Western Weekly Reports

WESTERN WEEKLY REPORTS Reports of Cases Decided in the Courts of Western Canada and Certain Decisions of the Supreme Court of Canada 2012-VOLUME 7 (Cited [2012] 7 W.W.R.)

All cases of value from the courts of Western Canada and appeals therefrom to the Supreme Court of Canada

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[Indexed as: Lawson v. Baines] The Hon. Edward M. Lawson (Respondent / Plaintiff) and David Baines, Hugh Dawson, Patricia Graham, Kirk LaPointe, Kevin D. Best and Canwest Publishing Inc. (Appellants / Defendants) British Columbia Court of Appeal Docket: Vancouver CA038961 2012 BCCA 117 Finch C.J.A., Hall, Hinkson JJ.A. Heard: January 11, 2012 Judgment: March 9, 2012 Torts –––– Defamation — Nature of defamation — Innuendo — General principles –––– Defendant B wrote newspaper column that mentioned involvement of plaintiff, former senator, in events that happened in 1980s — Plaintiff brought action for damages against B and business editor, managing editor, editor-in-chief, and publisher of newspaper, claiming that he was libelled by statements made about him in column — Plaintiff alleged that, properly understood, words complained of meant that he was corrupt, was guilty of corruption under Racketeer Influenced and Corrupt Organizations Act, and had abused his office with Teamsters Union for personal benefit and financial gain — Plaintiff’s action for defamation was allowed — Trial judge found if words complained of bore inferential meaning alleged by plaintiff, they were defamatory — Trial judge found describing someone as corrupt or dishonest would clearly lower him in estimation of right-thinking members of community — Trial judge found sting of alleged libel was that plaintiff engaged in criminal activities by participating in fraudulent stock scheme and obtaining personal and unauthorized benefits from making Teamsters jet available to his close friends C and W, who were found to have been involved in fraudulent stock scheme — Trial judge found plaintiff could not succeed if words bore only inferential meaning that he was unethical person of poor judgment who gained from his involvement with questionable individuals and organizations — Trial judge found ordinary person would infer from words complained of that plaintiff was corrupt in sense that he had associated with two convicted criminals in their fraudulent scheme and that he had obtained personal benefit, in form of free shares, by making Teamsters jet available to C and W — Defendants appealed — Appeal dismissed — Trial judge clearly found words complained of were capable of not only defamatory meaning, but capable of at least some of inferential meanings claimed — Find- ing that words were capable of bearing defamatory meaning did not unreasonably seize on only possible bad meaning amongst several good interpretations in order to hold them capable of bearing defamatory meaning — One reasonable inference of words was that plaintiff had advertently engaged in corrupt activi- 430 WESTERN WEEKLY REPORTS [2012] 7 W.W.R. ties by participating in fraudulent stock scheme and also by obtaining personal and unauthorized benefits from making teamster’s jet available to C and W — Combined implications and overall impression was that words were capable of bearing defamatory meaning — Trial judge properly considered column as whole — Trial judge properly found words were defamatory and not true. Torts –––– Defamation — Practice and procedure — Miscellaneous –––– Standard of review — Defendant B wrote newspaper column that mentioned involvement of plaintiff, former senator, in events that happened in 1980s — Plaintiff brought action for damages against B and business editor, managing editor, editor-in-chief, and publisher of newspaper, claiming that he was libelled by statements made about him in column — Plaintiff alleged that, properly understood, words complained of meant that he was corrupt, was guilty of corruption under Racketeer Influenced and Corrupt Organizations Act, and had abused his office with Teamsters Union for personal benefit and financial gain — Plain- tiff’s action for defamation was allowed — Trial judge found if words complained of bore inferential meaning alleged by plaintiff, they were defamatory — Trial judge found describing someone as corrupt or dishonest would clearly lower him in estimation of right-thinking members of community — Trial judge found sting of alleged libel was that plaintiff engaged in criminal activities by participating in fraudulent stock scheme and obtaining personal and unauthorized benefits from making Teamsters jet available to his close friends C and W, who were found to have been involved in fraudulent stock scheme — Trial judge found plaintiff could not succeed if words bore only inferential meaning that he was unethical person of poor judgment who gained from his involvement with questionable individuals and organizations — Trial judge found ordinary person would infer from words complained of that plaintiff was corrupt in sense that he had associated with two convicted criminals in their fraudulent scheme and that he had obtained personal benefit, in form of free shares, by making Teamsters jet available to C and W — Defendants appealed — Appeal dismissed — Trial judge clearly found words complained of were capable of not only defamatory meaning, but capable of at least some of inferential meanings claimed — Proper standard of review was reasonableness, and this was not altered by fact that trial judge did not rely on evidence to find meaning of words — Standard of review should be identical whether trier of fact was judge or jury, and findings by judge alone should not be subject to less deferential standard of review — Facts should not be re-evaluated on appeal using same standard as at trial — Economic prejudice could result if more expensive jury trials had higher standard of review on appeal. Torts –––– Defamation — Nature of defamation — What constituting defamatory words — Imputations of crime –––– Defendant B wrote newspaper column that mentioned involvement of plaintiff, former senator, in events that happened in 1980s — Plaintiff brought action for damages against B and business editor, managing editor, editor-in-chief, and publisher of newspaper, claim- Lawson v. Baines 431 ing that he was libelled by statements made about him in column — Plaintiff alleged that, properly understood, words complained of meant that he was corrupt, was guilty of corruption under Racketeer Influenced and Corrupt Organiza- tions Act, and had abused his office with Teamsters Union for personal benefit and financial gain — Plaintiff’s action for defamation was allowed — Trial judge found if words complained of bore inferential meaning alleged by plaintiff, they were defamatory — Trial judge found describing someone as corrupt or dishonest would clearly lower him in estimation of right-thinking members of community — Trial judge found sting of alleged libel was that plaintiff engaged in criminal activities by participating in fraudulent stock scheme and obtaining personal and unauthorized benefits from making Teamsters jet available to his close friends C and W, who were found to have been involved in fraudulent stock scheme — Trial judge found plaintiff could not succeed if words bore only inferential meaning that he was unethical person of poor judgment who gained from his involvement with questionable individuals and organizations — Trial judge found ordinary person would infer from words complained of that plaintiff was corrupt in sense that he had associated with two convicted criminals in their fraudulent scheme and that he had obtained personal benefit, in form of free shares, by making Teamsters jet available to C and W — Defendants appealed — Appeal dismissed — Trial judge clearly found words complained of were capable of not only defamatory meaning, but capable of at least some of inferential meanings claimed — Finding that words were capable of bearing defamatory meaning did not unreasonably seize on only possible bad meaning amongst several good interpretations in order to hold them capable of bearing defamatory meaning — One reasonable inference of words was that plaintiff had advertently engaged in corrupt activities by participating in fraudulent stock scheme and also by obtaining personal and unauthorized benefits from making teamster’s jet available to C and W — Combined implications and overall impression was that words were capable of bearing defamatory meaning — Trial judge properly considered column as whole — Trial judge properly found words were defamatory and not true. Cases considered by Hinkson J.A.: Ager v. Canjex Publishing Ltd. (2005), 217 B.C.A.C. 160, 358 W.A.C. 160, 2005 BCCA 467, 2005 CarswellBC 2219, 46 B.C.L.R. (4th) 1, 259 D.L.R. (4th) 727, 35 C.C.L.T. (3d) 134, [2005] B.C.J. No. 2038 (B.C. C.A.) — considered Boyd v. Harris (2004), 24 B.C.L.R. (4th) 155, 195 B.C.A.C. 217, 319 W.A.C. 217, 44 C.P.C. (5th) 205, 22 C.C.L.T. (3d) 1, 237 D.L.R. (4th) 193, 2004 BCCA 146, 2004 CarswellBC 514, [2004] 6 W.W.R. 436, [2004] B.C.J. No. 472 (B.C. C.A.) — considered Color Your World Corp. v. Canadian Broadcasting Corp. (1998), 106 O.A.C. 279, 38 O.R. (3d) 97, 1998 CarswellOnt 535, 156 D.L.R. (4th) 27, 41 C.C.L.T. (2d) 11, [1998] O.J. No. 510 (Ont. C.A.) — considered 432 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Gillick v. BBC (1995), [1996] E.M.L.R. 267 (Eng. C.A.) — considered Grobbelaar v. News Group Newspapers Ltd. (2002), [2002] 1 W.L.R. 3024, [2002] UKHL 40 (Eng. H.L.) — considered Hill v. Church of Scientology of Toronto (1995), 25 C.C.L.T. (2d) 89, 184 N.R. 1, (sub nom. Manning v. Hill) 126 D.L.R. (4th) 129, 24 O.R. (3d) 865 (note), 84 O.A.C. 1, [1995] 2 S.C.R. 1130, 1995 CarswellOnt 396, 1995 Carswell- Ont 534, (sub nom. Hill v. Church of Scientology) 30 C.R.R. (2d) 189, 1995 SCC 67, EYB 1995-68609, [1995] S.C.J. No. 64 (S.C.C.) — followed Hodgson v. Canadian Newspapers Co. (1998), 1998 CarswellOnt 2757, 39 O.R. (3d) 235, [1998] O.J. No. 2682 (Ont. Gen. Div.) — considered Hodgson v. Canadian Newspapers Co. (2000), 49 O.R. (3d) 161, 189 D.L.R. (4th) 241, 133 O.A.C. 174, 2000 CarswellOnt 2164, [2000] O.J. No. 2293 (Ont. C.A.) — referred to Hodgson v. Canadian Newspapers Co. (2001), 149 O.A.C. 399 (note), 271 N.R. 394 (note), 2001 CarswellOnt 5614, 2001 CarswellOnt 5615, [2000] S.C.C.A. No. 465 (S.C.C.) — referred to Housen v. Nikolaisen (2002), 10 C.C.L.T. (3d) 157, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, 2002 CarswellSask 178, 2002 CarswellSask 179, 2002 SCC 33, 30 M.P.L.R. (3d) 1, 219 Sask. R. 1, 272 W.A.C. 1, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, REJB 2002-29758 (S.C.C.) — followed Laufer v. Bucklaschuk (1999), 1999 CarswellMan 565, 181 D.L.R. (4th) 83, [2000] 2 W.W.R. 462, 145 Man. R. (2d) 1, 218 W.A.C. 1, [1999] M.J. No. 553 (Man. C.A.) — considered Leith v. Stockdill (2000), 2000 CarswellBC 1049, 2000 BCCA 263 (B.C. C.A.) — followed Makow v. Winnipeg Sun (The) (2003), 2003 CarswellMan 177, 2003 MBQB 56, 172 Man. R. (2d) 213, [2003] 11 W.W.R. 166, [2003] M.J. No. 79 (Man. Q.B.) — considered Makow v. Winnipeg Sun (The) (2004), 184 Man. R. (2d) 97, 318 W.A.C. 97, 23 C.C.L.T. (3d) 193, 2004 CarswellMan 121, 2004 MBCA 41, [2004] 6 W.W.R. 45, [2004] M.J. No. 119 (Man. C.A.) — referred to Mitchell v. Nanaimo District Teachers’ Assn. (1994), 94 B.C.L.R. (2d) 81, 48 B.C.A.C. 194, 78 W.A.C. 194, 1994 CarswellBC 315 (B.C. C.A.) — referred to R. v. Mezzo (1986), 1986 CarswellMan 327, 1986 CarswellMan 403, (sub nom. Mezzo v. R.) [1986] 1 S.C.R. 802, 30 D.L.R. (4th) 161, 68 N.R. 1, [1986] 4 W.W.R. 577, (sub nom. Mezzo v. R.) 27 C.C.C. (3d) 97, 43 Man. R. (2d) 161, (sub nom. Mezzo v. R.) 52 C.R. (3d) 113, [1986] S.C.J. No. 40, EYB 1986-67202 (S.C.C.) — considered Statutes considered: Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C., c. 96 Generally — referred to Lawson v. Baines Hinkson J.A. 433

Rules considered: Rules of Court, 1990, B.C. Reg. 221/90 R. 39(27) — referred to Supreme Court Civil Rules, B.C. Reg. 168/2009 R. 12-6(5) — referred to

APPEAL by defendants from judgment reported at Lawson v. Baines (2011), 2011 BCSC 326, 2011 CarswellBC 600 (B.C. S.C.), allowing plaintiff’s action in defamation.

Robert S. Anderson, Q.C., Jason Yamashita, for Appellants Roger D. McConchie, Alan McConchie, for Respondent

Hinkson J.A.:

1 The appellants are Mr. Baines, a newspaper columnist for the Van- couver Sun Newspaper; Mr. Dawson, the business editor of the paper; Mr. LaPointe, the paper’s managing editor; Ms. Graham, the paper’s editor-in-chief; Kevin Bent, the paper’s publisher; and Canwest Publishing Inc., the paper’s proprietor. 2 The respondent is a former member of the Senate of Canada, and a former executive of the International Brotherhood of Teamsters. 3 On March 12, 2008, a column written by Mr. Baines entitled “Ambi- tious claims to a trillion-dollar jackpot” was published in the Vancouver Sun newspaper and made available on the Internet. Senator Lawson was named and discussed in the article, and brought proceedings against the appellants for defamation as a result of the article. 4 Senator Lawson’s claim succeeded at trial, and the appellants contend that the trial judge erred in finding for Senator Lawson. 5 The reasons for judgment of the trial judge are indexed as 2011 BCSC 326 (B.C. S.C.).

The Words Complained Of 6 The article describes how Arctic Oil and Gas, a “tiny U.S. company with big ambitions and some interesting Vancouver connections” had been promoting itself by claiming ownership of “a 30-per-cent interest in a claim to all the oil and gas resources within the entire Arctic Ocean ‘commons’ area” allowing them access to the “Trillion Dollars in oil and natural gas!” in the Arctic. The article dismisses the claim as overly “am- bitious” for a company that “trades at only eight cents per share on the 434 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

lowly ‘pink sheets’ in the United States” and quotes Michael Byers, a University of British Columbia professor of law and expert on Arctic sovereignty, who describes the claim as “very unlikely to be valid”. 7 The article provides a critical overview of the origins and background of Arctic Oil and Gas, which is now owned by Australian Peter J. Ster- ling, and was originally named “Bulldog Financial Inc.” The complaints, however, did not arise from the treatment of the company’s claims, but from the description of the company’s “Vancouver connections”, namely Senator Lawson. That part of the article, along with the portion complained of (underlined), reads as follows: Which makes it all the more curious that a retired Canadian senator would be a director of this company. But more on that later. ... At the same time that Bulldog morphed into Arctic Oil & Gas, Ster- ling appointed Senator Edward Lawson as a director and gave him 50,000 restricted shares. Lawson served 34 years in the Canadian Senate before retiring in 2004, making him the longest-serving senator in B.C. history. He also served as international vice-president of the Teamsters Union for more than 26 years, a position which often landed him in controversy. In June 1988, the US. Department of Justice filed a lawsuit under the Racketeer-Influenced [and] Corrupt Organizations Act alleging that the Teamsters Union and the union’s entire executive board (including Lawson), plus 26 purported mob figures, had hijacked the union from its members. Several months later, the suit was dropped after union executives signed a settlement agreeing to union reform. In 2003, the union presented Lawson with the James R. Hoffa Life- time Achievement Award in honour of the former Teamsters president. This is an award that only a Teamster could love. Lawson also suffered the embarrassment of being identified as a close associate of Ed Carter, who along with partner David Ward was caught in a huge stock bribery scam in the mid-1980s. Evidence at the criminal trial of Carter and Ward was that the two promoters gave Lawson shares of their rigged companies, and Law- son flew them, often free of charge, on the Teamsters executive jet he had at his disposal. In 1986, David Ward’s wife, Carol, and Lawson’s wife, Beverly, became embroiled in another stock fiasco while serving as directors of Lawson v. Baines Hinkson J.A. 435

an Alberta Stock Exchange company called Boston Financial Group Inc. A Bahamian bank called Charterhouse Bank and Trust, long suspected of acting as a front for insiders, had bought 90 per cent of Boston’s free-trading stock and had promptly dumped $291,000 worth of stock without filing insider trading reports. The bank claimed it was acting as agent and couldn’t reveal its clients’ identity. Although regulators suspected the stock belonged to insiders or related parties, its beneficial ownership was never established. Sterling said he met Lawson in Vancouver several months ago. “He offered to come on board [with Arctic Oil & Gas] because he be- lieves that there is a significant benefit to be had for the country of Canada from this project,” he said in an interview Tuesday.

Issues on Appeal 8 The appellants contend that the words complained of are incapable of being defamatory, and that the trial judge was thus incorrect in finding that they are. 9 The appellants contend that, because this case was heard at trial by a judge sitting without a jury, and because evidence cannot be called on the meaning of the words complained of, this Court is in as favourable a position as the trial judge to determine the correct meaning of those words. On this basis, the appellants contend for a standard of review of correctness, even though traditionally the meaning of words complained of has been viewed as a question of fact attracting a standard of review of reasonableness. 10 Finally, the appellants further contend that, regardless of the standard of review, if the words complained of were capable of being defamatory, they were not in fact defamatory, and that the finding of the trial judge to the contrary is both incorrect and unreasonable.

Analysis 11 In an action for defamation, there are two essential issues. The first issue is one of law, and requires the trial judge to determine whether or not the words complained of are capable of being defamatory. If they are not, then the action fails. The standard of review with respect to this issue is one of correctness: Mitchell v. Nanaimo District Teachers’ Assn. (1994), 94 B.C.L.R. (2d) 81 (B.C. C.A.) at para. 2 (per Southin and Ryan JJ.A.) and para. 38 (per Donald J.A.). 436 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

12 If the words complained of are capable of being defamatory, the second issue to be resolved is one of fact; whether the words are in fact defamatory. This second issue, being one of fact, has traditionally been reviewed on a standard of reasonableness: Mitchell at para. 7 (per Southin and Ryan JJ.A.) and paras. 38-39 (per Donald J.A.). 13 There are three alternate means by which defamation can be proven: a) If the literal meaning of the words complained of are defamatory; b) If the words complained of are not defamatory in their natural and ordinary meaning, but their meaning based upon extrinsic circumstances unique to certain readers (the “legal” or “true” innuendo meaning) is defamatory; or c) If the inferential meaning or impression left by the words complained of is defamatory (the “false” or “popular” innuendo meaning). 14 In his statement of claim, Senator Lawson alleged at para. 15 that: In their natural and ordinary meaning and in the context of the March 12 Article as whole, the false, malicious and defamatory words in the March 12 Article, bore and were understood to bear the following meanings, which are false and defamatory: a) The Plaintiff is corrupt; b) The Plaintiff was guilty of corruption under the U.S. Racket- eer-Influenced Corrupt Organizations Act in his capacity as a member of the executive of the international Brotherhood of Teamsters union (the “Teamsters Union”) and that he only avoided criminal conviction under that Act by entering into a plea bargain with the U.S. government; c) The Plaintiff abused his office and position of trust with the Teamsters Union for his own personal benefit and financial gain by providing Ed Carter and David Ward with free travel on a Teamsters Union executive jet in exchange for free shares in companies which had been manipulated dishonestly for personal gain by Mr. Carter and Mr. Ward; and/or d) One or more of the above. 15 The appellants did not allege that, if the words bore any of the meanings asserted in paragraph 15 of the statement of claim, they were true. 16 It is unnecessary to repeat the background facts in the same detail as did the trial judge. It is sufficient to state that the evidence at trial was that Edward Carter and David Ward were found to have been involved in illegal practices, including bribery, with respect to the promotion of jun- Lawson v. Baines Hinkson J.A. 437

ior resource stocks, which were traded on the Vancouver Stock Exchange. 17 Senator Lawson and his wife were found at trial to have been personal friends of Mr. Ward and his wife, and from time to time accounts held in the name of Senator Lawson were used to trade shares of at least one of the Carter/Ward companies. The trial judge found that the evidence as to whether Senator Lawson paid for the shares in his accounts, and the extent to which Senator Lawson actually controlled trading in the shares in those accounts was confused, such that he was unable to determine whether Senator Lawson purchased stock in Carter/Ward companies, was provided with it at a nominal or no cost, or traded it on his own account or as a nominee of Ward. He found that the appellants failed to establish that Senator Lawson received free shares in any Carter/Ward company. 18 The trial judge was, however, satisfied that Senator Lawson was one of many persons utilized by Carter and Ward in the carrying out of their fraudulent scheme. 19 The trial judge found that, although Senator Lawson pleaded in his statement of claim that the literal meaning of the words complained of was defamatory, his counsel abandoned that claim early in the trial. While nothing turns on the point, counsel for the respondent advised us that he did not believe that reliance on the literal meaning of the words had ever been pleaded. Certainly by the conclusion of the trial, there was no claim that the words complained of were literally defamatory. 20 At trial and in this Court, Senator Lawson did not rely upon a “legal” or “true” innuendo meaning of the words complained of. 21 Insofar as the reference to the U.S. Racketeer- Influenced and Cor- rupt Organizations Act, and the meaning of the words used in that context, it is clear that the proceedings commenced pursuant to that legislation were not criminal proceedings and that Senator Lawson made no plea bargain to avoid a criminal conviction under that legislation. The trial judge found at para. 45 of his reasons for judgment that: If Mr. Baines had confined himself to describing Senator Lawson’s involvement with the Teamsters’ Union and with the 1988 legal proceedings commenced by the United States Department of Justice, I do not think that the inferential meaning alleged in para. 15 of the statement of claim would be made out. My concern however is with the last two paragraphs of the words complained of, in juxtaposition with the reporting of the U.S. proceedings. 22 Senator Lawson did not challenge that conclusion in this Court. 438 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

23 The meaning of the remainder of the words complained of was determined by the trial judge, based upon the inferential meaning or impression left by the words complained of. Reliance on this means of proof requires that the meaning is that which the ordinary person, without special knowledge, will infer from the words complained of and this meaning must be determined objectively. Evidence concerning what the reasonable and ordinary meaning of the words is, or the sense in which they might be understood, or of facts giving rise to the inferences to be drawn from the words is inadmissible if this means of proof is relied upon: see Hodgson v. Canadian Newspapers Co. (1998), 39 O.R. (3d) 235 (Ont. Gen. Div.), varied on appeal as to damages (2000), 49 O.R. (3d) 161 (Ont. C.A.), leave to appeal dismissed (2001), [2000] S.C.C.A. No. 465 (S.C.C.) at para. 37, and the authorities referred to therein. 24 While the appellants argued at trial that a defendant in a libel action may both plead and lead evidence to seek to justify a lesser defamatory meaning to that alleged by the plaintiff, after hearing the evidence in this case, the trial judge declined to make findings as to the meaning of the words complained of based upon that evidence. He reached that conclusion because Senator Lawson could only succeed if he could establish that the words complained of bear the inferential meaning alleged in paragraph 15 of the statement of claim, or something substantially similar. The question of whether the defendants justified the literal meaning of those words was thus irrelevant. 25 The trial judge identified specific inaccuracies amongst the words complained of, but quite properly concluded that none of those inaccuracies were material. The error of the trial judge in referring to Senator Lawson as a director of Tye Explorations Inc. (Senator Lawson was not a director of this company, but rather was a director of another Carter/Ward company named Nalos Mining Corporation) similarly had no effect on his reasoning in the case.

a) Were the Words Complained of Capable of Defamatory Meaning? 26 The first task of a judge in a defamation case is to answer the “threshold question” of “whether the words cited are reasonably capable of a defamatory meaning”: Laufer v. Bucklaschuk (1999), [2000] 2 W.W.R. 462 (Man. C.A.), at 470-471. The judge, if sitting alone, then plays a second role; as a finder of fact, in determining whether the words do, in fact, bear that defamatory meaning. 27 In executing the first role, the question is whether the words complained of are reasonably capable of being understood in a defamatory Lawson v. Baines Hinkson J.A. 439

sense. In exercising this gatekeeper role, the judge must keep in mind that the question does not involve finding that the words are in fact defamatory, but concerns only what the words are capable of meaning. When performing this task, the judge must not stray from a “common sense construction” of these words (as it was termed in Makow v. Winnipeg Sun (The), 2003 MBQB 56, [2003] 11 W.W.R. 166 (Man. Q.B.), affirmed 2004 MBCA 41 (Man. C.A.)) and seize upon one margi- nal to that construction. 28 The appellants contend that the trial judge made no specific finding that the words complained of were capable of being defamatory. What the trial judge said on this issue is found at paras. 40-42 of his reasons: [40] As this is a trial without a jury it is not necessary for me to make an initial finding as to whether the words complained of are capable of bearing the inferential meaning alleged in the statement of claim. My task is to decide whether they in fact do bear that inferential meaning. While I must consider the words as a whole in the context of the entire column, I do propose to focus on those portions of the words complained of that make assertions with respect to Senator Lawson’s involvement with Carter and Ward. [41] In my view the words complained of could possibly bear two inferential meanings. The first is that alleged in paragraph 15 of the statement of claim. The second is that Senator Lawson is a unethical person of poor judgment, who allows himself to become involved with questionable individuals and organizations and to gain from such involvement. [42] I do not think that Senator Lawson can succeed if the words bear only the second inferential meaning. I say this because to my mind that meaning would be distinct and of a different character from the defamatory meaning alleged in the statement of claim. If such is the case, Senator Lawson will not have succeeded in proving the allegations contained in paragraph 15 of the statement of claim. [Emphasis added.] 29 Despite the disclaimer in para. 40 of his reasons, it is apparent from para. 41 of the reasons that the trial judge did find that the words complained of were capable of not only defamatory meaning, but capable of at least some of the inferential meanings alleged in the statement of claim. 30 The question thus arises; was he correct in so finding? 31 Addressing, at this juncture, only the question of whether the words complained of were capable of being defamatory, as opposed to the ques- 440 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

tion of whether they were in fact defamatory, it is my view that the trial judge was correct in finding that the words complained of are capable of bearing the inferential meaning set out in subparagraphs a) and c) of paragraph 15 of the statement of claim, listed above. 32 The trial judge found that there are only two possible meanings that the column, as a whole, is capable of bearing in relation to Senator Law- son. His finding that the words complained of are capable of bearing defamatory meaning does not unreasonably seize on the only bad meaning to be gleaned from the words amongst a number of good interpretations in order to hold them capable of bearing a defamatory meaning. 33 In my opinion, while the words complained of may literally be true, one reasonable inference that may be drawn from those words, in the context of the column as a whole, was that Senator Lawson had advertently engaged in corrupt activities by participating in some way in a fraudulent stock scheme and also by obtaining personal and unauthorized benefits from making the Teamster’s jet available to Cater and Ward. 34 The words complained of include the following two sentences: Lawson also suffered the embarrassment of being identified as a close associate of Ed Carter, who along with partner David Ward was caught in a huge stock bribery scam in the mid-1980s. Evidence at the criminal trial of Carter and Ward was that the two promoters gave Lawson shares of their rigged companies, and Law- son flew them, often free of charge, on the Teamsters executive jet he had at his disposal. 35 These two sentences, when read in light of the context and tone of the article as a whole, could leave the ordinary reader with the impression that Senator Lawson, as a “close associate of Ed Carter”, was tied in some way to the “huge stock bribery scam” in which Carter and Ward were involved. The content of the second sentence is bolstered and col- oured with legitimacy as having been put forward as “evidence” at a “criminal trial”, which further resonates with the mention earlier of the lawsuit under the Racketeer-Influenced and Corrupt Organizations Act. A clear implication is that there was an exchange between Senator Law- son, who received “shares of their rigged companies”, and Carter and Ward, who received rides on the Teamsters jet. 36 It is also notable that the dealings with Carter and Ward follow, and are juxtaposed to the article’s mention of the Teamsters (including Law- son) having been the target of a suit by the U.S. government under Rack- eteer-Influenced and Corrupt Organizations Act. The mention of the Carter/Ward criminal action could thus build upon the earlier impression Lawson v. Baines Hinkson J.A. 441

the mention of the civil action against the Teamsters made on the reader, such that the impact on the reader from the whole column is greater than that of the sum of its parts. 37 Without making the overly elaborate analysis of the issue warned against in Gillick v. BBC (1995), [1996] E.M.L.R. 267 (Eng. C.A.), [1995] E.W.C.A. Civ 46, it is clear that the combined implications and overall impression that the words are capable of bearing the complained of defamatory meaning certainly could be left on the reasonable reader. 38 I would not therefore accede to the first ground of appeal.

b) The Appropriate Standard of Review on the Factual Issue of Whether the Words Complained of Were in Fact Defamatory. 39 As I have indicated above, whether the words complained of are in fact defamatory, has traditionally been reviewed on a standard of reasonableness. 40 Counsel for the appellants contend that the standard of review on this issue should be correctness, and bases that contention on the comments expressed in obiter dicta by Madam Justice Saunders in Ager v. Canjex Publishing Ltd., 2005 BCCA 467 (B.C. C.A.) at paras. 20-22: [20] While agreeing that the articles implicated Dr. Ager in a failure to disclose, the appellants contend that the articles do not reasonably bear the meaning that Dr. Ager was aware of the Josh property’s lack of value, or was implicated either in salting or in the sale of a salted property. In making this submission, they refer to Colour Your World Corp. v. Canadian Broadcasting Corp. (1998), 38 O.R. (3d) 97, 156 D.L.R. (4th) 27 (C.A.), application for leave to appeal dismissed, [1998] S.C.C.A. No. 170, and say that as evidence cannot be called on the meaning of words, this Court is in as favourable a position as the trial judge to determine the correct meaning of the words even though the meaning of words is a question of fact. [21] This Court must give deference to the trial judge on questions of fact. The long line of cases of the Supreme Court of Canada culmi- nating in Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33 make that policy approach clear. The deference is based upon the better position of a trial judge, who is able to see and hear first-hand the evidence of witnesses and to appreciate and to explore the nu- ances and interrelationships of the evidence, and policy which favours finality of the legal process. [22] It may be, considering that evidence cannot be called on the meaning of words and giving full weight to the interests of the community in maintaining robust public comment and freedom of ex- 442 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

pression, that a relaxation of the standard of review as it applies to the meaning of words in a defamation case may be appropriate. Tra- ditionally, Courts of Appeal have not been shy to guard against a narrow perspective on public expression, as in Colour Your World. However, that question does not need to be resolved in this case. In my view, considering the audience to whom the words were communicated, it is a reasonable conclusion that a reasonably thoughtful and informed reader (per the test set out in R.E. Brown, The Law of Defa- mation in Canada, 2nd ed. vol. 1 (Toronto: Carswell, 1999 loose-leaf updated 2004, release 2 at 5-5 to 5-16 and 5-62 to 5-64) would find that the words had the meaning attributed to them by the trial judge. The essence of Dr. Ager’s complaint is that the articles implicated him in salting or in selling a property known by him to have been salted. The trial judge agreed with Dr. Ager. In my view, the conclusion of the trial judge is reasonable given the description of Dr. Ager in the article of 2 February, 2000: “vendor of the salted property”. While a discerning reader might also take the alternative meaning that he sold property that was later salted, the question for us is not whether more than one meaning may be taken, but whether a reasonable reader would take the defamatory meaning ascribed to the words by the trial judge. 41 As I have indicated above, although evidence was led as to the meaning of the words complained of, the trial judge declined to make findings as to the meaning of the words complained of based upon that evidence. In the result, the issue framed by Madam Justice Saunders in Ager requires resolution in this case. 42 In The Law on Defamation in Canada, 2nd ed. vol. 5, (Scarborough, Ont.: Carswell, 1994) at pp. 24-43, footnote 239, Raymond E. Brown, comments on Color Your World Corp. v. Canadian Broadcasting Corp. [1998 CarswellOnt 535 (Ont. C.A.)] and finds not only added uncertainty and complexity in the possibility of a bifurcated standard of review, but also problems of potential economic prejudice. He concludes that, if findings made by a judge alone were subject to a less deferential standard of review on appeal, this “might have the effect of prejudicing the position of those who choose or are compelled [by the notably higher costs of jury trials] to try the case to a judge rather than a jury.” 43 This potential economic prejudice exists in any circumstance where a litigant in civil proceedings must choose between trial by judge alone, and trial by judge and jury, and does not persuade me that it should fore- close a different standard of review than that proposed in defamation proceedings. Lawson v. Baines Hinkson J.A. 443

44 However, in footnote 239, Prof. Brown raises a second concern that will apply in some cases, and this is a concern with which I agree: Finally, the decision of the Ontario Appellate Court [in Colour Your World] certainly will have the effect of subverting the fact finding process at the trial level if either the plaintiff or defendant are afforded an additional opportunity to relitigate factual issues on appeal using precisely the same standards as that applied by the trial court. 45 This particular concern would not apply in the present case as the trial judge concluded that Senator Lawson could only succeed if he could establish that the words complained of bear the inferential meaning alleged in paragraph 15 of the statement of claim, or something substantially similar, and there was no evidence upon which the trial judge relied in order to determine the “false” or “popular” innuendo meaning of the words complained of as in Hodgson at para. 37. 46 But the distinction highlights the potential for an even narrower exception to the present standard of review than that proposed, as Prof. Brown’s concern would still exist in cases where the literal meaning of the words complained of is defamatory or in cases where the “legal” or “true” innuendo meaning of the words complained of is defamatory. 47 That said, the major difficulty the proposed bifurcated approach presents, in my view, arises from the distinction that it proposes to make between juries acting as finders of fact and judges performing that same role. In his submissions on this issue, counsel for the appellants were unable to point to any principled reason why, if the standard of review on whether the words complained of should be correctness in a case where the determination of whether the words in fact bear a false or popular innuendo defamatory meaning is made by a judge sitting alone, the standard should not be correctness where that same finding is made by a jury. 48 The inability to identify a principled basis upon which to apply one standard of review to a finding by a judge sitting alone, and a different standard of review where the same finding is made by a jury is problematic. I disagree that we should abandon the deference that appellate courts have traditionally given to judges as finders of fact based on the conditions that may arise due to evidentiary restrictions on determining the popular or false innuendo meaning in defamation actions. When a judge, instead of a jury, is acting as the finder of fact, his or her findings of fact should be afforded the same deference as those a jury would be afforded in performing that same role. 49 This sentiment is echoed in jurisprudence in other jurisdictions such as Grobbelaar v. News Group Newspapers Ltd., [2002] UKHL 40, 444 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[2002] 1 W.L.R. 3024 (Eng. H.L.), at 3052 where Lord Scott of Foscote concluded: In a civil case, the jury, as fact finders, are entitled to the same respect, no more and not less, than that which is due to a trial judge sitting without a jury. The difference is that the trial judge’s reasoning will be, or should be, on the face of the judgement whereas the jury’s reasons, being undisclosed, will need to be reconstructed by the appellate court. Subject to that important difference, however, the factual conclusions of juries in civil cases should, in my opinion, be treated by an appellate court no differently, with no greater and no less respect, than the factual conclusions of judges. 50 The appellants contend that findings of fact of this type made by a judge sitting alone should be subjected to a different standard of review than those made by a jury. Their argument is that, because juries represent the public point of view, their interpretation of the plain meaning of words, where no evidence can be led to explain them, should be given deference by appellate courts; however, as one judge sitting as a trier of fact cannot be considered to have any better means of identifying what the public would take from the words complained of than the three judges on an appellate court, those appellate judges should have the opportunity to review the words complained of as evidence de novo. In my view, this argument is flawed in that it goes against a basic principle of appellate courts, one best expressed by McEachern C.J.B.C. in Leith v. Stockdill, 2000 BCCA 263 (B.C. C.A.) at para. 3: [3] As is well understood by lawyers, but not always understood by litigants or the general public, we do not retry cases in the Court of Appeal. We are subject to very strict rules about the extent to which we can depart from the course of the proceedings in the court below or with the reasons or findings made by the trial judge. 51 Alternatively, if the standard of review of findings of defamation of both judges sitting alone and juries is to be that of correctness, that would be anathema to the traditional function of a jury in this province. In Brit- ish Columbia, a plaintiff has the absolute right to trial by jury in a defamation case, pursuant to Rule 12-6(5) of the Supreme Court Civil Rules, B.C. Reg. 168/2009 and its predecessor Rule 39(27) of the Rules of Court, B.C. Reg. 221/90. 52 The authorities are replete with statements as to the function and utility of civil juries. In Boyd v. Harris, 2004 BCCA 146, 237 D.L.R. (4th) Lawson v. Baines Hinkson J.A. 445

193 (B.C. C.A.) at para. 10, this Court, per Smith J.A., made this comment in relation to civil juries: [J]uries bring to the assessment of the evidence a common sense that derives from wide and varied experiences in life. As well, a jury’s assessment of damages is influenced by the community’s values and its opinions of what would be fair, just, and reasonable in the circumstances. 53 The Supreme Court of Canada, McIntyre J., for the majority in R. v. Mezzo, [1986] 1 S.C.R. 802 (S.C.C.), at 845, described modern jurors serving in a criminal jury as representing “a well-educated, well-informed and experienced cross-section of our society.” This fact enforces their ability to effectively perform their role as the conscience and voice of the community. This argument is equally valid in relation to those who serve on civil juries in defamation cases. 54 The Supreme Court of Canada relied on these same rationales in a defamation case in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 (S.C.C.) at para. 158, where Cory J., for the majority, observed: Jurors are drawn from the community and speak for their community. When properly instructed, they are uniquely qualified to assess the damages suffered by the plaintiff, who is also a member of their community. This is why, as Robins J.A. noted in Walker v. CFTO Ltd. (1987), 59 O.R. (2d) 104 (C.A.), at p. 110, it is often said that the assessment of damages is “peculiarly the province of the jury”. Therefore, an appellate court is not entitled to substitute its own judgment as to the proper award for that of the jury merely because it would have arrived at a different figure. 55 While the statement pertains to the assessment of damages by a jury in a defamation case, it is my view that the reasoning is equally apposite to the interpretation of words complained of where the meaning to be determined is that which the ordinary person, without special knowledge, will infer from the words complained of. 56 I cannot accede to the appellant’s contention that the standard of review from a finding that words complained of are in fact defamatory should be one of correctness, whether it is made by a judge sitting alone, or by a jury. In my view the standard remains one of reasonableness. I therefore decline to accede to the appellant’s second ground of appeal. 446 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

c) Was the Finding that the Words Complained of Were Defamatory Unreasonable? 57 In Hodgson at p. 253, Lane J. stated, Where there are a number of good interpretations, it is unreasonable to seize upon the only bad one to give a defamatory sense to the words in question: Nevill v. Fine Art & General Insurance Co., [1897] A.C. 68 at p. 73, [1895-9] All E.R. Rep. 164 (H.L.); Gatley on Libel and Slander, supra, paras. 120-21 at pp. 64-65; Lewis v. Daily Telegraph Ltd., [1963] 2 All E.R. 151 at p. 155, [1964] A.C. 234 (H.L.). 58 This observation was made in the context of the interpretation of the whole of the article containing the words complained of; the second of the two essential determinations required in a claim for defamation. The observation is equally true when there are but two interpretations. This is clear in light of the comments of the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.) at para. 72, per Iacobucci and Major JJ., for the majority. They state that when, all the evidence necessary was before the trial judge, then, there is a presumption that the trial judge reviewed the evidence in its entirety and that his factual findings were based on this review. This presumption will stand unless further proof is put forward that any omission in his consideration of that evidence was due to misapprehension or neglect of that evidence, and “is consistent with the high level of error required by the test of ‘palpable and overriding’ error.” 59 While he did not and need not have parsed each of the words complained of, nor mentioned each aspect of the column not complained of, the trial judge said (in para. 40 of his reasons) that he had considered the column as a whole. He was not obliged to discuss the entirety of the column in his reasons. 60 The trial judge found that the sting of the libel alleged was that Sena- tor Lawson had engaged in criminal activities by participating in some way in the fraudulent stock scheme and by obtaining personal and unauthorized benefits from making the Teamster’s jet available to Cater and Ward. 61 These inferences were not established by the evidence as being true. 62 The trial judge found, at para 46, that an ordinary person would infer from the last two paragraphs of the words complained of that Senator Lawson played an active role in the Carter/Ward scheme and that the Senator did abuse his office by making the Teamsters’ jet available to Carter and Ward in exchange for receiving shares in their “rigged com- Lawson v. Baines Hall J.A. 447

panies”. Further, he concluded that that impression would be reinforced by the reference to the allegations made against Senator Lawson in the U.S. proceedings. 63 The trial judge also found, at para. 50, that the words dealing with the Teamster jet read by an ordinary person would cause that person to conclude that the words contained in the column meant that Senator Lawson was corrupt in the sense that he had associated with two convicted criminals in their fraudulent scheme, and further, that he had obtained some personal benefit, in the form of free shares, as a result of making the Teamsters’ jet available to Messrs. Carter and Ward. It was the view of the trial judge that the assertion that Senator Lawson engaged in such activities and was closely associated with Mr. Carter would lead an ordinary person to that conclusion. 64 I am unable to reach the conclusion that these findings by the trial judge are unreasonable findings, and cannot accede to the third ground of appeal.

Conclusion 65 I would dismiss the appeal.

Finch C.J.A.:

I agree:

Hall J.A.:

I agree: Appeal dismissed. 448 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[Indexed as: Mraiche Investment Corp. v. Paul] Mraiche Investment Corporation (Appellant / Plaintiff) and McLennan Ross LLP (Respondent / Defendant) and Gurbachan S. Paul, Harjit Neeta Paul, 1396619 Alberta Ltd., Diamond Apartment Laundry Ltd., Robert G. Kent, and Robert G. Kent Professional Corporation, and John Doe (Not a Party to the Appeal / Defendants) Alberta Court of Appeal Docket: Edmonton Appeal 1103-0115-AC 2012 ABCA 95 Keith Ritter, Peter Martin, Jack Watson JJ.A. Heard: January 31, 2012 Judgment: March 20, 2012 Torts –––– Conspiracy — Nature and elements of tort — General principles –––– Plaintiff investment corporation claimed that defendant law firm acted with their client to commit tort of civil conspiracy — Claim was based on assertion that fraudulent conveyances were made with knowledge of lawyers and/or firm — Corporation brought action for civil conspiracy — Law firm brought motion for summary judgment on this claim — Law firm’s motion was successful — Corporation appealed from summary judgment — Appeal dismissed — Standard of review on appeal for summary judgment was reasonableness — If lawyer could be found culpable in conspiracy, there was nothing preventing finding of liability against lawyer in Code of Professional Conduct — There had to be some evidence of all branches of conspiracy test to evade summary judgment — There was no evidence that lawyer was aware of particulars or quantum of claims against co-defendants, nor was there evidence of duty of lawyer to know issues between co-defendants and corporation — There was no evidence that solicitor actively defrauded corporation as creditor in sale of properties — Lawyer took proper steps in sale to ensure closing based on guidelines for closing transactions — There was no triable basis for conspiracy claim and motions judge’s conclusion was completely reasonable. Civil practice and procedure –––– Summary judgment — Requirement to show no triable issue –––– Plaintiff investment corporation claimed that defendant law firm acted with their client to commit tort of civil conspiracy — Claim was based on assertion that fraudulent conveyances were made with knowledge of lawyers and/or firm — Corporation brought action for civil conspiracy — Law firm brought motion for summary judgment on this claim — Law firm’s motion was successful — Corporation appealed from summary judgment — Ap- Mraiche Investment Corp. v. Paul 449

peal dismissed — Standard of review on appeal for summary judgment was reasonableness — If lawyer could be found culpable in conspiracy, there was nothing preventing finding of liability against lawyer in Code of Professional Conduct — There had to be some evidence of all branches of conspiracy test to evade summary judgment — There was no evidence that lawyer was aware of particulars or quantum of claims against co-defendants, nor was there evidence of duty of lawyer to know issues between co-defendants and corporation — There was no evidence that solicitor actively defrauded corporation as creditor in sale of properties — Lawyer took proper steps in sale to ensure closing based on guidelines for closing transactions — There was no triable basis for conspiracy claim and motions judge’s conclusion was completely reasonable. Cases considered: Bank of Montreal v. Tortora (2010), 485 W.A.C. 14, 287 B.C.A.C. 14, 80 C.C.E.L. (3d) 161, 3 B.C.L.R. (5th) 39, 2010 CarswellBC 637, 2010 BCCA 139 (B.C. C.A.) — considered Can-Dive Services Ltd. v. Pacific Coast Energy Corp. (1993), 1993 CarswellBC 445, (sub nom. Can-Dive Services Ltd. v. Pacific Coast Energy Corp. (No. 2)) 28 B.C.A.C. 157, 96 B.C.L.R. (2d) 156, 26 C.P.C. (3d) 395, (sub nom. Can-Dive Services Ltd. v. Pacific Coast Energy Corp. (No. 2)) 47 W.A.C. 157, [1993] B.C.J. No. 2958 (B.C. C.A.) — considered Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd. (1983), [1983] 1 S.C.R. 452, 145 D.L.R. (3d) 385, 47 N.R. 191, [1983] 6 W.W.R. 385, 21 B.L.R. 254, 24 C.C.L.T. 111, 72 C.P.R. (2d) 1, 1983 Car- swellBC 734, 1983 CarswellBC 812, [1983] S.C.J. No. 33 (S.C.C.) — followed Capital Estate Planning Corp. v. Lynch (2011), 2011 CarswellAlta 1247, 51 Alta. L.R. (5th) 67, 337 D.L.R. (4th) 523, 9 C.P.C. (7th) 265, 2011 ABCA 224, 510 A.R. 244, 527 W.A.C. 244, [2011] A.J. No. 820 (Alta. C.A.) — considered DataNet Information Systems Inc. v. Belzil (2010), 2010 ABQB 72, 2010 CarswellAlta 190, 63 C.B.R. (5th) 205, 21 Alta. L.R. (5th) 250, 485 A.R. 301 (Alta. Q.B.) — referred to Desoto Resources Ltd. v. EnCana Corp. (2011), 2011 ABCA 100, 2011 CarswellAlta 502, 44 Alta. L.R. (5th) 253, 79 C.B.R. (5th) 202, 513 A.R. 72, 530 W.A.C. 72, [2011] A.J. No. 355 (Alta. C.A.) — followed Guarantee Co. of North America v. Gordon Capital Corp. (1999), [2000] I.L.R. I-3741, 126 O.A.C. 1, 247 N.R. 97, 49 B.L.R. (2d) 68, [1999] 3 S.C.R. 423, 15 C.C.L.I. (3d) 1, 178 D.L.R. (4th) 1, 1999 CarswellOnt 3171, 1999 Cars- wellOnt 3172, 39 C.P.C. (4th) 100, [1999] S.C.J. No. 60 (S.C.C.) — referred to Knight v. Imperial Tobacco Canada Ltd. (2011), 2011 CarswellBC 1968, 2011 CarswellBC 1969, 2011 SCC 42, (sub nom. British Columbia v. Imperial Tobacco Canada Ltd.) 419 N.R. 1, 86 C.C.L.T. (3d) 1, (sub nom. British 450 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Columbia v. Imperial Tobacco Canada Ltd.) 335 D.L.R. (4th) 513, 21 B.C.L.R. (5th) 215, [2011] 11 W.W.R. 215, 25 Admin. L.R. (5th) 1, (sub nom. British Columbia v. Imperial Tobacco Canada Ltd.) 308 B.C.A.C. 1, (sub nom. British Columbia v. Imperial Tobacco Canada Ltd.) 521 W.A.C. 1, 83 C.B.R. (5th) 169, [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, [2011] A.C.S. No. 42 (S.C.C.) — considered Lonrho Ltd. v. Shell Petroleum Co. (1981), [1982] A.C. 173, [1981] 3 W.L.R. 33, [1981] 2 All E.R. 456 (U.K. H.L.) — considered Maguire v. Calgary (City) (1983), 1983 CarswellAlta 56, 1983 ABCA 121, [1983] 4 W.W.R. 342, 25 Alta. L.R. (2d) 249, 146 D.L.R. (3d) 350, 43 A.R. 268 (Alta. C.A.) — considered Martel v. Spitz (2005), [2005] 6 W.W.R. 623, 2005 ABCA 63, 2005 Carswell- Alta 217, 40 Alta. L.R. (4th) 199, [2005] A.J. No. 176 (Alta. C.A.) — referred to Martel v. Spitz (2005), 2005 CarswellAlta 1131, 2005 CarswellAlta 1132, 391 A.R. 398 (note), 377 W.A.C. 398 (note), 346 N.R. 196 (note), [2005] S.C.C.A. No. 177 (S.C.C.) — referred to Papaschase Indian Band No. 136 v. Canada (Attorney General) (2006), 2006 CarswellAlta 1686, (sub nom. Papaschase Indian Band No. 136 (Descendants of) v. Canada (Attorney General)) [2007] 2 C.N.L.R. 283, (sub nom. Lameman v. Canada (Attorney General)) 404 A.R. 349, (sub nom. Lameman v. Canada (Attorney General)) 394 W.A.C. 349, 66 Alta. L.R. (4th) 243, 2006 ABCA 392, [2007] 2 W.W.R. 440, (sub nom. Lameman v. Canada (Attorney General)) [2006] A.J. No. 1603 (Alta. C.A.) — referred to Papaschase Indian Band No. 136 v. Canada (Attorney General) (2008), (sub nom. Lameman v. Canada (Attorney General)) 372 N.R. 239, [2008] 5 W.W.R. 195, 2008 CarswellAlta 398, 2008 CarswellAlta 399, 2008 SCC 14, [2008] 2 C.N.L.R. 295, 68 R.P.R. (4th) 59, 292 D.L.R. (4th) 49, (sub nom. Canada (Attorney General) v. Lameman) [2008] 1 S.C.R. 372, (sub nom. Lameman v. Canada (Attorney General)) 429 A.R. 26, (sub nom. Lameman v. Canada (Attorney General)) 421 W.A.C. 26, 86 Alta. L.R. (4th) 1, [2008] S.C.J. No. 14 (S.C.C.) — considered Pro-Sys Consultants Ltd. v. Microsoft Corp. (2011), 2011 CarswellBC 930, 2011 BCCA 186, 331 D.L.R. (4th) 671, 304 B.C.A.C. 90, 513 W.A.C. 90 (B.C. C.A.) — referred to Pro-Sys Consultants Ltd. v. Microsoft Corp. (2011), 2011 CarswellBC 3144, 2011 CarswellBC 3145, [2011] S.C.C.A. No. 396, [2011] C.S.C.R. No. 396 (S.C.C.) — referred to Reece v. Edmonton (City) (2011), 2011 ABCA 238, 2011 CarswellAlta 1349, 85 M.P.L.R. (4th) 36, [2011] 11 W.W.R. 1, 335 D.L.R. (4th) 600, 9 C.P.C. (7th) 21, 46 Alta. L.R. (5th) 1, 243 C.R.R. (2d) 230, 513 A.R. 199, 530 W.A.C. 199, [2011] A.J. No. 876 (Alta. C.A.) — referred to Mraiche Investment Corp. v. Paul Per curiam 451

Soleil Hospitality Inc. v. Louie (2011), 2011 CarswellBC 1605, 2011 BCCA 305, 308 B.C.A.C. 122, 521 W.A.C. 122 (B.C. C.A.) — considered Sun-Rype Products Ltd. v. Archer Daniels Midland Co. (2011), 2011 Car- swellBC 931, 2011 BCCA 187, 331 D.L.R. (4th) 631, 305 B.C.A.C. 55, 515 W.A.C. 55 (B.C. C.A.) — referred to Sun-Rype Products Ltd. v. Archer Daniels Midland Co. (2011), 2011 Car- swellBC 3155, 2011 CarswellBC 3156, [2011] S.C.C.A. No. 236, [2011] C.S.C.R. No. 236 (S.C.C.) — referred to Walters v. Clark (2006), 2006 CarswellOnt 3543, 211 O.A.C. 278, [2006] O.J. No. 2328 (Ont. C.A.) — referred to Waters v. Michie (2011), 2011 CarswellBC 2306, 2011 BCCA 364, 22 B.C.L.R. (5th) 275, 3 R.F.L. (7th) 273, 309 B.C.A.C. 305, 523 W.A.C. 305, [2012] 2 W.W.R. 696 (B.C. C.A.) — considered Statutes considered: Fraudulent Preferences Act, R.S.A. 2000, c. F-24 Generally — referred to Rules considered: Alberta Rules of Court, Alta. Reg. 124/2010 R. 7.3(1) — referred to

APPEAL from judgment, reported at Mraiche Investment Corp. v. Paul (2011), 511 A.R. 268, 2011 ABQB 164, 2011 CarswellAlta 434, [2011] A.J. No. 306 (Alta. Q.B.), granting summary judgment to defendant law firm in action brought by plaintiff investment corporation for civil conspiracy.

D.M. Hawreluk, A.L. Archer, for Appellant R.B. Drewry, Q.C., N.D. Tymchuk, for Respondent

Per curiam: I Introduction 1 This appeal raises the question of what sort of evidence is capable of making a case (of sufficient merit to survive summary judgment) that a solicitor, who carried out instructions from a client to transfer some of the client’s property, should be found liable for the tort of conspiracy to defraud a creditor of the client by doing so (by means of fraudulent di- version of assets). 2 The appellant submits that it is sufficient to lead evidence of facts that, if the solicitor knew or ought to have known of them, might have caused that solicitor, not otherwise motivated to do any harm to the creditor, to become suspicious of his own client’s motives in those instruc- 452 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

tions. In sum, the appellant’s position is that a solicitor can be held constructively guilty of the tort of conspiracy by unlawful means. The chambers judge was not persuaded that, on this record, the solicitor (and his law firm) should be held liable for the tort of conspiracy on such a constructive basis. On this record, we agree, and would dismiss the appeal.

