COURT OF APPEAL FOR ONTARIO

CITATION: Humphrey v. Mene Inc., 2022 ONCA 531

DATE: 20220715

DOCKET: C69525

van Rensburg, Nordheimer and Harvison Young JJ.A.

BETWEEN

Jacquelyn Humphrey

Plaintiff (Respondent/

Appellant by way of cross-appeal)

and

Mene Inc.

Defendant (Appellant/

Respondent by way of cross-appeal)

Jennifer Mathers McHenry, Khrystina McMillan and Jessica Donen, for the appellant/respondent by way of cross-appeal

Jordan Goldblatt and Jocelyn Howell, for the respondent/appellant by way of cross-appeal

Heard: March 10, 2022 by video conference

On appeal from the order of Justice Eugenia Papageorgiou of the Superior Court of Justice, dated May 4, 2021, with reasons reported at 2021 ONSC 2539.

van Rensburg J.A.:

A. OVERVIEW

[1] This is an appeal and a cross-appeal of a summary judgment in a wrongful dismissal action. The respondent, Jacquelyn Humphrey, was employed by the appellant, Mene Inc. (“Mene”), and its parent company, for approximately three years. At the time of her dismissal, she was 32 years old and was Mene’s Chief Operating Officer (“COO”), earning an annual salary of $90,000, with participation in Mene’s bonus/stock option plan. Ms. Humphrey was terminated, allegedly for cause, shortly after she asked for a raise. She remained unemployed at the date of the motion for summary judgment.

[2] Although Mene asserted in its defence that it terminated Ms. Humphrey’s employment for cause, it withdrew the allegation of cause in the course of the litigation, and instead relied on a contractual provision limiting Ms. Humphrey’s compensation to the minimum provided under the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). Ms. Humphrey alleged bad faith in the manner of her termination, and other misconduct by Mene during her employment and the litigation. The motion judge awarded Ms. Humphrey damages of $81,275.45 (in lieu of 12 months’ notice less one month’s compensation for unreasonable mitigation and the ESA amount she had already received), as well as aggravated damages of $50,000 and punitive damages of $25,000.

[3] There were several issues before the motion judge. In this appeal, Mene does not challenge the motion judge’s finding that the contractual limitation was inapplicable for want of consideration, and accepts that the common law governs Ms. Humphrey’s entitlement on termination. Nor does Mene challenge the finding that Ms. Humphrey was constructively dismissed when she was removed from her position as COO and suspended two weeks before her formal termination. Mene asserts that the motion judge erred (1) in determining the period of reasonable notice; (2) in her approach to and conclusions about mitigation; and (3) in concluding that Ms. Humphrey was entitled to aggravated and punitive damages, as well as in her assessment of the quantum of such damages.

[4] In her cross-appeal, Ms. Humphrey asserts that the motion judge erred in her approach to punitive damages, and she seeks an increased amount.

[5] For the reasons that follow, I would allow the appeal only on the mitigation issue. In my view, the motion judge erred in principle when she concluded that Mene had failed to establish that a position Ms. Humphrey was offered seven months after her termination was “comparable” for the purpose of mitigation. As I will explain, I would limit Ms. Humphrey’s damages in lieu of notice to six months’ compensation.

[6] However, I would dismiss the balance of the appeal and the cross-appeal. In determining the reasonable notice period, the motion judge properly considered and applied the Bardal factors (Bardal v. The Globe & Mail Ltd. (1960), 1960 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.)), and her conclusions respecting the character of Ms. Humphrey’s work at Mene and her anticipated difficulty in finding comparable employment are devoid of any palpable and overriding error. Nor would I interfere with the motion judge’s determination that Ms. Humphrey was entitled to both aggravated and punitive damages and the amounts awarded. Her analysis of each head of damages reveals no error in principle or law, and the awards of such damages are based on solid findings of fact respecting particularly egregious conduct.

B. RELEVANT FACTS

[7] Ms. Humphrey worked for Mene, an online jewellery retailer, and its parent company, Goldmoney Inc. (“Goldmoney”), for almost three years. She came to know Roy Sebag, Goldmoney’s co‑founder and CEO, through her previous employment as a senior account executive at a global communications firm. In July 2016, Ms. Humphrey was hired at Goldmoney as its Director of Global Communications, earning an annual salary of $72,000. Her role soon expanded to include responsibility for investor relations and marketing. From December 2016 and throughout 2017, Ms. Humphrey assisted Mr. Sebag in creating a new subsidiary, Mene, which went public in 2017.

[8] Ms. Humphrey took on the role of Vice President Operations of Mene in September 2017, initially pursuant to a Consulting Services Agreement dated September 26, 2017, which provided that her services were shared between Mene and Goldmoney. She was to be paid $6,250 per month, which would increase to between $7,000 and $7,500 per month when Mene secured additional financing. She also received 300,000 shares in Mene, half of which vested immediately, with the balance to vest quarterly over the next two years.

[9] In May 2018, Mene’s board of directors (the “Board”) advised Ms. Humphrey that she would be promoted to the position of COO of Mene. This was formalized in an Amended Consulting Services Agreement dated July 30, 2018. Ms. Humphrey received a base salary increase to $7,500 per month ($90,000 per year), retroactive to December 2017, and 150,000 stock options valued at $0.45/share that would vest annually over three years. (There is no issue in the litigation concerning Ms. Humphrey’s shares and stock options.) On December 13, 2018, Ms. Humphrey signed an employment agreement with Mene, with no change to her compensation.

[10] On January 22, 2019, Ms. Humphrey sent an email to Mr. Sebag, requesting a salary review. She proposed that her salary be increased to $165,000 annually with $15,000 in the form of additional Mene shares. Mr. Sebag sent a short response, questioning Ms. Humphrey’s dedication to the business, and stating:

I am surprised because I thought you felt passionate about this business and were looking to build it, recognizing the opportunity which was provided to you by the Board of Directors and myself. Being overly focused on your own personal compensation at this juncture is in my view premature and confabulates your incentives with where we are in the long journey of building this business into a viable enterprise.

