2004 BCSC 1098 Tull v. Norske Skog Canada Limited

Before: The Honourable Mr. Justice Pitfield

Reasons for Judgment

Counsel for the Plaintiff:	Dan Gleadle
Counsel for the Defendant:	Adam Albright
Date and Place of Trial:	July 21, 2004
	Vancouver, B.C.

Introduction

[1] Richard Tull claims damages for wrongful dismissal from his employment as Mill Manager, Paper Operations at the Crofton British Columbia paper mill operated by Norske Skog Canada Ltd. The appropriate notice period, the determination of an amount in lieu of the salary to which he would have been entitled through a period of working notice, and the enforceability of a salary continuance arrangement unilaterally imposed by Norske upon Mr. Tull are in dispute.

[2] Mr. Tull is 51 years of age. He holds a B.Sc. degree in Chemical Engineering from the University of British Columbia. He worked with Norske and one of its predecessors, MacMillan Bloedel Ltd., for a period of 13.5 years from May 1989 until October 27, 2003 when he was dismissed. From his initial employment as a Paper Mill Project supervisor at MacMillan Bloedel’s Alberni Pulp & Paper division, he progressed to become Director, Paper Production at Crofton in 2001, and Mill Manager, Paper Operations, in 2002. He was one of two mill managers who reported to a vice-president.

[3] At the time of dismissal, Mr. Tull earned a base annual salary of $148,625 or $12,385.16 monthly; participated in Norske’s short term incentive plan, stock option plan and basic and supplemental executive pension plans; and was provided with benefits in the form of Medical Services Plan coverage, extended medical and dental coverage for self and family, employee life insurance in the amount of $475,000, spousal life insurance of $275,000, children’s life insurance of $10,000 for each of three children, accidental death and dismemberment insurance for self and family, short and long term disability insurance, twenty-four hour accident insurance, and a leased vehicle.

[4] Mr. Tull was dismissed on October 27, 2003 when Norske presented him with two options, neither of which he accepted. The first was a lump sum payment arrangement providing for termination on October 27, 2003, and payment of 80% of 16 months’ base salary, the equivalent of 12.8 months’ notice. All benefits, including pension participation, ended on the termination date under this option.

[5] The second was described as a salary continuance arrangement under which Mr. Tull would be terminated on the last day of a period of ‘termination leave’ not exceeding 16 months. Leave and employment were to be terminated in the event he obtained ‘alternate employment’ during the 16 month period. In that event, he would receive a ‘special severance payment’ equal to one month’s base salary multiplied by one-half the full number of months remaining in the leave period. This amounted to one-half his base monthly salary. Benefits, except in respect of health and dental plans and basic group life insurance were to cease on commencement of the termination leave. He would continue to have the use of a leased motor vehicle.

[6] When outlining the options, Norske advised Mr. Tull that the salary continuance arrangement was the default option should he choose to accept neither.

[7] Mr. Tull accepted neither option. He was placed on termination leave effective October 28, 2003. The leave would end, as would his employment, on February 27, 2005. At the date of these Reasons, approximately 6.5 months remain in the leave period if Mr. Tull does not find alternate employment.

[8] Mr. Tull claims that Norske’s actions constitute wrongful dismissal. He says the salary continuance arrangement is unauthorized and the 16 month notice period is unreasonable. He claims that in his circumstances, the appropriate notice period is 20 months. As a result, he claims immediate payment of base salary in respect of a 20 month notice period, payment of an amount in respect of the short term incentive plan, the cost of replacing medical, dental and other insurance coverage that had been provided during his employment, payment of fuel costs associated with the operation of the leased vehicle, and recovery of lost pension benefits.

[9] Norske says the notice period was reasonable, participation in the short term incentive plan was not a fixed part of Mr. Tull’s remuneration so that entitlement ended with the commencement of termination leave, amounts are only recoverable in respect of lost benefits in the event a cost is incurred to replace them, the amount of the pension loss is less than that claimed by Mr. Tull, and the court should order that the salary continuance arrangement carry on, adjusted in amount and duration if necessary to accommodate rulings made in relation to the matters in dispute.

Reasonable Notice Period

[10] In any specific case, the reasonable notice period is to be determined by reference to 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, and, to some extent, by reference to economic factors that may affect employment opportunities: see Bardal v. Globe and Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), followed by McEachern C.J.S.C. in Ansari v. British Columbia Hydro and Power Authority (1986), 2 B.C.L.R. (2d) 33 (B.C.S.C.), affirmed at 55 B.C.L.R. (2d) xxxiii (C.A.). In British Columbia, it is accepted that the rough upper limit of reasonable notice is from 18 to 24 months: Ansari, supra.

