



COURT OF APPEAL FOR ONTARIO

CITATION: Evans v. Paradigm Capital Inc., 2018 ONCA 952

DATE: 20181127

DOCKET: C62564

Hoy A.C.J.O., Feldman and Huscroft JJ.A.

BETWEEN

Fabiene Evans

Plaintiff (Appellant/

Respondent by way of cross-appeal)

and

Paradigm Capital Inc.

Defendant (Respondent/

Appellant by way of cross-appeal)

Sean Lawler and Jonathan Miller, for the appellant

P.A. Neena Gupta and Jeramie Gallichan, for the
    respondent

Heard: November 14, 2018

On appeal from the judgment
    of Justice Arthur M. Gans of the Superior Court of Justice, dated July 20, 2016,
    with reasons reported at 2016 ONSC 4286, 36 C.C.E.L. (4th) 129.

REASONS FOR
    DECISION

OVERVIEW

[1]

This is an appeal and cross-appeal from a judgment concluding that the
    appellant, who was employed as an institutional equity salesperson, was
    wrongfully dismissed by the respondent, an institutional investment dealer.

[2]

It was agreed at trial that the appellant was constructively dismissed
    when the respondent revised her position and, among other things, reduced her
    responsibility, and that the dismissal occurred on January 16, 2009. The trial
    judge held that the appellant was entitled to 11 months pay in lieu of notice,
    which resulted in an award of $240,313.79 in damages. That amount included base
    salary ($75,000), performance bonus, and a shareholders bonus  dividends to
    which the appellant was entitled as an equity stakeholder in the company. After
    crediting the respondent for money it had already paid out and accounting for
    the appellants recovery of her mitigation expenses, the net amount owing was
    $137,055.54.

[3]

The trial judge held that the appellant was not required to accept the
    new revised role with the respondent in order to mitigate her damages. However,
    he rejected the appellants claims regarding the alleged historic underpayment
    of her performance bonus and held that the respondent had not breached its duty
    of good faith in administering the bonus.

[4]

The trial judge ordered the respondent to pay costs of $195,412.59 on a
    partial indemnity basis.

[5]

The appellant submits that the trial judge erred in two ways: first, in
    calculating her performance bonus entitlement based on her last percentage
    allotment and the respondents actual financial results in 2009, rather than a
    three-year historic average of her performance bonus; and second, in awarding
    partial indemnity costs on a reduced basis. At the hearing, the appellant abandoned
    her argument that the respondent breached its duty of good faith in contractual
    performance in administering her performance bonus.

[6]

In its response and cross-appeal, the respondent submits that the trial
    judge erred in four ways: first, in finding that the appellant was not required
    to accept the new revised role with the respondent in order to mitigate her damages;
    second, in finding that the appellant was entitled to 11 months notice; third,
    in awarding the appellant damages related to the shareholders bonus, even
    though her equity interest in the company had been redeemed following her
    dismissal in accordance with the shareholders agreement; and fourth, in
    failing to find that the respondent had been the successful party in the
    litigation and awarding the appellant costs. The respondent seeks leave to
    adduce fresh evidence on the costs appeal concerning a legal fees arrangement
    between the appellant and her counsel that it says should have been disclosed
    to the trial judge.

[7]

For the reasons that follow, the appeal is dismissed. However, on the
    cross-appeal, we conclude that the trial judge erred in awarding the appellant
    damages related to the shareholders bonus. The cross-appeal is allowed to this
    extent.

[8]

Given the outcome of the cross-appeal, the costs award must be remitted
    to the trial judge to be recalculated in accordance with the outcome of this
    decision.

The appeal

The calculation of damages

[9]

The appellant submits that the trial judge should have calculated her performance
    bonus on the basis of an historical three-year average rather than on what her
    bonus would have been in 2009. In essence, the appellant argues that because of
    her constructive dismissal in January 2009, the 2009 pool used to determine her
    performance bonus was lower than it would have been had the appellant
    contributed to it, and as a result her performance bonus was lower.

[10]

We
    disagree.

[11]

Although
    it may sometimes be appropriate to calculate damages based on an average of
    earnings, there is no requirement to do so:
Clark v BMO Nesbitt Burns Inc.
,
    2008 ONCA 663, 300 D.L.R. (4th) 313, at para. 35. In general, damages for
    wrongful dismissal reflect the amount the plaintiff would have earned had her
    employment continued in accordance with the contract. The trial judge was not
    persuaded that there was any reason to depart from this approach and there is
    no reason to interfere with his decision, absent a palpable and overriding
    error.

