Parties’ reasonable expectations in this type of K 132

The usual consequences of breach 132

Evidence (if any) of commercial expectations – how are the risks usually assigned? 132

Did the parties explicitly address the risk? 132

Basics 133

 must take reasonable steps to minimize the damages from ∆ breach 133

In sale of goods cases, the mitigation requirement is basically codified: 133

S. 53 – Damages for Nonacceptance 133

(1) If the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for nonacceptance. 133

(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of K. 133

(3) If there is an available market for the goods in question, the measure of damages is to be ascertained (unless there is evidence to the contrary) by the difference between the K price and the market or current price at the time or times when the goods ought to have been accepted, or if no time was set for acceptance, then at the time of refusal to accept. 133

S. 54 – Damages for Nondelivery 133

(1) If the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for nondelivery. 133

(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract. 133

(3) If there is an available market for the goods in question, the measure of damages is to be ascertained, unless there is evidence to the contrary, by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was set, then at the time of the refusal to deliver. 133

Cockburn v. Trusts Guarantee Co. 133

Facts 133

Company went into liquidation, ∆ wrongfully dismissed & sues for lost wages. 133

Salary at time of dismissal: $5000/year 133

 bought a bunch of stuff at the company’s liquidation sale, and sold it for $11k 133

Issue: did  mitigate out of any damages? 133

∆ argued  used his time to make profit, which he wouldn’t have been able to do if ≠ dismissed. 133

 argued ≠ mitigation because it goes beyond what an employee would be expected to do. He became an entrepreneur/speculator. Didn’t have to do this. 133

Held:  mitigated out of damages 133

Reasons 133

Although ≠ required to mitigate in that way, the ability to make that money resulted from the breach of K – could not have happened but for the breach. 134

First, he got the inventory because the company went into liquidation. 134

Second, he had the time to buy/sell the inventory because the company dismissed him as a result of the liquidation. 134

Apeco v. Windmill 134

Facts: 134

 owns warehouse; ∆ agrees to lease part for 5 years 134

∆ breaches,  finds new tenant. 134

 sues ∆ for 5 years of rent, but ∆ says they mitigated by renting to the new tenant. 134

Held:  is entitled to the lost rent from ∆ 134

Reasons: 134

Distinguishable from Cockburn: yes, they had found a new tenant, but ¾ of the warehouse was vacant. If ∆ had stayed, the new tenant would have been in addition to ∆ - not instead. 134

So, in this case the second transaction hasn’t mitigated the loss suffered by . 134

Assess by considering causation: did the breach cause or permit the new transaction with subsequent benefit? 134

i.e. is the second transaction dependent on or independent of the breach? 134

Erie County Natural Gas v. Carroll [HL] 134

Facts 134

π manufacturer of quicklime. 8 year lease of gas rights on π property to ∆ gas co, w/ req’mt to supply π with gas. 134

∆ sold the lease to a third party, who ≠ supply gas. 134

π built their own structure to obtain gas on their remaining portion of the property, at a cost of $60k. 134

At the end of the 8 year period, π sold the gas works for $75k. 134

π claimed the expenditure to get the gas, and also $125k for the cost of their own gas used 134

Held: No award to π. 134

Reasons 134

π mitigated by selling the structure for $75k. 134

Also, court said it would be unfair to award the additional $125k value of the gas consumed, because then π would profit from ∆’s breach. One Lord called this a “grotesque” result. 134

Comments: 134

However, the question re mitigation is really supposed to be whether the breach caused/permitted the earnings, and in this case it did not. 134

πs were tapping into their own gas, which was always there and which could have been done regardless of ∆ behaviour. 134

Jamal v. Moola Dawood Sons & Co. [1916, PC (Burma)] 135

Facts 135

∆ backed out of share sale w/ π 135

K price was $184,000 rupees. As a result of breach, π only got $75,000 rs. 135

π held shares past breach date, then made a series of sales that cumulatively brought in $200,000. (So, higher price than K would have brought in, even) 135

Held: π did not mitigate out of damages, ∆ still obligated to pay. 135

Damages are measured at time of breach. 135

Waiting is at π risk, and if π is found to have mitigated out of damages by waiting and selling at a higher price, then ∆s should also be responsible if π waits and is forced to sell at lower price. 135

π can do whatever he wants after breach, but it’s at his own risk. 135

Conceptually, π could have gone through with first K and then later bought and sold shares again independently  shares are fungible. 135

Distinct from Cockburn, in which π could not have done what he did but for the breach. 135

Campbell Mostyn v. Barnett Trading 135

There may be a class of cases in which it is impossible to resell goods – e.g. because there is no market. 135

Issue: ∆ argued that market price of ham at time of breach was very good – trying to minimize their damages on basis that π could have mitigated out of all damage. 135

But then later, on appeal, ∆ argued that there was no available market at time of breach, and damages should thus be assessed on the price 6 months after the breach. 135

