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.

On June 25, 2015, I posted an article concerning the lawsuit in the US between StubHub, eBay’s secondary ticket marketplace, and Ticketmaster and the NBA’s Golden State Warriors.

As I had indicated, the Warriors had hired Ticketmaster to be its official, primary and secondary ticketing partner.

In the lawsuit, StubHub, a secondary ticketing marketer used by people to resell their tickets to events that they cannot attend, alleged that the Warriors had essentially created illegal market conditions by requiring their season ticketholders to resell their tickets only through Ticketmaster. As a result, StubHub noticed a significant decline in the number of Warriors’ tickets available for sale on its site.

The lawsuit was brought under US anti-trust legislation. As I had indicated, it raised the interesting question as to whether or not a ticket to a sporting event is owned by the fan purchasing the ticket, or the team.

In any event, the lawsuit has now been dismissed at a preliminary motion. The judge was satisfied with the Warriors’ argument that when fans buy a ticket, they agree to the terms and conditions that set out the rules of having a ticket licence with the team.  The judge felt that while the Warriors do exert some control over their product, that is not unlike any company that wants to sell what it makes.  The judge specifically indicated that “the native monopoly every manufacturer has in the production and sale of its own product cannot be the basis for anti-trust liability”.

It is open to StubHub to reformulate its position by amending its claim to take another run at it. In the meantime, however, it would appear from this decision that teams do have the right to dictate what happens to tickets to their home games even after the tickets are sold.