Botched attempt to negotiate bonus and treatment resulted in poisoned work environment

Vendors SP and C Ltd. sold S Ltd. and SGB Inc. to purchaser numbered company, which was subsidiary of J Inc., pursuant to share purchase agreement (SPA). SPA included salespeople NM and MS as designated producers as key employees of S Ltd., and provided that S Ltd.'s targeted revenue goal would be reduced if they were terminated without cause or constructively dismissed. J Inc. attempted to renegotiate salespeople's compensation agreement, so salespeople resigned. C Ltd. brought derivative action in name of S Ltd. for breach of fiduciary duties relating to failure to protect C Ltd.’s interests in S Ltd. as shareholder, and brought second action alleging breach of SPA and oppression, alleging constructive dismissal of salespeople. Actions allowed in part. Salespeople were constructively dismissed and C Ltd. was entitled to remedy in s. 3.5.6 of SPA. There was no overall intent by J Inc. to act in bad faith. J Inc.'s requirement that NM renegotiate settled employment agreement that was provided for in SPA constituted constructive dismissal. NM did not resign to pursue better deal, as it was J Inc. that approached NM, and he did not steal business simply because his clients followed him. J Inc. attempted to unilaterally change NM's remuneration which likely would have resulted in decrease in compensation. Botched attempt to negotiate NM's bonus and treatment of SP resulted in poisoned work environment. Treatment of MS also constituted constructive dismissal for similar reasons as for NM. MS had right to resign since he reasonably saw changes as repudiation of his existing agreement.

Crescent (1952) Limited v. Safety Insurance (1959) Limited (2019), 2019 CarswellOnt 7177, 2019 ONSC 931, McEwen J. (Ont. S.C.J.).

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