2017 NLCA 9, 2017 NLCA 9

Avalon Ford Sales

(1996) Limited (appellant/respondent by cross-appeal) v. Ralph Evans (respondent/appellant by cross- appeal) (15/74 and 15/78) Indexed As: Avalon Ford Sales

(1996) Limited v. Evans 2017 NLCA 9 1 C.A.N.L.R. 441 Court of Appeal of Newfoundland and Labrador Rowe, White and Harrington JJ.A. February 2, 2017

Summary: The appellant, Avalon Ford, an automotive dealership, appealed a decision of the Supreme Court Trial Division which ordered it to pay damages to the respondent, Ralph Evans for wrongful dismissal. Avalon Ford argued the trial judge erred in finding that Evans did not voluntarily resign and misapplied the law of good faith in finding that it breached a duty of good faith resulting in constructive dismissal. It also argued the judge erred in calculating the damages owed to him. Evans cross-appealed the order dismissing his claim for the amount of damages moral and punitive damages.

Held: Appeal and cross-appeal dismissed. Harrington J.A. (Rowe and White JJ.A. concurring): The standard of review applied by an appellate court depends upon the nature of the matter being reviewed. A pure question of law is reviewed on a standard of correctness. Findings of fact cannot be reversed unless the trial judge has made a palpable and overriding error. All contracts, including employment contracts, are subject to the organizing principle of good faith and fair dealing.

Damages resulting from the manner of dismissal must then be available only if the employer engages in conduct during the course of dismissal that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. While the implied term of good faith extends to the manner of termination only, new types of implied terms may be recognized in the future and the organizing principle of good faith may be used to interpret existing doctrines. The trial judge did not apply the wrong test for resignation by importing a subjective component into a purely objective test.

The test for concluding there has been a resignation is an objective one: the resignation must be clear and unequivocal. To be clear and unequivocal, the resignation must objectively reflect an intention to resign or conduct evidencing such an intention. The employee’s state of mind is a relevant consideration in determining whether or not the objective circumstances reflect a genuine intention to resign. Therefore, resignation has both an objective and a subjective component.

Where the alleged resignation takes place in the heat of the moment, it may not be reasonable for the employer to conclude that the employee has resigned based on the employee’s statements alone. The trial judge held that it was not reasonable for Avalon to conclude that Evans resigned. This is determinative of the issue of wrongful dismissal.

An employee may only resile from the resignation until such time as the employer accepts it or, where there is no acceptance, until theemployer relies on it to its detriment. If the employer accepts a valid resignation, there is no dismissal, direct or constructive. It does nottherefore seem possible to find that failure to give the employee a grace period before validly accepting a genuine resignation entitles theemployee to collect damages for wrongful dismissal. Contrary to the finding of the trial judge, there was no free-standing term of good faith into the parties’ employment contract.

The breachof the employer’s duty of good faith at the point of termination in the employee-employer relationship does not give rise to a cause ofaction that is separate from the action for wrongful dismissal. Even if Avalon failed to act in good faith in accepting a valid resignation from Evans, this could not have been characterized asconstructive dismissal. However, the employer’s purported acceptance of a resignation and subsequent treatment of Evans as a person nolonger employed, was found by the trial judge to amount to wrongful dismissal in a manner that was unduly insensitive.

Even thoughsome other aspects of the ruling are flawed, there is no basis to set aside that conclusion. Regarding the calculation of damages, appellate court has no authority to arbitrarily substitute an award on an assessment of damagesdifferent from that of the trial judge unless it can identify a mistaken or wrong principle of law applied by the trial judge. The trial judge found that the employer had deliberately filled out the forms so as to deprive Evans of short-term disability benefits. Thejudge drew inferences from the information available to her.

There is no palpable and overriding error in this finding. There is also no error of fact or law in the trial judge’s conclusion that Evans was entitled to a portion of the funds from the “MayMania” incentive. Relying on the past practice of the parties, the trial judge found that it was their intention that Evans would receive aportion of the funds from Ford incentive programs unless indicated in advance by the owner. She was entitled to do so and there is noreason to interfere with her conclusion.

Turning to the calculation of damages in lieu of notice, the trial judge found that, had Evans returned to work for Avalon, his dutieswould have been modified and he would have earned less income. This is consistent with his own evidence. While the amount he wouldhave earned in a modified position is indeed somewhat speculative, in her calculation the trial judge used the numbers presented to herby Avalon. The award was not a wholly erroneous estimate of damages.

Moral damages may be warranted if, at the time the contract was entered into, such damages are in the reasonable contemplation of theparties thus making it reasonably foreseeable that mental distress and anguish would result from the breach of contract. They arecalculated by evaluating the actual damages suffered. In the employment context, moral damages are available whenever the employer breaches the duty of good faith and fair dealing.

In thecircumstances surrounding the end of this employment relationship, the trial judge made the finding that Evans had been adequatelycompensated for all his damages by the recovery of the short-term disability he had lost. There is no evidence to suggest otherwise. Thus,the trial judge did not err in declining to award moral damages. There are no grounds to set aside the judge’s ruling that punitive damages were not warranted.

