Court File and Parties

COURT FILE NO.: CV-18-592619 DATE: 20181122 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

IVARS MIKELSTEINS Plaintiff – and – MORRISON HERSHFIELD LIMITED Defendant

COUNSEL: James D. Heeney and Julia L. Burke, for the Plaintiff David E. Greenwood, for the Defendant

HEARD: September 21, 2018

Justice S. Nakatsuru

Overview

[1] Mr. Ivars Mikelsteins lost his job on October 26, 2017. He was terminated without cause. Mr. Mikelsteins had worked 31 years - his entire working life - at Morrison Hershfield Ltd. (“Morrison Hershfield”), an employee-owned engineering firm that provides engineering and construction consulting services throughout Canada and the United States. Prior to his termination, Mr. Mikelsteins held the position of Director, Business Development for the Telecom Business Unit. He was not responsible for supervising employees but his daily responsibilities included sales and business development. It is not disputed that Mr. Mikelsteins was a good employee. However, Morrison Hershfield believed there was a slowdown in his area in the securing of new work and therefore found it necessary to make some difficult staffing decisions. They terminated this long-time employee.

[2] Mr. Mikelsteins’ annual compensation package included: a base salary, employment benefits, company contribution to his RSSP equal to 4% of base salary, and a pay-for-performance plan. In addition to this, Mr. Mikelsteins was eligible to purchase shares of his company as an employee of Morrison Hershfield. He had bought a quantity of shares. Not all employees were invited to do so. There is a shareholder’s agreement: The Amended and Restated Morrison Hershfield Group Inc. Shareholders’ Agreement (“Shareholders’ Agreement”), that set out the terms and conditions regarding the shares held by the various shareholders. Mr. Mikelsteins received an annual payment called a “Share Bonus” paid in accordance with that agreement.

[3] Mr. Mikelsteins brings a summary judgment motion for damages for his wrongful dismissal. There is no issue that Mr. Mikelsteins was terminated without cause and without appropriate notice being given. The question on this motion is what he is rightly owed as damages by Morrison Hershfield.

[4] The parties have agreed that this case can be decided on summary judgment although it is really partial summary judgment given the contingencies involved. There are no material facts in dispute. I commend counsel for narrowing the issues. The following issues are now remaining:

• The reasonable notice period at common law that Mr. Mikelsteins should have received;
• The damages that he is entitled to during this period;
• His entitlement to any increase in the valuation of his shares in the defendant company during the notice period, any gross-up on the value, and the share bonus pursuant to the Shareholders’ Agreement; and
• His final award in light of his continuing obligation to mitigate his damages.

The Test for Summary Judgment

[5] Pursuant to Rule 20, a plaintiff is entitled to move for summary judgment dismissing “all or part” of a defendant’s claim. Rule 20.04(2) mandates that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to all or part of the claim.

[6] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 45, the Supreme Court of Canada confirmed that summary judgment is a “significant alternative model of adjudication”. Rule 20 provides judges with fact-finding powers (i.e., the power to weigh evidence, evaluate credibility, and draw inferences) if required in order to eliminate unmeritorious claims that have no chance of success at trial.

[7] Determination of a motion for summary judgment involves a two-step approach. A judge must:

1. Determine whether there is a genuine issue requiring trial based only on the evidence before him or her, without using the fact-finding powers. If there is no genuine issue requiring a trial, summary judgment must be granted.

2. If there appears to be a genuine issue requiring a trial, the judge should then determine whether the need for a trial can be avoided by using the fact-finding powers to weigh evidence, evaluate credibility, and draw inferences.

Analysis

The Reasonable Notice Period

[8] Mr. Mikelsteins submits that he should be entitled to a reasonable notice period of 30 months. Morrison Hershfield says it should be 20 to 22 months. In my view, the appropriate notice period is 26 months.

[9] Reasonable notice provides an employee with a reasonable period of time to find replacement work. In determining the length of the reasonable notice period, I must take the approach set out in the well-known case of Bardal v. The Globe and Mail Ltd., (1960), 24 D.L.R. (2d) 140 at p. 145 (Ont. H.C.J.). The notice period depends on the facts of each case. I should consider factors such as the character of the employment, the length of service, the age of the employee, and the availability of similar employment having regard to the experience, training, and qualifications of the employee: Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 at para. 86.

[10] At the time of his termination, Mr. Mikelsteins was 57 years old. He has a Bachelor and a Master’s degree in civil engineering. While employed he took some sales courses. While he has a technical background, his job involved about fifty percent sales and business development. That said, as I understand it, his professional qualifications were not irrelevant to his work.

[11] In his role as Director, Business Development for the Telecom Business Unit, Mr. Mikelsteins met with existing clients to maintain relationships, secure ongoing projects, and gain new work. He also was to seek out new clients to establish new relationships and get new projects. He would be involved in social functions to do that, and would also be a part of the deliverables process. Further, Mr. Mikelsteins would manage projects and provide advice to managers and staff. He would generally have 20 or 30 projects on the go at any given time. Some were $10,000 projects while others were over $1,000,000. In addition to sales, development, and management, he did technical work; such as technical review of the work of the engineers, or designing such things as telecommunications towers. Overall, he led a team with one direct report and worked with 10 to 12 other coworkers on other projects. It was his responsibility to manage the overall sales funnel, prepare proposals, provide guidance and advice to project managers and others regarding ongoing projects. Some of the clients that he worked with were major telecommunication companies such as Rogers Wireless, Rogers Cable, Freedom Mobile, and Bell Mobility. He also served on the internal activities of his employer. His base salary was $154,000, but it was supplemented by benefits, a bonus, and an opportunity to purchase the defendant’s shares.

