Court File and Parties
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Mounir Nader, Plaintiff/Moving Party
AND:
University Health Network and Ontario Health, Defendants/Responding Parties
BEFORE: W.D. Black J.
COUNSEL: David Whitten and Jason J. Jagpal, for the Plaintiff Maureen Quinlan, for the Defendant University Health Network Michelle S. Henry and Elizabeth Creelman, for the Defendant Ontario Health
HEARD: November 15, 2021
ENDORSEMENT
Overview
1The plaintiff, Mounir Nader (“Nader”), was employed by the defendant University Health Network (“UHN”), as an Executive Vice President, Clinical Operations, commencing in 2016. He signed an offer letter with UHN on May 18, 2016 (the “UHN Employment Agreement”), and commenced in the role on September 6, 2016.
2His title was changed in 2018 to Executive Vice President, Clinical Support and Performance.
3This case concerns Nader’s secondment, starting in July of 2019, with the defendant Ontario Health pursuant to an agreement between Nader, UHN and Ontario Health dated August 12, 2019 (the “Secondment Agreement”), the termination without cause of Nader’s employment and secondment in September/October of 2020, and Nader’s entitlements to compensation flowing from that termination. (I will from time to time refer to the UHN Employment Agreement and the Secondment Agreement collectively as the “Agreements”.)
4In brief, it is Nader’s position that the Secondment Agreement was a fixed term agreement, the termination of which entitles him to salary and related compensation for the balance of the term outstanding at the time of his termination in addition to payment for 12 months as set out in the UHN Employment Agreement for termination without cause.
5The defendants say that Nader was only ever employed by UHN and that the termination of his employment and secondment entitled him only to the 12 months specified under the UHN Employment Agreement.
6There are related questions to address concerning the potential use of parol evidence in interpreting the Secondment Agreement, what compensation beyond salary is properly included in Nader’s termination pay, and the impact of Nader’s early and successful mitigation efforts.
The UHN Employment Agreement
7As set out above, Nader executed the UHN Employment Agreement on May 18, 2016 and commenced work with UHN on September 6, 2016. As annual compensation under this agreement, Nader received:
(i) Base salary which started at $335,000.00 in 2016 and had increased to $362,300.00 by the time of his termination;
(ii) Eligibility for a performance bonus of up to 25% of his base salary;
(iii) A taxable car allowance of $7,200.00;
(iv) Participation in the Healthcare of Ontario Pension Plan (“HOOPP”);
(v) A Health Care spending account of $5,000.00;
(vi) Participation in UHN’s employee benefits plan; and
(vii) Five weeks paid vacation.
8The UHN Employment Agreement provided, with respect to termination without cause:
“(UHN) may terminate your employment, other than for just cause, at any time upon payment to you of an amount equal to 12-months’ salary, which includes all your entitlement pursuant to the Employment Standards Act. It is expected that if you elect to terminate your employment with UHN, you will provide two months prior written notice, which notice may be waived by UHN at its discretion.”
Opportunity at Ontario Health
9In about June of 2019, while Nader was employed at UHN, Ontario Health expressed an interest (to both Nader and UHN) in having Nader temporarily fill the role of Interim Chief Transformation Officer for Ontario Health’s Transition Team. Nader in turn expressed an interest in the position and commenced discussions with Ontario Health about a possible secondment.
10There is evidence in the record that upon learning of Nader’s interest in the secondment, certain senior people at UHN expressed concern to Nader about the potential arrangement and, in particular, advised Nader that there were no guarantees associated with the assignment and that Nader’s role at UHN might no longer be available upon his return from Ontario Health.
11This evidence is one of several sets of parol evidence to which the parties point, suggesting, depending on the party and the particular evidence, that certain parol evidence is either potentially helpful in my interpretation of the Secondment Agreement, or that it is inadmissible and that I ought to ignore it. For reasons discussed below, I have determined not to take into account any of the parol evidence in the record. I will describe that evidence as it comes up in the narrative but again, I do not rely on any of this evidence in my analysis of the issues at hand.
12In the case of the concerns expressed to Nader about the secondment, clearly, they did not ultimately dissuade him, and Ontario Health prepared and circulated a draft version of the Secondment Agreement in late July of 2019.
