Wrongful Dismissal Case In Ontario

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In Alberta, wrongful dismissal cases are defined as a circumstance where an employee has been dismissed or fired without “just cause.” While Alberta employers can release employees without cause, the employer must provide the employee with “reasonable notice” and/or a fair severance. A period of “reasonable notice” is defined as a fair duration that would provide that employee an opportunity to find alternative work.
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Ontario Wrongful Dismissal Case

COURT FILE NO.: 7256/07
DATE: 2009-12-14
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
STAN CARMICHAEL
John R. Evans and K.C. Wysynski, for the Plaintiff
Plaintiff
– and –
MANTIS RACING INC.
Ernie Jakubowski, self-represented, for the Defendant
Defendant
HEARD: November 24-26, 2009,
at Milton, Ontario
Michael G. Quigley J.
Reasons For Judgment
Introduction and Issues
[1] Stan Carmichael and Ernie Jakubowski used to be friends, joined together by a common love of Porsche sports cars. Stan Carmichael owned a Porsche 944S. He met Ernie Jakubowski, the owner and sole shareholder of Mantis Racing Inc., through events sponsored by the Porsche Club of North America. Mantis Racing Inc. is an Ontario corporation that operates from premises in Oakville, Ontario. There are two aspects to the Mantis business. One is Mantis Automotive, which operates a high-end automotive repair and maintenance business specializing in exotic European cars, especially Porsches. Mantis Racing Inc. is the corporate vehicle through which Mr. Jakubowski and his friends and customers participate in the competitive side of sports car ownership, involving driver education and racing events carried out under the sponsorship and auspices of the Porsche Club of North America.
[2] Stan Carmichael used to work for several international graphic design companies, but he lost his last job in 2006 when the company reorganized its North American operations. Ernie Jakubowski recognized that Stan had management and graphics design skills that might be of some benefit in increasing the exposure and visibility of Mantis and that might result in increased sales. He offered him the position of general manager of Mantis Racing Inc.
[3] Just over 15 months later, however, their relationship had fallen apart. Stan left Mantis on September 20, 2007 after receiving an e-mail from Ernie that stated he was “laid off” effective immediately. Stan claims that he was wrongfully dismissed by Mantis. In this action, he claims $45,000 damages for wrongful termination of his employment and/or the failure of Mantis to provide him with common law notice of termination. He also claims $52,000 for unpaid bonus he claims is due to him for 2006 and 2007. Finally, he seeks reimbursement of expenses incurred both prior to and during the course his employment on behalf of Mantis and an amount in respect of the unpaid vacation pay.
[4] Ernie Jakubowski denies all of these claims in his Statement of Defence. First, he says that Stan Carmichael voluntarily resigned from his position on July 30, 2007 and was not wrongfully terminated. Second, he insists that Stan Carmichael did not have the bonus entitlement he claims. Finally, he now claims to dispute the expense reimbursement claim advanced by Stan Carmichael, not only with respect to the period of his appointment, but also the expenses incurred prior to that time.
[5] There are four issues for resolution arising out of this trial. The first is whether Mr. Carmichael was wrongfully dismissed or resigned from his position and the second is whether he was entitled to receive a bonus. If Mr. Carmichael was wrongfully terminated, the third issue is the extent of the damages to which he is entitled on account of salary in lieu of notice. Finally, there is the issue of Mr. Carmichael’s entitlement to be reimbursed for the expenses that he claims and for his vacation pay claim.
Preliminary Matters
[6] This matter was put on the November, 2009 trial list in May of this year by order of Justice Coats. The trial was called on November 19 to commence on Monday, November 23. However, when the trial was about to commence that morning, the Court was confronted with a motion by Mr. Pilo, the then solicitor for the defendant, to be removed as solicitor of record. Mr. Pilo had represented Mantis Racing Inc. since the plaintiff first made his claim in November of 2007. Mr. Pilo’s motion was only served and filed two days before, on Friday, November 20, and Mr. Pilo himself did not appear on November 23. Instead, he sent an associate, Mr. Richey, in his place. His motions materials were thin, at best. Although he has been counsel for Mr. Jakubowski and his company for almost 2 years since the matter commenced, the best Mr. Pilo could do was to say that there had been a “breakdown in the relationship” – no other reasons or detail was provided to support his request to be removed as solicitor right when the trial was to commence.
[7] Mr. Jakubowski confirmed that there had been a breakdown in the relationship between them, largely, he said, as a result of Mr. Pilo doing little to advance his defence to the claim. As a result, he was content that Mr. Pilo be removed as solicitor of record. However, notwithstanding that this matter has been scheduled for trial for over six months, Mr. Jakubowski also wanted the commencement of the trial to be adjourned so that he could retain a new lawyer. In fact Mr. Freeman did appear in court with him as his agent and he advised the court that he would be prepared to go on record as solicitor, but that he would need time to prepare and require an adjournment of at least a few weeks, if not longer. Plaintiff’s counsel vigourously resisted the request for an adjournment, and it emerged once the plaintiff’s solicitor’s availability was taken into account, as well as Mr. Freeman’s availability, that the trial could not commence until sometime in late January or in February of 2010 if the adjournment was granted.
