Wrongfully Dismissed Employee Ordered to Pay Costs to Employer

In Court, it's generally presumed that a successful party is entitled to a contribution to costs.  However, there are a number of factors that can affect that - choice of venue, unreasonable conduct in the litigation, refusing to accept an offer to settle better than you achieved at trial, and others.

In a recent decision of the Ontario Superior Court of Justice in Goulding v. Street Motor Sales, the Court determined that a wrongful dismissal plaintiff, even though successful, should pay costs to the employer.

The Facts

This decision goes to costs only, and only briefly looks at some of the factors leading up to the judgment.  Mr. Goulding worked for Street Motor Sales for less than a year before he was dismissed, apparently earning approximately $60,000 per annum.

He brought a claim for wrongful dismissal against Street Motor Sales, and also against two other corporations (likely related companies), but those claims were dismissed at the outset of trial.  He claimed damages in the amount of $150,000, alleging inducement from secure employment, conspiracy, and spoliation.  The claim was brought in the Ottawa Superior Court, though all the defendants operated in Smiths Falls.

The Court found that the claims of inducement, conspiracy, and spoliation were baseless.  He was wrongfully dismissed, and was awarded pay in lieu of 3 months' notice ($15,000, less amounts already paid).

The Costs Question

Understand that, while it's common to overestimate the amount claimed for unliquidated damages, there are dangers of doing so at that level.  $15,000 is well within the jurisdiction of the Small Claims Court, and there's a provision in the Rules of Civil Procedure (Rule 57.05(1)) that a successful plaintiff can be denied costs where he should have, but didn't, bring the action in the Small Claims Court.

Had he brought the action in Small Claims Court, he would have had to have brought it in Perth, which would have been local for the defendants; instead, he made them suffer the inconvenience and expense of traveling to Ottawa for all stages of the litigation.

Moreover, what should have been a simple wrongful dismissal litigation was complicated excessively by these "vague" allegations of conspiracy and inducement.

However, it's important to note that neither party did better than their offers to settle - i.e. the employer never raised its offer up to 3 months.

The Plaintiff argued that the choice of venue was not unreasonable; that there was an argument for inducement, which could easily have pushed the damages above the jurisdiction of the Small Claims Court.  And there's something to that pitch, in the right case:  Rule 57.05(1) is seldom applied in wrongful dismissal cases.  I've seen quite a few scenarios in which such an analysis concludes that it wasn't unreasonable for an employee to make claims that would have led to additional damages - bad faith, etc. - justifying its choice in venue.

However, the judge wasn't so inclined to be so generous to the employee:

It should have evident to Plaintiff’s counsel that the claim for inducement was totally without merit and was fatally undermined by his client’s letter of resignation from his previous employer where he claimed to have been constructively dismissed. The Plaintiff then pursued his previous employer and recovered damages as a result of the termination from his previous employment. Those facts were known well before these proceedings were commenced.

Oops.  Yes, that would be a problem, claiming on the one hand that you were induced away from secure employment...and on the other hand that you were constructively dismissed from your prior job.

It helped the employer that they had made an offer which would have involved moving the proceeding into the Small Claims Court, and waiving costs incurred to that date.

The Court denied the employee recovery of his own costs, and went a step further to award over $11,000 in costs to the employer.

My Thoughts

This is an exceptional case, but worth noting.  There's a lot of uncertainty in wrongful dismissal litigation - particularly with short-service employees, the possible range of awards is often pretty significant, and the Courts usually recognize that when awarding costs.  But if you're going to make ancillary claims which put your claim above the Small Claims Court jurisdiction, you need to be able to justify that decision as being reasonable, even if the claims themselves don't succeed.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.