CITATION: Bansal v. 2343467 Ontario Inc., 2015 ONSC 1016
COURT FILE: CV-14-504331
MOTION HEARD: 20140728
RELEASED: 20150213
SUPERIOR COURT OF JUSTICE – ONTARIO
RE:
Bahadur Bansal
Plaintiff
v.
2343467 Ontario Inc., a subsidiary of MaxSys Staffing and Consulting Inc.
and 3755479 Canada Inc.
Defendants
BEFORE : MASTER D. E. SHORT
COUNSEL : Albertos Polizogopoulos fax: 613-241-2599
-Counsel for the Defendants
(Moving Parties)
Philip R White fax: 416-364-2490
-Counsel for the Plaintiff
RELEASED: February 13, 2015
Reasons for Decision
I. Background
[1] This action is one of three matters commenced against or by the same group of corporations collectively referred to in these reasons as “MaxSys”. The actions relate to separate individuals whose relationship with the defendant companies was terminated. The same counsel is representing each of the parties opposite MaxSys in those actions. The present action was treated as a test case as similar motion materials were filed in each of the three actions, wherein the impugned paragraphs to a large extent mirrored each other. The other actions are Garnet Waldron v. MaxSys (file number CV-14-504326) and MaxSys v. Maria Walter et al (file number CV-14-501425). In the latter action there is also a counterclaim by Nikita Patel against MaxSys.
[2] The major dispute in each of these motions relates to assertions pleaded in support of claims for an increased punitive damages award based on the allegation that MaxSys engaged in systemic wrongdoing by virtue of the manner in which it dealt with its former employees and dependent contractors. The plaintiff also seeks a declaration that the non-solicitation clause in the Agreement for Consulting Services is void and unenforceable.
[3] As well, its motion MaxSys seeks to strike portions of the pleadings that reference its legal counsel by name.
II. Positions of the Parties
[4] MaxSys argues that Mr. Bansal's pleadings related to systemic wrongdoing should be struck because:
(i) the pleadings are not capable of affecting the outcome of this action;
(ii) the Court is being asked to scrutinize the alleged conduct and behaviour of MaxSys in relation to individuals who are not parties to this action; and
(iii) the claim of systemic wrongdoing will significantly increase the scope of documentary production and examination for discovery.
[5] The plaintiff submits that arguments to strike based on such grounds have already been heard and rejected by Ontario courts in similar cases in the past.
[6] Mr. Bansal submits in his factum that the MaxSys motion should be dismissed for the following reasons:
(a) Mr. Bansal, a dependent contractor, is entitled to the same common law protections as those enjoyed by employees;
(b) an employee can claim an increased punitive damages award based on allegations that his or her employer engaged in systemic wrongdoing in its dealings with its employees;
(c) employees are members of a vulnerable group deserving of the Court's protection. Employees are particularly vulnerable at the time when the employment relationship ruptures;
(d) MaxSys' systemic acts of misconduct against its former employees have continued during the course of litigation. Litigation misconduct can result in an award of punitive damages;
(e) the Rules of Civil Procedure which govern the scope of both documentary and oral discovery are adequate to meet any concerns about the breadth of pleadings related to MaxSys' systemic wrongdoing; and
(f) a lawyer does not have immunity from having his actions in support of his client considered by a Court.
III. Background
[7] The plaintiff alleges that in August 2013, MaxSys acquired the outstanding shares of another recruitment company, GSI International Consulting Group bracket (“GSI”). Mr. Bansal Mr. Waldron, Ms. Walter and Mr. Patel all worked with GSI at the time of the share purchase.
[8] Apparently, Mr. Bansal worked for MaxSys/GSI as an account manager for 17 years. His contract with MaxSys defined his relationship with the company as that of an independent contractor. However, Mr. Bansal has pleaded that, at law, he was a dependant contractor. Mr. Bansal’s compensation was 100% commission and bonus based.
[9] MaxSys assets that the company dismissed Mr. Bansal for cause approximately 8 months after the share purchase. Mr. Bansal denies that MaxSys had cause to summarily dismiss him and has alleged that MaxSys’ allegation of cause was made in bad faith.
[10] In the action he is claiming damages for MaxSys’ failure to pay him his bonus owed, commission and a recruitment award. He also claims punitive damages.
[11] MaxSys asserts that the Statement of Claim contains allegations that raised no genuine issue of law, are relevant, prejudicial and have no probative value. They further assert that the allegations against the company are serious and inflammatory.
[12] They seek to strike the impugned portions on the basis that they “may prejudice or delay the fair trial of this action, are scandalous, frivolous or vexatious and/or are an abuse of the Court’s process.”
