Bavaria Autohaus, 2017 ABQB 220

Court of Queen’s Bench of Alberta Citation: Bavaria Autohaus

(1997) Ltd (Bavaria BMW) v Tiffinger, 2017 ABQB 220 Date: 20170328 Docket: 1603 04102 Registry: Edmonton Between: Bavaria Autohaus

(1997) Ltd. operating as Bavaria BMW Plaintiff - and - Joyce Tiffinger Defendant _______________________________________________________ Reasons for Decision of S.L. Schulz , a Master of the Court of Queen’s Bench of Alberta _______________________________________________________ [ 1 ] This is an application by an employee for

summary dismissal of a claim for negligence and breach of fiduciary duty/general duty of fidelity brought by the employer. The employer opposes the

summary dismissal application and, without filing an independent application, asks the Court to consolidate this action with the employee’s wrongful dismissal action and allow the employer to amend its Statement of Defence in the wrongful dismissal action to include a claim for set off with respect to any proven claims in this action. [ 2 ] For the reasons that follow, the request to consolidate actions and amend the pleadings in the other action is dismissed. [ 3 ] For the reasons that follow, I grant the application for

summary dismissal of the employer’s claim. Background [ 4 ] Joyce Tiffinger (“Ms. Tiffinger”) was employed by the Plaintiff (“Bavaria”) from approximately June of 1991 to June of 2014, a period of approximately 23 years. She started her employment as a bookkeeper, assuming additional responsibilities over time, and eventually being promoted to the position of Controller. [ 5 ] As Controller, Ms. Tiffinger reported to the President of Bavaria who reviewed and approved the monthly financial statements and reports prepared by Ms. Tiffinger.

PriceWaterhouseCoopers performed an annual review of Bavaria’s financial statements and produced year-end financial statements for Bavaria from 2006 to at least October of 2015 when Questioning occurred. The last financial statement prepared by Ms. Tiffinger was for February of 2014. [ 6 ] Sometime in March of 2014, Bavaria underwent an organizational change and Ms. Tiffinger began to report to the general manager, Gerald Lorente (“Lorente”). [ 7 ] On March 24, 2014, Ms.

Tiffinger went on an approved medical leave and was on medical leave when she was terminated from her employment by way of a letter dated June 25, 2014. She was approximately 63 years old on the date of termination.

[ 8 ] Ms. Tiffinger commenced a wrongful dismissal action under a different action number. [ 9 ] Bavaria subsequently commenced this action on March 4, 2016 alleging negligence in the execution of her accounting and breach of fiduciary duty. Ms. Tiffinger defended the action, raising inter alia , a limitations defence. Procedural Relief [ 10 ] In the written response brief, the Plaintiff/Respondent seeks: (

a) An Order pursuant to Rule 3.72(1) consolidating the within Claim with the Applicant’s Wrongful Dismissal Claim; or in the alternative: (

b) An Order pursuant to Rules 3.59 and 3.65(1) granting leave to amend its Statement of Defence in the wrongful dismissal action to include a claim for set-off in respect of any damages proven in this action relating to Ms. Tiffinger’s negligent or otherwise delict conduct during her employment. [ 11 ] An application has not been filed with respect to either relief.

There is an Order from Master Breitkreuz granted on March 22, 2016 permitting the evidence from the wrongful dismissal action to be used in this action and vice versa, but it does not consolidate the actions. [ 12 ] The Foundational Rules of the Alberta Rules of Court , Alta. Reg. 124/2010 (“Rule” or Rules”), in particular Rule 1.2, promote the efficient, timely and effective resolution of disputes, including the narrowing of issues.

Rule 1.3 permits the Court to give relief whether or not it is claimed or sought in an action, however Rule 1.5 admonishes the Court not to cure any contravention, non- compliance or irregularity unless it is in the overall interests of justice to cure the contravention, non-compliance or irregularity.

