Keays v. Honda Canada Inc., (2008) 376 N.R. 196 (SCC)

• Judge: McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ.
• Court: Supreme Court (Canada)
• Case Date: February 20, 2008
• Jurisdiction: Canada (Federal)
• Citations: (2008), 376 N.R. 196 (SCC);2008 SCC 39;[2008] SCJ No 40 (QL);66 CCEL (3d) 159;63 CHRR 247;[2008] ACS no 40;376 NR 196;[2008] 2 SCR 362;239 OAC 299;[2008] CarswellOnt 3743;294 DLR (4th) 577;92 OR (3d) 479;JE 2008-1354

Keays v. Honda Can. Inc. (2008), 376 N.R. 196 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

.........................

Temp. Cite: [2008] N.R. TBEd. JN.040

Honda Canada Inc. operating as Honda of Canada Mfg. (appellant/respondent on cross-appeal) v. Kevin Keays (respondent/appellant on cross-appeal) and Canadian Human Rights Commission, Ontario Human Rights Commission, Manitoba Human Rights Commission, Alliance of Manufacturers & Exporters Canada, Human Resources Professionals Association of Ontario, National ME/FM Action Network, Council of Canadians with Disabilities, Women's Legal Education and Action Fund and Ontario Network of Injured Workers' Groups (intervenors)

(31739; 2008 SCC 39; 2008 CSC 39)

Indexed As: Keays v. Honda Canada Inc.

Supreme Court of Canada

McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ.

June 27, 2008.

Summary:

Keays was terminated by Honda Canada Inc. after 14 years of employment for failing to obey a directive to meet with its occupational medicine specialist. Keays sued Honda for damages for wrongful dismissal.

The Ontario Superior Court, in a decision reported [2005] O.T.C. 222, allowed the action and fixed 15 months as the period of reasonable notice, plus nine months for the manner of Keays' dismissal (i.e., Wallace damages). The trial judge also awarded $500,000 in punitive damages because he found that Honda's treatment of Keays was both outrageous and high-handed. The judge also awarded Keays costs on a substantial indemnity basis together with a 25% premium. Honda appealed each of these findings and also alleged bias on the part of the trial judge. Keays cross-appealed the dismissal of his claims for intentional infliction of emotional stress, discrimination and lost disability benefits.

The Ontario Court of Appeal, in a decision reported 216 O.A.C. 3, dismissed the appeal and cross-appeal. The court unanimously upheld the finding of wrongful termination as well as the regular damages and the damages for manner of dismissal (Wallace damages). The court also reduced the quantum of punitive damages from $500,000 to $100,000 and reduced the costs premium. Goudge, J.A., dissenting in part, would have reduced the costs premium only. Honda appealed. Keays cross-appealed the reduction of punitive damages.

The Supreme Court of Canada, Lebel and Fish, JJ., dissenting in part, allowed the appeal in part. The court upheld the regular damages (i.e., the damages based on the 15 month notice period). The court held however that the Court of Appeal erred in maintaining the damages for the manner of dismissal (Wallace damages) and simply reducing the quantum of punitive damages. Those awards, as well as the costs premium, were thus set aside. The court dismissed the cross-appeal.

Damage Awards - Topic 1454

Contracts - Employment contracts - Wrongful dismissal - [See Damage Awards - Topic 2014 ].

Damage Awards - Topic 2014

Exemplary or punitive damages - Wrongful dismissal - Keays was terminated by Honda Canada Inc. after 14 years of employment - He developed Chronic Fatigue Syndrome (CFS) and was directed by his employer to meet with its occupational medicine specialist - Keays declined to do so without clarification from Honda as to the purpose of the meeting, the methodology to be used, and the parameters of the doctor's assessment - Honda refused to provide him with such clarification, and terminated him for disobeying its direction - Keays sued for damages for wrongful dismissal - The trial judge allowed the action and fixed 15 months as the period of reasonable notice, plus nine months for the manner of Keays' dismissal (i.e., Wallace damages) - The trial judge also awarded $500,000 in punitive damages because he found that Honda's treatment of Keays was both outrageous and high-handed - Honda appealed, challenging all of the trial judge's conclusions - The Ontario Court of Appeal dismissed the appeal, except for reducing the punitive damage award to $100,000 and reducing a costs premium - Honda appealed - Keays cross-appealed the reduction of punitive damages - The Supreme Court of Canada upheld the 15 month notice period, but held that the Court of Appeal erred in maintaining the damages for the manner of dismissal (Wallace damages) and simply reducing the quantum of punitive damages - Those awards, as well as the costs premium, were thus set aside - The court dismissed the cross-appeal.

