2006 BCCA 424 Wightman Estate v. 2774046 Canada Inc.

Before:	The Honourable Madam Justice Rowles
	The Honourable Madam Justice Levine
	The Honourable Mr. Justice Smith

M. Tevlin and B. Curtis	Counsel for the Appellants
M. Korbin	Counsel for the Respondents
Place and Date of Hearing:	Vancouver, British Columbia
8 June 2006
Place and Date of Judgment:	Vancouver, British Columbia
29 September 2006

Written Reasons by:

The Honourable Mr. Justice Smith

Concurred in by:

The Honourable Madam Justice Rowles

The Honourable Madam Justice Levine

Reasons for Judgment of the Honourable Mr. Justice Smith:

[1] It has long been a tenet of our law that a contract may be brought to an end by operation of law and the parties discharged from further performance if, without the fault of either party, the circumstances in which it was expected to be performed have changed so radically that performance would be impossible or at least something fundamentally different than was initially contemplated. In such circumstances, the contract is said to be frustrated.

[2] This appeal raises the question of the applicability of this doctrine to an employment contract that provided insurance for payment of long-term disability benefits to a totally disabled employee for the remainder of his working life. The appellant contends that a contract of employment can never be frustrated by the disabling sickness of an employee if the contract provides for such long-term disability benefits. She submits that the doctrine requires an unforeseen supervening event for its operation and that, contrary to the conclusion of the trial judge, the contract of employment in this case was not frustrated by the employee’s sickness since, by including such benefits in their contract, the employer and employee had contemplated and provided for this event.

[3] For the reasons that follow, I do not agree. That the parties have foreseen the possibility of a particular supervening event and have made some provision for it in their contract does not necessarily preclude frustration of the contract upon the happening of the event. The critical question is whether the parties have provided

that their contractual relationship will continue despite the radical change in circumstances brought about by the event.

[4] Here, although it is true that the parties contemplated the possibility of the employee’s disabling sickness and hedged their respective losses with long-term disability insurance purchased by the employer, they did not provide that the employment relationship would continue indefinitely despite this new circumstance. Rather, their contract provided that the long-term disability benefits would be paid whether or not the employment contract should be brought to an end by the employee’s sickness. Accordingly, the trial judge did not err in concluding on the facts as he found them that the employee’s sickness frustrated the contract and discharged the parties from further performance.

Background

[5] This is an appeal from a judgment of Mr. Justice Halfyard of the Supreme Court of British Columbia after a summary trial conducted pursuant to Rule 18A of the Rules of Court, B.C. Reg. 221/90, by which he dismissed an action brought by the executor of the estate of Sam Wightman claiming damages for failure to give reasonable notice to Mr. Wightman of the termination of his employment and for breach of an alleged oral agreement to continue to pay his salary after he was dismissed. The appellant seeks an order that the trial judgment be set aside and that judgment be entered for damages for failure to give reasonable notice. The appellant does not appeal from the dismissal of her claim on the alleged oral contract. The respondents have cross appealed from the trial judge’s conditional findings in respect of damages.

[6] Mr. Wightman died of a heart attack on 30 March 2004 at the age of sixty-one following surgical implantation of a heart pacemaker. The appellant, his widow and executor of his estate, brought the underlying action against three companies that stood in succession as his employer over a period of twenty-eight years. For convenience, I will refer to these companies collectively as “the Employer”.

[7] Mr. Wightman began working for the Employer on 1 December 1975 under an oral contract of employment of indefinite term. Although such a contract may be terminated by either party at any time without cause, reasonable notice of termination must be given and damages may be awarded for the failure to do so.

[8] The Employer provides engineering and consulting services, primarily to businesses in the forest products industry. Mr. Wightman was a senior project manager at the time of his dismissal. He was a hard-working, competent, and valued employee who loved his work.

[9] Unfortunately, Mr. Wightman experienced a number of serious health problems. First, he required a kidney transplant in 1984. Later, he developed angina, arthritis in his hips, and gout. He took short-term disability leave from work in 1996 and 1997 and then, in 1997, he was diagnosed with severe coronary artery disease. Next, his kidney function deteriorated and it was discovered in March 2000 that his body was rejecting his transplanted kidney. His several conditions worsened progressively until he was unable to continue to work and, on 18 February 2002, he went on sick leave. He never returned to work.

