Friday, December 14, 2012
Supreme Court lets corporate polluter off the hook.
The Supreme Court of Canada recently released its decision in the case of Newfoundland and Labrador v. AbitibiBowater Inc. (Q.C.C.A., May 18, 2010)(33797)
“A was involved in industrial activity in Newfoundland and Labrador (the “Province”). In a period of general financial distress, it ended its last operation there, filed for insolvency protection in the United States and obtained a stay of proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”). The Province subsequently issued five orders under the Environmental Protection Act, S.N.L. 2002, c. E-14.2, requiring A to submit remediation action plans for five industrial sites it had occupied, three of which had been expropriated by the Province, and to complete the remediation actions. The Province also brought a motion for a declaration that a claims procedure order issued under the CCAA in relation to A’s proposed reorganization did not bar the Province from enforcing the environmental protection orders. The Province argued that the environmental protection orders were not “claims” under the CCAA and therefore could not be stayed and subject to a claims procedure order. It further argued that Parliament lacked the constitutional competence under its power to make laws in relation to bankruptcy and insolvency to stay orders that were validly made in the exercise of a provincial power. A contested the motion, arguing that the orders were monetary in nature and hence fell within the definition of the word “claim” in the claims procedure order. The CCAA court dismissed the Province’s motion. The Court of Appeal denied the Province leave to appeal.”
The S.C.C. (7:2) dismissed the Province's appeal.
Justice Deschamps wrote as follows (at paras. 2-4, 61):
“Regulatory bodies may become involved in reorganization proceedings when they order the debtor to comply with statutory rules. As a matter of principle, reorganization does not amount to a licence to disregard rules. Yet there are circumstances in which valid and enforceable orders will be subject to an arrangement under the CCAA. One such circumstance is where a regulatory body makes an environmental order that explicitly asserts a monetary claim.
In other circumstances, it is less clear whether an order can be treated as a monetary claim. The appellant and a number of interveners posit that an order issued by an environmental body is not a claim under the CCAA if the order does not require the debtor to make a payment. I agree that not all orders issued by regulatory bodies are monetary in nature and thus provable claims in an insolvency proceeding, but some may be, even if the amounts involved are not quantified at the outset of the proceeding. In the environmental context, the CCAA court must determine whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability owed to the regulatory body that issued the order. In such a case, the relevant question is not simply whether the body has formally exercised its power to claim a debt. A CCAA court does not assess claims — or orders — on the basis of form alone. If the order is not framed in monetary terms, the court must determine, in light of the factual matrix and the applicable statutory framework, whether it is a claim that will be subject to the claims process.
The case at bar concerns contamination that occurred, prior to the CCAA proceedings, on property that is largely no longer under the debtor’s possession and control. The CCAA court found on the facts of this case that the orders issued by Her Majesty the Queen in right of the Province of Newfoundland and Labrador (“Province”) were simply a first step towards remediating the contaminated property and asserting a claim for the resulting costs. In the words of the CCAA court, “the intended, practical and realistic effect of the EPA Orders was to establish a basis for the Province to recover amounts of money to be eventually used for the remediation of the properties in question” (2010 QCCS 1261, 68 C.B.R. (5th) 1, at para. 211). As a result, the CCAA court found that the orders were clearly monetary in nature. I see no error of law and no reason to interfere with this finding of fact. I would dismiss the appeal with costs.
... I prefer to take the approach generally taken for all contingent claims. In my view, the CCAA court is entitled to take all relevant facts into consideration in making the relevant determination. Under this approach, the contingency to be assessed in a case such as this is whether it is sufficiently certain that the regulatory body will perform remediation work and be in a position to assert a monetary claim."
The Chief Justice (in dissent) wrote as follows (at paras. 65, 96):
"Remediation orders made under a province’s environmental protection legislation impose ongoing regulatory obligations on the corporation required to clean up the pollution. They are not monetary claims. In narrow circumstances, specified by the CCAA, these ongoing regulatory obligations may be reduced to monetary claims, which can be compromised under CCAA proceedings. This occurs where a province has done the work, or where it is “sufficiently certain” that it will do the work. In these circumstances, the regulatory obligation would be extinguished and the province would have a monetary claim for the cost of remediation in the CCAA proceedings. Otherwise, the regulatory obligation survives the restructuring.…
First, I find myself unable to decide the case on what I think the CCAA judge would have done had he gotten the law right and considered the central question. In my view, his failure to consider that question requires this Court to answer it in his stead on the record before us: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 35. But more to the point, I see no objective facts that support, much less compel, the conclusion that it is “sufficiently certain” that the Province will move to itself remediate any or all of the pollution Abitibi caused. The mood of the regulator in issuing remediation orders, be it disinterested or otherwise, has no bearing on the likelihood that the Province will undertake such a massive project itself. The Province has options. It could, to be sure, opt to do the work. Or it could await the result of Abitibi’s restructuring and call on it to remediate once it resumed operations. It could even choose to leave the site contaminated. There is nothing in the record that makes the first option more probable than the others, much less establishes “sufficient certainty” that the Province will itself clean up the pollution, converting it to a debt."
Justice LeBel (also in dissent) wrote as follows (at para. 101):
"In my view, the CCAA court was concerned that the arrangement would fail if the Abitibi respondents (“Abitibi”) were not released from their regulatory obligations in respect of pollution. The CCAA court wanted to eliminate the uncertainty that would have clouded the reorganized corporations’ future. Moreover, its decision appears to have been driven by an opinion that the Province had acted in bad faith in its dealings with Abitibi both during and after the termination of its operations in the Province. I agree with the Chief Justice that there is no evidence that the Province intends to perform the remedial work itself. In the absence of any other evidence, an off-hand comment made in the legislature by a member of the government hardly satisfies the “sufficient certainty” test. Even if the evidentiary test proposed by my colleague Deschamps J. is applied, this Court can legitimately disregard the CCAA court’s finding as the Chief Justice proposes, since it did not rest on a sufficient factual foundation."
Regards,
Blair
Thursday, November 29, 2012
Jurisdiction of Canadian Courts over Foreign Subject Matters
In two separate cases that were heard together at the Supreme Court of Canada in 2012, the court ruled that the courts of Ontario had jurisdiction to hear two lawsuits that were brought against tour companies offering vacations in Cuba where Ontario tourists were injured or killed while vacationing in Cuba.
