Bowes v. Goss Power Products Ltd., (2012) 293 O.A.C. 1 (CA)

• Judge: Winkler, C.J.O., Simmons, Cronk, Armstrong and Watt, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 25, 2012
• Jurisdiction: Ontario
• Citations: (2012), 293 O.A.C. 1 (CA);2012 ONCA 425

Bowes v. Goss Power (2012), 293 O.A.C. 1 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. JN.042

Peter Bowes (applicant/appellant) v. Goss Power Products Ltd. (respondent/respondent)

(C54173; 2012 ONCA 425)

Indexed As: Bowes v. Goss Power Products Ltd.

Ontario Court of Appeal

Winkler, C.J.O., Simmons, Cronk, Armstrong and Watt, JJ.A.

June 21, 2012.

Summary:

Bowes entered into a written contract of employment with Goss Power Products Ltd. ("Goss"), which provided that he would receive six months' notice or pay in lieu thereof if his employment was terminated without cause. The employment agreement was silent with respect to a duty to mitigate. Goss terminated Bowes' employment without cause. The letter of termination stated that Bowes would be paid his salary for six months, but was required to seek alternative employment during that period. Two weeks after he was terminated, Bowes obtained a new position at the same salary he had been earning with Goss. After paying the statutorily required three weeks' salary, Goss ceased making salary payments to Bowes. Bowes brought an application under rule 14.05 of the Rules of Civil Procedure, asking for a determination of rights pursuant to his employment agreement. Bowes argued that the employment agreement set out the termination payment that was due and owing and he had no duty to mitigate and was accordingly entitled to the amount set out in the employment agreement.

The Ontario Superior Court, in a decision cited as [2011] O.T.C. Uned. 4445, held that where an employment agreement contained a fixed severance entitlement, it was subject to a duty to mitigate unless the agreement, either directly or by implication, relieved the employee of that obligation. Since the agreement at issue provided no such exemption from the duty to mitigate, Bowes was not entitled to the full amount provided for under the agreement as he had mitigated his loss by finding new employment. Bowes appealed.

The Ontario Court of Appeal allowed the appeal. The application judge erred in deciding that an agreement specifying a fixed notice period, in the event of dismissal without cause, was akin to damages in lieu of reasonable notice at common law. That mischaracterization led him to wrongly conclude that there was a presumption that Bowes had a duty to mitigate and that, since the agreement was silent in respect of mitigation, the presumption had not been rebutted. On that basis, he wrongly determined that the parties intended that mitigation would be applicable to the calculation of damages upon termination. Bowes was entitled to the amount of salary in lieu of notice specified in the Employment Agreement notwithstanding any salary earned from his new employer.

Damages - Topic 1045

Mitigation - In contract - Exception - Action for debt or liquidated damages - [See second Master and Servant - Topic 8064 ].

Damages - Topic 6753

Contracts - Employment relationship or contract - Breach by employer - Mitigation by employee - [See both Master and Servant - Topic 8064 ].

Master and Servant - Topic 8008

Dismissal without cause - Notice of dismissal - Notice period - Working through or pay in lieu - [See first Master and Servant - Topic 8064 ].

Master and Servant - Topic 8064

Dismissal without cause - Damages - Mitigation - Bowes entered into a written contract of employment with Goss Power Products Ltd. ("Goss"), which provided that he would receive six months' notice or pay in lieu thereof if his employment was terminated without cause - The employment agreement was silent with respect to a duty to mitigate - Goss terminated Bowes' employment without cause - The letter of termination stated that Bowes would be paid his salary for six months, but was required to seek alternative employment during that period - Two weeks after he was terminated, Bowes obtained a new position at the same salary he had been earning with Goss - After paying the statutorily required three weeks' salary, Goss ceased making salary payments to Bowes - Bowes applied under rule 14.05 of the Rules of Civil Procedure, asking for a determination of rights pursuant to his employment agreement - Bowes argued that the employment agreement set out the termination payment that was due and owing and he had no duty to mitigate - The application judge held that where an employment agreement contained a fixed severance entitlement, it was subject to a duty to mitigate unless the agreement, either directly or by implication, relieved the employee of that obligation - Since the agreement provided no such exemption from the duty to mitigate, Bowes was not entitled to the full amount provided for under the agreement as he had mitigated his loss by finding new employment - Bowes appealed - The Ontario Court of Appeal allowed the appeal - The application judge erred in deciding that an agreement specifying a fixed notice period, in the event of dismissal without cause, was akin to damages in lieu of reasonable notice at common law - That mischaracterization led him to wrongly conclude that there was a presumption that Bowes had a duty to mitigate and that, since the agreement was silent in respect of mitigation, the presumption had not been rebutted - On that basis, he wrongly determined that the parties intended that mitigation would be applicable to the calculation of damages upon termination - Bowes was entitled to the amount of salary in lieu of notice specified in the employment agreement notwithstanding any salary earned from his new employer.

