



COURT OF APPEAL FOR ONTARIO

CITATION: Bain v. UBS Securities Canada Inc., 2018 ONCA 190

DATE: 20180227

DOCKET: C63051

LaForme, Rouleau and van Rensburg JJ.A.

BETWEEN

David Bain

Plaintiff/Respondent

and

UBS Securities Canada
    Inc. and UBS Securities LLC

Defendants/Appellants

Dan J. Shields and Hendrik Nieuwland, for the appellants

Chris G. Paliare and Tina Lie, for the respondent

Heard: February 1, 2018

On appeal from the judgments of Justice Darla A. Wilson
    dated November 4, 2016, reported at 2016 ONSC 5362 and March 3, 2017, reported
    at 2017 ONSC 1472.

REASONS FOR DECISION

[1]

This is an appeal of a judgment following a trial
    in a wrongful dismissal action. The respondent David Bain was an investment
    banker employed by the appellant UBS Securities Canada Inc. (UBS). Bain was
    dismissed without cause on February 28, 2013, which UBS concedes, as a result
    of the closure of UBSs Canadian Mergers & Acquisitions arm, in which Bain
    held the position of Managing Director and Head. The trial judge fixed the
    reasonable notice period at 18 months, and awarded damages (inclusive of
    amounts for cash and deferred bonuses and an amount for vacation pay),
    prejudgment interest and costs.

[2]

A number of issues raised at trial are not in
    dispute in this appeal. In particular, the appellant does not contest the trial
    judges determination of the period of reasonable notice, her finding that
    Bains bonus was an integral part of his compensation, the calculation of the
    annual bonuses that Bain would have earned for 2012 and during his reasonable
    notice period (and the comparators used), or her conclusion that Bain was
    entitled to damages for the loss of the cash portion of his bonus for 2012 and
    the cash bonus he would have received if his employment had continued during
    the reasonable notice period.

[3]

The principal issue on this appeal is whether
    the trial judge erred in awarding Bain damages that included amounts in respect
    of the loss of the deferred portions of his bonus. UBS also appeals the amounts
    awarded, but not Bains entitlement, in respect of vacation pay, prejudgment
    interest and costs. We deal with each issue in turn.

The Deferred Portion of Bains Bonus

[4]

From the time he was first employed by UBSs
    predecessor Bain earned annual compensation consisting of salary and bonus. For
    the first eight years Bains bonus was paid entirely in cash. From 2008
    onwards, UBS determined the amount of bonus for the year, and if the amount
    exceeded the equivalent of 250,000 Swiss Francs, 40% was paid in cash and the
    other 60% was placed into an account in the form of notional shares in UBS AG
[1]
, which would fluctuate over
    time as the value of global UBSs share price changed, and which would vest
    in equal amounts over a number of years. The deferred portion of the bonus was
    allocated and paid under UBSs Equity Ownership Plan (the EOP).

[5]

Once the decision was made to terminate his
    employment, Bain was not allocated or paid any bonus for 2012. After considering
    the bonus allocation process, Bains performance in 2012, the bonuses awarded
    to certain other UBS employees considered comparators, and how UBS would
    reasonably have exercised its discretion in the bonus process, the trial judge determined
    the amounts of Bains bonus for the 2012 year, for the stub year of 2013
    preceding the termination of his employment, and for the bonus Bain would have
    earned had he remained employed during the 18 month notice period.

[6]

On appeal UBS does not dispute the bonus amounts
    the trial judge concluded that Bain would have earned. UBS only contests the
    inclusion in those amounts of the deferred portion; that is, the amounts that
    Bain would have been allocated by way of notional shares, which would have
    vested in the future, after the expiry of the notice period. The amount in
    dispute is 60% of the bonus, approximately $1.2 million.

[7]

UBS makes two arguments with respect to the
    deferred portion of Bains bonus. First, it asserts that Bain was entitled to
    damages for lost bonus only in respect of amounts he would have
received
prior to his termination and during the notice period. Second, UBS
    relies on the wording of certain provisions of the EOP to exclude from Bains
    damages the deferred portion of his bonus.

[8]

We do not give effect to these arguments.

