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10 of 14 DOCUMENTS

Case Name:
Lounsbury v. Dakota Tipi First Nation

Between
Bonnie Lounsbury, Plaintiff, and
Dakota Tipi First Nation, Defendant

[2011] M.J. No. 138

2011 MBQB 96

Docket: CI 08-01-56209

Manitoba Court of Queen's Bench

Winnipeg Centre

R.A. Saull J.

April 29, 2011.

(57 paras.)

Counsel:

For the Plaintiff: Jeffrey J. Palamar.

For the Defendant: J.R. Norman Boudreau.

R.A. SAULL J.:--

INTRODUCTION

1 The plaintiff sued the defendant for wrongful dismissal. At the conclusion of the trial, I gave judgment and awarded
damages to the plaintiff in the amount of $143,965.95. Given the issues that arose both before and during the course of
the trial, after I rendered judgment, counsel addressed the issues of punitive damages and costs. These are my reasons
respecting both.

FACTS

2 The plaintiff is a health care services coordinator. She presently lives in Starbuck, Manitoba, but lived in Treherne,
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Manitoba, until July, 2008.

3 The defendant is an Indian Band located near Portage la Prairie, Manitoba. It is approximately a one-hour drive
from Winnipeg and approximately a 45-minute drive from Treherne.

4 In June, 2005, the plaintiff contracted with the defendant to return health programs to the community and reopen
the local health centre. The relationship was governed by a written agreement drafted by the defendant's third party
manager (Meyers, Norris, Penny) which was responsible for managing the affairs of the defendant at the time.

5 The parties later entered into a second written agreement, effective from April 1, 2007, for a five-year period
expiring on March 31, 2012. As of the date of this second agreement, the plaintiff's husband was suffering from cancer
and, as a result, the plaintiff was the sole "breadwinner" for her family. The plaintiff advised the defendant that she
required "certainty" in her employment because of her husband's condition and, therefore, the defendant agreed to a
five-year contract of employment.

6 Between April 1, 2007 and October 11, 2007, the plaintiff performed her duties in an efficient and effective
manner. She was paid accordingly and in addition to her regular salary, she was to be reimbursed for any overtime and
travel expenses that she incurred. As of October, 2007, she had accumulated a number of expenditures (inclusive of
overtime) that she had claimed for, but the defendant had refused to pay for some unknown reason.

7 On October 11, 2007, the defendant sent the plaintiff a letter requesting a meeting. The plaintiff responded with an
email at 6:20 a.m. on October 12, 2007, confirming her willingness to meet and requesting information as to the
purpose of the meeting.

8 The defendant responded with a letter dated October 12, 2007, which indicated that it wanted to meet with the
plaintiff to discuss three concerns it had, specifically:

(1) the accounting of her time and availability while performing her duties;
(2) her purported intention to notify certain staff and clients by memo of the impact of certain
management decisions; and
(3) any other issues that might be important in order to keep the lines of communication frank
and open.

9 The parties traded some further correspondence in anticipation of the meeting during the course of which the
plaintiff indicated that "... she took her work seriously and wanted to have a productive meeting."

10 The parties met on October 15, 2007. The defendant's legal counsel was present at this time. The discussion at the
meeting was later confirmed by a letter dated October 16, 2007, from the defendant which gave specific direction in
terms of future communications by the plaintiff, as follows:

4. You must seek prior approval from Chief and Council of any correspondence or memo
that may be distributed to the home care staff and clients regarding funding management
or any other issues which may negatively impact on Chief and Council.

To our end, we will attempt to reply to your requests in a timely manner. In addition, we intend to
meet on a regular basis in order to discuss issues and maintain the open lines of communication.

11 The plaintiff wrote back on October 23, 2007. Respecting the requirement to get approval on future
communications, she wrote as follows:

Action #4 -- ABSOLUTELY, this has always been my intent. I will seek prior approval from
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Chief and Council regarding any correspondence, that will be distributed not only to Home Care
Staff and Clients, but to ANY community member.

