Court of Appeal Decision of the Week

Civil Procedure/Employment Law: When is an Expert Needed/Not Needed?

Case: Lau v. Royal Bank of Canada, 2017 BCCA 253 (CanLII)

Keywords: Employment; Wrongful Dismissal; Dismissal for Cause; Aggravated Damages; Evidence; Mental Distress; Saadati v. Moorhead, 2017 SCC 28 (CanLII)

Synopsis:

The Respondent, Mr. Marco Lau, is a Royal Bank of Canada (RBC) employee subject to the Royal Mutual Funds Inc. (RMFI) compliance manual. Following a complaint and investigation by RBC’s “Corporate Investigation Services” (CIS), it is discovered Mr. Lau tracks sales incorrectly – recording them as “new money” to artificially increase his sales figures.

RBC dismisses Mr. Lau for cause and provides a letter stating as follows:

… your employment with Royal Bank of Canada is terminated for cause … as a result of your falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client. In particular, you claimed existing money as new to bolster your sales, and maintained that you participated in a joint session with a client despite evidence to the contrary.

Your actions demonstrate a serious lack of good judgment. Of further concern is the fact that you have acted contrary to our Code of Conduct, specifically Integrity, Integrity of Records and Telling the Truth. Through your actions, we have lost confidence in your honesty, integrity and trustworthiness. (See para. 8).

At trial, Mr. Lau testifies he felt “horrible” and “lost” following his termination because he anticipated working with RBC for a long time. The Trial Judge determines Mr. Lau’s actions amount to misconduct, not cause for dismissal. She also finds the CIS investigation to be flawed and that Mr. Lau was wrongfully dismissed.

Referring to Mr. Lau’s testimony, the Trial Judge awards $30,000 aggravated damages and states “I do not need medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress”. (See summary at paras. 14-16).

The Appellants challenge the Trial Judge’s aggravated damages award on the following grounds:

  1. the judge made palpable and overriding errors in determining the dismissal was made unfairly or in bad faith, and
  2. in any event, there was no evidentiary foundation for an award of aggravated damages in this case.

The Court of Appeal allows the appeal on the second ground (finding it unnecessary to “deal with” palpable and overriding error (See para. 3)), sets aside the award for aggravated damages.

Importance:

The Court of Appeal acknowledged the standard of review mandates deference and a requirement to show palpable and overriding errors in the decision below. (See paras. 35-36). Despite its description of the standard as being deferential, the Court of Appeal ultimately relied on the decision in Woelk v. Halvorson, 1980 CanLII 17 (SCC). Woelk provided the Court of Appeal authority for the proposition that an absence of evidence to support the Trial Judge’s conclusion entitles it to “substitute its own view of a proper award”. (See para. 37).

Citing principles from Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC) and Honda Canada Inc. v. Keays, 2008 SCC 39 (CanLII), the Court of Appeal found that, to receive aggravated damages based on mental distress, an employee is required to demonstrate the manner of dismissal caused injury rising beyond the “normal distress” and “hurt feelings” which ordinarily accompany a dismissal for cause. In the present case, the Court of Appeal found Mr. Lau did not adduce enough evidence to discharge that burden.

Citing the Supreme Court of Canada’s recent decision in Saadati v. Moorhead, 2017 SCC 28 (CanLII), the Court of Appeal held there is no requirement of expert testimony to demonstrate legally compensable mental injury. Although Saadati was a torts case, the Court of Appeal found the test for mental distress is “…in principle, the same in contract and in tort” (See para. 48). For the Court of Appeal, while no expert testimony was specifically required to prove distress, something more was required to show the distress suffered by Mr. Lau went beyond “normal distress” associated with termination.

For the Court of Appeal, the Trial Judge based her award on “the slow, quiet, and almost monotone manner in which [the plaintiff] testified”. (See para. 53). Since there was no further evidence concerning the impact of the termination on Mr. Lau (something to suggest he experienced anything more than “the normal distress and bad feelings resulting from the loss of employment” (See para. 57)), the Court set aside the award for aggravated damages. (See paras. 68-72).

Counsel for the Appellants: Lorene Novakowski (Fasken Martineau DuMoulin LLP, Vancouver)

Counsel for the Respondent: Ryan Parsons & Steven Hoyer (Eyford Macaulay Shaw & Padmanabhan LLP, Vancouver)

Posted: Wednesday, July 12, 2017