Doucet v. Spielo Mfg. Inc.,

• Jurisdiction: New Brunswick
• Judge: Rideout, J.
• Neutral Citation: 2009 NBQB 196
• Court: Court of Queen's Bench of New Brunswick (Canada)
• Citation: (2009), 352 N.B.R.(2d) 1 (TD),2009 NBQB 196
• Date: 02 February 2009

Doucet v. Spielo Mfg. Inc. (2009), 352 N.B.R.(2d) 1 (TD);

    352 R.N.-B.(2e) 1; 907 A.P.R. 1

MLB headnote and full text

Sommaire et texte intégral

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

.........................

Temp. Cite: [2009] N.B.R.(2d) TBEd. JL.028

Renvoi temp.: [2009] N.B.R.(2d) TBEd. JL.028

Yves Doucet and Peter Dauphinee (plaintiffs) v. Spielo Manufacturing Incorporated and Jon Manship (defendants)

(M/C/1157/03; 2009 NBQB 196; 2009 NBBR 196)

Indexed As: Doucet et al. v. Spielo Manufacturing Inc. et al.

Répertorié: Doucet et al. v. Spielo Manufacturing Inc. et al.

New Brunswick Court of Queen's Bench

Trial Division

Judicial District of Moncton

Rideout, J.

July 13, 2009.

Summary:

Résumé:

The plaintiffs were employees and minority shareholders of the corporate defendant. They sued the defendants alleging, inter alia, wrongful dismissal, oppression, unjust enrichment, failure to negotiate in good faith, negligent misrepresentation and breach of fiduciary duty. The defendants counterclaimed for the return of severance benefits paid to the plaintiff Doucet, alleging "after-acquired cause" for his termination.

The New Brunswick Court of Queen's Bench, Trial Division, dismissed the action and allowed the counterclaim.

Editor's Note: There are several prior cases involving these parties.

Company Law - Topic 7013

Fundamental changes and shareholders' rights - Rights of minority or dissenting shareholders - Oppression - What constitutes - Doucet and Dauphinee were employees and minority shareholders of Spielo - They signed a share subscription agreement that provided that if they ceased to be an employee, for any reason, Spielo would immediately repurchase their shares at the then net book value - Spielo terminated them and repurchased their shares at net book value - Spielo was later sold at a substantially higher price per share than that paid to Doucet and Dauphinee - They sued Spielo and its president alleging, inter alia, wrongful dismissal and oppression - They alleged that there was an implied provision in their employment agreements that they would be able to continue their employment at Spielo and benefit from its growth as long as they performed and that Spielo would only terminate their employment if it were in the company's best interest - They also argued that the defendants' termination of their employment based on false allegations of poor financial performance, and while negotiating to sell Spielo and gathering in shares from minority shareholders at a low price, was oppressive - The New Brunswick Court of Queen's Bench, Trial Division, held that the plaintiffs failed to establish that the defendants' actions were oppressive or unfairly prejudicial or improperly disregarded the plaintiffs' interests - The contracts which governed the plaintiffs' employment and the value of their shares on termination should not be amended as requested by the plaintiffs so as to establish oppression - The plaintiffs' alleged expectation of continued employment was not reasonable or well founded in the law - A contract of employment could be terminated provided there was cause or sufficient notice - The share subscription agreement provided that the "corporation has made no representations, promises or agreements, whether verbal or written" - Doucet, an experienced business person, and Dauphinee, an experienced lawyer, would have understood the meaning of these words - The case law required that courts give full effect to the agreements and not utilize the oppression remedy when there was an unambiguous contract for which a party could sue for any breaches of same - See paragraphs 187 to 216.

Company Law - Topic 9781

Actions against corporations and directors - Action for oppressive conduct - When available - [See Company Law - Topic 7013 ].

Company Law - Topic 9785

Actions against corporations and directors - Action for oppressive conduct - Oppression, prejudice or disregard of interests - [See Company Law - Topic 7013 ].

