Renzone v. Onyx Homes Inc.
COURT FILE NO.: CV-20-00642348
MOTION HEARD: December 8, 2020
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Renzone Plaintiff
AND:
Onyx Homes Inc., o/a Bremont Homes Corporation Defendant
BEFORE: Master J. Josefo
Date of Decision: December 11, 2020
Counsel: D. Camenzuli, counsel for plaintiff, moving party Email: dcamenzuli@dcworkplacelaw.ca
M. MacLellan, counsel for defendant, responding party Email: mmaclellan@ccpartners.ca
Endorsement of Master Josefo dated December 11, 2020 (motion argued December 8, 2020)
What this Motion is About: Overview of the Motion and the Case
[1] Plaintiff brings this motion to strike certain paragraphs of the Statement of Defence (“defence”). Plaintiff asserts that these paragraphs are contrary to Rule 25.11 because they relate to “without prejudice” settlement discussions, related correspondence, and to offers made to the plaintiff setting out the basis for her return to work. Defendant disagrees that the communications upon which it relies were without prejudice, and that its defence, which refers to and relies on such communications, in any way offends Rule 25.11.
[2] The Notice of Motion addresses, in paragraph one of it, whether the impugned paragraphs (41, 42, 43, 47, 48, 51, 53) of the defence should be struck “as they relate to ‘without prejudice’ settlement discussions and related correspondence and as these paragraphs relate to defendant’s alleged offer…to ‘return to work’…”. There is no specific suggestion that the pleading also offends Rule 25.06, by pleading evidence. That was the alternative argument of the plaintiff made in argument: that the above-referenced paragraphs of the defence plead evidence, so these could be struck on that basis.
[3] Yet I do not find the pleading particularly offensive or egregious in that regard. It is often a matter of style. Justice D. M. Brown stated in a thorough review of such issues in Rare Charitable Research Reserve v. Chaplin, [2009] O. J. No. 3893 (at paragraph 21) that, while in a pleading, in essence, less is more, no “bright line distinguishes material facts from evidence; the difference tends to be one of degree, rather than of kind.” In any event, I need not address this alternative ground of relief in this decision.
[4] The issues which underpin this within action are constructive, thus wrongful, dismissal. The plaintiff claims that, after 12 years of full-time employment at full-time hours, on May 3 & 4, 2020 the defendant purported to reduce her hours to 27 hours weekly, with a resulting reduction in pay. Before these reductions could take place, however, plaintiff left work on sick leave. On May 5, 2020, her lawyer wrote a demand letter asserting, inter alia, that the proposed changes constituted constructive dismissal. On May 29, 2020, counsel for the employer responded by a letter headed “without prejudice”, rejected the plaintiff’s settlement proposal, denied that the plaintiff was terminated “constructively or otherwise”, and set out terms for the plaintiff’s return to work.
The Impugned “Without Prejudice” Communications & Pleadings—with initial observations:
[5] It is helpful for context to include herein the entirety of the May 29, 2020 letter from defendant’s counsel to plaintiff’s counsel. It reads as follows:
May 29, 2020 VIA E-MAIL:
WITHOUT PREJUDICE
Dear Mr. Camenzuli: Re: Patricia Renzone and Onyx Homes Inc.
As you are already aware, your client was asked to return her employer's mobile phone and other equipment that was in her possession. This morning my client discovered that the mobile phone's password has been changed. My client can no longer access its own mobile phone. Please have your client provide the correct password immediately. Further, my client discovered this morning that your client removed the sim card from that phone. There is no legitimate reason for your client to have retained the employer's sim card for that phone. Please ensure that Ms. Renzone makes arrangements to return that sim card immediately.
My client and I have reviewed your letter dated May 22, 2020. My client obviously cannot accept your client's proposal to settle for $156,300.00. As you know my client denies that your client has been terminated, constructively or otherwise, and your client has maintained at all material times that she has not resigned from employment. You in fact advised me that your client would ideally prefer to return to employment.
Given the foregoing, and your client's far too expensive settlement proposal, my client does not wish to make any counter offer to settle at this time. Accordingly, my client expects your client to return to work upon the expiry of her sick leave of absence on the following terms, which we have carefully considered and believe are reasonable in light of the current circumstances, including restrictions related to COVID-19.
