Potter v. Legal Aid Services Commission (N.B.), (2015) 468 N.R. 227 (SCC)

• Judge: McLachlin, C.J.C., Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 12, 2014
• Jurisdiction: Canada (Federal)
• Citations: (2015), 468 N.R. 227 (SCC);2015 SCC 10;[2015] 1 SCR 500;2015 SCC 10;381 DLR (4th) 1;[2015] SCJ No 10 (QL)

Potter v. Legal Aid (2015), 468 N.R. 227 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2015] N.R. TBEd. MR.002

David M. Potter (appellant) v. New Brunswick Legal Aid Services Commission, a statutory body corporate pursuant to a special act of the Province of New Brunswick (respondent)

(35422; 2015 SCC 10; 2015 CSC 10)

Indexed As: Potter v. Legal Aid Services Commission (N.B.)

Supreme Court of Canada

McLachlin, C.J.C., Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.

March 6, 2015.

Summary:

The plaintiff, the Executive Director of the New Brunswick Legal Aid Services Commission, sued the Commission, seeking damages for constructive dismissal.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported (2011), 384 N.B.R.(2d) 14; 995 A.P.R. 14, dismissed the action, holding that the Executive Director was not constructively dismissed. Rather, it was he who repudiated the employment contract by commencing legal action. The Executive Director appealed.

The New Brunswick Court of Appeal, in a decision reported (2013), 402 N.B.R.(2d) 41; 1044 A.P.R. 41, dismissed the appeal. The Executive Director appealed again.

The Supreme Court of Canada allowed the appeal. The Executive Director was constructively dismissed. The trial judge also erred in finding that the amounts the Executive Director received under his pension plan should be deducted from his damages for wrongful dismissal.

Crown - Topic 5264

Officials and employees - Pension benefits - General - [See both Master and Servant - Topic 7704 ].

Damages - Topic 1742

Deductions for payments or assistance by third parties - Contractually - From employer - Pensions - [See both Master and Servant - Topic 7704 ].

Damages - Topic 6703

Contracts - Employment relationship or contract - General principles - Wrongful dismissal - [See both Master and Servant - Topic 7704 ].

Government Programs - Topic 1466

Legal aid - Governing bodies - Powers - [See eighth Master and Servant - Topic 7502 ].

