A trial judge’s assessment of damages is usually entitled to significant deference on appeal. Even so, when it comes to awarding punitive damages, appellate courts have a more interventionist role. But how interventionist? This is the question that divided the Ontario Court of Appeal in Pate Estate v. Harvey (Township).

The case arose from an acknowledged wrongful dismissal where the dismissal led to, among other things, criminal charges that resulted in an acquittal. After an unusual litigation history (which involved two re-trials after a trip to the Court of Appeal), the trial judge concluded that the defendant was also liable for malicious prosecution, and that the plaintiff should be awarded $550,000 in punitive damages. Lauwers J.A. wrote for a unanimous court dismissing the appeal from the finding of malicious prosecution.

But when it came to the issue of punitive damages, he found himself dissenting. Cronk J.A. (Doherty J.A. concurring) allowed the appeal and reduced the award to $450,000. She held:

[201] … it must be borne in mind that the standard of appellate review applicable to a trial judge’s award of punitive damages is whether “a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant’s misconduct” (emphasis added): Whiten, at paras. 96 and 107.

[202]    This standard emphasizes an appellate court’s supervisory obligation to ensure that an award of punitive damages is “the product of reason and rationality”: Whiten, at para. 108. Consequently, the Supreme Court held in Whiten, at para. 109:

If the award of punitive damages, when added to the compensatory damages, produces a total sum that is so “inordinately large” that it exceeds what is “rationally” required to punish the defendant, it will be reduced or set aside on appeal.  [Emphasis added.]

Cronk J.A. accepted that the trial judge noted this at the outset but she considered it troubling that the trial judge did not again mention or consider the other damages and costs to which the plaintiff was already entitled in his assessment of punitive damages. It had been agreed that the plaintiff was already entitled to other damages, by agreement of the parties or judgment of the court, in the aggregate amount of $132,513, apart from his proven special damages. Cronk J.A. held that the trial judge did “not advert to these damages or their significance when attempting to quantify a rational and proportionate punitive damages award” (para. 208).

Cronk J.A. emphasized that punitive damages are only to be awarded “in those circumstances where the combined award of general and aggravated damages would be insufficient to achieve the goal of punishment and deterrence” (para. 213, quoting Whiten) and the trial judge also failed to consider the punitive element of the compensatory damages.

Moreover, Cronk J.A. felt that the substantial indemnity costs which the plaintiff had been rewarded throughout the litigation also should have reduced the plaintiff’s entitlement to punitive damages:

[217]    I recognize that an award of substantial indemnity costs may be appropriate in a case where punitive damages are also awarded.  The trial judge made no error in deciding, in the exercise of his wide discretion concerning costs, to award substantial indemnity costs in this case.  And, of course, substantial indemnity costs are directed in part at the misconduct of a defendant.  But that is not the critical point.  In this case, the costs of the First Trial and the costs premium were awarded to Mr. Pate before the retrial on punitive damages and were undisturbed by the decision of this court on the First Appeal.  Both the costs award and the costs premium had punitive elements.

[218]    In these circumstances, it is my view that the trial judge was obliged to take the punitive components of his prior costs award and costs premium into account when quantifying a fit punitive damages award.  To do otherwise would be to ignore the full scope of the penalties imposed on the Township for its misconduct.  The trial judge failed to do so.

In light of the principles she had discussed, she ultimately concluded that an award of $450,000 was appropriate:

[239]    When the full circumstances of this case are considered, including the total compensation to which Mr. Pate is already entitled under the trial judge’s other damages awards, his costs award and the costs premium, and by the parties’ agreement concerning wrongful dismissal damages, I conclude that a punitive damages award in the amount of $450,000 is sufficient to meet the need for additional punishment of the Township.  An award in this amount amply denounces the Township’s conduct and achieves the additional objectives of retribution and deterrence.

Lauwers J.A. agreed that :

[99] … an appellate court owes a lesser degree of deference to a jury award of punitive damages than to a compensatory award. This standard also applies, by inference, to a punitive damages award made by a judge sitting alone. The award of punitive damages need not be so large as to shock the appellate court’s conscience before it may interfere; it is sufficient if the award’s size offends the court’s sense of reason.

