Employee’s failure to disclose stake in supplier not grounds for dismissal

Davey v. Syncrude Canada Ltd., 2004 CarswellAlta 886, 2004 ABCA 190, 2004 C.L.L.C. 210-029 (Alta. C.A.)

Peter Davey filed an action for wrongful dismissal against Syncrude Canada Ltd. after it summarily terminated his employment. Syncrude alleged Davey was in a conflict of interest because he owned a small percentage of one of Syncrude’s suppliers and that his failure to disclose the conflict was dishonesty that justified summary dismissal.

In October 1990 Davey loaned his brother $10,000 to help him with his company. The money was to be repaid when the company — Enviro-Safe — was able and Davey was given a 10 per cent shareholders stake in Enviro-Safe.

Davey said he was not aware he was a shareholder until three years later, when talks were launched between Enviro-Safe and a third party to sell half of the shares, a transaction that would have left Davey with a five per-cent stake. Davey claimed, and the trial judge accepted, that this was the first time he’d been aware he was a shareholder in his brother’s company.

There was no evidence or suggestion that Davey had ever been involved in decision making at Enviro-Safe or that he was a director or officer of the company.

Syncrude had a conflict-of-interest policy that required employees to avoid situations where they could provide a benefit to a business in which they or their family members may have an interest. In 1991 the matter came up in regard to another employee and Davey raised the matter with a manager. He did not follow up on the matter, he said at trial, because he didn’t believe himself to be in conflict and because he was busy with his work duties.

In a memo to Syncrude, Davey disclosed that he was a five-per-cent shareholder in Enviro-Safe, a company which was on Syncrude’s bidder list. The memo did not mention that his brother was a majority shareholder and controlled the affairs of Enviro-Safe.

In September 1993 a supervisor asked him what his involvement was with Enviro-Safe. Davey replied that it was his brother’s company and he had loaned his brother $10,000. On investigation Syncrude discovered that in 1990 Davey had signed a supply order that resulted in Enviro-Safe receiving business from Syncrude. The order originated in another department, and a misidentified chemical on the order resulted in only Enviro-Safe being considered as a supplier.

A meeting was scheduled for Nov. 23 to consider corrective action against Davey. When Syncrude found out Davey owned a 10 per cent share of Enviro-Safe it became a dismissal meeting.

At trial the court found the position Syncrude had taken was not supported by evidence. Davey had understated both his brother’s role with Enviro-Safe and that company’s dealings with Syncrude. But those understatements were a result of Syncrude’s focus on Davey’s share in his brother’s company, not on the brother’s role within that company. The court accepted Davey’s claim that when he signed the 1990 supply order he was under the impression it only started the process whereby chemicals would be ordered.

In any case, ruled the court, Davey had not been “deliberately incomplete and evasive constituting dishonesty justifying dismissal.”

The trial judge ruled that Syncrude had failed to establish cause for termination without notice, and awarded Davey reasonable notice of 18 months. The decision was upheld by the Alberta Court of Appeal.

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