In the first case, Morgan Van Breda suffered catastrophic injuries on a beach in Cuba. In the second case, Claude Charron died while scuba diving in Cuba. The plaintiffs brought actions in Ontario against a number of parties including Club Resorts Ltd., a company incorporated in the Cayman Islands that managed the two hotels where the accidents had occurred. Club Hotels sought to have the Ontario actions stayed on the basis that the courts of Ontario lacked jurisdiction and, alternatively, that Cuban courts would be the more appropriate forum for lawsuits based on the legal principal of forum conveniens.
In both cases, motions judges found that the Ontario courts had jurisdiction to hear the actions against Club Resorts. They also found that the Ontario court was clearly the more appropriate forum. Appeals of the ttwo cases were heard together in the Ontario Court of Appeal which dismissed the appeal of Club Resorts. The Supreme Court of Canada dismissed Club Resorts further appeal for the following reasons.
The court held that the cases concern the elaboration of the "real and substantial connection test (jurisdiction simpliciter)" and whether that test is an appropriate common law rule for the assumption of jurisdiction by a Canadian court. Under the jurisdiction simpliciter test, the Supreme Court held that a court can assume jurisdiction over a certain claim where, relying on a set of specific factors, those factors are given presumptive effect. The court held that it was preferable to have a system that had order and would permit the development of a just and fair approach to resolving conflicts.
To meet the real and substantial connection test, the party arguing that the court should assume jurisdiction over the case has the burden of identifying a presumptive connecting factor that links the subject matter of the case to the forum (Ontario in these appeals). Jurisdiction must be established primarily on the basis of objective factors that connect the legal situation or the subject matter of the litigation with the forum.
In a case concerning a tort, the following factors are presumptive connecting factors that prima facie entitle a court to assume jurisdiction over a dispute:
1. the defendant is domiciled or resident in the province;
2. the defendant carries on business in the province;
3. the tort was committed in the province; and
4. a contract connected with the dispute was made in the province.
Although these factors are considered presumptive, it does not mean that the list of factors is complete and a court can consider when and whether a new connecting factor should be given presumptive effect.
The burden of rebutting the presumption of jurisdiction rests with the party challenging the court's assumption of jurisdiction. That party must negate the presumptive effect of the listed factors or any new factor that the court uses in assuming jurisdiction and convince the court that the proposed assumption of jurisdiction would be inappropriate. The party may accomplish this by establishing facts that demonstrate that the presumptive connective factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship.
If jurisdiction is established, the claim may proceed subject to the courts discretion to stay the proceedings on the basis of forum conveniens.
In Van Breda, the presumptive factor was that a contract had been entered into in Ontario. The Supreme Court held that the existence of a contract made in Ontario entitled the courts of Ontario to assume jurisdiction and Club Resorts had failed to rebut the presumption of jurisdiction.
In respect of whether Cuban courts would be clearly the more appropriate forum, the court held that a trial in Cuba would present serious challenges to the parties and that all things considered, the burden on the plaintiffs would be far heavier if they were required to bring their action in Cuba.
In the Charron case, the presumptive factor was that Club Resorts carried on business in Ontario. It had a fiscal presence in Ontario and had offices in Ontario. Club Resorts did not rebut that presumption of jurisdiction.
It also failed to discharge the burden of showing that a Cuban court would be clearly the more appropriate forum in the circumstances of the case.
Regards,
Blair
In the first case, Morgan Van Breda suffered catastrophic injuries on a beach in Cuba. In the second case, Claude Charron died while scuba diving in Cuba. The plaintiffs brought actions in Ontario against a number of parties including Club Resorts Ltd., a company incorporated in the Cayman Islands that managed the two hotels where the accidents had occurred. Club Hotels sought to have the Ontario actions stayed on the basis that the courts of Ontario lacked jurisdiction and, alternatively, that Cuban courts would be the more appropriate forum for lawsuits based on the legal principal of forum conveniens.
In both cases, motions judges found that the Ontario courts had jurisdiction to hear the actions against Club Resorts. They also found that the Ontario court was clearly the more appropriate forum. Appeals of the ttwo cases were heard together in the Ontario Court of Appeal which dismissed the appeal of Club Resorts. The Supreme Court of Canada dismissed Club Resorts further appeal for the following reasons.
The court held that the cases concern the elaboration of the "real and substantial connection test (jurisdiction simpliciter)" and whether that test is an appropriate common law rule for the assumption of jurisdiction by a Canadian court. Under the jurisdiction simpliciter test, the Supreme Court held that a court can assume jurisdiction over a certain claim where, relying on a set of specific factors, those factors are given presumptive effect. The court held that it was preferable to have a system that had order and would permit the development of a just and fair approach to resolving conflicts.
To meet the real and substantial connection test, the party arguing that the court should assume jurisdiction over the case has the burden of identifying a presumptive connecting factor that links the subject matter of the case to the forum (Ontario in these appeals). Jurisdiction must be established primarily on the basis of objective factors that connect the legal situation or the subject matter of the litigation with the forum.
In a case concerning a tort, the following factors are presumptive connecting factors that prima facie entitle a court to assume jurisdiction over a dispute:
1. the defendant is domiciled or resident in the province;
2. the defendant carries on business in the province;
3. the tort was committed in the province; and
4. a contract connected with the dispute was made in the province.
Although these factors are considered presumptive, it does not mean that the list of factors is complete and a court can consider when and whether a new connecting factor should be given presumptive effect.
The burden of rebutting the presumption of jurisdiction rests with the party challenging the court's assumption of jurisdiction. That party must negate the presumptive effect of the listed factors or any new factor that the court uses in assuming jurisdiction and convince the court that the proposed assumption of jurisdiction would be inappropriate. The party may accomplish this by establishing facts that demonstrate that the presumptive connective factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship.
If jurisdiction is established, the claim may proceed subject to the courts discretion to stay the proceedings on the basis of forum conveniens.
In Van Breda, the presumptive factor was that a contract had been entered into in Ontario. The Supreme Court held that the existence of a contract made in Ontario entitled the courts of Ontario to assume jurisdiction and Club Resorts had failed to rebut the presumption of jurisdiction.
In respect of whether Cuban courts would be clearly the more appropriate forum, the court held that a trial in Cuba would present serious challenges to the parties and that all things considered, the burden on the plaintiffs would be far heavier if they were required to bring their action in Cuba.
In the Charron case, the presumptive factor was that Club Resorts carried on business in Ontario. It had a fiscal presence in Ontario and had offices in Ontario. Club Resorts did not rebut that presumption of jurisdiction.
It also failed to discharge the burden of showing that a Cuban court would be clearly the more appropriate forum in the circumstances of the case.