[9]

In
Paquette v. TeraGo Networks Inc.
, 2016 ONCA 618, 352 O.A.C. 1, at paras. 29-31, this court
    articulated a two-part test that is applicable here. In order to determine
    whether a terminated employee is entitled to damages on account of a lost bonus,
    first, the court must determine whether the plaintiff has a common law right to
    damages for breach of contract that would include compensation for a lost
    bonus. Second, the court must consider whether there is language in the bonus
    plan that unambiguously alters or removes the common law entitlement. See
    also
Taggart

v. Canada Life Assurance Co.
(2006),

50
    C.C.P.B. 163

(Ont. C.A.),
    at para. 12.

[10]

With respect to the first part of the test, UBS
    accepts that, if Bain had remained employed during the period of reasonable
    notice, he would have been awarded bonuses in the amounts determined by the
    trial judge.

[11]

UBS asserts however that while Bain was entitled
    to the cash amount of the bonus that he would have received during the
    reasonable notice period, he was not entitled to any portion that he would not
    have received during his employment and the notice period.

[12]

First we note that Bain had a contractual right
    to receive compensation that included bonus in the event of his termination
    without cause. His letter of hire, which continued in force, provided that in
    the event of his termination, Bain would receive not less than six (6) months
    notice or compensation in lieu thereof, and that for greater clarity, the
    amount of equivalent compensation [would] be determined by reference to salary
    and bonuses. His letter of termination offered to pay Bain the sum of $495,133
    as the equivalent of 14 months notice. The amount corresponds with the average
    of Bains total compensation for the prior two years, calculated by UBS as including
    both the cash and deferred portions of the bonus.

[13]

Notwithstanding UBSs own contractual documents, it asserts that it
    was not required to pay Bain compensation for any deferred portion of any bonus
    notwithstanding that the deferred portion would have been earned by Bain during
    his employment and during the reasonable notice period. This is contrary to
    settled law. As this court noted in
Taggart
at
    para. 13, where an employer terminates an employee without cause, the employer
    is liable for damages for breach of contract, measured by the loss of wages or
    salary and other benefits that would have been earned during the reasonable
    notice period. In that case the terminated employee was entitled to damages
    that included his pension accrual during the notice period. See also
Arnone
    v. Best Theratronics Ltd.
, 2015 ONCA 63, 329 O.A.C. 284,
    at paras. 30-32.


[14]

UBS points to the references in
Paquette
to bonuses that the appellant in that case would have
    received (at paras. 23 and 30) in support of its argument that Bains damages
    should not include any amount for the deferred portion of his bonus. In
Paquette
the bonus claim was for what the appellant would have
    earned and received during the notice period. There was no deferred portion of
    a bonus, nor was there a claim for the loss of opportunity to earn a bonus in a
    partial year during the reasonable notice period. Paragraph 17 of that case
    correctly states the law: [d]amages for wrongful dismissal may include an
    amount for a bonus the employee would have received had he continued in his
    employment during the notice period, or damages
for
    the lost opportunity to earn a bonus
 (emphasis added).
    Similarly, in
Lin v. Ontario Teachers Pension Plan Board
, 2016 ONCA 619, 352 O.A.C. 10, another case relied on by UBS, this
    court held, at para. 89, that the opportunity to earn a bonus was relevant to
    damages. There was no claim to or award of damages for bonus amounts that would
    have been paid to the plaintiff outside the notice period because of the terms of
    the agreement in that case, which provided for grants not vested at the time of
    termination to be forfeited without right of compensation.

[15]

Here, while the notional shares would not have
    vested before the end of the reasonable notice period, there is no question
    that the bonus was earned by Bain during that period.

[16]

UBSs second argument with respect to the
    damages award for the deferred portion of Bains bonus relies on the wording of
    the bonus plan. UBS argues that s. 2.2 of the 2012/13 EOP and certain clauses
    of s. 7.1 of the plans Common Terms meet the second part of the test in
Paquette
in that they unambiguously alter or remove the
    entitlement.