[11] Mr. Tull was employed by Norske and its predecessors for somewhat less than 14 years. That is not ‘long term’ when compared to the totality of one’s working career. Mr. Tull is 51 years of age. Assuming retirement at age 65, he is available to work in some other capacity for another 14 years.

[12] Mr. Tull’s position was one of considerable responsibility in a comparatively specialized industry. He managed approximately 300 employees, he was responsible for, or involved in, the organization and implementation of a significant plant upgrade at a cost in excess of $200 million and numerous other initiatives that improved production and reduced costs. He made a significant contribution to labour harmony within the Crofton Mill and Norske generally.

[13] I accept Mr. Tull’s affidavit evidence that he was employed in a responsible position in a very specialized industry, and there are limited opportunities of a similar kind in Canada in part because of the fact that the industry is in a period of consolidation. That fact is evident in this case. The dismissal resulted from Norske’s efforts at internal consolidation. Norske has also been a participant in industry consolidation as the purchaser of one or more MacMillan Bloedel Ltd. mills in the province.

[14] In my opinion, age, years of service, job responsibility, and limits on reasonable employment alternatives because of the specialized nature of the job in an industry with relatively limited opportunities at present, place the reasonable notice period in the upper range of 18 to 24 months.

[15] Other wrongful dismissal cases provide examples of other notice periods regarded as reasonable in other circumstances. Numerous authorities were cited and compared to present circumstances. Apart from offering a snapshot of the manner in which others have perceived particular cases, the decisions are not determinative of what is appropriate in this case. Averages derived from the cases are equally unhelpful. Each case falls to be determined by reference to its own circumstances.

[16] In all the circumstances, I am of the opinion that Mr. Tull was entitled to a greater period of notice than that provided to him. I accept his claim that the reasonable notice period is 20 months.

Compensation in the Notice Period

[17] The base rule is that a dismissed employee is entitled to receive, as damages, the remuneration that would have been received during the reasonable period of working notice. In this case, the employer and employee differ on the question of whether Mr. Tull is entitled to any amount under the short term incentive plan. He is so entitled if the short term incentive plan was an integral part of his compensation regime. Otherwise, he is not.

[18] Material provided to Mr. Tull in the form of a “Guide to Your Compensation Program” stated the following:

Your pay includes your base salary, which recognises the competencies, skills and knowledge you bring to your job, plus variable pay in the form of short-term incentive awards based on individual and corporate performance.

[19] The Guide stated that short term incentive plan awards were based on business results and individual performance against set targets measured quarterly and annually. If the targets were met, the short term component in Mr. Tull’s case was 15% of base salary. Entitlement was determined on an objective rather than subjective basis.

[20] Mr. Tull deposes that he always achieved at least 100% of his short term incentive plan target. On termination, he was paid a proportionate share of his short term incentive plan entitlement for the year 2003. In that regard, the Norske termination letter said the following:

Your eligibility for an award under the company’s Short Term Incentive Plan (STIP) will cease at the commencement of your Paid Termination Leave. You will be paid an award equal to 100% of your target award, pro-rated to your last day worked for the Individual component of the STIP. There will be no payment made under the Corporate (EBITDA) component.

[21] Against this background, the employer’s claim is that the incentive purpose associated with the short term incentive plan disappeared upon working notice being given to Mr. Tull, it was unlikely he would have earned a bonus in the working notice period, the kind of compensation provided by the short term incentive plan was not an industry standard, and, while not nominal, the component was not a substantial or integral portion of his income. With respect, I cannot agree.

[22] There is nothing in the material to suggest that short term incentive plan targets would cease any time prior to the actual termination of employment. The short term incentive plan was an essential term of the compensation package. Entitlement was tied to meeting individual performance targets, which on the corporate material, were to be ‘set for the coming year’ in January of each year. The setting of targets for any employee was not discretionary. Targets were to be set for all. The payment of the individual component of the short term incentive plan bonus was not discretionary in the event targets were achieved. The bonus was payable in February of each year if targets were achieved. In all respects, it was a bonus determined by reference to objective rather than subjective criteria and a fixed term of the compensation package.

[23] The claim that the Norske short term incentive plan was not the industry standard is not relevant. What is of concern is Mr. Tull’s contract of employment with Norske. In that regard, the situation for other employees with other employers in the industry is not of concern.

[24] Materiality is relative. A 15% bonus on Mr. Tull’s base salary was neither nominal nor insubstantial. Moreover, whatever its amount or materiality, the bonus is payable if it is a term of the contract.

