Court File and Parties

COURT FILE NO.: 16-CV68900 DATE: 20190404 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

DONALD SCHULTZ Plaintiff – and – CANADA LANDS COMPANY CLC LIMITED and CANADA LANDS COMPANY LIMITED Defendants

Counsel: Walter T. Langley, Counsel for the Plaintiff Katherine M. Pollock and Sophie Arseneault, Counsel for the Defendants

HEARD: January 21-30, 2019

Reasons for Decision

JUSTICE J. PARFETT

[ 1 ] The Plaintiff brings a claim for wrongful dismissal, damages for breach of the common law duty of good faith and fair dealing, special damages, and punitive damages. Initially, the Plaintiff was also seeking aggravated damages, but that claim was dropped at the conclusion of their case and the amount claimed for punitive damages was increased.

Background

[ 2 ] The Plaintiff was the director of real estate in Ottawa for Canada Lands Company CLC (“CLC”). He was hired in July 2012 to work on a project known as Wateridge, developing the land that was previously CFB Rockcliffe. He was responsible for all real estate activities associated with the Wateridge project, including creating and implementing a public consultation process, drafting the project master plan, securing planning approvals, planning and directing land servicing, and preparing and implementing both marketing and disposition strategies.

[ 3 ] The Plaintiff began work following a hiatus in the project. Prior to the hiatus, several consultants had been hired on contract, and when work was restarted, they were asked to continue based on those previous contracts. CLC developed a timeline for the project. Originally, it was anticipated that the project would be ready to sell to developers by the end of March 2017. [1] However, another project was delayed and CLC needed to ensure there was a revenue stream in 2016 so the company moved the deadline for the sale of lots to developers to the end of March 2016. [2]

[ 4 ] The Plaintiff testified that he expressed concern to his immediate superior about the change in deadline, and noted that everything would have to fall into place exactly as planned in order to meet it. Ultimately, the deadline was met.

[ 5 ] In early 2015, CLC decided that several of the contracts on the Wateridge project were coming to an end or had been extended more than once necessitating a new procurement process. [3] Mr. Schultz was opposed to some of the consultants having to go through this process. [4] In his view, the tight timelines imposed by CLC meant it was better to continue to work with consultants who were familiar with the project rather than risk having to introduce new consultants with the consequent delays. [5] However, by March 2015, the decision to initiate the procurement process had been made. [6]

[ 6 ] The Ottawa CLC office was not a happy office due to differences in personality and work styles. In early January 2016, an employee requested the assistance of the Toronto office. Nicole Hunter, a human resources employee, was sent from Toronto to try and assist in working out the problems. During her visit, an employee advised Ms. Hunter that she had seen an email on Mr. Schultz’ desk that suggested that he had shared information with one of the proponents during the procurement process. [7]

[ 7 ] As a consequence of receiving that information, senior management at CLC asked Ernst & Young to conduct a forensic audit of the procurement processes conducted in Ottawa in 2015, with a specific focus on Mr. Schultz. Ernst & Young issued their report on March 29, 2016 (“EY report”), which identified several troubling emails sent by Mr. Schultz to proponents on the Wateridge project. [8] The emails suggested that, contrary to CLC policies and procedures, Mr. Schultz had been sending confidential information to certain proponents during the procurement process.

[ 8 ] On March 31, 2016 Mr. Schultz was terminated with cause. [9]

Issues

1. Did Mr. Schultz’ actions constitute misconduct;
2. Was dismissal with cause warranted; and
3. If not, what damages are appropriate in the circumstances?

Legal Principles

A. Just cause for dismissal

[ 9 ] The first issue to be decided is whether Mr. Schultz’ actions constitute misconduct thereby giving the Defendant just cause for dismissal. The applicable standard for such a determination was established by the Supreme Court of Canada in McKinley v. BC Tel. [10] In that case, the court stated the test is “whether the employee’s dishonesty gave rise to a breakdown in the employment relationship.” [11] That test incorporates two essential questions: first, whether the evidence has established the employee’s deceitful conduct on a balance of probabilities and second, whether the nature and degree of the dishonesty is such that dismissal was the appropriate response. [12]

[ 10 ] With respect to the second branch of the test, the court in McKinley indicated that the response to the misconduct must be proportional to the nature and seriousness of the misconduct. [13]

[ 11 ] In Dowling v. Ontario (Workplace Safety & Insurance Board), the Ontario Court of Appeal divided the second branch of the McKinley test into three steps: [14]

1. Determine the nature and extent of the misconduct;
2. Consider the surrounding circumstances; and
3. Decide whether dismissal was the proportional response to the misconduct.

