Court File and Parties

COURT FILE NO.: CV-17-567760 DATE: 20170516 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MATTHEW BOWER Applicant – and – POTASH RIDGE CORPORATION Respondent

Counsel: Margaret Bramhill, for the Applicant Steven G. Frankel, for the Respondent

HEARD: May 15, 2017

Endorsement

DIAMOND J.:

Background

1Between June 12, 2012 and February 10, 2015, the applicant was employed by the respondent as its Director of Business Development. The parties signed an Employment Agreement dated November 26, 2013 (“the Agreement”) which outlined the terms of the applicant’s employment. For the purpose of this application, the salient terms of the Agreement are as follows:

“5. Bonus:

You may be entitled to a discretionary bonus at the sole option of the Corporation’s Chief Financial Officer and/or President/Chief Executive Officer, or such other individuals as the Board of Directors may designate from time to time, depending upon your performance, the Corporation’s achievement of its milestones and such other objectives as the Corporation may determine.

11. Termination of Agreement:

(a) Without Cause by the Corporation

Your employment may be terminated at any time without just cause in which case you shall be entitled to receive a severance payment equal to the greater of:

(i) any entitlements mandated by the minimum requirements of the Employment Standards Act, 2000 (Ontario) and the related regulations (“ESA”);

(ii) one month salary for every year of service up to a maximum of 12 months’ salary; or

(iii) six months’ salary.

For the purpose of (ii), for each partially year worked prior to termination you will be entitled to receive a pro-rated amount of one month salary proportioned to the number of months worked in the applicable year.”

2On or about January 29, 2015, Guy Bentinck (“Bentinck”, the respondent’s President and Chief Executive Officer) advised the applicant that his employment with the respondent would be terminated effective February 15, 2015.

3On February 10, 2015, Bentinck delivered a termination letter to the applicant stating, inter alia:

“In accordance with the terms of your Employment Agreement executed on November 26, 2013 (the “Agreement”) and the Employment Standards Act, 2000, the following payments and benefits are due to you upon termination:

(1) A severance payment equal to six months’ salary of $75,000.00.

(2) Payment of unused accrued vacation. Based on the Corporation’s records you have 2.5 days accrued for an amount of $1,562.50.

(3) Your annual bonus for the 2013 fiscal year of $20,000.00.”

4The termination letter went on to advise the applicant that given the respondent’s current lack of cash availability, on the February 15, 2015 payroll date (which was also the applicant’s termination date), the respondent would pay him $11,562.50, representing his unused accrued vacation pay ($1,562.50) and 50% of his 2013 annual bonus ($10,000.00). Regrettably, the respondent never made that payment to the applicant on February 15, 2015.

5In the termination letter, Bentinck further advised that “if and when there is sufficient cash availability”, the respondent would undertake to make further payments to the applicant for the unsatisfied debts owing.

6On July 15, 2016, the respondent paid the applicant a further $18,750.00, representing 25% of the severance pay due and owing to him. No further payments were made by the respondent, despite several requests by the applicant.

7In March 2017, after the respondent hired a new Chief Financial Officer, the respondent’s Board of Directors re-evaluated the accruals on its financial statements of several 2013 employee bonuses including the applicant’s bonus. The Board of Directors then decided that the accruals were no longer appropriate and formally passed a resolution reversing and cancelling the 2013 employee bonuses including the applicant’s bonus.

8The applicant brings this application seeking a determination of the parties’ rights under the Agreement and termination letter, and in particular:

(a) a declaration that the applicant is entitled to receive the balance of the severance payment together with his 2013 $20,000.00 bonus; and

(b) an order directing the respondent to pay the above amounts in a lump sum payment.

Analysis

9In response, the respondent first takes the position that the severance payment is indeed due and owing, but that the Court ought to exercise its discretion under Rules 1.05 and 38.10 of the Rules of Civil Procedure to “make an order on terms that are just” by imposing a reasonable and appropriate payment plan for the outstanding $56,250.00.

