On Second Thought: Overturning Damages Awards on Appeal

In Canada, appeal Courts are usually reluctant to overturn damages awarded by a trial judge. The rule is that an appeal Court should not interfere with the damages award, even if it would have arrived at a different result. Only in exceptional circumstances will an appellate Court overturn the trial judge’s analysis as to the quantum and type of damages awarded.

Despite this general rule, a recent decision of the Ontario Court of Appeal has confirmed that an appeal Court will undertake the task of recalculating damages where it feels the lower Court judge simply got it wrong.

In Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, per Epstein J.A. (“Strudwick”), the Court affirmed that where a lower Court judge fails to consider relevant factors in her damages analysis, the decision is ripe for reversal.

The Facts of Strudwick

Strudwick involved an action by the plaintiff for wrongful dismissal. The plaintiff had worked for the defendant business for fifteen years in various roles, from data entry to providing staff training. At the time of her dismissal, the plaintiff was 56 years old and was earning $12.85 per hour.

The plaintiff’s dismissal followed a sudden illness, in which the plaintiff became completely deaf. Shortly after the plaintiff became deaf, the defendant employer began a “campaign of abuse” against her. The abuse came in two forms. First, according to the Court, the plaintiff was subjected to cruel treatment at work. She was publically belittled and harassed by her supervisor and management. Second, the defendant employer refused to provide the plaintiff with “even the most basic accommodation of her disability”. The employer refused, amongst other things, to permit the plaintiff to bring an assistance dog to the workplace and to allow the plaintiff to access important company information in print.

Ultimately, the plaintiff was dismissed by management at a meeting, in which the plaintiff was referred to as a “goddamned fool” and terminated in front of her fellow employees.

As a result, the plaintiff commenced an action in January 2012, claiming, amongst other things, damages for wrongful dismissal, restitution under the Ontario Human Rights Code, general damages for breach of good faith, punitive and exemplary damages. The plaintiff claimed a total amount of $240,000  against the defendant, plus a request for damages associated with a loss of benefits during the notice period.

The defendant failed to defend the action and was noted in default. Following the defendant’s failed efforts to have the notice of default set aside, a hearing took place in which the motions judge granted the plaintiff judgment in the amount of $113,782.79, plus $40,000 in costs. The motions judge awarded the plaintiff, amongst other relief, damages representing 20 months in lieu of reasonable notice of termination.

The plaintiff appealed the damages assessment to the Court of Appeal, alleging that the motion judge’s damages award was too low in view of the defendant’s reprehensible conduct.

The Court of Appeal allowed the plaintiff’s appeal on damages. It increased the total damages award to $246,049,92, for the reasons set out below.

When Will an Appeal Court Interfere with Damages?

The Court began its analysis by noting that an appellate Court has a duty to defer to the trial judge’s assessment of damages. The decision of the lower Court judge cannot be reversed simply because the appellate Court “would have come to a different conclusion”.

The Court then identified the exceptional circumstances in which an appeal Court will interfere with a damages award. They include where the trial judge:

1. made an error of principle or law;
2. misapprehended the evidence;
3. erred in finding there to be evidence on which to base a conclusion;
4. failed to consider relevant factors or considered irrelevant factors; or
5. made a “palpably incorrect” or “wholly erroneous” assessment of damages.

In Strudwick, the Court of Appeal ultimately held that the motions judge made no err in determining a base period of 20 months reasonable notice in favour of the plaintiff. However, the Court also held that the motions judge failed to consider relevant factors when it came to the other heads of damages.

Failure to Consider Relevant Factors in Human Rights Code Damages

The motions judge awarded the plaintiff $20,000 in restitution under the Human Rights Code for the defendant’s discriminatory conduct based on the plaintiff’s disability. The Court of Appeal reversed this decision and held that an award of $40,000 was warranted instead.

In the Court of Appeal’s view, the motions judge made two errors.

First, the motions judge failed to “consider the impact of discrimination” on the plaintiff. In particular, the motions judge failed to consider the plaintiff’s “immediate feelings of isolation, anxiety, stigmatization and humiliation”. Moreover, the motions judge failed to consider the plaintiff’s vulnerability, resulting from the fact that the plaintiff had only recently become deaf and was completely dependent on the defendant for employment.

Second, the motions judge failed to consider that the defendant’s conduct went beyond a failure to accommodate the plaintiff’s disability. The defendant’s abuse was designed to “increase the difficulties she was experiencing at work”.

On the basis of these two errors, the Court of Appeal was required to interfere and increase the damages award.

Failure to Consider Relevant Factors for Intentional Infliction of Mental Distress

The motions judge awarded the plaintiff $18,984 to reimburse the plaintiff for the cost of behavioural therapy sessions. The Court of Appeal increased this amount to $35,294.

The Court of Appeal held that the motions judge failed to consider the “increased costs of therapy” resulting from the plaintiff’s permanent deafness. Evidence had been tendered showing that the plaintiff would require a sign language interpreter during therapy.

Moreover, the motions judge failed to consider non-pecuniary losses suffered by the plaintiff. The Court awarded an additional $5,000 in this regard to address the plaintiff’s “pain and suffering, and loss of enjoyment of life”.

Error in Concern about “Overlap” Between Aggravated and Other Damages

The motions judge was concerned that because aggravated damages were intended to address employer conduct that was unfair or in bad faith, there would be overlap and the plaintiff would be granted “double recovery” if she were granted aggravated damages. The motions judge was particularly concerned about the overlap between an award of aggravated damages and the damages awarded for pay in lieu of notice, breach of the Human Rights Code, and the tort of intentional infliction of mental distress. Accordingly, the motions judge declined to award the plaintiff aggravated damages.

The Court of Appeal overturned this ruling and awarded the plaintiff aggravated damages of $61,599.82.

The Court held that that in view of the “extreme bad faith” and “unfair treatment” by the defendant employer, the motions judge erred by being concerned about an overlap between aggravated damages and the other heads of damages. According to the Court, the defendant’s conduct “resulted in lasting psychological harm” to the plaintiff. Taking all this into account, the Court awarded the plaintiff $70,000 in damages, from which $8,400.18 for “Wallace” damages was deducted.

Error in Failing to Emphasize “Deterrent” Aspect of Punitive Damages

The motions judge emphasized that punitive damages were the exception, not the rule and should only be awarded where compensatory damages were inadequate. He also considered the effect a punitive damages award could have on the finances of the defendant. Accordingly, he awarded punitive damages of $15,000.

The Court of Appeal reversed this award and granted the plaintiff $55,000 in punitive damages instead.

According to the Court, the motions judge overemphasized the effect a punitive damages award would have on the defendant corporation. There was a lack of evidence regarding the defendant’s financial circumstances. The motions judge failed to award an amount of punitive damages that accomplished the goals of “retribution, deterrence and denunciation”, over and above the award of compensatory damages.

Conclusion

Though rare, the circumstances in which an appellate Court will overturn the damages assessment of a lower Court reflect a concern about whether the lower Court gave proper weight to the factors relevant to the damages calculation.

While the lower Court is usually in a better position to assess the parties’ evidence on damages, appellate Courts will not shy away from duty of quantifying damages if it means doing justice to the case.

The decision in Strudwick illustrates that while difficult to quantify, damages are not to be viewed by an appeal Court as an impossible task. Where a lower Court fails to consider relevant factors in arriving at a damages award, the appellate Court will intervene. In this respect, assessing damages is more art than science.