Beaird v. Westinghouse Canada Incorporated
[Indexed as: Beaird v. Westinghouse Canada Inc.]
43 O.R. (3d) 581
[1999] O.J. No. 893
Docket No. C28324
Court of Appeal for Ontario,
Finlayson, Osborne and Moldaver JJ.A.
March 29, 1999
Damages — Aggravated damages — Plaintiff bringing wrongful dismissal action in which he sought declaration that he was entitled to long-term disability benefits under defendant employer’s income protection plan — Plaintiff abandoning wrongful dismissal claim before trial started and parties settling issue of plaintiff’s entitlement to long-term disability benefits — Trial judge erring in awarding aggravated damages as result of defendant’s alleged failure to assist plaintiff in obtaining long-term disability benefits
— Trial judge failing to appreciate that wrongful dismissal claim was no longer primary cause of action to which separate actionable wrong could attach — Trial judge erring in assuming that aggravated damages could be awarded because it was in contemplation of parties at time they entered into employment relationship that termination and denial of benefits would cause plaintiff to suffer mental distress.
Damages — Punitive damages — Plaintiff bringing wrongful dismissal action in which he sought declaration that he was entitled to long-term disability benefits under defendant employer’s income protection plan — Plaintiff abandoning wrongful dismissal claim before trial started and parties settling issue of plaintiff’s entitlement to long-term disability benefits — Trial judge erring in awarding punitive damages against defendant — Trial judge failing to appreciate that wrongful dismissal claim was no longer primary cause of action to which separate actionable wrong could attach — Conduct of defendant not such as to attract opprobrium.
The plaintiff injured his back at work in 1989. His resulting disability led to the termination of his employment by the defendant in 1992. In 1994, the plaintiff commenced an action against the defendant for a declaration that the defendant had wrongfully terminated his employment, a declaration that he was entitled to long-term disability benefits under the defendant’s income protection plan, damages for loss of long-term disability benefits and damages for breach of the defendant’s good faith obligation towards him. (The long-term disability insurer, M Co., was later added as a party.) The plaintiff abandoned his wrongful dismissal claim before the trial began. At the opening of the trial, the parties announced that they had settled the claim against M Co. for long-term benefits. At the end of the trial, the parties announced a settlement of the plaintiff’s outstanding claims under the defendant’s employee benefit package. The trial judge found that the defendant failed in its duty towards the plaintiff by dismissing him without assisting him to obtain long-term benefits under its income protection plan. She found that it was in the contemplation of the parties at the time they entered into the employment relationship that the plaintiff’s dismissal and the denial of benefits would cause him to suffer mental distress.
She awarded aggravated damages in the amount of $15,000. She also found that the defendant’s failure to supply a copy of two medical reports to counsel for the plaintiff, as required by the Rules of Civil Procedure, constituted harsh and reprehensible behaviour. She awarded punitive damages in the amount of $32,000. The defendant appealed the awards of aggravated and punitive damages.
Held, the appeal should be allowed.
In awarding aggravated damages, the trial judge failed to appreciate that the abandoned wrongful dismissal claim was no longer the primary cause of action to which a separate actionable wrong could attach. She also erred in assuming that damages for mental distress might arise in wrongful dismissal actions because they were in the contemplation of the parties at the time they entered into the contract of employment. There was only one cause of action in this case, namely, failure to acknowledge and support the plaintiff’s claim for long-term disability benefits. It is questionable whether such a cause of action exists in law but if it does, it was necessary in this case to find an additional actionable wrong to support a claim for aggravated damages. No such separate actionable wrong existed here.
The same objection applied to the award of punitive damages. For an award of punitive damages to be made, the defendant must have committed an independent or separate actionable wrong causing damage to the plaintiff and the defendant’s conduct must be sufficiently harsh, vindictive, reprehensible and malicious. No separate actionable wrong existed in this case. A breach of the Rules of Civil Procedure does not constitute an actionable wrong. An award of costs will generally be the appropriate sanction for trial misconduct. Moreover, the conduct of the defendant did not come close to attracting the pejorative language necessary for punitive damages.
Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085, 36 B.C.L.R. (2d) 273, 58 D.L.R. (4th) 193, 94 N.R 321, 42 B.L.R. 111, 25 C.C.E.L. 81, 90 C.L.L.C. 14,035, [1989] 4 W.W.R. 218, apld Tarailo v. Allied Chemical Canada Ltd. (1989), 68 O.R. (2d) 288, 26 C.C.E.L. 209, 89 C.L.L.C. 14,040, [1989] I.L.R. 1-2427, consd
Other cases referred to
Gerula v. Flores (1995), 126 D.L.R. (4th) 506 (Ont. C.A.); Whiten v. Pilot Insurance Co. (1999), 42 O.R. (3d) 641, 170 D.L.R. (4th) 280, [1999] I.L.R. 1-3659, [1999] O.J. No. 237 (C.A.)
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 33.06(2), 33.07
APPEAL by defendant from awards of punitive and aggravated damages.
Louis A. Frapporti, for appellant. Kenneth M. Alexander, for respondent.
The judgment of the court was delivered by
FINLAYSON J.A.: — This is an appeal by Westinghouse Canada Incorporated (“Westinghouse”) from a judgment of the Honourable Madam Justice E.I. MacDonald of the Ontario Court (General Division). The judgment arose out of an action for wrongful dismissal but the appeal is restricted to the awards to the respondent of aggravated damages of $15,000 and punitive damages of $32,000.
Facts
The respondent commenced work as a motor winder at Westinghouse in June 1988. On November 20, 1989 he injured his back at work while attempting to change a connection on a large electrical motor. He reported the accident to his supervisor and a report was sent to the Workers Compensation Board (“WCB”). The report noted that he was covered under the Westinghouse income protection plan.
Subsequent to his injury, the respondent obtained medical treatment and, except for two days, continued to work. On April 5, 1990, he did not return to work because of difficulty driving and walking. He began to receive WCB benefits and Westinghouse short-term benefits including prescription drug coverage. On July 26, 1990, he was admitted to St. Catharine’s General Hospital and underwent surgery on his back.
After the respondent attempted to return to work, and after prolonged and extensive medical assessment, Westinghouse, the WCB and the respondent agreed that the respondent was capable of modified work. The respondent’s former work was out of the question and it was determined that he would be retrained as a computer repair technician at the expense of the WCB. Unfortunately there was no work of this nature at Westinghouse. As he could not return to work at Westinghouse in any capacity, his employment was terminated in June 1992, two and one-half years after his injury.
Following termination of his employment, the respondent underwent months of retraining. He obtained a diploma as a computer repair technician. During this period he repeatedly expressed a desire to return to Westinghouse, but there were no jobs available for him. He continued to seek employment at other work places.
Two years after his dismissal, the respondent engaged legal counsel and filed a complaint with the Ontario Human Rights Commission stating that he was fit for work and that Westinghouse had failed to accommodate him in this respect. Westinghouse was obliged to defend this complaint and it was ultimately dismissed as being out of time. The respondent then served a formal demand upon Westinghouse for payment of long- term disability benefits on the ground that he was permanently disabled on the date of his termination in June 1992. Despite this change of position, Westinghouse gave notice of the claim to its long-term disability insurer, the Mutual Life Assurance Company of Canada (“Mutual”), which was responsible for payment of these benefits.
The Benefits Package
The Westinghouse benefits package is comprehensive. It embraces a group life plan underwritten by Confederation Life, an income protection plan underwritten by Mutual Life, and a consolidated pension plan which is the responsibility of Westinghouse. There is also provision for medical, dental and prescription drug benefits that are the responsibility of Westinghouse.
The definition of disability in the income protection plan is as follows: A disability is an illness or injury which prevents you from performing any of the duties of your occupation during your first two years of absence. Thereafter, a disability is an illness or injury which prevents you from performing any gainful occupation for which you are reasonably, fitted by training, education or experience.