[10] Mr. Wightman was a beneficiary of an employees’ group benefits plan, purchased and paid for by the Employer. The plan provided insurance coverage for the employees, including life insurance, survivor benefits, and both short-term and long-term disability insurance. During his period of sick leave, Mr. Wightman received short-term followed by long-term disability benefits in the amount of two-thirds of his salary as provided in the plan.

[11] In the fall of 2003, the second- and third-named respondents negotiated a sale of the assets of the business to the fourth-named respondent. The purchaser agreed to hire only some of the employees and it was a term of the sale that the vendors would terminate the employment of the remainder, who comprised about one-third of the work-force. This group included Mr. Wightman, whose employment was terminated on 11 December 2003.

[12] Although his employment was terminated, Mr. Wightman continued to receive the long-term disability benefits until he died, since the group benefits plan provided for their payment until he ceased to be disabled as defined in the plan, until he reached age sixty-five, or until his earlier death.

[13] It is common ground that the terms of the group benefits plan are incorporated in Mr. Wightman’s employment contract. Thus, the disability benefits, although paid by the plan underwriter, discharged the Employer’s contractual obligation to Mr. Wightman.

[14] The Employer admitted that Mr. Wightman was dismissed without notice and without cause. The Employer’s defence to the wrongful dismissal action was that it had been discharged from performance of the contractual obligation to give reasonable notice because, at the time of the dismissal, the contract of employment had been frustrated by the serious, lengthy, and ongoing sickness that prevented Mr. Wightman from working.

The Trial Judgment

[15] The trial judge, whose reasons for judgment are available at 2005 BCSC 1393, found that Mr. Wightman remained totally disabled from working when he was dismissed. He described Mr. Wightman’s condition at that time and the outlook for his return to work as follows:

[103] As of December 11, 2003, the date of his dismissal, Mr. Wightman was still totally disabled from working. He was 61 years of age. During his disability leave, Mr. Wightman's conditions relating to his kidney, hips, angina and gout had worsened. He had developed two further significant problems, in that his carotid artery disease had become symptomatic, and he was being adversely affected by his parathyroid gland.

[104] As of December 11, 2003, Mr. Wightman would not be able to work until such time as he could successfully undergo coronary bypass surgery and then, kidney re-transplantation surgery. By that date, Mr. Wightman had not yet decided whether he would take the risk of heart surgery, and of course no date for potential heart surgery had been scheduled.

[16] The trial judge framed the issue in this way:

[105] The employer must prove on the balance of probabilities that Mr. Wightman's incapacity, looked at before the purported dismissal, was of such a nature, or it appeared likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment.

[17] The trial judge took this statement from the decision in Marshall v. Harland & Wolff Ltd., [1972] 2 All E.R. 715, [1972] 1 W.L.R. 899 (N.I.R.C.), which was accepted as authoritative by both sides at trial. In Marshall, an employee who became disabled due to illness after twenty-three years of service was terminated without notice after an eighteen-month absence. Sir John Donaldson (as he then was) concluded, for the court, that the termination was wrongful. In so doing, he set out the essential question and suggested the following guidelines for determining whether incapacity due to sickness brings an end to a contract of employment for an indefinite period terminable by notice, at 718-19:

In the context of incapacity due to sickness, the question of whether or not the relationship has come to an end by frustration sounds more difficult than it is. The tribunal must ask itself: was the employee's incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment? In considering the answer to this question, the tribunal should take account of:

(a) The terms of the contract, including the provisions as to sickness pay - The whole basis of weekly employment may be destroyed more quickly than that of monthly employment and that in turn more quickly than annual employment. When the contract provides for sick pay, it is plain that the contract cannot be frustrated so long as the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable. But the converse is not necessarily true, for the right to sick pay may expire before the incapacity has gone on, or appears likely to go on, for so long as to make a return to work impossible or radically different from the obligations undertaken under the contract of employment.

(b) How long the employment was likely to last in the absence of sickness - The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular job, than if it was expected to be long term or even lifelong.

(c) The nature of the employment - Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.

(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery - The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.

