Effective August 1, 2026, major changes to BC’s Business Practices and Consumer Protection Act introduced new requirements around consumer contracts, subscription renewals and unilateral changes to ongoing services.

For businesses selling online, running memberships, or offering subscription-based services, the changes could mean more than simply updating your terms and conditions.

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What you need to know:

1.More upfront disclosure: Key terms, renewal mechanics, cancellation rights and refund policies must be clearly communicated.

2.Stricter renewal rules: Certain longer-term automatic renewals will require advance written notice, or the renewal may be void.

3.Less flexibility to change the deal: Businesses will face tighter restrictions on unilateral changes to consumer agreements, particularly changes that increase consumer obligations or reduce consumer protections.

4.Your systems need to match your contracts: Checkout processes, billing systems, renewal notices and customer-service procedures may all need updating.

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The key takeaway here is that the BC government is putting more control in consumers’ hands, and more compliance responsibility on businesses.

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If you operate an e-commerce, digital service, subscription or membership business, now is the time to review your contracts and processes.

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When acquiring a business, due diligence is often described as the buyer’s best defense against hidden liabilities. It is a process designed to uncover risks, confirm ownership of assets, and ensure that the purchase price reflects the true value of the target enterprise. Yet, even the most rigorous due diligence can be undermined by statutory rules that create priorities invisible to standard searches. One such rule lies in British Columbia’s Commercial Liens Act (“CLA”), specifically, Section 20, which governs the priority of liens over other interests.

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This provision introduces two significant challenges for buyers:

1. Unperfected liens can outrank unperfected security interests, even if those security interests were created before the lien arose.
2. Unregistered liens perfected by possession outrank registered security interests, if the possession of the goods occurred before registration of the security interest, despite a lack of available methods for the secured party to identify whether perfection by possession has occurred.
3. Unregistered liens perfected by possession can defeat bona fide purchasers without notice, leaving buyers exposed even when they have acted diligently and in good faith by conducting registry searches.

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These rules create a unique risk profile for transactions involving tangible assets such as equipment, vehicles, or inventory.

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The Legal Landscape: Liens and Security Interests

To understand the problem, it is important to distinguish between liens and security interests. A commercial lien arises when a service provider such as a repair shop, storage facility, or transporter, performs work on goods and remains unpaid. Under the CLA, the lien attaches as soon as the services begin and can be perfected either by possession or by registration in the Personal Property Registry.

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By contrast, security interests under the Personal Property Security Act (“PPSA”) are typically consensual arrangements, such as general security agreements granted to lenders. PPSA rules generally reward early registration: the first to perfect usually wins. However, Section 20 of the CLA disrupts this logic by granting liens a super-priority status in certain circumstances.

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Section 20: A Statutory Trap for Buyers

Section 20 provides that a lien (whether perfected or unperfected) takes priority over a security interest that attached before the lien, unless the security interest is subsequently perfected prior to perfection of an initially unperfected lien. This means that a lender who acquired its security interest in tangible goods but experienced a minor delay in registration, during which the tangible goods were sent for repair in the ordinary course of business, can find its position subordinated to a lien in favour of the repairing service provider quite easily. For buyers, the implications are:

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1. Lender’s may require more due diligence prior to advancing funds to a buyer to facilitate their business acquisition, as confirmation that all service invoices in respect of vehicles, machinery, and equipment have been paid and no such assets are going for service at the time of closing may be required to ensure no initially unregistered liens exist that could take priority over their security interest.
2. A buyer who assumes that clearing PPSA registrations eliminates all encumbrances, such that they can receive goods unencumbered and in compliance with their lender’s requirements, may suddenly find that they are in breach of their obligations to their lender if a service provider commences services before the lender’s security interest is registered, despite the fact that services may have been commenced after the lender’s security interest attached.

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The second, and arguably more troubling, aspect of Section 20 is its treatment of liens perfected by possession. If a lienholder retains possession of goods, that lien has priority even against a bona fide purchaser for value without notice of the lien. In practical terms, if equipment is in a repair shop on closing day and the repair bill is unpaid, the buyer (and their lender) acquires the equipment and security interest, respectively, subject to that lien, even if the buyer had no knowledge that the lien existed.

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Why Due Diligence May Not Be Enough

Traditional due diligence measures, such as registry searches, site inspection, and review of financial statements, cannot fully mitigate these risks. Unperfected liens do not appear in the registry, and possessory liens may not be disclosed by the vendor, whether through oversight or omission. Even a physical inspection of the premises may fail to uncover equipment that is off-site for servicing or storage.