[12] Both parties have provided me with cases that support their range of reasonable notice periods. Both parties also distinguish the cases relied upon by the other. There is no absolute upper limit on notice periods. Yet, there remains a need for consistency and some certainty, even having regard to the specific circumstances of a case: Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520 at para. 41.

[13] In my view, a reasonable notice period of 26 months is right. It is consistent with the case law and recognizes the important and unusual circumstances in this case that support it. Mr. Mikelsteins is an older employee. He has spent his entire working life with Morrison Hershfield. He is a long-time employee of 31 years. He is well-paid. Given his age and limited work experience with one company, his ability to secure comparable work will be affected: Drysdale v. Panasonic Canada Inc., 2015 ONSC 6878 at para. 14. In addition, his experience in sales, technical, and business development has focused on telecommunications companies especially the larger ones. His was a skilled and specialized worker. Further, while time limited to one year, his ability to work for competitors has been narrowed by a non-solicitation clause: Dimmer v. MMV Financial Inc., 2012 ONSC 7257 at para. 99; Chambers v. Omni Insurance Brokers, 2002 O.J. No. 2063 (Ont. C.A.) at para. 66. While I appreciate that there is no non-competition clause, which means he can work for these telecommunications companies - and has tried to do so - this non-solicitation clause does restrict his marketability with third party companies who may wish to do business with these companies. Practically, given his inability to seek out as potential customers those telecommunications companies that dominate the marketplace in this country for that one year period, this clause places him at a disadvantage. I find that the effect of that disadvantage is one he may not be able to readily overcome once the clause expires. The fact that he may have willingly accepted the condition so that he could acquire shares in Morrison Hershfield has no material bearing on this effect on his employability.

[14] With respect to one factor argued by the plaintiff, I agree with the defendant that the lack of a reference letter is not a particularly probative factor since he has had no need for one yet and the defendant submits that they are willing to give him one. Mr. Mikelsteins was a well-liked employee and received good performance evaluations. If Morrison Hershfield has not yet provided Mr. Mikelsteins a reference, they should provide one forthwith.

[15] On the other hand, a notice period in the range suggested by Mr. Mikelsteins is too high, in my view. Stripped to its essence, although at a senior level, Mr. Mikelsteins’ role was mainly in sales and business development. These are skills and talents that can be of value in the marketplace in a number of contexts. In addition, while his experience does not involve a broad range of potential clients and customers, telecommunications itself is a burgeoning field in our society. Finally, while he held important responsibilities, his job did not include a large supervisory role and was not at the most senior levels of the company.

[16] Thus, taking into account all the appropriate factors, I conclude the reasonable notice period to be 26 months. Based on this, summary judgment is granted for the damages for his base salary, bonus, and RRSP.

Damages for Benefits During the Reasonable Notice Period

[17] The basic principle in awarding damages for wrongful dismissal is that the terminated employee should be placed in the same financial position they would have been in had such notice been given: Paquette v. TeraGo Networks Inc., 2016 ONCA 618 at para. 26. As previously noted, the parties have agreed on what Mr. Mikelsteins should receive for base salary, bonus both owing and during the notice period (during his notice period it is based on an average of his last three years of employment), and employer contribution to his RRSP (which is 4% of base salary).

[18] There remains a dispute about Mr. Mikelsteins’ benefit plan. Mr. Mikelsteins participated in the benefits plan. Morrison Hershfield discontinued his benefit coverage for out-of-country medical expenses, emergency travel assistance, AD&D and long-term disability on December 21, 2017. All premiums for these benefits were paid by Mr. Mikelsteins. [^1] All other benefits, including health benefits, have been continued by the defendant until October 26, 2018. It is not disputed that he should be compensated for the value of his benefits during the 26 month notice period where he does not have coverage. One difficulty posed is that Mr. Mikelsteins has not purchased any replacement coverage or lead any evidence regarding the cost of such a replacement plan.

[19] Mr. Mikelsteins submits that regardless of the fact he has not replaced his benefits coverage, he has still suffered damages from the loss of the former benefit plan. He submits that the cost of replacing this plan is higher than the employer’s monthly premiums and such an award would undercompensate him. Mr. Mikelsteins argues that a percentage award of his base salary as used in other Ontario cases would be the fair award of damages. He submits 5% of his base salary should be applied for the year which Morrison Hershfield continued some of the benefits and then 10% for the remainder of the notice period.

[20] Morrison Hershfield argues that this approach would provide Mr. Mikelsteins with a windfall. It submits that Mr. Mikelsteins has led no evidence as to the replacement costs of any of the benefits. It is submitted that a percentage of his base salary, whether 5% or 10 %, is arbitrary and has no connection to any possible damages that he may have suffered. The cases relied upon by the plaintiff are cases where the employer led no evidence as to its premium costs; something that is uniquely in the knowledge of the employer. In the case at bar, the appropriate award should be Morrison Hershfield’s monthly premium cost of $314.89 from October 27, 2018, to the end of the notice period.

