Bohn v. PG&E Corporation, 2013 ABQB 77

Court of Queen's Bench of Alberta Citation: Bohn v. PG&E Corporation, 2013 ABQB 77 Date: 20130131 Docket: 0401 15878 Registry: Calgary Between: Keith Bohn and Dave Guebert Plaintiffs - and - PG&E Corporation Defendant _______________________________________________________ Memorandum of Decision of J.B. Hanebury, Master in Chambers _______________________________________________________ [ 1 ] The plaintiffs, Mr. Bohn and Mr. Guebert, are suing for wrongful dismissal and seek damages for certain monetary benefits, including options, which they say they are entitled to from the defendant, PG &E Corporation.

It has defended the claim, arguing that both were dismissed for cause for taking funds from the subsidiary company where they worked, ET Canada. [ 2 ] There are two applications before the court. PG &E has applied to summarily dismiss the claim of the plaintiffs. The plaintiffs have brought a cross application seeking to strike

portions of the affidavit filed by the representative of PG &E in support of the initial application. [ 3 ] For the reasons that follow, I do not need to determine whether portions of the affidavit should be struck. Even considering the affidavit on its face, as a whole, I have come to the conclusion that this is not an appropriate situation to grant

summary dismissal as I am not satisfied that the employer viewed the employment relationship as fractured to the degree required for immediate dismissal. Page: 2 FACTS [ 4 ] Voluminous materials were filed. Cross examinations on the affidavits of the plaintiffs were held. Argument was lengthy. A number of the underlying facts are undisputed. [ 5 ] ET Canada was an indirect wholly-owned subsidiary of PG &E. Mr. Bohn was a Senior Vice President of ET Canada and Mr. Guebert was the Vice President of Finance of the company.

Their employment with ET Canada gave them certain benefits with PG &E, which they would not receive if they were terminated for cause. [ 6 ] While employed with ET Canada, the plaintiffs and ET Canada decided to purchase an investment in a business known as Cell-Loc Inc.

Funds were to be transferred from ET Canada and the two plaintiffs to a company known as IQ2, a company that was an investment vehicle for ET Canada, and then in turn to Cell-Loc. [ 7 ] It is not disputed that in July, 2001, a call was made for funds a few days earlier than expected and one of the plaintiffs scrambled to forward the necessary funds. A cheque was forwarded on the company's account for the sum of $800,000.00 which included the share of the plaintiffs in the sum of $150,000 each. The $800,000 cheque from ET Canada was prepared by Mr. Guebert and signed by Mr. Bohn. Mr.

Bohn states that he does not recall being aware of the early call for funds and did not realize company funds were being used to cover his personal investment, but he confirms that he signed the cheque. [ 8 ] Each of the plaintiffs had the funds available at that time but used the company's funds. Mr. Guebert says that this was necessary to meet the unexpected time constraints. [ 9 ] Within a couple of days, both plaintiffs reimbursed IQ2, the company to which the funds had been advanced, and the funds were subsequently sent back to ET Canada, albeit some weeks

later. [ 10 ] It is the position of the plaintiffs that what they did at that time did not harm the company and was fully documented in the records. Their personal involvement in the transaction had already been approved by the company. They made no attempt to hide what had occurred with the transfer and reimbursement of company funds. However, PG &E was apparently unaware of this aspect of the overall transaction. [ 11 ] Mr.

Bohn alleges that in 2002 both PG &E, and ET Canada's direct parent, a company referred to as NEG, had "issues surrounding [their] financial health" and as a result PG &E was trying to sell NEG. Page: 3 [ 12 ] Those attempts were unsuccessful and Mr. Bohn says he was then asked to find a buyer for NEG's subsidiary, ET Canada. He says that he found a potential buyer of the shares of the company, Seminole Canada Gas Trading Company. At that time Mr.

Bohn asked about the payment he would receive upon the sale and was told he would receive no severance if the sale was a share transfer, but certain stock options and performance unit plan entitlements (PUPs) would vest. [ 13 ] In early December, 2002, Seminole provided a sales proposal for ET Canada's shares and in Appendix C set out the potential liability upon termination to various ET Canada employees, including the plaintiffs. The Court was not advised of the source of the information found in Appendix C.

The document is unclear as to whether the termination amounts listed for the plaintiffs include their deferred bonuses, but Mr. Bohn was alleged to be owed $959,220.00 and Mr. Guebert, $514,782.00. No other employee listed was entitled to anything approaching these amounts upon termination. [ 14 ] While ET Canada was in the process of being sold, PG &E undertook an audit of ET Canada and the transaction in issue was discovered.