Contracts - Topic 1106

Formation of contract - General principles - Duty to negotiate in good faith - The New Brunswick Court of Queen's Bench, Trial Division, stated that "[i]t is important to observe that the implied duty of performance in good faith presupposes there is a contract ... My review of the authorities would suggest that Canadian law does not recognize a general duty to negotiate in good faith. However, it is acknowledged in the authorities that misstatement during the negotiation stage may be actionable if a contract is ultimately concluded. Although not an exclusive list, fraudulent misrepresentation or deceit, innocent misrepresentation and negligent misrepresentation are types of misstatements which have subsequently been the basis of a claim once the contract was entered into by the parties." - See paragraph 232.

Contracts - Topic 1106

Formation of contract - General principles - Duty to negotiate in good faith - The plaintiffs were employees and minority shareholders of the corporate defendant (Spielo) - They entered into negotiations with Spielo to buy one of its divisions (OLD) - The negotiations failed - Spielo terminated the plaintiffs' employment - Spielo was later sold - The plaintiffs sued Spielo and its president, alleging that they owed the plaintiffs a duty to negotiate in good faith respecting OLD's sale - The plaintiffs also alleged that the defendants had a duty to advise them of the possibility of selling Spielo as they were negotiating the sale of OLD and that the insertion of a new provision, a personal indemnity by the plaintiff Doucet, in the written agreement to buy and sell OLD when it was not mentioned in the letter of intent constituted a failure to negotiate in good faith - The New Brunswick Court of Queen's Bench, Trial Division, rejected the argument - The plaintiffs were not led into an improvident agreement to buy OLD - A contract of purchase and sale was never concluded - They failed to establish a duty of good faith in pre-contractual negotiations - Adding a requirement that Doucet provide a personal indemnity was not a breach of good faith - Also, the letter of intent was very clear that it was an expression of general intent only and was not binding on the parties - See paragraphs 217 to 235.

Equity - Topic 1122

Equitable relief - Contracts - Unconscionability - Unconscionable bargain defined - Doucet and Dauphinee were employees and minority shareholders of Spielo - They signed a share subscription agreement that provided that if they ceased to be an employee, for any reason, Spielo would immediately repurchase their shares at the then net book value - Spielo terminated them and repurchased their shares at net book value - Spielo was later sold at a substantially higher price per share than that paid to Doucet and Dauphinee - They sued Spielo and its president - They alleged that they were terminated for the sole or major reason that the president could subsequently sell their shares at a much higher price - The New Brunswick Court of Queen's Bench, Trial Division, held that there was no evidence that the subscription agreement was an unconscionable contract at the time it was executed - When the plaintiffs each entered into the share subscription agreement, there was no power imbalance - Both were successful in negotiating attractive employment packages - There was no evidence of need or distress - At the time of execution the plaintiffs could have attempted to negotiate different terms to the share purchase agreement or they could have refused to sign the agreement - See paragraphs 236 to 245.

Master and Servant - Topic 7525

Dismissal or discipline of employees - Grounds - General - Grounds learned after dismissal - Doucet was employed by the corporate defendant (Spielo) - He headed a division of Spielo before he was terminated after 10 years of service - He was 45 years old - He was an electrical engineer - He was given 12 months' notice - Doucet sued for wrongful dismissal - Spielo counterclaimed, alleging that just cause for the termination was discovered after the termination which entitled them to recover the notice paid to him - They alleged that Doucet demanded and received a $60,000 secret commission or kick-back from a company that Spielo did business with - They also alleged that Doucet was actively involved with the management of a company (Dovico) operated by his sister while he was still employed by Spielo - Doucet was even named "Young Entrepreneur of the Year" as a result of Dovico's success - He used other employees of Spielo to assist Dovico without any permission or compensation for such services - He invoiced Dovico for the services that he provided - Spielo's president had some knowledge of Doucet's involvement with Dovico but not the full extent - The New Brunswick Court of Queen's Bench, Trial Division, held that the defendants had sufficient grounds to dismiss Doucet for subsequently acquired cause - See paragraphs 284 to 303.

Master and Servant - Topic 7553

Dismissal or discipline of employees - Grounds - Misconduct or misconduct of business - [See Master and Servant - Topic 7525 ].

Master and Servant - Topic 7571

Dismissal or discipline of employees - Grounds - Remuneration from third party - [See Master and Servant - Topic 7525 ].

Master and Servant - Topic 7582.1

Dismissal or discipline of employees - Grounds - Personal use of employer's property - [See Master and Servant - Topic 7525 ].