[21] The plaintiff relies on a number of authorities where this 10% figure was settled on: Bergeron v. Movati Athletic (Group) Inc., 2018 ONSC 885 at paras. 49-51; Adjemian v. Brook Crompton North America, 2008 CarswellOnt 3304 (S.C.J.); Dussault v. Imperial Oil Ltd., 2018 ONSC 4345; Nemirovski v. Socast Inc., 2017 ONSC 5616 at para. 14; Beatty v. Best Theratronics Ltd., 2014 ONSC 3376 at para. 20; Nasager v. Northern Reflections Ltd., 2010 ONSC 5840 at para. 8; Egan v. Alcatel Canada Inc., 2004 CarswellOnt 2873 (S.C.J.) at para. 31. The defendant did not present me with any authority that held that damages in the amount of the premium paid by the employer would be just damages.

[22] There is no question that Mr. Mikelsteins has suffered damages due to the loss of his benefits plan and he should be entitled to compensation. That acknowledged, I must say the state of affairs on this issue is somewhat dissatisfactory. There is merit to both parties’ position. On the one hand, giving Mr. Mikelsteins what the employer paid in premiums would undercompensate him given that generally speaking, an employer plan is likely negotiated with lower overall premiums compared to benefits received than if an individual went into the marketplace and purchased a similar benefit plan. On the other hand, this type of evidence could readily have been obtained by Mr. Mikelsteins and depending on the circumstances, there may not be a significant difference in the premiums that need to be paid to purchase a comparable plan. At least, a more concrete figure than a percentage could have been assessed by me if further evidence was led.

[23] I note that in the authorities provided very little analysis has gone into determining that 10% of base salary is a fair estimate of the value of the benefit plan. I note that on the facts of each of those cases, the damages ranged from 10% of base salaries of approximately $50,000 to $100,000, leading to considerable differences in damages. The exception is the case of Dussault where the employer led evidence that their benefits were worth 7.8% of the base salaries of about $286,000 and $227,000, which Favreau J. used to settle on an 8 % figure as an appropriate amount. It seems to me from a review of the authorities that a percentage figure of 10% was chosen based upon the allure of a simple formula, selected for the sensible reason to avoid the litigation cost of unravelling a potentially contentious subject-matter without significant benefit.

[24] In the final analysis, I am persuaded that on this summary judgment motion that the just figure for damages for the loss of benefits would be to award Mr. Mikelsteins 10% of his base salary for the 14 month period of reasonable notice that extends beyond October 26, 2018, when his benefit plan ended. This is in keeping with the approach taken in the authorities and seems to be a fair and reasonable amount given his base salary of $154,000.

[25] However, I disagree that he should receive 5% of his base salary for the period of time before then. During this period of time he was still receiving his benefits, paid for by his employer. I find that he should have led evidence in determining the amount of damages he suffered during this period. It is speculative for me to simply award the percentage argued by him, and this amount would likely overcompensate him for these benefits. Up until December 21, 2017, he received his benefits. Thereafter, the employer paid benefits continued but not the benefits for which he only paid the premiums. It would be a windfall to award him 5% on the speculation that he would have had to pay higher premiums in the marketplace. The evidence of how much it would have cost him to buy comparable benefits given the specifics of his personal situation is evidence that is uniquely within his knowledge. On a balance of probabilities, I find he would not have proven damages for a loss of benefits for which he only paid the premiums for. Thus, he will not receive any damages for loss of benefits from the date of his termination to October 26, 2018.

[26] Thus, summary judgment is granted accordingly on the issue of the damages for the benefits he is to have received.

Entitlement to Increase in Share Valuation, Share Bonus, and Gross-Up

[27] Mr. Mikelsteins was eligible to purchase shares of Morrison Hershfield. Not all employees of the company were invited to purchase shares but only a select number at the senior level. Mr. Mikelsteins became a shareholder around 1996. Morrison Hershfield was then small enough that the shares were purchased through Mr. Mikelsteins’ RRSP. Prior to his termination, Mr. Mikelsteins owned a total of 5,108 shares through Morrison Hershfield’s parent corporation, Morrison Hershfield Group Inc. These shares are governed by the terms and conditions of the Shareholders’ Agreement. Mr. Mikelsteins entered into this Shareholders’ Agreement when he purchased the shares.

[28] As a shareholder, Mr. Mikelsteins received “Share Bonuses”. Each shareholder’s Share Bonus depended upon the number of shares held by the shareholder. The Share Bonus is paid out annually. Over the past three years, the Share Bonus on a per share basis has been $7.52 in 2014/14, $7.86 in 2015/16 and $11.10 in 2016/17. The sum totals received by Mr. Mikelsteins were $36,666.33 in 2014, $74,272.02 in 2015, and $42,436.14 in 2016. The Share Bonus is an objective calculation based on the company’s results and is paid according to the terms of the Shareholders’ Agreement. Mr. Mikelsteins received the 2016/2017 Share Bonus payment in early 2018, at the same time as all the other shareholders. It is Morrison Hershfield’s position that any Share Bonus owing to Mr. Mikelsteins has been paid. The Share Bonus value for 2017/2018 will not be set until January of 2019.

[29] On the termination of his employment, Morrison Hershfield took the position that according to the “Transfer Notice” provision of the Shareholders’ Agreement, Mr. Mikelsteins was deemed to have given his Transfer Notice on November 25, 2017 (30 days following the date of the written notice of dismissal on October 26, 2017). In other words, Mr. Mikelsteins was deemed to have sold his shares at that time. In January of 2018, Morrison Hershfield paid Mr. Mikelsteins the Fair Value applicable to his shares, [^2] which was set by the Board of Directors following the close of 2017. This Fair Value applies to everyone who purchased shares in Fiscal 2018 or who sold shares prior to June 2, 2018. This valuation was set at $195.66 per share.

