pay amount of $553.20 against employer, DQ — Order represented termination pay which ESO found to be payable to employee following termination without notice — Employer made application for review — Application granted — Order to Pay issued against employer was revoked — Based on uncontradicted evidence presented at hearing, board concluded that employee stole two ice cream blizzards and lied to manager when confronted — There was little doubt that deliberate theft constitutes wilful misconduct for purpose of Employment Standards Act (“Act”) — Employee’s conduct was theft — By engaging in such misconduct employee forfeited right to termination pay. Cases considered by Matthew R. Wilson V-Chair: Martin v. Ontario (Ministry of Labour) (May 22, 1997), Doc. 2824-96-ES, [1997] O.E.S.A.D. No. 637 (Ont. L.R.B.) — followed VME Equipment of Canada Ltd. v. Ontario (Ministry of Labour) (1993), 1993 CarswellOnt 3828, (sub nom. VME Equipment of Canada Ltd., Re) [1992] O.E.S.A.D. No. 230 (Ont. Referee under Empl. Stnds. Act) — considered 256 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Statutes considered: Employment Standards Act, 2000, S.O. 2000, c. 41 Generally — referred to s. 1(1) “prescribed” — considered s. 55 — considered s. 116 — pursuant to Regulations considered: Employment Standards Act, 2000, S.O. 2000, c. 41 Termination and Severance of Employment, O. Reg. 288/01 s. 2(1) — referred to s. 2(1) ¶ 3 — considered

APPLICATION by employer from decision of employment standards officer who ordered employer to make termination pay to former employee.

Rob Lucio, Filomena Aprile for Applicant No one for Responding Party employee No one for Director of Employment Standards

Matthew R. Wilson V-Chair:

1 This is an employer application for review pursuant to section 116 of the Employment Standards Act, 2000, S.O. 2000, c.41, as amended (the “Act”). 2 On March 21, 2011, an Employment Standards Officer (“ESO”) issued an Order to Pay in the amount of $553.20 against the applicant, Rel Foods Ltd. c.o.b. Dairy Queen Brazier (“Dairy Queen”). The Order represents termination pay which the ESO found to be payable to the responding employee, Ms. Theresa J. Smart (“Ms. Smart”) following her termination without notice on or about November 15, 2009. 3 The hearing was held on December 13, 2012, in Ottawa. Ms. Smart failed to attend. The Board waited its customary 30 minute period, then it proceeded in her absence. 4 Dairy Queen’s position is that Ms. Smart engaged in wilful misconduct pursuant to section 2(1) of Regulation 288/01 of the Act by preparing two ice cream blizzards for her daughter without paying for them. Allegedly, Ms. Smart made the ice cream blizzards, stored them in a freezer, gave them to her daughter contrary to the store’s policy and then lied about the incident when confronted. Dairy Queen submits that this Rel Foods Ltd. v. Smart Matthew R. Wilson V-Chair 257

constitutes theft and falls within the exception set out in section 55 of the Act, and was not entitled to notice of termination or termination pay. 5 In support of this application, Mr. Rob Lucio, one of the co-owners of Dairy Queen gave evidence before me. Mr. Lucio testified under oath and was forthright in his testimony. The Board accepts the witness’ un- contested testimony. 6 Ms. Smart started working for Dairy Queen on April 25, 2009. She worked the cashier, prepared food, and served customers. It came to Mr. Lucio’s attention that Ms. Smart had prepared food for her personal con- sumption and also gave it to her daughter without paying for it. 7 On November 15, 2009, Mr. Lucio went to check on the restaurant. As he pulled into the parking lot, he saw through the window that Ms. Smart was preparing an ice cream product. He noticed that there were no customers in the store or in the drive-thru. He did see Ms. Smart’s daughter standing outside of the drive thru window. It took approximately twenty seconds to walk from his car into the store. Mr. Lucio asked Ms. Smart why she was preparing ice cream. Ms. Smart denied making any ice cream products. Mr. Lucio opened a freezer underneath the ice cream machine and discovered two freshly made ice cream blizzards. The applicant then stated that she had made the ice cream blizzards by mistake for a customer and she was keeping them for resale. 8 Mr. Lucio maintains a security camera system that records activity in the store. He reviewed the camera footage and there were no cars in the parking lot for forty-five minutes. Mr. Lucio then left the store. 9 Approximately ten minutes later, Mr. Lucio returned to the store and checked the freezer again. The ice cream blizzards had been removed. Mr. Lucio asked Ms. Smart about the ice cream blizzards and she responded that they had been re-sold to a customer. Mr. Lucio thought that this was odd since November was a slow time of the year for ice cream sales and reselling two ice cream blizzards would mean that a customer ordered an identical mixture of toppings that had been prepared earlier by mistake. Mr. Lucio reviewed the footage from the security cameras again and saw no customers in the restaurant or the drive thru. He did see Ms. Smart hand two ice cream blizzards out the drive thru window, but was not able to identify on the video who had received them. He checked the cash register to review the sales and found that there had been no ice cream sales for the previous ten transactions. 10 Mr. Lucio confronted Ms. Smart about the missing ice cream blizzards. She insisted that the products had been sold. Mr. Lucio showed 258 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

her the video footage of an empty restaurant and drive-thru. Ms. Smart had no other explanation. 11 Mr. Lucio spoke with his mother, a co-owner of the business and advised that he would be terminating Ms. Smart’s employment for theft. He then proceeded to advise Ms. Smart that she was dismissed.

Analysis and Decision 12 The relevant sections of the Act are: 1. (1) In this Act, “prescribed” means prescribed by the regulations; ..... 55. Prescribed employees are not entitled to notice of termination or termination pay under this Part. Section 2(1)3 of Ont. Regulation 288/01 of the Act states: 2. (1) The following employees are prescribed for the purposes of section 55 of the Act as employees who are not entitled to notice of termination or termination pay under Part XV of the Act: ... 3. An employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. 13 To deny an employee termination pay the employer must establish on the balance of probabilities that the employee engaged in behaviour that constitutes wilful misconduct, disobedience or wilful neglect of duty that was not trivial and not condoned by the employer. 14 In VME Equipment of Canada Ltd. v. Ontario (Ministry of Labour) (1993), [1992] O.E.S.A.D. No. 230 (Ont. Referee under Empl. Stnds. Act), the Referee stated: [...] There are two general categories of serious misconduct. There will be single acts: insubordination, theft and dishonesty, and physi- cal violence against other employees, for instance, which may, standing on their own, meet that standard of seriousness. As well, there will be less serious repetitive forms of misconduct, which if handled properly by the employer, will also meet this standard of seriousness. The employer, in this scenario, must have explained to the employee after each occurrence that the conduct in question was not acceptable and that if continued would result in termination and there must be, subsequent to these warnings, a culminating incident. Rel Foods Ltd. v. Smart Matthew R. Wilson V-Chair 259

In addition to proving that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distin- guishes it from ‘just cause’, that the conduct complained of is ‘wilful’. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloqui- ally, being bad on purpose. 15 Based on the uncontradicted evidence presented at the hearing, the Board concludes that Ms. Smart stole two ice cream blizzards and lied to Mr. Lucio when confronted. As set out in Martin v. Ontario (Ministry of Labour), [1997] O.E.S.A.D. No. 637 (Ont. L.R.B.) “there is little doubt that deliberate theft constitutes wilful misconduct” for the purpose of the Act. Ms. Smart’s conduct is theft. By engaging in such misconduct Ms. Smart forfeited her right to termination pay.

Disposition 16 For these reasons, Dairy Queen’s application for review is successful and the Order to Pay issued against it is revoked. All monies paid to the Director of Employment Standards in this matter are to be returned to Dairy Queen. Application granted. 260 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: Oberle and Schindler Abroyd Inc., Re] In the Matter of an Adjudication Pursuant to S. 61.5 of the Canada Labour Code Mr. Frank Oberle Applicant and Schindler Abroyd Inc. Respondent Canada Adjudication (Canada Labour Code Part III) Docket: None given. Joseph B. Rose Adjud. Heard: January 11, 2013 Judgment: January 30, 2013 Labour and employment law –––– Labour law — Discipline and termination — Grounds — Insubordination — Violation of company rule — En- forcement of rule –––– Health and safety — Statutory requirement — Employee was crew foreman for employer, primarily engaged in construction of communication towers — Employee had committed multiple disciplinary infractions, including violations of employer’s health and safety manual for, inter alia, declin- ing to order wearing of protective headgear, eyewear and safety harnesses — Employee deliberately falsified driver log sheets, requirement of Hours of Ser- vice Regulations promulgated under Highway Traffic Act — Employer terminated employee, and employee brought complaint alleging unjust dismissal — Complaint dismissed — Falsification of time sheets, violation of employer’s manual and of Regulation, was very serious safety infraction — Employee had been advised on multiple occasions that, given employee’s antecedents including safety antecedents, further disciplinary infractions could result in termination — Inter alia given short-term nature of employment, those antecedents and serious nature of infraction, falsification of log sheets met test for culminating incident, termination was reasonable and complaint was properly dismissed. Labour and employment law –––– Labour law — Discipline and termination — Grounds — Doctrine of culminating incident — Application. Labour and employment law –––– Labour law — Discipline and termination — Kinds of discipline — Discharge — Just cause. Cases considered by Joseph B. Rose Adjud.: Jones v. Mudjatik Thyssen Mining Joint Venture (2012), 2012 CarswellNat 1615 (Can. Adjud. app. under Can. Lab. Code) — referred to Sampson v. Mohawk Moving & Storage (2012), 2012 CarswellNat 753 (Can. Adjud. app. under Can. Lab. Code) — referred to Oberle and Schindler Abroyd Inc., Re Joseph B. Rose Adjud. 261

Statutes considered: Highway Traffic Act, R.S.O. 1990, c. H.8 Generally — referred to Regulations considered: Highway Traffic Act, R.S.O. 1990, c. H.8 Hours of Service, O. Reg. 555/06 Generally — referred to s. 5 — considered Words and phrases considered: culminating incident There is broad agreement among arbitrators about the doctrine of a culminating incident. As described by Mitchnick and Etherington, Labour Arbitration in Canada, at page 161: Where an employee with a poor work record commits a further of- fence meriting discipline, the doctrine of culminating incident allows the employer to take the overall record into account in assessing the appropriate penalty. Although the employee’s final act of misconduct may not, in isolation, warrant the penalty imposed, his or her record as a whole may justify the employer in increasing the severity of the disciplinary response. The doctrine is accepted by most arbitrators as a necessary corollary to the corrective approach to discipline; it allows the employer to discharge an employee who could otherwise repeatedly engage in minor forms of misconduct without risk of discharge.

COMPLAINT alleging unjust termination.

Frank Oberle for Appellant Sharon P. Ilavsky for Respondent

Joseph B. Rose Adjud.:

1 A hearing was held on January 11, 2013 to consider the alleged unjust dismissal complaint of Frank Oberle. The employer maintains that Oberle was terminated for just cause as he failed on several occasions to comply with company policies, legislation and regulations. In support of its position, the employer submits the objective evidence supports its decision (see Sampson v. Mohawk Moving & Storage, February 20, 2012 (Rose), 2012 CarswellNat 753 (Can. Adjud. app. under Can. Lab. Code) and Jones v. Mudjatik Thyssen Mining Joint Venture, May 22, 2012 262 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

(Garden), 2012 CarswellNat 1615 (Can. Adjud. app. under Can. Lab. Code)). 2 The employer is primarily engaged in the installation and mainte- nance of communication towers. Oberle was hired as a crew foreman on August 13, 2010. He was terminated on October 24, 2011. At the time of his dismissal his hourly wage rate was $26.00. As described in greater detail below, Oberle received several warnings and a two-day suspension in 2011. The incidents leading to the imposition of discipline involved being late to work, ignoring safety issues, exceeding maximum hours of work, falsifying time sheets (including allowing crew members to do the same), and failing to complete daily driver logs. The employer viewed his failure to complete driver logs as a culminating incident, noting these are required by company policy and law. His failure to do so exposed the company to risks, including sanctions and loss of business. Oberle maintains his dismissal was unjust. 3 There were two witnesses for the employer: Ron Schindler, company president and Shawna Caswell, the office manager. Frank Oberle testified on his own behalf. Reference was made to the following provisions in company manuals. EMPLOYEE MANUAL 3.13 Each employee is expected to read and familiarize themselves with the safety and health manual.... Employees who violate health and safety requirements will be subject to disciplinary action, up to and including discharge. 6.2 Every employee is responsible for accurately recording time worked. Falsifying or otherwise altering time records will result in disciplinary action, up to and including discharge. HEALTH & SAFETY MANUAL Head Protection: CSA approved head protection must be worn at all times while on site, except while in the office areas and vehicles. Foot Protection: CSA approved safety toe boots or shoes shall be worn at all times at work sites and designated shop areas. Safety footwear used in climbing should provide good ankle support and arch protection. Safety Eyewear: Safety eyewear (CSA approved glasses with side shields, goggles, face shields, etc.) appropriate for the risk exposure must be worn at all times except while in office areas and vehicles, unless specified. Oberle and Schindler Abroyd Inc., Re Joseph B. Rose Adjud. 263

Fall Protection: Fall protection devices will be used as per appropriate Occupational Health and Safety Regulations pertinent at each job site.... Hand Protection. The appropriate gloves shall be worn at all times that there is a risk of hand injury either from the task being done, or products being handled.

Findings and Decision 4 There is broad agreement among arbitrators about the doctrine of a culminating incident. As described by Mitchnick and Etherington, La- bour Arbitration in Canada, at page 161: Where an employee with a poor work record commits a further of- fence meriting discipline, the doctrine of culminating incident allows the employer to take the overall record into account in assessing the appropriate penalty. Although the employee’s final act of misconduct may not, in isolation, warrant the penalty imposed, his or her record as a whole may justify the employer in increasing the severity of the disciplinary response. The doctrine is accepted by most arbitrators as a necessary corollary to the corrective approach to discipline; it allows the employer to discharge an employee who could otherwise repeatedly engage in minor forms of misconduct without risk of discharge. It can be noted at the outset that Oberle maintains that the driver logs incident was not the real reason he was dismissed. Additionally, he dis- putes some aspects of the incidents that led to prior discipline. In the circumstances, it is appropriate to review all of the incidents involving Oberle. The starting point is to consider the final incident that led to his termination. 5 October 24, 2011 (Log Sheets Incident). Oberle was dismissed when it was learned he had failed to fill out driver daily log sheets. Not only is this required by company policy and by law, but Oberle was aware of the requirement to complete daily log sheets. As described in the employer’s opening written statement, Oberle’s failure to do so put the employer at risk. There are serious consequences for the employer if an employee does not fill out the driver’s daily log. It was a serious act of disobedience not to keep the daily logs. And this incident was reflective of Mr. Oberle’s attitude that he could disregard legislated requirements and company policy. There was a real risk that if his employment were to continue, he would continue to breach procedures and leave the company to face the potential consequences. 264 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

It was Schindler’s evidence the company discovered Oberle had not completed logs since February. 6 There is no dispute in the evidence that the termination meeting was brief. In his testimony, Oberle raised two broad issues. First, with respect to the requirement to complete daily log sheets, he maintains he was never trained on how to properly fill out the logs. Second, Oberle submits this was not the real reason for his termination. Rather, the employer dismissed him because he was going to lodge several complaints against the company, one of which involved Dave Olsen, his supervisor. That complaint allegedly involved what he suggested was inappropriate conduct, i.e., giving shoulder massages to male employees. 7 The evidence before me reveals Oberle did not comply with the requirement to complete log sheets and he did not offer a satisfactory reason for not doing so. Even if one concluded he did not know how to fill out the log sheets, a conclusion that is not supported, it was his responsibility to find out how to do so. By his own admission, he never asked for help in this regard. He also suggested it really did not matter since he could simply pay the fine for failing to do so. This response is cavalier and irresponsible. As for Oberle’s claim he was dismissed for other reasons, there is no evidence to support this. Oberle admitted he knew going into the meeting he was going to be terminated. I believe he knew this because of the seriousness of his actions. I am also persuaded the complaints he intended to raise represented what might be called a “best de- fense is a good offense” strategy. In conclusion, the employer had just cause for discipline. 8 As described below, Oberle was involved in several other incidents. 9 June 24, 2011 (Tardiness Incident). Oberle received a verbal warning for being late to work. He was told about the need to arrive on time with boots on and ready for work. It was noted safety boots were required on arrival and this was covered in the company Health & Safety Manual. Oberle signed a memorandum that advised employees who are continu- ously late to work will be subject to discipline, including suspension and possible discharge. 10 Oberle maintains all the employees were late that day and this is supported by the memorandum in evidence about start times directed to all field personnel. According to Oberle, he and other employees were required to sign the memorandum. Although there are no other signed documents before me confirming this, even assuming other employees were late and were warned, it does not alter the fact that Oberle was directly Oberle and Schindler Abroyd Inc., Re Joseph B. Rose Adjud. 265

spoken to about being late and disciplined. Further, by signing the warning memorandum, he acknowledged his tardiness. 11 August 25, 2011 (Exceeding Hours Incident). Oberle received a written warning and a two-day suspension for driving a company vehicle after exceeding the working hours limit. This incident occurred on August 25th. It was noted the Highway Traffic Act Ontario Regulation 555/06 Hours of Service (s. 5) stipulates a driver must not drive again on the same day following 14 hours on-duty time in a day. On the date in question, Oberle worked 22.5 consecutive hours. This was considered a serious safety violation. 12 The write up of the incident noted Oberle had been spoken to on prior occasions about tardiness and not driving home after working long hours. It was further noted that s. 3.13 of the Employee Manual states that violations of safety standards may be subject to discipline, including termination. Schindler stated employees are required to call in and advise the office if jobs are going to take longer. The evidence on this point is Oberle did not call in on the day in question and worked 22.5 hours. 13 Oberle maintains employees often worked more than 14 hours per day. He presented a list compiled from his records that indicated he worked beyond the maximum hours per day on 30 days between Febru- ary and October 2011. He added the company put pressure on employees to complete jobs in the same day. On the date in question, he was told he and his crew were not to return until the job was completed. None of the crew members testified at the hearing to confirm this. 14 Caswell attended this meeting and took notes. The notes indicate Oberle was told about taking too long on jobs and that it was affecting profits. Oberle was told he was not working fast or effectively and that next time it would result in dismissal. Her notes indicate that Oberle gave “smart ass” answers during the meeting. 15 Given the potential safety risks attendant to driving a company vehicle in these circumstances and recognizing Oberle had previously been told about not driving home after working long hours, it must be concluded the employer had a valid basis for the suspension. Oberle did not dispute the issue and signed the discipline memorandum setting out the written warning and suspension. 16 At the same meeting Oberle received a verbal warning for lateness and inefficiency (Crane Incident). This warning resulted from Oberle’s failure to arrive at a job where a crane had been rented and a road had been closed off. Although Oberle stated an electrical storm had knocked 266 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

