Innu Nation of Uashat Mak Mani-Utenam v. Fontaine, 2005 FCA 357

                                                                                                                              Docket: A-402-03

OTTAWA, ONTARIO, OCTOBER 31, 2005

CORAM:       DÉCARY J.A.

LÉTOURNEAU J.A.

NOËL J.A.

BETWEEN:

                                 UASHAT MAK MANI-UTENAM BAND COUNCIL

                                                                                                                                            Appellant

                                                                           and

                                                          SOLANGE FONTAINE

                                                                                                                                        Respondent

                                                                   JUDGMENT

The appeal is allowed in part, the judgment of the Federal Court is reversed and the respondent’s application for judicial review is allowed to quash in part the decision of the adjudicator and refer the matter back to him for him to proceed to the third stage of the procedure set out in paragraph 49 of Toronto (City) Board of Education v. O.S.S.T.F., District 15, [1997] 1 S.C.R. 487, and if he comes to the conclusion that the dismissal without compensation was not an appropriate measure in the circumstances, to determine what that measure should be.

The respondent will be entitled to her costs in the Federal Court and in this Court.

Certified true translation

François Brunet, LLB, BCL

                                                                                                                                  Date: 20051031

                                                                                                                              Docket: A-402-03

                                                                                                                     Citation: 2005 FCA 357

CORAM:       DÉCARY J.A.

LÉTOURNEAU J.A.

NOËL J.A.

BETWEEN:

                                 UASHAT MAK MANI-UTENAM BAND COUNCIL

                                                                                                                                            Appellant

                                                                           and

                                                          SOLANGE FONTAINE

                                                                                                                                        Respondent

                                     Hearing held at Québec, Quebec on October 19, 2005

                                Judgment rendered at Ottawa, Ontario on October 31, 2005

REASONS FOR JUDGMENT:                                                                                    DÉCARY J.A.

CONCURRED IN BY:                                                                                       LÉTOURNEAU J.A.

                                                                                                                                          NOËL J.A.

                                                                                                                                  Date: 20051031

                                                                                                                              Docket: A-402-03

                                                                                                                     Citation: 2005 FCA 357

CORAM :      DÉCARY J.A.

LÉTOURNEAU J.A.

NOËL J.A.

BETWEEN:

                                 UASHAT MAK MANI-UTENAM BAND COUNCIL

                                                                                                                                            Appellant

                                                                           and

                                                          SOLANGE FONTAINE

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

DÉCARY J.A.

[1]               This is an application for judicial review of a judgment by a Federal Court judge dated July 9, 2003 (2003 FC 853) which reversed the decision dated November 30 2001, rendered by André Truchon, an adjudicator appointed pursuant to Part III, Division XIV of the Canada Labour Code, R.S.C. 1985, c. L-2 (the Code). The adjudicator dismissed the unjust dismissal grievance filed by the respondent Solange Fontaine. The judge ordered that the respondent be reinstated and referred the matter back to the adjudicator on the question of the quantum of financial compensation to be paid by the employer, the appellant Band Council.

[2]               Essentially, the appellant argued that the judge erred in applying reasonableness simpliciter as the standard of review and substituting his own opinion for that of the adjudicator. It further argued that the judge did not have jurisdiction to order directly that the respondent be reinstated.

[3]               On this latter point, the respondent agreed with the appellant. Once the judge came to the conclusion that the dismissal was unjust, he was bound to refer the matter back to the adjudicator ! who of course had not had to consider this point ! for the latter to decide on the advisability of ordering the respondent’s reinstatement pursuant to paragraphs 242(3)(a) and (4)(b) of the Canada Labour Code. What is more, in any case the judge could not have ordered reinstatement without giving reasons for his decision in this regard and without undertaking a review of the favourable and unfavourable factors (see Abénakis de Wôlinak Band Council v. Bernard, Federal Court, March 13, 2000, T-594-99). In the case at bar, the judge did not offer any reasons in support of his reinstatement order. It follows that if this Court decides the dismissal was unjust the appeal should nonetheless be allowed, if only to refer the matter back to the adjudicator on the question of reinstatement.

