Written by Michael J Weiler
Yes, you read that right! In two recent cases, Ruston v. Keddco Mfg. (2011) Ltd., the Ontario Superior Court of Justice has made this award in favour of a 54-year-old employee who was dismissed as President after 11 years’ service. The Court found the employer did not have just cause for termination. The Court’s award was based upon a notice period of 19 months.
The Plaintiff (curiously referred to only as “J.P. Ruston”) was at the highest level of management with the Defendant, a manufacturer and distributor of oil and petrochemical products. Although there were issues regarding his performance, no formal complaints were made, and the employee continued to receive substantial bonuses.
The Defendant did not handle the termination very well, first, having the Plaintiff take time off and then cutting off his email. At a meeting with a representative of the Defendant, the Plaintiff was advised his employment was terminated for cause because he had committed fraud. No details of the Defendant’s reasons were provided until the Defendant filed its Statement of Defence and Counterclaim for damages for civil fraud. The Court described the Defendant’s position at trial as follows (at para. 26):
The defendant’s narrative is one where the plaintiff’s employment was terminated for just cause primarily as a result of a series of inappropriate actions willfully engaged in by the plaintiff for the intended and sole purpose of the plaintiff’s own financial gain and benefit. The plaintiff inappropriately manipulated the defendant’s financial statements and engaged in several accounting and financial improprieties over a significant and continuous period of time so as to create the illusion of the defendant earning far higher profits than it actually had. The conduct resulted in the defendant providing the plaintiff and other members of the defendant’s staff with bonuses it would not have granted had it known the true state of the defendant’s affairs. In addition to having cause to dismiss the plaintiff, therefore, the defendant has incurred economic losses causally related to the plaintiff’s conduct.
In a very detailed decision, the Court determined that the Defendant did not have just cause and the $1.7 million counterclaim was dismissed. That finding sets the stage for an assessment of damages.
The Court considered the normal indicia for determining notice, namely, age, length of service, position and available alternate employment. It also noted the Plaintiff could not move as he had to take care of his elderly father. The Plaintiff’s highest level of education was Grade 12 and there were no comparable jobs in the area. The Plaintiff was still out of work 3 years after termination except for some temporary work. The Court’s reasons imply that the biggest factor may well have been the fact that the Defendant alleged and failed to prove serious allegations of cause at trial.
The Court relied on the decision of the Ontario Court of Appeal in Singer v Nordstrong Equipment where that court upheld a finding that a 51-year-old President and GM with 11 years’ service was awarded 17 months’ notice, stating (at para. 108):
The Court of Appeal upheld this court’s finding of a common-law notice period of 17 months: Singer, at para. 9; see Singer v. Nordstrong Equipment Limited, 2017 ONSC 5906 (CanLII). In reaching this 17-month figure, Diamond J. noted that older, longer-term employees in senior and managerial positions may be entitled to a longer period of notice considering the difficulties they may face in finding new employment. Although the employer had argued that the motion judge over-emphasized this factor in his analysis of the Bardal factors, the Court of Appeal disagreed.
Given some differences with the facts of Singer, the Court awarded 19 months’ notice.
The Court awarded damages based on monthly base salary ($13,385.75); car allowance ($700); health and dental benefits which the court awarded based on 10% of base salary ($1,338.57); and RRSP/Pension contributions of based on 5% of base salary ($669.28).
The bonus was a huge part of the award. The Court found that the Plaintiff received a bonus every year which constituted 41.68 percent over a 3-year average. The Defendant argued no bonuses were paid post-termination, but the Court found no credible evidence was led regarding the Defendant’s treatment of bonuses post-termination. Relying on a 2-year average, the Court awarded $153,835.97 for lost opportunity to participate in the bonus program during the 19-month notice period. The Plaintiff was also awarded $40,484.16 for bonuses owed for the 6-month period prior to termination.
PUNITIVE AND AGGRAVATED DAMAGES
The Defendant was incredibly aggressive, not only at the termination meeting with the Plaintiff and in alleging cause, but also in pursuing a counterclaim against the Plaintiff – perhaps adopting the tactic that “the best defence is a good offence”. The Defendant not only failed to prove cause, but it also failed to prove its counterclaim.
The Court, at para. 135, relied upon the Supreme Court of Canada’s views in the Honda decision that “[p]unitive damages are intended to address wrongs on the part of the defendant that ‘are so malicious and outrageous that they are deserving of punishment on their own’ ”, whereas, by contrast, aggravated or moral damages “are compensatory damages meant to compensate the plaintiff for the manner in which he or she was dismissed”.
The Court canvassed the recent case authority and, applying it to the facts of this case, awarded the Plaintiff $100,000 punitive damages (which, it should be noted, are likely non-taxable). The particular reasons of the Court are interesting. It awarded the Plaintiff $100,000 in punitive damages for the following reasons:
- The defendant’s representative, at the termination meeting, threatened a counterclaim should he sue for wrongful termination, and had done so previously to another employee;
- the defendant had caused delays and significant costs to the plaintiff by initially stating it would be producing 25 witnesses, then reduced that to five and then called only three at trial;
- the first time the defendant provided details of its allegations of cause was in its counterclaim;
- the allegations of cause were performance-based and personal attacks, which allegations were withdrawn when no evidence was brought at trial;
- a second allegation that the defendant had used company funds for personal benefit was also withdrawn when no evidence was brought at trial;
- the defendant’s expert was not able to speak to damages and, on the 7th day of trial, the defendant reduced its $1,700,000 damages claim to $1, suggesting that the defendant was using its counterclaim as a strategy to intimidate the plaintiff;
- after accusing the plaintiff of fraud, the defendant did not call any witnesses to substantiate its claim, suggesting, again, that this claim was a tactic to induce the plaintiff to drop his claim; and
- the serious allegations against the plaintiff were found to be entirely unfounded.
