Court File and Parties
COURT FILE NO.: CV-09-381336 DATE: 20160720 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
FABIENE EVANS Plaintiff – and – PARADIGM CAPITAL INC. Defendant
Counsel: Barry J. Goldman and Jonathan Miller, for the Plaintiff Neena Gupta, for the Defendant
HEARD: April 11-15, 18-22, 25, 26, 27, May 24-26, 2016
GANS J.
Introduction
[1] Wrongful dismissal cases are, generally speaking, pretty formulaic, particularly where just cause is not in issue. Further, in circumstances where the defendant admits that an offer to the plaintiff of alternative employment amounted to a constructive dismissal, one would have thought, that if such were rejected, the reckoning of damages for pay in lieu of notice would be reasonably straightforward.
[2] Indeed, relatively speaking, few of these cases ever goes to trial, let alone to the end of trial, because, in the final analysis, hurt feelings can usually be assuaged by the payment of money, and/or by the proffering of an apology.
[3] Even though cause was not in issue, the instant action was anything but straightforward since all manner of issues overlay and pierced the dispute, which resulted in something akin to a pitched battle spanning close to three weeks of trial, and the delivery of multiple facta. [1]
The History of the Relationship
[4] The plaintiff, Fabiene Evans (“Evans”), is by education a chartered accountant, having obtained her designation in 1993. She began her employment career as an internal auditor in the brokerage group of Canada Trust, moving shortly thereafter into the asset management department of the merged corporations of TD Canada Trust, first as a research analyst, and then as a junior and, ultimately, as a senior portfolio manager. She then moved over to another firm servicing high net worth individuals.
[5] In 2002, Evans moved from the “buy-side” of the capital markets to a position on the “sales side” of portfolio management as an institutional equity salesperson, first with an independent investment dealer and, ultimately, with Desjardins Securities Inc. (“Desjardins”).
[6] The defendant, Paradigm Capital Inc. (“Paradigm”) is a relatively new, independent, employee-owned institutional investment dealer. It has four departments, namely Sales, Trading, Research and Corporate Finance. It is fair to categorize Paradigm, at all material times, as an innovative, if not aggressive, investment dealer and corporate finance underwriter.
[7] Paradigm made an unsolicited offer of employment to Evans in the Spring of 2004, after pursuing her for several months to join the company. Paradigm was hopeful that Evans would help them break into accounts with which, historically, they had not done any or very little business. Evans offered them a new, if not better, public image, which was seemingly more appropriate for certain institutional houses.
[8] Paradigm offered Evans not only a significant upside to the overall compensation package as compared to what she was then earning, but a ‘signing’ bonus equal to the one she would have earned at Desjardins had she stayed there to year end. [2] Although the Sales group was small at the time, Evans started, notionally, as the number three person in the group, behind John Bellamy (“Bellamy”), the department head, and David Roland (“Roland”), who doubled as Paradigm’s Chief Executive Officer (“CEO”) and as an institutional salesperson in his own right and one of the firm’s chief rainmakers.
[9] Evans’ compensation package at the time of hiring included a base salary of $75,000 per annum (“Fixed Salary”); participation in a discretionary quarterly bonus pool (“Performance Bonus”), which was initially fixed at 2.38% for Q3 2004; and the right to purchase a 2% interest in Paradigm and its sister company through a combination of shares and subordinated debentures based on certain book value calculations set out in a shareholders’ agreement (“Shareholders’ Agreement”). A shareholder’s bonus, which I find to be the equivalent of a dividend, was paid on a “partner’s” equity interest (“Shareholder’s Bonus”) (collectively referred to as the “Total Remuneration”). [3] Evans completed the purchase of the shares and debentures in November, 2004.
[10] I hasten to observe that while Paradigm and its related company, Paradigm Capital Partners Limited (collectively sometimes referred to as the “Firm”), which latter corporation was the contracting party to the Shareholders’ Agreement, were cloaked in a corporate structure, I am satisfied that it functioned in large measure like a partnership, if not like a medium to large size law firm. The defendant was managed through an Executive Committee, had a CEO, in this case Roland, who was basically first among equals, and had a Compensation Committee that reviewed the Performance Bonus on a quarterly basis and set the points for the quarter just completed. As will be discussed later in these reasons, each of the partners, to a greater or lesser extent, functioned on an ‘eat what you kill’ basis, a fact of which Evans was well aware when she joined the Firm.
[11] When Evans started on the ‘institutional desk’ in June, 2004, she was given a list of clients by Bellamy. This book of business was expanded upon in July when she was temporarily assigned other clients previously handled by another institutional salesperson, Tina Bates, who went on maternity leave. Other accounts were added to her post during the balance of the year when another institutional seller left Paradigm in October. And finally, Evans was assigned or opened an additional 17 accounts during the balance of 2004 and into 2005. The prospects from both perspectives looked promising.
[12] Evans’ Total Remuneration, the breakdown in respect of which is attached as Appendix A, for the years 2004-2008 was $185,434.35, $530,321.29, $880,039.08, $700,090.53 and $583,472.04 respectively. Annualized (2004) and actually, the amounts earned in each of the four plus years at Paradigm eclipsed the total remuneration Evans received while she was at Desjardins, which capped out at a ‘mere’ $225,000.
[13] Tragically, Evans was diagnosed with breast cancer in late January, 2006. As might be expected, she then went through a 12 month period, or more, of hell, with multiple surgeries, extensive radiation and chemotherapy treatments. She continued to work throughout this period, absenting herself from work as little as was possible, servicing her clients and tending to her other Paradigm responsibilities as much as was practicable. [4]
[14] I have attached as Appendix B Evans’ Performance Bonus allocations for the period Q4 2004 – Q4 2008. While her Performance Bonus points remained relatively constant from Q4 2004 to Q3 2006, averaging 2.25% for the period, as indicated, her Total Remuneration increased markedly over the same period. [5] In addition, Evans’ ownership interest in Paradigm remained constant at 2%, until it was modestly reduced to 1.82% in Q3 2006 to accommodate the new partners added that summer from the opening of a Calgary office. Her ownership interest was not adjusted again until the middle of Q1 2008, when she was reduced to the ‘penultimate’ number of 1.38%.
[15] As will be discussed later, issues surrounding Evans’ Performance Bonus points, if not her ownership interest, began to take on a new dimension when the former was reduced significantly, first in Q4 2006, and again in Q1 2007, to the end of her relationship with Paradigm in mid-January, 2009.
The Termination
[16] At the end of the first week of January 2009, and on several days thereafter into the next week, Evans had several meetings and a telephone conversation with one or both of Roland and Bellamy and one other Paradigm executive. During these discussions, Roland, in particular, advised Evans that Paradigm wanted to recast her job in the form of a new position. It was the Firm’s intention to reduce her institutional client list by removing many of her largest clients and assigning them to other institutional sales staff, including a new person they were planning to bring on board. As a result of this redeployment, she would be left with a pared down list of, principally, smaller development clients.
[17] In addition, they wanted Evans to manage a nascent retail account base that Bellamy had been managing on a very part-time basis and only as a modest accommodation to some executives of their client base. This assignment would necessitate her obtaining a retail broker’s license, presumably at a cost to the Firm. Further, Roland broached with Evans the notion that she could perform the function of a community relations officer in an effort to help develop the Paradigm brand in the marketplace by formalizing the Firm’s philanthropic activities. Roland further suggested that she could take on other assignments as yet particularized if “deemed mutually agreeable” (“Revised Role”).
[18] In consideration for taking on this new and newly defined position, Evans would be paid an annual salary of $150,000 and would continue as a partner in the Firm, but with an ownership interest reduced to 1%, fixed for one year. She would no longer be a member of the Performance Bonus pool, but would be eligible to participate in the staff bonus pool (“SBP”), although the amount of her percentage interest in that pool was not then specified.
