Vorvis v. Insurance Corporation of British Columbia

Vorvis v. Insurance Corporation of British Columbia
Collection
Supreme Court Judgments
Date
1989-05-04
Report
[1989] 1 SCR 1085
Case number
18844
Judges
Beetz, Jean; McIntyre, William Rogers; Lamer, Antonio; Wilson, Bertha; Le Dain, Gerald Eric; L'Heureux-Dubé, Claire
On appeal from
British Columbia
Subjects
Contract
Notes
SCC Case Information: 18844
Decision Content
Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085
Eonis J. Vorvis Appellant
v.
Insurance Corporation of British Columbia Respondent
indexed as: vorvis v. insurance corporation of british columbia
File No.: 18844.
1987: October 20; 1989: May 4.
Present: Beetz, Estey*, McIntyre, Lamer, Wilson, Le Dain* and L'Heureux‑Dubé JJ.
on appeal from the court of appeal for british columbia
Contracts -- Employment contracts -- Pension rights -- Dismissal without just cause -- Pension not vesting prior to dismissal or during notice period -- Whether or not implied right to pension plan where dismissal without cause notwithstanding express clause in pension plan.
Contracts -- Damages -- Aggravated damages and punitive damages ‑‑ Whether or not available in action for wrongful dismissal.
Appellant was a solicitor in the respondent's legal department who was conscientious to a fault and prone "to produce a Cadillac when a Ford would do". Appellant's supervisor became increasingly dissatisfied with the pace of appellant's work and instituted weekly "productivity meetings" which degenerated into a form of inquisition. As the pressure increased, appellant suffered distress and obtained medical attention. He was dismissed without any precipitating event. Respondent offered pay and benefits for an eight-month period if appellant were to release it from any claim arising out of his employment and its peremptory termination. Appellant, however, was not prepared to admit that he was incompetent and that his employer had just cause for his dismissal.
Counsel agreed that damages should be assessed on the basis of a seven-month notice requirement. Appellant's pension in his employer's pension plan had not vested at the time of his dismissal and he accordingly only received his own contributions to the plan plus interest. Although the pension would not have vested during the notice period, it was argued that, notwithstanding the express wording of the pension plan, an employee should not lose his rights to the plan unless he were dismissed for cause.
The trial judge found that appellant had been wrongfully dismissed and was entitled to damages. He rejected certain other claims for lost pension rights, mental distress, and aggravated and punitive damages. The Court of Appeal, although it made an additional award for loss of overtime, confirmed in result the judgment at trial. Appellant appealed to this Court.
Two issues were raised in this Court: (1) whether the Court of Appeal erred in dismissing the appellant's claim for lost pension rights, and (2) whether the Court of Appeal erred in denying the claim for punitive damages. Damages for mental distress, properly characterized as aggravated damages, were not claimed in this Court as a separate head but it was argued that they were included in the general concept of punitive damages.
Held (Wilson and L'Heureux-Dubé JJ. dissenting in part): The appeal should be dismissed.
Per Beetz, McIntyre and Lamer JJ.: No term should be implied to the effect that the employee's right to his pension could not be terminated by the unilateral action of the employer in the absence of dismissal for cause. Such a term was contrary to the express provisions of the pension agreement. The vesting would not have occurred within the reasonable notice period.
The claim for aggravated damages -- damages awarded to compensate and take into account intangible injuries in addition to the normally assessed damages -- should be denied here because they are to be limited to earnings lost during the period of notice to which the employee is entitled and cannot include damages for the manner of dismissal. Although aggravated damages can be awarded in a case of wrongful dismissal, particularly where the acts complained of are independently actionable, the conduct complained of here preceded the wrongful dismissal and could not be said to have aggravated the damage incurred as a result of the dismissal.
Punitive damages -- damages which punish extreme conduct worthy of condemnation -- will rarely be awarded in cases of breach of contract for, unlike torts, the contract is the only link between the parties for the purpose of defining their rights and obligations. The injured plaintiff is not entitled to be made whole but only to have either that which the contract provided for him or compensation for its loss.
Appellant on his dismissal was only entitled to reasonable notice or to payment of salary and benefits for the period of reasonable notice. The conduct on the part of the employer, while it may have caused appellant mental stress and frustration was not sufficiently offensive, standing alone, to constitute actionable wrong and was not therefore of such a nature as to justify the imposition of an award of punitive damages.
