2005 BCSC 43 Martell v. Ewos Canada Ltd. et al

Before: The Honourable Mr. Justice Williams

Reasons for Judgment

Counsel for the Plaintiff:	R.J. Kaardal B.W. Curtis
Counsel for the Defendants:	H.S. MacDonald
Dates and Place of Trial:	January 13, 14, 15, 16, 2004
	Vancouver, B.C.

[1] The plaintiff Denis Martell brings an action against the defendants, alleging wrongful dismissal from his employment and seeking damages as well as enhanced costs; he says the conduct of the defendants was decidedly high-handed and warrants censure.

[2] The defendants ask that the plaintiff’s claim be dismissed on the basis that his termination was for cause and as well, seek judgment on a counterclaim. They ask for an order to recover certain sums that were paid out in a belief that the plaintiff was entitled. They, too, seek to recover special costs.

Facts:

[3] The plaintiff is 57 years of age. He holds degrees or diplomas in business administration, industrial marketing and chemical/metallurgical technology. He was employed as an executive in the aquaculture industry, primarily in British Columbia, between 1988 and the time of his termination by the defendants on January 5, 2001.

[4] Prior to September 1, 1990, Ewos Canada (a subsidiary of Cultor) was operating General Sea Harvest Ltd. (“G.S.H.”), a fish farming company. It was apparently not particularly successful.

[5] In September, 1990, Cultor hired the plaintiff as President and C.E.O. of a new Canadian subsidiary, Sea Prime Seafood Ltd. (“Sea Prime”). The plaintiff set that company up, including hiring and training personnel. The operation was successful; in the years up to 1994, it met and exceeded all of its financial targets. By 1994, sales had grown to a range of $30 million per year.

[6] In 1992, the plaintiff was instrumental in reorganizing G.H.S., and he engineered a partnership which turned out to be quite beneficial for Cultor.

[7] In 1994, Ewos sold Sea Prime; the plaintiff was then named President and C.E.O. of Ewos Canada and also was named Deputy Managing Director of Ewos Division, a larger entity with a number of international operations.

[8] Under the plaintiff’s direction, Ewos Canada made a number of strategic changes and redirections, with the result that the company did very well over the subsequent years.

[9] As Deputy Managing Director of Ewos Division, the plaintiff was second in command of that organization. He reported to Phillip Smith, the Managing Director. The plaintiff was a member of the senior management team and was actively involved in management of the group of companies operating in different parts of the world. His specific area of responsibility was purchasing and logistics. Transactions in that role were very substantial, something in the order of $400 million U.S. per year.

[10] In or about September, 1999, Mr. Smith broached with the plaintiff the matter of formalizing an employment agreement with Ewos Division. Because the plaintiff had some concern that there could be organizational restructuring in the industry and that it would affect him, he raised with Mr. Smith the matter of providing for adequate compensation in the event of termination. The plaintiff says the discussion produced an agreement:

… During our discussions on this point, Philip Smith told me that it was a policy of the Ewos Businesses that they could not write into a contract with a executive, a severance payment of greater than 12 months’ salary plus bonus and benefits. I then made it known to Mr. Smith that I believed I was entitled to more than 12 months’ notice in the event that I was terminated from the Ewos Businesses. Mr. Smith then assured me that the Ewos Businesses would pay me the 12 months’ severance payment in the event of my termination and they were prepared to agree that this would not restrict me from pursuing any notice award that I might be entitled to at law. I then provided Philip Smith with language to reflect our understanding and he agreed to incorporate this language, which now appears as Clause 14(c)(ii) in my Employment Agreement with the Ewos Businesses, dated January 1, 2000 (the “Agreement”).

[Paragraph 15, plaintiff’s affidavit #3, June 19, 2002]

That agreement recognized the plaintiff’s prior employment at Sea Prime, so that his effective service date was September 1, 1990.

[11] In the summer of 1999, the plaintiff learned that Ewos Division was to be sold, although there was at that time no purchaser. He and others in the management group discussed a buyout proposal, but it did not come to fruition. It is clear that, at the time, the plaintiff was most interested in acquiring some type of ownership stake in the company.

[12] In anticipation of the sale of the EWOS Division, Cultor agreed to pay a “stay on bonus” to the management group, of which the plaintiff was a member. A Memorandum of Agreement dated April 27, 1999 is in evidence. In April, 2000, pursuant to that Agreement, the plaintiff and his colleagues in the management group each received one year base salary as a bonus for agreeing to remain with the company for a minimum 12 month period following the sale.

