DIVISIONAL COURT FILE NO.: 326/15 DATE: 20160212
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
PATTILLO J.
BETWEEN:
SUSAN LANDRY
Plaintiff
(Respondent)
– and –
POINTONE GRAPHICS INC.
Defendant
(Appellant)
Howard Markowitz, for the Plaintiff (Respondent)
Alexander Melfi, for the Defendant (Appellant)
HEARD at Toronto: February 12, 2016
PATTILLO J. (ORALLY)
Introduction
1In a judgment rendered on May 22, 2015 following a brief trial, the Honourable Deputy Justice Peter Libman of the Toronto Small Claims Court awarded the plaintiff, Susan Landry (“Landry”), damages for wrongful dismissal in the amount of $19,000 plus pre-judgment interest and costs of $4,175 against the defendant Pointone Graphics Inc. (“Pointone”). In allowing Landry’s claim, the trial judge dismissed Pointone’s defence of set-off for $21,850.53 in damages.
2This is an appeal by Pointone only in respect of the trial judge’s rejection of its defence of set-off.
Background
3Pointone is a private company engaged in the commercial trade printing business. Landry was employed by Pointone as its Controller for a little more than a year. She was dismissed without cause on January 31, 2014. All of Pointone’s accounting information is entered and stored on its computer system on a daily basis utilizing accounting software called ACCPAC which is backed up daily. As part of her duties, Landry prepared spreadsheets to analyze the financial information and provided reports on a regular basis to Pointone’s owner, its president and its bank. The spreadsheets were maintained by Landry on two USB keys which she used to transfer her work back and forth between work and her home. The information on the USB keys was not automatically backed up by Pointone’s computer system.
4At trial, Pointone raised the defence of legal and equitable set-off. In its pleading it alleged that Landry owed a duty of care to carry out her employment duties with reasonable skill and competence and that she breached that duty by failing to produce any work product and/or failing to return the USB keys on which the work product was maintained. Alternatively, Pointone alleged that Landry’s actions amounted to negligence.
5Pointone led evidence at trial from its manager and IT consultant concerning the circumstances of Landry’s departure from the office on January 31, 2014 and the fact that Pointone was unable to locate any work product by Landry on its computer system or on the computers allocated to Landry. Nor was it able to locate the USB keys that Landry stored her work on. Pointone also called Ms. Dioni Manginsay who is the accounting administrator of Pointone. Ms. Manginsay has been with Pointone in its accounting department for 20 years and essentially took over Ms. Landry’s duties following her dismissal. She testified that in the absence of being able to locate Landry’s work product, it was reconstructed by four of Pointone’s employees in the accounting department at an additional cost of $16,602.26. Further, Pointone paid $5,248.27 to a third party accounting/bookkeeping company to prepare journal entries for 2013 in preparation for the year-end financial statements and audit that had not been done by Landry.
The Trial Judge’s Reasons
6The trial judge’s reasons for rejecting Pointone’s set-off defence are brief. At the outset, he referred to two difficulties which he had. First he stated he had a difficulty with the set-off figure. He noted that Pointone’s claim only arose after Landry started her claim although, given the issues, it should have been apparent to it very soon after termination.
7The second difficulty, which the trial judge called the stronger difficulty, concerned the damages Pointone said they had incurred internally in the form of extra work by its employees. He said that Pointone should have gone to an outside accountant rather than rely on its own staff. He alluded to a conflict using its employees.
8In conclusion, the trial judge stated he was not convinced that Pointone had established on a balance of probabilities that it had either incurred the expense or the set-off.
Pointone’s Position
9Pointone submits that in rejecting its defence of set-off, the trial judge made two errors of law:
He effectively concluded there was no merit in the defence given Pointone’s failure to raise it at an earlier stage in its pleading; and
He failed to consider material evidence in respect of Pointone’s damages. Specifically, the costs incurred by Pointone for a third party accountant to allegedly correct some of Landry’s mistakes.
Powers of the Appeal Court
10Section 134 of the Courts of Justice Act, R.S.O. 1990, c. C.43 sets out the powers of a court hearing an appeal. They are very broad and allow for any order or decision to be made that ought to or could have been made by the court appealed from; a new trial and any other order or decision that is considered just.
Standard of Review
11There is no issue between the parties concerning the standard of review. For questions of law, the standard is correctness; for questions of fact, the standard is palpable and overriding error; and for questions of mixed law and fact there is a spectrum between correctness (extricable legal principle) and palpable and overriding error (application of fact to the correct legal principle): Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at paras. 8, 10 and 36.
Discussion
12In my view, in dismissing Pointone’s set-off defence, the trial judge made the following errors of law:
(i) He failed to address at all whether set-off was available (that is whether Pointone had a claim for damages against Landry);
(ii) He incorrectly dismissed the defence as a result of what he considered its late blooming nature. While that is a factor which may be considered, it cannot be dispositive of the defence. Pointone had a right under the Small Claims Court rules (Rule 12) to amend its defence as of right any time up to 30 days before trial. It in fact did that here. It follows that it may advance the claim at trial. It cannot be dismissed out of hand simply because of a delay in advancing it, which, really in my view did not arise in this case; and
(iii) Finally, the trial judge failed to address Pointone’s claim for hiring an outside accountant. There was evidence in that regard and, after criticizing Pointone for not retaining an outside accountant to deal with damages, the trial judge failed to deal with that evidence. In my view, the evidence was material to Pointone’s claim and failure to address it was an error of law.