Held: not impossible to resell goods, viable market existed. 135

The two arguments made by ∆ cannot be reconciled, and the Court of Appeal caught this contradiction in finding that there was a viable market. 135

Time of Assessment 135

General principle: courts assess damages at time of breach. 135

Further changes in price and increases in costs after the time of breach are typically not relevant 135

But, there are some exceptions: 135

Asamera Oil Corp. v. Sea Oil and General Corp. [1979, SCC] 135

Facts 135

π loaned shares to ∆, ≠ returned on time, and much later π and court discovered that they were sold to a third party. 135

Issue: how to assess damages when shares were never returned, and varied in value? 135

π wanted highest list price of the shares in the time ∆ held them, but they were worth far less at time of breach. 135

π argued sophisticated commercial actor, would have sold shares at highest price. 136

π sought specific performance and damages. 136

Held: Court awards damages according to a mid-range share price. 136

Reasons 136

Court accepts that π might have sold shares at higher value than at date of breach, but not so high that they would get the full highest price. 136

1. Court endorses theory of damages put forward by π; damages are measured by the lost opportunity to sell the shares – i.e. to realize their value on sale. 136

2. The typical starting point for damages under a loan is at the time of breach. You assess as though π had disposed of property on the date of breach, or as soon after as they were realistically able to do so. 136

3. Sometimes, though, we will move the date of breach. 136

4. If π is seeking/entitled to specific performance, they are entitled to hold off on mitigation, so long as they have a real/substantial interest in specific performance. 136

Just because it’s in your writ doesn’t mean it’s a real/substantial interest. 136

Typically can’t get SP for shares – they’re fungible. 136

5. πs may also be entitled to hold off on mitigation depending on the state of the market (e.g. volatile or illiquid)  reasonableness depends on context 136

Even though ≠SP, π was entitled to wait before buying new shares. Successfully argued it wouldn’t be reasonable to go buy new shares right away, due to the illiquidity of the market. 136

π argued they didn’t have to mitigate because shares were too risky now, but they had wanted SP. So, if they wouldn’t have bought the shares, they wouldn’t have held the shares, so those arguments contradict in a rational commercial sense. (Supposedly.) 136

Dodd Properties v. Canterbury City Council [Eng. CA] 136

Facts 136

Two neighbouring buildings, one damaged during construction. 136

Value ↓ over time, by ~£30k 136

π wanted damages calculated at the later date, to account for the decline in value. 136

Held: damages assessed at later date 136

Reasons: 136

There will always be some reasonable period in which for π to organize finances, arrange contractors etc  to move on from the breached K. 136

Court allowed the π to wait 8 years in this case, during which time the cost of repairs massively increased. 136

πs argued it wasn’t reasonable for them to put their own $ at risk doing repairs at earlier date, for several reasons (none of which are especially convincing): 136

1. ∆s were denying liability 137

That’s sort of ridiculous, since ∆s deny liability all the time and it doesn’t typically let you off the hook for mitigation. 137

Maybe because it was government, in this case? Not at all clear from the judgment, though. 137

2. πs didn’t want to spend their own money because (a) they had a cash problem, and (b) even if they didn’t, director testified that they still wouldn’t have spent the money before they were sure of recovering cost from ∆. 137

This is a dangerous argument: recall Radford v. DeFroberville: intent to do the work is key in whether π can recover. So, in their anti-mitigation argument, π here actually led evidence that undercuts their main argument. 137

∆ argued they shouldn’t have to pay full amount of lost business. Since it’s less than 100% likely that they will actually experience loss because they may not conduct the repairs, ∆ argued for 60%. 137

Perry v. Sidney Philips [1982, Eng. CA] 137

Facts 137

Defective property – surveyor ∆ failed to detect the defect. 137

π couldn’t afford to properly repair the defect at the time it was discovered. 137

π claimed cost of repairs, and also damages for the physical inconvenience and stress of living in a crappy house (full of mould etc.) for 4 years as a result of the negligent survey. 137

Held: CA refused to award cost of repairs. Instead, awarded damages based on difference between cost paid and reasonable cost knowing about the defect. However, he gets the physical inconvenience b/c he had to stick with it due to impecuniosity (and no failure to mitigate) 137

Reasons 137

1. Surveyor didn’t cause the defect  negligent survey just caused a delay in the discovery of the damage, meaning that π spent a bit more on the property because he didn’t know about the defect. 137

Hence, π gets difference between cost paid and cost he should have paid given the defects. 137

2. Impecuniosity claim allowed 137

Consumer case, not commercial 137

Part of the reason people use a surveyor is to avoid financial risk 137

The key: is it within the scope of the K? (i.e., what is the K about?) 137

This is not a risk that π could have protected himself against. 137

No insurance for hidden defects 137

The way you protect against this is by hiring a surveyor. 137

Damages in Lieu of Specific Performance 137

Issue: these arise when π claims specific performance up to trial, then drops the SP claim at trial. 138

