The new judicial policy promoting summary judgment motions as a way of disposing of law suits, rather than trials, has become all the rage in lawful dismissal litigation. Counsel acting for wrongfully dismissed employees, who often operate on a contingency basis, have welcomed this development for obvious reasons.  The courts appeared to be totally receptive. However, there is still one aspect of a typical wrongful dismissal case that may require a special treatment where the case is brought to court on a summary judgment motion.

In most wrongful dismissal cases, mitigation is raised by the former employer as part of its defence.  Terminated employees have a duty to make reasonable efforts to mitigate their loss of income by finding new employment.  If a plaintiff fails to make reasonable efforts to find new employment, the court may reduce what would otherwise have been a reasonable notice period.

This may give rise to a problem under the following scenario.  Assume that an employee loses his job and sues promptly for damages for wrongful dismissal fairly promptly.  The action is defended and the plaintiff brings a motion for summary judgment.  Assume that the motion for summary judgment is heard only a few months after the actual termination has taken place.

At that point, the motions judge will be asked to determine the notice that should have been provided to the plaintiff by the former employer. Now assume that the period of reasonable notice as set by court extends beyond the period of time between the termination and the hearing of the motion.  The court may rule that up to the date of the motion, the plaintiff has made reasonable attempts to find another job.  What is the court to do about the fact that the period of reasonable notice will extend into the future?  How is the court to make sure that the plaintiff continues to seek new employment? And what happens to the judgment if the plaintiff actually does find new employment before the end of the notice period?

This is a relatively new problem. Historically, wrongfully dismissed plaintiffs did not bring motions for summary judgment because the courts were not interested in hearing them.  This problem did not arise.

The recent case of Lalani v. Canadian Standards Association summarizes the law on the point and adds a new option for the court to consider.

Traditionally, the court employed 3 different approaches to the problem of a motion being heard before the end of the notice period.

Firstly, the court could order that the plaintiff’s damages would be discounted by a contingency for re-employment during the balance of the notice period.

Secondly, judgment could be granted subject to a trust in favour of the employer. In the event that the employee did find a new job during the notice period, he would have to account to the employer in the sense that portion of the judgment covering the period in which the employee now had a new a job would have to be refunded.

Thirdly, the court could grant the employee a partial summary judgment for the period up to the date of the motion. The parties would then have to return to court on a subsequent date, either once the employee had a new job or following the end of the notice period, for a determination of the balance payable to the employee.

In the Lalali case, the motion court judge put forward a fourth approach, which a judge described as a hybrid between the second and third approaches previously used by courts.

In this case, the judge granted a judgment for the full amount. The funds paid to the plaintiff during the balance of the notice period were impressed with a trust in favour of the employer.  However, the plaintiff was ordered to account to the employer on a monthly basis with respect to his mitigation efforts and any mitigation income earned during the notice period from a new job.  The judge’s hope was that in the way, the parties might be able to avoid the time and expense involved in returning to court on a future date to deal with any refund to which the employer was entitled.

Each of these approaches brings with it advantages and disadvantages. When it comes to mitigation, regardless of the approach taken, much will depend the honesty and good faith of the former employee in terms of his willingness to report on his or her having found new employment, and the legitimate start date of that employment.

There is yet a further approach, of course, which is to develop a policy of refusing to entertain motions for summary judgment in wrongful dismissal cases where the hearing date is likely to pre-date the expiry of the reasonable period of notice. That would avoid the problem but, on the other hand, it would also deprive a terminated employee of what might be much needed income during a period of unemployment.  It is also inconsistent with the current policy encouraging motions for summary judgment.

The recent case of The Wish Group Inc. and Cianciulli v. De Vrij and Interactive Brokers Canada Inc. is an interesting review of the “know your client” obligations of a discount broker.

In this case, Mr. Cianciulli authorized Mr. De Vrij, a person claiming to have substantial experience as a trader in the financial industry, to open a corporate account for Cianciulli’s personal holding company, The Wish Group Inc., at Interactive Brokers Canada Inc.  Cianciulli signed a corporate resolution appointing De Vrij as an officer of The Wish Group and granted him sole trading authority over the account.  He then transferred $2,000,000 into the account.

