Toronto Transit Commission v. Amalgamated Transit Union Local 113, 2012 ONSC 3175

2012 ONSC 3175

DIVISIONAL COURT FILE NO.: 443/11

DATE: 20120531

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Swinton, Pepall and Harvison Young JJ.

B E T W E E N:

TORONTO TRANSIT COMMISSION

• and -

AMALGAMATED TRANSIT UNION LOCAL 113

Frank Cesario, Elisha Jamieson, for the Applicant

Ian J. Fellows, Karen Ensslen, for the Respondent

HEARD at Toronto: March 9, 2012

Harvison Young J.

1The Toronto Transit Commission (“TTC”) applies for judicial review of an award of Arbitrator Owen Shime, which ordered the TTC to repay funds to Heather Baillie (“the grievor”), a member of the respondent, the Amalgamated Transit Union, Local 113. The applicant seeks to have the award quashed on the ground that the Arbitrator erred in applying mitigation principles to bar the TTC from recovering a shortage of funds from an employee station collector.

2The respondent Union asks that this court dismiss the application. In the alternative, it asks that the court remit the matter to the Arbitrator with directions.

Background

3Ms. Baillie, a TTC station collector, provided Metropasses to nine customers (valued at $108 each) and, in error, credited their bank accounts instead of debiting them when they paid with debit cards. These incidents took place on October 27 and 28, 2008. The result of these transactions was a loss to the TTC in the amount of $1,962.00. One transaction valued at $218.00 was subsequently recovered from a customer, leaving a total loss of approximately $1,744.00.

4The TTC took the position that Ms. Baillie should repay this money as it constituted a “shortage” within Article V, Section 11 of the collective agreement in force between the parties. That Article provides as follows:

Effective with the payment of 2008 shortage allowance, an allowance of $617.00 at the end of each calendar year for the term of this Agreement to defray shortages incurred will be paid to present employees who during the calendar year worked in one of the classifications listed below:

Subway Supplier

Station Collector

[…] It is understood and agreed that all Station Collectors and Subway suppliers are responsible for Commission funds that are placed in their care or to which they have access. It is understood and agreed that the employee will repay to the Commission any shortages in such funds on demand and it is a condition of continued employment that the employee sign an agreement to that effect. [Emphasis Added.]

5The TTC made efforts to recover the funds through its point-of-sale payment service provider, Global Payments Canada (“Global”). The TTC contacted Global when it learned of the shortage of funds. Global sent letters to the banks involved describing the transactions and asking the banks to contact the customers and obtain authorization for the return of the funds. One customer of TD Bank refused an authorization to debit his/her account, while a customer of the Bank of Nova Scotia agreed to an adjustment of $218. The TTC followed up with Global several times from October 2008 to March 2009 and again in June 2010. The customer names were not known to the TTC until May 2010, after the information was subpoenaed from the banks during the arbitration.

6Ms. Baillie was initially discharged. However, she, the Union and the TTC entered into Minutes of Settlement according to which Ms. Baillie agreed to repay the amount of $1,743.75 (through payroll deductions at the rate of $100 per month) and the TTC agreed to reinstate her, although she was suspended without pay for 4 days. This agreement was without prejudice or precedent, and Ms. Baillie’s payment was made without any admission of fault or guilt. The parties agreed that any of them could proceed to arbitration to resolve the matter. Ms. Baillie and the Union did so, alleging that the discipline was unjust and that the payment by her was inappropriate.

7The Arbitrator agreed that the loss was subject to a provision in the collective agreement that required employees to “repay to the Commission any shortages” in their funds, and agreed that the loss in issue was a “shortage” within the meaning of Article V, Section 11. He also found that Ms. Baillie had been negligent and reckless, and that the 4 day suspension was warranted. That aspect of the award is not in issue in this application.

8The Arbitrator also held, however, that the TTC could not recover any of the loss from the grievor on the basis that the TTC had failed to mitigate the loss suffered. It is this part of the award which is at issue in this application.

The Issues

9The TTC submits that the decision in this respect is unreasonable and should be set aside. It argues:

a. that the Arbitrator should not have applied mitigation principles in these circumstances because mitigation does not apply to the repayment of a contractual debt and the collective agreement does not include an obligation to mitigate;

b. that the Arbitrator, in any event, applied the wrong legal test for mitigation, and in particular imposed a burden of proof on the TTC rather than the Union, and that he erred in concluding that the TTC had failed to take reasonable steps to recover the funds;

c. that the Arbitrator did not consider or determine how, or by how much, the loss would have been mitigated had the TTC taken reasonable steps; and

d. that the Arbitrator failed to provide adequate reasons for his decision.