(e) The period of past employment - A relationship which is of long standing is not so easily destroyed as one which has but a short history. This is good sense and, we think, no less good law, even if it involves some implied and scarcely detectable change in the contract of employment year by year as the duration of the relationship lengthens. The legal basis is that over a long period of service the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period.

These factors are interrelated and cumulative, but are not necessarily exhaustive of those which have to be taken into account. . . Any other factors which bear on this issue must also be considered.

[18] The trial judge focussed on the degree and duration of Mr. Wightman’s incapacity. He said,

[106] In my opinion, in this case the most important factor of the five factors referred to in the Marshall case, is the following:

“(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery

The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.”

[19] He concluded that the employment contract was frustrated at the date of dismissal by reason of Mr. Wightman’s medical disability. Accordingly, he dismissed the wrongful dismissal action, stating,

[107] At the time of his dismissal, Mr. Wightman had been totally disabled from working for more than 21 months. His prospects for recovery from the conditions that disabled him from working were uncertain at best. I infer, on the balance of probabilities, that his disability, at the time of his dismissal, was likely to continue for such a period that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment.

. . .

[109] In my opinion, as of the summer or fall of 2003, there was no reasonable possibility that Mr. Wightman would be able to return to work by the end of 2004. In my opinion, the length of Mr. Wightman's incapacity, the increasing degree of his incapacity to work, and the likelihood that the incapacity would continue for a further lengthy period of time, support the conclusion that, before the time when he was dismissed, Mr. Wightman was permanently disabled, within the meaning attributed to that term in the relevant authorities.

[110] Accordingly, the defence of frustration has been proved, and the cause of action based on breach of the employment contract must be dismissed.

The First Ground of Appeal

[20] The appellant submits as her primary ground of appeal that the trial judge erred in treating the employment contract as frustrated by Mr. Wightman’s total disability. She contends that he should have relied on factor (a) in the Marshall decision and concluded that, since the contract provided for long-term disability benefits, it remained in effect at the time of the dismissal. Accordingly, she submits, the contract required reasonable notice of dismissal and Mr. Wightman was entitled to damages in lieu thereof. Although the trial judge referred to this submission in his reasons for judgment, he did not address it directly.

[21] It is common ground that the doctrine of frustration can apply to employment contracts in cases where an employee is unable to work because of a disabling illness: see Dartmouth Ferry Commission v. Marks (1903), 34 S.C.R. 366 at 374-75. In such cases, the question is whether the disability prevents the performance of the essential functions of the employee’s job for a period of time sufficient to say that, in a practical or business sense, the object of the employment has been frustrated: see Jackson v. Union Marine Ins. Co. (1874), L.R. 10 C.P. 125 at 145, [1874-80] All E.R. Rep. 317 (Ex. Ch.); Yeager v. R.J. Hastings Agencies Ltd. (1984), [1985] 1 W.W.R. 218 at 240, 5 C.C.E.L. 266 (B.C.S.C.).

[22] In light of the appellant’s submission that frustration cannot apply in this case, it is necessary to say something about the juridical basis of the doctrine.

[23] The theoretical underpinning of the doctrine has evolved from its earliest expression. Initially, many judges applied an implied-term theory. For example, in F.A. Tamplin Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ltd., [1916] 2 A.C. 397 at 403-04, [1916-17] All E.R. Rep. 104 (U.K.H.L.), Lord Loreburn said,

. . . a court can and ought to examine the contract and the circumstances in which it was made, not of course to vary, but only to explain it, in order to see whether or not from the nature of it the parties must have made their bargain on the footing that a particular thing or state of things would continue to exist. And if they must have done so, then a term to that effect will be implied, though it be not expressed in the contract. . . . no Court has an absolving power, but it can infer from the nature of the contract and the surrounding circumstances that a condition which is not expressed was a foundation on which the parties contracted.

[24] As Lord Radcliffe explained in Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 at 728, [1956] 2 All E.R. 145 (U.K.H.L.), Lord Loreburn’s approach “is in line with the tendency of English courts to refer all the consequences of a contract to the will of those who made it.” However, he identified this approach as a fiction, stating,

But there is something of a logical difficulty in seeing how the parties could even impliedly have provided for something which ex hypothesi they neither expected nor foresaw; and the ascription of frustration to an implied term of the contract has been criticized as obscuring the true action of the court which consists in applying an objective rule of the law of contract to the contractual obligations that the parties have imposed upon themselves.

