Duty to Mitigate and Summary Judgment: Trust Approach or Partial Summary Judgment Approach?

With the recent expansion of Ontario's summary judgment rule, it has been rightly anticipated that many wrongful dismissal cases will be decided by way of summary judgment.

When dealing with lengthy notice periods, this runs into a question which - while not entirely new - takes on a new importance:  What do you do if the notice period hasn't yet run its course when the matter comes to court?

I posted about this issue two years ago, in context of the Bernier v. Nygard decision, where Justice Morgan awarded Bernier damages based on an 18-month notice period, merely 7 months into that notice period, with the proviso that the award was 'impressed with a trust', obliging Bernier to account for mitigation earnings.  I referred to it as "an imperfect solution to a difficult problem."  The Court of Appeal upheld the finding as being within the discretion of the Motion Judge.

However, it's far from clear that this is a 'one-size-fits-all' solution, and there's a growing schism in the case law.

Justice Pollak Applies the "Partial Summary Judgment" Approach:  Markoulakis

In April, Justice Pollak was faced with a similar question in the case of Markoulakis v. SNC-Lavalin, dealing with an employee entitled to 27 months of notice, a mere 9 months after the dismissal.

Justice Pollak reviewed the options thusly:  The Trust Approach, as applied in Bernier; the Contingency Approach (reducing damages arbitrarily based on the possibility that mitigation earnings might arise); or the Partial Summary Judgment Approach, fixing the notice period but not awarding damages in respect of portions of the notice period not yet elapsed.

SNC-Lavalin argued that the Trust Approach was incompatible with the Supreme Court of Canada's decision in Hryniak, and Justice Pollak appears to have accepted that argument, applying the Partial Summary Judgment approach.

Sean Bawden, on his Labour Pains blog, has an interesting commentary about that case.  In the comments, I argued that the fundamental principles underlying the Partial Summary Judgment approach are wrong as a matter of law.

Justice Perell Applies the Trust and Accounting Approach:  Paquette v. Terago

This week, Justice Perell released a decision in the case of Paquette v. TeraGo Networks Inc (not to be confused with the Paquette c. Quadraspec case, another case about which I've commented before, with a costs decision released this week).

Mr. Paquette was entitled to 17 months' notice, and the motion for summary judgment was heard and decided some 7 months after the dismissal.  Justice Perell reviewed the options as had Justice Pollak, but determined that it was appropriate to follow the Trust and Accounting approach, noting that the trust applied not to the damages themselves, but tather that it is the "mitigatory earnings...upon which there is a court imposed constructive trust in favour of TeraGo."  This is an important distinction, a reminder that the entitlement to damages presumptively follows from the employer's breach of contract, prior to any mitigation analysis.  (This is essentially why I argue that the "Partial Summary Judgment Approach" is wrong, as a matter of law.)

In light of the Court of Appeal's deference to Justice Morgan's discretion in Bernier, it would have been easy for Justice Perell to say that, in the circumstances of the case, it was more just to apply the Trust and Accounting approach.  But he went a step further, outright rejecting the Partial Summary Judgment Approach in some pretty harsh terms:

I reject the Partial Summary Judgment Approach as cynical, patronizing, unfair, impractical, and expensive.

Not much more to be said about that, I think.

Commentary

Justice Perell's word isn't necessarily final on the subject, but he's very well respected - one of the best commercial law judges in the Province.  It's surprising to see him use such language to describe a doctrine so recently applied by a fellow Superior Court judge, and in the absence of direct appellate intervention on the point, I expect that his reasoning will be widely regarded as persuasive.

It helps that the criticism makes a lot of sense.

As I've noted before, the trust approach isn't without its own problems, but in the overall scheme of things, it's probably the lesser evil in most cases.

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The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.