



COURT
OF APPEAL FOR BRITISH COLUMBIA




Citation:



Marchen v. Dams Ford Lincoln Sales
  Ltd.,









2010 BCCA 29




Date: 20100120

Docket:
CA036991

Between:

Tyler Marchen

Respondent

(
Plaintiff
)

And

Dams Ford Lincoln Sales Ltd.

Appellant

(
Defendant
)






Before:



The Honourable Madam Justice Saunders





The Honourable Mr. Justice Chiasson





The Honourable Mr. Justice Groberman




On
appeal from the Supreme Court of British Columbia, March 26, 2009 (
Marchen
v. Dams Ford Lincoln Sales Ltd.
, 2009 BCSC 400, S053163)




Counsel for the Appellant:



R.D.
  Lee & M.B. Gehlen





Counsel for the Respondent:



A.C.
  Kempf & U. Gabie





Place and Date of Hearing:



Vancouver
, British Columbia





December 3, 2009





Place and Date of Judgment:



Vancouver
, British Columbia





January
  20, 2010









Written Reasons by
:





The Honourable Mr. Justice Chiasson





Concurred in by:





The Honourable Madam Justice Saunders
The Honourable Mr. Justice Groberman






Reasons for
Judgment of the Honourable Mr. Justice Chiasson:

Introduction

[1]

This case concerns the assessment of damages for
wrongful dismissal in a contract which expressly limits an employers
obligation to employ to the availability of work, whether so-called
consequential damages are available to a wrongfully dismissed employee and the
relationship between an award of punitive damages and special costs.

[2]

Mr. Marchen entered into an Apprenticeship
Agreement (the Agreement) with the appellant, which was terminated
wrongfully.  He was unable to find another sponsor and did not complete his
apprenticeship.  The judge awarded Mr. Marchen damages for wrongful dismissal and
consequential damages based on his loss of training and loss of the status of
journeyman.  He also awarded punitive damages and special costs on the basis
that shortly after the termination the appellant gave an incorrect explanation
for the termination and advanced that explanation unsuccessfully at trial.

[3]

In the result, the judge awarded Mr. Marchen:  $18,151.73
damages for wrongful termination; $25,000 for consequential damages; $2,036
special damages; $100,000 punitive damages; special costs.  His reasons are
indexed at 2009 BCSC 400.  The appellant appeals contending the
Agreement was terminable on reasonable notice and challenges the awards of
damages for termination, consequential damages, punitive damages and special
costs.

[4]

For the reasons that follow I would, set aside
the award of punitive damages and the award for damages for wrongful
termination and would remit the matter to the Supreme Court to determine the
amount payable to Mr. Marchen in lieu of notice. Otherwise I would affirm the
order of the trial judge.

Background

[5]

On November 13, 2002 the parties entered into the Agreement.  It provided for Mr. Marchen to apprentice in the appellants
body shop.

[6]

Mr. Marchens brother, Anthony, worked in the
parts department of the appellant.  In the summer of 2004, after failing to
return to work after a scheduled vacation, Anthony confessed to stealing parts
to support a drug habit.  He no longer was employed by the appellant.  In
November 2004 the R.C.M.P. advised the appellant that Anthony was to be arrested
for violating his parole arising out of a conviction for the possession of a
stolen motor vehicle.  The president of the appellant, Mr. Dams, was shocked
because he understood Anthony had no previous difficulties with the law and
because the stolen vehicle had been repainted in the appellants body shop.

[7]

On January 27, 2005, Mr. Marchen was dismissed summarily and without explanation by the appellant.

[8]

Mr. Marchens father testified that on January 28, 2005 he was told by Mr. Dams that Mr. Marchen had been fired because the
criminal investigation had spread to the body shop and charges might be laid
against both Mr. Marchen and his brother.  Mr. Dams denied this conversation. 
The judge accepted the evidence of Mr. Marchens father.

[9]

On February 8, 2005, the General Service Manager of the appellant advised a federal government employee that Mr. Marchen
had been terminated due to a police matter.  The employee contacted Mr. Marchen
who denied the allegation.  He subsequently was approved for unemployment
insurance.

