147 D.L.R. (4th) 128, 29 C.C.E.L. (2d) 96, 30 O.T.C. 172

1997 CarswellOnt 1779

Schumacher v. Toronto Dominion Bank

C. John Schumacher, Plaintiff and The Toronto-Dominion Bank and Toronto-

Dominion Securities Inc., Defendants

Ontario Court of Justice, General Division

Kiteley J.

Judgment: May 15, 1997

Docket: Toronto 95-CQ-61700CM

Proceedings: additional reasons at (November 17, 1997), Doc. Toronto 95-CQ-61700CM (Ont. Gen. Div.)

Counsel: R.L. Colson and Larry M. Najjar, for plaintiff.

Robert S. Harrison and David F. O'Connor, for defendants.

Subject: Labour and Employment

Employment Law --- Termination and dismissal -- Termination of employment by employer -- Constructive dismissal -- Change in responsibilities or location of work

In nine years plaintiff progressed from trainee to senior vice president of defendant bank responsible for all trading in five key areas of bank's treasury operations -- Bank unilaterally decided to hire employee to assume part of plaintiff's duties and responsibilities -- Bank's action constituted constructive dismissal -- Implied term of employment contract that bank first consult plaintiff before making fundamental changes to plaintiff's duties and responsibilities -- Bank's unilateral decision to hire employee and change plaintiff's duties and responsibilities without first consulting plaintiff amounting to repudiation of employment contract.

The plaintiff commenced his employment with the defendant bank in 1984 and consistently moved into positions of greater responsibility. By 1994, he was a senior vice president, had acquired the top trading position in the bank and was responsible for all trading in each of the bank's five key areas. Throughout his employment, the plaintiff received positive and sometimes exceptional performance appraisals. The bank recognized the plaintiff as an important contributor to its derivative products and fixed income groups and acknowledged that he helped the bank achieve a top bond underwriting position. The plaintiff's notable achievements and contributions to the bank's profitability were reflected in the compensation which he received by way of salary and significant bonuses for successive years between 1987 and 1994. The compensation was related to the plaintiff's productivity and the profitability of his group. In the 18 months preceeding his departure from the bank the plaintiff received bi-annual bonus payments of $650,000 to $700,000.

In January 1995, the bank hired W to assume responsibility for fixed income, money trading, bond borrowing and lending operations. The plaintiff retained responsibility for foreign exchange, derivatives and bank funding operations. As a result of this, the plaintiff lost reponsibilty two of his four products, including the product with the greatest potential for growth. He also lost the opportunity to make broad recommendations affecting all five areas and participate in their implementation. As well, the plaintiff's objectives, as set out in his job description, could not be met in many respects because he no longer had control nor direction over important products and research. Furthermore, as a result of the changes in the plaintiff's duties and responsibilities brought about by W's hire, the plaintiff also stood to lose approximately 15 percent of his bonus, which constituted the most significant component of his total yearly compensation package.

The bank did not discuss W's hiring with the plaintiff prior to the hiring for fear that the plaintiff would react negatively and leave as a result. The bank maintained that the position held by the plaintiff was not materially changed and that the plaintiff should return to work. When the plaintiff failed to return to work on the date requested by the bank, the bank took the position that the plaintiff had resigned from his employment. The plaintiff brought an action for wrongful dismissal, alleging that he was constructively dismissed.

Held: The action was allowed.

While the employer has the unilateral right to change the duties and responsibilities of an employee, there are limits on those rights. Where the unilateral change is substantial, it constitutes a fundamental breach of contract and is constructive dismissal. It was an implied term of the plaintiff's employment agreement that he be consulted before fundamental changes were made and that he be involved in the process of hiring significant employees, especially where the hiring posed a fundamental change to his own duties and responsibilities. The hiring of W was the first time that fundamental changes were made to the plaintiff's duties and responsibilities without his consent and collaboration. These changes were material in nature and amounted to a repudiation by the employer of the contract of employment, and the constructive dismissal of the plaintiff on that date.

In none of the communications from the plaintiff to the bank did the plaintiff make a clear and unequivocal statement of intention to resign. The plaintiff was entitled to keep his position with the employer until he was constructively dismissed or he resigned. It was not essential that he take the positive step of saying that he wanted to keep his job. The plaintiff therefore did not repudiate the contract of employment and the option of treating him as though he had resigned was not open to the bank.

Cases considered by Kiteley J.:

Bardal v. Globe & Mail (The), [1960] O.W.N. 253, 24 D.L.R. (2d) 140 (Ont. H.C.) -- considered

Black v. Second Cup Ltd. (1995), 8 C.C.E.L. (2d) 72 (Ont. Gen. Div.) -- considered

Bremner v. Trend Housewares Ltd. (1985), 51 O.R. (2d) 101, 7 C.C.E.L. 272 (Ont. H.C.) -- applied

Canadian Bechtel Ltd. v. Mollenkopf (1978), 1 C.C.E.L. 95 (Ont. C.A.) -- considered

Cayen v. Woodwards Stores Ltd., 75 B.C.L.R. (2d) 110, 100 D.L.R. (4th) 294, [1993] 4 W.W.R. 11, 45 C.C.E.L. 264, 22 B.C.A.C. 32, 38 W.A.C. 32 (B.C. C.A.) -- considered

Cox v. Royal Trust Corp. of Canada (1989), 26 C.C.E.L. 203, 33 O.A.C. 95 (Ont. C.A.) -- considered

Davidson v. Allelix Inc. (1991), 39 C.C.E.L. 184, 86 D.L.R. (4th) 542, 7 O.R. (3d) 581, 54 O.A.C. 241 (Ont. C.A.) -- considered

Farber c. Royal Trust Co. (1996), (sub nom. Farber v. Royal Trust Co.) 145 D.L.R. (4th) 1 (S.C.C.) -- referred to

Farquhar v. Butler Brothers Supplies Ltd., 23 B.C.L.R. (2d) 89, [1988] 3 W.W.R. 347 (B.C. C.A.) -- considered

Greaves v. Ontario Municipal Employees Retirement Board (1995), 15 C.C.E.L. (2d) 94, 129 D.L.R. (4th) 347 (Ont. Gen. Div.) -- considered

Kolcun v. Carsten Electronics Ltd. (May 8, 1995), Doc. CA C16909 (Ont. C.A.) -- considered

Longman v. Federal Business Development Bank (1982), 36 B.C.L.R. 115, 131 D.L.R. (3d) 533 (B.C. S.C.) -- applied

Meyer v. Jim Pattison Industries Ltd. (1991), 38 C.C.E.L. 101 (B.C. S.C.) -- applied

Michaels v. Red Deer College, [1976] 2 S.C.R. 324, [1975] 5 W.W.R. 575, 5 N.R. 99, 75 C.L.L.C. 14,280, 57 D.L.R. (3d) 386 (S.C.C.) -- applied

Mifsud v. MacMillan Bathurst Inc. (1989), 28 C.C.E.L. 228, 63 D.L.R. (4th) 714, 35 O.A.C. 356, 70 O.R. (2d) 701 (Ont. C.A.) -- applied

Moore c. University of Western Ontario (1985), 8 C.C.E.L. 157 (Ont. H.C.) -- considered

O'Grady v. Insurance Corp. of British Columbia (1975), 63 D.L.R. (3d) 370 (B.C. S.C.) -- considered

Orth v. MacDonald Dettwiler & Associates Ltd. (1986), 8 B.C.L.R. (2d) 1, 16 C.C.E.L. 41 (B.C. C.A.) -- considered

Pulak v. Algoma Publishers Ltd. (1995), 10 C.C.E.L. (2d) 111 (Ont. Gen. Div.) -- considered

Ryshpan v. Burns Fry Ltd. (1995), 10 C.C.E.L. (2d) 235, 95 C.L.L.C. 210-036 (Ont. Gen. Div.) -- applied

Skidd v. Canada Post Corp. (1993), 93 C.L.L.C. 14,027, 47 C.C.E.L. 169 (Ont. Gen. Div.) -- applied

Smith v. Viking Helicopter Ltd. (1989), 24 C.C.E.L. 113, 31 O.A.C. 368, 68 O.R. (2d) 228 (Ont. C.A.) -- considered

Stacey v. Consolidated Foods Corp. of Canada (1987), 15 C.C.E.L. 113, 76 N.S.R. (2d) 91, 189 A.P.R. 91 (N.S. T.D.) -- considered

Wilkinson v. T. Eaton Co. (1992), 2 Alta. L.R. (3d) 71, 41 C.C.E.L. 57, (sub nom. Wilkinson v. Eaton (T.) Co.) 130 A.R. 55 (Alta. Q.B.) -- considered

Wood v. Canadian Marconi Co. (1995), 9 C.C.E.L. (2d) 174 (Ont. Div. Ct.) -- applied

ACTION for wrongful dismissal.

Kiteley J.:

1 John Schumacher was a highly regarded, very profitable senior executive in the employ of the defendants. In the fiscal year which ended shortly before his departure, he was within the top five earners in the Bank. He had, what he described as, the best job in Canada. Did he choose to leave this environment or was the choice made for him? For the reasons which follow, I find that he was constructively dismissed.

Employment History of John Schumacher

2 Schumacher is 41 years old. He obtained an LLB in 1980, and was called to the Ontario Bar in 1982. He has never practiced as a lawyer. He completed an MBA in the spring of 1984. The Toronto Dominion Bank (the TD Bank) was his first and only employer between graduation and 1995.

3 While still a student at the University of Western Ontario in early 1984, Schumacher met Ken Foxcroft at a reception. At that time, Foxcroft was Vice President, International Treasury at the Bank. Foxcroft and Schumacher hit it off. Schumacher accepted the training position offered by the TD Bank, and started working in May 1984.

4 Schumacher began as trainee in the Trading Room at a salary of $30,000. Throughout his career, he received positive and sometimes exceptional performance appraisals. In the spring of 1985, he was promoted to Treasury Officer, International Treasury. The performance review in 1986, when he was Senior Treasury Officer, indicated that Schumacher "showed a high degree of ability and initiative. He was able to quickly identify problems and propose and implement solutions."

5 In the spring of 1986, Schumacher was offered the position of Senior Treasury Officer in Tokyo. Schumacher attempted to negotiate a better financial arrangement than that offered by the Bank. He was promoted to Senior Dealer, Capital Markets in 1986, even though he rejected the offer to move to Tokyo. In the spring of 1987, he became eligible for participation in the Bank's Performance Compensation Plan (PCP).

6 After a brief stint as Senior Dealer, in June 1987, he was promoted to Chief Dealer, Capital Markets. This was a significant step for Schumacher. He had come to realize he was going to be a success. He knew that he could trade. He felt he was starting to get recognition from his peers as a rising star. The performance appraisal listed his strengths as "extremely strong math skills and very high desire to succeed and detailed knowledge of inter-relationships of major markets (a rare skill)." Schumacher had continued to take courses to increase his knowledge. He was acknowledged for his efforts with the comment in the appraisal that he was "a very profitable and most highly educated trader in TDB".

7 In the spring of 1988, Schumacher became eligible to participate in the Bank's Long Term Incentive Plan (LTIP). As a result, Schumacher was awarded units which had a base price of zero and the market value of the Bank's common stock. The units were redeemable in five years, with the redemption price based on the trading price. In the letter notifying Schumacher of his eligibility, the President of the Bank described the rationale of the Plan as to "focus management's attention on building shareholder value". The letter further indicated that the Board of Directors "has identified you as a being an important contributor to the Bank and want you to feel as a senior management employee that you have a significant ownership interest in the Bank's long term results."

8 Although his star was clearly rising, Schumacher resigned in May 1988. Since these circumstances came to be relevant when events occurred in 1995, I digress to summarize what occurred. Schumacher received an offer of employment from another bank with a significant salary increase and signing bonus. He met with Foxcroft and Bob Kelly (then General Manager, Capital Markets and Fixed Income Group) to discuss the pros and cons. In the end, Schumacher agreed to stay, with an increased salary equal to the competitor's offer and an increase in his trading limits, giving him greater scope in his job. The performance appraisal completed shortly after this event was very positive, including comments such as "outstanding trading skills".

9 In March 1989, Schumacher was promoted to Assistant General Manager and Chief Trader, Capital Markets and Fixed Income, Treasury & Investment Banking Division. This was the first of his appointments senior enough to require the approval of the Board of Directors. He became an officer of the Bank. The derivative products group which he had supervised had done very well, while the fixed income group had done poorly. Kelly created a group to help to improve fixed income performance. The performance appraisal completed later in 1989 included this comment under performance characteristics: "Expert understanding of the mechanics, trading and risk management of the bank's most complex foreign currency and interest rate related products. Highly disciplined, organized and dedicated. Is able to work with little supervision." Kelly and Foxcroft commended him for his "major accomplishments", and noted that profitability in fiscal 1989 was "significantly well above plan."

10 By the spring of 1990, it was apparent that Schumacher had "made major contributions to the reorganization and redevelopment" of the fixed income group and had achieved "significant improvement in the unit's performance". As a result, in June 1990, the Board of Directors approved his promotion to General Manager, Capital Markets & Fixed Income. His performance appraisal later that year noted that he had "consistently exceeded job expectations over the past year".

11 Schumacher continued to perform well. In 1991, the Board of Directors approved his appointment as Managing Director and Chief Trading Officer of Toronto Dominion Securities Inc. (TDSI), and he was elected to the Board of TDSI. Shortly thereafter, he was appointed to the position of Vice Chairman, TDSI. The memorandum by Foxcroft recommending the appointment contained this explanation: "With Mr. Schumacher now being responsible for trading activities in bonds and money market securities, he is already performing the role of Chief Trading Officer for a large part of the Bank's exposure. The Chief Trading Officer recognizes this fact and his membership on the Board will provide valuable input into trading risk and compliance issues." These changes put Schumacher into the senior management category, and made him eligible for further performance bonuses. His position at TDSI signalled his involvement in the regulatory issues which arose in running an investment bank. When he became Vice Chairman, TDSI, he joined five other Vice-Chairmen and the Chairman, the small group responsible for TDSI. Schumacher reported to Foxcroft both at the Bank and at TDSI.

12 Schumacher said that in 1991, he had a discussion with Charles Baillie, then Vice-President of the Bank. In this discussion about compensation, Baillie told Schumacher he was doing a good job and that, for the foreseeable future, the amount at the bottom right hand corner of his tax return would exceed $1 million. Baillie did not adopt that remark attributable to him about the tax return, but he did say that if Schumacher's performance continued, he would receive a bonus such as he had in the past.

13 In the performance appraisal in August, 1991, it was noted that "under Mr. Schumacher's management and direction, strong progress has been made over the past 12 months in money markets, bonds and capital market (derivative products) activities." The concluding remark by Foxcroft was that "Mr. Schumacher's sphere of responsibility has dramatically increased over the past 12 months, a major challenge for him in 1992 will be effective delegation of responsibilities to his key reports."

14 In late 1991, Schumacher was approached by a head hunter. He informed his superiors of this, which resulted in discussions of improving his compensation package. Schumacher declined the position promoted by the head hunter. But, the negotiations which ensued left him with a compensation package very similar to the competitor's position.

15 The performance appraisal in late 1992 reflected an overall rating of "B". It identified the "considerable progress" which had been made by Schumacher and his group in certain key aspects of the business. The "noticeable achievements" included, maintaining the leading money market dealer position with the Canadian market, attaining the top ten fixed income dealer position, attaining the top three position in Canada for medium term derivative products and first position for short term derivative products, dramatically upgrading the results for the Canadian derivatives group, playing a leading role in contributing to the success of the ALCO Committee, leading TDSI to a top three corporate bond underwriting position in Canada, and dramatically upgrading the bank's market position with key provincial governments.

16 In February 1993, Foxcroft announced that the Board of Directors had promoted Schumacher to the position of Senior Vice President, Capital and Money Markets Group (Global), Treasury, Corporate & Investment Banking Group. This was a significant promotion to the office of Senior Vice President. It put Schumacher in the group of senior people in the bank. The new position encompassed derivatives, fixed income and money markets. The appointment was not accompanied by a salary increase, but did attract other benefits.

17 In less than 9 years, Schumacher had progressed from Trainee to Senior Vice President. He consistently moved into positions of greater responsibility, and achieved or exceeded the Bank's expectations. As Senior Vice President Capital and Money Market Group, he was accountable for co-ordinating underwriting, distribution and trading of derivative, fixed income and Canadian Treasury money market products for the Bank, and managing the Bank's Canadian and U.S. funding activities. This required developing a strategy to increase new business and developing a strong group of subordinates.

