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lOMoARcPSD|16684553
REMEDIES CAN – WINTER 2019
Table of Contents
INTRODUCTION _______________________________________________________________ 3
PART 1: Monetary Compensation ________________________________________________ 3
1.1 Limiting Principles (Filters on Compensation) _________________________________________ 3
1.1.1 REMOTENESS ________________________________________________________________________ 3
[Parsons]: H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd, 1978 _______________________________ 3
[Kienzle]: Kienzle v Stringer, (1981) _________________________________________________________ 5
1.1.2 UNCERTAINTY and CAUSATION__________________________________________________________ 7
Shrump v Koot, 1977 (ON CA) _____________________________________________________________ 7
Laferrière v Lawson, SCC, 1991_____________________________________________________________ 8
1.1.3 MITIGATION_________________________________________________________________________ 9
[Janiak]: Janiak v Ippolito, SCC, 1995 ________________________________________________________ 9
Finelli v Dee, 1968, CA __________________________________________________________________ 11
[Erie County]: Erie County Natural Gas and Fuel Company Ltd v Carroll, 1911, CA ___________________ 12
Asamera Oil Corp Ltd v Sea Oil & General Corp; Baud Corp, NV v Brook ___________________________ 13
1.2 Equity – Specific Performance ____________________________________________________ 14
Semelhago v Paramadevan ______________________________________________________________ 15
Southcott Estates v Toronto Catholic School Board ____________________________________________ 16
Sky Petroleum_________________________________________________________________________ 17
Lumley v Wagner ______________________________________________________________________ 18
Warner Brothers v Nelson (Bette Davis) ____________________________________________________ 18
1.3 MITIGATION, EFFICIENT BREACH, AND THE MEASURE OF DAMAGES______________________ 19
TOPIC: Cost of Performance v Difference in Market Value ________________________________________ 20
Radford v DeFroberville _________________________________________________________________ 20
Groves v John Wunder Co _______________________________________________________________ 21
C.R. Taylor v Hepworth __________________________________________________________________ 22
Ruxley Electronics v Forsyth ______________________________________________________________ 23
TOPIC: Property Damage __________________________________________________________________ 25
Sub-Topic: Valuing chattel, Valuing Depreciation, Trespass _______________________________________ 25
Liesbosch Dredge v Edison S.S ____________________________________________________________ 25
Sub-topic: Betterment & Depreciation _______________________________________________________ 26
James Street Hardware v Spizziri __________________________________________________________ 26
Kates v Hall ___________________________________________________________________________ 27
Sub-topic: When there’s a Benefit to the Wrongdoer ____________________________________________ 29
Whitwham v Westminster _______________________________________________________________ 29
Wrotham Park v Parkside ________________________________________________________________ 30
Strand Electric v Brisford ________________________________________________________________ 31
AG v Blake ____________________________________________________________________________ 31
TOPIC: (Expectation Interest) Monetary Awards and Breach of Contract ____________________________ 33
Fuller & Purdue________________________________________________________________________ 33
RG McLean Ltd v Canadian Vickers ________________________________________________________ 33
Ticketnet Corp v Air Canada ______________________________________________________________ 35
TOPIC: Reliance Interest ___________________________________________________________________ 37
Bowlay Logging v Domtar ________________________________________________________________ 38
Sunshine Vacation Villas v Hudson’s Bay ____________________________________________________ 39
TOPIC: Punitive Damages __________________________________________________________________ 40
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Whiten v Pilot Insurance, 2002, SCC _______________________________________________________ 40
TOPIC: Non-Pecuniary loss _________________________________________________________________ 41
Fidler v Sun Life________________________________________________________________________ 41
Honda Canada Inc. v Keays_______________________________________________________________ 43
Bhasin v Hrynew _______________________________________________________________________ 44
0856464 B.C. v. TimberWest Forest Corp ____________________________________________________ 45
PART 2: PERSONAL INJURY _____________________________________________________ 46
Andrews _____________________________________________________________________________ 47
Lindal v Lindal _________________________________________________________________________ 49
Sub-topic: Loss of Working Capacity / Earning Capacity __________________________________________ 50
Cooper-Stephenson ____________________________________________________________________ 50
Teno v Arnold _________________________________________________________________________ 51
MacCabe v Westlock ___________________________________________________________________ 51
Sub-topic: Contingencies ___________________________________________________________________ 53
Penso v Solowan_______________________________________________________________________ 53
Sub-topic: Lost Years _____________________________________________________________________ 55
Sub-topic: Discount Rate __________________________________________________________________ 55
Lewis v Todd [1980] 2 SCR 694 ____________________________________________________________ 55
Sub-topic: Management Fees_______________________________________________________________ 56
Sub-topic: Taxation_______________________________________________________________________ 56
Ontario v Jennings _____________________________________________________________________ 56
PART 3: Equitable Remedies ____________________________________________________ 57
Sub-topic: quia timet (since I fear of future injury) ______________________________________________ 58
Fletcher v Bealey ______________________________________________________________________ 58
Palmer v Nova Scotia Forest Ind___________________________________________________________ 59
Hooper v Rogers _______________________________________________________________________ 60
Redland Bricks ________________________________________________________________________ 61
Sub-topic: Injunctions and Property _________________________________________________________ 64
Goodson v Richardson __________________________________________________________________ 64
Wollerton and Wilson Ltd________________________________________________________________ 65
Trenberth (John Trenberth Ltd v National) __________________________________________________ 66
Sub-topic: Nuisance_______________________________________________________________________ 67
Miller v Jackson _______________________________________________________________________ 67
Sub-topic: Interlocutory Injunctions _________________________________________________________ 69
American Cyanamid v Ethicon ____________________________________________________________ 69
RJR McDonald _________________________________________________________________________ 70
R v CBC ______________________________________________________________________________ 71
Vieweger _____________________________________________________________________________ 72
PART 4: Charter Remedies _____________________________________________________ 73
Vancouver (City of) v Ward ______________________________________________________________ 74
Brazeau v AG Canada ___________________________________________________________________ 74
Ernst v Alta Energy Reg__________________________________________________________________ 75
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Remedies CANs – Winter 2019
LECTURE 1
INTRODUCTION
-
What is the law of remedies about?
- A: the law of court orders? court orders which provide monetary relief, or direct physical action.
Two pillars of Remedies:
- Common Law
- Equity
Class Notes:
- This course sort of picks up where Torts and Contracts left of
- For example, in this course, we already know there was a contract, a breach of it, and causation
for harm/damages this course asks: So what happens next?
PART 1: Monetary Compensation
1.1 Limiting Principles (Filters on Compensation)
123-
Remoteness
Uncertainty
Mitigation
Basic Principles:
- The general common law objective:
- Monetarily put party in the same position as if no wrong had occurred
i.e. “but for the breach I would have had/not had ……”
-
What’s the main difference in that principle between Torts and Contracts?
- Torts usually deal with lost past position (but for the tort I would have avoided some harm)
- Contract usually deal with lost future position (but for the breach, I would have had something in
the future)
1.1.1 REMOTENESS
- What is the standard of foreseeability and should the nature of the harm matter?
[Parsons]: H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd, 1978
Summary:
Scarman No, it doesn’t matter whether we have a tort or a contract we should use the same standard
regardless
Denning Yes, there is a difference, it does matter, and we should change our position based on that
Facts:
- Faulty Hopper Mouldy Feed pigs getting E Coli Loss of Pigs
- D sold a hopper for storing pig food to the P for the P’s pigs
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In installing the hopper, the D failed to open a ventilator, with the result that the pignuts became
mouldy and the pigs got E. coli
- Ds say the parties could not have reasonably contemplated that the nuts, rendered mouldy by
lack of ventilation would cause serious illness to the pigs.
Trial Judgement:
- Obvious warranty to soundness breached
- However, E.coli was unforeseeable at formation of contract (too remote)
- Nevertheless, Trial court still found against vendor (D), because TJ considered it a breached
warranty and concluded that the court did not need to consider the remoteness question.
Problem: The E Coli factor is a problem because it was not even known at the time, so it was
unforeseeable.
Analysis:
Scarman:
The question that should be used is: “Was the loss a serious possibility at formation of contract?”
Scarman said: pig illness was a serious possibility from breach (of equipment soundness obligations)
an included more narrow causes such as E Coli. Because it is within the type of loss.
• Was E Coli a serious possibility? no
• Was illness a serious possibility? Yes
In effect, Scarman reasoned that both Torts and Contracts should be treated the same.
Serious possibility is standard regardless of subject matter, of whether it is physical harm or profits
• This also sounds like a Tort’s analysis…..the thin skull principle: even when the type of loss is
not foreseeable, you take your victim as you find them.
Scarman followed “Hadley v Baxendale”
Denning:
Followed HoL in Koufous different stds for contract and tort. Suggests modifying categories based
upon subject matter rather than cause of action.
Remoteness: The lens should be different
• Contract: serious possibility
• Tort: even the slightest possibility that are “not far fetched”
Denning Formulas:
If economic loss only (contract) = Within Contemplation of the parties + Serious Possibility
If physical harm = Foreseeable + Not Far Fetched (slight possibility)
Application to the case:
So even Denning agreed that since the pigs suffered physical harm so the Tort’s standard may be
applied here.
So, what’s wrong with Scarman’s approach?
It is not very consistent with the court’s understanding of contract remedies.
Changing what counts as “serious” is arguably more nebulous than Denning’s approach.
• E.Coli is recoverable only because of how he defined “serious”
Summary of how the judges applied their standards:
So how is the loss from E.coli recoverable in this contract if it was not actually a serious possibility?
By extending recovery through type of loss (illness) as a serious possibility (Scarman)
Through lower foreseeability standard due to physical harm (Denning)
Commentary:
- Even when courts adopt a singular approach or language, it may well be applied differently based on the
subject matter
- A serious possibility of physical harm is likely to be treated differently that the possibility of lost profits
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Ilg likes Denning’s approach.
RATIO:
-
-
-
Ultimately, when there is physical harm, the Courts will reach wider to find compensation owed
Scarman’s opinion:
The question that should be used is: “Was the loss a serious possibility at formation of contract?”
Generally, when loss involves physical damage, the ultimate form of loss need not be foreseeable,
only the type of loss needs to be foreseeable (Scarman) (e.g. pig illness may be foreseeable, so E.
Coli does not have to be)
Under foreseeable harm, type of loss is important it can go from general and bridge the
unusual
E.g. a victim of an accident could have a rare prior pre-existing condition. Is it reasonably
foreseeable that this event could bring about the tragedy to that person? NO, but nonetheless,
the victim should not bear the damage. If the accident would have caused ANY damage to a
regular person, you have to take the more severe damage that happens with this person (bridge
– thin skull)
Policy:
Physical harm will tend to deserve greater foresight than pure economic loss
Policy analysis how much loss are we asking the victim to bear (more if it’s economic loss,
less if physical harm)
An implicit policy balancing through foreseeability std.
Denning Formulas:
If economic loss only (contract) = Within Contemplation of the parties + Serious Possibility
If physical harm = Foreseeable + Not Far Fetched (slight possibility)
For contract law (economic loss), serious possibility of harm is required. For tort law
(physical harm), slight possibility of harm suffices.
LECTURE 2
Review of last class:
- When type of loss opens recovery for more random events
- When loss involves physical damage, the ultimate extent of loss need not be foreseeable, only the type ie., pig illness - e coli. (also, thin skull e.g.)
- Physical harm will tend to open recovery for less likely events than pure economic loss
- An implicit policy balancing through foreseeability std.
[Kienzle]: Kienzle v Stringer, (1981)
Topics:
-
Remoteness and Subsequent Plans
Remoteness as Policy
Remoteness & Mitigation - Overlapping elements
How to apply ‘but for’ reasoning
Facts:
-
Parents Farm (Oxford Farm) > Estate > P is 1 of 3 beneficiaries.
- Plaintiff helped his father on his farm shortly before his death as a widower, and continued to do
so until the time of trial
-
P adds leased parcel of farmland
- He rented a nearby 78 acres to help the operation become profitable (adjoining parcel)
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P buys Farm from Estate (sister 1 is exec.)
- He elected to buy the farm and offered $55,000, which was accepted by the sister as
administratrix of the parents’ estates
- HOWEVER, Lawyer didn’t fill out farm title properly in the conveyance (Negligence)
- Farm title vested in the P and his two sisters due to the lapse in time since the death of the father,
and hence the conveyance from the Estate was basically void (Estate cannot give what it doesn’t
own)
- P did not know any of this.
-
P agrees to buy K Farm and plans to sell the Oxford Farm to use the money for the purchase.
Lets adjoining parcel go
Title problem is discovered, so P attempts to correct it, but one of the sisters do not convey interest (she
holds out) the sale collapses
K farm purchase falls through, rising in value
P stuck on Oxf farm w/o adjoining parcel
-
Types of Damages claimed:
1- Added costs (replacement service + cost to fix later in time, including conveyance)
a. Legal costs
b. Cost of the other sister holding out (buyout cost)
2- Oxford farm losses
a. lost profit from Oxford farm because it became even less viable since he let go of the adjoining
parcel of land.
3- K farm appreciation MINUS Oxford farm appreciation.
Trial Court
- Trial court awards transactional loss and buyout cost, but indicates otherwise limited to difference in
market price of underlying property
CofA
- Added costs yes (direct connection to breach)
- Oxford farm losses yes (direct connection to breach), but…. Mitigation
- court says you can’t stay losing profit indefinitely. After a reasonable amount of time, there’s a
positive onus on wronged party to take steps to mitigate loss. (ex: after a year, should have been
able to make Oxford farm viable again)
- K farm appreciation - Oxf appreciation No (secondary transaction too remote)
- Use of funds for a secondary transaction could be limitless. (therefore too remote)
- Note: Even though all three headings actually caused by breach, only first two are Def’s responsibility
Standard for Remoteness
- CofA - Remoteness is “more policy than fact”
- Adopts single ‘reasonable foreseeability’ regardless of tort or contract
Questions:
Q: Why is another farm too remote?
- Because this is too unpredictable, and the consequences could be limitless
- The court did use the single perspective here, but still took the pure economic loss approach. (i.e.
followed Scarman)
- Q: when could a secondary transaction not be remote?
- If it’s expressly within the contemplation of the parties. (through disclosure)
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Q: consistent with Parsons?
- Seems to be in line with the Pure economic loss perspective
- Q: Was the result under/over compensatory?
- Arg. for Under: the plaintiff lost on the profit and the better farm
- Arg. for Over: he’s getting the loss of profit from the Oxford farm, from letting go of the leasehold
parcel.
Summary
1. A single reasonable approach to foreseeability (reasonably foreseeable)
2. Applied with a high hurdle for pure loss of profit (like Denning in Parsons)
3. Foreseeability is policy-based view to risk - who should bear what?
RATIO:
- But-for reasoning cannot contain to two future eventualities (i.e. can’t say but for the breach I would’ve
done this and then this and recover for both)
- A subsequent deal / anticipated use of proceeds is generally too remote to recover (e.g. can’t say -> You
breached, caused me to lose $10,000. I would’ve put that $10,000 into cryptos and made $100,000 so I’m
claiming $100,000).
- Usually recovery is limited to one loss after breach; otherwise it would be difficult, if not impossible, to
determine where a boundary would be found. Secondary transactions are inconceivable and too limitless.
1.1.2 UNCERTAINTY and CAUSATION
Shrump v Koot, 1977 (ON CA)
Topics:
-
Possibility v Probabilities (important in the area of human health)
How to treat possibility of future operation and likelihood of outcome
Or, should only probabilities be awarded?
Facts:
-
D was car driver caused collision.
Schrump was injured party (P) 61-yo woman, housewife with life expectancy of 20.5 years.
She sustained a serious back injury
P’s expert said 25%-50% chance of back surgery
D’s expert said very remote chance will she have back surgery.
Issue:
-
Is damage that is considered “possible” but not “probable” compensable? Yes
Analysis:
On the Balance of Probabilities Standard:
- Balance of probability is evidentiary gateway, not measure of loss.
Threshold to allow evidence to become facts
- Balance of probability for past fact, not liability for future uncertainties
- 50%+ standard should be applied as to causation, breach, etc, But not as to limitations or extent
of $Damages, i.e.:
This is the hurdle for establishing: breach, caussation, damages (now) etc….
But this standard is not the hurdle for determining amount of damages
- Awarding damages only on probability is artificial and unfair - L Reid - 51 v 49% problem
So how should damages be awarded and assessed for future events/harms?
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Assessment of loss includes substantial, real risk or danger of future loss that may be less than
50%
““The innocent party should not bear all the risk of uncertainties in the future”
The standard for future possibilities: there’s a serious (not trivial) chance of the future negative
occurring.
Then it comes down to the calculation of damages based on the likelihood and future
costs.
In calculating the damages:
- Positive future events will discount the award
- Negative future events will increase the award
- Pay attention to Mitigation also.
RATIO
-
-
Speculative possibilities unsupported by expert or other evidence is not compensable, but substantial
possibilities based on expert or cogent evidence must be considered in the assessment of damages for
personal injuries litigation
Balance of probabilities is the evidentiary gateway (for liability), not the measure of loss (for damages) (i.e.
don’t have to prove probability of loss on BOP)
It would be manifestly unfair to make the innocent party bear the burden if they can only show there is a
49% chance of needing future surgery
If liability is established, where future harm is a real and serious possibility as flowing from that risk,
and is established on the basis of evidence, the jury or judge can award compensation accordingly
We do not have to prove on a balance of probabilities that the future harm will occur, just that there is a
reasonable chance of it occurring
Laferrière v Lawson, SCC, 1991
Topics:
-
Medical negligence, which is not found to cause death
Pernicious disease would not have been avoided with earlier detection
- Basically, she would have died anyways regardless of the doctor’s action.
- Keep in mind that private actions are not about punishing the defendant
- Also, usually there’s insurance involved.
Facts:
-
P took over lawsuit for deceased (who died of cancer)
Deceased had a lump and had it examined. It was found to be cancerous, but doctor failed to tell her.
Deceased lived for several years, developed further cancer and discovered at that time that she had been
diagnosed with cancer years before.
Issue:
-
Can an action succeed against a doctor even if it’s impossible to prove the fate of the patient would
have been different if not for the doctor’s negligence? YES, Court awards damages for mental
suffering ($10,000) and for diminished quality of life ($7,500)
Analysis:
-
-
Causation problem!
Even though no medical intervention could have prevented the patient’s death, the court found other
types of intangible losses, including:
- Quality of life, psychological well-being
- Loss of chance was quite real
i.e. loss of chance to make arrangements, live her life differently, etc…
Causation in law is not identical to scientific causation
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Statistical evidence of causation is helpful but not determinative
When causation of particular damage fails on the balance of probabilities, lesser damage may be found
to be caused on the same evidence
RATIO:
-
Remedies can compensate for intangible loss; A breach may not cause central loss, but it may exacerbate
other intangibles
Quality of life is compensable. This is a narrow decision that does not really apply outside the scope of
medical negligence case law
Quick Summary of Lecture 2 Cases:
Kienzel - secondary trans. are too remote; loss must be tied to K subject (in cases of econ loss)
Shrump v Koot - though less than probable, serious (non-trivial) possibilities for the future should be awarded
Leffiere - loss of chance includes more than straight recovery, the intangibles should be considered and measured
on the ‘but-for’ test
LECTURE 3
Review example of Kienzel’s principles:
Fact pattern:
“Abigail agreed to purchase a home on Apple Ave. In anticipation of her upcoming move, Abigail gives an
eviction notice to her tenant who resides in her current house on Birch Blvd. Abigail plans to quickly remodel
the house on Apple Ave and resell it for a profit. Unfortunately, the deal on Apple Ave falls apart because of
the fault of A’s agent.”
Can Abigail recover:
- I) the market appreciation of the house on Apple Ave?
- Yes, direct connection to the breach (the subject matter of the K)
- However, subject to:
the appreciation of the house she wanted to sell (Birch).
mitigation
- May also be subject to mitigation.
- II) the lost profit on the sale of a remolded house on Apple Ave?
- No, seems like a secondary transaction. Secondary transactions are not recoverable on pure
economic loss transactions. (the test is: but-for the breach I suffered this loss, AND THEN I
WOULD HAVE sold/bought/renovated……)
- III) the loss of revenue from the empty rental suite?
- Yes, following the logic of CoA in Kienzele (similar to giving up the parcel of farmland)
(But arguably this should require specific knowledge)
1.1.3 MITIGATION
Introduction
- Not a public law duty, it’s a private law duty.
- Mitigation: the duty to cut reasonably avoidable losses from another’s breach
- Onus is on D to establish that P missed a reasonable opportunity to mitigate
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This duty is basically a “favour” owed to the party in the wrong by the innocent party (based on social
public policy).