[12]

We
    see no such error. The trial judge applied the 0.5% participation rate that the
    appellant had been allotted for seven straight quarters prior to the
    termination of her employment and multiplied it by the performance bonus pool
    for 2009. There was no evidence as to the appellants previous contribution to
    the pool, and her position that the pool would have been bigger had she
    contributed to it is speculative. Moreover, the appellants notice period was
    during a period of severe economic downturn. We agree with the trial judge that
    calculation of the performance bonus based on the 2009 pool and 0.5% participation
    rate was appropriate in all of the circumstances.

[13]

Given
    our conclusion on the cross-appeal, it is not necessary to address the
    appellants request for leave to appeal the trial judges decision on the costs
    at trial.

The cross-appeal

Mitigation

[14]

The
    respondent submits that the trial judge erred in finding that the appellant was
    not required to accept the new revised role with the respondent in order to
    mitigate her damages. In particular, the respondent argues that the trial judge
    erred in concluding that the revised role would have rendered the appellants
    compensation uncertain; that the reduction of the appellants shareholding to
    1% of the company  which the appellant argues was contrary to the terms of the
    shareholders agreement  was an appropriate factor in the appellants decision
    not to accept the revised role; and that the appellant would have been
    humiliated in the revised role.

[15]

We
    see no error in the trial judges conclusions.

[16]

The
    trial judge properly applied the law set out by the Supreme Court in
Evans
    v. Teamsters Local Union No. 31
, 2008 SCC 20, [2008] 1 S.C.R. 661, at
    paras. 27-33. In that case, the Supreme Court held that if an employer offers
    an employee the opportunity to mitigate damages by returning to work for the
    employer, the central issue is whether a reasonable person would accept such an
    opportunity. The Court added that employees are not obliged to mitigate by
    working in an atmosphere of hostility, embarrassment, or humiliation;
    non-tangible elements of the situation have to be considered as well as the
    nature and conditions of employment.

[17]

In
    this case, the trial judge found that there were too many variables concerning
    the tangible aspects of the revised role that were essentially left to the
    department head and CEO, and that in these circumstances the offer of
    alternative employment was more form than substance. It was not objectively
    reasonable to conclude that the offer should be accepted. Moreover, the trial
    judge found that non-tangible elements provided additional support for his
    conclusion. He found, in particular, that the move to the revised position
    would have been devastating for the appellant on several levels.

[18]

These
    findings were open to the trial judge and are entitled to deference. This
    ground of appeal must be rejected.

The appropriate notice period

[19]

The
    respondent submits that the trial judge erred in finding that the appellant was
    entitled to 11 months notice. The respondent argues that the trial judge made
    a palpable and overriding error by treating inducement as a relevant factor in
    calculating the period of reasonable notice, when the agreed statement of facts
    indicated that there was no inducement. According to the employer, the
    appropriate notice period was 6-8 months.

[20]

We
    see no such error. The trial judge did not find that inducement was a relevant
    consideration in calculating the appellants notice period; he simply stated that
    the appellant was actively recruited to her position, and made no error in
    doing so. Nor can it be said that 11 months notice was unreasonable. The
    appellant was a relatively senior sales person who was dismissed during a
    difficult employment market in 2009. The trial judge considered the relevant
    factors and reached a decision that was within a reasonable range in all of the
    circumstances.

[21]

This
    ground of appeal must be rejected.

The shareholders bonus

[22]

The
    respondent submits that the trial judge erred in awarding the appellant damages
    corresponding to the shareholders bonus. In essence, the respondent argues that
    dividends can be claimed only by shareholders and that the appellant ceased to
    be a shareholder upon the termination of her employment, when her shares were
    purchased by the respondent in accordance with the deemed transfer notice
    provided for in the shareholders agreement.

[23]

The
    appellant argues that the trial judge correctly found that her right to receive
    the shareholders bonus was an integral part of her overall compensation.
    Payment in lieu of notice is intended to compensate for breach of the
    employment contract, and as a result the shareholders bonus should be included
    in calculating the damages during the notice period.

[24]

On
    this issue, we agree with the respondent.

