Breach of an Employment Contract is not Cause for Dismissal.

In Valeurs mobilières Desjardins inc. c. Jean, 2019 QCCA 128, the Quebec Court of Appeal reminds us how difficult it is to establish cause, even when the employees are in clear violation of their employment obligations.

Prior to working for VMD, the Respondents were employed by Financière Banque Nationale (“FBN”). While there, they invested for clients off-shore and “off register” in order to, they claimed, protect their clients’ anonymity. This meant that they did not share their commissions with their employer.

One of their clients, Bouffard, had an investment account off-shore as well as an RRSP account. In 2004, the Respondents moved to VMD, and continued to manage Bouffard’s accounts off-register, which meant that VMD had no way of supervising their actions. For several years, Leclerc continued to manage Bouffard’s accounts, communicating with the off-shore bank by phone or on his VMD email address. Each Respondent earned about $7,500 in commissions that were not shared with VMD and about which VMD knew nothing.

In late 2010, VMD offered Respondent Jean the position of Regional Director. As a result, Jean was to sell his book of business to other VMD advisers for $800,000. In September 2011, VMD became aware that some advisors were transacting off-shore but did no further follow up. At the end of October 2011, VMD’s compliance department began an investigation of 21 advisors potentially involved in the management of off-shore accounts. Of those questioned, 10 were found to have been involved with such accounts.

VMD found that Jean and Leclerc were in violation of their regulatory and contractual obligations for having secretly received commissions, having advised a client without VMD’s knowledge and by holding bank accounts in the Bahamas. On November 1, 2014 the Respondents and 7 other advisors were dismissed for cause. On November 14, 2011, Jean and Leclerc were hired by FBN and were only able to transfer 25% of their book of business. In 2014, Jean accepted a position with Banque Laurentienne and sold his book of business to Leclerc for $430,000. Jean and Leclerc sued VMD for dismissal without cause.

The trial judge found that Jean and Leclerc were dismissed without cause. They were awarded 12 and 14 months of notice. Jean was also compensated for the loss of the sale of his clientele, being the difference between $800,000 and the eventual sale price of $430,000.

The Court of Appeal agreed with the Superior Court, despite the fact that the Respondents clearly violated their contractual obligations to VMD:

[82]     Or, la qualification des faits retenus et les inférences qui s’en dégagent relèvent de l’appréciation d’un juge de première instance, un domaine dans lequel une cour d’appel n’intervient qu’en présence d’une erreur manifeste et déterminante que VMD ne démontre pas en l’espèce.

[83]     VMD prétend en outre que le juge a erré dans l’appréciation des fautes de Jean et Leclerc en accordant de la pertinence à des éléments de la preuve qui n’en ont aucune.

[84]     Selon cet argument, le juge n’aurait pas dû prendre en compte les performances de Jean et Leclerc, l’utilisation des équipements et du matériel de l’employeur pour gérer le compte off shore de Bouffard, la tolérance des dirigeants de VMD à l’égard des activités hors registre des conseillers , l’absence de sanction imposée par l’OCRCVM, le Canadian Securities Institute (« CSI ») et le Canadian Finance Association Institute (« CFA ») et le fait que Jean et Leclerc n’ont pas été complices d’une infraction fiscale.

[85]     Contrairement à ce que soutient VMD, ces éléments, qui émergent tous de la preuve, n’ont pas servi à démontrer l’inexistence d’une faute commise par Jean et Leclerc, mais ont plutôt été considérés par le juge pour établir le niveau de gravité de celle-ci et, conséquemment, le sérieux des motifs invoqués pour les congédier .

[86]     Leur pertinence à cet égard est, à mon avis, indéniable.

…

[92]     En conclusion, on ne saurait nier que le conseiller en placement qui transige hors registre empêche son employeur d’assurer la surveillance à laquelle s’est obligé ce dernier et commet de surcroît une faute qui n’est pas bénigne et qu’il aggrave en percevant,  à l’insu de celui-ci, des revenus découlant du travail qu’il effectue ainsi.

[93]     VMD aurait voulu que l’inconduite de Jean et de Leclerc soit appréciée en considérant essentiellement la facette aggravante de celle-ci.

[94]     Ce n’est toutefois pas la voie empruntée par le juge qui a plutôt pris en compte l’ensemble de la preuve comprenant à la fois les facteurs aggravants et atténuants.

[95]     Il a ainsi conclu que l’inconduite de Jean et de Leclerc n’était pas d’une gravité telle qu’elle est incompatible avec le maintien de la relation d’emploi et, conséquemment, que leur congédiement n’était pas justifié.

[96]     Cette détermination résulte d’une appréciation globale de la preuve pour laquelle VMD n’établit pas que le juge a commis une erreur manifeste et déterminante.

While the Court of Appeal’s invocation of the rule not to interfere with the trial judge’s appreciation of the evidence is obviously not surprising, the result nonetheless is if one considers the duty of loyalty set out in Article 2088 CCQ. The Respondents, and the other dismissed advisors, some of whom also sued VMD and won, were essentially working for both VMD and themselves. Though the commissions in this case were not significant, one wonders why the Respondents would not simply have disclosed Bouffard’s account when they joined VMD.

The trial judge (and the Court of Appeal for that matter) were persuaded by the argument that VMD was aware of and tolerated the management of off-shore accounts by their advisors. The Court also noted that the investor did not lose any money. Yet the Court of Appeal concluded that the employees were in breach of their contractual and regulatory obligations. If that is the case, are the faults less serious because of VMD’s tolerance or delay to investigate them? The Court of Appeal says they are.