Date: 20041105
Docket: T-775-04
Citation: 2004 FC 1555
Ottawa, Ontario, November 5, 2004
Present: Mr. Justice Blais
BETWEEN:
NATIONAL BANK OF CANADA
Applicant
and
DIANE LEPIRE
Respondent
REASONS FOR ORDER AND ORDER
[1] This is an application for judicial review of an order dated March 15, 2004, by Mr. Jean Poudrier in his capacity as an adjudicator appointed under section 242 of the Canada Labour Code, R.S.C. 1985, c. L-2. The adjudicator's decision ordered the National Bank of Canada (the applicant) to pay Diane Lepire (the respondent) compensation equivalent to 12 months of salary with interest.
FACTS
[2] The respondent Diane Lepire was hired on September 28, 1971, by the Provincial Bank, to which the applicant National Bank has succeeded. She subsequently held various positions, and from December 1996 to the time of her dismissal she was an account manager. As such, she could grant lines of credit or loans of less than $100,000 to companies.
[3] On September 12, 1997, Diane Lepire granted a loan to her mother and subsequently administered it, contrary to the Code of Professional Ethics. When the employer noticed this three years later, it sent a letter to Ms. Lepire on April 4, 2001, notifying her of a retroactive suspension of 10 days without pay for the period from March 12 to 19, 2001. She was also warned by the applicant that any future breach of the Code of Ethics would not be tolerated and she would be subject to harsher corrective action that could go as far as dismissal.
[4] Six months later, in October 2001, the respondent opened an account under the name "Messagerie DLP", allowing her and her former husband, Denis Pelletier, to sign any document pertaining to this business account. She assigned a rating to the account that was not warranted by her former husband's financial situation. This rating gave the account's user the right to limitless deposit withdrawals with no holdback of funds. The employer did not notice this until August 2002, and it then dismissed the respondent on October 16, 2002.
[5] The respondent filed a complaint of unjust dismissal on November 21, 2002. She is not seeking reinstatement, but is claiming miscellaneous monetary compensation including moral damages of between $25,000 and $50,000.
ADJUDICATOR'S DECISION
[6] After reviewing the relevant context as a whole, the adjudicator decided that the dismissal was unjust. Although she had infringed the Code of Ethics twice in six months, the complainant had not committed any theft, embezzlement or serious fraud and she had acted without ulterior motive. The adjudicator found that the complainant should be treated fairly and equitably, in comparison with her colleagues who had benefited from the [translation] "Employee handbook - Reorganization of the division, Business services", which allowed 16 months of salary to any employee laid off by the Bank. He therefore considered 12 months of salary as a fair and reasonable compensation.
ISSUES
[7] 1. What is the applicable standard of review on a review by this Court of disputed findings in an adjudicator's decision?
2. Did the adjudicator act in a patently unreasonable way in the characterization of:
(a) the nature of the proved misconduct;
(b) the assessment of the mitigating and aggravating circumstances; and
(c) the compensation he ordered.
APPLICABLE STATUTORY PROVISIONS
| 242. Reference to adjudicator
Decision of adjudicator
(3) Subject to subsection (3.1), an adjudicator to whom a complaint has been referred under subsection (1) shall
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242. Renvoi à un arbitre
Décision de l'arbitre
(3) Sous réserve du paragraphe (3.1), l'arbitre :
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| (a) consider whether the dismissal of the person who made the complaint was unjust and render a decision thereon; and
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a) décide si le congédiement était injuste;
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| (b) send a copy of the decision with the reasons therefor to each party to the complaint and to the Minister.
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b) transmet une copie de sa décision, motifs à l'appui, à chaque partie ainsi qu'au ministre.
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| Where unjust dismissal
(4) Where an adjudicator decides pursuant to subsection (3) that a person has been unjustly dismissed, the adjudicator may, by order, require the employer who dismissed the person to
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Cas de congédiement injuste
(4) S'il décide que le congédiement était injuste, l'arbitre peut, par ordonnance, enjoindre à l'employeur :
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| (a) pay the person compensation not exceeding the amount of money that is equivalent to the remuneration that would, but for the dismissal, have been paid by the employer to the person;
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a) de payer au plaignant une indemnité équivalant, au maximum, au salaire qu'il aurait normalement gagné s'il n'avait pas été congédié;
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| (b) reinstate the person in his employ; and
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b) de réintégrer le plaignant dans son emploi;
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| (c) do any other like thing that it is equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal.
