DATE: 20020827 DOCKET: C36554
COURT OF APPEAL FOR ONTARIO
MCMURTRY C.J.O., WEILER AND ARMSTRONG JJ.A.
IN THE MATTER OF the Employment Standards Act R.S.O. 1990, c. E. 14
AND IN THE MATTER OF a decision made by Timothy W. Sargeant on June 6, 2000 pursuant to the Employment Standards Act
BETWEEN:
JOSEPH CLAUDE HALLORAN
John R. Sproat and Arthi Sambasivan, for the appellant
Applicant (Respondent in Appeal)
Timothy Costigan, for the respondent Joseph Claude Halloran
- and -
TIMOTHY W. SARGEANT
Ronald Lebi, for the respondent Timothy W. Sargeant
Respondent (Respondent in Appeal)
- and -
CROWN CORK & SEAL CANADA INC.
Respondent (Appellant)
Heard: March 20, 2002
On appeal from the order of the Divisional Court (Meehan and Cosgrove JJ. concurring and O’Leary J. dissenting) dated January 29, 2001, reported at (2001) 142 O.A.C. 286.
ARMSTRONG J.A.:
[1] This is an appeal by Crown Cork & Seal Canada Inc. (“Crown Cork”) from a judgment of the Divisional Court which quashed a decision of a Referee who dismissed certain claims of Joseph Halloran under the Employment Standards Act, R.S.O. 1990, c. E.14 (the “Act”).
Background
[2] Joseph Halloran was employed by Crown Cork for 31 years as a senior sales representative of the company. As a result of a corporate re-organization, his employment was terminated by a letter dated October 31, 1990 which gave him two compensation options. Option A permitted him to retire on an unreduced early pension. Option B provided a special retirement package. The letter of October 31, 1990 contained the following unqualified representation:
The above provisions are inclusive of all amounts payable under any provincial legislation or otherwise, including notice, payment in lieu of notice, severance pay and vacation pay. For your information the above provisions exceed provincial requirements.
[3] A financial analyst provided by the company advised Mr. Halloran to take Option A. It is clear that Mr. Halloran relied upon the representation of his employer that Option A exceeded what he was entitled to under provincial law. Unfortunately for Mr. Halloran, the representation made by the company was inaccurate.
[4] Subsequently, a group of former Crown Cork employees, who had accepted Option A, pursued a claim under the Act for severance pay in addition to the unreduced early pension. Mr. Haefling, a Referee under the Act, held that the employees were so entitled in a decision issued on March 24, 1994. The Referee’s decision was upheld by a judgment of the Divisional Court released on November 29, 1995. Leave to appeal to the Court of Appeal was refused on April 4, 1996.
[5] Mr. Halloran read a newspaper report on March 23, 1994 concerning these employees and, upon making an inquiry, he was advised that a pending decision was expected to go in favour of the former employees. Mr. Halloran took no further action at that time as he thought he should await the result of the proceedings. On December 2, 1995, Mr. Halloran read a further newspaper account that a decision of the Court had been rendered in favour of the employees. Mr. Halloran then proceeded to consult a lawyer and on January 25, 1996 he filed a similar claim under the Act.
[6] Mr. Halloran’s claim followed a somewhat complex procedural course which is not relevant to this appeal. The matter eventually came before Timothy Sargeant, another Referee under the Act, who held that Mr. Halloran’s claim was statute barred pursuant to s. 82(2) of the Act. Subsections 82(1) and (2) read as follows:
- (1) No proceeding or prosecution under this Act shall be commenced more than two years after the facts upon which the proceeding or prosecution is based first came to the knowledge of the Director.
(2) In a proceeding or prosecution under this Act, no employee shall be entitled to recover any money due to him or her more than two years before the facts upon which the proceeding or prosecution is based first came to the knowledge of the Director.
Mr. Sargeant’s Decision
[7] Mr. Sargeant, in holding that Mr. Halloran’s claim was statute barred, made a distinction between s. 82(1) and s. 82(2) of the Act. At paras. 24 and 25 of his decision he stated:
Certainly s. 82(2) of the Act, as it then was, is not what may be considered a strict limitation period. Rather it is a cap on monies that an employee may be entitled to recover based on when the facts first came to the knowledge of the Director. This section may be contrasted with s. 82(1) of the Act, as it then was, which clearly provides a limitation period as to when a proceeding may be commenced.
While it may be arguable that the Adjudicator/Referee could relieve against the limitation period in s. 82(1) of the Act, as it then was, the Adjudicator/Referee was not directed to any section of the Act or case law which in my view allows the Adjudicator/Referee to relieve against the “cap” set out in s. 82(2) of the Act, as it then was. The section is specific in regards to what period a claim may be made for, and on the facts, this claim relates to money owing that clearly predated such period.
