Superior Court of Justice – Ontario
Court File No.: CV-11-168 Date: 2018-12-19
Between: Craig Johnston, Plaintiff And: The Corporation of the Municipality of Arran-Elderslie, Defendant
Counsel: Brian Barrie, for the Plaintiff John Gilbert, for the Defendant
Heard: November 13-16; 19-22; 26-30, December 3, 4 and 6, 2018
Reasons for Judgment
Conlan J.
I. Introduction
[1] The Plaintiff, Craig Johnston (“Johnston”), was the Chief Building Official (“CBO”) for the Defendant, the Corporation of the Municipality of Arran-Elderslie (“Municipality”), headquartered in Chesley, Bruce County.
[2] On June 25, 2009, Johnston’s employment was terminated, effective immediately, without notice and without any pay in lieu of notice. There was a signed employment contract in place at the time which did not expire until June 2016, which contract contained a six-month notice clause in the event of termination.
The Issue
[3] The question is whether the Municipality had just cause to terminate Johnston’s employment.
The Burden and Standard of Proof
[4] The Plaintiff in a civil action normally carries the burden to establish both liability and damages, on a balance of probabilities.
[5] In a wrongful dismissal case, however, where the employer relies on just cause for termination, as here, it falls to the employer (the Municipality) to establish that on a balance of probabilities.
The Position of Johnston
[6] Johnston has sued the Municipality for big money. As amended orally at the commencement of the trial, on consent, and as further clarified in closing submissions by counsel for Johnston, his Claim is for $70,860.05 in damages for breach of contract, plus $650,000.00 to $700,000.00 in aggravated damages, plus $100,000.00 to $200,000.00 in punitive damages, plus interest and costs.
[7] The $70,860.05 is comprised of amounts allegedly owing by the Municipality to Johnston at the time of termination, plus six months’ pay in lieu of notice.
[8] The Municipality takes no issue with the calculation of that amount; the dispute is with regard to entitlement.
[9] The figure for aggravated damages is based on what Johnston would have earned if he had kept working as the CBO until the expiration of his contract in June 2016.
[10] Johnston denies that the Municipality had just cause to terminate his employment. Specifically, he opposes any attempt by his former employer to rely upon any alleged conflict of interest on his part. If there was any such conflict of interest between Johnston’s role as a designer and his role as the CBO, he argues that the Municipality knew about it and approved it and is, therefore, estopped from relying on it.
[11] Johnston’s claim for aggravated and punitive damages focusses on the manner of his dismissal, the press coverage that followed and the effects that it all had on Johnston personally. Johnston alleges that the Municipality acted in bad faith throughout, both before and after his dismissal.
The Position of the Municipality
[12] The Municipality submits that it had just cause to terminate Johnston’s employment. First, it is submitted that Johnston was operating in a conflict of interest with respect to two projects within the Municipality – the Kennedy and Grant files. Second, it is argued that Johnston engaged in deceit and fraud in trying to conceal his conflicts of interest.
[13] Through his alleged concealment of relevant facts, his dishonesty and his fraudulent actions, Johnston, the Municipality submits, breached his “duty of fidelity” owed to his employer.
[14] The Municipality asserts that Johnston is not a credible or reliable witness, and thus, his evidence on controversial issues ought to be rejected by this Court. Further, he does not come to Court with “clean hands”, therefore, he is not entitled to rely upon the doctrine of estoppel, the Municipality submits.
[15] In the alternative, if Johnston’s dismissal is found to have been without just cause, then the Municipality submits that no aggravated or punitive damages should be awarded because of a lack of independent and objective evidence to support Johnston’s claims and the absence of bad faith on the part of the Municipality.
[16] Finally, the Municipality asks that this Court pay attention to not only the employment contract that existed at the time of Johnston’s termination but also earlier contracts that were in effect when the Kennedy and Grant projects were designed.
The “Switcheroo”
[17] In June 2009, it was discovered that two CBO files in the possession of the Municipality (“building files”), Kennedy and Grant, had within them Home Hardware plans (drawings or designs).
[18] There is no dispute between the parties that there should not have been Home Hardware plans in either of those files. Why not? Because Johnston had designed both projects. The plans in both files should have been in the name of Craig Johnston Design.
[19] This is important in that the discovery of the Home Hardware plans in those files led to Johnston’s termination at a meeting at the Municipal building on June 25, 2009.
[20] Johnston’s position is that he was set-up, probably by Councillor Mark Davis (“Davis”). Johnston states that he had nothing to do with those Home Hardware plans being created or being inserted into the Kennedy and Grant building files.
[21] The Municipality takes the position that Johnston tried to conceal the fact that he had designed and inspected the Kennedy and Grant projects, in an effort to hide his conflicts of interest, and the Home Hardware plans that were discovered within the two building files were a part of that deception.
[22] Both sides invite this Court to make a finding as to who was responsible for the “switcheroo” – Johnston or Davis or someone else.
The Key Characters
[23] At all material times, Johnston was the CBO for the Municipality and also had an office in Owen Sound for his private business, Craig Johnston Design. He is currently 51 years old. He was hired by the Municipality in January 2003, appointed the CBO in March 2003 and terminated in June 2009. He testified at trial.
