Lovely v. Prestige Travel Ltd., 2013 ABQB 467

Court of Queen ’ s Bench of Alberta Citation: Lovely v. Prestige Travel Ltd., 2013 ABQB 467 Date: 20130821 Docket: 0903 06180 Registry: Edmonton Between: David Lovely Plaintiff - and - Prestige Travel Ltd. and McDonald & Bychkowski Ltd. carrying on business as CMB Insurance Brokers Defendants Corrected judgment: A corrigendum was issued on September 24, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Thomas W. Wakeling _______________________________________________________ I. Introduction

[ 1 ] David Lovely claims that Prestige Travel Ltd. and McDonald & Bychkowski Ltd. owe him his annual base salary in termination pay under an employment agreement the plaintiff and the defendants entered into on March 20, 2008 ( “ March 20, 2008 employment contract ” ). McDonald & Bychkowski Ltd. denies that it was the plaintiff ’ s employer. Prestige Travel Ltd. admits that it employed Mr. Lovely but denies the March 20, 2008 employment contract contains the terms which govern the plaintiff ’ s employment relationship.

It maintains, in its statement of defence, that “ the parties agreed to a form of employment agreement dated April 1, 2008 ” . Invoking this version, Prestige Travel Ltd. asserted that it was entitled “ on or about March 31, 2009 ” to terminate the plaintiff ’ s employment summarily without notice or termination pay because the travel business the plaintiff led was not progressing at a satisfactory rate. II. Questions Presented [ 2 ] Who was Mr. Lovely ’ s employer?

Was it Prestige Travel Ltd. or McDonald & Bychkowski Ltd. or both? [ 3 ] Is the March 20, 2008 employment contract enforceable, as the plaintiff alleges? If so, Mr. Lovely ’ s employer agreed to pay him his annual base salary if it terminated him before the end of the two-year fixed term. [ 4 ] If not, did the plaintiff and the defendants agree either orally or in writing, as the defendants allege, that the defendants could dismiss the plaintiff on March 31, 2009 without notice or termination pay if the defendants were dissatisfied with the performance of the travel business?

If so, is this provision contrary to s. 4 of the Employment Standards Code , R.S.A. 2000, c. E-9 ( “ Employment Standards Code ” ) and void? [ 5 ] If so, what were the terms which governed Mr. Lovely ’ s employment? Had the parties agreed to a fixed-term contract with no early termination provision. [ 6 ] If so, what loss did the plaintiff suffer when he was terminated roughly half way through the two-year fixed-term contract? [ 7 ] If the parties did not agree to a fixed-term contract and the employment agreement was of an indefinite duration, what is reasonable notice in the plaintiff ’ s case? III.

Brief Answers [ 8 ] McDonald & Bychkowski Ltd. and Prestige Travel Ltd. were Mr. Lovely ’ s employers. McDonald & Bychkowski Ltd. paid his salary and provided his benefits and held itself out to the Government of Canada as his employer. Its principals controlled everything Mr. Lovely did. Prestige Travel Ltd. admitted in its statement of defence that it employed Mr. Lovely. [ 9 ] The plaintiff has discharged his legal or persuasive burden to establish on a balance of probabilities that the March 20, 2008 employment contract is enforceable.

It follows that the defendants must pay the plaintiff $76,425, his annual base salary as of January 1, 2009. Mitigation principles do not apply to his claim for a stipulated sum due under the March 20, 2008 employment contract.

Even if they did, the defendants have not established that the plaintiff could have reduced his losses had he taken reasonable measures to secure new employment. [ 10 ] If the March 20, 2008 employment contract was not enforceable and the parties agreed that the defendants could terminate the plaintiff summarily without notice or termination pay, this provision is contrary to s. 4 of the Employment Standards Code and void.

[ 11 ] If the parties had agreed to a two-year fixed-term contract, the defendants have an obligation to pay the plaintiff the value of his salary and benefits over the unexpired twelve month period. [ 12 ] If the parties had not agreed to a two-year fixed-term contract and the plaintiff ’ s employment was of indefinite duration, the defendants must provide the plaintiff with reasonable notice of their intention to terminate his employment. This period is twelve months.

As no notice was given, the defendants must pay the plaintiff a sum equal to the value of the salary and benefits he would have received during the twelve-month reasonable notice period. While mitigation principles govern this claim, the defendants have not established that the plaintiff incurred avoidable losses. IV. Statement of Facts A. The Plaintiff ’ s Experience in the Travel Industry [ 13 ] As of 2008, Mr. Lovely had over twenty years experience in the travel business. [ 14 ] In 1987 Mr. Lovely and his father started a cruise-only travel agency in Seattle, Washington.

This was one of America ’ s first agencies to specialize in this facet of the industry. [ 15 ] The plaintiff also had his own software company which built software for the travel industry. During the dot com boom days of the 1990s he raised $10,000,000 of venture capital for this enterprise. [ 16 ] From 2001 to 2006 Mr. Lovely served Expedia Inc. as its director of cruise products. Expedia Inc. is the world ’ s largest on- line travel agency.

The plaintiff was responsible for developing Expedia ’ s initial cruise business strategy. [ 17 ] For parts of 2006 and 2007, the plaintiff commuted from Edmonton to Orlando, Florida to work as the director of cruise products for Westgate Resorts. B. Personal Information About the Plaintiff [ 18 ] Mr.

Lovely was born on May 23, 1961. [ 19 ] He earned an undergraduate degree in international business from the International Christian University in Tokyo and a Masters of Business Administration degree in 2006 from the University of Washington. [ 20 ] After he was granted his undergraduate degree he worked for a large regional bank in the Pacific northwest and one of Japan ’ s largest construction companies. [ 21 ] Mr. Lovely bought a house in Edmonton in 2006 so that he could continue a relationship with an Edmonton woman.

He subsequently decided to make Edmonton his home, even though he and his girlfriend broke-up. [ 22 ] The plaintiff entered Canada on January 13, 2008 under a temporary work permit issued by Citizenship and Immigration Canada that allowed him to work only for Voyages & Journeys Travelsellers Corp., an Alberta corporation he had incorporated solely for the purpose of securing his temporary work permit. This permit was valid until December 13, 2010.

[ 23 ] The plaintiff intended to start a travel agency in Edmonton. In order to meet potential customers, he joined the downtown Edmonton Rotary Club. Not long after this, a fellow Rotarian introduced him to Wally Bychkowski, one of the principal owners of McDonald & Bychkowski Ltd., an Alberta corporation carrying on business as CMB Insurance Brokers. C. Contract Negotiations Between Mr. Lovely and Messrs. McDonald & Bychkowski [ 24 ] On February 29, 2008 Messrs. Lovely and Bychkowski met at the 104 Avenue and 121 Street office of Prestige Travel. Mr. Bychkowski gave Mr.

Lovely an overview of the small enterprise, which had only three travel agents at the time. [ 25 ] The two agreed to meet again on Wednesday, March 5, 2008, this time with other colleagues of Mr. Bychkowski as well, Mark McDonald, David Sutherland and Pete Smalley. Messrs. McDonald and Bychkowski were the principal shareholders of McDonald & Bychkowski Ltd. Messrs. Sutherland and Smalley were the owners of corporations which held a minority interest in McDonald & Bychkowski Ltd. [ 26 ] The March 5, 2008 meeting took place at the downtown Edmonton offices of McDonald & Bychkowski Ltd.

The four owners of McDonald & Bychkowski Ltd. informed Mr. Lovely that Prestige Travel provided a valuable service to the customers of CMB Insurance Brokers - subsidized travel as a reward for doing business with CMB Insurance Brokers - but they were tired of the business losing money. They wanted to know if Mr. Lovely could turn the money- losing business around. He was optimistic that he could. [ 27 ] Both sides were sufficiently interested in each other to justify more contact. [ 28 ] On Monday, March 10, 2008 Mr. Lovely had lunch with Sandy Topechka, Prestige Travel ’ s office manager.

The object of the luncheon meeting was to convey more information about Prestige Travel ’ s small business to Mr. Lovely. [ 29 ] To this point there is a general consensus as to what transpired. After this, Mr. Lovely ’ s recollection of the important events is starkly different from that of Messrs. McDonald and Sutherland and Robert Riddle, a corporate lawyer who frequently advises McDonald & Bychkowski Ltd. on corporate matters. [ 30 ] The next two parts of the factual recitation are devoted to the accounts provided by the plaintiff and the defendants ’ three witnesses. 1.

The Plaintiff ’ s Version [ 31 ] On Tuesday, March 11, 2008 Mr. Lovely met a second time with Messrs. McDonald, Bychkowski and Sutherland. The plaintiff told his prospective business associates that they would have to invest $500,000 and give him two years to make the travel business a profitable venture. [ 32 ] Mr. McDonald, a very successful businessman, asked Mr. Lovely, to draft a business plan before negotiations proceeded any further. Mr. Lovely refused, informing Mr. McDonald that this was a major task. He would only do this if Mr. McDonald employed him. He also told Mr.

