THE COURT OF APPEAL FOR SASKATCHEWAN SASKATCHEWAN TRANSPORTATION COMPANY, (Defendant) APPELLANT, LEO LARSEN (Plaintiff) RESPONDENT, CORAM: The Honourable Mr. Justice Cameron The Honourable Mr. Justice Sherstobitoff The Honourable Madam Justice Jackson COUNSEL: Mr. T. J. Waller for the Appellant, Mr. G. W. Semenchuck Q.C. for the Respondent. DISPOSITION: Appeal Heard: September 14, 1993. On Appeal From: QB 4525/91 J.C. Regina Appeal File: 1445 Reasons: September 22, 1993 Appeal Allowed in Part: September 14, 1993 Reasons by: The Honourable Mr. Justice S. Cameron In concurrence: The Honourable Mr. Justice Sherstobitoff and The Honourable Madam Justice Jackson CAMERON J.A. This is an appeal from an assessment of damages in a wrongful dismissal action brought against Saskatchewan Transportation Company by Leo Larsen, its former President and Chief Executive Officer. Saskatchewan Transportation Company, or STC as it is commonly known, is provincial Crown corporation. It admitted to dismissing Mr. Larsen without cause or notice, in breach of its contract of service with him. In consequence Mr. Larsen obtained a judgment for damages against the corporation in the basic amount of $165,000, an amount it contends is exorbitant. For the most part we can find no tenable basis for concluding that the award of damages was inordinately high. The trial judge assessed the damages on the general principles, first, that the object of these awards is to compensate for the loss of income sustained in consequence of the wrongful dismissal; second, that their measure is prima facie the amount that would have been earned had the employment continued, subject to deduction of such amounts as in the ensuing months are either earned or should have been earned in light of the duty upon persons suffering such losses to keep them to minimum; and third that The Crown Employment Contracts Act, S.S. 1991, c. C- 50.11, had set aside the contractual provisions for payment on dismissal contained in all "Crown contracts", including those of Crown corporations, and directed instead that payment be determined in accordance with common law principle. With that in mind he calculated Mr. Larsen's loss of income on the following premises: (i) that Mr. Larsen had been employed by STC at salary of $110,000 year; (ii) that he was entitled at common law to eighteen months notice of termination having regard for the fact, among others, that he had been in the employ of the Crown in the right of the Province for about decade; and (iii) that he had met his legal duty to mitigate but had not succeeded in reducing his loss. STC took issue with these premises, contending the trial judge had erred in relation to each of them. (i) The salary. We do not agree, as STC suggests, that Mr. Larsen's loss of income should have been calculated on the premise his annual salary was $102,000, not $110,000. His contract read thus: "In consideration of your services you will be paid an annual base salary equal to $110,000.00, less: a) STC contributions to your pension plan; b) STC car allowance or the annual value of car provided to you; and c) the annual value of the CEO Benefit Package provided to you by STC." The term "base salary" meant that which would be paid him exclusive of such additional, performance-based amounts as he might earn under other terms of the contract. For the purpose of the "base salary" provisions of the contract, the annual value of the pension contributions, car allowance, and so on worked out to some $8,000. In our opinion these provisions constituted promise by STC to pay Mr. Larsen basic salary of $110,000 year made up of: (i) money in the amount of $102,000; and (ii) money or benefit to the value of $8,000. That being so, and since STC broke its promise, thus depriving Mr. Larsen of the opportunity to earn such salary, we are of the view the trial judge did not err in employing the figure of $110,000 in determining the loss of income and hence the damages in this respect. (ii) The period of notice. STC contends that the trial judge went wrong on two counts. First he attributed far lengthier period of service to Mr. Larsen than was appropriate to the determination of this issue; he should have attributed one year of service to Mr. Larsen, not ten. Second he exceeded by at least 50% the period of notice usually found to be appropriate in circumstances such as these; at best he should have found Mr. Larsen entitled to twelve months notice of termination, not eighteen. The basic facts are these. Mr. Larsen was forty-seven year old commerce graduate and chartered accountant who, before being dismissed by STC, had successively served three provincial Crown corporations over period of about ten years. On February 1, 1982 he left the employ of Hudson Bay Company in Winnipeg and went to work for Saskatchewan Housing Corporation