18 While Schumacher welcomed the new responsibilities of the position of Senior Vice President, there were significant stresses both in his business and personal life. He had separated from his wife and had been working seven days a week. In late May or early June, he attended a TDSI meeting, where he and Foxcroft made a presentation on the Fixed Income group. They were met with some criticism of the group's performance. He felt burnt out and unsupported by his peers.

19 On June 30, 1993, Schumacher was notified of his bonus for the first half of the fiscal year. Later that day, he submitted his written resignation to Baillie, who was then Vice Chairman, Corporate and Investment Banking Group. He indicated that he would continue to work until his departure date was agreed upon. He did not have another job, nor had he looked for one. Although he was reporting to Foxcroft at that time, he submitted his resignation to Baillie as Foxcroft was away.

20 In anticipation of meeting on July 20th, Schumacher sent a detailed letter to Baillie setting out the "measures necessary, in approximate order of priority" to have him withdraw his letter of resignation. His conditions included the promise that within 3-4 years he would be among the senior officers running the Bank, a change in reporting structure in order that he report to Baillie, increased staff, and a commitment for increased compensation (base salary and bonus). The priorities were essentially, career opportunities and compensation, in that order.

21 Baillie agreed to all conditions except the change in reporting from Foxcroft to Baillie. Schumacher withdrew his resignation. Schumacher said, in retrospect, that he was happy he had retreated from the impulsive decision to resign, which he had made to escape family and other pressures.

22 In the summer of 1993, steps were taken to reorganize Treasury Group given the changes in the market which caused them to desire an organization which made them more accessible to their clients. The planning and design took place during the balance of 1993. Implementation of the "Navigator project" took effect in February, 1994. Schumacher was in charge of the project. Up to that point, the Treasury Group had been organized by products with trading, sales and administration designated to each product. The conceptual change was that Treasury was re-organized along function lines, and not along product lines. The process of conception, design and implementation was very interactive. Schumacher achieved a high level of consultation, both within the group and in other departments. All senior people experienced a job change except for Foxcroft.

23 As a result of the change, Schumacher became responsible for all trading in each of the five key areas: derivatives, fixed income, money market, funding (including repos), and foreign exchange. Three other vice presidents were in charge of institutional sales, commercial sales, and retail sales.

24 While that project was underway, and before the organizational changes took effect, Foxcroft did the 1993 appraisal, and gave Schumacher an overall rating of "B+" with this comment:

The interest rate environment during fiscal 1993 did not provide the same opportunities to John Schumacher and his group as were seen in 1991 and 1992. "Choppy" markets had a detrimental impact on trading in the early part of the year, but results have improved in the latter months. Excellent progress has been made with regards to the distribution of Fixed Income and Derivative Products.

Foxcroft summarized nine notable achievements for Schumacher and his group over the preceding year including:

...being the leading instigator of the "Navigator Project" which has prompted a total review of how we develop and distribute treasury products to our various client sectors. Changing the emphasis of the Canadian Treasury operations from a product to a client focused organization.

25 The organizational changes took effect in February 1994, at which point Schumacher became Senior Vice President, Treasury Trading & Risk Management. He had the top trading position in the bank with global responsibilities. Schumacher said that he was very happy in the reconstituted job. He felt that trading really suited him and that the reorganization achieved the change he had been looking for. He described it as the "ideal job" and the "best job in any trading room in Canada".

26 In September 1994, Schumacher received his performance appraisal from Foxcroft at the same time as the job specification for the new position was finalized. The appraisal is attached to the Position Document (referred to below). This was his last appraisal, and his best. His overall rating up to February 1994, was "B+", and after the change in responsibilities his rating was "A". Foxcroft reported that "under John's direction, trading results for the first 7 months of 1994 reached record levels." Schumacher's "notable achievements" included a dramatic increase in contribution to profit (CTP) of derivatives and fixed income groups, upgrading staff, reorganizing the trading sector, and providing a focus for the newly formed proprietary trading group.

27 In the usual year end letter of December 1994, reporting on the bonus for the fiscal year, Foxcroft indicated that "fiscal 1994 represented a record year for the Treasury Group with an increase of 24% to the Bank's total profits over last year." Because performance was stronger in the first six months than in the last six months, the year end installment of the bonus was not as high as might have been suggested by the earlier high performance. In response to the bonus letter, Schumacher sent an e-mail to Baillie personally thanking him for the bonus and indicating that he felt "very grateful for being given the opportunity to earn such a good living and to have such a good job".

28 While Schumacher expressed considerable gratitude, the process of the year end performance appraisal and bonus calculation was not without controversy. Schumacher's compensation, both salary and bonus, was related to his productivity and the profitability of his group. Typically, Schumacher met with Foxcroft and exchanged views on profitability, taking unique circumstances into account. There was clearly an element of negotiation, particularly on the subject of what Schumacher's peers were receiving at other financial institutions. Schumacher was not always content with the outcome. But he was highly involved in the process. In the fall of 1994, Schumacher asked for a total year bonus of $2 million.

29 Schumacher was rewarded in benefits and perquisites, and in salary and bonus.

30 The following table summarizes his compensation for the calendar years indicated:

Year Salary Bonus Total

1987 $ 60,000 $ 49,000 $109,000

1988 $ 90,000 $ 80,000 $170,000

1989 $110,000 $130,000 $240,000

1990 $135,000 $231,000 $366,000

1991 $150,000 $750,000 $900,000

Year Salary Bonus Total

1992 $150,000 $ 900,000 $1,050,000

1993 $175,000 $ 850,000 $1,025,000

1994 $200,000 $1,400,000 $1,600,000

1995 $200,000 $ 0 $ 200,000

31 The bonus payments in later years were paid bi-annually. In 1993, the installments were in the amounts of $200,000 and $650,000. In 1994, the installments were each $700,000. In the 18 months preceding his departure, Schumacher received bi-annual bonus payments of $650,000 to $700,000. By far the largest component of his compensation was the bonus.

32 In January 1995, Schumacher had one hundred and two people reporting to him directly or indirectly (referred to as "reports"). Of those people, fifty-six directly reported to him. He was responsible for four major businesses: derivatives, foreign exchange, fixed income, and money market. Schumacher and members of his group handled trillions of dollars of investments. Schumacher's job was "much bigger than any other in the Canadian Market", and was so significant and so diverse that it was not replicated in Canada, which caused difficulties in finding comparables for purposes of establishing compensation. Schumacher was in charge of the Trading Room for one of Canada's leading banks. Schumacher spent about 5 hours each day in the Trading Room, 25% of that in making his own trades, and 75% in watching other peoples' positions and setting the trading strategy.

33 Schumacher said that he loved his job. He also felt partly responsible for creating it through the Navigator Project. Although still in the early stages, he felt it had already been proven a success. He said that there had been no year when he had more job satisfaction. He felt that the group had "fired on all cylinders".

34 The TD Bank built an investment banking business with individuals promoted from within, by merging or acquiring brokerage firms, and by hiring known performers at other institutions. Schumacher and his peers and seniors were always alert to external prospects. It was expected before and after Navigator that the trading room needed more experienced talent.

35 Before moving to the events which occurred at the end of January, a brief description of other significant persons is required.

36 Ken Foxcroft has worked for the T.D. Bank since about 1963. He progressed through many levels of responsibility similar to the advancements experienced by Schumacher. During the events in January 1995, Foxcroft was an Executive Vice President of the Bank and Deputy Chairman of TDSI.

37 Foxcroft described the massive growth in treasury businesses from 1985 to 1995 at TD Bank and all banks and investment dealers. Increasingly, banks had to compete for employees against investment dealers. Compensation that involved a bonus scheme was imperative. Foxcroft was involved in introducing it to the TD Bank. The Performance Compensation Plan (PCP) worked as follows. The success of the Treasury Group was determined by calculating the total revenue generated. Then the revenue from each product group was isolated and from that, the expenses of the product group were deducted. The remaining amount was the contribution to Profit (CTP). Then a portion of that CTP was put into the pool from which bonuses were paid. The portion of the CTP varied by product, for example, it was 10% for foreign exchange and 27.5% for derivative products. Generally, bonuses were paid only from that pool. The group and individual contribution in the year was calculated with comparisons between groups. At some of the senior levels, they commissioned market surveys to gain an understanding of what "the competition" was paying to ensure that the aggregate of salary and bonus was competitive in order to retain the executive. It was Foxcroft who made the decisions up to Schumacher's level. For Schumacher, he made a recommendation to Baillie. Baillie would involve others including the President of the Bank and the Compensation Committee.

38 Before making a decision or recommendation as to bonus, Foxcroft discussed it with the employee. Typically, the employee, including Schumacher, put forward a "brag sheet" to outline the individual contribution. The discussion usually included what the employee's expectations were. Foxcroft explained how difficult it had been to find a comparator for Schumacher's job because there was no other job like it in Canada. This had an impact on the discussions about the "retention factor". In addition to the profitability and comparative components of the bonus analysis, Foxcroft also considered soft factors such as potential and team work.

39 Generally at the half way point in the year, the analysis was made of performance to date, it was annualized and the employee received 40% of what the year end bonus was expected to be, to give some room in case any negative change in performance occurred in the second half of the year.

40 Foxcroft thought that he and Schumacher had a good working relationship. They talked several times each day and Foxcroft tried to meet with his reports weekly. Discussions in these regular meetings with Schumacher and others included people or human resources issues such as hiring, or promotion or people with disappointing performance or risk issues etc.

41 Following the implementation of Navigator, Foxcroft described Schumacher's role as head of global trading to include direct responsibility for all of Canada, oversight responsibility for non-Canadian offices, trading, risk management, compliance with Bank policies and regulatory requirements. Schumacher also had a broader responsibility to consider the future of the business and how the Bank would grow, and to make recommendations to Foxcroft and the Executive.

42 Allan Bell had been with TD Bank since 1981. He is Senior Vice President, Human Resources. He had been involved with recruitment for Treasury since the mid 1980's. He has dealt with recruitment, organization, compensation, and training. Bell had worked with Schumacher. After Schumacher resigned in 1993, Bell made a deliberate effort to communicate frequently with Schumacher. Bell said that the senior vice president group is the team which has accountability to run the businesses. They have a team approach. They are compensated on the basis of the impact that they have on the share value of the Bank.

43 A. Charles Baillie joined the Bank in 1964, and except for three years elsewhere, has been with the Bank ever since. He is the President. He first knew Schumacher in 1985 or 1986 when Treasury started reporting into his area. He had been involved when Schumacher resigned in 1993. He agreed that he had told Schumacher that he was one of four or five of the officers of his generation who, with skill and with a little luck and continued good performance, should be in the group running the Bank, meaning at the level of executive vice president and up.

Events Leading up to Hiring Donald A. Wright

44 Before embarking upon an outline of the events, I digress to remark that, in this case, there is a considerable paper trail. Key events were summarized in memoranda to individuals or to files. And the telephone line in the trading room from which Schumacher typically conducted business (with an extension in his office) was constantly recorded for purposes of verifying the communications and instructions between and among traders and clients and others. The tapes of relevant conversations and transcripts of those tapes were produced.

45 Donald A. Wright had been President of Merrill Lynch, Canada until April 1994, when he had joined Burns Fry as Executive Vice President, Fixed Income. When Burns Fry was acquired by another firm, Wright became available. He had a very high profile in the fixed income area. In August 1994, when Schumacher had one of his meetings with Baillie, they discussed possible "hires". Baillie asked Schumacher what he would think about Wright coming to the Bank. Schumacher responded that he thought Wright would want Baillie's job or Foxcroft's job because Wright was between Baillie and Schumacher in terms of stature and experience. Schumacher said that he did not consider Wright as a threat to him because Wright wasn't a trader. He described Wright as more of a "sales person".

46 Baillie said that he had raised with Schumacher the prospect of hiring Wright to "give us a boost in the fixed income side." Baillie could not remember Schumacher's exact response, but he understood that Schumacher didn't think it was a good idea. Baillie said that he remembered "clearly that it was not something [Schumacher] would favour".

47 In cross-examination, Schumacher accepted that he might have been a bit flippant with Baillie in his remark about Wright wanting Baillie's job. He thought that the conversation was casual, not focused on Wright. He resisted Baillie's interpretation that he gave the impression that he was opposed to Wright running Fixed Income.

48 In September 1994, Schumacher had a conversation with Ken Hight and Andrea Rosen, both of whom were Senior Vice-Presidents, in which Hight raised the possibility of Wright joining the TD Bank to run Fixed Income. Immediately after, Schumacher called Foxcroft to report how Hight had been "stirring the pot". Since the call was made on a phone line which is recorded, the tape and the transcript were produced. One can draw the inference from the call that Schumacher was not enthusiastic about the prospects of Wright taking over one of his key areas, namely Fixed Income. In cross-examination, he explained that he was very sensitive to criticism about the progress of the Fixed Income area, and that it was a hot button, particularly coming from Hight. His concern was that Hight and Rosen would not be the executives who would present a credible proposition about Wright, and that Hight was simply making a point of needling Schumacher. Schumacher said he was reacting negatively to the needling, not to the prospects of Wright being hired. It was Hight who had been the leader of the criticism in the TDSI meeting in 1993, which had been a factor in Schumacher's resignation. Foxcroft's evidence about the phone call was that Schumacher "didn't seem to be too pleased with the idea" of Wright being hired, and he took some objection to Hight and Rosen as the source of the prospect.

49 Foxcroft said that in early October, he had told Schumacher and Peter Bethlenfalvy that he had had lunch with Wright, and that Wright had offered his services as a consultant. According to Foxcroft, Schumacher's reaction was that it wasn't a good idea. Schumacher did not give any evidence about this event.

50 Schumacher said that, after the Hight/Rosen contact, he did not hear about Wright again until the morning of January 24, 1995, when he heard through the grapevine that Wright had been hired to run Fixed Income. Unbeknownst to Schumacher, senior officers of the Bank had engaged in preliminary discussions, and they had finally negotiated an agreement with Wright. All of which was done deliberately without Schumacher's knowledge.

51 In August 1994, Baillie and Marshall Lewis (Vice President, Human Resources) had met with Wright. In early September, Baillie asked Foxcroft to consider whether the Bank/TDSI should hire Wright to run the Fixed Income Area. Foxcroft said that he was "a little caught by surprise", and asked Baillie if he could consider it before responding. Foxcroft sent Baillie a memo dated September 7, 1994, outlining the pros and cons. On the positive side, he thought that hiring Wright would be "an attractive solution to quickly build our Fixed Income and Money Market Securities Business". Foxcroft prepared an organization chart by taking those areas away from Schumacher and putting them under Wright, while still having Schumacher and Wright report to Foxcroft. He also outlined four problems, two of which related to Schumacher:

(1) Be prepared to offer C.J. Schumacher a package (constructive dismissal).

(3) We would potentially lose C.J. Schumacher's trading revenues (which would, hopefully, be offset by increased revenues from the upgraded Fixed Income Group).

Foxcroft's explanation on the latter point was that if Schumacher left, the considerable revenues from his personal trading in bonds and derivatives would be lost. Foxcroft's closing recommendation was that he and Baillie should have further conversations with Wright.

52 Foxcroft was questioned at length about the first of his comments in the memo to Baillie about offering a package to Schumacher. He said that he had not discussed with anyone knowledgeable the meaning of "constructive dismissal" before he wrote the memo, and he had never been through a situation where an employee alleged such dismissal. He used the term because he had heard it before. And he knew that Schumacher would not receive the hiring "in a positive way". Foxcroft was conscious of Schumacher's legal background, indeed it had been a factor in his original hire, and he thought that a "possible outcome" would be that Schumacher would assert constructive dismissal. He anticipated that Schumacher would be upset if Wright were hired and that he would react negatively and might want to leave the Bank. He formed this conclusion on the basis of the telephone conversation about Hight "stirring the pot", and on what he perceived as Schumacher's two previous resignations and threats to resign on other occasions. Foxcroft thought that Schumacher would "strongly object" to Wright being hired. Although Foxcroft had expressed these concerns about Schumacher potentially leaving, he nonetheless did not want Schumacher to leave. He "definitely did not want to lose him".

