Doepker Industries - v. -, 2011 SKPC 29

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2011 SKPC 029 Date: February 03, 2011 File: SC#27 of 2009, SC#28 of 2009, SC#29, of 2009, SC#30 of 2009 Location: Melfort _____________________________________________________________________________ Between: Doepker Industries - and - Marlin Chetty, SC#27 of 2009 Andre Koeberg, SC#28 of 2009 Gavin Naicker, SC#29, of 2009 Gabriel Poggenpoel, SC#30 of 2009 Mara Doepker, Manager, Corporate Administration and Evan Doepker, Branch Manager For the Plaintiff Grant Carson For the Defendants _____________________________________________________________________________ JUDGMENT R.D.

JACKSON , J _____________________________________________________________________________

I INTRODUCTION [ 1 ] The Plaintiff claims in four separate actions (combined by agreement for purposes of trial) against the named Defendants for monies alleged due and owing as follows:

a) Marlin Chetty $9,886.18

b) Andre Koeberg $14,255.30

c) Gavin Naicker $14,237.12

d) Gabriel Poggenpoel $20,805.36 [1] . [ 2 ] The Plaintiff (“Doepker”) is a farm equipment and machinery manufacturer with plants in Anaheim and Moose Jaw employing roughly 290 people in total. In 2005 and 2006 Doepker sent two company recruiting personnel to South Africa to interview prospective welders for their operations.

A number of applicants had been pre-screened through an employment agency for a fee to Doepker of $3,500.00 per person. [ 3 ] The recruiting process netted 20 new employees, the four Defendants among them, to come and work for Doepker once the necessary travel and work arrangements had been made. Each of the Defendants was given a letter offer of employment and each signed a “Pre-employment Contract and Loan Agreement” (“the Agreement”). The purpose of the Agreement was to provide a mechanism for repayment to Doepker for funds advanced to the Defendants for travel costs to Canada for them and their families.

Additionally, the Defendants acknowledged indebtedness for fees and proportionate costs for the employment agency and the two Doepker employees who travelled to South Africa for the employee interviewing and testing process. [ 4 ] The essence of the Agreement was to implement a non-payment monthly forgiveness of the indebtedness over a three year period such that each month the employee worked for Doepker one-thirty-sixth (1/36) of his loan obligation would be automatically forgiven.

In the event that the employee resigned his position before the expiration of the three years the remaining balance would then be due and owing to Doepker. [ 5 ] The four Defendants each executed the Agreement and then commenced employment:

a) Marlin Chetty April 21/08

b) Andre Koeberg July 31/08

c) Gabriel Poggenpoel July 31/08

d) Gavin Naicker September 8/08 [ 6 ] Each Defendant was given an orientation and work related documentation on site prior to commencing work at the Anaheim plant. The documentation included a Doepker Employee Handbook, copy of the Collective Bargaining Agreement with the Union (“CBA”) as well as a

summary of costs and expenditures for each Defendant. Although some of the Defendants could not recall receiving various of these documents, the Court is satisfied on the evidence that all in fact did receive each of the documents as described. [ 7 ] During the fall of 2008, Doepker began experiencing some economic downturn necessitating discussions with the Union regarding possible work sharing and rotation such that no lay-offs would be required.

The Union rejected this and accordingly Doepker determined that a certain amount of lay-offs were necessary starting with those of least seniority according to the CBA. The four Defendants being the most junior were then susceptible to lay-off notice.

[ 8 ] On December 9, 2008 form lay-off letters were sent out by Doepker to inter alia , the four Defendants. The letters stated in part: The recent economic turmoil that took place around the globe has negatively affected the transportation industry in North America including western Canada. As a result, Doepker Industries does not see a quick return to normal order bank and sales activity levels. In an effort to minimize the impact, the company must adjust its size.

The order bank for the next six months is projected to stabilize between 20 - 25% lower than current levels and therefore manpower must be adjusted accordingly. It is with deep regret that Doepker Industries must issue lay-offs at this time. Please accept this letter as your temporary lay-off notice.