Wroth v. Tyler [1974, Eng.] 138

Facts: 138

House price: £6000. ∆ breached K for sale; π sued for SP. 138

At time of breach, house was worth £7500. At trial, worth £11,500. 138

So, damages at time of breach = £1500. But if real and substantial claim for SP, damages in lieu would be £5500. 138

Held: court awards damages in lieu of SP, totaling £5500 138

Reasons 138

Court wouldn’t grant SP, because it would cause husband to sue wife over charge, or SP subject to wife’s occupation rights. 138

 You can’t get SP where it would require a third party to waive their legal rights. 138

But, where π has a legitimate claim for SP, damages should be calculated in lieu. 138

Principle: π couldn’t mitigate, and reasonably didn’t, because they expected SP. So, court can push the time of assessment right up to trial. 138

Problem: people will always throw in a claim for SP even if they don’t want it, to push time of assessment. But must be real & substantial interest. 138

Semelhago v. Paramadevan [1996, SCC] 138

SCC adopts Asamera and Wroth. 138

Courts will take a different approach to damages and mitigation where there is a real and substantial interest in specific performance. 138

Facts: 138

House under construction at time of K. Purchase price = $205k 138

At time of trial, worth $325k 138

π was going to buy the house with $75k cash plus mortgage of $135, then sell their old house for $190k. Value of old house at time of trial = $300k. 138

So, if no breach: up by $114k between -6000 mortgage and +120k on (new) house. 138

Held: 138

Damages in lieu of SP 138

Result of judgment: 138

New house: +$120k; 138

Old house: +$110k; 138

Return on the $75k not spent: $20k; 138

So, up by a total of $250k. 138

Reasons 138

Court says you can’t deduct the increase in value to the old house, but they let the reduction in mortgage costs stand because it wasn’t argued. Yes, it is a windfall, but SP would have been too. 138

Note: later cases have resiled from this a bit. 139

Picks up line from Asamera: need real and substantial interest to rely on SP claim to get damages in lieu. 139

Specific Performance in Real Estate Ks 139

Background 139

This is important because of Asamera and Semelhago, which tell us that courts will take a different approach to damages and mitigation where there is a real and substantial interest in specific performance. 139

So, we need to know how to assess whether someone has a real and substantial interest in SP. 139

Up to a few years ago, SP was the prima facie rule in real estate Ks 139

There was a presumption that land is unique, damages inadequate and thus that SP would always be available 139

Consumer surplus element, esp. w/ residential land. 139

It’s not just about living situation  in UK especially, land was key to social status for a long time. 139

Changes (see Domowicz; Semelhago; Asamera): 139

(1) Land is no longer key to voting, status, civic rights 139

(2) It’s often not unique 139

Land is often bought as a commercial investment, even when it’s residential 139

Many people flip houses or otherwise buy land just to make revenue  things that can be measured in money. 139

(3) Even residential property is no longer really unique 139

Cookie cutter homes, many substitutes for the same property 139

(4) Courts: preference for damages  goal is to put people in as good a position but not better, and damages achieve this better than SP. 139

Problem of uncertainty about SP in real estate: it’s more difficult to advise clients now. 139

Domowicz v. Orsa Investments Ltd. [1993, ON Gen. Div.] 139

Most comprehensive analysis of this issue. 139

Fact: Bought apartment building in a suburb w/ 7 year delay. 139

Held: No SP. 139

Reasons 139

The longer the delay, the less likely a court will grant SP. 139

Asamera: “mitigate or litigate” – either mitigate to protect against escalating damages award, or get to litigating quickly so you minimize the possibility of price increases 139

SCC in Domowicz adopts this statement in obiter. 139

No damages in lieu of SP  only get those if you have a legitimate distinct interest in SP. 139

McNabb v. Smith [1982, BCCA] 140

Applied Domowicz to residential purchase 140

∆ showed evidence that  planned to flip house – not entitled to SP. 140

At time of breach, buyer had already entered into transaction to sell the property for more than his purchase price. So, damages could fully compensate for his loss. 140

Semelhago v. Paramadevan [1996, SCC] (continued) 140

Facts: Residential Development 140

Held: No SP, sort of. 140

TJ gave SP, but SCC says in obiter that SP shouldn’t have been granted – i.e. it wouldn’t have been available if it had been in issue on the appeal 140

SCC also says that you don’t presumptively give SP with land anymore. 140

Huge windfall to  of a damages award calculated in lieu of SP. Issue of hardship to ∆, who ended up paying  ~125k more in cash damages than  actually lost. (b/c  kept own home and avoided mortgage and carrying costs etc.) 140

Court is balancing necessity of protecting  w/ order for SP (weak) with a desire to protect ∆ against undue/oppressive amt of damages (strong)  inclines against SP. 140