[ 12 ] With respect to the second and third steps, the court noted, [15]

The second step, in my view, is intended to be a consideration of the employee within the employment relationship. Thus, the particular circumstances of both the employee and the employer must be considered. In relation to the employee, one would consider factors such as age, employment history, seniority, role and responsibilities. In relation to the employer, one would consider such things as the type of business or activity in which the employer is engaged, any relevant employer policies or practices, the employee’s position within the organisation, and the degree of trust reposed in the employee.

The third step is an assessment of whether the misconduct is reconcilable with sustaining the employment relationship. This requires a consideration of the proved dishonest acts, within the employment context, to determine whether the misconduct is sufficiently serious that it would give rise to a breakdown in the employment relationship.

[ 13 ] In recent jurisprudence, it has been held that cases relating to dishonesty and self-dealing are in a different category than cases involving breaches of policy. In Barton v. Rona Ontario Inc., this court noted that cases involving dishonesty and self-dealing “involve fundamental character flaws that may well cause an employer to lose trust and confidence in an employee.” [16] This same approach was used in Smith v. Diversity Technologies Corporation, where the court noted that, [17]

[W]here a breach of corporate policy forms part of the basis for dismissal, the rules must be well known to the employees, consistently enforced and the consequences proportionate to the implications of the breach.

B. Reasonable notice period

[ 14 ] If the court decides there was just cause for dismissal, the case ends there. However, if there was no just cause for dismissal, then the next step is to determine what would have been an appropriate notice period.

[ 15 ] The seminal case on reasonable notice remains Bardal v. Globe & Mail Ltd. [18] In that case, the court decided that “there can be no catalogue laid down as to what is reasonable notice in particular classes of cases.” [19] The court indicated that this determination should take into account the following four factors: the type of employment, the length of the employment, the age of the employee, and the availability of similar employment having regard to the experience, training and qualifications of the employee. [20] In Honda Canada Inc. v. Keays, the Supreme Court of Canada reiterated the position set out in Bardal and added that no one of the four factors should be given disproportionate weight. [21]

[ 16 ] Recently, in Paquette v. TeraGo Networks Inc., the trial judge stated, [22]

The approach to determining a reasonable notice period is flexible, and each case will turn on its own particular facts. The weight to be given to each factor will vary according to the circumstances of each case, and the judge in a wrongful dismissal case is required to exercise judgement in determining what factors are of particular importance. In determining the reasonable notice period, the court should not apply as a starting point any rule of thumb attributing so many weeks or months of service, because such an approach privileges length of service above all relevant factors in determining notice, and each case must be considered having regard to its particular facts. [Emphasis added.]

[ 17 ] Other cases have not chosen to follow the prohibition against using a “rule of thumb” approach as a starting point. Instead, the cases have adjusted the “standard” notice period taking into account all the relevant factors. [23]

C. Bonus

[ 18 ] It is common ground in the present case that if the court finds there was no just cause for dismissal, any damages should include the benefits and pension that would have been available during the notice period. However, the parties are not in agreement over what should occur with respect to the bonus that would have been payable had Mr. Schultz not been terminated during the 2015-16 fiscal period.

[ 19 ] The case law with respect to bonuses indicates that the starting point for determining whether a bonus should be payable as part of any damages award is whether the bonus was an integral part of the employee’s compensation package. [24] In making this determination, the court should take into consideration the following factors: [25]

1. Whether the bonus was received each year (albeit not necessarily in the same amount);
2. Whether the purpose of the bonus was to remain competitive with other employers;
3. Whether the bonuses were historically awarded, and the employer had never exercised its discretion against the employee; and
4. Whether the bonus constituted a significant component of the employee’s overall compensation.

[ 20 ] If the court decides that the bonus was an integral part of the employee’s compensation package, the next step is to determine whether there was something in the employment contract or bonus plan that would limit the employee’s entitlement to a bonus or whether the wording of the plan unambiguously altered or removed the employee’s right to a bonus. [26] As part of this analysis, the court may take into consideration whether any limitations or conditions were brought to the attention of the employee. [27]

D. Moral damages

[ 21 ] Employers have an obligation of good faith and fair dealing in the manner of dismissal. There is an expectation that in the course of dismissal, employers will be candid, reasonable, honest and forthright with their employees. Consequently, damages may be available if the employer engaged in conduct during dismissal that is unfair or is in bad faith.

