The Wallace Bump and Moral Damages
In October of 1997, the Supreme Court of Canada decided, in a case known as Wallace vs. United Grain Growers, that the employer owed a “duty of fair dealing and good faith” to employees at the time of termination. This was actually fairly well established before this decision, but it was made clear cut at this time.
The Court also stated for the first time, that if there was a breach of that duty, the court should increase the usual notice period. In Wallace, the company made nasty cause allegations against the plaintiff, which it dropped on the eve of trial – this was the basis of the breach of the duty of good faith.
The Court in Wallace contemplated that such bad faith conduct could impact on a person emotionally and also negatively impact on his ability to find new employment. For many years after this decision, trial and appeal judges followed this decision and routinely allowed increased notice periods where the employer had acted unfairly to the employee.
Honda v. Keays, a further Supreme Court decision released in the summer of 2008 changed Wallace. Keays sued Honda alleging he was fired due to a medical issue. After termination, he was not medically able to work. The trial decision followed Wallace, found a breach of the duty of good faith and awarded an increased notice period.
The Supreme Court, however, determined that in this case, had such a breach been actionable (there were other issues involving whether an employee could sue civilly in Ontario for a human rights violation) that a court should not increase the notice period to compensate for emotional harm, but rather should award damages for emotional distress, where proven.
A good example of a recent decision made in October of 2010 awarding such damages described as “moral damages” is the decision of Mr. Justice Stinson in Zesta vs. Cloutier et al, referring to the counterclaim of Joe Durante, in which an incremental award of $75,000 was made for moral damages due to the employer’s repeated unfair and abusive treatment of Mr. Durante. A similar award of $75,000 for aggravated ( different vocabulary for the same thing) damages in Pate vs. Galway-Cavendish, the details of which are discussed below in the punitive damages topic.
After the Keays v Honda decision, many observers believed that Wallace was hence outdated law, with respect to the remedy available for a breach of the duty of good faith.
It must be noted, however, that Keays did not assert a breach which impacted his ability to seek other employment. Keays was medically disabled and not looking for new employment. His original trial award for increased notice was strictly for emotional distress.
For this reason, it should be still possible to claim the Wallace “bump” for unfair conduct which adversely affects the employee’s ability to obtain new employment. This could include conduct such as unjustifiable cause allegations as were made in Wallace, the employer’s failure to provide a reference letter where there were no performance issues leading to termination and similarly connected conduct which can be shown to impact on further unemployment.
Human Rights Violations
The Keays v Honda decision determined that under Ontario law, all human rights complaints had to be filed under the Human Rights Code to the Human Rights Commission and could not be the subject of a civil claim. This decision was of academic significance only in Ontario as Ontario amended its legislation in the summer of 2008 to allow civil claims for a breach of a human rights violation when included with another civil claim. Hence in Ontario civil claims, a plaintiff suing for wrongful dismissal can also add a claim, where appropriate, for damages and other relief for a human rights violation at the time of termination.
For other provinces, the relevant legislation will need to be examined to determine if the human rights commission of the province has exclusive jurisdiction.
Under the new human rights legislation in Ontario, a civil court may make an order under section 46.1:
1. for damages for injury to dignity, feelings and self-respect; and/or
2. make an order for restitution other than through monetary compensation for losses arising out of the infringement.
Trial courts have yet to interpret these words in real cases to date. Traditionally such awards for injury to feelings have been modest, when given in a similar context. It is also arguable that restitution may mean reinstatement. Traditional common law judges rarely award reinstatement. It will remain for new judicial decisions to define these rights.
The differing method of proof required to show a human rights violation as referenced in Shaw v Phibbs as noted in Section 12 of the Reinstatement Remedy section should be carefully noted.
Damages attributable to human rights violations are considered non-taxable. See IT Bulletin 337R4, section 12. Often plaintiff’s lawyers make these such claims, with the expectation of a favourable disposition on settlement to attempt to minimize the tax consequences, where the allegations are made in good faith and support the settlement position.
Punitive Damages
Punitive damages are intended to punish a wrongdoer for deliberate malicious conduct. Such a damage award has been rarely ordered in employment cases, particularly with the development of moral damages as referenced in Keays and Honda above.
When punitive damages had been awarded, they had tended to be comparatively modest, in the range of $10,000 to $25,000.
The recent trial decision of Mr. Justice Gunsolus in Pate v Corporation of the Township of Galway-Cavendish and Harvey has awarded the late Mr. Pate punitive damages of $550,000. The case is factually distinctive and has had an unusual judicial history.
The First Trial – November 2009
At the outset of the first trial, the parties had agreed to settle the wrongful dismissal claim at 12 months. Also the plaintiff had abandoned his claim for damages for loss of reputation, all of which was without prejudice to the remaining claims.
Mr. Pate was initially hired by the township as its Chief Building Officer. He was employed from 1989 through the time of the merger of the two defendant municipalities on December 31, 1998, after which time he held the position of building inspector. Less than three months after the merger, on March 26, 1999, he was dismissed. He then earned an annual salary of $34,100 plus other benefits and was 43 years of age. As of the date of the first trial, he was 54.
