



COURT OF APPEAL
    FOR ONTARIO

CITATION: Mikelsteins v. Morrison Hershfield Limited, 2021
    ONCA 155

DATE: 20210312

DOCKET: C66315

Fairburn A.C.J.O., Lauwers and Nordheimer JJ.A.

BETWEEN

Ivars Mikelsteins

Plaintiff (Respondent)

and

M
orrison Hershfield Limited

Defendant (Appellant)

David E. Greenwood and Christopher McClelland, for the
    appellant

James D. Heeney and Julia Burke, for the respondent

Heard: in writing

On remand from the order of the Supreme Court of Canada, dated
    November 19, 2020.

REASONS FOR DECISION

[1]

On June 20, 2019, we released our decision allowing the appeal from the
    judgment of the Superior Court of Justice dated November 22, 2018 in this
    matter.
[1]
On November 19, 2020, the Supreme Court of Canada, in response to a motion for
    leave to appeal by the respondent, rendered judgment remanding this matter to
    this court pursuant to s. 43(1.1) of the
Supreme Court Act
, R.S.C.
    1985, c. S-26 for disposition in accordance with its decision in

Matthews
    v. Ocean Nutrition Canada Ltd.
,
2020 SCC 26, 449 D.L.R. (4th) 583.

[2]

After the remand was made, this court requested and received written submissions
    from the parties.

The principal issue

[3]

The background to this matter is set out in detail in our reasons on the
    appeal. It is unnecessary to repeat all of that detail. In brief, the
    respondent commenced an action for wrongful dismissal. He then brought a motion
    for summary judgment. The motion judge awarded the respondent damages for
    wrongful dismissal. That award was not appealed. The motion judge also determined
    that the respondent was entitled to an additional payment for the shares that
    he held in the appellants parent corporation, Morrison Hershfield Group Inc., and
    a further entitlement to a share bonus. Those awards were the subject of the
    appeal.

[4]

The respondent was one of a select group of the appellants employees who
    were eligible to purchase shares of Morrison Hershfield Group Inc. Those shares
    were governed by the terms and conditions of the Amended and Restated Morrison
    Hershfield Group Inc. Shareholders Agreement, dated January 18, 2013 (the
    Shareholders Agreement). At the time that his employment was terminated, the
    respondent owned a total of 5,108 shares.

[5]

Under the terms of the Shareholders Agreement, the respondent, and
    other shareholders, were eligible to receive annual Share Bonuses. The share
    bonus payable in respect of each share is determined by an objective calculation
    based on the companys financial results. The total share bonus payable to each
    shareholder depends on the total number of shares that the shareholder had
    previously decided to purchase. As we said in our earlier reasons, the share
    bonus is not related to the shareholders contributions as an employee of the
    appellant. It is, in effect, a dividend.

[6]

With respect to the respondents shareholdings, the motion judge
    determined that the respondent was entitled to: (i) hold the shares until the
    end of the reasonable notice period (i.e. 26 months after he was notified of
    his termination and his association with the appellant had ceased); and (ii)
    receive damages for the loss of the share bonus that would have been payable
    during such 26-month period.

[7]

Article 3 of the Shareholders Agreement deals with Automatic Transfer
    Notices, and applies in situations where, among other things, a shareholder
    resigns, is terminated, becomes bankrupt, or dies. Article 3.2 applies in cases
    of termination, and states:

A Shareholder whose association with the Corporation and its
    Affiliates ceases by reason of termination by the Corporation of his/her
    employment with the Corporation and its Affiliates shall, immediately after
    such termination, be deemed to have given a Transfer Notice covering all of the
    Shares held by him/her on a date which is 30 days from the date he/she is
    notified of such termination by the Corporation.

The Shareholders Agreement proceeds to specify that a
    shareholder that is deemed to have given a Transfer Notice under Article 3 is
    entitled to the Fair Value of his or her shares (as that term is defined in
    the Shareholders Agreement).

[8]

Contrary to the motion judges conclusions, we determined that the
    respondent was not entitled to have his shares valued as at the end of the
    notice period nor was he entitled to the share bonuses during that time.

[9]

The question that is now before us is whether the decision of the
    Supreme Court of Canada in
Ocean Nutrition
would direct that different
    conclusions ought to have been reached on those two issues. We conclude that it
    would not.

