Mady Development Corp. et al. v. Rossetto et al., 2012 ONCA 31

• Judge: Doherty, Armstrong and Hoy, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: December 01, 2011
• Jurisdiction: Ontario
• Citations: 2012 ONCA 31;(2012), 287 O.A.C. 277 (CA)

Mady Dev. Corp. v. Rossetto (2012), 287 O.A.C. 277 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. JA.014

Mady Development Corp., D. Mady Investments Inc. and Mady Contract Division Ltd. (appellants/respondents in appeal) v. Leonard "Len" Rossetto, 2034167 Ontario Ltd. and EMIK a.k.a. Emma Aboulian (respondents/appellant in appeal)

(C53884; 2012 ONCA 31)

Indexed As: Mady Development Corp. et al. v. Rossetto et al.

Ontario Court of Appeal

Doherty, Armstrong and Hoy, JJ.A.

January 17, 2012.

Summary:

Rossetto appealed from an appeal judge's order that allowed an appeal from an arbitrator's decision. See [2011] O.T.C. Uned. 6323. At issue was whether: (1) the appeal judge erred in holding that there was an overriding principle which disentitled a fiduciary employee to any bonus in respect of a period of time in which he acted in breach of his fiduciary duty, and (2) if so, should the arbitrator's award granting Rossetto the bonuses earned as part of his employment be reinstated?

The Ontario Court of Appeal allowed the appeal and restored the arbitrator's award.

Equity - Topic 3654

Fiduciary or confidential relationships - Breach of fiduciary relationship - Remedies - The Ontario Court of Appeal stated that "Fiduciary relief is equitable in nature. The remedies for breach of fiduciary duty are discretionary. They are 'dependent on all the facts before the court, and designed to address not only fairness between the parties, but also the public concern about the maintenance of the integrity of fiduciary relationships' ... Fiduciary relief is aimed at two goals: restitution and deterrence. Restitution is aimed at returning a beneficiary to the position he would have been in but for the fiduciary's breach. The goal of deterrence, or as it is sometimes referred to, the prophylactic purpose, is to prevent fiduciaries from benefitting from their wrongdoing and maintain the integrity of the fiduciary relationship. A remedy for breach of fiduciary duty can be aimed at one or both of these purposes. The role each one plays is a function of the particular facts of the case ... Deterrence is of particular importance where the beneficiary suffers no identifiable loss. Such was the case in 3464920 Canada Inc. v. Strothers. In Strothers, disgorgement of profits gained through a breach of fiduciary duty was ordered not for the purpose of making the beneficiary whole; but rather, to ensure that the fiduciary did not benefit from his wrongdoing, thereby deterring fiduciary faithlessness, and achieving the prophylactic goal." - See paragraphs 18 to 20.

Equity - Topic 3654

Fiduciary or confidential relationships - Breach of fiduciary relationship - Remedies - Rossetto was employed as an executive with the Mady companies (Mady) - Between September 3, 2007 and November 15, 2007, he diverted labour and materials, and used Mady's funds to renovate his house - Mady discovered his wrongdoing, and terminated his employment on December 12, 2008 - Mady sued Rossetto for damages for conversion, breach of employment contract, unjust enrichment and breach of fiduciary duty - Rossetto counterclaimed for his 2007 and 2008 bonuses - The parties submitted the dispute to arbitration - Mady framed its arbitration of the diversion of resources claim as a claim for breach of fiduciary duty - It argued that because Rossetto was terminated for cause, it was not obligated to pay his bonuses - The arbitrator awarded Mady damages totalling $546,452: $315,452 for the misappropriated labour, materials and funds; and $231,000 for delay to one of Mady's legitimate projects occasioned by Rossetto's diversion of resources and attention to his home renovations - The arbitrator found that "Rossetto's entitlement to an annual bonus was clearly an integral part of his contract with Mady from the very first day he entered into his employment" - He concluded that a dishonest dismissed employee was entitled to be paid for the work that he had done and he awarded Rossetto $364,661.33 representing unpaid bonuses for 2007 and 2008 - Mady appealed - The appeal judge held that Rossetto was not entitled to his bonuses where he was in breach of his fudiciary duties - Rossetto appealed - The Ontario Court of Appeal held that the appeal judge erred in holding that there was an overriding principle which disentitled a fiduciary employee to any bonus respecting the period in which he acted in breach of his fiduciary duty - The court reinstated the arbitrator's award granting Rossetto the bonuses where they were traditional performance bonuses and Mady had been compensated for its loss by the damage award.

Master and Servant - Topic 1916

Remuneration - Bonuses - Breach of contract by employee - Effect of - [See second Equity - Topic 3654 ].

Cases Noticed:

Sibilia v. G.P. Page Publications Ltd., 1983 CarswellOnt 1817 (H.C.), refd to. [para. 10].

Clark v. Coopers & Lybrand Consulting Group, [1999] O.T.C. 32; 19 C.C.E.L.(3d) 188 (S.C.), affd. (2002), 163 O.A.C. 1 (C.A), dist. [para. 10].

McBride Metal Fabricating Corp. v. H & W Sales Co. (2002), 158 O.A.C. 214; 59 O.R.(3d) 97 (C.A.), dist. [para. 12].

Canadian Aero Service Ltd. v. O'Malley et al., [1974] S.C.R. 592; 40 D.L.R.(3d) 371, refd to. [para. 12].

Procon Mining & Tunnelling Ltd. et al. v. McNeil et al., [2010] B.C.T.C. Uned. 487; 81 C.C.E.L.(3d) 119; 2010 BCSC 487, refd to. [para. 17].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 17].

Lavigne v. Robern (1984), 6 O.A.C. 304; 51 O.R.(2d) 60 (C.A.), dist. [para. 17].

3464920 Canada Inc. v. Strother et al., [2007] 2 S.C.R. 177; 363 N.R. 123; 241 B.C.A.C. 108; 399 W.A.C. 108; 2007 SCC 24, refd to. [para. 19].

Barnes (William R.) Co. v. MacKenzie (1974), 2 O.R.(2d) 659, refd to. [para. 30].

Olson v. Gullo Estate (1994), 71 O.A.C. 327; 17 O.R.(3d) 790 (C.A.), refd to. [para. 38].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57, refd to. [para. 42].

Authors and Works Noticed:

Ellis, Mark Vincent, Fiduciary Duties in Canada (1993) (Looseleaf), c. 16, p. 16-15 [para. 30].

Counsel:

Gregory M. Sidlofsky, for the appellant;

Myron W. Shulgan, Q.C., for the respondents.

This appeal was heard on December 1, 2011, by Doherty, Armstrong and Hoy, JJ.A., of the Ontario Court of Appeal. Hoy, J.A., delivered the following decision for the court on January 17, 2012.