Finlan v. Ritchie Bros. Auctioneers (Canada) Ltd.,


2006 BCSC 291

Date: 20060220
Docket: S087416
Registry: New Westminster


John Dale Finlan



Ritchie Bros. Auctioneers (Canada) Ltd.


Before: The Honourable Madam Justice D. Smith

Reasons for Judgment

Counsel for the plaintiff:

E. A. Saran

Counsel for the defendant:

J.L. Leathley, Q.C.

Date and Place of Trial/Hearing:

January 31, February 1 - 3, 2006


New Westminster, B.C.


[1]                On June 15, 1999, Ritchie Bros. Auctioneers (Canada) Ltd. (“RBA”) hired John Finlan as Chief Information Officer (“CIO”) to lead its Information Technology (“IT”) Department.  A term of Mr. Finlan’s contract of employment provided that upon termination he would receive five weeks notice or payment in lieu, for five years of employment.  This defined notice provision was the minimum required by the Employment Standards Act, RSBC 1996, c.113 (“the ESA”).  On June 2, 2004, RBA terminated Mr. Finlan’s employment and gave him an ex gratia payment equivalent to six months salary.

[2]                In this action Mr. Finlan seeks to set aside the employment contract as unconscionable and to recover common law damages for reasonable notice, including a pro rata share of a discretionary bonus, RRSP employer contribution and RBA stock options he may have earned during the notice period.  Mr. Finlan also seeks “Wallace” damages (see Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701) for the manner of his termination.

[3]                The issues may be summarized as follows:

(a)        Was Mr. Finlan’s contract of employment unconscionable and therefore unenforceable?

(b)        If so, what reasonable notice is Mr. Finlan entitled to at common law?

(c)        Should Mr. Finlan’s reasonable notice include a pro rata share of the discretionary portion of his compensation package including a performance bonus, RRSP contribution and stock options?

(d)        Is Mr. Finlan entitled to “Wallace” damages for the manner in which he was terminated?

[4]                The enforceability of Mr. Finlan’s contract of employment is a threshold issue.  If enforceable, the terms of the contract are binding on Mr. Finlan.

Background facts

[5]                Mr. Finlan, age 58, worked in the IT industry for a number of years before he was hired by RBA.  His work experience included managing the IT departments of both an international food chain and, immediately prior to his employment with RBA, a national food chain.

[6]                Although secure in his employment, Mr. Finlan was persuaded by a friend who worked at RBA to apply for an opening as CIO of RBA’s IT Department.  Founded in British Columbia, RBA now is the world’s largest industrial equipment auctioneer.  It has 110 offices throughout the world and as a public company trades its shares on the New York and Toronto stock exchanges.

[7]                It was Mr. Finlan’s belief that RBA would be a nice place in which to finish out his IT industry career.  RBA’s size and multinational scope were attractive to him.  To that end, he engaged in an extensive interview process with RBA that involved their contacting several business and personal references he provided.  On June 10, 1999, during one of the last meetings in the process, Mr. Finlan advised RBA that the title of Vice President was important to him.  RBA’s notes of that meeting included “will discuss” the issue, and further, that “expectations need to be made clear”.  Mr. Finlan also asked for four weeks vacation.  RBA’s proposed starting salary was about $5,000 less than Mr. Finlan was receiving from his existing employer.  However, Mr. Finlan was advised that after successfully completing the six-month probationary period he could expect a $17,000 salary increase, further salary increases tied to annual performance reviews and discretionary benefits.  The latter would potentially include an annual performance bonus, RRSP employer contributions and RBA stock options.

[8]                On or about June 14, 1999, Peter Blake, RBA’s Chief Financial Officer (“CFO”), now RBA’s Chief Executive Officer (“CEO”), presented Mr. Finlan with a contract of employment for the position of CIO.  Mr. Finlan would report directly to the President or CEO of RBA, Randolph Wall.  The terms of the contract included the salary provisions discussed, a $2,500 signing bonus, three weeks paid vacation, and a defined notice provision of one week for each year of employment including paid vacation.  The contract also provided that the complete agreement was contained in the written contract.

