Law Times

Law Times • June 5, 2017 Page 5 www.lawtimesnews.com NEWS Frank Portman, a lawyer with Stringer LLP, who was not involved in the case, says the de- cision will mean that employers intending to advance a mitiga- tion defence in order to try to offset damages in a wrongful dismissal case will need to go beyond simply proving an em- ployee earned an income during the notice period. "It's that extra level that makes what's frequently a difficult de- fence even more difficult for an employer," says Portman. After she was terminated, Brake received income from a job as a Sobey's cashier, but this was a part-time job she had during her employment with McDonald's. She expanded her hours at Sobey's after she was terminated. The courts found that as she would have continued to work at Sobey's even if she was not fired, this income could not be de- ducted from the damages. "As Ms. Brake had worked a second job with Sobey's while working full-time for the Appel- lant, her work for Sobey's and her work for the Appellant were not mutually exclusive," Justice Ei- leen Gillese wrote in the decision. "Had Ms. Brake stayed in the Appellant's employ, she could have continued to supplement her income through part-time work at Sobey's." Brake also received $600 in income as a cashier at Home De- pot during this time. The trial judge had found that the cashier position at Home Depot was "so substantially inferior" to the managerial position she held at McDonald's that the income she earned there did not diminish the loss of her job. The Court of Appeal upheld this part of the judge's decision not to deduct this income, but it said it was because the evidence regarding this income was un- clear. In a concurring decision, Jus- tice Kathryn Feldman said the trial judge was entitled to make the finding concerning the Home Depot income. When an employee is wrongfully termi- nated, they have a duty to miti- gate the loss they experienced by making reasonable efforts to obtain a job that is comparable to the one they lost. If Brake obtained or turned down such a job, her earnings or what she would have earned would be deducted from her damages. But if she could only find a job that was not compara- ble, she is entitled to turn it down and that amount she could have earned would not be deducted for a failure to mitigate her loss, Feldman said. Feldman continued to say that when an employee is ter- minated wrongfully and then forced to accept an inferior posi- tion because of the lack of a com- parable one, her income does not mitigate her loss and, therefore, should not be deducted form the damages. "In this case, the employee was not an executive who could afford to live during the notice period without a salary," Feld- man wrote. "It was in her interest to try to obtain a comparable managerial position but she was not able to do so, and because she could not afford to earn nothing, she had to take the only job she could find." Adrian Ishak, a partner with Rubin Thomlinson LLP, who was not involved in the case, says he was surprised by the decision on the point of mitiga- tion, but he was ultimately con- vinced by Feldman's concurring arguments. "[If] an employee is entitled to turn down a job that is not equivalent or comparable, and they won't fail in their duty to mitigate, then why should they be penalized when they accept that same job as they had the right to turn away from when they do it in order to survive?" he says. Ishak says the decision shows that the duty to mitigate has be- come more nuanced and that the nature of the work that has generated the income will be considered going forward. Vale Peters says the decision shows that while there is an obli- gation on the employee's part to mitigate their losses, there is not going to necessarily be auto- matic deductions as a result. "You still have a duty to miti- gate, but that doesn't mean your income is going to be deducted," she says. Portman says the decision brings into question how courts are going to treat income a for- mer employee receives from the expansion of hours from a job they were doing part time before they were fired. Jean Francois Lalonde, the lawyer representing the employ- er, declined to comment on the decision. LT exception to the statute is that a board who wants to keep their job could employ a pretty liberal definition of this exception and say, 'Oh, well, sorry you're not going to be able to decapitate us this week because we think that you're advancing a person- al grievance,'" Bell says. "And, really, what the appeal court has done here is bat that down." But the Divisional Court de- cision shows the personal griev- ance exception will not be an "easy catch-all" for denying a requisition request, he says. The dispute arose when a shareholder, Tat Lee Koh, who holds around 42 per cent of the company's shares, requisitioned a meeting to consider removing newly elected directors. The company became pub- licly traded in 2015, and it held a first annual general meeting in 2016, in which a slate of directors was elected, including a group referred to in the decision as the "Canadian Directors." Koh opposed this election and demanded the Canadian Directors resign. Otherwise, he said, he would requisition a shareholders' meeting to re- move them. When they did not resign, Koh submitted the requisition and the board declined it, saying it was for the primary purpose of redressing a personal griev- ance against the company. The board claimed that Koh's per- sonal grievances included that he wanted to be chairman of the company among a number of other complaints. The case turned on whether Koh had requisitioned the meet- ing because of a personal claim or personal grievance. The court found that the board of directors had failed to establish that the primary pur- pose of the requisition was to re- dress a personal grievance against them, and that if the directors and the shareholder disagree on the direction of the company, the shareholders should be allowed to decide those issues. "On fair review of the record, it appears that the appellant and the Canadian Directors have a significant difference of opinion as to the course that the company should take, and how it should be managed," Justice Ian Nord- heimer wrote in the decision. "It seems to be that the share- holders ought to be permitted to decide those issues." Nordheimer also said it is not "sufficient to show simply that the shareholder requisitioning the meeting has an element of personal interest in the matter. "That would cast the scope of the personal grievance excep- tion too broadly." Moysa says the decision confirms that the exceptions to a shareholder's fundamental right to call a meeting should be construed narrowly. He says the decision ultimately puts the onus on directors to prove that a shareholder is acting out of a personal grievance. Moysa says the decision also affirms the court's role in corpo- rate disputes. "The role of the court is one of a referee to these disputes rather than being the forum that determines the dispute itself," says Moysa, who is a partner with McMillan LLP. "The court is there to essen- tially determine whether or not the shareholder has that right . . . but, ultimately, it will be up to shareholders in a proxy fight or in a meeting of shareholders to determine the actual business matters and issues." The court also determined that while Koh had expressed his concerns to board directors in "personal terms" he had a valid difference of opinion as to the business steps that should be taken by the company. Jim Blake, a corporate law- yer, who was not involved in the case, says historically the courts have deferred to the business judgment sense of a board of di- rectors under the business judg- ment rule. The rule holds that directors are in a better position than the courts to make deci- sions concerning their company. "This is a bit of a break- through. It changes it from busi- ness judgment rule in the case of a requisition meeting to saying unless the board can prove this is truly a personal claim then the meeting must be held," says Blake, a partner with McLean & Kerr LLP. "It's a little bit of a shifting of power in favour of existing shareholders and their ability to requisition a shareholders meet- ing." Jay Naster, the lawyer repre- senting the respondent, said he was not in a position to com- ment. 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