[8] I inquired why Mr. Pilo was not present in court to speak for himself given the obviously last minute nature of his motion, but Mr. Richey weakly responded that he did not attend because he could not argue his own motion. Obviously that is true, but conveniently for Mr. Pilo, that excuse not only prevented the Court from making inquiry into the reasons for his request to be removed but also made it virtually impossible to order that he continue. I wanted to hear from him further on his last minute effort to be removed as solicitor given the obvious prejudice that potentially caused, either to his own client or to the other party depending on the outcome.
[9] Mr. Pilo’s office is only a 15-minute journey from the court house, so I asked Mr. Richey to call Mr. Pilo to tell him he was to appear in court without delay to explain himself. However, Mr. Richey reported a short while later that Mr. Pilo and others in his law firm were sick, allegedly with the H1N1 virus. He claimed that was why Mr. Pilo was not in court that day. He also stated on the record that that was why Mr. Pilo had failed to appear on the November 17 pre-trial scheduled the week before with Justice Gray. Not surprisingly, although Mr. Jakubowski did attend that day, nothing was accomplished by way of even partial resolution at that pre-trial in light of the absence of the lawyer for Mantis Racing and given the animosity between these parties. It was a lost opportunity for resolution, squandered owing to the failure of the solicitor to either appear or advise that he would not be appearing.
[10] To my dismay, I learned later in the day on Monday, November 23 that Mr. Pilo may not have been sick or struck down by the flu at all. I was advised that he had provided no indication that he was ill when he was summoned for this trial on Thursday, November 19 and spoke to the Trial Co-ordinator. She has advised me that he appeared to have no knowledge that he had actually missed the pre-trial two days before and suddenly realized that he needed to bring a motion to be removed as solicitor of record, even though the trial was imminent. Against this background, and having serious doubts in all the circumstances about the credibility and reliability of Mr. Pilo’s communications with the court, I requested that the Trial Co-ordinator contact him to advise him that I would require either that he produce a medical certificate within 24 hours that he had been ill on both November 17 and Monday, November 23 or, otherwise, that he appear in front of me forthwith to explain himself. Two weeks have now passed. To date, Mr. Pilo has not only chosen to do neither, but he has not even had the courtesy of returning the Trial Co-ordinator’s call made on my instructions. This is unacceptable conduct by a solicitor. It is reportable conduct.
[11] For reasons given on Monday, November 23, I ordered that the trial would proceed. I granted an adjournment until the next morning but ruled that the longer adjournment sought by the defendant would not be granted. I granted leave for Mr. Jakubowski to represent Mantis Racing since he is its owner and sole shareholder, and ordered the trial would commence at 10:00 am on November 24. In making the decision to order the matter to proceed, I was mindful of the criteria that the court is permitted to consider in exercising its broad discretion to determine whether an adjournment ought to be granted at the commencement of a trial. Those criteria were enumerated by Justice Laskin in Khimji v. Dhanani, 2004 CanLII 12037 (ON CA), [2004] O.J. No. 320, 69 O.R. (3d) 790 (C.A.) in a dissenting opinion, albeit one that is widely accepted as a thorough canvass of the issues that ought to be addressed in such a matter. Nonetheless, the overwhelmingly persuasive point for proceeding in this case, even if Mantis Racing was not represented by counsel, was the two-year history of non-responsiveness by Mr. Pilo to previous orders of the court in this matter, his evident non-compliance with the Rules as they pertain to the requirement that a party move a matter forward to trial, and his basic failure to respond in any meaningful way or at all to most of the correspondence that was sent to him by plaintiff’s counsel.
[12] As the reasons that follow show, I have made findings in favour of the plaintiff. I have ordered that Mantis Racing pay damages to the plaintiff for wrongful dismissal. At the beginning of the trial I did provide Mr. Jakubowski with a memorandum to assist him in the presentation of his case as a self-represented person, and he made a valiant effort in trying to defend the Corporation against the claims made against it. However, the fact remains that several of the aspects of the case which have given rise to liability flow back to the pleadings prepared by Mr. Pilo. Moreover, there is no doubt that in spite of his efforts, Mr. Jakubowski’s case would likely have been better presented and the plaintiff would likely have been more thoroughly cross-examined had Mr. Jakubowski had the benefit of counsel.
[13] I have recounted these facts because it seems likely to me, to the extent that any subsequent orders or procedure may follow after these reasons for judgment are issued, that such proceedings may involve questions relating to the conduct of Mr. Pilo. These facts may also be relevant to the issue of whether the solicitor should bear partial responsibility for the costs award that will be made against the defendant, having regard to the preponderant success of the plaintiff in its claims.