- What are those policy considerations?
A disincentive for injured parties to overload the defendant with more than they ought
to pay
An incentive for the injured party to put their skill and labour back into the market place.
[Janiak]: Janiak v Ippolito, SCC, 1995
Topics:
-
Mitigation in the context of personal injury (and in terms of chance/possibilities)
If the breach causes personal injury, should the unreasonable refusal of medical treatment affect loss
recovery?
Facts:
-
The plaintiff was injured, when rear ended by the defendant, and was unable to return to work.
The plaintiff refused to have the recommended surgery (scared), that may allow him to return to work.
- 70% chance of full recovery (recall Shrump)
Analysis:
-
-
Perfection is not required: P does not need to take all possible steps to reduce loss, just has to act like a
reasonable and prudent man in mitigating his loss (best choice does not need to be taken)
Burden of proof is on the D to show that the P could have or should have mitigated his loss
Question was whether the refusal of medical treatment was unreasonable:
- Considerations include:
Whether there is a general consensus from the medical community about the treatment
(i.e. do doctors agree its safe) – in general it is reasonable to refuse when there is
conflicting treatments
• So, when is it reasonable to refuse treatment?
Conflicting expert opinions
Confusing or unclear opinions
Degree of risk to the plaintiff; likelihood of success for a particular operation
• Example: Accident condition suffered to cause $100K of lost income per
year, injured person also told that you have a %70 chance of full recovery.
(Decision even if he did not follow the recommended treatment, he should
be getting compensated for the 30% risk that he’s incurring)
How much the operation will help
Thin Skull:
- If a person has an issue that causes him to act irrationally with respect to the refusal, this must be
considered re mitigation. In essence, if the P has psychosis causing him to say “no” to the
procedure, this is an application of thin skull (the psychological issue must be pre-existing and
triggered by the tort)
- A line must be drawn between a person who can make a rational decision and a person who
cannot. Not everyone with a psychological issue is a psychological thin skull
The court must consider whether the basis for the P’s reasoning was so faulty that it
qualified as a serious pre-existing psychological infirmity, as compared with a mere preexisting state of mind.
The test of “rationality” appears to imply a standard of being able to exercise judgment
in a proper or sensible manner
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If that is the case, then almost any pre-existing fear of medical treatment, such as an
extreme fear of anaesthetic, could be considered irrational – making it relatively easy for
a Pl to opt out of the duty to mitigate.
RATIO:
-
-
-
Mitigation Standard
P does not need to take all possible steps to reduce loss, just has to act like a reasonable and prudent
man in mitigating his loss
- Perfection is not required.
Consideration to determine whether the P acted reasonably:
- 1- Expert consensus: Whether there is a general consensus from the medical community about
the treatment
• Conflicting expert opinions reasonable to refuse
• Confusing or unclear opinions reasonable to refuse
- 2- Degree of risk to the plaintiff: likelihood of success for a particular operation
- 3- How much the operation will help
Burden of proof is on the D to show that the P could have or should have mitigated his loss
Future Unknowns
When thinking about future unknowns – no need to give value to the potentials (not an all or none case)
- If the P fails to mitigate in a medical scope, the damages are determined with respect to the
chance that the surgery would fail (Blair J, in Ont C.A.); In essence, if the surgery had a 70%
chance of success, then the D would be on the hook for 30% if the P fails to mitigate.
Psychological Thin Skull
Psychological thin skulls will be recognized as equivalent to physical ones, therefore the courts will not
always require that a person is reasonable in their decision to have surgery or not. However, a valid
psychological thin skull must be present before the accident and go to the patient’s ability to make
rational decisions.
- P is not held to an objective standard of mitigation if they lack capacity, but this lack of capacity
must occur prior to the accident
-
Wilson J., SCC. ...Summarizing case law...
i) timing – objective standard if psychological condition is not pre-existing
•
To escape the normal objective standard, (societal level objectivity) you need to
demonstrate a pre-existing psychological condition. Pre-existing in this context means
“latent within them”
•
You pretty much have to have a documented psychological pre-condition.
•
Post-accident condition held to objective std.
ii) nature - capacity for rational consideration
• Capacity must be above aversion, personality
Finelli v Dee, 1968, CA
Topics:
-
Repudiation of contract and the Duty to Mitigate
The reasonable response of the innocent party
White & Carter v McGregor
Facts:
-
The defendants had a written contract with the plaintiffs to pave their driveway.
The defendants called the company to cancel the contract after it was made but before performance
(sales manager agreed).
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The plaintiffs paved the driveway anyways, while the defendants were not at home, and sued for cost.
Issue of whether this contract was repudiated, or it simply amounted to rescission.
Held:
-
It was repudiation, but in this case, the Ps could not carry out the contract because it would involve
trespass on the Ds land. The Ps should not have paved and instead should have told the D they were
coming and sued for damages.
Analysis:
-
Repudiation
• If this was repudiation, P could complete contract and sue for damages
• Repudiation means refusal to perform the duty or obligation owed to the other party
Rescission
- No basis to enforce action on price because both parties agreed to cancel the contract and
unwind the terms
RATIO:
-
-
Where there has been a repudiation of the contract, and it cannot be carried out without the assent of the
breaching party, the innocent party’s right to choose between
- (1) continuing the contract and suing for the difference, and
- (2) stopping performance and suing for damages,
is limited, because without assent they cannot continue performance. This limitation does not diminish
the rights under the contract
Policy behind this is we do not want parties to knowingly provide wasteful performance when the other
party has indicated they are breaching
[Erie County]: Erie County Natural Gas and Fuel Company Ltd v
Carroll, 1911, CA
Facts:
-
The defendant wrongfully withheld a supply of gas needed by the plaintiffs for use in their business.
The plaintiffs acquired other gas leases, constructed new works to secure their supply of gas, and later
sold them at a profit.
Held:
-
No duty of the Def to compensate the P for additional lost revenues since all the damages have more or
less been mitigated nominal damages. (D got lucky)
Analysis:
-
-
-
In this case, the injured party did respond and mitigate
Ontario master’s ruling: 114K D$ for 129 total profits
- How do you justify the Ontario court ruling?
They awarded the $114K based on a direct application of the but-for test, they basically
said “well if they had received the agreed upon gas, they would have been able to sell
the gas on the market and made profit”
In general, an innocent party may substitute performance reasonably, but may not impose an
outrageous tax on the D
There were two elements for why the court refused to compensate the P:
- The substituted gas was actually cheaper then the originally contracted price (no damages)
- The constructed works, was sold at a profit. (So, no damages there either)
Reasoning:
The leases were only a substitute of gas from the defendants (“but for breach” would not have
purchased). It was part of the plaintiff’s duty to mitigate.
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Had the leases been more expensive the defendants would have been liable so long as they were
reasonable. Since the defendant would have borne that risk, it is fair to give the defendant “credit” for the
full savings achieved on the second transaction.
If one party does not perform his part of the bargain, the other party may do so for him, as near as may
be, and charge him the expenses incurred for doing so. The thing done must be reasonable with regard to
all circumstances.
Goods of a description and quantity similar to those contracted for can be recovered, but if he purchases
at a price equal to or less than the contract price, he can only recover nominal damages because there has
really been no loss suffered.
RATIO:
-
-
If one party does not perform his part of the bargain, the other party may do so for him, as near as may
be, and charge him the expenses incurred for doing so. The thing done must be reasonable with regard to
all circumstances. [duty to mitigate by performing contract or finding substitutes, but must be
reasonable]
Goods of a description and quantity similar to those contracted for can be recovered, but if he purchases
at a price equal to or less than the contract price, he can only recover nominal damages because there has
really been no loss suffered. [i.e. if mitigation results in profit or no loss nominal damages]
Mitigation & Time of Assessment of Damages
Asamera Oil Corp Ltd v Sea Oil & General Corp; Baud Corp, NV v
Brook
Topics:
-
Leading SCC decision on the basis of mitigation
Facts:
-
Baud, a subsidy of Sea Oil – lent the president of Asamera (Brook) 125K shares in Asamara (in 1957) –
to be returned 3 yrs later.
- Brook sells shares contrary to the agreement.
- In 1960 an injunction was issued to restrain Brook from selling the shares loaned to him. Brook
thought this meant as long as he held no less than 125K shares he was in compliance.
- Interestingly they did not ask for the shares back.
- Legal proceedings take 18 years to reach the SCC. Over this time the shares significantly increased in
value (however when they should have been returned they were low).
- They argued for SP.
Valuation:
- At the time they were to be returned (time of the breach) they were worth $0.29.
- At the time of trial (some 7 years after the breach), they are worth $6.50.
- Two years later, worth $46.50.
From CanLII Connect:
“Baud Corp (a subsidiary of Asamera) loaned 125,00 shares of Asamera to Brook, president of Asamera; he sold them in 1958
but was supposed to return them to Baud in 1960. Alta SC granted injunction against Brook forcing him to hold 125,000 shares.
Action taken in 1960 was eventually dismissed but another began in 1966 where Baud sued for damages for breach of contracthe held that Brook breached contract to return the 125,000 shares; price of the shares fluctuated wildly over the period since the
loan was made, but eventually their prices went up and Baud lost out on big earnings from not having the 125,000 shares.”
Issue:
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Held:
-
When is the time of assessment?
The loss of the P is the loss of opportunity to re-sell the shares at a profit. SCC confirmed the duty to
mitigate the loss which arose at the time of the breach. However, SCC set the time of assessment as 6
years later when the price was $6.50, but reduced the value based on failure to mitigate.
Analysis:
-
-
-
Rule: When does the duty to mitigate arise?
- 1- [Opportunity] The availability of a reasonable replacement
- 2- [Freed-up Asset] Whether you have the means to get the replacement?
The difficulty here is that there is no freed-up asset however, the court said that waiting 18 years is still
not reasonable.
So, they came up with a compromise crystalizing the claim at some reasonable point. They chose the
date of trial.
If you miss the opportunity to mitigate, then your damages stop at the crystallization date where you
should have mitigated (or litigated)
Based on that, the Court assessed damages at $6.50 but reduced it based on a failure to mitigate their
losses; assessed 7 years after the breach (date of crystallization of damages) based on the assessment of
the plaintiff’s circumstances and the practical considerations involved in replacing such a large number of
shares.
What are those circumstances?
- First: Purchase of replacement shares at the time of the breach would have been unduly risky for
the plaintiff given the speculative nature of the shares
- In 1967, the P was aware that the shares were not going to be returned and their value had
recovered and stabilized so that it could no longer be said to be unreasonable to require the
plaintiff to trade in the shares
- Thus, in Canada, the presumptive position is that, while damages are assessed at the date of the
breach, but courts have flexibility to take into account any special circumstances that make it
unreasonable for immediate mitigation to occur.
However, the general rule is still time of the breach
RATIO:
-
Duty to Mitigate Innocent party must take reasonable steps to mitigate his loss.
RULE: When does the duty to mitigate arise?
- 1- [Opportunity] The availability of a reasonable replacement
- 2- [Freed-up Asset] Whether you have the means to get the replacement?
RULE: Time of Assessment of Damages:
- 1- In Canada, the presumptive position is that damages are assessed at the date of the breach
- 2- but courts have flexibility to take into account any special circumstances that make it
unreasonable for immediate mitigation to occur.
- 3- If mitigation is not immediately available, the court will look at the circumstances and will likely
crystalize the damages at a certain date.
One option for the P to help crystalize the damages is to litigate (i.e. a requirement to
crystalize the claim arises even if there’s no ability to mitigate if the circumstances
warrant it).
If innocent party failed to mitigate/litigate, they can’t recover portion of loss that
mitigation or litigation would have prevented (i.e. no recoverable damages after the date
of crystallization)
Questions:
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What features of Asamera indicated against a duty to mitigate?
A: No freed-up asset
What features of Asamera indicated for a duty to mitigate?
A: policy based (passivity, risk of abuse)
What was the compromise requirement on innocent party? When did it arise?
A: crystalizing the claim.
LECTURE 4
1.2 Equity – Specific Performance
Class Notes:
- Equitable relief is given when common law remedies are inappropriate
- Sometimes Equitable remedies are orders in support of common law rights injunctions
- Sometimes they are conclusions SP
On SP:
- SP is the counterpoint or the alternative of the duty to mitigate
- Applying SP precludes the application of the CL and any of its filters (most importantly mitigation)
- If mitigation as a CL, then remedy is replacement performance…
- Equity proceeds under - inability to replace
-
The appeal of specific performance?
- Avoidance of CL rules
The danger?
- The application of CL rules much later in time (after the point when you should have mitigated)
Semelhago v Paramadevan
Topics:
-
The modern view of real estate & SP
Equity claim and Election (between SP and Damages in Lieu of SP)
-
How is property treated for specific performance?
- A: Historically property was considered always unique for SP purposes (i.e. irreplaceable)
What is the modern position?
- Property is not automatically qualified as unique
- These days: new builds and multiple-unit buildings are indications of items that will likely not
qualify for SP.
-
Facts:
-
Purchaser agreed to buy a house from the vendor for $205,000. (it was an empty lot for a new build)
Prior to the closing date, the vendor reneged on the deal and conveyed the house to the 3rd party.
The purchaser sued for specific performance or damages in lieu of. Both parties accepted the specific
performance as an acceptable remedy.
This is further complicated because the house in dispute increased $120,000 and the purchasers original
home increased $110,000.
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-
Class notes:
- At last second, before trial, P asks for damages in lieu of SP instead of a court order of SP. (i.e.
they elected to for D in lieu of SP)
Issue:
-
Under SP, should the damages in lieu of SP be reduced to account for the appreciation of the P’s own
house?
Held:
-
No, Damages should not be reduced to reflect the gain in value of the previous house.
Analysis:
-
In CL damages: Rationale for assessing damages as at date of the breach in the case of contract for the sale
of goods: claimant can purchase goods to replace what was lost by the breach and thereby put himself in
the same position as if the K was performed
- However, for SP time of the assessment is the date of trial “For all these reasons, it is not
inconsistent with the rules of the common law to assess damages as of the date of trial.” The
damages that are awarded must be a true substitute of specific performance. Technically
speaking, date of assessment should be date of judgment. Practical purposes: date of trial
because the evidence is given then.
RATIO:
-
Specific performance is no longer assumed in real estate cases (i.e. real property is no longer
automatically qualified as unique and irreplaceable), instead it must be evaluated on a case by case basis
Election: A party that is entitled to specific performance is entitled to elect damages in lieu thereof
Where an item is unique,
- Claimant can accept Def repudiation and sue for damages, under the CL
- or insist that the Def perform the contract – specific performance –
In this case, no duty to mitigate is required since the expectation is that the Def will
perform the K;
Also, no deductions!
Comments on the result:
- Windfall for the P
- Included full appreciation of the house that was to be purchased
- Included full appreciation of the house he kept. (this is because the equitable court order would
have been made at date of trial therefore all the appreciation on his own house would have been
there anyway – i.e. we are not concerned with any breach, there is no breach)
- Compare with CL:
If CL applied, then mitigation would have applied
If SP applied, mitigation is not required.
-
Key: this case was about the modernization of the SP rule for real property and the election for D in lieu,
and that it is a gamble (they won the gamble here because of the messy pleadings).
Southcott Estates v Toronto Catholic School Board
Facts:
-
School board entered into an agreement of purchase and sale with Southcott pursuant to which the Board
agreed to sell approx. 5 acres of land in Toronto to Southcott.
Southcott was a subsidiary, a single-purpose company with no assets except for the deposit paid for the
purchase.
It is wholly owned by Ballantry Homes Inc. Southcott used the land to develop residential housing.
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-
The agreement was conditional and closing dates were extended numerous times. Ultimately, the board
made a severance application late and it was impossible for the transaction to complete before the closing
date.
Southcott took the position that the Board was in breach of their obligation to use best efforts to obtain
the severance. They come to court asking for SP
- They argued that they have no funds to mitigate (shell corp) impecunity
Issue:
-
to what extent are they independent from parent corp? are they just simply trying to avoid private law
obligations?
HELD:
-
TJ:
-
Specific performance is not possible (not a unique property), but no way to mitigate, so they get
damages of $2M.
-
Specific performance is not possible (not a unique property), missed opportunity to mitigate
therefore nominal damages.
Uniqueness is about parcel not about financial opportunity
There were other parcels in the market in the vicinity.
Southcott admitted no attempt to mitigate
Therefore, D satisfied onus to show failure to mitigate on the part of the P.
The onus switches to the P to show that it was reasonable to not even look.
Asking for SP does not completely insulate the party from the duty to mitigate.
However, “A failed claim for SP may count as reasonable” depends on the
circumstances.
The case turned on the fact that it was a single-purpose corp
Single purpose corporation is no excuse not to mitigate (no corp veil)
• i.e. they can’t use this as excuse for lack of freed-up asset.
Other Ballantry purchases are separate (corp veil)
The other purchasers are also determinative because they show that the parent
company was able to find replacements, therefore:
• 1- Missed mitigation
• 2- no need for SP (replacements exist)
COA
-
-
RATIO:
-
-
Uniqueness is about parcel of land not about financial opportunity
On SP as an excuse not to mitigate:
- One is not insulated from the duty to mitigate by merely instituting and pursuing proceedings
for specific performance (the Gamble).
However, “A failed claim for SP may count as reasonable” depends on the
circumstances.
Before a party can rely on such conduct it must have some “fair, real and substantial
justification” for its claim to specific performance. (The traditional standard for
qualifying for specific performance)
Only where a party reasonably seeks specific performance will they be permitted to
postpone mitigation until trial.
ON single-purpose Corps:
- Absent evidence of actual impecuniosity, which would be one circumstance where it would not
be reasonable / possible to mitigate, finding that the losses cannot be reasonably avoided, simply
because the corp. is a single-purpose corporation within a larger group of companies, would give
corporations an unfair advantage. If single-purpose corps. Were not required to mitigate, this
could expose Def contracting with corporations to higher damages awards.
- Basically, using the impecunity excuse because of the thinly capitalized shell corp is not valid.
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Key Take-aways:
- Opportunity of replacement can often answer both Qs = i) no specific perf., and ii) missed mitigation
- How does result reflect the traditional approach to establishing a duty to mitigate?
- The same feature that tells us no SP (replacement opportunity), will also tell that you failed the
duty to Mitigate.
- i.e. A single replacement property can provide...
Is CL appropriate for P?
If so, no specific performance
Presumptive duty to mitigate
A failed duty to Mitigate
(commodity may be unique depending on the circumstances)
Sky Petroleum
Facts:
-
1970: Sky Petroleum entered into a K to purchase gas from VIP petroleum for a period of 10 years at a
fixed price
1973: Oil crises hits, and VIP tried to terminate on the ground that Sky had exceeded credit limits. Sky
wanted interlocutory injunction to lock VIP in and maintain the supply according to the K.
Held:
-
No specific performance where non-unique chattel; But Specific performance was granted here re
injunction and VIP had to continue providing gas under the contract (because market conditions kind of
made it a unique subject mater)
Analysis:
-
Contract was not advantageous to VIP because of the higher market price.
“Evidence that Sky has no great prospects of finding any alternative source of supply”; this would force Sky
out of business (irreplaceability, uniqueness)
- Under the ordinary contract for the sale of non-specific goods damages are a sufficient remedy; this is not
true here.
- Oil was an inherently non-unique item, but it was unusually scarce and the purchaser was vulnerable
Class notes:
- You’d think by definition, a non-specific good does not qualify for SP
- So, what qualified it here?
- There was no other replacement supply due to the market conditions (unusually scarcity)
- Damages are not sufficient anyways….because damages would give them money, but they would
have gone out of business by then (without gas supply) therefore, this a true equitable concern
(vulnerability of the purchaser)
Judge ordered an injunction because without equitable remedy, you won’t be around to
enjoy the common law damages.
- Criticisms?
- What if there is more to the story in the background? Like what if the gas is needed somewhere
else more urgent
- Why is this case filed under SP? Because of the rationale used to qualify the equitable remedy.
RATIO:
- If there is an inherently non-unique item (such as a commodity, non-specific good), it can still be held
unique, and attract equitable remedies (in this case interlocutory injunction) if there are other factors at
play
- Factors may include:
Scarcity
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Vulnerability of P.
Lumley v Wagner
Topic:
-
Specific performance for labour
Facts:
-
Def contracts to exclusively perform at P’s theatre and only at the P’s theatre.
Def refuses to perform and performs at another theatre.
Held:
-
Def cannot be bound to perform at the Pltf’s theatre, but can be prevented from playing elsewhere.
Analysis:
-
It goes against common law principles to force performance of a personal service contract; you cannot
force someone to sing at some place.
