Fraser v. Canerector Inc.

CITATION: Fraser v. Canerector Inc., 2015 ONSC 2138

COURT FILE NO.: CV-14-507469

DATE: 20150407

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Stuart Fraser, Plaintiff

AND:

Canerector Inc., Defendant

BEFORE: Sean F. Dunphy J.

COUNSEL: Greg McGinnis and Stephanie Ramsay, for the Plaintiff

W. Mark Fryer, for the Defendant

HEARD: April 7, 2015

ENDORSEMENT

[1] This is a motion for summary judgment brought by the plaintiff in a wrongful dismissal action. Prior to the amendments to the Rules of Civil Procedure which introduced the new powers found in Rule 20.04(2.1) and the very strong clarion call issued by the Supreme Court of Canada in Hryniak v Mauldin [2014] S.C.R. 87, this would have been a very short motion indeed. There is little doubt that both issues raised by this wrongful dismissal case are significant ones to the case and involve consideration of at least some evidence where there are disputed questions of fact of the sort our courts formerly declined to resolve on summary judgment motions. Post-Hryniak, however, our inquiry does not end there. Hryniak has called for the courts to be more robust in their willingness to grapple with issues and resolve them in a reasonable but cost-effective manner. The principle of proportionality, now enshrined in Rule 1.04(1.1), must permeate our interpretation and application of the Rules to each and every case before us. The present case is no exception.

[2] In the very short interval since the Hryniak case, the practice has changed greatly, most markedly in the area of wrongful dismissal. The evolution has proceeded to the point that Brown J. A. in Arnone v Best Theratronics, 2015 ONCA 63 (C.A.) (at para. 12) said that “a straight-forward claim for wrongful dismissal without cause, such as the present one, strikes me as the type of case usually amenable to a Rule 20 summary judgment motion”.

[3] The challenge in a summary judgment proceeding is assessing the real and pragmatic issues that require resolution in a case and striking a fair and just balance between procedure, access and proportionality. The fairness and reasonableness of procedures can and should be weighed against the objectives they serve and the principle of proportionality must inform all interpretation and application of the Rules in each case. While the defendant urged in its factum that discretion to grant summary judgment ought not to be exercised in this case, he did not press the point strongly and instead focused on the evidence in the record and the merits as regards the narrow issues separating the parties.

[4] In my view, the relatively narrow issues where contradiction exists in this case are sufficiently well-explored, few in number and confined in scope to enable me fairly to assess them using the tools authorized by Rule 20.04(2.1) in this case. I shall do so.

[5] While this case, in common with most wrongful dismissal cases, requires the court to assess the length of reasonable notice required and to calculate the various components of payment in lieu of notice that arise from that determination, the case in reality hinges on two fairly narrow factual issues which largely determine the rest:

a. Was the plaintiff induced to leave secure employment in circumstances which would warrant a lengthier notice period than the short (34 months) period of the plaintiff’s employment might otherwise suggest?

b. Is the plaintiff entitled to include in his damages calculation any claim for bonus amounts having regard to the allegedly discretionary nature of the bonus program in which he participated and the length of reasonable notice determined?

[6] The plaintiff’s position is that he was induced to leave a secure, long-term position at another firm to accept employment with the defendant and, as such, the period of reasonable notice ought to have regard to that fact. In addition, he participated in an executive bonus program with the defendant and seeks compensation for the amount of bonus he alleges was accrued to the date of his termination as well as any bonus amounts that might have accrued during a reasonable notice period since bonus entitlement was an integral part of his compensation package. The plaintiff claims twelve months would be a reasonable notice period in the circumstances.

[7] The defendant disputes the characterization of the hiring process as constituting inducement of any kind and takes the position that its bonus program was entirely discretionary, payable only to active senior employees at the time of assessment and award of bonus each year (February) and in the circumstances of this case, no amount of bonus would be payable to the plaintiff whether for his period of actual employment in 2014 or for any reasonable notice period thereafter. The defendant had offered to pay three month’s salary to the plaintiff on termination of his employment in return for a release which proposal was rejected by the plaintiff before the commencement of litigation.

[8] The plaintiff was fortunate enough to find alternative employment in his former industry (auto parts) approximately ten weeks after the termination of his employment by the defendant. He started work on August 25, 2014. Accordingly, the claim for damages must necessarily be somewhat bifurcated: from June 10, 2014 until August 25, 2014 and thereafter – if necessary – to the end of whatever period of reasonable notice is determined, damages will be subject to reduction by remuneration received by the plaintiff in his new position. The plaintiff was in receipt of a base salary of $205,000 plus benefits at the time of his termination. His new employment provided a base salary of $200,000 and bonus of up to 25%. The plaintiff received bonus of $25,000 in respect of 2014 from his new employer.

(i) Inducement issue

[9] There is little in the way of disputed evidence regarding the facts relevant to the claim of inducement. The parties are in broad agreement as to most of the facts and primarily dispute the characterization to be placed upon them.

[10] The plaintiff was working in a senior position for a manufacturer in the auto parts business. He had worked in the auto parts sector for his entire career, but had been with his then-employer about seven years. By reason of certain changes at his employer, it is fair to say that the plaintiff had developed a level of disenchantment with his future prospects at this employer but was not (yet) actively looking for new pastures when he began to consider working with the defendant.

[11] In or about March, 2011, Mr. Fraser had a conversation with Mr. Tuzi about an opening at the defendant. Mr. Tuzi was both a friend and former colleague of Mr. Fraser. Mr. Tuzi was now working for the defendant and was aware that the defendant would be looking for someone to help with acquisitions. Mr. Tuzi planted the seed both with the plaintiff and with his own employer (the defendant). There was no evidence that Mr. Tuzi was asked to locate a candidate or that doing so was in any way part of his duties. I conclude that Mr. Tuzi simply thought it would be a good idea to put his friend and former colleague and his new employer in touch with each other when he saw an opportunity that looked well-suited to both. He was not charged with “inducing” the plaintiff to leave secure employment – he simply did what friends do.

