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Punitive Damages

In Fernandes v. Penncorp Life Insurance Company (Ont CA, 2014) the Court of Appeal commented as follows on several issues relating to the awarding of punitive, aggravated and mental distress damages - and their appellate review - in the context of an appeal of a plaintiff's successful lawsuit for private disability insurance coverage. On the issue of punitive damages, and bad faith dealings by an insurer, the court stated:
[74] The law relating to punitive damages was canvassed in detail by the Supreme Court in Whiten and addressed again more recently in Fidler. The key applicable principles may be summarized as follows.
• Punitive damages are designed to address the objectives of retribution, deterrence and denunciation, not to compensate the plaintiff: Whiten, at paras. 43 and 94, and Fidler, at para 61.

• They are awarded only where compensatory damages are insufficient to accomplish these objectives: Whiten, at para. 94.

• They are the exception rather than the rule: Whiten, at para. 94.

• The impugned conduct must depart markedly from ordinary standards of decency; it is conduct that is malicious, oppressive or high-handed and that offends the court’s sense of decency: Whiten, at paras. 36 and 94; and Fidler, at para. 62.[4]

• In addition to the breach of contract, there must be an independent actionable wrong: Whiten, at para. 78, and Fidler, at para. 63.

• In a case of breach of an insurance contract for failure to pay insurance benefits, a breach by the insurer of its contractual duty to act in good faith will constitute an independent actionable wrong: Whiten, at para. 79, and Fidler, at para. 63.
In Boucher v Wal-Mart Canada Corp. (Ont CA, 2014), a wrongful dismissal case the Court of Appeal engaged in an extended and informative discussion of the principles applicable to awards of aggravated and punitive damages, and how they interact [see paras 65-94], particularly the point that in a contract case an independently actionable tort is required before punitive damages can be awarded:
(a) Independent Actionable Wrong

[79] To obtain an award of punitive damages, a plaintiff must meet two basic requirements. First, the plaintiff must show that the defendant’s conduct is reprehensible: in the words of Binnie J. in Whiten, “malicious, oppressive and high-handed” and “a marked departure from ordinary standards of decent behaviour”: see Whiten, at para. 36. Second, the plaintiff must show that a punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and to meet the objectives of retribution, deterrence and denunciation.

[80] When the claim against the defendant is for breach of contract, as is Boucher’s claim against Wal-Mart, the plaintiff must meet a third requirement. The plaintiff must show that the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract. In Canada, this requirement originated in the Supreme Court of Canada’s judgment in Vorvis, itself a case about a breach of an employment contract, and was later affirmed in Whiten, at paras. 78-83.

....

(c) Rationally Required

[87] The jury found Wal-Mart liable for aggravated damages of $200,000. In addition, Wal-Mart is vicariously liable for the $100,000 tort award against Pinnock. And Wal-Mart is liable for damages for constructive dismissal and for $140,000 in trial costs. In the light of these compensatory awards, Wal-Mart submits that an additional punitive damages award of $1,000,000 is not rationally required to punish it or to give effect to denunciation and deterrence. I accept Wal-Mart’s submission.

[88] The very high aggravated damages award by itself sends a significant denunciatory and punitive message and likely will have a deterrent effect. Additionally, although the jury was justified in finding Wal-Mart’s misconduct sufficiently reprehensible to warrant an award of punitive damages, its misconduct falls far short of the gravity and duration of the misconduct in other cases that have attracted high punitive damages awards. These cases were extensively reviewed by my colleagues Lauwers J.A. in dissent and Cronk J.A. for the majority in Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669 (CanLII), 312 O.A.C. 244. Two of these cases will illustrate the differences: Whiten and Pate Estate itself.

[89] In Whiten, the Supreme Court of Canada upheld the jury’s award of $1,000,000 in punitive damages. In that case, however, Pilot, the insurer, refused to pay a fire loss claim. Instead:
Pilot acted maliciously and vindictively by maintaining a serious accusation of arson for two years in the face of the opinions of an adjuster and several experts it had retained that the fire was accidental. It abused the obvious power imbalance in its relationship with its insured by refusing to pay a claim that it knew or surely should have known was valid, and even by cutting off rental payments on the Whiten’s rented cottage. It took advantage of its dominant financial position to try to force the Whitens to compromise or even abandon their claim. Indeed, throughout the nearly two years that the claim was outstanding, Pilot entirely disregarded the Whitens’ rights.
See Whiten, at para. 137. In addition to the punitive damages, the plaintiffs in Whiten received substantial costs and their out-of-pocket losses from the fire, but no aggravated damages or compensatory tort damages.

[90] In Pate Estate, the municipality wrongfully dismissed Mr. Pate, its senior building inspector. It alleged that he had engaged in wrongdoing, and instigated an Ontario Provincial Police investigation, which led to criminal charges and a four-day trial at which Pate was acquitted. As Lauwers J.A. noted at para. 9 of his reasons:
The local media reported extensively on the criminal proceedings and Mr. Pate remained in the public spotlight from March 26, 1999, when he was wrongfully dismissed, until his acquittal on December 17, 2002. Mr. Pate did not obtain employment in the municipal field again and passed away in January 2011.
[91] Pate sued the municipality for damages and at a second trial, the trial judge awarded $550,000 in punitive damages in addition to the award of aggravated damages of $75,000 made at the first trial. The majority of this court reduced the punitive damages award to $450,000. In dissent, Lauwers J.A. would have upheld the award of $550,000.

