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Damages - Contingent. YG Limited Partnership and YSL Residences Inc. (Re) [contingent claim]
In YG Limited Partnership and YSL Residences Inc. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from an earlier appeal which reversed "the Trustee’s decision disallowing [the respondent employee's] profit-sharing claim"."
Here the court considers whether an employee's profit-sharing involvency claim is a 'contingent claim', and thus not allowable as a 'claim provable' in bankruptcy [BIA s.2 'claims provable in bankruptcy', s.135 'Admission and Disallowance of Proofs of Claim and Proofs of Security']:Issue 2: The appeal judge did not err in finding that the profit-share claim is not a contingent claim and that it is not too remote and speculative
(a) Introduction
[65] The Trustee submits that the appeal judge erred in finding that Ms. Athanasoulis’ profit-sharing claim is not a contingent claim and that it is not too remote and speculative. The Trustee points out that, given that the Cresford Group did not ultimately build the YSL project, there were no profits earned on it. Moreover, had any profits been earned, they would have first gone to the limited partners.
[66] I disagree with the Trustee’s position. The appeal judge correctly explained that, once Ms. Athanasoulis’ claim is characterized as a claim for breach of her employment contract, damages are to be assessed from the date of the breach. Her claim is therefore not a contingent claim, but rather a claim for unliquidated damages. Calculating damages may be difficult and may even lead to the conclusion that Ms. Athanasoulis is entitled to no damages, but this does not make her claim for breach of the profit-sharing agreement too remote and speculative as understood in the context of bankruptcy law and contract law.
(b) Relevant legal principles
[67] As noted above, s. 135(1.1) of the BIA requires a trustee to determine whether a contingent claim or unliquidated claim is provable and, if so, to value it.
[68] A contingent claim is a claim that may or may not ripen into a debt, depending on whether future events occur: Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 S.C.R. 150, at para. 36. If a contingent claim is too remote or speculative, it is not a provable claim and a trustee can disallow it: Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443, at para. 36.
[69] A contingent claim must be distinguished from an unliquidated claim. An unliquidated claim is a claim whose value cannot be ascertained by mere arithmetic: L.W. Houlden, G.B. Morawetz, and Janis Sarra, Bankruptcy and Insolvency Law of Canada, loose-leaf (2025-Rel 7), 4th ed (Toronto: Thomson Reuters, 2009) at §6:127.
[70] An unliquidated claim that is non-contingent is still subject to considerations of remoteness or speculation. In valuing an unliquidated claim, the trustee must apply the law of damages relevant to that claim. I address the principles applicable to this calculation further below.
(c) Analysis
(i) Ms. Athanasoulis’ claim is not a contingent claim
[71] On appeal, the Trustee renews the arguments made to the appeal judge that Ms. Athanasoulis’ claim is a contingent claim because it depended on the completion of the YSL project and distribution of profits to the limited partners and then to the Cresford Group.
[72] In making the argument that the profit-sharing claim is a contingent claim, the Trustee ignores the appeal judge’s determination that the profit-sharing claim is a claim for damages based on the breach of Ms. Athanasoulis’ employment contract. The claim is therefore not contingent on a future event, namely the construction of the YSL project and earning of profits; rather, the breach occurred in January 2020 when Ms. Athanasoulis accepted the repudiation of her employment agreement. As the appeal judge stated, as in any employment context, damages are generally to be calculated from the date of the breach:Until there was a breach, the Profit Sharing Agreement would remain in place and any claim for payment under that agreement might reasonably be considered to be contingent upon profits actually being earned (to be calculated based on revenues less expenses, where expenses would include any amounts payable to the LPs). It might have been open to Ms. Athanasoulis not to accept the repudiation of the Profit Sharing Agreement and let it continue even though she was no longer employed by YSL and wait to be paid in the normal course; but she clearly did the opposite, as evidenced by her civil claim for damages for breach of that agreement commenced in 2020.
As a matter of law, the accepted repudiation of the Profit Sharing Agreement converted a future right to receive actual profits if and when earned into a current right to receive damages for breach of contract. Once converted to a damages claim, the “normal course” that Ms. Athanasoulis would be paid once the profits had been earned, usually at the end of the project, no longer applied. Rather, the Profit Share Claim became an unliquidated claim for damages for breach of contract that would presumptively be assessed at the time of repudiation. [Emphasis added.] [73] I see no error in the appeal judge’s finding that Ms. Athanasoulis’ profit-sharing claim is not a contingent claim. It is consistent with the treatment of other wrongful dismissal claims in the context of a bankruptcy, including claims based on future events, such as the payment of a bonus or a share of profits: Noble v. Principal Consultants Ltd. (Bankrupt), 2000 ABCA 133, 187 D.L.R. (4th) 80, at para. 41; see also Bankruptcy and Insolvency Law of Canada, at §6:319. The fact that an employer became a bankrupt after the breach does not turn a valid wrongful dismissal claim into a contingent claim.
[74] The Trustee argues that this case is different from other employment cases because Ms. Athanasoulis’ entitlement to share in the profits of the YSL project depended on the project going ahead and being profitable, which did not occur. I disagree. Again, this argument misses the point that the claim arose on the date of the breach. At that point, as found by the arbitrator, Ms. Athanasoulis had an interest in the profit-sharing agreement. The breach of her employment contract means that she lost the opportunity to earn profits under the profit-sharing agreement. Although it may be difficult to quantify this lost opportunity, arguments about quantification do not transform this claim into a contingent claim.
[75] The Trustee relies on this court’s decision in Schnier v. Canada (Attorney General), 2016 ONCA 5, 128 O.R. (3d) 537, to support its argument that the profit-sharing claim is a contingent claim. I agree with the appeal judge that Schnier has no application to the circumstances of this case. In Schnier, this court accepted that an amount claimed by the federal government for outstanding income tax which was under appeal by the bankrupt constituted a non-provable contingent claim because it depended on a determination to be made by a third party, namely the Tax Court, at a later date. Unlike in Schnier, the determination of Ms. Athanasoulis’ profit-sharing claim does not depend on a future decision by a third party. Once her claim is properly viewed as a claim for breach of contract, it is evident that the breach has already occurred, and the only issue remaining is the quantification of damages.
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