IV. Areas of Complaint
[13] I turn first to the category of complaint which relates to references in the pleading to the alleged conduct of defendant’s counsel and his law firm. The Defendants’ factum asserts:
“25. These references to the Defendants' Counsel and his law firm contain unfounded and inflammatory attacks on the integrity of the Defendants, their Counsel and their Counsel's law firm. These bare allegations are speculative, unfounded, irrelevant, argumentative, inserted only for colour without material facts in support of them and can have no effect on the outcome of the action. These paragraphs are therefore scandalous, frivolous and vexatious and ought to be struck.”
[14] Most of the concerns raised relate to allegations concerning the conduct of MaxSys with regard to a number of terminated individuals.
[15] Paragraph 36 of the pleading ,prior to setting out specific allegations , asserts:
“36. Mr. Bansal, in support of his claim for punitive damages, further pleads that MaxSys has adopted a corporate policy or practice of using a variety of unethical and unlawful tactics to harass, intimidate, Injure and play hardball with its former employees and dependent contractors (collectively "Employees"). in order to either: (i) avoid its statutory and contractual obligations to pay wages and provide proper notice of termination (or compensation in lieu of notice of termination) or; (ii) prevent its former Employees from gaining new employment in their chosen field, including:…”
[16] An example of the type of included allegations is found in sub-paragraph 36 (d) of the Statement of Claim:
“[MaxSys] sent letters (with attached cheques) to Employees after their contracts had been terminated or the Employees had resigned from their employment. The letters provided no explanation about how the amounts set out in the cheques had been calculated. The letters states, that:
By depositing the attached cheque, .You unconditionally agree and certify that you irrevocably release MaxSys from all liability arising from your contract with MaxSys and waive any and all rights to make claims against MaxSys.
Depending on the payee, the amounts payable by cheque were in breach of MaxSys' statutory obligations under the ESA to pay wages and/or notice and severance. MaxSys also breached its obligations under s. 12.1 of the ESA for failing to provide its employees with a statement of wages upon termination. The quantum of the cheques also breached MaxSys' contractual obligations. In addition, the letters and attached cheques often lacked the necessary consideration to form a binding settlement with the Employee;”
[17] Similarly in sub-paragraphs 36(f) and (g) it is asserted that MaxSys:
(f) used litigation and the threat of litigation as a weapon against former Employees. The litigation and threats of litigation were motivated by malice and undertaken with the intent of injuring the former Employees and have a chilling effect on any potential future employers of the Employees. For example MaxSys:
(i) fabricated allegations that departed Employees had unlawfully removed its client and temporary employee list in order to justify commencing litigation against the Employees;…
(g) unlawfully interfered with the administration of justice. For example:
(i)MaxSys used its legal counsel…to attempt to intimidate and coerce an affiant,..in MaxSys legal action against [another terminated individual]. MaxSys unlawfully withheld payment of the [affiant’s] settlement payment when it learned that [he]had agreed to act as an affiant for [that individual]….”
[18] I have removed the specified names that are set out in the pleading to respect the privacy of the named individuals.
[19] The Defendants also take issue with portions the pleading referring to a claim initiated by MaxSys against another representative in Small Claims Court for the repayment of her draw against commission. The factum quotes this challenged extract from the pleading:
“36(f)(iii)...MaxSys initiated this claim, despite knowing that the action had no chance of success. MaxSys mislead (sic) the Court in it (sic) pleadings when it pleaded various terms of Ms. Campbell’s employment contract, but failed to inform the court that the second sentence of Ms. Campbell’s employment contract stated:
“You are compensation for services will be a non-repayable draw based on an hourly rate of $20.” [Emphasis added in pleading]
the sole purpose of the defendants claim was to intimidate and harass Ms. Campbell;”
[20] Similarly sub-paragraph 36 (g) (ii) of the statement of claim deals with alleged omissions from disclosure by MaxSys in its productions in the litigation with Ms. Campbell.
[21] The position taken by counsel for MaxSys is that these paragraphs contain no material fact that may have an effect on the outcome of the action; that the allegations set out in these paragraphs do not involve the plaintiff but involve unnamed or hypothetical individuals. “The plaintiff does not allege that MaxSys engaged in the alleged behaviour with him, but rather that MaxSys engaged this alleged behaviour with unnamed hypothetical individuals.”
[22] I find these complaints odd; as they do not seem to acknowledge that the names of a number of terminated individuals are clearly identified in the pleading.
[23] Addressing a number of the challenged paragraphs, counsel for the defendants concludes:
“36. These paragraphs contain unfounded and inflammatory attacks on MaxSys' integrity, are speculative, and are replete with conclusions and expressions of opinion. These paragraphs are scandalous, frivolous and vexatious and ought to be struck.”