Standard of Review

10It is common ground that the standard of review is that of reasonableness as concerns the interpretation of the collective agreement and those issues within the specialized area of expertise of a labour Arbitrator (see Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at para. 47). Although the applicant in written submissions took the position that a correctness standard applies to the mitigation issue as a question of law beyond the Arbitrator’s specialized area of expertise, Mr. Cesario accepted reasonableness as the standard applicable to all issues in oral argument.

Did the Arbitrator unreasonably rely on the principles of mitigation?

11The Arbitrator began his consideration of the repayment issue by considering Article V, Section 11. He determined that,

…the parties were aware when they signed the collective agreement that debit\credit machines were being used and could have exempted electronic transactions from Article V Section 11. They did not, and therefore I conclude that electronic transactions are included within the meaning of the term “Commission funds” and that collectors are responsible for shortages, including electronic shortages, in those funds within the meaning of Article V Section 11. [Reasons, at p. 6.]

12At the next paragraph, the Arbitrator noted that this resulted in the unjust enrichment of those customers who were “twice enriched” by receiving Metropasses and, in addition, having their accounts credited instead of debited. He then stated,

[i]n these circumstances, it is my view that there was a duty primarily required of the Commission to take reasonable steps to pursue the customers for payment of the wrongful credit and for payment of the metro passes which they had gratuitously and wrongfully received. [Reasons, at p. 6.]

13The Arbitrator continued to review the conduct of Global Payments Canada to recover the funds. These steps had included sending “best efforts” collection letters to the banks. The Arbitrator found that there was some question as to whether some of the letters were sent, and he noted an “absence of any calls to the banks or follow up to the letters [by Global]”. He found that, because of the arrangements that the TTC had with Global and the banks to ensure payment when customers paid electronically, the duty to mitigate is shared, but that, having entered into the agreement, the TTC “must bear the ultimate responsibility to mitigate its damages in situations such as this one” (Reasons, at p. 12).

14The applicant argues that the Arbitrator’s application of the principles of mitigation was unreasonable for two reasons. First, it submits that the principles of mitigation have no application to these circumstances because of the legal rule that mitigation does not apply to the repayment of a debt. Rather, mitigation principles apply to claims for damages in tort or damages for breach of contract: see G.H.L. Fridman, The Law of Contract in Canada, 6th ed., (Toronto: Carswell, 2011), at p. 730; Manufacturers Life Insurance Co. et al. v. Granada Investments Ltd. et al., 2001 2708 (ON C.A.); Fischer v. Dyck Forages & Grasses Ltd., 2011 MBCA 47; Ermineskin Place Partnership v. Collins, 1989 3266, at paras. 28-32 (AB Q.B.); Pacific & Western Trust Corp. v. Gretchen Enterprises Ltd. (1989), 1989 4666 (SK QB), 63 D.L.R. (4th) 764 (Sask. Q.B.) , at paras. 3-8.

15Second, the applicant submits that the Arbitrator effectively amended the collective agreement to add a mitigation requirement where one does not exist.

16In response on this issue, the Union submits that the court must take a deferential stance to the Arbitrator’s determinations and the remedy awarded, including the mitigation principles applied. It cites the recent Supreme Court of Canada decision in Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59, in support of its proposition that Arbitrators should be given a margin of appreciation in interpreting common law doctrines. In considering an Arbitrator’s imposition of the doctrine of estoppel, the Supreme Court stated at para. 44 that,

[c]ommon law and equitable doctrines emanate from the courts. But it hardly follows that Arbitrators lack either the legal authority or the expertise required to adapt and apply them in a manner more appropriate to the arbitration of disputes and grievances in a labour relations context.

17There is no question that reviewing courts must take a deferential stance in reviewing arbitral awards. As the Supreme Court stated at para. 51 of Nor-Man,

[r]eviewing courts must remain alive to these distinctive features of the collective bargaining relationship, and reserve to Arbitrators the right to craft labour specific remedial doctrines. Within this domain, arbitral awards command judicial deference.

18If an Arbitrator is to modify common law doctrines, however, it must be done clearly and in recognition of what those principles are. As the Supreme Court cautioned in Nor-Man, at para. 52,

[b]ut the domain reserved to arbitral discretion is by no means boundless. An arbitral award that flexes a common law or equitable principle in a manner that does not reasonably respond to the distinctive nature of labour relations necessarily remains subject to judicial review for its reasonableness.

19The Arbitrator’s reasons do not meet the standard of reasonableness insofar as the duty to mitigate is concerned. First, the conclusion that a duty to mitigate arose in these circumstances where the obligation was to repay a debt is unreasonable, because the duty to mitigate at common law arises from breach of contract or tort, and the obligation to avoid damages caused by breach. The reasons do not indicate recognition of the common law principles or explain why they should not apply here where the obligation was to repay a debt.

