A British Columbia Supreme Court judge has awarded punitive damages of $100,000 in a wrongful dismissal case.  In the case of Kelly v. Norsemont Mining Inc., released on January 31, 2013, the plaintiff sued for wrongful dismissal and claimed that he was fired because he had insisted on compliance with securities regulations.  The defendant employer alleged that Mr. Kelly was dismissed for cause for failing to perform his duties and for making defamatory statements about the defendant and its management.

One of the alleged grounds for dismissal was a refusal by the plaintiff to provide a complete list of all of the brokers that he knew from previous experience and their detailed personal information to his new employer.  The Court rejected the argument that the plaintiff’s failure to provide this information could justify a cause dismissal.

The plaintiff had also demanded a larger number of stock options than had been agreed upon and had tried to insist that the company pay him $30,000 that he claimed it had agreed to pay.  While the Court held that the company had not actually agreed to pay the $30,000 and did not award this amount at trial, it held that it was reasonable for the plaintiff to demand this sum because company officials had suggested (even if not clearly) that the defendant would pay this amount even if it had not committed to doing so.  The Court also rejected the argument that asking for more stock options was grounds for dismissal.

At trial, the defendant tried to prove that the plaintiff was “hopelessly inept” and “incompetent.”  However, it failed here as well, with the Court finding that the defendant only put forward “unreliable and meagre evidence” in this regard.  It wasn’t even a close call.  Justice Fenlon of the B.C. Supreme Court had little difficulty concluding that the plaintiff was wrongfully dismissed.

In assessing damages, the Court noted that the plaintiff had signed an employment contract with a 30 day termination clause.  Based on other Canadian legal precedents, this clause should not have been valid as it would have fallen below the minimum requirment of the B.C. Employment Standards Act at some point in the future.  Ontario and B.C. courts have ruled that this kind of clause is void and cannot be used to limit an employee’s notice on dismissal.  Nevertheless, the Court here applied the clause and awarded the plaintiff only one month’s pay – $5,000.  The plaintiff had only been employed for about 7 months but a reasonable notice period here, without the clause, probably would have been between three and six months in the circumstances.  The plaintiff was stuck with one month’s pay.  This aspect of the decision is probably easily appealable.  The plaintiff was self-represented and it is likely that he did not bring the appropriate cases to the attention of the Court.

In turning to punitive damages, the B.C. Supreme Court held that the employer did not meet its implied obligations of “good faith and fair dealing.”  Its conduct was “harsh, vindictive, reprehensible and malicious.”

The defendant did not even pay the plaintiff’s salary that was owing at the time of dismissal.  It tried to get the plaintiff to sign a release in exchange for this relatively small amount of back pay that it clearly owed him and when he refused to sign, it withheld the amounts.  It continued to refuse to pay the unpaid salary for more than seven years until the trial of this case.   It refused to return the plaintiff’s personal belongings when it fired him for at least some period of time.  It threatened to “bankrupt” the plaintiff if he sued the defendant.   In the context of the ligitation, the defendant alleged fraud and incompetence in its defence and these grounds were found to be without merit – and they made it difficult for the plaintiff to find work as an advisor.  The Court concluded than an award of $100,000 in punitive damages was appropriate.

The Court’s decision includes a detailed examination of the different grounds for awarding punitive damages, the purpose of awarding these damages and other issues relating to this type of situation.  It seems to me that the award may have been excessive, when compared to other Canadian punitive damages awards, even if there was some basis for an award of  punitive damages.  It may be that some of these damages should have been “general damages” for the breach of the duty of good faith and fair dealing rather than “punitive damages” though ultimately that might not really make a big difference.

What is clear from the decision is that there is a great deal of uncertainty when it comes to general and punitive damages.  This case will likely be appealed the B.C. Court of Appeal and it is difficult to predict what the Court of Appeal might do with this decision.  It seems likely that it would alter the notice award and change it from $5,000 to an amount closer to $20,000 to $30,000.  With respect to the punitive damages award, the Court of Appeal could rule that there was an insufficient basis for awarding these damages or it could uphold the award but reduce the amount to something closer to $20,000 or $25,000.

Ultimately, the case demonsrates that employers that take hard ball positions all the way to trial in wrongful dismissal cases can find themselves embroiled in years of litigation and can face suprisingly aggressive, unexpected punitive damages awards at trial.  For employees, the case does not clearly demonstrate that there is a pot of gold at the end of the rainbow.  This case has been going on for 7 years so far and will now probably take another year or two to make its way through the B.C. Court of Appeal.  The large award may or may not be upheld.  If Mr. Kelly is successful and actually receives his award of $100,000 in punitive damages, this type of case may well make many plaintiffs reluctant to settle their wrongful dismissal cases early on.  However, the outcome remains to be seen.

Fortunately, in the majority of cases, employers and employees try to resolve wrongful dismissal cases on a reasonable basis and manage to avoid facing years of protracted litigation with large scale punitive damages awards.  It would be a harsh world indeed if a very large number of dismissals in Canada were handled in this fashion.