BY: MIKE WEILER

One of the toughest things for a lawyer to do is to convince his client, especially when that is the CEO or owner, that he or she is simply wrong when they thought they had a good case.  This is especially true when it comes to termination for just cause.  An employee may well have engaged in serious misconduct but given the courts’ high standard that needs to be met to prove just cause, the client simply has to come to grips with the fact that in law “being right (i.e. the decision to terminate) doesn’t necessarily make it right at law (i.e. termination for just cause).  Often clients think that folding on the issue of just cause will be a sign of weakness so they may well want to proceed to court even where there is a risk of losing.  They are often prepared to fight a case simply on principle.  Where there is an arguable case on the evidence that is understandable.

But in some cases the evidence is so clear that a claim of just cause for termination has no legal merit that a lawyer has to convince the client to not proceed to trial on the issue.  Not only will the client likely face a huge damage claim they will also incur significant legal fees and may well have to pay the plaintiff’s legal fees.  Worst of all the court decision may reject the client’s evidence and find that the client is not to be believed.  It is never an easy task to explain the court’s Reasons for Judgment to a client in these circumstances.

A recent decision of the B C Supreme Court illustrates this principle.

In Hrynkiw v Cental City Brewers & Distillers 2020 BCSC 1640 the owner of the company terminated his 56 year old CFO of 6 years’ service and argued all the way through trial that he had just cause for a summary termination.  He claimed that the Plaintiff was only entitled to 2 weeks’ vacation whereas the Plaintiff had been paid 4 weeks since he was hired. Further he claimed that the Plaintiff falsely claimed an increase in his share bonus from $25,000 to $50,000.

At trial the Defendant argued just cause for termination based on the following:

1. The “unauthorized” share bonus payments and the falsification of vacation records
2. The alleged “theft” of the Plaintiff’s personnel file at the time of termination
3. The alleged failure of the Plaintiff to purchase shares with his share bonus compensation which was a term of that bonus

Not only did the Defendant fail to prove cause based on the above 3 items the court made it clear there was simply no basis in fact to make such allegations.  Further the owner rushed to judgment and made the decision to terminate without any investigation of the facts—the owner’s investigation of the alleged misconduct was “adversarial and biased from the start” and he made “no genuine effort to review the full circumstances.”

Since there was no written employment contract nor any documents regarding the increase of the share bonus the court had to decide the issue of credibility between the Plaintiff and Mr. Frost the owner of the Defendant.  After reviewing the principles of law that applied and the overview of the evidence the court stated:

The principles that govern the assessment of the credibility of a witness are summarized in Bradshaw v. Stenner, 2010 BCSC 1398, aff'd 2012 BCCA 296, as follows:

[186]    Credibility involves an assessment of the trustworthiness of a witness' testimony based upon the veracity or sincerity of a witness and the accuracy of the evidence that the witness provides... .The art of assessment involves examination of various factors such as the ability and opportunity to observe events, the firmness of his memory, the ability to resist the influence of interest to modify his recollection, whether the witness' evidence harmonizes with independent evidence that has been accepted, whether the witness changes his testimony during direct and cross-examination, whether the witness' testimony seems unreasonable, impossible, or unlikely, whether a witness has a motive to lie, and the demeanour of a witness generally... . Ultimately, the validity of the evidence depends on whether the evidence is consistent with the probabilities affecting the case as a whole and shown to be in existence at the time (Farnya at para. 356). [Citations omitted]

[86]         Generally speaking, I found the plaintiff to be a more credible witness than Mr. Frost. The plaintiff’s evidence was internally consistent, and consistent with the documentary evidence and the evidence of witnesses other than Mr. Frost. The plaintiff answered questions directly and concisely. He was not defensive or argumentative in cross-examination. He was clear in his memory of relevant events, and his evidence did not change over the course of direct and cross-examination.

[87]         Mr. Frost, by contrast, was a difficult witness. He was combative and argumentative in cross-examination. He was frequently evasive in answering direct questions and he disparaged plaintiff’s counsel with remarks like “I think you actually know, counsel, I think you’re a very smart fellow”. Mr. Frost’s memory was selective. He admitted to having no clear memory about critical events like the meetings that preceded his initial hiring of the plaintiff. When pressed in cross-examination about the accuracy of his recollection regarding Central City’s organizational charts, Mr. Frost responded “clearly I am not that detailed, counsel”. As the same time, he claimed to recall discrete facts that supported his case with absolute clarity that left no room for doubt or ambiguity. Mr. Frost was not careful or restrained in his evidence about the plaintiff’s alleged wrongdoing. For example, he testified to his certainty that the plaintiff had stolen his own personnel file from the Central City office even while acknowledging he had no evidence to support such an accusation. Mr. Frost’s evidence was, in important respects, inconsistent with the documentary record and the evidence of other witnesses.