Per Wilson and L'Heureux-Dubé JJ. (dissenting in part): In appropriate circumstances aggravated damages for mental suffering may be awarded in breach of contract cases and they are, in distinction to punitive damages, essentially compensatory. Rather than relying on a characterization of the conduct as an independent wrong, the proper approach is to apply the basic principles of contract law relating to remoteness of damage. The issue is whether the defendant should reasonably have anticipated that damages in the form of mental suffering would be a consequence of the breach. Here, mental suffering would not have been in the reasonable contemplation of the parties at the time the employment contract was entered into as flowing from the appellant's unjust dismissal.
In deciding whether punitive damages should be awarded, the conduct of the defendant both before and after the wrongful dismissal should be considered. It should be reviewed in the context of all the circumstances in order to determine if it is deserving of punishment because of its shockingly harsh, vindictive, reprehensible or malicious nature. The misconduct need not be in itself an actionable wrong. The duties owed under the law of tort do not differ significantly from the duties breached in contract by the type of flagrant and deliberate misconduct that merits an award of punitive damages. Here, the respondent's conduct towards a sensitive, dedicated and conscientious employee was reprehensible and punitive damages should be awarded.
Cases Cited
By McIntyre J.
Considered: Addis v. Gramophone Co., [1909] A.C. 488; Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [1966] S.C.R. 673, aff'g (1965), 56 D.L.R. (2d) 117; distinguished: Gillespie v. Bulkley Valley Forest Industries Ltd., [1973] 6 W.W.R. 551; Ashford v. Laing Construction and Equipment Ltd., B.C.S.C., Gould J., Vancouver Registry No. C770710, December 14, 1978, unreported; Sloan v. Union Oil Co. of Canada (1955), 16 W.W.R. 225 (B.C.S.C.); Wilson v. Rudolph Werlitzer Co., 194 N.E. 441 (1934); Kern v. City of Long Beach, 179 P.2d 799 (1947); Police Pension and Relief Bd. of City and County of Denver v. Bills, 366 P.2d 581 (1961); referred to: London Export Corp. v. Jubilee Coffee Roasting Co., [1958] 2 All E.R. 411; Tippett v. International Typographical Union Local 226 (1976), 71 D.L.R. (3d) 146; Jarvis v. Swans Tours Ltd., [1973] Q.B. 233; Cringle v. Northern Union Insurance Co. (1981), 124 D.L.R. (3d) 22; Cox v. Philips Industries Ltd., [1976] 3 All E.R. 161; Pilon v. Peugeot Canada Ltd. (1980), 29 O.R. (2d) 711; Harvey Foods Ltd. v. Reed (1971), 18 D.L.R. (3d) 90; Heywood v. Wellers, [1976] 1 All E.R. 300; Brown v. Waterloo Regional Board of Commissioners of Police (1983), 43 O.R. (2d) 113, aff'g in part (1982), 37 O.R. (2d) 277; Pilato v. Hamilton Place Convention Centre Inc. (1984), 45 O.R. (2d) 652; Speck v. Greater Niagara General Hospital (1983), 43 O.R. (2d) 611; Bohemier v. Storwal International Inc. (1982), 142 D.L.R. (3d) 8, rev'd on other grounds (1983), 4 D.L.R. (4th) 383 (Ont. C.A.), leave denied, [1984] 1 S.C.R. xiii; Perkins v. Brandon University and Potter (1985), 35 Man. R. (2d) 177; Abouna v. Foothills Provincial General Hospital Board (No. 2) (1978), 83 D.L.R. (3d) 333; McMinn v. Town of Oakville (1978), 19 O.R. (2d) 366; Rookes v. Barnard, [1964] A.C. 1129; McElroy v. Cowper-Smith and Woodman, [1967] S.C.R. 425; Paragon Properties Ltd. v. Magna Envestments Ltd. (1972), 24 D.L.R. (3d) 156; Uren v. John Fairfax & Sons Pty. Ltd. (1966), 117 C.L.R. 118; Fogg v. McKnight, [1968] N.Z.L.R. 330; Robitaille v. Vancouver Hockey Club Ltd. (1981), 124 D.L.R. (3d) 228; H. L. Weiss Forwarding Ltd. v. Omnus, [1976] 1 S.C.R. 776; Warner v. Arsenault (1982), 53 N.S.R. (2d) 146; Meyer v. Gordon (1981), 17 C.C.L.T. 1.