[24] The Clerk for the Municipality for most of Johnston’s tenure was Joan Albright (“Albright”). The relationship between her and Johnston was not a good one. Albright is no longer with the Municipality, and she did not testify at trial.
[25] Albright’s replacement was A.P. Crawford (“Crawford”). She was the Clerk for the last six months or so of Johnston’s tenure. Crawford is also no longer with the Municipality, but she testified at trial for the Defendant. She played a significant role in the termination of Johnston’s employment.
[26] The long-time Municipal Solicitor, Ross McLean (“McLean”), testified at trial for the Defendant. He was in that role before, throughout and after Johnston’s employment as CBO. McLean is still in that role today. He was an integral part of the dismissal of Johnston.
[27] Glenn Tunnock (“Tunnock”) is very experienced when it comes to chief building officials. He testified at trial for the Defendant. He gave expert opinion evidence in the field of the proper operations of a municipal building department. He was consulted by the Municipality in early 2009 and wrote a report (essentially an audit of the building department) in April 2009. No wrongdoing on the part of Johnston was found. A parallel forensic audit was conducted by KPMG, and likewise no wrongdoing was found with respect to Johnston. Some, including Davis, remained unsatisfied, however. There were still concerns about conflicts of interest on the part of Johnston. It all culminated in a bizarre showdown between Tunnock and Johnston, with others present including McLean and Crawford, at the Municipal building on June 25, 2009. Johnston was confronted with the Kennedy and Grant files and the Home Hardware plans contained in them. Johnston was fired that same day.
The Other Witnesses at Trial
[28] Besides Johnston, McLean, Tunnock and Crawford, this Court heard testimony from the following witnesses.
[29] Marcia Wilkinson (“Wilkinson”) testified for the Plaintiff. She was the Municipality’s Assistant Clerk/Treasurer from September 2006 to June 2008. She did not speak highly of Albright. She lent some support to Johnston’s complaints about unauthorized access to building files and a lack of file security.
[30] Wilkinson left her employment with and commenced her own lawsuit against the Municipality, which has now settled.
[31] Terry Tuck (“Tuck”) testified for the Plaintiff. He is a long-time CBO for the neighbouring area of Brockton. He did not speak highly of the Defendant Municipality. He was appointed a back-up inspector for Johnston with regard to a special project, the Paisley Medical Clinic, but then had that appointment rescinded when the Municipality did not like the position that he took with regard to zoning.
[32] Donna Johnston (“Donna”) is the Plaintiff’s mother. She testified to support her son’s claim for exemplary damages.
[33] Murray Kennedy (“Kennedy”) testified for the Municipality. He confirmed that Johnston, not Home Hardware, designed his house project.
[34] Alan Grant (“Grant”) testified for the Municipality and confirmed the same thing as Kennedy.
II. Analysis
The Facts Not in Dispute
[35] Much, in fact most, of what happened leading up to the termination of Johnston’s employment is without any controversy. Below, reference will be made to only the most salient points that are undisputed.
[36] Johnston is a high school, college and university graduate. He studied architectural technology and interior design at Fanshawe College, and structural engineering at the University of Toronto.
[37] Craig Johnston Design, based out of Johnston’s home in Owen Sound, has operated for longer than Johnston was employed with the Municipality. It began in 1994. Since the year 2000, that business has been involved in hundreds of projects, from a high of 108 in 2000 to a low of 28 in 2009 (the year of Johnston’s dismissal).
[38] Johnston applied for the CBO job with the Municipality in December 2002. On March 24, 2003, the Municipality passed By-Law No. 05-03 which appointed Johnston as the CBO, although his first contract stated that Johnston had commenced working in February 2003.
[39] In 2003, the Clerk was Dan Sullivan (“Sullivan”). If not before he was hired, at least by September 1, 2003, Johnston had advised Sullivan in writing that there were projects within the Municipality that he had designed and which required inspections, and thus, a back-up inspector was needed.
[40] By October 2003, Sullivan was advising Johnston in writing that Johnston was to continue performing all CBO work, including inspections, until such time as the Municipality appointed a back-up inspector (see Sullivan’s letter to Johnston dated October 23rd).
[41] Johnston was a contract employee. From time to time, his contract was amended. And, from time to time, he reminded the Municipality to appoint a back-up inspector. There were also occasions when Johnston himself arranged for a back-up inspector to cover his vacation time (see, for instance, the Minutes of the Council meeting held on January 10, 2005).
[42] There are at least nine typed reports from Johnston to Council, between November 2004 and July 2008, wherein Johnston requests that a back-up inspector be appointed.
[43] For some unknown reason, that was never done until 2008, when the Municipality appointed Tuck to inspect the Paisley Medical Clinic (or Centre) because Johnston had been the designer. When Tuck refused to clear the project because of zoning concerns, the Municipality simply found another solution to the problem. Tuck’s appointment was rescinded. Johnston’s drawings were sent to a third party designer and adopted by that entity, with no material changes having been made. Johnston was then directed (essentially, ordered) to inspect and approve the project, which he did.
[44] That scheme was all put in writing by Albright in an email dated March 11, 2008, copied to Councillors.
[45] The Municipality’s April 14, 2008 instruction to Johnston to issue a building permit for the Paisley Medical Centre was not the only time that Johnston was ordered to do certain things as the CBO, regardless of any position that he had taken previously. There were others. And it is common ground, not only from the evidence of Johnston but also based on the evidence of McLean and Tunnock, that such interference by Council in the duties of the CBO was highly improper (see, for example, McLean’s letter to Albright dated May 7, 2008).