[24] The moving parties further assert in their factum that:
- These paragraphs contain irrelevant facts with are immaterial to the Plaintiff's claim and can have no effect on the outcome of this action. The allegations in these paragraphs are argumentative, inserted only for colour, are bare allegations without material facts in support of them and contain unfounded and inflammatory attacks on MaxSys' integrity. These paragraphs are therefore scandalous, frivolous and vexatious and ought to be struck.
[25] At the conclusion of the factum of the defendants counsel submits specifically:
The Plaintiff's Claim is framed in breach of contract. The Impugned Paragraphs are (i) immaterial to the Plaintiffs claim; (ii) not capable of affecting the outcome of this action; (iii) irrelevant to the Plaintiff's claim; (iv) inserted only for colour and to embarrass the Defendants in this action; and (v) are improper to bring before the Court.
The Impugned Paragraphs Allegations are not only prejudicial to the Defendants, but serve to significantly increase the scope of documentary production, examination for discoveries and the trial well beyond what is required for a trier of fact in determining whether the contract between MaxSys and the Plaintiff was breached.
[26] Having outlined the basis of the justifications put forward in support of the motion to strike portions of the plaintiff’s claim, I now turn to the applicable rules and the plaintiff’s responding arguments
V. Applicable Rules
[27] Rule 25.06 (1) provides that a plaintiff must plead the “material facts” on which it relies upon in support of its claim.
[28] Rule 25.11 of the Rules of Civil Procedure provides as follows with respect to the striking out of all or part of a pleading:
The Court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
(i) may prejudice or delay the fair trial of the action;
(ii) is scandalous, frivolous or vexatious; or
(iii) is an abuse of the process of the court.
[29] Relying upon the decision of Justice Strathy(as he then was) in Carney Timber Co. v. Pabedinskas,2008 63163 (ON SC), [2008] O.J. No. 4818; 173 A.C.W.S. (3d) 89; 2008 63163, the moving party asserts that the application of rule 25.11 has been summarized by the courts as follows:
a. a fact that is relevant to a cause of action cannot be scandalous, frivolous or vexatious;
b. a pleading that has no material facts is frivolous and vexatious;
c. a pleading that is superfluous or can have no effect on the outcome of the action is scandalous, frivolous and vexatious;
d. portions of a pleading that are irrelevant, argumentative, inserted only for colour or are bare allegations without material facts in support, will be struck as scandalous;
e. a pleading that is purely argumentative will be struck out;
f. a pleading that contains unfounded and inf1ammatory attacks on the integrity of a party, and speculative and unsupported allegations of defamation will be struck as scandalous and vexatious;
g. a pleading may be struck on the ground that it may prejudice or delay the fair trial of the action where the probative value of the evidence would be outweighed by the time and effort involved and would seriously interfere with the fair and focused trial of the issues;
h. striking a pleading on the ground that it may prejudice or delay the fair trial of an action is an exercise in discretion - the court must balance the added complexity of the pleading against the potential probative value of the facts alleged;
i. pleadings that are replete with conclusions, expressions of opinion and contain irrelevant matters will be struck in their entirety; and
j. pleadings that are clearly designed to use the judicial process for an improper purpose are an abuse of process - these include harassment and oppression of other parties by multifarious proceedings, the re-litigation of issues previously decided and the litigation of matters that have been concluded.
[30] However, it is clear that these various guidelines require further consideration. Based upon the facts in any particular case. In Carney Timber Justice Strathy was primarily concerned with the absence of support for a number of alleged causes of action. In many cases, he struck the paragraphs, but with leave to amend.
[31] For example, I was referred to the following extracts from the Carney Timber decision by counsel for the moving party :
27 I agree with the submission of counsel on behalf of the plaintiff that the bald allegation of a "scheme" is unsupported by a pleading of any material facts and there is no allegation of any unlawful action, tort or other cause of action: Miguna v. Ontario (Attorney General) (2005), 2005 46385 (ON CA), 262 D.L.R. (4th) 222, [2005] O.J. No. 5346 (C.A.). If the claim is really that Carney exploited his technology without compensation, the material facts can be pleaded clearly and directly. Mr. Pabedinskas has, however, requested leave to amend and I am not prepared to deprive him of the opportunity to cure the deficiencies in the pleading, if so advised. The paragraph is struck, with leave to amend.
- The Defendant maintains that the Plaintiff's action is an oppressive and vexatious abuse of the process of the court by the plaintiff Carney, in that it initiated this action as a means to intimidate the Defendant and to coerce him into signing away his rights to inventions he conceived and that he rightfully owns, in exchange for … Carney's promise to spare the Defendant from the specter of costly and protracted litigation.
