



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Nardulli v. C-W Agencies Inc.,









2014 BCCA 31




Date: 20140128

Docket: CA040455

Between:

Vito Nardulli

Respondent

(Plaintiff)

And

C-W Agencies Inc.

Appellant

(Defendant)




Before:



The Honourable Madam Justice Saunders

The Honourable Madam Justice Kirkpatrick

The Honourable Mr. Justice Harris




On appeal from:  An
order of the Supreme Court of British Columbia,
dated November 13, 2012 (
Nardulli v. C-W Agencies Inc.
, 2012 BCSC 1686,
Vancouver Docket S090014).




Counsel for the Appellant and Respondent on cross-appeal:



D.P. Church, Q.C.

I. Schildt





Counsel for the Respondent and Appellant on cross-appeal:



G. Holeksa

R. Germann





Place and Date of Hearing:



Vancouver, British
  Columbia

November 19 and 20,
  2013





Place and Date of Judgment:



Vancouver, British
  Columbia

January 28, 2014





Written Reasons by:





The Honourable Madam Justice Kirkpatrick





Concurred in by:





The Honourable Madam Justice Saunders

The Honourable Mr. Justice Harris








Summary:

At
trial, the plaintiff claimed damages for wrongful dismissal and profit share
during his employment and in the notice period. The trial judge awarded him 21
months wages in lieu of notice and profit share for the period of his
employment. His claim to profit share in the notice period was dismissed as was
his claim to special costs.

Held: 
appeal allowed in part; cross appeal dismissed. The judges finding that the
plaintiff was wrongfully dismissed and the award of 21 months wages was
upheld, as was the decision not to award special costs. However, the judge
erred in the award of profit share. The profit share plan was never
implemented. Although the plaintiff was eligible for a discretionary bonus, the
employer properly exercised its discretion in deciding not to pay an additional
bonus to the plaintiff.

Reasons
for Judgment of the Honourable Madam Justice Kirkpatrick:

[1]

Vito Nardulli was employed by C-W Agencies Inc. (C-W) from 1986 to
2008, except for a nine month period beginning in January 2006, when he was dismissed
for cause. He was rehired in October 2006. In September 2008, C-W informed
Nardulli that he was not entitled to payments under an alleged profit sharing
plan. Nardulli was asked to sign a release waiving any right to share in C-Ws
profits. Nardulli refused, sought legal advice and commenced an action against
C-W on January 2, 2009. In his statement of claim, Nardulli pleaded that at all
material times, it was a term of his contract of employment that he was
entitled to participate in a company profit sharing plan as an integral part of
his remuneration. He claimed it was a breach of his contract of employment to
refuse payment.

[2]

On January 22, 2009, C-W terminated Nardullis employment for cause.
Nardulli subsequently amended his claim to include damages for wrongful
dismissal.

[3]

Nardullis claims were tried in the Supreme Court over 37 days between
October 2010 and June 2011. The trial judge delivered very long reasons indexed
as 2012 BCSC 1686. The judge awarded Nardulli $262,500 in damages for wrongful
dismissal and $1,332,149 for profit sharing, $582,149 of which was to be
remitted to Canada Revenue Agency on account of tax, and $750,000 to be paid to
Nardulli.

[4]

The judge held that an additional sum of $895,000 paid to or on behalf
of Nardulli were gifts which were not, as C-W alleged, to be taken into account
in determining his profit share.

[5]

C-W appeals the order.

[6]

With respect to Nardullis profit share, C-W alleges the judge erred:
in deciding the issue of profit sharing on a legal basis that was not pleaded
or argued at trial; in finding that a bonus formed an integral part of
Nardullis compensation; and, having found that Nardulli was entitled to a
discretionary bonus, failing to consider whether C-W had reasonably exercised
its discretion to refrain from paying a bonus to Nardulli.

[7]

With respect to wrongful dismissal, C-W contends the judge erred in
concluding that the scope of Nardullis employment was unclear and by failing
to consider accumulated cause in finding whether or not Nardulli was wrongfully
dismissed.

[8]

Nardulli cross-appeals on the grounds that the judge erred in not
awarding him an amount for profit share during the notice period and in
refusing to award him his special costs.

Facts

[9]

The reasons for judgment fully set out the evidence. I need not repeat
it here. The essential facts relevant to the appeal are as follows.

[10]

C-Ws business is primarily the international marketing and resale of
lottery tickets purchased in Canada and elsewhere to purchasers outside of
Canada.