[10]

On June 16, 2005, shortly after this action was initiated, Mr. Dams called the government employee and advised her that the
criminal investigation involved Mr. Marchens brother and that Mr. Marchen was
terminated because the appellant was downsizing its body shop operation.  At
trial, the appellant advanced this as the reason for the termination.  The
judge concluded it was not the reason and that Mr. Marchen had been terminated
because he was suspected of criminal activity.

[11]

Mr. Marchen took fairly extensive steps to
obtain another sponsor so he could complete his apprenticeship, but was
unsuccessful.

Trial judgment

[12]

The Agreement was made pursuant to the
Industry
Training and Apprenticeship Act
, S.B.C. 1997, c. 50 (the 
Act
).


[13]

The judge addressed the terms of the Agreement
in paras. 7 and 8:

[7]        The term of the Apprenticeship
Agreement was from November 13, 2002 to November 12, 2006. Its provisions included:

1.         The
EMPLOYER agrees:

(a)        to
receive the Apprentice/Trainee for the period stated herein and to teach
efficiently the trade or occupation specified in this Agreement; and

(b)        to
fulfill the other obligations of an Employer as set out in Schedule A.

2.         The APPRENTICE/TRAINEE agrees:

(a)        to
place himself/herself as an apprentice/trainee in the trade/occupation listed
in this application/agreement for the period of time as stated below;

(b)        to
complete the prescribed hours of technical training;

(c)        to
share school and examination results with the Employer;



3.         The EMPLOYER and
APPRENTICE/TRAINEE further agree:



(d)        that
the term of this agreement may be extended at the sole discretion of the
Industry Training and Apprenticeship Commission for a period of not more than
13 months, upon written notification to the parties.

[8]        Schedule A of the
Apprenticeship Agreement includes the following provisions:



3.         Every
Employer shall:



(c)        Keep
each Apprentice/Trainee employed so long as work is available for the
Apprentice/Trainee;



(g)        Notify
the CEO and obtain the approval of the Industry Training and Apprenticeship
Commission before making any change affecting the Industry Training and
Apprenticeship Agreement;

(h)        Notify
the CEO immediately of any difficulty that occurs which could interfere with
the fulfillment of the terms of the Industry Training and Apprenticeship
Agreement; and

(i)         Notify
the CEO in writing immediately when, for any reason, an Apprentice/Trainee is
laid off or terminated from employment.

4.         Every
Apprentice/Trainee shall:

(a)        Render
faithful, honest, and diligent service to the Employer during the period of
apprenticeship;



5.         (a)        The
period of apprenticeship shall be as set out in the Industry Training and
Apprenticeship Agreement.

[14]

The Agreement also states a Start Date of November 13, 2002 and an Anticipated Completion Date of November 12, 2006.

[15]

The
Act
provides for the registration of apprenticeship
agreements and states in s. 15(6):  [a] party to a registeredapprenticeship
agreement may terminate it without the consent of the other parties.  The
Agreement was registered.  The CEO (Chief Executive Officer of the Industry
Training and Apprenticeship Commission) was not notified by either party when
Mr. Marchens employment was terminated.

[16]

The judge reviewed Mr. Marchens extensive
efforts to find a sponsor and his job history, concluding in para. 44:

[44]      Since
leaving Dams, Tyler has been unable to find a new apprenticeship sponsor.  He
has not been credited with any on-the-job training credits.  While it is
possible that he may, through a statutory declaration, earn some credits for
the hours he has worked in recent years, such credits must be approved by a new
sponsor.

[17]

In paras. 4547 the judge summarized the
evidence and positions of the parties:

[45]      Mr. Dams, Mr. Penner and Mr.
Delion all testified.  All acknowledged that Tyler was a good employee.  All
denied that Tyler was dismissed because of the criminal activities of his brother. 
Their evidence was that Tyler was let go because the dealership had decided to
downsize its body shop operations in order to increase its capacity to repair
commercial trucks.

