One Sunday each month we bring you a summary from Supreme Advocacy LLP of recent decisions at the Supreme Court of Canada. Supreme Advocacy LLP offers a weekly electronic newsletter, Supreme Advocacy Letter, to which you may subscribe. It’s a summary of all appeals as well as leaves to appeal granted so you will know what the SCC will soon be dealing with (September 12 – October 9, 2020 inclusive).
Bankruptcy and Insolvency: Priorities; Anti-Deprivation Rule
Chandos Construction Ltd. v. Deloitte Restructuring Inc., 2020 SCC 25 (38571)
The anti-deprivation rule exists in Canadian common law and has not been eliminated by either the S.C.C. or Parliament. Parliament’s actions here are better understood as gradually codifying limited parts of the common law rather than seeking to oust all related common law; Parliament is presumed to intend not to change the existing common law unless it does so clearly and unambiguously. The anti-deprivation rule renders void contractual provisions that, upon insolvency, remove value that would otherwise have been available to an insolvent person’s creditors from their reach. This test has two parts: first, the relevant clause must be triggered by an event of insolvency or bankruptcy; and second, the effect of the clause must be to remove value from the insolvent’s estate. An “effects-based” test. There are nuances with the anti-deprivation rule as it stands: eg, contractual provisions that eliminate property from the estate, but do not eliminate value, may not offend the anti-deprivation rule; nor do provisions whose effect is triggered by an event other than insolvency or bankruptcy; the anti-deprivation rule is not offended when commercial parties protect themselves against a contracting counterparty’s insolvency by taking security, acquiring insurance, or requiring a third-party guarantee. The BIA’s affirmation of set-off and the anti-deprivation rule are not incompatible; while set-off reduces the value of assets that are transferred to the Trustee for redistribution, it is applicable only to enforceable debts or claims. The anti-deprivation rule makes deprivations triggered by insolvency unenforceable. The combination means that set-off applies to debts owed by the bankrupt that were not triggered by the bankruptcy.
Employment Law: Constructive Dismissal
Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 (38252)
The majority of the Court of Appeal erred in not awarding Mr. Matthews the amount of the LTIP as part of his common law damages for breach of the implied term to provide reasonable notice. So long as damages are appropriately made out and causation established, a breach of a duty of good faith could certainly give rise to distinct damages based on the principles in Hadley, approved in this setting in Keays (at paras. 55-56), including damages for mental distress. Punitive damages also in certain circumstances. To this end, ensuring litigants take care that their pleadings are properly made out, and ensuring courts are following a methodologically coherent approach to constructive dismissal cases is certainly of value as it can affect the ultimate damage amount to be awarded to an employee plaintiff. When breached, the obligation to provide reasonable notice does not, in theory, turn on the presence or absence of good faith: it is, in a manner of speaking, a “good faith” wrongful dismissal (see Machtinger, at p. 990). The contractual breach that arises from the employer’s choice in this regard is simply the failure to provide reasonable notice, which leads to an award of damages in lieu thereof (Wallace, at para. 115, per McLachlin J., as she then was, dissenting, but not on this point). A breach of the duty to exercise good faith in the manner of dismissal is also independent of any failure to provide reasonable notice. It can serve as a basis to answer for foreseeable injury that results from callous or insensitive conduct in the manner of dismissal. Importantly, damages arising out of the same dismissal are calculated differently depending on the breach invoked. The majority of the Court of Appeal erred by focusing on whether the terms of the LTIP were “plain and unambiguous” instead of asking what damages were appropriately due for failure to provide reasonable notice. The issue is not whether Mr. Matthews is entitled to the LTIP in itself, but rather what damages he is entitled to and whether he was entitled to compensation for bonuses he would have earned had Ocean not breached the employment contract. Courts should accordingly ask two questions when determining whether the appropriate quantum of damages for breach of the implied term to provide reasonable notice includes bonus payments and certain other benefits. Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right? For the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, this too would not unambiguously alter the employee’s common law entitlement. In sum, Mr. Matthews is entitled to receive damages equal to what he would have received pursuant to the LTIP, subject to mitigation. Not all mistreatment by an employer will result in a constructive dismissal — some employees, for financial or other reasons, might choose not to leave their job.
Family Law: Retroactive Child Support
Michel v. Graydon, 2020 SCC 24 (38498)
Courts should not be deprived of jurisdiction re recipient parents who struggle to support children and to shift part of that burden to the payor parent if there was a change in circumstance that would have justified a variation while the children were still children of the marriage. Giving payor parents immunity after the children ceased to be children of the marriage would create a perverse incentive: if the payor parent is to be absolved from responsibility once the children cease to be “children of the marriage”, the payor whose income increases might be encouraged not to respond to his or her increased obligations in the hope that the reciprocal spouse will delay making an application for a variation increasing support until the children lose their status to avoid opening the door to an increased obligation; unless compelled by the applicable legislative scheme, courts should avoid creating any incentive whatsoever for payor parents to avoid meeting their child support obligations; permitting retroactive child support awards, as recognized in D.B.S., is perfectly consistent with the child support system.
Leaves to Appeal Granted
Criminal Law: Compensatory Fines
R. v. Vallières, 2020 QCCA 372 (39162)
How are compensatory fines in criminal law to be quantified.