II Synopsis 3 The appellant plaintiff corporation asserts that the solicitor here tor- tiously conspired with his client to commit the unlawful conduct, knowingly injurious to the appellant, of defrauding the appellant in its position as a creditor of the client. The appellant characterizes each transfer of four real properties belonging to the client as a fraudulent preference under the Fraudulent Preferences Act, R.S.A. 2000, c. F-24. The appellant became a judgment creditor of the client in Court of Queen’s Bench Action No. 0703-14586 (“Action No. 14586”) after the transfers closed. The appellant’s suit rests on the inferences it asserts should be drawn about the solicitor’s state of mind. The suit was dismissed by a chambers judge by summary judgment: 2011 ABQB 164 (Alta. Q.B.). 4 The appellant’s case rests entirely on the second prong of the test for the tort of civil conspiracy in Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452 (S.C.C.), pp. 471 472. LaFarge, adopting the statement in Lonrho Ltd. v. Shell Petroleum Co. (1981), [1982] A.C. 173, [1981] 2 All E.R. 456 (U.K. H.L.), stated that “the tort, unlike the crime, consists not of agreement but of concerted action taken pursuant to agreement”. LaFarge went on to hold (seemingly with some reluctance as it was discussing a tort of economic loss): It is important to bear in mind, when considering this explanation of the tort of conspiracy by unlawful means, the prior finding of fact that the defendants knew that their conduct, which was directed towards the plaintiff, would injure it. [.....] [and] Although the law concerning the scope of the tort of conspiracy is far from clear, I am of the opinion that whereas the law of tort does not permit an action against an individual defendant who has caused injury to the plaintiff, the law of torts does recognize a claim against them in combination as the tort of conspiracy if: Mraiche Investment Corp. v. Paul Per curiam 453

(1) whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants’ conduct is to cause injury to the plaintiff; or, (2) where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result. In situation (2) it is not necessary that the predominant purpose of the defendants’ conduct be to cause injury to the plaintiff but, in the pre- vailing circumstances, it must be a constructive intent derived from the fact that the defendants should have known that injury to the plaintiff would ensue. In both situations, however, there must be actual damage suffered by the plaintiff. 5 The appellant says that a trial court could arguably find that the solicitor knew or ought to have known enough about the relevant facts to be found to have a mental state equivalent to the conspiracy as alleged. This meant consciously and volitionally engaging in concerted action with the client to unlawfully carry out a fraudulent preference knowing that the appellant would suffer injury as a result. We assume that the appellant put its “best foot forward” in support of this position before the chambers judge. 6 In its pleadings, the appellant asserted facts which the appellant says would have (a) come to the attention of the solicitor and (b) informed any competent solicitor to the questionable nature of the transfers. The chambers judge rejected the appellant’s assertions that the alleged facts, if proven, as to the transactions carried out by the solicitor were sufficient to construct a case of conspiracy by the solicitor to do economic harm to the appellant by unlawful means and that the conspiracy was executed. On appeal, the appellant says that the chambers judge seriously misconceived those circumstances and more generally was wrong about their overall legal effect. 7 The respondent law firm asserts that, even taking the available evidence in a manner most favourable to the appellant, the conduct of the solicitor was no worse than the solicitor’s failure to ask his client questions. It says that questions might, indeed, have occurred to a different prudent solicitor as concerns arising from the client’s instructions; or they might not. 8 Because the solicitor was not alleged by the pleadings to have had any contractual duty to the appellant, nor any fiduciary duty to the appellant, nor any proximity with the appellant within the law of negligence, 454 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

the respondent suggests it was a legal leap too far to characterize possible mis-judgment or professional misconduct by the solicitor (neither of which was conceded) into tortious conspiracy. After all, every client of every lawyer probably has creditors, some of whom may have significant and unanswerable claims — of which the solicitor is or ought to be aware. 9 In sum, the firm submits that there is no triable case that the solicitor committed the tort of conspiracy with the client to do harm to the appellant by unlawful means. It does not dispute that a solicitor might be guilty of the tort of conspiracy to do harm to an identified individual by unlawful means even if the solicitor’s only active participation is in carrying out instructions of a client. But the firm says there is no triable case involving evidence of the culpable meeting of the minds which is necessary in law to implicate the solicitor as a conspirator in concerted action pursuant to agreement with a shared intent to cause injury to the appellant. 10 The law firm rejects the submission that there can be constructive liability for the tort of conspiracy to do harm by unlawful means to an identified person. To do so would convert the tort into a form of liability in negligence that steps around the exclusion of proximity in the present facts. The law firm contends that there is no basis in this record to find that this solicitor was obliged to police the actions and motives of his client in these circumstances. The firm submits that failure of the solicitor to do such policing should not be constructed in law as equivalent to concerted action taken pursuant to an unlawful agreement by the solicitor with the client.

III Evidential Context 11 The chambers judge struck the appellant’s suit against the law firm pursuant to Rule 7.3(1) of the Alberta Rules of Court AR 124/2010. The chambers judge found that the “claim of fraud against McLennan Ross is purely speculative and has no chance of success.” In his view, it had “no merit” and that, in accordance with Papaschase Indian Band No. 136 v. Canada (Attorney General), 2008 SCC 14, [2008] 1 S.C.R. 372 (S.C.C.) [Lameman], it should be “weeded out”. For the purposes of these reasons, we also are prepared to assume (as did the chambers judge) that the allegations of the appellant in the statement of claim even if not fleshed out in the affidavits and materials before the chambers judge were prova- ble as fact: Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 (S.C.C.) (“The court must rather ask whether, assum- Mraiche Investment Corp. v. Paul Per curiam 455

ing the facts pleaded are true, there is a reasonable prospect that the claim will succeed.”). A summary of the facts follows. 12 Other defendants in the appellant’s action against the law firm were spouses G.S. Paul and H.N. Paul and 1396619 Alberta Ltd. (“1396619”). 1396619 was incorporated by the solicitor, D. Fialkov, based on instructions from G.S. Paul on April 22 to 23, 2008. Also on April 23, 2008, the solicitor opened four files for transfer of four real properties that then belonged to a company called Premier City Investments Ltd. (“Premier”) of which G.S. Paul was the sole director, then ultimately to a company called Newcastle Construction (1994) Inc. (“Newcastle”). The principal of the appellant, Mraiche Investment Corporation, is S. Mraiche. 13 On April 22, 2008, Fialkov was informed by G.S. Paul about two further potential issues relating to two unrelated apartment / condomin- ium buildings which the appellant says would have exposed G.S. Paul or Premier to claims of $800,000. The appellant asserts that “McLennan Ross was aware of at least 4 claims against Premier and Mr. Paul totaling in excess of $15 million”: Factum, para. 22. This assertion is a conclusion, not evidence, as to what Fialkov knew in April of 2008. Linked to this is the fact that examinations of G.S. Paul and S. Mraiche are said to have been scheduled within a week of April 23, 2008. 14 Fialkov did the legal work on transfers of the four properties from Premier to 1396619. Two of the transfers occurred on May 8, 2008 and on May 9, 2008 respectively. Those transfers from Premier to 1396619 were for nominal sums, namely $10 per property. The appellant says that on the face of such transfers, creditors of Premier, or for that matter the Minister of National Revenue if interested would not be mystified about the nature of each transfer. Fialkov acknowledged that he did not inform the lenders on title that the four properties were being transferred and that he had no instructions from G.S. Paul to inform the lenders. He did not recall why he did so. He was aware that eventually the properties were to be transferred to Newcastle for $1,600,000. 15 H.N. Paul, wife of G.S. Paul, was the sole shareholder and director of 1396619. She professed on examination not to have found out about the incorporation of 1396619 or the transfer of the properties until around August 8, 2008 and that she received no advice from the solicitor about the transfers before then. Her signature purports to appear on many documents as to 1396619 as “effective” on April 23, 2008 [A58-A102]. She acknowledged signing a Directors’ Resolution for 1396619 putatively dated June 25, 2008, authorizing G.S. Paul to sign any documents necessary to allow 1396619 to deal with the four properties [A86]. H.N. Paul 456 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

also professed to having received no advice from Fialkov as to the meaning of that Resolution before August, 2008. 16 Against this, there is no evidence that it was communicated to Fi- alkov between April and August, 2008, that H.N. Paul was not in Canada in April, 2008 or that H.N. Paul was not aware of the incorporation of 1396619 or the planned transfers from Premier to 1396619. Nor was there evidence that Fialkov should have questioned G.S. Paul’s acting for his wife. 17 Fialkov’s affidavit agreed that he took instructions initially only from G.S. Paul and thereafter from both spouses. As of November 13, 2007, Premier along with G.S. Paul was being sued by the appellant on Action No. 14586. The appellant’s claim on Action No. 14586 centred on the appellant’s investment advances made to Premier on other properties. The total of those advances was $1,500,000. Action No. 14586 was ultimately settled by consent judgment for $2,500,000 plus costs against both Premier and G.S. Paul and two other companies on October 2, 2008 [A290]. Fialkov swears that he was unaware of the particulars of the dispute involving G.S. Paul, and unaware that the consent judgment had been entered until March, 2009. A different lawyer in the respondent law firm, J. Rossall, acted for Premier and G.S. Paul in relation to Action No. 14586 from the inception of that suit until Rossall withdrew as of Sep- tember 16, 2008 [A238]. 18 The appellant contends that a letter dated June 25, 2008 from Rossall to G.S. Paul which was copied to Fialkov referred to the examinations for discovery in Action No. 14586. Based on this letter copy, the appellant says Fialkov would know of “litigation on behalf of Mr. Paul”. The letter’s title line refers only to “Mraiche Investment Corporation” and the content refers to “an examination for discovery of Mr. Mraiche”. This was not a smoking gun. That letter does not contradict Fialkov’s assertion that he knew nothing of the particulars of Action No. 14586. 19 Between July 31, 2008 and August 6, 2008, Fialkov received copies of the listing agreement and the real estate purchase contract and related documents regarding the sale of the four properties to Newcastle. The appellant characterizes as suspicious the fact that the contract named Pre- mier as vendor and as the party to whom a deposit of $75,000 was to be released. The appellant says it is suspicious that no assignment was then in existence between 1396619 and Premier and Fialkov did not do anything about that until a date on or around August 8, 2008, when H.N. Paul signed the Directors’ Resolution for 1396619 which authorized G.S. Mraiche Investment Corp. v. Paul Per curiam 457

Paul to act for 1396619 on the sale of the four properties, and authorized G.S. Paul to receive the deposit in trust for 1396619. 20 On or about August 18, 2008, Fialkov completed the transfer of the four properties from 1396619 to Newcastle for a total price of $1,600,000 which included a vendor take back mortgage of $200,000. After paying out the mortgages, taxes and legal accounts and discharging a caveat, Fialkov paid the remaining proceeds of $250,000 to 1396619, with the further $200,000 owing to 1396619 being on the take back mortgage. Some time later G.S. Paul went to India. There is no evidence Fialkov was aware that he left. 21 Fialkov continued to do work for G.S. Paul after Rossall withdrew in September, 2008. Fialkov swears that he was not aware of Rossall having withdrawn. Fialkov prepared a trust document on October 1, 2008, which trust document was backdated to April 29, 2008. The trust document was to say that as of April 29, 2008, the four properties were held in trust for Premier by 1396619, with beneficial ownership of the properties solely in Premier. The appellant proposes that this was another suspicious element of the interaction between Fialkov and G.S. Paul. This was well after the alleged fraudulent conveyance of the properties. There is no evidence whether this trust document was executed. H.N. Paul on examination denied any awareness of these trust arrangements prior to the trust document being prepared. Fialkov swears that he received his instructions to prepare the trust document from H.N. Paul. 22 On November 26, 2008, 1396619 sold the $200,000 vendor take back mortgage on the four properties to Canadian Mutual Acceptance Corpo- ration for $146,000. The appellant says that it was unable to capture through Premier any of the $250,000 proceeds of sale of the four properties. There is no evidence that Fialkov was aware of the sale of the take back mortgage. 23 The solicitor’s affidavit on the present motion asserts, inter alia, as follows: 2. In the fall of 2007 I became aware that Jon Rossall of McLennan Ross LLP was acting for one or more of Dr. Paul, Mrs. Paul and / or Premier Investments in connection with a dispute with Mraiche In- vestment Corporation but I was not aware that Mraiche had commenced the ‘Negligence Action’ [14586] referred to in paragraph 28 of the within Statement of Claim prior to March of 2009 when the within action was commenced. Prior to that time I knew nothing of the particulars of the Negligence Action, the status of that Action or the details of any dispute between Mraiche Investment Corporation 458 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

and Dr. Paul or Premier City Investments Ltd. At no time had I discussed the Negligence Action with Dr. Paul or Mrs. Paul. Nor was I made aware that Jon Rossall and McLennan Ross LLP had ceased to act for Premiere [sic] Investments and Dr. Paul and Premier Invest- ments Ltd. [sic] in September 2008 in the Negligence Action or that the Defendants in that action granted a consent judgment to Mraiche in that action in December 2008. 24 Other aspects of the Fialkov affidavit are noted below. The respondent on appeal submits that the snippets of the examination of H.N. Paul as a defendant are not properly admissible on the motion or the appeal as evidence against Fialkov. We do not find it necessary to deal with this procedural point as we find that the evidence does not advance the appellant’s position in any event.

IV Reasons of the Chambers Judge 25 The chambers judge was entitled to draw inferences on undisputed facts before him: Lameman at para. 11 (“The chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts: Guarantee Co. of North America v. Gordon Capital Corp. [1999 CarswellOnt 3171 (S.C.C.)], at para. 30.”) Cˆot´e JA of this Court in his decision in Lameman at 2006 ABCA 392, 66 Alta. L.R. (4th) 243 (Alta. C.A.) at para. 95 added that “summary judgment does not permit choosing among competing reasonable inferences arising from the primary facts in evidence: Walters v. Clark (2006), 211 O.A.C. 278 (Ont. C.A.), 279 (para. 6). But that did not occur here.”. As in Lameman, the chambers judge here was entitled to consider the evidence in the round on the crucial issues. 26 The chambers judge acknowledged that merely because a lawyer is acting in accordance with instructions from his client is not exemptive, if in so doing the law is actually engaged in the tort of conspiracy to harm by unlawful means. The chambers judge proceeded on the assumption, solely for the purposes of argument, that the conduct of G.S. Paul involved an effort to effectuate a fraudulent preference expressly to the disadvantage of the appellant: 2011 ABQB 164 (Alta. Q.B.) at para. [16]. 27 The appellant’s principal, S. Mraiche, on examination on his affidavit, effectively conceded that his position was mounted on interpretation of the circumstances. He pointed to no evidence in the appellant’s possession showing an actual agreement by the solicitor to conspire to injure let alone to defraud the appellant (R7-R10): 2011 ABQB 164 (Alta. Q.B.) at para. [9]. The chambers judge also noted the content of Fi- Mraiche Investment Corp. v. Paul Per curiam 459

alkov’s affidavit: at para. [8]. He summarized the appellant’s assertions: at paras. [3] to [7]. There does appear to be error in one aspect of his summary of the appellant’s position but we do not find it to be significant in the outcome: see below. 28 The appellant contends that the chambers judge ignored or misappre- hended the affidavit of S. Mraiche in reaching his conclusion that the appellant’s ‘best foot forward’ provided no evidence of such an agreement being reached, let alone an agreement being effectuated and only provided speculation. The elaborate affidavit of S. Mraiche with exhibits as provided to the chambers judge (and to this court as the appellant’s extracts [A1-A292]) consists essentially of a concatenation of available records, correspondence, portions of examination of some witnesses, and the principal’s interpretive argument. Despite one error, the reasons of the chambers judge, read fairly, reveal that he was fully conscious of all this material. 29 Against this was the sworn denial of the solicitor including that aspect quoted earlier in these reasons. The solicitor asserted under oath other details of his involvement with his clients which conform with the other documentary evidence and correspondence. He denied knowledge of the particulars of Action No. 14578. He denied under oath having any awareness of any insolvency on the part of Premier, 1396619 or the Pauls “or that any of the aforesaid were taking steps to convey property of any sort, including the Lands, to avoid the claims of any creditor”. He specifically denied that any of them told him they were incapable of paying their debts or that the conveyance of the lands was undertaken to avoid the claims of any creditors. 30 The chambers judge’s decision at 2011 ABQB 164 (Alta. Q.B.), paras. [3] - [4] addressed the interpretive contentions of the appellant seria- tim. The appellant says that the chambers judge erred in stating that the four properties being transferred were actually subject matter of Action No. 14578. The appellant says that this is significant because Premier had equity in those properties and had no equity in the properties that were the subject matter of Action No. 14578. We find no significance to this error. The balance of the reasons of the chambers judge makes it clear that he appreciated that the question was whether Fialkov conspired in a fraudulent preference scheme that, for the sake of argument, the chambers judge assumed against G.S. Paul. 460 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

V Standard of Review 31 The standard of review was put this way in EnCana [Desoto Resources Ltd. v. EnCana Corp., 2011 CarswellAlta 502 (Alta. C.A.)]: [19] The parties agree that the standard of review of a decision to grant summary judgment is reasonableness, and that the identifica- tion of the legal test for summary judgment is a question of law for which the standard of review is correctness: Tottrup v. Clearwater (Municipal District No. 99), 2006 ABCA 380, 68 Alta. L.R. (4th) 237 at para. 8. An appeal court reviewing a summary judgment decision will be reluctant to interfere where the chambers judge has stated and applied the proper principles and where there was evidence to support the findings made and inferences drawn: De Shazo v. Nations Energy Co., 2005 ABCA 241, 48 Alta. L.R. (4th) 25 at para. 16; Wolfert v. Shuchuk, 2003 ABCA 109, 15 Alta. L.R. (4th) 5 at para. 9. Absent palpable and overriding error, findings of fact and inferences drawn will not be overturned: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235at para. 10; Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd., 2010 ABCA 126, 25 Alta. L.R. (5th) 221 at para. 10; De Shazo, supra; Wolfert, supra. See also: Murphy Oil Co. v. Predator Corp., 2006 ABCA 69, 384 A.R. 251at para. 23; Wolfert v. Shuchuk, 2003 ABCA 109, 15 Alta. L.R. 5th 5 at para. 9; Samson Indian Band v. Chevron Canada Re- sources, 2009 ABCA 180, 6 Alta. L.R. 5th 5; Milavsky v. Milavsky, 2011 ABCA 231, at paras. 13 to 16 (quoting) De Soto Resources Ltd. v. Encana Corporation, 2011 ABCA 100, 44 Alta. L.R. 5th 253 at para. 19; Reece v. Edmonton (City), 2011 ABCA 238at paras. 9 to 10 (majority) and at paras. 132 to 133 (dissent); Gayton v. Lacasse,, 2010 ABCA 123, 482 A.R. 179 at para. 9. 32 In this case, the decision as to summary judgment turned on the defin- itive elements of the conspiracy tort rather than on whether there was an overwhelming shortfall in the reliability and sufficiency of the available evidence. As such, this was a decision which evaluated the overall effect of the available evidence and pleadings vis-`a-vis those defined elements and thus involved the extricable question of law as to the definition. It therefore attracts correctness review. 33 A brief side-step seems to be necessary. When a court tunes in on the concept of “no reasonable prospect of success” as mentioned in the pleadings case of Imperial Tobacco, it does so with consideration of reasonable viability in law even if the law is not settled: see e.g. Reece v. Edmonton (City) [2011 CarswellAlta 1349 (Alta. C.A.)], supra; Imperial Tobacco at para. 21 (“The law is not static and unchanging. Actions that Mraiche Investment Corp. v. Paul Per curiam 461

yesterday were deemed hopeless may tomorrow succeed.”) Thus, neither mere novelty of a viable claim, nor the mere fact the available evidence on the crucial matters may be debatable should drive a bona fide claimant from the judgment seat in pleadings challenge cases. A motion for summary judgment could well turn on a similar question as to the legal viability of the action. 34 In the case at bar, there is no doubt about the definition of the tort of conspiracy to injure by unlawful means. So tort novelty is not directly an issue here. But the appellant’s argument amounts to a contention that the conspiracy tort can be made out constructively at virtually every point in the required analysis. If that argument succeeded on the record before the chambers judge, it would, as the respondent says, arguably expand the definition of the tort as set out in LaFarge by including within it a form of liability in negligence in substitution for actual conspiracy. We note, however, that the appellant does not directly ask this court to re-engineer the conspiracy tort (assuming we were empowered to do so). That being so, we hasten to say that we are not addressing the complex question of whether the essential ingredients of the conspiracy tort should be re-cast to substitute different ingredients for what the law now requires. That can wait for another day. 35 Returning to this case, we note that although the appellant contends that there is a crucial difference between the position of the appellant and the position of the respondent on material issues of fact, we find that both sides are essentially arguing on common ground. As the respondent says, the appellant’s case rests entirely on suspicions of the appellant contrived from the basic facts indicated by the documents, transactional history, and evidence. The respondent says there is no actual evidence of any entry into a conspiracy by Fialkov and that is that.

VI Discussion 36 As noted above, the chambers judge assumed for argument’s sake that a solicitor can be found to be culpable in a conspiracy tort to assist a client in fraudulent conveyances to do harm to a specific creditor of the client of which the solicitor is aware, depending on the available evidence. He was satisfied that if such conspiracy tort could be proven, the solicitor would not be shielded by the Code of Professional Conduct for lawyers in so doing: see e.g. DataNet Information Systems Inc. v. Belzil, 2010 ABQB 72, 485 A.R. 301 (Alta. Q.B.) at para. 91. 37 Indeed, the Law Society of Alberta Code of Professional Conduct and the Canadian Bar Association Code of Professional Conduct indicate that 462 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

lawyers must guard against becoming the tool of an unscrupulous client. On the other hand, a lawyer for the defendant in a lawsuit does not have a general duty of care towards the plaintiff in that suit; such duties as may exist are interpreted strictly or else the adversarial system would become impossible: see e.g. Martel v. Spitz, 2005 ABCA 63, 40 Alta. L.R. (4th) 199 (Alta. C.A.), leave denied [2005] S.C.C.A. No. 177 (S.C.C.). 38 As noted above, the form of conspiracy tort asserted by the appellant is exclusively in the second category described by LaFarge. Bank of Montreal v. Tortora, 2010 BCCA 139, 287 B.C.A.C. 14 (B.C. C.A.), at para. rejected the submission that the LaFarge test could include a “third category of conspirator: someone who does not meet either of the first two branches of the test, but is drawn in because of his familial or business relationship with another conspirator”. 39 The LaFarge test was also raised in a fraudulent conveyance situation in Waters v. Michie, 2011 BCCA 364, 309 B.C.A.C. 305 (B.C. C.A.). The conspiracy tort was again noted there to be an anomaly. Although the pleading of conspiracy there raised no reasonable claim, in part in light of the doctrine of merger, Waters does not assist either side here other that to point out that the form of suit is far from ‘novel’ within the meaning of Imperial Tobacco. Rather, it is controversial and has been for a considerable time because it is anomalous in its character. 40 It is important to read LaFarge accurately as to what constitutes this unusual form of economic tort. In Can-Dive Services Ltd. v. Pacific Coast Energy Corp. (1993), 96 B.C.L.R. (2d) 156, 26 C.P.C. (3d) 395 (B.C. C.A.), McEachern CJBC wrote: 5 Accordingly, the following elements must be proved: 1. an agreement between two or more persons; 2. concerted action taken pursuant to the agreement; 3. (i) if the action is lawful, there must be evidence that the conspirators intended to cause damage to the plaintiff; (ii) if the action is unlawful, there must at least be evidence that the conspirators knew or ought to have known that their action would injure the plaintiff (i.e., constructive intent); 4. actual damage suffered by the plaintiff. 41 This summary was affirmed in Soleil Hospitality Inc. v. Louie, 2011 BCCA 305, 308 B.C.A.C. 122 (B.C. C.A.) at para. 111, where the trial Mraiche Investment Corp. v. Paul Per curiam 463

judge found the unlawful means to include fraud, perjury and breach of court orders. See also Pro-Sys Consultants Ltd. v. Microsoft Corp., 2011 BCCA 186, 331 D.L.R. (4th) 671 (B.C. C.A.), leave granted [2011] S.C.C.A. No. 396 (S.C.C.), and Sun-Rype Products Ltd. v. Archer Daniels Midland Co., 2011 BCCA 187, 331 D.L.R. (4th) 631 (B.C. C.A.), leave granted [2011] S.C.C.A. No. 236 (S.C.C.) where a divided Court of Appeal found no cause of action. 42 It is clear, as noted in Capital Estate Planning Corp. v. Lynch, 2011 ABCA 224, 510 A.R. 244 (Alta. C.A.) that direct evidence of conspiracy will not be the usual case: 81 Capital Estate correctly pointed out that direct evidence is rarely available to prove the essential agreement between the parties, so that resort must be had to circumstantial evidence. However, the evidentiary difficulty faced by the appellant does not relieve it of adducing at least some evidence from which it may be inferred that there was an intentional participation by the parties with a view to the further- ance of a common design. Here, there is none. 43 So the question on a summary judgment motion is whether there is any triable case of evidence on all of the essential ingredients of the conspiracy tort. It is not enough that there is some evidence of some parts of the tort if there is no evidence of any one or more essential ingredients. What is important in the present context is the existence of an actual agreement. The artificial imposition of a deemed agreement arising from a purely constructively determined ‘ought to know’ state of mind would make this tort so elastic as to make it mere negligence without proximity, privity, or fiduciary duty. This Court in Maguire v. Calgary (City), 1983 ABCA 121, 43 A.R. 268, [1983] 4 W.W.R. 342 (Alta. C.A.) at paras. 11 to 13 said: 11 The wording “concerted action taken pursuant to agreement” was used by Lord Diplock in Lonrho et al. v. Shell Petroleum Co. et al., [1981] 2 All E.R. 456, at 463. 12 In order to be found to be a party to a conspiracy one must know the facts of the alleged agreement or combination and intend to be a party to the “combining”. This principle was adopted by the English Court of Appeal in Belmont Finance Corp. v. Williams Furniture et al. (No. 2), [1980] 1 All E.R. 393, wherein both Buckley, L.J., and Waller, L.J., referred to Churchill v. Walton, [1967] 2 A.C. 224, approving the words of Viscount Dilhorne at p. 237: 464 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

... I would say that mens rea is only an essential ingredi- ent in conspiracy in so far as there must be an intention to be a party to an agreement to do an unlawful act; that knowledge of the law on the part of the accused is immaterial and that knowledge of the facts is only material in so far as such knowledge throws a light on what was agreed. (emphasis added) (Leave to appeal this decision of the British Columbia Court of Appeal to the Supreme Court of Canada has been granted). [See 47 N.R. 191 for the decision of the Supreme Court of Canada re- versing the British Columbia Court of Appeal.] 44 These passages from Maguire bring to the fore the appellant’s argument for a constructive form of agreement. This arises, inter alia, in the appellant’s contention that Fialkov should be taken to have realized that G.S. Paul and / or Premier were being sued for as much as $15,000,000 not merely by the appellant but by other creditors. There is no evidence that Fialkov was aware of any such parlous economic state of G.S. Paul and / or Premier. 45 The appellant contends that Fialkov should have become aware of economic embarrassment of G.S. Paul and / or Premier initially by reason of potential claims by persons other than the appellant. That element of the appellant’s argument is another reflection of the constructive manner in which the appellant would define the evidence for this tort. The appellant in effect suggests that the tort of conspiracy to injure a plaintiff creditor by unlawful means can be made out without reference to a specific agreement to harm that specific plaintiff so long as the solicitor should have known that some creditor[s] of the client were pressing the client for money, even if the solicitor does not know who they are. 46 A moment’s reflection reveals that such reasoning seems to extend the concept of the ‘target group’ referred to in the English cases in Maguire. It is not necessary for this Court to grapple with this interesting point whether a conspiracy tort grounded on the execution of an agreement to defraud a specific creditor can be made out on evidence that the solicitor might have been aware of claims of other creditors. We note only that the argument perhaps re-engages the tort with its root in trade competition cases. It raises the question of whether the tort can be made out towards a foreseeable category of plaintiff who will be injured as a result of the clear agreement and unlawful conduct of the conspirators: see Sun-Rype Products and Pro-Sys Consultants. Perhaps those cases Mraiche Investment Corp. v. Paul Per curiam 465

will shed light on this aspect of the conspiracy tort. We need not resolve the question here because the appellant appears to contend that the solicitor should be held liable in a conspiracy to specifically harm the appellant. We take it that the reference to other creditors should be taken only to be a contextual factor that the appellant says should be added to the basis of imposing on the solicitor a state of mind that he ought to have known that the specific appellant would be injured by the conduct of the solicitor’s client. 47 The generality of the ‘target group’ claimed by the appellant is, indeed, reflected in the first “badge of fraud” which the appellant asserts relates to the chambers’ judge’s finding that there was “no evidence that Mr. Fialkov had any knowledge of Mr. Paul’s financial status”: 2011 ABQB 164 (Alta. Q.B.) at para. [26]. The appellant asserts in a con- clusory way that “Mr. Fialkov was aware of numerous claims against Premier, including the negligence Action and two further potential claims totaling approximately $15,000,000.”: Factum, para. 62. The chambers judge found no evidence of that actual awareness. There is no palpable and overriding error in that finding. Imbedded in this is the appellant’s suggestion that Fialkov could have figured out the creditor risks of the client by asking around the firm. The chambers judge was not persuaded that on these facts there was enough to create in the solicitor the equivalent of a conspirator’s state of mind on that basis. 48 We find no error in the chambers’ judge conclusion that there was no evidence that Fialkov was aware of the particulars or quantum of claims against G.S. Paul or Premier, nor was there any pleading or evidence supporting a duty on the part of Fialkov to find out what the issues were between G.S. Paul or Premier and Mraiche. While the appellant says there is no evidence that Fialkov would have believed G.S. Paul was a “Condo King” in Edmonton, that is neither here nor there. The chambers judge merely said, reasonably on the material before him, that there was no evidence that Fialkov knew that G.S. Paul or Premier was insolvent. 49 The appellant’s second “badge of fraud” is an allegation that the sale of the four properties by Premier to 1396619 was done in haste. The appellant says that the chambers judge was not correct to conclude that because the sale to Newcastle did not close until August 18, 2008, there was no haste. The chambers judge did not err in finding that the transfers to Newcastle were not done in haste, at least from the point of view of putting the solicitor into the conspiracy tort frame. 50 It was the transfers to Newcastle which turned the equity of G.S. Paul and Premier into cash. The nominal transactions in the meantime from 466 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Premier to 1396619 are unexplained and perhaps inexplicable. But in any event they would not have been difficult to trace or unwind. The process of involving 1396619 seems doubly curious when G.S. Paul expended legal fees in October, 2008, to engage Fialkov to backdate a trust agreement so as to make even more obvious that it was Premier’s beneficial interest in the properties that passed through 1396619 to Newcastle. But this after fact evidence is not evidence of an actual agreement by the solicitor to defraud the appellant as a creditor months earlier. 51 This raises the third “badge of fraud” accused by the appellant here, namely the nominal price for the transfer to 1396619. Once again, Fi- alkov was under instructions that the four properties were being transferred ultimately to Newcastle. This bare title interlude with 1396619 had no obvious effect (or reason for that matter). Premier owned the properties to begin with. Fialkov in the regular manner paid off the mortgage holders and taxes and caveators on the properties when closing those transactions almost four months after being instructed to do so. We find nothing in this to contradict Fialkov’s assertion that he was unaware that G.S. Paul or Premier was doing anything fraudulent to put assets out of the appellant’s reach by these steps. 52 As noted above, we do not find any significance to the chambers’ judge’s error about the four properties being associated with the earlier Action No. 14578. Indeed, had the properties been tied into that suit, it might have been somewhat more suspicious at least from the point of view of G.S. Paul. It is not plain how the difference enhances the evidence of Fialkov’s knowledge of any significant facts such as to constructively immerse Fialkov in a fraudulent conspiracy. 53 We do not need to discuss the chambers judge’s observations about lack of proof of damages. While we agree with him on the evidence in this case that the appellant’s damages claim seems doubtful on causation grounds, it may be that unwinding a fraudulent preference might involve a claim of damages in terms of legal costs. That said, we refrain from getting into the topic of damages. 54 We also find the references by the appellant to professional obligations by solicitors do not advance the appellant’s argument, and we elect not to elaborate on them. What the Law Society of Alberta might make of this situation is up to that Society. 55 Finally, much of the appellant’s argument is aimed at showing that a fraudulent preference by a debtor is sufficiently unlawful conduct to support a claim of the tort of conspiracy to do harm by unlawful means. It is Mraiche Investment Corp. v. Paul Per curiam 467

not necessary to be elaborate on that issue. We have considered this appeal as if that foundational element of the appellant’s claim had validity. In the end result, it makes no difference as the chambers judge concluded correctly that there was no evidence of the requisite elements of the alleged conspiracy. 56 As a consequence, we agree with the chambers judge that there is simply no triable basis for finding that Fialkov entered into a conspiracy to injure Mraiche by unlawful means.

VII Conclusion 57 The appeal is dismissed. Appeal dismissed. 468 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[Indexed as: R. v. Marsland] Jason Cody Marsland (Appellant) and Her Majesty the Queen (Canada) (Respondent), Her Majesty the Queen (Saskatchewan) (Respondent) Saskatchewan Court of Appeal Docket: CACR2026 2012 SKCA 47 Smith, Ottenbreit, Caldwell JJ.A. Heard: March 22, 2012 Judgment: April 25, 2012 Natural resources –––– Fish and wildlife — Offences — Illegal possession — Wildlife –––– Accused raised deer in Alberta and sold them to hunt farms — Accused, for several years, sold to operation located on First Nation reserve in Saskatchewan — Operation did not have provincial licence to import wildlife — Accused was charged with transporting and possessing deer without permit contrary to Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act (WAPPA), and with importing without permit under Wildlife Act, 1998 (WA) — Accused would be exempt from liability under WAPPA if and only if he complied with WA — Judge acquitted accused on basis that import permit could not be obtained under WA — Alternatively, judge found that defence of due diligence was made out — Crown appealed — Appeal was allowed — Accused appealed with Court of Appeal — Appeal allowed in part — Accused’s appeal from conviction dismissed — Summary conviction judge mistakenly applied amendment to WAPPA, and costs reduced to $100.00 — Summary conviction appeal judge did not err in his analysis of whether accused had obligation to obtain permit pursuant to WA — Accused was mistaken as to whether WA applied and whether he had legal obligation to obtain permit under WA — Accused’s legal inquiries were minimal at best and concerned existence of obligation to obtain permit and its interpretation and not its fulfilment. Natural resources –––– Fish and wildlife — Offences — Sentencing — Fines –––– Accused raised deer in Alberta and sold them to hunt farms — Ac- cused, for several years, sold to operation located on First Nation reserve in Sas- katchewan — Operation did not have provincial licence to import wildlife — Accused was charged with transporting and possessing deer without permit contrary to Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act (WAPPA), and with importing without permit under Wildlife Act, 1998 (WA) — Accused would be exempt from liability under WAPPA if and only if he complied with WA — Judge acquitted accused on R. v. Marsland 469

basis that import permit could not be obtained under WA — Alternatively, judge found that defence of due diligence was made out — Crown appealed — Appeal was allowed — Accused appealed with Court of Appeal — Appeal allowed in part — Accused’s appeal from conviction dismissed — Summary conviction judge mistakenly applied amendment to WAPPA, and costs reduced to $100.00 — Summary conviction appeal judge did not err in his analysis of whether accused had obligation to obtain permit pursuant to WA — Accused was mistaken as to whether WA applied and whether he had legal obligation to obtain permit under WA — Accused’s legal inquiries were minimal at best and concerned existence of obligation to obtain permit and its interpretation and not its fulfilment. Natural resources –––– Fish and wildlife — Offences — Taking without a licence –––– Accused raised deer in Alberta and sold them to hunt farms — Ac- cused, for several years, sold to operation located on First Nation reserve in Sas- katchewan — Operation did not have provincial licence to import wildlife — Accused was charged with transporting and possessing deer without permit contrary to Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act (WAPPA), and with importing without permit under Wildlife Act, 1998 (WA) — Accused would be exempt from liability under WAPPA if and only if he complied with WA — Judge acquitted accused on basis that import permit could not be obtained under WA — Alternatively, judge found that defence of due diligence was made out — Crown appealed — Appeal was allowed — Accused appealed with Court of Appeal — Appeal allowed in part — Accused’s appeal from conviction dismissed — Summary conviction judge mistakenly applied amendment to WAPPA, and costs reduced to $100.00 — Summary conviction appeal judge did not err in his analysis of whether accused had obligation to obtain permit pursuant to WA — Accused was mistaken as to whether WA applied and whether he had legal obligation to obtain permit under WA — Accused’s legal inquiries were minimal at best and concerned existence of obligation to obtain permit and its interpretation and not its fulfilment. Cases considered by Ottenbreit J.A.: Lévis (Ville) c. Tétreault (2006), 36 C.R. (6th) 215, 2006 CarswellQue 2911, 2006 CarswellQue 2912, 2006 SCC 12, 31 M.V.R. (5th) 1, (sub nom. Lévis (City) v. Tétreault) 346 N.R. 331, 207 C.C.C. (3d) 1, [2006] 1 S.C.R. 420, (sub nom. Lévis (City) v. Tétreault) 266 D.L.R. (4th) 165, [2006] S.C.J. No. 12 (S.C.C.) — followed R. v. Greenwood (1986), 50 Sask. R. 129, 1986 CarswellSask 473 (Sask. C.A.) — followed R. v. Kienapple (1974), 1974 CarswellOnt 238F, [1975] 1 S.C.R. 729, 26 C.R.N.S. 1, 1974 CarswellOnt 8, 15 C.C.C. (2d) 524, 44 D.L.R. (3d) 351, 1 N.R. 322, [1974] S.C.J. No. 76 (S.C.C.) — followed 470 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

R. v. Molis (1980), 1980 CarswellOnt 659, [1980] 2 S.C.R. 356, 55 C.C.C. (2d) 558, 116 D.L.R. (3d) 291, 33 N.R. 411, 1980 CarswellOnt 659F (S.C.C.) — followed R. v. Shiner (2007), 2007 CarswellNfld 101, 264 Nfld. & P.E.I.R. 186, 801 A.P.R. 186, 46 C.R. (6th) 268, 2007 NLCA 18, 29 C.E.L.R. (3d) 157, [2007] N.J. No. 101 (N.L. C.A.) — considered Statutes considered: Animal Products Act, R.S.S. 1978, c. A-20.2 (Supp.) Generally — referred to Criminal Code, R.S.C. 1985, c. C-46 s. 839 — pursuant to Diseases of Animals Act, R.S.S. 1978, c. D-30 Generally — referred to Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act, S.C. 1992, c. 52 Generally — referred to s. 6(3) — pursuant to s. 8(a) — pursuant to s. 10(1) — considered s. 21(1) — considered s. 22 — considered s. 22(1)(a) — considered s. 22(2)(b)(i) — considered Wildlife Act, 1998, S.S. 1998, c. W-13.12 Generally — referred to s. 2 “wildlife” — considered s. 31 — considered s. 31(1) — considered s. 31(1)(b) — pursuant to s. 32 — considered Regulations considered: Animal Products Act, R.S.S. 1978, c. A-20.2 (Supp.) Domestic Game Farm Animal Regulations, R.R.S., c. A-20.2, Reg. 10 Generally — referred to s. 2(j) “import licence” — considered s. 9(b) — considered s. 15(1) — considered Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act, S.C. 1992, c. 52 Wild Animal and Plant Trade Regulations, SOR/96-263 s. 10 — considered s. 11 — considered R. v. Marsland Ottenbreit J.A. 471

Wildlife Act, S.S. 1979, c. W-13.1 Captive Wildlife Regulations, R.R.S., c. W-13.1, Reg. 13 s. 13(1) — considered

APPEAL from judgment reported at R. v. Marsland (2011), 2011 SKQB 207, 2011 CarswellSask 365, [2011] S.J. No. 344, 374 Sask. R. 255 (Sask. Q.B.), allowing appeal from judgment acquitting accused with transporting and possessing deer without permit contrary to Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act, and with importing without permit under Wildlife Act, 1998.

Lyle Bouvier, Dallas Lommer, for Appellant Douglas Curliss, for Federal Crown Anthony Gerein, for Provincial Crown

Ottenbreit J.A.: I. Introduction 1 The appellant, Jason Cody Marsland (“Mr. Marsland”), applies for leave to appeal and appeals the convictions that on September 27, 2005 he: (i) transported white-tailed deer without a valid permit from Alberta to Saskatchewan contrary to s. 6(3) of the Wild Animal and Plant Protec- tion and Regulation of International and Interprovincial Trade Act, S.C. 1992, c. 52, as amended (“WAPPRIITA”); (ii) knowingly possessed white-tailed deer that had been transported in contravention of s. 8(a) of WAPPRIITA; and (iii) committed the offence of importing white-tailed deer/wildlife without a permit contrary to s. 31(1)(b) of The Wildlife Act, S.S. 1998, c. W-13.12 (the “Wildlife Act”). 2 Mr. Marsland was originally acquitted by the Provincial Court judge of all charges. The Crown appealed to the Court of Queen’s Bench, sitting as a summary conviction appeal court, where the acquittals were set aside and convictions against Mr. Marsland were entered. Mr. Marsland now appeals these convictions and, as well, appeals the sentence imposed by the summary conviction appeal court which consisted of one dollar for the Wildlife Act conviction and a total of $5,000 for the two convictions under WAPPRIITA.

II. Facts and Background 3 Mr. Marsland operated a deer farming ranch near Cochrane, Alberta and raised and sold deer to hunt farms. On September 27, 2005 Mr. Mar- sland was transporting five white-tailed deer from his ranch to Carlin Nordstrom’s game farm located on Poundmaker Cree First Nation lands 472 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

south of Battleford, Saskatchewan. The deer were domestic game farm animals born and raised on Mr. Marsland’s farm. 4 While transporting the deer to Mr. Nordstrom’s game farm, Mr. Mar- sland was stopped south of Battleford by Saskatchewan conservation officers. At the time he was stopped, he was in possession of a Canadian Food Inspection Agency (“CFIA”) export permit issued for the purpose of transporting the deer out of the Province of Alberta. He was also in possession of an import permit issued by the Poundmaker Cree Nation Band Council. He was not in possession of an import permit issued pursuant to the Wildlife Act or to WAPPRIITA. 5 After stopping Mr. Marsland, the conservation officers photographed the deer and requested he return them to Alberta. Mr. Marsland refused to return the deer. The officers issued Mr. Marsland a summary offence ticket for importing white-tailed deer without an import permit contrary to s. 31(1)(b) of the Wildlife Act and Mr. Marsland continued on and delivered the deer to Mr. Nordstrom’s game farm. Sometime later, the federal charges under WAPPRIITA were laid. 6 Mr. Nordstrom was authorized by the Poundmaker Cree Nation Band Council to operate an outfitting and game farm on the reserve lands. It was wholly located within the boundaries of the Poundmaker Cree Na- tion. Mr. Nordstrom did not, however, have a licence to operate his game farm from the Province of Saskatchewan because his hunt farm was on a First Nation. 7 At the time the conservation officers stopped Mr. Marsland, they were aware of a Saskatchewan Environment Resource Management De- partment meeting some two weeks earlier at which senior members of the Department had decided to start laying charges against individuals who, without an import permit, imported game farm deer into Saskatche- wan destined for game farms on First Nations. Notice of this policy change was not communicated to Mr. Nordstrom or to Mr. Marsland. 8 Mr. Marsland testified at trial that he was familiar with game farm regulations, both at the Alberta provincial level and the federal level. As well, he had read and was familiar with a policy document prepared by Saskatchewan Environment called the General Protocols for Importing Game Farm Animals into Saskatchewan. After reviewing the provincial protocols for importation, he believed that the protocols did not apply to game farms on reserve land. He testified that he believed he did not need an import permit pursuant to the Wildlife Act because he had an import permit issued by Poundmaker Cree Nation. Mr. Marsland was aware that R. v. Marsland Ottenbreit J.A. 473

Mr. Nordstrom’s game farm was not provincially licenced and as a result he believed that he could not have obtained an import permit from the Province to import the deer to Mr. Nordstrom’s farm. 9 Sometime prior to transporting the deer to Saskatchewan, Mr. Mar- sland, during a visit with a friend of his who was a lawyer, discussed the requirements for importing deer to Poundmaker Cree Nation. Mr. Mar- sland had shown his friend the Poundmaker Cree Nation import permit and received advice from him that the First Nation was exercising its right to self-government and that the Poundmaker Bylaws applied. Mr. Marsland had imported game farm animals to Mr. Nordstrom’s hunt farm without a Saskatchewan import permit a number of times in the past without being stopped by conservation officers.

III. The decision of the trial judge 10 The trial judge reviewed the relevant sections of WAPPRIITA and the Wildlife Act and Regulations passed thereunder as well as The Diseases of Animals Act, R.S.S. 1978, c. D-30 and its Regulations and The Animal Products Act, R.S.S. 1978 (Supp.), c. A-20.2 and its Regulations. 11 The trial judge observed that although s. 6(3) of WAPPRIITA required a federal importation permit, s. 11 of the Regulations thereto set out an exception of that requirement where all required provincial permits were obtained. He reviewed s. 31(1) of the Wildlife Act and the definition of wildlife as defined in s. 2 of that Act. The trial judge determined that the deer were “wildlife” under the Wildlife Act, but for the purposes of the case they were domestic game farm animals and thus covered by The Animal Products Act and its attendant The Domestic Game Farm Animal Regulations, R.R.S., c. A-20.2, Reg. 10. Sections 15(1) and 2(j) of those Regulations required an import permit under the Wildlife Act, but he determined that the Wildlife Act did not apply to domestic game farm animals and those Regulations excluded the operation of the Wildlife Act. 12 Additionally, he found that neither the Wildlife Act nor any Regula- tions passed pursuant to it contemplate the importation of domestic game farm animals onto an unlicenced game farm and, therefore, because Mr. Nordstrom’s farm was unlicenced, Mr. Marsland could not have obtained an import permit for the five deer under the Wildlife Act. Because an import permit could not be obtained under the Wildlife Act and compliance was impossible, he determined Mr. Marsland was not guilty under s. 31(1)(b) of the Wildlife Act for failing to obtain a permit which was not obtainable. He determined that because Mr. Marsland had not violated the Wildlife Act, he therefore did not violate WAPPRIITA. 474 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

13 The trial judge found alternatively that Mr. Marsland had exercised due diligence in determining what import permits were required and in attempting to meet any obligations under the law for a number of reasons. He observed that Mr. Marsland: (i) held a transport authorization permit from CFIA and a Poundmaker Band import permit; (ii) believed that no provincial permit was available in Saskatchewan for importing domestic game farm animals onto a First Nations reserve; (iii) had relied on his own past experience that no permit was available; and (iv) had relied on the fact that federal officials were aware of his importation practices and he had not been charged. 14 The trial judge acquitted Mr. Marsland of all charges.

IV. The decision of the summary conviction appeal court 15 The summary conviction appeal judge set aside the decision of the trial judge and entered convictions on all charges. She found that the deer met the definition of wildlife in the Wildlife Act and the provisions of The Animal Products Act and its attendant Domestic Game Farm Animal Regulations did not exclude the requirement for an import permit pursuant to the Wildlife Act. The substance of her decision is found at paras. 45 and 46: 45 It is clear from a review of the Berg decision that the primary purpose of The Wildlife Act is to protect wildlife and that it applies to anyone, anywhere, who wants to import wildlife into Saskatchewan. I take from the Berg decision that every person must obtain a permit before they can import any species of wildlife into the province, regardless of where they live, or what their occupation. 46 Again, with respect to the learned trial judge, the accused did not have the import license he was required to have. He was required to have a provincial import license under the provisions of The Wildlife Act. Although I accept the learned trial judge’s finding that it was not possible for the accused to obtain such a license because Poundmaker Cree Nation could not obtain a provincial license for its hunt farm, this does not excuse the accused from the provisions of The Wildlife Act. This violation of The Wildlife Act, leads to the violation under WAPPRIITA. The accused is guilty under WAPPRIITA if he had no provincial import license as required by The Wildlife Act. 16 The summary conviction appeal judge also found after reviewing part of the transcript that the defence of due diligence had not been established. She determined that Mr. Marsland’s inquiries with the lawyer as to the propriety and legality of his actions were insufficient. The summary conviction appeal judge also found that there was no defence of R. v. Marsland Ottenbreit J.A. 475

officially induced error. She found that there was very little evidence that Mr. Marsland had made efforts to obtain information as regards his legal responsibilities for importation of deer and that the fact the officials allowed him in the past to import deer on previous occasions could not be said to amount to officially induced error. 17 Neither the Federal Crown nor the Provincial Crown took a position on sentence before the summary conviction appeal court. With respect to the violation of the Wildlife Act, the summary conviction appeal judge imposed a fine of one dollar. She believed that she was required by the relevant penalty section, s. 22(2)(b)(i), of WAPPRIITA to impose a minimum fine of no less than $5,000. With respect to the violations of s. 6(3) and s. 8(a) of WAPPRIITA, she imposed a fine of $5,000 for both convictions together.

V. Position of the parties 18 Both the Federal Crown and the Provincial Crown argue that the summary conviction appeal judge was correct in her analysis and applied the proper standard of review. 19 Mr. Marsland argues that the summary conviction appeal judge erred by failing to consider: (i) the defence of honest and reasonable but mistaken belief in facts; (ii) that Mr. Marsland had made out his defence of officially induced error; and (iii) that Mr. Marsland had established a defence of due diligence.