[13] In February, 2000, Statkorn Holdings ASA (“Statkorn”) acquired Ewos Group from Cultor. The plaintiff and the other five members of the management team continued to maintain a keen interest in having a participation in the businesses. They did not know what the new owners had in mind, or even if their positions would continue, and so Mr. Smith, representing the management team, had discussions with Mr. Isaksen of Statkorn as to “what types of stock incentives the management team could expect from Statkorn for remaining with the organization after the transaction”. [Plaintiff’s affidavit #3, paragraph 20, June 19, 2002].

[14] On February 25, 2000, members of the management group met with Mr. Isaksen. He discussed with them, in a general way, the intention that a share incentive program would be made available to them by Statkorn. The details of the plan hinged upon an intention that Statkorn would be listed on the Oslo Stock Exchange. Although no specific details were provided, Mr. Isaksen indicated that the percentage of the value of Statkorn that would be made available for distribution to the management group would be not less than 3% and not as high as 10%.

[15] There was a further meeting of the management group and Mr. Isaksen in March, 2000. At that time, Mr. Isaksen provided further details of the proposed share incentive program, although specific amounts were not determined.

[16] The plaintiff and other members of the management group continued to discharge their duties. There were reviews of strategies and corporate activities which resulted in at least one significant acquisition and a review of the structure and strategy of the company. The plaintiff, as a member of the management group, played an active role in these developments.

[17] On January 5, 2001, the plaintiff was called to a meeting with Mr. Isaksen in Oslo, Norway. He was advised that his employment was terminated effective immediately. He was not provided with any notice nor was cause for the dismissal alleged. No severance payment or any other payment was made at that time.

[18] At the time of the termination, the plaintiff was actively involved in the negotiation of certain important contracts on behalf of the company. The company asked him and he agreed to continue with these projects to see them to completion, which he did.

[19] The plaintiff’s “base salary” at the time of the termination of his employment was $244,975.90. He was also entitled to receive a car allowance in the amount of $14,766.70. In addition, he was receiving an operating expense for his automobile in the amount of approximately $250 per month.

[20] In the first three months of 2001, Statkorn put in place stock option agreements with all members of the management team (excepting the plaintiff and Mr. Smith, both of whom had been terminated). Cash bonuses were also paid to the management team.

[21] On March 16, 2001, the plaintiff initiated his action against the defendants. He alleged wrongful dismissal and sought damages.

[22] On March 29, 2001, the defendants, through their solicitor, paid the plaintiff his base salary for one year and car allowance for the same period of time, less certain statutory withholdings. This was tendered pursuant to the defendants’ obligations under the Employment Contract.

[23] A statement of defence was filed May 14, 2001, conceding that the plaintiff had been dismissed without cause, but dealing with a number of issues relating to the claim for damages.

[24] Subsequent to the filing of the statement of defence, the defendants became aware that, in July, 2000, the plaintiff had acquired a “full play membership entrance fee” for himself at the Seymour Golf & Country Club in North Vancouver at a cost of $23,540. The fee was paid with a cheque drawn on the account of Ewos Canada. There were as well subsequent monthly invoices related to that membership; those too were paid by Ewos Canada.

[25] On August 23, 2002, an amended statement of defence and counterclaim was filed. In that pleading, the defendants alleged that it had recently been discovered that the circumstances relating to the payment of the golf membership fees constituted a breach of the plaintiff’s duties and terms of his employment contract, and thus the defendants asserted the position that the dismissal had been for cause. A claim was made to recover sums paid to the plaintiff, including his severance (as per the contract of employment) and other incidental sums paid.

[26] On September 5, 2002, the plaintiff filed a statement of defence to the counterclaim, contending that there was no impropriety in the acquisition of the golf membership and that it had been duly approved by the appropriate superior in the defendant’s corporate structure.

Issues:

[27] The initial issue to be determined is whether or not this matter is appropriate for adjudication under the Rule 18A provisions.

[28] If the case is suitable for determination by way of summary trial, the pivotal issue which must be addressed is whether the defendants had cause to terminate the plaintiff’s employment. If the dismissal was for cause, the defendants’ claim for damages must be addressed. On the other hand, if the defendants do not establish cause, the plaintiff’s claims for damages have to be adjudicated. As well, the issue of mitigation is raised.

[29] In any event, the claims for damages will have to be decided.

Suitability for Rule 18A Disposition:

[30] In this case, it is the common position of the parties that it is appropriate for the Court to determine the action by summary trial.

[31] While the Court will not necessarily be bound by such an agreement between the litigants, it is evident to me that the position that they have taken in this instance is sound. The facts can be sufficiently found on the material which has been filed, and the economy of proceeding in such a fashion is clearly in the interest of all concerned.

[32] This matter will be decided under Rule 18A.

Was there cause for the dismissal?

[33] The defendants say that there was cause, namely that the arrangements that the plaintiff made to have the employer pay for his golf club membership were without authorization or adherence to company policy, and therefore constituted a serious betrayal of his office, warranting termination.