[46]      Tyler submits that the
Apprenticeship Agreement was a four-year fixed term contract and he is entitled
to damages based on the difference between what he has earned subsequent to
termination of his employment and what he would have earned if he had completed
the apprenticeship.  He also seeks moral damages arising from the way in which
he was terminated and consequential damages arising from the premature
termination of the Apprenticeship Agreement.  In addition, he seeks punitive
damages.  He submits that subsequent to his termination Dams has acted in a
reprehensible manner that departs to a marked degree from the ordinary
standards of decent behaviour.

[47]      Dams
submits that Tylers employment was terminated because of a lack of work
arising from the decision to downsize the body shop.  Pursuant to the
Apprenticeship Agreement, an employer is only obligated to continue an
apprentices employment if there is available work.  Alternatively, it submits
that the Apprenticeship Agreement was terminable on reasonable notice.  It
relies on s. 15(6) of the
Act
in support of this submission.  It
submits that reasonable notice would be six to eight weeks.  Dams submits that
consequential damages are not recoverable at law and that the method of
termination does not give rise to moral damages.  Finally, Dams says that in
the circumstances of this case, there are no grounds to award punitive damages.

[18]

The judge observed that the evidence indicates
that the body shop was ultimately downsized but stated the evidence did not
establish this was the reason for Mr. Marchens termination.  He concluded in
paras. 56 and 57:

[56]      I find that Tylers termination
arose from Mr. Dams unfounded suspicion that Tyler was somehow involved in his
brothers activity.  There was no evidence whatsoever to support that
suspicion.  The evidence is that Tyler at all times was a loyal and faithful
employee.

[57]      I
reject and do not believe the evidence of Mr. Dams, Mr. Penner and
Mr. Delion that Tyler was terminated because of the decision to downsize
the body shop.  That evidence is inconsistent with the facts as I have found
above based on the evidence which I do accept.

[19]

The judge began his analysis of damages by
considering whether the Agreement was for a fixed term.  It was his view that
the provision permitting termination by either party without the consent of the
other did not allow termination on reasonable notice.  He found the Agreement
to be for a fixed term: that the appellant agreed to employ [Mr. Marchen] for
the period set out in the contract so long as work was available.

[20]

In para. 61, the judge concluded Mr. Marchen was
entitled to damages based on the amounts he would have received to the end of
the fixed term less money he actually earned subsequent to his termination. 
This resulted in an award for lost wages of $18,151.73.

[21]

The judge then turned to moral damages and the
comments of the Court in
Honda Canada Inc. v. Keays
, 2008 SCC 39, [2008]
2 S.C.R. 362, stating in para. 63:

[63]       The
Court concluded that damages resulting from the manner of dismissal are
available only if they result from circumstances in which the employer engages
in conduct during the course of dismissal that is unfair or in bad faith.  The
Court emphasized that the normal distress and hurt feelings resulting from
dismissal are not in themselves compensable.

[22]

In para. 66, the judge concluded:

[66]      When
[the appellant] terminated [Mr. Marchen] it had an honest, albeit mistaken,
belief that he may possibly have been involved in some criminal activity.  While
that belief did not justify his dismissal, I find, given that belief that [the
appellants] conduct at the time of termination was not unfair, unfaithful,
misleading or unduly insensitive.  There is no evidence that [Mr. Marchen]
suffered emotional distress in excess of the normal distress and hurt feelings
that result from any dismissal.

[23]

The claim for moral damages was dismissed.

[24]

The judge began his consideration of
consequential damages by referring to
Fidler v. Sun Life Assurance Co. of
Canada
, 2006 SCC 30, [2006] 2 S.C.R. 3, which confirmed the applicability
of the rule in
Hadley v. Baxendale
(1854), 9 Exch. 341, 156 E.R. 145
(Eng. Ex. Div.).  He then turned in para. 68 to
Addis v. Gramophone Co.
,
[1909] A.C. 488 (H.L.), which articulated the general rule governing damages in
a wrongful dismissal action:

[68]      
Damages allocated in such actions are confined to the loss suffered as a result
of the employers failure to give proper notice.  No damages are available to
the employee for the actual loss of his or her job, pain and distress that may
have been suffered as a consequence of being terminated or for the loss he or
she may sustain because of the fact that having been dismissed of itself makes
it more difficult to obtain fresh employment.