By Wilson J. (dissenting in part)
Not followed: Addis v. Gramophone Co., [1909] A.C. 488; Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [1966] S.C.R. 673; considered: Brown v. Waterloo Regional Board of Commissioners of Police (1983), 43 O.R. (2d) 113, aff'g in part (1982), 37 O.R. (2d) 277; disapproved: Bliss v. South East Thames Regional Health Authority, [1987] I.C.R. 700; Hayes and anor v. Dodds, [1988] N.L.J. 259; distinguished: Cox v. Philips Industries Ltd., [1976] 3 All E.R. 161; Pilon v. Peugeot Canada Ltd. (1980), 29 O.R. (2d) 711; Tippett v. International Typographical Union Local 226 (1976), 71 D.L.R. (3d) 146; referred to: Jarvis v. Swans Tours Ltd., [1973] Q.B. 233; Antonaros v. SNC Inc. (1984), 6 C.C.E.L. 264; Gordon v. Saint John Shipbuilding & Dry Dock Co. (1983), 47 N.B.R. (2d) 150; Cormier v. Hostess Food Products Ltd. (1984), 52 N.B.R. (2d) 288; Pilato v. Hamilton Place Convention Centre Inc. (1984), 45 O.R. (2d) 652; Lightburn v. Mid Island Consumer Services Co-operative (1984), 4 C.C.E.L. 263; Bohemier v. Storwal International Inc. (1982), 142 D.L.R. (3d) 8, rev'd on other grounds (1983), 4 D.L.R. (4th) 383 (Ont. C.A.), leave denied, [1984] 1 S.C.R. xiii; Speck v. Greater Niagara General Hospital (1983), 43 O.R. (2d) 611; Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145; Victoria Laundry (Windsor Ld.) v. Newman Industries Ld., [1949] 2 K.B. 528; Koufos v. C. Czarnikow Ltd., [1969] 1 A.C. 350; Newell v. Canadian Pacific Airlines, Ltd. (1976), 14 O.R. (2d) 752; Heywood v. Wellers, [1976] 1 All E.R. 300; Cook v. Swinfen, [1967] 1 W.L.R. 457; Guildford v. Anglo-French Steamship Co. (1883), 9 S.C.R. 303; Cardinal Construction Ltd. v. The Queen in right of Ontario (1981), 32 O.R. (2d) 575; Dale Perusse Ltd. v. Kason (1985), 6 C.P.C. (2d) 129; Noranda Mines Ltd. v. Seaboard Surety Co. (1985), 7 C.C.E.L. 227; Centennial Centre of Science and Technology v. VS Services Ltd. (1982), 40 O.R. (2d) 253; Delmotte v. John Labatt Ltd. (1978), 22 O.R. (2d) 90; Nantel v. Parisien (1981), 18 C.C.L.T. 79; Edwards v. Lawson Paper Converters Ltd. (1984), 5 C.C.E.L. 99; New Brunswick Electric Power Commission v. IBEW, Local 1733 (1978), 22 N.B.R. (2d) 364; Makarchuk v. Midtransportation Services Ltd. (1985), 6 C.C.E.L. 169; Thom v. Goodhost Foods Ltd. (1987), 17 C.C.E.L. 89; Rookes v. Barnard, [1964] A.C. 1129; McElroy v. Cowper-Smith and Woodman, [1967] S.C.R. 425; H. L. Weiss Forwarding Ltd. v. Omnus, [1976] 1 S.C.R. 776; Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; Paragon Properties Ltd. v. Magna Envestments Ltd. (1972), 24 D.L.R. (3d) 156.
Authors Cited
American Law Institute. Restatement on the Law of Contracts 2d. St. Paul, Minn.: American Law Institute Publishers, 1986.
Chitty, Joseph. Chitty on Contracts, 25th ed. London: Sweet & Maxwell, 1983.
Fridman, G. H. L. The Law of Contract in Canada, 2nd ed. Toronto: Carswells, 1986.
Grosman, Brian A. and Stephen H. Marcus. "New Developments in Wrongful Dismissal Litigation" (1982), 60 Can. Bar Rev. 656.
Waddams, S. M. The Law of Damages, 2nd ed Toronto: Canada Law Book, 1983.
APPEAL from a judgment of the British Columbia Court of Appeal (1984), 53 B.C.L.R. 63, 9 D.L.R. (4th) 40, allowing in part an appeal from a judgment of Macfarlane J. (1982), 134 D.L.R. (3d) 727, 17 B.L.R. 150. Appeal dismissed, Wilson and L'Heureux-Dubé JJ dissenting in part.
F. A. Schroeder, for the appellant.
Robert H. Guile, Q.C., and D. G. Cowper, for the respondent.
