David M. Potter Appellant v. New Brunswick Legal Aid Services Commission,, 2015 SCC 10

SUPREME COURT OF CANADA Citation: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500 Date: 20150306 Docket: 35422 Between: David M. Potter Appellant and New Brunswick Legal Aid Services Commission, a statutory body corporate pursuant to a special act of the Province of New Brunswick Respondent Coram: McLachlin C.J. and Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner JJ.

Reasons for Judgment: (paras. 1 to 130) Concurring Reasons: (paras. 131 to 183) Wagner J. (Abella, Rothstein, Moldaver and Karakatsanis JJ. concurring) Cromwell J. (McLachlin C.J. concurring) potter v. new brunswick legal aid services commission, 2015 SCC 10, [2015] 1 S.C.R. 500 David M. Potter Appellant v. New Brunswick Legal Aid Services Commission, a statutory body corporate pursuant to a special act of the Province of New Brunswick Respondent Indexed as: Potter v. New Brunswick Legal Aid Services Commission

2015 SCC 10 File No.: 35422. 2014: May 12; 2015: March 6.

Present: McLachlin C.J. and Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner JJ. on appeal from the court of appeal for new brunswick Employment law — Constructive dismissal — Administrative suspension — Commission suspending Executive Director indefinitely with pay — Commission alleging that suspension was authorized by express or implied term of contract — Whether administrative suspension constitutes unilateral act that amounts to breach of employment contract — If so, whether decision to suspend could reasonably be perceived as having substantially changed essential terms of contract.

Employment law — Wrongful dismissal — Damages — Employee drawing pension benefits upon dismissal — Whether pension benefits should be deducted from damages for wrongful dismissal — If not, whether s. 16 of Public Service Superannuation Act displaces private insurance exception and precludes employee from collecting both pension benefits and equivalent of salary — Public Service Superannuation Act, R.S.N.B. 1973, c. P-26 [rep. 2013, c. 44, s. 2], s. 16. P was appointed as the Executive Director of the New Brunswick Legal Aid Services Commission (“Commission”) for a seven-year term.

In the first half of that term, the relationship between the parties deteriorated and they began negotiating a buyout of P’s employment contract. P took sick leave before the matter was resolved. Just prior to his return, and unbeknownst to P, the Commission wrote a letter to the Minister of Justice recommending that P’s employment be terminated for cause. The Commission’s legal counsel wrote to P’s lawyer on the same date, advising that P was not to return to work until further direction from the Commission.

Before the conclusion of his sick leave, the Commission suspended P indefinitely with pay and delegated his powers and duties to another person. P claimed that he was constructively dismissed and commenced litigation. The Commission took the view that in doing this, P had voluntarily resigned. The trial judge found in favour of the Commission, as did the Court of Appeal. Held : The appeal should be allowed. Per Abella, Rothstein, Moldaver, Karakatsanis and Wagner JJ.: P was constructively dismissed.

In light of the indefinite duration of his suspension, of the fact that the Commission failed to act in good faith insofar as it withheld reasons from him, and of the Commission’s concealed intention to have him terminated, the suspension was not authorized by his employment contract. Nor did the Commission have the authority, whether express or implied, to suspend P indefinitely with pay and that suspension was a substantial change to the contract, which amounted to constructive dismissal. The test for constructive dismissal has two branches.

The court must first identify an express or implied contract term that has been breached and then determine whether that breach was sufficiently serious to constitute constructive dismissal. However, an employer’s conduct will also constitute constructive dismissal if it more generally shows that the employer intended not to be bound by the contract. This approach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer and the determination of whether those acts evinced an intention no longer to be bound by the contract.

Given that employment contracts are dynamic in comparison with commercial contracts, courts have properly taken a flexible approach in determining whether the employer’s conduct evinced an intention no longer to be bound by the contract. The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps: first, the employer’s unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract.

For that second step of the analysis, the court must ask whether, at the time that the breach occurred, a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed. In determining this, a court must not consider evidence consisting of information that was neither known to the employee nor reasonably foreseeable.

Constructive dismissal can take two forms: that of a single unilateral act that breaches an essential term of the contract, or that of a series of acts that, taken together, show that the employer intended to no longer be bound by the contract. In all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrative suspension is at issue, the burden will necessarily shift to the employer, which must then show that the suspension is reasonable or justified.

If the employer cannot do so, a breach will have been established, and the burden will shift back to the employee at the second step of the analysis. A finding of constructive dismissal does not require a formal termination, but a unilateral act by the employer to substantially change the contract of employment. In this case, the Commission was P’s employer for most purposes, although the Crown was his employer for the purposes of appointment, reappointment and termination. In other words, the Commission had the power to substantially change P’s contract, and thus to constructively dismiss him.

The express terms of P’s employment contract are found in the Legal Aid Act , R.S.N.B. 1973, c. L-2, and in the terms and conditions of employment established by the Commission pursuant to s. 39(2) of that Act. However, none of those terms nor conditions, or even the Act itself, refer to suspension for administrative reasons. There is simply no express grant of power to suspend. There is also no implied grant of power to suspend.

Given the nature of the Executive Director’s position and the detail in which his statutory obligations were defined in the contract, the Commission had an obligation to provide P with work. Even if the Commission had an implied authority to relieve P of some or all of his statutory duties, such an authority is not unfettered, but is subject to a basic requirement of business justification.

Because the Commission has failed to establish that the suspension was reasonable or justified, it cannot argue that it was acting pursuant to an implied term of the contract, which means that the suspension constituted a unilateral act. To begin with, P was given no reasons for the suspension. In most circumstances, an administrative suspension cannot be found to be justified in the absence of a basic level of communication with the employee. At a minimum, acting in good faith in relation

to contractual dealings means being honest, reasonable, candid and forthright. Failing to give an employee any reason whatsoever for hissuspension is not being forthright. Moreover, the limited evidence presented in support of the Commission’s ostensible purpose offacilitating a buyout is undercut by the actions that the Commission took to have P terminated. The Commission’s letter to the Minister inwhich it recommended that P be terminated ought to be admitted at this stage of the analysis.

Add to this the facts that P was replacedduring the suspension period and that the period was indefinite, and there remains no doubt that the suspension was unauthorized. Furthermore, on the evidence, it cannot be said that P acquiesced in the change. Even if P was interested in a buyout, thatinterest can in no way be taken as consent to his suspension, nor can it be prejudicial to his position in his action. P simply did what mostemployees would do if their employer raises the possibility of a buyout: listen to the offer and, depending on its terms, consideraccepting it.

With respect to the second step of the first branch of the test for constructive dismissal, it was reasonable for P to perceivethe unauthorized unilateral suspension as a substantial change to the contract. As far as he knew, he was being indefinitely suspended andhad been given no reason for the suspension. The letter to P stated that the suspension was to continue until further direction from theCommission. When P had his lawyer write to request clarification of the Commission’s instructions, the Commission persisted in itssilence regarding the reason. That is sufficient to discharge P’s burden here.

Knowledge of the reasons given by the Commission at trialshould not be imputed to P as of the time of the suspension. In short, P has proven that the Commission’s unilateral act breached his employment contract and that the breachsubstantially changed the essential terms of the contract. P was constructively dismissed and therefore entitled to damages for wrongfuldismissal. The trial judge’s provisional assessment of those damages should be adopted, with the exception that on the basis of theprivate insurance exception from IBM Canada Limited v.

Waterman, 2013 SCC 70, [2013] 3 S.C.R. 985, P’s pension benefits should notbe deducted from the damages awarded to him. Those benefits were not intended to compensate P in the event of his being wrongfullydismissed.

Section 16 of the Public Service Superannuation Act, R.S.N.B. 1973, c. P-26, does not displace the private insuranceexception. Neither the ordinary meaning of the words of s. 16 nor its context support the position that the provincial legislature intendedto preclude the common law rule in Waterman. Rather, they support the position that s. 16 is intended for situations in which a formeremployee who is receiving pension benefits returns to employment in the public service. It therefore neither applies to wrongfuldismissal cases nor precludes P from collecting both the full damages amount and his pension benefits.

Per McLachlin C.J. and Cromwell J.: The trial judge made two related errors of law in his analysis of whether theCommission had repudiated P’s employment contract and thereby constructively dismissed him. First, the trial judge failed to recognizethat constructive dismissal may be established not only on the basis of a sufficiently serious breach, but also by conduct which, in light ofall of the surrounding circumstances and viewed objectively by a reasonable person in the position of the employee, shows that theemployer does not intend to be bound in the future by important terms of the contract of employment.