[4]               As to the standard of review applicable to the findings of fact and inferences drawn from them by the adjudicator, the parties have agreed ! and I agree with them ! that the applicable standard is that of the patently unreasonable decision, as the Supreme Court of Canada held in Toronto (City) Board of Education v. O.S.S.T.F., District 15, [1997] 1 S.C.R. 487, indeed, in issue was an arbitral award in relation to a dismissal without just cause. (See also Defence Construction Canada Ltd. v. Girard, 2005 FC 1177, per de Montigny J.).

[5]               In Toronto Board of Education, Cory J. said that this standard was a “very strict test”, which he described at paragraph 46 of his reasons as follows:

. . . it is apparent that if the decision the Board reached, acting within its jurisdiction, is not clearly irrational, that is to say evidently not in accordance with reason, then it cannot be said that there was a loss of jurisdiction.

At paragraphs 47 and 48, he added:

47            In order to decide whether a decision of an administrative tribunal is patently unreasonable, a court may examine a record to determine the basis for the challenged findings of fact or law made by the tribunal . . .

48            Therefore, in those circumstances where the arbitral findings in issue are based upon inferences made from the evidence, it is necessary for a reviewing court to examine the evidence that formed the basis for the inference. I would stress that this is not to say that a court should weigh the evidence as if the matter were before it for the first time. It must be remembered that even if a court disagrees with the way in which the tribunal has weighed the evidence and reached its conclusions, it can only substitute its opinion for that of the tribunal where the evidence viewed reasonably is incapable of supporting the tribunal's findings.

[6]               In the case at bar, the judge dealt with the question of the applicable standard of review at the very end of his reasons. At paragraph 75, he said he agreed with counsel for the appellant [translation] “that it is well settled that this Court should not intervene to review an administrative tribunal’s findings of fact unless it is apparent that the adjudicator made an error in interpreting the facts revealed by the evidence”. At paragraph 76, he quoted [translation] “in this respect” the Supreme Court of Canada decision in Director of Investigation and Research v. Southam Inc., [1997] 1 S.C.R. 748, where the standard of reasonableness simpliciter is indeed defined. At paragraph 77, he concluded that the adjudicator’s decision was [translation] ] “unreasonable” because his reasons [translation] “cannot stand up to careful analysis”, the same words used by the Supreme Court to describe the standard of reasonableness simpliciter. Although at paragraph 78 he said he relied [translation] “also on the tests set out by the Supreme Court regarding the ‘patently unreasonable’ standard of review”, he did not explain in what respect the decision was patently unreasonable, which leads me to conclude, like the appellant, that it is the standard of reasonableness simpliciter which the judge wrongly said he applied; and here again I am not sure that the judge did not substitute his own opinion for that of the adjudicator without explaining in what respect the latter was unreasonable.

[7]               As the judge applied the wrong standard, this Court must review the case in light of the applicable standard, namely that of the patently unreasonable decision (Dr. Q. v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, at paragraph 43).

THE LAW                                                            

[8]               First, a word on certain applicable rules of law.

[9]               As Cory J. pointed out at paragraph 49 of his reasons in Toronto Board of Education:

The first step in any inquiry as to whether an employee has been dismissed for “just cause” is to ask whether the employee is actually responsible for the misconduct alleged by the employer. The second step is to assess whether the misconduct gives rise to just cause for discipline. The final step is to determine whether the disciplinary measures selected by the employer are appropriate in light of the misconduct and the other relevant circumstances.

The Canada Labour Relations Board followed this approach, for all practical purposes, in a case which involved a British Columbia statute (Wm Scott & Company Ltd., [1977] 1 Can. L.R.B.R. 1 (Can. L.R.B.), and the Federal Court in Kelowna Flightcraft Air Charter Ltd. v. Kmet (1998), 149 F.T.R. 246 (T.D.), held that this approach should also be applied in cases falling under section 242 of the Canada Labour Code.