as its Executive Director of Finance and Administration. Some three years later, having in the meantime risen to vice- presidency of that corporation, he was taken on by Saskatchewan Economic Development Corporation as its Vice-President of Finance and Administration. He remained with SEDCO for about five years. Then on December 1, 1990, he was engaged by STC as its President and Chief Executive Officer for term of three years. He served in that capacity until November 22, 1991, when following change of government in the Province, he was let go. Under the terms of his contract with STC, Mr. Larsen was entitled on "Involuntary Termination" to severance payment "equal to twelve (12) months salary and benefits plus an additional two (2) months salary and benefits for each year of service calculated using February 1, 1982 as the beginning date...." This was capped with year maximum. These terms were obviously founded on the whole of his previous Crown corporation service and would have entitled him in effect to two years notice of termination had it not been for The Crown Employment Contracts Act. Since the Act set aside those terms of the contract and since the Province's Crown corporations are distinct legal entities, independent of one another, STC requested the trial judge, when determining the period of notice to which Mr. Larsen was entitled at common law, to disregard all but Mr. Larsen's year of service with STC. Any other approach, it said, would be inconsistent with precedent, referring to Nupdal v. SGI (Sask. Q.B., March 15, 1984, per Malone J.) and Richardson v. SEDCO, (1985) 1985 CanLII 2770 (SK QB), 41 Sask. R. 236 (Sask. Q.B., per McIntyre J.). The trial judge rejected that request and took the whole of Mr. Larsen's Crown corporation service into account, saying that "When [in February, 1982] Larsen accepted Ernst Young's invitation to leave Hudson Bay Company for service in the Government ranks of Saskatchewan, he traded career in the private sector for one in the civil service. The evidence is convincing: Larsen at the time of his dismissal was career civil servant, skilled and dedicated." Was this error? Even if it were, and we do not think it was, not in substance at least, too much can be made of it. While undoubtedly relevant, length of service is but one of several considerations to be taken into account in determining fit period of notice in cases such as these. And it is to be taken into account not in isolation but in conjunction with other considerations, including the nature of the employment. Hence the weight or comparative importance of this consideration can vary from case to case. In this case we are dealing with the president and chief executive officer of major Crown corporation. This is not unique employment, but it is comparatively rare. There are not many positions of that nature available to persons here or even elsewhere. That being the case, does it much matter whether Mr. Larsen had been at this post for one year rather than three, or two instead of five or even ten? Does it much matter, that is, to the period of time he ought to have had to find comparable employment. We are not suggesting his length of service is of no moment, but we are saying that too much can be made of it if viewed in isolation. That general observation aside, the severance terms of Mr. Larsen's contract with STC were arrived at, as noted, with an eye to his earlier service. Indeed they were inserted on the premises he had been in the service of the Crown since February 1, 1982, the day he joined Sask. Housing, and was moving up once again to more senior level of service. This is understandable. These corporations are agents of the Crown for all their purposes. And so Mr. Larsen was taken to have been employed by the Crown throughout the period, first by one of its agents, then by another, and finally by STC. That was the intention of the parties. To be sure, these terms of the contract were swept away by The Crown Employment Contracts Act. It does not necessarily follow, however, that his prior service to the Crown through one or another of its agents fell to be disregarded in making the determination at issue. In the absence of an express provision to that effect in the statute, and none appears there, we cannot think the legislature so intended. The cases brought to the attention of the trial judge were distinguishable on these and other grounds, and we cannot say that he went wrong on the point under discussion. Nor can we say that the period of notice to which the trial judge found Mr. Larsen entitled was unreasonable. We might have settled on something less had we been trying the case, but judging from such other cases as Herbison v. Intercontinental Packers, (1984) 1983 CanLII 2398 (SK CA), 29 Sask. R. 296 (Sask. C.A.) and Wankling v. Saskatchewan Urban Municipalities