[11]

Randall Thiemer was, until his death in 2008, the sole shareholder and
director of C-W. Sometime in 2000 he announced his intention to implement an
employee profit sharing plan.

[12]

A draft profit sharing plan was prepared by C-Ws lawyers on or about
November 15, 2000. It was to be effective from September 1, 2000.

[13]

The profit sharing distributions under the draft plan required C-Ws
board of directors to determine the amount available for distribution, the
persons entitled to participate in the plan, and the number of units awarded to
each participant for the year.

[14]

The draft profit sharing plan stated that the distribution amount would
be 25% of available cash. The available cash was to be calculated based on the
total cash flow from operating activities for the year, less 2.5% of sales as a
reserve of working capital and fixed assets and 1.5% of sales as a reserve of
prepaid sales.

[15]

Profit sharing distributions were to be calculated using a specific
formula set out in clause 5.5 of the draft plan.

[16]

Under the draft plan, Nardulli was to receive two unit entitlements for
the year ending August 31, 2001.

[17]

A resolution approving the draft profit sharing plan by the C-W board of
directors, of which Thiemer was the then sole director, was never signed by
Thiemer.

[18]

Nardulli commenced employment with C-W in March 1986 and eventually
worked his way up to Vice-President Operations. Nardulli became drug dependent
and his work performance suffered. His employment was terminated for cause in
January 2006. He did not, at that time, claim entitlement to profit sharing.
When Nardulli was rehired in October 2006, he was reinstated with the same
benefits and annual salary of $150,000, effective from October 1, 2006.

[19]

At about the time Nardulli returned to work in October 2006, he told Thiemer
that he and his family had suffered financially following his dismissal. Thiemer
offered to purchase a house for Nardulli. Within weeks, Thiemer gave Nardulli $150,000
(for household furnishings and to pay for drug rehabilitation) and purchased a
home for him for a total of approximately $895,000. There is some evidence that
suggests Thiemer purchased the house for Nardulli rather than advancing him
cash as Thiemer was concerned Nardulli would use the money unwisely.

[20]

These payments, or the promise of them, coincided with Nardulli informing
Thiemer in mid-October 2006, that Michael McLoughlin, who was C-Ws CEO from
2004 (and who fired Nardulli in January 2006), was setting up a competing
business and was circulating unflattering photographs of Thiemer. Thiemer
immediately terminated McLoughlins employment.

[21]

In the years following the announcement of the profit sharing plan, some
employees had raised with Thiemer their wish to be paid profit share. Around the
same time that Thiemer paid $895,000 to Nardulli, he also paid sums to other
employees from his personal accounts, some of which were noted to be profit
draws:

a)

on October 11,
2006, Thiemer paid $250,000 to Nick Belmonte;

b)

on October 17,
2006, Thiemer paid $250,000 to Al DeJoseph;

c)

on October
17, 2006, Thiemer paid $500,000 to Frank Vogt;

d)

on October 18,
2006, Thiemer paid $300,000 to Marisol Malates;

e)

on October 22,
2006, Thiemer paid $400,000 to Ted Weir; and

f)   on November 23, 2006, he
paid a further $250,000 to Nick Belmonte.

[22]

These payments were in addition to two other payments that had been made
earlier in the year as a result of DeJoseph and Belmonte confronting Thiemer
about not receiving their profit share:

a)

on June 23,
2006, Thiemer paid $250,000 to Al DeJoseph; and

b)

on September 21,
2006, Thiemer paid $250,000 to Nick Belmonte.

The cheque request form for the payment to Belmonte
indicated that it was for an Advance on Profit Sharing.

[23]

The foregoing amounts paid by Thiemer to employees were less than, or
more than, or equal to the amount payable under the draft profit sharing plan.
However, it is clear, as the judge found, that the payments were not made in
accordance with the formula in the draft plan.

[24]

Thiemer died on August 21, 2008. Prior to his death, Thiemer retained Brian
Gardiner, a chartered accountant and certified fraud examiner, to undertake an
analysis of the amounts Thiemer had paid to various C-W employees in October
2006 so as to achieve parity among the employees.

[25]

A complicating feature in this trial was that Thiemer had died and there
was little evidence as to his intentions with respect to the profit sharing
plan.