out the power at the motel he was staying at, he was told it was his responsibility to make arrangements for a backup, wakeup call. Oberle acknowledged he did not have a backup, i.e., he never requested a wakeup call at the motel where he was staying. As a result of his lateness, the company incurred a considerable expense and the work had to be rescheduled. 17 September 15, 2011 (Safety Incident). A written warning was issued for failing to comply with or to enforce the company health and safety policy or government rules and regulations. In this instance, Oberle and his crew were photographed working on site without hard hats and safety goggles. In addition, they were not wearing harnesses, which are required to minimize the risk of falling from roofs. Schindler testified that after seeing the pictures he was concerned about the company’s safety reputation and its potential liability if lax safety was permitted. He proceeded to tell Dave Olsen it was time to get rid of Oberle. Olsen reportedly responded they needed a foreman and he would give Oberle another chance and try to turn things around. Oberle signed the written warning which states “any further neglect of duty will be harshly dealt with not excluding dismissal”. 18 Oberle testified the reason he and his crew were not wearing safety protection because they had completed the work and were wrapping up the job. He submitted he put on safety gear only when needed. Although he said his former manager told him there was no need for harnesses, Oberle did not provide any evidence to confirm this. 19 According to Caswell’s notes of the meeting, Oberle was told it was important for the foreman to set an example and not disregard safety rules. He was also asked if he was looking to get fired. Oberle gave various assurances he would shape up, e.g., “you can trust me” and “you won’t have to do this again”. According to Caswell, she found it somewhat odd that Oberle did not argue, offer an explanation or defend his actions. She took this to mean he agreed with the concerns raised by the company. 20 In considering the nature of this type of work, it must be concluded Oberle and his crew occupy safety-sensitive jobs. As such, Oberle was aware of s. 3.13 of the Employee Manual and the Health & Safety Man- ual provisions covering protective gear and equipment. By signing the warning memorandum, he acknowledged his failure to comply with safety regulations and accepted the disciplinary sanction. Oberle and Schindler Abroyd Inc., Re Joseph B. Rose Adjud. 267

21 I would simply add safety was related to a previous workplace injury, Specifically, Oberle was the subject of an accident/injury report on No- vember 22, 2010 as a result of cutting his hand. The report indicates the cause of the accident involved a “sharp edge on cable”. Although this did not involve any discipline, the accident report indicates the action required to prevent recurrence was “gloves to be worn when working [with] cable”. 22 September 28-29, 2011 (Falsifying Hours Incident). Following a review of data from newly installed GPS devices in company vehicles, it was discovered that Oberle had falsified time sheets and allowed his crew to do the same. Specifically, on two days the data showed he reported 1 hour and 45 minutes more time worked than was actually worked. It was noted that s. 6.2 of the Employee Manual recognizes the importance of accurately recording hours and the disciplinary consequences of failing to do so. Schindler testified Oberle could not be trusted to fill out time sheets accurately and adhere to safety practices and he should be dismissed. Oberle received a written warning and was reminded about prior occasions in which he failed to comply with company policies and procedures. The supervisor’s comment in the written warning states: “We consider falsifying time sheets as fraud and theft. Any further instances will result in severe disciplinary action or dismissal.” 23 Oberle did not actually deny he falsified time sheets. He stated there were bugs in the newly installed GPS devices and they were not accu- rate. There was no evidence to support this claim for the dates involved. He added he was unaware the company was using the GPS devices to spy on its employees and considered their use to be an unwarranted invasion of privacy. It must be observed there is no evidence that he raised these concerns in the disciplinary meeting. Further, his actions violated s. 6.2 of the Employee Manual. 24 The objective evidence shows Oberle had a checkered employment record. He was also apprised on several occasions that further misconduct would result in discipline up to and including dismissal. Oberle did not appear to soberly reflect on these warnings and alter his behaviour. Although his supervisor did not attend at the hearing to give evidence, there is no concrete evidence that casts doubt on the validity of the incidents for which he was disciplined. The fact he signed the discipline memoranda confirms his acceptance of their content. To claim, as he did at the hearing, that he always signs what he is asked to sign, does not 268 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

detract from substantive grounds relied on by the employer. Nor does it advance his claim. At the same time, I agree with Oberle’s submission that the references to Ontario statutes and Regulations by counsel for the employer are of no assistance as this matter falls within the federal jurisdiction. 25 In reviewing the evidence in this matter, it appears Oberle had difficulties conforming to workplace policies. It is difficult to escape the conclusion that this reflected what might be described as an attitude problem. This manifested itself in several ways. For example, while acknowledging he signed the Employee Manual, he maintained he signed it only to indicate he had read it and not that it would be used against him. When queried why he signed the discipline memoranda, he explained he signed anything he was asked to sign. It is difficult to recon- cile his willingness to do so with his stated concerns about the GPS devices being an invasion of his privacy. He also seems to have an indifferent attitude about health and safety. While he insists he never received the Health & Safety Manual, the evidence indicates otherwise. He seems to rely on the last page of the Manual, which indicates it was revised on December 15, 2012 or after he was terminated. Even so, I accept Schindler’s evidence that most revisions were minor and this version of the document existed when Oberle was employed. This was confirmed by Caswell who updated the document. She indicated the date of December 15, 2012 represented the latest update. On inspection, the Health & Safety Manual confirms this and also includes an earlier revi- sion (September 1, 2010). 26 Oberle also acknowledged on cross-examination that the Employee Manual indicated health and safety was important, there were numerous policies and laws governing health and safety, the foreman was responsible for and had to follow health and safety policies and the failure to do so could result in discipline, including dismissal, and that head, foot, hand and eye protection were required. He also admitted he was subject to commercial vehicle laws and the requirement to fill in log books. A further example of his somewhat cavalier attitude was the reason he gave for not filling out log books. He claims he never received any training on how to complete the forms properly. Oberle took the position that if he failed to complete the log books, he would take responsibility for paying whatever fines were required. 27 In considering this matter, I note Oberle was a short-term employee. He was employed as a foreman in what can be regarded as a safety-sensi- Oberle and Schindler Abroyd Inc., Re Joseph B. Rose Adjud. 269

tive position. Il follows he was responsible for adhering to health and safety standards both for himself and his crew members, At the time of his hire, he had considerable experience in this type of work. Shortly after he was hired, he received a certificate for completion of a course in fall protection fundamentals and rescue. He was required to work independently without supervision in the field. In all the circumstances, the employer had the right to expect a higher standard of performance. 28 In conclusion, the employer established there was a culminating incident. Based on a review of Oberle’s record, I find the employer had just cause for termination. Accordingly, the complaint is dismissed. Complaint dismissed. 270 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: York University v. Markicevic] York University Plaintiff and Michael Markicevic, Janet Fleming, Mima Veronica Markicevic, Aleeyah Apparel Inc. operating as A-Tech Construction and Design Inc., Aleeyah Inc., AFC Inc. operating as Arsenal Facility Consulting Inc., Toronto Engineering Company, Guga’s International, Canadian & American Concrete Renovation & Drain-Layer Ltd., Roman Ritacca, Luigi Lato, Phil Brown, Riaz Jadavji, Helen Saoulli, Guram Sekhniashvili, Gia Sekhniashvili, John Doe #1, John Doe #2, John Doe #3, Jane Doe #1, Jane Doe #2 and Jane Doe #3 Defendants Ontario Superior Court of Justice [Commercial List] Docket: CV-12-107954-00 2013 ONSC 1045 D.M. Brown J. Judgment: February 14, 2013 Real property –––– Registration of real property — Certificate of pending litigation (lis pendens) — General principles –––– Borrowing against property — Plaintiff obtained certificate of pending litigation on each of defendants’ two properties — Consent order was made which permitted defendants J and MVM to borrow against properties in order to finance their legal fees, but funds could not be released without consent of plaintiff or order by court — J and MVM entered into written joint defence agreement with third defendant MM — Fees billed by their lawyers significantly exceeded those billed by MM’s lawyer — Defendants J and MVM brought motion for order that funds held in trust by their counsel be released to pay their counsel’s account — Issue arose as to allocation of legal fees — Motion granted — Basic premise of consent order was that any encumbrance on residences was only to be for benefit of J and MVM — J and MVM were entitled to receive amount equal to 50% of total fees, taxes, and disbursements billed by lawyer from trust account funds, which was fairest and more reasonable way to allocate legal fees . Professions and occupations –––– Barristers and solicitors — Fees — Mis- cellaneous –––– Allocation of legal fees — Plaintiff obtained certificate of pending litigation on each of defendants’ two properties — Consent order was made which permitted defendants J and MVM to borrow against properties in order to finance their legal fees, but funds could not be released without consent of plaintiff or order by court — J and MVM entered into written joint defence agreement with third defendant MM — Fees billed by their lawyers significantly ex- York University v. Markicevic D.M. Brown J. 271

ceeded those billed by MM’s lawyer — Defendants J and MVM brought motion for order that funds held in trust by their counsel be released to pay their counsel’s account — Issue arose as to allocation of legal fees — Motion granted — Basic premise of consent order was that any encumbrance on residences was only to be for benefit of J and MVM — J and MVM were entitled to receive amount equal to 50% of total fees, taxes, and disbursements billed by lawyer from trust account funds, which was fairest and more reasonable way to allocate legal fees. Cases considered by D.M. Brown J.: Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business & Technology (2003), [2003] O.T.C. 7, 2003 CarswellOnt 35, [2003] O.J. No. 40 (Ont. S.C.J.) — referred to Royal Bank v. Welton (2009), 2009 CarswellOnt 5194, [2009] O.J. No. 3675 (Ont. S.C.J. [Commercial List]) — referred to Waxman v. Waxman (2007), 42 C.P.C. (6th) 37, 2007 ONCA 326, 2007 Cars- wellOnt 2714, 223 O.A.C. 375, [2007] O.J. No. 1688 (Ont. C.A.) — referred to

ADDITIONAL REASONS relating to allocation of legal fees from judgment reported at York University v. Markicevic (2013), 2013 CarswellOnt 429, 2013 ONSC 378, 4 C.C.E.L. (4th) 285 (Ont. S.C.J. [Commercial List]).

W. McDowell, D. Varah, B. Kolenda for Plaintiff B. Shiller for Defendant, Michael Markicevic L. Caylor, M. Paris for Defendants, Janet Fleming, Mima Veronica Markicevic

D.M. Brown J.: I. Issue 1 In paragraphs 148 to 151 of my Reasons released January 21, 2013 (2013 ONSC 378 (Ont. S.C.J. [Commercial List])), I wrote: Request by Janet and Mima to access funds to pay their legal fees [148] As observed, the Consent Order of Newbould J. permitted Ja- net and Mima to borrow against the two residences in order to finance their legal fees, but no funds could be released without the consent of York or the order of this Court. Janet and Mima now seek such an order so that the funds held in trust by their counsel, Bennett Jones, can be released to pay that firm’s accounts. [149] They are entitled to such an order, but York raises an objection as to the amount, contending that the work product filed on these motions revealed that Markicevic, Fleming and Mima Markicevic are running joint defences and it would not be appropriate for Mar- 272 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

kicevic to “run his legal defence through the properties that allegedly belong to Fleming and Mima”. [150] There is merit to York’s submission. The Consent Order permitted encumbrances on the two properties for the benefit of Mima and Janet’s legal defence, not that of Markicevic. The three family members filed joint materials on these motions. While cooperation between their counsel may well reduce their overall legal costs, Janet and Mima have to be able to demonstrate that the funds whose release they seek will only benefit them. [151] The materials filed on these motions do not enable me to figure out how much, if any, of the amounts billed by Bennett Jones covered work which benefited Markicevic. I would ask counsel to see whether they can reach an agreement on the amount of the Bennett Jones fees which benefited only Mima and Janet. If they can agree on an amount, that amount may be released to the law firm from the funds it presently holds in trust. If the parties cannot agree, then I would ask them to book a 9:30 appointment before me within the next 7 days so that I can determine how much to release. This matter must be dealt with this month. 2 In my 9:30 appointment endorsement dated January 31, 2013, I wrote: (1) Wife/daughter — 2 bills — fees total ❏ $388,000 — I order that 15% of that amount be released from BJ trust account to cover that work which counsel says was solely for the benefit of wife-daughter. (2) Counsel says 15% work for benefit of Michael Markicevic; 70% joint. I set a timetable for the delivery of submissions on the issue of the apportionment of the fees for legal work performed by the Bennett Jones firm as between Michael Markicevic, on the one hand, and the defendants, Janet Fleming and Mima Markicevic, on the other. The parties have filed their submissions. 3 In their February 7, 2013 submissions Janet and Mima clarified that the total amount of the Bennett Jones fees was $379,253, not $388,000.

II. Positions of the Parties 4 Janet and Mima submitted that 70% of the total fees of their counsel ($265,477.10) related to work for the mutual benefit to all of the defendants, 15% ($56,887.95) reflected work primarily for themselves, and 15% ($56,887.95) primarily benefitted Michael Markicevic. Janet and York University v. Markicevic D.M. Brown J. 273

Mima contended that the 70% ($265,477.10) should be split into thirds, with two-thirds paid to Bennett Jones in payment of their legal fees, with taxes and disbursements similarly allocated. That would result in the further release of $111,761.93 in fees, taxes and disbursements to Bennett Jones. 5 York took the position that Janet and Mima should not be permitted to access any further funds held in trust by Bennett Jones, which originated in the encumbrancing of the Duntroon Residence, since they already had accessed $158,200 of the equity of that property: $100,000 pursuant to the order of Newbould J. made August 15, 2012 and $58,200 under my January 31 endorsement. In addition, York submitted that the record revealed that both Janet and Mima owned other assets, either directly or indirectly in the case of Direct Signal Inc.’s ownership of the plane, and that both Janet and Mima should look to those funds before seeking to make a claim on the trust account funds. Alternatively, York argued that Janet and Mima should be entitled to trust account funds to cover no more than 50% of the Bennett Jones fees, taxes and disbursements.

III. Analysis 6 No perfect answer exists to the allocation of legal fees issue; one can only try to fashion an allocation which is fair and reasonable in the specific circumstances of this case. In trying to fashion such a result I have reviewed the factors concerning the payment of legal fees from assets subject to a proprietary injunction set out in three cases: Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business & Technology, [2003] O.J. No. 40 (Ont. S.C.J.), paras. 25 and 26; Waxman v. Waxman, 2007 ONCA 326 (Ont. C.A.), paras. 38 and 39; Royal Bank v. Welton, [2009] O.J. No. 3675 (Ont. S.C.J. [Commercial List]), paras. 22 to 26, and 42 to 47. 7 A singular feature of this case is that the funds held in trust by Ben- nett Jones originated in the encumbrancing of the Duntroon Residence permitted by the Consent Order of Newbould J. made June 14, 2012. While York acknowledged that that fact distinguished the present case from the typical one involving an injunction to protect a proprietary claim, York argued that the order I made a few weeks ago effectively created a proprietary injunction through the granting of CPLs against the Duntroon and Vaughan Residences and restraining the further dissipation of the Residences without court approval. 274 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

8 In light of the mechanism created by the Consent Order to encumber the Residences to fund the legal fees of Janet and Mima, I think it would be unfair to go back and subject the legal fees they incurred prior to the release of my Reasons to a proprietary/non-proprietary injunction type of analysis. 9 That said, I do accept the arguments made by York on pages 5 and 6 of its February 8, 2013 submissions regarding the appropriate method for allocating the Bennett Jones legal fees. Paragraph 8 of the Consent Order entitled Janet and Mima to encumber the two Residences “in connection with borrowing to pay for legal advice and representation”. I accept York’s argument that the basic premise of the Consent Order was that any encumbrance on the Residences was only to be for the benefit of Janet and Mima. In the result, Janet and Mima entered into a written joint defence agreement with Markicevic and the fees billed by their lawyers ($379,253) significantly exceeded those billed by Markicevic’s lawyer (about $80,000). In light of the issues at play on the motions, I accept York’s submission that had Bennett Jones and Markicevic truly shared the workload, Markicevic would have borne significantly more of the up- front cost of the litigation. 10 That leads me to conclude that the fairest and most reasonable way in which to allocate the Bennett Jones legal fees is to order that Janet and Mima are entitled to receive from the trust account funds an amount equal to 50% of the total fees, taxes and disbursements billed by Bennett Jones — i.e. 15% based on work done solely for the benefit of Janet and Mima, plus 35% (50% of the joint 70%) based on an allocation of the joint benefit work, for a total of 50% of the amount billed by Bennett Jones. The amount billed by Bennett Jones consisted of fees of $379,253, together with taxes and disbursements which brought the total to $440,200.94. One-half of that amount is $220,100.47. To date, out of the $350,000 in trust account funds the sum of $158,200 has been released to satisfy the Bennett Jones accounts. If my math is correct, that means that Bennett Jones may release from their trust account a further $61,900.47 to pay their accounts, and I so order. Motion granted. Middleton v. Highlands East (Municipality) 275

[Indexed as: Middleton v. Highlands East (Municipality)] Donald Middleton Plaintiff and Municipality of Highlands East, David Burton, James Mackie, Gary Stoughton and The Bancroft Times Ltd. Defendants Ontario Superior Court of Justice Docket: Belleville CV-07-561 2013 ONSC 2027 James E. McNamara J. Heard: September 17-21, 24-25, 2012; December 17-19, 2012 Judgment: April 9, 2013 Civil practice and procedure –––– Costs — Persons entitled to or liable for costs — Multiple parties — Success divided among defendants — Sander- son order –––– Plaintiff was hired as fire chief by defendant municipality, and issues arose over firefighters’ alcohol use leading to municipal policy barring such use at stations and installation of video surveillance in stations — Defend- ants B, M, and S, of which B and M had been volunteer firefighters disciplined by plaintiff, were elected to municipal council and shortly afterwards voted as majority to dismiss plaintiff without cause — Plaintiff’s action for wrongful dismissal was allowed against municipality and dismissed against individual defendants — Costs submissions received — Plaintiff entitled to partial indemnity costs to date of offer and substantial costs thereafter, and individual defendants were entitled to costs from municipality — Plaintiff had made offer to settle in amount just slightly less than amount awarded after trial, and there there was no reason to deviate from general rule — Individual defendants were entitled to award of costs, as they succeeded in having action dismissed against them, and those costs would be paid directly be municipality — It was reasonable in circumstances of confusing and unusual facts to join together all these defendants in single action, and Sanderson order would be just and fair in circumstances — From plaintiff’s perspective, he was working well with employer until individual defendants were elected after campaign in which negative comments were made about him, and suddenly he was terminated without any explanation — Unfair manner of dismissal occurred in part because returning councillors of municipality and municipal staff were not completely candid with individual defendants as to certain events that transpired before their election. Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 Generally — referred to R. 49.10 — considered 276 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

R. 49.10(1) — considered R. 57.01(1) — considered

ADDITIONAL REASONS relating to costs of judgment, reported at Middleton v. Highlands East (Municipality) (2013), 2013 ONSC 763, 2013 CarswellOnt 1622, 5 C.C.E.L. (4th) 289, 8 M.P.L.R. (5th) 114 (Ont. S.C.J.), allowing plaintiff’s action for wrongful dismissal against municipality and dismissing it against individual defendants.

