Punitive Damages are Not a Consolation Prize

Punitive Damages are Not a Consolation Prize

September 5, 2021

By Brian Babcock

Punitive damages may only be awarded if the court finds that there is an “independent actionable wrong.” Misconduct alone is not enough.

This principle, established at least since 2002, has been somewhat overlooked in recent years as judges easily found the requirement met by almost any malicious or intentional wrongdoing.

The Ontario Court of Appeal affirmed that the “independent actionable wrong” test still exists in the case of Hornstein v. Kats. The failure of a trial judge to identify an act that satisfies the test will result in the decision being overturned on appeal.

The case involved an allegation of a partnership in the purchase and sale of a residential property. The Plaintiff claimed to have been in a partnership with the prior registered owner. She registered a caution on the title of the property, although all that she sought was a share of the proceeds of sale. The current owner counter-claimed for slander of title because of the caution.

The Plaintiff was not a credible witness. She was found to have taken advantage of the prior registered owner, including forging his signature on a second mortgage. No partnership existed. Her claim was dismissed.

At trial, no slander of title was found. Despite this, the trial judge awarded $35,000.00 in punitive damages against the Plaintiff, citing her egregious, unreasonable, and malicious conduct.

On appeal, the Court found against the Plaintiff on her claims, refusing to overturn the trial findings of fact. They did, however, allow her appeal to the extent of overturning the award of punitive damages, stating that:

It is well established that there is no basis for an award of punitive damages in the absence of an independent actionable wrong: Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595. Punitive damages cannot be awarded simply on the basis of a party’s misconduct. Given that the trial judge did not identify an independent actionable wrong, the award of punitive damages cannot stand.

The Court of Appeal however took the unusual step of awarding no costs to be paid by the owner against the partially successful Plaintiff, an expression of their disapproval of the Plaintiff’s conduct.

This case serves as a useful reminder that all claims, including punitive damages, have requirements that must be met in order for the claim to succeed. That means that you need careful drafting of the claim, and the presentation of proper evidence and arguments to support the claims. It is also a reminder that the judge must take the step of identifying the “independent actionable wrong” – something that should be part of your lawyer’s closing submissions whenever you are seeking punitive damages.

It does nothing however to answer the elusive question as to just what is truly an “independent actionable wrong”. As long as the judge follows the formula, most egregious conduct may be denounced – the absence of tight limits on that test still allow a great deal of flexibility.

Given the background of the Hornstein case, it is unfortunate that the judge did not tick off that box. If you find yourself in a similar position, take steps to make sure it does not happen to you.