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c) de prendre toute autre mesure qu'il juge équitable de lui imposer et de nature à contrebalancer les effets du congédiement ou à y remédier.
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| 243 Decisions not to be reviewed by court
(1) Every order of an adjudicator appointed under subsection 242(1) is final and shall not be questioned or reviewed in any court.
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243. Caractère définitif des décisions
(1) Les ordonnances de l'arbitre désigné en vertu du paragraphe 242(1) sont définitives et non susceptibles de recours judiciaires.
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| No review by certiorari, etc.
(2) No order shall be made, process entered or proceeding taken in any court, whether by way of injunction, certiorari, prohibition, quo warranto or otherwise, to question, review, prohibit or restrain an adjudicator in any proceedings of the adjudicator under section 242.
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Interdiction de recours extraordinaires
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ANALYSIS
[8] I begin by saying I am in general agreement with the arguments advanced by the applicant in this case. In my opinion, the application for judicial review should be allowed, for the following reasons.
[9] The applicant decided to dismiss the respondent for a breach of the Bank's Code of Professional Ethics. Thus, it is this code of ethics that is the appropriate starting point for our analysis.
[10] In fact, I think it is important to note that the notion of good faith is found in the Civil Code of Québec, in articles 6, 7 and 1375; and this obligation to demonstrate good faith in contracts of employment gives rise to another obligation, to be faithful and honest in relation to one's employer, under the provisions of article 2088 of the Civil Code.
[11] It is important to recall this obligation to demonstrate good faith and the employee's obligation of faithfulness and honesty in relation to his employer, since these obligations exist independently of the existence of any code of ethics to which an employee may be subject from time to time in regard to his employer. The applicant's Code of Professional Ethics in this case stipulates:
[translation]
An employee is in a conflict of interest when he is in a situation that can lead him directly or indirectly to choose
- between the interests of the Bank or its clients and his personal interests, his business interests or the interests of any person with whom he is related in some way,
- or between the interests of two of his clients,
and in any situation that could affect his judgment and his loyalty toward the Bank.
[12] In the case at hand, it was not necessary for the Bank to establish that it had been adversely affected in determining whether or not the respondent had placed herself in a conflict of interest situation. The mere existence of the conflict of interest already created a situation of potential prejudice, an especially important consideration for a banking institution.
[13] In this sense, it was vital for the applicant to bear in mind that the banking system is largely based on honesty and integrity and that the relationship of trust between employer and employees, as between the Bank and its customers, is essential. As J.-J. Turcotte, an adjudicator, stated in Vaillancourt v. Banque Nationale du Canada (February 29, 1984), at page 32:
[translation]
Compliance with bank regulations is to a bank employee the equivalent of observance of a trust account for professionals who receive sums of money for distribution among their clients.
...
When a superior begins to have doubts, uncertainty and disbelief about the work of a subordinate, no matter how high-ranking, it is very hard to rekindle faith, peace of mind and a compassionate credulity.
The banking industry, as we pointed out earlier, cannot suffer any "breach of confidence" for the simple reason that the employees of a bank branch are in constant contact with the money of third parties and the assets of the bank.
[14] It is clear that the respondent's position of responsibility as an account manager, far from reducing the importance of this concept of conflict of interest, increased it and something more was to be expected on the part of an employee holding a position of responsibility in the Bank.
[15] A careful reading of the adjudicator's decision leads us to conclude that he based himself essentially on the decision of the Supreme Court of Canada in McKinley v. BC Tel, [2001] 2 S.C.R. 161.
[16] It appears that in the McKinley decision, supra, the Supreme Court spelled out the circumstances in which an employer would be entitled to summarily dismiss an employee because of the latter's dishonest conduct.
[17] It is my unequivocal opinion that this decision must be distinguished from the present case because it is much too restrictive and inapplicable. It seems to me that an employee's dishonesty, irrespective of the employee's level in relation to his employer, must be treated differently from that of an employee who would knowingly put himself in a conflict of interest situation, which is the situation in this case.
[18] Although the notion of conflict of interest may occasionally intersect with a situation of "theft, embezzlement or gross misconduct", these are two types of serious breaches that are distinct and may both lead to dismissal, as the applicant's counsel noted. The adjudicator, at paragraphs 146 et seq. of his decision, dwells at length on the fact that the employer never criticized the complainant for conduct comparable to [translation] "theft, embezzlement or gross misconduct" and seems to trivialize the misconduct as being a mere conflict with the Code of Professional Ethics applying to employees of the Bank. It is curious, in fact, that the adjudicator, at paragraph 149, manifests his agreement with the employer's counsel [translation] "that in the banking business, trust is the cornerstone of such an undertaking".