[25]

In para. 69 the judge stated that
Dunk v.
George Waller & Son
, [1970] 2 All E.R. 630 (C.A.), recognized
apprenticeship contracts as an exception to the
Addis
principle:

[69]
Dunk v. George Waller & Son
,
[1970] 2 All E.R. 630 (C.A.) recognized an exception to this general rule in
regard to apprenticeship contracts.  At 634, Widgery L.J. described a
contract of apprenticeship as follows:

A
contract of apprenticeship is significantly different from an ordinary contract
of service if one has to consider damages for breach of the contract by an
employer.  A contract of apprenticeship secures three things for the
apprentice:  it secures him, first, a money payment during the period of
apprenticeship, secondly, that he shall be instructed and trained and thus
acquire skills which would be of value to him for the rest of his life, and,
thirdly, it gives him status, because the evidence in this case made it quite
clear that once a young man, as here, completes his apprenticeship and can show
by certificate that he has completed his time with a well-known employer, this
gets him off to a good start in the labour market and gives him a status the
loss of which may be of considerable damage to him.

Lord Denning noted at 633:

The very object of an apprenticeship
agreement is to enable the apprentice to fit himself to get better employment. 
If his apprenticeship is wrongly determined, so that he does not get the
benefit of the training for which he stipulated, then it is a head of damage
for which he may recover.

[26]

The judge continued in paras. 70 and 71:

[70]      Those comments are consistent with
the principles set out in
Hadley
.  The wrongful termination of the
Apprenticeship Agreement has significantly set back Tylers career.  Instead of
learning his trade at a well-established dealership, he has been forced to
scramble to find employment.  His wages remain well below what he would have
earned as a journeyman.  In spite of his best efforts, he has been unable to
find a new sponsor to complete his apprenticeship.  He has not had the benefit
of the training for which he contracted.  The termination of the Apprenticeship
Agreement has dimmed his future prospects.

[71]      I find
in the circumstances of this case that Tyler is entitled to damages in respect
of the loss of training and loss of status which has resulted.  Such an award
cannot be calculated with any precision.  I award $25,000 for this loss.

[27]

Mr. Marchen was awarded $2,036 as special
damages, which were his relocation expenses to find work.  At the hearing of
the appeal, the appellant advised it took no exception to this award.

[28]

The basis on which the judge awarded punitive
damages was stated by him in paras. 7678:

[76]      In this case, the claim for
punitive damages arises not from Tylers dismissal but Dams attempt throughout
this litigation to cover up the real reason for his dismissal.  If Dams had
been able to establish that Tyler was dismissed for a lack of work, Tylers
claim would have been dismissed, as lack of work was a proper ground to
terminate the contract.

[77]      Dams attempt to justify Tylers
dismissal on the ground of downsizing was a planned and deliberate attempt to
mislead this court as to its true motives.  Its conduct persisted over a
lengthy period of time.  The misconduct commenced shortly after the issuance of
the writ when Mr. Dams contacted Ms. Mahovlich to rewrite the reasons given for
Tylers termination.

[78]      I find
that Dams actions are reprehensible and a substantial departure from the
conduct and practices reasonably to be expected from an employer such as the
defendant.  It breached its obligation to Tyler to act fairly and in good
faith.  It is particularly reprehensible that Dams acted in this manner in
regard to a young apprentice whom it wrongfully terminated from his first
full-time job because of unfounded suspicions.  Tyler was a hard working, loyal
employee.  He deserved better.  While I have found that method of termination
did not warrant moral damages, I find that Dams attempt to cover up the true
reasons for the termination merit an award of punitive damages.

[29]

He held that the appellants conduct was
planned and deliberate and intended to mislead the court.  The motive was to
keep [Mr. Marchen] from receiving damages to which he was entitled.  The
conduct began within days of the commencement of the litigation.....

[30]

The judge addressed special costs in para. 81:

[81]      Dams
attempt to mislead the court as to the true reasons for termination is
reprehensible conduct deserving of rebuke:
Garcia v. Crestbrook Forest
Industries Ltd. (No. 2)
(1994), 119 D.L.R. (4th) 740 (B.C.C.A.).  The
plaintiff is entitled to special costs.

