



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Quach v. Mitrux Services Ltd.,









2020 BCCA 25




Date: 20200123

Docket: CA45644

Between:

Tri Quach

Respondent

(Plaintiff)

And

Mitrux Services
Ltd. and Ameri-Can Freight Systems Inc.

Appellants

(Defendants)






Before:



The Honourable Madam Justice Saunders

The Honourable Mr. Justice Harris

The Honourable Mr. Justice Hunter




On appeal from:  An
order of the Supreme Court of British Columbia,
dated September 6, 2018 (
Quach v. Mitrux Services Ltd.
, 2018 BCSC 1535,
Chilliwack Docket S030413).




Counsel for the Appellants:



E.A.W. Heath





Counsel for the Respondent:



D.A. Sorensen

M.A. Truong





Place and Date of Hearing:



Vancouver, British
  Columbia

September 6, 2019





Place and Date of Judgment:



Vancouver, British
  Columbia

January 23, 2020









Written Reasons by:





The Honourable Madam Justice Saunders





Concurred in by:





The Honourable Mr. Justice Harris

The Honourable Mr. Justice Hunter








Summary:

The appeal is from an award
of a years salary, under a fixed‑term contract providing that upon
termination by the employer, the balance of the salary for the remaining
portion of the term would become due and owing, and an award of aggravated
damages. The parties had signed a second agreement making the contract a month
to month contract. The judge found new consideration was not given to the
employee in exchange for agreeing to the second contract, and hence the fixed‑term
contract applied. The employer appealed. Held: Appeal allowed on the issue of
aggravated damages only. The language of the second contract contemplated fresh
consideration but none was given. The judges conclusions that the fixed‑term
contract applied were correct. The award for aggravated damages is set aside.
The record did not support a conclusion that the employee suffered more than
normal distress, stress and anxiety as a result of the dismissal. Comments on
the law of mitigation of damages in an employment setting are provided.

Reasons for Judgment of the Honourable
Madam Justice Saunders:

[1]

This appeal concerns damages assessed under a one‑year fixed‑term
contract of employment in circumstances in which the employer, Mitrux Services
Ltd. and Ameri-Can Freight Systems Inc., repudiated the contract before the
employment began and in which the employee, Mr. Quach, obtained
alternative employment soon after the repudiation. The judgment was in an
amount equal to the total annual salary of $138,000, plus $15,000 in aggravated
damages, plus costs.

[2]

In these reasons, I refer to the employee as having been dismissed even
though the employment never began. In doing so I adopt the language of the
parties, which seems to be a convenient entry into relevant authorities,
remembering that employment law in any case is but a specialized field of the
law of contract.

[3]

The main issue in the trial was which of two signed contractual
documents applies as the operative contract between the parties. The first in
time, referred to as the Fixed‑Term Contract, was prepared by a lawyer
engaged by the employee to record the employment offer made to him by the
employer, accepted by e‑mail on August 7, 2015. The operating
mind of the employer was Mr. Arora and Ms. Ali was, at the material
time, the employers sales manager. Mr. Arora and Ms. Ali met with Mr. Quach
on August 25, 2015, and each signed the Fixed‑Term Contract. This
document described a one‑year term of employment from October 1, 2015,
to September 30, 2016, at an annual salary of $138,000.

[4]

The second contract, entitled Employment Agreement and Contract Waiver
referred to as the Second Contract, was signed by the parties on September 28, 2015.
It came into being after Mr. Arora sought legal advice regarding the Fixed‑Term
Contract, and asked the employee to agree to a month‑to‑month
contract in its place. The employee resisted, and in doing so reminded Mr. Arora
he had not been reimbursed $1,000 for his preparation of the Fixed‑Term Contract.
Mr. Arora replied that he would reimburse the employee when he started
work. On September 28, 2015, Mr. Arora advised the employee that
he required a new contract to be in place before the employee started work. By
then, the employee had left his secure previous employment. The employee signed
the Second Contract later that same day. That document provided for month‑to‑month
employment commencing October 1, 2015, terminable upon four weeks
written notice or payment of one months salary in lieu of notice. On the
employees insistence, it included as a term:

5.6       Any failure to comply the terms
[
sic
] of the Employment Agreement or misrepresentation by the Employer
will void this Employment Agreement.

