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Contracts - Suing in Contract and Tort Concurrently. McMillan v. Canada
In McMillan v. Canada (Fed CA, 2024) the Federal Court of Appeal considered an appeal, this from class action orders from a motion judge of the Superior Court that "dismissed Mr. McMillan’s motion to certify the action as a class proceeding on the basis that his statement of claim failed to disclose a reasonable cause of action" and refused "leave to amend his statement of claim".
Here the court considers a doctrine that no negligence duty of care is owed to employees by the employer:(1) Did the Federal Court Err in Law in Finding that it is not Plain and Obvious that no Private Law Duty of Care is Owed to Kelowna TCEs Hired Pursuant to Contracts of Employment?
[204] The Crown asserts that even if there were grounds for the Federal Court to have assumed jurisdiction over the claims of the Kelowna TCEs during the class period, the Court nevertheless erred in law in refusing to strike Mr. McMillan’s pre-March 31, 2005 claims. According to the Crown, it is plain and obvious that Mr. McMillan does not have a reasonable cause of action against the RCMP in negligence.
[205] There is no dispute about the fact that the RCMP employed Mr. McMillan and the other Kelowna TCEs through individual contracts of employment. The Crown submits that there are numerous appellate authorities (including decisions of this Court) holding that employers (including the RCMP) do not owe a private law duty of care to employees who are engaged through contracts of employment. In the absence of a duty of care, it follows that these employees do not have a cause of action in negligence against their employer for workplace harassment.
[206] This does not mean that such employees are out of luck: relief for workplace harassment may be available to these individuals through contract and employment law actions (such as those for wrongful or constructive dismissal), or through other torts (such as intentional infliction of mental suffering), but not through claims in negligence.
[207] In support of this contention, the Crown cites the decision of the Court of Appeal for Ontario in Piresferreira v. Ayotte, 2010 ONCA 384, where the Court declined to recognize a duty of care owed by an employer to a former employee. Noting that no Canadian appellate court had recognized the existence of such a duty, the Court found that it was neither necessary nor desirable to extend negligence principles to the context of workplace harassment: at paras. 61−62. See also Merrifield v. Canada (Attorney General), 2019 ONCA 205 at para. 43, where the Court of Appeal for Ontario came to a similar conclusion.
[208] In finding that it was not necessary to extend the law in this regard, the Court found that sufficient relief was already available to aggrieved employees through the laws of contract and employment, and through the tort of intentional infliction of mental suffering. The Court found that extending negligence principles into the workplace was also not desirable, as it would mark "“a considerable intrusion by the courts into the workplace, [that] has a real potential to constrain efforts to achieve increased efficiencies, and the postulated duty of care is so general and broad it could apply indeterminately”": Piresferreira, above at para. 62.
[209] Referring, by analogy, to the Supreme Court of Canada’s decision in Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, [1997] S.C.J. No. 94, the Court of Appeal for Ontario concluded in Piresferreira that the recognition of a negligence-based tort in the employment context is a matter better left to the legislature: at paras. 56−57.
[210] This Court came to a similar conclusion in Greenwood, holding that a claim in negligence for workplace harassment—whether brought on an individual or a systemic basis—is liable to being struck where it is brought by or on behalf of individuals whose relationship with the RCMP is governed by written or unwritten contracts of employment: above at para. 155.
[211] The Federal Court was well aware of this jurisprudence, discussing it at paragraphs 70 to 75 of its reasons. While recognizing that these cases have found that no common law duty of care is owed to employees whose relationship with their employer is governed by employment contracts, the Federal Court nevertheless found that the appellate authority was divided "“on the question of tortious negligence in the context of workplace harassment”": Federal Court reasons at para. 72.
[212] In making this finding, the Federal Court stated that the British Columbia Court of Appeal had come to the opposite conclusion in Sulz v. Minister of Public Safety and Solicitor General, 2006 BCCA 582. There, the Court upheld an award in tort for workplace harassment suffered by an RCMP member at the hands of her superior officer.
[213] An internal investigation had confirmed that sexual harassment had taken place, but the RCMP did not offer any compensation to Ms. Sulz, and it took no disciplinary action against the superior officer as he had retired. The trial judge found the Province of British Columbia to be vicariously liable in negligence for the actions of the superior officer, under the terms of the policing agreements between the federal government and the province. This finding was upheld on appeal.
[214] I do not agree with the Federal Court’s characterization of the British Columbia Court of Appeal’s decision in Sulz. That Court did not address the question raised by this case: that is, whether a common law duty of care can be owed to employees whose relationships with their employers are governed by employment contracts. It is not surprising that the British Columbia Court of Appeal did not engage with this question, as it did not arise in Ms. Sulz’s case.
[215] This is because Ms. Sulz was not an RCMP employee—she was a member of the force, and RCMP members are not employed pursuant to employment contracts: they are statutory office holders, not employees: Greenwood, above at para.156, citing Davidson, above at para. 37.
