Aggravated damages for wrongful dismissal: Some objective evidence required

The British Columbia Court of Appeal has recently clarified that an employee will not be entitled to damages for mental distress or aggravated damages which are alleged to arise from the termination of employment where the only evidence before the court is the testimony of the former employee.

In Lau v. Royal Bank of Canada, the plaintiff was an account manager for the defendant bank for five years before being terminated for cause. During a meeting with a client, the plaintiff transferred the client’s money to a short-term income fund and entered the transaction as “new money” rather than a transfer. The plaintiff also recorded the meeting as a “joint meeting”, stating that an investment retirement planner (IRP) was present. The client later became dissatisfied with the plaintiff’s services, and made a complaint to the defendant bank. She complained, in part, that the IRP was not present at the meeting. The bank launched an investigation, which revealed that the plaintiff had been tracking sales incorrectly. He had recorded sales as new money rather than renewed or retained investments, which had the effect of increasing his sales numbers. The plaintiff admitted doing so and apologized. The investigators also spoke to the IRP alleged to have been in the meeting. Although he first confirmed his presence, he later recanted and video surveillance appeared to confirm that he was not in the meeting.

The bank terminated the plaintiff for cause for falsification of bank records and failing to tell the truth about the meeting with the client. Following the termination, the bank submitted disclosure forms to the BC Securities Commission regarding the reasons for termination.

The plaintiff brought a claim for wrongful dismissal and sought aggravated damages for mental distress.

At trial, the Court accepted the plaintiff’s version of events and found that the bank did not have cause to terminate the employment. The Trial Judge further concluded that the plaintiff was entitled to aggravated damages based upon her view that she did not need “medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress”. She awarded damages in the amount of $30,000.

The Court of Appeal concluded that the Trial Judge erred in awarding damages for mental distress without an adequate evidentiary basis. While the court noted that expert medical evidence was not required to establish such damages, there had to be some evidentiary foundation. The Court of Appeal noted that the only evidence was that of the employee and the Trial Judge’s observation of the employee’s demeanor some years after the events. This was not found to be sufficient.

The Court of Appeal decision in Lau follows on the heels of the Supreme Court of Canada’s decision in Saadait v. Moorhead, which confirmed that expert evidence is not required to establish mental harm arising from a tort. The Court of Appeal’s decision, however, is a useful reminder that a claim for aggravated damages arising from the manner of termination still requires terminated employees to meet the evidentiary burden of proof and forces trial courts to come to clear and transparent conclusions to support any award of damages for mental distress.

Questions relating to this article may be directed to Tom Posyniak.


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