Was Mr. Carmichael wrongfully dismissed?
[14] On June 28, 2006, Stan Carmichael and Ernie Jakubowski met at Ernie’s house over a couple of beers. They had become friends over the years. They both had a love for Porsche sports cars. Stan had done some graphics work for Mantis Racing on a freelance basis over the last couple of years. Stan had recently lost his job at another graphics company. Ernie testified that he thought he could do Stan a favour by offering him a position as general manager of Mantis Racing and at the same time, Mantis would benefit from the skills Stan had to offer. That evening, they reached an agreement on the terms on which Stan Carmichael would be employed as general manager of Mantis Racing Inc.
[15] Unfortunately, their agreement was never reduced to writing. Ernie testified that he did not take any notes. He also testified that he did not recall Stan taking notes, but Stan testified that he did take notes during the course of their meeting, and he produced those notes[1]. He also said that Ernie made notes. I accept Stan’s evidence on this point, at least as it relates to him having made his own notes. Stan Carmichael’s notes reflect that he was to be the General Manager of Mantis Racing Inc. He was to continue the Mantis sport program, which involved promotion of their involvement with the Porsche Club educational and racing activities. He was not to be responsible for financial matters or human resource matters. Stan was also to be entitled to three weeks of vacation and he was to be reimbursed for reasonable expenses incurred in the course of his duties. The agreement also contemplates that Stan was entitled to a bonus, and entitled to “elect to take his bonus or part in service or parts” from Mantis Automotive. Finally, he was to start at the beginning of Mantis’ 2007 fiscal year that commenced two days later on July 1, 2006. I will have more to say below on the subject of Stan’s salary and bonus entitlement arrangements, but for the moment have restricted my analysis to whether he was wrongfully dismissed.
[16] Stan Carmichael commenced his duties two days later. His evidence disclosed that he served as General Manager of Mantis over the course of the 13 months that followed. He assisted in the promotion of the Mantis business with a view towards increasing the sales of the business, and he designed graphics used by Mantis to promote itself. He was an active member of numerous teams that went to the big car events of North America when the gatherings of the Porsche Club took place through the year and he participated in those events to win and to promote Mantis.
[17] Moreover, the sales of Mantis grew after Stan took up his duties as general manager. Mantis had average sales for the five years prior to 2006-2007 fiscal year of about $800,000 per year. The target that Stan and Ernie agreed to strive for was $1,000,000 in sales, according to Stan. At the end of the 2007 fiscal year ending June 30, 2007, Mantis had achieved increased sales of $961,000. Stan testified this increase in sales was largely attributable to his efforts respecting the Cayman S Project where Mantis took one of the first North American models of the new Porsche Cayman S and Ernie converted it with Stan’s assistance into a racing car that they took around to the Porsche Club events.
[18] However, Stan also testified that there seemed to be operational problems with the business. He said the business seemed always to be short of cash. By May or June of 2007 he was becoming increasingly concerned that his expenses incurred on behalf of Mantis were not being paid. He knew that he had become the company’s second largest “payable” account. He talked to Ernie and the bookkeeper about it and they agreed to look into it and talk again in two weeks, but they did not. No such meeting was arranged by Ernie. Stan started to feel he was getting the run-around. He was starting to feel ignored, notwithstanding that he claimed Mantis owed him a very significant amount of money by this point, approximating $20,000 before bonus.
[19] On July 30, 2007, Stan wrote a letter to Ernie. Stan testified that he wrote the letter out of frustration to force the issue of what he was owed by Mantis Racing, but there is no question that on its face Stan’s letter recounts that he intends to terminate his involvement with Mantis subject to whatever future involvement he and Ernie might discuss after he has been paid the amounts he claims were due to him. However, Ernie did not want to discuss it at that time. Ernie never pressed Stan on the letter and he did not confirm with Stan that, in fact, it was Stan’s intention to resign from Mantis. Ernie was focused on upcoming events. He was heading off to the Wisconsin Porsche event and Stan was heading off to the Targa Newfoundland event. Ernie testified that he did not talk to Stan about it because it would upset him, and he could not afford to be upset. He needed to keep a clear and clean mind focused only on high speed driving. The times they were away on these separate promotions did not overlap so by the time they could next discuss Stan’s grievances it was September 20 after Stan returned from the Targa Newfoundland event.
[20] Ernie and Stan had a relatively brief meeting. Stan claims Ernie told him that he would only pay Stan a smaller amount than Stan claimed was owed to him, and Ernie wanted to pay Stan over time. Ernie never did question Stan further about whether he had intended to resign when he wrote the July 30 letter. Instead, Ernie wrote an e-mail to Stan. He told Stan in that e-mail that he really could not afford a General Manager as he claimed they had discussed and agreed that day. Then the e-mail stated that he was laying Stan off. He asked Stan to deliver his key to the Mantis premises the next day. Stan sent a reply e-mail in which he responded that whether Ernie knew it or not, he had just terminated Stan’s employment. It was those events that led to Stan’s wrongful dismissal claim in this action.