[30] The fundamental disagreement between the parties is whether Mr. Mikelsteins should receive his entitlements under the Shareholders’ Agreement during the 26 month notice period. Morrison Hershfield submits that according to the terms of the Shareholders’ Agreement, they have paid what is owing to Mr. Mikelsteins. He is not entitled to more. On the other hand, Mr. Mikelsteins submits that he is entitled to the increase in the value of his shares and the Share Bonus during the 26 month notice period. He submits that this is required in order that he be placed in the same financial position he would have been had he been given proper notice. Damages for wrongful dismissal include all of the compensation and benefits that the employee would have earned during the notice period. The Shareholders’ Agreement does not clearly oust this entitlement. Finally, Mr. Mikelsteins argues his award for an increase in the value of the company’s share price should be grossed-up to address the fact that such an award will be taxed differently than if he had held the shares in his RRSP.

[31] The Shareholders’ Agreement is comprised of 7 Articles and 5 schedules. The Articles deal with: Definitions and Interpretation; Transfer of Shares; Automatic Transfer Notices; Other Mandatory Dispositions; Additional Issues; Policies and Programs; Miscellaneous.

[32] Article 2.1 deals with the restriction on the issuance, transferal, sale, etc. of the shares and restricts this in accordance with the Shareholders’ Agreement. Except for limited prescribed situations, Article 2.2 requires any sale or transfer of shares be done by way of a Transfer Notice. It states:

2.2 Transfer Notice Any Shareholder proposing or offering to sell or being required by this Agreement to offer for sale or otherwise dispose of any Shares (hereinafter referred to as a “Selling Shareholder” , which expression includes the legal personal representative or representatives of a deceased Shareholder, the assignee of a Shareholder who has made an assignment for the benefit of creditors, the trustee of a bankrupt Shareholder, the committee of a Shareholder who has been declared mentally incompetent or incapable of managing his/her affairs, the liquidator of a Corporate Shareholder in the process of being wound-up voluntarily or involuntarily, and a Corporate Shareholder applying for leave to surrender its charter or dissolving under applicable law) shall initiate such sale or transfer by, and only by, giving a Transfer Notice forthwith if such sale or transfer is voluntary or within such other time period as prescribed herein, which Transfer Notice shall identify the Shares to be offered for sale or otherwise disposed of (the “Offered Shares”). Where pursuant to this Agreement any Selling Shareholder is required to deliver a Transfer Notice and does not do so within the time herein specified, then for all purposes of this Agreement such Selling Shareholder shall be deemed to have forwarded such Transfer Notice within the time specified and such Transfer Notice shall be deemed to have been received by the Corporation immediately prior to the expiration of the time within which such Transfer Notice was required to be forwarded. A Selling Shareholder may not revoke a Transfer Notice, except with the consent of the Directors. Subject to the discretion of the Directors, the Corporation shall provide notice to the Shareholders on a regular basis as to the details of the delivery or deemed delivery of Transfer Notices.

[33] “Transfer Notice” is further defined in Article 1.1(a) which prescribes under Schedule B the form to be used as a Transfer Notice. Schedule B is a simple form to be used as a Transfer Notice, which is a notice to the company that the undersigned notifies that he/she wishes to transfer a certain number of shares in accordance with the terms of the Shareholders’ Agreement.

[34] Article 2.4 deals with what occurs when the Transfer Notice is received. Except as otherwise provided, the corporation, a purchaser, or the remaining shareholders agree to buy the offered shares. Thus, the Transfer Notice sets in motion the process under the Shareholders’ Agreement for the purchase of these shares by the company or others and the setting of the valuation of those shares (the Fair Value which is defined) on a specified date (the Transfer Date).

[35] Article 3 deals with Automatic Transfer Notices. This includes, amongst other things, a shareholder’s decision to terminate active participation in the business (resignation of an employee), bankruptcy of a shareholder, death or incompetency of a shareholder, and the winding-up or dissolution of a corporate shareholder. It also provides for the payout of the shareholder. The pivotal provision for the purposes of this motion is Article 3.2 which states:

3.2 Termination A Shareholder whose association with the Corporation and its Affiliates ceases by reason of termination by the Corporation of his/her employment with the Corporation and its Affiliates shall, immediately after such termination, be deemed to have given a Transfer Notice covering all the Shares held by him/her on a date which is 30 days from the date he/she is notified of such termination by the Corporation.

[36] The general principles I must follow in my analysis are well set out in Paquette v. TeraGo Networks Inc. That case dealt with a wrongfully dismissed employee’s entitlement to damages arising out of a bonus plan that required him to be “actively employed” at the time the bonus was paid. Van Rensburg J.A. held that it was an error on the part of the motions judge to focus on whether the term “active employment” was ambiguous or not. Rather, the question that needed to be addressed was whether the employee’s common law right to damages was limited by the “active employment” requirement of the bonus plan. In Paquette, the court concluded that the common law right to damages was not so limited.

[37] Van Rensburg J.A. set out the approach to be taken on such issues. The basic principle to be applied is to put the person in the same position they would have been in if lawfully terminated. The claim being made on a wrongful dismissal action is not for the benefits themselves but for common law contract damages as compensation for the benefits the employee would normally have earned but for the illegal breach of contract: Taggart v. Canada Life Assurance Co. (2006), 50 C.C.P.B. 163 (Ont. C.A.) at para. 16.