Can’t force performance of affirmative covenant
She can be prevented from singing at other theatres because she covenanted not to (negative covenant)
RATIO:
-
Personal service contracts: If the Def shows intention to break a negative covenant, an injunction will be
granted
Never SP for personal services
- Why?
Cause you can’t really compel people to do personal service. positive, mandatory
element
But you may be able to enjoin someone from performing the personal service
somewhere else. (non-compete) negative, prohibitive element
Warner Brothers v Nelson (Bette Davis)
Topic:
-
Specific performance for labour
Facts:
-
Bette Davis had a contract with Warner for exclusive professional services: “Will not render services for
any other photographic, stage, motion picture production or engage in any other occupation”
She declined to be bound by the contract and left the US for the UK. Warner Bros sued for specific
performance.
The contract included:
- (1) positive requirement for service
- (2) negative against competitor
- (3) Cannot work in another occupation (negative)
Held:
-
Parts of the K are enforceable
Analysis:
-
Court will not enforce a positive covenant of personal service
- Look at substance and not the form of the covenant
- Will also never grant negative covenant if in effect of doing so would drive the Def wither to
starvation (or remain idle) restraint of trade, OR to specific performance of the positive
covenant
- Other than that, will grant specific performance for negative covenants subject to judicial
discretion
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-
Here, the actress is not driven to perform the contract if the specific performance of the negative
covenants is awarded. Court says she’s smart, she can find other things to do if she wants.
Contract included:
- (1) Positive Requirement of Service
Never enforceable; cannot be forced to work re policy reasons
- (2) Negative Against Competitor
Sometimes enforceable; As long as the time is limited (cannot be indefinite)
- (3) Cannot work in Another Occupation
Never enforceable; this would force Bette Davis to work for the other party or die
RATIO:
-
Court will not enforce a contract requiring a person to work or preventing them from working in another
occupation (restraint of trade). But a negative covenant to prevent a person from working against the
competitor is often enforceable (as long as it’s not too broad)
REVIEW:
Why can specific performance enforce the delivery of a non-unique good?
- Equity relief due to common law inappropriateness to P. Irreparable to wait
How does the irreplaceable qualification apply to personal service?
- Irreplaceability could capture many personal services - policy prohibits application
How may specific performance apply to personal service?
- Injunctive relief to prevent service, not impel it
LECTURE 5
Class 4 Review:
- Equity allows us to leapfrog the common law
- Sky Petroleum allowed SP on a non-unique good because of scarcity.
1.3 MITIGATION, EFFICIENT BREACH, AND THE MEASURE OF
DAMAGES
Economic Efficiency discussion of Efficient Breaches (Pg. 158 – 162)
- Efficient breach
- Efficient breaches and SP
- Efficient breaches and Injunctions
- The theme here is that some of our common law rules and equity rules tend to be economically efficient.
Class Notes:
- Common law damages and efficient breach of contract better to pay than perform.
- Or – when is it socially useful to have a breach result in i) mitigation ii) and liability for expectation
damages.
- i.e. when do we, socially, accept that someone should breach their contract because it results in
better outcomes than if they performed.
TOPIC: Cost of Performance v Difference in Market Value.
- Usually in a dispute that involves work that is left undone.
- The focus here is on Common Law rule of compensation
-
Example: contract to build a fence
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-
When is the fence a fence (cost of performance)? Or an item attached to a house (diminution of
the market value of property)?
Radford v DeFroberville
(I got this from Online sources)
Facts:
Radford owned two adjacent blocks of land. He sold one to de Froberville on the condition that she builds an expensive
brick wall on the boundary. She failed to build the wall, and resold her property to a third party. Radford sued de
Froberville for damages for breach of contract. He claimed the cost of actually constructing the promised brick wall. De
Froberville argued that Radford was only entitled to be compensated for the reduction in the value of Radford's
property as a result of her failure to build the wall. This was less than the cost of actually building the wall.
Issue: What was the appropriate measure of damages?
Decision: Radford was entitled to claim damages equal to the cost of actually constructing the wall.
Reason: The objective of an award of damages is to put the non-defaulting party in the position he would have occupied had
the breach of contract not occurred. If de Froberville had performed the contract, the wall would have been built, and it was
the cost of this that Radford was entitled to claim
Topic:
-
Cost of performance from broken covenant
Facts:
-
The P sued for a breach of covenant for a sale of land, whereby the covenant was for the Def (purchaser)
to erect a boundary wall on the purchased property.
The Def did not erect the wall.
The cost of erecting the wall when it should have been done was $1,200; now (at trial) it would cost
$3,400.
The expert witnesses said the property could be more valuable without the wall, and certainly did not lose
any market value.
P elected for the cost of performance remedy.
Held:
-
Damages measurable at the date of hearing, not the time of the breach; unless the P ought to have
reasonably mitigated.
Court was satisfied that the P wanted the work done and would spend the amount awarded on the fence;
therefore, cost of work was awarded. (Genuineness)
Analysis:
-
Why does SP not fit in this case?
- Non-legal reasons: it would probably not be good to force your litigation opponent to perform on
the breach (covenant in this case)
-
Court says there are two lenses to remedy under common law:
• (1) Based on performance (or cost of performance)
• (2) Based on position (objective market value)
-
Within common law, we can proceed on the basis of giving economic substitute on performance that one
did not receive (interplay between fulfilling K terms and mitigation)
Essentially, P can claim economic amount for work to be done
The concern with cost of performance is that the P will pocket the money and get a windfall
-
Framework under Radford:
• Start with presumption that you get what you bargained for under K.
• However, Court can decline to uphold the K if they are concerned with unreasonableness (potential
for unfair windfall)
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-
Believability of investment and magnitude of the windfall are concerned; if magnitude of windfall
is high, objective criteria will be considered
Takeaway/RATIO:
- Both types of common law remedies are available (i.e. cost of performance && decline in market value)
FW:
- In CL, start with presumption that you get what you bargained for under K.
- If you claim cost of performance as a remedy, you should be ready to show that
- 1- you have genuine interest in the performance. (risk of P pocketing the Windfall)
- 2- that the cost is reasonable (Apply the test for reasonableness/objective)
- If P fails this test they get the depreciation in market value remedy (even if nominal)
- Here: The P had a genuine interest in the fence being built, so even though there’s a danger of a windfall,
the P had genuine interest in the performance and hence deserve the cost of performance remedy.
The Court used the following precedent, and distinguished it:
• Wigsell School for Indigent Blind
o Non-profit purchased property with view to construct building to care for vulnerable
o Vender agreed to sell as long as Def (non-profit) constructed a fence (covenant)
But then the project doesn’t go through
Vender sues on cost of performance in breach (because the non-profit didn’t erect
fence)
o Pretty clear the original intent for fence is no longer there
o The economic value of the breach to the Pl (fence but no school) is negligible (most don’t
care if the fence is there, or maybe they find it to be a negative)
o Therefore, the measure of loss for the Pl against the Blind School (non-profit) is market
value
In this case, there was no indication that the P had any genuine interest in the
performance of the covenant and therefore the risk of pocketing the windfall was
quite high.
o Risk of awarding damages in lieu of performance, the party may pocket it and then not use
the funds to carry out performance
o Distinguished:
In Wigsell, there was no genuine interest in constructing the wall, whereas in this
case there is.
•
Practice Tip: if you frame your opponent’s claim as a serious risk of a potential windfall, the court
may go with the remedy approach that you suggest (such the decline in Market Value).
Groves v John Wunder Co
Topic:
-
A contract between two construction companies, portion re land clearing left undone on P’s property
Construction contract + willful breach of K.
Facts:
-
Def contracts to lease a property from Groves. Property was to be used for a gravel plant.
Part of the deal is that the Def will strip and level off the land (reclamation).
The Def fails to do the reclamation work and the land is left broken and uneven.
Cost of doing the work is now $60,000 and property is only worth $12,160.
Therefore, cost of performing the obligation is higher than the value of the property.
Def refused to fulfill their part of the K, willfully breaching their K.
Issue: Is the P entitled to the cost of having the work done or to the difference in the property value?
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Held: P is entitled to the cost of work done.
Analysis:
P is not seeking SP.
Class Notes:
- If P gets cost of performance, P gets a huge windfall because chances are they will not spend the
money to perform the work anyways
- If the P gets market value, the Def will basically walk away without any purchase price, basically
they would have gotten the gravel use for free.
- The second outcome is worse (from a policy perspective) in the eyes of the court, so they went
with the large windfall. i.e. the court was concerned that they’d be letting parties out of their
contracts if the breach value does not register in the market.
Majority:
• This was a willful breach of contract and was done so in bad faith.
• Well settled rule: Where a contractor willfully and fraudulently varies from the terms of a K, he cannot
sue and have the benefit of the equitable doctrine of substantial performance.
o
I.e. the DEAFULT: Wilful breach, fraudulent breach + construction K = cost of performance remedy
Extra Notes from Majority
• Correct Doctrine: Cost of remedying the defect is the proper measure of damages
o Tort Law: Deterioration in value of property (that is all the P has lost)
o Contract Law: Where P’s part of the K has been performed
• The owner’s right to improve his property is not trammeled by its small value
• Re: Economic Waste rule: Only seeks to avoid wrecking physical structures unnecessarily
Minority:
• Unreasonable since it was $60,000 to reclaim for a $12,000 property
• There was no special personal use (no specific performance)
• Basis of recovery would be cost to Def, not actual loss to P
Minority says reclamation was secondary deal only
RATIO:
-
Default position should not be market value since this robs the P of specified quality; important to frame
actual loss in terms of overall purpose (what has the P lost?)
Willful breach + construction contract default is cost of performance remedy
- Even though there’s a clear risk of windfall in this case, the court went with that in order not to
encourage contract parties from willfully/fraudulently breaching Ks without attempting to do any
of the work (policy reasons)
REVIEW:
-
What will tend toward loss of market value remedy?
- When it does not appear that the P’s true purpose is performance, in part because it is a very
unreasonable investment, especially if commercial
What helps define cost of performance as a windfall for P?
- When it will not actually perform the work + involved a secondary feature of deal
- However, despite this Groves still awarded the windfall.
C.R. Taylor v Hepworth
Topic:
-
Loss of unused/unoccupied billiard hall
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-
Note: owner insured
Facts:
-
Fire started at Def’s premises (caused by the Def) and spread to the P’s vacant premises (billiard hall)
- Loss of unused/unoccupied billiard hall.
- Chances of re-leasing the premises were very low.
Issue: Should the P be compensated for rebuild of the premises OR for diminution in property value?
Held:
- P was entitled to diminution of property value only because it appeared as though the P was going to
demolish the property anyways, also the hall was not used.
Analysis:
• Diminution of property and cost of reinstatement both adhere to the same principle:
o Damages awarded have to be reasonable as between P on one hand and the Def on the
other
• Court finds that the premises is worth $42,500 and was worth $40,000 after the fire therefore
diminution of property was only $2500 (mainly the value of the land)
• Here, the P had no intention of rebuilding: they just wanted to hold on to the property for
investment purposes; the value of the land lay in the site, not in the building
• Cost of reinstatement would put the P in a better position than they would have been.
• Much of the focus was on the P’s intention: Shitty building burns down, is it fair that the Def would
have to pay for a new one?
o Reasonableness of the P’s desire to reclaim the property is the appropriate test
• Ultimately the Court finds that there was a small loss or even a benefit to the P because they did not
have to demolish the building now; the value was in the land, not the old building.
• P did not really lose the building, it was unoccupied and awaiting demolition
Take-aways:
- Since the building was unused, and was old and awaiting demolishing, awarding the high cost of
performance (i.e. rebuilding the building) to the P would be unreasonable. The P had no genuine interest
to use the building, or to rebuild it. Therefore, awarding the “decline in market value” remedy is
appropriate.
RATIO:
- This case is based on Tort not Contract
- But the award of damages still follows the FW in Radford still applies:
- Here, the intention of the P was the deciding factor
- Also, the awarding of cost of performance (replacement) would have been over-compensatory because
it would have put the P at a better position but-for the tort.
Ruxley Electronics v Forsyth
Facts: (A backyard pool not built to exact specifications)
- P contracted with the Def to build an enclosed swimming pool with a specified maximum depth for
$70,000.00.
- Contractor did not complete pool to specified depth (1 foot too shallow).
- Owner paid for various bills along the way and still owed $39,000 but refused to pay.
- Builder brought action for balance of contracted price and owned counterclaimed for breach of contract
-
At trial, it was held that contractor breached the contract and the pool was too shallow, but the breach did
not decrease the value of the pool so they got $2,500 for loss of amenity only.
-
Court of appeal said it was not unreasonable to award damages for the cost of fixing the pool
Held:
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-
Award of $2,500 upheld for loss of amenity; rebuilding the pool to increase the depth was unreasonable
and market value was unfair.
Analysis:
-
Three Options for Damages:
• (1) Cost of correcting(performance) / replacement – This may give a windfall to the Def, so must be
reasonable
o Where it is reasonable for the person to insist on reinstatement that will be the measure of
damages
o Personal preferences should count, but not when grossly disproportionate to ultimate
purpose
Here, no one would have spent that amount of money to fix the one-foot problem.
o To determine if reinstatement is reasonable, we must consider (a) if the plaintiff has a
genuine interest in doing the work (b) if doing the work is the reasonable thing to do
• (2) decline of Market Value of the Asset – But for the breach you would have had something worth
more money
o Issue is that this defeats the purpose of making your own specifications in a contract
o Here there would no measurable decline in market value based on the one foot.
• (3) Loss of Amenity – Damages for loss of enjoyment and not just decrease in business value; this acts
as a middle ground
o In this case, the cost of correcting is irrational, but the breach was also not trivial. P lost
enjoyment and should be compensated for the loss of the amenity
Test for Reasonableness (from Radford)
•
(1) Does the P have a genuine or serious intention of doing the work?
•
(2) Is carrying out the work on his own land reasonable?
•
(3) Does it make any difference that the P is not in occupation of the land, but desires to do the work for the
benefit of his tenants? (Not relevant here)
-
From slides
- When cost of performance is unreasonable and unlikely to be undertaken, it may be
characterized as not a true reflection of P’s loss (or punitive to D)
- We begin with presumption for replacement work, and personal preferences should count, but
not when grossly disproportionate to ultimate purpose
RATIO:
-
The addition of the 3rd branch of remedies (loss of amenity)
Also, when considering cost of performance remedy: Personal preferences should count, but not when
grossly disproportionate to ultimate purpose
Class Discussion
- Say something superficial went wrong in one of the terms of the K, should we be stuck between:
- A- performance costs (which would be huge), or
- B- market value diminution (which would be almost nothing)
The court here find a middle ground:
- C- loss of amenity! i.e. reduction in the value of the thing received.
Notes after the Case:
- What is the development added since such cases as Groves v John Wunder?
- Three alternatives for damages: Replacement Cost, Market Value, Amenity Loss?
The addition of “loss of amenity” branch
- Would it apply in Groves?
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-
It would be hard to apply the “loss of amenity” or “loss of enjoyment” when dealing with
construction contracts (industrial lots), may still apply. All depends on the fact.
LECTURE 6
TOPIC: Property Damage
Review of last topic:
- What will tend toward loss calculation on cost of performance?
Cost of Performance:
- It is a construction, building contract
- It is Plaintiff’s genuine purpose
- It is the primary part of the deal
- The D wilfully profited
- What will tend toward loss calculation on market value?
Market Value
- It is not the true purpose – pocket $ (lack of a claim of no SP)
- The investment would be grossly disproportionate or wasteful.
- More about imposing penalty on D that compensating P
- It is the secondary part of the deal
- Modern Relaxation (Ruxley)
- Third category for loss of amenity (intangible)
Sub-Topic: Valuing chattel, Valuing Depreciation, Trespass
- Chattels are different than land because there are likely replacements in the market (allows for direct
substitution, unlike old buildings for example)
Liesbosch Dredge v Edison S.S.
Facts:
-
Ships mooring got fouled by D who did not free them which carried the ship into open water where it sank
and was a total loss;
Replacing the dredger took a long time since it had to be shipped around.
In the meantime, P could not perform their contract to dredge the harbor and they were losing money
because of the property damage to the ship.
Issue:
-
Are the damages limited to the replacement costs of the ship, price of shipping to the same location and
interests? Or can lost profits be claimed as well?
Held:
-
In this case, damages should include the loss of or profits too. Lower courts erred in assessing loss as
simply market replacement value
Analysis:
Remoteness
• It could have been possible to replace the dredger without any delay had there been one nearby, but
there wasn’t so this possibility should be ignored.
• Compensation should not be denied on the grounds of delay
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Court Awards:
• Cost of new dredger,
• Cost of adaptation and modification,
• Cost of lost contract during period of delay,
• Cost of staff and instruments thrown away
Court Declines to Award:
• Cost due to appellant’s financial position (impecuniosity at the time)
o Additional contracts they could not obtain during the inoperative time were not recoverable
since they were too remote
o Limit on future earning to the next planned K; only things that are foreseeable
• Restores the value of the vessel as a “going concern”, at the time of the loss (i.e., vessel and business
use)
RATIO:
For Chattels (especially ones that are used in business as part of a larger project):
• Generally recoverable damages include:
o Market value of replacing the good, and
o Transaction costs, cost of transfer, modifications, etc.., and
o potentially can include lost profit if they were foreseeable (e.g. need specific contracts in place)
• Loss of profit can continue until point of mitigation.
o Lord Wright here also said but excluding any compensation due to P’s financial position.
o (However, this was overturned later) that is impecuniosity and financial position can actually
be used as an excuse for mitigation if it was foreseeable.
Class Notes:
- This case involves negligence causing physical harm
- Therefore, foreseeability plays a role
- Main issue is whether to include the loss of profit in addition to the ship replacement?
- Historically, the courts have excluded the loss of profit damages because it would be limitless
- Here, the court said that it can be included, but there has to be a specific contract for that profit.
- Fact dependent.
- Challenges in this case:
- 1- no immediate replacement
- 2- it is utilized in a wider project
- 3- impecuniosity of the P
[NOTES ON PAGE 391]
Notes – Review
- How could cargo profits be double recovery?
- Because the cargo carrying ability is already built in into the price (this reason is weak sauce)
- Why market value and specific modifications?
- Replacement theory
- Impecuniosity and mitigation?
- Financial position can be an excuse for no mitigation if foreseeable.
Sub-topic: Betterment & Depreciation
- Reasonable mitigation to rebuild business
James Street Hardware v Spizziri
Facts:
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-
Negligence of a welder destroyed a hardware building.
Tried to rebuild the store but had to comply with the new building code and therefore, could not rebuild
it exactly.
Built new building that was not exactly the same design as the old building, it was restored in a better
way
History:
-
TJ deducts ‘enhancement’, does not award compliance with new code costs, but rejects depreciation
Issues:
-
1- Depreciation and betterment
2- New code mandated costs
3- Inventory profits
Analysis:
• Each case turns on its own facts and the process of assessing damages should be a practical one
designed to do justice between the parties
o Rules applied should be responsible to the particular facts of the case; should not be
unnecessarily complicated or rule-ridden.
• [on new building code, added costs] From Harbutt’s Plasticine Ltd v Wayne Tank & Pump Co Ltd:
o Deducting the cost of modernizing replacement facilities is akin to forcing the P to invest their
own money in modernizing their facilities which may be highly inconvenient for them; and is
contrary to the restitution in integrum principle
• The P may wish their property to be in the same condition it was in before the loss, but this may cost
substantially more than the amount by which the property is diminished
• Reasonability of the P’s position is central to this analysis
• [on betterment] What if replacement leads to betterment?
o If replacement leads to betterment over mere indemnification, this is justifiable only if mere
indemnification would impose a loss or burden on the P which is unjustifiable.
o Otherwise the diminution in value is all that is claimable
• The D bears the onus to prove that indemnification bears the P no such burden or loss
• Court here does not deduct betterment due to an absence of evidence
RATIO:
• NEW CANADIAN POSITION – There will be a rebuild and the Pl will get a superior building post-accident
because you can’t build an “old building”. That’s inevitable. And having to meet new building codes may also
be more costly. You have to take the opportunity to upgrade/meet zoning bylaws.
o 1- UPGRADES: When we take opportunity to put in latest security/technology and we choose to
include that, this is VOLUNTARY (this should be subtracted because this cost is not due to the fault of
the defendant)
o 2- BUILDING CODES: These are MANDATORY. (this is not discountable)
o 3- DEPRECIATION: There should be an accounting for depreciation. But for the wrong, you’d be in a
worn building. (subtract how much the old building had declined in value) otherwise Pls would
get a windfall
Courts will now take down one side of the ledger and add to the other
But while Courts will discount depreciation from P they will also recognize that they lost
something further TIME WITH THEIR MONEY
o 4- TIME VALUE OF MONEY: (this gets added to the P’s compensation)
o i.e. They are upgrading earlier than they had to. We’re forcing them to use their funds 10
years earlier than they had to. They would have had that money for 10 years before they
would have put it into the building.
o 5- Inventory losses: (this gets added if applicable)
Class Notes:
- this case is very important, sometimes: if there’s something destroyed that had to be rebuilt.
