Thursday, October 18, 2012

Ontario Employment Law: Punitive Damages In Wrongful Dismissal Suits

In Pate Estate v. Galway-Cavendish and Harvey (Townships)decided in November 2011 after 10 years of protracted litigation, a wrongfully dismissed building inspector's estate was awarded a whopping $550,000.00 in punitive damages against the municipality that had employed him.

Pate had served as the Chief Building Official for the Township of Galway and Canvendish for about 9 years and then as a building inspector for the amalgamated Township of Galway-Cavendish and Harvey for about three months, when on March 26, 1999, he was dismissed from his employment without notice.

Prior to the termination, the municipal employer had falsely accused (the since diseased) Pate of theft and financial improprieties in his role as building inspector. Specifically, he was accused of receiving certain building permit fees and not turning them over to the municipality.

Pate was given no details as to the allegations and no opportunity to respond. His employer told him to resign or the matter would be turned over to the police for further investigation.

Pate refused to resign and was subsequently charged with theft. After a four-day criminal trial, Pate was acquitted  of all charges. At the trial, it was revealed that an internal investigation that had been conducted by the municipality, prior to Pate's termination, had found Pate innocent of any wrongdoing in the matter.

For example, it emerged that Pate had recorded receiving fees for one of the properties' under a name different from that of the property owner because he had received payment from the owner's son-in-law. Mr. Pate had a note of this in a journal he maintained, but the Municipality seized this journal when Pate was terminated. So this, and other "exonerating" information never reached the police.

As a direct consequence of the employer's improper conduct, Pate suffered public humiliation and was never able to repair his tarnished reputation in the eyes of the public. Worse yet, the strain from the incident contributed to his marriage breaking apart, his family business failing, and caused him severe mental distress.

In 2003, Pate sued his former employer for wrongful dismissal and was awarded 16 months pay and $25,000.00 in punitive damages. See the trial judge's decision here.

In November 2010, the Court of Appeal for Ontario, per Simmons J.A., set aside the punitive damage award, finding it to be too low of an award in the all the circumstances of the case. It ordered a new trial, stating as follows:
Taking account of the trial judge’s findings of significant misconduct on the part of the respondent that lasted over a lengthy period and that had a devastating impact on the appellant’s life, as well as the amounts awarded under the other heads of damages, it is not immediately apparent why whatever higher amount of punitive damages the trial judge was considering would not have been appropriate. The trial judge gave no explanation for his conclusion that a higher award of punitive damages would offend the “principles of proportionality”. In these unusual circumstances, the trial judge’s reasons are not susceptible to appellate review and a new trial on this issue should therefore be ordered.
The Court for Ontario also ordered a new trial with respect to the quantum of damages awarded by Gunsolus J. to the Plaintiff for the tort of malicious prosecution. The  Court also found that the amount that had been awarded by the trial judge needed to be revisited.

The Court's decision to order a new trial for damages for malicious prosecution was appealed by the employer to the Supreme Court of Canada, which dismissed its application for leave to appeal in April 2012.

At the re-trial in November 2011, the award of punitive damages was increased to $550,000.00 by the same trial judge who had heard the case at the first instance.

In his decision to substantially increase the punitive damage award in the case, and in effect overrule himself, Gunsolus J. remarked as follows:
This is not a situation where one is punishing taxpayers for the actions of a rogue employee over a relatively short time frame.  The evidence disclosed that the conduct of municipal employees and officials was, or in the very least, should have been within the knowledge of the Chief Administrative Officer, council or a council committee, and occurred over a period in excess of ten years.To date, no evidence has been put before me whereby it would appear that the municipality has apologised or in any way accepted responsibility for the conduct of its municipal officer, nor has it in any way accepted responsibility for the result of these actions.  Indeed, viewed through the eyes of the average citizen, no doubt they would view the conduct of the municipality as offensive and morally repugnant.
It is noteworthy, but not at all surprising, that Gunsolus J.'s decision to increase punitive damages  has been appealed to the Court of Appeal for Ontario.

The appeal is anticipated to be heard some time next year.

Until then, at least, this substantial punitive damages award will stand as a stark warning to employers.  

- Robert Tanha, Toronto
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