The Ontario Court of Appeal has reduced a trial court award from $550,000 to $450,000 for malicious prosecution in a wrongful dismissal suit.  Unfortunately for the plaintiff, the decision in Pate Estate v. Galway Cavendish and Harvey (Township) came more than 14 years after Mr. Pate was dismissed and two years after he passed away.

Background – Wrongful Dismissal, Criminal Acquittal and Malicious Prosecution Lawsuit

Mr. Pate had worked as a building inspector for the defendant township for more than 10 years.  In 1999, his employment was terminated and the township alleged that it had uncovered “discrepancies” relating to building permit fees.  Prior to terminating his employment, the township demanded that Mr. Pate resign.  He was told that if he refused, the township would involve the police, even though Mr. Pate was not provided with full details of the allegations against him.  When Mr. Pate refused, the township fired him and provided information to the police. The police were reluctant to charge Mr. Pate due to the insufficiency of the evidence. But, according to the Ontario Court of Appeal, the township exerted pressure on higher level officials within the OPP and Mr. Pate was eventually charged.  Three years later, in 2002, Mr. Pate was acquitted after a four day trial.

After his acquittal, Mr. Pate brought a wrongful dismissal lawsuit against the township.  He also sued for malicious prosecution, punitive damages, reputational injuries, criminal defence costs and aggravated damages.  In 2009, after a civil trial, Mr. Pate and the township agreed that he should be paid 12 months’ compensation for wrongful dismissal.  In addition, he was awarded an array of other damages totalling approximately $130,000 plus costs and interest by the court.  However, the trial judge refused to award damages for malicious prosecution as the judge concluded that the facts in Mr. Pate’s case did not meet the legal threshhold.  Mr. Pate appealed this decision and also appealed the amount of award of punitive damages, which had been set at $25,000, a number the judge felt reflected the principle of “proportionality” in awarding punitive damages.  Mr. Pate was successful with both appeals and the matter was sent back to the trial judge.  The trial judge now changed the award of punitive damages to $550,000 and also made a finding of malicious prosecution for which Mr. Pate was awarded $1, though the punitive damages award was related to the finding of malicious prosecution.  The Township appealed this second decision to the Ontario Court of Appeal.

Court of Appeal Decision:  Reducing Award to $450,000 for Punitive Damages and Malicious Prosecution

In a decision released on November 5, 2013, the Ontario Court of Appeal reduced the award of $550,000 in punitive damages to $450,000 by a two to one majority.  One judge would have kept the amount  at $550,000.  The Court of Appeal also upheld the finding of malicious prosecution.

The Court of Appeal summarized the elements of a successful lawsuit for malicious prosecution:

1.  The criminal proceedings were “initiated” by the defendant;

2.  They ended in favour of the plaintiff;

3.  There was no reasonable and probably cause for the prosecution; and

4.  There was “malicie, or a primary purpose other than that of carrying the law into effect…”

The Court of Appeal uhpheld the trial court finding that the township had knowingly withheld exculpatory evidence from the police when it pushed to have Mr. Pate charged criminally.    Moreover, this was evidence that the police could not necessarily be expected to find through a normal investigation.

Turning to the award of punitive damages, the Court of Appeal adopted the minority statement that an appellate court may revisit an award of punitive damages if the award is so large that it “offends the court’s sense of reason.”  The Court of Appeal concluded that the trial judge had applied all of the proper tests and that the award was not unreasonable.  However, the majority of the Court concluded that the aggravated damages award and the substantial indemnity costs awards should be factored into the award of punitive damages.  Accordingly, the Court reduced the award by $100,000 due, primarily, to duplication of damages.

The Court agreed with the reasons of the dissenting Court of Appeal judge in which the Court reviewed and considered a wide range of punitive damages cases.   Ultimately, the Court of Appeal agreed with the trial court that this case should be at the high end of the range.  It upheld the findings that the township’s conduct was “rerehensible,” “offensive and morally repugnant” and “a departure to a marked degree from ordinary standards of decent behaviour.”

In a lengthy but partially dissenting decision, Justice Lauwers would have kept the puntive damages award at $550,000.  Justice Lauwers disagreed with the majority that the award should be reduced due to a perceived duplication.  Even with the reduction that by the majority from $550,000 to $450,000, the award of punitive damages on this scale is still quite significant.

Conclusion – Higher Punitive Damages Awards May Become More Common

Punitive damages cases are very dependent on particular facts.  Generally, the behaviour in these cases is quite extreme.  Nevertheless, even with extreme facts, courts have historically awarded much lower amounts.  Given some of the more recent punitive damages cases that the Court of Appeal referenced in its decision in Pate Estate v. Galway Cavendish, there may well be a signficant upward trend in punitive damages awards.  Even with the reduction of $100,000 in this case, this decision will greatly benefit plaintiffs in wrongful dismissal cases who have been treated in an extremely harsh and vindictive manner.

However, this Court of Appeal decision will also make it more difficult to resolve many of these types of cases and will make it much more enticing for plaintiffs and their legal counsel to take these types of cases all the way through to a trial.