[21] For his part, Ernie claims that he did not terminate Stan. He says that Stan effectively resigned in the July 30 letter, and that the September 20 departure was consistent with Stan’s statement in that letter that he would be leaving as soon as he returned from the Targa Newfoundland event. Interestingly, on this issue and whether Stan was terminated or resigned and left the company voluntarily, Ernie’s statement of defence states as follows in paragraph 7:
The Defendant did not terminate the Plaintiff’s employment. The Plaintiff resigned in writing on July 31, 2007 [sic] via e-mail. He reconsidered for a short time and later the parties mutually agreed to a final termination.
[22] I accept that Stan may have been considering resignation at the time that he wrote the July 30 letter, but Ernie cannot successfully defend against Stan’s claim of wrongful dismissal on the basis of a voluntary resignation. The law is clear that in order to constitute a resignation, the onus is on the defendant to establish that the communication was, in fact, a resignation and that it was accepted. To constitute a resignation, the communication from Stan would have to have been clear and unequivocal such that a reasonable third person looking at the matter would have unquestionably understood or concluded without doubt that the employee had unequivocally resigned: Skidd v. Canada Post Corp., [1993] O.J. No. 446 (Gen. Div.) aff’d. [1997] O.J. No. 712 (C.A.). As Justice Lang stated in Kieran v. Ingram Micro Inc., [2004] O.J. No. 3118 (C.A.) at para. 27, to be clear and unequivocal, “the resignation must objectively reflect an intention to resign, or conduct evidencing such an intention.”
[23] If Stan’s July 30 letter was to be accepted as his resignation, there needed to be further discussion and Mantis needed to question Stan that this was his actual intent. A mere proclamation by an employee that “I quit!” will not constitute a valid resignation in law if the employer does not make inquiry to determine exactly what the intentions of the employee are and when, if at all, they are meant to take effect: Lelievre v. Commerce and Industry Insurance Company of Canada, 2007 BCSC 253 (CanLII), 2007 BCSC 253. Moreover, an employer cannot merely quickly rush to snap up a rash statement by the employee that he or she is quitting – the employee is entitled under our law to pull back or resile from a resignation letter following reconsideration: Tolman v. Germatic Company 1986 CanLII 1212 (BC CA), (1986), 14 C.C.E.L. 195 (B.C.C.A.), Fitzsimmons v. North Thompson School District No. 26, [1996] B.C.J. No. 304 (B.C.S.C.).
[24] Here, however, there was no discussion at the time of Stan’s letter whether Stan actually intended to resign. Moreover, a significant portion of Stan’s letter focuses not on the issue of resignation, but rather the amounts that Mantis Racing owed to him. By his own admission, Ernie did not want to talk to Stan about it. He wanted to focus on racing. He never questioned Stan whether, in fact, it had been and remained Stan’s intention to resign based on the July 30 letter. Even if it amounted to a resignation letter, he never accepted it. There was no conduct on Stan’s part immediately or even soon following the delivery of the July 30 letter evidencing an objective intention to resign. Stan carried on with his assigned tasks just as he had before.
[25] Ernie advanced the testimony of his brother Gunther as evidence of Stan’s continuing intention to resign. Gunther’s evidence was that when they were in Newfoundland together for the Targa Newfoundland event, Stan repeatedly stated that he was fed up and that he was going to quit. The difficulty with this evidence is that it is difficult to accord it the same weight as the evidence of an independent third party, rather than the defendant’s brother who might have a reason for giving evidence that was supportive of his brother’s position. The second problem with it was that it was never put to Stan in cross-examination that he had continually told Gunther while they were in Newfoundland that he intended to resign to obtain his acceptance or denial of that suggestion. Finally, it still does not overcome the legal requirements that Mantis formally make inquiry of Stan’s real intentions. I accept the argument of plaintiff’s counsel that this was an unaccepted resignation letter that was then superseded on September 20 with a lay-off, a termination by Ernie of Stan’s employment with Mantis.
[26] Additional factors that persuade me this was not a resignation as understood in our law include the failure for any specific departure date to be specified, the failure of the employee to remove any of his possessions from the workplace for some seven weeks after the alleged letter of resignation was submitted until he was asked to return the key attendant on layoff, and the fact not only that Stan unequivocally continued to work for Mantis until September 20, but that he was paid for those work periods and remained on Mantis’ payroll during that period as well.
[27] Even if this was a resignation initially, which I think is unlikely, it certainly did not formalize into a legally recognizable resignation in the absence of any discussion about it and questioning about it by the employer, or any agreement on the question. Moreover, the company itself in its pleadings admits that it was a resignation that was “reconsidered,” and once that reconsideration occurred, there could be no legally recognizable resignation. Finally, there is no such thing as a lay off at common law that can apply in a context like this[2]. For all of these reasons I find that Stan was terminated without notice and without cause. He is entitled to damages at common law by way of salary in lieu of proper notice.