[25] The evidence persuades me that Mr. Tull consistently achieved the individual targets set for him, a fact that suggests targets were always reasonable such that they could be achieved with reasonable effort. There is no reason to believe Mr. Tull would have failed to perform throughout a reasonable period of working notice in a manner that would result in reaching the individual targets. He is entitled to payment of the individual component under the short term incentive plan which was a fixed part of his compensation arrangement.

[26] Mr. Tull makes no claim for the corporate component of the short term incentive plan citing his inability to determine corporate earnings before interest, taxes, depreciation and amortization (“EBITDA”) and economic challenges in the industry which cloak any claim to the corporate component with sufficient uncertainty to compel its rejection.

[27] I determine that Mr. Tull’s short term incentive plan entitlement is 15% of base monthly salary of $12,385.16, or $1,857.78 monthly, payable for 20 months to a total of $37,155.48.

Employment Benefits

[28] The base rule in relation to benefits in the notice period is that stated by McLachlin J., as she then was, in Wilks v. Moore Dry Kiln Co. of Can. (1981), 32 B.C.L.R. 149 (S.C.) at pp. 152-53:

Mr. Wilks also claims damages for the loss of fringe benefits, including medical, dental and group life insurance, as well as contributions to the Canada Pension Plan, Unemployment Insurance Commission, Workers' Compensation Board and company pension plan. The defendant admittedly expended $4,335.19 in the last year of Mr. Wilks' employment in providing these benefits to him, and Mr. Wilks claims he is entitled to a proportionate amount of that sum for the period of notice to which this court finds he was entitled. The defendant, on the other hand, argues that he can claim only those amounts which he has expended in making other provision for these services during this period. I accept the defendant's contention. The question is not what the defendant has gained by the dismissal, but what the plaintiff has lost. This loss must be established on the evidence. If the plaintiff fails to show that he has paid out or lost money or has otherwise suffered by reason of the absence of fringe benefits, his claim cannot succeed: McKilligan v. Pac. Vocational Institute (1981), 28 B.C.L.R. 324 at 340, per Macdonald J.A., Seaton J.A. concurring.

[29] It follows that in the ordinary course, no recovery in the form of damages for a lost benefit will be permitted unless the claimant has incurred a cost to obtain a replacement or the claimant has incurred an economic loss as a result of the termination of the benefit as would be the case, for instance, if the claimant incurred a cost to obtain a service that had been insured under a plan provided in the course of employment. In most cases, the measure of loss can be readily determined, particularly when a trial occurs after expiry of the notice period. Replacement products will or will not have been purchased in the notice period and economic loss will or will not have been suffered because a previously provided benefit was not in place.

[30] A different conclusion was reached by Esson C.J.S.C., as he then was, in Cooper v. MacMillan Bloedel Ltd. (1991), 56 B.C.L.R. (2d) 341 where the trial occurred before expiry of the notice period. The learned Chief Justice said the following at pp. 347-348:

The plaintiff also advances a claim for the cost of replacing the medical and hospital benefits which are part of the MacMillan Bloedel benefit package. At this stage, he has incurred no cost because the benefits have been maintained in place. On the other hand, I am satisfied that he will, as he has sworn, incur that cost once the benefit package is no longer available to him. I therefore accept that cost as a proper item of damage from the date when the benefit package ceases to be available to the end of the notice period.

I have not overlooked the fact that the Court of Appeal in Sorel v. Tomenson Saunders [(1987), 15 B.C.L.R. (2d) 38 (C.A.)] disallowed the plaintiff's claim for such benefits (except for a small amount spent before trial) on the ground that the plaintiff had not expended money to replace those benefits. But that was a case in which the notice period was over before the action came to trial and it was clear that the plaintiff never would incur any cost to replace those benefits. Mr. Cooper will incur such cost. I therefore allow his claim for the medical and hospital benefits.

[31] The reasoning of the former Chief Justice in Cooper is relevant in present circumstances because the period of reasonable notice has not expired. One cannot know with certainty what lost benefits Mr. Tull will replace before the expiry of the notice period.

[32] Almost 10 months after termination, Mr. Tull has replaced the insurance on his life and that of his spouse, but not that on the lives of three children. On the evidence, the cost of the replacement is $138.06 monthly from May 24, 2004. On the basis of the reasoning in either the Wilks or Cooper decisions, Mr. Tull is entitled to damages equal to life insurance premiums for the unexpired portion of the notice period payable on the replacement policies he has acquired on his and his wife’s life.