In this case, the surrounding circumstances reveal the following: (

i) the Commission wanted to bring P’s employment to anend before the expiry of the term of his contract; (ii) the Commission wanted him to stay out of the workplace indefinitely; and (iii) theCommission provided no assurances that it would continue to honour the remuneration terms of his contract in the future.

Had the trialjudge taken these surrounding circumstances into account, as the relevant legal principles require, rather than focusing simply on howserious a breach of contract the suspension was, he would inevitably have concluded that the Commission had evinced a clear intentionnot to be bound in the future by important provisions of P’s employment contract.

The trial judge’s second error was to exclude from consideration the fact that on the same day the Commission’s counselinstructed P to stay out of the workplace indefinitely, the Commission sent a letter to the Minister of Justice seeking to have P’sappointment revoked for cause. The trial judge decided that he could only consider what P knew at the time he claimed to have beenconstructively dismissed.

While the law on this point is not as clear or as settled as one would wish, a non-breaching party claiming repudiation isentitled to rely on grounds actually in existence at the time of the alleged repudiation but which were unknown to him at the time. Inother words, P is entitled to rely on the Commission’s conduct up to the time he accepted the repudiation and sued for constructivedismissal, even if he was unaware of it at that time.

This is important for the purposes of this case: the trial judge excluded fromconsideration the fact, unknown to P at the time, that the Commission on the very day that it suspended him, sent a letter seeking to havehis appointment revoked for cause. The trial judge therefore erred in failing to take this into consideration in deciding whether P hadbeen constructively dismissed. Contrary to the opinion of the Court of Appeal, the judge’s error was not harmless.

The letter, understoodin the context in which it was written, made it clear that the Commission did not intend to be bound in the future by important provisionsof his contract of employment. This was one of the surrounding circumstances that the judge was obliged to consider in deciding whetherthe suspension, viewed in light of all of the circumstances, evinced the Commission’s intention not to be bound by the contract. According to this Court’s decision in IBM Canada Limited v.

Waterman, 2013 SCC 70, [2013] 3 S.C.R. 985, the pensionbenefits that P received should not be deducted from his damage award for wrongful dismissal. Cases Cited By Wagner J. Applied: Farber v. Royal Trust Co., (SCC), [1997] 1 S.C.R. 846; IBM Canada Limited v. Waterman,2013 SCC 70, [2013] 3 S.C.R. 985; adopted: Cabiakman v. Industrial Alliance Life Insurance Co., 2004 SCC 55, [2004] 3 S.C.R. 195;Devlin v. NEMI Northern Energy & Mining Inc., 2010 BCSC 1822, 86 C.C.E.L. (3d) 268; Reininger v. Unique Personnel Canada Inc.(2002), 21 C.C.E.L. (3d) 278; discussed: Park v.

Parsons Brown & Co. (1989), (BC CA), 39 B.C.L.R. (2d) 107;referred to: Wallace v. United Grain Growers Ltd., (SCC), [1997] 3 S.C.R. 701; In re Rubel Bronze and Metal Co.and Vos, [1918] 1 K.B. 315; Shah v. Xerox Canada Ltd. (2000), (ON CA), 131 O.A.C. 44; Whiting v. Winnipeg RiverBrokenhead Community Futures Development Corp. (1998), (MB CA), 159 D.L.R. (4th) 18; Tercon ContractorsLtd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69; General Billposting Co. v. Atkinson, [1909]

A.C. 118; Freeth v. Burr (1874), L.R. 9 C.P. 208; Western Excavating (ECC) Ltd. v. Sharp, [1978] 1 All E.R. 713; Downtown Eatery(1993) Ltd. v. Ontario (2001), (ON CA), 54 O.R. (3d) 161; Universal Cargo Carriers Corp. v. Citati, [1957] 2 AllE.R. 70; Carscallen v. FRI Corp. (2005), (ON SC), 42 C.C.E.L. (3d) 196, aff’d (2006), (ONCA), 52 C.C.E.L. (3d) 161; Labarre v. Spiro Méga inc., 2001 CarswellQue 1753; Belton v. Liberty Insurance Co. of Canada (2004), (ON CA), 72 O.R. (3d) 81; McKinley v. BC Tel, 2001 SCC 38, [2001] 2 S.C.R. 161; Haldane v. Shelbar EnterprisesLtd. (1999), (ON CA), 46 O.R. (3d) 206; Turner v.

Sawdon & Co., [1901] 2 K.B. 653; Suleman v. B.C. ResearchCouncil (1990), (BC CA), 52 B.C.L.R. (2d) 138; Reference re Public Service Employee Relations Act (Alta.), (SCC), [1987] 1 S.C.R. 313; Sûreté du Québec et Association des policiers provinciaux du Québec, [1991] T.A. 666;Fraternité des policiers de la Communauté urbaine de Montréal et Communauté urbaine de Montréal, [1984] T.A. 668; Re OntarioJockey Club and Mutuel Employees’ Association, Service Employees’ International Union, Local 528 (1977), (ONLA), 17 L.A.C. (2d) 176; Pierce v. Canada Trust Realtor (1986), 11 C.C.E.L. 64; MacKay v.

Avco Financial Services Canada Ltd.(1996), (PE SCTD), 146 Nfld. & P.E.I.R. 353; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; Evans v.Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 S.C.R. 661; Parry Sound (District) Social Services Administration Board v.O.P.S.E.U., Local 324, 2003 SCC 42, [2003] 2 S.C.R. 157. By Cromwell J. Applied : In re Rubel Bronze and Metal Co. and Vos, [1918] 1 K.B. 315; Farber v. Royal Trust Co., (SCC), [1997] 1 S.C.R. 846; IBM Canada Limited v. Waterman, 2013 SCC 70, [2013] 3 S.C.R. 985; approved: Stolze v. Addario(1997), (ON CA), 36 O.R. (3d) 323; Shah v.

Xerox Canada Ltd. (2000), (ON CA), 131 O.A.C. 44;referred to: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Tercon Contractors Ltd. v. British Columbia (Transportationand Highways), 2010 SCC 4, [2010] 1 S.C.R. 69; General Billposting Co. v. Atkinson, [1909] A.C. 118; Freeth v. Burr (1874), L.R. 9C.P. 208; Western Excavating (ECC) Ltd. v. Sharp, [1978] 1 All E.R. 713; Woodar Investment Development Ltd. v. Wimpey ConstructionUK Ltd., [1980] 1 All E.R. 571; Federal Commerce & Navigation Co. v. Molena Alpha Inc., [1979] A.C. 757; Eminence PropertyDevelopments Ltd. v.

Heaney, [2010] EWCA Civ 1168, [2011] 2 All E.R. (Comm.) 223; Universal Cargo Carriers Corp. v. Citati,[1957] 2 All E.R. 70; British and Beningtons, Ltd. v. North Western Cachar Tea Co., [1923] A.C. 48; Glencore Grain Rotterdam BV v.Lebanese Organisation for International Commerce, [1997] 4 All E.R. 514; Taylor v. Oakes, Roncoroni, and Co. (1922), 127 L.T. 267;Scandinavian Trading Co. A/B v. Zodiac Petroleum S.A., [1981] 1 Lloyd’s Rep. 81; Lake Ontario Portland Cement Co. v. Groner, (SCC), [1961] S.C.R. 553.

Statutes and Regulations Cited Act Respecting Pensions under the Public Service Superannuation Act, S.N.B. 2013, c. 44, s. 2. Civil Code of Québec.

Interpretation Act, R.S.N.B. 1973, c. I-13, ss. 1(1)(a), 21(1). Legal Aid Act, R.S.N.B. 1973, c. L-2 [am. 2005, c. 8], ss. 2, 39, 40(1), 41(1), 42, 50(2), 51(1), 52(8), 53(2), (3). Public Service Superannuation Act, R.S.N.B. 1973, c. P-26 [rep. 2013, c. 44, s. 2], s. 16. Public Service Superannuation Act (1966), S.N.B. 1966, c. 23, s. 16. Authors Cited Barnacle, Peter. Employment Law in Canada, 4th ed. Markham, Ont.: LexisNexis, 2005 (loose-leaf updated June 2014, release 51). Barron’s Canadian Law Dictionary, 6th ed. by John A. Yogis and Catherine Cotter.

