COURT OF APPEAL FOR ONTARIO
DATE: 20001220
DOCKET: C31096
FINLAYSON, WEILER and GOUDGE JJ.A.
BETWEEN:
Darryl A. Cruz
CHARLES GRYBA ) for the appellant
Plaintiff )
(Respondent) )
–and– ) D. Barry Prentice
) for the respondent
MONETA PORCUPINE MINES LTD. )
Defendant )
(Appellant) )
) Heard: October 12, 2000
On appeal from the judgment of Justice Katherine E. Swinton dated November 17, 1998.
FINLAYSON J.A. (Dissenting):
1The defendant, Moneta Porcupine Mines Ltd. (“Moneta”), appeals from the judgment of The Honourable Madam Justice Swinton of the Ontario Court (General Division) wherein it was ordered that Moneta pay the plaintiff, Charles Gryba (“Gryba”), $111,308 plus interest as damages for wrongful dismissal. The appeal is restricted to the quantum of damages.
Facts
2At the time of trial, Gryba was a 49 year old mining engineer. He had joined Moneta in 1986 as President and a Member of the Board of Directors with a yearly salary of $60,000 plus stock options. His duties as President included looking for new business opportunities, negotiating for mining properties, raising financing and ensuring regulatory compliance. He was employed as President for nine years.
3On June 28, 1989, the Annual General Meeting approved the company’s Incentive Stock Option Plan that remained in force at the time of the plaintiff’s dismissal. Article 5 of the Incentive Stock Option Plan deals specifically with the effect of the termination of employment:
5.2 If an optionee ceases to be employed by the Corporation for cause or if an optionee is removed from office as a director or becomes disqualified from being a director by law, any option or the unexercised portion thereof granted to such optionee shall terminate forthwith. If an optionee ceases to be employed by the Corporation otherwise than by reason of death or termination for cause, or if an optionee ceases to be a director other than by reason of death, removal or disqualification, any option of unexercised portion thereof held by such optionee at the effective date thereof may be exercised in whole or in part for a period of thirty (30) days thereafter. [Emphasis added.]
4Gryba was a member of the Moneta Board of Directors which crafted the Incentive Stock Option Plan.
5Gryba was dismissed on June 20, 1995, following an Annual Shareholder’s meeting held on that day. Dissatisfied shareholders considered that the administrative costs of the company were too high and recommended the termination of all employees. Gryba was offered a severance package, which he refused. He received a payment of $12,295 in lieu of notice. On the effective date of his dismissal, Gryba was earning $84,000 a year in salary and had a benefits package that he valued at 30% of his salary. It included 260,000 stock options. Gryba did not exercise his stock options during the thirty days after his dismissal because he saw no financial benefit in doing so.
6Gryba sought to mitigate his damages after his dismissal by working as an independent prospector with a view to starting up another junior mining corporation. In the course of these efforts, he staked 42 claims in Taylor Township. Gryba also earned $800 for services that he provided at Noranda’s Expert Mining School.
7In April 1996, some 9½ months after his dismissal, Gryba was hired by St. Andrew Goldfields, a junior mining exploration company, to serve as President. That company also acquired the claims that he had staked in Taylor Township as a pre-condition or term of his employment. The Taylor Township claims were valued at $144,000 by an independent consultant and as a result Gryba was given 400,000 shares in St. Andrew Goldfields, which were then trading at 28 cents a share. His annual salary was set at $120,000.
Issues
8The appellant submits that the trial judge erred in her calculation of the damages in three specific respects:
(1) in failing to determine how long the plaintiff’s notice period should have extended;
(2) by not applying the terms of the Incentive Stock Option Plan which gave Gryba 30 days from the date of his dismissal without cause to exercise his stock options; and
(3) in not recognizing that Gryba appropriately mitigated his damages by starting a business whose proceeds exceed the company’s financial obligation to pay wages in lieu of reasonable notice.
Analysis
Issue 1: Notice Period
9The trial judge did not determine the number of months notice that Gryba should have received. Gryba was employed by St. Andrew Goldfields some 9½ months after he was terminated by Moneta. The trial judge held that Gryba was entitled to at least 9½ months notice. No issue is taken with this finding as such. Indeed, counsel for the appellant suggested that a proper notice period would be 12 months. However, the failure to make a finding on this critical matter makes it difficult to arrive at an alternative assessment of damages for the loss of the option benefit that the respondent enjoyed.
