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Supreme Court of Canada (SCC) to Address the Duty of Good Faith in Employment Contracts

Supreme Court of Canada (SCC) to Address the Duty of Good Faith in Employment Contracts

 

What role does good faith play in contractual performance?

 

Duty of Good Faith in Contract Law

 

The landmark SCC decision in Bhasin v Hrynew identified two steps to make the common law more coherent and just:

The acknowledgement of an organizing principle of good faith in contractual performance which “underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance.”  
Recognition of a common law duty of honest performance

 

Good faith is not a stand-alone duty but the principles of good faith can inform the evolution of the common law. The broad principle of good faith entails honest, candid, forthright and reasonable conduct in the performance of a contract. The duty of honest performance is a narrow duty not to lie or knowingly mislead the other party.

 

The Bhasin decision has left some uncertainty as to the scope of the duty and the way in which the common law will evolve now that an organizing principle of good faith in contractual performance has been recognized by the Supreme Court of Canada.

 

Duty of Good Faith and the Employment Contract

 

Employment law already recognizes a duty of good faith in the manner of dismissal. Employers are required to conduct themselves in a candid, reasonable, honest and forthright manner in the manner of dismissal. A duty of good faith has not been recognized in the performance of the contract or to override express contractual provisions of the employment contract.

 

A 2018 Nova Scotia Court of Appeal case addressed the issue of whether bad faith conduct can override the express provisions of a Long Term Incentive Plan.

 

Matthews v Ocean Nutrition Canada Limited

 

Matthews involved the constructive dismissal of an employee of 14 years who was integral to the success of the company. The trial court found that he was constructively dismissed through the behavior of his employer. The trial court found that a change in reporting structure and limiting responsibilities and hours constituted a constructive dismissal. The evidence indicates that the Chief Operating Officer, to whom Mr. Matthews reported, was disrespectful, dishonest, secretive and unreasonable. Mr. Matthews ultimately resigned from Ocean Nutrition.

 

Mr. Matthews had a Long Term Incentive Program (LTIP) agreement aimed to incentivize and retain management by sharing in the profits upon the sale of the company. However, under the contract, his entitlement to such a payment required Mr. Matthews to be an active employee at the time of realization to qualify.

 

The realization event for payments under the LTIP occurred approximately 14 months after Mr. Matthews resigned resulting in a loss of approximately $1.85M which he would have received under the LTIP.

 

Trial Court Decision

 

The trial judge found that Mr. Matthews was entitled to 15 months of common law reasonable notice. The trial judge also found that the LTIP payment was an integral part of his compensation and awarded the payment as it would have been payable within the 15 month notice period.

 

Appeal Court Decision

 

The Nova Scotia Court of Appeal upheld the 15 month notice period and the finding of a constructive dismissal. However, the majority found that the trial judge erred in awarding the LTIP payment as per the clear terms of the LTIP agreement.

 

Justice Scanlan provided a strong dissent at the Court of Appeal finding that “this case cries out for resolution.” In particular, Justice Scanlan relied upon the duty of good faith and honesty in the performance of the employment contract.

 

Duty of Good Faith and Express Contract Provisions

 

The disagreement between the trial court and the Court of Appeal as well as the majority and dissent at the Court of Appeal highlight the uncertainty as to the scope and application of the duty of good faith in contractual performance.  

 

This case will provide the Supreme Court of Canada the opportunity to clarify the application and the scope of the duty of honest performance and the organizing principle of good faith.

 

This decision could result in a broadening of the duty of good faith as it is applied in the context of employment law. We will have to wait until the Supreme Court of Canada hears this case in October 2019 for some clarity on this issue.

 

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Brianne Kostal, law student

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GGFI Celebrates St. Mary's RedDAY

Giesbrecht, Griffin, Funk & Irvine was happy to celebrate wearing red on St. Mary's RedDAY on Friday June 8, 2019. Combined, all participants in RedDAY helped raise $302,625 in support of the patients at St. Mary's Regional Cardiac Care Centre.  

 

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Genetic Non-Discrimination Act

Genetic Non-Discrimination Act

 

Chances are you or someone you know has used or heard of genetic testing technologies. These technologies have increased in popularity as a result of people attempting to learn about their ancestries. While services that use genetic testing technologies are quick, easy and serve as a great gift for some, have you ever wondered what legal protections your genetic materials have? In Canada, protections exist but they may not be around for much longer.   