Positions of the parties

[31]

The appellant asserts in its factum that the
judge erred:

1.         in
law, when he construed the
Act
as not permitting termination of Mr.
Marchen on reasonable notice; accordingly, the awards of damages for wrongful
dismissal and consequential damages cannot be sustained;

2.         in principle, awarding punitive
damages;

3.         in
principle, awarding special costs.

[32]

The respondent supports the conclusions of the
trial judge.

Discussion

Wrongful dismissal

[33]

Although it specifies an approximate term, in my
view, it is not helpful to characterize the Agreement as a fixed term contract
because there are a number of variables.  It specifies a starting date and an
anticipated end date.  The uncertainty flows from the nature of an
apprenticeship, which is a period of educational training and experience
tailored somewhat to individual participants.  In addition, by the terms of the
agreement the employment can end before the conclusion of the apprenticeship if
work is not available.

[34]

In para. 7, the trial judge stated the term of
the agreement was from November 13, 2002 to November 12, 2006.  This appears
to have been carried forward as the period of the fixed term as expressed in
para. 60:  [the appellant] agreed to employ [Mr. Marchen]
for the period
set out in the contract
so long as work was available (emphasis added).

[35]

The judge continued:

If [the appellant] had terminated [Mr.
Marchen] because of a lack of work, the termination would not have given rise
to a claim for breach of contract.  Clause 3(c) is clearly intended to
encourage employers to hire apprentices without fear that they may be liable
for damages if they no longer have work available.

[61]      In
this case, however, the termination did not arise from a lack of work but from
unfounded suspicions concerning [Mr. Marchens] conduct.  In the
circumstances, [he] is entitled to damages based on the amounts he would have
received to the end of the fixed term less the money he actually earned
subsequent to his termination.

[36]

In my view, the judge erred in this analysis
because, subject to the availability of work, the contract was for a period of
training, experience and education resulting in journeyman status; the dates
expressed in the contract were approximate only.  They could not define a fixed
term, but more importantly, as the judge noted, the obligation of the appellant
was conditioned on the availability of work.  The fact that Mr. Marchen was not
terminated because work was not available does not change this.  By focusing on
whether the contract was for a fixed term and so concluding, the judge does not
appear to have considered whether there was work available through to November
2006.

[37]

The duration of the agreement was approximately
four years or as long as work was available.  That is, the minimum period was
the availability of work; the maximum was the completion of the required
educational training and experience.

[38]

Generally, termination of a non-fixed term
employment contract is not unlawful.  The actionable wrong is the failure to
give proper notice, which is an implied term of an employment contract (
Vorvis
v. Insurance Corporation of British Columbia
, [1989] 1 S.C.R. 1085;
Machtinger
v. HOJ Industries Ltd.
, [1992] 1 S.C.R. 986).

[39]

Section 15(6) of the
Act
allowed the
parties to terminate the Agreement without the consent of the other, but
termination must be consistent with the provisions, expressed or implied, of
the employment contract.  The section may be recognition that many
apprenticeships take place under collective agreements which usually constrain
termination.  In the non-unionized employment context, the provision confirms
the common law right to terminate a non-fixed term contract, but it does not
obviate the need to give reasonable notice.

[40]

I observe that the present provision replaced
previous legislation that provided an apprenticeship agreement could be
terminated only by mutual agreement and with the approval of the Provincial
Apprenticeship Committee or for cause (
Apprenticeship and Tradesmens
Qualification Act
, R.S.B.C. 1960, c.13, s. 15).

[41]

I do not agree with the judges position that if
there were no work available for Mr. Marchen his termination necessarily would
not have been a breach of contract.  In my view, the question would remain
whether or to what extent he was entitled to reasonable notice.  Clearly
relevant to that inquiry would be the fact the parties agreed Dams did not have
to employ Mr. Marchen if no work was available.  In assessing what notice, if
any to which Mr. Marchen was entitled the court must take into account all of
the circumstances of the relationship.

[42]

Mr. Marchen was terminated in January 2005.  The
anticipated end of the Agreement was November 2006.  The appellant contends six
weeks notice is sufficient.  The respondent asserts reasonable notice would be
to the end of the term, that is, to November 12, 2006; approximately 22 months.