VI. Analysis 20 This appeal is brought pursuant to s. 839 of the Criminal Code. This provision makes the right of appeal contingent on the Court granting leave and the appeal involving a question of law. Mr. Marsland has raised several questions of law. 21 I start by turning to the relevant legislation which is as follows: WAPPRIITA 6(3) Subject to the regulations, no person shall, except under and in accordance with a permit issued pursuant to subsection 10(1), transport from one province to another province any animal or plant, or any part or derivative of an animal or plant. ... 8 Subject to the regulations, no person shall knowingly possess an animal or plant, or any part or derivative of an animal or plant, 476 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

(a) that has been imported or transported in contravention of this Act; (b) for the purpose of transporting it from one province to another province in contravention of this Act or exporting it from Canada in contravention of this Act; or (c) for the purpose of distributing or offering to distribute it if the animal or plant, or the animal or plant from which the part or derivative comes, is listed in Appendix I to the Convention. ... 10(1) The Minister may, on application and on such terms and conditions as the Minister thinks fit, issue a permit authorizing the importation, exportation or interprovincial transportation of an animal or plant, or any part or derivative of an animal or plant. 22 WAPPRIITA Regulations (SOR/96-263, passed pursuant to s. 21(1) of WAPPRIITA): 10 For the purposes of subsection 6(3) of the Act and in respect of a province into which an animal or plant is to be transported, (a) “animal” means any specimen, whether living or dead, of any wild species of the animal kingdom (kingdom Animalia) the transportation of which into that province is regulated or prohibited by the province, and includes any egg, sperm, tissue culture or embryo of any such animal; and (b) “plant” means any specimen, whether living or dead, of any wild species of the plant kingdom (kingdom Plantae) the transportation of which into that province is regulated or prohibited by the province, and includes any seed, spore, pollen or tissue culture of any such plant. 11 An animal or plant, or any part or derivative of an animal or plant, is exempted from the operation of subsection 6(3) of the Act where all required provincial permits have been obtained. 23 The Wildlife Act: 31(1) Subject to the regulations, no person shall, without having first obtained an export or import licence issued pursuant to this Act or the regulations: (a) export or cause to be exported from Saskatchewan any wildlife; or (b) import, release or introduce into Saskatchewan any wildlife. (2) No person shall ship or transport out of the province any wildlife without first paying the royalties prescribed in the regulations. R. v. Marsland Ottenbreit J.A. 477

32 No person shall take into or keep in captivity or wilfully destroy or disturb any wildlife, or the eggs or nests of any bird protected pursuant to this Part or the regulations or pursuant to the Migratory Birds Convention Act, 1994 (Canada) or the regulations made pursuant to that Act without the written permission of the director or without a licence to do so. 24 The Captive Wildlife Regulations, R.R.S., c. W-13.1, Reg. 13 (pursuant to the Wildlife Act): 13(1) Any person importing or exporting wildlife or parts of wildlife shall obtain an import or export licence, as the case requires, pursuant to section 30 of the Act. 25 The Domestic Game Farm Animal Regulations (pursuant to The Animal Products Act): 2 In these regulations: (j) “import licence” means an import licence issued pursuant to The Wildlife Act, 1997; ... 9 No person shall obtain a domestic game farm animal or a big game animal unless: (b) the animal is imported in accordance with these regulations. ... 15(1) No person, without obtaining an import licence and complying with any import restrictions or protocols imposed by the minister pursuant to The Diseases of Animals Act and any regulations made pursuant to that Act, shall import any of the following into Saskatchewan: (a) live domestic game farm animals; (b) domestic game farm animal semen; (c) domestic game farm animal embryos. ... 26 The arguments of Mr. Marsland before us appear to concede that the Wildlife Act and the requirement therein to obtain an import permit applied to him in this case. However, there is some merit in reviewing this preliminary issue. 27 Both the summary conviction appeal judge and the trial judge determined that the true intent and purpose of the Wildlife Act is to protect wildlife, regulate hunting and promote the conservation and management of wildlife within the Province. Both the trial judge and the summary conviction appeal judge determined that the deer fit within the definition 478 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

of wildlife under the Wildlife Act. There is nothing in the Wildlife Act and its Regulations which excludes game farm animals from the definition of wildlife as it relates to the requirement under s. 31(1) to obtain an import permit. Everyone is therefore required by the Wildlife Act to have an import permit to bring “wildlife” as defined by that Act into the Province unless excepted by that Act. The fact that The Domestic Game Farm Animal Regulations may also apply to that wildlife does not mean those Regulations can exclude the operation of the statutory permit provision in s. 31(1) of the Wildlife Act. 28 Admittedly, the published policy of Saskatchewan Environment, the General Protocols for Importing Game Farm Animals into Saskatche- wan, upon which Mr. Marsland relied is ambiguous. On page 6 thereof it clearly states that an import permit is required for the importation of game farm animals yet in paragraph 1.8 it also states that the farm in Saskatchewan for which the animals are destined must hold a valid and current domestic game farm licence. Mr. Marsland understandably inferred that he did not need a permit to import to a game farm on a reserve which was permitted by the Province to operate without a licence. How- ever, whether or not Mr. Nordstrom needed or could get a licence to operate his farm under The Animal Products Act, Mr. Marsland certainly needed a licence to import deer into Saskatchewan which were caught by the definition of wildlife under the Wildlife Act. 29 That said, I can find no error on the summary conviction appeal judge’s analysis of whether Mr. Marsland had an obligation to obtain a permit pursuant to the Wildlife Act. 30 These offences are strict liability offences save for s. 8(a) of WAP- PRIITA which requires mens rea. Accordingly, the law allows certain defences to the charges. Mr. Marsland submits that the summary conviction appeal judge erred in determining that those defences were not established. 31 Mr. Marsland’s first argument is that his belief that the Poundmaker Cree First Nation had the ability to authorize him to import deer and that they had done so pursuant to a permit issued by the Band was a mistake of fact. This is no mistake of fact. Although the Band did authorize importation, Mr. Marsland was mistaken as to whether the Wildlife Act applied and whether he had a legal obligation to obtain a permit under that Act. This is a mistake of law and is not a defence. See: R. v. Greenwood (1986), 50 Sask. R. 129 (Sask. C.A.). Accordingly, this ground fails. R. v. Marsland Ottenbreit J.A. 479

32 With respect to the defence of officially induced error, we agree with the analysis of the summary conviction appeal judge. Mr. Marsland’s argument that his past practice of importing deer without a permit, the past lack of any enforcement by the Province in that respect, and his reliance on the Poundmaker Cree Nation Bylaws affords him a defence cannot succeed. All of this does not amount to officially induced error as the law is articulated in L´evis (Ville) c. T´etreault, 2006 SCC 12, [2006] 1 S.C.R. 420 (S.C.C.). The relevant past practice is that of the provincial officials. However, their failure to enforce the law in the past does not give rise to the defence of officially induced error. See: R. v. Shiner, 2007 NLCA 18, 264 Nfld. & P.E.I.R. 186 (N.L. C.A.). 33 Finally, Mr. Marsland argues that his discussions with a lawyer as to whether he needed a permit under the Wildlife Act, his belief that the Band permit was sufficient, his belief that he could not have obtained an import permit and his past practice of importing deer without a permit, all amount to a defence of due diligence. In R. v. Molis, [1980] 2 S.C.R. 356 (S.C.C.), Lamer J. (as he then was) at p. 364 had this to say about the availability of the defence of due diligence: It is clear to me that we are dealing here with an offence that is not to be considered as one of absolute liability and, hence, a defence of due diligence is available to an accused. But I hasten to add that the defence of due diligence that was referred to in Sault Ste.Marie is that of due diligence in relation to the fulfilment of a duty imposed by law and not in relation to the ascertainment of the existence of a prohibition or its interpretation. [emphasis added] 34 With respect to this argument, we agree with the summary conviction appeal judge that Mr. Marsland’s legal inquiries were minimal at best and in any event concerned the existence of the obligation to obtain a permit and its interpretation and not its fulfillment. The other factors Mr. Marsland cites as contributing to his due diligence are based on the mistake of law dealt with earlier. His actions in total do not afford him a defence of due diligence. We can see no error in this determination by the summary conviction appeal judge. 35 Based on the foregoing, I find no error of law made by the summary conviction appeal court judge. Accordingly, Mr. Marsland’s conviction appeal is dismissed. 480 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

VII. Sentence Appeal 36 It is acknowledged that the summary conviction appeal judge, when sentencing Mr. Marsland, mistakenly applied an amendment of s. 22(2)(b)(i) of WAPPRIITA which had not been proclaimed and was not in force. She mistakenly believed the legislation imposed a minimum sentence of $5000. The version of s. 22 of WAPPRITTA in force at that time read as follows: 22. (1) Every person who contravenes a provision of this Act or the regulations (a) is guilty of an offence punishable on summary conviction and is liable (i) in the case of a person that is a corporation, to a fine not exceeding fifty thousand dollars, and (ii) in the case of a person other than a person referred to in subparagraph (i), to a fine not exceeding twenty- five thousand dollars or to imprisonment for a term not exceeding six months, or to both; ... 37 Counsel for Mr. Marsland urged this Court to impose a fine of one dollar for convictions under WAPPRITTA because the summary conviction appeal judge was inclined to impose a minimum sentence for all offences. It was acknowledged by the Federal Crown that the two convictions under WAPPRITTA would be subject to the principles in the well-known case of R. v. Kienapple (1974), [1975] 1 S.C.R. 729 (S.C.C.) because they are essentially for the same act. 38 Several factors are relevant in determining the amount of the fine. We note that although the circumstances of this case did not afford Mr. Mar- sland a legal defence, there was substantial ambiguity in the Saskatche- wan importation protocol mentioned earlier. As well, the import permit enforcement policy change by the Province of Saskatchewan without notice to anyone is relevant. All of this warrants this Court imposing a nominal sentence in the circumstances. 39 Accordingly, with respect to s. 8(a) of WAPPRITTA the charge is stayed pursuant to the principle in Kienapple. The penalty for the conviction under s. 6(3) of WAPPRITTA will be a $100 fine in place of that imposed by the summary conviction appeal judge. The sentence for the conviction under the Wildlife Act remains unchanged. R. v. Marsland Caldwell J.A. 481

Smith J.A.:

I concur

Caldwell J.A.:

I concur Appeal allowed in part. 482 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[Indexed as: R. v. S. (J.W.T.)] Her Majesty the Queen (Applicant) and S. (J.W.T.) (Respondent / Young Person) Manitoba Court of Queen’s Bench Docket: Winnipeg Centre YO 11-01-31542 2012 MBQB 53 Keyser J. Judgment: February 15, 2012 Criminal law –––– Youth offenders — Youth Criminal Justice Act — Statu- tory interpretation –––– Importing Criminal Code provisions — To prevent inconsistent treatment — Accused young person was convicted of offence and sentenced, inter alia, to community supervision order — Accused allegedly breached terms of order and was compelled to appear to answer breach allegation — Accused brought application for judicial interim release pending breach hearing, notwithstanding that Youth Criminal Justice Act was silent as to its availability — Application was granted and Crown brought application for certiorari quashing judicial interim release order for want of jurisdiction on basis that impugned order was illegal — Application dismissed — In pith and substance, community supervision order was akin to conditional sentence of imprisonment available to adult accused pursuant to Criminal Code — By operation of s. 515 of Code, adult accused allegedly breaching conditional sentence order may bring application for judicial interim release — It would be unfair to permit adult accused to obtain judicial interim release in circumstances in which young persons could not — Having regard inter alia to liberal construction appropriate to interpretation of Act generally, judicial interim release was available in present case and application was accordingly properly dismissed. Criminal law –––– Extraordinary remedies — Certiorari — Grounds for review — Miscellaneous –––– Judicial interim release — Where charging statute silent — Accused young person was convicted of offence and sentenced, inter alia, to community supervision order — Accused allegedly breached terms of order and was compelled to appear to answer breach allegation — Accused brought application for judicial interim release pending breach hearing, notwithstanding that Youth Criminal Justice Act was silent as to its availability — Ap- plication was granted and Crown brought application for certiorari quashing judicial interim release order for want of jurisdiction on basis that impugned order was illegal — Application dismissed — In pith and substance, community supervision order was akin to conditional sentence of imprisonment available to adult accused pursuant to Criminal Code — By operation of s. 515 of Code, adult accused allegedly breaching conditional sentence order may bring applica- R. v. S. (J.W.T.) Keyser J. 483

tion for judicial interim release — It would be unfair to permit adult accused to obtain judicial interim release in circumstances in which young persons could not — Having regard inter alia to liberal construction appropriate to interpretation of Act generally, judicial interim release was available in present case and application was accordingly properly dismissed. Cases considered by Keyser J.: R. v. B. (J.D.) (2007), 57 M.V.R. (5th) 286, 2007 MBPC 48, 2007 CarswellMan 458, 221 Man. R. (2d) 24, [2007] M.J. No. 415 (Man. Prov. Ct.) — followed R. v. P. (S.A.) (2007), 305 Sask. R. 61, 2007 SKPC 113, 2007 CarswellSask 597, [2007] S.J. No. 548 (Sask. Prov. Ct.) — considered Statutes considered: Criminal Code, R.S.C. 1985, c. C-46 Generally — referred to Pt. XVI — referred to Pt. XXIII — referred to s. 515 — considered Youth Criminal Justice Act, S.C. 2002, c. 1 Generally — referred to s. 3 — considered s. 3(1)(d)(i) — considered s. 3(2) — considered s. 28 — considered s. 50 — considered s. 109(1) — referred to s. 140 — considered

APPLICATION by Crown for certiorari quashing judgment granting accused young person’s application for judicial interim release pending disposition on charge of breach of community supervision order.

John Barr, for Crown Lori Van Dongen, for Accused

Keyser J.:

1 The Crown applies for certiorari to quash a decision of a provincial judge to grant bail pending determination of an allegation of breach of a community supervision order by a young offender, alleging lack of jurisdiction. For the reasons which follow, the application is denied. 2 S. (J.W.T.) was sentenced July 5, 2010 to a custody and supervision order of 18 months. The custody portion finished July 8, 2011 and the community supervision order took effect. On October 11, 2011 S. is al- 484 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

leged to have breached his curfew and his supervision order was suspended as a result. His supervisor compiled a report for a breach review pursuant to s. 109(1) of The Youth Criminal Justice Act, S.C. 2002, c. 1 (YCJA) which review took place October 26, 2011. In the meantime S. appeared before the Learned Provincial Judge requesting bail pending his breach review. The Crown opposed the request and argued that there was no jurisdiction in the court to entertain an application for judicial interim release under the circumstances of S.’s case. The Learned Provincial Judge disagreed and released him on bail. 3 The Crown has thus applied for certiorari to quash the decision of the provincial judge on the grounds of lack of jurisdiction. S.’s supervision order in fact expired January 1, 2012, so any decision rendered in this matter will not affect him personally. However, despite the apparent mootness of the issue as far as S. is concerned, both counsel urged me to rule on the issue of jurisdiction as this question has arisen on a number of occasions and will continue to arise. As a result, I heard the arguments of counsel. 4 The position of the Crown is that there is no jurisdiction to release a young offender who is alleged to have breached a community supervision order. He points to a number of factors. Firstly, section 28 of the YCJA is prefaced by the heading of “Detention before Sentencing” and provides that: Application of Part XVI of Criminal Code — Except to the extent that they are inconsistent with or excluded by this Act, the provisions of Part XVI (compelling appearance of an accused and interim release) of the Criminal Code apply to the detention and release of young persons under this Act. The Crown’s position is that the bail provisions in s. 28 only apply to young persons who are not already sentenced, particularly with reference to the heading of the section. 5 In addition, the incorporated sections of Part XVI of the Code, and particularly the bail provisions in s. 515, are directed at “an accused who is charged with an offence ....” Because S. has been sentenced already, he is not charged with an offence. He, rather, faces an allegation of breach of a sentence he is already serving and thus bail is not available to him in these circumstances. 6 The Crown, as well, points to s. 50 of the YCJA This section provides that: 50. (1) Application of Part XXIII of Criminal Code — Subject to section 74 (application of Criminal Code to adult sentences), Part R. v. S. (J.W.T.) Keyser J. 485

XXIII (sentencing) of the Criminal Code does not apply in respect of proceedings under this Act except for paragraph 718.2(e) (sentencing principle for aboriginal offenders), sections 722 (victim impact statements), 722.1 (copy of statement) and 722.2 (inquiry by court), subsection 730(2) (court process continues in force) and sections 748 (pardons and remissions), 748.1 (remission by the Governor in Coun- cil) and 749 (royal prerogative) of the Act, which provisions apply with any modifications that the circumstances require. (2) Section 787 of Criminal Code does not apply — Section 787 (general penalty) of the Criminal Code does not apply in respect of proceedings under this Act. 7 Part XXIII includes the conditional sentencing provisions of the Code and specifically excludes those provisions from applicability to a young offender. Thus the mere fact that adults charged with breach of a conditional sentence are entitled to apply for bail pending determination of the allegation does not mean that the same is true for young offenders. In fact, the Crown says the possibility is excluded by reason of this section. Therefore, the position of the Crown is that there is no jurisdiction to release a youth under the circumstances at bar. 8 The position of the defence is that it is patently unfair to treat young offenders disproportionately harsher than adults in similar situations. If a person sentenced as an adult to a conditional sentence order can at least apply for bail pending determination of the breach, then a youth on an allegation of breach of a supervision order should be in the same position. Her position is that nowhere in the YCJA is the issue of bail under these circumstances specifically prohibited. Rather the Act is merely silent on the point. She urges the court to have recourse to the declarations of principles as set out in the YCJA for the general intent of parliament in dealing with youths. 9 Finally, defence counsel points to s. 140 of the YCJA which provides that: 140. Application of Criminal Code — Except to the extent that it is inconsistent with or excluded by this Act, the provisions of the Crim- inal Code apply, with any modifications that the circumstances require, in respect of offences alleged to have been committed by young persons. 10 A number of provincial decisions have been rendered all upholding the liberal construction of the Act in similar circumstances. In the case of R. v. P. (S.A.), 2007 SKPC 113, [2007] S.J. No. 548 (Sask. Prov. Ct.), Whelan, P.C.J. dealt with whether or not the court had the jurisdiction to 486 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

release two individuals, one pending on a breach of a custody and supervision order and one pending on a breach of a deferred custody and supervision order. The matters were argued together as counsel agreed there was no meaningful distinction between the question of entitlement to bail pending review as between a deferred custody and supervision order and a custody and supervision order. 11 At para. 54 of Whelan, P.C.J.’s decision, she says: I find that it would be inconsistent with the purpose and principles of the YCJA to interpret it such that the bail provisions of the Code would apply only to young persons who are charged with an offence. I find that these bail provisions apply to reviews upon breach allegations with such modification as may be required, including that the words “accused” and “offence” be read to include a young person who is alleged to have breached a condition of community supervision, whether pursuant to a custody and supervision sentence or a deferred custody and supervision sentence. 12 A similar conclusion was reached in R. v. B. (J.D.), 2007 MBPC 48, [2007] M.J. No. 415 (Man. Prov. Ct.), a decision of Harvie, A.C.J. Her decision at para. 88 was that: Bearing in mind all of the foregoing, I am satisfied that section 28 of the YCJA need not be limited only to those occasions where a youth has not yet been sentenced, but the provisions for judicial interim release can apply to a youth who is pending on an allegation of a breach on a deferred custody order. I am satisfied that by applying the principles of statutory interpretation, such a reach of the Act would most closely reflect the intention of Parliament and would allow for the youth to exercise their section 11(e) Charter right to bail. Given inevitable delays in the system, I am satisfied that any other interpretation would have the potential to result in significant injustice. Although this decision dealt with a deferred custody and supervision order, I agree that for all practical purposes the same situation exists in custody and supervision orders. 13 I agree with the decisions above for a number of reasons. In s. 3 of the declaration of principle of the YCJA at 3(d)(i) Parliament legislated that: Young persons have rights and freedoms in their right, such as a right to be heard in the course of and to participate in the processes, other than the decision to prosecute, that lead to decisions that affect them, and young persons have special guarantees of their rights and freedoms. R. v. S. (J.W.T.) Keyser J. 487

In case there was any misunderstanding, s. 3(2) decrees that: This Act shall be liberally construed so as to insure that young persons are dealt with in accordance with the principles set out in subsection (1). 14 I agree with Crown counsel that there is a distinct statutory setup for dealing with breaches of community supervision orders incorporated in ss. 102 to 109. That, however, is the mechanism for dealing with the breach allegation itself and is not determinative of whether or not bail is permitted pending that determination. 15 As was pointed out in R. v. B. (J.D.) (supra), at para. 75, the analogy to the conditional sentence regime for adults fails to recognize the unique system established for young persons. However, as Harvie, A.C.J. goes on further to state at para. 76: ... it is instructive to compare the two systems, in part because the YCJA specifically states that under s. 38(2) A youth justice court that imposes a youth sentence on a young person shall determine the sentence in accordance with the principles set out in section 3 and the following principles: (a) the sentence must not result in a punishment that is greater than the punishment that would be appropriate for an adult who has been convicted of the same offence committed in similar circumstances; .... 16 An adult arrested for a breach of a conditional sentence is entitled to apply for bail under s. 515 of the Code, notwithstanding the fact that section is prefaced to apply to persons “charged with an offence”. The Code specifically allows this. The YCJA is silent in this area. 17 Under the circumstances I find it to be unfair to allow an adult to apply for bail in these situations and not a youth. As both R. v. P. (S.A.) and R. v. B. (J.D.) concluded, it would not be consistent with the expressed purpose of the YCJA to interpret the incorporated bail provisions of the Criminal Code as restricting their applicability only to young persons charged with an offence. I further agree that, given the ambit of s. 140 of the YCJA, the bail provisions should apply to young persons charged with breach allegations with modifications as may be necessary, including reading “accused” and “offence” to include young persons in such situations. 18 This is particularly so when one is mindful of the liberal construction that is mandated to be consistent with the expressed philosophy of the 488 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

YCJA. And this is reinforced by the lack of an express prohibition in the YCJA against bail for such young offenders. 19 Thus the application for certiorari is denied. Application dismissed. Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. 489

[Indexed as: Coppola v. Capital Pontiac Buick Cadillac GMC Ltd.] SERGIO COPPOLA (Plaintiff) and CAPITAL PONTIAC BUICK CADILLAC GMC LTD. (Defendant) Saskatchewan Court of Queen’s Bench Docket: Regina Q.B.G. 208/03 2011 SKQB 318 G.A. Chicoine J. Judgment: August 31, 2011 Labour and employment law –––– Employment law — Termination and dismissal — Notice — Entitlement –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Ac- tion allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — There was no question that C was terminated without cause and without reasonable notice — Attempt to compensate C for lack of reasonable notice by payment of two weeks’ salary was totally inadequate — C was wrongfully dismissed because he was terminated in breach of his contract of employment. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Considerations affecting length of notice — Responsibil- ity of position –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — While C did not necessarily supervise other employees, he was instrumental in assisting others in closing their deals — When C started with C Ltd. in 2000, he earned average salary of approximately $3,450 per month — At time of his dismissal, C’s aver- 490 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

age salary was almost $12,900 per month — Since much of C’s salary was based on commissions, there was no question that he was generating significant sales — C was in category of senior or higher-ranking employee deserving of longer period of notice of dismissal, despite his relatively short period of employment at C Ltd.. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Considerations affecting length of notice — Length of service –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — C’s length of service was just shy of 23 months — Given C’s success, it was reasonable for C to feel secure in his employment — Reason given by C Ltd. to C that he was being dismissed because number of finance managers were being reduced from three to two did not ring true. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Considerations affecting length of notice — Age of employee –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — C was 36 years of age at time of his hiring — C brought with him nine years of experience in automotive sales and management, and he had had some success as self-employed businessman — Given C’s success at C Ltd., he could have anticipated remaining with company for number of years — C was not close to retirement age — C was young enough to establish new career away from automotive sales and financing, which was what he eventually did. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Considerations affecting length of notice — Availability of similar employment –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. 491

and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — Availability of similar employment was problem for C — While he did find employment at another company after his dismissal, that job lasted less than one month — C did not lose position because of anything he did or did not do. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Mitigation by employee — Reasonable steps –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — Failure to mitigate was not issue in this case — C obtained employment with another company and was not dismissed for cause — C made enquiries of other automotive dealers in city, but was unable to find similar employment — Steps which C took within weeks of his dismissal to establish mortgage brokerage business was entirely reasonable, given his experience in sales and financing. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages for mental distress arising from dismissal (Wallace damages) –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — When C was told that he was being laid off, C Ltd. did not have any information regarding fraudulent conduct on part of C — Allegation of misappropriation of vehicle had been discussed amongst management and staff of C Ltd. at least as early as October 492 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

2002 — Accusation of dishonest and fraudulent conduct exacerbated and prolonged C’s mental distress beyond normal hurt feelings associated with dismissal — Allegations were stressful and caused sleepless nights — Allegations also consumed great deal of C’s time and effort trying to convince D that they were untrue — C’s wife employed her own skill as psychiatric nurse to help C overcome effects of false accusations. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Aggravated, punitive or exemplary damages –––– In 2000, C was hired by C Ltd. — C was offered position as fleet account manager — C was proficient as fleet account manager, and was later promoted to finance manager — In June 2002, C was fired with two weeks’ written notice — After being employed by another company for less then one month, C decided to set up mortgage brokerage firm in partnership with D — In October 2002, one of C Ltd.’s sales staff advised D to be careful in his dealings with C because vehicle had gone missing when C worked at C Ltd. — C brought action against C Ltd. for unjust dismissal — Action allowed — C was awarded $66,384.74 in lieu of six months’ notice, $1,650 for loss of vehicle benefit, and $20,000 in aggravated damages — This was not case which called for imposition of punitive damages — Significant compensatory damages were already awarded under pay in lieu of notice and aggravated damages — These awards were adequate to achieve objectives of retribution, deterrence and denunciation. Cases considered by G.A. Chicoine J.: Addis v. Gramophone Co. (1909), [1908-10] All E.R. Rep. 1, [1909] A.C. 488 (Eng. H.L.) — considered Bardal v. Globe & Mail Ltd. (1960), [1960] O.W.N. 253, 24 D.L.R. (2d) 140, 1960 CarswellOnt 144, [1960] O.J. No. 149 (Ont. H.C.) — followed Chapell v. Canadian Pacific Railway (2010), 2010 ABQB 441, 2010 Carswell- Alta 1207, 29 Alta. L.R. (5th) 380 (Alta. Q.B.) — considered Farber c. Royal Trust Co. (1996), 1996 CarswellQue 1158, 1996 CarswellQue 1159, 145 D.L.R. (4th) 1, 97 C.L.L.C. 210-006, [1997] 1 S.C.R. 846, (sub nom. Farber v. Cie Trust Royal) 210 N.R. 161, 27 C.C.E.L. (2d) 163, [1996] S.C.J. No. 118 (S.C.C.) — considered Fidler v. Sun Life Assurance Co. of Canada (2006), 2006 SCC 30, 2006 Car- swellBC 1596, 2006 CarswellBC 1597, (sub nom. Sun Life Assurance Co. of Canada v. Fidler) [2006] I.L.R. 1-4521, [2006] 2 S.C.R. 3, 350 N.R. 40, 227 B.C.A.C. 39, 374 W.A.C. 39, 39 C.C.L.I. (4th) 1, (sub nom. Sun Life Assurance Company of Canada v. Fidler) 2007 C.L.L.C. 210-015, [2006] 8 W.W.R. 1, 2006 C.E.B. & P.G.R. 8202, 57 B.C.L.R. (4th) 1, 53 C.C.E.L. (3d) 1, (sub nom. Sun Life Assurance Co. of Canada v. Fidler) 271 D.L.R. (4th) 1, [2006] R.R.A. 525, [2006] S.C.J. No. 30, EYB 2006-107056 (S.C.C.) — considered Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. 493

Gismondi v. Toronto (City) (2003), 2003 CarswellOnt 1498, 64 O.R. (3d) 688, 2003 C.L.L.C. 210-043, 24 C.C.E.L. (3d) 1, 226 D.L.R. (4th) 334, 171 O.A.C. 1, [2003] O.J. No. 1490 (Ont. C.A.) — considered Hadley v. Baxendale (1854), 23 L.J. Exch. 179, 156 E.R. 145, 9 Exch. 341, [1843-60] All E.R. Rep. 461 (Eng. Ex. Div.) — followed Hall v. Canadian Corporate Management Co. (1984), 4 C.C.E.L. 166, 3 O.A.C. 289, 1984 CarswellOnt 749 (Ont. C.A.) — considered Isaacs v. MHG International Ltd. (1984), 4 C.C.E.L. 197, 7 D.L.R. (4th) 570, 3 O.A.C. 301, 45 O.R. (2d) 693, 1984 CarswellOnt 751 (Ont. C.A.) — considered Jivrag v. Calgary (City) (1986), 13 C.C.E.L. 120, 1986 CarswellAlta 129, 45 Alta. L.R. (2d) 343, 71 A.R. 87 (Alta. Q.B.) — considered Jivrag v. Calgary (City) (1987), 62 Alta. L.R. (2d) xlviii (note), 18 C.C.E.L. xxx (note) (Alta. C.A.) — referred to Keays v. Honda Canada Inc. (2008), 2008 SCC 39, (sub nom. Honda Canada Inc. v. Keays) 2008 C.L.L.C. 230-025, 376 N.R. 196, 294 D.L.R. (4th) 577, (sub nom. Honda Canada Inc. v. Keays) [2008] 2 S.C.R. 362, 92 O.R. (3d) 479 (note), (sub nom. Honda Canada Inc. v. Keays) 63 C.H.R.R. D/247, 66 C.C.E.L. (3d) 159, 2008 CarswellOnt 3743, 2008 CarswellOnt 3744, 239 O.A.C. 299, [2008] S.C.J. No. 40, EYB 2008-135085 (S.C.C.) — followed Lavallee v. Saskatoon Friendship Inn (1999), 175 Sask. R. 22, 1999 Carswell- Sask 81, [1999] S.J. No. 102 (Sask. Q.B.) — referred to Looman v. Superior Propane Inc. (1994), 6 C.C.E.L. (2d) 132, 126 Sask. R. 50, [1995] 1 W.W.R. 102, 1994 CarswellSask 252 (Sask. Q.B.) — referred to Love v. Acuity Investment Management Inc. (2011), 2011 C.L.L.C. 210-024, 2011 ONCA 130, 2011 CarswellOnt 1060, 89 C.C.E.L. (3d) 157, 277 O.A.C. 15 (Ont. C.A.) — considered Machtinger v. HOJ Industries Ltd. (1992), (sub nom. Lefebvre v. HOJ Industries Ltd.) [1992] 1 S.C.R. 831, 11 C.P.C. (3d) 140, (sub nom. Lefebvre v. HOJ Industries Ltd.) 134 N.R. 386, (sub nom. Lefebvre v. HOJ Industries Ltd.) 53 O.A.C. 306, 1992 CarswellOnt 986, 1992 CarswellOnt 347, EYB 1992- 67514 (S.C.C.) — referred to 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 McNevan v. AmeriCredit Corp. (2008), 245 O.A.C. 28, 305 D.L.R. (4th) 233, 2008 CarswellOnt 7512, 2008 ONCA 846, 2009 C.L.L.C. 210-027, 94 O.R. (3d) 458, [2008] O.J. No. 5081 (Ont. C.A.) — considered Michaels v. Red Deer College (1975), [1976] 2 S.C.R. 324, 1975 CarswellAlta 57, 1975 CarswellAlta 142, [1975] 5 W.W.R. 575, 5 N.R. 99, 75 C.L.L.C. 494 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

14,280, 57 D.L.R. (3d) 386, [1975] A.C.S. No. 81, [1975] S.C.J. No. 81 (S.C.C.) — referred to Nagel v. Del-Air Systems Ltd. (2001), 2001 SKQB 562, 2001 CarswellSask 813, 214 Sask. R. 268 (Sask. Q.B.) — referred to Pagliaroli v. Rite-Pak Produce Co. (2010), 2010 ONSC 3729, 2010 Carswell- Ont 5175 (Ont. S.C.J.) — considered Peso Silver Mines Ltd. v. Cropper (1966), [1966] S.C.R. 673, 56 W.W.R. 641, 58 D.L.R. (2d) 1, 1966 CarswellBC 90 (S.C.C.) — 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 Simmons v. Webb (2008), [2008] O.J. No. 5249, 84 C.C.E.L. (3d) 196, 2008 CarswellOnt 7874, 54 B.L.R. (4th) 197 (Ont. S.C.J.) — considered Trask v. Terra Nova Motors Ltd. (1995), 9 C.C.E.L. (2d) 157, 127 Nfld. & P.E.I.R. 310, 396 A.P.R. 310, 1995 CarswellNfld 18, [1995] N.J. No. 89 (Nfld. C.A.) — considered Vettraino v. Sun Country Health Region (2007), 2007 C.L.L.C. 210-050, 2007 SKQB 246, 2007 CarswellSask 423, 300 Sask. R. 268 (Sask. Q.B.) — considered Vorvis v. Insurance Corp. of British Columbia (1989), 25 C.C.E.L. 81, [1989] 1 S.C.R. 1085, [1989] 4 W.W.R. 218, 58 D.L.R. (4th) 193, 94 N.R. 321, 36 B.C.L.R. (2d) 273, 42 B.L.R. 111, 90 C.L.L.C. 14,035, 1989 CarswellBC 76, 1989 CarswellBC 704, [1989] S.C.J. No. 46, EYB 1989-66980 (S.C.C.) — 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 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.) — considered Wenarchuk v. Comstock Canada (1997), 1997 CarswellSask 498, [1998] 2 W.W.R. 669, 32 C.C.E.L. (2d) 313, 160 Sask. R. 119, [1997] S.J. No. 608 (Sask. Q.B.) — referred to Whiten v. Pilot Insurance Co. (2002), 156 O.A.C. 201, 35 C.C.L.I. (3d) 1, [2002] 1 S.C.R. 595, 2002 SCC 18, 2002 CarswellOnt 537, 2002 Carswell- Ont 538, 283 N.R. 1, 20 B.L.R. (3d) 165, [2002] I.L.R. I-4048, 209 D.L.R. (4th) 257, [2002] S.C.J. No. 19, REJB 2002-28036 (S.C.C.) — followed Statutes considered: Employment Insurance Act, S.C. 1996, c. 23 s. 45 — considered s. 46 — considered Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) s. 248(1) “retiring allowance” — considered Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 495

Labour Standards Act, R.S.S. 1978, c. L-1 Generally — referred to Prepaid Funeral Services Act, S.S. 1986, c. P-22.3 Generally — referred to s. 6(1) — considered s. 6(2) — considered

ACTION by employee against C Ltd. for unjust dismissal.

Mervin C. Phillips for Plaintiff Timothy W. Stodalka, Megan K. Milani for Defendant

G.A. Chicoine J.: Introduction 1 The plaintiff, Sergio Coppola (“Mr. Coppola”), brings this action against the defendant, Capital Pontiac Buick Cadillac GMC Ltd. (“Capi- tal Pontiac”), for unjust dismissal. In addition to loss of salary and benefits, Mr. Coppola also claims damages for loss of reputation and mental distress because of allegations of wrong-doing made by his former employer some time after he was terminated. 2 Capital Pontiac takes the position that it has provided Mr. Coppola with fair compensation upon his release from employment and specifically denies any harsh or vindictive conduct subsequent to his termination.

The Issues 3 The issues to be determined are whether Capital Pontiac has paid to Mr. Coppola the proper amount of pay in lieu of notice, whether Mr. Coppola has failed to mitigate his damages and whether Mr. Coppola is entitled to receive any additional amount by way of aggravated damages for loss of reputation or mental distress.

The Evidence Evidence on behalf of the Plaintiff 4 Mr. Coppola was 36 years of age when he was hired as a car salesperson for Capital Pontiac in Regina on August 8, 2000. He had nine years experience in the motor vehicle sales business ranging from part-time salesperson work while still in High School to a one year stint as general manager of a rural dealership. Then in 1990 and for the next 10 years he was self-employed in two different businesses and met with some suc- 496 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

cess in both. However, both eventually came to an end due to changing market conditions. He declared personal bankruptcy within a month of commencing employment at Capital Pontiac due to inability to meet his financial obligations on personal guarantees related to his last business venture. He received his discharge from bankruptcy on September 17, 2001. 5 Mr. Coppola first discussed the possibility of joining the staff of Cap- ital Pontiac with Bruce Axelson, the President and CEO of Capital Pon- tiac, in the spring of 2000. Mr. Axelson advised Mr. Coppola that Capital Pontiac was looking to increase its staffing complement to deal with in- creasing sales volumes. Mr. Coppola was offered a position as Fleet Ac- count Manager commencing August 8, 2000. As such he would report to the General Sales Manager who reported directly to Mr. Axelson. Remu- neration was based on a performance formula which included a base salary (after a 90 day probation period) of $1,500.00 per month, a per unit amount for fleet and retail sales, and an annual volume performance bo- nus of $2,700.00 at 180 units or $6,000.00 at 240 units. He also obtained the use of a demonstrator vehicle with a dealer plate. After the 90 day probation period, he was enrolled in the company’s group benefit plan. 6 Mr. Coppola was quite proficient as Fleet Account Manager and obtained a bronze level recognition from the GM Canada Fleet Managers Club for the Prairie Region for the year 2000. In addition, Mr. Coppola was selling more and more vehicles other than fleet sales. He was also assisting younger salesmen with the closing of their deals. Mr. Coppola proposed to Mr. Axelson a revised remuneration plan that would take into consideration any increase in fleet sales as well as his retail sales. Mr. Axelson offered Mr. Coppola additional compensation if he would also take charge of Americredit financing for six months during the absence of another employee. A new remuneration plan was agreed upon effective January 1, 2001. 7 As it turned out, Mr. Coppola took the Americredit financing portfolio to new levels. Upon return of the other employee in July of 2001, Mr. Axelson promoted Mr. Coppola to the position of Finance Manager in addition to retaining his responsibilities as Fleet Account Manager. 8 From August 8, 2000, to December 31, 2000, Mr. Coppola earned $16,315.66 including a $250.00 per month taxable benefit for use of a vehicle. 9 From January 1, 2001, to December 31, 2001, Mr. Coppola earned $82,494.65 including a $250.00 per month taxable benefit for use of a Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 497

vehicle. Of this amount, $58,223.15 was earned in the last six months of the year — after his appointment as Finance Manager. 10 From January 1, 2002 to June 30, 2002, Mr. Coppola earned $77,263.08 including the taxable benefit for use of a vehicle which had increased to $300.00 per month starting in February. If Mr. Coppola had continued to be remunerated at the same rate for the balance of the year he would have had annual income of $154,526.16, which equates to a wage of $12,877.18 per month. Mr. Coppola testified that sales information was shared by Mr. Axelson with all of the sales people. He knows that his sales were considerably higher than the other two Finance Man- agers who also worked there. Much of his success, he stated, resulted from his ability to persuade his customers to use dealer financing, purchase life or disability insurance, or buy extended warranties, rust proofing, paint sealant and other after-market products. 11 On June 28, 2002, without any indication that anything was awry, Mr. Axelson came into Mr. Coppola’s office and gave him a written notice that read: “It is with regrets that I inform you that you will be LAID OFF from your current position and employment at Capital Pontiac, effective July 12, 2002.” Mr. Axelson informed Mr. Coppola that he was in the process of reorganizing his dealership. When Mr. Coppola asked him why he would be laying off his top producer, he replied that he did it on the tenure process — the other finance managers being longer term employees. Mr. Coppola received his Record of Employment and a final pay cheque for $5,052.09 based on a gross payment of $8,535.76 for the two-week period of notice (including the $300.00 taxable benefit for continued use of his demonstrator vehicle for the next two or three weeks). 12 Upon his release from employment at Capital Pontiac, Mr. Coppola contacted a number of motor vehicle dealerships in Regina but the only job offer was from Bennett Dunlop. He was employed with Bennett Dunlop from August 29, 2002, to September 23, 2002, for the purpose of looking into the possibility of establishing sub-prime credit department for this motor vehicle dealership to sell vehicles to people with low credit ratings. Mr. David Kohonick, General Sales Manager for Bennett Dunlop, confirmed that management abandoned the project after a short time to focus on other matters. It was not because of any lack of effort on the part of Mr. Coppola. Mr. Coppola’s earnings at Bennett Dunlop during this period totalled $2,342.58. 13 After the short stint at Bennett Dunlop, Mr. Coppola decided to set up a mortgage brokerage firm in partnership with Brian Drayton, an ac- 498 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

countant. After he had started this process Mr. Coppola was informed by Mr. Drayton that he had been advised by one of the sales staff at Capital Pontiac that he should be careful in his dealings with Mr. Coppola. This person claimed that Mr. Coppola had been released from his position at Capital Pontiac because a vehicle had gone missing. Mr. Coppola had his lawyer write a letter to Mr. Axelson inquiring about the allegation but no response was received in regard to an alleged missing automobile. Mr. Coppola began this action for unjust dismissal in January 2003. In Febru- ary 2003, Mr. Coppola became aware that Capital Pontiac would allege just cause. Particulars of the allegations were set forth in a statement of defence and counterclaim served on his counsel on April 11, 2003. 14 In the meantime, Mr. Coppola incorporated a company on December 4, 2002, for the mortgage brokerage business named Quick Response Mortgage Services Ltd. Both Mr. Coppola and Brian Drayton held shares in this company through holding corporations. A mortgage brokerage licence was obtained in March 2003. Mr. Coppola testified that issuance of the licence was delayed by the outstanding allegations made by Capi- tal Pontiac. He had to continually assure his partner that the allegations were unfounded. 15 Mr. Coppola testified that he encountered hurdles in setting up the mortgage brokerage business because of the unfounded allegations. He suspected that one of the credit unions that refused to deal with him did so because Capital Pontiac was a major customer of theirs. However, he did not provide any concrete evidence to substantiate this suspicion. 16 In the first year of operation from April 1, 2003, to March 31, 2004, the mortgage brokerage business had gross commissions of $38,270.00 and a net loss of $30,460.00. Mr. Coppola drew a salary $22,000.00 from the company in 2003. His only other source of income in 2003 was $6,195.00 from employment insurance; $5,400.00 from rental income; and a capital gain of $23,874.77 from the sale of a rental property. Mr. Coppola testified that he sold the rental property in order to cover living expenses for himself and his family. 17 Mr. Coppola advised that he disclosed the allegations of dishonest or fraudulent conduct in the statement of defence and counterclaim to his partner, Mr. Drayton, and also to one of his former customers from Capi- tal Pontiac, Ms. Gertie Mazil. The purpose of disclosing the allegation to Ms. Mazil was to ask her to write a letter clarifying the nature of the transaction that led to the allegation of a missing vehicle. Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 499

18 Mr. Coppola could not estimate the financial loss arising from the allegation of dishonesty or fraudulent conduct but described that these allegations were emotionally devastating. It consumed a great deal of his time and effort which he could not otherwise devote to the new mortgage brokerage business. He found it stressful and caused sleepless nights, especially since he did not know who else was aware of the allegations. He did not seek medical attention to deal with this stressful situation. How- ever, he did get support from his siblings and also from his wife, who is a psychiatric nurse. 19 Mr. Coppola also testified that he was greatly bothered by the fact that Mr. Axelson did not accept that Capital Pontiac had made a mistake in regards to the Gertie Mazil matter until the examinations for discovery in January of 2004. Even that, however, was short-lived consolation since the amended statement of defence filed in May of 2004 which re- moved the allegation of dishonest or fraudulent conduct retained the allegation made in the original statement of defence and counterclaim that he had “engaged in actions which resulted in the termination of his employment” from Bennett Dunlop — thereby suggesting that he was dismissed for cause. 20 The mortgage brokerage business did eventually improve such that Mr. Coppola earned net income of $46,113.37 in 2004 and $72,806.57 in 2005. Thereafter his annual income from the mortgage brokerage business and other ventures continued to increase exponentially and in amounts that far exceed what he was earning as Finance Manager for Capital Pontiac in 2002. 21 Mr. Drayton testified on behalf of Mr. Coppola at the trial. He described the encounter with Tri Stewart, the then current Finance Manager at Capital Pontiac, in early October of 2002 who informed him that he should be careful in his dealings with Mr. Coppola because Mr. Cop- pola’s termination as an employee of Capital Pontiac resulted from the theft or misappropriation of a vehicle. Mr. Drayton stated that he could not remember the exact words used by Tri Stewart, but this was the impression that he was left with. 22 The information Mr. Drayton received from Mr. Stewart concerned him greatly because it reflected on the character and reputation of someone with whom he was contemplating going into business. He said that Mr. Coppola was surprised when he raised the issue with him. He and Mr. Coppola discussed the matter at a number of subsequent meetings. He was eventually satisfied with the explanation given to him by Mr. 500 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Coppola about how such a misunderstanding may have arisen in relation to Ms. Mazil’s vehicle. 23 After more due diligence, Mr. Drayton decided to continue with the mortgage brokerage venture, starting with incorporation of Quick Re- sponse Mortgage Services on December 4, 2002, and thereafter with application for a mortgage brokerage licence which was issued on March 20, 2002. He also confirmed that the allegation made by Mr. Stewart may have delayed commencement of the mortgage brokerage business by three or four months while he conducted further due diligence. Exis- tence of a criminal record would have affected Mr. Coppola’s ability to obtain a mortgage brokerage licence. 24 A Chartered Accountant, Lorne Wirth, gave expert testimony on behalf of Mr. Coppola. His evidence was that Mr. Coppola suffered estimated lost income of $494,910.00 between 2002 and 2005 as a result of the termination of his employment with Capital Pontiac. This included loss of wages for the balance of 2002 and subsequent years as well as loss of the vehicle benefit and the group health. It also included rental income and a capital gain loss on the forced sale of a rental property. His report did not take into account all of the wage severance paid, income earned from Bennett Dunlop or employment insurance received. The rel- evance of this information will be dealt with in due course in this judgment. 25 Mr. Coppola’s spouse, Cheryl Coppola, who is a psychiatric nurse, testified about the effect which his dismissal from Capital Pontiac had on her husband in June 2002. He went from being a happy and proud bread- winner to being moody and withdrawn. He made significant efforts to find other employment in the vehicle sales industry. He was excited about getting a job with Bennett Dunlop and it was another blow when it did not work out. She recalls that he again got excited about going into business with Mr. Drayton and then being down again when Mr. Drayton told him about the allegation made by Mr. Stewart concerning a missing vehicle. These ups and downs were having an effect on his family. 26 Mrs. Coppola further testified that when the allegation showed up in the original statement of defence and counterclaim both she and Mr. Coppola were shocked. She claimed it was devastating to her. In addition, being accused of being a criminal was very difficult for her husband who took pride in his work. His outlook improved when Mr. Drayton decided to continue pursuing the mortgage brokerage business with him. She used her own psychiatric nursing skills as much as she could to assist Mr. Coppola to overcome the effects of these false accusations. Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 501

Evidence on behalf of the Defendant 27 Mr. Axelson testified that he hired Mr. Coppola in 2000 because he was eloquent and he would fit well in his organization as a strong sales person. His first position was as Fleet Manager which involved sales to rental agencies, the government and large businesses. This was not a management position in the sense that he supervised any other employees. He acknowledged that Mr. Coppola was proficient in arranging financing for customers and became one of three Finance Managers working for him in July of 2001 after another of his Finance Managers became ill. 28 When it was inquired of Mr. Axelson why he decided to terminate Mr. Coppola in June of 2002, he stated that it was a business decision that he made on his own just like any other, either to generate more income or to reduce business expense. He said that in this case, he made the decision to go back to two Business Managers from three. He took into consideration that the two Business Managers who had been with him longer than Mr. Coppola were loyal employees and on that basis decided to let Mr. Coppola go. 29 Mr. Axelson testified that in making the decision to keep the other Business Managers he also took into account that a few weeks earlier he had offered Mr. Coppola a position as a Team Leader in charge of three or four sales people at the Percival Ford dealership that he had purchased late in 2001 and that Mr. Coppola had turned down his offer. He stated that because he never tries to talk someone into a job they do not want he did not pursue the matter further with Mr. Coppola. This became a factor in which of the three Business Mangers would be retained at Capital Pontiac, however. 30 Mr. Axelson stated that he personally delivered the written notice of termination to Mr. Coppola. He advised Mr. Coppola that he was being laid off solely for the reason that he was going back to two Business Managers. He allowed him to keep the demonstrator vehicle for a few weeks until he could get his affairs in order. 31 Mr. Axelson denied discussing the reasons for Mr. Coppola’s lay off with any other employees except to inform the accounting department that he was no longer on the payroll. He specifically stated that he was not aware of discussing the issue with Tri Stewart, one of the team leaders on his staff. He also stated that at no time after Mr. Coppola was terminated did he receive any call from anyone asking for a reference in regard to Mr. Coppola or asking why he was terminated. He did admit, 502 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

however, that he took offence to the fact that in the statement of claim it was alleged that his conduct in terminating Mr. Coppola was “harsh and vindictive”. He claims that it was only after being served with the statement of claim that he asked two other senior employees, one of the sales managers and the comptroller, to investigate whether there was just cause to terminate Mr. Coppola’s employment. He further admitted that the allegation of “dishonest and/or fraudulent conduct” relating to Ms. Mazil’s vehicle in the original statement of defence was withdrawn after the examinations for discovery in January, 2004. Capital Pontiac no longer alleges just cause for Mr. Coppola’s dismissal. 32 Mr. Axelson testified at the trial that he was unaware at the time that he terminated Mr. Coppola that the two week notice requirement set out in the provincial Labour Standards Act for employees with less than three years service was only the minimum amount of notice for all employees or that employees such as Mr. Coppola who occupied management positions would normally be entitled to considerably more notice under well established common law principles. It would therefore serve us well to begin by reviewing some of the more important court decisions which discuss the criteria for determining the period of reasonable notice in cases such as this.

The Legal Principles and Their Application Wrongful dismissal 33 Mr. Justice Iacobucci of the Supreme Court of Canada in the case Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 (S.C.C.); [1997] S.C.J. No. 94 (S.C.C.)(QL) (at para. 75), stated the following: “The law has long recognized the mutual right of both employers and employees to terminate an employment contract at any time provided that there are no express provisions to the contrary.” He referred to a summary of the general contractual principles applicable to contracts of employment penned by Mr. Justice Gonthier in Farber c. Royal Trust Co. (1996), [1997] 1 S.C.R. 846 (S.C.C.), wherein he stated (at page 858): In the context of an indeterminate employment contract, one party can resiliate the contract unilaterally. The resiliation is considered a dismissal if it originates with the employer and a resignation if it originates with the employee. If an employer dismisses an employee without cause, the employer must give the employee reasonable notice that the contract is about to be terminated or compensation in lieu thereof. Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 503

34 Stated in another way, while an employer is entitled to terminate an employee without cause, there is an implied term in the employee’s contract of employment that the employer will give the employee proper notice of termination, during which the employee will continue to work under the terms and conditions of his contract. Alternatively, an employer can terminate an employee without cause, but without proper notice. This, however, constitutes a wrongful dismissal, in breach of the employment contract. In these circumstances, the employer is obligated to compensate for the breach by making a payment to the employee in lieu of notice. The Ontario Court of Appeal explained it in this fashion in Taylor v. Dyer Brown (2004), 73 O.R. (3d) 358 (Ont. C.A.), at para. 15: Proper notice of termination is an implied term of the contract of employment; payment in lieu of notice is not. We agree with the opinion of Lambert J.A. in [Dunlop v. B.C. Hydro and Power Authority (1988), 23 C.C.E.L. 96 (B.C.C.A.)] when he states 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”. 35 In this case, there is no question that Mr. Coppola was terminated without cause and without reasonable notice. The attempt to compensate Mr. Coppola for the lack of reasonable notice by payment of the equivalent of two weeks’ salary was totally inadequate. In legal terms, Mr. Coppola was wrongfully dismissed because he was terminated in breach of his contract of employment, that is, without reasonable notice. As such, it was a termination that did not comply with the law. It now falls to this Court to determine what the period of reasonable notice should have been.

Reasonable notice 36 The factors to be considered in assessing what constitutes reasonable notice are summarized in the statement of Chief Justice McRuer of the Ontario High Court of Justice in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.) at p. 145: There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant. 504 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

37 These four factors were adopted by the Supreme Court of Canada in Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 (S.C.C.), (1992), 11 C.P.C. (3d) 140 (S.C.C.), and they were applied by the Supreme Court of Canada in Wallace, and more recently in Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 S.C.R. 362 (S.C.C.). It is the approach which has been followed in a myriad of cases in this jurisdiction, including: Looman v. Superior Propane Inc. (1994), 126 Sask. R. 50, [1994] S.J. No. 460 (Sask. Q.B.); Wenarchuk v. Comstock Canada (1997), 160 Sask. R. 119, [1997] S.J. No. 608 (Sask. Q.B.); Lavallee v. Saskatoon Friendship Inn (1999), 175 Sask. R. 22, [1999] S.J. No. 102 (Sask. Q.B.); Nagel v. Del-Air Systems Ltd., 2001 SKQB 562, 214 Sask. R. 268, [2001] S.J. No. 771 (Sask. Q.B.) and Vettraino v. Sun Country Health Region, 2007 SKQB 246, 300 Sask. R. 268 (Sask. Q.B.). 38 In the past, when assessing the character of employment it was common to refer to the employee’s position in the management hierarchy, such as the number of employees supervised by the plaintiff. In Honda, Mr. Justice Bastarache recognized the recent trend to give less consideration to the dismissed employee’s position in the hierarchy and instead suggested (at para. 30) that: “The particular circumstances of the individual should be the concern of the courts in determining the appropriate period of reasonable notice. Traditional presumptions about the role the managerial level plays in reasonable notice can always be rebutted by evidence.” He suggested (at para. 27) that what matters is experience and qualifications, in addition to the other factors mentioned in Bardal. He also stated (at para. 32) that: “No one Bardal factor should be given disproportionate weight.” 39 Length of service is another factor which has often borne disproportionate weight in past court decisions. The rule of thumb was to award one month of notice for each year of service — a rule which severely penalized short service employees. 40 This is an issue that was recently thoroughly canvassed in the Ontario Court of Appeal decision Love v. Acuity Investment Management Inc., 2011 ONCA 130, [2011] O.J. No. 771 (Ont. C.A.). At trial, the plaintiff was awarded damages equivalent to five months notice. He was a chartered accountant who had worked for the investment management company for two and a half years as a senior vice-president in charge of institutional investment clients. He had acquired a small equity position in the company and expected to increase his holdings even more. 41 The Ontario Court of Appeal allowed the plaintiff’s appeal on the issue of the length of reasonable notice, finding that the trial judge had Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 505

overemphasized Mr. Love’s short length of service, underemphasized the character of his employment, and failed to consider the availability of similar employment. The Court of Appeal extended the period of notice upon which damages were to be calculated to nine months. 42 With regard to length of service, Mr. Justice Gouge wrote on behalf of the court (at para. 19): While short service is undoubtedly a factor tending to reduce the appropriate length of notice, reference to case law in a search for length of service comparables must be done with great care. The risk is that while lengths of service can readily be compared with mathematical precision that is not so easily done with other relevant factors that go into the determination of notice in each case. Dissimilar cases may be treated as requiring similar notice periods just because the lengths of the service are similar. The risk is that length of service will take on a disproportionate weight. 43 I will refer to four examples of cases where factors other than the relatively short length of service resulted in significant length of notice requirements. Three of these are from the Ontario Court of Appeal and the other is a recent decision of this Court. 44 In Hall v. Canadian Corporate Management Co. (1984), 4 C.C.E.L. 166, [1984] O.J. No. 61 (Ont. C.A.), the Ontario Court of Appeal considered an appeal of an award at trial of 12 months notice for a 51 year old employee who had been enticed by a friend to sell his business in one locale and to join him as Vice-President of Merchandising and Marketing in a new venture in a different city at a substantial salary of $50,000.00 per year. He was terminated after only 11 months. The trial judge took into account that the employee had expected a fairly lengthy period of employment with the new company and that it took him over a year to find new employment. The Court of Appeal decided that the 12 months notice was too long considering that he had been employed for only 11 months and reduced the notice period to six months. 45 In Isaacs v. MHG International Ltd. (1984), 7 D.L.R. (4th) 570, [1984] O.J. No. 3155 (Ont. C.A.) , a 38 year old employee with a Bache- lor of Science degree was hired as a purchasing agent for a company that had been retained to design and build a large petrochemical plant at a salary of $41,000.00 per year. Less than eight months later, the project was cancelled and the employee’s services were terminated. The trial judge determined that a reasonable notice of termination was nine months, having regard to the nature of the employment and the employee’s age, training and qualifications. The trial judge also considered 506 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

that the employee had been enticed from a situation of secure employment. The Ontario Court of Appeal upheld the trial judge’s decision to award damages based on nine months notice, but did state that individual members of the court would have been disposed to fix a shorter period of six months. 46 In McNevan v. AmeriCredit Corp., 2008 ONCA 846, 305 D.L.R. (4th) 233, 94 O.R. (3d) 458 (Ont. C.A.), the plaintiff was dismissed without cause from his position as assistant vice-president at one of the defendant’s call centres after 13 months’ service. The trial judge took into account a dearth of similar employment available to the plaintiff in his chosen field of automotive finance. He also found that it would have been reasonable for the plaintiff to assume that his position was secure given the experience that he brought to the position and the success he had achieved during the year he was with the company. The Ontario Court of Appeal found that the trial judge’s award of six months’ notice, while generous, to be within the acceptable range given the difficulties that the plaintiff would encounter finding opportunities to match his skill and experience in a smaller urban area. The court referred to both Hall and Issacs as examples of cases establishing the range. 47 In Vettraino this Court had occasion to consider both Hall and Issacs in the context of an action brought by a 56 year old social worker with extensive experience in mental health counselling and supervision who was dismissed from a $78,000.00 per year position as Director of Mental Health and Addiction Services for Sun Country Health Region just short of 18 months after assuming the position. He found comparable employment five months after his dismissal. I found that while the plaintiff had not been enticed to leave secure employment, the offer of reimbursement for relocation expenses conditional on two years’ return service at the time of hire created an expectation of secure employment. This Court awarded the plaintiff damages based on five months’ notice. 48 Having regard to the factors mentioned in Bardal and the other factors referred to in subsequent jurisprudence as noted above, I find Mr. Coppola’s situation to be as follows: • The character of employment is evidenced in the title which Mr. Coppola was given upon being hired by Capital Pontiac, being Fleet Account Manager. His proficiency in retail sales was recognized in a new remuneration plan. A few months later, Mr. Cop- pola took charge of the AmeriCredit financing portfolio and as a result of his success he was promoted to the position of Finance Manager in addition to retaining his position as Fleet Account Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 507

Manager. While it may be the case that Mr. Coppola did not necessarily supervise other employees, he was instrumental in assisting others in closing their deals. When he started with Capital Pontiac in 2000 he earned an average salary of approximately $3,450.00 per month. At the time of his dismissal in June of 2002, his average salary was almost $12,900.00 per month. Since much of his salary was based on commissions, there is no question that he was generating significant sales for his employer, Capital Pontiac. • The length of service in this case was just shy of 23 months. Given the phenomenal success that Mr. Coppola had exhibited in managing the fleet sales, conducting retail sales, his handling of the AmeriCredit portfolio and being promoted to one of the Fi- nance Manager positions, it would appear that Mr. Coppola had every reason to feel secure in his employment at Capital Pontiac. While the employment principles referred to above clearly establish that an employee may be dismissed without cause and without the need for the employer to give any reason, when an employer does proffer a reason, it should be honest and forthright. The reason given by Mr. Axelson to Mr. Coppola that he was being dismissed because he had decided to reduce the number of Finance Managers from three to two does not ring true. While it makes no difference given the employers’ right to terminate without cause it would seem in this case that Mr. Coppola’s refusal of a transfer to a different dealership was more likely the reason for his dismissal, though this was not communicated to Mr. Coppola at the time. It may also be the case that Mr. Axelson realized that he had been outwitted in compensation negotiations with Mr. Coppola who was now earning almost four times his initial salary. • Mr. Coppola was 36 years of age at the time of his hiring. He brought with him nine years of experience in automotive sales and management, and he had had some success as a self-employed businessman. Given his success as a salesman at Capital Pontiac, he could have anticipated remaining with the company for a number of years. He was not close to retirement age. He was young enough to establish a new career away from automotive sales and financing — which is what he eventually did. • Availability of similar employment was a problem for Mr. Cop- pola. While he did find employment at Bennett Dunlop in Regina two months after his dismissal, that job lasted less than a month. 508 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Mr. Coppola did not lose that position because of anything he did or did not do. In considering whether “similar employment” was available to Mr. Coppola in the City of Regina or its environs, I also take into account that it was highly improbable that anyone would have hired him at the same salary that he was earning at Capital Pontiac at the time of his dismissal. • Given Mr. Coppola’s experience and qualifications in automotive sales and financing and his ability to quickly translate his personal attributes into a successful sales career at Capital Pontiac within a short period of time — as evidenced by the substantial salary and commissions he was earning at the time of his dismissal — I am inclined to place Mr. Coppola into the category of a senior or higher-ranking employee deserving of a longer period of notice of dismissal despite his relatively short period of employment at Capital Pontiac. 49 In these particular circumstances, and having carefully considered the precedents referred to herein, I find that Mr. Coppola ought to have received six months notice prior termination.

