Filed counterclaim in wrongful dismissal action, then abandoned it
An Ontario employer must pay a fired worker more than $800,000 in costs in addition to $700,000 in damages because of its meritless counterclaim and behaviour during a wrongful dismissal proceeding, the Ontario Superior Court has ruled.
The worker joined PearTree Securities, a company that arranges financing for the mining and energy sector, to be its president and co-head of banking, in 2016.
In January 2018, PearTree terminated the worker’s employment without cause. PearTree then suspended his salary continuation payments to offset money it had already paid to him and tried to get him to waive a claim to further amounts if he accepted money that it owed him.
The worker sued for wrongful dismissal as well as amounts of money that he claimed PearTree owed him – between $3.1 million and $3.9 million. PearTree acknowledged that it owned the worker money, cut claimed that it was only between $240,000 and $617,516, depending on the methodology used.
$1 million counterclaim
PearTree also responded to the worker’s wrongful dismissal action but filing a counterclaim against him for breaching restrictive covenants in his employment agreement when started working for a competitor nine months after his termination. The company claimed that it suffered nearly $1.6 million in damages because of the worker’s breach and also sought $1 million in punitive damages.
When the action proceeded to trial, PearTree, in its opening statement, abandoned its claims for general and punitive damages against the worker, instead requesting that the worker disgorge all of his employment income for the two years following his dismissal from PearTree.
The court found that PearTree undercompensated the worker and awarded him $10,000 in punitive damages for the company’s suspension of his salary continuation payments. The court also awarded damages of more than $700,000 to the worker for wrongful dismissal.
The court also found that the non-solicitation and non-competition clauses in the worker’s employment agreement were unenforceable, as they were overly broad and contrary to public policy. In addition, there was no evidence that the worker misused confidential PearTree information or competed unfairly with PearTree, said the court in dismissing PearTree’s counterclaim in its entirety.
Worker requested full costs award
The worker then applied for an award equalling full costs of the proceeding on a partial indemnity basis. He argued that he was successful in the proceeding that was caused by PearTree’s termination of his employment and refusing to pay him the amounts owed to him. He also pointed out that he was awarded punitive damages for PearTree’s abuse of its power and the company’s counterclaim was frivolous and added to his legal costs.
PearTree countered that it was appropriate for each party to bear its own costs and it achieved a better result than a $1.25 million offer it had made to the worker. It also argued that the worker showed no willingness to compromise, which affected the legal costs, and that “success was divided” in the proceedings.
The court noted that the “overarching objective is to fix an amount of costs that is objectively reasonable, fair, and proportionate for the unsuccessful party to pay in the circumstances of the case, rather than to fix an amount based on the actual costs incurred by the successful litigant.”
The court disagreed with PearTree that the success was divided, as the worker won damages of more the $700,000 and the company’s counter claim was dismissed. In addition, PearTree’s allegations in its counterclaim were serious the company had to expect that the worker would “expend significant resources responding” to the counterclaim, the court said.
Counterclaim increased costs
The court also found that PearTree launched a million-dollar meritless counterclaim and abandoned that claim at trial, which “unnecessarily increased the costs of this proceeding.”
The court acknowledged that PearTree had made an offer, but it the worker did in fact achieve a better result through trial. Although PearTree’s offer was $1.25 million, his damage award plus another $600,000-plus partial indemnity cost award exceeded the company’s offer, the court said.
In addition, the court found that this was an appropriate situation to award costs to “sanction inappropriate behaviour by PearTree” in the proceedings – the company “missed no opportunity to malign” the worker, the counterclaim was filed for “tactical reasons and in an attempt to dissuade” the worker from pursuing the money owed to him, and it then tried to characterize the case as an unexceptional employment action.”
The court determined that PearTree should bear the entire costs of the proceeding on a partial indemnity basis. On top of the damages owed, PearTree was ordered to pay more than $830,000 in costs, inclusive of disbursements and HST. See Gicomodonato v. PearTree Securities Inc., 2023 ONSC 5628.