//McIntyre J.//
The judgment of Beetz, McIntyre and Lamer JJ. was delivered by
MCINTYRE J. -- This appeal raises questions concerning the amount and nature of damages which may be payable in an action for wrongful dismissal from employment. The appellant is a fifty-four year old solicitor who commenced employment as a junior solicitor in the respondent's legal department in September of 1973. His employment terminated on January 20, 1981. The respondent initially purported to dismiss for cause, that is, incompetence, but, as the trial judge determined, it had no cause for dismissal. The trial judge therefore found that the plaintiff was wrongfully dismissed and that he was entitled to damages. Upon his dismissal the appellant received salary until February 15, 1981, a period of about one month, and he was able to obtain new employment, but not as a lawyer, on September 15, 1981, some seven months since his last payment. At trial, it was agreed by counsel that damages should be assessed on the basis of a seven-month notice requirement, because the plaintiff was able to mitigate his loss by finding other employment at a similar salary by September 15, 1981.
When the appellant commenced work with the respondent he was assured that in addition to his salary there would be benefits which would include a pension plan. The pension plan was established by the employer with effect from January 1, 1975. The appellant joined the plan at its inception with an effective service credit dating from his date of hiring. The plan had a ten-year vesting period, and pursuant to its terms both the appellant and respondent made contributions. On termination of the employment, the appellant received only his own contributions to the plan, plus interest, which amounted to $28,971.
In his reasons for judgment (reported at (1982), 134 D.L.R. (3d) 727), the trial judge awarded damages for wrongful dismissal but rejected certain other claims for lost pension rights, mental distress, and aggravated and punitive damages. In the Court of Appeal (reported at (1984), 9 D.L.R. (4th) 40), the appellant alleged error in the rejection of his claim for loss of pension rights; in rejection of his claim for six weeks' additional salary which had been paid to management employees for overtime work performed during a strike which occurred during the reasonable notice period; and in rejection of his claim for punitive or exemplary damages.
The Court of Appeal allowed the appeal in so far as it related to the six weeks' additional salary, but it unanimously dismissed the appellant's claim for mental distress. Hinkson and Craig JJ.A. disallowed the appellant's claim for punitive damages. On this question, however, although Anderson J.A. would have disallowed the appellant's claim for aggravated damages for mental distress, he would have allowed punitive damages in the amount of $5,000 because of the conduct of one Reid in terminating the employment contract. In the result, the judgment at trial was affirmed in the Court of Appeal though the appellant was awarded, in addition to the damages awarded at trial, the sum of $4,308 as compensation for the loss of overtime salary he would have earned during the strike if his employment had continued into the strike period.
In this Court, the appellant raised only two issues. He asserted error in the Court of Appeal in dismissing the appellant's claim for lost pension rights. He also argued that the court was in error in denying his claim for punitive damages. Damages for mental distress, properly characterized as aggravated damages, were not claimed in this Court as a separate head but it was argued that they were included in the general concept of punitive damages.
Pension Rights
As earlier stated, the respondent had established a pension plan for its employees. The appellant joined the plan and agreed to be bound by its terms and conditions. The plan provided for contributions from both employer and employee and provided a vesting period of ten years. The appellant was not in the employment for the required ten-year period, having been employed in September, 1973 and dismissed in January, 1981, nor did the period of reasonable notice, which was agreed at trial to extend to September, 1981, add sufficient time to create a vesting in the appellant.
Section 6 of the retirement plan deals with the general topic of benefits. Clauses 7(a) and (b) deal with termination of service and are in these terms:
(7) Termination of Service
(a) Refund of Contributions
If, prior to attaining ten years of Pensionable Service, such service is terminated for any reason other than retirement or death, a Member's contributions will be refunded with interest to the date of termination.
(b) Vesting of Benefits
If a terminating Member has ten or more Years of Pensionable Service, the Member's required contributions will not be refundable, except in the event of death, and the terminating Member will receive, commencing at retirement date, monthly payments based on the amount of pension earned under the Plan, plus any pension that may be provided, at the option of the Former Member, in respect of any voluntary additional contributions made, with interest.
