Abandoning Allegations of Cause on the Day of the Hearing Triggers Cost Award on a Substantial Indemnity Basis

Fabricating or puffing up allegations to justify a termination for cause is a litigation tactic used by unscrupulous employers. By alleging cause, the employer drives up the legal costs of the litigation and places a significant amount of emotional pressure on the dismissed employee.  The intent of the employer is to force the dismissed employee to abandon the litigation.

The Court in Tetra Consulting v Continental Bank et al., 2015 ONSC 6546 recently responded to this employer tactic by ordering Continental Bank to pay costs on a substantial indemnity basis. The Court ordered this punitive cost award because, on the day of the hearing, the Bank had dropped its allegation that it had cause to dismiss the employee. Morgan J. described the Bank’s tactic as follows:

As an aside, I observe that the Bank originally pleaded that Mr. Cassar was terminated for cause, but has subsequently abandoned that line of attack. The reason for having abandoned it is that there is not a stitch of evidence to support it. Mr. Cassar was highly successful in the tasks he performed for the Bank, and the Bank’s lawyer was in the process of drafting his permanent employment agreement when the Bank ceased its operations. The pleading of termination for cause was, as far as I can tell, nothing more than a cynical tactic deployed by the Bank to discourage this legal action. Mr. Cassar’s termination by the Bank was entirely unrelated to his performance.

Justice Morgan viewed the Bank’s litigation strategy as an attempt to hinder the dismissed employee’s access to justice.  He wrote at paragraphs 8 to 10:

The Divisional Court has advised trial and motions judges to balance the principle of indemnity with the fundamental objective of access to justice: Anderson v St. Jude Medical, Inc. (2006), 264 DLR (4th) 557 (Div Ct). This is wise policy and serves as a guide to the exercise of discretion in the award of costs

In the present case, the position taken by the Bank regarding termination for cause was not only aggressive, it was done for no other reason than to make the Plaintiffs’ case more difficult than it should have been. It thereby increased the costs of the overall action, which is inevitably a burden on a wrongful dismissed employee.

In my view, the Bank’s position in this litigation reflects the type of conduct addressed by Rule (57.01(1)(e). Moreover, the principle of indemnity and the object of access to justice both align in the Plaintiff’s favour. Under the circumstances, the Plaintiff deserves to be indemnified through an award of substantial costs for the Bank’s attempt to impede their access to justice.