Issue 2: Terms of the Stock Option Plan
10The trial judge found with respect to the interpretation of the Incentive Stock Option Plan that the terms of Article 5.2 did not apply. She held:
While the plan does provide that a person in Mr. Gryba’s position would have 30 days after his termination to exercise his options, this interpretation does not determine his claim for damages. An employee dismissed without notice is entitled to damages for the amounts he would have received from employment had he been given proper notice and allowed to work through his notice period. Had Mr. Gryba been given proper notice, he would have had several months in which to exercise his stock options, not just the 30 days following June 20, 1995.
11The trial judge concluded that the respondent was entitled to $62,400 for the loss of profit on his stock options. Gryba claimed that had he been able to do so, he would have started to buy and sell some stocks around early January 1996 (six months after he was terminated), starting with a small amount in order to finance further purchases. He calculated his loss on the assumption that the average price of his options was 36 cents and that the stock, which ranged from 50 to 88 cents would have an average price of 60 cents. He also assumed that he would have to proceed cautiously, given the market for Moneta shares, which traded in the amount of about 1.5 million shares a month, so as not to unduly affect the price. He did not comment directly on the impact on the market of his trading as an insider or the reaction of the Board of Directors of Moneta to such an activity.
12In any event, based on his projections, made totally in hindsight, Gryba claims he could have made a net trading profit of more than $62,000. The trial judge accepted these figures without applying any discount to reflect the improbability of such an inspired option marketing scheme because Moneta did not challenge Gryba’s hypothetical scenario.
13The trial judge clearly contemplated that Article 5.2, which provided 30 days for an employee dismissed without cause to exercise his stock options, applied to Gryba. However, the trial judge concluded that the terms of the contract did not bind the court in its assessment of damages.
14On authority, it was not open to the trial judge to rewrite the contract and conclude that if Gryba had been given proper notice, he would have had at least six months before he needed to start exercising his stock options and that he would have been able to benefit from the market to the extent that he envisioned. Gryba’s employment contract and the Incentive Stock Option Plan are governed by the general law of contract. In my opinion, this court is bound by its own decisions in Ryan v. Laidlaw Transportation Ltd. (1995), 1995 7020 (ON CA), 26 O.R. (3d) 97 (C.A.) and Brock v. Matthews Group Ltd. (1991), 34 C.C.E.L. 50 (Ont. C.A.).
15In Ryan v. Laidlaw, the plaintiff employee was terminated from his position of vice-president after being employed by the defendant for 12 years. Four months prior to dismissal, Ryan was afforded an opportunity to participate in the company’s stock option plan. The trial judge held that the appropriate notice period was 15 months and that the plaintiff was entitled to receive the value of the stock option plan. On appeal, the majority of the court held at p. 98:
The trial judge found that the respondent was entitled to receive the value of an option to purchase the number of shares of the appellant company which would have been available to him had his benefits continued during the 15 months’ notice period following his dismissal. We agree. The annual stock option had become a part of the respondent’s compensation package by July of 1985 when he was dismissed. The appellant’s wrongful termination of the respondent without notice denied him the opportunity to exercise the stock option given to him in the spring of 1985.
16Accordingly, the respondent in Ryan v. Laidlaw was entitled to damages. Unfortunately, the report of the decision does not explain how these damages were assessed.
17This court in Brock v. Matthews considered the validity of a share option agreement that it set out at p. 95:
[T]he Employee shall have 15 days from the date notice of dismissal is given in which to exercise the option hereby granted in respect of the Optioned Shares available as at October 31 of the Year preceding such dismissal. [Emphasis in original.]
18In Brock v. Matthews, the employee notified Matthews Group of his exercise of options under the agreement in respect of 47,000 shares by letter 15 days after the termination of his employment. Payment for the shares was held in trust pending the conclusion of litigation between the parties. The terms of the stock option agreement did not contemplate a dismissal without cause. Accordingly, the trial judge, having determined that Brock was entitled to 12 months’ notice, considered that Brock had until 15 days after the end of the period of reasonable notice to which he was entitled to exercise his stock options.