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This case vs the billiard case: in that case, the P did not genuinely intend to use the building for business,
etc.. here, the P genuinely intended (and did) get back into the business this is why the court here
awarded the cost of replacement approach!
FW Note: always start by deciding whether the Cost of Performance branch applies or the Market Value
branch THEN IF the cost of performance apply the ratio in the case above.
(Trespass)
Kates v Hall
Facts:
-
P owned a 3-acre lot in Vancouver with a bunch of mature looking Hemlock trees shading a swimming
pool of his neighbour.
Def entered onto the P’s property and cut down 13 of the trees without permission/notice.
P brought action claiming the cost of replacing the mature trees ($210,000).
- There’s no guarantee the new tree would survive, Also they would require guywires that
anchored on the D’s property.
- The P is claiming replacement by the “express wishes” of the P under willful trespass i.e. to
exclude reasonability std.
Held:
-
TJ awards $21,000 for replacement trees, $13,000 for loss of amenities and $26,000 for punitive damages
(against the D);
CA dismisses appeal.
Analysis:
Court of Appeal:
- There was no loss of profit or change in value of the P’s property. P chose not to replace the trees and the
trees have no commercial value.
- The cost of meticulous restoration was patently unreasonable in the face of the loss in actual value of the
damaged property
- The chief loss was privacy for a bedroom on a property, and the P spent very little time there anyways.
- There were methods to restore the same level of privacy for cheaper; loss of trees did not detract from
the look of the property.
- P did not affect any restoration and it did not seem like they would unless the Def paid for it.
RATIO:
• Principle of reasonableness can be held to decide between meticulous restoration and reasonable repair
• Look at: Difference in cost and actual benefit to the P of both possibilities including actual use for the P of
the damaged property
• Courts may grant relief for loss of amenity where Courts don’t believe that you are going to use the $$ to
replace and you have not lost any market value; this is a way for Courts to come up with a number that is
fair even though it does not fall under a prescribed damages heading.
• Trespass and willful does not exclude objective std.
o Did result in punitive damages here.
• But, nor does it produce market value.
Class Notes:
- On punitive damages awarded:
- The court awarded that because it was very tied to the wilful trespass element.
- The main reason the court refused the full “express wishes” compensation is because the damages would
have been so unreasonable that they would border on punitive.
- Why market value wasn’t used?
- No loss in market value
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-
No actual use
indicating no intention to invest the money to restore the trees.
LECTURE 7
Review of last Class:
- Scenario: Ship used in business, is lost due an accident
- If I sold the ship right before the accident I would have received $20
- If I had the ship for a year after the accident I would have made $10 profit
- Can I get $30?
Answers:
- Generally You should not have capital value returned and at same time receive future proceeds
of using capital
- However, as per Liesbosch, you should be entitled to receive:
Market value of ship + the cost of getting the ship (transaction costs)
The loss of business* until you got another ship (if loss of business is certain, not too
remote)
Unless the breach would deprive you of ability to buy another ship based on
foreseeability (impecunity)
- Depreciation:
- Buying a comparable ship?
No. If there is a market with used
- Building a comparable ship?
Yes. Betterment, new for old
- Betterment:
- Solution to the problem of betterment (James Street Hardware)
Discount P’s gains in building improvement Deduct building depreciation
But compensate P for early investment Award time with rebuilding $
Sub-topic: When there’s a Benefit to the Wrongdoer
Whitwham v Westminster
Topic:
-
The ‘wayleave’ cases
- Way-leave cases: even without economic loss, Courts should protect against Involuntary Use
- Blend involuntary nature of tort with voluntary of contract
When market value does not adequately protect property interest
Facts:
-
The D company put coal waste on the Pl land for 6 years.
Caused a decrease in value of the land of $200.
Rent for those 6 years would have been $900.
P sued for an injunction and damages.
Held: TJ awarded damages including diminished value to the property as well as value derived by the Def.
Analysis:
Ps were injured in two respects:
• 1- Value of their land decreased (decrease in market value of property)
• 2- Lost the use of their land for 6 years when the Ds used it for their benefit (involuntary use)
Issue in this Case:
• The P did not lose much other than some loss of value to the property, but the Court must protect
against involuntary use
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•
Essentially the Court devises a hypothetical bargain if the parties had entered into a contract
Application:
• In this case, something intuitively wrong with only rewarding based on market value lost as this would
completely miss all the circumstances where there is no permanent harm
• In “way leave” cases, where one person has been using the land of another without their permission they
should pay for such involuntary use: recovery of gains
• Adaption of such cases to this situation allows recovery to be obtained for the decrease in value of the
land and the rental value (blurs involuntary nature of the torts with voluntary nature of the contracts)
RATIO:
• Where only one party has been obtaining a benefit from the use of the other’s property without their
permission, the trespasser will be liable for
o (1) any decrease in value of the land they caused, as well as
o (2) rental cost of the P’s land (in essence, the Court is hypothetically looking at what would have
been contracted if the parties agreed to do business together).
Wayleave is a hypothetical retroactive rent/bargain.
• This is not a traditional restitution situation as not all the profits from the wrong are being given to the
innocent party; but it is compensatory on a retroactive basis.
Wrotham Park v Parkside
Facts:
-
Def built 14 houses and a road on land in violation of a restrictive covenant with P (neighbor).
Claims that there should be no damages as the neighbour’s buildings do not decrease the value of the
land.
P claims for an injunction to have the houses demolished.
Held:
-
Common law damages denied because there was no diminution in value to the P’s land;
Equitable damages awarded equal to 5% of profit obtained by Def ($2,500)
Analysis:
-
No CL damages are awarded since there was no diminution in value to the P’s land. TJ refused a
mandatory injunction to demolish the buildings on policy grounds. The Def argued that if the injunction
was refused, then equitable damages should be refused as well
Court rejected the argument re equitable damages; damages should be awarded based on putting the Pl
in the situation they would be in had the covenant not be broken
To not break the covenant, the Def would have had to (1) not develop the land or (2) asked for
permission
Damages awarded equal to the amount that would have been reasonably sought by the P for
permission
Clean Hands principle applies
- There was an unreasonable delay on the P’s part; they could have informed various parties that they
would not consent to the development before it was developed, but they acquiesced to the development
- Equitable damages awarded in relation to nominal profit D obtained by building the building.
RATIO:
• The basic rule for damages for breach of contract is to award a sum of money to put the plaintiff in the
position he would be but for the breach
• Here, the Court considered three types of reliefs:
o (1) Injunction
refused on policy grounds
o (2) Award for diminution in value none sustained
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o
(3) Relaxation of covenant (decided to go with this one) basically they awarded damages
equal to the amount that would have been reasonably sought by the P for permission
(similar to way leave)
NOTES:
What relief can be granted
Injunction (equitable, discretionary remedy, requested by plaintiff)
o Such an injunction would restore the plaintiffs rights, however there are policy reasons not to issue it
Also not that plaintiffs knew the land was being offered for sale to begin with
Award for diminution in value
o In this case would be nothing, and is therefore not acceptable because it offends the notion that there
should be some damage where people break rules (don’t want people to rule break with impunity)
Relaxation of Covenant
o Take the approach of the way-leave cases and ask what the community would have agreed to as a
price to relax the covenant that amount would be award for damages
Would result in a fair result on equitable and policy grounds
o What would this amount be?
Plaintiffs claim it is proportional to development costs (£140K) No – too much
The proper amount would be a percentage of the developer’s profits (total gain was £25K)
Strand Electric v Brisford
Facts:
-
Bedford Theatre group where in negotiations with the D to purchase their theatre.
The Ps had lent the Bedford Theatre group a switchboard;
when negotiations fell apart, the D took possession of the theatre and refused to return the switchboard
to the P even after the P requested it be returned.
Held:
- Court granted the P a user fee/hiring charge for the 43 weeks that the Def held onto the switchboard.
Analysis:
• Default position of damages is the P recovering only the loss he has suffered; However where the Def has
obtained a benefit from his wrongdoing, he may be liable to account for it even though the P has suffered
no loss (essentially this is akin to rent)
• Court followed the principles in Whitwham – payment of a reasonable hire for involuntary use of the
property even though there was no loss on the part of the P
• The basis of this is that the wrongdoer cannot be better off by doing wrong than he would be by doing
right.
• In this case, the owner suffered no loss, but the wrongdoer had the benefit of the goods and therefore has
to pay for it
• Where the goods have been sold, the Def must pay reasonable hire up until the point of sale and then pay
for loss for conversion
• In this case, P entitled to 43 weeks of rent
RATIO:
• Where the Def has obtained a benefit from his wrongdoing, he can be made liable to account for it even
where the P has lost nothing and suffered no damages.
• This applies to land (Whitwham) as well as goods (present case). The wrongdoer does not escape liability
because of a failure to seek permission.
• In assessing damages for wrongful detention of a good, the Court will retroactively imagine the value that
the goods would have bene rented for (if you sold this permission, what would the agreement have
been?)
o DAMAGES INCLUDE:
Loss to the property in question, less reasonable wear and tear
Any increased loss to the P as a result of the detention including replacement cost if
necessary
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Possibly any profits made by the Def as a result of the detention
Time of loss runs from the moment the Def obtained possession, even if it was
reasonable that the period of time for inquiry into hire and/or ownership be granted
before hire would have begun
AG v Blake
Facts:
-
Def was an employee of the British Secret Service who betrayed secrets to the Soviets resulting in many
British Agents being killed.
The Def was convicted of spying but escaped to Moscow.
In 1989 the Def wrote an autobiography revealing information about his employment.
Information contained in the book was no longer confidential, but publication was in breach of his
contract as well as the Officials Secrets Act.
Crown claims all money received by the publisher on the basis of breach of contract.
Held:
Analysis:
Majority:
- Court of Appeal said there were 2 situations where restitution is available:
- (1) Where the Def has knowingly skimped on the performance of the contract
House of Lords did not agree because there are other ways to deal with skimped
performances
- (2) Where the Def obtained a profit by doing the very thing he contracted not to do
House of Lords said this one is too vague, different magnitudes where
confidentiality is involved
Application:
- The details and nature of the breach are no longer secret or governing themselves (too much time
lapsed)
- The confidentiality agreement in the original employment contract still applies (no fiduciary
agreement)
- House of Lords looks to the wayleave cases to indicate the damages for breach of contract are not
always compensatory; can be measured by benefit gained by the wrongdoer.
- When considered just, the Court should respond to breach of contract by granting the discretionary
remedy of requiring a defendant to account to the P the benefits received from the breach of contract
(should occur where there is a breach of confidential information from a non-disclosure agreement)
Dissent:
- Bad precedent and looks more like punitive instead of compensatory
RATIO:
• Restitution may be appropriate for breach of contract in exceptional circumstances (e.g. non-disclosure
agreement in an employment contract)
o Fiduciary breaches merit restitution
Here: Similarity drawn with breach of confidentiality agreements, and especially fiduciary
obligation - Crown has legitimate interest
o But only two general contract forms of breach previously recognized
1- Skimped performance
2- doing exact opposite of what was bargained for.
And only one of these makes sense
o Care should be taken to distinguish skimped performance v efficient breach, which is permissible
and does not open an accounting for profits
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•
When a just result for a breach of contract requires the Def to account his profits to the P and pay him
some/all, the Court may so order it
LECTURE 8
REVIEW: GoldiBlox Example: “Valuation of loss when market value is insufficient to protect property rights, and cost
of performance inapplicable“
- Beastie Boys complained about the use of their music in the GoldiBlox commercial
- What can the BB do?
- Maybe first ask for equitable remedy: injunction?
- If that failed, then you would consider the common law way:
Is there market value loss? Probably not that may undermine the value of their
intellectual property [lowest protection]
What about the middle ground? “Wayleave” that can take the form of reasonable
licensing fees [medium protection]
• It is a hypothetical retroactive rent/bargain
If that was not sufficient, then go the restitutionary way this can happen by statute
too [restitutionary protection]
Note - wayleave is a CL remedy in damages It does not work like equitable damages
of property right
CL compensates for breach
TOPIC: (Expectation Interest) Monetary Awards and Breach of
Contract
Fuller & Purdue:
- one of the most cited legal articles in history
- An exercise in legal realism; contrast of doctrinal concepts with underlying purpose
Three possible interest of contractual remedies:
- Restitution Interest: P, in reliance on the promise of the defendant, confers value on the defendant
but the Def fails to perform his promise. Object is to prevent gain by the defaulting promisor (prevent
unjust enrichment.) Unites two elements:
- (1) reliance by the promisee and
- (2) a resulting gain by the promisor.
(STRONGEST case for judicial intervention)
Class Notes:
- P Suffers a negative because of someone else’s promise. And, the other person gets rich.
- Historically, it was restorative (someone else has my money unjustly)
- Modern approach aims to enlarge the restorative portion to contain all of the defendant’s
profits.
Reliance Interest: P relies on the promise of the Def and changes his position. Damages awarded to P
to undo the harm caused by the reliance. Policy position to make the P in as good as position as he
was in before the promise was made. (STRONG case for judicial intervention)
Class Notes:
- Something deserving protection; we have acted in faith on the other person’s promise
- The negative doesn’t have to benefit the other person. It could just be wasted expenses (i.e. I
bought all these supplies on your promise)
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-
-
i.e. P suffered a negative, but no positive went to the Defendant. (such as failed delivery of a
machine)
Expectation Interest: Put the P in as good as position as he would have been had the defendant
actually performed his promise. Court may seek specific performance or award monetary damages
based on the value of the defendant’s promised performance. Here recovery is based on the loss of
an expectation.
(WEAKER case for judicial intervention, yet the default position)
Class Notes:
- The P did not suffer any negative per se, but they lost the future interest in a positive.
- “But for the breach, your position would have been X”
Most often, the court is trying to replicate through $ what the outcome of the K should
have looked like
Notes:
-
We’ve looked at restitution, next we will look at the other two.
I guess all of the above cases (since Radford) were about restitutionary awards
RG McLean Ltd v Canadian Vickers
Facts:
-
The Def sold a two-color press to the P to use in commercial activity.
The sale contract was subject to conditions restricting the liability of the seller.
After installation of the press, there were problems that were unable to be fixed.
D eventually offered to take back the press and refund the payments that had been made, but the P
disagreed as they had incurred $36,000 in expense / losses.
Analysis:
•
•
•
•
Breach in this case was a fundamental breach of a condition going to the heart of the contract
o The restricted liability clause of the seller is inapplicable; the machine never worked as contemplated
When there is a fundamental breach, the party is entitled to be put in the position had the breach not occurred
o In order to do this, need to look at where the Ps would be if there was no breach
Damages need to be assessed on the basis that the contract was still in force, the P is
therefore entitled to be compensated (subject to mitigation) to the extent that it would be in
approximately the same position as if it would have been if the contract had been performed
according to its terms
If the contract has been performed, and the profits had been earned along the way from use of the machine, the
P would have had to pay for the press and expenses along the way
Damages cannot be awarded for both expenses and lost profits at the same time because you would never have
profits without paying expenses (this is double recovery).
Application
•
If nothing had gone wrong, the business would have paid costs of purchasing and running the machine, and
would have expected profits from the sale of product (can have cost of machine OR loss of profits)
Mitigation
•
The P has a duty at some point to mitigate their losses; it was reasonable for them to try and save the deal but at
some point you know the machine does not work
•
Entitled to receive repair costs up until the point of mitigation, you are not entitled to run up the damages against
the Def once you know that the breach was fundamental
Re: Damages for future profit
•
Companies past indicates uncertain profits, no indication that the addition of this second printing press would
increase profits
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Proper Damage Assessment Will Include:
•
P is liable to pay balance of purchase price (it hadn’t done so) if it elects to assert a claim for damages for breach
of warranty in excess of the purchase price
•
No Damages after cut-off date for lack of mitigation
•
Loss of business profits award: ensure there is no duplication with items claimed for losses (i.e. expenses within
the plant)
•
Also: must ask if there was work sufficient to earn the profits claimed was in fact available in the periods in
question, and could have been obtained and performed by the P
•
Should take into account work that was actually done, so that any estimate of work which could have been done
but for the defects of the machine will not include the expenses and time of work actually done
RATIO:
-
Damages for future loss cannot be collected along with damages for expenses (one or the other)
Class Notes (Better notes than the above CAN segment):
- The first fork/question in the road is to ask whether the machine is:
- A- something to be sold (asset)
If asset, then it is totally valid for the P to ask for purchase price as a remedy
(restitutionary interest)
- B- used in the business (equipment)
If equipment, then the P can ask for expectation interest.
- On Mitigation:
- The loss would crystalize at the point of missed mitigation, when did that happen here?
When the P (purchaser) refused to give the machine back to the vendor. Why? Because
then they would have a refund and hence (freed up asset) to buy a new machine.
- On the core of the case:
- Headings of recovery:
1- Purchase price of the machine (rejected)
• Why? Because this is a machine used in a business and therefore, this heading
of recovery would not be consistent with the 3rd heading of recovery (loss of
profit / expectation interest).
• Otherwise, this is a totally valid heading of recovery.
2- Expenses/special damages (some awarded)
• You can’t claim regular expenses that you would have had to incur anyways
during normal business to generate the desired profit, and also claim lost profit.
• But you can claim repair expenses (those would not have happened but for the
breach)
3- Lost profits up until mitigation, and maybe a few days later to find a replacement
(awarded)
• When you use this head of recovery, you should still add the remaining asset
value at the end of the calculations (Baer’s observation).
Mclean Summary of Elements
Observation of Future Position
Lost Profit
Wasted expenditure
Repair costs*
Machine price
(Depreciated Machine)
Amount
- 500
- 100
- 100
- 500
- 200
But For
y
x
y
x
y
RATIO:
-
A P cannot claim purchase price of asset AND loss of profit they are inconsistent headings of recovery
Anything characterized as double accounting should not be awarded
- In this case, it was the request to award usual expenses in addition to lost profit.
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-
-
This is inconsistent since usual expenses are expected to be spent on route to making profit.
These expenses include the purchase price too (price of admission)
Don’t forget the remainder asset value (depreciated asset) - Baer
Ticketnet Corp v Air Canada
Facts:
-
Ticketnet entered into a contract with Air Canada to create and deliver software for ticket booking
(Ticketnet was paying Air Canada $2,000,000 to develop their software).
Air Canada wrongfully repudiated this agreement and refused to accept delivery of the software.
Air Canada got an injunction to force Ticketnet to stop delivering software.
American then purchased Ticketnet for $750,000 (the company, not the software)
-
Ticketnet sued Air Canada for breach of contract claiming:
- (a) loss of profits from the software sales and they could not mitigate because of the injunction
(b) Anticipated business opportunity
- (c) out of pocket expenses before and after the breach
-
Air Canada contended it was only responsible for diminishment of market value; contended the
assessment of the company was only $750,000
- i.e. AC argued that since TN was wold for 750K, and they only made that software, the value of
the software contract cannot exceed 750K. (company sale as value for the loss) [this is the loss of
market value approach]
- But this does not take into account the fact that the company was sold in financial distress (going
out of business sale) therefore this is not a fair way to valuate the loss….because the sale price
itself was affected by the breach.
Issues:
Problems of Valuation
i) Company sale value as market value for damages;
ii) the Trial court’s deduction of expenses
Analysis:
-
(i) Proper measure of Value:
Air Canada relies on the principal that the capital value of property reflects the present value
of future use, so that if complete compensation is given to Ticketnet for the value of the
software, there is no room for an additional claim
A party is not entitled to both the net asset value and the value of the business as a going
concern because the value of the business as a going concern reflects the net asset value
Court says TN is only seeking present value of its lost business concern, which was destroyed
by AC
- Held:
Here, forced sale price of the software, as a result of AC’s breach is not a good measure
of asset value; it was lower than it should have been. (fire sale conditions)
financially distressed Shareholders are not a reflection of breach value, esp. when
breach causes the distressed position
-
(ii) Discounting of expenses issue
- TJ subtracted out of pocket expenses as the “price of admission”,
but did he/she make TN pay for it twice? Yes (because they had already paid those
expenses)
i.e. Expenses of Ticketnet were deducted twice, once in the auditor’s loss of profits
estimate and again as actual expenses
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-
-
(iii) Valuing the future position (loss of opportunity/expectation) damages
- A party cannot claim loss of profits AND wasted expenditures
- Therefore, there are two ways, either:
1) Gross – Saved Cost;
OR
2) Net + Actual Cost
RATIO:
-
Uncertain future outcome analysis
Valuation via underlying share value: Sale of company under distress caused by the breach is not an
accurate reflection of asset value.