At the salary level you indicate below, Mene Inc., and its Board of Directors in its Compensation Committee would be required to stress test for comparable hires in that bracket and breadth of interdisciplinary experience they bring. That is to say beyond a communications background. This would be before any subsequent testing for quarterly and annual performance which I assure you would be nothing like what is presently being carried out.

Have you lost your passion for the business? Do you feel you are working too hard? I need to know if that’s the case.

If you want me to proceed with a discussion on this matter with the Comp Committee, I will at the next board meeting. I just feel it will bring up a lot more negatives than positives for your role.

[11] Ms. Humphrey responded to Mr. Sebag on January 27, 2019, saying that she remained “100% committed” to Mene and asking him to take her request for a salary increase to the compensation committee. On February 16, after not hearing from Mr. Sebag for three weeks, Ms. Humphrey sent Mr. Sebag a follow-up email, asking for a firm timeline regarding his discussion with the Board.

[12] On February 18, Ms. Humphrey was contacted by one of Mene’s vendors, who told her that she had received an email from Mene saying that Ms. Humphrey no longer worked there. Ms. Humphrey tried to access her business-related accounts online, but was unable to do so. She sent a message to Mr. Sebag, who responded that she would be receiving a letter from the Board shortly. Mr. Sebag had also sent a message to all Mene employees other than Ms. Humphrey at 4:23 that morning, advising that Ms. Humphrey had been suspended “pending investigation into a few matters”, and that “the board has weighed a few recent events and decided she is not the right person to serve as COO”.

[13] The evening of February 18, Ms. Humphrey received by email a memo dated February 16 (the “Suspension Letter”). The Suspension Letter was signed by the chairman of Mene’s Audit Committee, and advised that after “conversations with senior management and an investigation of recent performance”, Mene had decided to remove her as COO effective immediately and to suspend her from work with pay for two weeks, pending an investigation and final decision whether to terminate her employment or to demote her to a non-executive level position. The Suspension Letter referred to six performance issues, including what were referred to in this litigation as the “Insurance Issue” and the “Working Capital Issue”.

[14] Ms. Humphrey retained counsel. On February 21, her lawyer sent a letter to Mene disputing the allegations in the Suspension Letter, and objecting to Mene undertaking any investigation without seeking Ms. Humphrey’s version of events. The letter also requested that Mene “protect and preserve all documents associated with the [Suspension Letter] should litigation subsequently ensue”.

[15] On February 26, Mene sent Ms. Humphrey a notice of termination by email, attaching a memo, also authored by the chairman of the Audit Committee, and addressed to Mene’s Board (the “Board Memo”). The Board Memo set out a number of alleged performance issues, including, but not limited to, the Insurance Issue and the Working Capital Issue. It stated that the letter from Ms. Humphrey’s lawyer “made clear that [she] was no longer a good fit” and was a further reason precipitating her termination. The Board Memo concluded that Mene had just cause to terminate Ms. Humphrey’s employment and claimed that Mene had “extensive employee affidavits, complaints, and other concerns shared by the Board”, as well as “additional materials” that it would “provide in any court process to further solidify [its] position that [the] termination [was] with cause”.

[16] By letter dated February 27, 2019, Ms. Humphrey’s lawyer disputed the Board Memo’s assertion that Mene had cause for termination and specifically requested production of “all documents and records in respect of the purported investigation”.

[17] Ms. Humphrey commenced a wrongful dismissal action against Mene in the Superior Court on April 18, 2019. She sought damages in lieu of reasonable notice, as well as aggravated, punitive and other heads of damages.

[18] Mene defended the action, asserting that Ms. Humphrey’s employment had been terminated for cause, and setting out in its statement of defence a detailed account of her alleged performance issues and misconduct. Mene also relied on the termination provisions contained in the December 13, 2018 employment agreement.

[19] Ms. Humphrey brought a motion for summary judgment. A date was fixed, with an agreed schedule for the exchange of documents. Mene failed to comply with two court orders that were made with its consent: first, that Mene produce a sworn affidavit of documents by December 13, 2019; and second, that it deliver its responding materials for the motion by February 14, 2020. In January 2020, the day before Ms. Humphrey’s motion materials were due, Mene withdrew its cause defence because it was “unable to recover many of the documents that helped support [its] position with respect to just cause”. On February 21, 2020, Mene’s counsel advised that documents related to Ms. Humphrey’s termination had been destroyed in accordance with the company’s document retention policy. Although the defence of cause was withdrawn, Mene did not amend its statement of defence and continued throughout the proceedings (including on this appeal) to assert that it had terminated Ms. Humphrey’s employment because of her performance issues and misconduct.

C. THE MOTION JUDGE’S DECISION

[20] At this stage, a brief overview of the motion judge’s decision will suffice. A more detailed consideration of her findings and conclusions on each of the issues in the appeal and cross-appeal follows below.

[21] The record before the motion judge consisted of the affidavits of Ms. Humphrey and Mr. Sebag and the transcripts of their cross-examinations out of court (along with answers to undertakings), as well as three affidavits from Mene representatives (addressing Ms. Humphrey’s alleged performance issues and misconduct), and an affidavit from Mene’s counsel (addressing mitigation). The motion judge, after considering the submissions of the parties on the suitability of summary judgment (in view of credibility issues), decided to proceed with the motion, after noting that “[b]oth parties doubled down on the appropriateness of summary judgment in this case on all issues”.

[22] The main issues for determination, apart from the enforceability of the clause in Ms. Humphrey’s employment agreement that limited her entitlement on termination without cause to the amounts payable under the ESA (which was decided against Mene and is not appealed), were: (1) Ms. Humphrey’s compensation in lieu of notice, including the reasonable notice period and whether and to what extent she mitigated her damages; (2) the circumstances surrounding the termination of Ms. Humphrey’s employment, including whether there was bad faith in her termination; and (3) Ms. Humphrey’s eligibility for, and the quantum of, aggravated and punitive damages.

[23] In determining the reasonable notice period, the motion judge applied the Bardal factors. She considered Ms. Humphrey’s age at termination (32), her length of service (three years), her compensation (an annual salary of $90,000 and participation in a bonus/stock option plan), as well as the character of her employment and her expected difficulty in finding a comparable position.