[26]

Critical evidence of Thiemers intentions came from a recorded telephone
conversation in which Thiemer instructed Gardiner to undertake the analysis to
achieve parity in the amounts Thiemer had paid C-W employees from his
personal accounts in 2006. The telephone instructions made on August 21, 2007
were tape recorded by Gardiner and include the following:

Theres a lot of peoples pay that really dont have any
semblance to each other, uh
you know people and the profit sharing plan
which never worked out and I dont think ever will, but uh you know with
everybody thinking there were profit coming you know Im supposed to make it so
and I was doling out money, you know so, from my personal account to make it so
and so you know but I dont want it out of my personal account in the Caymans,
or out of my personal account in Canada and a I want it out of the company and
what I would like to do is do an audit and see who got what and how they, how
they you know, you know sort of parity if any ...

. . .

You know some people are under
balance, some people are way over balance on their profit draws and I just, I
just paid them out as for loans, personal loans and that sort of thing and I
just want to pacify them,
except as bonuses I guess
.

[Emphasis Added.]

[27]

Gardiner affirmed Thiemers view of the non-existence of the profit
sharing plan:

Q         Any discussions with Mr. Thiemer about
these payments to employees? All this work you had done?

A.         We talked about
the issue of the profit-sharing plan, and he told me that he had never
successfully completed the implementation of a public profit-sharing plan. He
told me that he understood it was his obligation to communicate to his senior
people that there wasnt one.

[28]

These instructions reflect the very unusual circumstances of this case.
It is plain that Thiemer, as the companys sole shareholder, treated C-W as his
own financial fiefdom. Thiemer was, in essence, C-W. He paid very significant
sums from his personal accounts in the expectation that they would eventually
be run through the company and he would be repaid the sums he had advanced on
behalf of the company.

[29]

After conducting the review, Gardiner prepared documents dated June 25
and 26, 2008 which identified payments to C-W employees as profit share/bonus.
The payments were confirmed by Thiemer initialling both documents. The document
dated June 26, 2008 included the following statement:

The payments in 2005 and 2006 noted above as #1-9 were each,
the net after tax amount of the profit share/bonus advanced to by Randy
[Thiemer] on behalf of C-W.

Accordingly C-W should be
declaring the payments at the grossed up amounts and remitting the taxes due.

[30]

The payment described as item #2 was the $150,000 payment to Nardulli on
October 11, 2006. The paragraph immediately following the list of payments
referred to the funds that had been advanced for the purchase of a house that
was registered in Nardullis name.

[31]

Following Thiemers death, Gardiner completed the task assigned to him
to even up the payments to C-W employees by way of a written schedule setting
out his recommendations to the board of directors for amounts he defined as discretionary
bonuses. The schedule was adopted by directors resolution on September 23,
2008. Nardulli was excluded from the schedule and therefore was not entitled to
further payment. A note to the schedule explains that in 2006 Thiemer had
provided Nardulli with $150,000 and funds to purchase a house. The note further
explains that Nardulli was fired for cause in 2006 and therefore ineligible for
profit sharing.

[32]

When Nardulli was advised that the payments made to him in 2006 would be
treated as bonuses, he told Gardiner he could not afford to pay tax on the
amounts he had received. Gardiner testified that because there was no profit
sharing plan, the parity issue had to be resolved through discretionary
bonuses, or, in Nardullis case, by characterizing the advances as gifts, so as
to allow Nardulli to avoid paying tax. Gardiner testified that in order for
Nardulli to avoid paying tax on these amounts, he decided to characterize the
payments to Nardulli as gifts unrelated to his employment with C-W.

[33]

On November 4, 2006, Nardulli demanded to be paid his alleged profit
share, a demand that astounded Gardiner since Nardulli had already received a
gift of $895,000. On November 26, 2008, Nardulli went on medical leave and
never returned to work. As noted, he commenced his action against C-W on
January 2, 2009 and was dismissed for cause on January 22, 2009.

Discretionary Bonus and Profit Sharing Issues

[34]

In her reasons, the judge summarized her factual findings with respect
to the profit share issue, albeit in the context of determining whether a bonus
would have formed part of Nardullis compensation during the notice period (at para. 555):

1.   Mr.
Thiemer promised profit sharing to the senior
management employees;

2.   A Profit
Sharing Plan was drafted but not formerly implemented by Mr. Thiemer;

3.   Mr. Nardulli
was to have been a participant in the Profit Share Plan;

4.   Mr. Thiemer
continued to promise profit sharing to various senior employees over the years
and, with other senior employees, expressly contracted on behalf of C-W to pay
profit sharing under the Profit Sharing Plan, even though the Plan was never
formerly implemented;

5.   Since
around 2000, the salaries of senior management were capped at $150,000, and
there were no salary increases in recognition of the fact that senior
management employees would receive profit sharing in lieu of any salary
increases;