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Practical Strategies for Managing the Risk

While the statutory framework cannot be changed by contract, buyers can take steps to reduce exposure:

1. Expand Enquiries: Request a detailed list of all equipment, including its current location, and confirm whether any items are off-site for repair or storage.
2. Contractual Protections: Include strong representations and warranties regarding the absence of liens, coupled with indemnities for any losses arising from undisclosed liens or encumbrances.
3. Escrow or Holdbacks: Retain a portion of the purchase price to cover potential lien claims discovered after closing.
4. Direct Verification: If equipment is off-site, contact the service provider to confirm that all charges have been paid.
5. Physical Inspections: Where possible, verify that key assets are in the vendor’s possession before closing.

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Conclusion

Section 20 of the CLA creates a risk that cannot be fully addressed through conventional due diligence. By granting priority to liens, even unperfected ones. over prior security interests, and by protecting possessory lienholders against bona fide purchasers, the Act introduces a layer of uncertainty that buyers must actively manage. The lesson is clear: due diligence must go beyond the registry. It requires targeted questions, contractual safeguards, and practical verification steps to ensure that the assets being acquired are truly free and clear. Failure to take these precautions can result in unexpected liabilities, additional costs, or even the loss of critical equipment after closing

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The early resolution process is an important consideration for individuals navigating family law matters in Provincial Court. Although the early resolution process is not necessarily new, the number of early resolution registries throughout the province of BC has recently expanded. Currently, all Provincial Court registries in the Fraser Valley, the Lower Mainland, Vancouver Island and the BC Interior are classified as early resolution registries. Therefore, it’s crucial to understand the early resolution process in advance of starting a Provincial Court family law claim.

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The early resolution process provides parties with the opportunity to resolve their family law matter or, at the very least, some of their family law issues, before a formal application about a family law matter is filed with the court. The early resolution process is also free and can be a cost-effective way for parties to resolve their family law issues.

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The BC Provincial Court Family Rules sets out the requirements that must be met before an application about a family law matter can be filed in an early resolution registry, which includes:

• Filing a notice to resolve a family law matter
• Providing a copy of the notice to resolve to the other party or parties
• Participating in a needs assessment
• Completing a parenting education program
• Participating in at least one consensual dispute resolution session

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Although the early resolution process is mandatory at applicable registries, exemptions to the early resolution requirements do exist, particularly in urgent circumstances. For example, if a party is only applying for a protection order or an order about a priority parenting matter, the early resolution requirements do not apply. For a comprehensive list of exemptions, please refer to the BC Provincial Court Family Rules.

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The early resolution process may seem overwhelming, but it is important to remember that the process is in place to provide parties with the chance to avoid the stress and expense of litigation. Our Family Law Department would be pleased to arrange a consultation to discuss your specific circumstances and help guide you through the early resolution process, whether you are simply contemplating separation or are already in the process of doing so.

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1. The complaint should be in writing

A workplace investigation usually won’t be initiated until Human Resources receives a written complaint.

The written complaint ensures:
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• The Complainant describes what has been occurring in their own words.  
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• Human resources can evaluate and decide next steps like:
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  • Administrative leave for the person being complained about (the Respondent)
  • Determine if an informal process might be appropriate or if a workplace investigation is needed.
  • If a workplace investigation is needed if an internal investigation is going to be suitable or does an external third-party investigator need to be retained.
    
• The investigator (internal or external) has a starting point to prepare for their interview with the Complainant and witnesses, if anyone witnessed the conduct being complained about.
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2. Confidentiality/no retaliation

Workplace policies and collective agreements generally have language about the importance of confidentiality in a workplace investigation. Confidentiality on the part of all the participants ensures a fair process and helps eliminate gossip in the workplace.

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Human resources, citing the workplace policies and/or a collective agreement, will also make sure all of the participants understand that retaliation by the Respondent, or others aligned with them, is not okay and how to report retaliation when it occurs.

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3. Interviews

If an informal process is not appropriate, then the workplace investigator (internal or external) will conduct interviews so they can hear in each participant’s own words what occurred and gather details about what happened. The workplace investigator will also ask for documents, like text messages or photos that are relevant to the conduct being investigated.
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The workplace investigator asks for these details so that they can summarize what they have heard and provide the Respondent with a summary of allegations in advance of their interview.

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4. Follow-up interviews or questions

Sometimes in the Respondent interview, new information comes to light that the Complainant or a witness did not discuss.  This may require a second interview or follow-up questions to help the workplace investigator reconcile the new information with the information gathered earlier. The workplace investigator does this so the investigation process is fair to both the Complainant and the Respondent.