[8] Mr. Sargeant then went on to state, at para. 26, that even if he had a discretion to relieve against the operation of s. 82(2) he would decline to do so because “there was ample opportunity [for Mr. Halloran] to review the letter of termination with counsel of his own choosing”.
[9] It is significant that counsel for the Referee on this appeal does not draw the distinction between a “cap” and a limitation period in his factum. Rather, counsel simply states that s. 82 contains two limitation provisions – one in ss. (1) governing the time for commencement of the proceedings and one in ss. (2) limiting the effect of employee recovery.
The Divisional Court (Majority)
[10] The majority of the Divisional Court (Meehan and Cosgrove JJ.) allowed the application for judicial review on the basis that Mr. Sargeant’s decision was patently unreasonable. In holding that the decision was patently unreasonable the majority prefaced their judgment by saying that the applicable standard of review was reasonableness as mandated by the judgment of this court in Re United Steelworkers of America Local 14097 v. Franks et al. (1994), 1994 8708 (ON CA), 16 O.R. (3d) 620, per Morden A.C.J.O. Both the majority of the Divisional Court and the parties appeared to use the terms reasonable and patently unreasonable interchangeably.
The Divisional Court (Dissent)
[11] O’Leary J., in a dissenting judgment, would have dismissed the application for judicial review. Justice O’Leary adopted reasonableness as the applicable standard of review. In concluding that Mr. Sargeant’s decision was not unreasonable he stated, at para. 31 of his judgment:
[31] Assuming Mr. Sargeant is wrong in his interpretation of the law, including his finding that s. 82(2) is not a limitation section, I cannot say his decision is unreasonable. Mr. Sargeant may well feel there is good reason and there may be good reason not to allow employees, except in cases of deliberate fraud, to claim for money owing more than two years prior to making a claim, that is to say, good reason to enforce such a cap as a matter of policy.
The Position of the Parties to this Appeal
[12] In the case before us, counsel for the parties argued a multiplicity of issues. In order to dispose of this appeal it is not necessary to deal with all of them. The following three paragraphs set out the major points made by each of the parties.
[13] Counsel for Crown Cork argued that the Divisional Court erred in its application of the doctrine of fraudulent concealment as there is no evidence that Crown Cork had engaged in unconscionable conduct. The appellant further argued that at the time Crown Cork made its representation to Mr. Halloran it was true, and if there is any duty to inform him of a change in the law it only arose after the two year limitation period had expired. Finally counsel for Crown Cork argued that the majority of the Divisional Court erred by applying a standard of correctness in its review of the Referee’s decision. In this regard I should say that although there appeared to be some confusion about the applicable standard of review by both the Divisional Court majority and the parties, I do not find anything in the judgment of the majority which suggests that they employed a standard of correctness.
[14] Counsel for the Referee, Mr. Sargeant, after outlining the relevant provisions of the Act, submitted that his decision was reasonable and should not be disturbed.
[15] Counsel for Mr. Halloran argued that it was unconscionable for Crown Cork to invoke the limitation period in circumstances where Mr. Halloran’s delay in making his claim was caused by an untruthful statement made by Crown Cork. He argued that the doctrines of fraudulent concealment and discoverability applied to this case. He also argued that the Divisional Court properly applied patent unreasonableness as the standard of review, and that the Referee’s interpretation of s. 82(2) was patently unreasonable.
Analysis
[16] The first issue to be determined is the proper standard of review applicable to the case at Bar. As indicated above, this court has determined in Re United Steelworkers of America Local 14097 v. Franks et al, that the standard of review is reasonableness. Although the majority in the Divisional Court referred to the United Steelworkers case and its mandated standard of reasonableness they proceeded to discuss the decision of the Referee in terms of whether it was patently unreasonable. In the argument before us there did not appear to be agreement among counsel concerning the distinction between reasonableness and patent unreasonableness. In Canada (Director of Investigation and Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748 Iacobucci J. articulated the distinction at pages 776 and 777 of his judgment:
I conclude that the third standard should be whether the decision of the Tribunal is unreasonable. This test is to be distinguished from the most deferential standard of review, which requires courts to consider whether a tribunal's decision is patently unreasonable. An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reasons support it. The defect, if there is one, could presumably be in the evidentiary foundation itself or in the logical process by which conclusions are sought to be drawn from it. An example of the former kind of defect would be an assumption that had no basis in the evidence, or that was contrary to the overwhelming weight of the evidence. An example of the latter kind of defect would be a contradiction in the premises or an invalid inference.