When dealing with assessing damages for future position (expectation of profit)
- First Step, decide whether the subject matter is: asset? OR future/business use?
- Second step
(if future /business use) 2) two valid means of building but-for future position
Gross revenue – saved costs (Top-down approach)
• i.e. Gross revenue – (purchase price + other regular expenses you would have to
spend)
• “saved” here means that these are costs you would have had to pay anyway
but for the breach, but you did not (thus you saved them)
Net profit + actual cost
• i.e. lost Profit you should have at the end + extra expenses you actually incurred
LECTURE 9
Review:
-
-
RG McLean:
- The difference between Asset Value approach v Use to generate Income approach
- Another lesson anything characterized as double accounting is not allowed
- Types of expenses recoverable:
Ordinary v additional expenses
Ordinary expenses are required to get to the breach
• Therefore, price of the machine should be included as price of admission since it
is needed to generate profit.
• Don’t forget to depreciate the asset though
Ticketnet
- 1- uncertain future outcome
- 2- Valuation underlying share value
- 3- Relationship between Revenue, Expenses, Profit.
Class Problem
see notes
TOPIC: Reliance Interest
•
Reliance interest: In relying on the Def’s promise to perform, the P has acted on his own detriment usually by
the outlay of some money
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o
•
•
E.g. while awaiting the completion of a transfer of title for a house, the P may have purchased fittings
for the house
Damages awarded for reliance interest:
o (1) As an alternative to damages for loss of the expectation interest; OR
Puts P into position he would have been if he had not entered into the K
If P made a profitable bargain, then P would not want to use this because it would prevent
from reaping benefits
If P made a bad bargain, this would protect him against the consequences of his folly
classic example in McRae
o (2) To complement damages for the loss of the expectation interest
Expectation interest puts P in the position he would have been in if the Def had satisfactorily
performed his K
Where reliance interest is used to complement the expectation interest, the object of the
award is the more effectively to put the P in the position he would have been in had the K
been performed
Reliance Interest as an Alternative to Expectation Interest:
o Losses other than expenses:
Reliance remedy will extend to cases where the P assigns some valuable property to or
performs some valuable service for another
o Overlap with Restitution Interest
P may confer something of value on the Def
o Time & Purpose of Expenses
In order to recovery compensation for the reliance interest, the doctrine of remoteness must
be satisfied
In the ordinary case of expenses necessary for performance, this requirement will always be
satisfied
Incidental expenses, expenses incurred after breach and expenses incurred before contract
are all remote and less certain
East Anglia v Reed
• A controversial L Denning decision in which an actor who repudiated was held to be liable for reliance
damages:
o i) including period before contract formation;
o ii) at the election of the Plaintiff.
• Therefore there’s a potential of election in UK,
o
o
o
“It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of profits; or for
his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss
of profits - or if he cannot prove what his profits would have been - he can claim in the alternative the
expenditure which has been thrown away, that is, wasted, by reason of the breach”. (L Denning)
If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was
concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would
reasonably be in the contemplation of the parties... when Mr. Reed entered into this contract, he must have
known perfectly well that much expenditure had already been incurred on director's fees and the like. He must
have contemplated… that if he broke his contract, all that expenditure would be wasted, whether or not it was
incurred before or after the contract. He must pay damages for all the expenditure so wasted and thrown away.
compare with US Restatement in Bowlay (next case)
When a party is better off because of the breach, P elected reliance interest instead of expectation interest.
Bowlay Logging v Domtar
Facts:
-
P Bowlay contracted with the Def Domtar to log timber.
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-
P underbid on the Contract for cutting/skidding logs. Def would pay for them and haul them away.
Domtar (D) breached this contract by failing to provide sufficient trucks to haul timber and could not
accept delivery of all the logs.
The P would have made a loss on the contract as a whole had it been performed.
P elected to terminate because of the Def’s breach and sue for damages to stop their poor deal that they
made.
- That is, P sued for breach of contract, claiming $125,000 amounting to expenses in partially
performing the contract.
- i.e. the P is suing for wasted expenditures (reliance interest) as opposed to lost profits
(expectation interest)
Held:
-
Only nominal damages could be awarded. A plaintiff was not entitled to damages on a basis which would
leave him better off than he would have been in had the contract been performed. The plaintiff would
have made a loss on the contract as a whole.
Analysis:
-
Bowlay wanted damages “but for the contract” and not “but for the breach” – essentially P wanted the
Court to enforce the contract as if the breach did not occur, not unwinding the contract
P cannot be put in a better position that it would have been if the contract were performed – default rule
is the expectation interest
Contract law awards damages for Def’s breach, not for the P’s bad bargain
Unprofitable venture that is injured is not precluded from recovering damages for the breach of contract;
if the loss was greater by reason of the breach than it otherwise would have been, damages are
recoverable.
In this case, if the contract was performed, Bowlay would have lost money, no evidence that Bowlay lost
more money due to the breach.
RATIO
-
-
The default rule in Canada is the expectation interest (i.e. a claim for lost profit)
- P cannot be put in a better position that it would have been if the contract were performed
Reliance is unavailable at ELECTION of P when D establishes likely (losing) outcome of K.
- i.e. the Court will not rewrite unfavourable K by undoing losses due to K
- Onus is on D to demonstrate a losing K
- Nominal damages will be awarded
However, added losses are recoverable
- i.e. If the breach actually resulted in additional losses than the contract then those added
losses are generally recoverable.
Note 335, re Omak Maritime Ltd.
- Repudiation at a time of higher prices and a claim for wasted expenditures
- Held: In total, if we are still better off due to the breach, then no expenses are recoverable regardless of
their value/price.
Sunshine Vacation Villas v Hudson’s Bay
Facts:
-
HBC promised Sunshine Vacations that they could operate travel agencies throughout their department
stores in BC if they set up in non-prime locations first before moving to prime locations.
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-
SV set up shop in the non-prime locations to start.
However, HBC renewed its contract with another travel agency for the prime locations.
Sunshine eventually shut down all locations after failing to reach a solution or a settlement with HBC
Analysis:
•
Trial judge says that HBC breached its contract with SV and SV was awarded damages amounting to
$176,000 for loss of capital and $100,000 for loss of profits; this was appealed
o HBC said that the award for loss of capital was wrong in principle because there were no lost
profits
o SV claimed that due to the breach they never had the benefit contracted for and should be
entitled to loss of capital and loss of profit
Appeal Reasoning
• TJ awarded an inappropriate blending of wasted expenditures and lost profits (double accounting)
Reliance interests: Where SV would be “but for entering the contract”
Expectation interest: (lost profits) where would SV have been but for the breach
• So, reliance is appropriate heading in the alternative, but not alongside of profit
•
However, wasted expenditures cannot be claimed to get out of a bad bargain
Onus is on the Def to show the P was in a losing agreement
Was the Bargain a Losing Bargain?
• Distinguished from Bowlay where they did not get reliance because the venture would have lost more
money if there had not been a breach
• Here
Unlike Bowlay, D cannot discharge onus of showing losing bargain for P
Yet, P cannot show that lost profits would have exceeded wasted expenditure, either.
The CA did award the lost expenses/capital (under reliance) even though it could have been
higher amount than the lost profit, why?
• because the future is too unpredictable in his K to award lost profits.
Application
•
Breach went to the root of the contract; after SV completed the non-profitable part of the contract, HBC refused
to let them into the prime stores for the profitable part.
•
Reliance is allowable if the contract is speculative and you could never look into the future (McRae)
SV did not prove that lost profits would have exceeded the amount of loss capital and therefore, the amount of lost
capital is the appropriate award of damages.
RATIO:
-
Where the breach went to the root of the contract to deny the plaintiff the opportunity to receive the
profits they contracted for, and the future profits they would have obtained are too speculative to
determine, the court may award damages for reliance interests.
- These damages would be the capital costs of the plaintiffs in performing their side of the bargain
until breach by the defendants. (wasted expenditures)
Review:
When is the reliance interest awarded in the alternative to expectation in Canadian law?
- Sunshine Vacations
When is the expectation interest awarded despite reliance claims?
- Bowlay
When is the reliance interest awarded in addition to the expectation interest?
- To complement the expectation interest in order to put the P back in the same position had the K been
performed (also when the breach results in additional reliance losses (Bowlay))
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TOPIC: Punitive Damages
- Additional. Non-commercial recovery under breach of contract
- Aggravated, True Aggravated, Punitive
Whiten v Pilot Insurance, 2002, SCC
Facts:
-
The home of the plaintiff insured was destroyed in a fire.
The Defendant insurance company refused to pay the claim and claimed arson despite there being no
evidence and the adjuster concluding it was accidental.
The D knew that based on the P’s vulnerable financial position they would probably accept a lower
settlement offer.
D refused coverage of 345K, P spent an additional $320K in legal fees
Dad (P) suffered frost bite
An egregious withholding of insurance coverage
Held:
-
The punitive damages of $1,000,000 were not disproportionate to the conduct of the insurance company.
Analysis:
-
Historical reluctance to equate contract recovery with anything more than P’s commercial loss
That is, a breach of contract could not be the basis of aggravated / punitive damages; separate actionable
wrong would be required. (like a tort wrong)
-
The court did express some Inflationary, Americanization fears – huge arbitrary awards based upon Def’s
deep pockets
-
In this case, breach of implied duty of good faith is a separate wrong
-
When considering whether punitive damages should be awarded look at the total compensation and then
ask if there is more penalty that should be paid:
- ASK: if there is a need for the three terms associated with punitive damages (retribution,
deterrence and denunciation)
Amounts must be rational and proportionate
In this case, 1 mill was not disproportionate to the conduct of the insured
RATIO:
-
Punitive damages are expressly non-compensatory and therefore are explicitly a windfall to the P.
Punitive damages can be awarded in cases where there is a need for retribution, deterrence and
denunciation. (1st value involves specific D, the 2nd and 3rd are social values)
- When
D’s behaviour is a flagrant wrong and offensive to justice… and
P is de facto public prosecutor; and
P’s compensatory loss is insufficient for public sanction
- then
awarding proportionate punitive damages is appropriate
- these are exceptional cases.
- Under contract law recovery, there must be a separate actionable wrong that exacerbates the loss
Class Notes:
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-
The P in essence assumes the role of public prosecutor in these kind of cases, where the Courts just want to
make an example of the bad behavior.
Alternate RATIO (from slides)
Punitive Damages (Whiten)
- Qualification - Hallmark descriptors of behaviour - coercive, heavy-handed, which offends society
- Quantification - The proportionality/rational connection requirement between entire award and
punitive objective
LECTURE 10
TOPIC: Non-Pecuniary loss
Review:
-
Historically, Punitive and Aggravated loss required a legal wrong in addition to contract breach.
- In (Whiten v Pilot) the additional contract breach was the breach of the implied duty of good
faith.
i.e. where is the independently actionable wrong? i.e. a breach of contract could never get you
compensation for intangible losses by itself.
What are True Aggravated Damages?
- An exacerbation of the damages due to a secondary reason.
- Examples:
- Doctor is negligent in diagnosing an injured knee (first wrong)
- Doctor also mis diagnoses the injury resulting in more damages (second wrong)
- This sometime gets confused with small (a) aggravated damages such as mental distress.
Fidler v Sun Life
Facts:
-
P worked as a receptionist and was covered by a group policy including long term disability benefits that
only covered her after the second year if she was totally disabled (i.e. unable to do any job).
P became ill and received long-term disability benefits for 6 years.
However, later she was informed that her benefits would be terminated because there was surveillance of
her doing activities.
Issues:
-
In addition to compensatory damages, should the P also get:
- Aggravated damages?
- Punitive damages?
Analysis:
Historically (Addis Jarvis Voris)
- Aggravated and punitive damages are not compensable on a breach of a commercial contract,
these damages needed a separate actionable wrong
- Unless they fit within the “peace of mind” exemption, that is contracts that are specifically about
peace of mind like vacation contracts, etc..
The Court here, however, clarifies the aggravated damages test in Canadian law
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-
They re-connect aggravated damages to the general Hadley foreseeability std.
What are the situations where aggravated damages arising from the breach of contract are awarded?
• 1- True Aggravated Damages
o Arises from circumstances that constitute a separate cause of action besides breach of contract
• 2- little (a) aggravated damages (such as mental distress) that arise out of Breach of Contract Itself
o Based on Hadley foreseeability test for contract damages
Mental distress arising from breach of an ordinary commercial contract will normally not
be within the reasonable contemplation of parties (foreseeability at the time the
contract was entered into)
However, foreseeability normally arises in relation to contracts intended to secure a
particular psychological benefit for the plaintiff (implied term that the contract is for the
personal state of mind)
However. notice how the court applies the test using:
1- In the contemplation of the parties at formation of K
2- Non-trivial mental distress (this element prevents mere hurt feelings in purely commercial contracts)
Application
• Purpose of disability insurance is to secure a psychological benefit that brought the prospect of mental
distress upon breach within reasonable contemplation of the parties at the time the contract was made
• Obviously non-trivial.
• Held: Mental distress that did occur was sufficient to warrant compensation ($20,000)
o In this case, the wrongful denial of the benefit was malicious and high-handed, but had been
reinstated by trial and was not a breach of good faith; therefore, punitive damages were not available.
RATIO:
• Recovery of small (a)ggravated damages for intangible benefits is allowed where there is foreseeability
that a breach would result in loss of such benefits.
o 1- But the benefit must be within the contemplation of the parties
o 2- Must no be trivial
Here: In this case (mental distress): psychological benefit was within the contemplation of the
parties on a disability insurance contract, and was obviously not trivial.
• No separate actionable wrong is required; loss of psychological benefit (mental distress) just has to arise
from the breach.
Side note: Examples of commercial contracts with foreseeable mental element
- Home owners’ insurance: commercial nature contract + there’s a contemplated peace of mind element to
buying this insurance.
- Disability Insurance
- Vacation contracts: primarily about peace of mind
- Employment contracts: commercial in nature + foreseeable mental element at time of dismissal?
Questions after the case:
- Why not punitive damages?
- Because there was no separate actionable wrong, egregious conduct
- How does this compare to Whiten?
- The conduct in this case does not rise to the level of conduct of the D in Pilot.
Summary (so far):
- Punitive damages requires separate actionable wrong, egregious conduct (Whiten)
- Aggravated damages require separate actionable wrong later altered in Honda, see below
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-
(a)aggravated damages such as mental distress do not require separate actionable wrong because they
were within the contemplation of the parties at K’s formation. (Fidler)
(wrongful dismissal)
Honda Canada Inc. v Keays
Facts:
-
Employee worked with employer for 11 years on assembly line and additional 3 years in data entry.
In year 11, employee was diagnosed with chronic fatigue syndrome (confirmed by doctor).
He went on long term disability. Independent insurer later determined the employee was okay to return to
work and benefits were denied.
Employee returned to work under modified duty, but continued to miss work.
Employer suspected the doctor did not independently evaluate whether the employee missed work due
to disability.
Employer requested the employee go to an occupational specialist, but the employee refused to meet
with the expert.
He was terminated.
Held:
-
Employee was wrongfully dismissed; reasonable noticed was 15 months. No aggravated damages as the
manner of dismissal was not egregious or a display of bad faith.
Analysis:
-
Historically, based on the Wallace case:
- The law is that bad faith conduct during the dismissal of an employee is still not a separate
actionable wrong and therefore no aggravated damages in order to get around this rule we
will just extend the notice period. (Wallace notice period damages)
-
However, here the Court extends Fidler to employment law in the scope of termination in bad faith
Breach of the duty to terminate in good faith can occur re:
- misrepresentations as to reasons,
- aimed at benefit avoidance,
- or damaging to reputation.
Here: there was no bad faith in the manner of termination.
RATIO:
-
This case added the idea that a second breach of the K itself can be the basis for big A aggravated
damages.
Mental damages are recoverable in employment K, but arises from the secondary breach (e.g. implied
duty of good faith in the manner of dismissal)
-
i.e. Employment contracts have the implied duty of termination in good faith
- Breach of the duty to terminate in good faith can occur re:
misrepresentations as to reasons,
aimed at benefit avoidance,
or damaging to reputation.
Class notes:
- This case opened up the idea that you can reward big (A) Aggravated damages based on breach of
contract and not necessarily from a sperate actionable wrong (i.e. tort) but from a second breach in the K
itself
- That usually happens when there are implied duties in contracts
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1- Employment contracts are famous for implied duties such as the implied duty of
termination in good faith.
2- Bhasin created a new implied duty (honest performance of contracts)
Sub-topic: Dishonest Performance
Bhasin v Hrynew
Facts:
-
C markets education savings plans to investors through retail dealers, known as enrollment directors, such
as B. An enrollment director’s agreement that took effect in 1998 governed the relationship between C
and B. The term of the contract was three years. The applicable provision provided that the contract
would automatically renew at the end of the three-year term unless one of the parties gave six months’
written notice to the contrary.
-
-H was another enrollment director and was a competitor of B. H wanted to capture B’s lucrative niche
market and previously approached B to propose a merger of their agencies on numerous occasions. He
also actively encouraged C to force the merger. B had refused to participate in such a merger. C appointed
H as the provincial trading officer (“PTO”) to review its enrollment directors for compliance with securities
laws after the Alberta Securities Commission raised concerns about compliance issues among C’s
enrollment directors. The role required H to conduct audits of C’s enrollment directors. B objected to
having H, a competitor, review his confidential business records.
-
During C’s discussions with the Commission about compliance, it was clear that C was considering a
restructuring of its agencies in Alberta that involved B. In June 2000, C outlined its plans to the
Commission and they included B working for H’s agency. None of this was known by B. C repeatedly
misled B by telling him that H, as PTO, was under an obligation to treat the information confidentially. It
also responded equivocally when B asked in August 2000 whether the merger was a “done deal”. When B
continued to refuse to allow H to audit his records, C threatened to terminate the 1998 Agreement and in
May 2001 gave notice of non-renewal under the Agreement. At the expiry of the contract term, B lost
the value in his business in his assembled workforce. The majority of his sales agents were successfully
solicited by H’s agency. B sued C and H.
-
The trial judge found C was in breach of the implied term of good faith, H had intentionally induced
breach of contract, and both C and H were liable for civil conspiracy.
-
The Court of Appeal allowed the appeal and dismissed B’s lawsuit.
Held:
-
There is a common law duty of honest performance under the broad umbrella of the organizing principle
of good faith performance of contracts.
Analysis:
• Cromwell J proposes ‘incremental’ approach
Result o i) Organizing Principle of Good Faith;
o ii) No General Duty of Good Faith;
o iii) Requirement of Honest Performance (an actual implied duty in every K)
•
•
General duty of honesty in contractual performance; parties must not lie or otherwise knowingly mislead
each other about matters directly linked to the performance of the K.
The new duty of honest performance should not be thought of as an implied term, but as a general
doctrine of contract law that imposes a contractual duty of a minimum standard of honest contractual
performance
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•
Doctrine applies to all contracts and parties cannot exclude it from operation (it can be expressly relaxed if
it still meets minimum core requirements)
• Duty of honest performance should not be confused with duty of disclosure or of fiduciary loyalty; a party
to a contract has no general duty to subordinate his/her interest to that of the other party
o However, contracting parties must be able to rely on a minimum standard of honesty from their
contracting partner in relation to performing the contract as a reassurance that if the contract
does not work, they have a fair opportunity to protect their interests
o That said, dealership agreements are not contracts of utmost good faith (such as insurance
contract) which among other things obliges the party to disclose material facts
Class Notes/RATIO:
- Before this case, a scenario like this would have had no contractual breach
- (RATIO) This case recognized the organizing principle of the duty of good faith in every contract. But
stopped short declaring it an implied duty. Instead it declared that the requirement/duty is of honest
performance.
- i.e. the implied duty of honest performance
- Honest performance more limited to not mislead or lie about one’s performance
- this creates a potential for a secondary breach in every K.
- Problems
- : how do you phrase the “but for” test in this case?
“but for the breach they would have been honest in terminating his contract””
- How do you value damages?
Could be difficult to articulate
Here: the Court just used a valuation of his business because they were sympathetic, but
it’s unclear how they got to this number considering he would have lost his business due
to non-renewal anyways. (breach or not)
Effects:
- Increases incentives for fair dealing amongst contract parties.
