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Aggravated Damages for Mental Distress

The Court of Appeal recently set aside an award for aggravated damages in relation to an employee’s termination in Lau v. Royal Bank of Canada, 2017 BCCA 253. The appellate level decision clarified that mental distress is not a prerequisite for an award of aggravated damages.

This case involved an employee who was dismissed as a “result of [his] falsification of bank records and failing to tell the truth when questioned regarding [a] joint session with a client.” In the lower court decision, Justice Loo held that the plaintiff did “not need medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress”, and awarded the plaintiff $30,000 in aggravated damages.

On appeal, the Court of Appeal considered: (1) whether the employer breached its duty of good faith and fair dealing when it terminated the plaintiff; and, (2) if so, whether that breach caused harm warranting an award of aggravated damages. The Court of Appeal looked at whether there was evidence that the plaintiff had been harassed or mistreated during his termination, and found that, while the termination may have caused him to experience a “horrible feeling” and feel “lost”, “it [was] not open to the court to award damages for the normal distress and bad feelings resulting from the loss of employment”.

In its submission before the Court of Appeal, the employer urged that only mental distress could attract an award of aggravated damages, and further argued that medical expert evidence was necessary to establish the existence of any compensable mental distress. As expected, the plaintiff opposed the employer’s submission. On this issue, the Court of Appeal ultimately concluded:

… There must be an evidentiary foundation for [an award of damages for mental distress]. That evidentiary foundation may be testimony demonstrating a “serious and prolonged disruption that transcended ordinary emotional upset or distress”.

In light of this conclusion, it would appear that we now have clarification that the absence of medical expert evidence will not in itself prove fatal to a claim for aggravated damages stemming from mental distress in British Columbia.

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