[43]

The Supreme Court of Canada addressed
determining an appropriate period of notice in
Honda
:

[28]      In determining what constitutes reasonable notice
of termination, the courts have generally applied the principles articulated by
McRuer C.J.H.C. in
Bardal
, 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.

[29]      These
four factors were adopted by this Court in
Machtinger v. HOJ Industries Ltd.
, [1992] 1
S.C.R. 986.  They can only be determined on a case-by-case basis.

[44]

The judge concluded in para. 49 that the
evidence indicates that the body shop was ultimately downsized, but he made no
finding of fact when this occurred.

[45]

The appellant could have given Mr. Marchen
notice it was downsizing the body shop and there would be no work for him at a
certain date in the future.  It did not do so.  Mr. Marchen was not entitled to
employment beyond the date when there was no work for him, but we do not know when
that was, although the evidence suggest it was the autumn of 2005 or later.

[46]

Although the appellants General Service Manager
testified he believed the truck shop took over body shop bays in March 2005,
other evidence placed the event in the fall of 2005.  Reviewing this evidence
as a whole it appears that the truck shop made some use of body shop bays in
March 2005, but the actual surrender of the bays took place sometime later.

[47]

There also was evidence the appellant hired a
journeyman to work in the body shop after the termination of Mr. Marchen. 
There was evidence this person could do work that Mr. Marchen could not do, but
there is little to establish whether Mr. Marchen could do work done by the new
journeyman.  The judge did not address this issue.

[48]

In this case, Mr. Marchen was not terminated
because work was not available.  He was terminated because Dams incorrectly
suspected him of criminal conduct. Because the judge did not consider the
implication of the parties agreement Dams did not have to employ Mr. Marchen
if work no longer were available, made no finding of fact when work no longer
was available and did not consider what would be reasonable notice in the
circumstances of this case, I would remit this matter to the Supreme Court to
determine the pay in lieu of notice to which Mr. Marchen is entitled.

Consequential damages

[49]

The claim for consequential damages arose out
of Mr. Marchens inability to find a sponsor to complete his apprenticeship. 
The appellant contends the apprenticeship could have been completed without a
sponsor and referred to a form entitled Prior Work-based Training Credit
Application, Motor Vehicle Body Repairs.  Mr. Marchen testified he had never
seen the document.  His conduct was consistent with this assertion.  When
seeking employment after his termination he looked for employers who would be
prepared to sponsor him and on occasion pressed them to do so.

[50]

The judge awarded Mr. Marchen $25,000
consequential damages in respect of the loss of training and loss of status
which has resulted from his termination.  The judge observed such an award
could not be calculated with any precision.

[51]

The starting point in considering whether this award
is sustainable is the decision of the Supreme Court of Canada in
Honda
. 
The Court there began its analysis as follows:

[50]      An action for wrongful dismissal
is based on an implied obligation in the employment contract to give reasonable
notice of an intention to terminate the relationship in the absence of just
cause. Thus, if an employer fails to provide reasonable notice of termination,
the employee can bring an action for breach of the implied term (
Wallace
,
at para. 115). The general rule, which stems from the British case of
Addis
v. Gramaphone Co.
, [1909] A.C. 488 (H.L.), is that damages allocated in
such actions are confined to the loss suffered as a result of the employer's
failure to give proper 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 Court affirmed this
rule in
Peso Silver Mines Ltd. (N.P.L.) v. Cropper
, [1966] S.C.R. 673,
at p. 684:

[T]he 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.

[51]

Later
in
Vorvis v. Insurance Corp. of British Columbia
, [1989] 1 S.C.R. 1085,
McIntyre J. 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
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 régime) 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.

[52]

The judge in this case concluded damages for
loss of training and loss of status could be awarded following
Dunk
as
consistent with
Hadley v. Baxendale
.

[53]

I would not adopt
Dunk
as part of the law
of Canada.  It has been referred to a number of times in this country, but not
followed.  The English system of apprenticeship is not necessarily consistent
with Canadian practice.  I do find some support for the judges approach in the
Supreme Courts consideration of
Hadley v. Baxendale
in
Honda
.

