Law Times

Page 6 February 4, 2013 Law Times • COMMENT u Editorial obitEr By Glenn Kauth Nortel's shrinking pie A s the legal battle over Nortel Networks Corp.'s assets continues, an employee group is seeking an investigation into the professional fees paid out during the proceedings. It seems like a reasonable request given the concerns over the money paid to professionals such as lawyers during the Companies' Creditors Arrangement Act proceedings in relation to Nortel. According to last week's Law Times online poll, 95 per cent of respondents found the legal fees paid out so far — a recent estimate put the costs for professionals worldwide at $755 million — to be excessive. Of course, it's unclear what the Office of the Superintendent of Bankruptcy — the agency the workers are complaining to — can do about the fees. A spokeswoman told Law Times in late January the office only looks into complaints that directly involve the conduct of court monitors. In this case, the court monitor is Ernst & Young. The office might consider taking the firm to task for failing to limit the fees paid out, but it's uncertain whether it can or will do so. In the meantime, the fees will continue to mount after mediation efforts pitting former Nortel employees against bondholders failed last month. That means going to court for a decision on divvying up what remains of Nortel, but with assets spread around the world, asserting jurisdiction in the case could also be subject to challenges. The employee groups blame the bondholders for holding out for the full value of their bonds. The bondholders, meanwhile, have deflected blame for the failed mediation talks, the Globe and Mail reported. Whoever is to blame, what is clear is that the Nortel pie will shrink as the litigation drags on. As such, no party is likely to come out on top. Unfortunately, the Nortel story is a complicated one. While Nortel pensioners have a right to decry cutbacks to their entitlements, we can't ignore the fact that the Ontario government has already stepped in with some relief through its pension benefits guarantee fund. The former employees on long-term disability appear to be in a particularly disadvantaged situation with only 35 per cent of their benefits remaining. And if the bondholders truly are holding out for the full value — plus interest — of the bonds they bought at a discount, the employee groups would seem to have a very valid complaint. Blaming lawyers and other professionals for the mess may be a bit much given the difficult issues involved. There are, however, legitimate concerns about the lack of control over legal fees and the purported propensity of lawyers to let them mount. As a result, the Nortel mess should provide an opportunity for governments and regulators to consider whether there should be new rules in place — such as expanded protections for employees or increased monitoring of the fees — for dealing with these situations. The Nortel case isn't a scenario anyone should want to repeat. — Glenn Kauth Decision shows courts' leeriness of rule-of-thumb approach T he concept of reasonable notice is like a living tree capable of growth and expansion within its natural limits. The expansion begins with necessity and is customarily informed by a series of prudential and pragmatic considerations designed to test those natural limits. It's common knowledge that there's no single measure of a scientifically correct determination of reasonable notice, but on occasion the courts are asked to apply a formulaic approach in calculating its quantum. An employment matter on point is Abrahim v. Sliwin, a recent case in which the court refused to apply the purported rule-of-thumb formula of one month for every year worked for calculating the reasonable notice period. This decision is peculiar in the sense that the court's rejection of the rule of thumb appears to be purely academic, thereby rendering it inexorable. Abrahim concerned a group of 33 non-managerial employees, each of whom was dismissed by virtue of being laid off and not recalled. The employees brought a motion for default judgment through which their counsel sought to Law Times worked. Consequently, Gray recover damages based on the Court of one month's pay for each year Labour followedAbrahim. On Appeal's lead in the one of service subject to a cap of Pains hand, Gray disagreed with the 24 months. Under the pen approach of calculating damof Superior Court Justice ages according to a formula; Douglas Gray, the court rebut on the other hand, he uljected the proposed formula timately applied it as he found as untenable at law. In supthat damages in the amount of port of its decision, the court one month's pay for each year adopted the Ontario Court of service were reasonable in of Appeal's view as expressed the circumstances. in Minott v. O'Shanter DevelNikolay As a result, the decisions in opment Co. Ltd. In that case, Chsherbinin Minott and Abrahim demonthe court found the rule-ofstrate that the courts' refusal thumb approach suffers from two deficiencies: it risks overemphasiz- to adopt the rule-of-thumb formula is ing the length-of-service factor and it really distinction without a difference risks undermining the flexibility that's because the substance of that approach the virtue of the test for assessing rea- appears to prevail. Nevertheless, at sonable notice propounded in Bardal least in theory, the courts' rejection of v. Globe & Mail Ltd., and recently reaf- the rule-of-thumb approach is good firmed by the Supreme Court of Cana- news for employers. In practical terms, though, the consistency with which da in Honda Canada Inc. v. Keays. Gray found it to be interesting that the courts arguably apply the formula notwithstanding the rejection of the rule is equally good news for employees. In discussing the employees' proof thumb, the Court of Appeal nevertheless upheld the award of wrongful-dis- posal of a cap of 24 months' notice, missal damages based on what essential- Gray offered an alarming observation: "I ly amounted to one month for every year might have decided to award more than Thomson Reuters Canada Ltd. One Corporate Plaza, 2075 Kennedy Rd., Toronto, ON • M1T 3V4 Tel: 416-298-5141 • Fax: 416-649-7870 • www.lawtimesnews.com Group Publisher . . . . . . . . . . . . . . . . . . . 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The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reliance upon information in this publication. Publications Mail Agreement Number 40762529 • ISSN 0847-5083 Law Times is published 40 times a year by Thomson Reuters Canada Ltd., 2075 Kennedy Rd., Toronto, ON, M1T 3V4 • 416-298-5141 clb.lteditor@thomsonreuters.com circulations & subscriptions $179.00 + HST per year in Canada for print and online (HST Reg. #R121351134), $145 + HST per year for online only. Single copies are $4.50. Circulation inquiries, postal returns www.lawtimesnews.com 24 months' pay had such a request been made." This observation, coupled with a recent award of 26 months' notice in Hussain v. Suzuki Canada Ltd., is a cause for concern for employers and their advisers. It allows employees, especially in cases of older and long-serving ones, to plead any notice period with a view to potentially stretching the natural limits of the reasonable-notice doctrine. Gray's observation, then, may serve to support a disturbing proposition as some may take it as questioning whether there should be any limit on the reasonable notice recoverable by dismissed employees. Abrahim serves as a good reminder that in order to substantially reduce their liability for damages, prudent employers should consider drafting and properly implementing employment contracts. Carefully crafted severance clauses may shield employers from increased damages for wrongful dismissal. LT uNikolay Chsherbinin is an employment lawyer at Chsherbinin Litigation and author of The Law of Inducement in Canadian Employment Law. He can be reached at 416-907-2587, nc@nclaw.ca or nclaw.ca. and address changes should include a copy of the mailing label(s) and should be sent to Law Times One Corporate Plaza, 2075 Kennedy Rd. Toronto ON, M1T 3V4. Return postage guaranteed. Contact Ellen Alstein at ............ 416-649-9926 or fax: 416-649-7870 ellen.alstein@thomsonreuters.com advertising Advertising inquiries and materials should be directed to Sales, Law Times, 2075 Kennedy Rd., Toronto, ON, M1T 3V4 or call: Karen Lorimer ....................................416-649-9411 karen.lorimer@thomsonreuters.com Kimberlee Pascoe ..............................416-649-8875 kimberlee.pascoe@thomsonreuters.com Sandy Shutt...... sandra.shutt@thomsonreuters.com

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