Lawsuits and Privacy Legislation – How do they Interact?

As litigators know, the Rules of Civil Procedure provide for what is usually referred to as the “Deemed Undertaking” between parties to a lawsuit not to disclose documents gathered in the course of a lawsuit to parties outside of that lawsuit unless compelled to by law.

This rule does not relate to the obligations of a party to disclose documents to the other party. The Rules specifically require every party to a lawsuit to disclose to the other party the documents in that party’s possession, custody or control that are relevant to the lawsuit.

On a number of occasions, I have requested production of a document from opposing counsel in the context of a lawsuit only to be met with a refusal for two reasons: firstly, because the document is allegedly not relevant, and secondly, because production of the document would cause the producing party to violate the Personal Information Protection and Electronic Documents Act (“PIPEDA”). PIPEDA is a data privacy legislation governing the manner by which private organizations collect, use and disclose personal information in the course of commercial business. Among other things, it regulates the basis upon which a party can and cannot disclose information that reveals personal information about a third party.

Such an objection gives rise to the broader question as to whether or not PIPEDA is ever available to a party attempting to avoid the disclosure of a document in the course of a lawsuit simply because it contains information about a third party.

The issue was specifically dealt with by the Office of the Privacy Commissioner of Canada last year in PIPEDA Case Summary Number 2016-011, resulting in an interesting ruling.

In that case, after a car accident leading to a lawsuit, the insurance company for the Defendant retained a psychiatrist to conduct a psychiatric assessment of the Plaintiff. After that was completed, the Plaintiff requested access to his personal information held by the psychiatrist.

The psychiatrist would only provide a limited amount of information including a redacted copy of his report. The Plaintiff felt that there was additional information to which he was entitled and also that some of the information held by the psychiatrist might not be accurate. Accordingly, he filed a complaint with the Office of the Privacy Commissioner and requested a ruling.

The Commissioner ruled that PIPEDA had no application to this situation. PIPEDA applies to the collection of information in the course of a commercial activity. In this case, the collection and use of the Plaintiff’s information by the psychiatrist took place for the purpose of defending a lawsuit and not a commercial activity. While there was commercial activity between the Defendant in the lawsuit and his insurance company, there was no commercial activity between the Plaintiff and the Defendant, and accordingly, none between the Plaintiff and the Defendant’s insurer or its psychiatrist.

Accordingly, it seems that PIPEDA cannot be relied on as a reason to refuse to produce personal information in the context of a lawsuit if the information was collected for a purpose other than commercial activity as between the parties. If such information is not protected by some type of privilege, PIPEDA cannot be relied on to avoid its production.

Can a Lawyer’s Duty to his Client Extend Beyond the Scope of his Retainer?

 

In the recent case of Meehan v. Good, the Ontario Court of Appeal dealt with a situation in which a lawyer was retained to represent a client with respect to the assessment of the accounts of the client’s former lawyer.

The former lawyer had represented the client in the settlement of a personal injury action and had rendered an account which the client wished to challenge by way of assessment.

The client entered into a written retainer agreement with the new lawyer that specified that the new lawyer was being retained to conduct the assessment proceeding. Nowhere in the retainer agreement was there any mention of a duty on the new lawyer to advise the client about a possible negligence action against the former lawyer, or any limitations issue in that connection (i.e., any time limit on the bringing of a negligence action against the former lawyer).

In this case, it would appear that the client may have had a valid claim of negligence against the former lawyer but that the claim was not brought in time. The client sued the new lawyer alleging that the new lawyer had been negligent in failing to warn him about the time limit. The new lawyer moved for summary judgment to dismiss the claim on the basis that he owed no duty of care to the client to discuss that point since the scope of his obligations to the client were limited by the wording in the written retainer. The motions judge agreed with the new lawyer and dismissed the claim. The client appealed to the Court of Appeal.

The Court of Appeal noted that the new lawyer had advised the client on a number of occasions to obtain legal advice elsewhere regarding any issue of negligence. The client acknowledged having received that advice.