PG &E says that it took the view that this transaction was a violation of company policy which provided, inter alia, that company funds were only to be used for company business, and it justified the plaintiffs' termination. They were terminated by letter dated February 20, 2003. [ 15 ] Two weeks prior to receiving their termination letters, Mr Maddox, a senior employee of NEG, who was also an officer of PG &E and who had undertaken the audit, advised the plaintiffs that PG &E had reviewed their responses to the audit process.

He stated that it had agreed to stop the audit process and there would be no further review. He said that he was

authorized to conclude the audit investigation and that he would work out an arrangement with Seminiole to cover any severance obligations. He said the plaintiffs should work out an employment arrangement with Seminole. [ 16 ] However, apparently the decision was not Mr. Maddox's to make, and only the Board of Directors or the Committee had the discretion to terminate the plaintiffs, and termination occurred. [ 17 ] After the termination of the plaintiffs, the other employees of ET Canada were not advised of the termination. No announcement was made.

ET Canada's bank was not advised of any change in signing officers and both Mr. Bohn and Mr. Guebert remained as signing officers of ET Canada until the transaction with Seminole closed a month later. Both plaintiffs were authorized to have ongoing access to the offices of the ET Canada and had continued access to the NEG data base and email system. Both of them continued to conduct business on behalf of NEG and participated in meetings on behalf of that company.

Page: 4 [ 18 ] The shares of ET Canada were sold as of March 18, 2003, and $1,500,000.00 was put in trust with the new owner, Seminole, to deal with the claims of the plaintiffs. The plaintiffs had expected to start work as employees with the new company, but in light of their termination, were initially hired as consultants and only later confirmed as employees. Mr. Guebert started right after his termination and Mr.

Bohn started his post upon the share transfer. [ 19 ] At the end of 2003, nine months after the sale, they entered into a settlement with the new company and the 1.5 million dollars was released to them: $1,000,000.00 to Mr. Bohn who had held a more senior position and $500,000 to Mr. Guebert. The releases they executed in exchange left outstanding their right to claim for various monetary benefits, including supplemental retirement savings plan benefits, options and in the case of Mr. Bohn, his PUPs .

This release was only disclosed to PG &E part way through the course of this action. [ 20 ] The plaintiffs then commenced this action. [ 21 ] In the affidavit filed by its representative, PG &E provided an analysis of the plaintiffs' entitlement to monetary compensation, including the value of the stock options and the PUPs, that they would have received had they been dismissed without cause. It indicated a sum less than each of them had received and a sum different than that set out in the proposal of Seminole of December, 2002. Mr. Bohn was entitled to approximately $825,000.00 and Mr. Guebert, only $3,000.00.

[ 22 ] Mr. Bohn states that he believes his PUPs and stock options would have been worth at least $1,150,000.00. Mr. Guebert states his options would have been worth at least $750,000.00 and that he was entitled to a bonus of $77,217.00. Without providing further evidence, both state that they expect to lead expert evidence on their damages at trial. ANALYSIS [ 23 ] The test for

summary judgment is well known and numerous cases were cited by the parties. [ 24 ] Rule 7.3 of the Alberta Rules of Court provides that a defendant may apply for

summary dismissal on the ground that there is no merit to a claim in whole or in part. The onus is on the defendant to convince the Court that there is no genuine issue for trial: De Shazo v. Nations Energy Company Ltd., 2005 ABCA 241 , para. 17 ; Murphy Oil Co. v. Predator Corp., 2006 ABCA 69, para. 24. The test has also been described as a determination that it is "beyond real doubt" or "plain and obvious" that the action can be summarily decided: Tottrup v. Clearwater No. 99 (Municipal District), 2006 ABCA 380 ; Kwan v.

Superfly Inc., 2011 ABQB 343 , para. 23. [ 25 ] The response required of a plaintiff resisting such an application is described in Forwest Development Enterprises Ltd. v. High River Regional Airport Ltd. 2012 ABQB 785 (Master) at paragraph 12: Page: 5 A plaintiff responding to a

summary dismissal application is not required to prove all the requirements of its cause of action, but must raise enough evidence to warrant the cause of action going to trial: Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., 2012 ABCA 328 at paragraph 14 . A respondent may successfully resist by establishing the existence of disputes on material questions of fact, including inferences to be drawn therefrom, or on points of law that cannot be readily resolved given the factual disputes: Condo Corp. 0321365 v. MCAP Financial Corporation, 2012 ABCA 26 at paragraph 43.