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada discussed what constituted constructive dismissal - The court stated that "The burden rests on the employee to establish that he or she has been constructively dismissed. If the employee is successful, he or she is then entitled to damages in lieu of reasonable notice of termination. In Farber [1997 SCC], the Court surveyed both the common law and the civil law jurisprudence in this regard. The solutions adopted and principles applied in the two legal systems are very similar. In both, the purpose of the inquiry is to determine whether the employer's act evinced an intention no longer to be bound by the contract" - See paragraph 31.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada stated that there were two branches to the test for constructive dismissal: the court must first identify an express or implied contract term that had been breached, and then determine whether that breach was sufficiently serious to constitute constructive dismissal - However, an employer's conduct would also constitute constructive dismissal if it more generally showed that the employer intended not to be bound by the contract - "In applying Farber [1997 SCC], courts have held that an employee can be found to have been constructively dismissed without identifying a specific term that was breached if the employer's treatment of the employee made continued employment intolerable ... This approach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer and the determination of whether those acts evinced an intention no longer to be bound by the contract ..." - See paragraphs 32 and 33.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada stated that there were two branches to the test for constructive dismissal - Wagner, J., stated that "The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps: first, the employer's unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract ... Often, the first step of the test will require little analysis, as the breach will be obvious. Where the breach is less obvious, however, as is often the case with suspensions, a more careful analysis may be required. In Farber [1997 SCC], Gonthier J. identified such a change as a 'fundamental breach' ... To avoid confusion, I will therefore use the term 'substantial breach' to refer to breaches of this nature. The standard nevertheless remains unchanged - a finding of constructive dismissal requires that the employer's acts and conduct 'evince an intention no longer to be bound by the contract' ..." - See paragraphs 34 and 35.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada stated that there were two branches to the test for constructive dismissal - The first branch had two steps, i.e., the court had to first identify an express or implied contract term that had been breached, and then determine whether that breach was sufficiently serious to constitute constructive dismissal - "At the first step of the analysis, the court must determine objectively whether a breach has occurred. To do so, it must ascertain whether the employer has unilaterally changed the contract. If an express or an implied term gives the employer the authority to make the change, or if the employee consents to or acquiesces in it, the change is not a unilateral act and therefore will not constitute a breach. If so, it does not amount to constructive dismissal. Moreover, to qualify as a breach, the change must be detrimental to the employee. This first step of the analysis involves a distinct inquiry from the one that must be carried out to determine whether the breach is substantial ..." - See paragraphs 37 and 38.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada stated that there were two branches to the test for constructive dismissal - The first branch had two steps, i.e., the court had to identify an express or implied contract term that had been breached, and then determine whether that breach was sufficiently serious to constitute constructive dismissal - "Once it has been objectively established that a breach has occurred, the court must turn to the second step of the analysis and ask whether, 'at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed' ... A breach that is minor in that it could not be perceived as having substantially changed an essential term of the contract does not amount to constructive dismissal. The kinds of changes that meet these criteria will depend on the facts of the case being considered ... The uniqueness of the application of this first branch of the test is evident in cases involving administrative suspensions. In all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrative suspension is at issue, the burden will necessarily shift to the employer, which must then show that the suspension is justified. If the employer cannot do so, a breach will have been established, and the burden will shift back to the employee at the second step of the analysis ..." - See paragraphs 39 to 41.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada stated that there were two branches to the test for constructive dismissal - Under the second branch, an employer's conduct would constitute constructive dismissal if it more generally showed that the employer intended not to be bound by the contract - "In cases in which this branch of the test applies, constructive dismissal consists of conduct that, when viewed in the light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract. The employee is not required to point to an actual specific substantial change in compensation, work assignments, or so on, that on its own constitutes a substantial breach. The focus is on whether a course of conduct pursued by the employer 'evince[s] an intention no longer to be bound by the contract' ..." - See paragraph 42.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The Supreme Court of Canada discussed what constituted constructive dismissal - The court stated that "... constructive dismissal can take two forms: that of a single unilateral act that breaches an essential term of the contract, or that of a series of acts that, taken together, show that the employer no longer intended to be bound by the contract ..." - See paragraph 43.

Master and Servant - Topic 7502

Dismissal of employees - General principles - What constitutes dismissal or discharge (incl. constructive dismissal) - The New Brunswick Legal Aid Services Commission Board and its Executive Director (ED) were in discussions about a buy-out of the ED's contract - While on sick leave, the ED was suspended with pay until further notice and his statutory powers and duties were reassigned - The ED commenced legal action, alleging constructive dismissal - The Commission claimed that by commencing the action, the ED had effectively resigned and stopped paying him - The trial judge held that the ED was not constructively dismissed - The ED appealed - The New Brunswick Court of Appeal dismissed the appeal - The ED appealed again - The Supreme Court of Canada allowed the appeal - The trial judge erred in applying the test for constructive dismissal and in applying the burden of proof - Upon proper application of the principles, the ED was constructively dismissed - The administrative suspension was not authorized by the contract of employment either expressly or impliedly and, therefore, amounted to a breach of the employment contract - The breach of contract amounted to a substantial change to the essential terms of the contract that was imposed unilaterally by the employer - See paragraphs 30 to 106.