 

In 2017, Canada joined all other G7 countries when the Federal government passed the Genetic Non-Discrimination Act. During a time where medical testing technologies were rapidly expanding and unravelling beneficial insights into human genetics, the Genetic Non-Discrimination Act was enacted to prevent the dubious and discriminatory use of genetic testing technologies. More specifically, the Genetic Non-Discrimination Act prohibits an entity from discriminating against an individual because of an individual’s genetic materials and prohibits the disclosure of genetic test results without an individual’s written consent. In fact, the Genetic Non-Discrimination Act goes as far as to criminally prohibit such conduct.   

 

The practical application of the Genetic Non-Discrimination Act for Canadians means that being excluded from employment as a result of genetic testing results, as was the case in both Quebec v Montréal (City) and Quebec v Boisbriand (City), or being denied insurance because one refuses to take a genetic test is no longer permissible. Further, the Genetic Non-Discrimination Act provides peace of mind for those that enjoy learning about their ancestry through the use of genetic testing technologies, by ensuring genetic materials remain protected and private. However, the protections provided by the Genetic Non-Discrimination Act may not be around much longer.  

 

Recently, the constitutional validity of the Genetic Non-Discrimination Act has been brought into question and has made its way up to the highest court in Canada, the Supreme Court of Canada. In December 2018, the Quebec Court of Appeal ruled that the Genetic Non-Discrimination Act was not constitutionally valid because it was ultra vires, meaning outside of the jurisdictional authority of the Federal government. Following this decision, leave for appeal was granted to the Supreme Court of Canada which has left the fate of the Genetic Non-Discrimination Act to be determined. The appeal is due to be heard in Fall 2019 and a decision followed closely thereafter.  

 

For the time being, the status quo prevails, while we await the decision by the Supreme Court of Canada. However, no matter how the Supreme Court of Canada rules this Fall, one thing is for certain, the decision is sure to impact the lives of Canadians in many ways.

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Lucas Barbosa, law student

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Welcome to Haney, Haney & Kendall

Giesbrecht, Griffin, Funk & Irvine is happy to announce that the firm Haney, Haney, and Kendall will be joining ours on July 2, 2019. We would like to welcome Mary Anne Haney, John Jowett Kendall, Alana Aird, Alice Dupuis, Brenda Clare, and Rhonda Hirtle to our GGFI team! We look forward to learning from their combined experience and working together to continue to provide great service to clients of both GGFI and HHK.

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Intergenerational Loans

Intergenerational Loans

Madchen V.J. Funk, associate

 

In a recent family law case of the Ontario Superior Court of Justice, the Court contended with an intergenerational loan. In Testani v Haughton (2019 ONSC 174), the wife’s mother had transferred a piece of property to the husband and wife; in exchange, the husband and wife paid the costs associated with the transfer and took on the outstanding mortgage.  After the transfer of the property, the wife executed a note which indicated that she would pay her mother $125,000.00 upon the mother’s request. The registered land transfer documents made no mention of the loan or note.

 

At trial, the wife claimed the loan to her mother as a debt which would be taken into account for equalization (i.e. the ordinary post-separation process by which assets and liabilities accumulated during a marriage are divided equally between the spouses). The husband challenged the validity of this debt, claiming that it was concocted after separation to provide a financial benefit to the wife during the family law proceeding.

 

The Court determined that the $125,000.00 debt would be discounted to $12,500.00 for the purposes of the equalization process, as it was unlikely that the wife would ever be required to repay the loan. The discount was applied, in part, because no demand for repayment was ever made until after the parties separated and because the wife did not tell anyone (including her bank, the real estate lawyer, or her husband!) about the note until after they separated.

 

This issue of the characterization of money advanced from parents to their children arises frequently in family law disputes at the time of the separation. The parents and their own child characterize the advances as loans to be repaid, while the son-in-law or daughter-in-law characterize the advances as gifts. Courts are often suspicious of transactions such as loans between family members which would credit one spouse during equalization, and will require proof of the nature of the dealing to allow such a credit.

 

The case outlined here suggests that such proof might include ensuring the loan is properly documented; disclosed consistently (to banks, real estate lawyers, family members, etc.); and likely to be called upon for repayment by the parent. These are important considerations to have in mind when gifting or loaning funds to your children.

