Canada: SCC Monitor (18/03/2015)

Since our last post, the Supreme Court sat during the weeks of February 23 and March 16, 2015 and heard a few important appeals to take note of. The Court also released judgment in three appeals, including Potter v. New Brunswick Legal Aid Services Commission, an important constructive dismissal case.

Potter, 2015 SCC 10, is a notable decision for employers and employees everywhere as it clarifies the two branches of the constructive dismissal test. Mr. Potter was suspended indefinitely with pay and had his powers delegated to another worker. In unanimously finding that Mr. Potter had been constructively dismissed, the Court overturned the trial judge and Court of Appeal and revisited the applicable test.

The majority judgment, by Wagner J., explained that the first branch of the test for constructive dismissal examines the written employment contract to look, first, to whether the employer effected a unilateral change constituting a breach of the employment contract and, second, whether the change substantially alters an essential term of the contract. For the second step of the analysis the court must ask whether, at the time that the breach occurred, a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed. Constructive dismissal can take two forms: a single unilateral act that breaches an essential term of the contract or a series of acts that, taken together, show that the employer intended to no longer be bound by the contract.

The concurring judgment of Cromwell J. and McLachlin C.J. also highlighted that constructive dismissal may be established by conduct which, in light of all of the surrounding circumstances and viewed objectively by a reasonable person in the position of the employee, shows that the employer does not intend to be bound in the future by important terms of the contract of employment. Moreover, this decision highlighted that a non-breaching party claiming repudiation can rely on facts in existence at the time of the alleged repudiation which were unknown to the party at the time he accepted the repudiation (i.e., the employer's conduct up to the time the employee sued for constructive dismissal, even if the employee was unaware of this conduct at that time).

In light of the decision in Potter, employers should use great caution in conducting themselves and carefully examine the employment contract when suspending an employee, even if the employee is being suspended with pay.

In terms of appeals heard, the Court heard argument in the intellectual property case of Canadian Broadcasting Corporation v. SODRAC, which will decide whether incidental copies of music or video made during the production of a media segment each require royalty payments. The CBC applied for judicial review of licenses issued by the Copyright Board allowing royalties for copies incidental to the use of new broadcast technologies. SODRAC argued that each copy adds value and, therefore, the reproductions merit royalty payments as set out in the terms and conditions of the established license. The CBC argued that the Copyright Board's Decision conflicted with the principle of technological neutrality. The Supreme Court is expected to clarify the scope and application of the principles of technological neutrality in relation to ephemeral recordings.

The Court also heard argument in M.M. a.k.a. M.M.M. v. Minister of Justice Canada on behalf of the United States of America, a case regarding the limits of criminal law defences in relation to international extradition orders. In this case, the Court will consider whether a woman from the United States who was found in a battered women's shelter in Quebec with her children, over which she did not have custody, could resist an extradition order on the basis of the defence of necessity. The issue is whether extradition must be refused where a defence is available in Canada, pursuant to the Criminal Code, which is not available in the country requesting the extradition, here the United States. This case will have ramifications for criminal law extradition cases spanning different areas, including white collar crime.

Finally, the Court heard argument in the civil law case of Société en commandite Place Mullins and 139612 Canada inc. v. Services immobiliers Diane Bisson inc., regarding whether real estate commissions should be paid in a conditional real estate deal which is ultimately not closed. The brokerage contract provided an entitlement to commission if "une entente visant à vendre" [translation: if "an agreement to sell"] was reached during the term of the contract. The broker obtained a promise to purchase that was conditional on a satisfactory inspection being performed, and that offer was accepted by the seller. Following an inspection which revealed contamination, the purchaser reiterated his intention to purchase if the seller has the property decontaminated. The seller refused, and the sale never took place. The Supreme Court will have to decide whether a commission is available where a broker secures a tentative agreement under certain terms, which is then not concluded by the seller.

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