[9]                Mr. Finlan was not familiar with employment contracts and was taken by surprise when the contract was presented to him at the end of the interview process.  He stated that at the meeting Mr. Blake advised him that all employees were required to sign the standard form contract.

[10]            Mr. Blake had no recollection of the meeting and had taken no notes.  He stated that all employees at the managerial level and higher were required to sign the contract, although some had negotiated changes to the standard form.  He also stated that his usual practice was to review the terms of an employment contract with a prospective employee and, if requested, to provide that individual with whatever time he or she required in order to review the contract.  Although Mr. Blake did not recommend Mr. Finlan obtain legal advice before signing the proposed contract, neither did he prohibit or discourage him from seeking out that advice.

[11]            Mr. Finlan asked to review the contract overnight.  Mr. Blake agreed and the parties arranged to meet again the following day.  Mr. Finlan said by that stage of the interview process, after his references had been contacted, he felt pressure to sign the contract.  He also acknowledged that he understood the meaning of the defined notice provision before signing the contract, though he believed it was an onerous one.

[12]            On June 15, 1999, after a brief discussion with Mr. Blake about several of the less significant terms, Mr. Finlan signed the employment contract.  On August 3, 1999, Mr. Finlan started work as RBA’s CIO.

[13]            At that time, the IT department was disorganized and had a staff of only ten.  During his tenure Mr. Finlan increased the IT staff to 40, prepared the department’s annual action plan and operating budget, and made changes to the IT infrastructure.  He set up a call centre where employees worldwide could call for assistance.  He implemented systems, policies and procedures that resulted in the reduction of operating costs in several areas.  Mr. Finlan was described by senior management as an honest, loyal and hard-working employee.

[14]            After the six month probationary period, Mr. Finlan’s salary was increased to the agreed upon amount.  In 2001, 2002 and 2003, Mr. Finlan received annual salary increases as well as annual performance bonuses, employer contributions to his RRSP and RBA stock options.  These discretionary benefits were set in January or February based on Mr. Finlan’s performance in the preceding calendar year.

[15]            On January 1, 2004, Mr. Finlan was invited to join the Management Advisory Committee (“the MAC”) while continuing with his regular duties as CIO. The MAC is an advisory committee of senior executives, including the President, Vice Presidents and leaders of the departments.  In 2004, four additional heads of departments, including Mr. Finlan, were invited to join the committee of 12, bringing it to 16 members.  The purpose of the MAC is to provide advice and guidance on RBA’s future direction.

[16]            Members of the MAC receive a different and enhanced performance bonus than other senior employees.  The MAC performance bonus is determined in part by peer votes of each MAC member’s performance, in part by a review of that assessment by the executive committee (a MAC sub-committee of six members) and is subject to a final review by a compensation committee of the Board of Directors.  Like the performance bonuses for senior staff, the MAC performance bonus is discretionary.  It provides the potential to make substantially higher earnings upon receipt of positive performance reviews of a MAC member’s contribution at that level of participation.  The MAC performance bonuses are set in January or February, following the calendar year in which they are earned.

[17]            By early 2004, concerns about Mr. Finlan’s performance began to surface.  Morale issues amongst staff had developed within the IT Department.  A new internet bidding project was experiencing considerable difficulties.  Those difficulties resulted in substantial business losses for RBA.  At the MAC level Mr. Finlan was met with resistance and negativity to his marketing of a proposal for costly infrastructure changes.  In short, Mr. Finlan was unable to meet the higher standard of leadership contribution expected of members at the MAC level.

[18]            On February 27, 2004, Mr. Finlan met with Mr. Wall to discuss some of his concerns about the MAC’s negative response to his $1 million proposal to upgrade IT infrastructure.  Feedback was provided to him on how to better handle such issues in the future.  Concerns, however, continued to mount that Mr. Finlan would not be able to provide the necessary leadership skills to lead the IT Department.