[33] I am not persuaded Mr. Tull intends to replace the children’s life insurance, family accident insurance, or disability insurance. Some 10 months into the notice period, he has not replaced any of these benefits. I find that, on a balance of probabilities, he will not replace those products, he has incurred no loss in respect of those items, and he is not entitled to damages in respect of those employment benefits.

[34] Norske continues to provide medical, extended medical and dental coverage under company plans. The affidavit evidence does not persuade me that Mr. Tull will procure replacement of extended health and dental insurance on termination of Norske’s coverage. In any event, as I appreciate the record before me, there is no objectively verifiable evidence of the cost that would be incurred to provide such replacement coverage should he intend to do so. I am not persuaded Mr. Tull has incurred a loss in respect of extended medical and dental coverage of the kind contemplated by the Wilks or Cooper decisions.

[35] The situation with respect to basic Medical Services Plan coverage is different. That is the base insurance residents of British Columbia are expected to maintain in the ordinary course of events. I fully anticipate Mr. Tull will replace that coverage when he ceases to be covered by the Norske plan. He is therefore entitled to recover as damages the amount that will be payable for Medical Services Plan basic coverage for a family of two parents and three children from and after the termination of participation in the Norske plan to the end of the 20 month notice period.

[36] Norske has continued to provide Mr. Tull with the use of a leased vehicle for which Norske pays all costs except fuel. Mr. Tull was reimbursed for fuel costs during his employment. His average monthly fuel cost is admitted by Norske to be $314.40. Its recoverability is also admitted. Mr. Tull is entitled to recover that amount from the date of termination to the date upon which the lease of the vehicle is surrendered.

[37] There is insufficient evidence to persuade me that Mr. Tull has incurred or will incur any loss in respect of the rental of a leased vehicle. He has not incurred any loss to date and I am not persuaded he will incur the cost required to lease a substitute vehicle on termination of the present lease arrangement with Norske. As a result, I decline to award any amount in respect of that claim.

Loss of Pension Benefits

[38] The value of Mr. Tull’s pension has decreased as a consequence of termination. That fact is not disputed by Norske. The issue is computation of the amount of the loss.

[39] The base rule is that set forth in Ansari, supra. An employee is entitled to recover as damages an amount equal to the difference between the value of his or her pension had he worked to the end of the reasonable notice period, and the value of the pension determined at the date of dismissal. In this case, an adjustment to the base rule is required because ongoing contributions have been made by Norske to the pension plan in accordance with the salary continuance arrangement. There is a risk that I will misconstrue the expert evidence which may not reflect the results flowing from my Reasons. I will therefore refrain from stipulating an amount of damages in respect of lost pension value. I will, however, state the principle by which the loss is to be determined.

[40] The amount of the pension loss shall be the difference between the value of Mr. Tull’s pension as it would have been had contributions been made by reference to base salary and the individual component of the short term incentive plan in the 20 month period following October 27, 2003, and the value of the pension as it will be, having regard for contributions that have actually been made to the plan by unilateral action on the part of Norske since October 27, 2003. In the event of disagreement, the parties may apply before me to finalize the amount of the loss.

Mitigation

[41] Norske admits that Mr. Tull has acted reasonably in an attempt to mitigate his loss to this point in time. He has not succeeded in finding new employment. Norske claims that some reduction should be made to the length of the notice period or the amount of the award to reflect the fact that income may be earned in the remainder of the notice period which has yet to expire. Mr. Tull claims there should be no reduction because there is no evidence that the positive contingencies will outweigh the negative.

[42] Bouck J. considered the issue of mitigation in Smith v. Pacific National Exhibition (1991), 34 C.C.E.L. 64, also a summary trial proceeding under Rule 18A in which the notice period had not expired. The learned judge remarked as follows:

… the exercise of reducing an award in these circumstances is essentially based on a possibility or contingency that the plaintiff will find a new position prior to [expiry of the notice period]. Like the assessment of any contingency, it is possible this may happen, but it is also possible he might not find any work until long after [the notice period]. In fairness, both negative and positive contingencies should be taken into account.

[43] The learned judge deducted one month from the reasonable notice period of 21 months to reflect the possibility that employment would be found.

[44] The Smith trial commenced three months after dismissal. At the date of judgment, approximately 16 months remained in the notice period. In this case, approximately 10 months have elapsed and 10 months, or half the period, remains. I am not persuaded that there is much more than a remote possibility that Mr. Tull will find suitable alternative employment that he should reasonably be expected to accept given the nature of the position from which he was dismissed and the circumstances of the industry in which he is involved and has been involved throughout his career. In my opinion, no deduction should be made in the circumstances of this case to reflect the possibility that income will be earned before the expiry of the notice period.