(1) Ms. Renzone's regular compensation will be reduced by 10%;
(2) Ms. Renzone's hours of work will be a daily schedule of 8:30am to 5:00pm;
(3) Ms. Renzone will perform administrative and clerical tasks as assigned by Onyx Homes Inc. which will not necessarily include the full range of duties performed by Ms. Renzone in the past. Even if the amount of work assigned to Ms. Renzone is modified, her compensation will remain consistent;
(4) Ms. Renzone will comply with her implied duty of good faith and fidelity by devoting her working time to her employer and not carrying on side business during her working time, or at all if such side business conflicts or interferes with the Employer's business, including but not necessarily limited to Ms. Renzone's mortgage business;
(5) Ms. Renzone will not be provided with a mobile phone by the Employer and she will provide her personal mobile phone number to the Employer;
(6) Ms. Renzone's employment will end on a without cause basis eight (8) months after her return to work and this letter shall constitute notice of termination of employment. The Company also reserves the right to end Ms. Renzone's employment earlier and pay out the balance of the working notice remaining, along with appropriate entitlements if any. In this case, paragraph 7 will apply. Finally, the Company reserves the right to dismiss Ms. Renzone prior to the end of the working notice period without any further payment to her if it has just cause to do so;
(7) If Ms. Renzone remains an employee of Onyx Homes Inc. at the expiry of the eight (8) month notice period she will be provided with a neutral letter of employment and a five thousand dollar ($5,000.00) retiring allowance, less any and all required statutory deductions. Upon her return to work a termination date will be set and acknowledged for all parties;
(8) The entitlements in paragraph 7 are strictly conditional upon Ms. Renzone first signing the attached full and final release upon the expiry of the eight (8) month notice period.
My client will of course follow up with Ms. Renzone to obtain further medical information regarding her ability to return to work in due course.
[6] The May 29^th^ letter was reproduced, essentially as was written, at paragraph 41 of the defence, including the eight clauses. In essence, after on May 4, 2020 writing to plaintiff that “the hours I am proposing…are set”, meaning that the reduction of the plaintiff’s working hours was then stated to be fixed and final, a little more than three weeks later, on May 29, 2020, the employer made a different proposal in its letter from its counsel to counsel for plaintiff. That included a $5,000.00 payment if the plaintiff remained with the employer for the eight-month time period and if she signed a release.
[7] The “full and final release” attached to the May 29^th^ letter was typically all-encompassing. If signed, it purported to release defendant from the usual suite of claims and would preclude plaintiff from taking any action against the defendant for claims arising out of her employment or the cessation of it. Thus, for $5,000.00 all her potential claims would be irrevocably compromised.
[8] The May 29^th^ letter does not specify if the plaintiff could agree to return to work for the eight-month period, yet choose not to sign the release and not collect the $5,000. The paragraph immediately before the eight numbered paragraphs reads, “Accordingly, my client expects your client to return to work upon the expiry of her sick leave of absence on the following terms, which we have carefully considered and believe are reasonable…”[emphasis added]. Accordingly, in my view a logical and likely interpretation of the letter and the employer’s proposal is that all these terms are a complete and indivisible package, linked together, from which one cannot cherry-pick. After all, if the employer or counsel for the employer intended that some terms from the letter could be hived off, the letter would and should likely have so stated.
[9] In a June 5, 2020 letter, counsel for the employer, when referring to the May 29^th^ letter, states:
The substance of that May 29, 2020 letter was not represented to be a settlement proposal from my client. Rather, it represented a reconsideration of its previous position and set new terms for your client's employment with Onyx Homes Inc.
[10] Finally, in the June 18, 2020 letter from the employer directly to the plaintiff, the employer seeks to “confirm our position” as set out in the May 29^th^ and June 5^th^ letters. It then spells out the same eight points as excerpted above, again sending the comprehensive release to the plaintiff.
[11] These further letters are referenced in paragraphs 43 and 47 of the defence, the latter paragraph leading to an assertion that the terms proposed on May 29^th^ and June 18^th^ “would not constitute constructive dismissal…”.
[12] Paragraph 51 of the defence asserts that the plaintiff has “continuously refused to accept reasonable alternate terms of employment…set on May 29, reiterated on June 5 and once again provided on June 18, 2020…[and] by unreasonably refusing to avail herself of these terms, plaintiff has failed to mitigate her alleged losses…”.
[13] Paragraph 53 of the defence pleads:
Further and/or in the alternative to the foregoing, Onyx respectfully submits that considering all regular factors that the Plaintiff's reasonable common law notice period would be no more than six months. The Plaintiff would be entitled to no more than 10% of her regular compensation for six months, or $3,750.00. However, the further two months of work at 90% compensation which the Plaintiff unreasonably refused to accept amounts to $11,250.00, and the Plaintiff's failure to mitigate her potential losses disentitle her to any common law remedies.