Hauppauge, N.Y.: Barron’s Educational Series,2009, “constructive”. Black’s Law Dictionary, 10th ed. by Bryan A. Garner, ed. St. Paul, Minn.: Thomson Reuters, 2014, “constructive”. Brown, Donald J. M., and David M. Beatty. Canadian Labour Arbitration, 2nd ed. Aurora, Ont.: Canada Law Book, 1984. Concise Oxford English Dictionary, 12th ed. by Angus Stevenson and Maurice Waite, eds. Oxford: Oxford University Press, 2011,“appoint”, “appointment”. Doorey, David J. “Employer ‘Bullying’: Implied Duties of Fair Dealing in Canadian Employment Contracts” (2005), 30 Queen’s L.J.500. Echlin, Randall Scott, and Jennifer M.

Fantini. Quitting for Good Reason: The Law of Constructive Dismissal in Canada. Aurora, Ont.: Canada Law Book, 2001. England, Geoffrey. Individual Employment Law, 2nd ed. Toronto: Irwin Law, 2008. McCamus, John D. The Law of Contracts, 2nd ed. Toronto: Irwin Law, 2012. New Brunswick. Legislative Assembly. Synoptic Report: Legislative Assembly of the Province of New Brunswick, June 16, 1966, pp.1235-54. Petit Robert: dictionnaire alphabétique et analogique de la langue française, nouvelle éd. Paris: Le Robert, 2012, “nomination”. Sproat, John R. Wrongful Dismissal Handbook, 6th ed. Toronto: Carswell, 2012.

Sullivan, Ruth. Sullivan on the Construction of Statutes , 5th ed. Markham, Ont.: LexisNexis, 2008. Swan, Angela, with the assistance of Jakub Adamski. Canadian Contract Law , 2nd ed. Markham, Ont.: LexisNexis, 2009. Waddams, S. M. The Law of Contracts , 6th ed. Aurora, Ont.: Canada Law Book, 2010. APPEAL from a judgment of the New Brunswick Court of Appeal (Drapeau C.J.N.B. and Richard and Bell JJ.A.), 2013 NBCA 27 , 402 N.B.R. (2d) 41, 1044 A.P.R. 41, 6 C.C.E.L. (4th) 1, 2013 CLLC ¶201-032, [2013] N.B.J.

No. 122 (QL), 2013 CarswellNB 196 (WL Can.) , affirming a decision of Grant J., 2011 NBQB 296 , 384 N.B.R. (2d) 14, 995 A.P.R. 14, 94 C.C.E.L. (3d) 302, [2011] N.B.J. No. 361 (QL), 2011 CarswellNB 579 (WL Can.). Appeal allowed. Eugene J. Mockler and Perri Ravon , for the appellant. Clarence L. Bennett and Josie H. Marks , for the respondent. The judgment of Abella, Rothstein, Moldaver, Karakatsanis and Wagner JJ. was delivered by Wagner J. — I.

Introduction [ 1 ] The issue in this appeal is whether and in what circumstances a non-unionized employee who is suspended with pay may claim to have been constructively dismissed. The case involves the indefinite suspension of an employee with pay in the context of negotiations for a buyout of his contract of employment. The courts below found that the suspension did not amount to constructive dismissal and that the employee, Mr. Potter, had therefore repudiated the contract when he brought an action for constructive dismissal. For the reasons that follow, I respectfully disagree. Mr.

Potter’s employer, the New Brunswick Legal Aid Services Commission (“Commission”), lacked the authority, whether express or implied, to suspend him indefinitely with pay for the reasons it gave. I find that Mr. Potter was constructively dismissed and that he is accordingly entitled to damages for wrongful dismissal. I would adopt the trial judge’s provisional assessment of those damages, with the exception that the pension benefits Mr. Potter received should not be deducted from them. II. Background and Judicial History A. Background [ 2 ] Mr.

Potter is a lawyer who was admitted to the Law Society of New Brunswick in 1977. After serving in various positions primarily with the Province of New Brunswick, Mr. Potter became the Province’s interim Director of Legal Aid in 1993. He remained in that position until 2005, when the Legal Aid Act , R.S.N.B. 1973, c. L-2, was amended to create a new scheme under which staff lawyers would represent litigants (S.N.B. 2005, c. 8). Under the former system, lawyers in private practice had been paid for performing legal aid work.

The amendments also created the position of Executive Director of Legal Aid (“Executive Director”). [ 3 ] On December 12, 2005, the day the amendments were proclaimed, the Board of Directors (“Board”) of the newly created Commission nominated Mr. Potter for appointment as the Executive Director. The Lieutenant-Governor in Council formally appointed him to that office on March 16, 2006, by means of Order-in-Council 2006-85. The appointment was for a seven-year term that was to expire on December 12, 2012. [ 4 ] Mr.

Potter’s appointment as the Executive Director was governed by s. 39 of the Legal Aid Act , which reads as follows: Executive Director 39

(1) The Lieutenant-Governor in Council shall appoint as the Executive Director of Legal Aid the person nominated by the Board. 39

(2) The Board shall establish the terms and conditions of the Executive Director’s appointment. 39

(3) An Executive Director shall hold office for a term of 7 years from the date of his or her appointment. 39

(4) The appointment of an Executive Director may be revoked for cause by the Lieutenant-Governor in Council. 39

(5) An Executive Director is eligible for reappointment and subsections (1) to (4) apply with the necessary modifications in respect of a reappointment. 39

(6) The Executive Director shall perform the duties and may exercise the powers imposed on the Executive Director by this Part, the

regulations or the Board. [ 5 ] The Board had also established the terms and conditions of Mr. Potter’s appointment, as required by s. 39(2), in a resolution dated December 12, 2005 that included provisions on remuneration, insurance benefits, pension benefits, vacation and sick leave, and a vehicle allowance. Section 39(6) provides that certain powers and duties are attributed to the Executive Director by the Legal Aid Act itself, by the regulations or by the Board.

The powers and duties attributed by the Act include the following (Court of Appeal reasons, at para. 15): • “the hiring of employees (s. 40(1))”; • “contracting with lawyers not employed by the Commission (s. 41(1))”; • “directing employees and contractors (s. 42(1), (2))”; • “assisting the Legal Aid Committee with investigations (s. 50(2))”; • “appointing area legal aid committees (s. 51(1))”; • “acting as one of the signing officers of the Legal Aid Fund (s. 52(8))”; • “administering Legal Aid New Brunswick (‘the plan’) in accordance with

Part III, the regulations and any policies established under

Part III and the regulations (s. 53(2))”; and • “subject to Board approval, establishing policies to govern the administration of the plan (s. 53(3))”. [ 6 ] In October 2009, after Mr. Potter had completed nearly four years of his seven-year contract, his physician advised him to take time off for medical reasons. Although initially one month, the period of his medical leave was subsequently extended, first to January 4, 2010, and then to January 18, 2010. The second extension was accompanied by a note in which Mr.

Potter’s physician observed that he “needs to be reassessed before [going] back” (Court of Appeal reasons, at para. 31). In his absence, Mr. Potter delegated his powers and duties to Peter Corey, the Commission’s Director of Criminal Operations. [ 7 ] Before then, in the spring of 2009, Mr. Potter and the Board had begun to negotiate a buyout of his contract. If successful, that process would have culminated in Mr. Potter’s resignation in exchange for an agreed-upon compensation package. [ 8 ] On January 5, 2010, the Board decided — without alerting Mr.

Potter — that if the buyout negotiations were not resolved before January 11, it would request that the Lieutenant-Governor in Council revoke Mr. Potter’s appointment for cause pursuant to s. 39(4) of the Legal Aid Act . Its decision was reflected in the following resolution: The Chair shall send correspondence to the Minister of Justice (with a cc to the Deputy Minister) requesting that David Potter’s appointment as Executive Director of the Legal Aid Services Commission be revoked for cause, such letter to be sent only if Gordon Petrie, Q.C. is unable to negotiate a resolution with Mr.

Potter before Monday, January 11, 2010 (on the basis that Mr. Potter receive no more than 18 months’ salary including his retirement allowance). [Emphasis deleted.] (Court of Appeal reasons, at para. 32) [ 9 ] On January 11, unbeknownst to Mr. Potter, the Chairperson of the Board sent a letter to the Minister of Justice recommending that Mr. Potter be dismissed for cause and outlining in general terms the grounds for dismissal. [ 10 ] Also on January 11, counsel for the Commission sent a letter to counsel for Mr. Potter advising him that Mr.

Potter was not to return to work “until further direction”: Our client, the Legal Aid Services Commission, has instructed us to advise you that David Potter ought not to return to the work place until further direction from the Commission. He will continue to be paid until instructed otherwise. [ 11 ] On January 12, counsel for Mr. Potter replied, acknowledging receipt of that letter and requesting clarification of the Commission’s instructions: I have received your letter dated January 11, 2010. I note the use of the phrase that “Mr. Potter ought not to return to the work place. . .”.