13As a result, in my view, the trial judge’s rejection of the defence of set-off cannot stand. However, given the issue and the amount involved, this matter should not be sent back for a new trial. Counsel agree that I can make any decision that ought to have been made. In that regard, I have a full transcript of the evidence at trial which I have read.
14Set-off is essentially in the nature of a cross-claim for debt or damages which may be raised as a defence to an action. The first issue to consider, therefore is whether Landry is liable to Pointone for damages. As noted, Pointone’s claim for damages as pleaded is based on negligence or contract.
15The issue of employee liability to his or her employer was recently canvassed by Dunphy J. of this Court in 2261897 Ontario Inc. v. Quest Audio Visual Inc., 2015 ONSC 2428 (S.C.J.) at paras. 62 and 63 as follows:
62The Court of Appeal has closed the door on employer claims in tort against their employees for what might be called “ordinary negligence” in the case of Douglas v. Kinger, 2008 ONCA 452. As Lang J.A. found, (at para. 52):
“An examination of the employment relationship demonstrates that employee negligence was foreseeable and that the employee’s liability for negligence was not. This is apparent from the expectations that can readily be inferred from any common-sense consideration of the employment relationship”.
63While the Court of Appeal in Douglas v. Kinger did not involve a claim in contract (the employee being a minor) the reasoning of Lang J.A. applies with equal force or logic in any analysis of the employment relationship from a contract law perspective as well. In the absence of a written agreement imposing such liability, it cannot be consistent to a construction of the employment contract or with the reasonable expectations of the parties to impose an obligation upon the employee to indemnity the employer for consequences of ordinary negligence.
16Pointone does not disagree with that standard. It submits, however, given the authority on which it is based that a different standard applies for skilled employees. I disagree. The question of employee negligence or contractual liability will in all cases depend on the facts of the employment relationship and the alleged breach of duty.
17In this case the evidence establishes that there was no term of employment or policy at Pointone that required employees to reimburse it for damages caused arising from ordinary negligence or breach of contract. Nor was there any IT policy that required Landry to back up her data. Pointone knew that Landry used USB keys to create and transport data (they provided her with the keys). Pointone’s IT consultant agreed that it was not intuitive for older people such as Landry to back up computer work. In my view, the evidence does not establish that Landry was negligent in failing to back up her work or utilize USB keys in her work.
18Further, the evidence does not establish that Landry did no work product or that she took the USB keys with her. It’s clearly apparent from the evidence that she had done the work product, in fact she was working on it that very day that she was terminated. She also said that she didn’t take the USB keys at the time she left and I note that the trial judge found her evidence to be very credible. Mr. Lee supervised her as she gathered her things and escorted her from the premises. He didn’t observe her taking any USB keys. Finally, Landry was co-operative throughout, including looking for USB keys after the fact when asked by the company.
19In my view, therefore, the evidence fails to establish on a balance of probabilities that Landry was either negligent or in breach of contract to Pointone in terms of her duties of employment. Accordingly, the defence of set-off fails on that basis.
20Notwithstanding that I have concluded Pointone’s defence of set-off cannot succeed based on no claim for damages, I wish to briefly comment on its damage claim.
21The trial judge had difficulty with Pointone’s claim for $16,602.26 of extra costs paid to its employees. I also have a problem with it but not because it was advanced by the employees or by Pointone. It is not clear from Ms. Manginsay’s evidence, in my view, why so much extra work of the accounting personnel was needed. The information was in hard copy and had also been provided to the bank and management. In my view, it should not have been difficult to reproduce it during normal working hours. I accept the extra time was spent and paid for. I am not satisfied, however, that it was in any way attributable to any fault of Landry.
22I am also not satisfied that the outside accounting work in the amount of $5,248.27 can be attributable to any fault of Landry either. According to Ms. Manginsay’s evidence, Landry did not enter journal entries for 2013 required by the accountants after the 2013 audit. The entries were required for the year-end financial statements and audit. Pointone’s year-end is May 31. In this case, May 31, 2014. The work by the outside accountant was done from April to July, 2014. Ms. Manginsay said the outside accountant had to do it as she was not qualified. Even assuming that Landry was required to have made the entries earlier and didn’t, in my view, had she not been terminated, she could have easily made the entries and done the work required well before the year-end financials and audit. The reason Pointone had to hire an outside accountant was simply because it did not replace Landry.
Conclusion
23In conclusion, I find that the trial judge erred in dismissing Pointone’s defence of set-off in the manner in which he did but in my view, for the reasons given, I agree that the defence of set-off fails. Accordingly, the appeal is dismissed.
Costs
24I have endorsed the Appeal Book, “For oral reasons given in Court, appeal is dismissed. Costs to the respondent fixed at $4,000 inclusive of disbursements and taxes.”
___________________________ PATTILLO J.
Date of Reasons for Judgment: February 12, 2016
Date of Release: February 18, 2016
CITATION: Landry v. Pointone Graphics Inc., 2016 ONSC 1131
DIVISIONAL COURT FILE NO.: 326/15 DATE: 20160212
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
SUSAN LANDRY
Plaintiff
(Respondent)
– and –
POINTONE GRAPHICS INC.
Defendant
(Appellant)
ORAL REASONS FOR JUDGMENT
PATTILLO J.
Date of Reasons for Judgment: February 12, 2016
Date of Release: February 18, 2016