Regards,
Blair
Wednesday, November 28, 2012
Supreme Court denies Abuse of Authority claim
In a recent decision of the Supreme Court of Canada, the court unanimously affirmed the decision of the Public Service Staffing Tribunal ("Tribunal") which dismissed a federal employee's claim that he had been passed over for a promotion on the basis of "abuse of authority".
The employee was employed by Service Canada in a "Level 5" position. As part of a reorganization, the position of Regional Manager was created at a "Level 6" position. Service Canada decided to fill the Level 6 position through an internal advertised process. The employee applied to the competition but failed a mandatory examination. The employee subsequently filed a complaint with the Tribunal alleging an abuse of authority contrary to the Public Service Employment Act. The Tribunal dismissed the employee's claim because he had not established abuse of authority. The Federal Court affirmed the Tribunal's decision but the Federal Court of Appeal allowed the appeal and sent the case back to the Tribunal.
In reversing the decision of the Federal Court of Appeal and allowing the appeal, the Supreme Court held that there were four reasons to reject the Federal Court of Appeal's decision:
1. The basis of the employee's complaint was that his employer had abused its authority in choosing an advertised internal appointment process. The employee had argued that advertising the position constituted abuse of authority because the Level 6 position was not a new position but rather a reclassification of an old position. The court agreed with the Tribunal's finding that regardless of whether the position was new or old, Service Canada was entitled to advertise the position with the result that the alleged newness of the position did not give rise to an obligation to advertise the position. The Tribunal held that there was nothing in the regulations that required Service Canada to utilize a particular selection process depending on whether the position was new or reclassified. On the contrary, the regulations clearly provided that the employer had the discretion to use an advertised or a non-advertised appointment process;
2. The Federal Court of Appeal had assessed the decision of the Tribunal against a claim that the employee did not make. The employee had assumed that if he could establish that the Level 6 position was reclassified, he would be entitled to a non-advertised process. He identified the abuse of authority as the "erroneous interpretation of the facts against the employer's own reclassification guideline". On his view, if the position was reclassified, no matter what other reasons the employer might have had for preferring an advertised process, he was owed a non-advertised process. The Tribunal responded to this complaint by finding that given the broad discretion accorded to employers under the regulations, the employee was wrong to argue that he was entitled to any particular process. The Supreme Court agreed and indicated that in its view, the employee was seeking to restrict the discretion of his employer in a way that did not accord with the purpose or wording of the Act;
3. The Federal Court of Appeal's decision to send the case back to the Tribunal was based on its reading of the record that the newness of the Level 6 position was the "principal justification" for the employer's decision. The employer presented evidence before the Tribunal that its regional management board decided to advertise the position in order to have a fair, accessible and transparent process to allow more than one person to apply, especially since this was a new position at a higher level. The Tribunal made no finding as to what the employer's "principal justification" may have been. The Federal Court of Appeal erred by effectively undertaking its own assessment of the record and attributing to the employer a principal justification that the Tribunal did not find; and
4. The Supreme Court disagreed with the Federal Court of Appeal's conclusion that the Tribunal acted unreasonably by failing to give the employee the opportunity to show that there was no rational basis for the employer's position that the Level 6 position was new. There was no realistic possibility based on the record that the Tribunal could find any such rational finding of material fact in this case.
Regards,
Blair
The employee was employed by Service Canada in a "Level 5" position. As part of a reorganization, the position of Regional Manager was created at a "Level 6" position. Service Canada decided to fill the Level 6 position through an internal advertised process. The employee applied to the competition but failed a mandatory examination. The employee subsequently filed a complaint with the Tribunal alleging an abuse of authority contrary to the Public Service Employment Act. The Tribunal dismissed the employee's claim because he had not established abuse of authority. The Federal Court affirmed the Tribunal's decision but the Federal Court of Appeal allowed the appeal and sent the case back to the Tribunal.
In reversing the decision of the Federal Court of Appeal and allowing the appeal, the Supreme Court held that there were four reasons to reject the Federal Court of Appeal's decision:
1. The basis of the employee's complaint was that his employer had abused its authority in choosing an advertised internal appointment process. The employee had argued that advertising the position constituted abuse of authority because the Level 6 position was not a new position but rather a reclassification of an old position. The court agreed with the Tribunal's finding that regardless of whether the position was new or old, Service Canada was entitled to advertise the position with the result that the alleged newness of the position did not give rise to an obligation to advertise the position. The Tribunal held that there was nothing in the regulations that required Service Canada to utilize a particular selection process depending on whether the position was new or reclassified. On the contrary, the regulations clearly provided that the employer had the discretion to use an advertised or a non-advertised appointment process;
2. The Federal Court of Appeal had assessed the decision of the Tribunal against a claim that the employee did not make. The employee had assumed that if he could establish that the Level 6 position was reclassified, he would be entitled to a non-advertised process. He identified the abuse of authority as the "erroneous interpretation of the facts against the employer's own reclassification guideline". On his view, if the position was reclassified, no matter what other reasons the employer might have had for preferring an advertised process, he was owed a non-advertised process. The Tribunal responded to this complaint by finding that given the broad discretion accorded to employers under the regulations, the employee was wrong to argue that he was entitled to any particular process. The Supreme Court agreed and indicated that in its view, the employee was seeking to restrict the discretion of his employer in a way that did not accord with the purpose or wording of the Act;
3. The Federal Court of Appeal's decision to send the case back to the Tribunal was based on its reading of the record that the newness of the Level 6 position was the "principal justification" for the employer's decision. The employer presented evidence before the Tribunal that its regional management board decided to advertise the position in order to have a fair, accessible and transparent process to allow more than one person to apply, especially since this was a new position at a higher level. The Tribunal made no finding as to what the employer's "principal justification" may have been. The Federal Court of Appeal erred by effectively undertaking its own assessment of the record and attributing to the employer a principal justification that the Tribunal did not find; and
4. The Supreme Court disagreed with the Federal Court of Appeal's conclusion that the Tribunal acted unreasonably by failing to give the employee the opportunity to show that there was no rational basis for the employer's position that the Level 6 position was new. There was no realistic possibility based on the record that the Tribunal could find any such rational finding of material fact in this case.
Regards,
Blair
Tuesday, November 27, 2012
Ontario Court ousts Toronto Mayor Rob Ford
Mr. Justice Hackland of the Ontario Superior Court of Justice has handed down his long-awaited decision in Mayor Rob Ford's conflict of interest case (Magder v. Ford). Justice Hackland found that Mr. Ford had contravened section 5 of the Municipal Conflict of Interest Act ("Act") and declared Mr. Ford's seat on Toronto City counsel vacant. Justice Hackland delivered a well reasoned judgment that is almost certain to be overturned on appeal.