The trial judge dealt with a pension claim in these words, at pp. 731-32:
The plaintiff contends that a term should be implied in his contract of employment that, in the absence of dismissal for cause, the right of the employee to his pension cannot be terminated by the unilateral action of the employer. I do not think that argument can succeed in the face of the specific provisions respecting termination of service and vesting contained in cls. 7(a) and (b) above. The plaintiff accepted those terms. They are clear and unambiguous, and in my view they settle the question. Ashford et al. v. Laing Construction & Equipment Ltd. (C770710 Vancouver Registry, December 14, 1978, Gould J.) was quite a different case. There, the contract provided options if a "member leaves the service of the Company before pension is payable". It also provided a formula for sharing the contributions made by the company when a "member withdraws after 11 years of service". The contract was silent with respect to the event which did occur, namely, a complete shut-down of the plant. Here the contract clearly covers the situation which has arisen. Another case cited by counsel for the plaintiff was Gillespie et al. v. Bulkley Valley Forest Industries Ltd. (1973), 39 D.L.R. (3d) 586, [1973] 6 W.W.R. 551 (affirmed 50 D.L.R. (3d) 316, [1975] 1 W.W.R. 607). In that case the right under an agreement would have vested within the period of reasonable notice and the employee was found to be entitled to the benefits of the agreement when his employment had been wrongfully terminated prior to the vesting. Here, the plaintiff was discharged two years and seven months before the time for vesting, when reasonable notice could not have exceeded one year. It is contended here that the plaintiff had a right to a pension and that the defendant could not unilaterally deprive him of that right. But the right which the plaintiff had, by agreement, was to a pension if his service to the company exceeded 10 years. "If, prior to attaining ten years of Pensionable Service, such service is terminated for any reason other than retirement or death" his right was to have a refund of his contributions with interest to the date of termination. To accommodate the argument of counsel for the plaintiff I would have to construe the words "for any reason" as meaning "for cause", and reword the clause excluding the words "other than retirement or by death". Such an interpretation is not justified. The plaintiff's contention must fail. [Emphasis in original.]
This view of the matter was accepted in the Court of Appeal. Hinkson J.A., speaking for the court on the pension issue, agreed that in light of the express provisions of the pension plan it was not possible to imply a term in the contract of employment, that the employer could not prevent the plaintiff from achieving a vested pension except by termination for cause. He disposed of the point with these words, at p. 43:
In addition to the authorities cited to the trial judge, on the appeal the plaintiff relied upon the decision in Acklam v. Sentinel Ins. Co., Ltd., [1959] 2 Lloyd's Rep. 683. Each of these decisions turns upon the terms of the particular pension plan. For that reason each of them is distinguishable. In my opinion the trial judge was correct in concluding that it was not possible to imply the term urged by the plaintiff because it would be contrary to the express provisions of the pension plan.
The appellant's argument under this head of the case is that, having in view the largely unwritten contract of employment, which is relatively fluid in nature and may alter in detail from time to time during the course of employment, a term should be implied to the effect that in the absence of a dismissal for cause the right of the employee to his pension cannot be terminated by unilateral action of the employer. Put against that argument is the fact that the express provisions of the pension agreement, supra, provide for the very events which occurred in the case at bar: a termination of employment for a reason other than retirement or death which would result only in a return to the member of his contributions with interest. The employment was terminated, it was pointed out by the respondent, two years and seven months before the time of vesting, and the vesting would not have occurred within the reasonable notice period.
The appellant argued that the implied term would preclude the employer from frustrating the pension right by a wrongful dismissal prior to the acquisition of a vested right by the employee. Reliance for this argument was placed upon Gillespie v. Bulkley Valley Forest Industries Ltd., [1973] 6 W.W.R. 551 (B.C.S.C.), per Berger J. In that case, the employer agreed to repurchase from the employee a company home if the plaintiff occupied it for twelve months prior to giving his notice to repurchase. The employee was wrongfully dismissed eight months after occupation of the home. It was held at trial that the employee was entitled to twelve months' notice of termination and, had he been given proper notice, he would have completed twelve months of occupation and become entitled to the benefit under the repurchase agreement. The Gillespie case illustrates the respondent's point that the appellant in this type of case is not entitled to be compensated by his employer for all losses that flow from a termination of a contract of employment but only those which arise from a failure to give reasonable notice of termination.
Other cases were cited where courts found implied terms which supported claims for wrongful dismissal. They include Ashford v. Laing Construction and Equipment Ltd. (see B.C.S.C., Gould J., Vancouver Registry No. C770710, December 14, 1978, unreported) where the event giving rise to the pension claim -- an abandonment of the employer's operations -- was neither contemplated by the parties nor provided for in the pension agreement. In the absence of any provision to the contrary the employer's pension contribution was awarded to the employee. The situation at bar, however, is not one in which a term must be implied to cover a situation not within the contemplation of the parties, but rather one where the parties made specific provision for the events which occurred. The appellant cited further cases such as Sloan v. Union Oil Co. of Canada (1955), 16 W.W.R. 225 (B.C.S.C.), Wilson v. Rudolph Werlitzer Co., 194 N.E. 441 (1934) (Ohio C.A.), Kern v. City of Long Beach, 179 P.2d 799 (1947), and Police Pension and Relief Bd. of City and County of Denver v. Bills, 366 P.2d 581 (1961).
