Counsel:

Bruce N. Baron, for the plaintiff.

Roy E. Stephenson, for the defendant.

       E.M. MACDONALD J.:—

Introduction and Background

¶ 1      The Plaintiff, Frank Flynn ("Flynn") seeks general damages in the amount of $700,900.00 for breach of a contract of employment. Flynn also seeks punitive or aggravated damages in the amount of $100,000.00 together with pre and post judgment interest and costs.

¶ 2      Flynn was employed by the Defendant, Shorcan Brokers Limited ("Shorcan") from November 4, 1998 to December 16, 2002. Shorcan is an Ontario company carrying on business in the bond trading/brokerage industry. Shorcan's President is James Magee ("Magee"). Magee hired Flynn in November 1998 after learning from contacts within the industry that Flynn had left his previous employer, Freedom Bond Brokers Inc. ("Freedom"). At Freedom, Flynn had been employed on its Repo desk. [See Note 1 below] At Freedom, Flynn's title was Senior Broker and Vice-President. The circumstances surrounding Flynn's departure from Freedom are ambiguous but not relevant to anything that I have to decide in this case. In late October 1998, Flynn approached Magee for employment on Shorcan's Repo desk. At that time, Shorcan's Repo business was not doing well and consideration was being given to closing the desk. Flynn's reputation in the Repo business was known to Magee. He was hopeful that Flynn could turn this part of Shorcan's business around.

   Note 1: The reference throughout these reasons to the "Repo" desk is a reference to the repurchase agreement desk at either Freedom or Shorcan. This is a highly specialized aspect of the bond business.

¶ 3      The legal issue in this case is whether Flynn was employed by Magee on a permanent basis for an indefinite term as alleged by Flynn or whether Flynn was employed for a fixed term pursuant to a fixed term employment contract as alleged by Shorcan. Shorcan alleges that the contract expired in accordance with its terms with the result that the common law principles of reasonable notice do not apply. Shorcan asserts that Flynn was employed for a fixed term renewable every 12 months pursuant to standardized employment agreements, which were used in the offices of Shorcan. In late 1998, Shorcan had business reasons for its decision to ask each of its 40 employees to execute standardized employment agreements. Shorcan's parent company, Exco Shorcan Limited had done an analysis of its balance sheet and was advised that there was potential exposure to a contingent liability of approximately $6,000,000.00 for severance in the event that employees had to be let go, especially those who were long standing.

¶ 4      Flynn alleges that Shorcan wrongfully terminated his employment on December 16, 2002. It is undisputed that Shorcan gave Flynn $100,000.00 in severance by direct deposit to his bank account at that time. Flynn then sought employment at Tradition, a company based in New York City. Shorcan and Tradition had a relationship with each other. Part of Flynn's claim for damages is based on his allegation that Shorcan caused Tradition not to hire Flynn for 6 months with the result that from mid December 2002 to June 2003, he was unemployed. In June 2003, he started to work with Tradition. By the end of December 2003, he had earned $62,500.00 U.S. with no dividends and no bonus. Flynn claims that had he stayed at Shorcan, he would have earned in excess of $400,000.00 Canadian [See Note 2 below] instead of the $100,000.00 he received by way of severance together with the $62,500.00 U.S. that he earned from June to December 2003.

   Note 2: This was comprised of salary, bonus, dividends and benefits.

¶ 5      Flynn is an American Citizen. At the time of trial, he was 44 years old. He received his BA from New York University in 1982. From 1982 to 1994, he worked in Manhattan for a variety of brokers. He moved to Canada in 1994 and worked at Freedom until October 1998. There is no suggestion in the evidence or the pleadings that Shorcan lured him way from Freedom. The management of Shorcan decided to purchase Exco Shorcan Limited, a large international company based out of London, England. This decision led to a number of changes at Shorcan, the most important of which for purposes of this case is that in January 1999 all employees were offered a standard contract of employment for a fixed term of one year. They guaranteed employment for one year and incorporated provisions of notice and severance for all employees. Shorcan takes the position that when Flynn left Shorcan in December 2002, he was employed pursuant to one of these standardized employment contracts. It was for a fixed term beginning on November 26, 2001 and ending on November 30, 2002. Negotiations in early December 2002 between Magee and Flynn for another fixed term contract or for the alternative of a Consulting Agreement failed, leading to this action commenced by Flynn in February 2003.