Master and Servant - Topic 8000

Dismissal without cause - Notice of dismissal - What constitutes reasonable notice - Doucet was employed by the corporate defendant (Spielo) - He headed a division of Spielo before he was terminated after 10 years of service - He was 45 years old - He was an electrical engineer - He was given 12 months' notice - Doucet had provided assistance to another company, Dovico, during his tenure at Spielo and became employed at Dovico as soon as his notice period expired - Doucet sued for wrongful dismissal, arguing that he should have received 24 months' notice - The New Brunswick Court of Queen's Bench, Trial Division, held that there was cause for Doucet's dismissal - In any event, the 12 months' notice provided was reasonable - Doucet could have gone to work for Dovico shortly after he was terminated but chose to wait out the notice period - See paragraphs 264 to 267.

Master and Servant - Topic 8000

Dismissal without cause - Notice of dismissal - What constitutes reasonable notice - Dauphinee was employed by the corporate defendant (Spielo) as an information technology lawyer - He had extensive training in the intellectual property field - He was terminated after seven years of service - He was 48 years old - He was given six months' notice - He sued for wrongful dismissal, arguing that he should have received 24 months' notice - The New Brunswick Court of Queen's Bench, Trial Division, held that the appropriate notice period should have been nine months - However, Dauphinee failed to mitigate his damages - He did not apply to any law firms and did not take any of the usual types of job search initiatives - The failure to mitigate negated any claim to an additional notice period over the six months provided - See paragraphs 268 and 273 to 279.

Restitution - Topic 64

Unjust enrichment - General - Juristic reason for enrichment - Doucet and Dauphinee were employees and minority shareholders of Spielo - They signed a share subscription agreement that provided that if they ceased to be an employee, for any reason, Spielo would immediately repurchase their shares at the then net book value - Spielo terminated them and repurchased their shares at net book value - Spielo was later sold at a substantially higher price per share than that paid to Doucet and Dauphinee - They sued Spielo and its president - They alleged unjust enrichment respecting the sale of the plaintiff's shares - They alleged that their work efforts were such that the Spielo share value increased substantially and they were deprived of this enrichment which was occasioned by their efforts - The New Brunswick Court of Queen's Bench, Trial Division, dismissed the claim - Both plaintiffs were properly and well remunerated for their services - They negotiated their remuneration arrangements and signed the share subscription agreement - The employment contract and the share subscription agreement constituted a juristic reason for a deprivation - The court stated that "[i]t is difficult to comprehend how they should be additionally compensated for an alleged unjust enrichment because the company was successful" - See paragraphs 246 to 253.

Contrats - Cote 1106

Formation du contrat - Principes généraux - Obligation de négocier de bonne foi - [Voir Contracts - Topic 1106 ].

Droit des compagnies - Cote 7013

Modifications de structure et droits des actionnaires - Droits des actionnaires minoritaires ou dissidents - Oppression - Éléments constitutifs - [Voir Company Law - Topic 7013 ].

Droit des compagnies - Cote 9781

Actions contre les corporations et les dirigeants - Demande en cas d'abus - Conditions d'ouverture - [Voir Company Law - Topic 9781 ].

Droit des compagnies - Cote 9785

Actions contre les corporations et les administrateurs - Demande en cas d'abus - Oppression - Préjudice ou mépris des intérêts - [Voir Company Law - Topic 9785 ].

Employeurs et employés - Cote 7525

Congédiement d'employés - Motifs - Généralités - Motifs appris après le congédiement - [Voir Master and Servant - Topic 7525 ].

Employeurs et employés - Cote 7553

Congédiement d'employés ou recours disciplinaire - Motifs - Mauvaise conduite ou mauvaise conduite des affaires - [Voir Master and Servant - Topic 7553 ].

Employeurs et employés - Cote 7571

Congédiement d'employés - Motifs - Rémunération fournie par un tiers - [Voir Master and Servant - Topic 7571 ].

Employeurs et employés - Cote 7582.1

Congédiement d'employés ou recours disciplinaire - Motifs - Utilisation des biens de l'employeur à des fins personnelles - [Voir Master and Servant - Topic 7582.1 ].

