Link v. Venture Steel Inc. et al., 2010 ONCA 144

• Judge: O'Connor, A.C.J.O., Juriansz and Rouleau, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: Thursday October 29, 2009
• Jurisdiction: Ontario
• Citations: 2010 ONCA 144;(2010), 259 O.A.C. 199 (CA)

Link v. Venture Steel Inc. (2010), 259 O.A.C. 199 (CA)

MLB headnote and full text

Temp. Cite: [2010] O.A.C. TBEd. MR.001

William Link (plaintiff/respondent) v. Venture Steel Inc. and Ruben Rivas (defendants/appellant)

Venture Steel Inc. and 1452938 Ontario Limited, carrying on business under the firm name and style of Venture Steel, and the said Venture Steel (plaintiffs by counterclaim) v. William Link (defendant by counterclaim)

(C49763; 2010 ONCA 144)

Indexed As: Link v. Venture Steel Inc. et al.

Ontario Court of Appeal

O'Connor, A.C.J.O., Juriansz and Rouleau, JJ.A.

March 1, 2010.

Summary:

The original founders in 1997 of Venture Steel Inc. included Rivas, as President, and Link, as General Sales Manager. By 2004, a shareholders' agreement was entered into. Link received 9% of the company and 25,000 Class A preferred shares and 9 Class B preferred shares. Venture's retained earnings to the date of the shareholders' agreement were to be paid out pursuant to the terms of an option agreement. By early 2005, Venture had grown to $335 million in sales and Link was earning some $536,000 per annum as Vice-President of Sales. On February 21, 2005, Venture fired Link, alleging just cause. On April 30, 2006, Royal Laser purchased Venture for some $43.5 million. In August 2006, Link found employment as a Vice-President of Sales and Purchasing. In his action against Venture, Link sought damages for wrongful dismissal and the value of his shares. By the trial's outset, all claims against Rivas had been discontinued.

The Ontario Superior Court, in a decision reported at [2008] O.T.C. Uned. O67, held that Venture did not have just cause to dismiss Link. The court awarded, inter alia, damages in lieu of reasonable notice (fixed at 12 months), damages for the loss of benefits for one year and for unpaid business expenses, and some $500,000 for damages for the value of the shares covered by the option agreement. Venture appealed, arguing that the court erred (a) in failing to reduce Link's damages for his failure to mitigate; in ordering Venture to pay Link nine per cent of the proceeds from the sale of Venture to Royal Laser for his common shares; and in ordering Venture to pay nine per cent of the total dividend paid on the Class B preferred shares.

The Ontario Court of Appeal allowed the appeal with respect to that part of the judgment relating to the dividend payment, as there was insufficient evidence to support the award. In all other respects the appeal was dismissed.

Company Law - Topic 9731

Actions against corporations and directors - Practice - Pleadings - The defendant corporation (Venture) fired the plaintiff, alleging just cause - The plaintiff sought damages for wrongful dismissal and the value of his shares - The trial judge held that Venture did not have just cause to dismiss the plaintiff and awarded damages - On appeal, Venture argued that the plaintiff did not plead that he was entitled to the relief the trial judge granted, which was an amount equal to nine per cent of the proceeds from the sale of Venture; that the plaintiff did not plead the facts that underlay the trial judge's award; and that the plaintiff's pleadings were inconsistent with the relief granted - The Ontario Court of Appeal did not interfere with the award in relation to the plaintiff's common shares on the basis of the inadequacy of the pleadings - The basis of liability on which the trial judge made the award could be supported by the pleadings, "albeit with a generous and liberal interpretation of those pleadings" - Such an interpretation was appropriate, where Venture conducted the trial with the evident understanding that the plaintiff was claiming an amount equal to nine per cent of the sale proceeds for his common shares - Venture was not misled and no unfairness resulted from the general pleadings - See paragraphs 36 to 54.

Courts - Topic 587

Judges - Duties - To decide according to evidence and pleadings - The Ontario Court of Appeal stated that "[i]t is well accepted that the parties to an action are entitled to have a resolution of their differences based on the pleadings. The trial judge cannot make a finding of liability and award damages against a defendant on a basis not pleaded in the statement of claim because it deprives the defendant of the opportunity to address that issue" - In the appeal at bar, the court held that read generously, the pleadings included the critical matters that underlay the plaintiff's claim - Further, the defendant was not misled or prejudiced as a result of the very general pleadings - See paragraphs 35, 42, 46.