John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. [2001, ONSC] 140

Facts: 140

 = hotel builder/manager. Agreement to purchase land (vacant lot) from ∆ co. 140

Agreement req’d severance approval from city before proceeding. City granted approval, subj to possibility that ∆ might be req’d to construct an extension to a nearby road & dedicate it to city. Cost was set b/w $350-500k. 140

Building the road would not have benefited  or ∆, only other property owners. 140

∆ tried to get out of the agreement;  sued for specific performance. 140

Legal Issues: Specific performance – is performance of the K unique? Since Sopinka’s dissent in Semelhago, courts don’t assume that about land Ks anymore. 140

Held: SP awarded 140

Reasons: 140

This particular transaction merited SP, damages would be inadequate. 140

Land was right next to a mall and Wonderland, so that was a specific attribute. 140

Evidence that they had tried to find a substitute but couldn’t find one that replicated all the features of the desired land. 140

Note: It would be highly speculative to calculate the damages in a monetary sense 140

SP is granted where damages are inadequate (i.e. it’s not just about money), but also where it is all about money but damages are too difficult to calculate. 140

Earthworks 2000 Design Group Inc. v. Spectacular Investments (Canada) [2005, BCSC] 140

Facts: Convenience store 140

Held: you can build a gas station w/ convenience store pretty much anywhere. Damages ≠ inadequate. Not a unique or complicated business model like in Dodge. 141

Raymond v. Raymond Estate [2011, SKCA] 141

Facts: Farmland dispute.  owned part interest in land and K’d w/ ∆ for another portion. 141

Held: SP granted. 141

Reasons 141

Personal reasons why ownership of this particular family farm was unique. 141

Note, though, that farming is generally a commercial operation, so must look at rel’ship b/w ∆ and the property in question. Is it really tied to the family thing or is it just that he needs to expand? 141

TJ refused SP on grounds that he suspected  real interest in property wasn’t unique, but that it was actually part of a long-standing family feud in which he was seeking retribution against his siblings. 141

CA: that’s irrelevant, so long as we also believe he wanted this particular piece of property. 141

See list of factors at pg. 1029. 141

Proximity – yardsite for his cattle 141

Emotional attachment to the land (accepted) 141

Right across the road from his house 141

Damage to Chattels 141

Dewees v. Morrow [1932, BCCA] 141

Cost of repair: $1458 141

Cost of replacement: $900 141

Court says only entitled to cost of reasonable substitute, not cost of repair 141

Darbishire v. Warran [1963, Eng. CA] 141

Repair: £192 141

Replacement: £85 141

Same as Dewees -  not entitled to cost of repair where that cost exceeds that of a reasonable substitute. 141

BUT: 141

O’Grady v. Westminster Scaffolding Ltd. [1962, QB] 141

Repair: £253 141

Replacement: £180-250 141

Held: entitled to repair even though repair costs exceed reasonable cost of substitute. 141

Reasons: 141

Personal attachment to the car. 142

 had named it, replaced the engine three times already 142

So, he had shown that he was willing to spend the $, and that he HAD done the work. 142

Remember the policy from DeFroberville: if  wouldn’t do the work otherwise or isn’t actually going to do the work now, shouldn’t be entitled to make ∆ pay for it. 142

Price was close to repair cost. 142

Note: monetary value of the wasn’t fully ascertainable, as it kept appreciating due to status as classic car. 142

Plus, court noted that it was difficult to find a reasonable substitute given the condition he had kept it in. 142

Note that  was NOT allowed to claim for 5 months of rental cars while waiting to have car repaired. 142

Duty to mitigate; goes to time of assessment. 142

Court did make a deduction from the repair costs for betterment – the car was in slightly better condition than before, and avoided 5 months worth of wear-and-tear/depreciation, thus increasing its value. 142

Factors to Consider Re Reinstatement for Damage to Chattels: 142

Damage to Real Property 142

Taylor v. Hepworths Ltd. 142

Facts:  owned shops & billiards hall. ∆ caused fire and property is basically destroyed.  claimed cost of rebuilding the hall. 142

Held: Not awarded. 142

Reasons 142

 did not actually intend to rebuild the hall  it was only an investment property, and rebuilding would not have been a good investment 142

Basically, there was no diminution in value because  was going to have to tear down the building to redevelop the site. 142

So, really, he saved money by not having to pay for the tear-down. 142

Jens v. Mannix & Co. [1978, BCSC] 142

Facts: Oil spill makes house uninhabitable; will have to dig up overburden and replace all contaminated soil, then build entirely new house. Property could likely be sold for more w/o house, since zoned commercially and has greater value as such. 142

Held: full value of repairs awarded by TJ; CA reduced for betterment. 142

Reasons 143

 actually lives there and wants to stay. 143

It’s like the factors discussed in Dodge: 143

 has proximity to car museum in which he keeps his cars 143

Local community likes it and gave exemption to have the museum on his property 143

Basically,  has a credible, proven subjective attachment to this particular property, which can’t easily be replicated. 143

Note: this would have been a tough case to argue: 143

He hadn’t actually rebuilt the house  if he had done so, it would show real intention to do the work 143

