The unprecedented award on account of punitive damages is what the Keays case is most known for. That's what I'll now discuss.
It will be recalled that the trial judge determined that Mr. Keays was entitled to $500,000 in punitive damages following his conclusion that the employer had failed in their obligation to accommodate Mr. Keays contrary to the Ontario Human Rights Code.
The Court of Appeal that heard Keays agreed that a breach of human rights legislation could be an actionable wrong for purposes of founding a claim for punitive damages. A majority reduced the quantum of the punitive damages award to $100,000 while Mr. Justice Goudge, in the minority, would have upheld the trial judge's award of $500,000.
The Supreme Court blew this entire aspect of the case out.
Punitive Damages - Generally
The first thing the Court did was to clarify those circumstances in which punitive damages can be awarded in an employment case.
In Vorvis, McIntyre J., for the majority, determined that punitive damages are only recoverable where the defendant’s, that is the employer's, conduct is said to give rise to a claim that is itself “an actionable wrong”.
Mr. Justice Binnie clarified the matter in the Whiten v. Pilot Insurance case where he noted that an "actionable wrong" does not require that the defendant committed an independent tort and, instead, that a breach of the contractual duty of good faith could qualify as an independent wrong for purposes of punitive damages.
The trial judge and the Court of Appeal in Keays concluded that “discriminatory conduct” would amount to an independent actionable wrong for the purposes of establishing a claim for punitive damages. The Court of Appeal concluded that Bhadauria only precluded "a civil action based directly on a breach of the Code – but [did] not preclude finding an independent actionable wrong for the purpose of allocating punitive damages."
Mr. Justice Bastarache disagreed:
In that case [Bhadauria], this Court clearly articulated that a plaintiff is precluded from pursuing a common law remedy when human rights legislation contains a comprehensive enforcement scheme for violations of its substantive terms. The reasoning behind this conclusion is that the purpose of the Ontario Human Rights Code is to remedy the effects of discrimination; if breaches to the Code were actionable in common law courts, it would encourage litigants to use the Code for a purpose the legislature did not intend — namely, to punish employers who discriminate against their employees. Thus, a person who alleges a breach of the provisions of the Code must seek a remedy within the statutory scheme set out in the Code itself. Moreover, the recent amendments to the Code (which would allow a plaintiff to advance a breach of the Code as a cause of action in connection with another wrong) restrict monetary compensation to loss arising out of the infringement, including any injuries to dignity, feelings and self‑respect. In this respect, they confirm the Code’s remedial thrust.
In other words, the Code "provides a comprehensive scheme for the treatment of claims of discrimination and Bhadauria established that a breach of the Code cannot constitute an actionable wrong; the legal requirement is not met."
Even if a breach of the Code could amount to an actionable wrong, which the Court said it could not, then the Court took the occasion to reiterate that punitive damages will only be awarded where the "conduct meriting punitive damages" is “harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”"
Furthermore, punitive damages are an exceptional remedy and there must be both rationality, proportionality as well as an avoidance of duplication of damages.
In the end, the Court held that "Honda’s conduct was not sufficiently egregious or outrageous to warrant an award of punitive damages under the Whiten criteria."
The fact that a breach of human rights legislation is not an actionable wrong that could ground a claim for punitive damages is of extreme significance though not entirely surprising given the approach the Supreme Court has taken in past cases.
In addition, the fact that the Court emphasized that an award of punitive damages is exceedingly rare is helpful as is the discussion about rationality of the amount of the award and the proportionality of the total monetary damages package.
Punitive damages have been claimed with increased frequency after the Court of Appeal decision in Keays. One hopes that the Supreme Court of Canada's decision in Keays will send the message that such claims are, indeed, exceptional and should be plead judiciously and sparingly and then only in the most egregious of circumstances.
It remains to be seen what, if any, effect the amendments to the Code might have on this discussion.