[19] Roland advised Evans that if she was not prepared to accept the Revised Role, Paradigm was prepared to provide her with a settlement package, which included a lump-sum payment of $178,120, less statutory deductions, her entitlement to the Performance Bonus for Q4 2008 and the immediate redemption of her shares and debentures in Paradigm (“Severance Package”).
[20] Evans recorded several of the mid-January discussions surreptitiously, which were transcribed (twice) and filed as exhibits at trial. From my reading of the transcriptions, which were not in any respect contradicted by the oral evidence, the discussions with Evans, Roland and Bellamy in the days after January 8th were conducted cordially, civilly, and without a hint of rancour. In fact, in at least one of the discussions held on Tuesday, January 13th, Roland, after reviewing the alternatives with Evans, suggested that if she wanted to tweak the job description upon reflection or after discussions with her husband, he was open to receiving her “feedback”. [6]
[21] On the other hand, while Roland further suggested at the end of that meeting that there was “no timeline” for her response or a decision on the offers, things apparently changed during her conversation with Bellamy the next day (January 14th), when he urged her to come to some conclusion on the offers sooner rather than later and in any event before the next Monday so that he could physically accommodate the new institutional salesperson on the desk. [7]
[22] Matters came to a crashing halt on the 16th. Evans consulted counsel, Barry Goldman, who wrote a blistering letter to Paradigm rejecting both the offer of alternative employment contained in the Revised Role and the Severance Package (“Goldman Letter”). He further took the position that the proposed change in the terms and conditions of employment amounted to a constructive dismissal.
[23] Mr. Goldman went on to assert that he would be advancing claims “representing the underpayment” of Performance Bonuses for the time period from and after the diagnosis of Evans’ cancer to the date of her termination, which he calculated would take her claim, under this head of damage alone, to in excess of $2 million (“Underpayment”). [8] The last mentioned claim was in addition to, but formed part of the claim, for lost income during the period of reasonable notice.
[24] In subsequent correspondence, Mr. Goldman demanded that Paradigm payout the amounts then owing under the Shareholders’ Agreement for Evans’ ownership interest in the Firm. [9]
[25] From Paradigm’s point of view, to which Roland testified in chief, once he received the Goldman Letter, he considered that the employment relationship with Evans, for all intents and purposes, had been put to an end. All subsequent correspondence was then undertaken through Paradigm’s solicitors.
[26] Roland did not renew the original offer for the Revised Role thereafter, although Paradigm gratuitously paid Evans, in installments, the sum of $105,398. The parties stipulated that the amount equated to six months’ base salary, six months of the quarterly Performance Bonus based on 2008 averages and the cost equivalent for six months of Life, AD&D and Dependent Life benefits.
The Issues
[27] The claim advanced on behalf of Evans was a bit of a moving target. It changed or was modified from time to time from the Goldman Letter, to the statement of claim, to the opening and then through to closing argument at trial, if not into the written reply argument which I permitted plaintiff’s counsel to file after oral argument was completed.
[28] In the final analysis, I am of the view that Paradigm’s articulation of the issues as set out in its written submissions provides a manageable roadmap for dealing with each of the overarching issues to which I alluded above:
Issue 1: Was the offer of alternate employment in January 2009 a form of constructive dismissal? Issue 2: Did Evans fail to mitigate in refusing the new position? Issue 3: If Evans was not obligated to accept the new position, what is the reasonable period of notice? Issue 4: How should damages in lieu of notice be calculated? Issue 5: Are the allegations of bad faith sustainable in whole or in part?
Constructive Dismissal
[29] The parties are in agreement that the offer of the Revised Role amounted to a constructive dismissal. Although I need not analyze this agreement any further, it is of some moment, for continuity purposes, to recite the oft-repeated descriptor of a constructive dismissal first articulated by the Supreme Court of Canada almost two decades ago in Farber v. Royal Trust Co., 1997 SCC 387, [1997] 1 S.C.R. 846, at para. 24:
Where an employer decides unilaterally to make substantial changes to the essential terms of an employee's contract of employment and the employee does not agree to the changes and leaves his or her job, the employee has not resigned, but has been dismissed. Since the employer has not formally dismissed the employee, this is referred to as "constructive dismissal". By unilaterally seeking to make substantial changes to the essential terms of the employment contract, the employer is ceasing to meet its obligations and is therefore terminating the contract. The employee can then treat the contract as resiliated for breach and can leave. In such circumstances, the employee is entitled to compensation in lieu of notice and, where appropriate, damages.
Mitigation
[30] In the instant case, the more difficult issue with which I am faced was whether Evans was obliged, by way of mitigation, to accept the offer of the Revised Role that was first formulated on January 8th and discussed and amplified upon on several occasions in the days following in, as I previously observed, a reasonably civilized, if not businesslike, fashion.
[31] The judicial backdrop against which the Revised Role must be evaluated was revisited, if not clarified, by the Supreme Court of Canada in Evans v. Teamsters Local Union, 2008 SCC 20, [2008] 1 S.C.R. 661, at paras. 27-31 and 33 (“Evans”), extracts of which bear repeating at some length in these reasons:
27 Given that both wrongful dismissal and constructive dismissal are characterized by employer-imposed termination of the employment contract (without cause), there is no principled reason to distinguish between them when evaluating the need to mitigate. … Accordingly, this relationship is best considered on a case-by-case basis when the reasonableness of the employee's mitigation efforts is being evaluated, and not as a basis for creating a different approach for each type of dismissal.
28 In my view, the courts have correctly determined that in some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer. Assuming there are no barriers to re-employment (potential barriers to be discussed below), requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.
29 … It is likewise appropriate to assume that in the absence of conditions rendering the return to work unreasonable, on an objective basis, an employee can be expected to mitigate damages by returning to work for the dismissing employer. Finding otherwise would create an artificial distinction between an employer who terminates and offers re-employment and one who gives notice of termination and offers working notice. In either case, the employee has an opportunity to continue working for the employer while he or she arranges other employment, and I believe it nonsensical to say that when this ongoing relationship is termed "working notice" it is acceptable but when it is termed "mitigation" it is not.
30 I do not mean to suggest with the above analysis that an employee should always be required to return to work for the dismissing employer and my qualification that this should only occur where there are no barriers to re-employment is significant. This Court has held that the employer bears the onus of demonstrating both that an employee has failed to make reasonable efforts to find work and that work could have been found (Red Deer College v. Michaels, 1975 SCC 15, [1976] 2 S.C.R. 324). Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity. …In my view, the foregoing elements all underline the importance of a multi-factored and contextual analysis. The critical element is that an employee "not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation" (Farquhar, at p. 94), and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee's position would have accepted the employer's offer (Reibl v. Hughes, 1980 SCC 23, [1980] 2 S.C.R. 880), it is extremely important that the non-tangible elements of the situation -- including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements -- be included in the evaluation.
31 I note that the nature of this inquiry increases the likelihood that individuals who are dismissed as a result of a change to their position (motivated, for example, by legitimate business needs rather than by concerns about performance) will be required to mitigate by returning to the same employer more often than those employees who are terminated for some other reason. This is not, however, because these individuals have been constructively dismissed rather than wrongfully dismissed, but rather because the circumstances surrounding the termination of their contract may be far less personal than when dismissal relates more directly to the individuals themselves. …
33 In sum, I believe that although both constructively dismissed and wrongfully dismissed employees may be required to mitigate their damages by returning to work for the dismissing employer, they are only required to do so where the conditions discussed in para. 30 above are met and the factors mentioned in Cox are considered. This kind of mitigation requires "a situation of mutual understanding and respect, and a situation where neither the employer nor the employee is likely to put the other's interests in jeopardy" (Farquhar, at p. 95). Further, the reasonableness of an employee's decision not to mitigate will be assessed on an objective standard. (Emphasis added)
[32] Paradigm, in a very well-crafted argument, took the position that Evans acted unreasonably in refusing to accept the Revised Role even on a temporary ‘look-see’ basis until she secured or attempted to secure an institutional sales position with another financial services firm. It was their argument, which was borne out by the transcripts of the meetings with Roland and company that the offer was delivered in circumstances which belied an atmosphere of mistrust or antipathy. While it was readily acknowledged by Roland and Bellamy that the Revised Role did not meet Evans’ expectation and, admittedly, her career objectives, it warranted consideration especially at the commencement of 2009 — a time when the financial services industry had just come off a disastrous year, with no end in sight. [12]
[33] Furthermore, Paradigm argued that a reasonable person might have been better off considering an alternative position of employment even though such employment might result in a diminution of income since, objectively, a failure to do so might amount to a failure to mitigate, particularly when faced with choppy employment waters. [13]
[34] In any event, Paradigm argued that while the formulation of the Revised Role was something of a work in progress, necessitated by the Executive Committee’s view that Evans’ continued underperformance in the institutional sales side of the business amounted to a liability to the Firm, there was enough certainty to the new position both in terms of its mandate and the proposed compensation that it should have been seriously considered, if not massaged, rather than dismissed out of hand. Objectively, so the argument goes, Evans would have been provided with a ‘soft landing’ until the economic environment improved while creating alternative value to Paradigm on an on-going basis.