The motions judge had determined that it would not be necessary to make any findings as to whether or not the new lawyer had, in fact, advised the client about the limitation period in relation to a possible negligence claim.

The Court of Appeal had a different view of the matter. It pointed out that to determine whether a lawyer owes a duty of care to a client, a court has to examine all of the surrounding circumstances defining the relationship between the lawyer and the client including, but not limited to, the scope of a written retainer. Where the client alleges that the lawyer’s duty extends beyond the retainer, the court has to meticulously examine all of the surrounding circumstances including the nature of the instructions, and the sophistication of the client, to determine whether a duty is owed beyond the four corners of the retainer agreement.

In this case, the motions judge did not do this. The motions judge focused narrowly on the written retainer in order to determine that no duty was owed. The motions judge did not take into account the fact that over the course of the retainer, the new lawyer communicated his views about the former lawyer’s competence, the new lawyer advised the client to raise the issue of negligence in the course of the assessment proceeding itself, and the new lawyer specifically suggested that the client obtain advice from other counsel as to a potential negligence claim. In the view of the Court of Appeal, those facts should have been taken into account in the analysis as to whether or not it might be said that the new lawyer also had a duty to point the limitations issue out to the client.

Having failed to consider that issue, the motions judge erred. The Court of Appeal allowed the appeal and ordered that the matter proceed to trial.

Both lawyers and clients often assume, mistakenly, that the scope of the lawyer’s duties and obligations to the client is defined by the strict terms of a written retainer agreement. This case is a useful reminder of the fact that this is not so. It is entirely possible that in the course of a professional relationship, a lawyer may take on responsibilities to his or her client, intentionally or not, that go beyond the strict terms of a written retainer agreement. In such cases, if any such additional duty or responsibility is not fulfilled, the client may well have a right of recovery.

Termination for Cause: How Serious Does the Transgression Have To Be?

The recent case of Sinnathamby v. The Chesterfield Shop Limited (case and endorsement) provides a useful reminder of the very high threshold to be met by an employer terminating for just cause.

In this case, the Plaintiff had been a 14-year employee of the Defendant.  On September 10, 2010, she called in sick.  Three days later, her supervisor telephoned her to discuss her absence and she apparently indicated that she was ill, without any indication of when she might be able to return to work.  She did not return to work.  On October 4, 2010, she was fired because she had failed to provide notes from her doctor supporting her continued absence from work as required by the Defendant’s written policy.

Immediately after her October 4th termination, she faxed to her supervisor three doctor’s notes dated September 10, 17, and 27, 2010.  The first note indicated that she was unable to work but that she may be able to return to work on September 20th.  The other notes did not specify a return date.

The Plaintiff brought a motion for summary judgment.  There were significant disputes between the parties as to what had taken place between September 10th and October 4, 2010.  Nevertheless, the Judge concluded that, based on the evidence that was before him, he was able to make a final ruling on the matter and he proceeded to do so.

The Plaintiff claimed that she had telephoned her supervisor on the evening of September 9th to indicate that she was ill and would not be coming in to work the next day.  She claimed that she had made additional telephone calls to him and left a series of voicemail messages, describing her medical circumstances.  She testified that she had a number of conversations with her supervisor, in which the supervisor demanded that she either return to work or provide a doctor’s note specifying a return date because no other doctor’s note would be accepted.  She denied any knowledge of a company policy about doctor’s notes.

The supervisor denied that any communications had taken place at all, other than a telephone call on September 22nd in which the Plaintiff was told that a doctor’s note would have to be provided to support her absence.  According to the supervisor, there was no discussion as to what the doctor’s note had to say.  On October 4th, not having heard back from the Plaintiff, the supervisor called the Plaintiff to say that because she had not provided a doctor’s note, despite the request and in breach of the company’s employment policy, her employment was being terminated for cause.