[24] The main point of disagreement between the parties was with respect to the character of Ms. Humphrey’s employment and its role in the determination of the notice period. In finding for Ms. Humphrey on this issue, the motion judge rejected Mene’s evidence that Ms. Humphrey, although holding the title of COO, was not actually entrusted with the responsibilities of a “typical COO”. Instead, she found that Mene had contracted with Ms. Humphrey to perform the “usual duties of a COO”, that “it had represented to the world, its shareholders and Ms. Humphrey that she was the COO”, and that her functions, including as described by Mene’s own representatives, were inconsistent with the “minor” roles and responsibilities Mene alleged she had been performing. The motion judge also concluded that Ms. Humphrey, who remained unemployed at the date of the summary judgment motion, would have had a more difficult time finding a new position where she had been terminated allegedly for cause shortly after her promotion to the COO position. After weighing all of the Bardalfactors, and addressing the various case precedents provided by the parties, the motion judge concluded that the reasonable notice period was 12 months.

[25] With respect to mitigation of damages, Mene raised a number of issues, including Ms. Humphrey’s failure to apply for any positions for the first six months after her termination, whether she had conducted an appropriate job search having regard to her qualifications and experience, and her refusal of what Mene said was a comparable position seven months post-termination. After setting out and considering the issues, and concluding that the position offered to Ms. Humphrey was not comparable to her position with Mene, the motion judge reduced the damages in lieu of 12 months’ notice by the equivalent of one month’s compensation based on Ms. Humphrey’s mitigation efforts.

[26] In addressing the issue of aggravated damages, the motion judge considered the circumstances leading up to and surrounding Ms. Humphrey’s termination. She found that Mene did not act with good faith in alleging that it had cause for termination; rather, Ms. Humphrey’s termination was precipitated by, and sought to punish her for, her request for a salary increase. The motion judge further found that Mene had set Ms. Humphrey up to fail by hiring her with limited relevant background experience and failing to train her or to address performance issues directly (including the fact that she never received a performance review), and subjecting her to a toxic work environment.

[27] The motion judge concluded that Mene’s conduct went “to the heart of the employment relationship” and did not consist of “mere technical breaches made in good faith”. In making her findings, the motion judge concluded that Mr. Sebag was not a reliable or credible witness, and she rejected as problematic and unpersuasive the various affidavits filed by other Mene representatives that spoke to Ms. Humphrey’s alleged performance issues.

[28] After considering the evidence of the effect of Mene’s conduct, the motion judge concluded that Ms. Humphrey suffered compensable and reasonably foreseeable damages for mental distress. She considered the range of damages awarded in a number of other cases, and concluded that $50,000 in aggravated damages was an appropriate amount.

[29] As for punitive damages, the motion judge considered Mene’s litigation conduct. She concluded that Mene had “dredged the waters looking for anything and everything it can say which will make Ms. Humphrey look bad—even things that its own pleading shows are irrelevant”, and that this rose to the level of malice. Mene’s conduct in relation to the alleged evidence in support of cause was reprehensible: it was either “untruthful about the existence of extensive material in support of the Board Memo or it failed to preserve the documents”. Mene had failed to comply with court orders related to document production, and gave “shifting explanations” for why it failed to produce documents. The motion judge found it “simply incredulous” that, in the face of letters from Ms. Humphrey’s counsel requesting the preservation and production of documents, Mene did not understand its obligations. Mene had also included in the record inappropriate and irrelevant references to Ms. Humphrey’s personal life. The motion judge concluded that Mene’s conduct was “consistent with a litigant who sees itself as above the rules”. She awarded punitive damages of $25,000 after considering the awards in a number of reported cases, and adverting to the need to avoid double recovery between aggravated and punitive damages.

D. ISSUES IN THE APPEAL AND CROSS-APPEAL

[30] The appellant raises four issues on this appeal:

1. Does the 12-month notice period fall outside an acceptable range and, if so, what is the appropriate notice period?

2. Did the motion judge err in reducing the damages by only one month’s compensation to account for the respondent’s failure to mitigate?

3. Did the motion judge err in her award of aggravated damages?

4. Did the motion judge err in her award of punitive damages?

[31] In her cross-appeal, Ms. Humphrey seeks to have the punitive damages award increased from $25,000 to $100,000 or, in the alternative, if the appeal is allowed, to have the punitive damages award increased commensurate to any reduction in compensatory (including aggravated) damages.

E. DISCUSSION

(1) Issue 1: The Length of the Notice Period

[32] This court recognizes the “fact-specific and contextual approach to the period of reasonable notice, limited by a range of reasonableness”: Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, 349 O.A.C. 360, at para. 40. As Favreau J.A. recently noted, “[t]his court should not interfere lightly with a court’s determination of a common law notice period. Such a determination requires the court below to weigh multiple factors and assess the circumstances of each case on the basis of its unique circumstances”: Antchipalovskaia v. Guestlogix Inc., 2022 ONCA 454, at para. 56.

[33] Mene asserts that the motion judge erred in fixing a reasonable notice period of 12 months where the respondent was 32 years old, had less than three years’ service and was earning a base salary of $90,000 per year at the time of her dismissal. Mene says that the motion judge made a palpable and overriding error of fact when she failed to appreciate the true character of Ms. Humphrey’s employment, and that she erred in principle in considering Ms. Humphrey’s title as COO to the exclusion of other relevant factors, such as age and length of service. Mene asserts that an appropriate notice period in all the circumstances is four months.

[34] I will deal with each of Mene’s arguments in turn.

a) There Was No Error in the Characterization of Ms. Humphrey’s Employment

[35] With respect to the character of Ms. Humphrey’s employment, Mene repeats the argument made to and rejected by the motion judge: that Ms. Humphrey did not perform the “usual” COO duties, which was reflected in her compensation; that she was not qualified for a COO position; and that her duties were of a more clerical or administrative nature. Mene relies heavily on Ms. Humphrey’s salary to suggest that, in fact, she was not performing the role of a COO.

[36] I am not persuaded that the motion judge’s characterization of Ms. Humphrey’s employment reflects a palpable and overriding error. Her conclusion that Ms. Humphrey was operating at a COO level within Mene was fully supported by the evidence. The motion judge reasonably rejected Mene’s argument, based on Mr. Sebag’s description of Ms. Humphrey’s role, that although she held the title of COO, the court should find that her role was something less.