Allowing a party to spring a request for relief, such as an amendment to a pleading or consolidation of two actions, in a written response brief without providing adequate notice to the other party or providing evidence in support of the request, is a contravention of the Rules such that it is not in the overall interests of justice to cure it. [ 13 ] This relief is denied. Test for

Summary Dismissal [ 14 ] A number of cases have set out the modern approach to

summary judgment and

summary dismissal: Hryniak v Mauldin , 2014 SCC 7 , [2014] 1 SCR 87; 776826 Alberta v Ostrowercha , 2015 ABCA 49 (“ Ostrowercha ”); Windsor v Canadian Pacific Railway Ltd , 2014 ABCA 108 ; Canada (Attorney General) v Lameman , 2008 SCC 14 (“ Lameman ”); Beier v Proper Cat Construction Ltd , 2013 ABQB 351 (“ Beier ”); Whitecourt Power Limited Partnership v Elliott Turbomachinery Canada Inc , 2015 ABCA 252 ; P Burns Resources Ltd v Patrick Burns Memorial Trust (Trustee of), 2015 ABCA 390 ; Pyrra Design Inc v Plum and Posey Inc , 2016 ABCA 12 ( Pyrra ). [ 15 ] For the purpose of this application, the relevant principles can be summarized as follows: A.

Summary Dismissal can be granted if a disposition that is fair and just to both parties can be made on the existing record. B.

Summary Dismissal can be granted where there is no merit to the claim. To have merit, there must be a genuine issue of a potentially decisive material fact. C. There is no genuine issue requiring a trial when the fair and just process allows for the necessary findings of fact and allows the law to be applied to the facts in a proportionate, expeditious and less expensive manner that achieves a just result. D.

The key is whether the circumstances require viva voce evidence in order to properly resolve the case, or conversely whether the claim or defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily. E. The Respondent must put its best foot forward at the

Summary Dismissal application. Merits [ 16 ] The allegations in the Statement of Claim can be categorized as those relating to negligence due to accounting and financial errors (i.e. failing to adhere to the standard of care reasonably expected of a Controller) and breach of fiduciary duty. Interference with Bavaria’s economic interests (not interference with economic relations) is a head of damage, not a cause of action. (

i) Employee Negligence [ 17 ] Bavaria claims Ms. Tiffinger was negligent in failing or neglecting to: (

a) competently or properly supervise staff; (

b) cooperate with various managers; (

c) ensure the accounting department followed Generally Accepted Accounting Principles;

(

d) prepare, deliver and maintain accurate and timely financial records, including monthly reports; (

e) operate within the limits of her authority. [18] The pleadings raise the issue of whether an employee can be liable in negligence to his/her employer. [19] The older case law suggests that a negligence action by an employer against an employee can succeed if the employee isskilled, but where the employee is unskilled, employers cannot recover for the accidental or negligent activities of the employee unlessthe conduct of the employee is reckless or intentional.

At paragraphs 72 and 73 of Shamac Country Inns Ltd v Sandy’s Oilfield HaulingLtd, 2015 ABQB 518 (“Shamac”), Master Wacowich states, “In my view, the reasoning in Douglas is preferable to that in the oldercases dealing with skilled and unskilled workers.” He holds that an employer is not entitled to bring an application in negligence againstits employee unless there is evidence that the employee had engaged in the alleged breach intentionally or recklessly.

I agree withMaster Wacowich. [20] The Douglas case referred to by Master Wacowich is a decision of the Ontario Court of Appeal reported as Douglas v Kinger(Litigation Guardian of), 2008 ONCA 452 (“Douglas”).

The Ontario Court of Appeal rejects the skill-based approach (paragraph 26)and adopts the analytical framework endorsed by the Supreme Court of Canada in Kamloops (City) v Nielsen, (SCC),[1984] 2 SCR 2; Childs v Desormeaux, 2006 SCC 18 , [2006] 1 SCR 643 and Syl Apps Secure Treatment Centre v BD, 2007SCC 38 , [2007] 3 SCR 83. [21] The Douglas analytical framework can be summarized as follows: [14]...a court must first determine whether the parties’ relationship falls into a category already recognized as giving rise to a duty ofcare.