Punitive damages require malicious andoutrageous acts and are awarded when other damages, including aggravated damages, are insufficient to compensate the claimant.Nothing in the evidence suggests the trial judge erred in determining Evans had not established grounds for entitlement to punitivedamages. Cases cited: Cleary v. Courtney, 2010 NLCA 46, 299 Nfld. & P.E.I.R. 85 Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494 Wallace v. United Grain Growers Ltd., (SCC), [1997] 3 S.C.R. 701 Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 SCR 362 Kieran v.

Ingram Micro Inc. (2004), (ON CA), 189 OAC 58, 33 C.C.E.L. (3d) 157 (Ont. CA)

Beggs v. Westport Foods Ltd., 2011 BCCA 76, 14 B.C.L.R. (5th) 1 Cox v. Victoria Plywood Co-Operative Assoc. (1993), (BC SC), 2 C.C.E.L. (2d) 78 (B.C. Sup. Ct.) Widmeyer v. Municipal Enterprises Ltd. (1991), (NS SC), 36 C.C.E.L. 237 Robinson v. Team Cooperheat-MQS Canada Inc., 2008 ABQB 409, 67 C.C.E.L. (3d) 219 Lelievre v. Commerce and Industry Insurance Company of Canada, 2007 BCSC 253, 57 C.C.E.L. (3d) 31 Bru v. AGM Enterprises Inc., 2008 BCSC 1680 Johal v Simmons da Silva LLP, 2016 ONSC 7835 Bishop v. Rexel Canada Electrical Inc., 2016 BCSC 235 Tolman v.

Gearmatic Co. (1986), (BC CA), 14 C.C.E.L. 195 (B.C.C.A.) Kieran v. Ingram Micro Inc. (2004), (ON CA), 189 OAC 58; 33 C.C.E.L. (3d) 157 (Ont. CA) Kerr v. Valley Volkswagen, 2015 NSCA 7, 354 N.S.R. (2d) 327 Canada (Attorney General) v. Gatien, 2016 FCA 3, 479 N.R. 382 Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500 Stacey v. Consolidated Foods Corp. of Canada Ltd. (1987), (NS SC), 76 N.S.R. (2d) 91, 15 C.C.E.L. 113 O' Brien v. Cochrane, 2002 NLCA 45, 225 Nfld. & P.E.I.R. 285 Capital Pontiac Buick Cadillac GMC Ltd v. Coppola, 2013 SKCA 80, 364 D.L.R. (4th) 351 Turner v.

Newfoundland and Labrador Legal Aid Commission, 2014 NLTD(G) 156, 362 Nfld. & P.E.I.R. 94 Andrachuk v. Bell Globe Media Publishing Inc. (2009), (ON SC), 71 C.C.E.L. (3d) 224 (Ont. S.C.J.) Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29, 79 C.C.E.L. (3d) 23 Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 Counsel: Kevin F. Stamp Q.C., for the appellant/respondent by cross-appeal; Gregory M. Anthony and Ashley E. Savinov, for the respondent/appellant by cross-appeal. This appeal was heard on June 8, 2016 before Rowe, White and Harrington JJ.A.

The following judgment was delivered on February 2, 2017 by Harrington J.A. for the Court. ______________________________________________________________ Harrington J.A.: [1] This appeal arises from a judgment of a trial division justice ordering that Avalon Ford Sales

(1996) Limited (Avalon), anautomotive dealership, pay damages to Ralph Evans (Evans) for having caused his involuntary resignation. Evans also cross-appeals foran award of moral and punitive damages. For the reasons which follow, the appeal and cross-appeal should be dismissed. BACKGROUND [2] Evans worked for the Avalon from 1997 to 2010. During the twelve years Evans was employed there, Avalon became thelargest Ford dealership in Atlantic Canada and its sales volume increased significantly.

Evans was the commercial fleet managerresponsible for dealing with commercial customers while reporting to Doug Lester, General Sales Manager and David Wilkins, theOwner. He was also responsible, with two other managers, for the oversight of the sales desk at the dealership premises. [3] On June 10, 2010 it was discovered that a mistake had been made regarding inventory control for which Evans was responsible. A company which modified a new vehicle before delivery failed to return it promptly to Avalon to be delivered to the purchasingcustomer.

Instead, the vehicle was delivered directly to the customer and Avalon was not paid for it for a number of months. Although

the mistake was rectified, a tense meeting took place among Messrs. Wilkins, Lester and Evans. Evans responded poorly to Mr. Wilkins’ criticism and suffered a medically diagnosed acute stress reaction. Evans went home early that day but returned in the evening. He spoke to Mr. Lester who tried unsuccessfully to calm him down. Evans handed his keys and cellphone to Mr. Lester and left the office with the verbal statement: “I’m done”. Mr. Lester testified that Evans’ face was flush while displaying a troubled demeanor. The trial judge found Evans to be “a sensitive person”. [ 4 ] Mr. Lester advised Mr.

Wilkins that Evans had resigned. Both men were upset with Evans for abandoning the sales team at a busy time, especially when he had just returned from vacation and another member of the management team had not completed his vacation. Mr. Wilkins suspected that Evans was going to work for a competitor which in fact was found not to be true. [ 5 ] Evans tried to call Mr. Wilkins several times, but his phone calls went unanswered. The two eventually met on June 14, 2010. The meeting did not go well. Mr.