[12] The allegation that Mr. Tuzi was “selected” to approach Mr. Fraser was pure speculation on Mr. Fraser’s part and is not borne out by the evidence. Mr. Tuzi acted on his own initially in putting the two parties together and the plaintiff knew perfectly well that Mr. Tuzi took no part in the negotiation process thereafter. After his initial discussions with Mr. Fraser and with Mr. Puddy, Mr. Tuzi played no active role in the selection or negotiation process that ensued. He had some contacts thereafter with Mr. Fraser, but the evidence suggests that most if not all of these telephone or email contacts were initiated by Mr. Fraser looking for updates or an “inside track” on the process underway. Mr. Tuzi did not carry messages from his employer to Mr. Fraser or negotiate any of the terms of Mr. Fraser’s agreement – that was done by Mr. Puddy.

[13] The defendant posted an on-line advertisement for the position it was looking to fill on April 4, 2011. The plaintiff submitted an application a few days later although he disputes that he did so in response to the advertisement. There is no doubt that Mr Tuzi informed Mr. Fraser of the opportunity and that he informed his employer of Mr. Fraser and recommended him as a good candidate for the opening. Whether Mr. Fraser saw the advertisement as well is immaterial. Other candidates did and Mr. Fraser was not the only one in the running.

[14] Between April and June 1, 2011 (the date of the initial employment offer to Mr. Fraser) Mr. Fraser had two interviews with Mr. Puddy. Mr. Tuzi was not present for either. Ms. Hawkins, a senior executive was present for the second. The defendant received numerous applications in response to the advertisement placed but only interviewed five candidates (including Mr. Fraser). Mr. Fraser was the leading candidate after the first round of interviews since he was the only candidate to receive a second interview.

[15] The evidence establishes that the defendant made an employment offer to the plaintiff on or about June 1, 2011 which the plaintiff clearly and materially negotiated before accepting with minor changes. The changes sought by Mr. Fraser and the offer he ultimately signed back leave me little doubt that Mr. Fraser fully expected and understood that he was starting as an entirely new employee at the defendant and would not be able to claim to carry over to his new employer any entitlements to consideration of his prior seniority or entitlements.

[16] Mr. Fraser’s former employer provided the plaintiff with a salary of $185,000 compared to the offer made by the defendant of only $160,000. Mr. Fraser did not seek to increase his base pay and in fact agreed to leave for a lower guaranteed amount.

[17] Mr. Fraser’s former employer provided him with entitlement to a (formula-based) bonus program with a target bonus of 20% and a maximum of 50% of base salary. Performance goals were set each year. The employment agreement of the plaintiff with his former employer explicitly provided that only employees still employed at the time bonus was declared and paid in July of each year were eligible.

[18] As a result of this bonus eligibility condition at his old employer, the plaintiff requested and obtained deferral of his start date from the defendant until August, 2011 in order to ensure that he would be able to collect his bonus cheque from his former employer before starting work with the defendant. This request was granted.

[19] Mr. Fraser had discussions with Mr. Puddy wherein he sought to obtain the defendant’s agreement to consider his prior employment history and grant him earlier eligibility for an additional week of vacation. This request was denied and the three weeks vacation offered were accepted by Mr. Fraser without any acceleration of entitlement to a fourth week.

[20] Mr. Fraser sought to obtain a waiver by the defendant of its requirement that his employment be subject to a three month probationary period, noting his existing entitlement to 11 months’ severance under his then-current employment agreement. This request was specifically denied.

[21] Mr. Fraser was unable to negotiate any recognition of the 11 months severance entitlement that he was leaving behind at his former employer. This is quite significant since the plaintiff now claims to be entitled to 12 months of notice entitlement from the defendant when he was quite unable to obtain the defendants’ agreement to such a term when the employment agreement was being discussed by them and will be referred to below in relation to the question of reasonable notice.

[22] The above-described negotiation history occurred before Mr. Fraser took the plunge and gave notice to his prior employer. After receiving word of Mr. Fraser’s decision to leave, his former employer made efforts to talk him out of his decision and even flew over an executive to speak to him. It is significant to note here that the defendant’s response to the retention efforts of Mr. Fraser’s former employer was not to engage in a bidding war or to “sweeten the pot”: the offer as accepted by the plaintiff did not change.

[23] None of this evidence is consistent with an “inducement” case. The defendant offered no better financial terms – on their face, the financial terms offered were somewhat worse than those enjoyed by the plaintiff at his existing job. Mr. Fraser applied for this job and very much wanted to be selected at the end of what he knew to be a competitive process with other candidates.

[24] The attraction of the job to Mr. Fraser was not any inducement or “locked in” higher pay but the potential for higher remuneration working with a company whose entrepreneurial culture he found “fit” him better and whose fortunes were not tied to the potentially risky automotive sector.

[25] Mr. Fraser wanted the job and, after interviewing him and reviewing his application, the defendant wanted him. In the process, no doubt, the defendant sought to and did persuade the plaintiff that they were a great place to work and no doubt, along the way, did not fail to bolster whatever favourable impressions the plaintiff had developed. Such is the stuff of normal persuasion, not inducement.

[26] It is noteworthy that Mr. Fraser was hired subject to an initial probation period of three months. This factor is inconsistent with any allegation that he was “induced” in any sense to leave his former secure employment. One is not induced to leave secure employment with an offer of precarious employment at lower base salary unless the employee is already more than willing to consider the proposition without inducement. One has no need to knock on an open door. Mr. Fraser wanted this new position and was as anxious to sell his qualities to the defendant as they were to vaunt their merits to him.