20Second, the Arbitrator’s reasons do not explain why there should be a duty to mitigate, given the language of the collective agreement, which appears to clearly contemplate repayment of any shortages. Beyond the reference to Article V, Section 11, the Arbitrator’s reasons contain little reference to the collective agreement. Of particular concern is the fact that there is no interpretation of the collective agreement in light of the “shortage allowance”, which the parties negotiated to cover shortages, nor is there a discussion of the path of reasoning that led the Arbitrator to conclude that a duty to mitigate should apply in these circumstances.

21The Arbitrator emphasized the presence of third parties as a factor in finding that a duty to mitigate exists. However, it is not obvious how or why this materially differs from the situation where too much change is given, and why that matters as far as the interpretation of this collective agreement is concerned. The statement that the obligation to repay shortages must be balanced with the employer’s obligation to mitigate is essentially conclusory considering the shortage allowance and the clear wording of the provision.

22The respondent submits that the Arbitrator reasonably found that the duty to mitigate was implicit in the collective agreement. This is not, however, explained in the reasons. Given that he notes in his reasons that the parties were aware that electronic payment was an option for customers at the time that the collective agreement was negotiated, some analysis was necessary to explain the imposition of a duty to mitigate, particularly given the shortage allowances provided to station collectors, such as the grievor, to cover shortages.

23We are unable to find that the Arbitrator’s reasons with respect to the existence of the duty to mitigate satisfy the requirements of justification, transparency and intelligibility in relation to his conclusion that a duty to mitigate applies with respect to the collection of shortages from employees.

Was the Arbitrator’s finding that the TTC did not take reasonable steps to mitigate the loss reasonable?

24The applicant’s second ground is that, even if it was reasonable to impose a duty to mitigate upon the TTC, the Arbitrator’s application of the test for mitigation was unreasonable and based on erroneous principles.

25It is clear as a matter of general law that the burden of proof is on the party alleging a failure to mitigate to show on a balance of probabilities that the mitigation effort was lacking. The Union bore the burden of proving, first, that the TTC should reasonably have pursued certain steps to mitigate the loss, which it failed to take, and second, that had the TTC taken those steps, it would have reduced the loss: see Michaels v. Red Deer College, 1975 15 (SCC), [1976] 2 S.C.R. 324, at pp. 331-332; Link v. Venture Steel Inc., 2008 63189, at paras. 45-46 (ON S.C.), aff’d 2010 ONCA 144, at para. 73.

26The Arbitrator, though considering what steps the TTC and Global took to recover the shortage, states that the TTC’s efforts were minimal and insufficient. The Arbitrator does not explain what the TTC should reasonably have done to mitigate the loss. Even if Global’s efforts were inadequate, the customers who were enriched were strangers to Global and the TTC, and only the banks knew their identities. There is no evidence as to the banks’ efforts in response to the email requests they received, or their obligations, and there is also no explanation as to how this reflects on any duty on the part of the TTC to mitigate.

27In concluding that the TTC had not met its duty to mitigate, the Arbitrator’s reasons do not meet the reasonableness standard. First, there is no reference in his reasons to the fact that the Union bore the onus of demonstrating the TTC failed to mitigate its losses. This is critical in the circumstances of this case because the Arbitrator relied on the “absence of evidence” concerning the steps taken. For example, he states that “[n]o evidence was given as to the bank’s efforts in the case of the customer who refused authorization.” Second, while he is critical of what was not done, there is no evidence or analysis with respect to what would have constituted reasonable steps, nor the extent to which the loss would have thus been minimized: see Branco v. Ephstein, 2006 19941, at paras. 14-21 (ON Div. Ct.).

The Adequacy of the Reasons

28As the respondent submits, adequacy of reasons is no longer a stand-alone basis for quashing the decision of a labour Arbitrator. Rather, “the reasons must be read together with the outcome and serve the purpose of showing whether the result falls within a range of possible outcomes.” See Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, at para. 14.

29In a case such as this, where there are reasons given, the adequacy of the reasons is effectively subsumed within the substantive review of the reasonableness of the Arbitrator’s decision. It is therefore unnecessary to consider this issue as a separate ground for review.

Conclusion

30For these reasons, I conclude that the application must be granted, and that the award must be quashed insofar as the Arbitrator ordered the TTC to repay the monies paid by the employee on account of the shortage.

31At the end of the hearing, counsel agreed that costs should be granted to the successful party in the amount of $6,000 inclusive of disbursements and HST. Accordingly, costs in that amount are payable by the Union to the Applicant.

Harvison Young J.

Swinton J.

Pepall J.

Released: May 31, 2012

2012 ONSC 3175

DIVISIONAL COURT FILE NO.: 443/11