(Emphasis added)
The distinction emphasized is important because the evidence discloses that the responsibility for short-term disability benefits (the first two years or so-called “first tier”) is that of Westinghouse. Thereafter, the benefits are treated as long-term disability benefits and under the income protection plan are the responsibility of Mutual Life. During the course of the trial, the respondent’s counsel conceded that the termination of the respondent’s employment took place after the two-year period had expired and during what was referred to as the “second tier” of entitlement to disability benefits.
At the time of his termination, the respondent was receiving WCB benefits equal to 90 per cent of his pre-injury earnings. He was also receiving medical and dental benefits from Westinghouse. Subsequent to termination, the respondent’s entitlement to benefits supplied by Westinghouse ceased.
History of the Proceedings
The proceedings in appeal were commenced by a statement of claim dated August 29, 1994 claiming:
1. A declaration that Westinghouse wrongfully terminated him on June 29, 1992;
2. A declaration that at the time of his wrongful termination he was and continues to be entitled to receive the long-term disability benefits provided under the plaintiff’s Income Protection Plan;
3. Damages against Westinghouse, in the amount of $325,830.00, for loss of long-term disability benefits;
4. Damages against Westinghouse for breach of its good faith obligation, held towards the plaintiff, in the amount of $50,000.00.
By the time the matter reached trial, Mutual Life had been added as a party as Westinghouse’s insurer of the income protection plan’s long-term disability benefits. The statement of claim was amended and the claims numbered 1 and 2 above were deleted. Claims for aggravated and punitive damages were made for the first time.
At the opening of trial, the parties announced that they had settled the claim against Mutual Life for long-term benefits under the income protection plan. Mutual Life acknowledged its responsibility to the respondent for long-term benefits and made a lump-sum payment to him to cover accrued arrears. It refused to make any payment of interest on the arrears. This interest claim was still maintained against Westinghouse.
The issues remaining against Westinghouse related to the respondent’s entitlement to the other benefits in the benefits package, namely group life coverage, medical and dental coverage and pension plan accrual. At the end of the trial, the parties announced a settlement of the outstanding claims under the benefits package. We were advised on appeal that the respondent was reinstated with respect to all the coverages claimed.
Reasons for Judgment
At the conclusion of argument, the trial judge delivered judgment in which she dismissed the claim against Westinghouse for interest on the Mutual Life settlement. This portion of the judgment has not been appealed. She awarded aggravated damages in the amount of $15,000 and punitive damages in the amount of $32,000. In the course of her reasons she stated:
While I can understand the reasons for the actions of Westinghouse, I am of the opinion that they were wrong as to his physical condition and that the company should have applied on his behalf to Mutual to have him placed on second tier disability benefits in accordance with the plan rather than abruptly terminate his employment. As was admitted by Robert Stait of Westinghouse, whether a person has a disability is a medical issue. This issue should have been referred to Mutual in 1992 for reference to its own medical expert, if considered necessary, as eventually happened in 1995 after this action had been commenced.
. . . . .
I find that an error was made by Westinghouse that could and should have been corrected. Westinghouse failed in its duty to the plaintiff by dismissing him without assisting him to obtain long-term benefits under the income protection plan of the company. Westinghouse is, therefore, liable to Mr. Beaird for the reasonable and foreseeable consequence of its actions.
As Mutual has now settled the claim in respect of past disability benefits and I am informed that Mr. Beaird’s other claims have been negotiated and settled during this trial, the only claims left to be adjudicated at this time are his claims for aggravated and punitive damages.
In making an award of aggravated damages, the trial judge relied upon the dissenting judgment of Wilson J. in Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085, 58 D.L.R. (4th) 193 where Wilson J. held that compensatory damages were available to the employee in an employment contract because “the parties should reasonably have foreseen mental suffering as a consequence of a breach of the contract at the time the contract was entered into” (at p. 1114 S.C.R., p. 212 D.L.R.). The trial judge held:
. . . the mental suffering of the plaintiff arose directly out of the wrongful conduct of the defendant and I do not think that the damage is so remote as to proscribe the recovery of aggravated damages. One of the purposes of an income protection plan is to provide peace of mind to employees in respect of possible future problems. Therefore, it is reasonable to infer that it was in the contemplation of the parties at the time the plaintiff commenced his employment with Westinghouse that his dismissal and denial of benefits in the circumstances of this case would cause him to suffer mental distress.