I agree with the submission of the respondent that none of these cases deals with the question raised before us. Certain of these cases will be applicable where the interests of the employer are not defined or where governmental authority intervenes and purports to repeal by legislation the basis of an existing right (Kern v. City of Long Beach, supra). Some American cases have implied vesting where there were no express terms concerning the question (Wilson v. Rudolph Werlitzer Co., supra). These cases are consistent with Ashford v. Laing Construction and Equipment Ltd., supra. None of these cases, however, affords authority for the proposition that a right may be implied to a pension entitlement on dismissal where express provision has been made in the contract of employment to cover the events which have occurred.
The law has long been settled that in assessing damages for wrongful dismissal the principal consideration is the notice given for the dismissal. A contract of employment does not in law have an indefinite existence. It may be terminated by either employer or employee and no wrong in law is done by the termination itself. An employee who is dismissed is entitled to the notice agreed upon in the employment contract or, where no notice period is specified in the contract, to reasonable notice. He is entitled in the alternative in the absence of due notice to payment of remuneration for the notice period. The significance of notice is illustrated by reference to Gillespie v. Bulkley Valley Forest Industries Ltd., supra, where vesting of an interest in the plan would have occurred before expiry of the notice period. In this case the employee succeeded. The case at bar is different. Even if due notice had been given, the appellant would not have acquired a vested interest during the notice period and, since specific provision had been made in the pension agreement, the appellant's claim must fail. Whatever may be implied in a case of ambiguity or absence of a provision, no term may be implied in a contract which is contrary to the clearly expressed intention of the parties: see Chitty on Contracts (25th ed. 1983), at p. 460, and London Export Corp. v. Jubilee Coffee Roasting Co., [1958] 2 All E.R. 411, at pp. 417-18, per Jenkins L.J.
Aggravated Damages
In his statement of claim, the appellant advanced a claim for mental distress as the result of the termination of his contract of employment in these terms:
The plaintiff makes a claim for mental distress, anxiety, vexation and frustration suffered by the plaintiff as a result of the termination of his contract of employment by the defendant.
Later, in the prayer for relief, in addition to asserting claims for general and special damages for breach of contract, he claimed punitive damages. In pursuit of his claim for mental distress, the appellant argued at trial that the offensive and unjustifiable conduct of Reid, a superior in his employment, was such that it caused great mental distress, anxiety, vexation and frustration as alleged in the pleadings, and in support of his claim he cited several cases. The trial judge reviewed the authorities, including Tippett v. International Typographical Union Local 226 (1976), 71 D.L.R. (3d) 146 (B.C.S.C.), where union members wrongfully dismissed from the Union were awarded damages of $500 for loss of social prestige and humiliation; Jarvis v. Swans Tours Ltd., [1973] Q.B. 233 (C.A.), where a breach of contract by a travel agent caused the loss of a holiday with attendant distress, upset and frustration; Cringle v. Northern Union Insurance Co. (1981), 124 D.L.R. (3d) 22, where Ruttan J., of the British Columbia Supreme Court, recognized that damages could be awarded for mental distress in an action in contract, citing Cox v. Philips Industries Ltd., [1976] 3 All E.R. 161 (Q.B.), and Pilon v. Peugeot Canada Ltd. (1980), 29 O.R. (2d) 711 (H.C.), but suggested that in such cases actual damage should be shown. The trial judge, at pp. 734-35, reached the conclusion upon a consideration of those and other authorities that "The rule expressed in Addis v. Gramophone Co. Ltd. as restated in Canada in Peso Silver Mines Ltd. (N.P.L.) v. Cropper (1966), 58 D.L.R. (2d) 1 at p. 10, [1966] S.C.R. 673, 56 W.W.R. 641 (S.C.C.), and in Harvey Foods Ltd. v. Reed (1971), 18 D.L.R. (3d) 90, at pp. 93-4, 3 N.B.R. (2d) 444 (N.B.C.A.), is unaffected by those decisions."