Damages - Topic 1326

Exemplary or punitive damages - Wrongful dismissal - [See Damage Awards - Topic 2014 and first Master and Servant - Topic 7712 ].

Master and Servant - Topic 7554

Dismissal of employees - Grounds - Wilful disobedience or insubordination - [See Damage Awards - Topic 2014 ].

Master and Servant - Topic 7701

Dismissal of employees - Damages for wrongful dismissal - General - [See third Master and Servant - Topic 8003 ].

Master and Servant - Topic 7707

Dismissal of employees - Damages for wrongful dismissal - Mental distress - [See third Master and Servant - Topic 8003 ].

Master and Servant - Topic 7708

Dismissal of employees - Damages for wrongful dismissal - Loss of reputation - [See third Master and Servant - Topic 8003 ].

Master and Servant - Topic 7712

Dismissal of employees - Damages for wrongful dismissal - Punitive or vindictive damages - Keays was terminated by Honda Canada Inc. after 14 years of employment - Keays sued for damages for wrongful dismissal - The trial judge allowed the action and awarded, inter alia, punitive damages of $500,000 because of discriminatory conduct by Honda - Honda appealed - The Ontario Court of Appeal reduced the punitive damage award to $100,000 - Honda appealed, arguing that discrimination was precluded as an independent cause of action under Seneca College v. Bhadauria (SCC 1981) - Keays argued in cross-appeal that Bhadauria should be set aside - The Supreme Court of Canada held that there was no need to reconsider the position in Bhadauria in this case and deal with Keays' request for recognition of a distinct tort of discrimination - There was no evidence of discrimination to support a claim under s. 5 of the Ontario Human Rights Code, therefore no breach of human rights legislation serving as an actionable wrong - Furthermore, there was no evidence of conduct meeting the strict requirements of Whiten v. Pilot Insurance Co. (2002) - The court therefore set aside the award of punitive damages - See paragraphs 62 to 78.

Master and Servant - Topic 7712

Dismissal of employees - Damages for wrongful dismissal - Punitive or vindictive damages - [See Damage Awards - Topic 2014 ].

Master and Servant - Topic 8000

Dismissal without cause - Notice of dismissal - What constitutes reasonable notice - The Supreme Court of Canada stated that in determining what constitutes reasonable notice of termination the courts have generally applied the principles articulated by McRuer, C.J.H.C., in Bardal v. Globe & Mail Ltd. (1960), wherein it was stated that: "There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant" - The court noted that these four factors were adopted by the court in Machtinger v. HOJ Industries Ltd. (SCC 1992) - The court stated that the factors could only be determined on a case-by-case basis and cautioned that no one "Bardal" factor should be given disproportionate weight - See paragraphs 25 to 32.

Master and Servant - Topic 8000

Dismissal without cause - Notice of dismissal - What constitutes reasonable notice - Keays was terminated by Honda Canada Inc. after 14 years of employment - He sued for damages for wrongful dismissal - The trial judge allowed the action, fixing 15 months as the period of reasonable notice - In arriving at 15 months, the trial judge pointed to: Honda's "flat" (i.e., egalitarian) management structure as limiting the effect of Keays' lower position in Honda's hierarchy; the fact that Keays had specialized training to compensate for his lack of formal education; his long service; and the lack of comparable employment in the area - The Court of Appeal agreed with this assessment - Honda appealed, arguing that the 15-month notice period was excessive - The Supreme Court of Canada rejected this ground of appeal - The court held that Honda's management structure had no part to play in determining reasonable notice in this case - The "flat management structure" said nothing of Keays' employment - No one "Bardal" factor should be given disproportionate weight - In the present case, the trial judge erred in applying one of the factors, alluding to the flat management structure, rather than examining the actual functions of Keays - Despite this error, the 15 month notice period was entitled to deference since, on the entirety of the circumstances here, there was no basis to interfere with the trial judge's conclusions - Keays was one of the first employees hired at Honda's plant - He spent his entire adult working life with Honda - He did not have any formal education and suffered from an illness which greatly incapacitated him - All these factors would substantially reduce his chances of re-employment and justify an assessment of 15 months' notice - See paragraphs 25 to 32.

Master and Servant - Topic 8000

Dismissal without cause - Notice of dismissal - What constitutes reasonable notice - [See Damage Awards - Topic 2014 and third Master and Servant - Topic 8003 ].

