ONTARIO SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-CV-430962
DATE: March 30, 2012
BETWEEN:
Doug MacGregor
Plaintiff
- and -
National Home Services
Defendant
COUNSEL:
• David H. Lauder for the Plaintiff
• Thomas A. Stefanik for the Defendant
HEARING DATE: March 26, 2012
PERELL, J.
REASONS FOR DECISION
[ 1 ] Pursuant to Rule 20 of the Rules of Civil Procedure , R.R.O. 1990, reg. 194, the Defendant National Energy Corporation (“National”) (misnamed as National Home Services) brings a motion for summary judgment to have the Plaintiff Doug MacGregor’s wrongful dismissal action dismissed.
[ 2 ] The misnomer of the defendant’s name should be corrected in the title of proceedings, and I so order.
[ 3 ] National’s first argument is that there is no genuine issue requiring a trial because it can enforce an employment agreement signed by Mr. MacGregor dated September 5, 2008.
[ 4 ] The employment agreement limits Mr. MacGregor’s compensation upon dismissal. The employment agreement provides that National can terminate Mr. MacGregor’s employment by paying his base salary plus benefits and pro-rated bonus. National submits that it has honoured the compensation provisions of the employment agreement, and, accordingly, National submits that Mr. MacGregor’s action for additional compensation should be dismissed.
[ 5 ] National’s second argument is that that Mr. MacGregor’s contention that the employment agreement is not enforceable does not raise a genuine issue requiring a trial, because Mr. MacGregor has never pleaded that the agreement is not enforceable and, thus, National submits that he cannot raise this issue as requiring a trial. Thus, once again, National submits that Mr. MacGregor’s action should be dismissed.
[ 6 ] National’s third argument is that if Mr. McGregor may raise the issue of the enforceability of the employment agreement, then, nevertheless there is no genuine issue requiring a trial.
[ 7 ] For the third argument, National submits that the agreement is enforceable. In other words, National submits that the parties having put their best evidentiary feet forward, Mr. MacGregor cannot show that his original employment agreement does not apply and, therefore, the agreement, which limits his compensation for having been dismissed without cause, is enforceable. Thus, once again, National submits that Mr. MacGregor’s action should be dismissed.
[ 8 ] For the reasons that follow, I disagree that there are no genuine issues requiring a trial, and, therefore, I dismiss National’s motion for a summary judgment.
[ 9 ] The discussion of my reasons for dismissing the summary judgment motion may begin by discussing the legal principle that underlies the debate between the parties about whether or not Mr. MacGregor’s employment agreement, which he signed before beginning work at National in the fall of 2008, is enforceable.
[ 10 ] Mr. MacGregor relies on what is known as “the changed substratum doctrine” as the basis upon which he resists National’s motion for a summary judgment. There is no debate between the parties about the nature of the changed substratum doctrine, but National submits that Mr. MacGregor cannot rely on the doctrine because he did not plead that his employment contract was unenforceable. Alternatively, assuming that Mr. MacGregor can rely on the changed substratum argument, National argues that there is no genuine issue requiring a trial because as a factual matter, the elements of the doctrine have not been satisfied in the case at bar.
[ 11 ] The changed substratum doctrine is a part of employment law. The doctrine provides that if an employee enters into an employment contract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employee’s responsibilities and status has significantly changed. See: Rasanen v. Lisle-Metrix Ltd. (2001), 2002 49611 (ON SC) , 17 C.C.E.L. (3d) 134 (S.C.J.), aff’d (2204), 2004 16321 (ON CA) , 33 C.C.E.L. (3d) 47; Toronto Dominion Bank v. Wallace (1983), 1998 4150 (ON CA) , 41 O.R. (3d) 161 (C.A.); Collins v. Kappele, Wright & MacLeod Ltd. (1983) 3 C.C.E.L. 228 (Ont. Co. Ct.) , aff’d (1983) 3 C.C.E.L. 240 (C.A.) .
[ 12 ] The idea behind the changed substratum doctrine is that with promotions and greater attendant responsibilities, the substratum of the original employment contract has changed, and the notice provisions in the original employment contract should be nullified. In Rasanen v. Lisle-Metrix Ltd. (S.C.J.), supra , at para. 41, Justice Dambrot approved the following description of the doctrine from Ball , Canadian Employment Law :
Canadian jurists have recognized that contractual terms that are fair in the early part of the employment relationship may be unfair when the employee has developed new skills, has acquired a new position, receives greater remuneration or has additional responsibilities. When these circumstances exist, the Court may hold that the "substratum" of a written contract of employment has disappeared or eroded sufficiently so that, inter alia, terms purporting to limit the amount of notice required for termination of employment no longer have contractual force.