Factual Findings

¶ 6      The following factual findings are key to my conclusion that Flynn was employed pursuant to a series of fixed terms contracts. Key to my finding in this regard is a memorandum dated January 8, 1999 from Magee to Flynn. It reads as follows:

¶ 7      It is common ground that Flynn received this memorandum and that a staff meeting was held to explain it. Although Flynn could not remember being present at this meeting, I accept Magee's evidence that 100 % of the staff attended, including Flynn. Flynn knew that he could get legal advice on the contracts but decided to work through them on his own. Between January 1999 and December 2002, Flynn signed a series of fixed term contracts, each containing the same or similar terms except that compensation varied widely over the years. To take the last of these contracts as an example, it was for the term from November 30, 2001 to November 30, 2002. Against the backdrop of the very clear and unambiguous terms of this agreement and the agreements that preceded it, I found it highly surprising that it was being suggested to me that portions of the agreement, when parsed from the entire agreement, imply employment for an indefinite term. This is particularly so in the face of clear evidence that in the year 2002, Flynn was looking to leave the business for the reasons mentioned below in paragraph [9].

¶ 8      When the last fixed term contract expired in accordance with its terms, the common law principle of reasonable notice did not apply. Magee was vigilant in his attention to the need to renew each of the fixed term contracts as their expiry dates approached. Internal office procedures were in place to track expiry dates. When Flynn's last contract was due to expire, both Magee and Flynn began to negotiate the terms of a replacement contract.

¶ 9      In his evidence, Magee described Flynn as a high maintenance employee. In his evidence, Flynn described himself as a high-end employee. These descriptions are accurate. Flynn had high expectations in terms of remuneration, benefits, vacation and leave time. He was not shy about asking for it. The reality is by 2002, he was becoming increasingly disenchanted with the lifestyle that he had to maintain in order to be successful in the highly competitive business in which he worked [See Note 3 below]. There were many late evenings with frequent dinners, drinking and smoking together with other social engagements all directed towards promoting business with existing clientele and developing new clientele. Flynn regarded the business as a "Young Man's Business". He found the routine of late nights and early mornings tiresome. [See Note 4 below] He said it was taking its toll on his body.

   Note 3: He admitted to taking a lot of time away from work. Attendance records maintained at the offices of Shorcan showed that in 2000, he was away on vacation for 50.5 days (approximately 10 work weeks). In 2001, he was away for 65.5 days (approximately 13 work weeks). He requested an unpaid leave of absence for the period from May 29 to June 25, 2001 so that he could take a course in child growth and development at the university of East Stroudsbury. This course was worth 3 credits towards his Master's Degree in Education. In 2002, up to December 16, he was away for 51 days or 10 work weeks. Magee testified and I accept as true, that the long periods of leave were a constant source of friction between Shorcan and Flynn and that it had a negative effect on the morale of other employees.

   Note 4: He was generally at his desk by 7 a.m. each working day.

¶ 10      In December 2000, his daughter was born. I inferred from his evidence that he decided that his lifestyle was incompatible with a meaningful family life. By November 2002, he had decided to return to the United States with a view to eventually leaving the business completely and becoming a teacher. He had sold his home in Mississauga in 2001. He purchased a home in East Stroudsbury, PA, where he was residing with his wife and daughter at the time of the trial. Flynn's aspiration to return to the U.S. was not a secret. Magee knew about it and attempted to accommodate Flynn by entering into a consulting agreement with him. Negotiations on the terms of the consulting agreement took place between Flynn and Magee in December 2002.