The charge against Mr. Ford had been that he spoke to, and voted on, a matter on February 7, 2012, in which he allegedly had a pecuniary interest.
The case arose when, on August 12, 2010, the City of Toronto Integrity Commissioner, issued a report to Toronto city council concluding that Mr. Ford (then a member of council) had breached the city's code of conduct. The integrity commissioner found that Mr. Ford had used the city of Toronto logo, his status as a councillor and city of Toronto resources to solicit funds for a private football foundation that he had created in his name. The commissioner recommended that council take steps to require Mr. Ford to reimburse $3,150 in donations made by lobbyists and corporate donors to his foundation and to provide confirmation of such reimbursement.
At the city council meeting on August 5, 2010, the commissioner's report and recommendations were initially approved without debate. Later in the meeting, after a city councillor moved for reconsideration, the motion for reconsideration was defeated. Mr. Ford voted on that motion.
Just before the vote, another councillor alerted Mr. Ford to the fact that voting on the motion would put him in a conflict of interest. Mr. Ford ignored the warning.
Notwithstanding the adoption of the report and recommendations, Mr. Ford failed to reimburse the $3,150.
Accordingly, the commissioner brought the matter back to city council in a report dated January 30, 2012.
On the February 7, 2012 date, Mr. Ford spoke against the motion but did not vote on the matter. The effect of the motion was that counsel rescinded its adoption of the integrity commissioner's findings as to Mr. Ford's violation of the code of conduct as well as the repayment obligation.
The applicant, a Toronto voter, subsequently brought the application.
In his decision, Justice Hackland made, among others, the following findings.
The Act applies to a city of Toronto code of conduct violation. He found that section 5(1) of the Act which clearly states that where a member has "any pecuniary interest…in any matter" and is present at a meeting of council he or she is to disclose his or her interest and must neither take part in the discussion or vote on the matter. There is no authority for implying a right to be heard in the face of a statutory provision which specifically denies such a right. In any event, the right to be heard does not have anything to with providing a justification for voting on a matter (rather than speaking) which was what Mr. Ford chose to do in this case.
The judge held that the justification for the section was related to transparency of the decision making process by municipal councillors and invoked the issue of whether the voting public could be confident in the actions and decisions of those we elect to govern.
Justice Hackland also found that the sum of $3,150 was not so insignificant in nature that it did not influence Mr. Ford. While it was not a huge amount of money, Mr. Ford stated in his remarks at council:
"and if it wasn't for this foundation, these kids would not have a chance. And then to ask for me to pay it out of my own pocket personally, there is no sense to this. The money is gone, the money has been spent on football equipment.".
The judge held that in view of such remarks, Mr. Ford's pecuniary interest in the repayment was of significance to him.
The judge also held that the section of the Act was not contravened through inadvertence or an error in judgment. He allowed that the mandatory removal from office for contravening this section was "a very blunt instrument" and quoted Professor David Mullan, Toronto's former Integrity Commissioner, in describing it as a sledgehammer.
While this was not a case that demonstrated corruption, or pecuniary gain on behalf of Mr. Ford, Justice Hackland held that it did not occur through inadvertence because inadvertence involved "oversight in attention or carelessness". To the contrary, Mr. Ford in his cross-examination admitted that he didn't regret acting in the way he did and that he did so deliberately.
Justice Hackland held that Mr. Ford's conduct did not amount to an error in judgment because the caselaw confirms that an error in judgment must have occurred honestly and in good faith. In this context, good faith involves such considerations as whether a reasonable explanation is offered for Mr. Ford's conduct in speaking or voting on the resolution involved in his pecuniary interest. In this case, Mr. Ford has served on city council for 12 years, the last two as mayor. He acknowledged in his cross-examination that he had never read or familiarized himself with the conflict of interest rules, he never attended any briefings on conflict of interest, nor did he read the councillors' handbook which addressed the issue. The judge held that in his view, the evidence of Mr. Ford that he gave little or no consideration to whether he was lawfully entitled to speak or vote on the motion even after he was warned by Ms. Bussin that he was in conflict of interest does not constitute a good faith error in judgment.
Justice Hackland found:
"In view of the respondent's leadership role in ensuring integrity in municipal government, it is difficult to accept an error in judgment defence based essentially on a stubborn sense of entitlement (concerning his football foundation) and a dismissive and confrontational attitude to the Integrity Commissioner and the Code of Conduct. In my opinion, the respondent's actions were characterized by ignorance of the law and the lack of diligence in securing professional advice, amounting to wilful blindness. As such, I find his actions are incompatible with an error in judgment."
While well reasoned, Justice Hackland's decision does not seem to square with the recent decision of the Supreme Court of Canada in upholding the contested federal election in Etobicoke Centre. In that case there was also no allegation of fraud, corruption or illegal practices. The court held that:
"Given the complexity of administering a federal election, the tens of thousands of election workers involved, many of whom have no on-the-job experience and the short time frame for hiring and training them, it is inevitable that administrative mistakes will be made. If elections can be easily annulled on the basis of administrative errors, public confidence in the finality of and legitimacy of election results will be eroded. Only irregularities that affect the result of the election and thereby undermine the integrity of the electoral process are grounds for overturning an election."
In this case, count on Mr. Ford appealing the judgment on the basis that the court held that there is no question of fraud or corruption. He will be able to argue, (relying on the Supreme Court of Canada decision, as well as the obiter of Justice Hackland in referring to Professor Mullan citing a need for reform in the Act) that the citizens of Toronto should not be so negatively effected as to be required to spend hundreds of thousands of dollars, if not more, in a election for mayor.
Regards,
Blair
The charge against Mr. Ford had been that he spoke to, and voted on, a matter on February 7, 2012, in which he allegedly had a pecuniary interest.
The case arose when, on August 12, 2010, the City of Toronto Integrity Commissioner, issued a report to Toronto city council concluding that Mr. Ford (then a member of council) had breached the city's code of conduct. The integrity commissioner found that Mr. Ford had used the city of Toronto logo, his status as a councillor and city of Toronto resources to solicit funds for a private football foundation that he had created in his name. The commissioner recommended that council take steps to require Mr. Ford to reimburse $3,150 in donations made by lobbyists and corporate donors to his foundation and to provide confirmation of such reimbursement.