The Judge reviewed the facts carefully and made the following findings.  Firstly, he accepted the fact that the company had a policy about doctor’s notes and, furthermore, that this information had been conveyed to the Plaintiff when the supervisor specifically asked her for a doctor’s note.  He rejected the Plaintiff’s evidence that she was never told of this policy.  He also believed the supervisor’s evidence that at no time did the Plaintiff actually explain to him the nature of her illness or indicate that she had in her possession a doctor’s note saying that she could return to work on September 20th.

The Judge accepted that the Plaintiff was sick when she called in sick, but that she had failed to provide doctor’s notes notwithstanding her supervisor’s request until after she had been fired.

However, that was not the end of the inquiry, notwithstanding the fact that she had been fired for failure to provide medical documentation contrary to a specific policy and a request from her supervisor.  The question that had to be answered was whether or not that the Plaintiff’s conduct was sufficiently serious to justify dismissal without notice.  Depending on the circumstances, an employer must consider alternatives to summary dismissal without notice before terminating for cause.  A balance must be struck between the severity of an employee’s misconduct and the penalty.

The essential question is whether or not the employee has engaged in misconduct that the Court of Appeal has defined as “incompatible with the fundamental terms of the employment relationship”.  If misconduct is sufficiently serious as to strike at the heart of the employment relationship, termination with cause is justified.  As a result, the Court has to determine the nature of the misconduct, consider the surrounding circumstances, and then determine whether or not termination is a proportional response.

In this case, the Plaintiff did nothing illegal or dishonest.  She called in sick when she really was sick.  While the Defendant’s request for a doctor’s note was quite reasonable, there was no evidence as to the consequences to this Defendant of the doctor’s note being provided several weeks late.  While the Plaintiff disobeyed a reasonable company policy and a direct request from a supervisor, her failure to provide a doctor’s note in a timely way was not an essential condition of employment and her failure to do so was not a breach of faith or trust inherent in the work relationship.  Accordingly, her summary dismissal was disproportionate to her misconduct.

The Judge then went on to assess damages on the basis of the notice, or pay in lieu thereof, that the Plaintiff should have received based on her tenure and all the other usual factors.

It is clear that the mere breach of a company policy will not be sufficient to justify a summary dismissal.  The breach must be inherently serious and there must be some evidence before the Court as to the consequences of the breach for the employer before a termination without notice will be justified.

Who Says You Can’t Fight City Hall?

The recent decision of the Superior Court of Ontario in Russell v. The Corporation of the Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.

In this case, Mr. Russell owned a cottage property on the shore of Georgian Bay.  This property consisted of about 1.4 acres of land with 170 feet of water frontage.  He had a cottage located about 4.57 metres back of the high water mark fronting on to Georgian Bay.

He decided to build a 720 square foot workshop at the side of his cottage, with the front of it being the same distance to the water’s edge as the existing cottage.  He applied to the town for a permit.  After obtaining advice from external counsel, the town’s Chief Building Official denied his application on the basis that it contravened the relevant By-Law.

The By-Law in force required that any new construction on a front yard maintain a distance of 20 metres to the water.  The existing cottage was much closer to the water’s edge, but as it had been built before the current By-Law came into force, it was grandfathered.  The Town took the position that the workshop Mr. Russell wished to build, while located in the side yard of the property and not in the front yard, would nevertheless be situated closer to the water than the current By-Law permitted.  In effect, according to the judge, while the Town conceded that the workshop would be located in the side yard, it would lie within the area where Mr. Russell’s front yard would be if his cottage were newly built, instead of having been built before the Zoning By-Law came into force.

The judge pointed out that the dispute had been clouded by the fact that the parties had litigated against each other already, leaving a certain amount of ill will.  There had been a dispute concerning the issuance of a permit to build a boathouse that led to appeals to the Ontario Municipal Board and the Divisional Court, resulting in enormous legal fees on both sides.  While the judge found that this had absolutely nothing to do with the issue before him, he pointed out that the Affidavit filed on behalf of the Town included a recitation of the boathouse history in great detail.  As the judge put it, this suggested something of a departure “from the ideal of detached professionalism” that would ordinarily be expected of the town and it’s Chief Building Officer.  As the judge put it, “ruffled feathers and simmering resentment have no place in a neutral and objective application of the law by public officials”.