[35] I ‘flip-flopped’ on this issue through almost two days of argument and thereafter as I reread the authorities and reviewed the evidence in respect of the Revised Role, including the several days of transcribed conversations leading up to the Goldman Letter on January 16th. In the final analysis, I am not persuaded that, objectively, Evans was obliged to accept the offer as part of the mitigation process.
[36] In the first place, I am not convinced that the “tangible” aspects of the Revised Role were as well defined as Paradigm’s counsel would urge upon me. While the proposed position, which was set out in a draft job description, [14] contained Roland’s work product prepared over the weekend leading up to the Goldman Letter, all aspects of the alternative position were not fully buttoned down and were, seemingly, very much in the design phase, subject to revision even as Evans made her inquiries of Roland and Bellamy in the days before the discussions came to an abrupt end. I am not persuaded that the situation was made any the better simply because Roland was prepared to tweak the deal if Evans came back with further suggested — but not necessarily agreed to — revisions.
[37] Furthermore, I am not sure that a reasonable person would be rest assured by a compensation package as uncertain as the one proposed. To say that Evans would merely be permitted to participate in the SBP without any guarantee that she would be placed, for example, lock-step with the Chief Financial Officer (“CFO”), was to leave this element of her compensation more uncertain than it was when she was a member of the Performance Bonus pool. Furthermore, the offer of a right to participate in the SBP must be viewed against the backdrop of Evans’ experience as a member of the Performance Bonus pool in the years immediately preceding her termination. Whether she was right or wrong in her view of her treatment historically, Evans would have more than modest misgivings about how she would be treated from a bonus perspective in this new and untested position without greater certainty in respect of the mechanics of the offer. And, simply put, she could not be expected to put a dollar value to the offer with any precision.
[38] In addition, the fact that Paradigm intended to move Evans’ ownership interest below what was permitted under the Shareholders’ Agreement would not have engendered much confidence in the overall intentions of the Executive Committee. It was apparent from all the circumstances that the Revised Role was but a one year stop-gap offer, indeed a job created for Evans and not one which had reasonable prospects of growth over time as Roland and Bellamy represented in their discussions with her. This last proposition is, in some respects, borne out by the fact that in the seven years since her dismissal, Paradigm has not created a position in the Firm that resembles the Revised Role in any respect. Furthermore, Evans’ ownership interest could still be reduced even further after the 12 months elapsed, assuming she was still employed, to but a fraction of the number at which she started, assuming again that the applicable provision in the Shareholders’ Agreement was subsequently adhered to. [15]
[39] Put otherwise, in respect of the tangible variables associated with the Revised Role, there were too many issues simply left to the good offices of Roland, if not Bellamy. I am convinced that viewed objectively a reasonable person would conclude that the offer of alternative employment was more form than substance.
[40] Finally, in the circumstances of the instant case, I am of the view that the “non-tangible elements”, including what is referred to as work atmosphere, stigma, and loss of dignity, items to which the majority of the Supreme Court of Canada made reference in Evans, provide additional support for the conclusion that the plaintiff was not obliged to accept the Revised Role by way of mitigation.
[41] Paradigm was at the time a relatively small ‘shop’. As the photos of the floor demonstrate, everyone works in close quarters, a proposition that was, ironically, emphasized by Roland and Bellamy in their evidence, about which I will comment later. For Evans to show up to work on the Monday following the mid-January discussions, with a new ‘kid’ occupying her seat on the Sales desk, would, in my view, subject her to significant if not intolerable embarrassment. I do not believe it would have been much consolation to her knowing that her chair would have been located at a desk in the Research department carrels directly behind Bellamy. In my view, such a move would be akin to moving a heretofore starting pitcher to the bullpen while asking him to be the set-up man for a new ‘hot-shot’ closer. Furthermore, the entire desk, if not the entire Firm, would know that she had been ‘stripped’ of her key clients for ‘performance issues’, neither of which would have done wonders for her self-esteem.
[42] While at no time did Evans articulate a “woe is me” demeanour in the January 2009 discussions, as the transcripts show, I have little doubt on the evidence that a move off the frontlines would have been devastating for her on several levels and on balance was not something she needed to accept although the employment well, as it were, was not poisoned completely.
[43] I make two final observations before moving to the next section of the judgment. First, I would note that an employer bears the onus of proving that the alternative offer of employment is objectively reasonable in the circumstances. I am not persuaded, but not without much internal debate, that Paradigm has discharged this obligation. Therefore, even if I were on the fence on this issue, as I was at times throughout this trial, it must be resolved in favour of the plaintiff.
[44] Secondly, I would observe that I have come to the above conclusion on the issue of mitigation without relying on the “alternative” ground advanced by counsel for Evans, recently restated by the Court of Appeal in Farwell v. Citair Inc. (c.o.b. General Coach Canada), 2014 ONCA 177, 17 C.C.E.L. (4th) 329, at para. 20 (“Farwell”), as follows:
… To paraphrase Evans, the appellant's mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the Appellant that he was treating the reorganization as constructive and wrongful dismissal.
[45] At the risk of seeming presumptuous, I am unable to understand why an employer has to “renew” or maintain the offer of alternative employment as a condition precedent to raising a mitigation defence after an employee rejects the offer of alternative employment and effectively accepts the repudiation. On the facts of the instant case, however, where there was little doubt that a line was drawn in the sand as a result of the Goldman Letter and that litigation for more than reasonable notice was being threatened, I am not persuaded that the Farwell precondition would be operative.
Reasonable Notice
[46] It is trite to say — and there is no issue between the parties—that an employee who is constructively dismissed, as if they were merely wrongfully dismissed, is entitled to damages based on the total employment income the employee would have earned during a period of reasonable notice. The requirement of reasonable notice has been defined as the amount of time it would otherwise take a dismissed employee to find alternative employment. [17] In calculating the period of reasonable notice, Canadian courts almost universally employ the factors long since articulated in Bardal v. Globe & Mail (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J.), which include: (1) the character of employment; (2) the length of service; (3) the age of the employee; and (4) the availability of similar employment having regard to the experience, training, and qualifications of the employee. [18]
[47] As Paradigm’s counsel rightly conceded, the determination of a reasonable notice period is more an art than a science or, as was said by Laskin J.A. in Minott v. O’Shanter Development Co., 1999 ONCA 3686, 42 O.R. (3d) 321 (C.A.) at para. 66:
Determining the period of reasonable notice is an art and not a science. In each case trial judges must weigh and balance a catalogue of relevant factors. No two cases are identical and ordinarily, there is no “right” figure for reasonable notice. Instead, most cases yield a range of reasonableness. [19]
[48] As I enter upon this mugs game of ‘handicapping’ the notice period, I give regard to the ranges provided by counsel, underpinned by the welter of cases each relied upon in support of their respective positions. [20] Paradigm argued that a range of six to eight months would be fair and reasonable in the circumstances, while Evans, equally forcefully, suggested that nothing short of 12 months would suffice.