(Emphasis added)
In awarding punitive damages, the trial judge again relied upon the dissent of Wilson J. in Vorvis, where she had stated that “I do not share my colleague’s view that punitive damages can only be awarded when the misconduct is in itself an ‘actionable wrong'” (p. 1130 S.C.R., pp. 223-24 D.L.R.). The trial judge quoted from the headnote of Vorvis to that effect. She then proceeded to make findings that in her view supported an award of punitive damages. She said:
I do not think that, at the point in time when Mr. Beaird was dismissed, or indeed at any other time, Westinghouse exhibited particular malice towards him. Perhaps the company showed some callousness in cutting him off benefits abruptly while it was still not clear that he was employable, but the conduct was more heavy handed than malicious. However, as time passed, and especially after this action was commenced, the behaviour of the company became increasingly reprehensible.
It becomes apparent that the entire focus of the trial judge’s concern as to what she regarded as the misconduct of Westinghouse related to its counsel’s treatment of two medical reports by Dr. H.R. Galway obtained on a consent medical examination. The first report was dated February 24, 1995 and there was a follow up report dated November 7, 1995. The reports concluded that the respondent was permanently disabled. The trial judge acknowledged that even after receipt of the first report, Westinghouse had “a reasonable excuse for delaying reinstatement”. However, the failure to supply a copy of this report to the counsel for the respondent, as required by the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, was “harsh and reprehensible behaviour”. This despite the fact that on a motion at the opening of trial to have Westinghouse’s defence struck out for failure to deliver these two reports, the trial judge had ruled:
. . . the defendant should have produced the reports in a timely manner so that counsel for the plaintiff could have planned for the trial with the knowledge of those favourable reports. I consider the delay in this case to raise not a question of prejudice leading to the striking of the defence but, rather, a question of costs. Costs are a remedy for this late production.
(Emphasis added)
In the last analysis, these reports became central to the trial judge’s finding as to the entitlement to punitive damages. She said:
I find that the plaintiff is entitled to punitive damages and I am awarding those damages in the amount of $32,000. In fixing that amount, I have in mind that, here, there are no allegations of dishonesty and the amount should be less than in Ribeiro [Ribeiro v. Canadian Imperial Bank of Commerce (1989), 67 O.R. (2d) 385 (H.C.J.)]. Indeed, the reprehensible conduct is of a different nature. It consists of a refusal to recognize entitlement or to assist the plaintiff when entitlement should have been recognized and the plaintiff given assistance and the failure to provide evidentiary material it was required by law to provide.
In awarding punitive damages in the amount of $32,000, I have done so on the basis that the conduct of the defendant became progressively more outrageous. I have, roughly speaking, calculated the damages at the rate of $1,000 per month from December 1995 to November 1996 for a total of $12,000 and thereafter at the rate of $2,000 per month with a somewhat higher rate for this partial month of September for a total of $20,000 for this period.
Issues
This action began as a claim against Westinghouse for a declaration that the respondent’s contract of employment had been wrongfully terminated and for ancillary relief relating to his loss of benefits resulting from such termination. However, by the time the matter came to trial, the action was restricted to a claim for loss of benefits simpliciter. At the conclusion of the evidence, the parties announced that Westinghouse had settled the benefits claim by agreeing to re-establish the respondent’s eligibility for all benefits. The issues before us are:
1. Was the respondent entitled to aggravated damages as a result of Westinghouse’s alleged failure to assist him in obtaining long-term disability benefits?
2. Was the respondent entitled to punitive damages?
Analysis
The respondent abandoned his wrongful dismissal claim before the trial began. The secondary actionable wrong, that Westinghouse failed to recognize and support the respondent’s entitlement to long-term disability benefits, then became the primary cause of action. At the conclusion of the evidentiary portion of the trial, the parties settled the compensatory element of the new primary claim. The trial judge was left with the task of determining if there was any basis in the evidence to support awards for aggravated and punitive damages. Aggravated damages are compensatory, while punitive damages, as the name implies, constitute a punishment imposed upon a person by the court. Before either aggravated or punitive damages can be awarded, a separate actionable wrong must be demonstrated by the plaintiff.