Mitigation 50 It is well settled law that the onus is on the employer to establish that the employee failed to mitigate. (See:Michaels v. Red Deer College (1975), [1976] 2 S.C.R. 324, [1975] 5 W.W.R. 575 (S.C.C.), at pp. 580 and 581.) In this case, Mr. Coppola did obtain employment with Bennett Dunlop for a short period of time following his dismissal from Capital Pontiac. I am satisfied that Mr. Coppola was not dismissed from his employment with Bennett Dunlop for cause. His earnings at Bennett Dunlop will be taken into account in establishing his damages for the wrongful dismissal. I am also satisfied that Mr. Coppola did make enquiries of other automobile dealers in Regina but was unable to find similar employment. In any event, since the onus lies on the plaintiff in this case to prove failure to mitigate, and because no evidence was presented by the plaintiff that similar positions would have been available to Mr. Coppola at similar rates of pay, I find that failure to mitigate is not an issue in this case. In my view, the steps which Mr. Coppola took within weeks of his dismissal to establish a mortgage brokerage business with Mr. Drayton was entirely reasonable in the circumstances given his experience in sales and financing. Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 509

‘Wallace’ type damages 51 Mr. Coppola also seeks damages for mental distress caused as a result of the manner in which he was dismissed without cause by Capital Pon- tiac. The law regarding the awarding of damages beyond compensation for breach of the contract for failure to give reasonable notice was recently clarified by the Supreme Court of Canada in Keays v. Honda Canada Inc.. An overview of the state of the law was provided by Mr. Justice Bastarache. He stated (at para. 50) that the general rule, which stems from the century old British case of Addis v. Gramophone Co., [1909] A.C. 488 (Eng. H.L.), is that damages allocated in an action for wrongful dismissal are confined to the loss suffered as a result of the employer’s failure to give notice and that no damages are available to the employee for the actual loss of his or her job and/or pain and distress that may have been suffered as a consequence of being terminated. This rule was affirmed by the Supreme Court of Canada in Peso Silver Mines Ltd. v. Cropper, [1966] S.C.R. 673 (S.C.C.), at p. 684: ... the damages cannot be increased by reason of the circumstances of dismissal whether in respect of the [employee’s] wounded feelings or the prejudicial effect upon his reputation and chances of finding other employment. 52 Mr. Justice Bastarache noted that the possibility of awarding what was referred to as “aggravated damages” in an action for breach of contract was recognized by Mr. Justice McIntyre in Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085 (S.C.C.), wherein he stated at p. 1103: ... I would conclude that while aggravated damages may be awarded in actions for breach of contract in appropriate cases, this is not a case where they should be given. The rule long established in the Addis and [page388] Peso Silver Mines cases has generally been applied to deny such damages, and the employer/employee relationship (in the absence of collective agreements which involve consideration of the modern labour law r´egime) has always been one where either party could terminate the contract of employment by due notice, and therefore the only damage which could arise would result from a failure to give such notice. 53 The possibility of allocating aggravated damages in wrongful dismissal cases was nevertheless left open where the acts complained of were also independently actionable. Mr. Justice McIntyre stated at p. 1103: I would not wish to be taken as saying that aggravated damages could never be awarded in a case of wrongful dismissal, particularly 510 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

where the acts complained of were also independently actionable, a factor not present here. [Emphasis added] 54 The issue was taken up by the Supreme Court of Canada again in Wallace. According to Mr. Justice Bastarache, in that decision Mr. Jus- tice Iacobucci endorsed a strict interpretation of the Vorvis “independently actionable wrong” approach, rejecting both an implied contractual duty of good faith and a tort of bad faith discharge. He quoted the following from para 73 of Wallace: Relying upon the principles enunciated in Vorvis, supra, the Court of Appeal held that any award of damages beyond compensation for breach of contract for failure to give reasonable notice of termination “must be founded on a separately actionable course of conduct” (p. 184). Although there has been criticism of Vorvis ... this is an accurate statement of the law. ... An employment contract is not one in which peace of mind is the very matter contracted for (see e.g. Jarvis v. Swans Tours Ltd., [1973] 1 Q.B. 233 (C.A.)) and so, absent an independently actionable wrong, the foreseeability of mental distress or the fact that the parties contemplated its occurrence is of no consequence... . [Emphasis added.] 55 Justice Bastarache notes (at para. 50) that in the subsequent Supreme Court of Canada decision of Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3 (S.C.C.), Chief Justice McLachlin and Justice Abella concluded that it was no longer necessary that there be an independent actionable wrong before damages for mental distress can be awarded for breach of contract, whether or not it was a “peace of mind” contract. He quotes the following from their decision (at para. 49): We conclude that the “peace of mind” class of cases should not be viewed as an exception to the general rule of the non-availability of damages for mental distress in contract law, but rather as an application of the reasonable contemplation or foreseeability principle that applies generally to determine the availability of damages for breach of contract. Mr. Justice Bastarache stated that this conclusion was based on the principle, articulated in Hadley v. Baxendale (1854), 9 Exch. 341, 156 E.R. 145 (Eng. Ex. Div.), that damages are recoverable for a contractual breach if the damages are “such as may fairly and reasonably be considered either arising naturally ... from such breach of contract itself, or such Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 511

as may reasonably be supposed to have been in the contemplation of both parties.” 56 Mr. Justice Bastarache applies the Hadley principle to contracts of employment in the following manner (at paras. 56, 57 and 58): 56 We must therefore begin by asking what was contemplated by the parties at the time of the formation of the contract, or, as stated in para. 44 of Fidler: “[W]hat did the contract promise?” The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of notice without regard to the ordinary psychological impact of that decision. At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable. 57 Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive” (para. 98). 58 ... In Wallace, the Court held employers “to an obligation of good faith and fair dealing in the manner of dismissal” (para. 95) and created the expectation that, in the course of dismissal, employers would be “candid, reasonable, honest and forthright with their employees” (para. 98). At least since that time, then, there has been expectation by both parties to the contract that employers will act in good faith in the manner of dismissal. Failure to do so can lead to foreseeable, compensable damages. ... 57 Finally, Mr. Justice Bastarache concludes his analysis of the jurisprudence with the following statement (at para. 59): 59 ... Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice pe- 512 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

riod, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance (see also the examples in Wallace, at paras. 99-100). 58 Before proceeding to an analysis of examples of conduct in dismissal which may result in an award of compensation, I would first make it clear that it is not my intent only to examine the conduct of Capital Pon- tiac at the moment of dismissal on June 28, 2002. I am satisfied that the court is also entitled to consider acts of the employer before and after termination. This view was endorsed by the Ontario Court of Appeal in Gismondi v. Toronto (City) (2003), 64 O.R. (3d) 688 (Ont. C.A.); (2003), 226 D.L.R. (4th) 334 (Ont. C.A.), wherein Mr. Justice Rosenberg wrote (at para 23): 23 ... I do not disagree with the trial judge’s view that Wallace damages are not limited to acts of the employer at the very moment of dismissal and can in appropriate circumstances include “the employer’s conduct pre- and post-termination ... and the conduct of the employer in its aftermath” but only, in my view, as a component of the manner of dismissal. 59 In addition to enumerating a number of examples of conduct in dismissal which could give rise to compensable damages, Mr. Justice Bas- tarache also suggested looking at the examples in Wallace mentioned at paras. 99-100. Among those are the cases of Trask v. Terra Nova Motors Ltd. [1995 CarswellNfld 18 (Nfld. C.A.)], and Jivrag v. Calgary (City) (1986), 45 Alta. L.R. (2d) 343 (Alta. Q.B.), rev’d (1987), 62 Alta. L.R. (2d) xlviii (note) (Alta. C.A.). 60 In Trask, the employer wrongfully accused the employee of theft of a small quantity of motor oil. He dismissed the employee for cause and proceeded to inform prospective employers of this accusation. The New- foundland Supreme Court – Court of Appeal approved of the trial judge’s award of 18 months notice for the seven year employee, finding that the manner of dismissal was relevant in this case. The trial judge had tacked an additional nine months to what would normally have been a nine month award for the reason that the wrongful accusation of involvement in theft would increase the amount of time that the employee would need to find alternate employment. In addition, the appeal court approved the award of $4,000.00 as damages for mental distress, finding no over- Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 513

lap as the extension of notice to a period of 18 months reflected estimated additional wages lost by the employee and the award of $4,000.00 was for pain and suffering. 61 In Jivrag, the employee, a parking attendant with over five and a half years service, was wrongfully accused of altering the time slips and con- verting the money to his own use. The employer had also refused to provide a letter of reference. The trial judge determined that the allegation of theft was totally unsubstantiated and that the employee was wrongfully dismissed. While he would have ordinarily awarded six months pay in lieu of notice, the judge found that the employee had suffered great mental anguish as a result of the allegation of theft and increased the award to 15 months salary in lieu of notice. 62 I am of the opinion that Mr. Coppola has established grounds for an award of aggravated damages for mental distress resulting from the manner of his dismissal from Capital Pontiac. I find that on June 28, 2002, when Mr. Axelson delivered the news to Mr. Coppola that he was being laid off due to reorganization of the dealership, Mr. Axelson did not have any information regarding any possible fraudulent conduct on the part of Mr. Coppola. I accept the evidence of Mr. Drayton that in early October 2002, he was informed by Tri Stewart, one of the Finance Managers at Capital Pontiac that Mr. Coppola’s dismissal was as a result of the theft of a vehicle from the dealership. I do not believe Mr. Axelson when he denied talking to any other employees except those in accounting or payroll about the reasons for Mr. Coppola’s lay off, or that it was only after he was served with the statement of claim on January 30, 2003, that he asked two senior employees to investigate whether there was just cause to terminate Mr. Coppola. I am satisfied that the allegation of the misappropriation of the Gertie Mazil vehicle had been discussed amongst the management and staff of Capital Pontiac at least as early as October 2002 when Tri Stewart warned Mr. Drayton that he should be careful in his dealings with Mr. Coppola. 63 I accept the evidence of Mr. Coppola to the effect that the accusation of dishonest and/or fraudulent conduct first raised by Mr. Stewart and confirmed in the statement of defence and counterclaim served on him on April 11, 2003, were emotionally devastating. These allegations were stressful and caused sleepless nights. They also consumed a great deal of time and effort trying to convince his business partner that the allegations were untrue. Mrs. Coppola confirmed that the loss of his employment at Capital Pontiac was already difficult for Mr. Coppola. However, the allegation made by Mr. Stewart to Mr. Drayton concerning a missing vehicle 514 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

was “another blow” which had an effect on Mr. Coppola and his family. She stated that both she and Mr. Coppola were “shocked” when the allegation appeared in the statement of defence and counterclaim since it accused Mr. Coppola of being a criminal. While Mr. Coppola did not seek medical attention for the mental distress, I also accept the evidence of Mrs. Coppola that she employed her own skill as a psychiatric nurse to help her husband overcome the effects of these false accusations. I am satisfied that the allegation of dishonest and/or fraudulent conduct exacerbated and prolonged the mental distress beyond the normal hurt feelings associated with dismissal. 64 In this regard, I find it disturbing that Mr. Axelson did not contact Ms. Mazil directly about the alleged misappropriation of her trade-in at a much earlier date. His attempt to confirm the allegation by asking her to fill out a purported “Customer Survey” on March 14, 2003, was disingenuous at best. However, what is completely perplexing is why the statement of defence and counterclaim prepared on April 11, 2003, alleged that Mr. Coppola had misappropriated Ms. Mazil’s old car when Ms. Mazil wrote on the survey form that the car was not worth anything and that Mr. Coppola got rid of the car as a favour to her. If Capital Pontiac had been honest and forthright with Ms. Mazil, she would have provided the same full explanation of the transaction that she gave to Mr. Coppola on August 7, 2003 (Exhibit P-4). 65 As stated, employers have an obligation of good faith and fair dealing in the manner of dismissal. Employers must be candid, reasonable, honest and forthright with their employees. I find that Capital Pontiac not only failed to meet its obligations of good faith and fair dealing with Mr. Coppola, but indeed acted in a manner that was harsh and vindictive os- tensibly because Mr. Coppola claimed to have been wrongfully dismissed — a claim which was well-founded in law. The damages which Mr. Coppola suffered as a result of the false accusation of dishonest and/or fraudulent conduct were clearly foreseeable and are compensable under the Hadley principle. The attack on Mr. Coppola’s reputation and the misrepresentation regarding the reason for his dismissal are the type of conduct in dismissal which call for an award of damages for mental distress. 66 Both Mr. Coppola and Mr. Drayton testified that the allegation of dishonest and/or fraudulent conduct delayed the commencement of the mortgage brokerage business for a number of months. However, following the dictates of the Supreme Court of Canada in Honda, damages attributable to conduct in the manner of dismissal are to be awarded not Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 515

through an arbitrary extension of the notice period, but through an award that reflects actual damages. Guidance in the awarding of aggravated damages for injuries suffered by reason of post-termination conduct can be found in other areas of the law. 67 In this regard, I refer to the comments of Mr. Justice Iacobucci in Wallace (at paras. 105 to 107: 105 The availability of compensation for these types of injuries has been recognized in other areas of the law. In McCarey v. Associated Newspapers Ltd. (No.2), [1965] 2 Q.B. 86 (C.A.), Pearson L.J. examined the scope of recovery in an action for libel. At pp. 104-5 he stated: Compensatory damages, in a case in which they are at large, may include several different kinds of compensation to the injured plaintiff. They may include not only actual pecuniary loss and anticipated pecuniary loss or any social disadvantages which result, or may be thought likely to result, from the wrong which has been done. They may also include the natural injury to his feelings — the natural grief and distress which he may have felt at having been spoken of in defamatory terms, and if there has been any kind of high-handed, oppressive, insulting or contumelious behaviour by the defendant which increases the mental pain and suffering caused by the defamation and may con- stitute injury to the plaintiff’s pride and self-confi- dence, those are proper elements to be taken into account in a case where the damages are at large. 106 Pearson L.J.’s list of the elements properly compensated for in an award of this type found favour with the Nova Scotia Supreme Court, Appeal Division in Barltrop v. Canadian Broadcasting Corp. (1978), 25 N.S.R. (2d) 637, at pp. 661- 62, leave to appeal refused, [1978] 1 S.C.R. vi. Having been asked to assess damages in an action for defamation, MacKei- gan C.J.N.S., writing for a unanimous court, quoted the above cited passage with approval (see also: Stumpf v. Globe Holdings Ltd. (1982), 22 Alta. L.R. (2d) 55 (Q.B.), at p. 61). 107 In my view, there is no valid reason why the scope of compensable injuries in defamation situations should not be equally recognized in the context of wrongful dismissal from employment. The law should be mindful of the acute vulnerability of terminated employees and ensure their protection by 516 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

encouraging proper conduct and preventing all injurious losses which might flow from acts of bad faith or unfair dealing on dismissal, both tangible and intangible. I note that there may be those who would say that this approach imposes an onerous obligation on employers. I would respond simply by saying that I fail to see how it can be onerous to treat people fairly, reasonably, and decently at a time of trauma and despair. In my view, the reasonable person would expect such treatment. So should the law. 68 These principles were applied by Justice Grace of the Ontario Supe- rior Court of Justice in Pagliaroli v. Rite-Pak Produce Co., 2010 ONSC 3729, [2010] O.J. No. 3017 (Ont. S.C.J.), in upholding an arbitrator’s award of $25,000.00 for aggravated damages in a constructive dismissal case. Approximately one month after his termination, the employer made a speech at a Christmas party in which he insinuated that the employee had been dismissed for corruption and dishonesty. After referring to the above passages from Wallace, Justice Grace wrote (at para. 61): 61 Those principles apply with full force to conduct that occurs after termination. In this case, Mr. Pagliaroli maintained that the usual “hurt feelings” which flow from dismissal were exacerbated by a later, thinly veiled and wide-ranging attack on his character. Given the circumstances, Mr. Pagliaroli was unable to respond. The arbitrator agreed the speech went too far. While the absence of medical evidence is a concern, there was factual support for the arbitrator’s conclusion the speech caused mental distress: Francis v. Canadian Imperial Bank of Commerce, [1994] O.J. No. 2657 (C.A.). While Mr. DuVernet is correct in saying the arbitrator did not label the “independent actionable wrong”, the arbitrator clearly viewed the speech as defamatory and to use the words in Wallace “unfair dealing”: Plester v. Wawanesa Mutual Insurance Co., [2006] O.J. No. 2139 (C.A.). In my view, the arbitrator did not err in awarding $25,000 on account of aggravated damages. 69 In Chapell v. Canadian Pacific Railway, 2010 ABQB 441, 29 Alta. L.R. (5th) 380 (Alta. Q.B.), a 27 year employee was dismissed after the employer became aware that he had submitted expense accounts which contained duplicate items. The court found that the employee had been wrongfully dismissed, accepting the employee’s explanation that the duplicates were submitted in error. The trial judge also held that the manner in which CPR dismissed him was unduly insensitive and unfair. The trial judge accepted the plaintiff’s evidence of mental distress though it Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 517 was unsupported by any medical reports. Following is an excerpt from the judge’s decision (at para. 101 and 102): 101 At trial, when asked how he felt after his dismissal, Mr. Cha- pell stated: “I didn’t get out of bed for I guess about three weeks. I was depressed.” I accept this evidence. I find Mr. Chapell is a stoic individual for whom these manifestations would be indicative of mental distress. The Defendant submitted in oral argument that for an employee to receive bad faith damages post-Honda Canada that the employee must tender evidence beyond his own testimony that the mental distress suffered went beyond the normal hurt feelings associated with the loss of employment. Based on the authorities provided by the Defendant to support that proposition I agree that further evidence, for example medical reports, would be a factor to consider, however, it is not required. For example, in Simmons v. Webb (2008), 54 B.L.R. (4th) 197 (Ont. S.C.J.), bad faith damages on the principles enunciated in Honda Canada were awarded seemingly without reliance on evidence beyond that of the plaintiff employee. I find that there is sufficient evidence on which to conclude that Mr. Chapell’s distress went beyond the normal hurt feelings associated with dismissal and should be awarded bad faith damages. 102 In the case of Simmons, a 20 year employee was abruptly fired by a letter which informed him of his termination and bluntly directed him to immediately remove his personal effects from the premises. The employer refused to return property of great sentimental value to the employee. The Court found that the actions of the employer were insensitive, and lacked courtesy, respect and compassion. Failing to return the treasured property was mean-spirited, petty and insensitive. I find that the circumstances under which Mr. Chapell was dismissed should garner bad faith damages in the same range as the court ordered in Simmons. CPR, in the manner in which it dismissed Mr. Chapell, humiliated him after a long and successful career, devaluing his contribution to the company and his self-worth through an investigation focussed on case building against him that led to his unwarranted dismissal for cause. The utter humiliation that Mr. Chapell had to have experienced both directly and indirectly is similar to the behaviour that the employee in Simmons experienced. 518 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

The award of bad faith damages in each of these cases was $20,000.00. 70 In this case, it appears that the allegation of dishonest and/or fraudulent conduct was not widely circulated. There is no doubt that a number of employees of Capital Pontiac were involved in investigating possible grounds to establish just cause for Mr. Coppola’s dismissal. There is no question that Mr. Stewart warned Mr. Drayton that he should be careful in his dealings with Mr. Coppola because he had misappropriated a vehicle. There is no evidence that Mr. Axelson mentioned the alleged theft of Gertie Mazil’s vehicle to any prospective employer or that he was ever asked for a reference from any prospective employer. Mr. Coppola was obligated to inform Gertie Mazil of the allegation in order to obtain a statement from her exonerating him of any wrong-doing. Other than that, the allegation was discussed in correspondence between the parties’ solicitors and it was mentioned in the court pleadings. Mr. Coppola informed his family and siblings about the allegation. He testified that he continually wondered who else was aware of the allegation and whether it would affect his ability to obtain a mortgage brokerage licence. Mr. Coppola also found it extremely frustrating that Capital Pontiac did not withdraw the allegation until after the examinations for discovery in Jan- uary of 2004. He also was disappointed in the fact that Mr. Axelson never apologized to him for having made the false allegation in the first place. 71 In the circumstances, I am of the view that Mr. Coppola is entitled to a substantial award for aggravated damages for mental distress caused by the false allegation of dishonest and/or fraudulent conduct following his wrongful dismissal from Capital Pontiac. I am satisfied that the mental distress suffered by Mr. Coppola was comparable to that experienced by the plaintiffs in the above cited cases of Pagliaroli , Chapell and Simmons v. Webb [2008 CarswellOnt 7874 (Ont. S.C.J.)] I have decided that a reasonable award for aggravated damages in this case is $20,000.00.

Punitive damages 72 Mr. Coppola has also asked for punitive damages. The purpose of such an award would be to punish the defendant. The principles to be considered in deciding whether an award of punitive damages should be made are set out in this passage from Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (S.C.C.) at para. 94, where Mr. Justice Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 519

Binnie enumerated the salient points which might be included in a charge to the jury tasked with assessing punitive damages: 94 ... (1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient. 73 The threshold issue is whether Capital Pontiac’s conduct in dismissal was so outrageous that punitive damages are necessary for the purpose of deterrence, denunciation and retribution. In my view, this is not a case which calls for the imposition of punitive damages. Significant compensatory damages have already been awarded under the headings of pay in lieu of notice and aggravated damages. These awards are, in my opinion, adequate to achieve the objectives of retribution, deterrence and denunciation. 520 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Other Issues Costs 74 Mr. Coppola is entitled to his costs of this action to be taxed with the exception that no costs are awarded relating to the calling of Mr. Lorne Wirth as an expert. 75 As I have previously indicated, Mr. Wirth provided opinion evidence estimating the total income lost by Mr. Coppola from the time of his dismissal from Capital Pontiac in 2002 until he was able to again earn the same level of income in his new business venture in 2005. I am not aware of any case law emanating from any court in Canada where the damage for the breach of the obligation to give reasonable notice is calculated in this manner. In addition, while I give little weight to Mr. Wirth’s evidence regarding the loss from the sale of a rental property, the income from which Mr. Coppola used to tide himself over during his career change, I am also of the opinion that this is not compensable as part of aggravated damages under the Hadley principles as damages reasonably arising from the breach of contract or that may have been in contemplation of the parties.

Pre-judgment interest 76 Mr. Coppola has claimed pre-judgment interest pursuant to The Pre- judgment Interest Act, S.S. 1984-85-86, c. P-22.2. Interest shall be payable on that portion of this judgment which represents pay in lieu of notice in accordance with s. 6(2) of the Act calculated at three month intervals commencing June 28, 2002, (excepting that portion paid to him as severance on July 2, 2002). Interest shall be payable in accordance with s. 6(1) of the Act on that portion of the judgment which represents aggravated damages from January 1, 2003.

Employment insurance 77 Mr. Coppola reported receiving $8,673.00 in employment insurance in 2002 and $6,195.00 in 2003. I am unable to ascertain whether all of the employment benefits received in these years relate to the period between his dismissal in June 2002 and his return to employment with Quick Response Mortgage Services Ltd. The issue is pertinent because of the application of ss. 45 and 46 of the Employment Insurance Act, S.C. 1996, c. 23 which state: 45. If a claimant receives benefits for a period and, under a labour arbitration award or court judgment, or for any other Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. G.A. Chicoine J. 521

reason, an employer, a trustee in bankruptcy or any other person subsequently becomes liable to pay earnings, including damages for wrongful dismissal or proceeds realized from the property of a bankrupt to the claimant for the same period and pays the earnings, the claimant shall pay to the Receiver Gen- eral as repayment of an overpayment of benefits an amount equal to the benefits that would not have been paid if the earnings had been paid or payable at the time the benefits were paid. 46.(1) If under a labour arbitration award or court judgment, or for any other reason, an employer, a trustee in bankruptcy or any other person becomes liable to pay earnings, including damages for wrongful dismissal or proceeds realized from the property of a bankrupt, to a claimant for a period and has reason to believe that benefits have been paid to the claimant for that period, the employer or other person shall ascertain whether an amount would be repayable under section 45 if the earnings were paid to the claimant and if so shall deduct the amount from the earnings payable to the claimant and remit it to the Receiver General as repayment of an overpayment of benefits. 78 I will leave it to counsel for the parties to make the appropriate inquiries to determine if any amount of the award relating to pay in lieu of notice is repayable to the Receiver General and who will remit any amount payable.

Income tax 79 Counsel should also be aware that s. 248 of the Income Tax Act, R.S.C. c. 1 1985 (5th Supp.) defines “retiring allowance” as including an amount “in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account of or in lieu of payment of, damages pursuant to an order or judgment of a competent tribunal”. Once again, I will leave it to counsel for the parties to determine whether any amount of the pay in lieu of notice must be remitted to the Receiver Gen- eral on account of income taxes.

Loss of benefits 80 Mr. Coppola had also claimed loss of employee benefits including group medical coverage, group insurance, dental plan and any other inci- dental benefits. No loss of benefits was proved at the trial except for the $300.00 per month vehicle allowance. Mr. Axelson allowed Mr. Coppola 522 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

to continue using his demonstrator vehicle for two weeks after his termination. Mr. Coppola is entitled to recover the loss of use of a vehicle for the balance of the six month notice period. The value of the vehicle benefit for five and one-half months is $1,650.00.

Summary 81 Mr. Coppola was earning the equivalent of $154,526.16 per year or $12,877.18 per month at the time of his dismissal. The amount of salary he would have earned during the six month reasonable notice period was $77,263.08. He received the sum of $8,535.76 representing two weeks’ notice pursuant to The Labour Standards Act, R.S.S. 1978, c. L-1 on July 2, 2002. Also to be deducted is the amount of $2,342.58 which is the amount that Mr. Coppola earned at Bennett Dunlop during the reasonable notice period. The balance payable by Capital Pontiac to Mr. Cop- pola as pay in lieu of notice is $66,384.74. 82 In addition, Capital Pontiac will pay to Mr. Coppola $1,650.00 for loss of the vehicle benefit during the reasonable notice period. 83 Finally, Capital Pontiac will also pay to Mr. Coppola the sum of $20,000.00 in aggravated damages resulting from the employer’s conduct in the manner of dismissal. 84 Accordingly, Mr. Coppola will have judgment against Capital Pontiac for $88,034.74 minus any amount remitted to the Receiver General as an overpayment of employment insurance benefits or income taxes. Interest calculated pursuant to The Pre-judgment Interest Act and as directed herein shall be added to the judgment. Mr. Coppola shall have his costs of this action, to be taxed, excluding costs related to the calling of the expert witness. Action allowed. Manitoba Eastern Star v. Dominion Cons. 523

[Indexed as: Manitoba Eastern Star Chalet Inc. v. Dominion Construction Co.] Manitoba Eastern Star Chalet Incorporated (Plaintiff) and Dominion Construction Company Inc. (Defendant) Manitoba Court of Queen’s Bench Docket: Winnipeg Centre CI 09-01-62386 2011 MBQB 320 McKelvey J. Judgment: December 21, 2011 Remedies –––– Specific performance — Grounds for refusal — Mistake — General principles –––– Plaintiff owners of housing complex formulated plans to expand complex in 1990’s — Defendant construction company was one of three companies invited to bid on expansion project — Company was lowest bidder and was conditionally approved for project — Construction company pulled out of project, due to what they called error with their own estimate on project — Complex owner stated that bids were irrevocable and that damages for breach of contract would be sought based on difference between bid and next lowest bid — Contract was negotiated between owners and next lowest bidders — Owners brought action for breach of contract against company — Ac- tion allowed — Submission of tender could create contractual obligations — For company’s claim of non-compliance to be valid, error had to be obvious on face of bid — Company could not rely on own non-compliance as error was merely typographical, and essential elements of bid were present — Signing and sealing of bid were also compliant — Intentions of company to submit bid at time of submission were clear and outweighed any errors in bid. Remedies –––– Damages — Damages in contract — General principles –––– Plaintiff owners of housing complex formulated plans to expand complex in 1990’s — Defendant construction company was one of three companies invited to bid on expansion project — Company was lowest bidder and was conditionally approved for project — Construction company pulled out of project, due to what they called error with their own estimate on project — Complex owner stated that bids were irrevocable and that damages for breach of contract would be sought based on difference between bid and next lowest bid — Contract was negotiated between owners and next lowest bidders — Owners brought action for breach of contract against company — Action allowed — Damages would normally be calculated as difference between accepted bid and next lowest bid — However, negotiations lowered contract price with next lowest bidder and this was considered to be proper measure of damages — Damages were awarded 524 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

in amount of $518,059.85, representing difference between company’s bid and negotiated price with next lowest bidder. Contracts –––– Performance or breach — Obligation to perform — Tender of performance –––– Plaintiff owners of housing complex formulated plans to expand complex in 1990’s — Defendant construction company was one of three companies invited to bid on expansion project — Company was lowest bidder and was conditionally approved for project — Construction company pulled out of project, due to what they called error with their own estimate on project — Complex owner stated that bids were irrevocable and that damages for breach of contract would be sought based on difference between bid and next lowest bid — Contract was negotiated between owners and next lowest bidders — Owners brought action for breach of contract against company — Action allowed — Submission of tender could create contractual obligations — For company’s claim of non-compliance to be valid, error had to be obvious on face of bid — Company could not rely on own non-compliance as error was merely typographical, and essential elements of bid were present — Signing and sealing of bid were also compliant — Intentions of company to submit bid at time of submission were clear and outweighed any errors in bid. Cases considered by McKelvey J.: Calgary (City) v. Northern Construction Co. (1982), 67 A.R. 106, 1982 CarswellAlta 247, 23 Alta. L.R. (2d) 338 (Alta. Q.B.) — referred to Calgary (City) v. Northern Construction Co. (1985), 42 Alta. L.R. (2d) 1, 67 A.R. 95, 32 B.L.R. 81, 19 C.L.R. 287, [1986] 2 W.W.R. 426, 1985 Carswell- Alta 258, [1985] A.J. No. 741 (Alta. C.A.) — considered Calgary (City) v. Northern Construction Co. (1987), 80 N.R. 394, [1987] 2 S.C.R. 757, 82 A.R. 395, 56 Alta. L.R. (2d) 193, [1988] 2 W.W.R. 193, 1987 CarswellAlta 585, 1987 CarswellAlta 259, EYB 1987-66912 (S.C.C.) — referred to Chandos Construction Ltd. v. Alberta (Minister of Infrastructure) (2004), 46 C.L.R. (3d) 275, 381 A.R. 58, 2004 ABQB 836, 2004 CarswellAlta 1926, [2004] A.J. No. 1483 (Alta. Q.B.) — followed Chandos Construction Ltd. v. Alberta (Minister of Infrastructure) (2006), 2006 ABCA 41, 2006 CarswellAlta 91, 380 A.R. 152, 363 W.A.C. 152, 61 Alta. L.R. (4th) 217, 50 C.L.R. (3d) 1, [2006] A.J. No. 78 (Alta. C.A.) — considered Derby Holdings Ltd. v. Wright Construction Western Inc. (2002), 2002 SKQB 247, 2002 CarswellSask 390, 17 C.L.R. (3d) 64, 221 Sask. R. 112, 2002 SKQB 247a, [2002] 9 W.W.R. 126, [2002] S.J. No. 367 (Sask. Q.B.) — followed Derby Holdings Ltd. v. Wright Construction Western Inc. (2003), 2003 Car- swellSask 623, 2003 SKCA 87, [2004] 5 W.W.R. 8, 238 Sask. R. 223, 305 W.A.C. 223, 27 C.L.R. (3d) 7 (Sask. C.A.) — referred to Manitoba Eastern Star v. Dominion Cons. 525

Double N Earthmovers Ltd. v. Edmonton (City) (2007), 2007 CarswellAlta 36, 2007 CarswellAlta 37, 2007 SCC 3, 391 W.A.C. 329, 401 A.R. 329, 275 D.L.R. (4th) 577, 28 B.L.R. (4th) 169, [2007] 1 S.C.R. 116, 29 M.P.L.R. (4th) 1, 68 Alta. L.R. (4th) 1, 58 C.L.R. (3d) 4, [2007] 3 W.W.R. 1, 356 N.R. 211, [2007] S.C.J. No. 3 (S.C.C.) — followed Graham Industrial Services Ltd. v. Greater Vancouver Water District (2003), 2003 BCSC 1735, 2003 CarswellBC 2820, 40 B.L.R. (3d) 159 (B.C. S.C.) — referred to Graham Industrial Services Ltd. v. Greater Vancouver Water District (2004), 2004 BCCA 5, 2004 CarswellBC 5, 25 B.C.L.R. (4th) 214, 40 B.L.R. (3d) 168, 194 B.C.A.C. 1, 317 W.A.C. 1, [2004] B.C.J. No. 5 (B.C. C.A.) — considered Graham Industrial Services Ltd. v. Greater Vancouver Water District (2004), 2004 CarswellBC 1300, 2004 CarswellBC 1301, 210 B.C.A.C. 320 (note), 348 W.A.C. 320 (note), 331 N.R. 198 (note), [2004] S.C.C.A. No. 72 (S.C.C.) — referred to H B Lynch Investments Inc. v. Canada (Minister of Public Works & Government Services) (2004), 2004 CarswellNat 1579, 2004 FC 747, (sub nom. H B Lynch Investments Inc. v. Canada (Minister of Public Works)) 252 F.T.R. 301, 2004 CF 747, 2004 CarswellNat 5407, [2004] F.C.J. No. 931 (F.C.) — distinguished H B Lynch Investments Inc. v. Canada (Minister of Public Works & Government Services) (2005), 2005 FCA 237, 2005 CarswellNat 1736, 2005 CAF 237, 2005 CarswellNat 4764, 339 N.R. 261, [2005] F.C.J. No. 1091 (F.C.A.) — considered M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. (1999), 170 D.L.R. (4th) 577, 49 B.L.R. (2d) 1, 237 N.R. 334, 44 C.L.R. (2d) 163, [1999] 1 S.C.R. 619, 232 A.R. 360, 195 W.A.C. 360, 1999 CarswellAlta 301, 1999 CarswellAlta 302, 2 T.C.L.R. 235, 69 Alta. L.R. (3d) 341, [1999] 7 W.W.R. 681, 3 M.P.L.R. (3d) 165, [1999] S.C.J. No. 17 (S.C.C.) — considered Maple Reinders Inc. v. Cerco Developments Ltd. (2011), 2011 CarswellBC 1831, 2011 BCSC 924, 3 C.L.R. (4th) 11, 89 B.L.R. (4th) 295 (B.C. S.C.) — referred to Midwest Management (1987) Ltd./Monad Contractors Ltd. v. BC Gas Utility Ltd. (1999), 1999 CarswellBC 1383, 47 C.L.R. (2d) 101, [1999] B.C.J. No. 1429 (B.C. S.C. [In Chambers]) — considered Midwest Management (1987) Ltd./Monad Contractors Ltd. v. BC Gas Utility Ltd. (2000), 2000 CarswellBC 2284, 2000 BCCA 589, 5 C.L.R. (3d) 140, 82 B.C.L.R. (3d) 79, 147 B.C.A.C. 175, 241 W.A.C. 175, [2000] B.C.J. No. 2204 (B.C. C.A.) — considered R. v. Ron Engineering & Construction (Eastern) Ltd. (1981), 1981 CarswellOnt 109, (sub nom. Ron Engineering & Construction (Eastern) Ltd. v. Ontario) 35 N.R. 40, 1981 CarswellOnt 602, 13 B.L.R. 72, 119 D.L.R. (3d) 267, [1981] 1 S.C.R. 111, [1981] S.C.J. No. 13 (S.C.C.) — followed 526 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

R. Litz & Sons Co. v. Manitoba Hydro (2006), (sub nom. Litz (R.) & Sons Co. v. Manitoba Hydro) 204 Man. R. (2d) 256, 2006 MBQB 164, 55 C.L.R. (3d) 26, 2006 CarswellMan 259, [2006] 12 W.W.R. 127, 21 B.L.R. (4th) 68 (Man. Q.B.) — followed Silex Restorations Ltd. v. Strata Plan VR 2096 (2004), 21 R.P.R. (4th) 180, 2004 BCCA 376, 2004 CarswellBC 1497, 36 C.L.R. (3d) 73, 201 B.C.A.C. 244, 35 B.C.L.R. (4th) 387, 328 W.A.C. 244, [2004] B.C.J. No. 1339 (B.C. C.A.) — considered Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways) (2010), 397 N.R. 331, [2010] 1 S.C.R. 69, 281 B.C.A.C. 245, 475 W.A.C. 245, 315 D.L.R. (4th) 385, 2010 CarswellBC 296, 2010 Car- swellBC 297, 2010 SCC 4, 86 C.L.R. (3d) 163, 65 B.L.R. (4th) 1, [2010] 3 W.W.R. 387, 100 B.C.L.R. (4th) 201, [2010] S.C.J. No. 4 (S.C.C.) — considered Toronto Transit Commission v. Gottardo Construction Ltd. (2005), 2005 Cars- wellOnt 4019, 257 D.L.R. (4th) 539, 202 O.A.C. 178, 45 C.L.R. (3d) 301, 8 B.L.R. (4th) 173, 77 O.R. (3d) 269, [2005] O.J. No. 3689 (Ont. C.A.) — considered Toronto Transit Commission v. Gottardo Construction Ltd. (2006), 355 N.R. 394 (note), 2006 CarswellOnt 2544, 2006 CarswellOnt 2545, 223 O.A.C. 398 (note) (S.C.C.) — referred to

ACTION for breach of contract by plaintiff housing complex owner against defendant construction company.

Helga D. Van Iderstine, John B. Martens, for Plaintiff David M. Skwark, Johanna C. Caithness, for Defendant

McKelvey J.:

1 Dominion Construction Company Inc. (“Dominion”) was one of three bidders on a building project at 525 Cathcart Street, in the City of Winni- peg. The issue before the court is whether Dominion was the successful bidder and, hence, liable for its failure to enter into a construction contract in accordance with its bid, or whether its bid was non-compliant thus rendering it not liable. For the purpose of this decision, the terms “bid” and “tender” will be used interchangeably.

I. Background 2 The plaintiff, Manitoba Eastern Star Chalet Incorporated (“Eastern Star”), is a non-profit organization which owns and operates a seniors housing complex known as the Eastern Star Chalet. The complex is located at 525 Cathcart Street, in the City of Winnipeg. In the 1990s, East- Manitoba Eastern Star v. Dominion Cons. McKelvey J. 527

ern Star formed the intention to expand and modernize the complex (“the construction project”) upon securing the necessary financing. The board of directors of Eastern Star, and specifically its construction committee, has, over the years, acted as overseers in endeavouring to have the construction project come to fruition. The treasurer, Donald Rae (“Rae”), and the chairman, Ron Maidment (“Maidment”), were intimately involved in, and to a significant extent have overseen, the construction project. Rae has a background in the construction industry. 3 In or around October, 1996, arccadd.com (“the consultant”) was retained by Eastern Star and initiated work towards the realization of the construction project. The consultant was represented throughout by its principal, Murray R. Wilson (“Wilson”). Wilson’s background included involvement with construction contracts, specifications and drawings. The construction project was to be financed by way of board fundraising accompanied by a mortgage to cover any shortfall. Eastern Star’s budget with respect to the construction project was in the area of $2,000,000.00. The consultant performed the services of an architectural consultant who prepared the drawings and specifications for the construction project, provided project management, and essentially orchestrated a tendering process along with other duties. It was agreed that three construction companies would be approached and invited to bid on the construction project. Those three companies were Dominion, Bird Construction Com- pany (“Bird”), and Bockstael Construction Limited (“Bockstael”). 4 In accordance with its duties, the consultant prepared a set of tender drawings, an architectural specification book, a mechanical and electrical specification book, and the necessary contract bid documents for Domin- ion, Bird and Bockstael to submit their respective bids on the construction project. The contract bid documents included “Instructions to Bid- ders”. The bid call was made on February 2, 2009, with the bid closing to take place February 27, 2009, at 2:00 p.m. 5 Particulars of the bid call, as well as other terms and conditions, were set out in the Instructions to Bidders. They read as follows in the statement of agreed facts, at paragraph 3 (Exhibit No. 1): a. Offers signed under seal, executed and dated were to be received at 525 Cathcart Street in Winnipeg, Manitoba; b. Offers were to be received no later than 2:00 p.m. local time on February 27, 2009 (hereinafter the “bid closing”); c. Bids would be open for acceptance and be irrevocable for a period of thirty (30) days after the bid closing; 528 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

d. Offers would only be opened after bid closing; e. Amendments to a submitted offer would be permitted if received in writing prior to bid closing and if the amendment was endorsed by the same party or parties who signed and sealed the initial offer; f. The owner reserved the right in its absolute discretion to accept any bid which it deemed most advantageous to itself and the right to reject any or all bids, in each instance without giving any notice; g. After acceptance by the Owner the Consultant on behalf of the Owner would issue to the successful bidder a written bid acceptance and notice to proceed; and h. The performance of the Work would be in accordance with the tender documents under a standard form contract, namely the 2008 edition of a CCDC 2 stipulated price contract. 6 During the course of their consideration of the construction project and the preparation of their respective bids, questions were posed by Do- minion, Bird and Bockstael to the consultant. Certain of these queries resulted in the realization of a number of specific addenda that were utilized to address and clarify the concerns raised about certain aspects of the construction project, drawings, and other matters. The preparation of such addenda is recognized as occurring in the usual course of construction projects and the bidding process. The structural addenda for the construction project, (two dated February 19 and two dated February 24, 2009), will be considered later in this decision and are contended by Do- minion as being one of the issues related to what it describes as its “non- compliant” bid on the project. 7 On February 27, 2009, Dominion, Bird and Bockstael submitted their respective bids in compliance with the 2:00 p.m. deadline and at the specified location of the bid delivery. Dominion’s bid was largely formulated and prepared by Eric Johnston (“Johnston”) and overseen by Rich- ard Graumann (“Graumann”), Dominion’s chief estimator. Graumann assessed the bid on Johnston’s computer screen and conducted a final review before authorizing its finalization. Graumann acknowledged, under cross-examination at trial, that he authorized the bid and thought that it reflected a reasonable cost with respect to the construction project. The Dominion bid was $2,450,000.00. There is no issue that Graumann, on behalf of Dominion, intended to submit the indicated bid on the construction project and was authorized to do so. Manitoba Eastern Star v. Dominion Cons. McKelvey J. 529

8 The bids were opened on February 28, 2009, at the complex. In attendance at the bid opening were Wilson (principal of the consultant), Maidment, Rae, and other members of the board of directors of Eastern Star. The Dominion bid was the lowest submitted at $2,450,000.00; the Bird bid was $3,097,000.00; and the Bockstael bid was $3,157,000.00. In Wilson’s view, the variance in price was reasonable with respect to what he determined to be a fairly conducted and competitive bid process. East- ern Star’s primary concern going into the tendering process was that of price and it, accordingly, was pleased with Dominion’s bid. Wilson requested time to review the bids in order to ensure that nothing was omitted in the circumstances of the bid process. As a consequence, the board of directors of Eastern Star made no decision on February 28 with respect to the successful bidder so as to facilitate Wilson’s review of the bids for the purposes of completeness and compliance. 9 Wilson returned to his office that day and prepared a “chart” which compared the essential elements of the three bids. With respect to Do- minion, he noted that the list of drawings had been included, as was the list of addenda with the exception of structural addendum #4. He noted that the exclusion of structural addendum #4 “should mean credit”. In terms of the signing officer, he determined that the chief estimator executed the bid and that a corporate seal was affixed to the document. There were similar notations with respect to other and similar issues as regards the Bird and Bockstael bids. Both of these bids had been entered subject to financing and, hence, were conditional. As Wilson was required to leave town on business the next day, he tasked Melody Stewart (“Stewart”), the consultant’s senior architectural project manager, with completing a reporting letter to Eastern Star that the Dominion bid be accepted. The letter dated March 2, 2009, from Stewart stated: We have examined the submitted tender prices and supporting documentation, and find them all to be in order and in compliance with the tender documents. 10 Wilson also advised Stewart by e-mail dated March 1, 2009, “If Do- minion calls please thank and congratulate them, and tell [them] they are ‘low and probable’ and we are awaiting final OK on the award from the board in two or three days.” In the event Bid and Bockstael called, they were also to be advised that Dominion was “low and probable”. 11 On March 2, 2009, at 11:27 a.m., Stewart received a telephone call from Johnston inquiring as to whether the bids had been opened. Stewart advised Johnston that Dominion was “low and probable” only to be told that there was a problem and that he would ‘get back to her’. Shortly 530 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

thereafter, Johnston forwarded correspondence to Eastern Star to the attention of Maidment and Rae advising: Upon review of our estimate for the Eastern Star Chalet Addition and Renovation project, we have discovered a substantial mathematical error in our Offer Price as submitted on Friday, February 27, 2009. As such, it is to our regret that Dominion Construction has no choice but to withdrawal [sic] our Bid for this project. This notification was sent to Stewart by e-mail at approximately 3:06 p.m. on March 2. 12 Johnston, after opening his computer on March 2, 2009, determined that something had gone wrong with the estimate upon which Domin- ion’s bid had been based. The numbers reflected on the computer program were now varied from those that had existed on February 27. The type of computer software utilized by Dominion has been identified as the probable cause of the mathematical error. Johnston determined that the bid price, as submitted on February 27, was incorrect and should have been approximately $600,000.00 higher. This would have placed the bid in the area of those submitted by Bird and Bockstael, albeit still the lowest. Dominion has been unable to reconstruct the estimate that it relied upon in formulating the February 27th bid. Graumann acknowledged that neither Eastern Star nor the consultant could have identified the “mathematical” error on the face of the Dominion bid document. Do- minion is not relying upon the mathematical error in the defence of this claim. Instead, Dominion asserts that its bid was materially non-compliant or that the bid was, at most, a counteroffer, which was capable of withdrawal at any time before acceptance. The withdrawal of the bid was argued to have been accomplished on March 2, 2009, before Eastern Star’s formal acceptance on March 11, 2009. 13 On March 11, 2009, Wilson had forwarded a letter to the attention of Wade Benjaminson, vice-president of Dominion, indicating that Domin- ion’s irrevocable offer dated February 27, 2009, of $2,450,000.00 for the construction project was accepted. Included with the letter was the stipulated price contract accompanied by a request that it be executed and returned. Wilson also stated: We acknowledge receipt of your Mr. Eric Johnston’s fax / e-mail dated March 2 2009 ... in which he sought to withdraw your Offer dated February 27, 2009 of $2,450,000.00. Because the tender documents required that all bids submitted stand irrevocable for 30 days, withdrawal after close of tenders is not permitted. Manitoba Eastern Star v. Dominion Cons. McKelvey J. 531

Failure to execute and return the enclosed CCDC2 2008 contract within the time required will result in award instead to the next lowest bidder whose bid price submitted was $3,097,000.00. In this event, the Owner shall look to Dominion to pay damages for breach of contract in the sum of the difference between your irrevocable Of- fer of $2,450,000.00 and the above mentioned second lowest bid of $3,097,000.00. [Emphasis in original.] 14 On March 17, 2009, the consultant was advised that Dominion would not be executing the stipulated price contract, asserting that its bid had been non-compliant with the Instructions to Bidders. 15 Eastern Star negotiated a contract for the construction project with Bird, the next lowest bidder, for the sum of $2,905,571.00. The project has been completed by Bird. Eastern Star seeks damages in the sum of $647,000.00 from Dominion, being the difference between Dominion’s bid ($2,450,000.00) and Bird’s bid ($3,097,000.00).

II. The Issues Surrounding the Alleged Non-Compliance 16 In order to avoid liability, Dominion argues that its bid was non-compliant based on: (1) its failure to provide a copy of a by-law resolution of its board of directors authorizing its chief estimator, who is not a stipulated officer of the company, to sign the bid document; and (2) its failure to include structural addendum #4 in its bid.