36 The pleading as filed does not disclose a cause of action and the draft pleading, even if treated as particulars, is no real improvement. There is no allegation of any intent to injure and no allegation of any interference with the defendant's economic interests by illegal or unlawful means. See: Correia v. Canac Kitchens, 2008 ONCA 506, [2008] O.J. No. 2497, (2008), 91 O.R. (3d) 353 (C.A.); Drouillard v. Cogeco Cable Inc., 2007 ONCA 322, [2007] O.J. No. 1664, (2007), 86 O.R. (3d) 431 (C.A.).
37 Nor, with respect to the allegation of abuse of process, is there any pleading that the proceedings were commenced for an improper or collateral purpose and no allegation of an act or threat in furtherance of a purpose not legitimate: Metrick v. Deeb, 2003 804 (ON CA), [2003] O.J. 2221, (2003), 172 O.A.C 229 at 230, (C.A.), citing Fleming on Torts (4th ed. 1971) at 548. [my emphasis added]
[32] Referring to other paragraphs in the pleading challenged before Justice Strathy, he observes:
40 The claims made in these paragraphs are for punitive and exemplary damages and for aggravated damages. There are no facts pleaded in support of these claims. There is a bald conclusory allegation in paragraph 36 that "Carney's callous actions warrant the payment of punitive and exemplary damages, and as these same actions have inflicted severe mental, emotional and psychological distress on the Defendant, he is entitled to aggravated damages." The only allegation in the pleading that may be remotely connected to these claims is the allegation in paragraph 35 referred to above.
41 There is no pleading of an "independent actionable wrong" that would support the claim for punitive damages: Honda Canada Inc. v. Keays (2008), 2008 SCC 39, 294 D.L.R. (4th) 577, [2008] S.C.J. No. 40 (SCC); Whiten v. Pilot Insurance Co. 2002 SCC 18, [2002] 1 S.C.R. 595. Nor is there a pleading of any facts that would support the requirement that the conduct must be "harsh, vindictive, reprehensible and malicious" and "extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment": Vorvis v. Insurance Corporation of British Columbia, 1989 93 (SCC), [1989] 1 S.C.R. 1085; Honda Canada Inc. v. Keays, above.
42 In Vorvis v. Insurance Corp. of British Columbia, the Supreme Court of Canada said, at 1099, that aggravated damages "describ[e] an award that aims at compensation, but takes full account of the intangible injuries, such as distress and humiliation, that may have been caused by the defendant's insulting behaviour." Such damages have been awarded, for example, in libel cases where the conduct of the defendant has been high-handed or oppressive and has increased the plaintiff's humiliation resulting from the defamation: Hill v. Church of Scientology, 1995 59 (SCC), [1995] 2 S.C.R. 1130. This can be reconciled with the recent decision of the Supreme Court of Canada in Honda Canada, above, in which it was suggested that compensatory aggravated damages can be awarded based simply on the Rule in Hadley v. Baxendale (1849), 9 Ex. 341, 156 E.R. 145 as being within the reasonable contemplation of the parties at the time the contract was made. [my emphasis added]
[33] I take from this decision the direction that bald assertions are to be struck but if sufficient supporting information is provided such claims will be allowed to remain.
[34] With respect to prejudice and delay of a fair trial, counsel quotes the following from the Justice Malloy decision in Brodie v. Thomson Kernaghan & Co., [2002] O.J. No. 1850. In that case the Court struck potentially relevant allegations from the pleading after balancing the probative value against the potential prejudicial effect and delay to the defendant, stating:
Therefore, although the issue of the defendants' knowledge of prior complaints against Mr. Grieve has some tangential relevance, it is minor. It adds very little to the plaintiffs claim and its absence would not deprive her of a cause of action or reduce any compensatory damages to which she might be entitled. On the other hand, allowing the pleading to stand will result in a far more expensive and complex proceeding. ….
[35] In Rare Charitable Research Reserve v. Chaplin, [2009] O.J. No. 3893 Justice Brown held that pleadings in a Statement of Claim that do not relate to the elements of the claim are treated as scandalous and struck out pursuant to Rule 25 .11 (b), stating:
Finally, the facts pleaded in a statement of claim or defence must relate to the elements of the claim or defence. Portions of a pleading that are irrelevant, argumentative, speculative, inserted merely for colour, or that constitute bare allegations or unfounded and inflammatory attacks on the integrity of a party are treated as scandalous and struck out under Rule 25.11 (b) as offending the basic principles of pleadings….