Employeurs et employés - Cote 8000

Congédiement non motivé - Avis de congédiement - Préavis raisonnable - Éléments constitutifs - [Voir Master and Servant - Topic 8000 ].

Equity - Cote 1122

Redressement en equity - Contrats - Marché exorbitant - Définition de marché exorbitant - [Voir Equity - Topic 1122 ].

Restitution - Cote 64

Enrichissement sans cause - Généralités - Motif juridique à l'enrichissement - [Voir Restitution - Topic 64 ].

Cases Noticed:

Doucet et al. v. Spielo Manufacturing Inc. et al. (2008), 326 N.B.R.(2d) 187; 838 A.P.R. 187; 2007 NBQB 37, refd to. [para. 168].

BCE Inc. v. 1976 Debentureholders - see Aegon Capital Management Inc. et al. v. BCE Inc. et al.

Aegon Capital Management Inc. et al. v. BCE Inc. et al., [2008] 3 S.C.R. 560; 383 N.R. 119, refd to. [para. 190].

J.S.M. Corp. (Ontario) Ltd. v. Brick Furniture Warehouse Ltd. et al. (2008), 234 O.A.C. 59 (C.A.), refd to. [para. 194].

Jedfro Investments (U.S.A.) Ltd. et al. v. Jacyk Estate et al. (2007), 369 N.R. 329; 232 O.A.C. 385 (S.C.C.), refd to. [para. 195].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 200].

2082825 Ontario Inc. et al. v. Platinum Wood Finishing Inc. et al. (2009), 248 O.A.C. (Div. Ct.), refd to. [para. 203].

New Brunswick (Board of Management) v. Dunsmuir (2006), 297 N.B.R.(2d) 151; 771 A.P.R. 151 (C.A.), affd. [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 208].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 219].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 222].

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 262 N.R. 285, refd to. [para. 225].

055774 N.B. Ltd. v. Midwinter (G.) & Associates Ltd. et al. (2002), 253 N.B.R.(2d) 126; 660 A.P.R. 126; 2002 CarswellNB 331 (T.D.), refd to. [para. 227].

Crawford et al. v. Agricultural Development Board (N.B.) et al. (1997), 192 N.B.R.(2d) 68; 489 A.P.R. 68 (C.A.), refd to. [para. 228].

978011 Ontario Ltd. v. Cornell Engineering Co. (2001), 144 O.A.C. 262 (C.A.), refd to. [para. 229].

GMAC Leaseco Ltd. v. 1348259 Ontario Inc. et al., [2005] O.T.C. Uned. 131 (Sup. Ct.), refd to. [para. 229].

Gateway Realty Ltd. v. Arton Holdings Ltd. and LaHave Developments Ltd. (1991), 106 N.S.R.(2d) 180; 288 A.P.R. 180 (T.D.), affd. (1992), 112 N.S.R.(2d) 180; 307 A.P.R. 180 (C.A.), refd to. [para. 231].

Kosaka v. Chan et al., [2008] B.C.T.C. Uned. 858; 298 D.L.R.(4th) 117 (S.C.), refd to. [para. 233].

Lloyd's Bank Ltd. v. Bundy, [1974] 3 All E.R. 757 (C.A.), refd to. [para. 238].

Harry v. Kreutziger (1979), 95 D.L.R.(2d) 231 (B.C.C.A.), refd to. [para. 238].

S-244 Holdings Ltd. v. Seymour Building Systems Ltd. (1994), 41 B.C.A.C. 272; 66 W.A.C. 272 (C.A.), refd to. [para. 238].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384, refd to. [para. 248].

Confederation Life Insurance Co. (Liquidation), Re (1995), 24 O.R.(3d) 717 (Gen. Div.), affd. (1997), 97 O.A.C. 18 (C.A.), refd to. [para. 250].

Kiewit (Peter) Sons Co. v. Eakins Construction Ltd., [1960] S.C.R. 361, refd to. [para. 251].

Kendall v. Husby et al., [1997] B.C.T.C. Uned. 356 (S.C.), refd to. [para. 251].

Schurman v. Covered Bridge Recreation Inc. (2009), 340 N.B.R.(2d) 168; 871 A.P.R. 168 (C.A.), refd to. [para. 256].