[49] The bottom line is that at the time of her termination, Evans was 44 years of age, having been constructively dismissed from, initially, a relatively senior institutional sales position to which she had been actively recruited. She was cast into a down market after roughly four and a half years of service, during most of which she earned a healthy total compensation package. And, as was stated by the defendant, albeit for other purposes, there was intense industry competition for a seat — if not her seat — at the institutional sales desks with financial services firms, like Paradigm, of which, in their cohort group, there were but four. This fact alone suggests that the job market, even absent economic conditions, was limited. And finally, in actual fact, Evans did not obtain alternative employment (at a compensation level of which I heard no evidence) until 12 months after her Paradigm employment ended.
[50] As suggested above, I find it a tad ironic that Paradigm sought to rely on “tough and limited market conditions” in support of their argument that Evans was obliged to consider or even take the Revised Role, but that the same conditions could not factor into the equation on determining the extent of reasonable notice. The case law to which my attention was directed, before I was ‘beset’ with Reply facta, makes it clear that the economics at the time of termination cannot be ignored, but that the reasonable period of notice must be fair to both the employer and the employee. [21] Economic conditions is but one factor to which unreasonable weight should not be given.
[51] I would also observe that when the Executive Committee met in early January 2009 to consider Evans’ ongoing relationship with Paradigm, the minutes of the meeting reflect the fact that not only had counsel been consulted to review the matter, but that Roland was given a mandate to settle her severance package at between $300,000 and $400,000 if she rejected the Revised Role. While I do not believe Roland as a businessman can be faulted for offering Evans far less than the lower end of the above amounts as an opening salvo, as Mr. Goldman suggested, I think the amounts are instructive in terms of what Paradigm thought or was counselled as might be “reasonable” in the circumstances.
[52] After considering the case law provided, not one of which is identical to the case at bar, I am of the view that the reasonable notice period on the facts of this case should be set at 11 months.
Damage Calculation - Performance Pool Bonus and Shareholders’ Equity
Salary Level and Performance Bonus
[53] As will be explained in detail below, because I have come to the conclusion that Paradigm did not act in bad faith or in breach of its duty of honest performance when determining Evans’ historic share of the Performance Bonus pool or in setting her percentage interest in the Firm in the years leading up to her termination, I need only assess her Total Remuneration without any reckoning to the Underpayment asserted by the plaintiff. This is not to say that the issue is straightforward since, as with most matters infusing this case, the plaintiff has provided me with an alternative method of calculating damages that warrants consideration.
[54] Counsel for the plaintiff argued that I ought to use a three year total remuneration average when calculating the loss suffered by Evans during the period of reasonable notice. It was his position that this methodology constitutes a “most reasonable approach” when the income “…in prior years has followed an irregular and unpredictable pattern”. [22] He also suggested that it was appropriate to use this method because the contribution Evans might have made in 2009 was uncertain, which might generate some modification to her share, I presume, of the Performance Bonus. On the basis of this methodology, he argued that Evans’ lost Total Remuneration for the 11-month period would amount, therefore, to $570,217.
[55] In the first place, as the Ontario Court of Appeal observed, there is no hard and fast rule that mandates a trial judge to adopt an averaging absent compelling reasons to the contrary. [23] The British Columbia Court of Appeal adopted the following statement from Harris in Wrongful Dismissal, looseleaf (Toronto: Carswell, 1989) at 4-52.9:
Whatever assessment of damages is made, the standard of salary is not to be an average of prior years, but rather should be based on the income of the employee at the date of termination. In Lawson v. Dominion Securities Corp., [1977] 2 A.C.W.S. 259, the Ontario Court of Appeal stated:
The governing principle is that damages for wrongful dismissal are “prima facie the amount that the plaintiff would have earned had the employment continued according to the contract subject to a deduction in respect of any amount accruing from any other employment which the plaintiff, in minimizing his damages, either had obtained or should reasonably have obtained”. McGregor on Damages 13th edition, para. 884 at p. 594. The judgment appealed from erred in measuring damages by the remuneration of the dismissed employee in the year or years prior to his dismissal: Findlay v. Howard (1919), 58 S.C.R. 516.
(See also Cappelli v. Promospec Specialty Advertising Ltd. (1997), 31 C.C.E.L. (2d) 202, 97 C.L.L.C. 210-026, 39 O.T.C. 328, 1997 CarswellOnt 3704 (Ont. Gen. Div.).)
On the other hand, in some cases the plaintiff’s earnings in the last year of employment may not be representative of his or her usual earnings. The court undoubtedly has jurisdiction to look at preceding years in order to determine a “representative income” for the plaintiff. [24] (Emphasis added)
[56] Assuming without deciding at this moment in time, whether such a method would permit me to include an amount in respect of the Shareholders’ Bonus, which is very much in issue, I am not persuaded that the use of an averaging of Total Remuneration is appropriate in the circumstances of this case. In my view, the income averaging method is more appropriate in circumstances where the size of the income pool is uncertain; when the dismissed employee is, for example, a commissioned salesperson; or when there is marked volatility in the employee’s remuneration as a result of his or her own efforts over the preceding years leading to termination.
[57] In the instant case, the math is fairly straightforward—it is simply a matter of multiplying the ‘last percentage allotment’ established by the Compensation Committee against the Performance Bonus and Shareholders’ Bonus ‘pots’, both of which latter numbers are derived from the charts and appendices that were filed on consent as part of the JBDs. The computation is not dependent on what success — or otherwise — Evans might have enjoyed or suffered in the period of reasonable notice. The trickier issue is determining the appropriate percentage allotment for inclusion in the calculation.
[58] While the Performance Bonus could be said to be subject to an upward adjustment had the Compensation Committee determined in any quarter that such were warranted, having regard to the fact that Evans’ client base was dramatically altered for 2009, I am at a loss to see how she might have improved upon her relative ratings during the notice period after this alteration. She had been allotted a 0.5% participation rate for seven straight quarters prior to the moment of termination as a result of point allocation generated from a reasonably static client roster. This track record, as it were, undercuts the notion that she was perhaps on an up-tick. It would not, therefore, be unreasonable to fix her Performance Bonus percentage at the number with which she ended in 2008, being 0.5%. As a corollary, I would not reduce the percentage because her relative performance might very well have declined in light of the loss of clients. In my view, Paradigm can't have it both ways.
[59] Finally, I find the decision of my colleague Wilton-Siegel J. in Chann v. RBC Dominion Securities Inc. (2004), 34 C.C.E.L. (3d) 244 (Ont. S.C.), in circumstances not too dissimilar to the instant case, to be most instructive:
First, the plaintiff suggested that a three year average of bonus payments should be used as the base rather than the level of the bonus payment in fiscal 2001. This approach may be appropriate in circumstances where bonuses fluctuate only moderately. However, it is not appropriate for the investment banking business in which significant fluctuations occur from year to year. In this industry, bonuses are adjusted yearly for all employees to address results within the most recent fiscal year and performance in prior years is discounted quickly. I see no basis for departing from this approach in the case of the plaintiff. The plaintiff also suggested his 2001 bonus was already reduced to a certain extent as a result of the defendant's determination in that year that his origination activities were unsatisfactory. I do not see a reason, however, to use a three year average to reduce the effect of that determination which was made while the plaintiff was employed and was, therefore, not included in the plaintiff's claim. [25]
[60] In the result, I would hold that the plaintiff should recover the sum of $68,750 for the fixed portion of the salary for the 11-month period of notice, and $86,771.21 for her share of the Performance Bonus for the same period. [26]
Post-Termination Bonus Calculation
[61] Paradigm paid the Q4 2008 Performance Bonus to all employees and Evans in late January 2009, within two weeks of the Goldman Letter. Apparently, all performance bonus pool participants whose percentage was less than 1% received a minimum $10,000 bonus instead of the $5,000 that was paid to Evans. I am not satisfied that there was any principled reason for distinguishing between Evans and her then cohort group in this regard. Clearly, had she not been terminated from her position and remained with Paradigm, she would have received the same bonus as the others in her category. Accordingly, she will be entitled to an additional $5,000 for her Performance Bonus participation for the Q4 2008 period, in addition to the foregoing amount.