The difference between "unreasonable" and "patently unreasonable" lies in the immediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal's reasons, then the tribunal's decision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreasonable.
This analysis proceeds on the basis that reasonableness, as defined by Iacobucci J., is the appropriate standard of review. I propose to consider the following issues:
(i) Was the representation of the company to the effect that the unreduced early pension option exceeded provincial requirements true?
(ii) Was the Referee’s interpretation of s. 82(2) of the Act reasonable?
(iii) Was the Referee’s refusal to apply the doctrine of fraudulent concealment reasonable?
(iv) Was the Referee’s conclusion that even if he had a discretion to relieve against the operation of s. 82(2) he would decline to do so reasonable?
As noted above counsel for Mr. Halloran also urged us to consider the application of the doctrine of discoverability. The focus of the Divisional Court majority judgment was on the doctrine of fraudulent concealment. In view of the position which I take in regard to the latter issue I find it unnecessary to deal with the doctrine of discoverability.
(i) The Representation of the Company
[17] Counsel for Mr. Halloran argued that at the time the company made its representation in the letter of October 31, 1990 it was untrue based, upon the 1988 decision of Kenneth P. Swan, a Referee under the Act, in Goodyear Canada Inc. v. United Rubber, Cork, Linoleum and Plastic Workers of America, Employment Standards Branch File No. 033417, Dec. 2, 1988 (unreported). The case involved a plant closure in which the employees were given the choice to receive “a reduced pension…plus severance pay or to receive an unreduced pension” (at p. 11). They were informed that these provisions were “in addition to any benefits or provisions which would flow from… applicable provincial legislation” (at p. 12).
[18] The dispute in Goodyear Canada turned on the wording of the Act regarding reduced and actuarially unreduced pensions. Essentially, the employer argued that only those who took the reduced pension option were entitled to severance pay. Those who chose to take the unreduced pension took themselves out of the severance pay provisions of the Act. The union argued that any employee whose employment was truncated by the plant closure prior to serving the maximum number of years allowed for the calculation of pension benefits, must be understood to be entitled to receive a reduced pension and thus severance pay. The Referee held that the union’s interpretation was correct.
[19] In a decision released December 6, 1989, the Divisional Court upheld the decision of the Referee. (Goodyear Canada Inc. v. U.R.W. [1989] O.J. No. 2136) The court also agreed that the compensation under the severance pay provisions is for loss of opportunity to be derived from further employment including the accrual of pension benefits. It would appear that Goodyear Canada was the applicable law when Mr. Halloran received his letter on October 31, 1990 and he therefore was entitled to severance pay under the Act in addition to his pension.
[20] Counsel for Crown Cork relied upon a later decision of Justice Lang in Pawluk v. Crown Cork and Seal Canada Canada Inc. released on March 5, 1992 (unreported). In that case Lang J. held that an employee of Crown Cork who had elected to take an unreduced early pension was not terminated and therefore not entitled to pursue his claim in common law for damages for wrongful dismissal. Justice Lang made no reference to the Goodyear Canada case in her endorsement. However, it may not have been drawn to her attention. In any event it is significant that she expressly declined to deal with the plaintiff’s claim for statutory relief under the Act. The Pawluk case is therefore clearly distinguishable from Goodyear Canada.
[21] The decision of Mr. Sargeant and the majority of the Divisional Court made no reference to either the Goodyear Canada or Pawluk cases. However, in his dissenting judgement O’Leary J. relied upon the Pawluk case when he stated that there was serious doubt as to whether the company representation was incorrect. He made no reference to the earlier Goodyear Canada case. As indicated, both of these cases were argued before us by counsel for Mr. Halloran and counsel for Crown Cork. As I have already said, I am satisfied, based upon the earlier case of Goodyear Canada, that at the time that the representation was made by the company, the state of the law was contrary to the representation made by Crown Cork to Mr. Halloran in its letter of October 31, 1990. In my view the company was not justified in making the statement in its letter.
[22] Mr. Sargeant did not make a determination as to whether the company’s representation was true or false. In view of his conclusion that s. 82(2) was a bar to Mr. Halloran’s claim, he appears to have proceeded on the assumption that whether the statement was true or false was of no consequence.
(ii) Was the Referee’s interpretation of s. 82(2) of the Act reasonable?
[23] It is common ground that Mr. Halloran’s claim first came to the knowledge of the Director through the lawyer’s letter of January 25, 1996. I agree with Mr. Sargeant that s. 82(1) of the Act is therefore not relevant. The parties agree that if any monies were due to Mr. Halloran under the Act they were due in early November 1990. As a result, s. 82(2) of the Act is engaged unless Mr. Halloran is entitled to relief in accordance with the doctrine of fraudulent concealment or some other equitable principle.