Lord Radcliffe set out and rejected the “implied-term” theory in the following passage, at 728-29:

. . . [I]t seems that when the event occurs “the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it), but that which the parties, as fair and reasonable men, would presumably have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence” (Dahl v. Nelson (1881), 6 App. Cas. 38 per Lord Watson).

By this time it might seem that the parties themselves have become so far disembodied spirits that their actual persons should be allowed to rest in peace. In their place there rises the figure of the fair and reasonable man. And the spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself. So perhaps it would be simpler to say at the outset that frustration occurs 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.

[Emphasis added]

[25] Lord Radcliffe’s exposition of the doctrine in the passage I have emphasized was adopted as the proper approach in Peter Kiewit Sons’ Co. v. Eakins Construction Ltd., [1960] S.C.R. 361 at 368, 22 D.L.R. (2d) 465. More recently, this approach was affirmed and the implied-term theory was expressly rejected in Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943, 2001 SCC 58, where Binnie J., who gave the judgment of the court, said,

53 Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes "a thing radically different from that which was undertaken by the contract": Peter Kiewit Sons Co. v. Eakins Construction Ltd., [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 (H.L.), at p. 729.

54 Earlier cases of "frustration" proceeded on an "implied term" theory. The court was to ask itself a hypothetical question: if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end? The implied term theory is now largely rejected because of its reliance on fiction and imputation.

55 More recent case law, including Peter Kiewit, adopts a more candid approach. The court is asked to intervene . . . to relieve the parties of their bargain because a supervening event . . . has occurred without the fault of either party. For instance, in the present case, the supervening event would have had to alter the nature of the appellant's obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agreed to under the tendering contract: [Citations omitted].

[26] Since the implied-term theory has been rejected, it is no longer necessary to speculate as to what the parties, as reasonable persons, would have agreed if they had thought about the supervening event at the time they made their contract. Thus, whether the parties foresaw the event is irrelevant. Rather, the question is whether the contract is broad enough to apply to the changed circumstances or whether the change is such that performance of the contractual obligations in the new circumstances would be something radically different from what the parties had agreed upon. As Lord Reid said in Davis Contractors Ltd. v. Fareham Urban District Council, supra, at 720-21,

It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made. . . . [T]here is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they did make is, on its true construction, wide enough to apply to the new situation; if it is not, then it is at an end.

[Emphasis added]

[27] It follows that the court will not declare a contract frustrated if the parties have provided that the contract will apply in the new circumstances. For example, in Peter Kiewit Sons’ Co. v. Eakins Construction Ltd., supra, where a subcontractor on a bridge construction project argued that the requirement to do extra work frustrated the subcontract, Judson J. said, at 368,

On any view of the facts of this case, there cannot be frustration. The performance of extra work will not justify it, even if such work was done. Extra work of the kind said to have been performed in this case is a contingency covered by the express contract and does not afford a ground for its dissolution. If there was to be extra piledriving, the character and extent of the obligation to pay were fully covered in the contract.

To the same effect, see Naylor Group Inc. v. Ellis-Don Construction Ltd., supra, at ¶ 59.

[28] Accordingly, whether the parties contemplated the possibility of Mr. Wightman’s disabling sickness is not a relevant question. Rather, the critical question is whether they provided that the contract would remain on foot despite the sickness if it should occur. The proper approach therefore requires an examination of the contract in order to determine whether its terms are wide enough to accommodate Mr. Wightman’s permanent disability without termination. If not, the contract is at an end.

[29] The goal of contractual interpretation is to determine the parties’ contractual intent at the time they entered into the contract by reference to the words they used in the contract (since the parties are presumed to intend the legal consequences of the words they used), reading those words in light of the surrounding circumstances prevalent at the time: Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, 161 D.L.R. (4th) 1 at ¶¶ 54 – 57.

[30] The appellant’s submission that frustration does not apply because the contract stipulated for long-term disability benefits relies on the following term:

LONG TERM DISABILITY INSURANCE

Long Term Disability Insurance provides you with regular income to replace salary or wages lost because of a lengthy disability due to disease or injury . . .

