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Damages - Aggravated. Konstan v. Berkovits
In Konstan v. Berkovits (Ont CA, 2024) the Ontario Court of Appeal comments on aggravated and punitive damages in the defamation context:[115] Aggravated and punitive damages may be awarded for defamation if the defendant’s conduct has been high-handed and oppressive: Hill, at paras. 190, 196. Aggravated damages are compensatory: Plester v. Wawanesa Mutual Insurance Co. (2006), 2006 CanLII 17918 (ON CA), 269 D.L.R. (4th) 624, 213 O.A.C. 241 (C.A.), at para. 62, leave to appeal refused, [2006] S.C.C.A. No. 315; McIntyre v. Grigg (2006), 2006 CanLII 37326 (ON CA), 83 O.R. (3d) 161, at para. 50. By contrast, punitive damages are designed to signal the court’s disassociation with the defendant’s conduct: Whiten v. Pilot Insurance, 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 94. For a court to award aggravated damages, a plaintiff must prove that the defendant had “actual malice” in making the defamatory remarks: Hill, at para. 190.
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[118] Citing Rogacki v. Belz, (2004) 2004 CanLII 21439 (ON CA), 243 D.L.R. (4th) 585, at para. 44, Jack argues that malice means “acting out of spite or ill will”. He therefore argues that the trial judge’s finding that Harold acted out of ill will necessarily means that actual malice was proved.
[119] Rogacki does not stand for the proposition that every act of ill will attracts an exceptional award of aggravated or punitive damages. The trial judge’s reasons show that he understood the principles underlying the award of aggravated or punitive damages. He found that actual malice had not been proved because Harold did not know and could not have known that Oziel fabricated the text messages. Although Harold took pleasure in bringing the fake messages to the attention of the local media, the trial judge effectively found that his act did not rise to the level of high handed and outrageous conduct necessary to attract aggravated damages. This finding was also sufficient to dispose of the claim for punitive damages. . Krmpotic v. Thunder Bay Electronics Limited
In Krmpotic v. Thunder Bay Electronics Limited (Ont CA, 2024) the Ontario Court of Appeal considered aggravated damages, mental distress damages and the duty of honest performance in the employment law context:AGGRAVATED DAMAGES
[29] The appellants submit that the trial judge erred in awarding the respondent aggravated damages. They say that, following Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, the trial judge could award aggravated damages only if there was evidence of both mental distress – that is, distress beyond the normal distress and hurt feelings resulting from dismissal – and that the mental distress was caused by the manner of dismissal. Accordingly, they contend, not only did the trial judge err in considering mental distress and the manner of dismissal separately, but also that, once he rejected the respondent’s claim for damages for mental distress, the trial judge was precluded in law from making an award for aggravated damages.
[30] I do not accept the appellants’ submission. In my view, it reflects an unduly narrow view of the employer’s duty of good faith during the termination process and the meaning of mental distress in that context. Further, I see no error in the trial judge’s determination that Mr. Caron’s conduct in the termination meeting breached that duty and caused Mr. Krmpotic harm deserving of compensation.
[31] The principles governing the employer’s obligations on termination are clearly articulated in a series of Supreme Court of Canada decisions that include Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, at para. 98; Keays, at para. 58; and Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, [2020] 3 S.C.R. 64, at paras. 40, 44. Those principles can be summarised as follows.
[32] The duty of honest performance applies to all contracts, including employment contracts. It encompasses the employer’s duty to exercise good faith during the course of dismissal from employment. Breach of the duty of good faith occurs through conduct that is unfair or made in bad faith, as for example, by being “untruthful, misleading or unduly insensitive”. Callous or insensitive conduct in the manner of dismissal is a breach of the duty to exercise good faith.
