Case In Point

Ontario Court of Appeal Upholds Malicious Prosecution Finding Against Municipality, Reduces Punitive Damages

Case In Point

Ontario Court of Appeal Upholds Malicious Prosecution Finding Against Municipality, Reduces Punitive Damages

Date: November 19, 2013

In a cautionary tale for employers, the Court of Appeal for Ontario has upheld a lower court decision which found a Township guilty of malicious prosecution in its actions relating to a dismissed employee. The quantum of punitive damages awarded is also a stark reminder that employee terminations must be conducted in a fair and even-handed manner, failing which substantial liability may result.

The plaintiff in the original action (now deceased) was the Chief Building Inspector for the Township. He was confronted with alleged building fee discrepancies and was told that if he resigned immediately, the matter would not be reported to the police. He was not provided with particulars or given an opportunity to respond to the allegations. The plaintiff refused to resign and his employment was terminated. Criminal charges were laid and, after a four day trial, the plaintiff was acquitted. He sued the Township for wrongful dismissal, malicious prosecution and reputational injuries.

At the civil action, it emerged that certain pieces of exculpatory information had been withheld from the police and the responsible officer would not have proceeded with the charges had he been aware of that information. However, the trial judge dismissed the malicious prosecution action. He did award damages in the approximate amount of $280,000 (the parties had separately agreed to a 12 month award for wrongful dismissal). The damages included $25,000 for punitive damages. The judge indicated he would have granted more but was bound by “the principles of proportionality.” On appeal, the Court of Appeal ordered a new trial on the issues of punitive damages and malicious prosecution. After two separate re-trials, the trial judge found the Township guilty of malicious prosecution, and increased the punitive damages to $550,000. The Township appealed.

The Court of Appeal unanimously agreed on the issue of malicious prosecution, but split on the question of punitive damages.

The malicious prosecution finding was upheld in part on the basis that exculpatory information had been knowingly withheld from the police, thereby misleading and undermining the police investigation. As agreed upon between the parties, $1.00 in damages was ordered for this claim.

The majority of the Court also reduced the punitive damages award from $550,000 to $450,000, stating that the trial judge was required to “step back” and examine the punitive elements of the other substantial awards (e.g. compensatory and costs), to determine what other “additional punishment” was required. Here, the Court determined that an award of $450,000 was sufficient to meet the objectives of retribution, deterrence and denunciation. The minority of the Court would have left the award for punitive damages at $550,000.

What should employers take away from this decision?

First, where termination for cause is being alleged, make sure that a thorough and unbiased investigation is undertaken into the allegations prior to termination.

Second, provide the employee with the opportunity to respond to any allegations giving rise to a potential cause termination and consider any response as part of the decision-making process.

Third, where a police investigation is commenced against an employee as a result of an alleged incident, co-operate fully in the process. Be aware of legal obligations to disclose relevant information.

Finally, substantial liability can attach to employers who adopt a “hardball” or “callous” approach and do not proceed in good faith in the manner of termination.

Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669 (CanLII)