DATE: 20060106
DOCKET: C42746
COURT OF APPEAL FOR ONTARIO
McMURTRY C.J.O., SHARPE and CRONK JJ.A.
B E T W E E N :
GRANT HENRY LOWNDES
Charles M. Loopstra Q.C. and Sean C. Doyle for the appellants
Plaintiff (Respondent)
- and -
SUMMIT FORD SALES LIMITED, SUMMIT FORD SALES (1982) LIMITED, LESLIE VICKERS, MARJORIE VICKERS, SCOTT VICKERS and BRIAN VICKERS
Anthony M. Speciale for the respondent
Defendants (Appellants)
Heard: December 12, 2005
On appeal from the judgment of Justice Nancy M. Mossip of the Superior Court of Justice dated November 12, 2004.
CRONK J.A.:
I. Overview
[1] This is an appeal from the judgment of Mossip J. of the Superior Court of Justice dated November 12, 2004 in a wrongful dismissal action.
[2] The trial judge held that the respondent was entitled to 30 months notice of termination of employment, plus an additional four months notice based on the principles set out in Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701. She awarded the respondent damages in the sum of $319,922.32, inclusive of bonus compensation, less the amount of $120,723.33 on account of severance payments received by the respondent from the corporate appellants. She also awarded the respondent prejudgment interest on the damages awarded, net of severance payments received, at the statutory rate of 7.6% per annum from the date of the termination of the respondent’s employment to the date of judgment.
[3] The appellants challenge the appropriateness of the base notice period set by the trial judge, the award of “Wallace” damages, the trial judge’s approach to the award of prejudgment interest, and the trial judge’s assessment of the respondent’s entitlement to bonus compensation following dismissal. For the reasons that follow, I would allow the appeal in part.
II. Background Facts
[4] The respondent was a long-term employee of the corporate appellants. He began to work at the appellants’ car dealership in the late 1960s, having been recruited from his former place of employment by the appellant Leslie Vickers, with whom he had previously worked. The respondent’s employment was terminated in July 1995 by the appellant Scott Vickers, Leslie Vicker’s son, who was then president of the corporate appellants. When he was fired, the respondent was 59 years of age and had worked for the Vickers family at the dealership for approximately 28 years.
[5] During the course of his employment, the respondent was promoted several times. Ultimately, he became the general manager of the car dealership and a director of at least one of the corporate appellants. He held these positions at the time of his dismissal. The respondent was also a registered shareholder of one or both of the corporate appellants for several years. It appears that he ceased being a shareholder in the early 1980s.
[6] The trial judge found that between 1968 and approximately 1990, the respondent “did everything necessary in the dealership”. His responsibilities were extensive during this period. However, in 1990, after Scott Vickers became president, the respondent’s duties at the dealership were significantly reduced. He appears to have acquiesced in this diminution of his job function and did not commence constructive dismissal proceedings. Nonetheless, he retained his directorships and the title of general manager, and his remuneration remained the same.
[7] The appellants did not purport to fire the respondent for cause. Instead, they offered the respondent two different and alternative severance packages. No formal severance agreement was executed by the parties. Eventually, the appellants determined to pay the respondent salary continuance payments that amounted to about 8.5 months notice of termination, payable over 24 months. The respondent received these payments for 21 months, including after the commencement of this litigation, until a dispute arose regarding the repayment of life insurance premiums paid by the corporate appellants for the benefit of the respondent. Payment of the last three months of salary continuance was withheld by the appellants because of this dispute.
[8] In the result, the respondent received severance payments in the total amount of $120,723.33. These included amounts for vacation pay and bonus, as calculated by the appellants. In addition, various benefits for the respondent were paid. For at least 24 months, he also enjoyed the use of two vehicles owned by the dealership.
III. Analysis
(1) Base Notice Period
[9] The trial judge concluded that the respondent was entitled to 30 months notice of termination of employment. In reaching this conclusion, she correctly identified the legal principles applicable to the determination of a reasonable base notice period. She also properly emphasized the holdings of this court in Minott v. O’Shanter Development Co. (1999), 1999 3686 (ON CA), 42 O.R. (3d) 321 at 343-44 that most wrongful dismissal cases yield a “range of reasonableness”; that “determining the period of reasonable notice is an art not a science”; that, in each case, trial judges must “weigh and balance a catalogue of relevant factors”; and that “there is no one ‘right’ figure for reasonable notice”.
