By: Chris D. Drinovz

‍

In the recent decision of Vassilakaki v Vassilaki & Sons Investments, 2026 BCSC 474, an 80-year-old employee’s wrongful dismissal case went horribly wrong for him.

‍

The Facts

John Vassilakaki was a director, officer, and long-time employee of Vassilaki & Sons Investments Ltd. (VSI), a family company which operated the Last Call Liquor Mart and other businesses in the Okanagan. This wrongful dismissal case followed numerous other lawsuits amongst the feuding family, including a shareholder oppression claim brought by John Vassilakaki (which was dismissed with special costs, then appealed and upheld except the costs award) and an assault claim where John was found liable for $14,000 for battery against his brother Nick.  

‍

The subject of this case was Mr. Vassilakaki’s employment. Over many years, Mr. Vassilakaki had used company funds for personal expenses, including personal income taxes and legal fees, increased his own compensation, paid himself bonuses, and authorized payments to his wife, son, and daughter-in-law without board approval or informing the company's other director, his brother Nick. Notably, Mr. Vassilakaki did not work for VSI continuously, including periods of time when he was a Councilor and then Mayor of Penticton, and when he was appointed as a director of the Regional District of Okanagan-Similkameen.  

‍

Although Nick warned him in August 2020 that future pay increases, bonuses, and personal use of company funds required board approval, Mr. Vassilakaki continued the conduct.

‍

After discovering additional questionable payments in 2023, VSI retained an independent workplace investigator. The investigation report dated July 2023 revealed serious misconduct much of which Mr. Vassilakaki admitted. Also during his interview, Mr. Vassilakaki displayed serious insolence towards his brother Nick and other family members.

‍

Following the investigation, and after hiring a replacement manager for the liquor store, VSI terminated Mr. Vassilakaki's employment for just cause in October 2023. The hiring process took some time as VSI used several recruiters, and the process occurred during a summer with bad forest fires.  

‍

Mr. Vassilakaki sued for wrongful dismissal and VSI counterclaimed for breach of fiduciary duty. Interestingly, the case proceeded as a “summary trial” based on affidavits only and not live testimony, which is rare for cases involving just cause and misappropriation; however in this case many of the underlying facts had been agreed between the parties in advance of the hearing.

‍

The Court's Decision

During the second day of trial, Mr. Vassilakaki admitted that his conduct constituted just cause for dismissal. His principal argument instead was that VSI had condoned his misconduct by delaying his dismissal after discovering the misconduct and by conducting what he characterized as an unnecessary investigation.

‍

The Court rejected this argument and held that:

• the workplace investigation was reasonable and necessary, particularly because other litigation between the parties was already underway (including shareholder oppression);
  ‍
• VSI was entitled to fully investigate the allegations before making a termination decision;
  ‍
• the time taken to recruit a replacement manager before dismissing Mr. Vassilakaki was also reasonable; and
  ‍
• there was no evidence that VSI had forgiven or accepted the misconduct.

‍

‍

Having found no condonation, the Court concluded that VSI had just cause to terminate the employment:

‍

[90]      In the case at bar, the plaintiff acknowledged his misconduct was worthy of dismissal. The misconduct involved causing VSI to pay excessive salaries to the plaintiff and to members of his family, payment of salaries for employees while on vacation where such holiday pay had already been paid regularly with pay cheques on a monthly basis, paying three sets of management salaries which were demonstrably unnecessary given the size of the business of VSI, and causing VSI to give him interest-free loans and pay personal expenses for additions to the plaintiff’s personal stamp collection, household insurance and payments of personal income tax in the amount of $20,000. All of this was coupled with intransigent insolence that no doubt was so egregious that it rendered the continuation of the employment relationship impossible.

…

[93]      It is clear that the plaintiff’s behaviour was seriously incompatible with his duties as the manager of the Liquor Store, and that the employment relationship could not viably persist after the workplace investigation concluded and its results were made known to VSI and its board. Accordingly, the plaintiff’s claim for wrongful dismissal is dismissed.

‍

Accordingly, the wrongful dismissal claim was dismissed.

‍

Fiduciary Duty and Counterclaim Damages

The Court then addressed VSI's claim against Mr. Vassilakaki for funds he had improperly obtained during his employment and while serving as a director. The Court found that he had deliberately concealed the diversion of company funds and had breached his fiduciary duties to VSI.

‍

Relying on an expert economic report that the plaintiff did not contest, the Court awarded VSI an extraordinary $814,681.99 in damages, representing diverted company funds, excessive wages and unauthorized compensation, and unpaid loans owed to the company.

‍

Punitive Damages

The issues of costs and punitive damages were left to be determined in a second hearing. This hearing with reasons reported at 2026 BCSC 1059 occurred in front of a different judge because the original judge (Justice Ball) had retired.

‍

The Court acknowledged that punitive damages are an exceptional remedy. They are awarded where conduct is malicious, oppressive and high-handed such that it offends the Court’s sense of decency, and where compensatory damages are insufficient to achieve the objectives of retribution, deterrence and denunciation. The Court found that Mr. Vassilakaki’s conduct was exceptionally serious and met this high threshold including because he had:

‍

• Deliberately diverted company funds for personal benefit;
• Breached his fiduciary duties as a corporate officer;
• Falsified or allowed falsification of payroll records;
• Attempted to conceal the misconduct; and
• Continued the misconduct despite being warned by the company's board.

‍

Although Mr. Vassilakaki argued he had already suffered significant consequences - including having to pay significant damages and legal costs from all of his lost cases, losing his job, reputation, and political career - the Court concluded that additional punishment was necessary to denounce and deter this type of misconduct. Accordingly, it awarded an astounding $100,000 in punitive damages.

‍

Special Costs

The award for punitive damages was not the end of the matter. The Court also criticized the plaintiff's conduct during the litigation, including that fact that Mr. Vassilakaki i) continued pursuing a wrongful dismissal claim even though he knew it lacked merit; ii) had already admitted the misconduct that justified his dismissal; and iii) abandoned key parts of his claim only during the second day of trial.

‍

Because of this, the Court ordered special costs (100% of legal fees) for the portion of the trial devoted to defending the meritless wrongful dismissal claim, but not for VSI's successful counterclaim. This resulted in a costs award equal to 1/3 of VSI’s trial costs, with the remainder recoverable under the normal “Scale B” costs.

‍

As the cherry on top, the Court awarded VSI statutory pre-judgment interest of $137,067.43.

‍

Key Takeaways

‍

• An employer is not required to terminate an employee immediately upon discovering misconduct. A reasonable investigation and practical considerations, such as arranging business continuity, do not necessarily amount to condonation.
  ‍
• Condonation requires evidence that the employer knowingly forgave or accepted the misconduct. Mere delay, without more, is generally insufficient.
  ‍
• Employees who are also corporate directors owe fiduciary duties to the corporation. Unauthorized self-dealing, diversion of corporate assets, and concealment of such conduct can result in substantial personal liability in addition to dismissal for cause.
  ‍
• Admissions by an employee that their conduct constitutes just cause can significantly narrow the issues at trial, leaving the court to focus on defences such as condonation rather than whether the misconduct itself justified dismissal.
  ‍
• Employees who bring frivolous claims where they have already admitted serious misconduct may be subject to serious consequences, including punitive damages and/or special costs.

‍

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

‍