19This court overturned the trial judge precisely on this point. It held that Brock, in accordance with the terms of the stock option plan, had 15 days from the date of his dismissal without cause to exercise his stock options. This court unanimously held at pp. 58-59:
The trial Judge’s numbers were based upon his view that the “notice of dismissal”, “dismissal”, and “ceasing to be an employee” did not contemplate the wrongful dismissal that occurred in the present case. Accordingly, he held that Brock could have exercised his option up to November 8, 1985, the expiration of the period of reasonable notice, and he made his calculations of the numbers on that basis.
With respect, we are of the view that he was in error. Brock was discharged from his employment on November 8, 1984. He had, in law, a right to reasonable notice or compensation in lieu of such notice. But the proper focus of the question relating to the interpretation of the share option agreements is not the determination of the period of reasonable notice or the quantification of compensation in lieu thereof. The proper focus of that question is the meaning, within the contemplation of the option agreements, of the words “notice of dismissal”, “dismissal”, and “ceasing to be an employee”. In our view, that meaning is the same for all of the events described, and the date on which all three events occurred is the same: November 8, 1984. It was on November 8, 1984, that Brock was given notice that he was dismissed; it was on that day that he was, in fact, dismissed; and it was on that day that he, in fact, ceased to be an employee. Accordingly, in our view, the number of shares to which Brock was entitled to exercise his option under the option agreements must be tested by reference to that date. [Emphasis added.]
20This court upheld the validity of the stock option agreement, but relieved the employee from the strict fulfillment of the condition precedent, namely the actual delivery of the funds to the employer within the 15 day period.
21The term of the stock option plan in Brock v. Matthews is similar to the one on appeal which provides that “If an optionee ceases to be employed by the Corporation otherwise than by reason of death or termination for cause . . . any option . . . held by such optionee at the effective date may be exercised . . . for a period of thirty (30) days… .” [Emphasis added.] There is no disagreement that Gryba was terminated otherwise than for cause; the effective date of termination was obviously June 20, 1995, and it follows that Gryba had thirty days from that date to exercise his option.
22The respondent Gryba relies on another decision of this court: Veer v. Dover Corp. (Canada) Ltd. (1999), 1999 3008 (ON CA), 120 O.A.C. 394. In this decision, the court again laid down a rule of contractual interpretation in the context of a stock option agreement. The court concluded that terms of a contract should be presumed to refer to a lawful termination rather than an unlawful termination. Goudge J.A. stated for the court at p. 396:
In my view “voluntary” termination refers to a termination that is consensual or initiated by the employee, whereas “involuntary” termination is that initiated by the employer. In either case, the termination contemplated must, I think, mean termination according to law. Absent express language providing for it, I cannot conclude that the parties intended that an unlawful termination would trigger the end of the employee’s option rights. The agreement should not be presumed to have provided for unlawful triggering events. Rather, the parties must be taken to have intended that the triggering actions would comply with the law in the absence of clear language to the contrary. There is no such language in these stock option agreements. [Emphasis added.]
23However, Goudge J.A. stated at p. 397: “The language of the option agreements in this case is clearly different from that in Brock, supra”. Goudge J.A. further commented:
[Brock v. Matthews] also involved an employee terminated without cause and without reasonable notice. This court read the language quoted above to provide that the date of the actual dismissal of the employee was the reference point for the ending of the employee’s option rights. In doing so, it focused on the special language in that provision of “ceasing to be an employee . . . from the date of the notice of the dismissal” and “such dismissal” to conclude that it was the day on which the employee was in fact dismissed that mattered, irrespective of whether that dismissal was lawful or unlawful. Absent language such as this, it seems to me that parties must be presumed to contemplate triggering action that complies with the law.1
24The appellant Moneta submits, and I think accurately, that both Veer v. Dover and Brock v. Matthews stand for the proposition that the terms of the contract with respect to stock options govern in the context of a dismissal without cause. There is no basis on which to disregard the plain wording of the contract where it provides for a period of time
following termination in which the options may be exercised. The Incentive Stock Option Plan in this case was approved by Moneta at its Annual General Meeting on June 28, 1989. Gryba was a member of the Board at that time. Gryba was terminated without cause on June 20, 1995. Thirty days later, on July 20, 1995, he had made no effort to redeem his unexercised stock options. Article 5.2 of the Incentive Stock Option Plan specifically provides that, where an optionee is terminated without cause, the optionee has 30 days in which to exercise the options. Accordingly, Gryba is not entitled to damages representing his fictional trading profits from his deemed exercise of options that he no longer had.