Master and Servant - Topic 8003

Dismissal without cause - Notice of dismissal - Reasonable notice - Considerations affecting (Wallace damages) - Keays was terminated by Honda Canada Inc. after 14 years of employment - He developed Chronic Fatigue Syndrome (CFS) and was directed by his employer to meet with its occupational medicine specialist - Keays declined to do so without clarification from Honda as to the purpose of the meeting, the methodology to be used, and the parameters of the doctor's assessment - Honda refused to provide him with such clarification and terminated him for disobeying its direction - Keays sued for damages for wrongful dismissal - The trial judge determined that the period of reasonable notice was 15 months, but increased the notice period to 24 months because Honda's manner of dismissal was an egregious display of bad faith (i.e., Wallace damages) - The Court of Appeal found no palpable and overriding error in this regard - Honda appealed - The Supreme Court of Canada held that a proper reading of the record showed that Honda's conduct in dismissing Keays was in no way an egregious display of bad faith justifying an award of damages for conduct in dismissal under the revised test adopted by the court in this case - The court held that the trial judge made a number of significant and palpable factual errors and for that reason the decision could not stand - None of the four foundations accepted by the trial judge for his "Wallace award" of damages was valid - The court examined each factual foundation individually - See paragraphs 33 to 61.

Master and Servant - Topic 8003

Dismissal without cause - Notice of dismissal - Reasonable notice - Considerations affecting (Wallace damages) - In 1997, in Wallace v. United Grain Growers (SCC), the court established that damages could be awarded for manner of dismissal in the form of an extension of the notice period (Wallace damages) - The Supreme Court of Canada (2008) stated that a re-evaluation of this area of the law was mandated particularly by the court's recent decision in Fidler v. Sun Life (2006), wherein it was held that it was no longer necessary that there be an independent actionable wrong before damages for mental distress could be awarded for breach of contract - Rather, the principle of reasonable contemplation or foreseeability principle was found to apply generally in determining the availability of damages for breach of contract - Therefore, the analysis had to begin by asking what was contemplated by the parties at the time of the formation of the contract - "The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of notice without regard to the ordinary psychological impact of that decision. At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable. Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is 'unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive'..." - The application of Fidler made it no longer necessary to pursue an extended analysis of the scope of any implied duty of good faith in an employment contract - Fidler provided that "as long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable" - See paragraphs 49 to 60.

Master and Servant - Topic 8003

Dismissal without cause - Notice of dismissal - Reasonable notice - Considerations affecting (Wallace damages) - In 1997, in Wallace v. United Grain Growers (SCC), the court established that damages could be awarded for manner of dismissal in the form of an extension of the notice period (Wallace damages) - The Supreme Court of Canada (2008) stated that a re-evaluation of this area of the law was mandated particularly by the court's recent decision in Fidler v. Sun Life (2006), wherein it was held that it was no longer necessary that there be an independent actionable wrong before damages for mental distress could be awarded for breach of contract - In revising the test in light of Fidler, the court stated that "... there is no reason to retain the distinction between 'true aggravated damages' resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance ..." - See paragraph 59.

Master and Servant - Topic 8003

Dismissal without cause - Notice of dismissal - Reasonable notice - Considerations affecting (Wallace damages) - [See Damage Awards - Topic 2014 and first and second Master and Servant - Topic 8000 ].

Practice - Topic 7429

Costs - Solicitor and client costs - Measure of solicitor and client costs - Counsel fees (incl. premium) - Keays was terminated by Honda Canada Inc. after 14 years of employment - He sued for damages for wrongful dismissal - The trial judge allowed the action and, inter alia, awarded costs on a substantial indemnity basis together with a premium - The Ontario Court of Appeal reduced the costs premium - Honda appealed - The Supreme Court of Canada stated that "in Walker v. Ritchie, [2006] ... this Court found that the risk of non-payment of lawyer's fees is not a relevant factor under the Ontario Rules of Civil Procedure (Rule 57.01). This decision, which was released after the cost premium was awarded in this case, and Honda's success on this appeal are determinative. Thus, the cost premium should be set aside" - See paragraph 79.

Cases Noticed:

Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R.(2d) 140 (Ont. H.C.), refd to. [para. 8].

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1, refd to. [paras. 10, 81].

McKinley v. BC Tel et al., [2001] 2 S.C.R. 161; 271 N.R. 16; 153 B.C.A.C. 161; 251 W.A.C. 161; 2001 SCC 38, refd to. [para. 14].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 18].

Minott v. O'Shanter Development Co. (1999), 117 O.A.C. 1; 168 D.L.R.(4th) 270 (C.A.), refd to. [para. 25].

Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986; 136 N.R. 40; 53 O.A.C. 200, refd to. [para. 29].

Machtinger v. HOJ Industries Ltd. - see Lefebvre v. HOJ Industries Ltd.; Machtinger v. HOJ Industries Ltd.