De Vrij invested those funds in commodity futures and lost over $1.8 million over a period of 3 months.

Cianciulli and Wish Group then sued De Vrij and Interactive for the losses.  The matter went to trial against Interactive only.

Interactive is a discount broker.  It does not provide investment advice to clients.

Nevertheless, Cianciulli asserted a claim against Interactive in negligence.  He alleged that Interactive breached its “know your client” and “gatekeeper” obligations by failing to make necessary inquiries of Cianciulli before opening the account under De Vrij’s trading authority.  As a result, the plaintiffs wished to hold Interactive responsible for the investment losses arising from De Virj’s mismanagement of the funds.

The expert witness testifying on behalf of Cianciulli at the trial insisted that Interactive should have been alerted to a number of red flags both before and after the account was opened.  As all brokers, including discount brokers, are subject to a “know your client” obligation, it was required to “use due diligence to learn and remain informed of the essential facts relative to every customer and to every order or account accepted”, as set out in regulatory requirements and obligations imposed by the rules governing the behavior of stock brokers in Ontario.

Even though Interactive was not in the business of providing investment advice, so that it did not have the obligation to make sure that investments were suitable for its clients, it is still required to obtain certain information before opening a corporate account.  In particular, it must identify all beneficial owners of the company with an interest of 10% or more, verify the identity of the beneficial owners, obtain the names and occupations of its Directors, and obtain a certificate of corporate status.  It must also obtain a corporate resolution to ascertain who is authorize to trade in the account on behalf of the company, and must verify the identity of that individual.

In addition, investment dealers must act as gatekeepers, meaning that they must exercise diligence when faced with situations that raise a potential of illegal activity.  In particular they must respond to red flags, such as information known to the dealer that raises an issue respecting compliance with securities laws.

In this case, Interactive knew that The Wish Group was a holding company with a net worth of about $5,000,000.  De Vrij characterized himself as President and Chief Investment Officer.  According to the plaintiff’s expert, Interactive should have questioned why a relatively small company like The Wish Group would have required a full time Chief Investment Officer.  Furthermore, Interactive should have tried to understand better the relationship between De Vrij and The Wish Group.

The principal of Interactive had known De Vrij for years and knew that he had acted as a professional investment advisor in the past.  According to the plaintiff’s expert, he should have made further inquiries to determine if De Vrij was truly a corporate officer or was in fact acting as an investment advisor.

Interactive’s expert insisted that Interactive had complied with all “know your client” requirements.

The trial judge agreed with the position taken by Interactive.  It had to seek specific instructions from De Vrij to open a corporate account and De Vrij had the authority of Cianciulli to give those instructions.  It obtained the necessary corporate documentation and information about The Wish Group and its beneficial owner and it received duly authorized trading authority.  It had obtained the corporate resolution of The Wish Group setting out who had trading authority, signed by Cianciulli as sole director and beneficial owner.  It was under no obligation to contact Cianciulli to inquire about his relationship with De Vrij, the person being granted trading authority.  It was under no obligation to question why a small company would have a chief investment officer and it had no obligation to inquire into exactly what role was being played by De Vrij.  There were no red flags warranting further action.

There are number of cases that have held dealers liable for losses for having failed to comply with “know your client” obligations.  Generally speaking these cases involving dealers that provide investment advice.  That was not the case with Interactive, a discount broker.

In the result, the action against Interactive was dismissed.

There was one other fact which, although does not relate precisely to the obligations of Interactive in this case, may well have swayed the judge’s view.

It turns out that very shortly after De Vrij began trading on the account, it sustained a loss of about $500,000.  Cianciulli found out about it and was livid.  He emailed De Vrij and demanded that the money be replaced.  De Vrij responded by indicating that the losses were not abnormal and that they could be recouped.  Cianciulli decided to give De Vrij a second chance.

De Vrij went on to lose almost all of the balance of the funds.