McDonald that the duration of his employment agreement had to be two years because it would take that much time to make the business profitable. The owners of the business wanted Mr. Lovely to take an equity position in the business. As the plaintiff did not have any money to invest, the parties agreed that Mr. Lovely would work for a smaller salary and share in the future profits of the enterprise. Mr. Lovely was an entrepreneur and willing to forego a larger salary for the prospect of a substantial bonus a couple of years down the road.

This compensation plan aligned the interests of the investors and the plaintiff. [ 33 ] Following the March 11, 2008 meeting, Mr. Lovely drafted a written memorandum entitled “ Prestige Travel Employment Contract ” which recorded his understanding of the employment terms discussed at the March 11, 2008 meeting. This document

indicated that he was to be president of Prestige Travel effective April 1, 2008 with an annual salary of $75,000, a personal travel account of $10,000, a 20% bonus “ on the pre-tax profit of the company ’ s fiscal year ” , three weeks vacation in the first two years of employment, severance pay equal to “ one year ’ s base salary [p]rovided termination is not due to illegal or overtly unethical actions by the Employee ” and a provision entitling the plaintiff to “ 20% of the cash value of the sale in cash upon closing of the sale ” . [ 34 ] A third meeting between the owners of McDonald & Bychkowski Ltd. and the plaintiff took place on Thursday, March 13, 2008, again at the offices of CMB Insurance Brokers in Manulife Place.

This time Robert Riddle, McDonald & Bychkowski Ltd. ’ s corporate lawyer, attended. This was a sign that Messrs. McDonald and Bychkowski were very interested in securing the services of the plaintiff to turn around their unprofitable side business. [ 35 ] At the March 13, 2008 meeting, Mr. Lovely presented his draft two-page “ Prestige Travel Employment Contract ” which he had prepared after the March 11, 2008 meeting. Negotiations produced some revisions to the term sheet Mr. Lovely had distributed at the outset of the meeting. [ 36 ] Messrs. Lovely and Bychkowski had a lunch meeting on Monday, March 17, 2008.

Mr. Bychkowski informed Mr. Lovely that his colleagues were excited about the project and wanted Mr. Lovely to start work right away. Mr. Lovely reminded Mr. Bychkowski that he would be on vacation in Mexico from March 22 to April 5, 2008. In spite of the fact that Mr. Lovely could only devote a few days to his new job before going to Mexico, Mr. Bychkowski insisted that he commence employment immediately. Mr. Lovely was prepared to do this, provided a written employment contract was in place before he started. They finalized the terms of his employment over lunch. Mr. Bychkowski told Mr.

Lovely to prepare the agreement and that Mr. Sutherland would sign it. [ 37 ] As the defendants did not call Mr. Bychkowski as a witness, Mr. Lovely ’ s version of his March 17, 2008 meeting with Mr. Bychkowski is unchallenged. [1] [ 38 ] On Thursday, March 20, 2008 Mr. Lovely met with Mr. Sutherland at CMB Insurance Brokers ’ office. He presented Mr. Sutherland with two different one-page typed documents on plain paper which he had prepared at his home. One was entitled “ Prestige Travel Employment Contract ” and the other was entitled “ Prestige Travel Job Description ” .

The employment contract contained the terms Messrs. Lovely and Bychkowski agreed to at the March 17, 2008 meeting. It did not identify a legal entity as the employer. [ 39 ] An extract from Mr. Lovely ’ s cross-examination captures the essence of his evidence on this point: Q . . . Did you say to Mr. Sutherland, this is a contract sign it, I ’ m not working without this document in writing. Or did you say, I ’ m leaving the country. I need this travel document signed so that I can come back into the country and work for Prestige Travel? A I said, Here ’ s the contract that we agreed to.

These are the terms that we actually agreed to and for me to start working for you I need to have a contract signed. And by the way, I ’ m leaving the country for my trip to Mexico which I told you about and I want to get a work permit upon my return so that I need the job description signed as well. . . . Q Okay, and you are sure you told Mr. Sutherland that? A Yes. Q And you are sure that you told Mr. Bychkowski that ’ s why you were going to Mr. Sutherland ’ s office? You had a contract you expected to be signed?

A Absolutely, ’ cause I was always emphatic that I would not start working for him without a contract. [ 40 ] Mr. Sutherland signed both the March 20, 2008 employment contract and the job description. He wrote “ Gen Mgr ” under his signature. Before Mr. Lovely signed the employment contract, he asked Mr. Sutherland to photocopy both documents bearing Mr. Sutherland ’ s signature on Prestige Travel letterhead. The plaintiff wanted these documents on Prestige Travel letterhead because he thought that Canadian immigration officers would want to see them on letterhead. Mr.

Lovely had no access to Prestige Travel letterhead when he prepared these two documents at his home. [ 41 ] Mr. Sutherland photocopied the two documents and Mr. Lovely signed the March 20, 2008 employment contract which was on plain paper and on letterhead. He did this at Mr. Sutherland ’ s desk on March 20, 2008. [ 42 ] Mr. Lovely understood that Mr. Sutherland, an owner of CMB Insurance Brokers, had the authority to sign on behalf of the employer. He had been present at each of the three meetings during which negotiations occurred.

As well, one of the persons he understood was a large shareholder in the corporation had directed him to meet with Mr. Sutherland so that Mr. Sutherland could sign the employment contract on behalf of the employer. [ 43 ] Mr. Lovely, an experienced businessman, appreciated that the March 20, 2008 employment contract did not contain the usual boiler plate terms found in most employment contracts.

For this reason, he was prepared to entertain additional employment contract proposals from his employer so long as they did not contain provisions inconsistent with those recorded in the March 20, 2008 employment contract. [ 44 ] Some time in mid-April the employer presented Mr. Lovely with a draft employment contract. Mr. Lovely immediately rejected this version: “ I took one look at the contract, especially

part 3 which referred to severance pay, and I said absolutely not. I do not agree to this, and this changes entirely the - - the written contract that we already have ” . [ 45 ]

Article 3 of the employment agreement presented to Mr. Lovely in mid-April 2008 read as follows: 3.1 The Employee acknowledges that the Corporation must be at liberty to assess and review the employment relationship between the Employee and the Corporation after the Employee ’ s first year of employment. The review will include assessing whether the Employee has achieved the overall objectives set out in

Schedule “ A ” [Mr. Lovely ’ s job description], as well as the assessment of the Corporation ’ s overall performance. 3.2 The Employee understands and agrees that on or about March 31, 2009, the Corporation may, in its absolute discretion, terminate the employment of the Employee without notice and without reason or cause. If the employment of the Employee is terminated but the Employee has met the overall objective set out in

Schedule “ A ” , the Employee shall be entitled to severance in the amount of $85,000, subject to normal and applicable statutory deductions. However, no severance will be provided upon the termination of the employment of the Employee if the Employee has failed to meet the overall objectives as set out in

Schedule “ A ” . It is the Corporation ’ s absolute and sole discretion to determine whether the Employee has met the overall objectives set out in

Schedule “ A ” . [ 46 ] From Mr. Lovely ’ s perspective, this provision was inconsistent with the severance term in the March 20, 2008 employment contract and it was unworkable. There was no business plan in place at that time, which meant that there was no measurable objectives in place. [ 47 ] Mr. Lovely ’ s refusal to sign did not mean that he was unwilling to revisit the issue again. In an April 28, 2008 email to Messrs.

Bychkowski, McDonald and Sutherland, he stated that “ I ’ d also like to see if we can finalize our [employment] agreement which still hasn ’ t been done ” and made it the number 1 agenda item for a proposed May 8, 2008 meeting called to “ update [his colleagues] . . . on . . . [his] progress ” . [ 48 ] The update meeting occurred in May as proposed. But the owners never presented a formal employment agreement to Mr.

Lovely for his review and the issue never came up again. 2. The Defendants ’ Version [ 49 ] Messrs. McDonald and Sutherland dispute the plaintiff ’ s version of events surrounding the March 20, 2008 employment contract. They deny that the terms of the March 20, 2008 employment contract constitute the terms which applied to Mr. Lovely ’ s employment relationship. Mr. Sutherland rejects Mr. Lovely ’ s account of what transpired in his office on March 20, 2008. While Mr.

Sutherland concedes that he, in his capacity as general manager of CMB Insurance Brokers, read and signed the March 20, 2008 employment contract, he claims that the document he signed on March 20, 2008 was on plain paper and that he believed that this term sheet was prepared solely for the purpose of assisting Mr. Lovely secure a work permit. His belief was based on a telephone conversation he had with Mr. Bychkowski and his conversation with the plaintiff in his office on March 20, 2008. He swore that Mr. Lovely did not sign the March 20, 2008 employment contract in his presence. Mr.

