Court File and Parties

Court File No.: CV-17-578601 Date: 2021-09-17 Superior Court of Justice - Ontario

Re: Sunwing Airlines Inc. And: Amilcar Mora and Sonya Sekulic

Before: J.E. Ferguson J.

Counsel: Jordan Goldblatt and Jocelyn Howell, for the plaintiff Stathi Balopoulos, for the defendant Amilcar Mora

Heard: In Writing

Endorsement

[1] The trial of this matter took place in January of 2021. On July 28, 2021, the decision was released. The action against Amilcar Mora ("Mora") was granted and damages were fixed in the amount of $537,885.00. Mora's wrongful dismissal action was dismissed. (Sekulic had been let out of the action before the trial).

[2] Sunwing makes these supplementary submissions only with regard to its entitlement to:

(a) a constructive trust over Mora's property to the extent of any compensatory damages awarded;

(b) punitive damages.

Constructed Trust on The Constructive Trust

[3] Sunwing's submissions include the following:

(i) if a plaintiff successfully establishes a restitutionary claim, the judge may, in the exercise of their discretion, grant a constructive trust over specified property if the judge concludes that a monetary award does not properly address the plaintiff's legitimate remedial needs in the particular circumstances;[^1]

(ii) this court has determined that Mora used the kickbacks to pay off the mortgage on his property. Sunwing therefore has an interest in the property. There is a 'direct link' between Sunwing's money and the property.[^2] Ignoring that the property was enriched by Sunwing's money would detrimentally harm Sunwing;

(iii) in Soulos v. Korkontzilas, the Supreme Court of Canada identified four conditions for imposing a constructive trust based on wrongful conduct, including a breach of duty of loyalty:

(a) the defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities giving rise to the assets in his hands;

(b) the assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;

(c) the plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties; and

(d) there must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected.[^3]

(iv) Sunwing accordingly ought to be able to trace its money into the property. Mora has been enriched, Sunwing has been deprived, there is no juristic reason for Mora's enrichment, and that enrichment is directly traceable into the property.

[4] Mora's submissions on this issue include the following:

(i) Sunwing should not have a constructive trust over his property. The monetary award properly addresses Sunwing's legitimate remedial need in the circumstances;

(ii) there is a lack of documentary or corroborative evidence establishing a "direct link" between Sunwing's money and the purchase of his property;

(iii) the morality of the act will not alone justify such an order (Soulos, at para. 56);

(iv) Sunwing has not shown a legitimate reason for seeking a constructive trust as a proprietary remedy. Sunwing fails to demonstrate that a monetary award would be inadequate in this case, being one of the criteria for the finding of a constructive trust;

(v) as stated by the court in International Corona Resources Ltd. v. Lac Minerals Ltd. 1989 34 (SCC), [1989] 2 S.C.R. 574 at para. 197: "[there is] no reason to award a constructive trust [where] the plaintiff's claim [can be] satisfied by a personal monetary award";

(vi) it is premature for this court to award a constructive trust, as it has not been established that the judgment cannot be satisfied by Mora personally;

(vii) Mora's property is a matrimonial home and his wife was a likely contributor to the purchase and payments of the property. Mora's wife would suffer from an order requiring Mora to convey the matrimonial home to Sunwing (there is no evidence regarding this);

(viii) in Soulos, at para. 34, the court was clearly concerned about the impact of imposing a constructive trust on third parties, where it stated: "finally, it is informed by the absence of an indication that a constructive trust would have an unfair or unjust effect on the defendant or third parties, matters which equity has always taken into account. Equitable remedies are flexible; their award is based on what is just in all the circumstances of the case." In keeping with this line of reasoning, the fact that it is a matrimonial, a family home, the interests of Mora's wife and his young children would also be impacted and should also be considered (again, I heard no evidence about a wife and young children);

(ix) Sunwing, has not provided sufficient reasons as to why a proprietary remedy is appropriate at this time. Absent any indication that the judgment cannot be satisfied personally by Mora, the monetary award of $537,885.00 is sufficient and there is no need for a constructive trust over Mora's matrimonial property, in lieu of the monetary award to be paid personally;

(x) a ruling on a constructive trust is premature at this juncture. The appropriate route is for Sunwing to pursue a post-judgment mareva order. Compensatory damages have been awarded by this court in the amount of $537,885.00 and they are sufficient. Moreover, Sunwing has not demonstrated why this compensatory damage is not sufficient and they fail to demonstrate that a monetary award paid personally by Mora would be inadequate in this case, being one of the criteria for the finding of a constructive trust.