[19]            On April 8, 2004, Mr. Wall and Vic Pospiech, Vice President of Human Resources, (“VPHR”) held a spontaneous performance review with Mr. Finlan.  The presence of Mr. Pospiech alarmed Mr. Finlan.  He felt the meeting was hostile and for the first time understood that he was receiving negative feedback regarding his performance.  He said that he was shocked and dumbfounded.  At the conclusion of the meeting the group agreed to meet again in a few weeks.

[20]            The next meeting occurred on April 23, 2004.  This time Mr. Finlan came prepared to address the concerns that had been raised in the previous meeting.  He was again upset and uncomfortable about the presence of Mr. Pospiech at the meeting.  A few days after the meeting, Mr. Finlan phoned Mr. Wall, who was on a business trip in Europe, and reiterated his commitment to addressing the concerns raised.

[21]            By then, however, a decision had been reached to terminate Mr. Finlan’s employment.  On June 2, 2004, Mr. Wall and Mr. Pospiech met Mr. Finlan and gave him a letter of termination.  The letter provided for an ex gratia lump sum payment the equivalent of six months salary and continued coverage under the RBA benefit plan, at their cost, until November 30, 2004, or until Mr. Finlan obtained alternate coverage.

[22]            Although a difficult time for all involved, everyone in the meeting was civil, courteous and professional.  At the end of the meeting, Mr. Finlan shook hands with Mr. Wall and Mr. Pospiech.  They gave him time alone in the CEO’s office to collect his thoughts before attending at his office, unsupervised, to pack up his personal effects and leave.

[23]            During the meeting, Mr. Wall and Mr. Pospiech invited Mr. Finlan to provide the payroll department with instructions that would minimize his tax liability on the lump sum payment through an RRSP contribution.  When payroll did not hear from him, a phone message was left at his residence.  However, no instructions were forthcoming and on August 2, 2004, RBA issued Mr. Finlan a final cheque for the lump sum payment less income taxes.  They also withheld further taxes owing on Mr. Finlan’s exercise of his RBA stock options, from which he realized a capital gain of about $63,000.

[24]            On Mr. Finlan’s Record of Employment, the code reference used for his termination was a dismissal.  The accounting clerk stated that she was unaware this code was only to be used for employees that had been involved in criminal misconduct and that it was an honest mistake on her part.  Upon learning of the error steps were immediately taken to amend the Record of Employment to include the appropriate code reference.

[25]            The next day, Mr. Wall forwarded a general distribution e-mail to all staff advising that RBA had accepted Mr. Finlan’s resignation.  He stated that he had chosen to describe Mr. Finlan’s departure in that manner to avoid any embarrassment to Mr. Finlan.  When several employees subsequently phoned Mr. Finlan at home, he felt obliged to advise them that he had been fired.

[26]            The contract of employment includes a restraint of trade clause for a period of 18 months for those employees who resign their positions.  While at trial it was suggested that RBA’s notice to its employees that Mr. Finlan had resigned may have been linked to this provision in the contract of employment, Mr. Wall denied any such plan to harm Mr. Finlan’s future employment prospects.  Such an inference was not seriously advanced in submissions.  Indeed, the wording of Mr. Finlan’s letter of termination would negate any inference that Mr. Wall’s notification to the staff that Mr. Finlan had resigned was an attempt to undermine Mr. Finlan’s future employment prospects.

[27]             Since leaving RBA, Mr. Finlan has experienced difficulties in securing alternate employment.  In order to produce revenue he has worked as an independent contractor.  After deducting the usual business expenses permitted for someone who is self-employed, he has realized taxable income of $10,481 in 2004 and $12,900.23 in 2005.


(i)         Is the contract of employment enforceable?

[28]            The threshold issue of the enforceability of Mr. Finlan’s contract of employment involves a consideration of the concept of unconscionability.

[29]            An employer may not contract for a defined notice period shorter than that set out in the ESA.  However, a contract of employment that includes a defined notice period in accordance with the ESA, but not the reasonable notice that an employee could expect to receive at common law is not, by itself, grounds for finding a contract unconscionable.  See Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986; Simpson v. Moffat Communications Ltd., [1983] B.C.J. No. 2089 (Q.L.)(C.A.).