[17]

We disagree. The reference in s. 2.2 to awards
    being granted to employees does not disentitle a terminated employee from
    having the deferred portion of his bonus included as part of a wrongful
    dismissal award. As this court noted in
Paquette
at para. 35,

a
    requirement that the recipient be employed in order to receive a bonus, does
    not prevent the [recipient] from receiving, as part of his wrongful dismissal
    damages, compensation for the bonuses he would have received had his employment
    continued during the period of reasonable notice.

[18]

Nor do the provisions of s. 7.1 unambiguously
    exclude Bains claim for damages for the deferred part of his bonus. Section
    7.1.6 purports to exclude a claim or right of action in respect of UBSs
    exercise of discretion. Section 7.1.7 excludes an employees right to
    compensation for any loss in relation to a plan. The claim here is not for
    compensation for a loss in relation to a plan, or for the improper exercise of
    discretion. The claim is to have included in his compensation on termination
    the amounts of the deferred part of his bonus  amounts that pursuant to the
    plain terms of his employment contract, he would be entitled to expect. Neither
    provision clearly disentitles Bain to a right to damages for his lost bonus on
    termination.

[19]

This conclusion is reinforced by s. 5.2 of the
    2012/13 EOP which provides that unvested awards will not be forfeited and will
    continue to vest in accordance with the terms of the EOP and Common Terms, if
    employment is terminated (as here) due to redundancy. The trial judge
    reasonably concluded that, had Bain been awarded a bonus in 2013 for his 2012
    performance, which included stock options that would have vested in the future,
    such options would have continued to vest and would not have been forfeited (at
    para. 128).

[20]

For these reasons the trial judge did not err in
    including the deferred portions of Bains bonus for 2012, the stub year 2013
    and the reasonable notice period in Bains damages award.

Vacation Pay

[21]

At trial the parties agreed that Bain was
    entitled to compensation for a total of 20.10 vacation days, which included
    vacation he had not taken in 2012, and vacation accrued during his statutory
    notice period. They disagreed about whether vacation pay should be based on
    Bains salary or, as the trial judge found, his overall compensation including
    bonus.

[22]

The trial judge awarded vacation pay of $87,472,
    after deducting the amount Bain received for vacation pay when his employment
    was terminated. The amount was based on Bains salary and the average bonus of
    the comparators for 2013. On appeal UBS says that the amount ought to have been
    $5,700, and based on Bains salary only.

[23]

An employees entitlement to vacation pay under
    the
Employment Standards Act, 2000
, S.O. 2000, c. 41,

is determined
    as a percentage of the employees wages. Wages is defined as monetary
    remuneration payable by an employer to an employee under the terms of an
    employment contract but does not include sums paid as gifts or bonuses that
    are dependent on the discretion of the employer and that are not related to
    hours, production or efficiency.

[24]

The trial judge considered the evidence, which
    included a description of the detailed and methodical approach of UBS to
    determining bonuses, and the acknowledgment of its witness that bonus was tied
    to production and efficiency. She reasonably concluded that the bonuses
    here were based in part on how an employee produced and how diligent he or she
    was in their work at UBS and that while the bonus was discretionary, there
    were definite factors on which it was based, including performance (at paras.
    153 and 154). We see no reason to interfere here, or, as proposed by UBS, to
    read into the exception in the definition of wages the requirement that
    numerical targets would be required before a bonus could be considered to be
    related to hours, production or efficiency.

Prejudgment Interest

[25]

The trial judge awarded prejudgment interest on
    the entire net amount of Bains damages commencing at the date of his
    termination (the lump sum basis). She rejected UBSs argument, which is renewed
    on appeal, that prejudgment interest ought to have been calculated on the
    payments Bain would have received had he worked during the notice period (the
    instalment basis). The difference is $44,585.81.

[26]

The appellant accepts that a trial judges approach
    to determining how prejudgment interest should be calculated under s. 130 of
    the
Courts of Justice Act
, R.S.O. 1990, c. C.4,
    including in wrongful dismissal cases, is an exercise of discretion and
    entitled to deference. UBS also acknowledges that this court has affirmed the
    use of both approaches in wrongful dismissal cases. UBS argues however that
    this court should endorse, on a principled basis, the instalment approach in
    wrongful dismissal cases.