Failure to rebuild leaves judges a bit nervous  because he put up with the problem for 4 years, may not use the award to rebuild and may sell the land instead, garnering a windfall. 143

This is probably why they scaled back the award. 143

Betterment 143

Old house; tearing it down and building new one gives  an advantage, so court makes a 10% deduction for betterment and also deducts an amount for the increase in building costs over the 4 year delay. 143

Kates v. Hall [1991, BCCA] 143

Facts: ∆ cut down several mature trees on  property to get better view. Cost of replacement with fully grown trees (which may not even take) is $210k, but no diminution in value of  property. 143

Issue: Neither amount is really appealing. The question is: what interest of the  is the court seeking to protect? 143

Held: Court crafted a 3-part award, tied to this policy question. 143

1. Repair interest: $21,000 to plant a bunch of smaller trees w/ greater likelihood of flourishing. 143

Because the trees do serve an important esthetic/privacy purpose, part of the award should be to spend a reasonable amount on repairs. 143

This takes care of some repairs, but doesn’t address the functional interest 143

2. Functional interest: $1000/tree for lost amenity 143

Subjective value of having nice, full-grown trees 143

3. Punitive damages: $26,000 to deter ∆ behaviour 143

$210k would be too much, but some punitive amount is necessary to address the egregious and flagrant breach – intentional trespass and cutting down trees to make own property go up in value. 143

Court could have awarded higher punitive damages, but: 143

Judge thought  was just after retribution. 143

Plus,  didn’t even really live there – just a few weeks a year; and they owned 8 homes each worth multi-millions. 143

If you look at the overall award as punitive damages, 60k is pretty high. 144

Betterment 144

General Principle: we deduct windfall amounts of increased value to property resulting from repairs 144

James St. Hardware v. Spizziri [1987, ONCA] 144

Facts: 144

Cites similar old UK HL case (Harbotts Plasticine): 144

 factory burned down by ∆; replaced and updated to code etc. Got more valuable factory as a result; court refused to deduct for betterment in that case. Not fair that ∆ torched  factory and forced  into that situation, and not fair to make  spend own money on the repairs. Lord Denning: destruction of bldg isn’t the same as of car – can go into market and get a new car, but when mill was destroyed company had to replace it. 144

Factory burned down and  had to build to better std b/c of building codes. Plus getting extra years out of factory 144

Held: 144

Court accepts (but does not apply) Waddams’ argument: 144

Courts should deduct for betterment, then add back in the opportunity costs of the money (this was done in Safe Steps) 144

Safe Steps 144

Calculate deduction for betterment by taking betterment value [how much it will increase] and subtracting from that the interest on the amount it will cost to do the repairs. 144

Assumption: you can borrow the money to do the repairs, so only the interest is counted against the betterment value. If you don’t get a loan, it’s assumed that you would have invested the money on a rate of return approximately equivalent to the bank’s interest rate. 144

Fontaine v. Roofmart Western Ltd. [2005, MBQB] 144

Facts: Shingles deteriorated before expected;  had to replace. But they did last for 10 years. 144

Issue: if awarded full value of new shingles,  getting a windfall for those 10 years’ coverage. But had to spend own money 5 years earlier than expected. 144

Held: court awarded 5 years of the value of the shingles (but actually only 2 years because it took a while to replace the shingles) 144

Looked at opportunity costs over time the advance was made by , and amount of money spent. 144

Betterment: 10 years. 144

III. Remedies for Personal Injury 145

Context: The Role of Tort in Dealing with Disability 145

Theoretical Basis 145

Compensation, deterrence, corrective justice, dispute resolution 145

Is tort the best way to achieve these goals? Alternatives? 145

Itemizing Damages 145

There must be a rationale for why particular heads of compensation are used, and in what amounts. 145

Tort law can act as a junior partner in injury response. Other sources include: 145

Workers compensation: 145

Public compensation scheme, available in every province; provides compensation to people injured in the course of employment 145

Vastly most significant than tort law in providing compensation. 145

Plus, worker’s comp is exclusive/exhaustive  it’s a complete system; can’t go to worker’s comp then move to claim in tort law as well. 145

Provincial health insurance 145

Automobile insurance – first party no-fault benefits 145

People buy liability insurance, to cover them in the event that someone is injured, but we also have first party benefits to give compensation if the driver is injured. 145

This helps keep smaller injuries out of court, reducing transaction costs of providing compensation. 145

Private disability insurance 145

Public disability plans (pensions): EI, social welfare, CPP 145

Tort as a problematic mechanism for addressing injury/disability. 145

See Dickson J’s comments in Andrews, at pg. 492. 145

Efficiency: litigation is uncertain, time consuming and expensive. 145

Tort provides uneven coverage. 145

Tort in the world of insurance does not promote deterrence 145

Occasional spectacular lump sum awards highlight: 145

(a) moral arbitrariness 145

(b) pragmatic problems for prediction and management 145

Andrews (The “Trilogy”): Overview of Methodology 145

SCC dealt with three cases at once: 145

Andrews v. Grand & Toy; Teno; Thornton v. Prince George School 145

Court came very close to legislating in these decisions. 145

Set out a highly systematic approach to personal injury damages 145

Special (past) damages 145

General (future) damages – itemize for appellate review and settlement predictability. 145

