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Plaintiff awarded $546,684 in costs in a wrongful dismissal action

In the recent case of Ruston v Keddco Mfg. the court granted one of the largest cost awards ever against the employer in a wrongful dismissal action.

Here’s what happened.

Keddco fired its president, Scott Ruston, for alleged fraud and breach of fiduciary duty and refused to provide a severance package. Ruston sued Keddco for wrongful dismissal. In response, Keddco brought a counterclaim against Ruston for $1.7 million dollars.

The fraud allegations were not upheld at trial, and the court ordered Keddco to pay Ruston damages of $604,627.09 as follows:

  1. 19 months’ notice
  2. $100,000 in punitive damages for, among other things:
    • intimidating Ruston during the termination
    • making unsubstantiated allegations
    • the unsubstantiated and excessive counterclaim
  3. moral damages in the amount of $25,000.

Generally, the winning party to a lawsuit is awarded a contribution towards their legal fees from the losing party. In this case, the court ordered Keddco to pay $546,684.73 in costs to Ruston. The court justified this enormous cost award because:

  • Ruston was awarded $604,627.09 and successfully defended the counterclaim of $1.75 million. Therefore, the costs were proportionate to the result.
  • Keddco threatened Ruston with expensive litigation if he pursued his wrongful dismissal claim and then proceeded to follow through on the threat.
  • Keddco pursued unfounded allegations of fraud, breach of fiduciary duty and unjust enrichment, jeopardizing Ruston’s professional and financial future.
  • The counterclaim turned a simple wrongful dismissal action into complex litigation, which meant Ruston had to retain an expert witness at a cost of approximately $30,000.
  • Keddco’s conduct substantially increased the costs of trial preparation and the length of trial by:
    • refusing to admit facts but failing to contest them at trial
    • refusing to provide relevant financial documents until Ruston brought a motion to the court
    • providing will-say statements late
    • relying on only 45 of the 163 documents it produced on the first day of trial; and
    • providing a 25-person witness list on the eve of trial, forcing an adjournment but then only calling two witnesses at trial.
  • Keddco’s lawyer was comparatively unprepared for the trial.
  • As a result of Keddco’s conduct during the litigation, Ruston had to withdraw funds from his RRSP, sell his house below market value and break his car lease.

This case is a stark reminder that unwarranted and frivolous allegations, counterclaims and “hardball” litigation tactics can not only impact an award of damages, but also increase liability for costs.