[36] To determine the applicability of these decisions it is necessary to examine the purpose and extend of the portions of the pleading which the Defendants seek to strike. That process clearly requires a consideration of the Plaintiff’s counsel’s submissions
VI. Plaintiffs Submissions on Current Case Law
[37] The position set out in the factum of the responding party is that the objections set out do not accord with the current case law in this area, particularly in employment termination cases. In considering the submissions of the parties, I come to the determination of the specific items challenged based on my view that the following principles apply to a Rule 25.11 motion of this nature:
(a) motions to strike under rule 25.11 should only be granted in the "clearest of cases";
Ref: Jama (Litigation Guardian of) v. McDonald's Restaurants of Canada Ltd., [2001] O.J. No. 1068, at para. 21
(b) a pleading cannot be scandalous if it is relevant;
Ref: Quizno's Canada Restaurant Corp. v. Kileel Developments Ltd., 2008 ONCA 644, [2008] O.J. No. 3674 (C.A.) at para. 14;
(c) if similar facts will be material to a portion of the claim including punitive damages, they may be pleaded in order to give fair notice that they will form part of the discovery and will be part of the case at trial;
(d) "The distinction between material facts, particulars and evidence is not a bright line and there will be situations in which the level of detail required to provide adequate particulars sets out material facts that might also be regarded as evidence. Furthermore, pleadings motions should not be approached in an overly technical manner. Generally speaking a party should be at liberty to craft a pleading in the manner it chooses providing the rules of pleading are not violently offended and there is no prejudice to the other side";
Ref: Toronto (City) v. MFP Financial Services Ltd., [2005] O.J. No. 3214, at paras. 15, 17 and 30
(e) The motion to strike is a tool that must be used with care, as the law is not static and actions previously were deemed hopeless may in the future succeed. Therefore, it is not determinative that the law has not yet recognized the particular claim. In its analysis the court must be generous and err on the side of permitting a novel but arguable claim to proceed to trial;
Ref: R. v. Imperial Tobacco Canada, 2011 SCC 42, at para 21
[38] The general legal principles when pleading a claim for punitive damages were set out by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at paras 86 and 87.:
(a) the facts said to justify punitive damages should be pleaded with some particularity;
(b) before someone is punished through an award of punitive damages "they ought to have advance notice of the charge sufficient to allow them to consider the scope of their jeopardy as well as the opportunity to respond to it";
(c) the principle that a claim for punitive damages should be expressly pleaded with some particularity is made explicit in Rule 25.06 (9) of the Rules of Civil Procedure.
[39] The Plaintiff’s counsel argues that Mr. Bansal is entitled to claim additional punitive damages as a result of Maxsys' systemic wrongdoing in the manner in which it deals with its former employees. Paragraph 36 of Mr. Bansal's statement of claim pleads as following:
Mr. Bansal, in support of his claim for punitive damages, further pleads that Maxsys has adopted a corporate policy or practice of using a variety of unethical and unlawful tactics to harass, intimidate, injure and play hardball with its former employees and dependent contractors (collectively "Employees") in order to either: (i) avoid its statutory and contractual obligations to pay wages and provide proper notice of termination (or compensation in lieu of notice of termination) or; (ii) prevent its former Employees from gaining new employment in their chosen field, including: …
[40] What is clear from the Defendants’ submissions is that Maxsys does not seek to strike paragraph 36 but instead ask the Court to strike its subparagraphs that the plaintiff asserts contain material facts in support of Mr. Bansal's claim for punitive damages. The subparagraphs can broadly be characterized as follows:
(a) material facts related to Maxsys' misconduct in its dealings with its Employees at the point at in time when the employment relationship ended [Paragraph 26, 28, 29, 36(a),(b),(c), and (d)];
(b) material facts relevant to Maxsys' attempt to interfere with its former Employees' attempts to find new employment in their chosen field; [Paragraph 36 (e)]
(c) material facts relevant to Maxsys' misconduct during the course of litigation with its former Employees [Paragraphs 36(f) and (g)]
[41] Is the pleading of such allegations and details permissible in this case? Is this an employment type of case where such matters may be claimed?
VII. Position of Dependant Contractors
[42] Counsel for the plaintiff submits that dependent contractors are entitled to the same common law protections as employees.
[43] I agree with the submission that the Ontario Court of Appeal has held that there is little legal difference between a dependent contractor and an employee at the time of dismissal. Dependent contractors work exclusively or near exclusively for the contracting company and, as a result, are economically dependent. They are in a position of economic vulnerability and are therefore owed reasonable notice upon termination.(see McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916 at para 30 and 36)
[44] Justice MacPherson , writing for the Court in McKee, cited with approval Geoffrey England's et al, Employment Law in Canada, 4th ed. (Markham, Ont.: LexisNexis Canada) vol. 1, at s. 2.33. There a summary of the frequently stated policy reasons found in the decisions that have recognized dependent contractors as an intermediate category between employees and independent contractors:
“These decisions have frequently acknowledged the policy justification for using the "intermediate" status doctrine in order to extend the safeguards of the employment contract to self-employed workers who are subject to relatively high levels of subordination and/or economic dependency, but who, technically, do not qualify as "employees" strict sensu.”