53 In September or early October, Foxcroft met with Wright. Wright wanted to come in at the Executive Vice President level, the same as Foxcroft and Kym Anthony. Foxcroft told Wright that it was unlikely, but that he would talk to others. As an alternative, Wright suggested that he come in as a consultant for six months or so to advise on "growing" the investment banking business.

54 Foxcroft canvassed the prospect of Wright coming in at the Executive Vice President level with Anthony. Anthony was not impressed with the prospect and unwilling to share responsibility with Wright. Foxcroft then reported Wright's proposal to Baillie, advising him that neither he nor Anthony were keen on the idea. He recommended that Wright not be hired at the Executive Vice President level, and Baillie agreed that it should be dropped.

55 Wright subsequently approached Foxcroft in early November, and outlined his proposal which essentially involved Wright taking over "a whole range" of Foxcroft's existing responsibilities. Foxcroft canvassed the proposal with Baillie, Bell and Lewis. The consensus was that the others "were comfortable about [Foxcroft] doing the job" and the proposal was rejected. Foxcroft added Baillie's comment that if Wright was rejected, then Foxcroft ought to be looking to hire people for the Fixed Income area. It was shortly after this that Schumacher hired Chris Coderre to work as a trader in Fixed Income. More will be said about Coderre below.

56 Wright surfaced again. He called Foxcroft and they had lunch at the end of December. Wright was still interested in TD Bank and willing to come in at a lesser role. He thought his abilities were in fixed income and the repo business. Foxcroft thought that this proposal was more "workable". He rationalized the Wright hire in those areas in this way. Foxcroft had experienced a lot of pressure from peers to build the business quickly. Schumacher and Bethlenfalvy had tried to build it over two or three years and had done well and quickly passed some of the smaller players in the market. TD had gone from 16th or 17th ranking over a three year period to 6th or 7th ranking without costing a lot of money in acquisitions. They had acquired a brokerage firm which did mergers and acquisitions. They had increased derivative business. They were building a research capability and were developing relationships. There was some feeling that fixed income wasn't growing at the same pace as derivatives. Wright had twenty years' experience and had built Fixed Income at Merrill Lynch and, in his short tenure at Burns Fry, he had accomplished a lot. Foxcroft thought that the Wright hire would give TD "instant credibility" in Fixed Income and would make it easier for the Bank to attract critical clients. Foxcroft thought that this was an opportunity which could not be rejected.

57 Foxcroft reported this proposal to Baillie and Anthony who were in agreement. From that time forward, Marshall Lewis, Vice President, Human Resources, handled the negotiations with Wright. By letter dated January 20, 1995, Lewis informed Wright of the proposed terms of his employment as Vice Chairman, TDSI, reporting to Foxcroft as Executive Vice President of the Bank. The Board would be asked to appoint him as a Senior Vice President in the Bank after he started. His responsibilities would include "Fixed Income and Money Market Trading operations (including the bond borrowing, lending and "repo" activity) together with the distribution of Interest Rate securities and other Treasury products to the Corporate Borrowers, Canadian Government accounts and institutional investors." After some negotiations on compensation, Wright accepted the employment offer on the evening of Monday, January 23rd.

58 Foxcroft was asked why he had not discussed the prospect of the Wright "hire" with Schumacher. He thought that Schumacher would take the news negatively, and that he would leave the Bank as a result of it. Foxcroft did not want him to leave. Further, he was not entirely sure that Wright was coming until he signed the contract, and he did not want to be left without both Schumacher and Wright. It was Foxcroft who recommended that Schumacher not be told until after Wright had been hired.

59 When Foxcroft was asked how he intended to deal with Schumacher's possible departure after learning of Wright's hire, he responded by saying he would try to carefully explain to Schumacher why the Bank thought the hire was a good idea. He was optimistic that he could explain the rationale, including the change in responsibilities and how those changes could be dealt with as a management team.

60 Bell was also asked whether there had been mention of including Schumacher in the pre-hiring discussion. He said that it had been considered but there was uncertainty about concluding a deal with Wright, (which Foxcroft assessed at only 50%), that Foxcroft thought Schumacher had a tendency to "be upset, to be volatile" and, with the chances of success so low, there seemed no point in unnecessarily upsetting Schumacher. When asked to elaborate on "volatile", Bell said that Schumacher didn't always agree with the strategic direction of the Bank. He had a tendency to become upset, and on one occasion he had resigned or threatened to resign. He said "we didn't want to risk losing [Schumacher] on a less than 50% chance of getting Wright."

61 Baillie agreed that it was a deliberate decision not to include Schumacher in the discussion. He said that they were afraid that if they told Schumacher, he might get upset and leave, and then they might not get Wright and they would be left with nobody.

Events After Donald A. Wright was Hired

62 Wright signed the contract on the night of Monday, January 23rd. Foxcroft, Lewis and Joseph were the only Bank employees aware that evening that the deal had been made. Wright had a vacation planned from January 24th. He agreed to start on the 30th. He asked that details not be disclosed to employees or to "the street" or to the press until he returned. Wright wanted to be in the Trading Room or outside so that he could immediately meet his new reports after the announcement. And he thought he could participate in informing the press. Foxcroft arranged to meet with Joseph, Bell and Lewis the following morning at 9:00 a.m. to discuss how people would be told, including Schumacher, Bethlenfalvy and other staff.

Tuesday, January 24th

63 At that meeting there was a discussion about telling Schumacher. The consensus was that Foxcroft would deliver the news to Schumacher and Bethlenfalvy that morning but that others would not be told until later in the week. Foxcroft would tell Schumacher about the hire, about Wright's responsibilities and what would be left for Schumacher, that the Bank still considered him a valuable employee and wanted him to stay, that his reporting would not change, his base salary would not be affected and that Foxcroft could give him a strong message that they didn't think that his ability to earn a bonus would be affected. Someone queried whether that message could be given, to which Foxcroft responded that he thought Schumacher was keeping "the lion's share" of the business from 1994, and that he would be left with Foreign Exchange and Derivatives which represented 85% to 90% of the CTP. Foxcroft said that he had not done an analysis in advance, that he "threw out" those percentages, but that he was fairly confident of that range given his regular review of the CTP numbers.

64 While that meeting was going on, the news of the Wright hire leaked out. Bell was called out of the meeting and returned to report that "the cat was out of the bag". Foxcroft was shocked and extremely annoyed because there had been an agreement that it be kept quiet. They were developing a "carefully laid plan" to tell Schumacher and Bethlenfalvy who were entitled to hear from Foxcroft, not from the street. He said he felt badly for Schumacher and Bethlenfalvy for the way they had heard it. He acknowledged that they were entitled to be told by their direct boss. Because of the leak, the discussion with Schumacher and Bethlenfalvy had to take place immediately. Bell agreed that it was "bad propriety" for Schumacher to find out as he did. Baillie said that it was "terrible" and "wrong" that word had gotten onto the street before Schumacher was told officially.

65 In the morning of Tuesday, January 24th, Schumacher heard from several of his reports who had heard from the street that Wright had been hired to run Fixed Income. Schumacher called Foxcroft, Baillie and Lewis, but was unable to reach any of them. As Schumacher said, he was unprepared for the news because Wright didn't have much of a reputation for trading - he had a good profile as a "relationship guy".

66 Foxcroft went to his office and "quickly checked" the CTP numbers for 1994, to verify what he had said in the meeting. He had anticipated the meeting with Schumacher would have been difficult in any event, but the leak made it "doubly difficult" because Foxcroft was no longer in control of the process.

67 Foxcroft and Schumacher met that morning. The evidence of Foxcroft and Schumacher about this meeting is consistent in many respects. Foxcroft confirmed that Wright had been hired to run Fixed Income, Money Market trading and Bond Borrowing and Lending (Repo business). Schumacher would retain Foreign Exchange, Derivatives and Bank Funding. Schumacher's title would not change, he would continue to report to Foxcroft and they thought that he should have the same opportunity for bonuses.

68 The messages which Schumacher heard from Foxcroft were that the Bank had "lost confidence" in Schumacher, and that Wright could do a better job in Fixed Income. Schumacher said it was the combination which had an important impact on him. He said that if the discussion had only been about Wright's abilities he would not have felt so "destabilized". Foxcroft vigorously denied that he said anything which would directly or indirectly indicate that the Bank had lost confidence in Schumacher.

69 Schumacher agreed that Foxcroft acknowledged that a mistake had been made by not telling Schumacher before the news leaked. Foxcroft asserts that not only did he acknowledge the mistake, but he also apologized to Schumacher. Schumacher is adamant that there was no apology.

70 Schumacher said he raised with Foxcroft the prospect of a transfer to the London office and that Foxcroft had said it wasn't "in the cards." Foxcroft asserted that the London issue was not discussed.

71 Schumacher agreed that Foxcroft told him on behalf of the Bank that the Bank did not want him to leave. But he said he found it difficult to accept those words at face value because it was in the Bank's interest to say something like that.

72 Foxcroft said that in difficult meetings like this one, you have to focus on the messages because the person you are speaking to doesn't hear it.

73 In his evidence and his note of the conversation, Foxcroft said that the products for which Schumacher were still responsible comprised 90% of Treasury's CTP in 1994, and that he expected the Bank would pay a "similar level of bonuses as in previous years", given the CTP of the business still reporting to him.

74 Schumacher described his reaction to the news. He considered that the unbroken pattern of promotions, and ever increasing responsibilities and accountabilities which he had enjoyed for the previous ten years, had come to an abrupt halt. Instead of expanding responsibilities, his job was reduced. Schumacher thought that this signalled the end of his career at the Bank. He felt that it was the worst day of his life. He was so shocked that he was having difficulty integrating what was going on.

75 In the meeting in the early afternoon between Foxcroft and Schumacher, they discussed how the hire of Wright would be officially announced. By this time, the rumour about the Wright hire was widespread. Foxcroft deferred to Schumacher since it was his responsibility to pass on the information. But Foxcroft offered to make the announcement if he was not up to it. Schumacher agreed to do it. At trial, Schumacher said it would have been beneficial if Foxcroft had offered to accompany him in making the announcement as a show of support from the Executive Vice President. Foxcroft said that if Schumacher had asked him, he would have participated with him in meeting his reports, but that it wasn't normal practice, and it didn't cross his mind to suggest it.

76 In the late afternoon, Schumacher assembled his direct reports, a group of 6 to 8, and told them the news - which by then they all had known unofficially. Schumacher said that he felt vulnerable because he couldn't answer some of the questions, such as who would be responsible for Fixed Income Research and whether the hiring of Wright meant the dismantling of Navigator. He had never been in a position of not knowing answers to such questions. It is agreed by the defendants that Schumacher communicated a positive message to his reports, encouraging them to welcome Wright and work with him, notwithstanding the awkwardness of the position he was in, namely that it was clear that a senior and reputable executive would take some of his responsibilities. Schumacher also met with the group of 20 to 25 people who would no longer report to him to thank them for an enjoyable working relationship and to encourage them to support the change.

77 The notes made by Schumacher at the time indicate that he was "pretty shaken and not very comfortable." He was reluctant to go into the Trading Room but forced himself to go in and circulate.

78 The Annual General Meeting was scheduled for January 25th. On the evening of January 24th, a dinner had been arranged to mark the retirement of Robert Korthals, the President of the Bank. All senior executives had been invited and were expected to be host to the outside directors. Schumacher was very anxious about being with his peers and superiors given what had occurred that day, but he had no choice but to attend. His concern was increased when only Allen Bell acknowledged to Schumacher that he knew what was happening. Schumacher found it incredible that Anthony said that he was shocked and that he hadn't known anything about the Wright hire. Schumacher felt humiliated and embarrassed at the dinner because he expected his colleagues would perceive that the Wright hire was a demotion.

79 Schumacher had received what he considered to be limited information from Foxcroft. His opportunity to obtain more details from informed sources was hampered by the Annual General Meeting on January 25th, and the preoccupation by senior officials with that meeting and related events. Schumacher needed much more information in order to understand his circumstances. While reacting to the news, formulating the questions in his mind and trying to contact senior executives, Schumacher also had sought legal advice on January 24th.

80 Schumacher reflected on the day. On the face of it, he had been told that a mistake had been made and the news had gotten out prematurely. But nothing was done to make him feel good about it. And lots of things had happened which made him feel concerned: his understanding from his brief meeting with Foxcroft that a transfer to London was not in the cards; the uncertainty, according to Foxcroft, of the future of one of his staff; a statement that his compensation would not likely be adversely affected which meant to him that it would be affected; and being ostracized at the dinner. He was compelled to the conclusion that the Bank wanted him to leave because it was the only thing that made sense to him.

Wednesday, January 25th

81 Schumacher called Allen Bell. Since the call was on the trading line, a transcript is available. Schumacher initiated his call by saying that what he wanted to talk to somebody about "career options". The impression he had from Foxcroft was that Foxcroft couldn't really help him on that except to try to describe the job that was left. Schumacher wanted to talk to Urban Joseph and he called Bell (who had replaced Joseph as Senior Vice President Human Resources) to arrange that. Because of the AGM, Bell said that Joseph was unavailable probably for the balance of the week, but Bell made himself available.

82 Schumacher told Bell that he had spoken with a lawyer because the events had left him in "shock" and without the details, he felt he needed professional advice. He told Bell that his lawyer had said he had been constructively dismissed. According to Schumacher, Bell responded that retaining a lawyer was a "mistake". Schumacher felt that Bell was threatening him. In cross-examination, Schumacher said Bell had told him to slow down (in the sense that engaging a lawyer might be precipitous) and that Schumacher's legal position might be damaged by acting too quickly. He repeated that he felt threatened by Bell warning him against getting legal advice.

83 Schumacher attributed to Bell the comment that Schumacher should "lose his lawyer".

84 Bell prepared a memorandum to file that day or the next day. He agreed that the request for the meeting with Joseph and Bell was to discuss Schumacher's "future career with the Bank".

85 Bell reports that the conversation about Schumacher retaining a lawyer was not in the initial telephone call but in their meeting later that morning. Bell's memo on the subject is as follows:

I said to John that neither he nor his counsel appeared to have sufficient information to make [a claim of constructive dismissal]. The Bank did not consider John's role diminished in any way and that any such action would be defended vigorously by the Bank. I pointed out to John that the factors the court would consider material had either remained constant in his job or only changed marginally.

His title was the same, he continued the same reporting relationship, his base salary was unchanged and his opportunity for over base compensation was unaffected. What had changed was a shift of functions representing 10-15% of the revenue of his business which the Bank believed a new business strategy including Don Wright could more than make up for. (emphasis added)

I further advised John that even if there were a base case for constructive dismissal it would be weakened by him initiating a legal process so early without what he believed to be full information. I encouraged him to wait until Don Wright returned from vacation in order to be in a position to make a considered decision.

I also indicated to John that should a letter be received from his lawyer, we would immediately consider ourselves to be in an adversarial process and that we would also engage legal counsel making it more difficult for us to work this matter out in an amicable fashion. John indicated he would consider this before taking any further action.

86 Bell decided at the end of that meeting that the role he should play was to get the key facts to Schumacher as soon as possible. Bell denied using the expression "lose your lawyer" or communicating anything as a threat.

87 Sheldon Resnick is a recruiter who had done some work for the Bank. Schumacher had previous dealings with Resnick. He felt comfortable discussing personal matters with Resnick. On Wednesday morning, Resnick called and Schumacher returned the call on his trading line. A transcript was provided. It was clear that the information about the Wright hire was widespread. In a fairly wide ranging discussion, Schumacher said some not very flattering things about Foxcroft. And he, somewhat flippantly, told Resnick to let him know if any good opportunities came up. Later Schumacher said that he had communicated with friends (whose calls were also recorded) because he thought that there was a serious possibility that he would be out on his ear.

88 The letter dated January 25, 1995, from Mr. Colson to Foxcroft and Bell, arrived on Wednesday. The defendants rely on this letter as part of their submission that Schumacher resigned. The text of the letter is as follows:

We are counsel to John Schumacher and have been retained as a result of unilateral changes in the terms and conditions of Mr. Schumacher's employment...

Our client has been stripped of a substantial portion of his overall responsibilities which the employer has reassigned to another as part of what has been described to him as a reorganization. Mr. Schumacher was given no notice whatsoever of these intended changes, and needless to say, it has not been suggested by Toronto Dominion that there is lawful cause such as to permit the employer to make these changes unilaterally without proper and appropriate notice. We regard the changes as fundamental and they unarguably constitute a significant diminution of responsibilities and thus a demotion amounting in law to a constructive dismissal.

