Court File and Parties

COURT FILE NO.: CV-17-585593

MOTION HEARD: 20180301

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Greg Posehn, Plaintiff

AND:

Canadian Imperial Bank of Commerce, Defendant

BEFORE: Master Jolley

COUNSEL: Kimberly Boara Alexander, Counsel for the Moving Party Plaintiff

Frank Cesario, Counsel for the Responding Party Defendant

HEARD: 1 March 2018

REASONS FOR DECISION

[1] The plaintiff brings this motion to strike two paragraphs of the statement of defence on the basis that they refer to a without prejudice settlement offer made by the defendant to the plaintiff on the termination of his employment (the “termination offer”). The plaintiff argues that the termination offer is subject to settlement privilege and is also irrelevant to the matters in issue. He seeks to strike the paragraphs as tending to prejudice or delay the fair trial of the action and on the basis that they are scandalous, frivolous or vexatious.

[2] The defendant argues that the plaintiff has made the termination offer relevant as a result of the allegations in his statement of claim and takes the position that that it needs to refer to the termination offer to defend itself. I agree.

[3] Normally in wrongful dismissal cases, an employer’s without prejudice termination offer would not be relevant. Had this been a wrongful dismissal claim where the only issue was the length of reasonable notice, I would have found the paragraphs in question to be irrelevant. However, in his statement of claim the plaintiff alleges bad faith against the defendant and claims aggravated and/or punitive damages in the amount of $500,000 arising from the defendant’s bad faith conduct “as pleaded herein”.

[4] The plaintiff argues on this motion that the bad faith alleged is related only to actions taken by the defendant some years prior to the termination in misleading the plaintiff as to its position on how certain compensation would be treated on a termination. The plaintiff pleads that CIBC had attempted to restrict his severance calculation in a letter to him in October 2014. He alleges that he and CIBC reached an agreement that in the event his employment was terminated, his severance would not be based only on his cash compensation, which was what was provided in the letter, but would also include his deferred incentive compensation. The plaintiff pleads that CIBC amended the October 2014 letter as a result of these negotiations and removed that restriction by removing all references to payment on termination.

[5] He pleads that CIBC “later” went back on their agreement. Paragraph 15 of the statement of claim reads “CIBC removed the objectionable language from the Original Promotion Letter. It otherwise stayed silent in the face of Mr. Posehn’s objections. For it to later rely upon language in its other plans, policies or agreements to limit Mr. Posehn’s entitlement on termination is deceitful and in bad faith and constitutes bad faith in the performance of its contractual relationship with Mr. Posehn. CIBC’s bad faith was only discovered or discoverable when, at the time of termination, it refused to include the value of deferred equity award in the calculation of pay in lieu of notice.”

[6] The only time that CIBC could have “relied” on language in plans to limit the plaintiff’s severance is in the termination offer it made upon terminating the plaintiff’s employment. The only place where CIBC “refused to include the value of deferred equity awards in the calculation of pay in lieu of notice” is in that termination offer.

[7] In paragraph 40 of the statement of claim the plaintiff pleads that, in breach of the agreement between him and CIBC, “CIBC is now taking the position that compensation over the Stub period and pay in lieu of notice are to be calculated on the basis of cash compensation only”. That allegation directly puts in play the “position of CIBC”, which is the position it set out in its termination offer.

[8] In paragraph 4 of the statement of claim the plaintiff alleges that CIBC underpaid him in the two fiscal years leading up to his termination and then failed to respond to his objection. The plaintiff argued on this motion that this underpayment and this failure to respond and correct the situation are the focus and extent of his bad faith claim. However, this is not borne out by a reading of the statement of claim, as the plaintiff goes on in that same paragraph to plead that “not only did CIBC fail to respond to those objections, it then sought to capitalize on its prior unreasonable payments to reduce the amounts payable to Mr. Posehn over a reasonable notice period”. This reference to the position of CIBC on an appropriate termination payment makes relevant the termination offer that CIBC made.

[9] Further, paragraph 5 of the statement of claim pleads that “Mr. Posehn brings this action for breach of contract and wrongful dismissal. He also claims damages for CIBC’s bad faith conduct.” While the plaintiff argued that his bad faith claim relates only to the earlier agreement from which CIBC is either now resiling or about which CIBC mislead him and does not relate to its conduct during termination, the paragraph claiming bad faith follows on the heels of paragraph 4 that directly references CIBC “capitalizing on its prior unreasonable payments to reduce the amounts payable to Mr. Posehn over a reasonable notice period”.

[10] Lastly, paragraph 56 of the statement of claim pleads that CIBC’s conduct “as pleaded herein” was in bad faith and warrants an award of general, aggravated and/or punitive damages. There “herein” conduct includes CIBC’s calculation of pay in lieu of notice based solely on cash compensation and its refusal to include the value of deferred equity awards in the severance offer. Having alleged that CIBC acted in bad faith in its calculations, CIBC is entitled to answer the allegation and respond by pleading the termination offer it made. The plaintiff is then entitled to reply.

[11] As noted in Mueller Canada Inc. v. State Contractors Inc. (1989) 1989 CanLII 4117 (ON SC), 71 O.R (2d) 397 (H.C.), where documents referable to settlement negotiations have relevance apart from establishing one party’s liability for the conduct which is the subject of the negotiations and apart from showing the weakness of one party’s claim in respect of those matters, the privilege does not bar production. Here, the termination offer is relevant apart from establishing liability – it is responsive to the plaintiff’s claim for bad faith. This was confirmed in Bechtold v. Wendell Motor Sales Ltd. [2007] O.J. No. 4886 where the court cited Ariganello v. Dun & Bradstreet Ltd. [1993] O.J. No. 411 for the proposition that “where a proposal is pled to answer accusations of bad faith or of conduct deserving punishment, it is appropriate to make reference to the proposal in the pleadings.”

[12] As noted in Ariganello, “when the so-called offer of settlement is introduced, not to show any admission by either party, and not to indicate the strength or weakness of the case of either party but rather, as the only way to answer an accusation of conduct deserving punishment, then it should be possible to plead the offer.” In the case before me, the statement of claim directly comments on the actions the defendant took at the time of the termination of the plaintiff’s employment and on the termination offer the defendant made.

[13] The motion is therefore dismissed.

[14] I have reviewed the defendant’s costs outline, which is substantially similar to that of the plaintiff. I find the amount reasonable for this motion and order that the plaintiff shall pay the defendant its partial indemnity costs of this motion in the amount of $4,500 within 30 days of the date of this order.

Master Jolley

Date: 2 March 2018