- But, arguably, decreases incentives for self-help
0856464 B.C. v. TimberWest Forest Corp.
Facts:
-
Good faith duty was express in the K
Timberwest terminated the K
- There was a memo that indicated that Timberwest wanted the K to end therefore they offered
nothing in the renewal negotiations.
P claimed breach re renewal renegotiation
- i.e. that the D negotiated in bad faith
- that is, they claimed a breach of the duty to negotiate in good faith.
Analysis:
-
Since good faith was explicit in the K, it is enforceable
- means the party must consider the other party’s interest too.
Here, the D breached that duty: because they were unreasonable in negotiation, and eviscerated purpose
of K’s renegotiation
- The D’s strategic change/memo were central to this finding.
Even if FG was not explicit, the Bhasin duty of honest performance would have obligated Timberwest to be
honest in their renegotiations.
What is the “but for the breach” test? here
- But for the breach….the renewal would have happened (Wait what!!!)
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-
The Court effectively created an objective standard for contract renegotiations…they basically said:
- Had you negotiated in good faith, you would have reached an agreement
- And these are the numbers you would have agreed to
-
But in assessing damages, the Court applied a form of discount to those numbers to compensate for the
fact that the Court is basically re-writing the contract.
Take-Away/RATIO:
- Good faith duty was express in the K
- But even if not:
-
This case would indicate that moving forward, the Bhasin honest performance duty means that every
renegotiation clause is de facto on a reasonable std.
Which means:
- This case adds a level of encouragement for contract parties to fair dealing on contract
renegotiation terms
- But it may also discourage parties from having good-faith contract renegotiation terms, for fear of
getting a deal imposed on them by the courts.
LECTURE 11
PART 2: PERSONAL INJURY
Class Notes:
- This section is like an island in the common law of remedies
- Usually, it is about catastrophic loss and the difficult fit with tort recovery.
Unsuitability of Tort:
1- Cost and expense of court proceedings
2- Fault requirement makes the awarding of compensation uneven sometimes when there is a slight
difference in the circumstances.
3- One-time, lump sum awards
4- Questionable policy efficacy
Therefore, Statutory schemes that are comprehensive and/or no-fault may be warranted.
Class Discussion:
- Recently there has been a push where legislation is displacing tort liability, and instituting no-fault
insurance schemes
- Areas that are out of Tort liability include:
- Workplace Accidents
- Automobile Accidents (although AB is still heavily dependent on Tort).
-
Also, it is important to think about
- who are the parties that are handling the claims,
- where the compensation is coming from,
- what kind of liability distribution is being achieved. (especially important if public funding is
involved such as public health care)
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Andrews
Significance:
1) Provides framework for tort recovery re personal injury
2) Provides perspective on Ps claims and choices
3) Establishes relationship between pecuniary and nonpecuniary awards for personal injury
Facts:
- 21-year-old was injured in a motor vehicle accident and was rendered a quadriplegic.
Analysis:
Headings of Recovery:
1- Pre-Trial Loss
a. Losses that already happened after accident and before the trial
b. Easiest head to recover by P
c. Subject to mitigation (reasonableness)
2- Cost of Care (details below)
a. This is the post-accident assessment of living costs
i. i.e…..the new negative the P confronts because of the accident
ii. The financial amounts that have to be spent to put the P in the same position but
for the accident
3- Lost Earnings (details below)
a. Income capacity for pre-Accident career assessment
b. The amount of money the P would have been able to recover/make but for the accident.
4- Non-pecuniary Loss
a. To compensate for the loss of “happiness”
5- Deductions, Accounting, One-time lump-sum payment reality
a. Dealing with the reality that we are awarding everything in one lump sum payment at a
single point in time.
Cost of Care
Issues:
- Choice of facility, Mitigation, and reasonability
- Andrews opted for individualized home care
- SCC said mitigation is out, i.e. you don’t have to mitigate loss when dealing with cost of
care.
Mitigation still applies however in the choice of procedure, minimizing the
damage/injury to the P (this is within the Pre-Trial Loss head of recovery)
- But reasonability is still required, for example opting for home care in the Bahamas is
not reasonable.
- The role of family in support
- The CA is essentially volunteering Andrews’ mother to help out in order to reduce his
recovery award.
- SCC said this is not even something to be considered.
• Family does not lessen Def’s liability (i.e. just because the ’s family is supportive
does not get the D off the hook)
• Family support may change
- Future government programs
- SCC this is not even something to be considered.
- Should normal expenses be deducted?
- These costs should be awarded (i.e. no deduction) under Cost of Care, and deducted
under the lost earnings heading.
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-
This is arguably preferable - since cost of care can represent new expectations, and the
earnings heading can reflect pre-accident position
Loss of Earnings
- This is where the normal costs (basic necessities) are deducted.
- Career projection income, earnings
- Negative / positive earnings-contingencies applied
Reality of one-time awards
- discount rate/inflation rate
- The SCC assumes the money will go into a fund, that would be invested therefore it will
earn money that if not accounted for, it would result in a windfall to the P.
- These earnings need to be accounted for in order to avoid that windfall.
- Inflation rate also needs to be considered
- Formula: projected rate of return – inflation rate
- taxation issues
- The courts just decided not to charge taxes during estimating.
- They will let the P pay taxes normally. (even if it was determined to be capital gains)
- lost years life expectancy
- SCC reduced the life expectancy by 5 years (lost years) because injuries of this type will
result in a shorter lifespan.
- expiration of the award.
Non-pecuniary Losses
- conceptual, personal, and functional in nature
- a shift from compensation for loss, award for solace
- The SCC argued that because:
- It is hard to quantify
- It can be limitless
This should not be based on compensation
- Instead this award is just an award in recognition of your intangible loss.
- Capped at 100K
RATIO:
-
The FW for the heads of recovery for personal injury (And associated discussion above):
- 1) Pre-Trial Loss
Def: losses suffered after accident but before trial.
Easiest to award because these losses wouldn’t have occurred but-for the accident
Mitigation: Subject to mitigation on choice of treatment/procedure (mitigation entails
following the recommended medical course of action) (Janiak)
- 2) Cost of Care
Def: This is the post-accident assessment of living costs, the new negatives that the P
confronts, the financial amounts that have to be spent to put the P in the same position
but for the accident
Mitigation: Not subject to mitigation
But subject to reasonableness (ex. Home care in the Bahamas)
Do not deduct normal living expenses here!
Role of Family? Should not be considered in deductions
Future government plans? Should not be considered in deductions
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-
-
-
3) Lost Earnings
Def: Income capacity for pre-accident career assessment, i.e. the amount of money the P
would have been able to recover/make but for the accident.
Earning capacity, career projects income
Normal living expenses are deducted here (to avoid double compensation)
But apply:
• Contingencies (deductions) see McCabe and Penso
• Rate of return on investment
• Inflation rate
Discount Rate Formula: projected rate of return – inflation rate
(Lewis)
• Discuss Taxation (SCC decided to not set rules of taxes and let CRA deal with it,
even if it was treated as capital gains) (Ontario v Jennings)
Apply Gross up to Cost of Care
Apply another gross up to Lost Earning capacity if in a jurisdiction that
mandates tax deductions on awards (such as AB)
• Lost years / expiration of the award
Life expectancy post-accident.
• Management fees (Mandzuk, Lewis)
factual assessment of need for investment assistance in circumstances,
which is largely a matter of mental competence regardless of accident
4) Non-pecuniary Loss
Non-compensatory in nature (because it would be limitless, hard to quantify)
Capped at 100K (in today’s money)
5) Deductions, Accounting
See lost earnings above
Lindal v Lindal
Topics:
-
The SCC’s confirmation/clarification on the nature of non-pecuniary damages, and the cap upon these,
from the trilogy
The public policy concerns re insurance in Canada are prominent
Facts:
-
Appellant claimed against respondent for personal injuries—extensive brain damage resulting in physical
and mental disability and emotional disorder—sustained as a result of the respondent’s negligent driving
of a motor vehicle.
The trial court awarded $135,000 for non-pecuniary damages, irrespective of the upper limit of $100,000
set by this Court in the “trilogy” cases, because the appellant in that court’s opinion suffered more severe
injury than plaintiffs in the “trilogy” cases.
On appeal the British Columbia Court of Appeal, discountenancing an alternative argument that inflation
favoured the award, allowed the appeal and reduced the amount to $100,000.
Issue:
-
The question was whether the Appeal Court erred in making the reduction.
Held:
-
Trial court erred in awarding beyond cap* based upon assessment of relative loss of plaintiffs across cases
- *In present day dollars
Analysis:
-
The function of this approach is about solace in place of irreplaceable / un-substitutable loss.
It is a monetary addition on top of cost of care / earning capacity to help with mental burden.
A new addition of recovery in recognition of insurmountable compensatory objective / obstacle
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-
Non-pecuniary heading is strictly non-compensatory since you cannot compensate for certain losses (i.e.
unlimited losses) and have to be restricted by public policy.
RATIO:
-
Conceptual, Personal, Functional approach to intangible personal injury
The award is strictly non-compensatory for public policy reasons, capped at 100K (you can award less but
not more)
Class Notes:
- SCC basically said, no! we really meant hard cap
- This approach is called the functional approach
- FW:
1- is this a catastrophic injury where it is hard to quantify the nonpecuniary loss?
2- if yes it is a hard cap of 100K. (the Andrews solace payment)
- Because this heading is non-compensatory
Question, would non-pecuniary damages be awarded to a plaintiff that is no longer sentient?
A:
- NO, solace needs to be able to be provided/received.
- But if there was a chance of recovery of mental faculties, the court will probably multiply the 100K by the
chance.
See Knutson v Farr
LECTURE 12
Review:
Andrews FW:
1- Preliminary costs: Consider any recommended medical course of action
2- Calculate Cost of Care: The post accident assessment for cost of living (private health + everyday exp.)
3- Calculate Lost Earnings: pre-accident estimate and pre-accident estimate of everyday expenses
4- Award 100K for non-pecuniary
Extra take-aways:
- Mitigation does not apply to cost of care (but exorbitant expenses are not reasonable)
- Family’s help does not lessen D’s liability.
Lindal the non-pecuniary heading under Andrews is non-compensatory, therefore apply the Functional approach
which is about solace as a substitute for incalculable loss. (cap is rule of law)
Discussion:
- Under tort law, it is said to be cheaper to kill than to maim.
- Common law historical about only pecuniary loss to estate
- Reasons: There is no non-pecuniary loss for a deceased person, and the major heading of cost
of care obviously does not apply
Sub-topic: Loss of Working Capacity / Earning Capacity:
Cooper-Stephenson
- Definitions and conceptions underlying earnings heading
- Why is “work” preferred to “earnings?
-
Because using the term “earnings” is too narrow (it only captures tangible economic receipt)
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-
-
Work involving a family or family business may not receive payment, but it has value
Individual capital has a value outside of the wage marketplace
Why is “working capacity” preferred to “work value”
- Because compensation should rest on what is actually lost, and that depends on what is likely to
happen.
Teno v Arnold
Facts:
-
The infant plaintiff was seriously injured when she was struck by a car driven by the defendant
Brian Arnold and owned by the defendant Wallace Arnold.
She had just purchased ice cream from an ice cream vending truck owned by the defendant company J. B.
Jackson Limited and operated at the time by its employee, the defendant Stuart Galloway.
After she had purchased her ice cream, the infant plaintiff ran out onto the road and was struck by the
passing vehicle.
Held:
-
Appeal allowed; damages fixed at $540,000.
Analysis:
-
-
At issue was the amount to award the plaintiff for her inability to work / loss of working capacity;
- should a convention amount be used? or should the child’s parent’s salary be used as a
benchmark?
- How to substitute for loss of earning capacity?
No experience, education, or work record, to estimate upon
The amount of $7,500 was adopted as the annual income lost by the infant plaintiff. There was no
deduction from this amount for the income tax which would have been payable.
A 20 per cent contingency deduction was also provided for.
The discount rate utilized was 7 per cent.
As I have said, I think we must make an award of some sum but we have no guidance whatsoever in the
fixation of that sum. It would seem to me that we are entitled to say that the infant plaintiff would not
have become a public charge. To award an annual loss of income of the sum of $5,000 is to make an award
of an amount which, in the present economic state, is merely on the poverty level, yet I cannot justify an
award based on an amount of $10,000 as did Zuber J.A. I think that we would be doing justice to both
plaintiff and defendants, and I find it equitable, to determine that the infant plaintiff would, at least,
have earned $7,500 per year for her business life.
RATIO:
-
In cases where it is impossible or very difficult to predict the loss of earning capacity of a P (due to factors
such as age, uncertainty of career, etc.) a convention sum may be awarded.
- But a parent’s wage can be used as guidance.
- And “justice to both plaintiff and defendants” should be considered.
- A spectrum, and perhaps the parent’s wages becomes more likely with age
- Income replacement is necessary, otherwise a plaintiff will have to draw upon non-pecuniary award for
basic needs
Class notes:
- CA awards the earning capacity payment based on her mother’s earnings, but with adjustment
- Insert decision slide
Notes After the Case:
- What if statistics are indicative?
- Compare previous case with Houle v Calgary(Child Earnings):
Factors: Youth’s school record, IQ; father’s occupation, education + income; the mother’s
education; birth order; family life stability
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This court used the child’s statistics to lower the earning capacity of the injured child.
MacCabe v Westlock
Facts:
-
Teenage girl was rendered a quadriplegic in an accident at high school accident.
Plaintiff subsequently graduated from high school and obtained bachelor of recreational administration
degree from university — Plaintiff was pursuing post-graduate degree in health promotion
-
Trial judge determined that plaintiff would secure employment in either area upon her graduation, have
employability potential of 50 per cent and be capable of 60 per cent full-time work —
Trial judge found that plaintiff would have been able to attain her pre-accident desire to become
physiotherapist
Trial judge concluded that it was inappropriate for court to play role in sanctioning perpetuating or
accepting realities of women's access to paid labour market and refused to adopt female specific
statistics
Appealed
TJ:
Issues:
-
1- Relationship between pre-accident vs post-accident aspirations
2- Gender discrepancies in earning capacity and contingencies
Held:
-
Appeal allowed; earning capacity award was reduced
Analysis:
-
-
Issue 1: relationship between pre and pos accident aspirations:
- The Plaintiff’s pre-accident earning capacity was not in dispute
- Afterward, her employability was reduced, and she would only work until the age of 52
(compared to 62 pre accident)
- The Court compared her pre-accident aspirations to become a physiotherapist, to her postaccident actual academic achievement
- And then awarded the difference in value (because this is the responsibility of the Def), and this
difference includes:
The difference in earning years
The difference in earning level between the two careers
Issue 2: gender-based discrepancies
- Two issues with earning potential were raised re gender:
Income Level
• TJ explicitly ignored reality of gender-based pay discrimination
• Male earning data was used to calculate the award and the appellants said this
was inappropriate because it unrealistically inflated the Plaintiff’s earnings
• Charter should be used to interpret common law principles, but Court said only
to the extent that it still allows tort laws’ goal of compensation to function
Contingencies (interruptions to work, etc..)
• Additional contingency for women is children; lowers the amount of money
available re earning capacity
• Applying male contingencies ignored the Plaintiff’s stated desires of having
children
• The Court awarded:
No pay reduction: because stats show similar pay for male/female
therapists.
Higher contingencies for female therapists (based on stats)
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•
The Court grappled with the idea of inequality in the era of the Charter versus
statistics and the idea that the P should be compensated according to restitutio
in integrum and concluded that they can’t overturn the latter.
• The Court also argued that Discriminatory group classifications are already
permissible in some contexts when descriptive, e.g. insurance!
The question remains: If restitutio in integrum has to prevail, how may equality
nonetheless factor into award?
• i) actual pay equality - eg, collective agreement
• ii) statistical trends, which should be extended for life of award
RATIO:
-
-
-
1- Relationship between pre and post accident career aspirations:
- Award damages based on:
The difference in earning years
The difference in earning level between the two careers
2- Gender-based discrepancies in pay and contingencies:
- Charter values do not overcome the long-established common law principle of restitutio in
integrum, why?
(i.e. it is not the place of the charter to legislate change)
Because inequality is already imposed in the marketplace such as auto insurance
Therefore consider:
Stats for pay (i.e. whether male and female workers in that space get paid differently)
Stats for contingencies (i.e. whether male and female workers in that space have
different contingencies)
The actual stated desire of the P for having children, etc…
Then decide which table to apply
• No parental leave = male table (regardless of P’s gender)
• Parental leave = female table (regardless of P’s gender)
See factors in Penso, especially:
• Be Careful: if there is a gender-based pay gap be careful not count the
contingency twice (once under contingency, and once under the lower pay
itself)
the case also stands for the proposition that: as time progresses, the P’s plans and actual progress through
career itself will affect the assessment of damages (may reduce the liability of the D).
Sub-topic: Contingencies
What are Contingencies?
• Most earning capacity and cost of care awards deduct a specific percentage to account for contingencies
• These are used to represent the possible changes in circumstances for the plaintiffs (e.g. unemployment,
illness, pregnancy, accidents)
Penso v Solowan
Facts:
-
The plaintiff was injured while riding as a passenger in an automobile.
She was 38 years old. Her injuries were severe, leaving her with residual effects which prevented her
ever earning an income and had a lasting effect on her lifestyle.
At trial the judge awarded her $22,500 for non-pecuniary loss and $17,500 for loss of future earning
capacity.
She appealed the amount of both awards.
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Held:
-
Appeal allowed; award for non-pecuniary loss increased to $60,000; award for lost earning capacity
increased to $75,000.
Analysis:
• The trial judge erred in holding that he had to make a contingency allowance of at least 70 per cent for
loss of future earning capacity.
• Contingency factors should be determined on the basis of the evidence in each case. It was considered
that, in the absence of unusual factors, 20 per cent was the maximum deduction.
• It was also felt that actuarial advice should be relied on whenever possible, and that the judgment should
express the evidentiary basis on which the contingency allowance was made.
• While some deduction might be made for the possibilities that the plaintiff might have sought to live on
welfare, or have found a lasting relationship with a man, the court had to approach the calculation on the
basis that the plaintiff would not have been a public charge had she not been injured. The loss of future
earning capacity was raised accordingly.
• In summary, the above cases appear to set out the following guidelines:
o (1) The courts are not justified in applying automatic contingency deductions.
o (2) The courts should avoid making large contingency deductions which are not justified by the
evidence.
o (3) Past experience has shown that if there is to be an error in the amount of the award, it is likely
to be one of inadequacy.
o (4) If the trial judge, after reviewing all the evidence, reaches the conclusion that the award is
inordinately high or low, he may make an upward or downward adjustment.
o (5) Twenty per cent appears to be the maximum contingency deduction in the absence of unusual
factors.
o (6) Contingencies are susceptible to more exact calculation than is usually apparent in the cases.
o (7) Actuarial advice is very helpful and should be relied upon wherever possible.
o (8) The reasons for judgment should express the evidentiary basis upon which contingency
allowances are made.
RATIO:
• Contingencies:
o A) Be Careful income projections may already account for much of normal work
interruption (so be careful of double contingency accounting)
o B) Not Automatic should be based upon particular context
o C) preferable if actuarial or evidence based;
o D) judge has wide latitude to treat as impressionistic tool;
o E) may be positive as well as adverse
o F) errors tend to inadequacy of compensation
o G) should be based on:
The patient’s actual goal
Evidence based data to calculate rates/quantums
Class Notes:
- Dickson J.’s criticism:
- We should consider positive as well as negative contingencies. (and often they are too high)
- they are usually automatically applied, but an evidence-based approach is preferred.
- Therefore, this historical 20% should not be used. Instead it should be based on two things:
- The patient’s actual goal
- Evidence based data to calculate rates/quantums
LECTURE 13
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Review:
-
Teno v Arnold: the difficulty of assessing loss of income for a disabled child
-
McCabe v Westlock,
- issues re gender:
Income level
Contingencies
- Held:
Charter values cannot overcome basic common law principles, nonetheless:
• Statistical trends should be integrated in awards moving forward.
• Inequality is produced by the market (not the law), Ps can build equality into
their plans
“my job does not have a gender pay gap”
“before the accident, I do not plan to take childcare time off”
On contingency:
• We can use the male/female contingency tables:
No parental leave = male table (regardless of P’s gender)
Parental leave = female table (regardless of P’s gender)
Careful: if there is a gender-based pay gap be careful not count the contingency twice
(once under contingency, and once under the lower pay itself)
McCabe also stands for the proposition that: as time progresses, the P’s plans and actual
progress through career itself will affect the assessment of damages (may reduce the
liability of the D).
Toda’s lecture:
- Lost years
- Discount Rate
- Management Fees
- Taxes
Sub-topic: Lost Years
- When the post-accident life span is less than the pre-accident retirement age there is the potential for a
-
windfall to the plaintiff’s estate if expenses are not deducted.