[34] The plaintiff contends that the golf club membership was in compliance with company policy and was a properly authorized expense. Accordingly, it cannot be a proper basis for his dismissal.

[35] The onus of proving that the dismissal was justified, that is, was “for cause”, lies on the defendant.

[36] The plaintiff says that there were two bases upon which the expenditure for the golf club membership was proper. In his affidavit, he testifies that he obtained the authorization of his immediate superior, Mr. Smith. There is an affidavit in evidence from Mr. Smith, confirming that he was apprised of the proposed expenditure by the plaintiff and gave his approval. Furthermore, the plaintiff relies upon discussions he had at the time of his original hiring. The party with whom he dealt then, Mr. Hertsberg, offered, as a condition of employment, that the company would pay the cost of a membership in a Vancouver men’s club such as the Vancouver Club or the Terminal City Club. In fact, the plaintiff never availed himself of that offer and for many years there was no club membership claimed. He says it was only in the year 2000 that he decided that he wished to take out the membership and at that time elected to join the Seymour Golf and Country Club. As well, there is evidence before the Court that other members of the management group, located in other countries, enjoy golf club memberships, the cost of which are paid by the company.

[37] It is the position of the defendants that the justifications offered by the plaintiff are without merit.

[38] Dealing first with the plaintiff’s contention that he was simply availing himself of the offer which had been made at time of hiring, the defendants say it is unreasonable for the plaintiff to suggest an equivalence between membership in a downtown business club and a full play membership in a golf and country club. With respect to the plaintiff’s position that other equivalent officers in the company enjoyed similar benefits, albeit in other locations, the defendants say that the memberships acquired by those persons at company expense were not full play long term affiliations, but rather year-to-year and substantially less in cost.

[39] As for the plaintiff’s claim that he relied upon the authorization of his immediate superior, Mr. Smith, it is the position of the defendants that the established and accepted model of authorization which governed personnel decision-making in the company was a so-called “grandfather principle”. Essentially, this entails any significant decision with respect to salary or benefit being authorized not by the immediate supervisor (the father) but rather the supervisor’s supervisor (the grandfather). In the present matter, the evidence suggests that the plaintiff’s “grandfather” had not approved nor had he been called upon to approve the company expenditure for the plaintiff’s golf club membership.

[40] On all of the evidence, it is apparent to me that the grandfather principle upon which the defendants seek to rely is not precisely defined, certainly not in a way that would enable the Court to conclude the plaintiff breached the protocol. As best I can understand, it did not entail the “grandson” speaking with or otherwise ensuring that the “grandfather” had approved the expenditure in question. Evidently, the “grandson” would be entitled to rely upon discussions he had with his “father”. As well, it is not clear that the policy as it was understood and practically applied would extend to approval for benefits such as a golf club membership at issue here.

[41] I find that the plaintiff discussed the proposed expenditure with Mr. Smith and that Mr. Smith gave his approval. That being so, it would not be reasonable to impute to the plaintiff a finding of misconduct or deceitful action.

[42] There are a number of affidavits which deal with the “grandfather principle” and the role it played in the operation of the companies. The plaintiff, in his affidavits, appears to say that the principle was virtually unknown to him. In his affidavit #4, sworn on February 28, 2003, he says:

Prior to August 22, 2002, when the first reference to the so-called “grandfather principle” was made in this litigation, I had never heard this or any similar term used within the Defendants’ organization. Nor had I ever heard a person two levels up in the corporate hierarchy referred to as a “grandfather”.

Generally, the flavour of the plaintiff’s assertion is that there was really no substantive policy as asserted by the defendants.

[43] In my view, there is reason to be sceptical of the position taken by the plaintiff. The affidavits of Mr. Jarvinen (Senior Officer of Cultor), Mr. Grierson (now President and C.E.O. of EWOS Canada), Mr. Luck (Controller of EWOS Canada), Peter Williams (a long time member of the Management Group and now Chief Financial Officer of the defendant Statkorn, albeit, renamed) and Mr. Smith all satisfy me that there was a well known feature of the management model that required approval in the manner which I have described above as constituting the “grandfather principle”. I find it was by no means unreasonable for the defendants to believe that the matter of the golf membership would have been subject to the policy. To be clear, my conclusion on this issue is not based upon a finding that there was no “grandfather” policy in place, but rather the doubts I have that the plaintiff acted in violation of the policy and the doubts I have as to whether the policy would extend to the specific matter of the golf club membership.

[44] There is as well the plaintiff’s assertion that he placed reliance on the much earlier agreement made by his then superior, that the company would pay the cost of the club membership. While there is some basis to question whether the plaintiff’s claimed understanding of the matter was entirely reasonable, it must be considered in the plaintiff’s favour.