The phrasing could be interpreted as advisory as opposed to directive.

Given that Mr. Potter occupies a position which sets out a statutory obligation to perform the duties of his position, can you confirmwhether the Board has suspended Mr. Potter[?] [Emphasis in original.] [12] On January 13, counsel for the Commission confirmed that the statement was directive: “I am surprised that you andyour client are confused. He is not to return to work until further notice.” [13] Mr. Potter was not aware of the Board’s letter recommending that he be dismissed for cause, and there is noevidence that the Lieutenant-Governor in Council took any steps towards acting on the recommendation. Mr.

Potter’s sick leave was dueto expire on January 18, 2010, but having received the instruction of January 11, as clarified in the letter of January 13, he did not returnto work. The Board delegated the powers and duties of the Executive Director to Mr. Corey, to whom Mr. Potter had previouslydelegated them. [14] On March 9, 2010 — eight weeks after the Board’s instruction to stay away from the workplace, and seven weeksafter Mr. Potter had been scheduled to return from sick leave — Mr. Potter commenced an action for constructive dismissal.

He claimedthe following relief: damages with respect to salary and benefits through December 12, 2012 (the end of his term), general damages,damages arising from the manner of dismissal like those defined in Wallace v. United Grain Growers Ltd., (SCC),[1997] 3 S.C.R. 701, a declaration that the Board had no authority to suspend Mr. Potter, a declaration that the Board had unlawfullyobstructed Mr.

Potter from exercising his statutory powers, declarations that the Board had unlawfully usurped the functions of both theExecutive Director and the Lieutenant-Governor in Council by delegating those statutory powers to someone who had not been dulyappointed, and post-judgment interest. [15] In response, the Board stopped Mr. Potter’s salary and benefits. Counsel for the Commission advised his counsel ofthis in a letter of March 15, 2010: Based upon your clients’ legal action claiming constructive dismissal, our client takes the position that he has effectively resigned hisposition.

Therefore, salary and benefits were stopped on March 9, 2010. Furthermore, he is directed to return to the Commission the following items:

a) Blackberry;

b) Cell phone;

c) Home computer; and

d) On Star. We thank you for your anticipated cooperation. [16] Counsel for Mr. Potter replied that same day, indicating that Mr. Potter had not resigned: “To be clear, Mr. Potterhas not resigned from any position or office and your Client is incorrect in that regard.” The letter went on to say that Mr. Potter might be“forced” to draw on his pension, retirement/severance and other benefits, but that his doing so would not constitute acquiescence in theCommission’s view that he had resigned.

A similar letter of clarification was sent to the Deputy Minister of Justice, also on March 15.On March 23, 2010, counsel for Mr. Potter notified the Deputy Minister, in a letter that was copied to counsel for the Commission, thatMr. Potter was taking steps to draw on his pension and other benefits “[f]or financial reason[s]”. This letter went on as follows: However, we ask that your Office take immediate steps to direct reinstatement of his salary and benefits until the matter is finallydetermined. As you are aware, Mr. Potter’s appointment to his Office by Order in Council remains in effect.

The Commission hasdeprived him of his duties and now his pay. That action is reserved exclusively to the Crown upon showing just cause. We ask for your intervention as noted. Again, as set out in previous correspondence, Mr. Potter has not resigned his Office or refused tocarry out the duties of his Office. The fact that Mr. Potter now feels he must access his pension plan or other benefits ought not to beconsidered in anyway [sic] as a resignation of his Office or duties, but only as a matter of financial necessity forced upon him by theactions of the Commission.

B. New Brunswick Court of Queen’s Bench, 2011 NBQB 296, 384 N.B.R. (2d) 14 (Grant J.) [17] Grant J. found that the Board had the statutory authority, under the Legal Aid Act, to place Mr. Potter on anadministrative suspension with pay.

Although that Act clearly grants the Lieutenant-Governor in Council the authority to retain anddismiss the Executive Director (s. 39(1) and (4)), Grant J. found that s. 39(6) of the Act gives the Board a broad discretion to supervisethe Executive Director in the performance of his or her duties and that this discretion includes the power of suspension. [18] On the central question of constructive dismissal, Grant J. held that Mr.

Potter’s administrative suspension with paydid not in the circumstances of the case, despite its indefinite term, constitute constructive dismissal. [19] The question was whether, by taking Mr. Potter’s duties and powers away from him for an indefinite period of time,the Board had repudiated his contract of employment. Grant J. held that this question should be examined in light of what Mr. Potterknew at the time of what he alleged to be a constructive dismissal, “because he could hardly allege that he was constructively dismissedbased on something the employer did unbeknownst to him” (para. 36).

Since there was no evidence that the Board had advised Mr.Potter that it intended to arrange for his termination, he could not rely on the Board’s letter to the Minister of Justice recommendingtermination for cause. If the situation is viewed only in light of what Mr. Potter knew at the time he commenced his action, although hewas clearly suspended from work and unable to perform his duties, “the Commission [had] not do[ne] or sa[id] anything that would leadan objective observer to conclude that they had removed those duties from him permanently” (para. 38). [20] On the contrary, Grant J. found that Mr.

Potter and the Board had been engaged in ongoing discussions about abuyout of his contract, and that an administrative suspension pending resolution of these discussions was consistent with the relationshipbetween the parties (paras. 40 and 43). In suspending Mr. Potter, the Board was “buying time” for further negotiations, “and while theduration of the suspension was becoming lengthy, there is nothing on the record before me [Grant J.] to indicate that a reasonable personlooking at the matter objectively would have concluded that the employer had repudiated the contract” (para. 42). Grant J. noted that ifMr.

Potter was concerned about the indefinite nature of the suspension, he could have corresponded with the Board or given them noticethat after a certain date he would consider himself to have been constructively dismissed, rather than taking the “precipitous course” ormaking the “dramatic move” of starting legal proceedings (paras. 39 and 44). Grant J. distinguished this situation of a suspensionpending negotiations from the one in Park v.

Parsons Brown & Co. (1989), (BC CA), 39 B.C.L.R. (2d) 107 (C.A.), inwhich a decision to strip an employee of all his powers and duties had been found to amount to constructive dismissal (paras. 41-42). [21] Grant J. went on to find that by commencing an action for constructive dismissal, Mr.

Potter had effectivelydestroyed any chance of a productive working relationship between the parties and had therefore repudiated the employment contract bywhat amounted to a resignation (paras. 50-51). [22] In case his decision on the constructive dismissal issue should be reversed on appeal, Grant J. also made aprovisional assessment of damages. He found that any damages would be measured by calculating the balance of salary and benefits towhich Mr. Potter would be entitled from the date the Board stopped paying him (March 9, 2010) until the date his term was to expire(December 12, 2012) (paras. 61-62).

He held that by virtue of s. 16 of the Public Service Superannuation Act, R.S.N.B. 1973, c. P-26(repealed by

An Act Respecting Pensions under the Public Service Superannuation Act, S.N.B. 2013, c. 44, s. 2), Mr. Potter would not beentitled to collect both his salary and pension benefits, and that any amounts received or to be received under his pension would bededucted from the award of damages (paras. 63-64). Grant J. added that Mr. Potter had had no duty to mitigate his damages by seekingother employment, given his age (66 in March 2010) and “the small likelihood he would find any employment let alone a job analogousto the [Executive Director] position” (para. 71).

Finally, he refused to award Wallace​-type damages or general damages, which werebeing claimed for the manner of the alleged dismissal, as he found no evidence that Mr. Potter had been mistreated or that the Board hadacted in bad faith (paras. 72-76). C. New Brunswick Court of Appeal, 2013 NBCA 27, 402 N.B.R. (2d) 41 (Drapeau C.J.N.B. and Richard and Bell JJ.A.) [23] Drapeau C.J.N.B., writing for a unanimous panel of the New Brunswick Court of Appeal, dismissed the appeal. Hebegan by addressing the question whether the Commission was truly Mr.

Potter’s employer or whether the employer was instead theCrown, which was the only entity empowered to appoint, reappoint or dismiss the Executive Director. In his view, the action forconstructive dismissal could not succeed if the Crown was the true employer. After giving reasons in support of this position, DrapeauC.J.N.B. declined to dispose of the appeal on this ground, as it had not been pursued by the parties (paras. 58-69). Instead, he confirmedGrant J.’s

interpretation to the effect that the Legal Aid Act confers on the Board power over all aspects of the Executive Director’semployment other than his or her appointment, reappointment and removal. The Board’s discretion to supervise the Executive Directorincludes the power of administrative suspension (paras. 70-79). [24] Drapeau C.J.N.B. held that the trial judge had committed no reversible error in concluding that Mr. Potter had notbeen constructively dismissed.