12 On Friday, November 2, 2007, the plaintiff attended at the defendant's Band office to update its Chief, Cornell
Pashe ("Chief Pashe"), on certain matters and also talked to one of its Councillors, Keith Pashe ("Councillor Pashe").
Councillor Pashe told the plaintiff that "they" were going to get her off the reserve as she did not want to help or care
about their people. He told her further that "they were going to get a petition going" and use it to get her off the reserve.

13 The plaintiff's last day in the community was Friday, November 2, 2007. On Saturday, November 3, 2007, at 1:48
p.m., the plaintiff sent an email to Chief and Council, copying the necessary support staff. The email asked for Chief
and Council's permission to distribute a Fact Sheet that was provided with it, and also directed staff specifically that
once Chief and Council had approved the Fact Sheet, it was to be distributed as soon as possible.

14 This process essentially mirrored the approval-seeking process the plaintiff agreed to and followed after the
meeting of October 15, 2007. To obtain the necessary approval, the plaintiff was to send emails to Chief Pashe, copying
them to staff, with the material not to be distributed until permission was granted.

15 The Fact Sheet was distributed, but the plaintiff was not involved in that in any way. A staff member by the name
of Melanie Pashe was directed by Councillor Pashe to distribute the Fact Sheet and did so.

16 After the Fact Sheet was distributed by Melanie Pashe, the defendant suspended the plaintiff from work. It did this
through a telephone call and then a letter from the defendant's lawyer faxed to her dated November 8, 2007, in which he
ordered her not to return to the community until further notice.

17 Later, in the course of litigation, a petition dated November 7, 2007, and written on the defendant's letterhead was
produced. As of the date of the petition, the defendant had approximately 325 citizens, 250 of whom were living in the
community. Only 59 citizens signed the petition. At trial, at one point in his testimony, Chief Pashe maintained that the
reason that the plaintiff was terminated was because a "clear majority" (which was required) of the defendant's citizens
had signed the petition. It was "clearly not" the case that a majority had signed the petition. Up to this point in his
testimony, he had claimed that he knew nothing of the allegation that the plaintiff had sent out the Fact Sheet. He later
admitted that he did know of the allegation and did know that it had been sent by someone other than the plaintiff.

18 On November 9, 2007, Chief Pashe spoke with Doug Mercer of First Nations and Inuit Health Branch (the federal
government organization dealing with First Nation health issues) about the plaintiff's status.

19 On November 13, 2007, a staff meeting took place at which time the defendant (particularly Councillor Pashe)
told the staff that the plaintiff had been terminated.

20 Through the defendant's legal counsel it was confirmed that the defendant had terminated the plaintiff due to her
alleged breach of her agreement with the defendant by sending out the Fact Sheet without prior approval.

21 On November 16, 2007, the plaintiff's counsel wrote to the defendant's counsel explaining what had happened
from the plaintiff's perspective regarding the distribution of the Fact Sheet, so there would be no misunderstanding of
what had actually happened. The plaintiff did this in an attempt to resolve matters before they escalated even more than
they had already. No resolution proved possible and through the defendant's legal counsel it was confirmed that the
plaintiff was, in fact, terminated. She was not told anything before or after October 15 regarding the danger of her being
terminated, and based on the evidence that I had before me, at no time did the plaintiff conduct herself in any way such
that this should have been a concern for her.

22 The plaintiff's dismissal and the subsequent litigation up to and including the time of submissions respecting the
current issues have caused her significant emotional upset. I accept that on the basis of all of the evidence that I heard
and the observations that I made during the trial and the subsequent hearing regarding the current issues.
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23 After leaving her position with the defendant, the plaintiff became employed with Health Canada on December 4,
2007. Although this was only term employment taking her up to March 31, 2010, it was later extended to December 31,
2010. This employment opportunity arose after she had been terminated by the defendant, although it came about in part
because of discussions she had had with Health Canada back in April, 2007. At that time, her initial agreement with the
defendant had not yet been renewed and she was concerned about what opportunity she would have if the defendant
chose not to hire her. Health Canada had invited her to submit her name into a competition, which she did, and for
which she was unsuccessful. She then signed the second agreement with the defendant and worked there until she was
terminated. After that, as Chief Pashe had advised Doug Mercer of the termination, Health Canada came to know of her
availability and approached her offering her the position.

