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Indexed as:
Neilson v. Vancouver Hockey Club Ltd.

Vancouver Registry: CA006417 and CA006727
[1988] B.C.J. No. 584

COURT OF APPEAL FOR BRITISH COLUMBIA

Between

Roger Neilson

Plaintiff, (Respondent)

And:

Vancouver Hockey Club Ltd.

Defendant, (Appellant)

Seaton, Carrothers and Aikins JJ.A.

April 11, 1988

Employer/Employee -- mitigation.

The Plaintiff was fired in January 1984, in breach of his contract which called for him to coach the Defendant's hockey team until July 1985.  Issue:  Whether trial judge erred in holding that Plaintiff was entitled to be paid to July, 1985, with no deduction for the amount earned from employment with other hockey clubs?  Per Seaton J.A. (Aikins J.A.):  Whether a contract is for a fixed period or an indefinite time, the usual rules of mitigation apply and earnings from other sources after termination are taken into account unless the contract provides otherwise.  This contract does not provide otherwise.  Per Carrothers (dissenting):  Contract guaranteed Plaintiff salary for the full term with no duty to mitigate.  [B.C. Recent Decisions, vol. 8, no. 23.]

Counsel for the Appellant:  Richard H. Hamilton and Garth S. McAlister.

Counsel for the Respondent:  G. Sidney Cross and David P. Church.

---

Reasons for judgment delivered by Seaton J.A., allowing the appeal; concurred in by Aikins J.A.  Dissenting reasons for judgment delivered by Carrothers J.A.

SEATON J.A.:— The plaintiff's contract called for him to coach the defendant's hockey team until the end of the season in 1985. He was fired in January, 1984 in breach of the contract. The trial judge held that the plaintiff was entitled to be paid to the end of the season in 1985 with no deduction for the amount he earned from other employment between January, 1984 and July, 1985 and awarded judgment in the amount of $173,500. In this appeal the defendant says that the judgment should be reduced by the amount earned from employment with the Los Angeles Kings and the Chicago Black Hawks, leaving a balance of $64,364.

The trial judge posed the question:

I have to decide whether the contract does in fact guarantee a salary to the plaintiff to the end of the 1984-1985 season even after termination and re-employment. If not, then mitigation would be the general rule.

   The general rule is that on wrongful dismissal the employee's action is for damages, not for the remumeration promised. He is not entitled to consider the contract as subsisting (see Philp v. Expo 86 Corporation (1987), 19 B.C.L.R. (2d) 88 and the many cases referred to therein). Of course one must look to the contract.

   This employment contract, drawn by the plaintiff's solicitor, covers four hockey seasons:  the first as associate coach and the other three as head coach. Under the heading "TERM" are these provisions:

(1)		The term of this agreement shall commence on July 1, 1981, and shall terminate at the close of business July [June appears in the margin] 30, 1985, unless otherwise terminated or renewed strictly as provided in this agreement.
(2)		Notwithstanding anything herein contained to the contrary, the Canucks have the right to terminate this agreement, with the termination becoming effective June 30, 1984, by giving you written notice on or before the later of May 15, 1984, or ten days after the Canucks' last game in the 1983-1984 season, including play-off games, upon payment to you of the sum of SIXTY THOUSAND ($60,000.00) DOLLARS, such payment to be in full and final settlement of all compensation and claims hereunder, except any amounts accured and unpaid with respect to the seasons 1981-1982, 1982-1983, and 1983-1984, it being understood that the compensation provided for in paragraph (c) below for the seasons 1981-1982, 1982-1983 and 1983-1984, is subject to the performance by you of your obligations and duties hereunder, irrevocable and not affected by any such termination notice. For greater certainty the termination payment must be made forthwith upon the giving of said notice and is separate from and without prejudice to any monies earned by you through coaching or otherwise through ensuing endeavors. It being the intent that this agreement that the obligations of yourself and the Canucks, subject to the termination provision, shall be guaranteed for the full term of the agreement.

   The two clauses describing the terms of employment show an interesting feature. The $60,000 termination payment was "... separate from and without prejudice to any monies earned by you through coaching or otherwise through ensuing endeavors." There is no such language in the salary provision entitled "COMPENSATION". That provision spells out amounts after this introduction:  "for all of your services rendered hereunder, the Canucks shall pay you ..."