Shareholders’ Bonus
[62] Paradigm argued that because Evans asked to have her equity redeemed almost immediately after the Goldman Letter, she was no longer thereafter entitled to receive any compensation in the way of a Shareholders’ Bonus on money that had been repaid to her. It was Paradigm’s position that shareholders’ equity was very much risk capital and that the payment of the Shareholders’ Bonus was, in part, a reflection of this ‘risk’. Furthermore, it was suggested, almost in passing and only in argument, that Evans had the use of these funds for the last almost seven years and hence it would not be fair and reasonable for her to receive something akin to an unfair advantage to those of her former colleagues. [27]
[63] In my view, the evidence led by Paradigm on this issue was far from compelling. On balance, I was not persuaded that the Shareholders’ Bonus was as much a payment to partners for the risk of leaving their capital in the Firm on an historic basis as it was part of the overall compensation in any year, particularly since, as Roland said, one’s percentage ownership should approximate the quarterly performance allocation. [28]
[64] In my view, whether Evans receives a ‘deemed’ allocation in respect of the Shareholders’ Bonus or not comes down to the agreement between the company and its shareholders.
[65] Without reciting the provisions of the Shareholders’ Agreement that speak to the rights and obligations of a departing shareholder, suffice it to say that a shareholder who leaves Paradigm voluntarily or because of a termination has no choice but to offer his or her shares and the debentures back to the Firm for redemption. A departing shareholder, simply put, has no option to retain the shares and debentures even if they were so inclined for whatever economic value such a retention might otherwise provide. The mere fact that Mr. Goldman made a request for the redemption in short order as part of his many and ever changing demands on the Firm in the days and weeks subsequent to the Goldman Letter is really of no moment and does not alter the facts of the case and the obligation of Evans as a shareholder. She simply had no choice but to tender her ‘interest’ for redemption.
[66] In my view, her interest in the equity and the right to receive an annual Shareholders’ Bonus was vested on acquisition of the shares and the debentures, subject to divestment on her leaving Paradigm. This fact distinguishes her interest to the contingent interests described in the stock option bonus cases referenced by the defendant in its argument. [29] Hence, she should not be disentitled to receive the Shareholders’ Bonus calculated for the period of reasonable notice.
[67] Not surprisingly, the percentage ownership at the moment of termination is in issue as well. First, Paradigm purported to, as part of the compensation offered with the Revised Role, reduce her percentage ownership to but 1%, which reduction was clearly not permitted under the Shareholders’ Agreement. In argument, Ms. Gupta acknowledged that for the period of reasonable notice, the defendant could only reduce Evans’ entitlement to 1.0275%, which of the math, translates to $59,844.44.
[68] However, as previously indicated, the snapshot for damage calculation purposes should occur at the moment the offer of alternative employment was made, which was the moment of repudiation. Evans’ percentage ownership had been set for the preceding 13 months at 1.37%. This translates to a Shareholders’ Bonus entitlement of $79,792.58, a number which, again, is based on the calculations provided to me by counsel post-argument.
[69] The parties acknowledge that Paradigm paid Evans, gratuitously, the sum of $105,398 during the six months after the receipt of the Goldman Letter, which sum must be deducted from any award made in her favour.
[70] Evans will, therefore, be entitled to judgment in the amount of $240,313.79 in respect of Total Remuneration less the above amount paid by Paradigm. She will also be entitled to recover her mitigation expenses, which the parties have agreed to, of $2,139.75, for a total of $242,453.54. The net amount for judgment purposes will, therefore, be $137,055.50.
Bad Faith Argument
The Factual Matrix
[71] I previously noted that the plaintiff, right from the delivery of the Goldman Letter, asserted a claim for the Underpayment of her Performance Bonus, if not an underpayment associated with her Shareholders’ Bonus and the corresponding reduction in her equity interest in the Firm. The claims asserted were something of a moving target both in terms of amounts and the time period in which such claims were alleged to commence and the rationale for same.
[72] When all was said and done, the claims for the Underpayment were alleged to have their genesis in the point reductions suffered by Evans from and after Q4 2006, and not at the time of her cancer diagnosis, and are alleged to run for each quarter thereafter through to and including the period of reasonable notice. The underpinning for this claim, at least as it was argued at trial, is rooted in the “organizing principle” of contract law recently articulated by Cromwell J. in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras. 63-4 (“Bhasin”). Put otherwise, Evans asserts that Paradigm breached its duty of good faith and honest performance of its contract of employment with her.
[73] As noted, I have rejected this claim on the facts of this case. However, because much trial time was devoted to the allegations, I will attempt to do justice to the positions of the parties by expanding on the rationale for my conclusion. I will first make reference to the claim, albeit at 30,000 feet, then review, but briefly, the applicable legal principles, and then set out the facts as I find them with reference to the jurisprudence.
[74] Evans asserted that the following incidents constitute evidence of the breach: she was hired to develop new accounts over a one to- two year period, but Paradigm raised performance issues with respect to her work prior even to that period ending; she was not given the rationale for the reduction in her Performance Bonus allotment quarter after quarter; Paradigm systemically reduced her Performance Bonus participation from 2.5 points to 0.5 points in an effort to compel her to seek alternative employment with another financial services firm; she was hampered in her attempts to excel and generate revenues first because she had accounts removed from her post, and then because she was not thereafter given new accounts and was not permitted to prospect for new accounts; Paradigm failed to protect her Performance Bonus pool participation despite agreeing to do so after she was diagnosed with cancer; and, finally, she was subjected to a different method of determining her Performance Bonus participation than were other employees, the last of which allegation included an assertion that the Compensation Committee acted in a flawed or improper manner.
[75] While not quite articulated by plaintiff’s counsel in this fashion, Evans suggested that the evidence of bad faith was further demonstrated in the manner in which she was treated by Bellamy during certain of her performance review meetings where she alleges he made it clear that he removed or was not assigning her new clients because she was “sick”.
The Legal Matrix
[76] Historically, Canadian courts limited the duty of honesty and good faith to but certain classes of contracts, into which limited category employment contracts were often found. In those circumstances, the duty was more often expressed as an implied term of law. [31]
[77] Thus, for example, in Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, the Supreme Court held that terminating an employee in an “untruthful, misleading or unduly insensitive” manner breached the implied term of good faith governing employment contracts. [32]
[78] With respect to the situations in which the duty of good faith has been held to apply, Professor McCamus categorized them as follows: (1) where cooperation is necessary to achieve the contractual objectives; (2) where one party exercises a discretionary power over the other; and (3) where one party seeks to evade contractual obligations. [33]
[79] In Greenberg v. Meffert (1985), 50 O.R. (2d) 755 (C.A.), a case that both parties have referenced for obvious reasons, the Court of Appeal held that an employer’s discretionary power to determine an employee’s bonus was subject to a requirement of honesty and good faith, and could not be exercised “arbitrarily or capriciously”. [35]
[80] In my opinion, given the fact that the present case involves an employment contract and revolves to a significant extent around the exercise of contractual discretion (i.e., setting bonuses), Bhasin does not fundamentally change the nature of the good faith and honesty obligations owed by Paradigm to Evans.
