McCallum v Saputo, 2021 MBCA 62

Citation: McCallum v Saputo, 2021 MBCA 62 Date: 20210616 Docket: AI20-30-09499 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Jennifer A. Pfuetzner Madam Justice Karen I. Simonsen BETWEEN : PATRICK HALL MCCALLUM ) ) J. A. Kagan and (P laintiff) Appellant ) A. M. Mariani ) for the Appellant - and - ) (via videoconference) ) SAPUTO DAIRY PRODUCTS GP, SAPUTO ) C. L. Lazar and FOODS LIMITED ) M.

Alward ) for the Respondents (Defendants) Respondents ) (via videoconference) ) - and - ) Appeal heard: ) January 13, 2021 LOBLAW COMPANIES LIMITED, ) LOBLAWS INC. and ORRY LAMB ) Judgment delivered: ) June 16, 2021 (Defendants) ) COVID-19 NOTICE: As a result of the COVID-19 pandemic and pursuant to r 37.2 of the MB, Court of Appeal Rules , MR 555/88R , this appeal was heard remotely by videoconference.

On appeal from 2020 MBQB 66 pfuetzner JA [ 1 ] This appeal raises issues of procedural fairness in the termination of employment, including whether an employer has a free-standing, actionable duty to investigate circumstances of its employee’s alleged wrongdoing prior to dismissing the employee for cause. [ 2 ] The defendant employer, Saputo Dairy Products GP (Saputo), received information that its employee, the plaintiff, had taken product from one of its customer’s stores without authorization.

Saputo terminated the plaintiff’s employment without conducting any further investigation. [ 3 ] At trial, the trial judge found that Saputo established that it had just cause to terminate the plaintiff’s employment and he dismissed the plaintiff’s claim for wrongful dismissal.

The plaintiff appeals, arguing that the trial judge erred in finding that Saputo was entitled to dismiss him for allegations of dishonesty without even a “rudimentary form of investigation” (at para 42) into the allegations and on the basis of information discovered after the plaintiff commenced his action. [ 4 ] For the reasons that follow, I would dismiss the appeal. The trial judge made no reversible errors of fact or law. It remains the case in Manitoba that, at common law, an employer has no duty to investigate prior to dismissing an employee.

That is not to say that such a course of conduct is without risk to an employer because, if it cannot establish just cause at trial, it will be liable for damages for breach of contract, as well as potentially for punitive damages for the manner of dismissal. Background [ 5 ] The plaintiff was employed by Saputo as a sales representative.

One of his duties was to attend stores that sold cheese manufactured by Saputo, identify Saputo cheese that was unsaleable, determine whether the store would get a credit (depending on the reason it was unsaleable), document his findings and have them approved by a designated store employee. The unsaleable cheese would

be disposed of by store employees. [ 6 ] On Friday, August 21, 2015, the plaintiff attended at a “Superstore” grocery store in Winnipeg (the store) owned by Loblaw Companies Limited and Loblaws Inc. (Loblaw) and took from the shelves 14 packages of cheese which he claimed were unsaleable. The plaintiff removed the cheese from the store as he claimed the store’s trash compactor was locked and he intended to dispose of the cheese himself.

At his car, he was stopped and subsequently detained by an assistant store manager and a loss prevention officer for removing the product without paying for it. [ 7 ] Over the next few days, the plaintiff approached the store’s management to try to resolve the matter, but he was unsuccessful. On Monday, August 24, 2015, the plaintiff spoke to his supervisor, who had already been contacted by Loblaw about the incident, and was told to take the week off. The plaintiff and his supervisor gave differing accounts of that conversation. [ 8 ] On September 1, 2015, Saputo terminated the plaintiff’s employment in writing.

It is undisputed that Saputo did not know certain details of the plaintiff’s actions at the time that he was dismissed, including the amount of cheese taken, that it was saleable, that some of the cheese was made by a competitor and that other cheese was “deli” cheese for which a credit could not be given. [ 9 ] The plaintiff brought a claim against Saputo and others, including Loblaw, seeking damages for breach of his employment contract, bad-faith damages, punitive damages, aggravated damages and costs.