However, Lauwers J.A. felt the trial judge properly instructed himself on the principles of proportionality and the relationship between punitive damages and compensatory damages. He accepted that a plaintiff is not to be overcompensated by receiving excessive compensation due to both mental distress damages and punitive damages. But he rejected the defendant’s argument that that the same behaviour could not be considered under both headings of damages. Looking at the Supreme Court authorities, he concluded:

[115] … In my view, the word ‘double’ or ‘duplicate’ in these cases is no more than a figure of speech.  It gets at the issue of real concern, which is to avoid over-compensating the plaintiff by way of an excessive award of punitive damages.

He disagreed with Cronk J.A. that the trial judge had not taken account of the other damages rewarded, instead holding that:

[126] … Although the trial judge did not mention in the Punitive Damages reasons the actual amounts that he awarded to Mr. Pate as the result of the First Trial, I am not prepared to draw the inference from that omission that he did not take account of them in quantifying punitive damages.

In light of the trial judge’s proper consideration of the principles, Lauwers J.A. concluded:

[148] … the trial judge did not err in principle by placing the award of punitive damages towards the high end of the spectrum, even with a large award of $100,000 by way of mental distress damages. This placement towards the high end of the spectrum is appropriate and does comport with the principles and the outcomes in Hill, Whiten and McNeil. Further, in my view, the range of damages set by the cases referred to by the Township only confirms the comparative fitness of the specific cases on which the trial judge based his punitive damages award.

Lauwers J.A. did not agree with the trial judge that the facts here were worse than McNeil (where $500,000 had been awarded) but concluded that “in light of the Supreme Court’s approach in Whiten, this court should not interfere with a punitive damages award where the difference on a sizeable base of $500,000 is only $50,000” (para. 156). Cronk J.A. explicitly disagreed with this conclusion.

Lauwers J.A. also disagreed that the large costs awards should inform the punitive damages calculation, holding the costs should remain “something uniquely within the trial judge’s discretion,” that cases where punitive damages are awarded will often also result in awards for substantial indemnity costs, and that the authorities suggested these should be treated distinctly.

When expressing his disagreement with his colleague, he stated as follows:

[165]    I have had the benefit of reading the reasons of my colleague, Cronk J.A. in draft. I take a different approach, for the following reasons. My view is that this is an error correction decision. In considering whether a trial judge made an error that warrants correction, an appellate court can really only look to what the trial judge said and what he or she did in the specific factual context, the legal context and the larger context.

[166]    As I have already discussed, the trial judge was well-briefed on the applicable principles. He had the reasons of this court in the First Appeal to consider, and he had full argument. He had obviously read Whiten, Hill and McNeil; no purpose would have been served by him extensively quoting from them, since he got the principles right.

[167]    Since the trial judge heard full argument, self-instructed properly, and cited the right cases, an error is not plain on the face of the reasons. As noted earlier, I do not view the fact that the trial judge did not recite the actual amounts that he already granted as a reasonable basis for inferring that he erred in his reasoning.  I do not think that there is a warrant for imputing to the trial judge the error that he somehow forgot what he had already awarded despite reciting the operative principles.

[168]    Where the error is not express, an appellate court must look at the result.  Arguably the trial judge erred in setting the award of punitive damages $50,000 above the jury award in McNeil. As I said earlier, there is no material difference between these cases, in my view. McNeil, being a jury decision, is a reasonable basis for comparability, according to Whiten, at paras. 96 and 107; it sets a reasonable punitive damages number, in a case where wrongful dismissal damages and aggravated damages in a significant sum were also awarded. If the trial judge had seriously departed from McNeil I would have found a basis for inferring that he made a reasoning error, but he did not.

[170]    I am unable to agree that the trial judge asked himself the wrong question or that he saw determining whether punitive damages serve a rational purpose as the task that he actually set for himself in the re-trial or that he undertook.