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5. Final Report

Generally speaking, a final report will be prepared and kept on file with Human Resources.  While the final report will not be shared in full with the Complainant or the Respondent, workplace policies and collective agreements typically set out what can be shared, for instance a short summary saying if the complaint was substantiated, in part or in whole.  

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Final reports are not shared because they often include personal information about employees other than the Complainant and the Respondent and privacy laws require employee personal information to be treated very carefully.

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To learn more about KSW Lawyers, how we help clients, and how we can assist you with your workplace investigation, workplace policies or human rights matter, call (604) 591-7321, visit kswlawyers.ca or email fmcfarlane@kswlawyers.ca.

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Employers and employees have both been increasingly turning to publicly available generative AI (artificial intelligence) tools like ChatGPT, Microsoft Copilot, Claude, Grok and other similar platforms. In some high-profile cases, litigants have attempted to use those types of tools in place of legal advice. Some recent US-based cases serve as a strong warning of the risks in relying on AI tools as a substitute for legal representation and advice.

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In United States v. Heppner, No. 25 Cr. 503 (JSR) (S.D.N.Y. Feb. 17, 2026), the defendant fed information that he had received from his lawyers (which are normally protected by solicitor-client privilege), generated additional documents without input from those lawyers (which, if produced by those lawyers, would also be shielded from disclosure) and subsequently shared them with the lawyers. In that case, the court held that the documents generated by the AI (in that case, Claude) were not protected by solicitor-client privilege and therefore weren’t protected by solicitor-client privilege and could be used against Heppner. This decision was due in large part to the fact that the individual was sending information to a third party (Claude) that was not a lawyer or used under the direction of or in consultation with his lawyers.

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In Fortis Advisors, LLC v. Krafton, Inc. C.A. No. 2025-0805-LWW (Del. Ch. March 16, 2026) (Will, V.C.), a Delaware case, the CEO of the defendant game publisher notoriously turned to ChatGPT for a second opinion after being told by the company’s legal counsel that they likely could not fire key employees for just cause in order to try to avoid paying employees of the developer, Unknown Worlds, over $200 million in performance bonuses relating to the projected success of its upcoming game Subnautica 2. In that case, the CEO used ChatGPT to create a strategy (despite previous advice from legal counsel that Krafton would likely be contractually obligated to pay out the bonuses) to try to avoid paying those bonuses; the CEO mostly followed that advice from the AI including by locking down the developer’s ability to publish the game as planned in order to generate leverage for a settlement. When negotiations stalled, Krafton removed key employees from the developer’s board and terminated the developer’s leadership team, citing the “premature” pending release of the game as something that would “inflict long-term damage” to the game and franchise.

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One eye-opening piece of the Krafton case was the fact that the court’s decision included extensive references to the CEO’s conversations with ChatGPT and the resulting strategies attempted by the company. Although the decision itself does not address how those AI chats came into evidence, the fact that they were disclosed and referenced in the decision serves as another warning of the dangers of relying upon AI in place of legal counsel.

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Although – as far as we are aware – no similar cases have emerged in Canada yet, the rules around solicitor-client privilege are similar and it would not be surprising if future Canadian cases reach a similar decision. At minimum, the above cases serve as a strong warning sign that relying upon AI for legal work at least creates a significant risk of having to disclose and justify those conversations in court later.

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It is also worth understanding that despite AI being quite good at some tasks (such as summarizing or organizing information), chatbots have a distinct bias towards providing responses that fit what the user is seeking. For example, if someone asks a chatbot whether an employee has been constructively dismissed, its answer will likely be “yes” if the query is from the employee and “no” if the query is from the employer. In most cases, the answer won’t be this clear-cut and understanding that gray area and the degree of risk involved in your situation is precisely where legal professionals can be most useful.

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In short, AI platforms can be a great tool for surface-level research or high-level explanations of concepts but for the most part should not be used in place of legal advice or (if you are represented by a lawyer) without consulting your lawyer first. Of course, the risk involved will also vary depending on the stakes involved and the legal topic.

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Every spring, WorkSafeBC publishes its annual report reflecting the work it did in the prior calendar year.  Here are some of the highlights from the 2025 annual report:

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Deaths because of work still happen.

• WorkSafeBC reports that 138 workers died at or because of work in 2025.
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  • 59 died due to physically traumatic incidents, including 18 as a result of motor vehicle incidents.
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  • 79 due to occupational disease, including 36 deaths related to asbestos exposure.

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Prevention is key.

