The Search for Goldilocks in the Wilderness of Punitive Damages: Pate Estate v Galway-Cavendish and Harvey (Townships)

In March 1999, Mr. John Gordon Pate was wrongfully dismissed by the Township of Galway-Cavendish and Harvey, after having worked for the Township as a building inspector for nearly a decade. After a subsequent police investigation, a four-day criminal trial, a civil action by Mr. Pate, a successful appeal to the Ontario Court of Appeal (“ONCA”), a denied appeal to the Supreme Court of Canada (“SCC”), and two re-trials, the ONCA was once again called upon to resolve the 14-year dispute over Mr. Pate’s dismissal. In Pate Estate v Galway-Cavendish and Harvey (Townships), 2013 ONCA 669 [Pate Estate], the appeal centred on a single line of the re-trial judge’s reasons for awarding Mr. Pate $550,000 in punitive damages.

According to paragraph 15 of the trial judge’s reasons, “…the question to be asked [was] whether punitive damages serve a rational purpose.” Differing interpretations of paragraph 15 resulted in a $100,000 difference in the award of punitive damages to be paid by the Township to Mr. Pate. The dissenting Justice Lauwers of the ONCA would have upheld the trial judge’s $550,000 award, while the majority, Justice Cronk and Justice Doherty, ruled that a $450,000 award in punitive damages was appropriate.

Facts

On March 26, 1999, Mr. John Beaven, the Township’s Chief Building Official, terminated Mr. Pate’s employment on the alleged basis that the Township had uncovered discrepancies in the building permit fees collected. Mr. Pate was never provided with the particulars of these allegations. Although Mr. Beaven turned over some information to the Ontario Provincial Police (“OPP”), investigating officers were reluctant to lay charges against Mr. Pate. It was only after the Township exerted pressure on OPP commanders that criminal charges were laid. Following extensive news coverage in the local media and a four-day trial, Mr. Pate was acquitted in 2002.

After his acquittal, Mr. Pate brought an action against the Township for damages for wrongful dismissal, malicious prosecution, and reputational injuries. He also sought special damages for the costs of his defence in the criminal trial, aggravated damages, and punitive damages. It was later found by the civil trial judge, and upheld on appeal, that Mr. Beaven knowingly withheld exculpatory information from the police which would have prevented Mr. Pate from being criminally charged in the first place.

Procedural History

At the first civil trial, Justice Gunsolus of the Ontario Superior Court of Justice (“OSCJ”) awarded Mr. Pate $279,094, including $25,000 in punitive damages.

Mr. Pate successfully appealed to the ONCA, on the dual grounds that Justice Gunsolus erred in failing to hold the Township liable for malicious prosecution, and erred in assessing his punitive damages at only $25,000. The ONCA agreed and sent both issues back to the OSCJ for re-trial.

The Township’s application for leave to appeal to the SCC, solely on the issue of malicious prosecution, was ultimately denied. The Township and the estate of the now-deceased Mr. Pate agreed to re-litigate both issues before Justice Gunsolus based on the existing trial record.

Upon re-trial of the first issue, Justice Gunsolus found that the Township was liable to Mr. Pate for malicious prosecution, and awarded his estate damages in the sum of $1.00, as agreed to by the parties.

In a separate judgement on the second issue, Justice Gunsolus held that the Township was liable for $550,000 in punitive damages – thereby increasing the punitive damages award by $525,000 from the first civil trial, which would be further added to the award of $279,094.

ONCA Decision

On appeal, Justice Lauwers held that the Township failed to demonstrate any palpable and overriding errors committed by the trial judge in finding the Township liable for malicious prosecution. The majority of the ONCA agreed with their colleague on this point.

However, Justice Cronk and Justice Doherty were at odds with Justice Lauwers’ conclusions regarding the trial judge’s application of the legal principles surrounding punitive damages. For the majority, paragraph 15 of Justice Gunsolus’ reasons disclosed an error:

The necessary inquiry, however, was not whether punitive damages would serve a rational purpose in this case but, rather, what amount of punitive damages, taken together with the other compensation to which Mr. Pate was already entitled, was rationally required to meet the objectives of retribution, deterrence and denunciation. The trial judge did not address this question (Pate Estate, para 211).

While Justice Lauwers saw no reason to interfere with the trial judge’s $550,000 award, the majority of the ONCA held that Justice Gunsolus was “obliged to take the punitive components of his prior costs award and costs premium into account when quantifying a fit punitive damages award” (at para 218) in order to “avoid the risk of an inordinately high award and ‘double compensation’ to Mr. Pate” (para 236).