The claims against Loblaw and its employee were discontinued prior to the trial. [ 10 ] A key issue at trial was whether the plaintiff acted dishonestly. The trial judge carefully reviewed the evidence, assessed the credibility of the witnesses and concluded, “Weighed on a balance of probabilities, I am satisfied that the plaintiff intended to steal the cheese that he removed from the [s]tore in the milk crate and that his conduct constitutes theft” (at para 58). He found that the cheese was “in good condition and perfectly saleable” (at para 41).

He accepted the store manager’s evidence that the plaintiff asked him “to say, falsely, that he had given the plaintiff his permission to remove the units from the [s]tore” (at para 59). Moreover, the trial judge accepted the evidence of the plaintiff’s supervisor at Saputo that the plaintiff confessed to him that he intended to donate the cheese to a wedding social (see para 63).

He did not believe the plaintiff’s evidence that he made an innocent mistake while he was tired and in a hurry and that he intended to throw the cheese in a dumpster behind his condominium (see para 64). [ 11 ] Ultimately, the trial judge dismissed the plaintiff’s claim, finding that “the plaintiff’s conduct gave rise to a fundamental breakdown in the employment relationship” (at para 66) and that “Saputo was entitled to terminate the plaintiff’s employment for just cause and without notice” (at para 7).

The trial judge also found that “[n]o effort was made by Saputo to interview the plaintiff prior to termination” (at para 42) or to get a statement from any of the store employees present at the time of the incident.

The plaintiff was “simply presented with his termination letter and informed that [Loblaw] had provided a letter to Saputo banning him from all of their stores” (at para 43). [ 12 ] The trial judge, relying on this Court’s decision in Middelkoop v Canada Safe way Limited , 2000 MBCA 62 , found that “an employer terminating a contract of employment does not owe a duty of procedural fairness to an employee (at para. 25), unless there is an express term in the contract of employment to that effect (at para. 30)” (at para 51). [ 13 ] Importantly, the trial judge concluded (at para 70) : In my view, the circumstances known by Saputo as at September 1, 2015 entitled it to terminate the plaintiff’s employment.

The facts revealed to it thereafter reinforced that decision. Saputo did not owe the plaintiff a duty to investigate. It had a duty to treat him fairly and honestly based on the information that it had at hand on the day it terminated his employment and I find that it fulfilled that duty. Saputo is also entitled to rely on the information that it subsequently obtained after the date of termination.

Issues [ 14 ] The plaintiff raises six grounds of appeal, only two of which require more than a brief comment. [ 15 ] First, the plaintiff argues that the trial judge misapplied Middelkoop and erred by finding that Saputo did not have a duty to conduct an investigation into the allegations before terminating his employment. He submits that Middelkoop stands only for the proposition that an employer is not required to hold a hearing at which the employee may plead his or her case prior to the decision to terminate.

The plaintiff maintains that there is a “well-established duty to investigate before terminating an employee for dishonest conduct” and relies on the decisions in Prashad v ICI Paints (Canada) Inc , 1997 CarswellOnt 3454 (Ct J ( Gen Div) ); and Headley v City of Toronto , 2019 ONSC 4496 . [ 16 ] Second, he asserts that the trial judge erred by finding that Saputo was entitled to rely on information obtained after it terminated his employment.

He argues that this case “sets a dangerous precedent” by allowing an employer to terminate based on allegations of dishonesty without any investigation and “then to use the discovery process afforded by litigation, if any is actually commenced by the employee, to justify the termination after the fact.” Analysis Duty to Investigate [ 17 ] In Middelkoop , this Court considered whether there was a duty on a commercial employer to give an employee a fair hearing before dismissing him for just cause. Such a duty, if found, would import a degree of procedural fairness into the dismissal process.

This Court held that the starting point in any inquiry into the need for procedural fairness in terminating a contract of employment is Reid LJ’s speech in Ridge v Baldwin (No 1) , [1963] UKHL 2 (BAILII) . T waddle JA wrote (at para 25): The weight of authority overwhelmingly supports the view that, in terminating a contract of employment within the first classification, a

commercial employer owes the employee no duty of procedural fairness. Lord Reid himself had this to say about such a termination at p.71: The law regarding master and servant is not in doubt. There cannot be specific performance of a contract of service and a master canterminate the contract with his servant at any time and for any reason or for none. But if he does so in a manner not warranted by thecontract he must pay damages for breach of contract.

