A Referee (“Sargeant”) hearing a claim under the Employment Standards Act decided that he was not entitled to consider a limitation period issue in a claim by an employee (“Halloran”) against his former employer with respect to a compensation package offered upon Halloran’s termination. The Referee’s decision was overturned by the Divisional Court. On appeal, the Court of Appeal held that it was unconscionable for the company to invoke a limitation period to deny Halloran’s claim as there had been a fraudulent concealment of the existence of a cause of action against the company.

Administrative law – Employment standards – Employer’s representations – Termination package – Fraudulent concealment – Judicial review – Standard of review – Patently unreasonable decision – Limitations

Halloran v. Sargeant, [2002] O.J. No. 3248, Ontario Court of Appeal, August 27, 2002, McMurtry C.J.O., Weiler and Armstrong JJ.A.

Halloran was employed by Crown Cork & Seal for 31 years as a senior sales representative. As a result of a corporate reorganization, his employment was terminated October 31, 1990. He was given two compensation options. The letter presenting the options from Crown Cork contained an unqualified representation that both options “exceeded provincial requirements”. The court found that it was clear that Halloran relied upon the representation of the employer that Option A exceeded what he was entitled to under provincial law but found that the representation made by the company was inaccurate. Subsequently, a group of former Crown Cork employees who had accepted Option A pursued a claim with respect to severance pay in addition to the unreduced early pension. Halloran discovered this proceeding and decided to take no further action with respect to his claim as he thought he should await the result of the proceedings. On December 2, 1995, he found that a decision had been rendered in favour of the employees, and Halloran consulted a lawyer on January 25, 1996 to file a similar claim.

Halloran’s claim was made under the Employment Standard Act and was heard by T. Sargeant, a Referee under the Act. Mr. Sargeant found that Halloran’s claim was statute-barred pursuant to s. 82(2) of the Act which read:

In a proceeding or prosecution under this Act, no employee shall be entitled to recover any money due to him or her more than two years before the facts upon which the proceeding or prosecution is based first came to the knowledge of the Director.

An appeal of the Referee’s decision was made to the Divisional Court. The Divisional Court allowed the application for judicial review on the basis that Sargeant’s decision was patently unreasonable. Crown Cork then appealed this decision.

The Court of Appeal first reviewed the issue of the appropriate standard of review for a Referee’s decision and found that this was “reasonableness”. The court noted that the parties and the Divisional Court appeared to use the standard “reasonableness” and “patent unreasonableness” interchangeably. The court stated that this was inappropriate and referred to the statement of Iacobucci J. in Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 where he stated:

The difference between “unreasonable” and “patently unreasonable” lies in the immediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal’s reasons, then the tribunal’s decision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreasonable.

The court reviewed the evidence with respect to the representation made by the company and the current state of the law at the time. The court held that the representation concerning the compensation package options made by the company was false at the time it was made by the company.

The court reviewed the issue as to whether Sargeant’s interpretation of the Act was reasonable in finding that he was not entitled to relieve against the limitation period set out in s. 82(2). The court held that it was unreasonable for Sargeant to decline to consider whether the doctrine of fraudulent concealment applied to this case in the circumstances where the company made a categorical representation which was false at the time of making. The court referred to the decision in Guerin v. The Queen, [1984] 2 S.C.R. 335, where the Supreme Court of Canada held that where there has been a fraudulent concealment of the existence of a cause of action, the limitation period will not start to run until the Plaintiff discovers the fraud, or until the time when, with reasonable diligence, he ought to have discovered it.

In this case, the court found that it was unconscionable for the company to invoke the limitation period in s. 82(2) of the Act in order to deny Halloran’s claim when it was responsible for his delay in filing the claim. In the result, the court held that the Referee’s decision that Halloran’s claim was barred by s. 82(2) of the Act was unreasonable and dismissed the appeal.

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