Aggravated Damages
Although the respondent had abandoned the wrongful dismissal claim, the trial judge failed to appreciate that it was no longer the primary cause of action to which a separate actionable wrong could attach. She found that “Westinghouse failed in its duty to the plaintiff by dismissing him without assisting him to obtain long-term benefits under the income protection plan of the company” (emphasis added). By abandoning the claim for wrongful dismissal, the respondent impliedly accepted that Westinghouse was entitled to terminate his employment because, by reason of his injury, the respondent was incapable of performing his regular job or any other job that was available at Westinghouse. To the extent that the trial judge’s above finding is limited to the issue of the liability of Westinghouse for its failure to pursue the respondent’s entitlement to long-term benefits from Mutual Life, it ignores all of the evidence, including the conduct and assertions of the respondent, that the respondent was not disabled within the definition in the income protection plan at the time he was terminated. As soon as the respondent changed his position, at a time when he could qualify for second tier benefits, Westinghouse passed his application along to Mutual Life.
More important to this appeal, in awarding aggravated damages for mental distress, the trial judge stated that the suffering of the respondent “arose directly out of the wrongful conduct” of Westinghouse, i.e., “by dismissing him without assisting him to obtain long-term benefits under the income protection plan of the company”. The trial judge reasoned that it was in the contemplation of the parties at the time they entered into the employment relationship that “his dismissal and denial of benefits in the circumstances of this case would cause him to suffer mental distress”. This is a direct award of damages arising out of a claim for wrongful dismissal. As such, it is a misstatement of the law.
This idea that damages for mental distress may arise in wrongful dismissal actions because they were in the contemplation of the parties at the time they entered into the contract of employment was rejected by the majority of the Supreme Court of Canada in Vorvis, supra. McIntyre J., for the majority of the court, referred to the modern labour law principle that, in the absence of a collective agreement, either party can terminate the contract by giving appropriate notice. Accordingly, the only damages that can arise from termination must relate to the failure to give such notice. He then stated at pp. 1103-04 S.C.R., p. 205 D.L.R.:
I would not wish to be taken as saying that aggravated damages could never be awarded in a case of wrongful dismissal, particularly where the acts complained of were also independently actionable, a factor not present here. As noted by Hinckson J.A. in the Court of Appeal, at p. 46: It was not suggested by the plaintiff that Reid’s actions in the months prior to his termination constituted a breach of contract. Upon the basis of the reasoning in the Brown case, Reid’s conduct was not a separate head of damages in the claim for breach of contract.
His reference to the Brown case was to the words of Weatherston J.A. in Brown v. Waterloo Regional Board of Com’rs of Police, supra [(1983), 43 O.R. (2d) 113, 150 D.L.R. (3d) 729 (C.A.)], p. 736, where speaking for the court, he said: If a course of conduct by one party causes loss or injury to another, but is not actionable, that course of conduct may not be a separate head of damages in a claim in respect of an actionable wrong. Damages, to be recoverable, must flow from an actionable wrong. It is not sufficient that a course of conduct not in itself actionable be somehow related to an actionable course of conduct.
There was but one cause of action and that was for failure to acknowledge and support the respondent’s claim for long-term disability payments. I am not sure that there is such a cause of action, but if there is, it is necessary to find an additional actionable wrong to support claims for aggravated damages.
In making her finding of liability, the trial judge relied upon Tarailo v. Allied Chemical Canada Ltd. (1989), 68 O.R. (2d) 288, 26 C.C.E.L. 209, a decision of R.E. Holland J. of the High Court of Justice. While there are many factual similarities to the case on appeal, it is noteworthy that Tarailo was restricted to a claim for compensatory damages. There was no discussion of aggravated or punitive damages.
