Home Employment Contracts Fresh consideration and legal costs: Court of Appeal finds second contract valid in case against PearTree Securities

Fresh consideration and legal costs: Court of Appeal finds second contract valid in case against PearTree Securities

by HR Law Canada

The Court of Appeal for Ontario has upheld the decision of the Superior Court in the case of Giacomodonato v. PearTree Securities Inc., ruling there was fresh consideration in a second employment contract signed by the plaintiff.

D.G., a prominent investment banker in the mining sector, was recruited by PearTree to serve as president and co-head of banking in early 2016.

After agreeing to an initial employment contract in April 2016, a second contract was negotiated and finalized in July 2016. PearTree terminated D.G.’s employment without cause in January 2018.

The Superior Court found that he had been wrongfully dismissed and awarded him compensatory and punitive damages totaling $671,765, along with partial indemnity costs of $830,761.75. D.G. appealed the damages award, arguing that the calculation should be based on the first contract. PearTree cross-appealed, seeking to vary the massive costs award.

Court of Appeal’s decision

The Court of Appeal dismissed D.G.’s appeal, agreeing with the trial judge that the second contract was valid and enforceable.

The court found that there was fresh consideration for the second contract, including a $40,000 payment to cover costs associated with severing his previous employment contract and an additional two weeks of paid vacation.

“His reasoning was premised primarily on the fact that the parties referenced this payment in discussing the second contract,” the Court of Appeal said. “In any event, the trial judge found that the additional vacation entitlement by itself constituted fresh and non de minimis consideration.”

Costs award upheld

The court also dismissed PearTree’s cross-appeal, upholding the trial judge’s discretion in the costs award. PearTree’s conduct during the litigation, described as “unforgiving, scorched earth, and bare-knuckle,” significantly influenced the costs decision. The trial judge’s findings that PearTree unnecessarily increased litigation costs and failed to comply with discovery obligations further justified the partial indemnity costs award.

It called the employer’s grounds for appealing the costs award “not strong.”

“The trial judge did not err in finding that there was fresh consideration for the second contract,” the Court of Appeal said. It emphasized that fresh consideration beyond continued employment is essential for contract amendments, aligning with established precedents such as Techform Products Ltd. v. Wolda and Hobbs v. TDI Canada Ltd.

It noted that the trial judge made “many findings unfavourable to PearTree.”

“He found that PearTree unnecessarily increased the costs of the proceeding, that it did not comply with its discovery obligations in a timely way, and that its counterclaim, including its claim for punitive damages, was ‘obviously meritless,'” it said.

D.G.’s appeal was dismissed with $30,000 in all-inclusive costs awarded to PearTree. PearTree’s motion for leave to appeal was dismissed, with $15,000 in all-inclusive costs awarded to D.G.

Lessons from this case

This ruling underscores several key lessons for employers and HR professionals:

  1. Contractual Amendments Require Fresh Consideration: Employers must provide something new and beneficial to employees when amending contracts. Continued employment alone is insufficient.
  2. Precision in Settlement Offers: Settlement offers must be clear and precise to attract cost consequences. All-inclusive offers lacking specificity may not meet the requirements of a valid settlement offer under r. 49.
  3. Conduct During Litigation Matters: Employers should avoid aggressive litigation strategies that can increase costs and negatively impact judicial decisions on costs awards.

For more information, see Giacomodonato v. PearTree Securities Inc., 2024 ONCA 437 (CanLII).

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