[ 22 ] In Wallace v. United Grain Growers Ltd., the Supreme Court of Canada provided for an extended notice period as compensation for the psychological damage resulting from the manner of dismissal. [28] In Honda, the court revisited the issue of moral damages and held, [29]

To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between “true aggravated damages” resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. [Emphasis added.]

[ 23 ] As will be noted below, Mr. Schultz takes the position that an extended period of notice is still available in circumstances where the manner of dismissal is unfair or in bad faith.

E. Punitive damages

[ 24 ] Punitive damages are available in exceptional circumstances where the defendant’s behaviour was malicious, oppressive, or high-handed. The misconduct must offend the court’s sense of decency and must represent a marked departure from ordinary standards of decent behaviour. [30]

[ 25 ] In order to obtain an award of punitive damages, the plaintiff must demonstrate first that the defendant’s conduct is reprehensible and secondly that the damages are required to punish the defendant and meet the objectives of retribution, deterrence, and denunciation. [31]

Analysis

F. Just Cause for Dismissal

[ 26 ] It is common ground between the parties that the behaviour alleged by the Defendant gave rise to a breakdown in the employment relationship. Consequently, the focus of the analysis is on whether the nature and degree of the misconduct was such that dismissal was the appropriate response.

[ 27 ] Mr. Schultz’ actions relate to two specific requests for proposals (RFPs): one in relation to municipal planning and the other in relation to landscape design. The specific conduct complained of can be grouped into two categories: communications before the procurement process began and communications during the procurement process.

Communications before the procurement process began

[ 28 ] Mr. Schultz communicated with the incumbent consultants in respect of both the municipal planning contract and the landscape design contract to request their input on the scope of work. Specifically, he provided each of the incumbent contractors with a draft scope of work and asked for their input. [32]

[ 29 ] With respect to the municipal planning RFP, Mr. Schultz emailed two draft versions of the scope of work to the incumbent consultant MMM Meloshe. One was sent on March 31, and one on April 1, 2015. In the second email, Mr. Schultz states, [33]

In the meantime, and CONFIDENTIALLY, the attached MSWord document reflects the latest thinking on the RFP Scope of Work. You will see on the last page that I have inserted two requirements of the successful consultant.

[ 30 ] When the draft scope of work in relation to the landscape design work was forwarded to the incumbent contractor, JRS Inc. (“JRS”), Mr. Schultz stated, “Please, please, keep this confidential among the three of us and any associates you might want to advise us.” [34]

[ 31 ] CLC pointed to these comments regarding confidentiality as evidence that Mr. Schultz knew that what he was doing was wrong. Mr. Schultz did not agree that seeking the input of the incumbent contractor was a breach of CLC’s code of conduct. He stated that the references to confidentiality were in relation to the fact he did not want the scope of work to go out to other external parties. He denied that he did not want other people within CLC to know what he was doing and testified that one of his co-workers, Mr. Lachance, was aware of what he was doing.

[ 32 ] Mr. Schultz testified that the scope of work was the most important part of the RFP. He indicated that if not properly drafted, it was possible that the proposals received would not properly relate to the actual work required and ultimately result in time wasted. He also noted that the people who best knew what work needed to be done to complete the phase of the project in question were the people who were already doing the work. Finally, Mr. Schultz advised the court that it was not uncommon to seek the input of the incumbent contractor, regardless of whether it was expected that they would also submit a proposal.

[ 33 ] CLC conceded that Mr. Schultz did not send out the final version of the scope of work to either of the incumbents. On the other hand, there was some dispute over how many changes were made to the scope of work before each one was finalized. Mr. Schultz testified there were numerous iterations of each scope of work. Roger Martin, who was Mr. Schultz’ immediate superior, testified and suggested there were only minor changes made to each scope of work. As Mr. Schultz oversaw drafting the RFPs and Mr. Martin was only involved in the final part of the evaluation, I prefer Mr. Schultz’ evidence on this point.

[ 34 ] Mr. Martin stated that while it did happen occasionally that an incumbent might be asked to provide input on the scope of work for an RFP, they would not be sent a draft copy of the work. At most, there would be a conversation about the scope of work. According to Mr. Martin, the two RFPs in question were not sufficiently complex to require consultation with the incumbent contractors about the scope of work.