We expect the markets to stabilize and improve over the next six months in order for Doepker to return to normal operations. [ 9 ] On December 12, 2008 by reason of a sudden and unexpected bump in product orders, Doepker did a complete turnaround deciding to rescind the lay-off notices sent out only three days earlier. Each Defendant received this correspondence which stated: December 12, 2008 TO RESCIND Lay-off NOTICE Due to recent

schedule adjustments, Doepker Industries would like to rescind your Notice of Lay-off that was issued December 9, 2008. If you have any questions, please do not hesitate to contact Human Resources Department of [sic] myself at anytime. [ 10 ] Each of the Defendants however determined that Doepker could not provide job stability and security for them. Each then sought and obtained immediate employment in St. Brieux with Bourgault Industries, a similar company which also produced farm equipment and machinery.

The starting wage for each was roughly $2.00 per hour higher than Doepker and additionally, Bourgault offered an employee profit sharing plan as well as partial gas cost coverage to and from work. [ 11 ] Upon termination with Doepker, each Defendant submitted his own letter of resignation to the company as follows: Marlin Chetty 12 January 2009 Evan Doepker Doepker Industries Anaheim, SK Re: Resignation

Dear Sir I would like to inform you that I am resigning from my position as a welder from Doepker Industries, effective as of January 16, 2009. Thank you for the support and opportunities that you have provided me during my time with Doepker Industries. I wish you and the company all the best. Sincerely Signature André Koeberg To Doepker Ind LTD I ANDRÉ KOEBERG , with great regret must give notice to Doepker Ind ltd. My last day of work will be Jan 02, 2008. This has been a hard and worry [sic] decision. I enjoy working at Doepker - the people are wonderful.

My supervisor, shows good direction - and I understand what is required to be completed, and in what time frame. This atmosphere makes it so difficult to leave. I feel with the market conditions the way they are - I must take another step, so as to ensure security for my family here in Canada. I would like to call the people at Deopker’s [sic] my friend’s [sic] . Thank you for placing trust in me. I have such enjoyed my time spent here. Signature Gavin Matthew Naicker 12 January 2009 EVAN DOEPKER DOEPKER INDUSTRIES ANNAHEIM SK RE: RESIGNATION DEAR SIR

IT IS WITH GREAT SADNESS THAT I AM HEREBY TENDERING MY RESIGNATION TO YOU. DUE TO THE FACT THAT I AM TOLD THAT DOEPKER HAS JOB ONLY TILL MARCH 2009, FOR THE WELL BEING OF MY FAMILY I HAVE SEEKED EMPLOYMENT ELSEWHERE, BECAUSE I DON’T WANT TO BE IN A POSITION OF ANOTHER LAY-OFF. I APPRECIATE HAVING HAD THE OPPORTUNITY OF BEING A MEMBER OF DOEPKER AND OFFER MY BEST WISHES FOR YOUR CONTINUED SUCCESS. SINCERELY GAVIN MATTHEW NAICKER Signature Gabriel Poggenpoel Jan 16 - 2009 To Whom this may concern I, Gabriel Poggenpoel, hereby wish to hand in my resignition [sic] as effective from today, Jan 16 - 2009.

Reason for leaving is because of lay-offs and no security of my job. I wish to thank Doepker Industries for the time I could work for them. Yours sincerely G.J. Poggenpoel Signature [ 12 ] Following receipt of these letters, Doepker management met with each Defendant in turn privately to discuss the resignations. All were firm that they were leaving and accordingly repayment of the Agreement indebtedness was canvassed with each. None of the Defendants denied owing their respective portions.

Repeated follow up thereafter by Doepker was not fruitful in that none of the Defendants repaid any monies to Doepker alleged owing to them. [ 13 ] The position now of the Defendants is that they are not responsible to pay back any monies under the Agreement due to the doctrine of anticipatory breach in that Doepker by its actions could not fulfill their contractual obligation of a three year continuous work

guarantee to them. Further, the Defendants each challenged a portion of the loan indebtedness under the Agreement relating to the per person fee of $3,500.00 paid by Doepker to the South African Employment Agency together with the proportionate sharing of the two Doepker employees travel costs to South Africa. [2] They also challenged the accounting of their alleged indebtedness. II ISSUES [ 14 ] The following issues arise for review and determination:

a) Whether the doctrine of anticipatory breach should apply permitting the Defendants to repudiate their obligations under the Agreement?

b) Effect of ss. 2 and 3 of the Employment Agencies Act .

