COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Coutts v. Brian Jessel Autosports Inc.,

 

2005 BCCA 224

Date: 20050415


Docket: CA031988

Between:

Stuart Coutts

Respondent

(Plaintiff)

And

Brian Jessel Autosports Inc. and Brian Jessel Sport Cars Inc.,
carrying on business as Brian Jessel Ferrari

Appellants

(Defendants)

 


 

Before:

The Honourable Mr. Justice Esson

The Honourable Mr. Justice Oppal

The Honourable Mr. Justice Lowry

 

R. Josephson and
M. Chen

Counsel for the Appellants

H.S. MacDonald

Counsel for the Respondent

Place and Date of Hearing:

Vancouver, British Columbia

18 February 2005

Place and Date of Judgment:

Vancouver, British Columbia

15 April 2005

 

Written Reasons by:

The Honourable Mr. Justice Oppal

Concurred in by:

The Honourable Mr. Justice Esson

The Honourable Mr. Justice Lowry


Reasons for Judgment of the Honourable Mr. Justice Oppal:

INTRODUCTION

[1]                The appellants, Brian Jessel Autosports Inc. and Brian Jessel Sport Cars Inc. (the "dealership"), terminated the respondent, Stuart Coutts, from his position as sales manager after four and a half years of employment.  In an action for wrongful dismissal, Garson J. ordered that the notice period for the termination was 30 weeks of which 11 weeks was served as working notice.  She found that Mr. Coutts was entitled to $102,885 in damages as a result of his employer's failure to provide a reasonable dismissal notice, less $35,000 that had already been paid for a net amount of $67,885.  She also found that Mr. Coutts was entitled to $8,250 in unpaid commissions, less $1,400 that had already been paid for a net amount of $6,850.

[2]                By agreement, the trial was heard under the summary trial procedure pursuant to Rule 18A of the Rules of Court.

[3]                In the appeal, the appellants have raised the following issues:

1.         Whether the trial judge erred in fixing the notice period at 30 weeks;

2.         Whether the trial judge erred in dismissing the defence of mitigation; and

3.         Whether the trial judge erred in finding that Mr. Coutts was entitled to $8,250 in unpaid commissions.

BACKGROUND

[4]                Mr. Coutts was 34 years old on the date of his termination.  For most of his working life, he has been employed as a car salesperson.  He left school without completing grade 12, and began working for the dealership in the fall of 1998.  He was employed there for four and a half years.

[5]                By all accounts, Mr. Coutts' tenure at the dealership was extremely successful.  While his title was that of a sales manager, no person reported to him.  He reported to the general manager who in turn reported to Brian Jessel, the principal owner of the dealership.  Mr. Coutts was the only salesperson in the dealership who sold Ferraris.  His earnings were as follows:

1998

$18,311.00

3 months

1999

$165,949.53

12 months

2000

$206,565.98

12 months

2001

$300,587.32

12 months

2002

$282,763.81

12 months

2003

$107,112.20

5 months

[6]                Mr. Coutts' earnings at the dealership were in significant contrast to what he had earned with his previous employer.  His earnings from 1994 to 1998 were as follows:

1994

Partial year

$12,606.14

1995

 

$74,370.96

1996

 

$73,374.75

1997

 

$37,182.16

1998

Partial year, 7 months

$21,000.00

[7]                On 10 March 2003, Mr. Jessel informed Mr. Coutts in writing that the dealership would close its Ferrari division and that his employment would be terminated on 20 May 2003.  Mr. Coutts was given working notice of 11 weeks plus 7 weeks salary in lieu of notice for a total of 18 weeks.  The letter of termination contained the following provision:

1.         Brian Jessel Ferrari will allow you to remain with Jessel Ferrari for a further nine weeks ending May 20, 2003.  During that period Jessel Ferrari will pay you full commission on any new Ferrari delivered up to and including May 20, 2003.  We estimate that from now until May 20, 2003 you will receive commissions in excess of $100,000.00.

