COURT FILE NO.: CV-15-542492 DATE: 20180921
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM (BILL) MCMICHAEL Plaintiff – and – THE NEW ZEALAND AND AUSTRALIAN LAMB COMPANY AND THE LAMB CO-OPERATIVE, INC. Defendants
Counsel: Stephen J. Moreau and Genevieve J. Cantin for the Plaintiff Jeffrey E. Goodman and Karina E. Pylypczuk for the Defendants
HEARD: September 13, 2018
REASONS FOR DECISION
DIAMOND J. :
Overview
[1] Pursuant to an Employment Agreement dated January 20, 2003 (“the Agreement”), the plaintiff commenced employment with the defendant, The New Zealand and Australian Lamb Company (“US Lamb”) as the Vice-President of Operations at US Lamb’s processing facility in Los Angeles, California. He remained employed by US Lamb until his termination without cause on June 28, 2015. At the date of his termination, the plaintiff was 63 years of age.
[2] In this proceeding, the plaintiff seeks damages for wrongful dismissal equivalent to 24 months’ reasonable notice, inclusive of the value of his lost benefits during the notice period. The plaintiff has accounted for mitigation income earned during the notice period, but seeks a “net zero” figure due to the expenses he incurred to earn that income.
[3] Relying upon, inter alia, the Agreement and the actions of the plaintiff described in greater detail hereinafter, the defendant takes issue with the plaintiff’s claim for 24 months’ reasonable notice, and submits that the Agreement precludes the plaintiff from seeking the value of any lost benefits during the notice period.
[4] On September 13, 2018 I heard the plaintiff’s motion for summary judgment against US Lamb. At the conclusion of the hearing, I took my decision under reserve. These are my Reasons.
Summary Judgment
[5] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the Court shall grant a summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence.” As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[6] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada held that on a motion for summary judgment the Court must first determine whether there is a genuine issue requiring a trial based only upon the record before the Court, without using the fact-finding powers set out in the 2010 amendments. The Court may only grant summary judgment if there is sufficient evidence to justly and fairly adjudicate the dispute, and if summary judgment would be an affordable, timely and proportionate procedure.
[7] The overarching principle is proportionality. Summary judgment ought to be granted unless the added expense and delay of a trial is necessary for a fair and just adjudication of the case.
[8] As held in Sanzone v. Schechter, 2016 ONCA 566, only after the moving party discharges its evidentiary burden of proving that there is no genuine issue requiring a trial for resolution does the burden then shift to the responding party to prove that its claim has a real chance of success. The Court must address the threshold question of whether the moving party discharges its evidentiary obligation to put its best foot forward by adducing evidence on the merits.
[9] Nothing in Hyrniak or the subsequent jurisprudence displaces the onus upon a party responding to a motion for summary judgment to “lead trump or risk losing”. The Court must assume that the parties have put their best foot forward and placed all relevant evidence in the record. If the Court determines that there is a genuine issue requiring a trial, the inquiry does not end there and the analysis proceeds to whether a Court can determine if the need for a trial may be avoided by use of its expanded fact-finding powers.
The Defendant’s Preliminary Motion
[10] In the plaintiff’s Statement of Claim, he sought damages from both US Lamb and the co-defendant The Lamb Co-Operative, Inc. (“Canada Lamb”), taking the position that both defendants operated as his common employer.
[11] During this litigation, the parties entered into a consent Order dated June 7, 2017 of Master Sugunasiri whereby the plaintiff’s action against Canada Lamb was stayed. That consent Order set out a series of circumstances under which the stay could be lifted against Canada Lamb (i.e. if a judgment was obtained against US Lamb and not satisfied within 30 days, or if US Lamb ceased operations prior to any judgment being obtained against it).
[12] In response to the plaintiff’s motion for summary judgment, US Lamb brought its own motion seeking an order declaring the plaintiff to be in breach of the consent Order by including evidence in his supporting affidavit raising the issue of whether US Lamb and Canada Lamb were indeed his common employer. US Lamb further sought an order striking out various paragraphs of the plaintiff’s affidavit on the basis that allowing those allegedly offending paragraphs to remain would constitute an abuse of process. In particular, US Lamb was concerned that, by allegedly raising the common employer issue, the plaintiff was seeking to include, for the purpose of calculating his notice period, a previous 2.5 year period when he provided consulting services as an independent contractor to Canada Lamb.