[5]

On September 30, 2015, Mr. Arora terminated the employment,
offering reasons that the judge found did not constitute cause for dismissal.

[6]

The employee sued for damages for wrongful dismissal, basing his claim
for damages on the Fixed‑Term Contract. The employer, in response, alleged
cause and advanced the Second Contract as the operative agreement between the
parties.

[7]

In his reasons for judgment concerning the operative contract, the judge
rejected the employers two submissions that the Fixed‑Term Contract was
unenforceable by reason of
non est factum
and because the fixed‑term
provision was mistakenly included. The judge accepted the employees submissions
that the Second Contract failed for lack of fresh consideration. Alternatively,
the judge found that the Second Contract was void on the basis that Mr. Arora
had misrepresented his intentions to employ Mr. Quach and failed to comply
with the terms of the Second Contract by not allowing the employee to begin
employment on October 1, 2015, both contrary to clause 5.6 set out
above.

Grounds of Appeal

[8]

The employer appeals from the order for damages and costs. It contends the
judge erred:

1.

in finding the $1,000 payable to the employee as reimbursement of legal
fees incurred in preparing the Fixed‑Term Contract was not good
consideration for the Second Contract;

2.

in determining that the employer had made a misrepresentation to the
employee that voided the contract; and

3.

in awarding the employee aggravated damages.

[9]

To succeed in establishing the Second Contract as the operative
agreement, the employer must succeed on both ground 1 and ground 2.

Discussion

[10]

It is useful to start with the scope of this courts appellate role. Our
function is not to retry a case, but rather to determine whether the judge made
a reversible error. In respect of errors of law, we must ask whether the judge
was correct on the question of law posed. On questions of fact or mixed
questions of fact and law, we must ask whether a judge made an obvious (palpable)
and material (over‑riding) error:
Housen v. Nikolaisen,
2002 SCC 33.

Consideration for the Second Contract

[11]

It is a basic principle of contract law that consideration between
parties is required to create a binding contract. There has been shifting of
this principle in cases of variation of terms of the contract, discussed in
Rosas
v. Toca
, 2018 BCCA 191.
Rosas
considered a series of
informal arrangements to extend the time for payment of a debt, to the point
that the limitation period on the original debt expired before an action was
commenced seeking to recover it. Chief Justice Bauman, writing for the court,
addressed the law of fresh consideration as it should apply to variations of existing
contracts and concluded at para. 183:

[183]     When parties to a
contract agree to vary its terms, the variation should be enforceable without
fresh consideration, absent duress, unconscionability, or other public policy concerns,
which would render an otherwise valid term unenforceable. A variation supported
by valid consideration may continue to be enforceable for that reason, but a
lack of fresh consideration will no longer be determinative.

[12]

Employment contracts, even where reduced to writing, rarely define the
consideration for the contract. They are commonly devised so that the benefit
(consideration) received by the employer is the services of the employee, and
the benefit received by the employee is the pay and other emoluments flowing on
performance of the duties. From time to time employment contracts, both written
and oral, are modified. When that occurs, we may come to the issue as to which terms
apply: those of the original agreement or those after modification. An example
of an oral agreement subsequently modified to the disadvantage of the employee
in a written agreement is
Singh v. Empire Life Ins. Co.,
2002 BCCA 452.
In
Singh
, Chief Justice Finch explained:

[12]      I am also of the opinion that the
defendant cannot rely on those provisions of the subsequently signed Regional
Manager's Agreement, which are less advantageous to the plaintiff than the
terms of the original contract. In
Watson v. Moore Corporation Ltd.
,
[1996] B.C.J. No. 525 (C.A.), a majority of the court held that
continued employment, without more, could not amount to consideration. There
was no evidence that forbearance to discharge the plaintiff could amount to
consideration.

[13]

A similar
conclusion was reached by the Ontario Court of Appeal in
Francis v.
Canadian Imperial Bank of Commerce
(1994), 21 O.R. (3d) 75.
The court affirmed the general principle that modification of a pre‑existing
contract will not be enforced unless there is a further benefit to both
parties.