[81] Nevertheless, Bhasin is helpful in describing the content of the duty of good faith and honest performance. Cromwell J. held that the duty requires a contracting party to have “appropriate regard” for the other party’s “legitimate contractual interests”; a contracting party must not “seek to undermine those interests in bad faith”. [36] Contracts must be performed reasonably, rather than arbitrarily and capriciously. [37] A contracting party must be “honest, candid [and] forthright”. [38] Parties must not lie or mislead. [39]
[82] Because the Superior Court is seeing increasing numbers of cases where Bhasin is being pleaded more as a reflex action than after detailed analysis, I sound this cautionary note which Cromwell J. expressed in his judgment: the duty does not prevent parties from making legitimate choices motivated by economic self-interest. [40] Nor does the duty rise to the level of a fiduciary obligation. [41] That said, it is also trite to say that the facts of each case will drive the conclusion reached on this issue.
Paradigm’s Compensation Process
[83] For a small and aggressive financial services firm, Paradigm, at the material times, actually had a relatively sophisticated and transparent compensation process. In the June, 2005 ‘Partners’ meeting, at which Evans was in attendance, Roland tabled a compensation metric. [42] The minutes state as follows:
PCI's compensation formula is transparent. Roland explained the process used to determine performance (including quantitative and qualitative) criterion. The firm's philosophy is to ensure an individual Partner's total compensation reflects overall contribution to the firm. Ownership rebalancing typically occurred yearly but dependent on circumstances could occur more often. In conclusion Roland said the process was fluid and continued to evolve as the firm evolved.
The published key metric provided as follows:
Qualitative • Value of individual within Paradigm franchise • Work ethic • Leadership • Contribution to building the Partnership • Teamwork • Impact on key pieces of business and/or focus names for Paradigm • Trend in all of the above • Compliance
Quantitative • Statistical analysis of revenues according to producers • Trend [43]
[84] From a nuts and bolts point of view, the Compensation Committee was charged with the function of distributing the Firm’s net income on a quarterly basis, first by allocating amounts to the SBP, then to the Performance Bonus pool and thereafter to the Shareholders’ Bonus pool. Each member of the Compensation Committee, which included Roland, and each department head, would receive a detailed information package within two to three weeks after quarter end. The package would include historic compensation figures for all partners and staff for the preceding four quarters and the Firm’s financial operating results for the most recent and previous four quarters.
[85] Each member of the Committee would then review the information package, a task which would take, at minimum, several hours to perform, and prepare his or her own draft “points’ allocation” for the upcoming meeting of the whole. That preparation, I was told, included a consideration of the non-quantitative aspects of the metric, including identifying “key pieces of business” that had been generated or processed in the previous quarter and the “trends” both in terms of business generated for the “franchise”, as Roland referred to the Firm, and anticipated in the coming months.
[86] The members of the Committee would then meet one evening for several hours within days of the material distribution. At that time, each department head would review the contribution of the members of his or her department, and would field questions from the other members of the Committee, receive input from others and make a recommendation in respect of the allocations. A consensus on the overall allocations would be achieved on a preliminary basis on the night of the first meeting, after which the Committee members would adjourn to reflect on the information and numbers reviewed and regroup a few days later. At this point, the “points” were thereafter fixed. Each department head would then meet with the members of the team, provide them with a “performance review” and then give them their respective quarterly bonus cheques.
[87] I would observe that insofar as the above process is concerned, I accept unqualifiedly the evidence of Roland and Bellamy. This evidence was confirmed in large measure by the evidence of Brenda Deline, the former head of Trading who was, in part, instrumental in persuading Evans to join the Firm. [44] I would note that Ms. Deline was called on behalf of Evans.
[88] I do not accept counsel’s argument that Evans was treated differently than were others along the way and after she advised Roland that she had just received her diagnosis of breast cancer. The notes of the Executive Committee prepared in the wake of this disclosure are most instructive:
Roland announced to the Executive that Fabienne Evans had been diagnosed with breast cancer. The disease was in its early stages. Evans would undergo surgery late next week followed by chemotherapy. Paradigm had offered to pay her fees to Medcan’s Wellness Program as well as help financially should medical costs surmount current coverage.
As in Dilay’s situation, PCI, its staff and partners were supportive and would ensure she was protected in her pool participation until such time as she return to work full time. [45]
[89] First, I find as a fact that Evans was ‘protected’ throughout the period of her treatment and recuperation. Her income in 2006 and 2007 grew exponentially from what it was when she joined the Firm and for a period of 18 months thereafter. Secondly, the minutes, for what they may be worth, do not create a contractual obligation on the part of Paradigm, but an expression of intent. Furthermore, her global pool participation remained protected since while her Performance Bonus participation was reduced starting in Q4 2006 and in 2007, her percentage equity ownership remained constant. The two combined meant that she received significant bumps in income in this period and did not suffer a diminution in her position in the wake of the diagnosis and during the period of convalescence.
[90] In my view, there was nothing in the material or in the oral evidence that gives credence to the assertion that after her diagnosis in January 2006, Evans’ points were reduced because of her illness. In fact, I am satisfied that Roland made every effort, and apparently carried the day, to ensure that Evans’ global income would remain constant until she was through her recuperation and convalescence. In my view, the minutes of the June 2006 Executive Committee are reflective of this proposition:
Discussion turned to Evans’ health issues and the concern by some individuals that Evans lack of productivity was becoming a liability. The Executive spoke of Evans’ accounts, the current back up and co-coverage of accounts and its ineffectiveness. After a prolonged discussion, the Executive agreed to review Evans’ numbers at the end of June. If warranted, changes in coverage would be made at that time.
Roland felt the timing to discuss Evans’ level of equity in PCI was inappropriate given her current medical issues and recommended the conversation be postponed until the end of August to coincide with Evans’ final medical treatment. Roland felt PCI was honorable and historically the firm’s philosophy was one of caring and compassion; in turn he believed Evans would be ethical and understanding of any decision PCI took regarding her equity level.
Roland stated that younger people had to work harder, and that an appropriate level of intensity should come from the younger professionals. He requested the heads of each department meet with staff and be mentors and motivators. Roland felt it important that meetings be held regularly during difficult markets so that staff understand expectations and receive the appropriate support from senior staff. [46]
[91] In point of fact, as previously indicated, Evans’ Performance Bonus percentage was not reduced but for the introduction of new partners into the mix until Q4 2006, after she returned to work, basically, fulltime. Furthermore, the reduction in her percentage equity did not take place until 2007, again after she resumed her full workload. And as I previously noted, her income went up significantly in 2006 and 2007, dropping dramatically in 2008, which was as much a function of the drop in Paradigm’s net income in the wake of the market crash as it was the reduction in points.
[92] Evans argued, and led evidence arguably in support of this position, that she was not given credit for the agency revenue generation for which she asserts she was responsible. She attempted to draw a parallel between her revenue numbers and those of her closest comparator, Tina Bates, and the marked differential treatment in terms of Performance Bonus allocation between the two during the relevant period. [47]
[93] First, Evans’ argument is rooted in a fallacy, namely that the revenue numbers attributed to her in the various reports are indicative of her efforts and not to those of others, in whole or in large measure. I am satisfied, however, with the explanation proffered by Roland that revenue numbers do not admit of a ‘direct drive’ conclusion or that Evans, for example, should receive credit for the totality of the fees paid because the business was attributed to a client for whom she was responsible from the institutional sales side.
[94] On the contrary, I am satisfied that agency revenues are as much attributable to all members of the team, to a greater or lesser extent depending on the transaction, than to any one person. This statement means that the revenue attribution has to be divided notionally between the Sales, Trading and Research desks. In other words, the raw numbers themselves do not bespeak the entire story.
[95] In this respect, the qualitative metrics about which Roland testified is the backdrop against which revenue numbers, both corporate finance and agency fees, were to be assessed, which in the final analysis, I cannot on the evidence begin to second-guess. The fact of the matter is that the Sales and Trading personnel worked in close quarters, which was as much a function of their physical proximity one to the other as it was the manner in which the team concept seemed to pervade the Firm’s activities.
[96] Furthermore, if Evans were as much of a team or key player as she perceived herself to be, it would not have been in the best interests of Paradigm to move accounts to others merely to ‘penalize’ her. Bellamy, if not Roland, was too mercenary to adopt such a myopic strategy.