[13] At the outset of the hearing, the plaintiff confirmed that he was not seeking to include the previous 2.5 year period for the purpose of calculating wrongful dismissal damages owed to him. I assured both counsel that from my review of the allegedly offending paragraphs, the plaintiff was providing historical background as to his understanding of his role in the two companies, and since the plaintiff’s action against Canada Lamb remains stayed, that evidence could only be relevant to the issue of his character of employment.
[14] On that basis, US Lamb’s motion did not proceed on its merits before me, and the parties reserved their respective rights to seek costs arising from that motion at the end of the day.
Issues to be addressed
[15] In my view, the following issues have been raised in the record before me:
Issue #1: Does the Agreement limit the plaintiff’s wrongful dismissal damages to 12 months?
Issue #2: If the answer to Issue #1 is “No”, what is the appropriate amount of common law reasonable notice due and owing to the plaintiff?
Issue #3: Does the Agreement preclude the value of the plaintiff’s lost benefits in the calculation of his reasonable notice (be it 12 months or higher)?
Issue #4: If the answer to Issue #3 is “No”, what is the appropriate valuation of the plaintiff’s lost benefits during the notice period?
Issue #5: What is the amount of mitigation income to be offset against the plaintiff’s wrongful dismissal damages?
[16] Despite US Lamb’s submissions, most of the salient facts giving rise to this proceeding are not materially in dispute. There is a divergence in the evidence with respect to how the parties respectively viewed the character of the plaintiff’s employment, although I will address same in my treatment of Issue #2 below.
[17] While US Lamb initially took the position that summary judgment was not appropriate on the record before me, and thus the plaintiff’s motion ought to be dismissed, during argument it became apparent that any alleged credibility issues or material facts in dispute could likely be resolved by resorting to the enhanced fact-finding powers and the scheduling of a mini-trial before me.
[18] I now therefore address each issue in turn, and specifically whether those issues warrant the exercise of the enhanced fact-finding powers for their resolution in favour of one party or another.
Issue #1: Does the Agreement limit the plaintiff’s wrongful dismissal damages to 12 months?
[19] Pursuant to clause 3(b) of the Agreement, the plaintiff’s employment could be terminated without notice for just cause. In such circumstances, clause 3(c) of the Agreement provided that the plaintiff would continue to accrue and receive his “compensation and benefits” through to the date of termination.
[20] The relevant clauses in the Agreement for the disposition of Issue #1 (and potentially Issue #3) are as follows (my emphasis in bold):
3(d) This Agreement and the employment of the Employee hereunder may be terminated by the Employer giving notice of termination (or at the Employer’s option, pay in lieu of notice) as follows:
(i) during the first three years of employment 12 months’ notice;
3(e) Pay in lieu of notice will be calculated on the basis of the Employee’s annual base salary as of the date he receives notice of termination. Bonuses and other forms of additional compensation will not be considered part of the Employee’s annual base salary. The Employee’s rights and entitlement under any performance bonus shall terminate effective as of the date of his or her termination of employment, or as at the date he or she receives notice of termination, if pay in lieu of notice is provided.
Pay in lieu of notice will be provided in regular monthly instalments and shall be subject to all deductions and withholdings required by law.
[21] The Agreement was drafted by counsel retained by US Lamb. The parties agree that both the construction and the contents of clause 3(d) of the Agreement are lacking and confusing. That clause specifically provides for a 12 month notice period if the plaintiff is terminated without cause during the first three years of his employment. Clause 3(d)(i) seems to be the start of a list that was never completed. Assuming the plaintiff remained employed for over three years (which he did), the Agreement is silent as to what reasonable notice would be due and owing to him.
[22] Clause 12 of the Agreement provides that the Agreement is to be governed by and construed in accordance with the laws of the province of Ontario. There is no real dispute that the plaintiff worked for US Lamb, a New Jersey company with its head office in the State of Connecticut, and the plaintiff was physically situated in the State of California. Regardless of all those undisputed facts, Ontario law governs the Agreement and the employment relationship between the parties.
[23] Both parties agree that under Ontario law, US Lamb could not terminate the plaintiff’s employment without providing him with reasonable notice or pay in lieu thereof. To the extent that US Lamb maintains that the Agreement should be construed to limit the plaintiff’s reasonable notice to 12 months regardless of when he was terminated, I disagree.
[24] As held by the Court of Appeal for Ontario in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, any termination clause can only rebut the presumption of reasonable notice if the clause’s wording is clear. Here, the contents of clause 3(d) are anything but clear. The inclusion of clause 3(d)(i) seems to, on its face, distinguish between the plaintiff’s reasonable notice before and after he completes three years of employment, although the clause appears incomplete. Under Ontario law and the principles of contractual interpretation, after three years of employment, the plaintiff is thus entitled to his common law reasonable notice.