   The draftsman of this contract knew how to provide that a payment would be unaffected by outside earnings. That provision appears with regard to the $60,000 but does not appear with regard to the salary.

   There is another distinction in this contract between salary and the termination payment. The payment of salary was said to be for "services rendered hereunder" which is the position that would be implied if there was no specific term. This contract thus incorporates the position that the right to remuneration and the obligation to render services are mutually interdependent. That is the usual position and was Buckley, L.J.'s third point in Gunton v. London Borough of Richmond upon Thames, [1980] 3 All E.R. 577 (at p. 589):

However, cases of wrongful dismissal in breach of a contract of personal service have certain special features. In the first place, as the term 'wrongful dismissal' implies, they always occur after the employment has begun and so involve an immediate breach by the master of his obligation to continue to employ the servant. Secondly, a wrongful dismissal is almost invariably repudiatory in character; it is very rarely that there can be any expectation that the master will relent and take the servant back into his service under the contract. Thirdly, the servant cannot sue in debt under the contract for remuneration in respect of any period after the wrongful dismissal, because the right to receive remuneration and the obligation to render services are mutually interdependent. Fourthly, the servant must come under an immediate duty to mitigate his damages and so must almost invariably be bound to seek other employment in fulfilment of that obligation; it would be very rarely that he could expect to find other employment, or could mitigate his damages in any other way, which would leave him free to return to his original employer's service at any moment, should the original employer relent.

 (emphasis added)

   Buckley, L.J.'s flrst observation, that there was a breach by the master of his obligation to continue to employ the servant, is clearly applicable here; so too is his second observation that a wrongful dismissal is almost invariably repudiatory. This was a repudiatory breach, but I need not add to the comments on that position. The result in this case is the same whether the employer's repudiation terminates the contract without the necessity for acceptance, whether the employee is bound to accept the repudiation in order to mitigate, or whether acceptance ought to be inferred in the absence of very special circumstances. The issue can also be resolved in this case by observing that the acceptance of employment elsewhere constituted acceptance of the repudiation.

   Buckley, L.J.'s third observation applies to this case and in my view is decisive unless there is a specific contractual provision to the contrary. I have already indicated that rather than a contrary provision in this contract there is a provision to the same effect.

   Buckley, L.J.'s fourth observation dealt with mitigation. The cases suggest that the plaintiff had a duty to mitigate but I do not have to resolve that question. The distinction between the duty to mitigate and the result of mitigation is explained in McGregor on Damages (London:  Sweet & Maxwell Limited, 14th ed., 1980), c. 7. That chapter starts (in para. 209) with three rules conveniently put shortly as (1) "the plaintiff cannot recover for avoidable loss", (2) "the plaintiff can recover for loss incurred in reasonable attempts to avoid loss", and (3) "the plaintiff cannot recover for avoided loss".

   It is the third of those rules that applies to this case. It was stated more fully (at para. 209):

(3)

The third rule is that, where the plaintiff does take steps to mitigate the loss to him consequent upon the defendant's wrong and these steps are successful, the defendant is entitled to the benefit accruing from the plaintiff's action and is liable only for the loss as lessened; this is so even though the plaintiff would not have been debarred under the first rule from recovering the whole loss, which would have accrued in the absence of his successful mitigating steps, by reason of these steps not being ones which were required of him under the first rule.

   A.A. Cockburn v. The Trusts and Guarantee Company (1917), 55 S.C.R. 264, indicates that even where the former employee takes steps he was under no obligation to take for the purposes of mitigating damages the actual diminution of his loss may be taken into account. This conclusion follows necessarily from the general principle that when a contract is broken the injured party is entitled to receive the sum that will put him in the position he would have been in if the contract had been performed.

   The leading authority on mitigation of damages for breach of contract is British Westinghouse Electric and Manufacturing Company, Limited v. Underground Electric Railways Company of London, Limited, [1912] A.C. 673. The defendants contracted to supply eight steam turbines and turbo alternators to the plaintiffs but failed to deliver machines conforming to the contract. The plaintiffs substituted Parsons machines, which were more efficient than the machines originally contracted for. The arbitrator stated a special case on the question of how the damages were to be assessed and the House of Lords held that the advantage enjoyed by the plaintiffs as a result of the Parsons machines' superiority was relevant to the assessment of damages. Viscount Haldane L.C. stated that when a plaintiff in the ordinary course of business took action arising out of the transaction which had the effect of reducing the loss suffered, that reduction must be taken into account even where there is no duty to act.

