Raising the Bar
Raising the Bar – Fifteenth Edition
Date: October 5, 2017
As we say goodbye to Summer and welcome Fall, we thought it would be a perfect time to share with you our latest edition of Raising the Bar.
In this issue, we bring you some of our favourite and most practical recent court decisions and share with you a list of key considerations in approaching and negotiating settlements. Chances are that you are working on, or negotiating, a settlement right now, so we encourage you to study our list. Feel free to reach out with any questions!
Special thanks to our colleagues Kathleen Tate, Evan Taylor, Kate Shao and Sarah Iaconis, for their contributions to this issue of Raising the Bar. And thanks as always to Pam Hillen and our great staff in Knowledge Management and Business Development.
Happy reading, and we look forward to hearing from you with your thoughts on this issue.
Frank & Elisha
In This Issue
- Part 1 – Recent Cases
- Part 2 – Shine a Light on … Key Considerations for Employers When Settling Employment Cases
- Part 3 – Did You Know?
Part 1 – Recent Cases
Potential Litigation Costs Recovery for In-House Counsel
The Ontario Superior Court of Justice recently found that a defendant which was represented by in-house counsel was entitled to partial indemnity costs despite the absence of time dockets.
The defendant’s Legal Department does not require its in-house lawyers to maintain time dockets. When it was successful in its negligence claim, the defendant sought costs on a partial indemnity scale and presented a Bill of Costs to the Court which included estimates for tasks performed by in-house counsel during and prior to litigation.
The plaintiff claimed, among other things, that in the absence of time dockets costs should not be awarded. The Court disagreed. It noted that in fixing costs, a court is required to consider what is “fair and reasonable.” Although the defendant’s costs were only based on estimates, the Court found the hourly rate proposed to be reasonable and ultimately made a cost award substantially similar to what the defendant requested.
This case suggests that as long as in-house counsel keeps a sufficient record of work performed, successful parties may be entitled to fair and reasonable costs awards even where traditional time dockets are not kept.
Be Careful When Pleading Severance Offers
The Ontario Superior Court of Justice recently struck out the reference to a severance package in a statement of defence, finding that the severance package had been offered on a “without prejudice” basis, was irrelevant to the litigation and reference to it may prejudice the fair trial of the action.
The defendant employer argued that the package had been offered prior to the commencement of litigation and was “with prejudice,” asserting among other things that the offer did not contain the words “without prejudice.” Therefore, the reference to the offer was properly included in the statement of defence.
The Court referred to the general principle that where an offer to settle is made “without prejudice” to buy peace in wrongful dismissal cases, the fact of the offer should not be pleaded. This principle is subject to certain exceptions which did not apply here. The Court held that on the basis of the evidence, the offer was substantively “without prejudice” and the absence of those words on the offer was not determinative. Moreover, the offer was irrelevant to the litigation: the issue of what constitutes a “reasonable severance package” was one for the trial judge to determine.
In reaching this conclusion, the Court highlighted that excluding “without prejudice” offers of settlement from statements of defence is based on the sound policy rationale of encouraging parties to settle without litigation.
Efforts to Remedy a Wrong May Toll a Limitation Period
The Ontario Court of Appeal recently found that the efforts by an accounting firm to remedy an error that resulted in significant liability to a client tolled the limitation period, such that the limitation period ran from the date those efforts were exhausted and not from the date the potential claim was discovered.
An accounting firm filed the appellant’s tax return late. On April 10, 2010, the appellant received a Notice of Assessment from the Canada Revenue Agency (CRA) denying certain tax credits as a result of the late filing, which gave rise to a significant tax liability. The accounting firm advised the appellant to retain a tax lawyer and assisted in its appeal to the CRA, which in May 2011 refused to alter the assessments. On August 1, 2012, the appellant brought a claim against the accounting firm. This was more than two years after the initial Notice of Assessment but within two years of the CRA’s refusal.
The motion judge found that the claim ran afoul of the two year limitation period in the Limitations Act, 2002. He relied on the language in s.5(1)(a)(iv) of the Act, which states, in part, that a claim is discoverable on the day in which the claimant first knew that a proceeding would be an “appropriate means” to seek to remedy its loss. He concluded the limitation period began to run when the appellant received the Notice of Assessment.