The majority of the ONCA noted that compensatory damages already have a punitive element, as per the SCC’s cautions against duplicate compensation in Whiten v Pilot Insurance Co, [2002] 1 SCR 595 [Whiten]. At paragraph 123, the SCC held:

Compensatory damages also punish. In many cases they will be all the ‘punishment’ required […] punitive damages are awarded, ‘if, but only if’ all other penalties have been taken into account and found to be inadequate to accomplish the objectives of retribution, deterrence, and denunciation.

As such, Justice Cronk and Justice Doherty found that there was considerable overlap among the considerations that the trial judge factored into his calculus of compensatory damages, costs, and punitive damages. It was therefore incumbent on the appellate bench to correct the trial judge’s error by materially discounting the punitive damages award.

In his reasons for awarding $550,000 in punitive damages, Justice Gunsolus relied heavily on the precedent set by McNeil v Brewers Retail Inc, 2008 ONCA 405 [McNeil]. In McNeil, the ONCA upheld a jury’s punitive damages award of $500,000. Accordingly, Justice Gunsolus fixed Mr. Pate’s punitive damages in the amount of $550,000 – given that the facts of McNeil were strikingly similar to the facts at bar, and in some aspects the Township’s treatment of Mr. Pate was even worse than the defendants’ treatment of the plaintiffs in McNeil. While Justice Lauwers characterized the $50,000 difference between the McNeil award and the award to Mr. Pate as “only $50,000” (para 156), the majority of the ONCA ruled that there is “no justification” in this case for a punitive damages award in excess of McNeil, and that $50,000 “is not insignificant, particularly when viewed from the perspective of the litigants” (para 227).

For the majority of the ONCA, a punitive damages award in the amount of $450,000 was sufficient to meet the need for additional punishment of the Township, while at the same time not exceeding that which was awarded in McNeil and avoiding a windfall for Mr. Pate.

Commentary

In 2013, the Township of Galway-Cavendish and Harvey was renamed the Municipality of Trent Lakes. Trent Lakes’ 2013 municipal budget was $10.6 million, with $1.6 million allotted for building inspection services, administrative/legal costs, and other protection services (in comparison, the neighbouring City of Peterborough’s 2012 operating budget was $210.8 million). As of the 2011 census, the small town in rural Ontario consisted of 5,105 residents.

Consequently, the ONCA, housed in the historic Osgoode Hall in the City of Toronto (whose own 2013 operating budget was $10.8 billion), was correct in its majority finding that $50,000 is a non-trivial amount of money for both the defendant and Mr. Pate. Particularly in the context of Trent Lakes’ modest budget, a $100,000 reduction in the punitive damages award is certainly not insignificant.

But the ONCA did not go so far as to adopt the position urged by the Township, that given its small size a punitive damages award of $25,000 or $75,000 was more appropriate. The majority of the ONCA agreed with Justice Lauwers’ holding that “[t]he range of punitive damages in wrongful dismissal cases in this court is wide” (para 139), and upheld the trial judge’s findings that the Township had engaged in seriously high-handed and oppressive conduct in its dismissal of Mr. Pate. In light of the Township’s reprehensible behaviour and the Township’s lack of apology to Mr. Pate or his estate, all three judges of the ONCA agreed that the defendant’s conduct was sufficiently egregious to attract significant punitive damages pursuant to Whiten. The disagreement between the appellate justices’ majority and minority opinions over the quantum was correctly resolved, in this author’s view, by relying on the Whiten principle of proportionality in setting the award.

It would be favourable to the development of the common law for the SCC to clarify how judges are to arrive at punitive damages calculations, what other types of damages are to be included in the punitive discount, and by how much. Justice Lauwers in Pate Estate found that it was “difficult to draw much of assistance” from a review of the existing jurisprudence, and as such could only observe that there is a wide spectrum of punitive damage awards reflecting a spectrum of misconduct (para 145). The ONCA, in its search for the Goldilocks amount that would achieve not-too-little-but-not-too-much punishment for the Township, was guided only by signposts of sparse precedents. A definitive statement from the SCC may add greater certainty to the law in this regard, especially given the increased application of punitive damages awards following Whiten.

Nevertheless, the reality of the Pate Estate dispute is that after 15 years of litigation, several court battles, and the passing of Mr. Pate himself, its litigants may be reluctant to take their fight to the highest court of the land – and its adjudicators reluctant to hear it.