Has the contract with my employee been frustrated?

Frustration, as that expression is meant to be used in the context of the employment andrew-montgomery-lgrelationship, is a cause for termination that doesn’t often arise, but is frequently misunderstood.  As a legal concept, it is the contract of employment that is said to be frustrated and not the parties themselves. As early as 1956, the British House of Lords’ defined the legal principle of frustration as occurring “whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract“.  In the context of the employment relationship, frustration generally arises in the form of some type of protracted, long term illness affecting the employee.  The employment contract is said to be frustrated because the nature of the employee’s illness has made the contract impossible to perform.

While the principle seems easy of enough to articulate, the difficulty is most often found in its application.  When and how does an employer make the determination that a contract of employment has been frustrated?  Not surprisingly, at the heart of these questions is the wording of the contract. For example, is the contract worded in such a way that it could survive the change in circumstances which is claimed to be frustrating the contract?

The Ontario Supreme Court stated, in 1999: “Whether a contract of employment has been frustrated by an employee’s illness or incapacity depends on whether or not the illness or incapacity was of such an nature or likely to continue for such a period of time that either the employee would never be able to perform the duties contemplated by the original employment contract, or that it would be unreasonable for the employer to wait any longer for the employee to recover.  To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.”

Put more simply, the answer to the question of when an employer will be able to determine an employment contract to be frustrated, will vary with the facts of each individual case.  For example, courts will generally consider the length of absence of an entry level line worker,that is required to support a finding of frustration, to be substantially longer than that for a senior manager upon whom the survival of a business may depend.  In the former case, several years or more may be required.  In the latter, six months might be considered sufficient, depending on all of the facts and circumstances.

One thing employers should be clear about, however, is that frustration does not constitute “cause” or “just cause” for termination.  Frustration does not assign blame or fault to either the employer or the employee.  Consequently, upon the determination that a contract of employment has been frustrated, the employee being terminated is entitled to all appropriate severance and/or notice provisions.

It is always safer and more cost effective to consult legal counsel in advance if you are considering terminating a contract of employment for frustration.

NOTE: adapted from Peter Neumann and Jeffrey Sack, eText on Wrongful Dismissal and Employment Law, 1st ed, Lancaster House, Updated: 2015-03-30 (CanLII), <http://canlii.org/en/commentary/wrongfuldismissal/&gt;.

Dangerous and Unsightly Properties

andrew-montgomery-lgDoucette v. Halifax (Regional Municipality), 2015 NSSC 151 (CanLII)

In Doucette, the Applicant had been issued a valid building permit by the Halifax Regional Municipality (“HRM” or “Municipality”) in September of 2013.  The permit was set to expire in September of 2015.  While the building permit remained in force and effect, the Municipality made an unsightly premises order against the Applicant requiring him to repair the exterior of the building.  The Applicant’s appeal of the unsightly order was denied by the Municipality and he subsequently sought judicial review.

The judicial review application raised three questions; first, did the HRM have the jurisdiction to issue the unsightly premises order? Secondly, if it did have the requisite jurisdiction, was the property unsightly? Thirdly, was there procedural unfairness during the appeal?

In summary, Moir, J., found that the HRM had the requisite jurisdiction to issue the unsightly order, but that it misinterpreted the unsightly premises provisions of the Municipal Government Act and it failed to provide the Applicant with procedural fairness during the course of the appeal.

One of the key findings of the court was that no paramountcy exists as between the legislative provisions for building permits and the legislative provisions for unsightly premises.  Put simply, it is an obligation of the property owner to maintain sightly and safe premises during the course of a new build or renovation.  As we shall see below, however, there are also corresponding limitations on a municipality in making the determination that a property is unsightly. What might be sufficient to establish unsightliness in the ordinary course, may not be sufficient in the context of a property under renovation.

Whether a property is unsightly or not requires an objective analysis as opposed to a subjective analysis.  In addition, the question of whether a property is unsightly must be resolved in the context of the lawful uses of the property.  In other words, unsightly, in the context of a property under major renovation, cannot be determined by reference to surrounding houses not under renovation.  The appeal committee was wrong to make a finding of unsightly premise in the context of a valid building permit by comparing a property under renovation to surrounding properties not under renovation.

Finally, the court determined that had it not found the municipality to have improperly interpreted the unsightly provisions of the Municipal Government Act, it would have set aside the Municipality’s decision on the basis of procedural unfairness.  The same Councillor who had brought forward the initial complaint against the property owner sat to hear the Applicant’s appeal.  When the Applicant sought to make submissions on possible bias, he was denied the opportunity.

A municipality, in interpreting its own authorizing legislation, must be correct in its interpretation.  In this case, finding a property to be unsightly could not be made without consideration of the interplay of the legislative provisions for unsightly properties with the provisions for building permits.  Determining a property to be unsightly must also consider the contextual background of the property, i.e., a property under renovation cannot be compared to surrounding properties that are not under renovation in order to determine the question of unsightliness.