[27] Apart entirely from the question of inducement, Mr. Fraser was given no reason to believe that his new employer would have agreed to accept any terms of his employment contract involving assumption of “successor employer” or similar obligations arising from his former job. Mr. Fraser sought to obtain recognition of his 11 months severance entitlement from his new employer and was unsuccessful in so doing. He cannot be heard to argue that this same employer impliedly agreed to that which it declined to accept expressly in its written employment agreement. The fact that the written contract between the parties does not speak to notice or severance entitlements does not give the court a blank sheet upon which to inscribe its own desires. These parties turned their minds to the matter and clearly agreed not to give the plaintiff credit for the severance entitlement he had accrued at his former employer – it is not for the court to re-write their deal after the fact.

[28] Mr. McGinnis sought to argue that the consequences of probation not being spelled out at length in the offer letter, the court ought to infer that possibly lengthy reasonable notice would nevertheless be due if his were employment terminated during the probationary period. I disagree. Both the employer and employee perfectly well understood what probation entailed and that is why Mr. Fraser sought (unsuccessfully) to have the clause removed. If Mr. Fraser’s employment contract afforded him only statutory entitlements in the case of termination within the first 90 days of employment, I cannot conclude that he could reasonably expect that his entitlement vaulted to 11 or 12 months’ notice the very next day. He knew, or ought to have known, that his entitlements and seniority within the new organization were starting from the perspective of a new employee.

[29] The suggestion that no employee at Mr. Fraser’s level had been terminated by the defendant or resigned was a perfectly normal statement in the hiring process and does not in any way create an assumption of inducement. Such a statement was clearly never intended and cannot be construed as rising to the level of a contractual agreement to pay some higher level of severance in the event of termination of employment. Rather, this statement was made in the nature of “for what it’s worth” by a defendant who was expressly declining to provide just the sort of job security or notice in lieu the plaintiff now seeks. There is no suggestion on the evidence that the statement was untrue when made or was somehow made fraudulently. In another context, such glowing talk might be characterized as “mere puffery” but is not something I can accept as rising to the level of contractual terms or representations.

[30] In conclusion on this point, I find that Mr. Fraser was not induced to leave his prior employment in such a way as to impact the assessment of an appropriate notice period for the termination of his employment. In assessing reasonable notice, I propose to consider Mr. Fraser’s years of service with the defendant without increasing the notice entitlement that he might be entitled to receive by consideration of his prior years of service with his former employer or his accrued entitlements there. Mr. Fraser can have had no reasonable expectation that whatever reasonable notice that he would be entitled to from his new employer would be determined other than by reference to his period of employment with that new employer and the other factors relevant to that determination.

(ii) Length of Reasonable Notice

[31] Having found no special circumstances regarding the manner of the hiring of the plaintiff in this case, I must now turn to consider what period of reasonable notice must be given where the defendant has determined to terminate the employment of the plaintiff. Cause is not alleged in this case. There is no dispute between the parties that the Bardal principles are the ones that govern reasonable notice in cases such as this. In the frequently-quoted passage from Bardal v. The Globe and Mail Ltd. 1960 CanLII 294 (ON SC), [1960] O.W.N. 253 (H.C.J.), McRuer C.J.H.C. found (at para. 21):

“the reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment having regard to the experience, training and qualifications of the servant.”

[32] The principles to be applied are simple to state if complicated to apply. As is often said, each case is determined on its particular facts. The question of reasonable notice is quintessentially a matter of mixed fact and law that requires the judge hearing the case to apply his or her judgment to the assessment of a number of factors many of which tend to pull in opposite directions. The end result is more art than science but must be one that is fair in all of the circumstances.

[33] Mr. Fraser was 46 years old at the time of termination and had been with the defendant for 34 months. His work history shows him to be a senior executive with talents and experience adaptable to more than a single industry. The employment market for a man of his talents was clearly fairly strong in 2014 as witnessed by the creditable speed with which he was able to secure new employment (about ten weeks). The fact that he returned to his former industry (auto) is at least suggestive that his more recent foray into the wider world of M&A was not considered by him or the job market to represent his main attribute from an employment perspective, however.

[34] Mr. Fraser had initially been hired in the acquisitions group with the job of originating prospective acquisitions and managing the process of acquiring them. In late 2013 his position was changed to that of “Division Liaison”. The change was more evolutionary than revolutionary – as Division Liaison, Mr. Fraser was to be involved in the management of the businesses that he had helped to acquire in the past. Division Liaisons were nevertheless still expected to be involved in the origination and completion of acquisitions.

[35] I find that for a man of Mr. Fraser’s age and level of responsibility but relatively short years of service, I must also account for the time of year when his employment was terminated in assessing reasonable notice. Mr. Fraser’s employment was terminated in June and it was quite foreseeable that hiring decisions at his level might have needed to be delayed somewhat due to the summer months in order to account for vacation schedules of key decision-makers. While his term of service might normally suggest a relatively shorter period of notice, timing plays a bigger role where notice is short. While timing in fact was no impediment in this case (Mr. Fraser having found new employment by August), that is a conclusion enabled by hindsight.

[36] Having regard to Mr. Fraser’s age, the level of his employment, his skill-set (both “M&A” as well as years as an auto parts executive), his relatively short service with the defendant and the time of year, I find the 12 months claimed to be clearly excessive while the two weeks statutory minimum actually paid to be clearly too little.

