Clarke v. First Light Technologies Ltd., 2024 BCPC 23

Citation: Clarke v. First Light Technologies Ltd. 2024 BCPC 23 Date: 20240212 File No: C-230154 Registry: Victoria IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: ANDREW JOSEPH CLARKE CLAIMANT AND: FIRST LIGHT TECHNOLOGIES LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE L. MROZINSKI Appearing on his own behalf: A. Clarke Counsel for the Defendant: E. Jimenez Gonzalez Place of Hearing: Victoria , B.C. Date of Hearing: February 9, 2024

Date of Judgment: February 12, 2024 I. Introduction [ 1 ] At issue in this Small Claims action is the

interpretation of two provisions of an Employment Agreement (the “Agreement”) entered into by the claimant, Mr. Clarke and the Defendant, First Light Technologies Ltd. (“First Light”). [ 2 ] Mr. Clarke, who resigned his position at First Light on February 3, 2023, seeks an order that First Light pay him a bonus which he maintains he is entitled to under the Agreement as well as compensation pursuant to a “material change” in the corporate structure clause in the Agreement, as well as a severance payment. First Light disagrees for the most part. It submits that as Mr.

Clarke resigned pursuant to a clause in the Agreement, he is entitled to two months’ compensation for the material change in the corporate structure and no more. II. Background Facts [ 3 ] Mr. Clarke, who is now 38 years of age, was employed by First Light as an Operations Manager commencing November 2020. Mr. Clarke, who has a background in engineering technology, appears well qualified for the position which is both a management position but also involves some hands on work. [ 4 ] In January 2023, two of the three owners of First Light left the company.

The parties agree that their departure constitutes a material change in ownership triggering a clause in the Agreement that enabled Mr. Clarke to resign in exchange for some compensation. Mr. Clarke testified he was uncomfortable with the new ownership and decided to give his notice and exercise the compensation option in the Agreement. [ 5 ] To that effect, Mr. Clarke gave notice in writing, dated January 5, 2023, to Mr. Carlos Shimoo, then the company’s Chief Executive Officer. In the notice, Mr. Clarke references s. 5.11 of the Agreement, a clause that does not exist. Still, the Defendant concedes that Mr.

Clarke was in fact giving notice of an intention to resign pursuant to s. 6.6 of the Agreement which provides as follows: Should the Company undergoes [sic] a material change in ownership (“Change in Control”) the Employee will have six (6) months in which he may choose to resign and the Company will pay a lump-sum amount equivalent to one month’s salary per year of service to a maximum of 12 months; this is calculated from the original hire date and is in addition to any severance pay. [ 6 ] In this same letter, Mr. Clarke references his bonus.

He writes: Due to the unique circumstances of this departure I would like to ensure that my bonus has been fully paid, as per the targets set by the company during the majority of the year and your statement during our All Hands Meeting on January 4 th where you stated that nothing would change… [ 7 ] As evidenced by subsequent brief correspondence between Mr. Clarke and Mr. Shimoo, the parties formed distinctly different

interpretations of the Agreement, and in particular, in Mr. Clarke’s understanding of the compensation he was entitled to upon the termination of his employment. As a valued employee, First Light attempted to convince Mr. Clarke to stay. Mr. Clarke declined and his employment with the company terminated on February 4, 2023. He expected to receive approximately $108,620.58. He was offered $16,125.00 by First Light. III. The Issues [ 8 ] At issue then is the

interpretation of two provisions of the Agreement: s. 6.6 (the “Resignation Clause”) and s. 2.3 (the “Bonus Clause”). In turn, this raises questions concerning the appropriate principles of contractual

interpretation applicable in these circumstances. IV.

Section 6.6 – the Resignation Clause [ 9 ] I have already set out s. 6.6 of the Agreement earlier in these reasons. The parties disagree on two aspects of this clause. First, there is the question of the amount of money payable to Mr. Clarke upon his exercising his option to resign following a material change in ownership. Secondly, there is the question whether under s. 6.6 of the Agreement Mr. Clarke is entitled to compensation after his resignation as well as a severance payment calculated, he submits, in accordance with the common law. [ 10 ] On the question of

interpretation, Mr. Clarke submits that s. 6.6 of the Agreement is ambiguous. He urges this court to apply the principle of contra proferentem : that is to say that as the weaker of the two bargaining parties, this court should interpret s. 6.6 is the manner that favors Mr. Clarke, the employee. Specifically, Mr. Clarke submits s. 6.6 ought to be read as entitling him to severance pay in accordance with the termination provisions of the Agreement. In addition, Mr.