Sutherland also denied that he photocopied the document he signed, as well as one entitled, “ Prestige Travel Job Description March 15, 2008 ” on to Prestige Travel letterhead. To buttress his claim that he did not photocopy the two documents onto Prestige Travel letterhead, he stated that there was no Prestige Travel letterhead at CMB Insurance Brokers ’ offices in Manulife Place. [ 50 ] Mr. Sutherland claimed that he did not see the March 20, 2008 employment contract with Mr. Lovely ’ s signature on it until Mr. Lovely forwarded it to him as an attachment to a January 28, 2009 email.

He said that he was “ gobsmacked ... because [Mr. Lovely] ... was using this as a contract base and this was not designed to be used as a contract ” [2] . [ 51 ] Mr. Sutherland was not surprised by Mr. Lovely ’ s appearance at his office on March 20, 2008. Mr. Lovely had called earlier in the day asking to see Mr. Sutherland. The plaintiff, either on the phone or in Mr. Sutherland ’ s office, told Mr. Sutherland that he needed a signed document so that “ he could prove at least [to Canadian immigration officials] that he had some sort of offering for employment ” . [ 52 ] Mr. Bychkowski had also called Mr.

Sutherland to alert him that the plaintiff would be paying him a visit. The following sets out Mr. Sutherland ’ s account of his state of mind after speaking with Mr. Bychkowski: A. I knew that Mr. Bychkowski and Mr. Lovely had met prior. I think it was on the 17 th and between the 17 th and 20 th , I can ’ t remember exactly what date, but Mr. Bychkowski had called me and told me he met with Mr. Lovely and advised me that Dave is going to need a letter of some sort to come back into Canada after his vacation and that Mr. Lovely was going to provide some form of communication for me to sign.

And he also gave me authorization to go ahead and sign it for him because he was going to start working for us. [ 53 ] Messrs. McDonald, Sutherland and Riddle also had recollections of the third meeting - the only one attended by Mr. Riddle - which varied greatly from Mr. Lovely ’ s version. Each of the three witnesses called by the defendants testified they left the meeting under the impression that Mr. Riddle had the task of drafting an employment agreement which incorporated the consensus reached at the third meeting. Mr. McDonald held strongly the opinion that he and Mr.

Lovely had hammered out a deal and his parting instructions to Mr. Riddle were “ paper it up, Bob ” . The defendants ’ witnesses also clearly recalled that Mr. McDonald informed Mr. Lovely that he was not prepared to pay Mr. Lovely one year ’ s salary as severance pay if at the end of the first year the business was not profitable and he decided to wind up the business and terminate Mr. Lovely ’ s employment. [ 54 ] Mr. Riddle ’ s evidence on this point is as follows: Mr.

McDonald was very vocal about saying, Look, we ’ re making a commitment to you here, I need a commitment back, I need to know that this is going to turn around and make money, and if it ’ s not at the end of one year, I want to be able to terminate this project, and if that happens, I ’ m not paying you any severance. [ 55 ] There were some points on which Mr. Lovely and one or more of the defendants ’ witnesses agreed. First, Mr. Lovely insisted that there be a severance payment. Mr. Sutherland and Mr. Riddle accepted as accurate Mr. Lovely ’ s evidence that he wanted a one -

year severance payment. Second, Mr. Sutherland acknowledged that Mr. Lovely had opined that the owners would have to invest $500,000 in the project and give him two years to turn it around. Mr. McDonald had a very different recollection. He testified that he agreed to invest $350,000 and expected to see results at the one-year mark. Third, everyone agreed that one of the objectives of the negotiations was to produce a written employment agreement for Mr. Lovely signed by the employer and the employee. Mr. McDonald regarded Mr.

Lovely as a “ senior manager ” or the holder of a “ senior position ” and he wanted a written contract. [ 56 ] Unlike Messrs. Lovely and McDonald, Mr. Sutherland concluded that negotiations of Mr. Lovely ’ s employment agreement never did end. While Mr. Sutherland participated in work on the draft employment agreement which Mr. Riddle prepared ( “ Riddle draft ” ), he was not present at any meeting at which Mr. Riddle ’ s work product was presented to Mr. Lovely. Nor was Mr. McDonald aware of any meeting at which the Riddle draft was given to Mr. Lovely. D.

The Plaintiff ’ s Work as President of Prestige Travel [ 57 ] Relying on the validity of the March 20, 2008 employment contract, Mr. Lovely started work on March 20, 2008. [3] [ 58 ] He left for Mexico as planned on March 22, 2008 and returned to Edmonton on April 5, 2008. [ 59 ] Mr. Lovely did not need the March 20, 2008 employment contract and job description to reenter Canada. But he did need them to secure a new work permit that would allow him to work for his new employer. [ 60 ] The Canadian immigration authorities declined to give the plaintiff a new work permit when he returned from Mexico.

He secured the necessary work permit on May 25, 2008. He submitted to Canadian immigration authorities a revised job description Mr. Sutherland signed on May 22, 2008. [ 61 ] Mr. Lovely ’ s first assignment was the preparation of a business plan. He presented it to Messrs. McDonald, Bychkowski, Sutherland and Smalley on July 15, 2008. The title page describes the document as the “ Prestige Travel Master Business Plan ” and reports that it was prepared by “ David Lovely, president ” .

The document accurately describes the plaintiff as a “ seasoned travel industry executive with experience in the formation of retail agencies from the ground up ” . The business plan contemplated the sale of “ premium to luxury products ” and marketing through the internet, utilizing “ best-of-breed technology solutions that are available for travel agencies today ” . It estimated that staff would grow from four to twenty-six by December 2010. Estimated sales revenue were over $21 million by 2010 with a $200,000 profit. Accumulated losses from January to April 2009 were forecast at roughly $350,000.

It projected that the business would not make a profit until the third quarter of 2009. [ 62 ] In a July 15, 2008 email to those who attended the meeting, the plaintiff stated that he was “ excited about the potential that we have to make this into a really great company ” . His email signature block indicates that he is president of “ Prestige Travel/Prestige Golf Tours ” . Mr. Bychkowski replied promptly: “ I think your plan is brilliant and if we can get good staff we should be able to build a great company ” . Mr. McDonald agreed with Mr. Bychkowski ’ s assessment of the business plan. [ 63 ] Mr.

Lovely understood that he was the president of Prestige Travel and his emails to Messrs. Bychkowski, McDonald, Sutherland and others in the organization described him as such. Mr. McDonald, in his evidence, repeatedly stated that Mr. Lovely held a “ senior position ” in the organization or was a member of “ senior management ” . [ 64 ] Regrettably, for all concerned, the implementation stages of the business plan did not unfold as planned. Edmonton ’ s overheated economy made it extremely difficult to hire good employees. In addition, Ms.

Topechka, the travel business ’ office manager, opposed the new plan and she secured the support of Mr. Bychkowski in blocking the plaintiff ’ s key initiatives. Given that Mr. McDonald was not willing to overrule his business associate, there was no chance Mr. Lovely could successfully achieve the business plan ’ s milestones. [ 65 ] Mr. Lovely, under the March 20, 2008 employment contract, was entitled to an annual raise no less than the “ annual inflation

rate for Alberta ” . He asked Mr. Sutherland in a January 28, 2009 email to Mr. Sutherland to adjust his annual salary effective January 1, 2009 by the rate of inflation. He attached his March 20, 2008 employment agreement to this email. [ 66 ] The defendants did not adjust the plaintiff ’ s salary. E. The Plaintiff ’ s Employment as President of Prestige Travel Ended on or About March 31, 2009 [ 67 ] Messrs. McDonald and Bychkowski met with Mr. Lovely near the end of March 2009 and terminated his employment with Prestige Travel effective immediately. They delivered to Mr.

Lovely a letter on Prestige Travel letterhead dated March 23, 2009 ( “ March 23, 2009 termination letter ” ) and signed by both of them which read as follows: The one - year anniversary of the commencement of your employment with Prestige Travel is at the end of this month.

Over the past several weeks we met with you on numerous occasions and you have provided us with reporting on a number of initiatives that were undertaken in the past year. [4] Pursuant to our agreement we jointly agreed that: The Corporation must be at liberty to assess and review the employment relationship between the Employee and the Corporation after the Employee ’ s first year of employment. The review will include assessing whether the Employee has achieved the overall objectives as well as assessment of the corporation ’ s overall performance.

The Employee understands and agrees that on or about March 31, 2009, the Corporation may, in it ’ s [sic] absolute discretion, terminate the employment of the Employee without notice, and without reason or cause. No severance will be provided upon the termination of the employment of the Employee if the Employee has failed to meet the overall objectives and it is the Corporation ’ s absolute and sole discretion to determine whether the Employee has met the overall objectives.