If it does, a prima facie duty of care is established and it becomes unnecessary to undertake the Anns analysis. If the case fallsoutside an established category, Anns must be applied. [13] ...[T]he first stage of the [Anns] analysis asks whether a duty of care has been established by considering both the foreseeability ofthe harm and the relationship between the parties that would make the imposition of a duty unjust or unfair, including any factors arisingfrom the relationship, such as the parties’ expectations, representations and reliance.

Where foreseeability and sufficient proximity areestablished in the first stage of the [Anns] test, the second stage requires a consideration of residual policy factors, including the impactof the proposed duty of care on other legal obligations, the legal system and on society generally. [9]...The plaintiff [employer] bears the burden of establishing a prima facie duty of care; however, if the plaintiff does so, the defendant[employee] has the evidentiary burden to show countervailing policy considerations...

Douglas, para 9 to 14 [22] With respect to whether this relationship falls into a category already recognized as giving rise to a duty of care, Ms. Tiffingeris not an independent contractor. This is not a relationship that is analogous to that of vicarious liability or implied indemnification(following the reasoning in Douglas at para 21 to 25). As to whether it could be argued that Ms. Tiffinger held herself out to be a skilledemployee and accordingly should be required to indemnify her employer for her negligence, I do not accept that this fact situation fallswithin the category of skilled or unskilled labour.

I adopt the reasoning set out in Douglas at paragraphs 26 to36, and accordingly, aprima facie duty of care does not arise. [23] Turning then to stage one of the Anns analysis, the harm to the employer arising from negligent performance by Ms. Tiffingerof her duties is foreseeable. Indeed, the President of Bavaria foresaw the possibility of such harm. Each month, he reviewed the financialstatements prepared by Ms. Tiffinger and the statements were reviewed yearly by an independent auditor. However, the employee’sliability for negligence is not foreseeable.

The relationship between the parties was that of a long term employee most recently situated asBavaria’s Controller. There is no evidence, express or implied, that the parties expected or represented that the employee would be liablefor her alleged negligence. There is no evidence that either party relied on such representations or expectations. Indeed, the evidence isthat Bavaria did not rely solely on any expertise that may or may not have been held out by Ms. Tiffinger. The President of Bavariareviewed Ms. Tiffinger’s work monthly, and annually engaged an independent auditor to review her work.

Bavaria, through its President,assumed oversight and responsibility himself and relied on the work of the auditors for the yearly review. Further, there is no evidence(as admitted by counsel at the application) that Ms. Tiffinger agreed to indemnify Bavaria. On these facts, it would not be just or fair toimpose a duty. Sufficient proximity is not made out. [24] Given the finding at stage one, it is not necessary to engage in a stage two analysis. However if I am wrong with respect to thestage one analysis, this is not the situation where I would impose a duty based on the broader (residual) policy perspective.

In general,employees are not realistically in a position to negotiate the terms of their employment with respect to foreseeable damage. There is noevidence of such a negotiation or an increase in compensation sufficient to cover the assumption of that risk. An employer is usually in abetter financial position to bear the risk than an employee, and is in a better position to protect its interests through disciplinary measuresor firing. Losses due to employee error are an expense of doing business.

These factors and a number of others are cited and relied uponin Douglas at paragraphs 58 to 64 to find that the residual policy concerns dictate against imposing a duty on the employee. I find themto be applicable to this case. [25] Bavaria argues that there is evidence that takes this matter outside the concept of ordinary negligence and into intentional orreckless misconduct by Ms. Tiffinger. It relies on the comment made by Ms. Tiffinger to Lorente shortly before she left on medical leavethat she “could make me look good or look bad” (found at paragraph 8 of the Lorente affidavit).