Iacobucci v. WIC Radio Ltd. et al. (1999), 131 B.C.A.C. 252; 214 W.A.C. 252; 47 C.C.E.L.(2d) 163 (C.A.), refd to. [para. 257].

Keays v. Honda Canada Inc., [2008] 2 S.C.R. 362; 376 N.R. 196; 239 O.A.C. 299, refd to. [para. 258].

Donovan v. New Brunswick Publishing Co. (1996), 174 N.B.R.(2d) 23; 444 A.P.R. 23 (T.D.), refd to. [para. 261].

Bramble et al. v. Medis Health and Pharmaceutical Services Inc. (1999), 214 N.B.R.(2d) 111; 547 A.P.R. 111 (C.A.), refd to. [para. 261].

Murphy v. Clarica Life Insurance Co. (2003), 266 N.B.R.(2d) 100; 698 A.P.R. 100 (T.D.), refd to. [para.261].

Humble v. Atlantic Rentals Ltd. et al. (2004), 276 N.B.R.(2d) 40; 724 A.P.R. 40 (T.D.), refd to. [para. 261].

St-Coeur v. Société d'investissement du Mouvement Acadien ltée et autre, [2004] N.B.R.(2d) (Supp.) No. 13; 2004 CarswellNB 100 (T.D.), refd to. [para. 261].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201, refd to. [para. 265].

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. 265].

Konop v. Brazilian Canadian Coffee Co. et al., [2004] O.T.C. 565; 2004 CarswellOnt 2696 (Sup. Ct.), refd to. [para. 277].

Canadian Aero Services Ltd. v. O'Malley, [1974] S.C.R. 592, refd to. [para. 287].

Atkins v. Windsor Star (1994), 2 C.C.E.L.(2d) 229 (Ont. Gen. Div.), refd to. [para. 289].

Bursey v. Acadia Motors Ltd. (1979), 28 N.B.R.(2d) 361; 63 A.P.R. 361; 1979 CarswellNB 310 (T.D.), revd. in part (1980), 35 N.B.R.(2d) 587; 88 A.P.R. 587 (C.A.), refd to. [para. 290].

Ennis v. Canadian Imperial Bank of Commerce, [1986] B.C.J. No. 1742 (S.C.), refd to. [para. 292].

Thorn v. RGO Office Products Ltd. (1993), 147 A.R. 284; 15 Alta. L.R.(3d) 346 (Q.B.), refd to. [para. 296].

McEwan v. Irving Pulp and Paper Ltd. (1995), 161 N.B.R.(2d) 328; 414 A.P.R. 328 (T.D.), refd to. [para. 297].

Levesque v. Comeau, [1970] S.C.R. 1010; 5 N.B.R.(2d) 15, refd to. [para. 300].

Authors and Works Noticed:

Harris, David, Wrongful Dismissal (Looseleaf), generally [para. 279]; pp. 3-186.1, 3-186.2 [para. 286].

Levitt, Howard Alan, The Law of Dismissal in Canada (3rd Ed. 2003), pp. 6-10 [para. 292]; 6-31 [para. 291]; 6-33 [para. 289].

McCamus, John D., The Law of Contracts, pp. 206 [para. 211]; 784, 785 [para. 230].

Perell, Paul M., Annotation to Martel Building Ltd. v. Canada, 2000 CarswellNat 2679, pp. 12, 13 [para. 225].

Sopinka, John, Lederman, Sidney N., and Bryant, Alan W., The Law of Evidence in Canada, § 6.321 [para. 299].

Wilton-Siegel, Herman, Corporate Law and Contract Law - What is the Deal?, generally [para. 205].

Counsel:

Avocats:

George MacDonald, Q.C., Eric LeDrew, Crystal Gamble and Chris Keirstead, on behalf of the plaintiffs;

Gordon Petrie, Q.C., Catherine Lahey and Clarence Bennett, on behalf of the defendants.

This action and counterclaim were heard on May 22-30, June 2-5, November 17, 18, 21, 24-28, December 8-12 and 22, 2008, with final briefs on February 2, 2009, by Rideout, J., of the New Brunswick Court of Queen's Bench, Trial Division, Judicial District of Moncton, who delivered the following decision on July 13, 2009.