24 The agreement that the plaintiff had with the defendant allowed for termination by the defendant only in certain
circumstances. The first was a breach of contract by the plaintiff; the second was 30 days' notice if termination was
based on a performance evaluation; the third was if funding for the position was terminated.

25 I found at trial that there was no breach of the contract by the plaintiff. The direction expressed to her at the
October 15, 2007 meeting was with respect to future communications and she followed the direction as required. There
was no performance evaluation done and there was no termination of the funding for the position.

26 At trial I found that the defendant plainly made a business and political decision to get rid of the plaintiff. There
were many issues in the community, including not spending health money in accordance with the directives of First
Nations and Inuit Health Branch and Indian and Northern Affairs Canada, and instead spending it in part on
unallowable program expenditures. The plaintiff was aware of these problems but she was not the reason for these
problems; rather, it was clear on the evidence at trial that she was scapegoated for raising concerns in a proper fashion
and terminated as a result.

27 As indicated above, the reality is that the plaintiff did not distribute the Fact Sheet. The defendant had no intention
of investigating what really happened because, it seems to me on all of the evidence, it knew what happened and, in the
end, it really did not matter. The defendant decided to terminate the plaintiff regardless of what the facts were.

28 While under cross-examination at trial, Chief Pashe admitted that he and Council were aware of the fact that the
plaintiff was not responsible for distributing the Fact Sheet but nonetheless terminated her on the basis that she
supposedly had done so. That, along with his admission to lying on the stand before me on at least two other occasions,
caused the defendant's case to collapse. The things that Chief Pashe lied about are not just peripheral. The entire defence
hinged on the lies, in particular, one of them -- that the plaintiff was responsible for the distribution of the Fact Sheet.
Were it not for that lie, we would not be here; this matter would have been resolved some time ago.

29 Having said that, there are a number of other facts which bear on the issues of costs and/or punitive damages.

30 The statement of claim was filed on April 1, 2008. The statement of defence and counterclaim was filed on May
12, 2008. In the statement of defence we find the following:

11.
d. In breach of the agreement reached on October 15, 2007, the Plaintiff persisted in
forwarding memos to the Dakota Tipi community members and clients of the Dakota
Tipi Health Centre. In particular, the Plaintiff distributed a document entitled "Fact
Sheet";

e. The distribution of the document entitled "Fact Sheet" was in clear breach of the
October 15, 2007, reasonable request from the Defendant and in contravention to
section 2(b) of the Agreement.
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12. The Defendant says that the Plaintiff's actions as described in the above paragraph were
designed to force the Defendant to terminate the Agreement. The Defendant says that the
Plaintiff had secured employment with the Department of Health Canada and as such
sought to gain from the Defendant. The Defendant says that the Plaintiff's claim is
brought on contrived grounds and ought to be dismissed. [emphasis added]

31 The defendant also relied on these allegations as the basis for its counterclaim where it claimed damages and
solicitor-client costs.

32 On December 16, 2009, the defendant filed an amended statement of defence and counterclaim alleging a breach
of fiduciary duty, asserting that the contract entered into between the plaintiff and the defendant was unfair to the
defendant.

33 As early as June 24, 2008 (prior to discoveries), the plaintiff proposed a settlement. Said settlement proposal was
rejected.

34 After the testimony of Chief Pashe on June 8, 2010, after he admitted that he lied about the allegation that the
plaintiff was responsible for the distribution of the Fact Sheet, the defendant abandoned its allegations of cause, called
no further evidence and closed its case, leaving the only issue outstanding being the amount of the award in the
plaintiff's favour. At 3:26 p.m., on that very afternoon, Melanie Pashe, who was employed by the defendant and had
been scheduled to testify at the trial (as was Councillor Pashe), posted on Facebook a very unflattering comment
respecting the plaintiff, as follows: "B.L. ... U OLE GREEDY BITCH". The initials "B.L." were clearly in reference to
the plaintiff Bonnie Lounsbury and, notwithstanding argument by the defendant, I allowed this evidence before me as
being relevant and probative to the issue of punitive damages.