[30]            The elements of unconscionability were set out by Maczko J. in Lambert v. Digital Rex Software Corp. (2002) C.C.E.L. (3d) 131, 2002 BCSC 481, where at ¶13 he referred to Stephenson v. Hilti (1989), 63 D.L.R. (4th) 573 (N.S.S.C. (T.D.)) which described them at 578-9:

… it seems to me that a transaction may be set aside as being unconscionable if the evidence shows the following:

(1)        That there is an inequality of bargaining position arising out of ignorance, need or distress of the weaker party;

(2)        The stronger party has unconscientiously used a position of power to achieve an advantage; and

(3)        The agreement reached is substantially unfair to the weaker party or, as expressed in the Harry v. Kreutziger [(1978), 9 B.C.L.R. 166 (C.A.)] case, it is sufficiently divergent from community standards of commercial morality that it should be set aside.

[31]            The requirements for unconscionability are conjunctive.  This was underscored by Lambert J. in Simpson at ¶19 where he stated:

… There will, no doubt, be cases where inequality of bargaining position between employer and employee leads to the inclusion of an unconscionable term in the written contract of employment, or an oral contract of employment, but it is necessary to show by evidence the inequality of the bargaining power and that that inequality was exerted in an unconscionable way to produce an unfair result.  [Emphasis added.]

[32]            At ¶15 of Lambert, Maczko J. further noted that the first element did not require evidence of malice on the part of an employer but could be met if an employer was reckless or cavalier about an employee’s rights.  Mr. Finlan submits that RBA was cavalier with his interests, as by the end of the interview process, his references had been contacted which, in his opinion, prejudiced his ongoing employment with his existing employer.

[33]            Mr. Finlan was an experienced IT manager familiar with the industry.  He chose to pursue an employment opportunity while enjoying a secure position with a national food chain.  He did so because he was attracted to the potential of working for a larger company that was international in scope.  He was not in a vulnerable position when he applied for the CIO position at RBA but made a conscious choice to pursue that opportunity when he learned of the opening.

[34]            That choice culminated in his signing the RBA contract of employment on June 15, 1999.  Mr. Finlan suggests that he was pressured to do so because his references had been contacted and therefore his search for alternate employment may have prejudiced his existing employment position.  However, no evidence was led in that regard except for Mr. Finlan’s perception of how his pursuit of alternate employment might have affected his existing job.  Everyone who pursues an employment opportunity, while gainfully employed at another job, is faced with that dilemma.  That is inherent in the choice one makes when seeking alternate employment.  The pressure Mr. Finlan felt when presented with the contract of employment at the end of the interview process was not exerted by anyone associated with RBA.

[35]            No evidence was led suggesting RBA pressured or coerced Mr. Finlan into signing the contract.  None of the criteria were present that were noted in Wallace v. Toronto-Dominion Bank (1983), 41 O.R. (2d) 161 at 180:

… the terms were not hidden in a maze of fine print but were set forth clearly and understandably; on the evidence, there was no attempt to take advantage of the plaintiff or to exert influence over him so as to procure a contract that otherwise would not have been made; and nothing that transpired can be treated as being oppressive of him or as constituting the type of coercion that may vitiate consent.

[36]            Mr. Finlan submits that RBA should have pointed out the strengths and weakness of each provision in the contract of employment.  That, however, is not required of a prospective employer.  It is sufficient that a prospective employee is given time to review a proposed employment contract on his own, in the absence of any influence by the prospective employer, and to be given the opportunity to seek out any advice he may wish to obtain about any implications of the proposed contract.  Mr. Finlan was given the time that he requested to review the employment contract and chose not to obtain any advice on it.  RBA never stated that the terms of the proposed contract were non-negotiable but did advise Mr. Finlan that it was a standard form contract all managerial staff were asked to sign.

