The former chief financial officer (CFO) for the City of Nanaimo, fired in part for using a city credit card repeatedly for significant personal expenses, has lost his wrongful dismissal case because it was filed outside the limitation period.
But the British Columbia Supreme Court ruled his other claims for intentional infliction of mental suffering, and allegations regarding breach of the duty of good faith and honest performance, could proceed to trial.
Background
The worker, VM, began working for the city in 2015 as its director of financial services. He signed an employment contract subject to the city’s management terms and conditions of employment bylaw and officers appointment and delegation bylaw.
VM was issued a credit card, known as a “P Card,” to be used for legitimate city-related expenses. The cardholder agreement, which he signed, said that “under no circumstances will I use the BMO MasterCard to make personal purchases, either for myself or for others.”
“Using the card for personal charges could be considered misappropriation of City funds and could result in corrective action up to and including termination of employment.”
Personal charges on city card
In 2016, before he became the CFO, VM started using the credit card for personal expenses, totaling around $14,200 — including about $1,300 incurred while on vacation in Cancun, Mexico.
In February 2018, a forensic investigation by the city’s auditors revealed that VM’s use of the credit card far exceeded that of other employees.
VM argued the agreement he signed did not absolutely preclude use of the card for personal expenses, and there was no policy or practice requiring personal purchase charges to be immediately repaid to the city.
Further, he said accounting staff didn’t follow-up with him regarding the personal charges, except as to repayment; nobody told him to stop using it for personal expenses; and no one told him the practice was wrong or contrary to the practice he “understood was in play.”
“It is to be remembered that such comments are made in the context that the plaintiff was, at the time, the CFO for the City of Nanaimo and therefore one of the highest-ranking persons in the City regarding decisions, directions, accountability and propriety in the use of City funds which were raised largely, if not exclusively, from the taxpayers of Nanaimo,” the court said.
“The accounting staff also presumably reported to the plaintiff and were under his authority while he was in this role,” it noted.
Repayment cheque bounced
In December 2016, VM issued a reimbursement cheque for some of the expenses incurred to that date. But it bounced, and was returned due to insufficient funds in January 2017.
By mid-February 2017, VM und unilaterally established an arrangement to repay his outstanding personal expenses at the rate of $500 per pay period.
Even after that point, VM continued to incur personal charges on the P card, including the above-noted charge in Cancun.
KPMG audit
On Oct. 11, 2017, the CAO wrote to VM and temporarily suspended his use of the city credit card. A February 2018 audit, conducted by KPMG, found that:
- there was a written policy that P cards were not to be used for personal expenses
- that policy had been modified, in practice but not writing, to allow for personal expenses to be identified as such and repaid in a timely manner
- VM was one of two “outliers” who used the P card for personal expenses more frequently and for higher amounts
- VM’s charges were outstanding for extended periods of time and one of his fairly major reimbursement cheques bounced
- VM unilaterally established the repayment regime of $500 per pay.
Two days later, a senior accountant with the city filed a Report of Serious Misconduct with HR regarding VM’s actions.
That complaint was placed before city council, dealt with in-camera, and resulted in a decision to suspend VM with pay pending receipt of a further auditor’s report and to turn the complaint and allegations of serious misconduct over to police.
VM was notified of this decision by letter on March 1, 2018. As of April 2018, all bust $690.17 of his personal expense charges had been repaid.
Termination
On April 23, 2018, VM was told council would be meeting to consider termination of his employment. He requested full disclosure for that meeting, which took place on May 11, 2018. He attended with counsel and provided submissions.
On May 14, 2018, he was notified of council’s decision to terminate his employment with cause. The court also noted that VM had been the subject of some local news reporting, as the KPMG report had found its way into the hands of the media.
In May 2021, VM filed a notice of civil claim against the City of Nanaimo, seeking damages for breach of contract, breach of good faith and honest performance, intentional infliction of mental suffering, and wrongful dismissal.
Ruling
The city applied for summary judgment, asserting that some of VM’s claims were filed beyond the statute of limitations.
The court agreed with the City’s position and dismissed the claims related to wrongful dismissal, as they fell under the six-month limitation period for claims against municipalities in British Columbia.
However, the court ruled that the claims of intentional infliction of mental suffering and breach of the duty of good faith and honest performance were not subject to the six-month limitation period and could proceed to trial.
It also noted that the city had been “substantially successful” on this application and awarded it costs on Scale B.
For more information, see Mema v Nanaimo (City), 2023 BCSC 1189 (CanLII)
