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CONTRACT OF EMPLOYMENT - Express terms - Remuneration - Bonuses - Interpretation

Tuesday, March 07, 2017 @ 8:47 AM  

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Appeal by Cornelson from the damage award in his claim against Alliance Pipeline (Alliance). Alliance cross-appealed from the assessment of damages. Cornelson was dismissed as Alliance’s President and CEO in 1999, prior to the start-up of the pipeline the company was formed to construct and run. He pursued a claim for greater damages than those provided at the time of his dismissal. The judge found that the 1996 Employment Agreement Cornelson signed, applied, and accepted that Alliance had paid the required 12 months’ salary under the Agreement. The judge found that Alliance’s obligations to Cornelson under the terms of a Long-term Incentive Plan (LTIP) ended at the time of his dismissal, just as they would in the case of an employee who left the company due to illness, disability or death. The judge considered Alliance’s offer of a gratuitous payment of $545,000 in anticipation of incentives, entitling Alliance to set off this amount against the compensation owing under the LTIP. He admitted and relied upon a report from Deloitte, commissioned by Alliance but prepared at Cornelson’s request, in determining the compensation payable to Cornelson under the plan, including the value of the units and their quantity. Rather than awarding compensation of $375 per unit based on this report, the judge awarded Cornelson compensation based on $620 per unit, the amount Alliance had paid other LTIP participants after they negotiated a greater amount from Alliance as their present employer.

HELD: Appeal and cross-appeal dismissed. The termination clause in Cornelson’s Employment Agreement clearly provided for the payment of 12 months’ salary from the date of dismissal. There was no support for Cornelson’s argument that he was also entitled to compensation related to other benefits he would have received had he worked these further 12 months, including a greater number of LTIP units. The judge was entitled to infer from the amount of the gratuitous payment that it represented Cornelson’s entitlement to compensation under the LTIP, using the valuation of units Alliance was employing in 2000. The Deloitte reports were admissible as evidence that Alliance had obtained an independent valuation of the units in the LTIP, and were relevant to the determination of whether or not the value Alliance gave to the units was reasonable. While the judge could have awarded Cornelson per unit LTIP compensation based on the Deloitte report, it was equitable to award compensation based on what other LTIP participants received for their units. This was a reasonable exercise of the judge’s discretion.

Cornelson v. Alliance Pipeline Ltd., [2017] A.J. No. 15, Alberta Court of Appeal, P.W.L. Martin, B.K. O'Ferrall and B.L. Veldhuis J.A., January 11, 2017. Digest No. 3641-005