[10]

In
Ocean Nutrition
, at para. 55, Kasirer J. concluded that, in assessing
    an employees damages arising from a wrongful dismissal, a court should ask
    itself two questions:

(i) Would the employee have been entitled to the bonus or
    benefit as part of their compensation during the reasonable notice period?

(ii) If so, do the terms of the employment contract or bonus
    plan unambiguously take away or limit that common law right?

[11]

One
    very important factual point underpins these two questions. They are both
    directed at determining the rights of the employee
qua
employee. That
    is, they are both directed at determining the damages that an employee is
    entitled to arising from a breach of the contract of employment.

[12]

In
    this case, the respondents claim to the dividend does not arise from the
    breach of his contract of employment. Rather, we were determining the
    respondents rights as a shareholder of Morrison Hershfield Group Inc. pursuant
    to the Shareholders Agreement. In that regard, it is of importance to remember
    that the respondent did not receive his shares in Morrison Hershfield Group
    Inc. as some form of compensation as an employee of the appellant. To the
    contrary, the respondent was given the opportunity to use his own funds to
    purchase shares in Morrison Hershfield Group Inc. When he elected to do so, the
    respondents rights regarding his shares were dictated by the terms of the
    Shareholders Agreement.

[13]

The
    decision in
Ocean Nutrition
does not change the proper analysis to be
    applied to the issues raised on the appeal in this case. The respondents
    entitlement respecting his shares falls to be determined by his rights as a
    shareholder of Morrison Hershfield Group Inc., not by his status as a
    terminated employee of the appellant. To conclude otherwise would run the risk
    of interfering with the established law on the rights and obligations of
    shareholders, much of which is codified in corporate statutes such as the
Business
    Corporations Act
, R.S.O. 1990, c. B.16 and the
Canada Business
    Corporations Act
, R.S.C. 1985, c. C-44.

[14]

Just
    by way of example, s. 32 of the
Business Corporations Act
provides
    that a corporation may purchase or redeem any redeemable shares issued by it,
    which, in one sense, is what happened in this case. As we observed in our decision,
    there are very good reasons why an employee-owned corporation would not wish an
    employee to be able to exercise all of the rights of a shareholder once their
    employment is terminated.

[15]

We
    would add that the treatment of the payment of the amounts under the
Income
    Tax Act
, R.S.C. 1985, c. 1 (5th Supp.), does not change the law applicable
    to the rights being determined under the Shareholders Agreement.

Other issues raised

[16]

The
    respondent raises certain other issues, including the possible application of
    the

Employment Standards Act
, 2000
, S.O. 2000, c. 41. With
    respect, the remand of this matter does not invite a wholesale reopening of the
    appeal and all matters relating to it:
Deslaurier Custom Cabinets Inc. v.
    1728106 Ontario Inc.
,
2017 ONCA 293, 135 O.R. (3d) 241, at para. 14,
    leave to appeal refused, [2016] S.C.C.A. No. 249. Rather, the remand is
    restricted to its terms, which was for disposition in accordance with

David
    Matthews v. Ocean Nutrition Canada Ltd.
,
2020 SCC 26.

[17]

None
    of the other issues raised by the respondent arise from the decision of
Ocean
    Nutrition
. Indeed, the Supreme Court of Canada expressly declined to deal
    with the application of minimum employment standards in its decision.
    Consequently, those issues are not open for re-argument.

[18]

Finally,
    the respondent sought a further oral hearing in this matter. The appellant said
    that no further oral argument was required. We agree with the appellant. The
    issue to be determined can be properly resolved through the written submissions
    of the parties.

C
onclusion

[19]

For
    these reasons, having reconsidered our decision in light of
Ocean

Nutrition
,
    we affirm our earlier appeal decision. The appellant is entitled to its costs
    of the remand proceeding fixed in the amount of $10,000, inclusive of
    disbursements and HST.

Fairburn A.C.J.O.

P. Lauwers J.A.

I.V.B. Nordheimer
    J.A.





[1]

Mikelsteins v. Morrison Hershfield Limited
,
    2019 ONCA 515, 56 C.C.E.L. (4th) 1.