[45] In summary, I cannot find that the defendant has satisfied its burden of proof of cause, and therefore the termination of the plaintiff was without cause and without notice.

Plaintiff’s Right to Recover Damages for Dismissal:

[46] The employment contract contains the following term:

14. Termination. This Agreement may be terminated only as follows:

(a) by death of the Executive;

(b) for just cause immediately upon written notice by the Company;

(i) the Executive giving three (3) months’ notice to the Company in writing;

(ii) the Company paying the Executive a sum equivalent to twelve (12) months’ salary plus car allowance and bonus. It is understood by both parties that payment of the twelve (12) months’ salary and bonus is without prejudice to the Executive’s right to seek additional notice according to his rights at common law.

(d) at the normal age of retirement, 65 years of age.

[47] It is the plaintiff’s contention that this right to the 12 months’ salary and benefits (car allowance and bonus) is in addition to whatever right there is to recover damages that he might have at common law. To support that position, he relies upon evidence of events and discussions leading up to the agreement.

[48] It is the position of the defendants that the 12 months represents a minimum, and that the agreement specifically provides that the plaintiff is not limited to the 12 month award, but rather allows the right to claim damages beyond that, subject to the facts of the termination and the law which may apply.

[49] In my view, there is a degree of ambiguity about the provision. That being so, the Court is required to look to other evidence, particularly the surrounding circumstances, in order to ascertain the meaning which should properly be attributed to the provision in question: Gilchrist v. Wester Star Trucks Inc. (2000), 73 B.C.L.R. (3d) 102 (C.A.).

[50] Here, I consider the following to be relevant:

(a) the Plaintiff contends for the interpretation which would find both the 12 month payment and common law entitlement to damages in lieu of notice. His evidence (referred to above, para. 10) is that he asked that the employer agree to provide him with the one year salary in addition to whatever common law rights he might have. He says that the employment contract reflects the employer’s agreement to his request. That must be viewed with a degree of caution, since his position is coloured to some extent by his self-interest in this litigation.

(b) Mr. Smith’s affidavit, although not perfectly clear, and accepting that he may have some animus to the defendants, is of some value.

During my negotiations with the Plaintiff, he raised concerns with me that if his employment should be terminated without cause that he wanted to be adequately compensated. I informed him that it was company policy that no severance payment in excess of 12 months be expressly written into an employment agreement. Mr. Martell advised me that he felt he would be entitled to more than 12 months’ notice in the event that he was terminated from the EWOS Businesses. I raised this issue in an EWOS Board Meeting and Juha Kurkinen, the Chief Legal Councillor of Danisco Ltd. and an EWOS Board Member, advised that it was not our intention to limit the notice he would be entitled to at law in the event of his employment being terminated without cause. I was simply not permitted to offer a severance payment, as opposed to reasonable notice, in excess of 12 months’ salary and bonus. This information was passed back to Mr. Martell and I assured him that the EWOS Businesses would pay him the 12 months’ severance payment in the event of his termination and the EWOS Businesses were prepared to agree that this payment would not restrict Mr. Martell from pursuing any notice award he might be entitled to at law. Following this advice, Mr. Martell presented me with some language to reflect the understanding that we had reached. We agreed to incorporate Mr. Martell’s language into his employment agreement with the EWOS Businesses, and this language now appears as clause 14(c)(ii).

[Paragraph 4, Philip Smith Affidavit #1, June 5, 2002]

I consider that his reference to the “twelve months’ severance payment” and, as well, conjunctively, reference to “any notice award he might be entitled to at law” are supportive of the 12 month payment being separate from and not part of the common law entitlement.

(c) The affidavit of Juha Kurkinen is informative; he was the General Counsel of the parent corporation at the relevant time, and specifically, the person from whom Mr. Smith took his direction on the matter of Mr. Martell’s request. Although he professes no recollection of a discussion with Mr. Smith, he says:

As Managing Directors of our companies in many jurisdictions including Finland have no protection under law regarding of the termination of their positions Cultor many times wanted to give them some protection and twelve months’ salary was something that could be deemed reasonable in addition to the possible notice period salary that they otherwise possibly had. It was equally clear that by contract we could not limit their possibilities to get compensation under some jurisdictions if in these jurisdictions there were provisions, which were obligatory provisions under law. So in this sense it was not always and is not always possible to limit the possibility to get the compensation under law. But the idea anyway was to secure at least in some selected cases the possibility to get this ‘minimum’ compensation of twelve months’ salary which in many cases is not out [of] proportion compared with what employees in general can get in cases when notice of termination is given without cause.

