COURT OF APPEAL FOR ONTARIO
DATE: 20000113
DOCKET: C29388
DOHERTY, CHARRON and BORINS JJ.A.
B E T W E E N :
VITO ANTONACCI Plaintiff (Respondent)
-and -
THE GREAT ATLANTIC & PACIFIC COMPANY OF CANADA, LIMITED Defendant (Appellant)
Howard Levitt, for the appellant
Maurice W. Pilon, for the respondent
Heard: October 22, 1999
On appeal from the judgment of Madam Justice K. E. Swinton dated
March 4, 1998
CHARRON J.A.:
[1] Vito Antonacci was dismissed from his employment with The
Great Atlantic & Pacific Company of Canada, Limited (“A & P”)
after 33 years of service. He brought this action for wrongful
dismissal seeking general, aggravated and punitive damages. The
trial judge, Swinton J., found that A & P did not have cause for
dismissing Mr. Antonacci and granted him judgment in the amounts
of $26,708.85 for general damages, $15,000 for aggravated
damages, $7,209.00 for prejudgment interest and $28,162.33 for
costs. She dismissed the claim for punitive damages. Both parties
appeal the decision.
[2] One week before the trial commenced, A & P abandoned its
position that Mr Antonacci had been dismissed for cause.
Therefore, the trial judge’s finding that Mr. Antonacci was
wrongfully dismissed is not in issue on this appeal. A & P’s
appeal raises issues concerning the frustration of the employment
contract arising from Mr. Antonacci’s medical problems, the
quantum of the deduction allowed for Workers’ Compensation
Benefits received by Mr. Antonacci, the award of aggravated
damages, and the quantum of the costs award. Mr. Antonacci’s
cross-appeal raises issues concerning the deductibility of part
of the Workers’ Compensation Benefits and the dismissal of the
claim for punitive damages.
[3] I would allow A & P’s appeal to the extent of setting aside
the award for aggravated damages but would not give effect to the
other grounds of appeal. I would dismiss Mr. Antonacci’s cross-
appeal. I will deal with the issues relating to the general,
aggravated and punitive damages each in turn and will conclude
with the issue of costs.
A. General Damages
[4] The trial judge reviewed the circumstances surrounding Mr.
Antonacci’s dismissal in considerable detail in order to
determine the appropriate notice period in her reasons for
judgment reported at (1998), 1998 14734 (ON SC), 35 C.C.E.L. (2d) 1. Therefore, I
will not review the facts beyond what is necessary to dispose of
the issues raised before this court.
[5] The trial judge found not only that there was no cause for
dismissal, but that this was a case where the conduct of the
employer justified a longer period of notice in accordance with
the principles established in Wallace v. United Grain Growers
(1997), 1997 332 (SCC), 152 D.L.R. (4th) 1 (S.C.C.). She concluded that “the
serious but unfounded allegations made against Mr. Antonacci - of
poor performance, harassment, intimidation, and threats cast a
shadow on him that would make it virtually impossible for him to
find another position, especially given his age and physical
condition”. Given these factors, the trial judge held that Mr.
Antonacci was entitled “to the maximum period of notice generally
said to be available in wrongful dismissal cases – namely, 24
months”. This finding is not in issue on this appeal.
[6] The trial judge held further that the amount of general
damages owing for the wrongful dismissal was the salary that
would have been earned by Mr. Antonacci during this 24-month
period less the actual amount he received in Workers’
Compensation benefits over the period. A & P makes two arguments
with respect to the award of general damages and Mr. Antonacci
raises one issue on his cross-appeal.
[7] Firstly, the employer argues that no general damages are
owing because the employment contract had been frustrated by the
fact that Mr. Antonacci, for medical reasons, was never able to
work after his dismissal. Secondly, if general damages are
payable, A & P takes the position that the amount deducted for
the Workers’ Compensation Benefits received during the notice
period should have been grossed up to account for the fact that
they are non-taxable. It is argued that it is necessary to gross
up the amount of the deduction to avoid double recovery.
[8] Mr. Antonacci takes the position that only the actual amount
received in benefits should be deducted. On his cross-appeal
however, he argues that no deductions should be made at all for
those benefits received during notice and severance period
prescribed under the Employment Standards Act, R.S.O. 1990, c. E-
14, as amended.
1. Frustration of contract
[9] A & P argued at trial that no damages were owing because the
employment contract had been frustrated due to Mr. Antonacci’s
medical condition. In support of this argument, A & P relied in
part on the fact that, in June 1995, Mr. Antonacci was found
permanently disabled by the Workers’ Compensation Board.
