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Pushing the Limits of Punitive Damages
Published in the October 2006 issue of Litigation Notes - View Article
It is clear that, in Canada, breach of human rights legislation does not directly give rise to a civil action. This was decided 25 years ago by the Supreme Court of Canada in the case of Seneca College v. Bhadauria. However, the Ontario Court of Appeal has recently released a decision which makes it clear that failure to provide the accommodation required by such legislation can be a factor which affects the availability of punitive damages.
The story behind Keays v. Honda Canada is that of an employee of some 15 years who was diagnosed as suffering from Chronic Fatigue Syndrome and eventually dismissed for insubordination. His employer, Honda Canada, accommodated his asserted disability for several years. However, his regular absences put pressure on his production unit and Honda took steps to nudge him towards a return to work. He was eventually fired and sued for wrongful dismissal.
After a twenty-nine day trial, the trial judge found that Mr. Keays had been dismissed without cause, awarded him damages in lieu of notice and punitive damages of $500,000 because Honda Canada’s treatment of Keays constituted discrimination and harassment and its conduct had been outrageous and high-handed.
What particularly provoked the trial judge was the fact that the employer sought to compel Mr. Keays to attend a meeting with the company doctor and an occupational medical specialist. The trial judge found that the “invitation” to attend this meeting contained a number of misrepresentations and that it was not made in good faith. While the finding of bad faith was not overturned, the trial judge made additional comments about the intent of Honda Canada which, the majority of the Court of Appeal found, were completely unsupported by the evidence. In particular, he found conduct which was “planned and deliberate and [which] formed a protracted corporate conspiracy”.
He also grossly distorted the circumstances of the wrong-doing, stating that Honda engaged in outrageous conduct which “persisted over a period of five years without a hint of modification of their position that Mr. Keays was the one in the wrong”. This is a surprising finding, given that Mr. Keays was clearly accommodated for all but, arguably, seven months of the period in question.
Finding that Keays had been dismissed without cause, the trial judge ignored his right to accommodation of his disability and concluded that he was entitled to fifteen months notice. In doing so, he took into account Honda’s “relatively flat management” structure which placed greater responsibilities on non-managerial employees. The Court of Appeal was unanimous in upholding him in this regard.
The appellate court also agreed that the notice period should be extended by a further nine months by reason of the “egregious bad faith” which was displayed by Honda in the manner of termination. The majority appears to be tepid in its acceptance of the bad faith finding, but they were not inclined to reverse it.
Given the trial judge’s extravagant view of Honda’s conduct, his award of punitive damages of $500,000 is perhaps not so surprising. The fact that one of the appellate judges would have upheld that award is a matter of concern, but he was over-ruled by the majority, who decided to reduce the amount of the award to $100,000, an amount which many will continue to view as extreme.
In reducing the award, the majority emphasizes the plaintiff’s vulnerability, the employer’s knowledge of its obligation to accommodate disability and its failure to disclose damaging evidence until late in the trial. It then goes on to review the extraordinary circumstances which must be encountered before an award in excess of about $50,000 should be contemplated. In the present case the reprehensible conduct took place over a matter of months, not years; the conduct of Honda could not be described as malicious; there was no suggestion of similar abuse of other employees and no evidence that a particularly large award would be necessary to discipline and deter a wealthy corporate party. Having made these findings, the majority acknowledged that assessing quantum was difficult and settled on the figure of $100,000.
There is an interesting side-light. The court allowed a special premium in assessing costs. This was justified by the fact that the plaintiff’s lawyer had assumed considerable risk which the court thought should be rewarded at the cost of the unsuccessful defendant. The court relied on its own precedent, the case of Walker v. Ritchie. Walker was overturned by the Supreme Court of Canada two weeks later.
Keays v. Honda Canada Inc., 2006 CanLII 33191