At the city council meeting on August 5, 2010, the commissioner's report and recommendations were initially approved without debate. Later in the meeting, after a city councillor moved for reconsideration, the motion for reconsideration was defeated. Mr. Ford voted on that motion.
Just before the vote, another councillor alerted Mr. Ford to the fact that voting on the motion would put him in a conflict of interest. Mr. Ford ignored the warning.
Notwithstanding the adoption of the report and recommendations, Mr. Ford failed to reimburse the $3,150.
Accordingly, the commissioner brought the matter back to city council in a report dated January 30, 2012.
On the February 7, 2012 date, Mr. Ford spoke against the motion but did not vote on the matter. The effect of the motion was that counsel rescinded its adoption of the integrity commissioner's findings as to Mr. Ford's violation of the code of conduct as well as the repayment obligation.
The applicant, a Toronto voter, subsequently brought the application.
In his decision, Justice Hackland made, among others, the following findings.
The Act applies to a city of Toronto code of conduct violation. He found that section 5(1) of the Act which clearly states that where a member has "any pecuniary interest…in any matter" and is present at a meeting of council he or she is to disclose his or her interest and must neither take part in the discussion or vote on the matter. There is no authority for implying a right to be heard in the face of a statutory provision which specifically denies such a right. In any event, the right to be heard does not have anything to with providing a justification for voting on a matter (rather than speaking) which was what Mr. Ford chose to do in this case.
The judge held that the justification for the section was related to transparency of the decision making process by municipal councillors and invoked the issue of whether the voting public could be confident in the actions and decisions of those we elect to govern.
Justice Hackland also found that the sum of $3,150 was not so insignificant in nature that it did not influence Mr. Ford. While it was not a huge amount of money, Mr. Ford stated in his remarks at council:
"and if it wasn't for this foundation, these kids would not have a chance. And then to ask for me to pay it out of my own pocket personally, there is no sense to this. The money is gone, the money has been spent on football equipment.".
The judge held that in view of such remarks, Mr. Ford's pecuniary interest in the repayment was of significance to him.
The judge also held that the section of the Act was not contravened through inadvertence or an error in judgment. He allowed that the mandatory removal from office for contravening this section was "a very blunt instrument" and quoted Professor David Mullan, Toronto's former Integrity Commissioner, in describing it as a sledgehammer.
While this was not a case that demonstrated corruption, or pecuniary gain on behalf of Mr. Ford, Justice Hackland held that it did not occur through inadvertence because inadvertence involved "oversight in attention or carelessness". To the contrary, Mr. Ford in his cross-examination admitted that he didn't regret acting in the way he did and that he did so deliberately.
Justice Hackland held that Mr. Ford's conduct did not amount to an error in judgment because the caselaw confirms that an error in judgment must have occurred honestly and in good faith. In this context, good faith involves such considerations as whether a reasonable explanation is offered for Mr. Ford's conduct in speaking or voting on the resolution involved in his pecuniary interest. In this case, Mr. Ford has served on city council for 12 years, the last two as mayor. He acknowledged in his cross-examination that he had never read or familiarized himself with the conflict of interest rules, he never attended any briefings on conflict of interest, nor did he read the councillors' handbook which addressed the issue. The judge held that in his view, the evidence of Mr. Ford that he gave little or no consideration to whether he was lawfully entitled to speak or vote on the motion even after he was warned by Ms. Bussin that he was in conflict of interest does not constitute a good faith error in judgment.
Justice Hackland found:
"In view of the respondent's leadership role in ensuring integrity in municipal government, it is difficult to accept an error in judgment defence based essentially on a stubborn sense of entitlement (concerning his football foundation) and a dismissive and confrontational attitude to the Integrity Commissioner and the Code of Conduct. In my opinion, the respondent's actions were characterized by ignorance of the law and the lack of diligence in securing professional advice, amounting to wilful blindness. As such, I find his actions are incompatible with an error in judgment."
While well reasoned, Justice Hackland's decision does not seem to square with the recent decision of the Supreme Court of Canada in upholding the contested federal election in Etobicoke Centre. In that case there was also no allegation of fraud, corruption or illegal practices. The court held that:
"Given the complexity of administering a federal election, the tens of thousands of election workers involved, many of whom have no on-the-job experience and the short time frame for hiring and training them, it is inevitable that administrative mistakes will be made. If elections can be easily annulled on the basis of administrative errors, public confidence in the finality of and legitimacy of election results will be eroded. Only irregularities that affect the result of the election and thereby undermine the integrity of the electoral process are grounds for overturning an election."
In this case, count on Mr. Ford appealing the judgment on the basis that the court held that there is no question of fraud or corruption. He will be able to argue, (relying on the Supreme Court of Canada decision, as well as the obiter of Justice Hackland in referring to Professor Mullan citing a need for reform in the Act) that the citizens of Toronto should not be so negatively effected as to be required to spend hundreds of thousands of dollars, if not more, in a election for mayor.
Regards,
Blair
Friday, November 16, 2012
Message to the Law Society of Upper Canada - End Articling Now
The following is reprinted from Larry Banack's Bencher News:
The Articling Task Force issued its final report entitled "A ROAD MAP FOR THE REFORM OF LAWYER LICENSING IN ONTARIO".
The report was received by Convocation on October 25, 2012. Because of the importance of the issues the proceedings were webcast and simultaneous twitter feeds were facilitated. During the discussions (which lasted 4.5 hours) there were nearly 1100 posts and 500 tweets with 166 unique comments.
The issue is now scheduled for determination by Convocation on November 22, 2012.
The Task Force has recommended a pilot project that will provide an alternative to articling through a new Law Practice Program (LPP).
The recommendation contemplates a 5 year transitional plan which provides:
The pilot project is to begin in the 2014-2014 licensing year;
The current ten month articling program will continue;
The LPP expected to be about 8 months long, will be an alternative path for those unable or uninterested in engaging in the traditional articling program;
A "final assessment" is to be introduced to test that candidates who either articled or took the LPP have the required practice competencies before being licensed;
The two paths to licensing will be monitored, assessed, compared and a final report for Convocation's consideration is due by the end of the fifth year.
MINORITY REPORT
Four Benchers released a minority report. Their dissent should be carefully reviewed and remembered by the Profession. The minority view called for the end of articling and dismissed the two tier licensing process on the basis that it is unfair and unworkable.
UNFAIR FOR THE FOLLOWING REASONS:
A disproportionate number of person who are unable to obtain articling positions appear to be from equality-seeking groups.
The Two tier system will create two classes of lawyers with the preferred group being those who articled.
