When Are Punitive Damages Available?
‘Punitive damages’ are additional damages beyond pure compensation that may be court-ordered in a civil action.
These damages are meant to punish a defendant’s outrageous conduct and/or to deter the defendant, as well as others, from engaging in similar conduct. These damages are only awarded in exceptional scenarios and are dependent on the conduct of the defendant, rather than the loss incurred by the plaintiff. Loss or injury to the plaintiff is the subject of the more standard compensatory damages.
When Are Damages Awarded?
Punitive damages can be awarded in actions for most legal wrongs, including tort and wrongful dismissal claims. Since a plaintiff must claim punitive damages, the burden of proof falls on them to establish entitlement.
Step 1: Type of Conduct
Punitive damages can only be awarded if the plaintiff can prove that the defendant's conduct was "malicious, oppressive and high-handed” and a “market departure from the ordinary standards of decent behaviour” (Boucher v Wal-Mart Canada Corp, 2014 ONCA 419). If satisfied, then the conduct becomes accepted as wrongful. In other words:
“here the defendant is guilty of insulting, high-handed, spiteful, malicious or oppressive conduct which increases the mental distress — the humiliation, indignation, anxiety, grief, fear and the like — suffered by the plaintiff as a result of being defamed, the plaintiff may be entitled to what has come to be known as ‘ damages.’"
Hill v Church of Scientology of Toronto 2 SCR 1130.
Although many different adjectives have been used to describe the subject wrongful conduct, no particular phrase is determinative. The act must merely be an ‘advertent wrongful act.’
Step 2: Independent Actionable Wrong
As established by Whiten v Pilot Insurance Co, 2002 SCC 18, a claim for punitive damages also requires an ‘independent actionable wrong.’ In Whiten, the defendant insurer unjustifiably refused to pay the plaintiff’s claim under a fire insurance policy, after a fire destroyed the plaintiff’s home and belongings. They also drew out an eight-week trial resulting in undue financial hardship on behalf of the plaintiff. The court determined that both the denial and high-handed litigation tactics were designed to force the plaintiff to accept an unfair settlement and awarded $1,000,000 in punitive damages, in addition to the compensatory damages, as a result. Citing a previous Supreme Court of Canada decision, Vorvis v Insurance Corp of British Columbia, 1 SCR 1085, the court confirmed that:
“… punitive damages are recoverable in such cases provided the defendant's conduct said to give rise to the claim is itself ‘an actionable wrong.’"
Whiten v Pilot Insurance Co, 2002 SCC 18.
Following Whiten, a debate arose regarding what exactly is required to establish an independent actionable wrong. Here, it was determined that it does not require an independent tort. Instead, less stringent wrongs have been accepted as a foundation for punitive damages. For example, it has been accepted that breaching obligations of good faith that are typically associated with insurance contracts, satisfy this requirement. In the case of wrongful dismissal, an intentional infliction of mental suffering or breach of the duty to perform a contract in good faith (a legally recognized duty established by Bhasin v Hrynew, 3 SCC 71) is an independent actionable wrong.
Step 3: Rationally Required
Even where the defendant’s wrongful conduct meets the high ‘wrongful’ threshold and is accompanied by an independent actionable wrong, punitive damages may not be ordered.
he plaintiff must show that a punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and to meet the objectives of retribution, deterrence and denunciation.
Boucher v Wal-Mart Canada Corp, 2014 ONCA 419
Punitive damages will only be awarded when compensatory damages are inadequate to satisfy these goals. This is largely a discretionary task, dependent on the specific context of the case and positioning of the parties.
Why Are Damages Awarded?
There are three objectives for punitive damages: (A) retribution, (B) deterrence, and (C) denunciation. These rationales are different than the more standard compensatory damages, which seek to financially compensate the plaintiff for the injuries/losses caused by the defendant. In contrast, punitive damages attempt to directly punish misconduct “that so malicious and outrageous that they are deserving of punishment on their own” (Honda Canada Inc v Keays, 2008 SCC 39).
There are many critiques of punitive damages due to their straddling between civil law (compensation) and criminal law (punishment). It may be help, however, not to view punitive damages as non-compensatory, but instead as a separate series of compensable damages. The only difference is, that punitives are targeting a separate loss and adjoining misconduct (i.e. mental distress, humiliation, and reputation) than the main action. These losses are still incurred from the defendant’s wrongful conduct and punitives are just trying to compensate for these additional injuries.
How Much Is Awarded?
There are a number of relevant factors for determining the amount of punitive damages that should be awarded. The general principle is that the quantum must be proportional between punishing the defendant’s acts and achieving the goals of punitive damages. The overall award must be rationally related to the objectives for which the punitive damages are awarded (retribution, deterrence and denunciation). This process is also discretionary and largely within the hands of the trial judge and/or jury. Although the case law provides some guidance, the range of possible punitive awards is wide. Factors include:
(1) The blameworthiness of the defendant’s conduct, including intent/motive, length of the misconduct, evidence of concealment etc.;
(2) The degree of vulnerability of the plaintiff and if there is an imbalanced relationship, as the financial well-being of the defendants may become relevant;
(3) The amount of harm directed specifically at the plaintiff;
(4) The need for deterrence if the misconduct is continuous;
(5) And the disgorgement of any profits gained by the defendant at the hands of their misconduct.
Additionally, while the quantum can be appealed by the defendant, the defendant’s onus is high:
“First, the jury's assessment is entitled to deference on appeal. An appellate court should intervene only if the award is unreasonable or serves no rational purpose. It should not intervene simply because it would have awarded a different amount.”
Whiten v. Pilot Insurance Company, 170 DLR (4th) 280 (ON CA).
Awards can also be overturned if they are judged to be irrationally disproportionate.