6.   Mr. Thiemer
made payments to Mr. Belmonte as an advance on his profit sharing;

7.   Mr. Thiemer
acknowledged to Mr. Gardiner that although the Profit Sharing Plan never
worked out, everyone believed that they would be receiving profit sharing, and
he had to make it so and was doling out money...to make it so;

8.   Mr. Thiemer
asked Mr. Gardiner to determine what payments he had made from his
personal account as profit draws, and to even out the payments and arrange
for those payments to be made by C-W;

9.   Mr. Gardiner
based the calculation of the profit sharing payments in part on the terms of
the draft Profit Sharing Plan;

10. Mr. Gardiner
recognized that Mr. Thiemers house purchase for Mr. Nardulli and the
$150,000 occurred before Mr. Nardulli was rehired, and was a gift from Mr. Thiemer;
and

11. The house and the $150,000 was not an
advance on profit sharing, or otherwise related to Mr. Nardullis
employment.

[35]

The judge then stated:

[556]    Where the Court concludes that the bonus constituted
an integral part of the plaintiffs salary, and the process of determining the
bonus under the contract involves an element of discretion, the court will
proceed on the basis that this discretion must be exercised reasonably and in
accordance with objective criteria:
Ivanore v. Bastion Development Corp
.
(1993), 47 C.C.E.L. 74.

[557]    Mr. Gardiner described the payments he
determined as discretionary bonuses. However, the payments Mr. Thiemer
personally made were considered by him to be profit draws. I accept that they
were discretionary because there was no established formula; the discretion
must be exercised reasonably and objectively.

...

[560]    Furthermore, I do not think that C-W can argue that
the Profit Sharing Plan never existed, yet at the same time argue that under
the terms of the Plan Mr. Nardulli is not entitled to profit sharing
because he was terminated for cause. In any event, Mr. Nardulli may have
been terminated for cause in January 2006, but when he was rehired in October
2006 it was on terms that all of his benefits be reinstated, which would
include those under the Profit Sharing Plan or the profit draws Mr. Thiemer
knew that the senior management employees reasonably expected was an integral
part of their overall compensation.

C.        Disposition of
Profit Sharing Claim

[561]    I accept Mr. Nardullis argument that the
evidence supports a finding that C-W created a reasonable expectation of a
Profit Sharing Plan, and those expectations were crystallized into an
entitlement to receive payment when Mr. Thiemer paid advances on profit
sharing to senior management employees in 2006.

[562]    The Profit Sharing Plan document was drafted and finalized,
except for Mr. Thiemers signature. Mr. Thiemer then advised the
senior management that the Plan existed and that it was meant to provide
significant remuneration as a way to recognize the senior management employees
devotion to C-W over the years. It was also written into Mr. DeJosephs
contract when he was hired.

[563]    The oral representations made by Mr. Thiemer
were intended to have contractual force. He recognized that the employees
expected to receive profit sharing. Raises were not given and senior management
salaries were left at $150,000 in lieu of the intended profit share payments.
When employees confronted Mr. Thiemer about profit sharing or salary
increases, he did not deny the existence of profit sharing or try to back out
of his promise to pay profit sharing. In fact, he did the opposite.

[564]    Although Mr. Thiemer
paid several C-W employees substantial amounts that were to be advances on
the profit shares under the Plan, he does not appear to have followed a formula
or to have pegged the payments to anything in particular. However, there is no
evidence that he did not appreciate what he was doing.

[36]

Nardullis fundamental pleading was that C-Ws profit sharing plan was a
material term of his contract of employment. C-Ws defence, which the judge
appears to have accepted, was that C-W never implemented the profit sharing
plan.

[37]

The trial judge found that the payments made by Thiemer to Nardulli in
October and November 2006 were in the nature of a gift. The judge concluded
that the amounts paid to Nardulli were gifts unrelated to his employment with
C-W because they were offered at a time when he was not employed by C-W. On
that basis, she considered that the gifts should not have precluded Nardulli
from an award of profit share. In my opinion, that conclusion is incompatible
with the evidence that Nardulli was reinstated to his employment as of October
1, 2006, and the evidence that the payments were actually made after he
returned to work. It also ignores the June 2008 document initialled by Thiemer
that indicated the $150,000 payment to Nardulli was profit share/bonus.
Gardiner designated the $150,000 payment as a gift solely for the purpose of
allowing Nardulli to avoid paying tax on the amount. Furthermore, it ignores
the factual context in which the gifts were made − at a point in time
when Thiemer was rehiring Nardulli, a long-time employee whose re-employment
effectively meant he had never left the company.