[10]           It goes without saying that the adjudicator has control over his procedure and the manner in which he arrives at his conclusion. Ultimately, what matters is that, in his own words, he must have asked the right questions and answered them in a way that is not clearly irrational.

[11]           Dealing more specifically with the appropriateness of the sanction in cases involving “forms of dishonesty that . . . bordered on theft, misappropriation, forgery or a fraudulent sham” (McKinley v. B.C. Tel, [2001] 2 S.C.R. 161, at para. 46), the Supreme Court of Canada in McKinley rejected the absolute and unconditional approach that allowed an employer to dismiss an employee for a single dishonest act, however negligible, and adopted an approach based on the principle of proportionality, which Iacobucci J. described at paragraph 57 of his reasons as follows:

57            . . . I favour an analytical framework that examines each case on its own particular facts and circumstances, and considers the nature and seriousness of the dishonesty in order to assess whether it is reconcilable with sustaining the employment relationship. Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal. At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.

[12]           The Court thus rejected the absolute and unconditional approach as a general rule to ensure that dishonesty does not entail the same consequences “irrespective of whether the impugned behaviour was sufficiently egregious to violate or undermine the obligations and faith inherent to the employment relationship” (at para. 55). So as to avoid “results that are both unreasonable and unjust”, it required “an analysis of the surrounding circumstances of the alleged misconduct, its level of seriousness and the extent to which it impacted upon the employment relationship” (at para. 56).

THE FACTS

[13]           At the time of her dismissal, the respondent, who had 25 years’ continuous service with the Band, was a managerial employee who, since 1986, had managed the finance and administration section, consisting of nine employees. This section was the most important in the Band and it was the one controlling income and expenditures. All Band monies passed through it (a.b. vol. 1, at p. 61). The branch director, here the respondent, had the primary duty of managing [translation] “the establishment and evaluation of the inventory, finance and general administration services to adequately meet the requirements of Band administration” (ibid., at p. 65). It sent periodic balance sheets to each sector and monitored their budgets. It took part in the preparation of annual budgets (ibid., at p. 73), which were on the order of some $34,000,000 (ibid., at p. 59). According to the Band chief, the respondent was the person with the greatest influence on the Council. It was she who signed all cheques, but she always had to have them counter-signed (ibid., at p. 84). She was authorized by the Council to sign requisitions, purchase orders, over-the-counter withdrawals and bank transfers.

[14]           The respondent’s salary was the second largest of all the salaries paid by the Band, $79,986, to which should be added indemnities amounting to $10,000 (ibid., at p. 103). Her contract provided that she could be dismissed without compensation in the event of serious fault.

[15]           On August 24, 1998, Chief Elie-Jacques Jourdain, whom the respondent supported, was defeated in a general election. Chief Rosario Pinette and his team of nine councillors succeeded him. A period of unrest and grumbling followed in the community, which culminated in December 1998 when a general meeting demanded a public inquiry relating to the preceding administration. The new Council then consulted lawyers as to how such an inquiry should be conducted, after which it hired a firm of auditors, investigators and experts to fine-tooth-comb the documents, records and books of the Jourdain administration (a.b. vol. 3, at p. 468).

[16]           The inquiry was conducted between June and September 1999. Progress reports were sent to the Council, which led the latter to suspend the respondent with pay on July 10, 1999, in particular because of problems relating to the signature of certain contracts and double invoicing (a.b. vol. 3, at p. 470). Eventually, on September 27, 1999, after receiving further progress reports, the Council dismissed the respondent as follows:

[translation]

As you know, since last December the Band Council has been conducting an inquiry into the administration and management of its affairs.

As a result of disturbing and troubling information concerning inter alia certain matters for which you were responsible and actions taken by you, you were suspended with pay on July 10 last so the ongoing inquiry could proceed.

