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A recent case of the Ontario Court of Appeal made the novel decision to award punitive damages (as well as bad faith damages) because a Bank blacklisted a former employee’s relatives.

In that case, Ms. Mastrogiuseppe was summarily dismissed for purportedly failing to abide by a number of bank policies that had been changed several years earlier. These policies discouraged contact between bank managers and mortgage brokers and indicated that a mortgage cash-back program was to be directed at the mortgagee and to no other person.

Ms. Mastrogiuseppe allegedly contravened these policies when she dealt directly with a mortgage broker with whom she was suspected of having an affair. She also directed a number of cash-backs to be made out to him or to solicitors in trust for him rather than to the mortagee.  In addition, Ms. Mastrogiuseppe had been accused of taking advantage of a glitch in the system for an early renewal of her mortgage without penalty. She also approved loans for family members in non-arm’s length transactions.

The Bank launched an investigation when it got wind of these actions. The investigator’s report came to the conclusion on each of these points that Ms. Mastrogiuseppe’s explanations were not satisfactory and that, given her extensive experience with the bank and her senior position, she knew, or ought to have known better. As a result, the investigator recommended that she be terminated for cause.

The Superior Court came to the conclusions that the policies relied on by the bank were not unambiguous prohibitions but rather recommendations. As a result, the bank could not rely on them to support its decision to terminate for cause. In addition, the bank’s conclusion that Ms. Mastrogiuseppe was having an affair with a mortgage broker was based on outdated stereotypes that person’s of the opposite sex could not have friendly relations exclusive of sexual relationships. The bank had also overlooked the evidence that indicated that she had renewed her mortgage the day before she found out about the glitch in the system, and the approval of loans to family members, although perhaps not good practice, were eventually proven to be legitimate.

The judge states, given the circumstances, that “[w]arnings, setting out the performance problem, the actions required to improve to an acceptable level and the consequences of failing to improve, were required.” Given her age (47), her 30 years of service and her role as a mid-to-senior manager, the judge awarded her 22 months in lieu of notice. In addition the judge awarded 8 additional months in Wallace damages as a result of the accusation of dishonest conduct and improper personal relations with the mortgage broker, the fact that the dismissal letter did not cite reasons, the Bank had written her a letter whose intent was found to devastate her prospects of getting employment insurance, the Bank refused to provide her with a letter of reference despite her years of exemplary service and finally because the Bank had refused to allow her to retrieve her personal effects and had instead couriered them to her. The Court also awarded an additional $25,000 in punitive damages for having blacklisted Ms. Mastrogiuseppe’s family members who were customers. The bank also doubled her interest rate on her personal loans and unlawfully used a direction signed by the plaintiff to deduct mortgage payments from a different bank, under protest of Ms. Mastrogiuseppe. As a result, her personal cheques were returned as NSF and her credit was adversely affected.

The Court of Appeal deferred to the Superior Court on its conclusions because they were all findings of fact. The Court of Appeal, however, reduced Wallace damages to 4 months because the Bank was not acting in bad faith in pursuing the allegations of dishonesty, even though they were ultimately not proved or refusing to provide a letter of reference in those circumstances. However, the Court of Appeal upheld the punitive damages and bad faith award due to the Bank’s vendetta against Ms. Mastrogiuseppe and her family.

Mastroguiseppe v. Bank of Nova Scotia, [2007] O.J. No. 4052 (Ont. C.A.)

Author: Adrian Ishak, © Nelligan O’Brien Payne LLP 2008

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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