[5] I am satisfied that a constructive trust order is appropriate. However, I am putting this order on hold at this point. It will be granted in 30 days if Mora has not paid the order in full. There is no need for Sunwing to apply for a mareva injunction. In the meantime, the CPL remains to prevent Mora from mortgaging or selling the property.

Punitive Damages

[6] Sunwing's submissions include the following:

(i) a court may award punitive damages in "exceptional cases" for "malicious, oppressive and high-handed" misconduct that "offends the court's sense of decency" and "represents a marked departure from ordinary standards of decent behaviour";[^4]

(ii) it is well-established that punitive damages are appropriate in cases involving employee fraud;[^5]

(iii) while the quantum of punitive damages in cases involving employee frauds was, in the past, relatively low, in Elekta Ltd. v. Rodkin, the court signalled that the time had come "to raise the range of possible awards of punitive damages made in cases involving serious, protracted fraud by an employee who works in a position of trust handling the funds of his employer". [^6] Finding that the message sent by past decisions awarding punitive damages in the range of $25,000 "[did] not seem to be sinking into the consciousness of the Ontario public", the court ultimately awarded $200,000 in punitive damages;

(iv) in this case, punitive damages must be awarded. If punitive damages are not awarded, the only penalty to Mora is that he must give up the kickbacks, which he never should have had in the first place. This would send the message that there is minimal risk to an employee who decides to engage in wrongful conduct. Punitive damages are required to deter other employees from defrauding their employers in similar schemes and to denunciate Mora's actions.

(v) the following factors militate in favour of imposing a damages award of $250,000:

(a) Mora's conduct persisted over a lengthy period (five years);

(b) Mora's conduct was planned and deliberate. He willfully and intentionally orchestrated the kickback scheme (see, for instance, the 2011 email calling for a "close circle" for their "mutual benefits"), regularly and secretly met with Jocelyne or Ms. Leduc to obtain the payments, and tactically pressured and lied to Ms. Leduc to keep her compliant;

(c) Mora concealed or attempted to cover up his misconduct by lying in the termination meeting and later denying the kickback scheme at trial;

(d) Mora knew what he was doing was wrong. Mora admits that he should not have been receiving payments from Ms. Leduc. During the termination meeting, Mora admitted that he was not proud of his actions which he evidently knew were wrong;

(e) Mora profited from his misconduct.[^7]

[7] Mora's submissions include the following:

(i) in determining whether the plaintiff is entitled to punitive damages, the court must consider two questions: (1) does his conduct offend the court's sense of decency; and (2) is the compensatory damage award of $537,885.00 a sum sufficient to punish and deter the defendant, as well as other individuals from this type of wrongdoing?

(ii) in Vorvis v Insurance Corp. of British Columbia, the Supreme Court of Canada held that the discretion to award punitive damages should be "most cautiously exercised";

(iii) in Whitten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, the court outlined the factors which should accompany a trial judge's jury charge where punitive damages are claimed. These factors underlie any determination of punitive damages. The court stated:

i. punitive damages are very much the exception rather than the rule,

ii. imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.

iii. where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant,

iv. having regard to any other fines or penalties suffered by the defendant for the misconduct in question.

v. punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation.

vi. their purpose is not to compensate the plaintiff, but

vii. to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community's collective condemnation (denunciation) of what has happened.

viii. punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and

ix. they are given in an amount that is no greater than necessary to rationally accomplish their purpose.

x. while normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a "windfall" in addition to compensatory damages.

xi. judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.