The part of the inquiry regarding you was concerned in particular, but not exclusively, with the unauthorized and backdated signature, unknown to the Council, of a number of contracts of employment (including your own) the day after or in the next few days following the elections of August 24, 1998.

More specifically, the Council has now determined, and obtained evidence to this effect, that you came to the premises of the Board on August 25, 1998, the day the chief was on leave, to take draft contracts out of the computer and quickly have them signed by the persons concerned, including yourself, being careful to indicate an earlier date.

Although the inquiry is proceeding as to other disturbing and troubling actions involving your conduct in the position of trust which you have held for over 25 years with this Council, these acts as such constitute extremely serious and unacceptable conduct, even fraudulent manoeuvers, with respect to your employer.

In view of the facts set out above, the importance of the position which you have held, the duties entrusted to you and the seriousness of the wrongful acts committed, the Council has no alternative but to conclude that you have seriously failed to abide by your duties of honesty, thereby irreparably damaging the relationship of trust which is essential to the continuance of your employment relationship.

In view of the foregoing, Innu-Takuaikan Uashat mak Mani-Utenam has resolved to dismiss you as of this date (a.b. vol. 1, at p. 58).

[17]           The inquiry report was completed on January 22, 2000. The report blamed the section headed by the respondent in 13 respects:

- a lack of control in requisitioning certain cheques;

- some invoices were paid twice;

- adjusting entries;

- the management of the complainant’s expense and petty cash accounts;

- missing invoices;

- payments on submission;

- advances to supplier;

- overpayments in the Innu L’Autobus contract;

- payment of tax-free salaries to administrative employees;

- defying the authority of the complainant;

- privileges, passes and exchanges of favours;

- signature of administrative employee contracts;

- cheque No. 61490 in the amount of $9,880.

(a.b. vol. 3, at p. 414).

[18]           The adjudicator’s decision was given on November 30, 2001 after 24 days of hearing (a.b. vol. 6, at p. 57). It fills 450 pages.

THE ADJUDICATOR’S DECISION

[19]           The adjudicator painstakingly analysed each of the blames made against the respondent or her section. He found that the first 11 were unfounded, but that the last two were justified; they related to the backdated signature of administrative employee contracts (already mentioned in the letter of dismissal), and to the issuance of a cheque for $9,880 to the respondent.

[20]           First, as regards the cheque for $9,880, the adjudicator undertook from pages 482 to 492 (a.b. vol. 3) to unravel complex and disjointed evidence showing that the cheque in question was actually intended for one Jenny Rock; that its purpose was to allow the latter, a student, to open a travel agency, allegedly as part of an authorized program; and that the money received by the respondent herself in rather suspicious circumstances was handed over in cash by her to Jenny Rock in seven unequal payments from December 5, 1996 to January 31, 1997.

[21]           The adjudicator came to the following conclusion:

[translation]

The Jenny Rock project episode is not clear: did she really intend to open a travel agency and what degree of seriousness should be attached to this undertaking, to this project?

Bernadette Michel’s note on the fact that “the complainant always says yes to Jenny Rock” leads us to conclude that the complainant wished to help Jenny Rock but, to do this, she deliberately shut her eyes, she did not act as a sound, competent administrator when she paid out money in the light of the circumstances that were known.

Although the complainant’s explanation may seem lacking in credibility in another context, in this matter things must be viewed in their context and in a situation where the administration was evolving at the time, a period when controls were not very effective and in some cases completely non-existent.

After hearing the evidence, we must conclude that the complainant gave Jenny Rock the money.

The complainant acted in an unacceptable way, she paid out money belonging to the employer without authorization under the guise of programs she was managing at the time, but which did not pertain to Jenny Rock.

The project, as set up by Jenny Rock, was not a serious one and no consciencious administrator would have agreed to spend this money in the absence of supporting documentation, for a project that, in view of the circumstances and Jenny Rock’s experience, was so vague and impractical.

