Court Of Appeal Summaries (August 8 – 12, 2016)

Hello again.

Welcome to another week of summaries of civil decisions of the Court of Appeal for Ontario. Topics covered include municipal liability, contracts (whether a written clarification of an unclear term of an existing contract is unenforceable for want of fresh consideration - no - the clarification itself was valuable consideration), employment law (two decisions confirming that bonuses are recoverable as damages for wrongful dismissal), stay pending appeal to the Supreme Court of Canada (stay not granted) and class actions (adding representative plaintiffs and whether breach of the price-fixing provisions of the Competition Act can constitute the unlawful act element of the tort of civil conspiracy).

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Have a great weekend.

Civil Decisions

Paquette v. TeraGo Networks Inc., 2016 ONCA 618

[Simmons, Pepall and van Rensburg JJ.A.]

Counsel: A. H. Monkhouse and S. Lucifora, for the appellant R. Frank and N. Marcus, for the respondent

Keywords: Employment Law, Wrongful Dismissal, Damages, Payment in Lieu of Reasonable Notice, Bonuses, Taggart v. Canada Life Assurance Co., Summary Judgment

Facts: The appellant, Trevor Paquette ("Paquette"), worked for the respondent TeraGo Networks Inc. ("TeraGo") until his employment was terminated without cause. Paquette earned a base salary and bonuses. The parties were unable to agree on a severance package, therefore Paquette sued for wrongful dismissal.

The appellant brought a summary judgment motion to determine the period of reasonable notice and damages, including the issues of compensation for lost bonuses and mitigation of damages. The motion judge fixed the reasonable notice period at 17 months. The motion judge awarded damages based on the salary and benefits that the appellant would have received during the notice period. The motion judge rejected the claim for damages for lost bonus payments. He found that the appellant had made reasonable efforts to mitigate his damages and directed him to account for any mitigation earnings for the balance of the reasonable notice period.

Issue: Did the motion judge err in denying the appellant's claim for compensation for lost bonuses as part of his damages for wrongful dismissal, on the basis that the bonus plan required the bonus recipient to be "actively employed" at the time the bonus was paid?

Holding: Appeal allowed.

Reasoning: Yes. The motion judge erred in principle by treating the issue of whether bonus amounts would be included in the appellant's damages for wrongful dismissal as a question of whether the "active employment" term in the bonus plan was ambiguous. The motion judge should have determined whether the appellant's common law right to damages for compensation and benefits that he would have earned during the reasonable notice period, including the bonus that was part of his compensation package, was effectively limited by the "active employment" condition in the bonus plan. By narrowly focusing the analysis of whether the "active employment" term was ambiguous, the motion judge applied an incorrect principle.

The motion judge's analysis focused only on the wording of the bonus plan. He stated that there was no ambiguity in its terms, and that, although the appellant might notionally be an employee during the reasonable notice period, he would not be an "active employee" and therefore would not qualify for a bonus.

There are two problems with the motion judge's approach. First, the appellant's entitlement to bonus payments in the context of the wrongful dismissal action does not depend on whether he was notionally or in fact "actively employed" after his employment was terminated. The issue before the court was the determination of his damages, comprised of the compensation and benefits to which he would have been entitled but for the wrongful termination of his employment. Had the appellant been terminated within the 17 months' reasonable notice fixed by the motion judge, he would have been "actively employed" when the bonuses were paid.

Similar to the precedent set in Taggart v. Canada Life Assurance Co., with respect to "active employment", the appellant's claim was not for the bonuses themselves, but for common law contract damages as compensation for the income (including bonus payments) he would have received had TeraGo not breached his employment contract by failing to give reasonable notice of termination.

The motion judge's next error was in looking to the terms of the bonus plan, and its requirement of "active employment", and then concluding that because that term was unambiguous, and the appellant could not meet the requirement, no amount for bonus would be included in his damages. The motion judge ought to have commenced the analysis from the premise that the appellant's common law right to damages is based on his complete compensation package, including any bonus he would have received had his employment continued during the reasonable notice period, and then examined whether the bonus plan specifically limited or restricted that right.

Taggart articulates the approach the motion judge ought to have followed in this case. The first step is to consider the appellant's common law rights. In circumstances where, as here, there was a finding that the bonus was an integral part of the terminated employee's compensation, Paquette would have been eligible to receive a bonus, had he continued to be employed during the 17 month notice period.

The second step is to determine whether there is something in the bonus plan that would specifically remove the appellant's common law entitlement. The question is not whether the contract or plan is ambiguous, but whether the wording of the plan unambiguously alters or removes the appellant's common law rights. Therefore, the requirement for active employment does not prevent the appellant from receiving, as part of his wrongful dismissal damages, compensation for the bonuses he would have received had his employment continued during the period of reasonable notice.

The motion judge erred since the question was not whether the bonus plan was ambiguous, but whether the wording of the plan (which in this case formed part of the appellant's employment contract) was effective to limit his right to receive compensation for lost salary and bonus during the period of reasonable notice.

Finally, the Court of Appeal determined that a term requiring active employment when the bonus is paid, without more, is not sufficient to deprive an employee terminated without reasonable notice of a claim for compensation for the bonus he or she would have received during the notice period, as part of his or her wrongful dismissal damages. In the result, the appellant is entitled to compensation as part of his damages for wrongful dismissal for the loss of his bonus as well as the lost opportunity to earn a bonus.

Lin v Ontario Teachers' Pension Plan, 2016 ONCA 619

[Simmons, Pepall and van Rensburg JJ.A.]

Counsel: P.J. Pape and A.M. Bolieiro, for the appellant C. Dockrill, for the respondent

Keywords: Employment Law, Wrongful Dismissal, Just Cause, Reasonable Notice, Bardal v Globe & Mail Ltd, Bad Faith, Honda Canada Inc v Keays, Damages, Payment in Lieu of Reasonable Notice, Bonuses, Contracts, Interpretation, Standard of Review, Sattva Capital Corp v Creston Moly Corp, Dumbrell v Regional Group of Companies, Unilateral Change in Employment Contract, Wronko v Western Inventory Service Ltd

Facts: The respondent, David Lin ("Lin") was employed by the appellant Ontario Teachers' Pension Plan Board ("Teachers'") for almost eight years as a Senior Associate in the investment bank division. In March 2011, Lin's employment was terminated, allegedly for cause. Teachers' alleged a breach of its code of business conduct (the "Code") after Lin emailed a copy of a private placement memorandum ("PPM"), previously received by Teachers' from a third party on an unsolicited basis, to a personal friend in the investment business. The trial judge concluded that Lin's employment was terminated without cause, and held that the appropriate notice period was 15 months. Damages in lieu of the reasonable notice period were set to include bonuses Lin would have received under Teachers' short-term incentive plan ("AIP"), and long-term incentive plan ("LTIP"), programs in which Lin participated during the period of reasonable notice. Teachers appealed.

Issues: (1) Did the trial judge incorrectly interpret the Code in concluding that Lin did not violate it?

(2) Did the trial judge err in fixing a reasonable notice period of 15 months, without a finding of bad faith?

(3) Did...