25While it is not necessary to resolve the issue in this case, I would suggest that there are other ways of valuing an option that is part of an employment package. In this case, Gryba described his benefits package as normal and worth 30% of his salary. This suggests to me that had the trial judge determined the notice period, the damages would be the loss of his salary and the benefits package over that period. Even in the absence of the evidence that we have here, since this type of employment package is normal in this industry, I would be surprised if there was not some knowledgeable person who could have put a figure on the true value to the parties of such a package.
26Every case must turn on its own facts, but to treat an option on penny stocks as exercisable retroactively at the election of the optionee and at the end of whatever period the court determines to be reasonable for severance purposes, is to attribute to it a value that is totally unrealistic. No one could purchase such an option in the market.
Issue 3: Mitigation
27The trial judge held that Gryba “made reasonable efforts to mitigate his losses in his job search and entrepreneurial efforts.” However, she refused to apply the full value of those efforts in mitigation of Gryba’s claim.
28Gryba testified that he concentrated on three or four areas to find a replacement source of income. He continued to attend gold shows and mining conventions in search of an equivalent job. He made regular trips to Toronto to talk to some large and medium sized mining companies. He looked for business in what he called “Double Post Mining” with an eye to starting up another junior exploration company. Gryba testified that he “spent quite a bit of time” on the junior mining company. He had discussions with a person in Garrison Township and “hired a staking contractor to stake some claims that were open and had been open for quite a while in Taylor Township”. He kept a record of his expenses and submitted an account for $20,229.77 which was not allocated to specific mitigation attempts. The trial judge awarded him $12,654 of this amount as job search expenses. This amount was not challenged by Moneta.
29These expenses related to the staking of the Taylor Township claims and took place after Gryba’s dismissal and before he accepted new employment as President of St. Andrew Goldfields. As President of that company, Gryba received a salary of $120,000 and as a condition of employment, he was obliged to sell his Taylor Township claims for 400,000 shares of Goldfields, then trading at 28 cents per share. The fair value of the Taylor Township claims was determined by outside mining consultants at $144,000 and added to Goldfields’ portfolio. They were touted in the company’s 1996 Annual Report by Gryba as one of the reasons for optimism for Goldfields’ future.
30Moneta submits that the value placed on Gryba’s efforts in the sale of the Taylor Township claims and assets relate to a period of time covered by the notice period. Accordingly, the $144,000 value of the mining claims was earned during the notice period and was a valid form of mitigation that should be deducted from the damages owed by Moneta. As an alternative to the $144,000 value to the claims, it could be argued that what Gryba received was $112,000 worth of shares (28 cents x 400,000 shares).
31However, the trial judge took a different view of the matter. She held that the shares transferred to Gryba were not:
… earnings during the notice period which should be deducted from the damages owing. As in Foster v. M.T.I. Canada Ltd. (1992), 42 C.C.E.L. 1 (Ont. C.A.) at 3, the sum paid by St. Andrews reflected its view of the possible future value of the claims, but it was not compensation for services rendered by the plaintiff during the period of unemployment, nor profit earned during that period.
32I agree with Moneta that the trial judge misapplied Foster v. M.T.I. In that case, the respondent was dismissed from his employment as vice-president and sales manager of the appellant company, which was a Canadian subsidiary of an American parent company, which in turn was a subsidiary of a Japanese corporation. After dismissal, the respondent started up his own company to distribute equipment similar to that distributed by his former employer. He put up $18,000 of his own money as the capital and received 100 common shares. Within the notice period, he sold 20 of those shares to a third party for $50,000, thus realizing a capital gain of $46,400. The court held at p. 3:
The appellant argues that this amount of $46,400 should be deducted from the damages award as moneys earned in mitigation, since it was money received personally by the respondent during the notice period, and was obtained through the business he was carrying on in place of his employment with the appellant. While there is an element of logic in that position, it fails on the facts of this case. At the time of the share sale the new company had barely commenced operations. The value of its shares merely reflected the new shareholder’s view of the future profitability of the company, and his assessment of the ability of the respondent to make the company profitable. Had a profit been earned during the notice period, when a duty to mitigate existed, a portion of the profits might have been deductible in mitigation. This company, however, made no profits in its first year.