[45] Mr. Bansal submits that the legal analysis that follows, which is focused on employees, also applies to dependent contractors.
VIII. Punitive Damages for Systemic Wrongdoing in the Employment Context
[46] 24. The Supreme Court of Canada held in Whiten, supra that the quantum of a punitive damage award may be increased as a deterrent in situations where the defendant has engaged in a policy or practice of using its superior bargaining power to exploit vulnerable individuals. In Whiten, the Court affirmed a jury's punitive damage award of $1,000,000 against an insurance company for the bad faith manner in which the insurer had handled the plaintiff's insurance claim. Binnie J., when addressing the importance of deterrence when awarding punitive damages, wrote at paragraph 120 of his judgment:
Deterrence is an important justification for punitive damages. It would play an even greater role in this case if there had been evidence that what happened on this file were typical of Pilot's conduct towards policyholders. [emphasis added]
[47] Justice Binnie also quoted with approval Laskin J.A.'s earlier comments at the Court of Appeal (of the same case at p. 659). Laskin J.A. acknowledged the importance of punitive damages as a deterrent in situations where a defendant may continue to exploit vulnerable individuals in the future:
"A significant award was needed to deter Pilot and other insurers from exploiting the vulnerability of insureds, who are entirely dependent on their insurers when disaster strikes"
[48] The availability of an increased punitive damage award in the employment context was recognized in Hodson v. Canadian Imperial Bank of Commerce, (2001), 16 CCEL (3d) 110. There the Divisional Court considered an appeal of an order striking paragraphs in the Plaintiff's statement of claim that alleged that the Bank had an ongoing corporate strategy of summarily dismissing unwanted employees in order to avoid having to pay severance. The Plaintiff alleged in the statement of claim that the Bank displayed the same tactics and approach in his dismissal as in earlier dismissal, which had resulted in court awards of punitive damages against the bank. In allowing the appeal, Zelinski J., framed the dispute as follows:
"The issue before us arises because the Plaintiffs also contend that the Defendant's conduct is part of an ongoing corporate strategy for getting rid of unwanted employees without giving proper notice of termination, as already disclosed in prior court proceedings. This, if proven, could result in higher punitive damages for reasons set out in Whiten v. Pilot Insurance Co. If the alleged corporate strategy is proved, the fact that the Defendant ma y have "profited" from such conduct may give rise to substantially higher punitive damages than would otherwise be the case. "
[49] Similarly in Craig-Smith v. John Doe, [2009] O.J. No. 4041, at para. 16(i) Justice C.W. Hourigan, prior to his joining the Ontario Court of Appeal, held that the Plaintiff's allegation that the employer's bad faith was systemic and that it had a practice of failing to fulfill its duty of good faith was a proper pleading and, therefore, refused to strike the impugned paragraph, writing:
" .,. the Plaintiff alleges that the Defendant' bad faith is systemic and there exists a policy of failing to fulfill its duty of good faith. In its factum, the Defendant argued that an allegation which deals generally with its business practice is not a proper plea regarding punitive damages or bad faith ... I reject the submission that an allegation of systemic wrong doing is not relevant to an analysis of bad faith or punitive damages. There are many examples of cases where such allegations are considered in the context of a punitive damages or bad faith analysis." [emphasis added]
[50] More recently, in Covelli v. Sears Canada Inc., 2011 ONSC 6984 (Div Ct.), Sears Canada was accused by several former employees of having a corporate policy of using unfounded allegations of cause to avoid its obligation to provide reasonable notice of dismissal to long service employees. The allegations were made by the former employees in support of their claims for moral and punitive damages. Dambrot J. refused to grant Sears' motion for leave to appeal to the Divisional Court to have the Plaintiffs' allegations of Sears' systemic misconduct struck from the Statement of Claim, writing:
“The Defendant in this wrongful dismissal claim seeks leave to appeal from the decision of Hainey J. dismissing an appeal from a decision of Master Sproat. The Master dismissed the Defendant's motion to strike out allegations in the Defendant's Statement of Claim that the Defendant had a practice or policy of terminating employees for just cause in circumstances where they knew that no cause existed in order to avoid providing notice or pay in lieu thereof These allegations are made in support of a claim for moral and punitive damages.
The Defendant says that leave should be granted because there are conflicting lines of cases on this issue and because there is good reason to doubt the correctness of the decision of Hainey J. with respect to it.
It is true that there is a line of cases that supports the position of the Defendant, albeit a short one. It consists of a 1986 decision of Master Peppiatt in Curry v. Advocate General Insurance Co. of Canada, [1986] O.J. No. 2564, 1986 CarswellOnt 617, and a 2009 decision of Pearce J. that followed Curry in Howells v. Manufacturers Life Insurance Co., [2005] O.J. No. 4816. But that line of cases has been overtaken by the obiter on this issue in the decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002]1 S.CR. 595 at para. 120 and subsequent decisions of the Ontario Court of Appeal and of the Divisional Court as well as other courts that have explicitly or implicitly followed Pilot.