35 In the face of numerous requests by the plaintiff's counsel through the defendant's counsel and through Chief
Pashe himself to remove the posting, it remained on Facebook at least until the late fall of 2010. Through the
defendant's counsel at the later hearing respecting the current issues, the court was advised that Chief Pashe did not have
the means by which he could control what was posted on Melanie Pashe's Facebook. In paragraph 3 of Chief Pashe's
affidavit affirmed on August 10, 2010, he stated:

3. The personal actions, views, statements or opinions of employees of Dakota Tipi First
Nation made outside of their working hours or outside the scope of their employment are
not subject to control by Dakota Tipi First Nation.

36 No evidence was led with respect to Melanie Pashe's hours of work but I note, nonetheless, that the Facebook
posting was made at 3:26 p.m., virtually within hours of the defence's case folding. This, by a woman who held a
position with the defendant that entrusted her with distributing the Fact Sheet, which distribution formed the
cornerstone of the grounds for the plaintiff's dismissal and what later turned out to be the essence of the defence to the
plaintiff's legitimate complaint regarding dismissal. I conclude as a matter of logic and common sense that Chief Pashe's
assertion that he had and continued to have no means to remove this slur from the Internet is wholly unacceptable.
Moreover, it is a clear indication that there is no contrition here, none.

ISSUES

37 The issues are as follows:

(1) Is the plaintiff entitled to solicitor-client costs in the circumstances of this case?
(2) Is the plaintiff entitled to punitive damages in the circumstances of this case?
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THE POSITIONS OF THE PARTIES

38 The position of the plaintiff is that given that the entire defence hinged on a lie which not only formed an essential
part of the pleadings but also continued on through the trial until finally Chief Pashe admitted to the lie (but only in
cross-examination), the court should order both solicitor-client costs and punitive damages. More specifically, in
addition to solicitor-client costs, the plaintiff seeks punitive damages in the amount of $25,000.00.

39 The position of the defendant is that solicitor-client costs are excessive, and that party and party costs are more
appropriate. The defendant argues further that were I to order solicitor-client costs, that should displace any need for
punitive damages. Should the court nonetheless order punitive damages, the defendant says, the amount should not
exceed $2,000.00.

JURISPRUDENCE

(a) Solicitor-Client Costs

40 The award of costs and the measure of costs are within the discretion of the court -- a discretion that is exercised in
accordance with a number of judicially articulated principles. Simply put, the purpose of awarding costs is to properly
indemnify a party for expenses incurred, to encourage settlement, and to promote sensible conduct in court proceedings.

41 Special costs, or "solicitor-client costs", are intended to more closely represent a party's actual legal costs. As to
what principles should govern the award of solicitor-client costs, in Young v. Young, [1993] 4 S.C.R. 3 at 134,
McLachlin J. (as she then was) stated the following:

... Solicitor-client costs are generally awarded only where there has been reprehensible,
scandalous or outrageous conduct on the part of one of the parties. Accordingly, the fact that an
application has little merit is no basis for awarding solicitor-client costs; nor is the fact that part
of the cost of the litigation may have been paid for by others. [emphasis added]

42 "Reprehensible" conduct has been described as encompassing scandalous or outrageous conduct but also including
milder forms of misconduct deserving of reproof or rebuke. See Garcia v. Crestbrook Forest Industries Ltd. (1994),
119 D.L.R. (4th) 740 at 747 (B.C.C.A.). For example, situations such as those in which a party makes unsubstantiated
and unfounded allegations of criminal conduct, breach of fiduciary duty, or fraud often attract an award of
solicitor-client costs. Solicitor-client costs have also been awarded to penalize a party for its conduct prior to the
litigation process. See Somers v. Fournier (2002), 60 O.R. (3d) 225 at para. 17 (C.A.), Cronk J.A.