A. The Signing Authority/Provision of a By-Law Resolution 17 The relevant terms in the Instructions to Bidders state: PART 1 INSTRUCTIONS TO BIDDERS ... 1.5 Definitions .1 Bid, Offer, or Bidding: An act of submitting an offer under seal. ... 1.11 Bid Ineligibility .1 Bids that are unsigned, improperly signed or sealed, conditional, illegible, obscure, contain arithmetical errors, erasures, alterations, or irregularities of any kind, may at the discretion of the Owner, [be] declared non-compliant. 532 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

.2 Bid Forms and enclosures which are improperly prepared may at the discretion of the Owner, be declared non-compliant. ... .4 The Owner may however, in its sole discretion, reject or retain for its consideration, bids which are non-conforming because they do not contain the content or form required or for failure to comply with the process for submission as set out in these Instructions to Bidders. ... 1.17 Bid Signing .1 The Bid Form shall be signed under seal by the bidder. ... .4 Limited Company: Signature of a duly authorized signing officer(s) in their normal signatures. Insert the officer’s capacity in which the signing officer acts, under each signature. Affix the corporate seal. If the bid is signed by officials other than the President and Secretary of the company, or the President-Secretary-Treasurer of the company, a copy of the by-law resolution of the Board of Directors authorizing them to do so, must also be submitted with the Bid in the Bid envelope. 18 Dominion contends that while Graumann, when signing the bid document, was acting on its behalf and with its authorization, he was not the president, secretary or treasurer of the company as was stipulated to be necessary in clause 1.17.4 of the Instructions to Bidders. In his capacity as chief estimator, Dominion argues that a copy of the by-law resolution of its board of directors, which authorized Graumann to sign for such bids, was required to be submitted with the bid document. Neither Rae nor Wilson knew who had the signing authority with Dominion, albeit Graumann’s position was clearly identified as the chief estimator on the submitted bid. There was no issue raised with respect to the absence of the “authorizing” by-law resolution by Wilson with the board of directors of Eastern Star. In Wilson’s view, he knew of Graumann and was satisfied that he could bind Dominion even in the absence of the by-law resolution. The corporate seal was affixed to the Dominion bid document. 19 Graumann acknowledged that the bid requirement of a by-law resolution demonstrating authorization as a signing officer was not unusual. That being said, he had never before sent such a by-law resolution with a bid offer even in those circumstances where it had been requested. Manitoba Eastern Star v. Dominion Cons. McKelvey J. 533

Graumann dealt with 50 to 100 bids on a yearly basis and had executed many bids on behalf of Dominion in the past. It had been his intention to submit a bid on behalf of Dominion on the construction project for the cost of $2,450,000.00. 20 Bird and Bockstael were also “not compliant” with the bid signing protocol as outlined in the Instructions to Bidders (clause 1.17.4).

B. Structural Addendum #4 21 Clause 1.18.1 of the Instructions to Bidders required that there be “... a complete listing of all documents and information issued by which the Bid Price was derived.” Dominion argues that structural addendum #4 was not listed in its bid document under the “Addenda” heading (clause 1.5), thereby rendering the tender to be non-compliant. The structural addenda listed in the Dominion bid document were as follows: 1.5 Addenda .1 The following Addenda have been received. The modifications to the Contract Documents noted therein have been considered and all costs thereto are included in the Bid Price. ... .8 Struct. Addendum # 1 Dated February 19, 2009 .9 Struct. Addendum # 1 Revised Dated February 19, 2009 .10 Struct. Addendum # 2 Dated February 24, 2009 .11 Struct. Addendum # 3 Dated February 24, 2009 22 Structural addendum #1 dealt with the issues of pile caps and pony walls. This addendum was revised on the same date, being February 19, 2009, to reflect a clarification on the pile caps issue. This revised addendum was referred to in the Beach Rocke Engineering documentation as structural “Addendum 02”. The third structural addendum concerned a basement slab on grade preparation. The fourth addendum concerned exterior sheathing and roof strapping. Beach Rocke Engineering was retained by the consultant to assist with the construction project. 23 On February 24, 2009, Johnston, while preparing the Dominion bid, raised a question with Stewart regarding the exterior sheathing (Exhibit No. 7): • Drawing A2.4 shows the bulkhead in the Lounge G16 as Type A (TBAR), while section 5/A2.3 shows the same bulkhead as wood framed 534 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

• The structural drawings show the exterior sheathing as 7/16” OSB, while the architectural drawings call up 5/8” Dens Glass Gold 24 Stewart’s response to Johnston’s question, on behalf of the consultant, was the preparation of structural addendum #4. It stated, with respect to exterior sheathing, “Revise 7/16” OSB exterior wall sheathing shown on the structural drawings to read 5/8” Type “X” Dens Glass Gold Sheathing to match wall type “W2” shown on the architectural drawings” (“OSB/Dens”). With respect to roof strapping, the addendum directed, “Delete all 2x4 strapping shown on the roof. Metal roofing material will be fastened directly to the sheathing.” 25 The Dominion bid document lists four structural addenda identified in part by the dates those documents were prepared and issued. However, they are not properly numbered as 1 through 4. At page 5 of the Domin- ion bid document (Appendix B), the structural addenda are listed as “Structural 1-3, dated Feb 2009”. Again, while they are not properly listed as addenda #1 to #4, it is arguable that only three structural addenda were operative at the material time given the fact that the first addendum was revised and essentially replaced by “Addendum 02” or, as contained in the Dominion bid document, “Struct. Addendum # 1 Re- vised Dated February 19, 2009”. As earlier stated, Wilson noted this “discrepancy” in his review of the bids and observed on his comparative chart that structural addendum #4 “look missing. Should mean credit.” (See Tab 9, Book of Agreed Documents.) This conclusion of a credit was based on the assumption that the Dominion bid would have included pricing for both the OSB and the Dens wall coverings as exterior sheathing. In any event, Wilson was aware that this sheathing issue had been brought to the attention of the consultant by Dominion for clarification. Wilson testified that it would be difficult to tell if any change in price within the bid would have occurred based upon this issue; however, if it did, it would be in the approximate amount of $5,000.00. Graumann testified that such a change in exterior covering would result in a $30,000.00 price variance. That being said, Graumann also could not ascertain whether the sheathing issue resulted in the Dominion bid being substantially lower than that of Bird ($647,000.00) or how it had been treated in the “lost” estimate upon which the Dominion bid had been based. 26 The contract bid documents also included “Specifications and Docu- ments”. At clause 1.5, a section entitled “Precedence Of Documents” stated, “In the event of conflict within and between the Contract Docu- Manitoba Eastern Star v. Dominion Cons. McKelvey J. 535

ments, the order of priority within specifications and drawings for this project are — from highest to lowest ....” The order of precedence em- braced the fact that the schedules had precedence over the drawings. This effectively would alert any of the bidders as to how to resolve any apparent discrepancy as to the proper order to consider the sheathing issue within the context of a schedule/drawings conflict. 27 Dominion suggested that because of the absence of structural addendum #4, it essentially bid on a different project than had Bird and Bock- stael. Both of those companies properly identified and included all of the appropriate addenda in their bids. Consequently, Dominion contends that its non-compliance rendered its bid to be non-compliant and a counteroffer.

III. The Law 28 The classic characterization of the tender process as contract A and contract B was established by the Supreme Court of Canada in the case of R. v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111 (S.C.C.). Estey J., speaking for the court, stated, at p. 119: ... There is no question when one reviews the terms and conditions under which the tender was made that a contract arose upon the submission of a tender between the contractor and the owner whereby the tenderer could not withdraw the tender for a period of sixty days after the date of the opening of the tenders. Later in these reasons this initial contract is referred to as contract A to distinguish it from the construction contract itself which would arise on the acceptance of a tender, and which I refer to as contract B.... This contract is brought into being automatically upon the submission of a tender.... 29 Further, Estey J. determined, at pp. 122-23: The tender submitted by the respondent brought contract A into life. This is sometimes described in law as a unilateral contract, that is to say a contract which results from an act made in response to an offer, as for example in the simplest terms, “I will pay you a dollar if you will cut my lawn”. No obligation to cut the lawn exists in law and the obligation to pay the dollar comes into being upon the performance of the invited act. Here the call for tenders created no obligation in the respondent or in anyone else in or out of the construction world. When a member of the construction industry responds to the call for tenders, as the respondent has done here, that response takes the form of the submission of a tender, or a bid as it is sometimes called. The significance of the bid in law is that it at once becomes irrevocable if filed in conformity with the terms and conditions under which the 536 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

call for tenders was made and if such terms so provide.... Conse- quently, contract A came into being. The principal term of contract A is the irrevocability of the bid, and the corollary term is the obligation in both parties to enter into a contract (contract B) upon the acceptance of the tender.... 30 Estey J. also stated, at p. 125: It might be argued that by some abstract doctrine of law a tender which could not form the basis of a contract upon acceptance in the sense of contract B, could not operate as a tender to bring into being contract A. It is unnecessary to consider such a theory because it was not and could not be argued that the tender as actually submitted by the contractor herein was not in law capable of acceptance immediately upon its receipt by the owner, the appellant. There may well be, as I have indicated, a situation in the contemplation of the law where a form of tender was so lacking as not to amount in law to a tender in the sense of the terms and conditions established in the call for tenders, and it may well be that such a form of tender could not be ‘snapped up’ by the owner, as some cases have put it, and therefore it would not operate to trigger the birth of contract A.... 31 There are many cases which deal with the creation of contract A, most of which turn on their specific facts, the contents of the tender documents, and the express intention of the parties. The relevant time to determine whether contract A arose is at the time of the submission of the bid. These cases must also be determined in the context of the governing principles of the tender process. An excellent summary of the principles that arise from cases such as Ron Engineering, supra, was outlined in the case of Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] 1 S.C.R. 116 (S.C.C.): [105] As Estey J. said in The Queen in Right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, at p. 121, the “integrity of the bidding system must be protected where under the law of contracts it is possible so to do”. In order to protect the integrity of the tendering process, this Court has adopted a particular analysis of that process: Ron Engineering; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; and Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, 2000 SCC 60. This analysis is often referred to as the Contract A/Contract B analysis. According to this analysis, the tendering process is characterized by two contractual stages. At the first stage, the owner issues a tender, in response to which bidders submit bids. This creates a first contract — “Contract A” — between the owner and every compliant bidder. At the second stage, when the owner accepts a bid, a second Manitoba Eastern Star v. Dominion Cons. McKelvey J. 537

contract — “Contract B” — is formed. This is the actual contract to supply the equipment or to perform the work that was the subject- matter of the tender. A bidder’s bid thus constitutes both an acceptance and an offer. It constitutes an acceptance of the owner’s offer to receive and consider tenders, and it simultaneously constitutes an offer to perform the tendered contract. [106] It is settled law that the terms of Contract A are set out in the tender documents and that, in addition, there may also be implied terms based on custom or usage or on the presumed intentions of the parties. An implied duty to accept only a compliant bid was recognized by this Court in M.J.B. Enterprises. Speaking for the Court, Iacobucci J. found that this implied term was necessary to give “business efficacy” to the tendering process, explaining as follows: The rationale for the tendering process ... is to replace negotiation with competition. This competition entails certain risks for the appellant .... It appears obvious to me that exposing oneself to such risks makes little sense if the respondent is allowed, in effect, to circumscribe this process and accept a non-compliant bid. Therefore I find it reasonable, on the basis of the presumed intentions of the parties, to find an implied term that only a compliant bid would be accepted. [para. 41] [107] Likewise, in Martel, this Court held that an owner also had a duty to treat all bidders fairly and equally. As Iacobucci and Major JJ. said, “[i]mplying an obligation to treat all bidders fairly and equally is consistent with the goal of protecting and promoting the integrity of the bidding process, and benefits all participants involved” (para. 88). Such implication, they noted, “is necessary to give business efficacy to the tendering process” (para. 88). [108] The parties agree that these two implied terms formed part of Contract A: the City was obliged to accept only a compliant bid — in other words, it was implied that the City would not enter into a Con- tract B on terms other than those contemplated in the tender call — and the City was also obliged to treat all bidders fairly and equally. The thread running through Ron Engineering, M.J.B. Enterprises and Martel is the importance of business efficacy and the integrity of the tendering process. In my view, it is through the lens of these con- cepts that this case must be viewed. 32 There is no question in this case that Dominion, through Graumann, wanted to bid on the construction project and intended to submit the bid that it did. The issue with respect to this matter is that of compliance with the bid requirements and process, as well as Eastern Star’s duty as 538 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

“owner” to reject non-compliant tenders. This duty is based upon the pre- mise that all bidders must be treated fairly and equally. This is an implied term of contract A, as a bid must be compliant in order to give rise to contract A. The requirement to deal fairly with all bidders stands at the core of the integrity of the bid process. In the case of M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 (S.C.C.) at para. 41, Iacobucci J., speaking for the court, found “... it reasonable, on the basis of the presumed intentions of the parties, to find an implied term that only a compliant bid would be accepted.” The issue of bid compliance is a consistent issue when dealing with tendering cases. 33 In Chandos Construction Ltd. v. Alberta (Minister of Infrastructure), 2004 ABQB 836, 46 C.L.R. (3d) 275 (Alta. Q.B.), the court provided three factors to be considered in the determination of whether or not bid non-compliance was material: [61] I conclude from the foregoing that the following factors will assist in the consideration of whether or not non-compliance is material. First of all, conditions of the tender must be considered. Do they indicate that precise compliance is required in a particular context? Do they suggest that a particular requirement is important or essential, something that is substantially likely to be significant in the deliberations of the owner in deciding which bid to select? [62] Secondly, the impact on other bidders and the requirement to be fair to other bidders must be considered. Is there a substantial risk of mischief to the bid process? For example, would unfair bid-shopping be facilitated? [63] Thirdly, matters related to price and the scope and quality of work may be more likely to be material, as what is essentially involved in a tender process is a cost comparison regarding specified work. The dollar value of such matters is relevant, and their materiality may be assessed with reference to the overall bid price and the overall nature of the work bid upon. On the other hand, the dollar value of these matters in relation to the difference between the lowest and other bid prices, does not appear to be a relevant consideration in the assessment of materiality. The materiality of non-compliance is determined with reference to the terms of Contract A, and the difference between bid prices arises subsequently and has no relationship to those terms. 34 The courts, in cases such as Double N Earthmovers Ltd., supra, have indicated that the test for bid compliance is not one of perfection, but instead is one of substantial compliance. As an example, an overlooking of checking a box must be distinct as a matter of form as opposed to a Manitoba Eastern Star v. Dominion Cons. McKelvey J. 539

substance issue when evaluating compliance issues. A non-compliant bid is regarded as a counteroffer which may be accepted, rejected or withdrawn before acceptance: Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5, 40 B.L.R. (3d) 168 (B.C. C.A.), at para. 23. 35 Derby Holdings Ltd. v. Wright Construction Western Inc., 2002 SKQB 247 (Sask. Q.B.) (includes correction), [2002] S.J. No. 367 (Sask. Q.B.), held: [34] ... [T]he substantial compliance test should be adopted, not the strict compliance test. 36 Further, in Graham Industrial Services Ltd., supra, the British Co- lumbia Court of Appeal stated: [32] “Material” is defined in the Concise Oxford Dictionary to be “important, essential, relevant ... concerned with the matter not the form of reasoning ...”. Black’s Law Dictionary, 7th ed. (West Group: St. Paul, 1999) includes in the definition for material: “of such a nature that knowledge of the item would affect a person’s decision- making process; significant, essential”. 3 3This Court also considered the definition of materiality recently in Inmet Mining Corp. v. Homestake Canada Inc., 2003 BCCA 610 (B.C. C.A.) ¶27. In the context of determining disclosure obligations of a seller under a contract for purchase and sale of a gold mine, Levine J.A. held that a material fact is one where there is ... a substantial likelihood that disclosure of the omitted fact would have assumed actual significance in the deliberations of the reasonable purchaser, or would have been viewed by the reasonable purchaser as having significantly altered the total mix of information made available. [34] According to these definitions, in the context of the present case, material non-compliance will result where there is a failure to address an important or essential requirement of the tender documents, and where there is a substantial likelihood that the omission would have been significant in the deliberations of the owner in deciding which bid to select. 37 In this case, all of the bidders were non-compliant with the Instruc- tions to Bidders in some aspects of their tenders. That being said, tender compliance is appropriately measured in terms of substantial compliance. Clearly, substantial compliance allows an owner a limited discretion to waive minor non-material irregularities in a tender. This is particularly so where an owner may “... in its sole discretion, reject or retain for its consideration, bids which are non-conforming because they do not contain 540 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

the content or form required or for failure to comply with the process for submission ...” as set out in the Instructions to Bidders at clause 1.11.4. “... [S]ubstantial compliance requires that all material conditions of the tender, determined on an objective basis, be complied with, and that a bid is substantially compliant if any departures from the tender documents concern mere irregularities ...: Maple Reinders Inc. v. Cerco Developments Ltd., 2011 BCSC 924, [2011] B.C.J. No. 1313 (B.C. S.C.) at para. 49. 38 In this case, the acceptance provision of the bid form stated: 1.3 Acceptance .1 This offer shall be open to acceptance and is irrevocable for thirty (30) calendar days from the Bid closing date and time. 39 In Ron Engineering, the Supreme Court of Canada held, at p. 119: The revocability of the offer must, in my view, be determined in accordance with the “General Conditions” and “Information for Ten- derers” and the related documents upon which the tender was submitted. There is no question when one reviews the terms and conditions under which the tender was made that a contract arose upon the submission of a tender between the contractor and the owner whereby the tenderer could not withdraw the tender for a period of sixty days after the date of the opening of the tenders. Later in these reasons this initial contract is referred to as contract A to distinguish it from the construction contract itself which would arise on the acceptance of a tender, and which I refer to as contract B. Other terms and conditions of this unilateral contract which arose by the filing of a tender in response to the call therefor under the aforementioned terms and conditions, included the right to recover the tender deposit sixty days after the opening of tenders if the tender was not accepted by the owner. This contract is brought into being automatically upon the submission of a tender.... 40 The most recent pronouncement by the Supreme Court of Canada on tender issues was in Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4, [2010] 1 S.C.R. 69 (S.C.C.), where Cromwell J., speaking for the court, stated: [17] Submitting a compliant bid in response to a tender call may give rise to a contract — called Contract A — between the bidder and the owner, the express terms of which are found in the tender documents. The contract may also have implied terms according to the principles set out in Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; see also M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, and Martel Building Manitoba Eastern Star v. Dominion Cons. McKelvey J. 541

Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860. The key word, however, is “may”. The Contract A/Contract B framework is one that arises, if at all, from the dealings between the parties. It is not an artificial construct imposed by the courts, but a description of the legal consequences of the parties’ actual dealings. The Court emphasized in M.J.B. that whether Contract A arises and if it does, what its terms are, depend on the express and implied terms and conditions of the tender call in each case. As Iacobucci J. put it, at para. 19: What is important ... is that the submission of a tender in response to an invitation to tender may give rise to contractual obligations, quite apart from the obligations associated with the construction contract to be entered into upon the acceptance of a tender, depending upon whether the parties intend to initiate contractual relations by the submission of a bid. If such a contract arises, its terms are governed by the terms and conditions of the tender call. [Emphasis added.] [Emphasis in original.] 41 The case of Double N Earthmovers Ltd. also stands for the proposition that there is no implied duty which requires an owner to investigate in order to determine if bidders will do what they promise to do in their tender: [51] The notion that an owner is expected to investigate bids falls well short of the necessary “obviousness” to form part of the presumed intentions of the “actual parties”: M.J.B. Enterprises, at para. 29 (emphasis deleted). There is no reason why the parties would expect an owner to investigate whether a bidder will comply, when each bidder is legally obliged to comply in the event its bid is accepted. Whether or not the bidder is, at the time of tender, capable of performing as promised is irrelevant in light of the bidder’s legal obligation to do so once its bid is accepted. 42 There were a number of cases argued before this court that deal with the question of how far a bid may depart from the strict letter of the instructions to bidders without rendering it to be materially non-compliant. One such case was R. Litz & Sons Co. v. Manitoba Hydro, 2006 MBQB 164, 204 Man. R. (2d) 256 (Man. Q.B.), where Schulman J. outlined a number of sources which have afforded guidance on this issue: [16] Some guidance may be found in five particular sources. In British Columbia v. SCI Engineers & Constructors Inc., [1993] 542 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

B.C.J. No. 248, 22 B.C.A.C. 89, 38 W.A.C. 89 (C.A.), McEachern, J.A., stated: ¶18 One of the modern source authorities supporting a substantial compliance test as the appropriate judicial response to this kind of a problem is the Ron Engineering case mentioned above where Estey, J., writing for the Court, said at p. 278: It would be anomalous indeed if the march forward to a construction contract could be halted by a simple omission to insert in the appropriate blank in the contract the numbers of weeks already specified by the contractor in its tender...... ¶20 It would be otherwise, of course, if a material fact were omitted from the tender, or if the meaning of the tender was unclear, but that is not the case. It could also be otherwise if there were non-compliance that intruded substantially upon the secrecy of the tenderer (sic) process. It is almost unnecessary to add that the Crown could impose a requirement for strict compliance by [reword- ing] its Conditions of Tender appropriately. [17] In Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, 262 N.R. 285, Iacobucci and Major, JJ., stated: ¶117 A party calling for tenders has the discretion to set out its own specifications and requirements. This includes the discretion to change its mind with respect to the terms or preferences that were discussed in the course of non- committal negotiations. Tender requirements are not ne- gotiable. To decide otherwise would in fact force the party making the call for tenders to continue in its negotiations with one potential bidder even after those negotiations have proven unfruitful. [18] In Graham Industrial Services Ltd. v. Greater Vancouver Water District et al., [2004] B.C.J. No. 5, 194 B.C.A.C. 1, 317 W.A.C. 1, leave to appeal refused [2004] S.C.C.A. No. 72 ..., Finch, C.J.B.C., stated: ¶32 “Material” is defined in the Concise Oxford Diction- ary to be “important, essential, relevant ... concerned with the matter not the form of reasoning ...”. Black’s Law Dictionary, 7th ed. (West Group: St. Paul, 1999) includes in the definition for material: “of such a nature that Manitoba Eastern Star v. Dominion Cons. McKelvey J. 543

knowledge of the item would affect a person’s decision- making process; significant, essential”...... ¶34 According to these definitions, in the context of the present case, material non-compliance will result where there is a failure to address an important or essential requirement of the tender documents, and where there is a substantial likelihood that the omission would have been significant in the deliberations of the owner in deciding which bid to select. ¶35 Graham’s responses to requests for details of its proposed management of the hauling operation and mitigation of impact, and environmental protection plan, were not merely a matter of non-compliance in form. They amounted to a perfunctory “we will comply” response to questions seeking detailed plans on substantive and important matters. Among other deficiencies, Graham’s response said nothing about the mitigation of impact to the residents of Nancy Greene Way with respect to noise, air emissions and road safety. In addition, it includes absolutely no site specific information regarding an environmental protection plan, let alone the detailed five page outline as stipulated in the tender documents. The other contractors expended considerable resources on meeting these requirements. In these circumstances, I agree with the learned chambers judge that there was material non- compliance. Graham’s responses could not reasonably be said to conform in any material way to the requirements in Schedule 8. [19] In Bidding and Tendering, What is the Law?, 3rd ed. (Mark- ham: Butterworths, 2004), Sandori and Pigott state at p. 251: Substantial Compliance/Irregular Bids Revisited Most of the industry would define an “irregular” bid as one that possesses all the essential information required by the bid documents while it is, in some way, incomplete or mistaken. Examples of irregularities include unfilled blanks, omission of phone numbers and addresses, and obvious mathematical errors. Before Ron Engineering, and even after, a bid that was merely irregular was treated as compliant and admitted into bid evaluation except where the bid documents called for perfection. 544 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

After referring to the SCI Engineers case, the authors state at pp. 252-53: So, it is fair to say that the threshold for compliance of any bid is, as long as the bid documents allow it, “substantial compliance”. However, determining whether “substantial compliance” has been achieved or not is just as difficult as distinguishing between an irregularity, a qualification or an informality. Different label, same test. [20] In the case of Chandos Construction Ltd. v. Alberta (Minister of Alberta Infrastructure), [2004] A.J. No. 1483, 381 A.R. 58; 46 C.L.R. (3d) 275 (Q.B.), revd. (2006), 380 A.R. 152, 363 W.A.C. 152; 2006 ABCA 41 (C.A.), the court considered the validity of a bid filed under the Alberta Construction Tendering System. There were four irregularities in the successful bid. One of the irregularities was the failure of the bidder to give 24 hours notice of an intention to self-bid for architectural woodwork. Ross, J., stated: ¶61 I conclude from the foregoing that the following factors will assist in the consideration of whether or not non- compliance is material. First of all, conditions of the tender must be considered. Do they indicate that precise compliance is required in a particular context? Do they suggest that a particular requirement is important or essential, something that is substantially likely to be significant in the deliberations of the owner in deciding which bid to select? ¶62 Secondly, the impact on other bidders and the requirement to be fair to other bidders must be considered. Is there a substantial risk of mischief to the bid process? For example, would unfair bid-shopping be facilitated? ¶63 Thirdly, matters related to price and the scope and quality of work may be more likely to be material, as what is essentially involved in a tender process is a cost comparison regarding specified work. The dollar value of such matters is relevant, and their materiality may be assessed with reference to the overall bid price and the overall nature of the work bid upon. On the other hand, the dollar value of these matters in relation to the difference between the lowest and other bid prices, does not appear to be a relevant consideration in the assessment of materiality. The materiality of non-compliance is determined with reference to the terms of Contract A, and the difference between bid prices arises subsequently and has no relationship to those terms. Manitoba Eastern Star v. Dominion Cons. McKelvey J. 545

She found that the failure to give notice was a substantive irregularity, but that it was not material and dismissed the claim by the second-lowest bidder. The Alberta Court of Appeal reversed the decision (2006 ABCA 41). The court stated: ¶24 The trial judge properly concluded that the integrity of the tendering process requires that any discretion clause contained in the conditions of tender must be subject to an objective rather than a subjective analysis. She also correctly found s. 12.3 cannot be interpreted to mean the respondent, in its sole discretion, can subjectively determine whether or not irregularities are minor and inconsequential. Nor does it allow the respondent to accept a tender that is not substantially compliant. She concluded the following factors were relevant in making an objective assessment of whether irregularities in Keller’s bid were minor and inconsequential: • conditions of tender; • matters affecting fairness to other bidders; and • impact on price and the work considered in relation to the overall bid price and nature of work bid upon. ¶25 While we agree those factors are key to such an assessment, in our view the trial judge erred in her application of those factors and in failing to complete the analysis. ¶26 As noted, the irregularity with regard to architectural woodwork was Keller’s failure to give notice of its intention to self-bid on installation. Because the ACTS regulations prohibit trades from bidding on installation alone (s. 7.2), Keller had two choices: accept a bid for both supply and installation, or accept a bid for supply only and bid its own forces for installation. Keller chose to do the latter, as it listed a bid for supply only and listed itself for installation. However, ACTS regulation 2.3 requires a general contractor to provide 24 hours written notice of its intention to self-bid. The intent of that requirement is to allow other architectural woodwork trades to adjust their bid prices accordingly. Keller failed to provide such notice. ¶27 The trial judge assessed this irregularity as immaterial by considering its dollar value in the context of the overall bid amount. Keller’s error related to an item that represented only 1 or 1 1/2 percent of the total amount bid. 546 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

While the comparative analysis is correct as far as it goes, it fails to consider the options available to Keller and the respondent to deal with a minor and inconsequential irregularity, and overlooks what was actually done when the subject irregularity was discovered...... ¶30 The steps taken in an effort to make Keller’s bid compliant demonstrate that the architectural woodwork irregularity was not minor and inconsequential, and hence, Kel- ler’s bid was not substantially compliant. The trial judge states, at para. 62 of her reasons, that the impact on other bidders and the requirement to be fair to other bidders must be considered. We agree. If the effect of the irregularity, and the remedy therefor, involves displacing an accepted bidder, the irregularity cannot be considered minor and inconsequential. Moreover, the remedy provided did not correct the irregularity, which was the failure to give notice, but rather attempted to ameliorate its effects by carrying out the project in a different manner than contemplated in the bid. 43 These referenced cases emphasized the importance of considering compliance issues within their particular facts and context. This must be done in order to determine whether a bid may be considered to be substantially compliant or a counteroffer. 44 In Chandos Construction Ltd. v. Alberta (Minister of Infrastructure), 2006 ABCA 41, 50 C.L.R. (3d) 1 (Alta. C.A.), the Alberta Court of Ap- peal wrestled with the minor versus material non-compliance, irregularities in a bid, and an application of a discretion clause, as follows: [23] Where the terms of a tender call confer significant discretion on the party calling for tenders, as they do in this case, bidders should take that discretion into consideration in submitting their bids: Mar- tel at para. 118. However, that discretion does not negate the obligation to treat all bidders fairly and equally: Martel at para. 92, and to only accept a compliant tender.... 45 In Derby Holdings Ltd., supra, the Saskatchewan Court of Queen’s Bench, affirmed by its Court of Appeal [2003 CarswellSask 623 (Sask. C.A.)], held a bid to be invalid that erroneously neglected to refer to an addendum required by the tender documents, even though the contractor subsequently acknowledged receiving the addendum. The court stated: [43] ... In the context of the unfortunate case before me, the failure of the defendant to acknowledge the addenda in its tender is not merely Manitoba Eastern Star v. Dominion Cons. McKelvey J. 547

an irregularity. A crafty tenderer might decline to acknowledge an addendum with the objective of getting a further chance to fine tune its bid once the other bids were known. It could then elect whether to verbally acknowledge or refute the addendum depending on the economic consequences of the election. The court went on to say: [46] I am troubled that my decision on this issue appears to have the potential of permitting a contractor to avoid its promises and obligations by its own neglect or by its failure to submit a tender that substantially complies with the invitation to tender package. Counsel did not cite any case in which a tender has been found to be non-compliant at the behest of the contractor whose tender was accepted by the owner. As noted previously, the defendant in this case is attempting to utilize the law that has developed respecting non-compliant tenders as a shield to avoid liability to the owner under its own tender. Invariably, the law respecting non-compliant tenders is utilized by a contractor who submits a compliant tender as a sword to establish liability against the owner for accepting a non-compliant tender. [47] But there is no valid reason why the application of this legal principle should depend upon the source of the challenge. The legal rationale for requiring owners to reject non-compliant bids from consideration is that those bids are not capable of acceptance by the owner within the context of the tendering process. The case law has established that a bid is non-compliant if it is uncertain or is at odds with the terms of the invitation to tender. The issue of whether a bid is compliant is not determined by the source of the challenge. It is determined by its own terms and those of the invitation to tender package. The integrity of the tendering process would be undermined by the disparate application of this legal principle. The modern case law clearly holds that the submission of a bid or the acceptance of it does not always result in the formation of Contract A. The owner, not the contractor, is the one in control of the tendering process and the one who is able to define what constitutes a compliant bid. There is no justification for a rule of law that permits an owner to hold a tenderer to a bid that the owner itself has pre-determined to be non- compliant. 46 In the case of H B Lynch Investments Inc. v. Canada (Minister of Public Works & Government Services), 2004 FC 747, [2004] F.C.J. No. 931 (F.C.), the Federal Court held that where the instructions to bidders 548 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

required proof of signing authority with their bid, that requirement is mandatory, failing which a bid is rendered non-compliant: [26] In my opinion, the tendering instructions were clear and unam- biguous that proof of signing authority was an essential requirement for compliant bids. There is simply no room to invoke the common law principle of contra proferentem, where ambiguity in forms or documents is to be construed unfavourably against the drafter. This is evidenced by the language of Clause 14(a) of the tender package, where it is clearly stated that for joint stock companies or corporations, certain mandatory requirements had to be met with regards to proving signing authority, namely: • the signatures of the authorized signatories; and • their names and titles typed or printed in the space provided and • the corporate seal may be affixed, or if no corporate seal is affixed, the signatures shall be witnessed and proof of signing authority shall accompany the Offer. 47 The Federal Court of Appeal upheld the decision in H B Lynch Investments Inc. v. Canada (Minister of Public Works & Government Services), supra (cited 2005 FCA 237, [2005] F.C.J. No. 1091 (F.C.A.)), and stated: [7] This is not a matter of mere formality, as alleged by counsel for the plaintiff. The issue of capacity to contract is fundamental in contract law. The Minister took great pains to draft a clear, precise and comprehensive clause dealing with the formalities of execution so as to avoid any dispute as to the tenderer’s capacity to contract. [8] Section 14 is a complete code in itself. It attempts to cover all the usual forms of business organizations, namely corporations, partner- ships and sole proprietorships. It sets out distinct requirements for each of these categories, including an optional method of compliance. To find that the section was not intended to be strictly complied with would be to add options to those so carefully selected by the Minister. 48 Cases such as Midwest Management (1987) Ltd./Monad Contractors Ltd. v. BC Gas Utility Ltd., 2000 BCCA 589, 5 C.L.R. (3d) 140 (B.C. C.A.), rev’g in part Midwest Management (1987) Ltd./Monad Contractors Ltd. v. BC Gas Utility Ltd. (1999), 47 C.L.R. (2d) 101 (B.C. S.C. [In Chambers]); Silex Restorations Ltd. v. Strata Plan VR 2096, 2004 BCCA 376, 36 C.L.R. (3d) 73 (B.C. C.A.); Graham Industrial Services Ltd.; R. Litz & Sons Co., supra, have all dealt with the issue that Manitoba Eastern Star v. Dominion Cons. McKelvey J. 549

a non-compliant bid would amount to a counteroffer. A counteroffer may be withdrawn before acceptance.

IV. Analysis 49 The case law is clear that the submission of a tender in response to an invitation to bid may give rise to contractual obligations, being the formation of contract A. In this case, Graumann, on behalf of Dominion, endeavoured to submit the lowest bid in compliance with the contract bid documents in order to secure the construction project contract. It was then expected that if Dominion was the lowest bidder, the construction project would be awarded to it. The substantial mathematical error that Dominion relied upon to withdraw the bid was not obvious on the face of its bid document. Graumann had reviewed the final number of $2,450,000.00 before the submission of the bid and was satisfied that it was compliant and reasonable. Additionally, the bid reflected Domin- ion’s intention to submit such a bid to Eastern Star. The question remains, was this a substantially compliant bid or one of non-compliance which would render it to be a counteroffer capable of withdrawal before acceptance? This issue will be considered in the context of the competitive bid process which must, in all the circumstances, be protected and shielded from any potential “corruption” in terms of purposeful non- compliant bids. Additionally, it must be considered in terms of fairness and equality between the tendering companies. As the cases indicate, protecting the integrity of the tender process is a paramount concern. 50 A useful summary may be found in the treatise of Paul Emanuelli, Government Procurement, 2d ed. (Markham, Ont.: LexisNexis Canada Inc., 2008) at 499, wherein he set out the governing principles related to those circumstances where a bidder has endeavoured to renege on its tender based upon mistake or non-compliance: (1) In a formal legally binding bidding process, a bidder is typically under a duty to honour its tender if it is selected by the purchaser. A bidder that fails to honour its tender may be liable for the difference between its tender and the next-best bid. (2) A non-compliant tender is generally seen to be incapable of acceptance and a non-compliant bidder is therefore generally not liable for failing to honour its tender. (3) In cases where the bidder has alleged that it made a mistake which rendered its tender non-compliant and incapable of acceptance, 550 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

the courts have tended to distinguish between tenders containing patent and latent errors: (a) Tenders containing patent errors (that are apparent to the purchaser on the face of the tender) are typically held to be legally incapable of acceptance and bidders are therefore typically not liable for failing to honour such tenders. (b) Tenders containing latent errors (that are not obvious to the purchaser) are generally seen to be capable of acceptance and bidders may be liable for failing to honour such tenders. (4) In instances where the selected bidder fails to honour its tender in a timely fashion, purchasers may be entitled to rescind the selection of the tender and proceed with the selection of the next-best bid. However, purchasers should be careful to confirm that the selected bidder is actually refusing to honour its tender before re- scinding the selection. 51 Many tendering cases involve the situation where legal actions are brought by unsuccessful bidders who have contended that the “owner” inappropriately awarded a contract to a non-compliant bidder that should have been rejected. The case before the court is different in that Domin- ion purports to utilize its own non-compliance to protect itself from having to honour its tendered bid. As the cases of Derby Holdings Ltd.and Chandos Construction Ltd., supra have indicated, this type of behaviour is concerning because it can be based upon “mischief” and effectively reward a bidder who has made a mistake in its bid, but then can utilize its non-compliance for the purposes of not honouring a contract. That being said, the Saskatchewan Court of Queen’s Bench in Derby Holdings Ltd., whose decision was upheld by the Saskatchewan Court of Appeal on this point, has effectively determined that bid non-compliance requires an owner to reject a non-compliant tender, but may also relieve a non-compliant bidder from its duty to honour its tender. Other cases such as Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5, 40 B.L.R. (3d) 168 (B.C.C.A.), aff’g 2003 BCSC 1735, 40 B.L.R. (3d) 159 (B.C.S.C.), leave to appeal refused, [2004] S.C.C.A. No. 72 (S.C.C.); Toronto Transit Commission v. Gottardo Construction Ltd. (2005), 77 O.R. (3d) 269 (Ont. C.A.), leave to appeal refused, 2006 CarswellOnt 2544 (S.C.C.); and Calgary (City) v. Northern Construction Co. (1985), [1986] 2 W.W.R. 426 (Alta. C.A.), rev’g (1982), 23 Alta. L.R. (2d) 338 (Alta. Q.B.), aff’d [1987] 2 S.C.R. 757 (S.C.C.), are fur- Manitoba Eastern Star v. Dominion Cons. McKelvey J. 551

ther examples of where a bidder has endeavoured to utilize its own non- compliance as a shield against liability. 52 In the case of Calgary (City), supra, a tender submitted by the contractor contained a mathematical error that was not apparent on the face of the bid. The contractor brought the error to the attention of the owner and requested that it be allowed to withdraw its tender. Instead, the owner submitted a construction contract to the contractor for signature. The contractor declined to sign the contract. The mathematical error had been committed unwittingly and the contractor was free from improper or dishonest motives. It was also determined that the tender submitted by the contractor was what was intended, albeit the mistake was unknown until after the bids were opened. The Alberta Court of Appeal reviewed all of the relevant authorities in order to determine whether contract A had been formed and stated, at p. 443: I am of the view that it is not unconscionable for a tenderee with knowledge of motivational error to hold a tenderer to his bargain provided that his doing so does not impose a grossly disproportionate burden upon the tenderer. In my view, the burden here is not so disproportionate in the circumstances as to put the city in a situation where its claim is unconscionable. It is of some significance that no argument along these lines was made.... 53 The decision in Toronto Transit Commission, supra (“TTC”) involved a situation where the TTC tendered a major project with the defendant being the lowest bidder. The tender was stipulated to be irrevocable for 120 days and could not be withdrawn. The defendant understood the tendering process and intended that contractual relations be entered into. Shortly after the tenders had been opened, the defendant determined that it had made a $557,000.00 error in the amount of the bid. The defendant maintained that it was not obligated to honour the tender price, while TTC took the position that the defendant was bound. 54 The defendant refused to comply with the TTC’s demand that it provide further documents and execute the construction contract. The On- tario Court of Appeal held: [25] The instructions to tenderers contemplated that once the tenders had been submitted and opened, the TTC could require the tenderers to provide additional documentation to be used in its evaluation process and in the preparation of Contract B. By signing the form of tender, the tenderers specifically agreed to provide the documents should these be requested by the TTC as provided in the instructions to tenderers. 552 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[26] Once the para. 7.2 documents were requested from a compliant tenderer, the failure to provide these documents was a breach of Con- tract A, and could not change the status of the bid and render it non- compliant. The breach by the tenderer of Contract A, whether at an early stage in refusing to produce required documentation or at a later stage in refusing to sign Contract B, does not make the bid non- compliant. It would defeat the integrity of the bidding system to allow a bidder who has complied with all the tender requirements in the submission of its tender to thereafter breach its obligations pursuant to Contract A and then treat this breach as freeing it from its commitment. 55 In this case, Graumann had reviewed all of the documents and drawings in advance of affirming the bid prepared by Johnston. It is clear that Dominion was well aware of the sheathing issue with respect to structural addendum #4. Indeed, it was Johnston who raised that issue with Stewart, on behalf of the consultant, which ultimately resulted in the authoring of structural addendum #4. 56 There were four structural addenda listed at clause 1.5 in the Domin- ion bid document. The dates with respect to those structural addenda mir- ror those dates of the structural addenda prepared by Beach Rocke Engi- neering with respect to the construction project. I acknowledge that on page 5 of the Dominion bid document, being Appendix B, only structural addenda #1 to #3 are identified. This may well represent a “collapse” of what is noted to be “Struct. Addendum # 1” and “Struct. Addendum # 1 Revised” into one addendum. The dates for these addenda are the same as set out in the Beach Rocke Engineering documentation as “Addendum 01” and “Addendum 02” for the construction project. Addendum 01 and Addendum 02 could have been subsumed into one, with the other two dated February 24, 2009, being operative and described as “Struct. Ad- dendum #2” and “Struct. Addendum #3” in the Dominion bid document (and described as “Addendum 03” and “Addendum 04” in the Beach Rocke Engineering documentation). Therefore, structural addendum #4 was included and, again, the appropriate dates are reflected which coin- cide with the correctly numbered structural addenda as prepared by Beach Rocke Engineering. 57 Additionally, the order of precedence with respect to documents governed any conflicts within specifications and drawings. The order of precedence served to resolve any issues related to a confusion over the appropriate “sheathing” to be utilized. That precedence of documents is at clause 1.5 of the “Specifications and Documents” section of the contract bid documents. Manitoba Eastern Star v. Dominion Cons. McKelvey J. 553

58 The fact that Johnston, on behalf of Dominion, raised the issue as regards OSB or Dens sheathing is important and reflects the fact that they were aware of the matter. Wilson, in reviewing the contract bid documents, had noted that structural addendum #4 appeared to be missing from the Dominion bid, albeit he testified that there were clearly four structural addenda identified. Further, he testified that it was difficult to determine whether there would be a change in price related to the exterior sheathing but, if so, it may have resulted in a credit, as both types of sheathing could not be utilized. In reviewing the documentation, Wilson reflected that the dates of the structural addenda contained in the Domin- ion bid document aligned with those of the “owner”/Beach Rocke Engi- neering documentation and considered that perhaps there had been a mis- numbering or a typographical error. In the event that structural addendum #4 was indeed missed, the pricing of the Dominion bid would likely, in his view, have included both OSB and Dens and, as a result, a credit would be afforded to the construction project, or at most result in a $5,000.00 expenditure. In any event, the precedence of documents component of the contract bid documents would have resolved the matter in question. There was no issue that Dominion had all of the documentation. 59 When Dominion endeavoured to recreate the standard estimate report related to the February 27th bid, both OSB and Dens were mentioned, albeit there was no amount reflected under the Dens category in the new estimate. That being said, it is impossible to know what had been done in the original estimate on this issue, if anything, and whether both were included and costed. Graumann testified that the error in question with respect to the sheathing could have resulted in a $30,000.00 expenditure. Clearly, this issue was not sufficiently substantial so as to account for the $647,000.00 variance in the Dominion and Bird bids. 60 I am satisfied that the bid submitted by Dominion encapsulated all four structural addenda and their numbering at clause 1.5 was simply a typographical error, a matter of form. The dates of the four addenda were the same as those of the addenda generated by Beach Rocke Engineering with respect to the construction project. The addenda, as contained in Appendix B of the Dominion bid document, simply reflected the “func- tional” structural addenda and included only revised addendum #1, as well as the two that followed. In any event, Dominion was well aware of the issue in question and any confusion could have been settled by the “Precedence Of Documents” as outlined in “Specifications and Docu- ments” of the contract bid documents. The facts of this case are varied 554 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

and can be distinguished from those in Derby Holdings Ltd. Here, the four operative addenda were referenced, albeit in an irregular manner. I am satisfied that there was substantial compliance with the bid process with respect to this issue. 61 The Dominion bid was executed by Graumann, chief estimator of Do- minion, and placed under seal. Graumann clearly was not one of the des- ignated authorized signing officers — the president, secretary or treasurer of Dominion — as required by clause 1.17.4 of the Instructions to Bidders. A copy of the by-law resolution of the board of directors authorizing another individual with the authority to sign was not submitted in the bid envelope as required. There is no issue that Graumann had the authority and intention to execute the bid. The question is whether that authority, his signature, accompanied by the company seal were substantially compliant with the bid process. This must also be considered in the context of Dominion’s intention to be bound by an irrevocable bid which would ultimately create the formation of contract A. Graumann testified that as regards the bids he had signed in the past, he had never submitted a signing authority by-law resolution even when it had been requested. Indeed, such a resolution had never existed. It was Dominion’s custom to act as it did in this case — Dominion intended to make and execute the bid in the manner that it did. There was no intention, in the circumstances, to make a counteroffer. 62 The Instructions to Bidders also recognized that a non-compliant bid may, at the discretion of the owner, be retained for its consideration. This is the case with non-conforming bids with respect to content or form (clause 1.11.4). Further, at clause 1.20.1, “The Owner reserves the right in its absolute discretion to accept any bid which it deems most advantageous to itself and the right to reject any or all bids, in each instance without giving any notice.” 63 The facts of the case of H B Lynch Investments Inc. and the clause in question are distinguishable from those that exist in this case. Impor- tantly, that case required the existence of the corporate seal and in its absence, the signatures were to be witnessed and proof of signing authority “shall accompany the Offer”. The seal was not affixed in the circumstances of that case, which was considered to be a very significant formality. In this case, the seal was affixed, Graumann did have the authorization of Dominion to bind the company and intended to do so. Indeed, according to his evidence, he had done so in the past without ever providing a by-law resolution reflecting his authority even in those circumstances where it was a requirement in other instructions to bid- Manitoba Eastern Star v. Dominion Cons. McKelvey J. 555

ders. This bid was not in any way altered by the lack of the by-law resolution. 64 This is an example of one area that could be utilized by contractors to essentially “lie in the weeds” once it is determined that they no longer wish to go forward with their tender. 65 I am satisfied that the method of signing and sealing the bid was substantially compliant with the bid process. Further, any non-compliant or non-conforming bids could be retained for consideration at the owner’s sole discretion. 66 In the circumstances, I have concluded that the “non-compliance” evidence in this case was not a failure to address an important or essential element of the tender documents. The “non-compliance” was not so significant so as to affect the deliberations of the owner in its determination of which bid to accept when considered on an objective basis. The discretion clause, viewed objectively, permitted these areas of alleged non- compliance to be considered to be substantially compliant. In arriving at this conclusion, I have also acknowledged the objectives underlying the tendering process as well as the reasonable expectations of the parties involved. The “non-compliant” issues raised in this case did not under- mine the fairness of the process. Further, the issue of whether there would be a cost impact was not founded on the evidence given the fact that Dominion could not “recreate” its estimate. Wilson felt that there could be credit implications, while Graumann indicated there could be a $30,000.00 cost. This being the case, the “cause” of the significant difference in what was bid and the mathematical error could not be confirmed. 67 I acknowledge that the Dominion bid was significantly lower than those of Bird and Bockstael. That being said, there was nothing to alert the consultant as to why that was the case. I am satisfied that the divergence in the bid numbers did not raise the need for an investigation into the reasons, nor was there a duty to do so as set out in the decision in Double N Earthmovers Ltd. Further, the “holding” of Dominion to the submitted bid does not impose a “grossly disproportionate burden” upon it. 68 Based on the evidence before me, I find as follows: (1) Dominion submitted what it believed was a valid and correct bid. (2) Dominion fully intended for its bid to be binding on it. (3) The failure in Dominion’s bid to refer to the four structural addenda by their correct numbers was, at worst, an understandable 556 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

error and, at best, a typographical error. All four structural addenda were taken into account by Dominion in preparing its bid and were intended by Dominion to be referred to in its bid. If this was an incident of non-compliance, Dominion’s bid was in this respect substantially compliant. (4) The failure of Dominion to include a copy of a by-law resolution with its bid was consistent with its practice with other bids it has submitted and with the conduct of Bird and Bockstael. There is no issue, including with Dominion, as to whether Dominion’s bid was properly authorized by it, or as to whether Dominion intended its submission to be fully binding on it. This omission was not material and the bid was substantially compliant. (5) Dominion’s bid was compliant with the contract bid documents; a valid contract A was entered into by Eastern Star and Dominion; and thus Dominion’s bid was open for acceptance and was accepted by Eastern Star. (6) The applicable and relevant factors outlined in the case law have satisfied me that the Dominion bid was, in all of the circumstances, substantially compliant. 69 If there is any error in my analysis or my findings, I am satisfied that such an error would be sufficiently small that it is incumbent on the court to protect the integrity of the tendering process by not allowing Domin- ion to point to these alleged incidents of non-compliance to resile itself from a bid which it fully intended when it was submitted to be compliant, to be binding, and to be accepted.

V. Damages 70 The case of Calgary (City) set out that the ordinary measure of damages suffered by an owner upon the refusal by a contractor to enter into contract B is to be the difference between the defendant’s bid and the next lowest tender. In this case, the next lowest bid was that of Bird in the amount of $3,097,000.00. The difference between the two tenders was $647,000.00. 71 The facts show, however, that a negotiation occurred between Eastern Star and Bird as is evidenced by the letter of March 23, 2009, from Wil- son to David Dulko at Bird. David Dulko, Business Development Man- ager of Bird, on April 21, 2009, stated that the final contract price negotiated was $2,905,571.00. That being said, there were a number of change Manitoba Eastern Star v. Dominion Cons. McKelvey J. 557

orders which ultimately resulted in the final contract price being raised to $2,968,059.85 (Exhibit No. 6). 72 The Bird tender, as submitted on February 27, 2009, was not accepted, as a different contract price was reached. This was based upon Eastern Star’s being required to reduce the construction project plans to better accord with its budget. The need to scale down the project was based upon the fact that Bird’s bid was higher than Dominion’s bid and beyond Eastern Star’s financial capacity. There were, as a consequence, reductions in the scope of the work and a number of change orders which resulted in costs savings. That being said, certain of the “costs savings” were put back into the project over the time of the construction (canopy and elevator), which resulted in the higher price than had been initially negotiated. 73 I am satisfied that the measure of damages with respect to this matter is $518,059.85. This figure represents the difference between the Domin- ion bid and what was ultimately paid by Eastern Star to construct and complete the construction project.