Cost of care, standard of care, predictions. 145

Collateral benefits – how are these addressed? 145

Taxation: 146

(a) deducted from lost earnings? 146

(b) add-on for impact on award? 146

Discounting to a lump sum 146

Management fees, structured settlements 146

Advantages and Disadvantages 146

See Dickson J’s comments in Andrews at pg. 492 146

Courts need to consider the amount needed for annual support over a lifetime, but also how spending power will be reduced over time. 146

Shifting needs are an issue – a lump sum is a once-and-for-all decision. 146

Andrews, 21, has a remaining life span of 43 years, and is awarded $740k to provide for his needs over the next 43 years. 146

BUT, we don’t know what his needs will be over that whole time period. We sort of need to, though… 146

Contingencies 146

How courts deal with uncertainty and future changes. 146

Discounting 146

How courts deal with future changes in the value of money 146

Theoretical basis: 146

Discount rate is a percentage that takes into account the combined effect of investment earnings and inflation. 146

A dollar today is worth more than a dollar tomorrow. 146

Theory: future value must take into account the negative effects of inflation, and the positive effects of compound interest. 146

Rule from the Trilogy: subtract inflation (3%) from interest rates (10%) to determine the discount rate (so, 7%). 146

So, to give $100/year: 146

Need $100 this year, 93 next year (100% minus 7%), 87 the following year (93% minus 7%), 81 the next year, and so on. 146

The Trilogy Mistake: 146

The inflation rate was higher than the court anticipated, and the difference meant that the assumed rate of return was basically halved. 146

Data in 1975: 146

Inflation: 10% 146

Long term inflation forecast: 3.5% 146

Long term bonds: $10% 146

So, to produce $100 in 45 years: 146

7% = $4.76 147

3% = $26.44 147

$500,000 lump sum for 45 years (per Andrews) 147

7% = $34,346/year 147

3% = $19,798/year 147

Law and Equity Act 147

Corrects the error and facilitates settlement and adjudication 147

Discount Rates: s. 56 147

(1) in this section: 147

“discount rate” means the rate, expressed as a percentage, used in calculating the present value of future damages. 147

“future damages” means damages to compensate for pecuniary losses to be incurred, or expenditures to be made, after the date of the trial judgment in a proceeding. 147

(2) The Chief Justice of the Supreme Court may make regulations prescribing: 147

(a) the discount rate that is deemed to be the future difference between the investment rate of interest and the rate of increase of earnings due to inflation and general increases in productivity, and… [2.5% for future earnings] 147

(b) the discount rate that is deemed to be the future difference between the investment rate of interest and the rate of general price inflation. [3.5% for cost of care] 147

(3) In a proceeding, the discount rate prescribed under (2)(a) must be used in calculating the present value of future damages that are intended to compensate for or are determined with reference to 147

(a) loss of earnings because of partial or total loss of income-earning capacity, or 147

(b) loss of dependency under the Family Compensation Act 147

(4) The discount rate prescribed under (2)(b) must be used in calculating the present value of all future damages other than those referred to in (3). 147

Non-Pecuniary Losses 147

The conundrum: money can’t buy happiness. Pain and suffering is not commensurable (can’t be measured in money) 147

Issue: how do we compensate something with money that can’t really be measured in money? 147

The old approach: pain & suffering, lost amenities or enjoyment of life, lost expectation of life  all awarded with general arbitrary sum 147

The “Insurance Crisis”: 147

Sense that tort awards were getting out of control. 147

Courts’ approach in personal injury cases didn’t lend itself to predictability. 147

Judges and juries were just tossing out numbers and it was difficult to see the parameters for an award. 148

Uncertainty bred a litigation explosion – can’t settle if you don’t even know what the range of damages is. 148

Dramatic escalations in auto insurance premiums 148

Defensive medicine: 148

Doctors fleeing North America to practice in jurisdictions where the fear of tort litigation wasn’t so high. 148

Changing medical practice b/c doctors were always trying to protect against liability. 148

Public services and amenities (schools, parks) 148

Rash of closures of fun playground equipment, ridiculously overprotective safety measures put in because of the fear of liability/increased costs. 148

Media focus on spectacular awards 148

New Theoretical Basis – The Functional Approach 148

As Opposed To: 148

The Conceptual Approach 148

Trying to capture human facilities and ascribe costs to them 148

Sometimes described as a “meat chart” approach. Injury, and a dollar value associated therewith. 148

Does get some certainty, but not the best. 148

The Personal Approach 148

Developments on the conceptual approach: take the same chart, but personalize it. 148