This comment alone does not establishintentional or reckless misconduct. The comment was prospective in nature and there is no evidence tying the statement to any of thealleged errors or alleged damages. [26] I conclude that the parties’ relationship does not fall into a category already recognized as giving rise to a duty of care. Thiscase lacks the necessary proximity required by stage one of the Anns analysis. In addition, the residual policy concerns noted at stage 2of the Anns analysis weigh against the imposition of a duty of care. There is no evidence that takes this matter outside the concept of

ordinary negligence and into intentional or reckless misconduct by Ms. Tiffinger. Negligence has not been made out. (ii) Breach of Fiduciary Duty/General Duty of Fidelity [ 27 ] Counsel for Bavaria withdrew the allegations of breach of fiduciary duty at the

summary dismissal application. Instead, he characterized the claim as breach of a general duty of fidelity owed by an employee to an employer. The Statement of Claim is framed in terms of a breach of fiduciary duty and is not sufficient to maintain a breach of the general duty of fidelity. I would dismiss this claim on that basis alone, however if I am wrong on that point, a breach of the general duty of fidelity owed by an employee to an employer has not been made out. [ 28 ] Bavaria alleges insubordination based on the evidence given at paragraphs 8 and 9 of Lorente’s affidavit: 8.

After the change in management structure, Ms. Tiffinger did tell me immediately that as the Controller of Bavaria BMW that she ‘could make me look good or look bad.’ I took this to be a threat by Ms. Tiffinger to use her position as Controller for her own personal and improper purposes. 9. In particular, I understood her statement to me to mean that Ms.

Tiffinger in her position of Controller could amend, alter, doctor, massage or otherwise do something with the financial data and reports that it was her Department’s responsibility to generate, that would artificially and without reference to the underlining [sic] business fundamentals of Bavaria BMW, make certain departments to appear to perform better or perform worse than was actually the case. [ 29 ] There is no actual evidence that Ms. Tiffinger actually carried through on this statement rather than it being something said in the heat of the moment. Counsel for Ms.

Tiffinger advised that it was made after the last monthly financial statement was completed. Ms. Tiffinger went on medical leave shortly after making the statement. This claim fails because the evidence does not tie Ms. Tiffinger’s comment to make Lorente “look good or look bad” to any alleged damages. [ 30 ] Lorente also deposes that he was employed as a co-worker with Ms. Tiffinger from June 2012 until March of 2014, during which time he observed several interpersonal disputes between Ms. Tiffinger and other staff and management at Bavaria.

However, there is no evidence that it warranted disciplinary action or that it caused any of the alleged damages. [ 31 ] Insubordination could perhaps be inferred from Ms. Tiffinger’s refusal to participate in the Manufacturer’s Scrapping Program. The Parts Manager was aware of this refusal, and being in a management position, one would expect him to advise his superior or the President of Bavaria of his concerns if this was a problem. However, disciplinary action was not taken.

The passage of time without disciplinary action is evidence that the refusal was condoned by upper management and/or the President of Bavaria. [ 32 ] Simply raising an issue is not enough. There must be evidence sufficient to raise a genuine issue requiring a trial and viva voce evidence as to the breach of the general duty of fidelity owed by an employee to an employer. Bavaria has not put its best foot forward. A Breach of the general duty of fidelity has not been made out.