[ 13 ] In the case at bar, Mr. MacGregor has never expressly pleaded the changed substratum doctrine. However, his Statement of Claim does plead the history of his employment relationship with National, and the pleading refers to the circumstances of enhanced responsibilities, and the Statement of Claim speaks about his having been promoted. In this regard, paragraphs 9 and 10 of the Statement of Claim should be noted:
The Plaintiff pleads that at the request of the Defendant, he attended on an Examination for Discovery as a representative of the Defendant, which was involved in litigation with a competitor, the Plaintiff’s former employer, Reliance Home Comfort. The effect of this testimony had positive benefits for the Defendant in the litigation, in particular relating to the impact of the Defendant’s Agency Agreement but also was to effectively close all doors for the Plaintiff to future re-employment with Reliance Home Comfort or any other competitor in the industry. Further, the Defendant has failed to confirm or take steps to provide indemnification to the Plaintiff with respect to his testimony and involvement in this litigation.
On February 1, 2011, the Plaintiff was promoted to the position of VP, Sales, responsible for the dealer, homebuilder and property management sales channels. As such the Plaintiff occupied a senior management position with the Defendant. On April 22, 2011, Shelley Sheppard, COO for National Home Services, acknowledged Mr. MacGregor’s importance to the company in an e-mail provided to the Plaintiff.
[ 14 ] Mr. MacGregor returned to these themes of his job responsibilities and his status at National in his affidavit delivered for the summary judgment motion and during his cross-examination on that affidavit. Thus, he deposed that he took over the role of vice-president of operations as well as being vice-president of contractor and new home sales in 2009. He described in more detail his involvement in the litigation with Reliance Home Comfort. He deposed that he was promoted to vice-president of sales responsible for the dealer, homebuilder, and property management sales.
[ 15 ] In paragraph 13 of his affidavit for the summary judgment motion, Mr. MacGregor dealt with the allegation contained in National’s Statement of Defence that it was relying on the original employment agreement. Mr. MacGregor stated:
In its Statement of Defence, National has sought to rely upon the conditions in the original Employment Agreement even though this Agreement was entered into with respect to my original employment position of Vice President, Contract Division, and despite the fact that as of February 1, 2011, I had been promoted to Vice President of Sales with different job responsibilities and a different bonus plan. National has failed to recognize these promotions or my common-law rights on the standard of notice required under these circumstances, including the position I held at the time of my termination of employment, my length and character of service, my age and availability or comparable employment having regard to my experience training and qualifications.
[ 16 ] Practically speaking, paragraph 13 of his affidavit is a pleading of the changed substratum doctrine, and he was cross-examined on this issue for the purposes of the summary judgment motion. This all being the case, National’s argument that Mr. MacGregor cannot raise a genuine issue for trial about the changed substratum doctrine becomes quite arid and technical.
[ 17 ] Technically speaking, Mr. MacGregor should have delivered a Reply to the Statement of Defence, if he wished to challenge the enforceability of the employment contract; see rules 25.09 (1) (4) and 25.09 (2) of the Rules of Civil Procedure but, practically speaking, he did plead to the Statement of Defence in replying to the summary judgment motion. Thus, I do not agree with National’s argument that Mr. McGregor is precluded from relying on the changed substratum argument.
[ 18 ] This brings me to National’s argument that assuming that the changed substratum argument is in play, there is no genuine issue requiring a trial about this issue. National submits that based on the evidence for the summary judgment motion and the inferences that may be drawn from that evidence, there was no significant change in the substratum of Mr. MacGregor’s employment relationship.
[ 19 ] I disagree with National’s argument. It may eventually be determined at trial that the changed substratum doctrine does not apply; however, at this juncture, I am unable to decide that there is no genuine issue requiring a trial.
[ 20 ] Following, Combined Air Mechanical Services Inc. v. Flesch , 2011 ONCA 764 (C.A.), I regard the case at bar as being one in which it would be both substantively and procedurally unfair to dispose of the changed substratum doctrine issue without the full appreciation of the evidence that would be available at trial.
[ 21 ] I wish to be clear that I am not holding that by its nature the issue of the application of the changed substratum doctrine cannot be resolved by a motion for a summary judgment motion, particularly after fulsome discovery of documents and examinations for discovery, but Mr. MacGregor has raised just enough evidence to refute National’s argument that even with the Court’s enhanced powers to weigh evidence and make findings of fact, there should be a summary judgment.
[ 22 ] It is a mystery to me why Mr. MacGregor did not cross-examine National’s representative or provide more or better evidence about his alleged promotions, but in my opinion, his action should proceed to a trial because sufficient evidence was advanced by him to establish that there are genuine issues requiring a trial. Because I am dismissing the summary judgment motion, I do not wish to say more about the evidence developed for the summary judgment motion.
[ 23 ] Accordingly, I dismiss the motion for summary judgment. I direct Mr. MacGregor to deliver a Reply expressly relying on the changed substratum doctrine.
[ 24 ] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Mr. MacGregor within 20 days of the release of these Reasons followed by National’s submissions within a further 20 days.
[ 25 ] Order accordingly.
Perell, J.
Released: March 30, 2012
COURT FILE NO.: 11-CV-430962
DATE: March 30, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Doug MacGregor
Plaintiff
‑ and ‑
National Home Services
Defendant
REASONS FOR DECISION
Perell, J.
Released: March 30, 2012.