[8]                Around this time, Mr. Jessel asked Mr. Coutts to keep the matter of the Ferrari division closing confidential since public knowledge of it would adversely affect sales.  After receiving the termination notice, Mr. Coutts continued to work at the dealership.  On 12 May 2003, Mr. Coutts received another letter from Mr. Jessel advising him that: (a) the closure of the Ferrari division had been postponed to 26 May 2003; and (b) Mr. Coutts would have the option to work until that date.  This extra week would increase the working notice and reduce the salary in lieu of the notice in Mr. Coutts' severance package.  The letter also contained the following provisions:

1.         For your length of service of less than 5 years, the severance period is 18 weeks of which 11 weeks have been served as working notice.  The remaining 7 weeks will be paid at $5,000 per week, totalling $35,000.00.

2.         With regard to commissions, the three outstanding deals will be paid at $700.00 for each deal.  The deals are as follows:

(a)        Global Investment Lease – ’01 360 Spider-Red

(b)        Totem Automotive Group and Leasing Inc.-’03 360 F-1 Modena-Silver

(c)        Transport Action Lease Systems Inc. – ’02 Coupe Corsa-Grey

Mr. Coutts accepted the terms of the letter and advised Mr. Jessel that he would work the additional week.

[9]                By early April 2003, all employees in the dealership were notified of the closure of the Ferrari division.  In the circumstances, the judge concluded that there was no longer a need for confidentiality of the closure.  The judge further found that Mr. Coutts could have started looking for alternative employment by 1 May 2003.

[10]            The Ferrari division closed on 24 May 2003.  On 29 May 2003, Mr. Coutts received from the dealership a cheque for $37,100 of which $35,000 was salary in lieu of notice and $2,100 was commission on sales that Mr. Coutts made at or about the time of his departure.  At trial, there was a dispute as to his entitlement to the commissions.  Mr. Coutts claimed $8,250 in unpaid commissions for two vehicles: $2,000 for a Maserati and $6,250 for a Ferrari.  However, the deliveries of these vehicles took place after his departure.  Nonetheless, the judge awarded Mr. Coutts $8,250 for commissions for the sale of those two vehicles on the ground that he had sold them while he was still employed by the dealership.

[11]            The appellants have alleged that Mr. Coutts failed to mitigate his damages.  They have argued that he did not take reasonable and necessary steps to find alternative employment during the four and a half month notice period.  They have argued further that there were suitable replacement employments available for him by at least July 2003, well within the four and a half month notice period.

[12]            Shortly after his departure from the dealership Mr. Coutts had interviews with two companies: Weissach Motors and MCL Motors.  There is a conflict in the evidence as to what transpired during the interviews.  Asgar Virji was the president of Weissach Motors, a dealership that sold Porsche, Lotus and Ruf automobiles.  Mr. Virji deposed that Mr. Coutts did not approach their dealership to explore the possibilities of employment.  He said that he called Mr. Coutts and invited him to meet to discuss his availability for work and "become part of our plans to expand our Lamborghini dealership".  Mr. Virji knew that Mr. Coutts had worked for Brian Jessel's Ferrari division and that it had ceased operations.  He deposed that "it was clear to me that the prospect of Stuart Coutts joining Weissach Motors and helping us develop the Lamborghini dealership was not particularly exciting to Stuart Coutts".  He was left with the impression that Mr. Coutts was keen on Ferrari North America opening another dealership in Vancouver rather than being a part of Weissach Motors.  He went on to depose that, "[i]f Stuart Coutts had shown any interest whatsoever in applying for or making himself available for such position, I would certainly have made an attempt to create a position for him and make a formal offer of employment to Stuart Coutts and negotiated terms of employment with him".

[13]            Mr. Coutts has denied the suggestion that Mr. Virji made any concrete proposal to him regarding employment.  In response, Mr. Coutts has deposed that:

It was crystal clear to me that Mr. Virji's primary interest in discussing opportunities with me about Lamborghinis was to have me use my contacts in helping him create a customer data base for Lamborghini. …

* * *

At no time during my meeting with Mr. Virji did he offer me a job.

[14]            Mr. Coutts also met with John Chesman, General Manager of MCL Motors.  MCL Motors also specialized in the sale of high-end luxury cars.  Again, Mr. Chesman suggested that Mr. Coutts was not at all serious about prospective employment with MCL Motors.  Mr. Chesman deposed that:

7.         During the Meeting, Stuart Coutts and I discussed what he was doing from an employment standpoint, now that his job at Brian Jessel Ferrari had come to an end, and whether he was in the market for a job, either with MCL or somewhere else.  Stuart Coutts at that time told me that he was not in the market for a job at that time, as he was waiting to see what Ferrari North America was doing about finding a replacement Ferrari dealer in Vancouver.  He envisioned himself working at the new Ferrari dealership in Vancouver.