¶ 11      These negotiations were conducted with knowledge on both sides that Flynn wanted to go back to Philadelphia as soon as he could but that prior to doing so, he wanted to maximize his earnings. I accept Magee's evidence that Shorcan saw the proposed consulting agreement as providing a means whereby Flynn would be able to move on to his other priorities, including his family and his desire to become an educator. At the same time, Flynn would transition his clients to new full time employees of Shorcan or as Magee put it in his examination in chief, "help us to operate without Frank Flynn". I also accept Magee's evidence that Shorcan could not let him take clients to competitors based out of New York. A final version of the proposed consulting agreement, contained at Schedule A to these reasons, was presented to Flynn on December 9, 2002.* It remained open until December 13, 2002. On Friday, December 13, 2002 Flynn advised Regina Hahn from the Human Resources Department of Shorcan that he would be letting the offer expire. He also made it clear that he was leaving for the U.S. I accept Magee's evidence that he conceived the idea of the consulting agreement in an effort to balance Flynn's aspirations with Shorcan's needs.

       [* Editor's note: Schedule A was not attached to the copy received by LexisNexis Canada and therefore is not included in the judgment.]

¶ 12      In the circumstances, I find that it was not unreasonable for Magee to insist on the December 13 cut-off date. Flynn was negotiating hard. He testified that he did not even open the envelope containing the last agreement. He said he knew what was in it. I find that he was not prepared to accept the terms of the consulting agreement chiefly because he did not like the concept of the discretionary bonus. Magee regarded the situation as one that was becoming urgent. He was under pressure from the Board of Shorcan to get the matter resolved. On December 16, 2002, Magee confirmed these developments in writing as follows:

¶ 13      I do not agree that this letter constitutes a wrongful termination of Flynn's employment. The negotiations to achieve a consulting agreement had failed. These negotiations were conducted in good faith with each party attempting to achieve a "win-win" situation for Shorcan and for Flynn. They came to an impasse. It must be remembered that the parties were in a contractual setting, in the sense that they were attempting to reach a contract on terms satisfactory to both. The fundamentals of the law of contract such as offer and acceptance, consideration, and a meeting of the minds are key to the formation of the contract, even if it be in an employer-employee setting. Contract law does not impose an obligation on Shorcan to accede to every demand made by Flynn as the negotiations progressed. Shorcan acted reasonably. Recognizing the need to protect it business for its employee shareholders is but one of the factors that motivated Magee when he insisted that Flynn not compete with Shorcan's clients, at least in the short term, when he moved to the offices of Tradition in New York.

¶ 14      Both sides knew that Flynn was talking to Tradition. In January 2003, Mr. Robin Wyatt ("Wyatt"), the managing director of Canadian business in the offices of Tradition came to Toronto to meet with Magee to discuss the existing Correspondent Agreement between Tradition and Shorcan. Magee admitted that he told Wyatt that if Tradition hired Flynn, it would put pressure on the Correspondent Agreement. As Magee put it, instead of working cooperatively with Tradition, Shorcan would be in direct competition with Tradition. A part of the theory of Flynn's case is that this meeting and the results thereof constituted an inducement for Tradition not to hire Flynn. It was suggested that this gives rise to a Wallace factor on the basis that it constitutes an agreement not to hire Flynn [See Note 5 below]. On the contrary, I saw this as an attempt to protect the pre-existing business relationship between Shorcan and Tradition. At that time, Flynn did not have a job offer from Tradition. I accept Mr. Stephenson's point that Flynn did not lay the factual foundation on what happened between December 2002 and July 2003 when he started to work at the offices of Tradition. The evidence falls far short of triggering any Wallace factors. I also accept the point that although it was within his purview to do so, Flynn did not call Wyatt as a witness. They work in the same office. I draw the inference that Wyatt's evidence would not have assisted Flynn on this issue.

   Note 5: The reference is to Wallace v. United Grain Growers Ltd. [1997] 3 S.C.R. 701.