Without authority or right to do so, the complainant disposed of a sum of $9,880 belonging to her employer which will never be recovered by the latter, and in so doing the complainant committed a most serious fault, necessarily affecting the relationship of trust between her and her employer (a.b. vol. 3, at pp. 491-492).

[22]           Then, from pages 479 to 482, he discussed the execution of administrative employee contracts, which was done after the date of the election and unbeknownst to the new Council, and he came to the conclusion that, although it was not possible, on account of the contradictory evidence to determine with certainty the date of execution or the events that occurred, [translation] “one thing is certain: contracts were executed after June 1999 even though a June date was staked bearing a date ” (a.b. vol. 3, at p. 480). He thus said that, in his opinion, this blame was justified:

[translation]

This operation of having contracts signed was not conducted with the propriety and openness which an employer is entitled to expect from senior management, such as

the complainant, on a matter which was so important and which had significant financial implications for the employer . . .

There are many contradictions in the testimony of the director general, the complainant and the signatories of the contract.

We have to put ourselves in the employer’s position and assess this matter, this episode of the signing of the contract. Judging from the events indicated by the evidence, it was right to doubt – to lose confidence – in the interveners in general and the complainant in particular.

The employer was right to regard the complainant’s performance in this matter as inadequate . . .

No employer can tolerate and accept situations in which it cannot with certainty distinguish the true role of employees in a particular situation, and this will have a clear effect on the relationship of trust.

In the administration of this matter, the complainant did not act according to accepted practice and also did not behave with sufficient propriety, nor did she show all the loyalty the employer could expect from her in administering this matter. The employer was justified in blaming the complainant for this conduct (a.b. vol. 3, at pp. 480, 481).

[23]           These findings to the effect that bank accounts had been manipulated and employment contracts antedated are findings of fact which are supported by the evidence and do not give rise to judicial review. It is true, as the respondent noted, that the adjudicator did not formally characterize her conduct as fraudulent or dishonest, but the language he used is still revealing: unacceptable behaviour, spending the employer’s monies without authorization, under the guise of certain programs, acting without authority or right, absence of propriety, lack of loyalty . . . in short, all elements which led the adjudicator to conclude that serious faults had been committed that should be sanctioned.

[24]           The respondent argued that the sum of $9,880 which she diverted is only a drop in the bucket in an annual budget of some $34 million. That may be so, although we do not know what

part of the budget was allocated to the administration of current affairs. However, it was not so much the amount which drew the adjudicator’s attention as the way in which the respondent manipulated the Band’s bank account, and he found this was unacceptable behaviour on the part of a director of a financial section.

[25]           The respondent further pointed to the fact that there was no specific conclusion drawn regarding forgery of the employment contract of the respondent herself. This is not really relevant at the second stage. Here again, it is the very fact that employee contracts were forged which led the adjudicator to conclude that there had been serious misconduct.

[26]           Finally, the respondent argued that the adjudicator stopped at the second stage and did not ascertain whether the measure – dismissal without compensation – was disproportionate in view of all the circumstances, including the respondent’s 25 years of employment, the summary nature of the controls traditionally applied by the Band, the fact that only two of the 13 blames mentioned in the inquiry report were proved and the fact that only the respondent was dismissed by the new Council.

[27]           On this point, I agree with the respondent. The adjudicator went through the third stage somewhat too rapidly, if he went through it at all, and I am not persuaded that he properly understood his function when he concluded as follows, in three short paragraphs:

[translation]

The adjudicator’s function under Part III of the Canada Labour Code is to determine whether the complainant was unjustly dismissed. To do this, it must be determined whether the employer had grounds for proceeding with dismissal and whether those grounds warranted dismissal.

Once the employer has established sufficient grounds for relying on a breach of the relationship of trust, its reaction – the selection of the appropriate penalty – is for it to decide. A judgment of the Supreme Court in this area has held:

“The sole issue in this case was whether the three employees left their jobs to work for someone else and whether this fact was a proper cause for discipline. Once the board had found that there were facts justifying discipline, the particular form chosen was not subject to review on arbitration.”