Therefore it is very possible although I have no recollection of that, that this kind of discussion did take place also with Mr. Smith regarding Mr. Martell’s and possibly some others’ employment agreements. [emphasis added]

[Paragraph 7, Juha Kurkinen Affidavit #1, August 29, 2002]

[51] In the circumstances, recognizing the ambiguity in the actual wording of the clause, by reference to other evidence, I am driven to conclude that the employment agreement entitles the plaintiff to receive the monetary equivalent of 12 months’ salary plus car allowance and bonus, as well as common law damages in lieu of notice.

Notice Period:

[52] In view of the finding that the plaintiff was dismissed without cause, he is entitled to reasonable notice of his dismissal; the Court’s task will be to determine the appropriate notice period and award damages in recognition of that, so as to reflect the remuneration that the plaintiff would have been entitled to receive during that notice period.

[53] In this Province, the leading case on that issue is Ansari v. British Columbia Hydro & Power Authority (1986), 2 B.C.L.R. (2d) 33 (S.C.), aff’d (1986) 55 B.C.L.R. (2d) xxxiii (C.A.). There, McEachern C.J.S.C., accepting that the most important factors were as set out by McRuer C.J.H.C. in Bardal v. Globe & Mail Ltd. (1960), O.W.N. 253, 24 D.L.R. (2d) (H.C.), said:

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 appointment, but not necessarily in that order.

[54] In the case at bar, the plaintiff was 53 years of age at the time he was terminated. He had accrued in excess of ten years of service. He held a senior position with significant responsibility and, on the evidence, I conclude that equivalent alternative employment was not at all readily available.

[55] Counsel have referred me to a substantial number of cases. Needless to say, each case has its own particular circumstances. Having reference to the criteria set out above, and having comparatively analyzed this case to those to which I was referred, it is my view that an appropriate period of notice for Mr. Martell would be 16 months.

Entitlement to Bonus:

[56] By virtue of his dismissal on January 5, 2001, the plaintiff was precluded from participating in the bonus and incentive programs which were put in place for those members of the management team who continued to be employed. (In effect, the new ownership group were making changes that were considered right for the future of the company; it is quite apparent from the evidence that they were of the view that, going forward, some personnel changes were in order. Specifically, I accept that they had concluded that Mr. Smith and the plaintiff were not persons that were suited to the team or group that they wanted to lead the company into its future. That of course did not constitute cause to dismiss the plaintiff, and the defendant recognized that when the plaintiff was advised of his termination.)

[57] In the evidence and submissions, much has been made by the defendants of the fact that there was never any contract between the plaintiff and the defendants which would entitle the plaintiff to receive the benefit of bonus for participation schemes which were finalized or formalized after his dismissal. As I understand the argument, the plaintiff cannot now claim to be entitled to those benefits because he is not contractually entitled.

[58] I do not find that contention to be persuasive.

[59] The plaintiff, for his part, appears to suggest that it is significant that were discussions between a senior officer of Statkorn and the senior management group (of which he was a member) and that specific proposals were made and considered as an exact amount or minimum amount or value for shares and money to be dedicated to the bonus or participation scheme. More than once the plaintiff refers to having relied on or believed that a certain percentage of Statkorn stock would be distributed to the management group.

[60] There is no doubt that the plaintiff and others were most interested in having a participatory role in the Ewos business. Indeed, it appears that the ardency of that view became a point of friction between the group and Statkorn. The rather bold insistence of the management group, or certain of the group, was quite evidently a factor in decisions concerning personnel retention, including Statkorn’s election to terminate the plaintiff.

[61] However, from the perspective of the issues at bar, there cannot be any viable suggestion that the plaintiff has any enforceable claim to specific (rather than general) bonuses or equity participation based solely upon his understanding or expectation of what had been discussed by the management group and Statkorn’s representative in the course of exploring the possibility of such an arrangement. I cannot conclude that binding promises were made by the company or relied upon by the plaintiff.

[62] The manner in which this issue resolves is less complicated.

[63] I have concluded that the plaintiff, having been dismissed without cause and without notice, has a right to be compensated in damages in lieu of notice. Those damages are based upon the remuneration which he would have been entitled to receive if he had continued to be employed through the notice period. The concept was succinctly articulated in Gillies v. Goldman Sachs Canada Inc., [2001] B.C.J. No. 2542 (C.A.):

... the clear principle that [the plaintiff] is entitled to be treated, for remedial purposes, as if he were an employee throughout the notice period.