[37] In the circumstances, Mr. Fraser was very fortunate to have found the employment he did as early as August. While hindsight will not determine the outcome of the process, I can allow his actual job-hunting experience to help guide me in assessing the robustness of the job market Mr. Fraser faced at the time of his termination (employment prospects being one of the Bardal factors). Beyond this limited use of the data, however, his securing of new employment goes primarily to the question of mitigation, not entitlement. I find that the employment market for an executive of Mr. Fraser’s skills in 2014 was reasonably strong.

[38] Having regard to the totality of circumstances, I find that 4.5 months is a reasonable period of notice for the termination of Mr. Fraser’s employment with the defendant. Absent my consideration of the potential negative impact of the summer break on Mr. Fraser’s job prospects, I should have awarded a somewhat shorter period of notice (three months). The defendant is entitled to credit against the wages otherwise payable for such period for the remuneration received by Mr. Fraser from his new employer, including the portion of 2014 bonus attributable to the reasonable notice period.

(iii) Defendant’s Bonus Plan

[39] Had the defendant provided the plaintiff with working notice in accordance with this judgment in June, 2014, Mr. Fraser would have been employed with the defendant up until approximately the end of October, 2014 had he not found suitable alternative employment by that time. What entitlements to bonus, if any, would Mr. Fraser have been entitled to under his employment contract had he remained with the defendant until such time?

[40] The defendant’s position is simple. The offer of employment included permitting the defendant to participate in the executive bonus program. There is no formal bonus policy. There is neither a floor nor a ceiling to bonus entitlement nor any formula which the court could employ to calculate bonus entitlement. Awards are confidential and not shared among employees. Entitlement each year is determined as a matter of pure discretion having regard to an assessment of the individual contributions of the employee and the performance of the company as a whole. The owners (Mr. Hawkins and his daughter Ms. Hawkins) undertake the review and award process. Awards had been made as high as 100% of salary and as low as nil. Quality and number of acquisitions originated and completed had been a key driver while Mr. Fraser’s job description was restricted to acquisitions – his new title of Division Liaison still carried with it responsibility for acquisitions. The defendant says that the plaintiff asked for details regarding the bonus program during the process of negotiating his employment offer and was told that there were none to be had beyond the general description summarized above.

[41] The plaintiff’s position is not materially different as to the basics, although of course he emphasizes different elements. He submits that bonus was an integral part of his employment contract and the level of bonus relative to Mr. Fraser’s fixed salary speaks for itself in that regard. The plaintiff urges the court to find the bonus must be based on objective criteria objectively applied and, to make a finding of the bonus amount based upon a consideration of the bonus paid in 2013 (which was the high water mark of the plaintiff’s three year bonus history).

[42] There is no question but that the plaintiff fully appreciated that the bonuses were discretionary, followed no fixed formula, could vary quite significantly from year to year, were determined by Mr. Hawkins (the owner) with the input of his daughter, were awarded annually in arrears in connection with the annual salary review (in February of each year) and depended both upon an appreciation of his own contributions (particularly in relation to acquisitions) as well as a consideration of the results of the business.

[43] The actual bonus history of the plaintiff and of other similar level senior employees is confirmatory of the above description. The plaintiff received a $50,000 bonus for his first part year as an acquisitions manager despite having originated no acquisitions. This was described as intending to incent him for the future. He received $75,000 after his second year and then $175,000 after his last full year 2013. His own evidence was that 2013 was a record year for acquisitions. There is no evidence as to his accomplishments if any in 2014 apart, of course, from the decision of the defendant to terminate the plaintiff’s employment.

[44] There are of course two ways of interpreting the plaintiff’s bonus history. Looked at one way, the plaintiff was on a one-way trajectory both in salary and bonus levels (up). Looked at differently, the bonus amounts were wildly variable and highly dependent on contributions. It does however confirm the defendant’s central tenet: the program was discretionary and past performance was not necessarily a guarantee of the future.

[45] There is no suggestion on the evidence that the plaintiff was ever given any indication of any particular formula to be applied in assessing his contributions. The plaintiff sought to argue that the process was not “arbitrary” but the cross-examination of Ms. Hawkins revealed no formula nor any basis upon which the process could be described as objective or non-discretionary. Mr. Fraser’s affidavit made generalizations about the bonus history of all senior executives, but he admitted that he had no information about any of them except Mr. Tuzi and Mr. Puddy. Of these, Mr. Puddy denied ever having shared his own bonus history. Ms. Hawkins had numerous examples of nil bonus being awarded which the plaintiff was unable to contradict.

[46] Having regard to the fact that the plaintiff had been moved out of the acquisitions group and been given the “Division Liaison” title under the supervision of Amanda Hawkins (instead of CEO Cecil Hawkins who had formerly supervised him), it is not reasonable to assume that his 2013 bonus was in any way “locked in” as a baseline for future bonus allocations. Prior year’s bonus decisions had been driven very largely by acquisitions and the variability in his bonus history was largely explained by the number and success of deals Mr. Fraser had been instrumental in originating or closing. It was clear that his new position as “Division Liaison” continued to include responsibility for originating acquisitions and that bonus would thus continue to be, at least in part, continue to be driven by an assessment of his success in that regard. There is no suggestion on the evidence that the defendant had originated any acquisitions in the part-year he was there nor was there any evidence at all from the plaintiff regarding any other milestones of his performance. The evidence does not support the conclusion that bonus was ever payable just for showing up or not being the object of severe criticism.

