Executive Summary: Key Legal and Evidentiary Issues

• Dr. Marshall Ross alleged he was wrongfully dismissed from his role as Chief Scientific Officer of Newly Institute Inc. in July 2022.
   
• The Newly Institute maintained he had instead been temporarily suspended and later resigned or abandoned his position, or alternatively was dismissed for cause based on insolence.
   
• Central to the dispute was a July 14, 2022 meeting at the Glencoe Club where Dr. Ross relayed conditions from two departing employees regarding their possible return.
   
• Conflicting employment agreements raised the question of which contract governed the applicable Termination Payment.
   
• Justice Banks applied established objective and subjective tests for dismissal, resignation, and abandonment to determine how the employment relationship ended.
   
• Fresh consideration emerged as a decisive issue in assessing whether a later agreement could validly reduce Dr. Ross's severance entitlement.
   

Facts of the case

Dr. Marshall Ross served as Chief Scientific Officer of Newly Institute Inc. (formerly Aspen Island Therapeutics Inc.), reporting to CEO Arthur Kwan. The parties had entered into several agreements between 2021 and 2022, including an Advisory Committee Participation Agreement (January 5, 2021), an Executive Employment Agreement dated March 1, 2021 (the Initial Contract), a revised Executive Employment Agreement dated December 1, 2021 (the December 2021 Contract), an Executive Employment Agreement dated March 1, 2022 (the March 2022 Document), and an Amending Agreement dated May 1, 2022. In early July 2022, Kwan made significant organizational changes, terminating clinic manager Natasha Bainsley and prompting the resignation of senior clinician Jeff Krahn. On July 12, 2022, Dr. Ross was placed on temporary suspension with pay, and his system access was briefly cut before being restored. Kwan asked Dr. Ross to approach Bainsley and Krahn about returning, and Dr. Ross did so. At the Glencoe Club meeting on July 14, 2022, Dr. Ross told Kwan that staff had lost confidence in him and outlined conditions for Bainsley's and Krahn's return, including that Kwan step down as CEO in favour of a role such as president, that founders' shares be transferred to the three individuals, and that a reinstated Chief Medical Officer be removed. That evening, Kwan emailed Dr. Ross — to his personal Gmail account, as his Newly Institute account access had again been cut — stating that he and others "cannot live with the demands" and wishing Dr. Ross, Bainsley, and Krahn well in their future endeavours. Dr. Ross replied asking that his account be reinstated so he could attend two meetings the next day; access was not restored. Kwan indicated they would speak the following Monday, but no follow-up occurred, and Dr. Ross was not invited to a townhall held on July 15. On July 18, 2022, Dr. Ross's counsel demanded payment of the Termination Payment under the Employment Agreement. On July 20, 2022, Kwan responded that Dr. Ross had not been terminated and asked him to either report to work or submit a written resignation by 4:00 p.m., warning that failing to do either would be treated as abandonment. Dr. Ross did not return to work. On August 10, 2022, Kwan again told Dr. Ross he had not been terminated. Dr. Ross filed his statement of claim on August 11, 2022, and on August 17, 2022, the Newly Institute sent a letter asserting that his employment had ended through abandonment. Dr. Ross claimed entitlement to a Termination Payment of $300,000.

Policy and legislative provisions at issue

The December 2021 Contract provided for a Termination Payment equal to 18 months of base salary, calculated as 1.5 times Dr. Ross's annual base salary of $200,000, yielding $300,000. The March 2022 Document, presented unilaterally by the Newly Institute, was otherwise nearly identical but reduced the Termination Payment to a graduated formula of one month's salary at termination plus one month per full year of service, capped at 18 months. Both agreements recited a $500 signing bonus as consideration for entering into them, but the evidence showed only a single $500 payment had ever been made, in November 2021. The Amending Agreement of May 1, 2022 addressed how the Termination Payment would be calculated between May 1 and July 31, 2022. The governing legal principle, drawn from cases including Stonham v Recycling Worx Inc, Globex Foreign Exchange Corp v Kelcher, and related authorities, is that fresh consideration is required for an employer to make a significant unilateral change to an employment contract, such as reducing severance entitlements; continued employment alone does not suffice. The Newly Institute urged the court to instead follow Rosas v Toca, a British Columbia Court of Appeal decision suggesting consideration may not be required for all contractual amendments.

Reasoning and analysis

Justice Banks applied three distinct legal tests. Dismissal is assessed objectively — whether a reasonable person, viewing all the circumstances, would understand the employee to have been dismissed, per Bohnet v Rebel Energy Services Ltd and related authorities. Resignation requires both a subjective intention to resign and an objective indication understood as such, following Stonham and Caroll v Purcee Industrial Controls Ltd. Abandonment likewise requires an objective assessment of whether the employee's words or conduct show an unequivocal abandonment of the contract. On resignation, the court found neither element established: Dr. Ross had been carrying out the task Kwan assigned him, and his July 14 Gmail message requesting reinstated account access to attend upcoming meetings objectively showed an intention to keep working, not to resign. On dismissal, the totality of the Newly Institute's conduct — blocking his computer access, wishing him well in his "future endeavours," failing to follow up as promised, and excluding him from the July 15 townhall — objectively indicated termination, even though the Newly Institute never issued formal notice or a Record of Employment. On abandonment, the court found no conduct by Dr. Ross supporting that conclusion, and viewed the Newly Institute's later ultimatums — issued only after receiving the demand letter for the Termination Payment — as having "an air of artificiality." On the alternative claim of just cause based on insolence, the court applied the framework in McDonald v Sproule Management GP Ltd and found Dr. Ross's conduct at the July 14 meeting was polite and respectful, not insulting, abusive, or threatening, and that his proposals — including a temporary CEO role pending an executive search — did not amount to a takeover attempt. On the applicable contract, the court found the March 2022 Document was materially identical to the December 2021 Contract apart from a drastic reduction in the Termination Payment, and that the recycled $500 signing bonus could not constitute fresh consideration for both agreements. The court declined to adopt the Rosas v Toca approach in the employment context, noting later British Columbia authorities, including Quach v Mitrux Services Ltd and Sui v HungryPanda Tech Ltd, continuing to require fresh consideration in similar circumstances.

Ruling and overall outcome

Justice Banks concluded that Dr. Ross did not resign, was not insolent, and did not abandon his employment, but was instead dismissed without cause by the Newly Institute in July 2022. The court further found that the March 2022 Document was unenforceable for lack of fresh consideration, and that the December 2021 Contract governed the parties' relationship at the time of dismissal. Dr. Ross, as the successful party, was found entitled to the contractual Termination Payment of $300,000, less applicable statutory deductions, plus applicable interest. The parties were left free to contact the court regarding costs if they could not reach agreement within 30 days.