A judge has reserved decision in an application by the province to have a $2 million payout to the fired head of Horizon Health Network quashed.

Lawyers for the province argued Wednesday in the Court of King's Bench of Saint John that either the labour arbitrator's decision in the case of Dr. John Dornan should be thrown out or the grievance should be sent to another arbitrator.

Dornan served as president and CEO of Horizon for only four months of his five-year contract when Premier Blaine Higgs announced his firing during a news conference July 15, 2022, in a major shakeup of New Brunswick's health-care leadership.

Higgs, who also replaced the health minister and removed the boards of both Horizon and Vitalité, cited a growing health-care crisis that included the "traumatizing" death of a patient on July 12 in the waiting room of the Dr. Everett Chalmers Regional Hospital's emergency department.

Dornan filed for unjust dismissal under the Public Service Labour Relations Act.

Record-breaking award

In February, adjudicator George Filliter awarded Dornan special damages of about $1.8 million, representing the value of lost salary, pension contributions and health benefits, plus $200,000 in aggravated damages for "breach of the employer's implied obligation to act in good faith when dismissing him."

It was the largest employment compensation award in the province's history, according to Dornan's lawyers.

Filliter ruled Dornan was entitled to the amount he would have earned over the remainder of his five-year contract. He also ruled that the 12-month cap on severance added to his written contract after an employment agreement was already reached was unenforceable "due to a lack of consideration," meaning no additional benefit in exchange for signing the modified agreement, and that Dornan did not have a duty to mitigate his losses by attempting to find a new job, as "duty to mitigate" does not apply to fixed-term contracts.

'Unreasonable decision'

But Jamie Eddy, representing the Department of Health and Horizon, argued Filliter "erred in fact and law and made an unreasonable decision."

His "fatal error," Eddy told Justice Kathryn Gregory, was he ignored long-standing, binding precedent from the New Brunswick Court of Appeal on the issues of consideration and mitigation, relying instead on Ontario Court of Appeal decisions.

"You as a trial judge can't deviate from binding Court of Appeal precedent unless there is a very, very significant reason to do so," Eddy said.

"Certainly an adjudicator under the Public Service Labour Relations Act can't deviate from a binding precedent from this province, even if he likes the rationale from the Ontario Court of Appeal better."

Jamie Eddy, a lawyer for the province, presented his arguments to Court of King's Bench Justice Kathryn Gregory in Saint John Wednesday morning. (Roger Cosman/CBC)

Filliter also failed to consider that Dornan agreed to, and later acquiesced to, the mutual termination clause of his contract, Eddy said.

Dornan "had a number of options that were available to him." He could have refused to sign the contract, or signed under protest, or quit and then sued for constructive dismissal and got his full five-year term, he said, as Dornan looked on from the front row of the courtroom.

Contrary to procedural fairness

The province's other lawyer, Jessica Bungay, further argued Filliter should not have awarded aggravated damages because Dornan's lawyers didn't raise the issue until closing arguments, after both parties had already finished presenting evidence.

This was "contrary to the rules natural justice and procedural fairness," said Bungay. "It amounted to trial by ambush."

Jessica Bungay, a lawyer for the province, argued Dornan's appointment as interim CEO and permanent CEO were both publicly announced, as was his firing. He held the most senior role within Horizon Health and the public have a right to know when there's been a change in that, she said. (Roger Cosman/CBC)

Bungay also argued that aggravated damages are "an exceptional remedy," not meant "for the normal distress and hurt feelings that arise from a termination."

They are compensation for the injury suffered by the employee as a result of the employer's breach duty of good faith and fair dealing in the manner of dismissal, and must reflect the actual damages, she said, describing the amount awarded to Dornan as "exorbitant."

In addition, Bungay argued Filliter did not have jurisdiction to even hear Dornan's grievance. Although both parties had agreed to have Filliter serve as adjudicator, the Public Service Labour Relations Act stipulates an adjudicator must be appointed by the New Brunswick Labour and Employment Board in the case of non-unionized employees, she said.

This, Bungay suggested, was "fatal."

"Jurisdiction is fundamental to administrative law," she said.

'Ruinous' to reputation

Dornan's lawyer, Toronto-based Howard Levitt, countered that Dornan was in a "vulnerable" position when he signed the written contract. He had already arranged to have his previous positions as an endocrinologist and chief of staff filled on a permanent basis, and he required the security of a five-year term to take him through to retirement, said Levitt.

"He spoke to his wife and  … they decided he had nowhere else to go back to if he didn't take the job."

Although the province argued Dornan was actually fired during a private phone call with the health minister, not during the premier's press conference, Levitt maintained he was terminated in a "public, disingenuous and callous way."

The unmistakable inference, he said, was that Dornan was responsible for the ER patient's death.

"They simply threw him under the bus," said Levitt.

"I simply don't understand how [the province] could argue these findings of fact don't amount to award aggravated damages.

"What could be more ruinous for a doctor's reputation than killing a patient? What could be more ruinous to a hospital administrator's reputation than being so negligent that a patient died in the emergency room?"

Kelly VanBuskirk, a lawyer for Dornan, said the parties were in agreement with appointment of George Filliter as adjudicator. Filliter accepted the appointment and copied the CEO of the Labour and Employment Board on correspondence to 'keep her posted.' (Pierre Fournier/CBC)

Dornan's other lawyer, Saint John-based Kelly VanBuskirk, addressed the jurisdiction issue, arguing that if Filliter didn't have it, he "acquired it" through the province acknowledging his jurisdiction in correspondence and arguments.

He also submitted the province wouldn't be questioning Filliter's jurisdiction if Dornan's case had been dismissed.

'Interesting and complicated issues'

The judge thanked the lawyers for their "excellent arguments" and reserved decision to an undetermined date. She said there are "a lot of very interesting and complicated issues" to consider.

Each lawyer had numerous binders stacked beside them, containing hundreds of pages of documents related to the case and relevant case law.

Kathryn Gregory, pictured here when she was a senior New Brunswick Crown prosecutor prior to being appointed a judge in 2020, heard about five hours of arguments in Dornan's case Wednesday. (Supreme Court of Canada)

In the meantime, both parties will submit briefs on a request by Dornan's lawyers to have several paragraphs from an affidavit filed by a lawyer from the province struck. They contend only evidence that was before the adjudicator is admissible in court, and that "the attempt to introduce evidence in a judicial review application is improper."

The province's lawyers said they had no notice of the motion and weren't in a position to fully respond.

Gregory gave Dornan's lawyers until Nov. 22 to file their written submissions and the province's lawyers must file their response by Dec. 6.