[25] As such, the answer to Issue #1 is “No”.
Issue #2: If the answer to Issue #1 is “No”, what is the appropriate amount of common law reasonable notice due and owing to the plaintiff?
[26] In determining the appropriate length of reasonable notice due and owing to the plaintiff, I am guided by the traditional criteria set forth in Bardal v. Globe & Mail. These criteria include the plaintiff’s age, length of service, character of employment and the availability of similar employment with regard to his experience, training and qualification.
[27] It is trite to state that the assessment and reasonable notice is far more of an art than a science. All of traditional Bardal factors warrant consideration. The plaintiff’s age at termination (63 years), annual base salary ($190,100.00 USD) and length of service (12.5 years) are not in dispute. Where the parties differ is the character of the plaintiff’s employment (and, in turn the availability of similar employment), and the importance of that Bardal factor in the calculation of reasonable notice.
[28] In Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469, the Court of Appeal for Ontario noted the existence of recent jurisprudence suggesting that the character of employment is “a factor of declining relative importance”. However, a few months earlier the Court of Appeal for Ontario also held in Love v. Acuity Investment Management Inc., 2011 ONCA 130 that high level employees favour a longer notice period.
[29] US Lamb argues that despite the plaintiff’s job title, he was effectively no more than a Plant Manager, and that he has overstated the scope of his duties and obligations on this motion. From my review of the record, US Lamb confirmed on cross-examination that employment contracts are typically reserved for “high level employees” within the company. When the plaintiff moved from Ontario to Los Angeles to commence employment with US Lamb, as part of that relocation US Lamb (a) guaranteed the listing price of his Ontario home, (b) provided bridge financing to help the plaintiff purchase his home in California, (c) paid the closing costs for the purchase of the California home, and (d) paid the fees to fast track his and his family’s green card applications. In my view, such actions are consistent with the securing of a more senior level employee than a Plant Manager.
[30] Under the Agreement, the plaintiff was to report directly to the COO and President of US Lamb. The Agreement sets out the plaintiff’s responsibilities, which include all production and distribution operations associated with the Los Angeles production facility. That position was responsible for the warehousing and distribution of approximately 75% of the US product (which in 2003 totaled approximately $200,000,000.00 CAD).
[31] US Lamb’s corporate organizational charts lists the plaintiff as one of two Vice-Presidents, who along with the Finance Director and National Foods Service Sales Manager reported directly to US Lamb’s President and CEO. There is evidence that as late as 2014 (less than a year before he was terminated), the plaintiff was the Vice-President who signed US Lamb’s Management Policy Statement.
[32] US Lamb submits that it was the plaintiff who was interested in pursuing an employment opportunity with US Lamb and that he was not enticed or induced in the circumstances. The plaintiff’s evidence that the scope of his employment included “international duties and responsibilities” through his attendance at Canada Lamb in Ontario is, according to US Lamb, greatly overstated, as the purpose of the plaintiff’s trips to Ontario was personal, and not business. Such a position is interesting given the fact that US Lamb ultimately reimbursed the plaintiff for the expenses associated with such trips, although US Lamb states that such reimbursement was more of a “perk” than an entitlement.
[33] In addition, the defendant submits that the plaintiff’s character of employment (presumably combined with his age) did not make it more difficult for him to secure alternative employment. In September 2015, the plaintiff received an offer to work with Thomas Foods (US Lamb’s largest competitor) in the State of Pennsylvania. The plaintiff declined the offer due to the fact that he did not want to relocate to a new state (a decision which, for the purposes of mitigation efforts, is not challenged). However, US Lamb submits that the plaintiff was still employable and thus his character of employment did not present an obstacle to locating an alternative employment.
[34] Jurisprudence provided by both parties suggests a range of reasonable notice periods. US Lamb has submitted case law supporting a range of 12-16 months. The plaintiff relies on cases awarding 24 months’ reasonable notice, which is typically the upper echelon of notice periods. In my view, I find my colleague Justice Faieta’s decision in Ziten v. Sadie Moranis Realty Corporation, 2015 ONSC 7987 to be helpful and instructive. In Ziten, the plaintiff was 63 years old and was terminated from his position of Vice-President of Finance after 17.25 years. Justice Faieta awarded the plaintiff 24 months’ reasonable notice.
[35] From my review of the record, I see no need to utilize the enhanced fact-finding powers. The issue is not whether the plaintiff was a senior employee with US Lamb. He was. While other senior employees may have had different responsibilities, the totality of the evidentiary record supports a finding that the character of the plaintiff’s employment was that of an executive.