So the question in a pure case of master and servant does not at all depend onwhether the master has heard the servant in his own defence: it depends on whether the facts emerging at the trial prove breach ofcontract. [emphasis added] [18] Twaddle JA cited Laskin CJC in Nicholson v Haldimand-Norfolk Reg Police Cmmrs, (SCC), [1979] 1SCR 311 at 318: “A master-servant relationship would not, per se, give rise to any legal requirement of observance of any of theprinciples of natural justice” (at para 26).

Similarly, Twaddle JA referred to Knight v Indian Head School Division No 19, (SCC), [1990] 1 SCR 653 at 670, which described the “master and servant relationship” as one “where there is no duty to act fairlywhen deciding to terminate the employment” (at para 27). [19] In further support of the proposition that an employer is not bound to act fairly in dismissing an employee, Twaddle JApointed to Lake Ont Portland Cement Co Ltd v Groner, (SCC), [1961] SCR 553, which held that an employer can justifya

summary dismissal by reliance on grounds different from those given, even if they were not known at the time of dismissal (see para29). This is known as the doctrine of after-acquired cause and will be discussed later in these reasons. [20] Ultimately, in Middelkoop, this Court held that the employer did not owe a duty of procedural fairness to its employeeand was not obliged to give him a hearing on either the issue of breach or that of consequence.

Middelkoop was affirmed by this Court inKapitany v Thomson Canada Ltd, 2001 MBCA 167, where Huband JA wrote that “there is no duty on a private sector employer toaccord procedural fairness in employment relationships or to entertain the request of an employee for reconsideration” (at para 18). [21] This principle is subject to exceptions, including the terms of the particular employment contract or the relevantstatutory framework (see Halsbury’s Laws of Canada (online), Employment, “Termination of the Employment Relationship:

SummaryDismissal for Just Cause: Duty of Procedural Fairness” (VII.6.(9)) at HEM-319 “Employer Not Bound by Such Duty” (Cum SuppRelease 49)). However, none of these exceptions apply to the facts in the present case. [22] Where courts have commented on an obligation to investigate prior to dismissing an employee, it is in a practical,cautionary sense rather than as a free-standing legal duty.

Flawed or inadequate investigations into just-cause allegations are sometimescited by trial judges as the reason why the defendant was unable to muster sufficient credible evidence to prove just cause at trial. [23] For example, in Prashad, the employer defended a wrongful termination suit on the basis that it had just cause—namely, a reasonable suspicion that the plaintiff was involved in the disappearance of goods. The judge found that “no investigation wasdone to inquire into the possibility that the plaintiff’s denials were truthful” (at para 11).

The judge concluded that, “[n]ot havingconducted a reasonable investigation, the employer cannot successfully contend that its suspicion was reasonably based” (at para 22). [24] The Court, in Prashad, cited Francis v Canadian Imperial Bank of Commerce (1994), (ON CA), 120DLR (4th) 393 (Ont CA), for the proposition that “[t]here is an onus on an employer to conduct a full investigation before reachingconclusions that are devastating to an employee” (at para 22).

However, in Francis, the employer did not advance the defence of justcause—the only issue at trial was the quantification of damages for the wrongful termination of the plaintiff’s employment. The Court’sfindings with regard to the inadequate investigation went to an order for punitive damages for the demoralizing manner in which theemployee was dismissed. [25] Ultimately, in Prashad, not only did the employer fail to prove that the plaintiff stole the missing goods, it failed toprove that its suspicion was reasonable.

While the inadequacy of the employer’s investigation resulted in the employer being unable tomeet its evidentiary burden to prove just cause at trial, it was not held to independently vitiate a defence of just cause. [26] Similarly, in Headley, an employer unsuccessfully relied on circumstantial evidence of theft to prove just cause fortermination. It had obtained the evidence through an investigation which the trial judge found to have been deficient and based on “falseunderlying assumptions” (at para 342).

