The Ontario Court of Appeal has ordered a new trial of a malicious prosecution claim where an employer reported groundless allegations of employee theft to the police.
After he had served as Chief Building Official for the Township of Galway-Cavendish and Harvey for about nine years, John Pate was dismissed without notice in March of 1999. John Beaven, Mr. Pate’s immediate supervisor, called Mr. Pate to his office to tell him that discrepancies had been discovered regarding building fee permits. As a result, Mr. Pate was to be terminated, but if he agreed to resign the Township would not contact the police.
Mr. Pate did not resign, and Mr. Beaven eventually went to the OPP to report six allegations of the theft of building permit fees. Although Mr. Beaven was himself a retired police officer with nearly 30 years service, it appears that he was extremely casual in the conduct of his investigation, and failed to disclose exculpatory information in his report to the OPP even though that information was known to him.
In one of the alleged incidents, for instance, Mr. Pate had recorded the receipt of the fees under the name of the property owner’s son-in-law because the fees were paid by the son-in-law on the owner’s behalf. Another set of allegations involved property owners who paid their building permit fees at a satellite office operated by the Township, but their files were lost when that office was moved following a municipal amalgamation. In each instance, Mr. Pate had a reasonable explanation as to why the Township had no record of fees that had been paid, but Mr. Beaven had not given him a chance to respond to the allegations.
These facts emerged at Mr. Pate’s criminal trial, and he was acquitted of all charges. At the trial, the OPP officer who investigated the case testified that if he had known the true facts, the charges would not have been laid.
Mr. Pate sued the Township for wrongful dismissal and malicious prosecution. At the commencement of trial, the Township conceded that he had been wrongfully dismissed and was entitled to 12 months notice.
On the wrongful dismissal claims, the trial judge ordered the following damages in addition to the agreed-upon twelve-month severance:
- a four-month “bump up” of the notice period for Wallace damages based on the manner in which Mr. Pate was terminated;
- $75,000 in aggravated damages for intentional infliction of mental distress and social and economic damage;
- $7,500 for special damages; and
- $25,000 in punitive damages.
The trial judge dismissed the malicious prosecution claim on the grounds that Mr. Pate had failed to establish that the Township initiated the prosecution, and that Mr. Pate had also failed to show malice on the Township’s part (in the sense of an intent to subvert or abuse the criminal justice system). According to the trial judge, these two elements were central components in the four-part test for a malicious prosecution claim.
Mr. Pate appealed the dismissal of his malicious prosecution claim and the assessment of punitive damages at $25,000. He succeeded on both grounds of appeal.
According to the Court of Appeal, the trial judge erred in relying on a series of cases that sets a very high bar for plaintiffs who seek to prove malice on the part of a crown lawyer or public prosecutor. For constitutional reasons, the courts are reluctant to second-guess decisions by crown attorneys in the prosecution of a case. The case law states that a plaintiff suing the crown law office for malicious prosecution has to show “the deliberate and malicious misuse of the office for ends that are improper and inconsistent with the traditional prosecutorial function”.
This is because crown lawyers have an obligation to the public to pursue criminal cases, so it is possible for a prosecutor to pursue groundless criminal charges out of a misguided sense of duty, as a result of simple negligence or an error of judgment rather than malice.
In cases in which it is alleged that a private individual has committed the tort of malicious prosecution, these constitutional concerns have no application. The Court of Appeal in the Pate case referred to authorities in which the courts have asked the common sense question: in the absence of malice, “…why else would a private person initiate a prosecution based entirely on facts not believed to be true, or worse still, known to be false”? In these cases, it is possible for the court to infer malice from the surrounding circumstances, including the relationship between the parties, and from the absence of reasonable and probable grounds for the allegations of criminal conduct.
The conclusion that the plaintiff had failed to show malice was also inconsistent with other findings by the trial judge. He held that the Township’s deliberate withholding of exculpatory evidence was an arbitrary decision that amounted to reprehensible conduct. There were also findings that this conduct was a departure from ordinary standards of decent behaviour, and that the Township had terminated the plaintiff and then mounted an investigation in order to build a case to justify the termination. The trial judge characterized this conduct as unfair, insensitive, high-handed, and oppressive. Although these findings provided support for the awards of aggravated and punitive damages, they also seemed to contradict the trial judge’s conclusion that there was no proof of ill will on the part of the Township.
On the question of whether or not the Township could be found to have initiated the prosecution, even though the charges were actually laid by the police and prosecuted by the crown law office, the Court of Appeal pointed out that it is well-established that a defendant can be found to have initiated a prosecution in these circumstances. As the evidence adduced at trial did not contain enough detail as to what Mr. Beaven actually told the police and what information he deliberately withheld, a new trial was needed in order to determine whether or not this element of the tort of malicious prosecution could be established.
The new trial might very well result in a finding of liability for malicious prosecution. As this could provide additional support for the award of punitive damages, a new trial on the punitive damages assessment was also justified. The trial judge had stated that although he would like to award a higher amount of punitive damages, he had to be mindful of “principles of proportionality”. The Court of Appeal questioned this application of proportionality principles in light of the significant misconduct of the Township over a lengthy period and the devastating impact that this conduct had on the plaintiff’s life. This provided further justification for ordering a new trial on the punitive damages question.
The case illustrates the danger that an employer faces when an employee is dismissed on the grounds of theft or other criminal misconduct. If the employer has failed to conduct a thorough investigation into these allegations, and lacks strong evidence to support the charges if they are later challenged in court, the employer can be hit with damages for wrongful dismissal, including increased severance under Wallace, plus substantial aggravated and punitive damages.
Although defamation was not claimed in Pate, if the allegations are made public outside the context of a criminal prosecution, the employee might also have a claim for libel or slander.
The Pate case shows that an employer who chooses to report these kinds of allegations to the authorities faces additional hazards. It is not enough to simply turn whatever information the employer has over to the police and to rely on them to conduct an investigation. If the employer makes a police report without first conducting a thorough investigation itself, and especially where the employer withholds exculpatory information from the authorities, the employer is exposed to an action for malicious prosecution.
Link: Pate v. Galway-Cavendish (Township), 2011 ONCA 329
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