Candidates in the lengthy LPP must be able to support themselves and thereafter work for free at a co-op type placement which may require temporary relocation and possibly be of limited or no value.
The cost of the new two tiered licensing process will increase substantially, but will be payable on an equal basis by the LPP candidates who will not be receiving articling income. As well, some law firms pay those costs for their articling students.
UNWORKABLE FOR THE FOLLOWING REASONS:
The pilot project simply puts off needed change;
The Law Society has numerous prior reports and examples of past bar admission programs and evaluations that could be adapted and provided online.
The ten month articling program and eight month LPP could be replaced with a comprehensive transitional pre-licensing program of two to three months with objective, measurable standards that assess substantive legal knowledge and business, professional and ethical issues.
Newly licensed lawyers who practice on their own will be better assisted in their first years through mentoring and other regulatory oversight to ensure public protection than can ever be provided in the prolonged, uneven and uncertain articling or LPP.
Convocation was not provided with a realistic estimate of the significant costs to be incurred to administer two streams of licensing candidates instead of one.
The minority report agrees with a Law Society Committee that considered the issues 40 years ago and concluded that articling be abolished at that time. Although the Articling Task Force majority recognizes that changes are required it is not ready to accept the reality recognized long ago that articling be abolished.
THE OBVIOUS
The LPP creates a cumbersome and costly licensing requirement that will do little to enhance the competence of newly licensed lawyers and will itself amount to another bar to entry to the profession.
Everyone knows that articling has inherent limitations based on individual articling experiences. Most articles train practitioners to work in sophisticated areas of practice supported by large firms in urban centres. Articling experiences simply do not generally equip young lawyers with the skills needed to successfully and ethically maintain small firm legal practices.
The profession which has been a strong proponent for articling as evidenced by the numerous submissions made during the consultation process has simply failed to provide sufficient articling positions to meet the demand.
There is no verifiable basis upon which to assert that articling achieves for the majority of the licensees, an experience satisfying the Law Society's regulatory responsibilities.
The assessment report to Convocation is not due until the end of the 2019 licensing year. We can expect that significant time will be needed to consider whether the pilot project has been a success, should be continued, modified or if the entire road map for reform, should be scrapped and reconsidered. That process may take Convocation into the year 2020 if not beyond. The grim reality is that there will be no final decision for the next 7 or 8 years.
In that period we will have processed about 2000 lawyers through a two tier licensing program. The profession and the public will conclude whether the tiers are equivalent or the lawyers are somehow to be distinguished because of their training experience. There also remains unanswered, serious questions raised by our Ontario Law Schools who have significant experience in the teaching of law and whether the Australian LPP experience is one we should model.
Perhaps the most astounding and egregious aspect of the Task Force report is its reliance upon a yet to be issued request for proposals. The Law Society will be seeking "interested parties" who for profit will provide the alternative pathway to licensing - the LPP. Convocation will be asked to approve the report without knowing the capacity of outside providers or the cost. There has not been any significant consideration given to outsourcing the second tier of the licensing process which somehow is to be equivalent to that of articling.
Bencher Julian Falconer has given notice of his intention to bring a motion reinstating a financial contribution by every lawyer as part of our annual dues to defray the significant increased costs to licensee applicants. Such a contribution had regularly been made by the profession up to 2011.
Perhaps an enlightened compromise can be reached to reflect the strengths of both the majority and minority reports as well as the many concerns coming from the profession.
This is undoubtedly the most important Law Society decision in years because it will impact on the recruitment and training of all future lawyers. IF we get this truly wrong we may invite questions about the profession's ability to self regulate.
The answer - End the requirement for articling.
Regards,
Blair
The Articling Task Force issued its final report entitled "A ROAD MAP FOR THE REFORM OF LAWYER LICENSING IN ONTARIO".
The report was received by Convocation on October 25, 2012. Because of the importance of the issues the proceedings were webcast and simultaneous twitter feeds were facilitated. During the discussions (which lasted 4.5 hours) there were nearly 1100 posts and 500 tweets with 166 unique comments.
The issue is now scheduled for determination by Convocation on November 22, 2012.
The Task Force has recommended a pilot project that will provide an alternative to articling through a new Law Practice Program (LPP).
The recommendation contemplates a 5 year transitional plan which provides:
The pilot project is to begin in the 2014-2014 licensing year;
The current ten month articling program will continue;
The LPP expected to be about 8 months long, will be an alternative path for those unable or uninterested in engaging in the traditional articling program;
A "final assessment" is to be introduced to test that candidates who either articled or took the LPP have the required practice competencies before being licensed;
The two paths to licensing will be monitored, assessed, compared and a final report for Convocation's consideration is due by the end of the fifth year.
MINORITY REPORT
Four Benchers released a minority report. Their dissent should be carefully reviewed and remembered by the Profession. The minority view called for the end of articling and dismissed the two tier licensing process on the basis that it is unfair and unworkable.
UNFAIR FOR THE FOLLOWING REASONS:
A disproportionate number of person who are unable to obtain articling positions appear to be from equality-seeking groups.
The Two tier system will create two classes of lawyers with the preferred group being those who articled.
Candidates in the lengthy LPP must be able to support themselves and thereafter work for free at a co-op type placement which may require temporary relocation and possibly be of limited or no value.
The cost of the new two tiered licensing process will increase substantially, but will be payable on an equal basis by the LPP candidates who will not be receiving articling income. As well, some law firms pay those costs for their articling students.
UNWORKABLE FOR THE FOLLOWING REASONS:
The pilot project simply puts off needed change;
The Law Society has numerous prior reports and examples of past bar admission programs and evaluations that could be adapted and provided online.
The ten month articling program and eight month LPP could be replaced with a comprehensive transitional pre-licensing program of two to three months with objective, measurable standards that assess substantive legal knowledge and business, professional and ethical issues.
Newly licensed lawyers who practice on their own will be better assisted in their first years through mentoring and other regulatory oversight to ensure public protection than can ever be provided in the prolonged, uneven and uncertain articling or LPP.
Convocation was not provided with a realistic estimate of the significant costs to be incurred to administer two streams of licensing candidates instead of one.
The minority report agrees with a Law Society Committee that considered the issues 40 years ago and concluded that articling be abolished at that time. Although the Articling Task Force majority recognizes that changes are required it is not ready to accept the reality recognized long ago that articling be abolished.
THE OBVIOUS
The LPP creates a cumbersome and costly licensing requirement that will do little to enhance the competence of newly licensed lawyers and will itself amount to another bar to entry to the profession.