Was Mr. Carmichael entitled to bonus?
[28] I have previously described the events of June 28, 2006 when Stan and Ernie agreed that Stan would come to work for Mantis Racing as its General Manager. They agreed to all of the terms noted above. They also agreed that Stan would be paid a salary of $60,000 per year. The focus of this second element of their dispute is whether they agreed that Stan would be entitled to earn a bonus, what level of increased performance of the business, if any, had to be achieved to enable him to collect it, and whether the bonus was to be determined relative to Mantis sales or profits.
[29] There are two strongly divergent versions of what it was to which the parties agreed. This issue is inevitably one of credibility, and it requires an assessment of the credibility and the reliability of the evidence of both witnesses. In such circumstances, where both credibility and reliability of evidence must be evaluated, I have endeavoured to follow the guidance provided at paras. 11-12 of Faryna v. Chorny, [1951] B.C.J. No. 152 (B.C.C.A.), [1952] 2 D.L.R. 354, a case put forward by the plaintiff:
The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanor of a particular witnessed carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions. Only thus can a Court satisfactorily appraise the testimony of quick-minded, experienced and confident witnesses, and of those shrewd persons adept in the half-lie of long and successful experience in combining skilful exaggeration with partial suppression of the truth. Again, a witness may testify what he sincerely believes to be true, but he may be quite honestly mistaken. For a trial judge to say “I believe him because I judge him to be telling the truth,” is to come to a conclusion on consideration of only half the problem. In truth, it may easily be self-direction of a dangerous kind.
The trial judge ought to go further and say that evidence of the witness he believes is in accordance with the preponderance of probabilities in the case and, if his view is to command confidence, also state his reasons for that conclusion. The law does not clothe the trial Judge with a divine insight into the hearts and minds of the witnesses. And a Court of Appeal must be satisfied the trial judge’s finding of credibility is based not on one element only to the exclusion of others, but is based on all the elements by which it can be tested in the particular case.
[30] Stan testified and his notes reflect that he and Ernie had a discussion that evening about the future prospects for Mantis Racing. Over the prior five years, the other evidence showed that Mantis had average annual sales of about $800,000 per year. Stan testified that he wanted to earn $100,000 a year. I accept that testimony and I also accept Ernie’s evidence that he told Stan that he could not afford to pay that amount. It was as a result of that difference of position that they agreed that his actual salary would be limited to $60,000 per year but that he would be entitled to receive a bonus if a target was achieved. They worked out a bonus arrangement dependant on the success of Mantis, and Stan’s contribution to that success. The target was to be $1,000,000 in sales. The exact words respecting the salary and bonus arrangement, with spacing almost exactly as it appears in Stan’s notes (other than the fact that Stan’s notes are in his handwriting) are as follows:
Target 1,000,000 In Sales
– Current Are 800,000
– Salary 60,000
– Bonus 40,000 @ Target
(20% of Sales over 800 K)
[31] In his evidence, Ernie Jakubowski denied that he agreed to pay a bonus to Stan on the basis of sales. He said that as a small businessman, he simply could not afford to pay a bonus unless the company realized profit out of which the bonus could be paid. He testified that he would never have agreed to that. Paragraph 4 of the Mantis Racing Statement of Defence reads as follows:
The Plaintiff commenced employment with the Defendant July 1, 2006. There was no written agreement. The Plaintiff’s [sic] was to be paid $60,000 per year and was entitled to a bonus based on increased profits of the business. The bonus was agreed to be 20% of the increase in profits. During the Plaintiff’s tenure the Defendant’s profits went down, not up.
[32] For his part, Stan was equally adamant that the bonus had been agreed to be tied to sales because otherwise Stan said he would have had no control over whether it would ever be earned. He was not prepared to agree to a bonus scheme that was based upon profits in the context of a small owner-managed business where he would have no control over the reported profit or loss of the business, and where the owner was in a position where he could potentially manipulate the firm’s financial data to yield either a profit or loss, thereby affecting the quantum of bonus, or whether any amount at all would be earned. Stan wanted a bonus payable with reference to sales, because his job was to increase the sales up to a target of $1,000,000, and that was a number that he would be able to monitor and control, and he would be able to know when the target was reached.
[33] Ernie’s evidence at trial on the subject of the bonus was inconsistent, to put it at its highest and most charitable. At first he testified that there was no agreement to a bonus. He said this aspect of his discussions with Stan had never been formalized. This was his original evidence, notwithstanding that his pleadings themselves do acknowledge that there was an agreement respecting bonus. However, then, in the middle of his testimony as he responded to Mr. Evan’s cross-examination, he changed his testimony and said there, in fact, had been an agreement, but that the bonus had been tied to profits, not sales.