[ 35 ] Mr. Miguel Tremblay also testified about seeking input from an incumbent on the scope of work. He worked for FoTenn, one of the competitors of MMM Meloshe, and his company was outbid by MMM Meloshe on the municipal planning RFP. He noted that the scope of work was the most important part of the RFP. He stated that it was important to get that part of the RFP correct or the proposals would not accurately reflect the work that needed to be done. He stated that it was not unusual to provide input on the scope of work even where the incumbent was expected to be a proponent on the RFP. In addition, he testified there was no advantage to the incumbent contractor in receiving a draft copy of the scope of work. All that mattered was that all proponents received the same amount of time to respond to the final version of the scope of work.

[ 36 ] Based on the testimony of all three witnesses, it is apparent that requesting the input of an incumbent contractor when drafting the scope of work for an RFP was not a breach of confidentiality or inappropriate in the context of the procurement process. Mr. Martin’s concern was not that Mr. Schultz reached out to the incumbent contractors, but the fact he sent them a draft copy of the scope of work. Mr. Tremblay’s testimony on this point was important as he had no interest in the outcome. He testified that it was the norm in the industry to seek the input of incumbent contractors and there was no advantage to the incumbent in the RFP process. Consequently, I find that there was no misconduct on Mr. Schultz’ part.

Communications during the procurement process

[ 37 ] Mr. Schultz’ communications during the procurement process are a different matter. Mr. Schultz communicated with both MMM Meloshe and with JRS during the procurement process.

G. Municipal Planning RFP

[ 38 ] Mr. Schultz candidly admitted that he had favoured MMM Meloshe in the municipal planning RFP by providing them with information concerning the other proponents.

[ 39 ] There were three proposals received on the municipal planning RFP. MMM Meloshe’s proposal was the middle proposal in terms of price. The proposal with the highest price was ultimately disqualified. [35] Consequently, FoTenn’s proposal was only other proposal in the running for the contract and MMM Meloshe’s proposal was significantly more expensive. [36] Mr. Schultz and his evaluation team prepared a memo, which they submitted to Mr. Martin, recommending that MMM Meloshe receive the contract despite the higher price. [37] Mr. Martin responded by suggesting that the two proponents be interviewed prior to making a final decision. [38]

[ 40 ] Before it was decided that an interview would occur, Mr. Schultz sent an email to MMM Meloshe attaching the notes prepared by Mr. Lachance in relation to the two competing proposals. [39] Mr. Martin agreed on cross-examination that the information provided to MMM Meloshe about the disqualified proposal was harmless, but maintained that providing any such information was a breach of policy.

[ 41 ] As soon as it was decided that an interview would be held, Mr. Schultz sent an email to MMM Meloshe outlining the subjects to be discussed at the interview and attaching the draft memo sent to Mr. Martin. [40] Mr. Schultz testified that he telephoned Mr. Tremblay and advised him of the same information as that contained in the email to MMM Meloshe. Mr. Tremblay was unable to confirm that this phone call took place. However, he did not deny that such a phone call could have occurred. Both MMM Meloshe and FoTenn were also sent an email with some general information concerning the upcoming interviews. [41]

[ 42 ] The difference between the information provided to MMM Meloshe and FoTenn was that MMM Meloshe received the draft memo with the evaluation team’s recommendations and thinking with respect to each proposal. Most importantly, that memo contained the specific prices of each proposal. [42]

[ 43 ] Mr. Tremblay testified that while it was not unusual, and indeed helpful, to receive information in advance of an interview concerning the matters to be discussed, it was a breach of confidentiality to provide information concerning a competitor’s hourly rates. Furthermore, Mr. Tremblay stated that providing that information could be potentially damaging in the short term.

[ 44 ] Mr. Martin stated that any communication with a proponent during the procurement process was inappropriate and contrary to CLC’s policies. On the other hand, he also said it was appropriate to provide the proponents with a general indication of the issues to be addressed at an interview. [43] Indeed, Mr. Martin indicated in an email that he had asked Mr. Schultz to discuss specific items of concern with both MMM Meloshe and FoTenn. [44] However, Mr. Martin was unhappy with the detailed information provided to MMM Meloshe. Mr. Martin was unaware that FoTenn had been provided with the same detailed information by Mr. Schultz. He indicated that in his view, the issue was the fact that such detailed information had been provided, not the fact that by providing the same information to each proponent, Mr. Schultz had maintained a level playing field.

