Court of Appeal for Ontario

Date: 2017-11-20 Docket: C63444

Judges: Cronk, Huscroft and Nordheimer JJ.A.

Between

Paul Holmes Plaintiff (Respondent)

and

Hatch Ltd. Defendant (Appellant)

Counsel

William D. Anderson, for the appellant

Andrew H. Monkhouse and Busayo Faderin, for the respondent

Heard: November 15, 2017

On appeal from: the judgment of Justice A. Pollak of the Superior Court of Justice, dated November 10, 2016.

Reasons for Decision

[1] The appellant employer, Hatch Ltd ("Hatch"), appeals from a summary judgment awarding the respondent employee, Paul Holmes ("Holmes"), 18 months reasonable notice at common law for the termination of his employment, subject to his mitigation obligations and applicable statutory deductions.

[2] The motion judge's core finding, which anchored her decision to grant summary judgment in favour of Holmes, was that Hatch breached the termination clause contained in the written employment agreement between the parties, thereby repudiating, as a matter of law, the entire benefit of the employment agreement. Specifically, the motion judge held, as a fact, that Hatch failed to consider Holmes' years of service, position and age when fashioning his termination package, contrary to the express wording of the termination clause.

[3] Hatch appeals from the summary judgment on several grounds. In our view, it is unnecessary for the disposition of this appeal to address all the grounds raised. We are satisfied, on this record, that the summary judgment must be set aside and the matter remitted to the Superior Court of Justice for a new hearing on Holmes' summary judgment motion. We reach this conclusion for the following reasons.

[4] First, the motion judge's finding of Hatch's breach of contract underpinned her entire decision. She found, on the evidence before her, that the breach involved Hatch's failure to take account of some of the specific factors set out in the termination clause, as described above. This failure, she held, was a fundamental breach of contract that, at law, constituted a repudiation by Hatch of the entire employment agreement. As a result, the motion judge concluded, the contract was invalid and Holmes was entitled to common law damages based on reasonable notice of termination.

[5] The difficulty with these holdings, however, is that Holmes did not plead this type of breach of contract by Hatch. Nor did he allege in his pleading that Hatch repudiated the employment agreement on this basis. Similarly, he did not advance these claims in his Notice of Motion or factum on the summary judgment motion. It was only when the motion judge raised the notion of this type of breach during oral argument, and on her own motion, that the parties made oral and subsequent written submissions on this issue.

[6] In these circumstances, Hatch was denied the opportunity to lead evidence on the precise breach allegation on which the motion judge's decision ultimately turned. Put somewhat differently, the motion judge decided the summary judgment motion on the basis of a legal theory of liability that was neither pleaded nor advanced by Holmes in support of his motion. As a result, prior to oral argument of the motion, Hatch did not know the evidentiary burden that the motion judge ultimately held it had to meet.

[7] The law assumes that the parties' pleadings properly delineate all relevant claims in dispute and define the issues. In Rodaro v. Royal Bank (2002), 59 O.R. (3d) 74 (C.A.), at para. 60, this court described the operative principle in this fashion:

It is fundamental to the litigation process that lawsuits be decided within the boundaries of the pleadings. As Labrosse J.A. said in 460635 Ontario Ltd. v. 1002953 Ontario Inc., [1999] O.J. No. 4071 (Ont. C.A.), at para. 9:

The parties to a legal suit are entitled to have a resolution of their differences on the basis of the issues joined in the pleadings. A finding of liability and resulting damages against the defendant on a basis that was not pleaded in the statement of claim cannot stand. It deprives the defendant of the opportunity to address that issue in the evidence at trial.

See also A-C-H International Inc. v. Royal Bank (2005), 197 O.A.C. 227; Labatt Brewing Co. v. NHL Enterprises Canada L.P., 2011 ONCA 511, 106 O.R. (3d) 677.

[8] In fairness to the motion judge, the record confirms that, once the suggestion of this type of breach of the termination clause arose, the motion judge attempted to ensure fairness to the parties by inviting oral submissions on the issue during the hearing and in writing after the hearing. Hatch was thus provided with some opportunity to address the new allegation against it in argument before the motion judge.

[9] But, with respect, this did not meet the concern that the alleged breach had not been pleaded or raised by Holmes. And it did not remedy the denial of the opportunity for Hatch to lead evidence responsive to the precise breach allegation belatedly raised against it. Hearing fairness was therefore fatally compromised.

[10] Second, because the motion judge concluded that Hatch had fundamentally breached and repudiated the employment agreement on this basis, thereby rendering it invalid, she did not address or rule on Holmes' arguments concerning the enforceability of the employment agreement. These included his contentions that the termination clause does not reflect a clear agreement to contract out of the common law or, in the alternative, that it is ambiguous on this issue, that the termination clause violates the provisions of the Employment Standards Act, 2000, S.O. 1990, c. 41, and that it was not supported by any valid consideration. These issues, therefore, have yet to be determined.

[11] For these reasons, the summary judgment cannot stand.

[12] The appeal is allowed and the summary judgment is set aside. The matter is remitted to the Superior Court of Justice for a new hearing of Holmes' summary judgment motion, if he is so advised, before a different judge of that court.

[13] Hatch is entitled to some costs of this appeal. However, Hatch candidly acknowledges that it neither objected to the breach issue being raised by the motion judge or sought an adjournment for the purpose of filing additional, directly responsive materials. In these particular and somewhat unusual circumstances, any award of costs of the appeal should be modest. We fix those costs in the amount of $2,500, inclusive of disbursements and all applicable taxes.

"E.A. Cronk J.A."

"Grant Huscroft J.A."

"I.V.B. Nordheimer J.A."