Master and Servant - Topic 7704

Dismissal or discipline of employees - Damages for wrongful dismissal - Measure of damages for wrongful dismissal - The New Brunswick Legal Aid Services Commission Board wanted to buy-out its Executive Director's (ED's) fixed-term contract - While on sick leave, the ED was suspended with pay until further notice and his duties reassigned - The ED sued, alleging constructive dismissal - The trial judge dismissed the action, but provisionally assessed damages, opining that pension benefits received by the ED were to be deducted from damages - The ED appealed - The Supreme Court of Canada allowed the appeal, finding that the ED was constructively dismissed - The court held that the pension benefits should not be deducted from damages awarded - Those benefits were not intended to compensate the ED in the event of his being wrongfully dismissed - The pension plan was a contributory plan - Therefore the pension benefits received should not be deducted from the damages to which he was entitled - The court held that s. 16 of the Public Service Superannuation Act did not displace the private insurance exception and did not preclude the ED from collecting both the equivalent of his salary and his pension benefits - See paragraphs 112 to 128.

Master and Servant - Topic 7704

Dismissal or discipline of employees - Damages for wrongful dismissal - Measure of damages for wrongful dismissal - Section 16 of the Public Service Superannuation Act provided that "Where a contributor in receipt of an immediate pension or an annual allowance under this Act, the Superannuation Act ... becomes employed in full time employment in the Public Service, his or her entitlement to such immediate pension or annual allowance is to be suspended effective the date of his or her appointment ... " - The Supreme Court of Canada interpreted this provision - The court stated that "This section applies to a 'contributor in receipt of an immediate pension or an annual allowance' on being appointed to employment in the public service. It therefore prevents a retired employee who returns to employment in the public service from collecting pension benefits while at the same time receiving a salary as an employee. Section 16 does not establish a general bar on the receipt of both a pension entitlement and employment income. More specifically, it does not apply to an employee who has been wrongfully dismissed and is entitled to receive damages as a result of that wrongful dismissal" - See paragraphs 122 to 128.

Master and Servant - Topic 8073

Dismissal without cause - Damages - Deduction for pension benefits - [See both Master and Servant - Topic 7704 ].

Cases Noticed:

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1, refd to. [para. 14].

Park v. Parsons Brown & Co. (1989), 39 B.C.L.R.(2d) 107 (C.A.), refd to. [para. 20].

Cabiakman v. Industrielle Alliance Compagnie d'assurance sur la vie, [2004] 3 S.C.R. 195; 325 N.R. 1; 2004 SCC 55, refd to. [para. 24].

Farber v. Compagnie Trust Royal, [1997] 1 S.C.R. 846; 210 N.R. 161, refd to. [paras. 24, 142].

Devlin v. NEMI Northern Energy & Mining Inc., [2010] B.C.T.C. Uned. 1822; 86 C.C.E.L.(3d) 268; 2010 BCSC 1822, refd to. [para. 24].

Rubel Bronze and Metal Co. and Vos, Re, [1918] 1 K.B. 315, refd to. [paras. 30, 142].

Shah v. Xerox Canada Ltd. (2000), 131 O.A.C. 44, refd to. [paras. 33, 162].

Whiting v. Winnipeg River Brokenhead Community Futures Development Corp. (1998), 126 Man.R.(2d) 176; 167 W.A.C. 176; 159 D.L.R.(4th) 18 (C.A.), refd to. [para. 33].

Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2010] 1 S.C.R. 69; 397 N.R. 331; 281 B.C.A.C. 245; 457 W.A.C. 245; 2010 SCC 4, refd to. [paras. 35, 148].

General Billposting Co. v. Atkinson, [1909] A.C. 118 (H.L.), refd to. [paras. 35, 154].

Freeth v. Burr (1874), L.R. 9 C.P. 208, refd to. [paras. 35, 154].

Western Excavating (ECC) Ltd. v. Sharp, [1978] 1 All E.R. 713 (C.A.), refd to. [paras. 43, 155].

Downtown Eatery (1993) Ltd. v. Ontario et al. (2001), 147 O.A.C. 275; 54 O.R.(3d) 161 (C.A.), refd to. [para. 51].

