More than a few eyebrows were raised when, in 2009, the British Columbia Supreme Court released its decision in Marchen v. Dams Ford Lincoln Ltd. At trial, Mr. Marchen was awarded damages in excess of $140,000 (including $100,000 in punitive damages) flowing from the Court’s conclusion that he had been wrongfully dismissed by his employer. In January 2010, the British Columbia Court of Appeal released its decision, setting aside the punitive damage award, and sending back the case to the trial judge for a reassessment of the appropriate “in lieu of notice” damages. This decision is noteworthy not only because of the punitive damages award reversal, but because of the Court of Appeal’s approval of the consequential damages award for the loss of Mr. Marchen’s apprenticeship, and special costs award for the manner in which the employer defended the litigation.

Background

Mr. Marchen was hired by Dams Ford in November 2002 pursuant to an apprenticeship agreement that provided for an “anticipated completion date” in November 2006. He was terminated in January 2005 without notice when his employer suspected him of criminal behaviour. Ultimately, the employer’s suspicions were proven unfounded. However, Mr. Marchen’s abrupt termination from his apprenticeship made finding a replacement position difficult if not impossible.

At trial, Mr. Marchen was awarded (1) $18,151.73 as damages in lieu of notice; (2) $25,000 in consequential damages from the breach of the employment contract; (3) $2,036 in special damages for relocation expenses incurred by Mr. Marchen as he tried to find a new position; (4) $100,000 in punitive damages; and (5) special costs. With such a significant award for a short term, entry level employee, few were surprised when the trial decision was appealed.

Damages for ‘Loss of Apprenticeship’

The Court of Appeal held that, despite the term providing for an “anticipated completion date”, the apprenticeship agreement was not a fixed-term contract, as the trial judge had found, but was instead subject to a number of variables, most significantly the availability of work at the employer’s place of business. Because the trial judge did not make any findings on whether work would have been available for Mr. Marchen, the Court of Appeal sent the matter back to the trial judge to make that determination, and thus fix what the proper damages were arising from the termination (breach of a four year contract or merely based on reasonable notice of termination).

Of particular interest, however, was the award of consequential damages based on the inability of Mr. Marchen to complete his apprenticeship. The Court of Appeal found that, given the somewhat unique nature of the apprenticeship contract, it was appropriate for the trial court to consider an award for consequential damages based on what the contract promised and the claimant lost when the contract was breached. The Court of Appeal noted that Mr. Marchen’s agreement with Dams Ford obliged the employer “to teach efficiently the trade or occupation” and “to provide adequate training … in all branches of the trade as far as facilities and the scope of the business would permit“. With Mr. Marchen’s inability to secure a replacement position to complete his apprenticeship, he could not attain the level of journeyman contemplated by the agreement. As a result, Mr. Marchen’s later positions did not pay him at the journeyman pay level; thus, the award of $25,000 consequential damages to compensate Mr. Marchen for this loss was upheld by the Court of Appeal.

Punitive Damages & Special Costs Relating to Employer’s Behaviour

The trial in Dams Ford was heard shortly after the Supreme Court of Canada released its 2008 decision in Honda Canada Inc. v. Keays. The Honda decision severely limited an employee’s ability to successfully advance a claim for “moral” damages to compensate for the employer’s conduct as it dismisses an employee. Following Honda, the trial judge dismissed Mr. Marchen’s claim for moral damages, holding that although the employer was mistaken in its belief as to Mr. Marchen’s involvement in criminal activity, the employer’s conduct was not “unfair, unfaithful, misleading or unduly insensitive”.

However, the trial judge punished the employer by making the significant punitive damage award of $100,000 based on its dissatisfaction with the employer’s conduct during the litigation itself. The trial judge rebuked the employer for defending Mr. Marchen’s claim on the basis that he had been terminated due to a downsizing, instead of its suspicions about Mr. Marchen’s behaviour. After Mr. Marchen had started his lawsuit, the employer changed its reason for terminating Mr. Marchen, which the judge concluded was a deliberate and misleading attempt to cover up the real basis for the termination and deny Mr. Marchen his damages for wrongful termination. The trial judge considered this conduct to be a breach of the employer’s duty to act fairly and in good faith, particularly reprehensible given Mr. Marchen’s job performance and status as a “young apprentice … wrongfully terminated from his first full-time job because of unfounded suspicions“.

On appeal, the Court held that the punitive damage award was inconsistent with the trial judge’s conclusion that the employer’s conduct had not been “unfair, unfaithful, misleading or unduly insensitive“, and set aside the $100,000 punitive damages award. The Court of Appeal agreed, however, that the employer’s behaviour during the litigation deserved some rebuke and so it confirmed the trial judge’s special costs award (which award increases the legal costs that the employer, as the losing party, is required to pay Mr. Marchen).