R. Steven Baldwin for Plaintiffs John Ewart for Defendant, Highlands William D. Watson for Defendants, James Mackie and David Burton John Bonn for Defendant, Gary Stoughton

James E. McNamara J.:

1 This wrongful dismissal action was tried before myself in Belleville over a period of 10 days. I awarded 10 months in lieu of notice in the amount of $72,218.30, aggravated damages in the amount of $30,000.00, and vehicle restoration costs of $5,600.00. The total amount of the judgment was, then, $107,728.30 plus pre-judgment interest. The Defendant municipality was found liable for those damages and the Plaintiff’s claims against the individual named Defendants were dismissed. 2 In my Reasons I also directed that if counsel were unable to agree on costs they should make written submissions. They apparently were not able to agree and I have received and reviewed extensive submissions. My ruling on costs follows.

(A) Plaintiff’s Costs 3 There is no issue, in my view, that the Plaintiff is entitled to his costs. The issues that need to be determined are a scale of costs to be applied, and the quantum of same. Firstly as to the scale of costs, both sides made offers to settle. The Plaintiff offered to settle the proceeding in writing by letter dated January 28th, 2011 for the principle amount of $100,000.00 plus prejudgment interest and costs. Just slightly less than the amount awarded after trial. The Defendant municipality apparently made a verbal offer on July 17th, 2012 in the all inclusive amount of $35,000.00, followed by a written offer to settle on September 7th, 2012, the eve of trial, in the all inclusive amount of $100,000.00. In my view the Plaintiff’s recovery was generally more favourable then the terms of the offer and pursuant to rule to 49.10(1) the Plaintiff is entitled to partial indemnity Middleton v. Highlands East (Municipality) James E. McNamara J. 277

costs to the date of the offer, and substantial indemnity costs thereafter. I am not persuaded that in the circumstances of this case there is any reason to deviate from the general direction given by the rule. 4 The Plaintiffs’ costs outline delivered with his written materials and seeks fees, calculated on the basis of partial indemnity to the date of the offer and substantial indemnity thereafter, of $137,486.41. 5 In exercising my discretion in terms of fixing appropriate partial and substantial indemnity rates, I am, of course, mindful of my obligation to take into account all of the factors enumerated in rule 57.01(1), and I have done so. In fixing an appropriate rate, at the end of the day, quantum must be guided by overriding principles of reasonableness, that is, the reasonable expectation of both parties. In his materials Mr. Baldwin indicates that his full indemnity rate is $425.00 per hour. Principles of fairness would dictate that the parties would expect that things like hourly rates would bear some resemblance to what would be considered reasonable in the area where the case was tried. All counsel involved in this matter practice in the Belleville area. Mr. Ewart, counsel for the municipality, is slightly senior to Mr. Baldwin and his full indemnity rate is $300.00 per hour. The same hourly rate is used by Mr. Bonn counsel for the Defendant Stoughton, who is admittedly somewhat junior to Mr. Baldwin. Mr. Watson, who is considerably senior to all the other counsel, has a full indemnity rate of $350.00 per hour. In my view, allowing the Plaintiff’s counsel an hourly rate on a full indemnity basis of $350.00 per hour would be reasonable and within the expectations of the parties. 6 Partial indemnity is roughly 60% of full indemnity. That translates into an hourly rate, on a partial indemnity basis, of $210.00. Substantial indemnity under the Rules is 1.5 times partial indemnity, or approximately 90% of full indemnity. That makes Mr. Baldwin’s hourly rate on a substantial indemnity basis for purposes of these calculations, $315.00 per hour. Those rates will be applied to the times claimed in the costs outline on a partial indemnity basis to January 28th, 2011 and on a substantial indemnity basis thereafter. 7 The Plaintiff’s costs outline also claims 223.8 hours at a rate of $235.00 per hour for the assistance of a paralegal. While I am satisfied that some paralegal assistance would be required by counsel in a case of this nature, I find the hours claimed and the hourly rate, excessive. 8 It is not clear what services were rendered by the paralegal, but it would appear from a review of the description of services appended to the costs outline that of the 157.8 hours claimed for the paralegal subse- 278 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

quent to the date of the written offer, a very significant portion of that time related to while the trial was on and the paralegal, Ms. Thomson, was in attendance taking notes. While certainly there is nothing wrong with having someone take notes, principles of fairness would dictate that it be done at a reasonable rate. 9 I find on a full indemnity basis an appropriate rate for a paralegal in the area would be $150.00 per hour. That translates into a partial indemnity rate of $90.00 an hour and a substantial indemnity rate of $135.00 per hour. I will allow the time claimed in full to the date of the written offer of 66 hours at the partial indemnity rate, but in terms of the hours subsequent to that I would reduce them by 50%. That is then, at a substantial indemnity rate, I will allow 78.9 hours at $135.00 an hour. 10 Two junior lawyers did some work on the file prior to the date of the offer and nothing thereafter. The amounts claimed seem fair and what would be expected in a case of this nature. Those times are allowed after applying the 60% factor to each counsel’s full indemnity rate. 11 I am not prepared to allow the amounts claimed for the services of law clerks. In my view an unsuccessful Defendant would, quite properly, not reasonably expect to pay those administrative costs in addition to costs for lead counsel, junior counsel and a paralegal. The Plaintiff is also, of course, entitled to appropriate HST on those costs plus disbursements. In my view approaching costs on this basis is reasonable and fair and also has regard to principles of proportionality.

(B) Costs of the Successful Defendants 12 First and foremost I am persuaded that having successfully defended their clients, Mr. Watson on behalf of the Defendants Mackie and Bur- ton, and Mr. Bonn on behalf of the Defendant Staughton are entitled to an award of costs. 13 As to the scale of those costs, the case law that has developed on this issue has repeatedly stated that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10 where substantial indemnity costs are explicitly authorized. The other circumstance is where the losing party has engaged in behaviour worthy of sanction. Neither of those circumstances apply in this case so the proper rate is partial indemnity. In Mr. Bonn’s case 60% of his full indemnity rate is $180.00 per hour and in Mr. Watson’s case his partial indemnity rate would be $210.00 per hour. Mr. Bonn was also assisted by his law student at various points as indicated in the bill of Middleton v. Highlands East (Municipality) James E. McNamara J. 279

costs. The full indemnity rate for that student is $90.00 which translates into an hourly rate of $54.00 on a partial indemnity basis. 14 In terms of the times claimed by both Mr. Bonn and Mr. Watson, it is common ground that it is not for this court, save in exceptional circumstances, to second guess successful counsel on the time spent on a case. The times as claimed are allowed. 15 That then leaves the issue of who should be ordered to pay those costs. 16 The Defendants suggest that the costs are the Plaintiff’s responsibility while the Plaintiff counters that in the circumstances of this matter a San- derson Order ought to be made. 17 The usual test for determining whether a Sanderson Order is appropriate has two steps. The threshold question is whether it was reasonable to join the several Defendants together in the one action. If the answer is yes, then I must use my discretion to determine whether a Sanderson Order would be just and fair in the circumstances. 18 I am satisfied that it was reasonable, in all the circumstances, to join all these Defendants together in one action. Aspects of the facts of this matter as outlined in my Decision are, to put it mildly, unusual. From the Plaintiff’s perspective he was getting along famously with his employer, there is an election where the three individual Defendants join council, there had been comments made during the election campaign negative to him, and suddenly he was let go. No explanation or discussion of issues ever takes place. I found after hearing all the evidence that the manner of dismissal was unfair and caused the Plaintiff mental distress. That conduct, at least in part, occurred because returning councillors of the De- fendant and municipal staff were not completely candid with the three individual Defendants as to certain things that had transpired prior to those Defendants becoming members of council. At least one of the individual Defendants during the course of his evidence went so far as to indicate that during the trial itself he was hearing things from municipal staff of which he had not been previously aware. 19 The facts as to who did what and why were confusing and unusual and justified the joining of the several Defendants. Furthermore, again keeping in mind the factual backdrop to this case, making a Sanderson Order would be just and fair in the circumstances. The costs of the successful Defendants together with HST and disbursements will be paid directly by the Defendant municipality. 280 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

20 Obviously counsel will need to put their heads together and recalcu- late costs in light of my ruling. That should be a reasonably straightforward exercise following this template, but if there are any issues I can be spoken to, perhaps by way of conference call. 21 I do not intend to make any order of costs relating to the Costs Submissions. Order accordingly. Ted Thomson Management Inc. v. 1331503 Ontario Ltd. 281

[Indexed as: Ted Thomson Management Inc. v. 1331503 Ontario Ltd.] TED Thomson Management Inc. Plaintiff /Moving Party and 1331503 Ontario Limited operating as Jenner Geisler, Ian Jenner, Jamie Geisler, Assante Capital Management Ltd., Wayne Malcolm and David Grannary Defendants /Responding Parties Ontario Superior Court of Justice Docket: CV-12-5513 2013 ONSC 2025 Ellies J. Heard: December 17, 2012 Judgment: April 11, 2013 Civil practice and procedure –––– Costs — Effect of success of proceedings — Successful party deprived of costs — Grounds — Misconduct of parties –––– T Inc. was branch manager for investment company A Ltd. — JG Group were financial advisors who worked for T Inc.’s branch — Since 2004, JG Group had abided by terms of agreement, to which A Ltd. was also party, not to compete with T Inc. — In October 2012, with consent of A Ltd., JG Group opened up branch office about one block away from T Inc.’s branch — T Inc. brought unsuccessful motion to enforce restrictive clauses against JG Group and to require A Ltd. to comply with positive obligation it undertook in that agreement — Hearing on costs was held — T Inc. was ordered to pay partial indemnity costs to JG Group in amount of $40,000, inclusive of HST and disbursements — T Inc. was not ordered to pay costs to A Ltd. — A Ltd.’s conduct in failing to advise T Inc. when it learned of planned defection of advisors, secretly reaching agreement with them to open competing branch and then keeping that information from T Inc., qualified as outrageous, if not reprehensible. Civil practice and procedure –––– Costs — Scale and quantum of costs — Quantum of costs — Miscellaneous –––– T Inc. was branch manager for investment company A Ltd. — JG Group were financial advisors who worked for T Inc.’s branch — Since 2004, JG Group had abided by terms of agreement, to which A Ltd. was also party, not to compete with T Inc. — In October 2012, with consent of A Ltd., JG Group opened up branch office about one block away from T Inc.’s branch — T Inc. brought unsuccessful motion to enforce restrictive clauses against JG Group and to require A Ltd. to comply with positive obligation it undertook in that agreement — Hearing on costs was held — T Inc. was not ordered to pay costs to A Ltd. — T Inc. was ordered to pay partial in- 282 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

demnity costs to JG Group in amount of $40,000, inclusive of HST and disbursements — Proceeding was of moderate complexity — Issues involved were of importance to parties — T Inc. had arguable case, and it was not so devoid of merit as to attract increased award of costs against it — It was neither fair nor reasonable to require T Inc. to pay costs of more than $50,000 on partial indemnity basis. Cases considered by Ellies J.: Boucher v. Public Accountants Council (Ontario) (2004), 48 C.P.C. (5th) 56, 2004 CarswellOnt 2521, 188 O.A.C. 201, 71 O.R. (3d) 291, [2004] O.J. No. 2634 (Ont. C.A.) — considered Hamilton v. Open Window Bakery Ltd. (2003), 2004 SCC 9, 316 N.R. 265, 235 D.L.R. (4th) 193, 2003 CarswellOnt 5591, 2003 CarswellOnt 5592, 2004 C.L.L.C. 210-025, 184 O.A.C. 209, [2004] 1 S.C.R. 303, 70 O.R. (3d) 255 (note), 40 B.L.R. (3d) 1, [2003] S.C.J. No. 72, REJB 2004-54076 (S.C.C.) — referred to Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 32 C.P.C. (5th) 304, 2003 CarswellOnt 934, 64 O.R. (3d) 135, [2003] O.J. No. 990 (Ont. S.C.J.) — referred to Schut v. Poll Venture Investments Inc. (1991), 1991 CarswellOnt 3334, [1991] O.J. No. 2425 (Ont. Gen. Div.) — considered Somers v. Fournier (2002), 2002 CarswellOnt 2119, 27 M.V.R. (4th) 165, 60 O.R. (3d) 225, 12 C.C.L.T. (3d) 68, 162 O.A.C. 1, 22 C.P.C. (5th) 264, 214 D.L.R. (4th) 611, [2002] O.J. No. 2543 (Ont. C.A.) — referred to Steen Estate v. Iran (Islamic Republic) (2011), 2011 CarswellOnt 12470, 2011 ONSC 6464, (sub nom. Steen v. Islamic Republic of Iran) 108 O.R. (3d) 290 (Ont. S.C.J.) — considered Steen Estate v. Iran (Islamic Republic) (2013), 2013 CarswellOnt 386, 2013 ONCA 30 (Ont. C.A.) — referred to Statutes considered: Courts of Justice Act, R.S.O. 1990, c. C.43 s. 131(1) — considered Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 14.03(3) — referred to R. 57.01 — considered R. 57.01(2) — considered R. 57.03(1) — referred to

ADDITIONAL REASONS to judgment reported at Ted Thomson Management Inc. v. 1331503 Ontario Ltd. (2013), 2013 ONSC 264, 2013 CarswellOnt 143, 7 C.C.E.L. (4th) 38 (Ont. S.C.J.), respecting costs. Ted Thomson Management Inc. v. 1331503 Ontario Ltd. Ellies J. 283

Rahul Shastri, Joseph Kennedy for Plaintiff Allan Sternberg for Defendants, 1331503 Ontario Limited, Ian Jenner and Jamie Geisler W. Michael G. Osborne, Fiona Campbell for Assante Capital Management Ltd.

Ellies J.: Introduction 1 For reasons released on January 11, 2013 I dismissed a motion by Ted Thompson Management Inc. (“TTMI”) to enjoin 1331503 Ontario Ltd., Ian Jenner, Jamie Geisler (collectively, the “JG Group”) and As- sante Capital Management Ltd. (“Assante”) from breaching the terms of a noncompetition agreement (the “2004 Agreement”) by opening a competing Assante branch down the street from the one being operated by TTMI. I found that the scope of the activity prohibited by the clauses in question was too broad to be enforceable and that, therefore, TTMI could not establish either a serious issue to be tried or a strong prima facia case with respect to those clauses. I invited the parties to make written submissions with respect to the matter of costs, if they were unable to reach agreement with respect to them. I subsequently received those submissions, for which I wish to thank counsel, and which I have now had an opportunity to consider.

Positions of the Parties 2 The JG Group seeks partial indemnity costs, including disbursements and HST, in the total amount of $57,076.31. This represents approximately 60% of the value of the solicitor and client fees paid. This amount includes the sum of $3,610.01 for disbursements. 3 Assante seeks partial indemnity costs in the amount $63,409.55, all- inclusive. Of this amount, the sum of $9,023.45 represents disbursements. 4 The defendants argue that these costs should be paid forthwith. 5 TTMI submits that the issue of costs should be deferred to the trial judge. Alternatively, it argues that the JG Group’s costs and those of As- sante should be fixed in the amount of $20,000 each, and made payable in the cause, or in any event of the cause. 284 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Analysis 6 Section 131(1) of the Courts of Justice Act gives the Court broad discretion with respect to the issue of costs. It provides: Subject to the provisions of an act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid. 7 Rule 57.01 specifies some of the principles and factors that a court may take into account when exercising its discretion under Section 131(1). I will refer only to those factors which are relevant to this matter, after I deal with the issue of whether costs should be payable at all and, if so, when.

