Saturday, 18 October 2014

Former Employee's Wrongful Dismissal Case against US Embassy Continues

Sandra McDonald’s legal saga against the Embassy of the United States at Ottawa is a long and interesting story. On July 17, 2012, Ms. McDonald, a former employee of the embassy, obtained default judgment in the amount of approximately $250,000.00 against her ex-employer after it failed to defend her wrongful dismissal case.

The judgment received a fair amount of media attention at the time. Although, even then, at least one Ottawa employment lawyer was sceptical; telling the Toronto Star , “Good luck to her. The U.S. Treasury is already in debt to the tune of $13 trillion.”

Less well publicized is what has happened since. As expected, Ms. McDonald has not seen her money. However, rather than simply ignore the judgment, the US Embassy has, in fact, responded to the case.

Default Judgment Set Aside on Terms

On March 12, 2014, the Honourable Justice Tim Ray of the Ontario Superior Court of Justice sitting at Ottawa ordered the default judgment set aside. Justice Ray’s reasons for decision were published at 2014 ONSC 1557.

While it is not wholly surprising that Justice Ray ordered the default judgment set aside, His Honour did impose two conditions on the defendant employer in doing so:

  1. The plaintiff was to be “made whole” insofar as her costs thrown away including her costs of this motion; and
  2. The defendant was required pay into court the full amount of the default judgement. (The Embassy had submitted that such an order was unnecessary, but Justice Ray held that its conduct in defending the case suggested otherwise.)

Full Indemnity Costs Awarded

Costs were awarded to Ms. McDonald on a full indemnity basis. In his reasons for decision on costs, reported as 2014 ONSC 2779, Justice Ray held that:

[4] It is clear that ‘costs thrown away’ amount to full indemnity costs that were unnecessarily incurred. There appears to be no disagreement that the plaintiff is entitled to her costs up to the date of the defendant’s motion.

[5] As for the costs incurred by the plaintiff to respond to the defendant’s motion, my order was intended to see that the plaintiff was fully indemnified subject to hearing from counsel. I now know there were no offers to settle that counsel believe may bear on this issue. It was clear during argument that the live issues were whether the judgement should have been set aside at all, and secondarily whether conditions should have been imposed. Those issues were hotly contested.

[6] There is no doubt that the conduct of the defendant prior to judgement demanded that the plaintiff be fully indemnified. I was quite concerned as well about the conduct of the defendant after it became aware of the judgement. Those delays were unacceptable and I considered a proper response was appropriate in the form of a full indemnity order – subject to counsels’ submissions.

[7] I am not prepared, as proposed by the defendant, to accept that partial indemnity costs in this case are sufficient for the plaintiff. I believe my reasons are clear in the motion decision. I am of the view that the plaintiff in this case should be made whole by means of a full indemnity order for costs so that she can be put in the same position that she would have been had the defendant responded appropriately to the originating process, and then have responded appropriately when the judgement came to its attention.

Leave to Appeal Denied

On October 8, 2014, the plaintiff’s request for permission (“leave”) to appeal Justice Ray’s decision was denied by the Honourable Justice Robert Beaudoin, also of the Ontario Superior Court of Justice sitting at Ottawa. Justice Beaudoin’s reasons for decision were published at 2014 ONSC 5819.

In denying the request for leave, Justice Beaudoin commented that he had “no reason to doubt the correctness of Justice Ray’s decision.” In Justice Beaudoin’s opinion, Justice Ray’s interpretations of the provisions of State Immunity Act were wholly reasonable. Costs of $5,000.00 were awarded to the Embassy in the result.

Where Matters Stand Now

It is important to note that my involvement in this matter has been no higher than that of interested observer. From what can be gathered from the reported decisions and media reports, the case continues. Ms. McDonald, who worked for the Embassy as locally engaged staff for nearly 30 years before being dismissed while on long-term disability leave, is essentially back to the start. Her employer, now aware of the claim, is entitled to file a defence. Fortunately for Ms. McDonald, $240,000.00 of the US Government’s money is sitting in trust for her with the Ontario Superior Court. What that means is if she ultimately wins her case, at least she will be able to collect on her judgment. (I guess the comments about her needing luck to collect were misplaced.)

But Ms. McDonald is a long way from seeing any money. In its motion to have the default judgment set aside, the US government (on behalf of the Embassy) argued, amongst other things, that Ms. McDonald's extended absence from employment may have amounted to “frustration”, thereby disentitling her to any damages. Justice Ray must have seen at least some merit in that argument in order to have allowed the motion setting aside the default judgment.

Whether this is the last we hear of the case is yet to be seen. A lot of cases settle out of court; especially employment law matters. Ms. McDonald’s last day of work at the Embassy was June 17, 2009. She was fired effective January 31, 2011, and filed her lawsuit against the Embassy on July 14, 2011. A little over three years later, she’s still standing on first base.

Contact Us

To reach the author of this blog, Sean Bawden, email or call 613.238.6321 x260. You may also use the contact box at the top of this page.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Sean Bawden, publisher of Labour Pains, can be reached by email at or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.

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