Discussion and Analysis:
[14] I begin with Rule 25.11. This Rule allows the Court to “strike out or expunge all or part of a pleading…with or without leave to amend on the ground that the pleading…is scandalous, frivolous or vexatious…”.
[15] It is settled law that referring to settlement offers or discussions, which are thus subject to “settlement privilege”, may well be considered scandalous, frivolous or vexatious, leading to that part of the pleading being struck given that such communications are inadmissible. See, in that regard, 2030945 Ontario Ltd v. Markham Village Shoppes Ltd 2013 ONSC 1020 at para. [8].
[16] Are the May 29^th^ and subsequent letters, communications subject to “settlement privilege”? There is a three-part test used to determine if “settlement privilege” arises. Settlement privilege arises if:
• There is the existence of litigation, or a litigious dispute is likely on the horizon,
• The communications were made with either the express or the implied intention that such would not be disclosed to the court if settlement discussions failed, and,
• The purpose of the communication(s) was to try to settle the dispute.
[17] Clearly, as of May 29, 2020, litigation was well visible on the horizon. This was after counsel for the plaintiff wrote his initial demand letter. The May 3^rd^ & 4^th^ communications emanated directly from the defendant directly to the plaintiff, to inform her in absolute terms of her reduction of hours and pay. By contrast, the May 29^th^ letter was sent by counsel for defendant, responding to counsel for plaintiff. The two lawyers were writing to each other because the plaintiff was at that time threatening or at least implying a potential lawsuit. The first condition for settlement privilege is thus met.
[18] Was the communication not intended to be disclosed? While defendant maintains that no such secrecy was contemplated, considering the facts and context of the matter I am unable to agree. That the letter was headed “without prejudice” is a factor, yet by no means a determinative one. I agree with counsel for defendant that, as discussed in R.K. v. S.K., 2005 ABQB 672, at paragraph [6], “merely marking a letter ‘without prejudice’ does not make it privileged, unless the contents are actually privileged”. It is necessary, therefore, to consider the contents of the May 29^th^ and subsequent letters, and also the context in which these were written.
[19] The May 29^th^ letter was not written in a vacuum. Rather, as can be seen from reading it, it was responding to plaintiff’s May 22^nd^ letter which had put forward a settlement proposal of the plaintiff. Thus, the parties were engaged in at least some settlement communications. In that context, the use of the heading “without prejudice” is more significant. I find that the plaintiff, who had made an offer and who received a detailed response from counsel for defendant headed “without prejudice”, was communicating in the reasonable expectation of settlement privacy. Below, I further discuss what I make of the May 29^th^ and similar subsequent correspondence of defendant, and the seeming intentions of the defendant.
[20] Above in these reasons I discussed why I found the likely indivisibility of the eight terms offered to the plaintiff in the May 29^th^ letter. Those terms included that she must sign a release in order to collect $5,000 should she work until the end of the proposed eight-month period. A Release typically implies an intention to settle a dispute. In this case, the release, if signed, would indeed have settled the entirety of the dispute between the parties. Moreover, the Release, in addition to being typically comprehensive, also provided (at clause eight of it) for confidentiality. By signing the release, the plaintiff agreed that she would “keep the terms and conditions of the termination of my employment confidential and shall not disclose them to any third person…”.
[21] As Justice Ryan Bell discussed in Ramos v. Hewlett-Packard (Canada) Co, 2017 ONSC 4413, a case where that employer attempted to plead a separation offer, given terms of confidentiality in the offer (at paragraph 11(v):
“…the offer was made with the implied intention that it would not be disclosed to a court. Hewlett-Packard ought not be entitled to refer to the offer in its statement of defence simply because Ms. Ramos did not accept the offer.”
[22] Those are facts very similar to this matter before me. In Ramos, the letter was not headed “without prejudice”. Yet the court nevertheless concluded that what was made was “a without prejudice offer, to buy peace between the parties”. Ramos, I find, is quite on point to this within matter. In this within matter, the plaintiff did not accept the offer of eight months full-time work, at a 10% reduction in pay, and a $5,000.00 bonus at the end of that time period. Just because she chose not to accept that proposal, which arguably was enhanced from the original imposed reduction to part-time hours and pay made May 4^th^, does not mean that it was intended to be revealed. The fact that the Release provided for confidentiality, indeed, makes clear that it was not intended to be disclosed. For all these reasons, I find it likely that the communications were intended or at least implied not to be disclosed if settlement negotiations failed.