[47] There is certainly some evidence that both Mr. Hawkins and Ms. Hawkins found the plaintiff needed quite a bit more supervision than they had thought would be necessary for someone in his position charged with sourcing and managing completing acquisitions. Indeed, one of the themes that emerges from the evidence as a basis for the defendant’s decision to terminate his employment was a sense that he had been given the benefit of the doubt for some time while learning the ropes and Ms. Hawkins had come to the view that he had not grown sufficiently into his role to meet her expectations. Her father, who had supervised Mr. Fraser until then, had been more forgiving in his assessments and made allowances she would not have made. Ms. Hawkins’ negative subjective assessments of Mr. Fraser’s contributions cannot simply be dismissed from consideration in examining bonus entitlement. They were not entirely ex post fact as they were instrumental in her decision to terminate his employment (albeit not rising to the level of an allegation of cause). She had assumed direct supervision over him for 2014 and would have had primary responsibility for assessing his bonus entitlements in 2014 had he not been terminated. I have no basis to challenge the bona fides of her negative assessment of his contributions at the time of her decision to terminate his employment. The fact remains that all parties understood that the bonus process was managed by the owners including Ms. Hawkins and her negative assessment of him was bona fide, real and not the result of hindsight in litigation.

[48] The defendant provided some limited evidence by way of answers to undertakings regarding bonuses given to other employees at a similar level to the plaintiff. Five years of history of four employees (other than the plaintiff) were provided. The history confirms that bonuses were quite variable, did not move in a single direction and were capable of being assessed at nil in some years for some employees even if other employees received bonus.

[49] The plaintiff sought to attach considerable weight to an internal email dated January 1, 2014 between Mr. Cecil Hawkins (the CEO and former supervisor of the plaintiff) and Ms. Amanda Hawkins (the plaintiff’s new supervisor as of late 2013). The email was part of the year end assessment process that ultimately led to Mr. Fraser’s bonus declaration in 2013. In the email, Mr. Hawkins suggested that a bonus of $200,000 might be warranted in Mr. Fraser’s case ($175,000 was ultimately awarded). The email had both praise and criticism of Mr. Fraser. Mr. Hawkins went on to state:

“I sound like the typical division manager wanted to give all of his reports just a bit more than last year. My sense of the Liaison position is a base salary of $200,000, and a bonus in a “typical” year of $200,000, which could go up or down as much as 50 per cent based on performance (originations, and developments of existing and acquired businesses). Of course, if the company has a terrible year, the Liaisons might receive no bonus.

I have wrestled with Liaisons’ bonus in the past, and wish we had a less subjective, and more formulaic approach to their calculation.

There are just my recommendations, and I won’t be offended if you have a different view”.

[50] The plaintiff sought to put great weight on this suggesting that bonus of 100% of salary should be considered “typical”. The problem with this interpretation is that:

a. The internal email was clearly of the “musing” variety and reflected an internal attempt to grapple with the problem of possibly developing a more formulaic and less subjective system in the future;

b. The email does confirm the discretionary and non-formulaic nature of the bonus program as it existed at that time;

c. Actual experience of bonus awards is clearly different than that reflected in the memo – both for Mr. Fraser (in his prior role as acquisitions manager) and for other senior employees, and some senior employees had received nil awards in the past;

d. I cannot in any event conclude in this case that “typical” in the context used by Mr. Hawkins means bonus would be awarded in all cases even without any “wins” or noteworthy contributions - the history of bonus in this organization does not permit a conclusion that any portion of it was ever “automatic” or paid to employees whose only distinction was not being the object of severe criticism or rebuke; and

e. On its face, the email represented a work in progress subject to differing views that Ms. Hawkins might have had and she did have differing views.

[51] I cannot attach undue importance to the January 1, 2014 email. Obviously, it cannot inform me as to the terms of the contract as regards bonus entitlement at the time Mr. Fraser was originally hired in 2011. As a mere draft or a work in progress that was not communicated to the plaintiff prior to this litigation, it cannot be construed as forming part of the plaintiff’s contractual entitlements in 2014 either. The salary and bonus awarded to Mr. Fraser differed materially from the numbers mooted in the email, a fact which confirms its draft character.

[52] At its highest, the email evidences consideration being given as to the possible alteration of the bonus program as it applied to the plaintiff’s new position in 2014. No firm decision is reflected in it and, of course, no communication of the email was made to Mr. Fraser. The Division Liaison position is one that he occupied less than a year prior to his termination and the musings about what the bonus policy towards Mr. Fraser in that new position might have become in future cannot be mutated into findings that such musings had already become an integral part of Mr. Fraser’s contractual entitlements (without ever having been communicated to him). Treating the email as any part of Mr. Fraser’s contract would transform the court’s role from an objective search for the terms of an actual agreement between these two parties based upon the evidence regarding their reasonable expectations into an unguided tour of hopes and aspirations anchored by no more than personal opinions. That exercise has no place in a court of law.

[53] The plaintiff argues that bonus was an integral part of the remuneration package and submits that, even absent a formula, there must be an objective assessment of it. While participation in the plan itself was clearly an entitlement under Mr. Fraser’s employment contract, the plan itself was fundamentally and by its nature discretionary and thus subjective. The court is in no position to assess performance of an individual executive still less to compare his performance to others. The court has no basis to assess the merits of acquisitions originated by the plaintiff, the skill (or lack thereof) used by the plaintiff in managing them, the results obtained from divisions under his supervision and the degree to which he has managed them well or poorly.

[54] If the bonus plan were to be treated as objective for purposes of assessing damages in wrongful dismissal cases, then it must logically be considered objective for ALL purposes and not merely end-of-employment questions. Merely stating the proposition is sufficient to reject it – the court is in no position to sit as a court of appeal weighing allegedly unfair bonus calculations for active employees or to hear constructive dismissal suits based on allegations that a particular decision regarding bonus in a year was alleged to be unfair.