[37] First, as the motion judge noted at para. 70 of her reasons, Ms. Humphrey’s July 2018 Amended Consulting Services Agreement, which initially appointed her as COO, specifically stated that she would “oversee operations and manage personnel in operations, design, marketing and customer service roles, work with and oversee external vendors and agencies, including but not limited to manufacturing, Brink’s and PR matters, along with other duties and responsibilities customary for the position of Chief Operating Officer”.

[38] Second, Mene’s own conduct emphasized Ms. Humphrey’s level of responsibility. The motion judge did not accept Mr. Sebag’s assertion that Ms. Humphrey was unqualified for a senior management position, given that Mene’s predecessor, and later Mene, offered her several roles and ultimately promoted her to COO. The motion judge observed that Mene promoted Ms. Humphrey to the position of COO knowing that she was very young and that she had a marketing background with no experience as a senior executive. Nevertheless, as pleaded in Mene’s statement of defence, Ms. Humphrey was entrusted with “one of the most senior positions at Mene in her role as COO and had significant discretion, responsibility and autonomy”.

[39] As the motion judge aptly observed, Mene represented to Ms. Humphrey and to the world that she was its COO, and it “[could not] resile from this after the fact, with bald, self-serving statements”: at para. 150. The motion judge firmly rejected Mene’s position that, despite the positions Ms. Humphrey held at Mene and her various promotions, including to the position of COO, Ms. Humphrey did not have the necessary skills, expertise, background or paper credentials for the position. She explained her reasoning at para. 155:

Mene hired and promoted Ms. Humphrey with its eyes wide open as to her background and experience and potential for similar employment elsewhere. It represented to the world, its shareholders and Ms. Humphrey that she was the COO. This is the bargain which it made and damages for its breach in calculating the reasonable notice period should reflect the actual bargain it made, not the one it is attempting to re-imagine.

[40] The motion judge observed that Mene “could not have it both ways”, on the one hand emphasizing Ms. Humphrey’s level of responsibility in connection with its detailed allegations of performance deficiencies, and on the other claiming that she did not have the necessary skills, expertise, background or paper credentials for the position and that her role was purely administrative or clerical. She concluded that it was a reasonable inference that Mr. Sebag had “reconstructed what Ms. Humphrey’s position entailed to enable Mene to advance arguments which would reduce the notice period”: at para. 70.

[41] Nor is there merit to the argument, pressed on appeal, that it is obvious from Ms. Humphrey’s base salary of $90,000 that she was not fulfilling the usual functions of a COO. The character of employment depends on the role of the terminated employee within the employer’s organization. The employee’s relative compensation may say something about their role or level of employment within the company; in this case, however, there was no evidence of what others (with more or less responsibility) in the company were earning.

[42] In any event, on the record in this case, what Ms. Humphrey was earning says more about the size and nature of Mene’s business than it does about her role in the company or the character of her employment. Mene states at para. 9 of its responding factum on the cross-appeal that, “because of [its] small start-up nature… it could not afford to pay all its senior employees high salaries akin to those paid to senior management and executives at other businesses”, and that “[a] significant aspect of Ms. Humphrey’s compensation was made up of shares and stock options.” Indeed, the Board Memo asserted that, at the time of her termination, Ms. Humphrey was “one of the highest paid executives” at Mene, having received over $335,000 in fully vested cash and equity compensation in less than 17 months.

[43] There is simply nothing raised on appeal to suggest that the motion judge made a palpable and overriding error in her characterization of Ms. Humphrey’s employment.

b) The Motion Judge Properly Considered the Bardal Factors

[44] Mene submits that, in considering and applying the Bardalfactors, the motion judge relied too heavily on Ms. Humphrey’s title as COO, and did not take into consideration her relatively short period of employment and young age at the time of her dismissal.

[45] I disagree. A fair reading of the motion judge’s reasons makes it clear that she considered all of the Bardal factors. As noted earlier, the question of the weight to be given to each factor was within her discretion, having regard to the particular circumstances of the case. The motion judge reviewed and applied the Bardal factors of age, length of service, character of employment, and availability of similar employment, having regard to the experience, training and qualifications of the employee: Bardal, at para. 21. She considered the authorities put forward by both parties and, after weighing all of the Bardal factors, she fixed the reasonable notice period at 12 months.

[46] Because no single Bardal factor should be given disproportionate weight or be treated as determinative, a short period of service will not always lead to a short period of notice: Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, at para. 32;see also, for example, Sager v. TFI International Inc., 2020 ONSC 6608, 2021 C.L.L.C. 210-014 (two years and nine months of service, nine months’ notice); Sanghvi v. Norvic Shipping North America, 2020 ONSC 8068, 2021 C.L.L.C. 210-023 (three years and nine months of service, eight months’ notice); and Norgren v. Plasma Power LLC, 2018 ONSC 3186, 2018 C.L.L.C. 210-060 (23 months of service, 8 months’ notice).

[47] It would have been an error for the motion judge to overemphasize the short duration of Ms. Humphrey’s employment as a factor. See, for example, Love v. Acuity Investment Management Inc., 2011 ONCA 130, 277 O.A.C. 15, leave to appeal refused, [2011] S.C.C.A. No. 170, where this court concluded that the trial judge erred by overemphasizing the employee’s short length of service (2.53 years) and underemphasizing the character of his employment, where (as here) he reported directly to the CEO. The court substituted a notice period of nine months for the five months awarded at trial.

[48] It is important to keep in mind the object of fixing a reasonable notice period, which is to determine, in the particular circumstances of the case, how long it would reasonably take the terminated employee to find comparable employment: Lin v. Ontario Teachers’ Pension Plan Board, 2016 ONCA 619, 352 O.A.C. 10, at para. 54. In the present case, the motion judge also properly considered the circumstances of Ms. Humphrey’s termination as a factor affecting how long it might reasonably take her to find a new position. The motion judge observed that, having regard to the fact that Ms. Humphrey was terminated allegedly for cause six months after her promotion to COO, “it would be more difficult for [her] to have obtained comparable employment because she would have to explain to prospective employers why she was terminated so soon after her recent appointment”: at para. 147. This is a relevant factor: see, for example, Lin, at para. 53.

