Alberta Decision Expands Wallace Damages

Mariana Oliveira and Erin A. Viala of Miller Thomson comment at Lexology (subscription required) on an employment law case worthy of reprise and note - an October 2009 Alberta trial court's ruling in Soost v. Merrill Lynch Canada Inc., 2009 ABQB 591:

...The Court went on to find that Wallace damages could be awarded for categories of loss not previously recognized by the courts. Prior to the decision in this case, the courts discussed Wallace damages only in the context of mental distress suffered by employees due to the bad faith manner in which they were dismissed from their employment. In this case, the Court held that the Defendant’s actions in purporting to dismiss the Plaintiff for cause were both unfair and insensitive, and went on to say:

I appreciate that in Honda Canada the facts dealt with mental suffering. But I see no principled reason why the legal principles set out in that case cannot and should not be applied to the circumstances pertaining to this case. Therefore, I will do so. If I did not, the Plaintiff would be woefully under-compensated for his true loss…

I am satisfied that the manner in which the Plaintiff was terminated had a significant detrimental effect on his reputation in the industry and his ability to keep his old clients and attract new clients. I am satisfied that the Defendant knew at the time it hired the Plaintiff that if it purported to terminate for cause and without notice, the Plaintiff would suffer significant damages to his reputation and book of business or good will such as would not be compensated for simply by an award of damages in lieu of notice.

In Keays v. Honda, [2008] 2 S.C.R. 362, the Court recognized that Wallace damages may be awarded for mental distress, if one can prove this through medical evidence. Soost expands the law on Wallace damages, and states that Wallace damages can also be awarded for other objectively provable losses, foreseeable by both parties at the time of entering into the employment contract, such as the loss of a book of business, if such losses arise from the unfair and insensitive conduct of the employer at the time of termination.

Soost is referenced in Elgert v. Home Hardware Stores Limited, 2010 ABQB 65 (CanLII), a January 28, 2010 Alberta ruling that includes a comprehensive survey of Canadian Courts' approach to aggravated damages, Wallace damages and punitive damages - before and after Honda and Keays.

- Garry J. Wise, Toronto

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