[ 45 ] Additionally, Mr. Martin indicated that MMM Meloshe should not have been provided with the draft recommendation memo. He noted that the memo contained confidential information of FoTenn and the other competitor, as well as with CLC’s budget for municipal planning. Mr. Schultz disputed Mr. Martin’s characterization of CLC’s budget information as confidential. He stated that MMM Meloshe knew that information well before the RFP was issued.

[ 46 ] As noted earlier, Mr. Schultz conceded that by providing information to MMM Meloshe, he had exhibited favouritism during the procurement process. He acknowledged that this behaviour was wrong and regretted his actions.

[ 47 ] The final issue with respect to this RFP is two social outings that Mr. Schultz went on with MMM Meloshe employees. During the procurement process, Mr. Schultz went to a soccer game and to a concert. Mr. Schultz testified that he did not see these outings as being any different than other social contact he had with contractors. Testimony from both Mr. Martin and Mr. Tremblay indicated that some social contact with clients was normal. However, Mr. Martin noted that social outings during the procurement process were different. I agree. Attending these social events could create a perception of bias or favouritism and they should have been avoided.

H. Landscape Design RFP

[ 48 ] Three proposals were received on this RFP. JRS’ proposal was the middle proposal in terms of price. The evaluation team agreed that if the prices were equivalent, then JRS’ proposal would be the preferred option. Mr. Schultz testified that when the issue of fees was discussed with Mr. Martin, he suggested that JRS should be contacted regarding their fees. [45] Mr. Martin did not recall asking the evaluation team to contact JRS regarding their fees. However, in my view, there is ample circumstantial evidence to support a finding that even if it was not his suggestion, he was aware of the evaluation team’s intention to speak with JRS about their fees and agreed with this approach. [46]

[ 49 ] Mr. Schultz provided JRS with information concerning the issue of fees. Specifically, he provided JRS with some excerpts from a competitor’s proposal and followed up with an email outlining where he believed JRS could cut costs and lower their fees. [47] Mr. Schultz stated that he also called JRS and advised them of their competitor’s fees.

[ 50 ] Mr. Martin testified that even if he was aware of the evaluation team’s intention to speak with JRS about their fees, that Mr. Schultz’ approach was contrary to policy. He stated that Mr. Schultz should never have provided excerpts from a competitor’s proposal and should never have told JRS what their competitor’s bid was. The excerpts of the competitor’s proposal do not contain any information of consequence. As Mr. Martin noted, it was the provision of the competitor’s fee proposal that was inappropriate.

[ 51 ] Taking into consideration all the facts with respect to Mr. Schultz’ behaviour during the procurement process, I find that some of Mr. Schultz’ actions are mitigated by the fact he ensured that both MMM Meloshe and FoTenn received the same information concerning the interviews. In so doing, he did maintain a level playing field and therefore, no unfairness occurred.

[ 52 ] However, providing MMM Meloshe with the draft recommendation memo was clearly wrong. That memo provided MMM Meloshe with confidential information belonging to other proponents that could not only have been damaging during that procurement process, but also with respect to future procurement processes.

[ 53 ] In addition, Mr. Schultz should not have attended any social events with MMM Meloshe during the procurement process.

[ 54 ] Finally, the contact with JRS during the procurement process was agreed to by Mr. Martin and it was specifically agreed that JRS would be approached about their fees. In the circumstances, I do not find there was any significant misconduct in providing JRS with the target they had to meet.

[ 55 ] The issue then becomes whether, in all the circumstances, termination with cause was appropriate.

[ 56 ] In my view, the significant factors to consider in relation to that issue are as follows:

• Despite the position taken by CLC at trial, getting input on the scope of work from an incumbent contractor was not uncommon. The Defendant takes issue in this case with the way it was done, but in circumstances, it cannot be regarded as misconduct;
• Mr. Schultz was working under tight timelines created by CLC and was concerned about potential delays if there were new contractors. His motivation was in the best interest of the company, even if he went about it the wrong way;
• Mr. Schultz made derogatory comments about CLC’s bureaucracy. For instance, he described the RFP process as “nonsense”. [48] These comments were not appropriate. However, by themselves, such comments would not justify termination with cause.
• During both RFPs, Mr. Martin asked the evaluation teams to address certain specific issues with the proponents. In his testimony, he took exception with how his instructions were carried out. While there is no question that Mr. Schultz went too far at times, as noted above, the fact CLC sought contact with the proponents during the procurement process is a significant mitigating factor;
• CLC argued they were scrupulous in ensuring that their procurement processes were above reproach. However, there were several instances of their policies being unevenly applied;
• Specifically, CLC took the position that avoiding conflict of interest or the perception of conflict of interest was paramount in the procurement process. Consequently, they required that declarations be signed by each member of the evaluation team on any RFP indicating they had no conflict of interest. [49] However, CLC was quite lax in how these declarations were dealt with. Sometimes the declarations were signed late or not signed at all. Most notably, with one exception, Mr. Martin’s declarations are all missing;
• Ernst & Young’s procurement process audit turned up an instance where a contract was awarded prior to a recommendation memo being drafted or reviewed. [50] It was conceded by CLC that this was a breach of their policies. However, in that instance there were no consequences to the employee who committed that breach;
• There was a previous incident involving Mr. Schultz in which he had advised a contractor that they were likely to receive the contract before a formal decision had been made. [51] This matter was brought to Mr. Schultz’ attention by Mr. Martin. However, there were no disciplinary consequences and no warning to Mr. Schultz that a similar incident in future would be cause for termination. The only consequence was a notation in Mr. Schultz’ performance review that accountability was an area he needed to improve; [52]
• Finally, management did not address the limitations Ernst & Young noted in their report and did not do any follow up investigation. [53] While the employer is not obliged to conduct a particular type of investigation before making its decision, there is nonetheless an onus on the employer to have all the facts necessary to have a full understanding of the events in question. [54] In the present case, the failure of the Defendant to address the limitations noted in the EY report meant they were unaware of many of the circumstances that the court became aware of and that mitigated much of what was seen by management as misconduct.

[ 57 ] In all the circumstances, the misconduct does not rise to a level requiring termination with cause. Either discipline or termination without cause would have been a proportional response to the actual nature and seriousness of the misconduct.

I. Reasonable notice period

[ 58 ] Given the finding that termination with cause was not warranted in this case, the issue of reasonable notice must be addressed.

[ 59 ] If a “rule of thumb” is applied in this case, reasonable notice would be four months (one month for each year). However, it would be inappropriate to simply apply a formula without taking into consideration all the circumstances. In the present case, Mr. Shultz was 58 years old at the time of his dismissal. Mr. Schultz’ position in CLC was one level below senior management. He oversaw a major, multi-million-dollar project. Mr. Schultz’ performance reviews up to 2015 indicated he was a very capable employee with an almost unblemished record. Even the 2015 performance review indicated that Mr. Schultz was an excellent employee apart from the area of accountability where it was noted that he needed improvement. Mr. Schultz was unemployed for 15 months and has not been able to get a job that either pays as well or has the benefits he had at CLC.

[ 60 ] As a result, a notice period of more than four months is required in this case. In my view, reasonable notice in this case is 12 months.

J. Bonus

[ 61 ] The next issue to deal with is what, if any, portion of the bonus should be paid? It is to be noted that the fiscal year end was March 31. According to the bonus program documentation “employees whose employment is terminated, either voluntarily or involuntarily, are not entitled to a pro-rated bonus payment for the fiscal year of termination.” [55] As a result, if Mr. Schultz had been terminated one day later, it is possible that some portion of the bonus would have been payable.

[ 62 ] CLC argued that even if Mr. Schultz’ termination had been delayed until the new fiscal year, Mr. Schultz would not have been eligible for a bonus. CLC pointed to the bonus program documentation, which indicated that employees who receive “partially meets expectation” (or worse) as a performance review rating are not eligible to receive a bonus. They argue that Mr. Schultz would necessarily have received a poor review rating and therefore would not have been eligible for a bonus. There are several problems with this argument. First, Mr. Schultz was never advised of these limiting criteria. His offer letter indicated only that he would be eligible for a bonus of up to 25% of his salary. No limiting criteria were mentioned. [56] Secondly, Mr. Shultz never received a “partially meets expectations” rating. [57] In his last performance review, Mr. Shultz received an overall rating of “successful”. Clearly, if Mr. Schultz had undergone another performance review relating to the 2016 year, he would have received a different rating than he had previously. However, it is speculative to suggest that he would necessarily have received a rating that would have prevented him from receiving any portion of the bonus.

[ 63 ] In the present case, the evidence indicated that Mr. Schultz received a bonus each year. [58] Furthermore, CLC had never exercised its discretion against Mr. Schultz. Finally, the bonus constituted a significant component of Mr. Schultz’ overall compensation.