[34] Let me first observe that the evidence persuaded me that it was agreed that Stan could earn a bonus and that the bonus was to be paid on the basis of sales not profits. I accept Stan Carmichael’s evidence on this point. Ernie Jakubowki’s evidence on this issue was inconsistent. It was neither credible nor reliable. Indeed, there is justification for Stan’s stated concern with a profits-based calculation when one considers the disparity in the evidence even with respect to the Mantis Racing sales figures for its 2007 fiscal year, much less its profitability. Stan’s evidence based on his tracking of the financial information maintained within the computer system showed that sales for 2006-2007 totalled about $961,000, up over $150,000 from the prior year. However, the financial statements of Mantis show sales of only $942,000.
[35] How, one might ask, could there be a disparity between these numbers? The sales should be whatever they were. How could the numbers taken from the computer system by Stan vary from the final numbers reflected in the Mantis financial statements? The answer lies in the ability of the owner/manager in circumstances such as this to adjust the data provided to the accountant engaged to prepare the financial statements, not necessarily out of malice or improper intent, but merely to reflect the results of the business as the owner/manager thinks they ought to appear. No explanation was provided for the discrepancy. One is left to conclude that Ernie must have reduced the final reported sales number by some cost or item of expenditure that is not specifically noted in the financial statements. This does not alter the fact that I find the correct sales number was the $961,000 number reported by Stan in his evidence, at least for the purposes of determining Stan’s bonus entitlement. I reach that conclusion because it comes from the source accounting system, the equivalent of the general ledger of the business.
[36] I would also make note specifically with respect to this finding that the financial statements are not audited. They were produced by the accountant in what is known as a compilation engagement. As its name suggests, such an engagement merely involves the accountant compiling the financial statements from the financial data provided by the owner. It involves no audit and no independent verification by the accountant respecting the validity or the reliability of the company’s own financial data. I am satisfied that the correct amount of sales realized by Mantis in its 2006-2007 fiscal year was the amount of $961,000 testified to by Stan Carmichael. However, this finding alone does not determine whether Stan is entitled to the bonus he claims. There remains the question of the intent of the parties as it can be discerned from the evidence of what they agreed to.
[37] Stan’s interpretation of his agreement with Ernie acknowledges that the target established was $1,000,000 in sales and, as the language reflected above shows, if $1,000,000 in sales had been realized, the bonus payable to Stan would be $40,000. That is clear. However, whatever the other deficiencies of his evidence, I accepted the evidence of Ernie that Mantis Racing was not a company that could willy-nilly afford to pay Stan the materially higher “salary” that Stan wanted to receive. To my mind, that was exactly why the parties agreed to structure the bonus as they did, and if the sales had achieved the $1,000,000 level, then I agree with Stan that he would have been entitled to receive the $40,000 that he would have claimed.
[38] Here, however, it is acknowledged that sales did not reach $1,000,000 in the 2006-2007 fiscal year. In contrast, the evidence showed that they were likely materially increased in July, August and September of 2007 and were on track to exceed the $1,000,000 sales level in 2007-2008. Whether that level of sales activity would have persisted throughout the year is a question that none of the witnesses can answer, for obvious reasons, but I am satisfied, based on the presumption set out below, that the monthly level of sales for July-September 30, 2007 consistently exceeded the level that would have been needed to break the million dollar target, and I so find. However, they did not achieve that level in 2006-2007, and that is why Stan cannot succeed in his claim for bonus for the 2006-2007 year.
[39] I find, based on the wording used by the parties, that they had a contemplation that a bonus would indeed be payable to Stan if sales for Mantis exceeded the magic one million dollar threshold, but in my view partial bonus was not payable if that threshold target was not met. If this were not so, then why did Stan write down “Bonus $40,000 at Target” rather than simply noting that he was entitled to 20% of all sales in excess of $800,000. I find that the answer is that there was to be no bonus until sales reached $1,000,000. I find that if sales reached the $1,000,000 mark, then Stan would have received the 20% bonus of $40,000, and indeed that he would have earned 20% of each additional dollar earned in sales above $1,000,000, but I also find that he had no bonus entitlement until the target of $1,000,000 was met. He was not entitled to 20% of every extra dollar in sales earned by Mantis above the $800,000 five-year average sales figure because, as Ernie testified and indeed as was evident from a review of the successive years of financial statements issued, Mantis was a small business and it clearly could not afford that level of generosity to one single employee in the context of the business as a whole.
[40] Even if Ernie was less than candid in his description of the bonus base, I must acknowledge that I found him to be persuasive in his evidence that he had been successfully operating this small business for almost 30 years. While I agree that the bonus was tied to sales, it defies common or business sense that he would have agreed to the bonus payment being made unless the target was met. The reason was simple. It would have been a bonus that, it appears to me, the business could not have afforded to pay. He had indicated to Stan that he could not afford to pay him the $100,000 salary that Stan wanted. Common sense in this situation persuades me that he would only have been willing to see the bonus paid if, in fact, there had been the material increase in sales that hitting the $1,000,000 sales target would have represented. For these reasons, I conclude that Stan Carmichael is not entitled to bonus for 2006-2007, not because it was not agreed, but because the threshold target was not achieved in 2006-2007.