In view of the fact that the employer does not wish to continue the existing employment arrangement, our client is reluctantly prepared to enter into negotiations for an appropriate termination package.

...our client is prepared to assist TD by remaining in his present position and continuing to fulfil his overall responsibilities for so long as negotiations continue and appear to be making progress, provided that it is understood that in doing so he is not to be taken as having waived the legal consequences of the changes or to have condoned them.

89 In cross-examination, Schumacher was asked to agree that what he really wanted was a severance package. Schumacher insisted that his intention was not to leave the bank but to get involved in a process that would give him more information. Mr. Harrison challenged Schumacher for not making it clear to the people he was dealing with at the Bank that he wanted to stay. Schumacher replied that he didn't recall saying words to that effect but that, judging by his actions, he certainly indicated that he wanted to stay.

90 Schumacher continued to want to speak with Charles Baillie, Urban Joseph and Richard Thomson. Unable to reach them by telephone, he sent an e-mail to all of them on January 25, 1995, the text of which was as follows:

The only request I would have made is that in the circumstances, given the obviously significant degree to which my responsibilities have been cut, is that I had been given the opportunity to have portrayed it to my reports and to the trading room as a whole, as a decision I was involved in and one which I therefore supported in the best interests of TD. I did my best but being given no warning and having KBF [Foxcroft] tell me virtually nothing in terms of his reasoning or what I did to warrant this type of treatment or any detail as to what role and opportunities were going forward left me in a tough position. Again, I did my best but I could have done a better job for you if I had had some help.

On a personal note, I always did my best for TD and although I understand these things happen I would have hoped I had earned an explanation of the reasoning behind such a big change in my career and life. In now basically 2 days of trying I have been unable to get one.

I am assuming there is a strong message in this silence.

91 In cross-examination, Mr. Harrison suggested that the tone of the e-mail was consistent with the letter from his lawyer, namely that his mind set was to leave the Bank. Schumacher denied that that was his mind set, but said that he felt he was being pushed out and the e-mail was a "cry for help from senior people at the bank".

92 Bell and Baillie discussed the e-mail. Bell told Baillie that they had received a letter from Schumacher's lawyer indicating that he felt he had been constructively dismissed and that he wanted to negotiate his severance package, that Foxcroft would be talking to Schumacher and "hopefully [Ken] could talk him out of it." Because of the lawyer's involvement, Baillie and Bell agreed that Baillie would stay out of it.

93 Schumacher felt ill, tried unsuccessfully to work, developed a headache, and uncharacteristically, went to the sick room where he slept for over an hour. He "flattened out" his trading positions during the morning because he thought that his judgment was such that he should not take risks. He went to the AGM but left after a few minutes because he had an anxiety attack.

94 On the evening of January, 24th, Wright had telephoned Chris Coderre, one of the senior employees reporting to Schumacher. Coderre had recently been hired by Schumacher specifically to help in the Fixed Income area with the expectation that Coderre would report to him. Coderre was on holiday at the beginning of the week of January 23rd and expected to start work by the end of the week. Coderre and Schumacher spoke on Wednesday, January 25th and Coderre told Schumacher about the call from Wright. This telephone call was on Schumacher's trading line and a transcript and a recording were provided. Coderre asked about Wright's hire. Schumacher had to tell Coderre that he would report to Wright, not to Schumacher as he had been hired to do. While Schumacher acknowledged some misgivings about how the news had been released, he was nonetheless positive about the hire and encouraged Coderre to consider that the re-organization would be beneficial for all concerned.

95 The Chairman of the Investment Dealers' Association Capital Markets Committee had heard the news of Wright's hire, and he called Schumacher to inquire whether Schumacher would remain Vice-Chairman of the Committee or whether Wright would replace him. When Schumacher called him, Foxcroft said that he hadn't considered that implication. Foxcroft told Schumacher to tell the Chairman that they would let him know in due course. Schumacher cited this as another situation in which he was embarrassed and humiliated because he thought that he looked like a fool and didn't have the answers.

96 Foxcroft was both surprised and concerned about the letter from Schumacher's lawyer. He thought the letter meant that Schumacher was leaving the Bank. He called Schumacher to ask him not to leave the Bank before they met again that day. At the end of Wednesday, Schumacher met with Foxcroft and Marshall Lewis, the latter being in charge of Human Resources for the Treasury group. They brought their written response to the letter from Mr. Colson-addressed to Schumacher rather than to his counsel as Mr. Colson had suggested. The text of that letter was as follows:

We have Mr. Colson's letter of January 25, 1995 advising of your position.

Further to our discussions yesterday, we wish to confirm the following. By way of the attached Position Description dated September 1994, all accountabilities identified remain your responsibility with the exception of Money Market and Fixed Income Trading and Bond Borrowing, Lending and Repurchase Agreement Activity which shall fall to Mr. Don Wright upon his commencement of employment with us. As discussed, the accountabilities remaining with you subsequent to Mr. Wright's employment will represent 90% of the Treasury Group's 1994 revenues.

Further, you will retain the title of Senior Vice President, and continue to report directly to me. Your base salary will be unaffected by this change and with the maturing and growth of our Treasury business, it is our sincere belief that in similar market conditions, your opportunity for bonus payments from the Performance Compensation Programme will not be adversely affected by this modification to your accountabilities.

Should you have any further questions regarding this matter, I would be pleased to discuss these with you personally. I would ask that you confirm your acceptance of these adjustments to your position to me by end of day January 27, 1995. (emphasis added)

97 Foxcroft told Schumacher to go home for the balance of the week and "think about it". It is agreed that Foxcroft told Schumacher not to make any trades or any management decisions and not to talk to anyone. Schumacher said that he felt that he was being punished by the Bank for the letter from his lawyer, sent home and cut off from talking with people he worked with. He compared this event to 1993, when he had resigned yet carried on working while the discussions occurred. Schumacher did agree in cross-examination that it was reasonable for the Bank to ask him to go home because there was so much at stake in the decisions he made in the Trading Room. At the same time, however, being sent home heightened his concern that the Bank didn't want him. Schumacher also agreed that it was reasonable for the Bank to set a deadline and important for him to let the Bank know before the deadline passed what his position was.

98 Foxcroft said that the direction to go home and think about it was accompanied with a statement that they very much wanted Schumacher to stay with the Bank. Schumacher does not agree that Foxcroft made such a statement. Foxcroft explained the direction to go home as being based on a concern about his employment relationship. Schumacher had an important role to play with the Bank and there was a lot of risk. Foxcroft was concerned that Schumacher might be compromised by trying to carry on with his duties and negotiate a severance package at the same time.

99 Bell was involved in drafting the letter dated January 25th. Bell explained that this letter and subsequent letters were sent to Schumacher, not to his lawyer, because of Bank policy to communicate directly with the employee as long as there is an employment relationship. It became even more apparent to Bell that Schumacher needed the analysis behind the assertion of the 85 to 90% and that it was Bell who would have to get that information. Bell agreed that Schumacher should go home for a couple of days. Bell said that his hope was that "we could get the information to him and could get things settled, and [Schumacher] would back off on the constructive dismissal".

100 Unfortunately, this letter, intended by Foxcroft to clarify the situation, compounded the problem for Schumacher. The letter contained an error. The accountabilities remaining to Schumacher did not represent 90% of the Treasury Group's 1994 revenues. Assuming the calculation was accurate, the remaining accountabilities represented 90% of the Treasury Group's 1994 contribution to profit (CTP).

101 Schumacher said that the letter worried him because of the error and the lack of attention to detail which the mistake conveyed. Furthermore, he saw the reference to "maturing and growth" of Treasury as contradictory because a maturing business does not experience growth. He also said that he read that letter to mean that the Bank was setting him up to get a reduced bonus payment, reduced in proportion to the responsibilities of the product groups he had lost. The letter was not the comfort intended by Foxcroft. It had the opposite effect.

102 Schumacher left work at the end of the day on Wednesday with the letter asking him for confirmation of his acceptance of the new position by Friday.

Thursday, January 26

103 The Financial Post carried an article announcing the news and quoting Wright's statements about his enthusiasm for the job. Wright was quoted as saying that he would be responsible for distributing all interest-rate securities. The article contained information about Bethlenfalvy, a Senior Vice President who had reported to Schumacher. The reporter indicated that Bethlenfalvy would now report to Wright, while Schumacher "will continue to be responsible for global foreign exchange and derivatives and funding the bank on a wholesale basis".

104 Schumacher spoke to Foxcroft for clarification of the direction not to talk to people because he had received many phone calls, mostly from people in the trading room. Foxcroft told him he could talk to his staff but that he was not to make any management decisions.

Friday, January 27

105 Mr. Colson wrote to Foxcroft and indicated that Schumacher was unable to meet the deadline of responding that day. Mr. Colson indicated that "we will make every effort to be back to you with our position by the end of next week and I trust that is satisfactory to all concerned." Schumacher said that he felt he did not have enough information to enable him to go back.

106 That same day, Foxcroft wrote, again to Schumacher directly. He acknowledged receipt of Mr. Colson's letter with "disappointment". Foxcroft indicated as follows:

We request that you return to work on Monday, January 30, 1995 and reassume the duties described to you in our letter. To that end, I would ask that you report to Marshall Lewis at 9:30 a.m. on January 30th.

Sunday, January 29

107 Schumacher sent an e-mail to Foxcroft and Marshall Lewis acknowledging receipt of Foxcroft's letter, and indicated that he had arranged to respond to them. His e-mail contained the following:

I have read and understand your letter and have arranged to respond in writing for your opening.

I wish not to be considered by the bank to have ignored your letters but only wish, in what I would describe as difficult circumstances, to have the opportunity to digest the events of last week more thoroughly. The letter will provide more in the way of details.

Monday, January 30

108 After the 9:30 a.m. deadline, Mr. Colson's letter was delivered to Foxcroft. After describing the humiliation experienced by Schumacher because of the way in which the news was communicated, Mr. Colson indicated the following:

I am very concerned about the way in which the Bank is choosing to treat our client. A return to work in these circumstances, and particularly while matters remain unresolved, would constitute a further embarrassment to him. Furthermore, I am most concerned that the Bank will attempt to seize upon a failure to return to work on Monday as lawful cause for Mr. Schumacher's dismissal. Please be assured that if that is your intention, it will be resisted vigorously.

I am proposing that we proceed as suggested in mine of January 27. Please confirm that this is acceptable and that the Bank will not take the position that a failure to report to work on Monday is tantamount to a resignation or to cause for dismissal.

109 That same day, Foxcroft wrote, again to Schumacher directly. He acknowledged receipt of Mr. Colson's letter. He reiterated much of what had been in the January 25th letter, including repeating the error about 90% of revenues. Foxcroft's letter contained the following:

My objective in permitting you to remain away from work was to provide you with an opportunity to objectively assess your approach to these issues away from the pressures and distractions of the office. In the circumstances, I saw that period of time as being quite short. Your willingness to remain at work, as cited in Mr. Colson's letter of January 25, 1995 was in the context of the stated intention of negotiating a severance payment with us. Remaining at work while negotiating a severance arrangement with us is unacceptable and is tantamount to resignation. (emphasis added)

...We sincerely regret any embarrassment you have felt as a result of these events.

We see no circumstances requiring an extended period of time to deal with this situation. Your responsibilities and conditions of employment are essentially unchanged. You should be ready to resume your duties with us. As a senior officer of the Bank, your presence is required to manage and provide direction to a critical business. Accordingly, we request that you return to work on Wednesday, February 1, 1995. To that end, I would ask that you report directly to Marshall Lewis at 9:30 a.m. on February 1, 1995.

Tuesday, January 31

110 Bell and Schumacher spoke, probably on January 31st. Bell said his concern was that the letters were getting "increasingly legalistic" but nobody was getting to the real issues. He thought that he could act as intermediary to get the information Schumacher needed. He saw himself as a catalyst to get things done. On the telephone, Schumacher said that he told Bell he wanted to discuss his career, his compensation, and assistance in getting back into the Trading Room. Schumacher was heartened by what he perceived was a positive response from a senior person. They agreed to meet for breakfast on the morning of February 1 in lieu of Schumacher reporting to Lewis that morning. Schumacher and Bell both understood that this was an indefinite extension of the deadline.

Wednesday, February 1

111 Bell and Schumacher met. Schumacher's notes indicated that he reiterated to Bell that he needed "some comfort with respect to career path, compensation and a plan for re-entering the Trading Room". Schumacher raised various topics, including Schumacher's relationship with Foxcroft, re-entering the Trading Room, the role of Navigator as a result of Wright, the inaccuracy in the letters, and guarantees with respect to compensation. The discussion focused on compensation issues because, according to Schumacher, Bell said that it had to be done first. On career issues, Schumacher said he needed some reassurance that he would be in the group of officers running the bank, as Baillie had promised in 1993. He needed to know whether the recent turn of events altered what he saw as a long term plan. He wanted some comfort about the future. With respect to Navigator, Schumacher said that he didn't understand Foxcroft's strategy in hiring Wright. He felt that hiring Wright in strong product roles meant rolling back Navigator which would cause confusion. He pointed out that Navigator was introduced after lots of thought and consultation, yet Wright was hired with no thought about the implications to Navigator and no consultation. According to Schumacher, it seemed to come as news to Bell that Navigator was rolled back by the introduction of Wright.

112 Bell agrees that Schumacher raised three issues: (i) would the re-allocation support the level of compensation he had enjoyed; (ii) his career options; and (iii) if they were resolved, he would need help returning to the Trading Room. Bell said that, based on the letters, the issue to be addressed first was how much of the business was left. Bell undertook to act as an intermediary on the basis that he was not an expert in the numbers but he could get the people who were familiar with them to get the information Schumacher needed. Bell felt that the compensation was the key issue. Based on previous discussions after the July 1993 resignation, Bell knew that career options included access to a broader based executive position than Schumacher then occupied. Schumacher said the Trading Room issue was that he had been out of the room for a week and, given the events, he would feel awkward and would need help. Bell acknowledged that and said it could be dealt with. Bell agreed that at the conclusion of the meeting, the ball was in Bell's court to come up with some answers to the questions which Schumacher had raised.

113 It was Bell who suggested that they should pursue an "informal" route, meaning that Bell and Schumacher should have direct communications rather than through lawyers. After the meeting, Schumacher consulted with Mr. Colson about the informal route and that approach was undertaken. As long as the informal route was pursued, there was no deadline on Schumacher. It was apparent from the meeting on February 1st that the reporting deadline had been waived. Schumacher asked Bell to confirm that in writing.

114 The next day, Schumacher sent an e-mail to Bell which summarized the financial issues which concerned him and which he had raised with Bell. He was clearly doubting the assertion that his job was "essentially unchanged". He asked for an explanation, and was willing to carry on the discussions.

115 It is apparent that by Wednesday, February 1st, a week after the news leaked, the Bank had not given to Schumacher the basis of the analysis and implications of the 90% number.

116 Bell responded immediately to the request for written confirmation. He sent a letter dated February 2nd, in which he confirmed "the waiver of our request that you attend Mr. Marshall Lewis' office at 9:30 a.m. Wednesday, February 1, 1995."

Thursday, February 2

117 Bell and Schumacher spoke by telephone. Bell agreed that there was a "gap" on the numbers side, that what was left was something less than 90% but he wasn't sure how much. On the issue of compensation, Bell said that Schumacher had the potential to make the same bonus if Schumacher "grew" the pool of his new group to the same size as he had with the old group. Bell denies that he made that statement. Schumacher had serious reservations whether he could do that for several reasons. Firstly, the funding group had not contributed significantly to the bonus pool. He considered it a stable business with no growth opportunity. Secondly, foreign exchange was in a decline. The Bank was having trouble hanging on to its market share. At best it was a stable business with no growth opportunity. Thirdly, derivatives had had really dramatic increase of 160 to 170% of the previous best year revenue. CTP was two times better than the previous year. The pool was approximately 2.5 times the previous best year. From a business planning perspective, using 1994 as a base year was inappropriate because the group had significantly over-achieved.

Friday, February 3

118 Bell and Schumacher spoke again by phone. Bell reported that he had been too busy to follow up on the questions raised on February 1st. He asked Schumacher if he had made any decisions. Schumacher said that he was waiting to hear from Bell and reiterated the importance of getting to the bottom of the 90% number because of the impact it had on compensation, career, etc.