The trial judge was not impressed by Cianciulli’s behavior.  While he was not required to calculate damages because he had decided to dismiss the action, he did say that if he was wrong, he would have concluded that Cianciulli’s damages would be limited to the $500,000 of which he had become aware fairly early on.  His decision to leave De Vrij in place constituted a failure to mitigate his damages.  Presumably in the sense that from that point forward, Cianciulli was taking his chances.  This suggests that the decision would have been different had Cianciulli pulled the plug on De Vrij’s authority on the spot.  The fact that he left De Vrij in place may well have played a role in the judge coming to the conclusion that Cianciulli was, as they say, the author of his own misfortune.

The recent case of Palkowski v. Ivancic provides an excellent illustration of the extent to which the court will strive to use all the tools at its disposal to create a result that is fair, even when neither party to the dispute deserves favourable treatment.

In this case, the trial judge was required to decide between two parties, “neither of whom has demonstrated high moral fibre”. The Court found that the parties “worked together to create a sham transaction that was intended to defeat at least one of the plaintiffs’ creditors…”.  He observed that he “must decide between two parties to a decidedly dishonorable transaction in order to settle the equities as between them”.  Accordingly, the judge concluded that he would choose “the least unjust remedy that [I] believe the authorities enable me to fashion…Justice, even rough justice, is better than none at all”.

Mr. Polkowski and Mr. Ivancic had both been involved in the construction industry and were retired. By the date of trial, Mr. Polkowski was 68 years old and Mr. Ivancic was 80.  They had been friends for many years, until shortly before this action had begun.  By the time it reached trial, the lawsuit had gone on for almost 10 years.

By 1996, Mr. Polkowski was in financial trouble. He and his wife owned a home which they had purchased for $600,000 in 1988.  This was his only significant asset by 1996.  He had lost money in two real estate transactions and he had significant debts.  He had debts of over $500,000 with three creditors, one of which had obtained a judgment against him.

Mr. Polkowski realized that he had to do something. He did not want to sell the family home.  So he made a deal with Mr. Ivancic.

Their plan was to make it appear as though Mr. Polkowski had sold the home to Mr. Ivancic. Mr. Ivancic would pay some money and take title to the house, although no keys would be handed over, and the Polkowski family would never move out of the house.

Mr. Polkowski obtained a valuation of the home at the time of about $600,000. He then went ahead and sold it to Mr. Ivancic on paper, for $350,000.  While the two men cooked up some paper work that looked like there had been an offer, a counter-offer, and further negotiations before the final purchase price was set, the judge found that none of this was real and that it was always intended that the transaction take place at $350,000.

Mr. Polkowski then presented the apparent situation to his creditors and succeeded in settling with each of them at amounts far less than the actual debts. In fact, out of $350,000 actually paid by Mr. Ivancic so that Mr. Polkowski could satisfy these debts, there was some money left over for Mr. Polkowski.

Mr. Ivancic had borrowed the money to make that advance. Over the ensuing decades, Mr. Polkowski paid Mr. Ivancic $1500 per month to keep Mr. Ivancic’s loan in good standing.  He also made improvements on the house and generally behaved as if he was the owner all along.

In 2004, Mr. Ivancic evidently decided that he wanted it all. He insisted that Mr.Polkowski stop renovating the house.  In 2005, the parties met to try and straighten things out.  They were unable to do so.  Mr. Polkowski demanded that the title to the property be given back to him.  Mr. Ivancic refused.  Mr. Polkowski made a number of offers to make Mr.Ivancic financially whole.  They were declined.

Mr. Polkowski then sued, claiming that Mr. Ivancic would be unjustly enriched if he was able to retain title to the house, and alternatively that Mr. Ivancic’s interest in the house was subject to a constructive trust in favour of Mr. Polkowski.

At trial, the Court had no hesitation in finding that the transaction had been a sham. Everyone knew that the property was worth at least $250,000 more than Mr. Ivancic had paid, that the intention was to change legal ownership without changing beneficial ownership (although the lack of anything written made this legally impossible), and that the whole scheme was designed to deceive Mr. Polkowski’s creditors.

So in essence, the Court was faced with a situation in which it would have to either allow Mr.Ivancic to have the title, for much less than the house was worth, or devise some way for Mr. Polkowski to get the title back subject to some type of compensation – in circumstances in which both parties had been completely dishonourable.