• Employers have an easier way to report incidents and near-misses at their workplaces, which helps to improve data accuracy and provide insight into the hazards that led to the incident and what actions the employer can take to improve workplace safety.
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• WorkSafeBC focuses on high-risk areas, ensuring consistent inspections across industries and regions and targeted risk-reduction strategies are the goal, for instance their refreshed crane-safety initiative. Their approach focuses on three areas of worker health and safety:
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  • physical risks,
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  • occupational disease and environmental hazards, and
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  • psychological health and safety.
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• The changing mix of industries and more major projects means a shift from lower- to higher-risk industries in BC. As such, WorkSafeBC is developing and implementing targeted strategies to effectively mitigate risk.
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• WorkSafeBC is working on draft regulations on psychological health and safety, and harassment and violence in the workplace.

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Claims are getting more complex.  

• While the number of claims has remained the same claims are more complex involving chronic pain and psychological injuries, which leads to higher costs and longer claim durations.
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• A new clinical advisor role, along with new streamlined processes for psychological assessments, and improved tools have been introduced to enhance supports for psychological injuries.

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Claims management is changing with the times.

• WorkSafeBC is improving and modernizing processes and approaches to manage the increasing number of complex claims.
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• This includes changes to care pathways, which “are structured, step by step plans that outline how patient care is delivered over time, ensuring care is consistent, evidence based, and coordinated. They are used to improve quality, efficiency, and patient outcomes. In the WorkSafeBC context, care pathways guide injured workers through the claim and recovery process.”
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• 2025 saw changes to WorkSafeBC’s digital infrastructure, improved data and analytics capabilities, and the establishment of robust artificial intelligence (AI) and data governance frameworks.

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If your company needs help understanding its obligations under the Workers' Compensation Act and regulations, including supporting injured workers as they return to work and creating policies that address workplace investigations, psychological health and safety, and harassment and violence in the workplace please contact Fiona H McFarlane for more information.

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How To Interpret Employment Contracts In BC

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We often get asked if the employment contract someone signed on day 1 of their employment is still enforceable after the employee has been promoted and received salary increases.  In British Columbia, the Supreme Court confirmed in October 2025 in LaPlume v AAA Internet Publishing Inc., 2025 BCSC 2139,  that changes to employment does not impact the enforceability of the employment contract.

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Mr. Laplume became an employee of AAA Internet Publishing Inc. in December 2013, after some time as an independent contractor.  While initially in a junior position, Mr. Plume received salary increases in 2015, 2016 and 2019 and then was promoted to a manager role in fall 2019 then to operations manager in 2022, which is the role he held until his without cause termination in July 2023.

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The employment contract Mr. Plume signed in 2013 contained a termination clause that set out severance amounts greater than the Employment Standards Act amounts, and, at paragraph 3 said:

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During your employment, the Company may change your position, title, duties, responsibilities or reporting relationship as it deems appropriate from time to time, consistent with your qualifications, skills and experience, and such change will not constitute a breach of this [employment contract] or a constructive dismissal, as long a such changes do not materially increase work duties or hours of work;

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The BC Supreme Court considered Mr. Plume’s raises and the changes to his job description with reference to the common law concept of “changed substratum”, essentially it is possible to “outgrow” an employment contract if an employee's job duties, responsibilities, or compensation expand so drastically over time that they are no longer connected to the foundation of their original role, and whose effect is to void the outgrown employment contract.

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To understand if “changed substratum” occurred the BC Supreme Court reviewed Mr. Plume’s employment contract, in particular the clause permitting the employer to change the employee’s position and duties and asked what is

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   (a) the degree of change required to constitute the erosion of the substratum of the contract;

   (b) the degree of the changes to the terms of employment in this case, and

    (c) in any event, were the changes contemplated or allowed under the employment contract?

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In Mr. Plume’s case the changes to his employment were not considered dramatic since they consisted of mostly pay increases and his first promotion to manager of a small team was after seven years of employment, and the subsequent promotion added relatively minor responsibilities to the work he was already doing. According to the judge, these are reasonable incremental changes to employment so didn’t change the enforceability of the employment contract, and were contemplated and within the expectation of paragraph 3 of the employment contract.  Specifically, the BC Supreme Court found:

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Specifically, pursuant to para. 3, both he and the defendant expected Mr. LaPlume’s role to evolve with his qualifications, skills, and experience. That is exactly what happened: as he gained more experience and skill as a developer, his role evolved to overseeing less experienced developers. Paragraph 3 expressly reflects that both parties expected that the employment contract would remain effective notwithstanding those changes.

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KEY TAKEAWAYS

It is important to start out all employment relationships with a solid and enforceable employment contract, and KSW Lawyers can provide legal advice to ensure your employment contracts anticipate and permits changes in employment.  Further, reviewing your employment contracts with KSW Lawyers periodically, especially when promotions are contemplated, will ensure any changes will not erode the foundation/substratum of the contract beyond what was anticipated and permitted.