- Pre-accident 65 retirement age
- Post 40 life expectancy
This introduces a deduction from lost earnings to account. Usually 30-50%. Sometimes higher if a savings
estimation is used.
Why is this not in the Andrews framework?
- This discount is only applicable/appropriate if ordinary expenses are not already deducted.
Therefore:
- If the method is New Cost of Care + Total Lost Earnings and then there should be a deduction
for lost earnings during lost years
- If the method is Total Care + Earnings - Minus Ordinary Expenses, then no deduction is
necessary (this one is Dickson’s approach in Andrews)
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Sub-topic: Discount Rate
Lewis v Todd [1980] 2 SCR 694
Facts:
-
A police officer was killed in the line of duty; damages were awarded and at issue was the discount rate to
be made. Trial judge awarded $195,000 with no deduction made for income tax.
RATIO:
-
Reality of lump sum award
Discount rate is a factual assessment, not rule of law nor constant rate
Formula (Real rate of return) = Projected Investment Rate of Return - Projected Inflation
- External, legislative guides, etc.
Class Notes:
- Stop using 7% because you saw it in a previous case
- This is a factual investigation
- Ps would want low discount rates.
Sub-topic: Management Fees
- Investment advice costs money
- Normally via a lump sum addition (Lewis v Todd)
- Sopinka J. in Mandzuk; factual assessment of need for investment assistance in circumstances, which is
largely a matter of mental competence regardless of accident
Some courts have rejected management fees because it is assumed that added investment gains can cover
the investment fees (e.g. MacCabe)
Class Notes:
- If they lack capacity to make investment decisions they require management fees (whether that was
caused by the accident or not)
- These days, it would be a coin-flip as to whether you get them.
-
Sub-topic: Taxation
Ontario v Jennings
Facts:
-
Plaintiff in an action for damages for personal injuries was mentally and physically completely
incapacitated;
he would have to spend the rest of his life, which was estimated at 5 years, in hospital.
The trial Judge, in assessing damages, calculated the loss of income on the basis of plaintiff's net income
after income tax.
On appeal by plaintiff, held, no deduction on the basis that income tax would have been paid should have
been made.
No foundation had been laid for it, since there was no agreement between counsel that the award would
not have been taxable.
Crown was not a party to the action, and there was no evidence as to any investment income of plaintiff.
Held:
-
Appeal dismissed. The deduction for estimated future income tax should not be made as it was highly
speculative and was not an element of cost in the earning of income.
Analysis:
-
Damages should, so far as any monetary award can do so, restore the plaintiff to the position in which he
would have stood but for the defendant’s wrongdoing. On this basis they should represent compensation
for loss of earning capacity and not for loss of earnings.
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-
In a case of personal injuries, what the plaintiff has lost is the whole or part, as the case may be, of his
natural capital equipment and to tax him on this is contrary to generally accepted principles of taxation.
- In essence, the award was not taxable because compensation is for capital lost (loss of earning
capacity) and is not for lost earnings.
RATIO:
-
Tax should not be deducted from loss of earning capacity estimates.
- Gross up for Cost of Care (if applicable)
- Another gross up for loss of earnings capacity if the jurisdiction mandates tax deduction.
Class Notes:
- The court decided not to step in and act as CRA, they let the funds go to the victim and the victim would
pay later at capital gains rates (which is OK)
- Problems:
- 1- Cost of Care portion of the award should not be taxed!
So, the courts came up with a Cost of Care gross up.
- 2- Keep in mind that some jurisdictions mandate an income tax deduction for damage awards
received from some accidents (example: AB Insurance Act mandates income tax deduction on
automobile accidents)
Solution: another gross up
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PART 3: Equitable Remedies
Introduction to Equitable Remedies
- The historical role of Chancery; Substantive differences w CL
- Equity more discretionary in articulation of remedy
- When the CL is inadequate or inappropriate
Judicature Act, AB
Equitable relief
• 16(1) If a plaintiff claims to be entitled
(a)
to an equitable estate or right,
(b)
to relief on an equitable ground
(i)
against a deed, instrument or contract, or
(ii)
against a right, title or claim whatsoever asserted by a defendant or respondent
in the proceeding, or
(c)
to any relief founded on a legal right,
the Court shall give to the plaintiff the same relief that would be given by the High Court of Justice in
England in a proceeding for the same or a like purpose.
•
Damages instead of injunction, specific performance
19 In all cases in which the Court has jurisdiction to entertain an application
(a)
for an injunction against
(i)
a breach of a covenant, contract or agreement, or
(ii)
the commission or continuance of a wrongful act, or
(b)
for the specific performance of a covenant, contract or agreement,
the Court if it thinks fit may award damages to the injured party either in addition to or in substitution for
the injunction or specific performance, and the damages may be ascertained in any manner the Court may
direct, or the Court may grant any other relief that it considers just.
We will look at two areas:
- When equity provides a distinct remedy from the CL
- When equity is protective or supportive of a CL right.
Main Types of Injunctions:
- Temporary
- Interim (Only valid for a specific time period)
- Interlocutory (until trial)
- Permanent
Also
- Prohibitive
- Mandatory (order for a person to take positive action)
Elements to justify an Injunction
1) substantive cause (the right);
2) inappropriateness of substitutive relief by CL (irreparable harm);
3) balance of factors and fairness (irreparable to whom?)
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Key issue to determine the inappropriateness of the CL remedy, is the nature of the harm
Sub-topic: quia timet (since I fear of future injury)
•
•
•
Quia Timet injunctions are provided where a plaintiff seeks injunctive relief before a wrong has been
committed
Common law requires damages to actually have occurred before we have access to damages
Think: One-time harm that would render a subsequent trial “far too late” once the harm occurs, there
is no way to guess “what would have been”
Fletcher v Bealey
Facts:
-
Plaintiff complained that the Def was placing “vat waste” upstream of his land on the river and that over
time it would drain into the river and impede his trade of paper manufacturing.
The Def claimed that none of the waste will end up in the river.
Held:
-
The quia timet injunction was not allowed; danger was not imminent enough.
Analysis:
-
What are the requirements for obtaining a quia timet injunction?
• (1) If no actual damage proven, P must prove real strong probability of damage to occur in the
future
• (2) Apprehended damage must be proven to be substantial (almost irreparable)
• (3) Must be an imminent danger
o Must be such that without the quia timet injunction, the plaintiff would not be able to
protect themselves;
o probable harm that will not occur right away is not appropriate to fulfill this requirement
Application
• Plaintiff did not show imminent danger;
o the damage would not occur within 10 years;
o additionally, the Court was optimistic that something could be developed to prevent the
damage from occurring since the damage would not occur for a long time.
The risk was significant, but not imminent and by the time the risk materializes, there
may be a way to deal with it.
RATIO:
- Injunctions may be granted for anticipatory problems when it is more appropriate and cost effective to
prevent at this point, rather than waiting for unpredictable damages later.
- A fear of a one-time serious harm is more likely to engage an injunction than a compounded incremental
danger over time
- To sustain a quia timet action, P must show:
- 1- substantial harm, and
Substantial means almost Irreparable in nature
Irreparable the insufficiency of the CL to address it.
- 2- Imminent danger
Imminent means not too far into the future
About to occur
Not premature
• Factors that affect imminence:
Possibility of technological advances
Possibility of regulation changes
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Incremental damages over time (applies to nature too)
The availability of Injunctive relief in the future (app. to nature too)
The availability of common law relief in the future (app. To nature too)
Class notes:
- The right here is not in question. The harm is in question, it hasn’t happened yet.
- No CL remedy because there is no infringement yet.
- Two requirements:
- Time: imminent danger
What would stop it from being imminent?
• other intervening factors that will stop the harm from happening.
Technology advancements
Regulation, etc..
Or just come get the injunction later when the harm is imminent.
Or CL can take care of it when the harm happens
-
Extent: substantial harm (irreparable in nature)
Overwhelming in a way that you will not rebound from.
What would stop it from being irreparable? Incremental damages, that can be remedied
by CL when they occur.
So in this case:
Application is premature...
i) Time: for scientific advances; or regulatory change that would alleviate future risks/harm; or altered
practices
ii) Nature of harm – incremental and possibility of legal recourse at a later time
Note on older Cases:
• Earl of Rippon v Hobart
o proposed steam engine use: imminent risks, use can be scarcely imagined without abuse
o Law cannot give relief for a mere possibility of damage, nor can it refuse to give relief on a mere
possibility that the damage can be avoided. Law will intervene if there is a risk so certain that a
prudent person would avoid incurring it even if that is short of certainty of damage
• Attorney General v Corporation of Kingston – Evidence was necessary to show an extreme probability of
nuisance; possibility should be imminent, not one hundred years into the future
• Salvin v North Brancepeth Coal Company – Where there has been zero evidence of nuisance of a particular
kind causing harm, it is impossible to say for certain that the substantial damage will result so as to sustain
a quia timet injunction; in summary the two necessities needed for this type of injunction are no
damage proved, but imminent danger of damage and that this damage will be substantial
LECTURE 14
Palmer v Nova Scotia Forest Ind.
Topics:
-
Dispute over proposed herbicide use
A toxic chemical, and scientific debate on effects
Demarcation between public regulation of hazardous materials and more limited inquiry of private law
action
Facts:
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-
Plaintiffs applied for injunction to prevent the spraying of herbicides in the vicinity of their homes and
farms.
They were concerned that a certain toxin (TCDD) would infiltrate their lands and contaminate their
drinking water.
They sought a permanent injunction to prevent the spraying and a declaration that they have the right to
be free from exposure to TCDD-containing herbicides.
Held:
- Injunction was not granted; Plaintiffs did not meet the burden of showing they needed such an injunction.
Analysis:
Reach of Injunction:
• Court cannot grant a permanent declaration that the Plaintiff’s have a right to be free from herbicides; can
only deal with the rights between the two parties at bar
• Permanent declaration is a matter of governmental policy regulation
Requirements for Quia Timet Injunction:
• Plaintiff must demonstrate: (a) strong possibility of (b) future harm that is imminent and not remote /
premature causing (c) grave or irreparable harm that would not be appropriate for common law damages
• There also must be sufficient grounds to warrant the exercise of the Court of its discretion
Application:
• A proven serious risk to health would constitute irreparable harm
• The Plaintiffs did not know/prove that there was a serious health risk that would occur with spraying; the
Court cannot determine if there is a serious health risk; it must be proven by science
• In this case, there was no sufficient research on the effects of low concentrations of the material
o Serious harms have only been demonstrated in instances of undiluted dosages; and further no
evidence of cancer causation over thirty-years
o planned dilution does not meet standard of strong probability of irreparable harm
What does “strong possibility of damage” entail?
• It’s a careful balancing of the balance of convenience or hardship between the parties, and the magnitude
or amount of injury
• The claimant must prove the essential elements of any injunction
RATIO:
- When there are no CL $D established yet Anticipatory injunctive relief may be granted, when
- 1- Strong Probability
- 2- of imminent harm
- 3- that is Irreparable in nature
-
Probability here means more likely than not. (a strong or ‘real’ probability).
A serious health risk would constitute irreparable harm and could support a quia timet injunction.
Why is health irreparable?
- Because of the intuitive idea that one should not knowingly cause a health risk and wait for CL to
address compensatory damages later.
risk must be proven using sufficient, scientific research/evidence.
Plaintiff must provide evidence to satisfy the test for the injunction
Class notes:
- Added the element of “Strong probability of future irreparable harm”
- Health risk Why is health irreparable?
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-
Because of the intuitive idea that one should not knowingly cause a health risk and wait for CL to
address compensatory damages later.
Various standards:
Balance of probabilities for causation
Possibilities awarding of CL damages
Strong probability qualifier for the availability of an anticipatory injunction.
Hooper v Rogers
Facts:
Held:
Analysis:
-
Defendant bulldozed a region below its neighbors (plaintiff’s) house, exposing the slope to erosion and
possibility that the plaintiff’s house would collapse.
TJ
- awards damages in lieu of mandatory Quia Timet injunction
- No damages under common law until tort/harm occurs
CoA agreed, the P was entitled to quia timet injunction
CL Damages cannot be awarded at for cases of probable or even certain future damages; damage must
have occurred already
Therefore, the CoA considers the quia timet injunction (mandatory, in this case)
The CoA considered all elements of a QT injunction:
-
-
-
Strong probability? Yes, it will happen it’s just a question of when.
Court is not concerned with technical sense of strong probabilities, but rather fairness
between the parties in the circumstances.
Imminent? Yes
A- Not premature (because the whole house may come down all at once, i.e. not an
incremental harm)
• That is, the CofA examines imminent as equivalent to ‘not premature’ rather
than truly imminent, or about to occur shortly
B- There would be no other chance for an injunction after the damage happens.
Nature of Harm?
What happened to irreparable?
Why the CL damages is not adequate?
• A:
because it is a residence.
Or simply because it would be wasteful, nonsensical to not affect the
fix beforehand at much less cost
•
-
i.e. similar to Palmer, the CL can compensate for damages eventually, but
this is a house and therefore if there’s someone is in the house, that would not
be an acceptable way to treat anticipatory harm…life/injury could be at risk.
Why did the court order damages in lieu instead of a mandatory order?
- Lord Cairns Act – potential of equitable damages - damages in lieu of equitable order
- Just for practicality’s sake:
trespass situation
neighbours don’t like each other
the P would be just as effective making the fixes.
RATIO:
-
Imminent can mean
not premature
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-
Even if the harm can be compensated by CL damages eventually, policy reasons will require an
anticipatory injunction to prevent the harm if the context requires (house, safety, etc..)
When ordering mandatory qt injunction, the court can award damages in lieu of the order:
- When disgruntled performance is undesirable
- When the P has access and can perform the work in an equivalent way
Redland Bricks
Facts:
-
Def land bordered the P’s land.
Due to the Def’s removal of support, the P’s land started slipping down into the Defs land.
A professional okayed the digging and said it would not cause slippage
Slippage continued and the P’s claimed an injunction and damages for the harm that has occurred.
TJ
1) prohibitive injunction from further undermining soil (regular negative injunction);
2) mandatory injunction to correct original harm (QT to prevent future harm); and
3) CL damages for established loss
Analysis:
•
Situations where mandatory injunctions are ordered:
o 1- corrective to trespass (as a matter of course)
o 2- to correct past harm and prevent further loss. (NOT a matter of course)
The intentions of the D plays a role in the 2nd type.
•
If a person withdraws support from their neighbor’s land, they are liable for damages for any slippage
and equity will allow the granting of an injunction prohibiting the continuance or recurrence of any
actions leading to further withdrawal of support.
Quia timet injunctions can be granted where existing damage has been compensated with damages,
but where previous actions may cause future harm
These would be of the sort to mandate positive action to buttress the land
•
•
•
Mandatory injunctions can never be granted as a matter of course
o Except in trespass cases
Two situations where quia timet injunctions can be awarded:
• 1- Where no harm has occurred to the P but the Def is threatening and intending to do work which will
render irreparable harm to him or his property if carried to completion
• 2- Where harm has occurred which the plaintiff has been compensated for (in equity and under common
law) but where it is alleged that the earlier actions of the defendant may lead to further causes of action
(Mandatory injunction to fix the earlier harm)
What are the requirements for a mandatory injunction to protect land?
• (1) Plaintiff must show a strong possibility on the facts that grave damages will occur in the future
• (2) Common law damages will not be sufficient or adequate remedy if damage does occur
• (3) What are the costs to Defs to do work and prevent or lessen the likelihood of future harm
o When considering costs to the D, the intention/actions of the D play a role:
1st level – when wilful (such as trespass) then disproportionate cost is more readily imposed
2nd - innocent error = more measured i) no further wrong yet ii) which may not occur, and;
iii) P has further recourse in D$
• (4) The order for the mandatory injunction must be directive and clear so the defendant knows what to
do
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Application
• In this case, TJ’s granting of the QT injunction was not clear about what steps they were to take to restore
support to the Plaintiff’s land
• Some mandatory preventative order was arguably appropriate, but now impractical to award.
• Difficulty in reassessment + no further slippage in two plus years
• They can return for CL $D later.
RATIO:
-
RULE: Two situations when mandatory injunctions are given
- To stop trespass as a matter of course
- To correct past harm and prevent further loss not a matter of course
RULE: Two types of QT injunctions:
- Where no harm has occurred yet, but D is threatening to do something that may bring harm to P
- Where D had already brought harm to P, P was compensated, but where it is alleged that the
earlier actions of the D may lead to further future harm of the P
-
Three levels of awards considered:
- Negative injunction to stop trespass, ongoing harm (regular negative injunction)
- CL damages to remedy the harm already suffered (CL damages)
- QT mandatory injunction to stop future harm resulting from earlier actions of D
Not a matter of course therefore, you need to apply the test:
-
TEST (QT mandatory injunction):
- (1) Plaintiff must show a strong possibility on the facts that grave damages will occur in the
future (i.e. strong possibility + irreparable + imminent)
- (2) CL damages will not be sufficient or adequate remedy if damage does occur
- (3) What are the costs to D’s to do work and prevent or lessen the likelihood of future harm?
When considering costs to the D, the intention/actions of the D play a role:
• 1st level – when wilful (such as trespass) then disproportionate cost is more
readily imposed
• 2nd - innocent error = more measured, why?
i) no further wrong yet
ii) which may not occur, and;
iii) P has further recourse in D$
-
(4) The order for the mandatory injunction must be directive and clear so the defendant knows
what to do
Class Notes:
- What was the problem with #3?
- It was not specific enough
- Ultimately the appeal was allowed because TJ was not specific enough in the order, potentially
opening the “innocent” D to unlimited liability.
- This case also stands that a mandatory quia timet order can be given even in the face of incremental
harm, but the harm must be irreparable (and there reasons here that showed it not to be irreparable
weird)
-
Lessons:
- Injunctions
Negative injunctions easier
Mandatory harder
Within mandatory:
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Quia timet harder
Within quia timet:
• Innocent D less awards/orders imposed
• Not innocent easier to award/order
Not quia timet easier
Notes after the case:
- Note 2: Could the P have obtained a quia timet before excavation?
- Strong probability might fail because of expert opinions
- Irreparable might also fail if there was no real danger to life/injury
Sub-topic: Injunctions and Property
- Injunctions in support of property rights
- A discretionary exercise that sometimes gives way to concerns of social waste and economic development
- Normally the absence of harm from a trespass is the very reason an injunction is merited - contrast with
quia timet and interlocutory
(Classical view)
Goodson v Richardson
Facts:
-
P owned a section of land and a hwy ran through the land.
P was not the owner of the surface rights where the hwy ran (right of way restrictive covenant), but
remained the owner of the dirt underneath.
P also was a shareholder in a waterworks company.
Def wished to start a competing waterworks company and obtained permission from the city to lay pipes
along the hwy (subject to consent of the property owners).
Def began to lay pipes and the P sough a perpetual injunction to restrain him from laying pipes.
Held:
-
The plaintiff was granted the injunction.
Analysis:
-
The harm already happened, so why is there no CL damages here?
- Because the infringing items are on the right-of-way which the P has no access to. Therefore,
even if P is awarded damages, he cannot use it to remedy the situation (i.e. remove the pipes).
- Also, there’s in essence an absence of economic harm i.e. the P does not have economic
benefit from that piece of land anyways.
-
Injunction as a remedy for Trespass
- Laying of the pipes was trespass on the P’s land; P is entitled to enforce his property rights even if
his underlying reason for doing so is simply to protect his economic interests.
i.e. the P is entitled to act completely selfishly with his property rights.
- The absence of economic harm is the very reason the injunction is necessary
- Legislatures may trump private property (as with road) but other private parties arguably should
not be able to ride along
i.e. we do not want someone to abuse the rights of another because there will be no
damage at the end
RATIO:
• strong protection of property rights (against trespass)
• Where there is a deliberate and unlawful invasion by one person of another’s land for the purpose of a
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•
continued trespass, for the profit and gain of the trespasser without the consent of the owner of the land –
common law damages will not be sufficient, and an injunction will be available.
This case So great is the regard of the law for private property, that it will not authorize the least violation of
it, no, not even for the benefit of the whole community
LECTURE 15
Class notes:
- The difference between Trespass and the Quia Timet injunctions and others, is the fact that trespass serves
to protect the sacrosanct character of property. The Common law can operate but will give you no real
compensation since there’s no real damage. Therefore, injunctions are the only practical protection
against trespass.
(Modern Property Infringements View)
- Rethinking property classical protections
- Social utility/Public interest
- Timing, nature, magnitude.
Wollerton and Wilson Ltd
Facts:
-
P’s company owns a factory and warehouse, over which a crane that the Def is using to build a property
swings.