Everyone knows that articling has inherent limitations based on individual articling experiences. Most articles train practitioners to work in sophisticated areas of practice supported by large firms in urban centres. Articling experiences simply do not generally equip young lawyers with the skills needed to successfully and ethically maintain small firm legal practices.
The profession which has been a strong proponent for articling as evidenced by the numerous submissions made during the consultation process has simply failed to provide sufficient articling positions to meet the demand.
There is no verifiable basis upon which to assert that articling achieves for the majority of the licensees, an experience satisfying the Law Society's regulatory responsibilities.
The assessment report to Convocation is not due until the end of the 2019 licensing year. We can expect that significant time will be needed to consider whether the pilot project has been a success, should be continued, modified or if the entire road map for reform, should be scrapped and reconsidered. That process may take Convocation into the year 2020 if not beyond. The grim reality is that there will be no final decision for the next 7 or 8 years.
In that period we will have processed about 2000 lawyers through a two tier licensing program. The profession and the public will conclude whether the tiers are equivalent or the lawyers are somehow to be distinguished because of their training experience. There also remains unanswered, serious questions raised by our Ontario Law Schools who have significant experience in the teaching of law and whether the Australian LPP experience is one we should model.
Perhaps the most astounding and egregious aspect of the Task Force report is its reliance upon a yet to be issued request for proposals. The Law Society will be seeking "interested parties" who for profit will provide the alternative pathway to licensing - the LPP. Convocation will be asked to approve the report without knowing the capacity of outside providers or the cost. There has not been any significant consideration given to outsourcing the second tier of the licensing process which somehow is to be equivalent to that of articling.
Bencher Julian Falconer has given notice of his intention to bring a motion reinstating a financial contribution by every lawyer as part of our annual dues to defray the significant increased costs to licensee applicants. Such a contribution had regularly been made by the profession up to 2011.
Perhaps an enlightened compromise can be reached to reflect the strengths of both the majority and minority reports as well as the many concerns coming from the profession.
This is undoubtedly the most important Law Society decision in years because it will impact on the recruitment and training of all future lawyers. IF we get this truly wrong we may invite questions about the profession's ability to self regulate.
The answer - End the requirement for articling.
Regards,
Blair
Wednesday, October 31, 2012
Supreme Court upholds results of contested election
The Supreme Court of Canda recently handed down its decision in Ted Opitz et al. v. Borys Wrzesnewskyj et al. It upheld the results of a closely-decided federal election that was contested by the loser on the basis of administrative "irregularities". The Court refused to disenfranchise voters on that basis. Here are exerpts from the decision.
“O was the successful candidate in the electoral district of Etobicoke Centre for the 41st Canadian federal election, with a plurality of 26 votes. The runner‑up, W, applied to have the election annulled, on the basis that there were “irregularities. . . that affected the result of the election” (s. 524(1)(b) of the Canada Elections Act (the “Act”)). The Ontario Superior Court of Justice granted the application, finding that 79 votes amounted to such irregularities and that, since this number exceeded the plurality of 26 votes, the election could not stand. O appealed to the Supreme Court of Canada as of right, and W cross‑appealed (s. 532(1) of the Act). The Chief Electoral Officer and the returning officer for Etobicoke Centre also brought a motion for directions, seeking to adduce fresh evidence, pursuant to s. 62(3) of the Supreme Court Act. ”
The S.C.C. held (4:3) the appeal is allowed, the cross-appeal dismissed, the motion to adduce fresh evidence also dismissed.
Justice Rothstein and Moldaver wrote as follows in joint reasons (at paragraphs 1-2, 44-50, 74-75):
“A candidate who lost in a close federal election attempts to set aside the result of that election. We are asked to disqualify the votes of several Canadian citizens based on administrative mistakes, notwithstanding evidence that those citizens were in fact entitled to vote. We decline the invitation to do so. The Canadian Charter of Rights and Freedoms and the Canada Elections Act, S.C. 2000, c. 9 (“Act”), have the clear and historic purposes of enfranchising Canadian citizens, such that they may express their democratic preference, and of protecting the integrity of our electoral process. Following these objectives and the wording of the Act, we reject the candidate’s attempt to disenfranchise entitled voters and so undermine public confidence in the electoral process.
At issue in this appeal are the principles to be applied when a federal election is challenged on the basis of “irregularities”. We are dealing here with a challenge based on administrative errors. There is no allegation of any fraud, corruption or illegal practices. Nor is there any suggestion of wrongdoing by any candidate or political party. Given the complexity of administering a federal election, the tens of thousands of election workers involved, many of whom have no on-the-job experience, and the short time frame for hiring and training them, it is inevitable that administrative mistakes will be made. If elections can be easily annulled on the basis of administrative errors, public confidence in the finality and legitimacy of election results will be eroded. Only irregularities that affect the result of the election and thereby undermine the integrity of the electoral process are grounds for overturning an election.
Central to the issue before us is how willing a court should be to reject a vote because of statutory non-compliance. Although there are safeguards in place to prevent abuse, the Act accepts some uncertainty in the conduct of elections, since in theory, more onerous and accurate methods of identification and record-keeping could be adopted. The balance struck by the Act reflects the fact that our electoral system must balance several interrelated and sometimes conflicting values. Those values include certainty, accuracy, fairness, accessibility, voter anonymity, promptness, finality, legitimacy, efficiency and cost. But the central value is the Charter-protected right to vote.
Our system strives to treat candidates and voters fairly, both in the conduct of elections and in the resolution of election failures. As we have discussed, the Act seeks to enfranchise all entitled persons, including those without paper documentation, and to encourage them to come forward to vote on election day, regardless of prior enumeration. The system strives to achieve accessibility for all voters, making special provision for those without identification to vote by vouching. Election officials are unable to determine with absolute accuracy who is entitled to vote. Poll clerks do not take fingerprints to establish identity. A voter can establish Canadian citizenship verbally, by oath. The goal of accessibility can only be achieved if we are prepared to accept some degree of uncertainty that all who voted were entitled to do so.
The practical realities of election administration are such that imperfections in the conduct of elections are inevitable. As recognized in Camsell v. Rabesca, [1987] N.W.T.R. 186 (S.C.), it is clear that “in every election, a fortiori those in urban ridings, with large numbers of polls, irregularities will virtually always occur in one form or another” (p. 198). A federal election is only possible with the work of tens of thousands of Canadians who are hired across the country for a period of a few days or, in many cases, a single 14-hour day. These workers perform many detailed tasks under difficult conditions. They are required to apply multiple rules in a setting that is unfamiliar. Because elections are not everyday occurrences, it is difficult to see how workers could get practical, on-the-job experience.