[51] Counsel for the plaintiff also submits that the courts will protect employees at the conclusion of the employment relationship by awarding punitive damages in appropriate circumstances. It is asserted that the subparagraphs of paragraph 36 of Mr. Bansal's Statement of Claim plead material facts “of the type of systemic misconduct which Maxsys committed in its attempt to exploit the vulnerability of its former Employees.” Based on the case law submitted, I am satisfied that if proven, such facts as pleaded in this case could justify an award of punitive damages.
[52] The seminal decision of the Supreme Court of Canada in Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701 noted that a power imbalance exists between employee and employer and that imbalance informs virtually all facets of the employment relationship. That Court has held that employees are a vulnerable group deserving of the court's protection and that this vulnerability is underscored by the level of importance which our society attaches to employment. The Court has noted that any change in a person's employment status is bound to have far-reaching repercussions.
[53] In his decision in Wallace Justice Iacobucci observed that the law out to encourage conduct that minimizes the damage and dislocation that result from dismissal. Specifically, he held that:
"The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal. "
[54] Relying on the above and other case law, the factum filed on behalf of the plaintiff asserts:
“33. Maxsys' conduct is designed to take advantage of former Employees at a time when they are most vulnerable. Not only does Maxsys attempt to exploit its former Employees by failing to pay wages owed and provide proper notice of dismissal, it also seeks to interfere in their post-termination employment conduct by harassing and misleading the Employees about the obligations they continue to owe to Maxsys and by threatening them should they continue to seek employment in the recruitment industry.”
[55] Obviously, the plaintiffs allegations with respect to the conduct of Maxsys are presently unproven. Nevertheless, I see nothing which would prevent the allegations presently in the pleading remaining, so as to potentially support the claim for punitive damages, which is asserted.
IX. Involvement of Counsel in Terminations
[56] The plaintiff’s factum further asserts:
“34. Maxsys' practice of threats and hardball tactics continues into the course of litigation.
This includes initiating litigation against former Employees when it has no legal or factual basis to do so; threatening an affiant; and on in three separate actions tampering with documents produced as part of its discovery obligations or attached to an affidavit.
- Mr. Bansal submits that a court may order an employer to pay punitive damages if the employer has engaged in systemic misconduct during litigation not only to protect vulnerable employees from intimidation but to protect the administration of justice from abuse.”
[57] Justice Echlin and Mathew Certosimo in their Canada Law Book text, Just Cause: The Law of Summary Dismissal in Canada noted, at page 1-4, that the vulnerability of dismissed employees does not end with the conclusion of the employment relationship but continues into litigation:
"The employee's disadvantaged position has an effect on the capacity to bargain or litigate for a fair remedy, and often diminishes the employee's ability to respond to allegations of wrongdoing or misconduct.”
[58] Similarly, in the LexisNexis publication Employment Law in Canada, the authors observe at paragraph 16.126:
“Although it is impossible to itemize precisely what conduct will attract punitive damages (the circumstances of each case will vary and all of the facts must be weighed in the balance) some or all of the following features, often in combination are typically present:….
The employer utilizes “hardball” tactics to intimidate the employee and Withdrawing resettling his or her wrongful dismissal suit, such as withholding in bad faith monies owing to the employee under the employment standards legislation, or the contract of employment;…”
[59] More recently the Ontario Court of Appeal in Pate v. Galway-Cavendish (Township), (2011 ONCA 329) allowed an award of punitive damages based on the Defendant's "egregious conduct in making unfounded claims, both in the criminal action and in its Statement of Defence respecting the employee's conduct, amounted to the intentional infliction of mental distress and social and economic damage"
[60] Lastly, I turn to Maxsys' argument that the subparagraphs of paragraph 36 should be struck because of the impact on the discovery process. Such justifications have been rejected by courts that have considered claims for damages based on an employer's systemic wrongdoing. For example, the Ontario Court of Appeal in Gnanasegaram v. Allianz Insurance Co. of Canada, 2005 7883 (ON CA), [2005] O.J. No. 1076 overturned the motion judge's decision to strike a plaintiff's pleading that alleged that her employer's systemic discrimination against visible minority employees would result in "wholesale investigation" of the employer's personnel files. MacFarland J.A., writing for the Court, stated:
"1 am satisfied that the Rules of Civil Procedure and specifically those which relate to the ability of the Defendant to require particulars, and which govern the scope of both documentary and oral discovery are adequate to meet any concerns about the breadth of these pleadings. "
[61] Similarly, in Covelli v. Sears Canada Inc., 2011 ONSC 1850 Master Sproat dismissed the employer's argument that a pleading that alleged that Sears had a policy or practice of terminating dismissed employees for cause when no cause existed would result in a limitless discovery. Master Sproat found that the Rules of Civil Procedure would place the necessary restraints to prevent a "limitless" discovery regarding the plaintiff's allegation. [Leave to appeal refused 2011 ONSC 6984 (Div. Ct.)]