[38] The proper analysis is a two-step analysis: 1) What was the proper common law rights of the employee? 2) Is there something in the agreement that specifically removes the employee’s common law entitlement? The question here should not be focused on whether there is ambiguity in the plan but rather whether the wording clearly altered or removed that right.

[39] Let me deal quickly with the first argument made by Morrison Hershfield. It is submitted that employment law principles should not apply to the Shareholders’ Agreement as it sits outside the employment context. In other words, it does not form a part of Mr. Mikelsteins’ common law entitlements. I do not agree. It is conceded by the defendant that only employees, and a select few employees, could participate in this agreement. In my view, the evidence demonstrates that this was a significant and integral part of the compensation package received by Mr. Mikelsteins from his former employer. Furthermore, well-established authorities weigh against Morrison Hershfield’s position. As a result, any damages flowing from the breach of the material provisions of the Shareholders’ Agreement should be properly considered on this summary judgment motion.

[40] That said, the main argument made by Morrison Hershfield deals with the second step of the analysis: it is submitted that the Shareholders’ Agreement clearly ousts Mr. Mikelsteins’ common law entitlements.

[41] After careful consideration, I find that it does not.

[42] First of all, Article 3.2 of the Shareholders’ Agreement does not include express language such as the termination being “without cause” like in Love v. Acuity Investment Management Inc., 2011 ONCA 130 at para. 45. Similarly in Kieran v. Ingram Micro Inc., [2004] O.J. No. 3118 (QL) (Ont. C.A.) at para. 59, the language of the material provisions specifically differentiated between rightful and wrongful terminations. Such plain and clear language would show that the parties had bargained out of any common law entitlement to damages. I find the authorities that deal with such contractual conditions containing similar terms, easier to decide and distinguishable from the provision here: see as an example of such a clear and carefully worded clause in Lin v. Ontario Teachers’ Pension Plan Board, 2016 ONCA 619 at para. 64.

[43] I must look at the whole of Article 3.2, the contract, and the factual matrix surrounding the contract in assessing the effect of this provision. This provision was made in the employment/shareholder context where certain key employees were given the opportunity to share in the growth and profits of Morrison Hershfield. However, that opportunity was limited to those who remained employees of the company. Once they no longer held that status, they were no longer entitled to these rights. Of course, this begs the question of exactly when they lost these rights to the shares and the Share Bonus, but the context is important.

[44] When I look at Article 3.2, the language used, the structure of it, and the context of its enactment, it limits the entitlements of a shareholder to those whose “association with the Corporation… ceases by reason of termination by the Corporation of his/her employment”. When that occurs, “ immediately after such termination ”, a deeming provision comes into force. That deeming provision involves the shareholder having deemed to have given a Transfer Notice within 30 days of the notification of such termination by the Corporation. In other words, the triggering event that causes the operation of the deeming provision is the “termination” of employment. It is not the actual receipt of the notice of termination, whether lawful or not. That “termination” is not defined in the Shareholders’ Agreement, nor is it expressly defined within Article 3.2 to include terminations “without cause”. In my view, the language found in Article 3.2 and the intention of the parties that it evinces does not demonstrate a bargain to oust the common law entitlements to reasonable notice.

[45] In Lin v. Ontario Teachers’ Pension Plan Board at paras. 83-90 and Veer v. Dover Corp., [1999] O.J. No. 1727 (Ont. C.A) at paras. 18-19, the language of “terminate” employment was found to require lawful termination. It did not oust the common law rights of the wrongfully dismissed employee.

[46] In the case at bar, it is true that that the “deemed” provision refers to a time period of 30 days from the notification date of the termination. Morrison Hershfield argues that the language and the structure of the provision is similar to that found in the case of Brock v. Matthews Group Ltd, [1991] O.J. No. 83 (Ont. C.A.). However, I find that Article 3.2 can be distinguished from the provision found in this case.

[47] First of all, the use of the word and the concept “deemed” differs from the provision in question in Brock. Here, “deemed” is used to designate a notional Transfer Notice being given by the shareholder. As such, it can support the proposition that the 30 day period is “deemed” to commence from a legally valid notification for dismissal as opposed to the actual date Mr. Mikelsteins received written notice. The term “deemed” indicates a selection of a date that need not be contingent on the occurrence of an actual event. Further, given that the Transfer Notice sets into process the purchase and valuation of the shares, the provision merely selects an appropriate date for this to occur; a date that need not be connected to the actual date of termination whether it be with or without cause. Article 2.2 of the Shareholders’ Agreement also uses the term “deemed” in a similar conceptual fashion.