[24] As already stated, Mr. Sargeant concluded that s. 82(2) “is not what may be considered a strict limitation period. Rather it is a cap on monies that an employee may be entitled to recover…”. He then postulated that an Adjudicator/Referee may be able to relieve against a limitation period such as exists in s. 82(1) of the Act but did not believe that he was entitled to relieve against the “cap” as set out in s. 82(2) of the Act.
[25] Mr. Sargeant considered the arguments advanced by counsel for Mr. Halloran to the effect that this is an appropriate case to relieve against the application of s. 82(2) of the Act. However, he declined to do so, apparently on the basis of the distinction which he made between what he called a strict limitation period and a “cap”. In this regard, I believe that the Referee’s decision is unreasonable.
[26] In coming to his conclusion, Mr. Sargeant made no reference to a number of cases under the Act which treat s. 82(2) as creating a limitation period. (See Kroll v. 949486 (c.o.b. Texas Border Grill and Boot Bar) 1997 12343 (ON SC), [1997] O.J. No. 4932 (Ont. Gen. Div.); Re Blake [1994] O.E.S.A.D. No. 219 (O.L.R.B.); Re Haddam [1995] O.E.S.A.D. No. 69 (O.L.R.B.); Case [1997] O.E.S.A.D. No. 888; and D.I.C.S. Machinery Ltd. [1998] O.E.S.A.D. No. 224 (O.L.R.B.).) While the distinction articulated by Mr. Sargeant between a cap and a limitation period was not an issue in the aforesaid cases, I believe it is nevertheless telling that other adjudicators under the Act and a judge of the Ontario Court General Division have treated s. 82(2) as a limitation section. Section 82(2) would also seem to fit the definition of a limitation period as set out in Mew, The Law of Limitations (Butterworths: 1991):
A stated period of time, the expiry of which extinguishes a party’s legal remedies and also, in some cases, a party’s legal rights.
[27] I am mindful that Mr. Sargeant is deemed to have considerable expertise in the field of labour relations and employment law. I am equally mindful that his analysis of s. 82(2) of the Act engages him in the interpretation of his “home statute” which requires a court to proceed with caution before finding that his interpretation is unreasonable.
[28] Even if one accepts the distinction which Mr. Sargeant makes between the provisions of s. 82(1) and s. 82(2) I do not discern any principled basis upon which to conclude that s. 82(2) is to be given a more narrow interpretation than s. 82(1) in the circumstances which obtain here. O’Leary J., in his dissenting judgment in the Divisional Court, suggested that “Mr. Sargeant may well feel there is good reason and there may be good reason not to allow employees, except in cases of deliberate fraud, to claim for money owing more than two years prior to making the claim…” Unfortunately, Mr. Sargeant did not articulate any such reason.
(iii) Was the Referee’s refusal to apply the doctrine of fraudulent concealment reasonable?
[29] In my view it was unreasonable for Mr. Sargeant to decline to consider whether the doctrine of fraudulent concealment applies to this case, particularly in the circumstances where the company made a categorical representation which in my view was wrong at the time, and resulted in Mr. Halloran’s declining to pursue his rights under the Act.
[30] The majority in the Divisional Court applied the doctrine of fraudulent concealment in order to relieve against the limitation in s. 82(2). I agree with their approach.
[31] The doctrine of fraudulent concealment relied upon by the majority was succinctly articulated by Justice Dickson (as he then was) in Guerin v. The Queen 1984 25 (SCC), [1984] 2 S.C.R. 335 at 390:
It is well established that where there has been a fraudulent concealment of the existence of a cause of action, the limitation period will not start to run until the plaintiff discovers the fraud, or until the time when, with reasonable diligence, he ought to have discovered it. A fraudulent concealment necessary to toll or suspend the operation of the statute need not amount to deceit or common law fraud. Equitable fraud, defined in Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563, as ‘conduct which having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other’, is sufficient.