[46] In February 2009, after Crawford became the Clerk, the Municipality finally passed a By-Law for a standing appointment of Tuck as Acting CBO for instances when Johnston was absent or unable to perform his duties.
[47] During Johnston’s tenure, the work environment at the Municipal building was far less than ideal. Some describe it as “toxic”. Particularly bad were the relationships between Albright and Johnston and between Davis and Johnston.
[48] To be more specific, Johnston disagreed with Albright’s stance on access to and storage of building files. As early as April 2004, Albright was directing Johnston to leave his office file cabinet unlocked so that all staff could access his files.
[49] It is common ground, not only from the evidence of Johnston but also from that of McLean and Tunnock, that such an instruction from the Municipal Clerk was improper.
[50] I pause here to note that Johnston also complained about a lack of file security to Albright’s successor, Crawford, as evidenced by his memo to Crawford dated February 25, 2009.
[51] With regard to Davis, for whatever reason, and whether legitimate or not, the evidence establishes that he did not approve of Johnston’s work as the CBO and would have preferred that Johnston not occupy that position.
[52] On January 9, 2006, the Municipality established a Code of Conduct for the CBO. Section 3.2 of that Code specifically spoke about the need for the CBO to avoid conflicts of interest. Sections 4.1 through 4.5 set out the procedure to be followed in the event of a complaint about a potential breach of the Code committed by the CBO.
[53] Skipping ahead for a moment to the date of Johnston’s dismissal, June 25, 2009, it is clear that the said Code of Conduct was not followed by the Municipality in June 2009. For example, there is no evidence that, as per section 4.3, Crawford considered whether there was an appropriate informal course of action to resolve the “complaint”, whatever precisely that grievance was.
[54] In June 2007, Johnston entered into his last contract of employment before he was fired. Its term was from July 1, 2006 to June 30, 2016. Either party could terminate it on six months’ notice to the other. Under the heading “Acknowledgement of Other Interests”, the following clauses appear in the said contract, about one full page in length in its entirety:
6.1 It is hereby acknowledged and agreed that Johnston operates his own business as Craig Johnston Design, BCIN 28883;
6.2 It is further acknowledged and agreed that building designs by Johnston may be purchased for construction in the Municipality of Arran –Elderslie;
6.3 It is further agreed that Johnston shall arrange for another Chief Building Official/Inspector to inspect any building designed by him, at no additional cost to Arran-Elderslie.
[55] By June 2008, the situation with access to and storage of building files was getting even worse. A Resolution was passed by Council on June 24th which forced all building files out of the control of the CBO. All records contained in those files had to be signed out temporarily, and no exception was made for the CBO himself.
[56] Even members of the public had access to the building files, without the need for any Freedom of Information request. In fact, there is a memo from Albright to Council dated October 21, 2008 which explicitly says that she allowed a man named Tooke to review a number of property files that he was simply curious about.
[57] There is no debate, not just based on Johnston’s evidence but also based on that of McLean and Tunnock, that such action by the Clerk was improper.
[58] By late 2008, Albright was retiring. She did not leave her post happy. In an email dated December 24th, her very last day on the job, she threw pretty much everyone under the bus, including members of Council, for allegedly ignoring her alarms about Johnston.
[59] In December 2008, concerns were getting stronger about whether Johnston was up to no good. Davis, especially, was suspicious about Johnston.
[60] Why Council did not simply invoke the termination clause in Johnston’s employment contract, give him six months’ notice and be done with him, is a mystery to me.
[61] Acting on the lingering concerns, as instructed by Council, McLean wrote to Johnston on December 10, 2008. There was a demand that Johnston disclose, in writing by December 15th, what newly constructed buildings in the Municipality he had designed since becoming the CBO. Johnston replied in writing two days later, stating that from memory he could say that there were two such buildings – the Paisley Medical Centre and the Chesley Agricultural Storage Building. He offered to go through his files to confirm the information but could not do that by December 15th.
[62] As it turns out, the said response from Johnston was incorrect, as was a similar letter that he sent to Council dated January 15, 2009 (Johnston had been away for some of the time between mid-December 2008 and mid-January 2009). Johnston left out of his correspondence other relevant projects, including the Kennedy and Grant houses. The Kennedy project was designed by Johnston in 2006, and the Grant one in 2005 and 2006.
[63] Concerns remained well after January 15, 2009, especially on the part of Davis.
[64] Thus, an audit of sorts was conducted. Tunnock was hired by the Municipality to do it, and his actions were authorized by a Council By-Law passed on April 14, 2009. He selected randomly and reviewed twenty building files for each of three years – 2006, 2007 and 2008.
[65] Tunnock authored a detailed report dated April 30, 2009. Numerous recommendations were made. Many shortcomings in the building department were found, for example, with regard to file security. No wrongdoing was found on the part of Johnston personally.
[66] A KPMG forensic audit was also conducted. No fingers were pointed at Johnston.