(b) Punitive Damages

43 Non-compensatory damages serve many purposes, unrelated to reimbursement of the plaintiff for harm suffered.
Within the precinct of non-compensatory damages, punitive or exemplary damages are designed to address the purposes
of retribution, deterrence and denunciation. In other words, an award of such damages has, as its aim, an expression of
special disapproval of a litigant's conduct and is tied to the judicial assessment of that conduct, not to the extent of the
compensation required for reparation of actual prejudice, whether monetary or not. See Whiten v. Pilot Insurance Co.,
2002 SCC 18, [2002] 1 S.C.R. 595 at para. 43. The purpose of punitive damages is to punish the defendant, to deter the
defendant (and others of like mind) from future bad conduct, and, in the end, to denounce the type of conduct that
warrants the award. As Cory J. stated in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at 1208:

[196] Punitive damages may be awarded in situations where the defendant's misconduct is so
malicious, oppressive and high-handed that it offends the court's sense of decency. Punitive
damages bear no relation to what the plaintiff should receive by way of compensation. Their aim
is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the
jury or judge expresses its outrage at the egregious conduct of the defendant. They are in the
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nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in
this manner. ... [emphasis added]

44 Punitive damages are appropriate only in limited circumstances, where the wrongdoer's conduct is particularly
egregious and departs "markedly" from ordinary standards of decency. They are awarded only in exceptional cases. See
Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085 at 1107-08.

45 The law is equally clear that punitive damages can be awarded if, but only if, compensatory damages (and
presumably other civil or criminal penalties) do not adequately achieve the objectives of retribution, deterrence and
denunciation. In Hill, supra, Cory J. put it in the following terms (at p. 1208):

[196] ... It is important to emphasize that punitive damages should only be awarded in those
circumstances where the combined award of general and aggravated damages would be
insufficient to achieve the goal of punishment and deterrence.

46 Punitive damages are available in contract although, again, only in extraordinary circumstances. In Vorvis, supra,
the Supreme Court of Canada held that punitive damages will be available in a contract case but only where the
circumstances of the breach constitute an independent actionable wrong which caused the injury for which punitive
damages are claimed. However, in the subsequent decision of the Supreme Court of Canada in Whiten, supra (at para.
79), it was made clear that the independently actionable wrong may be a breach of contract or some other duty such as a
fiduciary obligation. In other words, an independent tort is unnecessary and it can be a violation of the implied duty of
good-faith dealing.

47 In Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, the Supreme Court of Canada warned that a
judge should be cautious not to over-compensate a wrongfully dismissed employee by awarding both general and
punitive damages. Punitive damages should be awarded only in cases where the defendant's conduct is egregious or
outrageous. It is important to consider the deterrent effect of the compensatory award in determining whether or not
punitive damages are necessary.

48 In the recent decision of the Supreme Court of Canada in de Montigny v. Brossard (Succession), 2010 SCC 51,
[2010] 3 S.C.R. 64, LeBel J. (speaking for the court), after referring to the comments of Cory J. in Hill (referred to at
paragraph 43 in these reasons), stated:

[52] ... That outrage is expressed through an award of a substantial or symbolic amount of money,
often accompanied by a declaration, which together are intended to convey the opinion of the
justice system concerning the particularly reprehensible nature of the conduct in question. In this
sense, denunciation constitutes an objective serving both the retributive and the utilitarian
functions of the system of exemplary damages. The retributive function is served by the
opprobrium attaching to the person of the wrongdoer, which is in itself a form of punishment for
the wrongdoer's conduct. The utilitarian function for its part is served by the preventive effect that
such damages can have on the type of conduct involved, which benefits society as a whole.
Denunciation also serves a declaratory function, which it shares, to a lesser degree, with the
general deterrent objective of exemplary damages. While the objectives of punishment,
deterrence and denunciation intersect to some extent in these functions, each of them covers a
different aspect of the role played by exemplary damages and can therefore, in itself, justify an
award of such damages. [emphasis added]

49 If it is determined that punitive damages should be awarded, the amount of the award should bear a rational
relationship to the purpose of the award. See Whiten at paras. 71, 74 and 101. Rationality implicates the notion that
there must be proportionality to the ends of punishment, deterrence and denunciation. Proportionality, in turn, requires a
consideration of proportionality of an award in relation to a constellation of factors. For present purposes, they may be
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summarized as:

(1) the blameworthiness of the defendant's conduct;

(2) the degree of vulnerability of the plaintiff;
(3) the harm or potential harm directed specifically at the plaintiff;
(4) the need for deterrence;
(5) the advantage wrongfully gained by the defendant from the misconduct; and
(6) proportionality, even after taking into account the "other" penalties (both civil and criminal)
which have been or are likely to be visited on the defendant.