[97] This last observation leads to another of Evans’ arguments, if not theories, namely that accounts were removed from her post in the wake of her diagnosis because of her illness. First, there is no doubt that some accounts were moved to others, temporally, during her treatment period. Such, her counsel acknowledged, was driven in some measure by the opening of a Calgary office and the assignment of accounts to the new sales people in that city.
[98] I am also prepared to conclude that others of her accounts were moved again temporally during her convalescence. But I am not prepared to conclude that Bellamy made these account adjustments for an improper purpose. I am satisfied on the evidence that such reallocation of accounts was done for business purposes, namely to ensure continuity of service for accounts which might not have been actively worked while Evans was convalescing. Again, my conclusion is driven more by the nature of the industry and the level of competition between houses and internally at Paradigm itself, than by anything else, all of which factors were well known to Evans at all material times.
[99] I digress to note that much time was spent in evidence and in written argument on whether or not and in which performance reviews, Evans alleged that Bellamy stated that he was moving accounts or not giving her new accounts due to her illness. Without detailing the evidence, suffice it to say, that an issue arose during Bellamy’s evidence which Paradigm argued cast doubt on the accuracy, if not the validity, of Evans’ notes upon which she not only testified but relied to vouchsafe her credibility. [48]
[100] I am going to assume for purposes of this discussion that Bellamy made the insensitive, if not ignorant, remarks concerning the movement of accounts. I agree with Paradigm’s counsel that such remarks, except in limited circumstances not pleaded in the instant case, do not give rise to an independent cause of action.
[101] If I understand Evans’ argument, the remarks were intended to play more into the Bhasin claim of honesty and good faith, than provide her with a standalone cause of action either rooted in a Human Rights complaint or the intentional infliction of mental distress, or some other tortious act not specified. I would also observe that had I accepted the claim as currently constituted, I am of the view that the defences of condonation and the operation of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B would be of some moment, which for obvious reasons I need not explore as part of this judgment.
[102] I am also of the view that the reduction of participation percentages to send a message to a ‘partner’ is not, in and of itself, a tool that supports a claim of bad faith or dishonest performance. As I indicated at the outset, Paradigm is a partnership in a corporate guise. Such an implicit message is routinely used in circumstances where a partner is urged to relocate to another firm, and is a better alternative than an outright firing.
[103] Finally, I feel compelled to comment upon the evidence of Roland captured in the transcripts of the January 2009 meetings. During the taped conversations, Roland made reference to specific accounts that were being moved from Evans’ post because he and Bellamy had received client complaints about the ‘lack of connection’ between Evans and the particular client. None of the clients who registered a concern was called to testify.
[104] In my view, because the evidence was led by Paradigm not for the truth of its contents but for the fact that the statements were made leading to a result does not preclude their admissibility. Furthermore, the onus rested with the plaintiff throughout to call evidence sufficient to carry the day on the Bhasin claim, which meant either that she was compelled to call witnesses from the client group who would contradict the statements allegedly made or lead other evidence to support her thesis.
[105] Finally, I end this analysis by adopting the reasoning of Wilton-Siegel J. in Chann v. RBC Dominion Securities Inc. (2004), 34 C.C.E.L. (3d) 244 (Ont. S.C.) in respect of the exercise of discretion for the subject bonus pools:
... The Executive Committee retains the sole discretion to award the discretionary cash bonus. However, it is also clear, and I believe acknowledged by the defendant's counsel on behalf of his client, that this discretion must be exercised in a fair and reasonable manner. In other words, it is an implied term of the employment agreement between RBCDS and its investment banking professionals that this discretion will be exercised in a fair and reasonable manner. While issues of enforcement of this provision would, typically, be raised by employees only in the context of allegations of constructive dismissal or actual termination of employment, it is a provision which exists throughout the employment relationship.
The determination of whether the defendant's representatives established the discretionary cash bonus in a fair and reasonable manner involves an examination of the process adopted by the defendant's representatives and of the factors taken into consideration. The plaintiff is entitled to a process which ensures that the determination is made with adequate information regarding his relative contribution to the defendant's financial performance. It is also incumbent upon the decision-maker to consider only factors which are reasonably related to the firm's performance and, as far as is practicable, to apply those factors consistently among employees and from year to year. I agree with the defendant, however, that if the defendant satisfies this test, the Court should not interfere with the exercise of this discretion by substituting a different award applying the same factors. [50] (Emphasis added)
Conclusion
[106] To repeat what I stated at the outset of this section, I am not persuaded that the plaintiff has established on a balance of probabilities that Paradigm acted dishonestly and with lack of good faith in the exercise of its discretion in the award of the Performance Bonus and Shareholders’ Bonus for the period Q4 2006 through to the date of termination and for the period of reasonable notice thereafter. There was a system in place which I did not find to be arbitrary, capricious or unfair either in form or in its implementation. I am not persuaded that the plaintiff has proven otherwise.
[107] The plaintiff will be entitled to judgment in the amount of $137,055.50, for the reasons expressed above. If the parties cannot agree on the disposition of interest and costs, I may be spoken to in respect of the process for dealing with either or both of these remaining items.
GANS J.
Released: July 20, 2016
APPENDIX A
FABIENE EVANS COMPENSATION OVERVIEW
| Employee Performance Bonus: | Shareholders’ |
|---|---|
| Period Pool % Amount Salary | Dividends |
| TOTAL |
2008 Q308 0.50% $ 26,108.94 Q208 0.50% $ 63,234.92 Q108 0.50% $ 41,313.16 Q407 0.50% $ 61,525.00
$192,182.02 $ 75,000.00 $316,290.04 $583,472.04
2007 Q307 0.50% $ 54,530.00 Q207 0.50% $ 72,819.00 Q107 0.75% $ 88,553.44 Q406 1.25% $103,573.00
$319,475.44 $ 75,000.00 $305,615.09 $700,090.53
2006 Q306 1.75% $ 77,000.00 Q206 2.25% $153,315.00 Q106 2.50% $207,987.50 Q405 2.50% $105,000.00
$543,302.50 $ 75,000.00 $261,736.58 $880,039.08
2005 Q305 2.25% $135,000.00 Q205 2.25% $ 67,500.00 Q105 2.25% $ 91,150.00 Q404 2.25% $101,250.00
$394,900.00 $ 75,000.00 $ 60,421.29 $530,321.29
2004 Q304 2.30% $ 71,400.00 Q204 2.25% $ 70,000.00
$141,400.00 $ 44,034.35(May31/04) $185,434.35
APPENDIX B
| Year | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2004 | 2.38 | 2.25 | ||
| 2005 | 2.25 | 2.25 | 2.25 | 2.50 |
| 2006 | 2.50 | 2.25 | 1.75 | 1.25 |
| 2007 | 0.75 | 0.50 | 0.50 | 0.50 |
| 2008 | 0.50 | 0.50 | 0.50 | 0.50 |
Reasons for Judgment
COURT FILE NO.: CV-09-381336 DATE: 20160720 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
FABIENE EVANS Plaintiff – and – PARADIGM CAPITAL INC. Defendant
REASONS FOR JUDGMENT
GANS J.
Released: July 20, 2016
[1] While neither counsel left any stone unturned, as it were, in respect of the arguments they each advanced on behalf of their respective clients, they never descended into the fray and were at all times remarkably courteous to each other and to the Court, for which I was obliged.
[2] Counsel prepared two Agreed Statements of Facts (ASF) (Exhibits 4 and 18), and a Joint Brief of Documents (JBD). I have drawn liberally from the very detailed ASF, which I have attempted to distill in this section of the judgment.
[3] Evans did not execute the Shareholders’ Agreement during her employment. The parties were in agreement that such a ‘deficiency’ in process was of no moment and Evans and Paradigm were bound by its terms.
[4] JBD 61- Evans’ Chronology of Medical Appointments from November 22, 2005 – December 16, 2008.
