CEO loses fight for moving costs

Former boss turned struggling company around, but was let go with a million-dollar parachute

A former president and CEO who was fired without cause from his job in Vancouver lost a bid to have his moving expenses paid when he relocated to Toronto.

Michael Cardiff was at the helm of Fincentric when he was dismissed without cause on Feb. 17, 2003. At the time, the company paid him more than $1 million in severance.

Cardiff contended that he was entitled to additional damages, including benefits and moving expenses, totalling a further $550,000. The company conceded more was owing, but said it was only about $330,000 and that Cardiff had no entitlement to moving expenses or benefits.

There were three issues before the British Columbia Supreme Court. Cardiff said:

•he was entitled to further stock options;

•he was owed $162,913.57 in respect of costs in moving back to Toronto following his dismissal; and

•he was entitled to $56,138.96 for benefits (including car allowance) for two years following his dismissal.

The facts of the case

In 1999 Cardiff was the executive vice-president for financial services for EDS Canada in Toronto. He earned about $600,000 per year plus about $1 million in stock grants and options. He was sought out as a candidate for president and CEO of Fincentric, and he agreed to take the job and move to Vancouver. He started on Sept. 1, 1999. Fincentric paid him about $175,000 for moving-related expenses.

At the time, the company was suffering declining revenues and had suffered multi-million dollar losses. Under Cardiff’s leadership, the company changed its focus to wealth management and made impressive progress. Its revenues increased from $12 million in 1999 to about $62.5 million in 2001. Its profitability changed from $16.5 million in losses in 1998 to a profit of $18 million in 2001. Its workforce increased from about 120 employees to almost 300.

But in early 2003 the company started to think about going in a different direction. Several members of the Fincentric’s board of directors favoured a restructuring. The board voted 4-4 on the issue, with Cardiff and three outside directors opposing the restructuring.

The board chair asked the outside directors to resign, which they all did. The board then approved the restructuring, and later dismissed Cardiff without cause on Feb. 3, 2003. It decided to let him go because it concluded the relationship between him and the board was poor.

The decision

Cardiff’s lawyer argued it was an implied term of the employment contract that Fincentric would pay the costs of relocating Cardiff back to Toronto if he was dismissed.

The legal principles relating to implied terms can be found in the 1990 decision of London Drugs Ltd. V. Kuehne & Nagel International Ltd. In that case the B.C. Court of Appeal said the following conditions (which may overlap) must be met:

•it must be reasonable and equitable;

•it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;

•it must be so obvious that “it goes without saying”;

•it must be capable of clear expression; and

•it must not contradict any express term of the contract.

In Cardiff’s case, his employment contract specifically dealt with relocation and the terms expressly did not survive dismissal, the court said. It specified the entire payment on dismissal without cause will be calculated with reference to the salary and bonus, and Cardiff would not be entitled to receive any further payment.

Therefore the court said it did not meet the test set out in London Drugs, and relocation was not an implied term of the contract.

The court then turned to whether or not benefits should be paid during the notice period. It said that while Cardiff certainly wanted benefits included if he were dismissed — he suffered a health scare while still working for Fincentric that put it at the top of his mind — there was nothing in the employment contract about it. It might have been discussed, but no agreement was reached and therefore the court rejected that claim.

It did award him continuation of stock option benefits. The court awarded judgment against Fincentric for the further $333,630.30 the company agreed it owed Cardiff plus stock options.

For more information see:

London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1990 CarswellBC 74 (B.C. C.A.)

Cardiff v. Fincentric Corporation, 2005 CarswellBC 399 (B.C. S.C.)

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