¶ 15      I accept Magee's evidence that he told Flynn that if he did not sign the consulting agreement, his employment would be terminated and he would be paid severance. The totality of the evidence is that Magee and Flynn were agreed that his employment was over. The only remaining issues were whether severance would be paid or whether there would be a consulting contract. The severance payment of $100,000 considerably exceeded the total eligible severance of $65,096.

¶ 16      I summarize my factual findings below:

¶ 17      I now turn to the law.

Legal Analysis

¶ 18      In Ceccol v. Ontario Gymnastic Federation (2001), 55 O.R. (3d) 614, the Court of Appeal indicated, at para. 25, that "the consequences for an employee of finding that an employment contract is for a fixed term are serious ...". Accordingly, the courts require unequivocal and explicit language that the contract is for a fixed term and any ambiguities should be interpreted in favour of the employee. The Court of Appeal also indicated (at para. 26) that the courts should "be particularly vigilant when an employee works for several years under a series of allegedly fixed-term contracts." The Court of Appeal concluded that the employment contract in Ceccol, supra, was for an indefinite term.

¶ 19      In this case, the contracts of employment were clear and comprehensive, particularly with respect to the issue of termination. The facts in this case are distinguishable from those in Ceccol, supra, where the language of the contracts which were renewed 15 times over a 16-year period was ambiguous with respect to extension. Indeed, the facts of this case are closer to Lambert v. Canadian Assn. Of Optometrists [1994] O.J. No. 4168 (Gen. Div.) aff'd [1996] O.J. No. 1229 (C.A.) in which Bell J. granted summary judgment dismissing the plaintiff's action on the basis that the provisions of the plaintiff's employment contract relating to term (four years) and notice were clear, and Wood v. Industrial Accident Prevention Assn., [2000] O.J. No. 2711 (Sup. Ct.), in which Leitch J. dismissed the application on the basis that the termination provision in the letter of employment was worded with sufficient clarity.

¶ 20      It must be remembered that each of the parties negotiating in this contractual setting were sophisticated. I find the facts of this case distinguishable from Ben David v. Congregation B'nai Israel, [1999] O.J. No. 1238 (Gen. Div.) ("Ben David"), in which an indefinite term employment relationship was found by Festeryga J. who held that the employer acted in bad faith by relying on terms that it had unilaterally added to the agreement and that Ben David was not aware of the onerous fixed term and non-renewal provisions.

¶ 21      There were no verbal representations or conduct on the part of Magee and others at Shorcan that signaled an indefinite-term relationship which also distinguishes this case from the facts in Ceccol and Ben David. There is no evidence which permits me to find that there was conduct on the part of either Shorcan or Flynn which could be construed as indicating that Flynn thought that he was a full-time permanent employee at Shorcan.

Punitive Damages

¶ 22      Flynn asks for punitive damages largely as a result of a counterclaim issued by Shorcan which was pursued up until the eve of trial at which time it was wholly abandoned. The counterclaim was in essence a claim for the difference between the $100,000.00 payment made to Flynn which was in excess of total eligible severance of $65,096.00. The abandonment of this counterclaim or the presence of the counterclaim itself does not trigger punitive damages in this case. I have already indicated that this is not a case which justifies additional Wallace notice. There was no oppressive or highhanded conduct on the part of Shorcan. Indeed, the evidence is very much to the contrary.

¶ 23      Therefore, Flynn's claims are dismissed. In the alternative, if I am wrong on the matter of the dismissal of the claim, I would fix the notice period at six months calculated on the basis that Flynn's earnings would have been $400,000.00 Canadian. There would be credit for the $100,000.00 paid to him and the mitigated income earned by Flynn at Tradition would be deducted from the calculation of the severance based on six months. I invite written submissions on costs which should include detailed Bills of Costs and details of Offers of Settlement.

E.M. MACDONALD J.

QL UPDATE:  20040723