Since the Supreme Court of Canada decision in Saadati v. Moorhead, 2017 SCC 28 (CanLii), this decision has been referenced in several cases, and a debate exists on whether or not this decision may decrease the use of expert opinion and testimony as it pertains to psychological injury.
A recent Court of Appeal decision in Lau v. Royal Bank of Canada, 2017 BCCA 253 (CanLii) which is a case dealing with contract law has referenced the Saadati decision and states “the test for mental distress damages is, in principle, the same in contract and in tort”.
The Plaintiff in this case was successful at trial. The case involved damages being sought on behalf of the Plaintiff for being wrongfully dismissed. The BCSC trial Judge concluded that the Defendant did terminate the Plaintiff’s employment wrongfully, and the Plaintiff was also successful in a claim for aggravated damages (for mental distress) in the sum of $30,000. The Defendant employer appealed this award for aggravated damages for mental distress and was successful.
This post will highlight the comments in relation to proving mental distress.
Summary of Appeal
“The employer appeals an award of aggravated damages based on mental distress arising out of the wrongful dismissal of an employee. Held: appeal allowed. The ordinary psychological impact of termination is not compensable because the contract of employment is by its terms subject to cancellation on reasonable notice. There was no evidentiary foundation for an award of aggravated damages in this case.”
The Court of Appeal reviewed the claim for aggravated damages as a result of mental distress caused by the Defendant’s conduct, and referenced and highlighted the Saadati decision. The Defendant argued that expert testimony was required, and as no expert testimony was produced, the Plaintiff was not entitled to aggravated damages for mental distress. However, the Court of Appeal declined this specific argument.
Reference was made to the decision Capital Pontiac Buick Cadillac GMC Ltd. v. Coppola, 2013 SKCA 80 (CanLII), 364 D.L.R. (4th) 351at para. 30 (which is a decision rendered in a claim in contract, and which was decided prior to the Saadati decision, which states:
“medical evidence is not strictly necessary to prove the existence of mental distress provided there is an adequate factual basis to support an award of moral damages based on the employer’s conduct.”
The Court of Appeal also references the Saadati decision and quotes the following:
“On the other hand, damages for mental distress beyond the ordinary upset that accompanied termination of employment cannot be evidenced simply from the demeanor of the plaintiff in the witness stand. There must be an evidentiary foundation for such an award.”
The conclusion in this case was that the Plaintiff’s evidence alone was not sufficient to prove mental distress. The Court of Appeal found that as there was an absence of evidence from family, members, friends, or third parties documenting or shedding light on the impact of the Plaintiff’s mental distress and (although not necessary) there was also an absence of expert or medical evidence or otherwise, the Plaintiff’s claim for mental distress was not proven.
As I found this case interesting, I am appending a majority of the Court of Appeal decision for review:
“Mr. Lau seeks punitive damages in the amount of $30,000 on the basis that RBC did not meet its duty of good faith towards him, did not conduct a thorough and complete investigation, did not give him an opportunity to respond to the allegations under after the defalcation report was written, and humiliated him by closing his personal bank account, the bank he had trusted with his money and established a relationship with since he immigrated to Canada as a child.”
In reviewing the claim for aggravated damages, the Court of Appeal said the following:
In awarding aggravated damages, the judge in this case was considering and making an award for “mental distress”. RBC argues there must be medical evidence of a psychological condition such as depression. RBC says the judge made a diagnosis she was unqualified to make, and that had to be made by a medical professional.
In my view, the cases do not go so far as to require expert testimony as argued by RBC. The cases to which we have been referred (of which there are many) in which there was medical evidence of depression or other psychological maladies do not go so far as to require medical evidence. See, for example, the discussion of Mr. Justice Caldwell, speaking for the Court, in Coppola:
I would, however, pause here to address an evidentiary issue arising in this case, that being whether a plaintiff must adduce medical evidence to prove mental distress. There is conflicting authority on this point. On one hand, some courts have refused to award moral damages in the absence of medical evidence.5 On the other hand, some courts have awarded damages notwithstanding the absence of formal medical evidence.6 Regardless, while evidence such as expert medical reports and itemized expense receipts would be of considerable assistance to a court in determining the quantum of moral damages, it is sensible to hold that medical evidence is not strictly necessary to prove the existence of mental distress provided there is an adequate factual basis to support an award of moral damages based on the employer’s conduct (see: Keays, at para. 90, per LeBel J. (Fish J. concurring)). Therefore, even though the respondent failed to adduce any specific medical reports or the like with respect to the mental distress that he says he has suffered due to the manner of his dismissal, this does not mean the trial judge was incorrect or erred in concluding that such damages had been established based on other evidence which led to findings of fact which were sufficient to underpin his claim to moral damages. Moreover, the respondent and the respondent’s wife, who is a psychiatric nurse, did testify to the existence of some mental distress.
[Footnotes omitted, emphasis added.]
In any event, following argument in this matter the Supreme Court of Canada rendered its decision in Saadati v. Moorhead, 2017 SCC 28 (CanLII), reversing a decision of this Court (2015 BCCA 393 (CanLII)), which the parties referred to on this appeal. The Supreme Court of Canada in Saadati specifically rejected the notion that legally compensable mental injury must rest on the claimant proving a recognized psychiatric illness (at paras. 2, 36‑38). Saadati was a tort case rather than a contract case. However, I am of the view the discussion in Saadati on proving mental injury is nevertheless applicable.
