In a recent decision, the Ontario Court of Appeal ("ONCA") dismissed an employer's $150 million counterclaim against an employee claiming wrongful dismissal, because it found that the counterclaim was an "attempt to silence" him. Namely, in Boyer v. Callidus Capital Corporation["Boyer"], the ONCA dismissed Callidus Capital Corporation's ("Callidus") counterclaim against Craig Boyer under s. 137.1 of the Courts of Justice Act (the "Act").
Boyer is an important reminder for employers that making counterclaims which lack merit against employees who sue for wrongful dismissal for "tactical reasons" is generally ill-advised, because such claims may be dismissed and result in substantial costs awarded against the employer.
In 2009, Boyer was hired as the Vice President of Callidus - a lender to distressed businesses. Boyer was responsible for underwriting new loans and assessing potential borrowers for Callidus. However, in 2015, Boyer "became concerned about the direction the company was taking" and provided 18 months' notice of his retirement in July 2015, effective late 2016.
Boyer subsequently became increasingly concerned about his employer's work environment and business practices after he witnessed verbal abuse and threats in the workplace, which culminated in him witnessing a senior executive physically assault his supervisor in April 2016. As a result, Boyer left Callidus in May 2016 "“ months earlier than planned.
Subsequently, on February 6, 2017, Boyer filed a lawsuit for constructive/wrongful dismissal. Approximately two weeks later, his employer filed a counterclaim for $150 million against Boyer, alleging that Boyer was a fiduciary and breached his fiduciary duties to Callidus in relation to three of its borrowers/clients.
Callidus alleged that Boyer failed to provide it with honest and transparent reporting in relation to the loans it made to three companies. However, it ultimately became apparent that Callidus's allegations against Boyer were unsubstantiated. For example, Callidus alleged that Boyer failed to properly monitor its loan to Gray Aqua Group on which it suffered losses after Gray Aqua's fish farm became infested with sea lice. However, the sea lice infestation occurred in 2015, a year after Boyer had transferred the file to another Callidus employee.
Boyer filed several motions with the court, including a motion for summary judgment for his wrongful dismissal claim and a motion to dismiss Callidus's counterclaim pursuant to s. 137.1 of theAct. Section 137.1 provides that a judge may dismiss a proceeding against a person where "the proceeding arises from an expression made by the person that relates to a matter of public interest". Notably, one of the purposes of s. 137.1 is to "discourage the use of litigation as a means of unduly limiting expression on matters of public interest".
The Motion Judge's Decision
The motion judge found that Boyer's claims regarding the poisoned workplace at Callidus qualified as an "expression that related to a matter of public interest" because Callidus was once among Canada's most influential publicly traded companies and its business practices had attracted national news coverage. However, the motion judge ruled that Callidus' counterclaim did not "arise from" these expressions because he found that there was no causal connection between Boyer's claim and the counterclaim, and he dismissed Boyer's motion as a result.
Boyer then appealed the decision to the ONCA.
The Ontario Court of Appeal's Decision
The ONCA granted Boyer's appeal in respect of his s. 137.1 motion, holding that the motion judge erred by not dismissing Callidus' counterclaim.
In reaching this conclusion, the ONCA held that, once a judge is satisfied that a proceeding arises from an expression relating to a matter of public interest under s. 137.1, the burden shifts to the responding party to show that: (i) the proceeding has substantial merit; (ii) the moving party has no valid defence; and (iii) that the public interest in permitting the proceeding to continue outweighs the public interest in protecting the expression.
Applying this test, the ONCA found that the counterclaim did "arise from" Boyer's wrongful dismissal claim and allegations of a toxic work environment, given that Callidus made the counterclaim almost immediately after Boyer filed his claim, despite that the counterclaim was based on events that Callidus had known about for years. Subsequently, the ONCA found that Callidus' counterclaim lacked substantial merit because it failed to plead the required elements of law or fact to support its claim that Boyer was a fiduciary. Moreover, the ONCA found that Boyer clearly had valid defences to the counter claim, and that Callidus had failed to demonstrate otherwise. Finally, the ONCA held that the public interest in allowing the counterclaim to proceed did not outweigh the public interest in protecting Boyer's expression, because what was "really going on" was that Callidus was attempting to silence Boyer from pursuing his wrongful dismissal lawsuit and "create a chilling effect for other employees."
In the end result, the ONCA dismissed Callidus' counterclaim, and ordered Callidus to pay $25,000 in costs to Boyer.
The Bottom Line
The ONCA's decision in Boyer serves as a cautionary tale for employers who might otherwise consider making a counterclaim against a former employee in response to a wrongful dismissal action for tactical reasons. In particular, Boyer illustrates that it is generally ill-advised for an employer to make such a counterclaim where it lacks merit because the claim may be dismissed and result in the employer being ordered to pay tens of thousands of dollars in additional legal costs.
However, it is important to note the counterclaim in Boyer was without merit, and that employers can have valid counterclaims against former employees who are pursuing wrongful dismissal actions. The Boyer decision does not mean that employers should never make counterclaims against former employees; however, they should seek specific legal advice and carefully consider their options before doing so.
At Hyde HR Law, we regularly offer expert legal advice and representation to both employers and employees in respect of wrongful dismissal actions. Please do not hesitate to contact us.