Frustration of contract resolved by way of summary judgement

A welcome decision for employers

Frustration of contract resolved by way of summary judgement

A welcome decision for employers recently came to light as the Ontario Divisional Court in Katz et al. v. Clarke, 2019 ONSC 2188 ruled that frustration of contract can be resolved by way of summary judgement. While an admirable display of determination, an employee’s stated desire to return to work is not sufficient to rebut the medical evidence that a contract of employment has become legally frustrated.

The case involved Mr. Clarke who was a former front store manager for Katz Group Canada Ltd. He was off work since July 2008 due to a disability.

On June 11, 2013 Clarke’s family physician completed an Attending Physician’s Statement for Great West Life (GWL) Insurance, who was providing the LTD benefits at the time. The physician wrote that Clarke was “totally disabled…There is no job he would be able to perform”.

On July 1, 2013, the Katz Group wrote to Clarke informing him that:

  1. The Katz Group believed he was incapable of performing the essential duties of his position due to his illness, and there was no reasonable expectation that he would become able to return to his position in the foreseeable future;
  2. Clarke's employment had therefore been frustrated and would cease on December 31, 2013
  3. Clarke would be provided with 22 weeks of pay as required under the Employment Standards Act (the "ESA"); and
  4. Clarke's benefits would cease effective December 31, 2013 and his statutory entitlements under the ESA would be paid to him on January 9, 2014.

On September 24, 2013, Clarke's lawyer wrote to the Katz Group that Clarke "has been working very hard to get well so that he can return to his former employment and perform the essential duties of his position." The Katz Group requested updated medical information outlining Clarke's estimated date for return to work. Clarke did not respond to that letter.

On December 10, 2013, the Katz Group again wrote to Clarke's counsel and reiterated that the Katz Group would deem Clarke's employment to be frustrated effective December 31, 2013, on the basis that there was no reasonable prospect that he would be able to perform the essential duties of his position in the foreseeable future, unless updated medical information was received. The Katz Group again received no response to that letter.

Clarke's employment was terminated effective December 31, 2013 on the basis of the frustration of his contract of employment.

Clarke sued the Katz Group, seeking a declaration that he was dismissed as a result of his disability in breach of s. 5(1) of the Ontario Human Rights Code ("the Code"). Clarke sought damages under s. 46.1 of the Code for lost wages from January 1, 2014 until the date of judgment and the amount of $25,000 for injury to dignity, feelings, and self-respect. In addition, Clarke sought a declaration that he was wrongfully dismissed and, in the alternative to the damages set out above, damages in the amount of $75,000 as compensation in lieu of reasonable notice. Clarke also sought moral damages in the amount of $25,000 on the basis of alleged bad faith conduct by the Katz Group in the manner of his dismissal.

Decision of the Motion Judge
Katz Group moved for summary judgement which was dismissed as the motion judge, the Honourable Justice Thomas J. Carey, determined that there was a genuine issue for trial.

Decision of the Divisional Court

The Katz Group appealed the decision of the Motion Judge. A -3-judge panel of the Divisional Court overturned the Motion Judge’s decision.

The Divisional Court ruled that Justice Carey erred with respect to his conclusion that the law did not require more of the Respondent than an expression to his employer of his wish to return to full employment to trigger the employer’s duty to accommodate.

[24] The doctrine of frustration of contract applies where there is evidence that the employee's disabling condition is permanent. The principle applies in these circumstances because the employee's permanent disability renders performance of the employment contract impossible "such that the obligations of the parties are discharged without “penalty”…

[25] Summary judgment is clearly appropriate to determine an issue of frustration of contract where, as here, there is no dispute as to the underlying facts: see Fraser at para. 3. Courts have granted summary judgment on the basis of frustration of contract on a number of occasions [emphasis added].

The test for frustration was clearly met in this case. The medical evidence was undisputed that the documentation available to the Katz Group indicated that Clarke was totally disabled and unable to work in any occupation for the foreseeable future.

[28] … the law is clear that an employer's duty to accommodate is only triggered when an employee informs an employer not only of his wish to return to work but also provides evidence of his or her ability to return to work including any disability-related needs that would allow him or her to do so…

[29] Further, an employer's duty to accommodate ends where the employee is no longer able to fulfil the basic obligations associated with the employment relationship for the foreseeable future [emphasis added].

Despite Clarke’s desire to return to work, his employer had no obligation to accommodate him when there was on objective evidence that he was able to do so in any way.

Employers may find it difficult to understand when the duty to accommodate arises and how to discharge one’s duty appropriately. This decision provides a clearer picture of when that duty does not arise in circumstances where the employee has failed to first discharge their duty to provide supporting medical evidence of the accommodation they require. Importantly, it does highlight that a lack of participation and/or lack of additional medical information can be relied upon by the employer to determine (at the very least) frustration of employment in disability cases. To determine the best way to deal with employees in situations of disability, leaves of absence and/or accommodation, contact the team at CCPartners.

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