VI. Conclusion 74 Eastern Star is awarded the sum of $518,059.85 plus interest and costs of this action. If costs cannot be agreed between the parties, this area may be brought back before the court. Action allowed. 558 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[Indexed as: Vernon v. British Columbia (Housing & Social Development, Liquor Distribution Branch)] Stephanie Vernon (Plaintiff) and Her Majesty the Queen in right of the Province of British Columbia as represented by the BC Ministry of Housing and Social Development (Liquor Distribution Branch) (Defendant) British Columbia Supreme Court Docket: Vancouver S104016 2012 BCSC 133 R.B.T. Goepel J. Heard: July 25-29; August 2-5, 8-12, 2011 Judgment: January 27, 2012* Labour and employment law –––– Employment law — Termination and dismissal — Termination of employment by employer — What constituting just cause — Misconduct — Breach of employer’s rules –––– Plaintiff was managerial employee of defendant, charged with managing large retail liquor store — Plaintiff was described as “little general” throughout her 30-year career in defendant’s employ, which appeared to be intended in largely complementary manner but referred to her serious and strict managerial style — Plaintiff and other store employees frequently used profane language in non-public areas at work, but as finding of fact plaintiff did not use such language or permit its use on sales floor to which customers had access — Plaintiff enforced high work standards, plaintiff’s store was very successful and plaintiff received exemplary performance reviews throughout — Complainant alleged pattern of systematic abuse and mistreatment by plaintiff, including use of profane ethnic slur and intimidation — Representatives of defendant, including witness vdB who was in clear conflict of interest having regard to past discussions with plaintiff inter alia concerning employment issues concerning complainant, conducted investigation — Investigation involved, inter alia, employee interviews, in which employees apparently supporting plaintiff’s position and management style were allegedly mistreated — Plaintiff was ultimately summoned to meeting, which as finding of fact was conducted in oppressive and unfair manner, and terminated without notice after being placed on unpaid suspension and left “in limbo” for considerable length of time — Plaintiff brought action for damages for wrongful

*Additional reasons at Vernon v. British Columbia (Housing & Social Development, Liquor Distribution Branch) (2012), 2012 BCSC 445, 2012 Car- swellBC 896, 30 B.C.L.R. (5th) 414, [2012] 7 W.W.R. 630 (B.C. S.C.). Vernon v. British Columbia 559

dismissal — Action allowed — Defendant bore burden of proof with respect to allegations of cause for summary dismissal, but burden was on standard of balance of probabilities — Plaintiff’s use of profane language and elements of her treatment of subordinates were less than perfect, but as matter of law did not approach cause — While complainant clearly did subjectively feel harassed and intimidated by plaintiff, having regard to complainant’s vulnerability and to complainant’s employment issues not concerning plaintiff complainant’s feelings were not objectively reasonable — Specifically and as finding of fact, alleged profane ethnic slur did not occur — “A thorough and fair investigation would have revealed that [plaintiff’s] management techniques could use some improvement” — As finding of fact, investigation was seriously flawed, lacked objectivity and in fact involved intimidation of employees supporting plaintiff — Resort to training, available to defendant, or to progressive discipline, could have ameliorated complainant’s concerns, particularly as neither complainant nor complainant’s Union sought termination of plaintiff — Defendant lacked cause for summary dismissal of plaintiff, and accordingly plaintiff was entitled to damages as pay in lieu of reasonable notice. Labour and employment law –––– Employment law — Termination and dismissal — Notice — Considerations affecting length of notice — Miscellane- ous –––– Effect of statutory and regulatory limits — Plaintiff was managerial employee of defendant agency of Crown in Right of province, with approximately 30 years’ service — Pursuant to Employment Termination Standards Regulation promulgated and then amended with enactment of Public Sector Em- ployers Act with effective date of October 21, 2002, by operation of s. 14.4(5) of Act common-law notice periods for public sector employees were capped at 18 months — Plaintiff’s action for damages for wrongful dismissal was allowed, parties agreeing that reasonable notice period in circumstances was at least 18 months — Plaintiff’s entitlement to notice at common law was subject to Act and Regulation — Clearly plaintiff’s contract of employment with public employer was in effect as at effective date for purposes of Act — Accordingly Act and Regulation limits were properly read in as term of plaintiff’s employment agreement in accordance with those instruments — Plaintiff was entitled to 18 months’ pay in lieu of reasonable notice, being award of $103,774.50 calculated as $5,765.25 per month, less plaintiff’s employment income of $6,601.32 earned in course of notice period. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Pensions –––– Plaintiff’s action for damages for wrongful dismissal was allowed — Reasonable notice was set at 18 months — Parties agreed that defendant was to make employer’s contribution, and plaintiff employee’s contribution, to defendant’s pension plan for notice period — Parties likewise agreed that plaintiff was properly considered employed for pension purposes during notice period, and that plaintiff’s pension was properly calculated in accordance with that employed status. 560 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Entitlement to specific heads of damage –––– Special damages — Counselling — Plaintiff’s action for damages for wrongful dismissal was allowed — Plaintiff spent $57 per month from time of dismissal to December 2011 and $60.50 per month from January 2011 until mid-2011 to replace health benefits previously covered by defendant — Plaintiff incurred $131.43 in out-of-pocket medical expenses during notice period which would have been covered by defendant’s health plan — Plaintiff spent $502.88 attending job workshop — Plaintiff spent $3,850 for private counselling to deal with, inter alia, manner of plaintiff’s dismissal — Defendant agreed that all above-noted amounts were recoverable as special damages and it was so ordered. Labour and employment law –––– Employment law — Termination and dismissal — Remedies — Damages — Aggravated, punitive or exemplary damages –––– Where both aggravated and punitive damages available — Plain- tiff was managerial employee of defendant with some 30 years of service — Plaintiff had exemplary performance review record and was described by credible witnesses as excellent manager — Following grossly unfair and biased investigation of largely-unfounded complaint, in effective rush to judgment plaintiff was terminated — At meeting prior to termination, in course of which meeting plaintiff was dealt with in harsh and unreasonable manner, plaintiff was offered letter of reference in exchange for voluntary resignation — Plaintiff brought action for damages for wrongful dismissal — Action allowed — Man- ner of termination and defendant’s conduct with respect to complaint, in which representatives of defendant charged with conducting impartial investigation instead essentially became prosecutors and founded termination recommendation on false premises, warranted award of aggravated damages — Plaintiff was entitled to $35,000 in aggravated damages in present case — While defendant’s conduct was reprehensible, to allow award of punitive damages where aggravated damages had been awarded would generally amount to double punishment — However, offer of letter of reference in exchange for resignation in context where that resignation would spare defendant from having to justify unfair treatment of long-standing senior employee with strong record was so high- handed as to mandate award of punitive damages to express denunciation and deterrence — Plaintiff was accordingly awarded $50,000 on account of punitive damages for reference letter incident. Cases considered by R.B.T. Goepel J.: Altman v. Steve’s Music Store Inc. (2011), 89 C.C.E.L. (3d) 120, 2011 ONSC 1480, 2011 CarswellOnt 1703 (Ont. S.C.J.) — considered Ansari v. British Columbia Hydro & Power Authority (1986), 1986 CarswellBC 86, 2 B.C.L.R. (2d) 33, 13 C.C.E.L. 238, [1986] 4 W.W.R. 123, [1986] B.C.J. No. 3005 (B.C. S.C.) — considered Vernon v. British Columbia 561

Ansari v. British Columbia Hydro & Power Authority (1986), 55 B.C.L.R. (2d) xxxiii (note), [1986] B.C.J. No. 3006 (B.C. C.A.) — referred to Bardal v. Globe & Mail Ltd. (1960), [1960] O.W.N. 253, 24 D.L.R. (2d) 140, 1960 CarswellOnt 144, [1960] O.J. No. 149 (Ont. H.C.) — considered Beggs v. Westport Foods Ltd. (2011), 14 B.C.L.R. (5th) 1, 2011 C.L.L.C. 210- 012, 301 B.C.A.C. 255, 510 W.A.C. 255, 2011 BCCA 76, 2011 CarswellBC 283, 88 C.C.E.L. (3d) 1 (B.C. C.A.) — followed Boulet v. Federated Co-operatives Ltd. (2001), 157 Man. R. (2d) 256, 2001 Car- swellMan 322, 2001 MBQB 174, [2001] M.J. No. 306 (Man. Q.B.) — followed Boulet v. Federated Co-operatives Ltd. (2002), 170 Man. R. (2d) 9, 285 W.A.C. 9, 2002 CarswellMan 411, 2002 MBCA 114, [2002] M.J. No. 357 (Man. C.A.) — referred to Butcher v. British Columbia (Public Sector Employers’ Council) (2003), 2004 C.L.L.C. 210-003, 11 B.C.L.R. (4th) 254, 182 B.C.A.C. 179, 300 W.A.C. 179, 2003 BCCA 192, 2003 CarswellBC 648 (B.C. C.A.) — considered C. (R.) v. McDougall (2008), [2008] 11 W.W.R. 414, 83 B.C.L.R. (4th) 1, (sub nom. F.H. v. McDougall) [2008] 3 S.C.R. 41, 2008 CarswellBC 2041, 2008 CarswellBC 2042, 2008 SCC 53, 60 C.C.L.T. (3d) 1, (sub nom. H. (F.) v. McDougall) 297 D.L.R. (4th) 193, 61 C.P.C. (6th) 1, 61 C.R. (6th) 1, (sub nom. F.H. v. McDougall) 380 N.R. 82, (sub nom. F.H. v. McDougall) 439 W.A.C. 74, (sub nom. F.H. v. McDougall) 260 B.C.A.C. 74, [2008] S.C.J. No. 54 (S.C.C.) — followed Di Vito v. MacDonald Dettwiler & Associates Ltd. (1996), 21 C.C.E.L. (2d) 137, 1996 CarswellBC 1525, [1996] B.C.J. No. 1436 (B.C. S.C.) — referred to Fleming v. Ricoh Canada Inc. (2003), 2003 CarswellOnt 5593, [2003] O.T.C. 1166, [2003] O.J. No. 5557 (Ont. S.C.J.) — distinguished Keays v. Honda Canada Inc. (2008), 2008 SCC 39, (sub nom. Honda Canada Inc. v. Keays) 2008 C.L.L.C. 230-025, 376 N.R. 196, 294 D.L.R. (4th) 577, (sub nom. Honda Canada Inc. v. Keays) [2008] 2 S.C.R. 362, 92 O.R. (3d) 479 (note), (sub nom. Honda Canada Inc. v. Keays) 63 C.H.R.R. D/247, 66 C.C.E.L. (3d) 159, 2008 CarswellOnt 3743, 2008 CarswellOnt 3744, 239 O.A.C. 299, [2008] S.C.J. No. 40, EYB 2008-135085 (S.C.C.) — followed Leach v. Canadian Blood Services (2001), 7 C.C.E.L. (3d) 205, 90 Alta. L.R. (3d) 99, [2001] 5 W.W.R. 668, 284 A.R. 1, 2001 CarswellAlta 173, 2001 ABQB 54, [2001] A.J. No. 119 (Alta. Q.B.) — distinguished McKinley v. BC Tel (2001), 9 C.C.E.L. (3d) 167, 200 D.L.R. (4th) 385, 91 B.C.L.R. (3d) 1, 2001 C.L.L.C. 210-027, [2001] 8 W.W.R. 199, 153 B.C.A.C. 161, 251 W.A.C. 161, 271 N.R. 16, [2001] 2 S.C.R. 161, 2001 SCC 38, 2001 CarswellBC 1335, 2001 CarswellBC 1336, [2001] S.C.J. No. 40, REJB 2001-24834 (S.C.C.) — followed New Brunswick (Board of Management) v. Dunsmuir (2008), 372 N.R. 1, 69 Admin. L.R. (4th) 1, 69 Imm. L.R. (3d) 1, (sub nom. Dunsmuir v. New Brunswick) [2008] 1 S.C.R. 190, 844 A.P.R. 1, (sub nom. Dunsmuir v. New 562 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Brunswick) 2008 C.L.L.C. 220-020, D.T.E. 2008T-223, 329 N.B.R. (2d) 1, (sub nom. Dunsmuir v. New Brunswick) 170 L.A.C. (4th) 1, (sub nom. Dunsmuir v. New Brunswick) 291 D.L.R. (4th) 577, 2008 CarswellNB 124, 2008 CarswellNB 125, 2008 SCC 9, 64 C.C.E.L. (3d) 1, (sub nom. Dunsmuir v. New Brunswick) 95 L.C.R. 65, [2008] S.C.J. No. 9, [2008] A.C.S. No. 9 (S.C.C.) — followed Panton v. Everywoman’s Health Centre Society (1988) (2000), 2000 BCCA 621, 144 B.C.A.C. 179, 236 W.A.C. 179, 82 B.C.L.R. (3d) 364, 4 C.C.E.L. (3d) 262, 2000 CarswellBC 2350, [2000] B.C.J. No. 2290 (B.C. C.A.) — followed Reference re Public Service Employee Relations Act (Alberta) (1987), (sub nom. A.U.P.E. v. Alberta (Attorney General)) 28 C.R.R. 305, [1987] D.L.Q. 225, 1987 CarswellAlta 580, 1987 CarswellAlta 705, 87 C.L.L.C. 14,021, [1987] 1 S.C.R. 313, 38 D.L.R. (4th) 161, (sub nom. Reference re Compulsory Ar- bitration) 74 N.R. 99, [1987] 3 W.W.R. 577, 51 Alta. L.R. (2d) 97, 78 A.R. 1, EYB 1987-66907, [1987] S.C.J. No. 10 (S.C.C.) — considered Richardson v. Davis Wire Industries Ltd. (1997), [1997] L.V.I. 2848-1, 1997 CarswellBC 702, 28 C.C.E.L. (2d) 101, 33 B.C.L.R. (3d) 224, [1997] B.C.J. No. 937 (B.C. S.C.) — referred to Rieta v. North American Air Travel Insurance Agents Ltd. (1996), 19 C.C.E.L. (2d) 117, 1996 CarswellBC 822, [1996] B.C.J. No. 816 (B.C. S.C.) — considered Rieta v. North American Air Travel Insurance Agents Ltd. (1998), 1998 Car- swellBC 642, 35 C.C.E.L. (2d) 157, 105 B.C.A.C. 239, 171 W.A.C. 239, 98 C.L.L.C. 210-027, 21 C.P.C. (4th) 314, 52 B.C.L.R. (3d) 114, [1998] B.C.J. No. 640 (B.C. C.A.) — referred to Rodrigues v. Shendon Enterprises Ltd. (2010), 2010 BCSC 941, 2010 Car- swellBC 1754 (B.C. S.C.) — considered Schewe v. Okanagan University College (2001), 2001 CarswellBC 496, 2001 BCSC 343, [2001] B.C.J. No. 501 (B.C. S.C.) — considered Shinn v. TBC Teletheatre B.C., A Partnership (2001), 2001 CarswellBC 233, 2001 BCCA 83, 85 B.C.L.R. (3d) 75, 6 C.C.E.L. (3d) 244, (sub nom. Shinn v. TBC Teletheatre B.C.) 148 B.C.A.C. 244, (sub nom. Shinn v. TBC Teletheatre B.C.) 243 W.A.C. 244, [2001] 4 W.W.R. 203, [2001] B.C.J. No. 223 (B.C. C.A.) — referred to Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. (2002), 98 Alta. L.R. (3d) 1, 283 N.R. 233, [2002] 5 W.W.R. 193, (sub nom. Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd.) [2002] 1 S.C.R. 678, 2002 SCC 19, 2002 CarswellAlta 186, 2002 CarswellAlta 187, 50 R.P.R. (3d) 212, 299 A.R. 201, 266 W.A.C. 201, 20 B.L.R. (3d) 1, 209 D.L.R. (4th) 318, [2002] S.C.J. No. 20, REJB 2002-28038 (S.C.C.) — followed 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 Vernon v. British Columbia R.B.T. Goepel J. 563

N.R. 161, [1997] 3 S.C.R. 701, [1999] 4 W.W.R. 86, 36 C.C.E.L. (2d) 1, 3 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.) — considered Warrington v. Great-West Life Assurance Co. (1996), 24 B.C.L.R. (3d) 1, [1996] 10 W.W.R. 691, 39 C.C.L.I. (2d) 116, 139 D.L.R. (4th) 18, [1997] I.L.R. I-3394, 81 B.C.A.C. 164, 132 W.A.C. 164, 1996 CarswellBC 1952, [1996] B.C.J. No. 1944 (B.C. C.A.) — considered Whiten v. Pilot Insurance Co. (2002), 156 O.A.C. 201, 35 C.C.L.I. (3d) 1, [2002] 1 S.C.R. 595, 2002 SCC 18, 2002 CarswellOnt 537, 2002 Carswell- Ont 538, 283 N.R. 1, 20 B.L.R. (3d) 165, [2002] I.L.R. I-4048, 209 D.L.R. (4th) 257, [2002] S.C.J. No. 19, REJB 2002-28036 (S.C.C.) — followed Statutes considered: Public Sector Employers Act, R.S.B.C. 1996, c. 384 Generally — referred to s. 4.2 [en. 1997, c. 38, s. 2] — considered s. 14.4 [en. 2002, c. 64, s. 5] — considered s. 14.4(3) [en. 2002, c. 64, s. 5] — considered s. 14.4(5) [en. 2002, c. 64, s. 5] — considered s. 14.4(5)(b) [en. 2002, c. 64, s. 5] — considered Regulations considered: Public Sector Employers Act, R.S.B.C. 1996, c. 384 Employment Termination Standards, B.C. Reg. 379/97 Generally — referred to

ACTION for damages for wrongful dismissal.

J. McKay, F. Wynne, for Plaintiff J.E. Gouge, Q.C., D. Baumgard, for Defendant

R.B.T. Goepel J.: Introduction 1 In July 1980, the plaintiff, Stephanie Vernon, aged 19, commenced employment as an auxiliary clerk at the 28th & Main liquor store in Van- couver operated by the Liquor Distribution Branch (the “LDB”). Over the next 30 years, she continued her employment with the LDB being promoted from auxiliary clerk, to regular clerk, to assistant manager, to store manager. In May 2005, she became manager of the Ironwood store in Richmond and in 2006 when Ironwood became a Signature Store after a major renovation, she was appointed a Senior Store Manager. 2 On March 1, 2010, an employee at Ironwood (the “Complainant”), made a written complaint about Ms. Vernon. After interviewing the 564 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Complainant, Ms. Vernon, and several other employees, the LDB terminated Ms. Vernon’s employment without notice. 3 Ms. Vernon claims that she was dismissed without cause, and is entitled to damages for the defendant’s breach of contract for failure to provide reasonable notice of dismissal. In addition, she claims aggravated and punitive damages arising from the manner of her dismissal. 4 The LDB alleges that Ms. Vernon engaged in gross workplace misconduct including bullying, harassing and intimidating subordinates. It submits that her conduct demonstrated a complete lack of respect for her employees and her position as a Senior Store Manager. It submits it was justified in dismissing Ms. Vernon for cause.

Background A. Overview 5 The action raises difficult questions of fact and law. The fundamental question is whether the LDB had cause to summarily terminate Ms. Vernon without notice. 6 To decide this question, it is necessary to make findings concerning Ms. Vernon, the Complainant, several Ironwood employees and LDB management. This requires a detailed review of the LDB employment structure, Ms. Vernon’s work history, her management techniques, the evidence of employees she supervised, the allegations of the Complain- ant, the LDB investigation into the complaint and manner in which it terminated her employment. Credibility is a major issue.

B. The LDB 7 The LDB operates liquor stores of all sizes throughout British Colum- bia. Their flagship stores are branded as Signature Stores. Signature Stores sell and contain more products than other stores. Their annual sales volume is in excess of $7.5 million. 8 Most LDB employees are members of the B.C. Government and Ser- vice Employees’ Union (the “Union”). Their terms of employment are governed by the terms of a collective agreement entered into between the Union and the Government of British Columbia (the “Collective Agree- ment”). The Collective Agreement recognizes the Union’s right to select stewards to represent the employees and assist them in making complaints. 9 Clause 32.15 of the Collective Agreement sets out a detailed process pursuant to which LDB employees can complain of misuse of manage- Vernon v. British Columbia R.B.T. Goepel J. 565

rial/supervisory authority. The Collective Agreement describes the misuse of managerial/supervisory authority as follows: Misuse of managerial/supervisory authority takes place when a person who supervises or is in a position of authority exercises that authority in a manner which serves no legitimate work purpose and which ought reasonably be known to be inappropriate. Misuse of managerial/supervisory authority does not include action occasioned through the exercise, in good faith, of the Employer’s managerial/supervisory rights and responsibilities. Nor does it include a single incident of a minor nature where the harm, by any objective standard is minimal. 10 Most LDB store managers are members of the Union and covered by the Collective Agreement. Managers of Signature Stores are considered senior employees and are excluded from the Union. Senior employees are not protected by the terms of the Collective Agreement. Senior employees can only be terminated by the LDB’s General Manager. 11 The LDB has a labour relations department. Labour relations advisors assist and guide store managers with labour relation issues that arise at their worksite. 12 In determining disciplinary action, the LDB follows what was described in testimony as “the principles of William Scott”. Pursuant to those principles the LDB in making a disciplinary decision factors in the employee’s length of service, the nature of the misconduct, previous behavior that may have been the subject of discipline and the employee’s response during the investigative process. In most cases the LDB engages in progressive discipline and will provide warnings to an employee before they are terminated. There are instances, however, when the conduct is considered so egregious, that employees are summarily terminated without any prior warning. For example, in cases of theft or physical violence, the LDB has a zero tolerance policy and will terminate an employee without any warning.

C. Ms. Vernon i. Employment History 13 Ms. Vernon graduated from high school in 1979. After high school, she worked for three months at a grocery store. In July 1980, she started her career at the LDB. 14 Ms. Vernon began as an auxiliary clerk. As an auxiliary, she worked at various stores throughout Vancouver. She testified that when she first 566 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

started working at the LDB, it was a male-dominated environment. She described the atmosphere as gruff, with a strong military influence. Pro- fanity was common in the workplace. 15 In 1989, Ms. Vernon became a regular clerk at the 28th & Main store. As a regular, her responsibilities included running a cash register and stocking shelves. While a regular at 28th & Main, she also assisted with various managerial duties including running the area recall program which scheduled auxiliary employees to the different LDB stores. 16 Ms. Rothwell, who is currently a Senior Store Manager for the LDB, testified that Ms. Vernon was working as a regular at 28th & Main when Ms. Rothwell was transferred there as an Assistant Manager. She testified that when she came to the store, she found that Ms. Vernon was performing many managerial functions, even though she was still a clerk. 17 Ms. Rothwell testified that Ms. Vernon appeared to respect everyone, but had a no-nonsense style. She was known as “The Little General”. Ms. Rothwell encouraged Ms. Vernon to apply for a management position. 18 In June 1998, Ms. Vernon won the position of Assistant Manager II (“AM II”) at the Kingsgate Mall store. She continued to run the area recall program from Kingsgate. As an AM II, Ms. Vernon supervised approximately six employees. 19 In September 1998, Ms. Vernon won the position of Assistant Man- ager III (“AM III”) at the 39th & Cambie store. The 39th & Cambie store was one of the LDB flagship stores. At the Cambie store, she continued to operate the recall program and oversaw approximately 20 employees. 20 From November 1999 to January 3, 2000, she managed a boutique Christmas store that operated in the Oakridge Mall. Next she relieved as a Grid 18 Store Manager at 28th & Main. When the 28th & Main Store Manager position was posted, she passed a written test and interview process and in April 2001 she was appointed the Grid 18 Store Manager at 28th & Main. 21 As the Store Manager, Ms. Vernon oversaw the whole working function of the store. Her responsibilities included providing leadership and direction to staff, controlling costs through effective human resource planning and inventory control, and maximizing revenues through effective merchandising and customer relations. Her primary responsibilities included managing and training employees, which included assigning and delegating tasks and monitoring performance, following corporate direction and incorporating and maintaining best business practices. As a Vernon v. British Columbia R.B.T. Goepel J. 567

Store Manager, she was responsible for hiring and dealing with labour relations issues for the work unit. 22 In May 2005, she was transferred to Ironwood as Store Manager. Over the next 15 months, Ironwood underwent extensive renovations and in September 2006, it was rebranded as a Signature Store. 23 When Ironwood was converted to a Signature Store, Ms. Vernon was appointed Senior Store Manager. The responsibilities of a Senior Store Manager are essentially the same as a Store Manager, albeit a Senior Store Manager is managing a much larger operation. Store Managers are members of the Union while Senior Store Managers are excluded from the Union. Accordingly, when Ms. Vernon became Senior Store Man- ager in May 2006, she ceased being a member of the Union and could no longer look to the Union to assist her if anyone complained about her. 24 Ms. Vernon continued as Senior Store Manager at Ironwood until her termination. In addition, she served as the Area Relief Manager on several occasions between March 2007 and September 2009. In that position, she supervised all the stores in her area. 25 Ms. Vernon was the subject of annual performance reviews. Her last two employment reviews were dated March 31, 2008 and March 31, 2009. The reviews were prepared by her Area Manager, Gerry Lidin. 26 In the March 31, 2008 review, Mr. Lidin commented: Steph leads the area in store presentation, Signature service and results. Her store has the best results of Signature stores of similar volume. Team building and organization is also top in area. A great mentor for her management team. 27 The review noted that she had exceeded her sales target by approximately $852,000 and her implementation of marketing programs was one of the best in the province. It was noted that she was pro-active in developing her team and she keeps interest level high and holds all staff ac- countable to get things done. Her focus was to get results on sale, service and implementation of programs. She was complimented for creating a teamwork concept, not only in her store, but throughout the Richmond area. Her overall rating was considered outstanding. 28 The March 31, 2009 review was similarly complimentary. Under the heading “Teamwork and Cooperation”, it was noted that her store was best in the area and that her staff really enjoyed coming to work at the store. The review noted that Ms. Vernon was closely managing attendance and sick leave had improved. It was noted that the store’s improved attendance showed that Ms. Vernon was effective in holding people ac- 568 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

countable and making her staff feel enthused about coming to work. The store was recognized as a model for service, presentation and social responsibility initiative. It noted that Ms. Vernon took pride in developing staff career promotions. With regard to the overall performance review, Mr. Lidin noted that Ms. Vernon “takes pride in her store, staff, results and truly leads people to be the best they can be.” 29 Ms. Vernon testified that her performance reviews led her to believe that in regard to the key work goals of making sales targets and in-store marketing she was doing well. She also believed that her staff was happy coming to work and she was doing a good job with regard to managing attendance. 30 In 2009, Ms. Vernon was asked to participate in an LDB recruitment campaign. Ms. Vernon was a model in the campaign pamphlet and starred in a recruitment video. After the recruitment campaign, the LDB printed a poster of Ms. Vernon taken from the campaign material. Many of the Ironwood staff signed the poster in a complimentary fashion. 31 The Grapevine is an internal magazine published by the LDB and circulated to all stores. In the spring of 2007, The Grapevine published an article which described a series of comments from new Ironwood employees, relating to their positive experiences arriving at the Ironwood store. 32 In October 2009, Ms. Vernon was asked to speak on behalf of all long service government employees at a banquet in their honour held at Gov- ernment House.

ii. Management Style 33 Ms. Vernon described herself as a no-nonsense manager. She did not let employees get away with anything at work and would tell them if they were slacking. She described herself as firm, but fair. She said she was well organized and that she saw store presentation as most important. She said she made an effort to enforce LDB policies and procedures. 34 Ms. Vernon was known throughout the LDB as “The Little General”. She was first given that nickname while working at the 28th & Main Store. In the summer of 2009, The Grapevine published an article about Ms. Vernon entitled “The Little General”. Evidence indicated that the nickname arose because of her no-nonsense style and her insistence that her employees not slack off. Vernon v. British Columbia R.B.T. Goepel J. 569

35 The nickname was widely known throughout the LDB system. Carol Johnson, who worked with Ms. Vernon at Ironwood, was aware of the nickname before Ms. Vernon came to Ironwood. Ms. Vernon had a loud voice. Her employees had no difficulty understanding her commands. 36 Ms. Vernon testified that she attempted to foster teamwork. She said she treated her employees as family. She often entertained her employees in her home. 37 To foster teamwork, Ms. Vernon established the “Players Choice Awards” that were given annually to staff members at a party Ms. Vernon hosted. The awards recognized employees for Best Customer Service, Best Team Player, Most Improved Player and Most Valuable Player. Award winners were voted on by store employees. 38 The Most Valuable Player was described as the employee who demonstrated the highest level of commitment to the success of the team. The award was to go to the employee who best demonstrated initiative, commitment and encouragement to all team players, maintained a positive attitude and had the respect of the team. In 2007, the staff voted Ms. Vernon the Most Valuable Player.

D. Ironwood Employees i. Plaintiff’s Witnesses 39 Ms. Vernon called six Ironwood employees as part of her case. Three of these witnesses are presently employed by the LDB in management positions. Two of them have been employed by the LDB in excess of 25 years. Two of the witnesses worked as auxiliaries at Ironwood. One worked in the warehouse. Their evidence was universally complimentary of Ms. Vernon and her management style. 40 Wendy Whynot has worked for the LDB for 25 years. She is presently a supervisor. She admired Ms. Vernon’s management style. She described her as being ruthlessly organized, very considerate and wanting her staff to excel. She said she was a true mentor who helped people move forward. She said Ms. Vernon cared for her staff and it was a plea- sure working for her. Ms. Whynot said that in her 25 years of employment with the LDB, Ms. Vernon was the best manager she ever had. 41 Ms. Whynot testified that Ms. Vernon did often swear. She said most everyone at the Ironwood store swore from time to time. She said Ms. Vernon never swore when customers were present. 42 Ms. Whynot was interviewed in the course of the LDB investigation. She said the questions were asked without reason or context. She said 570 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

when she supported Ms. Vernon in the interviews, she was made to feel as if she was wrong and lying. 43 Jake Jacobson worked at the LDB for 33 years. He was employed at Ironwood from 2006 to 2009. He initially was assigned to Ironwood on a temporary assignment to fix rollers. He then requested to stay on as he liked Ms. Vernon’s management style and the store environment. He acknowledged she had a loud management style, but said that it did not appear to bother anyone. He commented that 85 to 90% of the staff swore, but the swearing was neither mean nor vicious. There was no swearing in front of customers. He described Ms. Vernon as one of the best managers he had ever had. 44 Wendy Rondeau has worked at the LDB for 11 years. She came to Ironwood as a Clerk in 2006. At the time of Ms. Vernon’s termination, she was an Assistant Manager. 45 Ms. Rondeau said she never would have become an Assistant Man- ager without Ms. Vernon’s encouragement and assistance. She taught her the best customer service procedures and how to be fair with staff. She also helped her obtain counselling when she had difficulties in her private life. She described Ms. Vernon as tough, but fair, and she was grate- ful for the time that she worked with her. She said that when Ms. Vernon was dismissed the majority of the staff was crying and upset. She said that Ms. Vernon was the best manager she has ever had. 46 Ms. Rondeau said nobody ever complained to her about Ms. Vernon. She said swearing in the warehouse or lunchroom was common. Al- though she considered Ms. Vernon a friend, Ms. Vernon insisted that Ms. Rondeau follow the rules when she sought an exemption in regard to the manner in which uniforms were worn. 47 Ms. Rondeau was interviewed during the investigation. When she denied certain allegations that were made against Ms. Vernon, she said the interviewers made her feel as if she was lying. They yelled at her when she denied she ever heard Ms. Vernon say “They think with their penises”. 48 Karen Chan worked at Ironwood as an auxiliary. She requested to work at the store because she liked Ms. Vernon’s management style. She described her as a fantastic manager, who accommodated her employees’ personal needs. Ms. Chan testified that Ms. Vernon mentored her and gave her responsibility and guidance. She said that Ms. Vernon treated the auxiliaries with respect and compassion. Vernon v. British Columbia R.B.T. Goepel J. 571

49 Ms. Chan said Ms. Vernon was always loud. Although Ms. Vernon never yelled at her, she corrected her for not wearing the proper uniform. Ms. Chan testified that swearing was commonplace at the Ironwood store, but there was no swearing on the sales floor, a matter that Ms. Vernon had made clear to her. 50 Ms. Chan described Ms. Vernon as an awesome manager whom most everyone appreciated. She said that she ran a tight ship. Ms. Chan considered Ironwood the best place in Richmond to work. She agreed that after Ms. Vernon was terminated, the store was divided and a few of the staff appeared happy to see her go. Ms. Chan was not interviewed during the investigation. 51 Ivan Ty also worked as an auxiliary at Ironwood. He started at Iron- wood in February 2008. He described Ms. Vernon as being strict. She rewarded those who worked hard. When Mr. Ty told Ms. Vernon that he wanted to become a supervisor, she mentored him and advised him. When Mr. Ty was on parental leave, Ms. Vernon took steps to keep a job competition open so that Mr. Ty would have the opportunity to compete for the job. She scheduled shifts to accommodate Mr. Ty’s second job. 52 Ms. Johnson has been with the LDB for 33 years. She is presently a Senior Store Manager. She worked with Ms. Vernon at Ironwood from 2004 to 2008, initially as a clerk and then as an assistant manager. 53 Ms. Johnson described Ms. Vernon as an amazing manager. She said she treated staff as family. Ms. Johnson expressed the wish that she could be as good a manager as Ms. Vernon. 54 Ms. Johnson said no one at Ironwood ever complained to her about Ms. Vernon. She said that Ms. Vernon was a mentor for anyone who wanted to advance. 55 Ms. Johnson said Ms. Vernon was very direct in giving instructions. She said Ms. Vernon was critical when someone made mistakes. Some- times she would shout instructions across the floor. She never heard Ms. Vernon use profanities in the customer area of the store. On occasion, Ms. Vernon might call a staff member “an idiot” but she also called herself “an idiot”. Ms. Johnson could not understand how anyone could be offended by Ms. Vernon. 56 Tim Talmey commenced work at the LDB in 1975. He worked his way up through the system. From 1995 to 2007 he served as Relief Area Manager. He retired from the LDB in October 2008. 57 Mr. Talmey met Ms. Vernon in 2005 when she was transferred to Ironwood. He was her Relief Area Manager from 2005 until January 572 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

2007. Sometime after January 2007, when he was no longer her Area Manager, Ms. Vernon and Mr. Talmey commenced a personal relationship. They presently live together. 58 While he was Area Manager, Mr. Talmey’s observations were that Ms. Vernon was a very good manager. She was extremely well organized, the staff remained on task, the store was always neat and the employees appeared happy. Ms. Vernon was accommodating and treated the auxiliaries in the same manner as regular employees. Mr. Talmey suggested that some LDB managers do not. He said he never received any employee complaints about Ms. Vernon.

ii. LDB Witnesses 59 In addition to the Complainant, whose evidence I will detail below, the LDB called six witnesses who had worked for Ms. Vernon at Iron- wood. Their evidence was far from complimentary and in certain instances directly contradicted evidence led on behalf of Ms. Vernon. Later in these reasons, I will attempt to resolve some of the credibility issues that arise from this testimony. 60 Melanie Wylie commenced working at Ironwood in May 2006 as an auxillary. She became a regular employee in July 2007. She said she heard Ms. Vernon call several employees “f*****g idiots”. She called panhandlers outside the store “f*****g guys”. 61 Ms. Wylie testified that in July 2008, while she was assigned light duties because of a back problem, Ms. Vernon ordered her to unload a skid of alcohol. This work is known as doing a liquor load and is not considered light duties. When Ms. Wylie objected she said that Ms. Vernon told her “If you can f**k your husband, you can do a liquor load” (the “Liquor Load Incident”). Ms. Vernon denies the Liquor Load Incident ever happened. 62 Ms. Wylie acknowledged that she never told Ms. Vernon that she found her language offensive. She never complained to anyone about Ms. Vernon. She acknowledged that Ms. Vernon had been supportive when she had a Workers’ Compensation claim. She acknowledged attending staff parties at Ms. Vernon’s house but denied Ms. Vernon had got her flowers when she became a regular employee or that she had ever socialized with Ms. Vernon outside of work. 63 In cross-examination, Ms. Wylie testified that she never said “f**k” in the workplace or wrote the word “f**k”. She says when she first com- Vernon v. British Columbia R.B.T. Goepel J. 573

menced work at Ironwood she admired Ms. Vernon but by November 2009 she no longer did so. 64 In November 2009, Ms. Wylie wrote on Ms. Vernon’s poster the following three comments: a) You know I look up to you. You are the f*****g best!!! I think you are someone that we all aspire to be. XOXO Mel; b) Everyone absolutely admires you XOXO; and c) Welcome aboard! I expect the best. I deserve the best. XOXO Mel. 65 Ms. Wylie was interviewed in the investigation. She denied telling the interviewer that the Liquor Load Incident had happened approximately four years before (which would put it in 2006 and at a time she was not on light duties.). In the interview, she said that Ms. Vernon ran a tight ship and was very strict. She said Ms. Vernon swore in the lunchroom, warehouse and kitchen. She said that Ms. Vernon did not swear in the customer service area. She said Ms. Vernon treated everyone the same. 66 Ms. Wylie did not recall telling Ms. Chan following the interviews that she was uncomfortable with the interview process and that the LDB had something on her. Ms. Chan testified that Ms. Wylie had told her so. 67 In re-examination, Ms. Wylie said she never complained about Ms. Vernon because she believed Ms. Vernon was well protected in the LDB hierarchy. She said she wrote the comments on the poster at a staff party, but the comments did not accurately reflect her feelings. 68 Betty Mejias has worked for the LDB for 12 years. She worked at Ironwood for four and one-half years. She started as an auxiliary and ultimately became a regular. She said one day at work, Ms. Vernon said “Are you a f*****g idiot?” She said she never complained about Ms. Vernon because she believed Ms. Vernon had friends in the LDB management. 69 Ms. Mejias left Ironwood in 2007. She acknowledged that Ms. Vernon bought flowers for her and Ms. Wylie when they became regular employees. She said Ms. Vernon helped her advance her career and called her when she was on maternity leave about a job posting. 70 In November 2010, Ms. Mejias swore an affidavit in which she said the following: I was working in the Ironwood Liquor Store when I observed Me- lanie Wylie run out of Ms. Vernon’s office and into the warehouse. Ms. Wylie was red faced and in tears. Immediately afterwards, I 574 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

asked Ms. Wylie why she was crying and upset. Ms. Wylie responded by saying that Ms. Vernon had just told her “If you can f**k your husband, you can work the liquor load”. 71 At trial, Ms. Mejias admitted that her sworn statement was not true and the incident she described in her affidavit did not happen. She did testify that Ms. Wylie had telephoned her after the Liquor Load Incident and advised her of it. 72 Maricel Canizares worked at Ironwood from August 2008 to January 2010 as an assistant manager under Ms. Vernon. She said the relationship was extremely difficult. She said Ms. Vernon would regularly hu- miliate and degrade her. She said she lost her self-respect and self-confi- dence and Ms. Vernon made her feel like an idiot. She said as a result of treatment she received from Ms. Vernon, she subsequently received psychological counselling. She considered Ms. Vernon to be ill-mannered and uncouth. She did not believe that Ms. Vernon went out of her way to hurt her feelings; it was just the way she was. 73 Ms. Canizares said Ms. Vernon described herself as the Queen and Ms. Canizares as the princess and that the staff were court jesters. This apparently was said in the context of Ms. Canizares being too friendly with the staff. 74 Ironwood was Ms. Canizares’ first employment at the LDB. She acknowledged that Ironwood was a fun place to work and that she and her staff members would joke around. She testified she never told Ms. Vernon that she found her language or behaviour offensive. She said she did not do so because she was afraid of Ms. Vernon and wanted to avoid her as much as possible. 75 Ms. Canizares acknowledged that Ms. Vernon rearranged her shifts to accommodate her need to attend doctor’s appointments. Ms. Canizares acknowledged that she sometimes has problems with English, which is her second language. Occasionally, she interprets comments negatively because she does not understand the context. 76 In January 2010, Ms. Canizares was successful in winning a competition to become a manager. She wrote Ms. Vernon and thanked her for all the help she had given to her. Shortly after Ms. Canizares started as a manager at the 28th & Main Branch, Ms. Vernon telephoned her and gave her helpful advice on how to deal with a problem employee. Ms. Vernon also gave her the name of a labour relations advisor that she could call to assist her. Vernon v. British Columbia R.B.T. Goepel J. 575

77 Kathryn van Pelt has worked for the LDB for 25 years. She was Act- ing Manager of the Ironwood Store when Ms. Vernon was appointed its Manager. She then worked as Ms. Vernon’s assistant. Her last day at Ironwood was February 19, 2006. 78 Ms. van Pelt told of an incident in which Mr. Talmey and Mr. Lidin had come to the Ironwood Store and brought Ms. van Pelt a muffin. She said Ms. Vernon became angry about the muffin. They had a conversation in which Ms. Vernon said to Ms. van Pelt that Gerry liked her and after Ms. van Pelt agreed, Ms. Vernon said “I like you too, but, if I didn’t, your ass would be out of here so fast”. Ms. van Pelt took that as a threat. 79 Ms. van Pelt acknowledged that she never complained about Ms. Vernon. She says she believed Ms. Vernon was well connected and there would be no value in a complaint. She agreed that when she left Iron- wood in February 2006, Ms. Vernon cooked a dish for her. 80 Ms. van Pelt denied that she had a grudge against Ms. Vernon. She agrees that when Ms. Vernon started at Ironwood she felt bad when she heard Ms. Vernon comment that “I was sent here to clean this up”. Ms. van Pelt took that as a slight on her own work. 81 Ms. van Pelt said she was pleased when Ms. Vernon was fired. Al- though it had been four years since she had worked with Ms. Vernon, Ms. van Pelt felt her firing was deserved. When she learned Ms. Vernon had been suspended, she spoke to Mr. Branham, the Director of Store Operations, and advised him that she had information concerning Ms. Vernon. Ms. van Pelt was subsequently interviewed during the investigation. 82 Donita Catamo-Meyer worked at Ironwood from June 30 to Septem- ber 4, 2009. She was a cashier and clerk. In her opinion, Ms. Vernon treated staff badly, would be insulting and scream and swear at them. She could not, however, recall specifics. 83 Shortly after Ms. Catamo-Meyer commenced work at Ironwood, her daughter was in an accident and was hospitalized. She said when she called in the next day and could not go to work, Ms. Vernon grilled her about the accident and asked her questions as to what had happened. She said Ms. Vernon continued to call her on several occasions thereafter when she remained off work. Ms. Catamo-Meyer said that this added to her stress. 84 Ms. Catamo-Meyer testified that in 2002, while she was working at Ironwood, she had been robbed. As a result of that incident, she devel- 576 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

oped post-traumatic stress disorder. Because of that incident, when she was transferred to Ironwood in June 2009, she did not want to go. She filed a grievance concerning her transfer. She mistakenly believed that Ms. Vernon had arranged her transfer to Ironwood. 85 Ms. Catamo-Meyer agreed that at the time of her daughter’s accident, Ms. Vernon told her that she could take a family illness day and could also use vacation days if she needed to stay off work longer. Although she said Ms. Vernon questioned her concerning her daughter’s accident, she could not remember the exact words that had been used. 86 In August 2009, at a time when Ms. Vernon was working as the Area Relief Manager, Ms. Catamo-Meyer had an argument with Ms. Rondeau. Thereafter she was no longer willing to work at Ironwood. Ms. Vernon then arranged for her to be transferred to Marpole. 87 Ms. Catamo-Meyer initially refused to report to Marpole. She said she was ill and depressed. She subsequently met with Ms. Vernon and Daphne van der Boom, a LDB Labour Relations Advisor. She was suspended for three days without pay. 88 In October 2009, Ms. Catamo-Meyer resigned from the LDB and took a job working with handicapped children. She said she quit as a result of her experience at Ironwood and Marpole. She thought her transfer to Marpole was a punishment. 89 Ms. Catamo-Meyer was interviewed in the course of the investigation. In the interview, she said Ms. Vernon used profanity in the lunchroom, office and warehouse, but not in front of customers. 90 Shirley Kirkland has worked at Ironwood for six years. She said Ms. Vernon was a very strong manager. She acknowledged that she had lots of knowledge and ability as a manager. She said Ms. Vernon intimidated the staff. She was very loud. She would say sarcastic thing such as “do not call in sick, call in dead”. 91 Ms. Kirkland testified that Ms. Vernon often used profanity in the retail sections of the store. She said her profane remarks would be clearly audible to customers. She said this happened two to three times a week. 92 Ms. Kirkland testified that Ms. Vernon would swear at staff members including the Complainant and Ms. Canizares. She could not remember exactly what was said. 93 Ms. Kirkland agreed that there was a rule limiting the time an employee could spend with a wine representative. She also agreed that Ms. Vernon had been fair to her most of the time. She said she felt good when she was given the Players Choice Award for Best Team Player. Vernon v. British Columbia R.B.T. Goepel J. 577

She said that Ms. Vernon would compliment her on her appearance. She said that she never complained to Ms. Vernon about her language or behavior.

E. The Complainant i. Overview 94 Ms. Vernon’s termination followed an investigation of a written complaint made by an Ironwood employee. I have issued a publication ban with regard to the employee’s name, and she will be referred to throughout as the Complainant. To put the complaint and the investigation that followed into perspective, it is necessary to review the Complainant’s background and work history and the events that immediately preceded the filing of the complaint.

ii. Background 95 The Complainant is a native of Iran. She came to Canada in Novem- ber 2000. She commenced employment at the LDB in May 2006. 96 The Complainant had a difficult childhood. Her father was a veteran of the Iran/Iraq war in which he suffered shell shock. He came to consider his family as the enemy. On at least one occasion he chased the Complainant with a knife. 97 The Complainant became anxious as a child. She developed a compulsive neck twitch. She still has panic attacks and flashbacks concerning her childhood experiences. She suffers obsessive-compulsive symptoms and has had suicidal tendencies. 98 The Complainant’s sister still lives in Iran. The Complainant has for some years been attempting to assist in her sister’s immigration. It is an issue that causes her considerable stress. 99 After leaving Iran, she lived for some time in Europe. While in Eu- rope, she was kidnapped. She was also assaulted by someone who had promised assistance in bringing her sister to Canada. 100 The Complainant acknowledged that English is her second language. She agreed that she sometimes might not understand a word or phrase and sometimes takes comments out of context.

iii. Work History 101 The Complainant commenced work at the LDB in May 2006. She was initially hired as an auxiliary at the Marpole store. In due course she became a regular. 578 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

102 The Complainant wished to become a Product Consultant. Prior to transferring to Ironwood she had taken wine courses to increase her knowledge. Product Consultants are only hired at Signature Stores. She requested a transfer to Ironwood in order to further her career. She started at Ironwood in September 2009. 103 While at Marpole, the Complainant’s manager was Ms. Johnson who had previously worked for Ms. Vernon at Ironwood. Ms. Johnson testified that the Complainant at times had difficulty understanding English. On several occasions she refused to serve customers who she believed were being rude to her or not treating her with proper respect. Certain of these problems appear to have arisen because of language difficulties. 104 In June 2009, the Complainant and another employee at the Marpole store got into a dispute. The Complainant wrote a two-page letter in which she criticized the other employee’s “negative attitude and destruc- tive behaviour”. She indicated that if the employee continued to behave in a similar fashion she would take the case to Head Office. 105 The Complainant commenced work at Ironwood in September 2009. The Complainant considered Ms. Vernon to be a bully. She said she treated people as if they were not worthy. She said Ms. Vernon would intimidate her and yell at her in front of staff and customers. She said Ms. Vernon would pick on her and make fun of the way she spoke. The Complainant felt she did not deserve such treatment. She never told Ms. Vernon that she found her comments or behaviour offensive. 106 The Complainant acknowledged that English was her second language and she sometimes took comments out of context or did not understand a word or phrase. She agreed that Ms. Vernon signed her up for various courses which would assist her in becoming a Product Consult- ant. She also agreed that Ms. Vernon had granted her request for time off work so she could study and take a wine course at head office. 107 The Complainant came to believe she had to stand up for other staff at Ironwood. She wanted Ms. Vernon to stop harassing people. When she learned that Ms. Vernon was prepared to apologize she was not prepared to except an apology from Ms. Vernon because she did not trust Ms. Vernon and did not believe that any apology would be sincere.

iv. Events of February 2010 108 The Complainant’s last day of work was Thursday, February 11, 2010. On that day she had been assigned work on the cash register. As the store was not busy, Ms. Vernon asked her to work on a project. Ms. Vernon v. British Columbia R.B.T. Goepel J. 579

Vernon said something to the Complainant that the Complainant did not hear and she asked Ms. Vernon to repeat herself. Ms. Vernon then asked “Are you deaf?” and when the Complainant responded that she had not heard her, she said words to the effect that “I think you are going deaf because every time I speak to you, you do not hear me”. The Complain- ant said two employees, including Ms. Chan, witnessed this exchange. 109 The Complainant considered this the last straw. After her shift finished she felt terrible. When she went home she believed she could not take this conduct anymore as it offended her dignity and integrity. She believed if she continued to go to work, Ms. Vernon would have her transferred. 110 On the evening of February 11, the Complainant phoned the store and advised she would not be in for her shift that began at 7:00 a.m. the next morning. She gave no reason for her absence. 111 On Friday February 12, at 12:48 p.m., Ms. Vernon left messages on the Complainant’s home and cell phone. These calls and several others that Ms. Vernon made to the Complainant in the following days were recorded on the Complainant’s answering machine. The audio recordings were played back at trial. 112 In the February 12 calls Ms. Vernon asked the Complainant whether she was coming in the next day because they had nobody to replace her. She asked her to give her a call and let her know how she was feeling. She also advised her that when somebody calls in sick they are supposed to phone in on the day they are sick. Ms. Vernon asked the Complainant to contact her. 113 At approximately 4:15 p.m. on February 12, the Complainant came to the store and dropped off a doctor’s note that said she was unable to come to work. She spoke to Ms. Wylie. Ms. Wylie asked her what her problem was and she refused to discuss it, but said she would speak to Ms. Vernon directly. When Ms. Wylie asked if she could get her anything, the Complainant started to cry. 114 Ms. Wylie told the Complainant that if she was planning on taking more than a few days off, she needed proper documents and the Com- plainant took with her an ST02 form which would be completed by her doctor. The medical note that the Complainant had brought in said that the Complainant could not work for “medical reasons until further notice”. 115 On Saturday February 13, at 8:08 and 8:10 a.m., Ms. Vernon left messages for the Complainant on her home and cell phone. Ms. Vernon 580 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

indicated that she needed to know more about what was going on because the Complainant was registered in certain courses, and if she was going to be off for an extended period of time, those matters would have to be re-directed. She asked the Complainant to call her to give her a sense of what was going on. She indicated she hoped the Complainant’s illness was not too serious and that it would not preclude her from doing the courses that she had signed up for. 116 At 10:02 a.m. on February 13, Ms. Vernon phoned again. She advised that she was at work and looking at the work schedule. She advised the Complainant that she was scheduled to work Sunday, Monday and Tues- day and in looking at the doctor’s note there appeared to be nothing that indicated she could not work. She advised the Complainant that in order to pay for medical leave, it was necessary to find out what was going on and if it was physical that perhaps they could put her on light duties. 117 On Monday February 15, at 8:22 a.m., Ms. Vernon again phoned. She indicated that it was imperative that they speak and asked the Complain- ant to give her a call at the store. She advised that the Complainant’s coding was Leave Without Pay. 118 On February 15, Ms. Whynot called the Complainant to ask how she was and to direct her to call Ms. Vernon. The Complainant told Ms. Whynot that she was not prepared to call Ms. Vernon. She stated she was having anxiety attacks and it was comments from Ms. Vernon that had induced those feelings. She told her that Ms. Vernon’s style of management was unacceptable to her and she could not work under those conditions. 119 At 5:56 p.m. on February 15, Ms. Vernon left another message with the Complainant. At that time, she was aware that the Complainant had spoken to Ms. Whynot. She advised the Complainant that she needed to speak to her and that it was necessary to obtain a clear understanding to deal with the situation and find out what it was that was precluding her from working. She told her she would be at work the following day and that she had to contact her. 120 On Tuesday, February 16, at 9:24 a.m., Ms. Vernon left a further message for the Complainant. Ms. Vernon indicated that she understood that the Complainant had been directed to call her, but she had refused. Ms. Vernon told her that in such circumstances the employer looks at that as insubordination. Ms. Vernon told her that if she had an issue with the store or with her, she wanted to discuss it and if that did not happen that day, then the next process would be that the Complainant would be Vernon v. British Columbia R.B.T. Goepel J. 581

directed to a meeting at Head Office with a Labour Relations Advisor to which she should bring a Shop Steward. She told the Complainant that it was in her interest to call and that she was there to help as to what was going on and again advised her that if she did not, the next step would be disciplinary action. 121 At approximately 9:40 a.m. on February 16, the Complainant phoned the store and spoke to Ms. Vernon. Ms. Vernon was with Ms. Wylie and they spoke to the Complainant on a speaker phone. Ms. Wylie made notes of the conversation. 122 Ms. Vernon asked the Complainant if the reason she was off work was anything to do with any of her co-workers. The Complainant indicated no, that she loved working with everyone. Ms. Vernon then asked if there was an issue with her. The Complainant said “No, absolutely not.” She said she loved the challenges that were given to her, that she was strong and could handle quite a bit. (In her trial testimony, the Com- plainant said that in this telephone call she lied when she told Ms. Vernon that she had no issues with her). 123 Ms. Vernon then went on to advise the Complainant that she was there to guide and help her and that she wanted her to succeed. Ms. Vernon asked whether there were any problems with her sister or family and the Complainant said there was not. The Complainant indicated that she was presently outside her doctor’s office and had the ST02 form and would drop it off later that day. Ms. Vernon told the Complainant about the Employee and Family Assistance Program that offers assistance to employees and that it might be of assistance to her. 124 On Wednesday, February 17, at 10:38 a.m. and 12:16 p.m., Ms. Vernon again phoned the Complainant. She advised her that she had spoken to the Area Manager for Labour Relations and was directing her to attend a meeting the following day at her office at Ironwood. She advised her to have a Shop Steward present or, alternatively, she could ask a co- worker to sit in with her. 125 At approximately 2:52 p.m. on February 17, the Complainant called Ms. Rondeau. She advised her that she would not be attending the meeting the following day. She told her she was still sick and had been advised by her Shop Steward not to attend the meeting because of her illness. She said that the Shop Steward and staff representative who were handling the case would discuss this matter with Ms. Vernon and the Shop Steward would call Ms. Vernon on February 23 since she was not available until then. She advised that if Ms. Vernon called her again, she 582 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

would not speak to her until Ms. Vernon had spoken to the Shop Steward. 126 Ms. Vernon sought advice from George Reynolds, her Area Manager concerning the Complainant’s absence. She called Mr. Reynolds and told him that she had an employee who was refusing to return her phone calls. Mr. Reynolds told her she should direct the Complainant to a meeting at Head Office. Before doing so, however, he advised her that she should speak to Ms. van der Boom. 127 On February 12 and February 15, the Complainant had left telephone messages for Ms. van der Boom. The messages indicated that she was being harassed at the work place in some fashion. Ms. van der Boom did not transcribe the messages. 128 Some days after Ms. Van der Boom had received those messages, Ms. Vernon telephoned her to seek her advice as to how to deal with the Complainant. Ms. van der Boom and Ms. Vernon had a lengthy telephone call which Ms. van der Boom estimated to be between 45 minutes and an hour. During the call, Ms. Vernon advised that the Complainant was off sick, but was not returning phone calls and was refusing to speak to her. 129 Ms. van der Boom advised Ms. Vernon that the Complainant’s failure to return phone calls and refusal to come to a meeting could be considered insubordinate. She advised Ms. Vernon that she should direct the Complainant to a meeting at Head Office. 130 In the conversation, Ms. Vernon apparently spoke very poorly about the Complainant and her failure to provide a proper doctor’s certificate. She indicated that she had been assisting her with her private consultant courses. Ms. van der Boom testified that she was somewhat taken aback during the conversation because expletives were ripping out of Ms. Vernon’s mouth and she was dropping the “F- bomb” consistently and regularly. In the course of the conversation, Ms. van der Boom asked Ms. Vernon whether she used such language when speaking with her staff and Ms. Vernon said no, that she is always professional and respectful. 131 Ms. van der Boom testified that she was not troubled about the language because in her experience when she receives calls, it is often because her clients are at their wits’ end with an employee. She was somewhat concerned, however, because the agitation appeared to go on so long and she said she told Ms. Vernon that she did not want to hear that she was “speaking to her staff that way because that would be a big, big problem”. Vernon v. British Columbia R.B.T. Goepel J. 583

The Complaint 132 On March 1, 2010, the Complainant sent a letter to Ms. van der Boom (the March 1 Letter”). In the March 1 Letter, the Complainant indicated she was writing to express her concerns regarding the behaviour of her manager, Ms. Vernon. She advised that over the last four or five months there had been many incidents which had made her feel harassed, embarrassed, humiliated and uncomfortable at work. 133 In the March 1 Letter, the Complainant provided eight examples of conduct which she said made her feel uncomfortable in her job. The specific complaints were: 1. Use of profane language on a daily basis that is both embarrassing and degrading. In that regard, she gave several examples including “f*****g Muslims” which she said was used directly in relation to her as the only Muslim in the store. 2. An incident in which Ms. Vernon yelled at the Complainant to “tuck in your uniform”. In the course of that incident, the Com- plainant had said that she did not have any problems doing so and reported that Ms. Vernon had responded “Yeah because you know if you don’t do it I’ll kill you”. The Complainant said Ms. Vernon’s tone of voice was absolutely serious and threatening and her comments made her feel threatened. 3. An incident in which she was speaking to her co-worker, Ms. Chan, which Ms. Vernon had shouted at her “Work, no talk”. 4. An incident concerning a potluck at work which Ms. Vernon had apparently ignored by taking her assistant that day to The Keg to buy her lunch. She said in reference to one of the staff member’s food that it “tastes like s**t”. 5. An incident when the Complainant had been assisting a customer choose a bottle of wine. She said that when she had done so Ms. Vernon then told her she had spent seven minutes with the customer and the rule is only one minute. When the Complainant tried to explain that she had sold her five bottles of wine, Ms. Vernon allegedly told her it did not matter and if she wanted to be a Product Consultant she had to follow the one minute rule. She said that thereafter every time Ms. Vernon saw a customer ap- proaching her she would stop and scream right away “one minute rule”. 6. An incident in which a wine representative approached the Com- plainant while she was working at her till. Ms. Vernon came to the 584 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

till and berated her and the wine representative because the wine representative was not to speak to employees when they were working on the till. The Complainant indicated that another wine representative who she identified as “Robert” had witnessed the entire incident. 7. A general complaint that Ms. Vernon set expectations that were impossible to meet. 8. An incident where a customer had made inquiries concerning the availability of a certain product and the Complainant checked the computer. She said she felt that she had been embarrassed and humiliated in front of the customer. 134 In the March 1 Letter, the Complainant indicated she had considered discussing these issues with Ms. Vernon but due to her unapproachable and unprofessional attitude, she did not think it wise to do so. In the result, she was asking for Ms. van der Boom’s assistance as she did not feel she should have to work in an environment where such language and behaviour was tolerated.