[216] The result of this is that the Piresferreira line of authority had no application to people in Ms. Sulz’s situation: Greenwood, above at para. 156. The decision of the British Columbia Court of Appeal in Sulz thus does not represent a conflict in the appellate jurisprudence insofar as RCMP employees are concerned.
[217] This Court did find there to be conflicting appellate authority on the question of whether RCMP members may recover damages in tort for workplace harassment: Greenwood, above at para. 159. However, when it came to claims in negligence for workplace harassment—on either an individual or systemic basis—brought by individuals whose relationship with the RCMP were governed by contracts of employment, this Court was clear: such claims are liable to being struck: Greenwood¸ above at para. 155.
[218] All of that said, however, the door has not been firmly and forever shut on the question of whether a common law duty of care could ever be owed to employees whose relationships with their employer are governed by employment contracts. Indeed, the Court of Appeal for Ontario concluded its analysis in Merrifield, above, by stating that it "“[did] not foreclose the development of a properly conceived tort of harassment that might apply in appropriate contexts”": at para. 53. The Court was simply not persuaded that a compelling reason existed to recognize a new tort of harassment in that case.
[219] There are also decisions, albeit decisions of the Federal Court, that suggest that employees may be able to recover damages in tort for workplace harassment in some circumstances.
[220] For example, the Federal Court refused to strike a statement of claim brought by female employees of the Correctional Services Canada, in which they alleged that their employer was negligent in its response to the gender-based harassment, discrimination, and sexual assault they experienced in the workplace: Hudson, above at paras. 107−116.
[221] In refusing to strike the claim, the Federal Court observed that it should be "“circumspect”" in finding at a preliminary stage of the proceedings that the employer did not owe a duty of care to the plaintiffs and other members of the proposed class: Hudson, above at para. 116.
[222] In the Merlo case discussed earlier, a class proceeding was brought on behalf of regular RCMP members, civilian members and public service employees for gender-based workplace bullying, discrimination, and harassment. Amongst other causes of action asserted, the claim was framed in negligence.
[223] In reasons reported as 2017 FC 51, the Merlo claim was certified as a class proceeding by the Federal Court. It is true that the Crown consented to the issuance of the certification order in Merlo for the purpose of settlement, which potentially reduces the precedential value of the Court’s decision, but it cannot be completely ignored: Greenwood, above at para. 160.
[224] Indeed, even if the certification order in Merlo went on consent, the Federal Court nevertheless had to be satisfied that the claim disclosed a reasonable cause of action before it could approve the settlement. The same argument may be made with respect to the certification order in Tiller.
[225] Other decisions have been to a similar effect. For example, in Bouchard v. Attorney General of Canada, 2018 QCCS 1486, the Superior Court of Québec authorized a class action brought on behalf of former employees of the Government of Canada, for claims, including claims in negligence, resulting from the problems encountered with the implementation of the Phoenix pay system.
[226] Moreover, as was noted earlier, courts have recognized that the law is not static, and that judges must err on the side of permitting novel, but arguable claims to proceed to trial: R. v. Imperial Tobacco, above at paras. 19−25; Mohr, above at para. 48.
[227] Given this, and recognizing that the threshold that a plaintiff has to meet to establish that a claim discloses a reasonable cause of action is a low one, the Crown has not persuaded me that the Federal Court erred in finding that it was not plain and obvious that a negligence-based claim for workplace harassment brought by employees against the Crown was bound to fail. . Zhang v. Primont Homes (Caledon) Inc.
In Zhang v. Primont Homes (Caledon) Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a trial judgment that found the real estate professional defendants negligently misrepresented the location of a property for which the plaintiffs entered into an APS as purchasers.
Here the court considers when a plaintiff may assert tort damages in a contractual (breached APS) context:[23] The appellants’ first causation argument is that the respondents could not legally establish that they suffered any loss as a result of the misrepresentation because they did not complete the purchase. To put it another way, the respondents were required to prove that they had the right to repudiate the APS as a condition precedent to any recovery against the appellants.
[24] The appellants rely on Kaltenegger v. Cao, 2022 BCSC 2203 for this proposition. In that case, Mr. Kaltenegger sued Ms. Cao after she repudiated her agreement to buy his house. Ms. Cao took the position that she was entitled to abandon the contract because both Mr. Kaltenegger and Ms. Cao’s realtor, Mr. Liu, had misrepresented the property’s boundaries. The B.C. Supreme Court trial judge who heard both actions concluded that Ms. Cao had not proved that she was entitled to repudiate her contract with Mr. Kaltenegger and that she must accordingly compensate him for the difference between the price she agreed to pay for the house and the price he ultimately obtained for it from another buyer. Although Ms. Cao had proved that Mr. Liu made negligent misrepresentations that induced her to enter into the contract, the trial judge held that this “negligence did not entitle Ms. Cao to break her contract with Mr. Kaltenegger.” As a result, Ms. Cao was not entitled to recover any damages for Mr. Liu’s misrepresentations.