[10] The trial judge stated as follows:
The doctrine of frustration applies when a contract becomes
incapable of performance because, in the circumstances,
performance would be radically different from that contemplated
by the parties at the time they made the contract. Many cases
have emphasized that the frustrating event must be beyond the
contemplation of the parties. With respect to employee illness or
incapacity, modern courts have not treated illness per se as a
frustrating event; rather, they have looked at the length of the
illness in relation to both the terms and duration of the
employment contract.
[11] After reviewing some of the relevant case law, the trial
judge concluded that, on the facts of this case, it would not be
appropriate to find that the contract of employment was
frustrated. In particular, the trial judge noted that A & P
offered its employees sick leave and long term disability plans
and that the prognosis for Mr. Antonacci’s condition at the time
of dismissal was not total disability. Hence, she concluded that,
at the time of dismissal, A & P would not have been justified in
dismissing Mr. Antonacci on the basis that the contract of
employment was frustrated because the contract gave him an
entitlement to a period of sick leave. In further support of her
conclusion that the contract of employment was not frustrated,
the trial judge relied on evidence that Mr. Antonacci’s job could
have been modified to accommodate a worker with a back injury,
or, alternatively, that A & P, with 24,000 workers in Ontario,
might well have been able to find alternative suitable work for
him. Finally, the trial judge held that, because A & P did not
rely on Mr. Antonacci’s medical condition in support of its
decision to terminate the contract, it would be wrong to allow it
to invoke events arising at least eight months after the
termination of the contract to argue frustration of a contract no
longer in existence.
[12] A & P does not suggest on appeal that the trial judge made
any findings of fact that are not supported by the evidence. A &
P simply reiterates the position it took at trial that no damages
should be awarded for the wrongful dismissal because, as it
turned out, Mr. Antonacci was never able to return to any form of
employment and was later found to be permanently disabled.
[13] I see no reason to interfere with the trial judge’s
conclusion on this issue. Her finding that there was no basis to
argue frustration of the contract of employment at the time of
dismissal, given the terms of the contract and Mr. Antonacci’s
condition at the time, is entirely supported by the evidence.
Indeed A & P never claimed justification for termination on the
basis of frustration. Further, A & P entirely abandoned at trial
its claim that the termination was justified. In these
circumstances, it is my view that it was not open to A & P, in
its argument on damages, to invoke the doctrine of frustration.
In effect, A & P, in advancing this argument was attempting to
reopen the whole issue of justification for the dismissal, a
position that it had clearly abandoned at the commencement of the
trial.
2. Deductibility of Workers’ Compensation Benefits
[14] Both parties agree that Workers’ Compensation Benefits must
be deducted from the award of general damages in order to prevent
double recovery for wage loss in accordance with this court’s
decision in Dowsley v. Viceroy Fluid Power International Inc.
(1997), 1997 3448 (ON CA), 34 O.R. (3d) 57 (C.A.). The parties submit, however, that
Dowsley did not deal with the issues raised in this case. I will
deal firstly with the cross-appeal.
[15] Mr. Antonacci submits that Workers’ Compensation Benefits
received during the notice and severance period under s.58 of the
Employment Standards Act are not deductible from the award of
general damages because of the following provision under s.58(7):
58(7) – Severance pay under this section is
Payable to the employee in addition to any
other payment under this Act or contract of
employment without set-off or deduction, except
for,
(a) supplementary unemployment benefits
payable to and received by the employee; or
(b) payments made to the employee under
a contractual severance pay scheme under
which payments for loss of employment based
upon length of service are provided.
[Emphasis added.]
[16] Mr. Antonacci submits that because severance pay, payable
under the Employment Standards Act, is not subject to any
reduction if there is mitigation income from other sources of
employment, it would be inconsistent to deduct the Workers’
Compensation Benefits received during that same period from the
award of general damages.
[17] I see no merit to this argument. The fact that Workers’
Compensation Benefits are not deductible from any severance
payment under s.58 lends no support to Mr. Antonacci given that
severance payments under s.58 are themselves deductible from any
award of damages for wrongful dismissal. See Stevens v. The Globe
and Mail (1996), 1996 10215 (ON CA), 28 O.R. (3d) 481 (C.A.). It follows that all
Workers’ Compensation Benefits received during the 24 month
notice period are deductible from the damage award.