He noted that the question whether an indefinite suspension with pay constitutes constructive dismissaldepends on the circumstances of the case, quoting Cabiakman v. Industrial Alliance Life Insurance Co., 2004 SCC 55, [2004] 3 S.C.R.195, at para. 71, in this regard (para. 82). The test, as this Court had stated in Farber v. Royal Trust Co., (SCC), [1997]1 S.C.R. 846, at para. 33, is whether the suspension constitutes “a fundamental or substantial change to an employee’s contract ofemployment”. To this end, Drapeau C.J.N.B. applied the following “useful list” of factors that had been formulated in Devlin v.

NEMINorthern Energy & Mining Inc., 2010 BCSC 1822, 86 C.C.E.L. (3d) 268, at para. 50: 1. the duration of the suspension; 2. whether someone was appointed to replace the suspended employee; 3. whether the employee was asked for his or her keys;

4. whether the employee continued to be paid and receive benefits; 5. whether there is evidence that the employer intended to terminate the employee at that time; and 6. whether the employer suspended the employee in good faith, for example, for bona fide business reasons. [ 25 ] For Drapeau C.J.N.B., although the indefinite duration of the suspension weighed in favour of a finding that the suspension constituted constructive dismissal, it did not trump the other factors, all of which supported Grant J.’s “amply justified” conclusion that Mr. Potter had not been constructively dismissed (para. 81).

Thus, no one was formally appointed to replace Mr. Potter during his suspension, and the person tasked with assuming his responsibilities had been designated by Mr. Potter himself upon going on sick leave. Nor was Mr. Potter asked to turn in his BlackBerry, cell phone, laptop and “On Star” until after he had launched his action. Mr. Potter continued to be paid his full salary, and to be eligible for benefits, during the period of the suspension. The Board did not intend to terminate Mr.

Potter, as it was operating under the honest conviction that only the Lieutenant-Governor in Council could prescribe termination. Finally, the Board acted in good faith in suspending Mr. Potter, as was shown by the unchallenged testimony of Dr. Doherty, the Board’s Vice-Chair (paras. 86-90). [ 26 ] Drapeau C.J.N.B. also suggested, although without deciding this point, that Grant J. may have erred by limiting his assessment to facts known to Mr. Potter at the time of his alleged constructive dismissal: “It may be that the trial judge was required to consider all of the circumstances, including those unknown to Mr.

Potter prior to commencing his action . . .” (para. 94). He nevertheless stated that such an error would have been “wholly harmless” because, had Grant J. considered the Board’s letter to the Minister of Justice recommending that Mr. Potter’s employment be terminated, this would only have confirmed that the Board understood it could not itself terminate Mr. Potter ( ibid. ). [ 27 ] Drapeau C.J.N.B. went on to hold that, by suing for damages for constructive dismissal, Mr. Potter had terminated not only his employment with the Board, but also his appointment by the Lieutenant-Governor in Council (para. 101).

Although Mr. Potter had cautioned the Board that he was prepared to continue to perform his duties and that the filing of his action did not constitute a resignation, he had done so only after taking legal action, in an attempt to avoid the legal consequences that flowed from his lawsuit (para. 95). In Drapeau C.J.N.B.’s view, Mr. Potter had, by equating his indefinite administrative suspension with pay to a constructive dismissal, elected to repudiate his contract of employment and resign. His resignation had been effected by operation of law, and it had to be what Mr.

Potter intended, since it was a corollary to his action for constructive dismissal (para. 100). [ 28 ] Drapeau C.J.N.B. did not address the issue of damages in his reasons. III. Issues [ 29 ] This appeal raises three questions, which I will answer in turn:

(1) Did the trial judge err in concluding that Mr. Potter was not constructively dismissed?

(2) If Mr. Potter was not constructively dismissed, did the trial judge err in concluding that Mr. Potter resigned when he launched his action in damages?

(3) If Mr. Potter was constructively dismissed, did the trial judge err in finding that the amounts Mr. Potter received under his pension should be deducted from his damages for wrongful dismissal? IV. Analysis A. Was Mr. Potter Constructively Dismissed? [ 30 ] When an employer’s conduct evinces an intention no longer to be bound by the employment contract, the employee has the choice of either accepting that conduct or changes made by the employer, or treating the conduct or changes as a repudiation of the contract by the employer and suing for wrongful dismissal.

This was clearly stated in Farber , at para. 33 , the leading case on the law of constructive dismissal in Canada. See also In re Rubel Bronze and Metal Co. and Vos , [1918] 1 K.B. 315, at p. 322 . Since the employee has not been formally dismissed, the employer’s act is referred to as “constructive dismissal”. The word “constructive” indicates that the dismissal is a legal construct: the employer’s act is treated as a dismissal because of the way it is characterized by the law (J. A. Yogis and C. Cotter, Barron’s Canadian Law Dictionary (6th ed. 2009), at p. 61; B. A.

Garner, ed., Black’s Law Dictionary (10th ed. 2014), at p. 380). [ 31 ] The burden rests on the employee to establish that he or she has been constructively dismissed. If the employee is successful, he or she is then entitled to damages in lieu of reasonable notice of termination. In Farber , the Court surveyed both the common law and the civil law jurisprudence in this regard. The solutions adopted and principles applied in the two legal systems are very similar.

In both, the purpose of the inquiry is to determine whether the employer’s act evinced an intention no longer to be bound by the contract. [ 32 ] Given that employment contracts are dynamic in comparison with commercial contracts, courts have properly taken

a flexible approach in determining whether the employer’s conduct evinced an intention no longer to be bound by the contract. There aretwo branches of the test that have emerged. Most often, the court must first identify an express or implied contract term that has beenbreached, and then determine whether that breach was sufficiently serious to constitute constructive dismissal: J. R. Sproat, WrongfulDismissal Handbook (6th ed. 2012), at p. 5-5; P.

Barnacle, Employment Law in Canada (4th ed. (loose-leaf)), at §§13.36 and 13.70.Typically, the breach in question involves changes to the employee’s compensation, work assignments or place of work that are bothunilateral and substantial: see, e.g., G. England, Individual Employment Law (2nd ed. 2008), at pp. 348-56. In the words of McCardie J.in Rubel Bronze, at p. 323, “The question is ever one of degree.” [33] However, an employer’s conduct will also constitute constructive dismissal if it more generally shows that theemployer intended not to be bound by the contract.

In applying Farber, courts have held that an employee can be found to have beenconstructively dismissed without identifying a specific term that was breached if the employer’s treatment of the employee madecontinued employment intolerable: see, e.g., Shah v. Xerox Canada Ltd. (2000), (ON CA), 131 O.A.C. 44; Whiting v.Winnipeg River Brokenhead Community Futures Development Corp. (1998), (MB CA), 159 D.L.R. (4th) 18 (Man.C.A.).

This approach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer andthe determination of whether those acts evinced an intention no longer to be bound by the contract. [34] The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract,has two steps: first, the employer’s unilateral change must be found to constitute a breach of the employment contract and, second, if itdoes constitute such a breach, it must be found to substantially alter an essential term of the contract (see Sproat, at p. 5-5).

Often, thefirst step of the test will require little analysis, as the breach will be obvious. Where the breach is less obvious, however, as is often thecase with suspensions, a more careful analysis may be required. [35] In Farber, Gonthier J. identified such a change as a “fundamental breach”. The term “fundamental breach” has takenon a specific meaning in the context of exclusionary or exculpatory clauses: see, e.g., Tercon Contractors Ltd. v. British Columbia(Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 104-23.

To avoid confusion, I will therefore use the term“substantial breach” to refer to breaches of this nature. The standard nevertheless remains unchanged — a finding of constructivedismissal requires that the employer’s acts and conduct “evince an intention no longer to be bound by the contract”: Rubel Bronze, at p.322, citing General Billposting Co. v. Atkinson, [1909] A.C. 118 (H.L.), at p. 122, per Lord Collins, quoting Freeth v. Burr (1874), L.R.9 C.P. 208, at p. 213. [36] The two-step approach to the first branch of the test for constructive dismissal is not a departure from the approachadopted in Farber.

Rather, the situation in Farber was one in which the identification of a breach required only a cursory analysis. Theemphasis in Farber was on the second step of this branch, as the evidentiary foundation for the perceived magnitude of the breach wasthe key issue in that case. However, the identification of a unilateral act that amounted to a breach of the contract was implicit in theCourt’s reasoning. In many cases, this will be sufficient.