Entitlement 8 Ordinarily, a court that hears a motion should fix the costs and order them to be paid within 30 days (: R. 57.03(1)). However, the practice with respect to motions for injunctions is somewhat different and de- pends on who wins. Where the plaintiff succeeds, costs are often deferred (: Robert J. Sharpe, Injunctions and Specific Performance, loose- leaf, 4th ed., (Toronto: Canada Law Book, 2012), at para. 2.1330). This is because a trial often follows. At the motion stage, the plaintiff needs to demonstrate only that it meets the threshold test for an interim injunction. The ultimate strength of the plaintiff’s case remains to be determined. 9 However, where the plaintiff is unsuccessful, trials are less likely because the plaintiff has been unable to meet even the threshold test. For that reason, deferring the issue of costs to the trial judge may work an injustice to a successful defendant. 10 TTMI asserts that there is no risk of such an injustice in this case, as it intends to proceed to trial. However, as of the date of the reply submissions of the JG Group (February 13, 2013), TTMI had not yet gone beyond issuing a notice of action, despite the expiry in December of the 30 day period referred to in Rule 14.03 (3) within which to file a statement of claim. 11 In these circumstances, I see no reason to depart from the usual rule applicable to motions for an injunction with respect to the JG Group. I cannot say the same, however, with respect to Assante. 12 There is no right to costs (: M. Orkin, The Law of Costs, loose-leaf, 2d ed. (Toronto: Canada Law Book, 2012, at para. 202). Rule 57.01(2), which provides that a court may order costs against the successful party, Ted Thomson Management Inc. v. 1331503 Ontario Ltd. Ellies J. 285

makes it clear that success is no guaranty that costs will be awarded (: Somers v. Fournier (2002), 60 O.R. (3d) 225 (Ont. C.A.), at para. 17). 13 The conduct of a party, both before and during the litigation, is a relevant factor and may, in an appropriate case, result in an order depriving a party of costs or, indeed, requiring the successful party to pay costs. In Schut v. Poll Venture Investments Inc., [1991] O.J. No. 2425 (Ont. Gen. Div.)), Bolan J. required the defendants, although successful, to pay the costs of the unsuccessful plaintiffs where the defendants had “created an atmosphere in which (the plaintiffs) had no recourse but to seek the assistance of the courts”. 14 The same result was reached in Steen Estate v. Iran (Islamic Repub- lic), 2011 ONSC 6464 (Ont. S.C.J.) (leave to appeal denied, 2013 ONCA 30 (Ont. C.A.)), where Corrick J. awarded costs against the successful defendants whose pre-litigation conduct had “provoked” the litigation. 15 Costs may also be used to sanction pre-litigation conduct on the part of a successful party that is reprehensible, scandalous or outrageous (: Somers, ibid.). In my view, Assante’s conduct in failing to advise TTMI when it learned of the planned defection of Jenner, Geisler and the other advisors (by means of monitoring their e-mails), secretly reaching an agreement with them to open a competing Assante branch just down the street (reportedly for the good of TTMI), and then keeping that information from TTMI qualifies as outrageous, if not reprehensible. Certainly, it left TTMI with little recourse but to attempt to enforce Assante’s obligation to facilitate the agreement between the JG Group and TTMI under the 2004 agreement. 16 For this reason, I would not award any costs to Assante.

Quantification 17 Despite my decision regarding Assante’s costs, I will consider the quantum of costs requested by both parties so as to provide my view in the event that I have made an error of such a nature as to allow an appellate court to interfere with my discretion (: see Hamilton v. Open Window Bakery Ltd. (2003), [2004] 1 S.C.R. 303 (S.C.C.), at para. 27, per Arbour J.). 286 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

The Principal of Indemnity, Including the Experience of the Lawyer for the Party Entitled to Costs, as well as the Rates Charged and the Hours Spent by that Lawyer 18 Counsel for the JG Group, Mr. Sternberg, was called to the Bar of Ontario in 1977. Certainly, he is experienced and the JG Group ought to be entitled to partial indemnity costs at a rate appropriate for senior counsel. Mr. Sternberg charged his clients at the rate of $650 per hour. The JG Group seeks partial indemnity costs at the rate of $400 per hour. In my view, this is somewhat excessive. 19 The Costs Subcommittee of the Civil Rules Committee provided guidance with respect to the maximum partial indemnity rates of counsel, law students and clerks in their work leading up to the revocation of the costs grid in 2005. Although their work in this regard is often ignored (see Erik S. Knutsen, “The Cost of Costs: The Unfortunate Deterrence of Everyday Civil Litigation in Canada” (2010), 36 Queen’s L.J. 113, at para. 20), I believe that use of these maximums provides consistency and much needed predictability when dealing with partial indemnity costs. The maximum range for a lawyer with at least 20 years experience under the guidelines is $350 per hour. That is the rate at which I would assess Mr. Sternberg’s time in awarding partial indemnity costs to his clients. 20 Mr. Sasso, who assisted Mr. Sternberg, was called to the bar in 2007. His time was charged to the JG Group at $300 per hour. The JG Group seeks partial indemnity costs with respect to his time at the rate of $180 per hour. This is more in keeping with the Cost Subcommittee’s guidelines and is reasonable, in my view. 21 Mr. Osborne, lead counsel for Assante, was called to the bar in 1998. He charged his client at the rate of $550 per hour. Assante seeks partial indemnity costs at the rate of $330 per hour for his time. I find this excessive, as well. Instead, I would adhere to the Subcommittee’s guidelines and award partial indemnity costs for his time at the rate of $300 per hour. 22 Ms. Campbell, who assisted Mr. Osborne, was called to the bar in 2011. Her time was billed to Assante at the rate of $325 per hour. As- sante seeks partial indemnity costs for her time at the rate of $195 per hour. Given what I have said about Mr. Sasso’s hourly rate, I would award partial indemnity costs for Ms. Campbell’s time at the rate of $160 per hour. 23 In addition to Ms. Campbell, Assante engaged the services of a student-at-law and two law clerks, with respect to all of whom it paid hourly Ted Thomson Management Inc. v. 1331503 Ontario Ltd. Ellies J. 287

fees of $195 and seeks partial indemnity costs at the rate of $117 per hour. This is also excessive, in my view. I would award partial indemnity costs at the hourly rate of $60 for the student and $80 for the law clerks. 24 The JG Group seeks partial indemnity costs for 106 six hours of Mr. Sternberg’s time and for 25 hours of Mr. Sasso’s time. Assante seeks partial indemnity costs for 86.2 hours of Mr. Osborne’s time, 94.7 hours of Ms. Campbell’s time, 9.7 hours of the student’s time, and .7 hours of the law clerks’ time. TTMI has not specifically challenged either the hourly rates or the time spent on behalf of the defendants. Nor has it provided the court with any information on the amount of time spent on behalf of or fees charged to the plaintiff, so as to provide a point of com- parison (: see Risorto v. State Farm Mutual Automobile Insurance Co., 2003 CarswellOnt 934 (Ont. S.C.J.), at para. 10). For this reason, although I do have some concerns about the amount of time spent by Ms. Campbell on the matter, I do not propose to second guess the amount of time spent on behalf of the successful defendants. 25 Looking at the time spent on behalf of the defendants and applying the reduced rates set out above, the partial indemnity costs for counsel and support staff would work out as follows: For Mr. Sternberg: 106 × $350 per hour = $37,100 For Mr. Sasso: 25 × $180 per hour = 4,500 Total $41,600 - For Mr. Osborne: 86.2 × $300 per hour $25,860 = For Ms. Campbell: 94.7 × $160 per hour 15,152 = For Student: 9.7 × $60 per hour = 582 For Clerk: .7 × $80 per hour = 56 Total $41,650 -

The Amount of Costs an Unsuccessful Party Could Reasonably Expect to Pay 26 TTMI’s failure to provide information on its own costs makes it difficult to apply this factor at this stage of the analysis. I will return to a 288 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

discussion of what an unsuccessful party might find fair and reasonable at the conclusion of these reasons. 27 For now, I propose to address under this heading a concern I have with respect to the disbursements sought by Assante. Those disbursements include a charge for travel expenses incurred to attend court on November 16 in the amount of $4,115.12. No details are provided. That amount seems excessive when compared to the travel expenses associated with the December 17 attendance, in the amount of $1,692.60. It also seems excessive when one considers that the amount sought by As- sante for travel expenses for attending court on November 16 is more that the amount all of the disbursements sought by the JG Group in their costs outline. 28 The amount claimed for disbursements must also be reasonable. On that basis, I would reduce the amount sought by Assante for disbursements associated with their November 16 court attendance to $2,500. This brings the overall disbursements down to $6,370.23. Adding the reduced disbursements for Assante to the reduced amount for fees pro- duces the following overall result with respect to partial indemnity costs claimed by the defendants, namely: For the JG Group: Legal fees $41,600.00 Disbursements 3,610.01 HST at 13% 5,877.30 Total $51,087.31 For Assante: Legal fees $41,650.00 Disbursements 6,370.23 HST at 13% 6,242.63 Total $54,262.86

The Complexity of the Proceeding 29 I agree with TTMI’s characterization of the proceeding as being of moderate complexity. As I pointed out in my reasons on the motion, there are competing lines of authority with respect to the test to be applied in a situation such as this. With respect to the facts, seven affidavits were filed in advance of the motion and cross-examinations were con- ducted of the affiants. Ted Thomson Management Inc. v. 1331503 Ontario Ltd. Ellies J. 289

The Importance of the Issues 30 TTMI concedes that the issues involved in the motion were of importance to the parties. Given the affect of the outcome of the motion on the prospect of a trial, as I have referred to above, I agree with the submission made on behalf of the JG Group that the issues here were of “ut- most” importance to the parties.

Whether Any Step of the Proceeding was Improper, Vexatious or Unnecessary 31 The JG Group and Assante assert that their attendance on the first return date of the motion, November 16, 2012, was completely unnecessary and was required only because counsel for TTMI at first refused to agree to a request for an adjournment without terms. TTMI argues that the attendance of all parties was necessary on that date because the parties could not agree on a return date and one had to be fixed by the court after hearing submissions. 32 It seems to me that if TTMI is arguing that the attendance was necessary, then there is no real issue and the costs incurred by the defendants for doing so ought to be included in this assessment. It would be different if TTMI was looking for its costs, or if TTMI was arguing that the attendance of the other parties on November 16 was unnecessary, in which case those costs associated with an unnecessary attendance would be relevant.

Any Other Matter Relevant to the Question of Costs 33 TTMI and Assante made their submissions regarding whether costs should be payable at all as part of their submissions regarding this factor, which issue I have already addressed. In addition, Assante argues that TTMI’s failure to pass even the serious issue to be tried test with respect to the scope of the activity prohibited by the clauses in question is a relevant consideration under this factor. While it may be relevant, I disagree that it has any effect. TTMI had an arguable case. It was not so devoid of merit as to attract an increased award of costs against it. 34 I believe that this may also be the appropriate point at which to address the issue of what is fair and reasonable. The fixing of costs is not simply a mechanical exercise involving a calculation of hours times rates (: Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26). Overall, the objective is to fix an amount 290 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

that is fair and reasonable for the unsuccessful party to pay in the particular proceeding (: Boucher, ibid). 35 In my view, it would be neither fair nor reasonable to require TTMI to pay costs of more than $50,000 on a partial indemnity basis to each of the two groups of defendants, if it was my view that Assante should be awarded costs. This was a proceeding that lasted one day, although it did involve another brief court appearance for which counsel had to be prepared. 36 Nonetheless, I am unable to agree with the submission made by TTMI that costs for each of the two groups of defendants ought to be fixed in the amount of $20,000, all-inclusive. That is too low, in my opinion, given what was at stake and the preparation involved. 37 My view is that the proper quantum lies somewhere in between these amounts. It is my opinion that costs in the amount of $40,000, all-inclusive, represents an amount that is fair and reasonable for each of the two groups of defendants. 38 For the foregoing reasons, an order will issue, requiring TTMI to pay partial indemnity costs to the JG Group in the amount of $40,000, inclusive of HST and disbursements. No costs shall be paid by TTMI to Assante. Order accordingly. Whittemore v. Open Text Corp. 291

[Indexed as: Whittemore v. Open Text Corp.] Paul Whittemore Plaintiff and Open Text Corporation Defendant Ontario Superior Court of Justice Docket: CV-11-437731 2013 ONSC 2339 D.A. Wilson J. Heard: April 11, 2013 Judgment: April 19, 2013 Labour and employment law –––– Employment law — Termination and dismissal — Notice — Effect of contractual terms regarding notice –––– In 1994 employee commenced employment with SA Inc. as software developer — In 1999 SA Inc. was taken over by small company called MC2 Corp., which had SA Inc. salaried employees sign employment agreement — Agreement provided that upon termination employees with more than four years’ service were entitled to four weeks’ salary in addition to notice required under Ontario Employ- ment Standards Act — There were financial issues with MC 2 Corp., it was purchased by larger company and employee was advised that time he had logged with SA Inc. would be recognized — Employee was terminated, at which time he had over 17 years of service with company — Employee brought action for damages for failure to provide reasonable notice under employment contract — Action allowed — Agreement was binding upon successors — Only reasonable conclusion was that employer assumed employment contract when it took over MC2 — Termination provisions in employment contract were in effect and governed employment relationship between parties. Labour and employment law –––– Employment law — Interpretation of employment contract — Miscellaneous –––– Successor — In 1994 employee commenced employment with SA Inc. as software developer — In 1999 SA Inc. was taken over by small company called MC2 Corp., which had SA Inc. salaried employees sign employment agreement — Agreement provided that upon termination employees with more than four years’ service were entitled to four weeks’ salary in addition to notice required under Ontario Employment Stan- dards Act — There were financial issues with MC 2 Corp., it was purchased by larger company and employee was advised that time he had logged with SA Inc. would be recognized — Employee was terminated, at which time he had over 17 years of service with company — Employee brought action for damages for failure to provide reasonable notice under employment contract — Action allowed — Agreement was binding upon successors — Only reasonable conclusion was that employer assumed employment contract when it took over 292 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

MC2 — Termination provisions in employment contract were in effect and governed employment relationship between parties. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Notice by successor employer –––– In 1994 employee commenced employment with SA Inc. as software developer — In 1999 SA Inc. was taken over by small company called MC2 Corp., which had SA Inc. salaried employees sign employment agreement — Agreement provided that upon termination employees with more than four years’ service were entitled to four weeks’ salary in addition to notice required under Ontario Employment Stan- dards Act — There were financial issues with MC 2 Corp., it was purchased by larger company and employee was advised that time he had logged with SA Inc. would be recognized — Employee was terminated, at which time he had over 17 years of service with company — Employee brought action for damages for failure to provide reasonable notice under employment contract — Action allowed — Agreement was binding upon successors — Only reasonable conclusion was that employer assumed employment contract when it took over MC2 — Termination provisions in employment contract were in effect and governed employment relationship between parties. Cases considered by D.A. Wilson J.: Pattillo v. Murphy Canada Exploration Ltd. (2001), 99 Alta. L.R. (3d) 299, 16 C.C.E.L. (3d) 24, 2001 ABQB 1070, 2001 CarswellAlta 1737, 309 A.R. 96, [2002] 4 W.W.R. 162, [2001] A.J. No. 1716 (Alta. Q.B.) — considered Rasanen v. Lisle-Metrix Ltd. (2002), 2002 CarswellOnt 214, 17 C.C.E.L. (3d) 134, [2002] O.J. No. 291 (Ont. S.C.J.) — considered Rasanen v. Lisle-Metrix Ltd. (2004), 2004 CarswellOnt 2030, 2004 C.L.L.C. 210-046, 33 C.C.E.L. (3d) 47, 187 O.A.C. 65, [2004] O.J. No. 2095 (Ont. C.A.) — referred to Wronko v. Western Inventory Service Ltd. (2008), 65 C.C.E.L. (3d) 185, 2008 C.L.L.C. 210-020, 90 O.R. (3d) 547, 237 O.A.C. 1, 2008 ONCA 327, 2008 CarswellOnt 2350, 292 D.L.R. (4th) 58, 46 B.L.R. (4th) 159, [2008] O.J. No. 1589 (Ont. C.A.) — considered Statutes considered: Employment Standards Act, 2000, S.O. 2000, c. 41 Generally — referred to

ACTION by employee for damages for failure to provide reasonable notice of termination under employment contract.

Kevin Fox for Plaintiff Evert Van Woudenberg for Defendant Whittemore v. Open Text Corp. D.A. Wilson J. 293

D.A. Wilson J.:

1 The Plaintiff brings this action claiming damages for failure to provide reasonable notice of termination of his employment given his years of service. This is not a claim for constructive dismissal. 2 The Defendant denies the claim, pleading that the applicable employment agreement specifically provides that the Plaintiff’s employment could be terminated with the minimum notice as set out in the Employ- ment Standards Act together with an additional four weeks’ salary, which was done.