[49] In these circumstances, considering only certain factors (Ms. Humphrey’s age and length of service) might suggest that a notice period of 12 months was too high. The determination of reasonable notice, however, required an approach that considered all of the relevant circumstances as they would bear on Ms. Humphrey’s likely ability to find another comparable position. The determination of reasonable notice depends on the context and particular circumstances of the case. Mene has failed to demonstrate any legal error or error in principle in the motion judge’s approach, or any palpable and overriding error of fact that would justify interfering with her determination that 12 months was a suitable notice period. Nor am I persuaded that 12 months is entirely outside of an appropriate range in the circumstances of this case. As I will explain in the next section, however, I would reduce the damages to which Ms. Humphrey is entitled to the equivalent of six months’ compensation as a result of her failure to properly mitigate her damages.

(2) Issue 2: Mitigation

[50] In the section of her reasons for judgment on “Mitigation”, the motion judge first set out the relevant principles, including that a terminated employee has a duty to mitigate damages by seeking and accepting reasonably comparable employment, and that the employer has the onus to prove lack of reasonable efforts to mitigate. She identified Mene’s various arguments, and ultimately reduced the damages to which Ms. Humphrey was entitled by one month’s compensation “to reflect some of the mitigation issues raised by Mene”: at para. 170.

[51] Mene asserts that Ms. Humphrey’s damages in lieu of notice should be reduced by three to five months’ compensation to reflect her failure to mitigate. Mene submits that the motion judge erred in her approach to mitigation, and makes the same or similar arguments on appeal that it made at first instance: first, that the notice period ought to have been reduced further by virtue of Ms. Humphrey’s six-month delay in sending out applications; second, that Ms. Humphrey applied for too narrow a range of positions, and failed to apply for comparable positions that were reasonably available; and third, that she unreasonably rejected a suitable comparable position seven months post-termination.

[52] I would reject the first two arguments, but give effect to the third.

[53] I begin with the observation that the burden is on a defendant to establish a failure to mitigate damages. The question is “whether [the employee] has stood idly or unreasonably by, or has tried without success to obtain other employment”: Red Deer College v. Michaels, 1975 15 (SCC), [1976] 2 S.C.R. 324, at p. 331. Whether a terminated employee has failed to take reasonable steps to mitigate, and the effect of this failure on the quantum of damages, are typically questions of fact, subject to review for palpable and overriding error: Beatty v. Best Theratronics Ltd., 2015 ONCA 247, 27 C.C.E.L. (4th) 177, at para. 10, leave to appeal to S.C.C. refused, 36476 (October 8, 2015).

[54] Mene’s first argument is based on a false premise: that any mitigation delay, other than what is legitimately an “adjustment period”, should result in an automatic reduction in the notice period. There is no precise formula for determining the reasonableness of an employee’s mitigation efforts or the effect of any delay in mitigation on the employee’s damages. Here, the motion judge concluded that given the way Ms. Humphrey was treated, it was difficult to fault her for not starting her job search immediately, although waiting six months to send out applications was too long: at para. 163. The motion judge’s assessment of the reasonableness of Ms. Humphrey’s efforts, and the effect of Ms. Humphrey’s delay in applying for jobs on the damages to which she is entitled, reveals no error in principle or palpable and overriding error of fact. Although a reduction of only one month is very generous, the motion judge’s assessment of the appropriate reduction is entitled to deference.

[55] As for the appellant’s second argument, I see no reason to interfere with the motion judge’s findings of fact. She concluded that Ms. Humphrey was qualified for the positions for which she applied, and that, although Mene had conducted various searches to show that there were many jobs for which Ms. Humphrey did not apply, it failed to demonstrate that those positions were comparable to Ms. Humphrey’s position at Mene.

[56] I would, however, give effect to the third argument respecting the motion judge’s approach to the evidence that Ms. Humphrey did not accept an offer of the position of VP E-Commerce that she received in or around October 2019. The motion judge dealt with this at para. 165 of her reasons. She noted that, when cross-examined, Ms. Humphrey explained that her initial conversations with this potential employer contemplated a broader role in senior management, and that she declined the offer because it was not for a broad-based senior leadership role. The motion judge stated, “in any event, Mene has not provided the Court with persuasive evidence or analysis on whether this position was comparable in terms of role, as well as in terms of all aspects of the remuneration including stock options, bonuses etc.”: at para. 165.

[57] With respect, the motion judge set the bar too high on the issue of mitigation in addressing this evidence. Comparable employment does not mean identical employment. It means “a comparable position reasonably adapted to [the plaintiff’s] abilities”: Link v. Venture Steel Inc., 2010 ONCA 144, 259 O.A.C. 199, at para. 73, leave to appeal to S.C.C. requested but appeal discontinued, 33690 (April 30, 2010); Dussault v. Imperial Oil Limited, 2019 ONCA 448, 2019 C.L.L.C. 210-053, at para. 5. It was sufficient for Mene to rely on evidence that Ms. Humphrey had been offered a senior management position with compensation that was comparable to or greater than what she earned at Mene. The motion judge erred in finding that “Mene has not provided the Court with persuasive evidence or analysis on whether this position was comparable”: at para. 165.

[58] In these circumstances, it is difficult to conceive of what further evidence an employer could adduce to establish that an employee has unreasonably rejected an offer of comparable employment. In her mitigation journal, Ms. Humphrey recorded six meetings or other interactions, over the course of about a month, with this prospective employer. The mitigation journal made no mention of a job offer, and simply noted that the company’s response was: “Company determined too early-stage to hire; may reach out in future”. Ms. Humphrey in fact received an offer of employment in October 2019 for the position of “VP E-Commerce”, which “can change as the company grows”, with compensation of $125,000 base salary, “at least” $25,000 in options, $75,000 bonus “based on achieving metrics jointly determined”, and benefits. It was only when Ms. Humphrey presented a counter-offer and requested, among other things, a C-level title and greater compensation, that the company advised that it did not have the budget and organization to meet her requests.