[41] It does appear, however, that the target was on track to be achieved in 2007-2008 and on that basis I have concluded that Stan is entitled to three months of accrued bonus for July 1-September 20, 2007. I conclude that the target was likely to be achieved on the basis of the adverse inference I draw against Ernie on this issue. In this litigation, Ernie failed to produce his actual financial performance numbers for the 2007-2008 fiscal year, much less the actual numbers for the months of July to October, 2007, the last three months that Stan worked and in which he could have been entitled to bonus. As a result, it was not possible to determine the actual performance of the business during those months. However, a consideration of the last three months of the 2006-2007 year shows that sales were accelerating. Sales for April, May and June, 2007 were $80,600, $125,700 and $133,000 respectively. This totals $339,300 or an average sales level per month of $113,000. For the purposes of calculating Stan’s bonus entitlement for those three months, however, I accept Stan’s position that monthly sales of only $100,000 should be assumed rather than the higher average number, in fairness to Ernie and the likelihood that there would have been months where the performance may not have been as high. Thus, assuming $100,000 per month of sales for July to October, I find that Stan would have earned and is entitled to receive bonus of $20,000[3].
Expenses and Vacation Pay
[42] Dealing first with vacation pay, it is clear and undisputed that Stan was entitled to three weeks per year. This amounts to fifteen working days. Stan claimed that he did not take any vacation, but Ernie disputed that. He claimed, and in cross-examination Stan did admit that he delayed his return to work on at least one occasion after the Sebring Porsche event so that he could get in a few extra days of golf. The plaintiff claims that for one-and-a-third years of employment, he would be entitled to about 19 days of vacation pay. However, he claims only 14 days taking account of the fact that he did not work right until the end of September 2007, and taking account of the extra days that he took for golf after the Sebring event. I am satisfied that this is a fair claim and that the compensation of $250 per day is appropriate. Accordingly, Stan Carmichael shall receive $3,500 from Mantis in respect of unpaid vacation pay.
[43] Stan also claims $20,121.78 in unreimbursed expenses after giving a credit of $994.88 against the gross claim of $21,116.66. These expenses fall into two categories. The first is expense incurred while actually employed by Mantis. These expenses largely relate to the costs of attending the various Porsche events. The second is the category of expense incurred by Stan before he was employed under an arrangement where he did freelance promotional and graphics design work for Mantis. Both Stan and Ernie acknowledged that this arrangement was intended to work as a “contra”, that is, that Stan would obtain mechanic services respecting his Porsche in return for these services that he provided to Mantis. However, contrary to the original understanding, Stan claimed that Ernie’s staff started to want him to pay for the invoiced amount of his automobile servicing costs rather than leaving it as a payable against which his receivable could offset. Ernie denies this version of events. He says, moreover, that he thinks Stan got his money’s worth for these expenses in services provided free of charge to Stan respecting his automobile.
[44] Ironically, the statement of defence essentially admits these expenses and at trial Ernie did not challenge the quantum of pre-employment expenses totaling $9,559.44 ($8,310 of graphics and communications work and $1,249 of other expense), nor did he challenge net employment expenses claimed of $11,557.22. However, he claimed that such expenses had largely been paid in kind through services rendered to Stan. However, Ernie had no accounting of any kind to show the quantum of services allegedly provided to Stan for which payment was never obtained. This struck me as unbelievable.
[45] Ernie’s staff members are trained mechanics. Auto mechanics generally seem to record their time and labour in undertaking work, at least based on my own experience, so I found it difficult to accept that there would not have been some record of the services provided to Stan that would be available to show how their “contra” account, as Ernie described it, was balanced when Stan’s employment came to an end. I choose to draw a negative inference against Ernie on this point as well. It was his business. He should have records to be able to show services he has provided to any customer. He does not. Nevertheless, I accept that there is at some truth in the existence of a “contra” arrangement between them, and I also accept that there are services that were provided to Stan that should offset at least in part his claims for expense reimbursement against Mantis. I have chosen to fix that offset at 20% on the basis that I believe it to be reasonable in the circumstances and having regard to the evidence, to considerations of common sense and to the low likelihood that there would ever be an equivalence between the extent of the expenses incurred by Stan and for which he is entitled to reimbursement as compared to the free mechanic and auto repair services that Ernie was in a position to offer under the so called “contra” arrangement. Accordingly, I find that Stan is entitled to be reimbursed for pre-employment and employment expenses, but I have discounted the amount claimed and find that $16,100 is a reasonable and appropriate amount under this head of damage.