[32] There is no question that a special relationship existed between Crown Cork and Halloran when Crown Cork delivered the termination letter to its employee. It is at that point, as emphasized by Justice Iacobucci in Wallace v. United Grain Growers Ltd. 1997 332 (SCC), [1997] 3 S.C.R. 701 at 742, that “the employee is most vulnerable and hence, most in need of protection”. Iacobucci J. went on to state that, “the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal”. Although the factual context in Wallace was different from this case I am persuaded that Justice Iacobucci’s conclusion that employers ought to be held to an obligation of good faith and fair dealing towards a terminated employee is applicable here:
The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.[^1]
[33] Crown Cork argued that the doctrine of fraudulent concealment should not apply in the case before us because there was no justification for the Divisional Court’s finding that Crown Cork engaged in unconscionable conduct. In this regard counsel for Crown Cork relied upon the shorter Oxford Dictionary definition of unconscionable: “having no conscience; unscrupulous; monstrously extortionate, harsh…showing no regard for conscience; irreconcilable with what is right or reasonable…” The Oxford English Dictionary Second Edition, 1991, Volume XVIII gives a broad range of definitions for unconscionable including simply: “not in accordance with what is right or reasonable”. In my view, it was not in accordance with what is right or reasonable for the company to make an unqualified statement containing a misrepresentation which caused its employee to act to his detriment. The company was in a position to ascertain the state of the law at the time and provide accurate information to Mr. Halloran. There is nothing in the record to suggest otherwise. I believe that it was unconscionable for the company to invoke the limitation period in s. 82(2) of the Act in order to deny Mr. Halloran’s claim when it was responsible for his delay in filing the claim. Mr. Halloran is, in the circumstances, a completely innocent party who did no more than take the word of his employer of 31 years to his detriment. To put it another way, I believe that Crown Cork breached its obligation of good faith and fair dealing to Mr. Halloran and thereby acted unconscionably.
[34] Counsel for Crown Cork relied upon Justice LaForest's judgment in M. (K.) v. M. (H.) 1992 31 (SCC), [1992] 3 S.C.R. 6 at p. 57 where he noted that there was an important restriction to the scope of the doctrine of fraudulent concealment as stated in Halsbury's, 4th ed., vol. 28, para 919, at p. 413:
In order to constitute such a fraudulent concealment as would, in equity, take a case out of the effect of the statute of limitation, it was not enough that there should be merely a tortious act unknown to the injured party, or enjoyment of property without title, while the rightful owner was ignorant of his right; there had to be some abuse of a confidential position, some intentional imposition, or some deliberate concealment of facts.
[35] I do not find that the restriction articulated in Halsbury's precludes the application of the doctrine in this case. Mr. Halloran was in a vulnerable position in relation to his employer at the time of termination. Given this special relationship there was, in my view, a clear obligation on the part of Crown Cork to provide accurate information to its employee. To do otherwise is an abuse of the relationship. It was unreasonable for the Referee to decline to relieve against the application of s. 82 (2) of the Act in this case. In my view, the limitation period in s. 82 (2) should not have commenced until Mr. Halloran became aware that severance money under the Act was due to him which was either December 2, 1995 or perhaps earlier, on March 23, 1994. Either of the aforementioned dates bring him within the time prescribed in s. 82 (2).
[36] I note that in the M. (K.) v. M. (H.) case, LaForest J. reviewed both the Kitchen and Guerin cases and concluded at page 57:
What is clear from Kitchen and Guerin is that “fraud” in this context is to be given a broad meaning, and is not confined to the traditional parameters of the common law action. [Emphasis added]
He also stated at p. 58 that the underlying premise of the doctrine of fraudulent concealment is that, “the courts will not allow a limitation period to operate as an instrument of injustice”. While M. (K) v. M. (H.) involved a tort action for incest, its discussion regarding the doctrine is equally applicable to the case at Bar.
(iv) Was the Referee’s conclusion that even if he had a discretion to relieve against the operation of s. 82(2) he would decline to do so reasonable?
[37] In view of the position I have taken above I need not dwell on this issue. Mr. Sargeant said that if he had a discretion he would decline to exercise it because Mr. Halloran had the opportunity to consult with counsel of his choosing. With respect, I disagree. The same conduct of the company that amounted to fraudulent concealment resulted in Mr. Halloran doing nothing. He had no apparent reason to consult a lawyer based upon what he was told by the company. When there was reason to question the information he consulted counsel. I do not find the Referee’s position reasonable.
CONCLUSION
[38] I therefore conclude that the Referee’s decision that Mr. Halloran’s claim was barred by s. 82(2) of the Act is unreasonable. I would dismiss the appeal.
COSTS
[39] Mr. Halloran should have his costs of the leave to appeal application and the appeal on a partial indemnity scale paid by the appellant, Crown Cork. I would fix his costs at $9,500.
Released: “AUG 27 2002” “RRMc”
“Robert P. Armstrong J.A.”
“I agree K. M. Weiler J.A.”
“I agree R. R. McMurtry C.J.O.”
[^1]: Wallace v. United Grain Growers Ltd., supra at 743.