We have reviewed and assessed your performance and the Corporation ’ s overall performance and have concluded that neither has met the standard anticipated and expected. Accordingly, your employment with the corporation is terminated effective immediately. You will be paid to the end of March 31, 2009. [ 68 ] Mr. Lovely asked Messrs. Bychkowski and McDonald to pay him the severance stipulated in the March 20, 2008 employment contract. They refused, stating that they had no obligation to do so. [ 69 ] Some time after Messrs. Bychkowski and McDonald informed Mr.

Lovely that Prestige Travel terminated his employment, representatives of the employer delivered to him a Service Canada record of employment form. The human resources administrator of CMB Insurance Brokers prepared and signed this form. McDonald & Bychkowski Ltd. indicated that it was the employer and named “ Dave Sutherland ” as the person to contact for further information. F. The Corporate Structure Within Which Prestige Travel Operated [ 70 ] As of April 1, 2008 and April 1, 2009 Messrs.

Bychkowski and McDonald were the sole directors of McDonald & Bychkowski Ltd. and its largest shareholders, each owning 39% of the voting shares. Corporations controlled by each of Messrs. Sutherland and Smalley owned 11% of the voting shares in McDonald & Bychkowski Ltd. [ 71 ] McDonald & Bychkowski Ltd. owned all the voting shares of Prestige Travel Ltd. Messrs. Bychkowski and McDonald were the sole directors of Prestige Travel Ltd. [ 72 ] Prestige Travel Ltd. had its own bank account. But it did not operate without considerable assistance from McDonald & Bychkowski Ltd.

The parent corporation provided financing, human resources management, information technology and other services.

[73] McDonald & Bychkowski Ltd. notified the Canada Revenue Agency that it was Mr. Lovely’s employer. The T4 statementsof remuneration McDonald & Bychkowski Ltd. issued to the plaintiff for each of 2008 and 2009, the years Mr. Lovely served as thepresident of Prestige Travel, identified itself as the employer. [74] As well, McDonald & Bychkowski Ltd. retained The Great-West Life Assurance Company to provide Mr. Lovely withemployment benefits while he worked for Prestige Travel.

It no doubt did the same for others who worked for Prestige Travel. [75] CMB Insurance Brokers hosted functions attended by persons who worked for CMB Insurance Brokers and Prestige Travel. G. The Plaintiff’s Post March 31, 2009 Efforts To Generate Income [76] After Messrs. McDonald and Bychkowski informed Mr. Lovely near the end of March 2009 that his employment terminatedeffective immediately, the plaintiff utilized Voyages and Journeys Travelsellers Corp., the Alberta company he had incorporated beforemoving to Alberta, to carry on a travel business.

This undertaking never made enough money to pay the plaintiff anything. He could notwork for any other company until he became a permanent resident of Canada which happened in December 2009. Until then he couldonly work for his own company. [77] Mr. Lovely accepted a job with Alberta Motor Association in June 2010. This job paid him $62,108.98 between June 1 andDecember 31, 2010. June 1 is roughly fourteen months after Messrs. McDonald and Bychkowski informed him near the end of March2009 that he no longer had a job. V. Analysis A. Prestige Travel Ltd. and McDonald & Bychkowski Ltd.

Were the Plaintiff’s Employers 1. General Principles [78] There are many reasons why A Co. may resist the allegation that it is B’s employer. [79] C may have sued A Co. alleging that A Co. is vicariously liable for B’s negligent conduct. Professor Klar, in his leading text Tort Law 672-73 (5th ed. 2012) explains the tort context for the problem: “[G]enerally, an employer is vicariously liable to third partiesfor torts committed by employees in the course of their employment”. Obviously, A Co. will not be held responsible for the negligentacts of B if the court concludes that A Co. is not B’s employer.

See McKee v. Dumas, (ON CA), 70 D.L.R. 3d 70 (Ont.C.A. 1976) (a mill operator was held responsible for the negligent conduct of a worker it regularly employed while the worker drove alumber truck under the direction of a lumber hauling contractor) & Mersey Docks and Harbour Board v. Coggin & Griffith (Liverpool)Ltd., [1947] 1 A.C. 1 (H.L. 1946) (the dock authority was held responsible for the negligent conduct of a worker it regularly employedwhile he operated a crane under the direction of a stevedoring company). [80] The issue may also arise in the labour law context.

Union B may ask a labour board to certify it as the bargaining agent of ACo.’s employees. Mr. Adams explains why labour lawyers and adjudicators have to address the issue: The purpose of labour relations legislation is to regulate relations between employers and employees. It is therefore incumbent on a tradeunion to show that the employees which it seeks to represent are in fact employees of the respondent company. … [T]here are manysituations where the identity of the true employer may be in question particularly where one party has subcontracted some of its work toanother party.

2 G. Adams, Canadian Labour Law ​ 6.440 (looseleaf ed. release no. 46 June 2013). [81] Recognizing that an enterprise may utilize a business structure featuring a number of distinct legal entities to achievelegitimate business goals, legislators have given labour boards the jurisdiction to identify the legal entity or entities through whichcontrol or direction of the enterprise is exercised. This discretion is necessary to ensure that the purpose of the legislative provision is notfrustrated by the form of the business structure. Section 47(1) of the Labour Relations Code, R.S.A. 2000, c.

L - 1 serves this precisefunction: On the application of … a trade union affected, when, in the opinion of the Board, associated or related activities or businesses,undertakings or other activities are carried on under common control or direction by or through more than one corporation, partnership,person or association of persons, the Board may declare the corporations, partnerships, persons or association of persons to be oneemployer for the purposes of the Act. [82] A Co. may be the defendant in a wrongful dismissal action.

An essential element of a wrongful dismissal action is thedetermination that A Co. is the plaintiff’s employer. If the plaintiff cannot establish that A Co. is his employer, A Co. will not have topay damages to the plaintiff. Dennis v.

West Coast Truss Ltd., 2006 BCSC 529 (the plaintiff sued a party that was not his employer). [83] Canadian courts hearing wrongful dismissal suits have frequently had to review corporate structures featuring related legalentities in order to identify which of the related legal entities exercised sufficient control and direction over the part of the enterprise theplaintiff served to characterize them as employers. E.g., Bagby v. Gustavson International Drilling Co., 1980 ABCA 227 , 24A.R. 181, 199 (Alta.

C.A. 1980) (the court identified the parent corporation and the subsidiary for whom the plaintiff regularly workedas his employer because the parent controlled the subsidiary and determined the key terms of his employment); Ling v. Unity BuildersInc., 2008 ABQB 733 , [2009] 3 W.W.R. 712, 718 (Alta. Q.B. 2008) (the parent and operating companies were the plaintiff’s“real employer”); Sinclair v. Dover Engineering Services Ltd., (BC CA), 49 D.L.R. (4th) 297 (B.C.C.A. 1988)(plaintiff was an employee of both the company for which he provided professional services and the company which paid him);Bartholomay v.

Sportica Internet Technologies Inc., 32 C.C.E.L. 229, 233 (B.C. Sup. Ct. 2004) (the existence of an employment contractwith one of three related companies did not preclude the court from determining that all three defendants were the plaintiff’s employer because “they carry on one enterprise”); Downtown Eatery

(1993) Ltd. v. Ontario, (ON CA), 200 D.L.R. 4th 289, 301(Ont. C.A. 2001) (“The definition of ‘employer’ in this simple and common scenario should be one that recognizes the complexity ofmodern corporate structures, but does not permit that complexity to defeat the legitimate entitlements of wrongfully dismissedemployees”); Orr v. Magna Entertainment Corp., (ON SC), 63 C.C.E.L. 3d 132, 142 (Ont. Super. Ct. J. 2008) (“Thecommon employer doctrine will generally treat as a single employer two or more related organizations which operate under commondirection or control”); Stoody v.

Kennedy, (ON SC), 34 C.C.E.L. 3d 282, 288 (Ont. Super Ct. J 2003) (parent andsubsidiary company were common employers of plaintiff because the controlling minds of the two entities were the same); Ashton v.Perle Systems Ltd., (ON SC), 2 C.C.E.L. 2d 243, 259 (Ont. Ct. J. Gen. Div. 1994) (plaintiff was an employee of theenterprise as a group); Gray v. Standard Trustco Ltd., (ON SC), 8 C.C.E.L. 2d 46, 47 (Ont. Ct. J. Gen. Div. 1994) (“anindividual may be held to be an employee of more than one corporation in a related group of corporations”); Cathcart & LonginesWittnauer Watch Co.,1 C.C.E.L. 287, 304 (Ont.