The case at bar, however, is one in which the claim can be properly resolvedonly after both steps of the analysis have been completed. [37] At the first step of the analysis, the court must determine objectively whether a breach has occurred. To do so, itmust ascertain whether the employer has unilaterally changed the contract. If an express or an implied term gives the employer theauthority to make the change, or if the employee consents to or acquiesces in it, the change is not a unilateral act and therefore will notconstitute a breach. If so, it does not amount to constructive dismissal.

Moreover, to qualify as a breach, the change must be detrimentalto the employee. [38] This first step of the analysis involves a distinct inquiry from the one that must be carried out to determine whetherthe breach is substantial, although the two have often been conflated by courts in the constructive dismissal context. Gonthier J.conducted this inquiry in Farber, in which an employee had been offered a new position that was found to constitute a demotion.

Hestated that “the issue of whether there has been a demotion must be determined objectively by comparing the positions in question andtheir attributes”: Farber, at para. 46. [39] Once it has been objectively established that a breach has occurred, the court must turn to the second step of theanalysis and ask whether, “at the time the [breach occurred], a reasonable person in the same situation as the employee would have feltthat the essential terms of the employment contract were being substantially changed” (Farber, at para. 26).

A breach that is minor inthat it could not be perceived as having substantially changed an essential term of the contract does not amount to constructive dismissal. [40] The kinds of changes that meet these criteria will depend on the facts of the case being considered, so “one cannotgeneralize”: Sproat, at p. 5-6.5. In each case, determining whether an employee has been constructively dismissed is a “highly fact-driven exercise” in which the court must determine whether the changes are reasonable and whether they are within the scope of theemployee’s job description or employment contract: R. S. Echlin and J. M.

Fantini, Quitting for Good Reason: The Law of ConstructiveDismissal in Canada (2001), at pp. 4-5. Although the test for constructive dismissal does not vary depending on the nature of the allegedbreach, how it is applied will nevertheless reflect the distinct factual circumstances of each claim. [41] The uniqueness of the application of this first branch of the test is evident in cases involving administrativesuspensions.

In all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrativesuspension is at issue, the burden will necessarily shift to the employer, which must then show that the suspension is justified. If theemployer cannot do so, a breach will have been established, and the burden will shift back to the employee at the second step of theanalysis. [42] The second branch of the test for constructive dismissal necessarily requires a different approach.

In cases in whichthis branch of the test applies, constructive dismissal consists of conduct that, when viewed in the light of all the circumstances, wouldlead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract. The employee is notrequired to point to an actual specific substantial change in compensation, work assignments, or so on, that on its own constitutes asubstantial breach. The focus is on whether a course of conduct pursued by the employer “evince[s] an intention no longer to be boundby the contract”: Rubel Bronze, at p. 322.

A course of conduct that does evince such an intention amounts cumulatively to an actual

breach.

Gonthier J. said the following in this regard in Farber : In cases of constructive dismissal, the courts in the common law provinces have applied the general principle that where one party to a contract demonstrates an intention no longer to be bound by it, that party is committing a fundamental breach of the contract that results in its termination. [para. 33] [ 43 ] Thus, constructive dismissal can take two forms: that of a single unilateral act that breaches an essential term of the contract, or that of a series of acts that, taken together, show that the employer no longer intended to be bound by the contract.

The distinction between these two forms of constructive dismissal was clearly expressed by Lord Denning M.R. in a leading English case, Western Excavating (ECC) Ltd. v. Sharp , [1978] 1 All E.R. 713 (C.A.) . First of all, an employer’s conduct may amount to constructive dismissal if it “shows that [he] no longer intends to be bound by one or more of the essential terms of the contract”: p. 717. But the employer’s conduct may also amount to constructive dismissal if it constitutes “a significant breach going to the root of the contract of employment”: ibid.

In either case, the employer’s perceived intention no longer to be bound by the contract is taken to give rise to a breach. [ 44 ] In applying the first branch of the test for constructive dismissal to the facts of the case at bar, this Court must ask, first, whether the Board’s suspension of Mr. Potter amounted to a breach of the employment contract. For this, it must determine whether the suspension was a unilateral act. On its face, the Board’s decision to suspend Mr. Potter was clearly unilateral, since he did not consent to the suspension.

But the Commission counters that the suspension does not evince an intention no longer to be bound by the contract, as it was authorized by an express or an implied term of the contract, which is a way of saying that Mr. Potter consented to such a change by signing the contract. I agree that the question whether the suspension amounted to constructive dismissal turns in part on whether it was authorized by the contract. If there was an express or an implied term that authorized the Board to suspend Mr.

Potter as it did, then there was no unilateral act and, therefore, no breach of the contract — let alone a substantial change to the essential terms of the contract — and the constructive dismissal claim must fail. [ 45 ] If, however, the suspension was not authorized by the contract, then it satisfies the requirements of the first step of this branch of the test, that is, it constitutes a unilateral change that amounts to a breach of the contract. It would then be necessary to turn to the second step and ask whether the Board’s unilateral decision to suspend Mr.

Potter could reasonably be perceived as having substantially changed the essential terms of the contract . It is clear that a suspension can amount to constructive dismissal: Cabiakman , at paras. 71-72 . In determining whether the unauthorized suspension constituted a substantial breach, the Court must consider whether a reasonable person in the employee’s circumstances would have perceived, inter alia , that the employer was acting in good faith to protect a legitimate business interest, and that the employer’s act had a minimal impact on him or her in terms of the duration of the suspension.

With respect, the trial judge erred in failing to consider the two steps of the inquiry independently. [ 46 ] Applying the principles discussed above to the facts of the instant case, I find that Mr. Potter was constructively dismissed by the Board. In light of the indefinite duration of the suspension, of the fact that the Commission failed to act in good faith insofar as it withheld valid business reasons from Mr. Potter, and of the Commission’s concealed intention to have Mr.

Potter terminated, I respectfully find that the trial judge erred in concluding that the suspension was authorized by the contract of employment. Moreover, for the reasons set out below, I find that this breach of the contract amounted to a substantial change to the essential terms of the contract that was imposed unilaterally by the employer. [ 47 ] With respect, I cannot agree with Cromwell J.’s assertion that this analysis is unnecessary or that constructive dismissal can be established on the basis of the second branch of the test.

First, little, if any, support can be found for the position that a reasonable person in Mr. Potter’s situation would conclude that the suspension evinced an intention on the employer’s part no longer to be bound by the contract without addressing the question of whether the suspension was authorized. If the contract expressly or impliedly authorized the suspension in the manner in which it was carried out, this cannot contribute to the determination that a course of conduct amounted to a breach. The same is true of the buyout negotiations, which, as far as Mr. Potter knew, were being conducted in good faith.

Moreover, although this is not central to Cromwell J.’s analysis, the Board’s letter to the Minister of Justice is not, in light of the discussion that follows, relevant to the analysis under this branch. The only relevant evidence is therefore the letter advising Mr. Potter that he would “continue to be paid until instructed otherwise”. I concede that this letter unnecessarily introduced some uncertainty into Mr. Potter’s employment situation.

Nevertheless, a reasonable person in his situation could not have concluded on this basis that the Commission’s conduct evinced a clear intention no longer to be bound by the contract. [ 48 ] I will begin by addressing two preliminary issues. First, I will dispel the doubts expressed by the Court of Appeal regarding the existence of an employment relationship between the Commission and Mr. Potter. Second, I will review the terms of the contract to determine whether there was an express grant to the Board of authority to suspend Mr. Potter.

Having concluded that there was no such express grant, I will then turn to the central question in this appeal: whether there was an implied grant of authority to do so. The trial judge found that the suspension was authorized, but I am of the view that this finding was based on an erroneous understanding of the law applicable to suspensions in the constructive dismissal context. My conclusion is that the Board did not have the authority, whether express or implied, to suspend Mr.

Potter indefinitely with pay for the reasons it gave, and that the suspension was a substantial change that amounted to constructive dismissal.

(1) The Employment Relationship Between Mr. Potter and the Commission [ 49 ] The Court of Appeal held that if the Commission was not Mr. Potter’s employer, his action could not succeed “as a matter of common sense and law” (para. 60). Although Drapeau C.J.N.B. accepted that neither party was contesting the existence of an employment relationship between Mr. Potter and the Commission, he did so “with some hesitation” (para. 69), and only after providing several reasons why such a relationship might not exist. At the hearing in this Court, the Commission once again conceded that it was Mr. Potter’s employer.