Clarke submits the clause ought to be read so that his compensation upon resignation would be three months – that is to say one month for each year in which he was employed by First Light whether or not he completed three actual years of service. Upon these

interpretations, Mr. Clarke calculates he is owed $24,187.50 for “change of control pay” and a further $29,769.23 in severance calculated under the common law. [ 11 ] First Light does not disagree that at some point in an employment contract analysis there is room for the application of the principle of contra proferentem . It submits however that there is no room in this case for the application of the principle as there is really no ambiguity in the clauses of the Agreement at issue. With respect to the principles of contract

interpretation, First Light relies on several authorities including Sattva Capital Corp. v. Creston Moly Corp. , [2014] 2 SCC 633, at para 47; and Miller v Convergys CMG

Canada Limited Partnership, 2014 BCCA 311, at paras 14 and 15. Each gives consideration of the principle of contra proferentem asdoes Mr. Clarke’s case, Ceccol v. Ontario Gymnastic Federation, (ON CA), [2001] 55 O.R. (3d) 614, at para 48. [12] At para 47 of Sattva, courts are urged, when called upon to interpret commercial contracts, to take a practical, common-senseapproach striving ultimately to “determine the intent of the parties”. This injunction is reiterated in more detail in Miller at paras 14 and15 as follows: 14 The construction of the Agreement is central to determining several of the issues raised on this appeal. I summarize the governingprinciples of contractual

interpretation that have application here as follows. 15 The court should strive to give effect to what the parties reasonably intended to agree to when the contract was made. The startingpoint is the language of the contract, which should be given its plain and literal meaning, and be interpreted in the context of the entireagreement. Consideration may also be given to the factual matrix surrounding the creation of the contract. If the contractual languagereveals two possible

interpretations, the court should seek to resolve this ambiguity by searching for an

interpretation that reflects the trueintent and reasonable expectations of the parties when they entered the contract, and achieves a result consistent with commercialefficacy and good sense. Considerations of reasonableness and fairness inform this exercise. If these principles do not resolve theambiguity, extrinsic evidence may be admissible to assist in ascertaining the parties' intent. As a last resort the principle of contraproferentem may be invoked to favour construction of the ambiguity against the party that drew the agreement. This principle may notbe used, however, to create or magnify an ambiguity.

As to employment contracts in particular, these will be interpreted in a manner thatfavours employment law principles, specifically the protection of vulnerable employees in their dealings with their employers.Nevertheless, the construction of an employment contract remains an exercise in contractual

interpretation, and the intentions of theparties will generally prevail, even if this detracts from employment law goals that are otherwise presumed to apply: Geoff R.Hall, Canadian Contractual

Interpretation Law, 2d ed (Markham, Ont.: LexisNexis, 2012) at 9-52, 66-70, 187-88. [13] Taking these principles into account, I find firstly that there is no real ambiguity in the terms of s. 6.6 of the Agreement. First,with respect to the question of the compensation payable upon Mr. Clarke exercising his option to resign upon a material change inownership, the language seems clear.

The employer offers to pay an employee the equivalent of one month’s salary per year of service.In other words, for every year an employee works, they are entitled to one month’s salary upon their resignation pursuant to s. 6.6 of theAgreement. The provision seems clear enough. Nothing in the section, or the whole of the Agreement would suggest the word “year” begiven anything other than its ordinary meaning: that is to say a 12 month period of continuous employment. [14] In this case, Mr. Clarke calculates he worked for First Light for 2 years and 3 months.

As he was in his third year ofemployment, he submits the provision entitles him to be compensated for three months – equivalent to three year’s employment. Withrespect, that reads in far too much into an otherwise simple term. I see no basis for the application of the principle of contra proferentemin this case. As I say, in my view, the language is clear. A commercial and common-sense view is that the parties intended that for everyyear of employment, that is to say every 12 month period, certain compensation would flow, and no more. [15] The second issue in s. 6.6 is whether Mr.