[38]

The trial judge also found, incongruously, that although the profit sharing
plan was not implemented, Nardulli was nonetheless entitled to profit sharing
based on Thiemers oral representations which were intended to have
contractual force. She concluded that this created a reasonable expectation
of payment, which crystallized into an entitlement following the advances
on profit sharing paid to other employees in 2006.

[39]

The judge agreed with C-W, however, that Nardulli was not entitled to
any profit sharing payments in the notice period.

[40]

On appeal, C-Ws position with respect to the finding that Nardulli was
entitled to profit sharing was stated as follows:

(a)      Nardullis claim, as pleaded and argued at trial, was for
payment under a specific profit sharing plan. Having determined that no such
profit sharing plan was implemented, it was not open to the Court to grant an
award on the basis of a discretionary bonus;

(b)      to the extent it was open to the Trial Judge to make an
award on the basis of a discretionary bonus, she erred in doing so, as Nardulli
did not establish any contractual right to receive such a bonus; and

(c)      even
if Nardulli did establish a contractual right to receive a bonus, the bonus was
still discretionary in nature and C-W acted reasonably in concluding that
Nardulli was not entitled to any bonus payment.

[41]

C-Ws first position

that
it was not open to the judge to grant an award on the basis of a discretionary
bonus, since this was not pleaded

has
some force. However, I do not need to address it because, although I conclude
that Nardulli had some kind of entitlement as a result of the oral
representations made by Thiemer, in this case the discretion not to give him a
bonus over and above what he had already received was reasonably exercised.
Moreover, C-Ws submission that the award should not have been made on the
basis of discretionary bonus is somewhat anomalous because the
order
appealed from refers to Nardullis entitlement to profit sharing; it does not
refer to a discretionary bonus.

[42]

This anomaly may be explained by the fact that the judges reasons are
unclear as to the precise characterization of Nardullis entitlement. Doing the
best I can with the findings that are supported by the evidence, I conclude
that Nardulli was not entitled to profit sharing as contemplated by the draft
profit share plan. However, the evidence does support a finding that he was eligible
for a discretionary bonus that was aimed at achieving parity among the
employees of C-W. In my view, the critical question is whether C-W reasonably
exercised its discretion in refusing to pay Nardulli a discretionary bonus
because he had already received $895,000. I conclude C-W did reasonably
exercise its discretion.

[43]

My reasons for these conclusions follows.

[44]

Central to Nardullis argument as to profit sharing was that C-W created
a reasonable expectation of a profit sharing plan that crystalized when
other employees were paid amounts described as profit share, a submission the
judge accepted (at para. 561).

[45]

However, the proper legal question to be asked was not whether Nardulli
had a reasonable expectation of a profit sharing plan, but rather, whether C-W
was under a legal obligation to pay profit share. As stated in
Lavarack v.
Woods
, [1966] 3 A.E.R. at 690:

The general rule as
stated by Scrutton, L.J. in
Abrahams v. Herbert Reiach, Ltd.
, [1922] 1
K.B. 477, that in an action for breach of contract a defendant is not liable
for not doing that which he is not bound to do,  The law is concerned with
legal obligations only and the law of contract only with legal obligations
created by mutual agreement between contractors - not with the expectations,
however reasonable, of one contractor that the other will do something that he
has assumed no legal obligation to do.

[46]

Nardulli did not have a written employment contract. The essential terms
of his employment were recorded on the Employee Personnel Notification Form
submitted on October 17, 2006 which states reinstate all benefits and pay rate.
The fundamental issue before us is the nature of the benefits, if any, to
which Nardulli was entitled under his contract of employment. That
determination cannot rest, as the judge assumed, on payments made to other
employees because their contracts were as between them and C-W.

[47]

It is difficult to reconcile the judges finding at para. 555 that
the draft profit share plan was never formerly implemented (by which I
understand the judge to mean it was not implemented) with her finding at para. 562,
that Nardullis expectation of profit sharing crystallized into an entitlement
when Thiemer paid advances on profit sharing to senior management employees
in 2006.

[48]

There can be no question that Thiemer told his employees in 2000 that he
wanted them to share in the profits of the company they had helped to build.

[49]

There is also no doubt that Thiemer recognized that the formal profit
sharing plan had never worked out, but that he nonetheless wanted his
employees to be compensated for their part in the companys success. Indeed, in
some instances the payments made by Thiemer to others from his personal
accounts in October and November 2006 were noted as related to profit sharing.