[33] While the normal distress and hurt feelings resulting from dismissal are not compensable, aggravated damages are available where the employer engages in conduct that is unfair or amounts to bad faith during the dismissal process by being untruthful, misleading, or unduly insensitive, and the employee suffers damages as a consequence. As the trial judge noted, in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, at para. 66, this court confirmed that aggravated damages compensate an employee for the additional harm suffered because of the employer’s conduct.
[34] Mental distress is a broad concept. It includes a diagnosable psychological condition arising from the manner of dismissal but is not limited to that. There is a spectrum along which a person can suffer mental distress as a result of the manner of dismissal. At one end is the person who suffers the normal distress and hurt feelings resulting from dismissal, which are not compensable in damages. At the other end of the spectrum is the person who suffers from a diagnosable psychological condition as a result of the manner of dismissal. In between those two end points, there is a spectrum along which the manner of dismissal has caused mental distress that does not reach the level of a diagnosable psychological injury.
[35] In my view, on a full reading of his reasons, the trial judge approached the issue of mental distress in that fashion. The fact that Mr. Krmpotic had not established, through medical evidence, that he had suffered a diagnosable psychological injury, was not the end of a consideration of the issue of mental distress damages. As the trial judge correctly understood, he had to go further and determine whether (1) the appellants’ conduct, during the course of termination amounted to a breach of their duty of honest performance; and (2), if so, whether Mr. Krmpotic suffered harm – beyond the normal distress and hurt feelings arising from dismissal - as a result of that breach. The trial judge found in Mr. Krmpotic’s favour on both matters: the appellants had engaged in conduct that amounted to bad faith during the dismissal process; and, Mr. Krmpotic suffered harm beyond the normal distress and hurt feelings that result from dismissal. These findings were fully open to the trial judge.
[36] The trial judge found that Mr. Caron breached the duty of good faith in the manner of dismissal in a number of ways. Mr. Caron claimed that Mr. Krmpotic had been dismissed for financial reasons and that the appellants’ financial statements would support that claim. However, he refused to produce the financial statements. Further, while the trial judge found that Mr. Caron was not directly untruthful with Mr. Krmpotic during the termination meeting, he had “no hesitation” in finding that Mr. Caron was neither candid nor forthright. He found that Mr. Krmpotic’s employment was terminated because his physical limitations restricted him from continuing to perform the wide array of job duties and responsibilities that he had performed for the appellants over the previous 29 years. He described Mr. Caron’s conduct during the termination process as the antithesis of what is required by the duty of good faith in dismissal. Mr. Krmpotic was terminated within two hours of returning to work after his back surgery. During the termination meeting, instead of being candid, reasonable, honest, and forthright, Mr. Caron engaged in conduct that was untruthful, misleading, and unduly insensitive.
[37] Reading the trial judge’s reasons as a whole, it is clear that he accepted that as a result of the manner of dismissal, Mr. Krmpotic was plagued by anxiety, depression, fear, poor sleep, frustration, and feelings of helplessness. That is, he found that Mr. Krmpotic suffered harm beyond the normal distress and hurt feelings resulting from dismissal.