The test for mental distress damages is, in principle, the same in contract and in tort: Mustapha v. Culligan of Canada Ltd., 2008 SCC 27 (CanLII) at para. 19,  2 S.C.R. 114; Harvin D. Pitch and Ronald M. Snyder, Damages for Breach of Contract, 2nd ed, loose-leaf (updated 2017, Release 2) (Toronto: Thomson Reuters, 2017), ch. 5 at §6. This is particularly so given that the law of contract accepted compensation for mental distress earlier than the law of tort: see S.M. Waddams, The Law of Damages, loose-leaf (updated November 2016, Release 25) (Toronto: Thomson Reuters, 2016) at ¶3.1250.
On the other hand, damages for mental distress beyond the ordinary upset that accompanied termination of employment cannot be evidenced simply from the demeanor of the plaintiff in the witness stand. There must be an evidentiary foundation for such an award (see Mustapha at para. 9). That evidentiary foundation may be testimony demonstrating a “serious and prolonged disruption that transcended ordinary emotional upset or distress” (Saadati at para. 40).
As noted in Mustapha:
9 This said, psychological disturbance that rises to the level of personal injury must be distinguished from psychological upset. Personal injury at law connotes serious trauma or illness: see Hinz v. Berry,  2 Q.B. 40 (C.A.), at p. 42; Page v. Smith, at p. 189; Linden and Feldthusen, at pp. 425‑27. The law does not recognize upset, disgust, anxiety, agitation or other mental states that fall short of injury. I would not purport to define compensable injury exhaustively, except to say that it must be serious and prolonged and rise above the ordinary annoyances, anxieties and fears that people living in society routinely, if sometimes reluctantly, accept. The need to accept such upsets rather than seek redress in tort is what I take the Court of Appeal to be expressing in its quote from Vanek v. Great Atlantic & Pacific Co. of Canada (1999), 1999 CanLII 2863 (ON CA), 48 O.R. (3d) 228 (C.A.): “Life goes on” (para. 60). Quite simply, minor and transient upsets do not constitute personal injury, and hence do not amount to damage.
Regarding the effects of the termination on Mr. Lau, the trial judge said only this:
 Mr. Lau testified that since his termination, the one thing he has been focussed on is “for this case to have a result”. He wants to move on, but finds it difficult to move on with the record that he now has, and the accusations that have been made about him by RBC.
 There is no medical evidence about Mr. Lau’s medical condition, or the impact that the termination has had on him. However, I could not help but gain the impression from the slow, quiet, and almost monotone manner in which he testified, that he is depressed.
In awarding aggravated damages on that basis, the judge said this:
 I do not need medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress.
The trial judge based her award on her observation as to “the slow, quiet, and almost monotone manner in which [the plaintiff] testified”, some years after the event. In my opinion, this evidence could not found an award for aggravated damages.
In this case there was no evidence from family members, friends, or third parties concerning the impact of the termination on Mr. Lau and his mental state. Although not required, there was no expert evidence, medical or otherwise. The only evidence to which we have been referred is Mr. Lau’s. When asked about what happened after he was told of the reasons for the termination and given a termination letter, Mr. Lau said:
A … I remember disagreeing with the termination. I voiced that opinion. I made another request of the video surveillance, which, in reply, Ms. Jennifer McCarthy stated that the decision has been made and it’s not up for any debates.
Q And what happened then?
A After that conversation, I remember Ms. McCarthy left the room. I think Ms. Shirley Ma was still with me, and she brought in another person. I don’t recall her name, but she is with the company Ceridion, I believe, to explain to me the services that they can provide. And when I was having the conversation with that lady, Ms. Shirley Ma was not in the room. It was just a one-on-one conversation.
When she started to explain the services, eventually I stopped her from going any further and I just left the room, and then I saw — then I met Ms. Shirley Ma outside of the conference room and I remember Ms. Ma asking me if I wanted to come back to the branch at a later time to collect my belongings, in which I replied it’s okay, I can do it right now because I don’t plan to come back at a later time.
So Ms. Shirley Ma helped me in finding me a box, a cardboard box, and I went back to my office, along with Ms. Ma and our other manager at the time. His name is Wei [phonetic]. I can’t remember his last name. But he was a new assistant branch manager. They accompanied me back to my office where I packed up my belongings and then I left the branch.
Q And how did you feel about that?
A It was a horrible feeling. I was disappointed in the bank’s decision. I was embarrassed to have to pack my belongings and leave. Even though I understood that I was given a chance to come back at a later time, but at the moment I felt it wouldn’t matter, I should just deal with it. So I packed my things and I left, and it was — it was just a horrible feeling.
In the above passage Mr. Lau refers to a horrible feeling saying he “was disappointed in the bank’s decision”. The bank’s decision was to terminate his employment. He was embarrassed about packing and leaving, but he was offered an alternative. Mr. Lau decided to just to “deal with it” rather than come back later.
There was some further elaboration during examination in chief as follows:
Q … Following being handed the termination letter in the meeting with Ms. McCarthy and Ms. Ma, you had all your stuff, how did you feel at that time?
A After my termination?
A I just felt lost because I — it wasn’t — the decision was not one that I expected. I didn’t expect that I would be terminated. I thought I was going to be working for RBC for a long time, so I — so I was limited in terms of choices that I have for a new career. One of the reasons why I say that is because I never finished college. I don’t have a degree. The only thing I had was working experience, and I was fortunate enough when I was employed by RBC, I was able to obtain a designation, being an account manager, and having that designation without employment and having the difficulty to finding new employment within the industry because of the form 33 was definitely challenging.
Mr. Lau felt lost because the “decision was not one that I expected”. The decision was “that I would be terminated”. Mr. Lau relies on the “horrible feeling” and feeling “lost” as grounding an award for aggravated damages. In my view, it is not open to the court to award damages for the normal distress and bad feelings resulting from the loss of employment.
In the result, I would allow the appeal and set aside the award for aggravated damages. Although the appellants have been successful, they have not sought costs. Accordingly, I would allow the appeal with each party bearing their own costs.
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