A hand injury to one person might not be as serious as to another, depending on their personal circumstances. 148

E.g. a pianist’s hands are arguably more valuable. 148

Lends itself to ‘invidious’ comparisons  comparability problems between injuries and consequent awards. 148

Basics of the Functional Approach 148

Consideration: not so much the category of the injury, but the way that injury affects π’s life, and the way in which money can be used to replace/address what was lost. 148

Substituting one imperfect system of measurement for other imperfect systems. 148

The Cap 148

Controls social costs. 148

In Andrews, the court imposed a rough upper limit: 148

Unless in exceptional circumstances, the max award in this category is $100k. 148

This was done explicitly on the basis of the insurance crisis  social costs can be taken into account here as a matter of policy, to maintain some regulation on those costs. 148

The ‘rough upper limit’ really operates as a cap – no courts have made awards above it. 149

Note inflationary increase: as of October 2012 the upper limit is about $342k. 149

Logical Conclusions of the Functional Approach 149

Not based on severity of the injury, but on ability to use money [See Lindal at para 17] 149

The same injury in two different people will likely have different non-pecuniary losses. 149

Issues: lost years, age 149

Unconscious or vegetative π [see Wipfli; Tonneguzzo; Brimacombe; Bystedt] 149

Consistency? Factors? 149

Factors to consider in compensating for non-pecuniary loss in a brain injury case: 149

Ability to appreciate what has been lost 149

E.g. experience pleasure, pain, enjoyment, sadness 149

Attempts to communicate 149

Attentional abilities 149

Memories 149

Life expectancy 149

Problems with the Canadian Approach 149

Berryman et al 149

The functional approach isn’t really applied in practice. 149

So, basically, everyone talks about the functional approach, but then everyone runs to the meat charts and uses them anyway. 149

The cap doesn’t apply to aggravated damages in other areas 149

E.g. defamation (Hill), debate re sexual assault cases 149

This appears to create anomalies 149

Problem of compression/relative unfairness 149

Any award above the cap will be overturned. 149

The cap is meant to be reached only by really extreme injuries, etc. 149

Most personal injury cases aren’t about quadriplegia, they’re about whiplash and broken bones, etc. 149

But, awards for these things are creeping up. 149

So, the cap really just means that catastrophic cases aren’t getting much in comparison – not much (if anything) more than the basic injury cases 149

Because of the lack of regulatory scaling, the real costs of insurance and litigation are resulting from these minor injuries. 149

Chaos below the cap: no jury direction, no scale, no consistency 149

Technically, no one uses the word “cap” – judgments still call it the rough upper limit. 149

But no case has ever exceeded that limit, so it’s really a solid ceiling on non-pecuniary damages for personal injury. 149

Alternatives 149

Take the functional approach seriously 150

Remove cap entirely and leave it to juries 150

English model: common law conceptual approach with guidance 150

Australian model: statutory scale based on severity 150

Start at the top (most catastrophic) and scale down. 150

So, e.g. quadriplegia = 100% of cap awarded, then lesser amounts depending on severity of injury 150

This model may encourage settlement (since it makes it easy to calculate damages), meaning there will actually be more money for πs (since less money spent on litigation) 150

Eliminate non-pecuniary damages altogether in personal injury cases 150

Money would be reallocated to other purposes 150

New Zealand has essentially abolished the tort system: 150

Statutory no-fault compensation scheme. Small amounts on non-pecuniary side, but uses the savings to provide compensation to a much broader class of things on the pecuniary side. 150

Pecuniary Losses: Lost Future Earnings 150

Issue: 150

It’s easy to quantify the lost earnings up to trial: the actual amount of money that was lost as a result of not being able to work. 150

BUT: it’s tougher to determine what future earnings would have been. 150

Theoretical basis: (see Cooper-Stevenson) 150

Lost actual earnings 150

Lost earning capacity 150

Lost working capacity 150

Step 1: Estimate the level of earnings 150

Probable earnings plus chances [Andrews] 150

Step 2: Consider length of working life 150

Pre-accident lifespan and estimated retirement date 150

Important: lost future earnings are based on pre-accident lifespan  the total amount π might have earned. 150

Note: we used to estimate that people would retire around 65, unless other factors impacted it. But now that mandatory retirement has been eliminated, parties get into arguments about this more often. 150

Complicating feature: the issue of lost years 150

Example: A 20 year old is catastrophically injured, and prior to the accident would have worked until 65. As a result of the accident, lifespan shortened by 20 years, such that they will die at 45. 150

Lost earnings will be calculated on the basis of pre-accident lifespan, and from that award π is supposed to pay costs of living while they live, and then they will die and [theoretically] won’t have used it all because of having fewer years. 151

Issue: windfall to estate? 151

Basically, the unused portion will increase the estate and mean that the heirs will get a larger inheritance than they otherwise would have. 151