33This is not the situation in the case on appeal. Gryba had acquired a tangible asset with a present value because of the use of his expertise in mining claims. He realized a financial gain from it by selling it to his new employer. Indeed, he had to sell the claims, as he readily conceded, or he would not have become president of Goldfields. All this was done well within the period of notice determined by the trial judge. Just as he was entitled to claim the costs of his efforts to mitigate, he was obliged to credit his former employer with the fruits of those same efforts in asking for compensation for his loss by reason of lack of sufficient notice of termination.
34It is the duty of the court to determine what Gryba’s real loss was in light of the steps which he took to mitigate his damages after his dismissal. Laskin C.J.C. in Michaels v. Red Deer College, 1975 15 (SCC), [1976] 2 S.C.R. 324 at 330-331 stated:
The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a “duty” to mitigate should be understood in this sense.
In short, a wronged plaintiff is entitled to recover damages for the losses he has suffered but the extent of those losses may depend on whether he has taken reasonable steps to avoid their unreasonable accumulation.
35It is now well established that an individual can properly start his or her own business in order to mitigate damages when dismissed from employment. Indeed, at least one court has held that an employer is liable for any loss incurred by a new business that is pursued in mitigation: McKee v. NCR Canada Ltd. (1986), 10 C.C.E.L. 128 (Ont. H.C.). In that case, Reid. J. held at p. 135 that it was reasonable for the plaintiff to have attempted to establish a business on his own and the defendant employer was held liable for the losses of the new business which fell within the notice period. Similarly, in Shiels v. Saskatchewan Government Insurance (1988), 1988 5293 (SK QB), 20 C.C.E.L. 55 at 67 (Sask. Q.B.), Maclean J. held that the defendant corporation was liable for the start-up costs of the plaintiff’s business as the business was a proper form of mitigation.
36Admittedly, ascertaining the real gain to an individual within a corporate or business structure in its initial start-up phase can be complex. In Ward v. Royal Trust Corp. of Canada (1993), 1993 1324 (BC SC), 1 C.C.E.L. (2d) 153 at 159 (B.C.S.C.), the court held that it was unclear whether the new business would at any point in time earn a profit and declined to deduct amounts that could be considered to be “anticipated mitigation”.
37In Larsen v. Saskatchewan Transportation Co. (1993), 1993 6612 (SK CA), 49 C.C.E.L. 165 (Sask. C.A.), the plaintiff landed a contract shortly after his dismissal. He incorporated a company for the purposes of carrying out this contract and became, together with his wife, the only shareholders of the company. The court found that the plaintiff had validly mitigated his damages and found that there was no sound conceptual reason for not attributing the net financial gain of the company to Larsen in calculating his damages. Cameron J.A., writing for the Saskatchewan Court of Appeal, recognized the factual sensitivity of suchcases in stating at p. 171:
Finally he contended that attributing even the net income to him for the purpose of mitigation would be inconsistent with Foster v. M.T.I. Canada Ltd. …
We are not persuaded by these arguments. Foster’s case was decided on its own facts, and on the facts in this case we are satisfied that the trial judge erred. Bearing in mind Mr. Larsen’s duty to [Saskatchewan Transportation Co.] to mitigate his loss, and having regard for all of the circumstances surrounding this matter, the trial judge ought to have found that Mr. Larsen had in fact managed to mitigate his loss. There is simply no sound reason for holding otherwise.
38In PCL Construction Management Inc. v. Holmes (1994), 1994 ABCA 358, 26 Alta. L.R. (3d) 1 at 10 (C.A.),the court applied the principles enunciated in Foster v. M.T.I. in finding that the plaintiff had experienced a real financial gain as a result of his business activities which should be deducted from his claim in damages. The plaintiff had set up a company which earned him a total of $58,000 during the notice period.
39I am of the view that the trial judge was in error in applying Foster v. M.T.I. to this case. The benefit of this mitigation exercise should have been credited to the defendant Moneta. If it had been, it would have more than offset the difference between what was offered by way of severance and what was claimed at trial.