. . .

After 24 months, LTD benefits continue to be payable only if disease or injury prevents you from being gainfully employed in any job. Gainful employment is work you are medically able to perform, for which you have at least the minimum qualifications, and which provides you with an income of at least 50% of your pre-disability monthly earnings, indexed for inflation. The employment must exist either in the province or territory where you worked when you became disabled or where you now live. Whether or not employment is actually available is not considered in assessing your disability.

You are entitled to LTD benefits as long as your disability continues but only until you reach age 65.

[31] Thus, the appellant contends, Mr. Wightman’s promise to provide his services to the Employer was qualified by their agreement that he would not be required to discharge that obligation during periods of time when he was entitled to receive disability benefits. Accordingly, his continuance on sick leave because of his total disability was not something radically different from what the parties agreed to in their contract.

[32] However, this provision cannot be interpreted in isolation from the other terms of the contract. Rather, it must be considered in the context of the contract as a whole.

[33] Although the contract provided that Mr. Wightman would be entitled to receive long-term disability benefits until he ceased to be disabled as defined in the plan, until he reached age sixty-five, or until his earlier death, it did not provide that the employment contract would continue indefinitely despite his disability. Rather, it envisaged that Mr. Wightman’s employment might come to an end in certain circumstances.

[34] First, although the group benefits plan provides rehabilitation plans and programs to facilitate the return to work of disabled employees, these provisions also contemplate that a disabled employee might not be able to return to work with the same employer. The policy defines “rehabilitation” as involving “a training strategy or work related activity that can be expected to facilitate your return to your own or another job”. It distinguishes between a “comprehensive rehabilitation program” and a “rehabilitation plan”. The goal of the first must be “to return to work in a different job that requires extensive or prolonged training or in a self-employed capacity” while the goal of the second must be “to return to work in the same job, in a modified job with the same employer, or in a different job that capitalizes on transferable skills”. As well, the plan provides that if the insurance “terminates at the end of a rehabilitation plan or program that requires you to change employers”, the employee may convert the group coverage to an individual disability income policy without proof of insurability.

[35] Further, the policy provides for a continuation of insurance benefits even after the employment ends if the employment was brought to an end by the employee’s sickness:

TERMINATION OF INSURANCE

Your insurance will terminate when:

· your employment ends, or

· the group policy terminates, or

· you stop making required contributions, or

· you are no longer in an eligible class.

…

Your LTD Insurance will also terminate when you reach age 65.

…

If your employment ends because of injury, sickness, leave of absence or temporary lay-off, you may be entitled to continued insurance under this plan. . . .

[Emphasis added.]

[36] I digress to repeat that it is agreed that Mr. Wightman was entitled to continued disability benefits under the plan.

[37] Since the contract is silent as to the conditions upon which sickness would end the employment, it must be taken that the phrase “if your employment ends because of sickness” has the meaning given to it by the common law.

[38] Temporary sickness is not a cause for summary dismissal at common law. In Dartmouth Ferry Commission v. Marks, supra, Davies J., who gave the majority judgment, said at 374,

The law permits [temporary sickness] on the ground of common humanity to be offered as an excuse for not discharging duty temporarily and suffers the disabled party to recover wages for the time he is temporarily away from his work.

[39] However, in the usual case, if the sickness is so enduring as to defeat the object of the employment contract, it will operate at common law to bring the contract to an end. Thus, Davies J. said, at 374,

[B]y rendering it impossible that he could ever afterwards discharge his duties under his contract, the permanent disablement determined and ended the contract. The consideration which moved the Commission to promise wages was gone. The mutuality necessary for longer continuance of the contract ceased.

[40] After discussing this passage, Wood J. (as he then was) said, in Yeager v. R.J. Hastings Agencies Ltd., supra, at 240,

Although the illness in that case was obviously a permanent one, in the ordinary sense of that term, in this passage Davies J. has clearly used the term "permanent" to describe an illness that would, in the language of Bramwell B. in the Jackson case (at p. 145) [Jackson v. Union Marine Ins. Co., supra], "put an end, in [the] business sense, to their business engagement" and thus "frustrate the object of that engagement". By contrast, the term "temporary" is used to characterize one which would not have such an effect on the contract of service.