The adjudicator cannot intervene in this matter. The relationship of trust between the employer and employee is the basis of the employment contract concluded between the two parties (a.b. vol. 3, at p. 506).

[28]           In my opinion, the adjudicator made two errors of law when he said that [translation] “Once the employer has established sufficient grounds for relying on a breach of the relationship of trust, its reaction – the selection of the appropriate penalty – is for it to decide”.

[29]           He confused the fault committed, which warranted a penalty (the first and second stages), with the breach of the relationship of trust, which may justify the nature of the penalty applied (the third stage).

[30]           In particular, he relied – and this is what has sown the confusion to which I have just referred – on an old decision of the Supreme Court of Canada, Port Arthur Shipbuilding Company v. Arthurs, [1969] S.C.R. 85, which is obsolete. The Supreme Court itself narrowed the scope of that case in Heustis v. New Brunswick Electric Power Commission, [1972] 2 S.C.R. 768, and it is at variance with Toronto Board of Education. Moreover, in 1978, the Supreme Court stated in Newfoundland Assn. of Public Employees v. Newfoundland (Attorney General), [1978] 1 S.C.R. 524, that it was prepared to revisit Port Arthur Shipbuilding. (See also Dairy Producers Co-Operative Ltd. v. Lyons, [1982] 1 S.C.R. 338, and Alberta Union of Provincial Employees v. Lethbridge Community College, [2004] 1 S.C.R. 727.) In my opinion, it is significant that, in McKinley, at paragraph 32, the Supreme Court cited with approval the reasons of Laskin J.A. of the Ontario Court of Appeal, as he then was, whose decision was reversed by the Supreme Court in Port Arthur Shipbuilding, and that the Canada Labour Relations Board did likewise in Wm Scott (supra, at p. 3).

[31]           The adjudicator misdirected himself in law, and since it is not possible for this Court even to know whether he raised the right question, I can only hold that the matter should be referred back to him for him to decide, based on all the circumstances and applying the relevant principles, whether dismissal without compensation was an appropriate measure. In all fairness to the parties, I feel the adjudicator should give them an opportunity to present their views on this point, in writing or orally, based on the record as it stands.

[32]           I would allow the appeal in part, reverse the judgment of the Federal Court and, making the decision which should have been made, I would allow the application for judicial review to quash the adjudicator’s decision in part and refer the matter back to him, so that he can proceed to the third stage of the procedure set out in paragraph 49 of Toronto (City) Board of Education v. O.S.S.T.F., District 15, [1997] 1 S.C.R. 487, should he come to the conclusion that, in the circumstances, dismissal without compensation was not an appropriate measure, so that he can determine what that measure should be.

[33]           I would award the respondent her costs in the Federal Court and in this Court.

I concur.

Gilles Létourneau J.A.

I concur.

Marc Noël J.A.

Certified true translation

François Brunet, LLB, BCL

                                                  FEDERAL COURT OF APPEAL

                                                      SOLICITORS OF RECORD

DOCKET:                                                         A-402-03

STYLE OF CAUSE:                                          UASHAT MAK MANI-UTENAM BAND COUNCIL v. SOLANGE FONTAINE

PLACE OF HEARING:                                   Québec, Quebec

DATE OF HEARING:                                     October 19, 2005

REASONS FOR JUDGMENT BY:                Décary J.A.

CONCURRED IN BY:                                     Létourneau J.A.

Noël J.A.

DATE OF REASONS:                                     October 31, 2005

APPEARANCES:

Jean-François Bertrand                                        FOR THE APPELLANT

Gilles Grenier                                                       FOR THE RESPONDENT

SOLICITORS OF RECORD:

Bertrand, Poulin                                                   FOR THE APPELLANT

Sainte-Foy, Quebec

Joli-Coeur, Lacasse                                             FOR THE RESPONDENT

Québec, Quebec