[67] Effectively, Johnston was cleared by the two audits. The Municipality was not. Tunnock’s report was particularly critical of improper meddling by Council in the affairs of the CBO and bad management of building files (a lack of file security, unauthorized access to the files, and improper storage of the files). In some respects, the Tunnock report was a scathing indictment, not of Johnston, but of the Municipality.
[68] Concerns about Johnston remained, however, especially on the part of Davis. He was disappointed with Tunnock’s investigation, as reported in the local newspaper.
[69] Ironically, the very day that Tunnock was given the green light to conduct the audit, April 14, 2009, the police had to be contacted with regard to missing CBO log books that had been allegedly taken by someone from Johnston’s office during a Council meeting. Embarrassingly for the Municipality, there was extensive media coverage of the police investigation.
[70] Johnston is no shrinking violet. Some might see him as being provocative. On April 30, 2009, for example, he issued an Order to Comply with regard to a structure owned by Davis personally. That could not have helped the already existing tension between the two men.
[71] There are other examples of Johnston, as CBO, taking on other high-ups in the Municipality, including the solicitor McLean with regard to a proposed addition to his law office.
[72] By May 2009, media and public scrutiny of the goings-on at the Municipality had intensified. It was depicted as somewhat of a bungling organization. As an illustration of that, a satirical cartoon about the building department appeared in the Owen Sound Sun Times newspaper on May 16th.
[73] On June 1, 2009, there was a special meeting of Council. Crawford was directed to start working towards the implementation of Tunnock’s recommendations made in his April 2009 report. Shockingly, McLean was asked whether there were grounds to fire Johnston based on the audits that had been done (apparently, nobody bothered to read the reports all that carefully). McLean answered in the negative, unless Council gave the six months’ notice required by the contract. Davis supplied a handwritten list of projects that he thought should be further investigated.
[74] It fell on Crawford and McLean to conduct the review of those matters with Johnston. That meeting occurred on June 1, 2009. A typed report was prepared by McLean and signed by him, Crawford and Johnston.
[75] Two of the files that were reviewed were the Kennedy and Grant matters. Even though it is clear that Johnston designed and inspected the houses for each of those two files, during the meeting on June 1st, when documents or parts of documents were produced which showed Home Hardware as the designer in both cases, Johnston did not say anything. His silence only fueled the concerns.
[76] The business about what happened between Johnston, McLean and Crawford on June 1, 2009 is, in part, controversial between the parties, or at least uncertain. Thus, I return to that topic in the section below in these Reasons.
[77] I pause here to note that the Home Hardware plans that were discovered inside the Kennedy building file have gone missing. They were not available at trial. They were lost by the Municipality, without explanation.
[78] On June 8, 2009, Council resolved to terminate Johnston’s employment but with six months’ notice. That same date, McLean reported back to Council on what transpired during the review of files with Johnston on June 1st.
[79] For some strange reason, however, there was still some discussion between Council and McLean, on June 8th, about negotiating a new contract for Johnston.
[80] Davis took it upon himself to obtain and was successful in gathering further evidence from Kennedy and Grant that Johnston, not Home Hardware, had indeed designed their homes.
[81] McLean also went to work, preparing and sending out questionnaires to homeowners. Kennedy and Grant received and completed those surveys, confirming that Johnston, alone, designed their homes.
[82] Now armed with that further evidence and now certain that Johnston had deceived the Municipality, in particular with regard to the Kennedy and Grant files, the Municipality arranged for a final showdown at the Municipal building. That occurred on June 25, 2009. McLean typed out a plan in advance for what was about to happen. He met with Crawford and Tunnock and the police in advance of the meeting with Johnston.
[83] During the meeting with Johnston inside the Council chambers, Tunnock was the chief soldier for the Municipality, although others were present including Crawford and McLean.
[84] Tunnock’s involvement had been authorized by a Council By-Law passed on June 22, 2009.
[85] Tunnock reviewed with Johnston the Kennedy and Grant files. The meeting ended with Tunnock declaring that Johnston was in a conflict of interest position. A pre-typed termination letter was presented and read out loud to Johnston by Crawford, Johnston was then escorted out of the building under police watch, and a pre-typed press release was sent out which explained the dismissal and why it had occurred.
[86] There were other staff inside the Municipal building on June 25th.
[87] The press release dated June 25th declared that Johnston had “breached specific terms of his contract with Arran-Elderslie relating to a prohibition on designing buildings for construction within the Municipality, and further for not advising the Municipality of receipt of building permit applications for buildings which he had designed”.
[88] At a minimum, the first half of that sentence is incorrect. Johnston was not the subject of any contractual term that prohibited him from designing buildings for construction within the Municipality. In fact, his contract in force as of June 25, 2009 expressly permitted that to occur provided someone else did the inspections.
[89] The local media pounced on the tale of Johnston’s dismissal. Bayshore Broadcasting Corporation ran a story about Johnston’s “direct conflict of interest and a breach of his contract”. The Owen Sound Sun Times ran a prominent headline “Arran-Elderslie fires CBO”. That article, dated June 27, 2009, repeated the incorrect statement that “Johnston’s employment contract with the municipality stated he may not design buildings for construction within the municipality…” A prepared statement read out by the Mayor was referred to in the article.