While the boathouse issue was not relevant, the obvious hostility of the Town towards Mr. Russell was relevant.  The matter was put before the court under a provision of the Building Code Act that permits judges to substitute their opinions for that of public officials.  There is case law to support the proposition that when considering such issues, a judge should apply a degree of deference to the expertise and experience of the public official.  The judge concluded that in this case, the history of the boathouse conflict provided him with “some added reason to approach the question of deference with caution.”  It seems that the history of ill will was taken into account by the judge in assessing the correctness of the Chief Building Officer’s decision.

The judge considered the matter as a straight forward problem of interpretation and provided the following analysis:

Mr. Russell had a waterfront lot with a cottage on it and with a front yard, side yards on each side of the cottage, and a rear yard.  These were mutually exclusive divisions of the lot, meaning that one yard ended where the other yard began and there was no part of the lot that was both a front yard and a side yard.

In Mr. Russell’s case, his front yard was 4.57 metres deep across the entire front of his lot, at which point his side yards began.  The By-Law stated that the minimum yard requirement for a front yard was 20 metres.  The cottage was grandfathered because it was built before the current by-law was put in place.  Consequently, his front yard was to be measured in relation to where his cottage was and not where it would be if it was newly built.  The By-Law in this case expressed itself by reference to front yards, not set-backs, and made clear that property owners can build accessory buildings in their side yards.  The judge ruled that if the Chief Building Officer was correct in his interpretation, and the “yard” requirement was defined as a separate set-back requirement applicable to all structures in every yard on the lot, it would strip Mr. Russell of the right to build an accessory building in his side yard when the By-Law permitted him to do so.

Accordingly, the decision of the Chief Building Officer was set aside.

Cottage owners often find it necessary or appropriate to improve their properties in ways that require the issuance of permits.  Municipal officials are often seen by cottage owners as petty local bureaucrats who have it in for big city-dwelling cottage owners.  I am not suggesting that the Chief Building Officer in this case was actually motivated by anything improper, but the fact is that, as this case points out, the courts are always available to straighten things out if required.

Yes, you can fight City Hall.

Wrongful Dismissal: When will a Refusal to Return to Work Constitute a Failure to Mitigate?

The recent Ontario Superior Court decision of Fillmore v. Hercules SLR Inc. provides a useful summary of the current state of the law on offers of re-employment and a duty to mitigate.

The plaintiff had been employed as the defendants’ Director (Purchasing), with an annual salary of approximately $80,000, together with benefits.

He was fired without cause after having been employed for over 19 years.

The plaintiff sued and the matter proceeded by way of motion for summary judgment.

As there was no signed Employment Agreement, the Court assessed reasonable notice with reference to the usual factors, including the plaintiff’s age, length of service, character of his employment and the availability of similar employment.  The Court found that the appropriate period of reasonable notice was 17 months.

Complicating the matter was the fact that when the plaintiff was presented with a letter terminating his employment, he was given a second letter offering him the “permanent full-time role of Supervisor of Service” at a salary of $60,000 per annum, with his previous salary being maintained for a period of six months “to assist him in the transition from the current role to the new role”.

The plaintiff declined the offer of new employment at the lower salary.

At the motion, the defendant argued that the plaintiff had been offered a reasonable opportunity to mitigate his damages by returning to work for the defendant and that by failing to accept that offer, he had failed to discharge his duty to mitigate his damages.

The Court began its analysis by referring to the decision in the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31, where the Court held that in some circumstances, it may be necessary for a dismissed employee to mitigate damages by returning to work for the same employer.  It was suggested that in the absence of the employee facing a potential hostile atmosphere, embarrassment or humiliation, he may have to mitigate by “taking temporary work” with the dismissing employer.

