General counsel's medical leave, resignation did not breach contract, fiduciary duty: Ontario court

No evidence supporting claim that lawyers co-ordinated withdrawal from employment

General counsel's medical leave, resignation did not breach contract, fiduciary duty: Ontario court

A lawyer’s duty of care does not entail refraining from saying anything negative about the client to the lawyer’s colleagues in private exchanges where confidentiality obligations are not breached, the Ontario Superior Court of Justice has ruled.

The plaintiff in OZ Optics Ltd. v. Evans, 2022 ONSC 5890 is a federal corporation with an international fibre optics business. OZ Merchandising Inc., the plaintiff’s sister company, commenced an action against certain soccer-related entities in 2004.

The plaintiff employed the first defendant, Diane Lesley Evans, as general counsel in July 2018. After she suffered a stroke in September, she stopped working and went on medical leave. She was terminated in March 2021. The plaintiff hired the second defendant, Samuel Edgar Schwisberg, as general counsel on a part-time basis from June to July 2018, then on a full-time basis. He resigned in September 2018.

In April 2021, the plaintiff brought an action claiming $100,000 in damages for breach of contract from each defendant, $100,000 in damages for breach of fiduciary duty from each, and $10 million in damages for conspiracy with intent to injure or alternatively for negligent performance of a service from the defendants jointly and severally.

In the alternative, the plaintiff sought $250,000 in damages for negligence from the defendants jointly and severally. In response, the defendants filed motions for summary judgment.

Defendants committed no breaches

The court  granted the defendants’ summary judgment motions and dismissed the plaintiff’s action. The court found the case appropriate for summary judgment since there was enough evidence to fairly and justly adjudicate the matter and  meaningful dispute or credibility issues on material facts.

The court saw no evidence indicating that the defendants committed any breach of contract, fiduciary duty, or duty of care. First, relating to the post-resignation clause in the employment agreement, Evans did not breach her obligations since she never resigned. She violated no contractual obligations by withdrawing from the soccer litigation since she was incompetent to continue acting for OZ Merchandising and was required to withdraw following her stroke and resulting disability, the court said.

The court noted that the plaintiff undertook in the employment agreement to comply with the Law Society of Ontario’s requirements relating to legal counsel, legal services, and the legal profession, including Rule 3.7-7 of the Rules of Professional Conduct that state a lawyer should withdraw when incompetent to continue handling a matter.

As for Schwisberg, the court ruled that he also did not breach the post-resignation clause because the plaintiff’s president and chief executive officer expressly withdrew the offer for him to continue working for the plaintiff until the hiring and training of his replacement and because OZ Merchandising served a notice of change of lawyers confirming that it found a suitable replacement for the purpose of the clause.

Second, the court held that bringing the removal motion did not amount to a breach of obligations since Evans was required to withdraw, Schwisberg’s resignation was accepted, and there was a clear and material breakdown in the lawyer-client relationship.

Third, the court determined that the internal emails that the defendants and the legal department’s other members exchanged did not breach fiduciary duty or the duty of loyalty. The emails showed that the defendants tried to act in OZ Merchandising’s best interests, shared their concerns with the plaintiff’s president regarding the soccer action, and complied with their duty of candour, the court said.

The court noted that the defendants owed duties to OZ Merchandising and the plaintiff but not personally to the plaintiff’s president. The defendants, who were obliged to ensure that their clients’ interests were served and protected, had the professional view that the directions and instructions given by the plaintiff’s president were not in OZ Merchandising’s best interests, the court added.

Next, regarding the alleged conspiracy to injure, the court saw no evidence backing the plaintiff’s claim that the defendants co-ordinated their withdrawal from employment so that they could leave at the same time. The court found this position “preposterous” considering Evans’ stroke, which was unpredictable. As for Schwisberg, he outlined his reasons for resigning in an email and in his affidavit.

The evidence supported the conclusion that the defendants were trying to act in OZ Merchandising’s best interests or to promote their legitimate self-interest, including for health reasons, coping with difficult work situations, and complying with professional obligations, the court said. Lastly, the court decided that the plaintiff failed to show that it suffered damages due to the defendants’ conduct.

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