Limitation Defence [ 33 ] Section 3(1) of the Limitations Act , RSA 2000, c L-12 (“ Limitations Act ”) provides: 3(1) Subject to subsections (1.1) and 1.2) and

section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances, ought to have known, (

i) That the injury for which the claimant seeks a remedial order had occurred, (ii) That the injury was attributable to conduct of the defendant, and (iii) That the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. ... 3(2) The limitation period provided by subsection (1)(

a) or 1.1)(

a) begins ... (

c) against a principal when either (

i) the principal first acquired or ought to have acquired the knowledge prescribed in subsection (1)(

a) or 1.1(a), or (ii) an agent with a duty to communicate the knowledge prescribed in subsection 1(

a) or (1.1)(

a) to the principal, first actually acquired that knowledge,

... 3(5) Under this section, (

a) The claimant has the burden of proving that a remedial order was sought within the limitation period provided by subsection (1)(

a) or (1.1)(

a) and ... Analysis [ 34 ] The Statement of Claim was filed on March 4, 2016. Ms. Tiffinger ceased performing her employment duties when she went on medical leave on March 24, 2014. The last financial records prepared by Ms. Tiffinger were for the month of February, 2014.

The monthly financials were reviewed each month by Bavaria’s President and reviewed yearly since 2012 by independent auditors. [ 35 ] The onus is on the entity advancing the claim, in this case Bavaria, to establish that the claim was brought in time ( Section 3(5) of the Limitations Act ). [ 36 ] The evidence from Lorente is that the alleged accounting mistakes were “blatantly obvious”, even to someone such as the general manager who had no accounting background. In his affidavit, Lorente points out alleged accounting mistakes that go back to 2012.

If the errors were as blatant as Lorente suggests, then Bavaria “knew or ought to have known” of the injury and that it warranted action against Ms. Tiffinger well before March 4, 2014. This is reinforced by the fact that Ms. Tiffinger’s work was being reviewed by independent auditors yearly since 2012. Lorente, the President of Bavaria, the Parts Manager and the independent auditors were agents of the principal corporation as contemplated in section 3(2) (c)(ii) of the Limitations Act and Bavaria is fixed with this knowledge. [ 37 ] Bavaria also alleges insubordination to Lorente and other managers.

The comment made by Ms. Tiffinger came “immediately” after a change in the management structure in March of 2014. The evidence does not say when in March this occurred and therefore could conceivably have occurred before March 4, 2014. There is also an allegation raised by Lorente that he witnessed several interpersonal disputes between Ms. Tiffinger and other members of management and staff, but the timing is not particularized as occurring after March 4, 2014. Bavaria has not met its onus on this allegation. [ 38 ] Bavaria also alleges negligence or breach of the general duty of fidelity as a result of Ms.

Tiffinger’s refusal to participate in a Manufacturer’s Scrapping Program for obsolescent parts. The onus is on Bavaria to establish when this was discovered. The issue is whether Bavaria knew or ought to have known of the requirements in section 3(1) of the Limitations Act before March 4, 2014. Bavaria does not need to know every little detail before the limitation begins to run, just enough to know that Ms. Tiffinger was responsible and the damages warrant bringing proceedings against her. The Parts Manager had knowledge of the Manufacturer’s Scrapping Program. He knew that Ms.

Tiffinger was refusing to participate in the program. He must have known of the benefits and disadvantages of participating in that program. He may not have known the extent of the damages (if any) to be incurred by Bavaria, but he knew that Ms. Tiffinger was refusing to participate and Bavaria would not enjoy the benefits of the program as a result of that refusal. This is sufficient. The Parts Manager is an agent of Bavaria and Bavaria is fixed with his knowledge. [ 39 ] The onus is on Bavaria to prove its action was brought in time. Given the close oversight of Ms.

Tiffinger’s work by both the President and by the independent auditors, and the knowledge of Bavaria’s agents, Bavaria has not met the onus of proof. [ 40 ] Bavaria has not put its best foot forward on the limitations issues ( See Pyrra ) and the claims are barred by the Limitations Act . Costs [ 41 ] If the parties are unable to agree upon costs, they have leave to speak to costs by way of written submissions provided to the Court within 45 days of the date of this decision. Dated at the City of Edmonton, Alberta this 28 th day of March, 2016. S.L. Schulz M.C.C.Q.B.A. Appearances: Michael Marchen

Hladun & Company for the Plaintiff James Lingwood McLennan Ross LLP for the Defendant