The provision for contesting elections in Part 20 of the Act serves to restore accuracy and reliability where it has been compromised. However, tension exists between allowing an application to contest an election on the basis of irregularities and the need for a prompt, final resolution of election outcomes. The Act provides, in s. 525(3):
(3) An application shall be dealt with without delay and in a summary way.
It should be remembered that annulling an election would disenfranchise not only those persons whose votes were disqualified, but every elector who voted in the riding. That voters will have the opportunity to vote in a by-election is not a perfect answer, as Professor Steven F. Huefner writes:
. . . a new election can never be run on a clean slate, but will always be colored by the perceived outcome of the election it superseded. New elections may also be an inconvenience for the voters, and almost certainly will mean that a different set of voters, with different information, will be deciding the election. Moreover, there can be no guarantee that the new election will itself be free from additional problems, including fraud. In the long term, rerunning elections might lead to disillusionment or apathy, even if in the short term they excite interest in the particular contest. Frequent new elections also would undercut democratic stability by calling into question the security and efficiency of the voting mechanics.
Permitting elections to be lightly overturned would also increase the “margin of litigation”. The phrase “margin of litigation” describes an election outcome close enough to draw post-election legal action: Huefner, at pp. 266-67.
The current system of election administration in Canada is not designed to achieve perfection, but to come as close to the ideal of enfranchising all entitled voters as possible. Since the system and the Act are not designed for certainty alone, courts cannot demand perfect certainty. Rather, courts must be concerned with the integrity of the electoral system. This overarching concern informs our interpretation of the phrase “irregularities . . . that affected the result”.
The following approach should be followed in determining whether there were “irregularities . . . that affected the result of the election”: An applicant must prove that a procedural safeguard designed to establish an elector’s entitlement to vote was not respected. This is an “irregularity”. An applicant must then demonstrate that the irregularity “affected the result” of the election because an individual voted who was not entitled to do so. In determining whether the result was affected, an application judge may consider any evidence in the record capable of establishing that the person was in fact entitled to vote despite the irregularity, or that the person was not in fact entitled to vote.
If it is established that there were “irregularities . . . that affected the result of the election”, a court may annul the election. In exercising this discretion, if a court is satisfied that, because of the rejection of certain votes, the winner is in doubt, it would be unreasonable for the court not to annul the election. For the purposes of this application, the “magic number” test will be used to make that determination."
Regards,
Blair
Tuesday, October 9, 2012
No Duty to Mitigate Where Notice Period Fixed
In Bowes v. Goss Power Products Ltd., a unanimous panel of five judges of the Ontario Court of Appeal confirmed that an employee has no duty to mitigate damages (unless the employment agreement stipulates such obligation) when the employment agreement fixes the notice period or termination pay in lieu of notice.
In this case, the employee signed an employment agreement for the position of executive vice president of sales and marketing for the employer. The agreement fixed his entitlement to six months’ notice or pay in lieu of notice if the employee’s employment was terminated. The agreement was silent on mitigation.
On April 13, 2011, the employer terminated the employee’s employment without cause and advised that he was entitled to salary continuance for the contractually fixed six month period. Shortly after termination, the employee secured a new job with an equivalent salary. The employer took the position that the employee had mitigated his damages and was only entitled to receive the minimum statutory entitlement under the Employment Standards Act. The employee disagreed and commenced an application in the Ontario Superior Court of Justice seeking a declaration that he was entitled to the full six months base salary in accordance with the agreement and that such payment was not subject to a duty to mitigate.
The applications judge held that simply because the parties agreed on the period of reasonable notice did not mean that the obligation to mitigate is ousted by agreement.
The Court of Appeal allowed the appeal. The Court held that by contracting for a fixed sum of termination/severance pay, the parties displaced the common law regime thereby contracting out of the Bardal “reasonable notice” approach or damages in lieu of notice.
The Court of Appeal gave the following reasons to support its conclusion:
a) the duty to mitigate is not applicable if the damages are either liquidated or a contractual sum;
b) It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer to later seek to obtain a lower amount at the expense of the employee by raising an issue of mitigation that was not mentioned in the employment agreement;
c) It is counter-intuitive for the parties to contract for certainty and finality, and yet leave mitigation as a live issue with the uncertainty, risk and litigation that would ensue as a consequence; and
d) A broad release in an employment agreement demonstrates an intention to avoid resort to the courts, confirms a desire for finality, and bolsters a finding that the parties intended that mitigation would not be required unless the agreement expressly stipulates to the contrary.
Bowes v. Goss Power Products Ltd., 2012 ONCA 425
Regards,
Blair
In this case, the employee signed an employment agreement for the position of executive vice president of sales and marketing for the employer. The agreement fixed his entitlement to six months’ notice or pay in lieu of notice if the employee’s employment was terminated. The agreement was silent on mitigation.
On April 13, 2011, the employer terminated the employee’s employment without cause and advised that he was entitled to salary continuance for the contractually fixed six month period. Shortly after termination, the employee secured a new job with an equivalent salary. The employer took the position that the employee had mitigated his damages and was only entitled to receive the minimum statutory entitlement under the Employment Standards Act. The employee disagreed and commenced an application in the Ontario Superior Court of Justice seeking a declaration that he was entitled to the full six months base salary in accordance with the agreement and that such payment was not subject to a duty to mitigate.
The applications judge held that simply because the parties agreed on the period of reasonable notice did not mean that the obligation to mitigate is ousted by agreement.
The Court of Appeal allowed the appeal. The Court held that by contracting for a fixed sum of termination/severance pay, the parties displaced the common law regime thereby contracting out of the Bardal “reasonable notice” approach or damages in lieu of notice.
The Court of Appeal gave the following reasons to support its conclusion:
a) the duty to mitigate is not applicable if the damages are either liquidated or a contractual sum;
b) It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer to later seek to obtain a lower amount at the expense of the employee by raising an issue of mitigation that was not mentioned in the employment agreement;
c) It is counter-intuitive for the parties to contract for certainty and finality, and yet leave mitigation as a live issue with the uncertainty, risk and litigation that would ensue as a consequence; and
d) A broad release in an employment agreement demonstrates an intention to avoid resort to the courts, confirms a desire for finality, and bolsters a finding that the parties intended that mitigation would not be required unless the agreement expressly stipulates to the contrary.
Bowes v. Goss Power Products Ltd., 2012 ONCA 425
Regards,
Blair
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