[13]

The judge relied upon
Singh
in reaching his conclusion that fresh
consideration was required to solidify the Second Contract as a binding
agreement. The effect of
Rosas
upon
Singh
(not referred to in
Rosas
) has not been addressed in this case. It seems to me that the import
of
Rosas
may not change the authority of
Singh
in the nuanced
world of employer and employee contractual relationships. Whether it does is an
interesting question that can and should be left to another day because, in my
view, the Second Contract presents much more than a
Rosas
‑style
variation in any event.

[14]

The nature of the Second Contract is exposed in its formal name
Employment Agreement & Contract Waiver. The name demonstrates that something
more than employment is the subject of the agreement. That something more is
the cancellation of the Fixed‑Term Contract. This Second Contract, then, is
much more than variation of the Fixed‑Term Contract. By the terms of the
Second Contract, that first contract would come to an end and would be replaced
by an arrangement favourable to the employer and unfavourable to the employee. Recognizing
that this new contract bestows benefit on the employer, the Second Contract
expressly contemplates consideration (benefit) to the employee for the
cancellation, in these words:

2.2       In consideration of the
termination of the prior Employment Agreement, the Employer agrees to waive
probationary requirements as set out by the Labour Standards of BC and will adhere
strictly to the terms of Termination of Employment.

[15]

When analyzed carefully, however, this clause provides no consideration,
although it pretends to do so. It may be that the reference to probationary
requirements is a reference to the three month period during which, by
s. 63 of the
Employment Standards Act,
R.S.B.C. 1996, c.113,
an employee is not entitled to termination pay. Section 63, however, would
not apply in the circumstances present here because the
Employment Standards
Act
establishes a floor of standards, and does not interfere with higher
standards resulting from the common law, or contracts of employment. In other
words, the consideration spoken of in clause 2.2 of the Second Contract
gives no benefit to the employee. Yet the contract contemplates a purported
benefit to the employee for giving up the Fixed‑Term Contract. It is to
this point that the employer advanced the payment of $1,000 as consideration
capable of supporting the Second Contract.

[16]

The judge found that the mutual benefit required to form the Second
Contract was not established. He said:

[252]    I do not find the defendants promise to pay $1,000
towards the plaintiffs legal bill for the drafting of the First Contract is
consideration for the Second Contract. They are unrelated.



[264]    I find in the case at bar that the plaintiff
received no further benefit from the Second Contract; in fact, he suffered the
loss of the benefit of the Term provision, and its guarantee of employment for
a term of one year, as he had over the first term under the Fixed‑Term
Contract, with nothing in exchange. Counsel for the plaintiff pointed out,
aptly in my opinion, that the defendants, on the other hand, received a
significant benefit because they were no longer liable to the plaintiff for
damages over the first term.

[265]    There is a conspicuous
difference in Mr. Quachs entitlement to damages on termination under the
Fixed‑Term Contract (12 months) and the second contract, (one month). I
agree with the plaintiff that from a policy standpoint it would lead to an
unrealistic and unfair result if the principles of fresh consideration did not
apply in a situation where employment had not yet commenced but there was a
subsequent contract that amended the initial expected terms of employment, as
did the Fixed‑Term contract.

[17]

The employer says the judge erred in his conclusions and that its
commitment to pay $1,000 to reimburse the legal fees incurred by the employee
in creating the Fixed‑Term Contract was sufficient benefit to the employee
to create the Second Contract as a binding agreement. In support of that
submission it refers us to the following cross‑examination of the
employee:

Q         Now, one of your claims is that you have
claimed that you are entitled to be reimbursed for a thousand dollars for the
cost of drafting the first contract, correct?

A          Yes.

Q         And who told you that -- that that would be something
you'd be entitled to?

A          Mr. Arora.

Q         When?

A          When I was discussing with him about changing
the contract again in late September, when he asked me to get the contract
redrafted again by a lawyer and I told him that the first contract had already cost
me a thousand dollars, where he had previously promised me that he would pay
for that and still have done so.

Q         I see. So that had never been discussed prior
to the execution of the first contract, it was only discussed at the time of
the second contract?

A          That is correct.



Q         Well, how much -- how long before the signing
of the second contract did you agree that you'd be reimbursed for the $1,000?

A          The 1100 dollars?

Q         Well, I'm just talking about the 1,000, for
now.

A          Okay, well, the 1,000 was probably made a few
days or maybe a week before that.

Q         But Jas said, "If you sign this contract,
we'll make sure to reimburse you the 1,100 dollars even."