Disposition
40This is a case that should not have gone to trial. Gryba was entitled to 12 months’ notice on the concession of Moneta, at least in this court. Once he became re-employed within that notice period by another junior exploration company at a higher salary and with equivalent benefits, he should have forgotten about the matter. Not every employee suffers when he is discharged and some, like Gryba, improve their circumstances. Here, even apart from the unexpected bonus of having his mitigation efforts result in a substantial personal benefit, he appears to have been left better off.
41Accordingly, I would allow the appeal, set aside the judgment below and replace it with a judgment dismissing the action with costs. The appellant is entitled to its costs of the appeal.
Released: DEC 20 2000 Signed: “G.D. Finlayson J.A.”
GDF
WEILER AND GOUDGE JJ.A.:
42We have had the benefit of reading the reasons for judgment of Finlayson J.A. in this matter. With respect, we disagree with his conclusion on each of the three issues raised by the appellant, and for the reasons that follow, we would dismiss the appeal.
43It is unnecessary for us to review the facts, since they are concisely set out by our colleague. We can therefore turn directly to the issues.
44First is the issue of reasonable notice. In the course of addressing this issue, Swinton J. said that given the respondent’s age, his position, the duration of his employment and his salary level, he was entitled to notice for at least the period of nine and one-half months in which he was out of work. Swinton J. went on to assess the damages owed to the respondent based on a notice period of nine and one-half months. That is the notice period for which she found the respondent to be entitled to compensation. Reading her reasons as a whole, we are satisfied that Swinton J. found the appropriate notice period in this case to be nine and one-half months.
45In this court, the appellant does not say that this period of notice is too long and the respondent does not say it is too short. Moreover, in our view, there is no basis to interfere with the trial judge’s determination of the reasonable notice to which the respondent was entitled.
46The second issue relates to the stock options held by the respondent when he was dismissed without cause and without notice. Swinton J. held that the respondent was entitled to exercise his stock options during the period for which he would have been entitled to notice of termination.
47The appellant submits that the respondent was bound by the wording of the stock option plan. The relevant wording of paragraph 5.2 of the stock option planstates:
5.2 If an optionee ceases to be employed … by the Corporation otherwise than by reason of death or termination for cause … any option … held by such optionee at the effective date may be exercised in whole or in part for a period of thirty (30) days thereafter.
48The appellant submits that Swinton J., in effect, enlarged the time period during which the respondent could exercise his options based on broader principles of employment law concerning the notice period and that this was contrary to the wording of the stock option plan.
49We agree that the wording of the plan, in essence the terms of the contract, must govern: Brock v. Matthews Group Ltd. (1991), 34 C.C.E.L. 50 (Ont. C.A.). In that case, the 1978 stock option agreement specified that upon the employee ceasing to be an employee, the employee would have 15 days from the date of notice of dismissal in which to exercise his options. The 1981 option agreement stated that upon the employee ceasing to be an employee, the employee would have 15 days from the date of the occurrence of such event in which to exercise any options … that could have been purchased (but were not purchased) as at December 31 of the year in which such event occurred. In that case the history of the stock optionclause and the reference to the end of the calendar year indicated that the date for the exercise of stock options was unchangedirrespective of whether termination was proper or not.
50The question here is whether the stock option planclearly includes as a triggering event a termination that is done in breach of contract. See Veer v. Dover Corp. (Canada) Ltd. (1999), 1999 3008 (ON CA), 120 O.A.C. 394.
51The wording in the stock option planin this case is different from that in Brock and can be read as contemplating a lawful termination. While the plan speaks of the optionee “ceasing to be employed” as in Brock, supra, here the date for the exercise of stock options is 30 days following the effective date of termination. The effective date of termination would include the notice period. The wording of the stock option planin this case can be read as contemplating a lawful notice of termination and the effective date of the cessation of employment is the end of the notice period. Our interpretation is supported by the fact that the stock option clause also provides that in the event of death or dismissal for cause the employee has no right to exercise stock options.
52Given this interpretation, the respondent was not required by the stock option planto exercise his options within 30 days of his unlawful termination and was entitled to do so during his notice period.
53As to the quantum of damages found by the trial judge to flow from this, in our view there was a reasonable evidentiary basis for the finding and we would not interfere with it.