Contents and Negotiation of Secondment Agreement
13It is common ground among the parties — and a second potential piece of parol evidence - that the draft version of the Secondment Agreement contained a clause saying that:
“14. A party to this agreement may terminate the secondment by giving the other parties four (4) weeks written notice.”
The parties agree that this clause was removed at Nader’s request. Nader’s position on parol evidence generally is that “it is unnecessary for the court to consider parol evidence surrounding the formation of the contract” because “the UHN (Employment) Agreement and Secondment Agreement are clear and unambiguous”. Moreover, Nader fairly adds, the existence of the “entire agreement” clause at paragraph 22 of the Secondment Agreement also weighs in favour of excluding extrinsic evidence. However, Nader goes on to say:
“Alternatively, parol evidence will confirm that the parties agreed to remove an early termination provision thereby entitling Nader to be paid for the balance of the secondment, regardless of when it was terminated, following which he would receive the 12 months’ severance described in the UHN (Employment) Agreement.”
14In its final form the Secondment Agreement did not contain the former clause 14 set out above. It did, however, contain the following provisions, each of which, to varying degrees, factor into my analysis:
“1. Subject to early termination in accordance with this agreement, the Employee will be seconded from UHN to Ontario Health for a period of two (2) years from September 3, 2019 to August 31, 2021.
During the period of the secondment the Employee will remain an employee of UHN on UHN’s payroll and UHN will continue to pay the Employee’s salary of $362,300.00 and continue the Employee’s benefit coverage and pension contributions. For greater certainty, all entitlements owed to the Employee by UHN, including all pension entitlements, bonus payments, benefits and any severance accrued as a result of the Employee’s employment relationship with UHN, shall continue to accrue during the term of the secondment and shall not be impacted in any way as a result of the secondment.
Upon the termination of the secondment the Employee will return to the position of Executive Vice President Clinical Support and Performance of UHN or a comparable position. If that position no longer exists at the UHN then the Employee will be entitled to receive the termination entitlement provided for in his/her employment agreement with the UHN.
Should for any reason the Employee be unable to return to his former, or comparable, position at UHN at the end of the two year term, which causes his termination entitlement to be activated then it is agreed that Ontario Health will be responsible for reimbursing UHN for 50% of the total cost of this severance entitlement providing such. It is understood that such reimbursement will not exceed 50% of a salary continuance that will be no more than twelve (12) months.
The secondment will terminate on the expiry of the term of the secondment.
This agreement constitutes the entire agreement between the parties with respect to the subject matter of this agreement and supersedes all previous negotiations, communications, and other agreements relating thereto, unless specifically incorporated by reference.”
15The parties executed the Secondment Agreement in early August of 2019 and Nader began the secondment with Ontario Health on September 3, 2019.
Termination of the Secondment Agreement
16In September of 2020, Ontario Health advised Nader and UHN that Nader’s secondment assignment would end on October 23, 2020.
17At the time that Nader had committed to the secondment with Ontario Health, UHN had hired another person to fill Nader’s erstwhile role at UHN. Nader places some emphasis on the fact that the person hired to replace him was given a two-year agreement to coincide with the expected length of Nader’s secondment. In any event, Nader’s position was not available at the time of the termination of his secondment. In the circumstances, UHN conducted an internal search for available jobs that were at a comparable level and compensation rate as Nader’s former position, but found none.
18Given no available suitable positions, UHN opted to terminate Nader’s employment on a without cause basis and advised Nader on October 2, 2020 that his employment would be terminated without cause effective October 23, 2020.
19Relying on the termination provision of the UHN Employment Agreement, UHN ultimately continued Nader’s salary for 12 months and continued his benefits over the 12 month continuance period, including car allowance, health and dental coverage and HOOPP contributions, as well as statutory vacation entitlements.
20While UHN initially sought a full and final release from Nader in exchange for the 12 month salary continuance, at some point it relented and did not insist on that release, and I understand that the 12 months of salary continuance and related benefits (those which UHN agrees were owing) have been entirely paid.