[59] In my view, the availability of this comparable role seven months post‑termination means that Ms. Humphrey turned down a position that could reasonably have mitigated her damages. While the onus on a defendant in this context is a heavy one, on the evidence before the motion judge, Mene met its obligation of demonstrating that Ms. Humphrey’s damages for the balance of the notice period could reasonably have been avoided. Ms. Humphrey had no obligation to accept the offer made to her, but the effect of her rejection of this comparable position was to limit her recovery from Mene for compensation in lieu of notice to the point at which this comparable job offer was made, seven months post-termination.

[60] Accordingly, I would give effect to this ground of appeal. Together with the reduction in damages arising from Ms. Humphrey’s delay in applying for jobs (a reduction of one month’s compensation, which Ms. Humphrey has not challenged), I would limit Ms. Humphrey’s damages in lieu of notice to the equivalent of six months’ compensation, and reduce her damages accordingly.

(3) Issue 3: Aggravated Damages

[61] An award of aggravated damages can be made in wrongful dismissal cases where an employer engages in conduct that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”: Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701, at para. 98; Honda,at para. 57. Typically, as here, the assertion is that there was bad faith in the manner of dismissal. However, the “normal distress and hurt feelings resulting from dismissal are not compensable”: Honda, at para. 56.Assessing aggravated damages is “an imprecise, fact-specific exercise”, entitled to deference on appeal: Colistro v. Tbaytel, 2019 ONCA 197, 145 O.R. (3d) 538, at para. 60, leave to appeal refused, [2019] S.C.C.A. No. 173; Doyle v. Zochem Inc., 2017 ONCA 130, 2017 C.L.L.C. 210-030, at para. 14; and Strudwick, at para. 33.

[62] Mene asserts that the motion judge made three errors in finding that Ms. Humphrey was entitled to aggravated damages. First, Mene submits that the motion judge’s conclusion that it acted in bad faith was based on unreasonable and unsupported inferences, amounting to an error of fact. Second, Mene says that the motion judge erred in principle in awarding aggravated damages based on behaviour that occurred during Ms. Humphrey’s employment, and that was not connected to the manner of her dismissal. Third, Mene argues that aggravated damages were awarded in the absence of evidence of compensable injury linked to the manner of dismissal.

[63] I would reject this ground of appeal.

a) The Conclusion of Mene’s Bad Faith Was Amply Supported by the Evidence

[64] At first instance, Mene took the position that aggravated damages should not be awarded simply because it had made an unsuccessful allegation of cause. The motion judge noted that Mene’s conduct went beyond mere mistaken good faith cause allegations. She stated, at para. 176:

Mene relies upon Mastrogiuseppe v. Bank of Nova Scotia, 2007 ONCA 726, at para. 4 where the Court of Appeal stated that there is no bad faith in pursuing allegations of termination for cause even if those allegations are not proven in the end. All of the facts relevant to Ms. Humphrey’s entitlement to aggravated damages have already been reviewed above with respect to Mene’s repudiatory conduct and I will not repeat them. The facts that I have found go well beyond mere mistaken good faith for cause allegations. Suffice it to say that Mene’s conduct in this case (setting her up to fail, the manner she was treated throughout her employment, the manner of dismissal which included being untruthful about the reasons for dismissal and exaggerating those reasons, communicating with other employees and clients about her before she was terminated) entitles Ms. Humphrey to aggravated damages if she can prove them.

[65] Contrary to Mene’s assertions on appeal, there is no error in the motion judge’s conclusion that there was bad faith in the manner of Ms. Humphrey’s termination. Mene has demonstrated no palpable and overriding error in any of the motion judge’s findings in support of this conclusion.

[66] Unlike other cases where an employer initially alleged and then abandoned cause before the matter was determined, in this case Mene continued to insist throughout the proceedings (including on appeal) that it had cause to terminate Ms. Humphrey’s employment. Mene’s position was that, although it no longer relied on cause as a legal defence (because it had destroyed relevant documents), Ms. Humphrey’s performance issues justified her dismissal. As such, it had a good faith basis for terminating Ms. Humphrey for cause, and had not done so in retaliation for her request for a raise. In addition to Mr. Sebag’s affidavit, Mene relied on the affidavits of three other Mene employees that set out a litany of complaints about Ms. Humphrey’s performance that would have justified the termination of her employment for cause.

[67] The motion judge concluded that the termination for cause was in bad faith – that the various performance issues and misconduct allegations that Mene had raised at the time of Ms. Humphrey’s suspension and removal from the position of COO (which amounted to constructive dismissal, a finding not challenged on appeal) and formal termination were a pretext for terminating her for cause. The motion judge rejected Mr. Sebag’s evidence as not credible or reliable (another finding not challenged on appeal), and she explained why the affidavits from other Mene employees purporting to set out performance issues were unpersuasive.

[68] The motion judge concluded that Mene had no serious concerns with Ms. Humphrey’s performance as of December 31, 2018, and that, with the exception of what were characterized as the Working Capital Issue and the Insurance Issue, for which Mene sought to hold Ms. Humphrey responsible, all of the other alleged concerns in the Board Memo were “bald allegations unsupported by the contemporaneous documents”: at para. 109. The motion judge did not make any findings on whether Ms. Humphrey was responsible for the Working Capital Issue and the Insurance Issue, but she concluded that these matters were not significant enough on their own to constitute cause for immediate termination: at para. 109. The motion judge concluded that the issues outlined in the Board Memo were exaggerated to support a “for cause” termination and to dissuade Ms. Humphrey from bringing a claim. She stated, at para. 110:

In my view, Mene was not interested in doing a fair performance appraisal; it was looking for evidence to support a “for cause” termination and all of the other issues in the Board memo were exaggerated and included to buttress and justify Mene’s decision to terminate her for cause, and frankly to penalize her for having had the nerve to ask for a raise after the Working Capital and Insurance Issue arose. This is consistent with the punitive and abusive manner with which Mr. Sebag treated Ms. Humphrey. The fact that Mene exaggerated so significantly the material which they had in support of a “for cause” termination is objective evidence that they knew that the true facts could not support a “for cause” termination. I also find that they exaggerated the material they had to bully her into not bringing a legal claim. The Board Memo specifically references all of this evidence that Mene would “provide in any court process to further solidify [its] position that this termination is with cause…”.