54The third issue relates to the amount that is properly set off against the respondent’s damages due to his efforts at mitigation. The trial judge declined to include in this calculation the 42 mining claims which were staked by the respondent during the notice period. We agree with her conclusion.
55After his dismissal in June 1995 the respondent investigated the possibility of starting a junior mining company. This led him to investigate mineral properties and to stake these 42 claims. When he subsequently obtained employment with St. Andrew’s Goldfields in April 1996, his new employer made it a condition of his employment that St. Andrew’s acquire these claims from him so that he would not have any conflict of interest. In return, St. Andrew’s issued 400,000 common shares to him. The fair value of these shares was determined for St. Andrew’s by outside mining consultants in the amount of $144,000.
56Our review of the decision of the trial judge to exclude these mining claims from the mitigation calculus must be done against the backdrop of the legal principles relating to mitigation. The starting point is that a wrongfully dismissed employee has a duty to take reasonable steps to minimize the loss suffered due to the breach of his employment contract. The well-known statement by the House of Lords quoted with approval in Asamera Oil Corp. v. Sea Oil & General Corp. (1978), 1978 16 (SCC), [1979] 1 S.C.R. 633 at 661 puts it as follows:
The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.
57Two other principles are important in this analysis. First, in assessing reasonableness the context is important namely, in this case, what an ordinary business executive would reasonably do in these circumstances. Second, the burden of proof is on the defendant to demonstrate that the plaintiff could reasonably have avoided a loss or that he acted unreasonably in failing to do so. See Red Deer College v. Michaels, 1975 15 (SCC), [1976] 2 S.C.R. 324; Jamie Cassels “Remedies: The Law of Damages”, p. 340.
58Turning then to the facts of this case, the loss suffered by the respondent due to his wrongful dismissal was the loss of employment income for the nine and one-half months of notice which he did not receive, but to which he was entitled.
59While the respondent acquired the 42 mining claims during this period, he did not acquire them from a new employer as income or in lieu of income. Nor were these claims profits from a new business undertaken by the respondent during the period of notice. At most, they were potential inventory for a possible new business the respondent was considering. As such, they would become part of the mitigation calculation only if the appellant could show that these claims could have been sold at a profit during the notice period and that it would have been reasonable for a mining executive in the appellant’s position to have done so to minimize his lost employment income.
60In our view, the appellant can demonstrate neither in this case. There is no evidence that there was anyone willing to purchase the claims during the notice period. The only evidence of any relevance to this question was that of the respondent who said that if he had tried to sell these claims on the open market, he may have got nothing for them.
61The fact that his subsequent employer gave him shares worth $144,000 for these claims after the notice period does not demonstrate that the claims could have been sold at a profit during the notice period. There is no suggestion that the respondent could have made his arrangement with St. Andrew’s Goldfields any earlier nor that during that nine and one-half months there was any other potential purchaser willing to buy these claims either alone or as part of an employment contract with the respondent.
62Moreover, there is no showing that it would have been reasonable for the respondent to sell these claims as part of the junior mining company he was considering starting. He did not in fact start such a business during the notice period and even if he had, it would not be reasonable to require that the business immediately dispose of its complete inventory in order to replace the respondent’s lost employment income.
63The appellant simply has not demonstrated that it was possible for the respondent, in order to minimize his loss, to sell these claims at a profit during the notice period nor that it would have been reasonable for him to do so. It was therefore proper for the trial judge to exclude the mining claims from her mitigation determination.
64This conclusion is not undermined by the trial judge’s decision to allow the respondent damages of $12,654 as recovery of expenses incurred by him during the notice period in seeking to mitigate his loss. The appellant did not challenge this claim at trial. In any event, most of these expenses related to travel for job searches and only at most $19.09 appears to be an expense relating to staking mining claims.
65We therefore would dispose of each of these issues adversely to the appellant and would dismiss the appeal with costs.
Released: DEC 20 2000 Signed: “S.T. Goudge J.A.”
KMW “K.M. Weiler J.A.”
Each of the 10 options are conditional upon the executive completing continuous service with the Company (which includes any of the subsidiaries), … to the last day of the year immediately following the granting date of the particular option, failing which the option becomes null and void.