[88]         I will more specifically address the difficulties I had with Mr. Frost’s evidence in resolving the particular issues in dispute. As a general comment, where the evidence of the plaintiff and Mr. Frost conflicts, I prefer the plaintiff’s evidence. [Emphasis added]

It seemed clear from reading the decision that the Defendant’s evidence would not support any of these serious allegations.  Among other things the documentary evidence and the fact the Plaintiff was paid for 2 years at the higher bonus rate and had taken 4 weeks’ vacation from the start of his employment was totally inconsistent with Mr. Frost’s evidence.  In one case a witness called by the defence gave evidence contradicting Mr. Frost’s evidence and supporting the Plaintiff’s evidence.

The Defendant insisted throughout the trial that the Plaintiff had stolen his personnel file—there was no evidence whatsoever to support that serious allegation.  In fact Mr. Frost admitted such an allegation was based solely on speculation. Allegation #3 was only made in legal argument after the trial and was without foundation.

Turning then to the issue of damages the Plaintiff hit a home run and succeeded 100% in his claims.

Notice:          

The Plaintiff claimed 12 months’ notice; the Defendant argued 6-7 months.

       Court Held:     12 months

Damages:

The Plaintiff claimed $118,492.76 after taking mitigation into account; the Defendant argued damages should not include any damages for the share bonus during the notice period thus reducing the damage claim substantially.

Court Held       Damages of $118,492.76

Share bonus to termination

The Plaintiff claimed $33,513.92 for unpaid bonus to termination date; the Defendant argued that no bonus should be paid

Court Held       damages of $33,513.92

Accrued Vacation

Although relying on the Defendant’s payroll records the Plaintiff was awarded $14,903.87 for accrued vacation

Aggravated (mental stress) damages

The Plaintiff argued that the defendant had breached its duty of good faith and fair dealing in the manner of dismissal by failing to conduct a balanced investigation and advancing and maintaining meritless allegations of serious misconduct against the Plaintiff,

The court found in favour of the Plaintiff on both counts:

Even by the defendant’s account, the plaintiff had been a loyal and competent employee of Central City for over six years up to the time that he was, virtually overnight, locked out of the office and terminated without notice. To the extent that the defendant had concerns as a result of the events around the plaintiff’s request for a share bonus payment in June 2018, the plaintiff deserved to have those concerns addressed through a process that was fair, objective, and respectful. In my view, the defendant’s closed mind and failure to objectively investigate the circumstances before purporting to terminate the plaintiff’s employment for cause was unfair, unduly insensitive to the plaintiff, and constituted a breach of the defendant’s duty of good faith and fair dealing.

The unfounded allegations of cause were also a breach of the duty of good faith and fair dealing that was entirely forseeable that the Plaintiff would suffer mental distress and reputational harm as a result of such conduct in the course of dismissal.

Court Held      

Plaintiff awarded $35,000 aggravated damages.  NOTE those damages are not taxable so worth substantially more to Plaintiff

Punitive Damages

The Plaintiff claimed punitive damages

The court rejected this claim but a careful review of its reasons shows that it would likely reward the Plaintiff by awarding Special Costs i.e. full indemnification for legal fees.  The court noted punitive damages are rarely awarded especially where other remedies are available:

In considering an employer’s alleged bad faith conduct in the course of litigation, care must be taken not to conflate the analysis of punitive damages and special costs. Generally speaking, reprehensible conduct of parties during the course of litigation should be addressed by way of an award of special costs, while punitive damages relate to an employer’s conduct at the time of termination: Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29 at paras. 66-69 [Marchen]. See also: Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177 at paras. 128-134.

[214]     However, an employer’s conduct in the course of litigation may be taken into account in an award of punitive damages where an employer’s bad faith conduct at the time of termination continues in an “unbroken course” throughout the legal proceeding: Kelly at para. 128…

The conditions for an award of punitive damages include that other remedies available to the plaintiff are insufficient to serve the objectives of deterrence, retribution, and denunciation. Marchen directs that, generally speaking, allegations of reprehensible conduct during the course of litigation should be addressed by way of an application for special costs rather than by way of an award of punitive damages.

[217]     I have awarded the plaintiff compensatory damages for the mental distress caused by the defendant’s breach of its duty of good faith in the manner of his dismissal. He has requested, and will have, a further opportunity to make submissions on an appropriate costs order. To the extent that the plaintiff alleges the defendant’s conduct in the course of the litigation is reprehensible and deserving of rebuke, he will have an opportunity to seek a remedy in costs. [Emphasis added] 

TAKEAWAYS

It is easy to be a Monday morning quarterback and second guess litigation strategy without knowing the full details of what went into the decision to terminate for cause or pursue these matters through a full trial.  But here the court record and reasons show that such defense was clearly without merit given the lack of evidence, the fact that the Defendant’s own witness gave evidence against it, the fact that documentary evidence supported the Plaintiff’s claim and the fact that some allegations were clearly advanced on pure speculation without any evidence.

It is important to carefully examine the evidence of cause at the time of termination and the content of the termination letter.  It is also important to review the merits of such a claim and where appropriate pursue settlement.  And that often means counsel have to have a serious “Come to Jesus” meeting with the owner before proceeding.

November 5th 2020

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