[69] Apart from the conclusion that the decision to terminate for cause reflected bad faith, there were other aspects of Ms. Humphrey’s termination that were relied on by the motion judge: the fact that she “was set up to fail” in that she had never received a performance review, or any indication that her position was in jeopardy when she was promoted to the position of COO; that her request for a raise set the wheels in motion for her termination; that she was removed from the position of COO and “suspended” for a variety of alleged performance issues, pending an investigation that never took place; that clients and other employees were informed of her removal from the position before Ms. Humphrey was informed; that her formal dismissal relied in part on the fact that she had retained counsel; and that the lengthy Board Memo set out spurious allegations of cause for which Mene insisted it had extensive documentation, which never materialized.

[70] There is no basis to interfere with the motion judge’s conclusion that there was bad faith in the circumstances of Ms. Humphrey’s dismissal that would warrant an award of aggravated damages.

b) The Motion Judge Did Not Improperly Rely on Mene’s Pre-Termination Conduct

[71] The motion judge acknowledged that any award of aggravated damages in this case would require a finding of bad faith in the manner of Ms. Humphrey’s termination. She adverted to, and then applied, the relevant case law with respect to the breach of the duty of good faith in the manner of termination. She accepted that the burden was on Ms. Humphrey to prove that the manner of her dismissal led to mental distress.

[72] Mene asserts that the motion judge erred in relying on its pre‑termination conduct, as reflected in the numerous demeaning and unprofessional emails and messages Mr. Sebag sent to Ms. Humphrey in the course of her employment, to conclude that Ms. Humphrey was entitled to an award of aggravated damages.

[73] I would not give effect to this argument. The time frame relevant to an award of aggravated damages is not limited to the moment of dismissal. Pre- and post-termination conduct may be considered so long as it is “a component of the manner of dismissal”: Doyle, at para. 13. The motion judge carefully considered all of the evidence respecting the circumstances and timing of Ms. Humphrey’s dismissal, as well as the manner in which Mene handled the termination and then conducted itself in the litigation that followed. The finding of bad faith was not, as Mene suggests, premised on the unprofessional and bullying manner in which Ms. Humphrey was treated by Mene’s CEO during the course of her employment. The motion judge, in awarding aggravated damages, focussed squarely on Mene’s conduct leading up to and in connection with the termination of Ms. Humphrey’s employment. She found that the emails were indicative of a pattern of conduct, and that Mr. Sebag’s unprofessional and abusive outbursts did not constitute any legitimate warnings to Ms. Humphrey that her job was in jeopardy or any sincere attempt to assist her with any performance issues.

[74] As this court noted in Doyle, “while some conduct [in relation to a dismissal] viewed in isolation would not constitute bad faith, the same conduct when part of a course of conduct on the part of an employer that inflicts mental distress on an employee may legitimately inform the result”: at para. 39. There are many parallels between this case and Doyle: in that case, the employer “mangled the termination process”; employees had been instructed to “dig up dirt” on the terminated employee; and the dealings with the employee were “disingenuous”. The “letter of termination, coupled with the circumstances surrounding the termination process itself, echoed the ‘hard line’ tone taken by [the employee’s superior] throughout [their dealings]”: Doyle, at para. 40. Much the same could be said about how Mene dealt with Ms. Humphrey. There is no question that Mr. Sebag’s overall conduct, as reflected in the pattern of his communications with Ms. Humphrey, properly informed the result in this case. As in Doyle,it is appropriate to consider the employer’s conduct in context and as a whole. The motion judge did not err when she concluded, at para. 180, that the abuse Ms. Humphrey suffered was ongoing throughout her employment and that it was “directly related to the manner of her dismissal”.

c) There Was Ample Evidence of Compensable Harm

[75] As for quantum, Mene asserts that the motion judge awarded $50,000 in the absence of evidence of compensable injury, and that this award was arbitrary and excessive. I disagree.

[76] The motion judge was satisfied that Ms. Humphrey suffered compensable and reasonably foreseeable damages for mental distress. She set out her conclusions on the evidence at paras. 177 to 179, noting, among other things, that Ms. Humphrey had suffered embarrassment and humiliation from the public nature of the dismissal and that her reputation had been harmed by Mene’s allegations. Ms. Humphrey provided receipts for the psychotherapy she had received since February 2019. The motion judge accepted that what happened was devastating to Ms. Humphrey’s sense of self and would be with her for a long time. She noted that this was something that Mr. Sebag in particular would have been aware of. All of these findings were amply supported by the evidence, and constitute harm of the nature and extent that would justify an award of aggravated damages: see, e.g., Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125, 2019 C.L.L.C. 210-036, at paras. 12-14.

[77] Nor am I persuaded by Mene’s submission that the motion judge’s award of aggravated damages is excessive or arbitrary. The motion judge considered the positions and authorities provided by the parties, and determined that aggravated damages in the amount of $50,000 (inclusive of Ms. Humphrey’s claim for counselling services) was appropriate. I see no basis to interfere with this conclusion in the circumstances of this case and the manner of Ms. Humphrey’s dismissal.

(4) Issue 4: Punitive Damages – the Appeal and the Cross-Appeal

[78] The motion judge awarded punitive damages in the amount of $25,000. On its appeal, Mene asserts that no punitive damages were warranted in this case. On her cross-appeal, Ms. Humphrey challenges the quantum of damages awarded, and submits that an award of $100,000 in punitive damages is rationally necessary.

[79] Punitive damages in breach of contract or tort cases are exceptional: their purpose is to punish a defendant for conduct that is reprehensible, and a “marked departure from ordinary standards of decent behaviour”. Whereas damages for conduct in the manner of dismissal are compensatory, punitive damages are “restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”: Honda, at para. 62. They should be awarded, in addition to the compensatory damages already awarded, when rationally required to punish a defendant to meet the objectives of retribution, deterrence and denunciation, in an amount no greater than necessary to satisfy these objectives: Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, at para. 79.