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Finally, the following takeaways from LaPlume v AAA Internet Publishing Inc. will help to ensure that the employment contract signed on day 1 continues to be enforceable at the end of the employment relationship. Since not all changes in employment benefits, duties, and responsibilities are sufficient to erode the foundation/substratum of an employment contract, we recommend contacting KSW Lawyers if:

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- Significant changes in employment are being planned since they can make the employment contract unenforceable IF

    (a) The foundation/substratum of the employment when the employment contract was signed no longer exists by the time of termination, or

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   (b) it may be implied that the employed contract could not have been intended to apply to the position ultimately occupied by the time of termination.

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- A change that could be dramatic and fundamental is being considered since they can erode the foundation/substratum of an employment contract. If incremental and predictable changes in the terms of employment are introduced, they are unlikely to be a sufficient basis on which to conclude that an employment contract is unenforceable.

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- Where an employment contract anticipates and permits changes in employment, the change required to erode the foundation/substratum of the contract must be beyond what was anticipated and permitted.

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Please contact Fiona H McFarlane for more information.

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By: Junki Hong

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While the length of service is often associated with notice entitlement of a dismissed employee, with greater emphasis than other relevant factors, Canadian courts have recognized that short-service employees are often entitled to a proportionately longer period of notice. Carroll v. Oracle Canada ULC, 2025 ONSC 4889 (“Carroll”) is a recent example from Ontario.

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Court Decision

The Court in Carroll awarded 12 months’ notice to Mr. Carroll, who served for three years and seven months in the position of Global Strategic Client Executive for the employer, Oracle Canada ULC (“Oracle”). He was 61 years old at the time of termination. Mr. Carroll earned from Oracle $761,069.79 in 2022, $786,186.33 in 2021, and in 2023, between January 1, 2023 and his termination on June 30, 2023, earned $725,674.08.

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In coming to this determination, the Court considered the earnings of the employees of authorities cited by the parties, and how the salary level would affect the availability of a comparable position.

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The Court also noted that failing to provide a positive letter of reference was a factor that increases the length of an employee’s reasonable notice period. The letter that Oracle did provide was seen as a “letter that an employer would write for a mediocre or problematic employee in respect of whom an employer did not want to say anything proactively negative”.  Although Oracle maintained that it was company policy not to write letters of recommendation, the letter it did write does not indicate that company policy was not to write letters of recommendation.

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Mr. Carroll found alternative employment on February 28, 2024, eight months after his termination.  Nevertheless, the Court held that the appropriate notice period was 12 months.

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In ascertaining the monetary value of the 12 months notice, the Court used a three-year average for the commissions portion. The Court also awarded for benefits, a sum equal to 10% of the base salary.

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The Court also awarded $57,740.55, equal to the amount of the improperly withheld commissions, in punitive damages for the employer's bad faith conduct, including delays in paying statutory entitlements without any explanation for that failure, and for relying on a termination provision, when a similarly worded employment agreement involving another Oracle employee had been struck down as unenforceable.

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Takeaways

For your consideration:

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• Reference letter practices can backfire. While reference letters can mitigate legal risks, refusal to provide a reference is seen as impeding an employee's ability to mitigate their losses.
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• In assessing the notice, courts will weigh multiple factors—including the availability of a reference.
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• Statutory requirements, including commissions earned during the notice period, are not optional, and further, not leverage. They must be paid promptly.
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• The Court will note the history of the enforceability of termination clause. Oracle tried a similar contractual language in the past and did not succeed and was punished for trying to do so again knowing that it would fail.
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• When an employee occupies a senior, specialized, or high-earning role where the market for comparable positions is narrow, courts will look carefully at all the relevant factors.

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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.

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By: Chris D. Drinovz

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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.

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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.  

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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.  

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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.

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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.

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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.  

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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.

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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.

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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);
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• VSI was entitled to fully investigate the allegations before making a termination decision;
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• the time taken to recruit a replacement manager before dismissing Mr. Vassilakaki was also reasonable; and
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• there was no evidence that VSI had forgiven or accepted the misconduct.

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

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[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.

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[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.

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Accordingly, the wrongful dismissal claim was dismissed.

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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.

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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.

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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.

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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:

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• 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.

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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.

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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.

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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.

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

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Key Takeaways

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• 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.
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• Condonation requires evidence that the employer knowingly forgave or accepted the misconduct. Mere delay, without more, is generally insufficient.
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• 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.
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• 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.
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• 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.

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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.

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