Note: living expense deduction for lost years [Tonneguzzo, 1994 SCC] 151

Lost Years 151

In Andrews and Tonneguzzo, courts deducted 50% from the lost years 151

Because they won’t actually live to the age they would have, deduct for the lost years for the windfall to the estate  typically 50% 151

Step 3: Factor in Contingencies: 151

Positive and negative impacts on awards 151

Statistical contingencies: affect everyone 151

∆s and πs will bring evidence about general contingencies that would have impacted π’s work years/income etc. 151

Individualized contingencies: lost chances [see e.g. Conklin v. Smith, 1978 SCC] 151

Can be positive or negative  in Conklin, the π was working toward a higher-paying career, so the court awarded more on the change that he might have made a career change. 151

Caution: avoid double discounts and resist over-estimates 151

Double Discounts: see e.g. Andrews 151

Court estimated his working life at 65, but CP pension would have kicked in at 55, so they set that as the limit. 151

Then, they deducted 20% from the award for the chance, among other things, of early retirement. 151

Factored in a possible unemployment period as well. 151

Advice: don’t accept a 20% contingency deduction, because it’s probably too high – even though that happens all the time. Bring statistical evidence to bear, because actuaries have info on everything. 151

Step 4; Account for Residual Earnings 151

Consider the difference between pre-accident earning capacity and post-accident residual earning capacity [see e.g. McCabe] 151

Earnings are only going to be reduced to zero in catastrophic cases  in most cases, though, π may earn less or will be unable to work full-time. 151

Step 5: Deduct for Any Overlap with Cost of Care 151

You would already have spent money on food etc., so if the cost of care calculation includes that sort of expenses (i.e. in a nursing home), deduct for this. 151

Deduct fully over the course of the prior life expectancy 151

Step 6: Factor in Collateral Benefits 152

Other sources of income replacement 152

E.g. employer wage continuation, sick benefits, disability insurance 152

Step 7: Discount to Present Value 152

See above  subtract inflation rate from interest rate and apply that percentage to discount the value. 152

S. 56 of Law and Equity Act 152

Note: Issue of Taxation 152

In calculating lost earning capacity, we generally don’t take taxation into account. 152

i.e. courts calculate lost earnings on a pre-tax basis, even though awards are not taxed. 152

So, in Andrews, π was awarded based on loss of $1000/month, even though he would really only have taken home $800/month after tax if he hadn’t been injured. 152

Windfall? 152

Theoretical Justification 152

It’s a capital asset  …this seems wrong. 152

Idea: the award is a valuation of the person’s earning capacity, not their actual lost earnings. 152

Basically, the court says you’re valuing the earning capacity as an asset. 152

But… no we’re not. 152

Practical Justification 152

Buffers errors 152

The calculation is complicated 152

Difference may be partly offset by tax on income from award 152

Income from award is subject to the usual rules of taxation. 152

So, maybe that justifies it. We just ignore it on both sides and pretend it’s a wash. 152

It’s not really equal, but it may be close enough that it’s not worth the effort to adjust the system. 152

Past Loss 152

See Insurance (Vehicle) Act, s. 98: 152

Despite any other enactment or rule of law but subject to this Part, a person who suffers a loss of income as a result of an accident or, if deceased, his or her personal representative, is entitled to recover from designated defendants, as damages for the income loss suffered after the accident and before the first day of trial of any action brought in relation to it, not more than the net income loss that the person suffered in that period as a result of the accident. 152

Past income loss is replaced on a post-tax basis, per s. 98. 153

Basically, we know what the take-home pay is, so we replace that. 153

Compensating Future Losses of Children & πs who did Unpaid Work 153

Where π has work history [e.g. Andrews], can use direct evidence. 153

Use current wage as a baseline 153

Consider educational and motivational track record 153

Consider evidence re life plans as basis for adjustments and contingencies 153

Children and unwaged work: lack of individualized evidence causes problems of calculation. 153

Conventional sums vs. individualized awards: 153

Teno, Fenn and Penso: $6000 awarded in each case as a rough estimate of annual earning capacity. 153

Courts have shifted from Teno model to statistical methods assessment 153

Issues of Fairness 153

What are the key indicators of success? Can we agree on these? 153

E.g. height; birth order; parental education attainment, socio-economic status, and ethnic origin 153

But, is it really fair to replicate the outcomes of an unfair world? Is it worth court time to do this? 153

Response: the tort system isn’t there to fix the world; it’s just there to replicate it  The whole compensation model is based on replicating what the outcomes would have been, but for the tort. 153

Male/female: if you compare prospects of 4 year old boy and 4 year old girl, you get a disparity of about 25% 153

The tort system is just perpetuating these inequalities. 153

Gender factors in damages assessments 153

Gender neutral statistics 153

Addressing these Issues: 154

It’s becoming common for courts to adjust upwards for female πs, for two reasons: 154

Enhance past statistics with the contingency of future improvement 154

The situation is improving, especially in relation to inequality of wages. 154