[55] Where, as here, the parties have both freely agreed that a portion of the remuneration of the employee will be subject to a discretionary determination of the value of contributions at year end, their decision prevails for better and for worse, in good times and in bad. The court cannot substitute its judgment for that of the employer by employing averages, extrapolations or other similar but equally arbitrary improvised measures. The plaintiff alleges the defendant could not act arbitrarily in failing to award bonus for an employee who has either been terminated or is working out his notice period prior to termination. What the plaintiff suggests instead is equally arbitrary, consisting of picking and choosing whichever combination of extrapolation or averaging as best suits his aspirations untethered to any consideration of the actual agreement between the parties or any objective view of their collective reasonable expectations.

[56] The plaintiff did well out of the defendant’s discretionary, formula-free bonus program while it worked in his favour, particularly in comparison to the more conservative bonus program he left behind at his old employer. He received bonus of $50,000 for less than five months work in 2011 when he had made no identifiable contributions to the new business and had been able to arrange matters with the defendant so as to collect his full year bonus from his prior employer in addition. He received very nearly the equivalent of his old employer’s bonus ceiling (approximately 50% of salary or $75,000) in 2012 while he was still finding his legs in the acquisition business with the defendant. Finally, he received almost 100% of his 2013 salary in bonus ($175,000) after having had a record year for acquisitions – well beyond anything he could have earned at his prior employer. Unfortunately, while benefitting in good years, the plaintiff must also live with the risk inherent in such a system since he had no fixed entitlements under it and was at risk of the very thing which happened here occurring.

[57] The question the court must ask when bonus is claimed as part of compensation in a wrongful dismissal case is whether any identifiable amount of bonus is a contractual entitlement of the plaintiff. In this case, I cannot conclude that the plaintiff was entitled to any such amount. There is no formula that the court is in any position to apply, objectively or otherwise. Any amount or methodology posited by the plaintiff (or the court) would be as arbitrary and thus subject to the same criticism as the plaintiff makes regarding his exclusion from bonus awards in 2014.

[58] I reach this conclusion both because the bonus plan in question implicitly required participants to be employees at the time the assessment process is undertaken after year end and because the plan itself was fundamentally discretionary and subjective, lacking any formula which a court might objectively apply. For both reasons, there is no amount of bonus to which the plaintiff was contractually entitled as of June 10, 2014 when his employment was terminated or as of October 25, 2014 when his 4.5 months of reasonable notice would have expired.

[59] The following considerations lead me to the conclusion that only employees who were still active, contributing employees after year end had any rights to be considered for bonus:

a. The plaintiff’s prior employment agreement expressly conditioned eligibility upon employment at the time of declaration of the bonus and the parties specifically negotiated Mr. Fraser’s starting time with the defendant in order to ensure he would be able to qualify for that bonus from his prior employer in a plan which was formula-driven – this may be relevant to the reasonable expectations of the parties as regards the requirements of the defendant’s discretionary bonus program without any prescribed formula, floor or ceiling;

b. While the defendant had communicated no written bonus policy expressly excluding the eligibility of departing employees, the plaintiff was advised that his salary was reviewed annually in February and he was also aware that his contributions were reviewed and bonus amounts announced at the same time;

c. The program was described (and understood by participants) as being discretionary, employing no fixed formula and based upon the subjective assessments of contribution by the owners (Mr. Hawkins and his daughter) which were communicated confidentially along with each award.

[60] Neither the discretionary nature of this bonus program, the past history of its application within this company nor Mr. Fraser’s own employment history would have given him any reasonable basis to expect that he was eligible for bonus for a partial year were his employment to be terminated during the year. There is no basis in the relationship between the parties or the application of the bonus program in the past to infer an understanding that bonus entitlements accrued to the level of a contractual entitlement to any amount prior to the annual review process. To the contrary, I find that both parties fully expected that employees needed to be employed past year end in order to be considered. The plaintiff, having asked for the defendant’s indulgence in deferring his start date at the beginning of the relationship in order to collect his bonus cheque from his prior employer, had no need to ask nor any basis to presume that there was a mutual understanding that his entitlement to a purely discretionary bonus from his new employer would be on more generous terms. His new employer did not specifically so advise him, it is true, but such a warning would have been unnecessary and entirely superfluous among business people of this level of sophistication with the background and expectations both brought to the conversation. For the court to impose an express notification requirement in the context of an understanding that was so clearly implicit in the relationship would be entirely artificial and ex post facto reasoning.

[61] Having found that employment beyond December 31, 2014 was a pre-condition of being eligible for consideration in the bonus program for 2014 and given that the notice period in this case extended only to October 25, 2014, it follows that the plaintiff was ineligible to receive bonus for 2014 in any event.

[62] The plaintiff is also disentitled to inclusion of bonus in his damages claim by reason of the purely discretionary and subjective nature of this particular bonus program. Indeed, the year-end eligibility requirement, in a sense, flows from the discretionary nature of the program in the first place. The only reasonable expectation of the parties at all material times regarding the bonus program was that it was fully discretionary and depended upon the outcome of the assessment of each employee’s contributions as part of the year-end process.

[63] It is instructive to note that the plaintiff is claiming an “estimate” of his bonus for the first half of 2015 given his claim for twelve months’ notice. He estimates bonus entitlement at $50,000 for six months (about 50% of his claimed salary entitlement for the period). This number of course is well below the pace of his 2013 bonus award (which was $175,000 for the full year) and underscores the purely discretionary nature of the bonus in this case. Any formula imposed to estimate the purely discretionary bonus entitlement of the plaintiff would necessarily be as arbitrary and subject to the same criticism.