In this case, the defendant simply provided the plaintiff with an offer to accept a demotion.

The Court observed that had the offer of the lower position been presented by a third party employer during the notice period, and had the plaintiff chosen to accept it, the plaintiff could have still looked to the dismissing employer for compensation for the difference between his previous salary and his new salary.  In this case, the dismissing employer’s offer made no reference whatsoever to compensation for that difference or to the idea that the plaintiff could accept the demotion and still pursue a claim for that difference.

Accordingly, the Court held that the plaintiff did not fail to mitigate his damages by refusing the new offer of employment.

This analysis gives rise to an interesting, but unanswered question.  What if the plaintiff had responded to the new offer of employment by suggesting that he would accept it provided that he was doing so without prejudice to his right to make a claim for the difference in salary for what would ultimately be determined by a Court to be a reasonable period of notice?  If he had done so, and the employer refused to accept that condition, in my view that would have put an end to the question of any possible failure to mitigate.  For dismissed employees being offered new employment at a reduced salary, that might be a prudent course of action to take.

The fact is that there are not an abundance of guidelines around this issue.  To a very significant extent, the question of whether or not to fault a dismissed employee for not accepting a new offer of employment is within the discretion of the judge.  While the Supreme Court of Canada has made reference to factors such as embarrassment and humiliation, that does not necessarily end the matter.  While there is much to be said for leaving it to the Court’s discretion, the lack of predictability inherent with that approach means that both sides have to give the issue very careful thought.

You Have Breached a Contract: Can an Exclusion Clause Protect You From a Damage Claim?

The recent decision of the Ontario Court of Appeal in Chuang v. Toyota Canada Inc. provides a useful insight into the current state of the law relating to exclusion clauses.

In this case, Dr. Chuang entered into an agreement with Toyota to build and operate a Lexus dealership in downtown Toronto.

The agreement set out a number of deadlines that Dr. Chuang had to meet with respect to his obtaining financing, building the facility and opening the dealership for business.

The agreement also gave Toyota the right, in its sole discretion, to terminate the agreement if any of the deadlines were not met or if Toyota, in its sole opinion, determined that Dr. Chuang would not be able to meet any one or more of those deadlines.

In addition, the agreement contained an exclusion clause. It provided that in the event of the termination of the agreement, neither Toyota nor any of its personnel would be liable for any losses, damages or expenses of any kind.

Dr. Chuang, who was an experienced builder and operator of luxury car dealerships, ran into a number of difficulties. Many of them were not his fault. Nevertheless, deadlines were missed. Toyota terminated the agreement and Dr. Chuang sued Toyota for specific performance of the agreement and damages. By the time the matter had come to trial, he had been able to complete the construction of a showroom and open a different dealership on the site. As a result, he abandoned his claim for specific performance and pursued his damages claim only.

At trial, Toyota argued that it had acted reasonably in terminating the agreement. However, if it had not acted reasonably, thereby breaching the agreement, it was insulated from any damage claim by the exclusion clause.

The judge found that Toyota had not acted reasonably in terminating the agreement. However, he also ruled that Toyota was nevertheless entitled to the protection of the exclusion clause.

Dr. Chuang appealed to the Court of Appeal, arguing that the exclusion clause could only apply in cases where Toyota had acted reasonably. He argued further that the trial judge had not properly considered the nature of the relationship or the commercial efficacy of the clause. In essence he argued that the trial judge’s interpretation of the exclusion clause would lead to a commercial absurdity, in that no reasonable person would ever have agreed to a clause protecting Toyota from the consequences of its own unreasonable and arbitrary termination of the agreement.

The Court of Appeal dismissed the appeal. It pointed out that the Court will take a three-step approach to the interpretation of exclusion clauses:

  1. Does the clause apply to the facts?
  2. If so, is the clause unconscionable?
  3. If it applies and is not unconscionable, is there any public policy reason strong enough to outweigh the public interest in the enforcement of contracts that should persuade the Court to ignore the clause?