* * *

19.       … it was made perfectly clear to me at all relevant times by Stuart Coutts that he was not interested in any employment opportunity with the MCL Dealership, unless we acquired the Ferrari dealership for Vancouver.

[15]            Again, Mr. Coutts has denied Mr. Chesman's allegations.  In response, he deposed that:

12.       The only opportunity he ever suggested was available for me, was to sell Jaguars if I was "stuck for money".  He told me this during our meeting and in the subsequent telephone conversation I had with him on October 9, 2003.  Both times he made the statement about selling Jaguars, he added the comment that he knew it was not really appropriate for me but that I could call him if I was stuck for money.  I was left with the impression that it would be evident to him that I would be settling for something below my abilities, in his eyes, and he never expected me to show an interest in selling Jaguars, when I was looking for a potential management position.

[16]            Mr. Coutts deposed that from late May 2003 to February 2004 he prepared and distributed copies of his resume, registered with an executive search firm in August 2003, reviewed job postings on websites regularly, and searched for work through his contacts in the industry.  He further deposed that it would be very difficult for him to achieve the same income level that he had been earning at Brian Jessel Ferrari.  He stated that, "I determine [sic] that the best opportunity I had to get back what I had lost was try to get the same position with the new Ferrari dealership which I expected FNA [Ferrari North America] would award to replace Brian Jessel Ferrari".  In the fall of 2003, he learned that Brian Ross had been awarded the new Ferrari dealership in Vancouver.  He contacted Mr. Ross and had a series of meetings with him in November 2003.  In spite of his optimism, nothing transpired with the new Ferrari dealership until early 2004 at which time Mr. Ross hired another person.

Whether the Trial Judge Erred in Fixing the Notice Period at 30 Weeks

[17]            The law on the assessment of reasonable notice is well established.  The seminal case on this issue is Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.).  McRuer C.J.H.C. stated the following at p. 145:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases.  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.

[18]            More recently in Ansari v. British Columbia Hydro and Power Authority (1986), 2 B.C.L.R. (2d) 33 (S.C.), it was held that damages for wrongful dismissal were intended to put the employee in the position he or she would have been if he or she had received proper notice.  McEachern C.J.S.C. (as he then was) provides a useful summary of the applicable factors at p. 43 wherein he stated:

At the end of the day the question really comes down to what is objectively reasonable in the variable circumstances of each case, but I repeat that the most important factors are the responsibility of the employment function, age, length of service and the availability of equivalent alternative employment, but not necessarily in that order.

[19]            Garson J. relied on both Bardal and Ansari.  She correctly concluded that the rough upper limit for reasonable notice was between 18 and 24 months, and that damage amounts in wrongful dismissal claims needed to be scaled down in most cases based upon the factors enumerated in Bardal and Ansari.  She found it appropriate to assess reasonable notice by using 2.5 weeks per year of service as guideline on the basis that Mr. Coutts' skills as sales employee were readily transferable: Husband v. Labatt Brewing Co., [1998] B.C.J. No. 3193 (S.C.).  However, in her reasons she went on to state:

[37]      … a factor that takes this case out of the usual sales manager genre of cases is the income that was earned by Mr. Coutts.  The evidence satisfies me that it would be difficult for Mr. Coutts to readily transfer to another sales position earning income comparable to that which he earned at Brian Jessel Ferrari. ...

[20]            She went on to state that since the employer asked Mr. Coutts to keep confidential the closure of the Ferrari division, he could not begin a job search until 1 May 2003.  Thus, she added 7 weeks notice for the confidentiality period to approximately 11 weeks (2.5 weeks per 4.5 years of Mr. Coutts' service in the dealership) for a total of 18 weeks.  Moreover, the judge added an additional 12 weeks notice because she was satisfied that Mr. Coutts' skills were not readily transferable to increase the total period to 30 weeks to expire on 5 October 2003.  She arrived at her decision in the following way:

[38]      There is another factor that is relevant to the notice period.  The legal requirement for notice is based on an assessment of the time it ought to take the employee to find replacement employment. ...
I conclude that there was little Mr. Coutts could do to find replacement employment until at least the end of April.  There were not a large number of potential employers in the Vancouver luxury car market and I accept his evidence that any enquiries he made with those potential employers would quickly have spread the news of the Jessel Ferrari closure.  By early April, all employees were notified of the dealership closure, and by May 1
st, it is reasonable to suggest that Mr. Coutts could have begun a job search.  I would therefore add seven weeks’ notice, assuming notice is to be calculated from March 10th.  If the average notice for a salesperson is, according to Husband [Husband v. Labatt Brewing Co., [1998] B.C.J. No. 3193 (S.C.) (QL)], 2.5 weeks per year of service, the plaintiff is entitled to at least 11.25 weeks plus 7 weeks for the confidentiality period.  In my view, the fact that his skills were not readily transferable at even close to his income level increases the notice period.  Taking into account all the authorities cited to me by both counsel, I would add an additional 12 weeks’ notice for a total of 30 weeks’ severance.  (See in particular Gillies v. Goldman Sachs Canada (2001), 14 C.C.E.L. (3d) 1 (BCCA) and Mandell v. Apple Canada Inc. (1990), 34 CCEL 319 (BCSC)).  Thirty weeks’ severance would notionally expire on about October 5, 2003.

[21]            With respect, Garson J. was in error.  There was no evidence regarding transferability.  She placed undue emphasis on Mr. Coutts' high income to conclude that his skills were not readily transferable without proper regard to the availability of equivalent alternative employment.

Whether the Trial Judge Erred in Dismissing the Defence of Mitigation

[22]            The main issue in this appeal is mitigation.  The appellants' position on this appeal is that the trial judge misapplied the evidence and erred in law in rejecting the defence of mitigation.  The starting point in this discussion on mitigation is that in any action for wrongful dismissal, an employee has a clear duty to mitigate his or her damages.  The duty to mitigate is not a duty owed to an employer, rather it is a duty an employee owes to conduct himself or herself as a reasonable person.  In most cases, this necessarily means that the employee must take reasonable steps to find alternative employment upon dismissal.  The underlying basis for the existence of the duty of mitigation was discussed by Taylor J.A. in Forshaw v. Aluminex Extrusions Ltd. (1989), 39 B.C.L.R. (2d) 140 (C.A.), at pp. 143-44 wherein he stated:

That "duty" – to take reasonable steps to obtain equivalent employment elsewhere and to accept such employment if available – is not an obligation owed by the dismissed employee to the former employer to act in the employer's interests.  It would indeed be strange that such a duty would arise where an employer has breached his contractual obligation to his employee, having in mind that no duty to seek other employment lies on an employee who receives proper notice.

The duty to "act reasonably", in seeking and accepting alternate employment, cannot be a duty to take such steps as will reduce the claim against the defaulting former employer, but must be a duty to take such steps as a reasonable person in the dismissed employee's position would take in his own interests - to maintain his income and his position in his industry, trade or profession.  The question whether or not the employee has acted reasonably must be judged in relation to his own position, and not in relation to that of the employer who has wrongfully dismissed him.  The former employer cannot have any right to expect that the former employee will accept lower paying alternate employment with doubtful prospects, and then sue for the difference between what he makes in that work and what he would have made had he received the notice to which he was entitled.

[23]            In an action for wrongful dismissal, the onus is on the plaintiff to prove damages.  However, where an employer seeks to reduce damages on the ground that the employee failed to mitigate his or her losses, then the onus is on the employer to prove on a balance of probabilities that the employee failed to mitigate by not acting reasonably.  The question of onus of proof where the defence of mitigation has been advanced was discussed in Red Deer College v. Michaels, [1976] 2 S.C.R. 324.  Laskin C.J.C. made the following comments at p. 331:

In the ordinary course of litigation respecting wrongful dismissal, a plaintiff, in offering proof of damages, would lead evidence respecting the loss he claims to have suffered by reason of the dismissal.  He may have obtained other employment at a lesser or greater remuneration than before and this fact would have a bearing on his damages.  He may not have obtained other employment, and the question whether he has stood idly or unreasonably by, or has tried without success to obtain other employment would be part of the case on damages.  If it is the defendant's position that the plaintiff could reasonably have avoided some part of the loss claimed, it is for the defendant to carry the burden of that issue, subject to the defendant being content to allow the matter to be disposed of on the trial judge's assessment of the plaintiffs evidence on avoidable consequences. …