[64] The specifics of his entitlement are less than entirely straightforward. In addition to damages based upon his salary and benefits (car, pension, etc.) upon which the parties were in essential agreement, there is the matter of the claim to the bonus. The task is complicated because the plaintiff’s position was unique (Canadian C.E.O. of an international corporation) and because the restructuring of the company resulted in modified arrangements being created for his position. Specifically, if he had remained employed through the notice period (as I notionally must consider he was), he would not necessarily have been entitled to the same bonus programs which he had previously enjoyed. If the restructuring and modification of employment conditions had reduced or eliminated such benefits for his position and equivalent positions, then his entitlement to damages for these components will reflect those changes. This assumes the changes were made in good faith and not to defeat an otherwise valid entitlement. By the same principle, if new benefit programs were available to his group (which in fact is the case), he has a right to partake of those. Thus the principle can work both for and against the plaintiff.

[65] I find that his entitlement is similar to that of Messrs. Meakin, Williams, Samsing and Hanebold, other members of his management group who were kept on.

[66] Those members of the group to which the plaintiff had formerly belonged, and who remained with the company, were named as beneficiaries of a bonus program and a program granting share options in the corporation. The agreement, dated March 16, 2001, provided, in part, as follows:

2. Background

At the time when the Company acquired the shares of EWOS the parties discussed a possible bonus arrangement as an incentive for he Employee to continue to be employed by a company within the group. The parties have now agreed that the Employee shall be entitled to receive bonus payment subject to the terms and conditions of this agreement.

3. Amount of Bonus

The total bonus amounts to NOK [amount varies]. Bonus payment shall be made in accordance with the schedule of Clause 4 subject to continued employment.

4. Vesting Schedule and Conditions

Subject to the Employee continuing to be employed by the Company or any companies within the group on such dates, bonus is vested in accordance with the following schedule:

· One-third of the amount 1 May 2001

· One-third of the amount 1 May 2002

· One-third of the amount 1 May 2003.

In the case the Employee ceases to be employed by the Company or any companies within the group, the Employee will not be entitled to any bonus payment that is not vested at the time of termination. By ‘the time of termination’ means the date the other party has been informed of the termination in writing.

4. Vesting Schedule

Subject to the Optionee continuing to be employed on such dates, this option shall vest and become exercisable in accordance with the following schedule:

· One-third of the shares subject to the Option shall vest 1 May 2001

· One-third of the shares subject to the Option shall vest 1 May 2002

· One-third of the shares subject to the Option shall vest 1 May 2003

5. Exercise Period

The Option may be exercised from the date of vesting and until 1 June 2006. If the Optionee cease to be employed by the Company or any companies within the group, the Optionee may exercise his or her Option to the extent it is vested at the time of termination. In that case the Option will have to be exercised within 12 months following the Optionee’s termination. By ‘termination’ means the date the other party has been informed of the termination in writing.

[67] The defendants argue that these provisions act to prevent the plaintiff from being able to claim entitlement to the option and bonus arrangements, since they appear to require continued employment as a condition of receiving any of the options or bonuses, and provide that the entitlement is limited to options or bonuses which have vested by the date the employee has been informed of the termination. In my view, that argument cannot succeed. As indicated, it has been determined that the plaintiff was terminated without cause. The termination was not of his volition, but rather was that of the employer. It has been found to have been unlawful. In the circumstances, the employer cannot thus benefit from having wrongfully dismissed the plaintiff. The correct course is that the plaintiff will be entitled to benefits which he would have had a right to claim, had he been employed. Accordingly, it is my finding that he is entitled to the benefit of the option and bonus agreements to which he would have been entitled, had he remained employed for a period of 16 months following the date of his dismissal. That is, he is entitled to the benefit of those programs as though he was employed through May 5, 2002.

[68] In the circumstances, I find that the plaintiff is entitled to the share options which were granted on May 1, 2001, and the second instalment of share options, granted May 1, 2002. I am informed that each of those instalments represented 5,000 shares with a value of NOK 400 per share. In addition, the plaintiff is entitled to be compensated for the bonus payment made on May 1, 2001 in the amount of NOK 1 million and a second bonus payment which was paid on May 1, 2002 in the same amount. It follows from this analysis that he has no entitlement to the share options which were granted in May, 2003, nor the bonus payment granted in May, 2003.

Pension Benefits:

[69] The plaintiff seeks an order that the defendants shall pay him a further 5% of his base salary for the year 2000, representing an unsatisfied obligation to provide pension benefits. As well, the plaintiff seeks a pension benefit for the period of notice.

[70] The matter of the plaintiff’s entitlement to receive pension benefits is found at paragraph 6(a) of the Employment Agreement dated January 1, 2000. The provision states:

6)(a) Pension – The Company agrees to provide a Group Retirement Savings Plan through Great West Life. The Company will contribute up to 15% of the Executive’s base salary to his retirement savings plan.