10The respondent cited no specific case law in support of its request. In my view, the absence of such case law is clearly due to the fact that there are no grounds upon which to make such an order, especially in the context of severance payments due and owing to terminated employees. The purpose of providing a terminated employee with reasonable notice (or a severance payment in lieu thereof) is to ensure that the employee is able, as best as he/she can, to secure alternative employment without losing any income. Reasonable notice allows a terminated employee the best chance to make a seamless transition into another job. Why would an employer be permitted to delay payment in lieu of reasonable notice - especially a contractually obligated severance payment – as a result of its own financial status, something well beyond the control of the terminated employee? As held by the Court of Appeal for Ontario in Antunes v. Limen Structures Ltd. 2016 ONCA 61, the fact that a business may find itself in financial difficulty for various reasons is completely irrelevant to the wrongful dismissal claims of a former employee. Accordingly, I grant the relief sought by the applicant with respect to his outstanding severance payment due and owing from the respondent.

The 2013 Bonus

11With respect to the applicant’s 2013 bonus, the respondent submits that notwithstanding the terms of the Agreement and the termination letter, the applicant’s 2013 bonus remained subject to approval by the respondent’s Board of Directors, and the applicant was made aware of that fact.

12The respondent relies upon the evidence of its Chief Operating Officer Ross Phillips, who gave evidence on cross-examination that he advised the applicant that the 2013 bonus was always subject to approval from the respondent’s Board of Directors. As the Board of Directors never gave its approval, this allegedly disposes of the applicant’s claim to the 2013 bonus.

13I reject the respondent’s position for the following reasons:

(a) the terms of the Agreement, drafted by the respondent, are clear and unambiguous on their face. Clause 5 states that the applicant may be entitled to a discretionary bonus as the sole option of either (i) the respondent’s Chief Financial Officer and/or President/Chief Executive Officer, or (ii) such other individuals as the respondent’s Board of Director may designate from time to time. The termination letter was drafted and signed by Bentinck, the respondent’s Chief Executive Officer (i.e. one of the individuals at whose sole option could exercise the necessary discretion to award the 2013 bonus). It is clear that Bentinck exercised that discretion and confirmed it in his termination letter.

(b) Bentinck’s termination letter makes no reference whatsoever to the applicant’s 2013 bonus being tied to or dependent upon approval from the respondent’s Board of Directors. On the contrary, the termination letter confirms that the 2013 annual bonus is “due to the applicant upon termination”. The termination letter goes even further to confirm that on February 15, 2015 50% of his 2013 annual bonus would be paid (even though it was not). How could that payment have been conditional upon approval from the respondent’s Board of Directors if Bentinck confirmed it would be made five days after the termination letter? The respondent attempted to argue that the reason it was not paid on February 15, 2015 was that its Board of Directors did not provide the necessary approval. There is no evidence whatsoever in the record before me to support such a position.

(c) on cross-examination, Phillips confirmed that after delivery of Bentinck’s termination letter Phillips never reached out to confirm the discretionary nature of the 2013 bonus with the applicant. As such, it was and remains open to the applicant to rely upon the “indoor management rule” which provides that any person dealing with a corporation has no obligation to ensure that the corporation has gone through any procedures required by its articles, by-laws, resolutions, contracts or policies to authorize the transaction or to give authority to the person purporting to act on behalf of the corporation. All the applicant needed to prove was that Bentinck had actual or apparent authority to authorize the 2013 bonus. Who other than the respondent’s President and Chief Executive Officer could be in a position to authorize the applicant’s 2013 bonus, especially when the Agreement itself provides that Bentinck could perform that exact task?

14Accordingly, I grant the relief sought by the applicant with respect to the 2013 $20,000.00 bonus.

Costs

Costs

15With respect to costs of this application, I would urge the parties to try and resolve the issue, failing which they may serve and file written submissions.

16The applicant may serve and file his costs submissions within 10 business days of the release of this Endorsement. Those submissions shall be no more than five pages including a Bill of Costs.

17The respondent shall thereafter have an additional 10 business days from the receipt of the applicant’s costs submissions to deliver its responding costs submissions which shall also be no more than five pages including a Bill of Costs.

Diamond J.