Monday, February 6

119 Schumacher met with Bell, Foxcroft, Paul Huyer and Marshall Lewis for the stated purpose of discussing the 90% number, or as Bell indicated in his memo after the meeting, to discuss the financial magnitude of the revised position. At the outset of the meeting, Bell reviewed the purpose as reaching agreement on the revenue, contribution to profit and pool allocations in the businesses, which would now be split between Schumacher and Wright. In the detailed memorandum made by Bell after the meeting, he reports that he also indicated that "with either agreement on these numbers or an understanding of where there was disagreement, we would hopefully be in a position to resolve what John viewed as other outstanding matters."

120 At the meeting, there was a discussion about revenue, CTP and bonus pay out for 1993, 1994 and forecast for 1995. Huyer presented a forecast which indicated that the businesses for which Schumacher remained responsible reflected 78% of revenue, 87% of CTP and 85% of bonus pay out. According to Bell's note, Schumacher did not dispute the analysis and conceded the impact on his business was not 50% as he had originally stated, but more likely 25% to 30% based on the two year analysis. He took the position, however, that to obtain a complete view of the impact of the proposed change, the review would have to go back to 1992, to represent a full interest rate cycle of 4 years. He asserted that, on average, over the cycle, this analysis would show that he had been dealt only 50% of the treasury business.

121 During the meeting, Foxcroft and Schumacher had a disagreement, and the discussion became heated. Bell met briefly with Schumacher after the meeting, and confirmed that Schumacher would hear from them "shortly" in respect of next steps. Schumacher felt "pretty good" after the meeting, as they were discussing the issues. He thought that the meeting was just a start and that he expected to talk about his other priorities after this subject was resolved.

Tuesday, February 7

122 Schumacher spoke to Bell who told him that the Bank was going back to the "formal route", and that Schumacher should expect a letter that afternoon asking him to report to work. Schumacher received a letter at his home at about 6:30 p.m. In that letter, Foxcroft said as follows:

Thank you for meeting with us yesterday. We have considered your comments and views regarding the impact on your compensation as a result of the structuring of the Treasury business. We remain convinced that your position has not been changed materially and there will be no significant adverse impact as a result of this restructuring. In fact, we believe this provides you with a significantly positive opportunity. (emphasis added)

It is our view you have been given ample opportunity to reassess your position and that it is now time that you returned to your assignment. To that end, I would ask that you report to me at 10:00 a.m. Wednesday, February 8, 1995.

123 Foxcroft said that he wasn't sure what would happen if Schumacher didn't come back as directed. He said that the Bank did not have a position as to whether Schumacher had resigned at the time the February 7th letter was sent. Bell agreed.

124 Schumacher knew that he had to respond. But he felt that he was still in a process of discussing issues. He said that it didn't occur to him that the Bank would consider that he had resigned if he didn't turn up. He asked rhetorically why somebody wouldn't call him to tell him that.

Wednesday, February 8

125 In the morning, Schumacher met with Mr. Colson to formulate a response to the letter. While he was taking advice, Foxcroft, Bell and Lewis met. According to Foxcroft, Bell or Lewis made the decision to send the letter which he said was done "with great regret", but this "seemed to be going on for two weeks" and he wasn't sure how they would resolve the issues. Schumacher was in charge of an important part of the Room and "we had to get on with life" It was Foxcroft's view that Schumacher had wanted a package according to the January 25th letter, so he thought that Schumacher didn't want to return to the Bank.

126 After meeting with Mr. Colson, Schumacher returned home and at about 1:00 p.m. (three hours after he was directed to attend at work), Schumacher received a letter from Marshall Lewis, Vice President, Human Resources, which contained the following:

We refer to the various meetings and communications which have been exchanged recently regarding our decision to restructure the Bank's Treasury business and its impact on your position.

You were asked to return to work and report to Mr. Foxcroft at 10:00 a.m. today. We have not heard from you.

We can only conclude, from all of your actions, that you have resigned from our employ. Your resignation is to be effective as of today. We will attend to the usual matters arising from a resignation and we trust we will have your co-operation.

We sincerely regret that you have chosen this course but we wish you well in the future.

If you have any questions, please feel free to contact me directly. (emphasis added)

127 Schumacher was shocked. He said that until he received that letter, he had not been given any clue that if he failed to attend at 10:00 a.m. that he would be terminated immediately. He said that he "never chose to resign and didn't know (he) was resigning."

128 Up to February 8th at 10:00 a.m. all of Schumacher's absences were at the request of the Bank or with its express authority.

129 Mr. Colson's letter arrived at the Bank in the afternoon of February 8th, after Schumacher had received the "resignation letter". Mr. Colson took the position that his client would not accept the changes but that he was willing to continue the dialogue. He indicated that if the February 7th letter from the Bank terminated that dialogue, that he would discuss a compensation package.

130 Mr. Colson's letter of February 9th to Allan Bell is the final letter. Among other things, the letter contained the following:

Needless to say, it remains our position that Mr. Schumacher was constructively dismissed and any suggestion on the part of the bank that he has resigned in fact or in law will be resisted.

Effect on Schumacher

131 I heard considerable evidence about the manner in which the hiring of Wright and the consequential restructuring was communicated to Schumacher. Much of the evidence of the emotional and intellectual effect on him has been referred to above.

132 Schumacher said that he had no problem with the Bank bringing in strong people. If he had been involved in "a series of discussions" as part of the hiring decision, it would have indicated that he was an important part of the bank and, being asked to "make room" for Wright, he could have done so. Schumacher agreed that it made sense for the Bank to make a commitment to grow the fixed income business by hiring somebody like Wright. But the right way to do it was to involve himself and anyone else affected by the change as had been the process when Navigator was conceived and implemented. He said that he could have "come to terms with it; that it made sense if it had been done the right way." Schumacher agreed that part of his concern was the process. But he said that, leaving the process aside, he had unanswered questions such as whether the senior executives hiring Wright intended to roll back the navigator strategy, which had been such an important reorganization completed less than a year earlier.

133 It is clear on the evidence that the hiring of Wright caused the roll back of Navigator which: (i) had been a novel and creative reorganization; (ii) had been spearheaded by Schumacher; and (iii) had dramatically increased profitability in its first part-year of performance. It is also clear that in the hiring process, none of the Bank representatives turned their mind to that outcome as a consequence of the Wright hire.

134 The plaintiff called three witnesses to corroborate his allegations about the Wright hire and the perceived implications for Schumacher's job and career. Robert Catani had worked at the Bank for about 10 years. In his last position, he had been Chief Dealer, Government Trading, which put him in charge of all the liability trading on the Bond Desk. He reported to Schumacher. Since Schumacher was in charge of liability trading for the entire bank, including bonds, money market, capital markets and foreign exchange, it was Schumacher who was "the number one guy". He was "the man", "the person that you went to for everything. He was in charge, he was the pulse of the trading room". Schumacher was "very much involved" in the operation of the Trading Room. Schumacher had reached had reached the "pinnacle of success".

135 Catani heard about the Wright hire from other dealers on the street. He asked Schumacher and was told it wasn't true. At the end of the day, Schumacher had all the chief traders in and told them that it was true. While questions were raised, Schumacher had no answers. This was contrary to their experience because he had always had the answers. Catani said that "it kind of threw us all for a loop. We were pretty shocked." Catani was asked what, if any, impact that had on his view of Schumacher's position within the bank. He said that he felt that Schumacher was "now suddenly not in charge, and that he was being pushed off somewhere else." He described how trading rooms for financial institutions are associated with the person in charge, referred to as "the man". He concluded that Schumacher wasn't "the man anymore". The hiring of Wright meant that Schumacher "had just been, you know, fired, canned from most of his job." And "the very fact that he was as surprised at the news as the rest of us were just reinforced the concept that he was being pushed aside and moved away."

136 In cross-examination, Mr. Harrison pursued "the man" concept and in the exchange which followed it was apparent that Catani believed that two people could not share the role of "The Man". Catani agreed that he had been asked to leave the Bank after Schumacher's departure. He had joined another firm in a capacity similar to Chief Dealer. Mr. Harrison did not pursue it further, but I did not have any impression that the substance of Catani's evidence was affected by the termination of his employment at the Bank.

137 Nick Hungerford had worked at the Bank in Toronto since June 1992. In his last position, he had been Chief Trader, Interest Rate Options. By early 1995, he had reported to Schumacher for about two years. His reaction to hearing about the Wright hire was that "it didn't seem to gel with the strategy of the bank. The bank had seemed to want to home-grow its businesses in a Treasury environment, and it had a very successful record in doing so, and the hiring of some one from the outside in a key position was certainly a surprise and it was a shock." He also expressed surprise,

...because it was my view that John's star was on the rise within the bank and that he was within the loop as far as strategy and that he was going to play a leading role in that strategy, so to do this was effectively demoting John. So, to me, it sent a clear message that John was out of the loop, he wasn't involved in this decision.

138 He was asked the significance of being out of the loop in terms of how one is perceived in the Trading Room and he gave this answer:

Well, people are going to lose confidence in you. I mean, everyone had aligned themselves with John, because he was the rising star, and he was very good to work for. By bringing - like, carving out two-thirds of his empire and giving that to someone else coming in, a lot of people were going to have to change their loyalties, to then align themselves with a new reporting channel.

It was his view that instead of Schumacher's next move being to a very high level in the bank, "his career had ground to a screaming halt".

139 Hungerford commented on the lack of input from senior management once the Wright hire became known. He said that "the bank didn't seem to be doing anything. It seemed to have taken a bunker mentality and there was nothing being issued on the subject."

140 Hungerford is Director of Global Financial Products at another major bank in Canada. He left the TD Bank in April 1995, after having been approached several times earlier by his current employer. He had not been interested in moving because he had been happy at TD. Hungerford said:

The first approach by a headhunter to me after John's, what I saw was an effective demotion, I then agreed to talk to the [other bank and I left]. So there is a definite connection, [between my departure and what had occurred to Schumacher] because I had no interest in leaving Toronto-Dominion Bank until they effectively changed the rules on loyalty, as far as I was concerned.

141 He was asked if he had any expectation as to how the bank would handle the hiring of persons such as Wright in ordinary circumstances and he gave this answer:

Yes, I would have expected that John - by bringing in someone like Don Wright, that was effectively demoting John, I'm surprised - I would think if they were going to do this, they would have had to have consulted John, and for what they were taking away from him, either offered him a position elsewhere, which was still showing him that his career was on the up-and-up, or - I'm not sure how they would have done it, because it was - it obviously seemed to be done without any of John's understanding or consultation, and it seemed to be a loss of confidence in John, because to bring in someone like Don Wright in that role, to me, was sending a message to John that either you've offended someone upstairs, or we've lost confidence in you, because we think someone else can do it better.

142 It was apparent that Hungerford remains loyal to Schumacher. He displayed some bitterness about the way in which Schumacher had been treated by the Bank and identified that as the precipitating factor for his own departure. Having said that, I did not have the impression that his bitterness had a material impact on the substance of his evidence.

143 The third witness attended as a result of a summons by Mr. Colson. Filip had started at TD in 1978 as a management trainee. For most of his career he had been involved in personnel/human resources. From 1989 to January 1994, he had been Manager of Human Resources for Corporate and Investment Banking, which included Treasury group. While in that position, he was familiar with the effect of Navigator but he left before its implementation. He moved to an unrelated position in early 1994. He gave evidence about Schumacher's history of promotions and the significance in terms of responsibilities.

144 He was asked what it would mean to an employee who had responsibility for Money Markets, Fixed Income and Bonds, and those responsibilities were taken away. He said with considerable hesitation, that it meant that the "job was getting smaller. It could be viewed as a loss of responsibility, the opposite of promotion, a demotion." When a similar question was asked, but related to Schumacher, rather than the hypothetical employee, he gave the same answer, again with hesitation.

145 In cross-examination, Filip agreed that Bell would be more familiar with the hiring of Wright and with the effect of hiring Wright on Schumacher's progression. Filip did not take issue with the proposition that the Bank can re-assign people to satisfy legitimate management goals. Filip agreed that there is nothing preventing the Bank from reducing the responsibilities of a senior manager without discussing it in advance with the employee and that the circumstances in which that might occur would include a concern about the reaction of the employee.

146 Filip was asked about Human Resources practices where an employee is absent from work, allegedly without authority. He thought that his practice was consistent with Bank policy, namely that he would try to reach the employee to find out the reason. If there were no response or no credible reason (such as health), he would write a letter requiring the employee to report to work in a short time frame, such as 24 hours or the next day, and indicate that failure to report could result in disciplinary action. The disciplinary action identified would be the possibility of termination. He had never been involved in a situation where an employee had been terminated where the employee had not been told that termination would be the consequence of failure to report.

147 Bell was asked whether the Bank had a policy or practice of advising employees about termination if they failed to respond to a "report to work letter". Bell said that there was no policy and no practice, and that each case was individual. He said that situations where notice was given usually were where there had been no contact with the employee. But in this case, there had been frequent contact with Schumacher.

148 Foxcroft was asked about the changes in Schumacher's assignment vis-a-vis the industry. He responded by stating that "certain parts of the businesses are so critical that if you allow the executive to keep adding business and growing them, his ability to perform becomes impaired." He thought that Schumacher was being asked to do the kinds of things that he had done with different and less complex businesses. Schumacher's responsibilities were too much for one man. There was no other financial institution where one man had the same responsibility as Schumacher. Regardless of Wright's availability, this would have been an issue. Something would have happened within three or six months: he would have had to sit down with Schumacher and discuss how broad his business had become.

149 Foxcroft was asked to comment on the concept of Schumacher no longer being "the man". He was unhappy with the concept because it connoted a star system with one man while he thought the team system was promoted at the TD Bank. To the extent that the concept was a reality, he thought that there could be two such people in the Trading Room.

150 Foxcroft was asked to comment on the concern raised by Schumacher that his credibility in the Trading Room had been damaged. He conceded that the way in which the Wright hire was communicated would have caused him some short term embarrassment over one or two days but in the longer term, his credibility would not be in issue. If Schumacher had decided to stay, it could have been managed and overcome.

151 Foxcroft was asked to comment on the impact on Navigator of hiring Wright. He said that the first he heard about it being an issue was during Schumacher's evidence at trial. Wright had the opinion that if he joined the Bank, he would want the trading and sales groups together for the products for which he had responsibility. While Wright had only raised it with respect to his products, it made sense to revert to the pre-Navigator system for all products.

152 In cross-examination, Foxcroft agreed that Wright came to take over two businesses - not to take a small or insignificant job but to take "a large job". He agreed that Wright was to be well compensated for the "large and important job" but that his compensation was for the expectation that he would "grow" the businesses: he was being paid for what would happen in the future.

153 Allen Bell was asked about re-allocation of responsibilities within the Bank. He said it might occur as a result of a change in business strategy such as if the business had grown to the extent that another executive would take over accountability. One business might be better aligned with another. For purposes of succession, an executive may need experience in many areas. In the last five years, he had been involved in several such reallocations at senior levels. It was Bell's opinion that at the senior vice president level and up, the number of reports was not in issue. Up to that level, the number of reports "size" the job. But at the senior VP level, the number of people who report is not significant because senior VP's are paid for their strategic ability and problem solving, and how they use those abilities.

154 Bell was asked whether there was a practice of consulting in advance with person(s) affected before a re-allocation. He said that there was no fixed practice, that it depends on the circumstances. He cited two recent decisions where the positions of Senior Vice President were affected without consultation. Both of these were examples where the senior VP's in the positions before and after the re-allocation were already employees of the Bank. An external candidate was not involved.

155 Bell said that where a decision was made not to consult in advance with the person affected, the policy is that the person's supervisor or boss would tell them at the appropriate time. He also described this as common courtesy.

Legal Issues

156 The plaintiff alleges that:

(a) the unilateral changes which were imposed upon him by the bank as a consequence of the hiring of Wright amount to a constructive dismissal;

(b) he has fulfilled his obligation to mitigate his damages; and

The defendants take the position that:

(a) the changes caused by the hiring of Wright did not amount to a constructive dismissal; rather, Schumacher simply refused to accept a new assignment;

(b) the plaintiff had a duty to mitigate which was fulfilled in so far as attempts to obtain employment are concerned; but that he should have remained at the Bank in the new position offered to him; and

(c) in the alternative to (a), Schumacher's refusal to return to work was unjustified and amounted to repudiation of his employment contract, and permitted the Bank to treat the contract at an end.