[36] Having reviewed the relevant jurisprudence and considered the traditional Bardal criteria, I award the plaintiff a reasonable notice period in the amount of 22 months.
Issue #3: Does the Agreement preclude the value of the plaintiff’s lost benefits in the calculation of reasonable notice (be it 12 months or higher)?
[37] This is a most interesting issue. While it is open to interpret clause 3(e) of the Agreement to exclude benefits as “bonus or other form of additional compensation” (ie. to be included in the plaintiff’s base salary), the parties proceeded with argument on the basis that, at least on its face, clause 3(e) of the Agreement does exclude payment of the value of the plaintiff’s benefits as part of any reasonable notice due to the plaintiff upon termination without cause.
[38] As previously stated, the law of Ontario governs the Agreement and the employment relationship between the parties. As held by the Court of Appeal for Ontario in Singer v. Nordstrong Equipment Limited, 2018 ONCA 364, in addition to lost salary, in a successful action for wrongful dismissal an employee is entitled to damages for the breach of his/her contract of employment, including the pecuniary value of lost benefits flowing from his/her dismissal.
[39] Section 60(1)(c) of the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”) mandates each employer to include whatever benefit plan contributions would be required to maintain benefits under such plan until the end of any notice period. As held by the Court of Appeal for Ontario in North v. Metaswitch Networks Corporation, 2017 ONCA 790, section 5 of the ESA prohibits employers and employees from waiving or contracting out of any employment standard prescribed by the ESA save to provide a greater benefit to the employee.
[40] Thus clause 3(e) of the Agreement appears to be void and unenforceable in Ontario. However, US Lamb relies on section 3(1) of the ESA which provides that all employment standards set out in the ESA only apply to an employee if his/her work is to be performed in Ontario, or outside Ontario as a continuation of work performed in Ontario. As the plaintiff resided and worked for US Lamb in California, US Lamb argues that the provisions of ESA do not apply to the plaintiff. Put in another way, clause 3(e) “boomerangs” back to being enforceable due to (a) the law of Ontario applying, but more narrowly (b) the provisions of the ESA not applying.
[41] In response, the plaintiff relies upon the decision of the Court of Appeal for Ontario in Landsbridge Auto Corp. v. Midas Canada Inc., 2010 ONCA 478. In Landsbridge a group of franchisees brought a class action against a franchisor for, inter alia, damages for the breach of the duty of fair dealing under the provisions of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (“the AWA”). Some of the franchisees who formed part of the defined class operated outside of the province of Ontario. Section 2(1) of the AWA states that the provisions of the AWA apply to franchise businesses “operated partly or wholly in Ontario”. As a result, the franchisor argued that those franchisees who carried on business outside of Ontario had no standing to claim a breach of a duty of fair dealing under the AWA.
[42] In upholding the original decision of Justice Cullity, the Court of Appeal for Ontario held that as the parties had agreed to the law of Ontario governing the validity, construction, performance and enforcement of the franchise agreements, the most reasonable inference was that the parties intended to have all their rights and obligations be the same, ie. as if the business operations of all franchisees were operated in Ontario. A choice of law clause often bears no relationship to the location in which the contract is to be performed. A governing law can thus be the law intended by the parties. As long as that choice is “bona fide and legal, and there is no reason for avoiding the choice on the ground of public policy”, then the law will govern the contract.
[43] Accordingly, the plaintiff submits that, using the same logic applied to the ESA, by agreeing to Ontario as the governing law, the plaintiff and US Lamb agreed that the provisions of the ESA would apply to them regardless of where the plaintiff was situate when he performed his employment functions for US Lamb.
[44] Subject to there being sound public policy reasons to hold otherwise, I agree with the plaintiff. However, that does not end the inquiry as US Lamb argues the presence of public policy reasons to enforce clause 3(e) of the Agreement. Specifically, US Lamb points to the fact that the plaintiff filed a claim for outstanding vacation pay in California with the California Labour Commission (and relying upon the California Labour Code), and as such the plaintiff has taken the position that his statutory rights for vacation pay are in fact governed by California Law (and not Ontario law under the Agreement). US Lamb argues that the plaintiff is “forum shopping” and seeking the most beneficial result for each potential claim he may have against US Lamb. US Lamb is arguing that the plaintiff has used a “pick and choose approach” to the Agreement, relying on the ESA when he wishes to strengthen his claim, but seeking compensation under the California Labour Code even though clause 5 of the Agreement specifically deals with the plaintiff’s entitlement to vacation pay.