[50]

Most significantly, as the judge acknowledged at para. 564 of her
reasons, Thiemers payments to other employees were not made in accordance with
the draft profit sharing plan, and were not pegged  to anything in particular.

[51]

Profit sharing plans, such as the draft plan in this case, typically
call for profit sharing to be paid on the basis of a formula that reflects the
profitability of the company. These have also been called formula bonuses:
Leduc
v. Canadian Erectors Inc.
(1996), 18 C.C.E.L. (2d) 216 at paras. 46−47
(Ont. Ct. Jus. Gen. Div.). If the profit sharing plan had in fact been
implemented, it would have created a contractual right to a non-discretionary
profit-sharing bonus.

[52]

On the other hand, non-formula bonuses, while they too may reflect the
success or profitability of the company, are awarded on a discretionary basis.
Such discretion may take into account a myriad of factors. However, they are
not paid on the basis of a formula.

[53]

The judge found that the payments made to the employees did not in fact
follow any formula. This, in and of itself, is compelling evidence that the
draft profit sharing plan was not implemented. In finding that there was no
formula, the judge was precluded from finding that the payments were made
pursuant to a non-discretionary, formula-based profit sharing plan.

[54]

In my opinion, the judges finding that he was entitled to profit
sharing as contemplated by the draft profit share plan cannot be sustained. The
finding does not give effect to the recorded evidence that Thiemer acknowledged
that the plan never worked out. The plan was, as the judge found, not
implemented. Neither Thiemer nor C-W, by course of conduct over eight years,
confirmed the existence of the plan (i.e., by making payments specifically in
accordance with the draft plan). Indeed, Nardulli never demanded payment of
profit share when he was dismissed in 2006. At the very most, the payments made
in 2006 were to pacify employees for the fact that the profit share plan had
never
been implemented.

[55]

That leaves to consider whether Thiemers oral representations and
conduct gave rise to a different kind of entitlement
such as a discretionary bonus.
For ease of
reference, the judges reasons on this point are repeated:

[556]    Where the Court concludes that the bonus constituted
an integral part of the plaintiffs salary, and the process of determining the
bonus under the contract involves an element of discretion, the court will
proceed on the basis that this discretion must be exercised reasonably and in
accordance with objective criteria:
Ivanore v. Bastion Development Corp
.
(1993), 47 C.C.E.L. 74.

[557]    Mr. Gardiner
described the payments he determined as discretionary bonuses. However, the
payments Mr. Thiemer personally made were considered by him to be profit
draws. I accept that they were discretionary because there was no established
formula; the discretion must be exercised reasonably and objectively.

[56]

I acknowledge that these paragraphs are inconsistent with the later
finding that Nardulli was entitled to profit sharing. I conclude the judge
either conflated entitlement to profit sharing under the draft plan with
entitlement to a bonus, or considered that the quantum of the bonus should
reflect what would have been paid under a notional profit share plan.

[57]

In any event, Nardulli had the burden of proving a legal entitlement to
a bonus. As I have observed, the proof necessary to establish entitlement to
any kind of bonus was made more difficult because Thiemers testimony was not
available. As well, interpreting entitlements based on an oral agreement has
additional challenges. As the Court remarked in
DeCotiis v. Viam Holdings Ltd
.,
2010 BCCA 368 at para. 21:

As G.H.L. Fridman notes in
The
Law of Contracts in Canada
(5th ed., 2006) [i]n the case of a completely
oral contract there is greater flexibility in the nature of the evidence that
is admissible to prove the contents of the contract and the meaning of the
language used by the parties. (At 440.) This flexibility follows intuitively
from the recognition that oral contracts must often be construed without the
key interpretive tool used to understand written contracts  the words of the
agreement.

[58]

To determine the nature of the obligation, if any, that arose from
Thiemers promises to pay profit share the court must apply an objective
standard in order to protect the reasonable expectations of the parties:
DeCotiis
at para. 22.

[59]

This question is typically asked in the context of whether an employee
is entitled to bonus payments during the notice period. In that context there is
no debate about the factors to be considered in determining whether a bonus
forms an integral part of the employees compensation. These factors look to the
employers course of conduct, and include:

(a)        whether a bonus was received in previous years;

(b)        whether
bonuses were required in order to remain competitive with other employers;

(c)        whether
bonuses were historically awarded and the employer had ever exercised his
discretion against the employee; and

(d)        whether
the bonus constituted a significant component of the employees overall
compensation.