P asks for an interlocutory injunction to restrain the trespass of the crane into their air space.
They do not claim that the trespass affects them negatively (since there is no loss or damage);
The crane was temporary, and no materials were on the P’s land.
Held:
-
Injunction granted but suspended until end of construction.
- Next contractor will be on notice of need for permission... (Because property rights would be
completely undermined otherwise)
Analysis:
• Where the loss / damage action is for nuisance the P can be compensated at CL;
• In this case, no harm is done and CL damages will not give relief (not nuisance)
o The court distinguished the nuisance precedents.
•
Does the motivation of the parties have an effect?
o If this was intentional on the part of the defendants – trying to take advantage of the importance
of their project or if the act were flagrant, an injunction would be granted and there would be no
exceptions to it
o However, in this case, only intentions that are negative seems to be the P; the Def were not trying
to harm or annoy the P. The Defs tried to pay them off
Application
• No damages available at CL, so they are entitled to an injunction
• However, the injunction application will be withheld until the construction is expected to be completed,
and if it goes over time, a renewal of the withholding may be renewed
• Trespass was innocent and temporary
• The costs to the Def would be very high
• This may create the potential for the P to hold the D hostage to get their future approval, and
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• The Ps were offered compensation and did not take it
RATIO:
- Innocent trespass + temporary + scale of project + potential for ransom = leniency
- Scale of project: if tremendous costs for the Def to execute court order leniency is granted
Class Notes:
- What ingredients can we detect in this case:
- An undetectable financial loss the breach is only trespass over the P’s unused airspace.
(innocent)
- Temporary trespass (temporary)
- They distinguished this case from the nuisance precedents
- The idea that post court order, the P will have a very strong leverage and will ask for whatever
price they want to grant access. (ransom)
- Scale of project
- So, the formula is: innocent trespass + temporary + scale of project + potential for ransom = leniency
-
Question: the court ordering a suspended injunction which effectively is useless to the P, so why did the
court not award any kind of compensation like a way leave?
- Because the P did not ask for common law remedies
- Because they technically succeeded in their equitable remedy application.
Trenberth (John Trenberth Ltd v National)
Facts:
-
Ps are neighbors to the Ds whose building is in a dangerous condition.
In order for the Ds to repair the building, they would have to go onto the P’s property.
They ask for permission, but the P says No!! and the Ds decide to trespass to do the work anyways.
- D’s decision to trespass to avoid public penalty, further liability.
Held:
- Injunction granted; Def could not go onto the Pltfs land.
Analysis:
Intention of the Parties:
• Pltf is trying to have strict construction of property rights and the denial of access was in good faith
• Def is trespassing after being denied access and this is a flagrant disregard
Remedy available?
• Actual damages caused are slight and therefore, an injunction is appropriate
• Injunction cannot be suspended in this case (Wollerton is not persuasive)
• The P’s opted for strict enforcement of their property right and the Court cannot change this (also
difference in intentions between parties)
•
•
Court argues that the Defs knowing full well that there was no consent to trespass did so anyways
o “If that is not flagrant invasion of another’s property without their permission such to engage the
court of equity, then nothing is”
Def argues
o 1- they were trying to make the building safe for a third parties
Court rejects this argument
Court said that if this were the case, they could have chosen the expensive option of pulling
down the building and starting over
o 2- injunction should be stayed like Wollerton
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Rejected
Suppose that advance notice of the trespass (from erecting scaffolding) had been given to
the Pls and they had applied for a quia timet injunction, what possible ground could there be
not to grant it?
RATIO:
-
Where there is an intentional trespass following a bona fide denial to enter on the property, this will
warrant injunction.
Distinguished from Wollerton (intentional and flagrant trespass)
Class notes
- Diametrically opposed to Wollerton
- If a quia timet injunction would be granted, then a regular injunction should be granted as well.
- Although oddly enough, the court considered the good faith refusal of the P to grant permission as a
factor.
- Very protective of private property rights
A Note on Bargaining:
- The judicial contextual, discretionary approach often hypothesizes the use of an injunction in bargaining;
- Consider language of exhort in cases of ancient lights.
- Considerations that the courts take into account:
- Sanctity of property rights v the need for development/progress;
- Rewarding intentional trespass v oppressive results for D.
- Eg Wrotham Park. Destruction of sub-division v knowing breach of covenant for profit
-
Court orders can, inter alia, be:
-
-
-
-
1- Approximate a bargain:
Ex. Way leave cases
McDonald v Mars
• Facts: Someone negligently builds a wall that trespassed on neighbour property
• permanent trespass the court orders a mandatory injunction to remove the
wall (at estimated cost of $1500), or pay $3500 in damages 30 days later
• the court was trying to encourage the parties to resolve/settle the issue without
tearing the wall down.
2- Impose a bargain:
Dempsey
• Facts: flagrant building in trespass
• Held:
No mandatory order for removal, given huge cost to Def.
But ordinary damages awarded, including view to rent, and exemplary
$D;
P must release interest in portion of land.
The court in effect imposed the rental bargain on both parties.
3- Delay enforcement to encourage it
Gallant
• Facts: innocent building in trespass, significant market loss and affects
alienability of title
• Held: Market loss D$ + 1000 D$ for trespass
• Suspended six months for parties to settle.
4- Allow involuntary expropriation if denied
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Wollerton
Alternatives to Injunctive relief
- Judicial Options, Inter Alia, are:
i) Refuse order;
ii) Make order conditional ($D unless);
iii) $D (+Exemplary $D)
Sub-topic: Nuisance
-
A’s interference with B’s lawful use/enjoyment of property
Often, more securely tied to damages than above problems of trespass. i.e. there is demonstrated harm to
P
Miller v Jackson
Facts:
-
Cricket ground which is 70 years old at issue;
New houses built on the edge of the cricket field.
If a homerun was hit it would land in the yard. Cricketers hit the ball over the fence then come into the
person’s yard to get the ball.
Cricket club put up a higher fence and took other measures.
Held:
-
Denning refuses to grant the injunction and favors the cricket pitch’s rights
Analysis:
-
-
Nuisance necessary for injunction.
- If the P seeks a remedy in damages for injury done to him on his property, he can lay claim in
negligence or nuisance, but if he seeks an injunction to stop the playing of cricket, he must make
his claim in nuisance
Some harms will not attract liability - ‘ordinary usages’
In Bolton v Stone harm was too remote, but it introduced public policy problem.
- L Reid : “if Cricket cannot be played without substantial risk then it ought not be played at all”
Should an injunction against playing cricket be granted?
No, why? (Lord Denning’s reasons):
- 1- The social value and utility of the activity cricket in the summer time
Denning chose public interest over private here
Used the test of reasonable use of grounds; a modern balance
- 2- Who was there first the club has been there for 70 years
Denning says the right of the long-standing cricket club takes precedence over the
newcomer and that the homeowner should have known the risk.
RATIO:
-
The two reasons Lord Denning gave for denying the injunction based on an action in nuisance
- Modern balance public v private interest
- Who came first? (priority in time)
Class Notes:
- Contrast w Sturges v Bridgman
- Re whether it matters if one ‘came to the nuisance’
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LECTURE 16
Review:
-
The historical need for equity to protect property rights from trespass and private expropriation, balanced
against modern needs for development, inevitable interferences
- The tension of property rights and public interest (development, social cost, etc)
-
Features that might influence the balance (FW)
- 1- Public benefit and priority in time – Miller v Jackson
- 2- How the trespass was entered into
Innocently (Redlands*, Wollerton)
Or deliberately (Kates, Goodson, Dempsey, Trenberth)
-
-
* Redland is not really a trespass case but it’s still about property rights.
3- Scale of the Project
i) size of social waste (Wrotham Park(new subdivision), Dempsey(entire building)]
ii) concern for exhort, ransom (Wollerton)
Cases and property rights
- Strongly supportive Goodson, Lewest v Scotia, Trenberth, Mr. Pickles
- Less so Wrotham Park*, Wollerton (ancient lights e.g.)
Sub-topic: Interlocutory Injunctions
- Injunction granted before a final determination of the litigants’ dispute
- Procedural Advantages/Characteristics
-
-
Speed
Ex parte
Temporary until trial
In quia timet, the right was not in question, but the harm was. HERE however, both the right and the harm
are in question.
The Classical Position (Challander v Royal),
- Eng CA’s endorsement of classical model, with high threshold on merits before balancing requirements.
- Established the TEST as:
- 1- Strong prima facie claim/right
What is the likelihood of success at trial?
Has the right existed? Has it been infringed upon?
- 2- Appropriateness of equity (irreparable harm)
- 3- balance of convenience
- The effect of that was that more and more mini-trials were happening upon affidavit evidence alone.
American Cyanamid v Ethicon
Facts:
-
Ps were the registered owners of a patent for absorbable sutures;
The D is the dominant player in the traditional sutures market.
D are also preparing to launch their own line of absorbable sutures made with different polymer.
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-
Ps sued for patent infringement and want a quia timet interlocutory injunction to restrain marketing of
the D’s competing sutures.
- i.e. AC trying to stop Ethicon from entering the market with an infringing product)
Q for trial is the scope of patent description and whether it includes XLG competitor suture.
-
TJ finds prima facie infringement of valid patent, and then proceeds to grant injunction on balance of
convenience, which favours status quo until trial = no XLG on market
-
CA finds no prima facie infringement (a std of review problem – overruling expert court on merits), so by
‘rule of law’ cannot proceed to balance of convenience
- Full stop to injunctive claim
Held:
-
Interlocutory injunction granted
Analysis:
-
The court (House of Lords) revises the test and lowers the threshold of the first step to just “a serious
question to be tried”, so the TEST now is:
1- Serious question to be tried
• i.e. Unless no real prospect of success, then we should proceed to the rest of the
test
2- Appropriateness of equity (irreparable harm) if damages would be adequate then no
injunction should be granted, no matter how strong the merits.
3- Balance of convenience
• Very strong presumption in favor of the status quo in the face of uncertainty.
-
Application:
Serious question to be tried? Yes
Irreparable harm? If AC does not get the injunction, we may never know what market share
they lost in the 2-3 years it takes to get to trial.
BoC?
• P is much more vulnerable v just a delay to enter the market for Ethicon (Def)
• Nature of medical field
• Plus, presumption of status quo.
-
Undertaking:
The court got AC (the P) to give an undertaking to account for Ethicon’s lost profits if their
injunction turned out to be on wrong on the merits after trial.
RATIO:
-
The test for Int. Injunctions.
RJR McDonald
Facts:
-
Interlocutory stay re Charter challenge for tobacco packaging
Applicant seeks an interlocutory stay against enforcement of the Tobacco Products Regulations which had
placed controls on tobacco advertisements.
Held:
-
Injunction denied
Analysis:
-
Confirmed AC test
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Part 1: Serious issue to be tried
EXCEPT:
• 1- when motion is in effect final determination of issue (e.g. political debate)
• 2- perhaps when immediate resolution possible with factual record complete
• 3- mandatory (not from this case CBC)
Then you need a strong prima facie case (i.e. min-trial)
Part 2: irreparable harm (irreparable harm is not about magnitude/degree, rather it’s
about the nature)
Part 3: BoC (consider the Public interest)
-
Charter features – uniqueness; importance; public interest
-
Application to Public Law Cases:
- Step One – serious issue – filter for trivial, frivolous
Step 1 is almost always a green light under the charter
-
-
Step Two – irreparable harm – often presumed given unclear state of charter remedies; damages
not primary object, reflection of harm
Step 2 is also easy in the context of the charter because
• 1- charter remedies are not very consequential yet
• 2- you are suing the government (legislature) which is often insulated from
damages
-
Step Three – Balance of Convenience – Public interest almost automatic presumption for D, may
be displaced
the government has a strong presumption that it is acting in the public interest but it
can be displaced.
The status quo presumption is not appropriate in charter cases (i.e. to stopping the
government from legislating a new law)
Specific Public Law Application:
- 1) almost as a matter of course (not frivolous)
- 2) significant financial loss – normally this would be realm of CL $D, but unique difficulty of
legislative insulation;
- 3) public interest not overcome by claimants (pricing v public health)
RATIO:
-
The confirmation of the AC test
- Addition of exceptions to Part 1
The application to charter cases
(Mandatory Interlocutory Injunction)
R v CBC
Facts:
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An accused was charged with the first-degree murder of a person under the age of 18.
Upon the Crown’s request, a mandatory ban prohibiting the publication, broadcast or transmission in any
way of any information that could identify the victim was ordered.
CBC had published the identity prior to the publication ban
The issue was CBC’s prior publication of an under-age murder victim (prior to the publication ban)
Issue:
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Are the CBC in criminal contempt court (of the ban)?
Held:
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Appeal denied; Crown had to show a strong prima facie case for criminal contempt and it was unable to
do so.
Analysis:
-
There’s a blend of “contempt of court application” and a “mandatory interlocutory injunction”
CBC lost on the balance of convenience stage.
-
To obtain a mandatory interlocutory injunction, the appropriate criterion for assessing the strength of the
applicant’s case at the first stage of the RJR—MacDonald test is not whether there is a serious issue to be
tried, but rather whether the applicant has demonstrated a strong prima facie case.
The potentially severe consequences for a defendant which can result from a mandatory interlocutory
injunction further demand an extensive review of the merits at the interlocutory stage.
This modified RJR—MacDonald test entails showing a strong likelihood on the law and the evidence
presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the
originating notice.
The applicant must also demonstrate that irreparable harm will result if the relief is not granted and that
the balance of convenience favours granting the injunction
-
On Pure Speech Exception:
- Expression can sometimes qualify for ‘pure speech’ exception to RJR framework, where there
may be no tangible loss to speaker and the speech has no value to others
- RJR method could ‘stack the cards’ against a popular, non-commercial speaker in parts 2 and 3.
- ‘Pure speech’ exception is not appropriate nor necessary here. Yet, CBC’s utility easily trumps
government restriction.
- Administration of justice is lessened because victim is deceased; while CBC represents a general
public interest in freedom of the press
RATIO:
-
This case added the mandatory injunction exception to the list of exceptions to the “serious
question/claim to be tried” in part 1 of the test.
- (i.e. if mandatory injunction is requested, then a strong prima facie case must be demonstrated
(mini-trial))
- The P must show a strong likelihood on the law and the evidence presented that, at trial, the
applicant will be ultimately successful in proving the allegations set out in the originating
notice.
Vieweger
Facts:
-
Appellants try and remove their equipment from a project they are no longer being paid for.
But the respondents obtain an interim injunction preventing removal of the equipment and give the
standard undertaking for damages;
- Appellants win at trial and claim damages flowing from interim injunction. (suing on an undertaking)
- TJ hold that they are not entitled to damages because damages are only available where the Plaintiff
obtains the injunction.
In other words:
- This is a case where the respondent has already won an interlocutory injunction to continue using the
equipment of the appellant, even though they were in arears paying the appellant.
- At trial, it turned out to be wrong.
Held:
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The appeal should be allowed, the judgment in favour of the defendant upon the counterclaim restored,
and a reference directed to determine the damages attributable to the interim injunction, such damages
to be granted to the defendant.
Issue:
-
How should the respondent account for the damages caused to the appellant through the use of the
equipment during the interlocutory injunction period?
Analysis:
-
Griffith v Blake: If P ultimately fails on merits, an inquiry as to $D granted unless special circumstances to
the contrary
Special circumstances would normally involve countervailing behaviour of the successful Def.
What is the undertaking? It’s the P’s trade-off for getting an injunction; they will pay the Defs if they prove
them wrong at trial
If the Def succeeds, the P must pay the undertaking.
RATIO:
-
An undertaking is given at the end of a successful injunction, where by the successful applicant would
insure the D should their interlocutory injunction turned out to be wrong.
Undertaking can flow to the Pltfs or Defs depending on the facts
LECTURE 17
Review:
-
The RJR test
The modified RJR test mini trial
- Applies in:
Order is one and for all determination
Clearly resolvable at once
A mandatory injunction sought
PUBLIC vs PRIVAT LAW ISSUES
- Irreparable:
- Private law examples of Irreparable?
Loss will be incalculable
P cannot recover position later (like going out of business)
P will not be in position to sue later
- Public law examples of irreparable
Not primarily about money
Government officially generally immune have immunity from liability.
-
Presumptions:
- In favour of keeping the status quo (private)
- No presumption of keeping the status quo (public)
-
BOC:
-
public law:
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Step 3 involves the balancing of wider public interest with private law interest. (check
slide)
-
Undertakings:
- Private law features :
Default position is that plaintiff to assume an undertaking
Insuring payment of Def’s damages, if Plaintiff’s injunction in error deprived Def of some
right/opportunity
-
1) A plaintiff’s financial inability to meet an undertaking should not bar an equitable order. The
court may use its discretion to dispense with the need for an undertaking
2) A defendant may be successful on the merits and yet behave in an otherwise objectionable
way, so that a court may use its discretion to not award damages under an undertaking
PART 4: Charter Remedies
What is the current state of Charter remedies?
To what extent if any, do/should private law conceptions inform Charter remedies?
Immunity of Public Officials
- Distinction between the actions of agents and officials, and legislative, judicial, or policy decision-making
- The latter is extraordinarily difficulty to attach individual liability to - historically has required establishing
actual malice.
S. 42 Remedies:
s.42(1)
Anyone whose rights or freedoms have been infringed… may apply to a court… to obtain such remedy as
the court considers appropriate and just in the circumstances
History of Charter Remedies
1982 – 2003
- Mullan: The ‘false spring’ 2005
- The reality of legislative, quasi legislative, and administrative versions of immunity
- A point of divergence - Doucet-Boudreau v Nova Scotia
- Charter Injunctive Relief - A Structural Order for Group Language Rights
- A 5-4 majority endorsement of court monitored (reporting) school construction
2005 - Van City v Ward
- A hopeful spring? Re Individual Damages
Class Notes:
- The starting point is the application of section 42(1) of the Charter
- The key words are “just and appropriate”
(charter-based damages)
Vancouver (City of) v Ward
Facts:
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A political protest and the wrongful detention and partial strip search of a lawyer
RATIO:
-
A New FW:
- 1- P establish a Charter breach
- 2- P establish damages are just and appropriate, having regard to:
Compensation
Vindication
Deterrence
- 3- D govt may claim countervailing factors
The good governance concerns of liability
- 4- Determine the quantum of damages.
a modest approach, since 2 + 3 are only supporting the main compensatory goal
-
Note: the reference in this case to the functional approach in Andrews is weird. Because in Andrews the
functional approach was strictly non-compensatory while here it clearly is.
-
What would compensation damages cover?
- Pecuniary - loss of income, medical expenses
- Non-pecuniary - the mental stress unduly imposed
(substitute comfort and pleasure like Andrews??)
What would vindication damages represent?
- Vindicate the charter and the justice system
- The loss to Canadian society
What would deterrence damages represent?
- To deter government actors from repeating the behavior towards others.
- This is mostly achieved through a reputation hit that an agency or a politician takes.
-
Application
- $5,000 for unlawful strip search, which is cumulative but mainly about compensation
- $100 for car unlawful seizure replacement by declaration
Recent Developments slide:
Brazeau v AG Canada
- $20 million in non-compensatory damages, on basis of vindicating Charter rights, ear-marked for mental
-
health programming at federal prisons
These awards were non-compensatory they were about vindicating Charter rights.
And they did not go to the P, they were earmarked to mental health programming at federal prisons.
(administrative body that has an immunity clause)
Ernst v Alta Energy Reg
Facts:
-
An administrative body with an immunity clause
A citizen with a belated expression/charter claim
Issue: could such a claim ever entitle Charter remedy?
Held:
No - 4 - Cromwell J.
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No - 1 - Abella (procedure)
Yes - 4 - McLachlin
Analysis:
-
-
Cromwell J (4)
- Issues of countervailing factors, and esp. alternative recourse in judicial review, mean that
Charter remedies would ‘never’ be appropriate against the board
Cromwell’s opinion (No charter damages):
• Since there are other avenues available such as judicial review of Board
decision, then there’s no need for Charter remedies, especially in the face of this
Board’s immunity
McLachlin (4)
- vindication and deterrence could be furthered potentially
- judicial review may not be satisfactory in every single case, especially as it cannot produce any
damages in this context
McLaughlin’s opinion (Maybe charter damages):
• Judicial review may not be suitable in every single case, especially that it does
not provide damages.
Current Status, maybe
- Charter remedies more readily available for individual abuses by officials when there is no opportunity for
systemic appeal
- Administrative bodies may retain immunity for their actions if there is the potential for judicial review.
-
The so-called functional approach actually appears to be a hybrid, with a straight compensatory element
The vindication element has received some support
The deterrence element remains
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