[19] The adjudicator notes that this is a repeat offence, since this breach of the Code of Professional Ethics occurred barely six months after the complainant had been suspended for 10 days, again for having breached the Code of Ethics in relation to transactions she had made on behalf of a person not at arm's length, in this case her mother. He adds, at paragraph 152, that this is an aggravating circumstance, while in the preceding paragraph, he concluded that the presence of a single suspension in the complainant's disciplinary record could be considered a mitigating circumstance.
[20] The applicant referred the Court to Canadian Imperial Bank of Commerce v. Marc Boisvert, [1986] 2 F.C. 431 (C.A.), a decision of MacGuigan J.A. of the Federal Court of Appeal. In this judgment, an important one that is much more applicable to this case, MacGuigan J.A. set aside the decision of the adjudicator Boisvert as wrong in law because the adjudicator had held that the employee had to have committed an act that was illegal or contrary to law if the cause for dismissal was to be considered fair and sufficient.
[21] MacGuigan J.A. thought this reasoning should be rejected, particularly in a conflict of interest case. The judge insisted that it was not necessary to prove that the employer had suffered actual prejudice but that the mere possibility of prejudice because of the conflict of interest was sufficient to justify a dismissal. At page 454 of his decision, he stated:
The general principle as to the misconduct that will constitute just cause for dismissal was well stated by Lord Esher in Pearce v. Foster (1886), 17 Q.B.D. 536 (C.A.), at page 539:
The rule of law is, that where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him. The relation of master and servant implies necessarily that the servant shall be in a position to perform his duty duly and faithfully, and if by his own act he prevents himself from doing so, the master may dismiss him.... What circumstances will put a servant into the position of not being able to perform, in a due manner, his duties, or of not being able to perform his duty in a faithful manner, it is impossible to enumerate. Innumerable circumstances have actually occurred which fall within that proposition, and innumerable other circumstances which never have yet occurred, will occur, which also will fall within the proposition.
Actual prejudice to the employer need not be proved. Potential harm is sufficient: Empey v. Coastal Towing Co. Ltd., [1977] 1 W.W.R. 673 (B.C.S.C.); Tozer v. Hutchison (1869), 12 N.B.R. 540 (C.A.). As it was put by Meldrum J. in Bursey v. Acadia Motors Ltd. (1980), 28 N.B.R. (2d) 361 (Q.B.), at page 369, varied in another respect on appeal (1982), 35 N.B.R. (2d) 587 (C.A.):
There is no evidence that defendant was in any way harmed by the potential conflict of interest. Nevertheless, in conflict of interest situations, the rule of Caesar's wife applies. It must not only be pure, it must be seen to be pure.
It is irrelevant that the employee's conduct was designed to protect only his own interest and not intended to injure that of his employer: Federal Supply and Cold Storage Co. of South Africa v. Angehrn & Piel (1910), 80 L.J.P.C. 1; Empey v. Coastal Towing Co. Ltd., supra.
Further on, at pages 460-61, he writes:
It is clear from this passage that the Adjudicator had an entirely mistaken view of the law. In his opinion, for just cause for dismissal to exist the respondent would have had herself to commit an act that is illegal or contrary to law. If that were the test, that would eliminate many conflict of interests situations. The true test of an employee's misconduct, however, is that stated by Lord Esher, supra: it applies to acts of the employee which are "incompatible with the due or faithful discharge of his duty to his master".
...
... and it was only the Adjudicator's idée fixe that misconduct requires an act contrary to law on the employee's part that prevented him from seeing the situation as it was. She betrayed her duty to her employer by continuing to associate with a person so apparently dedicated to playing Robin Hood for his own benefit. Nothing more is required for incompatibility with the interests of her employer.
[22] I also think that the adjudicator's analysis of the mitigating circumstances is unreasonable in some respects. I particularly agree with counsel for the applicant that 31 years' seniority is more an aggravating factor for a person who not only is suspended for 10 days for having breached the Code of Professional Ethics by making a loan to her own mother, but who, six months later, re-offends by conducting transactions for and on behalf of her former husband, again a person not at arm's length. This is a repeat offence that should not be anticipated from a person who has been working for 31 years for the same employer.