[5] Evans’ Performance Bonus points crested in two quarters at 2.5% and ‘dipped’ to 1.75% in the above period. I am satisfied on the evidence that these modest swings are accounted for by the distribution of partners’ points in respect of those who had left or had been added to the partnership base. The modest dips or blips are not material to the matters in issue particularly, as will be discussed later, because the plaintiff has acknowledged that no claim in respect of Performance Bonus points is being made for the period prior to Q4 2006.
[6] Exhibit 23 – Transcript – January 13th meeting, page 7.
[7] Exhibit 24 – Transcript – January 14th telephone conversation, page 1.
[8] Exhibit 11, tab 1 – Goldman letter to Paradigm, January 16, 2009 (“Goldman Letter”).
[9] Exhibit 11, tab 3 – Goldman letter to Paradigm, January 29, 2009.
[10] Farber v. Royal Trust Co., 1997 SCC 387, [1997] 1 S.C.R. 846, at para. 24.
[11] Evans v. Teamsters Local Union, 2008 SCC 20, [2008] 1 S.C.R. 661, at paras. 27-31 and 33 (“Evans”).
[12] Campbell v. Merrill Lynch Canada Inc. (1992), 47 C.C.E.L. 248 (B.C.S.C.), at para. 15.
[13] Whiting v. First Data Canada Merchant Solutions ULC., 2011 BCSC 881, 96 C.C.E.L. (3d) 137, at paras. 18-25; Shmyr v. Lakeland Regional Health Authority (1996), 23 C.C.E.L. (2d) 255 (Alta. Q.B.), at paras. 2 (Agreed Facts 7 and 8), 13, 15, 50-51.
[14] JBD 67 – Draft Job Description.
[15] Ms. Gupta provided me with a “surrebuttal” to a “reply” factum delivered by Mr. Goldman after closing argument. I do not intend to review in the body of the judgment the manner in which argument proceeded or unfolded through no fault of Ms. Gupta. I will have more to say about this issue when dealing with costs. I make but two quick observations: (1) I agree with Ms. Gupta that Mr. Goldman’s reply factum transcended the boundaries of proper reply and have endeavoured to have reference solely to matters and cases referenced in argument only; and (2) I do not agree with Ms. Gupta, however, that the fact that Evans did not raise the possible reduction of her ownership interest in the post January 8th discussions is of significance, if I understand the import of her argument. What a dismissed employee does or does not raise in the wake of a termination must be viewed through the lens of the trauma of the termination itself. Such discussions or omissions are not dispositive of objective concerns and are in some measure more a function of human dynamics than clarity of thinking.
[16] Farwell v. Citair Inc. (c.o.b. General Coach Canada), 2014 ONCA 177, 17 C.C.E.L. (4th) 329, at para. 20 (“Farwell”).
[17] See the decision of Perell J. in Paquette v. TeraGo Networks Inc., 2015 ONSC 4189, 255 A.C.W.S. (3d) 641, at paras. 21-31, and the cases therein referred to.
[18] (1960), Bardal v. Globe & Mail (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J.). See also Machtinger v. HOJ Industries Ltd., 1992 SCC 102, [1992] 1 S.C.R. 986.
[19] Minott v. O’Shanter Development Co., 1999 ONCA 3686, 42 O.R. (3d) 321 (C.A.) at para. 66. See also the decisions of MacPherson J., as he then was, in Ryshpan v. Burns Fry Ltd. (1995), 10 C.C.E.L. (2d) 235 (Ont. Gen. Div.), at paras. 9-11 (“Ryshpan”) and Wilton-Siegel J. in Chann v. RBC Dominion Securities Inc. (2004), 34 C.C.E.L. (3d) 244 (Ont. S.C.) (“Chann”).
[20] I do not intend to parse the cases provided by counsel since little if anything would be accomplished by embarking upon that exercise in these reasons.
[21] Russo v. Kerr, 2010 ONSC 6053, 326 D.L.R. (4th) 341, at para. 53; Bohemier v. Storwal International Inc. (1982), 40 O.R. (2d) 264 (H.C.J.); varied Bohemier v. Storwal International Inc. (1983), 44 O.R. (2d) 361 (C.A.); Ryshpan, supra.
[22] Plaintiff’s Written Argument, paragraph 127. See Dimmer v. MMV Financial Inc., 2012 ONSC 7257, 5 C.C.E.L. (4th) 94, at paras. 86, 87.
[23] Clark v. BMO Nesbitt Burns Inc., 2008 ONCA 663, 69 C.C.E.L. (3d) 71, at paras. 35-37.
[24] Davidson v. Tahtsa Timber Ltd., 2010 BCCA 528, 12 B.C.L.R. (5th) 59, at para. 17.
[25] At para. 85.
[26] Counsel for Evans provided me with a damage calculation chart subsequent to argument. This chart is found at Damages Scenario IV. The numbers used in the judgment are derived from the chart provided. I have not checked the arithmetic.
[27] The last aspect of this argument is the ‘gloss’ that I attach to the argument provided to me by Ms. Gupta. I would also observe that Ms. Gupta, who is a first rate counsel, provided me, on an after-the-fact basis, with ‘economic’ data that had not been properly introduced at trial. Nor had she, as I recollect, cross- examined Evans on the use to which she put her return of capital after it had been repaid to her. In any event, I am not persuaded that whether or not Evans earned little or a lot on the capital was of any moment to the issue other than as ‘background noise’.
[28] Regrettably, neither counsel mined this area thoroughly for me to have a better appreciation of the ‘business’ rationale for this type of income splitting.
[29] Kieran v. Ingram MicroInc. (2004), 33 C.C.E.L. (3d) 157 (Ont. C.A.); Brock v. Matthews Group Inc. (1991), 34 C.C.E.L. 50 (Ont. C.A.).
[30] Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras. 63-4 (“Bhasin”). As will be discussed, the above organizing principle was expressed by Cromwell J. four years after the delivery of the Goldman Letter in which the claim was first asserted.
[31] Bhasin, at para. 54, citing Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362 (“Keays”).
[32] Keays, at para. 57, citing Wallace v. United Grain Growers Ltd., 1997 SCC 332, [1997] 3 S.C.R. 701, at para. 98.
[33] Bhasin, at para. 47, citing J.D. McCamus, The Law of Contracts (2nd ed.) (Toronto: Irwin Law, 2012), pp. 840-856.
[34] (1985), Greenberg v. Meffert (1985), 50 O.R. (2d) 755 (C.A.) (“Greenberg”).
[35] Greenberg, pp. 763-764.
[36] Bhasin, at para. 65.
[37] Bhasin, at para. 63.
[38] Bhasin, at para. 66. See also Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500, at para. 99.
[39] Bhasin, at para. 73.
[40] Bhasin, at para. 70. See also Chann, at paras. 48 and 50; Mathieson v. Scotia Capital Inc. (2009), 78 C.C.E.L. (3d) 76, at paras. 57-60 (“Mathieson”).
[41] Bhasin, at para. 65.
[42] JBD 130 – Minutes of Paradigm Executive Committee Meeting – June 1, 2005.
[43] JBD 142 – Memo Roland re: Metric (Compensation Committee Meeting) – October 14, 2005.
[44] I would also note that Paradigm offered to call the remaining members of the Compensation Committee for cross-examination purposes, which offer was not taken up by plaintiff’s counsel leaving unassailable the above evidence.
[45] JBD 23 – Minutes of Executive Committee Meeting – January 27th, 2006.
[46] JBD 163 – Minutes of the Executive Committee Meeting – June 20, 2006.
[47] Exhibit 7 – Graphs and the Charts from Appendix 3 of the Macaulay Report; Exhibit 9 – Comparison Chart - Evans & Bates (Prepared by Mr. Miller).
[48] Exhibit 20 – Evans’ Notes. See also JBD 154 – Handwritten Notes re Q1 2006; JBD 165 – Handwritten Notes re Q2 2006.
[49] Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
[50] Chann, at paras. 48 and 50. See also Mathieson, at paras. 57-60.