Background 3 The Plaintiff [“Whittemore”] obtained a Bachelor of Science degree in computer science and started working in software for Bell in 1985. In 1994, he commenced employment with a small company known as SoftArc Inc. [“SoftArc”]. This corporation was owned by several men with whom the Plaintiff became acquainted while at university. 4 At SoftArc, Whittemore worked as a software developer and he did not have a written employment contract. 5 In June 1999, SoftArc was taken over by a small company based in Vancouver called MC2. The new company had the SoftArc salaried employees sign an employment agreement with it when it acquired SoftArc. On June 17, 1999 Whittemore signed an employment agreement with MC2 [Exhibit 1, tab 2] as well as a non-competition and confidentiality agreement [Exhibit 1, tab 3]. He was given a copy of the Standard Terms of Employment for full time salaried employees of MC2 [Exhibit 1, tab 1]. One of the standard terms of employment was that salaried employees were entitled to a month long paid sabbatical every five years. The agreement also provided that upon termination, an employee with more than four years’ service was entitled to four weeks’ salary in addition to the notice required under the Employment Standards Act, regardless of length of service with the company [Article 4.2(c). There were numerous other provisions included in the agreement including such items as health benefits, vacation time, harassment policies and maternity leave. 6 After the take-over, Whittemore’s salary and job function remained the same. His years of employment with SoftArc were recognized in terms of his seniority. The name of the company changed to Centrinity Inc. in March, 2000 when the company was listed on the Toronto Stock Exchange. 294 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

7 There were financial issues with the company and Whittemore learned in October, 2002 that Centrinity was being purchased by a larger company called Open Text Corporation [“Open Text”]. There was much discussion about the new company and there were several meetings with the Centrinity employees and representatives from Open Text to discuss what was occurring. At one of the meetings, the employees were told that their seniority would be lost and that they would no longer be entitled to a sabbatical every five years. There was a discussion between the two organizations and eventually, Whittemore was advised that the time that he had logged with SoftArc would be recognized but that the term in the employment agreement that entitled the employees to the sabbatical would not carry forward as Open Text was a much larger company and they did not offer that “perk”. 8 Whittemore continued working in his usual capacity and received the same salary over the course of the fall of 2002. He was asked by Open Text to sign the Employee Confidentiality and Non-Solicitation Agree- ment. Whittemore testified that he hesitated to sign the documents because he was uncertain as to whether he should take the job since the market in his area was very strong. He was not happy about losing the sabbatical option. He stated that by the beginning of 2003, he was getting daily pressure from the managers about signing the new documents from Open Text. Eventually, Whittemore decided to stay on with Open Text and determined that the loss of the sabbatical every 5 years was not worth losing his job. He signed the Confidentiality and Non-Solicitation Agreement on January 6, 2003 [Exhibit 1, Tab 9]. 9 Whittemore testified that he was advised that things would continue on pretty much as they had under Centrinity. His job remained the same and he continued to work on the Firstclass programme as he had from the time he joined SoftArc. His salary remained unchanged. He was not given any documentation from Open Text that dealt with the terms of his employment. He knew that neither he nor any other employee would be given a sabbatical. 10 He did not make any statement to Open Text about the fact that the new company had changed at least one term of the employment contract that he had signed with MC2. He never had any discussion with Open Text about the employment contract that was in effect when he worked at MC2/Centrinity. In Mr. Whittemore’s mind, the employment contract with Centrinity was over and he had a new agreement with Open Text, Whittemore v. Open Text Corp. D.A. Wilson J. 295

which was evidenced by his signing of the documents on January 6, 2003. 11 By 2011, the Plaintiff was working with the Defendant as a team leader. In August, he heard that Open Text was going to terminate many of the employees who worked on the Firstclass programme, as he did. He understood that of the 85 people who worked with him on that programme, only 15 would be kept on. He wondered if he would be one of the workers let go. 12 On August 25, 2011, he was called into a meeting and was advised that his employment with Open Text was being terminated and he was given a bundle of documents to take away and review. When Whittemore looked at the severance package, he thought the calculations were incor- rect because he was given eight weeks’ notice and then an additional eighteen weeks of salary continuance plus a lump sum payment of four weeks base pay. At that time, he had over seventeen years of service with the company, commencing with SoftArc.

Position of the Plaintiff 13 Simply put, the Plaintiff argues that he did not have an employment contract with the Defendant that included a provision dealing with severance and consequently, it is the common law that governs the appropriate notice. Counsel for the Plaintiff submits that his employment agreement with MC2/Centrinity cannot be relied upon by Open Text as it was terminated when the takeover occurred. Mr. Fox submits that the employer cannot pick and choose from terms of the employment agreement Cen- trinity had in place with its employees because it was no longer in effect.

Position of the Defendant 14 Counsel for the Defendant argues that the employment contract with MC2/Centrinity was in place following the amalgamation between the two companies and Open Text is entitled to rely on its provisions. Open Text did not have the employees of the former company sign new agreements because there was no need to since there was already one in existence that governed the relationship. 15 Mr. Van Woudenberg submits that if the Plaintiff wished to repudiate the terms of the agreement with the Defendant the onus was on him to communicate that to Open Text, which he never did. Instead, he continued to work for almost nine years with Open Text, under the same terms 296 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

that he had with Centrinity, apart from the sabbatical term, which was not carried forward.

Analysis 16 There was no significant factual dispute between the parties. I found the Plaintiff to be a straight-forward, credible witness with a good recollection of the events giving rise to this litigation. 17 The issues that must be addressed are: whether the existing employment contract was binding on the successor company; what the effect was of the takeover of MC2/Centrinity on the employment contract; and, if so, whether the Defendant can rely on the existing employment contract with respect to termination provisions.

Was the employment agreement with MC2/Centrinity binding upon Open Text? 18 An issue which was not addressed by counsel but which seems to me to be of critical importance is whether the existing employment contract with MC2/Centrinity survived the takeover by Open Text and continued to govern. Article 6.7 of the employment agreement signed in June, 1999 states as follows: Assignment: This agreement is personal to the De- veloper (employee) and may not be assigned by him. Upon notice to the Developer, this agreement may be assigned by the Company to any affiliate of the Company. Except as aforesaid, this agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, including, in the case of the Developer, his heirs, executors and administrators. 19 The Defendant called no evidence. I anticipated hearing evidence from the Defendant concerning what the terms were upon which the employees from MC2/Centrinity continued to be employed by Open Text. This would have been of assistance in my determination of what the un- derstanding was of the terms of the employment agreement after Open Text took over the company. There was no evidence to suggest that the Defendant did not believe the contract was binding after the purchase of MC2/Centrinity or that there was any other agreement that governed the employment relationship. The evidence was clear that Open Text recognized the years of service of the employees and at least in the case of the Plaintiff, he continued to perform the same job function for the same salary. Whittemore v. Open Text Corp. D.A. Wilson J. 297

20 Mr. Whittemore continued to work for the Defendant for approximately nine years after the takeover, without signing a new employment contract with Open Text, although he signed a non-competition agreement and a confidentiality agreement. These latter documents cannot be construed as a new employment agreement. 21 As I read section 6.7 of the agreement, it is binding upon the successors to MC2/Centrinity. The evidence at trial supports this finding.

Did the employment contract with MC2/Centrinity continue to be in effect after the takeover by Open Text? 22 The principle governing takeovers is stated by The Honourable Mr. Justice John R. Sproat in Wrongful Dismissal Handbook, 5th ed. (To- ronto: Carswell, 2009), at p. 3-37: “The general principle is that on a sale of shares there is no change in the corporate identity of the employer and, therefore, no termination of employment.” 23 Pattillo v. Murphy Canada Exploration Ltd.1 , held the following with regard to how corporate changes affect an employment contract, at paras. 7-9: The case law is clear that the mere acquisition of a company’s shares, as opposed to a sale of its assets, does not automatically terminate the company’s employment relationship with its employees. Similarly, the mere amalgamation of a company with another entity does not automatically amount to a termination of that company’s employment contracts. The result of an amalgamation is not the death of a company but rather its continuation in a new form. The transfer of an employee from a subsidiary corporation to its parent, in this case, does not automatically constitute constructive dismissal. Under the doctrine of “common employer,” two or more separate corporate entities may, but not always, be considered a single employer in relation to one employee. Therefore, the mere transfer of that employee from a subsidiary to its parent does not necessarily constitute a change in the identity of that employee’s employer, which would terminate the existing employment relationship. 24 When Open Text took over MC2/Centrinity, it was an amalgamation as is evidenced by exhibit 1, tab 6. It was not an acquisition and there was no change in the identity of the employer. It was open to the Defen-

1Pattillo v. Murphy Canada Exploration Ltd., 2001 ABQB 1070 (Alta. Q.B.). 298 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

dant to continue on with the existing employment contract and to modify its terms if it chose to do so. 25 In the text “Wrongful Dismissal Handbook”2 , it is noted, “In modern situations, businesses frequently are transferred with the new owner making known to all employees, either directly or by implication, that their jobs will continue on the same terms. In such cases, it can be said that the new owner has assumed each employee’s contract, including the obligations as to dismissal. Even where there has been no definite act or agreement to assign, the courts may imply an assignment or novation where the worker continues to provide services as before which are accepted by the new owner.” 26 In the case before me, as I have indicated, it would have been preferable to have heard evidence about what transpired when Open Text informed the employees of MC2/Centrinity about their terms of employment after the takeover, since no new employment contracts were signed. I have no information as to whether Open Text adopted the other terms of the employment agreement that was in existence after they acquired MC2/Centrinity. There may have been some terms that Open Text did not agree to continue on with; I simply do not know because this was not addressed in evidence. 27 What is clear is that the Plaintiff continued working for Open Text for 9 years, receiving salary increases and working in essentially the same manner as he had for the previous company [Exhibit 1, tab 7].Presuma- bly, his salary was the same and he confirmed that his prior years of service were recognized by the Defendant. He never signed a new employment contract. While he asserts that he viewed the employment agreement as being terminated, if that were so, it is unclear on what basis the terms of his employment with Open Text were to be determined. In cross examination he acknowledged that he accepted the standard terms of employment offered by Open Text, as modified by the non-competition and confidentiality agreements he signed. 28 It is conceded that the policy of MC2/Centrinity of providing employees with a sabbatical every five years was not assumed by Open Text when it took over the company. Counsel for the Plaintiff did not argue that the dropping of the sabbatical provision constituted a unilateral

2Ellen E. Mole & Marion J. Stendon, The Wrongful Dismissal Handbook, 3rd ed. (Markham, Ont.: LexisNexis Canada, 2004). Whittemore v. Open Text Corp. D.A. Wilson J. 299

change to a fundamental term of the employment agreement which amounted to a repudiation of the contract. It was open to the Plaintiff to advise the Defendant that this refusal constituted a breach of the terms of his employment contract, but he did not do so. There was no evidence to suggest that he advised Open Text at any time after the acquisition that he took the position that his employment agreement with the former company no longer governed the employment relationship. The only reasonable conclusion that can be drawn from the evidence is that Open Text assumed the employment contract of the Plaintiff when it took over MC2/Centrinity.

Can the Defendant rely on the termination provisions in the employment contract? 29 It is conceded that Open Text refused to continue with the sabbatical option for its employees. If the Plaintiff was of the opinion that this constituted an amendment to a fundamental term of his employment, he had several options: he could have taken the position that there was a repudiation of the employment contract, but in that scenario, he would have had to make his position clear to the employer that he was treating the contract as at an end. He could have claimed constructive dismissal and sued for damages. Alternatively, he could have made it clear that he did not accept the new terms, continue to perform his job and insisted that Open Text adhere to the terms of the original contract of employment: Wronko v. Western Inventory Service Ltd.3 30 In Wronko, supra, the Court of Appeal noted that when an employer unilaterally changes a fundamental term of an employment contract much turns of how the employee responds to the repudiation. If the employee rejects the new terms of employment, the Court noted that the employee must make it clear to the new employer that he is rejecting the new term. He cannot simply carry on and then years later say that the contract was no longer in effect.

3Wronko v. Western Inventory Service Ltd., 2008 ONCA 327 (Ont. C.A.). 300 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

31 The Superior Court of Justice decision of Rasanen v. Lisle-Metrix Ltd.4 discussed the significance of a plaintiff’s acceptance of unilateral changes to the employment contract, at para. 54: [The plaintiff] says that the plaintiff was constructively dismissed when the various terms of the contract were unilaterally altered. In other words, these alterations represent fundamental breaches of the employment contract, resulting in that contract no longer governing the relationship. This strikes me as a curious argument. Unlike the constructive dismissal cases, the plaintiff did not consider that any of the changes to the terms of his employment brought that employment to an end. He did not treat the contract as wrongfully terminated, and resign. Instead he agreed to the changes and carried on. As Ball notes in Canadian Employment Law, supra, at vol. 1 s. 10:140, in respect of a change in the employment relationship amounting to constructive dismissal: An employee may elect either to accept the change or to reject it and report to work. Condonation of the change constitutes acceptance. 32 When Open Text purchased the shares of MC2/Centrinity the Plain- tiff knew there was a change to a term of his employment contract. He continued to work in the same job and raised no objection with Open Text. This behaviour amounts to acceptance of the changes to the agreement. It was not argued by the Plaintiff that the failure to honour the sabbatical provision amounted to a fundamental breach of the employment contract and it is not necessary for me to determine this issue. While he may have thought the contract was at an end, Mr. Whittemore never communicated this to Open Text nor did he treat the contract as being over. Instead, he continued to work in the same capacity for almost 10 years, thereby condoning the change by his own conduct and ac- cepting the modification to the term of his employment. 33 On the evidence before me, I find that the termination provisions contained in the employment contract signed June 17, 1999 were in effect and governed the employment relationship between the parties.

4Rasanen v. Lisle-Metrix Ltd. (2002), 17 C.C.E.L. (3d) 134 (Ont. S.C.J.), aff’d (2004), 33 C.C.E.L. (3d) 47 (Ont. C.A.). Whittemore v. Open Text Corp. D.A. Wilson J. 301

Conclusion 34 The Plaintiff is entitled to notice of termination in accordance with the provisions of Article 4 in the employment agreement dated June 17, 1999. If parties cannot agree on costs, I may be contacted. Action allowed. 302 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: Matthews v. Ocean Nutrition Canada Ltd.] David Matthews Applicant v. Ocean Nutrition Canada Limited Respondent Nova Scotia Supreme Court Docket: Hfx 353606 2013 NSSC 158 Michael J. Wood J. Heard: May 3, 2013 Judgment: May 17, 2013 Civil practice and procedure –––– Costs — Costs of particular proceedings — Interlocutory proceedings — Motions and applications –––– Em- ployee resigned from business believing he was being constructively dismissed so that employer would not have to meet terms of incentive agreement — Em- ployee brought action for relief from oppression and wrongful dismissal against employer, MJ and DE — Both parties brought motions for production order — Applicant’s motion involved reviewing significant volume of redacted documents — Issue arose as to costs — Employer was awarded costs of $750 on its motion — Success on merits was divided and in normal circumstances, costs for motion would have been fixed in amount of $1000 for half-day hearing — How- ever, there was merit to position that employer was put to unnecessary additional expense which arose specifically from employee’s failure to file brief and draft form order as required as part of initial motion documents — Employee was awarded costs of $750 on his motion — Employee was successful in having remaining production requested by respondent dismissed or deferred. Civil practice and procedure –––– Costs — Effect of success of proceedings — Divided success — General principles –––– Unnecessary expense — Employee resigned from business believing he was being constructively dismissed so that employer would not have to meet terms of incentive agreement — Employee brought action for relief from oppression and wrongful dismissal against employer, MJ and DE — Both parties brought motions for production order — Applicant’s motion involved reviewing significant volume of redacted documents — Issue arose as to costs — Employer was awarded costs of $750 on its motion — Success on merits was divided and in normal circumstances, costs for motion would have been fixed in amount of $1000 for half-day hearing — However, there was merit to position that employer was put to unnecessary additional expense which arose specifically from employee’s failure to file brief and draft form order as required as part of initial motion documents — Em- Matthews v. Ocean Nutrition Canada Ltd. Michael J. Wood J. 303

ployee was awarded costs of $750 on his motion — Employee was successful in having remaining production requested by respondent dismissed or deferred. Cases considered by Michael J. Wood J.: Matthews v. Ocean Nutrition Canada Ltd. (2012), 1029 A.P.R. 340, 324 N.S.R. (2d) 340, 2012 NSCA 127, 2012 CarswellNS 953, [2012] N.S.J. No. 680 (N.S. C.A.) — considered Rowe v. Lee (2007), 802 A.P.R. 174, 251 N.S.R. (2d) 174, 2007 NSSC 31, 2007 CarswellNS 53, 35 C.P.C. (6th) 255 (N.S. S.C.) — distinguished Statutes considered: Companies Act, R.S.N.S. 1989, c. 81 Generally — referred to Rules considered: Civil Procedure Rules, N.S. Civ. Pro. Rules Generally — referred to R. 15 — referred to R. 15.02 — considered R. 15.06(3) — considered R. 23.11 — considered R. 77 — considered Tariffs considered: Civil Procedure Rules, N.S. Civ. Pro. Rules Tariff C — referred to

ADDITIONAL REASONS to judgment reported at Matthews v. Ocean Nutrition Canada Ltd. (2012), [2012] N.S.J. No. 680, 1029 A.P.R. 340, 324 N.S.R. (2d) 340, 2012 NSCA 127, 2012 CarswellNS 953 (N.S. C.A.).

Blair Mitchell for Applicant Nancy F. Barteaux for Respondent

Michael J. Wood J.:

1 This proceeding is an application in court in which the Applicant David Matthews alleges that he was constructively dismissed by the Re- spondent Ocean Nutrition Canada Limited. Mr. Matthews also claims that he was oppressed by the actions of Ocean Nutrition and its officers in a fashion which would entitle him to relief under the Third Schedule to the Companies Act. More details with respect to the allegations in the proceeding are found in the Nova Scotia Court of Appeal decision in Matthews v. Ocean Nutrition Canada Ltd., 2012 NSCA 127 (N.S. C.A.). 304 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

2 The parties have been in a disagreement with respect to document disclosure since last fall. On February 21, 2013, I participated in a conference call with counsel at which time they advised that production motions might be required by both parties. We tentatively set the full day of April 30, 2013 for these motions. During the conference call I directed counsel that if the motions were to proceed they would need to comply with the filing deadlines set out in Civil Procedure Rule 23.11. 3 Both parties pursued production motions and these were heard on April 30, 2013. I gave my oral decision on May 3, 2013 following which the parties made submissions on costs. This is my decision with respect to the cost issues. I will deal with each party’s motion separately.