[ 64 ] In all the circumstances, Mr. Schultz should have received a portion of the bonus for the 2016 fiscal year. In my view, an appropriate amount is $33,381.38. This amount reflects no individual bonus but provides the corporate portion of the bonus for that year. [59]

K. Moral Damages

[ 65 ] Counsel differed in their view of whether moral damages were available in the present case. The Defendant’s counsel argued that Wallace had been overturned by the Honda decision and, consequently, an extended period of notice was no longer available. Instead, a plaintiff had to show that he suffered mental distress greater than the normal distress and hurt feelings that would result from dismissal. In that case, damages could be awarded.

[ 66 ] Counsel for the Plaintiff argued that an extended notice period was still available after the Honda case in situations where the plaintiff could not prove any psychological damage, but the manner of dismissal was unfair or conducted in bad faith. However, he could not provide any cases that supported his position. As a result, I find that the analysis in Honda is a complete answer to the question of moral damages. Given Mr. Schultz candidly acknowledged that he did not suffer any psychological distress over and above that which would ordinarily result from dismissal, I find that moral damages have not been proven.

L. Punitive Damages

[ 67 ] The Plaintiff argues that punitive damages are appropriate in the present case given the manner of his dismissal. Specifically, the Plaintiff contends that the following facts meet the test for punitive damages:

• The Defendant lied to Mr. Schultz about the purpose of the audit. Mr. Schultz was told the audit was a routine audit of the procurement process. In fact, the audit was a forensic audit focussed on his behaviour;
• The Defendant was contemplating termination from the outset of the audit process and never gave any serious consideration to other options;
• The Defendant specifically told the Ernst & Young auditors not to re-interview Mr. Schultz. The Defendant took this position despite the EY report’s specific limitation that “we have not yet conducted follow up discussions with CLC Ottawa employees in order to verify our understanding and interpretation of emails or the information provided during our initial discussions with them.”; [60]
• The Defendant did not conduct any follow up investigation of its own to ensure that its interpretation of the emails was accurate;
• The meeting held between Mr. Schultz, Ms. Law, and Mr. Martin was, in theory, to determine if Mr. Schultz had any legitimate explanation for the emails. In fact, Mr. Martin’s evidence was that it did not matter what answers Mr. Schultz gave to the questions he was asked. He was going to be terminated absent something extraordinary. This evidence was confirmed by Mr. Barker who stated that the possibility that Mr. Schultz would not be terminated was remote; and
• During this meeting, Mr. Schultz was not provided with the emails in question; therefore, was not able to respond in any realistic manner to the accusations of wrongdoing.

[ 68 ] While I agree with the Plaintiff that this behaviour is troubling and could be described as dishonest and unfair, in my view, it is not conduct that could be described as malicious, oppressive, or high-handed. The Defendant’s conduct does not represent a marked departure from ordinary standards of decent behaviour. Consequently, I find that punitive damages are not appropriate in this case.

Conclusion

[ 69 ] Accordingly, I find that Mr. Schultz has demonstrated that he should not have been dismissed with cause and consequently damages are payable by the Defendant. As noted above, a reasonable notice period in this case is 12 months, with the benefits that would have been available had Mr. Schultz remained employed. In addition, Mr. Schultz should have received a portion of the bonus for which he was eligible, specifically, $33,381.38. No other damages are payable.

Costs

[ 70 ] The parties should attempt to resolve the issue of costs themselves. However, if the parties cannot resolve the issue of costs, they can either make written submissions or arrange a date and time convenient to all parties for oral argument. If written submissions are to be provided, the submissions should be no more than three pages in length, with attachments including Offers to Settle and a detailed Bill of Costs and should be provided within 30 days, with a right of reply within a further ten days.