[80] An appellate court may interfere with a trial court’s assessment of punitive damages where (1) there is an error of law; or (2) the amount is not rationally connected to the purposes for which the damages are awarded, namely prevention, deterrence (both specific and general), and denunciation: Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725, at para. 98. When the quantum of punitive damages awarded is challenged, the question on appeal is “whether a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant’s misconduct”: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at paras. 107-108. As observed by this court in Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, 117 O.R. (3d) 481, at para. 202, this standard emphasizes an appellate court’s supervisory obligation to ensure that an award of punitive damages is “the product of reason and rationality”: Whiten, at para. 108.

[81] Mene contends that the motion judge awarded punitive damages for what was, in fact, “perfectly reasonable litigation conduct”, including conduct not put in issue prior to the judgment.

[82] Ms. Humphrey argues that there was no error in the motion judge’s decision to award punitive damages, and that Mene’s litigation conduct was properly found by the motion judge to be entirely unreasonable and to reflect malice. On her cross‑appeal, Ms. Humphrey asserts that the motion judge, in fixing the quantum of punitive damages, failed to consider the objective of denunciation and that, in limiting herself to a consideration of Mene’s conduct over the course of the litigation, she failed to consider Ms. Humphrey’s manner of termination and Mene’s pre-termination conduct.

[83] I would not interfere with the award of punitive damages in this case.

[84] First, Mene has not demonstrated any reversible error in the motion judge’s decision to award punitive damages. The motion judge cited and applied the relevant legal principles. She concluded that Mene’s conduct, particularly in connection with the litigation, was “reprehensible” and “consistent with a litigant who sees itself as above the rules”: at paras. 189, 198.

[85] The motion judge listed a number of reasons warranting an award of punitive damages in this case at paras. 185 to 197 of her decision. These included the fact that Mene continued to raise irrelevant performance issues, which were alleged to have arisen prior to Ms. Humphrey’s promotion to COO, although it had abandoned its defence of cause. The motion judge stated, “The issue in this case is not whether Mene had cause – it is whether it had an honest belief that it did. Information that it never had or considered at the time of termination or after‑acquired evidence of performance issues is not relevant and yet this record is replete with that”: at para. 186. She concluded that Mene had “dredged the waters looking for anything and everything it can say which will make Ms. Humphrey look bad—even things that its own pleading shows are irrelevant”, and that this rose to the level of malice: at para. 187. She also noted that Mene had never formally amended its pleading to withdraw the for-cause allegation, and that Mene was either “untruthful about the existence of extensive material in support of the Board Memo or it failed to preserve these documents”, notwithstanding that Ms. Humphrey’s counsel made two specific written requests for the preservation of such documents, and that either was reprehensible: at para. 189. The motion judge found it “simply incredulous that in the face of letters from Ms. Humphrey’s counsel requesting preservation of its documents that Mene did not understand its obligations or seek to do so”: at para. 195. She noted that “Ms. Humphrey had to labour under unspecific allegations that she [had] never been given full disclosure of and never will”: at para. 190. The motion judge also noted that Mene had breached court orders requiring it to provide a sworn affidavit of documents. Finally, there were inappropriate and irrelevant references to Ms. Humphrey’s personal life in the affidavits, which the motion judge found “very troubling”: at para. 197.

[86] Mene has demonstrated no palpable and overriding error in the motion judge’s factual conclusions and analysis. All of her findings were supported by the evidence and are entirely reasonable. I see no basis to interfere with the motion judge’s conclusion that an award of punitive damages was warranted.

[87] Second, with respect to the quantum of punitive damages, the motion judge considered the range of punitive damages awarded in other cases and settled on an amount that she considered necessary in the circumstances of this case. She specifically adverted to the requirement to avoid double recovery as between compensatory and punitive damages, and she “calculated the damages with this in mind”: at para. 199. There is no reason for this court to interfere with her assessment of the quantum of punitive damages.

[88] As for the cross-appeal, I would not give effect to Ms. Humphrey’s first argument: that the motion judge failed to consider the objective of denunciation. The motion judge’s reasons must be read as a whole. Although she did not identify “denunciation” as a specific objective of punitive damages, she referred to the relevant case authorities, and there is nothing to suggest that she failed to consider all of the purposes of punitive damages. The motion judge referred to Mene’s conduct as “reprehensible”, rising “to the level of malice”, “less than forthright”, and “very troubling”. Reading her reasons as a whole, it is apparent that she determined that the compensatory damages were insufficient in this case in light of all of the objectives of a punitive damages award, including denunciation.

[89] Nor would I give effect to Ms. Humphrey’s second argument on the cross‑appeal: that the motion judge ought to have considered the manner of termination and Mene’s pre-termination conduct in fixing the quantum of punitive damages. While Ms. Humphrey is correct that the same conduct can justify an award of both aggravated and punitive damages (see, for example, Ruston, at para. 18; Strudwick, at para. 113), there ought to be no double-compensation or double-punishment: Honda, at para. 60. The motion judge properly determined, in light of the other compensation awarded to Ms. Humphrey, the need for “additional punishment in the case before the court”: Whiten, at para. 123 (emphasis in original). I read the motion judge’s observation that “there should be no double recovery as between aggravated and punitive damages” as an acknowledgment that a higher amount for punitive damages was not warranted where the same conduct had been punished by the award of aggravated damages.

[90] Finally, I would decline Ms. Humphrey’s invitation to increase the award of punitive damages to offset the reduced compensatory damages to which she is entitled by virtue of her failure to mitigate. There is no basis for doing so.

F. DISPOSITION

[91] For these reasons, I would allow the appeal in part and reduce Ms. Humphrey’s damages in lieu of reasonable notice to the equivalent of six months’ compensation. I would dismiss the appeal in respect of aggravated damages, as well as the appeal and the cross-appeal in respect of punitive damages.

[92] After considering the costs outlines provided by the parties, and in view of their divided success in the appeal and cross-appeal, I would award Ms. Humphrey $18,500 in costs, inclusive of HST and disbursements.

Released: July 15, 2022 “K.M.v.R.”

“K. van Rensburg J.A.”

“I agree. I.V.B. Nordheimer J.A.”

“I agree. Harvison Young J.A.”