Wilkins sought an apology and was harsh in his criticism of Evans’ actions in “deserting” the dealership when it was already short-handed due to the vacation absence. Evans sought emotional support. Evans gave Mr. Wilkins a note from a doctor in support of his request to leave work due to stress. Mr. Wilkins tore up the note and told Evans to leave the premises and not to speak to anyone. [ 6 ] Evans’ final compensation was limited to his vacation pay and an amount which was due to him as part of an incentive bonus which had been previously miscalculated.

He pursued litigation for damages for constructive dismissal or, in the alternative, for wrongful dismissal after an involuntary resignation. [ 7 ] The trial judge characterized the main issue as whether there had been a breach of a fundamental term of Evans’ employment contract. There was no written contract. The trial judge made findings identifying the terms of employment and found that there was an implied duty of good faith and fair dealing in contractual performance which Avalon had breached.

The judge concluded that Evans involuntarily resigned and elaborated at paragraph 117 of her reasons as follows: I have thus far concluded: 1. The duty of good faith and fair dealings was an implied fundamental term of the Plaintiff’s contract of employment; 2. Mr. Evans resigned but his resignation was neither voluntary nor equivocal ( sic ); 3. Whether the Plaintiff’s resignation was involuntary (as I have found) or voluntary, in the circumstances of confusion and uncertainty, in this case, the Defendant was required to make further enquiries and act with consideration in response to the resignation; and 4.

The Defendant breached its duty of good faith and fair dealings in failing to give the Plaintiff time to cool off and reconsider, in failing to make further enquiries and act with consideration in response to the resignation. Alternatively, the Defendant’s actions represented careless disregard for the employee, similarly characterized as a breach of this implied term of their contract. ISSUES ON APPEAL AND CROSS-APPEAL [ 8 ] The issues on this appeal and cross-appeal are:

(1) Did the trial judge err in law by misapplying the law of voluntary resignation?

(2) Did the trial judge make palpable and overriding errors of fact?

(3) Did the trial judge err in calculating damages in lieu of notice?

(4) Did the trial judge err in calculating damages concerning the incentive program or disability benefits?

(5) Did the trial judge err by declining to order moral damages?

(6) Did the trial judge err by declining to order punitive damages? STANDARD OF REVIEW [ 9 ] The standards of review applicable to this appeal are derived from Cleary v. Courtney , 2010 NLCA 46 , 299 Nfld. & P.E.I.R. 85 at paragraph 15 : [15] The standards of review applied by this Court were discussed in Ring v. Canada et al ., 2010 NLCA 20 , at para. 6 : The standard of review applied by an appellate court depends upon the nature of the matter being reviewed. A pure question of law is

reviewed on a standard of correctness and an appellate court is free to replace the opinion of the trial judge with its own. Findings of fact, on the other hand, cannot be reversed unless the trial judge has made a palpable and overriding error. A determination of whether a legal standard was met involves the application of a legal standard to a set of facts which is a question of mixed fact and law.

A question of mixed fact and law is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect to the characterization of the standard or its application, in which case the error may amount to an error in law and the applicable standard is correctness. These principles are well established: Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235 . Findings of credibility are part of the fact finding process and are subject to the same standard of review, as are inferences drawn from the facts.

If inferences drawn by the trial judge are reasonable, an appellate court should not intervene just because other inferences could also have been reasonably drawn: H.L. v. Canada (Attorney General) , 2005 SCC 25 , [2005] 1 S.C.R. 401 at para. 74 . In H.L. v. Canada , paras. 55-56, Fish J. said: “Palpable and overriding error” is at once an elegant and expressive description of the entrenched and generally applicable standard of appellate review of the findings of fact at trial. But it should not be thought to displace alternative formulations of the governing standard.

In Housen , for example, the majority … and the minority … agreed that inferences of fact at trial may be set aside on appeal if they are “clearly wrong”. Both expressions encapsulate the same principle: an appellate court will not interfere with the trial judge’s findings of fact unless it can plainly identify the imputed error, and that error is shown to have affected the result. In my respectful view, the test is met as well where the trial judge’s findings of fact can properly be characterized as “unreasonable” or “unsupported by the evidence”.

ANALYSIS [ 10 ] The trial judge held that Avalon did not constructively dismiss Evans by materially altering his job description or ignoring his requests for assistance. She considered whether there could be constructive dismissal through breach of a major term of the employment relationship. She concluded that, whether Evans resigned voluntarily or involuntarily, there was a duty on Avalon to act in good faith and to permit him time to reconsider his employment status.

Having found careless disregard of Evans by Avalon, the trial judge held the employer breached a fundamental term of the employment contract. [ 11 ] The trial judge further held that Avalon had not established that Evans had resigned voluntarily or unequivocally and ordered Avalon to pay Evans damages in lieu of notice including monetary benefits for the amount for time he would have spent on stress/disability leave, and also compensation for a portion of the dealership incentive program entitlement.

Avalon’s Position [ 12 ] Avalon submits that the trial judge misapplied the law regarding involuntary resignation, made errors of fact by drawing mutually exclusive and unsupported conclusions and erred in principle in the calculation of damages. Avalon further submits that the trial judge imported a subjective component into the test for resignation, as well as a voluntariness component when such an element is not legally recognized in the jurisprudence. The Appellant submits that the traditional test is whether the employee intended to resign and whether this was supported by his acts and words.