In the end, the trial judge found a creative way to accomplish what he wanted, which was to allow Mr. Polkowski and his family to remain in the home subject to compensation. He did that through the Conveyancing and Law of Property Act, which provides that where a person makes lasting improvements on land thinking that it is his own, he is entitled to a lien on it to the extent of the enhancement of its value or, in the right circumstances, to retain the land subject to providing compensation.

This enormous discretion gave the judge the opportunity to fashion the desired remedy. He ordered that the title be transferred back to Mr. Polkowski upon payment by Mr. Polkowski of a sum which he calculated as being not less than $506,000, made up of credits for the amount that Mr. Ivancic had been unjustly enriched by having acquired title to a $600,000 house for $350,000, together with interest and a further credit in respect of the value of the improvements made by Mr. Polkowski over the years.

This sensible result brought 10 years of acrimonious and probably very expensive litigation to a close. The judge specifically commented that he found this task to be distasteful.  But he was able to arrive at fair result using a novel and imaginative strategy to get there.

The recent case of Data & Scientific Ink v. Oracle Corporation may open the door to a cause of action against a party to a renewable contract for failure to give the other contracting party notice of non-renewal.

In this case, the plaintiff had a contract with the defendant, a multi-national computer technology company carrying on business through partner network conduits.  The plaintiff was a member of the network under an agreement which was said to be renewable annually at the sole discretion of the defendant.

The contract specifically provided that the plaintiff could apply for renewal on an annual basis, and the defendant would notify the plaintiff if it accepted its application for renewal annually.

The plaintiff had been a member of the partner network from 1994 to 2014. Every year for 20 years, the agreement was renewed without interruption or incident.  The plaintiff’s business and its reliance on the relationship with the defendant grew over the years.

In the fall 2014, the plaintiff was invited by the defendant to renew the agreement as in previous years.  After an unsuccessful attempt to make its request for renewal online, it made the request in a letter to the defendant.  Several weeks later it received a written response from the defendant saying that the agreement would not be renewed notwithstanding the long-term relationship and notwithstanding the fact the defendant had actually invited the plaintiff to submit an application for renewal.

The plaintiff had received no prior notice of the defendant’s decision not to renew.

The plaintiff sued the defendant for damages for failing to give reasonable notice of non-renewal.  The plaintiff took the position that the defendant had been obliged to exercise his discretionary renewal power reasonably and that its termination of the 20 year relationship without notice was unreasonable.

The defendant brought a motion to strike out the claim on the basis that it failed to disclose a reasonable cause of action.  In other words, the defendant asked the court to conclude that there is no duty in law to provide reasonable, or any notice of a decision not to renew a renewable contract.

At the hearing of the motion the defendant agreed that as a general rule, discretionary contractual powers must be exercised reasonably as a matter of good faith.

However, the defendant also referred to previous judicial authority to the effect that absent active dishonesty, the reasonable exercise of discretionary contractual powers does not apply in case of contract renewals.  The defendant asked the court to accept that as a general principle, the obligation to exercise discretionary contractual powers reasonably simply does not apply in contract renewal situations, ever.

The Court did not accept that submission.  The Court concluded both that there is a judicially recognized requirement that parties perform their contractual duties honestly and reasonably, and that as a newly recognized duty, there is a new general duty of honesty in contractual performance.  This new duty of honesty in contractual performance flows directly from the general organizing principle of good faith.

As a result, there may well be an argument available that in contract renewal situations including a “sole discretion” non-renewal power, the discretion must be exercised reasonably in the sense that appropriate consideration ought to be given to the legitimate interests of both contracting parties.  As part of that consideration, notice of an intention not to renew might well be required in some circumstances.

Accordingly, the Court declined to strike out the statement of claim on the basis that it could not succeed.  The judge felt that it was not plain and obvious that the claim had no chance of success and accordingly, the plaintiff was entitled to proceed with the action.

Needless to say, nothing in the case involved a determination that the plaintiff was going to win at trial.  The case stands for the proposition only that a party is entitled to assert a claim based on the proposition that the discretionary power relating to a renewal provision must be exercised reasonably and a reasonable exercise of that discretion may include providing notice of an intention not to renew.

The recent case of Tetra Consulting and Cassar v. Continental Bank of Canada may advance the law on the manner in which the Court will calculate reasonable notice on the case of a dependent contractor.