Universal Cargo Carriers Corp. v. Citati, [1957] 2 All E.R. 70 (Q.B.), refd to. [paras. 64, 173].

Carscallen v. FRI Corp., [2005] O.T.C. 484; 42 C.C.E.L.(3d) 196 (Sup. Ct.), affd. [2006] O.A.C. Uned. 464; 52 C.C.E.L.(3d) 161 (C.A.), refd to. [para. 65].

Labarre v. Spiro Méga inc., 2001 CarswellQue 1753, refd to. [para. 65].

Belton et al. v. Liberty Insurance Co. of Canada (2004), 189 O.A.C. 173; 72 O.R.(3d) 81 (C.A.), refd to. [para. 66].

McKinley v. BC Tel et al., [2001] 2 S.C.R. 161; 271 N.R. 16; 153 B.C.A.C. 161; 251 W.A.C. 161; 2001 SCC 38, refd to. [para. 70].

Haldane v. Shelbar Enterprises Ltd. (1999), 125 O.A.C. 254; 46 O.R.(3d) 206 (C.A.), refd to. [para. 70].

Turner v. Sawdon & Co., [1901] 2 K.B. 653 (C.A.), refd to. [para. 76].

Suleman v. British Columbia Research Council (1990), 52 B.C.L.R.(2d) 138 (C.A.), refd to. [para. 77].

Reference Re Compulsory Arbitration, [1987] 1 S.C.R. 313; 74 N.R. 99; 78 A.R. 1, refd to. [para. 83].

Reference Re Public Service Employee Relations Act (Alta.) - see Reference Re Compulsory Arbitration.

Sûreté du Québec et Association des policiers provinciaux du Québec, [1991] T.A. 666, refd to. [para. 90].

Fraternité des policiers de la Communauté urbaine de Montréal et Communauté urbaine de Montréal, [1984] T.A. 668, refd to. [para. 90].

Reininger v. Unique Personnel Canada Inc., [2002] O.T.C. 512; 21 C.C.E.L.(3d) 278 (Sup. Ct.), refd to. [para. 91].

Ontario Jockey Club and Mutuel Employees' Association, Service Employees' International Union, Local 528 (1977), 17 L.A.C.(2d) 176 (Ont.), refd to. [para. 91].

Pierce v. Canada Trust Realtor (1986), 11 C.C.E.L. 64 (Ont. H.C.J.), refd to. [para. 94].

MacKay v. Avco Financial Services Canada Ltd. (1996), 146 Nfld. & P.E.I.R. 353; 456 A.P.R. 353 (P.E.I.T.D.), refd to. [para. 94].

Bhasin v. Hrynew et al. (2014), 464 N.R. 254; 584 A.R. 6; 623 W.A.C. 6; 2014 SCC 71, refd to. [para. 99].

Evans v. Teamsters Union Local No. 31, [2008] 1 S.C.R. 661; 374 N.R. 1; 253 B.C.A.C. 1; 425 W.A.C. 1; 2008 SCC 20, refd to. [para. 109].

Waterman v. IBM Canada Ltd., [2013] 3 S.C.R. 985; 452 N.R. 207; 347 B.C.A.C. 43; 593 W.A.C. 43; 2013 SCC 70, refd to. [paras. 114, 182].

Social Services Administration Board (Parry Sound District) v. Ontario Public Service Employees Union, Local 324 et al. [2003] 2 S.C.R. 157; 308 N.R. 271; 177 O.A.C. 235; 2003 SCC 42, refd to. [para. 124].

Stolze v. Addario et al. (1997), 105 O.A.C. 266; 36 O.R.(3d) 323 (C.A.), refd to. [para. 161].

Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd., [1980] 1 All E.R. 571 (H.L.), refd to. [para. 164].

Federal Commerce & Navigation Co. v. Molena Alpha Inc., [1979] A.C. 757 (H.L.), refd to. [para. 169].