Avalon submits that this test was met on the facts. Avalon submits that consideration of the opportunity to resile was not relevant since Evans did not intend to return to his former job and submits that the trial judge significantly expanded the duties of employers in this area of the law. [ 13 ] Moreover, Avalon submits that the trial judge erred in fact and law in finding that: (

i) Evans did not resign from a position to which he maintained he would not return; (ii) Avalon falsified the facts when filling out Evans’ application for disability benefits by stating Evans resigned and had not provided notice of any prior health issues; (iii) if Evans had continued to work for Avalon, he could have returned to the former position of fleet sales manager earning $80,000- $90,000 which significantly affects the assessment of the damages; and (iv) there was an implied term in the contract entitling Evans to $26,661.10 for a sales incentive payment entitled the “May Mania” incentive. [ 14 ] Avalon submits that when calculating damages, the trial judge erred by ordering compensation for the time Evans would have been on disability leave, and by awarding any damages for the “May Mania” incentive when the evidence had not been established that there was an implied term in Evans’ contract entitling him to any such payments.

Further, Avalon submits the trial judge miscalculated the damages in lieu of notice since it was not established on a preponderance of evidence that Evans would have earned the wages previously earned while working solely as a fleet manager. Evans’ Position [ 15 ] Evans submits that the trial judge made no errors with respect to the key issues raised by Avalon, and that she applied the correct, well-established, legal test for resignation and did not import any extraneous components into that test.

She made correct findings of fact about Avalon’s failure to process the disability forms for Evans and regarding Evans’ entitlement to a portion of the “May Mania” incentive paid out for vehicle sales that month by the three managers. [ 16 ] However, Evans has acknowledged that the judge erred in her calculation of damages in lieu of notice by assuming he would been limited to claiming loss of earnings based on income of $80,000-$90,000 as a fleet manager when the yearly income had been approximately double that amount. Evans cross-appeals seeking a greater amount of lost income.

Respondent’s counsel argues that Avalon’s submission that Evans would have performed other, lesser jobs, is condescending and there is no jurisprudence that would

support Avalon’s submission. Evans submits that damages in lieu of notice are not calculated by assessing what the employee wouldhave earned had he continued working with “modified duties” as found by the trial judge, but by calculating the amount he would haveearned had the contract in place at the time of the involuntary resignation been performed, which would have been $186,902.16. Evansalso cross-appeals seeking moral and punitive damages. In reply to the cross-appeal, Avalon argues the trial judge did not err bydeclining to award moral or punitive damages.

APPLICABLE LAW [17] The Supreme Court has held that all contracts, including employment contracts, are subject to the organizing principle of goodfaith and fair dealing (Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494). Even prior to Bhasin, the Supreme Court had recognized aduty on an employer to act in good faith when terminating an employee (Wallace v. United Grain Growers Ltd., (SCC),[1997] 3 S.C.R. 701; Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 SCR 362).

In Bhasin, the Supreme Court explained severalways in which the organizing principle of good faith has been applied in contract law and the nature of the duty it creates in theemployment context: [53] …. [C]ommon law Canadian courts have also recognized that there are classes of relationships that call for a duty of good faith tobe implied by law. [54] For example, this Court confirmed that there is a duty of good faith in the employment context in Honda Canada Inc. v. Keays,2008 SCC 39, [2008] 2 S.C.R. 362….

The majority held that in all employment contracts there was an implied term of good faithgoverning the manner of termination. In particular, the employer should not engage in conduct that is “unfair or is in bad faith by being,for example, untruthful, misleading or unduly insensitive” when dismissing an employee: para. 57, citing Wallace v. United GrainGrowers Ltd., (SCC), [1997] 3 S.C.R. 701, at para. 98.

Good faith in this context did not extend to the employer’sreasons for terminating the contract of employment because this would undermine the right of an employer to determine the compositionof its workforce: Wallace, at para. 76. [18] In paragraphs 56-57 of Honda Canada, citing the Wallace decision, the Supreme Court described that damages may flow from abreach of the term of good faith as follows: … The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of noticewithout regard to the ordinary psychological impact of that decision.

At the time the contract was formed, there would not ordinarily becontemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distressand hurt feelings resulting from dismissal are not compensable.

Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace,namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example,untruthful, misleading or unduly insensitive” (para. 98). (Emphasis added.) [19] While the implied term of good faith established by these precedents extends to the manner of termination only, Bhasin alsorecognized that new types of implied terms may be recognized in the future and that the organizing principle of good faith may be usedto interpret existing doctrines (at paragraph 66).

Good Faith, Involuntary Resignation and the End of the Employment Contract [20] The trial judge found that Evans was entitled to damages for wrongful dismissal by his former employer, Avalon. The trialjudge found that Evans offered an equivocal and involuntary resignation which the employer purported to accept, but in so doing, failedto act in good faith. She found that good faith would require the employer to give the employee some time to resile from the resignation.

She concluded Avalon breached a fundamental term of the purported employment contract and held that it was liable to pay damages: [87] The evidence as a whole supports therefore that Mr. Evans’ decision to resign was made while he was under significant stress and Iconclude that these circumstances undermine the voluntariness of what I have concluded was a resignation by Mr. Evans on the eveningof June 10, 2010. … [94] On the evidence as a whole, I conclude therefore that Mr. Evans’ resignation cannot be characterized as unequivocal.