In Tarailo, the employee was disabled by reason of mental illness, an illness that was not apparent to his employer because it was not disclosed. His discharge for failing to properly perform his work terminated his entitlement to permanent disability benefits. The trial judge found: I am satisfied that Mr. Tarailo was prevented by illness from working and earning his regular income in the six-month period following September 6, 1978 [the date of his termination]. There is little evidence to the contrary. He did attempt to engage in some stock market activity without much success. He suffered from the delusion that he had solved the secret of the stock market. He was seriously mentally ill.
. . . . .
Mr. Tarailo was a permanent full-time employee of Allied when he became ill. He became entitled to benefits when his illness prevented him from working. Allied could not cut off Mr. Tarailo’s benefits by discharging him or by telling him he was to be discharged and then accepting his resignation.
Tarailo brought an action for wrongful dismissal. He also claimed damages because he was wrongly denied his short- and long-term disability benefits. The wrongful dismissal claim against his employer was dismissed, but the action against the employer and the insurer for the benefits was successful.
As I understand the facts, the employer could not have known of the employee’s mental illness prior to the decision to terminate him. However, after the supervisor received correspondence from the employee chronicling his illness and stating that he was receiving treatment, the employer should have realized that employee had been mentally ill for some time. The supervisor had forms for application to the insurer for disability benefits, but did not feel it was his responsibility to bring this avenue of relief to the employee’s attention. In the opinion of the trial judge, he should have done at least that. The employer had a responsibility to assist in putting forward an employee’s application for disability benefits because it had undertaken to do so in a brochure setting out the benefits. In these circumstances the trial judge found that for the purposes of dealing with the benefits, the employer was the agent of the insurer. In the course of his reasons he said at p. 299:
It should have been in the contemplation of the officers or employees of Allied, upon receiving the letters of November, 1979, that carelessness on their part may be likely to cause damage to their ex-employee. It was not up to them to decide whether or not there was a valid claim but rather to “assist in completing the required forms”. Mr. Tarailo may well have been so mentally ill that he did not appreciate that he might have a claim. I conclude that a duty was owed to him. There do not appear to be any considerations which ought to negative, or to reduce or limit the scope of the duty or the damages to which a breach of it may give rise. Allied did nothing to assist Mr. Tarailo.
In the unique circumstances of Tarailo, Holland J. held that the employee had become disabled prior to his discharge and accordingly was entitled to claim the short- and long-term disability benefits stipulated in his employment contract. The reason for the employee’s termination was irrelevant. The nature of the employee’s illness prevented him from recognizing his disability and in fairness prevented his supervisors from realizing that the erratic conduct that led to his discharge was caused by that illness. The fact that recognition of Tarailo’s disability was not possible until after his discharge did not disentitle him to claim the disability benefits earned under his contract of employment. The company was liable for the short-term benefits and the insurer for the long-term benefits. The insurer could not rely upon the late submission of an application for these benefits because the company was its agent for the purpose of passing the application to the insurer. Properly understood, Tarailo is not a precedent for a stand- alone cause of action for disability benefits arising out of Westinghouse’s “breach of its good faith obligations”. The judgment was a recognition of disability benefits accrued by Tarailo under his contract of employment.
In the case on appeal, the action for a declaration of wrongful termination was abandoned and the claim for compensatory damages for loss of benefits under the benefits package was settled. Therefore, there is no need to explore whether there was a basis in law for either claim. However, accepting the submission of the respondent that the issue of liability for the loss of benefits was still alive for the purpose of resolving the outstanding claim for aggravated damages, there is no room for a further finding that there is an actionable wrong to support a claim for aggravated damages. The same observation will be pertinent to the claim for punitive damages.