Salary Continuance

[45] Mr. Tull claims that Norske was not justified in subjecting him to a salary continuance arrangement with the result that the full amount of the damages awarded to him must be paid forthwith. Norske claims that the salary continuance arrangement is permitted on the authorities and should be continued to the end of the notice period, modified as necessary to reflect the results of any award of damages.

[46] Salary continuance arrangements have been the subject of discussion in several authorities that are difficult to reconcile.

[47] In Cooper, supra, reasons released May 29, 1991, Esson C.J.S.C., as he then was, considered whether an employer was entitled to continue to pay salary during the period of reasonable notice. As in the present case, a salary continuance arrangement option and lump sum severance option had been offered to the employee who accepted neither. At p. 344 the learned Chief Justice said the following:

In this case, I think it unnecessary to get into the complexities of constructive dismissal. What took place on October 29, 1990, was accurately described by the division manager when he said that Mr. Cooper was "terminated as of right now". The fact that the employer offered, as one of two options, to keep the employee on payroll for 12 months did not affect the reality of the transaction. Any possible doubt about that is removed by the alternative offer of a lump sum payment equal to 10 months salary. Those were two ways of offering to meet the employer's obligation to pay a reasonable amount in lieu of notice. Neither offer having been accepted by Mr. Cooper, he was free then to bring action.

The next question is whether the amount offered was sufficient to meet the company's obligation. I do not think it is correct to describe the offer, as the company now does, as one equivalent to 12 months' notice. The lump sum offer was based on 10 months. The offer to keep Mr. Cooper on payroll was subject to the onerous term that his salary and benefits would cease were he to "commence other employment".

[48] In MacDonald v. Woodward Stores Ltd. (1991), 39 C.C.E.L. 58, reasons released August 27, 1991, Campbell A.C.J. addressed the argument that the Chief Justice, in Cooper, had found nothing wrong with salary continuance arrangements. The learned Associate Chief Justice addressed the claim as follows at p. 61:

The defendant suggests that the Chief Justice, in Cooper, did not find anything objectionable to salary continuation as a means of an employer meeting its severance pay obligations and that he, in effect, confirmed its legitimacy. Thus, it says, that since the options offered the plaintiff here were fair and reasonable considering the plaintiff's position and length of service, the defendant's obligations have been met and the plaintiff has no basis on which to bring this action.

I cannot agree with this submission. At best, the Chief Justice gave equivocal support to the notion that salary continuation does not offend an employee's rights. He said of the options given Cooper "those were two ways of offering to meet the employer's obligation ..." [emphasis in original].

He did not say that they were both legitimate means of achieving that result at law. Indeed, later in his reasons he treated salary continuation as the lesser of the two offers due to the "onerous" term dealing with mitigation and the premature loss of coverage upon re-employment, and also found the alternate offer of ten months’ salary in lieu of notice inadequate in the particular circumstances.

The Chief Justice makes it clear in Cooper that where an employee is not prepared to accept severance terms or a choice of severance packages offered by an employer, he is "free then to bring [an] action" (p. 5 quoted supra). I find myself in full agreement with him despite the persuasive submissions to the contrary on behalf of the defendant. It makes no difference in this regard whether Cooper is, as the defendant suggests, a dismissal for cause case.

[49] With respect to the reasonableness of either offer made to the employee in the case before him, the learned Associate Chief Justice wrote as follows at p. 62:

The options offered, as noted earlier, were a maximum 54 weeks salary continuance, payable bi-weekly with conditions similar to those characterized as "onerous" in Cooper, or a lump sum equal to six months salary.

Do either of these options fall within the range of a reasonable notice or salary in lieu thereof? Clearly, the six month offer does not. In terms of dollars alone, the 54 week offer is roughly equivalent provided the payment continued for that entire period. While it also includes various benefits, there are "onerous" conditions, including the cessation of the payments and benefits upon obtaining new employment. In addition, bi-weekly written reports from the plaintiff of his efforts to obtain employment are required.

Given these factors, it is difficult to determine the true value to the plaintiff of the salary and benefit continuation option. However, an exact determination is not necessary in these circumstances since whatever that value is, it is, in my opinion, significantly less than the 12 months which I have determined to be reasonable notice the plaintiff was entitled to receive.

The defendant suggests that if it has given adequate notice regardless of how payment in lieu thereof is made, there is no breach for which it can be held liable. This argument overlooks the fact that, as stated earlier, the conditions attached to the salary continuance option reduce its effective term to significantly less than 12 months.