The Defendant has not met the onus of proving that the Plaintiff resigned. [21] As discussed below, the trial judge misapplied some of the doctrine. However, she made the key finding that Evans did notunequivocally resign but the employer treated him as terminated. As the following explains, this finding is determinative of the issue ofwrongful dismissal. [22] Since Bhasin, good faith is an underlying principle in all contracts. However, the fundamental rules of contract such as theprinciples of offer and acceptance continue to apply.

Thus in the employment context, before determining whether or not the employerhad a duty to act in good faith when terminating the employee and whether it was breached, it must be determined whether or not theemployee was in fact terminated or whether he or she willingly resigned.

[23] The employer argues that the judge applied the wrong test for resignation by importing a subjective component into a purelyobjective test. I do not agree. The test for concluding there has been a resignation is an objective one: the resignation must be clear andunequivocal. To be clear and unequivocal, the resignation must objectively reflect an intention to resign or conduct evidencing such anintention (Kieran v. Ingram Micro Inc. (2004), (ON CA), 189 OAC 58, 33 C.C.E.L. (3d) 157 (Ont. CA) at para. 27; G. England, R. Wood & I.

Christie, Employment Law in Canada, 4th ed, loose-leaf, (Markham, ON: LexisNexis Butterworths, 2005) at13-8 - 13-9). [24] It is accordingly clear from the authorities that the employee’s state of mind is a relevant consideration in determining whether ornot the objective circumstances reflect a genuine intention to resign. Therefore, resignation has both an objective and a subjectivecomponent (Beggs v.

Westport Foods Ltd., 2011 BCCA 76, 14 B.C.L.R. (5th) 1 at paras. 36-37). [25] Where the alleged resignation takes place in the heat of the moment, it is well-established that it may not be reasonable for theemployer to conclude that the employee has resigned based on the employee’s statements alone. In fact, the jurisprudence hasconsistently held that it may be unreasonable for the employer to conclude from an emotional outburst that the employee has resigned:Cox v. Victoria Plywood Co-Operative Assoc. (1993), (BC SC), 2 C.C.E.L. (2d) 78; Widmeyer v.

MunicipalEnterprises Ltd. (1991), (NS SC), 36 C.C.E.L. 237; Robinson v. Team Cooperheat-MQS Canada Inc., 2008 ABQB409, 67 C.C.E.L. (3d) 219 at paras. 49-53; Lelievre v. Commerce and Industry Insurance Company of Canada, 2007 BCSC 253, 57C.C.E.L. (3d) 31 at para. 52; Bru v. AGM Enterprises Inc., 2008 BCSC 1680 at paras. 101-109; Johal v Simmons da Silva LLP, 2016ONSC 7835 at paras. 35-36; Bishop v.

Rexel Canada Electrical Inc., 2016 BCSC 235 at paras. 49-50. [26] Moreover, this is precisely the type of situation where the overarching duty of good faith takes effect and influences theinterpretation of the established doctrines of “resignation” and “reasonableness”.

Particularly where there has been a lengthy employmentrelationship and the employer is aware that the employee has a sensitive disposition and may be emotionally and financially vulnerable,the employer cannot, without clarification, reasonably conclude that the employee’s intention is to resign solely on the basis of theemployee’s statement “I quit”. [27] Consistent with the authorities, the trial judge held that it was not reasonable for Avalon to conclude that Evans resigned.

Hepresented a doctor’s note certifying that he suffered from a serious stress reaction while subject to an existing cardiac disorder followingfrom a severe reprimand from Mr. Wilkins, the dealer principal, which required an absence from the workplace. He did not receive amedical clearance to resume employment for several months. [28] Notwithstanding this important finding, which is supported by the weight of authority, the trial judge proceeded to discuss whather findings would be if she had found that Evans did resign.

She found that, had Evans resigned, the duty of good faith required theemployer to give him some time to resile from the resignation.

Despite her earlier finding that Evans had not been constructivelydismissed due to a change in the terms of his employment, the trial judge then appeared to find that Evans had been constructivelydismissed because the employer failed to comply with the duty of good faith by not giving him sufficient time to resile from theresignation. [29] The trial judge having found that Evans did not offer a clear and unequivocal resignation, this part of the discussion had nobearing on the key issues of this case.

I comment on it only to clarify some aspects which appear to have caused confusion for theparties. [30] An employee has traditionally been permitted to resile from a resignation if the employer had not relied on it to the employer’sdetriment (Tolman v. Gearmatic Co. (1986), (BC CA), 14 C.C.E.L. 195 (BCCA) at paras. 3, 14; Kieran v. IngramMicro Inc. (2004), (ON CA), 189 OAC 58; 33 C.C.E.L. (3d) 157 (Ont. CA) at para. 34).

However, recently in Kerr v.Valley Volkswagen, 2015 NSCA 7, 354 N.S.R. (2d) 327 at paragraphs 11-14, the Nova Scotia Court of Appeal explained that “[w]hetheror not a party relied upon an offer to their detriment is only relevant in cases where the offer has not been accepted” (at paragraph 12).Thus, an employee may only resile from the resignation until such time as the employer accepts it or, where there is no acceptance, untilthe employer relies on it to its detriment.