[54]

Honda
was a
wrongful dismissal case.  As part of its analysis whether the conduct of the
employer could attract damages absent an independent cause of action, the Court
referred to and quoted from its previous decision in
Fidler
.

[55]

Fidler
concerned
the denial by the defendant of long term disability benefits.  The plaintiff
sought damages for mental distress.  The Court summarized its conclusion in
para. 2:

[2]
Since mental distress of the kind experienced by Ms. Fidler
was reasonably within the contemplation of the parties when they entered into
the contract of disability insurance, we see no reason to deny her compensation
for the damages for mental distress directly flowing from the breach. However,
the trial judge's finding that Sun Life did not act in bad faith should not be
interfered with and precludes an award of punitive damages. Accordingly, we
reverse the Court of Appeal's order as to punitive damages and restore the
award made by the trial judge.

[56]

The Court explained its conclusion in para. 44:

[44]
We conclude that damages for mental distress for breach of
contract may, in appropriate cases, be awarded as an application of the
principle in
Hadley v. Baxendale
: see
Vorvis
.  The court should ask what did the contract
promise? and provide compensation for those promises.  The aim of compensatory
damages is to restore the wronged party to the position he or she would have
been in had the contract not been broken.  As the Privy Council stated in
Wertheim v. Chicoutimi Pulp Co.
, [1911] A.C. 301, at p.
307: the party complaining should, so far as it can be done by money, be placed
in the same position as he would have been in if the contract had been
performed.  The measure of these damages is, of course, subject to remoteness
principles.  There is no reason why this should not include damages for mental
distress, where such damages were in the reasonable contemplation of the
parties at the time the contract was made.  This conclusion follows from the
basic principle of compensatory contractual damages: that the parties are to be
restored to the position they contracted for, whether tangible or intangible. 
The laws task is simply to provide the benefits contracted for, whatever their
nature, if they were in the reasonable contemplation of the parties.

[57]

In
Honda
, the Court concluded damages
could be awarded arising out of an employers conduct at the time of dismissal
regardless of the existence of a separate cause of action, stating in para. 59:

[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.  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
period, but through an award that reflects the actual damages.

[58]

In my view, the Court in
Honda
broke away
from the strictures of
Addis
and the jurisprudence that limited damages
in wrongful dismissal cases solely to the period of notice.  There is
recognition that some employment contracts involve more than the provision of
services for remuneration and that damages flowing from a wrongful dismissal
may take that fact into account.

[59]

The journey began with
Vorvis
with the
Courts recognition that aggravated damages could be awarded.  In
Wallace v.
United Grain Growers Ltd.,
[1997] 3 S.C.R. 701 at para. 95, the Court held
that employers have an obligation of good faith and fair dealing in the manner
of dismissal, which led to an extension of the period of notice.  The Court in
Fidler
concluded damages for mental distress were recoverable if such
damages were in the reasonable contemplation of the parties at the time they
entered into the contract.  In
Honda
the Court extended this conclusion
into the employment relationship.  The Court rejected the need for a separate
actionable wrong and stated damages should not be dealt with through an
extension of the notice period, but through an award of monetary damages.

[60]

Returning to the root of contract damages, the
question becomes: what was in the reasonable contemplation of the parties at
the time they entered into the contract?  As stated in
Fidler
,

the
task of the court is to ask what did the contract promise and what was in the
reasonable contemplation of the parties if what was promised was not provided?

[61]

In this case, the Agreement contemplated the
completion of an apprenticeship and the conferring on Mr. Marchen of the status
of journeyman.  The appellant was obliged to teach efficiently the trade or
occupation and to [p]rovide adequate training...in all branches of the trade
so far as the facilities and the scope of the business will permit.  Mr.
Marchen was to work and to take courses to become a qualified journeyman.

[62]

It is clear that subsequent to his dismissal,
Mr. Marchen was not paid at the journeymens level.  He would not have been
entitled to that amount before the end of 2006, but, in my view, the clear
objective of the Agreement and the clear anticipation of the parties was that
he would earn a journeymans wage after that date.  It also was the clear
objective of the Agreement and the clear anticipation of the parties that Mr.
Marchen would have the status of journeyman.