Agreement that Summary Judgment is Appropriate
21The parties agree that, given the lack of contested credibility issues, and the considerable consensus about the contents of the relevant record, the matter can fairly be determined on the basis of a summary judgment motion. I agree, and commend the parties for working cooperatively to generate and agree upon a common record.
Nader’s Entitlements on Termination
22The overarching issue for my consideration on this summary judgment motion is the interpretation of the UHN Employment Agreement and the Secondment Agreement and the interplay between them. More specifically, based on that interpretation, the questions are:
(1) Whether or not Nader is entitled, in addition to the 12 months’ salary and benefit continuation he has received pursuant to the UHN Employment Agreement, to salary and benefits for the notional remaining term of the Secondment Agreement (i.e. from October 23, 2020 to August 31, 2021);
(2) Whether or not Nader is entitled to a bonus of 25% of his salary, and additional related benefits; and,
(3) Whether or not Nader has mitigated his damages (which may or may not arise depending on my interpretation of Nader’s entitlements under the Agreements).
Legal Framework
23I will first address the legal framework within which I must interpret the Agreements.
24There is considerable agreement among the parties that in particular, relying on the Supreme Court of Canada’s decision in Sattva Capital Corp. v. Creston Moly Corp. (2014 SCC 53), my task is to determine, based on the language of the Agreements, “the intent of the parties and the scope of their understanding”. I am to take a “practical, common-sense approach”, and to interpret the Agreements in a way that gives words “their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time of formation of the contract” (Sattva).
25In terms of contextual factors, I am to take account of “the commercial purpose of the contract” as well as the “genesis of the transaction, the background, the context, [and] the market in which the parties are operating” (Sattva).
26Extrinsic evidence, or parol evidence, is inadmissible if the evidence would contradict the express terms of a written agreement, and the goal of examining such evidence is only to “deepen a decision maker’s understanding of the mutual and objective intentions of the parties”, and not to “deviate from the text such that the court effectively creates a new agreement” (Sattva).
27Along these lines, the Court of Appeal for Ontario explained in Gutierrez v. Tropic International Limited et al. (63 O.R. (3d) 63, 2002 45017 (C.A.)), that “under the parol evidence rule, when the language of a written contract is clear and unambiguous, extrinsic evidence is not admissible to vary, qualify, add to, or subtract from, the words of the written contract”.
28The preference to interpret the agreement in issue as the best evidence of the parties’ intentions, and the limited scope for admissibility of parol evidence, have been continuing themes in Canadian academic writing and jurisprudence. J.D. McCamus, for example, in “The Law of Contracts” wrote, in expressing approval about the approach taken by Lambert J.A. in Gallen v. Butterley (1984), 1984 752 (BC CA), 9 D.L.R. (4th) 496 (B.C. C.A.):
“The effect of the Canadian jurisprudence is simply to create a presumption in favour of the written agreement. The presumption is a strong one and would be at its strongest when the alleged oral representation is contrary to the written terms and somewhat less strong when the oral representation merely adds to them. Further, it was his view that the presumption would be more rigorous in a case where the parties had themselves negotiated and prepared the written agreement than in a case where a printed form was used.”
29To similar effect, in defining the parol evidence rule, Cronk J.A. said (in Gutierrez, para. 19):
“Under the parol evidence rule, when the language of a written contract is clear and unambiguous, extrinsic evidence is not admissible to vary, qualify, add to, or subtract from, the words of the written contract.”
30Justice Cronk went on to qualify that statement somewhat by adding:
“Recent authorities suggest that it applies only where it is clear that the contract sued upon is wholly in writing. If a party can establish that there was a pre-contractual stipulation which was not intended to be excluded, then it may be relied on even though it is arguably inconsistent with certain terms of the written contract.”
31More recent cases have upheld and followed this approach; for example, see MDS Inc. v. Factory Mutual Insurance Company, 2021 ONCA 594.
32In my view, as discussed in more detail in the analysis below, the intention of the parties here was to reduce their entire agreement to writing, and no party has established, or really even sought to establish, that any pre-contractual stipulations were intended to be included in the written agreement but inadvertently omitted, or are necessary to resolve any ambiguity.