(iv) the applicable standard of review for "rationality" was articulated by the court in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R.: "In other words, was the misconduct of the defendant so outrageous that punitive damages were rationally required to act as a deterrence?";

(v) the "rationality" test applies to both the question of whether an award of punitive damages should be made at all, as well as to the question of its quantum;

(vi) in Performance Industries, supra, the court stated that it must be kept in mind that an award of punitive damages is rational, "if, but only if" compensatory damages do not adequately achieve the objectives of retribution, deterrence and denunciation;

(vii) in the case of Mora, compensatory damages of $537,885.00 adequately achieves the objectives as set out above;

(viii) this court has awarded full compensation to Sunwing, all of which undoubtedly has a punitive effect on Mora. In addition, the plaintiff's evidence at trial was such that they believed multiple parties were alleged to be involved in a kickback scheme totalling $537,885.00, and this court has awarded the full kickback scheme amount as against Mora to be paid personally;

(ix) an additional punitive damage award would be excessive in the circumstance, given the plaintiff's evidence at trial alleging fraud as against multiple parties, as well as the judgment awarded to Sunwing, in which Mora is to pay personally. The compensatory damages award achieves the objectives of retribution, deterrence and denunciation. The compensatory award in this case of $537,885.00 is obviously sufficient to satisfy whatever need there may be for punishment and deterrence, and as such there is no rational purpose served in awarding any amount in punitive damages;

(x) the risk that Mora took on behalf of Sunwing at their request of tasking him to carry large sums of money in cash into another country put Mora's own life at risk as well as his safety at all material times. The court should consider this task and on-going risk that Mora undertook on behalf of Sunwing to have somewhat of redeeming qualities on part of Mora (this is ridiculous);

(xi) more importantly, however, Mora is stigmatized with a judicial finding that he acted in a way that was "fraudulent, dishonest and deceitful". His conduct has been soundly denounced and he has been required personally to pay a large amount of money in compensation. He has additionally lost employment opportunities from other airline carriers and will continue to lose opportunities for employment into the future given this judicial finding, which is punitive in itself for his earning income into the future to support his young family. His loss of future employment opportunities and ventures are adequate to achieve the objectives of retribution, deterrence and denunciation. Further, Mora was not motivated by actual malice in this case;

(xii) in the case at bar, Mora's financial means are limited. At trial, his evidence was that he was unable to secure employment given the stigmatization of the claim as against him. He is of modest means, and that being so, punitive damages should be moderately assessed if this court decides to award them in this case, and would inevitably carry a stigma in the broader community, in following the factors outlined by the court in Whitten.

(xiii) punitive damages should not be awarded in this case. If an award of punitive damages is awarded by this court, the quantum of such damages should not exceed $5,000.00. Punitive damages in the sum of $1,000.00-5,000.00 should be adequate and sufficient to act as a deterrent, when considering Mora's moderate means, his young family, his loss of employment due to stigmatization in the community, and his continued cooperation in this case in moving it along without any unnecessary delays.

[8] Punitive damages are absolutely appropriate. Mora is a thief. He stole $537,885.00. To not award punitive damages will send a message that if you steal from your employer you only have to pay it back. If this was in the criminal system, he would go to jail. Punitive damages are awarded in the amount of $200,000.00.

[9] On consent $210,000.00 are awarded for costs.

J.E. Ferguson, J.

DATE: September 17, 2021

[^1]: 306440 Ontario Ltd. v. 782127 Ontario Ltd. (Alrange Container Services), 2014 ONCA 548, ["Alrange"] at para. 23. [^2]: Alrange at para. 29. [^3]: Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 S.C.R 217, ["Soulos"] at paras. 43, 45 (cited to 1997 CarswellOnt 1489). [^4]: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 [Whiten], at para. 36. [^5]: Jefflin Investments Ltd. v. Charendoff, 2009 69795 (ON SC), and the cases cited therein at para. 29; Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at paras. 28-31 [Elekta]. [^6]: Elekta, at para. 31. [^7]: Whiten, at para. 113.