H.C. 1980) (judgment awarded against the defendant which paid the plaintiff and theother related corporate defendant which selected and dismissed him) & Sullivan v. Mack Maritime Ltd., (NB KB), 103A.P.R. 298 (N.B.Q.B. 1982) (plaintiff awarded judgment against the holding company and three subsidiaries who were declared theemployer). [84] Bagby v. Gustavson International Drilling Co., 1980 ABCA 227 , 24 A.R. 181 (C.A. 1980) illustrates the properapplication of the governing principle. Mr. Bagby was the president and general manager of Gustavson International. GustavsonInternational paid Mr.

Bagby and provided his pension. A corporation which holds itself out to a government agency as the plaintiff’semployer and pays wages and provides benefits cannot maintain in a wrongful dismissal action that it is not an employer of the plaintiff. For this reason, the Court of Appeal characterized Gustavson International as the plaintiffs “nominal” employer. 24 A.R. 181, 200(1980). But the parent corporation was described as the “real” employer because “Raymond International Inc. was in complete controlof … [Gustavson International] and governed every aspect of Mr. Bagby’s employment”. 24 A.R. 181, 200 (1980).

The parentcorporation exercised a sufficient degree of control over Gustavson International to justify declaring it an employer of Mr. Bagby. 2. Application of General Principles [85] McDonald & Bychkowski Ltd. was an employer of Mr. Lovely. The facts and the law compel this conclusion.

[86] The four shareholders of McDonald & Bychkowski Ltd., either collectively or individually, selected the plaintiff to lead theproject to make the travel business profitable. The same actors discussed contract terms with Mr. Lovely and the nature of the businessplan. And it was the same actors who decided to dismiss Mr. Lovely. In addition, McDonald & Bychkowski Ltd. paid the plaintiff’ssalary, provided his benefits, issued his T4 slips which identified itself as his employer and claimed that it was his employer when itdismissed him near the end of March 2009. [87] All aspects of Mr.

Lovely’s work were subject to the direction and control of McDonald & Bychkowski Ltd. Nothinghappened without the permission of either or both of Messers. McDonald and Bychkowski. The plaintiff’s unhappy experience withPrestige Travel’s office manager is but one example of this workplace reality. [88] Prestige Travel Ltd. admits in its statement of defence filed May 12, 2009 that it was the plaintiff’s employer. [89] The court finds that McDonald & Bychkowski Ltd. and Prestige Travel Ltd. were the plaintiff’s employers.[5] B.

Common Law Principles Governing Termination of Employment Apply in the Absence of Clear Terms to the Contrary [90] At common law an employee who has not engaged in misconduct of the kind described in The Queen v. Arthurs, ex p. PortArthur Ship Building Co., (ON CA), 62 D.L.R. (2d) 342, 348 (Ont.

C.A. 1967) is entitled to receive from his or heremployer either reasonable notice of the employer’s intention to terminate the employment relationship or payment of the value of thewages and benefits the employee would have earned during the period of reasonable notice, provided that there is no term in theemployment agreement to the contrary. Justice McIntyre’s opinion in Vorvis v. Insurance Corp. of British Columbia, (SCC), [1989] 1 S.C.R. 1085, 1096 supports this statement of the law: A contract of employment does not in law have an indefinite existence.

It may be terminated by either employer or employee and nowrong in law is done by the termination itself. An employee who is dismissed is entitled to the notice period agreed upon in theemployment contract or, where no notice period is specified in the contract, to reasonable notice. He is entitled in the alternative in theabsence of due notice to payment of remuneration for the notice period. See also 2 G.

England, Employment Law Canada ​ 14.3 (4th ed. looseleaf release 43 April 2013) (“where no term of employment isexpressly agreed to or imported by special custom, the law now presumes a contract of indefinite employment ... may be terminated uponsuch notice as is required by statute or common law or upon payment in lieu of notice”). [91] Justice Iacobucci, writing for the majority in Machtinger v.

HOJ Industries Ltd., (SCC), [1992] 1 S.C.R.986, 988, elaborated on the general thrust of Justice McIntyre’s opinion this way: “I would characterize the common law principles oftermination only on reasonable notice as a presumption, rebuttable if the contract of employment clearly specified some other period ofnotice, whether expressly or impliedly”. C.

The Termination Provisions Relied on by the Parties if Enforceable Preclude the Application of the Common LawTermination Provision [92] Do the terms on which the plaintiff and the defendants rely qualify as a clear specification of the employer’s terminationobligation? [93] They do. The terms on which both the defendants and the plaintiff rely if enforceable qualify as specific exposition oftermination terms which preclude the application of the common law termination provision. [94] The defendants allege that they had an unqualified right to dismiss Mr. Lovely summarily without notice or termination pay

if, on approximately March 31, 2009, they were dissatisfied with the performance of the travel business he led. The term they invoke unquestionably gave them this right. [ 95 ] And the termination provision in the March 20, 2008 employment contract is equally clear. The employer, in the case of early severance, had to pay the employee one year ’ s base salary unless the termination was attributable to the employee ’ s “ illegal or overtly unethical actions ” . [ 96 ] I will now consider whether the provisions on which the parties rely are enforceable and their effect if they are. D.

The Termination Provision the Defendants Rely on Is Unenforceable 1. The Plaintiff Never Agreed to a Term Which Allowed His Employers To Terminate the Employment Agreement Without Notice or Termination Pay [ 97 ] The plaintiff vehemently denies that he ever agreed, either orally at the March 15, 2008 meeting or at any other time or in writing to the termination term reproduced in the March 23, 2009 termination letter Messrs. McDonald and Bychkowski delivered to him near the end of March. I accept his evidence. [ 98 ] The defendants did not produce a signed employment agreement which contained the term.

In fact, Mr. McDonald was embarrassed to discover that the termination provision reproduced in the March 23, 2009 termination letter was not part of an employment agreement signed by Mr. Lovely or representatives of his companies: Q . ... So other than ... [the March 20, 2008 employment contract], you ’ re not aware of any other documents with Mr. Lovely ’ s signature or that purports to discuss his employment terms? A Exactly, yeah, that ’ s the only one I am aware of. This was embarrassing. Mr.

McDonald acknowledged that the Riddle draft “ was never signed by anybody ” . [ 99 ] Nor did the defendants vigorously argue that Mr. Lovely orally agreed to a term which allowed the employer to terminate the agreement without notice and termination pay. While Mr. McDonald swore that he believed Mr. Lovely had agreed to this term at the March 15, 2008 meeting, Mr. Sutherland did not share this view. I find that Mr. Lovely did not orally agree to the termination provision referred to in the March 23, 2009 termination letter. But even if he did, this provision is unlawful and unenforceable. 2.

Alberta ’ s Employment Standards Code Protects Employees from Unfair Termination Provisions [ 100 ]

Section 4 of the Employment Standards Code , R.S.A. 2000, c.

E-9 states that “ [a]n agreement that this Act or a provision of it does not apply ... is against public policy and void ” . [ 101 ] Sections 56 and 57 of the Employment Standards Code stipulate that an employer must provide an employee who has been employed more than three months but less than two years with termination notice of at least one week or termination pay equal to the regular wages an employee would receive in a week. [ 102 ] I reject the defendants ’ argument that they did not have to provide termination notice because the plaintiff was “ employed for a definite term ... not exceeding 12 months on completion of which the employment terminates ” , an exemption provision in s. 56(2) (

c) of

the Employment Standards Code. The employment term the defendants rely on constitutes a definite term of two years. That a reviewcould be conducted earlier which might result in the early termination of the agreement does not alter the fundamental fact that this is a fixed-term contract of two-years duration.[6] [103] The no-notice termination term which Mr. McDonald believed Mr. Lovely had assented to is obviously less than theminimum standard recorded in ss. 56(

a) and 57(1) of the Employment Standards Code. It, in effect, constitutes “[a]n agreement that ... aprovision of ... [the Act] does not apply”. [104]

Section 4 of the Employment Standards Code, as a consequence, comes into force. The termination provision in the March 23,2009 termination letter is void. [105] But what is the effect of a declaration that the termination provision is void? [106] The Supreme Court of Canada in Machtinger v. HOJ Industries Ltd., (SCC), [1992] 1 S.C.R. 986, 1001declared that a term of an employment agreement which contravened a comparable statutory provision in the Ontario Law is “null andvoid for all purposes”. Mr.

Machtinger and another employee of a car dealership signed employment agreements which allowed theemployer to terminate the employment relationship by giving less notice than the minium termination pay demanded by Ontariolegislation. The Ontario Court of Appeal, having refused to enforce the unlawful provision, concluded that the employer was obliged toprovide the employees with the minimum termination pay under Ontario legislation. The Ontario Court of Appeal rejected the employees’ argument that they were entitled to common law reasonable notice. (ON CA), 55 D.L.R. (4th) 401, 408(1988).