Constructive Dismissal

157 Based on the dozens of cases provided by counsel, there are a number of general principles which can be extrapolated which have application to this case.

158 When a substantial change in the duties and responsibilities of the employee is made without the employee acceding, the change is unilateral and goes to the root of the contract: Wilkinson v. T. Eaton Co. (1992), 41 C.C.E.L. 57 (Alta. Q.B.) at 67.

159 Where there is a fundamental breach by the employer of a major term of the employment relationship, the employee can take the position that there has been a constructive dismissal. That is, the employer's direction to the employee amounts to a repudiation by the employer of the employment contract: Longman v. Federal Business Development Bank (1982), 131 D.L.R. (3d) 533 (B.C. S.C.) at 548.

160 According to Orth v. MacDonald Dettwiler & Associates Ltd. (1986), 16 C.C.E.L. 41 (B.C. C.A.) at 55-56, in order to establish constructive dismissal, the employee must prove:

...that there has been conduct on the part of the employer which breaches an express or an implied term of the contract of employment going to the very root of the contract. One term which, if not express, may be implied in a contract of employment is that the employer will not make such a substantial change in the duties and status of the employee as to constitute a fundamental breach of the contract.

The Court then stated (at p.59) that "the test for determining whether the change in the respondent's position in the managerial hierarchy and the alteration in ... duties is sufficient to constitute a breach of a fundamental term of [the] contract of employment is an objective one".

161 Finlayson J.A., in Smith v. Viking Helicopter Ltd. (1989), 24 C.C.E.L. 113 (Ont. C.A.), at 116-118 (Ont. C.A.), made the following comments on the issue of constructive dismissal:

In my opinion a damage action for constructive dismissal must be founded on conduct by the employer and not simply on the perception of that conduct by the employee. The employer must be responsible for some objective conduct which constitutes a fundamental change in employment or a unilateral change of a significant term of that employment. A decision to change its manner of conducting its business or a move to another place of business does not necessarily result in such a fundamental breach of its contract with its employees as to constitute a constructive dismissal.

He then quoted from Canadian Bechtel Ltd. v. Mollenkopf (1978), 1 C.C.E.L. 95 (Ont. C.A.) at 98:

The evidence led in this respect may have been relevant on the issue as to whether the assignment to new responsibilities was made in good faith and not as a disguised means of discharging the plaintiff. However, even if the jury were of the view that Inco's complaints about the plaintiff were unjustified, and the employer erred in its assessment of the plaintiff's capabilities, such a finding would not be decisive. The plaintiff had no vested right in the particular job initially given to him. If the employer, although mistaken, acted in good faith and in the protection of its own business interests, the plaintiff would have had no right to refuse the transfer.

More recently, the Ontario Court of Appeal in Kolcun v. Carsten Electronics Ltd. (May 8, 1995), Doc. CA C16909 (Ont. C.A.), stated the following on the issue:

The test for a constructive dismissal is an objective one. An employer must have some latitude to make changes in the disposition of ... forces as ... business needs change. That an employee does not like a proposed new assignment does not turn the proposal into a constructive dismissal. It is only where the alteration of the employee's position by the employer objectively constitutes a fundamental change in the employment that a constructive dismissal can arise; in general nothing is more likely to go to the substance of the contract than the nature and duties of the position; see: Lesiuk v. British Columbia Forest Products Ltd. (1986), 33 D.L.R. (4th) 1 (B.C.C.A.).

162 A demotion or reduction in job responsibilities can constitute a constructive dismissal: Davidson v. Allelix Inc. (1991), 7 O.R. (3d) 581 (Ont. C.A.) at 588. This is generally true even if there was a legitimate business justification for the reorganization of the business which is the reason for the demotion and reduction in responsibilities: Greaves v. Ontario Municipal Employees Retirement Board (1995), 129 D.L.R. (4th) 347 (Ont. Gen. Div.) at 359.

163 It has been held that the fact that the employer's motives are benign and that it may act "with genuine concern both for the company and the plaintiff" is one factor to consider but it does not necessarily change the conclusion of constructive dismissal if there has been a fundamental change in the plaintiff's position: Cox v. Royal Trust Corp. of Canada (1989), 26 C.C.E.L. 203 (Ont. C.A.) at 208.

164 According to the court in Kolcun, supra, "[t]he obligation on the defendant's management was to convey their proposals clearly to [the employee]", and "[t]he burden is on the employer to give clear notice of its intentions". Where the employer does not do so, it must bear the consequences.

165 I will consider the terms of the employment contract, an objective analysis of the effect of the change, and the effect on compensation.

166 The starting point is to identify the contract between the employee and employer to ascertain whether there are any express terms which affect the outcome. Few of the cases relied upon by either counsel featured a written employment agreement or memorandum describing the terms of employment. In Stacey v. Consolidated Foods Corp. of Canada (1987), 15 C.C.E.L. 113 (N.S. T.D.), the "unambiguous contractual language permitted reclassification without cause". In O'Grady v. Insurance Corp. of British Columbia (1975), 63 D.L.R. (3d) 370 (B.C. S.C.), the correspondence and management guide were referred to but did not appear to have an impact on the result. In most cases cited, the employment agreement was oral.

167 In the present case, there is no document referred to as a contract. In Foxcroft's letter of January 25th, he referred to the "attached Position Description dated September 1994" and indicated that Schumacher retained "all accountabilities with the exception of Money Market and Fixed Income Trading and Bond Borrowing, Lending and Repurchase Agreement Activity which shall fall to Mr. Don Wright". Foxcroft relied on this to minimize the effect on Schumacher of the introduction of Wright and to support the Bank's proposition that the Bank simply re-allocated responsibilities in a way which was not fundamental to the employment contract.

168 The Position Description is a document initiated by the TD Bank. It appears regularly, either to signal a change in responsibility or as part of the annual performance appraisal. The Position Description to which Foxcroft referred is the last appraisal for which Foxcroft gave Schumacher his first "A" rating. Several such documents were produced reflecting previous appraisals. Typically, the Position Document contains three parts: a job description; a performance evaluation; and a summary of the objectives for the ensuing year as the basis upon which the employee expects the next performance evaluation to be measured. It is signed by the incumbent and, in Schumacher's case, an Executive Vice President. While it is not a contract, it does formulate the duties and responsibilities of the employee.

169 There are two Position Documents relevant to ascertaining Schumacher's duties and responsibilities. The first is dated July 1994, which contains the job description as Senior Vice President Capital and Money Market Group-the pre-Navigator position which he held up to February, 1994.

170 While the Position Document is dated July 1994, the performance appraisal was done in September, as was typically the case. After the job description, Foxcroft made the performance appraisal referred to above, namely "B+" up to February 1994, and "A" from February to the date of the appraisal. And Foxcroft summarized Schumacher's "notable achievements" of the past 12 months which included the re-organization of Treasury. Then Schumacher added his objectives for the next year "as discussed in our meeting", which included strengthening foreign exchange and fixed income through aggressive external recruiting, broadening of product ranges (particularly derivatives and fixed income), and rebuilding the treasury unit in London.

171 Schumacher signed the appraisal on September 15, 1994, and Foxcroft signed on September 16, 1994. The Position Description which replaced that one, and which reflected the duties and responsibilities as a result of Navigator, has an effective date of September 1994. Schumacher said that it took about seven months after implementation of Navigator to finalize the document. I assume that when Schumacher outlined his objectives for the ensuing year, he did so with the expectation of the replacement Position Description.

172 The following are excerpts from the Position Description which was in effect at the time of his departure, and to which Foxcroft made reference in his letter dated January 25, 1995:

The Senior Vice President - Trading is responsible for profitable trading of all Treasury domestic and international products...

In trading and overseeing the Bank's traders, the position must maintain and enhance the Bank's position as an industry leader.... The Senior Vice President oversees departments dedicated to servicing clients (i.e. Foreign Exchange, Short Term Rate Instruments, Bonds and Derivatives) and departments dedicated to trading for the Bank (ie Proprietary Trading).

Contributing to the enhancement of existing and development of new business through innovative techniques and strategic trading direction...

...Additionally, the position assists in the enhancement and development of client relationships ensuring the provision of exemplary customer service, liaising with senior sales levels and relationship management staff and a variety of Treasury, CIBG and Bank departments and Divisions, setting rates and executing (and overseeing) transactions which are competitive and profitable.

...The Senior vice President also oversees a dedicated research group....

Under the category of "specific accountabilities (end results)" the following appears:

...Lead the creation/development/implementation of product strategies by remaining current with market activity and competitive practices, by contributing to development of new business through innovative technique, and by fostering, maintaining and enhancing trading, intra-Bank and external relationships to better identify business opportunities and function as a value-added product expert.

Ensure superior customer service by working with the senior sales force to assess client needs and to assist in the enhancement and development of relationships, and by providing competitively priced deals and ensuring all transactions reconcile and effectively settle.

Oversee a team dedicated to providing comprehensive fixed income research for the Bank's dealing, sales, and underwriting personnel and their clients.

173 The implementation of Navigator put Schumacher in the position of being responsible for Foreign Exchange, Derivatives, Funding, Fixed Income and Canadian Money Market. As a result of the hiring of Wright, Schumacher was left with Foreign Exchange, Derivatives, and Funding. Wright assumed responsibility for Fixed Income and Canadian Money Market.

174 As a result of that re-allocation, the following conclusions can be drawn:

(1) two of the four products were no longer Schumacher's responsibility;

(2) Fixed Income was the product with the greatest potential for growth. According to Schumacher, it was the "flagship business" of any investment banking operation and was considered by industry standards to be one of the two most important businesses in any treasury operation. Bell agreed that Fixed Income and derivatives were the two "prestigious products" and that Schumacher lost one of them. Bell also agreed that Schumacher was left without any investment banking businesses;

(3) the synergy arising from Schumacher's leadership in five areas was lost;

(4) the position description which represented nine months of collaboration and analysis leading up the implementation of Navigator no longer applied. It is simplistic to say, as Foxcroft asserted, that certain products were no longer Schumacher's responsibility. The concept of delivering services designed to address client needs (as was the foundation of Navigator) was abandoned. Schumacher's 1993/4 "notable achievements" were obliterated;

(5) the hiring of Wright caused the roll back of Navigator which was a novel and creative reorganization, spearheaded by Schumacher in consultation with all those affected, which had dramatically increased profitability in its first part-year of performance;

(6) Schumacher lost the opportunity to make broad recommendations affecting all five areas and participate in their implementation; and

(7) Schumacher's objectives, as set out in the Position Document, could not be met in many respects because he no longer had control nor direction over important products and research.

175 Foxcroft attempted to minimize Wright's role in his letter, dated January 25th, where he referred to the Position Description and asserted that "all accountabilities identified remain your responsibility with the exception of Money Market and Fixed Income Trading and Bond Borrowing, Lending and Repurchase Agreement Activity." I do not agree with Foxcroft. Based on the above description of the duties and responsibilities of the "position", the plaintiff has established on a balance of probabilities that his duties and responsibilities had been fundamentally changed by the unilateral action of the employer. Foxcroft said that Wright wanted the trading and sales responsibilities together for the products for which he had responsibility and it made sense to revert to the pre-Navigator system for all products. It appeared to be a decision taken by default not by deliberation. It may have made sense, but it constituted a material change in Schumacher's duties and responsibilities.

176 The Navigator strategy was the culmination of months of collaborative effort by many very senior individuals at the Bank, spearheaded by Schumacher. That strategy had been implemented less than one year earlier. It was demolished as a result of the realignment of responsibilities precipitated by the hiring of Wright. I find that this fundamental change of the conditions of employment as described in the Position Description constituted constructive dismissal.

177 On an objective analysis, there are other criteria by which the defendant's breach of contract can be measured. Schumacher lost 38 out of 102 reports; he lost 26 of his 56 direct reports. He lost a considerable portion of the Trading Room. I accept Bell's evidence that at the senior Vice President level, the number of "reports" is less significant. The number of reports is not a feature on the Position Description which tends to confirm Bell's evidence. Furthermore, in Schumacher's last "brag sheet" dated December 1994, there is no mention of the number of people or positions for which he was accountable. That was not a factor in his own assessment of his value. However, while the absolute number may not be critical, the loss as a relative number is relevant. Schumacher lost approximately 38% of total reports and about 50% of direct reports. While Foxcroft might object to the concept, there is support for the proposition that the Trading Room is dominated by one person. Two could not share that role. Schumacher lost two significant products. Schumacher lost responsibility for the Fixed Income Research Group. Externally, Schumacher would probably have lost a prestigious position on the IDA committee.

178 The objective analysis of Schumacher's loss includes a consideration of the perception of his colleagues. Catani and Hungerford were convincing in their description of how the change would be perceived as a demotion. These are witnesses who shared the workplace, who reported to Schumacher, and therefore, would be in a position to make observations. I accept their compelling evidence that they would perceive the change as a demotion.

179 The objective analysis must include the evidence of Filip and Bell. Filip acknowledged that Bell was closer to the events and the outcome. But Filip had been closely involved during the conceptual and planning stages of Navigator. His knowledge of the organization of the Trading Room was not remote. He considered that the loss of responsibility for money markets and fixed income signalled that the job was getting smaller and would be viewed as a demotion. Bell and Foxcroft minimized the effect of the hiring of Wright consistent with their opposition to the claim of constructive dismissal. On this point, as to the Human Resources response to the changes brought about by the hiring of Wright, I accept Filip's evidence.

180 One need only consider what Wright acquired to appreciate what Schumacher lost. Foxcroft expected that hiring Wright would give the Bank "instant credibility". According to Foxcroft, Wright acquired products which represented only 10 to 15% of CTP. Wright was expected to "grow" Fixed Income and Money Markets. If Wright was expected to take 10 to 15% of Schumacher's job and "grow" it into 100% of his own job, it represents substantial growth. Wright was given a "large and important job." The Bank would not have hired a "heavy hitter" except to expand, develop and mature the potential that Schumacher had nurtured. That opportunity was lost to Schumacher.

181 One of the factors to be considered in assessing the effect of a change in duties and responsibilities is the effect of the change on the employee's compensation. Schumacher's basic salary of $200,000 would not have changed. The issue is the extent of the effect on the bonus which formed the most significant component of Schumacher's compensation package. The bonus represented 86% of his income in 1992, 83% in 1993, and 87.5% in 1994. A significant amount of evidence was led by both sides as to the effect of the hiring of Wright on Schumacher's bonus. By February 6, 1995, Schumacher had the following information or views:

-Foxcroft's letters dated January 25th and January 30th: "your opportunity for bonus payments from the Performance Compensation Programme will not be adversely affected by this modification to your accountabilities";

-at the meeting on February 6th, the Bank presented calculations which indicated that the products acquired by Wright represented 22% of revenue, 13% of CTP and 15% of bonus pay out. Conversely, the products left constituted 78% of revenue, 87% of CTP and 85% of pay out; and

-using Schumacher's interest rate cycle analysis, the loss could have been 21.08% of revenue and 19.47% of CTP.

182 I am not in a position to ascertain whether the loss is 15% or 20% of CTP or somewhere in between. Indeed, it may be as high as 25-30% as indicated by Bell in his evidence. It is a reasonable inference that the potential loss of bonus was at least 15%. While considerable energy was devoted to this analysis at the trial, it is not the determinative factor. Even at 15%, it adds to the many other losses which Schumacher experienced as a result of the hiring of Wright.

183 The defendants assert that there are many factors which indicate that the position held by Schumacher had not materially changed. Mr. Harrison cited these: Schumacher remained one of 37 Senior Vice Presidents at the Bank; he continued to report to Foxcroft who was an Executive Vice President; he retained global responsibility for the treasury group's trading in foreign exchange, derivative products, NAMM US $ funding, Cdn $ funding, and proprietary trading; the areas remaining generated 89% and 99.5% of the treasury groups CTP in 1994 and 1995 respectively; the nature of Schumacher's functions and responsibilities were not changed by the hiring of Wright; and the only change was the re-assignment to Wright of the responsibility for areas which generated 11% and .5% of the CTP in 1994 and 1995 respectively and Schumacher viewed such a re-assignment as inevitable.

184 For reasons elaborated above, I do not accept the characterization by the defendants of the effect of the change. Furthermore, the analysis of the effects in the fiscal year ending October 31, 1995 is irrelevant. In the section on "damages" below, I have reflected on the reasons for the disappointing results in the fiscal year ending after Schumacher left. The results in that fiscal year are not relevant to a determination of whether Schumacher was constructively dismissed which determination is based on what was known in late January and early February 1995.