Matthews Motion 4 When Mr. Matthews filed his motion documents on April 11, 2013 he did not include a brief. The notice of motion was very general and simply sought better production, directions with respect to redaction of documents and directions with respect to the scope of electronic searches to be carried out by the Respondent. In addition, the form of order filed by Mr. Matthews was blank and included no particulars with respect to documents or directions being sought. The affidavit filed on behalf of Mr. Matthews included a letter dated April 11, 2013 from his counsel, Blair Mitchell, to Ms. Nancy Barteaux, who was counsel to the Respondent. This letter set out various demands for documents to be produced. 5 On April 18, 2013 Ms. Barteaux filed a response to the motion. It consisted of a covering letter and a table summarizing the positions of the parties on various issues based upon her interpretation of the correspondence over the previous six months including Mr. Mitchell’s letter of April 11, 2013. 6 Mr. Mitchell filed a brief on behalf of Mr. Matthews on April 24, 2013 and on April 26, 2013 provided a proper form of order containing particulars of the relief being sought. He also identified the documents for which the Respondent’s redactions were being challenged. 7 Upon reviewing the Matthews’ brief it was apparent that some of the requests set out in the letter of April 11, 2013 were being abandoned. The order which was provided on April 16, 2013 reduced the scope even further. By the time oral submissions had been concluded Mr. Matthews’ request had been narrowed considerably. In addition, the Respondent had agreed to search for or provide further documents. Matthews v. Ocean Nutrition Canada Ltd. Michael J. Wood J. 305

8 Much of the work by counsel and the court with respect to the Mat- thews’ motion involved reviewing a significant volume of redacted documents. During that process the Respondent agreed to remove a number of redactions voluntarily. I ordered additional documents to be unredacted. The end result was that approximately one-quarter of the redactions challenged by Mr. Matthews were set aside by agreement or court order. 9 With respect to the remaining disclosure sought by Mr. Matthews, I was not satisfied that there was an evidentiary basis to order production. In many cases I suggested that the issue should be pursued through the discovery examination process to determine what evidence might be obtained with respect to the existence and relevance of the documents in questions. 10 In her submissions on costs of this motion Ms. Barteaux reviewed the provisions of the Civil Procedure Rules setting out the court’s discretion with respect to costs. She acknowledged that Mr. Matthews was partially successful, particularly with respect to the issue of redactions. Despite this she felt that costs should be awarded to her client due to the failure of Mr. Matthews to file a brief or otherwise provide particulars of the order being sought until a few days before the hearing. This required Ocean Nutrition to file their response to the motion (on April 18, 2013) without a formal indication from Mr. Matthews setting out what he was seeking. The response focussed on every issue raised in the debate which had been taking place between counsel through correspondence over the previous few months. Once Mr. Matthews’ brief and draft order was filed, it appeared that some of those items were no longer in issue. 11 Ms. Barteaux referred to Tariff C of the Rule 77 and said that for a full day motion costs should be $2000. She relies on the decision in Rowe v. Lee, 2007 NSSC 31 (N.S. S.C.), for the further request that these costs be payable personally by counsel for the Applicant as a result of the failure to file the motion brief on time. In that case, the failure to file a brief resulted in two adjourned chambers’ hearings. The defendant was awarded their throw away costs in the amount of $900 payable by plaintiff’s counsel. 12 I have reviewed the decision in Rowe v. Lee, supra, and, in my view, the circumstances there were quite different from those on this motion. In that case, counsel for the plaintiff acknowledged full responsibility for the failure to file the necessary brief. In addition, this default continued even after counsel received specific directions from the judge requiring him to file the brief. 306 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

13 Here, I do not have any information with respect to why the brief was not filed until April 24, 2013. In this case, there was some indication of the Applicant’s position on production found in the various letters between counsel which were filed in support of the motion. I accept the submission from Ms. Barteaux that without more precise particulars she was required to address every potential issue, some of which were not ultimately pursued by Mr. Matthews. 14 Mr. Mitchell on behalf of Mr. Matthews simply says that success was divided and no costs should be ordered. He said that if the court felt it was necessary to award costs at all then it should be $500 in favour of Ocean Nutrition. To be fair to Mr. Mitchell this was said in the context of his further submission that Mr. Matthews should receive $1500 on the Ocean Nutrition motion so that the net position was a payment to him of $1000. 15 I am satisfied that success on the merits was divided and that in normal circumstances I would have fixed costs of the motion in the amount of $1000 for a half-day hearing payable in the cause. However, I think there is merit to Ms. Barteaux’s position that the Respondent was put to unnecessary additional expense trying to anticipate the matters in issue and this arose specifically from the failure of Mr. Matthews to file a brief and draft form of order as required by Civil Procedure Rule 23.11 as part of the initial motion documents. As a result, I will award costs of $750 on this motion in favour of Ocean Nutrition in any event of the cause. Since the additional expenses incurred by Ocean Nutrition responding to this motion were unnecessary I believe payment of these costs should not wait until conclusion of this litigation. As a result, I will order that they be paid on or before June 30, 2013.

Ocean Nutrition Motion 16 The production motion brought by Ocean Nutrition sought various documents from Mr. Matthews. For the most part the position of Mr. Matthews was that the documents did not exist and that he had no further documents of that type. Ocean Nutrition also sought a direction requiring Mr. Matthews to produce an affidavit disclosing documents pursuant to Civil Procedure Rule 15. In that affidavit Mr. Matthews would have to provide a description of documents for which privilege was claimed as well as relevant documents which were no longer in his possession. 17 This proceeding is an application in court and as a result Civil Proce- dure Rule 15.02 imposes the same duty to make disclosure as there Matthews v. Ocean Nutrition Canada Ltd. Michael J. Wood J. 307

would be in a defended action. The difference between these two types of proceedings is that there is no automatic requirement for an affidavit disclosing documents in an application. Rule 15.06(3) provides that a judge may give directions for producing an affidavit disclosing documents in an application. Ocean Nutrition has produced their documents by way of affidavit while Mr. Matthews has produced books of documents without an accompanying affidavit. 18 The record of the motion for directions in this proceeding simply states that there will be disclosure in accordance with Civil Procedure Rule 15. It is silent as to whether it will be by way of booklet or affidavit. 19 I have reviewed the correspondence between counsel filed as exhibits on the motion and there was no indication in any letter from Ms. Barteaux that she was seeking an affidavit disclosing documents from Mr. Matthews. It appears that the first request was in the motion and brief filed in April 2013. Mr. Mitchell on behalf of Mr. Matthews did not argue against the request and essentially consented to the direction requiring an affidavit during the hearing on April 30. During her submissions, Ms. Barteaux requested deferral of much of the production requests until after she had obtained and reviewed the affidavit disclosing documents. To the extent that there were any remaining production requests by Ocean Nutrition I dismissed these as having no evidentiary basis. As with Mr. Matthews’ motion I suggested that many of these issues should be pursued through the discovery examination process. 20 With respect to costs Ms. Barteaux said that because of the success in obtaining the direction for an affidavit disclosing documents Ocean Nu- trition was substantially successful and should receive a cost award of $2000 plus disbursements. Mr. Mitchell responded by saying that the substantive production requests by Ocean Nutrition were either with- drawn or dismissed and Mr. Matthews should have costs of $1500 if there is to be any award at all. With respect to the affidavit disclosing documents Mr. Mitchell noted that there had been no prior request or objection on behalf of Ocean Nutrition until the motion was made. 21 I do not believe the success of Ocean Nutrition in obtaining a direction requiring Mr. Matthews to provide an affidavit disclosing documents should have any significant costs consequences. This was not a matter of much discussion or debate at the hearing and had not been previously raised. I would note that Mr. Matthews did not immediately agree to this request once it was raised by Ocean Nutrition in the motion documents and so it was still necessary to deal with the issue to some extent at the 308 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

hearing. On the remaining production request by Ocean Nutrition Mr. Matthews was successful in having them dismissed or deferred. 22 Taking all of this into consideration, I believe that an award in favour of Mr. Matthews in the amount of $750 is appropriate and that it should be payable in any event of the cause. Unlike the award on Mr. Matthews’ motion, payment of this amount will be at the conclusion of the proceeding. Costs awarded. Dimson v. KTI Kanatek Technologies Inc. 309

[Indexed as: Dimson v. KTI Kanatek Technologies Inc.] Fred Dimson Plaintiff (Appellant) and KTI Kanatek Technologies Inc. Defendant (Respondent) Ontario Court of Appeal Docket: CA C56437 2013 ONCA 454 J. MacFarland, David Watt, Gloria Epstein JJ.A. Heard: June 24, 2013 Judgment: June 24, 2013 Labour and employment law –––– Employment standards legislation — Ap- plicability of legislation — Contracting out –––– Employee held senior position with employer subject to employment agreement — Agreement provided employer could terminate employee for any reason, subject only to requirements of Employment Standards Act, 2000 — Agreement also provided that bonuses “will not be included in the calculation of payment for the purpose of this Arti- cle or as otherwise agreed to or required by the Employment Standards Act” — Employer terminated employee and made payments required by Act — Em- ployee commenced action against employer for damages for wrongful dismissal — Employee’s motion for partial summary judgment on issue of validity of termination provisions in agreement was dismissed, and action was dismissed — Employee appealed — Appeal dismissed — Motion judge’s interpretation of bonus provision was correct — There was no reason to interfere with motion judge’s conclusion that provision was clear and did not purport to bypass ss. 61 and 65 of Act — It was inconsistent to interpret provision as denying plaintiff his entitlement under Act when provision expressly provided that plaintiff would be provided with everything to which he was entitled under Act. Statutes considered: Employment Standards Act, 2000, S.O. 2000, c. 41 Generally — referred to s. 5(1) — referred to s. 61 — considered s. 65 — considered Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 20 — considered 310 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

R. 21 — referred to

APPEAL by employee from judgment, reported at Dimson v. KTI Kanatek Technologies Inc. (2012), 2012 CarswellOnt 14606, 2012 ONSC 6556 (Ont. S.C.J.), dismissing employee’s action for damages for wrongful dismissal.

Daniel A. Lublin, Aaron Rousseau for Appellant Andrew J. McCreary, Cheryl A. Waram for Respondent

Per curiam (orally): The Appeal 1 The appellant moved for summary judgment seeking a determination of the enforceability of a clause in the written employment contract he entered into with the respondent, his former employer. As a result of the motion judge’s rejection of the appellant’s arguments regarding the im- port of the clause, the appellant’s action for common law severance damages for wrongful dismissal, was dismissed. 2 The appellant appeals primarily on the basis that the clause in issue is void because, contrary to s. 5(1) of the Employment Standards Act (“ESA”), it seeks to avoid the application of ss. 61 and 65 of the ESA. 3 The provision in the contract, the interpretation of which is central to this appeal, is as follows: 18(d) If at any time Kanatek provides you with a bonus, it will not be included in the calculation of payment for the purposes of this Arti- cle, or as otherwise agreed to or required by the Employment Stan- dards Act. 4 The motion judge provided detailed reasons for rejecting the appellant’s primary submission that this clause was unenforceable as being an attempt to contract out of the ESA. The motion judge interpreted the clause as preserving the appellant’s right to the inclusion of a bonus in the calculation of his termination entitlement if both parties otherwise agreed or if it was required by the ESA. 5 We agree with the motion judge’s interpretation of the provision particularly when interpreted, as it must be, in the context of the entirety of clause 18. We refer specifically to 18(c) that provides as follows: In addition, KANATEK may terminate this Agreement at its sole discretion for any reason, without cause, upon providing Employee all payments or entitlements in accordance with the standards set out in Dimson v. KTI Kanatek Technologies Inc. Per curiam 311

the Ontario Employment Standards Act, as may be amended from time to time. 6 We agree with the motion judge’s observation that it would be inconsistent to interpret 18(d) as denying the appellant his entitlement under the ESA when 18(c) expressly provides that the appellant would be provided with everything to which he was entitled under the ESA. 7 We see no reason to interfere with the motion judge’s conclusion that the provision is clear and does not purport to bypass ss. 61 and 65 of the ESA. There is, therefore, no need to consider the appellant’s other arguments relating to ambiguity, misinterpretation, or the principle of contra preferentem. 8 Accordingly, the appeal is dismissed. 9 The respondent is entitled to its costs on the appeal fixed in the sum of $10,000 inclusive of disbursements and HST.

The Cross-Appeal 10 The respondent seeks leave to appeal the motion judge’s award of costs on the basis that the motion judge erred in principle in fixing upon an amount that was unreasonably low. 11 The motion judge determined the quantum of costs based on his view that this matter could have been dealt with under rule 21 as opposed to rule 20. In our view, he was best placed to make that determination and we see no reason to interfere. 12 Therefore, while leave to appeal costs is granted, the cross-appeal is dismissed. 13 The respondent by cross-appeal is entitled to its costs of the cross- appeal fixed in the sum of $1,500 inclusive of amount of disbursements and HST. Appeal dismissed. 312 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: Orr v. Pioneer Distributors Ltd.] Sean Orr Plaintiff and Pioneer Distributors Ltd. Defendant British Columbia Supreme Court Docket: Vancouver S108262 2013 BCSC 1244 Greyell J. Heard: July 8, 2013 Judgment: July 12, 2013 Civil practice and procedure –––– Costs — Scale and quantum of costs — Quantum of costs — Special costs –––– Plaintiff was terminated from his employment with defendant — Plaintiff brought action for damages for wrongful dismissal — Following trial, it was determined that parties had entered into binding agreement after plaintiff accepted defendant’s offer to settle — Plaintiff unsuccessfully brought application for special costs and double costs — Issue arose as to further costs — There was no reason to parse off issue of costs arising from plaintiff’s application for special costs from plaintiff’s right to recover costs as successful party on its application to enforce settlement — Plaintiff’s application was not specious application — While application required separate submissions and resulted in separate reasons, it was not extraordinary or unusual such that plaintiff should not have recovered those costs. Labour and employment law –––– Employment law — Termination and dismissal — Practice and procedure — Costs — Entitlement to costs –––– Plaintiff was terminated from his employment with defendant — Plaintiff brought action for damages for wrongful dismissal — Following trial, it was determined that parties had entered into binding agreement after plaintiff accepted defendant’s offer to settle — Plaintiff unsuccessfully brought application for special costs and double costs — Issue arose as to further costs — There was no reason to parse off issue of costs arising from plaintiff’s application for special costs from plaintiff’s right to recover costs as successful party on its application to enforce settlement — Plaintiff’s application was not specious application — While application required separate submissions and resulted in separate reasons, it was not extraordinary or unusual such that plaintiff should not have recovered those costs. Cases considered by Greyell J.: Orr v. Pioneer Distributors Ltd. (2013), 2013 CarswellBC 797, 2013 BCSC 535 (B.C. S.C.) — considered Orr v. Pioneer Distributors Ltd. Greyell J. 313

Service Corp. International (Canada) Ltd. v. Nunes-Pottinger Funeral Service & Crematorium Ltd. (2012), 2012 BCSC 1588, 2012 CarswellBC 3301 (B.C. S.C.) — considered Rules considered: Supreme Court Civil Rules, B.C. Reg. 168/2009 R. 14-1(9) — considered R. 14-1(15)(b) — considered App. B, s. 2(2)(b) — referred to

FURTHER ADDITIONAL REASONS to judgment reported at Orr v. Pioneer Distributors Ltd. (2013), 2013 BCSC 1002, 2013 CarswellBC 1674, 8 C.C.E.L. (4th) 292 (B.C. S.C.).

D.E. Gruber, R.J.M. Androsoff for Plaintiff G.C. Allison for Defendant

Greyell J.:

1 In reasons for judgment issued in Orr v. Pioneer Distributors Ltd. (indexed as 2013 BCSC 535 (B.C. S.C.))following a summary trial, I concluded the parties had reached a settlement settling a portion of Mr. Orr’s claim for damages arising from his dismissal as an employee of Pioneer. 2 In a further decision between the parties (indexed as 2013 BCSC 1002 (B.C. S.C.)) I dismissed Mr. Orr’s application for special costs and double costs against the defendant. 3 The present application was brought June 18, 2013 seeking the payment out of court for funds paid into court in October, 2012 pursuant to a garnishing order before judgment and for costs of the action on Scale B and special costs, or in the alternative, costs at Scale B in respect of the application. 4 The matter initially came on for hearing on Friday, July 5, 2013. Shortly before the hearing the defendant agreed to release the funds garnished into court and the matter of costs of the application was put over for hearing on Monday July 8, 2013 pending a discussion between counsel to determine if they could resolve that issue. 5 The issue of costs on the application was not resolved and hence counsel appeared and argued that issue July 8. 314 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

6 The defendant takes the position it should be entitled to costs for successfully defending the plaintiff’s application for special costs on the summary judgment application. The defendant also says that, as the plaintiff’s application for payment out of the funds garnished into court was resolved without a hearing, and as there were no discussions between July 5 and July 8 between counsel endeavoring to resolve the issue of costs, each party should bear its own costs of the current application.