[38] Accordingly, I see no basis for appellate interference with the trial judge’s determination of this issue. . Ahluwalia v. Ahluwalia
In Ahluwalia v. Ahluwalia (Ont CA, 2023) the Court of Appeal considered the interaction between tort and statutory family law. In these quotes the court comments on a requirement of both aggravated and punitive damages law:[132] I agree with the trial judge that the appellant’s conduct called for condemnation. But the trial judge failed to take a required step in the analysis of whether an award of punitive damages was warranted. She did not address, and made no finding that the award of general and aggravated damages was insufficient to achieve the goals of denunciation and deterrence. This was an error. In Whiten v. Pilot Insurance, 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 94, the court set out the following principles for an award of punitive damages:(1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient. [Emphasis added.] [133] A proper consideration of the Whiten requirements in the context of this case does not justify an award of punitive damages because the compensatory and aggravated damages (in the amount sought by the respondent) are sufficient to accomplish the objectives of condemnation. It was unreasonable and disproportionate to add punitive damages in the amount of an additional 50% of the total claimed, without any explanation. I would allow the appeal with respect to the punitive damage award, thereby reducing the total damages to $100,000. This is not to say that where a tort is made out in circumstances such as these punitive damages are never justified. They may very well be, where the trial judge is satisfied that the deterrent and denunciatory effect of the other heads of damages is insufficient to accomplish the objective of condemnation. . Nissen v. Durham Regional Police Services Board
In Nissen v. Durham Regional Police Services Board (Ont CA, 2017) the Court of Appeal commented briefly on the nature of aggravated damage awards, and in particular that 'post-incident' behaviour counts toward aggravation:[55] I am not persuaded by the Police argument that this passage reveals an error of law. Aggravated damages aim not at punishing wrongful behaviour, but at compensating the injured plaintiff for the full extent of the plaintiff’s loss. Very often, aggravation of the plaintiff’s loss will be caused by outrageous or reprehensible conduct, as it is that quality of the defendant’s conduct that causes additional distress or humiliation that calls for compensation not captured by a purely conventional award. I am not persuaded, however, that a trial judge can only take aggravating features into account where there has been outrageous or reprehensible conduct. I agree with the observation made by this court in Weingerl v. Seo (2005), 2005 CanLII 21356 (ON CA), 256 D.L.R. (4th) 1, at para. 70 that “post-incident conduct which aggravates the harm to the victim” may also be taken into account. . Tim Ludwig Professional Corporation v. BDO Canada LLP
In Tim Ludwig Professional Corporation v. BDO Canada LLP (Ont CA, 2017) the Court of Appeal had this to say about aggravated damages for intangible harm:(b) Aggravated Damages
[58] The motion judge awarded aggravated damages for “intangible harms” that Ludwig suffered, particularly embarrassment and reputational harm. BDO submits that such damages cannot be awarded for a breach of contract arising out of a partnership.
[59] I begin with a review of the jurisprudence regarding aggravated damages for intangible harm. Then I review the facts before the motion judge and apply the principles arising out of the jurisprudence to those facts.
[60] Contract damages for intangible harm may be awarded under the principle established in Hadley v. Baxendale (1854), 156 E.R. 145 (Eng. Exch.), where the intangible harm was in the reasonable contemplation of the parties when they entered into the agreement. In Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30 (CanLII), [2006] 2 S.C.R. 3 at paras. 44-45, the Supreme Court stated that all types of damages for breach of contract are awarded on the basis of the “reasonable foreseeability” principle: damages are meant to compensate the victim of the breach by reference to what was in the reasonable contemplation of the parties at the time the contract was made.
[61] In Fidler, at para. 52, the court distinguished contract damages for intangible harm from damages for intangible harm arising out of circumstances that aggravate the breach of contract, referring to the latter as “true aggravated damages”:[These damages] are not awarded under the general principle of Hadley v. Baxendale, but rest on a separate cause of action — usually in tort — like defamation, oppression or fraud. The idea that damages for mental distress for breach of contract may be awarded where an object of a contract was to secure a particular psychological benefit has no effect on the availability of such damages. If a plaintiff can establish mental distress as a result of the breach of an independent cause of action, then he or she may be able to recover accordingly. The award of damages in such a case arises from the separate cause of action. It does not arise out of the contractual breach itself, and it has nothing to do with contractual damages under the rule in Hadley v. Baxendale. [62] In the employment context, damages for intangible harm arising out of the manner of termination may be awarded pursuant to the Hadley v. Baxendale principle. In Keays v. Honda Canada Inc., 2008 SCC 39 (CanLII), [2008] 2 S.C.R. 362, the Supreme Court confirmed the rule established in Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, that employers owe an obligation of good faith and fair dealing in the manner of dismissing an employee, such that an employment contract creates an expectation that the employer will be “candid, reasonable, honest and forthright with its employees”: Keays, at para. 58. Breach of this obligation therefore gives rise to damages for intangible harm, which is reasonably foreseeable and in the contemplation of the parties as a consequence of the breach. In Keays the Supreme Court stated, at para. 58:Fidler provides that “as long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable”. In Wallace, the Court held employers “to an obligation of good faith and fair dealing in the manner of dismissal” and created the expectation that, in the course of dismissal, employers would be “candid, reasonable, honest and forthright with their employees”. At least since that time, then, there has been expectation by both parties to the contract that employers will act in good faith in the manner of dismissal. Failure to do so can lead to foreseeable, compensable damages. [Citations omitted.] [63] Intangible damages for bad faith in the manner of dismissal of employment are therefore not awarded for an independently actionable wrong and are not “true aggravated damages”, as defined in Fidler. They arise from the breach of the employment contract – specifically, the employer’s implied contractual obligation to act in good faith when dismissing an employee.