[50] Neither the Cooper nor the MacDonald decision denies the employer use of a salary continuance arrangement, but neither looks favourably upon such an arrangement.

[51] The issue was next considered by MacDonald J. in Spooner v. Ridley Terminals Inc., (1991), 62 B.C.L.R. (2d) 132, reasons released December 2, 1991. The learned trial judge wrote as follows at pp. 137-138:

I see no reason in principle to reject salary continuance as a proper means of paying the damages which flow from the termination of employment without reasonable notice. No reason, that is, so long as the salary continuance is equivalent to the damages which would be fixed by a court for such a breach. By doing so, an employer can avoid the accumulation of pre-judgment interest on the amounts so paid. There is even an attractive argument that the periodic nature of salary payments during employment suggest salary (and benefit) continuance as the most appropriate means of paying such damages. Salary continuance also avoids such questions as present value (see below) and future possible mitigation arising from alternate employment.

The defendant urges upon me the proposition that "termination of employment alone is not a breach of contract". It argues that if an employer correctly estimates the reasonable notice period and pays the salary and benefits due for that period, no breach has occurred. That argument is designed to provide a foundation for the "reasonable offer" doctrine discussed below since it avoids the need to characterize post-termination payments as damages.

Even though I accept that the law does not in most cases require an employer to provide work during the notice period (See Park v. Parsons Brown (1989), 39 B.C.L.R. (2d) 107 (C.A.)), I prefer the plaintiff's characterization of what occurs when employment is terminated on less than reasonable notice. Termination in such circumstances is a breach of the employment contract. Even where the employer elects to pay in lieu of notice and pays more than the court awards, there has been a breach. But in that case, the employee's action will be unsuccessful because he has already received adequate damages for the breach.

While Cooper and Macdonald [cites omitted] do not embrace the salary continuance alternative with much enthusiasm, I do not read either of those decisions as rejecting that alternative. I agree with the plaintiff's submission that the issue is not whether there has been a breach of the employment contract (assuming termination on less than reasonable notice) but rather what damages flow as a consequence of that breach.

In both Cooper and Macdonald the court found that the conditions attached to salary continuance in those cases (cessation on re-employment) rendered such offers less valuable than a lump sum payment calculated on an equivalent period. I do not have that difficulty with the form of the salary continuance offered here. Had the initial offer been for a 12 rather than an 8 month term, the 50% reduction and cessation of health benefits on re-employment would not have prevented me from accepting such payments as adequate compensation (subject, of course, to the "productivity award" discussed below). And I am assuming that any contributions by the defendant to the plaintiff's pension would continue in proportion to the amounts she was entitled to receive monthly under salary continuance, both before and after re-employment.

[52] In Spooner, the learned trial judge modified the salary continuance arrangement by increasing its duration to coincide with his determination of the reasonable notice period. At the same time, he awarded damages in relation to the ‘productivity bonus’ payable forthwith.

[53] In Marshall v. Artek Group Ltd. (1993), 47 C.C.E.L. 229, Meredith J. followed Spooner, supra, and held that a salary continuance arrangement was a proper means of paying damages “which flow from the termination of employment without reasonable notice”. It removed “most, if not all, of the speculation implicit in a lump sum award”. Having so found, the learned trial judge said the following at p. 233:

I am not sure that the court has jurisdiction to make an order for future payments short of enforcement of a judgment. So in the present case, insofar as salary continuation is concerned, I order that the application for lump sum judgment be adjourned generally with liberty to the plaintiff to apply if, as, and when, the defendant discontinues the payment of salary and benefits before the expiration of the notice period. I do not carry the terms of the offer of the defendant to the plaintiff into this part of the order.

[54] In Polak v. Surrey Memorial Hospital Society (1996), 17 C.C.E.L. (2d) 283, Cohen J. endorsed a salary continuance arrangement that was to extend for a period of 17 months which was the reasonable notice period stipulated by the employer. The learned judge ordered the employer to continue to pay the amounts stipulated in the salary continuance arrangement and adjourned the application for lump sum judgment generally with liberty to the plaintiff to apply if the employer discontinued the payments contemplated by it.

[55] In Albach v. Vortek Industries Ltd. (2000), 79 B.C.L.R. (3d) 353, reasons released August 14, 2000, Brooke J. concluded that “salary continuance with the condition of the reduction of the payments during the notice period if new employment is obtained requires the employer, and may permit the court, to look to the higher end of the appropriate range [of the period of reasonable notice]”. On the facts before him, the learned judge determined that the notice provided to the employee was unreasonable, the dismissal was therefore wrongful and he saw no reason to depart from the principle that damages are awarded in a lump sum once and for all.