[48] Secondly, in Brock the language used, the structure of the provision, and the context is explicit. There the employee was given “15 days from the date notice of dismissal is given in which to exercise the option hereby granted in respect of the Optioned Shares.” In addition, in that case, the history of the stock option clause and a reference to the end of the calendar year in another stock option clause under consideration led the court to conclude the date for the exercise of the stock option was unchanged irrespective of the propriety of the termination: see the interpretation of Brock in Gryba v. Moneta Porcupine Mines Ltd., [2000] O.J. No. 4775 (Ont. C.A.) at para. 49. In Brock, the entitlement is clearly tied to the date whereby the notice is in fact given and received. The context in Brock is the exercise of a specific stock option that must be concretely performed within a fixed period of 15 days. This is not similar to Article 3.2, which does not expressly tie the Transfer Notice to the date of actual notice being given. While it states the time in which to start the process of the purchase of the shares held by Mr. Mikelsteins to be within “30 days from the date he/she is notified of such termination”, the interpretation that it is 30 days from the time after which he should have received the notice he was entitled to under the common law can be reasonably supported. Had he received that proper notice, the valuation of shares would have taken place 30 days after he no longer was an employee. As Article 3.2 focuses on “termination” as the triggering event, it makes sense that the employee be permitted to own these entitlements and enjoy any increase in the value of the shares possessed [^3] up to 30 days after legal termination. It makes little sense that the parties would so readily agree to a provision that would only give Morrison Hershfield an incentive to wrongfully dismiss Mr. Mikelsteins without proper notice: Buchanan v. Geotel Communications Corp., [2002] O. J. No. 2083 (S.C.J.) at para. 166; Hawkes v. Levelton Holdings Ltd., 2012 BCSC 1219 at para. 307.

[49] In a similar fashion, the provisions of the Shareholders’ Agreement can be distinguished from the stock option case of Kierans. In Kierans the express language used did not simply refer to termination of employment, but the provisions of the plan anticipated the very event of wrongful dismissal. There “termination of employment” was defined as the date the employee ceased to perform services for the employer “without regard to whether the employee continues thereafter to receive any compensatory payments therefrom or is paid salary in lieu of notice of termination.” Thus, the employee had to exercise the stock option within the allocated time in the agreement. In the Shareholders’ Agreement in the case at bar there is no definition of “terminates” or “termination” in such a similar fashion. There is no other language that contemplates the Transfer Notice being deemed upon the occurrence of a wrongful dismissal taking place.

[50] In reviewing the remainder of the Shareholders’ Agreement, no other provision sheds any further light on what happens to the shares when an employee/shareholder is terminated without cause. Nor is there anything else referable to the issue of the meaning and effect of the notification of termination. In short, Article 3.2 stands predominantly alone on this specific issue.

[51] Van Rensburg J.A. reviewed the leading authorities, the same authorities relied upon by the parties in the case before me, and the language used in the relevant provisions that were considered in those authorities in Paquette at paras. 38-43, stating:

Recognizing that the loss of the right to exercise stock options during the notice period is compensable in wrongful dismissal actions, the stock option cases have required clear language to limit the right to exercise stock options on termination. In a number of cases, the courts have found that the time for the exercise of stock options following the "termination" or "cessation" of employment was extended by the reasonable notice period: see Gryba v. Moneta Porcupine Mines Ltd. (2000), 5 C.C.E.L. (3d) 43 (Ont. C.A.), leave to appeal refused, [2001] S.C.C.A. No. 92 (the "effective date" of termination occurred at the end of the notice period); Veer v. Dover Corporation (Canada) Limited (1999), 45 C.C.E.L. (2d) 183 (Ont. C.A.) ("whether such termination be voluntary or involuntary" not sufficient to oust presumption that termination would be lawful); and Schumacher (recovery of damages for lost opportunity to exercise stock options was permitted under a "phantom" stock option plan referring to cessation of employment, but not in respect of a second plan providing for the exercise of options within 60 days following the employee's termination "without cause"). By contrast, in Brock v. Matthews Group, this court held that there was no recovery of damages for the lost opportunity to exercise certain stock options where the plan required the exercise of options within "15 days from the date notice of dismissal is given".

The approach in these cases can be summed up in the words of Goudge J.A. in Veer, at para. 14, "the parties must be taken to have intended that the triggering actions [for the cancellation of an employee's stock option rights] would comply with the law in the absence of clear language to the contrary."

Therefore, regardless of whether I am correct in this interpretation of Article 3.2, I have no doubt that Article 3.2 does not use clear language ousting Mr. Mikelsteins’ entitlements under the Shareholders’ Agreement during the reasonable notice period. Such language is required. It does not exist here. Therefore the triggering event of termination was intended to comply with the law.

[52] Given my conclusion, it is not necessary to deal with Mr. Mikelsteins’ alternative argument that interpreting the Shareholders’ Agreement in the manner argued for by the defendant would be a violation of the Employment Standards Act, 2000, S.O. 2000, c. 41.

[53] For the same reasons, I find that Mr. Mikelsteins is entitled to damages for his loss of his Share Bonus pursuant to the Shareholders’ Agreement during the reasonable notice period. I disagree with the defendant that they have fully paid all the Share Bonus that he is entitled to. Since I have concluded Mr. Mikelsteins should have been a shareholder during the notice provision and have received his Share Bonus during this period of time, he is entitled to damages for this as well. The amount of this remains to be determined when the Share Bonus is calculated in the New Year.

[54] Finally, there is the issue of the gross-up value of the shares that Mr. Mikelsteins continues to have. Mr. Mikelsteins had the majority of his shares in his RRSP. On this issue the defendant submits that while they do not disagree with the plaintiff’s submission that any quantification of these damages needs to await another hearing - given that it will depend upon the notice period, my finding that he was entitled to hold his shares during this period, and the valuation of the shares - the plaintiff has failed to lead proper evidence to show he has suffered damages on any gross-up. For instance, Morrison Hershfield submits that the plaintiff has not presented any actuarial evidence. Mr. Mikelsteins did not even say exactly how many shares he held in his RRSP.