If the employer accepts a valid resignation, there is no dismissal, direct or constructive. [31] It does not therefore seem possible to find that failure to give the employee a grace period before validly accepting a genuineresignation entitles the employee to collect damages for wrongful dismissal. This would seem consistent with the finding of the SupremeCourt of Canada in Bhasin at paragraph 64 that good faith is an organizing principle and not a free-standing rule. [32] I would not therefore, go as far as the trial judge did and imply a free-standing term of good faith into the parties’ employmentcontract.

I agree with the statement of the Federal Court of Appeal in Canada (Attorney General) v. Gatien, 2016 FCA 3, 479 N.R. 382at paragraph 13 that “…the breach of the employer’s duty of good faith at this point [the point of termination] in the employee-employerrelationship does not give rise to a cause of action that is separate from the action for wrongful dismissal.” [33] However, the organizing principle of good faith may be relied upon to imply specific duties and to evaluate how the actions ofthe parties fit into existing doctrines.

A genuine acceptance of a genuine resignation does not entitle the employee to damages.

However,in assessing whether the employer has communicated a genuine acceptance of a resignation, the court may take account of therelationship between the parties and general obligations of good faith and fair dealing and find that, in a particular case, the employerintended to give an employee some time to resile from a resignation before accepting it and that failure to do so means that no genuineacceptance was communicated. [34] I have found that no free-standing duty of good faith can be implied into the parties’ contract.

Even if I am wrong about that, hadAvalon failed to act in good faith in accepting a valid resignation from Evans (something which did not occur, since Evans did not offer agenuine resignation) this could not have been characterized as constructive dismissal as the trial judge appeared to find. In Potter v. NewBrunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500, the Supreme Court of Canada clarified the test forconstructive dismissal as follows: [32] Given that employment contracts are dynamic in comparison with commercial contracts, courts have properly taken a flexible

approach in determining whether the employer’s conduct evinced an intention no longer to be bound by the contract. There are twobranches of the test that have emerged. Most often, the court must first identify an express or implied contract term that has beenbreached, and then determine whether that breach was sufficiently serious to constitute constructive dismissal: J. R. Sproat, WrongfulDismissal Handbook (6th ed. 2012), at p. 5-5; P.

Barnacle, Employment Law in Canada (4th ed. (loose-leaf)), at §§13.36 and 13.70.Typically, the breach in question involves changes to the employee’s compensation, work assignments or place of work that are bothunilateral and substantial: see, e.g., G. England, Individual Employment Law (2nd ed. 2008), at pp. 348-56. In the words of McCardie J.in Rubel Bronze, at p. 323, “The question is ever one of degree.” [33] However, an employer’s conduct will also constitute constructive dismissal if it more generally shows that the employer intendednot to be bound by the contract.

In applying Farber, courts have held that an employee can be found to have been constructivelydismissed without identifying a specific term that was breached if the employer’s treatment of the employee made continuedemployment intolerable: see, e.g., Shah v. Xerox Canada Ltd. (2000), (ON CA), 131 O.A.C. 44; Whiting v. WinnipegRiver Brokenhead Community Futures Development Corp. (1998), (MB CA), 159 D.L.R. (4th) 18 (Man. C.A.).

Thisapproach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer and thedetermination of whether those acts evinced an intention no longer to be bound by the contract. (Emphasis added.) [35] First, it is difficult to see how breaching the duty of good faith in accepting a resignation would be a sufficiently “serious” breachor change in the employment relationship to ground a cause of action in constructive dismissal.

Second, constructive dismissal ispredicated on the notion that an employee may consider themselves to have been dismissed in response to the repudiation of the contractby the employer (Potter at para. 30; see also Stacey v. Consolidated Foods Corp. of Canada Ltd. (1987), (NS SC), 76N.S.R. (2d) 91, 15 C.C.E.L. 113). Here the lack of good faith and fair dealing of the employer in accepting the resignation was notdeterminative of Evans’ choice to give it in the first place.

Moreover, if the employer’s actions were in response to what the dealermanagement believed to be a resignation by Evans, it is difficult to see how the employer could be viewed to be acting unilaterally tochange the terms of the contract. [36] Therefore, this part of the trial judge’s analysis was flawed. Nonetheless, the trial judge did not err in finding that the duty ofgood faith could be applied to inform a finding of what, in the context of this employment relationship, would have been reasonablecircumstances which had to exist for Avalon to conclude that Evans resigned.

Such a scenario was at play in this proceeding by Evanstelling Mr. Lester that “he was done”, handing in his keys, and leaving the premises. He then sought medical advice which led tosubmission of a disability insurance claim form to be co-signed by management to trigger a sick leave entitlement. At this point therehad been no written resignation and Evans’ main complaint was a heavy workload that had grown to the point where his place ofemployment was the largest Ford dealership in Atlantic Canada. From the outset, Mr.

Wilkins, the dealer principal had been angry withEvans for his mishandling of the sale transaction where payment had not been obtained before the vehicle left the dealership. [37] Mr. Wilkins showed no sympathy for Evans’ mistake. When Evans left the workplace to see a physician which led to theissuance of a doctor’s sick leave note, Mr. Wilkins would not confirm on the employer’s portion of the form that Evans was sufferingfrom high blood pressure and was in need of time off work. This series of events included an incident when in anger Mr.