[90] These incorrect statements must be viewed in the context of what Johnston had been told in the past, even apart from the terms of his contract. For example, on June 19, 2006, Albright wrote an email that was copied to Johnston which stated “Arran-Elderslie Council has an agreement with our Chief Building Official whereby he, as part of his own personal business, can design buildings for construction anywhere”. The said email went on to say that the only condition was that any such buildings located in the Municipality had to be inspected by someone else.
[91] In actuality, over the years, while CBO, Johnston did design work for municipal buildings, at the request of the Municipality. Such projects included the Chesley pool, the Chesley agricultural building, the entrance to the Chesley arena, two picnic shelters, and the Paisley Medical Centre.
[92] After his dismissal, Johnston submitted to the Municipality invoices for his last regular pay period, “banked hours”, holiday pay, pay during what would have been the six-month notice period, and design work for the Paisley Medical Clinic, totalling $71,020.05 (part of the relief sought in the Claim before this Court, although amended downwards to the sum of $70,860.05). The invoices were not paid.
[93] Similar invoices for “banked hours” had been submitted by Johnston in the past and paid by the Municipality (see, for example, Albright’s memo to Council dated July 6, 2005, wherein the Clerk refers to payment for “banked time”).
[94] Between the Fall of 2009 and 2016, Johnston applied for numerous building department jobs at various municipalities. All of his applications were unsuccessful.
Findings of Fact on Disputed Matters
[95] Despite the length of this trial and the amount of evidence presented, both viva voce and by way of exhibits, there are, in my view, just two controversial matters of fact that require this Court’s assessment.
[96] First, was Johnston operating in a conflict of interest? Second, did Johnston try to deceive the Municipality, whether via the “switcheroo” or otherwise?
[97] On the former, I find that Johnston was indeed operating in a conflict of interest. On the latter, I find that Johnston did not attempt to deceive the Municipality.
[98] For our purposes, a conflict of interest may be defined as a situation where a person (Johnston) is involved with multiple interests, and serving or working towards the fulfillment of one of those interests could work against another one of those interests.
[99] Johnston clearly had multiple interests: (i) the success of his own private design business and (ii) the performance of his duties as the Municipality’s CBO.
[100] By designing buildings and then inspecting them himself, which there is no dispute Johnston did, Johnston’s interests conflicted or at least had the very real potential for doing so.
[101] This is common sense. An inspector must be impartial. The very definition of partiality existed here, however. Johnston was inspecting projects that he had personally designed. A failed inspection would not look good for his own design skills and the success of his private business. Thus, Johnston had an incentive to pass the inspections of those buildings that he had designed.
[102] Frankly, the situation ought never to have been permitted to occur.
[103] What evidence is there of deceit or fraud, though? There could only be three things relied upon by the Municipality: (i) the two letters sent by Johnston in December 2008 and January 2009, (ii) the meeting between Johnston, Crawford and McLean on June 1, 2009, and (iii) the penultimate meeting between Johnston, Tunnock and others on June 25, 2009.
[104] Remember, it is alleged deceit, fraud, concealment of facts, a breach of the “duty of fidelity” that the Municipality relies upon as just cause for Johnston’s firing. In both his opening and closing addresses at trial, Mr. Gilbert, counsel for the Municipality, made it clear that the alleged just cause for Johnston’s dismissal is wider than and does not depend on a breach by Johnston of any contractual provision in existence at any time.
[105] Thus, it is not necessary for this Court to decide which employment contract(s) to examine on the issue of whether Johnston breached his obligations.
[106] Regarding the two letters authored by Johnston, I do not think that they support the submission that Johnston was deceitful. The context is crucial. Several years after being hired as the CBO, and two to three years after being involved with the Kennedy and Grant projects, Johnston suddenly receives a demand letter from McLean. He has only a few days to respond, in writing. There are hundreds of building files in existence since Johnston became the CBO. There are numerous projects that Johnston has designed since 2003. There is no reason to think that there was anything special about the Kennedy and/or Grant projects. Finally, all the while, the Municipality itself has approved of Johnston designing and then inspecting certain buildings.
[107] In that context, I accept Johnston’s evidence that he simply forgot to include the Kennedy and Grant projects in his two letters.
[108] With regard to the June 1st meeting, I accept Johnston’s evidence that he remained silent when he saw the Home Hardware plans inside the Kennedy and Grant files because he was stunned, afraid and growing increasingly distrustful of others including Crawford and McLean.
[109] I also accept Johnston’s evidence that the sets of plans for those two files were not fully opened-up during the said meeting. Only corners of pages were exposed, revealing the Home Hardware insignia. There was little time or opportunity for Johnston to examine the documents carefully and digest them.
[110] In hindsight, it would have been better for Johnston to have immediately spoken-up during that meeting and asked aloud why Home Hardware plans would be inside those two files when he had done the design work for those projects. Hindsight is 20-20, however, and there was good reason for Johnston’s vision to be more clouded than that on the day in question.
[111] I am convinced that Johnston’s silence on June 1st was not a part of any deliberate effort by him to deceive the Municipality into thinking that he did not design the Kennedy and/or Grant projects.
[112] Regarding the June 25th meeting, likewise, I find no evidence of deception on the part of Johnston. In fact, I accept the evidence of Tunnock that Johnston did, at some point, admit that he was in a conflict of interest position. On that item, I prefer the evidence of Tunnock over that of Johnston. It makes sense to me that Johnston made the inculpatory remark and then attempted to retract it when he realized that it could be interpreted as an acknowledgement that he had done something wrong and deserving of termination, which he denied.
