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Remedies Summaries (2019)
Remedies Summaries (2019)
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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?
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?
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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.
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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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
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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
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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- 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.
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
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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
LECTURE 3
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.
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
pre- existing 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.
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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]
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
contract- he 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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- 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 was the compromise requirement on innocent party? When did it arise?
A: crystalizing the claim.
LECTURE 4
Semelhago v Paramadevan
Topics:
- The modern view of real estate & SP
- Equity claim and Election (between SP and Damages in Lieu of SP)
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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
- 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).
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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.
- COA
- 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)
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
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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
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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.
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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
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• 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).
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o I.e. the DEAFULT: Wilful breach, fraudulent breach + construction K = cost of performance remedy
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.
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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.
- 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
- 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.
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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
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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
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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 $
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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.
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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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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 CL compensates for
breach of property right
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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
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
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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
- 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
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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.
• 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
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.
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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
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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- The court did express some Inflationary, Americanization fears – huge arbitrary awards based upon
Def’s deep pockets
- 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.
LECTURE 10
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.
The Court here, however, clarifies the aggravated damages test in Canadian law
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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.
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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)
- -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.
• 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
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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
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).
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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
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
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
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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
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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
TJ:
- 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
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
post- accident 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)
lOMoARcPSD|16684553
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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
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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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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.
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Key issue to determine the inappropriateness of the CL remedy, is the nature of the harm
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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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
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
LECTURE 14
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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
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
- 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:
- 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 Held: CoA agreed, the P was entitled to quia timet
injunction Analysis:
- 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:
- 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
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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
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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(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.
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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.
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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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.
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
- 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
Sub-topic: Nuisance
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)
* 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)
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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:
- 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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- 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)
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- 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
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
- 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
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.
Application
- $5,000 for unlawful strip search, which is cumulative but mainly about compensation
- $100 for car unlawful seizure replacement by declaration
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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.
- 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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