The Court of Appeal reversed that decision. It found the term “appropriate” to mean “legally appropriate,” the purpose of which is to deter needless litigation by allowing parties to remedy a claim through alternative methods. The Court reasoned that resort to legal action may be inappropriate where the plaintiff is relying on the defendant’s efforts to remedy the loss, or where administrative or other processes have not yet been exhausted.
Here, the claim was not discoverable until the appellant received the CRA response to its appeal; in other words, the claim was not discoverable until the conclusion of the alternative process. The CRA process had the potential to resolve the dispute, making a legal proceeding unnecessary.
The Court noted, however, that claimants cannot delay the discoverability of a claim for tactical reasons; rather, the date on which an alternative process has run its course must be reasonably certain or ascertainable. This decision therefore attempts to walk the line between two policy objectives: on the one hand, encouraging parties to attempt to resolve their disputes through alternative methods before turning to judicial processes; but on the other hand, requiring reasonable certainty to prevent claimants from gaining a tactical advantage.
Part 2 – Shine a light on… Key Considerations for Employers When Settling Employment Cases
When settling employment law claims (including litigated claims), employers should ensure that by the time they start drafting the paperwork, no surprises or unanticipated roadblocks arise which prevent the parties from finalizing the settlement.
We have selected several key considerations that employers should think about during settlement discussions, including issues that employers might address with opposing counsel at the beginning of settlement discussions in order to avoid any surprises or set backs later on down the road.
- Confidentiality Clause
Employers should consider whether they have any concerns with respect to: (a) ensuring the confidentiality of the settlement terms; and (b) the ongoing confidentiality of information the employee obtained in the course of their employment. A comprehensive confidentiality clause may be used to prohibit the plaintiff from discussing the terms of the settlement, subject to certain limited exceptions, and provide greater certainty with respect to the employee’s post-employment obligations.
- Fundamental Breach Clause
A fundamental breach clause can allow employers to recover any settlement amounts paid to the former employee in circumstances where they breach a fundamental provision of the Minutes of Settlement or Release. This type of clause is particularly important to consider where employers have concerns with respect to whether the confidentiality of the settlement will be maintained.
- Taxation and Non-Taxable Damages
From the beginning of settlement discussions, employers should survey the plaintiff’s expectations and views as to how settlement amounts will be allocated – e.g., as between taxable wages or retiring allowance, legal costs, RRSP direction or in some cases non-taxable general damages. Dealing with the tax implications of settlement payments early is important because it produces clarity and plaintiffs are usually most focused on how much of the settlement funds will actually end up in their hands.
- Documentation for Reasonableness of Legal Fees
If settlement funds are allocated to the plaintiff’s lawyer as legal fees, employers should ask for a certification in writing from the lawyer confirming that the lawyer has incurred at least that amount in legal fees. Be aware of any internal requirements as some organizations require more than a lawyer’s certification for auditing purposes (e.g. an invoice made payable to the employer).
- Settling All Parallel Proceedings
If the plaintiff commenced multiple legal proceedings (e.g. human rights proceedings or an unjust dismissal complaint under the Canada Labour Code), employers should consider whether the settlement resolves all of the employee’s claims. If the settlement is fully inclusive of all claims, any preconditions that must be met to finalize the settlements (e.g. approval of the Canadian Human Rights Commission) and any stipulations regarding the dismissal of the parallel claims should be clearly addressed in the Minutes of Settlement.
- Mutual Releases
Plaintiff’s counsel may ask employers to sign a mutual release. Mutual releases should only be considered by employers in cases where a counter-claim has been filed.
- Dealing with Employment Insurance
Employers should inquire in the settlement negotiations whether the employee received Employment Insurance (EI) benefits and determine how it will address any repayment obligations – generally by holding back settlement payments pending receipt of a Notice of Debt from the government. EI issues should be addressed early on with plaintiff’s counsel to avoid any surprises on amounts and timing of payment, particularly given that employees are not necessarily aware of their repayment obligations.
Did you know … that you can answer a question on an out-of-court examination (e.g. discovery or cross-examination), even if you have objected to it, with a proviso that the evidence cannot be used at a hearing without a ruling from the court? It’s true, and it’s all set out in Rule 34.12(2) of the Ontario Rules of Civil Procedure.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©