[23] Nor do I understand why [translation] "the frankness, sincerity and co-operation of the complainant" at the investigation and the hearing could be considered a mitigating circumstance when it was only after her employer had noticed her new breach of the Code of Professional Ethics that she agreed to co-operate, and when she did not want to speak about the circumstances surrounding the opening of the account on behalf of her former husband, hiding behind [translation] "personal reasons" as the explanation. She also sought to justify herself and to attribute the misconduct in part to a problem of interpersonal relations with her immediate superior. Despite some effort, I am unable to understand how one can attempt to justify such a serious breach of the Code of Professional Ethics in this way. If there is anything to be learned from this surprising (to say the least) attitude on the part of the respondent, it is its demonstration that the relationship of trust was irremediably broken and could in no case be re-established between the Bank and its employee.
[24] The reasons cited in connection with both the initial breach of the Code of Ethics concerning her mother and the breach concerning her former husband may appear defensible in human terms, but they remain completely unacceptable in the context of an employer-employee relationships in a banking institution.
[25] In the Vaillancourt case, supra, adjudicator Turcotte explains:
[translation]
(a) It is true that Ms. Vaillancourt's case is pathetic in one sense, quite comprehensible in another sense, for she brought about her loss by trying to save her husband from financial decline.
...
But Ms. Vaillancourt knowingly, deliberately, for reasons that may be touching in conjugal terms but are not at all in the reality of the banking industry, took roundabout ways to help her husband profit from additional sums loaned by two outsiders, under false pretenses.
...
The complainant voluntarily and directly placed herself in a devious, dangerous path the unfortunate outcome of which she was in a position to know when the day came when the embezzlements, made for a laudable purpose from the conjugal standpoint but unacceptable in the professional area in which the complainant was working, burst into the open.
[Emphasis added]
[26] It seems clear that the analysis made by the adjudicator and the conclusions of fact and law are completely unreasonable in the circumstances, and the intervention of this Court is fully warranted. In Banque Nationale du Canada v. Salvant, D.T.E. 96T-1126, adjudicator Du Mesnil writes at page 23:
[translation]
In banking, for obvious reasons, the relationship of trust is a matter of overriding importance. It is of greater scope and importance than elsewhere. It is a constant and uppermost preoccupation. There is no better way to summarize this than to quote some decisions: ...
...
The result of all this is that in the banking industry, in particular, there must always be a relationship of trust between the employer and the employee and, if this relationship of trust is broken, the breach may be considered a just cause for dismissal, as the judgments already cited, among others, teach us.
The result, therefore, is that in the banking industry especially and above all, the relationship of trust between employer and employee must always exist, not be undermined in the least and, if there is a breach or break in this relationship of trust, this breach, this break, as the cases show, may be considered a just cause of dismissal. The loss of confidence, which has the immediate effect of ending the relationship of trust, results in most cases from the attitude, deeds and actions, reluctance, lack of frankness, in the employee's conduct.
[27] The adjudicator's decision that the dismissal was unjust will therefore be set aside.
[28] Moreover, the erroneous conclusions of fact and of law by the adjudicator led this adjudicator to order a compensation that itself becomes patently unreasonable.
[29] It is understandable that in his decision the adjudicator took into account an array of factors that I discussed above; however, the compensation of 12 months salary granted to Ms. Lepire is unreasonable in the circumstances, much too generous and does not meet the criteria laid down by the cases in this area.
[30] I am also of the opinion that since the dismissal was just and reasonable, the adjudicator's conclusions that 12 months salary should be awarded as compensation must also be rejected.
[31] For these reasons, I am of the opinion that this application for judicial review should be allowed, the decision by the adjudicator, dated March 15, 2004, that the dismissal was unjust, should be set aside and the compensation granted should also be set aside.
O R D E R
THE COURT ORDERS:
- That this application for judicial review be allowed.
- That the decision by the adjudicator, dated March 15, 2004, that the dismissal was unjust, be set aside.
- That the decision by the adjudicator to award 12 months salary as compensation be set aside.
- With costs against the respondent.
"Pierre Blais"
Judge
Certified true translation
Jacques Deschênes, LL.B.
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-775-04
STYLE: NATIONAL BANK OF CANADA
Applicant
and
DIANE LEPIRE
Respondent
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: September 28, 2004
REASONS FOR ORDER
AND ORDER: MR. JUSTICE BLAIS
DATED: November 5, 2004
APPEARANCES:
André Giroux FOR THE APPLICANT
Jean Lagacé FOR THE RESPONDENT
SOLICITORS OF RECORD:
Ogilvy Renault FOR THE APPLICANT
Montréal, Quebec
Lagacé, Goupil & Lacasse FOR THE RESPONDENT
Pintendre, Quebec
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