[71] The only evidence before the Court is that of the plaintiff, wherein he deposes that he historically received the full 15% of his base salary. A portion of that (up to the maximum allowable) went into his R.R.S.P., while the balance was for his investment outside of the registered plan. The defendants have not adduced any evidence to the contrary, although it has been argued that the defendants’ contribution should not exceed the maximum allowable under the R.R.S.P. regulations, the sum of $13,500.

[72] In my view, the plaintiff has established that his customary entitlement was the full 15%, and accordingly, there is no reason that he would be denied compensation of the further 5% for the calendar year 2000. With respect to his pension entitlement for the 16 month notice period, the weight of the evidence would support the plaintiff’s claim that he is entitled to receive 15% of his base salary in satisfaction of this obligation.

Claim for Extended Notice Period:

[73] The plaintiff submits that the circumstances at hand warrant an extended notice period in accordance with the principles set out in Wallace v. United Grain Growers Ltd. (1997), 152 D.L.R. (4^th) 1 (S.C.C.). Specifically, it is contended that the defendants engaged in bad faith behaviour, both at the time of termination and during the conduct of the litigation. The plaintiff argues that the following features justify such an award:

· The termination was without notice and no cause for dismissal was alleged.

· The defendants failed to pay the plaintiff a proper sum in lieu of notice and obligations under the Employment Contract, necessitating the commencement of this action.

· After the plaintiff gave notice in June, 2002 of an intention to seek summary trial, the defendants filed an amended statement of defence and counterclaim, alleging cause.

· The allegations made by the defendants are characterized as “spurious, mean-spirited and entirely without merit”.

· The defendants’ termination of the employment was allegedly calculated to prevent his participation in the imminent benefit schemes, in which he had been promised participation.

[74] Wallace establishes that employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which may be compensated for by adding to the length of the notice. It makes clear that employers are expected to be candid, reasonable, honest and forthright in the course of dismissal, and are expected to refrain from untruthful, misleading or unduly insensitive behaviour. Injuries such as humiliation, embarrassment, or damage to self esteem caused by bad faith conduct in the course of dismissal, may be compensable. The Court makes clear that these losses flow from the manner of dismissal, not the fact of the dismissal.

[75] In my view, the circumstances at bar do not warrant the imposition of an additional notice period to compensate for bad faith on the part of the defendant.

[76] In the facts of this case, I find that the decision by the defendants to terminate the plaintiff’s employment was a legitimate business decision. The new owners of the business were in the process of making the changes they felt were appropriate for the future and that included personnel decisions. It was decided that the plaintiff and Mr. Smith were not suited to be part of that future, and accordingly, the defendants elected to terminate these two persons. Such is the employer’s prerogative, subject of course to the obligation to pay damages in lieu of notice where cause is not present. I reject the contention that the termination was for the purpose of preventing the plaintiff from reaping the benefits of the new bonus and benefit arrangements. That was an incidental effect of what happened, and the judgment of this Court will address that matter.

[77] Similarly, I reject the argument that the assertion of cause and advancement of the counterclaim was of such character that it warrants the censure of this Court by way of an extended notice. I accept that the defendants were not aware of the golf club membership arrangement at the time that the plaintiff’s employment was terminated, and that it came to their attention much later in 2001. I find as well that, once the defendants became aware of the matter, they caused an investigation to ensue; that, too, was reasonable in the circumstances.

[78] On all the evidence, I find that the position taken by the defendants with respect to the allegation of cause was not unreasonable. While the defendants were ultimately unsuccessful on the claim, I am not prepared to conclude that the allegation was of the character asserted by the plaintiff. It was not unreasonable for the defendants to advance the allegation of cause.

[79] In all the circumstances, I find that the plaintiff’s claim for an extended notice period under the doctrine set out in Wallace has not been proven, and I decline to make the order sought.

Summary:

[80] Based upon the foregoing, the plaintiff is entitled to recover the following:

(a) Contractual:

The Employment Contract entitles the plaintiff to one year’s salary, together with bonus and car allowance. The salary and car allowance were remitted to him by defendants’ counsel in March, 2001. As best I can discern, he was not paid the bonus component of this entitlement.

While the evidence discloses that the bonus arrangements for the plaintiff’s position were changed substantially in 2001 and going forward, the evidence also satisfies me that, over the time of his employment, the plaintiff consistently received a bonus which amounted to 40% of his base salary. That was paid some 10 of the 11 years that he was employed. There is no reason to doubt that it had become in effect a component of his remuneration. The evidence does not disclose that there were deficiencies in his productivity that would have disentitled him to that bonus. I note as well that this bonus arrangement was in place at the time his employment contract was determined and executed. In all the circumstances, it is my conclusion that the plaintiff is entitled to receive a bonus in the amount of $97,990.36, which is 40% of his base salary.