[37]            Mr. Finlan acknowledges he reviewed the proposed employment contract and understood the defined notice provision before he signed it.  There is no issue that the contract or any of its terms lacked a consensus between the parties.  Although Mr. Finlan may have felt the defined notice provision was onerous, there was nothing in the provision that he did not understand or found ambiguous.

[38]            At the end of the day Mr. Finlan was faced with a decision of whether he would sign the employment contract or not.  He chose to sign it.  He did so because RBA’s offer of employment provided him with greater financial opportunities and a more challenging work environment than his existing employer.  After weighing the risks of giving up a secure position against the potential offered by RBA, Mr. Finlan chose the latter.  He did so with full knowledge of what was being offered, what he was accepting, and what he was leaving by departing his then employer.

[39]            RBA operates a service-based business in a highly competitive market.  Its profitability relies on more than operational efficiencies.  In a knowledge-based environment RBA is seeking visionary leadership through the MAC in order to stay in front of its competitors.  Contribution to the MAC requires a team approach, strong interpersonal skills and a forward-looking perspective to ensure growth of the business.  At the MAC level members are expected to contribute beyond what is required at an operational level.  MAC members need to possess judgement and discernment sufficient to move the business forward.  Although an honest, loyal and hard-working employee, Mr. Finlan was not able to move beyond his operational strengths and contribute at the level required of a member of the MAC committee.

[40]            It was for that reason that Mr. Finlan’s employment was terminated.  Although Mr. Finlan’s employment contract contained a defined notice provision of five weeks for five years of work, RBA elected to pay Mr. Finlan the equivalent of six months salary.  While required to exercise his stock options upon termination, Mr. Finlan was able to realize a net profit of about $63,000 from sale of the RBA stock he acquired.

[41]            In summary, there was no inequality of bargaining position between RBA and Mr. Finlan and RBA did not use its interviewing process in an unconscionable way to produce an unfair result.  The terms of Mr. Finlan’s contract of employment were clear and unambiguous.  Both sides understood them.  Mr Finlan was given the time he requested to review the contract and thereafter made the decision to accept RBA’s offer.  The fact that he made choices which he may now regret does not change the character of RBA’s interviewing process and its presentation of an offer of employment from a standard process to oppressive or unconscionable conduct.

[42]            In the result, I am of the view that Mr. Finlan’s contract of employment is enforceable.

(ii)        Alternate relief requested

[43]            If the contract of employment had been set aside, I am satisfied that the equivalent of six months salary provided to Mr. Finlan upon termination was within the range of damages that would have been available to an employee at his level of employment.

[44]            I am also satisfied that Mr. Finlan’s employment benefits, including his performance bonus at the MAC level, the employer’s contribution to his RRSP and RBA’s stock options were discretionary in nature and not an integral part of his salary.  A MAC member’s receipt of a performance bonus was subject to three discretionary levels of review in the year following the member’s performance.  Mr. Finlan had received his performance review for 2003 in February 2004, along with its attendant bonus and stock options.  His performance review for 2004, at the MAC level, would not have been determined until February 2005.  In those circumstances I am of the view that no requirement to pay these benefits was established at the time of his termination.

[45]            I am also satisfied that the circumstances of Mr. Finlan’s termination do not give rise to a claim for “Wallace” damages.  There was no evidence to support a finding of bad faith against RBA.  RBA was considerate of Mr. Finlan’s upset and embarrassment over his termination.  Mr. Wall and Mr. Pospiech left him alone in the CEO’s office to collect his thoughts, permitted him to gather his personal belongings without supervision, gave him a lump sum payment of almost five months more salary than that provided for in the contract of employment.  They also offered to assist him in minimizing his tax liability on that payment.

[46]            I further find no malice or bad faith in the clerical error that occurred in filling out his Record of Employment or in Mr. Wall’s notice to the staff that Mr. Finlan had resigned.  In my view the latter action was merely an attempt to minimize any embarrassment that Mr. Finlan may have experienced over the dismissal.

[47]            In the result, Mr. Finlan’s claim must be dismissed.

[48]            Costs shall follow the event at Scale 3.

“D. Smith, J.”
The Honourable Madam Justice D. Smith