Given that this position was accepted by both parties throughout the proceedings, I agree with Drapeau C.J.N.B. that “it would be unfair to recast the case and dispose of the appeal on a ground that has not been pursued by the Commission” (para. 69). That being said, I do not share Drapeau C.J.N.B.’s hesitation in reaching this conclusion. I find, in light of the “common employer” doctrine, that the Commission was in fact Mr. Potter’s employer for the purposes of this case and that it was therefore correctly designated as the defendant to Mr. Potter’s action.

[50] Although it is true that under the Legal Aid Act, the Lieutenant-Governor in Council retains the formal power ofappointment, reappointment and termination of the Executive Director, the power of appointment is fettered by an obligation to appointthe person nominated by the Commission’s Board of Directors: s. 39(1). The Board is also responsible for establishing the terms andconditions of the Executive Director’s appointment.

In addition, it has the authority under s. 39(6) to attribute duties and powers to theExecutive Director, an authority that, according to the courts below, includes the power of suspension. These powers conferred on theBoard, including its nomination power, which gives it effective control over the Crown’s power of appointment, cover nearly all aspectsof the employment relationship. Drapeau C.J.N.B. suggested that the Board’s lack of authority to formally terminate the ExecutiveDirector might undermine Mr.

Potter’s claim, but such a conclusion would conflict with the common employer doctrine and with the lawapplicable to constructive dismissal. [51] I accept that the Commission was Mr. Potter’s employer for most purposes, even though the Crown was hisemployer for the purpose of formal appointment, reappointment and termination. What a finding of constructive dismissal requires is notformal termination, but a unilateral act by the employer to substantially change the contract of employment.

As is clear from the wide-ranging powers discussed above, the Commission has the power to alter fundamental aspects of the Executive Director’s contract ofemployment, and thus to constructively dismiss him. To conclude otherwise would be to allow a permissible complexity inorganizational arrangements to work an injustice by undermining the legitimate entitlements of wrongfully dismissed employees: seeDowntown Eatery

(1993) Ltd. v. Ontario (2001), (ON CA), 54 O.R. (3d) 161 (C.A.), at para. 36. It would protect anemployer from liability for acts amounting to constructive dismissal on the basis that it lacked the power to formally terminate theemployee.

(2) Can the Words of the Contract Be Interpreted to Mean That It Established an Express Grant of Authority to Suspend Mr.Potter for Administrative Reasons? [52] If the Commission had the authority under the contract to suspend Mr. Potter for the administrative reasons it gave,then the contract was not breached and Mr. Potter’s constructive dismissal claim must fail. The express terms of the contract are found inthe Legal Aid Act, and in the terms and conditions of employment established by the Board pursuant to s. 39(2) of the Act. Thepossibility of suspension is not mentioned in the terms and conditions. Nor does the Legal Aid Act refer to suspension. However, s. 21(1)of the

Interpretation Act, R.S.N.B. 1973, c. I-13, reads as follows: 21(1) Words authorizing the appointment of a public officer include the power (

a) of removing or suspending him, (

b) of re-appointing or reinstating him, (

c) of appointing another in his stead or to act in his stead, and (

d) of fixing his remuneration and varying or terminating it, in the discretion of the authority in whom the power of appointment is vested. [53] At trial, Mr.

Potter argued that this provision should be applied in interpreting s. 39(1) of the Legal Aid Act, whichprovides that “[t]he Lieutenant-Governor in Council shall appoint as the Executive Director of Legal Aid the person nominated by theBoard.” He submitted that, since these are “[w]ords authorizing the appointment of a public officer”, the power of suspension lies notwith the Board, but with the Crown, and that the Board therefore lacked the authority to suspend him for administrative reasons. [54] The trial judge disagreed, relying on s. 39(6) of the Legal Aid Act, which I reproduce here once again forconvenience: 39(6) The Executive Director shall perform the duties and may exercise the powers imposed on the Executive Director by this Part, theregulations or the Board.

According to Grant J., the Board’s general supervisory powers referred to in s. 39(6) include the power to suspend and replace theExecutive Director. Were this not the case, if the Executive Director were to become ill or otherwise incapacitated, the Commissionwould be unable to function unless the Lieutenant-Governor in Council appointed a replacement. Grant J. found that such an outcomewould run counter to the primary purpose of the Legal Aid Act, which is to establish a functioning legal aid plan: s. 2. [55] The Court of Appeal gave additional reasons in support of this

interpretation of the contract. Drapeau C.J.N.B.pointed out that s. 1(1)(

a) of the

Interpretation Act provides that the

Interpretation Act applies in this case only if it is not “inconsistentwith the intent or object” of the Legal Aid Act.

Section 39 of the Legal Aid Act does not merely consist of “[w]ords authorizing theappointment of a public officer”. It goes further than that in that it grants additional powers to the Lieutenant-Governor in Council, theBoard and the Executive Director, and s. 21(1) of the

Interpretation Act is inconsistent with the provisions establishing some of thosepowers. For instance, s. 39(5) of the Legal Aid Act fetters the Lieutenant-Governor in Council’s reappointment power, and s. 39(2) grantsthe Board the authority to establish the terms and conditions of the Executive Director’s appointment, including remuneration. Section

21(1) of the

Interpretation Act is inconsistent with both of these provisions. [ 56 ] Even if the

Interpretation Act did apply, Drapeau C.J.N.B. suggested that the power of “suspending” provided for in s. 21(1) (

a) is limited to disciplinary measures, since that word is used in conjunction with “removing” (para. 73). [ 57 ] In my view, for the reasons given by Grant J. and by Drapeau C.J.N.B., the Legal Aid Act comprehensively sets out the various powers applicable to the Executive Director’s contract of employment, and the

Interpretation Act is inconsistent with some of the provisions establishing those powers. The Lieutenant-Governor in Council’s power of appointment does not necessarily include the power of suspension, and even if it did include that power, I agree that the power of suspension contemplated in s. 21(1) (

a) of the

Interpretation Act is limited to disciplinary suspension.

As a result, any power to suspend the Executive Director for administrative reasons can only lie with the Board. [ 58 ] I also agree with Grant J. that s. 39 of the Legal Aid Act attributes to the Board jurisdiction over all aspects of the Executive Director’s employment — except for his or her formal appointment or reappointment, and the formal revocation of an appointment — and that the Board’s jurisdiction in this regard includes establishing the terms and conditions of the appointment (s. 39(2)) and directing the Executive Director in the performance of his or her duties and the exercise of his or her powers ( s. 39(6) ).

That being said, these broad powers conferred on the Board do not expressly include the power of suspension for administrative reasons. I will now turn to the question whether such a power can be found to be implied in the contract of employment.

(3) Was There an Implied Grant of Authority to Suspend Mr. Potter for Administrative Reasons? [ 59 ] Since there was no express grant of authority to suspend Mr. Potter for administrative reasons, any such authority would have to be found to be implied in the contract. This requires us to inquire into whether the Board’s authority under s. 39(6) of the Legal Aid Act to attribute powers and duties to the Executive Director includes the authority to suspend Mr. Potter indefinitely with pay for the administrative reasons the Board gave. In my view, it does not.

In reaching the opposite conclusion, the trial judge was led astray by an incorrect articulation of the law applicable to administrative suspensions. Grant J. erred in finding that the Commission did not have a duty to provide Mr. Potter with work, and as a result he failed to inquire into whether it had discharged its burden by showing that the suspension was justified. For the reasons set out below, I conclude that the Commission did not discharge that burden and that, as a result, the suspension was unauthorized. (

a) Admissibility of Evidence Adduced to Prove That

an Act Constitutes Constructive Dismissal [ 60 ] The onus is on the employee to prove that

an act constitutes constructive dismissal. The employee must prove on a balance of probabilities that the employer’s unilateral act breached the contract and that that breach substantially changed the essential terms of the contract. As I mentioned above, the evidence produced to establish that the breach was substantial must be assessed from the perspective of a reasonable person.

The test is “whether, at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed” ( Farber , at para. 26 ). In the instant case, the trial judge, purporting to apply the above test, commented as follows: . . . it is necessary, in my view, that I only consider what [Mr. Potter] knew at the time he alleges he was constructively dismissed because he could hardly allege that he was constructively dismissed based on something the employer did unbeknownst to him.