1. Should Costs be Awarded to the Defendant for Successfully Defending the Plaintiff’s Application for Special Costs? 7 The defendant says it should be entitled to a portion of the costs of the summary trial as it was on that application that the plaintiff sought special costs. In the defendant’s estimate, approximately 20% of the total time consumed in submissions by counsel dealt with the issue of special costs. Counsel for the defendant refers to the fact that separate submissions were requested by the court and separate reasons were issued dealing with this issue. 8 Rule 14-1(9) of the Supreme Court Civil Rules, B.C. Reg. 168/2009, provides that “costs of a proceeding must be awarded to the successful party unless the court otherwise orders.” The new rule difference from its predecessor’s rule which provide that costs would normally be awarded to the party who was “substantially” successful in the litigation. 9 InService Corp. International (Canada) Ltd. v. Nunes-Pottinger Funeral Service & Crematorium Ltd., 2012 BCSC 1588 (B.C. S.C.) Mr. Justice N Smith stated at paras. 10 - 11: [10] The new wording of R. 14-1(9) is, if anything, clearer and more emphatic. It does not leave room for argument about what might constitute “the event”, nor does it suggest any measurement of the degree of success. The rule simply states that costs are awarded to the successful party. [11] At the most basic level, the successful party is the plaintiff who establishes liability under a cause of action and obtains a remedy, or the defendant who obtains a dismissal of the plaintiff’s claim. In this case, the plaintiff sought judgment for alleged breaches of duties owed by the departing employees. It proved sufficient facts to establish a breach of duty, albeit not in all of the particulars alleged, and was awarded damages that fell short of what it was seeking but were nevertheless substantial. On any reasonable interpretation of the plain words of R. 14-1(9), the plaintiff was the successful party and is entitled to costs. Orr v. Pioneer Distributors Ltd. Greyell J. 315

10 Rule 14-1(15)(b) provides that the Court “may” award costs “that re- lates to some particular application, step or matter in or related to the proceeding...”. Application of this Rule invokes the discretion of the court. As noted by Smith J. in Service Corporation at para 13, the authorities “made clear apportionment was to apply only in unusual circumstances and, absent special circumstances, a successful litigant can reasonably expect an order for the payment of its costs”. 11 In this case the plaintiff sought special costs in its original application. The issue was not addressed fully at the hearing as I wanted to first consider whether the application would succeed on the merits before considering the issue of costs. In my reasons I gave the parties an opportunity to make written submissions which were subsequently received. I issued reasons on June 6, 2013 [2013 CarswellBC 1674 (B.C. S.C.)] denying the plaintiff’s application for special costs. 12 There is no reason in my view to parse off the issue of costs arising from the plaintiff’s application for special costs from the plaintiff’s right to recover costs as the successful party on its application to enforce the settlement. 13 The issue of costs is commonly addressed by counsel in submissions to the court following the determination of a matter. It is common for the court to address costs in separate reasons following submissions. 14 Further, the plaintiff’s application was not a specious application. There was authority, which I found to be distinguishable on the facts of this case, which supported such an application. 15 I must also conclude that the time spent on this issue did not approach the amount or percentage of time estimated by counsel for the defendants. 16 The plaintiff was successful in maintaining his claim in the action and, in my view should not be deprived of his full recovery of his cost. The application, while requiring separate submissions and resulting in separate reasons was not extraordinary or unusual such that the plaintiff should not recover those costs.

Costs of the Application 17 On a review of the material before me and based on the submissions of counsel I am not persuaded that each party should bear its own costs of this application. 316 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

18 In my reasons of March 28, 2013 [2013 CarswellBC 797 (B.C. S.C.)] I granted the plaintiff judgement in the amount of $100,000 less statutory deductions and directed the defendant to implement the terms of the settlement agreement. That implementation did not occur as the defendant wanted to wait until I had issued my decision regarding special costs. The defendant then further sought to delay implementation and the plaintiff’s’ application to have the funds released from court (paid under the Garnishing Order) based on an argument Mr. Orr may not be able to repay Pioneer should its appeal of my decision be successful. 19 In short, the plaintiff was required to bring this application before the matter finally resolved with the defendant agreeing to the payment of the funds out of court shortly before the application was heard. Under these circumstances the plaintiff is entitled to his costs of the application. 20 The fact that the parties did not discuss settlement of the issue is im- material. The fact, as defendant’s counsel submits, that plaintiff’s counsel did not contact her after the adjournment to discuss settlement which begs the question of what efforts she made to contact plaintiff’s counsel. The fact is there were no discussions. In my view this argument has no merit. 21 The plaintiff will receive his costs both for the action and this application assessed at Scale B. Order accordingly. Petrook v. Natuzzi Americas Inc. 317

[Indexed as: Petrook v. Natuzzi Americas Inc.] Jan Petrook Plaintiff, Responding Party on the Motion and Natuzzi Americas, Inc. Defendant, Moving Party on the Motion Ontario Superior Court of Justice Docket: CV-12-453330 2013 ONSC 4508 Greer J. Heard: June 7, 2013 Judgment: July 3, 2013* Conflict of laws –––– Contracts — Choice of law — Where contract specify- ing law –––– In early 1980s, employee began working in Ontario for employer furniture company which had its North American headquarters in North Caro- lina — Employee worked out of home office in Toronto, was directly supported by employer’s sales support team, and took instructions from employer’s headquarters; she performed all work in Ontario and went to North Carolina about twice per year for meetings and furniture shows — Employee eventually took over administrative role and sales role and Ontario customers paid accounts in Canadian dollars through account employer had with Bank of Montreal in Can- ada — In 2001 and 2009, employer presented employee with engagement agreement (agreement) which she signed — Both agreements stated they would be “governed by laws of the State of North Carolina applicable to agreements and entered into and performed within that State” — On March 20, 2012, vice president of sales of north region of employer dismissed employee at coffee shop at Toronto airport; after 27 years of service she was given 10 days’ working notice of termination — Employer brought motion to stay or dismiss employee’s action for wrongful dismissal on basis that court had no jurisdiction over matter — Motion dismissed — Ontario was appropriate forum for employment case since employee lived in Ontario, worked there for employer there for 27 years, was paid in Canadian dollars through Canadian bank, and had no connection to North Carolina other than visiting for meetings few times per year — All of employee’s witnesses were in Ontario and she would likely not have been able to afford to fly them to North Carolina; employer, however, was international company with resources to fly its witnesses to Toronto — Since North Carolina had no Employment Standards Act, employment case arising out of that state could

*Additional reasons at Petrook v. Natuzzi Americas Inc. (2013), 2013 Carswell- Ont 13588, 2013 ONSC 5855 (Ont. S.C.J.). 318 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th) have been unfair to employee — These factors vitiate courts’ respect of parties’ express choice of North Carolina law. Conflict of laws –––– Contracts — Choice of law — Forum conveniens — General principles –––– In early 1980s, employee began working in Ontario for employer furniture company which had its North American headquarters in North Carolina — Employee worked out of home office in Toronto, was directly supported by employer’s sales support team, and took instructions from employer’s headquarters; she performed all work in Ontario and went to North Car- olina about twice per year for meetings and furniture shows — Employee eventually took over administrative role and sales role and Ontario customers paid accounts in Canadian dollars through account employer had with Bank of Mon- treal in Canada — In 2001 and 2009, employer presented employee with engagement agreement (agreement) which she signed — Both agreements stated they would be “governed by laws of the State of North Carolina applicable to agreements and entered into and performed within that State” — On March 20, 2012, vice president of sales of north region of employer dismissed employee at coffee shop at Toronto airport; after 27 years of service she was given 10 days’ working notice of termination — Employer brought motion to stay or dismiss employee’s action for wrongful dismissal on basis that court had no jurisdiction over matter — Motion dismissed — Ontario was appropriate forum for employment case since employee lived in Ontario, worked there for employer there for 27 years, was paid in Canadian dollars through Canadian bank and had no connection to North Carolina other than visiting for meetings few times per year — All of employee’s witnesses were in Ontario and she would likely not have been able to afford to fly them to North Carolina; employer, however, was international company with resources to fly its witnesses to Toronto — Since North Carolina had no Employment Standards Act, employment case arising out of that state could have been unfair to employee — These factors vitiate courts’ respect of parties’ express choice of North Carolina law. Cases considered by Greer J.: Black v. Breeden (2012), 2012 CarswellOnt 4272, 2012 CarswellOnt 4273, 2012 SCC 19, 17 C.P.C. (7th) 1, 91 C.C.L.T. (3d) 153, 343 D.L.R. (4th) 629, 429 N.R. 192, 114 O.R. (3d) 78 (note), 291 O.A.C. 311, (sub nom. Breeden v. Black) [2012] 1 S.C.R. 666 (S.C.C.) — followed SVB Underwriting Ltd. v. Fairfax Financial Holdings Ltd. (2007), 2007 Cars- wellOnt 749, [2007] O.J. No. 518 (Ont. S.C.J.) — distinguished Tisi v. Cornell Trading Inc. (2006), 52 C.C.E.L. (3d) 152, 2006 CarswellOnt 5254, [2006] O.J. No. 3468 (Ont. S.C.J.) — followed Van Breda v. Village Resorts Ltd. (2012), 17 C.P.C. (7th) 223, 2012 SCC 17, 2012 CarswellOnt 4268, 2012 CarswellOnt 4269, 91 C.C.L.T. (3d) 1, 343 D.L.R. (4th) 577, 429 N.R. 217, 10 R.F.L. (7th) 1, (sub nom. Charron Estate v. Village Resorts Ltd.) 114 O.R. (3d) 79 (note), 291 O.A.C. 201, (sub nom. Petrook v. Natuzzi Americas Inc. Greer J. 319

Club Resorts Ltd. v. Van Breda) [2012] 1 S.C.R. 572, [2012] S.C.J. No. 17, [2012] A.C.S. No. 17 (S.C.C.) — followed Vasquez v. Delcan Corp. (1998), 38 C.C.E.L. (2d) 230, 1998 CarswellOnt 2784, [1998] O.J. No. 2833 (Ont. Gen. Div.) — followed Young v. Tyco International of Canada Ltd. (2008), 69 C.C.E.L. (3d) 52, 65 C.P.C. (6th) 39, 300 D.L.R. (4th) 385, 92 O.R. (3d) 161, 2008 ONCA 709, 2008 CarswellOnt 6037, [2008] O.J. No. 4046 (Ont. C.A.) — followed Statutes considered: Employment Standards Act, 2000, S.O. 2000, c. 41 Generally — referred to Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 21.01 — considered

MOTION by employer to stay or dismiss wrongful dismissal action of employee on grounds court has no jurisdiction over subject matter.

Andrea J. Sanche for Plaintiff Peter J. Pliszka, Zohaib I. Maladwala for Defendant

Greer J.:

1 The Defendant, Natuzzi Americas, Inc. (“Natuzzi”), an Italian furniture company, moves under Rule 21.01(c) of the Rules of Civil Proce- dure for an Order to stay the Action of the Plaintiff, Jan Petrook (“Pe- trook”) or dismiss it, on the grounds that the court has no jurisdiction over the subject matter of the action. In the alternative, and if necessary, Natuzzi asks for an order extending the time for delivery of Natuzzi’s statement of defence, and suspending the effect of the Notice of Action Dismissed dated November 7, 2012, until thirty days following the final determination of this motion proceeding. Natuzzi says this action is duplicative of a pending legal proceeding brought in North Carolina. It also says that North Carolina is the more appropriate forum for the legal proceedings to take place. 2 Jan Petrook, the Plaintiff (“Petrook”), says the Motion should be dismissed and that her action should be allowed to proceed in the Province of Ontario. She commenced her action in Ontario on May 10, 2012, three days after Natuzzi had commenced a legal proceeding in North Carolina for a declaration of Natuzzi’s and Petrook’s rights under the contract. That State is where Natuzzi’s North American headquarters is situate. 320 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Natuzzi was aware that Petrook intended to bring her on an action in Ontario, when it took that step.

Some background facts 3 Petrook is a resident of Ontario and has been for 33 years. In the early 1980’s she met Hans Kau (“Kau”), a furniture retailer who owned several retail furniture stores in Ontario and who was the Canadian sales agent for Natuzzi, an Italian company with its North American headquarters in North Carolina. She says he offered her a “...position selling Natuzzi products in Ontario.” She accepted that position. She says that after Kau lost the rights, she began working directly with Natuzzi. She says: I understood that in hiring me, Natuzzi wanted to capitalize on sales in Ontario, which is a lucrative market, and wanted a direct employee in the independent retail market rather than an agent like Mr. Kau, who had his own furniture stores and was not dedicated to only selling and promoting Natuzzi product. 4 At the beginning on their relationship, Petrook did not sign an employment contract. She says she worked out of her home office in To- ronto and was directly supported by Natuzzi’s sales support team. She says she travelled the entire province selling Natuzzi’s products. She took her instructions from Natuzzi’s head office in North Carolina and she was under its supervision. She says she performed all her work in Ontario and went to North Carolina about twice per year for meetings and furniture shows. 5 Petrook says that Natuzzi provided any administrative help she needed and they sent her catalogues and other information about products she would be selling in Ontario to her customers. The Natuzzi staff entered all orders placed by her Ontario customers and all adjustments were made by them. 6 Petrook says her role changed gradually due to cut-backs in North Carolina and elsewhere in the United States. She took over much of the administrative role as well as the sales role. The customers in Ontario paid their accounts in Canadian dollars through a bank account Natuzzi had with the Bank of Montreal in Canada. She says this was the business arrangement for 27 years. 7 In 2001, Natuzzi presented Petrook with an “Engagement Agree- ment” in November of 2001, while she was attending a meeting in North Carolina. She signed it in Ontario on November 13, 2001, and it was sent Petrook v. Natuzzi Americas Inc. Greer J. 321

back to North Carolina by e-mail or fax. Again, in 2009, Natuzzi presented Petrook with a new Agreement to sign. 8 On March 20, 2012, Petrook says she was wrongfully terminated by Craig Ruse, Natuzzi’s Regional Vice President of Sales for the North region. This dismissal took place in a coffee shop at Pearson Airport, while Ruse was travelling on to Montreal. She says after 27 years of service, she was given 10 days working notice of her termination.

The Engagement Agreements (a) November 13, 2001 9 Some of the components of the contract are that Petrook is referred to as a “Contractor” and as “an independent sales representative”. She is to be paid on a commission basis. The Agreement terminates upon receipt of, “written notice” as given by either party. There are 13 short paragraphs in this contract, ending with the “Miscellaneous” paragraph. It contains the following term as part of that paragraph: ...This Agreement shall be governed by the laws of the State of North Carolina applicable to agreements entered into and performed within that State.

(b) The 2009 Agreement 10 This contract is very similar to the 2001 contract. There is a change in the Commission paragraph, The No Employment clause has now become the No Compete clause, with some additional changes to the paragraph. In the Miscellaneous paragraph, the same line about the Agreement being governed by the laws of the State of North Carolina is present. What is left out at the end of this paragraph, that is in the 2001 contract is the sentence, “This Agreement shall supersede all prior agreements, amend- ments thereto and course of dealing between the parties.”

Position of Natuzzi 11 Natuzzi takes the position that Petrook worked for it as an independent contractor. They say that the contract between them is governed by the laws of the State of North Carolina. 12 Natuzzi says that the issues raised in the Ontario Action are subsumed within the North Carolina Action. The determination of the North Caro- lina Action, it says, will “render the Ontario Action redundant.” It further says that “...a balancing of the relevant factors clearly demonstrates that 322 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

Ontario is a forum non conveniens and North Carolina is the clearly more appropriate forum for this action.” 13 Natuzzi says that Petrook admits that she read and understood the contracts she had signed and knew that the contract said that it would be governed the laws of North Carolina. 14 Natuzzi argues that most of the relevant witnesses reside in the United States. It lists them as Gaetano De Cataldo, Executive Vice Presi- dent of Natuzzi, who resides in North Carolina. The second witness is Craig Ruse, Vice President of Sales and Marketing (North Region) who now lives in Chicago, Illinois. The third witness is Joseph Mussallem, Natuzzi’s President from 2010 to October 2012, who also resides in North Carolina. The fourth witness is Dale Zimmerman, a former Natuzzi employee who currently resides in the State of North Dakota (no city given). Natuzzi argues that if the Ontario action is not stayed, the cost of Natuzzi’s defence would escalate, having to bring all these witnesses to Ontario to participate in the Trial. 15 Natuzzi says that it would have to arrange commissioned evidence for witnesses no longer employed by it and would have to bring on a separate application to the U.S. Court for an Order recognizing the Ontario Court’s Letters of Request that those witnesses to give evidence out of court. This, it says, would prejudice the company and add substantial additional expense and possibly delay the trial. In addition, since the contract says the governing law is that of North Carolina, if the trial is con- ducted in Ontario, the parties would incur the expenses of retaining lawyers as expert witnesses to attend and give evidence about the law of North Carolina. 16 Natuzzi says that a multiplicity of proceedings should be avoided in litigation. If the action goes forward in Ontario, there would still be the action in North Carolina. This, is says could give rise to conflicting judicial decisions, which could have a “negative impact” on Natuzzi, given its many contractors in various places in the United States and Canada.

The position of Petrook 17 Petrook says that Natuzzi moved with undue haste to start its own action in North Carolina, after it knew that Petrook was bringing on an action in Ontario. Her counsel had exchanged correspondence with Natuzzi’s U.S. counsel and asked an indulgence to seek advice on substantive legal questions before Petrook started an action in Ontario. That Petrook v. Natuzzi Americas Inc. Greer J. 323

professional indulgence was obviously not granted, and now Petrook is faced with this Motion to stay or dismiss her action. 18 Petrook says her action is about employment law in Ontario, not North Carolina. She says she worked for Natuzzi in Ontario for 27 years and was a very successful sales person. She is not the only sales person Natuzzi has in Canada. She says this action in Ontario could have an impact on them as well, if any of them is also wrongfully dismissed by Natuzzi in the same manner she was dismissed. 19 Petrook takes the position that Ontario can assume jurisdiction in this action and that Ontario is the proper forum for an employment law case. She sees herself as a dependent contractor or an employee of Natuzzi with no benefits. She performed no work in North Carolina and she obtained administrative support from the head office in North Carolina. She was paid in Canadian dollars with Natuzzi’s commission cheques to her drawn on a Canadian bank. She sees Ontario as the proper forum for her action to be heard. 20 Petrook reported to regional managers who came to see her in Ontario for meetings. Sometimes they accompanied her on sales calls across the province. 21 Petrook says that there is no clear or reliable evidence as to where the contracts were formalized. They were signed by Natuzzi respectively 13 and 17 days after she signed them. She says Natuzzi could have drafted a forum selection clause into the contract if it wanted one. There is none in the contract. 22 Petrook sees Natuzzi as carrying on business in Ontario. She has evidence that between 1985 and 2012, Natuzzi earned approximately $40,000,000 in sales revenues in Ontario. Natuzzi has not disputed that fact. 23 Petrook’s termination took place at Pearson Airport in Toronto, at a coffee shop where Mr. Ruse, Natuzzi’s regional representative in On- tario, gave her the news. She was not brought to the head office in North Carolina to effect this termination. 24 Petrook says that there is great prejudice to her if her Ontario action is struck or stayed. All her witnesses are here in Ontario. The Plaintiff, her husband, John Phillips (a former sales representative), a second sales representative, two or more customers in Ontario, and the Plaintiff’s sister (a Natuzzi sales representative in British Columbia) will all give evidence 324 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

at Trial. Seven of these witnesses are resident in Ontario, twice as many as Natuzzi will have. 25 Petrook says the forum conveniens is Ontario, not North Carolina. She says there is a high onus on Natuzzi to prove otherwise. She points to the fairness required in setting the matter down for Trial in the most convenient location and the efficiency of the Ontario system in dealing with employment matters. She says she did no business in North Caro- lina and all her work was here in Ontario. All her customers are here. She is paid here in Canadian dollars. 26 In addition, Petrook says that there is no Employment Standards Act in North Carolina. She says, if needed, our Court can apply North Caro- lina law to the interpretation of the contract in our province. Both legal systems are common law systems. Petrook says that her North Carolina lawyer has advised her that North Carolina would recognize any Ontario judgment rendered by an Ontario Court.

