Court of Appeal for Ontario

Citation: Chapman v. The Bank of Nova Scotia, 2008 ONCA 769 Date: 2008-11-17 Docket: C47310

Between: David Chapman (Plaintiff/Appellant) and The Bank of Nova Scotia (Defendant/Respondent)

Before: Doherty, Cronk and Juriansz JJ.A.

Counsel: Paul J. Pape and John J. Adair, for the appellant Martin Sclisizzi and Margot Finley, for the respondent

Heard and released orally: November 3, 2008

On appeal from the judgment of Justice Barbara A. Conway of the Superior Court of Justice, dated May 25, 2007.

Endorsement

[1] The appellant, who was a Senior Vice-President (SVP) with the respondent, The Bank of Nova Scotia, claimed that he was constructively dismissed in the early part of 2004. The appellant’s claim was based on reductions in his compensation package between the years 2001 and 2003. His compensation package included a salary, a cash bonus, and various share options. The cash bonus and the share options varied from year to year during the relevant time. The salary remained the same.

[2] The trial judge found against the appellant. She provided thorough and careful reasons for judgment.

[3] Counsel on appeal attempts to re-litigate what are factual questions decided at trial, albeit with an argument that takes a somewhat different slant than the submissions put before the trial judge. The trial judge correctly observed early in her reasons, that the case was fact bound and turned on an application of well settled legal principles to the evidence heard by her.

[4] The appellant accepts that the trial judge did not err when she found against him on his claim that he was advised in 2000 that he would be on his way to Executive Vice-President compensation levels if he took up a newly created Senior Vice-President position with the Bank. The trial judge referred to this claim, which she rejected and which counsel does not renew on appeal, as the “crux of the claim” advanced at trial. The appellant also accepts that his September 2000 level of compensation did not establish a permanent base line for the calculation of his future levels of compensation.

[5] The appellant’s main argument is that in fixing the variable components of his overall compensation package for the years 2001 to 2003, the Bank took into consideration a factor that was not one of the three criteria that the appellant claims could be looked at by the Bank according to the terms of the appellant’s employment. These terms were not reduced to writing but, according to the appellant can be inferred from the conduct of the parties.

[6] The appellant argues that the Bank wrongly, and contrary to the terms on which his compensation was to be settled, looked to the Bank’s perceived need after 2000 to bring the appellant’s compensation into line with Senior Vice-President levels of compensation.

[7] It is agreed that the appellant’s compensation went up dramatically in 2000, but went down during the three years in issue (2001-3). There is some disagreement as to exactly how much it went down. In our view, the trial judge’s figure of 13% over the three year period is the correct figure. It is also uncontested that throughout this period, the appellant remained among the highest paid Senior Vice-Presidents in the Bank. His performance evaluations were always very good.

[8] Although the appellant’s argument was not put in the same terms as the argument made to the trial judge, her factual findings, which are fully supported by the evidence, are dispositive of this ground of appeal. We think it is appropriate to set those findings of fact out in the terms in which they appear in the trial judge’s reasons:

[94] In reviewing the decreases in Chapman’s compensation over this period, it must be remembered that his total compensation was never fixed at a particular number, nor was he ever given assurance that it would not fluctuate or go down, nor was he told that he would remain at a particular number relative to other SVPs.

[96] It was his variable compensation which fluctuated. This, by very definition, is the nature of variable compensation.

[97] (d) There was no commitment given with respect to MIP [the bonus] which was a significant variable component of Chapman’s overall compensation. It was clear that MIP was to be determined by individual performance, within the context of the overall MIP pool for any particular year. The pool itself could fluctuate depending on Bank performance and market conditions.

[100] Further, I do not think the fact that Chapman’s compensation went down from 2000-2003 and the average of the steady state [the comparator group of Senior Vice-Presidents] went up supports Chapman’s constructive dismissal claim. There was no commitment that he would remain at a certain level above SVPs or that he would stay at any particular point in the SVP range. It was only necessary that he be compensated fairly – which in this case was within the range for his position and performance level. He was.

[101] With respect to the argument that the Bank was bringing him into line with other SVPs, I see nothing wrong with that, as long as Chapman stayed within the applicable range for SVPs. If he had been overpaid in any particular year, then absent any agreement that he would not be reduced (which I have not found to be the case), it was within the Bank’s right to align him with other SVPs.

[104] While I accept that compensation is an essential term of an employment contract, the question is what were the terms of Chapman’s employment contract on compensation. As set out above, I do not consider that there was an express or implied term that Chapman’s variable compensation would not fluctuate, or that his overall compensation would remain at a specific level every year or that he would have a specific gap over other SVPs. Chapman knew that his compensation had a variable component and that it would fluctuate from year to year. [Emphasis added.]

[9] The appellant also makes a second submission. He argues that the overall reduction in his compensation (13%) was so significant as to constitute a substantial change in the terms of his employment resulting in a fundamental breach of his employment contract and constituting a constructive dismissal. The trial judge examined this submission at length and rejected it. She found that the reductions in the appellant’s compensation in 2001 and 2002 were condoned by the appellant. In both years, he successfully renegotiated aspects of his compensation package when he was dissatisfied with that package as initially presented to him. She found that the reduction in 2003 (3.7%) was minimal and not enough to amount to a constructive dismissal.

[10] In the course of addressing this argument, the trial judge said:

[124] What would a reasonable person have thought when Chapman’s compensation was decreased in 2003? Given the factors outlined in paragraph 97 and 113 above, I cannot say that the change from 2002, nor the overall reduction from 2000, could have been regarded as a fundamental breach of the employment contract entitling Chapman to treat it as repudiated. There was no change of the agreed basis upon which he was to be compensated as an SVP, nor was there any change in his employment responsibilities, title or working relationship with the Bank. Chapman was not making as much as he did in the banner year of 2000 and had declined to a level that was within the SVP range. That is not sufficient, in my view, to establish a constructive dismissal. [Emphasis added.]

[11] As with the earlier findings, we see no basis upon which to interfere with this essentially factual assessment. The trial judge made no material factual error. Her analysis and her conclusion are both reasonable.

[12] In light of our disposition of these two arguments, it is unnecessary to hear submissions on the mitigation issue.

[13] The appeal is dismissed.

[14] We have heard submissions on costs. The respondent is entitled to its costs of the appeal fixed at $20,000, inclusive of disbursements and GST.

“Doherty J.A.”

“E.A. Cronk J.A.”

“R.G. Juriansz J.A.”