[92] Here, by contrast, Wal-Mart is already liable for significant compensatory damages. Its misconduct lasted less than six months. It did not profit from its wrong. And while it obviously maintained a power imbalance over Boucher, it did not set out to force her resignation. In the light of these considerations, a punitive damages award of $100,000 on top of the compensatory damages it must pay is all that is rationally needed to punish Wal-Mart and denounce and deter its conduct. Accordingly, I would allow Wal-Mart’s appeal on punitive damages and reduce the award from $1,000,000 to $100,000.
In Grand Financial Management Inc. v. Solemio Transportation Inc. (Ont CA, 2016) the Court of Appeal had this to say with respect to punitive damages:
Punitive Damages

[101] Even though he found that Solemio had made out the tort of intentional interference with economic relations, the trial judge declined to grant Solemio’s request for punitive damages in the amount of $250,000. I see no error in this determination.

[102] The trial judge properly summarized the law relating to punitive damages at para. 88 of his reasons:
Punitive damages are only awarded in extraordinary situations. In general, punitive damages are considered in situations where the defendant’s misconduct is so malicious, oppressive, and high-handed that it would offend the court’s sense of decency. Punitive damages do not bear any relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate a party, but rather to punish someone. It is the means by which a court expresses its outrage at what it considers egregious conduct of a party. As noted by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 S.C.R. 595, punitive damages are very much the exception rather than the rule. [Citations omitted.]
[103] His application of the law on punitive damages to the circumstances of this case was a matter of fact and mixed fact and law, and is therefore entitled to deference.

[104] The trial judge concluded on the evidence that, even though Grand Financial had acted in an unlawful manner, its conduct did not rise to a level warranting an award of punitive damages. In doing so, he took into account, at para. 89, the fact “that Solemio [had run] up a very substantial debt in connection with the Wild Lions’ invoices”, while at the same time it was receiving prompt payment from Arnold Bros. for the Solemio counterpart of those invoices. He noted in addition that one component of the award of damages at large was a reflection of the court’s disapproval of Grand Financial’s abuse of the legal process. The punitive damages concept of expressing society’s disapproval of the defendant’s behaviour had accordingly already been taken into account.

[105] He was entitled to make this call on the evidence, in my view.
In Filice v. Complex Services Inc. (Ont CA, 2018) the Court of Appeal set aside the trial judge's judgment for punitive damages with the following reasons:
Punitive damages

[56] I now turn to the trial judge’s award of punitive damages. An appellate court has a much broader scope for review on an appeal from an award of punitive damages. As Cory J. said in Hill v. Church of Scientology of Toronto, 1995 CanLII 59 (SCC), [1995] 2 S.C.R. 1130 at para. 197:
Unlike compensatory damages, punitive damages are not at large. Consequently, courts have a much greater scope and discretion on appeal. The appellate review should be based upon the court's estimation as to whether the punitive damages serve a rational purpose. In other words, was the misconduct of the defendant so outrageous that punitive damages were rationally required to act as deterrence?
[57] Punitive damages are only to be awarded where compensatory damages are inadequate to accomplish the objectives of retribution, deterrence, and condemnation: Pate Estate v. Galway-Cavendish (Township), 2013 ONCA 669 (CanLII), 117 O.R. (3d) 481, at para. 211; and Rutman v. Rabinowitz, 2018 ONCA 80 (CanLII), at paras. 94-97 per curiam. Further, an award of punitive damages is exceptional. As Binnie J. said in Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 S.C.R. 595, at para. 36:
Punitive damages are awarded against a defendant in exceptional cases for “malicious, oppressive and high-handed” misconduct that ”offends the court's sense of decency”.

[Citation omitted.]
[58] In this case, the trial judge simply stated (at para. 276):
In my opinion, the compensatory award in addition to any costs award does not rationally meet the objectives of retribution, deterrence and denunciation.
[59] The trial judge did not engage in any analysis of why the compensatory award that he decided on was inadequate to achieve those objectives. In failing to do so, he committed an error in principle. The fact remains that, insofar as the appellant was not justified in suspending the respondent without pay, it will pay for that error through the award of compensatory damages. On this point, it must not be forgotten that compensatory damages have a punitive element to them. As Binnie J. also said in Whiten, at para. 123:
Compensatory damages also punish. In many cases they will be all the “punishment” required. To the extent a defendant has suffered other retribution, denunciation or deterrence, either civil or criminal, for the misconduct in question, the need for additional punishment in the case before the court is lessened and may be eliminated.

[Original emphasis.].
[60] This same point was made in Pate Estate where Cronk J.A. said, at para. 214:
It is therefore incumbent on trial judges, when considering whether to award punitive damages and quantifying those damages where such an award is justified, to have regard to the punitive components of the compensation otherwise awarded to the plaintiff and the penalties otherwise imposed on the defendant. This did not occur in this case.
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