In respect of aggravated/moral damages, for similar reasons to those stated above (but also with an emphasis on the effect on the plaintiff of being accused of fraud and the defendant failing to bring any evidence to support that claim), the Court awarded $25,000 to the Plaintiff.
In a subsequent award, the Court ordered the Defendant to pay the Plaintiff $546,684.73 on account of legal fees. The court’s reasons for awarding these costs are important as the reasons relied upon may be applicable in BC for an award of Special Costs. The Court’s reasons were stated at para 3 as follows:
I make this conclusion for the following reasons taken together:
(1) The costs requested are proportionate to the result. $700,000 was in dispute for the plaintiff’s claim plus $1,750,000 in the counter-claim. Out of a total of $2,450,000 in dispute, the plaintiff was successful on $2,354,628.00, calculated as the amount won, plus the entire value of the counter-claim which was dismissed in its entirety.
(2) The defendant pursued unfounded allegations of fraud. This was a matter of utmost importance to the plaintiff. Both his financial and professional future were at risk if the allegations were proven in court.
(3) It was the defendant’s conduct that contributed to the plaintiff’s costs. The plaintiff’s costs can be said to be what a reasonable party would expect to spend upon pursuing litigation against a party who engaged in conduct like that of the defendant. The defendant refused to admit facts but failed to contest them at trial. The defendant only provided relevant financial documents after the plaintiff brought a motion. The defendant provided will say statements 14 days in advance of the trial and not 30 days in advance as ordered. The defendant relied on only 45 of the 163 documents it produced on the first day of trial. The defendant caused an adjournment of the first trial less than six weeks before the date scheduled due to the introduction of a 25 person witness list. This led to a one year delay, double preparation and the requirement to have a second pre-trial. The defendant called only two fact witnesses at trial. By this conduct, the defendant caused the plaintiff to incur far greater costs than expected, substantially increasing the costs of trial preparation and the length of trial.
(4) The counter-claim rendered this action much more complex than a simple case of wrongful dismissal. Because of the fraud accusations, the plaintiff had to hire an expert witness costing approximately $30,000.
(5) The defendant threatened the plaintiff with expensive litigation if he pursued his wrongful dismissal matter and then proceeded to follow through on the threat. The plaintiff would have been denied access to justice had his lawyers not agreed to defer their fees. The plaintiff survived financially by relying on his RRSP’s, selling his house below market value and breaking his car lease.
(6) The use of two counsel at trial was reasonable for this case, considering the complexity of the counter-claim and the serious consequences to the plaintiff if he was unsuccessful in defending the counter-claim. Having adjudicated the trial, I observed that the work done during the trial by both counsel was different.
(7) The amounts claimed by the plaintiff to prepare the trial record were reasonable as the plaintiff had to determine if it was appropriate to set the matter down for trial. This requires a detailed documentary review to ensure full disclosure and that there will be no need for further motions.
(8) Having reviewed the costs outline submitted by the plaintiff, I have concluded that the time spent on various steps in the litigation is reasonable. It cannot be compared to the costs outline submitted by the defendant which is not certified. Further, my observation at trial was that plaintiff’s counsel was well prepared for trial while the defendant’s counsel was comparatively unprepared in that he arrived late or not at all in one instance, could not advise the court of the sequence and timing of his witnesses, failed to effectively use his book of documents and delivered materials at the last minute. The plaintiff’s costs outline is reflective of more time spent than the defendant in preparing for trial. This difference was demonstrated at trial to the detriment of the defendant’s counsel.
(9) The plaintiff was awarded both punitive and moral damages. The costs awarded herein are done so to indemnify the plaintiff, as the successful litigant, for the costs of litigation. Any references to the defendant’s conduct are meant to explain why the plaintiff’s costs are higher than one would reasonably expect from litigating a simple claim for wrongful dismissal and in no way reflect an overlap of the punitive or moral damages awarded.
The numbers speak for themselves. Few employers could afford such litigation, including having to pay their own counsel, which, based on the Plaintiff’s costs, could have been an additional $500,000. Further, such a win for the Plaintiff may have consequences down the road as a precedent for other employees. This employer may never again allege cause.
Employers should not be shy in advancing legitimate cases of termination for cause. Such claim, if done in good faith, would rarely result in a court awarding such punitive damages or “Special Costs”. Alleging cause offers a good lever for the employer to use to settle a case by putting the employee at risk. Having said that, readers of this blog will note other cases in BC where substantial punitive damages have been awarded. Caution then is the prudent course.
The full decision is found at: Ruston v. Keddco Mfg. (2011) Ltd. and the decision re legal fees is found at: Ruston v. Keddco Mfg. (2011) Ltd. (legal fees award)
The content in this blog is for your general information and should not be taken as legal advice. If you have a specific problem, please contact KSW Law to discuss your situation.
 Ruston v. Keddco Mfg. (2011) Ltd., 2018 ONSC 2919 and Ruston v. Keddco Mfg. (2011) Ltd., 2018 ONSC 5022
 2018 ONCA 234 (CANLII)
 Bardal v. Globe & Mail Ltd., 1960 CANLII 294 (ON SC)
 Honda Canada Inc. v. Keays, 2008 SCC 3 (CANLII)
 Ruston v. Keddco Mfg. (2011) Ltd., 2008 ONSC 5022 (CANLII)
 We have corrected spelling errors in the original decision without affecting the substance of the judge’s reasoning.