Workers can't intervene in former employer's appeal of corporate breach-of-contract decision

Employees of a food and beverage service provider who filed a motion to intervene in a breach-of-contract dispute between their employer and a hotel had an interest in the appeal’s subject matter, but other factors weighed against adding them as interveners, the Ontario Court of Appeal has ruled.

The appellant in 2505243 Ontario Limited (ByPeterandPaul.com) v. Princes Gates Hotel Limited Partnership, 2022 ONCA 700 operated a luxury hotel in Toronto, which closed to the public when Ontario declared a COVID-19 state of emergency on March 23, 2020. The respondent, which provided food and beverage services at various locations in the hotel, sued the appellant for breach of contract.

The trial judge awarded the respondent over $7 million in damages, less $735,879 that was owing to the appellant. She set aside an additional $2.063 million for potential claims by the respondent’s former employees, to be held in trust since the respondent was insolvent. Those funds were not to form part of the respondent’s estate or be available to other creditors, the judge said.

The appellant brought an appeal challenging the trial judge’s jurisdiction to make the award in the ex-employees’ favour. The appellant contended that the damages were contingent and uncertain and that the Ministry of Labour had already determined that the appellant was not liable for the employees’ claims for termination pay or vacation pay.

Ninety-four of the respondent’s food and hospitality workers who lost their jobs in the fallout of the dispute filed a motion to intervene as an added party on the appeal under r. 13.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The proposed intervenors made the following arguments:

• they had a direct financial interest in the appeal’s subject matter
• they could make a useful contribution to the appeal’s issues although their interests aligned with the respondent’s position on appeal
• their submissions would complement but would not duplicate the respondent’s arguments because the respondent did not address the appellant’s position that it was not liable for damages because it did not employ the workers and the extent to which the contractual terms made damages for employee termination “reasonably foreseeable.”

The appellant opposed the intervention. It asserted that the proposed interveners stood in the same position as any of the respondent’s other creditors, would not make a useful contribution to the mostly straightforward issues of contractual interpretation, and were trying to introduce a new issue on appeal – namely, whether the appellant and the respondent were common employers of the workers.

Ex-workers not allowed to intervene

The Ontario Court of Appeal dismissed the motion upon finding that this was not a rare case for granting intervener status in an appeal involving a private dispute. The respondent’s submissions more than adequately addressed the proposed interveners’ interests, the court ruled.

The appellate court accepted that the workers had, in line with r. 13.01, an interest in the proceeding’s subject matter, specifically the $2.063 million fund created for their benefit. However, other factors did not support permitting them to intervene, the court found.

The first factor was the nature of the dispute, which was a contractual dispute between two corporate entities, said the appeal court.

The second factor pertained to the nature of the contribution that the proposed interveners could make. The workers made submissions substantially echoing the respondent’s position on appeal, the appellate court said. While the proposed interveners were potentially introducing a new issue regarding whether the respondent and the appellant were common employers, this issue was not tackled by the trial judge, was not litigated at trial, and was being litigated in a separate class proceeding that was in its early stages, the court concluded.