[23] Was the purpose of the offer to try to settle the dispute? Again, what was proposed on May 29^th^ may be argued as an improvement over what was initially to be imposed on the plaintiff. It was arguably a “better offer”. It proposed a Release to allow the parties to entirely end their dispute, if the offer was accepted. To enhance what could be described as either the eight months working notice or the new fixed and finite term of employment, depending on which side is doing the describing, the plaintiff was offered a further monetary payment at the end of her employment. Cleary, at least one purpose, and a key one, of this offer in my view was to try to settle the dispute, to “buy peace”.
[24] Accordingly, I find that settlement privilege arises in the context of these letters, and in context of the impugned portions of the defence which references them. To refer to these items breaches Rule 25.11 as it is “scandalous, frivolous or vexatious” to do so. Before turning to the defence to briefly review and rule upon the specific impugned paragraphs, I make a few additional observations regarding the May 29^th^ letter, which observations also apply to the subsequent letters, which essentially reiterated what was written on May 29th.
Observations on Mixing Without Prejudice and With Prejudice Communications:
[25] The May 29^th^ letter tried to be, in my view, “all things to all people”. It was, for reasons herein, an offer of compromise. It thus falls squarely within settlement privilege. Yet it also appears to me that defendant was trying to position itself in this within litigation, after it had retained counsel and after it unilaterally imposed new terms on the plaintiff which were to start within a few days but for her commencing sick leave first. This one letter confusingly tried to impart several different messages, including, significantly, I emphasize, that of settlement. Yet if settlement failed, another purpose of the May 29^th^ letter was, as was specifically pleaded at paragraph 51 of the defence, the defendant trying to establish a “failure of mitigation” argument on the part of the plaintiff. Whether such would be viable over three weeks after the planned imposition of new terms of employment is an open question.
[26] Yet where the defendant ran into difficulties, in my observation, was in attempting to combine different elements and messages in the one letter. One take-away may be that, in future, counsel should not mix “with prejudice” and “without prejudice” elements in the same one item of correspondence. Writing separate letters or emails, each with their individual and clear messages, and each either clearly on or off the record, with or without prejudice, may assist to avoid such confusion.
The Impugned Paragraphs of the Defence:
[27] Paragraph 41 is essentially a “cut & paste” from the May 29^th^ letter. It is struck, including the sub-clauses.
[28] Paragraph 42 refers to “these terms”, meaning the eight terms in the May 29^th^ letter. It is struck.
[29] Paragraph 43 refers to the subsequent correspondence, which reiterates the May 29^th^ correspondence and the eight terms. It is struck.
[30] Paragraph 47 reads:
Onyx never had any opportunity to implement reduced terms of employment for the Plaintiff, either as stated on May 3, 2020, or May 29, 2020. Onyx respectfully submits that the terms of employment proposed on May 3, 2020 and contained in the May 29, 2020 and June 18, 2020 correspondences would not constitute constructive dismissal if they were ever implemented.
[31] The portion of this paragraph which refers to the original May 3^rd^ (or/and May 4^th^) terms is appropriate. Yet references to the May 29^th^ terms and June 18 terms must be struck. Paragraph 47 thus can be amended accordingly.
[32] Paragraph 48 I find is unobjectionable. It is not struck.
[33] Paragraph 51, which pleads a failure to mitigate because the plaintiff did not accept the settlement offers, also must be struck.
[34] Paragraph 53 in the first sentence pleads what it asserts is the reasonable notice period. That sentence is not struck. The remainder of the paragraph refers back to the settlement offers, so must be struck.
[35] Unless otherwise stated, the paragraphs struck are without leave to amend.
Costs and a Formal Order:
[36] At the end of submissions, the parties properly raised the question of costs. It was my desire to come to my conclusions first, before considering costs. Now that I have done that, with the plaintiff being in the main successful in what it achieved in this motion, the parties should discuss costs amongst themselves. They should when so doing keep in mind basic principles set out in Rule 57, that “costs follow the event” and, as discussed in the seminal case of Boucher, the reasonable expectation of the unsuccessful party.
[37] To that end, I urge counsel to exchange their Costs Outlines and attempt to resolve this issue themselves. If they cannot, then they may contact my ATC to arrange a short tele-or-Zoom hearing on costs. In addition to the Costs Outline, should counsel desire to file submissions on costs, these are limited to three pages each.
[38] If counsel agree on a formal Order, it may also be provided to my ATC for me to sign. If for some reason counsel cannot agree on the terms of the Order then, when addressing the costs, I will also address the Order.
Master J. Josefo