[24]            Garson J. made the following findings of fact in dismissing the defence of mitigation.  She found that: Mr. Coutts was primarily interested in pursuing opportunities with a new Ferrari dealership; he was overly optimistic about his employment with Mr. Ross, the principal of the new dealership; he failed to diligently pursue other opportunities; and had he pursued alternative employment opportunities, "he probably would have found work by the end of August 2003".  In light of these findings of fact, the judge erred in dismissing the mitigation defence advanced by the dealership.  In her reasons she stated:

[53]      From all the evidence of both parties concerning Mr. Coutts’ efforts to find replacement employment and evidence of the availability of potential employment in the high end automobile field, I conclude that Mr. Coutts was primarily interested in pursuing opportunities with a new Ferrari dealership and, on the possibly overly optimistic view that his employment with Mr. Ross was assured, he failed to diligently pursue other opportunities.  I am satisfied that Mr. Coutts did not pursue alternative employment opportunities and that had he done so he would probably have found work by the end of August 2003.  However, on the evidence before me, the defendant has not proven that the employment opportunities that were probably available would replace the income that Mr. Coutts has lost. …

[25]            Thus, the judge concluded that Mr. Coutts did not have a duty to accept a position at less remuneration than he earned from his former employment.  With respect, the judge was in error in making that finding.  The duty of mitigation required Mr. Coutts to act reasonably and diligently, in his own interest, in pursuing alternative employment.  Personal preferences and career objectives are a consideration in deciding whether an employee is entitled to turn down an alternative employment, but they are not decisive.  The employee must still act reasonably.  In my view, Mr. Coutts did not act reasonably in the circumstances.  Refusing to follow through with employment opportunities in the employee's accustomed line of work, in this case with Weissach Motors and MCL Motors, is not reasonable.  Critical to the judge's finding was that Mr. Coutts could have had alternative employment by the end of August 2003.  In this case, the judge found that Mr. Coutts was primarily interested in a new Ferrari dealership that did not even come into existence until 2004.  His hopes of securing employment with Ferrari were both unrealistic and unreasonable.

[26]            I consider the appropriate notice period to have ended 31 August 2003.

Whether the Trial Judge Erred in Finding that Mr. Coutts Was Entitled to $8,250 in Unpaid Commissions

[27]            The 30 May 2000 letter makes reference to Mr. Coutts' entitlement to commissions.  The letter in part reads, "[a] flat commission of $700 per outstanding factory order that you have written, limited to a maximum of 30 factory orders".

[28]            The judge concluded that none of the transactions at issue were for an "outstanding factory order" and therefore the reference to Mr. Coutts' commission entitlement in the letter had no application.  She also concluded that the commission owing for $6,250 was for a used Ferrari that Mr. Coutts sold on his last day of work, 23 May 2003.  He was thus entitled to that amount.  Finally, the judge awarded Mr. Coutts $2,000 in commissions for the sale of a Maserati on the ground that Mr. Jessel gave Mr. Coutts a list of specific used vehicles for which he promised to pay fixed commissions.  The fixed commission for the Maserati was $2,000.  Mr. Coutts sold that vehicle on 15 May 2003.

[29]            The appellants have argued that the judge erred in finding that Mr. Coutts was entitled to $8,250 in commissions.  They say that the sale of the two vehicles for which the commissions were claimed was renegotiated after Mr. Coutts' departure and that, "industry practice is that commissions are earned only upon completion".

[30]            With respect, there is no merit to the appellants' argument.  The judge made clear findings of fact that Mr. Coutts had earned the two commissions because he sold the two vehicles while he was employed at the dealership.  There is no evidence to suggest that the judge was plainly wrong or made an overriding or palpable error in coming to that conclusion.

[31]            Accordingly, I would not accede to this ground of appeal.

[32]            I would accordingly allow the appeal and reduce the notice period to 31 August 2003.

“The Honourable Mr. Justice Oppal”

Signed: 7 April 2005

I Agree:

“The Honourable Mr. Justice Esson”

I Agree:

“The Honourable Mr. Justice Lowry”