185 The second position advanced by the defendants is that the employer has the right to "re-align" or to "re-allocate" or to "re-organize" its workforce in the most efficient manner to maximize profit particularly where Schumacher had not contracted for a particular job but had risen to the position through a series of promotions. I do not quarrel with that proposition. The employee is not entitled to a job for life. The employer has some latitude in making changes to the work force in response to changing needs.

186 In submissions, Mr. Harrison took the position that, absent a term to the contrary, there is an implied term in every employment contract that the employer has the discretion to realign responsibilities. Mr. Colson objected to this submission as a "sweeping new defence" not raised in the pleadings and not canvassed in the plaintiff's case. Mr. Harrison responded by asserting that it was implicit in paragraph 8 of the Statement of Defence and is explicit in the legal principles, some of which are summarized above.

187 The difference between the positions taken by counsel is one of degree not substance. Absent a term to the contrary, the authorities, some of which were relied upon by the plaintiff, clearly support the proposition that the employer has the unilateral right to change duties and responsibilities. There are limits on those rights. Where the unilateral change is "substantial", it constitutes a fundamental breach of contract and is constructive dismissal.

188 Schumacher and the Bank had a history of negotiating the terms and conditions of his employment: the offer to move to Tokyo in 1986, which was rejected; the resignation in 1988, as a result of an offer of employment from another bank; the enhancements because of the head hunter's approach in 1991; the resignation in 1993 and the acceptance by the Bank of all but one of his "measures necessary" to have him withdraw his resignation; the collaboration involved in the conceptualization, planning and implementation of Navigator (1993-94); the re-writing of his own position document as a result (1994); and the almost annual bonus negotiations. The hiring of Wright was the first time that fundamental changes were made to his duties and responsibilities without extensive discussions with him, and his ensuing consent and collaboration. The Bank had established a pattern of negotiating changes to his job description on which Schumacher was entitled to rely. Having developed those expectations, it was reasonable for Schumacher to rely on there being a process before fundamental changes would be made to his duties and responsibilities.

189 The following is an often quoted passage from Mifsud v. MacMillan Bathurst Inc. (1989), 63 D.L.R. (4th) 714 (Ont. C.A.) at 719:

It must be remembered that the relationship between the parties is contractual. Where there is no written contract it is necessary first to determine what terms are implied in the specific contract involved, and those terms are not those which the court considers reasonable, but rather what the parties would have agreed to when forming the contract, had they turned their minds to the type of situation which later transpired.

190 The defendants use this principle to support their position that it is an implied term of the contract of employment that the employer may re-align, re-organize and re-structure. But it can also be used to support the proposition that, in this case, as the employer/employee relationship evolved, it became an implied term that Schumacher would be consulted before fundamental changes were made to his duties and responsibilities. Foxcroft acknowledged that Schumacher's responsibilities were too much for one person and that regardless of Wright's availability, this would have been an issue. Foxcroft said that, within three to six months, he would have had to sit down with Schumacher and discuss how broad his business had become. As Foxcroft said, Wright was an opportunity which could not be rejected. Foxcroft decided that Schumacher would be opposed to the hiring of Wright based on: (i) passing discussions with Baillie in August and September 1994; (ii) an angry comment directed more at Hight and Rosen than at Wright; and (iii) a discussion which Foxcroft described in the context of Wright coming as a consultant (about which Schumacher gave no evidence). Bell and Baillie acquiesced in that view. All of them said that the reason why Schumacher was not consulted in advance was because of the fear that the Bank might end up with neither Schumacher nor Wright. That fear cannot be justification for failure on the part of the employer to fulfill what I find is an implied term of the employment agreement to consult with Schumacher before fundamental changes were made. It was an implied term of the employment agreement that Schumacher would be involved in the process of hiring significant employees, especially where the hiring would pose a fundamental change to Schumacher's duties and responsibilities.

191 Mr. Harrison made submissions about the difference between the manner in which the change in the employment relationship is implemented and the substance of the change. The manner of implementation gives rise to two areas to be examined: the manner in which the decision to change is made; and the manner in which that decision was communicated to those affected. I agree with Mr. Harrison that the manner of communication is not relevant in this case. The defendants' witnesses agreed unequivocally that it was wrong for the plaintiff to have heard "on the street". I agree with Mr. Harrison that the unfortunate way in which Schumacher learned of the Wright hire is not actionable. The leak was egregious but does not attract liability.

192 But that is to be distinguished from the process by which the decision to make a fundamental change in duties and responsibilities was made. The Bank chose to make unilateral decisions without consultation. I find that it had the implied right to make decisions which would result in realignment, reorganization, or re-allocation of duties and responsibilities. But Schumacher had the right to be consulted in advance. Conversely, the Bank had the obligation to inform and consult in advance of making the decision.

193 As indicated in Longman v. Federal Business Development Bank, supra, the question is not: "Can the employer unilaterally vary the terms of a contract of employment..." but rather: "Does the employer's direction to the employee amount to a repudiation by the employer of that contract?": Mifsud, supra at p. 235.

194 I find that the changes in duties and responsibilities described in Foxcroft's letter dated January 25, 1995 (together with the expectation that Research would also be part of Wright's mandate), amounted to a repudiation by the employer of the contract of employment. Schumacher was constructively dismissed on January 25, 1995.

Mitigation

195 Chief Justice Laskin articulated the doctrine of mitigation in Michaels v. Red Deer College, [1976] 2 S.C.R. 324, 57 D.L.R. (3d) 386 (S.C.C.), at 390:

The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as [the plaintiff] would have been if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a "duty" to mitigate should be understood in this sense.

In short, a wronged plaintiff is entitled to recover damages for the losses ... suffered but the extent of those losses may depend upon whether [the plaintiff] has taken reasonable steps to avoid their unreasonable accumulation.

The onus is on the defendant to establish that the plaintiff did not act reasonably.

196 Mr. Harrison does not dispute that Schumacher made reasonable efforts to find alternate employment after February 8, 1995. The defendants do argue that there was an opportunity for Schumacher to mitigate which he failed to do, namely by taking the position available to him at the Bank. Mr. Harrison submits that if Schumacher had done so, he would have had no damages.

197 This issue arises from a number of cases, most notably in Mifsud v. MacMillan Bathurst Inc., supra, where McKinlay J.A. indicated the following at p.238:

When an employer wishes to dismiss an employee (other than for cause) the employer may choose either to give the employee reasonable notice of [the] termination date and require that [the employee] work out the notice period or [the employer] may require the employee to leave immediately, thus rendering the employer liable for damages equal to the employee's remuneration and benefits for the reasonable notice period. If the employee leaves immediately, [the employee] is required to take reasonable steps to mitigate [the] loss and, barring any agreement to the contrary between the parties, any moneys earned in mitigation must be credited against ... damages.

Is the situation substantially different when an employer does not wish to dismiss an employee but, being unsatisfied with ... performance, or for some other valid reason, wishes to place [the employee] in a different position at the same salary? Why should it not be considered reasonable for the employee to mitigate [the] damages by working at the other position for the period of reasonable notice, or at least until [the employee] has found alternative employment which [the employee] accepts in mitigation?

The fact that the transfer to a new position may constitute in law a constructive dismissal does not eliminate the obligation of the employee to look at the new position offered and evaluate it as a means of mitigating damages. In all cases, comparison should be made to the contractual entitlement of the employer to give reasonable notice and leave the employee in [the] current position while a search is made for alternative employment. Where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious (as in this case), it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until [the employee] finds acceptable employment elsewhere.

(emphasis added)

198 I assume that it is the latter scenario which applies: the employer does not wish to dismiss the employee. I assume that the "other valid reason" which precipitated the different duties and responsibilities is the desire to hire Wright. I disregard for the moment whether the compensation would have been the same. The point is made repeatedly in the above excerpt that assuming the duties and responsibilities of the new or different position is a transitional measure: the employee should take it until other employment is found.

199 Many cases have followed that proscription to employees whether by directly referring to Mifsud, or to other cases in which a similar thesis is expounded. Many of the cases specifically indicate that the employee's obligation is to mitigate by taking the altered position while the employee looks for another job: Greaves v. Ontario Municipal Employees Retirement Board, supra at p. 364; Farquhar v. Butler Brothers Supplies Ltd., [1988] 3 W.W.R. 347 (B.C. C.A.) at 352; Black v. Second Cup Ltd. (1995), 8 C.C.E.L. (2d) 72 (Ont. Gen. Div.) at 83; Pulak v. Algoma Publishers Ltd. (1995), 10 C.C.E.L. (2d) 111 (Ont. Gen. Div.) at 118; Cayen v. Woodwards Stores Ltd. (1993), 45 C.C.E.L. 264 (B.C. C.A.) at 273.

200 In Mr. Colson's first letter, he extended Schumacher's offer to work in the different position pending negotiation of the severance package. But that option of working in the different position while Schumacher looked for alternative employment was not available. In his letter dated January 30th, Foxcroft said that "remaining at work while negotiating a severance arrangement with us is unacceptable and is tantamount to resignation." Bell agreed. Unless Schumacher accepted the new position unconditionally, he was not permitted to return to the workplace. For that reason, the option of working out the notice period was not available.

201 In addition, Schumacher was never given the opportunity to choose between working out the notice period while he looked elsewhere or of being terminated. He was never threatened with termination. He was never told he would be terminated if he did not accept the new job description. In order to mitigate, the employee must be aware of the options available and choose the most reasonable course of action from among the options. In the context of being terminated, Schumacher was never given the opportunity to consider the option of working out the notice period. As the court said in Wood v. Canadian Marconi Co. (1995), 9 C.C.E.L. (2d) 174 (Ont. Div. Ct.) at 178, the employee "was still trying to maintain her old position when she was dismissed. After that occurred it was never brought home to her that the offered positions were still available."

202 Accordingly, this is a case where Schumacher's only mitigation option was to explore possibilities outside the Bank. He did so. Mr. Harrison takes no issue with the reasonableness of those efforts. I find that Schumacher fulfilled his obligation to act reasonably in mitigation of his damages.

Period of Notice

203 Mr. Colson submits that the range for the period of notice should be eighteen to twenty-one months. Mr. Harrison asserts that the range is six to nine months and that it would be, at most, 12 months. He had encouraged me to find that the Bank's liability for damages ended on September 11, 1995 when Schumacher commenced employment with Citibank.

204 Most cases dealing with period of notice refer to Bardal v. Globe & Mail (The) (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), where the factors relevant to the reasonableness of the notice were articulated as the character of the employment, the length of service of the servant, the age of the servant, and the availability of similar employment, having regard to the experience, training and qualifications of the servant. In Ryshpan v. Burns Fry Ltd. (1995), 10 C.C.E.L. (2d) 235 (Ont. Gen. Div.), MacPherson J. referred to the "reality that in perhaps the majority of wrongful dismissal cases, courts apply a "rule of thumb" that an employee should receive pay in lieu of notice of one month for each year of service."

205 Schumacher was 39 years old in January 1995, and at trial was 41 years old. He is highly educated with two degrees and continuing education after his formal programs ended. He had been continuously employed from the time he finished his MBA and started at the Bank in May 1984 until January 25, 1995, a period of almost 11 years. He was consistently highly rated on his performance reviews and promoted on a regular basis. All of those suggest that he is marketable and would, relatively easily, find suitable employment. However, as in Ryshpan, supra, there are factors which may reduce his marketability: his unique position (as evidenced in the Position Description), his rise to very senior levels of the Bank, and his extremely high income achieved in the two years preceding his termination. On balance, the latter factors slightly outweigh the former. For that reason, I adopt the rule of thumb, which would put reasonable notice at 11 months, but add two months to reflect the difficulties that he might experience.

206 Accordingly I find that appropriate notice for Schumacher is 13 months commencing from January 25, 1995, to February 26, 1996.

207 Mr. Harrison submits that the Bank's liability for damages should cease as of September II, 1995, when Schumacher commenced employment with CitiBank as Vice President, Head of Exposure Management Trading Desk and Fixed Income Trading Desk. I disagree. It has been held that the notice period does not end at the point when the employee gets a new job: Meyer v. Jim Pattison Industries Ltd. (1991), 38 C.C.E.L. 101 (B.C. S.C.). The proper approach is to look at the entire picture and determine the appropriate notice period. This is then set-off against whatever the employee was able to earn during that period: Bremner v. Trend Housewares Ltd. (1985), 51 O.R. (2d) 101, 7 C.C.E.L. 272 (Ont. H.C.).

Resignation

208 The defendants advanced an alternative argument, namely, that, based on Mr. Colson's letter dated January 25, 1995, Schumacher had resigned, that Schumacher's behaviour confirmed that resignation, that Schumacher failed to respond to the letter of February 7th demanding that he report on February 8th and that the letter of February 8th from Lewis to Schumacher simply confirmed the intentions manifested throughout by Schumacher. Mr. Harrison asserts that Schumacher repudiated the contract of employment, that he refused to return to work based on his continuing and unwavering posture that he had been constructively dismissed and that the Bank was therefore entitled to take the position that he had resigned.

209 In order to have a resignation it must be clear and unequivocal that the employee is resigning from the employment contract. Skidd v. Canada Post Corp. (1993), 47 C.C.E.L. 169 (Ont. Gen. Div.). In that case and in Moore c. University of Western Ontario (1985), 8 C.C.E.L. 157 (Ont. H.C.), the Court considered the effect of a letter from the employee or counsel asserting constructive dismissal or rejecting the employer's position with respect to duties and responsibilities. As Chadwick J. held in Skidd, supra, in the absence of clear wording of an intention to resign or conduct which would amount to an intention to resign, the wording of the letter or the conduct of the plaintiff did not amount to resignation.

210 In this case, Mr. Colson's letter dated January 25th contained an assertion that Schumacher had been constructively dismissed and, in that context, Schumacher was "reluctantly" prepared to enter into negotiations for a severance package. In the January 30th letter, Mr. Colson resisted any suggestion that Schumacher's non attendance at work that day constituted resignation. Foxcroft's January 30th letter contained the assertion that the intention reflected in the January 25th letter was "tantamount to resignation." Foxcroft's February 7th letter demanded a return to work. After Lewis' February 8th letter, Mr. Colson's letter indicated a resistance to the notion that Schumacher had resigned.

211 In none of the communications from Mr. Colson is there a clear and unequivocal statement of intention to resign. In none of Schumacher's communications (the e-mail to Baillie et al on January 25th, the e-mail to Foxcroft and Lewis on January 29th, the e-mail to Bell on February 2nd) is there any statement which clearly communicates resignation.

212 Schumacher did say in evidence that he had not unequivocally told senior representatives at the Bank that he wanted to continue his job. But that is not the issue. The job was his until he was constructively dismissed or he resigned. It is not essential that he take the positive step of saying that he wanted to keep his job. Furthermore, I agree that Schumacher's conduct particularly with Bell, clearly indicated that he preferred to remain at the Bank. He responded promptly to all communications, including February 7th. When it finally became available to him, he participated in an information gathering/negotiation process to clarify what was left to him.

213 Furthermore, the conduct of the representatives of the Bank suggests that none of the senior officers involved considered that Schumacher had resigned. Foxcroft would not have demanded that Schumacher return to work on February 8th if Schumacher had clearly and unequivocally resigned. If the Bank intended to take the position that failure to report to work constituted resignation, it was incumbent on Foxcroft or his substitute to so advise Schumacher. In the February 7th demand letter, there was no suggestion that if Schumacher failed to report as demanded that he would be considered to have resigned. Indeed, that position wasn't even considered on the afternoon of February 7th when the demand letter was sent. It wasn't considered until the morning of February 8th, when, literally within minutes of Schumacher not reporting to work on what was one working hour notice, Foxcroft and others formulated the conclusion that Schumacher had resigned.

214 I find that Schumacher did not express in writing or by conduct that he had resigned. Schumacher did not repudiate the contract of employment. The option of treating him as if he had resigned was not open to the Bank.

Credibility

215 During the trial, both counsel pursued in evidence and in submissions, the extent to which the credibility of the key players (Schumacher and Foxcroft) had been challenged. There were some differences in the evidence at trial of Schumacher and Foxcroft, such as whether Foxcroft apologized or whether the London issue was discussed. There are some differences between the notes each made at the time and their evidence at trial. There are some differences between the evidence each gave at discovery compared with evidence at trial. And there are some differences between Schumacher and Bell.