He, accordingly, refused the general damage claim for aggravated damages for mental distress, and in this he was supported by the Court of Appeal. The trial judge sought to distinguish between damages for mental distress which, as will be explained below, would include cases properly classified as aggravated damages, and punitive or exemplary damages. In respect of punitive damages, he said at p. 735: "If exemplary damages could be awarded in a wrongful dismissal case I would award them here." On his interpretation of Addis v. Gramophone Co., [1909] A.C. 488 (H.L.), and Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [1966] S.C.R. 673, he held that the sole measure of damages for wrongful dismissal was the salary which the plaintiff was entitled to during the period of reasonable notice. Therefore, he awarded neither aggravated nor punitive damages.
Before dealing with the question of punitive damages, it will be well to make clear the distinction between punitive and aggravated damages, for in the argument before us and in some of the materials filed there appeared some confusion as to the distinction. Punitive damages, as the name would indicate, are designed to punish. In this, they constitute an exception to the general common law rule that damages are designed to compensate the injured, not to punish the wrongdoer. Aggravated damages will frequently cover conduct which could also be the subject of punitive damages, but the role of aggravated damages remains compensatory. The distinction is clearly set out in Waddams, The Law of Damages (2nd ed. 1983), at p. 562, para. 979, in these words:
An exception exists to the general rule that damages are compensatory. This is the case of an award made for the purpose, not of compensating the plaintiff, but of punishing the defendant. Such awards have been called exemplary, vindictive, penal, punitive, aggravated and retributory, but the expressions in common modern use to describe damages going beyond compensatory are exemplary and punitive damages. "Exemplary" was preferred by the House of Lords in Cassell & Co. Ltd. v. Broome, but "punitive" has also been used in many Canadian courts including the Supreme Court of Canada in H. L. Weiss Forwarding Ltd. v. Omnus. The expression "aggravated damages", though it has sometimes been used interchangeably with punitive or exemplary damages, has more frequently in recent times been contrasted with exemplary damages. In this contrasting sense, aggravated damages describes an award that aims at compensation, but takes full account of the intangible injuries, such as distress and humiliation, that may have been caused by the defendant's insulting behaviour. The expressions vindictive, penal and retributory have dropped out of common use.
Aggravated damages are awarded to compensate for aggravated damage. As explained by Waddams, they take account of intangible injuries and by definition will generally augment damages assessed under the general rules relating to the assessment of damages. Aggravated damages are compensatory in nature and may only be awarded for that purpose. Punitive damages, on the other hand, are punitive in nature and may only be employed in circumstances where the conduct giving the cause for complaint is of such nature that it merits punishment.
The issue which is faced by this Court is whether punitive damages may be awarded by the Court in an action for breach of contract, based on wrongful dismissal of an employee, and, if so, whether the circumstances of this case would merit such an award. Also, before the Court is a similar question with respect to aggravated damages. This question was not shown in the appellant's factum as a question in issue but much of the argument and many of the cases cited concerned the question, presumably on the theory that aggravated damages were included in the concept of punitive damages, and for that reason this issue will be addressed first.
Consideration of a claim for damages as a result of unlawful dismissal from employment usually commences with Addis v. Gramophone Co., supra, and Peso Silver Mines Ltd. (N.P.L.) v. Cropper, supra. In Addis, the plaintiff was held to have been wrongfully dismissed from his employment with the defendant. The contract of employment provided that he could be dismissed on six months' notice. The employer gave him the appropriate notice, but at once appointed his successor and effectively prevented him from performing his duties and earning his full remuneration during the notice period. The manner in which his dismissal was brought about was injurious to his business reputation and caused significant distress. He brought action for wrongful dismissal. The jury found that he had been wrongfully dismissed and fixed damages at six hundred pounds for wrongful dismissal and three hundred and forty pounds for lost commissions in the period of notice. The damages of six hundred pounds greatly exceeded the salary which would have been payable to him in the notice period. On the appeal, the question was whether the jury could in law award the plaintiff such damages over and above the salary he would have earned had he been permitted to work during the six-month notice period. The majority of the House of Lords determined that the jury could not award more than salary lost during the notice period. This case has long stood as an authority for the proposition that in a case of wrongful dismissal damages are limited to the earnings lost during the period of notice to which the employee is entitled and cannot include damages for the manner of dismissal, for injured feelings, or for loss sustained from the fact that the dismissal makes it more difficult for the plaintiff to obtain other employment. In the Peso Silver Mines case, supra, a decision of this Court, a director of a corporation was wrongfully dismissed. In dismissing him, the corporation made unsubstantiated charges against him which impaired his reputation in the mining community. He brought action for wrongful dismissal and claimed, in addition to lost salary, damages for injury to his reputation. Damages were awarded at trial on this second heading. In the British Columbia Court of Appeal (1965), 56 D.L.R. (2d) 117, Bull J.A., speaking for the majority, disallowed the award of damages as it related to damage for loss of reputation with these words at p. 161:
As to the quantum awarded, I consider, with respect, that the learned trial Judge erred in two particulars. First, he increased the damages to $10,000 (9 1/4 months' salary) from $6,500 (6 months' salary) which he said he would have awarded had it not been for damage to the respondent's reputation among mining men. There is no evidence of such damage to reputation, and, in any event, I do not consider this that type of contract of employment which involves any collateral or implied agreement the breach of which justifies the awarding of damages for loss of reputation . . . .