In this case, the defendant Bank retained a consulting firm called, Tetra Consulting, to help it obtain approval from the Office of the Superintendent of Financial Institution to operate as a Schedule 1 bank under federal banking legislation. It was understood that once such approval was obtained, the owner of the consulting firm, Lewis Cassar, would become an employee of the Bank.

Approval was obtained in December 2014 in which time Cassar was appointed to several offices in the Bank. In the next month, before a formal employment agreement could be signed, the Bank venture came to an end, and the Bank terminated the relationship with Cassar and his consulting firm.  The Bank refused to provide any pay in lieu of notice on the ground that Cassar had never been employed by the Bank.

Cassar and his consulting company sued and brought a motion for summary judgment.

In his decision, the motions judge concluded that Cassar had become an employee of the Bank even if the drafting of an employment contract had not been completed.  The final agreement, if it had been completed, would simply have documented a relationship that was already in place.

The interesting question, however, had to do with the relevance of the fact that Cassar had been doing work at the Bank through his consulting company since January 2013, almost two years before Government approval had been obtained.

The law appears to be well established in Ontario that a worker who provides service only for one company but is not an employee will usually be considered to be a dependent contractor if he occupies space at the company’s premises, remains subject to the control of the company at all times, and represents himself to third parties as an employee. It has been clear for some time that a dependent contractor is entitled to reasonable notice of termination by the company.  What has been less clear is the extent of that notice and particularly, how such a notice period would compare to the worker’s notice entitlement if he had been an employee.

In this case, the Court had no hesitation in finding that Cassar had been a dependent contractor for almost two years. As such he was entitled to the same notice as would have been the case had he been an employee.  The Court concluded that there is no distinction between the amount of notice that a company must provide a dependent contractor or an employee performing the same tasks.

While the decision in this case certainly makes sense given the relationship between Cassar and the Bank, it should be borne in mind that an individual may be considered to be a dependent contractor in circumstances in which he does not necessarily devote one hundred percent of his working time to a particular company – such as, for example, where a dependent contractor continues to maintain a relationship with one or more other clients although only to a very small extent. There are other factors for a court to consider coming to the conclusion that an individual is a dependent contractor that also might not be totally consistent with an employment relationship.

In such cases, I would suggest that a period of reasonable notice of termination might not be equivalent to the notice period for an employee. In my view, this case does not stand for the proposition that a dependent contractor will be entitled to the same notice of termination as an employee in every case.  That principle should only apply where, as in the case of Mr. Cassar, a worker’s relationship with the company is indistinguishable from that of an employee.

The recent case of Gordon v. Altus Group Limited provides an interesting insight into one circumstance, at least, in which punitive damages will be awarded against a former employer which has acted egregiously.

Alan Gordon had a company which sold its assets to Altus in November 2008.  A portion of the purchase price was connected to the performance of the business after the closing, with the price to be adjusted if appropriate by February 2010.  Gordon was hired to continue working in the business, as an Altus employee.

Gordon’s employment contract with Altus provided for payout provisions if the contract was terminated other than for cause, as well as a non-competition clause.

As February 2010 approached, issues arose between Gordon and Altus.  Altus complained that Gordon was difficult to work with, that he was involved in a conflict of interest, and that he failed to inform Altus that one of the employees of the business taken on by Altus had been charged with fraud.  At the end of March 2010, Altus fired Gordon, alleging cause and providing no notice.  Altus did insist, however, that Gordon honour his non-competition obligation in his contract.

Although it is not clear from the judgment, it also appears that before he was dismissed, the dispute between Gordon and Altus relating to a possible adjustment in the purchase price for the business had escalated to the point that Gordon commenced an arbitration proceeding under the sale agreement to determine the issue.

The matter went to trial in the summer of 2015.  The trial judge had no hesitation in finding that the allegations of cause were simply examples of “Altus puffing up complaints to justify its peremptory dismissal of Mr. Gordon”.  The court concluded that if Altus did have complaints concerning Mr. Gordon’s behavior, it should have imposed progressive discipline.