   On this question I conclude that whether or not the plaintiff was bound to mitigate is irrelevant. He cannot recover for avoided loss in any case. The trial judge observed:

... in the case of contracts of employment for a fixed period mitigation is not a factor unless the party terminated accepts the unlawful termination and does not make himself available to perform and obtains new employment, thus breaching the agreement himself.

This suggests that termination of a fixed term contract can only be brought about by a breach on the part of the employee. No authority is cited for that proposition and I know of none.

   On the contrary, there is authority indicating that the principle of mitigation applies to fixed term contracts just as it does to contracts of employment for an indefinite term. Innis Christie, in Employment Law in Canada (Toronto: Butterworth & Co. (Canada) Ltd., 1980) states (at p. 316) that because the recovery in such cases is not actually wages but damages, the rules respecting mitigation apply. He cites as authority Little v. Laing, [1932] 1 W.W.R. 210 Sask. C.A.), a case in which the plaintiff's damages were assessed as equivalent to the pay he would have received had the contract been performed, less the wages he received from other sources during the unexpired period of the contract. Also cited by Christie is Forest Products Consulting Co. Ltd. v. Newfoundland Hardwoods Ltd. (1956), 38 M.P.R. 374 (Nfld. S.C.). In that case Walsh, C.J. stated (at pp. 386-7):

     This being a contract of employment for a fixed term, non-acceptance of the repudiation does not keep the contract alive for the benefit of the parties and the plaintiff is not entitled to sue for wages as they would fall due or to wait until the termination of the period and sue for all wages that would have fallen due in the meantime.

   Kellock, J. in Canadian Ice Machine Company Limited v. J. Horace Sinclair, [1955] S.C.R. 777 (at pp. 780-1) dealt with repudiation of an employment contract in which there was a five-year term without provision for termination during the term:

It is unquestionable, therefore, in my opinion, that the monthly instalments were to be made in consideration of services to be rendered by the respondent, although it was for the appellant to require the performance of such services from time to time as it saw fit. That being so, as Mr. Starr contends, the contract was an "employment" contract for a fixed term with the usual result that upon repudiation without cause on the part of the employer, the appellant company became liable for the consequent damages with a corresponding obligation on the part of the respondent to mitigate those damages. The law is clearly settled that the remedy of a person in the position of the respondent in such case is to sue for damages. He is not entitled to wait until the termination of the period for which he was engaged and sue for the whole amount of the wages which have fallen due in the interim.

   English courts have also applied the principles of mitigation to fixed term contracts. In Yetton v. Eastwoods Froy, Ltd., [1967] 1 W.L.R. 104, [1966] 3 All E.R. 353 (Q.B.), the question was whether a plaintiff wrongfully dismissed from a fixed term contract of employment had sufficiently mitigated his damages. Blain, J. said (at p. 362):

The basic principle of damages is restitutio in integrum: the plaintiff should have what he has lost through the defendants' fault; but of course, if a plaintiff in fact, in the case of a contract of service, earns something elsewhere through being at liberty so to do, then he has lost that much less as the consequence of the default.

   In my view, whether a contract of employment is for a fixed period or an indefinite time, the usual rules of mitigation apply and earnings from other sources after termination are taken into account unless the contract provides otherwise.

   The trial judge purported to follow Pinder v. Vancouver Hockey Club Ltd. (1972), 28 D.L.R. (3d) 374. That decision is of no help here. The question in that case was whether Pinder by accepting employment elsewhere had repudiated his contract.

   In this case there was no income loss before June 30, 1984 when the defendant could have terminated the contract by paying $60,000. If there had been a loss I would have been inclined to think that the plaintiff would he entitled to the income loss plus $60,000. That would yield the difference between the amount he would have got if he had been properly terminated and the amount he received elsewhere; in short, his damages. Here the income loss took place after the contractual termination date, and I think that $60,000 would be the minimum award. I need not resolve whether that is so because the defendant contends that the proper damage award is $64,364.