On the appeal to this Court, Cartwright J. (as he then was) speaking for the full Court, said at p. 684:
I agree with Bull J.A. that the claim being founded on breach of contract the damages cannot be increased by reason of the circumstances of dismissal whether in respect of the respondent's wounded feelings or the prejudicial effect upon his reputation and chances of finding other employment. I am also in agreement with Bull J.A. that in view of the respondent's evidence that he remained unemployed for only five months the award should be reduced to $6,500.
The Addis case was not referred to by either Bull J.A. or Cartwright J., but the Peso Silver Mines decision discloses a clear application of the Addis principle and has been regarded as having followed it.
These two cases have resulted in much judicial comment and the subsequent case law has not been consistent. There is English authority for the proposition that the Addis case will not bar a claim for general damages for mental distress in an action for a breach of contract: see Jarvis v. Swans Tours Ltd., supra, Cox v. Philips Industries Ltd., supra, Heywood v. Wellers (a firm), [1976] 1 All E.R. 300 (C.A.) These cases stand for the proposition that in some contracts the parties may well have contemplated at the time of the contract that a breach in certain circumstances would cause a plaintiff mental distress. This line of authority was followed by Linden J. in Brown v. Waterloo Regional Board of Commissioners of Police (1982), 37 O.R. (2d) 277 (H.C.) In the Court of Appeal in that case, per Weatherston J.A. writing for the court, (1983), 150 D.L.R. (3d) 729, the award of damages for mental distress was disallowed, but it may be said that the power of the court to award damages upon that basis in an appropriate case was implicitly accepted.
Also, following this line of authority are such cases as Pilon v. Peugeot Canada Ltd., supra; Pilato v. Hamilton Place Convention Centre Inc. (1984), 45 O.R. (2d) 652 (H.C.), Speck v. Greater Niagara General Hospital (1983), 43 O.R. (2d) 611 (H.C.), and Bohemier v. Storwal International Inc. (1982), 142 D.L.R. (3d) 8 (Ont. H.C.), which case was upheld on appeal in the Ontario Court of Appeal (1983), 4 D.L.R. (4th) 383, (leave to appeal denied, [1984] 1 S.C.R. xiii). Finally, in Perkins v. Brandon University and Potter (1985), 35 Man. R. (2d) 177, the majority of the Manitoba Court of Appeal (Hall and Matas JJ.A., Huband J.A. dissenting) refused to strike out a claim for damages for loss of reputation due to wrongful dismissal. Hall J.A. expressed the view that the common law was flexible and that it could comprehend such a claim. On the other hand, the Addis case with its stricture against the awarding of damages for mental distress and loss of reputation was followed in Abouna v. Foothills Provincial General Hospital Board (No. 2) (1978), 83 D.L.R. (3d) 333 (Alta. C.A.), and McMinn v. Town of Oakville (1978), 19 O.R. (2d) 366 (H.C.)
From the foregoing authorities, I would conclude that while aggravated damages may be awarded in actions for breach of contract in appropriate cases, this is not a case where they should be given. The rule long established in the Addis and Peso Silver Mines cases has generally been applied to deny such damages, and the employer/employee relationship (in the absence of collective agreements which involve consideration of the modern labour law régime) has always been one where either party could terminate the contract of employment by due notice, and therefore the only damage which could arise would result from a failure to give such notice.
I would not wish to be taken as saying that aggravated damages could never be awarded in a case of wrongful dismissal, particularly where the acts complained of were also independently actionable, a factor not present here. As noted by Hinkson J.A. in the Court of Appeal, at p. 46:
It was not suggested by the plaintiff that Reid's actions in the months prior to his termination constituted a breach of contract. Upon the basis of the reasoning in the Brown case, Reid's conduct was not a separate head of damages in the claim for breach of contract.
His reference to the Brown case was to the words of Weatherston J.A. in Brown v. Waterloo Regional