A          If I sign this contract?

Q         Yeah, if -- if you chan --

A          No, it was --

Q         -- if you change the contract that -- that you'd
-- you'd certainly get your reimbursement.

A          To change the contract.

Q         Yes.

[18]

The employee says the promise to reimburse $1,000 was not good
consideration because the evidence does not establish that the promise to pay
was given in exchange for his agreement to the Second Contract. He denies that
the portions of the cross‑examination relied upon by the employer, read
in the context of his entire testimony, establish that the promise to pay him
$1,000 was made in exchange for his signing the Second Contract. He refers us,
also, to other passages of the transcript in which he describes a previous
promise by the employer to reimburse him for his legal fees related to the
Fixed‑Term Contract, and adopts the judges characterization of the
evidence as vague. Further, he says that the offer to pay $1,000 was illusory
because the amount was not paid, although at trial the employer agreed that it
owed him that amount. He also asks the court to draw an adverse inference from
the absence of a plea of fresh consideration in the employers amended response
to civil claim, as it was written at the time of trial.

[19]

The question whether fresh consideration was provided to the employee as
part of the price for the employer securing a more favourable contract with
the employee is a question of fact, to which the deferential standard applies.

[20]

In my view, the judge accurately described the evidence on the issue of
whether reimbursement is fresh consideration when he said it was vague. Apart
from the problem that consideration is referred to in the Second Contract,
but not in the form of the $1,000 payment consideration now posited as its
basis, it is clear that the terms of the Second Contract were not settled when
the employer offered to reimburse the employee $1,000. It is equally clear that
the sum of $1,000 was not paid to the employee on signing the contract, or at
any later time. Absent payment of $1,000, or a commitment given in the Second
Contract to pay it, any discussion of such a payment is fairly characterized as
vague. It was open, in my view, to the judge to find the employer had not
established fresh consideration of $1,000. I see no basis on which we may
interfere with the judges conclusion on this factual issue.

[21]

The Second Contract was premised upon the cancellation of the Fixed‑Term
Contract for consideration, but no consideration was provided. In these circumstances,
I cannot say the judge erred in his conclusion in respect to the consideration
issue.

[22]

In the result, I would not accede to this ground of appeal, and
accordingly, the submission that the Second Contract governs the dispute cannot
prevail.

Misrepresentation

[23]

The judge found, in the alternative to his conclusion that the employer
had failed to establish fresh consideration for the Second Contract, that the
employers failure to allow the employee to commence his employment was a
misrepresentation by the employer that voided the Second Contract pursuant to
clause 5.6 replicated above at para. 4.

[24]

The employer contends the judge erred in this conclusion. Given my
conclusion on the first ground of appeal, I will not address this ground in
these reasons.

Aggravated Damages

[25]

The employer contends the judge erred in awarding $15,000 as aggravated
damages.

[26]

The circumstances in which aggravated damages may be awarded are
described by Mr. Justice Goepel in
Cottrill v. Utopia Day Spas and
Salons Ltd.
, 2018 BCCA 383, leave to appeal refd [2018] S.C.C.A.
No. 533:

[14]      It has long been accepted that a dismissed
employee is not entitled to compensation for injuries flowing from the fact of
the dismissal itself:
Wallace v. United Grain Growers Ltd.
,
[1997] 3 S.C.R. 701 at para. 103. While the loss of a job is
very often the cause of injured feelings and emotional upset, the normal
distress and hurt feelings resulting from dismissal are not compensable: [
Honda
Canada

Inc. v. Keays
, 2008 SCC 39] at para. 56.

[15]      Ms. Cottrill argued that unfairness in the
manner of dismissal was sufficient in itself to ground an award for aggravated
damages. The authorities do not support that proposition. An award of
aggravated damages resulting from the manner of dismissal requires: (a) a
finding that an employer engaged in conduct during the course of dismissal that
was unfair or in bad faith,
and
(b) a finding that the manner of
dismissal caused the employee mental distress:
Honda
at para. 59.