Analysis of Agreement
33Applying this guidance to my consideration of the Agreements, I find that they are clear and unambiguous. The central issue dividing the parties is the question of whether or not the Secondment Agreement could be terminated before the end of the two years that the parties contemplated as the likely duration of the secondment, and, if so, what compensation would be required in that event.
34Paragraph (1) of the Secondment Agreement is clear, in my view, in contemplating termination before the expiry of two years. It says explicitly that the anticipated two year duration of the secondment is “[s]ubject to early termination in accordance with this agreement”.
35Nader argues that “in accordance with this agreement” is significant and that there is no explicit mechanism under the Secondment Agreement whereby it can be terminated before the end of two years.
36In my view, while it is fair to say there is nothing explicit providing for early termination (apart from the clear words of paragraph 1), the Secondment Agreement does implicitly but clearly contemplate such a scenario.
37Nader’s counsel concedes that the Secondment Agreement can be terminated before the end of two years. As he colourfully put it, there is no “indentured servitude” in Canada anymore and parties are free to terminate their employment arrangements at any time.
38So, in other words, the issue is not whether early termination of the Secondment Agreement is possible — clearly it is — but rather what compensation flows from early termination.
39Nader points to and relies on the Court of Appeal for Ontario’s landmark decision in Howard v. Benson Group (2016 ONCA 256). Specifically, Nader emphasizes the Court of Appeal’s statement that:
“Parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of notice or payment in lieu. However, and on this point [the parties] agree, if the parties to a fixed term employment contract do not specify a predetermined notice period, an employee is entitled on early termination to the wages the employee would have received to the end of term.”
40Proceeding on this basis, Nader argues that in the absence of an early termination provision, an employee’s rights do not revert back to common law standards of reasonable notice; rather, the employee is entitled to the balance of payments remaining under the fixed term agreement.
41Again quoting from Howard, Nader maintains that a fixed term employment agreement benefits the employer as much as the employee, in that it “will oust the implied term that reasonable notice must be given for termination without cause” (Howard, para. 21).
42The defendants suggest that it is critical to Nader’s argument that:
(i) the Secondment Agreement is an employment agreement (since Howard applies, on its face, to a “fixed term employment contract”); and,
(ii) that the agreement in question does not specify a “pre-determined notice period”.
43The defendants argue that Nader misses the mark on both parameters.
44Firstly, the defendants say that a secondment agreement is not an employment agreement per se, and is in its own category with its own rules, particularly when this Secondment Agreement contains explicit confirmation that the UHN Employment Agreement continues to govern Nader’s employment. Specifically, the defendants point to paragraph 6 of the Secondment Agreement, which explicitly provides that:
“During the period of the secondment the Employee will remain an employee of UHN on UHN’s payroll and UHN will continue to pay the Employee’s salary of $362,300.00 and continue the Employee’s benefit coverage and pension contributions.”
45Secondly, the defendants say, citing paragraphs 6, 11 and 12 of the Secondment Agreement, that this is not a case in which no pre-determined notice period has been specified.
46I will deal with these two arguments in turn.
Entitlements Under Remaining Term of Secondment Agreement
47In laying the groundwork for the argument about the secondment agreement not constituting a fixed term employment agreement, UHN (joined by Ontario Health) notes that Nader does not dispute that he continued to be governed by the UHN Employment Agreement throughout his secondment with Ontario Health. It says, fairly, that Nader’s position is that the court should treat him as if he were also a fixed term employee of Ontario Health during this period. The defendants submit that Nader cannot be both an indefinite term employee with UHN and a fixed term employee of Ontario Health at the same time. It cannot be, UHN argues, that an employee who has been assigned to another organization, yet who remains an employee of the assignor at all times, is entitled to “double collect” damages from the assignor for the termination of concurrent agreements.
48In support of this argument, the defendants each point to cases involving and interpreting secondment agreements in the setting of a pre-existing employment agreement.
49In Brannan v. Exxon Mobil Corporation (2009 NSCA 53), the appellant asserted that a constructive dismissal from his seconded position with Sable Energy had the effect of constructively dismissing him from his indefinite employment with Exxon Mobil. The Nova Scotia Court of Appeal dismissed the appeal, holding that the secondment was temporary in nature and that the appellant had remained solely an employee of Exxon Mobil throughout the secondment. Despite the secondment agreement, the court held, there was no concurrent employment with Sable Energy.