 

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The lawyers at Giesbrecht, Griffin, Funk & Irvine LLP would be pleased to discuss intergenerational loans with you, and encourage you to contact their office in New Hamburg (519-662-2000) or Kitchener (519-579-4300). This advice is offered for information purposes only and may not cover all circumstances; please consult the lawyers at Giesbrecht, Griffin, Funk & Irvine LLP for advice tailored to your needs.

 

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GGFI Welcomes Amanda Geiger

Giesbrecht, Griffin, Funk & Irvine LLP is excited to welcome Amanda Geiger to its civil litigation team. Amanda will be assisting clients with a variety of litigation matters, including employment, estate, construction and commercial disputes. 


Read more about Amanda Geiger here.

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All the Best to Fred Heimbecker in His Retirement

After more than 45 years in the practice of law and dedicating himself to his clients, Fred Heimbecker has retired at the end of 2018.

 

In October of 2016 Fred joined our firm in anticipation of his retirement and in order to assure a smooth transition for all of his clients. The lawyers at GGFI Law will continue to serve Fred’s clients with dedication and excellence.

 

We wish Fred all the best in his retirement and look forward to serving you in the future.

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GGFI Law Supports St. Mary's Hospital Foundation on Red Day

GGFI Law is happy to support St. Mary’s Hospital Foundation and their efforts on Red Day, June 8, 2018. 

 

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Ontario Land Transfer Tax Exemptions

In Ontario, provincial Land Transfer Tax (LTT) is payable by anyone who acquires real property or a beneficial interest in land. The rule is that LTT is payable on the value given for obtaining such an interest (legally described as “consideration”). Consideration is generally the amount paid for the land and the amount of any debt or mortgage assumed as part of the purchase. 

 

As with many rules, there are exceptions to the application of LTT. I outline a few of them here:

 

First-time homebuyers are eligible for a refund of LTT. The conditions for eligibility are:

  1. They are 18 years or older;
  2. They have not owned a home or an interest in a home anywhere in the world; and
  3. They have not been a spouse of someone who has owned a home or interest in a home anywhere in the world while s/he was the purchaser’s spouse.

For example: If Adam owns property and marries Ann, who has never owned a home, Ann does not meet the eligibility requirements for a LTT refund because she was the spouse of someone who has owned property.

 

It is important to note that the definition of “spouse” includes a) married couples, b) couples who have cohabited for more than 3 years, and c) couples who have lived together “in a relationship of some permanence” and have a child.

 

This definition of “spouse” also applies to the LTT exemption for transfers between spouses or former spouses, which are not subject to LTT if a) they are made pursuant to a court Order or a Separation Agreement or b) if the only consideration provided is the assumption of an encumbrance such as a mortgage. For example: If Blake owns property and wants his spouse, Barrie, to be added to title, Barrie will not pay LTT for obtaining an interest in Blake’s property so long as no value is changing hands aside from Barrie’s name being added to the existing mortgage.

 

Transfers from an estate to a beneficiary are not subject to LTT if the transferor is the personal representative of the deceased (i.e. Estate Trustee, Executor, or Estate Administrator) and the recipient is given the property in satisfaction of all or a part of his/her beneficial interest in the estate. This is true regardless of whether the transfer is pursuant to a will or on an intestacy.

 

If you are thinking of giving or acquiring an interest in land and would like to know if LTT is something you should budget for, please contact one of GGFI’s real estate lawyers who can help you navigate the eligibility requirements for these and other exceptions.

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GGFI Welcomes Madchen V.J. Funk

GGFI is pleased to welcome its newest lawyer, Madchen V.J. Funk. Madchen joined the GGFI team as a summer student and returned to complete her articling term before receiving her call to the bar in June 2017.


Madchen’s areas of practice include civil litigation, family, wills and powers of attorney, real estate, and estates.

 

Read more about Madchen here.

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Contributors

Brianne Kostal
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August 5, 2019
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Kristina Pick
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July 10, 2019
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Lucas Barbosa
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July 10, 2019
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Madchen Funk
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June 11, 2019
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GGFI LLP
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May 30, 2019
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Dennis Crawford
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December 20, 2016
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Robert Lanteigne
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November 21, 2016
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Laura Tatum
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September 30, 2016
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