216 From my perspective, all of the witnesses called were trying hard to provide the court with recollections which were as accurate as possible given the interval between the events and trial of approximately 20 months, given the notes made at the time of the events, given the transcripts and tapes of telephone calls most of which only became available during the trial, and given the days during which Foxcroft and Schumacher participated in examination for discovery and the ensuing detailed answers to undertakings. This is not a case where anybody was deliberately altering the description of events or the recollection of events.

217 I make two further observations about the key witnesses. Firstly, Schumacher readily acknowledged that he was destabilized, shaken, shocked, having difficulty integrating what was going on, vulnerable. Foxcroft implicitly conceded that Schumacher's various reactions were legitimate when he said that the first meeting on January 25th would be "doubly difficult" because Foxcroft was no longer in control of the process.

218 Secondly, Foxcroft sometimes reacted negatively during his evidence, particularly during cross-examination. His responses were in the range of cordial and appropriate to annoyance to anger, the latter being manifested toward the later stages of a detailed cross-examination, many days after the opening address by Mr. Colson where he signalled an intention to challenge the integrity of Bank employees.

219 It is not necessary for me to choose between the versions of the key witnesses for two reasons. Firstly, the version which each presented is believable. Secondly, there is remarkable consistency about the evidence which is dispositive namely, the evidence about how Schumacher's duties and responsibilities had changed, and how the decision to make those changes was made. Consequently, the areas of disagreement do not affect the outcome.

Damages

(a) Salary

220 There are two major components of Schumacher's loss of income. The first is his base salary. Foxcroft confirmed in his letter dated January 25th that the base would not be affected. Consequently, Schumacher is entitled to loss of salary for thirteen months at the rate of $200,000 annualized.

(b) Bonus

221 The other component is the loss of bonus. From 1989, the greater part of Schumacher's compensation had been the bonus. Commencing in 1991, Schumacher's bonus was many times greater than his salary. In 1994, his bonus was seven times the amount of his base salary.

222 There are three issues to be addressed. The first is calculating the bonus which Schumacher might have earned for the period November 1, 1994 to January 25, 1995, being the first quarter in the fiscal year during which Schumacher was employed by the TD Bank. The second issue is the bonus which Schumacher might have earned for the period of notice, which I have established as January 25, 1995 to February 26, 1996. Mr. Colson encourages me to assess the annualized bonus at $1.6 million and the first quarter at $438,356.00.

223 Before dealing with those quantifications, I must consider the third issue, namely whether Schumacher is entitled to consideration of any bonus for either period.

224 Under the PCP, eligible employees were awarded fiscal half-year bonuses (for the period ending April 30) and fiscal year-end bonuses (for the period ending October 31). The half-year and year-end bonuses were paid within 90 days following the end of each of those periods. The half-year payment was usually made in June or July and the year-end payment was usually made in mid December.

225 The PCP provided that "recipients must be actively employed by the Bank at the time the award is paid to be eligible for payment". Mr. Harrison's position is that Schumacher ceased to be actively employed on February 8, 1995, and consequently he is not eligible for consideration in the PCP for either period. I have already concluded that Schumacher was constructively dismissed, as he was terminated without cause and without notice. His involuntary inability to comply with the condition of the PCP ought not to be justification for the Bank in declining the award of the bonus as part of Schumacher's damages. If that were the case, an employer would achieve a significant advantage by wrongfully terminating an employee because the severance package would not have to include any bonus. Where the bonus was promoted as an integral part of the employee's cash compensation, it would be inappropriate and unfair to the employee to be deprived of the bonus by reason of the unilateral action of the employer. I do not agree with the position taken by the Bank on this third issue. Schumacher remains entitled to consideration of a bonus, both for the period he worked and the notice period.

226 I return to the quantification of the bonus. The evidence is from two perspectives: the discussions and position taken in 1995, and the evidence at the trial.

227 I consider first what occurred in 1995. Of the three issues on Schumacher's agenda the only one which was discussed was the effect on his bonus of the hiring of Wright. Foxcroft's letters indicated his "sincere belief that in similar market conditions, your opportunity for bonus payments from the Performance Compensation Programme will not be adversely affected by this modification to your accountabilities". Using the calculation advanced by the Bank at the meeting on February 6th, as a minimum, there was a prospect of a 15% reduction in bonus pay-out. As indicated above, Bell's reduction was as high as 25-30%. And, based on the four year interest rate cycle, the reduction was potentially even higher.

228 I turn to the hindsight evidence at the trial. I heard a considerable amount of evidence with respect to the performance of the Treasury Group after Schumacher's departure. It was not a good year. According to Foxcroft, it was a "terrible year" for Treasury - particularly, and ironically, in Fixed Income. The products which would have been left to Schumacher constituted 99.5% of the total CTP for Treasury. The reasons suggested in the evidence include generally lower market on both Foreign Exchange and Fixed Income, transition to Wright, and the hiatus after Schumacher's departure until alternate leadership could be identified.

229 Bell was very experienced in the issue of senior executive compensation. He had been involved in setting Schumacher's bonus and he was consulted with respect to the compensation package for Wright. Bell said in cross-examination that Schumacher would have received a bonus in an amount which was at least equal to the guaranteed minimum bonus payable to Wright in the first twelve months after his hiring. Wright's guaranteed minimum bonus for the first twelve months was $1.6 million. The timing of Wright's bonus was different than Schumacher's bonus entitlement under the PCP. However, Bell said that, but for the issue of the timing of the payments, Schumacher's bonus in 1995 fiscal year would have matched or exceeded the minimum payable to Wright.

230 With respect to fiscal 1996, Bell's evidence was that Schumacher's bonus would have increased to approximately $1,750,000 partly because of the base of $1.4 million and partly because of the increase in market for derivative traders by 25% (a product kept by Schumacher). Retention is a very important aspect of the bonus and any increase in comparators would be given serious consideration.

231 Baillie testified that Schumacher's bonus in fiscal 1995 would not have gone down as a result of the hiring of Wright and, in fact, that it would probably have gone up.

232 Mr. Harrison points out that if I find that Schumacher was constructively dismissed on account of the hiring of Wright, it would not be appropriate to measure the bonus which Schumacher should receive based on the bonus which the Bank contracted to give to Wright. I agree.

233 Given the variables which are now identified as likely to have an impact on profitability, how does one assess the bonus that Schumacher would have received if he had not been terminated? There are many positive and negative contingencies.

234 The bonus entitlement for purposes of assessing damages for constructive dismissal should reflect the bonus which Schumacher would likely have received if the status quo at January 23, 1995 had prevailed. I assume that derivatives were a reasonably profitable product, that the market was otherwise stable or less buoyant, and that derivative traders were likely to benefit from a market increase. I find that it is reasonable to expect that Schumacher's bonus entitlement for the fiscal year ending October 31, 1995, would have been the same as for the fiscal year ending October 31, 1994, namely $1.4 million and that Schumacher should be entitled to one-quarter of that amount reflecting the period from November 1, 1994 to January 24, 1995. Schumacher is also entitled to a bonus for the period January 25, 1995 to February 26, 1996. For the fiscal year ending October 31, 1995, the annualized bonus is, as indicated above $1.4 million. Schumacher is entitled to the balance of the annualized bonus reflecting the period from January 26, 1995 to October 31, 1995.

235 At the trial in September 1996, the evidence was that by the end of the fiscal year at October 31, 1996, profitability has increased significantly. But the entitlement for Schumacher ended in February 1996, at the end of only the first quarter. I find that the factors applicable for the fiscal year ended October 31, 1995, apply for at least the first half of the fiscal year ended October 31, 1996, and that the annualized bonus should also be $1.4 million pro-rated from November 1, 1995 to February 26, 1996.

Stock Options

(a) Phantom Options

236 During the trial, there were some general references to stock options available to the plaintiff. However, counsel advised that it would not be necessary to hear specific evidence. I gather that considerable effort was involved by Mr. Najjar and Mr. O'Connor as a result of which consensus was reached as to value of all the options. Counsel also agreed that the damages should be quantified as amounts equal to the amounts which Schumacher would have realized upon maturity or redemption. The issue left to me was entitlement.

237 There are three categories: phantom units, real stock options, and 1995 stock option award.

238 The plaintiff and defendants have agreed that the following 1990 and 1991 phantom stock options and related instruments (the Phantom Units) had been issued to Schumacher, but were not redeemable prior to February 8, 1995:

(a) on March 22, 1995, 6660, 1990 series A units could have been redeemed for a gross profit of $8,857.80;

(b) on March 22, 1995, the promissory note relating to the 1990 series B units would have matured and Schumacher would have become entitled to a payment in the amount of $23,100.72 (net of taxes);

(c) on March 22, 1995, the 3000 series C units issued to Schumacher in 1993 (in respect of the maturing of his 1990 series B units at that time) would have been redeemable by Schumacher for a gross profit of $13,740;

(d) on April 4, 1995, Schumacher could have redeemed 4000 of his 1991 series A units for a gross profit of $12,040;

(e) on April 4, 1996, Schumacher could have redeemed the remaining 8000, 1991 series A units at a gross profit of $51,520;

(f) on April 4, 1996 the promissory note dated April 4, 1994 relating to the 1991 series B units would have matured and resulted in a payment to Schumacher in the amount of $40,780.87 (net of taxes); and

(g) on April 4, 1996, the 4000 series C units issued to Schumacher in respect of the 4000 1991 series B units which matured in 1994 would have become redeemable and would have resulted in a gross profit to Schumacher of $9,680.

239 All of the Phantom Units were granted in accordance with certificates issued to Schumacher which provide that the phantom stock units were issued subject to the provisions of the Long Term Incentive Phantom Stock Plans. In executing the certificates, Schumacher acknowledged receipt of the Phantom Units in accordance with the terms of the Plan, acknowledged that he had received copies of the Plans and agreed to be bound by the Plan terms. The Plans provide under the heading "Termination of Employment" that:

if a participant ceases to be an employee of the Bank except by reason of disability, retirement or death, any Non-Redeemable Unit [or promissory note] held by the participant at the date of termination of employment is thereupon null and void.

A Non-Redeemable Unit is defined as a unit which is not then redeemable in the hands of the participant/employee.

240 The defendants assert that the termination provisions apply and consequently, Schumacher is not entitled to the benefit of any of the phantom units and related instruments because all were "non-redeemable" units. I do not agree with the defendants' position. Schumacher ceased to be an employee because he was constructively dismissed. I have found that he is entitled to thirteen months' notice. If he had worked through the notice period, he would have remained an employee and he would have been entitled to redeem. I agree with the submission by the plaintiff that the plaintiff ought not to be in a worse position because of the unilateral action the employer.

241 Accordingly Schumacher is entitled to damages equivalent to those listed in (a) to (d) above since they fall within the thirteen month period which begins January 25, 1995.

(b) Real Stock Options

242 The plaintiff and defendants have agreed that, had Schumacher remained with the Bank, he could have exercised the 1993 and 1994 "real" stock options as follows:

(a) on April 1, 1995: 2,500 shares under the 1993 option exercisable at a gross profit of $9,687.50;

(b) on April, 1, 1996: 5,000 shares under the 1994 option exercisable at a gross profit of $13,750; and

243 The Stock Options were granted in accordance with the terms of the Stock Option Plan. At the time of the grants, Schumacher executed Employee Stock Option Agreements which detailed the terms of the grants, enclosed copies of the Stock Option Plan and regulations, and provided that Schumacher agreed to be bound by the terms and conditions of the Stock Option Plan and regulations. Section 9 of the Stock Option Plan provides for the vesting and forfeiture of the Stock Options as follows:

(a) at termination of employment of a Participant with a Bank and any Subsidiary as a result of resignation or for cause, all outstanding Options grant that Participants shall be forfeited immediately upon termination. (sic)

(b) If a participant is terminated without cause, any outstanding Options granted to that participant which are exercisable at the date of such termination of employment and which become exercisable in the sixty days following termination may be exercised at any time on or before the expiration of such sixty-day period. After that time all unexercised Options and all Options not yet exercisable will be forfeited by the terminated Participant.

244 This plan included differential provisions which applied depending on the reason for termination. There is no ambiguity which requires interpretation. I disagree with the plaintiff's submission that he should be entitled to the options exercisable within the thirteen months notice period and sixty days thereafter. The plain language of the Plan does not support that interpretation. Schumacher is entitled only to options exercisable by March 26, 1995. There were none.

245 The plaintiff asserts that, but for the wrongful termination of employment, he would have received in 1995, an award of stock options consistent with the awards in 1994 and 1993. In each of those years, Schumacher had received an award of an option to purchase 10,000 shares, with 2,500 of those shares becoming redeemable in each of the four succeeding years. He takes the position that he should be entitled to an award of 10,000 shares of which 2,500 would have been redeemable within the notice period.

246 I accept that it would be reasonable to assume that Schumacher would have received such an award. But the redemption date in 1996 would be well past the termination date of January 25, 1995. The sixty day clause applies to prevent entitlement.

Benefits

247 Based on my earlier finding of constructive dismissal, the plaintiff and defendants agree that Schumacher is entitled to "one-shot" benefits valued at $3,273.49 and "annual" benefits valued at $11,579.94 per year, or $965 per month.

Mitigation Income and Expenses

248 Schumacher commenced employment with Citibank on September 12, 1995. He earned an annual salary and bonus which totalled $950,000. Counsel have agreed that for the purposes of calculating mitigation income, Schumacher's monthly income was $79,166.67. The defendants are entitled to deduct that monthly income for the period September 12, 1995, to February 26, 1996, which I round to 5.5 months.

249 Counsel have also agreed that, based on my finding of constructive dismissal, Schumacher is entitled to recover expenses incurred in obtaining employment in the amount of $9,601.12.

Conclusion

250 The plaintiff is entitled to damages for constructive dismissal for a thirteen month period from January 25, 1995 in the following categories:

Categories Annualized Amount Allowed

1. salary (13 months: Jan. 25/95 $ 200,000.00 $ 216,666.67

to Feb. 26/96)

2. earned but unpaid bonus (Nov. 1,400,000.00 350,000.00

1/94 to Jan. 31/95)

3. bonus (13 months: Jan. 25/95 to 1,400,000.00 1,516,666.67

Feb. 26/96)

4. phantom stock options (13 N/A 8,857.80

months: Jan. 25/95 to Feb.

26/96)

23,100.72{*}

13,740.00

12,040.00

5. real stock options N/A 0

6. one shot benefits N/A 3,273.49

7. other benefits (13 months: 11,579.94 12,545.00

Jan.25/95 to Feb. 26/96)

8. mitigation expenses N/A 9,601.12

Subtotal N/A $2,166,491.47

Less:

Mitigation

Earnings - 5.5

months

(950,000 / 950,000.00 (435,416.67)

12=$79,166.67)

DAMAGES TOTAL N/A $1,731,074.80

Notes: {*} net of taxes

251 I have found constructive dismissal effective January 25, 1995. Schumacher received his salary until February 8, 1995. I am confident counsel can agree on the necessary adjustment.

252 The claim was issued against both defendants. The evidence was focused on the employment relationship with the Bank. In the absence of submissions that the employment relationship with TDSI differed, judgment will go against both defendants.

Pji and Costs

253 It will now be necessary to hear submissions with respect to prejudgment interest and costs. Toward that end, the following timetable will apply:

a) by May 29, 1997, Mr. Colson will make written submissions on both issues not to exceed 6 pages. Copies of offers to settle should be included (in addition to the 6 pages);

b) by June 9, 1997, Mr. Harrison will respond with similar length limitations;

c) counsel will attend on June 12, 1997 at 9:00 a.m. for oral submissions which, in total, will not exceed one hour.

After I award costs, I will entertain a request to fix costs.

Addendum

254 After submissions, the Supreme Court of Canada released its reasons in Farber c. Royal Trust Co. (1996), 145 D.L.R. (4th) 1 (S.C.C.). Counsel offered to make further written or oral submissions. The evidence in this action was heard in September. Oral submissions were heard in November. Then counsel asked to make supplementary submissions which happened in late December. I was about to release these reasons in May, when counsel made this further request. In order to avoid the delay that such further submissions would involve, counsel have agreed with my suggestion that I should release these reasons without regard to the effect of Farber.

Action allowed

END OF DOCUMENT