[Emphasis
in original]

[27]

On the reasoning in
Honda
, not all mental distress from the fact
of dismissal attracts an award of aggravated damages  the plaintiff is
required to establish something well beyond the normal distress and hurt
feelings that invariably accompanies loss of employment. As Mr. Justice
Savage explained in
Lau v. Royal Bank of Canada
, 2017 BCCA 253
at para. 49, referring to
Mustapha v. Culligan of Canada Ltd.,
2008 SCC 27,
and
Saadati v. Moorhead,
2017 SCC 28, testimony showing a
serious and prolonged disruption that transcended ordinary emotional upset of
distress may constitute a sufficient evidentiary foundation but the demeanor
of the plaintiff in the witness stand is an insufficient basis for a finding
of the requisite distress.

[28]

The judge in the present case found both of the
Cottrill
conditions were present. The employer, on appeal, does not dispute the judges
finding of bad faith. Its challenge to the award is directed to the second condition
 that the manner of dismissal caused the employee mental distress.

[29]

Having found that the employers behaviour during the dismissal
satisfied the criterion of bad faith, the judge summarized the effects of the
dismissal on the employee:

[317]    I found credible Mr. Quachs
testimony regarding the devastation he felt, feeling like a complete failure;
the stress and anxiety he felt. As he put it, he had been fired from a job he
had not even started. As I related earlier in these reasons, he had a baby coming,
financial obligations, in‑laws moving to live at his home and no other
source of income. I find Mr. Arora knew Mr. Quachs situation and
despite promises Mr. Quach would keep his employment, ignored his
situation.

[30]

The judge then observed that the employee had found new employment
quickly, and awarded what he said was an amount at the low end of the range of
aggravated damages  $15,000, concluding with this description of the employers
conduct:

[329]    The defendants conduct
was spiteful and deserving of compensation to the plaintiff.

[31]

The points that follow the judges description in his para. 317 of
the devastation attested to by the employee are the employees life
circumstances at the time of the dismissal, and in the normal course are not
matters that will increase damages. Rather, the question in this aspect of the
aggravated damages analysis is the impact of the termination on the employee
and his mental state, as to which the judge says little. Although he quotes the
word devastation and refers to the employees stress and anxiety, there is no
indication that the employees feeling of strong dismay and anxiety for himself
and family was beyond the normal distress and hurt feelings that are not
compensable. On the contrary, there is considerable evidence that he recovered quickly
from his loss of the position. For example, the record shows that the employee
was at least partially prepared for the possibility he would lose his job; he
had already sought out other employment opportunities, and because of that anticipatory
search, he found new employment soon after he learned he would not be starting
work with the employer. So too, the employees frank exchanges with Mr. Arora,
quickly corresponding with Mr. Arora and saying that he would see [Mr. Arora]
in court, demonstrate a sturdy response to the dismissal.

[32]

I conclude that as in
Cottrill
at para. 18, the record
falls well short of the legal standard that requires a serious and prolonged
disruption that transcends ordinary emotional upset or distress. While the
judge was entitled to factor his view on the employers spiteful behaviour
into the first condition (bad faith) for aggravated damages, evidence of more
than the normal transitory dismay, stress and anxiety is required to satisfy
the second condition of the test for aggravated damages. Here the quality of
the employees response does not equate to the sort of mental distress required
for this exceptional remedy.

[33]

I conclude the award for aggravated damages must be set aside.

Mitigation of Damages

[34]

The Fixed‑Term Contract, which governs the parties, provides:

4.1       The
parties understand and agree that the Employees employment pursuant to this
agreement may be terminated as follows:

(a) By the Employee, at any time, for any reason, on the
giving of four weeks written notice to the Employer;

(b) By the Employer, in its absolute discretion, at any
time, on the giving of written notice to the Employee at which time payment of
the full balance of the compensation due to the Employee for the entire First
Term or Second Term as the case may be will become due and payable within two
weeks of such notice of termination. For greater clarity, the Employer shall
pay to the Employee, all compensation due to the Employee at the date of
termination as well as all compensation due to the Employee from the date of
termination through to the expiration of the First Term or Second Term as the
case may be.