The Supreme Court of Canada, on the other hand, accepted the employees’ argument: What is at issue in this appeal is the effect, if any, to be given to a term of an employment contract which does not comply with theminimum notice requirement of the Act. Is such a term capable of displacing the common law presumption of reasonable notice? Theeffect of ss. 3 and 4 of the Act is to make any attempt to contract out of the minimum employment standards of the Act by providing forlesser benefits than those minimum standards, “ null and void”.

The two contracts at issue on this appeal do attempt to contract out ofthe minimum notice period set out in s. 40(1)(

c) of the Act by specifying notice periods shorter than the statutory minimum. Accordingly, the two contracts are not in compliance with the mandatory language of s. 3 of the Act, and those provisions of the twocontracts specifying the notice periods are “null and void”. In argument, the respondent accepted that the attempt to contract out of the provisions of the Act was “null and void”, but argued that thedocuments should be considered as evidence “that contracts were entered into which expressed clearly the intention of the parties withrespect to notice of termination.

I cannot accept this argument. … In this case we are not faced with an entirely void contract, but a contract of which one clause is null and void by operation of statute. ...[I]f a term is null and void, then it is null and void for all purposes, and cannot be used as evidence of the parties’ intention. (SCC), [1992] 1 S.C.R. 986, 1000-01. [107] This finding served as the foundation for a determination by the Supreme Court that the employer had not rebutted thepresumption that an employment agreement for an indefinite duration contains an implied term that the employer may terminate anemployment agreement only by giving the employee reasonable notice of the date the employer intends the employment relationship toend. (SCC), [1992] 1 S.C.R. 986, 1000-01. [108] Had I determined that the Riddle draft contained terms to which the parties had agreed, a determination that the mid-termtermination provision is void, would have left the defendants with an obligation to give the plaintiff reasonable notice.

I will discuss thenature of this obligation later.

E. The Plaintiff ’ s Position on Termination Is Meritorious [ 109 ] The plaintiff maintains that the defendants had promised to pay him a sum equal to his annual base salary if they terminated his employment before the end date of his two-year fixed term employment agreement for a reason other than that he committed an “ illegal or overtly unethical action ” . [7] His annual base salary as of January 1, 2009, taking into account the applicable inflation rate adjustment of 1.9 %, was $76,425. [ 110 ] I agree. [ 111 ] There are three routes to this conclusion. 1.

The March 20, 2008 Employment Contract Is Enforceable [ 112 ] The plaintiff argues that the defendants promised to pay him his annual base salary if the defendants terminated his employment before March 31, 2010. He relies on the March 20, 2008 employment contract. [ 113 ] I accept the plaintiff ’ s evidence that he and Mr. Bychkowski finalized the key terms of his employment at their March 17, 2008 lunch meeting; that the March 20, 2008 employment contract incorporates those agreed-upon terms; that Mr. Bychkowski asked him to prepare the agreement; and that Mr. Bychkowski told him that he would direct Mr.

Sutherland to sign it. [8] I also find that the plaintiff told each of Messrs. Bychkowski and Sutherland that he intended to present the March 20, 2008 employment contract to Canadian immigration officials. As Mr. Bychkowski did not testify, I am left with only Mr. Lovely ’ s account of what happened at lunch. [ 114 ] Messrs. Lovely and Sutherland provided totally different versions of their March 20, 2008 meeting. I accept Mr. Lovely ’ s account. It is consistent with other incontrovertible facts which I will set out below. [9] As a result, I find that Mr.

Sutherland knew he was signing a document entitled “ Prestige Travel Employment Contract ” on March 20, 2008 when Mr. Lovely was in his office. I also am completely satisfied that Mr. Sutherland read it and understood its terms. If Mr. Sutherland had any doubts about the wisdom of signing this document he could easily have contacted Mr. Bychkowski to seek instructions. He did not. And if Mr. Sutherland believed that Mr. Lovely only needed an offer of employment to meet immigration requirements he could have asked Mr.

Lovely to change the title of the document. [ 115 ] The plaintiff ’ s conduct in the period following March 20, 2008 was consistent with his belief that the March 20, 2008 employment contract contained his key employment terms. His refusal to sign the Riddle draft falls in this category. He declined to sign it because the termination provision was inconsistent with the termination provision in the March 20, 2008 employment contract. In January 2009 Mr. Lovely asked Mr.

Sutherland to change his annual base salary to “ reflect the annual inflation rate for Alberta ” , an adjustment to which he was entitled by the March 20, 2008 employment contract. On January 28, 2009 Mr. Lovely forwarded the March 20, 2008 employment contract to Mr. Sutherland. The plaintiff would not have taken these steps if he did not believe the March 20, 2008 employment contract was binding on both parties.

As well, after he was terminated, the plaintiff asked the defendants to discharge their obligations to him under the March 20, 2008 employment contract and pay him his annual base salary as termination pay. [ 116 ] I reject Mr. Sutherland ’ s evidence of the March 20, 2008 meeting with Mr. Lovely. His decision to sign the March 20, 2008 employment contract under the circumstances he related to the Court do not meet my expectations of what a sophisticated businessman like Mr. Sutherland would do in that situation. If Mr.

Lovely had told him that he needs something “ to give [to Canadian immigration officials] ... that at least he had some sort of offering for employment ” , I am convinced that Mr. Sutherland would have refused to sign a document entitled “ Prestige Travel Employment Contract ” containing terms of employment. [ 117 ] Had Mr. Sutherland and his colleagues contested the validity of the March 20, 2008 employment contract, I would have expected them to raise the issue with Mr. Lovely in a timely and appropriate manner after Mr. Lovely emailed the March 20, 2008 employment contract to Mr.

Sutherland on January 28, 2009. None of Messrs. McDonald, Bychkowski or Sutherland challenged Mr. Lovely ’ s assertion that the March 20, 2008 employment contract contained enforceable terms until Messrs. McDonald and Bychkowski delivered the March 23, 2009 termination letter to him invoking a termination provision in the Riddle draft nobody had signed. Indeed,

there is no evidence that Mr. Sutherland ever informed Messrs McDonald and Bychkowski that he had received the March 20, 2008employment contract from the plaintiff on January 28, 2009. If Mr. Sutherland was surprised to see the March 20, 2008 employmentcontract on January 28, 2009 I am convinced that he would have alerted his colleagues of its existence. Mr. McDonald swore that he hadnever seen the March 20, 2008 employment contract until just before trial. I accept his evidence.

Had he done so I cannot believe thatMessrs McDonald and Bychkowski would have signed the March 23, 2009 termination letter without making some inquiries todetermine whether the Riddle draft had ever been signed. Mr. Sutherland waited until August 9, 2009 to forward to Mr. Riddle Mr.Lovely’s January 28, 2009 email. I am satisfied that Mr. Sutherland did not inform Mr. Bychkowski of its existence. If Mr. McDonalddid not know about the March 20, 2008 employment contract, it is unlikely Mr. Bychkowski did. [118] The defendants are essentially arguing that the plaintiff induced Mr.

Sutherland to sign the March 20, 2008 employment contract by fraudulently misrepresenting its nature.[10] Had Mr. Lovely told Mr. Sutherland that the March 20, 2008 employment contractwas a job description and knew that Mr. Sutherland signed it without reading it relying on Mr. Lovely’s representation, the defendantswould have had a good argument. The same would be true if Mr. Lovely had told Mr. Sutherland that he did not intend to rely on theMarch 20, 2008 employment contract as an enforceable agreement and that he would only use it to secure his work permit.

Professor Waddams explains why in The Law of Contracts, 218 & 220 (6th ed. 2010): If A is induced by B to sign a document under a misapprehension as to its real nature and effect, A may seek relief on the ground of themistake from the transaction evidenced by the document. If B has reason to know of A’s mistake, relief should be readily available. ...Certainly if B fraudulently misrepresents the nature of the document or induces signature by some other fraudulent trick, there can be nodoubt that relief will be available to A against B. ... ... ...

If A seeks relief against B, the very party who deceived A, it cannot be in B’s mouth to say that A was negligent in falling victim tothe fraud. See Nocton v. Lord Ashburton, [1914] A.C. 932, 962 (H.L.) (“No one is entitled to make a statement which on the face of it conveys afalse impression and then excuse himself on the ground that the person to whom he had made it to had available the means ofcorrection”) & Free Ukranian Society (Toronto) Credit Union Ltd. v. Hnatikiw, (ON CA), 44 D.L.R. (2d) 633, 637(Ont.

C.A. 1964) (“the misrepresenting party cannot rely on the terms of the written documents in the face of his misrepresentation[regardless of whether the signor was negligent in signing]”). [119] This is not what happened. Mr. Lovely delivered to Mr. Sutherland a one-page document written in plain English entitled“Prestige Travel Employment Contract” and asked him to sign it. The plaintiff told Mr. Sutherland that he needed a signed employmentcontract so that he could start work and secure the necessary immigration approvals. Mr. Sutherland read and signed the March 20, 2008employment contract. Both of Mr.