Master and Servant - Topic 8064

Dismissal without cause - Damages - Mitigation - The Ontario Court of Appeal stated that "the preponderance of appellate jurisprudence supports the view that, where an employment agreement contains a stipulated entitlement on termination without cause, the amount in question is either liquidated damages or a contractual sum. Either way, mitigation is irrelevant. This conclusion is based on the following reasoning: By contracting for a fixed sum the parties have contracted out of the Bardal 'reasonable notice' approach or damages in lieu thereof. There is no material difference whether the quantum contracted for is fixed or readily calculable from the terms of the agreement. By specifying an amount, the stipulated quantum is characterized as either liquidated damages or a contractual sum. Mitigation is a live issue at law only where damages are at large, i.e. damages in lieu of reasonable notice. Mitigation is not applicable if the damages are either liquidated or a contractual sum. It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer to later seek to obtain a lower amount at the expense of the employee by raising an issue of mitigation that was not mentioned in the employment agreement. It is counter-intuitive and inconsistent for the parties to contract for certainty and finality, and yet leave mitigation as a live issue with the uncertainty, lack of finality, risk and litigation that would ensue as a consequence. Thus, where an agreement provides for a stipulated sum upon termination without cause and is silent as to the obligation to mitigate, the employee will not be required to mitigate. Moreover, a broad release in an employment agreement, as here, demonstrates an intention to avoid resort to the courts, confirms a desire for finality, and bolsters a finding that the parties intended that mitigation would not be required unless the agreement expressly stipulates to the contrary" - See paragraph 61.

Master and Servant - Topic 8071

Dismissal without cause - Damages - Effect of contractual provision setting notice period - [See both Master and Servant - Topic 8064 ].

Cases Noticed:

Graham v. Marleau, Lemire Securities Inc. et al., [2000] O.T.C. 92; 49 C.C.E.L.(2d) 289 (Sup. Ct.), not appld. [para. 22].

Bardal v. Globe & Mail Ltd., [1960] 24 D.L.R.(2d) 140 (H.C.), refd to. [para. 24].

Evans v. Teamsters Union Local No. 31, [2008] 1 S.C.R. 661; 374 N.R. 1; 253 B.C.A.C. 1; 425 W.A.C. 1; 2008 SCC 20, refd to. [para. 24].

Michaels et al. v. Red Deer College, [1976] 2 S.C.R. 324; 5 N.R. 99; [1975] 5 W.W.R. 575, refd to. [para. 24].

Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986; 136 N.R. 40; 53 O.A.C. 200; 91 D.L.R.(4th) 491, refd to. [para. 25].

Machtinger v. HOJ Industries Ltd. - see Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.

Thermidaire Corp. v. Clarke (H.F.) Ltd., [1976] 1 S.C.R. 319; 3 N.R. 133, refd to. [para. 28].

Collins (J.G.) Insurance Agencies Ltd. v. Elsley's Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 28].

Brown v. Pronghorn Controls Ltd. (2011), 515 A.R. 128; 532 W.A.C. 128; 2011 ABCA 328, refd to. [para. 37].

Abrahams v. Performing Right Society, [1995] I.C.R. 1028 (Eng. C.A.), refd to. [para. 42].

Taylor v. Dyer Brown (2004), 192 O.A.C. 91; 73 O.R.(3d) 358 (C.A.), refd to. [para. 42].

Mills v. Alberta (1986), 46 Alta. L.R.(2d) 157 (C.A.), refd to. [para. 43].

Philp v. Expo 86 Corp. (1987), 45 D.L.R.(4th) 449 (B.C.C.A.), refd to. [para. 44].

Boutcher et al. v. Clearwater Seafoods Limited Partnership (2010), 288 N.S.R.(2d) 177;  914 A.P.R. 177; 2010 NSCA 12, leave to appeal denied (2010), 410 N.R. 386 (S.C.C.), refd to. [para. 45].

Wronko v. Western Inventory Service Ltd. (2008), 237 O.A.C. 1; 90 O.R.(3d) 547; 2008 ONCA 327, addendum [2008] O.A.C. Uned. 349; 2008 ONCA 479, leave to appeal denied (2008), 391 N.R. 385 (S.C.C.), refd to. [para. 50].

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1, refd to. [para. 56].

Davidson v. Slaight Communications Inc., [1989] 1 S.C.R. 1038; 93 N.R. 183, refd to. [para. 56].

Authors and Works Noticed:

McGregor, Harvey, McGregor on Damages (16th Ed. 1997), pp. 322-323 [para. 41].

Swinton, K., Contract Law and the Employment Relationship: The Proper Forum for Reform, in Studies in Contract Law (1980), p. 363 [para. 56].

Counsel:

Alex Van Kralingen, for the appellant;

David Rosenfeld, for the respondent.

This appeal was heard on May 25, 2012, before Winkler, C.J.O, Simmons, Cronk, Armstrong and Watt, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Winkler, C.J.O., and was released on June 21, 2012.