[10] In my view, however, the trial judge erred in her application of the governing legal principles to the facts of this case.
[11] Although it is true that reasonable notice of employment termination must be determined on a case-specific basis and there is no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months: see Baranowski v. Binks Manufacturing Co., [2000] O.J. No. 49 (S.C.J.) at para. 277 and Rienzo v. Washington Mills Electro Minerals Corp., [2005] O.J. No. 5126 (C.A.).
[12] In this case, the trial judge failed to consider whether the respondent had demonstrated exceptional circumstances warranting a base notice period in excess of 24 months. This is reversible error.
[13] In my opinion, this record does not support a base notice period in excess of 24 months.
[14] The trial judge concluded that the respondent’s position with the corporate appellants was that of an executive, thereby attracting a generous notice period. However, the evidence at trial established that the respondent was not a senior executive at any time in the sense recognized in the developed jurisprudence. In addition, as candidly acknowledged by the respondent, his day-to-day responsibilities with the dealership were radically altered in 1990 after Scott Vickers and his cousin, the appellant Brian Vickers, had assumed senior management roles and responsibilities with the appellant corporations. Moreover, the trial judge expressly held that, unlike the facts in Baranowski, the respondent received no assurance of secure employment until age 65, the time of retirement. Simply stated, this case does not come within the category of cases in which exceptional circumstances have been held to justify notice of termination in excess of 24 months.
[15] By these comments, I do not wish to be understood as denigrating the value of the respondent’s important contributions to the appellants’ car dealership business over most of his working career. I also recognize that the evidence indicates that the respondent’s job performance was characterized by exemplary loyalty and dedication to the Vickers family and their business venture, for decades. For this, the respondent is to be commended. However, a base notice period of 24 months, the high end of the appropriate range of reasonable notice for long-term employees in the respondent’s position, recognizes these factors and rewards them accordingly.
[16] In the result, therefore, I would reduce the base notice period to which the respondent is entitled from 30 to 24 months.
(2) Award of Wallace Damages
[17] The trial judge concluded that the manner of the respondent’s dismissal warranted a four month increase in the notice period to which he was entitled, in accordance with Wallace. The appellants challenge this holding, on several grounds.
[18] This was not a strong case for Wallace damages. However, I am not persuaded that there are grounds for appellate intervention. The trial judge made the following key factual findings:
(i) Scott Vickers embarked on a lengthy campaign to provoke the voluntary resignation of the respondent;
(ii) Scott Vickers’ behaviour and treatment of the respondent over five years “verged on being cruel”;
(iii) at the time of his dismissal and to the know-ledge of the appellants, the respondent had been diagnosed with prostate cancer and was await-ing treatment;
(iv) the behaviour of Scott Vickers in carrying out the termination of the respondent’s employment was insensitive and indifferent to the respon-dent;
(v) after presenting the respondent with two different severance options, Scott Vickers essentially declined to discuss these options with the respondent; and
(vi) the written version of the severance options presented to the respondent could be construed as suggesting an offer based on 24 months notice when, in fact, the options contemplated, at most, the monetized value of 8.5 months notice, payable over 24 months.
[19] I appreciate that some of these factors predate the actual dismissal of the respondent. Nonetheless, they form part of the context that fuelled and eventually surrounded the dismissal itself. In combination, they provide a basis for the trial judge’s finding that the corporate appellants, through the actions of Scott Vickers, demonstrated bad faith in the manner of the termination of the respondent’s employment. This is sufficient to ground the award of Wallace damages.
[20] Accordingly, I would not interfere with the trial judge’s augmentation of the applicable notice period by four months. As I have concluded that the appropriate base notice period is 24 months, this results in a total notice period of 28 months.
(3) Prejudgment Interest Award
[21] The appellants submit that the trial judge erred in her approach to prejudgment interest by awarding interest on a net ‘lump sum’, rather than on an ‘installment’, basis. Under the latter approach in a wrongful dismissal case, prejudgment interest accrues on salary continuance payments as they would have been paid had employment continued during the notice period. In contrast, under the ‘lump sum’ approach in a similar case, pre-judgment interest is assessed on the full value of the awarded damages from the date of dismissal.