Eminence Property Developments Ltd. v. Heaney, [2010] E.W.C.A. Civ. 1168; [2010] 2 All E.R. (Comm.) 223, refd to. [para. 171].

British and Beningtons Ltd. v. North Western Cachar Tea Co., [1923] A.C. 48 (H.L.), refd to. [para. 174].

Glencore Grain Rotterdam BV v. Lebanese Organisation for International Commerce, [1997] 4 All E.R. 514 (C.A.), refd to. [para. 175].

Taylor v. Oakes, Roncoroni and Co. (1922), 127 L.T. 267 (C.A.), refd to. [para. 175].

Scandinavian Trading Co. A/B v. Zodiac Petroleum S.A., [1981] l Lloyd's Rep. 81 (Q.B.), refd to. [para. 176].

Lake Ontario Portland Cement Co. v. Groner, [1961] S.C.R. 553, refd to. [para. 177].

Statutes Noticed:

Interpretation Act, R.S.N.B. 1973, c. I-13, sect. 21(1) [para. 52].

Legal Aid Act, R.S.N.B. 1973, c. L-2, sect. 39(6) [para. 54].

Public Service Superannuation Act, R.S.N.B. 1973, c. P-26, sect. 16 [para. 113].

                 

Authors and Works Noticed:

Barnacle, Peter, Employment Law in Canada (4th Ed. 2005) (2014 Looseleaf Update, Release 51), §§ 13.36, 13.70 [para. 32] 18.29 to 18.39 [para. 68] 18.40 [para. 70].

Brown, Donald J.M., and Beatty, David M., Canadian Labour Arbitration (2nd Ed. 1984), generally [para. 90].

Doorey, David J., Employer Bullying: Implied Duties of Fair Dealing in Canadian Employment Contracts (2005), 30 Queen's L.J. 500, generally [para. 84].

Echlin, Randall Scott, and Fantini, Jennifer M., Quitting for Good Reason: The Law of Constructive Dismissal in Canada (2001), pp. 4, 5 [para. 40].

England, Geoffrey, Individual Employment Law (2nd Ed. 2008), pp. 346, 347 [para. 143]; 348 to 356 [para. 32].

McCamus, John D., The Law of Contracts (2nd Ed. 2012), pp. 651 [para. 148]; 676, 677 [paras. 144, 145]; 678 [para. 144]; 689 [para. 149].

New Brunswick Legislative Assembly, Synoptic Report: Legislative Assembly of the Province of New Brunswick (1966), pp. 1235 to 1254 [para. 127].

Sproat, John R., Wrongful Dismissal Handbook (6th Ed. 2012), p. 5-5 [para. 32].

Swan, Angela, and Adamski, Jakub, Canadian Contract Law (2nd Ed. 2009), §7.89 [para. 149].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), p. 1 [para. 124].

Waddams, Stephen M., The Law of Contracts (6th Ed. 2010), paras. 590 [para. 145]; 595 [para. 170].

Yogis, John A., and Cotter, Catherine, Barron's Canadian Law Dictionary (6th Ed. 2009), p 61 [para. 30].

Counsel:

Eugene J. Mockler and Perri Ravon, for the appellant;

Clarence L. Bennett and Josie H. Marks, for the respondent.

Solicitors of Record:

EJ Mockler Professional Corporation, Fredericton, N.B.; Heenan Blaikie, Ottawa, Ontario, for the appellant, David M. Potter;

Stewart McKelvey, Fredericton, N.B., for the respondent, New Brunswick Legal Aid Services Commission.

This appeal was heard on May 12, 2014, before McLachlin, C.J.C., Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada. The decision of the court was delivered on March 6, 2015, in both official languages, including the following opinions:

Wagner, J. (Abella, Rothstein, Moldaver and Karakatsanis, JJ., concurring) - see paragraphs 1 to 130;

Cromwell, J. (McLachlin, C.J.C., concurring), concurring reasons - see paragraphs 131 to 183.