Surrounding circumstances clarify employment contract

Court interpreted the purpose the contract was entered into

Skyreach Equipment Ltd. is in the business of renting construction equipment and tools to construction companies. On Aug. 3, 1999, Brian Paradis’s employment with Skyreach was terminated because he refused to move from Kamloops, B.C., where he was based, to Edmonton, Alta., where Skyreach wanted him to work.

Mr. Paradis began working for Skyreach in November 1998. He was hired to manage the shutdown division in Western Canada, a new division renting out tools and construction equipment to industries such as pulp , paper and saw mills, refineries, gas and cement plants during times when they shut down their operations to do maintenance.

His employment contract stated that he reported directly to regional managers, vice-presidents and the president on a weekly basis. His remuneration consisted of an annual salary of $72,000 plus commissions on gross profit of rental revenue generated from Western Canada. The contract did not state whether the commission was payable with respect to revenue generated by Skyreach generally, or revenue earned by the shutdown division.

When Mr. Paradis was terminated in August 1999, he was paid $2,523.10 in lieu of notice, the equivalent to a half month’s salary plus vacation pay. Mr. Paradis brought an action against Skyreach for wrongful dismissal, arguing that the payment in lieu of notice was insufficient. He also sought payment of commission on an $11.5 million contract obtained by Skyreach to supply construction equipment to Suncor’s Millenium Project.

Skyreach admitted the wrongful dismissal thereby leaving only the issue of damages.

The issues before the Court were the period of notice to which Mr. Paradis was entitled and whether he was entitled to commission on the $11.5 million contract entered into by Skyreach for the Suncor Millenium Project.

The matter proceeded as a summary trial. In assessing the appropriate notice period for Mr. Paradis the Court considered the fact that although his employment with Skyreach was short, it was a relatively senior position. His dismissal, although wrongful, had no aggravating or mitigating factors and he was not induced to leave another position to come to Skyreach.

The Court concluded that Mr. Paradis was entitled to severance pay calculated on the basis of a six-month notice period.

With respect to the commission on the $11.5 million contract, Skyreach argued that Mr. Paradis was only entitled to commission with respect to contracts obtained for the shutdown division, not for Skyreach generally. Unfortunately the employment contract was not clear on this issue.

As a result the Court had to consider the contract in light of all the surrounding circumstances and the purpose for which it was entered into. The employment contract focused on the fact that Mr. Paradis was being hired to manage the shutdown division for Western Canada. This was evidenced by the fact that the heading on each page of the contract referred to “manager - shutdown division.” Nothing in the contract indicated that Mr. Paradis was to be involved in other parts of Skyreach’s business.

Another factor of importance to the Court was the fact that Mr. Paradis was not being paid solely by commission; he was entitled to a relatively substantial salary. For these reasons the Court held that Mr. Paradis was not entitled to commission with respect to the contract pertaining to the Suncor Millenium Project as that contract had nothing to do with the shutdown division.

Even if the Court had found that Mr. Paradis was entitled to commissions for Skyreach contracts generally, not limited to the shutdown division, the Court held that Mr. Paradis was not entitled to the commission on the $11.5 million Suncor contract. Mr. Paradis did not satisfy the Court that he was the effective cause of obtaining the Suncor contract.

Although Mr. Paradis made contact with the construction management firm engaged in the project and was asked by Skyreach’s president to follow up on that contact, his role in Skyreach obtaining the contract was minor.

Much of the exchange of information between Skyreach and Suncor occurred when Mr. Paradis was on sick leave. Even without Mr. Paradis’ connection with the construction management firm, Skyreach would have been involved in bidding on the this project.

The Court awarded Mr. Paradis damages equivalent to six months’ notice less the severance payment he received but denied the claim for commissions.

For more information:

Paradis v. Skyreach Equipment Ltd., 2002 BCSC 32.

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