The court went on to find that the real basis for the termination had to do with the arbitration that Gordon had commenced to determine the appropriate adjustment to the purchase price for the business, if any.  The court characterized this conduct as “outrageous because Altus got mean and cheap in trying to get rid of an employee as they approached arbitration…”.

The court observed that according to the Supreme Court of Canada, “punitive damages may be considered if there is an independent actionable wrong” on the part of Altus.  An actionable wrong can be established with a breach of a distinct and separate contractual provision or other duty such as a fiduciary duty.  In this case, the court found that Gordon’s termination as a result of his having given notice to pursue arbitration under the purchase agreement constituted an independent actionable wrong.  The court awarded punitive damages at $100,000 “because that sum of money notes the harsh treatment to Allen Gordon over an extended period of time as a means of sanctioning Altus for its terrible conduct”.

Quite frankly, the decision is difficult to understand.  It is difficult to see how the invoking of the arbitration clause would be anything more than simply the motivation for the firing.  One might easily consider such conduct worthy of an award of punitive damages, but to call it an independent actionable wrong does seem to be a bit of a stretch.  Without doubt, the court was particularly upset with what it found to be retaliatory conduct on the part of the former employer.  That would appear to the be the only real issue setting this case apart from any other case in which an employer alleges cause and fails to prove it.  As such, the case may well stand for the position that wherever retaliatory conduct can be demonstrated, the door to a possible award of punitive damages opens up.

In the past, I have published a number of posts commenting on the difficulty in obtaining specific performance in the case of a developer attempting to complete a commercial transaction with an unwilling vendor.

Plaintiffs seeking such relief typically register and attempt to maintain certificates of pending litigation on the properties in question so that they are secured in the event that specific performance is ultimately ordered. In order to do so, it is accepted jurisprudence that the purchaser must satisfy the court that the property is unique. Unfortunately, that has proven to be a difficult task in the context of commercial acquisitions.

Nevertheless, the recent case of Northfield (Waterloo) Development Inc. v. North American Acquisition Corporation may signal a somewhat different view of the issue.

In this case, Northfield owned a parcel of vacant land at the intersection of two regional roads in Waterloo, Ontario. North American, an experienced developer, entered into an agreement with Northfield to purchase the land for development as a shopping centre. The agreement was conditional on North American obtaining the necessary rezoning and other municipal approvals.

Over the course of the next few years, North American spent over $500,000 in fees, costs and expenses and ultimately succeeded in obtaining rezoning. During that time, it became apparent that the value of the property had increased substantially, both as a result of the investment by North American in obtaining the rezoning and simply as a result of normal increases in real estate values over time.

When the closing date approached, Northfield refused to close. Litigation ensued. In the course of the litigation, North American registered a certificate of pending litigation on the title to the property to prevent Northfield from selling it to anyone else. Northfield brought a motion to remove the certificate on the grounds that, among other things, the land was in no way unique and if the court ultimately ruled in North American’s favour at trial, damages would be an adequate remedy.

In support of its position of the motion to remove the certificate, Northfield referred to a variety of cases in which the court had made it clear that where land is purchased for investment, the land will not be considered unique and the certificate will not be allowed to stand.

In this case, however, the court took a different approach. The court observed that according to the City of Waterloo Planning Department’s own file, the intersection was considered an important intersection in the City. North American had invested a great deal of time and money in the development, arranging for it to be rezoned and thereby giving it a very different character and value than had been the case at the time that the Agreement of Purchase and Sale was signed. Perhaps most importantly, the court accepted that North American’s intention was to build a shopping centre and then retain it on a long-term basis. In other words, this was not a situation in which the property was to be treated as some type of inventory to be sold at the next opportune moment. Nor was it to be looked at merely as an investment in the sense of an acquisition strictly for the purpose of profiting from its anticipated income stream.

In the result, the court was satisfied that even though this was a commercial transaction, the property could be considered unique. The certificate was allowed to stand.

In my view, this was an eminently sensible solution. As has already been observed in earlier cases, uniqueness in this context is not synonymous with singularity. The property does not have to be a one-of-a-kind property in order to be considered unique. Uniqueness can also be measured by factors such as the precise location of the lands, the pre-closing investment made in the property by the prospective purchaser, and the purchaser’s intentions following acquisition.