Damages for Wrongful Dismissal
[46] Having found that Mr. Stan Carmichael was wrongfully dismissed, it remains to determine what level of damages he ought to receive as salary in lieu of his common law notice entitlement. First, it is trite that our law provides that Stan is presumptively entitled to receive damages by way of salary in lieu of notice following his wrongful dismissal by Mantis Racing and that the appropriate award in each case will turn on the particular facts and circumstances of the case: see Ball, Canadian Employment Law, above, at para. 9.40. 1a. Further, Mr. Evans provided a chart to the court summarizing case law he said was directly relevant to these circumstances, a proposition with which I generally agree. That case law dealing with general manager level employees who were earning income roughly comparable to Stan and who were terminated from their positions after relatively short periods of employment, and all of whom were employed for less than two years, shows that between five and nine months notice has been paid in those circumstances.
[47] In this case, Stan was employed as general manager of Mantis, but I am satisfied based on the evidence at trial that this was not a position entailing the same level of expertise as some of the more sophisticated positions that were described in the alleged comparables put forward by Mr. Evans. It is true that Stan did have expertise in the graphics design business and sales and he certainly was a Porsche aficionado, but I disagree with Mr. Evans respecting the relative sophistication of the business. At its highest, it was a specialty sports car mechanics and service business. Mr. Evans argued it was not a “Mom and Pop” type of operation. He said that at a million dollars in sales, “this was a more sophisticated operation.” However, I disagree on that characterization, and to my mind, having heard the evidence and having been in a position to assess Mr. Jakubowski, his brother Gunther who also did some work for Mantis, and having heard of how it operated, it was more akin to a small family business operation than anything more sophisticated. Frankly, to my eye, Stan was possibly the most sophisticated person of the bunch. He had held positions before in international graphics design firms. Moreover, there was no one in the business who was earning anywhere near the salary level that was being paid to Stan, and, yes, he was developing sales and creating some more or less simple graphics promoting the business, but these are not elements of a job that commands the higher levels of compensation by way of damages for which Mr. Evans argued. I do, however, accept the evidence of Stan Carmichael that he made valiant efforts to mitigate, as reflected in the supplementary affidavit he filed at the commencement of the trial attesting to those efforts. Mr. Evans argued that Mr. Carmichael should receive six months notice. Given the range of five to nine months notice that the case law shows is appropriate, I agree with those submissions in the circumstances of this case and having regard to the particularities of the business and I have concluded that five months is the appropriate level of notice in the particular circumstances of this case.
[48] Stan was paid a base salary of $60,000 per year. As such, he earned a total salary of $75,000, plus 2007-2008 bonus of $20,000, for total employment earnings of $95,000 over the 15 months of his employment. This amounts to average monthly earnings of $6,333. Accordingly, I find that damages are payable to Stan for wrongful dismissal by Mantis Racing in an amount equal to six months of employment earnings, totalling the amount of $38,000.
Disposition and Costs
[49] In summary, I have found that Stan Carmichael is entitled to receive $38,000 by way of damages for having been wrongfully dismissed by Mantis Racing, that he was entitled to $20,000 bonus for the three months he was employed in the 2008 fiscal year, that he is entitled to three weeks of vacation pay totaling $3,500 and that he is entitled to receive $16,100 on account of the expenses claimed. Accordingly, the total damages award payable to Stan Carmichael by Mantis Racing Inc. is $77,600.
[50] Stan has succeeded in his claims against Mantis and is accordingly presumptively entitled to be paid his costs, on at least a partial indemnity scale. However, Mr. Evans indicated at the end of the trial that if he was successful, he would be seeking costs on a substantial indemnity basis. His stated reason for making a costs claim on this basis is the conduct of the solicitor who represented Mantis and Mr. Jakubowski before trial. Without deciding the extent to which the alleged sins of the solicitor ought to be visited on the client, it seems likely that a hearing will be required for the costs in this matter to be resolved, and in particular for there to be a resolution on the plaintiff’s position that substantial indemnity costs are merited. Should that be the case, counsel for the plaintiff shall obtain a date on an ordinary motions day or a long motions day when I will be presiding (long motions day if more than one hour will be required in total), and book an appointment for the costs motion to be heard. Notice of that hearing is to be provided to Mr. Pilo and LawPro, as well as to Mantis Racing Inc. and Mr. Jakubowski and his current counsel, if he has retained new counsel to advise him since the trial was completed. Should it be possible for costs to be resolved without another attendance, that will be preferable, and counsel is requested to advise the Court early in the New Year which way he intends to proceed.
___________________________
Michael G. Quigley J.
Released: December 14, 2009
COURT FILE NO.: 7256/07
DATE: 2009-12-14
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
STAN CARMICHAEL
Plaintiff
– and –
MANTIS RACING INC.
Defendant
REASONS FOR JUDGMENT
Michael G. Quigley J.
Released: December 14, 2009

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