[63]

The importance of that status was illustrated by
the appellants evidence concerning its hiring of an employee in the body shop
after Mr. Marchen was terminated, despite downsizing the operation.  He was
retained because he was a journeyman and was described as much more valuable to
the appellant because of that training and status.

[64]

I view the apprenticeship contract as somewhat
unique, but I would not uphold the judges award of consequential damages on
that basis alone.  In my view, it is supportable on first principles, on
Hadley
v. Baxendale
.  The special circumstances under which this contract was made
were known to the appellant. It was in the reasonable contemplation of the
parties that Mr. Marchens loss of the opportunity to earn a journeymans wage
and a loss of the status of journeyman would result from the appellants breach
of contract; the loss of the education and steps to qualification he would have
enjoyed had he been employed to the time work became unavailable made it more
difficult to complete the apprenticeship successfully.  On the facts as found
by the trial judge, Mr. Marchen was not able to secure a further apprenticeship
that would have allowed him to become a journeyman. On the evidence, it is
likely downsizing did not occur until late autumn 2005, which would have entitled
Mr. Marchen to at least 10 months additional employment and training as an
apprentice.

[65]

In the circumstances of this case, I would
sustain the judges award of damages in the amount of $25,000.

Punitive damages

[66]

Punitive damages are awarded to express
approbation and to punish in circumstances where the global amount of damages
awarded, including aggravated damages in appropriate circumstances, is
insufficient (
Whiten v. Pilot Insurance Co.
, 2002 SCC 18, [2002] 1
S.C.R. 595 at para. 94;
B.P.B. v. M.M.B.
, 2009 BCCA 365 at para. 59). 
The trial judge was well aware of this, but, in my view, he erred making such
an award in this case.

[67]

In breach of contract cases, punitive damages
flow out of egregious conduct of a defendant at the time of the breach.  In
this case, when dismissing the claim for moral damages, the judge held that the
appellants conduct at the time of termination was not unfair, unfaithful,
misleading or unduly insensitive.  He also held that Mr. Marchen did not
suffer undue distress.  On these findings of fact, punitive damages are not available.

[68]

I would set aside the award of punitive damages.

Special costs

[69]

The judge conflated the analysis of punitive
damages and costs.  Punitive damages are a remedy for breach of contract that
reflects the conduct of a party at the time of the breach.  Costs reflect the
results and conduct of parties leading to and in the course of litigation. 
They are not a remedy for breach of contract.

[70]

Although the judge conflated the analysis
damages and costs analysis, he made findings of fact relevant to and supportive
of his award of special costs. They can be summarized as concluding that very
shortly after this action was commenced, the appellant began to lay the
groundwork for a defence that was based on facts it knew to be untrue: that Mr.
Marchen was terminated as a result of downsizing the body shop operations.  It
persisted with this defence throughout the trial and it was rejected by the
trial judge.  He concluded the appellants conduct was planned and deliberate
and intended to mislead the court.

[71]

The appellant contends it is condemned for
pursuing a defence it was entitled to pursue and that an award of special costs
has a chilling effect on the ability of defendants to advance legitimate
defences that ultimately are rejected.

[72]

In my view, the appellants concern is
misplaced.  There is no question a defendant is entitled to advance defences in
good faith.

[73]

In this case, the judges conclusions go far
beyond merely rejecting a defence.  Looking at the evidence overall, he
concluded the appellant sought to mislead the court and to drive Mr. Marchen
from the judgment seat.  No palpable and overriding error has been shown in the
judges findings of fact.  They are based on his appreciation of the evidence. 
There is no basis in principle on which this Court could interfere.

[74]

I would sustain the judges award of special
costs.

Conclusion

[75]

I would allow this appeal to the extent of
setting aside the order for payment of $18,151.73 as damages for wrongful
termination, would remit this matter to the Supreme Court to determine the
amount payable to Mr. Marchen in lieu of notice and would set aside the award
of punitive damages.  In all other respects, I would affirm the order of the
trial judge.

The
Honourable Mr. Justice Chiasson

I agree:

The Honourable Madam
Justice Saunders

I agree:

The Honourable Mr. Justice Groberman