[55] In my view, sufficient evidence has been led by the plaintiff to show his entitlement to a gross-up. There is no genuine issue requiring a trial. He has presented a sufficient basis to make this finding. Mr. Mikelsteins has provided basic and uncontested evidence that he held the majority of his shares in an RRSP account and that there were going to be tax consequences given that the award of damages will be taxed differently than those shares. I am satisfied based upon the authorities provided to me that he should be entitled to a gross-up on this award: Taylor v. Research in Motion Ltd., 2010 ONSC 1896 at para. 33; Schram v. Government of Nunavut, 2018 NBCA 41 at paras. 22, 41. The quantification of that can wait until the final judgment.

[56] Thus, partial summary judgment is granted on these issues. Calculation of the value of his shares, the gross-up value, and the share bonus he is entitled to, will have to await the end of the reasonable notice period and information that is yet to be calculated by the defendant to determine the amount of damages.

Nature of Damages Given Ongoing Duty to Mitigate

[57] The courts have taken three approaches to addressing the issue of how to handle an employee’s duty to mitigate when a summary judgment decision is rendered prior to the end of the reasonable notice period. These were summarized by Perell J. in the trial decision in Paquette v. TeraGo Networks Inc, 2015 ONSC 4189 at para. 48:

Where judgment is granted before the expiration of the reasonable notice period, courts have employed three approaches to the duty to mitigate during the balance of the notice period; namely:

• The Contingency Approach -- The employee's damages are discounted by a contingency for re-employment during the balance of the notice period. See Russo v. Kerr, 2010 ONSC 6053; Smith v. Pacific National Exhibition (1991), 34 C.C.E.L. 64 (B.C.S.C.).

• The Trust and Accounting Approach -- The employee is granted judgment but a trust in favour of the employer is impressed on the judgment funds for the balance of the notice period requiring the employee to account for any mitigatory earnings. See: Thomson v. Bechel Canadian Ltd. (1983), 3 C.C.E.L. 16 (Ont. H.C.J.) at para. 23; Bullen v. Proctor & Redfern Ltd., supra; Correa v. Dow Jones Markets Canada Inc. (1997), 35 O.R. (3d) 126 (Gen. Div.); Adjemian v. Brock Crompton North America, supra; Di Tomaso v. Crown Metal Packaging Canada LP, supra. In Correa, the Court awarded a lump sum payment for the maximum notice period, which included damages for the unexpired period of reasonable notice and the plaintiff was ordered to account to the defendant for any earnings during the notice period.

• The Partial Summary Judgment Approach -- The employee is granted a partial summary judgment and the parties return to court during and or at the end of the notice period for further payments subject to the duty to mitigate. See Markoulakis v. SNC-Lavalin Inc., supra.

[58] Mr. Mikelsteins submits that the contingency approach to his damages for his salary, benefits, bonus, and RRSP contributions during the reasonable notice period at a 1% reduction is most appropriate. He argues that, in his case, the likelihood of re-employment is small. Further, it is submitted that this approach encourages an employee to seek new employment and that this benefits society in general. Alternatively, it is submitted that the trust and accounting approach is suitable here if I find that given the extended period of reasonable notice remaining, it would too speculative to apply the contingency approach. Morrison Hershfield submits that the partial summary judgment approach should be preferred.

[59] I agree with the defendant that the partial summary judgment approach is appropriate on the facts of this case. Some of the advantages and practical realities underlying this approach were outlined by Pollack J. in Markoulakis v. SNC Lavalin Inc., 2015 ONSC 1081 at paras. 16 – 17, 40-41:

The Defendant submits that the trust approach is inconsistent with the principles of judicial economy and fairness. If the Court awards the maximum amount of damages that the Plaintiff could receive, the Defendant may be forced to return to court to recover any overpayment. Requiring the Defendant to recover any overpayment through subsequent negotiations or further litigation is not fair to the Defendant. Further, the Defendant argues that the trust approach may negatively affect the Plaintiff's motivation to mitigate his damages. The Defendant states that this "motivational problem" is of particular concern in the instant case, as the Plaintiff has the belief that he will not succeed.

In support of its position, the Defendant directs the Court's attention to the case of Russo v. Kerr, 2010 ONSC 6053, 326 D.L.R. (4th) 341. In that case, Gray J. held that that if a plaintiff is awarded full damages on the motion for summary judgment; s/he will have no real incentive to mitigate, as anything earned would have to be paid to the defendant. Any duty to mitigate would be merely theoretical, particularly given the difficulty the defendant would face in assessing the reasonableness of the mitigation efforts for the remainder of the notice period. As Gray J. observed at para. 61 that by adopting the trust approach:

“T he Court will have no real ability to assess the reasonableness of the Plaintiff's conduct. Once the money is paid, the ability to get the matter back before the Court is practically non-existent. Unlike at a trial, after the notice period has expired, where the Plaintiff can be cross-examined as to his or her efforts that cannot realistically be done after the money has been paid."

As a result, Gray J. concluded that "[t]he imposition of a trust... provides no real solution" (Russo, at para. 61).

The Court has determined that the reasonable notice period for Mr. Markoulakis is 27 months. It follows that the Defendant has the obligation to the Plaintiff to pay the agreed upon compensation monthly for the balance of such notice period. This obligation of the Defendant to pay is subject to the Plaintiff's obligation to mitigate his damages and to a deduction in the monthly payments by the Defendant for any earnings from employment or a business. If during the balance of the notice period, the Defendant challenges the mitigation efforts or earnings of the Plaintiff and does not make such payments to the Plaintiff, the parties may deal with this dispute either on a motion for summary judgment, or by way of a trial of an issue.

