Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether Bruce Kirke was entitled to damages for loss of Shareholder Profit Sharing (SHPS) payments during a 20-month reasonable notice period following termination.

• The SHPS payments were deemed part of Kirke’s compensation, but limited by contractual terms in the Unanimous Shareholder Agreement (USA).

• Section 2.6 of the USA was found to unambiguously permit Spartan Controls to repurchase employee shares at any time with 90 days' notice, limiting compensation for SHPS payments to that period.

• The summary trial judge rejected Spartan’s argument that SHPS payments were merely shareholder returns unrelated to employment.

• Kirke’s claim of bad faith and oppression was dismissed due to consistent company practice and lack of abusive or unfair conduct.

• Both Kirke’s appeal and Spartan’s cross-appeal were dismissed, affirming that SHPS compensation was limited to 90 days post-termination.

Background and employment termination

Bruce Walter Kirke was employed by Spartan Controls Ltd. from November 1997 until April 2022. On April 4, 2022, Spartan terminated his employment and informed him that his position as Manager, Projects & Solutions Services was being eliminated. The summary trial judge found the appropriate reasonable notice period to be 20 months, and this was not disputed by either party.

Participation in the SHPS program

Spartan offered a Shareholder Profit Sharing (SHPS) program to permanent employees after three years of service. Participation required purchasing shares in Spartan’s parent company, Spartech 1991 Limited. Kirke joined the program in 2000 and ultimately acquired 73,600 shares. The SHPS payments were made annually or semi-annually depending on company profitability and could be paid as employment income or a mix of employment and dividend income. The terms were governed by a Unanimous Shareholder Agreement (USA), which included provisions for mandatory share repurchase:

• Section 2.4: Allowed the company to repurchase all shares upon termination, with 90 days' notice.

• Section 2.6: Allowed Spartan to require share repurchase from a shareholder at any time, with 90 days' written notice, obligating the shareholder to sell.

Upon his termination, Spartan invoked section 2.6 of the USA in the termination letter dated April 4, 2022, requiring Kirke to sell all his Spartech shares back to the company. He was paid the 2022 share price, without prejudice to his claim for SHPS payments during the reasonable notice period.

Summary trial decision and analysis of contractual clauses

Kirke argued that the SHPS payments were part of his compensation and should be included in damages. The trial judge applied the Supreme Court’s test from Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26: whether the benefit would have been received during the notice period and whether the contract unambiguously removed that right.

The judge held that the SHPS program was part of Kirke’s employment compensation. Section 2.4 was found ambiguous because “termination” could refer to the end of the reasonable notice period. However, section 2.6 was clear and allowed the company to repurchase shares anytime with 90 days' notice, thus limiting damages to that timeframe. Relying on Hamilton v Open Window Bakery Ltd., 2004 SCC 9, the judge determined the least burdensome contractual method limited SHPS-related damages to 90 days.

Appeal and cross-appeal

Kirke appealed on three grounds:

• Section 2.6 did not clearly limit his entitlement to damages;

• Spartan acted oppressively and in bad faith by triggering share buyback;

• Hamilton principle was misapplied.

Spartan cross-appealed, arguing that SHPS payments were not part of employment compensation. During the hearing, Spartan conceded that the SHPS program and USA were part of Kirke’s employment terms. The Court of Appeal upheld the trial judge’s finding that the SHPS was employment-related.

Oppression and good faith arguments

Kirke’s claim of oppression and bad faith was rejected. The Court noted the consistent application of share buybacks upon termination and found no evidence Spartan acted in bad faith or contrary to Kirke’s reasonable expectations. Referencing BCE Inc v 1976 Debentureholders, 2008 SCC 69, the Court stressed that actual stakeholder expectations are not determinative—objective context matters more.

The argument that Spartan had to trigger section 2.6 before the notice period started was also dismissed. The Court found no evidence that Spartan’s actions violated employment law or constituted constructive dismissal under the test in Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10.

Decision

The Alberta Court of Appeal dismissed both the appeal and the cross-appeal. It confirmed that the trial judge made no palpable and overriding error. Damages were correctly limited to 90 days of SHPS payments in accordance with section 2.6 of the USA. The Court affirmed that where contractual terms are unambiguous, they govern, and that equity should not override clearly agreed terms.

Disposition

The appeal and cross-appeal were both dismissed on February 7, 2025, by Justices Watson, Kirker, and Grosse. The appeal was heard on November 5, 2024.