Name of case: Honda Canada Inc. v. Keays

Court appealed from and date of judgment: Judgment of the Ontario Court of Appeal dated September 29, 2006

Facts: The case involves Kevin Keays, a Honda Canada employee who began suffering from chronic fatigue syndrome shortly after he was hired in 1986, although this disability was not diagnosed until 1997. Keays' health deteriorated to the point where he was off on disability from October 1996 until December 1998, when he was forced to return to full-time work after his long-term disability benefits were cut off because his doctor's diagnosis of chronic fatigue syndrome could not be supported by "objective medical evidence." Having received disciplinary "coaching" for his repeated absences and been subjected by the employer to various harassing tactics, Keays was required by Honda to meet with a company doctor who threatened to have him removed from less strenuous duties and returned to the production line, even though his physical condition precluded such work.

Later, in March 2000, Honda insisted that Keays meet with the company's occupational medicine specialist who, he suspected, intended to dismiss his medical condition and pressure him to refrain from any more absences, while cutting him off from his own physician's advocacy. When Keays refused, the company fired him for insubordination. Keays then sued for wrongful dismissal.

Case History: In a March 17, 2005 decision, Ontario Superior Court Judge John McIsaac awarded Keays damages in lieu of notice, including nine months of extended notice as Wallace-type damages, totaling 24 months' pay. He was also scathing in his criticism of the employer. Finding that "Honda committed a litany of acts of discrimination and harassment in relation to [Keays'] attempts to resolve his accommodation difficulties," McIsaac referred to the decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 and concluded that "[a]s Binnie, J. stated in Whiten ..., a 'large whack' is required to 'wake up a wealthy and powerful defendant to its responsibilities'." To that end, he awarded Keays punitive damages of $500,000 against Honda. In a separate decision on costs, McIsaac awarded Keays the costs of the litigation on a substantial indemnity basis, meaning that the costs were fully rather than partially covered. In addition, he awarded a 25 percent premium, amounting to $155,000, to Keays' lawyer in recognition of the fact that the lawyer had handled the case without any certainty of ever being paid.

On September 29, 2006, delivering the majority decision of a three-member panel of the Ontario Court of Appeal, Justice Marc Rosenberg held that the trial judge had based the magnitude of the punitive damages award on a number of findings of fact that were not supported by the evidence.

Rosenberg determined that McIsaac had no factual basis for finding that Honda's misconduct was "planned and deliberate and formed a protracted corporate conspiracy." The trial judge's statement that Honda's "outrageous conduct has persisted over a period of five years without a hint of modification of their position that Mr. Keays was the one in the wrong" amounted to "a palpable and overriding error," Rosenberg ruled, because "this case concerns a period of seven months not five years." The Court of Appeal judge also took issue with the trial judge's finding that "Honda ran amok as a result of their blind insistence on production 'efficiency'," stating that "I see nothing in this record to show that [Honda] 'ran amok'…. [T]he record does not support this grave allegation of corporate malfeasance leveled at [Honda] by the trial judge."

Rosenberg noted that the $500,000 punitive damages award was on the same scale as the one million dollar award in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 592 and the $800,000 award in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, but he observed that "[p]unitive damage awards in other wrongful dismissal cases have been far more modest even in the face of serious misconduct such as slander of the employee. The awards in such cases have been in the range of $15,000 to $50,000 and, rarely, up to $75,000."

While he acknowledged that Whiten was the most reasonable comparator because it, like the present case, dealt with breach of contract, Rosenberg considered that "[t]wo factors stand out when comparing the two cases. First, in Whiten there was a two-year period of escalating misconduct up to the trial. Here the misconduct was for no more than seven months and is largely focused on the events of March [2000].... Second, in Whiten, the defendant persisted in its course of conduct, based on a theory that the plaintiff deliberately set the fire, in the face of repeated findings from its own experts and advisors that the fire was accidental. Binnie J. described the defendant's attitude to the plaintiffs at para. 4 as 'harsh and unreasoning opposition' and an attempt to 'exploit a family in crisis.' That is not the case here. [Honda] had advice, albeit wrong and based on incomplete information, that caused it to question [Keays'] disability and it had, for almost a year, accommodated his absences."

In Rosenberg's view, "[b]earing in mind the trial judge's findings that can be supported by the evidence, and in particular the findings that the conduct by [Honda] was planned and deliberate and designed to intimidate and ultimately terminate the employment of a particularly vulnerable employee and that [Honda] was aware of its continuing duty to accommodate, an award in excess of those awarded in other wrongful dismissal cases is appropriate." However, he ruled that, "given the compensatory damages awarded, especially the Wallace damages, and that there were no special factors requiring deterrence such as a pattern of abuse or the kind of conduct found in Whiten, as well as the relatively short duration of the misconduct, in my view, an award of no more than $100,000 can be justified." While the Court was split on whether to reduce the punitive damages award, the three-member panel unanimously agreed that the 25 percent premium on costs awarded to Keays' lawyer should be halved, to $77,500.
 
Issue(s): (1) Whether punitive damages for wrongful dismissal are available if an employer's conduct was discrimination or harassment that breached human rights legislation; (2) whether a trial judge should conduct independent research other than as to matters of law and, if so, what procedures are required; (3) whether a punitive damages award should be reduced on appeal without increasing compensatory damages; (4) what effect should the proportionality analysis have on compensatory and punitive damage awards?    

Status: Heard February 20, 2008. Judgment Reserved.
 
Lancaster Reference: For analysis of the Ontario Court of Appeal's decision, see Lancaster's Wrongful Dismissal E-Bulletin,November 7, 2006, Issue No. 163.

Court of Appeal decision: http://www.lancasterhouse.com/decisions/2006/sep/OCA-Keays.pdf