Wilkins tore upthe medical note tendered by Evans to commence paid disability leave because the dealership was short staffed. The trial judge foundthat in all the circumstances, including (

i) the request for disability leave, (ii) the length of the employment relationship of fifteen years,and (iii) the failure to inquire further, the employer could not reasonably conclude Evans had voluntarily resigned. The employer’spurported acceptance of that resignation and subsequent treatment of was as a person no longer employed, was thus found by the trialjudge to amount to wrongful dismissal in a manner that was “unduly insensitive” (see Wallace at para. 98). Even though some otheraspects of the ruling are flawed, there is no basis to set aside that conclusion.

Calculation of Damages for Lost Salary and Other Compensation [38] Both Avalon and Evans argue that the trial judge erred in calculating the damages due to Evans for the wrongful dismissal.Avalon argues that there was no evidence to support an award of damages for the period that Evans was on short-term disability and nobasis to find an implied term that Evans was entitled to any portion of the money from the “May Mania” incentive.

Both Avalon andEvans argue the trial judge erred in calculating damages in lieu of notice: Avalon says the trial judge should have ordered lesscompensation and Evans says she should have ordered more. [39] The approach to reviewing damage awards was set out by this Court in O' Brien v. Cochrane, 2002 NLCA 45, 225 Nfld. &P.E.I.R. 285: [4] In Kielley v. General Hospital Corporation (NL CA), [1999] N.J.

No. 355, 183 Nfld. & P.E.I.R. 1, Steele J.A.,of this Court described the standard of review of assessment of damages as follows at § 30 It is clear an appellate court has no authority to arbitrarily substitute an award on an assessment of damages different from that of the trialjudge unless it can identify a mistaken or wrong principle of law applied by the trial judge, be it some irrelevant factor or the omission toconsider some relevant one.

Intervention by an appellate court may be warranted if the award is either so inordinately low orinordinately high that it constitutes a wholly erroneous estimate of the damages. The error necessary to justify interference by an appealcourt has been described as a manifest or some palpable and overriding error. (See also: Taylor v. Hogan (1998), (NL CA), 160 Nfld. & P.E.I.R. 93; Gosse v. CBS Taxi Ltd., 2000 NFCA 16,[2000] N.J. No. 75, 185 Nfld. & P.E.I.R. 255; and Naylor Group v.

Ellis-Don Construction (2001), 2001 SCC 58, 204 D.L.R. (4th) 513at § 80 (SCC).) [40] I begin with the award of damages to compensate for the loss of short-term disability benefits. The trial judge found that theemployer had deliberately filled out the forms so as to deprive Evans of short-term disability benefits. Avalon has challenged this findingas not being supported by the evidence. However, the judge drew inferences from the information available to her and concluded thatbased on the objective circumstances known to the employer, Avalon must have made false statements regarding Evans’ application for

disability insurance. There is no palpable and overriding error in this finding. Based on the evidence, this conclusion was reasonablyopen to the trial judge. Nor is the award so high as to be a wholly erroneous assessment of the damages. There is therefore no basis onwhich this Court may interfere. [41] There is also no error of fact or law in the trial judge’s conclusion that Evans was entitled to a portion of the funds from the “MayMania” incentive.

Relying on the past practice of the parties, the trial judge found that it was their intention that Evans would receive aportion of the funds from Ford incentive programs intended to benefit the sales team or programs intended to benefit the dealership team,unless indicated in advance by Mr. Wilkins. In so finding, the trial judge implicitly rejected Mr. Wilkins’ evidence at trial that it was nothis intention that Evans should benefit from this particular program and took a view of the facts which was more consistent with theobjective circumstances.

She was entitled to do so and there is no reason to interfere with her conclusion. [42] Turning finally to the calculation of damages in lieu of notice, both parties argue, for different reasons, that the trial judge madeerrors in calculating the amount due to Evans. Avalon argues that Evans would not have suffered any damages since it was speculationthat he could return to work with modified duties.

Evans asks for the full amount of his salary presuming he returned to work in his priorposition and performed all of the duties as he had previously done. [43] The trial judge rejected both of these extreme positions. She found that, had Evans returned to work for Avalon, his duties wouldhave been modified and he would have earned less income. This is consistent with his own evidence and therefore his argument that heshould be entitled to the same amount of pay as he had previously is not sustainable.

While the amount he would have earned in amodified position is indeed somewhat speculative, in her calculation the trial judge used the numbers presented to her by Avalon,Avalon. In these circumstances, since it was common ground that Evans would have earned at least $80,000-90,000, I find she made noerror. The award was not a wholly erroneous estimate of damages. Moral and Punitive Damages [44] The trial judge found that the employer lacked good faith in terminating Evans, but did not award moral damages because he hadnot shown his stress to be causally connected to the lack of good faith.

She also found that the employer’s conduct was not so egregiousas to warrant punitive damages. [45] Moral damages may be warranted if, at the time the contract was entered into, such damages are in the reasonable contemplationof the parties thus making it reasonably foreseeable that mental distress and anguish would result from the breach of contract. They arecalculated by evaluating the actual damages suffered (Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362 at paras. 54–55).