[113] You see, by June 25th, Johnston had to know that there was a difference between saying that one is in a conflict of interest and saying that one is, unbeknownst to the other side, in a conflict of interest. Johnston’s remark was an admission of only the former. He attempted to retract it so that it was not seen as an admission of the latter.
[114] In summary, I make a finding of fact that Johnston never tried to deceive the Municipality in terms of whether he had designed and inspected buildings generally or, in particular, the Kennedy and/or Grant homes.
[115] I have deliberately left the “switcheroo” to the end of this discussion. It happened for sure – someone manipulated Johnston’s drawings for Kennedy and Grant to look like Home Hardware plans and then inserted those manipulated drawings into the building files.
[116] I find, however, that there is insufficient evidence, direct and/or circumstantial, to conclude who it was.
[117] Johnston does not need to prove who it was. Whether it was Johnston himself, I find that he had absolutely no motive to do so. Nor did he have any good opportunity to do so.
[118] The opportunity was limited because, by June 2009, he had no exclusive control over and only limited access to the building files.
[119] The motive was non-existent because there was no secret that Johnston was designing and inspecting at the same time. Why would Johnston have any reason to think that his disclosure of two extra private projects would cost him his job? It makes no common sense.
[120] I accept Johnston’s evidence that he had no part in the “switcheroo”. But I also make no finding of fact that Davis did it, as alleged by Johnston. I do not know who did it. I do know that it was not Johnston.
The Law as Related to Issues of Liability
The Failure to Call a Material Witness
[121] It is well accepted that, in civil cases, an unfavourable or adverse inference may be drawn against a party litigant who fails to call a witness who would have knowledge of the facts on a certain issue and would be assumed to be willing to assist that party.
[122] There is no question that this Court was deprived of the benefit of hearing testimony from several persons who played important roles in the history of Johnston’s employment with the Municipality, and who would certainly have knowledge of the facts on relevant issues spoken about by Johnston in his trial testimony, and who would be assumed to be aligned with the interests of the Municipality.
[123] Those persons include Sullivan, Albright, Davis, and Kim Grant. Johnston’s counsel suggested other names as well, however, those four are the key ones, in my view.
[124] Sullivan was the Clerk when Johnston was hired by the Municipality. He is the person who wrote the letter to Johnston in October 2003, a key document that Johnston states was permission for him to conduct “all inspections required” until a back-up person was appointed. Presumably, “all” would include projects that were designed by Johnston himself.
[125] As Sullivan did not testify at trial, Johnston’s interpretation of the said letter stands alone.
[126] Albright was the Clerk during most of Johnston’s tenure as the CBO. Johnston had a lot to say at trial about Albright, including but not limited to her alleged responsibility for the creation of a toxic work environment at the Municipal building and her alleged responsibility for allowing insecure storage of and unauthorized access to building files.
[127] As Albright did not testify at trial, Johnston’s said allegations stand uncontradicted.
[128] Davis was a Councillor throughout Johnston’s tenure as CBO. Johnston points to him as the villain, even to the point of asserting that Davis was responsible for the “switcheroo”.
[129] While Johnston testified and denied any allegation by the Municipality that he had anything to do with the insertion of the Home Hardware plans into the Kennedy and Grant building files, Davis did not testify to deny Johnston’s allegation about him.
[130] Kim Grant is the spouse of Alan Grant. She could have offered relevant evidence as to whether she met with Johnston in September 2006 to discuss design changes to the Grants’ master bedroom and en-suite bathroom, as alleged by Johnston.
[131] According to Johnston, that meeting occurred, and the result was page A2 of Exhibit 75 – a revised drawing by Johnston.
[132] Alan Grant, in his trial testimony, was unable to refute the possibility of Johnston’s evidence being correct in that regard.
[133] In the end, therefore, this Court is left with Johnston’s evidence about the revised drawing, Alan Grant’s acknowledgement that it is possible that the said evidence is correct, and no evidence from Kim Grant.
[134] There is no doubt that Johnston has presented a prima facie case on the issues that these four potential witnesses could have given evidence about. The failure of the Municipality to call any of these four persons only detracts from its argument that Johnston is not a credible or reliable witness.
Estoppel
[135] “Estoppel occurs when the words or conduct show unambiguously that one party does not intend to insist on his or her legal rights, leading to a detrimental reliance on the part of the other party”. Roclar Leasing Ltd. v. MacMillan Bloedel Ltd., 1988 CarswellOnt 1078 (Ontario Supreme Court, Potts J.), at paragraph 34.
[136] Estoppel is an equitable doctrine, and it is trite law that “[o]ne who seeks the aid of equity must come with clean hands”. Edwards et al. v. Harris-Intertype (Canada) Ltd., [1984] O.J. No. 3202 (C.A.), at paragraph 2.
[137] Be careful with the word “must”, however. “It is a matter of discretion for the trial judge whether to refuse to grant equitable relief on the basis that a litigant has not come to court with clean hands”. Sorrento Developments Limited v. The Corporation of the Town of Caledon, at paragraph 5.
[138] An example of a party with “unclean hands” is one who has violated the principle of good faith. Taylor v. Guindon, [2005] O.J. No. 3110 (S.C.J., McKinnon J.), at paragraph 48.