[18] A & P maintains, as it did at trial, that the calculation of
damages requires a grossing up of the Workers’ Compensation
Benefits to reflect the fact that they are not subject to income
tax. It is argued that if the amount is not grossed up, Mr.
Antonacci will be overcompensated.
[19] The trial judge rejected A & P’s argument on the basis that
the tax treatment of Workers’ Compensation Benefits rests on a
tax policy of the federal government and any resulting benefit to
the employee cannot be claimed by the employer. The matter is
best left to the legislature.
[20] I agree with the trial judge’s conclusion. The result is
consistent with the general approach adopted in personal injury
cases whereby damages for loss of income are calculated on the
basis of the before-tax income lost: The Queen in Right of Ont.
v. Jennings (1966), 1966 11 (SCC), 57 D.L.R. (2d) 644 (S.C.C.). Much the same
reasoning applies here.
[21] Damages should restore Mr. Antonacci to the position in
which he would have stood but for A & P’s wrongdoing. However,
what Mr. Antonacci would have done, or would have been required
to do, with the employment income he would have received from A &
P, in so far as A & P is concerned, is irrelevant. The “loss”
resulting from any resulting overcompensation is to Revenue
Canada, not to the employer. The rule against double recovery is
not absolute. It admits of certain exceptions, particularly where
there are competing policy considerations. In a case such as this
one, it would be against public policy to make it more profitable
for the employer to pay damages for the breach of contract than
to perform the contract. Further, to require an assessment of
the plaintiff’s liability to pay tax in every case where
deductions are made from a damage award would give rise to
considerable practical difficulties that would result in an
unwarranted increase in the cost of litigation. Indeed, as the
trial judge concluded, the tax treatment of Workers’ Compensation
Benefits and any resulting benefit to the recipient is a question
better left to the legislature.
B. Aggravated Damages
[22] The trial judge correctly instructed herself on the law with
respect to aggravated damages, as re-examined by the Supreme
Court of Canada in Wallace. She noted that aggravated damages are
designed to compensate for intangible injuries and that they
generally supplement the damages awarded under general
principles. She also noted that the Supreme Court of Canada, in
Vorvis v. Insurance Corp. of British Columbia (1989), 58 D.L.R.
(4th) 193 (S.C.C.), made it clear that an award of aggravated, or
punitive, damages will be rare in cases of contract law and that,
after Wallace, the conduct giving rise to either type of damage
must be a separate actionable wrong.
[23] The trial judge then considered the facts. In so far as the
employer’s unfounded claims of misconduct were concerned, she
held that they had been taken into account in the calculation of
the notice period and that, in any event, they could not be
characterized as separate actionable wrongs. In my view, she was
entirely correct in reaching this conclusion. The trial judge
then stated as follows:
Nevertheless there has been conduct by the employer which is
harsh and reprehensible and which, in my view, constitutes a
separate actionable wrong that justifies an award of aggravated
damages. The employer informed the Workers’ Compensation Board
that Mr. Antonacci had been dismissed for cause in December,
- That information was never corrected.
[24] The letter in question was sent by the employer when it was
informed by the Workers’ Compensation Board (“WCB”) that Mr.
Antonacci’s file was being reviewed by the Re-Employment Branch
of the WCB. The text of the letter sent by A & P’s representative
reads as follows:
“Thank you for your letter of 12/5/94.
Mr. Vito Antonacci has requested
his file be reviewed by the Re-employment
Branch of the WCB.
Mr. Antonacci last worked week
ending Oct.15 1994. At this time he received
a large settlement from the company. The
termination had nothing to do with the WCB
injury under which Benefits ceased
approximately Aug.25 1994. Mr. Antonacci’s
termination was based on performance issues
which long preceded his injury. The
termination is an employment issue only.
Please refer this letter to the Re-
employment Branch for their consideration.
Thank You.
[25] The trial judge considered the effect of the letter and
concluded as follows:
The reason for the dismissal was very important,
especially once it was determined that Mr.
Antonacci was permanently partially disabled
because of a work-related injury. Section 54
of the Workers’ Compensation Act grants rights
to re-employment to injured workers.
…
By informing the Board that Mr.
Antonacci had been dismissed for cause and by
never changing that story, the employer
misled the Board and deprived Mr. Antonacci
of the opportunity to avail himself of the re-
employment rights under the Act.
[26] The trial judge rejected the submission that s. 54 of the
Workers’ Compensation Act was irrelevant because Mr. Antonacci,
for reasons that had nothing to do with the employer’s letter,
had not sought re-employment and stated as follows:
… the fact that he left his complaint in abeyance
while pursuing other avenues of redress does not,
in my view, excuse the employer’s conduct in placing
obstacles in the way of his access to re-employment
rights.