The Court pointed out that Dr. Chuang did not argue either that the clause was unconscionable or that there was any public policy reason against its enforcement. The only real issue was as to whether or not it could apply to excuse Toyota from any damage claim by reason of its own unlawful termination of the agreement.

The Court pointed out that parties to an agreement are free to allocate risk as they see fit. Exclusion clauses are a means of allocating risk. The beneficiary of an exclusion clause contracts out of the obligation that normally follows from the breach of a contract and puts that risk on the other party.

In this case, the clause was broadly written and made it clear that no damage claim could be brought as a result of any termination of the agreement. The Court rejected Dr. Chuang’s argument about commercial efficacy by pointing out that while Dr. Chuang would not be able to sue for damages, even though Toyota had breached the agreement, he could have sued for specific performance or other relief and, in fact, did not pursue such a claim to trial only because he had been able to open another dealership on the site. Accordingly, the appeal was dismissed.

The result of the case with respect to costs is also somewhat dramatic. At trial, the trial judge awarded Toyota costs of $1.21 million. Dr. Chuang appealed the amount awarded and the Court of Appeal dismissed that part of the appeal as well.

This case is a useful reminder of the fact that parties to a contract – particularly sophisticated parties bargaining on a relatively level playing field – will be held to the strict language of their written commitments. Unless they are unconscionable or void on public policy grounds, exclusion clauses will not be treated any differently.

Must an employee mitigate damages when a fixed term employment contract is terminated early?

The recent decision of the Ontario Court of Appeal in Howard v. Benson Group Inc. clarifies the current state of the law on the duty to mitigate where a fixed term employment contract is terminated early.

In this case, Mr. Howard was employed at the Defendant’s auto service center as a manager. He had a written employment contract for a five-year term starting in September, 2012.  His employer terminated the contract after almost two years, without cause.

The contract included the following provision concerning the employer’s right to early termination without cause:

“Employment may be terminated at any time by the Employer and any amounts paid to the Employee shall be in accordance with the Employment Standards Act of Ontario.”

The employer took this to mean that it had the right to terminate the contract early at any time, at which point it would be liable to the employee only for statutory benefits.

Mr. Howard’s position was that he was owed the full amount that would have been payable for the balance of the employment contract, as a lump sum.

The matter went to trial. The trial judge concluded that the early termination clause was so ambiguous as to be unenforceable.  He then concluded that the employee was entitled to damages, but the damages were to be calculated on the basis of reasonable notice at common law.

Furthermore, the judge determined that in accordance with usual common law principles, the employee had a duty to mitigate those damages.

The employee appealed to the Court of Appeal both on the question of the applicability of common law reasonable notice in these circumstances, and on the question of his having a duty to mitigate.

The Court of Appeal allowed the appeal. It ruled that as the relationship was governed by a fixed term contract, the common law presumption of the employer having an implied obligation to provide reasonable notice of termination was completely displaced.  The judge’s characterization of the early termination clause in the agreement as ambiguous was not challenged by either party but the Court of Appeal considered that whatever it meant, it did not alter the fact that this was a fixed term contract.  Accordingly, the employer was liable for the immediate payment of everything that would have been paid to the employee over the balance of the term of the contract had it not been terminated.

The Court of Appeal went on to determine that in such circumstances, the employee was under no duty to mitigate. As a fixed term employment contract requires the employer to pay the employee to the end of the term, in effect this means that the parties have contracted out of the common law approach to reasonable notice subject to mitigation.

As a result, even if Mr. Howard had obtained another job the day after his employer terminated the fixed term employment contract, he would have been entitled to payment of the balance under the contract.

This points up the very serious consequences of a fixed term employment contract that does not have a clear and unambiguous provision for early termination, specifying the rights and obligations of the parties in that event. Clearly, a clause simply saying that the employer may terminate early, without specifying those consequences, cannot be relied upon by the employer to escape the obligation to pay the balance due under the contract.