I am well aware that, commencing 2001, and under the new ownership regime, significant amendments were made to the performance bonus program as that program affected the plaintiff and others of his group. The amendments were described in the affidavit of Peter Williams, sworn October 9, 2002. Mr. Williams is the Chief Financial Officer of the defendants. At paragraph 6(d) he states:

Changes were made to the bonus criteria for all senior management in 2001. Senior management received 6% of salary as bonus for 2001. This is based on a maximum entitlement of 30%. Had Denis Martell been a member of the Cermaq senior management team, his maximum entitlement would have been 6%/30 x 40 = 8% of salary.

(b) Common Law Notice Period

· Salary for a period of 16 months, in lieu of notice: $362,634.53.

· Car allowance for the period of notice (16 months, based on $14,766.70 per annum): $19,688.93.

· Bonus for period of notice: (8% of salary) $26,130.07.

Further to the discussion above, and in accordance with the principle that the plaintiff should receive what he would have received had he continued to be employed, the bonus is properly calculated at 8% of his base salary, not the 40% which he had received under the previous arrangements.

· R.R.S.P. contribution (up to point of termination plus notice):

5% of base salary for 2000 = $12,248.80

Plus 15% of 16 months’ salary = $54,395.18

Total: $66,643.98.

· Bonus payment:

(i) payment due May 1, 2001: NOK 1,000,000: $192,200;

(ii) second bonus payment due May 1, 2002: NOK 1,000,000: $192,200.

· Share option:

(i) Share option due May 1, 2001: 5,000 shares at NOK 400 per share.

(ii) Share option due May 1, 2002: 5,000 shares at NOK 400 per share.

[81] In submissions, the plaintiff took the position that there should be an award for vacation pay. On my understanding of the matter, vacation pay is included in the annual salary, and accordingly there will be no award made to compensate the plaintiff for vacation pay over the period of notice.

[82] The plaintiff’s entitlement to recover damages as set out above is offset by the following:

(a) repayment of expense float: $10,000.00;

(b) consulting fees from EWOS in 2000: $41,427.67;

(d) earnings from AquaChile Inc. in April, 2002, (up to point of expiry of notice) ($24,916.33 U.S.D.) $33,529.90.

[83] The total amount to be deducted is $107,344.10.

[84] The defendants advanced a claim, seeking to be compensated for the plaintiff’s use of company equipment that he retained when he was terminated. Specifically, the items included a mobile telephone and certain computer equipment.

[85] The evidence discloses that this arrangement was initially based on agreement between the parties, and that there developed some acrimony over the equipment. Eventually, that was resolved and the goods were returned to the defendants in September, 2002.

[86] Considering these facts, and given the nature and value of the items in question, I have concluded that it would not be appropriate to make any award under this head.

[87] On the basis of submissions and the evidence before me, I am not able to attribute a cash value to the share options. Obviously that determination requires information as to the value of the shares at the time of the grant of the options. In the circumstances, I will leave that to counsel. If necessary, the matter can be brought back before me to adjudicate the value of that component of the benefit package.

Defendants’ Counterclaim

[88] Based upon all of the foregoing, it follows that the counterclaim of the defendants is dismissed.

Costs:

[89] The plaintiff also seeks an award of special costs, pursuant to Rule 57. The authority relied upon is the decision of our Court of Appeal in Garcia v. Crestbrook Forest Industries Ltd. (No. 2) (1994), 119 D.L.R. (4^th) 740 (B.C.C.A.).

[90] In my view, in order to give effect to the plaintiff’s claim for an order of special costs, the Court must find that the conduct of the unsuccessful party is reprehensible, that is, deserving of reproof or rebuke. Relevant considerations would include the pursuit of litigation in circumstances where there is no reasonable prospect of success, or the purpose of which is to impose financial and other associated burdens on a weak or vulnerable party. Obviously, the absence of merit to the maintenance of the action and the presence of an improper motive are factors that may well justify the invocation of the Court’s discretion to order the award.

[91] For reasons essentially similar to my determination of the plaintiff’s claim for Wallace damages, I decline to find the defendants should be liable for special costs. As indicated, I do not accept that the defendants pursued this litigation in the absence of any merit to their position, nor that they were acting on any improper motive. Obviously, the fact that the defendants have not been successful is not determinative of that issue.

[92] In the result, the plaintiff is entitled to recover his costs at Scale 3. The plaintiff is also entitled to Court Order interest on the award. In the event there are difficulties or issues with respect to the determination of costs, counsel may arrange to set the matter down before me.

“J.W. Williams, J.”
The Honourable Mr. Justice J.W. Williams

Citation:	*Martell v. Ewos Canada Ltd. et al.,*
	2005 BCSC 43