Association, (1989) 1989 CanLII 4625 (SK QB), 75 Sask. R. 252 (Sask.Q.B.), the period chosen by the trial judge was within the range, albeit at the top of it. But since it was within the range, and since decisions of this kind entail the exercise of fair measure of discretion and ought not to be interfered with lightly, we do not think we should intervene. That then leaves the third of the premises upon which the loss was arrived at, namely that Mr. Larsen had not managed to reduce his loss despite his best efforts to do so. (iii) Mitigation. With respect, we do not wholly agree with the trial judge's treatment of this issue. We agree with his finding that Mr. Larsen had met his duty to mitigate. That finding is amply supported by the evidence. But we have difficulty with his further finding that Mr. Larsen had not managed to reduce his loss of income. The evidence provides little if any support for that finding. According to the evidence, Mr. Larsen landed contract with Saskatoon developer after STC dismissed him. That contract, for the provision of accounting and related financial services at the price of $4000 month and determinable on two weeks notice, was taken up in the name of company, Management Ltd. Mr. Larsen incorporated the company for the purposes of carrying out this and such other contracts of the sort as he might obtain. On incorporation, he and his wife became the sole shareholders of the company. Over the next eight to nine months Mr. Larsen devoted virtually the whole of his time to providing the services called for by this contract, thus earning, to the credit of Management, $33,100. After allowing for expenses (including the cost of Mr. Larsen's going to and from Saskatoon and living there throughout the week, as well as salary of $300 month to Mrs. Larsen for answering the phone and looking after things in Regina while her husband was in Saskatoon) Management netted over $11,000. In other words it netted about $1200 month during this period. But no salary was paid to Mr. Larsen. The net income was simply left to accumulate in the company. The developer was delighted with the service, and Mr. Larson intended to continue with the work into the foreseeable future. Having regard for this evidence and for Mr. Larsen's duty to mitigate his loss of income, STC asked the trial judge to attribute the bulk of the income of Management to Mr. Larsen and to reduce his loss accordingly. The question, which Mr. Larsen must answer to in the circumstances, is why at the very least the net income of the company should not have been attributed to him for the purpose at hand. Conceptually it might be attributed to him on one basis or another, but that is not the issue. He resisted the attribution on pragmatic grounds, arguing that the company had not in fact paid him any salary; that there was no guarantee the company was going to earn profit; that it needed working capital; that it was mere fledging; and so on. Finally he contended that attributing even the net income to him for the purpose of mitigation would be inconsistent with Foster v. MTI Canada Ltd. (an unreported decision of the Ontario Court of Appeal dated July 16, 1992). We are not persuaded by these arguments. Foster's case was decided on its own facts, and on the facts in this case we are satisfied that the trial judge erred. Bearing in mind Mr. Larsen's duty to STC to mitigate his loss, and having regard for all of the circumstances surrounding this matter, the trial judge ought to have found that Mr. Larsen had in fact managed to mitigate his loss. There is simply no sound reason for holding otherwise. That leaves only the extent of the mitigation. We can see no good reason for going behind the expenses, as STC invited us to do on the ground they were inflated for the purpose of shielding income from the obligation to mitigate, but we can see no good reason either for not attributing the net income of about $1200 month to Mr. Larsen for the whole of the period at issue, past as well as prospective. And so we have decided to reduce his damages by some $16,000 to $17,000. Let us say $16,500. It follows, then, that the appeal will be allowed to the extent of reducing this head of damages from $165,000 to $148,500. Otherwise the judgment at trial will stand. There will be no order for costs on the appeal.
On appeal from 106 SaskR 277. 47 year old respondent, former President and Chief Executive Officer of STC, had been awarded $165,000 (18 months) for wrongful dismissal. He had successively served three Crown Corporations over a period of ten years. On appeal held the award of damages was not inordinately high. The court however reduced the damages by $16,500 as it disagreed with the trial judge's determination regarding mitigation of damages. Appeal allowed to the extent of reducing the damages from $165,000 to $148,500.