[64] The case of Grace v Reader’s Digest Assn. (Canada) Ltd., 1995 CarswellOnt is cited by the plaintiff to argue that no requirement conditioning eligibility to participation in the bonus program upon continuing employment may be applied in this case due to the failure to communicate that requirement explicitly to the plaintiff. The Grace case is clearly distinguishable. In Grace, the plaintiff had in fact fully completed the fiscal year for which bonus was sought (the year ended in June), but had been constructively dismissed prior to the actual calculation and payment which occurred later (August). More importantly, the bonus in that case was found to be non-discretionary compared to the highly discretionary, non-formulaic bonus program in the present case.

[65] None of the cases cited by the plaintiff are of any assistance here. In Knox v. Interprovincial Engineering Ltd., 1993 CarswellNS 288, the plaintiff was a long-time (27 years) employee who had received bonus almost every year. The evidence was that the bonus was regularly paid to a number of employees in lieu of overtime and was premised on the financial success of the firm which had enjoyed a record year. The case concerned bonus for 1989 (the plaintiff’s employment having terminated in January, 1990). While there was no formula in the case of that bonus plan either, the Board of Directors actually considered and declared a bonus amount of a total of $30,000 and senior management had approved the specific allocation of $11,000 ($10,300 after deductions) of that total to the plaintiff. The issue was whether the allocation was somehow invalid because one director who voted on the original resolution was subsequently found to lack a qualifying share. Although the company purported to cancel the accrual of bonus authorized by the allegedly invalid directors’ resolution, the bonuses were nevertheless paid to all but the plaintiff in the originally authorized amounts. Far from awarding bonus despite the lack of a specific formula, the court in Knox expressly declined to do so. The already allocated (and paid to everyone else) bonus for 1989 was ordered to be paid to the plaintiff it is true, however, the court expressly declined to make any award in his favour for 1990 despite finding a notice period in excess of one year (at para. 97): “Mr. Knox claims a loss of bonus for 1990 at least for the period of his salary entitlement. I am not satisfied on the evidence that such was at all likely, or at all probable and no allowance is assessed under this heading”. On the evidence before me, I cannot conclude that any bonus in respect of Mr. Fraser in this case was likely or probable even if it had been considered by the plaintiff.

[66] Moore v Thomas Fuller Construction Co. (1958) Limited, 2003 CanLii 16536 (C.A.) was also cited by the plaintiff. In Moore, the plaintiff claimed entitlement to a specific amount of money under a formula-driven profit-sharing plan. He was awarded 7/12ths of 10% of 1999 net profits. The court found that this entitlement was an integral part of his employment agreement. The facts of that case could not be more distant from the present case where no particular amount of money has been identified as being placed in any pool – each employee is separately evaluated and given a confidential award revealed to no others.

[67] I find the decision of Trotter J. in Rawlley v Coretec Inc. [2009] O.J. 321 (S.C.J) to be more closely analogous to this case on the bonus issue at least. In that case, the plaintiff had high expectations of bonus although no particular amount was promised. The contract provided that a “bonus will be paid to the Employee when and where applicable”. Trotter J. found (at para. 30-31) “The clause does not create an entitlement to a fixed benefit. Instead, the clause reflects the reality at Coretec, and many other companies, that the award of a bonus is discretionary. There was nothing sinister in the fact that Mr. Rawlley did not receive a bonus. The history and organizational culture at Coretec made it entirely plausible that he would not receive a bonus in 2004. Moreover, as the evidence revealed, the company was unhappy with Mr. Rawlley’s performance and he was about to be terminated. Given the wording of the bonus clause in the contract, it is not surprising that Mr. Rawlley was not awarded a discretionary bonus before or when he was terminated.” With appropriate changes of names and dates, the findings of Trotter J. are applicable to the present case quite precisely. The words in Mr. Fraser’s employment agreement “You will also be eligible to participate in our employee bonus plan” are no more specific as to entitlement. The plan, as described to Mr. Fraser, was fully discretionary.

[68] The defendant urges upon this court that this bonus program was an integral part of the plaintiff’s remuneration, a factor which he seeks to elevate to the level of entitlement. In this regard, the plaintiff is conflating “eligibility” with “entitlement”. The plaintiff’s contract stipulated that he would be “eligible” to participate in the bonus program. His entitlements under that program, however, were at all times discretionary until fixed and declared. For this reason as well, I find that he had no entitlement to any amount of bonus at the time of the termination of his employment or at the end of the notice period I have found he was entitled to.

[69] I have not been pointed to any cases where the courts have found an entitlement to bonus arising from a discretionary plan such as this without any formula to turn to. I decline to invent such an entitlement when doing so would, in my view, run plainly contrary to the reasonable expectations of the parties in this case. Abandoning the test of accrued, objective entitlements would require me to substitute my own views regarding Mr. Fraser’s contributions in 2014 for those of his employer. While Ms. Hawkins assertions that she would allow nothing in respect of Mr. Fraser’s contributions in 2014 may appear self-serving, on what basis could I interpose a different assessment? There is no evidence before me that Mr. Fraser originated or closed any acquisitions in 2014. There is no evidence of the profitability of the divisions that he would have been managing or what other exceptional positive impact his five and a half months of efforts had produced.

[70] If I am wrong in declining to attempt to quantify an accrual of bonus for 2014 until the end of the notice period, I would have calculated the plaintiff’s entitlement based upon the only evidence I have to go on being a comparison of the plaintiff’s bonus history with the bonus history of other employees who received bonus in 2014. Of the five similar-level employees for whom some data was provided (anonymized through the use of letters), only the first three (Employee A, B and C) would appear to me to be at least partly comparable. Of these, employee “A” provides the nearest thing to a viable comparator. This employee clearly had some negatives associated with his or her 2014 performance review since bonus for 2014 was assessed at a level of only 30% of the level that had been awarded for 2013 (contrasted, for example, with Employee B whose bonus was unchanged year over year).