[64] The decision in Keays overturned that in Vorvis v. Insurance Corp. of British Columbia, 1989 CanLII 93 (SCC), [1989] 1 S.C.R. 1085, in which the court held that damages for intangible harm in the employment context were only available if the employer committed an independently actionable wrong. Keays also overturned the proposition established in Wallace that bad faith in the manner of dismissal entitles the employee to an increase in damages in lieu of proper notice of termination. As the court wrote in Keays, at para. 59:[T]here is no reason to retain the distinction between “true aggravated damages” resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. [65] More recently, this court summarized the availability of intangible damages for breach of employment contracts, along the same lines as those presented above, in Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520 (CanLII), 349 O.A.C. 360, at paras. 90-91.
[66] I pause to note that caution must be exercised when directly applying the rules governing intangible damages in the employment context to partners. Courts have held that partners are typically not employees and are governed by a separate legal regime at common law and have specialized legislation, particularly the Partnerships Act: see SMI Sales Inc. v. Ontario (Minister of Finance), 2007 ONCA 451 (CanLII), 226 O.A.C. 169; Weibe Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553 (C.A.); and McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39 (CanLII), [2014] 2 S.C.R. 108.
[67] However, the reasoning of the court in Keays, in combination with the principles of partnerships law discussed above, suggests that damages for intangible harm are available in the partnerships context on the Hadley v. Baxendale principle where the harm was in the reasonable contemplation of the parties when they made their contract.
[68] Keays holds that, because employers have an implied contractual obligation of good faith in the manner of dismissal, damages for bad faith in the manner of dismissal are within the contemplation of the parties when they enter into the contract. Given the duty of utmost good faith owed between partners, confirmed in Rochwerg, the reasoning in Keays should apply in the partnerships context: damages flowing from bad faith in the manner of a partner’s expulsion are within the reasonable contemplation of the parties when they enter into the partnership agreement. Such damages can be awarded on the Hadley v. Baxendale principle.
[69] In other words, part of what the parties agree to when they enter into the partnership agreement is that they must treat each other with utmost good faith. The intangible harm resulting from a bad faith expulsion is reasonably foreseeable and flows from the breach of the duty of good faith, which is an implied term of the partnership agreement.
[70] The motion judge awarded aggravated damages on the basis of BDO’s conduct and the humiliation it caused. He said, at para. 93:[T]he circumstances of Mr. Ludwig’s removal, including the “negotiation” that was not, in fact, a negotiation (at least vis-à-vis the fundamental issue of the termination of Mr. Ludwig’s partnership), the unilateral announcement of his “retirement” by BDO, his subsequent ejection (“deemed” resignation) from the partnership and BDO’s invocation of the non-competition clause in the Partnership Agreement, warrant an award of aggravated damages reflecting the embarrassment and reputational harm which he experienced. I fix those damages at $100,000. [71] I see no error in the motion judge’s award of aggravated damages.
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