The plaintiff is entitled to aggravated
damages to compensate him for the loss of his
potential right to re-employment, as well as
the intangible harms that flow from the
employer’s actions.
She held that an award of $15,000 was appropriate in this case.
[27] A & P disputes the award on four grounds. First, it is
argued that the employer’s conduct in sending the letter was
never pleaded as a basis for the claim for aggravated or punitive
damages and that, consequently, the award is beyond the scope of
the pleadings as particularized. Second, it is argued that the
award is based on findings of fact that have no foundation on the
evidence. Third, it is argued that the submission made by the
employer to the Workers' Compensation Board is inherently
privileged and cannot constitute an independent actionable wrong
and, fourth, because the submission to the Workers' Compensation
Board relates to the issue of reinstatement of the employee - a
matter within the exclusive jurisdiction of the Board, it cannot
found a civil action.
[28] I do not find it necessary to deal with the issues of
privilege and exclusive jurisdiction of the Board because I am
persuaded that the award cannot stand for the reasons advanced by
the appellant on the first two grounds.
[29] Counsel for the appellant contends that his client was never
advised by the respondent, at any time during the course of the
proceedings, that the December 14 letter to the WCB was being
relied upon in support of the claim for aggravated damages and
this despite all efforts being made to obtain full particulars of
the claim. Indeed, he states that his client discovered for the
first time that the letter was in issue upon reading the trial
judge’s reasons for decision. In my view, the material before the
court supports the appellant’s contention.
(a) the statement of claim
Mr. Antonacci’s pleading makes no reference either
to the December 14, 1994 letter to the WCB or generally
to any submissions made by A & P to the WCB respecting
re-employment. To the contrary, the statement of claim
ascribes an entitlement to punitive and aggravated
damages to A & P’s conduct on or before the date of
dismissal on October 14, 1994. The conduct relied upon
by the trial judge occurred two months outside that
period.
(b) the examination for discovery
During the October 17, 1996 examination for
discovery, counsel for Mr. Antonacci advised that the
claim for aggravated and punitive damages was limited
to the facts contained in the statement of claim and
examination for discovery. No reference is made to the
December 14, 1994 letter or to submissions made to the
WCB during the examination for discovery. Counsel for
Mr. Antonacci undertook to organize and specify which
of the facts delineated in the examination for
discovery and the statement of claim were still being
relied upon for the claim for aggravated and punitive
damages.
(c) correspondence between counsel
In answer to his undertaking, counsel for Mr.
Antonacci confirmed on October 31, 1997 that “the facts
relied upon in the claim for aggravated and punitive
damages are contained in the pleadings and further
particularized in the evidence of Mr. Antonacci on his
examination for discovery, and relate to the conduct of
various supervisors throughout the years leading up to
and including the decision to dismiss him [on October
14, 1994].” The December 14, 1994 letter falls outside
this period and its author was not a supervisor but a
nurse of A & P’s Occupational Health and Safety
department.
Counsel for A & P sought further
particulars of the facts relied upon in
support of the claim for aggravated and
punitive damages by letter dated November 11,
1997 but received no response. He therefore
decided to bring a motion for particulars.
(d) motion for particulars
Sheard J. granted A & P’s motion and ordered Mr.
Antonacci to provide particulars as requested. In
compliance with the order, counsel for Mr. Antonacci
supplied a list on January 21, 1998 entitled “Facts
Relied Upon for Claim for Punitive Damages.” No
particulars were provided with respect to the claim for
aggravated damages. More importantly, no reference was
made to the December 14, 1994 letter or to any aspect
of A & P’s position before the WCB.
(e) further correspondence
Counsel for A & P requested further particulars by
letter dated January 23, 1998 and suggested that these
claims be abandoned. Counsel for Mr. Antonacci
responded that the claim for punitive damages was not
being abandoned and provided further particulars by
letter dated January 23, 1998. No reference was made to
any claim for aggravated damages or to the conduct in
question. By letter dated January 24, 1998, counsel
for A & P advised counsel for Mr. Antonacci that he
would vigorously oppose any attempt to adduce
undisclosed evidence at trial.
(f) the trial
At the commencement of the trial on January 26,
1998, counsel for A & P objected to the admissibility
of evidence in relation to most of the particulars
provided by counsel for Mr. Antonacci in his list dated
January 21, 1998. In making his submissions, he
informed the trial judge of all the steps he had taken
in an effort to obtain full particulars. No reference
is made whatsoever to the letter in question, nor to
any communications between A & P and the WCB in the
exchange that followed between counsel and the trial
judge.