[25] Based on Kaltenegger, the appellants contend that, since the respondents did not comply with their obligations pursuant to the APS, they cannot recover any damages flowing from the appellants’ misrepresentation.
[26] I reject this argument. I am not persuaded that Kaltenegger establishes a general rule that any plaintiff who agrees to buy property based on misrepresentations of any kind by a third party, such as a realtor or lawyer, is legally foreclosed from recovering damages for that misrepresentation if they fail to complete the purchase. The result in Kaltenegger was, on my reading, specific to the facts of that case. Alternatively, if Kaltenegger does purport to establish a general rule, I reject it. The appellants have not pointed to any other authority supporting their argument on this point. Their position is moreover inconsistent with the Supreme Court of Canada’s jurisprudence on concurrent liability.
[27] The appellants are conflating the issue of causation with the respondents’ entitlement to assert a separate cause of action against the appellants because of their negligent misrepresentation. The two issues are distinct. A party who has suffered damages may have concurrent claims in contract and tort. In a case “where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort”: BG Checo, at p. 26, citing Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147. As stated in Rafuse, at p. 206, “the plaintiff has the right to assert the cause of action that appears to be most advantageous to him in respect of any particular legal consequence”.
[28] In Edgeworth Construction Ltd. v. N. D. Lea & Associates Ltd., 1993 CanLII 67 (SCC), [1993] 3 S.C.R. 206, the principle of concurrent liability was applied where a plaintiff had concurrent claims in contract and tort against two different parties. A contractor successfully bid on a road building contract and entered into a contract with the province of British Columbia for the work. It alleged that it lost money on the project due to errors in the specifications and construction drawings by an engineering firm hired by the government. The contractor sued the engineers who had done the work and their firm for negligent misrepresentation. The action was struck on the basis that the plaintiff’s sole recourse was a claim in contract against the government. Citing BG Checo, the Supreme Court of Canada allowed the plaintiff’s appeal, rejecting the argument that the plaintiff’s contract terminated any duty of care between the contractor and the engineers. In short, “the presence of a contract does not bar the right to sue in tort”: Edgeworth, at p. 217.
[29] Citing BG Checo as well as Rafuse, the Court also rejected the argument that the contractor ought to have sued the province, which could then in turn bring a third-party claim against the engineers. It held that “the notion that there is only one right way to proceed – in contract – undercuts the philosophy expressed by this Court … that plaintiffs may sue concurrently in contract and tort, provided the contract does not negate the imposition of a duty of care in tort”: Edgeworth, at p. 220.
[30] There is no suggestion that anything in the APS in this case precluded the respondents from suing their own real estate agent or broker for a negligent misrepresentation. There was therefore nothing preventing the respondents from suing the appellants, whether or not they chose to pursue a claim in contract (or tort) against Primont. Whether or not the respondents, by failing to close the transaction with Primont, were themselves the authors of the damages they claim against the appellants, is a separate question, to which I now turn. . De Rita v. 1266078 Ontario Inc.
In De Rita v. 1266078 Ontario Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal of a successful negligence judgment, here where the fault was breach of a "contractual obligation to timely discharge a mortgage":[2] The application judge found that the delay in discharging the mortgage deprived the respondent of the opportunity to use the Ouellette property to obtain financing to fund the purchase of a property on Bruce Avenue in Windsor, which he had contracted to do at an extremely favourable price. By the time the respondent obtained a discharge by court order, the Bruce Avenue purchase agreement had lapsed. The application judge awarded damages based on the difference between the purchase price of the Bruce Avenue property and her estimate of what the property was worth when the respondent was able to re-enter the market, less certain deductions and adjusted for certain contingencies. . Beer v. Townsgate I Ltd.
In Beer v. Townsgate I Ltd. (Ont CA, 1997) the Court of Appeal stated as follows regarding actions commenced in both contract and tort:The existence of a contractual relationship between the parties does not preclude a claim in tort: see Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, 31 D.L.R. (4th) 481. In BG Checo International Ltd. v. British Columbia Hydro & Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12, [1993] 2 W.W.R. 321, the Supreme Court of Canada addressed the issue of concurrent liability in tort where a clause in the contract may exclude or limit such liability. In that case, the court held that the contract did not negate or limit the defendant's common law duty not to negligently misrepresent certain facts, nor did it negate or limit the plaintiff's right to sue in tort. As to whether the right to sue in tort was precluded, the court said at p. 27 S.C.R., p. 331 W.W.R.:
The rule is not that one cannot sue concurrently in contract and tort where the contract limits or contradicts the tort duty. It is rather that the tort duty, a general duty imputed by the law in all the relevant circumstances, must yield to the parties' superior right to arrange their rights and duties in a different way. In so far as the tort duty is not contradicted by the contract, it remains intact and may be sued upon.
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