The Investigation A. Overview 135 The March 1 Letter led to an investigation and the ultimate termination of Ms. Vernon. The individuals involved in the investigation and the decision to terminate Ms. Vernon included Ms. van der Boom, Sam Sethi who was also a Labour Relations Advisor, Rita Ferrara, the Acting Di- rector of Labour Relations, Gord Zelenika, the Director of Human Re- sources, Gary Branham, the Director of Store Relations, George Reyn- olds who was Ms. Vernon’s Area Manager, Sheila Puga, the Union staff representative and Jay Chambers, the LDB’s General Manager. Ms. van der Boom, Mr. Sethi, Ms. Ferrara, Mr. Reynolds and Mr. Branham testified at the trial. Mr. Zelenika was examined for discovery and certain answers he gave on his discovery were read in as part of the plaintiff’s case. 136 The thoroughness and fairness of the investigation and the manner in which the LDB decided to terminate Ms. Vernon are matters of controversy in this litigation. I will first provide a brief chronological overview and then review in some detail the various events that took place during the course of the investigation up to Ms. Vernon’s termination. Vernon v. British Columbia R.B.T. Goepel J. 585

B. Chronology 137 After receipt of the March 1 Letter, Ms. Ferrara instructed Ms. van der Boom to investigate the complaint. Ms. van der Boom and Mr. Reyn- olds interviewed the Complainant on March 9 and Ms. Vernon on March 25. Ms. van der Boom provided Ms. Ferrara oral reports on those interviews. 138 Subsequent to the interviews, Ms. Van der Boom had discussions with Ms. Puga and sought the Union’s input as to how the complaint should be resolved. On April 1, Ms. Puga sent Ms. Van der Boom an email setting out the Union’s proposed remedy. The remedy did not include the termination of Ms. Vernon. 139 At the end of March, Ms. van der Boom went to California to assist in a family situation. She did not return until the end of April. 140 On Friday, April 9 at 5:51 p.m., Ms. Puga emailed Ms. Ferrara asking for an update. In the email she advised that if a resolution was not forth- coming by April 23 she would refer the matter to the Deputy Minister pursuant to the terms of the Collective Agreement. 141 On April 12, Ms. Ferrara and Ms. Puga exchanged emails. Ms. Puga agreed to extend the time to respond to the complaint to April 30. 142 At approximately 4:00 pm on April 12, Ms. Ferrara asked Mr. Sethi to take over the investigation. She gave him an oral briefing, a copy of the March 1 Letter, and a list of witnesses to interview. She did not give him copies of Ms. van der Boom’s notes of her interviews of the Com- plainant and Ms. Vernon. 143 On April 13 and 14, Mr. Sethi and Mr. Reynolds interviewed 10 LDB employees. During the course of the interviews Mr. Sethi provided oral reports to Mr. Branham. At the end of the interviews Mr. Sethi orally briefed Ms. Ferrara and Mr. Zelenika. He recommended to them that Ms. Vernon be terminated. 144 On either April 15 or 16, Mr. Branham, Mr. Zelenika and Ms. Ferrara met. The only written information before them was the March 1 letter. They decided that Ms. Vernon must be terminated. 145 On April 19, Mr. Branham and Ms. Ferrara met with Ms. Vernon. Mr. Talmey was present for part of the meeting. Mr. Branham told her that the investigation had confirmed that she had engaged in gross workplace misconduct and the LDB had no option but to terminate her employment. In recognition of her length of service, they gave her the opportunity to tender her resignation. There is a dispute in the evidence whether they offered to provide a reference if she resigned. 586 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

146 Ms. Vernon refused to resign. Because she was an excluded employee, only Mr. Chambers had the authority to terminate her employment. 147 On April 23, Mr. Branham sent by courier a letter to Ms. Vernon suspending her without pay or benefits for an indefinite period pending a recommendation to the General Manager terminating her employment. The letter advised that she would be advised in due course of the disposition of the matter. 148 Ms. van der Boom returned at the end of April. On May 11 she interviewed Ms. Catamo-Meyer and Ms. van Pelt. 149 On May 18, Ms. van der Boom forward to Ms. Ferrara a memo rec- ommending Ms. Vernon’s dismissal (the “Recommendation Memo”.) 150 On May 20, Mr. Zelenika forwarded the Recommendation Memo and a letter dismissing Ms. Vernon (the “Dismissal Letter”) to Mr. Chambers. 151 On May 21, Mr. Chambers approved the recommendation to terminate Ms. Vernon and signed the Dismissal Letter. 152 On May 31, the Dismissal Letter was couriered to Ms. Vernon.

C. Events March 1 - 9, 2010 153 After she received the March 1 Letter, Ms. van der Boom advised Ms. Ferrara of the complaint. Ms. Ferrara asked her to interview the Complainant. 154 Ms. Ferrara was aware that Ms. van der Boom had received telephone messages from the Complainant prior to writing the complaint letter. She believed Ms. van der Boom also had told her about her discussions with Ms. Vernon in mid-February 2010 when Ms. Vernon was seeking advice as to how to deal with the Complainant’s absence.

D. Interview with Complainant - March 9, 2010 155 Following receipt of the March 1 Letter, Ms. van der Boom made arrangements to interview the Complainant. The interview took place on March 9, 2010. Present were Ms. van der Boom, Mr. Reynolds, the Com- plainant, and Ms. Puga. 156 In the interview, the Complainant repeated many of the matters set out in the March 1 Letter. She also complained about Ms. Vernon’s telephone call of February 13. The Complainant took Ms. Vernon’s com- Vernon v. British Columbia R.B.T. Goepel J. 587

ments concerning the product courses as a threat that she would not be able to take the courses unless she immediately returned to work. 157 The Complainant gave several examples of Ms. Vernon’s use of profane language. She said she expected Ms. Vernon to be more professional as she was a manager. She indicated that other employees, both clerks and supervisors, used similar language. She said that Ms. Vernon had a beautiful store but she ran it in a disrespectful manner. 158 The Complainant gave considerable detail concerning an incident in which she alleged that Ms. Vernon said “f******g Muslims do whatever they want but they don’t eat ham”. She said that Ms. Rondeau was present when that comment was made. 159 In discussing Ms. Vernon’s swearing, the Complainant indicated she was loud and customers could hear her. 160 Ms. van der Boom testified that she was not surprised by the allegations of the use of expletives because in the course of her communications over the years with Ms. Vernon both of them would use expletives in their discussions. She said she was surprised to hear, however, that Ms. Vernon was yelling expletives across the store when customers were present. 161 In the interview, the Complainant did not say that she wanted Ms. Vernon to be fired. She did want the conduct to stop and she suggested that Ms. Vernon take some training. The LDB had harassment training programs for their employees. 162 Ms. van der Boom and Mr. Reynolds both testified that they found the Complaint to be sincere and credible. Ms. van der Boom testified she was shocked by what she heard.

E. Events March 9 - March 20, 2010 163 On March 9, following the interview of the Complainant, Mr. Reyn- olds and Ms. van der Boom prepared a list of potential witnesses to interview (the “March 9 List”). Mr. Reynolds and Ms. van der Boom’s recollection of how the March 9 List was prepared differ. Ms. van der Boom says that the list was prepared based on what the Complainant had told them and Mr. Reynolds’ knowledge of who in the store might be an appropriate witness. Mr. Reynolds testified that he did not contribute any names to the witness list. He said that Ms. van der Boom decided who would be interviewed. 164 The March 9 List included four auxiliary employees, but not Ms. Chan who had been identified by the Complainant as a witness to two of 588 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

the specific incidences which had occurred. The list, in addition to store employees, also included Ms. Canizares, Ms. Catamo-Meyers and Ms. Mejias, none of whom were at that time working at Ironwood. 165 In her evidence, Ms. van der Boom testified that the list of persons to be interviewed included those suggested by Ms. Vernon. When it was pointed out to her that the March 9 List had been prepared prior to Ms. Vernon’s interview, she said a second list was prepared based on her and Mr. Reynolds’ notes from their meetings with Ms. Vernon and the Com- plainant. Her evidence in this regard was contradicted by Ms. Ferrara who said the interviews were based on the March 9 List. 166 I do not accept Ms. van der Boom’s evidence that a second list was prepared. Nor do I accept her evidence that Mr. Reynolds suggested names to be interviewed. I find that the March 9 List was the only interview list prepared and Ms. van der Boom prepared it. 167 On March 9, Ms. van der Boom sent an email to Mr. Reynolds asking him to arrange interviews with 12 Ironwood employees on March 17 and 19. Ms. Ferrara subsequently ordered Ms. van der Boom to cancel those interviews and to meet first with Ms. Vernon before interviewing any employees. 168 On March 10, Mr. Reynolds called Ms. Vernon and told her of the complaint. While she understood from Mr. Reynolds that the complaint was serious, Ms. Vernon was not told that her job might be in jeopardy. 169 On the day she spoke to Mr. Reynolds, Ms. Vernon was leaving for holidays. She returned on March 20th. When she got home, there was a message for her to call Mr. Zelenika. He told her that she had to attend a meeting concerning the complaint. He indicated to her that the meeting was to be a chit-chat. She was not given a copy of the March 1 Letter in advance of the meeting. 170 Ms. van der Boom testified that a few days after the interview of the Complainant, Ms. Puga contacted her to confirm that the Complainant wanted to pursue the complaint under Articles 1.9 and 32.15 of the Col- lective Agreement. Article 1.9 is concerned with discrimination and sexual harassment while Article 32.15 concerns the misuse of managerial authority.

F. Interview with Ms. Vernon - March 25, 2010 171 Ms. Vernon met with Ms. van der Boom and Mr. Reynolds on March 25. Ms. Vernon had limited recollection of the meeting. Vernon v. British Columbia R.B.T. Goepel J. 589

172 Ms. Vernon had no knowledge of the substance of the complaint prior to the meeting. At the meeting, she was handed the March 1 Letter. She was told that Ms. van der Boom and Mr. Reynolds had met with the Complainant and that the complaint was serious. She said Ms. van der Boom began to go through the complaint. She said that Ms. van der Boom was smirking and condescending. Ms. Vernon said she was very confused at the meeting and was not comprehending exactly what was going on. She said the meeting was an interrogation. She was told she was not being truthful. Ms. van der Boom asked her “why would the Complainant lie”. Ms. Vernon responded she did not know. 173 In the meeting, Ms. Vernon admitted that she did swear. She pointed out to Ms. van der Boom that she also swore. She told Ms. van der Boom she could stop swearing if told to. She says, in fact, she never again swore while at the store. 174 In regard to specific matters in the complaint, she denied that she had ever called the Complainant a “f*****g Muslim”. She admitted that she used the expression “Chinky food”. 175 Ms. van der Boom testified that Ms. Vernon initially denied each and every allegation made by the Complainant. In the course of the meeting she said that Ms. Vernon ultimately admitted that she did swear and use the expression “Chinky food”. She said that Ms. Vernon was quite agi- tated. She said during the meeting, Ms. Vernon became upset and raised her voice in a manner Ms. van der Boom considered unacceptable. She said she had to speak loudly over Ms. Vernon to get her attention. Ms. van der Boom acknowledged that at the meeting Ms. Vernon kept saying that she did not understand. 176 Ms. van der Boom’s notes of the meeting do not corroborate her evidence that Ms. Vernon vehemently denied all of the allegations. She did deny that she had called the Complainant a “f*****g Muslim”. The notes record that Ms. Vernon said she would not use that expression and it was a blatant lie. She said she did not even know that the Complainant was a Muslim. 177 Ms. Vernon denied saying to the Complainant in a threatening manner that she would kill her if she did not tuck in her uniform. 178 In regard to the potluck, she said she did not attend. On that date, she had taken Ms. Whynot out to lunch at The Keg as a reward. She denied that she had made any derogatory comments about an employee’s food. 179 Ms. Vernon said the comment about the one-minute rule was “a bunch of bunk”. She acknowledged that she had a three-minute rule and 590 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

it applied to everyone. She denied that she ever used the intercom to call a clerk but would stand close and let her presence be known. 180 Ms. Vernon acknowledged the incident concerning the wine representative at the cashier’s till. She said she told the Complainant and the wine representative that they were not to conduct business at the till in front of customers. She says the wine representative apologized and left. Ms. Vernon said that Ms. Chan and Ms. Rondeau both witnessed this incident. 181 Ms. Vernon said she was unaware the Complainant had such feelings about her. She said she had made arrangements for the Complainant to take certain courses and had spoken to her from time to time about certain matters at work. She said there had been customer complaints about the Complainant. 182 When Ms. Vernon was questioned about her numerous phone calls to the Complainant after February 11, she indicated that the store was short staffed and she needed to know the Complainant’s intentions in order to staff the store. Ms. Vernon denied that she swore at her staff. She acknowledged that she swore in the warehouse but never on the floor or in front of customers. 183 Ms. Vernon said that she took offence to the discrimination allegations. She said she “doesn’t care about such stuff” and that she did not understand the Muslim comment. She said she understood the swearing thing and would not swear in the future. When asked if it was possible that she had made any of the comments even as a joke, she repeated she had never said “f*****g Muslims”. 184 Ms. Vernon pointed out that if there were problems at the store, employees would raise them with Ms. Whynot who was the supervisor. Ms. Whynot, in turn, would bring them to Ms. Vernon. 185 At the end of the meeting, Ms. van der Boom told Ms. Vernon she was not to discuss the meeting with anyone. She was told if she did she would be subject to discipline.

G. Events March 25 - April 16, 2010 186 Ms. Vernon was upset by the meeting. Following the meeting, she complained to Mr. Reynolds and Mr. Zelenika about the way in which she had been treated. Mr. Zelenika told her words to the effect that “this is not how we treat our senior managers”. She told Mr. Zelenika that she was prepared to apologize for her use of profanity. Vernon v. British Columbia R.B.T. Goepel J. 591

187 When questioned on discovery Mr. Zelenika testified that the purpose of the interview was to give Ms. Vernon as opportunity to come in a casual way to discuss what was going on at Ironwood with the Com- plainant. It was intended to be a discussion, not an interrogation. He said he subsequently spoke to Ms. van der Boom and Mr. Reynolds in relation to the interview. He told them that he was upset with the way that the interview had been conducted. He told them he had wanted them to have a conversation with Ms. Vernon to understand what was going on with the Complainant and that he had wanted Ms. Vernon to be treated with respect and she felt she had not been. 188 Ms. van der Boom gave Ms. Ferrara an oral report on her interview with Ms. Vernon. She told Ms. Ferrara that Ms. Vernon had been emotional, loud and disruptive. She said that Ms. Vernon had denied all of the allegations. 189 Subsequent to the interview with Ms. Vernon, Ms. van der Boom had some discussions with Ms. Puga concerning the remedy the Complainant was seeking. On April 1, 2010, Ms. Puga sent Ms. van der Boom an email in which she advised that the Complainant and the Union were seeking the following: 1. a finding from the LDB that her complaint of harassment and misuse of managerial authority is valid and a commitment from the LDB that they support her desire to work in an environment free of harassment and discrimination; 2. an apology from Ms. Vernon to the Complainant and her co-workers at BCLS #120 regarding her inappropriate conduct; 3. in order to ensure that the Complainant will no longer be subject to ongoing harassment, for Ms. Vernon to be transferred to another store immediately; and 4. prior to starting in a new location, Ms. Vernon be directed to participate in sensitivity training involving harassment, interpersonal communication or other relevant training. 190 On or about April 1, 2010, Ms. van der Boom travelled to California to look after a family problem. She did not return until April 29, 2010, and had no involvement in this matter while she was away. 191 On Friday, April 9 at 5:51 p.m., Ms. Puga sent Ms. Ferrara an email concerning the complaint. She pointed out that under the Collective Agreement the employer had to respond to the complaint within 30 days and if the matter was not resolved satisfactorily at the labour relations level, the Union was entitled to file a complaint with the Deputy Min- 592 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

ister. Ms. Puga advised that if the Union did not receive a satisfactory resolution to the matter before April 23, they would be filing a complaint to the Deputy Minister. 192 The Collective Agreement sets out the process that must be followed when a complaint is referred to the Deputy Minister. The process includes a written complaint and can culminate in an evidentiary hearing before a panel chosen by the employer and Union. While Ms. Vernon was not a member of the Union, if the complaint had gone to the Deputy Minister it would have been adjudicated under the terms of the Collec- tive Agreement. 193 At 11:16 a.m. on April 12, Ms. Ferrara emailed Ms. Puga. She advised that as a result of the email exchange that had taken place between Ms. Puga and Ms. van der Boom, the investigation was going to be ex- panded and she requested an extension of the required timelines in order to complete the investigation. She advised that because of Ms. van der Boom’s absence, the matter would be assigned to a new investigator and should be completed by April 30. 194 At 3:09 p.m., Ms. Puga confirmed that the Union was prepared to extend the time to respond to the complaint until April 30. 195 Late in the afternoon of April 12, Ms. Ferrara asked Mr. Sethi to take over the investigation. He was given a copy of the March 1 Letter and Ms. Ferrara orally briefed him concerning the interviews of the Com- plainant and Ms. Vernon. He was also given a list of witnesses to interview. That list contained the names of the store employees set out on the March 9 List. 196 Mr. Sethi asked Mr. Reynolds to set up the interviews on the following two days. Arrangements were made to interview four employees the afternoon of April 13 and an additional six employees on April 14. The interviews were scheduled at 45 minutes intervals. Three of the auxiliary employees on the interview list, including Mr. Ty, were not available on short notice and were never interviewed. 197 In advance of the interviews, Mr. Sethi prepared a series of questions. He prepared his questions based on the March 1 Letter. He did not have notes of the interview with the Complainant or Ms. Vernon. [198] The employee interviews took place as scheduled. On April 13, Chris Pelzer, Rod Symchych, Ms. Rondeau and Ms. Kirkland were interviewed. On the morning of April 14, Wanda Leong, Robert Bertram, Gerry Little and Ms. Whynot were interviewed. In the afternoon of April 14, Ms. Wylie and Ms. Canizares were interviewed. Ms. Wylie and Ms. Canizares were Vernon v. British Columbia R.B.T. Goepel J. 593

by far the most critical of Ms. Vernon. I note that of the 10 employees interviewed, the LDB at the trial called only Ms. Kirkland, Ms. Wylie and Ms. Canizares. Ms. Rondeau and Ms. Whynot testified for Ms. Vernon. 199 The employees met with Mr. Sethi and Mr. Reynolds. Mr. Reynolds appears to have taken no role in the interviews other than as note taker. 200 The employees were asked to describe Ms. Vernon’s management style. They were then asked whether they had ever heard, witnessed or been subject to profane language, inappropriate comments or behaviour, or discriminatory behaviour. They were asked whether Ms. Vernon had used various expressions. 201 Mr. Sethi thought most of the employees had given their statements in a straightforward manner. He did not find Ms. Whynot or Ms. Ron- deau credible. He did not believe that Ms. Whynot was taking the allegations seriously and he thought Ms. Rondeau was exaggerating and defensive. 202 Following the interviews, Mr. Sethi gave oral updates to Mr. Branham, Ms. Ferrara and Mr. Zelenika. He told them that the employees had to some extent corroborated the complaint. 203 Mr. Sethi recommended to Ms. Ferrara and Mr. Zelenika that Ms. Vernon be terminated. He testified that he thought a reprimand would not be an adequate response, while a suspension or demotion would be considered constructive dismissal. He said Ms. Vernon’s lack of remorse was a factor in his recommendation. 204 Following the interviews, on either April 15 or 16, Mr. Zelenika, Mr. Branham and Ms. Ferrara met to discuss Ms. Vernon. The information before them at the meeting was the March 1 Letter and the oral reports they had received concerning the interviews of the Complainant, Ms. Vernon and the employees. They had not read and did not have the notes of any of those interviews. 205 Mr. Zelenika, Mr. Branham and Ms. Ferrara concluded that Ms. Vernon should be terminated. Mr. Branham says he based his decision on the fact the complaints had all been found to be true, that Ms. Vernon had refused to admit the truth and the likelihood that she would change was slim. Ms. Ferrara believed that termination was appropriate as opposed to some other disciplinary procedure because Ms. Vernon had continually maintained that she had not engaged in the alleged behaviour and had never offered an apology. Although there was some discussion of alternative discipline, they decided to terminate Ms. Vernon, notwith- 594 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

standing that neither the Union nor the Complainant sought Ms. Vernon’s termination.

H. The Termination Meeting - April 19, 2010 206 On April 19, Ms. Vernon was summoned to a meeting with Mr. Branham and Ms. Ferrara. At the meeting, Mr. Branham told her that the investigation had concluded and that the investigation had confirmed that she had engaged in gross workplace misconduct including bullying, harassing and intimidating behaviour. Mr. Branham told her “Your actions have embarrassed me and the organization. Frankly, your conduct is shameful and has irreparably damaged your employment relationship with the Liquor Distribution Branch”. 207 Ms. Vernon was clearly dismayed. She left the meeting to speak with Mr. Talmey who had accompanied her and was waiting outside. Mr. Talmey then joined the meeting. 208 When the meeting resumed Ms. Vernon said ‘“So my understanding is you are calling me a monster”. Ms. Ferrara replied “No Stephanie. It is not your intent, it is how you impacted”. 209 Mr. Branham told Ms. Vernon that the LDB had no alternative but to terminate her employment. He indicated that in recognition of her length of service he was prepared to offer her the opportunity to tender her resignation. Mr. Talmey and Ms. Vernon both testified that Ms. Ferrara said that if Ms. Vernon resigned she would be given a letter of reference. Ms. Ferrara denied that a letter of reference was offered. Mr. Branham has no recollection of a reference letter being discussed. 210 Ms. Vernon was initially advised that she had until Wednesday, April 21 at 5:00 p.m. to decide whether she was prepared to resign. If she did not respond by that date, her pay would be suspended and the LDB would proceed with the recommendation for termination. When Mr. Talmey asked for additional time, Mr. Branham agreed to extend the deadline until 12:00 p.m. on Friday April 23. He told them he needed an answer by noon because he did not want to be waiting around until 4:00 p.m. on a Friday to get her decision.

I. Events April 23 - May 18, 2010 211 Ms. Vernon did not agree to resign. On April 23, 2010, Mr. Branham couriered to her home a letter advising that she was suspended without pay, seniority, or benefits for an indefinite period pending a recommendation being made to the General Manager for the termination of her em- Vernon v. British Columbia R.B.T. Goepel J. 595

ployment. The suspension was effective immediately. He advised he was making a recommendation to the General Manager for her termination. 212 On April 28, Ms. van der Boom returned to Vancouver. On May 11, she interviewed Ms. Catamo-Meyer and Ms. van Pelt. She testified that she had been requested to interview Ms. Catamo-Meyer because her name had come up in several of the interviews conducted by Mr. Sethi. 213 In cross examination, Ms. van der Boom admitted that she had put Ms. Catamo-Meyer on the March 9 List. She agreed that she may have done so because she believed she would have negative things to say about Ms. Vernon based on Ms. van der Boom’s interaction with her when she was transferred from Ironwood to Marpole.

J. The Recommendation Memo 214 On May 18, 2010, Ms. van der Boom prepared the Recommendation Memo for Mr. Chambers. The Recommendation Memo was signed by Ms. van der Boom and Mr. Sethi. Ms. van der Boom said they were the co-authors. Mr. Sethi said that Ms. van der Boom drafted the letter and he simply signed it. I accept Mr. Sethi’s evidence on this point. 215 Ms. van der Boom knew Mr. Chambers would rely on the Recom- mendation Memo to make his decision about whether or not to dismiss Ms. Vernon. She knew as a labour relations advisor that the Recommen- dation Memo should be as objective as possible and that it was important that the Recommendation Memo was true and accurate. 216 When Ms. van der Boom prepared the Recommendation Memo, she had a copy of Mr. Sethi’s and Mr. Reynolds’ interview notes with the employees. She also had a copy of the March 1 Letter together with her notes of her interviews with the Complainant, Ms. Vernon, Ms. van Pelt and Ms. Catamo-Meyer. She could not recall if she had looked at Ms. Vernon’s performance reviews in advance of writing the Recommenda- tion Memo. 217 The Recommendation Memo commences by setting out the specific complaints the Complainant made in the March 1 Letter and at her March 9 interview. The Recommendation Memo then goes on to say that Ms. Vernon emphatically denied each and every allegation although she did concede that she does use foul language in the workplace and may have used the expression “Chinky food”. The Recommendation Memo states that Ms. Vernon denied harassing or bullying her staff. 218 Neither of those statements was accurate. Ms. Vernon did not emphatically deny all of the allegations. She admitted some and gave expla- 596 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

nations for others. Ms. Vernon had not been asked in her interview whether she bullied her staff. 219 Ms. van der Boom then referenced the employee interviews. She did not, however, accurately set out what the employees said in those interviews. For example, she indicated that all but one employee described Ms. Vernon’s management style in a negative light. Two witnesses had described Ms. Vernon quite positively and others were not entirely negative. 220 Ms. van der Boom wrote that the evidence suggested that Ms. Vernon frequently used expletives as part of her every day vernacular and that she was indiscriminate as to where, when and around whom she spoke this way: office, warehouse, store, staffroom and in front of customers and employees alike. While all the employees agreed that Ms. Vernon used profanities in the workplace, only two of the persons interviewed suggested she swore in front of customers. Several said that she did not. 221 Ms. van der Boom made specific reference to the Liquor Load Inci- dent. She did not mention, however, that Ms. Vernon had never been asked about that incident and had had no opportunity to respond to that allegation. 222 Ms. van der Boom wrote that when asked if Ms. Vernon has a beautiful store but operates it in a disrespectful manner, all but two witnesses emphatically agreed. In fact, three witnesses disagreed with that statement and three others only partially agreed. Only one employee could be said to have “emphatically” agreed. Ms. van der Boom agreed that the word “emphatic” was not objective. 223 The Recommendation Memo then went on to reference that one witness had been called at least seven times in a two-day period when she was sick. Aggravating the situation was that Ms. Vernon had refused to pay the employee short term benefits, had coded the individual as being away without approval and directed the employee to a meeting with herself and labour relations. Ms. van der Boom admitted on cross examination the employee in question was the Complainant. Ms. van der Boom did not disclose that Ms. Vernon had been in consultation with the labour relations department concerning the employee’s absence or that Ms. van der Boom herself had advised Ms. Vernon to direct the employee to a meeting with labour relations. 224 The Recommendation Memo indicates that since Ms. Vernon’s suspension numerous other LDB employees have come forward and shared with the employer their negative experiences with Ms. Vernon. In fact, Vernon v. British Columbia R.B.T. Goepel J. 597

only one employee came forward voluntarily, being Ms. van Pelt. Ms. Catamo-Meyer had been sought out by Ms. van der Boom. 225 Ms. van der Boom wrote that every employee who had been interviewed corroborated the allegations of misconduct, stating they were afraid to report Ms. Vernon’s behaviour because they were convinced she was well connected with the high ranking LDB officials at Head Of- fice. In fact, six of the employees who had been interviewed did not make such an allegation. Ms. van der Boom on cross examination admitted the statement was not accurate and that she wrote it to bolster her argument that Ms. Vernon was a bully. 226 Ms. van der Boom wrote that the interviews corroborated the allegations in the March 1 Letter. In fact, they did not. While many witnesses, including Ms. Vernon, acknowledged her use of expletives in the workplace, all denied she had ever used the term “f*****g Muslims”. 227 In regard to the various other specific complaints, no witnesses corroborated the Complainant. In regard to the alleged one-minute rule, it was clear from the interviews that Ms. Vernon did have a three-minute rule in relation to the time that employees should spend with wine representatives. 228 In the Recommendation Memo, Ms. van der Boom did mention that there were two witnesses who denied any misconduct on Ms. Vernon’s part but she suggested they lacked credibility due to their close personal relationships with Ms. Vernon. She indicated their evidence was suspect, for example with respect to Ms. Vernon’s use of expletives in the workplace. In fact, both Ms. Rondeau and Ms. Whynot, in their interviews, acknowledged Ms. Vernon’s use of expletives in the workplace. 229 In her letter, Ms. van der Boom wrote that: Given Ms. Vernon’s attitude during the Employer’s Investigation, her lack of honesty, her failure to understand the gravity of the situation and the serious and devastating impact of her misconduct we believe that she will not improve her behaviour. Even when provided with the opportunity to respond to the allegations, Ms. Vernon was defiant, aggressive and dishonest, denying virtually every allegation. As the investigation has borne out the complaint filed by [the Com- plainant], Ms. Vernon’s patent denial of any wrongdoing, coupled with her refusal to take any responsibility for her behaviour is that much more egregious. 230 What the Recommendation Memo did not disclose was that Ms. Vernon had been given no opportunity to respond to the matters raised in the interviews, that she had agreed to stop swearing, was prepared to 598 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

apologize for her use of profanity and that the Complainant and the Union were not seeking her dismissal. The Recommendation Memo made no mention of her exemplary work reviews or the fact that in her 30 years of employment there had never been a complaint made against her. 231 Ms. van der Boom agreed at the conclusion of her cross -examination that in the Recommendation Memo, instead of reporting objectively the findings of the investigation, she was trying to prove that Ms. Vernon was guilty of misconduct and should be terminated.

K. The Termination 232 Mr. Zelenika forwarded the Recommendation Memo to Mr. Cham- bers on May 20, 2010. Mr. Chambers agreed with the recommendation and signed the Dismissal Letter on May 21. The Dismissal Letter was couriered to Ms. Vernon’s home on May 31, 2010.

Post-Termination Events 233 Following her termination, Ms. Vernon suffered from anxiety and panic attacks. Her physical symptoms of anxiety included chest tight- ness, headaches, decreased concentration, decreased appetite, and sleep disturbance. For several weeks she was reluctant to leave her home. She was put on anti-anxiety and antidepressant medication. Her symptoms continued into 2011. 234 Mr. Talmey testified that Ms. Vernon has been devastated by her termination. Previously she had a happy and bubbly personality. It now appears only in flashes. She went into hiding and could not talk to or face meeting her friends. She still has difficulty sleeping. She had always looked up to the people at the LDB and feels betrayed by the way she was treated. 235 Ms. Vernon’s family physician, Dr. Sheilagh Phillips, testified that Ms. Vernon is suffering from adjustment disorder with mixed anxiety and depressed mood. She opined that Ms. Vernon’s condition was caused by the allegations made, her dismissal and the manner of dismissal. 236 Subsequent to her dismissal, Ms. Vernon requested a letter of reference from the LDB. The LDB refused to provide one. 237 In August 2010, Ms. Vernon started work at a fitness centre. She works 13 hours a week at $10 per hour. It is the only money she has earned since her dismissal. The LDB does not allege a failure to mitigate. Vernon v. British Columbia R.B.T. Goepel J. 599

238 Ms. Vernon remained on medication until February 2011. In February 2011, she attended a job workshop and began three months of private counselling to deal with her fears and anxiety.

Position of the Parties A. Ms. Vernon 239 Ms. Vernon submits that she was dismissed without cause and is entitled to an award of damages equivalent to 18 to 22 months salary. She further submits that it was a term of her employment contract that the LDB would treat her fairly and in good faith if she was dismissed. She submits that the LDB dismissed her in a harsh and unduly insensitive manner which caused her injury. She seeks an award of aggravated damages to compensate her for mental distress. In addition she submits that the LDB’s conduct should be condemned and the court should make an award of punitive damages.

B. The LDB 240 The LDB submits that Ms. Vernon’s bullying of her subordinates gave it cause to dismiss her without notice. It further submits that Ms. Vernon was not honest in the March 25 interview and that in itself justi- fies her dismissal. 241 The LDB submits that Ms. Vernon’s employment contract is subject to the provisions of the Public Sector Employers Act, R.S.B.C. 1996 c. 384 (the “PSEA”) and its Employment Termination Standards, BC Reg. 379/97 (the “Regulation”). Pursuant to the PSEA and the Regulation a public sector employee is limited to 18 months notice. The LDB concedes that if Ms. Vernon is entitled to reasonable notice, 18 months notice would be appropriate. The LDB submits that in the circumstances of this case the plaintiff is not entitled to aggravated or punitive damages. It concedes that the PSEA and the Regulation do not bar such damages if they are otherwise warranted.

Discussion A. Context of Employment 242 In McKinley v. BC Tel, 2001 SCC 38, [2001] 2 S.C.R. 161 (S.C.C.), the Supreme Court of Canada endorsed a “contextual approach” when determining whether an employer has just cause for dismissal. The contextual approach requires an examination not only of the alleged misconduct, but also the nature of the employment and the status of the em- 600 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

ployee. I make the following findings of fact concerning the context of Ms. Vernon’s employment. 243 Ms. Vernon was a 30-year employee of the LDB who had devoted her entire working career to the service of the LDB. When she commenced employment, she was 19 years old, fresh out of high school. 244 Ms. Vernon entered into a male dominated workforce that operated on military lines. Profanity was common in the workplace. While the make-up of the work force has changed, profanity remains. 245 Ms. Vernon was a very demanding boss. She was loud and flamboy- ant. She ran a tight ship and expected much from her employees. She expected her employees to follow her rules. She demanded perfection. She pushed her employees hard, but was as hard on herself as she was on her subordinates. Their shortcomings did not go unnoticed or uncom- mented upon. They were made fully aware when they failed to live up to her standards. 246 Ms. Vernon encouraged and mentored her staff and several owe their advancement in the LDB to the interest Ms. Vernon took in their careers. She could sometimes be intimidating. Like a drill sergeant, she tended to be harder on new employees than on old. 247 Mr. Bertram, one of the employees interviewed in the investigation accurately captured the essence of Ms. Vernon when he said in the interview: — everything said has to be put into context. She can be caring, considerate, thoughtful and can be a wonderful person to work under even with all of her faults. Stephanie is rough but redeems herself because she cares about people. 248 Long before she was transferred to Ironwood, Ms. Vernon was widely known throughout the LDB as “The Little General”. The LDB newsletter, The Grapevine, reported that she got the name because she was a hard worker and would try to get others to work at her pace and be as organized as possible. 249 For 30 years, Ms. Vernon worked at the LDB without a single complaint being made against her. Her performance reviews could not have been more positive. She considered her staff to be family. Until the Com- plainant came forward, Ms. Vernon was not aware that her management style was in any way unacceptable. Vernon v. British Columbia R.B.T. Goepel J. 601

B. The Investigation 250 Before turning to the question of cause, it is first necessary to comment on and make findings of fact about the investigation. 251 Ms. van der Boom had been Ms. Vernon’s labour relations advisor. In that regard she had often counselled Ms. Vernon in regard to employment situations. Ms. Vernon had confided in her and looked to her for assistance in dealing with employee issues. 252 Ms. van der Boom had advised and guided Ms. Vernon in regard to difficulties that she had with both the Complainant and Ms. Catamo- Meyer. Ms. Vernon and Ms. van der Boom had a lengthy conversation about the Complainant less than two weeks before delivery of the March 1 Letter. 253 Ms. Ferrara testified that if an advisor has had a prior involvement in a matter, a different advisor should handle any investigation arising out of the matter. Given Ms. van der Boom’s role as Ms. Vernon’s labour relations advisor and her specific role in advising Ms. Vernon about the Complainant, she should not have been put in charge of the investigation. 254 As a result of her interview of the Complainant, Ms. van der Boom appears to have been convinced of Ms. Vernon’s wrongdoing. Following that interview, she put together a list of employees to interview including Ms. Catamo-Meyer, who she knew would likely have negative things to say about Ms. Vernon. 255 The interview of Ms. Vernon was contrary to its intended purpose and unfair in the extreme. Ms. Vernon thought she was meeting with her labour relations advisor and area manager to discuss in an informal setting a complaint that had been made against her. Instead, she was the subject of an intense interrogation. The person who she had relied on as her labour relations advisor was now her interrogator. Ms. Vernon was upset at the meeting. She had good reason to be. 256 At the outset of the meeting she was given a copy of the March 1 Letter, which contained eight separate complaints, and asked for her im- mediate response. When she denied certain allegations, she was met with the classic question, “Why would the complainant lie?” It is of course a question that is impossible to answer. 257 Ms. Vernon and Ms. van der Boom both spoke in raised voices. Ms. Vernon told Ms. van der Boom that she did not understand what was going on or the nature of the accusations against her. 258 I do not accept Ms. van der Boom’s evidence that Ms. Vernon initially denied all of the allegations. A review of her notes indicated that 602 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

she did no such thing. She did deny certain specific allegations including use of the derogatory term “f*****g Muslims”. She gave a different perspective concerning many of the allegations. She acknowledged her swearing but she pointed out to Ms. van der Boom that Ms. van der Boom also swore. She said that she would not swear in the future and there is no evidence that she did. 259 Ms. van der Boom made oral reports concerning this meeting to Mr. Branham and Ms. Ferrara. They have both testified that Ms. Vernon denied all the allegations. I find that the source of that information was Ms. van der Boom’s oral reports. 260 Ms. van der Boom’s mistaken report had serious consequences. Thereafter, all persons at the LDB involved in the investigation proceeded on the basis that Ms. Vernon was denying all the allegations, when in fact that was not so. One of the major reasons that Mr. Branham and Ms. Ferrara decided to terminate Ms. Vernon was their mistaken belief that she did not admit any wrongdoing. 261 Following the interview with Ms. Vernon, Ms. van der Boom had communications with Ms. Puga. Ms. Puga advised that neither the Com- plainant nor the Union wanted Ms. Vernon dismissed. They wanted a finding that the complaint was valid, an apology, Ms. Vernon moved to another store and be directed to participate in sensitivity training involving harassment and interpersonal communication. The LDB had such programs but they did not then or had they in the past offered them to Ms. Vernon. 262 After Ms. van der Boom left at the beginning of April, the matter stalled until Ms. Puga contacted Ms. Ferrara on April 9, and advised her that the matter must be resolved by April 23 or a complaint would be made to the Deputy Minister. This appears to have set off a race to judgement. 263 In the afternoon of April 12, Ms. Puga agreed to hold off any action until April 30. Shortly thereafter, Ms. Ferrara asked Mr. Sethi to continue the investigation. She gave him an oral report on the investigation, a list of witnesses to interview and the March 1 Letter. 264 Mr. Sethi and Mr. Reynolds then conducted interviews over the next two days of 10 employees. Mr. Sethi’s notes of those interviews com- prise 127 pages. Mr. Reynolds’ notes are some 104 pages. Mr. Sethi acknowledged that he did not ask the individual employees about several of the specific complaints set out in the March 1 Letter. Vernon v. British Columbia R.B.T. Goepel J. 603

265 The interviews were not simple question and answer affairs. They were interrogations. They were not carried out in an impartial manner. Witnesses who spoke favourably about Ms. Vernon were accused of lying. I accept the evidence of Ms. Whynot and Ms. Rondeau that the interviewers chided and yelled at them when they gave answers that supported Ms. Vernon. 266 Following the interviews, Mr. Sethi orally reported to Mr. Branham, Mr. Zelenika and Ms. Ferrara. He does not give them his notes. None of the witnesses were able to recall exactly what they were told. Given the length of the interviews and the limited time available to conduct the briefings, I conclude that the briefings did not include all the information provided by the employees. 267 Mr. Sethi told Mr. Branham, Mr. Zelenika and Ms. Ferrara that the employees had to some extent corroborated the Complainant’s allegations of bad language and unprofessional behaviour. 268 Mr. Sethi recommended to Mr. Zelenika and Ms. Ferrara that Ms. Vernon be terminated. He said that Ms. Vernon’s lack of remorse was a factor in his decision. Mr. Sethi’s knowledge concerning Ms. Vernon’s lack of remorse had to come from the briefing he received from Ms. Ferrara. 269 Mr. Branham, Mr. Zelenika and Ms. Ferrara then met on April 15 or 16. They decided that Ms. Vernon should be terminated. Ms. Ferrara testified that options other than termination were not appropriate because Ms. Vernon had denied any wrongdoing and offered no apology. Mr. Branham says that one of the reasons that they had to terminate Ms. Vernon was because she did not admit any of the allegations and there was no practical way of supervising her. Their source of Ms. Vernon’s denials of wrongdoing was Ms. van der Boom’s earlier erroneous briefing. 270 When Mr. Branham, Mr. Zelenika and Ms. Ferrara decided to fire Ms. Vernon, less than 96 hours had elapsed from the time that Mr. Sethi was asked to take over the investigation. In their rush to judgment, nobody at the LDB ever stepped back and put the allegations in context. 271 Ms. Vernon was a 30-year employee. She had been a store manager for almost 12 years. In all those years there had never been a single complaint made against her. Her performance reviews were glowing. The LDB stores are all Union shops. The Collective Agreement protects workers from harassment and abuse of managerial authority. The lack of 604 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

any prior complaints against Ms. Vernon should have given them cause to stop and reflect. 272 Further, the fact that Ms. Vernon was a tough boss who swore was not a surprise. Mr. Zelenika acknowledged that swearing was common in LDB stores. The nickname “The Little General” was well known. 273 The Recommendation Memo suggests that Ms. Vernon swore in the customer areas of the store. Indeed, two people in the interviews said as much, although others suggested that swearing was restricted to staff areas. A modicum of reflection should have made clear that swearing was not taking place in the front portion of the store in front of customers. It is inconceivable that such conduct would be taking place on an ongoing basis and never have been the subject of any reports or complaints by customers. 274 Mr. Ferrara and Mr. Branham never appear to have considered the actual complaints in the March 1 Letter. Outside of Ms. Vernon’s swearing which was acknowledged, the balance of the complaints concerned Ms. Vernon’s management style and her harsh corrections of the Com- plainant on various occasions for alleged misdeeds. When they decided to terminate Ms. Vernon, most of the specific complaints remained unproven. 275 The meeting of April 19 was badly handled. Telling Ms. Vernon, after a 30-year exemplary career, that her actions are embarrassing and shameful could not have been more insensitive. Ms. Vernon had given her entire working life to the LDB and to treat her in such a manner was egregious, shocking and unnecessary. 276 Equally egregious was the LDB leaving Ms. Vernon in limbo from April 19 to May 31. Having rushed to terminate her employment, the LDB did not take any steps to further the process between the meeting of April 19 and the preparation of the Recommendation Memo on May 18. During that time it was common knowledge throughout the LDB that Ms. Vernon had been suspended. Mr. Chambers approved the dismissal on May 21, but Ms. Vernon was not advised for a further 10 days when the dismissal letter was finally delivered to her home. 277 Ms. van der Boom testified that the Recommendation Memo was supposed to be a balanced recommendation to the General Manager. It was anything but. On her cross-examination, with some reluctance, she ultimately admitted that when she wrote the Recommendation Memo, instead of objectively reporting the investigations findings, she was trying to prove Ms. Vernon guilty of misconduct. Vernon v. British Columbia R.B.T. Goepel J. 605

278 The investigation was flawed from beginning to end. It was neither objective nor fair. 279 Because of her prior dealings with Ms. Vernon, Ms. van der Boom should not have conducted it. Once she concluded the Complainant was credible, Ms. van der Boom lost all objectivity. She became the prosecu- tor, not the objective investigator. She added Ms. Catamo-Meyer to the March 9 List because she believed she would provide damaging information. She did not bother to interview Ms. Chan who both the Complain- ant and Ms. Vernon stated witnessed two of the incidents. Her oral reports of her interview with Ms. Vernon are inaccurate and misleading. She told Ms. Ferrara and Mr. Branham that Ms. Vernon was denying all allegations when her notes of the meeting clearly show otherwise. The Recommendation Memo is replete with inaccuracies. 280 Ms. van der Boom is, however, not alone in rushing to judgment. Within 48 hours of being asked to investigate, Mr. Sethi had recommended Ms. Vernon’s dismissal. He made his recommendation based on his interviews, the March 1 Letter and the information he was given that Ms. Vernon did not acknowledge any wrongdoing. He knew that Ms. Vernon had no opportunity to respond to the information developed in the interviews. He knew that he had asked few questions concerning the specific allegations in the March 1 Letter. 281 Similarly, Mr. Branham, Mr. Zelenika and Ms. Ferrara were prepared to terminate a 30-year employee with a spotless record based on Mr. Sethi’s report. Mr. Zelenika and Ms. Ferrara both knew that Ms. Vernon was upset at the March 25 interview, yet they blindly accepted without question that she had denied all the allegations. 282 If this was an administrative law case, the LDB’s decision to terminate Ms. Vernon would be quashed as a breach of natural justice. This is, however, not such a case. Although Ms. Vernon is a public sector employee, public law duties of procedural fairness do not apply. Ms. Vernon’s relationship with the LDB is contractual. Her claim must be decided on the principles that govern all private law employment relationships: New Brunswick (Board of Management) v. Dunsmuir, 2008 SCC 9, [2008] 1 S.C.R. 190 (S.C.C.). Regardless of the flaws in the investigation, if the LDB had cause they were entitled to dismiss Ms. Vernon without notice.

C. Termination - Legal Principles 283 The primary issue for determination in this litigation is whether Ms. Vernon was terminated for cause. Absent a fixed term contract or con- 606 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

tractual notice provision, it is an implied term of an employment contract that an employer may dismiss an employee at any time by giving the employee reasonable notice or payment in lieu. If the employer shows cause, the employee may be dismissed without notice or payment in lieu: Ansari v. British Columbia Hydro & Power Authority (1986), 2 B.C.L.R. (2d) 33 (B.C. S.C.), at 36, aff’d (1986), 55 B.C.L.R. (2d) xxxiii (note) (B.C. C.A.) (“Ansari”). 284 In Panton v. Everywoman’s Health Centre Society (1988), 2000 BCCA 621, 82 B.C.L.R. (3d) 364 (B.C. C.A.), Saunders J.A. discussed the legal principles governing just cause at paras. 25-28: [25] The degree of misconduct required to permit dismissal without notice has varied with the times in which the misconduct has been judged. In concept, cause was described as early as 1886 by Lord Esher, M.R. in Pearce v. Foster (1886), 17 Q.B.D. 536 at 539-40: The rule of law is that where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him. The relation of master and servant implies necessarily that the servant shall be in a position to perform his duty duly and faithfully, and if by his own act he prevents himself from doing so, the master may dismiss him. It is not that the servant warrants that he will duly and faithfully perform his duty; because, if that were so, upon breach of his duty his master might bring an action against him on the warranty. But the question is, whether the breach of duty is a good ground for dismissal. I have never hitherto heard any doubt that that is the true proposition of law. What circumstances will put a servant into the position of not being able to perform, in a due manner, his duties, or of not being able to perform his duty in a faithful manner, it is impossible to enumerate. Innumerable circumstances have actually occurred which fall within that proposition, and innumerable other circumstances which never have yet occurred will occur, which also will fall within the proposition. But if a servant is guilty of such a crime outside his service as to make it unsafe for a master to keep him in his employ, the servant may be dismissed by his master; and if the servant’s conduct is so grossly immoral that all reasonable men would say that he cannot be trusted, the master may dismiss him. Vernon v. British Columbia R.B.T. Goepel J. 607

[26] In Canada, Mr. Justice Schroeder described cause in these often quoted terms in R. v. Arthurs, [1967] 2 O.R. 49, 62 D.L.R. (2d) 342 (C.A.), [reversed on other grounds 1969 S.C.R. 850] at p. 348: If an employee has been guilty of serious misconduct, ha- bitual neglect of duty, incompetence, or conduct incompatible with his duties, or prejudicial to the employer’s business, or if he has been guilty of wilful disobedience to the employer’s orders in a matter of substance, the law recognizes the employer’s right summarily to dismiss the delinquent employee. [27] Mr. Justice Vancise discussed cause for dismissal in terms of a repudiation of the contract in Jim Pattison Industries v. Page, [1984] 4 W.W.R. 481, 10 D.L.R. (4th) 430 (Sask.C.A.), saying at p. 490: There is no middle ground. The employer either has cause or he does not. ... An employee who repudiates the contract of employment is not entitled to “some” notice because he or she has been a “good” employee prior to such repudiation. [28] In general, then, just cause is employee behaviour that, viewed in all the circumstances, is seriously incompatible with the employee’s duties, conduct which goes to the root of the contract and fundamentally strikes at the employment relationship. 285 In Boulet v. Federated Co-operatives Ltd., 2001 MBQB 174, 157 Man. R. (2d) 256 (Man. Q.B.) aff’d 2002 MBCA 114, 170 Man. R. (2d) 9 (Man. C.A.) (“Boulet”), McCawley J. summarized the principles applicable when cause is alleged at para. 3: 1. Each case must be decided on its facts. 2. An employer’s displeasure at an employee’s performance is not enough to warrant dismissal. There must be some serious misconduct or substantial incompetence. 3. The onus of proving just cause rests with the employer and the standard of proof is beyond a balance of probabilities. 4. The performance of an employee, especially one in a management position, must be gauged against an objective standard. 5. The employer must establish: (a) the level of the job performance required, (b) that the standard was communicated to the employee, (c) that suitable instruction and/or supervision was given to en- able the employee to meet the standard, 608 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

(d) the employee was incapable of meeting the standard, and (e) the employee was warned that failure to meet the standard would result in dismissal. 6. Where the employee’s performance is grossly deficient and the likelihood of discharge should be obvious to the employee, warnings and reasonable notice are not required. 7. While the standard of incompetence to warrant discharge for cause is severe, the threshold of incompetence necessary to warrant dismissal for cause is significantly lower where dismissal is preceded by many warnings indicating unsatisfactory performance. 8. In considering whether an employer has provided adequate warning to an employee, where the dismissal is for repeated instances of inadequate work performance, the employer must show: (a) it has established a reasonable objective standard of performance, (b) the employee has failed to meet those standards, (c) the employee has had warnings that he or she has failed to meet those standards and the employee’s position will be in jeopardy if he or she continues to fail to meet them; and (d) the employee has been given reasonable time to correct the situation. 9. An employer who has condoned an inadequate level of performance by his employee may not later rely on any condoned behavior as a ground for dismissal. 10. Condoned behavior is relevant if the employee fails to respond after appropriate warnings. Condonation is always subject to the implied condition that the employee will be of good behavior and will attempt to improve. 286 As a result of the decision of the Supreme Court of Canada in C. (R.) v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41 (S.C.C.) at para. 40, the standard of proof set out in point 3 of Boulet must be restated. The onus is on the employer to prove just cause on the balance of probabilities, not on some higher standard. 287 In Rodrigues v. Shendon Enterprises Ltd., 2010 BCSC 941 (B.C. S.C.) (“Rodrigues”), the facts were very similar to those in the present case. The plaintiff had begun working for the Dairy Queen in 1993 at a minimum wage while performing basic tasks required at a fast food out- Vernon v. British Columbia R.B.T. Goepel J. 609

let. Over time she was promoted and in 2003 she was the manager, a position she held until she was terminated in 2009. She was dismissed one day after receiving a probation letter. Prior to the probation letter her employer had never advised her of any faults or shortcomings in her work or warned her about her behavior. She regarded most of the employees as her friends and socialized with some of them outside of work. She thought they knew that her use of foul language and derogatory comments was her way of doing things and not intended to hurt feelings. 288 In words that could be applied to Ms. Vernon, Mr. Justice Butler summarized the evidence concerning the plaintiff’s management style at para. 16: [16] It was evident from all of the witnesses called by Shendon that Ms. Rodrigues is a strong personality. She did not hide her disapproval of employees when she considered their performance to be inadequate. She did not hesitate to call someone stupid or use foul language to emphasize her disapproval. Other employees were generally wary of her. Even Mr. Kenna was afraid to confront her directly. They were particularly cautious in their dealings with her when she was in a poor mood. She never attempted to hide her moods which were obvious to all other employees. On the other hand, there is little doubt that she was a competent employee who knew how to run a Dairy Queen franchise as well or better than the other employees. It would also have been evident to others that she had the best interests of the Dairy Queen at heart. Indeed, her criticism of other employees always related to work that she thought could be performed better or faster. The other employees enjoyed her company when she was in a good mood. She considered the other employees to be her friends and was evidently unaware of the impact she had on them when she was critical or when she was in a foul mood. 289 In considering the cause allegation, Butler J. examined whether the plaintiff’s conduct went to the root of the employment contract. He found the plaintiff’s conduct prior to dismissal did not amount to just cause stating at paras. 34-35: [34] ...Contrary to the position taken in that letter, it is alleged at trial that the conduct before June 24, 2009, did justify summary dismissal. I cannot accept that submission and find that prior to June 24, 2009, Ms. Rodrigues had not engaged in serious misconduct and had not committed acts that struck at the root of the employment relationship. It is significant that the most contentious issue was the manner in which she disciplined or criticized other employees. In taking those actions, Ms. Rodrigues was attempting to improve the performance of the employees. Her actions, while inappropriate and unacceptable, 610 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

did not amount to a repudiation of the employment contract. Rather, her actions amounted to poor performance of the management responsibilities that she was attempting to fulfil. [35] Much of the conduct referred to in the probation letter had been permitted at the Dairy Queen for a long time, or was relatively trivial in nature. An example of conduct that had been permitted for some time was Ms. Rodrigues’ swearing. It was apparent at trial that all employees used foul language. While Ms. Rodrigues may have done so more than others, when employees have not been told that such behaviour is inappropriate, it is disingenuous to use that behaviour as a basis to justify summary dismissal. 290 A distinction between this case and Rodrigues is that in Rodrigues, unlike in this case, none of the employees supported the manager. 291 Another case dealing with allegations of just cause arising from an employee’s inappropriate conduct is Rieta v. North American Air Travel Insurance Agents Ltd. (1996), 19 C.C.E.L. (2d) 117 (B.C. S.C.) aff’d (1998), 52 B.C.L.R. (3d) 114 (B.C. C.A.) (“Rieta”). In Rieta, the evidence at the trial indicated that the plaintiff berated, belittled, and harshly criticized other employees. The trial judge concluded that there was little doubt from the evidence that the plaintiff’s performance with respect to the manner in which she managed her subordinates needed improvement. The Court concluded however that viewed objectively the plaintiff’s conduct did not justify summary dismissal.