[62] Maxsys also asks that paragraphs in which its legal counsel is referenced by struck from the Statement of Defence. Maxsys has failed to produce any jurisprudence that supports its position.
[63] Clearly, any allegations with respect to the conduct of Maxis Legal counsel are presently unproven. However legal counsel do not have immunity from their actions, on behalf of his client, being reviewed by the Court. Indeed, the Supreme Court of Canada in Whiten was highly critical of conduct of the insurer's legal counsel. Justice LeBel J., writing in dissent, described the case as follows:
This case started as litigation based on a home insurance contract. The insured had the misfortune to run across what might be characterized as the insurer from hell. Far from finding peace of mind and receiving a settlement in a fair and diligent manner, the claimant faced obduracy and bad faith. No evidence has been offered, though, that such conduct was a regular incident of Pilot Insurance's way of running its business. It looks more like a rogue file mishandled by an overeager manager, aided and abetted by counsel who seemed to have misunderstood the nature of his duties as an officer of the court…”
[64] I conclude this portion of my reasons by setting out the observations with which I fully agreement made by my colleague Master C.U.C. MacLeod in Prior v. Sunnybrook and Women's College Health Sciences Centre, [2006] O.J. No. 2070; 148 A.C.W.S. (3d) 534; 2006 17329. In that case similar problems arose in a case alleging bad faith by the employer with respect to the position of their counsel: for the employer
“13 Arguably the pleading as drafted injects into the litigation an unnecessary distinction between the acts of the defendants and those of their counsel. Perhaps there might be seen in this pleading an invitation to the defendants to disown their counsel's actions or to put in issue their legal advice. Perhaps there lies in this pleading the seed of a motion to compel McCarthy Tëtrault to withdraw as counsel by increasing the possibility that Ms. Bock may be a necessary witness. There is always, truth be known, an uncomfortable tension that arises when the termination letter or other communication must be put in evidence and it was sent by the solicitor of record or a member of his or her firm. Should it be necessary to call the author of the letter as a witness at trial, there is a potential problem but this pleading does not create that problem. Whether the problem materializes will depend to a large degree on what facts are admitted and denied, how the defendant pleads and what is ultimately in issue at trial. In the case of paragraph 30 it is necessary to plead who wrote the allegedly libellous letter, when it was written and to whom. Thus the name of the author is material and cannot be described as frivolous or vexatious.
14 It is true that if the letter from counsel simply reiterates defamatory remarks already made the claim could be constructed without mentioning the communication from counsel. It is also true that the pleading of agency could be viewed as anticipating a defence that may not be made and it would have been possible to construct the other paragraphs without mentioning counsel. Providing the party pleading does not offend the rules of pleading however the plaintiff should be allowed to tell her story as she and her counsel see fit and the court does not concern itself with the wisdom of her tactics. In the final analysis, while I have an uneasy feeling that the naming of counsel in the pleading and the defendants' response by way of motion forebodes future procedural difficulties, I am unable to agree with the moving party that the pleading is improper. [my emphasis]
[65] Similarly, in this case based on the foregoing analysis, I am satisfied that there is nothing improper in the pleading of the plaintiff in this case, and thus in the companion actions.
X. Disposition
[66] The motions of the Defendant companies are therefore dismissed.
[67] The Defendants shall serve their Statements of Defence or other presently outstanding pleadings within 21 days from the release of these reasons.
[68] I am not satisfied that this motion needed to be brought, nor that it ought to of been brought. There are clearly genuine factual issues between the parties in all four actions with respect to the entitlement of each individual who used to work with MaxSys.
[69] When there is one case used as a test case, it is difficult to know how best to allocate the costs of the motions. I have determined that this case, I am going to award one set of substantial indemnity costs to the plaintiff in the test case, Mr. Bansal; but on the understanding that his counsel will allocate a portion of the recovery to each of his other three clients on a basis that is proportional and appropriate in the circumstances
[70] If the parties cannot agree on the substantial indemnity costs amount within 30 days, I will receive written costs submissions from both sides to be prepared first by the plaintiffs’ counsel, to be served within 45 days of the date of these reasons. The defendants’ counsel shall have 20 days to respond. Counsel for the plaintiff will then be responsible for delivering those documents and any reply submissions to my Assistant Trial Coordinator.
Master D. E. Short
DATE: February 13, 2015
DS/R.88