DECISION

(a) Solicitor-Client Costs

50 In reviewing the proceedings from their inception, up to and including the case called for the defence, I have little
resort but to order solicitor-client costs.

51 Firstly, there was meaningful effort by the plaintiff to settle the matter even before discoveries.

52 Secondly, and most significantly, this is not a case where an employer simply acted in bad faith in which a court
might be more inclined to order costs on a substantial indemnity basis. Rather, this is a case where the entire defence
was premised on lies -- lies that were perpetuated in the statement of defence and counterclaim through to the amended
statement of defence and counterclaim through to discoveries and through to the trial whereupon the proceedings
regarding liability came to an end but only when the lies were unveiled during the cross-examination of Chief Pashe.
There was no valid defence nor was there any basis whatsoever for a counterclaim.

53 In these circumstances, the plaintiff should not have to pay for her legal costs. She is, quite simply, entitled to be
compensated for all of them.

(b) Punitive Damages

54 Here I must ask myself if this is an exceptional case. Can the conduct of the defendant be characterized as "so
malicious, oppressive and high-handed that it offends the court's sense of decency"? In my view, this is indeed one of
those exceptional situations referred to in Hill where punitive damages are necessary and deserved notwithstanding my
orders respecting damages and solicitor-client costs.

55 The conduct that I have outlined above speaks for itself. Each item identified supports the overall suggestion that
the defendant's behaviour before, during and after the trial of this matter was high-handed, malicious and reprehensible.
Considered at once, however, the behaviour of the defendant can for certain be described as outrageous and deserving
of punishment, deterrence and denunciation. The conduct that I refer to bears repeating, even if only in summary form:

(1) withholding the plaintiff's expense cheque without justification;

(2) unceremoniously throwing the plaintiff off the reserve on the basis of a trumped-up
petition;
(3) terminating the plaintiff without notice or warning or offer of pay in lieu of notice;
(4) notifying members of the community of the plaintiff's termination before notifying the
plaintiff;
(5) not having the common decency to speak directly to the plaintiff;
(6) lying about the reason for dismissal, i.e., ordering Melanie Pashe to distribute the Fact
Sheet and accusing the plaintiff of non-compliance with a direction by issuing the Fact
Sheet;
(7) lying about the fact that the plaintiff deliberately failed to comply with a direction in order
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to terminate employment with the defendant and pursue an employment opportunity with
Health Canada as the basis of a counterclaim;
(8) misleading the community with respect to why the plaintiff had left the employ of the
defendant and the reserve, creating a perception of being dismissed for cause;
(9) posting disturbing comments on Facebook at 3:26 p.m., on June 8, 2010, immediately
after the defendant's case collapsed due to Chief Pashe's admitted lying on the stand;
(10) refusing to remove the Facebook posting;
(11) making threats to the plaintiff by Councillor Pashe;
(12) emotionally traumatizing a vulnerable plaintiff by raising a defence based on total
fabrication;
(13) filing a counterclaim to secure damages from the plaintiff, i.e., attempting to get
something for nothing;
(14) making serious allegations amounting to fraud or moral turpitude in a manner in which
the plaintiff could not respond;
(15) damaging the plaintiff's reputation in a small community where she had worked for a
number of years and was a well-known member of the public;
(16) pursuing the litigation which dragged on for three years as a result of a contrived defence;
and
(17) overall putting into effect a scheme that was planned and deliberate.

56 I have carefully considered the guidance provided by the Supreme Court of Canada in Whiten and in Honda
Canada Inc., supra. Amongst other things, I must be mindful of the circumstances of the defendant including the orders
that I have made regarding damages of $143,965.95 and solicitor-client costs. Although, in the circumstances, the
plaintiff was perfectly entitled to ask for punitive damages in the amount of $25,000.00, I am not prepared to go that far.
On the other hand, I do not accept that an award of punitive damages of $2,000.00 is adequate in these particularly
reprehensible circumstances. Given the totality of the circumstances, I fix and award the sum of $10,000.00 for punitive
damages.

CONCLUSION

57 I order against the defendant costs on a solicitor-client basis and punitive damages of $10,000.00.

R.A. SAULL J.

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