[30] A & P submits that because the December 14, 1994 letter was
not placed in issue by the particulars, it did not adduce any
evidence at trial as to its position before the WCB following the
letter, as to any other submissions it may have made in response
to Mr. Antonacci’s re-employment application, or specifically as
to whether the December 14, 1994 letter was ever modified.
Further, A & P did not inquire into, nor adduce evidence on, the
question whether the WCB was at all misled by the contents of
that letter as found by the trial judge.
[31] A & P further submits that there was no evidentiary basis
for the trial judge’s crucial finding that:
By informing the Board that Mr. Antonacci had been dismissed
for cause and by never changing that story, the employer misled
the Board and deprived Mr. Antonacci of the opportunity to avail
himself of the re-employment rights under the Act.
[32] It is A & P’s position that there was no evidence that it
had never “chang[ed] that story”, that the Board was “misled” or
that Mr. Antonacci was deprived of any opportunity as a result.
Counsel for A & P also submits that the letter itself does not
state that Mr. Antonacci had been dismissed for cause. While the
reference in the letter to the fact that his termination was
“based on performance issues” may support this inference, the
earlier statement in the letter that Mr. Antonacci “received a
large settlement from the company” is inconsistent with dismissal
for cause.
[33] I agree with the counsel for A & P that the letter was
ambiguous on the question of cause for dismissal. I also agree
that the trial judge’s inference that the WCB was misled as a
result of the letter is difficult to support on the record. In
any event, it is my view, in the circumstances of this case, that
it was not open to the trial judge to make a finding of liability
and award damages for aggravated damages on the basis of this
letter. The conduct in question fell outside the scope of the
pleadings as particularized.
[34] This court in Int. Nickel Co. v. Travellers Ind. Co, [1962]
1 O.W.N. 109 adopted the following statement in Mexican N. Power
Co. v. Pearson (1913), 25 O.W.R. 422 at 425 on the function of
particulars:
The function of particulars is to limit the generality of
pleadings and thus to define the issues which have to be tried
and as to which discovery must be given. Each party is entitled
to know the case to be made against him at the trial and to have
such particulars of his opponent’s case as will prevent him from
being taken by surprise.
[35] The purposes of particulars are also well summarized in Tse-
Ching v. Wesbild Holdings Ltd (1994), 98 B.C.L.R. (2d) 92 (S.C.)
at 100:
- to inform the other side of the nature
of the case they have to meet;
- to prevent the other side from being
taken by surprise at trial;
- to enable the other side to determine
what evidence will be necessary and to
prepare for trial;
to limit the generality of pleadings;
to limit and decide the issues to be
tried and as to which discovery will be
conducted;
- to tie the hands of the party
providing particulars.
[36] To give effect to the finding of the trial judge and the
consequent award of aggravated damages would defeat the whole
purpose of particulars. Full particulars were repeatedly sought
by counsel for A & P and the claim for aggravated and punitive
damages was vigorously opposed throughout. Mr. Antonacci’s
failure to put forth any allegation relating to the
communications between A & P and the WCB as a basis for his claim
precludes him from relying on this conduct in support of the
trial judge’s award of aggravated damages.
[37] I would therefore give effect to this ground of appeal.
C. Punitive Damages
[38] I see no merit to Mr. Antonacci’s cross-claim on punitive
damages. In my view the trial judge was correct in her findings
and in her conclusion on this issue. There is no reason to
interfere with the dismissal of the claim for punitive damages.
D. Costs
[39] The appellant’s sole argument on the issue of costs is that
the amount of $28,000 is excessive because it represents
approximately 90% of the total damage award for the notice
period. In my view, this fact, in and of itself, provides no
reason to interfere with the award. The appellant has not
provided any basis upon which this court could assess the
reasonableness of the award. Consequently, I see no basis for
interfering with the trial judge’s exercise of discretion in
fixing the costs at that amount.
E. Disposition
[40] I would allow the appeal to the extent of deleting the award
for aggravated damages and I would dismiss the cross-appeal. In
view of the divided success, I would award the appellant half of
its costs of the appeal and all of its costs of the cross-appeal.
(signed) "Louise Charron J.A."
(signed) "I agree Doherty J.A."
(signed) "I agree S. Borins J.A."
RELEASED: January 13, 2000