The Saskatchewan Court of Appeal explained the modern approach to moral damages in Capital Pontiac Buick Cadillac GMC Ltd v.Coppola, 2013 SKCA 80, 364 D.L.R. (4th) 351 at paragraphs 26 and 27: [26] Moral damages are generally aggravating in nature and, therefore, appear to take the place of or, more properly, are the same asaggravated damages in the context of wrongful dismissal cases. In Keays, Bastarache J. noted (at paras. 54-60) that what constitutesmoral damages is informed by the Supreme Court of Canada’s previous decision in Wallace [Wallace v.

United Grain Growers Ltd. (SCC), [1997] 3 S.C.R. 701] and that moral damages flow from the principle first articulated in Hadley v.

Baxendale (1854),156 E.R. 145, 9 Ex. 341 (being that damages for breach of contract are compensable when such damages are in the reasonablecontemplation of the parties at the time the contract was entered into, thus making them reasonably foreseeable in the event of a breach).Damages for hurt feelings or for the normal feelings that accompany a dismissal are not compensable (Keays at para. 59). [27] In the employment context then, moral damages are available whenever the employer breaches the duty of good faith and fair dealing it owes to its employee in the dismissal of its employee (see Wallace, at para. 95).[4] The duty requires employers to be“[c]andid, reasonable, honest, and forthright…” and further requires employers to “[r]efrain from engaging in conduct that is unfair or isin bad faith by being, for example, untruthful, misleading, or unduly insensitive” when dismissing an employee (Wallace, at para. 98).

Ifan employer should run afoul of these requirements, moral damages will likely follow. (Emphasis added) [46] S. Ray-Ellis, Halsbury's Laws of Canada - Employment (2015 Reissue), (Markham:LexisNexis, 2015) notes that “Examples ofconduct in dismissal resulting in compensable damages include attacking the employee's reputation at the time of dismissal,misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right.” See also Turner v.

Newfoundland and Labrador Legal Aid Commission, 2014 NLTD(G) 156, 362 Nfld. & P.E.I.R. 94 at paragraphs 308-325 where the tone of the dismissal, the failure to treat the employee in a similar manner to other employees and the employer’ssubsequent actions in making exaggerated, untrue and unsubstantiated representations to the Law Society, warranted an award of moraldamages. (See also Gatien, supra at paras. 13-18; Andrachuk v. Bell Globe Media Publishing Inc. (2009), (ON SC),71 C.C.E.L. (3d) 224 at paras. 29-37). [47] The trial judge accepted that Avalon’s treatment of Evans amounted to careless disregard.

She also accepted that the employertook steps to deprive Evans from drawing short-term disability benefits, in a vindictive manner (at paragraph 193). However,circumstances surrounding the end of the employment relationship in this proceeding are distinguishable from other cases where anaward of moral damages was held to be warranted given that in this proceeding, the trial judge made an ultimate finding that Evans hadbeen adequately compensated for all his damages by the recovery of the short-term disability he had lost. There is no evidence tosuggest otherwise.

Thus, I find that the trial judge did not err in declining to award moral damages. [48] Further, there are no grounds to set aside the judge’s ruling that punitive damages were not warranted. Punitive damages requiremalicious and outrageous acts and are awarded when other damages, including aggravated damages, are insufficient to compensate theclaimant (see Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29, 79 C.C.E.L. (3d) 23 at para. 66; Whiten v. Pilot Insurance Co.,2002 SCC 18, [2002] 1 S.C.R. 595, at para. 94).

Ray-Ellis suggests the following examples of employer actions which may result inpunitive damages, although this is not exhaustive:

1. The employer knowingly fabricates allegations of serious misconduct or incompetence against an employee to support dismissal, especially if such allegations are maintained up to and during the trial. 2. The employer summarily dismisses an employee for serious misconduct, such as theft without conducting a reasonably comprehensive and unbiased investigation, especially if the employer goes ahead with the dismissal after it becomes obvious that the employee is innocent. 3.

The employer implements the dismissal in a manner designed to disparage the employee's capabilities and/or honesty in the eyes of his or her colleagues and potential employers. 4. The employer utilizes "hardball" tactics to intimidate the employee into withdrawing or settling his or her wrongful dismissal suit, such as withholding in bad faith moneys owing to the employee under the employment standards legislation or the contract of employment. 5. The employer conducts a bad faith (or possibly even a seriously negligent) performance appraisal of the employee that diminishes his or her professional reputation. 6.

The employer fraudulently misrepresents to the employee important facets of the employment relationship, such as job security, in order to induce him or her to accept employment and subsequently dismisses him or her in disregard of those representations. 7. The employer's mistreatment of the employee also amounts to a violation of his or her human rights at common law or under legislation. [ 49 ] Nothing in the evidence suggests the trial judge erred in determining Evans had not established grounds for entitlement to punitive damages.

The trial judge did not err in her conclusion that the conduct of the employer does not rise to the level of the actions described above.

SUMMARY AND DISPOSITION [ 50 ] In the result, I would order that the appeal and the cross-appeal be dismissed. I would affirm the costs award from the court appealed from. Evans shall have party and party costs for one counsel in this Court under Column 3 of the Scale of Costs given the primary appeal on the issues of liability and damages was not successful. Appeal dismissed. Cross-appeal dismissed.