Case In Point
Appellate Court Overturns Summary Judgment Decision that Former Employee Owed $20m in Damages to Employer; Matter Remitted for Trial
Date: March 15, 2019
The decision of a summary judgment motion judge who ordered a former employee to pay his former employer $20 million in damages has been overturned by the Court of Appeal. In Plate v. Atlas Copco Canada Inc., the Court held that the motion judge erred when he found a trial was not necessary and proceeded to rely on the decision of a criminal sentencing judge to conclude that the appellant employee was a fiduciary of the company. The Court ordered that the matter be remitted to trial.
The appellant had been an employee of the company as a general manager of one of its divisions and later as a vice-president. During this time, he was alleged to have been involved, with other (now former) employees, in misappropriating funds through false advances and bonuses, the reimbursement of illegitimate expenses and inflated and/or false invoices. The appellant’s employment was terminated. He was later convicted of defrauding the company and was sentenced to five years in prison. The sentencing judge also made a restitution and forfeiture order against the appellant for the current value of $1,440,000 in annuities received as a part of the fraudulent scheme and $77,930 in additional amounts received through the fraud.
The company brought a civil claim against the appellant and other individuals alleged to have been involved with the fraudulent scheme for breach of fiduciary duty, fraud, conspiracy, and unjust enrichment.
In the summary judgment motion, the company only sought judgment against the appellant. The motion judge held that the appellant was a fiduciary and that he had breached his fiduciary duty to the company (the other claims brought by the company were dismissed). In so finding, he allotted “very considerable weight” to the conclusion of the criminal sentencing judge that the appellant was a fiduciary:
[65] I therefore find that [the appellant] breached his fiduciary duty to his employer Atlas Copco. A fiduciary does not have the option of remaining mute in the presence of an identified, known scheme that is actively harming his employer. […]
The motion judge stated that a trial was not necessary as there was sufficient evidence to determine the issue on summary judgment. He concluded the appellant had breached his fiduciary duty and damages in the amount of $20 million were ordered.
The Court of Appeal held that the motion judge could not solely rely on the finding of the criminal sentencing judge that the appellant was a fiduciary because that finding was not accepted by the sentencing judge as express or implied in the jury’s verdict, rather it was an exercise of the fact-finding power of the sentencing judge. Applying the analysis of the Supreme Court of Canada in British Columbia (Attorney General) v. Malik, the Court of Appeal found that the motion judge could admit the sentencing findings, but was not entitled, in this case, to grant summary judgment on that basis.
At the criminal sentencing hearing, the relationship of trust between the appellant and the company and the extent of the appellant’s breach of trust were relevant considerations. It was in relation to this factor that the sentencing judge determined that the appellant breached his fiduciary duty to the company. However, the status of the appellant as a fiduciary was “not in play before the sentencing judge and the appellant did not have a reasonable opportunity to challenge the fiduciary finding.” The Court stated that, considering these factors, the motion judge should have “diminished the weight” of the sentencing judge’s finding that the appellant was a fiduciary.
The Court of Appeal noted that the determination of whether the appellant is a fiduciary is a conclusion of mixed fact and law and was not a matter that could be decided at the summary judgment stage. It allowed the appeal, dismissed the company’s motion for summary judgment, and remanded the matter back to the Ontario Superior Court of Justice for trial.
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