c) Accounting of claimed expenses if Defendants determined to be liable to repay Doepker. III DECISION

a) Whether the doctrine of anticipatory breach should apply permitting the Defendants to repudiate their obligations under the Agreement? [ 15 ] Learned counsel for the Defendants directs the Court to the following passage in CED (4 th ) [3] relating to the concept of anticipatory breach: Just as in cases of serious malperformance of contractual obligations, repudiation of a contract may be justified where a party has committed an anticipatory breach of the contract, either expressly or by implication. An anticipatory breach occurs where, prior to the date fixed for completion, one party:

a) expressly repudiates his or her obligations under the contract;

b) by acts or omissions evidences an intention that he or she will not complete the contract; or

c) by acts or omissions demonstrates that he or she cannot carry out the contract. In any such case, the innocent party may without waiting for the time for performance or completion to arrive, accept the breach and put an end to the contract forthwith. Once this election is made, the innocent party is thereby freed of all of his or her obligations under the contract , and is entitled to pursue such remedies as would have been available to him or her at the time performance was due. [Emphasis added by counsel] [ 16 ] In support of the highlighted proposition in the above paragraph the text footnotes the following cases: Brault v. R. (1920),

1920 Carswell Nat. 21 (Can. Ex. Ct.) (inability to provide all crushed stone required for road construction project as agreed); Pompeaniv. Bonik Inc. (1977), (ON CA), 1997 Carswell Ont. 3744 (Ont. C.A.); Bethko Ltd. v. Clareco Canada Ltd. (1985),1985 Carswell Ont. 1407 (Ont. C.A.); Linardos v. Landmark Vehicle Leasing Corp. (2006), 2006 Carswell Ont. 2881 (Ont. S.C.C.J.)(Plaintiff’s letter indicating both unwillingness and inability to perform ongoing vehicle lease obligations and clear intention to sever allleasing relationships with Defendant); Endacom 2000 Inc. v.

Hydro One Networks Inc. (2002), 2002 Carswell Ont. 57 (Ont. S.C.J.)(Abundant evidence that manufacturer incapable of producing hydrometers ordered by purchaser); Alcan Aluminium Ltd. v. UnicanInternational S.A. (1996), 1996 Carswell Nat. 931 (Fed. T.D.) (Carrier loading substitute cargo preventing it from taking Plaintiff’scargo; conduct indicating inability to perform contract). [17] The Defence also asserts that the intention or motive of the offending party is irrelevant citing the learned author Waddams[4]: The motives of the party and breach are not relevant. In Federal Commerce & Navigation Ltd. v.

Molena Alpha Inc. the House of Lordsheld that an anticipatory breach amounts to a repudiation if it threatens to deprive the innocent party of substantially the whole benefit ofthe contract or if it goes to the root of the contract. Lord Wilberforce added that the subjective desire of the breaching party is irrelevant. In the Federal Commerce case the party threatening breach in fact hoped that the contract would continue, but the Court held that thishope did not detract from the innocent party’s right to terminate.

This conclusion seems inevitable, for otherwise a party in breach couldremove the other’s right to terminate by accompanying the substantial breach with an expression of hope that the contract wouldcontinue. [18] In essence, the Defendants assert that they were entitled to treat the contract at an end and repudiate their performance becauseDoepker could not meet its obligation to provide a guarantee of three years continuous employment. Doepker’s position is that nowherein the Agreement or supporting employment documentation is there such a three year guarantee made by Doepker.

Further, theDefendants were aware that their terms of employment were subject to the Union CBA as clearly set out in the letter offer of employmentand the Agreement itself. Doepker maintains that the CBA is clear in anticipating lay-offs and setting out a mechanism to deal withsame. [19] The letter offer of employment tendered into evidence in P-1 to each Defendant reads inter alia: After three months, you will be eligible to join our group benefit plan that includes pension, disability and life insurance. After one yearof employment, you will also qualify for health and dental benefits.

As a condition of employment, you will become a member of theUnited Steelworkers of America Union with whom we have a Collective Agreement until July, 2009. [20] The salient portions of the Agreement executed by each Defendant prior to coming to Canada reads: Whereas: . . . Full time permanent employees of DIL, including welders, are subject to the terms of a Collective Bargaining Agreement betweenDIL and the United Steelworkers of America, Local 5917 (“the Union”).

NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS CONTAINED HEREIN, THISPRE-EMPLOYMENT CONTRACT AND LOAN AGREEMENT WITNESS AS FOLLOWS: . . . 2. The Proposed Employee acknowledges that it is his/her present intention to remain employed with DIL for at least three (3) years. 3. DIL also agrees to advance to the Proposed Employee sufficient funds to cover the following costs (“the Costs”):

a) Airfare for the Proposed Employee and his/her family of Two (2) additional person(s) ((One) adult(

s) and One child/children) from

CAPE TOWN to Saskatoon, Saskatchewan, Canada as arranged by DIL (Saskatoon is the closest airport to Anaheim);

b) Meal costs for the proposed employee and his/her family for the trip from CAPE TOWN to Saskatoon;

c) Approved immigration fees for the Proposed Employee and his/her family (eligible dependants only);

d) Costs of approved medical examinations required for the Proposed Employee and his/her family as a condition of immigration to Canada;

e) Costs of transportation from Saskatoon, Saskatchewan to the plant location where the Proposed Employee will be working;

f) An amount equal to one-twentieth (1/20) of DIL’s additional out-of-pocket expenses to arrange to bring the Proposed Employee and his/her family to Saskatchewan, Canada including professional recruitment fees paid to Howarth, Yengeni and Associates (PTY) Ltd. and the costs of travel and personnel for DIL representatives to travel to South Africa to meet with the Proposed Employee and others to arrange for all requirements necessary to allow the Proposed Employee and his/her family to travel to Canada. 4. DIL will advance the costs to the Proposed Employee as a forgivable loan (“The Loan”), the terms of which loan shall be as follows:

a) Subject to subparagraph 3(d), the Loan shall bear no interest;

b) The Loan shall be repayable in thirty-six (36) equal monthly installments commencing with the last day of the first month of employment of the Proposed Employee by DIL;

c) As long as the Proposed Employee does not resign from his employment with DIL, then as each installment comes due, DIL agrees to forgive the amount of that installment.

d) Should the Proposed Employee resign from employment with DIL at any time in the first thirty-six (36) months of employment, the entire amount of the loan outstanding as of the last date worked by the Proposed Employee shall become due and owing to DIL immediately and shall accrue interest at the rate of TEN (10%) percent per annum. [Emphasis added] [ 21 ] Nowhere in the Letter of Employment offer nor the Agreement is there any suggestion or term relating to a guarantee of continuous three year employment.

Conversely, it is the employee in paragraph number 2 of the Agreement acknowledging that it is his intention to remain employed with DIL for at least three years. The only other reference to three years is the one thirty-six monthly forgiveness of the total obligation as set out in paragraph 4(

c) and (

d) which would continue unless the employee resigns. As explained at trial, this would continue unabated through any lay-off period provided the employee did not resign, a fact which Doepker reiterated during its meetings with each of the Defendants following receipt of the termination letters. The Defendants testified that Doepker even encouraged them to seek temporary employment with Bourgault or any other employer until such time as they were called back to work. [ 22 ] Further, even if such a term was in place, Doepker did not demonstrate that it could not carry out the contract.

To the contrary, Doepker rescinded the Temporary Lay-off Notice three days after issuance such that no work interruption was experienced at all. Perhaps if there had been a term guaranteeing continuous three year employment and Doepker could not or would not offer work to

the end of the term, anticipatory breach would be available to the Defendants. However, as stated, neither of these conditions in fact existed. [ 23 ] It is instructive as well that none of the Defendants in their individual termination letters cited the inability of Doepker to fulfill its contract obligation providing three years continuous employment. Rather, it is the concern for future job security that appears to have motivated the Defendants to seek alternative permanent employment with Bourgault.

It is also noteworthy that each of the Defendants started with Bourgault at a higher wage and with increased benefits and further, that each Defendant testified that Bourgault did not offer any continuous guarantee of employment. [ 24 ] It was certainly the prerogative of each Defendant to seek what they perceived to be more stable and lucrative employment. However in so doing, they triggered their obligation to Doepker to repay that portion of their indebtedness which had not been forgiven to their date of resignation.

