Introduction

An anticipatory breach of contract occurs where one party to a contract expresses, or it becomes clear by the circumstances, that they are not going to perform on the due date. The innocent party may accept the repudiation when it occurs and seek damages, or instead, wait until the performance was contractually due and then bring their action.

Facts

The plaintiff became an employee of the defendant Darwin Productions Inc. (“Darwin”) in June of 2007. The second defendant was the principal of Darwin. The plaintiff’s position is that he was to be paid $15,000.00 a month. He accepted that $10,000.00 a month would be deferred for twenty-four months and applied towards the acquisition of a twelve percent share ownership in the company. After the twenty-four month deferral, he would resume the salary of $15,000.00 a month. The salary deferral was necessary due to Darwin’s budget constraints.

The plaintiff retained lawyers in 2009 to assist him in enforcing his contractual rights. This step resulted in a series of negotiations between the plaintiff and Darwin’s principal. They could not, however, agree on either the amount earned to date or the amount of any shareholding interest. This resulted in a letter from the plaintiff’s lawyers seeking to confirm that $127,377.30 had been earned together with the 12% interest in Darwin.

Darwin’s lawyers responded by asserting the agreement only called for a salary of $5,000.00 a month and that whatever else was owed it would be paid when Darwin could afford to pay it. The share entitlement was disputed as well.

The Litigation

The plaintiff commenced an action in January 2012. This was more than two years after the exchanged positional correspondence. The defendants pleaded that the action was barred by the Limitations Act. The plaintiff then commenced a second lawsuit against his original law firm for negligence. The law firm’s insurer intervened in the action.

Darwin successfully moved to have the claim dismissed as statute-barred. The motions judge did not accept the plaintiff’s discoverability argument that he only discovered the defendants’position following a letter from their lawyer in January 2010.

The plaintiff’s position was that his unpaid salary was a demand obligation. Darwin’s position was that these were theoretical debts and would only become real debts when, and if, Darwin was able to pay them.

The lawyer’s insurer appealed the motion result to the Ontario Court of Appeal (ONCA). The issue that had to be decided to determine whether the plaintiff’s claim was statute-barred was when the plaintiff’s cause of action against Darwin arose and when he discovered it. As this was a breach of contract claim, the question is, did the respondents breach their contract with the plaintiff and, if so, when?

The Appeal

The appellant/plaintiff now argued that the Darwin positional letters sent in late 2009 were in effect an expression of their intention to breach the agreement. Therefore the plaintiff could have accepted the breach (repudiation) and sued, or, as he chose here, to wait to sue until the performance under the contract was actually due. The ONCA agreed with the appellants. When an anticipatory breach occurs, the cause of action does not accrue until the other contracting party accepts the breach.

As to the finding below that, there was no triable issue the ONCA stated:

The primary issue between the parties was the terms of the agreement. The motion judge did not make a finding on that critical issue, or whether and if so, when the respondents breached that agreement. There is a basic disagreement on what was agreed and no written contract. In our view, there was a genuine issue requiring a trial. The limitation issue will turn on that finding.

At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of oppression. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online for a consultation.