D. Cause for Dismissal i. Overview 292 The LDB has maintained throughout this trial that they had cause to terminate. In their statement of defence they raised 24 particulars. In closing submissions, they acknowledged that no evidence had been called to support the particulars 5, 7, 10, 11 and 12. It submits that there is some evidence to support the balance of the particulars. 293 The LDB also submits that Ms. Vernon lied in the March 25 interview and that in itself is grounds for termination: Di Vito v. MacDonald Dettwiler & Associates Ltd. (1996), 21 C.C.E.L. (2d) 137 (B.C. S.C.); Richardson v. Davis Wire Industries Ltd. (1997), 33 B.C.L.R. (3d) 224 (B.C. S.C.). Vernon v. British Columbia R.B.T. Goepel J. 611

ii. Findings and Comments on Witnesses 294 Before turning to the particulars, it is first necessary to make certain additional findings of fact with regard to some of the contested evidence and comment on the credibility and evidence of certain witnesses. 295 I accept Ms. Vernon’s evidence that until the complaint was made she did not understand that her conduct was in any way unacceptable. She had worked for the LDB without complaint or reprimand for 30 years. Nobody had ever told her she was doing anything wrong. Her employment reviews were exemplary. Her criticism of staff was directed to im- proving their work. It was never personal. She always had the best interest of the LDB at heart. 296 I reject the suggestion that she lied at the March 25 meeting. I accept her evidence that at the meeting she was confused and upset and did not fully understand the allegations that were being made against her. 297 I accept the evidence of Ms. Vernon and Mr. Talmey that at the April 19 meeting Ms. Ferrara told Ms. Vernon that she would be given a letter of reference if she resigned. Absent a letter of reference there would be no reason why Ms. Vernon would resign. 298 Generally speaking, I accept the evidence of the witnesses called by Ms. Vernon in regard to her management of Ironwood. I found them to be credible and sincere concerning their experiences working for Ms. Vernon. Those witnesses all found Ms. Vernon to be an exemplary manager. Several testified she was the best manager that they had ever had. I note that three of those witnesses, Ms. Whynot, Ms. Rondeau, and Ms. Johnson are still employed in management positions with the LDB. It cannot have been easy for them to give testimony in this case against their employer. 299 Considerable evidence was led concerning Ms. Vernon’s use of profanities. There is little doubt and I find that Ms. Vernon did swear. I find, however, that her swearing was limited to the non-retail portions of the store. In this regard, I accept the evidence of Ms. Rondeau, Ms. Why- not, Ms. Johnston, Ms. Chan and Ms. Wylie. I reject the evidence of Ms. Kirkland, Ms. Canizares, and the Complainant to the contrary. As noted earlier in the discussions concerning the investigation, if Ms. Vernon was on a regular basis using loud and profane expletives in the customer area of the store it is inconceivable that a member of the public would not have complained to the LDB. None did. 300 I find that Ms. Vernon never used the expression “f*****g Muslims”. I reject the Complainant’s evidence that she did. The Complainant testi- 612 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

fied that Ms. Rondeau was present when this was said. Ms. Rondeau denied that it was ever said and I accept her evidence. None of the other witnesses suggested that Ms. Vernon used that phrase. 301 The evidence of Ms. van Pelt and Ms. Catamo-Meyer was not helpful. I found neither to be objective. As noted by Ms. Johnson, Ms. van Pelt and Ms. Vernon clashed from the outset. Ms. Vernon took over from Ms. van Pelt and, as is not unusual in such situations, there was tension between them. Ms. van Pelt left Ironwood in February 2006. She was a senior employee with the LDB but did not raise any complaint about Ms. Vernon until after Ms. Vernon had been suspended. I do not accept her evidence that she felt threatened by Ms. Vernon’s comment that “if I didn’t like you, your ass would be out of here”. 302 Ms. Catamo-Meyer worked at Ironwood for approximately two months. She did not wish to go to Ironwood because she had been held up when she worked there previously. When she was transferred to Iron- wood, she began to see a counselor for post-traumatic stress disorder. She mistakenly believed that Ms. Vernon had a role in transferring her to Ironwood. 303 Ms. Catamo-Meyer was undoubtedly unhappy at Ironwood. After a dispute with Ms. Rondeau, she advised that she was not prepared to work further at Ironwood. She was then transferred to Marpole but refused to report. As a result of her refusal to report she was ultimately suspended three days without pay. 304 There are several problems with Ms. Wylie’s evidence. At trial she said that the Liquor Load Incident happened in July 2008. In her interview she said the incident had happened four years previously which would place it in 2006. She testified that at the time of the incident that she was on light duties. Documents in evidence at trial indicate that she did not commence light duties until September 22, 2009. 305 Ms. Wylie denied using or writing the word “f**k”, but she wrote that very word on Ms. Vernon’s poster. Ms. Wylie says that by Novem- ber 2009 she did not admire Ms. Vernon, but signs her poster in complimentary terms in three locations. Such conduct is inconsistent with someone who claims to have been so offended by Ms. Vernon. 306 Ms. Wylie refused to acknowledge that she socialized from time to time with Ms. Vernon or that Ms. Vernon presented her with flowers when she became a regular. I accept the evidence of Ms. Chan that Ms. Wylie did attend a girls’ night with Ms. Vernon and Ms. Chan and the Vernon v. British Columbia R.B.T. Goepel J. 613

evidence of Ms. Mejias that Ms. Vernon gave her and Ms. Wylie flowers when they were promoted. 307 A particular concern with Ms. Wylie’s evidence concerning the Li- quor Load Incident is Ms. Mejias’ testimony. Ms. Mejias admits she swore a false affidavit when she deposed that she was present at work on the day it occurred. In her affidavit she describes Ms. Wylie running out of Ms. Vernon’s office, red faced and in tears. 308 How the affidavit came to be is troubling. Ms. Wylie must have claimed that Ms. Mejias was a witness to the incident. The difficulty was, however, that Ms. Mejias did not work at Ironwood after 2007 and could not have been present at the time Ms. Wylie said the incident occurred. 309 Given her false affidavit, I cannot accept Ms. Mejias’ evidence that Ms. Wylie phoned and told her of the Liquor Load Incident. Ms. Wylie has no recollection of such a call. That evidence would appear to be a desperate attempt to justify her affidavit. 310 Ms. Vernon denies the Liquor Load Incident ever happened. Given all of the difficulties with Ms. Wylie’s evidence, I do not accept her evidence concerning the Liquor Load Incident. 311 I generally accept the evidence of Ms. Canizares. I believe she had a difficult time working for Ms. Vernon. While Ms. Vernon did not treat her differently than she treated other employees, Ms. Canizares was new to the LDB and Ms. Vernon’s manner and lack of patience undoubtedly made her life tougher and she suffered for it. 312 Ms. Canizares acknowledged that some of the things she said in the interview with Mr. Reynolds and Mr. Sethi were exaggerated. For example, when she was interviewed she said that she said every single sentence has an “F” word in it. She agreed that was not so. 313 It is important to note, that when Ms. Canizares came to Ironwood she had never before worked at the LDB. Ms. Vernon was her mentor. She agreed that she did learn from Ms. Vernon and she left Ironwood when she was promoted to Store Manager. Ms. Vernon attempted to assist her in her new position when she had difficulty with certain employees. 314 In regard to the Complainant, I accept that she honestly feels ag- grieved by her treatment by Ms. Vernon. Ms. Vernon was demanding. Some of the difficulties appear to have arisen from the Complainant’s misunderstanding of circumstances and context. For example, a comment to an employee “I will kill you’ in the context of tucking in a shirt, is not 614 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

one that most people would take seriously. The Complainant, I suspect because of her troubled upbringing and the many difficulties she has had in her life, did so. Similarly, when she was criticized for the manner in which she did her work, she took offense even when the criticism was justified. 315 The Complainant has a low threshold when it comes to conduct she considers offensive. Evidence of this can be found in the letter that she wrote concerning the incident when she worked at the Marpole store, her refusal to serve customers at Marpole who she felt insulted her and her refusal to apologize to a customer at Ironwood because she was convinced she had done nothing wrong.

iii. The Particulars 316 Particulars 1, 2, 3 and 6 deal with Ms. Vernon’s intemperate language. There is no doubt that Ms. Vernon swore; she readily acknowledged it. The Complainant in her interview indicated that just about all the employees swore. Prior to the meeting of March 25 it had never been suggested to Ms. Vernon that her use of language was inappropriate. The LDB acknowledges that the use of bad language, in and of itself, is not grounds for termination. 317 Particular 4 relates to Ms. Vernon apparently stating at some stage to regular employees when talking about staffing a Sunday shift, “Don’t worry, I have some low lifes working those shifts”, referring to her auxiliary employees. Those comments were not directed to the auxiliaries themselves. They were made in private conversation with other workers. Ms. Vernon’s treatment of auxiliary employees appears to have been exemplary. Ms. Chan and Mr. Ty who were auxiliaries working at Iron- wood had nothing but praise for Ms. Vernon. Her comment in a private conversation is not grounds for dismissal. 318 Particular 8 deals with Ms. Vernon’s relationship with Ms. Canizares. It is alleged that she used profane, harsh, demeaning and bullying language to Ms. Canizares and at one time said to her “I am the Queen, the Assistants are my court jesters and the rest are the low of the low.” 319 There is no doubt that Ms. Vernon did speak harshly from time to time to Ms. Canizares. Ms. Canizares was obviously impacted by her language. I accept Ms. Canizares’ evidence that she found Ms. Vernon most difficult to work for. These are, however, matters of degree. When Ms. Canizares was promoted to a managerial position she thanked Ms. Vernon for her assistance. Ms. Vernon also reached out to her when she was having difficulty in her new job. Ms. Canizares did not think that Vernon v. British Columbia R.B.T. Goepel J. 615

Ms. Vernon went out of her way to hurt her feelings - it was just the way she was. 320 Ms. Vernon treated Ms. Canizares no different than she treated other employees. The LDB had never suggested to her that her treatment of employees was in any way improper. I accept Ms. Vernon’s evidence that she did not realize the negative impact that she had on certain employees, including Ms. Canizares. Many employees thrived under her management style. If that style was no longer appropriate for the management of an LDB store the LDB owed Ms. Vernon a chance to change her ways before summarily dismissing. They did not give it to her. 321 As to the “I am the Queen” comment it was made in a private conversation in the context of explaining the hierarchy of the store. Ms. Vernon had concerns that Ms. Canizares was being too friendly with staff who reported to her. She was trying to explain in somewhat colorful language the relationships that existed. It is certainly not a firing offence. 322 Particulars 9, 13-14 deal with Ms. Catamo-Meyer. As noted, I did not find her to be an objective witness. Particular 9 is a general allegation that Ms. Vernon frequently used profane, harsh, demeaning and bullying language towards her. Particular 13 deals with discussions that took place after Ms. Catamo- Meyer’s daughter was injured in an automobile accident. Particular 14 is an allegation that Ms. Catamo-Meyer ultimately resigned in part, because of the plaintiff’s demeaning, bullying and offensive management style. 323 It is important to note that Ms. Catamo-Meyer worked at Ironwood for less than two months. She came to Ironwood reluctantly. While Ms. Vernon was acting as Area Manager, and not at Ironwood, Ms. Catamo- Meyer got into a dispute with Ms. Rondeau and refused to come back to work. She sent in a medical report saying that she was no longer able to work at Ironwood. 324 Ms. Vernon arranged that Ms. Catamo-Meyer be sent to Marpole. This apparently angered her because it was further away from her home and she initially refused to report. Ultimately, she attended a meeting with Ms. Vernon and Ms. van der Boom as a result of which she was suspended three days without pay. 325 Ms. Catamo-Meyer worked at Marpole for six weeks and then got a job offer to work with handicapped children. She was certified to teach special needs children and submitted her resignation from the LDB. 326 Ms. Catamo-Meyer had filed a grievance when she was transferred to Ironwood. When she arrived at Ironwood, Ms. Vernon attempted to reas- 616 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

sure her about security and told her that she would not be left alone in the store. 327 Shortly after Ms. Catamo-Meyer commenced work at Ironwood her daughter was in an accident. Ms. Vernon asked her numerous questions about the accident. Ms. Catamo-Meyer found the questions intrusive and unpleasant and it caused her some stress. She acknowledges that after the accident Ms. Vernon told her that she could take a family illness day and also told her that she could use vacation days if that she was taking too much time. 328 Nothing in Ms. Vernon’s treatment of Ms. Catamo-Meyer gives rise to cause for dismissal. Ms. Catamo-Meyer was clearly upset when she came to Ironwood. Her daughter’s accident was obviously a matter of concern. The fact that Ms. Vernon would call wanting to know when she would return to work may have been distressing to Ms. Catamo-Meyer but it was consistent with Ms. Vernon’s obligations to manage absenteeism. 329 When Ms. Catamo-Meyer refused to work at Ironwood Ms. Vernon had little choice but to move her to another store. The fact that the new store was further from her home was a direct consequence of her refusal to work at Ironwood. I have little doubt that Ms. Catamo-Meyer’s decision to leave the LDB was triggered by the series of events that commenced with the LDB’s decision to transfer her to Ironwood and then Marpole. Ms. Vernon played but a minor role in those events and was not the cause of her departure. 330 Particulars 15 to 21 concern Ms. Vernon’s dealings with the Com- plainant. As with Ms. Canizares, I accept that Ms. Vernon on occasion spoke with the Complainant in a manner in which the Complainant found harsh and demeaning. She did not treat the Complainant different than other employees and she had no reason to believe that her treatment of the Complainant was unacceptable. 331 Some of the matters raised by the Complainant are difficult to determine. For example one of the complaints concerns Ms. Vernon telling the Complainant to put her name tag on and tuck in her uniform. After she complied, the Complainant told Ms. Vernon she had no problem doing so and Ms. Vernon allegedly responded “Yeah because you know that if you don’t do it I’ll kill you”. The Complainant said that she found her tone to be serious and threatening and was psychologically disturbed by the comment. Given the Complainant’s background, it may well be that she was. Objectively, however, such a comment seems far from of- Vernon v. British Columbia R.B.T. Goepel J. 617

fensive and not one that Ms. Vernon would appreciate that someone would take seriously. 332 Similarly, the complaint concerning Ms. Vernon telling her and Ms. Chan “to work, not talk” seems almost frivolous. Ms. Chan was never asked about this incident. 333 As previously set out, I do not accept the Complainant’s evidence that Ms. Vernon made the “f*****g Muslim” comment. While Ms. Vernon acknowledged her use of bad language, she vehemently denied and did deny in the March 25 meeting ever making such a comment. Indeed, when one reads the notes of the March 25 meeting she was clearly disturbed by the suggestion she made such a racially insensitive comment. 334 Ironwood had a multi-cultural work force. No other employees suggested that Ms. Vernon’s language was ever racially motivated. No employees said that they had heard her make the comment “f*****g Mus- lim”. I do not accept it happened. 335 Similarly, I cannot accept the Complainant’s evidence concerning the potluck luncheon and the allegation that Ms. Vernon pretended to be sick after having sampled Ms. Canizares’ dish. No witness corroborated that evidence and Ms. Vernon’s evidence was that she did not even attend the potluck. 336 Particular 20 deals with the incident on the till with the wine representative. I accept it did occur. I do not accept the Complainant’s evidence of the manner in which it occurred. The Complainant had been told she was not to deal with wine representatives while working as a cashier. Other witnesses indicated that customers in line were ignored and another cashier had to open while the Complainant carried on the discussion with the wine representative. Ms. Vernon was justified in crit- icizing the complainant for her actions. It may well be so that she did so too harshly. It is not a firing offence. 337 Particular 21 deals with the hearing incident and the phone messages Ms. Vernon left when the Complainant stopped coming to work. Ms. Chan witnessed the hearing incident. She said the Complainant did ask twice what she was supposed to do. She said she worked the rest of the shift with the Complainant and the Complainant did not appear to be upset. When it occurred the Complainant was most fragile and Ms. Vernon’s comments did not assist. Ms. Vernon, however, was not aware of the many difficulties the Complainant was dealing with. 338 In regard to the allegation that Ms. Vernon left 11 messages on the Complainant’s home phone and cell phone threatening her with dismissal 618 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

unless she returned to work immediately, I note that those messages were played in Court. Ms Vernon’s tone was neither harsh nor threatening. It contains no profane language. Ms. Vernon was most appropriately seeking information as to when the Complainant would be returning to work. Given her need to staff the store, it was appropriate that she did so. 339 On February 16, the Complainant untruthfully told Ms. Vernon she had no problems with her. Ms. Vernon did not know that the Complain- ant concealing her true feelings. Ms. Vernon directed the Complainant to attend at Head Office after consulting Ms. van der Boom. 340 Particular 22 deals with Ms. van Pelt and the suggestion that Ms. van Pelt had somehow been threatened when Ms. Vernon said words to her “I like you too but if I didn’t, your ass would be out of here so fast”. As stated above, I do not accept her evidence that she felt threatened by Ms. Vernon’s comment. Ms. van Pelt was not an objective witness. She and Ms. Vernon clashed from the outset. Ms. van Pelt arranged her own transfer from the Ironwood store in 2005. She came forward to complain about Ms. Vernon only after Ms. Vernon had been suspended. 341 Particular 23 deals with the Liquor Load Incident. I have found that the Liquor Load Incident did not occur. 342 Particular 24 references an incident that allegedly occurred in 2005 shortly after Ms. Vernon started work at Ironwood. It concerns the Big River Brew Pub. Big River is an important customer of the LDB. The particular alleges that Ms. Vernon rudely refused the manager of Big River, Mr. Tomlinson, permission to return empties to the Ironwood store and rudely imposed unreasonable requirements on when and how empties could be returned. 343 The source of this allegation was Ms. van Pelt. It occurred when Ms. van Pelt was still employed at Ironwood. 344 Mr. Tomlinson had limited recollection of the alleged incident. Ms. Vernon and Mr. Talmey gave evidence that Ms. Vernon discussed the incident with Mr. Talmey and not only did he not discipline her for it, he thought she did not do anything wrong in handling the matter. 345 At that time Mr. Talmey was Ms. Vernon’s superior. They had no personal relationship. Even if it could be suggested that Ms. Vernon did something wrong, and the evidence does not support the conclusion that she did, her conduct was clearly condoned by her superior. Vernon v. British Columbia R.B.T. Goepel J. 619

iv. Analysis 346 The LDB submits that it had no choice but to terminate Ms. Vernon. It says it owed a duty to its other employees to remove Ms. Vernon from its work force. In support of this proposition it cites Fleming v. Ricoh Canada Inc., [2003] O.J. No. 5557 (Ont. S.C.J.) and Leach v. Canadian Blood Services, 2001 ABQB 54, 7 C.C.E.L. (3d) 205 (Alta. Q.B.). Both of those cases involved claims of sexual harassment. In my opinion, different considerations arise in such a case than in the case at bar. This case concerns how Ms. Vernon managed her store - not allegations that she was seeking sexual gratification in the work place. 347 That said, the LDB did have an obligation to investigate when the Complainant came forward. A thorough and fair investigation would have revealed that Ms. Vernon’s management techniques could use some improvement. The LDB had courses that could have assisted her, but it chose not to make the courses available. 348 The LDB’s disciplinary policy takes into account various matters including the employee’s length of service, the nature of the misconduct, previous behavior that may have been the subject of discipline and the employee’s response during the investigative process. In most cases, the LDB engages in progressive discipline and will provide warnings to an employee before they are terminated. In this case even the Union and the Complainant did not seek Ms. Vernon’s termination. 349 Mr. Sethi testified that suspension or demotion was not considered because it might be considered constructive dismissal. The fallacy with that proposition is that the LDB alleges it had cause to dismiss without notice. If the LDB did have the right to summarily dismiss Ms. Vernon a constructive dismissal action would be doomed to fail. An employer with cause to dismiss cannot be held liable for constructive dismissal if it imposes a lesser penalty. 350 In this case the major factor which led to the decision to terminate Ms. Vernon was her response to the complaint. Ms. Ferrara, Ms. van der Boom, Mr. Sethi and Mr. Branham all testified to the importance of Ms. Vernon’s refusal to acknowledge any wrongdoing. In this regard they were acting under a factual misapprehension. Ms. Vernon had not denied all wrongdoing. She had offered an apology. Many of the allegations she did not even learn about until after she was terminated. 351 The LDB was under no obligation to continue to employ Ms. Vernon. It could end her employment at any time. Absent cause, however, it was contractually obligated to give pay in lieu of notice. 620 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

352 The onus is on the LDB to establish cause to summarily dismiss Ms. Vernon. While some of the alleged allegations were serious, many were not. Those that have been proved in this action do not amount to cause. I find that the LDB did not have grounds to summarily dismiss Ms. Vernon without notice. 353 While Ms. Vernon’s use of language and her treatment of employees may at times have been problematic, and possibly have warranted some form of discipline, her conduct did not strike at the root of or amount to a repudiation of her employment contract. As in Rodriques most of the allegations went to the manner in which she criticized her staff. While some of her conduct may have been inappropriate, she was at all times trying to improve the performance of her employees. At their worst, some of her actions amounted to poor performance of the management responsibilities that she was attempting to fulfil. 354 Ms. Vernon was a senior employee with an untarnished record. She was entitled to a warning that her conduct was not acceptable. If she had then continued with such conduct, it is possible the LDB would have had grounds to dismiss. They did not have such grounds in May 2010.

Damages A. Notice Period 355 The reasonableness of notice must be determined in each case with regard to the character of the employment, the length of service, the age of the employee and the availability of similar employment having regard to the experience, training and qualifications of the employee: Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.) at 145; Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 S.C.R. 362 (S.C.C.) at para. 28 (“Honda”). Absent exceptional circumstances, 18 to 24 months is the upper limit for reasonable notice: Ansari. 356 Ms. Vernon submits that in the circumstances of this case, she is entitled to between 18 and 22 months’ notice. In this regard, she points out that she was 49 years old at the time of her dismissal, having spent approximately 30 years in the employment of the LDB. She submits her extremely long service, as well as her age, dictates in favour of a notice award at the upper end of the scale. The fact that she worked in a managerial capacity further supports a high notice award. 357 The LDB submits as a result of the PSEA and the Regulation, notice is limited to 18 months. Ms. Vernon concedes that if the PSEA and Regu- lation apply, she is limited to 18 months’ notice. Vernon v. British Columbia R.B.T. Goepel J. 621

358 Pursuant to s. 14.4 of that PSEA, the Lieutenant Governor in Council may, by regulation, establish employment termination standards for an employee. It is common ground that the Regulation sets out such standards and in the case of Ms. Vernon, would limit her notice to 18 months. The point of contention between the parties is whether the Regu- lation applies to Ms. Vernon’s contract of employment. 359 The governing sections are s. 14.4(3) and (5). Those sections read: (3) If the Lieutenant Governor in Council establishes an employment termination standard by regulation under subsection (1), effective on the date on which the regulation comes into force, (a) the standard is deemed to be included in all applicable contracts of employment that are commenced, changed or renewed on or after that date, and (b) any provision of an applicable contract of employment referred to in paragraph (a) that conflicts or is inconsistent with the standard is void to the extent of the conflict or inconsistency. ... (5) On the effective date, (a) the Employment Termination Standards regulation (B.C. Reg. 379/97) is deemed to have been amended as set out in the Schedule to the Public Sector Employers Amendment Act, 2002, (b) the employment termination standards set out in that regulation are deemed to be included in all applicable contracts of employment that are in force on the effective date or are commenced, changed or renewed on or after that date, and (c) any provision of an applicable contract of employment referred to in paragraph (b) that conflicts or is inconsistent with any of those standards is void to the extent of the conflict or inconsistency. 360 Pursuant to s. 14.4(3), the standard is deemed to be included in all applicable contracts of employment that are commenced, changed or renewed on or after the effective date. Pursuant to s. 14.4(5)(b), the standard applies to all applicable contracts of employment that are in force on the effective date or are commenced, changed or renewed on or after that date. The parties are agreed that the effective date is October 21, 2002. 361 In support of her submission that the standard does not apply, Ms. Vernon relies on Schewe v. Okanagan University College, 2001 BCSC 622 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

343 (B.C. S.C.) (“Schewe”). That case turned on the wording of s. 4.2 of the PSEA as it then was. That section is identical to s. 14.4(3) of the present legislation. In Schewe, Brooke J. held that the contract of employment had not commenced, changed or been renewed after the effective date and, accordingly, the PSEA had no effect on the plaintiff’s claim. A similar result was reached in Butcher v. British Columbia (Public Sector Employers’ Council), 2003 BCCA 192 (B.C. C.A.). 362 The Public Sector Employers Amendment Act, 2002 S.B.C. 2002, c. 64 (the “Amendment Act”) was passed the year following the decision in Schewe. The Amendment Act repealed s. 4.2 and added sections 14.4(3) and (5). While s. 14.4(3) is identical to the old s. 4.2, s. 14.4(5) is a new section. That section makes clear that the employment termination standards set out in the Regulation are deemed to be included in all contracts of employment in force on the effective date. 363 Ms. Vernon’s contract of employment was in force on the effective date. I find that the Regulation is deemed to be included in her contract of employment. Pursuant to the Regulation, she is limited to 18 months’ notice. 364 The LDB concedes that if Ms. Vernon is entitled to notice, 18 months’ notice is appropriate. 365 In 2009, Ms. Vernon earned $69,183. While her base salary was less than $69,000, Ms. Vernon consistently earned more than her stated salary as a result of working as the Relief Area Manager. She testified she would have continued to act as Relief Area Manager had she not been terminated. 366 Damages are meant to compensate Ms. Vernon for the income she would have earned during the notice period. The LDB agrees that her damages should be calculated on the basis of her 2009 earnings. In 2009, she earned $5,765.25 per month and, accordingly, she is entitled to damages for lack of notice of $103,774.50 ($5,765.25 × 18). From this sum must be deducted $6,601.32 being the amounts Ms. Vernon earned in the 18 months subsequent to May 31, 2010, leaving an award of $97,173.18.

B. Pension 367 The parties have agreed that if Ms. Vernon is entitled to damages for wrongful dismissal, she is also entitled to damages for her loss of pension. In that regard the parties have agreed as follows: a) the province will make the employer’s contribution to the pension plan for the notice period awarded by the court; Vernon v. British Columbia R.B.T. Goepel J. 623

b) Ms. Vernon will make the employee’s contribution to the pension plan for the notice period awarded by the court; c) Ms. Vernon will be entitled to credit in the pension plan for service during the notice period as if she had been employed during that period and her pension will be calculated as if she had been employed during that period.

C. Special Damages 368 Ms. Vernon incurred expenses of $57 per month to replace her MSP coverage from May 2010 to December 2010 and $60.50 a month from January 2011 until she was covered on Mr. Talmey’s plan. Ms. Vernon has incurred out of pocket medical expenses of $131.43 which would have been covered by the defendant’s plan. Ms. Vernon spent $4,352.88 attending the job workshop ($502.88) and private counselling ($3,850). The LDB agrees that all these amounts are recoverable.

D. Aggravated Damages 369 Aggravated damages in wrongful dismissal cases are compensatory in nature. It is an implied term of an employment contract that an employer will act in good faith in the manner of dismissal: Beggs v. Westport Foods Ltd., 2011 BCCA 76, 14 B.C.L.R. (5th) 1 (B.C. C.A.) at para 48. 370 In Honda, the Supreme Court of Canada reviewed the history of the law relating to damages in case of employment termination, noting that aggravated damages must be considered in the context of a breach of the employment contract. The court held that aggravated damages were recoverable for breach of contract if such damages were contemplated by the parties at the time they entered the contract. As an employment contract is inherently subject to cancellation on notice, or payment in lieu of notice, damages for mental distress caused merely by the dismissal are not recoverable since dismissal is a clear legal possibility. 371 In Honda, Bastarache J. summarized the discussion of aggravated damages at paras. 57-59: [57] Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wal- lace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive” (para. 98). [58] The application of Fidler makes it unnecessary to pursue an extended analysis of the scope of any implied duty of good faith in an employment contract. Fidler provides that “as long as the promise in 624 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable” (para. 48). In Wallace, the Court held employers “to an obligation of good faith and fair dealing in the manner of dismissal” (para. 95) and created the expectation that, in the course of dismissal, employers would be “candid, reasonable, honest and forthright with their employees” (para. 98). At least since that time, then, there has been expectation by both parties to the contract that employers will act in good faith in the manner of dismissal. Failure to do so can lead to foreseeable, compensable damages. As aforementioned, this Court recognized as much in Fidler itself, where we noted that the principle in Hadley “explains why an extended period of notice may have been awarded upon wrongful dismissal in employment law” (para. 54). [59] To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between “true aggravated damages” resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreo- ver, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance (see also the examples in Wal- lace, at paras. 99-100). 372 In this case, for reasons I have already set out, the investigation of the complaint was unfair. Ms. Vernon was given no real opportunity to deal with the allegations in the complaint and no opportunity at all to deal with the allegations made in the course of the interviews. The unfair investigation, however, does not give rise to aggravated damages. 373 The foundation of the claim for aggravated damages is the manner of dismissal. The meeting of April 19, 2010, could not have been handled in a more insensitive manner. Ms. Vernon, a 30-year employee with an un- blemished record, was summoned to a meeting where she was told her Vernon v. British Columbia R.B.T. Goepel J. 625

conduct was shameful and that she was an embarrassment to the LDB. When she asked for additional time to consider her position she was told she only had until noon on Friday because Mr. Branham was not prepared to wait around until 4:00 p.m. on a Friday to learn her decision. Having told Ms. Vernon that she was to be terminated, the LDB then suspended her without pay and left her in limbo from April 19 to May 31 when they finally got around to telling her she was fired. 374 The Supreme Court of Canada has long recognized the importance of work in a person’s life. It is the foundation of its jurisprudence concerning employer conduct at the time of termination. In Reference re Public Service Employee Relations Act (Alberta), [1987] 1 S.C.R. 313 (S.C.C.), Dickson C.J. noted at p. 368: Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as im- portantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being. 375 In Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 (S.C.C.), Iacobucci J. said at para. 95: The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal. In Machtinger, supra, it was noted that the manner in which employment can be terminated is equally important to an individual’s identity as the work itself (at p. 1002). By way of expanding upon this statement, I note that the loss of one’s job is always a traumatic event. However, when termination is accompanied by acts of bad faith in the manner of discharge, the results can be especially devastating. In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, 376 Ms. Vernon’s position with the LDB was clearly an essential component of her sense of identity, self-worth and emotional well-being. It had been her entire working career. When she was asked to speak on behalf of all the recipients at the long service awards banquet on October 9, 2009, she said in part: We have been invited here this evening because we have reached an important milestone in our careers in the public service. Whether it’s 30 or 35 years, I believe it is a great personal achievement each of us 626 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

is celebrating, and not simply marking the passage of time. You should be very proud of your dedication, perseverance, resilience, your ability to adapt to change, your courage and your determination. These are some of the qualities in you that have brought you here tonight. When I was hired in 1980 I was so excited. I lived down the street from the 28th and Main Liquor store and I thought it seemed like a cool place to work. What can I say? I was 19...but it turned out that I was right. I made so many wonderful friends and had so many great experiences. I knew this was going to be my career. Everyone here should be proud of the work he or she has done, not only in providing service to the public throughout their career, but in developing this next wave of leaders who will follow us. In the end it is the people that make it all worthwhile. So in closing I would like to acknowledge the many people in this room who I have worked for and with over the past 30 years. Thank you for your friendship, your support and your generosity. It has meant everything. 377 I find that the LDB’s conduct during the course of dismissal was unfair and unduly insensitive. I accept the evidence of Ms. Vernon and Dr. Phillips that the manner of dismissal caused Ms. Vernon mental distress over and above the normal distress and hurt feelings resulting from the dismissal itself. She is entitled to an award of aggravated damages. 378 Ms. Vernon seeks aggravated damages of $35,000 - $40,000. I note the comments of Newbury J.A. in Warrington v. Great-West Life Assurance Co. (1996), 139 D.L.R. (4th) 18 (B.C. C.A.) at para. 25 where she stated that “courts should exercise caution in their awards for mental distress”. 379 In Altman v. Steve’s Music Store Inc., 2011 ONSC 1480 (Ont. S.C.J.) which involved the insensitive termination of a 30-year employee suffering from lung cancer, the court awarded $35,000 in aggravated damages. The court held that the employer’s actions must be viewed in the context of the employee’s age, length of service, state of health and relationship with the employer. 380 In this case Ms. Vernon was a long serving faithful employee. The manner of her termination was devastating and caused her serious harm. I award $35,000 in aggravated damages. Vernon v. British Columbia R.B.T. Goepel J. 627

D. Punitive Damages 381 Unlike aggravated damages (which are compensatory in nature), punitive damages are directed towards punishment. The leading authority remains Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (S.C.C.) at para. 36(“Whiten”). 382 The three objects of punitive damages are retribution, deterrence and denunciation. The Supreme Court of Canada has directed trial courts to approach punitive damages with caution and restraint and to resort to them only in exceptional circumstances: Whiten at para. 69. 383 An award of punitive damages is rational only when compensatory damages do not adequately achieve the objectives of retribution, deterrence and denunciation: Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 (S.C.C.) at para. 87. 384 In Whiten, at para. 94, the Court set out the factors that should be taken into account when considering an award for punitive damages: (1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inev- 628 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

itably carry a stigma in the broader community, are generally sufficient. 385 As noted in Honda, in the context of damages for conduct in the course of dismissal, care must be taken when aggravated damages have been awarded to avoid the pitfall of double compensation or double punishment for the same actions. Punitive damages are restricted to adver- tent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own. 386 In this case, I have made an award of aggravated damages arising out of the insensitive manner in which Ms. Vernon was terminated. To award punitive damages for the same conduct would lead to double punishment for the same acts. 387 There is, however, one exception. At the termination meeting of April 19, Ms. Ferrara told Ms. Vernon that if she agreed to resign, the LDB would provide her with a reference letter. While an employer is under no obligation to give a reference letter (Shinn v. TBC Teletheatre B.C., A Partnership, 2001 BCCA 83, 85 B.C.L.R. (3d) 75 (B.C. C.A.)), to offer Ms. Vernon a reference letter, conditional on her resignation, was reprehensible and departed to a marked degree from ordinary standards of decent behaviour. If Ms. Vernon’s conduct was sufficiently serious that the LDB had the right to summarily dismiss her without notice, it would have been improper for the LDB to give her a reference letter. To offer a reference letter as a carrot to resign, is, in my opinion, conduct which is properly the subject matter of retribution, deterrence and denunciation. 388 Whiten directs that when punitive damages are awarded, they should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage of profit gained by the defendant. At the time the proposal was made, Ms. Vernon could not have been more vulnerable. She had just been told she was being terminated from her job of 30 years. She knew that without a reference she would have little chance of finding suitable new employment. The LDB knew that if she voluntarily resigned, it could avoid a possible lawsuit for wrongful termination in which it would have to justify its treatment of a 30-year employee. I award $50,000 in punitive damages.

Costs 389 The plaintiff has been successful in this litigation. Unless there are matters of which I am not aware, my tentative view is the plaintiff is entitled to costs at Scale B. If either party seeks a different cost order or Vernon v. British Columbia R.B.T. Goepel J. 629 if there are any other matters arising from these reasons, counsel should make written submissions within 30 days of the date of these reasons. Any responsive submissions should be filed within 15 days thereafter. Action allowed. 630 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

[Indexed as: Vernon v. British Columbia (Housing & Social Development, Liquor Distribution Branch)] Stephanie Vernon (Plaintiff) and Her Majesty the Queen in right of the Province of British Columbia as represented by the BC Ministry of Housing and Social Development (Liquor Distribution Branch) (Defendant) British Columbia Supreme Court Docket: Vancouver S104016 2012 BCSC 445 R.B.T. Goepel J. Judgment: March 28, 2012 Civil practice and procedure –––– Costs — Scale and quantum of costs — Quantum of costs — Special costs –––– Plaintiff was managerial employee of defendant with some 30 years of service — Plaintiff had exemplary performance review record and was described as excellent manager — Complainant alleged abuse and mistreatment by plaintiff, including use of profane ethnic slur and intimidation — Representatives of defendant conducted biased investigation — Plaintiff was summoned to meeting, which was conducted in oppressive and unfair manner, and terminated without notice — Plaintiff successfully brought action for damages for wrongful dismissal — Plaintiff was awarded damages equal to 18 months’ notice, together with certain pension adjustments, special damages, aggravated damages and punitive damages — Hearing on costs was held — Plaintiff was not entitled to special costs — Conduct of defendant was not reprehensible or deserving of reproof or rebuke — Although defendant refused to produce documents based on its interpretation of new Supreme Court Civil Rules, this was not case where defendant concealed existence of documents — Defendant’s amendment of its particulars, to include allegation of cause relating to incident at pub, did not unduly extend length of trial and was not conduct deserving of rebuke — Similarly, defendant’s refusal to make offer to settle was not reprehensible. Labour and employment law –––– Employment law — Termination and dismissal — Practice and procedure — Costs — Offers to settle –––– Plaintiff was managerial employee of defendant with some 30 years of service — Plain- tiff had exemplary performance review record and was described as excellent manager — Complainant alleged abuse and mistreatment by plaintiff, including use of profane ethnic slur and intimidation — Representatives of defendant conducted biased investigation — Plaintiff was summoned to meeting, which was conducted in oppressive and unfair manner, and terminated without notice — Plaintiff successfully brought action for damages for wrongful dismissal — On Vernon v. British Columbia 631

April 13, 2011, plaintiff made formal offer to settle her claim for sum of $126,582 plus costs — Plaintiff was awarded damages equal to 18 months’ notice, together with certain pension adjustments, special damages, aggravated damages and punitive damages — Hearing on costs was held — Plaintiff was entitled to costs at Scale B with double costs from April 13, 2011 — Plaintiff’s ultimate recovery was approximately $200,000 — Defendant conceded that factors weighed in favour of award of double costs after April 13, 2011. Cases considered by Richard B.T. Goepel J.: Columbia Trust Co. v. Drew (1988), 1988 CarswellBC 10, 21 B.C.L.R. (2d) 384 (B.C. S.C.) — considered Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740, 9 B.C.L.R. (3d) 242, 14 C.C.E.L. (2d) 84, 41 C.P.C. (3d) 298, (sub nom. Garcia v. Crestbrook Forest Industries Ltd. (No. 2)) 45 B.C.A.C. 222, (sub nom. Garcia v. Crestbrook Forest Industries Ltd. (No. 2)) 72 W.A.C. 222, 1994 CarswellBC 1184, [1994] B.C.J. No. 2486 (B.C. C.A.) — followed Laface v. McWilliams (2005), 2005 BCSC 1766, 2005 CarswellBC 3034, 33 C.C.L.I. (4th) 1, 22 C.P.C. (6th) 98 (B.C. S.C. [In Chambers]) — distinguished McEvoy v. Ford Motor Co. (1990), 45 B.C.L.R. (2d) 363, 1990 CarswellBC 101 (B.C. S.C.) — considered Rules considered: Rules of Court, 1990, B.C. Reg. 221/90 Generally — referred to Supreme Court Civil Rules, B.C. Reg. 168/2009 Generally — referred to R. 7-1(1) — considered R. 9-1 — considered R. 9-1(6) — considered App. B, s. 2(2)(b) — referred to

ADDITIONAL REASONS to judgment reported at Vernon v. British Columbia (Housing & Social Development, Liquor Distribution Branch) (2012), 2012 BCSC 133, 2012 CarswellBC 239, (sub nom. Vernon v. BC (Ministry of Housing & Social Development)) 2012 C.L.L.C. 210-017, 30 B.C.L.R. (5th) 341, [2012] 7 W.W.R. 558 (B.C. S.C.), respecting costs.

J.A. McKay, for Plaintiff D.L. Baumgard, for Defendant 632 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

R.B.T. Goepel J.: Introduction 1 Ms. Vernon sued for wrongful dismissal. The defendant submitted she was terminated for cause. I found for Ms. Vernon and awarded her damages equal to 18 months’ notice, together with certain pension adjustments, special damages, aggravated damages and punitive damages. While the parties have not provided me with a precise calculation, I estimate that Ms. Vernon will receive approximately $200,000. My reasons for judgment are indexed at 2012 BCSC 133 (B.C. S.C.). 2 In regard to costs, I said at para. 389: The plaintiff has been successful in this litigation. Unless there are matters of which I am not aware, my tentative view is the plaintiff is entitled to costs at Scale B. If either party seeks a different cost order or if there are any other matters arising from these reasons, counsel should make written submissions within 30 days of the date of these reasons. Any responsive submissions should be filed within 15 days thereafter. 3 Following the release of the reasons I have received written submissions on costs. Ms. Vernon requests special costs or, alternatively, requests she be awarded double costs for all work performed after the delivery of an offer to settle on April 13, 2011. 4 The defendant opposes the application for special costs. It submits that the present case is not one that evidences the type of egregious conduct that would warrant such an award. It does not oppose an award of costs at Scale B, with double costs after April 13, 2011.

Special Costs A. Overview 5 Ms. Vernon submits that she is entitled to special costs for the following reasons: (a) throughout the course of the litigation, the defendant’s document disclosure was reprehensible, and/or deserving of rebuke; (b) the defendant tendered witnesses who did not have relevant evidence with the result of extending the trial; and (c) the defendant failed to make any efforts at resolution short of trial. Vernon v. British Columbia R.B.T. Goepel J. 633

B. Document Production 6 Ms. Vernon’s submission sets out a lengthy chronology concerning document disclosure. At the outset of the litigation, Ms. Vernon’s counsel requested production of all documents produced in the investigation of the complaints against Ms. Vernon, a copy of her personnel file, a copy of all employee surveys performed at the Ironwood store between 2006 and 2010 and a copy of the complaint allegedly provided to the plaintiff as referred to in the statement of defence. 7 On August 4, 2010, the defendant’s counsel forwarded a letter together with a list of documents. The list contained but two documents being copies of letters of April 23, 2010 and May 21, 2010 that had been sent to Ms. Vernon. In the letter accompanying the list, the defendant’s counsel indicated that he had prepared the list of documents in accordance with his understanding of Rule 7-1(1) of the Supreme Court Civil Rules. The new Rules had just come into effect on July 1, 2010. 8 In his August 4, 2010 correspondence, counsel advised that Ms. Vernon’s personnel file was approximately three inches thick. He acknowledged it contained a variety of documents which undoubtedly would have been producible under the Peruvian Guano test which had governed document production under the old Rules. He also acknowledged that he had in his possession considerable documentation concerning the investigation into the complaint. He advised that in his opinion it was arguable whether the documents generated in the course of the defendant’s investigation were producible under Rule 7-1(1). He did acknowledge that there was a divergence of opinion within the profession as to the proper interpretation of the new Rules and invited the plaintiff to bring an application to test the proper interpretation of the Rules. 9 On August 12, 2010, the plaintiff’s counsel responded enclosing an application for document production. While acknowledging the need for the profession to test the new Rules, he indicated that this case was not appropriate to test the extent of document production required by Rule 7- 1(1). He suggested that the documents the defendant had described in its correspondence could clearly help the plaintiff prove material facts in her case and the documents were in those circumstances producible. He pointed out that this was not a matter of two corporate clients with significant funds to advance litigation and that his client, being a newly unemployed individual, should not be forced to incur significant fees to obtain documents to which she was entitled. He suggested that forcing his client to bring an application for documents would be contrary to the objectives of expedient and cost effective litigation and he intended to bring this 634 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

issue to the Court’s attention and would seek costs on his application in any event. 10 Thereafter, the parties continued to spar over document production. At a case planning conference on August 27, 2010, the defendant’s counsel advised the Court that the limited disclosure was provided to invite an application to test the meaning of the new Rules. The defendant’s counsel made enquiries of another prominent counsel to see whether that individual was prepared to act for the plaintiff without charge on a case to test the meaning of the new Rules. 11 The initial examination for discovery took place on September 7, 2010. The plaintiff conducted this discovery without the benefit of document disclosure. Subsequent to the discovery, the defendant provided additional documents. A second examination for discovery took place on October 19, 2010 in which questions were asked concerning these further documents. 12 The defendant ultimately produced some 350 pages of documents without requiring Ms. Vernon to proceed with her application for document production. 13 On July 11, 2011, the defendant provided will-say statements in regard to various witnesses it intended to call at the trial. Mr. Reynolds’ will-say statement mentioned that Ms. van der Boom had sent a list of names to Mr. Reynolds of who would be interviewed. The plaintiff’s counsel requested a copy of that list and on July 19, 2011, the defendant provided certain additional documents. 14 The trial started on July 25, 2011. During the course of the trial, Ms. van der Boom testified concerning an email to herself from Ms. Puga relating to the complaint and how the complaint was being handled. On August 8, 2011, the defendant produced an email from Ms. Puga to Ms. van der Boom dated April 1, 2010 regarding the Union’s proposed resolution of the complaint. This email ultimately became Exhibit 61 at trial. 15 Ms. Vernon says that the defendant’s document production was reprehensible and should give rise to an order for special costs. She submits that it was improper for the defendant to refuse to provide her with relevant documents in an attempt to force her to bring an application that would test the interpretation of the new Rules. She says this is particularly so given that she was at the time unemployed and had, to the defendant’s knowledge, limited financial means. 16 Ms. Vernon submits that the defendant should have produced the investigation documents in their entirety in August 2010. She notes that the Vernon v. British Columbia R.B.T. Goepel J. 635

investigation documents were extremely relevant and detrimental to the defendant’s case and it was reprehensible that the defendant failed to disclose those documents at the outset of the litigation. The plaintiff submits she had to conduct her initial examination for discovery without the benefit of document disclosure and without the critical interview notes. She submits that the defendant’s lack of fair, timely and complete disclosure is deserving of rebuke. 17 In support of her submission, Ms. Vernon refers to Laface v. McWil- liams, 2005 BCSC 1766 (B.C. S.C. [In Chambers]) (“Leface”), in which the Court found that one of the defendants had failed to produce investigative reports, employment records and written hotel policies that went to the core of the allegations against it. In those circumstances, the judge found that the failure to disclose critical documents warranted an award of special costs. 18 The defendant submits that there was nothing improper about the position it took concerning document disclosure. It submits that the position it took reflected legitimate debate within the profession as to the impact of the new Rules on document disclosure. In any event it notes that it ultimately did produce the requested documents without the necessity of a court application.

C. Witnesses 19 The defendant amended its particulars on May 20, 2011, to include an allegation of cause relating to the Big River Brew Pub. That alleged incident occurred in 2005. The defendant’s witness in relation to the Big River incident could not recall the incident in question, and could not provide evidence in relation to the particular. 20 Ms. Vernon submits that the particular concerning Big River was entirely without merit. She says that the testimony in relation to the Big River incident was unnecessary, and only acted to prolong the trial. She submits special costs should be awarded for the one-half day of trial time spent on the Big River issue. 21 The defendant submits that the evidence concerning the Big River matter took up only an hour or so of trial time. It submits that the fact the Court ultimately decided that the evidence concerning Big River did not support the allegation of cause is not reason in and of itself to award special costs. 636 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

D. Offers to Settle 22 The defendant from the outset of the action made clear that it would not make any offers to settle in this matter. At a case planning conference on August 27, 2010, the defendant’s counsel advised the Court that, from the defendant’s point of view, the case raised issues of principle, so there would be no offers to settle. 23 On April 13, 2011, the plaintiff made an offer to settle pursuant to Rule 9-1 for a lump sum payment of $126,582, plus costs. On July 14, 2011, the plaintiff made an offer to settle pursuant to Rule 9-1, for a lump sum payment of $105,274.50 plus 18 months’ pension contribu- tions, plus costs. The defendant did not respond to either offer and it made no offer to settle the action. 24 While Ms. Vernon does not say the defendant had an obligation to settle this matter in advance of trial, she submits that the defendant did have an obligation to be open to considering offers to settle or other resolution short of an expensive and lengthy trial. She submits that the defendant, even before disclosure, was completely closed to any settlement. She submits this is reprehensible and contrary to the purposes of the justice system in this province. She submits that she should not have had to incur costs to bring her case to court and should be awarded special costs as a result. 25 The defendant submits that its decision to take the case to trial is not conduct that should be sanctioned by an award of special costs. It submits that if a party fails to accept a reasonable settlement offer the remedy is found in Rule 9-1 which specifically deals with offers to settle.

E. Discussion 26 The test for special costs was set out in Garcia v. Crestbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 (B.C. C.A.) at para. 17, where Lambert J.A. speaking for the Court, after an extensive review of the authorities concluded: ... it is my opinion that the single standard for the awarding of special costs is that the conduct in question properly be characterized as “reprehensible”. As Chief Justice Esson said in Leung v. Leung, the word reprehensible is a word of wide meaning. It encompasses scan- dalous or outrageous conduct but it also encompasses milder forms of misconduct deserving of reproof or rebuke. Accordingly, the standard represented by the word reprehensible, taken in that sense, must represent a general and all-encompassing expression of the applicable standard for the award of special costs. Vernon v. British Columbia R.B.T. Goepel J. 637

27 In the circumstances of this case, I do not find that the conduct of the defendant was reprehensible or deserving of reproof or rebuke. With regard to the matter of document production, this is not a situation in which the defendant concealed the existence of documents. The defendant disclosed the documents that were in its possession, but refused to produce them based on its interpretation of the new Rules. This case is distinguishable from Laface. In Laface, the party failed to disclose that certain key documents exited. That is not the situation in this case. A refusal to produce documents cannot be equated with concealing their existence: Columbia Trust Co. v. Drew (1988), 21 B.C.L.R. (2d) 384 (B.C. S.C.) at 390. 28 The plaintiff’s remedy was to bring an application for document production in accordance with the Rules: McEvoy v. Ford Motor Co. (1990), 45 B.C.L.R. (2d) 363 (B.C. S.C.) at para. 10. On the return of that application, if it was clear that the defendant’s position was without merit, the plaintiff could have sought special costs of the application. 29 The particular concerning the Big River Brew Pub added little to the defendant’s case. Adding that particular, however, did not unduly extend the length of the trial and is not conduct deserving of rebuke. 30 Similarly, the defendant’s refusal to make an offer to settle is not reprehensible. A party who does not accept a reasonable offer to settle may, pursuant to the provisions of Rule 9-1, suffer certain cost consequences. A party is, however, not required to settle a lawsuit in advance of trial. If a party wishes to take a matter to trial, it is entitled to do so and generally speaking that decision in and of itself will not attract special costs. Given all the circumstances of this case, the defendant’s refusal to consider any settlement and insist on a trial cannot be considered reprehensible.

Double Costs 31 As noted, Ms. Vernon, on April 13, 2011, made a formal offer to settle her claim for the sum of $126,582 plus costs. Her ultimate recovery will be approximately $200,000. In these circumstances, the defendant concedes that the factors relevant to the exercise of the Court’s discretion under Rule 9-1(6) weigh in favour of an award of double costs and it does not oppose an order that the plaintiff is entitled to double costs after April 13, 2011. 638 WESTERN WEEKLY REPORTS [2012] 7 W.W.R.

Summary 32 In the result, therefore, the plaintiff’s application for special costs is dismissed. The plaintiff is entitled to costs at Scale B with double costs from April 13, 2011. Order accordingly.