I am of the opinion that in this case, this determination with respect to the amount of notice period is the best way to ensure a fair and expeditious resolution of the dispute between the parties. The employee's right to a determination of the appropriate period of reasonable notice has been satisfied and the employer's right to challenge the employee's mitigation efforts has been preserved. As the parties know what their obligations are, the likelihood of the need for further court proceedings is minimized.

[60] There are good reasons supporting the partial summary judgment approach in Mr. Mikelsteins’ case. First of all, there remains a significant portion of the notice period that has not yet expired. While he has attempted to mitigate his damages up to the date this summary judgment motion was heard, as pointed out by his counsel, his efforts were hampered by the non-solicitation clause. This clause will have expired. Thus, his ability to secure other employment will be enhanced. Further, while the reasonable notice period is lengthy for all the factors that I have already listed, Mr. Mikelsteins is an intelligent, proven capable and successful individual who has experience and skill in sales, engineering, and telecommunications. He still has years of potential employability. Morrison Hershfield understandably wishes to know and potentially contest half-hearted efforts designed to simply avoid a reduction in his award. Finally, the parties agree that I should not grant full summary judgment given the need to determine the value of the shares and the Share Bonus. In these circumstances, I am persuaded that Pollack J.’s approach makes sense. We will have to determine the final resolution of this action on a future date. Thus, the matter will not be completed in any event and another hearing may be required regardless. While I do not hold that this approach should be followed in every case, let alone the majority of wrongful dismissal cases, given that there will be an inevitable delay in coming to the final judgment in this case, I am prepared to so order.

[61] Thus, Morrison Hershfield will pay on a monthly basis the sums owed to Mr. Mikelsteins for his base salary, bonus, benefits and RRSP without any reductions. Morrison Hershfield will be entitled to contest any alleged failure to mitigate by having the matter return before me.

[62] However, to be clear, the final determination of the issue of mitigation need not await the end of the notice period. This case will return before me in order to determine the damages for the value of the shares and the Share Bonus. I do not know exactly when that will be. It may well be that once the damages are determined for the shares and Share Bonus, circumstances will be such that Mr. Mikelsteins will have already found other employment and thus have mitigated some of his damages. Alternatively, it may well be that even though the reasonable notice period will not have run, the prospect of mitigation will be an unlikely event given what has by then transpired. At that point in time, it may well be that the relative merits of the contingency or trust and accounting approaches will transcend the benefit obtained by the partial summary judgment approach. On the circumstances of this case, I find that for now, partial summary judgment is right with respect to the mitigation issue. But it may not be for the entire length of notice period. As was said by Corbett J. in Sweda Farm Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 33 (affirmed: 2014 ONCA 878) in interpreting the Supreme Court’s direction in Hryniak:

If the court cannot grant judgment on the motion, the court should:

a. Decide those issues that can be decided in accordance with the principles described in 2), above;

b. Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;

c. In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.

Conclusion

[63] Judgment is awarded regarding Mr. Mikelsteins’ damages for his base salary, bonus, benefits, and RRSP in accordance with my decision. The parties have agreed to what these amounts should be: base salary $12,833.33; bonus $484.47 [^4]; benefits (10% of base salary commencing October 27, 2018) $1,283.33; and RRSP $513.33. These damages are to be paid monthly without reduction. The defendant is entitled to challenge any mitigation effort by way of a motion returnable before me. If there are changed circumstances, the plaintiff, by way of motion, can ask for the partial summary judgment approach to mitigation be varied. If there is an unforeseen issue, I may be spoken to.

[64] In addition, partial summary judgment is granted to Mr. Mikelsteins on the issues regarding the share valuation, gross-up, and Share Bonus. Calculation of the exact quantum of damages will need to be deferred until the appropriate evaluations are conducted. If the parties are able to agree to this, the agreement can be simply forwarded to me. If this cannot be resolved between the parties, then either a re-attendance before me can be scheduled or written submissions can be made on a timetable that I will fix.

[65] With respect to costs, I would encourage the parties to reach an agreement. I appreciate that the matter has not yet been finally decided. If the issues of costs cannot be resolved, then I may be spoken to on this as well.

[66] Finally, I would like to thank both counsel for the cooperative approach they have taken on this litigation and the assistance they have given me. I fully expect it will continue as this case continues on. Too often I am remiss in not expressing my gratitude to lawyers when they have done a good job. I will not be/do so in this case.

Footnotes

[^1]: I note that Morrison Hershfield’s group employer plan did include out-of-country and emergency travel assistance as a part of the employer paid premium. However, given the nature of these benefits, this does not alter my analysis. [^2]: Morrison Hershfield paid the bulk of the total in January. They paid Mr. Mikelsteins the remainder on what amounted to 66 shares later on June 15, 2018 using the same Fair Value amount. There was an initial disagreement about the return of share certificates that appears to have been the cause of this delayed payment. [^3]: Of course, Mr. Mikelsteins bears the risk that the shares would decrease in value during the reasonable notice period. [^4]: The parties have agreed that Mr. Mikelsteins should get a lump sum of $6,232.05 for his bonus for the period of time he has already worked but was not yet paid.

Justice S. Nakatsuru Released: November 22, 2018