[45] US Lamb’s argument is attractive. The plaintiff appears to be speaking out of both sides of his mouth, as he has sought to excise his vacation pay claim from being governed by the laws of the province of Ontario, and advance that claim in California under the provisions of California Labour Code. Such a step could render the rationale in the Landsbridge decision inapplicable.
[46] To reject the plaintiff’s argument, I must be satisfied that granting him the relief sought would not violate conceptions of essential justice and morality. On the record before me (which I am to assume represents all the evidence available to the parties), I cannot conclude that such public policy grounds exist. No expert evidence proving the foreign law of California was tendered on the plaintiff’s motion, and thus I have no ability to determine whether the plaintiff’s claim for vacation pay under the California Labour Code could possibly succeed given the provisions of the Agreement. There may be a solid factual and legal basis to support the plaintiff’s decision to pursue his vacation pay claim in California, which claim may or may not prove successful.
[47] US Lamb cited no real jurisprudence in support of its request. In the absence of appellate authority confirming that the purported actions of the plaintiff could invoke public policy concerns, I believe that the rationale in Landsbridge must apply.
[48] The answer to Issue #3 is therefore “No”.
Issue #4: If the answer to Issue #3 is “No”, what is the appropriate valuation of the plaintiff’s lost benefits during the notice period?
[49] At paragraph 44 of his supporting affidavit, the plaintiff unilaterally lists a series of various benefits forming part of his total annual compensation package, with those benefits worth approximately $185,621.00 USD per year. The plaintiff assesses each specific benefit item with a value, but does not include any source documents to support such valuations.
[50] During the hearing, counsel for US Lamb advised that he mistakenly understood those valuations to represent the replacement cost of the benefits that the plaintiff claims he enjoyed during his employment.
[51] In the end, counsel for the parties agreed that if my answer to Issue #3 was “No”, then the parties be permitted to attempt to resolve Issue #4 on their own, failing which they would be at liberty to contact my assistant Michelle Giordano at michelle.giordano@ontario.ca with a view to scheduling a mini-trial of Issue #4 with further oral and documentary evidence if necessary.
[52] With a view to reaching a fair and just determination on the merits, I agree with the parties’ request. They may attempt to resolve Issue #4 on their own, and I will make myself available to conduct the mini-trial if requested. A case conference can be arranged to discuss a new hearing date and a timetable for all steps leading up to a mini-trial.
Issue #5: What is the amount of mitigation income to be offset against the plaintiff’s wrongful dismissal damages?
[53] There is no dispute that during the 22 month notice period, the plaintiff earned mitigation income of $52,977.33 USD. US Lamb is not advancing an argument that the plaintiff failed to discharge his duty to mitigate.
[54] However, the plaintiff is further seeking an order that he be permitted to use his “net mitigation income”, which is nil given his position that he incurred $71,079.44 USD in mitigation expenses to earn such gross income. This is primarily due to the plaintiff’s gross income being earned on a sales commission basis.
[55] The plaintiff filed some documents to support his claim of incurring $71,079.44 USD in mitigation expenses. Those documents relate to fees associated with his family’s move from California to Waterloo, Ontario, and consist of invoices and statements for real estate commission, closing fees and moving costs.
[56] In argument, US Lamb did not challenge these figures. However, with respect to his decision to move back to Waterloo, Ontario, the plaintiff gave evidence that he and his wife made that decision due to “the reality that they were getting older and their children had left the family home.” This led them to feel less attached to the idea of remaining in California. This decision was made in advance of the plaintiff’s securing his consulting position with Thomas Foods. As such, while I understand the plaintiff would likely have incurred relocation expenses in finding another job at some point, these particular expenses do not necessarily relate in total to the plaintiff’s new consulting position with Thomas Foods.
[57] I am exercising my discretion to award a net mitigation income claim to be offset against the reasonable notice I have already awarded. In my view, a fair and appropriate amount of mitigation income in the circumstances is $30,000.00 USD.
Costs
[58] The parties have already indicated that they are going to try and resolve Issue #4. If they are successful, they should try and resolve the issue of the costs of this motion and this action. If those efforts prove unsuccessful, they may exchange and file written costs submissions (totaling no more than 5 pages including a Costs Outline) pursuant to the following schedule:
(a) the plaintiff shall serve and file his costs submissions within 10 business days after the parties confirm with my assistant that they cannot resolve the costs of the motion and the action; and,
(b) US Lamb shall thereafter have an additional 10 business days from the receipt of the plaintiff’s costs submissions to deliver its responding costs submissions.
Diamond J. Released: September 21, 2018