Home Featured Former Scotiabank mortgage specialist awarded $900,000 in defamation case after he was accused of fraud

Former Scotiabank mortgage specialist awarded $900,000 in defamation case after he was accused of fraud

by HR Law Canada

A former Bank of Nova Scotia mortgage development manager has been awarded more than $900,000 in a defamation case against his former employer, culminating a legal battle that spanned over a decade.

G.C., who had been one of top producers in the Toronto region, resigned in 2012 amid accusations of mortgage fraud, which he denied. Following his resignation, the bank placed a “SIFT” alert on him in the Canadian Bankers Association database, effectively preventing him from obtaining employment in the industry.

It stated there was “strong evidence” that he had “knowingly uttered fraudulent documents on several applications.” That included falsified notices of assessment, letters of employment, pay stubs, financial statements, and bank documents that contained forged customer signatures.

G.C. received offers of employment from the mortgage departments of other major banks. But, as a result of the SIFT alert, the offers were quickly withdrawn. This SIFT alert was contested in court as being defamatory, and G.C. sought $18 million — consisting of $10 million in general damages; $3 million in aggravated damages; $3 million in special damages; and $2 million in punitive damages.

Bank’s defenses rejected

The bank conceded libel in this case, but relied on justification and qualified privileges to defend it.

“Had the SIFT alert not been requested unjustifiably by the bank investigator, the inference can be drawn, as invited by the bank in defence of the damages case, that the plaintiff could have accepted any of the three employment offers he received in May 2012, and that CIBC could have offered him a job as well,” it said.

The court found that the bank failed to prove the truthfulness of its statements about G.C., nor did it show that these statements were necessary or made without malice. As a result, the bank’s defenses of justification and qualified privilege were rejected.

The Ontario Superior Court of Justice cited a lack of evidence from the bank to support its claims, emphasizing that G.C. had been unfairly labeled and blocked from employment opportunities within the financial sector, a situation that significantly affected his professional life and personal well-being.

The ruling awarded him $175,000 in general and aggravated damages, recognizing the personal and reputational harm he suffered. Additionally, he was awarded $475,000 in special damages for lost earnings and $200,000 in punitive damages to underscore the need for accountability and deter similar conduct by the bank or other institutions.

General and aggravated damages

G.C.’s ability to prove specific losses tied to the defamation was limited, but there was no questioning it had a significant impact on his reputation.

Acknowledging both the immediate and enduring impacts of the libel, the court awarded $75,000 in general damages for the immediate impact on employability and $100,000 in aggravated damages for the prolonged suffering and reputational damage over more than a decade.

The court also considered the plaintiff’s claim for future economic damages until retirement but found the evidence insufficient to warrant an award for ongoing economic losses beyond the SIFT alert’s removal in 2019.

Special damages

G.C. provided a spreadsheet documenting his income before and after he was defamed. After he was excluded from the mainstream banking sector, he found work as a mortgage broker.

He compiled his income figures for a nine-year period between 2002 and 2011. He then compiled his income for the period between 2012 and 2023 as a mortgage broker. His calculations compared his expected earnings as a banker to his actual earnings as a broker, factoring in regional real estate trends which he argued would have increased his potential commissions.

The court critiqued the plaintiff’s income projections for their speculative nature, particularly his assumption that bank profits would directly correlate with his potential earnings. Scotiabank contested these projections and argued that G.C.’s resignation, rather than an outright dismissal, facilitated the defamation, impacting his career trajectory.

Despite acknowledging G.C.’s enterprising nature and his adaptation to his new role as a broker, the court was skeptical of significant income growth post-defamation, given the lack of consistent upward trends in his past earnings. The litigation’s toll on the plaintiff’s financial and emotional well-being was also considered, with the court noting the broader impact of prolonged legal battles on individual litigants.

Ultimately, the court decided on reference earnings starting at $150,000 annually post-resignation, increasing to an average of $200,000 by 2019, with total special damages for lost income assessed at $475,000. This figure was calculated based on the income differential between his actual earnings and the estimated income he might have earned had he continued in the banking sector without the defamation.

Punitive damages

The punitive damages claim was driven by G.C.’s animosity and outrage from the bank’s defamatory SIFT alert, which wasn’t removed until 2019 — years after it was proven baseless.

Punitive damages are meant not to compensate the plaintiff but to punish the defendant for actions that are malicious, oppressive, and shock the conscience of the court.

The court did not find the bank’s investigative process alone warranted punitive damages; however, the bank’s failure to lift the alert, knowing the defamation was unsupported, merited punitive actions. This failure demonstrated a neglect for the required re-evaluation of the defamation, especially considering the severe impact such defamation has on employment and personal identity, the court said.

Prejudgment interest adds nearly $70,000

Prejudgment interest added approximately $69,268 to the total compensation, bringing the final award to G.C. to $919,268.

The court also highlighted the need for institutions to reassess and potentially withdraw harmful allegations if they are shown to be unfounded, particularly when those allegations prevent individuals from gaining employment.

“The bank ought to have taken a hard look at the evidence and the law of defamation to reach the conclusion that the SIFT alert had to be lifted,” it said.

“Although this was not an employment law case, as I had to remind both parties repeatedly during the trial, defamation that impedes future employment is particularly harmful because of the importance our society places on employment on personal identity and social standing.”

This case sheds light on the significant impacts defamatory statements can have on individuals and underscores the responsibilities of employers in handling such allegations with due diligence and fairness.

For more information, see Gary Curtis v. Bank of Nova Scotia, 2024 ONSC 2308 (CanLII).

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