[35]

The judge made no deduction for mitigation of damages through post‑dismissal
earnings, relying upon
Howard v. Benson Group Inc. (The Benson Group Inc.)
,
2016 ONCA 256, leave to appeal refd [2016] S.C.C.A. No. 240.
Howard
was a case of a fixed‑term contract that did not contain a notice
period provision determining the employers obligations upon termination. The
court in
Howard
applied the courts earlier case,
Bowes v. Goss Power
Products Ltd.
, 2012 ONCA 425, and said at para. 22

that
if the parties to a fixed term employment contract do not specify a pre‑determined
notice period, an employee is entitled on early termination to the wages the
employee would have received to the end of the term. This conclusion in
Howard
extends
Bowes,
a case of a contract with a fixed notice period
provision that provided for payment
in lieu.
In
Bowes
,

the
court held at para. 30 that the amount agreed upon should be treated as
liquidated damages or a contractual amount.

[36]

The leading authority in British Columbia in a
Howard
sort of
situation, however, is
Neilson v. Vancouver Hockey Club Ltd
. (1988),
51 D.L.R. (4th) 40, (B.C.C.A.), not referred to in either
Howard
or
Bowes.
Rather than approaching the damages issue from the singular
question whether the contract is for a fixed term, as
Howard
does,
Neilson
distinguishes between a fixed‑term contract without a termination clause and
a contract with a termination clause providing for payment of a fixed amount. Observing
that employment law is governed by the law of contract, Mr. Justice Seaton
in
Neilson
closely analyzed the status of the contract once the employee
is refused continuing employment. He observed that the employees action then is
for damages, not remuneration, and that the employee is not entitled to treat
the contract as subsisting. Justice Seaton then turned to the issue of
mitigation. Without resolving whether there is a
duty
to mitigate, an
issue on which there are conflicting authorities based on competing theories, Justice
Seaton concluded that unless the contract provides otherwise, the employer
derives the benefit of mitigation, even in a fixed‑term contract. For
this conclusion, he relied on
Cockburn v. Trusts & Guar. Co.
(1917),
55 S.C.R. 264, 37 D.L.R. 701, which held at 703 that
even where an employee is under no duty to mitigate, the actual diminution of
his loss may be taken into account. After referring to
Br. Westinghouse
Elec. & Mfg. Co. v. Underground Elec. Ry. Co. of London
,
[1912] A.C. 673 (H.L.), Justice Seaton stated the general principle
that applies in British Columbia:

[14]      On this question I
conclude that whether or not the plaintiff was bound to mitigate is irrelevant.
He cannot recover for avoided loss in any case.

[37]

At the same time as stating the general principle applicable to
contracts that do not have fixed provisions for termination, Justice Seaton
recognized that the parties can agree to a term that compels a different result
on the effect of mitigating earnings, referring to a contract that may provide
otherwise.

[38]

Neilson
has been followed by this court in
Mosher v. Epic
Energy Inc.
, 2001 BCCA 253, and
Alsip v. Top Rollshutters Inc.
dba Talius
, 2016 BCCA 252. In addition,
Neilson
was relied
upon by Justice Major in
Wells v. Newfoundland,
[1999] 3 S.C.R. 199 at para. 65, for the proposition that
in a contractual claim, whether arising from a fixed‑term contract or
not, the usual rules of mitigation of damages apply.

[39]

The result of these authorities, in my view, is that in British
Columbia, on the authority of
Neilson
, the fixed‑term nature of a
contract does not entitle the employee to damages in the full amount of unpaid
wages for the balance of the term without deduction of monies earned elsewhere
during the term, absent a provision otherwise. In this way
Neilson
is at
odds with
Howard
but not
Bowes
.

[40]

I mention all of this lest the judges reference to
Howard,
and
our silence on it, be taken as agreement with the conclusion that in all cases
of fixed‑term contracts, mitigation of damages may not be considered.
Instead, I suggest the jurisprudence is to the effect that consideration of
mitigated damages will depend on the particular termination provisions of the
contract at issue.

[41]

In this case, of course, the contractual language in clause 4.1(b) expressly
establishes the amount of the payment owing to the employee by the employer
immediately upon termination of the employment by the employer. For that
reason, and applying the notion of otherwise provided allowed in
Neilson
,
the judges conclusion that the employee is entitled to damages equal to one
full year of earnings provides the correct remedy under the Fixed‑Term
Contract.

Disposition

[42]

I would allow the appeal to the extent only of setting aside the award
of aggravated damages.

The Honourable Madam
Justice Saunders

I agree:

The Honourable Mr. Justice Harris

I agree:

The Honourable Mr. Justice Hunter