   In my view the trial judge erred when he failed to take into account the earnings of the plaintiff.

   I would allow the appeal and reduce the amount awarded to $64,364.

SEATON J.A.

AIKINS J.A.:— I agree.

CARROTHERS J.A. (dissenting):— This appeal is from a judgment granted to a former employee against his former employer in respect of breach of a fixed term contract of employment between them. Vancouver Hockey Club Ltd. appeals a judgment against it granting the respondent Neilson judgment for $173,500 plus court order interest for breach of Neilson's contract as coach of the Vancouver Canucks hockey team. The amount of the judgment is derived from the terms of the contract in question and without reference to the terms of Neilson's subsequent employment elsewhere.

   I consider this case to have the attributes of a special one, as wrongful dismissal cases go, for three reasons. First, this is not a case of an indefinite hiring, as found in most wrongful dismissal cases, but rather a hiring for a fixed term. Secondly, this is a case of a hiring to a specific position with a high public profile, with the potential of exceptional detrimental consequences to the employee in the event of wrongful dismissal, that is dismissal without cause.

   Thirdly, as the issue of mitigation of damages for wrongful dismissal is raised on this appeal, I note at this juncture, for a better understanding of what follows, that the order appealed is in effect not an award of damages for wrongful dismissal but rather a money judgment for the balance of wages contracted for over the fixed term but unpaid to an employee fired without cause and under circumstances which precluded the employee from earning that balance of wages.

   The principal issue on this appeal, as posed by the trial judge, is whether the breached contract is one for a fixed term entitling Neilson to his salary for the full term regardless of premature termination and whether the contract exempts Neilson from a duty to mitigate his loss with a concomitant offset of actual earnings elsewhere during the balance of the fixed term after the dismissal.

   This appeal calls into question the precise nature of Neilson's loss consequent upon his discharge by the appellant. Neilson, a well-known experienced hockey coach, was hired to coach the Canucks by written contract with the appellant dated August 14, 1981. The contract, which specified particular employment, provided that Neilson, then 47 years of age, was to he associate coach for the N.H.L. season 1981-82 and thereafter, for the next three N.H.L. seasons, as head coach. The contract was to run until June 30, 1985, "unless otherwise terminated or renewed strictly as provided in this agreement". By way of information only, I observe that the contract provides a mechanism for its termination one year early, that is as of June 30, 1984, calling for a termination payment of $60,000. This provision was not exercised or implemented in any way. It plays no part in this appeal, other than to indicate, when construing the document, an intent that the employment contract provide an income of some amount to Neilson for all years of the fixed term, even in the event it is foreshortened.

   There is no suggestion or complaint that Neilson did not perform satisfactorily as coach of the Canucks. The trial judge found Neilson gave his all to the job. However, on January 10, 1984, without warning or prior notice, Neilson was relieved of his coaching duties at a game in Edmonton by the man who succeeded him as coach acting on the directions of the appellant. This occurred approximately one and a half years ahead of the contract termination date of June 30, 1985. Neilson, who had the contractual right to do the coaching, was not merely forbidden thereafter to coach the Canucks but was told that he was cleared to get another job without the appellant's consent. He was not told to stand by to coach the Canucks. Nor was he told that payment of his salary would stop once he became employed elsewhere.

   Neilson promptly obtained work temporarily as hockey coach for the Los Angeles Kings from the end of January, 1984 until the end of the 1983-84 season on June 30, 1984. Neilson was subsequently hired by the Chicago Black Hawks for the 1984-85 season at a substantially lower salary than provided for that season in the breached contract with the appellant.

   In reasons for judgment granting Neilson the full amount of the salary provided for in his contract with the appellant from February 1, 1984 when the appellant stopped Neilson's salary, down to the end of the fixed term on June 30, 1985, the trial judge found that this case turns on its facts to be found within the four corners of the breached contract of personal service. The main issue is the interpretation of the contract. The term of the contract was to run until June 30, 1985. The contract by its own terms must be terminated or renewed strictly as provided in the agreement. The contract provides that the compensation to be paid until the end of the 1983-84 season was subject to performance of Neilson's obligations and duties. The contract was irrevocable and not affected by any termination notice. Subject to the above-mentioned early termination provision, the contract, though perhaps it could have been more lucidly written, is stated to be guaranteed for the full term of the agreement. For these reasons, the trial judge found that the contract is one for a guaranteed term and therefore Neilson is entitled to salary for the full term and is not under a duty to mitigate. I cannot quarrel with this finding.