50Notably, say the defendants, the secondment agreement in Brannan included language that was similar to the agreement between Nader and Ontario Health. Specifically the agreement between the appellant and Sable Energy provided:
“The Secondee will, at all times during the Secondment, remain an employee of the Shareholder [Exxon Mobil] and the Shareholder will remain solely responsible for Secondee’s salary and required deductions” (Brannan, para. 4).
51The court said, in considering this language, that the “secondment was meant by all parties to be transitory and project specific, and was never a sine qua non of Mr. Brannan’s underlying employment with EM Corp” (Brannan, para. 47).
52Comparing this finding with the case at hand, UHN argues that it is clear based on the language of the Secondment Agreement that the parties intended the secondment to be a transitory arrangement, and that therefore, applying the reasoning from Brannan, a reasonable interpretation of the Secondment Agreement supports the conclusion that Nader remained an employee of UHN, and did not enter into an employment relationship with Ontario Health, fixed term or otherwise.
53Ontario Health, in its factum, also cites Snead v. Agricultural Development Corporation of Saskatchewan (1990 7410 (SK QB), 85 Sask. R. 13, 33 C.C.E.L. 179 (S.K. Q.B.)). In that case, the plaintiff was employed by Agdevco in an executive position. By way of a secondment agreement, Agdevco made the plaintiff’s services available to another entity, APM, for three years. When the plaintiff’s services with APM were terminated after about eight months into the secondment, he was not returned to his previous (or comparable) position with Agdevco and he sued both companies for damages for wrongful dismissal.
54The court found that at all times Agdevco remained Snead’s employer, and was therefore liable for pay in lieu of notice in accordance with Snead’s employment contract with Agdevco. The court held that no damages should be awarded for the remaining period of the secondment, stating:
“It is here appropriate to observe that while the term seconded is not per se defined in Collins English Dictionary, or Black’s Law Dictionary, or The Concise Oxford Dictionary, in Collins English Dictionary “Second” as a verb is defined to mean:
“To transfer (an employee) temporarily to another branch”
and, in the Concise Oxford Dictionary, the learned author notes that “Second” is at times used to denote transfer temporarily to another department, hence – “ment.”
55The court found that APM (the company to which the plaintiff was seconded) was at no time the plaintiff’s employer; the secondment agreement did not create an employment relationship between Snead and APM; and, APM had no liability towards Snead upon the termination of the secondment agreement.
56To similar effect, in Tse v. Trow Consulting Engineers Ltd. ([1995] O.J. No. 2529 (Gen. Div.)), the plaintiff was employed by Trow and was seconded to KST. The court found that it was clear that the plaintiff’s employment was solely with Trow, with only a secondment to KST. The court noted that, while the plaintiff had an expectation that the secondment would last for three years, that expectation was dependent on his continuing employment with Trow. As the plaintiff’s employment with Trow was not for a fixed term but to continue on an indefinite basis, the plaintiff’s only entitlement was to reasonable notice upon the termination of his employment with Trow, and not to damages for breach of a fixed term employment contract with KST.
Conclusion re: Effect of Secondment Agreement
57These cases appear to confirm that, against the backdrop of a continuing employment agreement, pursuant to which the original employer evinces an intention to remain the employer and retain responsibility for salary and benefits, a secondment agreement is not itself an employment agreement, but something other, and in its own category. Nader has provided no cases to the contrary, rather simply assuming in his argument that the Secondment Agreement is not only an employment agreement but a fixed term employment agreement, such that Howard applies. Based on the authorities presented to me and clause 6 of the Secondment Agreement, I find that the Secondment Agreement is just that, and not an employment agreement per se.
58Moreover, it is not the case that, as Howard also appears to require in order for a fixed term to govern compensation on termination, there is no pre‑determined notice period provided here. Rather, both the UHN Employment Agreement and, in incorporating the relevant provision of the UHN Employment Agreement in paragraph 11 in particular, the Secondment Agreement, specify that in the event of termination without cause, Nader is entitled to 12 months’ salary as provided in the UHN Employment Agreement.