If the evidence establishes that there are missing links in the essential elements of a cause of action or that there is no cause of action in law, there will be no genuine issue for trial: Condo Corp 0321365 v. MCAP Financial Corporation at paragraph 43. [See as well Pioneer Exploration Inc. (Trustee of ) v. Euro-Am Pacific Enterprises Ltd., 2003 ABCA 298 , paras. 15 - 19 .]

[ 26 ] However, the existence of a question of law will not, in and of itself, defeat an application. As noted in Tottrup , supra, at para. 11 , an issue of law may be decided summarily in certain cases unless it is unsettled or complex or intertwined with the facts. [ 27 ] The facts and the law of wrongful dismissal must be considered in light of this test. [ 28 ] The parties provided extensive case law on wrongful dismissal. [ 29 ] Theft by an employee, even when the money is "borrowed" has been found to be a fundamental breach of the employment contract, justifying immediate dismissal: McKinley v.

BC Tel, 2001 SCC 38 , para. 51 ; Ducharme v. England, 1999 CarswellBC 2768 (B.C.S.C.) , para. 17, 20, 36; Murrell v. Simon Fraser University, 1998 CarswellBC 2643 (C.A.) , paras. 34 - 35. Similarly, where a senior employee has breached his fiduciary duty to the employer so that the employer can no longer trust the employee, immediate dismissal is justified: On-Site Solutions Inc. v. Knapik , 2011 ABPC 129 , para. 24 . In such cases, where the facts and the law are clear,

summary judgment is a viable option: Poliquin v. Devon Canada Corp., 2009 ABCA 216, para. 14. [ 30 ] However, as the case law has noted, the conduct must be looked at in context when deciding if it resulted in a breakdown in the employment relationship. As noted by the Supreme Court of Canada in McKinley supra, at para. 48 , "the test is whether the employee's dishonesty gave rise to a breakdown in the employment relationship." To make this determination a contextual analysis must be undertaken and the surrounding circumstances examined.

As the Court said at para. 56: Absent an analysis of the surrounding circumstances of the alleged misconduct, its level of seriousness, and the extent to which it impacted upon the employment relationship, dismissal on a ground as morally disreputable as "dishonesty" might well have an overly harsh and far-reaching impact for employees.

In addition, allowing termination for cause wherever an employee's conduct can be labelled Page: 6 "dishonest" would further unjustly augment the power employers wield within the employment relationship. [ 31 ] The case law makes it clear that the Court must undertake a careful analysis of the facts in each case to make the determination that the dishonesty impacted the employment relationship

to such a degree that immediate dismissal was justified. [32] It cannot be denied that the plaintiffs converted company funds for their own use contrary to company policy.

However, other facts in this case differ from those found in the usual case of employee theft, fraud, misappropriation or conversion. [33] In this case, if the discovery of the conversion of funds ended the trust relationship between PG &E and the plaintiffs so as to justify their immediate dismissal, it is surprising that the plaintiffs were allowed continued access to the office, continued as signing authorities with the Bank and continued to have access to the NEG database and their e-mail.

The position of the company that the relationship had been broken such that immediate dismissal was justified is at odds with their actions. No evidence was filed by PG &E to explain the company's actions. [34] Relying on the decision of Johnstone J. in Mitran v. Guarantee RV Centre Inc., 1999 CarswellAlta318, para. 101, PG &E argues that these aspects of PG &E's conduct cannot be considered by the Court because they can be classified as a waiver and an allegation that waiver occurred is not found in the pleadings. By this I assume it is arguing that a Reply making this allegation should have been filed by Mr.

Bohn and Mr. Guebert. [35] Counsel for the plaintiffs responds that these facts do not constitute waiver, but condonation. Part of the context to be considered when considering whether dismissal was justified is whether or not the conduct now being condemned was at some point, in some way, condoned: Palmer v. Godfrey Associates Ltd., 2005 NBCA 114, para. 4, 5; MacDonald-Ross v. Connect North America Corp., 2010 NBQB 250, paras. 48-49; and Philip H.

McLarren, Employment in Alberta (2nd ed.), Lexis Nexis Canada: Canada, 2002, p. 3.16. [36] The statement found in Mitran relies on the decision of the British Columbia Court of Appeal in King v. Mayne Nickless Transport Inc., (1994) (BC CA), 3 C.C.E.L. (2d) 21, where the Court observes that a trial judge cannot make a decision on a matter never raised in the pleadings or in argument, which is not the situation here.