   The trial judge distinguished on its facts the case of Barton v. Agincourt Football Enterprises Ltd., [1982] 1 S.C.R. 666. In that case, permission to seek employment elsewhere was refused whereas in the instant case it was clearly given. Therefore, there was no breach by Neilson of his duties under the contract. The trial judge further held that the appellant cannot, by deliberately breaching the contract, put itself in a better position than it would have been in had it lawfully terminated the contract. The trial judge concluded that Neilson is entitled to payment of the guaranteed salary for the full balance of the term of the contract.

   I turn to the subject of Neilson's obligation to mitigate his loss. In general, in cases of an indefinite hiring, it is the duty of the party whose contractual rights have been infringed to act reasonably in mitigation of damages. This duty to mitigate, which is generally imposed on the employee, is derived from the reciprocal obligations under any personal service contract on the part of the employer to pay the remuneration in return for performance of services on the part of the employee. If not stated in the contract, reciprocity is to be implied. But in the present contract it is, as I have said, explicit.

   This reciprocity, as one of his foundations in support of mitigation, was stated by Buckley, L.J. (but importantly not in reference to a fixed term personal service contract) in the leading case of Gunton v. London Borough of Richmond upon Thames, [1980] 3 All E.R. 577 (at p. 589) as follows:

Thirdly, the servant cannot sue in debt under the contract for remuneration in respect of any period after the wrongful dismissal, because the right to receive remuneration and the obligation to render services are mutually interdependent.

   I would distinguish that case, and all cases following it dealing with indefinite hirings, and not require mitigation in the present case not only because the subject personal service contract is for a fixed term, but because the loss suffered by Neilson was not simply pecuniary in nature.

   The events of January 10, 1984 confronted Neilson with two kinds of loss: on one hand with the potential loss of public reputation and esteem, which are attributes of the highly visible occupation of hockey coaching, and on the other hand with the potential loss of income. These categories of potential loss warrant analysis.

   For obvious reasons, stemming from the public nature of hockey coaching, the appellant could not simply put Neilson on the shelf to stagnate out of the public eye and pay him the agreed salary for the balance of the agreed term of the contract. This would not only be in breach of Neilson's right to coach actively, and to be seen coaching, but it would be devastating to his future career as a coach, giving rise to immeasurable damages.

   There are two aspects of Neilson's loss. Firstly, there is the immediate loss which Neilson himself was exposed to by the events of January 10, 1984, and from which a claim for damages and a duty to mitigate could be said to arise, that is his being deprived of the contract right to coach and to be seen coaching. This deprivation was a real loss which Neilson could not completely avoid by obtaining employment elsewhere. Neilson did substantially avoid this potential loss by obtaining another coaching position at once. The remaining consequential loss is nebulous and difficult to quantify, notwithstanding that his subsequent employment at a substantially lesser salary would indicate that the events of January 10, 1984 had a detrimental effect on his future career as a hockey coach. Neilson does not make a separate claim for loss of entitlement to coach and be seen coaching or for future loss in this regard. Not only is Neilson's case a pecuniary one based upon what the trial judge found to be a fixed term contract with guaranteed payment of full wages, but also it is in part a case of damages for personal and public humiliation and degradation of his coaching career.

   As to the other aspect of Neilson's loss, the potential income loss consequent upon the appellant's breach of Neilson's employment contract, there is no evidence that the appellant ever communicated to Neilson its intention to continue Neilson's salary only to the end of January, 1984. Until the appellant actually stopped paying Neilson the salary which it had contracted to pay through to June 30, 1985, Neilson had no income loss to mitigate. In any event such non-payment would give rise to a claim for payment of a contract debt rather than damages for wrongful dismissal. The immediate monetary loss, which could be said to have resulted from the appellant's wrongful dismissal of Neilson, fell potentially upon the appellant itself, which continued contractually committed to pay a salary to Neilson for the balance of the fixed term without the reciprocal benefit of his coaching services which the appellant itself had dispensed with. The only loss which might be said to be a monetary loss is the appellant's loss of quid pro quo the executory consideration for the balance of salary payable to Neilson. Assuming that Neilson had some kind of duty to do so, the only way that he could mitigate this potential monetary loss, self-inflicted by the appellant, would be to return to coaching the Canucks, which the appellant itself had precluded.