The employer’s inadequate investigation resulted in it being unable to gather sufficient evidenceto prove cause. [27] As I have mentioned, where just cause is not proven, inadequate investigations have, in some instances, resulted inpunitive damage awards against employers for the manner of dismissal (see Francis; Perewernycky v National - Oilwell Canada Ltd,2007 ABQB 170 at paras 60-61, 71; and Elgert v Home Hardware Stores Limited, 2011 ABCA 112 at paras 88-89). [28] As the law in Manitoba continues to be that employers are under no inherent obligation to comply with the standards ofnatural justice or with any duty of procedural fairness when dismissing an employee for cause, it follows that there is no duty to conductan investigation prior to termination. [29] In the present case, the trial judge made no palpable and overriding error in finding that the plaintiff had taken cheesefrom the store without authorization and that this dishonest conduct constituted just cause for his

summary dismissal by Saputo. UnderManitoba law, Saputo had no duty to investigate the circumstances of the plaintiff’s misconduct. Since Saputo was able to establish justcause at trial, there is no legal consequence to Saputo for having failed to conduct a meaningful, or any, investigation prior to terminatingthe plaintiff.

After-Acquired Cause [30] As previously mentioned, in Middelkoop, this Court held that “an employer can justify a

summary dismissal by relianceon grounds different from those given, even if they were not known at the time of the dismissal” (at para 29). [31] The plaintiff argues that the doctrine of after-acquired cause does not apply where an employer fails to exercise any duediligence to discover the facts to support its allegations of wrongdoing and the termination of an employee. [32] The trial judge found that the plaintiff’s termination was justified based only on the information known to Saputo at thattime, without reliance on after-acquired cause (see para 70).

He made no palpable and overriding error in doing so. [33] I would dismiss this ground of appeal as the trial judge did not even rely on the doctrine of after-acquired cause todismiss the plaintiff’s claim.

Nonetheless, as I will explain, the doctrine of after-acquired cause remains good law in Manitoba. [34] The doctrine of after-acquired cause is related to the larger question of whether an employer owes a duty of proceduralfairness to an employee in dismissing him or her for cause, including the provision of reasons for dismissal. [35] Recently, in Van den Boogaard v Vancouver Pile Driving Ltd, 2014 BCCA 168, an employer successfully relied onafter-acquired cause in defending an action for wrongful dismissal.

The Court held that “the issue [was] whether the employer . . .establish[ed] that, at the time of dismissal, there were facts sufficient in law to warrant a dismissal” (at para 34). It matters not whetherthe employer knew of the particular misconduct and chose not to rely on it at the time of dismissal, unless the employer both knew ofand condoned the misconduct. [36] The plaintiff relies on Cao v SBLR LLP, 2012 CarswellOnt 9184 (Sup Ct J), for the proposition that the doctrine is notavailable where an employer fails to conduct any investigation.

Prattas DJ wrote (at para 92): In any case, the onus is on the employer to prove that there was just cause at the time of termination and to disclose it accordingly.

If itis after-acquired just cause, the onus remains on the employer to prove why it was not known or not discovered at termination and how itwas discovered subsequently, so that the court can evaluate the reasonableness and due diligence efforts of the employer in this regardand whether it may even constitute just cause. [37] While I am not entirely convinced that Cao stands for the proposition argued by the plaintiff, I certainly do not agreethat it reflects the law in Manitoba.

Prattas DJ cited no authority for this position, and it is contrary to the approach to after-acquiredcause taken in Middelkoop and other appellate court decisions, such as Carr v Fama Holdings Ltd (1989), (BC CA), 63DLR (4th) 25 (BCCA); and Van den Boogaard.

Other Grounds of Appeal [38] The remaining four grounds of appeal allege that the trial judge erred by finding that the cheese that the plaintiffremoved from the store was “perfectly saleable” (at para 41); dismissing the claim on the basis of defences not pled by Saputo; failing toapply the rule in Browne v Dunn (1893), [1894] 6 R 67 (HL (Eng)), to prohibit Saputo from alleging theft by the plaintiff; and failing todraw an adverse inference against Saputo for not calling evidence from two material witnesses.

None of these grounds raise arguablequestions of law, fact, or mixed fact and law, and I would summarily dismiss them. Conclusion [39] For all of these reasons, I would dismiss the appeal with costs. JA I agree: JA I agree: JA