Legal Blog: Commercial Matters

Termination Provision in Employment Agreement

Rahman v. Cannon Design Architecture Inc. 2022 Ont CA

An employment agreement provided that the employer could terminate the employee’s employment without notice or payment if the employee engaged “in conduct that constitutes a just cause for summary dismissal.” That provision was contrary to the Employment Standards Act which excepts termination payment provisions under the Act only if the employee is guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned.” In accordance with previous jurisprudence, once one of the termination provisions is held to be invalid, all of the termination provisions are invalid. Accordingly, the four weeks contractual notice provision did not apply and common-law notice was imposed.

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Oppression Damages

Tahmasebi v. Hosseini 2022 Ont SCJ (Div Ct)

When a corporation is being wound up as a remedy for oppression and nothing is being paid towards shareholders’ loans or other money shown on the records as due to shareholders, damages do not include what the corporation would have been worth had the amounts due to the shareholders been recorded accurately.

We reported on the Superior Court decision in 2021.

Mareva Injunction

Sapex Canada Inc. v. 2264233 Ontario Inc. 2022 Ont SCJ

Landlord was suing tenant and indemnifier for damages for breach of a lease. The indemnifier bought a house and was selling her old house in the ordinary course. It was expected she would net about $20,000 from the sale. Landlord moved for a Mareva injunction. The judge agreed that he had jurisdiction to issue an injunction under the Simplified Rues, but held that the balance of convenience favoured the indemnifier. There was no genuine risk of the indemnifier putting her assets beyond the reach of the landlord. She had equity in the new house and the corporate tenant was still a going concern.

Oppression

Wisser v. CEM International Management Consultants Ltd. 2022 Alta QB

Employee was dismissed without proper notice. He brought an action against his old employer and its principals and a new corporation that the principals had incorporated to carry on the old employer’s business. He brought his action against the principals and the new corporation under the oppression section of the Alberta Business Corporations Act. The court held all defendants liable, holding in particular that the transfer of all assets for minimal consideration to the new corporation was oppressive conduct.

Mitigation

Humphrey v. Mene Inc. 2022 Ont CA

Wrongful dismissal action. Employee had been offered and refused a job at a comparable salary and, though not the same management position, a good one. The trial judge refused to deduct for lack of mitigation, saying that the employer had not provided the judge with persuasive evidence as to whether the two roles were comparable. The Court of Appeal held that comparable did not mean identical. It was sufficient that the employee had been offered a senior management position with a salary as good as or more than her previous salary and it was sufficient for the employer to show that the employee had been offered and rejected the job. Any further evidence had to come from the employee. The court reduced the award by 6 months for failure to mitigate.

Costs & Conduct

Gracias v. Dr. David Walt Dentistry 2022 Ont SCJ

Costs – the employee sued for wrongful dismissal and was mostly unsuccessful. Both the employer and employee asked for costs. The judge did not like the attitudes and actions of either of them. The employee could have been in Small Claims Court, made unsubstantiated claims of human rights violations, and was dilatory in production of documents. The employer had claimed it terminated for cause and alleged that the employee had fabricated evidence. Neither was proved. The judge refused to order costs to either of them.

Promissory Estoppel

2059008 Ontario Ltd. V. CM Weicker 2022 Ont SCJ

Lease referred to premises being 1,689 sq ft. Tenant paid rent on this basis for over 9 years. In the 10th year of a 10-year lease, landlord appointed a new property manager, who measured the premises at 1,953 sq ft, and landlord demanded an additional $152,000 in rent – although it was willing to forego those arrears if tenant renewed the term of the lease on very different terms from the original. Although the lease gave authority for a re-measurement, the judge held that landlord, on the facts of this case (which we will not list), was estopped (prevented) from demanding the arrears.

Arbitration Agreement

2832402 Ontario Inc. v. 2853463 Ontario Ltd. 2022 Ont SCJ

Parties stipulated that if they could not agree on price adjustments in a final closing statement, the dispute would be referred to a specified accountant for a decision. The vendor commenced a court application to force the purchaser to provide better backup documents for its calculations. The purchaser moved to stay the application on grounds that the dispute resolution was an arbitration and only the arbitrator could decide on documents to be produced. The court agreed that the parties’ agreement was an arbitration agreement, regardless that the word arbitration was never found in it. It was not merely a request for the accountant’s expert opinion. The judge stayed the application.

Consent to Assignment

Tabriz Persian Cuisine Inc. v. Highrise Property Group Inc. 2022 Ont CA

Parties had ongoing litigation as to whether landlord had authorised tenant to install a patio – contrary to the lease. Tenant on three occasions had identified a purchaser for its business and requested landlord’s consent to an assignment of the lease. On the first two occasions, landlord refused consent because tenant had failed to remove the patio. On the third occasion, landlord refused to consider the assignment until the patio was removed and tenant discontinued its litigation. The court agreed that tenant had not demonstrated that landlord’s refusal – to consider the assignment until the patio was removed – was unreasonable. It further held that, even though the 2^nd condition was improper, it was not relevant; the true origin for the refusal was the valid requirement to remove the patio.

Limitations – Claim Appropriate

Georgian Properties Corporation v. Robins Appleby LLP 2022 Ont CA

A condo had executed debt instruments in favour of the developer. When the debts were due, the condo failed to pay, ultimately attacking the debt instruments as unenforceable. The condo ultimately was successful in its attack. After the decision, the developer commenced an action against its lawyers who drafted the debt instruments. The court held that the condo suffered damages as set out in s.5(1)(a)(i) of the Limitations Act, not when the condo failed to pay the developer according to the debt instruments, but when the judge decided that the debt instruments were invalid. Similarly, commencement of an action was “appropriate” (ss. a(iv)) after the decision was rendered, not when the allegations of invalidity were made.