[56] Finally, in Moody v. Lafarge Canada Inc., [2000] B.C.J. No. 2678, 2000 BCSC 1847, reasons released December 21, 2000, Hunter J. dealt with the employer’s claim that it should be entitled to continue to pay salary on a monthly basis over whatever term the court considered appropriate as follows at paras. 25-26:

I am not satisfied that a salary continuance is appropriate. Lafarge terminated the plaintiffs’ employment which it was entitled to do. It did not however provide reasonable notice of that. Instead Lafarge advised the plaintiffs that they would no longer be employees as of April 28, 2000. The breach by Lafarge is in failing to give reasonable notice. The plaintiffs’ claim for damages is based on a calculation of the notice period multiplied by their monthly salary. There is no agreement to accept payment of a salary continuance in the event of dismissal nor an acceptance by the plaintiffs, upon their employment termination, of payment on a monthly basis for the appropriate notice period.

In the circumstances I have concluded that the plaintiffs are entitled to judgment in a lump sum and should not have to wait for payment of that judgment amount spread over a period of months following the judgment.

[57] Salary continuance arrangements and the British Columbia cases were considered in the Ontario context in Correa v. Dow Jones Markets Canada Inc. (1997), 35 O.R. (3d) 126 (Ont. Gen. Div.). After reviewing some of the authorities to which I have referred, Sanderson J. said the following at pp. 134-135:

At common law damages have historically been paid by a once and for all lump sum payment. The authors of MacGregor in MacGregor on Damages, 15th ed. (London: Sweet & Maxwell, 1988), have said at para. 1:

Damages are the pecuniary compensation, obtainable by success in an action, for a wrong which is either a tort or a breach of contract, the compensation being in the form of a lump sum which is awarded unconditionally . . .

And at para. 1795:

The award must be in the form of a lump sum for which judgment is entered. No other form of final award is allowed to the court, so that in Fournier v. Canadian National Ry. [[1927] A.C. 167 (P.C.)] it was held to be improper and illegal to award an annuity by way of damages; however, in Metcalfe v. L.P.T.B. [[1938] 2 All E.R. 352] McNaughten J. said that a pension could be awarded to the plaintiff with the consent of the parties . . .

In Watkins v. Olafson, [1989] 2 S.C.R. 750 at pp. 760-61, 61 D.L.R. (4th) 577, McLachlin J. for a unanimous court, albeit in the context of a personal injury claim, held that alteration of the common law principle that judgment be rendered once and for all at the time of trial and the correlative entitlement of the plaintiff to immediate execution of the entire award is a major revolution in the law of damages best left to be undertaken by the legislature.

In the case at bar, Dow Jones has not continued to pay the plaintiff's salary and benefits. The plaintiff has not agreed to accept periodic payments. It is a long-standing principle of common law that a plaintiff is entitled to a once and for all lump sum award of damages. Accordingly, I reluctantly conclude that I do not have jurisdiction to impose periodic payments on the plaintiff, although I agree with Macdonald J. in Spooner, supra, that such an order would be logical and desirable in circumstances such as these, had the legislature seen fit to confer such jurisdiction upon this court.

[58] Sanderson J. provided a lump sum award and dealt with the uncertainty surrounding mitigation by following the practice adopted in Ontario of impressing any earnings of the former employee in the notice period from newfound employment with a trust in favour of the former employer: see Thomson v. Bechtel Canada Ltd. (1983), 3 C.C.E.L. 16 (Ont. H.C.), aff’d (1985), 6 C.C.E.L. xxxv (C.A.)

[59] This overview of decided cases compels me to conclude that employers, employees and those advising them would be well-served if the Court of Appeal were to consider the place, if any, of salary continuance arrangements in wrongful dismissal actions.

[60] In my opinion, the principle that damages must be assessed on a once and for all, one-time basis, the requirement that the court resort to a kind of mandatory injunction or adjourn judgment to a point following expiry of the notice period if the effectiveness of a salary continuance arrangement is to be assured, and the fact that a salary continuance arrangement to which the employee does not agree reflects the employer’s attempt to unilaterally amend the employment contract, suggest that such arrangements should not be endorsed as a means of compensating an employee for damages in a wrongful dismissal action. It is obvious, of course, that nothing should prevent an employer and employee from agreeing to enter into a salary continuance arrangement.