Furthermore, this case pre-dates the Supreme Court of Canada decision in McKinley where the Court defined the test to be considered and the need for a contextual analysis. [37] In my view, relying on McKinley, the contextual analysis includes a consideration of what the surrounding facts reveal about how the impugned conduct impacted on the employment relationship. The facts in this case must support a

summary determination by this Court that the plaintiffs' conduct impacted the employment relationship to a degree that justified dismissal. The facts in this case do not do so. The unchallenged evidence of the conduct of PG &E does not

jibe with the company's position that the employment relationship had been fractured to the point that dismissal was justified. Page: 7 [ 38 ] The claim cannot be dismissed summarily as further consideration by a trial judge is necessary in order to come to the appropriate conclusion on the facts. I am not convinced that there is no genuine issue for trial. [ 39 ] However, this is not the end of the matter.

Two other issues are raised by the defendant in its brief, each of which, it alleges, is sufficient to dismiss the claim: the failure to demonstrate any damages; and, that the releases executed by the plaintiffs when they received their settlements from the new corporate entity resulted in a release of these claims. Damages [ 40 ] At trial, or upon its own

summary judgment application when it must prove the elements of its case, the plaintiff is under an obligation to prove its damages. However, this is an application by the defendant for

summary dismissal and the obligation on the plaintiff is not to prove its damages, but merely to show that there is a genuine issue for trial in relation to its claim for damages. [ 41 ] Turning first to the evidence of PG & E, it has provided a recent calculation of the value of the termination amounts, including stock options and the PUPs, which would indicate that the funds already received would more than cover those claims, particularly in the case of Mr. Guebert who, it is said, was owed a mere $3000.00.

However there is not a clear calculation of all possible sums to which the plaintiffs may, or arguably may not, have been entitled. For example, was there a right to any claim at common law? If so, were all of their other claims for damages partly or completely mitigated by their consulting and subsequent employment contracts with Seminole? If the total possible amounts to which the plaintiffs could possibly be entitled were just over $800,000.00, why was $1,500,000.00 put into trust? [ 42 ] The plaintiff's evidence also raises a question relating to the amounts for termination plus bonuses shown in

Schedule C to the Seminole proposal. Where did those numbers come from? It is not unreasonable to assume that they may have come originally from PG &E, however the source has not been stated. This

schedule appears to have likely been used as the basis for the funds paid into trust.

[ 43 ] No evidence was filed by PG &E explaining these anomalies. [ 44 ] While the circumstances may raise the question of the settlement agreements being essentially a facade to permit the plaintiffs to more than recover their losses, the facts before this Court are not sufficiently clear for me to find that there is no genuine issue for trial as to the entitlement of the plaintiffs to at least some damages.

I do note though, that if the evidence were more clear, the provision by the plaintiffs of an unsubstantiated estimate of their claim and a statement that they would provide further expert evidence at trial is insufficient. The case law is clear that they are required to put their best foot forward at a

summary judgment application. Page: 8 Effect of Settlement Agreement [ 45 ] The plaintiffs argue that this issue is not found in PG &E's statement of defence and therefore cannot now be argued. [ 46 ] Rule 13.6(3) requires a pleading to include a statement of any matter on which a party intends to rely that may take another party by surprise, including payment and release. The goal, as the case law on the predecessor rule makes clear, is that the plaintiff not be caught by surprise by unexpected defences: Edmonton Savings & Credit Union v. Werenka, (1984) 35 Alta.

L.R. (2d) 44 at 53 (Master). [ 47 ] A review of the Statement of Defence reveals that the aforementioned requirements of rule 13.6 have not been met in relation to the defence that all possible outstanding claims have been released, with the result that at this

summary stage, this argument will not be considered. [ 48 ]

Summary judgment applications often have the result of fleshing out the arguments of both sides and a recognition that pleadings may need to be amended. It can be frustrating for the Court, and I assume the parties, when matters are delayed and costs and uncertainty continued, while the technical but necessary step of an amendment to the pleadings is undertaken. In situations such as this the Court sometimes adjourns the application to allow this to occur or gives leave for the application to be renewed.

With the rules now allowing an appeal de novo from a Master's decision, this result is more rare. [ 49 ] In this case, in light of the amount of material filed and the goals of rule 1.2, it is appropriate to permit a renewal of this application before me on the issue remaining. Assuming an amendment to the pleadings is consented to or allowed, the application must be brought within four months of the date of these reasons.

[ 50 ] Costs of this matter will be determined at the further hearing, should it occur, failing which costs may be spoken to, if the parties cannot agree. Heard on the 05th day of December, 2012. Dated at the City of Calgary, Alberta this 30th day of January, 2013. J.B. Hanebury M.C.C.Q.B.A. Page: 9 Appearances: Borden Ladner Gervais LLP Josef G.A. Kruger, Q.C. Layne Thiessen for the Plaintiffs Peacock Linder & Halt LLP Virgina Engel, Q.C. Patrick Robinson for the Defendant