For example he was not aware of the letter to the Minister of Justice at that time. He can’t therefore say that by sending the letter the defendant repudiated the contract and thereby constructively dismissed him. [para. 36] [ 61 ] The Court of Appeal questioned the trial judge’s conclusion on this issue, stating that “[i]t may be that the trial judge was required to consider all of the circumstances, including those unknown to Mr. Potter prior to commencing his action” (para. 94).

However, Drapeau C.J.N.B. said that such an error would have been “wholly harmless” because, even if Grant J. had considered the excluded evidence, that evidence would only have confirmed the view that the Board had acted in a manner consistent with its obligations under the contract, given that it could not itself terminate Mr. Potter ( ibid. ). [ 62 ] With respect, I am of the view that the trial judge was indeed in error and that this error was not harmless. The error stemmed from a failure to make a distinction between the individual steps of the test for constructive dismissal.

As I mentioned above, this Court’s test from Farber has two parts. Grant J. should have begun by asking whether, from an objective viewpoint, a breach of the contract had occurred. It was only after determining that a breach had in fact occurred that he should have proceeded to the second step, that of determining whether the breach was a substantial one.

It is at this second stage of the analysis that the perspective shifts and that “what is relevant is what was known by the appellant at the time of the [breach] and what ought to have been foreseen by a reasonable person in the same situation” ( Farber , at para. 42 ). The trial judge failed to deal with the first step of the test. [ 63 ] This shift in perspective demonstrates the balance that is struck in the doctrine of constructive dismissal.

On the one hand, the doctrine is based on a recognition that the employee is in a vulnerable position vis-à-vis the employer; however, the ensuing accommodations are not unlimited. Accordingly, the perspective at the second step of the first branch of the test, at which the issue is whether the breach was substantial, and in the second branch of the test is that of a reasonable person in the same circumstances as the employee . There is no requirement that the employer actually intend no longer to be bound by the contract.

The question is whether, given the totality of the circumstances, a reasonable person in the employee’s situation would have concluded that the employer’s conduct evinced an intention no longer to be bound by it. However, with respect for Cromwell J.’s opinion, the perspective here cannot be stretched so far as to allow the employee to rely on grounds that, although real, were unknown to him or her at the relevant time.

Such an approach would risk encouraging disgruntled employees who have quit their jobs to allege constructive dismissal and engage in fishing expeditions against their employers in the hope of identifying evidence in support of their claims. [ 64 ] In the instant case, at the first step of the first branch of the constructive dismissal analysis, the trial judge was required to inquire, from an objective viewpoint, into whether the administrative suspension amounted to a breach of contract.

To exclude evidence such as the evidence excluded by the trial judge in this case would be to make the employee’s right to claim constructive dismissal depend on whether the employer was “artful enough to conceal his state of mind”: Universal Cargo Carriers Corp. v. Citati , [1957] 2 All E.R. 70 (Q.B.), at p. 91 .

[65] As I mentioned above, the question whether a suspension amounts to a breach will often require a more carefulanalysis than might be necessary in constructive dismissal cases involving other types of changes. This is because, unlike with suchunilateral changes as a demotion, a reduction in wages or a modification to the pay structure, an employer’s ability to suspend anemployee can be found to be implied in the contract. The court must therefore determine whether the suspension was implicitlyauthorized by the contract. In Carscallen v. FRI Corp. (2005), (ON SC), 42 C.C.E.L. (3d) 196 (Ont.

S.C.J.), aff’d(2006), (ON CA), 52 C.C.E.L. (3d) 161 (Ont. C.A.), for example, the Ontario Court of Appeal, in inquiring intowhether an employee’s disciplinary suspension amounted to a breach, considered multiple factors, including the facts that the suspensionwas without pay and that it was indefinite. A similar approach was taken in Labarre v.

Spiro Méga inc., 2001 CarswellQue 1753 (WLCan.), in which the Quebec Superior Court also considered a notice sent to other employees to inform them of the suspension, as well asthe revocation of a company credit card and of the use of a vehicle. [66] When faced with a unilateral change by the employer, the employee is placed in the unenviable situation of having todecide whether to accept the change or to resign and bring an action for constructive dismissal: see Belton v. Liberty Insurance Co. ofCanada (2004), (ON CA), 72 O.R. (3d) 81 (C.A.), at paras. 25-26.

This life-altering decision must be made incircumstances in which the information available to the employee is limited and there is an imbalance of power between the employerand the employee. As was made clear in Farber, it would be unfair to rely on information that undermines the employee’s claim and thatthe employee did not know about or could not be expected to have foreseen. In Farber, as I mentioned above, Gonthier J. firstdetermined that a breach had occurred — the employee had been confronted with a unilateral change that involved “a significant, even aserious, demotion” (para. 38).

He then inquired into whether the demotion constituted a substantial change to the essential terms of theemployment contract. The employer argued that because the commission the employee would actually have earned in the new positionhad turned out to be higher than the amount he would have earned had he remained in his former position, the demotion did notconstitute a substantial change.

Gonthier J. held that this evidence should be excluded, however, on the basis that a court must not, indetermining whether a breach is substantial, consider evidence consisting of information that was neither known to the employee norreasonably foreseeable. [67] The reason why the evidence was excluded in Farber does not apply in the instant case. In Farber, the Courtexcluded the evidence in question not in determining whether a breach had occurred, but in determining whether the change wassubstantial. This distinction has a significant impact on the determination of whether evidence is relevant.

The Board’s letterrecommending that Mr. Potter’s employment be terminated for cause is plainly relevant to the circumstances at the time of the allegedbreach. Also, as I will explain in the next section, the employer’s intentions are relevant to the determination of whether the suspensionwas wrongful, which is the key issue in Mr. Potter’s constructive dismissal action. The exclusion of the evidence was therefore far from“wholly harmless”. It deprived the trial judge of evidence that was relevant to the central issue of the case. (

b) Characterizing Mr. Potter’s Suspension [68] The broad question of an employer’s right to temporarily discontinue an employee’s work in a non-unionizedworkplace has been the subject of much debate. Before addressing the question whether the Board had the authority to suspend Mr.Potter as it did in this case, I wish to make it clear that certain points are not at issue in this appeal. First, this case does not concern alayoff for economic reasons. Because Mr.

Potter’s salary and benefits continued to be paid, he was not laid off, and the question of animplied authority to lay employees off temporarily does not arise: Barnacle, at §§18.29 to 18.39. [69] Second, this case does not concern an administrative suspension for reasons unrelated to the employee’s conduct. InCabiakman, this Court drew a distinction, albeit in the civil law context, between extrinsic and intrinsic factors that might support afinding that an administrative suspension is justified (para. 33).

Some possible extrinsic factors are financial difficulties, a shortage ofwork, technological change or reorganization of the business, but no such factors are alleged in the case at bar. Rather, the decision tosuspend Mr. Potter was based on intrinsic factors in that it related to the actions of Mr. Potter himself. [70] Third, this case does not concern a disciplinary suspension. Although the Board privately recommended in its letterto the Minister of Justice — and gave reasons for doing so — that Mr. Potter’s appointment be revoked for cause, it did not suspend Mr.Potter for disciplinary reasons.

The parties agree, as did the courts below, that by directing Mr. Potter to stay home and delegating hispowers to someone else, the Board placed him on an “administrative suspension” (Court of Appeal reasons, at para. 3). In this Court, theCommission conceded that the suspension was administrative and not disciplinary. Questions related to an implied authority to suspendan employee for disciplinary reasons, or an implied obligation to impose a lesser sanction such as suspension where there is cause fordismissal, do not arise: see McKinley v. BC Tel, 2001 SCC 38, [2001] 2 S.C.R. 161, at para. 52; Haldane v.

Shelbar Enterprises Ltd.(1999), (ON CA), 46 O.R. (3d) 206 (C.A.); Barnacle, at §18.40. [71] Incidentally, given that cause was not alleged in the instant case, I question the relevance of the Court of Appeal’slengthy

summary of what it calls the “deterioration” of Mr. Potter’s relationship with the Board (paras. 2 and 21-26). Drapeau C.J.N.B.stated that he was including this evidence “to show the Board’s revocation recommendation was bona fide and anything but frivolous”(para. 21). However, these facts had not been litigated at trial, and they consisted mostly of unproven allegations that had been made bythe Commission. Unless they relate to the specific administrative reasons given by the Board for suspending Mr.

Potter, they are notrelevant. [72] The question I must answer is whether the Board had an implied authority to suspend Mr. Potter indefinitely withpay for the administrative reasons it gave. It should be noted that the Board gave no reason when it suspended Mr. Potter on January 11,2010. When asked for clarification the next day, the Board simply confirmed that Mr. Potter was not to return to work. There were nofurther com

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