The Ontario Court of Appeal recently affirmed a finding of malicious prosecution against Galway-Cavendish and Harvey Township (the “Township”) and ordered the Township to pay punitive  damages of $450,000. The plaintiff commenced litigation against the Township when he was dismissed  after almost a decade of employment. The parties’ history  together included a police  investigation, a criminal trial, an initial trial of the lawsuit, an appeal of that trial decision,  a denied leave application to the Supreme Court of Canada, two re-trials and another appeal.

FACTS

The plaintiff worked as the Township’s Chief Building Official from 1989 until December 1998, when he was terminated as a result of alleged discrepancies in building permit fees  collected. Following the plaintiff’s termination, the Township conducted an investigation and turned some information over to the Ontario Provincial Police (“OPP”). Despite  initial reluctance on the part of the OPP, criminal charges were ultimately laid. The plaintiff was  acquitted after trial. Local media covered the criminal proceedings extensively. The plaintiff then sued, claiming damages for wrongful dismissal, malicious prosecution and reputational injuries. He also sought special damages  for his criminal trial defence costs, punitive and aggravated damages. The plaintiff died in 2011,  and his estate continued with  the litigation.

PROCEDURAL HISTORY

By the time the plaintiff’s action proceeded to the first trial, the Township had conceded that he  was entitled to wrongful dismissal damages in an amount equal to 12 months’ wages. At trial, 

the malicious prosecution claim was rejected; however, the plaintiff was awarded $23,413 for the manner of his dismissal, $7,500 in special  damages for the costs of his criminal trial, $75,000 in general and aggravated damages, $25,000 in  punitive damages, pre-judgment interest and costs on a substantial indemnity basis.

The plaintiff appealed the malicious prosecution ruling and the $25,000 punitive damages award. The  Court of Appeal allowed the appeal, set aside the punitive damages award, and ordered two new,  separate trials: one on the quantum of punitive damages and one on the malicious prosecution issue. The Township’s application for  leave to appeal the decision to allow a retrial on the malicious prosecution issue was dismissed by  the Supreme Court of Canada.

On the retrial of the punitive damages award, the trial judge awarded the plaintiff $550,000 in  punitive damages, increasing the amount awarded at the first trial by $525,000. On the retrial of the malicious prosecution claim, the trial judge found the Township liable. The Township  appealed both decisions to the Court of Appeal.

COURT OF APPEAL

In affirming the finding of malicious prosecution, the Court of Appeal held that all four elements   of the test for malicious prosecution were present. Specifically, the criminal proceedings were  “initiated” by the Township; they ended in the plaintiff’s favour; there was no reasonable and  probable cause for the prosecution; and the Township acted maliciously.

The Township’s appeal focussed on the first element of the test for malicious prosecution, and the  Court of Appeal rejected the Township’s argument that it did not initiate the criminal proceedings.  The Court of Appeal found that the Township’s employee withheld exculpatory evidence from the OPP that the OPP could not have been expected to uncover. The Township’s employee  provided information to the OPP that he knew to be false, undermining the independence of the police investigation. This conduct  was sufficient to satisfy the “initiation” element of the malicious prosecution test.

With respect to the punitive damages award,  the Township argued that the trial judge’s award of  $550,000 was neither warranted by the Township’s misconduct, nor rationally necessary to satisfy  the objectives of punitive damages namely, retribution, deterrence and denunciation.

The Court of Appeal stressed that an award of punitive damages must be considered in light of any  damages previously awarded to the plaintiff. Compensatory damages and costs awards contain punitive  elements. The sum of all awards must produce an amount that is rationally required to punish the  defendant and meet the objectives of punitive damages.

Based on the fact that the Township’s conduct in this case was egregious, prolonged and of great  adverse impact, and considering the amounts the plaintiff had already been awarded, the majority of  the Court of Appeal held that a punitive damages award in the amount of $450,000 was appropriate.

IMPLICATIONS

The facts in this case are quite extreme and involve egregious conduct on the part of a municipal  employee. Comparable cases would likely be very rare. Nevertheless, this decision is notable for  municipalities who could find themselves exposed to potentially uninsured and very significant punitive damages awards for the egregious conduct of a single employee.