Clarke is entitled to severance pay as well as compensation for exercising theresignation clause due to the material change in ownership. Mr. Clarke’s basic point is that because severance is referenced in s. 6.6 ofthe Agreement, severance is therefore payable. Again, with respect, this makes little commercial sense. [16] First, I agree with First Light that as a rule, an employee is entitled to severance whenever their employment is terminated by theemployer either actually or constructively.

Section 6.6 of the Agreement provides that in the event of a material change in ownership, anemployee is entitled to exercise a right to compensation. Of course, if as a result of the change an employee’s position is changed orterminated, the employee is at the same time also entitled to severance as calculated in accordance with the common law, and, in anyevent, no less than an employee would be entitled to under statutory law.

But to interpret s. 6.6 as if the employee may be compensatedprovided they give 30 days’ notice of an intention to resign, while at the same time obligating the employer to pay severance in apotentially far greater amount, and with no prospect of giving the employee working notice for example, seems commercially inapt. [17] In my view, s. 6.6 of the Agreement keeps open the prospect of severance pay should the situation arise as First Light argues. It isnot mandatory.

Section 6.6 is constructed so that an employee may be entitled to both compensation arising upon their resignation andseverance pay if the circumstances require. It does benefit employees who may find themselves demoted, or otherwise constructivelydismissed, or even terminated with a change in ownership. Short of that, there would seem to be no legal reason to order an employer topay severance to an employee that voluntarily resigns their position. [18] For these reasons, I find that First Light owes Mr.

Clarke $16,125.00 pursuant to s. 6.6 of the Agreement, that being a month’ssalary per each year worked up to the date of his leaving the company. V. The Bonus Provision [19] There is no question that in addition to expecting compensation for exercising his right to resign pursuant to s. 6.6 of theAgreement, Mr. Clarke expected to receive his annual bonus as part of his departure package. He says as much in his resignation letter toMr. Shimoo. [20] The question in this regard is whether Mr. Clarke is entitled to a bonus in the circumstances. His entitlement, if any, isdetermined by s. 2.3 of the Agreement. That

section provides as follows: The Employee is eligible for a yearly bonus plan. The bonus plan is set at a rate of 25% of base salary measured against establishedperformance goals of the Company. To be eligible to receive your bonus you must be employed with the Company on the date the bonuspaid [sic]. Yearly updates are determined and articulated by the CEO, further details to be provided. [21] The bonus is important to Mr. Clarke. He submits that he is entitled to bonus pay totalling $54,663.75. He has, of course, agreedto abandon any amount over the Small Claims limit of $35,000.00, but it is still a substantial claim.

[22] Mr. Clarke testified that in 2022 he received his bonus in April. Mr. Taverna, the owner of First Light testified that bonuses aretypically paid out at the end of April, though year end, the basis on which the bonus would be calculated – for the most part – ends January 31st of each year. There is no evidence here, and little suggestion that First Light stalled in its calculations of employee bonuspayments until Mr. Clarke left the company. Rather, First Light’s position is that Mr. Clarke, having left the company in February 2023,was not employed in April when the bonuses were paid out. Mr.

Clarke submits that when his claimed severance period is taken intoaccount, he was in fact employed by the company in April 2023 and was therefore entitled to a bonus. [23] Given my earlier findings regarding Mr. Clarke’s right to severance, it is clear this claim cannot succeed. [24]

Section 2.3 of the Agreement is clear and unambiguous. An employee is entitled to a bonus provided the employee is with thecompany on the date the bonus is paid. I find I agree with First Light that this tends to be consistent with the purpose of a bonusdiscussed at para 29 of Nugent v. Midland Doherty Ltd., (BC CA): that is to say compensation intended to reward anemployee’s loyalty designed to encourage employees to stay in the employ of the employer. In all these circumstances, I do not see howthis court could find Mr. Clarke is entitled to a bonus pursuant to s. 2.3 of the Agreement. VI.

Conclusion [25] For all these reasons, I find that Mr. Clarke is entitled to $16,215.00 from First Light. That is compensation owed to him forexercising his option to resign pursuant to s. 6.6 of the Agreement. [26] As First Light made this same offer to Mr. Clarke last February 23, 2023, it follows that Mr. Clarke has been largelyunsuccessful in this claim. I would not award him his expenses or costs for this hearing. I will leave it to First Light to determine if theywill seek any further costs from Mr.

Clarke acknowledging, of course, that legal costs are not payable in this Small Claims court. _______________________________ The Honourable Judge L. Mrozinski Provincial Court of British Columbia