Gillies v. Goldman Sachs Canada
Inc
., 2000 BCSC 355 at paras. 62−63, appeal allowed on other
grounds, 2001 BCCA 683.

[60]

Although
Gillies
deals with the question of whether a plaintiff
was entitled to bonuses that would have been earned during the notice period, I
consider those factors may also be usefully applied to the question of whether a
plaintiff was entitled to a bonus during the employment period. The factors
provide objective criteria by which to measure the reasonable expectations of
the parties.

[61]

There is no dispute that before October 2006, Nardulli had never been
paid anything resembling a profit share or bonus. C-W relied on the judges
conclusion that the payments Nardulli received in October and November 2006
were not bonus payments, but rather gifts and that, therefore, those payments
could not be classified as past bonus payments. However, with respect, the
judge overlooked the fact that the gifts were merely characterized as such by
Gardiner in order to allow Nardulli to avoid tax he would have had to pay had
they been declared bonuses. In substance, however, the payments were in the
nature of a bonus.

[62]

There is some evidence of a pattern of paying bonuses in the 2006
payments to other employees and the 2008 payments made to achieve parity. Those
payments were, as the judge acknowledged, not made on any objective basis and
were entirely arbitrary, a finding that refutes the existence of a profit
sharing plan, but supports a finding that a bonus was an integral part of the
employment contract.

[63]

There was no evidence that bonus payments were necessary for C-W to
remain competitive. Indeed, Nardullis annual salary of $150,000 seems to have
been generous compensation for the work he performed. However, C-W employees
salaries were capped at $150,000 and a bonus that recognized the profitability
of the company could validly be considered a significant component of
Nardullis overall compensation.

[64]

It is clear that, after Thiemers death, Gardiner, who had been
designated by Thiemer to determine a mechanism for achieving parity, concluded
the amounts to be paid were to be discretionary bonuses. This evidence, along
with the other factors, supports the existence of a discretionary bonus as a
term of employment. The judge alluded to this in her reasons and accepted that
the decision to pay discretionary bonuses had to be exercised reasonably and on
the basis of objective criteria (at para. 556):
Ivanore v. Bastion
Development Corp.
(1993), 47 C.C.E.L. 74 (B.C.S.C.). However, having stated
that the discretion had to be exercised reasonably, the judge did not address
the question of whether C-W had exercised its discretion reasonably.

[65]

The question then is whether C-W properly exercised its discretion in
declining to pay Nardulli an additional discretionary bonus.

[66]

As I have noted, the judge did not address this issue. Pursuant to
s. 9(1)(a) of the
Court of Appeal Act
, this Court may make any
order that could have been made by the trial judge. The evidence is sufficient
to allow us to determine the issue omitted by the judge. In my opinion, C-W
acted entirely reasonably when it took into account the amounts previously paid
to Nardulli. The objective criteria adopted in Gardiners recommendation was
the substantial gift Nardulli had received from Thiemer, which was given in
the context of an employment relationship, and which Thiemer apparently sought
to recover through the company. To conclude otherwise would reward Nardulli in a
way that was completely out of proportion to any of C-Ws other employees and
contrary to Thiemers express directions that he wanted there to be parity in
the payments he had made to employees in 2006.

[67]

It follows that I would allow the appeal from that part of the order
awarding Nardulli an amount for profit share. It also follows that I need not
address Nardullis cross-appeal that he was entitled to an amount for profit
sharing during the 21-month notice period.

Wrongful Dismissal

[68]

The trial judge reviewed in detail Nardullis employment history with
C-W from 1986 until his final termination in 2008, as well as what can only be
described as his unusual relationship with Thiemer. I say unusual because, as
the judge found, Thiemer tolerated much of Nardullis misconduct and was
evidently reluctant, likely because of their close personal relationship, to
fire him.

[69]

Nonetheless, Nardullis employment was terminated by McLoughlin, with
Thiemers approval, on January 16, 2006. The grounds for dismissal included
repeated absences from work; arriving late and leaving early; being unavailable
to meet with fellow managers and subordinates; sleeping in his office;
continued substance abuse; and finding that the performance of his duties as
the Manager of Operations was completely inadequate and unacceptable.

[70]

As noted, Nardulli was rehired on or about October 17, 2006 at his
former salary of $150,000, with benefits, reinstated effective October 1, 2006.
His employment record originally indicated that he was hired as VP
Operations, but Thiemer changed the designation to the lesser position of
Manager Operations.