Bramble et al. v. Medis Health and Pharmaceutical Services Inc. (1999), 214 N.B.R.(2d) 111; 547 A.P.R. 111 (C.A.), refd to. [para. 30].

Byers v. Prince George (City) Downtown Parking Commission (1998), 111 B.C.A.C. 144; 181 W.A.C. 144; 53 B.C.L.R.(3d) 345 (C.A.), refd to. [para. 30].

Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3; 350 N.R. 40; 227 B.C.A.C. 39; 374 W.A.C. 39; 2006 SCC 30, refd to. [para. 49].

Addis v. Gramaphone Co., [1909] A.C. 488 (H.L.), refd to. [para. 50].

Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [1966] S.C.R. 673, refd to. [para. 50].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321, refd to. [para. 51].

Hadley v. Baxendale (1854), 9 Ex. 341; 156 E.R. 145, refd to. [para. 54].

Bhadauria v. Seneca College of Applied Arts and Technology, [1981] 2 S.C.R. 181; 37 N.R. 455, refd to. [paras. 63, 83].

McGill University Health Centre (Montreal General Hospital) v. Syndicat des employés de l'Hôpital général de Montréal et al., [2007] 1 S.C.R. 161; 356 N.R. 177; 2007 SCC 4, refd to. [para. 71].

Walker v. Ritchie et al., [2006] 2 S.C.R. 428; 353 N.R. 265; 217 O.A.C. 374; 2006 SCC 45, refd to. [para. 79].

St-Jean v. Mercier, [2002] 1 S.C.R. 491; 282 N.R. 310; 2002 SCC 15, refd to. [para. 84].

Counsel:

Earl A. Cherniak, Q.C., Jasmine T. Akbarali and Roslynn J. Kogan, for the appellant/ respondent on cross-appeal;

Hugh R. Scher, for the respondent/appellant on cross-appeal;

Philippe Dufresne, for the intervenor, the Canadian Human Rights Commission;

Anthony D. Griffin, for the intervenor, the Ontario Human Rights Commission;

Sarah Lugtig, for the intervenor, the Manitoba Human Rights Commission;

George Avraam and Mark Mendl, for the intervenor, the Alliance of Manufacturers & Exporters Canada;

Stuart E. Rudner and Stephen Rotstein, for the intervenor, the Human Resources Professionals Association of Ontario;

Chris G. Paliare and Andrew K. Lokan, for the intervenor, the National ME/FM Action Network;

Frances M. Kelly and Gwen Brodsky, for the intervenor, the Council of Canadians with Disabilities;

Susan Ursel and Kim Bernhardt, for the intervenor, the Women's Legal Education and Action Fund;

Debra M. McAllister and Ivana Petricone, for the intervenor, the Ontario Network of Injured Workers' Groups.

Solicitors of Record:

Lerners, Toronto, Ontario, for the appellant/ respondent on cross-appeal;

Scher & De Angelis, Toronto, Ontario, for the respondent/appellant on cross-appeal;

Canadian Human Rights Commission, Ottawa, Ontario, for the intervenor, the Canadian Human Rights Commission;

Ontario Human Rights Commission, Toronto, Ontario, for the intervenor, the Ontario Human Rights Commission;

Manitoba Human Rights Commission, Winnipeg, Manitoba, for the intervenor, the Manitoba Human Rights Commission;

Baker & McKenzie, Toronto, Ontario, for the intervenor, the Alliance of Manufacturers & Exporters Canada;

Miller Thomson, Toronto, Ontario, for the intervenor, the Human Resources Professionals Association of Ontario;

Paliare, Roland, Rosenberg, Rothstein, Toronto, Ontario, for the intervenor, the National ME/FM Action Network;

Community Legal Assistance Society, Vancouver, British Columbia, for the intervenor, the Council of Canadians with Disabilities;

Women's Legal Education and Action Fund, Toronto, Ontario, for the intervenor, the Women's Legal Education and Action Fund;

ARCH: A Resource Centre for Persons with Disabilities, Toronto, Ontario, for the intervenor, the Ontario Network of Injured Workers' Groups.

This appeal and cross-appeal were heard on February 20, 2008, before McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ., of the Supreme Court of Canada. The decision of the Supreme Court of Canada was delivered in both official languages on June 27, 2008, and the following opinions were filed:

Bastarache, J. (McLachlin, C.J.C., Binnie, Deschamps, Abella, Charron and Rothstein, JJ., concurring) - see paragraphs 1 to 80;

LeBel, J., dissenting in part (Fish, J., concurring) - see paragraphs 81 to 124.