Lovely’s representations were true. [120] Having found that the plaintiff made no misrepresentations to Mr. Sutherland, the defendants cannot rely on the fraudulent orinnocent misrepresentation doctrines. Mr. Sutherland knew exactly what he was signing. The document was entitled “Prestige TravelEmployment Contract” and its use of plain English and one-page length made it easy to read and understand. He knew that by signingthe March 20, 2008 employment contract two positive things would happen. First, it allowed Mr. Lovely to start work for PrestigeTravel. Mr.

Lovely had made it clear that he would not commence work until a signed employment contract was in place. Second, theMarch 20, 2008 employment contract would help the plaintiff secure the necessary approval from Canadian immigration officials toallow him to work for Prestige Travel. [121] My determination that the plaintiff did not mislead Mr. Sutherland and the defendants and that Mr. Sutherland could easilyhave avoided any misunderstanding by calling Mr.

Bychkowski and asking him whether he should sign a document entitled “PrestigeTravel Employment Contract” means that the defendants will be held to their bargain. Marvco Color Research Ltd. v. Harris, (SCC), [1982] 2 S.C.R. 774, 787 (“carelessness will disentitle a party to the document of the right to disown the document”). [122] The non est factum doctrine will seldom assist a sophisticated businessman like Mr. Sutherland. See P. Mitchell, “Illiteracy,Sophistication and Contract Law”, 31 Queen’s L.J. 311 (2005). The extraordinary circumstances which must exist to justify invoking this

doctrine do not exist here: It is a difficult matter to invoke the plea successfully. The onus of proof is heavily upon a party raising it. What must be proved ... is thatthe party relying on non est factum was not careless and that the document signed was different from what the party in question thoughthe or she was signing. ...

Where the plea has been successful, it has been because the party signing the document was ignorant of theEnglish language and did not know what was going on; or was of limited education and reading ability and was mistaken as to what thedocument was; or relied on what she was told by her husband to whom she was subservient in business matters, so that she did not knowwhat she was signing. G. Fridman, The Law of Contract in Canada 281-82 (6th ed. 2011). See also Free Ukranian Society (Toronto) Ltd. v. Hnatikiw, (ON CA), 44 D.L.R. (2d) 633, 636 (Ont.

C.A. 1964) (a person who did not understand the language in which the contractwas written and misunderstood the nature of the document was relieved of the obligation to discharge promises contained in it) &Westerland v.

Ayer, (SCC), [1971] S.C.R. 131, 134 (promisor relieved of obligations in an agreement he signed whendrunk). [123] An employee bound by a fixed-term contract with a provision which allows the employer to terminate the agreement beforethe end date may sue for the enforcement of the early termination term and is entitled to judgment for the full contractual amountwithout having to account for any employment income he received from other sources or any failure on his part to pursue employmentopportunities. Mills v. Alberta, 1986 ABCA 162 , [1986] 5 W.W.R. 567, 571 (Alta.

C.A. 1986) (the court ordered the employerto pay the plaintiff a sum equal to six months salary in accordance with the early termination provision in a two-year fixed-term contractwithout regard to mitigation principles); Brown v. Pronghorn Controls Ltd., 2011 ABCA 328 , 515 A.R. 128, 138-41 (C.A.2011) (an employer obliged to pay a stipulated amount if it decides to terminate an employment “contract could not claim mitigation or failure to mitigate against that contracted for sum of money”); Philp v.

Expo 86 Corp., (BC CA), 45 D.L.R. 4th 449,461 (B.C.C.A. 1987) (an employee who was bound by a fixed-term contract which the employer could end in its second year by givingthe employee either four months notice or four months salary was “absolutely entitled to the contractual entitlement, without any off-setfor the contingency of obtaining work in the future”) & Abrahams v. Performing Rights Society, 1995 E.W.C.A. Civ.

J 10519-1 (anemployee subject to a fixed-term contract with an early termination provision obliging the employer to pay a stipulated sum could sue forthe enforcement of the contractual obligation and the employer could not invoke mitigation principles). [124] Principle speaks against introducing mitigation into a fact pattern featuring an express contractual term which allows anemployer to terminate a fixed-term employment contract by paying a specified amount to the employee. Unless the contract provides thata lesser sum may be paid under prescribed conditions the promisor must pay the promised amount.

Employers and employees bargainspecific terms to secure certainty and eliminate the legal costs associated with hammering out the exact contours of flexible standards. I agree with the Ontario Court of Appeal’s opinion in Bowes v.

Goss Power Products Ltd., 2012 ONCA 425 , 351 D.L.R. 4th 219,237 (2012) that an employer should not be allowed to take inconsistent positions in an employment contract and before the courts: It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer tolater seek to obtain a lesser amount at the expense of the employee by raising an issue of mitigation that was not mentioned in theemployment agreement. [125] The explanation which most satisfactorily accounts for this disposition is that the plaintiff sues for a contractual sum and notfor damages at large.

The employer did not breach the employment agreement by deciding to exercise the contractual right to terminatethe employment contract before the end date. Mills v. Alberta, 1986 ABCA 162 , [1986] 5 W.W.R. 567, 571 (Alta. C.A.);Brown v. Pronghorn Controls Ltd., 2011 ABCA 328 , 515 A.R. 128, 140 (C.A. 2011); Bowes v. Goss Power Products Ltd., 2012 ONCA 425 , 351 D.L.R. 4th 219, 237 (Ont. C.A. 2012); Abrahams v. Performing Rights Society, 1995 EWCA Cir.J10519-1 & S.

Waddams, The Law of Damages § 8.20 (looseleaf release no. 21, November 2012). [126] While I am convinced that mitigation principles do not apply, I will discuss them now as there is one scenario in which theydo arise. This discussion also applies to issues canvassed below. [127] The legal burden rests on the employer to prove that the plaintiff’s efforts to secure remunerative employment were deficient,measured objectively, and that the expenditure of reasonable efforts would have been rewarded by securing remunerative employment.Michaels v.

Red Deer College, (SCC), [1976] 2 S.C.R. 324, 331 (1975) (“If it is the defendant’s position that theplaintiff could reasonably have avoided some part of the loss claimed, it is for the defendant to carry the burden of that issue”) & Cronkv. Canadian General Insurance Co., (ON CA), 25 O.R. 3d 505, 514 (C.A. 1995) (“The onus was on the ... [employer]

to prove that the ... [employee] could have obtained alternate employment consistent with her experience and ability ” ). This is not an easy burden to discharge: In order to prove that an employee has not made reasonable efforts to find alternate work in discharge of his or her duty of mitigation, the employer may adduce the testimony of professional job recruiters as “ expert ” evidence as to the state of the labour market and the plaintiff ’ s personal attractiveness therein. 2 G.

England, Employment Law in Canada ​ 16.85 (4 th ed looseleaf release 43 April 2013). [ 128 ] As the defendants made no effort to prove that a more vigorous effort on Mr. Lovely ’ s part to find remunerative employment would have been successful, there is no basis to conclude that any portion of Mr. Lovely ’ s losses were avoidable. It would have been difficult to establish that Mr. Lovely was likely to find work given the restrictions imposed on him under his work permit. He could only work for Prestige Travel until he became a permanent resident. I also note that, on cross-examination, Mr.

Lovely stated that he worked hard after March 31, 2009 while working for Voyages & Journeys Travelsellers Corp. [ 129 ] It follows that the defendants were obliged to discharge the promise they made in the March 20, 2008 employment contract. They did not. They must do so now. 2. The Defendants Must Pay Out the Balance of a Fixed-Term Contract [ 130 ] Had I accepted Mr. Sutherland ’ s account of the March 20, 2008 meeting, I would have been forced to conclude that the parties never intended the March 20, 2008 employment contract to memorialize the terms of Mr. Lovely ’ s employment.

The plaintiff would have secured Mr. Sutherland ’ s signature by fraudulently misrepresenting how he intended to use the document. [ 131 ] This finding would have necessitated a search elsewhere for the employment terms that regulated Mr. Lovely ’ s twelve-month work period. Are there some terms on which both the plaintiff and the defendants agreed? [11] [ 132 ] A review of the March 20, 2008 employment contract and the Riddle draft reveals several commonalities. First, both documents state that the engagement will end March 31, 2010. Second, there is a consensus that Mr.

Lovely ’ s annual salary would be $75,000. Third, each writing recognises Mr. Lovely ’ s entitlement to a substantial bonus. Fourth, both materials acknowledge the employer ’ s obligation to provide some benefits. Fifth, a three-week vacation was a feature of both sets of contract terms. Sixth, both versions of the employment contract allowed the employer to dismiss the plaintiff summarily for “ illegal or overtly unethical actions ” , the language of the March 20, 2008 employment contract.