Analysis 27 Mr. Justice Laskin, in Young v. Tyco International of Canada Ltd., 2008 ONCA 709 (Ont. C.A.), in paras. 28 to 31, notes that there are three principles that should guide the motion judge’s exercise of discretion, when determining which jurisdiction should be applied on a forum non conveniens motion. Firstly, that the standard to displace the plaintiff’s chosen jurisdiction is high. Secondly, the balancing of the relevant factors should aim to achieve the twin goals of efficiency and justice. Thirdly, such cases are typically brought early in the proceedings, to the motion judge should adopt a prudential, not an aggressive, approach to fact finding. In applying those principles and in my review of all of the facts and law presented to me, in my view, Natuzzi’s Motion must be dismissed for the reasons which follow. 28 The 2 contracts in question are simple documents of 2 pages in length each. An interpretation of these contracts, in either jurisdiction, would not be complex legally. 29 While Natuzzi quickly brought on a proceeding in the Court in North Carolina for a declaratory judgment, it was aware that an action was being brought on in Ontario in the employment law context. 30 The burden is on Natuzzi to show why the court should decline to exercise its jurisdiction and displace the forum chosen by the plaintiff. This principle is noted in para. 103 in the recent Supreme Court of Can- ada decision, Van Breda v. Village Resorts Ltd., 2012 CarswellOnt 4268, Petrook v. Natuzzi Americas Inc. Greer J. 325

2012 SCC 17, J.E. 2012-788, 212 A.C.W.S. (3d) 712, 343 D.L.R. (4th) 577, 91 C.C.L.T. (3d) 1, 17 C.P.C. (7th) 223, 10 R.F.L. (7th) 1, 429 N.R. 217, 291 O.A.C. 201, [2012] 1 S.C.R. 572, 114 O.R. (3d) 79 (note) (S.C.C.). That paragraph reads in part: The defendant must identify another forum that has an appropriate connection under the conflicts rules and that should be allowed to dispose of the action. The defendant must show, using the same ana- lytical approach the court followed to establish the existence of a real and substantial connection with the local forum, what connection this alternative form has with subject matter of the litigation. Finally the party asking for a stay on the basis of forum non conveniens must demonstrate why the proposed alternative form should be preferred and considered to be more appropriate. In para. 105, the Supreme Court says: ...the doctrine focuses on the contexts of individual cases, and its purpose is to ensure that both parties are treaty fairly and that the process for revolving their litigation is efficient. 31 There, the Court also lists a non-exhaustive list of factors to be considered by the court when examining which forum is the most convenient. The list includes: (a) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigation in the court or in the alternative forum; (b) the law to be applied to issues in the proceeding; (c) the desirability of avoiding multiplicity of legal proceedings; (d) the desirability of avoiding conflicting decisions in different courts; (e) the enforcement of an eventual judgment; and (f) the fair and efficient working of the Canadian legal system as a whole. 32 In my view, Ontario is the appropriate forum for this employment law case to be heard. The plaintiff lives here, has worked here for Natuzzi for 27 years, and has no connection to North Carolina other than visiting it for meetings a few times per year. She is paid in Canadian dollars through a Canadian bank. Natuzzi has a substantial sales business in Ontario. 326 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

33 All of Petrook’s witnesses are in Ontario. For her to have to ask them to fly to North Carolina on her behalf to give evidence would be a huge expense she could likely not afford. On the other hand, Natuzzi is an international company which will have only 4 witnesses to bring to Can- ada. Two of the four live in North Carolina and the other two have to fly somewhere to give evidence at Trial. The cost of sending them to To- ronto may somewhat exceed that of flying to North Carolina but that is just the price of doing business. It would be a deductible expense for the company. 34 An eventual Judgment in Ontario can be enforced in North Carolina. There would be little chance of conflicting decisions being made in On- tario, if other representative were terminated here. Even if a representative in another province is terminated, our legal system is such in Can- ada, which our Courts may follow or adopt the reasoning of cases decided in other provinces. Since North Carolina has no Employment Standards Act, an employment case arising out of that State, could be very unfair to Petrook. 35 In Tisi v. Cornell Trading Inc. [2006 CarswellOnt 5254 (Ont. S.C.J.)], a 2006 Ontario decision of Mr. Justice Perell of the Superior Court of Justice released August 29, 2006, Court File No.: 05-CV-302969PD3, he, in para.134 states the following: In the circumstances of this case, a particularly weighty factor is the matter of juridical advantage. It was conceded that because Vermont is an “at-will jurisdiction” with respect to the principles of employment law, from an employee’s perspective, Ontario is a preferable jurisdiction to advance a claim. This factor weighs heavily in Ms. Tisis’s favour in the case at bar. See: Hodnett v. Taylor Manufactur- ing Industries Inc. (2002), 22 C.P. C. (5th) (Ont. S.C.J.). In the case before me, this issue is also a weighty factor, given that Pe- trook’s case is also an employment law case. 36 In Black v. Breeden, 2012 CarswellOnt 4272, 2012 SCC 19 (S.C.C.), the Supreme Court of Canada relied on the factors it had set out in Van Breda, supra. It, however, added another factor in para. 23, to be considered by the Court when the other jurisdiction is a foreign one, namely, “the fair and efficient working of the Canadian legal system as a whole.” This factor is also applicable in the case at bar. In employment cases, it is important to move the cases forward as quickly as possible, given that the plaintiff’s livelihood is at issue. Petrook v. Natuzzi Americas Inc. Greer J. 327

37 If the terms of the 2 contracts, in question, have to be interpreted, Ontario courts are able to apply the law of North Carolina to contract interpretation, in that regard in Ontario. There is a principle in law, as set out in Vasquez v. Delcan Corp., [1998] O.J. No. 2833 (Ont. Gen. Div.) conflict of laws principles. There Madam Justice Swinton, in para. 31 states that Canadian courts respect express choice of the law to govern their contract, absent vitiating factors. In my view, the factors that I have set out above, vitiate the fact that the contracts specify that the law of North Carolina shall apply. 38 In SVB Underwriting Ltd. v. Fairfax Financial Holdings Ltd., [2007] O.J. No. 518 (Ont. S.C.J.), Madam Justice Harvison Young stayed an Ontario action and found that New York City was the proper forum. She based her decision on the fact that geographical location was virtually irrelevant to the nature of the business that the parties carried out. There were no witnesses in Toronto, and no evidence before the court to indicate how the substantive law would significantly differ in each jurisdiction. In that case, the alleged loss was suffered in New York and there was no juridical advantage to having the case heard in Ontario. These factors are very different than the ones I have outlined respecting the case at bar. 39 For the reasons noted above, I dismiss the Respondent’s Motion to stay the proceeding in Ontario or to dismiss it. The action shall continue in Ontario. An Order shall go accordingly. If Natuzzi requires an Order extending the time for delivery of Natuzzi’s statement of defence, and suspending the effect of the Notice of Action Dismissed dated November 7, 2012 until 30 days following the final determination of this Motion proceeding, such Order shall also go accordingly.

Costs 40 Since Petrook was successful on the Motion, she is entitled to her Costs. If the parties cannot otherwise agree on Costs, they shall send written submissions to me within 30 days of this Order, no longer than 3 pages in length, plus case law and time dockets and a Bill of Costs. Pe- trook shall send her submissions to Natuzzi and it shall have 10 days within which to respond, and Petrook shall have 5 days thereafter to Re- ply, if necessary. All such submissions shall be sent to me at Osgoode Hall. Motion dismissed. 328 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

[Indexed as: Bernier v. Nygard International Partnership] Diane Bernier Plaintiff and Nygard International Partnership Defendant Ontario Superior Court of Justice Docket: CV-12470810 2013 ONSC 5558 E.M. Morgan J. Heard: July 11, 2013 Judgment: August 30, 2013 Labour and employment law –––– Employment law — Termination and dismissal — Practice and procedure — Costs — Entitlement to costs –––– Em- ployee was management level employee, 54 years old and had worked for employer for 13 years — Employee was dismissed and received minimum statutory salary and benefits required under Ontario’s Employment Standards Act — Em- ployee successfully brought motion for summary judgment seeking monetary difference between statutory entitlements and common law rights — Motion brought for costs order — Order accordingly — Car allowance was included in calculation of employee’s award of $190,307.15 per anum — There was no reference to net present value discount in judgment and therefore none should have been applied to formal judgment — Costs award of $25,000 not varied. Cases considered by E.M. Morgan J.: Dunlop v. British Columbia Hydro & Power Authority (1988), 23 C.C.E.L. 96, [1989] 2 W.W.R. 518, 32 B.C.L.R. (2d) 334, 1988 CarswellBC 414, [1988] B.C.J. No. 1963 (B.C. C.A.) — considered Taylor v. Dyer Brown (2004), 2004 CarswellOnt 4703, 36 C.C.E.L. (3d) 221, 192 O.A.C. 91, 73 O.R. (3d) 358, 2005 C.L.L.C. 210-001, [2004] O.J. No. 4650 (Ont. C.A.) — considered Statutes considered: Courts of Justice Act, R.S.O. 1990, c. C.43 Generally — referred to Bernier v. Nygard International Partnership E.M. Morgan J. 329

Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 49 — considered

ADDITIONAL REASONS relating to costs relating to judgment reported at Bernier v. Nygard International Partnership (2013), 2013 ONSC 4578, 2013 CarswellOnt 9209, 9 C.C.E.L. (4th) 41 (Ont. S.C.J.).

Chris Foulon for Plaintiff Barry Weintraub for Defendant

E.M. Morgan J.:

1 The reasons for judgment in this matter were released on July 4, 2013. At paragraph 60 of those reasons, I outlined the damages awarded to the Plaintiff in the following terms: The Defendant shall pay the Plaintiff an amount equal to 12 months’ worth of her total compensation (including base salary, bonus and benefits), plus another 6 months’ worth of her salary and benefits (including base salary and benefits, but excluding bonus), plus 5.5 months’ worth of interest on the late paid 2012 bonus at the Courts of Justice Act rate, minus the amounts that she has already been paid under the Act. I leave it to the parties to calculate the relevant amounts. 2 I have received correspondence from counsel indicating that the parties have been unable to agree on the precise calculation of damages and, therefore, have been unable to settle the terms of the formal judgment. In response to counsels’ request to make further submissions on this point, I have now received written submissions from counsel for both parties. 3 There are three points of disagreement between counsel: a) the question of the Plaintiff’s car allowance; b) whether there should be a net present value discount on the award to the Plaintiff; and c) the correct quantum of costs.

I. Car allowance 4 Counsel for the Plaintiff has provided a draft judgment that calculates the pay in lieu of notice awarded to the Plaintiff by including her car allowance along with her monthly pay and other benefits. Counsel for the Defendant submits that the reasons for judgment did not contemplate the car allowance, as that was intended for reimbursement of expenses in- 330 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

curred during her employment as is not properly conceived as a “benefit”. 5 Counsel for the Plaintiff points out that the Defendant paid the Plain- tiff’s statutory notice and severance period for 21.3 weeks, and that during that time the Defendant included the car allowance in the Plaintiff’s payments. 6 More to the point, in paragraph 6 of my reasons for judgment I found that the Plaintiff’s entire compensation amounted to $190,307.15 per annum, which is a calculation that includes the car allowance. Plaintiff’s counsel correctly submits that paragraph 60, quoted above, awarded the Plaintiff “an amount equal to 12 months’ worth of her total compensation”, and that this, in turn, must be calculated in reference to my earlier finding at paragraph 6. In other words, counsel for the Plaintiff is correct in including the car allowance in the calculation of the award.

II. Net present value discount 7 Paragraph 2 of the draft judgment provided by counsel for the Plain- tiff quantifies the 12 months’ worth of salary (net of benefits and car allowance, which are calculated in separate paragraphs) as $147,201.01. Counsel for the Defendant takes the position that since this amount is being paid now in lieu of future salary, it must be discounted in order to more accurately represent the net present value of the 12 months’ salary. 8 Counsel for the Plaintiff responds that my reasons for judgment make no reference to any net present value discount, and since no such discount was contemplated none should be applied to the formal judgment. He also submits that pay in lieu of notice, such as that awarded to the Plaintiff, represents damages for wrongful dismissal and as a matter of law is payable immediately upon termination. It therefore is not properly conceived of as payment for a future debt. 9 In Taylor v. Dyer Brown (2004), 73 O.R. (3d) 358 (Ont. C.A.), at para 15, the Ontario Court of Appeal quoted approvingly from the British Co- lumbia Court of Appeal’s judgment in Dunlop v. British Columbia Hydro & Power Authority (1988), 32 B.C.L.R. (2d) 334 (B.C. C.A.), 338-9, where it was stated that, “payment in lieu of notice is seen as ‘an attempt to compensate for [the employer’s] breach of the contract of employment, not as an attempt to comply with an implied term of the contract of employment’”. In other words, unless specified it is conceived as a damages calculation based on the gross amount of the pay missed dur- Bernier v. Nygard International Partnership E.M. Morgan J. 331

ing the notice period, and not a discounted amount that is intended to somehow mirror the employment contract itself. 10 As a confirmation of this state of the law, counsel for the Plaintiff submits that there appears to be no reported case in the employment law area where such a net present value discount has been applied to a Plain- tiff’s award. In my view, no such discount should be applied here. Plain- tiff’s counsel’s calculation of the overall salary amount in paragraph 2 of his draft judgment is correct.

III. Costs 11 At paragraph 65 of my reasons of July 4, 2013, I awarded costs to the Plaintiff “in the total amount of $25,000, inclusive of disbursements and HST.” Counsel for the Defendant complains that in paragraph 9 of the draft judgment prepared by counsel for the Plaintiff, costs are set at $28,117.67, and that this represents an overpayment. 12 Counsel for the Plaintiff explains that the award exceeds an offer to settle made by the Plaintiff, and so the costs award should be on a substantial rather than a partial indemnity basis. I have not actually seen a copy of that offer and do not know whether it was compliant with the requirements of Rule 49. In any case, I am exercising my discretion not to vary the costs award. It was fixed at $25,000 in my reasons for judgment of July 4th, and shall remain so fixed.

IV. Disposition 13 Attached as Schedule “A” to this supplementary endorsement is a marked-up version of the draft judgment provided by counsel for the Plaintiff. The first paragraph of the draft judgment is superfluous and can be eliminated. Paragraph 9 of the draft judgment must reflect the correct amount of costs. I have noted and initialed these changes. 14 The judgment at Schedule “A”, with the noted changes, now reflects the proper terms of the formal judgment in this matter. Order accordingly.

Schedule “A”

Court File No. CV-11-004 332 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)

ONTARIO SUPERIOR COURT OF JUSTICE THE HONOURABLE MR. ) THURSDAY, THE JUSTICE E.M.MORGAN ) 4th DAY OF JULY, 2013 )

Between: Diane Bernier Plaintiff and Nygard International Partnership Defendant

Judgment THIS MOTION, made by the Plaintiff, for summary judgment, was heard on June 6, 2013, at Toronto, Ontario, in the presence of counsel for the parties. ON READING THE Consolidated Motion Record, Factum of the Plain- tiff, Factum of the Defendant, Cross-Examination of Diane Bernier and Cross-Examination of Abe Rubinfeld and on hearing the submissions of counsel for the parties, for written reasons delivered: 1. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff damages in the amount of $147,201.01 (which figure represents salary in lieu of reasonable notice of termination for eighteen (18) months less the amounts already paid by way of salary continuation). 2. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff damages in the amount of $3,676.14 (which figure represents car allowance in lieu of reasonable notice of termination for eighteen (18) months less the amounts already paid). 3. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff damages in the amount of $4,778.93 (which figure represents payment in lieu of continuation of benefits for eighteen (18) months less the benefits that were continued). 4. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff damages in the amount of $51,307.25, repre- senting the value of the Plaintiff’s bonus for the 2013 bonus year. 5. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff five and one-half (5.5) months’ interest on account of the delayed payment of the 2012 bonus in the amount of $273.13. Bernier v. Nygard International Partnership E.M. Morgan J. 333

6. THIS COURT FURTHER ORDERS THAT the Defendant shall pay to the Plaintiff the sum of $2,303.21 on account of the Plain- tiffs out of pocket mitigation expenses. 7. THIS COURT FURTHER ORDERS THAT the Plaintiff will hold in trust for the Defendant any overpayment of damages that results due to successful mitigation by the Plaintiff during the eighteen (18) month notice period. 8. THIS COURT FURTHER ORDERS that the Defendant shall pay to the Plaintiff costs in the amount of $25,000.00, inclusive of HST and disbursements. 9. THIS COURT FURTHER ORDERS that the Defendant shall pay to the Plaintiff prejudgment interest at a rate of 1.3% per annum from December 5, 2012 to July 4, 2013 in the total sum of $1,569.50. 10. THIS COURT FURTHER ORDERS that the Defendant shall pay to the Plaintiff post-judgment interest at a rate of 3.0% per annum from the date of judgment, July 4, 2013. 334 CANADIAN CASES ON EMPLOYMENT LAW 10 C.C.E.L. (4th)