[41] Thus, by using the words “if your employment ends because of sickness”, the parties must be taken to have intended to refer to a sickness that would “put an end, in the business sense, to their business engagement” and thus “frustrate the object of that engagement”. Sickness could not put an end to the employment contract at common law in any other way.

[42] Accordingly, the employment contract on its true construction provided for the situation that arose when Mr. Wightman’s disability became such that, at common law, it would have brought the employment contract to an end because of frustration. It provided that the Employer would, through the long-term disability provisions of the group benefits plan, provide for the payment of regular income to Mr. Wightman at a level proportionate to his exit salary during his period of incapacity, even if that period should extend to the end of his working life. However, this entitlement was not dependent upon the continued existence of the employment contract. Rather, the entitlement was to continue even if Mr. Wightman’s employment was brought to an end by sickness, that is, if his sickness frustrated the employment contract.

[43] This leads to the question whether the sickness in this case “put an end, in the business sense, to their business engagement”. Sickness will not frustrate an employment contract when the employee appears likely to return to work, but the longer the sickness persists, the more likely the employment relationship has been destroyed: see Marshall, supra. This important distinction between temporary and permanent disability was introduced into Canadian law in Dartmouth Ferry Commission v. Marks, supra, and adopted in Yeager v. R.J. Hastings Ltd., supra, in the passages from those decisions I have quoted above.

[44] On the facts before him in Yeager, Wood J. found at 241 that “the plaintiff’s illness left him incapable of discharging his duties at work for two years” but added that “the length of the period of disability alone is not determinative of the issue.” He discussed the facts of the case with reference to other factors set out in Marshall, and concluded at 243 that the two-year illness, “followed as it would have been by his return to work with normal job performance thereafter, was not an incapacity of such a nature that it frustrated the contract of employment between these parties...”.

[45] Two other decisions of the British Columbia Supreme Court followed a similar analysis to arrive at the opposite conclusion on their respective facts.

[46] In MacLennan v. H.B. Contracting Ltd. (1990), 32 C.C.E.L. 103, [1990] B.C.J. No. 935 (QL) (S.C.), Coultas J. rested his finding of frustration on several facts, including that the employee had been absent from work due to illness before his termination, had applied for and received long-term disability benefits, had refused other offers of employment because of his injury, and had been disabled from working for four years at the time of trial.

[47] In Demuynck v. Agentis Information Services Inc., 2003 BCSC 96, E.R.A. Edwards J. noted at ¶ 31 that “the employee was disabled for over twenty months at the time of termination with a prognosis of at least another seven months disability.” He held at ¶ 33 that while the disability could not be said to be “lifelong”, it was of “sufficient duration . . . to make the ‘further performance’ of the employee’s obligations under the contract of employment either ‘impossible’ or ‘radically different’ from those contemplated by the ‘agreed terms of employment’, according to the Marshall test.”

[48] Decisions in other provinces do not depart from this analysis. In White v. Woolworth Canada Inc. (1996), 139 Nfld. & P.E.I.R. 324, 22 C.C.E.L. (2d) 110, [1996] N.J. No. 113 (QL), Marshall J.A. for the Newfoundland Court of Appeal upheld a trial judge’s finding that the employment contract had not been frustrated. He held at ¶ 41 that “it could not be counted unreasonable for the judge to have drawn the conclusion that Woolworth had inadequate grounds to presume in February of 1991 that the ongoing absence appeared likely to continue beyond the range of temporary” and added that frustration should “not be made operative where the evidence does not permit an affirmative finding of a likelihood of the disability continuing beyond the range of temporary absence.”

[49] In Antonacci v. Great Atlantic & Pacific Co. of Canada (1998), 35 C.C.E.L. (2d) 1, [1998] O.J. No. 876 (QL) (Gen. Div.), varied on other grounds (2000), 128 O.A.C. 236, 48 C.C.E.L. (2d) 294 (C.A.), on which the appellant relied heavily for its comments on disability benefits, it was held that an employment contract had not been frustrated. The trial judge relied on the existence of a sick leave and long-term disability plan but, importantly, she noted at ¶ 39 that “the prognosis was not total disability” and the plaintiff was expected, at the time of termination, to return to work in “six to eight weeks”. Charron J.A. (as she then was), for the Court of Appeal, saw “no reason to interfere with the trial judge’s conclusion on this issue”. This finding of fact distinguishes the case from the case at bar.