[71] I would have assessed Mr. Fraser’s bonus entitlement at a minimum of a 15% discount to Employee A mutatis mutandis. I find it highly improbable to assume that the owners of the defendant would have had a more generous view of the value of the 2014 contributions of a Mr. Fraser who had been terminated or even received working notice compared to their assessment of another individual at a similar level whose employment was not actually terminated in the year. I also take into account (i) the lack of any evidence alleging any actual contributions of note by Mr. Fraser in the first five and half months at least, including by way of acquisition; and (ii) the fact that the evidence satisfies me that a component of bonus assessment was to provide an incentive to the employee for future performance. It is safe to assume that incenting future performance would form no part of the assessment of bonus for a terminated employee if one were to enter into the artificial process of attempting to assess bonus after the fact.

[72] In Mr. Fraser’s case, receiving only 30% of his 2013 bonus similar to Employee A would equate to an entitlement for the full year 2014 of $52,500. If pro-rated to his (approximately) 5.5 months of employment and 4.5 months of notice entitlements, the result would be $43,750, from which I would subtract a discount of at least 15% or $6,562. Had I undertaken the process, I would thus have found an entitlement of not more than $37,187.50 for bonus entitlement for the 10 months of 2014 worked by Mr. Fraser or in respect of which he was entitled to notice or pay in lieu thereof.

(iv) Other Damages

[73] The plaintiff has claimed $360 in respect of health care costs that would have been covered by the defendant’s plan were he given proper notice. There is no dispute of this claim and I would allow it.

[74] The plaintiff has made claims of $2,467.98 in job search and related mitigation expenses. The defendant suggests that a number of categories of claims are duplicates, relate to the period after he had new employment or have not been justified with any back up on cross-examination. The defendant admits a total of $1,293.93 of job search and related claims and challenges the remainder (detailed in paragraph 161 of the defendant’s factum). I find that the plaintiff has not proved entitlement to the second cancellation fee ($283.22), September cell phone charges ($72) and $93.52 in unspecified office supplies (for which the defendant would allow $25 and I concur in the absence of the plaintiff having adduced evidence). I would allow the remainder of the expenses disputed. Accordingly, I am disallowing $423.74 of the expenses claimed by the plaintiff and allowing a total of $2,044.24 under this head of damages.

[75] The parties did not file detailed materials outlining Mr. Fraser’s claim in relation to pension entitlements. Under Mr. Fraser’s employment agreement, he was entitled to participate in the company’s defined benefit pension plan for which his employer contributed 4% of base salary. Mr. Fraser is entitled to the value of such contributions for any period of time following the termination of his membership in the pension plan up until the end of the period of reasonable notice. The record does not provide me with sufficient evidence to calculate Mr. Fraser’s entitlement with precision. He shall be entitled to 4% of his base salary for the period from the date of the termination of his employment (June 10, 2014) to the extent not already contributed or paid to him until August 25, 2014 (his start date with his new employer). Thereafter, until October 25, 2014 he is entitled to 4% of base salary after an accounting of remuneration from his new employer.

(v) Disposition

[76] In the result I find:

a. The plaintiff was entitled to reasonable notice of 4.5 months (4 months and 15 days) under his contract of employment with the defendant when his employment was terminated on June 10, 2014, such notice period expiring on October 25, 2014;

b. The plaintiff’s claim to receive damages on account of bonus in respect of 2014 from the defendant (whether prior to termination of employment or during the notice period) is denied;

c. As the plaintiff’s efforts at mitigation were reasonable and resulted in no employment earnings prior to August 25, 2014, the plaintiff shall be entitled to receive payment of the full value of salary plus 4% of salary in respect of pension contributions from the date of the termination of his employment (June 10, 2014) until the date of the commencement of his new employment (August 25, 2014) subject only to deduction of amounts previously paid or contributed by the defendant;

d. For the period from August 25, 2014 until the expiry of the reasonable notice period (October 25, 2014), the plaintiff shall be entitled to further damages of an amount equal to what he would have received in wages from the defendant for the period (plus 4% in respect of pension contributions) less any amounts of remuneration received or receivable in respect of that time period, including a pro rata share of the 2014 bonus received; and

e. The plaintiff shall be entitled to the sum of $2,044.24 as reasonable mitigation expenses in respect of costs incurred in the job-search process and $360.00 in compensation for lost health benefits.

[77] While it may seem unfair to require Mr. Fraser to account for bonus from his new employer in respect of 2014 while not receiving any accounting of bonus from his old, I know of no principle that allows me to exclude particular amounts received in mitigation from the calculation of damages. The bonus received from his new employer was in respect of earnings partly in respect of the period of reasonable notice for which the defendant is responsible and the defendant is entitled to a full accounting of earnings for that period.

[78] I shall rely upon the parties to work out the numbers needed to implement this judgment on a co-operative basis between them and may be spoken to if there is any difficulty in arriving at final numbers. I trust that will not be necessary.

[79] Finally, there is the matter of costs. Of course, I am not privy to any Offers to Settle that may have been exchanged under Rule 49. The defendant did offer to provide three months salary to the plaintiff against a release when it terminated his employment on June 10, 2014.

[80] I will reserve judgment on the matter of costs until I have received written submissions from the parties. I would request the plaintiff to make its costs submissions in writing within two weeks of the date of release of these reasons, restricted to three pages plus an outline of costs. The defendant shall reply within one week thereafter (same length restrictions). Submissions may be sent to me by fax or delivery to judge’s reception (Room 107, 361 University Avenue) or by email to my assistant.

Sean F. Dunphy

Date: April 7, 2015