Alternatively, they could have continued on with Doepker weathering any potential lay-offs but reducing the loan obligation on a continuous basis, should they so have chosen. They can’t have it both ways however i.e. choosing to leave the employ of Doepker and also expect that they would have no consequences regarding their indebtedness as a result thereof. [5] [ 25 ] Accordingly for the foregoing reasons the Defendants cannot rely upon the doctrine of anticipatory breach in these circumstances to repudiate their obligation under the Agreement.

b) Effect of s. 2 of the Employment Agencies Act, R.S.S., 1978 ch. E-9 . [ 26 ] Sections 2 and 3 of the Employment Agencies Act reads: Fee Prohibited 2. No person, firm, corporation or association shall collect or receive, directly or indirectly, any fee or compensation for sending or persuading, enticing, inducing, procuring or causing to be sent from or to any place within the province, to or from any place outside the province, or between any two places within the province, any person seeking employment, or forgiving or furnishing information regarding employers seeking workers or workers seeking employment. Penalty 3. A person violating s. 2 is guilty of an offence and liable on

summary conviction before a Provincial Magistrate or two or more Justices of the Peace to a fine of not less than $10.00 nor more than $25.00. [ 27 ] Notwithstanding that s. 3 of the Act imposes a penalty for contravention, any contractual term to this effect would additionally be unenforceable because the object of such term would not be lawful by reason of malum prohibitum. [6] [ 28 ] By passing on their costs and expenses for procurement, Doepker is in effect collecting the fee directly from the Defendants contrary to the letter and spirit of the statute.

Undoubtedly, such fees and expenses could be claimed as tax deductible should they so choose however this is a different matter entirely. [ 29 ] Therefore those costs associated with the fees paid to the employment agency in South Africa as well as the proportionate share of the two Doepker employees as set out are not recoverable by Doepker.

c) Accounting of claimed expenses if Defendants determined to be liable to repay Doepker .

[ 30 ] The Court has reviewed the evidence of expenses submitted by Doepker for each employee. Although each Defendant took issue with the calculations, no credible evidence was provided to refute any of the claimed amounts. Anecdotal snippets of similar expenditures such as cost of airfare at a later time have no bearing on the cost to Doepker at the time the Defendants and their families were brought over to Canada. [ 31 ] Further, upon their arrival in Canada, each Defendant was provided with a

summary of expenses comprising the Agreement indebtedness. No issue was taken by any of the Defendants with the amounts at that time. IV RESULT [ 32 ] Doepker has calculated the recruitment fee and one-twentieth proportionate sharing cost to total $4,224.81 for each Defendant. This amount will be deducted from each of the Defendant’s outstanding indebtedness as follows:

a) Chetty $9,886.18 - $4,224.81 Balance owing $5,661.37

b) Koeberg $14,255.30 - $4,224.81 Balance owing $10,030.49

c) Naicker $14,237.12 - $4,224.81 Balance Owing $10,012.31

d) Poggenpoel $20,805.36 - $4,224.81 Balance Owing $16,580.55 [ 33 ] The Plaintiff is entitled to judgment in the principal amounts against each Defendant respectively: Chetty SC#27 of 2009 $ 5,661.37 Koeberg SC#28 of 2009 $10,030.49 Naicker SC#29 of 2009 $10,012.31 Poggenpoel SC#30 of 2009 $16,580.55 Although the Agreement in paragraph 4 calls for 10 percent per annum to be charged on any outstanding amounts owing to Doepker, the

Agreement is silent as to what interest accrual period would be utilised i.e. on a calendar year-end basis or alternatively, at the expiration of each twelve month period from the date indebtedness is triggered, or whether and in what manner compounding would or would not apply. Nor was there any evidence led at trial to explain how this was to be interpreted or calculated. In such circumstances, the Court is unwilling to speculate and declines to enforce this provision as it relates to interest.

Accordingly, the Court grants pre-judgment interest from February 1, 2009 to date of judgment on the judgment amounts as set out. Further, the Plaintiff shall have costs of issuing each claim against each Defendant together with service fees for each, if any. __________________________________ R.D. Jackson, J [1] The Plaintiff acknowledges the jurisdictional limit of $20,000.00 as the maximum amount of judgment permissible. [2] As per the Employment Agencies Act , R.S.S., 1978 ch. E-9, specifically ss. 2 and 3. [3] CED (4 th ) at para. 863, p. 1406 [4] The Law of Contracts , S.M.

Waddams, 4 th ed. at para. 595, p. 433 [5] A similar result was found by my sister Judge D.C. Scott in two decisions, Gregg’s Plumbing and Heating v. Leah Dawson , SC 483 [2008]; Gregg’s Plumbing and Heating Ltd. v. Doug Stephan , SC 76 [2009],(unreported), involving an agreement titled “Employee Training Cost Repayment Agreement”. Here funds advanced for training courses were not repayable unless the employee terminated employment within two years for any reason. In both instances, the employees terminated on their own volition and both were found liable accordingly. [6] Unlawful because prohibited by statute.