[139] Another example of a party with “unclean hands” is one who has misrepresented the true state of affairs. Strata Plan 1261 v. 360204 B.C. Ltd., [1995] B.C.J. No. 2761 (S.C.), at paragraph 158.
[140] Applying these legal principles to the facts in our case, although Johnston was operating in a conflict of interest position, I conclude that the Municipality is estopped from relying upon that conflict of interest as a ground for Johnston’s dismissal.
[141] By its own words and conduct, the Municipality clearly demonstrated that it had no intention of relying upon any right that it may have had, contractual or otherwise, to insist upon Johnston refraining from designing and inspecting the same buildings.
[142] Those words and conduct began very early after Johnston was hired, with Sullivan’s October 2003 correspondence. I accept Johnston’s interpretation of that letter. It was a licence to continue inspecting all buildings that required inspection, including those designed by Johnston himself, until such time as the Municipality appointed a back-up inspector, something which was never done for many years (through no fault of Johnston).
[143] Those words and conduct continued throughout Johnston’s tenure, right up until June 2009, through, as two examples only, the Municipality ignoring Johnston’s repeated written demands for the appointment of a back-up inspector and the Municipality itself approving Johnston to both design and inspect numerous public buildings.
[144] It behooves the Municipality from making hay about Johnston’s conflict of interest when it knew about his design business from the outset, when it failed or refused to solve the problem by simply appointing a back-up inspector in a timely manner, and when it used Johnston as both designer and inspector on multiple occasions when it suited its own purposes to do so.
[145] I reject any notion that Johnston is disentitled to equitable relief because he has come to this Court with unclean hands. Commencing with his letter to Sullivan on September 1, 2003, if not before, Johnston disclosed his potential conflict of interest and nearly begged for the Municipality to take measures to protect itself and him.
[146] Other than quit or shut down his design business, I am not sure what else Johnston was expected to do.
[147] I find no bad faith or misrepresentation or anything else on the part of Johnston that might bring him within the category of a litigant with “unclean hands”.
Conclusion on Whether the Dismissal was Wrongful
[148] Having found that there was a conflict of interest, but no deceit or fraud or breach of Johnston’s alleged “duty of fidelity” owed to the Municipality, and having concluded that the Municipality is estopped from relying upon the conflict of interest to justify Johnston’s dismissal, and there being no other ground for termination advanced that is capable of amounting to just cause for dismissal, this Court holds that the termination of Johnston’s employment was wrongful.
Damages
[149] No dispute is taken with the Plaintiff’s figure of $70,860.05 in damages for breach of contract (the only issue had been entitlement).
[150] Interest and costs will be dealt with later. That leaves Johnston’s claims for $650,000.00 to $700,000.00 in aggravated damages, plus $100,000.00 to $200,000.00 in punitive damages.
Aggravated and Punitive Damages
[151] Beginning with the latter, ironically, there is an Ontario appellate decision dealing with punitive damages in the context of a municipal chief building official who, like Johnston, was dismissed wrongfully.
[152] In Pate v. Galway-Cavendish (Township), 2011 ONCA 329, [2011] O.J. No. 3594 (C.A.), Mr. Pate had been the CBO for the Defendant Township for about nine years. Because of alleged discrepancies regarding permit fees that seemed to have not been remitted by Mr. Pate to the Township after he had collected them, he was dismissed without notice.
[153] Mr. Pate was charged criminally but acquitted on all counts. He sued the Township. At trial, the parties agreed that the dismissal was wrongful and settled on a 12-month notice period. Other claims were contested.
[154] The trial judge dismissed the claim for malicious prosecution but, among other things, awarded Mr. Pate $75,000.00 for general and aggravated damages and $25,000.00 for punitive damages.
[155] Mr. Pate’s Appeal was allowed. A new trial was ordered on the issues of malicious prosecution and punitive damages.
[156] After the new hearing, before the same trial judge, the award of punitive damages increased exponentially to $550,000.00. I am not aware of any subsequent appeal by either party.
[157] Gunsolus J. made the following key findings in arriving at the said $550,000.00 figure:
(i) the Township withheld exculpatory evidence which, if disclosed, would have saved Mr. Pate from criminal prosecution;
(ii) the actions of the Township meant that Mr. Pate’s career as a municipal official was destroyed;
(iii) the actions of the Township meant that Mr. Pate’s marriage and his business were ruined; and
(iv) Mr. Pate had suffered public humiliation and stigma in a relatively small area.
[158] Similarly, Johnston’s career as a CBO has never recovered since June 2009, despite numerous job applications that he has submitted. His marriage ended in part due to the events leading up to and on June 25, 2009. His private design business fell nearly dormant during the latter half of 2009. And the repeated media coverage, in a small area, partly inaccurate, caused Johnston much embarrassment and humiliation.
[159] The especially egregious conduct of the Township in Mr. Pate’s case, in withholding exculpatory evidence, is not present in our matter. Having said that, the manner in which Johnston was fired is very concerning to this Court.
[160] To invite Johnston to attend at the Municipal building on June 25, 2009, and not tell him why, and have police there to essentially guard him, and have a termination letter and press release already prepared, and ambush him with some kind of interrogation by Tunnock, and then put out for public consumption a grossly misleading statement that gave the false impression that Johnston was banned outright from designing buildings located within the Municipality, was very unfair, in my view.
