Court of Appeal Upholds Punitive and Moral Damage Awards

Written on behalf of Peter McSherry

We reviewed in a recent post a case in which the trial judge awarded $200,000 in punitive damages and $100,000 in aggravated or moral damages for emotional distress.

In a decision released this month[1], the Court of Appeal upheld a similar trial award of $100,000 and $25,000 in moral damages. The trial award of legal costs was also approved on appeal. The legal costs were noted as being high, yet not high enough to warrant interference on appeal. Those costs totaled a staggering $550,000.

The Facts

The case showed unusual facts. When the plaintiff was terminated, he was accused of fraud, without any specifics given to him. Upon the plaintiff advising that he would retain legal counsel, he was told that the company would counterclaim against him and that the lawsuit would be costly to him.

When the employee sued, the company filed a counterclaim seeking $1.7 million in damages.

The trial judge found that there was no cause for termination and also, significantly, that the counterclaim was used as a strategy to intimidate the plaintiff. The Court of Appeal agreed. It was also noted that in the course of the trial that the employer reduced its own damage claim from $1.7 million to $1.

This is text book examples of how not to conduct a termination and the resulting trial.

To support an award of moral damages, the court is required to find that the conduct on termination was contrary to the implied duty of good faith and fair dealing. The manner of termination, including unjustified fraud allegations and the threat and commencement of the counterclaim rose to this standard of unfairness.

The same arguments also supported the award of punitive damages of $100,000. The test for such an award is the need to punish and deter “inappropriate and unfair conduct”. Usually the catch phrase is “malicious and deliberate” conduct. This may be a new lower threshold for such an award, although there was no debate in the decision as to the specific test.

Also, the Court saw no validity in the argument of “double recovery”, that is, that the same facts gave rise to both aggravated and punitive damages. This is also a remarkable aspect of the decision as usually this submission shows signs of success.

Employees’ View

When the facts warrant it, where the conduct is blatantly unfair, the courts have become increasingly welcoming of awards of such “extra” damage awards. These sums are tax free, which adds considerably to the success of recovery.

Get Advice and Know Your Rights

This case is a further guiding light on such awards, particularly when coming from the Court of Appeal. Get advice. Know your rights. Contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation

[1] Ruston v Keddco Court of Appeal; trial decision