Punitive Damages
While aggravated damages are compensatory, punitive damages constitute a punishment imposed upon a person by the court. However, the punishment cannot be imposed simply because the trier of fact disapproves of that person in the abstract. It was put this way by McIntyre J. in Vorvis, supra, at pp. 1105-06 S.C.R., p. 206 D.L.R.:
When then can punitive damages be awarded? It must never be forgotten that when awarded by a judge or a jury, a punishment is imposed upon a person by a Court by the operation of the judicial process. What is it that is punished? It surely cannot be merely conduct of which the court disapproves, however strongly the court may feel. Punishment may not be imposed in a civilized community without a justification in law. The only basis for the imposition of such punishment must be a finding of the commission of an actionable wrong which caused the injury complained of by the plaintiff. The two requirements for an award of punitive damages were stated by Laskin J.A. at para. 22 of his judgment in Whiten v. Pilot Insurance Co. (1999), 42 O.R. (3d) 641 at p. 649, [1999] O.J. No. 237:
For an award of punitive damages to be made, two requirements must be met: first, the defendant must have committed an independent or separate actionable wrong causing damage to the plaintiff; and second, the defendant’s conduct must be sufficiently “harsh, vindictive, reprehensible and malicious” [Vorvis, p. 208] or “so malicious, oppressive and high-handed that it offends the court’s sense of decency” [Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at p. 1208].
In Whiten, this court expanded the concept of actionable wrong as the basis for an award of punitive damages. The court accepted that a claim against an insurer that it dealt with an insurance claim in bad faith could be classified as a separate actionable wrong in an action on the policy for damages for the insurance loss. In other words, the breach of an insurer’s obligation to act in good faith is a separate or independent wrong from the wrong for which compensation is paid.
However, no separate actionable wrong exists in the case on appeal and none is articulated as such by the trial judge. Indeed, as I indicated earlier, the trial judge appears to have proceeded on the basis that she was entitled to award punitive damages almost exclusively because of the treatment by counsel for Westinghouse of the two assessment reports by Dr. Galway. There are two problems with this approach.
First, a breach of the Rules of Civil Procedure does not constitute an actionable wrong. An award of costs will generally be the appropriate sanction for trial misconduct. For example, in Gerula v. Flores (1995), 126 D.L.R. (4th) 506 (Ont. C.A.), Weiler J.A. stated at p. 527: “solicitor-and-client costs should relate to the conduct of the action and not to the conduct which might have been the subject of punitive damages”. Although she awarded punitive damages for the “highly unethical conduct” of the defendant, she held that solicitor-and-client costs were the appropriate sanction for subsequent trial misconduct.
The obligation of counsel for the appellant to produce the reports is found in the Rules of Civil Procedure (rule 33.06(2)) and those same rules expose the appellant to two sanctions for failure to comply. One is the striking out of the statement of defence (rule 33.07) and the other is an award of costs. The trial judge declined to impose the first sanction and imposed the second in the form of an award of solicitor and client costs from the end of August 1987 until trial and thereafter.
The second problem is that the respondent has failed to establish the second requirement of Laskin J.A. as to the nature of the conduct that could be the basis for punitive damages. Westinghouse’s conduct must be sufficiently “harsh, vindictive, reprehensible and malicious” or “so malicious, oppressive and high-handed that it offends the court’s sense of decency”. The overall conduct of the appellant cannot possibly attract the pejorative language necessary for punitive damages. In point of fact, the trial judge did not even attempt to make such a finding. I have a great deal of sympathy with the position of the appellant that she should not have treated Dr. Galway’s reports as conclusive of the issue whether the respondent was permanently disabled from the date of his injury. In my view, the trial judge read too much into these two reports. Dr. Galway was called as a witness and testified as to the disabling symptomatology of back pain. He was forced to rely upon the respondent’s subjective impressions as to the extent of his pain. He knew nothing about the respondent’s earlier assertions and actions that were intended to demonstrate that the respondent was capable of working. Dr. Galway conceded that the accuracy or correctness of his opinion depended upon the accuracy of the respondent’s reporting of his medical history.
Disposition
Accordingly, I would allow the appeal and set aside the judgment below awarding aggravated and punitive damages. I would allow the appellant its costs of the appeal. I would not, however, interfere with the award of costs below. The trial was necessary and the settlement with the appellant did not take place until all the evidence was in. A cost sanction for the failure to deliver the reports of Dr. Galway was also justified.
Appeal allowed.