[22] The trial judge employed the ‘lump sum’ methodology, net of the total severance payments received by the respondent. The question of the proper manner of the calculation of prejudgment interest in this case is important because the ‘lump sum’ approach, as adopted by the trial judge, resulted in a prejudgment interest award approximately $50,000 higher than would have resulted under the application of the ‘installment’ approach.
[23] In my view, it is unnecessary for the disposition of this appeal to determine whether an award of prejudgment interest on a ‘lump sum’ basis is generally appropriate in a wrongful dismissal case. I agree with the appellants’ submission that the method-ology adopted by the trial judge was inappropriate in the circumstances of this case.
[24] In this case, the respondent received periodic severance payments in the amount of $5,748.73 per month for 21 months following the date of termination of his employment. During this 21-month period, therefore, he enjoyed the use of part of the damages to which he was entitled. Accordingly, his entitlement to prejudgment interest concerned only the ‘shortfall’ in the payments made during the period of salary continuance, that is, those additional payments that the appellants ought to have made to the respondent during that period, plus the damages payable by the appellants for the balance of the applicable notice period during which no severance payments were made.
[25] Put another way, the appellants made severance payments to the respondent over 21 months, for a period that amounted to approximately 8.5 months notice. I have already concluded that the respondent was entitled to an aggregate notice period of 28 months. Accordingly, his monthly severance payments should have been calculated on the basis of a 28 month notice period and paid accordingly. To the extent of the shortfall between the payments owed and the payments made, the respondent is entitled to prejudgment interest. This recognizes that the respondent’s prejudgment interest entitlement concerns only the loss of interest on the moneys that would have been payable to him from time to time had his severance payments been calculated in accordance with the quantum of monthly payments held by the trial judge to be owing and paid during the full notice period.
[26] The respondent’s actual loss during the salary continuance period was limited to $3,660.75 per month, that is, the difference on a monthly basis between the payments to which the respondent was found by the trial judge to be entitled ($9,409.48 per month) and the amount paid to the respondent each month ($5,748.73). This was the shortfall between the payments owed and the payments made during the period of salary continuance. Prejudgment interest was payable only on this shortfall during this period, on a month-to-month basis as the payments became due.
[27] In this case, the effect of the trial judge’s award of prejudgment interest from the date of the respondent’s dismissal on the amount of damages payable to the respondent was to award interest on payments before they were due. In effect, the award provided for a ‘prepayment’ of interest on salary continuance payments before they were earned. To this extent, the award conferred on impermissible windfall on the respondent: see Celanese Canada Inc. v. Canadian National Railway Co., 2005 8663 (ON CA), [2005] O.J. No. 1122 (C.A.).
[28] I agree with the appellants’ submission that the respondent’s entitlement to prejudgment interest should be calculated at the rate of 7.6% per annum on the difference between the monies that were paid to him following his dismissal and the monies that ought to have been paid to him, on a month-to-month basis as they became due and, thereafter, on a lump sum basis on the net outstanding damages owed to the respondent from May 1, 1997 to the date of the trial judgment, at the same rate of 7.6% per annum.
(4) Other Issues
[29] The appellants also challenge the trial judge’s assessment of the respondent’s entitlement to bonus compensation, which was based on the respondent’s historical earnings prior to his dismissal.
[30] I would not interfere with this aspect of the trial judge’s decision. The approach used by the trial judge to calculate the respondent’s bonus is unobjectionable. Moreover, and tellingly, it accords with the approach utilized by the appellants themselves in their own calculation of the respondent’s bonus for the purpose of formulating the severance options ultimately presented to the respondent.
IV. Disposition
[31] Accordingly, for the reasons given, I would allow the appeal in part and vary the trial judgment to reduce the total period of reasonable notice of termination of employment from 34 to 28 months and to adjust the award of prejudgment interest in accordance with these reasons. The appellants shall deliver their brief written submissions concerning the costs of the appeal and, if so advised, the costs of the trial, to the Registrar of this court within 30 days from the date of this judgment. The respondent shall deliver his brief written responding submissions to the Registrar within 30 days thereafter.
RELEASED: January 6, 2006
“Signed E.A. Cronk J.A.”
“I agree R. R. McMurtry C.J.O.”
“I agree R.J. Sharpe J.A.”