59As such, despite the able argument of Mr. Whitten on Nader’s behalf, I do not find that the Secondment Agreement is a fixed term employment agreement. Nor is Nader entitled to payment for the balance of the two years that the parties contemplated as the probable duration of Nader’s secondment.
Additional Entitlements Claimed
60This still leaves the question of what if any additional payments Nader is due under the UHN Employment Agreement. In addition to the 12 months of salary and the benefits ultimately paid by UHN during the salary continuation (being car allowance, health and dental coverage and HOOPP contributions as well as statutory vacation entitlements), Nader claims that he ought to be paid his $5,000.00 “Health Care spending account” amount and his performance bonus of 25%.
61My difficulty with both of these items is that there is very little evidence in the record before me about either of them.
62However, in his affidavit on behalf of UHN sworn July 16, 2021, Mr. Kevin Smith (as UHN’s president and CEO) deposes at paragraph 22 that, at the time of termination, Nader’s compensation consisted of, among the other items described above, “…(b) eligibility to receive an annual performance-based bonus of up to 25% of his annual base salary” and “…(d) health care spending account of $5,000.00”.
63It is noteworthy that Mr. Smith describes only “eligibility” for the performance bonus - which makes sense in relation to a discretionary evaluative bonus - whereas the health care spending account is described and listed simply as a part of Nader’s compensation.
64In other words, with respect to the health care spending account, there is no evidence as to any conditions that would have to be met in order for Nader to receive the payment, nor as to the specific use for which the account was intended. While the name “health care spending account” provides a general clue as to the intention of this item, there is no evidence that, for example, Nader would have to provide proof of expenditures in order to claim amounts under this heading. In the affidavit, it is simply listed as a component of Nader’s compensation. As such, and in the absence of any hint in the evidence of preconditions for Nader’s receipt of this amount, I am inclined to award it.
65On the other hand, while again there is a dearth of evidence about this item, the bonus is clearly (as one would expect) in the nature of a discretionary performance-related payment. There is simply no evidence before me, one way or the other, in terms of Nader’s performance, and whether or not he would have been eligible for the bonus (either 25% or some lesser amount). In my view, with respect to this item, the onus is on Nader to provide evidence in support of his claim, and there simply is none. As such, I decline to award any amount under this heading.
Mitigation
66Given that I have upheld the 12 month payment under the UHN Employment Agreement for termination without cause, I need not deal with mitigation. The evidence shows that Nader mitigated quickly and well, which is commendable, but I am not factoring that successful mitigation into my calculation.
Analysis of Costs Issue
67Finally, in terms of costs, while the defendants have been largely successful, I am troubled by the fact that UHN initially purported to refuse payment of the 12 months’ salary and related benefits provided for termination without cause under the UHN Employment Agreement unless and until Nader executed a full and final release. In my view, this tactic, which is not uncommon, is heavy-handed and to be discouraged; there is nothing in the Agreements requiring a full and final release in exchange for the contractually specified termination payment (under the UHN Employment Agreement). UHN’s initial termination letter also suggested that, in the event that Nader found alternative employment during the 12 month salary continuation, payments would cease and UHN would pay a lump sum 50% of the balance owing at that time. Again, there is nothing in the Agreements that would justify this approach. It is to UHN’s credit that it changed its’ position in that regard, ultimately paying the 12 month salary continuation (and benefits) without requiring a release, but it ought not to have “tried on” the original stance it took.
68In light of Nader’s modest partial success with respect to the $5,000 Health Care account claim and in light of UHN’s initial heavy-handed approach to termination payments, I decline to award costs in favour of UHN. Ontario Health is in a slightly different position, and is entitled to its costs. I am hoping, though, that in all of the circumstances Ontario Health will seek only relatively modest costs, and that Nader and Ontario Health can agree on the appropriate amount. I will allow 20 days from today’s date (February 8, 2020) for Nader and Ontario Health to discuss and hopefully agree on costs. If no agreement is reached, I may be spoken to about a schedule for exchanging written materials on that topic.
W.D. Black J.
Date: January 19, 2022