[71]

The judge found that the scope of Nardullis duties on his return to
work was unclear and that he was effectively Thiemers personal assistant or
courier. This finding is contrary to Nardullis pleading in which he described
himself as an executive and claimed that he performed the duties of
Vice-President Operations for 15 years. It is also contrary to Nardullis
evidence that his duties upon returning to C-W remained the same as they had
been prior to his termination in January 2006. The evidence of C-W was to the
same effect. The judges erroneous finding is also at odds with the manner in
which she assessed the notice period. Contrary to her finding that Nardulli was
Thiemers courier, she assessed the notice period in part on the basis that
he held a senior management position with a supervisory role.

[72]

C-W appeals the finding that it did not have sufficient cause to dismiss
Nardulli. It bases this argument partly on the judges finding that Nardulli
essentially performed the duties of a courier and that this implicitly meant
that he was not fulfilling his duties as a manager. However, the judges
erroneous finding cannot be determinative of the issue of whether Nardulli was
performing his duties as manager of operations, nor the issue of whether his
misconduct warranted dismissal.

[73]

C-W alleged an array of grounds for just cause from the date of his
rehiring in 2006, including unauthorized absences; failing to fulfill job
responsibilities of a senior manager; bullying and harassing other employees;
failing to co-operate in a company-wide audit following the theft of equipment;
and viewing and storing pornographic material on C-Ws computer.

[74]

The judge reviewed in extensive detail the evidence of C-Ws allegations
and parties respective positions as to each of the alleged grounds of cause
(63 pages of the reasons were devoted to this review).

[75]

C-Ws fundamental argument is that the judge considered each of the
grounds of just cause in isolation and thereby failed to have due regard to the
cumulative effect of Nardullis misconduct: see
Atkinson v. Boyd, Phillips
& Co
. (1979), 9 B.C.L.R. 255 (C.A.), where this court allowed an appeal
on that basis.

[76]

I am not persuaded the judge failed to consider Nardullis pre-2006
misconduct or the alleged misconduct following his rehiring. A careful review
of her reasons show that while she did indeed consider each of the grounds of
alleged cause, she did so to determine the individual merit of each ground. As
I have said, she reviewed the evidence thoroughly and ultimately concluded that
the totality of the evidence did not support a finding of just cause (at para. 414).
That conclusion signifies that all of Nardullis alleged misconduct was taken
into account. These are findings of fact that deserve deference.

[77]

Furthermore, the judges findings in this respect rested in large
measure on the credibility of witnesses. It is well established that an
appellate court will not interfere with such findings absent palpable and
overriding error:
Lensen v. Lensen
, [1987] 2 S.C.R. 672. I am not
persuaded that the judge erred as alleged. She had ample opportunity to
consider Nardullis misconduct. She concluded it did not rise to the level of
just cause, a finding that was available on the evidence. In substance, C-Ws
arguments on appeal amount to an invitation for us to retry the case which is,
of course, not the appellate function. I would not accede to this ground of
appeal.

Special Costs

[78]

Nardulli cross-appealed, alleging the judge erred in failing to award
him special costs. His claim to special costs was based on the ground that C-W
had, as the judge noted in her reasons, filed voluminous material and "left
no stone unturned (at para. 5). The trial judge also issued separate
reasons on the matter of costs: 2013 BCSC 441.

[79]

We indicated at the hearing of the appeal that the appeal from the order
dismissing special costs could not succeed. The judge heard many days of
evidence and produced extensive reasons for judgment. She heard argument on the
costs issue but concluded this isnt a case, in my view, that merits an award
of special costs. It was a hard fought case, but did not exhibit conduct that
was scandalous or reprehensible.

[80]

It is settled law that costs awards are highly discretionary and deserve
appellate deference. An appellate court should set aside a costs award only if
the trial judge has made an error in principle or if the costs award is plainly
wrong:
Hamilton v. Open Window Bakery Ltd.
, 2004 SCC 9 at para. 27,
[2004] 1 S.C.R. 303. I am not persuaded the judge erred in principle or failed
to exercise her discretion.

[81]

I would not accede to the cross-appeal relating to the special costs
issue.

Summary

[82]

I would allow the appeal from the award in respect of profit sharing. I
would dismiss the appeal from the award with respect to damages for wrongful dismissal.
I would dismiss the cross-appeal in respect of the claim to special costs.

[83]

As success has been divided, I would order that each party bear their
own costs of the appeal. I would not disturb the award of trial costs.

The Honourable Madam Justice Kirkpatrick

I agree:

The
Honourable Madam Justice Saunders

I agree:

The Honourable Mr. Justice Harris