[161] The seminal decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 tells us the following:
(i) punitive damages in contract cases are rare and require an independent actionable wrong to be found;
(ii) punitive damages are designed to address high-handed, malicious, arbitrary or highly reprehensible misconduct that departs markedly from ordinary standards of decent behaviour;
(iii) punitive damages must be proportionate to the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff, and any advantage or profit gained by the defendant;
(iv) the quantum of punitive damages should take into consideration any other fines or penalties suffered by the defendant for its misconduct;
(v) the objectives in awarding punitive damages are retribution, denunciation and deterrence, not compensation;
(vi) punitive damages should be awarded only where compensatory damages are insufficient to accomplish those objectives; and
(vii) the quantum of punitive damages should be no greater than what is necessary to rationally accomplish the goals mentioned above.
[162] In my opinion, quite apart from the unjustified termination of Johnston’s employment, the manner of his dismissal amounts to a wrong that is deserving of an award of punitive damages.
[163] The Plaintiff suggests something in the range of $100,000.00 to $200,000.00. Given the result in Pate, supra, I think that range is on the low side. I will not go above it, however, and thus I award to Johnston punitive damages in the amount of $200,000.00.
[164] Turning to aggravated damages, sometimes referred to as moral damages, Johnston must “prove actual damages resulting from the employer’s conduct in the manner of dismissal that exceed the normal distress associated with dismissal. This is a high evidentiary threshold that many plaintiff employees will simply not be able to meet”. 2018 Update on Extraordinary/Moral/Aggravated Damages, by Alan Whyte.
[165] Moral damages are compensatory in nature. This Court should ask itself whether the Municipality engaged in conduct during the course of Johnston’s dismissal that was “unfair” or “in bad faith” and caused Johnston mental distress that went beyond “normal distress and hurt feelings resulting from a dismissal”. 2018 Update, supra, quoting from Keays v. Honda Canada Inc., 2008 SCC 39, at paragraphs 56 and 57.
[166] I disagree with the Municipality that there is no evidence apart from Johnston’s own testimony to substantiate his claims about weight loss, the demise of his marriage and the inordinate stress that he was under just before and after June 25, 2009. There is also the corroborative evidence of Donna and McLean.
[167] I am of the opinion that the Municipality acted in bad faith in having Johnston attend at the Municipal building on June 25, 2009 and then surprise him with another “audit”, the result of which was a forgone conclusion given that Council had already decided to terminate him earlier in June, and the ink was still wet on the dismissal letter and press release.
[168] I am also satisfied that Johnston’s mental distress on and after the date of his dismissal went beyond that reasonably expected of any employee who is fired. Weight loss, loss of appetite, irritability, sleeping problems, marital breakdown, and social isolation were just some of the emotional consequences suffered by Johnston as a direct result of his harsh dismissal. I accept the evidence of Johnston, his mother and, to some degree, McLean in support of those findings.
[169] Johnston is entitled to an award of aggravated damages. On quantum, I must keep in mind the overall principle of proportionality. I have already decided to punish the Defendant with a sizeable award of punitive damages. The potential for double recovery must be guarded against.
[170] I do not agree with the Plaintiff’s suggestion of aggravated damages in an amount equivalent to what Johnston would have earned over the course of his contract that existed on the termination date. That is not the proper measure of aggravated or moral damages. It sounds more like the concept of expectation damages for breach of contract.
[171] In Pate, supra, the mental distress suffered by the dismissed employee was no greater in degree than that sustained by Johnston. Mr. Pate was awarded $75,000.00 in aggravated damages. That quantum was not disturbed on appeal.
[172] I award to Johnston the sum of $100,000.00 in aggravated damages. Although that is a little higher than what was given to Mr. Pate, I have taken into account the total award of both aggravated and punitive damages in the two cases.
III. Conclusion
[173] Judgment is rendered in favour of the Plaintiff, Johnston, for wrongful dismissal. There was no just cause for the termination of his employment.
[174] Damages are assessed in favour of Johnston as follows: $70,860.05 for breach of contract, plus $100,000.00 in aggravated damages, plus $200,000.00 for punitive damages, plus interest and, presumably, costs.
[175] If necessary, I will accept written submissions on costs, each one limited to three pages excluding attachments. Johnston’s submissions shall be filed within 60 days of the date of these Reasons; while the Municipality’s shall be filed within 30 days of its receipt of the Plaintiff’s submissions. Without leave, no reply is permitted on behalf of Johnston.
[176] A final word to counsel. I was advised that this was Mr. Barrie’s last trial before retirement. The end of the career of one of Grey-Bruce’s finest barristers, ever, has not gone unnoticed. This Court wishes him well.
[177] To Mr. Gilbert, he was placed in an unenviable position at trial. He had to represent what appears to have been in the past a dysfunctional organization, with a very unpleasant work environment, high staff turnover, an overly intrusive Council and a solicitor, McLean, who (through no fault of his) was not always apprised of what was going on.
[178] In those difficult circumstances, Mr. Gilbert carried out his task with the utmost professionalism, integrity and candour. This Court is very grateful for that. Mr. Gilbert is an excellent lawyer.
Conlan J.
Released: December 19, 2018