Gennett Lumber Co., v. John Doe a.k.a. Milton Harvey et al., 2019 ONSC 1345

Full Decision

Punitive Damages in Civil Claims

MATERIAL FACTS

The Plaintiff, Gennett Lumber Company, brought a motion for default judgment against a defendant who was a participant in a complex fraudulent scheme. Genett sought, among various damages, $200,000 in punitive damages. The scheme consisted of five orders for hardwood flooring and paid for with stolen credit cards. Gennett suffered losses in the amount of $168,442.30. Police charged the perpetrators however the charges did not crystallize.

ISSUE

Whether punitive damages are warranted, and if so, the appropriate quantum of punitive damages.

BRIEF ANSWER

Punitive damages were awarded in the amount of $100,000.

ANALYSIS

In assessing the claim for punitive damages Sossin J., turned to the Supreme Court decision of Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (S.C.C.) where it was stated that the purpose of punitive damages relate to retribution, denunciation and deterrence factors. Moreover the court expressly stated at [36]:

Punitive damages are awarded against a defendant in exceptional cases for “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at para. 196. The test thus limits the award to misconduct that represents a marked departure from ordinary standards of decent behaviour. Because their objective is to punish the defendant rather than compensate a plaintiff (whose just compensation will already have been assessed), punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment).

The factors outlined by Binnie J., included a charge to the jury as follows at [94]:

To this end, not only should the pleadings of punitive damages be more rigorous in the future than in the past . . . but it would be helpful if the trial judge’s charge to the jury included words to convey an understanding of the following points, even at the risk of some repetition for emphasis.

(1) Punitive damages are very much the exception rather than the rule,
(2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.
(3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant,
(4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question.

(5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation.
(6) Their purpose is not to compensate the plaintiff, but:
(7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened.

(8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and
(9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose.
(10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages.
(11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.

In Midwest Amusement Park, LLC v. Cameron Motorsports Inc., 2018 ONSC 4549 (Ont. S.C.J.) Perell J., summarized the analysis of punitive damages, in light of these factors at [103]:

It follows from Justice Binnie’s remarks that an assessment of punitive damages requires an appreciation of: (a) the degree of misconduct; (b) the amount of harm caused; (c) the availability of other remedies; (d) the quantification of compensatory damages; and (e) the adequacy of compensatory damages to achieve the objectives or retribution, deterrence, and denunciation. These factors must be known to ensure that punitive damages are rational and to ensure that the amount of punitive damages is not greater than necessary to accomplish their purposes.

The relationship between punitive damages and criminal sanctions was addressed in greater detail by the Saskatchewan Court of Appeal in Zurich Life Insurance Co. v. Branco, 2015 SKCA 71 (Sask. C.A.), leave to appeal to SCC ref’d (2016), [2015] S.C.C.A. No. 439 (S.C.C.). In that case, the trial judge awarded significant punitive damages of $3 million against an insurance company (See Branco v. American Home Assurance Co., 2013 SKQB 98 (Sask. Q.B.)). The Court of Appeal ultimately substituted a lower award of punitive damages of $500,000. In the course of its analysis, the Court of Appeal considered the link between punitive damages and criminal sanctions. Writing for the Court, Richards C.J.S. stated (at para. 175):

The narrower remedial role of punitive damages is reflected in the fact that they “straddle the frontier” between civil and criminal law. If the actions of a civil defendant are so outrageous, malicious, oppressive or high-handed that a court has no choice but to conclude that the actions are deserving of punishment, a remedy must be available. Accordingly, when criminal sanctions are not available, punitive damages can be used to address the relevant wrongdoing. Few cases require both remedies of this sort. However, their rarity should not be confused with their importance — punitive damages serve a vital function in sanctioning conduct that cries out for punishment where no other punitive remedy is available. (Emphasis added)

Other courts however have found punitive damages are not available in contexts where a defendant has been subject of a criminal conviction for the same conduct (see, for example, Cobb v. Long Estate, 2017 ONCA 717 (Ont. C.A.)).

At [39] Sossin J., turned to the analysis in McIntyre v. Grigg, (2006), 83 O.R. (3d) 161 (Ont. C.A.) at [79-81] where the court of appeal stated:

While the driver Grigg pleaded guilty to, and received a fine for, careless driving, the evidence in the civil trial established that he was significantly impaired and that his conduct should normally warrant a serious punishment. Where a wrongdoer has already been punished for an offence and the same conduct is in question at a civil trial, punitive damages generally will not serve a rational purpose as the sentence imposed in the criminal or regulatory environment will have already met the necessary objectives of retribution, deterrence and denunciation. In our view, there are sound policy reasons for generally not attempting to re-try those proceedings in a civil action. As this court held in Fleury v. Fleury, supra, at para. 11:

Where tortious acts have already been sanctioned by the imposition of a criminal sentence, it is inappropriate to award punitive damages in a civil lawsuit. To do so is to punish twice for the same offence . . . Where, however, the civil proceedings establish that … the sentence does not fully sanction the tortfeasor’s behaviour… punitive damages may be awarded.

In our view, a court in a civil proceeding should generally demonstrate deference to the decision of the other court. Otherwise, the review of the appropriateness of a penalty administered in a criminal court, for example, could be viewed as a collateral attack on that decision. In our opinion, the “disproportionality” test enunciated by Binnie J. in Whiten in relation to the wrongful conduct and the penalty imposed is one that should be approached with considerable caution. We believe that the facts in the present case present one of those rare instances where the disproportionality test applies. It was rational for the jury to conclude that punitive damages would denounce Andrew Grigg’s conduct and signal the need for general deterrence of impaired driving. Given Andrew Grigg’s fine of $500, punitive damages would not amount to double punishment and indeed would be more appropriate punishment.

CONCLUSION

Sossin J., concluded at [53] that the sum of $100,000 was justified. With adjustments for the difference in currency, this award of punitive damages is roughly 50% of the actual losses suffered by Gennett, which reflects the governing rule of proportionality. An award of punitive damages that is equal to or higher than the actual losses suffered by Gennett would not be rational given the criminal sentence already imposed on the defendant and the absence of vulnerability on the part of Gennett in this case. At the same time, an award of punitive damages that is a minor fraction of the actual losses of Gennett, or could be factored in as a modest risk in participating in an organized fraud, would not reflect sufficiently the goals of retribution, denunciation and deterrence in this context.

Antonio Meringolo
Written by

Antonio is a litigator with Lemieux Law. His practice focuses on motor vehicle accidents, accident benefits, occupiers’ liability, personal injury, long-term disability, wrongful & constructive dismissal, CPP disability, human rights, general litigation and WSIA Appeals. When Antonio is not practicing law, he enjoys playing hockey, working on cars, and visiting family in southern Italy.