[50] Here, the trial judge found that Mr. Wightman’s “disability, at the time of his dismissal, was likely to continue for such a period that performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment.” Subject to the appellant’s second ground of appeal, no basis has been suggested on which we could properly interfere with this finding of fact or with the trial judge’s conclusion that Mr. Wightman’s disability frustrated the contract.

[51] The appellant submits, on another level, that such a result is unacceptable in modern society. She refers to the following remarks of Wood J. in Yeager v. R.J. Hastings Ltd., supra, at 245:

In this case the plaintiff’s illness was caused, in part, by stress associated with his employment. When a person has devoted 30 years of faithful service to the benefit of an employer’s business, only to suffer an illness that is partially attributable to that employment, the employer in such circumstances is not entitled to discard the employee whose usefulness has been thus destroyed, unless, of course, the terms of the contract of employment provide for such determination. The fact that the parties to a contract of employment would not be likely to agree to such a provision merely serves to illustrate that such a course of conduct would not be acceptable in today’s society.

[52] Although Mr. Wightman had served the Employer faithfully and well for some twenty-eight years, the circumstances of this case distinguish it from those described in this passage. First, Mr. Wightman’s illness was not attributable in any way to his job. His illness was not the fault of the Employer – rather, it was an event that occurred without the fault of either party. Moreover, in this contract the parties expressly acknowledged that Mr. Wightman’s employment might end by reason of his long-term disability and they provided that, if that event should occur, he would continue to receive disability benefits under the plan purchased by the Employer as a term of the employment contract. It cannot be said, as it could be said in Yeager, that parties to a contract of employment would not likely agree to such a clause. Rather, the provision made in this case might well be seen by reasonable persons as an equitable adjustment of the risk and the burden of Mr. Wightman’s debilitating illness.

[53] There are other policy dimensions to this issue.

[54] In my view, the purchase by employers of group insurance benefits for their employees, including long-term disability benefits, is a practice to be encouraged. In the case of totally disabled workers, long-term disability benefits cushion the financial adversities suffered by the disabled individual and his or her dependants and, as well, benefit society by diminishing or eliminating the need for such individuals to rely on social benefits provided by the government. A finding that a contract of employment can never be terminated by reason of employee sickness as long as the contract provides for long-term disability insurance, as the appellant asserts, would tend to discourage the purchase of such insurance by employers for their employees. The law should not encourage such a result.

[55] The appellant also contends that the doctrine of frustration should not apply to contracts of employment because it is in conflict with the requirements of the Human Rights Code, R.S.B.C. 1996, c. 210. In particular, the appellant says, it conflicts with s. 13, which makes it unlawful to discriminate against employees on the basis of disability and, as well, with the duty of employers to accommodate disabled employees so long as doing so does not cause the employers undue hardship. She refers to Wu v. Ellery Manufacturing Ltd., 2000 BCHRT 53, where an employer was found to have contravened the Code because, although there was medical evidence that the employee was unable to return to his former job, the employer had made no effort to accommodate him in another job elsewhere in its operations. The employer had argued that the employment contract was frustrated by the employee’s permanent disability. In a passage emphasized by the appellant, the adjudicator observed,

[35] Legal concepts developed in the law with respect to frustration of contract have no place in the current view of obligations imposed on employers to accommodate those with disabilities in the workplace.

[56] I cannot agree with the suggestion that the enactment of the Code has abrogated the common law doctrine of frustration as it applies to employment contracts. Indeed, an employer’s duty to accommodate will most often be fulfilled through a new contract of employment. This is not inconsistent with the frustration of the old one.

[57] Moreover, even if we should take the provisions of the Code into account, to speak of a failure to accommodate Mr. Wightman is meaningless: on the findings of the trial judge, Mr. Wightman was unable to work at his own or any other job for the foreseeable future. And, in any event, although the appellant pleaded that Mr. Wightman’s dismissal was a violation of his rights under the Code, it abandoned that position at the trial. Thus, we do not have the necessary findings of fact to evaluate whether the dismissal amounted to discrimination and whether the Employer could have accommodated Mr. Wightman without undue hardship, nor do we have the benefit of the views of the trial judge on the question.

