West Bay SonShip Yachts Ltd. (Re) 2009 BCCA 31

On this appeal, Mr. Esaw, a long term employee of West Bay, had commenced a claim for wrongful dismissal upon his termination from the company shortly after West Bay obtained protection under the Companies Creditors Arrangements Act (“CCAA“). Mr. Esaw did not file a proof of claim and took the position that his claim for wrongful dismissal ought not to be compromised by the plan of arrangement. Mr. Esaw’s reasoning was that the claim for damages for breach of his employment contract did not accrue during the course of his employment but only arose when he was terminated. Therefore, West Bay had no liability, contingent or otherwise, until the termination of employment which occurred after West Bay sought protection under the CCAA. Thus, the claim for damages could not be compromised by the plan.

West Bay argued that, while the right to bring the claim for wrongful dismissal may not have crystallized until notice of termination was given, the company’s obligation to pay severance was in existence, either in whole or in part, as of the filing date for protection under the CCAA. Thus, the claim is a “pre-filing” claim and is compromised by the plan.

The Court of Appeal determined that, while the claim was not a pre-filing claim, it was nonetheless captured by the plan of arrangement. The ongoing employment contract was an executory contract as there were obligations on both parties that were yet to be completed. Accordingly, the claims for damages for breach of the executory contract fell within the definition of “claim” in the plan and Mr. Esaw’s claim was subject to the plan of arrangement. Accordingly, Mr. Esaw’s wilful failure to file a proof of claim disentitled him to participate under the plan of arrangement.