[25]

The
    trial judge distinguished
Kieran v. Ingram Micro Inc
.
(2004),
    33 C.C.E.L. (3d) 157 (Ont. C.A.), and
Brock v. Matthews Group Ltd
.
(1991),
    34 C.C.E.L. 50 (Ont. C.A.), two cases in which the wrongfully dismissed
    employee was found not able to exercise stock options during the reasonable
    notice period, for which the employees received pay in lieu of notice. The
    trial judge noted that in those cases, the employees had contingent interests
    in the stock options bonuses, while in the present case, the appellants
    interest in the equity and her right to receive the shareholders bonus vested
    on her acquisition of the shares and debentures, subject to divestment on
    leaving the respondent. We see no relevant distinction for purposes of this
    case.

[26]

In
Love v. Acuity Investment Management Inc
.
, 2011 ONCA 130, 89
    C.C.E.L. (3d) 157, which concerned the relevant date for valuation of the shares
    of a wrongfully dismissed employee  shares that the employer had the right to
    repurchase in accordance with an investment agreement once the employee ceased
    to be an employee  the court made clear that an employees employment is
    terminated when he or she is dismissed without cause, not when the notice
    period ends.

[27]

In
    the present case, although the trial judge referred to divestment of the shares
    and debentures occurring when the appellant left the respondent, he failed to
    give effect to the terms of the shareholders agreement, which clearly required
    the appellant to tender her shares for redemption on termination of her
    employment. As in
Love
, termination of employment occurred when the
    appellant was dismissed without cause  that is, when she was constructively
    dismissed. The appellant was required to tender her shares for redemption once her
    employment terminated and she did so in accordance with the terms of the
    shareholders agreement.

[28]

Once
    this occurred, the appellant was no longer entitled to receive the
    shareholders bonus. If it were otherwise, the appellant would receive both the
    return of her share capital upon termination of employment and the dividends
    she would have earned had she retained the shares and her capital remained at
    risk in the company for the duration of the reasonable notice period.

[29]

The
    trial judge assessed damages in relation to the shareholders bonus at $79,792.58.
    This amount must be deducted from the appellants net damages award of
    $137,055.54. In the result, the appellant is entitled to the net amount of $57,262.96.

Trial costs and the fresh evidence application

[30]

Both
    parties seek leave to appeal the trial judges costs order.

[31]

The
    appellant submits that the trial judge wrongly discounted the partial indemnity
    costs she was awarded and seeks her full partial indemnity costs, $421,478.09.
    The respondent says that the appellant should have received no costs because
    she was unsuccessful in her bad faith claim, which was the most significant
    aspect of her claim, and that it ought to have been awarded costs of
    $610,242.49 on a substantial indemnity basis.

[32]

The
    respondent brought a fresh evidence application, seeking to introduce evidence
    of a legal costs arrangement between the appellant and her counsel, which it
    argued the appellant wrongly failed to disclose in violation of procedural
    fairness.  The fresh evidence application was opposed by the appellant on the
    basis that it failed to meet the requirements of the tests set out i
n
R. v. Palmer
, [1980] 1 S.C.R. 759, and
Sengmueller v.
    Sengmueller

(1994), 17 O.R. (3d) 208 (C.A.)
.
In addition, the respondent argued
    that admission of the evidence would violate public policy, as the fee
    arrangement in question had been disclosed to the respondents counsel in a
    without prejudice discussion.

[33]

At
    the hearing the parties agreed that, if the respondent were to succeed on the shareholders
    bonus issue, the outcome of the case would change for purposes of determining
    costs. As a result, it would be necessary to return the matter to the trial
    judge so that the matter of trial costs could be considered afresh.

[34]

We
    agree. Accordingly, the trial judges costs decision is vacated and the matter
    is returned to the trial judge for re-consideration in light of this decision.
    The trial judge shall determine whether the fresh evidence should be admitted
    and shall address any issues of policy that might arise.

Conclusion

[35]

The
    appeal is dismissed.

[36]

The
    cross-appeal is allowed in part. The trial judges net award of damages is
    varied to $57,262.96. The case is remitted to the trial judge to determine the
    costs consequences of the revised damages award.

[37]

The
    respondent has been successful on the appeal and partially successful on the
    cross-appeal. In the circumstances, the respondents costs are fixed at
    $30,000, inclusive of taxes and disbursements.

Alexandra
    Hoy A.C.J.O.

K. Feldman
    J.A.

Grant
    Huscroft J.A.