The Riddle draft did not use this language, but the termination concepts it contained would certainly catch “ illegal or overtly unethical actions ” . [ 133 ] There was no common termination provision which could be invoked if the plaintiff did not perform “ illegal or overtly unethical actions ” . The March 20, 2008 employment contract obliged the employer to pay the employee upon termination before the end date of the term “ early severance ” of one year ’ s base salary unless the plaintiff performed an “ illegal or overtly unethical ” act.

In the Riddle draft the employer could terminate the contract at any time before the end date by giving reasonable notice or termination pay equal to the plaintiff ’ s salary during the reasonable notice period or summarily for cause. In addition, the employer reserved the right to terminate the employment agreement “ on or about March 31, 2009 ” for any reason. If the employer failed to meet defined objectives “ no severance will be provided ” .

As these provisions were not the subject of agreement by both parties, they are not part of the set of potential common employment terms. [ 134 ] This exercise leads to the conclusion, under the assumptions I have made, that Mr. Lovely was employed by Prestige Travel Ltd. and McDonald & Bychkowski Ltd. with several specific terms. First, the start date was March 20, 2008 and the end date was March 31, 2010. This is a fixed term. Second, while working during this period, Mr. Lovely was entitled to an annual salary of $75,000, benefits and a three-week vacation.

Third, the employer had the right to dismiss him summarily before the end of the term if he performed “ illegal or overtly unethical actions ” .

[135] A provision in an employment contract which unambiguously states that the term of employment is for a fixed term is enforceable. 2 G. England, Employment Law in Canada, ​12.11 (4th ed. looseleaf release 43 April 2013); Alguire v. Cash Canada GroupLtd., 2004 ABQB 797 ​ 41 (“the terms of the contract were clear and unequivocal. It states ‘The term of this contract is to run fromFebruary 1, 2002 to January 31, 2003’”); Dombrowski v. Board of Governors of Dalhousie University, (NS SC), 55D.L.R. (3d) 268, 291 (N.S. Sup. Ct. Tr.

Div. 1974) (“By accepting the terms of the final contract offered him in 1972 for a two-yearappointment, Professor Dombrowski had agreed that there will be no further obligations imposed on the university after June 30, 1974");MacLeod v. Board of School Commissioners of Town of Dominion, (NS SC), 16 D.L.R. (2d) 587, 600 (N.S. Sup. Ct.1958) (“The plaintiff having been employed only for one school year on a trial basis, I am of the opinion that her action for damagesagainst the defendant for refusing to permit her to continue for a second year must be dismissed with costs”).

An unambiguous and clearstatement of an employment contract’s duration rules out the need to imply the common law rule that a contract for an indefinite durationis terminable only upon provision of reasonable notice or pay in lieu of reasonable notice. [136] An employer who dismisses an employee before a fixed-term contract has expired must pay the dismissed employee the salaryshe would have received had she worked until the end date unless there is a provision which states otherwise. Canadian Ice Machine Co.v.

Sinclair, (SCC), [1955] S.C.R. 777, 786 (the employer was obliged to honour a seven-year fixed term contract);Pacquin v. Gainers Inc., 1991 ABCA 132 , [1991] 6 W.W.R. 45, 46 (Alta. C.A. 1991) (the employer bound by a three-yearfixed-term contract was obliged to pay the employee terminated before the end date the remainder of his unpaid salary) & 2 G.

England, Employment Law in Canada ​ 14.3 (4th ed. looseleaf release 43 April 2013). [137] Had these employment terms been in force, I would have concluded that the defendants were obliged to discharge theircontractual obligations to the plaintiff and must pay him the salary he would have earned between April 1, 2009 and March 31, 2010 inclusive. The plaintiff would have had judgment for $75,000.[12] [138] Is mitigation a live issue?

In this scenario, there is a fixed-term contract without a term that allows for early termination bypayment of a specified amount. (The March 20, 2008 employment contract was for a fixed term but it contained an early terminationprovision.) The Court of Appeal declined to apply mitigation values in Pacquin v.

Gainers Inc., 1991 ABCA 132 , [1991] 6W.W.R. 45, 46, a case which presented a fixed-term contract without a term that allows for early termination by payment of a specificamount: [T]he bargain here ... clearly contemplated early termination and provided that such early termination (unless for cause as defined) wouldentitle the ... [plaintiff] to the contractual benefits for the balance of the minimum term as though termination had not occurred.Accordingly, the ... [plaintiff] was under no duty to mitigate his loss nor to credit Gainers with any earnings he obtained from otheremployment after termination.

Pacquin’s primary claim was for the enforcement of his contractual benefits and not the damages forbreach of the contract. [139] But, other courts have expressed a different view: [T]he majority of modern cases have held that an employee whose definite-term contract is breached must still mitigate his or herdamages or that, in any event, any sums earned within the balance of the contractual term must be deducted from the employer’sliability. The Supreme Court of Canada has confirmed that employees whose fixed-term contracts are breached have a duty to mitigatetheir damages. 2 E.

Mole, Wrongful Dismissal Practice Manual § 10.9 (2d ed. looseleaf 2012). [140] As I do not have to decide this point on account of my determination that the defendants failed to establish that mitigationprinciples assist them, I will only observe that a very sound argument can be made that mitigation principles do not apply to fixed-termcontracts with no early termination provisions unless the contrary position is stated. The reasons which Chief Justice Winkler adopted in Bowes v. Goss Power Products Ltd., 2012 ONCA 425 , 351 D.L.R. 4th 219 (Ont.

C.A. 2012) dismissing an employer’s argumentthat mitigation values modified its express contractual obligation to pay the employee six months’ salary if it terminated his indefiniteduration employment during the employee’s third year of service are cogent in other fact patterns. Chief Justice Winkler stated that “[i]tis 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 ensure as a consequence”. 351 D.L.R. 4th 219, 237 (Ont. C.A. 2012).

Certaintyis just as much a feature of a fixed-term contract with no early termination provision as a contract term requiring an employer to pay an

employee a stipulated sum if it wishes to invoke an early termination provision in a fixed-term contract or a termination provision in anindefinite-duration agreement. An employer who ends the employment relationship in a fixed-term contract before its term expires mustpay the employee the value of the salary and benefits the employee would have received had he or she worked throughout the remaining term of the contract. If the parties wish to modify that obligation they should unambiguously say so. 351 D.L.R. 4th 219, 237-38 (Ont.C.A. 2012).

This approach is logically sound and has the added benefit of simplifying the law and encouraging people to work. [141] These principles support the second basis for determining that the defendants owe the plaintiff his annual base salary. Thedefendants dismissed Mr. Lovely halfway through a two-year fixed-term contract. They did not alleged that he committed an “illegal orovertly unethical” act. Accordingly, they have an obligation to pay him the salary and benefits he would have earned had he worked untilthe end of the fixed term. This works out to his annual salary and the value of his benefits. 3.

If the Plaintiff Worked Under a Contract of Indefinite Duration, the Defendant Must Pay Him the Value of the Salary andBenefits Payable in a Twelve-Month Period [142] If I am wrong in concluding that both the employer and employee had agreed to a two-year fixed-term employment contract, or the contract is not enforceable because of the Statute of Frauds, 29 Car.

II, c 3, s. 4,[13] I will consider the employer’s obligation underan employment agreement of indefinite duration. [143] If the employment contract does not contain provisions stipulating that it is in force for a period measured by an ascertainablestart and end date or that the employer must do certain things if it wishes to bring the employment relationship to an end, the commonlaw implies a term which requires the employer to provide the employee with reasonable notice of the end date of the employees’semployment or the value of the salary and benefits the employee would receive in the period of reasonable notice.

Sylvester v. BritishColumbia, (SCC), [1997] 2 S.C.R. 315, 317; Machtinger v. HOJ Industries Ltd., (SCC), [1992] 1S.C.R. 986, 988 & Vorvis v. Insurance Corp. of British Columbia, (SCC), [1989] 1 S.C.R. 1085, 1096. See generally, 2 G. England, Employment Law in Canada § 14.3 (4th ed. looseleaf release 43 April 2013). [144] There are a number of factors which influence what notice period is reasonable. Justice Iacobucci, in Machtinger v. HOJIndustries Ltd., (SCC), [1992] 1 S.C.R. 986, 988, referred to the list compiled by Chief Justice McRuer in Bardal v.Globe & Mail Ltd., (ON SC), 24 D.L.R. (2d) 140, 145 (Ont.

H.C. 1960) “as the most frequently cited enumeration offactors relevant to the assessment of reasonable notice”. Chief Justice McRuer’s list follows: There can be no catalogue laid down as to what is reasonable notice in particular classes of cases.

The reasonableness of the notice mustbe decided with reference to each particular case, having regard to the character of the employment, the length of service of theemployment, the age of the servant and the availability of similar employment, having regard to the experience, training andqualifications of the servant. [145] The use of a standard with so many components has introduced a degree of uncertainty into

[…]