[61] That said, I appreciate the relevant principles that have evolved in relation to the appropriate approach in awarding damages for wrongful dismissal in British Columbia to be the following:

1. A contract of employment, otherwise silent on the manner of termination, may be terminated by providing reasonable working notice, or upon payment of a lump sum in lieu of reasonable notice: Ansari, supra.

2. The amount payable in lieu of working notice must include all compensation that would have been received in, or in respect of, the reasonable period of working notice and an amount that will permit replacement of employment benefits that would have been enjoyed in the period of working notice had such benefits not been terminated: Ansari, supra.

3. The employer’s failure to properly determine the amount payable as a lump sum in lieu of working notice will permit the terminated employee to commence an action for wrongful dismissal. In that action, damages will ordinarily be assessed as a lump sum in satisfaction of all claims. The amount assessed in relation to lost benefits from employment will normally be determined by reference to the cost incurred by the employee to replace the benefit or, where the lost benefit has not been replaced but the court is persuaded on the balance of probabilities that they will be replaced, the reasonable cost that will be incurred to procure the replacement: Cooper, supra; Wilks, supra; MacDonald, supra.

4. The court may, in its discretion, endorse the use of an employer-imposed salary continuance arrangement as a means of providing the employee with payment in lieu of notice provided the amount determined by the employer to be payable on its terms is a reasonable reflection of that which the employee has lost as a result of not being provided with working notice: Spooner, supra; Polak, supra.

[62] In my opinion, discretion should only be exercised in favour of a salary continuance arrangement if the amount to be paid to the employee in accordance with its terms is equivalent to that which the employee would have received had he or she been dismissed with working notice: Spooner, supra.

[63] In the circumstances of this case, I would not exercise discretion to permit continuation of the salary continuance arrangement because of the substantial departure in the notice period as determined by the employer from that which was reasonable, the failure to properly compute lost income by omitting short term incentive plan compensation, the omission to appropriately compensate for certain of the lost employment benefits, the omission to compensate for lost pension benefits, the omission to adequately define ‘alternative employment’ that would result in a reduction in the monthly payments stipulated in the salary continuance arrangement, and the arbitrary nature of the 50% reduction in the event alternative employment were obtained.

[64] The reduction in the event that ‘alternate employment’ is found does not properly reflect the employee’s obligation to mitigate and, in any event, invites disagreement on the meaning of ‘alternate employment’. An employee who has been terminated should not be discouraged from undertaking any work he is prepared to pursue in the notice period. Acceptance of employment that provides less than one-half the employee’s base salary would result in an excessive reduction to overall compensation in the notice period. It is no answer to say that this, or any other reduction, provides certainty in relation to mitigation while a one-time assessment of damages does not. I prefer the approach adopted by Bouck J. in Smith, supra. The adjustment for the contingency of mitigation is a matter of assessment by the court just as contingencies are the matter of assessment in various aspects of personal injury awards.

[65] Acceptance of salary continuance arrangements, whether in the exercise of discretion or otherwise, represents a modification of the established principle that damages for wrongful dismissal are to be assessed as a lump sum, once and for all. Whether the law can and should be revised in that manner is a topic that should be addressed by the Court of Appeal.

Disposition

[66] It follows that Mr. Tull is entitled to an award comprised of the following:

(a) monthly base salary of $12,385.16 for 20 months from October 27, 2003;

(b) short term incentive plan compensation of $1,857.78 monthly for 20 months from October 27, 2003;

(d) the lost pension value determined in accordance with these reasons;

(e) replacement life insurance costs of $134.16 monthly from the date the policies were acquired to the end of the 20-month notice period; and

(f) replacement family medical services plan coverage from the date of termination of participation in the Norske plan to the end of the 20-month notice period.

[67] There shall be deducted from the aggregate amount payable to Mr. Tull, the total of payments received by him from Norske under the salary continuance arrangement.

[68] In accordance with the result in William P. Crooks Consultants Ltd. v. Cantree Plywood Corp. (1985), 62 B.C.L.R. 281 and Suttie v. Metro Transit Operating Co. (1983), 45 B.C.L.R. 394, Mr. Tull is entitled to pre-judgment interest from October 27, 2003 on the basis that the award in respect of salary, incentive compensation, and pension loss is one for general, rather than special, damages. Interest on damages awarded in respect of benefits will be determined in the manner applicable to special damages.

Costs

[69] In the absence of agreement, the parties may address the matter of costs by written submission through the Registry.

“I.H. Pitfield, J.”
The Honourable Mr. Justice I.H. Pitfield

Citation:	*Tull v. Norske Skog Canada Limited,*
	2004 BCSC 1098