Damages - Topic 1084

Mitigation - Evidence and proof - Burden of proof - The defendant corporation (Venture) fired the plaintiff (Vice-President of Sales) in 2005, alleging just cause - In August 2006, he found employment as a Vice-President of sales and purchasing - The plaintiff sought damages for wrongful dismissal - He testified that, during the 12 months after he had been dismissed, he did not search for employment because he did not wish to risk breaching the non-competition and non-solicitation provisions of the shareholders' agreement - The trial judge allowed damages for pay in lieu of notice and benefits for a 12-month notice period, without deduction - The Ontario Court of Appeal held that the trial judge did not err in not reducing the damages - The trial judge rightly pointed out that there was an onus on Venture to establish that the plaintiff failed to take reasonable steps to mitigate his damages and that had he done so, he would have been expected to secure a comparable position reasonably adapted to his abilities - Because Venture did not lead any evidence about the availability of suitable employment, the trial judge concluded that Venture had not met the second prong of the test - That conclusion was open to the trial judge - See paragraphs 71 to 74.

Damages - Topic 6753

Contracts - Employment relationship or contract - Breach by employer - Mitigation by employee - [See Damages - Topic 1084].

Master and Servant - Topic 7704

Dismissal or discipline of employees - Damages for wrongful dismissal - Measure of damages for wrongful dismissal - The plaintiff was an original founder, in 1977, of Venture Steel Inc. - By 2004, a shareholders' agreement was entered into - The plaintiff received 9% of the company and 25,000 Class A preferred shares and 9 Class B preferred shares - Venture's retained earnings to the date of the shareholders' agreement were to be paid out pursuant to the terms of an option agreement - By early 2005, Venture had grown to $335 million in sales and the plaintiff was earning some $536,000 per annum as Vice-President of Sales - On February 21, 2005, Venture fired Link, alleging just cause - On April 30, 2006, Venture was purchased for some $43.5 million - In August 2006, the plaintiff found employment as a Vice-President of Sales and Purchasing - The plaintiff sought damages for wrongful dismissal and the value of his shares - The trial judge held that Venture did not have just cause to dismiss the plaintiff, and awarded, inter alia, damages in lieu of reasonable notice (fixed at 12 months), damages for the loss of benefits for one year and for unpaid business expenses, and some $500,000 for damages for the value of the shares covered by the option agreement - Venture appealed, arguing that the court erred (a) in failing to reduce Link's damages for his failure to mitigate; in ordering Venture to pay Link nine per cent of the proceeds from the sale of Venture to Royal Laser for his common shares; and in ordering Venture to pay nine per cent of the total dividend paid on the Class B preferred shares - The Ontario Court of Appeal allowed the appeal with respect to that part of the judgment relating to the dividend payment, as there was insufficient evidence to support the award - In all other respects the appeal was dismissed.

Master and Servant - Topic 8064

Dismissal without cause - Damages - Mitigation - [See Damages - Topic 1084].

Master and Servant - Topic 8744

Dismissal - Practice - Pleadings - When specific pleading required - [See Company Law - Topic 9731].

Practice - Topic 1458

Pleadings - Statement of claim - General - Necessity of claiming damages or relief - [See Company Law - Topic 9731].

Cases Noticed:

Kalkinis et al. v. Allstate Insurance Co. of Canada (1998), 117 O.A.C. 193; 41 O.R.(3d) 528 (C.A.), leave to appeal refused (2000), 255 N.R. 199; 135 O.A.C. 197 (S.C.C.), refd to. [para. 35].

Counsel:

James Zibarras and Kevin Toyne, for the appellant;

Alan Lenczner, Q.C. and Dena Varah, for the respondent.

This appeal was heard at Toronto, Ontario, on October 29, 2009, by O'Connor, A.C.J.O., Juriansz and Rouleau, JJ.A., of the Ontario Court of Appeal. O'Connor, A.C.J.O., released the following judgment of the Court on March 1, 2010.