[27]

We are not prepared to interfere with the trial
    judges determination of prejudgment interest in this case. In
Chang
    v. Simplex Textiles Ltd.
(1985), 7 OA.C. 137, this court
    adverted to the debate between the instalment approach and the lump sum
    approach to awards of prejudgment interest on damages for wrongful dismissal,
    and stated, at para. 16, that the trial judges exercise of discretion should
    not be interfered with provided it had a logical basis and [was] in general
    accord with similar but not identical dispositions in other unjust dismissal
    cases. This approach was cited with approval by this court in
Stevens
    v. Globe & Mail
(1996)
, 28 O.R. (3d) 481 (C.A.), at para. 33.

[28]

As in
Lowndes v. Summit Ford Sales
    Ltd
. (2006), 206 O.A.C. 55, it is unnecessary for the
    disposition of the appeal to determine whether an award of prejudgment interest
    on a lump sum basis is generally appropriate in a wrongful dismissal case (at
    para. 23).

[29]

Here the trial judge carefully considered the
    particular circumstances of the case, including what should have been done,
    what actually was done, and how to restore [Bain] to the same position [he]
    would have been in had the proper payments been made at the time of
    termination (at para. 36). She considered relevant the fact that Bain had
    received an offer of a lump sum payment, and that there was no option of salary
    continuance. Interest on the 2012 bonus ran from the end of February 2013,
    which was when Bain would have been paid the bonus. Interest on the stub
    portion of the bonus for 2013, the compensation to which Bain was entitled for
    the period of reasonable notice and vacation pay, would run from March 22,
    2013, the date he left UBS. There is no reason to interfere with this exercise
    of discretion, which was supported by the evidence considered by the trial
    judge.

Costs

[30]

The appellant seeks a
    reduction of approximately $70,000 in the costs of the action. Its argument is
    essentially that the trial judge ought to have used the partial indemnity grid
    rates set out in the preamble to Rule 57, Information for the Profession, rather
    than basing partial indemnity costs on 60% of the actual rates charged by the
    respondents counsel.

[31]

This
    court should interfere with a
costs order
    only if the trial judge
made an
    error in principle, or the award was plainly wrong:
Hamilton v. Open Window
Bakery Ltd.
, 2004
    SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[32]

We see no such error here. There is no requirement to apply
    the grid rates, which are out of date, rather than 55 to 60% of a reasonable
    actual rate:
Inter-Leasing
    Inc. v. Ontario (Minister of Revenue)
, 2014 ONCA
    683, at para. 5.
Akagi v. Synergy
    Group (2000) Inc.
, 2015 ONCA 771,
128 O.R. 64,
a case
    relied on by the appellant, does not reject an approach to partial indemnity
    costs based on 60% of the actual rate charged. After referring to the 60%
    approach, the court stated at para. 55:

fixing costs of a proceeding or of a step
    within a proceeding on a partial indemnity basisis not simply an exercise of
    multiplying hourly rates by the amount of time expended. The court must balance
    the discretionary factors set out in r. 57.01(1) and, in the end, arrive at an
    amount that is reasonable and fair in the circumstances and that bears some
    relationship to the amount that an unsuccessful party could reasonably expect
    to pay.

[33]

This
    is exactly the approach taken by the trial judge in the present case. While she
    accepted partial indemnity fees based on 60% of the actual fees charged as
    reasonable, she considered all of the relevant factors under r. 57.01,
    including the amount in dispute, the outcome of the trial, the conduct of the
    parties, the offers made, and the reasonableness of the hours claimed in
    arriving at an award of costs of $225,000 plus taxes and disbursements.

[34]

There is no reason to
    interfere with the trial judges assessment of Bains costs.

Disposition

[35]

The appeal is therefore dismissed. Costs of the
    appeal to the respondent in the agreed amount of $25,000, inclusive of HST and
    disbursements.

H.S.
    LaForme J.A.

Paul
    Rouleau J.A.

K. van Rensburg J.A.





[1]
Initially, Bains employer, UBS, was a joint venture company effectively owned
    50% by employee shareholders and 50% by UBS AG. In March 2006 UBS AG purchased
    all the employee shareholdings to become the sole owner of UBS.