[58] I would therefore reject the first ground of appeal.

The Second Ground of Appeal

[59] As her second ground of appeal, the appellant alleges that the trial judge erred in considering evidence of post-termination deterioration in Mr. Wightman’s condition in reaching his conclusion that Mr. Wightman was totally disabled from working at or before the time of his dismissal.

[60] This ground of appeal is based on the following ruling of the trial judge:

[45] . . . The employer may introduce medical evidence in an attempt to prove that Mr. Wightman’s health continued to deteriorate after his dismissal on December 11, 2003, in support of the defence of frustration.

[61] The law is unsettled as to whether the employee’s medical prognosis in a frustration context should be assessed as of the date of the dismissal, as of the date of trial, or as of the date of dismissal but with the benefit of the hindsight available at the time of trial. Each of these three positions finds some support in the case law.

[62] White v. Woolworth Canada, supra, is an example of the first position. At ¶ 31 Marshall J.A. observed, “Having asserted that the engagement is at an end because of disability and resultant absence from work, what transpired afterwards would appear irrelevant to such a justification.”

[63] On the other hand, in Dartmouth Ferry Commission v. Marks, supra, where the question was whether the estate of an employee was entitled to recover wages from when he left work because of illness until his subsequent death, Davies J. relied on evidence of the employee’s condition discovered after he left work to conclude that the contract was frustrated on that date. He stated, at 374:

It is quite true that the deceased and his medical adviser both hoped and believed, at first, that his illness was only temporary, but their belief or hope cannot alter the truth subsequently disclosed. That truth is now admitted and is beyond controversy that on and after the 15^th of December, when Captain Marks ceased working, he was permanently disabled from doing his work he had contracted to do. In law, this disablement is termed the act of God. It not only, in my opinion, justified the Commission in formally determining the contract, if they had chosen to take that course, but by rendering it impossible that he could ever afterwards discharge his duties under his contract, the permanent disablement determined and ended the contract.

[64] Taking what might be perceived as either a middle ground or as a position indistinguishable from Dartmouth Ferry Commission are several cases from the British Columbia Supreme Court: Yeager, MacLennan, and Demuynck, all supra. These cases rely on a prognosis as it would have been assessed at the date of dismissal had relevant post-termination evidence been available to take into account at that time.

[65] Since the parties accept the first position as correct, it is not necessary to settle the question in this appeal.

[66] It appears that the trial judge intended to admit the evidence in question on the third basis I have described. However, he did not use the evidence in that way. After stating his conclusions that Mr. Wightman had been totally disabled from working for twenty-one months and that his prospects for recovery were uncertain at best, the trial judge said,

[108] In making this finding of fact, I find it unnecessary to rely on any facts relating to the continuing deterioration of Mr. Wightman’s health, after the date of his dismissal.

[67] Thus, the trial judge assessed Mr. Wightman’s medical prognosis as of the date of the dismissal without relying on this evidence. Accordingly, I would reject the appellant’s second ground of appeal.

Conclusion

[68] For the reasons I have stated, I would dismiss the appeal.

The Cross Appeal

[69] After concluding that the action should be dismissed, the trial judge said,

[132] In case I have erred on the issue of liability, I will briefly state my conclusions on the issues relating to damages. . .

[70] He went on to make several findings as to the award of damages he would have made had he decided the case in favour of the appellant. These conditional findings, quite properly, were not recorded as orders in the formal entered judgment. The respondents filed a notice of cross appeal from these findings and made submissions in their factum as to what, in their view, the findings should have been. As an appeal lies only from an order, the cross appeal is improper and I would quash it. Further, since I would dismiss the appeal, it is not necessary to consider the parties’ submissions relating to the assessment of damages.

Summary

[71] I would dismiss the appeal and I would quash the cross appeal. Costs should follow the events.

“The Honourable Mr. Justice Smith”

I agree:

“The Honourable Madam Justice Rowles”

I agree:

“The Honourable Madam Justice Levine”

Citation:	*Wightman Estate v. 2774046 Canada Inc.,*
	2006 BCCA 424