On the date of termination, Mr. Pate was advised that certain discrepancies had been noted with respect to permit fees, which were alleged to have been received by him and not given to the township. He was instructed by his superior, Mr. John Beaven, a former police officer, that failing his resignation, the police would be called in. Mr. Pate refused to do so and offered to call the police himself. No details of the allegations were given to Mr. Pate. On the same day. Mr. Pate noted that his ledger of permit applications was not given to him with his personal possessions. The employer stated it was township property and refused to provide it to him. This ledger card had been maintained by Mr. Pate. He had requested that the municipal clerk initial reconciled entries each month. At the trial it was discovered that the plaintiff’s journal had recorded receiving fees for one of the properties under a different name as he had received the fees from the owner’s son-in-law.
Criminal charges were laid against Mr. Pate. He was acquitted of all charges on December 17, 2002. The trial lasted four days over a one year time period. The Crown withdrew one charge when the above referenced ledger card was provided to it. The local newspaper published stories on the trial on at least three occasions, including headlines. Mr. Pate testified that his marriage ended shortly after the commencement of the criminal charges. He described this as one of numerous stressors which contributed to the separation. Mr. Pate and his former spouse had operated a local restaurant, known as the Loon’s Nest. It closed in 2000. Mr. Pate, whose evidence was accepted by the trial judge, testified that the allegations against him, locals stopped their patronage. He felt that these issues contributed to, but were not the sole cause of, its demise.
Mr. John Beaven, a retired experienced police officer, and the superior of the plaintiff on termination, conducted an investigation into the issues dealing with the permit fees and provided his report to the police. He was the sole witness for the employer at this civil trial.
Mr. Beaven initially claimed to have given all relevant evidence to the police. However, he admitted that he retained the plaintiff’s journal, including his notes relating to building permit applications and application fees. He could not state what had happened to the journal or produce it. He also admitted that he did not tell the police that the employer had lost a large number of files, including building permit files. During the criminal trial, it was proven that some of the property owners had paid their fees at a satellite office operated by the township prior to amalgamation and that many of the files had been lost during a move in 1998. Although municipal officials knew about the missing files, no one told the police of this.
The trial judge found that Mr. Beaven had admitted exculpatory evidence had been held back from the police. In particular, one of the allegations had been examined in a 1995 building committee investigation, which had concluded that there was no wrongdoing. This information had not been given to the police.
The investigating police officer at the civil trial testified that had he known of the all the information which emerged at the criminal trial, he would not have laid charges.
The trial judge awarded a Wallace bump of four months. (This was not the subject of appeal. The Court of Appeal later noted that it was not endorsing this aspect of the first trial decision.)
The tort of malicious prosecution was unsuccessful at trial. The trial judge found that the employer had not intended to subvert or abuse the criminal justice process and that the decision to prosecute was that of the police and that it had been also reviewed by a Crown Attorney in advance. This was the case, notwithstanding the trial judge’s evident severe criticism of the conduct of the municipality in withholding important evidence.
Aggravated damages were awarded in the sum of $75,000, in addition to the legals costs of Mr. Pate’s defence of the criminal trial of $7,500.
Punitive damages were also awarded in the sum of $25,000. In so doing, the trial judge stated that he “would order more, but I am bound by the principles of proportionality”. {ed – presumably the trial judge was referring to the SCC decision in Whiten v Pilot, which in paragraph 74 speaks of this issue in determining the quantum of punitive damages, which may have significance in view of the decision of the Court of Appeal below}
The Appeal
The appellant, Mr. Pate, raised two issues:
1. The dismissal of the malicious prosecution claim; and
2. The quantum of punitive damages.
The Court found in the appellant’s favour on both issues and ordered a new trial on both matters.
The Court of Appeal delivered its decision on April 28, 2001.
On the issue of malicious prosecution, the court determined that in claims against a private wrongdoer, the standard of proving this claim is not as high as that required for a case against a Crown Attorney. Further, the court examined the trial judge’s findings on the issues of aggravated and punitive damages concluding that the employer had acted in a reprehensible manner and was a departure from ordinary standards of decent behaviour, to show support for an apparent malicious conduct. In addition, the court concluded that the employer need not have actually laid the information to commence the criminal prosecution.
As to the punitive damage award, the court of appeal found that the trial judge’s statement that a higher award would offend principles of proportionality to be without explanation, and hence set aside the decision and ordered a new trial.
The case returned to Mr. Justice Gunsolus on November 7, 2011. The parties agreed to rely upon the prior evidence at the first trial. No new evidence was called. The trial judge noted that no apology had been delivered, nor had the municipality offered in any way a sign that it had accepted responsibility for its actions. Given the findings of misconduct, the fact that such misconduct was found to be lasting over a period of 10 years, the impact of the criminal proceedings and the effect on the plaintiff’s life, his employability, his marriage and the fact that these actions were intentional and foreseeable, an award of $550,000 was made for punitive damages.
The case is an unusual one on its facts, but nonetheless is reflective of the willingness of the court to make a realistic assessment of the need for a substantial award where the circumstances permit it. This is to be contrasted with a prior decision of the Court of Appeal, admittedly quite well aged, in which the plaintiff was awarded what was then considered the highest punitive award in an employment case of $50,000 for punitive damages in a very similar fact situation. ( Ribeiro vs CIBC 1992 44 CCEL 165)
Punitive damage awards do not attract tax ( par 7) which, needless to say, adds to the impact of the award. It also may allow legal counsel, where the facts permit it, some flexibility in negotiating a fair resolution. See also IT Bulletin 337R4, section 12. The damage award must be something that is distinct from the loss of employment itself.