   While Neilson had it within his power to mitigate, and did indeed mitigate, his loss of right to coach actively and to keep himself as a coach in the public eye, he ought not to be asked or expected to mitigate the monetary loss potentially suffered by the appellant as a result of its own conduct in breaching the contract. I cannot agree that Neilson owed any duty to attempt to go back and coach the Canucks. Certainly Neilson is not obliged to set off subsequently earned income against salary contractually payable to him by the appellant.

   This is not a usual case of damages to be assessed on the basis of notional salary for an appropriate notice period. There is no notice period in this fixed term contract. I consider the wages payable to Neilson are further insulated against reduction through mitigation by the incontestably adverse impact on his career and future earning capacity of his being wrongfully deprived publicly of the contractual right to coach and be seen coaching. There was no right in the contract enabling the appellant to "trade" Neilson mid-contract, which in effect the appellant did.

   In these circumstances it would be in the appellant's best interest to encourage Neilson at the earliest opportunity to get another coaching job, hopefully one equally as reputable and prominant, and thus mitigate his loss. By the same token it would be inappropriate for the appellant as the instigator of its own loss to expect Neilson to offset the salary obtained in his new job against the balance of salary which the appellant had contracted to pay him. I agree with the trial judge that Neilson was under no duty or obligation to mitigate the appellant's loss by any offset of salary. The fact that Neilson subsequently obtained employment as a coach is, in my opinion, irrelevant to payment of full wages under his fixed term contract with the appellant.

   In conclusion, I turn to the consequences in this case should the actions of the appellant be considered a repudiation of the contract. Here the appellant simply told Neilson that he could no longer coach and be seen coaching the Vancouver Canucks hockey team. He was not told to go and get employment as a hockey coach elsewhere, but that he was free to go. Neilson was not told that his salary would stop upon termination of his coaching the Vancouver Canucks or when he commenced employment elsewhere. There is no evidence that anything was said about salary.

   While it was clear that the appellant was not going to perform its part of the contract to the extent of prohibiting Neilson from coaching and being seen coaching, there was nothing said or to be implied concerning the appellant's intent respecting payment of Neilson's salary for the balance of the fixed term. Conversely, Neilson treated only the coaching aspect of the contract at an end, but not the remuneration aspect. It is also to be remembered that Neilson's personal service contract with the appellant was for a fixed term ending June 30, 1985 and was not an indefinite hiring.

   In these circumstances, I doubt whether the appellant's unilateral termination of Neilson's coaching services brought Neilson's contract of coaching services to an end in law. In my view, the remuneration aspect of the contract subsisted after the events of January 10, 1984, upon which Neilson could found his contract in debt claiming entitlement to remuneration for the balance of the fixed term of the contract rather than damages for breach thereof.

   If the repudiation was not complete, and I think it was not, I consider the principles enunciated in that line of cases, of which Gunton (supra) is one, holding that the terminated contract no longer subsists and the wrongfully dismissed employee's cause of action lies not in contract (debt) but rather in tort (damages) with the concomitant obligation to mitigate, do not apply in this case.

   In such event, Neilson can ignore rather than accept the repudiation and advance his monetary claim for remuneration promised without any obligation to mitigate by off-set of subsequent coaching earnings elsewhere.

   However, if I am wrong in law, and Neilson's cause of action and remedy are to be founded in tort (damages), although pleaded in contract (debt), I would consider Neilson to be fittingly compensated for his loss of remuneration and for his personal and public humiliation and career degradation by an amount equivalent to the balance of remuneration as awarded by the trial judge without any mitigation off-set.

   The trial judge came to his conclusions on the whole of the evidence and I am quite unable to say that he erred in this regard or that he was mistaken in his application of the law.

   For these reasons I would dismiss the appeal.

CARROTHERS J.A.