Madam Justice J.A. Parfett Released: April 04, 2019

[1] Exhibit Book #1, vol. 3, at tab 18. [Exhibit Book #1] [2] Ibid, vol. 3, at tab 18. [3] Ibid, vol. 3, at tab 19. [4] Ibid, vol. 3, at tab 22. [5] Ibid, vol. 3, at tab 21. [6] Ibid, vol. 3, at tab 23. [7] Ibid, vol. 1, at tab 12. [8] Ibid, vol. 2, at tab 12A. [9] Ibid, vol. 4, at tab 46. [10] McKinley v. BC Tel, 2001 SCC 38, [2001] 2 S.C.R. 161. [11] Ibid, at para. 48. [12] Ibid, at para. 49. [13] Ibid, at para. 53. [14] Dowling v. Ontario (Workplace Safety & Insurance Board) (2004), 246 D.L.R. (4th) 65 (Ont. C.A.), at para. 50, leave to appeal to the S.C.C. refused, [2005] S.C.C.A. No. 25. [15] Ibid, at paras. 52, 53. [16] Barton v. Rona Ontario Inc., 2012 ONSC 3809, 1 C.C.E.L. (4th) 32, at para. 50. [17] Smith v. Diversity Technologies Corp., 2014 ONSC, 2460, 2014 C.L.L.C. 210-033, at para. 28. [18] Bardal v. Globe and Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J.), at p. 145. [19] Ibid, at para 21. p. 145. [20] Ibid, at para. 21. [21] Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, at para. 32. [22] Paquette v. TeraGo Networks Inc., 2015 ONSC 4189, 2015 C.L.L.C. 2010-056, at para. 28, decision varied on other issues by Ont. C.A., 2016 ONCA 618. [23] See for example: Fernandes v. Peel Educational & Tutorial Services Ltd., 2016 ONCA 468., 34 C.C.E.L. (4th) 42, leave to appeal to S.C.C. refused, [2016] S.C.C.A. No. 376; Fernandes v. Goveas, 2016 ONSC 1992, 20 C.C.E.L. (4th) 317. [24] Paquette, supra note 27, at para. 17. [25] Bain v. UBS Securities Canada Inc., 2016 ONSC 5362, 2017 C.L.L.C. 210-015, at para. 83., affirmed by Ont. C.A., 2018 ONCA 190. [26] Taggart v. Canada Life Assurance Co. (2006), 50 C.C.P.B. 163 (Ont. C.A.), at para. 20. [27] Paquette, supra note 27, at para. 18. [28] Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, at p. 705. [29] Honda, supra note 25, at para 59. [30] Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 36. [31] Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, at paras. 82-88. [32] Exhibit Book #1, vol. 3, at tab 31; Exhibit Book #1, vol. 2, at tab 12A (sub-tabs 12, 13). [33] Exhibit Book # 1, supra note 1, vol. 2, at tab 12A (sub-tab 25). [34] Ibid, vol. 2, at tab 12A (sub-tab 13). [35] Ibid, vol. 2, at tab 13 (sub-tab 2.14). [36] Ibid, vol. 3, at tab 33. [37] Ibid, vol. 2, at tab 13 (sub-tab 2.14). [38] Ibid, vol. 3, at tab 35. [39] Ibid, vol. 2, at tab 12A (sub-tabs 16, 17). [40] Ibid, vol. 2, at tab 12A (sub-tab 14). [41] Ibid, vol. 3, at tab 35A. [42] Ibid, vol. 2, at tab 13 (sub-tab 2.14). [43] Ibid, vol. 3, at tab 35A. [44] Ibid, vol. 3, at tab 35. [45] Ibid, vol. 4, at tab 38. [46] Ibid, vol. 4, at tabs 38, 39, 40, 42. [47] Ibid, vol. 2, at tab 12A (sub-tab 15), tab 13 (sub-tab 2.18); Ibid, vol. 4, at tab 41. [48] Ibid, vol. 2, at tab 12A (sub-tab 8). [49] Ibid, vol. 1, at tabs 9, 10, 11. [50] Ibid, vol. 3, at tab 16. [51] Ibid, vol. 4, at tab 49. [52] Ibid, vol. 4, at tab 48. [53] Ibid, vol. 2, at tab 12A. [54] Dziecielski v. Lighting Dimensions Inc., 2012 ONSC 1877, 99 C.C.E.L. (3d) 267, at para. 35, affirmed by Ont. C.A., 2013 ONCA 565. [55] Exhibit Book #1, supra note 1, vol. 4, at tab 51. [56] Ibid, vol. 1, at tab 4. [57] The terminology for performance reviews changed during Mr. Schultz’ time with CLC. The rating “partially meets expectations” was the equivalent of “needs improvement”, which in turn was the equivalent of “developmental”. The rating “meets expectations” was the equivalent of “successful”. [58] Exhibit Book #1, supra note 1, vol. 4, at tab 52. [59] Ibid, at tab 52. [60] Ibid, vol. 2, at tab 12A (p. 2).