May 1, 2014 By: Janice B. Payne
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On April 17, 2014, the Ontario Superior Court of Justice released another interesting summary judgment in the employment context, Gregory Smith v. Diversity Technologies Corporation. This time, the case involved an employee dismissed for insubordination.

Gregory Smith was a sales manager at Diversity Technologies Corporation (‘DiCorp’), and had been with the company, as well as its predecessor ‘Drillwell’ for 20 years. When DiCorp purchased Driwell in 2007, Mr. Smith claimed that he signed a fresh employment contract. The contract included a termination provision allowing DiCorp to terminate his employment with 12 months of written notice or pay in lieu. DiCorp claimed that it never intended to enter into the contract, and that it was unenforceable. The contract had initially been drawn up at the request of Drillwell’s stakeholders as a condition of sale, but had been replaced with a $200,000 bonus.

Mr. Smith was terminated without notice in 2011, following allegations that he sold product to a client after being told that no further orders should be accepted from them due to a large outstanding account balance of approximately $100,000. Mr. Smith brought a motion for summary judgment for an order that DiCorp did not have cause to terminate him, and had failed to pay him the 12 months of notice that he was entitled to under his contract.

DiCorp argued that the Court should not entertain a summary judgment motion in this matter because there were credibility issues, and a trial was necessary for a fair adjudication of the dispute. The credibility issues involved the alleged sale of goods by Mr. Smith to the delinquent client company. In particular, DiCorp claimed that Mr. Smith, who was the primary contact for the client, was advised that no sales should be made to that client, and that he had made a sale despite these instructions, following which he had been given a written warning.

Mr. Smith on the other hand, claimed that he received different instructions, permitting sales to the client, but on a ‘cash on delivery’ basis, and that he had not received any written warning. He stated that after he had learned that DiCorp was going to start legal proceedings against the client to recover the debt, he put a custom order from the client into the system to reserve the product so as not to alert them of the impending proceedings. He did not process or complete the sale, nor did he give permission for another employee to do so.

The Court considered the 2014 Supreme Court of Canada decision, Hyrniak v. Mauldin, which provided guidance on the interpretation of Rule 20 of the Rules of Civil Procedure, in order to determine whether or not a summary judgment should be granted. The Court found that there was no genuine issue requiring a trial, and that the cost savings to the parties by proceeding with a motion for summary judgment were considerable. 

While the Court found that there were problems with the employer’s documentary evidence in this case, it found that there was sufficient evidence to allow the Court to carry out a fair and just adjudication of the dispute. Problems with the evidence included the existence of two copies of the employment contract, one signed by Mr. Smith, and the other signed by the President of DiCorp after the bonus was paid. There was also no copy of the written warning, and another employee’s initials were on the documents completing the sale of the product. In order to set aside any credibility issues, the Court considered DiCorp’s case at its 'highest and best’, and even when the evidence was viewed in this light, the Court found that the termination of Mr. Smith was unjustified.

In considering whether DiCorp had cause to terminate Mr. Smith, the Court considered whether Mr. Smith’s conduct was sufficient to justify it, using the contextual assessment outlined in the 2001 Supreme Court decision, McKinley v. BC Tel. The test used was whether or not the nature and degree of the employee’s dishonesty caused a breakdown in the employment relationship. The Court found that given his length of service and impeccable employment record, Mr. Smith’s actions did not amount to insubordination, and were not of a magnitude to justify termination. If Mr. Smith had intentionally processed the orders and accepted the cheque, it would have been the first mistake that he made in his employment, and the additional order did not raise the amount of the client’s outstanding account in any significant way.

Mr. Smith was awarded twelve months of notice, or $100,000, which was his base salary at the time of termination, and the amount he was entitled to under the contested employment contract in damages as result of his wrongful termination.

This case provides another example of the courts’ willingness to grant summary judgments in the employment context, even in cases where the documentary evidence produced by the parties is arguably incomplete, or the issue is highly fact driven, such as in cases involving dishonesty and insubordination, and where there are credibility issues involved.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law